-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NJPvzyS5i75qnYKjC8qiMF26Gt2m6aKNjU7CF2RgHc6JZ3MHmaGsCQH8Jopd0/4V 3exHBnm6Ptw6PbHfDvGMHQ== 0000950136-97-001353.txt : 19970930 0000950136-97-001353.hdr.sgml : 19970930 ACCESSION NUMBER: 0000950136-97-001353 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19970926 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19970929 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY CAPITAL I INC CENTRAL INDEX KEY: 0000762153 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 133291626 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 002-95564 FILM NUMBER: 97686926 BUSINESS ADDRESS: STREET 1: 1585 BROADWAY 37TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2147547400 MAIL ADDRESS: STREET 1: 1585 BROADWAY STREET 2: 37TH FL CITY: NEW YORK STATE: NY ZIP: 10036 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934 Date of Report: September 26, 1997 (Date of earliest event reported) Morgan Stanley Capital I Inc. ----------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 333-26667 13-3291626 - ------------------------------------------------------------------------------- (State or Other (Commission (I.R.S. Employer Jurisdiction of File Number) Identification No.) Incorporation 1585 Broadway, New York, N.Y. 10036 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 296-7000 ITEM 5. OTHER EVENTS. Attached as exhibits to this Current Report are (i) the consent of Cushman & Wakefield, Inc. ("Cushman & Wakefield") furnished to the Registrant by Cushman & Wakefield in respect of the Registrant's proposed offering of Commercial Mortgage Pass-Through Certificates, Series 1997-XL-1 (the "Certificates"); (ii) the consent of Hospitality Valuation Services International ("Hospitality Valuation") furnished to the Registrant by Hospitality Valuation in respect of the Registrant's proposed offering of the Certificates; (iii) the consent of O. Marshall Dodds Company, Inc. ("Marshall Dodds") furnished to the Registrant by Marshall Dodds in respect of the Registrant's proposed offering of the Certificates; (iv) the consent of Regional Appraisal Associates ("Regional") furnished to the Registrant by Regional in respect of the Registrant's proposed offering of the Certificates; (v) the consent of Landauer Associates, Inc. ("Landauer") furnished to the Registrant by Landauer in respect of the Registrant's proposed offering of the Certificates; (vi) the consent of CB Commercial Real Estate Group, Inc., ("CB") furnished to the Registrant by CB in respect of the Registrant's proposed offering of the Certificates; and (vii) certain property appraisals (the "Property Appraisals") furnished to the Registrant by Cushman & Wakefield, Hospitality Valuation, Marshall Dodds, Regional, Landauer, and CB (the "Appraisers") in respect of the Registrant's proposed offering of the Certificates. The Certificates will be offered pursuant to a Prospectus and related Prospectus Supplement (together, the "Prospectus"), which will be filed with the Commission pursuant to Rule 424 under the Securities Act of 1933, as amended (the "Act"). The offer and sale contemplated by the Prospectus of the Certificates will be registered pursuant to the Act under the Registrant's Registration Statement on Form S-3 (No. 333-26667) (the "Registration Statement"). The Registrant hereby incorporates the Appraisers Consent and the Property Appraisals by reference in the Prospectus and the Registration Statement. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (c) Exhibits
Item 601(a) of Regulation S-K Exhibit No. Description ------------------------- ----------- 23.1 Consent of Cushman & Wakefield, Inc. dated Sept. 17, 1997 23.2 Consent of Hospitality Valuation Services International, dated August 26, 1997 23.3 Consent of O. Marshall Dodds Company, Inc., dated August 27, 1997 2 23.4 Consent of Hospitality Valuation Services International, dated August 25, 1997 23.5 Consent of Regional Appraisal Associates, dated August 25, 1997 23.6 Consent of Landauer Associates, Inc., dated Sept. 3, 1997 23.7 Consent of CB Commercial Real Estate Group, Inc., dated Sept. 10, 1997 99 Property Appriasals Appraisal for St. Petersburg Bayfront Hilton Appraisal for Radisson Plaza, Fort Worth Appraisal for Howard Johnson, Middletown Appraisal for Howard Johnson, Westbury Market Study for Raeford - Hoke Village Market Study for Edgecombe Square Market Study for Northside Plaza - Henderson, N.C. Market Study for Raleigh Boulevard Shopping Center Market Study for Belvedere Plaza Market Study for Lakeside Square and Lakeside Plaza Shopping Center Market Study for South Square Shopping Center Market Study for Clover Plaza Market Study for Tri-County Plaza Market Study for Stephens Plaza Market Study for Northside Plaza - Clinton, N.C. Appraisal for Holiday Inn Select, Beverly Hills Appraisal for Holiday Inn Select, Clark Appraisal for Ramada Plaza, Woburn 3 Appraisal for Howard Johnson Plaza, Saddle Brook Appraisal for Westshore Mall Appraisal for Howard Johnson, Commack Appraisal for Howard Johnson, Woburn Appraisal for Grand Kempinski Appraisal for Ramada Plaza Pentagon Appraisal for 605 Third Avenue Market Study for Three Fountains Plaza Market Study for Barnwell Plaza Market Study for Capitol Square Market Study for Clusters of Whitehall Market Study for Cumberland Plaza Market Study for Hampton Plaza Market Study for Ravenel Towne Centre Market Study for Shoppers Port Market Study for Triangle Village Market Study for Westland Square Market Study for Widewater Square Market Study for Woodberry Plaza Market Study for Bay Village Shopping Center Market Study for Blowing Rock Square Market Study for Catawba Village Market Study for Crossroads Shopping Center Market Study for Cunningham Place 4 Market Study for Jackson Plaza - Goody's store Market Study for Kalmia Plaza Appraisal for Lawndale Village Market Study for Waterway Plaza Market Study for Waynesville Plaza Market Study for NBSC Building Market Study for 1634 Main Street Market Study for Bainbridge Mall Market Study for Edisto Village Market Study for Fairfield Square Market Study for Florence Mall Market Study for Friarsgate Plaza Market Study for Mauldin Square Market Study for Shotwell Square Market Study for St. George Plaza Market Study for Taco Cid Market Study for Blockbuster - Warner Robbins Market Study for Edens KW Winnsboro Market Study for Blockbuster - Broad River Market Study for Blockbuster - Decker Market Study for Dreher Plaza Market Study for Forest Drive Shopping Center Market Study for Gateway Plaza Market Study for Goldrush Shopping Center 5 Market Study for Lexington Village Market Study for Mitchell Plaza Market Study for Northway Plaza Market Study for Palmetto Plaza Market Study for Rosewood Extension Market Study for Saluda Town Center Market Study for Blockbuster - Irmo Market Study for Blockbuster/Taco Bell - Lexington Market Study for Trenholm Plaza Market Study for Western Square Appraisal for Keystone at the Crossing Fashion Mall Appraisal for Ramada Hotel, Omaha Appraisal for Embassy Suites Palm Beach Gardens/Admiralty Office Building Appraisal for Newark/Freemont Hilton Appraisal for Mansion Grove Appraisal for Monroe Plaza Appraisal for 25th Street Plaza Appraisal for Northside Mall Appraisal for Birney's Plaza Appraisal for Mountainville Plaza Appraisal for Martintown Plaza Appraisal for Shillington Plaza Appraisal for Cloud Spring Plaza Shopping Center Appraisal for Midway Plaza 6 Appraisal for Troy Plaza Appraisal for Kingston Plaza Appraisal for Plaza 15 Appraisal for New Smyrna Beach Appraisal for K-Mart/ Shamokin Dam Appraisal for Dunmore Plaza Appraisal for Ames Plaza Appraisal for Kings Fairground Shopping Center Appraisal for Westgate Mall Appraisal for Yorktown Appraisal for Arrowhead Towne Center Market Study for North Shore Towers
7 Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on behalf of the Registrant by the undersigned thereunto duly authorized. MORGAN STANLEY CAPITAL I INC. By: /s/ Russell Rahbany ------------------------------ Name: Russell Rahbany Title: Vice President Date: September 26, 1997 8 Exhibit Index -------------
Item 601(a) of Regulation S-K Exhibit No. Description Page ------------------------- ----------- ---- 23.1 Consent of Cushman & Wakefield, Inc. dated Sept. 17, 1997 23.2 Consent of Hospitality Valuation Services International, dated August 26, 1997 23.3 Consent of O. Marshall Dodds Company, Inc., dated August 27, 1997 23.4 Consent of Hospitality Valuation Services International, dated August 25, 1997 23.5 Consent of Regional Appraisal Associates, dated August 25, 1997 23.6 Consent of Landauer Associates, Inc., dated Sept. 3, 1997 23.7 Consent of CB Commercial Real Estate Group, Inc., dated Sept. 10, 1997 99 Property Appraisals Appraisal for St. Petersburg Bayfront Hilton Appraisal for Radisson Plaza, Fort Worth Appraisal for Howard Johnson, Middletown Appraisal for Howard Johnson, Westbury Market Study for Raeford - Hoke Village Market Study for Edgecombe Square Market Study for Northside Plaza - Henderson, N.C. Market Study for Raleigh Boulevard Shopping Center 9 Market Study for Belvedere Plaza Market Study for Lakeside Square and Lakeside Plaza Shopping Center Market Study for South Square Shopping Center Market Study for Clover Plaza Market Study for Tri-County Plaza Market Study for Stephens Plaza Market Study for Northside Plaza - Clinton, N.C. Appraisal for Holiday Inn Select, Beverly Hills Appraisal for Holiday Inn Select, Clark Appraisal for Ramada Plaza, Woburn Appraisal for Howard Johnson Plaza, Saddle Brook Appraisal for Westshore Mall Appraisal for Howard Johnson, Commack Appraisal for Howard Johnson, Woburn Appraisal for Grand Kempinski Appraisal for Ramada Plaza Pentagon Appraisal for 605 Third Avenue Market Study for Three Fountains Plaza Market Study for Barnwell Plaza Market Study for Capitol Square Market Study for Clusters of Whitehall Market Study for Cumberland Plaza Market Study for Hampton Plaza 10 Market Study for Ravenele Towne Centre Market Study for Shoppers Port Market Study for Triangle Village Market Study for Westland Square Market Study for Widewater Square Market Study for Woodberry Plaza Market Study for Bay Village Shopping Center Market Study for Blowing Rock Square Market Study for Catawba Village Market Study for Crossroads Shopping Center Market Study for Cunningham Place Market Study for Jackson Plaza - Goody's store Market Study for Kalmia Plaza Market Study for Lawndale Village Market Study for Waterway Plaza Market Study for Waynesville Plaza Market Study for NBSC Building Market Study for 1634 Main Street Market Study for Bainbridge Mall Market Study for Edisto Village Market Study for Fairfield Square Market Study for Florence Mall Market Study for Friarsgate Plaza Market Study for Mauldin Square 11 Market Study for Shotwell Square Market Study for St. George Plaza Market Study for Taco Cid Market Study for Blockbuster - Warner Robbins Market Study for Edens KW Winnsboro Market Study for Blockbuster - Broad River Market Study for Blockbuster - Decker Market Study for Dreher Plaza Market Study for Forest Drive Shopping Center Market Study for Gateway Plaza Market Study for Goldrush Shopping Center Market Study for Lexington Village Market Study for Mitchell Plaza Market Study for Northway Plaza Market Study for Palmetto Plaza Market Study for Rosewood Extension Market Study for Saluda Towne Centre Market Study for Blockbuster - Irmo Market Study for Blockbuster/Taco Bell - Lexington Market Study for Trenholm Plaza Market Study for Western Square Appraisal for Keystone at the Crossing Fashion Mall Appraisal for Ramada Hotel, Omaha 12 Appraisal for Embassy Suites Palm Beach Gardens/Admiralty Office Building Appraisal for Newark/Freemont Hilton Appraisal for Mansion Grove Appraisal for Monroe Plaza Appraisal for 25th Street Plaza Appraisal for Northside Mall Appraisal for Birney's Plaza Appraisal for Mountainville Plaza Appraisal for Martintown Plaza Appraisal for Shillington Plaza Appraisal for Cloud Spring Plaza Shopping Center Appraisal for Midway Plaza Appraisal for Troy Plaza Appraisal for Kingston Plaza Appraisal for Plaza 15 Appraisal for New Smyrna Beach Appraisal for K-Mart/ Shamokin Dam Appraisal for Dunmore Plaza Appraisal for Ames Plaza Appraisal for Kings Fairground Shopping Center Appraisal for Westgate Mall Appraisal for Yorktown 13 Appraisal for Arrowhead Towne Center Market Study for North Shore Towers
14 EX-23.1 2 CONSENT OF CUSHMAN & WAKEFIELD, INC. DATED SEPT. 17, 1997 Cushman & Wakefield, Inc. [CUSHMAN & WAKEFIELD LOGO] 51 West 52nd Street New York, NY 10019-6178 (212) 841-7500 CONSENT OF CONSULTANT --------------------- We consent to the inclusion of any form (whether in paper or digital format, including any electronic media such as CD-ROM or the Internet) of the Prospectus Supplement relating to Morgan Stanley Mortgage Capital I Inc., Commercial Pass-Through Certificates, Series 1997-LL1, (which we understand is a type of "Securitization" defined as an offering of debt securities that, as applicable, are registered with the Securities Exchange Commission pursuant to the Securities Act of 1933, as amended (the "Act") or are privately placed pursuant to an exemption from the Act, in which the property appraised is part of a pool of properties owned by various non-affiliated owners collateralizing such offering) of our appraisal with respect to the property listed on the attached annex, and we consent to the reference to our firm under the caption "Experts" in such Prospectus Supplement. CUSHMAN & WAKEFIELD, INC. By: /s/ T. W. W. ------------------------------- Signed on 9/17/97 ------------------------- Cushman & Wakefield, Inc. ANNEX ----- 1. 605 Third Avenue EX-23.2 3 CONSENT OF HOSPITALITY VALUATION SERVICES INTERNATIONAL, DATED AUGUST 26, 1997 CONSENT OF CONSULTANT --------------------- We consent to the inclusion of any form (whether in paper or digital format, including any electronic media such as CD-ROM or the Internet) of the Prospectus Supplement relating to Morgan Stanley Capital I Inc., Commercial Pass-Through Certificates, Series 1997-LL1, of our appraisal with respect to the property or properties listed on the attached annex, and we consent to the reference to our firm under the caption "Experts" in such Prospectus Supplement. HOSPITALITY VALUATION SERVICES INTERNATIONAL By: /s/ Anne R. Lloyd --------------------------- Name: Anne R. Lloyd Title: Senior Vice President Signed on August 26, 1997. ----------- ANNEX ----- 1. Newark/Fremont Hilton 2. Radisson Plaza, Fort Worth 3. Embassy Suites Palm Beach Gardens/Admiralty Office Building 4. St. Petersburg Bayfont Hilton 5. Holiday Inn Select, Beverly Hills 6. Holiday Inn Select, Clark 7. Howard Johnson, Woburn 8. Ramada Plaza Pentagon 9. Howard Johnson, Middletown 10. Howard Johnson, Westbury 11. Howard Johnson, Commack 12. Howard Johnson Plaza, Saddle Brook 13. Ramada Hotel, Omaha 14. Ramada Plaza Hotel, Woburn EX-23.3 4 CONSENT OF O. MARSHALL DODDS COMPANY, INC., DATED AUGUST 27, 1997 CONSENT OF CONSULTANT --------------------- We consent to the inclusion of any form (whether in paper or digital format, including any electronic media such as CD-ROM or the Internet) of the Prospectus Supplement relating to Morgan Stanley Capital I Inc., Commercial Pass-Through Certificates, Series 1997-LL1, of our market study and/or appraisal with respect to the property or properties listed on the attached annex, and we consent to the reference to our firm under the caption "Experts" in such Prospectus Supplement. O. MARSHALL DODDS COMPANY, INC. By: /s/ O. Marshall Dodds --------------------------- Name: O. Marshall Dodds Title: President Signed on August 27, 1997. ----------- ANNEX ----- 1. Bainbride Mall 2. Barnwell Plaza 3. Bay Village Shopping Center 4. Belvedere Plaza 5. Blockbuster/Taco Bell-Lexington 6. Blowing Rock Square 7. Capitol Square 8. Catawba Village 9. Clover Plaza 10. Clusters of Whitehall 11. Crossroads Shopping Center 12. Cumberland Plaza 13. Cunningham Place 14. Dreher Plaza 15. Edens KW Winnsboro - Advanced Auto 16. Edgecombe Squre - Tarboro, NC 17. Edisto Village 18. Fairfield Square 19. Florence Mall 20. Forest Drive Shopping Center 21. Friarsgate Plaza 22. Gateway Plaza 23. Goldrush Shopping Center 24. Hampton Plaza 25. Jackson Plaza Expansion 26. Kalmia Plaza 27. Lakeside Shopping Center 28. Lakeside Square 29. Lawndale Village 30. Lexington Village 31. Mauldin Square 32. Mitchell Plaza 33. Northside Plaza - Clinton, NC 34. Nortshide Plaza - Henderson, NC 35. Northway Plaza 36. Palmetto Plaza 37. Raeford-Hoke Village - Raeford, NC 38. Raleigh Boulevard Shopping Center - Raleigh, NC 39. Ravenel Town Center 40. Rosewood Extension 41. Saluda Towne Center 42. Shoppers Port 43. Shotwell Square 44. South Square Shopping Center ANNEX (cont'd) -------------- 45. St. Georges Plaza 46. Stephens Plaza - Toccoa, GA 47. Taco Cid 48. Three Fountains Plaza 49. Trenholm Plaza 50. Tri-County Plaza - Royston, GA 51. Triangle Village 52. Waterway Plaza 53. Waynesville Plaza 54. Western Square 55. Westland Square 56. Widewater Square 57. Woodberry Plaza 58. Blockbuster-Broad Rivers 59. Blockbuster-Decker 60. Blockbuster-Irmo - St. Andrews BB 61. Blockbuster-Warner Robbins 62. 1634 Main Street 63. NBSC Building EX-23.4 5 CONSENT OF HOSPITALITY VALUATION SERVICES INTERNATIONAL, DATED AUGUST 25, 1997 CONSENT OF CONSULTANT --------------------- We consent to the inclusion of any form (whether in paper or digital format, including any electronic media such as CD-ROM or the Internet) of the Prospectus Supplement relating to Morgan Stanley Capital I Inc., Commercial Pass-Through Certificates, Series 1997-LL1, of our appraisal with respect to the property or properties listed on the attached annex, and we consent to the reference to our firm under the caption "Experts" in such Prospectus Supplement. HOSPITALITY VALUATION SERVICES INTERNATIONAL By: /s/ Anne R. Lloyd --------------------------- Name: Anne R. Lloyd Title: Senior Vice President Signed on August 25, 1997. ----------- ANNEX ----- 1. Grand Kempinski Dallas EX-23.5 6 CONSENT OF REGIONAL APPRAISAL ASSOCIATES, DATED AUGUST 25, 1997 CONSENT OF CONSULTANT --------------------- We consent to the inclusion of any form (whether in paper or digital format, including any electronic media such as CD-ROM or the Internet) of the Prospectus Supplement relating to Morgan Stanley Capital I Inc., Commercial Pass-Through Certificates, Series 1997-LL1, of our market study and/or appraisal with respect to the property or properties listed on the attached annex, and we consent to the reference to our firm under the caption "Experts" in such Prospectus Supplement. REGIONAL APPRAISAL ASSOCIATES By: /s/ Kevin P. Michaels __________________________________ Name: Kevin P. Michaels Title: Vice President Signed on August 25, 1997. ---------- ANNEX ----- 1. North Shore Towers Apartments Incorporated EX-23.6 7 CONSENT OF LANDAUER ASSOCIATES, INC., DATED SEPT. 3, 1997 [LANDAUER REAL ESTATE COUNSELORS LETTERHEAD] CONSENT OF CONSULTANT - --------------------- We consent to the inclusion of any form (whether in paper or digital format, including any electronic media, such as CD-ROM or the Internet) of the Prospectus Supplement relating to the Morgan Stanley Capital I Inc., Commercial Pass-Through Certificates, Series 1997-LL1, of our market study and/or appraisal in full (including all assumptions and limiting conditions contained therein) with respect to the property or properties listed below (to be collectively referred to herein as the "Product"), and we consent to the reference to our firm under the caption "Experts" in such Prospectus Supplement. 1. Appraisal and/or Market Study of Westshore Mall, Holland, MI (Appraisal dated December 31, 1996) 2. Appraisal and/or Market Study of Mansion Grove Apartments, Santa Clara, CA (Appraisal dated April 30, 1997) 3. Appraisal and/or Market Study of Fashion Mall at Keystone at the Crossing, Indianapolis, IN (Appraisal dated March 31, 1997) 4. Appraisal and/or Market Study of Westgate Mall (Appraisal as of September 1997) 5. Appraisal and/or Market Study of Yorktown Mall (Appraisal as of September 1997) 6. Appraisal and/or Market Study of Arrowhead Towne Center (Appraisal as of September 1997) LANDAUER ASSOCIATES, INC. By: /s/ Kevin D. Gray ------------------- Name: Kevin D. Gray, CRE Title: Managing Director Signed on: September 3, 1997 EX-23.7 8 CONSENT OF CB COMMERCIAL REAL ESTATE GROUP, INC., DATED SEPT. 10, 1997 CONSENT OF CONSULTANT --------------------- We consent to the inclusion of any form (whether in paper or digital format, including any electronic media such as CD-ROM or the Internet) of the Prospectus Supplement relating to Morgan Stanley Capital I Inc., Commercial Pass-Through Certificates, Series 1997-LL1, of our market study and/or appraisal in its entirety with respect to the property or properties listed on the attached annex, and we consent to the reference to our firm under the caption "Experts" in such Prospectus Supplement. CB COMMERCIAL REAL ESTATE GROUP, INC. By: /s/ Michael R. Pecorino ------------------------- Name: Michael R. Pecorino Title: SVP Signed on September 10, 1997. ------------ EX-99.1 9 APPRAISALS FOR MORGAN STANLEY CAPITAL I This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. ============= HVS - ------------- International ============= ================================================================================ ------------------------------- Economic Study and Appraisal ------------------------------- St. Petersburg Bayfront Hilton ------------------------------- St. Petersburg, Florida ------------------------------- Prepared by: Hospitality Valuation Services A Division of Hotel Consulting Services, Inc. 372 Willis Avenue Mineola, NY 11501 516-248-8828 Submitted to: Mr. Shirish Godbole Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 [LETTERHEAD OF HVS INTERNATIONAL HOSPITALITY VALUATION SERVICES] November 26, 1996 Mr. Shirish Godbole Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 Re: St. Petersburg Bayfront Hilton St. Petersburg, Florida Ref. #9610274 Dear Mr. Godbole: Pursuant to your request, we herewith submit our economic study and appraisal pertaining to the above-captioned property. We have inspected the site and facilities and analyzed the hostelry market conditions in the Pinellas County area. Our report was prepared in accordance with, and is subject to, the requirements of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and the Uniform Standards of Professional Practice (USPAP), as provided by the Appraisal Institute. Based on the available data, our analysis, and our experience in the hotel industry, it is our opinion that the market value of the fee simple interest in the subject property described in this report, as of January 1, 1997, is: $14,300,000 FOURTEEN MILLION THREE HUNDRED THOUSAND DOLLARS We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings and valuation. The economic study and appraisal is made part hereof, and must remain attached in order for the value opinion set forth to be considered valid. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. Very truly yours, HOSPITALITY VALUATION SERVICES A Division of Hotel Consulting Services, Inc. /s/ Catherine M. Tam Catherine M. Tam Consulting and Valuation Analyst /s/ Anne R. Lloyd-Jones Anne R. Lloyd-Jones, CRE Senior Vice President /s/ Stephen Rushmore Stephen Rushmore, CRE, MAI, CHA President HVS International, Mineola, New York Table of Contents - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table of Contents 1. Executive Summary .............................................. 1 2. Nature of the Assignment ....................................... 3 3. Description of the Land, Improvements, Zoning, Taxes, and Neighborhood ................................ 7 4. Market Area Analysis ........................................... 29 5. Overview of External Forces Affecting the U.S. Lodging Industry .......................................... 45 6. Lodging Market Supply and Demand Analysis ...................... 61 7. Projection of Occupancy and Average Rate ....................... 79 8. Highest and Best Use ........................................... 93 9. Approaches to Value ............................................ 95 10. Income Capitalization Approach ................................. 98 11. Sales Comparison Approach ...................................... 136 12. Cost Approach .................................................. 144 13. Reconciliation of Value Indications ............................ 150 14. Statement of Assumptions and Limiting Conditions ............... 154 15. Certification .................................................. 157 Addenda Photographs of the Subject Property Photographs of the Competitors Legal Description Synopsis of Franchise and License Agreements Explanation of the Simultaneous Valuation Formula Qualifications Catherine M. Tam Anne R. Lloyd-Jones, CRE Stephen Rushmore, CRE, MAI, CHA HVS International, Mineola, New York Executive Summary 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 1. Executive Summary Property: St. Petersburg Bayfront Hilton Location: 333 1st Street South St. Petersburg, Florida 33701 Date of Inspection: October 23, 1996 Interest Appraised: Fee simple, including the land, the improvements, and the furniture, fixtures, and equipment Date of Value: January 1, 1997 Land Description - ---------------- Area: +/-4.68 acres, or +/-204,000 square feet Zoning: CBD 2 - Central Business District Assessor's Parcel Number: Parcel 6-C-526-R1-5 Improvements Description - ------------------------ Age: Constructed in 1970, opened in 1971 Property Type: Full-service Guestrooms: 333 Number of Stories: 15 stories Food and Beverage Facilities: Charmene's Restaurant 160 seats Pizza Hut Food and Fun Court 32 seats Brandi's Lounge 85 seats Meeting Space: 15 rooms totaling 31,844 square feet (including pre-function space) Parking: 200 surface spaces Summary of Value Parameters - --------------------------- Highest and Best Use (as if vacant): Hold for future development Highest and Best Use (as improved): Lodging facility Marketing Period: Six to nine months Number of Years to Stabilize: Three Stabilized Year: 1999 HVS International, Mineola, New York Executive Summary 2 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Valuation Assumptions - --------------------- Mortgage Interest Rate: 9.5% Amortization Period: 25 years Debt Service Constant: .104844 Loan-to-Value Ratio: 70% Stabilized Inflation Rate: 3.5% Equity Yield Rate: 22.0% Terminal Capitalization Rate: 11.0% Brokerage and Legal Fees: 3.0% Holding Period: Ten years Calculated Discount Rate: 14.3 % Estimates of Value - ------------------ Income Capitalization Approach: $14,229,000 Sales Comparison Approach: $12,700,000 - $17,000,000 Cost Approach (Replacement Cost): $22,000,000 Market Value Conclusion: $14,300,000 Market Value Conclusion per Room: $43,000 HVS International, Mineola, New York Nature of the Assignment 3 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 2. Nature of the Assignment Subject of the Economic Study and Appraisal The subject of the economic study and appraisal is the fee simple interest in a +/-204,000-square-foot (+/-4.68-acre) parcel improved with a 333-room, full-service lodging facility known as the St. Petersburg Bayfront Hilton , which opened in 1971. In addition to guestrooms, the subject property contains a 160-seat restaurant, a 32-seat Pizza Hut Food and Fun Court, an 85-seat lobby lounge, roundly 31,800 square feet of meeting and banquet space, an outdoor swimming pool, a fitness center, and all other facilities and amenities typical of a first-class hotel. The hotel is located at the northwestern corner of the intersection formed by 1st Street South and 4th Avenue South in St. Petersburg. Municipal jurisdictions governing the property include the City of St. Petersburg, Pinellas County, and the State of Florida. The hotel's civic address is 333 1st Street South, St. Petersburg, Florida, 33701. Objective of the Economic Study and Appraisal The objective of the economic study and appraisal is to evaluate the supply and demand factors affecting the market for transient accommodations in the St. Petersburg area for the purpose of estimating the market value of the subject property. Market value is defined by the Office of the Comptroller of the Currency (OCC), 12 CFR, Part 34, 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 and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. buyer and seller are typically motivated; 2. both parties are well informed or well advised, and acting in what they consider their own best interests; 3. a reasonable time is allowed for exposure in the open market; HVS International, Mineola, New York Nature of the Assignment 4 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) Use of the Appraisal This appraisal is being prepared for the use of Morgan Stanley Mortgage Capital, Inc. in connection with their proposed financing of a package of 17 hotels, including the subject property, which are owned by Ashford Financial Corporation or related entities. The information presented in this report should not be disseminated to the public or third parties without the express written consent of Hospitality Valuation Services. Scope of the Appraisal All information was collected and analyzed by the staff of Hospitality Valuation Services. Data such as historical operating statements, site plans, floor plans, and so forth were supplied by the Ashford Financial Corporation and the Remington Hotel Company. Unless noted otherwise, we have inspected the competitive lodging facilities and analyzed the sales summarized in this report, and our value conclusion is based on this investigation and analysis. Property Rights Appraised The property rights appraised are the fee simple ownership of the land and improvements, including the furniture, fixtures, and equipment. The fee simple interest is defined as "absolute ownership unencumbered by any other interest or estate subject only to the four powers of government."(2) The subject property is appraised as a going concern (i.e., an open and operating facility). (1) Federal Register, Vol. 55, No. 165, August 24, 1990; p. 34696. (2) The Dictionary of Real Estate Appraisal - Second Edition, American Institute of Real Estate Appraisers, Chicago, IL, 1989, p. 120. HVS International, Mineola, New York Nature of the Assignment 5 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Method of Study The methodology used to develop this economic study and appraisal is based on the market research and valuation techniques set forth in the textbooks authored by HVS International for the American Institute of Real Estate Appraisers and the Appraisal Institute, entitled The Valuation of Hotels and Motels,(1) Hotels, Motels and Restaurants: Valuations and Market Studies,(2) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations,(3) and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations.(4) The appraisal will consider the three standard approaches to value: income capitalization, sales comparison, and cost. Because lodging facilities are income-producing properties that are normally bought and sold on the basis of capitalization of their anticipated stabilized earning power, the greatest weight is given to the value indicated by the income capitalization approach. We find that most hotel investors employ a similar procedure in formulating their purchase decisions, and thus the income capitalization approach most closely reflects the rationale of typical buyers. When appropriate, the sales comparison and cost approaches are used to test the reasonableness of the results indicated by the income capitalization approach. Ownership, Franchise, and Management A photocopy of the subject property's legal description, which was provided by the Ashford Financial Corporation, is presented in the Addenda to this report; the appraisers assume no responsibility regarding the accuracy of this document. The subject property opened in 1971 as the St. Petersburg Hilton Hotel under a franchise from the Hilton Hotel Corporation. This franchise agreement was terminated and the hotel was sold to Darryl Wilde and a group of investors in October of 1978. At that time, the property was renamed the Bayfront Concourse, and operation was assumed by Bayfront Investors Limited. A conversion to a Holiday Inn franchise was planned, contingent upon the infusion of appropriate funds to upgrade the facility. The (1) The Valuation of Hotels and Motels, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1978. (2) Hotels, Motels and Restaurants: Valuations and Market Studies, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1983. (3) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1990. (4) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992. HVS International, Mineola, New York Nature of the Assignment 6 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= renovation and conversion did not take place, and the owners filed for Chapter 11 federal bankruptcy protection. The hotel closed shortly thereafter. In 1986, the property was purchased at auction by a bank consortium for $4,200,000 (the amount of their outstanding loan). An affiliate of Seaway Hotels then purchased the hotel for $4,350,000, which included the acquisition of an operating lease of $150,000. The hotel was extensively renovated in 1986 and early 1987 and upgraded to its current condition; a full reopening as a Hilton Hotel took place in July of 1987. Funds for the acquisition and renovation of the property were obtained from Industrial Revenue Bond financing (first position); Carteret Savings (second position); and Seaway Hotels. By March of 1994, the hotel owners had filed for bankruptcy. In September of 1994, the debt and equity interests in the hotel were purchased by the Ashford Financial Corporation, the property's current owner. The subject property operates under a franchise agreement with the Hilton Hotel Corporation, which expires at the end of August, 2005; an abstract of this contract is presented in the Addenda to this report. The hotel is also subject to a management agreement with the Remington Hotel Corporation; for the purpose of this appraisal, we assume that the hotel will continue to be operated by the Remington Hotel Corporation as a Hilton Hotel throughout the projection period. Marketing Period In light of the renewed interest in hotel investments and the increasing availability of debt and equity capital, we believe that it will take six to nine months to sell the subject property assuming it is placed on the market at the concluded value. Effective Date of the Appraisal The effective date of the appraisal is January 1, 1997. All projections are expressed in inflated dollars, and the value estimate represents 1997 dollars. Date of Inspection The subject property was inspected by Catherine M. Tam on October 23, 1996. HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 7 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 3. Description of the Land, Improvements, Zoning, Taxes, and Neighborhood LAND The suitability of the land for the operation of a lodging facility is an important consideration affecting the economic viability of a property and its overall value. Factors such as size, topography, access, visibility, and the availability of utilities have a direct impact on the desirability of a particular site. Size and Topography The subject site is located at the northwestern corner of the intersection formed by 1st Street South and 4th Avenue South. Municipal jurisdictions governing the property include the City of St. Petersburg, Pinellas County, and the State of Florida. According to a November 17, 1989 survey prepared by George F. Young, Surveyor and Engineer, Inc., the rectangular subject parcel measures approximately +/-204,000 square feet, or +/-4.68 acres, and has 510 feet of frontage on 1st Street South to the east and 2nd Street South to the west. The 400.38-foot northern property line faces an adjoining parcel improved with an office building, and the 400.55-foot southern boundary faces 4th Avenue South. The topography of the parcel is generally flat and drainage is adequate; overall, the property's size and topography appear well suited for the current use. The site appears to be fully developed, with no excess land available for expansion. Easements The appraisers were not provided with any information concerning easements affecting the subject property. For the purpose of this appraisal, we assume that the property is not encumbered by any unusual or onerous easements that would affect its use or marketability. Regional Access A lodging facility's ease of access and visibility should be evaluated with respect to local modes of transportation and the area's demand generators. The subject property is readily accessible to a mixture of local, county, state and interstate highways. Primary regional access to downtown St. HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 8 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Petersburg is provided by I-275, the major interstate serving the Tampa Bay area. Other important roadways in the subject property's vicinity include I-4 and State Route 694. Interstate 275 is a local highway that connects with I-75 just north of Tampa and links that city with St. Petersburg. Interstate 275 extends just south of Tampa International Airport and crosses Old Tampa Bay via the Howard Frankland Bridge, then continues south through St. Petersburg and over the Sunshine Skyway Bridge to Bradenton, where it again intersects I-75. Gandy Boulevard (State Route 694) extends west from I-75 through Tampa and crosses Old Tampa Bay south of the Howard Frankland Bridge. This route intersects I-275 approximately eight miles north of downtown St. Petersburg. Interstate 4 originates near Daytona Beach on Florida's eastern coast, passes through Orlando, and terminates at the I-275 juncture in Tampa. This highway is the major east/west route used by motorists traveling to central Florida destinations such as Orlando and Tampa. Originating near Sault St. Marie at the northernmost tip of Michigan, I-75 is a primary north/south route through the eastern half of the United States. This highway passes through Ohio, Kentucky, Tennessee, and Georgia before terminating in Florida. Motorists traveling on I-75 can gain access to the subject property via I-275 or Gandy Boulevard. Overall, regional access to the subject property is favorable. The area's well-developed network of high-speed interstates and superior local roadways significantly increases the Hilton's primary market area and facilitates the capture of both overnight guests and restaurant patrons. Local Access and Visibility Interstate highways that provide access to the hotel from I-275 include I-375 and I-175. Interstate 375 (Exit 10 off I-275) extends east from I-275 and terminates at 6th Street North, approximately nine blocks northwest of the Hilton. Interstate 175 (Exit 9 off I-275), which extends east from I-275 to its termination three blocks southwest of the subject property, provides the most convenient access to the hotel from I-275. Motorists travel east from the I-175 terminus along Delmar Terrace, turn north onto 1st Street South, and continue north two blocks to the Hilton's entrance. Direct access to the site is provided by 1st Street South, which forms the eastern boundary of the subject parcel. As it passes the property, 1st Street South is a three-lane, one-way route carrying northbound traffic. The one-way street system HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 9 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= throughout downtown St. Petersburg facilitates traffic flow and does not impede access to the hotel; the Hilton's proximity to the terminus of I-175 is also advantageous. Secondary access is provided by 2nd Street South (a one-way, southbound route), which forms the parcel's western border. A clear view of the Hilton is available from the eastern portion of I-175 and from 1st Street South. The 15-story hotel rises well above most of the surrounding improvements, and thus is highly visible throughout the downtown region. In addition, the property is bordered by roadways on the south, east, and west, and its parking area separates the hotel improvements from the office building that adjoins the parcel to the north. Airport Access Tampa International Airport is the major commercial airport serving the Tampa Bay area. Access to downtown St. Petersburg from Tampa International Airport is provided by I-275, which crosses Old Tampa Bay via the seven-mile long, eight-lane Howard Frankland Bridge. The expansion of the Howard Frankland Bridge, which was completed in 1992, has significantly improved transportation between Tampa and St. Petersburg and neighboring communities. This expansion more than doubled the capacity of the bridge, and has alleviated the congestion problem that plagued the original span. As a result, travel time between St. Petersburg and Tampa International Airport has been reduced significantly, particularly during peak traffic periods. Guests of the subject property can now reach the Tampa International Airport in 20 to 25 minutes under normal driving conditions. A few commercial airlines and private planes use St. Petersburg-Clearwater International Airport, which is located west of the Howard Frankland Bridge in Clearwater. To reach the subject property from this facility, motorists take Roosevelt Boulevard to southbound I-275, and continue into downtown St. Petersburg. Private and corporate planes also have access to Albert Whitted Airport, which is located two blocks south of the subject property, off 1st Street South. Access to Local Demand Generators The St. Petersburg Bayfront Hilton is situated in close proximity to a number of the area's generators of lodging demand. The following table outlines some of these demand generators and their distance from the subject site. HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 10 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 3-1 Local Demand Generators - -------------------------------------------------------------------------------- Approximate Distance from Subject Site Approximate Driving Demand Generator (in Miles) Time (in Minutes) ---------------- ---------- ----------------- Bayfront Center <.0.1 0 Florida International Museum 0.5 5 Poynter Institute 0.5 5 University of South Florida 0.5 5 Thunderdome 1.5 5 St. Petersburg Beach 10.0 15 - -------------------------------------------------------------------------------- The subject site is situated in close proximity to leisure attractions, offices, and educational institutions which generate some room night demand; however, a majority of the Hilton's occupancy is derived from meeting and group business that originates from outside the St. Petersburg area. Utilities The subject site is served by all necessary utilities, which are provided as follows. ================================================================================ Table 3-2 Available Utilities - -------------------------------------------------------------------------------- Utility Provider ------- -------- Water City of St. Petersburg Sewer City of St. Petersburg Electricity Florida Power Gas People's Gas Garbage and Trash Waste Management of Tampa Local Telephone GTE Long-Distance Telephone MCI - -------------------------------------------------------------------------------- Soil and Subsoil Conditions Geological and soil reports were not provided to the appraisers or made available for review during the preparation of this report. The appraisers are not qualified to evaluate soil conditions other than by a visual inspection of the surface. Nuisances and Hazards The appraisers have not been informed of any site-specific nuisances or hazards, and there were no visible signs of toxic ground contaminants at the time of our inspection. Because the appraisers are not experts in this field, we do not warrant the absence of hazardous waste, and we urge the reader to obtain an independent analysis of this factor. HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 11 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Flood Zone Possible locational hazards include flood potential. According to the Flood Insurance Rate Map for Community Number 125148, Panel 23 (revised in 1983), part of the subject site lies within the A8 flood zone, which represents an area of 100-year flood. Seismicity Information regarding the seismicity of the area surrounding the subject property was not available, but we assume that the hotel is not situated in an area of seismic danger. Conclusion The subject parcel appears well suited as the site of a lodging facility. We have analyzed the issues of size, topography, access, visibility, and the availability of utilities, and we note the following advantages and disadvantages. Advantages o Good visibility throughout the downtown area o Harbor view from most guestrooms o Convenient access to downtown St. Petersburg and Tampa Disadvantages o Non-oceanfront location The subject site's capacity, configuration, and access pattern are considered appropriate for its current use. The parcel is well situated with respect to surrounding highways, and access is favorable. Transportation from the Hilton to Tampa International Airport was significantly improved by the recent expansion of the Howard Frankland Bridge, and a clear view of the hotel is available from the surrounding area. IMPROVEMENTS The quality of a lodging facility's physical improvements has a direct influence on its marketability and attainable occupancy and average rate. The design and functionality of the structure can also affect operating efficiency and overall profitability. This section investigates the subject property's physical improvements and personal property in an effort to determine how they contribute to total value. The following description of the improvements is based on our inspection of the hotel and information provided by the subject property's management representatives. The St. Petersburg Bayfront Hilton is a full-service lodging facility containing 333 rentable units, +/-31,844 square feet of meeting space, two HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 12 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= restaurants, a lounge, an outdoor swimming pool, a health club, a gift shop, and appropriate back-of-the-house facilities. The 15-story property was constructed in January of 1970, opened in 1971, and is 26 years old as of the date of this appraisal. As noted earlier, the hotel was acquired by the Ashford Financial Corporation in September of 1994. Overall, the hotel is judged to be in good condition, and management representatives report that all building systems are in working order. The property operates under a license agreement with the Hilton Hotel Corporation, and reportedly meets the standards for lodging facilities of that brand. Based on our inspection and information provided by management representatives, the following table summarizes the facilities available at the subject property. HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 13 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 3-3 Facilities Summary - -------------------------------------------------------------------------------- Guestrooms (No. of Units) Kings 121 Double/doubles 184 Suites 28 ------ Total 333 Food and Beverage Outlets (No. of Seats) Charmene's Restaurant 160 Pizza Hut Food and Fun Court 32 Brandi's Lounge 85 Meeting and Banquet Rooms (Square Footage) Grand Ballroom 7,221 Bayboro Room 986 Skyway Room 475 Pier Room 450 Harborview Room 731 Boardroom 423 Dali Room 2,120 Janus Room 1,749 Whitted Room 2,067 Poynter Room 2,220 Demens Room 975 Williams Room 975 Pinellas East 496 Pinellas West 192 Executive Conference Center 1,664 Pre-Function Space 9,100 ------ Total 31,844 Recreational & Other Amenities Outdoor swimming pool and whirlpool, health club, gift shop, travel agency Surface Parking Spaces 200 Elevators Three passenger, one service Life-Safety Systems Full sprinkler system, hard-wired smoke alarms Laundry Two 125-lb.-capacity washers, one 75-lb.-capacity washer, four 110-lb.-capacity dryers Construction Details Steel and concrete structure, paint and stucco exterior, double-paned, glazed windows HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 14 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Property Exterior The hotel structure is situated on the south side of the site. Paved parking areas accommodating 200 vehicles are located on the north side of the parcel; additional parking is available to hotel guests at the Bayfront Center, across the street from the Hilton. Primary vehicular access to the subject property is provided by 1st Street South (a one-way, northbound route), which forms the site's eastern boundary. From 1st Street South, guests can either drive through the hotel's porte cochere to the parking lot or enter the parking lot directly through a separate driveway entrance located just north of the porte cochere. Secondary access to the parking lot is provided by 2nd Street South (a one-way, southbound route), which forms the subject site's western boundary. Two main entrances to the hotel are available. One is located at the porte cochere, on the east side of the hotel structure; another is found on the north side of the building, and is the most convenient means of access from the parking lot. A third entrance is located on 4th Avenue South (a one-way, westbound route), which borders the subject site to the south; this entrance provides direct access to the meeting and banquet areas and the leased health club, which is open for public membership. Service traffic can gain direct access to the hotel's loading dock, which is located on 2nd Street South. The hotel building is constructed of steel and poured/cast-in-place concrete. The exterior walls consist of poured concrete and feature an off-white paint and stucco finish. None of the hotel's double-pane, glazed windows can be opened. Roofing is of metal and concrete, and is covered with asphalt and roll roofing. The red Hilton logo and name mark the structure's west side, and a sign bearing the Hilton logo is installed on the east side of the building. Construction and Design The subject property features a 15-story guestroom tower and two adjoining one-story buildings that house a majority of the public space. The one-story structure located on the north side of the improvements was constructed when the building was gutted and renovated in 1986/87, prior to the reopening. This new construction involved expanding the lobby and installing a new entrance on the east side of the hotel. Another one-story building is situated immediately south of the guestroom tower; this structure houses the meeting space and most of the back-of-the-house facilities. HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 15 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= A majority of the Hilton's public space, including the lobby, the administrative offices, the food and beverage outlets, the gift shop, the outdoor swimming pool, the meeting space, and the back-of-the-house facilities, is located on the first two floors. All of the function rooms are situated on the first floor. Guestrooms are located on the second through 15th floors. Until December of 1995, the 14th and 15th floors had been designated as concierge levels, but this designation has been terminated. The area that formerly served as the concierge lounge is situated on the 15th floor, and is now used as overflow meeting space. Lobby The lobby occupies the northeastern portion of the hotel's first floor. Guests enter the building through the porte cochere, and the front desk is situated directly to their left; an alcoved sitting area is located directly right of the main entrance. Brandi's Lounge and Charmene's Restaurant lie ahead, in the northwestern portion of the first floor. Guest elevators, which are not visible from the front desk, are located beyond the front desk to the left, before Brandi's Lounge. Guests who use the second main entrance, which is located on the hotel's north side, find Brandi's and Charmene's to their left, the front desk and alcoved sitting area to their right, and the elevator lobby directly ahead. A gift shop is situated to the right of the guest elevators, and a travel agency is located to the left. Two hallways extend from either side of the guest elevators and lead to the hotel's south side, which houses the meeting and banquet space, the sales and executive offices, the health club, and the Pizza Hut Food and Fun Court. Most of the subject property's public space was recarpeted in 1995, including the lobby. Food and Beverage Outlets The subject property features three food and beverage outlets. Charmene's, which is located west of the lobby, is the hotel's main restaurant, and provides breakfast, lunch, and dinner seven days a week. This facility is open from 6:30 am to 2:00 pm and from 5:00 pm to 10:00 pm (9:00 pm on Sundays). The north side of the 160-seat restaurant has a casual atmosphere, featuring open tables and a view of the hotel's lobby to the east and the outdoor pool to the north, while the south side features a more intimate setting, featuring a number of booths and small, private rooms. In 1993 (under Seaway Management), Charmene's was divided into two areas, one of which was occupied by Eli's Steakhouse. After acquiring the hotel, the Remington Hotel Corporation returned the food and beverage outlets to their former configuration (i.e., one 160-seat facility known as Charmene's). Overall, the restaurant appears to be in good condition; a cosmetic upgrading was completed in 1996. Management representatives indicate that they HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 16 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= intend to change the restaurant's overall concept and menu in the near future. Brandi's Lounge adjoins the east side of Charmene's. Guests enter the lounge from the lobby and encounter the bar on the left; Charmene's is located directly ahead. Including the lounge area that is situated south of the bar, Brandi's has a total seating capacity of 85. In 1993, the New York Deli was converted to the Pizza Hut Food and Fun Court. This 32-seat facility, which is located in the southeastern portion of the hotel, also has a separate entrance from 1st Street South. Open for lunch daily, this food and beverage outlet offers standard fare from Pizza Hut (made on the premises), as well as various deli selections and frozen yogurt. All items are available for take-out or delivery (including guestroom pizza delivery), or can be eaten on the premises. The Food and Fun Court also offers an array of video games and vending machines. The addition of this outlet has enabled the subject property to offer guests a fast and inexpensive food alternative while also attracting patronage from nearby buildings. Meeting and Banquet Space As noted earlier, the Hilton's function space is concentrated on the first floor, in the south side of the building. Fifteen meeting and banquet rooms provide a total of 22,744 square feet of space, not including 9,100 square feet of pre-function space. As guests enter the south wing of the hotel, the 7,221-square-foot Grand Ballroom (which is divisible into two sections) is situated to the left (west). A hallway extending to the right (east) leads to the Bayboro Room, the Board Room, the Skyway Room, the Pier Room, the Harbor Room, and the Pinellas East and West Rooms. These facilities have no direct kitchen access, and thus are not used for banquets. Farther south, another hallway extends in a westerly direction along 4th Avenue South, providing access to the hotel's Williams Room, Demens Room, Dali Room, Janus Room, Whitted Room, Poynter Room, and the Executive Conference Center. These rooms are connected to the kitchen by a service corridor. The Dali, Janus, and Whitted Rooms can be combined to form what is commonly referred to as the Junior Ballroom. The Demens Room and the Williams Room, which each measure 975 square feet, can also be joined together. The Executive Conference Center, which located in the southwest corner of the hotel, can be divided into eight separate rooms. By virtue of its disproportionately large inventory of meeting space, the Hilton successfully penetrates those portions of the meeting and group market HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 17 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= that require a high ratio of meeting space to guestrooms. Management representatives report that carpeting in many of the meeting rooms was replaced in 1995, and the lighting grids in the Grand Ballroom were replaced in 1996. Guestrooms The subject property's 333 guestrooms consist of 121 king units, 184 double/doubles, and 28 suites. The average guestroom measures 325 square feet. Typical king rooms are furnished with a king bed, a chest of drawers, a television stand, a desk and chair, two nightstands, and either a sofa, a lounge chair, or an activity table with two chairs. Standard double/double rooms are equipped with two double beds, a chest of drawers, a television stand, a desk and chair, and one nightstand. All units offer a remote-control color television with on-command video, a digital alarm clock, a telephone, and an iron and ironing board. All guestrooms feature carpet flooring, vinyl wallcovering, popcorn ceilings, and a combination of fluorescent and incandescent lighting. At the time of our inspection, the subject property's guestrooms appeared to be in good condition. Guestrooms soft goods (including carpets, draperies, and bedspreads) were replaced in all units in 1994 and 1995. The subject property acquired on-command video in 1995, and the guestroom telephone and key systems were upgraded in 1996. Nine units have been modified for the use of disabled guests, and four of these have roll-in showers; management representatives indicate that the number of wheelchair-accessible guestrooms will be increased to 12 in the near future. Guestroom Corridors Guestroom corridors are wide enough to permit the easy passage of housekeeping and room service carts. The corridors are finished with carpets, vinyl wallcovering, popcorn and tile ceilings, and fluorescent lighting fixtures. Stairwells are located at each end of the corridors, and vending and ice machines are located on the west end of the guestroom floors. Management has created no-smoking levels on Floors 3, 4, 5, 6, 7, 9, 10, and 14 floors; the west wing of the 11th Floor has also been set aside for non-smoking guests. This yields a total of 215 units, which is more than 64% of the hotel's overall room count. This type of amenity costs very little and requires no structural changes. We expect that the number of rooms allocated for this purpose will be increased or reduced depending on demand and guest response. HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 18 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Recreational Amenities Recreational amenities at the subject property include an outdoor swimming pool, an outdoor whirlpool, a health club, and a small game room. The outdoor swimming pool and whirlpool are located near the northwest corner of the hotel structure, just outside Charmene's Restaurant. A path extending west from the hotel's north entrance leads to the swimming pool; this is also accessible from Charmene's and Brandi's, and from the west end of the second floor (via a set of outdoor stairs). St. Anthony's Health and Fitness Connection, which is leased to an outside operator, is located in the southeastern corner of the hotel, directly east of the entrance from 4th Avenue South. The health club is equipped with a number of treadmills, stationary bikes, stairclimbers, rowers, Cybex machines, free weights, and an aerobics floor. Hotel guests are charged $5 to use the health club, and this amount can be charged to their rooms. A small selection of video games is available in the Pizza Hut Food and Fun Court, in an area that is kept open when the food service area is closed. Additional amenities at the hotel include a gift shop (installed in 1996) and an in-house travel agency, which are both leased to outside operators. Back-of-the-House Space A majority of the subject property's back-of-the-house space is situated on the first two levels. The kitchen is strategically located on the west side of the first level, between Charmene's and the banquet rooms. According to management representatives, the kitchen is of sufficient size and is well equipped to meet the property's needs. The southern half of the kitchen serves Charmene's and handles room service, while the northern half is dedicated to banquet use. A service corridor extends from the kitchen and provides direct access to the Grand Ballroom, the Junior Ballroom (the Janus, Dali, and Whitted Rooms), the Demens and Williams Rooms, the Poynter Room, and the Executive Conference Center. Most of the subject property's administrative offices are located on the east side of the first level. The reservations and accounting offices, which are located behind the front desk, connect to the sales and executive offices, which are situated farther south. A set of doors leading to the sales and executive offices is located on the east side of the Grand Ballroom pre-assembly area, just north of the hallway that extends east to the smaller meeting rooms. The human resources office and the employee dining area are located on the west side of the first level, west of the kitchen; an employee entrance is located on 2nd Street South, just south of the loading dock. HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 19 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Housekeeping, laundry, mechanical, and electrical areas are located on the second level. The laundry room is equipped with two 125-pound-capacity washers, one 75-pound-capacity washer, four 110-pound-capacity dryers, two folders, and one ironer. The property uses chutes to transport soiled laundry, and storage areas for housekeeping supplies are located on Floors 3 through 15. Based on information provided by management representatives, all of the subject property's operating systems are in working order. Vertical Transportation Vertical transportation is provided by one passenger elevator with a 4,000-pound capacity, two with 3,000-pound capacities, and one service elevator with a 2,500-pound capacity. The three passenger elevators are located slightly east of the center of the tower, and the service elevator is located at the west end. All four elevators are electric and provide access to each of the hotel's 15 floors; the elevators were last renovated in 1994, and the cabs were being upgraded at the time of our inspection. In addition, stairwells are located at each end of the guestroom tower. Heating, Ventilation, and Air Conditioning Heating is provided by four natural-gas boilers that were installed during the 1987 renovation. Heating, ventilation, and air conditioning (HVAC) for the guestrooms are provided by a centralized, two-pipe system that was also installed in 1987. The centralized HVAC system for the public areas employs one packaged air conditioner and 18 air handling units. The subject property has a total of four chillers. Management representatives indicate that with the exception of a main hallway air conditioning unit that needs replacement, all HVAC equipment is in good working condition. Fire Protection Fire sprinklers are installed throughout the subject property. These are augmented by hard-wired, single-station smoke alarms in the guestrooms, public spaces, and employee work areas and a voice alarm system. The property's fire alarm is wired to the front desk, but is not connected to the fire department. Security Guestrooms are equipped with electronic locks, which provides some measure of security. We also note that the property features separate entrances for employees and guests, and access to the swimming pool area and to certain hotel entrances is restricted at night. Management representatives believe that security is adequate. Asbestos According to information provided by management representatives, there is no asbestos present in the subject property's improvements; however, we have not been provided with an asbestos report to confirm this assertion. HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 20 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The reader should be advised that any costs associated with asbestos removal or containment may have an unfavorable impact on the hotel's market value, and the estimate set forth in this appraisal reflects our value conclusions prior to the deduction of any such costs. We suggest that interested parties initiate an independent analysis regarding current asbestos levels and the capital expenditures necessary to remove any asbestos that is present. ADA Conformance Following the January 26, 1992 passage of the Americans with Disabilities Act (ADA), hotels are subject to new physical standards. The appraisers are not experts on ADA compliance, and we render no opinion regarding the subject property's conformance to ADA standards. Capital expenditures that may be necessary to bring the property into accordance with the ADA will reduce our estimate of market value. Any ongoing costs related to ADA regulations are expected to be funded by normal replacement reserves. Improvements Conclusion Overall, the subject property's improvements appear appropriate for hotel use. The hotel features good-quality construction, and the building systems are reported to be in good working order. Although the property opened in 1971, an extensive renovation that was completed in 1987 addressed most of the building systems. The guestrooms and public areas appear to be in good condition, and should require only normal maintenance in the near future. The property offers an unusually large amount of meeting and banquet space (more than 31,000 square feet) for a 333-room hotel, which is a competitive advantage in terms of capturing meeting and group demand. The food and beverage outlets are in good condition, and enhance the hotel's ability to attract both guests and local patrons. For the purpose of this appraisal, we assume that the Hilton will be maintained in its current condition throughout the ten-year holding period. Specifically, we assume that management will employ standard preventive maintenance measures, and that a reserve for replacement fund will be established to cover the cost of any capital expenditures that may be necessary in the future. ZONING According to the zoning regulations of the City of St. Petersburg, the subject property is zoned as follows. CBD 2 - Central Business District This zoning designation predominates in the subject property's immediate area. Uses that are expressly permitted under this classification include lodging facilities, office towers, and retail outlets. Based on this HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 21 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= information, the subject property appears to conform to local zoning regulations. We assume that all necessary permits and approvals have been secured (including an appropriate liquor license), and that the subject property was constructed in accordance with local zoning ordinances, building codes, and all other applicable regulations. Our zoning analysis should be verified before any physical changes are made to the hotel. ASSESSED VALUE AND TAXES Property tax is one of the primary revenue sources of municipalities. Based on the concept that the tax burden should be distributed in proportion to the value of all properties within a taxing jurisdiction, a system of assessments is established. Theoretically, the assessed value placed on each parcel bears a definite relationship to market value, so properties of equal market value will have similar assessments and properties with higher and lower values will have proportionately larger and smaller assessments. Depending on the taxing policy of the municipality, property taxes can be based on the value of the real property or the value of the personal property and the real property. The taxing jurisdiction governing the subject property assesses both real and personal property. Assessments are based on an income approach, and the assessed value ratio is reported to be 100% of market value. Because the objective of assessed value is to maintain a specific value relationship among all properties in a taxing jurisdiction, comparable hotel assessments should be evaluated to determine whether the subject property's assessed value is equitable. A review of the assessed values of four comparable hotels in Pinellas County reveals the following information. ================================================================================ Table 3-4 Assessed Value of Comparable Hotels - -------------------------------------------------------------------------------- Total Assessment Assessment per Room ----------------------- -------------------- No. of Real Personal Real Personal Hotel Rooms Property Property Property Property - -------------------------------------------------------------------------------- Subject Property 333 $9,312,900 $1,312,340 $27,967 $3,941 Renaissance Vinoy 360 29,780,200 N/A 82,723 N/A Heritage Holiday Inn 72 1,247,300 267,280 17,324 3,712 Courtyard by Marriott 149 3,288,300 90,180 22,069 605 Hampton Inn 118 2,498,900 470,830 21,177 3,990 Source: Pinellas County Assessor's Office HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 22 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The previous table illustrates the assessed values of the Hilton and four of its competitors that are located in Pinellas County. We note that although the two properties compete by virtue of their nearby locations, the Renaissance Vinoy offers facilities that are far superior to those of the subject property; consequently, it is appropriate that the total per-room assessment of the Renaissance Vinoy is substantially higher than that of the Hilton. The subject property's real property assessment is higher than those of the Heritage Holiday Inn, the Courtyard, and the Hampton Inn on a per-room basis. Given its greater scope of facilities (and its extensive meeting space in particular), the Hilton's higher assessed value appears appropriate. The subject property's per-room personal property assessment is higher than those of the Courtyard and Heritage Holiday Inn, but is slightly lower than that of the Hampton Inn, which again appears reasonable given the amount and condition of its personal property. The Hilton's tax burden is allocated to several categories: Pinellas County, School (State of Florida), School (City of St. Petersburg), City of St. Petersburg, Southwest Florida Water Management, Miscellaneous Pinellas County, Juvenile Welfare, Suncoast Transit Authority, and City of St. Petersburg Debt. The overall tax rate equates to 25.6430 per $1,000 of assessed value for real property, and 24.2323 per $1,000 of assessed value for personal property. In 1996, the Hilton's assessed values were $9,312,900 for real property and $1,312,340 for personal property. Thus, the subject property's 1996 tax burden is calculated as follows. Real Property: $9,312.900 x 25.6430 = $238,810.69 Personal Property: $1,312.340 x 24.2323 = $31,801.02 The subject property's total 1996 tax burden is $270,611.71. Applying projected inflationary increases to this amount yields the following forecast of property taxes. HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 23 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 3-5 Forecast of Property Taxes - -------------------------------------------------------------------------------- 1997 1998 Stabilized ------------------------------------------------------------------- Projected Property Taxes (+000) $280 $290 $300 - -------------------------------------------------------------------------------- NEIGHBORHOOD The neighborhood surrounding a lodging facility often has an impact on a hotel's status, image, class, style of operation, and sometimes its ability to attract and properly serve a particular market segment. This section investigates the subject property's neighborhood and evaluates any pertinent locational factors that could affect its occupancy, average rate, food and beverage revenues, and overall profitability. The subject property's neighborhood features a mixture of first-class retail and office space along the west side of 1st Street South, north of the hotel. Low-rise commercial buildings and middle-income residential housing characterize the area south of the Hilton along 1st Street South and the secondary streets west of 1st Street South. A number of vacant lots are also located in the immediate area. The hotel is situated approximately two blocks south of the most densely developed portion of St. Petersburg's central business district (the area that houses the newest and largest offices) and one block west of the Tampa Bay coastline. Low-rise commercial buildings and middle-income residential developments prevail in the areas south and west of the Hilton, which is located at the southernmost end of downtown St. Petersburg. The blocks north of the hotel are dominated by commercial uses such as office space and retail outlets. Directly north of the subject property is the 12-story, 239,000-square-foot City Center office building, which was completed in 1984; anchor tenants in this retail/office complex include Northern Trust Bank, Hough & Co., and VSI. The center of the downtown district commences one block north of the City Center building, near 1st Avenue North and 1st Avenue South. Pinellas County's newest and tallest office building, the Barnett Tower, is located in this district. This structure, which opened in the spring of 1991, contains 263,000 square feet of office space on 26 floors. The first two levels house retail outlets and restaurants; the building's total square footage is estimated at 307,000. Other major office buildings in the central business district include the Bankers Financial Center, the South Trust Building, and Plaza Tower and Shops. The Bankers Financial Center (which was HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 24 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= completed in 1984) is a 17-story, 260,000-square-foot building with a 500-car garage and 5,000 square feet of retail space. Recently acquired by Bankers Life Insurance Company, the tenth floor underwent a $175,000 build-out and renovation that was completed in early 1996. The South Trust Building (which was constructed in 1985) is a 17-story, 207,000-square-foot office building with a 225-car garage. The Plaza Tower and Shops is a retail and office complex that measures approximately 150,000 square feet. This facility houses companies such as Republic Bank, Cherry Bekaert & Holland, and J.S.A. Health Care Corp. The dominant employment sectors in downtown St. Petersburg are health and Medical Services; Finance, Insurance, and Real Estate; Publishing; Business Services; Retail Trade (including hotels ); and Education and Research. The area has three major hospitals, and the downtown market contains roundly 1,960,000 square feet of multi-tenant office space. The ten-square-mile district known as the St. Petersburg Enterprise Zone includes all of the downtown area and adjacent neighborhoods to the west and south. Those who establish or expand businesses in the zone, hire employees from the zone, or contribute to approved community projects within the zone can receive valuable state tax credits; in 1995, 40 businesses received a total of $500,000 in state tax credits as part of this program. A significant amount of the downtown office space was constructed in the 1980s, when the area underwent a surge in development activity. At that time, the St. Petersburg central business district was expected to emerge as the second most prominent regional center, after Tampa; however, market trends and economic conditions in the late 1980s and early 1990s had a sobering effect on the absorption of new space. High vacancies placed severe downward pressure on rental rates, and as a result, the downtown district has evolved into a secondary office location within the Tampa-St. Petersburg market. At present, much of the space is occupied by the back-office components of firms located in Tampa. Other tenants include financial institutions, insurance companies, law firms, and accounting firms. On the whole, these types of businesses do not produce strong hotel demand, and the number of commercial room nights generated by the central business district office market is limited. One of the area's noted tourist attractions is the Pier, a mixed-use complex that features food and beverage facilities, an aquarium, and retail outlets housed in a five-story building at the end of the St. Petersburg Pier. This facility was expanded and renovated, at an estimated cost of $12,500,000, in HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 25 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 1988. Annual attendance is approximately 2,000,000, and the Pier is estimated to have an annual economic impact of some $20,000,000. The Pier Aquarium is managed by the University of South Florida Science Department (St. Petersburg campus) and hosts an estimated 750,000 visitors each year. Al Lang Stadium is located on the downtown waterfront at 1st Street South, just east of the subject property. This 6,300-seat, outdoor stadium is home to the St. Petersburg Cardinals (the area's permanent minor league baseball team), and is used by the St. Louis Cardinals during spring training. The Tampa Bay Devil Rays will also use the stadium for spring training during their first season in 1998. The Bayfront Center, which is situated directly southeast of the Hilton, features an 8,400-seat arena and the Mahaffey Theater for the Performing Arts, which seats 2,000 people. Approximately 1,800 parking spaces are available on the site. Both the Tampa Bay Terror, a member of the National Professional Soccer League, and the Tampa Bay Windjammers, a member of the United States Basketball League, play home games at the center. The arena has also been used to host "Disney on Ice," and three major boat shows are held there each year. The center was constructed in 1990 at a cost of $25,500,000, which included a renovation of the existing arena. Immediately north of the Pier, along the waterfront, is the newly restored Renaissance Vinoy Hotel. This facility was constructed in the 1920s and reopened as Stouffer's Vinoy Resort in mid-1992. The property offers 360 guestrooms (102 of which are housed in a new wing that adjoins the original structure), a parking garage, a marina, a golf course, and a spa. Although it is not located in the subject property's immediate neighborhood, the Thunderdome (formerly known as the Suncoast Dome, and soon to be renamed Tropicana Field) is one of downtown St. Petersburg's important activity centers. This $110,000,000 facility was completed in February of 1990 and is located roughly 12 blocks west of the Hilton, near the intersection of Interstates 275 and 175. The multi-purpose, domed stadium is the largest enclosed, climate-controlled sports and entertainment facility in Florida, and seats 42,000 people for baseball and up to 50,000 for concerts. This venue also hosts a variety of sports events, trade shows, conventions, and so forth. The stadium features 152,000 square feet of uninterrupted floor space and 4,250 on-site parking spaces, and there are plans to expand on-site parking to 7,000 spaces. HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 26 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The primary purpose of constructing the Thunderdome was to attract a National League baseball team. Although the city was unsuccessful in obtaining an expansion team in 1992, it was announced on March 9, 1995 that a team tentatively known as the Tampa Bay Devil Rays would begin play at the Thunderdome. This new major league franchise, which is expected to enter the American League, was acquired for a reported price of $130,000,000. Although this franchise's impact on the local hotel market remains unknown, the subject property is expected to capture some demand generated by visiting teams, fans, and members of the press. The National Hockey League Tampa Bay Lightning and the Arena Football League's Tampa Bay Storm have set staggering single-game attendance records in the Thunderdome in recent years. On October 7, 1996, the Thunderdome closed for a $62,000,000 renovation. The stadium will undergo a 15-month upgrade, resulting in 3,000 additional seats (increasing the seating capacity for baseball to 45,000), 19 new escalators and elevators, wider concourses, a new food court, 85 new concession and souvenir counters, and fan and children's activity areas. The construction project is anticipated to create an economic spin-off of $125,000,000, including 1,900 new jobs and $39,000,000 in wages. According to the Tampa Bay Devil Rays' managing general partner, the home-base presence of the team will create an annual economic impact estimated at $170,000,000 to $200,000,000 once they take the field in 1998. In March of 1994, the Thunderdome hosted the first round of the NCAA basketball championships, and it will host the Final Four of this event in 1999. The facility will also be the site of the men's NCAA basketball southeast regional tournament in 1998. The City of St. Petersburg is expected to reap an economic impact of nearly $70,000,000 from the two events. Other attractions in downtown St. Petersburg include a number of museums. The Salvador Dali Museum houses the world's largest collection of the artist's work, valued at over $125,000,000. This facility underwent a $1,100,000 expansion in 1988 involving the addition of a community room, a library, and storage space for the collection; during 1995, an interior renovation valued at $165,000 expanded the museum's wall space by 130%. It is estimated that 250,000 visitors attend the museum each year. The Museum of Fine Arts features European, American, pre-Columbian and Asian art, sculpture, and period rooms with antiques and historical furniture. The museum is renown for its gallery of Steuben crystal. In 1988, HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 27 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= this Mediterranean-style facility, which is located on the downtown waterfront, underwent a $2,200,000, 30,000-square-foot expansion involving the addition of a second floor. The Florida International Museum (formerly known as the Florida Cultural Exhibit Center) opened in 1994 on the site formerly occupied by the Maas Brothers department store. Acquired and renovated by Florida Cultural Exhibitions, this facility is designed to house traveling international exhibitions. The first exhibit, "Treasures of the Czars," attracted more than 600,000 visitors in six months of 1995. The second exhibition, "Splendors of Ancient Egypt," opened in February of 1996 and attracted approximately 300,000 people during its six-month run. The museum's current exhibition, "Alexander the Great," began on October 1, 1996 and will continue until the end of March, 1997; this show is expected to attract 500,000 attendees. Other museums in the area include Great Explorations and the St. Petersburg Museum of History. A $1,000,000 renovation of a former sporting goods store produced Great Explorations. This facility, which houses rotating exhibits, a gift shop, and hands-on activities in the arts, science, and health fields, draws approximately 130,000 visitors annually. The St. Petersburg Museum of History features three separate galleries, and recently underwent a $1,000,000 renovation and expansion. The Poynter Institute and the St. Petersburg (Bayboro) campus of the University of South Florida (USF) are located south of the subject property, within walking distance. The Poynter Institute is a private, non-profit, accredited teaching and research institution dedicated to newspaper and broadcast journalism. The University of South Florida offers academic studies to approximately 2,500 students; the school also offers a graduate program in marine sciences. The $22,000,000 USF/DEP Marine Research Facility, developed on the St. Petersburg campus in 1994, is one of the most prestigious research facilities of its type in the country. The joint venture project was developed to serve the Florida Marine Research Institute, a branch of the Florida Department of Environmental Protection (DEP), and USF's marine science department. The six agencies that comprise the research complex currently employ more than 500 people, and bring important educational conferences and meetings to the area. In conclusion, the neighborhood surrounding the St. Petersburg Bayfront Hilton appears moderately well suited for the operation of a first-class lodging facility. During the past 15 years, downtown St. Petersburg has HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 28 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= experienced a surge of development activity, creating a small downtown urban environment consisting of waterfront parks, a university, numerous museums, public entertainment facilities, retail outlets, office buildings, and hotels. As noted earlier, the market also benefits from an extensive roadway system. However, only a small base level of commercial and meeting demand is generated by nearby offices, and a majority of the Hilton's occupancy is derived from groups that originate outside of St. Petersburg. Although entertainment facilities such as the Pier, the Bayfront Center, the Dali Museum, and the Thunderdome attract some visitors to the downtown district, these sources of diversion create minimal demand for overnight accommodations. Even when particular events do generate hotel demand, most of these guests are accommodated by the area's lower-priced lodging facilities. Although the neighborhood's attractive surroundings and first-class image enhance the subject property's reputation, the Hilton's high-quality facilities appear to be an overimprovement for this market. HVS International, Mineola, New York Market Area Analysis 29 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 4. Market Area Analysis The economic vitality of the market surrounding the subject property is an important consideration in forecasting lodging demand and income potential. Economic and demographic trends that reflect the amount of visitation provide a basis from which to project hostelry demand. The purpose of the area analysis is to review available economic and demographic data to determine whether the local market will undergo economic growth, stability, or decline. In addition to predicting the direction of the economy, the rate of change must be quantified. These trends are then correlated based on their propensity to reflect variations in lodging demand with the objective of forecasting the growth or decline in visitation by individual market segment. Market Area Definition The subject property's location can be analyzed on a number of levels. The area immediately surrounding the hotel is St. Petersburg, which is situated in Pinellas County, Florida. The primary economic market is the Tampa-St. Petersburg-Clearwater Metropolitan Statistical Area (MSA), which includes the Counties of Pinellas, Hillsborough, Pasco, and Hernando. Located about mid-peninsula along Florida's west coast, the Tampa Bay area includes Tampa, St. Petersburg, and Clearwater, three of Florida's fastest-growing cities. St. Petersburg is situated approximately 18 miles south of Clearwater, which is also located in Pinellas County, and 21 miles southwest of Tampa, which is located in Hillsborough County. What is known as the Suncoast region includes the four counties comprising the Tampa-St. Petersburg-Clearwater MSA, as well as Citrus and Manatee Counties. Pinellas is the most populous of the four counties in the MSA. Although its 280 square miles account for only 7% of the Suncoast land mass, the county is home to more than one-third of the Suncoast residents. Pinellas County is located on Florida's Gulf Coast, in the western portion of the Tampa Bay metropolitan area, and borders Hillsborough County to the east, Pasco County to the north, and the Gulf of Mexico to the west. [GRAPHIC OMITTED] AREA MAP HVS International, Mineola, New York Market Area Analysis 30 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Economic and Demographic Data Based on fieldwork conducted in the area and our in-house sources, we have evaluated various economic and demographic statistics to determine trends in lodging demand. A primary source of economic and demographic statistics used in this analysis is the Complete Economic and Demographic Data Source published by Woods & Poole Economics, Inc., a well-regarded forecasting service based in Washington, DC. Using a data base containing more than 300 variables for each county in the nation, Woods & Poole employs a sophisticated regional model to forecast economic and demographic trends. Historical statistics are based on census data and information published by the Bureau of Economic Analysis. Projections are formulated by Woods and Poole. All dollar amounts have been adjusted for inflation, and thus growth or decline represents real change in constant dollars. Population The State of Florida has sustained a population growth rate higher than that of the nation as a whole. Between 1980 and 1995, the total statewide population increased at an average annual compounded rate of 2.5%; a more moderate (but still strong) growth rate of 1.8% was registered from 1990 to 1995. These figures far outpace the annual national increases of 1.0% between 1980 and 1995 and 1.1% from 1990 through 1995. Florida's significant growth can be attributed to an increase in the number of retirees who have moved to the area and the relocation of younger individuals who are seeking the employment opportunities and high standard of living that the state offers. In terms of population, the Tampa-St. Petersburg-Clearwater MSA is the largest in Florida, and is second only to Atlanta in the southeastern region. Population is increasingly spreading into the suburbs, filling once-remote counties with new homes and subdivisions. On a national scale, the MSA ranks 23rd in population and 17th in number of households. The MSA sustained an average annual compounded population growth rate of 1.2% between 1990 and 1995; during the same period, Pinellas County registered an increase of only 0.5% annually. This disparity reflects the overall stability of Pinellas County's residential base. Pinellas is already the most densely populated county in Florida; between 1995 and the year 2000, population in Pinellas County is projected to increase at an average annual compounded rate of 0.8%, which is only slightly lower than the 0.9% growth rate anticipated in the nation as a whole. The state and the MSA are projected to achieve annual increases of 1.9% and 2.1%, respectively, outpacing both Pinellas County and the nation. HVS International, Mineola, New York Market Area Analysis 31 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Historically, population increases were the major impetus to the state's economic expansion; however, in recent years, business activity has surpassed residential volume as the driving force behind continued development. The Tampa-St. Petersburg-Clearwater MSA has been a strong participant in this trend; the area, and Tampa in particular, has long been one of the state's primary metropolitan centers and the location of a significant portion of Florida's business and industry. We find that the rate of population growth generally establishes a minimum rate of increase for commercial segment hotel demand; this observation also holds true for the meeting and group segment if a majority of the meetings are business-oriented. Age Distribution The age distribution of an area's population provides an indication of probable spending patterns; food, beverage, and banquet patronage; and the propensity to travel. A growing local population under the age of 20 is likely to yield greater banquet business in the form of weddings, proms, award dinners, and similar functions. Growth in the 20- to 39-year age group is likely to create increased lounge patronage and demand for entertainment facilities. Individuals aged 40 to 64 generally have the largest disposable incomes, and thus represent potential restaurant and lounge patrons. The following table summarizes the age distributions in Pinellas County and in the nation as a whole. ================================================================================ Table 4-1 Population Age Distribution - -------------------------------------------------------------------------------- Pinellas County USA ------------------------------------- ------ Age Group 1980 1990 1995 2000 1995 ------------------------------------------------------------------------ Under 20 21.5% 19.9% 20.0% 20.3% 28.8% 20 - 39 23.6 27.3 25.5 23.6 30.8 40 - 64 27.1 26.7 28.5 31.7 23.8 65 and Over 27.8 26.0 26.0 24.4 16.6 Median Age 45.8 42.0 43.0 43.9 34.3 Source: Woods & Poole Economics, Inc. - -------------------------------------------------------------------------------- The preceding table shows that Pinellas County, which is known as a retirement community, has a greater percentage of individuals aged 40 and over than the nation as a whole. As working-age people move to the area to fill jobs in the county's growing corporate and high-technology manufacturing community, the percentage of individuals under the age of 65 is expected to HVS International, Mineola, New York Market Area Analysis 32 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= increase slightly and the percentage of residents 65 and over is expected to decrease. St. Petersburg has been a favorite retirement area since an 1880s American Medical Association journal declared the city an exceptionally healthy place to live. While Tampa (in Hillsborough County) has evolved into a multicultural, diverse business center, St. Petersburg (and Pinellas County in general) has remained a retirement haven. However, development has been sweeping through the region throughout since the 1980s, and new and expanding firms are attracting younger workers to St. Petersburg; the city now has the youngest population in Pinellas County, with a 1995 median age of 38.6 (as compared to 43.0 in the county as a whole). Retail Sales Trends in retail sales reflect both changes in population and the propensity of area inhabitants and visitors to spend money on retail goods. Like population trends, retail sales have no direct correlation with hotel room night demand, but they do tend to gauge the economic health and vitality of the market. Between 1980 and 1995, retail sales in Pinellas County increased at an average annual compounded rate of 3.1%; the MSA and the state registered annual increases of 3.5% and 3.6%, respectively, during the same period. All three of these growth rates are significantly higher than that registered by the nation (at 1.9%). This data underscores the economic strength of the state as a whole. Between 1990 and 1995, retail sales in the state and the MSA rose at average annual compounded rates of 3.3% and 2.7%, respectively, which exceeded the annual national average of 2.5%. During the same period, Pinellas County registered an annual increase lower than the national rate (at 2.0%). A substantial amount of tourism contributed to the retail sales gains exhibited by both the MSA and the state. Forecasts for 1995 through the year 2000 indicate continued growth in retail sales in the MSA and the state, at average annual compounded rates of 1.8% and 1.9%, respectively. These levels are higher than the 0.8% annual gain anticipated for Pinellas County alone, and the 0.9% annual gain anticipated for the nation as a whole. Personal Income Personal income is similar to disposable income, and is defined as gross income available after taxes for the purchase of goods and services (i.e., available spending money). Personal income gauges the economic health of the local population and reflects market quality and the general ability to buy. HVS International, Mineola, New York Market Area Analysis 33 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Per-capita personal income levels in Pinellas County are significantly higher than national levels. This relationship suggests that residents of the St. Petersburg area enjoy an advantage over typical Americans in terms of the amount of money available to spend on retail goods and services. This increased spending ability contributes to a favorable environment for local commercial establishments, and restaurants in particular. It should be noted, however, that personal income does not take into account cost-of-living factors; as a result, it is possible for local residents to have higher income levels without enjoying greater affluence if the cost of necessities is greater than it is in other parts of the nation. However, according to third-quarter 1995 data assembled by the American Chamber of Commerce Researchers Association, the Tampa Bay metropolitan area had a cost of living index of 95.0, lower than the national average of 100.0. Work Force Characteristics The Tampa-St. Petersburg-Clearwater MSA was one of the regions that derived the greatest benefit from the Sunbelt phenomenon of the late 1970s and the 1980s. Economic activity in the area increased dramatically during that era, and total employment in the MSA rose at an average annual compounded rate of 3.6% between 1980 and 1995. Between 1990 and 1995, total employment increased by 2.2% annually, indicating that growth has slowed since the 1980s. From 1980 to 1995, the strongest employment gain was registered in the services sector, which increased at an average annual compounded rate of 6.3%. The dominance of this sector mirrors trends in the national economy, although the magnitude of the gains were extraordinary. Strong growth was also apparent in the agricultural services and trade sectors, which recorded average annual compounded growth rates of 3.9% and 3.2%, respectively. The slower growth rates recorded in the early 1990s are largely attributable to the national recession; however, the inherent strength of the market and area's desirability as a business location are reflected in the fact that most major employment sectors continued to expand during this period, albeit at a more moderate pace. Employment in the service sector increased at an average annual compounded rate of 4.4% between 1990 and 1995. Construction employment, which suffered significant declines on a national level, increased at an average annual compounded rate of 0.5% during these years. Total employment increased at an average annual compounded rate of 2.2%, and the only sectors of the MSA economy that HVS International, Mineola, New York Market Area Analysis 34 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= reported declines during the five-year period were Mining and Federal Military employment. Projections for the balance of the decade anticipate moderate growth rates in all sectors of the economy. Total employment in the MSA is projected to increase at an average annual compounded rate of 2.0% between 1995 and the year 2000, which is slightly lower than the 2.2% average annual compounded increase experienced between 1990 and 1995. Manufacturing It is significant to note that the MSA's manufacturing employment sector sustained a 1.3% average annual compounded growth rate between 1980 and 1995, and remained relatively stable between 1990 and 1995 despite the recession. These growth rates stand in dramatic contrast to national trends, which have exhibited a steady decline in manufacturing employment during the past two decades. Furthermore, manufacturing employment in the Tampa-St. Petersburg-Clearwater MSA is expected to continue to increase at an average annual compounded rate of 1.5% throughout the remainder of the decade. According to surveys by Dun & Bradstreet and the Florida Department of Labor and Employment Security, the six-county Suncoast area surrounding Tampa Bay boasts more than 6,000 manufacturers employing some 125,000 individuals. Pinellas County is the second-largest manufacturing center in Florida, with a concentration of high-technology and biomedical products companies. During the past three decades, the county has built a strong manufacturing base consisting of 1,284 firms employing approximately 48,500 people. The county's 107 medical companies have witnessed dramatic increases in the number of new jobs in recent years. Major Employers Pinellas County also has its share of corporate headquarters. Some of the larger hometown companies include Danka Industries, Jack Eckerd Drugs, Florida Progress, Jabil Circuit, Raymond James Financial, and Tech Data. Overall, the major employers in Pinellas County represent a cross section of hotel demand potential. Some are national in scope, while others operate on a more local basis; some are engaged in manufacturing, and others are active in government, educational, medical, and financial services. The following table outlines the largest employers in Pinellas County. HVS International, Mineola, New York Market Area Analysis 35 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-2 Major Employers in Pinellas County - -------------------------------------------------------------------------------- Number of Company Product/Type Employees - -------------------------------------------------------------------------------- Pinellas County School Board Public Education 15,497 Home Shopping Network Merchandising 5,000 City of St. Petersburg City Government 3,859 Jack Eckerd Corp. Drug, Other Retail 3,375 Morton Plant Hospital Hospital 3,215 Pinellas County Government County Government 3,157 Times Publishing Newspaper 3,000 Florida Progress Electric Utility Holding Co. 3,000 Bayfront Medical Center Hospital 2,300 All Children's Hospital Hospital 1,857 E-Systems Defense, Electronic Systems 1,700 City of Clearwater City Government 1,601 Raymond James Financial Financial Services 1,600 Mease Hospital Hospital 1,500 Honeywell Space Systems Group Aerospace, Avionics 1,450 Tech Data Computer Products Co. Computer Retail 1,200 AT&T Paradyne Data Communications 1,000 Essilor of America Plastic Lens (Optical) 1,000 Val-Pak Coupon Manufacturing 847 Better Business Forms Business Forms 673 Lockheed Martin R & D of Electric Products 620 Linvatec Orthopedic Arthroscopy Equipment 580 Danka Automated Office Equipment 525 Source: Tampa Bay Book of Lists, 1996 - -------------------------------------------------------------------------------- Economic Development The Tampa Bay area as a whole has evolved into the legal, commercial, financial, and service center of Florida's west coast. The area is home to the operations, affiliates, and subsidiaries of more than 187 Fortune 500 firms. Pinellas County, and St. Petersburg in particular, evolved into a residential suburb of the more commercial areas of Tampa and is a popular retirement community. During the past 20 years, Pinellas County has undergone strong commercial growth as suburban office parks and, to a lesser extent, downtown neighborhoods have become the focus of development. Originally, much of this commercial construction involved light manufacturing industries such as electronics, medical products, and defense-related high technology. In the 1980s, the area became home to numerous small businesses and the back-office components of larger firms located in Tampa. HVS International, Mineola, New York Market Area Analysis 36 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The most recent trend has been toward the service industry. In 1994 (the most recent year for which data is available), 8,654 new businesses were formed in Pinellas County. Of these new businesses, approximately 25.2% are classified as business and financial services and 20.8% are categorized as residential services. The commercial growth of Pinellas County has outpaced that of Hillsborough County, which recorded 7,275 new business formations in 1994. The 15,929 new businesses created in the two counties comprised 19.2% of the statewide total in that year; as a whole, the four-county metro area leads Florida in both employment and new business formations. Roughly 65% of total employment in 1995 in the Tampa Bay metropolitan area was white-collar, including professional/managerial (at 29.0%), administrative support (at 16.9%), sales (at 13.0%), and technical (at 6.5%). Blue-collar workers comprised 35% of the total; these employees are categorized as service workers (at 17.1%), craft/precision production/repair (at 8.4%), and operatives or laborers (at 9.1%). Pinellas County's unemployment rate decreased from 5.2% in 1994 to 4.6% in 1995; the unemployment rate in Hillsborough County also decreased, from 5.4% in 1994 to 5.1% in 1995. The Tampa Bay MSA is Florida's second-largest financial market, and Pinellas County leads the MSA in terms of banking, with almost 300 bank and thrift offices and deposits topping $13 billion. With approximately the same size population as neighboring Hillsborough County, Pinellas accounts for $4.7 billion more in bank and thrift deposits. Downtown St. Petersburg has become known as the financial center of Pinellas County. Many of the major area banks have their headquarters here, and the city is home to three national financial companies: William R. Hough & Co.; Franklin Templeton Fund, a worldwide mutual fund company; and Raymond James and Associates, a national full-service securities brokerage. In addition, Republic Bank recently relocated its corporate offices to downtown St. Petersburg, Northern Trust Bank chose the city for its first Tampa Bay branch, and NationsBank moved two lending divisions and approximately 200 new jobs into its downtown St. Petersburg building. Office Space Hillsborough County remains the dominant commercial core of the MSA in terms of the concentration of office space and major employers. According to Tampa Bay's Maddux Report (July, 1996), Hillsborough County contains approximately 20,670,000 square feet of multi-tenant office space. The county's largest sub-market is Westshore, with approximately 9,260,000 square feet of multi-tenant office space, followed by downtown Tampa, HVS International, Mineola, New York Market Area Analysis 37 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= with roundly 6,380,000. Overall, Hillsborough County reported a 15.8% office vacancy rate as of the end of the second quarter of 1996. During that quarter, the Hillsborough multi-tenant office market absorbed an estimated 60,975 square feet of space. With approximately 8,980,000 square feet, Pinellas County houses the second-largest concentration of multi-tenant office space in the MSA. The county reported a vacancy rate of 14.2% at the end of the second quarter of 1996, reflecting a drop of 3.6 points from the period in 1995. During the same quarter, total net absorption in Pinellas County was 71,220 square feet, bringing the total to 367,130 square feet absorbed during the 12 months ended in June of 1996. Downtown St. Petersburg is the third-largest concentration of office space in Pinellas County (after Clearwater/Bayside and Gateway/Mid-Pinellas), with a total of approximately 1,960,000 square feet. This sub-market also has the weakest office occupancy, and it registered a vacancy rate of 19.9% at the end of the second quarter of 1996. The downtown market is estimated to have absorbed 15,380 square feet of office space during that quarter. Airports At the center of the six-county Suncoast region is Tampa International Airport, which is perennially ranked by Conde Nast and the Airline Passenger Association as one of the top three airports in the world. The airport is designed so that walking distances are short. A central building, called the Landside Terminal, offers ticketing, baggage claim, parking, and shopping. Automated shuttles take passengers from the terminal to their planes at one of six airsides arranged like spokes of a wheel. In 1995, the airport added its sixth airside terminal (Airside A) in a $110,000,000 construction project; this new airside added 15 gates. The airport's 23 scheduled airline carriers offer more than 300 flights daily. In 1995, air passenger traffic totaled 11,396,130, 5.5% of which entailed international travel. We also note that more than 157,000,000 pounds of freight moved through the airport in 1995. A few miles across Tampa Bay is the 2,000-acre St. Petersburg-Clearwater International Airport, in central Pinellas County. A $4,500,000 renovation of this facility was completed recently, and two new parking lots were added in 1996. The airport serves a growing charter business, and, with its own Free Trade Zone, also has a thriving freight service, where UPS and other major express companies do brisk business. More than 20,000,000 pounds of air cargo moved through this airport in 1995. Scheduled commercial HVS International, Mineola, New York Market Area Analysis 38 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= carriers include ATA, Canadian, Canada 3000, and SunJet International, and charter service is available from USAir, Royal Air, Air Transat, and Nations Air. The following table summarizes airport activity in the subject property's market area in 1995. ================================================================================ Table 4-3 1995 Airport Activity - -------------------------------------------------------------------------------- Tampa St.Petersburg-Clearwater Type of Traffic International Airport International Airport - -------------------------------------------------------------------------------- Passenger Traffic Domestic 10,772,392 878,805 International 623,738 207,246 Total 11,396,130 1,086,051 Aircraft Operations Air Carrier, Domestic & International, Taxi, General, and Military 262,580 188,077 Cargo (in Tons) 157,124,331 25,560,000 Mail (in Tons) 93,597,810 Not available Runways (Length in Feet) Runway 1 11,000 8,500 Runway 2 8,300 5,165 Runway 3 7,000 5,000 Parking Spaces (1996) 12,000 1,100 - -------------------------------------------------------------------------------- Convention Facilities A number of convention facilities are located throughout the Tampa Bay region. The Tampa Bay Convention Center, which is located in the downtown district overlooking the Hillsborough River, includes 200,000 square feet of exhibit space and features a 36,000-square-foot ballroom and 42,000 square feet of meeting facilities. The convention center has a total of 22 meeting rooms with seating capacities ranging from 40 to 1,000 people. Parking for 450 cars is located under the building, and an additional 5,000 parking spaces are available within a four-block area. The Florida State Fairgrounds, located six miles from downtown Tampa, provides versatile facilities for year-round use. The exposition hall has 93,000 square feet of floor space, with a seating capacity of 12,500 or space for 322 exhibits or concessions. The air-conditioned structure has a 45-foot ceiling, enabling it to be used for circuses and sporting events, as well as trade shows. The 325-acre complex also provides numerous other exhibition buildings and HVS International, Mineola, New York Market Area Analysis 39 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= entertainment centers, campsites with restrooms and showers, and parking for 16,500 cars. Convention facilities in downtown St. Petersburg include the Thunderdome, the Bayfront Center, and the Coliseum Ballroom. The Thunderdome (which is currently closed for renovation) contains 152,000 square feet of unobstructed floor space and an additional 22,000 square feet of meeting space. On-site parking is available for 4,250 cars. The Bayfront Center's 8,400-seat arena and 2,000-seat auditorium provide space for Broadway shows, ice shows, circuses, concerts, conventions, exhibitions, and trade shows. The historic Coliseum Ballroom, which is located off of I-375 in downtown St. Petersburg, features the largest wooden dance floor in the southeastern United States, and can seat approximately 2,000 people. Leisure Travel By virtue of its miles of white beaches, favorable weather, and various attractions, the Tampa Bay area is among the nation's most popular vacation destinations. Visitors often divide their vacation time in Tampa with trips to Orlando, and to Disney World in particular. In Pinellas County, the gulf beaches generate strong tourist activity, especially during the winter months. In 1995, more than 4,000,000 people visited Pinellas County, and visitor expenditures were estimated at over $2 billion. These figures reflect increases of 3.2% and 3.7%, respectively, over 1994 levels. Tourist Attractions As stated previously, the Pinellas County beachfront along the Gulf of Mexico is the major tourist attraction in the Tampa Bay area. Popular island resort towns, which are connected to the mainland by causeways, include St. Petersburg Beach, Treasure Island, Indian Rocks Beach, Madeira Beach, North Redington Beach, and Clearwater Beach. In addition to beaches, the St. Petersburg area features a number of attractions, including 102 city parks on 2,400 acres, including a seven-mile preserved downtown waterfront; the 47-mile Pinellas Trail, which is the longest urban trail in the eastern United States, is available for hiking and bicycling; two municipal golf courses, including the Mangrove Municipal Golf Course, which is rated among the top 50 courses in the country; and a number of entertainment facilities and cultural attractions. Attractions in the downtown area include the Thunderdome, the Bayfront Center and Mahaffey Theatre, the Pier, Al Lang Stadium, five renowned museums, and HVS International, Mineola, New York Market Area Analysis 40 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= dozens of galleries and shops located within a cultural district known as the Quarter. St. Petersburg is also host to many popular sporting events that draw visitors to the area, including St. Anthony's Triathlon, one of the top triathlon events in the nation (held in April of each year), and the Kash n' Karry Florida Grand Prix of St. Petersburg, a February week-end event featuring the Sports Car Club of America Trans-Am Championship 100-mile race. In total, it is estimated that St. Petersburg has more than 400 events a year that draw in excess of 6,000,000 visitors annually. Conclusion Our review of the available economic and demographic data indicates that the local economy experienced consistent growth during the early to mid-1980s, which slowed in the latter part of the decade; however, the area was not as severely affected by the recession as some other parts of the United States. Projections indicate that economic expansion is likely to continue, and although we do not anticipate dramatic increases in lodging demand, some gains are expected. The following table summarizes the economic and demographic trends discussed throughout this section. All figures that reflect dollar amounts have been adjusted for inflation, and thus reflect real change. It should be noted that the percent changes indicated in the following tables are based on unrounded figures, and thus may not calculate exactly. HVS International, Mineola, New York Market Area Analysis 41 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4- Economic and Demographic Data for the Subject Property's Market Area - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------- Long-Term Historical Population (+000) Pinellas County 1980-1995 733.1 874.7 1.2% Tampa-St. Petersburg-Clearwater MSA 1980-1995 1,627.5 2,204.7 2.0 State of Florida 1980-1995 9,841.1 14,230.4 2.5 United States 1980-1995 227,225.6 262,791.0 1.0 Short-Term Historical Population (+000) Pinellas County 1990-1995 855.1 874.7 0.5 Tampa-St. Petersburg-Clearwater MSA 1990-1995 2,075.6 2,204.7 1.2 State of Florida 1990-1995 13,019.1 14,230.4 1.8 United States 1990-1995 249,401.4 262,791.0 1.1 Projected Population (+000) Pinellas County 1995-2000 874.7 912.0 0.8 Tampa-St. Petersburg-Clearwater MSA 1995-2000 2,204.7 2,443.5 2.1 State of Florida 1995-2000 14,230.4 15,606.5 1.9 United States 1995-2000 262,791.0 274,758.4 0.9 Long-Term Historical Retail Sales (+000,000) Pinellas County 1980-1995 4,930.9 7,741.1 3.1 Tampa-St. Petersburg-Clearwater MSA 1980-1995 10,392.6 17,322.2 3.5 State of Florida 1980-1995 66,181.6 113,048.9 3.6 United States 1980-1995 1,340,768.9 1,765,826.1 1.9 Short-Term Historical Retail Sales (+000,000) Pinellas County 1990-1995 7,001.0 7,741.1 2.0 Tampa-St. Petersburg-Clearwater MSA 1990-1995 15,151.5 17,322.2 2.7 State of Florida 1990-1995 96,339.3 113,048.9 3.3 United States 1990-1995 1,557,380.2 1,765,826.1 2.5 Projected Retail Sales (+000,000) Pinellas County 1995-2000 7,741.1 8,071.9 0.8 Tampa-St. Petersburg-Clearwater MSA 1995-2000 17,322.2 18,979.8 1.8 State of Florida 1995-2000 113,048.9 123,900.1 1.9 United States 1995-2000 1,765,826.1 1,846,830.4 0.9 Long-Term Historical Retail Sales per Capita Pinellas County 1980-1995 6,725.6 8,850.5 1.8 Tampa-St. Petersburg-Clearwater MSA 1980-1995 6,385.6 7,857.0 1.4 State of Florida 1980-1995 6,725.0 7,944.2 1.1 United States 1980-1995 5,900.6 6,719.5 0.9 Short-Term Historical Retail Sales per Capita Pinellas County 1990-1995 8,187.4 8,850.5 1.6 Tampa-St. Petersburg-Clearwater MSA 1990-1995 7,299.8 7,857.0 1.5 State of Florida 1990-1995 7,399.9 7,944.2 1.4 United States 1990-1995 6,244.5 6,719.5 1.5
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 42 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-4 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - -------------------------------------------------------------------------------------------------------------------- Projected Retail Sales per Capita Pinellas County 1995-2000 8,850.5 8,850.4 (0.0)% Tampa-St. Petersburg-Clearwater MSA 1995-2000 7,857.0 7,767.5 (0.2) State of Florida 1995-2000 7,944.2 7,939.0 (0.0) United States 1995-2000 6,719.5 6,721.7 0.0 Long-Term Historical Eating and Drinking Place Sales (+000,000) Pinellas County 1980-1995 538.4 732.5 2.1 Tampa-St. Petersburg-Clearwater MSA 1980-1995 1,054.7 1,631.0 2.9 State of Florida 1980-1995 6,553.9 11,648.0 3.9 United States 1980-1995 126,131.6 185,035.4 2.6 Short-Term Historical Eating and Drinking Place Sales (+000,000) Pinellas County 1990-1995 684.4 732.5 1.4 Tampa-St. Petersburg-Clearwater MSA 1990-1995 1,476.1 1,631.0 2.0 State of Florida 1990-1995 10,065.3 11,648.0 3.0 United States 1990-1995 161,197.4 185,035.4 2.8 Projected Eating and Drinking Place Sales (+000,000) Pinellas County 1995-2000 732.5 770.5 1.0 Tampa-St. Petersburg-Clearwater MSA 1995-2000 1,631.0 1,811.7 2.1 State of Florida 1995-2000 11,648.0 13,142.8 2.4 United States 1995-2000 185,035.4 199,127.3 1.5 Long-Term Historical Eating and Drinking Place Sales per Capita Pinellas County 1980-1995 734.3 837.5 0.9 Tampa-St. Petersburg-Clearwater MSA 1980-1995 648.1 739.8 0.9 State of Florida 1980-1995 666.0 818.5 1.4 United States 1980-1995 555.1 704.1 1.6 Short-Term Historical Eating and Drinking Place Sales per Capita Pinellas County 1990-1995 800.4 837.5 0.9 Tampa-St. Petersburg-Clearwater MSA 1990-1995 711.2 739.8 0.8 State of Florida 1990-1995 773.1 818.5 1.1 United States 1990-1995 646.3 704.1 1.7 Projected Eating and Drinking Place Sales per Capita Pinellas County 1995-2000 837.5 844.8 0.2 Tampa-St. Petersburg-Clearwater MSA 1995-2000 739.8 741.4 0.0 State of Florida 1995-2000 818.5 842.1 0.6 United States 1995-2000 704.1 724.7 0.6 Long-Term Historical Personal Income (+000,000) Pinellas County 1980-1995 11,222.5 16,438.4 2.6 Tampa-St. Petersburg-Clearwater MSA 1980-1995 21,770.0 36,722.8 3.5 State of Florida 1980-1995 135,546.7 242,033.9 3.9 United States 1980-1995 3,163,874.0 4,443,243.2 2.3
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 43 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-4 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ----------------------------------------------------------------------------------------------------------- Short-Term Historical Personal Income (+000,000) Pinellas County 1990-1995 15,252.5 16,438.4 1.5% Tampa-St. Petersburg-Clearwater MSA 1990-1995 32,454.9 36,722.8 2.5 State of Florida 1990-1995 212,884.6 242,033.9 2.6 United States 1990-1995 4,051,714.6 4,443,243.2 1.9 Projected Personal Income (+000,000) Pinellas County 1995-2000 16,438.4 19,146.5 3.1 Tampa-St. Petersburg-Clearwater MSA 1995-2000 36,722.8 44,292.7 3.8 State of Florida 1995-2000 242,033.9 286,366.1 3.4 United States 1995-2000 4,443,243.2 4,972,219.5 2.3 Long-Term Personal Income per Capita Pinellas County 1980-1995 15,307.0 18,794.0 1.4 Tampa-St. Petersburg-Clearwater MSA 1980-1995 13,376.0 16,657.0 1.5 State of Florida 1980-1995 13,773.0 17,008.0 1.4 United States 1980-1995 13,924.0 16,908.0 1.3 Short-Term Historical Personal Income per Capita Pinellas County 1990-1995 17,837.0 18,794.0 1.1 Tampa-St. Petersburg-Clearwater MSA 1990-1995 15,637.0 16,657.0 1.3 State of Florida 1990-1995 16,352.0 17,008.0 0.8 United States 1990-1995 16,246.0 16,908.0 0.8 Projected Personal Income per Capita Pinellas County 1995-2000 18,794.0 20,993.0 2.2 Tampa-St. Petersburg-Clearwater MSA 1995-2000 16,657.0 18,127.0 1.7 State of Florida 1995-2000 17,008.0 18,349.0 1.5 United States 1995-2000 16,908.0 18,097.0 1.4 Long-Term Historical Employment - Tampa-St. Petersburg-Clearwater MSA (+000) Farming 1980-1995 10.3 12.9 1.5 Agricultural Services 1980-1995 9.1 16.1 3.9 Mining 1980-1995 1.2 1.1 (0.5) Construction 1980-1995 51.9 68.0 1.8 Manufacturing 1980-1995 79.0 96.0 1.3 Transportation, Communications, & Public Utilities 1980-1995 35.5 52.8 2.7 Total Trade 1980-1995 178.8 288.0 3.2 Wholesale 1980-1995 40.6 62.9 3.0 Retail 1980-1995 138.2 225.1 3.3 Finance, Insurance, & Real Estate 1980-1995 77.6 102.5 1.9 Services 1980-1995 176.4 438.7 6.3 Total Government 1980-1995 95.0 138.7 2.6 Federal Civilian 1980-1995 13.0 19.1 2.6 Federal Military 1980-1995 11.2 12.5 0.7 State & Local 1980-1995 70.8 107.1 2.8 Total 1980-1995 714.8 1,214.8 3.6
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 44 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-4 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - -------------------------------------------------------------------------------------------------------- Short-Term Historical Employment - Tampa-St. Petersburg-Clearwater MSA (+000) Farming 1990-1995 11.6 12.9 2.1% Agricultural Services 1990-1995 14.1 16.1 2.7 Mining 1990-1995 1.5 1.1 (6.5) Construction 1990-1995 66.3 68.0 0.5 Manufacturing 1990-1995 95.4 96.0 0.1 Transportation, Communications, & Public Utilities 1990-1995 47.6 52.8 2.1 Total Trade 1990-1995 271.7 288.0 1.2 Wholesale 1990-1995 58.0 62.9 1.7 Retail 1990-1995 213.8 225.1 1.0 Finance, Insurance, & Real Estate 1990-1995 99.6 102.5 0.6 Services 1990-1995 352.9 438.7 4.4 Total Government 1990-1995 130.8 138.7 1.2 Federal Civilian 1990-1995 18.4 19.1 0.8 Federal Military 1990-1995 14.0 12.5 (2.3) State & Local 1990-1995 98.4 107.1 1.7 Total 1990-1995 1,091.6 1,214.8 2.2 Projected Employment - Tampa-St. Petersburg-Clearwater MSA (+000) Farming 1995-2000 12.9 13.7 1.2 Agricultural Services 1995-2000 16.1 16.8 0.9 Mining 1995-2000 1.1 1.2 1.4 Construction 1995-2000 68.0 71.1 0.9 Manufacturing 1995-2000 96.0 103.6 1.5 Transportation, Communications, & Public Utilities 1995-2000 52.8 56.3 1.3 Total Trade 1995-2000 288.0 315.2 1.8 Wholesale 1995-2000 62.9 67.0 1.3 Retail 1995-2000 225.1 248.2 2.0 Finance, Insurance, & Real Estate 1995-2000 102.5 111.6 1.7 Services 1995-2000 438.7 507.2 2.9 Total Government 1995-2000 138.7 143.5 0.7 Federal Civilian 1995-2000 19.1 20.3 1.2 Federal Military 1995-2000 12.5 12.6 0.2 State & Local 1995-2000 107.1 110.6 0.6 Total 1995-2000 1,214.8 1,340.3 2.0
- -------------------------------------------------------------------------------- In later sections of this economic study and appraisal, we will relate these historical and projected growth trends to specific market segments based on their propensity to reflect changes in room night demand in the subject property's area. HVS International, Mineola, New York Overview of External Forces Affecting the U.S. Lodging Industry 45 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 5. Overview of External Forces Affecting the U.S. Lodging Industry Introduction Hotel ownership is ultimately the business of creating and enhancing value. To understand the investment potential of lodging facilities, investors must be thoroughly aware of the many forces that can cause changes in the value of their properties. Although some of these forces are internal (such as the layout and design of the facilities, the quality of management, and the condition of the property), others are external (such as the local economic environment and the competitive nature of the market). The risk associated with hotel investment lies largely with the external forces that are beyond the control of ownership and contribute to the variability of future income flows. Investors and appraisers can project financial results by evaluating the historical impact of external forces on hotel values. Successful hotel investors seek opportunities where the risk of external forces can be minimized, thus reducing the uncertainty associated with income expectations. When investors engage in due diligence prior to acquiring a lodging facility, they are primarily interested in trends affecting a limited geographic market area, such as a town, city, or county. A broader overview takes into account national and international travel patterns and trends. An understanding of the general characteristics of the United States hotel market is important because these trends often foreshadow economic and demographic changes in smaller areas. This section of the appraisal will present an overview of the U.S. lodging industry by tracing many of the forces that influence hotel values. Historical economic and demographic data, and industry statistics will be analyzed to provide a basis for projections. Forecasts will be evaluated to determine their reasonableness. The conclusions represent another set of criteria that hotel investors consider in making their acquisition decisions. HVS International, Mineola, New York Overview of External Forces Affecting the U.S. Lodging Industry 46 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The Supply and Demand Relationship Most business ventures are influenced by the relationship between supply and demand. In the hotel industry, supply refers to the number of units. A unit consists of one or more rooms and represents the smallest accommodation that can be rented to a guest. Each unit must have a full bath and its own entrance to a public hallway or the building exterior. Demand refers to a room night, which is one unit that is occupied for one night. The supply and demand relationship has a significant influence on a hotel's occupancy and/or average room rate. Occupancy is calculated by dividing the number of rooms that are occupied for a specific period by the total number of rooms that are available during the same period. Average room rate is determined by dividing the total rooms revenue achieved during a specific period by the number of rooms occupied during that period; it also represents the weighted average of all the room rates charged during that period. In a market where demand is increasing faster than supply, occupancies rise and average rate growth generally exceeds inflation. When supply is increasing faster than demand, occupancies fall and average rates typically remain level or decline. Hotels generate revenue based on occupancy and average rate, and thus the supply and demand relationship is an important factor in analyzing profits and value. Hotel occupancy levels have shown definite cycles that reflect the balance between supply and demand. The early 1970s marked the beginning of a hotel building boom reminiscent of the 1920s. Many factors contributed to this expansion, but the two main elements were readily available financing and aggressive chains that were eager to sell franchises. The new construction during the 1970s was made possible by the enormous amount of financing generated by all lenders, particularly real estate investment trusts (REITs). These high-leverage finance companies were created to allow small investors to participate in real estate mortgages and equities. The concept was quickly accepted by Wall Street, and soon billions of dollars were available to finance real estate projects. Many lenders became so overwhelmed with new money that their underwriting procedures broke down and some marginal developments were approved. During the late 1960s and early 1970s, hotel companies actively expanded their chains through franchising. Franchising was a source of new capital, allowing hotel companies to grow and achieve national recognition using the franchisee's financial investment in individual properties. Some franchisors, eager to demonstrate sustained growth and establish a national HVS International, Mineola, New York Overview of External Forces Affecting the U.S. Lodging Industry 47 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= presence, employed questionable marketing tactics to sell new franchises. Salespeople were often compensated based on the number of franchises sold, so there was little incentive to discourage developers from investing in poor locations and overbuilt markets. Many lenders and hostelry developers were led to believe that a national franchise would guarantee a successful operation. The combination of readily available financing and aggressive hotel chains eager to sell franchises resulted in overbuilding and development of many poorly located, undercapitalized hostelries managed by inexperienced owners. The bubble burst on the lodging industry when inflation caused construction costs and interest rates to escalate. The 1974 energy crisis drastically reduced travel, and the accompanying recession curtailed business trips, conferences, and conventions. Operators of marginal properties quickly fell behind in their mortgage payments, and lenders were forced to foreclose. As lenders became hostelry owners, they either organized work-out departments headed by experienced hoteliers or engaged professional hotel management companies to assume operational responsibilities. Sales data indicate that lenders who were looking for quick sales to remove nonperforming hotel assets from their books had to lower their prices substantially to attract all-cash buyers. Lenders who were willing to hold on to foreclosed hotels and employ professional management to reposition and improve the properties' operation were generally able to recoup their original investments in three to five years, once the industry began to recover. However, even lenders who repositioned their hotels had to take back favorable purchase-money financing to sell the properties because money from other sources was not available. History has shown that during economic downturns, hotel values generally do not fall in proportion to the properties' declining incomes. Sellers, and particularly lenders who take back hotels through foreclosure, are often unwilling to sell at substantially reduced prices. They are more likely to wait out the downward cycle and dispose of their assets when the market begins to rebound. Thus, appraisers can best reflect market behavior by projecting a facility's net income to a point of recovery and applying the proper discounted cash flow procedure over that time period. The late 1970s was a period of relative calm for the lodging industry. Because most lenders were recovering from the financial wounds inflicted by HVS International, Mineola, New York Overview of External Forces Affecting the U.S. Lodging Industry 48 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= the 1975 recession, they had little interest in making hotel mortgages. New construction was restrained, and primarily consisted of additions to existing properties and the development of some large, downtown hotels oriented toward the commercial and convention markets. The rebirth of center-city hostelries was a direct result of fuel shortages and the availability of government financing for inner-city redevelopment projects. Highway-oriented properties, on the other hand, were adversely affected by escalating gasoline prices and decreased automobile travel, and these lodging facilities lost some of their appeal among investors and hotel companies. Decreased building activity, the normal retirement of older hostelries from the market, and an improving economy created a favorable supply and demand relationship and record-high occupancy levels from 1979 to 1980. Average room rates increased rapidly as operators took advantage of the excess demand to recoup earlier losses and keep up with inflation. After the decline in hotel development during the late 1970s, the environment appeared suitable for a period of renewed expansion. However, the Federal Reserve tightened the money supply in the early 1980s, sending the prime interest rate up to double-digit levels. Most of the projects that were in the preliminary planning stages but lacked sensible financing were put on hold. Fiscal policy and declining energy prices eventually reduced the national inflation rate. This caused a decline in hotel interest rates beginning in 1983, and suddenly massive amounts of capital were available for real estate investments. Hotel developers who had been out of the market since the mid-1970s rushed to initiate new projects. They were aided by several major real estate development incentives: high occupancies and escalating room rates, readily available debt and equity financing, and unique income tax benefits designed to stimulate the national economy out of a recession. During the early 1980s, trends were generally favorable for new hotel development. Although the recession caused a decline in lodging demand, many markets showed relatively high occupancy levels. Room rates were usually able to keep up with inflation, and the travel industry was expected to boom as a result of a recovering economy. Franchise sellers signed up new prospects aggressively, using product segmentation to justify the saturation of a market with a common brand. HVS International, Mineola, New York Overview of External Forces Affecting the U.S. Lodging Industry 49 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Financing was readily available from the savings and loan industry. Following deregulation, these banks were permitted to lend on commercial real estate, such as hotels. Although savings and loans had experience in making loans on single-family homes, few had expertise with commercial properties, and fewer still with hotels. The result was almost identical to the real estate investment trust fiasco the decade before: loan underwriting and administration were inept and sometimes nonexistent, the number of loans made seemed more important than the quality of the real estate and the integrity of the borrower, and short-term funds were often used to finance long-term mortgages. In the early 1990s, the industry suffered the consequences of this lending spree: most major hotel markets became severely overbuilt and many savings and loans went out of business. Another factor contributing to hotel development in the 1980s was the very favorable treatment provided by income tax regulations. By carefully structuring hotel syndications to take advantage of all available tax benefits, investors could virtually recoup their total cash outlay in the first year and reap additional benefits in the future regardless of the economic success of the underlying asset. Because there was little incentive to justify a transaction's economics (i.e., cash flow and reversionary benefits), a number of syndicators overpaid for hotel properties, took out usurious fees, and overloaded their hotels with debt. A change in the tax law in the mid-1980s eliminated many of the benefits associated with hotels, but the overbuilding in most markets was either in progress or had already taken place. By the end of the 1980s, the abuses of the savings and loans had become apparent, but it was too late to reverse the overbuilding. Between 1985 and 1990, approximately 556,000 rooms were added to the U.S. hotel supply. The national economy entered another recession in 1990, and this factor (coupled with overbuilding and the Persian Gulf War in 1991) caused the national hotel occupancy rate to bottom out at 60.9%. In some markets, hotel occupancies were as low as 35%. This supply and demand imbalance was almost identical to the situation in the 1970s that led to numerous hotel failures. As in the REIT days, the number of non-performing loans reached record levels, and lenders moved to a work-out mode of operation in order to foreclose and restructure their hotel investments. Many of the savings and loans were taken over by the government and their hotel assets were sold at auction. HVS International, Mineola, New York Overview of External Forces Affecting the U.S. Lodging Industry 50 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= According to the American Council of Life Insurance, which represents major life insurance companies, the number of delinquent hotel loans and the number of hotel loans in foreclosure peaked in 1991. This trend is undergoing a reversal as the U.S. lodging industry begins to recover. Loan restructuring was an attractive alternative to foreclosure during this period, and the number of loans in good standing with restructured terms almost doubled. By 1993, new hotel construction had declined significantly. Lenders, trying to get out from under problematic hotel portfolios, curtailed all real estate lending and would not even consider hotels. The tax benefits associated with lodging facilities had been reduced significantly, and passive investors left the hospitality market entirely. The slowdown in the growth of supply had a beneficial impact on occupancy levels, which started to recover in 1992. Improved occupancies are expected to continue through the late 1990s as increases in lodging demand outpace growth in supply. Beginning in 1991, many lenders and the Resolution Trust Corporation (RTC) sold their oldest and least desirable hotels at liquidation prices. Because virtually no third-party financing was available, most lenders were forced to take back purchase-money mortgages at favorable terms in order to sell these properties without suffering massive write-downs. The newer and more desirable hotels were not put on the market, because their lenders/owners were waiting for values to recover. This course of action significantly reduced the number of transactions involving good-quality lodging facilities. The following table shows the volume of hotel transactions exceeding $10,000,000 between 1990 and 1995. ================================================================================ Table 5-1 Summary of Major Hotel Transactions Year 1990 1991 1992 1993 1994 1995 - -------------------------------------------------------------------------------- Number of Transactions 130 54 67 52 92 104 Number of Rooms 40,543 16,427 25,187 19,935 33,503 36,951 Average Price Per Room $136,000 $91,000 $85,000 $79,000 $80,000 $83,000 Source: HVS International - -------------------------------------------------------------------------------- In 1991, there were only 54 major hotel sales recorded. This number increased to 67 in 1992 and declined to 52 in 1993, then rose dramatically in HVS International, Mineola, New York Overview of External Forces Affecting the U.S. Lodging Industry 51 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 1994 and 1995. During the low-volume years, many sellers remained on the sidelines waiting for values to increase before placing their properties on the market. The jump in 1994 is attributable to a number of factors, including the greater availability of mortgage funds, a return of institutional investors to the market, and a resurgence of investor interest in lodging facilities. The profile of typical hotel buyers has changed somewhat. During the mid-1980s, when tax-driven syndication's were popular, many hotels were purchased by passive investors who hired management companies to operate their properties. These owners had little involvement in day-to-day management decisions, which occasionally led to poor management and financial losses. Today, most buyers of major hotels are owner-operators who bring with them both the acquisition funds (usually from a joint venture partner) and management expertise. We also note that real estate investment trusts (REITs) and public hotel companies (C-Corps) are actively acquiring hotels using funds from public equity stock offerings. The supply of new hotel rooms is expected to increase slowly during the next several years. Lenders are beginning to return to the market, and are making some hotel loans based on conservative criteria. Initially, mortgage funds were available mainly to the budget and economy lodging sectors, for the purpose of refinancing existing properties or assisting buyers in acquisitions. Now, a number of lenders are willing to finance new construction for these small, low-end properties. Although financing is also becoming available for the acquisition of large, full-service hotels, very little has been allocated for new construction. At present, active hotel lenders are not necessarily traditional banks and insurance companies, but may include credit companies and Wall Street securities firms. A number of hotel owners and developers are now constructing budget and economy hotels; a few are planning more upscale, full-service properties. Most lenders are taking a conservative approach to new hotel loans, which should limit new development to those projects that demonstrate true economic feasibility. As a result, severe short-term overbuilding is unlikely. Room Rates The supply and demand relationship has a direct impact on hotel occupancies and an indirect influence on room rate growth. Between 1978 and 1995, hotel room rates increased at an average annual compounded rate of almost 6%. Significant rate growth was recorded during the late 1970s and HVS International, Mineola, New York Overview of External Forces Affecting the U.S. Lodging Industry 52 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= early 1980s as a result of strong occupancies (70%'s) coupled with a high monetary inflation rate (14%). In recent years, room rate growth slowed as a result of low occupancies and a drop in inflation. Hotel room rates generally increase faster than the Consumer Price Index (CPI) when occupancies are strong or moving upward. When occupancies are low or declining, room rate growth tends to lag behind the CPI; in some cases, rates may remain flat or actually drop. The following table compares the historical and projected annual increase in hotel room rates in the United States to the change in the national CPI. HVS International, Mineola, New York Overview of External Forces Affecting the U.S. Lodging Industry 53 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 5-2 Percent Change in Average Room Rates Versus CPI - U.S. Hotels - -------------------------------------------------------------------------------- Consumer Price Hotel Room Rate Index Hotel Year Percent Change Percent Change Occupancy ------------------------------------------------------------------ 1973 4.2% 6.2% 70.2% 1974 7.6 11.0 64.0 1975 7.3 9.1 63.7 1976 8.2 5.7 65.8 1977 8.1 6.5 67.3 1978 14.0 7.7 69.2 1979 17.0 11.3 71.9 1980 15.2 13.5 70.6 1981 10.0 10.3 67.9 1982 6.5 6.2 66.7 1983 5.1 3.2 64.4 1984 6.9 4.3 64.0 1985 4.6 3.6 63.1 1986 3.2 1.9 62.5 1987 3.6 3.6 61.9 1988 3.6 4.1 62.3 1989 3.5 4.8 63.2 1990 3.0 5.4 62.4 1991 0.6 4.2 60.9 1992 1.4 3.0 62.1 1993 2.8 3.0 63.1 1994 4.8 2.6 64.7 1995 4.8 2.8 65.5 1996* 5.0 3.0 66.0 1997* 5.5 3.5 67.0 1998* 6.0 4.0 68.0 1999* 5.5 4.0 68.0 Sources: Smith Travel Research & HVS International * Projected - -------------------------------------------------------------------------------- This table shows two periods when hotel room rate growth failed to keep pace with the CPI. From 1973 to 1975, the hotel industry was suffering from overbuilding related to real estate investment trusts, a recession, and a downturn in travel caused by the oil embargo. The second period of slow room rate growth occurred between 1988 and 1993, when the industry was again affected by overbuilding and a weak economy. The table illustrates that during periods of prosperity, room rates are a good hedge against inflation; this was true even when the CPI increased at double-digit levels. HVS International, Mineola, New York Overview of External Forces Affecting the U.S. Lodging Industry 54 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The projections indicate a strong recovery of room rates as the relationship between supply and demand becomes more favorable. Growth is expected to peak in 1998 at 6%, which is significantly higher than the projected gain in the CPI. This may appear high, but a similar trend occurred in 1978, when room rates rose 14.0% and the CPI increased by only 7.7%. Hotels are unique because their room rates can be adjusted at any time. Unlike office space, where rents are typically negotiated for a five-year period, hotel operators are free to base rates on occupancy trends. Using sophisticated yield management programs, modern lodging facilities can ride the demand curve and maximize room rates whenever the market permits. As a result, hotels generally offer significant upside potential during periods of economic prosperity. If lodging facilities can increase room rates faster than the CPI and still maintain occupancies, bottom-line profits usually escalate. If they can raise room rates and occupancy at the same time, profits will grow significantly. The opposite occurs when room rates fail to keep pace with inflation. Because market value is basically a multiple of bottom-line profits, changes caused by fluctuations in occupancy and average rate have a direct impact on value. Rooms Revenue per Available Room (RevPAR) The ability of a hotel to maximize its occupancy and room rate is measured in terms of rooms revenue per available room (RevPAR), which is the product of occupancy and average rate. Between 1978 and 1995, RevPAR in the U.S. lodging industry increased at an average annual compounded rate of approximately 5%. As in the case of average rate, most of the increase occurred during the late 1970s, when occupancies escalated rapidly. The only decline in RevPAR occurred in 1991. Trends in Hotel Sales HVS International constantly monitors hotel markets in order to collect information on sales of lodging facilities. This comprehensive database is known as the Hospitality Market Data Exchange (HMDE). The HMDE includes more than 90% of all hotel sales that took place during this period. The HMDE data shows that the number of transactions peaked at 726 in 1986. This strong activity is largely attributable to pending changes in the tax laws, which made it less favorable to own hotels. It is also possible that forward-thinking investors noted the substantial overbuilding and declining economy and decided to bail out at that time. In 1987 and 1990, the HVS International, Mineola, New York Overview of External Forces Affecting the U.S. Lodging Industry 55 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= average sales price per room peaked at $75,000. This was more than twice the 1981 average of $36,000. Following the 1990 peak, hotel prices fell rapidly as occupancies and profits were eroded by the massive number of hotel rooms entering the market. By 1991, the year of the Persian Gulf War, sales prices had fallen to $38,000 per room. Even the highest price per room declined from the record $1,195,652 (for the sale of the Bel Aire Hotel) to $251,816 in 1992. The market hit bottom in 1993 when the average sales price dropped to $36,000 per room. Prices recovered rapidly in 1994 and 1995 as investors became interested in hotels again and more full-service properties were put on the market. In 1995, the average sales price was $61,000 per room. The figures presented in the HMDE represent actual sales prices; no attempt was made to adjust for factors such as favorable or unfavorable financing, forced or liquidation sales, bankruptcy sales, foreclosures, and so forth. As a result, the average price per room does not necessarily reflect market value, which assumes a willing buyer and a willing seller. Many of the transactions that took place during the early 1990s involved unwilling sellers - usually lenders who were forced to liquidate hotel portfolios quickly at prices that were below market levels. Most hotel experts agree that a recovery is underway, and they recommend that owners hold their properties until more favorable conditions prevail. Trends in Hotel Values A more meaningful indicator of trends in hotel value is the Hotel Valuation Index (HVI), developed by HVS International. This index tracks changes in hotel values in 23 major markets and the nation as a whole. It is developed through an income approach, using market area data provided by Smith Travel Research and operational and capitalization rate information from HVS International, and is indexed to the 1986 U.S.A. value (1.0000). The following table sets forth the HVI from 1986 to 1995. HVS International, Mineola, New York Overview of External Forces Affecting the U.S. Lodging Industry 56 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 5-3 Hotel Valuation Index per Room - -------------------------------------------------------------------------------- Valuation Index Per Room
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 ------------------------------------------------------------------------------------------------------- Honolulu 3.3571 4.0357 4.6964 5.2857 5.3214 4.7857 4.9286 4.2857 4.3929 5.6071 New Orleans 1.5357 1.7500 2.2857 2.3929 2.5000 2.6071 3.2857 3.2500 3.8929 4.4286 New York 3.5714 4.1071 4.6429 4.5357 3.9286 3.0357 2.5714 2.5714 3.1429 4.1071 San Francisco 2.5000 3.0893 3.2500 3.0714 2.9286 2.5714 2.5714 2.9643 3.2143 4.0000 Phoenix 1.2143 1.0714 1.1786 1.5357 1.4286 1.2500 1.5000 1.9643 2.3571 3.2143 San Diego 2.8571 2.3571 2.5714 2.6786 2.3929 2.5357 2.5357 2.2143 2.3571 3.0357 Miami 1.4286 1.6071 1.7321 2.1429 2.1786 2.2500 2.5714 2.7857 2.3214 2.9286 Washington, DC 2.1786 2.1786 2.4464 2.6071 2.2500 1.8571 2.0357 2.5000 2.3929 2.8929 Atlanta 1.0714 1.0179 1.0536 1.0357 1.1429 1.1250 1.2857 1.7857 2.1429 2.6786 Minneapolis 0.7321 0.6964 0.7143 0.7143 0.7857 1.0000 1.2857 1.5714 1.8214 2.1786 Chicago 1.4643 1.5000 1.5714 1.5000 1.4286 1.2143 1.2500 1.5000 1.8571 2.1786 Boston 2.3571 2.7143 2.6071 2.1429 1.8214 1.2500 1.3036 1.3214 1.6071 2.1071 Fort Lauderdale 1.4643 1.2679 1.3214 1.4286 1.4821 1.3571 1.7143 1.8929 1.6071 1.9286 Orlando 1.5000 1.6429 1.9286 2.5000 2.5357 1.8929 2.0714 1.7857 1.6071 1.8929 Denver 0.5357 0.4464 0.4643 0.4821 0.7857 0.9268 1.0357 1.3214 1.5000 1.8571 Dallas 0.5536 0.6250 0.6607 0.7321 0.7857 0.7143 0.9643 1.0357 1.3214 1.7143 USA 1.0000 0.9464 1.0536 1.1250 1.0714 0.9214 0.9929 1.1429 1.3214 1.6071 Los Angeles 2.1071 2.2857 2.3929 2.4643 2.1786 1.5714 1.0714 0.9643 1.1964 1.5000 Tampa 0.8393 0.7679 0.8571 1.1429 1.2857 1.0357 1.0714 1.0357 1.1071 1.3214 Anaheim 1.7679 1.7321 1.7500 1.8571 1.6071 1.2857 0.9642 0.9464 0.8393 1.2500 Houston 0.3571 0.4286 0.6964 0.7857 1.1071 1.1607 1.1429 1.0357 1.0000 1.1786 Philadelphia 1.4643 1.5357 1.4286 1.3214 1.0714 0.6786 0.5714 0.6071 0.7500 1.0714 Norfolk 1.1786 1.0536 0.9286 0.7857 0.6429 0.5357 0.6071 0.6429 0.7500 0.9643 Riverside 0.9643 1.2143 1.5714 1.7143 1.4643 1.2500 0.7857 0.5357 0.4286 0.5357
Source: HVS International - -------------------------------------------------------------------------------- The HVI can be used to show the value change in a particular market over time or to show the relative difference in hotel values in various cities. The following table shows the annual change in hotel values in 23 major markets and the United States as a whole. HVS International, Mineola, New York Overview of External Forces Affecting the U.S. Lodging Industry 57 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 5-4 Percent Change in the Hotel Valuation Index - -------------------------------------------------------------------------------- Annual Percent Change
'86-87 '87-88 '88-'89 '89-'90 '90-'91 '91-'92 '92-'93 93-'94 '94-'95 '86-'95 - ----------------------------------------------------------------------------------------------------------- Honolulu 20 % 16 % 13 % 1 % -10 % 3 % -13 % 3 % 28 % 67 % New Orleans 14 31 5 4 4 26 -1 20 14 188 New York 15 13 -2 -13 -23 -15 0 22 31 15 San Francisco 24 5 -5 -5 -12 0 15 8 24 60 Phoenix -12 10 30 -7 -13 20 31 20 36 165 San Diego -18 9 4 -11 6 0 -13 6 29 6 Miami 12 8 24 2 3 14 8 -17 26 105 Washington, DC 0 12 7 -14 -17 10 23 -4 21 33 Atlanta -5 4 -2 10 -2 14 39 20 25 150 Minneapolis -5 3 0 10 27 29 22 16 20 198 Chicago 2 5 -5 -5 -15 3 20 24 17 49 Boston 15 -4 -18 -15 -31 4 1 22 31 -11 Fort Lauderdale -13 4 8 4 -8 26 10 -15 20 32 Orlando 10 17 30 1 -25 9 -14 -10 18 26 Denver -17 4 4 63 18 12 28 14 24 247 Dallas 13 6 11 7 -9 35 7 28 30 210 USA -5 11 7 -5 -14 8 15 16 22 61 Los Angeles 8 5 3 -12 -28 -32 -10 24 25 -29 Tampa -9 12 33 12 -19 3 -3 7 19 57 Anaheim -2 1 6 -13 -20 -25 -2 -11 49 -29 Houston 20 62 13 41 5 -2 -9 -3 18 230 Philadelphia 5 -7 -8 -19 -37 -16 6 24 43 -27 Norfolk -11 -12 -15 -18 -17 13 6 17 29 -18 Riverside 26 29 9 -15 -15 -37 -32 -20 25 -44
Source: HVS International - -------------------------------------------------------------------------------- On a national basis, hotel values rose in 1988 and 1989, then declined in 1990 and dropped by 14% in 1991. A turnaround commenced in 1992, when values increased by 8%; still greater increases of 15% in 1993, 16% in 1994, and 22% in 1995 signaled that a recovery was well underway. In the case of the individual cities, it is obvious that the movement in national hotel values has been offset somewhat by trends in local markets. Between 1986 and 1995, Riverside hotels lost more than 40% of their value, while San Francisco showed a 60% increase. Anaheim, Los Angeles, and Philadelphia also suffered significant drops. Future Trends Most hotel owners, operators and lenders agree that the U.S. lodging industry has emerged from one of the worst periods since the Depression of 1929. Today, there are many indications that signal a strong recovery is underway, and most hotels have experienced a dramatic rise in profitability. Conversely, the hotel industry remains cyclical, and there are long-term trends and risk factors that could have an unfavorable impact on the operating results and investment potential of lodging facilities. The following HVS International, Mineola, New York Overview of External Forces Affecting the U.S. Lodging Industry 58 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= list summarizes the positive and negative factors that are likely to influence the U.S. lodging industry in coming years. o No significant amount of new hotel development is likely to occur during the next three to five years. Lenders stopped financing new hotels in the early 1990s because of the high rate of loan defaults, and they are only now starting to make construction loans. Although mortgage funds are available to refinance existing properties and construction loans are being made for economy hotels, mortgages for new hotels in the mid-rate, first-class, and luxury categories are still difficult to secure. This lack of financing is major barrier to entry, and will prevent a number of proposed projects from moving forward. With only a slow increase in supply, hotel occupancies should rebound as fast as the growth in demand permits. o An additional barrier to entry is the current discrepancy between market values and replacement costs for first-class and luxury hotels. In today's market, many upscale hotels are still selling for prices that are below what it would cost to develop a comparable hotel. As a result, there is little justification for building a new hotel when a similar, existing facility is available for sale at some fraction of the cost. Until the gap between market value and replacement cost narrows, there will be minimal new hotel construction in the upper-tier segments. The market values and replacement costs of budget and economy hotels have been in equilibrium for several years which is another reason why new development is proceeding in these segments. o The U.S. economy continues to improve, which suggests that more people are traveling. Many people curtailed their travel plans during the recent recession, and there is likely to be pent-up demand that will be released as consumer confidence escalates. o Minimal additions to the hotel supply coupled with growth in demand should result in further improvement in occupancies during the next several years. o As shown by the historical data, hotel room rates rise rapidly as occupancies escalate. The most frequent complaint that owners and operators had during the recent recession was their inability to achieve average rate gains. Starting in 1994, gains in hotel room rates returned to levels in excess of inflation, foreshadowing enhanced profitability. In real dollars, hotel room rates are expected to return to 1988 levels by 1998. This HVS International, Mineola, New York Overview of External Forces Affecting the U.S. Lodging Industry 59 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= is a good indication that hotel values will return to record levels in the next two to four years. o The low cost of capital is another factor that tends to enhance value. Because capitalization rates are tied directly to the price of capital, the lower the cost, the lower the cap rate and the higher the value. The cost of hotel debt capital averaged 10.5% in 1990. Today, similar financing is available at 8.5% to 9.5%. Recent hotel sales support the downward trend in capitalization rates. o Government regulations are becoming increasingly expensive for the U.S. hotel industry. A national health care policy could force small operators to provide better benefits for many more employees, particularly the part-time workers who are used extensively by hotels and restaurants. Environmental laws are becoming stricter and will require hotels to implement recycling, reuse, and conservation procedures. Congress has limited deductions for meals and entertainment expenses, which increases the cost of doing business in hotels and restaurants. Local municipalities use hotel rooms taxes as a source of revenue for general use, and the hotel rooms tax is so high in some areas that it has driven away demand. This is particularly true with respect to meetings and conventions, which can be held in cities that tax accommodations at a lower rate. o Improved technology is rapidly changing the way business is conducted. During the next decade, advances such as video communication, enhanced data transfer, and faster transportation are expected to limit the need for face-to-face meetings and shorten the time that executives are away from their offices. Commercial hotels are bound to be influenced by this trend. Conclusion Interest in hotel acquisition has increased significantly during the past several years. Buyers have concluded that future earnings trends are likely to be favorable, and the risks posed by overbuilding or an economic downturn are small. Some sellers are holding their properties until prices reach a higher level. Consequently, we believe there is pent-up desire to sell once prices begin to approach levels that allow the existing (or restructured) debt to be paid off. The fact that numerous buyers are chasing very few acquisition opportunities has had a favorable impact on recent sales prices. For buyers to be successful in this highly competitive market, their projected operating results HVS International, Mineola, New York Overview of External Forces Affecting the U.S. Lodging Industry 60 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= must take into account at least a portion of any upside created from improved performance, particularly if the improvement can be readily achieved through management efficiencies. Capitalization rates based on historical operating income have fallen during the past several years. Hotel buyers in today's market must be aggressive in all of their acquisition assumptions. As a result, hotel values in some parts of the country are approaching the levels registered during the mid-1980s, and a full recovery is expected to occur in the next two to four years. HVS International, Mineola, New York Lodging Market Supply and Demand Analysis 61 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 6. Lodging Market Supply and Demand Analysis MARKET FOR TRANSIENT ACCOMMODATIONS The market for transient accommodations is an all-encompassing term referring to the many types of travelers who use lodging facilities in a given area. These travelers represent the market's accommodated room night demand. This section will begin with an analysis of historical demand trends to determine what changes have occurred; the historical number of competitive hotel rooms will then be estimated to evaluate local supply trends. Areawide occupancy levels can be calculated based on the number of hotel rooms available in the market and the demand for lodging accommodations. The total hotel room night demand will be divided into individual market segments to allow us to forecast growth rates based on the economic and demographic data set forth earlier in this report. Historical Supply and Demand Data Smith Travel Research (STR) has compiled historical supply and demand data for the subject property and its competitors in the downtown St. Petersburg and mid-Pinellas County areas. Although the subject property also competes with Pinellas County beachfront hotels and properties located in the Tampa/Westshore (Hillsborough County) area to some degree, the Hilton operates in a distinct market that demonstrates its own supply and demand trends. This historical supply and demand information is presented in the following table, along with the marketwide occupancy, average rate, and rooms revenue per available room (RevPAR). RevPAR is calculated by multiplying occupancy by average rate, and provides an indication of how well rooms revenue is being maximized. HVS International, Mineola, New York Lodging Market Supply and Demand Analysis 62 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 6-1 Historical Supply and Demand Trends (STR) - --------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 - --------------------------------------------------------------------------------------------------- Number of Rooms 735 846 846 906 1,206 1,206 1,206 Annual Guestroom Supply 268,113 308,790 308,790 330,750 440,190 440,190 440,190 Percent Change -- 15.2% 0.0% 7.1% 33.1% 0.0% 0.0% Room Night Demand 166,975 192,262 193,093 199,301 266,448 301,732 309,769 Percent Change -- 15.1% 0.4% 3.2% 33.7% 13.2% 2.7% Occupancy 62.3% 62.3% 62.5% 60.3% 60.5% 68.5% 70.4% Percent Change -- (0.0)% 0.4% (3.6)% 0.5% 13.2% 2.7% Average Rate $57.46 $59.41 $60.48 $61.98 $75.31 $76.21 $80.51 Percent Change -- 3.4% 1.8% 2.5% 21.5% 1.2% 5.6% RevPAR $35.79 $36.99 $37.82 $37.34 $45.59 $52.24 $56.65 Percent Change -- 3.4% 2.2% (1.3)% 22.1% 14.6% 8.4%
Year to Date ------------------- Avg. Annual Comp. Change, 1995 1996 1989-95 - ---------------------------------------------------------------- Number of Rooms 1,206 1,206 Annual Guestroom Supply 293,058 293,058 Percent Change -- 0.0% 8.6% Room Night Demand 217,866 217,814 Percent Change -- (0.0)% 10.8% Occupancy 74.3% 74.3% Percent Change -- (0.0)% 2.1% Average Rate $82.47 $89.51 Percent Change -- 8.5% 5.8% RevPAR $61.31 $66.53 Percent Change -- 8.5% 8.0% Note: The 149-unit Courtyard by Marriott opened in October of 1989, and the 360-unit Renaissance Vinoy Hotel reopened in November of 1992 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Lodging Market Supply and Demand Analysis 63 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= It is important to note some limitations of the STR data. Hotels are occasionally added to or removed from the sample, and not every property reports data in a consistent and timely manner; these factors can influence the overall quality of the information by skewing the results. These inconsistencies may also cause the STR data to differ from the results of our competitive survey. Nonetheless, we find that hotel buyers often rely on STR statistics, and thus they are considered relevant to this study. The STR table demonstrates the growth in the market's guestroom supply since 1989. In that year, there were 735 rooms (including those of the subject property) that competed for first-class and mid-rate travelers in the downtown St. Petersburg and mid-Pinellas County areas. The full impact of the Courtyard by Marriott, which opened in October of 1989 in mid-Pinellas County, was felt in 1990, when the market had 846 rooms open for the entire year; the additional 111 rooms in 1990 represents a 15.2% increase in supply from the previous year. There were no further increases in 1991, but the November, 1992 reopening of the Renaissance (Stouffers) Vinoy in downtown St. Petersburg effectively increased the supply by another 60 rooms, bringing the total to 906. In 1993, when the 360-room Renaissance Vinoy was operational for the full year, the supply rose to 1,206. Overall, the market registered a dramatic 64% increase in guestroom supply between 1989 and 1993. Since 1993, the guestroom count has remained stable at 1,206. Between 1989 and 1995, overall guestroom supply in this market increased at an average annual compounded growth rate of 8.6%. As indicated by the STR data, demand has grown in every year, increasing from 166,975 in 1989 to 309,769 in 1995. This represents a total gain of 85.5%, and an average annual compounded growth rate of 10.8%. In 1990, demand rose by 15.1%, nearly offsetting the 15.2% increase in supply; this pattern suggests that there had been some unaccommodated demand in the market prior to the opening of the Courtyard. Despite the deepening national recession and Persian Gulf Crisis in the early 1990s, which caused a reduction in all forms of travel, hotel demand in this market continued to increase at a modest rate of 0.4% in 1991 and a more rapid rate of 3.2% in 1992. In 1993, demand jumped by 33.7%, more than offsetting the 33.1% increase in supply. This again implies that the opening of the Vinoy enabled the market to accommodate demand that it could not handle previously; we also believe that this hotel was successful in inducing additional meeting and group demand into the market. Spurred by the economic recovery, demand continued to grow at 13.2% and 2.7%, respectively, in 1994 and 1995. The subject property's acceptance of a lodging contract with Delta HVS International, Mineola, New York Lodging Market Supply and Demand Analysis 64 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Airlines was a key component of the growth experienced in 1994. Year-to-date August figures indicate little change in demand from 1995 to 1996. Because demand growth outpaced supply increases during the historical period, the marketwide occupancy increased from 62.3% in 1989 to 70.4% in 1995, yielding an average annual compounded growth rate of 2.1%. As the STR table illustrates, occupancy increased by a modest 0.4% from 1989 to 1991. When the Renaissance Vinoy opened in November of 1992, growth in demand failed to keep pace with the gain in supply, and occupancy declined by 3.6% (to 60.3%). A recovery began in 1993, and although supply continued to increase (reflecting the first full year of operation at the Vinoy), demand growth occurred at a faster pace. In 1994 and 1995, when the number of available guestrooms remained stable, occupancy increases paralleled hotel demand growth, increasing by 13.2% in 1994 (to reach 68.5%) and by 2.7% in 1995 (to reach 70.4%). As noted earlier, year-to-date August statistics indicate that both supply and demand have essentially stabilized, indicating that occupancy probably has as well. Marketwide average rate rose consistently from 1989 through 1995. Following the opening of the high-rated Renaissance Vinoy in November of 1992, average rate jumped by 21.5% in 1993. As occupancy increased in 1994 and 1995, average rate continued to grow, by 1.2% and 5.6%, respectively. Year-to-date figures indicate a strong 8.5% increase from 1995 to 1996. Overall, average rate rose at an average annual compounded rate of 5.8% between 1989 and 1995. Our analysis of the STR data indicates a healthy trend in the local lodging market from 1989 to 1995. Despite a 64% increase in supply, occupancy and average rate rose at overall average annual compounded rates of 2.1% and 5.8%, respectively. Except in 1992, when a 2.5% rate gain failed to offset the 3.6% decline in occupancy, RevPAR also rose in each year. In total, RevPAR grew at an average annual compounded rate of 8.0% from 1989 to 1995. We note, however, that this overall trend is skewed somewhat by the influence of the high-rated Renaissance Vinoy. Demand Analysis Using Market Segmentation For the purpose of demand analysis, the overall market is divided into individual segments based on the nature of travel. Although a market may have various segments, the three primary classifications occurring in most areas are commercial, meeting and group, and leisure. HVS International, Mineola, New York Lodging Market Supply and Demand Analysis 65 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Market segmentation is a useful procedure because individual classifications often exhibit unique characteristics in terms of growth potential, seasonality of demand, average length of stay, double occupancy, facility requirements, price sensitivity, and so forth. By quantifying the room night demand by market segment and analyzing the characteristics of each segment, the overall demand for transient accommodations can be projected. Lodging demand in the subject property's competitive market is generated primarily by the following four market segments. Segment 1 Commercial Segment 2 Meeting and Group Segment 3 Leisure Segment 4 Airline/Contract Based on our fieldwork, area analysis, and knowledge of the local lodging market, we estimate the year-end 1996 distribution of accommodated hotel room night demand as follows. ================================================================================ Table 6-2 Estimated Year-End 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- Marketwide Subject Property ----------------------- ------------------------ Accommodated Percent Accommodated Percent Market Segment Demand of Total Demand of Total - -------------------------------------------------------------------------------- Commercial 72,000 19% 13,000 16% Meeting and Group 265,000 71 48,000 58 Leisure 29,000 8 13,000 16 Airline/Contract 8,000 2 8,000 10 - -------------------------------------------------------------------------------- Total 374,000 100% 82,000 100% - -------------------------------------------------------------------------------- Meeting and group demand predominates in the subject property's competitive market, accounting for an estimated 71% of the year-end 1996 room night demand. Because the room counts of the competitive hotels in the Pinellas County beachfront and Tampa/Westshore areas have been weighted to reflect the fact that these properties compete with the Hilton only in the meeting and group segment, the percentage of marketwide meeting and group demand is notably high. Commercial demand follows the meeting and group segment with an estimated 19% share of the room night demand, while leisure travelers contribute 8%. The overall market derives an estimated 2% of its occupancy from the airline/contract segment, HVS International, Mineola, New York Lodging Market Supply and Demand Analysis 66 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= which reflects the Delta contract demand accommodated by the subject property. Our analysis does not consider the airline demand that is accommodated by some of the properties in the Tampa/Westshore market; this demand primarily consists of crews that are on short layovers, and must be accommodated by hotels that are located within a ten-minute drive of the airport. Like the market as a whole, the subject property derives a majority of its room night demand from the meeting and group segment, at an estimated 58% as of year-end 1996. Because of the limited amount of commercial demand available in downtown St. Petersburg, the Hilton has targeted the meeting and group segment as its primary source of business. Given the hotel's extensive function space and the flexibility of these facilities in terms of size and configuration, the subject property is physically well suited to serve this market. Approximately 16% of the Hilton's occupancy is generated by commercial guests, versus 19% in the market as a whole; hotels that compete with the subject property in this segment (including the Renaissance Vinoy, the Heritage Holiday Inn, and the mid-Pinellas County hotels) tend to derive higher percentages of their room night demand from commercial guests. We note that an estimated 16% of the subject property's occupancy consists of leisure travelers, which is twice the marketwide level. Only two hotels compete with the subject property to any significant extent in this segment: the Renaissance Vinoy and the Heritage Holiday Inn. Although the Renaissance Vinoy's percentage of leisure travelers is lower than that of the subject property, the Heritage Holiday Inn's is higher. An estimated 10% of the Hilton's year-end 1996 occupancy can be attributed to airline/contract demand. Using the distribution of accommodated hotel demand as a starting point, we will analyze the characteristics of each market segment in an effort to determine future trends in room night demand. Commercial Segment The commercial segment consists of individual businesspeople and government employees. This type of demand is strongest Monday through Thursday nights, declines significantly on Friday and Saturday, and increases somewhat on Sunday. The typical length of stay ranges from one to three days, and the rate of double occupancy is a low 1.2 to 1.3 people per room. Commercial demand is relatively constant throughout the year, although some declines are noticeable in late December and during other holiday periods. HVS International, Mineola, New York Lodging Market Supply and Demand Analysis 67 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= In general, commercial travelers are not overly rate-sensitive, and they often make use of a hotel's food and beverage outlets and recreational facilities. The commercial segment represents a highly desirable and lucrative market that provides a consistent level of demand at relatively high room rates. In the market surrounding the St. Petersburg Hilton, most commercial demand is generated by firms and business parks in Tampa or in mid-Pinellas County (the area situated off I-275, north of the subject property), and by companies operating in downtown St. Petersburg. Most of the area's commercial demand generators are located in office and industrial developments that are within a 15-mile radius of the Hilton. Business travelers who are passing through the area en route to other destinations also contribute some commercial room nights; these guests may stop at local lodging facilities because they provide a convenient resting point. Management representatives at the subject property report that the hotel derives a majority of its commercial demand from companies located in downtown St. Petersburg, including First American Real Estate, Capital Marketing, Florida Power Corporation, and Olin Ordinance (a government contracting services company). As underscored by the relatively small percentage of commercial guests accommodated by the subject property, commercial demand in downtown St. Petersburg is considerably weaker than in the northern regions of Pinellas County and across the bay, in Tampa. In conjunction with the recent trend of slower growth in the local economy, commercial demand increases have become more moderate since the 1980s. As the national economy improves and prominent local businesses increase their production and employment levels, commercial hotel demand is expected to rebound quickly. We project that commercial demand will increase by 2.0% in 1997 before stabilizing at a growth rate of 1.5% annually in subsequent years. Meeting and Group Segment The meeting and group market includes meetings, seminars, conventions, trade association shows, and similar gatherings of ten or more people. Peak convention demand typically occurs in the spring and fall. Because of vacations, the summer months represent the slowest period for this market segment; winter demand varies. The average length of stay for typical meetings and groups ranges from three to five days. Most commercial groups meet during the weekday period of Monday through Thursday, but associations and social groups will sometimes gather on weekends. HVS International, Mineola, New York Lodging Market Supply and Demand Analysis 68 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Commercial groups tend to have a low double occupancy of 1.3 to 1.5 people per room, while social groups are likely to have double occupancy rates ranging from 1.5 to 1.9. A large percentage of the meeting and group demand in the local lodging market is generated by groups that are not based in the immediate area. Most of this demand is regional in nature, with a large representation of Florida-based associations and corporations. Management representatives indicate that a significant portion of the subject property's meeting and group demand is generated by state associations headquartered in Tallahassee, which is located approximately 210 miles northwest of St. Petersburg (and serves as the state capital). The Hilton reportedly competes with a number of hotels in St. Petersburg, Clearwater, and Tampa for groups that wish to meet in the Tampa Bay metropolitan area. Because the Hilton's location is inferior to those of resort-style hotels situated on the beachfront, the hotel offers rates that are typically lower than those available at many of the beachfront lodging facilities. Consequently, the Hilton generally serves the most rate-sensitive portion of the meeting and group market, including a considerable number of SMERF (social, military, educational, religious, and fraternal) organizations; management representatives indicate that SMERF groups comprise approximately 80% of the Hilton's meeting and group business. Meeting and group patronage is quite profitable for hotels. Although room rates are discounted for large groups, the property benefits from the use of meeting space and the revenues generated by in-house banquets and cocktail receptions. Facilities that are necessary to attract meetings and groups include function areas with adequate space for breakout, meals, and receptions; recreational amenities; and a sufficient number of guestrooms to house the attendees. Growth in business-related meeting and group demand is closely related to growth in the commercial segment. Non-commercial meeting and group demand, on the other hand, is tied to the economic factors that influence leisure travel. It should be noted that meetings and similar events are booked in advance, and thus growth in this segment tends to lag slightly behind increases in commercial or leisure demand. Historically, meeting and group demand in the subject property's competitive market is estimated to have increased slower than overall hotel HVS International, Mineola, New York Lodging Market Supply and Demand Analysis 69 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= demand in the area (which rose at an average annual compounded rate of 10.8% between 1989 and 1995). We believe that the arrival of the Tampa Bay Devil Rays in 1998 will generate a significant amount of meeting and group demand in the form of baseball teams and officials. In light of this information and the relevant economic and demographic trends, we estimate that meeting and group demand in the subject property's market area will increase by 1.0% in 1997 and by 2.0% in 1998 before stabilizing at 1.0% annually throughout the remainder of the projection period. Leisure Segment The leisure market segment consists of individuals and families who are spending time in the area or passing through en route to other destinations. Their travel purposes may include sightseeing, recreation, visiting friends and relatives, or numerous other non-business activities. Leisure demand is strongest Friday and Saturday nights and all week during holiday periods and the summer months. These peak periods are negatively correlated with commercial visitation, underscoring the stabilizing effect of capturing weekend and summer tourist travel. The typical length of stay ranges from one to four days, depending on the destination and travel purpose, and the rate of double occupancy generally ranges from 1.8 to 2.5 people per room. Leisure travelers tend to be the most price-sensitive segment in the lodging market. They often prefer low-rise accommodations where parking is convenient to the rooms, and they typically demand extensive recreational facilities and amenities. Ease of highway access and proximity to tourist attractions are important locational considerations. In the area surrounding the subject property, leisure demand is primarily generated by the Pinellas County beaches. When compared to its beachfront competitors, the Hilton is at a clear disadvantage as a result of its downtown location. This is particularly true in the leisure market segment, as Florida's prevalent image among leisure travelers is tied to the oceanfront and beaches. Although the Hilton is situated near several tourist attractions in downtown St. Petersburg (including the Thunderdome, Al Lang Stadium, the Pier, the Bayfront Center, and a number of museums and exhibits), these sources of diversion create minimal demand for overnight accommodations. Management representatives report that although nearby attractions generate some demand for the subject property, a majority of the leisure patronage accommodated by the hotel consists of overflow demand during periods when the beachfront hotels are fully occupied. HVS International, Mineola, New York Lodging Market Supply and Demand Analysis 70 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Future leisure demand is related to the overall economic health of the nation. Trends showing changes in state and regional unemployment and disposable personal income often have a strong impact on non-commercial visitation. Traffic counts on nearby highways and attendance at local attractions can also form a basis for projections. In October of 1996, the Thunderdome closed for a $70,000,000 renovation that will entail a reconfiguration and expansion of the public areas, making the stadium more suitable for baseball play. In 1998, the Thunderdome will reopen as Tropicana Field, in time to host a round of the NCAA basketball championships. The Tampa Bay Devil Rays will begin play at the stadium at the start of the 1998 baseball season. In 1999, the stadium will host the final four of the NCAA basketball championships. In light of these events and economic and demographic trends in the market area, we project leisure demand to decline by 5% in 1997, followed by increases of 8% in 1998, 3% in 1999, and 2% annually thereafter. Airline Segment Airline demand is generated by flight crews and delayed passengers. The airlines typically contract rooms in nearby lodging facilities for extended periods to ensure the availability of accommodations. Because they are able to guarantee a specific level of usage on a daily basis, airlines can usually negotiate deeply discounted room rates. This type of demand is advantageous because it provides a base level of occupancy over a long period that normally includes weekends and slow seasons. The occupancy benefit is offset by low contract room rates, which have an adverse impact on average rate. Skilled hotel operators use airline patronage to fill in during periods of low occupancy, and quickly displace this demand when higher-rated market segments offer better potential. In January of 1994, the subject property entered into a contract with Delta Airlines to accommodate some of the crews scheduled to remain in the area overnight. The hotel must also provide transportation to and from the airport for each crew. The low rate and the expense associated with transportation effectively limits the profit potential of this segment; however, the revenue generated by these room nights enables the hotel to achieve greater economies of scale (particularly with respect to staffing levels) and thus operate more efficiently. Some food and beverage revenue is also generated by these guests. In 1994, airline contract demand approximated 20,300 room nights, at an average rate of $31.73. In 1995, demand declined to roundly 14,300 rooms on HVS International, Mineola, New York Lodging Market Supply and Demand Analysis 71 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= an annual basis, at an average rate of $31.46. Management representatives indicate that Delta contract demand has continued to decrease in 1996; year-to-date September, 1996 figures indicate that approximately 6,800 contract room nights were accommodated, which represents a 40.1% drop from the same period in 1995. The subject property's contract with Delta Airlines terminates at the end of October of 1996, but management representatives report that the hotel is likely to continue its contract business with Delta on a month-by-month basis. Management also reports that a contract is being finalized with British Airways; this agreement will commence in January of 1997, and is estimated to generate approximately 3,000 room nights on an annual basis. In consideration of this factor, we anticipate airline/contract demand to increase by 25% in 1997. As the Hilton begins to accommodate increased demand from higher-rated segments (and leisure travelers in particular), we project its contract demand to drop by 30% annually in 1998 and 1999, and then remain stable. Growth Rates The purpose of segmenting the lodging market is to define each major type of demand, identify customer characteristics, and estimate future growth trends. Starting with an analysis of the local area, four segments were defined as representing the subject property's lodging market. Various types of economic and demographic data were then evaluated to determine their propensity to reflect changes in hotel demand. Based on this procedure, we forecast the following average annual compounded market segment growth rates. ================================================================================ Table 6-3 Average Annual Compounded Market Segment Growth Rates - -------------------------------------------------------------------------------- 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Commercial 2.0% 1.5% 1.5% 1.5% 1.5% Meeting and Group 1.0 2.0 1.0 1.0 1.0 Leisure (5.0) 8.0 3.0 2.0 2.0 Airline/Contract 25.0 (30.0) (30.0) 0.0 0.0 Overall Annual Growth 1.3% 1.5% 0.7% 1.2% 1.2% - -------------------------------------------------------------------------------- These growth rates will be used in subsequent sections of this study to forecast changes in lodging demand. HVS International, Mineola, New York Lodging Market Supply and Demand Analysis 72 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= COMPETITION An integral component of the supply and demand relationship that has a direct impact on the availability of lodging demand is the current and anticipated supply of competitive lodging facilities. Our survey indicates that two hotels in the downtown St. Petersburg market offer the facilities and amenities necessary to compete with the St. Petersburg Bayfront Hilton . These primary competitors and the subject property form the downtown district's first-class hotel supply. Including the subject property, these primary competitors total 764 rooms. A number of more distant hotels are considered secondarily competitive with the Hilton; although the facilities, rate structures, or market orientations of these hotels prevent their inclusion among the primarily competitive supply, they do compete with the subject property to some extent. These secondary competitors have been grouped by location (the Pinellas County beachfront area, mid-Pinellas County, and the Tampa/Westshore area) and are considered in the aggregate. The room counts of these hotels have been weighted to reflect the degree to which each group competes with the St. Petersburg Hilton. The aggregate weighted room count of the secondary competitors is 719. The following table summarizes the important operating characteristics of the competitive properties. This information was compiled from personal interviews, inspections, lodging directories, and our in-house library of operating data. As noted earlier, rooms revenue per available room (RevPAR) is calculated by multiplying a property's occupancy by its average rate, and serves to gauge how well a hotel is maximizing its rooms revenue. Penetration is the ratio between the subject property's operating results and the corresponding data for the market. If the penetration factor is greater than 100%, the subject property is performing better than the market as a whole; conversely, if the penetration is less than 100%, the hotel is performing at a level below the marketwide average. HVS International, Mineola, New York Lodging Market Supply and Demand Analysis 73 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 6-4 Competitive Lodging Facilities - --------------------------------------------------------------------------------
Estimated 1996 Market Segmentation Estimated 1995 ----------------------------------- --------------------------------- No. of Mtg. & Average Property/Location Rooms Comm. Group Leisure Airline Occ. Rate RevPAR - ------------------------------------------------------------------------------------------------------------------ Subject Property 333 First Street South 333 16% 58% 16% 10% 69.8% $60.80 $42.45 Renaissance Vinoy 501 5th Avenue Northeast 360 30 60 10 0 64.0 136.00 87.04 Heritage Holiday Inn 234 3rd Avenue North 71 50 10 40 0 65.0 62.00 40.30 Beachfront Hotels 274 0 100 0 0 75.0 99.00 74.25 Tampa/Westshore Hotels 335 0 100 0 0 65.0 102.00 66.30 Mid-Pinellas Hotels 110 75 25 0 0 77.0 59.00 45.43 - ------------------------------------------------------------------------------------------------------------------ Totals and Averages -- 19% 71% 8% 2% 68.6% $94.28 $64.66 Estimated 1996 --------------------------------------------------------- Average Occupancy Yield Property/Location Occ. Rate RevPAR Penetration Penetration - -------------------------------------------------------------------------------------- Subject Property 333 First Street South 68.0% $67.00 $45.56 98.4% 65.2% Renaissance Vinoy 501 5th Avenue Northeast 69.0 138.00 95.22 99.9 136.2 Heritage Holiday Inn 234 3rd Avenue North 63.0 63.00 39.69 91.2 56.8 Beachfront Hotels 71.0 108.00 76.68 102.8 109.7 Tampa/Westshore Hotels 67.0 111.00 74.37 97.0 106.4 Mid-Pinellas Hotels 78.0 64.00 49.92 112.9 71.4 - -------------------------------------------------------------------------------------- Totals and Averages 69.1% $101.22 $69.92
- -------------------------------------------------------------------------------- [GRAPHIC OMITTED] COMPETITION MAP HVS International, Mineola, New York Lodging Market Supply and Demand Analysis 74 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Our survey of the subject property's competitive market shows a wide representation of hotel types. Overall, the market demand has a meeting and group orientation; we estimate this segment's year-end 1996 contribution at 71% of the overall occupancy, followed by the commercial segment (at 19%), leisure travelers (at 8%), and airline/contract demand (at 2%). We estimate the year-end 1996 occupancy and average rate of the competitors at 69.1% and $101.22, yielding RevPAR of $69.92. The Hilton's estimated occupancy of 68.0% is slightly lower than the marketwide average. The mid-Pinellas County hotels lead the market (at an estimated occupancy of 78.0%), followed by the Pinellas County beachfront hotels (at 71.0%). Among the primary competitors, occupancy estimates range from 63.0% at the Heritage Holiday Inn to 69.0% at the Renaissance Vinoy. The subject property's estimated 1996 average rate of $67.00 is considerably lower than the marketwide level of $101.22. We note the competitive market includes a number of lodging facilities with substantially higher rate structures, such as the Renaissance Vinoy and the hotels in the Pinellas County beachfront and Tampa/Westshore areas. In terms of RevPAR, the Renaissance Vinoy is the top performer, with an estimated 1996 level of $95.22, and the Heritage Holiday Inn achieves the lowest RevPAR (estimated at $39.69 in 1996). The subject property's estimated RevPAR of $45.56 is the second-lowest in the market. We have evaluated the competitive supply, and descriptions of our findings are presented below. Heritage Holiday Inn The Heritage Holiday Inn is located in a residential area northwest of the subject property. The three-story building opened as a boarding house known as the Martha Washington, and is similar to an inn in terms of style. The hotel became affiliated with Holiday Inns in 1993. In addition to 71 guestrooms, facilities include a 3,148-square-foot ballroom that can be divided into three components. Food and beverage service is provided by an adjacent restaurant that is operated under a lease agreement. We estimate this property's year-end 1996 market mix at 50% commercial travelers, 40% leisure, and 10% meeting and group. This hotel's year-end 1996 occupancy and average rate are estimated at 63% and $63. Renaissance Vinoy Hotel The Vinoy is an historic property that was constructed in the 1920s. The hotel closed in 1974, and reopened as the Stouffer Vinoy in mid-1992, following a renovation. In May of 1995, Renaissance Hotels International purchased the Stouffer Hotel Company, and the hotel is now known as the Renaissance Vinoy. The hotel sits amid eight miles of city-owned park land that fronts Tampa Bay, north of the subject property. The $92,000,000 HVS International, Mineola, New York Lodging Market Supply and Demand Analysis 75 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= renovation project included extensive restoration of the Vinoy Hotel to its original condition and the addition of an adjacent wing housing guestrooms and other facilities. The Vinoy consists of 258 original rooms in the main building, 102 guestrooms in the new wing, four restaurants, one lounge, and approximately 21,780 square feet of meeting space. Recreational amenities include a 14-court tennis complex, a 5,000-square-foot health facility, a 74-slip marina, two croquet courts, two heated outdoor pools, and access to an 18-hole golf course that the hotel operates on a site approximately 1.6 miles away. The new Vinoy Hotel was intended to operate as a luxury resort, and thus was not expected to be directly competitive with the Hilton. However, the property achieved only limited success in this segment during its first years of operation, largely as a result of its downtown location, lack of beach access, and distance from the golf course. The absence of a strong corporate market in St. Petersburg has also contributed to this failure. Although the Vinoy has succeeded in capturing a majority of the area's high-end corporate demand (including both individuals and groups), this segment has proven insufficient to support the 360-room hotel. As a result of these circumstances, the Vinoy's current market orientation renders it primarily competitive with the Hilton. Given the Vinoy's superior facilities, the hotel has been extremely effective in attracting meeting and group demand, which is estimated to contribute 60% of its occupancy. Commercial guests comprise another 30%, and the remaining 10% of the hotel's demand is generated by leisure travelers. We estimate the year-end 1996 occupancy and average rate of the Renaissance Vinoy at 69% and $138. Pinellas County Beachfront Hotels The Pinellas County beachfront hotels are included among the competitive supply by virtue of their relative proximity to the subject property and the fairly extensive amount of meeting space available at each facility. Because they are situated directly on the Gulf of Mexico and feature a resort atmosphere, these properties typically attract high-rated commercial and meeting and group travelers who prefer to conduct business in a beachfront location. Nonetheless, these hotels do offer lower rates during off-peak periods, and thus compete with the Hilton for a defined component of the meeting and group segment. The St. Petersburg beachfront hotels that are considered competitive with the Hilton include the Don Ce Sar (275 rooms), the Tradewinds (577 HVS International, Mineola, New York Lodging Market Supply and Demand Analysis 76 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= rooms), and the Radisson Sandpiper (159); the Clearwater beachfront hotels are the Sheraton Sand Key (390 rooms) and the Doubletree Surfside Resort (428 rooms). These hotels compete with the subject property only in the meeting and group demand segment, and their total room count has been weighted to reflect an overall competitiveness of 15%. We estimate the year-end 1996 occupancy and average rate of the beachfront properties at 71% and $108. Tampa/Westshore Hotels Like the beachfront properties, the Tampa/Westshore hotels compete with the Hilton only in the meeting and group segment; however, these hotels also enjoy a strong level of commercial demand as a result of their proximity to office space concentrations and Tampa International Airport. Although these properties attract a number of corporate groups that originate in Tampa, the Hilton competes for those organizations that may choose between Tampa and other destinations based on accommodations and rate rather than location. For the most part, the Hilton competes with the Tampa/Westshore hotels during slow periods when commercial activity is limited (such as weekends) and for lower-rated business generated by state associations and government groups. Like the subject property, these lodging facilities have limited recreational amenities and must compete by offering lower rates during off-peak occupancy periods. The Tampa/Westshore hotels that are considered competitive with the Hilton are the Wyndham Harbor Island (300 rooms), the Crowne Plaza Westshore (272 rooms), the Hyatt Westshore (445 rooms), and the Sheraton Grand Hotel (324 rooms). As a group, these lodging facilities are considered 25% competitive with the subject property. We estimate the year-end 1996 occupancy and average rate of the Tampa/Westshore hotels at 67% and $111. Mid-Pinellas County Hotels The mid-Pinellas County hotels compete with the Hilton as a result of their proximity to Tampa and the region's international airport. Perhaps more importantly, these properties are located near a concentration of commercial demand generators, and are among the newest lodging facilities available in Pinellas County. Until the mid-1980s, there were no hotels on Ulmerton Road, and travelers seeking accommodations in this market generally used lodging facilities located along U.S. 19, which was once the primary multiple-access, north/south route serving Pinellas County. With the construction of Interstate 275, which created a bypass around U.S. 19, Ulmerton Road became the newest area of hotel development. Although these properties were constructed during a period of commercial expansion HVS International, Mineola, New York Lodging Market Supply and Demand Analysis 77 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= in Pinellas County, the new supply located on Ulmerton Road near the I-275 intersection is believed to have exceeded demand in the immediate area. As a result, new demand that has become available and much of the existing demand that was previously accommodated by older, unaffiliated hotels in Pinellas County has been absorbed by the mid-Pinellas County (Ulmerton Road) hotels. Overall, the new hotel development on Ulmerton Road has had an unfavorable impact on the subject property's ability to attract commercial guests. The competitive mid-Pinellas County hotels are the Courtyard by Marriott (149 rooms), the Holiday Inn (174 rooms), and the Hampton Inn (118 rooms). These properties are all affiliated with lodging chains that enjoy strong national reputations and reservation systems; in consideration of these attributes and the caliber of the physical facilities, we judge these hotels to be 25% competitive with the Hilton. All of these properties derive a majority of their occupancy from commercial travelers. The Holiday Inn, which offers approximately 5,000 square feet of meeting space, also competes with the subject property in the meeting and group segment. Overall, this competitive group is estimated to derive 75% of its occupancy from commercial demand and 25% from the meeting and group segment. We estimate the year-end 1996 occupancy and average rate of the mid-Pinellas County hotels at 78% and $64. Proposed Cometitors It is important to consider any new hotels that may have an impact on the subject property's operating performance. Based on our fieldwork in the market and our discussions with local hotel operators, developers, and government officials, we have not identified any properties that are proposed or under development in the St. Petersburg area that are likely to compete with the Hilton directly. CONCLUSION Smith Travel Research data indicates growth in the subject property's competitive market from 1989 through August of 1996. Despite increases in the guestroom supply, occupancy and average rate rose at average annual compounded levels of 2.1% and 5.8%, respectively, between 1989 and 1995. Year-to-date August, 1996 figures suggest that although occupancy remained fairly stable from 1995 to 1996, average rate continued to increase. We identified four market segments that generate lodging demand in the subject property's competitive market. Growth rates for each market segment were projected based on an analysis of the economic and demographic trends that have a significantly influence on lodging demand. In HVS International, Mineola, New York Lodging Market Supply and Demand Analysis 78 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= general, demand is anticipated to increase moderately throughout the projection period. Two properties in downtown St. Petersburg compete with the subject property directly. We also identified a number of more distant hotels that are considered secondarily competitive with the Hilton; these secondary competitors have been grouped by location, and are considered in the aggregate. Overall, the subject property's estimated year-end 1996 occupancy and average rate are lower than those of the market as a whole. HVS International, Mineola, New York Projection of Occupancy and Average Rate 79 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 7. Projection of Occupancy and Average Rate Historical Operating Performance The following table sets forth the subject property's historical occupancy, average rate, and RevPAR. For the purpose of comparison, we have also presented corresponding marketwide data (as provided by Smith Travel Research). In addition to the annual percent change calculations, we have determined the subject property's occupancy, average rate, and RevPAR penetration factors. ================================================================================ Table 7-1 Historical Trends - --------------------------------------------------------------------------------
Year to Date -------------------- 1991 1992 1993 1994 1995 1995 1996 --------------------------------------------------------------------------------------------- Subject Property Occupancy 57.2% 50.8% 53.3% 70.0% 69.8% 72.9% 71.0% Percent Change -- (11.2)% 4.9% 31.3% (0.3)% -- (2.7)% Occupancy Penetration 91.5% 84.3% 88.1% 102.1% 99.2% 98.1% 95.5% Average Rate $66.50 $68.44 $69.11 $61.00 $60.80 $62.80 $69.13 Percent Change -- 2.9% 1.0% (11.7)% (0.3)% -- 10.1% Average Rate Penetration 110.0% 110.4% 91.8% 80.0% 75.5% 76.1% 77.2% RevPAR $38.04 $34.77 $36.84 $42.70 $42.44 $45.81 $49.08 Percent Change -- (8.6)% 5.9% 15.9% (0.6)% -- 7.1% RevPAR Penetration 100.6% 93.1% 80.8% 81.7% 74.9% 74.7% 73.8% Areawide (STR) Occupancy 62.5% 60.3% 60.5% 68.5% 70.4% 74.3% 74.3% Percent Change -- (3.6)% 0.5% 13.2% 2.7% -- (0.0)% Average Rate $60.48 $61.98 $75.31 $76.21 $80.51 $82.47 $89.51 Percent Change -- 2.5% 21.5% 1.2% 5.6% -- 8.5% RevPAR $37.82 $37.34 $45.59 $52.24 $56.65 $61.31 $66.53 Percent Change -- (1.3)% 22.1% 14.6% 8.4% -- 8.5%
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Projection of Occupancy and Average Rate 80 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= As illustrated by the previous table, the subject property's occupancy rose from 57.2% in 1991 to 69.8% in 1995. There was a dramatic 11.2% drop in 1992, and the hotel registered an occupancy of only 50.8% in that year; we note that although the marketwide level also declined, that decrease was only 3.6%. We believe that the Hilton's poor 1992 performance can be attributed to the compounded effects of the national recession and the opening of the Stouffer's (Renaissance) Vinoy Hotel in downtown St. Petersburg. The Vinoy property now accommodates many of the high-end commercial travelers who formerly used the Hilton. As a result of this lower occupancy, the subject property's RevPAR decreased by 8.6% in 1992, resulting in a RevPAR penetration of only 93.1%. Occupancy at the Hilton rebounded by 4.9% in 1993 (as opposed to the marketwide gain of 0.5%), as the hotel's marketing staff succeeded in replacing some of the lost commercial business with meeting and group demand; the addition of the executive conference center and several smaller meeting rooms reportedly aided these efforts. The opening of the high-rated Vinoy Hotel in November of 1992 led to a 21.5% increase in the marketwide average rate in 1993 (the property's first full year of operation). The subject property's average rate increased by only 1.0% in that year, causing the hotel's RevPAR penetration to drop again, to 80.8%. In 1994, the subject property's occupancy rose by a full 31.3%, largely as a result of the Delta Airlines contract, which contributed an estimated 20,000 room nights in that year. The market also maintained a strong 13.2% occupancy gain in 1994. Because of its volume of low-rated Delta contract business, the Hilton's average rate decreased by 11.7%, dropping from $69.11 in 1993 to $61.00 in 1994. Conversely, the market registered a slight 1.2% increase. As occupancy rose and average rate fell, the subject property's RevPAR penetration increased slightly, to 81.7% in 1994. In 1995, both occupancy and average rate decreased by 0.3% at the Hilton, while the market as a whole achieve an occupancy gain of 2.7% and an average rate increase of 5.6%. Year-to-date August figures show another occupancy decrease of 2.7% at the Hilton from 1995 to 1996. However, by virtue of a 10.1% gain in average rate, the subject property's year-to-date RevPAR rose by 7.1% from 1995 to 1996. Marketwide data for the same year-to-date period show a similar trend of relatively stable occupancy coupled with rising average rates. HVS International, Mineola, New York Projection of Occupancy and Average Rate 81 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= A hotel's occupancy should also be evaluated on a monthly basis to identify seasonality trends. The following table sets forth the subject property's monthly occupancy in 1995 and 1996; we note that the figures for the last several months of 1996 represent estimates. ================================================================================ Table 7-2 Subject Property's Monthly Occupancy History - -------------------------------------------------------------------------------- 1995 1996 Percent Occupancy Occupancy Change ------------------------------------------- December 53.0% 46.4% (12.5)% January 69.8 76.1 9.0 February 87.5 86.7 (0.9) March 89.9 85.5 (4.9) April 81.7 78.3 (4.1) May 70.8 66.3 (6.4) June 67.4 60.0 (10.9) July 64.1 63.2 (1.4) August 53.8 52.8 (2.0) September 61.3 60.6 (1.2) October 79.0 81.2 2.8 November 61.1 63.1 3.2 ------------------------------------------- Full Year 69.8% 68.2% (2.3)% - -------------------------------------------------------------------------------- The subject property's occupancy tends to peak in the late winter and spring. October is also a strong month as a result of increased meeting and group demand. The lowest occupancies typically occur in December and August, when they average between 45% and 55%. Premise of the Projections To a certain degree, occupancy and rate attainment can be manipulated by management. For example, hotel operators may choose to lower rates in an effort to maximize occupancy. Our forecasts reflect an operating strategy that we believe would be implemented by competent management team to achieve an optimal mix of occupancy and average rate. Projected Room Night Demand Lodging demand and occupancy can be projected through a process known as room night analysis. A room night is a unit of hotel demand that equals one room that is occupied for one night. After estimating the number of room nights a hotel can be expected to attract during a 12-month period, we can determine occupancy by dividing the number of room nights of demand captured by the number of room nights available (calculated as the room count x 365). The total annual number of room nights occupied in HVS International, Mineola, New York Projection of Occupancy and Average Rate 82 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= the competitive hotels equates to the market's accommodated room night demand, as shown in the following table. ================================================================================ Table 7-3 Estimated Year-End 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- Marketwide Subject Property ------------------------ ----------------------- Accommodated Percent Accommodated Percent Market Segment Demand of Total Demand of Total - -------------------------------------------------------------------------------- Commercial 72,000 19% 13,000 16% Meeting and Group 265,000 71 48,000 58 Leisure 29,000 8 13,000 16 Airline/Contract 8,000 2 8,000 10 - -------------------------------------------------------------------------------- Total 374,000 100% 82,000 100% - -------------------------------------------------------------------------------- Latent Demand The previous table illustrates the accommodated room night demand in the subject property's competitive market. Because this estimate is based on occupancies, it includes only those hotel rooms that were used by guests. Latent demand considers guests who could not be accommodated by the existing competitive supply, and can be divided into unaccommodated demand and induced demand. Based on our fieldwork and analysis, we do not believe that there is any significant amount of latent demand in the subject property's market. Total Usable Room Night Demand Total usable room night demand is estimated by combining accommodated demand and usable latent demand. Usable latent demand is that portion of latent demand that can be absorbed based on the number of existing and proposed hotel rooms in the market. As noted above, our analysis does not consider any latent demand. Accommodated demand is expected to increase in each year of the projection period. Although leisure demand is expected to decline by 5.0% in 1997 (reflecting the closing of the Thunderdome, which is a major attraction in St. Petersburg), anticipated growth in the other three segments should more than offset this decrease, allowing a 1.3% gain in overall demand. Likewise, the anticipated drop in airline/contract room nights in 1998 and 1999 is projected to be accompanied by increases in the commercial, meeting and group, and leisure segments, allowing overall demand growth of 1.5% in 1998 and 0.7% in 1999. In subsequent years, total accommodated room night demand is projected to increase at a moderate rate of 1.2% HVS International, Mineola, New York Projection of Occupancy and Average Rate 83 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= annually. The following table outlines the projected annual change in accommodated room night demand in the subject property's competitive market. ================================================================================ Table 7-4 Total Usable Room Night Demand
Historical 1997 1998 1999 2000 2001 - ------------------------------------------------------------------------------------------------------- Commercial Growth Rate -- 2.0% 1.5% 1.5% 1.5% 1.5% Accommodated Demand 72,079 73,521 74,624 75,743 76,879 78,032 Meeting and Group Growth Rate -- 1.0% 2.0% 1.0% 1.0% 1.0% Accommodated Demand 264,737 267,384 272,732 275,459 278,214 280,996 Leisure Growth Rate -- (5.0)% 8.0% 3.0% 2.0% 2.0% Accommodated Demand 28,817 27,376 29,566 30,453 31,062 31,683 Airline/Contract Growth Rate -- 25.0% (30.0)% (30.0)% 0.0% 0.0% Accommodated Demand 8,271 10,339 7,237 5,066 5,066 5,066 Totals Commercial 72,079 73,521 74,624 75,743 76,879 78,032 Meeting and Group 264,737 267,384 272,732 275,459 278,214 280,996 Leisure 28,817 27,376 29,566 30,453 31,062 31,683 Airline/Contract 8,271 10,339 7,237 5,066 5,066 5,066 - ------------------------------------------------------------------------------------------------------- TOTAL DEMAND 373,904 378,620 384,159 386,721 391,221 395,777 Annual Demand Growth -- 1.3% 1.5% 0.7% 1.2% 1.2%
- -------------------------------------------------------------------------------- Guestroom Supply In 1996, the competitive properties provided a weighted total of 1,483 guestrooms. As noted earlier, we anticipate no further additions to the market. The following table shows the projected competitive supply of available rooms and available room nights. To calculate the annual number of available room nights, the number of available rooms is multiplied by 365. HVS International, Mineola, New York Projection of Occupancy and Average Rate 84 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-5 Available Rooms and Room Nights - -------------------------------------------------------------------------------- Total Room Overall Night Room Nights Competitive Year Demand Available Occupancy ------------------------------------------------------ Historical 373,904 541,295 69% 1997 378,620 541,295 70 1998 384,159 541,295 71 1999 386,721 541,295 71 2000 391,221 541,295 72 2001 395,777 541,295 73 - -------------------------------------------------------------------------------- Overall Competitive Occupancy As indicated by the table above, the overall occupancy of the competitive hotels is expected to increase steadily, from an estimated level of 69% as of year-end 1996 to 73% in 2001. This reflects the slow growth in room night demand and the lack of any additional supply entering the market. Competitive Index Analysis Competitive indexes are used to analyze the relative market position of each property on the basis of a particular demand segment. The index represents the number of times each year that one room is occupied by one type of traveler (e.g., commercial, meeting and group, leisure, or airline/ contract), or the number of room nights actually accommodated per year, per room, per market segment. For example, if a hotel has a commercial competitive index of 190, each room in the property is occupied 190 times a year by a commercial traveler. The competitive index is calculated by dividing a hotel's annual accommodated room night demand in a particular market segment by that property's room count. Competitive indexes will be used to illustrate each property's position in the market based on its ability to compete with other local lodging facilities. Commercial Segment The estimated year-end 1996 commercial segment competitive indexes in the subject property's market range from 40 to 214. The mid-Pinellas County hotels are the most competitive properties in this segment as a result of their proximity to a number of the area's primary commercial demand generators. The Heritage Holiday Inn occupies the second position with an index of 115, which is largely attributable to its chain affiliation and small size (which limits its reliance on group demand). The subject property's low index of 40 reflects the limited commercial activity in its immediate neighborhood and the hotel's reliance on meeting and group demand. The beachfront and Tampa/Westshore hotels do not compete with the Hilton in this market segment. We expect no changes in the relative market HVS International, Mineola, New York Projection of Occupancy and Average Rate 85 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= positions of the competitive hotels during the projection period, as illustrated by the following table. ================================================================================ Table 7-6 Commercial Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Subject Property 40 40 40 40 40 40 Renaissance Vinoy 76 76 76 76 76 76 Heritage Holiday Inn 115 115 115 115 115 115 Beachfront Hotels 0 0 0 0 0 0 Tampa/Westshore Hotels 0 0 0 0 0 0 Mid-Pinellas Hotels 214 214 214 214 214 214 - -------------------------------------------------------------------------------- Meeting and Group Segment The selected beachfront hotels and the Tampa/Westshore lodging facilities lead the market in the meeting and group segment, with estimated 1996 indexes of 259 and 245, respectively. Beginning in 1998 (when the Thunderdome facility reopens), the subject property is expected to exhibit an improvement in its competitive position in this segment, and its index is projected to increase from 144 to 150. Because it is the hotel closest to the Thunderdome, the Hilton is expected to accommodate a majority of the meeting and group demand generated by baseball-related groups. We anticipate the meeting and group segment competitive indexes of the other hotels to remain unchanged throughout the projection period. The following table illustrates the competitive indexes in the meeting and group segment. ================================================================================ Table 7-7 Meeting and Group Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Subject Property 144 144 150 150 150 150 Renaissance Vinoy 151 151 151 151 151 151 Heritage Holiday Inn 23 23 23 23 23 23 Beachfront Hotels 259 259 259 259 259 259 Tampa/Westshore Hotels 245 245 245 245 245 245 Mid-Pinellas Hotels 71 71 71 71 71 71 - -------------------------------------------------------------------------------- Leisure Segment The subject property competes with the Renaissance Vinoy and the Heritage Holiday Inn in the leisure market. The Heritage Holiday Inn is the most successful hotel in the leisure segment, with an estimated 1996 competitive index of 92, followed by the subject property (with an index of 40). HVS International, Mineola, New York Projection of Occupancy and Average Rate 86 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= We do not project any changes in the competitive indexes of these three hotels during the projection period, as illustrated by the following table. ================================================================================ Table 7-8 Leisure Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Subject Property 40 40 40 40 40 40 Renaissance Vinoy 25 25 25 25 25 25 Heritage Holiday Inn 92 92 92 92 92 92 Beachfront Hotels 0 0 0 0 0 0 Tampa/Westshore Hotels 0 0 0 0 0 0 Mid-Pinellas Hotels 0 0 0 0 0 0 - -------------------------------------------------------------------------------- Airline Segment As a hotel's occupancy improves, its reliance on airline demand generally diminishes. Because this segment commands deeply discounted rates, operators prefer to accommodate more lucrative types of demand whenever possible. The subject property is the only hotel in the competitive set that participates in the airline/contract segment. Although the total demand generated by this segment is expected to decline in 1998 and 1999, the subject property's competitive position will remain unchanged. ================================================================================ Table 7-9 Airline Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Subject Property 25 25 25 25 25 25 Renaissance Vinoy 0 0 0 0 0 0 Heritage Holiday Inn 0 0 0 0 0 0 Beachfront Hotels 0 0 0 0 0 0 Tampa/Westshore Hotels 0 0 0 0 0 0 Mid-Pinellas Hotels 0 0 0 0 0 0 - -------------------------------------------------------------------------------- Subject Property's Room Night Capture and Occupancy After the competitive index is calculated, it is adjusted to reflect the property's room count, yielding a figure referred to as the market share adjuster. The market share adjuster of each property is then divided by the total market share adjuster for all of the competitors, resulting in each hotel's market share. By multiplying the projected market share by the area's usable room night demand, we can determine the total number of room nights captured by a specific hotel. Occupancy is then calculated by dividing the projected HVS International, Mineola, New York Projection of Occupancy and Average Rate 87 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= number of room nights captured by the property's total number of available room nights. Multiplying the subject property's projected market share by the estimated room night demand in each segment results in the following estimate of room nights captured by the hotel. ================================================================================ Table 7-10 Room Nights Captured by the Subject Property - -------------------------------------------------------------------------------- 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Commercial Demand 73,521 74,624 75,743 76,879 78,032 Market Share 0.1840 0.1840 0.1840 0.1840 0.1840 - -------------------------------------------------------------------------------- Capture 13,529 13,732 13,938 14,147 14,359 Meeting and Group Demand 267,384 272,732 275,459 278,214 280,996 Market Share 0.1811 0.1872 0.1872 0.1872 0.1872 - -------------------------------------------------------------------------------- Capture 48,421 51,062 51,572 52,088 52,609 Leisure Demand 27,376 29,566 30,453 31,062 31,683 Market Share 0.4617 0.4617 0.4617 0.4617 0.4617 - -------------------------------------------------------------------------------- Capture 12,639 13,650 14,059 14,340 14,627 Airline/Contract Demand 10,339 7,237 5,066 5,066 5,066 Market Share 1.0000 1.0000 1.0000 1.0000 1.0000 - -------------------------------------------------------------------------------- Capture 10,339 7,237 5,066 5,066 5,066 Total Capture 84,928 85,680 84,635 85,641 86,661 - -------------------------------------------------------------------------------- Dividing the total number of room nights captured by the subject property's number of available room nights per year (calculated as 333 x 365) produces the projected occupancy percentage. HVS International, Mineola, New York Projection of Occupancy and Average Rate 88 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-11 Calculation of the Subject Property's Projected Occupancy - -------------------------------------------------------------------------------- 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Room Nights Captured 84,928 85,681 84,635 85,641 86,661 Available Room Nights 121,545 121,545 121,545 121,545 121,545 Occupancy 69.87% 70.49% 69.63% 70.46% 71.30% Rounded 70% 70% 70% 70% 71% - -------------------------------------------------------------------------------- For the purpose of forecasting income and expense, we will use the following occupancy levels. ================================================================================ Table 7-12 Occupancy Forecast - -------------------------------------------------------------------------------- Year Occupancy ------------------------------- 1997 70% 1998 70 Stabilized 70 - -------------------------------------------------------------------------------- Although the preceding room night analysis shows the subject property achieving a 71% occupancy in 2001, we have chosen to use a stabilized level of 70%. The stabilized occupancy is intended to reflect the anticipated results of the property over its remaining economic life, given any and all changes in the life cycle of the hotel. Thus, the stabilized occupancy excludes from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusually high or low occupancies. Although the subject property may operate at occupancies above this stabilized level, we believe it equally possible for new competition and temporary economic downturns to force the occupancy below this selected point of stability. AVERAGE RATE ANALYSIS One of the most important considerations in estimating the value of a lodging facility is a supportable forecast of its attainable average rate, which is more formally defined as the average rate per occupied room. Average rate can be calculated by dividing the total rooms revenue achieved during a specified period by the number of rooms sold during the same period. The projected average rate and the anticipated occupancy percentage are used to forecast rooms revenue, which in turn provides the basis for estimating most other income and expense categories. HVS International, Mineola, New York Projection of Occupancy and Average Rate 89 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Average Rate by Month The following table shows the subject property's monthly occupancy and average rate in 1995 and 1996. Once again, we note that figures for the last several months of 1996 represent estimates rather than actual data. ================================================================================ Table 7-13 Subject Property's Occupancy and Average Rate by Month - -------------------------------------------------------------------------------- 1995 1996 ------------------- ------------------------------------- Average Percent Average Percent Occupancy Rate Occupancy Change Rate Change - -------------------------------------------------------------------------------- December 53.0% $58.08 46.4% (12.5)% $59.05 1.7% January 69.8 61.33 76.1 9.0 71.67 16.9 February 87.5 72.78 86.7 (0.9) 82.57 13.5 March 89.9 78.27 85.5 (4.9) 81.69 4.4 April 81.7 67.28 78.3 (4.1) 70.87 5.3 May 70.8 61.15 66.3 (6.4) 67.25 10.0 June 67.4 52.57 60.0 (10.9) 57.63 9.6 July 64.1 45.73 63.2 (1.4) 56.33 23.2 August 53.8 52.71 52.8 (2.0) 56.66 7.5 September 61.3 51.13 60.6 (1.2) 60.41 18.1 October 79.0 56.01 81.2 2.8 65.45 16.9 November 61.1 59.84 63.1 3.2 67.75 13.2 - -------------------------------------------------------------------------------- The previous table underscores the correlation between a hotel's occupancy and its average rate: as occupancy increases, rates tend to follow. On a monthly basis, the St. Petersburg Bayfront Hilton achieves its highest average rate during February and March, when the hotel's occupancy reaches 85% to 90%. In 1996, as management began to replace airline/contract demand with meeting and group business, average rate has increased (particularly during the autumn months). There was also a 23.2% jump in average rate in July of 1996 (which is typically the month in which rates are lowest), and this occurred without a large sacrifice in occupancy (which declined by only 1.4% during the same month). Competitive Positioning The average rate of the St. Petersburg Bayfront Hilton will be projected using a competitive positioning method. This technique begins with an analysis of the average rates achieved by the subject property and its competitors. These rates establish a range that reflects certain characteristics of the specific market, such as price sensitivity, demand orientation, and occupancy. The subject property's average rate is then compared to those of the HVS International, Mineola, New York Projection of Occupancy and Average Rate 90 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= hotels to which it is most similar in terms of size, quality, facilities, amenities, market orientation, location, management, image, and affiliation. Adjustments are made to reflect any relevant differences. Although the average rate analysis presented here follows the occupancy projections, these two statistics are highly correlated; in reality, one can not project occupancy without making specific assumptions regarding average rate. This relationship is best illustrated by RevPAR, which reflects a property's ability to maximize rooms revenue. The following table summarizes the estimated year-end 1996 average rate and RevPAR of the subject property and its competitors. ================================================================================ Table 7-14 Estimated Year-End 1996 Average Rate and RevPAR Levels - -------------------------------------------------------------------------------- Property Average Rate RevPAR ----------------------------------------------------------- Subject Property $67.00 $45.56 Renaissance Vinoy 138.00 95.22 Heritage Holiday Inn 63.00 39.69 Beachfront Hotels 108.00 76.68 Tampa/Westshore Hotels 111.00 74.37 Mid-Pinellas Hotels 64.00 49.92 ----------------------------------------------------------- Average $101.22 $69.92 - -------------------------------------------------------------------------------- The competitive market includes a wide range of property types, ranging from the luxury-class Renaissance Vinoy to two limited- service hotels located in the mid-Pinellas County region (the Courtyard and Hampton Inn). The subject property's average rate is lower than those registered by the beachfront and Tampa/Westshore hotels, which are located in areas better suited to capture high-end leisure and meeting and group demand, and by the Renaissance Vinoy, which has far superior facilities. The estimated year-end 1996 average rate of the Hilton is slightly higher than those of the Heritage Holiday Inn and the mid-Pinellas County hotels, which are generally smaller and offer fewer facilities and amenities. Given the hotel's advantages and disadvantages relative to its competitors, the subject property's estimated year-end 1996 average rate of $67.00 appears appropriate, and it has been used as a basis for projecting changes during the next few years. HVS International, Mineola, New York Projection of Occupancy and Average Rate 91 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Average Rate Increase It is important to note that hotel room rate increases do not necessarily conform to the underlying monetary inflation rate, because lodging facilities are influenced by market conditions such as the relationship between supply and demand. A hotel's ability to raise room rates is affected by a number of factors, including the following. o Supply and Demand Relationships - The relationship between supply and demand is one of the factors that determine hotel occupancies and average rates. Strong markets where lodging demand is increasing faster than supply are often characterized by rate growth that exceeds inflation. Markets that are overbuilt or suffering from declining demand are unlikely to exhibit any significant increases in average rates. o Inflationary Pressures - Price increases caused by inflation affect hotel room rates by eroding profit margins and encouraging operators to raise prices. This strategy is effective only in markets that are characterized by a healthy supply and demand relationship. o Improving the Competitive Standard - When a new lodging facility enters a mature market, its rates may be set higher than the marketwide average in an effort to justify the development costs. This may allow other competitors to achieve corresponding gains by effectively raising the amount the market will bear. However, if the addition to supply has a severe impact on the occupancy levels of other hotels, price competition may ensue. o Property-Specific Improvements - Changes that make a hotel more or less attractive to guests can have an impact on average rate. An expansion, renovation, upgrading, or the introduction of additional facilities and amenities may enable greater-than-inflationary room rate increases. Likewise, deferred maintenance may make a property less competitive, engendering a decline in room rates. In determining average rate projections, changes that occur prior to occupancy stabilization are generally attributable to factors that are specific to the property and the market. After a hotel achieves a stabilized occupancy, room rates are generally expected to continue to increase at the underlying inflation rate throughout the remainder of the projection period. Between 1990 and 1993, the Hilton's average rate growth was hindered by a variety of factors, including the national recession, the property's physical condition, and a decline in market demand. In 1994, average rate dropped by roughly 12% as the hotel began to accommodate demand generated by HVS International, Mineola, New York Projection of Occupancy and Average Rate 92 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= the Delta Airlines contract. This contract was accepted because it provided a base level of occupancy. Year-to-date 1996 figures indicates a 10.1% rate gain from 1995 to 1996, which is commensurate with marketwide increases and reflects the hotel's reduced reliance on airline/contract business. Based on these considerations, we forecast the following average rates. ================================================================================ Table 7-15 Average Rate Forecast - -------------------------------------------------------------------------------- Marketwide Subject Property ---------------------- ------------------------- Rate Rate Projected Year Occupancy Increase Increase Average Rate - -------------------------------------------------------------------------------- Positioned Base -- -- -- $67.00 1997 70% 3% to 4% 4.0% 69.69 1998 71 4 to 5 5.0 73.17 1999 71 3 to 4 4.0 76.10 2000 72 3 to 4 3.5 78.76 2001 73 3 to 4 3.5 81.52 - -------------------------------------------------------------------------------- The subject property is expected to benefit from a variety of circumstances that are likely to have a favorable impact on average rate in upcoming years, including the introduction of baseball-related group business in 1998 and anticipated increases in leisure demand throughout the market area. In consideration of the sporting events that are to occur within the subject property's immediate vicinity (including the NCAA games and Tampa Bay Devil Ray games at the Thunderdome), we projected the average rate of the Hilton to increase by 4.0% in from 1996 to 1997, 5.0% from 1997 to 1998, and 4.0% from 1998 to 1999 before stabilizing at the underlying monetary inflation rate of 3.5% annually. The following occupancy levels and average rates will be used to project the subject property's rooms revenue. ================================================================================ Table 7-16 Forecast of Occupancy and Average Rate - -------------------------------------------------------------------------------- Year Occupancy Average Rate ------------------------------------ 1997 70% $69.69 1998 70 73.17 Stabilized 70 76.10 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Highest and Best Use 93 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 8. Highest and Best Use The concept of highest and best use recognized by the Appraisal Institute distinguishes between the highest and best use of the land (as though vacant) and that of the property (as improved). Highest and best use is defined as: The reasonably probable and legal use of vacant land or improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.(1) The concept of highest and best use is the premise upon which value is based, and is a product of competitive forces in the marketplace. The principle of balance holds that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium. This principle applies to relationships among various property components as well as the relationship between the costs of production and the property's productivity. The point of economic balance is achieved when the combination of land and building is optimal (i.e., when no marginal benefit or utility is achieved by adding another unit of capital). The law of increasing returns holds that larger amounts of the agents of production produce greater net income up to a certain point, after which the law of diminishing returns is applied.(2) It is important to recognize that the highest and best use of the land (as though vacant) may differ from the highest and best use of the property (as improved). This may occur when a site has existing improvements and the highest and best use of the land differs from the current use. Nonetheless, the current property use will continue until the value of the land under its highest and best use exceeds the value of the property in its current use, plus the cost to remove the existing improvements. (1) The Appraisal of Real Estate - Tenth Edition, Appraisal Institute, Chicago, IL, 1992, p. 45. (2) Ibid., p. 40. HVS International, Mineola, New York Highest and Best Use 94 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= In consideration of the factors influencing development in the immediate area, it is the appraisers' opinion that the highest and best use of the subject site, as vacant, would be to hold for future development. Based on the fact that the value of the land does not exceed the value of the hotel plus the cost of demolition, it is our further opinion that the subject property's highest and best use, as improved, is its current use as a lodging facility. HVS International, Mineola, New York Approaches to Value 95 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 9. Approaches to Value In appraising real estate for market value, the appraiser has three approaches from which to select: the income capitalization, sales comparison, and cost approaches. Although all three valuation procedures are given consideration, the inherent strengths of each approach and the nature of the subject property must be evaluated to determine which will provide supportable estimates of market value. The appraiser is then free to select one or more of the appropriate approaches in arriving at a final value estimate. The Income Capitalization Approach The income capitalization approach takes a property's projected net income before debt service and allocates this future benefit to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component is calculated. The total of the mortgage component and the equity component equals the value of the property. This approach is often selected as the preferred valuation method for income- producing properties, because it most closely reflects the investment rationale of knowledgeable buyers. The Sales Comparison Approach The sales comparison approach estimates the value of a property by comparing it to similar properties that have been sold on the open market. To obtain a supportable estimate of value, the sales price of a comparable property must be adjusted to reflect any dissimilarities between it and the property being appraised. The sales comparison approach may provide a useful value estimate in the case of simple forms of real estate, such as vacant land and single-family homes, where the properties are homogeneous and the adjustments are few and relatively simple to compute. In the case of complex investments such as shopping centers, office buildings, restaurants, and lodging facilities, where the adjustments are numerous and more difficult to quantify, the sales comparison approach loses much of its reliability. HVS International, Mineola, New York Approaches to Value 96 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Hotel investors typically do not employ the sales comparison approach in reaching their final purchase decisions. Factors such as the lack of recent sales data, the numerous insupportable adjustments that are necessary, and the general inability to determine the true financial terms and human motivations of comparable transactions often make the results of this technique questionable. Although the sales comparison approach may provide a range of values that supports the final estimate, reliance on this method beyond the establishment of broad parameters is rarely justified by the quality of the sales data. The market-derived capitalization rates sometimes used by appraisers are susceptible to the same shortcomings inherent in the sales comparison approach. To substantially reduce the reliability of the income capitalization approach by employing capitalization rates obtained from unsupported market data weakens the final value estimate and ignores the typical investment analysis procedures employed by hotel purchasers. Because appraisers are obligated to mirror the actions of the marketplace, we generally give the sales comparison approach minimal weight in the hotel appraisal process beyond bracketing the final estimate.(1) The Cost Approach The cost approach estimates market value by computing the current cost to replace the property and subtracting any depreciation resulting from physical deterioration, functional obsolescence, and external (or economic) obsolescence. The value of the land, as if vacant and available, is then added to the depreciated value of the improvements to produce a total value estimate. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements grow older and begin to deteriorate, the resultant loss in value becomes increasingly difficult to quantify accurately. We find that knowledgeable hotel buyers base their purchase decisions on economic factors such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, this approach is given minimal weight in the hotel valuation process. As noted in Hotels and Motels: A Guide to Market (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 209. HVS International, Mineola, New York Approaches to Value 97 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Analysis, Investment Analysis, and Valuations, "the cost approach is seldom used to value existing hotels and motels."(1) Reconciliation The final step in the valuation process is the reconciliation and correlation of the value indications. Factors that are considered in assessing the reliability of each approach include the purpose of the appraisal, the nature of the subject property, and the reliability of the data used. In reconciliation, the applicability and supportability of each approach is considered and the range of value indications is examined. The most significant weight is given to the approach that produces the most reliable solution and most closely reflects the criteria used by typical investors. Our nationwide experience with numerous hostelry buyers and sellers indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the investors who constitute the marketplace. For this reason, the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in the hotel valuation process. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 208. HVS International, Mineola, New York Income Capitalization Approach 98 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 10. Income Capitalization Approach - -------------------------------------------------------------------------------- The income capitalization approach is based on the principle that the value of a property is indicated by its net return, or what is known as the present worth of future benefits. The future benefits of income-producing properties, such as hotels, are net income before debt service and depreciation (as estimated by a forecast of income and expense) and any anticipated reversionary proceeds from a sale. These future benefits can be converted into an indication of market value through a capitalization process and discounted cash flow analysis. Using the income capitalization approach, the subject property has been valued by analyzing the local market for transient accommodations, examining existing and proposed competition, and developing a forecast of income and expense that reflects current and anticipated income trends and cost components through a stabilized year of operation. The forecast of income and expense is expressed in current dollars for each year. The stabilized year is intended to reflect the anticipated operating results of the property over its remaining economic life, given any or all applicable stages of build-up, plateau, and decline in the life cycle of the hotel. Thus, income and expense estimates from the stabilized year forward exclude from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusual revenues or expenses. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, published by the Appraisal Institute, "of the three valuation approaches available to the appraiser, the income capitalization approach generally provides the most persuasive and supportable conclusions when valuing a lodging facility."(1) This text recommends that using a ten-year forecast and an equity yield rate "most accurately reflects the actions of typical hotel buyers, who purchase properties based (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. HVS International, Mineola, New York Income Capitalization Approach 99 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= on their leveraged discounted cash flow."(1) The simpler procedure of using a ten-year forecast and a discount rate is "less reliable because the derivation of the discount rate has little support. Moreover, it is difficult to adjust the discount rate for changes in the cost of capital."(2) We have used both methods to discount the subject property's projected net income into an estimate of value. Method One is a ten-year discounted cash flow analysis in which the cash flow to equity and the equity reversion are discounted to the present value at the equity yield rate, and the income to the mortgagee is discounted at a mortgage interest rate. The sum of the equity and mortgage values is the total property value. Method Two is a simple ten-year discounted cash flow analysis in which the annual net income before debt service and the reversionary proceeds following a sale at the end of the tenth year are discounted back to the date of the appraisal at an overall discount rate, and then totaled to produce an indication of the present worth of future benefits. To convert the projected income stream into an estimate of value through Method One, the anticipated net income (before debt service and depreciation) is allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. The total of the mortgage component and the equity component equals the value of the property. The process is described as follows. 1. The terms of typical hotel financing are set forth, including interest rate, amortization term, and loan-to-value ratio. 2. An equity yield rate of return is established. Numerous hotel buyers base their equity investments on a ten-year equity yield rate projection that takes into account ownership benefits such as periodic cash flow distributions, residual sale or refinancing distributions that return any property appreciation and mortgage amortization, income tax benefits, and various non-financial considerations such as status and prestige. The equity yield rate is also known as the internal rate of return on equity. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236 (2) Ibid. HVS International, Mineola, New York Income Capitalization Approach 100 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 3. The value of the equity component is calculated by first deducting the annual debt service from the projected net income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value. After deducting the mortgage balance at the end of the tenth year and the typical brokerage and legal costs, the equity residual is discounted back to the date of value at the equity yield rate. The net income to equity for each of the ten projection years is also discounted to the present value. The sum of these discounted values equates to the value of the equity component. Adding the equity component to the initial mortgage balance yields the overall property value. Because the mortgage and the debt service amounts are unknown but the loan-to-value ratio was determined in Step #1, the preceding calculation can be solved through an iterative process or by use of a linear algebraic equation that computes the total property value. The algebraic equation that solves for the total property value using a ten-year mortgage and equity technique was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(1) 4. The value is proven by allocating the total property value between the mortgage and equity components and verifying that the rates of return set forth in Steps #1 and #2 can be met from the projected net income. The process of converting the projected income stream into an estimate of value through Method Two is described as follows. 1. A discount rate is established by evaluating the total property yield derived by Method One. Occasionally, the discount rate may be adjusted slightly based on the total property yields indicated by recent transactions involving hotels similar to the subject property. 2. The reversionary value is calculated by capitalizing the 11th-year net income by the terminal capitalization rate and deducting typical brokerage and legal fees. (1) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Income Capitalization Approach 101 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 3. The ten-year forecast of net income (before debt service and depreciation) and the reversionary value are discounted to the date of value at the rate derived above. Review of Operating History Because the St. Petersburg Bayfront Hilton is an existing hotel with an established operating performance, its historical income and expense experience can serve as a basis for projections. The subject property opened in 1971, and achieved occupancy levels of 69.8% in 1995 and 71.0% through August of 1996. The following income and expense statements were provided by Ashford Financial, and are unaudited. The first table shows the operating statements for years 1995 and estimated year-end 1996. The second compares year-to-date August data for 1995 and 1996. As a result of the change in ownership that occurred in 1994, complete operating statements for years prior to 1995 are not available. Where applicable, we have reorganized the statements in accordance with the Uniform System of Accounts for Hotels. HVS International, Mineola, New York Income Capitalization Approach 102 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-1 Historical Operating Performance - --------------------------------------------------------------------------------
1995 Estimated Year-End 1996 ----------------------------------------- --------------------------------------------- No. of Rooms: 333 333 No. of Occupied Rooms: 84,867 83,218 No. of Complimentary Rooms: 2,847 0 No. of Days Open: 365 366 Occupancy: 69.8% Amount per Amount per 68.3% Amount per Amount per Average Rate: $60.80 Percent Available Occupied $67.43 Percent Available Occupied (+000) of Gross Room Room (+000) of Gross Room Room - ------------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $5,160 66.9% $15,496 $60.80 $5,612 68.5% $16,851 $67.43 Food 1,682 21.8 5,050 19.81 1,773 21.6 5,325 21.31 Beverage 503 6.5 1,510 5.93 547 6.7 1,644 6.58 Telephone 237 3.1 711 2.79 131 1.6 394 1.58 Net Rental & Other Income 137 1.8 410 13.95 129 1.6 386 1.55 Total 7,718 100.1 23,177 90.94 8,192 100.0 24,601 98.44 - ------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES* Rooms 1,184 22.9 3,555 13.95 1,229 21.9 3,691 14.77 Food & Beverage 1,615 73.9 4,851 19.03 1,707 73.6 5,126 20.51 Telephone 121 51.2 364 1.43 0 0.0 0 0.00 Total 2,921 37.8 8,771 34.41 2,936 35.8 8,817 35.28 - ------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 4,797 62.3 14,407 56.53 5,256 64.2 15,784 63.16 - ------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 865 11.2 2,597 10.19 828 10.1 2,487 9.95 Management Fee 233 3.0 699 2.74 251 3.1 755 3.02 Marketing 582 7.5 1,747 6.85 502 6.1 1,506 6.03 Franchise Fees 229 3.0 688 2.70 253 3.1 761 3.04 Property Oper. & Maint. 385 5.0 1,156 4.53 389 4.7 1,168 4.67 Energy 533 6.9 1,602 6.29 566 6.9 1,700 6.80 Total 2,826 36.6 8,487 33.30 2,790 34.0 8,377 33.52 - ------------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 1,971 25.7 5,920 23.23 2,466 30.2 7,407 29.64 - ------------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 368 4.8 1,104 4.33 372 4.5 1,116 4.47 Insurance 110 1.4 330 1.30 126 1.5 378 1.51 Reserve for Replacement 310 4.0 931 3.65 335 4.1 1,007 4.03 Rent 39 0.5 118 0.46 41 0.5 122 0.49 Total 827 10.7 2,484 9.74 874 10.6 2,624 10.50 - ------------------------------------------------------------------------------------------------------------------------------- NET INCOME $1,144 15.0% 3,436 $13.49 $1,593 19.6% $4,783 $19.14 ===============================================================================================================================
*Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 103 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-2 Historical Operating Performance - --------------------------------------------------------------------------------
Year-to-Date August, 1996 Year-to-Date August, 1995 --------------------------------------------- ----------------------------------------------- No. of Rooms: 333 333 No. of Occupied Rooms: 57,686 59,029 No. of Complimentary Rooms: 1,440 1,824 No. of Days Open: 244 243 Occupancy: 71.0% Amount per Amount per 72.9% Amount per Amount per Average Rate: $69.13 Percent Available Occupied $62.80 Percent Available Occupied (+000) of Gross Room Room (+000) of Gross Room Room - ------------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $3,988 68.8% $11,975 $69.13 $3,707 68.6% $11,133 $62.80 Food 1,157 20.0 3,476 20.07 1,110 20.5 3,332 18.80 Beverage 374 6.4 1,122 6.48 323 6.0 971 5.48 Telephone 190 3.3 569 3.29 175 3.2 526 2.97 Net Rental & Other Income 85 1.5 254 1.47 87 1.6 260 1.47 Total 5,793 100.0 17,397 100.42 5,402 99.9 16,223 91.52 - ------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES* Rooms 833 20.9 2,503 14.45 767 20.7 2,303 12.99 Food & Beverage 1,139 74.4 3,421 19.75 1,061 74.1 3,187 17.98 Telephone 102 53.6 305 1.76 79 45.1 237 1.34 Total 2,074 35.8 6,229 35.96 1,907 35.3 5,728 32.31 - ------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 3,719 64.2 11,168 64.47 3,495 64.6 10,495 59.20 - ------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 558 9.6 1,675 9.67 629 11.6 1,888 10.65 Management Fee 397 3.0 525 3.03 359 3.0 489 2.76 Marketing +ERR 6.9 1,192 6.88 +ERR 6.6 1,078 6.08 Franchise Fees 120 2.1 359 2.07 185 3.4 557 3.14 Property Oper. & Maint 259 4.5 777 4.49 240 4.4 721 4.07 Energy 387 6.7 1,163 6.72 358 6.6 1,076 6.07 Total 1,895 32.8 5,692 32.86 1,934 35.6 5,809 32.77 - ------------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 1,823 31.4 5,476 31.61 1,560 29.0 4,686 26.43 - ------------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 228 3.9 685 3.95 193 3.6 578 3.26 Insurance 92 1.6 276 1.60 70 1.3 211 1.19 Reserve for Replacement 233 4.0 700 4.04 217 4.0 652 3.68 Rent 27 0.5 82 0.47 27 0.5 81 0.46 Total 581 10.0 1,744 10.07 507 9.4 1,522 8.59 - ------------------------------------------------------------------------------------------------------------------------------- NET INCOME $1,243 21.4% $3,732 $21.54 $1,054 19.6% $3,164 $17.84 ===============================================================================================================================
*Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 104 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Comparable Operating Statements These historical income and expense statements show that the subject property's profitability has increased both in terms of overall dollar amount and as a percentage of revenues. Year-to-date August figures show that net income rose from 19.6% of gross revenue in 1995 to 21.4% in 1996. Average rate increased by 10.1% on a year-to-date basis, from $62.80 in 1995 to $69.13 in 1996. By attracting higher-rated demand, the subject property was also able to increase its food, beverage, and telephone revenues on a per-occupied-room basis; however, we also note that management was forced to increase many departmental expenses in order to retain this type of clientele. The year-to-date 1996 increase in net income largely stems from growth in total revenue. Although year-to-date occupancy declined by 2.7% from 1995 to 1996, average rate and rooms revenue rose by 10.1% and 7.6%, respectively. In general, less rate-sensitive customers are also likely to use a hotel's various facilities and services; consequently, food, beverage, and telephone revenues all rose on a per-occupied-room basis. One exception was rent and other income, which includes revenue derived from space rentals, commissions, interest, vending, in-room movies, and other miscellaneous items. If activity involving these various revenue generators had remained stable, we would expect this line item to increase by inflation; however, year-to-date revenues remained unchanged, indicating a slight decrease in activity. Total revenue increased by 7.2% on a year-to-date basis, from roughly $5,400,000 in 1995 to $5,800,000 in 1996. Departmental expenses rose slightly as a percentage of gross revenues on a year-to-date basis, from 35.4% in 1995 to 35.8% in 1996. Specifically, rooms, food and beverage, and telephone expenses have increased at rates higher than inflation on a per-occupied-room basis. Marketing, energy, and property operations and maintenance expenses also increases when considered as amounts per available room, although administrative and general costs declined. Franchise fees also dropped by a substantial 35.5% from August of 1995 to August of 1996; this reflects the new franchise agreement with Hilton that was executed in August of 1995, which established a monthly franchise fee of 3.0% of rooms revenue through August of 1997 and 5.0% of rooms revenue for the remaining term of the agreement. Overall, year-to-date operating expenses decreased from 35.6% of gross revenues in 1995 to 32.8% in 1996. HVS International, Mineola, New York Income Capitalization Approach 105 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Forecast of Income and Expense The forecast of income and expense is intended to reflect the appraiser's subjective estimate of how a typical buyer would project the subject property's operating results. Depending on the dynamics of the local market, a typical buyer's projection may be adjusted upward or downward. We have attempted to consider these factors in formulating this forecast. HVS International uses a fixed and variable component model to project a lodging facility's revenue and expense levels. This model is based on the premise that hotel revenues and expenses have one component that is fixed and another that varies directly with occupancy and facility usage. A projection can be made by taking a known level of revenue or expense and calculating its fixed and variable components. The fixed component is then held constant, while the variable component is adjusted for the percent change between the projected occupancy and facility usage and that which produced the known level of revenue or expense. Base-Year Statement of Income and Expense Based on our review of the operating histories of the subject property and comparable hotels, we have derived a base-year statement of income and expense expressed in 1995 dollars. The units of comparison include a percentage of departmental and total revenue, amounts per available room, and amounts per occupied room. The income and expense ratios reflect an occupancy level of 69.8%. This base-year profit and loss statement will be used to determine the relationship between the fixed and variable components. HVS International, Mineola, New York Income Capitalization Approach 106 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-4 Base-Year Statement of Income and Expense - -------------------------------------------------------------------------------- 1995 ----------------------------------------------- No. of Rooms: 333 Occupancy: 69.8% Average Rate: $60.80 Amount per Amount per No. of Occupied Rooms: 84,867 Percent Available Occupied (+000) of Gross Room Room - -------------------------------------------------------------------------------- REVENUE Rooms $5,160 65.7% $15,496 $60.80 Food 1,732 22.0 5,201 20.41 Beverage 578 7.4 1,737 6.82 Telephone 253 3.2 761 2.98 Net Rental & Other Income 131 1.7 394 1.54 Total 7,855 100.0 23,589 92.56 - -------------------------------------------------------------------------------- EXPENSES Rooms* 1,279 24.8 3,840 15.07 Food & Beverage* 1,712 74.1 5,142 20.18 Telephone* 155 61.3 466 1.83 Administrative & General 822 10.5 2,467 9.68 Management Fee 236 3.0 708 2.78 Marketing 622 7.9 1,869 7.33 Franchise Fees 258 3.3 775 3.04 Property Oper. & Maint. 400 5.1 1,202 4.72 Energy 560 7.1 1,682 6.60 Property Taxes 261 3.3 785 3.08 Insurance 117 1.5 350 1.37 Reserve for Replacement 314 4.0 944 3.70 Rent 39 0.5 118 0.46 Total 6,776 86.3 20,347 79.84 - -------------------------------------------------------------------------------- NET INCOME $1,079 13.7% $3,241 $12.72 ================================================================================ *Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- Inflation Assumptions The base revenue and expense amounts are inflated to reflect current dollars for each projection year. Although line items can be affected by different factors, we must establish a general rate of inflation that will be applied to most revenue and expense categories. The following table shows inflation estimates made by economists at some noted institutions and corporations. HVS International, Mineola, New York Income Capitalization Approach 107 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-5 Inflation Estimates - --------------------------------------------------------------------------------
Projected Increase in Consumer Price Index (Annualized Rate Versus 12 Months Earlier) ------------------------------------------ November May Source of 1996 of 1997 - -------------------------------------------------------------------------------------------- Maureen Allyn, Scudder Stevens Clark 3.1% 2.3% Wayne Angell, Bear Stearns 3.0 3.2 Richard Berner, Mellon Bank 2.9 2.8 David Berson, Fannie Mae 2.9 2.8 David Blitzer, S&P 3.0 2.7 Paul Boltz, T. Rowe Price 3.2 3.5 David Bostian, Herzog, Heine, Geduld 2.9 2.5 Philip Braverman, DKB Securities 3.0 2.8 William Brown, J.P. Morgan 3.3 3.2 Rosanne Cahn, CS First Boston 3.1 2.6 James Coons, Huntington National Bank 3.2 3.0 Michael Cosgrove, The Econoclast 3.2 3.3 Dewey Daane, Vanderbilt University 3.4 3.6 Robert Dederick, Northern Trust 3.1 3.4 W.Dudley, Goldman Sachs 3.4 3.2 Michael Englund, MMS Intl 3.2 3.3 Michael Evans, Evans Group 3.0 3.0 Gail Fosler, Conference Board 3.5 3.6 Maury Harris, Paine Webber, Inc. 2.8 2.8 Tracy Herrick, Jefferies & Co. 3.2 3.6 Stuart Hoffman, PNC Bank 3.1 2.8 William Hummer, Wayne Hummer 2.9 3.0 Edward Hyman, ISI Group 2.8 2.1 Saul Hymans, University of Michigan 2.7 1.7 Mieczyslaw Karczmar, Deutsche Bank 2.8 3.2 Kurt Karl, WEFA Group 2.6 2.3 Irwin Kellner, Chase Manhattan Bank 2.6 2.3 D. Laufenberg, American Express Financial Advisors 3.2 3.4 Michelle Laughlin, Sanwa Securities 3.0 3.2 Carol Leisenring, CoreStates Financial 2.7 2.5 Richard Lemmon, General Motors 3.0 3.0 Mickey Levy, NationsBank Capital Markets 2.6 2.4 David Littmann, Comerica 3.1 3.0 John Lonski, Moody's Investors Service 3.3 3.2 Paul McCulley, UBS Securities 3.0 2.8 John McDevitt, 3M 2.6 2.5 Arnold Moskowitz, Moskowitz Capital 3.1 3.5 John Mueller, LBMC, Inc. 3.2 2.5 David Munro, High Frequency Econ 3.0 2.5 Carl Palash, MCM MoneyWatch 3.0 3.0 Nicholas Perna, Fleet Financial Group 3.3 3.3 Elliott Platt, Donaldson Lufkin 2.8 2.0 Maria F. Ramirez, MF Ramirez 3.0 3.0 Donald Ratajczak, Georgia State University 3.0 3.3 David Resler, Nomura Securities International 2.9 2.6 Allan Reynolds, Hudson Institute 3.3 3.6 Richard Rippe, Prudential Securities 3.1 3.3 A. Gary Schilling, Schilling & Co. 3.0 3.0 Allen Sinai, Lehman Brothers 3.2 3.4 James Smith, University of North Carolina 2.1 1.9 Susan Sterne, Economic Analysis 2.5 2.5 Donald Straszheim, Merrill Lynch 2.7 2.3 Thomas Synott III, U.S. Trust Company 3.3 3.4 John Williams, Bankers Trust 3.0 3.1 Raymond Worseck, A.G. Edwards 3.6 3.3 David Wyss, DRI/McGraw-Hill 3.0 2.5 Edward Yardeni, Deutsche Morgan Grenfell 2.2 2.0 Mark Zandi, Regional Financial Associates 3.0 3.2 ------ ------ Averages 3.0% 2.9%
Source: Wall Street Journal, July 1, 1996 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 108 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The preceding table shows inflation forecasts averaging 3.0% and 2.9%. Most of the economists in the sample estimate inflation rates ranging from 2.5% to 3.4%, but several anticipate slightly higher levels. As a further check on these inflation projections, we have reviewed historical increases in the Consumer Price Index. Because the value of real estate is predicated on cash flows over a relatively long period, inflation should be considered from a long-term perspective. Between 1986 and 1995, the national CPI increased at an average annual compounded rate of 3.7%. In consideration of these historical trends, the projections set forth above, and our assessment of probable property appreciation levels, we have selected an annual stabilized inflation rate of 3.5% throughout the projection period. One of the exceptions to this general inflation assumption is the projected growth in average rate. As noted earlier, increases in the subject property's room rate are projected as follows. ================================================================================ Table 10-6 Projected Growth in Average Rate - -------------------------------------------------------------------------------- Increase From Year Previous Year --------------------------------- 1997 0.0% 1998 5.0 1999 4.0 Thereafter 3.5 - -------------------------------------------------------------------------------- Using these inflation assumptions, the base-year income and expense statement (which is expressed in 1995 dollars) is inflated to arrive at projections. Each revenue and expense category will be projected using the inflated base statement to determine the fixed and variable component relationships. Rooms Revenue Rooms revenue is determined by two variables: occupancy and average rate. Earlier in this report, we estimated the subject property's occupancy and average rate as follows. ================================================================================ Table 10-7 Projected Occupancy and Average Rate - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Projected Occupancy Percentage 70.0% 70.0% 70.0% Projected Average Rate $69.69 $73.17 $76.10 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 109 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Rooms revenue is calculated as follows. ================================================================================ Table 10-8 Forecast of Rooms Revenue - -------------------------------------------------------------------------------- Rooms Number Days in Revenue Year Occupancy Average Rate of Units in Year (+000) - -------------------------------------------------------------------------------- 1997 70% x $69.69 x 333 x 365 = $5,929 1998 70 x 73.17 x 333 x 365 = 6,225 Stabilized 70 x 76.10 x 333 x 365 = 6,475 - -------------------------------------------------------------------------------- Food and Beverage Revenue Food and beverage revenue is generated by a hotel's restaurants, lounges, coffee shops, snack bars, banquet rooms, and room service. In addition to providing a source of revenue, these outlets serve as an amenity that assists in the sale of guestrooms. With the exception of properties with active lounges or banquet facilities that draw local residents, in-house guests generally represent a substantial percentage of a hotel's food and beverage patrons. The Uniform System of Accounts for Hotels/Eighth Revised Edition defines food revenue as "revenue derived from the sale of food, including coffee, milk, tea and soft drinks. Food sales do not include meals charged on employees' (staff) checks." Beverage revenues are "derived from the sale of beverages." In addition to the revenue generated by the sale of food and beverages, hotels often produce other income that is related to this department, such as meeting room rentals, cover charges, service charges, and miscellaneous banquet revenue. Although food and beverage revenues vary directly with changes in occupancy, the small portion generated by banquet sales and outside capture is relatively fixed. Food revenue was projected based on this relationship between the fixed and variable components. The following table shows the projected food revenue and several units of comparison that can be used to check the reasonableness of the forecast. HVS International, Mineola, New York Income Capitalization Approach 110 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-9 Forecast of Food Revenue - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Food Revenue (+000) $1,859 $1,924 $1,991 Percent of Total Revenue 21.1% 20.9% 20.8% Amount per Available Room $5,583 $5,778 $5,980 Amount per Occupied Room $21.85 $22.61 $23.40 - -------------------------------------------------------------------------------- Based on these units of comparison, the projected food revenue appears reasonable when compared with industry standards. Beverage revenue is generated by the sale of alcoholic beverages in a hotel's restaurants and banquet rooms and the sale of alcoholic and nonalcoholic beverages in the bars and lounges. Based on a comparison of year-to-date August figures for 1995 and 1996, beverage revenue has increased to approximating 33% of food revenue. The following table illustrates the forecast of beverage revenue, which is based on this information. ================================================================================ Table 10-10 Forecast of Beverage Revenue - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Projected Beverage Revenue (+000) $621 $643 $665 - -------------------------------------------------------------------------------- Telephone Revenue Telephone revenue is generated by hotel guests who charge local and long-distance calls to their rooms, and by individuals who use the property's public telephones. Prior to the deregulation of the telephone industry in the early 1980s, hotels were limited to a 15% commission on long-distance calls, a mark-up that allowed few profits. Deregulation and the development of sophisticated call-accounting equipment have resulted in profitable telephone departments. State-of-the-art equipment is capable of least-cost routing, automatic price billing, and posting telephone charges to guest folios. Hotels can select among various long-distance services, and can also work with any one of a number of Alternative Operator Services (AOS). These systems route and price calls, and may provide additional services. In recent years, the hospitality industry has experienced diverging trends with respect to telephone revenue. Prices per call have increased, in some cases dramatically, yielding departmental profits as high as 50% to 55%. However, the number of long-distance calls billed per occupied room has HVS International, Mineola, New York Income Capitalization Approach 111 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= declined as a result of the extensive use of long-distance carrier services that can be accessed locally or through a toll-free number. When guests charge long-distance calls to their personal or business accounts in this manner, the hotel loses the revenue associated with long-distance tariffs and mark-ups, and only receives an access fee. Most telephone revenue varies directly with changes in occupancy. However, there is a small fixed component consisting of public telephone revenue, which is primarily generated by individuals using the hotel's food, beverage, and meeting facilities. Using this fixed and variable relationship, the subject property's telephone revenue is projected as follows. ================================================================================ Table 10-11 Forecast of Telephone Revenue - -------------------------------------------------------------------------------- 1997 1998 Stabilized ------------------------------------------------------------------------- Projected Telephone Revenue (+000) $272 $281 $291 Percent of Total Revenue 3.1% 3.1% 3.0% Amount per Available Room $817 $845 $875 Amount per Occupied Room $3.20 $3.30 $3.42 - -------------------------------------------------------------------------------- Net Rental and Other Income Rental income is derived from the property's gift shop and health club rentals, as well as the other minor space rentals. Other income is derived from sources other than guestrooms, food and beverages, telephone services, and rent. Depending on the type of hotel and the facilities and amenities offered, other income may include the following items. o Commissions from auto rentals, photography, telegrams, and vending services. o Concessions - revenue derived from charges for the privilege of operating departments that could be operated by the hotel. Gift shops, barber shops, and beauty salons are often operated as concessions. o Laundry, dry cleaning, and fax services. o Cash discounts earned - discounts from creditors' accounts for payment within the discount period. This item does not include trade discounts, which are a deduction from the cost of goods sold. o Electronic games and pinball machines. o Forfeited advance deposits and guaranteed no-shows. HVS International, Mineola, New York Income Capitalization Approach 112 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= o Service charges - service charges that are added to a customer's account but are not paid to service personnel. o Interest income - interest from house accounts. o Salvage - revenue from the sale of old or obsolete items. Other income is highly sensitive to changes in occupancy and slightly correlated to food and beverage volume. Using this fixed and variable relationship, the subject property's other income is projected as follows. ================================================================================ Table 10-12 Forecast of Net Rental and Other Income - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Net Rental & Other Income (+000) $141 $145 $151 Percent of Total Revenue 1.6% 1.6% 1.6% Amount per Available Room $422 $437 $452 Amount per Occupied Room $1.66 $1.70 $1.77 - -------------------------------------------------------------------------------- Rooms Expense Rooms expense consists of items related to the sale and upkeep of guestrooms and public space. Salaries, wages, and employee benefits account for a substantial portion of this category. Although payroll varies somewhat with occupancy (because managers can schedule maids, bell personnel, and house cleaners to work when demand requires), much of a hotel's payroll is fixed. Front desk personnel, public area cleaners, the housekeeper, and other supervisors must be maintained at all times. As a result, salaries, wages, and employee benefits are only moderately sensitive to changes in occupancy. Commissions represent remuneration to travel agents for booking rooms. Because these fees are based on a percentage of rooms revenue, they are highly dependent on occupancy and rate. Reservations is a similar expense that reflects the cost of a franchise reservation system that typically bills as a percentage of rooms revenue. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are only slightly affected by changes in volume. In light of these considerations, we project the subject property's rooms expense as follows. HVS International, Mineola, New York Income Capitalization Approach 113 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-13 Forecast of Rooms Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Projected Rooms Expense (+000) $1,371 $1,419 $1,469 Percent of Rooms Revenue 23.1% 22.8% 22.7% Amount per Available Room $4,118 $4,262 $4,411 Amount per Occupied Room $16.11 $16.68 $17.27 - -------------------------------------------------------------------------------- Food and Beverage Expense Food and beverage expenses consist of items necessary for the operation of a hotel's food, beverage, and banquet facilities. Although food and beverage revenues are projected separately and occupy separate categories on a hotel's income and expense statement, the corresponding expenses are combined into a single category. The costs associated with food and beverage sales and payroll are moderately to highly correlated to food and beverage revenues, and comprise a substantial portion of this category. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are very slightly dependent on volume. Although the other expense items are basically fixed, they represent a relatively insignificant factor. After considering the fixed and variable components, we forecast the subject property's food and beverage expense as follows. ================================================================================ Table 10-14 Forecast of Food and Beverage Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Projected Food & Beverage Expense (+000) $1,836 $1,900 $1,967 Percent of Food and Beverage Revenue 74.0% 74.0% 74.0% Amount per Available Room $5,514 $5,707 $5,906 Amount per Occupied Room $21.58 $22.33 $23.12 - -------------------------------------------------------------------------------- Telephone Expense Telephone expense consists of all costs associated with this department. In the case of small hotels with automated systems, the operation of telephones may be an additional responsibility of front desk personnel; however, most large properties employ full-time operators. The bulk of the telephone expense consists of the cost of local and long-distance calls billed by the telephone companies that provide these services. Because most calls are made by in-house guests, these costs are moderately HVS International, Mineola, New York Income Capitalization Approach 114 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= correlated to occupancy. Unless a particular hotel department incurs high expenses, use of telephone services by hotel employees is charged to this account. The remaining costs, which include salaries, wages, printing, and other expenses, are moderately fixed. The following table illustrates our forecast of telephone expense. ================================================================================ Table 10-15 Forecast of Telephone Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Projected Telephone Expense (+000) $166 $172 $178 Percent of Telephone Revenue 61.2% 61.3% 61.2% Amount per Available Room $500 $517 $535 Amount per Occupied Room $1.95 $2.02 $2.09 - -------------------------------------------------------------------------------- Administrative and General Expense Administrative and general expense includes the salaries and wages of all administrative personnel who are not directly associated with a particular department. Expense items related to the management and operation of the property are also allocated to this category. Most administrative and general expenses are relatively fixed. The exceptions are cash overages and shortages; commissions on credit card charges; provision for doubtful accounts, which are moderately affected by the number of transactions or total revenue; and salaries, wages, and benefits, which are very slightly influenced by volume. In recent years, several new items have been added to the administrative and general expense category. Human resources includes the cost of recruiting, relocating, and training personnel. Security consists of the cost of contract security for the property and related expenses. The general insurance category includes premiums for liability, fidelity, life, theft coverage, and business interruption insurance. Fire and extended-coverage insurance on the building and contents is a separate insurance expense category. Liability insurance covers third-party actions involving bodily injury and personal property, and is typically based on rooms receipts, meeting and banquet income, and food and beverage revenue. Factors that may have an impact on a hotel's liability expense include the size of the meeting, banquet, and restaurant facilities; the ratio between the amount of alcohol served and total food and beverage sales; the presence of a dance floor; a high-rise structure; a swimming pool; life safety support systems; HVS International, Mineola, New York Income Capitalization Approach 115 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= and the guest transportation services provided by the hotel. The following table illustrates our forecast of administrative and general expense. ================================================================================ Table 10-16 Forecast of Administrative and General Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized --------------------------------------------------------- ---------------- Projected Admin. & General Expense (+000) $893 $927 $960 Percent of Total Revenue 10.1% 10.1% 10.0% Amount per Available Room $2,682 $2,784 $2,883 Amount per Occupied Room $10.50 $10.90 $11.29 - -------------------------------------------------------------------------------- Management Fee Management expense consists of the basic fee paid to the type of company that is anticipated to operate the subject property. Some companies provide management services alone, while others also provide a brand name affiliation. When a management company has no brand identification, the property owner often acquires a franchise that provides the necessary image and recognition. Although most hotel management companies employ a fee schedule that includes a basic fee (usually a percentage of total revenue) and an incentive fee (usually a percentage of defined profit), the incentive portion is often subordinated to debt service and does not appear in a forecast of net income before debt service. Basic hotel management fees are almost always based on a percentage of total revenue, which means they have no fixed component. Although the incentive fee does not decrease the cash flow available for debt service, it does reduce the potential cash flow to equity, and must be accounted for in the valuation process. Generally, the most appropriate procedure for handling the impact of the incentive fee on the equity component is to use the projected net income before debt service and incentive fee, but adjust the equity dividend or yield rate upward to reflect this added management cost. The adjusted equity dividend and yield rates will be described later in this section. The subject property is operated by the Remington Hotel Corporation, which receives a base fee of 3% of gross revenues. Based on our review of the current market for management contracts, it is our opinion that this fee is consistent with prevailing market terms. Applying this management fee structure to the projection of total revenue yields the following forecast of the subject property's management fee. HVS International, Mineola, New York Income Capitalization Approach 116 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-17 Forecast of Management Fee - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Management Fee (+000) $265 $277 $287 - -------------------------------------------------------------------------------- Marketing Expense Marketing expense consists of all costs associated with advertising, sales, and promotion; these activities are intended to attract and retain customers. Marketing can be used to create an image, develop customer awareness, and stimulate patronage of a property's various facilities. The marketing category is unique in that all expense items, with the exception of fees and commissions, are totally controlled by management. Most hotel operators establish an annual marketing budget that sets forth all planned expenditures. If the budget is followed, total marketing expenses can be projected accurately. Marketing expenditures are unusual because although there is a lag period before results are realized, the benefits are often extended over a long period. Depending on the type and scope of the advertising and promotion program implemented, the lag time can be as short as a few weeks or as long as several years. However, the favorable results of an effective marketing campaign tend to linger, and a property often enjoys the benefits of concentrated sales efforts for many months. Marketing expense can be divided into five categories: sales, reservations, advertising and merchandising, other marketing activities, and fees and commissions. Together, these categories include all marketing efforts made by hotel personnel and outside parties. Marketing expenses are fixed with the exception of reservations, fees, and commissions, which are calculated as a percentage of rooms revenue. Based on the location of the subject property, the local market for transient accommodations, the competitive environment, and the hotel's anticipated market segmentation, we have developed the following marketing forecast using a fixed and variable component model. HVS International, Mineola, New York Income Capitalization Approach 117 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-18 Forecast of Marketing Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Projected Marketing Expense (+000) $676 $702 $728 Percent of Total Revenue 7.7% 7.6% 7.6% Amount per Available Room $2,031 $2,109 $2,185 Amount per Occupied Room $7.95 $8.25 $8.55 - -------------------------------------------------------------------------------- Franchise Fee Franchise expense represents the fees paid to Hilton Inns, Inc., a subsidiary of the Hilton Hotel Corporation, for the use of the company's name, trademarks, and service marks. The following table illustrates the projection of the subject property's franchise fee. ================================================================================ Table 10-19 Forecast of Franchise Fee - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Projected Franchise Fees (+000) $217 $311 $324 - -------------------------------------------------------------------------------- Property Operations and Maintenance Property operations and maintenance expense is another expense category that is largely controlled by management. Except for repairs that are necessary to keep the facility open and prevent damage (e.g., plumbing, heating, and electrical items), most maintenance can be deferred for varying lengths of time. Maintenance is an accumulating expense. If management elects to postpone performing a required repair, they have not eliminated or saved the expenditure; they have only deferred payment until a later date. A lodging facility that operates with a lower-than-normal maintenance budget is likely to accumulate a considerable amount of deferred maintenance. The age of a lodging facility has a strong influence on the required level of maintenance. A new or thoroughly renovated property is protected for several years by modern equipment and manufacturers' warranties. However, as a hostelry grows older, maintenance expenses escalate. A well-organized preventive maintenance system often helps delay deterioration, but most facilities face higher property operations and maintenance costs each year, regardless of the occupancy trend. The quality of initial construction can also have a direct impact on future maintenance requirements. The use of high- HVS International, Mineola, New York Income Capitalization Approach 118 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= quality building materials and construction methods generally reduces the need for maintenance expenditures over the long term. Property operations and maintenance is considered an operating expense; as such, it includes only those components that can be expensed, rather than capitalized, under Internal Revenue Service regulations. For example, if a table leg is broken, the repair of that leg is considered an expense and is chargeable to property operations and maintenance. If the table is replaced, it becomes a capital expenditure and does not appear under the property operations and maintenance category. Appraisers account for capital replacement of items such as furniture and equipment in the reserve for replacement account, which is discussed later in this section. Property operations and maintenance costs are relatively fixed, and are projected as follows. ================================================================================ Table 10-20 Forecast of Property Operations and Maintenance Expense - --------------------------------------------------------------------------------
1997 1998 Stabilized - -------------------------------------------------------------------------------------- Projected Property Operations & Maint. Expense (+000) $435 $452 $468 Percentage of Total Revenue 4.9% 4.9% 4.9% Amount per Available Room $1,306 $1,356 $1,405 Amount per Occupied Room $5.11 $5.31 $5.50
- -------------------------------------------------------------------------------- Energy Expense The energy consumption of a lodging facility takes several forms, including water and space heating, air conditioning, lighting, cooking fuel, and other miscellaneous power requirements. The most common sources of hotel energy are electricity, natural gas, fuel oil, and steam. This category also includes the cost of water service. Total energy cost depends on the source and quantity of fuel used. Electricity tends to be the most expensive source, followed by oil and gas. Although all hotels consume a sizable amount of electricity, many properties supplement their energy requirements with less expensive sources, such as gas and oil, for heating and cooking. A large portion of a hostelry's energy consumption is relatively fixed. Restaurants, kitchens, public areas, and corridors must be continually lighted and climate-controlled, regardless of occupancy. The energy cost of an additional occupied room (i.e., a few hours of light, television, heat, or air conditioning) is minimal. The following table presents our forecast of the subject property's energy expense. HVS International, Mineola, New York Income Capitalization Approach 119 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-21 Forecast of Energy Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Projected Energy Expense (+000) $603 $625 $647 Percentage of Total Revenue 6.8% 6.8% 6.8% Amount per Available Room $1,811 $1,876 $1,942 Amount per Occupied Room $7.09 $7.34 $7.60 - -------------------------------------------------------------------------------- Property Taxes The estimate of property taxes was detailed in a previous section of this report. The following table summarizes these projections. ================================================================================ Table 10-22 Forecast of Property Taxes - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Property Taxes (+000) $280 $290 $300 - -------------------------------------------------------------------------------- Insurance Expense The insurance expense category consists of the cost of insuring the hotel and its contents against damage or destruction by fire, weather, sprinkler leakage, boiler explosion, plate glass breakage, and so forth. It does not include liability coverage, which is a component of administrative and general expense. Insurance rates are based on many factors, including building design and construction, fire detection and extinguishing equipment, fire district, distance from the firehouse, and the area's fire experience. Insurance expenses do not vary with occupancy. Based on historical levels, we project the subject property's insurance expense at approximately $125,000, or $375 per available room, in 1997 (the first projection period). In subsequent years, this amount is assumed to increase in tandem with inflation. The following table outlines our projection of insurance expense. ================================================================================ Table 10-23 Forecast of Insurance Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Projected Insurance Expense (+000) $125 $129 $134 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 120 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Reserve for Replacement Furniture, fixtures, and equipment are essential to the operation of a lodging facility, and their quality often influences a property's class. This category includes all non-real estate items that are capitalized, rather than expensed. The furniture, fixtures, and equipment of a hotel are exposed to heavy use and must be replaced at regular intervals. The useful life of these items is determined by their quality, durability, and the amount of guest traffic and use. Periodic replacement of furniture, fixtures, and equipment is essential to maintain the quality, image, and income-producing potential of a lodging facility. Because capitalized expenditures are not included in the operating statement but nevertheless affect an owner's cash flow, an appraisal should reflect these expenses in the form of an appropriate reserve for replacement. Our industry experience indicates that a reserve for replacement of 3% to 5% of total revenue is generally sufficient to provide for the timely replacement of furniture, fixtures, and equipment. Because the reserve for replacement is based on a percentage of total revenue, it has no fixed component. Based on an analysis of comparable lodging facilities, we believe that a reserve for replacement of 4% of total revenue is sufficient to provide for the periodic replacement of the subject property's furniture, fixtures, and equipment. This amount is consistent with the reserve account contributions that are being made currently. The following table summarizes the projected reserve for replacement. ================================================================================ Table 10-24 Forecast of Reserve for Replacement - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Projected Replacement Reserves (+000) $353 $369 $383 - -------------------------------------------------------------------------------- Rent Expense The subject property's rent expense consists of the cost of renting two vans and copier machines. We assume that the hotel will continue to lease these or similar items under the current contracts or under new contracts with comparable terms. Based on historical levels and the current contracts, we project the subject property's rent expense at $42,000 in 1997 (the first projection period). In subsequent years, this amount is assumed to increase in tandem with inflation. The following table outlines our projection of rent expense. HVS International, Mineola, New York Income Capitalization Approach 121 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-25 Forecast of Rent Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Projected Rent Expense (+000) $42 $44 $45 - -------------------------------------------------------------------------------- Summary of Projections Based on the preceding analysis, we have formulated a forecast of income and expense. The table on the following page presents a detailed forecast through the stabilized year, including amounts per available room (PAR) and per occupied room (POR). For the purpose of comparison, this table also presents the subject property's most recent full year of operating history. The second table illustrates our ten-year forecast of income and expense in less detail. The forecasts pertain to calendar operating years, and are expressed in inflated dollars for each year. HVS International, Mineola, New York Income Capitalization Approach 122 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-26 Detailed Forecast of Income and Expense through the Stabilized Year and Most Recent Operating History, St. Petersburg Bayfront Hilton, St. Petersburg, Florida - --------------------------------------------------------------------------------
1995 Operating Results 1997 -------------------------------------- -------------------------------------- No. of Rooms: 333 333 Occupancy: 69.8% 70.0% Average Rate: $60.80 $69.69 No. of Days Open: 365 Percent 365 Percent No. of Occupied Rooms: 84,867 of 85,082 of (+000) Gross PAR POR (+000) Gross PAR POR - --------------------------------------------------------------------------------------------------------------- REVENUE Rooms $5,160 66.9% $15,496 $60.80 $5,929 67.2% $17,805 $69.69 Food 1,682 21.8 5,050 19.81 1,859 21.1 5,583 21.85 Beverage 503 6.5 1,510 5.93 621 7.0 1,865 7.30 Telephone 237 3.1 711 2.79 272 3.1 817 3.20 Net Rental & Other Income 137 1.8 410 1.61 141 1.6 423 1.66 Total 7,718 100.1 23,177 90.94 8,822 100.0 26,492 103.69 - --------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES * Rooms 1,184 22.9 3,555 13.95 1,371 23.1 4,117 16.11 Food & Beverage 1,615 73.9 4,851 19.03 1,836 74.0 5,514 21.58 Telephone 121 51.2 364 1.43 166 61.0 498 1.95 Total 2,921 37.8 8,771 34.41 3,373 38.2 10,129 39.64 - --------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 4,797 62.3 14,407 56.53 5,449 61.8 16,363 64.04 - --------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 865 11.2 2,597 10.19 893 10.1 2,682 10.50 Management Fee 233 3.0 699 2.74 265 3.0 796 3.11 Marketing 582 7.5 1,747 6.85 676 7.7 2,030 7.95 Franchise Fees 229 3.0 688 2.70 217 2.5 653 2.56 Property Oper. & Maint. 385 5.0 1,156 4.53 435 4.9 1,306 5.11 Energy 533 6.9 1,602 6.29 603 6.8 1,811 7.09 Total 2,826 36.6 8,487 33.30 3,089 35.0 9,277 36.31 - --------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 1,971 25.7 5,919 23.23 2,360 26.8 7,086 27.73 - --------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 368 4.8 1,104 4.33 280 3.2 841 3.29 Insurance 110 1.4 330 1.30 125 1.4 375 1.47 Reserve for Replacement 310 4.0 931 3.65 353 4.0 1,060 4.15 Rent 39 0.5 118 0.46 42 0.5 126 0.49 Total 827 10.7 2,484 9.74 800 9.1 2,402 9.40 - --------------------------------------------------------------------------------------------------------------- NET INCOME $1,144 15.0% $3,436 $13.48 $1,560 17.7% $4,683 $18.33 =============================================================================================================== Food/Rooms 32.6% 31.4% Beverage/Food 29.9% 33.4% Telephone/Rooms 4.6% 4.6% Other Income/Rooms 2.6% 2.4% 1998 Stabilized -------------------------------------- -------------------------------------- No. of Rooms: 333 333 Occupancy: 70.0% 70.0% Average Rate: $73.17 $76.10 No. of Days Open: 365 Percent 365 Percent No. of Occupied Rooms: 85,082 of 85,082 of (+000) Gross PAR POR (+000) Gross PAR POR - --------------------------------------------------------------------------------------------------------------- REVENUE Rooms $6,225 67.5% $18,694 $73.17 $6,475 67.7% $19,444 $76.10 Food 1,924 20.9 5,778 22.61 1,991 20.8 5,979 23.40 Beverage 643 7.0 1,931 7.56 665 6.9 1,997 7.82 Telephone 281 3.0 844 3.30 291 3.0 874 3.42 Net Rental & Other Income 145 1.6 435 1.70 151 1.6 453 1.77 Total 9,218 100.0 27,682 108.34 9,573 100.0 28,748 112.52 - --------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES * Rooms 1,419 22.8 4,261 16.68 1,469 22.7 4,411 17.27 Food & Beverage 1,900 74.0 5,706 22.33 1,967 74.1 5,907 23.12 Telephone 172 61.2 517 2.02 178 61.2 535 2.09 Total 3,491 37.9 10,483 41.03 3,614 37.8 10,853 42.48 - --------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 5,727 62.1 17,198 67.31 5,959 62.2 17,895 70.04 - --------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 927 10.1 2,784 10.90 960 10.0 2,883 11.28 Management Fee 277 3.0 832 3.26 287 3.0 862 3.37 Marketing 702 7.6 2,108 8.25 728 7.6 2,186 8.56 Franchise Fees 311 3.4 934 3.66 324 3.4 973 3.81 Property Oper. & Maint. 452 4.9 1,357 5.31 468 4.9 1,405 5.50 Energy 625 6.8 1,877 7.35 647 6.8 1,943 7.60 Total 3,294 35.8 9,892 38.72 3,414 35.7 10,252 40.13 - --------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 2,433 26.3 7,306 28.60 2,545 26.5 7,643 29.91 - --------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 290 3.1 871 3.41 300 3.1 901 3.53 Insurance 129 1.4 387 1.52 134 1.4 402 1.57 Reserve for Replacement 369 4.0 1,108 4.34 383 4.0 1,150 4.50 Rent 44 0.5 132 0.52 45 0.5 135 0.53 Total 832 9.0 2,498 9.78 862 9.0 2,589 10.13 - --------------------------------------------------------------------------------------------------------------- NET INCOME $1,601 17.3% $4,808 $18.82 $1,683 17.5% $5,054 $19.78 =============================================================================================================== Food/Rooms 30.9% 30.7% Beverage/Food 33.4% 33.4% Telephone/Rooms 4.5% 4.5% Other Income/Rooms 2.3% 2.3%
*Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 123 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-27 Ten-Year Forecast of Income and Expense, St. Petersburg Bayfront Hilton, St. Petersburg, Florida (+000) - --------------------------------------------------------------------------------
1997 1998 1999 2000 2001 --------------- ---------------- ---------------- --------------- --------------- No. of Rooms: 333 333 333 333 333 No. of Occupied Rooms: 85,082 85,082 85,082 85,082 85,082 Occupancy: 70.0% % of 70.0% % of 70.0% % of 70.0% % of 70.0% % of Average Rate: $69.69 Gross $73.17 Gross $76.10 Gross $78.76 Gross $81.52 Gross - ----------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $5,929 67.2% $6,225 67.5% $6,475 67.7% $6,701 67.7% $6,936 67.7% Food 1,859 21.1 1,924 20.9 1,991 20.8 2,061 20.8 2,133 20.8 Beverage 621 7.0 643 7.0 665 6.9 688 6.9 712 6.9 Telephone 272 3.1 281 3.0 291 3.0 302 3.0 312 3.0 Net Rental & Other Income 141 1.6 145 1.6 151 1.6 156 1.6 161 1.6 Total 8,822 100.0 9,218 100.0 9,573 100.0 9,908 100.0 10,254 100.0 - ----------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES* Rooms 1,371 23.1 1,419 22.8 1,469 22.7 1,520 22.7 1,574 22.7 Food & Beverage 1,836 74.0 1,900 74.0 1,967 74.1 2,035 74.0 2,107 74.1 Telephone 166 61.0 172 61.2 178 61.2 185 61.3 191 61.2 Total 3,373 38.2 3,491 37.9 3,614 37.8 3,740 37.7 3,872 37.8 DEPARTMENTAL INCOME 5,449 61.8 5,727 62.1 5,959 62.2 6,168 62.3 6,382 62.2 - ----------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 893 10.1 927 10.1 960 10.0 994 10.0 1,029 10.0 Management Fee 265 3.0 277 3.0 287 3.0 297 3.0 308 3.0 Marketing 676 7.7 702 7.6 728 7.6 753 7.6 779 7.6 Franchise Fees 217 2.5 311 3.4 324 3.4 335 3.4 347 3.4 Property Oper. & Maint. 435 4.9 452 4.9 468 4.9 484 4.9 501 4.9 Energy 603 6.8 625 6.8 647 6.8 669 6.8 693 6.8 Total 3,089 35.0 3,294 35.8 3,414 35.7 3,532 35.7 3,657 35.7 - ----------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 2,360 26.8 2,433 26.3 2,545 26.5 2,636 26.6 2,725 26.5 - ----------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 280 3.2 290 3.1 300 3.1 310 3.1 321 3.1 Insurance 125 1.4 129 1.4 134 1.4 138 1.4 143 1.4 Reserve for Replacement 353 4.0 369 4.0 383 4.0 396 4.0 410 4.0 Rent 42 0.5 44 0.5 45 0.5 47 0.5 48 0.5 Total 800 9.1 832 9.0 862 9.0 891 9.0 922 9.0 - ----------------------------------------------------------------------------------------------------------------------- NET INCOME $1,560 17.7% $1,601 17.3% $1,683 17.5% $1,745 17.6% $1,803 17.5% ======================================================================================================================= 2002 2003 2004 2005 2006 --------------- --------------- --------------- --------------- --------------- No. of Rooms: 333 333 333 333 333 No. of Occupied Rooms: 85,082 85,082 85,082 85,082 85,082 Occupancy: 70.0% % of 70.0% % of 70.0% % of 70.0% % of 70.0% % of Average Rate: $84.37 Gross $87.33 Gross $90.38 Gross $93.55 Gross $96.82 Gross - -------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $7,179 67.7% $7,430 67.7% $7,690 67.7% $7,959 67.6% $8,238 67.7% Food 2,208 20.8 2,285 20.8 2,365 20.8 2,448 20.8 2,534 20.8 Beverage 737 6.9 763 6.9 790 6.9 818 7.0 846 6.9 Telephone 323 3.0 334 3.0 346 3.0 358 3.0 371 3.0 Net Rental & Other Income 167 1.6 173 1.6 179 1.6 185 1.6 192 1.6 Total 10,614 100.0 10,985 100.0 11,370 100.0 11,768 100.0 12,181 100.0 - -------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES* Rooms 1,629 22.7 1,686 22.7 1,745 22.7 1,806 22.7 1,869 22.7 Food & Beverage 2,181 74.1 2,257 74.0 2,336 74.0 2,418 74.0 2,502 74.0 Telephone 198 61.3 205 61.4 212 61.3 219 61.2 227 61.2 Total 4,008 37.8 4,148 37.8 4,293 37.8 4,443 37.8 4,598 37.7 - -------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 6,606 62.2 6,837 62.2 7,077 62.2 7,325 62.2 7,583 62.3 - -------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 1,065 10.0 1,102 10.0 1,141 10.0 1,181 10.0 1,222 10.0 Management Fee 318 3.0 330 3.0 341 3.0 353 3.0 365 3.0 Marketing 807 7.6 835 7.6 864 7.6 894 7.6 926 7.6 Franchise Fees 359 3.4 372 3.4 385 3.4 398 3.4 412 3.4 Property Oper. & Maint. 519 4.9 537 4.9 556 4.9 575 4.9 595 4.9 Energy 717 6.8 742 6.8 768 6.8 795 6.8 823 6.8 Total 3,785 35.7 3,918 35.7 4,055 35.7 4,196 35.7 4,343 35.7 - -------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 2,821 26.5 2,919 26.5 3,022 26.5 3,129 26.5 3,240 26.6 - -------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 333 3.1 344 3.1 356 3.1 369 3.1 382 3.1 Insurance 148 1.4 153 1.4 159 1.4 164 1.4 170 1.4 Reserve for Replacement 425 4.0 439 4.0 455 4.0 471 4.0 487 4.0 Rent 50 0.5 52 0.5 54 0.5 55 0.5 57 0.5 Total 956 9.0 988 9.0 1,024 9.0 1,059 9.0 1,096 9.0 - -------------------------------------------------------------------------------------------------------------------------- NET INCOME $1,865 17.5% $1,931 17.5% $1,998 17.5% $2,070 17.5% $2,144 17.6% ==========================================================================================================================
*Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 124 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The conversion of a property's projected net income into an estimate of value is based on the premise that investors typically purchase real estate with a small amount of equity cash (25% to 40%) and a large amount of mortgage financing (60% to 75%). The amounts and terms of available mortgage financing and the rates of return that are required to attract sufficient equity capital form the basis for allocating the net income between the mortgage and equity components and deriving a value estimate. Mortgage Component Data for the mortgage component may be developed from statistics of actual hotel mortgages made by long-term lenders. The American Council of Life Insurance, which represents 20 large life insurance companies, publishes quarterly information pertaining to the hotel mortgages issued by its member companies. The following table summarizes the average mortgage interest rates of the hotel loans made by these lenders. In addition, the A corporate bond yield (as reported by Moody's Bond Record) is shown for the purpose of comparison. HVS International, Mineola, New York Income Capitalization Approach 125 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-28 Average Mortgage Interest Rates and Average A Corporate Bond Yields - -------------------------------------------------------------------------------- Average A Average Corporate Period Interest Rate Bond Yield ---------------------------------------------------------- 1st Quarter 1996 7.79% 7.37% 4th Quarter 1995 8.44 7.28 3rd Quarter 1995 8.61 7.67 2nd Quarter 1995 9.25 7.87 1st Quarter 1995 9.14 8.50 3rd Quarter 1994 9.64 8.48 2nd Quarter 1994 9.38 8.28 4th Quarter 1993 9.38 7.80 3rd Quarter 1993 8.41 7.28 2nd Quarter 1993 10.53 9.65 4th Quarter 1992 9.43 8.48 3rd Quarter 1992 9.99 8.38 2nd Quarter 1992 9.47 8.79 1st Quarter 1992 10.02 8.81 4th Quarter 1991 10.49 8.97 3rd Quarter 1991 10.03 9.29 2nd Quarter 1991 10.75 9.45 3rd Quarter 1990 10.47 9.89 2nd Quarter 1990 10.58 9.83 4th Quarter 1989 9.96 9.42 3rd Quarter 1989 9.55 9.46 2nd Quarter 1989 10.54 9.93 1st Quarter 1989 10.39 10.16 4th Quarter 1988 10.07 10.03 3rd Quarter 1988 10.66 10.51 2nd Quarter 1988 10.09 10.33 4th Quarter 1987 10.41 10.45 3rd Quarter 1987 10.00 9.95 2nd Quarter 1987 9.81 9.46 1st Quarter 1987 9.43 9.19 4th Quarter 1986 9.44 9.55 3rd Quarter 1986 9.56 9.71 2nd Quarter 1986 9.80 9.91 1st Quarter 1986 10.99 10.62 Sources: American Council of Life Insurance; Moody's Bond Record - -------------------------------------------------------------------------------- Because of the six- to nine-month lag time in reporting and publishing hotel mortgage statistics, it is necessary to update this information to reflect current lending practices. Research by HVS International indicates that there is a close mathematical relationship between the average interest rate of a HVS International, Mineola, New York Income Capitalization Approach 126 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= hotel mortgage and the concurrent yield on an average A corporate bond. Through a regression analysis, this relationship is expressed as follows. Y = 2.76078 + 0.782280 X Where: Y = Estimated Hotel/Motel Mortgage Interest Rate X = Current Average A Corporate Bond Yield (Coefficient of correlation is 96.4%) The average yield on A corporate bonds for the third quarter of 1996, as reported by Moody's Bond Record, was 7.91%. Using a factor of 7.91% in the equation presented above produces an estimated hotel/motel interest rate of 8.95%. In addition to the mortgage interest rate estimate derived from this regression analysis, HVS International constantly monitors the terms of hotel mortgage loans made by our institutional lending clients. In the past year, we have noted an increase in the availability of debt financing, and many lenders have returned to the market. The current level of lending activity represents a significant increase from the restricted environment of the early 1990s. Nonetheless, the market for hotel mortgage loans remains somewhat tight, particularly when compared to the conditions that prevailed in the mid-to late 1980s. In the current lending climate, strong hotel projects that are structured on an economic basis can secure mortgage financing at interest rates ranging from 8% to 11%, depending on the property, location, affiliation, and operator. In the 1980s, when hotel mortgages were widely available, loan-to-value ratios typically ranged from 75% to 80%. Amortization schedules were generally based on 30 years, although the term of the loan was more likely to be seven to ten years. The few loans that were underwritten in the early 1990s were based on far more stringent parameters: loan-to-value ratios declined to a range of 50% to 65%, and amortization periods of 20 to 25 years were most common. With the recent reemergence of hotel financing, loan-to-value requirements and amortization schedules have loosened somewhat. At present, we find that lenders who are active in the market are using loan-to-value ratios of 65% to 75%, and amortization periods of 25 to 30 years. The exact terms offered depend on specific factors such as the property's location, the age and quality of the physical facility, local hostelry market conditions, and HVS International, Mineola, New York Income Capitalization Approach 127 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= (perhaps more significantly) the profile of the borrower. The strongest projects typically command the highest loan-to-value ratios. Based on the preceding analysis of the current lodging industry mortgage market and adjustments for specific factors such as the property's location and conditions in the local hotel market, it is our opinion that a 25-year amortization mortgage with a 9.5% interest rate and a .104844 constant is appropriate for the subject property. We believe that a mortgage lender will lend up to 70% of the hotel's market value as determined by this appraisal. Equity Compnent The remaining capital required for a hotel investment generally comes from the equity investor. The rate of return that an equity investor expects over a ten-year holding period is known as the equity yield. Unlike the equity dividend, which is a short-term rate of return, the equity yield specifically considers a long-term holding period (generally ten years), annual inflation- adjusted cash flows, property appreciation, mortgage amortization, and proceeds from a sale at the end of the holding period. It is difficult to quantify the rate of return required by equity investors who are seeking to purchase hotel properties. To establish an appropriate equity yield rate, HVS International uses two sources of data: past appraisals and investor interviews. Past Appraisals - During the past 12 months, HVS International has appraised more than 400 hotels, including properties located in most major national markets. Each appraisal used a similar mortgage-equity approach in which income is projected and then discounted to a current value at rates reflecting the cost of debt and equity capital. In the case of hotels that were sold subsequent to our valuations, we are able to determine an appropriate equity yield rate by excluding incentive management fees from the projection of income and expense, inserting the projection into a valuation model, and adjusting the appraised value to reflect the actual sales price by modifying the return assumptions. The following table shows a representative sample of hotels that were sold shortly after we appraised them, along with the imputed equity return based on our valuation approach. HVS International, Mineola, New York Income Capitalization Approach 128 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-29 Sample of Hotels Sold - --------------------------------------------------------------------------------
No. of Date of Overall Total Property Equity Hotel City and State Rooms Sale Sales Price Rate Yield Yield - --------------------------------------------------------------------------------------------------------------------- Ritz-Carlton Phoenix, AZ 281 2/94 $23,000,000 11.0% 14.6% 21.7% Marriott Marina Fort Lauderdale, FL 580 2/94 40,000,000 12.2 16.4 26.7 Holiday Inn Edison, NJ 274 3/94 11,803,000 7.8 17.0 26.3 Crescent Hotel Phoenix, AZ 342 3/94 26,000,000 6.5 7.2 2.2 Checkers Hotel Kempinski Los Angeles, CA 173 4/94 12,750,000 3.0 18.3 27.0 Best Western Fireside Inn Cambria, CA 46 4/94 3,377,000 11.7 15.8 24.3 Phoenician Resort Phoenix, AZ 580 4/94 224,000,000 6.6 9.3 8.9 Newark-Fremont Hilton Newark, CA 300 5/94 8,950,000 8.8 14.9 20.7 Radisson Inn Orlando, FL 299 5/94 11,150,000 12.9 18.0 28.2 Westin Kauai Lihue, Kauai, HI 840 6/94 97,400,000 (1.9) 8.1 7.2 Residence Inn Binghamton, NY 72 6/94 6,325,000 10.8 13.9 21.9 Hotel Millenium New York, NY 561 6/94 75,000,000 9.5 14.1 23.0 Best Western Otay Valley Chula Vista, CA 120 7/94 2,350,000 13.2 21.1 31.8 Hampton Inn Islandia, NY 121 7/94 6,572,000 12.6 16.6 28.2 Hampton Inn Willow Grove, PA 150 7/94 10,220,000 11.0 14.3 23.0 Hampton Inn West Palm Beach, FL 136 7/94 4,220,000 10.8 10.8 14.3 Hampton Inn Naples, FL 107 7/94 5,700,000 11.4 11.5 24.9 Hampton Inn Albany, NY 126 7/94 9,204,000 9.3 11.5 15.8 Marriott Hotel South Bend, IN 299 7/94 11,500,000 10.5 13.2 18.9 Marriott SFO Burlingame, CA 684 8/94 61,700,000 10.2 13.2 19.0 Westfields Conference Center Chantilly, VA 340 8/94 46,000,000 12.3 15.9 25.3 Radisson Mark Resort Vail, CO 349 9/94 25,200,000 8.9 15.8 24.1 Marriott East Side New York, NY 664 10/94 55,000,000 8.5 9.7 11.1 Marriott Resort Vail, CO 349 10/94 25,200,000 14.2 18.9 30.5 Marriott Quorum Addison, TX 547 10/94 29,815,000 13.5 18.2 31.8 Sheraton Hotel Hasbrouck Heights, NJ 338 11/94 10,450,000 18.3 21.1 30.7 Sheraton Inn Napa, CA 191 12/94 9,968,000 8.9 13.7 19.8 Marriott Fisherman's Wharf San Francisco, CA 255 12/94 27,755,000 10.8 13.4 19.4 Marriott Hotel Portland, OR 503 12/94 45,000,000 12.9 17.4 30.0 Radisson Inn Springfield, MO 199 12/94 5,800,000 8.2 10.1 11.3 Williamsburg Hilton Williamsburg, VA 291 12/94 15,000,000 15.4 19.0 32.0 Marriott Tech Center Denver, CO 625 12/94 36,000,000 13.7 16.4 27.1 Holiday Inn Sunspree Singer Island, FL 222 12/94 11,900,000 8.6 10.6 12.4 The Plaza New York, NY 805 6/95 325,000,000 7.0 11.0 14.0 Fullerton Suites Fullerton, CA 96 5/95 5,000,000 12.9 18.7 28.5 Residence Inn Baton Rouge, LA 80 6/95 6,518,000 12.7 14.8 21.2 Residence Inn Overland Park, KS 112 6/95 8,500,000 8.9 14.7 20.8 Residence Inn Des Moines, IA 112 6/95 7,660,000 9.8 14.1 19.6 Residence Inn Hunt Valley, MD 96 6/95 6,580,000 12.3 13.6 18.3 Residence Inn Kansas City, MO 112 6/95 6,560,000 10.4 13.2 19.8 Residence Inn Lincoln, NE 120 6/95 7,100,000 10.0 13.7 18.5 Embassy Suites Schaurmburg, IL 209 12/95 17,800,000 10.0 13.5 18.9 Marriott Hotel Andover, MA 293 12/95 24,000,000 9.7 13.5 19.2 Doubletree Suites Valley Forge, PA 229 12/95 28,500,000 10.7 14.2 15.5 Marriott Hotel Tysons Corner, VA 390 12/95 41,100,000 10.7 13.1 18.0 Marriott Hotel Warner Center, CA 461 12/95 57,900,000 6.2 11.6 14.2 Hilton at the Club Pleasanton, CA 294 12/95 22,000,000 10.5 13.4 17.0
Source: HVS International - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 129 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Investor Interviews - HVS International is in constant contact with numerous institutional and individual hotel investors. These sources of equity funds have definite return requirements that can be expressed as an equity yield rate based on a ten-year projection of net income before incentive management fees but after debt service. Based on our surveys and investor interviews, the following table illustrates the range of equity yields generally required by individual and institutional investors. ================================================================================ Table 10-30 Equity Yield Requirements - -------------------------------------------------------------------------------- Source Equity Yield Requirement ------ ------------------------ Individual 20% - 24% Institution 18% - 22% - -------------------------------------------------------------------------------- Based on the assumed 70% loan-to-value ratio, the risk inherent in achieving the projected income stream, and the age, condition, and anticipated market position of the subject property, it is our opinion that an equity investor is likely to require an equity yield rate of 22.0% before payment of incentive management fees. This estimate is well supported by the equity yield requirements presented previously. Terminal Capitalization Rate Inherent in this valuation process is the assumption of a sale at the end of the ten-year holding period. The estimated reversionary sales price as of that date is calculated by capitalizing the projected 11th-year net income by an overall terminal capitalization rate. A percentage for the seller's brokerage and legal fees is deducted from this sales price, and the net proceeds to the equity interest (also known as the equity residual) are calculated by deducting the outstanding mortgage balance from the reversion. To estimate a property's reversionary value, the appraiser must select a terminal capitalization rate and an allocation for brokerage and legal fees. The terminal capitalization rate is an overall rate that is applied to one stabilized year, and thus it inherently incorporates the cost of debt and equity capital. The terminal capitalization rate can be derived through a mortgage and equity band of investment technique which calculates the weighted average cost of the capital used in a hotel investment. Combining the mortgage financing terms derived previously (namely, a 70% loan-to-value ratio and a .104844 debt service constant) with a cash-on-cash equity dividend rate of 12% produces the following overall capitalization rate. HVS International, Mineola, New York Income Capitalization Approach 130 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-31 Capitalization Rate Calculation - -------------------------------------------------------------------------------- Percent Rate of Weighted of Value Return Average --------------------------------------------------- Mortgage 70% x 0.10484 = 0.07339 Equity 30% x 0.12000 = 0.03600 --------- Overall Capitalization Rate 0.10939 - -------------------------------------------------------------------------------- Because this overall rate will be used to capitalize net income ten years from the date of value, an upward adjustment is appropriate to reflect the uncertainty inherent in this extended period. For the purpose of this valuation, we will use a terminal capitalization rate of 11.0%. As a point of reference, the terminal capitalization rate can be compared to the going-in rate implied by the subject property's estimated value. The going-in rate reflects the capitalization rate that would be applicable if the hotel were operating at a stabilized level as of the date of value. This rate is calculated by dividing the stabilized net income (expressed in current dollars as of the date of value) by the value indicated by the income capitalization approach. Generally, the terminal capitalization rate is approximately 100 to 200 basis points above the going-in rate. Summary of Valuation Variables The following table summarizes the valuation variables that have been used to estimate the subject property's value via the income capitalization approach. ================================================================================ Table 10-32 Summary of Valuation Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Forecast Loan-to-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.104844 Equity Yield Ye 22.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 11.0% - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 131 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Valuation of the Mortgage and Equity Components The valuation of the mortgage and equity components is accomplished through use of an algebraic equation that calculates the exact amount of debt and equity that the hotel will be able to support based on the anticipated cash flow (as derived from the forecast of income and expense) and the specific return requirements demanded by the mortgage lender (interest) and the equity investor (equity yield). The equation and the calculations associated with this simultaneous valuation formula are set forth in the Addenda to this report. Using the variables summarized above, we estimate the value of the subject property via the income capitalization approach at roundly $14,229,000. The value is proven by calculating the yields to the mortgage and equity components during the projection period. If the mortgagee achieves a 9.5% yield and the equity yield is 22.0%, then $14,229,000 is the correct value by the income capitalization approach. Using the assumed financial structure set forth in the previous calculations, market value can be allocated between the debt and equity as follows. Mortgage Component (70%) $9,961,000 Equity Component (30%) 4,269,000 ----------- Total $14,229,000 The annual debt service is calculated by multiplying the mortgage component by the mortgage constant. Mortgage Component $9,961,000 Mortgage Constant 0.104844 ---------- Annual Debt Service $1,044,347 The cash flow to equity is calculated by deducting the debt service from the projected net income before debt service. HVS International, Mineola, New York Income Capitalization Approach 132 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-33 Forecast of Net Income to Equity - -------------------------------------------------------------------------------- Net Income Available for Net Income Year Debt Service Debt Service to Equity - -------------------------------------------------------------------------------- 1997 $1,560,000 - $1,044,000 = $516,000 1998 1,601,000 - 1,044,000 = 557,000 1999 1,683,000 - 1,044,000 = 639,000 2000 1,745,000 - 1,044,000 = 701,000 2001 1,803,000 - 1,044,000 = 759,000 2002 1,865,000 - 1,044,000 = 821,000 2003 1,931,000 - 1,044,000 = 887,000 2004 1,998,000 - 1,044,000 = 954,000 2005 2,070,000 - 1,044,000 = 1,026,000 2006 2,144,000 - 1,044,000 = 1,100,000 - -------------------------------------------------------------------------------- The equity residual at the end of the tenth year is calculated as follows. Reversionary Value ( $2,219,000 / 0.110 ) $20,173,000 Less: Brokerage and Legal Fees 605,000 Less: Mortgage Balance 8,334,000 ----------- Net Sale Proceeds to Equity $11,234,000 The overall property yield (before debt service), the yield to the lender, and the yield to the equity position have been calculated by computer with the following results. ================================================================================ Table 10-34 Overall Property Yields - -------------------------------------------------------------------------------- Projected Yield (Internal Rate of Return) Position Value Over 10-Year Holding Period ---------------------------------------------------------------------- Total Property $14,229,000 14.3% Mortgage 9,961,000 9.5 Equity 4,269,000 22.0 - -------------------------------------------------------------------------------- The following tables demonstrate that the property receives its anticipated yields, proving that the value of approximately $14,229,000 is correct based on the assumptions used in this approach. HVS International, Mineola, New York Income Capitalization Approach 133 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-35 Total Property Yield - -------------------------------------------------------------------------------- Net Income Before Present Worth of $1 Discounted Year Debt Service Factor at 14.3% Cash Flow - -------------------------------------------------------------------------------- 1997 $1,560,000 x 0.874513 = $1,364,000 1998 1,601,000 x 0.764774 = 1,224,000 1999 1,683,000 x 0.668805 = 1,126,000 2000 1,745,000 x 0.584879 = 1,021,000 2001 1,803,000 x 0.511484 = 922,000 2002 1,865,000 x 0.447300 = 834,000 2003 1,931,000 x 0.391169 = 755,000 2004 1,998,000 x 0.342083 = 683,000 2005 2,070,000 x 0.299156 = 619,000 2006 21,712,000* x 0.261616 = 5,680,000 ----------- Total Property Value $14,228,000 *Tenth-year net income of $2,144,000 plus sales proceeds of $19,568,000 - -------------------------------------------------------------------------------- ================================================================================ Table 10-36 Mortgage Component Yield - -------------------------------------------------------------------------------- Present Worth of $1 Discounted Year Debt Service Factor at 9.5% Cash Flow - -------------------------------------------------------------------------------- 1997 $1,044,000 x 0.913841 = $954,000 1998 1,044,000 x 0.835106 = 872,000 1999 1,044,000 x 0.763155 = 797,000 2000 1,044,000 x 0.697402 = 728,000 2001 1,044,000 x 0.637315 = 665,000 2002 1,044,000 x 0.582405 = 608,000 2003 1,044,000 x 0.532226 = 556,000 2004 1,044,000 x 0.486370 = 508,000 2005 1,044,000 x 0.444465 = 464,000 2006 9,378,000* x 0.406170 = 3,809,000 ---------- Value of the Mortgage Component $9,961,000 *Tenth-year debt service of $1,044,000 plus outstanding mortgage balance of $8,334,000 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 134 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-37 Equity Component Yield - -------------------------------------------------------------------------------- Net Income Present Worth of $1 Discounted Year to Equity Factor at 22.0% Cash Flow - -------------------------------------------------------------------------------- 1997 516,000 x 0.819637 = 423,000 1998 557,000 x 0.671805 = 374,000 1999 639,000 x 0.550636 = 352,000 2000 701,000 x 0.451321 = 316,000 2001 759,000 x 0.369920 = 281,000 2002 821,000 x 0.303200 = 249,000 2003 887,000 x 0.248514 = 220,000 2004 954,000 x 0.203691 = 194,000 2005 1,026,000 x 0.166953 = 171,000 2006 12,334,000* x 0.136841 = 1,688,000 --------- Value of the Equity Component 4,268,000 *Tenth-year net income to equity of $1,100,000 plus sales proceeds of $11,234,000 - -------------------------------------------------------------------------------- Valuation Method Two: Discounted Cash Flow The total property yield derived from the previous valuation method was 14.3%. After reviewing the total property yields indicated by recent hotel sales, it is our opinion that a 14.0% discount factor is appropriate for the St. Petersburg Bayfront Hilton. The following table illustrates the discounted cash flow analysis using this 14.0% factor. HVS International, Mineola, New York Income Capitalization Approach 135 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-38 Discounted Cash Flow Analysis - -------------------------------------------------------------------------------- Discount Net Factor Discounted Year Income at 14.0% Cash Flow - --------------------------------------------------------------------------- 1997 $1,560,000 x 0.87719 = $1,368,421 1998 1,601,000 x 0.76947 = 1,231,918 1999 1,683,000 x 0.67497 = 1,135,977 2000 1,745,000 x 0.59208 = 1,033,180 2001 1,803,000 x 0.51937 = 936,422 2002 1,865,000 x 0.45559 = 849,669 2003 1,931,000 x 0.39964 = 771,700 2004 1,998,000 x 0.35056 = 700,417 2005 2,070,000 x 0.30751 = 636,541 2006 21,711,545* x 0.26974 = 5,856,555 ----------- Estimated Market Value $14,520,799 (Say) $14,500,000 Reversion Analysis 11th-Year Net Income $2,219,000 Capitalization Rate 11.0% ----------- Total Sales Proceeds $20,172,727 Less: Brokerage & Legal Fees at 3.0% 605,182 ----------- Net Sales Proceeds $19,567,545 *Tenth-year net income of $2,144,000 plus sales proceeds of $19,567,545 - -------------------------------------------------------------------------------- Conclusion Based on our extensive experience in the hotel industry and comprehensive support provided by literature published by the Appraisal Institute, it is our opinion that the valuation procedure embodied by Method One most closely reflects the investment rationale of typical hotel buyers. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis and Valuations,(1) Method Two (which discounts the projected net income and reversion using an overall discount rate, or total property yield) "does not consider the impact of mortgage debt, leverage and the specific equity demands of typical hotel investors...This technique is simple but less reliable because the derivation of the discount rate has little support." In light of this consideration, we have relied on the $14,229,000 value conclusion indicated by Method One. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236 HVS International, Mineola, New York Sales Comparison Approach 136 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 11. Sales Comparison Approach The sales comparison approach is based on the assumption that an informed purchaser will pay no more for a property than the cost to acquire an existing property with equal utility. This approach estimates market value by considering the sales prices indicated by recent transactions involving properties that are similar to the property being appraised. Dissimilarities are resolved with appropriate adjustments; these differences may pertain to the date of sale, the age of the property, location, construction, condition, layout, equipment, size, or external economic factors. The reliability of the sales comparison approach depends on three factors: 1. the availability of timely, comparable sales data; 2. an understanding of the true terms of the sales and the motivation of the buyer and seller; 3. the degree of comparability, or the extent of the adjustments needed to reflect differences between the subject property and the comparable property. In appraising lodging facilities, it is often difficult to find an adequate number of recent sales involving hotels that are truly comparable to the subject property. Consequently, it may be necessary to consider transactions involving properties in different market areas, and the required adjustments greatly diminish the reliability of the conclusions. Moreover, it is virtually impossible for an observer to determine the true motivations of the buyers and sellers involved in transactions. Hotel acquisition often represents a highly ego-driven process in which a number of external, non-market factors influence the purchase price. Unless the appraiser can quantify these influences, there is no way of knowing whether the purchase price paid actually reflects market value. A final consideration is the degree of similarity between the subject property and the comparable; in most cases, the differences are significant enough to require numerous subjective and unsubstantiated adjustments. Each adjustment represents a potential for error, HVS International, Mineola, New York Sales Comparison Approach 137 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= and thus diminishes the reliability of this approach. As a result of these shortcomings, the use of the sales comparison approach in valuing hotels is primarily as a check against the value indicated by the income capitalization approach. Hotel values declined in many areas of the country during the late 1980s and early 1990s, although a rebound began in 1994 and 1995. The downturn, which began in most markets in 1988, was largely attributable to lower operating incomes caused by an oversupply of new hotel rooms constructed during the mid-1980s. Overbuilding resulted in flat or declining average rates and occupancies, which caused revenues to fall. A number of other factors exacerbated the situation. The national recession caused a drop in demand in many markets during the early 1990s, and the Persian Gulf War created a virtual freeze on travel in the beginning of 1991, further limiting hotel demand. Operating costs continued to rise despite poor market conditions, resulting in a decline in the net operating income of hotels throughout the nation. Because operating costs have a large fixed component, many lodging facilities experienced precipitous drops in net income. As bottom-line profits eroded, many hotels were unable to meet debt service, and hundreds of properties entered foreclosure or bankruptcy. Lenders and government agencies soon became hotel owners. Because most financial institutions were preoccupied with their distressed real estate, very little mortgage capital was available and the nation suffered from a well-publicized credit crunch. Most hotel transactions that occurred during the early 1990s were financed by the property owners, who, in most cases, were lenders. In the early 1990s, the primary market participants were owner-operators with the expertise to turn around under-performing properties. Hotels were out of favor with passive investors as a result of the industry's poor operating performance and the uncertainty of future appreciation. The wide disparity in buyer and seller expectations also limited the number of transactions. Many sellers were unwilling to accept the fact that the market value of their hotel investments had declined below the cost of the project or the original investment. Moreover, many owners were faced with a significant tax burden upon sale, further reducing their willingness to settle for a price that was below the original acquisition cost. As a result of these market forces, there was very little sales activity involving large, high-quality hotels. The primary difficulty was the lack of HVS International, Mineola, New York Sales Comparison Approach 138 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= properties available for sale; owners who were not forced to sell opted to wait for prices to recover. The few hotels that did enter the market generally attracted 15 to 20 interested bidders, mostly consisting of owner-operators. As a result of the competition for these few assets, the prices of better-quality hotels began to escalate rapidly. In response, more sellers have been encouraged to place their products on the market. An indicator of this market trend is the number of hotel sales that have occurred during the past few years. HVS International tracks major hotel transactions of more than $10,000,000 on an annual basis. In 1992, the number of major transactions was 67; a slightly lower level of 52 was registered in 1993. This total increased significantly (to 92) in 1994, and the 1995 total is estimated to have been 104. In tandem with escalating prices, hotels are again being considered by traditional financing sources, which had virtually abandoned the hospitality industry by the early 1990s. Although many lenders are still approaching the market with a high degree of caution, it is now possible to obtain third-party financing for hotel transactions. The mortgage loans that are now being made are subject to fairly stringent requirements: loan-to-value ratios remain in the 65% to 75% range. The qualification of the borrower is also a crucial consideration for most lenders. We believe that the upward trend in both pricing and sales activity will continue as financing becomes more available and additional buyers (particularly passive investors) enter the market. Consequently, it is important to consider the date of the transactions used in the sales comparison approach. When the comparable sales are not recent enough to provide an accurate picture of the current market, it may be necessary to make upward adjustments to the values indicated by the sales comparison and income capitalization approaches in recognition of the recent escalation. Comparable Sales Based on information provided by the Hospitality Market Data Exchange and compiled by the six offices of HVS International, the following transactions involved hotels that appear to have some degree of comparability to the subject property. HVS International, Mineola, New York Sales Comparison Approach 139 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Sale #1: - -------- Property: Lexington Hyatt Regency Location: 400 West Vine Street, Lexington, KY Date of Sale: May, 1996 Sales Price: $14,000,000 Grantor: Lexington Hotel and Mall Corporation Grantee: Patriot American Year Opened: 1977 Number of Rooms: 365 Price per Room: $38,356 Confirmed By: Patriot American Sale #2: - -------- Property: Hyatt Pittsburgh Location: 112 Washington Place, Pittsburgh, PA Date of Sale: April, 1996 Sales Price: $18,500,000 Grantor: Elteq Equities Inc., Pittsburgh Grantee: Interstate/Host Marriott Year Opened: 1966 Number of Rooms: 400 Price per Room: $46,250 Confirmed By: Host Marriott Sale #3: - -------- Property: Baton Rouge Hilton Location: 5500 Hilton Avenue, Baton Rouge, LA Date of Sale: April, 1996 Sales Price: $14,500,000 Grantor: Not available Grantee: Davidson Hotels Year Opened: 1976 Number of Rooms: 298 Price per Room: $48,658 Confirmed By: Davidson Hotels HVS International, Mineola, New York Sales Comparison Approach 140 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Sale #4: - -------- Property: Hyatt Newporter Location: 1107 Jamboree Road, Newport Beach, CA Date of Sale: April, 1996 Sales Price: $17,450,000 Grantor: Not available Grantee: Patriot American Year Opened: 1962 Number of Rooms: 410 Price per Room: $42,561 Confirmed By: Patriot American Sale #5: - -------- Property: Marina Hotel and Conference Center Location: 1515 Prudential Drive, Jacksonville, FL Date of Sale: November, 1995 Sales Price: $15,900,000 Grantor: New York Life Grantee: GenCom Hospitality Year Opened: 1980 Number of Rooms: 322 Price per Room: $49,379 Confirmed By: National Hotel Realty Advisors Sale #6: - -------- Property: Daytona Beach Marriott Location: 100 North Atlantic Ave., Daytona Beach, FL Date of Sale: February, 1995 Sales Price: $20,600,000 Grantor: Barclays Bank Grantee: Adam's Mark Hotels Year Opened: 1989 Number of Rooms: 402 Price per Room: $51,244 Confirmed By: Adam's Mark Hotels HVS International, Mineola, New York Sales Comparison Approach 141 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= We have also considered the 1994 sale of the subject property and the 1995 sale of the Stouffer Renaissance Vinoy (one of the Hilton's primary competitors). The details of these transactions are summarized as follows. Sale #7: - -------- Property: Stouffer Renaissance Vinoy Location: 501 5th Avenue NE, St. Petersburg, FL Date of Sale: December, 1995 Sales Price: $45,000,000 Grantor: Barclays Bank Grantee: Renaissance Hotels Year Opened: 1925/1992 Number of Rooms: 360 Price per Room: $125,000 Confirmed By: Aetna Comments: Grantor obtained the property through foreclosure; by virtue of an extensive renovation that occurred in 1992, this property was in very good condition at the time of sale. Subject Property: - ----------------- Property: St. Petersburg Hilton Location: 333 1st Street South, St. Petersburg, FL Date of Sale: September, 1994 Sales Price: $4,500,000 Grantor: St. Petersburg Harbor View Hotel Corp. Grantee: St. Petersburg Florida Hotel Limited Partnership (an entity controlled by the Ashford Financial Corporation) Year Opened: 1971 Number of Rooms: 333 Price per Room: $13,516 Confirmed By: Ashford Financial Corporation The 1995 sale of the Stouffer Renaissance Vinoy is included in our discussion as a result of the hotel's close proximity to the subject property. However, the Vinoy's far superior facilities exclude it from consideration in our range of value indications via the sales comparison approach. HVS International, Mineola, New York Sales Comparison Approach 142 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= In analyzing the sale of the subject property, it is important to consider the terms and conditions pertaining to the transaction. In June of 1994, the Ashford Financial Corporation acquired 100% of the outstanding industrial development revenue bonds secured by the subject property; the all-cash purchase price was $4,005,000. In July, Ashford entered into a settlement agreement with the debtor and owner of the property, St. Petersburg Harbor View Hotel Corporation; the terms of the agreement principally consisted of the conveyance of the real property and all furniture, fixtures, and equipment in exchange for the release of liability of all obligors. The subject property was also acquired subject to delinquent property taxes, which were under litigation. The unpaid tax amount was roundly $500,000; accordingly, the total investment for the acquisition of the property was approximately $4,500,000. Based on our understanding of the terms of this transaction, we do not believe that the sale was reflective of market value. The relevance of the transaction involving the subject property is also undermined by the significant change in market conditions that occurred between the date of this sale and the date of value of this appraisal. Areawide occupancy and average rate have improved in the intervening months, and this favorable trend is expected to continue. As previously discussed, the market for hotel investments has also improved significantly as a result of changes in lender and investor attitudes. For these reasons, it is our opinion that the 1994 sale of the subject property is not a reliable indicator of the hotel's current value. Conclusion Although the sales comparison approach may be useful in providing a value range and reflecting certain market characteristics, its applicability is limited by the numerous possible points of difference between the subject property and other hotels that have sold in recent years. These factors may include location, access, size, services and facilities offered, market conditions, chain affiliation, market orientation, management, rate structure, age, physical condition, date of sale, the highest and best use of the land, and the anticipated profitability of the operation. Circumstances surrounding a sale, such as financing terms, tax considerations, income guarantees, sales of partial interests, duress on the part of the buyer or seller, or a particular deal structure can also cause a disparity between the sales price and pure market value. Moreover, it is often difficult to determine the marketing periods that were necessary to consummate the transactions. It is extremely difficult to quantify the appropriate adjustment factors accurately because of their number and complexity, as well as the difficulty in obtaining specific, HVS International, Mineola, New York Sales Comparison Approach 143 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= detailed information. Any attempt to manipulate the necessary adjustments is insupportable and purely speculative. Because appraisers are expected to reflect the analytical processes and actions of typical buyers and sellers rather than to create a highly subjective valuation approach, the investment rationale of hotel owners is an essential consideration. As specialists in the valuation of hotels, we find that typical buyers purchase properties based on a thorough analysis of the anticipated economic benefits of property ownership, rather than on historical sales data. In light of these factors, it is our opinion that the sales comparison approach is unsuitable for indicating a specific estimate of the subject property's market value; however, this approach may indicate a range of values that can be used to test the reasonableness of the value indicated by the income capitalization approach. Excluding the sales of the Renaissance Vinoy and the subject property, the prices range from approximately $38,000 to $51,000 per room, or roughly 12,700,000 to $17,000,000 for the 333-unit subject property. The income capitalization approach indicates a value of $14,229,000, which falls within this range. HVS International, Mineola, New York Cost Approach 144 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 12. Cost Approach The cost approach is founded on the principle of substitution, which implies that no prudent person will pay more for a property than the amount to acquire a site and construct a building of equal desirability and utility without undue delay. This approach estimates market value by first calculating the current cost of replacing the improvements. Appropriate deductions are made for depreciation resulting from physical deterioration, functional obsolescence, and external (economic) obsolescence, and the land value is added to the depreciated replacement cost to provide an estimate of market value. The cost approach employs the following steps. 1. The current replacement or reproduction cost is estimated. 2. Land value is estimated using techniques such as allocation, extraction, or ground rent capitalization. 3. Accrued depreciation, which can be divided into physical deterioration, functional obsolescence, and external obsolescence, is estimated. 4. Total depreciation is deducted from the subject property's replacement cost, and the land value is added to arrive at an estimate of value via the cost approach. When forming their purchase decisions regarding existing properties, market participants tend to consider the cost of developing a new hotel with optimal physical and functional utility. External conditions, such as the depressed market for real estate (and hotels in particular), can cause a property to be worth less than its replacement cost as new. The task of estimating the loss in value resulting from incurable functional and external obsolescence is highly subjective. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements age and begin to deteriorate, the loss in value resulting from physical obsolescence becomes increasingly difficult to quantify accurately. Loss in value HVS International, Mineola, New York Cost Approach 145 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= attributable to functional obsolescence can be even more difficult to determine. The subject property was constructed in 1970, and will be approximately 26 years old as of the date of this appraisal. The property, which has not received a major renovation since 1987, appeared to be in good condition at the time of our inspection. The depressed hotel market conditions that prevailed in the late 1980s and the early 1990s have also led to a degree of external obsolescence. In our opinion, it is impossible to identify and quantify the impact of these factors on the property's value with any accuracy, so we will only estimate the replacement cost. Replacement Cost Replacement cost is the current construction cost of a building with the same utility as the subject property, but built with modern materials and according to current construction and design standards. For the purpose of estimating the replacement cost of the subject property, we have used a hotel development cost survey conducted by HVS International. This survey is published annually in a newsletter entitled The Hotel Valuation Journal, and appeared in the May issue of Lodging Hospitality. The survey presents the range of per-room costs associated with various components of hotel development, including the improvements, the furniture, fixtures, and equipment, pre-opening expenses, and operating capital. Statistics are compiled for three broad categories of hotels: luxury, standard, and economy. The results of this survey are presented in the following table. HVS International, Mineola, New York Cost Approach 146 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 12-1 Hotel Development Cost Survey (Amounts per Room) - --------------------------------------------------------------------------------
Improvements Furniture & Equipment Pre-Opening Operating Capital Total Percent Change - ------------------------------------------------------------------------------------------------------------------------------------ 1976 Luxury $32,000 - $55,000 $5,000 - $10,000 $1,000 - $2,000 $1,000 - $1,500 $39,000 - $68,500 --- - --- Standard 20,000 - 32,000 3,000 - 6,000 750 - 1,000 750 - 1,000 24,500 - 40,000 --- --- Economy 8,000 - 15,000 2,000 - 4,000 500 - 1,000 500 - 750 11,000 - 20,750 --- - --- 1979 Luxury 36,000 - 65,000 8,000 - 15,000 1,500 - 3,000 1,500 - 2,000 47,000 - 85,000 6.8 - 8.0 Standard 25,000 - 36,000 5,000 - 10,000 1,000 - 2,000 1,000 - 1,500 32,000 - 49,500 10.2 - 7.9 Economy 10,000 - 20,000 3,000 - 5,000 750 - 1,000 750 - 1,000 14,500 - 27,000 10.6 - 10.0 1981 Luxury 45,000 - 80,000 10,000 - 20,000 2,000 - 3,500 2,000 - 2,500 59,000 - 106,000 12.8 - 12.4 Standard 25,000 - 40,000 7,000 - 13,000 1,200 - 2,500 1,200 - 2,000 34,400 - 57,500 3.8 - 8.1 Economy 13,000 - 25,000 4,000 - 7,000 700 - 1,200 900 - 1,200 18,600 - 34,400 14.1 - 13.7 1983 Luxury 55,000 - 100,000 12,500 - 20,000 2,300 - 4,000 2,000 - 2,800 71,800 - 126,800 10.8 - 9.8 Standard 35,000 - 50,000 9,000 - 15,000 1,400 - 3,000 1,300 - 2,200 46,700 - 70,200 17.9 - 11.0 Economy 18,000 - 32,000 5,000 - 8,000 800 - 1,500 900 - 1,300 24,700 - 42,800 16.4 - 12.2 1985 Luxury 60,000 - 115,000 13,400 - 30,000 3,000 - 5,000 2,100 - 3,100 78,500 - 153,100 4.7 - 10.4 Standard 38,000 - 57,000 9,500 - 16,500 1,900 - 3,600 1,500 - 2,500 50,900 - 79,600 4.5 - 6.7 Economy 20,000 - 36,000 5,000 - 8,800 1,000 - 1,700 1,000 - 1,500 27,000 - 48,000 4.7 - 6.1 1986 Luxury 62,000 - 120,000 13,700 - 30,600 3,100 - 5,200 2,300 - 3,100 81,100 - 158,900 3.3 - 3.8 Standard 39,000 - 60,000 9,700 - 16,800 2,000 - 3,800 1,500 - 2,600 52,200 - 83,200 2.6 - 4.5 Economy 21,000 - 37,000 5,100 - 9,000 1,000 - 1,800 1,100 - 1,500 28,200 - 49,300 4.4 - 2.7 1987 Luxury 63,000 - 122,000 13,800 - 30,900 3,300 - 5,500 2,300 - 3,200 82,400 - 161,600 1.6 - 1.7 Standard 40,000 - 61,000 9,800 - 16,800 2,100 - 3,900 1,500 - 2,600 53,400 - 84,300 2.3 - 1.3 Economy 21,000 - 39,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 28,400 - 51,400 0.7 - 4.3 1988 Luxury 65,000 - 125,000 14,000 - 31,000 3,300 - 5,500 2,300 - 3,200 84,600 - 164,700 2.7 - 1.9 Standard 41,000 - 63,000 10,000 - 17,100 2,100 - 3,900 1,500 - 2,600 54,600 - 86,600 2.2 - 2.7 Economy 22,000 - 40,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 29,400 - 52,400 3.5 - 1.9 1989 Luxury 66,000 - 126,000 15,000 - 32,000 3,300 - 5,500 2,300 - 3,200 86,600 - 166,700 2.4 - 1.2 Standard 41,000 - 64,000 10,500 - 18,000 2,100 - 3,900 1,500 - 2,600 55,100 - 88,500 0.9 - 2.2 Economy 22,000 - 40,000 5,500 - 9,700 1,100 - 1,800 1,100 - 1,500 29,700 - 53,000 1.0 - 1.1 1990 Luxury 67,000 - 128,000 15,400 - 33,000 3,500 - 5,700 2,500 - 3,500 88,400 - 170,200 2.1 - 2.1 Standard 42,000 - 65,000 10,800 - 18,500 2,200 - 4,000 1,600 - 2,800 56,600 - 90,300 2.7 - 2.0 Economy 22,500 - 41,000 5,600 - 10,000 1,200 - 1,800 1,200 - 1,600 30,500 - 54,400 2.7 - 2.6 1991 Luxury 65,000 - 122,000 14,500 - 31,500 3,700 - 5,900 2,600 - 3,600 85,800 - 163,000 (2.9) - (4.2) Standard 40,000 - 63,000 10,000 - 17,800 2,300 - 4,200 1,700 - 2,900 54,000 - 87,900 (4.6) - (2.7) Economy 21,000 - 39,000 5,000 - 9,500 1,300 - 2,000 1,300 - 1,700 28,600 - 52,200 (6.2) - (4.0) 1992 Luxury 64,000 - 120,000 14,200 - 30,900 3,800 - 6,100 2,700 - 3,700 84,700 - 160,700 (1.3) - (1.4) Standard 39,000 - 62,000 9,800 - 17,400 2,300 - 4,400 1,800 - 3,000 52,900 - 86,800 (2.0) - (1.3) Economy 21,000 - 38,000 4,900 - 9,300 1,400 - 2,100 1,300 - 1,800 28,600 - 51,200 0.0 - (1.9) 1993 Luxury 63,000 - 119,000 14,000 - 30,500 3,900 - 6,200 2,800 - 3,800 83,700 - 159,500 (1.2) - (0.7) Standard 39,000 - 61,000 9,700 - 17,200 2,300 - 4,500 1,800 - 3,000 52,800 - 85,700 (0.2) - (1.3) Economy 21,000 - 38,000 4,900 - 9,200 1,400 - 2,100 1,300 - 1,800 28,600 - 51,100 0.0 - (0.2) 1994 Luxury 64,000 - 121,000 14,300 - 31,100 3,900 - 6,200 2,800 - 3,800 85,000 - 162,100 1.6 - 1.6 Standard 40,000 - 63,000 10,000 - 17,600 2,400 - 4,600 1,800 - 3,000 54,200 - 88,200 2.7 - 2.9 Economy 22,000 - 40,000 5,100 - 9,500 1,500 - 2,200 1,300 - 1,800 29,900 - 53,500 4.5 - 4.7 1995 Luxury 65,000 - 124,000 14,800 - 32,300 4,100 - 6,400 2,900 - 4,000 86,800 - 166,700 2.1 - 2.8 Standard 41,000 - 65,000 10,400 - 18,300 2,500 - 4,800 1,900 - 3,100 55,800 - 91,200 3.0 - 3.4 Economy 23,000 - 42,000 5,400 - 9,900 1,600 - 2,300 1,300 - 1,800 31,300 - 56,000 4.7 - 4.7
Average Annual Compounded Percent Change: 1976 - 1995: Luxury 4.3% - 4.8% 1986 - 1995: Luxury 0.8% - 0.5% Standard 4.4% - 4.4% Standard 0.7% - 1.0% Economy 5.7% - 5.4% Economy 1.2% - 1.4% - -------------------------------------------------------------------------------- HVS International, Mineola, New York Cost Approach 147 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= As illustrated by the previous table, hotel development costs rose significantly during the late 1970s and the early 1980s; however, the rate of increase slowed substantially in 1987. In 1991, hotel development costs declined for the first time since 1976. Further drops of as much as 2.0% were registered in 1992. Between 1986 and 1990, average annual compounded increases ranged from 1.7% to 2.5%. Costs rose slowly (at average annual compounded rates ranging from 0.5% to 1.4%) between 1986 and 1995, largely as a result of the declines in 1991, 1992, and 1993. In 1995, hotel development costs started to escalate more rapidly, reaching 4.7% in the economy segment. As more hotels are developed, we expect costs to continue to rise. Because the replacement cost tends to set the upper limit of a particular hotel's value, this figure is relevant to our analysis. We estimate the replacement cost of the subject property as follows, based on the development cost survey discussed earlier. ================================================================================ Table 12-2 Subject Property's Replacement Cost - -------------------------------------------------------------------------------- Cost No. of Hotel Cost per Room Rooms Total Cost -------------------------------------------------------------------------- Building $42,000 333 $13,986,000 FF&E 12,000 333 3,996,000 Pre-Opening 2,800 333 932,400 Operating Capital 2,000 333 666,000 -------------------------------------------------------------------------- Total $58,800 $19,580,400 - -------------------------------------------------------------------------------- Ground Lease Approach to Land Valuation Land value may be estimated either by the sales comparison approach, using comparable land sales, or by the ground lease approach, which is based on the economic value generated by an improvement that represents the property's highest and best use. Because it is unusual to find recent sales of comparable vacant land that is slated for imminent hotel development, we have used the ground lease approach to determine the subject property's land value. Hotels are often constructed on leased land, and although lease terms differ somewhat, the basis for the rental calculation is frequently tied to a percentage of revenue. By applying a typical ground lease rental formula to the subject property's stabilized revenues, the appraiser can determine the hotel's economic rent, or what is also known as the income attributable to the HVS International, Mineola, New York Cost Approach 148 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= land. Land value is then calculated by dividing the economic rent by an appropriate capitalization rate. The self-adjusting aspect of this approach is key to its reliability. Because the rental formula is tied to a percentage of revenue that inherently reflects both the locational attributes of the site (occupancy and rate) and the allowable density of development, the resulting economic ground rent justly represents the greatest net return to the land over a given period. Because the St. Petersburg Bayfront Hilton appears to represent the highest and best use of the property, the ground lease approach is an appropriate method of determining land value. We have researched long-term hotel ground leases in search of rental formulas that are based on a percentage of rooms revenue or on a combination of rooms, food, and beverage revenue. This analysis indicates that economic ground rents for hotels similar to the subject property typically range from 2.7% to 7.8% of rooms revenue. Although this range is quite broad, most of the formulas yield rental percentages of between 3 and 5% of rooms revenue. After considering these comparable ground leases and the locational attributes of the subject property, we believe the appropriate economic ground rental percentage is 4% of stabilized rooms revenue. The subject property's stabilized rooms revenue has been deflated to reflect 1997 dollars. The following calculation shows the derivation of the subject property's economic ground rent. Stabilized Rooms Revenue (1997 dollars) $6,043,918 Rental Percentage 0.04 ---------- Economic Ground Rent $241,757 Rent generated by a ground lease represents a fairly low-risk income flow. Because the tenant improvements typically amount to more than eight times the value of the land, the risk of default is low. When the ground lease terms are tied to rooms revenue, the landlord is also protected from the adverse effects of inflation. Based on these risk factors and the current cost of long-term capital, we estimate the appropriate ground rental overall capitalization rate at 10%. Applying this indicated capitalization rate to the subject property's economic ground rent yields the following estimate of land value. HVS International, Mineola, New York Cost Approach 149 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Economic Ground Rent $241,757 $2,417,567 -------------------------- = -------- = Capitalization Rate 0.10 Estimated Land Value (Say) $2,420,000 A new hotel's land value typically ranges from 10% to 20% of the overall value. The estimate of land value presented above is approximately 17% of the subject property's total value as indicated by the income capitalization approach. Replacement Cost Combining the replacement cost of the property with the land value yields the subject property's total replacement cost. ================================================================================ Table 12-3 Total Replacement Cost - -------------------------------------------------------------------------------- Cost of the Improvements and FF&E $19,580,400 Land Value 2,420,000 ----------- Total Replacement Cost $22,000,400 (Say) $22,000,000 - -------------------------------------------------------------------------------- If a property's replacement cost is significantly higher than the values indicated by the income capitalization and sales comparison approaches, it may indicate that an upward adjustment of these values is appropriate. This would also reduce the probability of new hotel development, which is not likely to be feasible under those conditions. This creates an effective barrier to entry for new competition, thus reducing the risk associated with the subject property's income-generating potential. An upward adjustment of the value indicated by the income capitalization approach is also justified by this barrier to entry. We find that knowledgeable hotel buyers generally base their purchase decisions on economic factors, such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, it is our opinion that the cost approach is inapplicable in estimating the market value of the St. Petersburg Bayfront Hilton. However, we have estimated the subject property's replacement cost as new, which may set the upper limit of the hotel's value. HVS International, Mineola, New York Reconciliation of Value Indications 150 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 13. Reconciliation of Value Indications The reconciliation, which is the last step in the appraisal process, involves summarizing and correlating the data and procedures employed throughout the analysis. The final conclusion of value is arrived at after reviewing the estimates indicated by the income capitalization, sales comparison, and cost approaches. The relative significance, applicability, and defensibility of each indicated value is considered, and the greatest weight is given to that approach deemed most appropriate for the property being appraised. The purpose of this report is to estimate the market value of the fee simple interest in the subject property. Our appraisal involves a careful analysis of the property itself and the economic, demographic, political, physical, and environmental factors that influence real estate values. Based on the data set forth in this report, the following value indications were developed. Approach Value Indication -------- ---------------- Income Capitalization $14,229,000 Sales Comparison $12,700,000 - $17,000,000 Cost (Replacement Cost) $22,000,000 Income Capitalization Approach To estimate the subject property's value via the income capitalization approach, we analyzed the local market for transient accommodations, examined the competitive environment, projected occupancy and average rate levels, and developed a forecast of income and expense that reflects anticipated income trends and cost components through a stabilized year of operation. The subject property's projected net income before debt service was then allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component was calculated; the total of the mortgage and equity components equates to the value of the property. HVS International, Mineola, New York Reconciliation of Value Indications 151 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Our nationwide experience indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the hotel investors who constitute the marketplace. For this reason, we believe that the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in our final estimate of the subject property's market value. Sales Comparison Approach The sales comparison approach uses actual sales of similar properties to provide an indication of the subject property's value. The strength of this approach is that it measures value based on the investment decisions made by actual buyers and sellers. Although we have investigated a number of sales in an attempt to develop a range of value indications, several adjustments are necessary to render the sales prices applicable to the subject property. These adjustments, which are numerous and highly subjective, diminish the reliability of the sales comparison approach. Furthermore, we find that typical hotel investors employ a sales comparison procedure only to establish broad value parameters. The hotel sales outlined earlier in this report indicate an adjusted value range of $38,000 to $51,000 per available room. The income capitalization approach indicates a per-room value of approximately $42,700. This information suggests that a slight upward adjustment of the value indicated by the income capitalization approach may be warranted. Cost Approach To estimate the subject property's value via the cost approach, we estimated the current replacement cost of the property and added the land value. We give the cost approach limited weight in arriving at a final value estimate, because knowledgeable buyers of lodging facilities generally base their purchase decisions on economic factors (such as projected net income and return on investment) rather than on a property's depreciated replacement cost. The replacement cost estimate developed via the cost approach can help to corroborate the results of the income capitalization and sales comparison approaches to value. If the replacement cost is substantially higher or lower than the value indicated by the income capitalization approach, an upward or downward adjustment of the income capitalization approach value may be necessary. The subject property's estimated replacement is more than 50% higher than the value indicated by the income capitalization approach; this high replacement cost represents a barrier to entry for prospective hotel HVS International, Mineola, New York Reconciliation of Value Indications 152 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= developers. Consequently, a slight upward adjustment of the value arrived at by the income capitalization approach is warranted. Value Conclusion Careful consideration has been given to the strengths and weaknesses of the three approaches to value discussed above. In recognition of the purpose of this appraisal, we have given primary weight to the value indicated by the income capitalization approach and made some subjective adjustments based on the replacement cost estimate, the sales comparison approach, and our extensive experience in the hospitality industry. It is our opinion that the market value of the fee simple interest in the St. Petersburg Bayfront Hilton , as of January 1, 1997, is: $14,300,000 FOURTEEN MILLION THREE HUNDRED THOUSAND DOLLARS The estimate of market value includes the land, the improvements, and the furniture, fixtures, and equipment. The appraisal assumes that the hotel is open and operational. This value estimate equates to roundly $43,000 per room, which is well supported by market sales and approximately 0.7% higher than the value indicated by the income capitalization approach. The estimate of value assumes either the availability of third-party financing or the willingness and capability of the seller to take back purchase-money financing so that a buyer can obtain the level of debt set forth in the Income Capitalization Approach section of this appraisal. Marketing Period Our estimate of market value assumes a marketing period of six to nine months. Under normal economic conditions, hotels are transferred within this time frame. Personal Property In accordance with the appraisal standards set forth by the Office of the Comptroller of the Currency, it is necessary for bank appraisals to identify and value any personal property, fixtures, or intangible items that are included in the appraisal and discuss their impact on the overall estimate of market value. A hotel's income-generating ability depends on a suitable inventory of furniture, fixtures, and equipment. Removal of these items can decrease the property value by as much as the cost to replace the inventory plus the loss of income incurred while the hotel cannot function. HVS International, Mineola, New York Reconciliation of Value Indications 153 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= A hotel's personal property consists of a wide variety of components, including bedroom furnishings, bathroom fixtures, restaurant and kitchen equipment, front office and accounting computers, exterior signs, and similar items. Our inspection of the St. Petersburg Bayfront Hilton indicates that the personal property and fixtures are in good condition. Based on an annual construction cost survey conducted by HVS International, we estimate the total replacement cost of the subject property's furniture, fixtures, and equipment at $12,000 per available room. Assuming an average useful life of ten years and an effective age of six years, the value of the furniture, fixtures, and equipment currently in place is approximately $4,800 per room, or a total of $1,598,000. Because furniture, fixtures, and equipment are essential to a hotel's income-generating ability and are seldom removed from the property or sold separately, the separation of the personal property component from the real property is not particularly meaningful. HVS International, Mineola, New York Statement of Assumptions and Limiting Conditions 154 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 14. Statement of Assumptions and Limiting Conditions 1. This report is to be used in whole and not in part. 2. No responsibility is assumed for matters of a legal nature, nor do we render any opinion as to title, which is assumed to be marketable and free of any deed restrictions and easements. The property is valued as though free and clear unless otherwise stated. 3. We assume that there are no hidden or unapparent conditions of the sub-soil or structures, such as underground storage tanks, that would render the property more or less valuable. No responsibility is assumed for these conditions or for any engineering that may be required to discover them. 4. We have not considered the presence of potentially hazardous materials such as asbestos, urea formaldehyde foam insulation, PCBs, any form of toxic waste, polychlorinated biphengyls, pesticides, or lead-based paints. The appraisers are not qualified to detect hazardous substances, and we urge the client to retain an expert in this field if desired. 5. The Americans with Disabilities Act (ADA) became effective on January 26, 1992. We have conducted no specific compliance survey to determine whether the subject property is operating in accordance with the various detailed requirements of the ADA. It is possible that the property does not conform to the requirements of the act, and this could have an unfavorable effect on value. Because we have no direct evidence regarding this issue, our estimate of value does not consider possible non-compliance with the ADA. 6. We have made no survey of the property, and we assume no responsibility in connection with such matters. Sketches, photographs, maps, and other exhibits are included to assist the reader in visualizing the property. It is assumed that the use of the land and improvements is HVS International, Mineola, New York Statement of Assumptions and Limiting Conditions 155 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= within the boundaries of the property described, and that there is no encroachment or trespass unless noted. 7. All information, financial operating statements, estimates, and opinions obtained from parties not employed by HVS International are assumed to be true and correct. We can assume no liability resulting from misinformation. 8. Unless noted, we assume that there are no encroachments, zoning violations, or building violations encumbering the subject property. 9. The property is assumed to be in full compliance with all applicable federal, state, local, and private codes, laws, consents, licenses, and regulations (including a liquor license where appropriate), and that all licenses, permits, certificates, franchises, and so forth can be freely renewed or transferred to a purchaser. 10. All mortgages, liens, encumbrances, leases, and servitudes have been disregarded unless specified otherwise. 11. None of this material may be reproduced in any form without our written permission, and the report cannot be disseminated to the public through advertising, public relations, news, sales, or other media. 12. We are not required to testify or appear in court by reason of this analysis without previous arrangements, and only when our standard per diem fees and travel costs are paid prior to the appearance. 13. If the reader is making a fiduciary or individual investment decision and has any questions concerning the material presented in this report, it is recommended that the reader contact us. 14. We take no responsibility for any events or circumstances that take place subsequent to either the date of value or the date of our field inspection, whichever occurs first. 15. The quality of a lodging facility's on-site management has a direct effect on a property's economic viability and value. The financial forecasts presented in this analysis assume responsible ownership and competent management. Any departure from this assumption may have a significant impact on the projected operating results and the value estimate. 16. The estimated operating results presented in this report are based on an evaluation of the overall economy, and neither take into account nor HVS International, Mineola, New York Statement of Assumptions and Limiting Conditions 156 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= make provision for the effect of any sharp rise or decline in local or national economic conditions. To the extent that wages and other operating expenses may advance during the economic life of the property, we expect that the prices of rooms, food, beverages, and services will be adjusted to at least offset those advances. We do not warrant that the estimates will be attained, but they have been prepared on the basis of information obtained during the course of this study and are intended to reflect the expectations of a typical hotel buyer. 17. This analysis assumes continuation of all Internal Revenue Service tax code provisions as stated or interpreted on either the date of value or the date of our field inspection, whichever occurs first. 18. Many of the figures presented in this report were generated using sophisticated computer models that make calculations based on numbers carried out to three or more decimal places. In the interest of simplicity, most numbers have been rounded to the nearest tenth of a percent. Thus, these figures may be subject to small rounding errors. 19. It is agreed that our liability to the client is limited to the amount of the fee paid as liquidated damages. Our responsibility is limited to the client, and use of this report by third parties shall be solely at the risk of the client and/or third parties. The use of this report is also subject to the terms and conditions set forth in our engagement letter with the client. 20. Appraising hotels is both a science and an art. Although this analysis employs various mathematical calculations to provide value indications, the final estimate is subjective and may be influenced by our experience and other factors not specifically set forth in this report. 21. Any distribution of the total value between the land and improvements or between partial ownership interests applies only under the stated use. Moreover, separate allocations between components are not valid if this report is used in conjunction with any other analysis. 22. This study was prepared by Hospitality Valuation Services, a division of Hotel Consulting Services, Inc. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of Hotel Consulting Services, Inc. as employees, rather than as individuals. HVS International, Mineola, New York Certification 157 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 15. Certification We, the undersigned appraisers, hereby certify: 1. that the statements and opinions presented in this report, subject to the limiting conditions set forth, are correct to the best of our knowledge and belief; 2. that Catherine M. Tam personally inspected the property described in this report; Anne R. Lloyd-Jones and Stephen Rushmore participated in the analysis and reviewed the findings, but did not personally inspect the property; 3. that we have no current or contemplated interests in the real estate that is the subject of this report; 4. that we have no personal interest or bias with respect to the subject matter of this report or the parties involved; 5. that this report sets forth all of the limiting conditions (imposed by the terms of this assignment) affecting the analyses, opinions, and conclusions presented herein; 6. that the fee paid for the preparation of this report is not contingent upon our conclusions; 7. that this report has been prepared in accordance with, and is subject to, the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute; 8. that the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives; 9. that this report has been prepared in accordance with the Uniform Standards of Professional Appraisal Practice (as adopted by the Appraisal Foundation); HVS International, Mineola, New York Certification 158 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 10. that no one other than the undersigned prepared the analyses, conclusions, and opinions concerning real estate that are set forth in this appraisal report; 11. that as of the date of this report, Stephen Rushmore has completed the requirements of the continuing education program of the Appraisal Institute; 12. that this appraisal is not based on a requested minimum value, a specific value, or the approval of a loan. /s/ Catherine M. Tam ------------------------------------ Catherine M. Tam Consulting and Valuation Analyst Hotel Consulting Services, Inc. /s/ Anne R. Lloyd-Jones ------------------------------------ Anne R. Lloyd-Jones, CRE Senior Vice President Hotel Consulting Services, Inc. /s/ Stephen Rushmore ------------------------------------ Stephen Rushmore, CRE, MAI, CHA President Hotel Consulting Services, Inc. HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= [GRAPHIC OMITTED] View of the Subject Property HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= [GRAPHIC OMITTED] View of the Subject Property's main entrance [GRAPHIC OMITTED] View of the Subject Property's grand ballroom HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= [GRAPHIC OMITTED] Charmene's Restaurant HVS International, Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= [GRAPHIC OMITTED] The Heritage Holiday Inn [GRAPHIC OMITTED] The Renaissance Vinoy Hotel L A W Y E R S T I T L E I N S U R A N C E C O R P O R A T I O N N A T I O N A L H E A D Q U A R T E R S R I C H M 0 N D, V I R G I N I A Schedule "A" Lands TRACT A: Lots 9 through 16, inclusive, and the South 30 feet of Lots 1 through 8, inclusive, Block 57, REVISED MAP OF THE CITY OF ST. PETERSBURG, as recorded in Plat Book 1, page 49, public records of Hillsborough County, Florida, of which Pinellas County was formerly a part; together with the vacated East/West alley in said Block 57, said tract being more particularly described as follows: From a point of beginning at the Southwest corner of Block 57, REVISED MAP OF THE CITY OF ST. PETERSBURG, as recorded in Plat Book 1, page 49, public records of Hillsborough County, Florida, of which Pinellas County was formerly a part; run North 250.00 feet along the West boundary of said Block 57; thence North 89(Degree)58'4l" East, 400.47 feet to the East boundary of said Block 57; thence South 0(Degree)01'07" East, 250.00 feet to the Southeast corner of said Block 57; thence South 89(Degree)58'4l" West, 400.55 feet to the point of beginning. TRACT B: Lots 1 through 8, inclusive, LESS the South 30 feet thereof, Block 57, REVISED MAP OF THE CITY OF ST. PETERSBURG, as recorded in Plat Book 1, page 49, public records of Hillsborough County, Florida, of which Pinellas County was formerly a party; together with the South 90 feet of vacated 3rd Avenue South, lying North of said Block 57. Said tract being more particularly described as follows: From the Southwest corner of Block 57, REVISED MAP OF THE CITY OF ST. PETERSBURG, as recorded in Plat Book 1, page 49, public records of Hillsborough County, Florida, of which Pinellas County was formerly a part; run North 250.00 feet along the West boundary of said Block 57 to the point of beginning; thence continue North 260.00 feet along said West boundary of Block 57 and its Northerly extension; thence North 89(Degree)58'4l" East, 400.38 feet to the East boundary of said Block 57, extended Northerly; thence South 0(Degree)0l'07" East, 260.00 feet along said Northerly extension and the East boundary of Block 57; thence South 89(Degree)58'41" West, 400.47 feet to the point of beginning. Commitment No.9401697 HVS International, Mineola, New York Synopsis of Franchise and License Agreements - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Synopsis of Franchise and License Agreements Date: September 1, 1995 Licensor: Hilton Inns, Inc. Licensee: St. Petersburg Florida Hotel Limited Partnership Premises: St. Petersburg Bayfront Hilton, St. Petersburg, Florida Term: Ten years Renewal: None stated Fees: Licensee shall pay a monthly percentage fee for each fractional or full calendar month in the amount of 3% of gross room sales from September 1, 1995 through August 31, 1997; thereafter, for the remaining term of the agreement, the fee is 5% of gross room sales. Licensee shall also pay a monthly advertising fee for each fractional of full calendar month in the amount of 1% of gross room sales. Licensor Services: Operation review; inspections; Hilton Reservation Service; regional and national directories; operating manuals; infringement protection; purchase and lease arrangements; technical assistance; central purchasing services; advertising and promotion Licensee Obligations: Operate hotel as a system hotel; use only the Hilton name and "H" service mark; operate, furnish, maintain, and equip hotel in a first-class manner; refer guests and customers, wherever possible, only to other system hotels; honor all nationally recognized credit cards and credit vouchers generally honored at other system hotels; feature the name Hilton where appropriate, including the hotel's exterior; advertise in a first-class manner; identify itself and any other management company to all persons; indemnify, defend, and save licensor; deliver monthly, quarterly, and annual operating statements Termination: By default by either party HVS International, Mineola, New York Simultaneous Valuation Formula 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ The Simultaneous Valuation Formula as Used in the Valuation of the Subject Property The algebraic equation known as the simultaneous valuation formula, which solves for the total property value using a ten-year mortgage and equity technique, was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of Hospitality Valuation Services. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(1) The process of solving for the value of the mortgage and equity components begins by deducting the annual debt service from the projected income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value using the terminal capitalization rate. The equity residual, which is the total reversionary value less the mortgage balance at that point in time and less any brokerage and legal costs associated with the sale, is discounted to the date of value at the equity yield rate. The net income to equity for each projection year is also discounted back to the date of value. The sum of these discounted values equals the value of the equity component. Because the equity component comprises a specific percentage of the total value, the value of the mortgage and the total property can be computed easily. This process can be expressed in two algebraic equations that set forth the mathematic relationships between the known and unknown variables using the following symbols. (1) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Simultaneous Valuation Formula 2 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= NI = Net income available for debt service V = Value M = Loan-to-value ratio f = Annual debt service constant n = Number of years in the projection period d(e) = Annual cash available to equity d(r) = Residual equity value b = Brokerage and legal cost percentage P = Fraction of the loan paid off during the projection period f(p) = Annual constant required to amortize the entire loan during the projection period R(r) = Overall terminal capitalization rate applied to net income to calculate the total property reversion (sales price at the end of the projection period) 1/S^n = Present worth of a $1 factor (discount factor) at the equity yield rate Using these symbols, the following formulas can be used to express some of the components of this mortgage and equity valuation process. Debt Service - A property's debt service is calculated by first determining the mortgage amount that equals the total value (V) multiplied by the loan-to-value ratio (M). Debt service is derived by multiplying the mortgage amount by the annual debt service constant (f). The following formula represents debt service. f x M x V = Debt Service Net Income to Equity (Equity Dividend) - The net income to equity (d(e)) is the property's net income before debt service (NI) less debt service. The following formula represents the net income to equity. NI - (f x M x V) = d(e) Reversionary Value - The value of the hotel at the end of the tenth year is calculated by dividing the 11th-year net income before debt service (NI^11) by HVS International, Mineola, New York Simultaneous Valuation Formula 3 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= the terminal capitalization rate (R(r)). The following formula represents the property's tenth-year reversionary value. (NI^11/R(r)) = Reversionary Value Brokerage and Legal Costs - When a hotel is sold, certain costs are associated with the transaction. Normally, the broker is paid a commission and the attorney collects legal fees. In the case of hotel transactions, brokerage and legal costs typically range from 1% to 4% of the sales price. Because these expenses reduce the proceeds to the seller, they are usually deducted from the reversionary value in the mortgage and equity valuation process. Brokerage and legal costs (b) expressed as a percentage of reversionary value (NI^11/R(r)) is calculated by application of the following formula. b (NI^11/R(r)) = Brokerage and Legal Costs Ending Mortgage Balance - The mortgage balance at the end of the tenth year must be deducted from the total reversionary value (debt and equity) in order to determine the equity residual. The formula used to determine the fraction of the loan remaining (expressed as a percentage of the original loan balance) at any point in time (P) takes the annual debt service constant of the loan over the entire amortization period (f) less the mortgage interest rate (i) and divides it by the annual constant required to amortize the entire loan during the ten-year projection period (f(p)) less the mortgage interest rate. The following formula represents the fraction of the loan paid off (P). (f - i)/(f(p) - i) = P If the fraction of the loan paid off (expressed as a percentage of the initial loan balance) is P, then the remaining loan percentage is expressed as 1 - P. The ending mortgage balance is the fraction of the remaining loan (1 - P) multiplied by the initial loan amount (M x V). The following formula represents the ending mortgage balance. (1 - P) x M x V Equity Residual Value - The value of the equity upon the sale at the end of the projection period (d(r)) is the reversionary value less the brokerage and legal costs and the ending mortgage balance. The following formula represents the equity residual value. (NI^11/R(r)) - (b (NI^11/R(r)) - ((1 - P) x M x V) = d(r) HVS International, Mineola, New York Simultaneous Valuation Formula 4 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Annual Cash Flow to Equity - The annual cash flow to equity consists of the equity dividend for each projection year plus the equity residual at the end of the tenth year. The following formula represents the annual cash flow to equity. NI^1 - (f x M x V) = d(e)^1 NI^2 - (f x M x V) = d(e)^2 NI^10 - (f x M x V) = d(e)^10 (NI^11/R(r)) - (b (NI^11/R(r)) - ((1 - P) x M x V) = d(r) Value of the Equity - If the initial mortgage amount is calculated by multiplying the loan-to-value ratio (M) by the property value (V), then the equity value is one minus the loan-to-value ratio multiplied by the property value. The following formula represents the value of the equity. (1 - M) V Discounting the Cash Flow to Equity to the Present Value - The cash flow to equity in each projection year is discounted to the present value at the equity yield rate (1/S^n). The sum of these cash flows is the value of the equity (1 - M) V. The following formula represents the calculation of equity as the sum of the discounted cash flows. (d(e)^1 x 1/S^1) + (d(e)^2 x 1/S^2) + . . . + (d(e)^10 x 1/S^10) + (d(r) x 1/S^10) = (1 - M) V Combining the Equations: Annual Cash Flow to Equity and Discounting the Cash Flow to Equity to the Present Value - The last step is to arrive at one overall equation that shows that the annual cash flow to equity plus the yearly discounting to the present value equals the value of the equity. ((NI^1 - (f x M x V)) 1/S^1) + ((NI^2 - (f x M x V)) 1/S2^) + . . . ((NI^10 - (f x M x V)) 1/S^10) + (((NI^11/R(r)) - (b (NI^11/R(r))) - ((1 - P) x M x V)) 1/S^10) = (1 -M) V Because the only unknown in this equation is the property's value (V), it can be solved readily. HVS International, Mineola, New York Simultaneous Valuation Formula 5 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Ten-Year Projection of Income and Expense - Because the fixed and variable forecast of income and expense is carried out only to the stabilized year, it is necessary to continue the projection to the 11th year. In most instances, net income before debt service beyond the stabilized year is projected at an assumed inflation rate. By increasing a property's revenue and expenses at the same rate of inflation, net income remains constant as a percentage of total revenue and the dollar amount escalates at the annual inflation rate. Hotel investors are currently using inflation rates of approximately 3.5% annually. The ten-year forecast of income and expense illustrates the subject property's net income, which is assumed to increase by 3.5% annually subsequent to the hotel's stabilized year of operation. Solving for Value Using the Simultaneous Valuation Formula - In the case of the subject property, the following known variables have been determined. ================================================================================ Table 1: Summary of Known Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Forecast Loan-to-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.104844 Equity Yield Ye 22.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 11.0% - -------------------------------------------------------------------------------- The following table illustrates the present worth of a $1 factor at the 22.0% equity yield rate. HVS International, Mineola, New York Simultaneous Valuation Formula 6 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 2: Present Worth of $1 Factor at Equity Yield Rate - -------------------------------------------------------------------------------- Present Worth of $1 Year Factor at 22.0% ------------------------------------ 1997 0.819637 1998 0.671805 1999 0.550636 2000 0.451321 2001 0.369920 2002 0.303200 2003 0.248514 2004 0.203691 2005 0.166953 2006 0.136841 - -------------------------------------------------------------------------------- Using these known variables, the following intermediary calculations must be made before applying the simultaneous valuation formula. The fraction of the loan paid off during the projection period is calculated as follows. P = ( 0.104844 - 0.09) / ( 0.155277 - 0.095) = 0.163306 The annual debt service is calculated as f x M x V. ( f x M x V ) = 0.104844 x 0.70 x V = 0.073391 V Inserting the known variables into the hotel valuation formula produces the following. ( 1,560,000 - 0.073391 V ) x 0.819672 + ( 1,601,000 - 0.073391 V ) x 0.671862 + ( 1,683,000 - 0.073391 V ) x 0.550707 + ( 1,745,000 - 0.073391 V ) x 0.451399 + ( 1,803,000 - 0.073391 V ) x 0.369999 + ( 1,865,000 - 0.073391 V ) x 0.303278 + ( 1,931,000 - 0.073391 V ) x 0.248589 + ( 1,998,000 - 0.073391 V ) x 0.203761 + ( 2,070,000 - 0.073391 V ) x 0.167017 + ( 2,144,000 - 0.073391 V ) x 0.136899 + ((( 2,219,000 / 0.110 ) - ( 0.03 x ( 2,219,000 / 0.110 )) - (( 1 - 0.163306 ) x 0.70 x V )) x 0.136899 ) = ( 1 - 0.70 ) V Like terms are combined as follows. $9,506,757 - 0.368105 V = (1 - 0.70) V $9,506,757 = 0.66810 V V = $9,506,757 / 0.66810 V = $14,229,444 Value Indicated by the Income Capitalization Approach (Say) $14,229,000 HVS International, Mineola, New York Qualifications of Catherine M. Tam - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Catherine M. Tam Employment 1996 to present HVS INTERNATIONAL Mineola, New York (Hotel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1995 CORNELL UNIVERSITY SCHOOL OF HOTEL ADMINISTRATION Ithaca, New York 1995 RADNOR HOTEL Saint Davids, Pennsylvania 1994 to 1995 STATLER HOTEL Ithaca, New York 1992 to 1993 CORNELL UNIVERSITY Ithaca, New York Education BS - School of Hotel Administration, Cornell University HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Anne R. Lloyd-Jones, CRE Employment 1982 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1981 FAIRMONT HOTEL Dallas, Texas 1979 - 1980 SAGA FOOD SERVICE SWARTHMORE COLLEGE Swarthmore, Pennsylvania 1977 - 1980 DARANNE CATERERS Swarthmore, Pennsylvania Professional Affiliations American Society of Real Estate Counselors - Member (CRE) Appraisal Institute - Candidate for Membership Cornell Society of Hotelmen Education MPS - School of Hotel Administration, Cornell University BA - Swarthmore College Appraisal Institute Course 1A1 - Real Estate Appraisal Principles Course 1A2 - Basic Valuation Procedures Course 1BA - Capitalization Theory and Techniques, Part A Course 1BB - Capitalization Theory and Techniques, Part B Course 2-1 - Case Studies in Real Estate Valuation Course 2-3 - Standards of Professional Practice Course 3-1 - Report Writing HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Corporate and Institutional Clients Served Ashford Financial Corporation Chase Manhattan Bank, N. A. Citibank / Citicorp NA Credit Lyonnais Doubletree Hotels Grand Heritage Hotels Great Western Bank Goldman Sachs Holiday Inns, Inc. Interstate Hotels MassMutual Marriott International / Host Marriott Morgan Stanley OCWEN Financial Services Remington Hotels Sheraton Hotels Starwood Capital Group Starwood Lodging Trust Winegardner & Hammons Wyndham Hotel Company Hotel Chains and Management Companies Appraised or Evaluated Doubletree Hotels Compri Hotels Interstate Hotels Fairmont Hotels Guest Quarters Hilton Hotels Corporation Omni International Hotels Ramada Hotel Corp. Servico Hotel Corp. Winegardner & Hammons Appearance as an Expert Witness Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Jefferson City, Missouri Federal Bankruptcy Court, Columbia, South Carolina Federal Bankruptcy Court, Houston, Texas Federal Bankruptcy Court, New York, New York Federal Bankruptcy Court, San Bernardino, California Federal Bankruptcy Court, Los Angeles, California Federal Bankruptcy Court, Charlotte, North Carolina Federal Bankruptcy Court, Miami, Florida Federal District Court, Central Division, Salt Lake City, Utah Iowa District Court, Story County, Iowa Texas District Court, Harris County, Texas Federal Bankruptcy Court, Tampa, Florida Utah District Court, Salt Lake County, Utah Federal Bankruptcy Court, Newark, New Jersey HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated Arizona - - Wyndham Garden Hotel, Chandler - - Wyndham Garden Hotel - Airport, Phoenix - - Wyndham Garden Hotel - Union Hills, Phoenix - - Canyon Ranch Spa & Fitness Resort, Tucson Alabama - - Holiday Inn, Birmingham - - Proposed Sheraton, Gulf Shores - - Proposed Inn, Mobile - - Holiday Inn, Sheffield California - - Industry Hills Sheraton Hotel, City of Industry - - Piccadilly Inn, Fresno - - Proposed Inn at Foss Creek, Healdsburg - - Sunset Towers Hotel, Hollywood - - Proposed La Quinta, Irvine - - Wyndham Garden Hotel, La Jolla - - Days Inn, La Palma - - Proposed Marriott Courtyard, Palm Springs - - Proposed Club Hilton Hotel, Pleasanton - - Center Pointe Development, San Diego - - Holiday Inn-Embarcadero, San Diego - - Holiday Inn-Harbor View, San Diego - - Seven Seas Lodge, San Diego - - Proposed Fountaingrove Inn, Santa Rosa - - Sheraton Round Barn Inn, Santa Rosa - - Wyndham Garden Hotel, Sunnyvale - - Westlake Plaza Hotel, Thousand Oaks - - Proposed Marriott Courtyard, Torrance Colorado - - Proposed Hotel, Keystone Connecticut - - Holiday Inn, Milford - - Holiday Inn, New Britain District of Columbia - - Grand Hotel, Washington - - Wyndham Bristol Hotel, Washington Florida - - Kon Tiki Village, Kissimmee - - Sheraton Lakeside, Kissimmee - - Holiday Inn, 22nd Street, Miami Beach - - Holiday Inn, 87th Street, Miami Beach - - Holiday Inn, 180th Street, Miami Beach - - Sheraton Resort & Marina, St. Petersburg - - Hilton Hotel, Singer Island - - Royce Hotel, West Palm Beach Georgia - - Marriott Hotel, Atlanta - - Wyndham Garden Hotel, Atlanta - - Holiday Inn, Brunswick - - Holiday Inn, Jekyll Island - - Mullberry Inn, Savannah - - Royal Savannah Inn, Savannah Hawaii - - Hobron in Waikiki, Honolulu Idaho - - Holiday Inn, Boise - - Red Lion Inn, Boise - - Super 8, Boise Illinois - - Ramada Inn, Bloomington - - Proposed Marriott Courtyard, Glenview - - Wyndham Garden Hotel, Naperville Indiana - - Holiday Inn, Bloomington - - Inn at the Four Winds, Bloomington - - Ramada Inn, Bloomington - - Hilton Hotel, Fort Wayne - - Airport Hilton Inn, Indianapolis - - Hilton at the Circle, Indianapolis Iowa - - Holiday Inn, Ames - - Proposed Fairfield Inn, Des Moines HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Kentucky - - Proposed Super 8, London - - Proposed Super 8, Radcliff Louisiana - - Sheraton Inn, Kenner - - Hotel Meridien, New Orleans Maine - - Proposed Hotel, Old Orchard Beach Maryland - - Brookshire Hotel, Baltimore - - Lord Baltimore Hotel, Baltimore - - Hyatt Regency, Bethesda Massachusetts - - Proposed Marriott Courtyard, Andover - - Hyatt Regency, Cambridge - - Proposed Hotel, Franklin - - Sheraton Inn, Hyannis - - Marriott Hotel, Worcester Michigan - - Bay Valley Inn, Bay City - - Hilton Airport, Detroit - - Westin Renaissance Center, Detroit - - Hotel Pontchartrain, Detroit - - Proposed Embassy Suites, Lansing - - Hilton Inn, Northfield - - Holiday Inn, Saginaw Minnesota - - Wyndham Garden Hotel, Bloomington - - Marriott Hotel, Minnetonka Missouri - - Inn at Grand Glaize, Osage Beach - - Bel Air Hilton, St. Louis - - Holiday Inn Riverfront, St. Louis Nebraska - - Holiday Inn Airport, Lincoln - - Holiday Inn Northeast, Lincoln Nebraska (continued) - - Marriott Hotel, Omaha - - Ramada Inn, Omaha - - Red Lion Inn, Omaha Nevada - - Proposed Super 8, Las Vegas New Jersey - - Ramada Inn, Edison - - Marriott Hotel, Hanover - - Headquarters Plaza, Morristown - - Hyatt Regency, New Brunswick - - Holiday Inn, North Brunswick New York - - Hilton Hotel, Albany - - Proposed Embassy Suites, Amherst - - Holiday Inn Arena, Binghamton - - Holiday Inn SUNY, Binghamton - - Proposed Hotel, Binghamton - - Proposed Hilton, Brooklyn - - Marriott Hotel, Dewitt - - Metropole Hotel, Flushing - - Midway Hotel, Flushing - - Ramada Inn, Kingston - - Royce Hotel, La Guardia - - Holiday Inn, Latham - - Proposed Crowne Plaza, Manhattan - - Proposed Prince Street Hotel, Manhattan - - Proposed Roslyn Inn, Roslyn - - Proposed Le Richmonde, Rye Brook - - Hilton Hotel, Syracuse - - Hotel Syracuse, Syracuse - - Proposed Hotel, Watertown North Carolina - - Proposed Inn, Chapel Hill - - Proposed Indep. Center Marriott Hotel, Charlotte - - Royce Hotel, Charlotte - - Howard Johnson's North, Charlotte HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) North Carolina (continued) - - Holiday Inn West, Durham - - Sheraton University Inn, Durham - - Holiday Inn, Fayetteville - - Holiday Inn Downtown, Raleigh Ohio - - Proposed Hyatt Hotel, Cleveland - - Proposed Marriott Hotel, Cleveland Oregon - - Holiday Inn Airport, Portland - - Holiday Inn South, Portland Pennsylvania - - Quality Inn, Allentown - - Holiday Inn, Bensalem - - Proposed Marriott Courtyard, Devon - - Proposed Lafayette Inn, Easton - - Ramada Inn, Erie - - Holiday Inn, Harrisburg - - Marriott Hotel, Harrisburg - - Proposed Super 8, Harrisburg - - Proposed Super 8, Lancaster - - Holiday Inn West, Monroeville - - Days Inn Philadelphia - - Franklin Plaza Hotel, Philadelphia - - Franklin Towne EconoLodge, Philadelphia - - Guest Quarters Hotel, Philadelphia - - Hilton Inn, Northeast, Philadelphia - - Marriott Airport Hotel, Philadelphia - - Holiday Inn Greentree, Pittsburgh - - Holiday Inn Parkway East, Pittsburgh - - Holiday Inn North, Pittsburgh - - Holiday Inn Parkway West, Pittsburgh - - Proposed Hotel, Pittsburgh - - Royce Hotel, Pittsburgh - - Westin William Penn Hotel, Pittsburgh - - Hilton Hotel, Scranton - - Proposed Marriott Courtyard, Valley Forge - - Holiday Inn Meadowlands, Washington - - Ramada Inn, York - - Proposed Super 8, York Rhode Island - - Proposed Hotel, Providence - - Omni Biltmore Hotel, Providence South Carolina - - Proposed Charleston Center Hotel, Charleston - - Proposed Cooper River Inn, Charleston - - Howard Johnson's, Spartanburg - - Proposed Middleton Inn and Conference Center, Charleston - - Best Western, North Charleston - - Proposed Marriott Courtyard, Columbia - - Fairfield Inn, Florence - - Holiday Inn, Florence - - Fairfield Inn, Greenville - - Proposed Marriott Courtyard, Greenville - - Fairfield Inn, Hilton Head - - Holiday Inn, Hilton Head Tennessee - - Hampton Inn, Brentwood - - Proposed Marriott Courtyard, Brentwood - - Howard Johnson's, Chattanooga - - Sheraton Hotel, Chattanooga - - Howard Johnson's, Knoxville - - Proposed Capital Mall Convention Center Hotel, Nashville - - Clarion Maxwell House, Nashville - - Holiday Inn Briley Parkway, Nashville - - Proposed Marriott Courtyard, Nashville - - Sheraton Music City, Nashville - - Stouffer's Nashville Hotel, Nashville - - Proposed Super 8, Nashville - - Union Station Hotel, Nashville - - Wyndham Garden Hotel, Nashville - - Proposed Super 8, Union City HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Texas - - Proposed Marriott Courtyard, Addison - - Proposed Marriott Courtyard, Arlington - - La Mansion, Austin - - Proposed Marriott Courtyard, Bedford - - Airport Hilton, El Paso - - Hotel Meridien, Houston - - Sheraton Hotel, Houston - - Proposed Marriott Courtyard, Las Colinas - - Proposed Marriott Courtyard, North Dallas - - La Mansion Del Norte, San Antonio - - La Mansion Del Rio, San Antonio - - Proposed Marriott Courtyard, San Antonio - - Proposed Marriott Courtyard - Medical Center, San Antonio Utah - - Deer Valley Resort, Park City - - Hilton Inn, Salt Lake City - - Holiday Inn, Salt Lake City - - Sheraton Hotel, Salt Lake City Virginia - - Mountain Lake Hotel, Blacksburg - - Howard Johnson's, Bristol - - Boars Head Inn, Charlottesville - - Proposed Fairfield Inn, Hampton - - Proposed Embassy Suites, Herndon - - Ramada Renaissance, Herndon - - Proposed Marriott Courtyard, Manassas - - Omni Hotel, Norfolk Virginia (continued) - - Proposed Marriott, Norfolk - - Howard Johnson's, Richmond - - Howard Johnson's, Roanoke - - Howard Johnson's, Roanoke Rapids - - Wyndham Hotel, Williamsburg Washington - - Wyndham Garden Hotel, Bothell - - Redmond Hotel, Redmond - - Wyndham Garden Hotel, SeaTac West Virginia Proposed Budget Motel, Princeton Wisconsin - - Proposed Granada Royale, Green Bay - - Holiday Inn-Downtown, Green Bay Canada - - Inn on the Park, Toronto Puerto Rico - - Carib Inn, San Juan Virgin Islands - - Virgin Grand Beach Hotel, St. Thomas Jamaica - - Holiday Inn, Montego Bay HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Stephen Rushmore, CRE, MAI, CHA Employment 1980 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1977 - 1980 1971 - 1974 HELMSLEY-SPEAR HOSPITALITY SERVICES, INC. New York, New York (Real Estate) 1974 - 1977 JAMES E. GIBBONS ASSOCIATES Garden City, New York (Mortgage Banking, Appraisals, Hotel Operations) Affiliated Ownership Interests HVS INTERNATIONAL (SAN FRANCISCO, CALIFORNIA) West coast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (MIAMI, FLORIDA) Southeast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (BOULDER, COLORADO) Midwest office for hotel/motel appraisals and counseling HVS INTERNATIONAL (VANCOUVER, CANADA) Canadian office for hotel/motel appraisals and counseling HVS INTERNATIONAL (LONDON, ENGLAND) European office for hotel/motel appraisals and counseling HVS - EXECUTIVE SEARCH Hotel/motel executive search and human resource consulting HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) HVS - ECO SERVICES Environmental consulting for hotels and motels; administrator of the ECOTEL designation HOSPITALITY EQUITY INVESTORS, INC. Hotel and motel investment and management company TRUMBULL MARRIOTT HOTEL General partner of a 324-room hotel and conference center PRINCETON HOTEL ASSOCIATES General partner of a 128-unit Residence Inn in Princeton, New Jersey SEAVIEW GOLF RESORT ASSOCIATES General partner of a 298-unit, 424-acre Marriott resort in Absecon, New Jersey SHELTON HOTEL ASSOCIATES General partner of a 96-unit Residence Inn in Shelton, Connecticut DANBURY HOTEL ASSOCIATES General partner of a 243-unit Hilton Hotel in Danbury, Connecticut PRUDENTIAL - HEI JOINT VENTURE Joint venture partner with Prudential Insurance Company of America on a 234-unit Embassy Suites in Atlanta, Georgia WESTPORT NORFOLK ASSOCIATES General partner of a 425-unit Omni Hotel in Norfolk, Virginia WESTPORT BWI, LLC General partner of a 310-unit Marriott Hotel in Baltimore, Maryland HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) WESTPORT RARITAN, LLC General partner of a 274-unit Crowne Plaza Hotel in Raritan, New Jersey WESTPORT NOVI, LLC General partner of a 193-unit Hilton Hotel in Novi, Michigan WESTPORT LONG BEACH, LLC General Partner of a 460-unit Sheraton Hotel in Long Beach, California WESTPORT PARK RIDGE, LLC General Partner of a 265-unit hotel and conference center in Valley Forge, Pennsylvania WESTPORT CHARLESTON, LLC General Partner of a 295-unit Hilton Hotel in Charleston, South Carolina HOSPITALITY VALUATION SOFTWARE, INC. Founder of software company that develops and distributes hotel financial analysis software Hotels Managed Sheraton Hotel, Smithtown, New York Marriott Hotel, Baltimore Airport, Maryland Hilton Hotel, Danbury, Connecticut Residence Inn, Princeton, New Jersey Embassy Suites, Atlanta Airport, Georgia Omni Hotel, Norfolk, Virginia Crowne Plaza, Raritan, New Jersey Hilton Hotel, Novi, Michigan Sheraton Hotel, Long Beach, California Hilton Hotel, Charleston, South Carolina Park Ridge Hotel and Conference Center, Valley Forge, Pennsylvania Hilton Hotel, Wilmington, Delaware HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Professional Affiliations American Society of Real Estate Counselors - Member (CRE) - Board of Governors Appraisal Institute - Member (MAI) (SREA) - Developer and Instructor, Hotel Investment and Valuation Seminar - Developer and Instructor, Hotel Computer Valuation Seminar American Hotel and Motel Association - Certified Hotel Administrator (CHA) - Industry Real Estate Financing Advisory Council (IREFAC) International Society of Hospitality Consultants - Member (ISHC) New York University - Adjunct Assistant Professor of Nutrition, Food and Hotel Management Michigan State University - Honorary Faculty, Honorary Alumnus Certified General Appraiser - Arizona, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Illinois, Massachusetts, Michigan, Minnesota, Nebraska, New Jersey, New York, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Virginia Licensed Real Estate Broker - New York, Pennsylvania Board of Advisers - Real Estate Finance Journal - Real Estate Workouts & Asset Management American Arbitration Association - National Real Estate Valuation Council Cornell Society of Hotelmen New York University Masters in Hospitality Management - Advisory Board New York University Hospitality Investment Conference - Board of Advisors Beta Gamma Sigma - National Honor Society in Business and Management HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Endowment Hospitality Valuation Services Professor of Hotel Finance and Real Estate - School of Hotel Administration, Cornell University (currently held by Professor James J. Eyster) Education BS - School of Hotel Administration, Cornell University MBA - Graduate School of Business Administration (Finance), University of Buffalo Candidate for PhD - School of Education, Department of Food Service Management, New York University Partial List of Teaching and Lecture Assignments Cornell University - Computer Valuation Techniques Michigan State University - Hotel Management Contracts University of North Carolina - Hotel Market Studies University of Virginia - Assessing Hotels American Arbitration Association - Real Estate Arbitration American Hotel and Motel Association - Hotel Obsolescence Appraisal Institute - Hotel Valuation (over 50 seminars) International Association of Assessing Officers - Hotel Valuation Montreal Appraisal Society - Total Project Analysis Society of Real Estate Appraisers - Lease Seminar Lodging Hospitality - Lodging Summit Published Books and Seminars Textbooks The Valuation of Hotels and Motels, Appraisal Institute, Chicago, Illinois, 1978 Hotels, Motels and Restaurants: Valuations and Market Studies, Appraisal Institute, Chicago, Illinois, 1983 How to Perform an Economic Feasibility Study of a Proposed Hotel/Motel, American Society of Real Estate Counselors, Chicago, Illinois, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Books and Seminars (continued) Textbooks (continued) Hotel Investments: A Guide for Owners and Lenders, Warren, Gorham and Lamont, Inc., New York, New York, 1990 The Computerized Income Approach to Hotel Market Studies and Valuations, Appraisal Institute, Chicago, Illinois, 1990 Hotel Investments: A Guide for Owners and Lenders, 1992 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotel Investments: A Guide for Owners and Lenders, 1993 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Appraisal Institute, Chicago, Illinois, 1992 Student Manuals The Valuation of Lease Interests, Society of Real Estate Appraisers, Chicago, Illinois, 1976 Hotel-Motel Valuation Seminar, Appraisal Institute, Chicago, Illinois, 1981, 1988, 1990 The Computerized Approach to Hotel Market Studies and Valuations Seminar, Appraisal Institute, Chicago, Illinois, 1991 Demonstration Appraisal Demonstration Appraisal of a Proposed Hotel, Spring Valley, New York, Hospitality Valuation Services, Mineola, New York, 1983, 1990 Chapters The Real Estate Handbook-Second Edition, Dow Jones-Irwin, 1989, "Hotels and Motels" Arbitration of Real Estate Valuation Principles, American Arbitration Association, 1987, "Arbitration in the Hospitality Industry" Ethics in Hospitality Management: A Book of Readings, Educational Institute of the American Hotel and Motel Association, 1992, "Ethics in Hotel Appraising" The Lodging and Food Service Industry, Educational Institute of the American Hotel and Motel Association, 1993, "Insider's Insights" HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles The Appraisal Journal "Using Total Project Analysis to Compete for Investment Capital," October, 1975 "The Appraisal of Food Service Facilities," July, 1980 "Publish and Prosper," October, 1980 "Valuation of Hotels and Motels for Assessment Purposes," April, 1984 "Adjusting Comparable Sales for Hotel Assessment Appeals," July, 1986 "Hotel Business Value and Working Capital: A Clarification," January, 1987 "Ethics in Hotel Appraising," July, 1993 The Appraiser "Hotel-Motel Appraisal Misconceptions Set Straight," January, 1979 "No Conventional Financing Available for Hotels: Rushmore," December, 1979 "Estimating Hotel Land Values Using Comparable Ground Leases," April, 1980 Bulletin of the Cornell Society of Hotelmen "Employment Philosophy for a Consulting Practice," July, 1984 Business Travel News "A Snapshot of a Classic Recovery," July, 1995 The Canadian Appraiser "Hotel/Motel Market Sales Update," Summer, 1987 Capital Sources for Real Estate "Stephen Rushmore Discusses the Future of the Lodging Industry," December, 1994 Cayuga Advisor "Secrets to Success in Consulting," October, 1992 Chapter News and Notes "Quantifying a Hotel's Business Value," November, 1979 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Cornell Hotel & Restaurant Administration Quarterly "A Preliminary Market Study," November, 1974 "How Much is Your Place Worth Today? A Case Study in Hotel - Motel Valuation," May, 1975 "What Can Be Done About Your Hotel's Real Estate Taxes?" May, 1977 "The Appraisal of Lodging Facilities," August, 1978 "The Appraisal of Food Service Facilities," February, 1979 "The Appraisal of Lodging Facilities - Update," November, 1984 "Hotel Sales Prices Down More Than 12%," May, 1991 "Seven Current Hotel Valuation Techniques," August, 1992 "The Valuation of Distressed Hotels," October, 1992 "Hotel Lending in the 1990's: Amateurs Beware," December, 1994 "Investment Values of Lodging Property: Modeling the Effects of Income Taxes and Alternative Lender Criteria," December, 1995 FCI Spec Sheet "Employment Philosophy for a Consulting Practice," September, 1984 Florida Hotel & Motel Journal "Rushmore Reports Rising Hotel Prices," February, 1995 Hotel and Motel Management "Average Rate vs. Project Cost," May 1, 1974 "How to Increase the Marketability of Your Motel," April, 1981 "Tougher Lending, Lower Room Rate Hikes On Way?" June, 1981 "What is That Mortgage Loan Going to Cost You?" August, 1981 "How to Perform a Study of Your Property's Market," October, 1981 "How do High Interest Rates Affect Your Motel's Value?" December, 1981 "How to Buy a Feasibility Study That Works for You," February, 1982 "Settling Lease Conflicts Quickly Through Arbitration," April, 1982 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Hotel and Motel Management (continued) "Are Casino Hotels Really Worth $500,000 Per Room?" June, 1982 "Discount Rates and Internal Rate of Return," August, 1982 "Determining a Property's Extended Life Cycle," November, 1982 "Using Microcomputers for Forecasting," December, 1982 "Update on Hotel Development Costs," January, 1983 "Estimating a Site's Worth by Finding Its Profit Value," June, 1983 "Hotel Construction May Be Slowing Down a Little Bit," April, 1983 "The Investor's Risk Sways to Prevailing Economic Winds," August, 1983 "Is Your Property Tax at as Low a Level as it Should Be?" October, 1983 "The Ultimate Guest Room: Could it Ever Exist Anywhere?" December, 1983 Hotel-Motor Inn Journal A Preventive Maintenance System for Motels," March, 1975 Hotel Valuation Journal "Hotel Valuation Index Peaks During 1989," Fall, 1990 "Hotel Development Costs," Winter, 1991 "Hotel Valuation Index for 1990," Spring, 1991 "Bad Year for Hotel Sales Prices Confirmed," Spring, 1992 "Hotel Sales Prices on the Rise," Fall, 1994 "United States Hotel Values Climb," Spring/Summer, 1995 "It's Time for Franchise Reform," Fall, 1995 Institutions/ Volume Feeding "Greater Risk/Greater Profit Potential: Hotel Management Contract," May, 1973 Lodging Hospitality "How to Finance Renovation Projects," January, 1974 "Controlling Your Real Estate Taxes," July, 1978 "Putting Together a Sound Financial Package," December, 1978 "Favorable Outlook for Lodging Values," December, 1983 "Are Your Property Taxes Too High? (Part I and II)," May and June, 1984 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Development Costs," July, 1984 "The Right Management Contract for You," September, 1984 "Selecting the Firm to Prepare Your Feasibility Study," October, 1984 "A Quick How-To In Hotel Valuation," November, 1984 "Updating Lodging Interest Rates," December, 1984 "Is Your Guest Experience Up to Par?" January, 1985 "How to Perform a Breakeven Analysis," May, 1985 "Evaluating Operating Performance," June, 1985 "Hotel Lenders Toughen Underwriting Requirements," July, 1985 "Don't Forget the Pre-Opening Agreement," August, 1985 "Management Companies Should Participate in Financing," October, 1985 "Current Techniques for Valuing Hotel Land," November, 1985 "Hotel Development Costs," December, 1985 "Sourcing Debt Into the 1990's," January, 1986 "Hotel Valuation Thumb Rule," February, 1986 "Value in Use Versus Value in Exchange," March, 1986 "Stretching Feasibility," April, 1986 "The Management Question," May, 1986 "How to Commission a Feasibility Study," June, 1986 "Macro Trends Affecting Property Values," July, 1986 "Hotel-Motel Market Sales Update," August, 1986 "Financing Alternatives: Zero Coupon Mortgages," September, 1986 "Forecasting Lodging Energy Costs," October, 1986 "Portfolio Financing a Better Way," November, 1986 "Profit by Looking at History," December, 1986 "Why New York Isn't Overbuilt," February, 1987 "How to Discourage Hotel Overbuilding: A Case Study," April, 1987 "Structuring an Incentive Management Fee," June, 1987 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Franchising Questions and Answers," July, 1987 "Comparing Hotel Development Costs," August, 1987 "Understanding Economic Life," September, 1987 "Prices Rise for Lodging Properties," October, 1987 "Management Companies Are Key to Success," November, 1987 "Evaluating a Management Contract Fee Structure," December, 1987 "Check Profits Before Selecting Hotel Operator," January, 1988 "It's a Good Time to Review Your Taxes," February, 1988 "How to Use a Management Company Rating System," March, 1988 "Make Sure Management Contracts Contain These Terms," April, 1988 "Hotel Access and Visibility," May, 1988 "Chain Sale Strategies," July, 1988 "Evaluating a Hotel Franchise," August, 1988 "Evaluating Franchise Fees," September, 1988 "Opportunities in Economy Lodging," October, 1988 "How to Obtain a Hotel Mortgage," November, 1988 "Arbitration in the Hospitality Industry," December, 1988 "Lodging Development Cost Update," January, 1989 "Amenities as Profit Builders," February, 1989 "Hotel Values Mirror the Times," March, 1989 "Forecasting Revenue and Expenses," April, 1989 "Real Estate Jargon Made Simple," May, 1989 "Pricing a Management Contract," June, 1989 "Trends in Valuation," July, 1989 "Rescuing the Distressed Hotel," August, 1989 "Shielding Against Incompetence," September, 1989 "Hotel Valuation Revisited," October, 1989 "New Breed of Hard Budgets," November, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Figuring Cap Rates," December, 1989 "A Glance Backward," January, 1990 "Costs Creeping Up," February, 1990 "Valuing Distressed Properties," March, 1990 "Cap and Discount Rates," April, 1990 "An Open Letter," May, 1990 "Misconceptions About Appraisals," June, 1990 "Hotel Values Still Growing," July, 1990 "Hotel Renovation is Key to `90s," August, 1990 "Time Right for Hotel Leases," September, 1990 "Getting a Fix on Rates," October, 1990 "The Wrinkles of Class," November, 1990 "A Glance Backward," December, 1990 "The Price Dropoff," January, 1991 "The Cost Washout," February, 1991 "Survival of the Fittest," March, 1991 "Looking Out and Up," April, 1991 "The Bottom is in Sight," May, 1991 "The Pitfalls of Liquidation," June, 1991 "Extra! Extra! Hospitality News," July, 1991 "The Art of Hotel Renovation," August, 1991 "No Better Time for a Tax Review," September, 1991 "No Time for Passivity," October, 1991 "What a Franchise Really Costs," November, 1991 "In Case You Hadn't Heard," January, 1992 "Negotiation - The Name of the Game," February, 1992 "Now Could be the Time to Build," March, 1992 "The Well May Stay Dry," April, 1992 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Life Expectancy," May, 1992 "Hotel Values - What a Downer," June, 1992 "How to Make Money Now," July, 1992 "Hotel Chain Class Survey," August, 1992 "Budget Dining with Rushmore," September, 1992 "Bookings Up, Rates Will Follow," October, 1992 "Hospitality Master's Good Preparation," November, 1992 "What's New on the Job Front?" January, 1993 "Where Have All the Hotels Gone?" February, 1993 "Hotel Building Costs Continue to Fall," March, 1993 "Hotel Values Head Upward," April, 1993 "The Rise and Fall of Trophy Hotels," May, 1993 "Hotel Sales and Prices Rebound," June, 1993 "Third Parties Loosening Purse Strings," July, 1993 "Beyond Recycling: The Ecotel," August, 1993 "Time to Reduce Property Taxes," September, 1993 "Lodging: The Way I See It," October, 1993 "Choosing an Appraiser," November, 1993 "Who Needs an Asset Manager?" January, 1994 "Investing by the Numbers," February, 1994 "Fire Your Staff and Lease Them Back," March, 1994 "Published Rates Hint at Recovery," April, 1994 "Now is the Time to Start Building," May, 1994 "Hotel Values Heading Up," June, 1994 "Farewell, Friend," July, 1994 "Sales Prices Creeping Up," August, 1994 "Selecting Green Hotel Supplies," September, 1994 "Don't Write Off Full-Service Hotels," October, 1994 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Lodging REIT's Are on the Rise," November, 1994 "Going Back to the Future," January, 1995 "How much do Managers Make?" March, 1995 "Lodging Transactions Soared in '94," April, 1995 "Hotel Development Costs on the Rise," May, 1995 "Hotel Values up Significantly," June, 1995 "What a Franchise Costs over the Long Term," July, 1995 "Road Food Part II," August, 1995 "It's Time for Franchise Reform," September, 1995 "Extended Stay May Not Extend Your Profits," October, 1995 "The Year as I See It," November, 1995 "Cap Rate 101," January, 1996 Michigan Lodging "Hotel Development Costs," January, 1988 The Mortgage and Real Estate Executives Report "Atlantic City Building Game Involves High Stakes," August, 1979 "How Interest Rates Affect Real Estate Values," June, 1982 "Update on Hotel Development Costs," May 1, 1983 Motel-Hotel Insider "The $100,000 Plus Hotel Room Has Become a Reality," November 19, 1979 "Update on Hotel Development Costs," April 4, 1983 NAIFA - The Appraisal Review "Hotel Valuation Techniques," Vol. 44, 1991 Real Estate Digest "Why Should the Management Team be Important to Hotel Lenders," Fall, 1988 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Finance Journal "What is a Typical Fee for a Hotel Management Contract?" Fall, 1988 "Hotel Franchise Fees," Winter 1989 "Why the Management Team Should be Important to Hotel Lenders," Spring, 1989 "Hotel Values and Costs," Summer, 1989 "Structuring a Hotel Investment," Fall, 1989 "A Guide for Lenders Holding Distressed Hotel Loans," Winter, 1990 "Estimating Current Interest Rates for Hotel Financing," Spring, 1990 "Hotel Valuation Techniques," Summer, 1990 "Now is the Time to Review Your Hotel's Property Taxes," Fall, 1990 "Property Tax Assessments for Hotels and Motels," Winter, 1991 "Putting Together Hotel Management Agreements - Part I," Spring 1991 "Putting Together Hotel Management Agreements - Part II," Summer, 1991 "The 1980s - The Decade of Change," Fall, 1991 "An Overview of the Hotel Industry: Past, Present, and Future," Spring, 1994 Real Estate Forum "Casino Hotels Raise Valuation Questions," November, 1981 Real Estate Investment Ideas "How Fuel and Energy Shortages Should Affect Investment Decisions in the Hospitality Industry," March, 1974 "Upward Trend Continues for Sales Price of Hotel-Motel Properties," May, 1988 "High Prices Paid for Hotel-Motel Properties," February, 1990 Real Estate Issues "Employee Compensation for a Consulting Practice," Fall/Winter, 1985 "Hotel/Motel Market Sales Update," Spring/Summer, 1987 Real Estate Newsletter "Computers in Hotel Appraising," May 15, 1989 Real Estate Investment Ideas "Hotel-Sales Update," Winter, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Review "Valuing Motels and Hotel in the Current Market," Fall, 1972 "Dealing With Distressed Hostelry Loans," Fall, 1975 "The Mortgage Underwriting Consultant Comes of Age," Fall, 1977 "Real Estate Compensation," Winter, 1987 Real Estate Workouts and Asset Management "Stephen Rushmore on Directions in the Hospitality Industry," September, 1992 Real Values "Hotel Construction Cost Update," April, 1986 Restaurant and Hotel Design "How Much Should the Renovation Be?" March, 1986 "14 Notable Hotel Development Firms," December, 1987 Rushmore on Hotel Valuation "Mortgage - Equity," Winter, 1979 "Atlantic City - From Bust to Boom," Winter, 1979 "Mortgage - Equity," Spring, 1979 "Developing Mortgage Data," Spring 1979 "Gasoline and Market Values, " Spring, 1979 "Mortgage - Equity," Fall, 1979 "Quantifying a Hotel's Business Value," Fall, 1979 "What Has Happened to Typical Hotel-Motel Development Costs?," Fall, 1979 "Mortgage-Equity," Winter, 1980 "Extending Hotel Economic Life Through Renovation," Winter, 1980 "Estimating Hotel Land Values Using Comparable Ground Leases," Winter, 1980 "Quantifying the Value of Personal Property to a Going Hotel," Spring, 1980 "Recent Changes in New York City's Hotel Market," Spring, 1980 "Hotel-Motel Economic Lives," Fall, 1980 "Mortgage - Equity," Fall, 1980 "Mortgage - Equity," Winter, 1981 "Developing Mortgage Data," Winter, 1981 "Statistical Support for Food and Beverage Projections," Winter, 1981 "Mortgage - Equity," Spring/Summer, 1981 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Rushmore on Hotel Valuation (continued) "Quantifying a Hotel's Demand," Spring/Summer, 1981 "A Five-Year Overview of Typical Hotel-Motel Development Costs," Spring/Summer, 1981 "Mortgage - Equity," Winter/Spring, 1982 "Update on Hotel Capitalization Rates," Winter/Spring, 1982 "Mortgage - Equity," Summer/Fall, 1982 "Are Casino Hotels Really Worth $500,000 Per Room?" Summer/Fall, 1982 "The Hotel-Motel Life Cycle, Summer/Fall, 1982 "Mortgage - Equity," Winter/Spring, 1983 "Update on Hotel Development Costs," Winter/Spring, 1983 "The Valuation of Hotels and Motels for Assessment Purposes," Winter, 1984 "Hotel Capitalization Rates," Summer, 1984 "Hotel Development Cost Survey," Summer, 1984 "Selecting a Hotel Management Company," Fall, 1984 "Hotel Capitalization Rates," Spring, 1985 "How to Perform a Breakeven Analysis," Spring, 1985 "Hotel Capitalization Rates," Winter, 1986 "Hotel Development Costs," Winter, 1986 "Hotel Valuation Survey," Winter, 1987 "Impact of New Tax Laws on Hotel Values," Winter, 1987 "Hotel-Motel Market Sales Update," Winter, 1987 "Structuring an Incentive Management Fee," Fall, 1987 "Understanding Your Hotel's Economic Life," Fall, 1987 "Hotel Development Costs," Fall, 1987 "Hotel, Motel Market Sales Update," Winter, 1988 "Amenity Creep," Winter, 1989 "Hotel Franchise Fees," Winter, 1989 "Hotel Valuation Index," Fall, 1989 "Latest Trends in Hotel Values," Fall, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Tri-State Real Estate Journal "Across the Nation: Hotel Sale Prices Escalate on Average," December 23, 1994 U.S. Real Estate Week "All-Suites Market Entering Second Phase," May 4, 1987 Valuation "Hotel-Motel Market Sales Update," February, 1987 Quarterly Newsletter Hotel Valuation Journal Professional newsletter with a circulation of 10,000 Real Estate Column Lodging Hospitality Real estate editor for a major monthly hospitality periodical Hospitality Column Real Estate Finance Journal Contributing hospitality editor Computer Software Hospitality Valuation Software Hotel financial software for room night analyses, income and expense forecasts, and valuation calculations - developed and distributed for the Appraisal Institute Hotel-Motel Data Hospitality Market Data Exchange National clearinghouse for information pertaining to hotel and motel transactions Hotel Valuation Index National index of hotel value trends for 24 individual market areas Hospitality Seminar Series Intensive short courses for hotel and restaurant professionals Hotel Franchise Fees Analysis Guide Analysis of hotel franchise fees and costs Hospitality Bibliography Comprehensive literature index of hotel and restaurant books and articles HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Awards Robert H. Armstrong Award For the most significant contribution to The Appraisal Journal in 1975 Activities Commercial pilot, instrument, multi-engine; sailing; skiing Corporate and Institutional Clients Served Aetna Life Insurance AIG Real Estate Investment Aldrich Eastman and Waltch Allstate American Airlines America's Best Inns Arthur Anderson & Company Bankers Trust Company Bank of America Bank of Boston Bank of Montreal Bank of New York Bank of Nova Scotia Bank of Tokyo Bank One-Columbus Banque Indosuez Barclay's Bank Baybank Boston The Beacon Companies Bear, Stearns & Company, Inc. Best Inns Best Western International Boykin Management Co. Bradbury Suites C. Itoh Caesar's World California Dept. of Transportation Chase Lincoln First Bank, N.A. Chase Manhattan Bank Chemical Bank Chrysler Capital Corporation CIGNA Citibank Citicorp Real Estate City of Boston City of Detroit City of Grand Rapids City of Kalamazoo City of Orlando City of Philadelphia City of Santa Monica City of Toronto Columbia Sussex Corporation Continental Illinois National Bank Copley Real Estate Advisors Corporex Development CRI, Inc. Cushman and Wakefield Days Inns Edward J. DeBartolo Corp. HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Deer Valley Ski Corporation Doubletree Hotels Drury Inns Econo Lodge Economic Development Admin. EIE Regent International Embassy Suites Equitable Life Assurance Equitable Real Estate Investment European American Bank Fairmont Hotels Federal Deposit Insurance Corp. First Boston First California Savings First Interstate Bank First National Bank of Chicago Four Seasons Hotels Goldman, Sachs Greater Orlando Aviation Authority Great Western Bank Great Western Savings Guest Quarters Hampton Inns Hilton Hotels, Corp. Hilton International Holiday Corporation Holiday Inns Home Savings of America Howard Johnson's Hudson Hotels Corporation Hyatt Hotels Industrial Bank of Japan Interstate Hotels The Irvine Company ITT Commercial Finance Corp. Japan Airlines JDC (America) Corporation John Q. Hammons John Hancock Life Insurance Johnson & Wales College Kenneth Leventhal & Assoc. Kidder Peabody & Company, Inc. La Quinta Larken, Inc. Lexington Companies Loews Hotels Harry Macklowe Real Estate Marine Midland Bank, N.A. Marriott Corporation MA Bay Transit Authority Massachusetts Mutual Life Mellon Bank Meridien Hotels Merrill Lynch Merrill Lynch Capital Markets Metropolitan Life Insurance Microtel Midlantic Bank HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Mitsubishi Morgan Guaranty Bank & Trust Co. J.P. Morgan Investment Management Morgan Stanley Motel 6, Inc. Mutual Benefit Co. National Westminster Bank New York Life Insurance Nippon Credit Bank Nomura Securities Int'l North American Taisei Corporation Northwestern Mutual Life Omni Hotels Parabas Bank Prime Motor Inns Property Capital Trust Prudential Life Insurance Radisson Hotels Ramada Inns Red Lion Inns Regent International Registry Hotels Residence Inns Resolution Trust Corporation Rhode Island Hospital Trust Ritz-Carlton Hotels Rodeway Inns Rose Associates Salomon Brothers San Antonio Hotel/Motel Assoc. Sanwa Bank Security Pacific Bank Servico Management Corp. Sheraton Hotels Sonesta Hotels Sonnenblick-Goldman Steamboat Ski Corporation Stouffer Hotels Stratton Corporation Sumitomo Bank Summerfield Hotel Corporation Super 8 Hotels Swiss Bank Corporation Taisei Texas Commerce Bancshares, Inc. Tishman Realty Corporation Trans World Airlines Travelers Insurance TraveLodge Trusthouse Forte UBS Securities Union Labor Life United Bank of Switzerland United Inns, Inc. United States Steel Universal Hotels U.S. Air Force U.S. Department of Justice HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) U.S. Department of the Army U.S. Department of the Interior U.S. Economic Development Authority U.S. Trust Company Walt Disney Productions Westin Hotels Williams Hospitality Corporation Winegardner & Hammons Winthrop Financial Associates Wyndham Hotels Zeckendorf Company Appearance as an Expert Witness Administrative Law Court - SEC, Washington, DC Appellate Tax Board, Boston, Massachusetts Arbitration, Wayne, New Jersey Assessment Appeals Board, Los Angeles County, Los Angeles, California Board of Equalization and Review, Washington, District of Columbia (2) Board of Taxation, Atlantic City, New Jersey Bureau de Revision Evaluation Fonciere du Quebec, Montreal, Canada Circuit Court, Orange County, Orlando, Florida Condemnation Review Board, Minneapolis, Minnesota Corporation Committee, Rhode Island State Senate Court of Common Pleas, Allegheny County, Pennsylvania Court of Common Pleas, Franklin County, Ohio Court of Common Pleas, Montgomery, Pennsylvania Court of Common Pleas, Pittsburgh, Pennsylvania Court of Common Pleas, Philadelphia, Pennsylvania Court of Queen's Bench of Alberta, Canada District Court, Arapahoe County, Colorado District Court, Dallas County, Texas District Court, Harris County, Texas District Court, Tarrant County, Texas District Court, Hennepin County, Minneapolis, Minnesota District Court, Knoxville, Tennessee Federal Bankruptcy Court, Oakland, California Federal Bankruptcy Court, Los Angeles, California HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Denver, Colorado Federal Bankruptcy Court, District of Columbia Federal Bankruptcy Court, Miami, Florida (2) Federal Bankruptcy Court, Chicago, Illinois Federal Bankruptcy Court, New Orleans, Louisiana Federal Bankruptcy Court, Greenbelt, Maryland Federal Bankruptcy Court, Baltimore, Maryland Federal Bankruptcy Court, Rockville, Maryland Federal Bankruptcy Court, Boston, Massachusetts Federal Bankruptcy Court, Grand Rapids, Michigan Federal Bankruptcy Court, Las Vegas, Nevada Federal Bankruptcy Court, Newark, New Jersey (2) Federal Bankruptcy Court, Manhattan, New York (2) Federal Bankruptcy Court, Westbury, New York Federal Bankruptcy Court, Philadelphia, Pennsylvania Federal Bankruptcy Court, Reading, Pennsylvania Federal Bankruptcy Court, Salt Lake City, Utah Federal Bankruptcy Court, Madison, Wisconsin (2) Federal District Court, Rochester, New York Federal District Court, Philadelphia, Pennsylvania (2) Judicial Arbitration and Mediation Services, Dallas, Texas Michigan Tax Tribunal, Detroit, Michigan New Jersey Tax Court, Newark, New Jersey (2) Superior Court, District of Columbia Superior Court, Clayton County, Georgia (2) Superior Court of North Carolina Superior Court, Nashua, New Hampshire Supreme Court, New York State, Buffalo, New York Supreme Court, New York State, Manhattan, New York Supreme Court, New York State, Riverhead, New York HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Tax Review Board, San Joaquin County, Stockton, California Tax Review Board, Bangor, Maine Tax Review Board, Schenectady, New York Tax Review Board, Yorktown, New York Tax Review Board, North Carolina Tax Review Board, Philadelphia, Pennsylvania (2) U.S. District Court, Wilmington, Delaware U.S. District Court, Madison, Wisconsin ============================================================================== Partial List of Hotels/Motels, Appraised or Reviewed Internationally North America Canada - Delta Hotel, Calgary - Econo Lodge, Hull - Hotel Lord Berri, Montreal - Hotel Vogue, Montreal - Hyatt Regency, Montreal - Le Ragence Hyatt, Montreal - Holiday Inn, Oshawa, Ontario - Hotel Le Chantecler, Quebec - Bond Place Hotel, Toronto - Carlton Hotel, Toronto - Chelsea Hotel, Toronto - Delta Chelsea Hotel, Toronto - Four Seasons on the Park, Toronto - Inn on the Park, Toronto - Novotel Missisauga, Toronto - Ramada Inn, Toronto - Sutton Hotel, Toronto - Toronto Marriott East, Toronto - Westbury Hotel, Toronto - Burnaby Villa Inn, Vancouver - Four Seasons Hotel, Vancouver - Sheraton Land Mark, Vancouver - Sheraton Plaza 500, Vancouver - Four Seasons Yorkville Hotel, Yorkville United States Alabama - MEI - Birmingham West, Bessemer - Comfort Inn, Birmingham - Courtyard by Marriott, Birmingham - Courtyard by Marriott-Hoover, Birmingham - Courtyard By Marriott/Homewood, Birmingham - Crown Sterling Suites, Birmingham - Fairfield Inn, Birmingham - Holiday Inn, Birmingham - Howard Johnson, Birmingham - Knights Inn, Birmingham - Ramada Inn, Birmingham - Residence Inn by Marriott, Birmingham - Still Waters Resort, Dadeville - Ramada Inn, Gadsden - Sheraton Hotel, Gulf Shores - Courtyard by Marriott, Huntsville - Knights Inn, Huntsville - Marriott Hotel-Proposed, Huntsville - La Quinta Inn, Huntsville University - Days Inn, Mobile - Hotel - Proposed, Mobile - Inn-Proposed, Mobile - Stouffer Riverview, Mobile - Courtyard by Marriott, Montgomery - Fairfield Inn, Montgomery - Holiday Inn-Downtown, Montgomery - Holiday Inn-East, Montgomery - Howard Johnson, Montgomery - La Quinta Inn, Montgomery - Residence Inn, Montgomery - Marriott's Grand Hotel, Point Clear - Holiday Inn, Sheffield - La Quinta, Tuscaloosa - Masters Economy Inn, Tuscaloosa - Proposed Extended Stay, West Mobile Alaska - Barratt Inn, Anchorage - Clarion Hotel, Anchorage - Holiday Inn, Anchorage - Hotel Captain Hook, Anchorage - International Airport Inn, Anchorage - Sheraton Anchorage Hotel, Anchorage Arizona - Holiday Inn, Bullhead City - Embassy Suites, Camelback - Compri Hotel-Proposed, Chandler - Quality Inn, Chandler - Ramada Inn, Chandler - AmeriSuite Hotel-Proposed, Flagstaff - Holiday Inn, Flagstaff - Motel 6, Flagstaff - Rodeway Inn, Flagstaff - Bright Angel Lodge, Grand Canyon - El Tovar Hotel, Grand Canyon - Grand Canyon National Park, Grand Canyon - Kachina Lodge, Grand Canyon - Maswik Lodge, Grand Canyon - Moqui Lodge, Grand Canyon - Phantom Ranch, Grand Canyon - Thunderbird Lodge, Grand Canyon - Yavapai Lodge, Grand Canyon - Hampton Inn-Proposed, Holbrook - Moqui Lodge, Kaibab National Forest - Rodeway Inn, Kingman - Nautical Inn Resort, Lake Havasu City - Lexington Hotel Suites, Mesa - Biosphere II Conference Center, Oracle - Best Western-Per Diem, Phoenix - Bobby McGee's, Phoenix - Caravan Inn, Phoenix - Compri Hotel-Proposed, Phoenix - Courtyard by Marriott-Black Canyon, Phoenix - Courtyard by Marriott-Mesa, Phoenix - Crescent Phoenix Hotel, Phoenix - Crown Sterling Suites, Phoenix - Days Inn, Phoenix - Doubletree Inn at Park Central, Phoenix - Embassy Suites, Phoenix - Embassy Suites-Biltmore, Phoenix - Executive Park Hotel, Phoenix - Fountain Suites Hotel, Phoenix - Granada Royale-Camelhead, Phoenix - Hilton Hotel, Phoenix - Holiday Inn, Phoenix - Hyatt Regency, Phoenix - La Quinta Hotel, Phoenix - Lexington Hotel Suites, Phoenix - Newton's Sands, Phoenix - Phoenician Golf & Tennis Resort, Phoenix - Pointe Hilton at Tapatio Cliffs, Phoenix - Quality Inn, Phoenix - Ramada Inn-Airport, Phoenix - Ramada Inn-East, Phoenix - Ritz Carlton, Phoenix - Sunburst Resort Hotel, Phoenix - Hassayampa Inn, Prescott - Clarion Inn at McCormick Ranch, Scottsdale - Conference Center, Scottsdale - Courtyard by Marriott-Mayo, Scottsdale - Doubletree Inn at Scottsdale Mall, Scottsdale - Fairfield Inn, Scottsdale - Fashion Square Hotel, Scottsdale - Loews Paradise Resort, Scottsdale - Marriott Camelback Inn, Scottsdale - Marriott Mountain Shadows, Scottsdale - Mountain Shadows Resort, Scottsdale - Orange Tree Resort, Scottsdale - Ramada-Valley Ho, Scottsdale - Red Lion's La Posada Resort, Scottsdale - Registry Resort, Scottsdale - Rodeway Inn, Scottsdale - Scottsdale Princess, Scottsdale - Sheraton Scottsdale Resort, Scottsdale - The Phoenician, Scottsdale - Valley Ho, Scottsdale - John Gardiner's Enchantment, Sedona - L'Auberege de Sedona, Sedona - Los Abrigados, Sedona - Orchards Inn, Sedona - Hotel-Proposed, Sierra Vista - Motel 6, Sierra Vista - Temple Bar Resort, Temple Bar - Coachman Inn - Proposed, Tolleson/Phoenix - Tubac Resort, Tubac - Canyon Ranch, Tucson - Coachman Inn-Proposed, Tucson - Courtyard by Marriott, Tucson - Doubletree Inn, Tucson - Embassy Suites, Tucson - Granada Royale Hometel-E. Broadway, Tucson - Hotel Park Tucson-Proposed, Tucson - Lexington Suites Hotel, Tucson - Loews Hotel, Tucson - Resort Hotel-Proposed, Tucson - Rodeway Inn, Tucson - Sunbelt Commerce Center Hotel, Tucson - La Quinta Inn, Tucson East - Bobby McGee's, Tuscon - Radisson Suite Hotel, Tuscon - Ventana Canyon Golf and Racquet, Tuscon - Ramada Inn, Union Hill Arkansas - Sheraton Inn, Fort Smith - Hilton, Hot Springs - Holiday Inn-Lake Hamilton, Hot Springs - Courtyard by Marriott, Little Rock - Holiday Inn, Little Rock - Legacy Hotel, Little Rock - Little Rock Hilton, Little Rock - Masters Economy Inn, Little Rock - Red Carpet Inn, Little Rock - Super 8, Little Rock - Masters Economy Inn, North Little Rock - Masters Economy Inn, Protho-Junction - Holiday Inn, Texarkana California - Hampton Inn, Agoura Hills - Ramada Inn, Agoura Hills - Residence Inn-Proposed, Agoura Hills - Island Motel, Almeda - Anaheim Hilton & Towers, Anaheim - Anaheim Park Motor Inn, Anaheim - Anaheim Plaza Hotel, Anaheim - Best Western Pavillions, Anaheim - Carousel Inn, Anaheim - Conestoga Hotel, Anaheim - Courtyard by Marriott, Anaheim - Crown Sterling Suites, Anaheim - Disneyland Hotel, Anaheim - Golden Forest Motel, Anaheim - Hampton Inn, Anaheim - Hilton, Anaheim - Holiday Inn Anaheim Center, Anaheim - Hotel-Proposed, Anaheim - Marriott Hotel, Anaheim - Pan Pacific Hotel, Anaheim - Pitcairn Motel, Anaheim - Raffles Inn, Anaheim - Ramada Maingate/Disneyland Hotel, Anaheim - Roger Morris Inn, Anaheim - Stovall's Inn, Anaheim - The Station Inn, Anaheim - Travelodge Inn at the Park, Anaheim - AmeriSuite, Anaheim Hills - Comfort Inn, Anahiem - Mansouri Hotel, Antioch - Red Lion, Apple Valley - Hampton Inn, Arcadia - Residence Inn, Arcadia - Hilton Lodge, Arrowhead Lake - Auburn Inn, Auburn - Sleep Inn, Auburn - Allstar Inn, Bakersfield - Clarion Hotel, Bakersfield - Courtyard by Marriott, Bakersfield - Economy Inn, Bakersfield - Ramada Inn, Bakersfield - Red Lion Hotel, Bakersfield - Residence Inn, Bakersfield - Rodeway Inn, Bakersfield - Hilton Hotel, Baldwin Park - San Gabriel Valley Hotel, Baldwin Park - The Hilton Hotel, Baldwin Park - Allstar Inn, Barstow - Economy Inn, Barstow - Marriott Berkeley Marina, Berkeley - Shattuck Hotel, Berkeley - Beverly Hills Hotel, Beverly Hills - Beverly Rodeo Hotel, Beverly Hills - Beverly Wilshire Hotel, Beverly Hills - Hilton Hotel-Cresthil, Beverly Hills - L'Ermitage, Beverly Hills - Peninsula Hotel, Beverly Hills - Best Western, Big Bear Lake - Big Bear Hotel, Big Bear Lake - Big Bear Lake Resort, Big Bear Lake - Big Bear Towering Pines, Big Bear Lake - Motel 6, Big Bear Lake - Post Ranch, Big Sur - Ventana Inn, Big Sur - Rodeway Inn, Blythe - Courtyard by Marriott, Brea - Holiday Inn, Brentwood - Courtyard by Marriott, Buena Park - Fairfield Inn, Buena Park - Hampton Inn, Buena Park - Holiday Inn, Buena Park - Crowne Sterling Suites, Burlingame - Hyatt Regency, Burlingame - Mariott Hotel - SFO, Burlingame - Marriott, Burlingame - Marriott-San Francisco Airport, Burlingame - Radisson Hotel-Proposed, Burlingame - Sheraton Hotel, Burlingame - Courtyard by Marriott, Camarillo - Best Western Fireside Inn, Cambria - Cambria Pines Lodge, Cambria - Residence Inn, Campbell - Hotel-Proposed, Capitola - Resort Hotel, Spa & Conference Ctr., Capitola - Allstar Inn, Carlsbad - Carlsbad Inn, Carlsbad - Inn of America, Carlsbad - La Costa Hotel and Spa, Carlsbad - Olympic Resort Hotel, Carlsbad - Tickle Pink Inn, Carmel - Allstar Inn, Carpinteria - Desert Princess Country Club, Cathedral City - Royce Suites Hotel, Cathedral City - Digger Bay, Central Valley - Marriott Hotel-Proposed, Century City - Westin Century Plaza Hotel, Century City - Neighborhood Inn-Proposed, Chatsworth - Red Lion Hotel, Chico - Otay Valley Inn, Chula Vista - Travelodge-Otay Valley, Chula Vista - Ramada Inn, City of Commerce - Sheraton Hotel, City of Industry - Allstar Inn, Coalinga - Harris Ranch Restaurant/Inn, Coalinga - Howard Johnson, Colton - Best Western Willow Tree Inn, Compton - Concord Hotel, Concord - Hilton Hotel, Concord - The Trees Inn, Concord - Motel 6, Corona - Hotel del Coronado, Coronado - Loews Coronado Bay Resort, Coronado - Madera Village Inn, Corte Madera - Ha' Penny Inn, Costa Mesa - La Quinta Hotel, Costa Mesa - Marriott Suites, Costa Mesa - Red Lion Hotel, Costa Mesa - Residence Inn, Costa Mesa - Pacifica Hotel, Culver City - Ramada Inn, Culver City - Courtyard by Marriott, Cupertino - Doubletree Hotel, Cupertino - Doubletree Hotel, Dana Point - Spa-Proposed, Danville - El Rancho, Davis - Furnace Creek Resort, Death Valley - Stovepipe Wells Village, Death Valley - Hilton, Del Mar - Days Inn, Diamond Bar - Compri Hotel, El Segundo - Proposed Summerfield, El Segundo - Days Inn, Emeryville - Holiday Inn-Bay Bridge, Emeryville - Lyons Restaurant, Emeryville - Budget Motel, Encinitis - Marriott Tenaya Lodge-Proposed, Fishcamp - Holiday Inn, Fort Myers Beach - All Suites Hotel/Athletic Club, Foster City - Clubtel-Proposed, Foster City - Courtyard by Marriott, Foster City - Holiday Inn, Foster City - Courtyard by Marriott, Fremont - Fremont Hotel, Fremont - Motel 6, Fremont - Residence Inn, Fremont - Allstar Inn, Fresno - AmeriSuite, Fresno - Chateau Inn, Fresno - Courtyard by Marriott, Fresno - Economy Inn, Fresno - Hacienda, Fresno - Holiday Inn, Fresno - Holiday Inn-Fresno Airport, Fresno - Howard Johnson Motel, Fresno - Piccadilly Inn, Fresno - Travelers Inn, Fresno - Travelers Lodge, Fresno - Griswold's Hotel, Fullerton - Holiday Inn, Fullerton - Marriott Hotel, Fullerton - Hotel-Proposed, Garden Grove - Hyatt Regency Alicante, Garden Grove - Princess Hotel, Garden Grove - Motel 6, Gilroy - Hyatt Regency-Proposed, Goleta - Allstar Inn, Hacienda Heights - Courtyard by Marriott, Hacienda Heights - Half Moon Bay Lodge, Half Moon Bay - Courtyard by Marriott, Harbor Boulevard - Grosvenor, Harborside-Pt. Loma - Inn at Foss Creek, Healdsburg - Chateau Marmont, Hollywood - Hollywood Palm Hotel, Hollywood - Sunset Towers Hotel, Hollywood - Waterfront Hilton Hotel, Huntington Beach - Compri Hotel, Hutton Centre - Grand Champions Resort, Indian Wells - Stouffer Esmerelda Resort, Indian Wells - Courtyard By Marriott, Irvine - Courtyard by Marriott - Proposed, Irvine - Embassy Suites, Irvine - Hilton Hotel, Irvine - Holiday Inn, Irvine - Hyatt Hotel, Irvine - La Quinta-Proposed, Irvine - Marriott Hotel, Irvine - Marriott-Proposed, Irvine - Registry Hotel, Irvine - Residence Inn-Proposed, Irvine - Amador Inn, Jackson - Embassy Suites, La Jolla - Hotel-Proposed, La Jolla - La Jolla Property, La Jolla - La Jolla Village Inn, La Jolla - Marriott Hotel, La Jolla - Residence Inn, La Jolla - Days Inn-Proposed, La Palma - PGA West Resort - Proposed, La Quinta - Lafayette Park Hotel, Lafayette - Laguna Shores, Laguna Beach - Holiday Inn, Laguna Hills - Ryokan Hotel-Proposed, Laguna Hills - Villa Valencia, Laguna Hills - Ritz Carlton, Laguna Niguel - Lake Mohave Resort, Lake Mohave - Resort at Squaw Creek, Lake Tahoe - Courtyard by Marriott, Larkspur Landing - Hilton, Las Cruces - Surf and Sand Hotel, Leguna Beach - Holiday Inn, Lido Beach - Motel-Proposed, Little Lake - Residence Inn, Livermore - Residence Inn-Proposed, Livermore - Breakers Hotel, Long Beach - Holiday Inn, Long Beach - Holiday Inn Airport, Long Beach - Marriott Hotel-Long Beach Airport, Long Beach - Marriott Hotel-Proposed, Long Beach - Ramada Renaissance Hotel, Long Beach - Residence Inn, Long Beach - Sheraton Long Beach & Office Tower, Long Beach - Airport Park Hotel, Los Angeles - Bel Age, Los Angeles - Biltmore Hotel, Los Angeles - Century Inn, Los Angeles - Checkers Hotel, Los Angeles - Courtyard by Marriott-Irvine Main, Los Angeles - Courtyard by Marriott-LAX Airport, Los Angeles - Crown Sterling Suites, Los Angeles - Days Inn, Los Angeles - Econo Lodge-Proposed, Los Angeles - Embassy Suites, Los Angeles - Embassy Suites-LAX-Proposed, Los Angeles - Four Seasons, Los Angeles - Hampton Inn-LAX, Los Angeles - Herrick and Campbell, Los Angeles - Hilton & Towers-LAX, Los Angeles - Hilton Hotel, Los Angeles - Holiday Inn Crowne Plaza-LAX, Los Angeles - Le Montrose Hotel, Los Angeles - Ma Maison Sofitel, Los Angeles - Macklowe Hotel, Los Angeles - Marriott Century City, Los Angeles - MCA Hotel-Proposed, Los Angeles - New Otani Hotel, Los Angeles - Playa Vista Development, Los Angeles - Stouffer Concourse Hotel, Los Angeles - Westin Bonaventure, Los Angeles - Westwood Marquis Hotel, Los Angeles - Los Gatos Lodge, Los Gatos - Macienda Inn, Los Gatos - Toll House Inn, Los Gatos - Residence Inn, Manhattan Beach - All Suite Hotel, Marina Del Rey - Marina Beach Hotel, Marina del Rey - Marina del Rey Hotel and Marina, Marina del Rey - Marina Suites Hotel, Marina Del Rey - Marriott Marina Del Rey, Marina Del Rey - Residence Inn, Meriden - Quality Suites Hotel - Proposed, Millbrae - Beverly Heritage Hotel, Milpitas - Crown Sterling Suites, Milpitas - Holiday Inn, Milpitas - Courtyard by Marriott, Mira Mesa - Grosvenor, Mission Bay - Motel Orleans, Modesto - Red Lion Hotel, Modesto - Red Lion-Proposed, Modesto - Carmel Mission Inn, Monterey - Doubletree Inn, Monterey - Former Monterey Hilton Hotel, Monterey - Monterey Plaza, Monterey - Plaza Hotel, Monterey - Sheraton Hotel, Monterey - Pebble Beach Company, Monterey County - Inn at Morro Bay, Morro Bay - Residence Inn, Mountain View - Inn at Napa Valley, Napa - Best Western Inn, Napa Valley - Clarion Hotel-Napa Valley, Napa Valley - Silverado, Napa Valley - Ha'Penny Motel, National City - Allstar Inn, Needles - Hilton-Newark/Fremont, Newark - Four Seasons Hotel, Newport Beach - Hotel Meridien, Newport Beach - Hyatt Newporter, Newport Beach - Newporter Resort, Newport Beach - Sheraton, Newport Beach - Days Inn-Proposed, North Hollywood - Northstar, North Lake Tahoe - Ramada Inn, Norwalk - Impact Study - Proposed Hotel, Oakdale - Hilton Inn, Oakland - Holiday Inn, Oakland - Holiday Inn-Oakland Airport, Oakland - Parc Oakland Hotel, Oakland - Resort - Proposed, Olympic Valley - Resort at Squaw Creek-Proposed, Olympic Valley - Clarion Hotel, Ontario - Compri Hotel, Ontario - Fairfield Inn, Ontario - Holiday Inn, Ontario - Lexington Hotel Suites, Ontario - Red Lion Hotel, Ontario - Doubletree Hotel, Orange - Woodfin Suites, Orange - Embassy Suites, Palm Desert - Marriott Desert Springs, Palm Desert - Canyon Resort, Palm Springs - Compri Hotel-Proposed, Palm Springs - Courtyard by Marriott, Palm Springs - Desert Princess, Palm Springs - Grand Champions Resort, Palm Springs - International Hotel and Resort, Palm Springs - Ocotillo Lodge, Palm Springs - Palm Canyon, Palm Springs - PGA West Resort-Proposed, Palm Springs - Spa Hotel at Mineral Springs, Palm Springs - Westin Hotel, Palm Springs - Grosvenor, Palmdale - Super 8, Palmdale - Cowper Square, Palo Alto - Garden Court, Palo Alto - Holiday Inn, Palo Alto - Stanford Park, Palo Alto - Marriott, Paradise Valley - All Suite Hotel-Proposed, Pasadena - Doubletree Hotel, Pasadena - Holiday Inn, Pasadena - Cascade Ranch Lodge, Pescadero - Elk Lodge, Petaluma - Hotel Petaluma, Petaluma - Hilton-Proposed, Pismo Beach - Hilton-Sea Point, Pismo Beach - Holiday Inn, Pismo Beach - Hotel-Proposed, Pismo Beach - Pismo II, Pismo Beach - Fairfield Inn, Placentia - Residence Inn, Placentia - Howard Hughes Center, Playa Vista - Pleasant Hill Inn, Pleasant Hill - Residence Inn, Pleasant Hill - Club Hilton Hotel-Proposed, Pleasanton - Compri Hotel, Pleasanton - Courtyard by Marriott, Pleasanton - Hilton, Pleasanton - Holiday Inn, Pleasanton - Pleasanton Creek, Pleasanton - Shilo Inn - Hilltop, Pomona - Compri Hotel, Rancho Bernardo - Radisson Suites, Rancho Bernardo - Comfort Inn Motel, Rancho Cordova - Courtyard by Marriott, Rancho Cordova - Economy Inn, Rancho Cordova - El Rancho, Rancho Cordova - Quality Suites-Proposed, Rancho Cordova - Sheraton Sunrise, Rancho Cordova - Marriott Rancho Las Palmas, Rancho Mirage - Mission Hills Hotel, Rancho Mirage - Resort Hotel-Proposed, Rancho Mirage - Westin Mission Hills Resort, Rancho Mirage - Bridge Bay Resort, Redding - Grand Manor Inn, Redding - La Quinta Inn, Redding - Motel 6, Redding - Motel Orleans, Redding - Red Lion Inn, Redding - Shasta Inn, Redding - Portofino Hotel & Yacht Club, Redondo Beach - Sheraton, Redondo Beach - Sofitel Redwood Shores, Redwood - Days Inn, Richmond - Best Western Carraige Inn, Ridgecrest - Days Inn, Riverside - Mission Inn-Proposed, Riverside - Omni Mission Inn, Riverside - Sheraton Hotel, Riverside - Red Lion Inn, Rohnert Park - Crown Sterling Suites, S.San Fransicso - Allstar Inn, Sacramento - Arco Arena II-Proposed, Sacramento - Arco Park, Sacramento - Catering Center - Proposed, Sacramento - Clarion Hotel, Sacramento - Compri Hotel-Proposed, Sacramento - Courtyard by Marriott, Sacramento - Courtyard by Marriott-S. Natomas, Sacramento - Hilton Hotel, Sacramento - Holiday Inn-Capital Plaza, Sacramento - Hotel-Proposed, Sacramento - Hyatt Arbitrat, Sacramento - Hyatt Regency, Sacramento - La Quinta Hotel, Sacramento - Motel Orleans, Sacramento - Radisson Hotel, Sacramento - Red Lion Inn, Sacramento - Residence Inn, Sacramento - Sacramento Inn, Sacramento - Sierra Inn, Sacramento - Sterling Hotel, Sacramento - Travelers Inn, Sacramento - Woodlake Inn, Sacramento - Harvest Inn, Saint Helena - Courtyard by Marriott, San Bruno - San Carlos Motel Development, San Carlos - Atlas Hotels/Mission Valley Inn, San Diego - Best Western Seven Seas Motor Lodge, San Diego - Budget Motel of America, San Diego - Catamaran Resort Hotel, San Diego - Center Pointe Development, San Diego - Comfort Inn, San Diego - Courtyard by Marriott-Mira Mesa, San Diego - Doubletree Hotel, San Diego - Embassy Suites, San Diego - Executive Lodge, San Diego - Hanalei Hotel, San Diego - Harbor Island Hotel-Proposed, San Diego - Harborside Inn-Point Loma, San Diego - Harbortown Marina Resort, San Diego - Holiday Inn Montgomery Airport, San Diego - Holiday Inn-Embarcadero, San Diego - Holiday Inn-Harbor View, San Diego - Horton Grand Saddlery, San Diego - Horton Park Plaza Hotel, San Diego - Howard Johnson Hotel, San Diego - Inter-Continental Hotel & Marina, San Diego - Kings Inn, San Diego - La Jolla Village Inn, San Diego - La Quinta Hotel, San Diego - Marriott Hotel-Mission Valley, San Diego - Marriott Twin Towers and Marina, San Diego - Mission Valley Inn, San Diego - Omni Hotel, San Diego - Radisson Hotel, San Diego - Ramada Inn, San Diego - Ramada Limited Suites, San Diego - Ramada Old Town, San Diego - Ramada Rancho Penasquitos, San Diego - Red Lion Inn, San Diego - Regency Plaza Hotel, San Diego - San Diego Marriott, San Diego - Seven Seas Lodge, San Diego - Sheraton Grand, San Diego - Sheraton Harbor Island East, San Diego - Super 8-Point Loma, San Diego - Symphony Towers, San Diego - Town and Country Hotel, San Diego - Travelodge Hotel Plaza, San Diego - U.S. Grant Hotel, San Diego - Westin-Proposed, San Diego - Abagail Inn, San Francisco - Bellevue Hotel, San Francisco - Cable Motor Inn, San Francisco - California Cafe, San Francisco - Campton Place, San Francisco - Cartwright Hotel, San Francisco - Chancellor Hotel, San Francisco - Clarion Inn-San Francisco Airport, San Francisco - Comfort Inn, San Francisco - Courtyard by Marriott-Airport, San Francisco - Embarcadero Inn, San Francisco - Fairmont Hotel, San Francisco - Grand Hyatt, San Francisco - Grosvenor Clift Hotel, San Francisco - Harbor Court Hotel, San Francisco - Hilton Hotel, San Francisco - Holiday Inn - Union Square, San Francisco - Holiday Inn Crowne Plaza, San Francisco - Holiday Inn-Civic Center, San Francisco - Holiday Inn-Fisherman's Wharf, San Francisco - Holiday Inn-Golden Gateway, San Francisco - Holiday Inn-South, San Francisco - Holiday Lodge, San Francisco - Hotel Diva, San Francisco - Hotel Meridien, San Francisco - Hotel Union Square, San Francisco - Hotel-Proposed, San Francisco - Hyatt Fisherman's Wharf, San Francisco - Hyatt Regency Embarcadero, San Francisco - Inn at Fisherman's Wharf, San Francisco - Inn at the Opera, San Francisco - Inn-Proposed, San Francisco - Juliana Hotel, San Francisco - King George Hotel, San Francisco - La Quinta Inn, San Francisco - La Quinta-Airport, San Francisco - Lambourne Hotel, San Francisco - Laurel Motor Inn, San Francisco - Majestic Hotel, San Francisco - Manx Hotel, San Francisco - Mark Twain, San Francisco - Marriott, San Francisco - Marriott San Francisco-Proposed, San Francisco - Marriott-Airport, San Francisco - Orchard Hotel, San Francisco - Pan Pacific Hotel, San Francisco - Parc 55 Hotel, San Francisco - Park Hyatt Hotel, San Francisco - Portman Hotel, San Francisco - Prescott Hotel, San Francisco - Queen Anne Hotel, San Francisco - Ramada Hotel, San Francisco - Regis Hotel, San Francisco - Ritz-Carlton Hotel, San Francisco - San Franciscan, San Francisco - San Francisco Hotel, San Francisco - Savoy Hotel, San Francisco - Sheraton Palace Hotel, San Francisco - Sheraton-Fisherman's Wharf, San Francisco - Sir Francis Drake Hotel, San Francisco - Stanford Court, San Francisco - Stouffer Stanford Court Hotel, San Francisco - Super 8-Fisherman's Wharf, San Francisco - Westin St. Francis, San Francisco - Crowne Sterling Suites, San Francisco - South - Olympic Club Golf Course, San Francisco/San Mateo - Budget Inn, San Jose - Courtyard by Marriott, San Jose - Cozy 8 Arena Hotel, San Jose - Fairmont Hotel, San Jose - Holiday Inn, San Jose - Ramada Renaissance, San Jose - Red Lion Inn, San Jose - Islander Motel, San Leandro - Apple Farm Inn, San Luis Obispo - Embassy Suites, San Luis Obispo - Holiday Inn, San Luis Obispo - Los Nomados Resort, San Luis Obispo - Twin Oaks Golf Course, San Marcos - Dunfey San Mateo Hotel, San Mateo - Compri Hotel-Proposed, San Pedro - Embassy Suites Hotel, San Rafael - Marriott Hotel-Proposed, San Ramon - Residence Inn, San Ramon - AAA Inn, Santa Ana - California Palms Hotel, Santa Ana - Comfort Inn, Santa Ana - Compri Hotel, Santa Ana - Embassy Suites Santa Ana, Santa Ana - Executive Lodge, Santa Ana - Howard Johnson, Santa Ana - Quality Inn, Santa Ana - Ramada Inn-Orange County, Santa Ana - El Encanto Hotel, Santa Barbara - Fess Parker's Red Lion Resort, Santa Barbara - Four Seasons Hotel, Santa Barbara - Montecito Inn, Santa Barbara - San Ysidro Ranch, Santa Barbara - Santa Barbara Inn, Santa Barbara - Biltmore Hotel & Suites, Santa Clara - Days Inn, Santa Clara - Doubletree Hotel, Santa Clara - Embassy Suites, Santa Clara - Inn At Saratoga, Santa Clara - Marriott Hotel, Santa Clara - Quality Suites Hotel, Santa Clara - Dream Inn, Santa Cruz - Hilton, Santa Maria - Motel 6, Santa Maria - Econo Lodge-Proposed, Santa Monica - Holiday Inn, Santa Monica - Holiday Inn at the Pier, Santa Monica - Park Hyatt Hotel, Santa Monica - Santa Monica Beach Hotel, Santa Monica - Santa Monica/Slatkin, Santa Monica - Allstar Inn, Santa Rosa - Doubletree Hotel, Santa Rosa - Fountaingrove Inn, Santa Rosa - Holiday Inn, Santa Rosa - Round Barn Inn-Proposed, Santa Rosa - Sheraton Round Barn, Santa Rosa - Days Inn, Seaside - Embassy Suites, Seaside - Seaside 8 Motel, Seaside - Valley Radisson, Sherman Oaks - Red Lion, Sonoma - Sonoma Mission Inn, Sonoma - Holiday Inn - Proposed, Sonora - Timberwolf Lodge, South Lake Tahoe - Holiday Inn, South San Francisco - Hotel-Proposed, South San Francisco - Meadowood Resort, St. Helena - Hilton Hotel, Stockton - Holiday Inn, Stockton - La Quinta Hotel, Stockton - Motel Orleans, Stockton - Paradise Point Manna, Stockton - Sheraton-Proposed, Stockton - Hilton, Sunnyvale - Holiday Inn, Sunnyvale - Neighborhood Suites, Sunnyvale - Ramada Inn, Sunnyvale - Sunnyvale Hilton, Sunnyvale - Temecula Creek Inn, Temecula Creek - Westlake Plaza Hotel, Thousand Oaks - Courtyard by Marriott, Torrance - Holiday Inn, Torrance - Marriott Hotel, Torrance - Residence Inn, Torrance - Holiday Inn, Union City - MCA Hotel-Proposed, Universal City - Comfort Inn, Vallejo - Holiday Inn, Van Nuys - La Quinta Hotel, Ventura - Ocean Resorts, Ventura - Sheraton, Ventura - Greentree Inn, Victorville - Doubletree Inn, Walnut Creek - Parkside Hotel, Walnut Creek - Ramada Renaissance Hotel, Walnut Creek - Royce Hotel-Proposed, Walnut Creek - Walnut Creek Project, Walnut Creek - Hampton Inn, West Covina - Le Bel Age, West Hollywood - Le Dufy, West Hollywood - Le Mondrian Hotel, West Hollywood - Hilton, Whittler - Hotel & Conference Center-Proposed, Woodland - Marriott Hotel-Woodland Hills, Woodland Hills - Skylonda Retreat, Woodside - Compri Hotel-Proposed, Yorba Linda - Marriott-Tenaya Lodge, Yosemite - Motel Orleans, Yuba City Colorado - Days Inn, Arapahoe - Continental Inn, Aspen - Ritz-Carlton Hotel-Proposed, Aspen - Hampton Inn, Aurora - Holiday Inn, Aurora - Radisson Hotel, Aurora - Radisson Southeast, Aurora - Raffles Hotel, Aurora - Comfort Inn, Avon - Boulder Hotel-Downtown, Boulder - Clarion Hotel, Boulder - Courtyard by Marriott, Boulder - Doubletree Hotel-Proposed, Boulder - Hilton Harvest House, Boulder - Holiday Inn, Boulder - Interlocken Conference Resort-Prop., Boulder - Proposed Golf Course, Boulder - Residence Inn, Boulder - Hilton, Breckenridge - Ski Lodge-Proposed, Breckenridge - Interlocken Conference Center, Broomfield - Interlocken Conference Center-Prop., Broomfield - Embassy Suites, Colorado Springs - Hilton, Colorado Springs - Howard Johnson, Colorado Springs - Le Baron Hotel, Colorado Springs - Marriott, Colorado Springs - Quality Inn, Colorado Springs - Red Lion Inn, Colorado Springs - Sheraton Inn, Colorado Springs - Grand Butte Hotel, Crested Butte - Best Western Regency, Denver - Brown Palace, Denver - Clarion Hotel-Denver Airport, Denver - Courtyard by Marriott-Airport, Denver - Courtyard by Marriott-Southeast, Denver - Days Inn, Denver - Denver Airport Hilton Inn, Denver - Doubletree Hotel, Denver - Embassy Suites, Denver - Embassy Suites-Airport, Denver - Hilton-Technical Center, Denver - Holiday Inn-Downtown, Denver - Holiday Inn-West, Denver - Jackson's Hole Sport, Denver - Marriott-Southeast, Denver - Marriott-West, Denver - Radisson Hotel, Denver - Red Lion Hotel, Denver - Regency Inn, Denver - La Quinta Inn, Denver - Airport - La Quinta, Denver - South - Red Lion Inn, Durango - Hilton-Denver, Englewood - Residence Inn, Englewood - Scanticon Conference Center, Englewood - Marriott Hotel-Proposed, Fort Collins - Holiday Inn, Golden - Marriott-Denver West, Golden - Ramada Inn, Grand Junction - Sheraton-Proposed, Keystone - Compri Hotel, Lakewood - Hampton Inn, Lakewood - Sheraton Inn, Steamboat Springs - Proposed Hotel, Telluride - Days Inn, Vail - Doubletree Hotel, Vail - Lodge at Vail, Vail - Marriott's Mark Resort, Vail - Westin Vail Resort, Vail - Ramada Hotel, Westminster - Winter Park Resort, Winter Park Connecticut - Chester Inn-Chester, Chester - Inn-Proposed, Chester - Super 8-Proposed, Cromwell - Danbury Hilton & Towers, Danbury - Residence Inn, Danbury - Holiday Inn, Darien - Howard Johnson Lodge, Darien - Ramada Inn, Darien - Holiday Inn, East Hartford - Howard Johnson Lodge, East Lyme - Days Inn-Proposed, Enfield - Greenwich Habor Inn, Greenwich - Howard Johnson Lodge, Greenwich - Showboat Inn, Greenwich - Hotel-Proposed, Groton - Hilton Hotel, Hartford - Holiday Inn-Proposed, Hartford - Motel 6, Hartford - Ramada Inn, Hartford - Sheraton Tobacco Valley Inn, Hartford - Summit Hotel, Hartford - Super 8 Motel, Hartford - Susse Chalet, Hartford - Residence Inn By Marriott, Meriden - Holiday Inn, Milford - Susse Chalet, Milford - Howard Johnson Lodge, Mystic - Mystic Ramada Inn, Mystic - Holiday Inn, New Britain - Ramada Inn, New Britain - Colony Inn, New Haven - Holiday Inn, New Haven - Howard Johnson, New Haven - Quality Inn, New Haven - Residence Inn, New Haven - Radisson Hotel, New London - Best Western-Proposed, New Milford - Courtyard by Marriott, Norwalk - Holiday Inn, Norwalk - Howard Johnson, Norwalk - Ramada Inn, Norwalk - Susse Chalet, Rocky Hill - Ramada Hotel-Proposed, Shelton - Residence Inn - Shelton, Shelton - Heritage Village, Southbury - Southbury Hotel, Southbury - Susse Chalet, Southington - Days Inn, Stamford - Executive Hotel, Stamford - Harley Hotel, Stamford - Holiday Inn-Crowne Plaza, Stamford - Inn at Mill River, Stamford - Le Pavillon Hotel, Stamford - Marriott, Stamford - Radisson Tara Hotel, Stamford - Sheraton, Stamford - Best Western-Proposed, Stratford - Stratford Motor Lodge, Stratford - Marriott Hotel, Trumbull - Courtyard by Marriott, Wallingford - Susse Chalet, Wallingford - Howard Johnson Plaza Hotel, Waterbury - Super 8-Proposed, Waterbury - Residence Inn-Proposed, Waterford - Holiday Inn, Westbury - The Island Inn, Westbury - Courtyard by Marriott, Windsor - Sheraton Tobacco Valley Inn, Windsor - Holiday Inn-Proposed, Windsor Locks Delaware - Wilmington Hilton, Claymont - Rusty Rudder, Dewey Beach - Residence Inn-Proposed, Newark - Hilton Hotel, Wilmington - Hotel-Proposed, Wilmington - Marriott Suites, Wilmington - Residence Inn-Proposed, Wilmington District of Columbia - All Suite Hotel - Proposed, Washington - Bellevue Hotel, Washington - Canterbury Hotel, Washington - Capital Hilton, Washington - Capitol Hill Hotel, Washington - Castleton Hotel, Washington - Comfort Inn, Washington - Convention Center Inn, Washington - Dupont Plaza, Washington - Embassy Row Hotel, Washington - Fairfax Hotel, Washington - Fairmont Hotel, Washington - Four Seasons Hotel, Washington - General Scott Inn, Washington - Georgetown Hotel, Washington - Grand Hotel, Washington - Grand Hyatt, Washington - Hampshire House, Washington - Harambee House, Washington - Hay Adams Hotel, Washington - Holiday Inn Crowne Plaza, Washington - Holiday Inn-Capitol, Washington - Holiday Inn-Georgetown, Washington - Holiday Inn-Governor House, Washington - Hotel Washington, Washington - Howard Johnson, Washington - Hyatt Regency-Capitol, Washington - Hyatt-Convention Center, Washington - International Inn, Washington - Intrigue Hotel, Washington - Jefferson Hotel, Washington - Lombardy Tower Apartment Hotel, Washington - Madison Hotel, Washington - Manger Annapolis Hotel, Washington - Manger Hamilton Hotel, Washington - Manger Hay Adams Hotel, Washington - Marriott-Key Bridge, Washington - Mayflower Hotel, Washington - Omni Georgetown Hotel, Washington - Omni Shoreham Hotel, Washington - Park Terrace Hotel, Washington - Phoenix Park Hotel, Washington - Plaza Hotel, Washington - Potomac Hotel Group, Washington - Quality Inn-Capitol Hill, Washington - Quality Inn-Downtown, Washington - Ramada Inn-Central, Washington - Ramada Renaissance Hotel, Washington - Ritz-Carlton, Washington - River Inn, Washington - Riverside Towers, Washington - Sheraton City Centre, Washington - Sheraton Grand Hotel, Washington - Shoreham Hotel, Washington - St. James, Washington - State Plaza, Washington - Statler Hilton Hotel, Washington - Washington Hilton, Washington - Washington Plaza, Washington - Watergate Hotel, Washington - Wyndham Bristol Hotel, Washington Florida - Holiday Inn, Altamonte Springs - La Quinta, Altamonte Springs - Turnberry Isle Resort, Aventura - Boca Raton Hotel and Club, Boca Raton - Boca West, Boca Raton - Deerfield Beach Hilton, Boca Raton - Embassy Suites, Boca Raton - Park Place Suite Hotel, Boca Raton - Petite Suites, Boca Raton - Residence Inn, Boca Raton - Days Inn, Brandenton - South Seas Resort, Captive Island - Days Inn, Clearwater - Days Inn-Proposed, Clearwater - Holiday Inn - Central/Clearwater, Clearwater - La Quinta Inn, Clearwater - Sheraton Sand Key Hotel, Clearwater - Holiday Inn - Gulfview South, Clearwater Beach - Holiday Inn - Surfside North, Clearwater Beach - Howard Johnson, Clermont - Econolodge, Cocoa Beach - Hilton Hotel, Cocoa Beach - Holiday Inn, Cocoa Beach - Howard Johnson, Cocoa Beach - Perkins Restaurant, Cocoa Beach - Coconut Grove Hotel, Coconut Grove - Mayfair House, Coconut Grove - Proposed Hampton Inn, Coconut Grove - Biltmore Hotel, Coral Gables - Holiday Inn, Coral Gables - Holiday Inn (Court), Coral Gables - Plantation Hotel, Crystal River - Sheraton Inn, Cypress Gardens - Budget Inn, Davenport - Daytona Beach Surfside Regency, Daytona Beach - Howard Johnson, Daytona Beach - La Quinta Inn, Daytona Beach - Pirates Cove, Daytona Beach - Sheraton Inn, Daytona Beach - Crown Sterling Suites, Deerfield Beach - Days Inn, Deerfield Beach - Hilton Hotel, Deerfield Beach - Horizon Club, Deerfield Beach - Sheraton Inn, Deland - Hilton Hotel, Disney World - Holiday Inn, Edgewater - Knights Inn, Florida City - AmeriSuites Hotel-Proposed, Fort Lauderdale - Bahia Mar Hotel, Fort Lauderdale - Comfort Suites, Fort Lauderdale - Compri Hotel-Proposed, Fort Lauderdale - Costa Del Sol, Fort Lauderdale - Crown Sterling Suites, Fort Lauderdale - Days Inn, Fort Lauderdale - Embassy Suites Hotel, Fort Lauderdale - Executive House, Fort Lauderdale - Hilton Hotel, Fort Lauderdale - Hilton Inverrary, Fort Lauderdale - Holiday Inn - Galleria, Fort Lauderdale - Holiday Inn - North Beach, Fort Lauderdale - Holiday Inn-Proposed, Fort Lauderdale - Marriott Harbor Beach Hotel, Fort Lauderdale - Marriott Hotel & Marina, Fort Lauderdale - Marriott Hotel-Cypress Road, Fort Lauderdale - Pier 66 Hotel and Marina, Fort Lauderdale - Port Everglades Hotel, Fort Lauderdale - Stouffer Hotel, Fort Lauderdale - Days Inn, Fort Meyers - Courtyard by Marriott, Fort Myers - Holiday Inn, Fort Myers - La Quinta Hotel, Fort Myers - Sheraton Harbor Place-Proposed, Fort Myers - Sheraton Motor Inn, Fort Myers - Proposed Hotel, Fort Myers Beach - American Way, Fort Pierce - Days Inn, Fort Walton Beach - Holiday Inn - Airport, Fort.Lauderdale - Days Inn-University Center, Gainesville - Fairfield Inn, Gainesville - Howard Johnson Lodge-I-75, Gainesville - La Quinta Hotel, Gainesville - University Centre Hotel, Gainesville - Holiday Inn, Hialeah - Motel, Hillsboro Beach - Days Inn, Hollywood - Diplomat Hotel, Hollywood - Holiday Inn, Hollywood - Quality Suites - Oceanside, Indiatlantic - Hilton Inn, Inverrary - Best Inn, Jacksonville - Bradbury Suites-Proposed, Jacksonville - Compri Hotel-Proposed, Jacksonville - Courtyard By Marriott, Jacksonville - Days Inn, Jacksonville - Doubletree Club Hotel, Jacksonville - Hampton Inn, Jacksonville - Hotel-Proposed, Jacksonville - Jacksonville Hotel, Jacksonville - Residence Inn, Jacksonville - Sheraton Hotel, Jacksonville - Wyndham Lakes Hotel, Jacksonville - Sheraton Beach Hotel, Jensen Beach - Howard Johnson, Juno Beach - Hilton Hotel, Jupiter - Key Biscayne, Key Biscayne - Howard Johnson Lodge, Key Largo - Casa Marina Marriott, Key West - Fairfield Inn, Key West - Hampton Inn-Roosevelt Rd., Key West - Holiday Inn, Key West - Hyatt Hotel, Key West - La Concha Holiday Inn, Key West - Pier House Inn and Beach Club, Key West - Reach Hotel, Key West - Santa Maria Hotel, Key West - Timeshare Resort, Key West - Best Western Vacation Lodge, Kissimmee - Days Inn, Kissimmee - Days Inn West, Kissimmee - Days Lodge, Kissimmee - Howard Johnson Plaza Hotel, Kissimmee - Howard Johnson's, Kissimmee - KOA Campground, Kissimmee - Old Town Retail Complex, Kissimmee - Quality Suites, Kissimmee - Quality Suites-Maingate, Kissimmee - Save Inn, Kissimmee - Sheraton Lakeside, Kissimmee - Suite Hotel-Proposed, Kissimmee - Wynfield Inn, Kissimmee - Days Inn, Lake Buena Vista - Embassy Suites-Proposed, Lake Buena Vista - Hilton Hotel-Disney World, Lake Buena Vista - Marriott Orlando World Center, Lake Buena Vista - Days Inn, Lake City - Flagship Inn, Lake County - Travelodge Motel, Lake County - Lake Park Inn, Lake Park - Holiday Inn, Lake Placid - Hampton Inn-Proposed, Lakeland - Hotel-Proposed, Lakeland - Howard Johnson, Lakeland - Resort Hotel-Proposed, Lakeland - Resort-Imperial Lake-Prpsd., Lakeland - Proposed Hotel, Lee County - Sonesta Sanibel Harbour, Lee County - Holiday Inn, Lido Beach - Holiday Inn, Longboat Kay - Holiday Inn - Madiera Beach, Madiera - Howard Johnson, Marathon - Radisson Suite Resort, Marco Island - Holiday Inn, Marianna - Oceanfront Hotel, Melbourne - Quality Suites, Melbourne - Bahia Mar Hotel & Yachting Club, Miami - Biscayne Bay Marriott, Miami - Courtyard by Marriott, Miami - Crown Sterling Suites, Miami - Doral Ocean Beach Resort, Miami - Fairfield Inn, Miami - Hilton Hotel-Proposed, Miami - Holiday Inn Civic Center, Miami - Holiday Inn-Airport (Le Juene Rd.), Miami - Holiday Inn-Calder, Miami - Howard Johnson Hotel-Broad Causeway, Miami - Howard Johnson Hotel-Port of Miami, Miami - Howard Johnson Lodge-Golden Glades, Miami - Howard Johnson Lodge-Int'l Airport, Miami - Hyatt Regency Hotel, Miami - Inter-Continental Hotel, Miami - Jockey Club, Miami - Marriott Hotel-Downtown, Miami - Miami Airport Ramada, Miami - Proposed AmeriSuites, Miami - Propsed Hampton Inn, Miami - Residence Inn-Proposed, Miami - Sheraton River House, Miami - Sofitel Miami, Miami - Alexander Hotel, Miami Beach - Art Deco Hotel, Miami Beach - Cresent Timeshare, Miami Beach - Delano Hotel, Miami Beach - Doral Beach Hotel, Miami Beach - Eden Roc Hotel, Miami Beach - Fontainebleu Hotel, Miami Beach - Holiday Inn, Miami Beach - Holiday Inn-Central, Miami Beach - Holiday Inn-North, Miami Beach - Holiday Inn-Oceanside, Miami Beach - Holiday Inn-South, Miami Beach - Hotel-Proposed, Miami Beach - Nautilus Club Hotel, Miami Beach - Palm Resort on the Ocean, Miami Beach - Pan American Radisson, Miami Beach - Proposed Hotel, Miami Beach - Shelborne Beach Hotel, Miami Beach - Sheraton Beach, Miami Beach - Solymar Hotel-Proposed, Miami Beach - Quality Inn, Naples - Quality Inn-Gulfcoast, Naples - Registry Hotel at Pelican Bay, Naples - Registry Resort-Proposed, Naples - Super 8 Motel-Proposed, Naples - World Tennis Resort, Naples - Hyatt Newporter Hotel, Newport Beach - Hilton Hotel, North Redington Beach - Masters Economy Inn, North Seffner - Amfac Hotel, Orlando - Army lodging-Proposed, Orlando - Comfort Suites Hotel, Orlando - Compri Hotel-Airport-Proposed, Orlando - Compri Hotel-Proposed, Orlando - Courtyard - Orlando Airport, Orlando - Days Inn, Orlando - Days Inn and Lodge-Florida Mall, Orlando - Days Inn Civic Center, Orlando - Days Inn East of Universal Studios, Orlando - Days Inn-E/O Magic Kingdom, Orlando - Days Inn-Proposed, Orlando - Days Inn-Sandlake Road, Orlando - Days Suites-E/O Magic Kingdom, Orlando - Dolphin Hotel-Proposed, Orlando - Dutch Inn, Orlando - Embassy Suites, Orlando - Fairfield Inn, Orlando - Fairfield Inn-Airport, Orlando - Grand Cypress Resort, Orlando - Hampton Inn - Proposed, Orlando - Heritage Inn, Orlando - Holiday Inn Central Park, Orlando - Holiday Inn Crowne Plaza, Orlando - Holiday Inn-Airport, Orlando - Holiday Inn-International Drive, Orlando - Holiday Inn-Lee Road, Orlando - Holiday Inn-Maingate West, Orlando - Holiday Inn-Orange Blossom Trail, Orlando - Howard Johnson - Walt Disney World, Orlando - Howard Johnson-Kirkman, Orlando - Howard Johnson-Lake Holden, Orlando - Howard Johnson-Maingate, Orlando - Hyatt Grand Cypress, Orlando - Hyatt Regency Grand Cypress, Orlando - Hyatt-W. Irlo Bronson Mem. Hwy., Orlando - International Inn, Orlando - Kon Tiki Village, Orlando - La Quinta Hotel-Airport, Orlando - La Quinta Inn, Orlando - Omni Orlando, Orlando - Orlando Airport Hotel-Proposed, Orlando - Orlando Hamiton, Orlando - Orlando Plaza Hotel, Orlando - Orlando Twin Towers Hotel, Orlando - Park Suite Hotel-Proposed, Orlando - Peabody Hotel, Orlando - Princess Hotel and Spa, Orlando - Proposed Wellesley Inn, Orlando - Quality Inn, Orlando - Radisson Hotel-Aquatic Center, Orlando - Regency Inn, Orlando - Residence Inn By Marriott, Orlando - Rodeway Inn, Orlando - Save Inn, Orlando - Sheraton Jetport Inn, Orlando - Sheraton Lakeside, Orlando - Sheraton Twin Towers, Orlando - Sonesta Village Resort, Orlando - Stouffer Orlando Resort, Orlando - Swan Hotel-Proposed, Orlando - Thriftway Motel, Orlando - Wynfield Inn, Orlando - American Way, Osceola - Sheraton Gateway Motel, Osceola - Brazilian Court Hotel, Palm Beach - Heart of Palm Beach Hotel, Palm Beach - Hilton Inn, Palm Beach - Palm Court, Palm Beach - Holiday Inn, Palm Beach Garden - Days Inn, Panama City - Marriott's Bay Point, Panama City - Super 8, Panama City - Days Inn, Pensacola - Hilton Hotel, Pensacola - La Quinta Hotel, Pensacola - Residence Inn, Pensacola - Super 8, Pensacola - Proposed Hampton Inn, Pensacola Beach - Comfort Inn, Perdido Key - La Quinta, Pinellas County - Courtyard by Marriott, Plantation - Holiday Inn Plantation, Plantation - Sheraton Suites, Plantation - Days Inn, Pompano Beach - Palm-Aire Spa Resort, Pompano Beach - Lodge & Bath Club, Ponte Verde - Howard Johnson, Punta Gorda - Days Inn, Riviera Beach - Safety Harbor Spa, Safety Harbor - Holiday Inn, Saint Augustine - Howard Johnson, Saint Augustine - Courtyard by Marriott, Saint Petersburg - Don Ceahsar Beach Resort, Saint Petersburg - Hilton Hotel, Saint Petersburg - Howard Johnson, Saint Petersburg - Ramada Inn, Saint Petersburg - Residence Inn, Saint Petersburg - Saint Petersburg Motel, Saint Petersburg - Sheraton Hotel and Marina, Saint Petersburg - Vinoy Park Hotel, Saint Petersburg - Countryside Inn, Sanford - Days Inn, Sanford - Holiday Inn, Sanford - Azure Tides Resort-Proposed, Sarasota - Days Inn, Sarasota - Holiday Inn-Lido Beach, Sarasota - Proposed Hotel, Sarasota - Holiday Inn, Sebring - Embassy Suites, Singer Island - Hilton, Singer Island - Econo Lodge, Starke - Radisson Pan American Hotel, Sunny Isles - Best Inn, Tallahassee - Courtyard by Marriott, Tallahassee - Days Inn-Tallahassee, Tallahassee - American Way, Tampa - Courtyard by Marriott, Tampa - Days Inn, Tampa - Embassy Suites-Airport, Tampa - Hampton Inn-Airport, Tampa - Hilton-Airport, Tampa - Holiday Inn, Tampa - Holiday Inn Sahal Park, Tampa - Holiday Inn-Airport, Tampa - Manger Motor Inn, Tampa - Marriott Hotel, Tampa - Omni Tampa Hotel at Westshore, Tampa - Ramada Inn, Tampa - Rodeway Inn, Tampa - Saddlebrook Resort, Tampa - Sheraton Grand West, Tampa - Master Economy Inn, Tampa-East(Selfner) - Master Economy Inn, Tampa-North(Zephyrhills) - Days Inn, Vero Beach - Holiday Inn-Countryside, Vero Beach - Holiday Inn-Oceanside, Vero Beach - Saddlebrook Resort, Wesley Chapel - Courtyard by Marriott, West Melbourne - Airport Centre, West Palm Beach - Courtyard by Marriott, West Palm Beach - Days Inn, West Palm Beach - Field Palm Hotel, West Palm Beach - Hilton-Airport, West Palm Beach - Howard Johnson Lodge, West Palm Beach - Hyatt Hotel of the Palm Beaches, West Palm Beach - Royce Hotel, West Palm Beach - Masters Economy Inn, Zephyrhills Georgia - Atlanta Radisson Hotel, Atlanta - Atlanta Terrace Motel, Atlanta - Comfort Inn, Atlanta - Compri Hotel, Atlanta - Courtyard By Marriott-Airport North, Atlanta - Courtyard by Marriott-Airport South, Atlanta - Courtyard by Marriott-Cumberland, Atlanta - Courtyard by Marriott-Executive Pk., Atlanta - Courtyard by Marriott-Gwinnett, Atlanta - Courtyard by Marriott-Jimmy Carter, Atlanta - Courtyard by Marriott-PeachtrDunwdy, Atlanta - Courtyard by Marriott-Perimeter, Atlanta - Courtyard by Marriott-Rosewell, Atlanta - Courtyard by Marriott-Windy Hill, Atlanta - Cresthil Inn-Proposed, Atlanta - Days Inn, Atlanta - Days Inn - Northlake, Atlanta - Doubletree Hotel, Atlanta - Embassy Suites-Atlanta Perimeter, Atlanta - Embassy Suites-Buckhead, Atlanta - Embassy Suites-Galleria, Atlanta - F.W.W. Hotel, Atlanta - Fairfield Inn-Airport, Atlanta - Fairfield Inn-Gwinnett, Atlanta - Fairfield Inn-North Lake, Atlanta - Fairfield Inn-Northwest, Atlanta - Fairfield Inn-Peachtree, Atlanta - Fairfield Inn-South Lake, Atlanta - Hampton Inn-Airport, Atlanta - Hilton Inn, Atlanta - Holiday Inn Crowne Plaza, Atlanta - Holiday Inn-I-20 East, Atlanta - Holiday Inn-I-85 Monroe Drive, Atlanta - Holiday Inn-Perimeter Dunwooody, Atlanta - Hotel-Downtown-Proposed, Atlanta - Hotel-Proposed, Atlanta - Howard Johnson Hotel-Hartsfield, Atlanta - Howard Johnson-Airport, Atlanta - Howard Johnson-Northeast, Atlanta - Howard Johnson-Northwest, Atlanta - Howard Johnson-South, Atlanta - Hyatt Atlanta-Airport, Atlanta - La Quinta - Stone Mountain, Atlanta - La Quinta Hotel, Atlanta - La Quinta Hotel-West, Atlanta - Marriott Atlanta Airport, Atlanta - Marriott Hotel, Atlanta - Marriott Hotel-Downtown, Atlanta - Marriott Marquis, Atlanta - Marriott Suites Hotel-Proposed, Atlanta - Marriott-Perimeter, Atlanta - Master Economy Inn, Atlanta - Motel 6, Atlanta - Neighborhood Inn, Atlanta - Omni International Hotel, Atlanta - Perimeter North Inn, Atlanta - Proposed AmeriSuites, Atlanta - Quality Inn-Central, Atlanta - Radisson Inn, Atlanta - Ramada Inn-Perimeter, Atlanta - Residence Inn by Marriott-Dunwoody, Atlanta - Residence Inn-Airport, Atlanta - Residence Inn-Buckhead, Atlanta - Residence Inn-Northwest, Atlanta - Sheraton Century Center, Atlanta - Sheraton-Airport, Atlanta - Sporting Club at the Concourse, Atlanta - Stouffer Hotel-Proposed, Atlanta - Swissotel, Atlanta - Terrace Motel, Atlanta - Waverly Hotel, Atlanta - Westin Lenox Hotel, Atlanta - Westin Peachtree Plaza, Atlanta - Wyndham Garden Hotel, Atlanta - Hyatt Hotel, Atlanta Airport - Hampton Inn, Atlanta-Buckhead - Courtyard by Marriott, Augusta - Landmark Hotel, Augusta - Masters Economy Inn - Gordon Hwy., Augusta - Masters Economy Inn - Warner Robins, Augusta - Masters Economy Inn - Washington Rd, Augusta - Holiday Inn, Brunswick - Super 8, Brunswick - Days Inn, Calhoun - Super 8, Cartersville - Days Inn, Chamblee - Comfort Inn-Proposed, College Park - Holiday Inn Crowne Plaza, College Park - Courtyard by Marriott, Columbus - La Quinta Inn, Columbus - Super 8, Columbus - Best Inn, Dalton - Days Inn, Dalton - Holiday Inn-Proposed, Decatur - Sheraton Hotel, Decatur - Best Western-Perimeter-North, Doraville - Days Inn - Gwinnett, Duluth - Howard Johnson, Forsyth - Holiday Inn-Proposed, Gwinnett County - Holiday Inn, Jekyll Island - Jekyll Island Inn-Proposed, Jekyll Island - Hilton Hotel, Macon - Master Economy Inn, Macon - Best Inn, Marietta - Courtyard by Marriott-Delk Road, Marietta - Lafayette Hotel, Marietta - Hampton Inn, Marrietta (Atlanta) - Master Economy Inn, McDonough - Courtyard by Marriott-Perimeter, Norcross - Motel 6, Norcross - Hilton Hotel, Peachtree Corners - Super 8, Rome - Best Western, Savannah - Courtyard by Marriott, Savannah - Days Inn, Savannah - Days Inn-Bay Street, Savannah - Days Inn-Mall Blvd., Savannah - Fairfield Inn, Savannah - Hotel-Proposed, Savannah - Mulberry Inn, Savannah - Radisson Hotel-Proposed, Savannah - Royal Savannah, Savannah - Sheraton Savannah Resort & C.C., Savannah - Town and Country Motel, Savannah - Days Inn, Savannah Beach - Howard Johnson, Smyrna - Master Economy Inn, Tilton - Courtyard by Marriott-Northlake, Tucker - Master Economy Inn, Warner Robins - Super 8, Warner Robins Hawaii - Hyatt Regency Waikoloa, Hawaii - Mauna Kea Hotel, Hawaii - Kahala Hilton, Honolulu - Plaza Hotel, Honolulu - Waikiki Beachcomber, Honolulu - Waikiki Hobron, Honolulu - Coco Palms Resort, Kauai - Kauai Surf Hotel, Kauai - Westin Kauai-Kauai Lagoons Resort, Kauai - Westin Kauai-Proposed, Kauai - Kona Village, Kona - Royal Sea Cliff Resort, Kona - Westin Kauai at Kauai Lagoon, Lihue - Hyatt Regency, Maui - Marriott Resort, Maui - Maui Lu Hotel, Maui - Maui Surf Hotel, Maui - Westin Maui, Maui - Hawaiian Regent Hotel-Waikiki Beach, Oahu - Hotel-Proposed-Schofield Barracks, Oahu - Hyatt Regency Waikiki, Oahu - Kiahuna Plantation, Poipu Beach, Kauai - Transient Lodging Facilities, Schofield Barracks - Hilton Hawaiian Village, Waikiki - Grand Hyatt Wailea, Wailea Idaho - Compri Hotel, Boise - Holiday Inn, Boise - Holiday Inn-Airport, Boise - Red Lion Inn, Boise - Super 8, Boise - Motel 6, Coeur d'Alene - Super 8, Coeur d'Alene - Proposed Motel, Coure d'Alene - Super 8, Lewiston - Cotton Tree Inn, Pocatello - Super 8, Sand Point - Busterback Ranch, Sawtooth Valley Illinois - Arlington Park Hilton, Arlington Heights - Church Creek, Arlington Heights - Courtyard by Marriott, Arlington Heights - La Quinta Hotel, Arlington Heights - Hampton Inn-Proposed, Bedford Park - Best Inn, Bloomington - Fairfield Inn-Normal, Bloomington - Holiday Inn, Bloomington - Indian Lakes Resort, Bloomington - Ramada Inn, Bloomington - Super 8, Bloomington - Cresthil-Proposed, Buffalo Grove - Holiday Inn, Champaign - La Quinta Inn, Champaign - Radisson Suites - Champaign, Champaign - Suite Hotel-Proposed, Champaign - Super 8, Champaign - Ambassador West Hotel, Chicago - Americana Congress, Chicago - Conrad Hilton Hotel, Chicago - Courtyard by Marriott-Glenview, Chicago - Courtyard by Marriott-Highland, Chicago - Courtyard by Marriott-Lincoln, Chicago - Courtyard by Marriott-O'Hare, Chicago - Courtyard by Marriott-Waukegan, Chicago - Courtyard by Marriott-Woodale, Chicago - Days Inn, Chicago - Executive House, Chicago - Fairfield Inn-Lansing, Chicago - Fairfield Inn-Willowbrook, Chicago - Fairmont Hotel, Chicago - Guest Quarters Hotel, Chicago - Hilton and Towers, Chicago - Hilton-O'Hare, Chicago - Holiday Inn-Merchandise Mart, Chicago - Howard Johnson-O'Hare Int'l Airport, Chicago - Hyatt Regency, Chicago - Hyatt Suites Hotel, Chicago - Inter-Continental Hotel-Proposed, Chicago - La Quinta Inn - Hoffman Est., Chicago - Le Meridien, Chicago - Lenox House, Chicago - Lincoln Hotel, Chicago - Mark Twain Hotel, Chicago - Marriott-O'Hare, Chicago - Mayfair Regent, Chicago - McClurg Holiday Inn, Chicago - McCormick Inn Hotel, Chicago - Morton Hotel, Chicago - Omni Ambassador East, Chicago - Omni Morton Hotel, Chicago - Palmer House Hotel, Chicago - Ramada Inn - Lakeshore, Chicago - Ramada O'Hare, Chicago - Residence Inn-Deerfield, Chicago - Residence Inn-Lombard, Chicago - Sheraton Hotel-Downtown, Chicago - Sheraton Hotel-Proposed, Chicago - Sheraton O'Hare, Chicago - Sheraton Plaza Hotel, Chicago - Summerfield Suites Hotel, Chicago - Swissotel, Chicago - Tremont Hotel, Chicago - Westin Hotel, Chicago - Whitehall Hotel, Chicago - Hilton Hotel, Collinsville - Holiday Inn, Collinsville - Super 8, Columbus - Super 8, Crystal Lake - Super 8, Decatur - Courtyard by Marriott, Deerfield - Embassy Suites, Deerfield - Marriott Suites Hotel, Deerfield - Holiday Inn-Chicago, Des Plaines - Hotel-Proposed, Des Plaines - Compri Hotel-Proposed, Downers Grove - Radisson Suite Hotel, Downers Grove - Best Inn, Effingham - Ramada Inn, Elgin - Hampton Inn, Elk Grove Village - Marriott Suites, Elk Grove Village - Holiday Inn, Elmhurst - Orrington Hotel, Evanston - Drury Inn, Fairview Heights - Conference Center & Resort-Proposed, Fox Lake - Holiday Inn, Freeport - Hotel-Proposed, Gurnee - La Quinta Hotel, Hoffman Estates - Carson Inn, Itasca - Hamilton Wyndham, Itasca - Nordic Hills, Itasca - Holiday Inn, Joliet - Proposed Harrah's Riverboat, Joliet - Days Inn, Kankakee - Holiday Inn, LaSalle - Marriott Hotel, Lincolnshire - Hilton Inn, Lisle - Holiday Inn Crowne Plaza, Lisle - Embassy Suites, Lombard - Holiday Inn, Macomb - Best Inn, Marion - Best Inn, Mount Vernon - Holiday Inn, Mount Vernon - Ramada Inn, Mount Vernon - Courtyard by Marriott, Naperville - Ramada Inn, Naperville - Sheraton Naperville, Naperville - O'Hareport Hotel, Northlake - Courtyard by Marriott, Oakbrook Terrace - Super 8, Okawville - Fairfield Inn, Peoria - Days Inn, Peru - Super 8, Peru - Courtyard by Marriott, Rockford - Fairfield Inn, Rockford - Hampton Inn, Rockford - Embassy Suites, Rosemont - Quality Inn/Clarion, Rosemont - Sheraton Int'l At O'Hare, Rosemont - Holiday Inn, Salem - Compri Hotel, Schaumburg - Embassy Suites, Schaumburg - Marriott Schaumburg, Schaumburg - Holiday Inn, South Beloit - Ramada Renaissance Hotel, Springfield - Sheraton Inn, Springfield - Super 8-East, Springfield - Super 8-South, Springfield - Jumer's Castle, Urbana - Best Inn, Waukegan - Super 8, Waukegan Indiana - Clarion Fourwinds Inn, Bloomington - Holiday Inn, Bloomington - Inn at the Four Winds, Bloomington - Ramada Inn, Bloomington - Harbor Point Resort, Brookville Lake - Super 8, Columbus - Best Inn, Fort Wayne - Hilton, Fort Wayne - Downtown Hotel, Gary - Sheraton, Gary - Holiday Inn, Goshen - Howard Johnson, Hammond - Quality Inn, Hammond - Courtyard by Marriott-Airport, Indianapolis - Courtyard by Marriott-Carmel, Indianapolis - Courtyard by Marriott-Castleton, Indianapolis - Embassy Suites-Claypool Center, Indianapolis - Fairfield Inn-Castleton, Indianapolis - Fairfield Inn-College Park, Indianapolis - Hampton Inn-Proposed, Indianapolis - Hilton Hotel-Airport, Indianapolis - Hilton Inn-Downtown, Indianapolis - Holiday Inn-South, Indianapolis - Holiday Inn-Southeast, Indianapolis - Knights Inn, Indianapolis - Midway Motor Lodge, Indianapolis - Mohawk Inn, Indianapolis - Motel 6, Indianapolis - Proposed Fairfield Inn, Indianapolis - Proposed Residence Inn, Indianapolis - Radisson, Indianapolis - Ramada-Airport, Indianapolis - Wyndham Garden Hotel, Indianapolis - La Quinta Inn, Indianapolis Airport - Hilton Inn, Jeffersonville - Holiday Inn, La Porte - Days Inn, Lafayette - Holiday Inn, Lafayette - Cotton Mill Inn-Proposed, Madison - Hampton Inn, Merrillville - Holiday Inn Express, Merrillville - La Quinta Inn, Merrillville - Hotel Roberts, Muncie - Radisson Hotel, Muncie - Brown County Inn, Nashville - Holiday Inn, Portage - Knights Inn, Richmond - Holiday Inn, South Bend - Howard Johnson, South Bend - Signature Inn, Terre Haute - Super 8, Terre Haute - Courtyard Conversion, Valparaiso - Holiday Inn, Vincennes Iowa - Holiday Inn-Gateway Center, Ames - Holiday Inn, Cedar Falls - Collins Plaza, Cedar Rapids - Holiday Inn, Cedar Rapids - Roosevelt Hotel, Cedar Rapids - Super 8, Davenport - Courtyard by Marriott, Des Moines - Fairfield Inn, Des Moines - Holiday Inn, Des Moines - Holiday Inn - West, Des Moines - Holiday Inn-Downtown, Des Moines - Holiday Inn-North, Des Moines - Ramada Inn, Des Moines - Super 8-North, Des Moines - Super 8-West, Des Moines - Holiday Inn, Iowa City Kansas - Embassy Suites, Kansas City - Fairfield Inn-Overland Park, Kansas City - Holiday Inn-Mission Overland Park, Kansas City - Fairfield Inn, Kansas City West - Holiday Inn, Lawrence - University Inn, Lawrence - Holiday Inn, Manhattan - Courtyard by Marriott, Overland Park - Hampton Inn-Proposed, Overland Park - Marriott Hotel, Overland Park - Park Inn International, Topeka - Super 8, Topeka - Canterbury Inn, Wichita - Former Sheraton Hotel, Wichita - Hilton-East, Wichita - Marriott Hotel, Wichita - Comfort Inn, Winfield Kentucky - Conference Center-Proposed, Boone County - Howard Johnson, Bowling Green - Brown County Inn, Brown County - Holiday Inn, Corbin - Hotel-Proposed, Covington - Thomas More Centre, Crestville Hill - Comfort Inn, Elizabethtown - Signature Inn, Elkhart - Holiday Inn, Florence - Signature Inn, Florence - Drawbridge Inn, Fort Mitchell - Days Inn, Georgetown - Days Inn, Henderson - Holiday Inn, Henderson - Bluegrass Motor Inn, Lexington - Courtyard by Marriott, Lexington - Holiday Inn, Lexington - Holiday Inn-East, Lexington - Holiday Inn-North, Lexington - Hyatt Hotel, Lexington - Knights Inn, Lexington - Super 8-Proposed, London - Brown Hotel, Louisville - Courtyard by Marriott-East, Louisville - Holiday Inn, Louisville - Holiday Inn South, Louisville - Holiday Inn-Central, Louisville - Holiday Inn-Northeast, Louisville - Ramada Inn, Louisville - Ramada Inn-East, Louisville - Signature Inn, Louisville - Days Inn, Madisonville - Executive Inn, Owensboro - Super 8-Proposed, Radcliff - Holiday Inn, Richmond Louisiana - Howard Johnson, Alexandria - Capital House, Baton Rouge - Convention Center Hotel-Proposed, Baton Rouge - Courtyard by Marriott, Baton Rouge - Crown Sterling Suites, Baton Rouge - Embassy Suites, Baton Rouge - Hilton Hotel, Baton Rouge - Holiday Inn-East, Baton Rouge - Holiday Inn-South, Baton Rouge - Holiday Inn-West, Baton Rouge - La Quinta Inn, Baton Rouge - Prince Murat Hotel, Baton Rouge - Proposed Homewood Suites, Baton Rouge - Quality Inn, Bossier City - Ramada Inn, Hammond - Ramada Inn, Houma - Holiday Inn - New Orleans, Kenner - Sheraton, Kenner - Hilton Hotel, Lafayette - La Quinta Hotel, Lafayette - Gateway Hotel, Metairie - Howard Johnson-Airport, Metairie - Canal Street Hotels L.P., New Orleans - Clarion Hotel, New Orleans - Days Inn, New Orleans - Fairmont Roosevelt Hotel, New Orleans - Hampton Inn-Proposed, New Orleans - Holiday Inn Crowne Plaza, New Orleans - Hostellerie de la Poste, New Orleans - Hotel Meridien, New Orleans - Hyatt Regency, New Orleans - Iberville Hotel, New Orleans - Inter-Continental Hotel, New Orleans - La Quinta Inn, New Orleans - Landmark Bourbon, New Orleans - Le Meridien New Orleans, New Orleans - Maison Dupuy, New Orleans - Marriott Hotel, New Orleans - Omni Royal Orleans, New Orleans - Ramada Inn, New Orleans - Saint Louis Hotel, New Orleans - St. Ann/Marie Antoinette, New Orleans - Warwick, New Orleans - Westin Hotel, New Orleans - Residence Inn, Shreveport - Super 8, Shreveport Maine - Hilton Inn, Bangor - Ramada Inn, Bangor - Residence Inn by Marriott-Proposed, Bangor - Inn By The Sea, Cape Elizabeth - Hotel-Proposed, Orchard Beach - Hotel-Proposed, Portland - Portland Regency, Portland - Ramada Inn, Portland - Sheraton Tara Portland, Portland - Susse Chalet, Portland - Susse Chalet, Portland (In-town) - Keddy's Motor Inn of Maine, Presque Isle - Hampton Inn, South Portland - Sheraton Inn, South Portland Maryland - Budget Hotel-Proposed, Aberdeen - Chesapeake House, Aberdeen - Holiday Inn, Aberdeen - Motel-Proposed, Aberdeen - Annapolis Hotel, Annapolis - Courtyard by Marriott-Riva Road, Annapolis - Governor Calvert House, Annapolis - Historic Inns of Annapolis, Annapolis - Hotel-Proposed, Annapolis - Howard Johnson, Annapolis - Marriott Hotel, Annapolis - Maryland Inn, Annapolis - Quality Royale Hotel, Annapolis - Ramada Hotel, Annapolis - Robert Johnson House, Annapolis - Brookshire Hotel, Baltimore - Courtyard by Marriott-BWI Airport, Baltimore - Days Inn, Baltimore - Harbor Court Hotel, Baltimore - Harrison's at Pier 5, Baltimore - Hilton Hotel, Baltimore - Holiday Inn-Belmont Blvd., Baltimore - Holiday Inn-Cromwell Bridge, Baltimore - Holiday Inn-Glen Burnie, Baltimore - Holiday Inn-Inner Harbor, Baltimore - Holiday Inn-Int'l Airport, Baltimore - Holiday Inn-Moravia Road, Baltimore - Holiday Inn-Pikesville, Baltimore - Holiday Inn-South Glen Burnie, Baltimore - Hotel-Proposed, Baltimore - Howard Johnson-Proposed, Baltimore - Johns Hopkins Hotel-Proposed, Baltimore - Lord Baltimore Hotel, Baltimore - Omni International Hotel, Baltimore - Ramada Inn-I-695 West, Baltimore - Susse Chalet, Baltimore - Susse Chalet Inn-BWI Airport, Baltimore - Susse Chalet Inn-Golden Ring, Baltimore - Bethesda Metro Center, Bethesda - Guest Quarters, Bethesda - Hyatt Regency Hotel, Bethesda - Linden Hill Hotel, Bethesda - Omni Linden Hotel, Bethesda - Residence Inn, Bethesda - Bethseda Metro Center, Bethseda - Guest Quarters, Bethseda - Residence Inn - Proposed, Bethseda - Comfort Suites-Proposed, Bowie - Days Inn, Capital Heights - Residence Inn, Cockneysville - Abbey, College Park - Best Western Maryland, College Park - Holiday Inn, College Park - Sheraton Inn, Dorsey - Days Inn, Easton - Mariner Inn, Easton - Holiday Inn, Frederick - Compri Hotel, Gaithersburg - Marriott Hotel, Gaithersburg - Century XXI Resort, Germantown - Comfort Inn, Germantown - Hampton Inn, Glen Burnie - Residence Inn-Proposed, Greenbelt - Courtyard by Marriott, Hunt Valley - Hunt Valley Embassy Suites, Hunt Valley - Hunt Valley Marriott, Hunt Valley - Susse Chalet Inn, Jessup - Courtyard by Marriott, Landover - Quality Inn-Proposed, Landover - Days Inn, Lanham - Best Western Maryland, Laurel - Days Inn, Laurel - Holiday Inn, Laurel - Susse Chalet, Linthicum - Howard Johnson Plaza Hotel, New Carrollton - Carousel Hotel, Ocean City - Days Inn, Ocean City - Susse Chalet, Oxon Hill - Hotel-Proposed, Prince Georges County - Budget Hotel-Proposed, Rockville - Comfort Inn, Rockville - Courtyard by Marriott, Rockville - Days Inn-Congressional Park, Rockville - Holiday Inn Crowne Plaza, Rockville - Quality Inn-Proposed, Rockville - Ramada Inn, Rockville - Salisbury Hotel, Salisbury - Sheraton Hotel, Salisbury - Courtyard by Marriott, Silver Spring - Quality Inn-Proposed, Silver Spring - Comfort Inn-Proposed, Solomons Island - Holiday Inn, Towson - Quality Inn-Proposed, Westminster Massachusetts - Susse Chalet, Amsbury - Courtyard by Marriott, Andover - Marriott Hotel, Andover - Stouffer Bedford Glen Hotel, Bedford - Anthony's Pier Four, Boston - Battery Wharf Hotel-Proposed, Boston - Boston Harbor Hotel, Boston - Boston World Trade Center, Boston - Bostonian Hotel, Boston - Colonnade Hotel, Boston - Commonwealth Center Hotel, Boston - Compri Hotel-Proposed, Boston - Copley Plaza Hotel, Boston - Courtyard by Marriott-Foxborough, Boston - Econo Lodge-Proposed, Boston - Harborside Conf. Center-Proposed, Boston - Hilton-Back Bay, Boston - Hilton-Logan, Boston - Holiday Inn-Government Center, Boston - Hotel - Proposed, Boston - Hyatt Fan Pier-Proposed, Boston - Hyatt Harborside-Proposed, Boston - Lafayette Hotel, Boston - Lenox Hotel, Boston - Marriott Copley Place, Boston - Meridien Hotel, Boston - Omni Parker House, Boston - Residence Inn, Boston - Ritz-Carlton, Boston - Statler Hilton Hotel, Boston - Tremont House Hotel, Boston - World Trade Center Hotel - Proposed, Boston - Marriott Hotel, Boston/Newton - Sheraton Tara Hotel, Braintree - Ocean Edge Inn & Conference Center, Brewster - Holiday Inn, Brookline - Days Inn, Burlington - Charles Hotel, Cambridge - Hyatt Hotel, Cambridge - Royal Sonesta Hotel, Cambridge - The Charles Hotel, Cambridge - Chatham Bars Inn, Chatham - Chelmsford Radisson Hotel, Chelmsford - Best Western Motor Lodge, Chicopee - Cummington Farm Resort-Proposed, Cummington - Appleton Inn, Danvers - Howard Johnson Hotel, Danvers - Radisson Ferncroft Hotel, Danvers - Residence Inn - Proposed, Danvers - Dedham Comfort Inn, Dedham - Holiday Inn, Dedham - Wequassett Inn, East Harwich - Harbor View Hotel, Edgartown - Kelley House, Edgartown - Airport Inn, Fall River - Sea Crest Hotel, Falmouth - Sheraton Inn, Falmouth - Radisson Hotel, Ferncroft - Sheraton Tara Hotel, Framingham - Hotel-Proposed, Franklin - Hotel-Proposed, Haverhill - Susse Chalet, Holyoke - Dunfey Hyannis Hotel, Hyannis - Heritage House Hotel, Hyannis - Holiday Inn, Hyannis - Sheraton Regal Inn, Hyannis - Tara Hyannis, Hyannis - Canyon Ranch-Berkshires, Lenox - Cranwell Hotel and Conference Ctr., Lenox - Spa/Resort-Proposed, Lenox - Holiday Inn, Leominster - Lexington Sheraton, Lexington - Residence Inn-Proposed, Littleton - Appleton Inn, Lowell - Hilton Hotel, Lowell - Town House Motor Inn, Lowell - Holiday Inn, Marlboro - Susse Chalet, Middleboro - Sheraton Milford Hotel, Milford - Holiday Inn, Natick - Skipper's Inn, New Bedford - Days Inn, Newton - Howard Johnson, Newton - Marriott Hotel, Newton - Sheraton - Wayfarer, Newton - Sheraton Tara, Newton - Susse Chalet, Newton - North Adams Inn, North Adams - Hilton Inn, Northampton - Hotel Northampton, Northampton - Factory Mutual Hotel, Norwood - University Inn, Oxford - Holiday Inn, Peabody - Berkshire Commons Hotel, Pittsfield - Hotel-Proposed, Plymouth - Hawthorne Hotel, Salem - Days Inn, Saugus - Susse Chalet, Seekonk - Howard Johnson, Somerset - Somerset Omni, Somerset - Federal House Inn, South Lee - Holiday Inn, Springfield - Howard Johnson, Springfield - Monarch Place, Springfield - Treadway Inn, Springfield - Publick House, Sturbridge - Sheraton, Sturbridge - Regency Inn of Taunton, Taunton - Holiday Inn, Tewksbury - Susse Chalet, Tewksbury - Susse Chalet, Waltham - Vista Waltham House, Waltham - Hampton Inn, West Springfield - Westford Regency Hotel, Westford - The Westminster Village Inn, Westminster - The Orchards, Williamstown - Treadway Inn, Williamstown - Days Inn, Woburn - Howard Johnson, Woburn - Radisson Hotel, Woburn - Ramada Inn, Woburn - Susse Chalet, Woburn - Marriott Hotel, Worcester - Alladin Motor Inn, Yarmouth - Flagship Motor Inn, Yarmouth - Gull Wing Suites Hotel, Yarmouth Michigan - Motel-Proposed, Adrian - Ramada Inn, Allen Park - Holiday Inn-Alpena, Alpena - Compri Hotel-Proposed, Ann Arbor - Hampton Inn-North, Ann Arbor - Hampton Inn-South, Ann Arbor - Hilton Hotel, Ann Arbor - Holiday Inn-East, Ann Arbor - Holiday Inn-West, Ann Arbor - Residence Inn, Ann Arbor - Sheraton Hotel, Ann Arbor - AmeriSuites Hotel-Proposed, Auburn Hills - Holiday Inn, Auburn Hills - Knights Inn, Battle Creek - Super 8, Battle Creek - Bay Valley Inn, Bay City - Howard Johnson, Belleville - Fairfield Inn-Airport, Charlotte - Courtyard by Marriott, Dearborn - Courtyard by Marriott-Airport, Detroit - Courtyard by Marriott-Auburn Hills, Detroit - Courtyard by Marriott-Livonia, Detroit - Days Inn, Detroit - Downtown Hotel-Proposed, Detroit - Fairfield Inn-Airport, Detroit - Fairfield Inn-Auburn Hills, Detroit - Fairfield Inn-Warren, Detroit - Fairfield Inn-West, Detroit - Golden Harp, Detroit - Hampton Inn, Detroit - Hilton-Airport, Detroit - Hilton-North Field, Detroit - Holiday Inn, Detroit - Holiday Inn-Metro Airport, Detroit - Hotel Pontchartrain, Detroit - Omni Detroit, Detroit - Westin Hotel Renaissance Center, Detroit - Holiday Inn, East Lansing - Holiday Inn-Proposed, East Lansing - Knights Inn, Flint - Amway Hotel, Grand Rapids - Holiday Inn, Grand Rapids - Grand Traverse Resort, Grand Traverse Village - Holiday Inn, Howell - Jackson Hotel, Jackson - Fairfield Inn, Kalamazoo - Hilton-Kalamazoo Center, Kalamazoo - Holiday Inn, Kalamazoo - Radison Plaza Hotel, Kalamazoo - Residence Inn, Kalamazoo - Super 8, Kalamazoo - Embassy Suites-Proposed, Lansing - Holiday Inn, Lansing - Motel 6, Lansing - Quality Suites Hotel, Lansing - Compri Hotel-Proposed, Livonia - Embassy Suites, Livonia - Embassy Suites-Proposed, Livonia - Holiday Inn, Livonia - Marriott Hotel, Livonia - Fairfield Inn, Madison Heights - Residence Inn, Madison Heights - Holiday Inn, Marquette - Knights Inn, Monroe - Comfort Inn-Proposed, Mount Clemens - Holiday Inn, Muskegan - Super 8, Muskegon - Hilton Hotel, Novi - Holiday Inn-Petoskey, Petoskey - Mayflower Hotel, Plymouth - Inn at the Bridge, Port Huron - Radisson Hotel, Romulus - Holiday Inn-East, Saginaw - Super 8, Saginaw - Courtyard by Marriott, Southfield - Embassy Suites, Southfield - Hilton Hotel, Southfield - Marriott Hotel, Southfield - Ramada Inn, Southfield - Residence Inn, Southfield - The Garden Inn, Southfield - Comfort Suites-Proposed, Sterling Heights - Holiday Inn, Sturgis - Grand Traverse Resort, Traverse City - Hampton Inn, Traverse City - Park Place Hotel, Traverse City - Courtyard by Marriott, Troy - Holiday Inn, Troy - Marriott, Troy - Residence Inn, Troy - Courtyard by Marriott, Warren - Days Inn, Warren - Holiday Inn, Warren - Motel 6, Warren - Residence Inn, Warren - Van Dyke Hotel & Conference Center, Warren - Bob Evans Restaurant, Wyoming - Super 8, Wyoming - Radisson Resort-Conference Center, Ypsilanti Minnesota - Embassy Suites, Bloomington - Hilton Airport Hotel, Bloomington - Hilton Hotel, Bloomington - Howard Johnson Lodge, Bloomington - Marriott Hotel, Bloomington - Ramada Inn, Bloomington - Days Inn - Minneapolis, Brooklyn Center - Residence Inn, Eagan - Compri Hotel-Proposed, Minneapolis - Courtyard by Marriott-Eden Prairie, Minneapolis - Courtyard by Marriott-Mendota, Minneapolis - Days Inn, Minneapolis - Dyckman Hotel, Minneapolis - Hilton Inn, Minneapolis - Holiday Inn-Downtown, Minneapolis - Hotel-Proposed, Minneapolis - Luxeford Hotel, Minneapolis - Marquette, Minneapolis - Marriott City Center Hotel, Minneapolis - Marriott-Minnetonka, Minneapolis - Motel 6, Minneapolis - Omni-Northstar, Minneapolis - Radisson Hotel, Minneapolis - Ramada Inn, Minneapolis - Sheraton Minneapolis, Minneapolis - Sofitel, Minneapolis - Motel-Proposed, Montevideo - Days Inn, Plymouth - Hotel-Proposed, Rochester - Howard Johnson, Rochester - Motel 6, Rochester - Radisson Hotel, Rochester - Days Inn, Roseville - Holiday Inn, Saint Paul - Holiday Inn-Town Square, Saint Paul - Hotel-Proposed, Saint Paul - Inn and Expo Center, Saint Paul - World Trade Hotel, Saint Paul - Wayzata Conference Center, Wayzata Mississippi - Howard Johnson, Biloxi - Holiday Inn, Greenwood - Motel 6, Hattlesburg - Hampton Inn, Jackson - Howard Johnson, Jackson - Ramada Inn-Proposed, Jackson - Residence Inn, Jackson - Cabot Lodge, Ridgeland - Holiday Inn, Vicksburg Missouri - Ramada Inn, Columbia - Howard Johnson-North St. Louis, Hazelwood - Super 8, Independence - La Quinta Inn, Jackson - North - Capital Plaza, Jefferson City - Ramada Inn, Jefferson City - Days Inn, Joplin - Super 8, Joplin - Allis Plaza, Kansas City - Americana Hotel, Kansas City - AmeriSuites Hotel-Proposed, Kansas City - Doubletree Hotel, Kansas City - Embassy Suites, Kansas City - Fairfield Inn-West, Kansas City - Hilton - Proposed, Kansas City - Hilton Inn, Kansas City - Historic Suites Hotel, Kansas City - Holiday Inn, Kansas City - Holiday Inn Crowne Plaza, Kansas City - Holiday Inn-Proposed, Kansas City - Proposed Sheraton Hotel, Kansas City - Radisson Suite Hotel, Kansas City - Resort Hotel - Proposed, Kansas City - Marriott-Tan-Tar-A, Lake of the Ozarks - Super 8, Liberty - Super 8, North Kansas City - Inn at Grand Glaize, Osage Beach - Super 8, Saint Joseph - Clarion, Saint Louis - Courtyard by Marriott-Creve Coeur, Saint Louis - Courtyard by Marriott-Downtown, Saint Louis - Courtyard by Marriott-Westport, Saint Louis - Days Inn, Saint Louis - Doubletree Hotel, Saint Louis - Drury Inn, Saint Louis - Embassy Suites, Saint Louis - Fairfield Inn-Hazel, Saint Louis - Henry VIII Hotel, Saint Louis - Hilton Hotel-Bel Air, Saint Louis - Holiday Inn Sports Complex, Saint Louis - Holiday Inn-Airport North, Saint Louis - Holiday Inn-Downtown, Saint Louis - Holiday Inn-Riverfont, Saint Louis - Howard Johnson-South, Saint Louis - Mayfair Hotel, Saint Louis - Omni-St. Louis Station, Saint Louis - Ramada Inn-Westport, Saint Louis - Residence Inn-Chesterfield, Saint Louis - Residence Inn-Richmond Heights, Saint Louis - Ritz-Carlton Hotel, Saint Louis - Sheraton-Airport, Saint Louis - St. Louis Airport Hilton, Saint Louis - St. Louis Airport Radisson Hotel, Saint Louis - St. Louisian Hotel, Saint Louis - Stouffer Concourse Hotel, Saint Louis - Super 8, Saint Louis - Marriott Hotel, Saint Louis County - Holiday Inn, Springfield - Sheraton Inn, Springfield - Super 8, Springfield - Executive Inn & Office Building, St. Louis - Holiday Inn, St. Louis - Howard Johnson Hotel, St. Louis - Hotel-Proposed, Unity Village - Holiday Inn, Wendtzville Montana - Sheraton Hotel, Billings - Super 8, Billings - Super 8, Great Falls - Super 8, Helena - Super 8, Kalispell - Holiday Inn, Missoula - Red Lion Inn, Missoula Nebraska - Holiday Inn, Kearney - Best Western Airport Inn, Lincoln - Holiday Inn-Airport, Lincoln - Holiday Inn-Northeast, Lincoln - Howard Johnson, North Platte - Marriott Hotel, Omaha - Ramada Inn, Omaha - Red Lion Inn, Omaha Nevada - Lake Mead Resort, Boulder City - Ormsby House Hotel and Casino, Carson City - Super 8, Carson City - Doubletree Hotel and Resort, Cathedral City - Best Western Motel - Proposed, Jackpot - Airport Inn, Las Vegas - Aladdin Hotel and Casino, Las Vegas - Alexis Park Resort Hotel, Las Vegas - Casino Hotel-Proposed, Las Vegas - Courtyard by Marriott, Las Vegas - El Rancho Hotel and Casino, Las Vegas - Hotel and Casino-Proposed, Las Vegas - Jockey Club Hotel and Casino, Las Vegas - La Quinta Hotel, Las Vegas - Paradise Resort, Las Vegas - Residence Inn, Las Vegas - Silverbird Casino, Las Vegas - Super 8-Proposed, Las Vegas - The Mirage, Las Vegas - Tropicana Travelodge, Las Vegas - Westward Ho Casino, Las Vegas - Echo Bay Resort, Overton - Holiday Inn, Reno - La Quinta Hotel, Reno - Quality Inn and Casino, Reno - Red Lion Hotel-Proposed, Reno New Hampshire - Sheraton Wayfarer, Bedford - Hampton Inn, Bow - Mount Washington Resort, Bretton Woods - Balsams Hotel, Dixville Notch - Sheraton Inn-Lamie's Tavern, Hampton - Woodbound Inn, Jaffrey - Brickyard Mountain Inn, Laconia - Loon Mountain Hotel, Lincoln - Appleton Inns, Manchester - Holiday Inn Center, Manchester - Sheraton Wayfarer, Manchester - Susse Chalet, Manchester - Clarion Somerset Hotel, Nashua - Hotel-Proposed, Nashua - Tara Sheraton Nashua, Nashua - Wentworth by the Sea, Newcastle - Susse Chalet, Portsmouth - Wentworth-by-the-Sea, Portsmouth - Salem Inn, Salem - Susse Chalet, Salem - Landmarc Lodge-East, Waterville Valley - Landmarc Lodge-West, Waterville Valley - Silver Squirrel Inn, Waterville Valley - Snowy Owl Inn, Waterville Valley - Chalet Susse International, Inc., Wilton New Jersey - Marriott Seaview Golf Resort, Abescon - Howard Johnson Hotel, Absecon - Seaview Country Club, Absecon - Berkeley Carteret Hotel, Asbury Park - Caesar's Hotel and Casino, Atlantic City - Casino Hotel-Proposed, Atlantic City - Deauville Hotel, Atlantic City - Diplomat Hotel, Atlantic City - Hampton Inn, Atlantic City - Harrah's Marina Hotel Casino, Atlantic City - Lafayette Hotel, Atlantic City - Resorts Int'l Hotel and Casino, Atlantic City - Royal Inn, Atlantic City - Sands Hotel and Casino, Atlantic City - Traymore Hotel Site, Atlantic City - Tropicana Hotel and Casino, Atlantic City - World International Hotel, Atlantic City - Bernards Inn, Bernardsville - Hotel-Proposed, Bridgewater - Proposed Hotel, Camden - Cherry Hill Hyatt, Cherry Hill - Cherry Hill Inn, Cherry Hill - Ramada Inn, Clifton - Comfort Suites, E. Rutherford - Ramada Renaissance, East Brunswick - Sheraton Inn, East Brunswick - Sheraton - Per Diem, East Rutherford - Holiday Inn-Raritan Center, Edison - Hotel-Proposed, Edison - Ramada Inn, Edison - Best Western Hotel, Egg Harbor Township - Newark Airport Vista Hotel, Elizabeth - Ramada Inn-Proposed, Elizabeth - Sheraton Inn, Elizabeth - Marriott Suite Hotel-Proposed, Elmwood Park - Howard Johnson, Englewood - Conference Center, Farleigh Dickinson - Motel-Proposed, Flemington - Hamilton Park Conference Center, Florham Park - Courtesy Motel, Fort Lee - Ramada Inn-Proposed, Franklin Township - Playboy Resort, Great Gorge - Marriott Hotel, Hanover - Sheraton Hotel, Hasbrouck Heights - Holiday Inn, Jamesburg - Restaurant at Port Liberte, Jersey City - Harrogate Senior Living Facility, Lakewood - Courtyard by Marriott, Lincroft - Hotel-Proposed, Long Branch - Comfort Inn, Mahwah - Courtyard by Marriott, Mahwah - Residence Inn-Proposed, Mahwah - Economy Lodge - Proposed, Meadowlands - Holiday Inn, Meadowlands - Hotel-Proposed, Meadowlands - Meadowlands Hilton, Meadowlands - Sheraton Hotel, Meadowlands - Forsgate Conference Center, Monroe Township - Conference Center, Morristown - Governor Morris Inn, Morristown - Headquarters Plaza Hotel, Morristown - Pleasantville Farms Conference Cent, Morristown - Howard Johnson Lodge, Mount Holly - Courtyard by Marriott, Mount Laurel - Hilton, Mount Laurel - Days Hotel, New Brunswick - Hyatt Hotel, New Brunswick - Rennaisance Hotel, New Brunswick - Residence Inn - Princeton, New Jersey - Airport Hotel-Proposed, Newark - Courtyard by Marriott-Airport, Newark - Holiday Inn, Newark - Holiday Inn-Airport North, Newark - Hotel-Proposed, Newark - Howard Johnson Hotel, Newark - Days Inn, North Bergen - Holiday Inn, North Brunswick - Port-O-Call, Ocean City - Sting Ray Motel, Ocean City - Hotel-Proposed, Ocean Grove - Spray View Hotel, Ocean Grove - Macy Hotel-Proposed, Paramus - Red Carpet Inn, Paramus - Residence Inn-Proposed, Paramus - Marriott Hotel-Proposed, Park Ridge - Embassy Suites, Parsippany - Hilton, Parsippany - Residence Inn-Proposed, Parsippany - Howard Johnson, Phillipsburg - Hotel-Proposed, Piscataway - Residence Inn-Proposed, Piscataway - Compri Hotel-Proposed, Princeton - Hyatt Regency, Princeton - Marriott Hotel, Princeton - Omni Nassau Inn, Princeton - Treadway Inn, Princeton - Howard Johnson, Ridgefield Park - Hotel-Proposed, Rockleigh - Hotel-Proposed, Roxbury Township - Ramada Inn, Runnemede - Howard Johnson, Saddle Brook - Marriott Hotel, Saddle Brook - Days Inn, Secaucus - Howard Johnson, Secaucus - Ramada Inn, Secaucus - Hilton At Short Hills, Short Hills - Pier 4 Motel, Somers Point - Garden State Convention Center, Somerset - Holiday Inn, Somerset - Marriott Hotel, Somerset - Neighborhood Suites-Proposed, Somerset - Sommerset Plaza Hotel, Somerset - Summerfield Suites Hotel, Sommerset - Hewitt Wellington Hotel, Spring Lake - Hotel-Proposed, Spring Lake - Loews Glenpointe Hotel, Teaneck - Appleton Inn, Tinton Falls - Envoy Inn, Tinton Falls - Hilton Inn, Tinton Falls - Residence Inn, Tinton Falls - Sunrise Suite Hotel, Tinton Falls - Hotel-Proposed, Toms River - Hotel-Proposed, Turnersville - Hotel-Proposed, Wayne - Howard Johnson-Proposed, Wayne - Holiday Inn, Wildwood Crest - Motel, Wrightstown New Mexico - Compri Hotel-Proposed, Albuquerque - Courtyard by Marriott-Airport, Albuquerque - Fairfield Inn-Proposed, Albuquerque - Hampton Inn, Albuquerque - Hilton Hotel, Albuquerque - Holiday Inn, Albuquerque - Marriott Hotel, Albuquerque - Radisson Suite Hotel-Proposed, Albuquerque - Residence Inn, Albuquerque - Rodeway Inn, Albuquerque - Winrock Motor Inn, Albuquerque - La Quinta Inn, Albuquerque - Airport - Corkin's Lodge, Chama - La Quinta Inn, Farmington - Hilton, Las Cruces - Las Cruces Hilton, Las Cruces - Super 8, Las Cruces - Ski Rio Ski Resort, Miracle Mountain - Super 8, Raton - Young's Ranch, Red River - Eldorado Hotel, Santa Fe - Homewood Suites Hotel, Santa Fe - Hotel-Proposed, Santa Fe - Inn at Loretto, Santa Fe - Inn on the Alameda, Santa Fe - La Fonda Hotel, Santa Fe - La Quinta Hotel, Santa Fe - Residence Inn, Santa Fe - Santa Fe Motel, Santa Fe - Sheraton de Santa Fe, Santa Fe New York - Americana Inn, Albany - Desmond Hotel, Albany - Hilton Hotel, Albany - Marriott Hotel, Albany - Sheraton Inn, Albany - Susse Chalet, Albany - VIP Motor Lodge (Howard Johnson), Albany - Embassy Suites-Proposed, Amherst - Holiday Inn, Amherst - Annandale Inn-Proposed, Annandale - Wampus Inn-Proposed, Armonk - Treadway Inn, Batavia - Hampton Inn, Binghamton - Holiday Inn-Arena, Binghamton - Holiday Inn-SUNY, Binghamton - Hotel-Proposed, Binghamton - Howard Johnson, Binghamton - Residence Inn, Binghamton - Sheraton Inn, Binghamton - Eden Motel, Bronx - Days Inn-Proposed, Brookhaven - Residence Inn, Brookhaven - Brooklyn Hotel-Proposed, Brooklyn - Hilton Hotel, Brooklyn - Airport Hotel-Proposed, Buffalo - Buffalo Hotel, Buffalo - Days Hotel-Proposed, Buffalo - Hilton Hotel, Buffalo - Holiday Inn - Midtown, Buffalo - Hyatt Hotel, Buffalo - Hyatt Regency Hotel & Retail Area, Buffalo - Radisson Hotel, Buffalo - Ramada Inn-Airport, Buffalo - Ramada Renaissance Hotel, Buffalo - Residence Inn-Proposed, Buffalo - Sheraton Hotel, Buffalo - Sheraton Inn Buffalo East, Buffalo - Sheraton Inn-Airport, Buffalo - Sheraton Inn, Canadaiqua - Airway Motel, Cheektowaga - Holiday Inn - Airport, Cheektowaga - Holiday Inn - Gateway, Cheektowaga - Quality Inn, Cheektowaga - Sheraton Buffalo, Cheektowga - Steeplechase Park-Proposed, Coney Island - Hilton Inn, Corning - Resort/Conference Center-Proposed, Cornwall - Holiday Inn, Cortland - Roycroft Inn, East Aurora - Hotel-Proposed, East Elmhurst - Susse Chalet, East Greenbush - Nevele Hotel, Ellenville - Int'l Conf./Learning Center-Propose, Ellis Island - Days Inn, Elmsford - Howard Johnson, Elmsford - Neighborhood Suites Hotel-Proposed, Fishkill - Residence Inn, Fishkill - Metropole Hotel, Flushing - Midway Hotel, Flushing - Sheraton - Proposed, Flushing Center - Hotel-Proposed, Garden City - Wyndham Condominium, Garden City - Harrison Conference Center, Glen Clove - Great Neck Hotel, Great Neck - Comfort Inn, Greece - Holiday Inn-Proposed, Greece - Tamarack Lodge, Greenfield Park - Claudio's Restaurant, Greenport - Colonie Hill, Hauppauge - Holiday Inn, Hauppauge - Marriott Wind Watch Hotel & Golf, Hauppauge - Marriott Windwatch, Hauppauge - Ramada Inn, Hauppauge - Residence Inn, Hauppauge - Homewood Suites-Proposed, Henrietta - Howard Johnson, Huntington - Huntington Townhouse, Huntington - Hampton Inn, Islandia - Marriott Wind Watch, Islandia - Hotel-Proposed, Islip - Howard Johnson Hotel, Ithaca - Ramada Inn, Ithaca - Sheraton Inn, Ithaca - JFK Hilton, Jamaica - Howard Johnson, Kingston - Ramada Inn, Kingston - Omni Sagamore, Lake George - Ramada Inn, Lake George - Former Lake Placid Club Hotel, Lake Placid - Hilton Hotel, Lake Placid - Mirror Lake Inn, Lake Placid - Holiday Inn, Latham - Howard Johnson, Latham - Howard Johnson, Liberty - The New Brown's Resort, Loch Sheldrake - Convention Center - Proposed, Long Island - Eastern Nassau/W. Suffolk Hotel, Long Island - Hyatt Hotel-Proposed, Long Island - Motel-Proposed, Lynbrook - Crowne Plaza Hotel, Manhattan - Hotel Mark, Manhattan - Proposed Economy Hotel, Manhattan - Sugar Maples Resort, Maplecrest - Hotel-Proposed, Middletown - Howard Johnson, Middletown - Montauk Yacht Club and Inn, Montauk - Kutsher's Resort, Monticello - Motel-Proposed, Nanuet - Wallkill Valley Inn Project, New Paltz - Hotel-Proposed, New Rochelle - Le Richmond Hotel, New Rochelle - Ramada Plaza Inn and Offices, New Rochelle - Sheraton Inn, New Rochelle - Aberdeen Hotel, New York - American Youth Hostel, New York - Americana Hotel, New York - Ashley Hotel, New York - Astor House-Proposed, New York - Barbizon Plaza Hotel, New York - Barclay Hotel, New York - Battery Park City Hotel-Proposed, New York - Berkshire Place, New York - Best Western Woodward Hotel, New York - Biltmore Hotel, New York - Broadway Crowne Plaza, New York - Carlton House Hotel, New York - Century Paramount Hotel, New York - Chatwal Inn, New York - Chatwal Inn on 45th Street, New York - Chatwal Inn on Park Avenue, New York - Chinatown Hotel-Proposed, New York - Courtyard by Marriott-Proposed, New York - Custom's House, New York - Days Inn, New York - Days Inn-West 57th Street, New York - Doral Inn, New York - Dover Hotel, New York - Downtown Athletic Club, New York - Downtown Conference Center, New York - Drake Hotel, New York - Econo Lodge-Proposed, New York - El Rio Grande, New York - Embassy Suites-Times Square-Propose, New York - Empire Hotel, New York - Essex House, New York - Executive Hotel, New York - Giordano Hotel, New York - Gorham Hotel, New York - Grand Bay at Equitable Center, New York - Grand Hyatt Hotel, New York - Greenwich Street Hotel, New York - Halloran House, New York - Hampton House, New York - Harley Hotel, New York - Helmsley Hotel, New York - Hilton Hotel, New York - Hilton Hotel-Statler, New York - Holiday Inn, New York - Holiday Inn Crowne Plaza-Broadway, New York - Holiday Inn Crowne Plaza-Manhattan, New York - Holland Hotel, New York - Hotel Intercontinental, New York - Hotel Pierre, New York - Hotel-1926 Broadway-Proposed, New York - Hotel-East 57th Street-Proposed, New York - Hotel-Proposed, New York - Hotel-Tenth Avenue-Proposed, New York - Howard Hotel, New York - Howard Johnson, New York - Journey's Court Hotel-Proposed, New York - Journey's End, New York - Kalikow Hotel-Proposed, New York - Kennedy Inn, New York - Lancaster Hotel, New York - Le Meridien Liberty New York, New York - Lowell Hotel, New York - Luxury Hotel-Proposed, New York - Macklowe Hotel, New York - Madison Towers Hotel, New York - Manger Windsor Hotel, New York - Mark Hotel, New York - Marriott East Side, New York - Marriott Financial Center, New York - Marriott Hotel-Proposed, New York - Marriott Marquis, New York - Martinique Hotel, New York - Mayfair Regent, New York - Milford Plaza Hotel, New York - Millennium Hotel, New York - Navarro Hotel, New York - Nova Park-Gotham, New York - Novotel, New York - Omni Berkshire Place, New York - Omni Park Central, New York - Parc Fifty One Hotel, New York - Parker Meridien Hotel, New York - Peninsula Hotel, New York - Penta Hotel, New York - Piccadilly Hotel, New York - Plaza Hotel, New York - President Hotel, New York - Prince George Hotel, New York - Prince Street Hotel-Proposed, New York - Proposed Hotel and Apartments, New York - Proposed Luxury Hotel-Proposed, New York - Quality Inn, New York - Quality Suites, New York - Ramada Inn, New York - Regent Hotel-Proposed, New York - Regent of New York-Proposed, New York - Ritz-Carlton, New York - Roger Smith Winthrop Hotel, New York - Roosevelt Hotel, New York - Russian Tea Room, New York - Sheraton Hotel, New York - Sheraton Motor Inn, New York - Sheraton Park Avenue, New York - Soho Hotel-Proposed, New York - St. Moritz Hotel, New York - St. Regis, New York - Stanhope, New York - Sutton Place Hotel, New York - Taft Hotel, New York - Tenth Avenue Hotels-Proposed, New York - The Pierre Hotel, New York - The Plaza Athenee, New York - Times Square Hotel-Proposed, New York - Timeshare-Proposed, New York - Travel Inn, New York - Tudor Hotel, New York - UN Plaza Suite Hotel-Proposed, New York - Vista International, New York - Waldorf=Astoria Hotel, New York - Warwick Hotel, New York - Westbury Hotel, New York - Westin Plaza Hotel, New York - Woodward Hotel-Proposed, New York - York Club, New York - Howard Johnson Motel & Restaurant, Newburgh - Ramada Inn, Newburgh - Hilton Hotel, Niagara Falls - Howard Johnson, Norwich - Hotel-Proposed, Orangetown - Hudson Valley Conference Center, Ossining - Sheraton Inn, Ossining - Hotel-Proposed, Oswego - Best Western, Painted Post - Lodge on the Green, Painted Post - Residence Inn - Proposed, Parsippany - Senior Living - Proposed, Pearl River - Drum Hill Hotel, Peekskill - Holiday Inn, Plainview - Howard Johnson, Plainview - Pickwick Motor Inn, Plainview - Residence Inn, Plainview - Holiday Inn, Plattsburgh - Motel-Proposed, Port Jefferson - Comfort Inn-Proposed, Poughkeepsie - Courtyard by Marriott, Poughkeepsie - Radison Hotel, Poughkeepsie - Wyndham Hotel, Poughkeepsie - Best Western-LaGuardia Airport, Queens - Crown Motel, Queens - Crowne Plaza-LaGuardia Airport, Queens - Days Inn-LaGuardia Airport, Queens - Executive Inn, Queens - Hilton Inn-LaGuardia Airport, Queens - Hilton-JFK Airport, Queens - Holiday Inn-JFK Airport, Queens - Holiday Inn-LaGuardia Airport, Queens - Howard Johnson, Queens - Jade East Motel, Queens - JFK Plaza Hotel, Queens - Marriott Hotel-JFK Airport, Queens - Marriott-LaGuardia Airport, Queens - Metropole Hotel, Queens - Midway Hotel, Queens - Riviera Hotel, Queens - Royce Hotel-LaGuardia Airport, Queens - Sheraton-LaGuardia East-Proposed, Queens - Adria Hotel, Queens (Bayside) - Holiday Inn, Riverhead - Riverhead Motor Hotel, Riverhead - Americana Hotel, Rochester - Courtyard by Marriott-Wrighton, Rochester - Days Hotel (former Holiday Inn), Rochester - Hilton-Campus, Rochester - Holiday Inn, Rochester - Hotel-Proposed (former St. Bernard), Rochester - Hyatt Hotel, Rochester - Lodge at Woodcliff, Rochester - Omni Suites Hotel, Rochester - Residence Inn, Rochester - Sheraton Inn, Rochester - Stouffer Hotel, Rochester - Town House Inn, Rochester - Limited Service Hotel-Proposed, Rome - Hotel - Proposed, Roslyn - Roslyn Country Club, Roslyn - Courtyard by Marriott, Rye - Le Richemonde Hotel, Ryebrook - Baron's Cove Inn, Sag Harbor - Holiday Inn, Saratoga - Hotel-Proposed, Saratoga Springs - Howard Johnson, Saugerties - Holiday Inn, Schenectady - Ramada Inn, Schenectady - Dering Harbor Inn, Shelter Island - Crowne Plaza-Proposed, Smithtown - Howard Johnson, Smithtown - Sheraton, Smithtown - Raleigh Hotel, South Fallsburg - Hotel-Proposed, Southhold - Susse Chalet, Spring Valley - Executive Motor Inn, Springfield Gardens - Staten Island Hotel, Staten Island - Imperial Htl/Stevensville Golf Crs., Stevensville - Holiday Inn, Suffern - Motel on the Mountain, Suffern - Browns Hotel, Sullivan County - Imperial Hotel, Sullivan County - The New Brown's Resort, Sullivan County - Courtyard by Marriott, Syracuse - Embassy Suites, Syracuse - Hampton Inn, Syracuse - Hilton Inn, Syracuse - Holiday Inn-Downtown, Syracuse - Holiday Inn-Exit 35, Syracuse - Holiday Inn-Exit 36, Syracuse - Holiday Inn-Exit 39, Syracuse - Holiday Inn-I-90, Syracuse - Homewood Suites Hotel-Proposed, Syracuse - Hotel Syracuse, Syracuse - Hotel-Proposed, Syracuse - Marriott Hotel, Syracuse - Residence Inn-Proposed, Syracuse - Sheraton University Inn & Conf.Ctr., Syracuse - Treadway Inn, Syracuse - Courtyard by Marriott, Tarrytown - Tarrytown House Conference Center, Tarrytown - Westchester Marriott, Tarrytown - Embassy Suites - Proposed, Times Square, New York - Marriott Hotel, Uniondale - Sheraton Nassau Hotel, Uniondale - Howard Johnson Hotel, Utica - Howard Johnson, Vestal - Hotel-Proposed, Watertown - Convention Hotel-Proposed, Westbury - Dalts Restaurant, Westbury - Howard Johnson, Westbury - Marriott Hotel, Westchester - Inn-Proposed, Westhampton - Crowne Plaza, White Plains - Hotel-Proposed, White Plains - Howard Johnson, White Plains - Roger Smith Hotel, White Plains - Stouffer Westchester Hotel, White Plains - White Plains Hotel, White Plains - Anton Meadows, Yaphank - Quality Suites, Yorktown - Yorktown Motor Lodge, Yorktown Heights North Carolina - Days Inn - Central, Asheville - Holiday Inn - Airport, Asheville - Holiday Inn - Tunnel, Asheville - Inn on the Plaza, Asheville - Sheraton Inn, Asheville - Days Inn, Ashville - Masters Economy Inn - Rocky Mount, Battlebro - Days Inn, Blowing Rock - All-Suite Hotel-Proposed, Boone - Residence Inn-Proposed, Cary - Carolina Inn, Chapel Hill - Hilton-Proposed, Chapel Hill - Charlotte Registry Hotel-Per Diem, Charlotte - Compri Hotel-Proposed, Charlotte - Courtyard by Marriott, Charlotte - Days Inn, Charlotte - Days Inn-Uptown, Charlotte - Fairfield Inn, Charlotte - Howard Johnson, Charlotte - Howard Johnson Lodge, Charlotte - Knights Inn, Charlotte - Manger Motor Inn, Charlotte - Marriott City Center, Charlotte - Marriott Hotel-Independence Center, Charlotte - Masters Economy Inn - Charlotte No, Charlotte - Masters Economy Inn - Merchandise, Charlotte - Queen City Motel, Charlotte - Residence Inn, Charlotte - Residence Inn-North, Charlotte - Resistry Hotel, Charlotte - Royce Suite Hotel, Charlotte - Sheraton Inn, Charlotte - Conference Center, Clemmons - Sheraton Motel, Dunn - Best Western, Durham - Cricket Inn, Durham - Days Inn, Durham - Dutch Village Inn, Durham - Fairfield Inn, Durham - Holiday Inn-West, Durham - Motel 6, Durham - Sheraton-University Center, Durham - The Duke Inn, Durham - Days Inn, Fayetteville - Fairfield Inn, Fayetteville - Holiday Inn, Fayetteville - Hotel-Proposed, Fayetteville - Knights Inn, Fayetteville - Goldsboro Motel, Goldsboro - Courtyard by Marriott, Greensboro - Days Inn, Greensboro - Embassy Suites, Greensboro - Fairfield Inn, Greensboro - Hilton, Greensboro - Marriott Hotel, Greensboro - Residence Inn, Greensboro - Sheraton Greensboro, Greensboro - Hotel-Proposed, Greenville - Radisson Hotel, High Point - Days Inn, Lumberton - Maggie Valley Country Club, Maggie Valley - Courtyard by Marriott, Raleigh - Fairfield Inn, Raleigh - Hampton Inn, Raleigh - Hilton, Raleigh - Holiday Inn-Downtown, Raleigh - Marriott Hotel-RTP, Raleigh - Raleigh Radisson, Raleigh - Residence Inn, Raleigh - Holiday Inn - Airport, Research Triangle Park - Howard Johnson, Roanoke Rapids - Sheraton Inn, Rocky Mount - Days Inn, Rocky Mountain - Fairfield Inn, Rocky Mountain - Motel 6, Rocky Mountain - Days Inn, Rowland - Sheraton Motel, Selma - Masters Economy Inn, Smithfield - Holiday Inn, Southern Pines - Fairfield Inn, Wilmington - Hilton, Winston/Salem - Holiday Inn, Winston/Salem - Winston Plaza Hotel, Winston/Salem North Dakota - Holiday Inn, Bismark - Radisson Inn, Bismark - Super 8, Bismark - Ramada Hotel, Fargo - Ramada Inn-Proposed, Fargo - Super 8, Grand Forks - Super 8, Minot Ohio - Holiday Inn-Cascade, Akron - Ramada Inn, Akron - Residence Inn, Akron - Aurora Inn and Pine Lake Trout Club, Aurora - Sheraton Inn, Aurora - Woodlands Inn, Aurora - Courtyard by Marriott, Blue Ash - Embassy Suites, Blue Ash - Residence Inn-Proposed, Blue Ash - Best Western, Cambridge - Days Inn, Cambridge - Hilton Hotel, Canton - Super 8, Canton - Best Western Northeast, Cincinnati - Carousel Inn, Cincinnati - Cincinnati Hotel, Cincinnati - Clarion Hotel, Cincinnati - Days Inn, Cincinnati - Embassy Suites-Proposed, Cincinnati - Holiday Inn-Downtown, Cincinnati - Holiday Inn-Eastgate, Cincinnati - Holiday Inn-Northeast, Cincinnati - Holiday Inn-Riverfront, Cincinnati - Holiday Inn-South, Cincinnati - Hotel-Airport-Proposed, Cincinnati - Howard Johnson, Cincinnati - Hyatt, Cincinnati - Knights Inn, Cincinnati - KOA Campground, Cincinnati - Marriott Inn, Cincinnati - Netherland Hilton, Cincinnati - Omni Netherland Plaza, Cincinnati - Proposed Hotel, Cincinnati - Radisson Inn, Cincinnati - Ramada Inn, Cincinnati - Residence Inn, Cincinnati - Residence Inn-North, Cincinnati - Sheraton Inn-Proposed, Cincinnati - Treadway Inn, Cincinnati - Vernon Manor, Cincinnati - AmeriSuite Hotel-Proposed, Cleveland - Downtown Hotel-Proposed, Cleveland - Fairfield Inn-Brook Park, Cleveland - Fairfield Inn-West, Cleveland - Holiday Inn-Airport, Cleveland - Holiday Inn-Lakeside, Cleveland - Hyatt Hotel-Proposed, Cleveland - Marriott Hotel, Cleveland - Sheraton City Center, Cleveland - Sheraton Hopkins, Cleveland - AmeriSuite - Proposed, Columbus - Embassy Suites, Columbus - Fairfield Inn-North, Columbus - Fairfield Inn-West, Columbus - Hilton Inn, Columbus - Holiday Inn-Airport, Columbus - Holiday Inn-City Center, Columbus - Holiday Inn-Worthington, Columbus - Hotel-Proposed, Columbus - Howard Johnson Hotel, Columbus - Howard Johnson-East, Columbus - Howard Johnson-West, Columbus - Knights Inn-West, Columbus - Marriott Hotel, Columbus - Nationwide Hotel, Columbus - Residence Inn-North, Columbus - Sheraton Plaza Hotel, Columbus - Sheraton-North, Columbus - Union Plaza Hotel-Steeplechase, Columbus - University Inn, Columbus - Woodfin Hotel, Columbus - Courtyard by Marriott, Crosswoods - Courtyard by Marriott, Dayton - Daytonian Hilton, Dayton - Fairfield Inn, Dayton - Hope Hotel & Conference Center, Dayton - Knights Inn-North, Dayton - Marriott Hotel, Dayton - Motel 6, Dayton - Ramada Inn, Dayton - Residence Inn-North, Dayton - Residence Inn By Marriott, Dayton South - Courtyard by Marriott, Dublin - Woodfin Suites, Dublin - East Liverpool Motor Lodge, East Liverpool - Howard Johnson, Euclid - Ramada Inn, Fairlawn - Hampton Inn, Independence - Howard Johnson, Lima - Ramada Inn, Lima - Best Western, Mansfield - Holiday Inn, Marietta - Lafayette Hotel, Marietta - Holiday Inn, Middletown - Howard Johnson, Middletown - Regal 8 Inn, Middletown - Sheraton-Proposed, Milford - Super 8, Montrose - Ramada Inn, Sandusky - Days Inn, Sharonville - Holiday Inn-Cincinnati North, Sharonville - Super 8, St. Clairsville - Holiday Inn, Strongsville - Balhalla Hotel, Toledo - Courtyard by Marriott, Toledo - Fairfield Inn-Airport, Toledo - Hilton at the Medical College, Toledo - Hilton Hotel, Toledo - Holiday Inn, Toledo - Knights Inn-West, Toledo - Marriott Portside Hotel, Toledo - Radisson Hotel, Toledo - Sofitel, Toledo - Hampton Inn-Proposed, Wickliffe - Holiday Inn, Youngstown - Hotel-Proposed, Youngstown - Sheraton-Proposed, Youngstown Oklahoma - Fountainhead Resort, Mcintosh County - Residence at the Trails Inn, Norman - Suit Hotel, Norman - Courtyard by Marriott, Oklahoma City - Embassy Suites, Oklahoma City - Holiday Inn, Oklahoma City - Lexington Hotel Suites, Oklahoma City - Lincoln Plaza Hotel, Oklahoma City - Marriott Hotel, Oklahoma City - Meridien Plaza, Oklahoma City - Sheraton Hotel, Oklahoma City - Arrowhead Resort, Pittsburgh County - Camelot Hotel, Tulsa - Doubletree Hotel, Tulsa - Former Holiday Inn, Tulsa - Former Holiday Inn-Downtown, Tulsa - Holiday Inn, Tulsa - Holiday Inn-Convention Center, Tulsa - La Quinta Inn, Tulsa - Marriott Hotel, Tulsa - Mayo Hotel, Tulsa - Residence Inn, Tulsa - Westin Hotel, Tulsa Oregon - Inn At Face Rock, Bandon - Courtyard by Marriott, Beaverton - Red Lion Motel, Bend - Sunriver Lodge and Resort, Bend - Econolodge Motel, Eugene - Valley River Inn, Eugene - Residence Inn Portland-South, Lake Oswego - Big Creek Resort-US Highway 101, Lane County - Embassy Suites, Portland - Holiday Inn Crowne Plaza - Proposed, Portland - Holiday Inn-Airport, Portland - Holiday Inn-South, Portland - Proposed Sheraton Suites, Portland - Red Lion - Jantzen Beach, Portland - Red Lion Inn-Lloyd Center, Portland - Red Lion Inn-Portland Center, Portland - Residence Inn - Proposed, Portland - Vintage Plaza Hotel, Portland - Wells Building, Portland - Execulodge Motel, Salem - Oregon Capital Inn, Salem - Springfield Red Lion Inn, Springfield - Sunriver Resort, Sunriver Pennsylvania - Allentown Hilton Hotel, Allentown - Holiday Inn, Allentown - Proposed Microtel, Allentown - Quality Inn, Allentown - Bedford Springs Hotel, Bedford - Compri Hotel-Proposed, Bensalem - Days Inn-Proposed, Bensalem - Holiday Inn, Bensalem - Residence Inn By Marriott, Berwyn - Econolodge, Bristol - Days Inn, Brookville - Buck Hill Falls Inn, Buck Hill Falls - Howard Johnson, Butler - Holiday Inn, Chambersburg - Days Inn, Clarion - Embassy Suites, Coraopolis - Hydeholde Country House-Proposed, Coraopolis - Days Inn, Danville - Holiday Inn, Dubois - Lafayette Inn-Proposed, Easton - Howard Johnson Hotel, Erie - Ramada Inn, Erie - Holiday Inn, Essington - Quality Suites-Proposed, Essington - Super 8-Proposed, Essington - Howard Johnson, Gibsonia - Compri Hotel-Proposed, Harrisburg - Holiday Inn, Harrisburg - Marriott Hotel, Harrisburg - Penn Harris Inn, Harrisburg - Sheraton Inn, Harrisburg - Super 8-Proposed, Harrisburg - Holiday Inn, Hazleton - Super 8-Proposed, Hazleton - Plaza Valley Forge Hotel, King of Prussia - Radisson Hotel, King of Prussia - Sheraton Hotel, King of Prussia - Valley Forge Complex, King of Prussia - Valley Forge Hilton, King of Prussia - Motel-Proposed, Lake Ariel - Days Inn, Lancaster - Holiday Inn-Route 30E, Lancaster - Holiday Inn-Route 501, Lancaster - Sheraton Lancaster Golf Resort, Lancaster - Super 8-Proposed, Lancaster - Holiday Inn, Lionville - Hilton-Great Valley, Malvern - Summerfield Suite-Proposed, Malvern - Days Inn, Meadville - Hilton Inn, Monroeville - Holiday Inn-West, Monroeville - Economy Hotel, Montgomery Township - Holiday Inn, New Hope - Treadway Inn, Newport - Residence Inn-Proposed, Paoli - Conference Center-Proposed, Penn State - Barclay Hotel, Philadelphia - Bellevue, Philadelphia - Courtyard by Marriott-Devon, Philadelphia - Courtyard-Willow Grove, Philadelphia - Days Inn-Airport, Philadelphia - Econo Lodge-Franklin Towne, Philadelphia - Essex Hotel, Philadelphia - Franklin Motor Inn, Philadelphia - Franklin Plaza Hotel, Philadelphia - Guest Quarters Hotel, Philadelphia - Hampton Inn-Proposed, Philadelphia - Health Club-Proposed, Philadelphia - Hilton Inn, Philadelphia - Hilton Inn-Northeast, Philadelphia - Holiday Inn-City Center, Philadelphia - Holiday Inn-City Line, Philadelphia - Hub Motor Inn, Philadelphia - Hyatt-Proposed, Philadelphia - Marriott Hotel, Philadelphia - Marriott Hotel-Airport, Philadelphia - Omni Philadelphia, Philadelphia - Penn Center Inn, Philadelphia - Quality Inn-Center City, Philadelphia - Residence Inn-Proposed, Philadelphia - Rittenhouse Hotel, Philadelphia - Treadway Mohawk, Philadelphia - Treadway Roosevelt, Philadelphia - Residence Inn, Philadelphia/Berwyn - Clubhouse Inn, Pittsburgh - Courtyard by Marriott, Pittsburgh - Hampton Inn at Playhouse Square, Pittsburgh - Hilton Hotel, Pittsburgh - Holiday Inn-Greentree, Pittsburgh - Holiday Inn-North, Pittsburgh - Holiday Inn-Parkway-East, Pittsburgh - Holiday Inn-Parkway-West, Pittsburgh - Hotel-Proposed, Pittsburgh - Howard Johnson Hotel, Pittsburgh - Marriott Hotel, Pittsburgh - Marriott-Airport, Pittsburgh - Motel 6, Pittsburgh - Quality Inn, Pittsburgh - Royce Hotel-Airport, Pittsburgh - U.S.S. Hotel-Proposed, Pittsburgh - Westin William Penn, Pittsburgh - Courtyard By Marriott, Pittsburgh Airport - Holiday Inn, Reading - Sheraton Hotel, Reading - Hilton at Lackawanna Station, Scranton - Hilton Hotel, Scranton - Sheraton Inn, Stroudsburg - HoJo Inn, Tannersville - Hilton-Northeast, Trevose - Compri Hotel-Proposed, Valley Forge - Courtyard by Marriott, Valley Forge - Holiday Inn-Meadowlands, Washington - Holiday Inn, Wilkes-Barre - Days Inn-Proposed, Williamsport - Hotel-Proposed, Williamsport - Hampton Inn - Proposed, Willow Grove - Holiday Inn-Market Street, York - Holiday Inn-Route 30 and I-83, York - Ramada Inn, York - Super 8-Proposed, York Rhode Island - Cresthil-Proposed, Lincoln - Courtyard by Marriott, Newport - Vanderbilt Hotel-Convention Center, Newport - Quality Inn, North Kingston - Biltmore Plaza, Providence - Convention Center Hotel-Proposed, Providence - Holiday Inn Providence - Downtown, Providence - Hotel-Proposed, Providence - Marriott Hotel, Providence - Sheraton-Airport, Providence - Susse Chalet, Smithfield - Howard Johnson, Warwick - Residence Inn-Proposed, Warwick - Susse Chalet, Warwick South Carolina - Quality Inn Motel, Anderson - Super 8, Anderson - Budget Hotel - Proposed, Charleston - Charleston Center Hotel-Proposed, Charleston - Cooper River Inn, Charleston - Days Inn, Charleston - Francis Marion Hotel, Charleston - Hampton Inn-Proposed, Charleston - Hawthorne Suites Hotel, Charleston - Holiday Inn, Charleston - Holiday Inn-Airport, Charleston - Holiday Inn-Riverview, Charleston - Masters Economy Inn - Mt. Pleasant, Charleston - Masters Economy Inn - Rivers Ave, Charleston - Middleton Inn, Charleston - Omni Charleston, Charleston - Quality Inn, Charleston - Trusthouse Forte, Charleston - Courtyard by Marriott, Columbia - Courtyard by Marriott-Northeast, Columbia - Courtyard by Marriott-Northwest, Columbia - Embassy Suites, Columbia - Marriott Hotel, Columbia - Masters Economy Inn - I-26, Columbia - Masters Economy Inn - Knox Abbot, Columbia - Motel 6, Columbia - Residence Inn, Columbia - Coral Beach Hotel, Coral Beach - Days Inn, Dillon - Save Inn, Fairplay - Fairfield Inn, Florence - Holiday Inn, Florence - Days Inn, Gaffney - Courtyard by Marriott, Greenville - Fairfield Inn, Greenville - Greenville Hilton Hotel, Greenville - Ramada Inn, Greenville - Super 8, Greenwood - Days Inn, Hardeeville - Fairfield Inn, Hilton Head - Hilton Head Inn, Hilton Head - Holiday Inn, Hilton Head - Inter-Continental Hotel, Hilton Head - Islander Inn, Hilton Head - Quality Suites-Proposed, Hilton Head - Residence Inn-Proposed, Hilton Head - Sheraton Inn, Hilton Head - PGA East Resort-Proposed, Kiawah Island - Save Inn, Lake Hartwell - Days Inn, Mt. Pleasant - Coral Beach Hotel, Myrtle Beach - Radisson Hotel, Myrtle Beach - Best Western Inn, North Charleston - Budget Hotel-Proposed, North Charleston - Days Inn, North Charleston - Northwoods Atrium Inn, North Charleston - Days Inn, Santee - Holiday Inn-West, Spartanburg - Howard Johnson, Spartanburg - Residence Inn, Spartanburg South Dakota - Holiday Inn, Aberdeen - Holiday Inn, Rapid City - Holiday Inn, Sioux Falls - Super 8, Sioux Falls - Holiday Inn, Spearfish Tennessee - Ameri Suite Hotel-Proposed, Brentwood - Courtyard by Marriott, Brentwood - Holiday Inn, Bristol - Holiday Inn-Southeast, Chattanooga - Howard Johnson, Chattanooga - Marriott Hotel, Chattanooga - Motel 6, Chattanooga - Sheraton Inn, Chattanooga - Super 8, Chattanooga - Holiday Inn, Cove Lake - Masters Economy Inn, Dickson - Comfort Inn-Proposed, Elizabethton - Park Vista Hotel, Gatlinburg - Holiday Inn-I-40, Jackson - Holiday Inn, Johnson City - Super 8, Johnson City - Fairfield Inn, Johnson Park - Holiday Inn, Kingsport - Courtsouth Healthclub-North, Knoxville - Courtsouth Healthclub-South, Knoxville - Courtsouth Healthclub-West, Knoxville - Days Inn, Knoxville - Hilton Hotel, Knoxville - Howard Johnson-Westhills, Knoxville - Motel 6, Knoxville - Quality Inn, Knoxville - Ramada Inn-West, Knoxville - Rodeway Inn, Knoxville - Courtyard by Marriott, Memphis - Courtyard by Marriott-Airport, Memphis - Holiday Inn - Crowne Plaza, Memphis - Holiday Inn-East, Memphis - Holiday Inn-East Poplar, Memphis - Holiday Inn-I-40-Sycamore View, Memphis - Holiday Inn-Memphis Int'l Airport, Memphis - Hyatt Regency, Memphis - Lexington Hotel Suites, Memphis - Motel 6, Memphis - Omni Hotel, Memphis - Proposed Fairfield Inn, Memphis - Residence Inn, Memphis - La Quinta Inn, Memphis - Airport - Brown County Inn, Nashville - Capital Mall Conv. Center-Proposed, Nashville - Clarion Maxwell House, Nashville - Courtyard by Marriott-Airport, Nashville - Days Inn, Nashville - Doubletree Hotel, Nashville - Grosvenor, Nashville - Hampton Inn, Nashville - Holiday Inn Crowne Plaza, Nashville - Holiday Inn Express, Nashville - Holiday Inn-Briley Parkway, Nashville - Marriott Hotel, Nashville - Nashville Union Station, Nashville - Ramada Inn, Nashville - Sheraton Hotel, Nashville - Sheraton Music City, Nashville - Stouffer Hotel, Nashville - Super 8, Nashville - Union Station Hotel, Nashville - AmeriSuite, Oakridge - Holiday Inn, Oakridge - Super 8-Proposed, Union City Texas - Harvey Hotel, Addison - Days Inn, Amarillo - Motel 6, Amarillo - Radisson Hotel-Proposed, Amarillo - Super 8 Motel, Amarillo - La Quinta Inn, Amarillo - Airport - Courtyard by Marriott, Arlington - Hilton Hotel, Arlington - Holiday Inn, Arlington - Lexington Suites Hotel, Arlington - Compri Hotel-Proposed, Austin - Driskill Hotel, Austin - Embassy Suites-Austin Town Lake, Austin - Embassy Suites-North, Austin - Fairfield North, Austin - Four Seasons Hotel, Austin - Holiday Inn, Austin - Holiday Inn-Austin Town Lake, Austin - La Quinta Inn, Austin - Marriott Hotel, Austin - Proposed Fairfield Inn, Austin - Quality Inn, Austin - Residence South, Austin - La Quinta Inn, Austin - Ben White - Holiday Inn Airport, Austins Cities - Holiday Inn, Bay Town - Hilton Hotel, Beaumont - Holiday Inn, Beaumont - Courtyard by Marriott, Bedford - Holiday Inn, Brownsville - La Quinta Inn, Brownsville - Hilton Hotel, College Station - Ramada Inn, College Station - Holiday Inn, Conroe - Corpus Christi Hotel-Airport, Corpus Christi - Days Inn, Corpus Christi - Hilton - Proposed, Corpus Christi - Holiday Inn, Corpus Christi - Holiday Inn-Airport, Corpus Christi - La Quinta Inn, Corpus Christi - North - La Quinta Inn, Corpus Christi - South - Allstar Inn, Dallas - Ambassador Plaza Hotel, Dallas - Arlington Hilton, Dallas - Bradford Plaza Hotel, Dallas - Bristol Suites, Dallas - Convention Center Hotel-Proposed, Dallas - Courtyard by Marriott, Dallas - Courtyard by Marriott-Northeast, Dallas - Courtyard by Marriott-Plano, Dallas - Courtyard by Marriott-Stemmons, Dallas - Dallas Grand Hotel, Dallas - Doubletree Inn, Dallas - Embassy Suites, Dallas - Fairmont Hotel, Dallas - Harvey Hotel, Dallas - Hilltop, Dallas - Hilton Inn-LBJ, Dallas - Hilton-Arlington, Dallas - Holiday Inn - North, Dallas - Holiday Inn Crowne Plaza, Dallas - Holiday Inn-Brook Hollow, Dallas - Holiday Inn-South, Dallas - Houstonian Hotel, Dallas - Howard Johnson-East, Dallas - Lexington Hotel Suites, Dallas - Loews Anatole Hotel, Dallas - Marriott Hotel-Airport, Dallas - Marriott-Park Central, Dallas - Marriott-Quorum, Dallas - Melrose Hotel, Dallas - Motel 6, Dallas - Omni Melrose Hotel, Dallas - Park Plaza, Dallas - Propsed Hotel - DFW, Dallas - Ramada Inn Convention Center, Dallas - Ramada-Market Center, Dallas - Registry Hotel, Dallas - Residence Inn-Market Center, Dallas - Sheraton Grand, Dallas - Southland Center Hotel, Dallas - Statler Hilton Hotel, Dallas - Summit Hotel, Dallas - Westin Galleria Hotel, Dallas - La Quinta Inn, Dallas - DFW - La Quinta Inn, Dallas - North Park - La Quinta Inn, Dallas - Plano - La Quinta Inn, Dallas - Richardson - Allstar Inn, El Paso - Hilton Inn-Airport, El Paso - La Quinta Hotel-Airport, El Paso - Rodeway Inn, El Paso - Travelers Inn, El Paso - Westin Paso del Norte, El Paso - La Quinta Inn, El Paso - Lomaland - Allstar Inn, Euless - La Quinta Inn, Euless - Allstar Inn, Fort Worth - Courtyard by Marriott, Fort Worth - Days Inn Downtown, Fort Worth - Hilton Hotel, Fort Worth - Holiday Inn-North, Fort Worth - Holiday Inn-South, Fort Worth - Lexington Suites Hotel, Fort Worth - Metro Center Hotel, Fort Worth - Radisson Plaza Hotel, Fort Worth - Residence Inn, Fort Worth - La Quinta Inn, Fort Worth - East - Holiday Inn, Harlingen - La Quinta Inn, HI-LA Marque - Crowne Plaza-Houston Park, Houston - Days Inn, Houston - Days Inn-Hobby, Houston - Doubletree Hotel, Houston - Embassy Suites, Houston - Galleria Gardens, Houston - Harvest House Hotel, Houston - Harvey Hotel Medical Center, Houston - Hilton Inn-West, Houston - Holiday Inn I-10 East, Houston - Holiday Inn-Downtown, Houston - Holiday Inn-East, Houston - Holiday Inn-Greenway Plaza, Houston - Holiday Inn-Hobby, Houston - Holiday Inn-Medical Center, Houston - Holiday Inn-NASA, Houston - Holiday Inn-North, Houston - Holiday Inn-Northwest, Houston - Holiday Inn-Southwest, Houston - Host Hotel International, Houston - Hotel Meridien, Houston - Hotel-Proposed, Houston - Houston House, Houston - Houston Medical Center, Houston - Houston Park 10 Crowne Plaza, Houston - La Quinta Hotel-Astrodome, Houston - La Quinta Hotel-Baytown, Houston - La Quinta Hotel-CY Fair, Houston - La Quinta Hotel-Hobby, Houston - La Quinta Inn-Stafford, Houston - Lexington Hotel Suites, Houston - Marriott Astrodome, Houston - Marriott Hotel, Houston - Marriott Hotel-Medical Center, Houston - Marriott-Airport, Houston - Motel 6, Houston - Remington, Houston - Residence Inn, Houston - Rodeway Inn, Houston - Rodeway Inn-Hobby, Houston - Shamrock Hilton Hotel, Houston - Sheraton Hotel, Houston - Sheraton Houston House, Houston - Sheraton Houston Place Hotel, Houston - Sheraton Town and Country, Houston - Sofitel, Houston - Stouffer Greenway Plaza, Houston - Suite Hotel-Proposed, Houston - Whitehall, Houston - Whitehall Hotel Conversion to HI, Houston - La Quinta Inn, Houston - Sharpstown - La Quinta Inn, Houston - East - La Quinta Inn, Houston - Loop 1960 - La Quinta Inn, Houston - Northwest - La Quinta Inn, Houston- SW Freeway - Holiday Inn, Huntsville - Harvey Hotel DFW, Irvine - Allstar Inn, Irving - Hampton Inn, Irving - Hampton Inn-Proposed, Irving - Harvey Hotel-D/FW Airport, Irving - Holiday Inn-Texas Stadium, Irving - Marriott Hotel, Irving - Holiday Inn, Kingsville - Del Lago Hotel, Lake Conroe - Hilton Inn, Laredo - La Posada, Laredo - Courtyard by Marriott, Las Colinas - La Quinta Inn, Longview - Hilton Inn, Lubbock - Holiday Inn, Lubbock - Residence Inn, Lubbock - La Quinta Inn, Midland - Holiday Inn, New Braunfels - All Star Inn, North Richland Hills - La Quinta Inn, Odessa - Holiday Inn, Orange - Holiday Inn, Paris - Plano Harvey Hotel, Plano - La Quinta Inn, Round Rock - Sheraton Inn, San Angelo - Coachman Inn-Proposed, San Antonio - Courtyard by Marriott-Downtown, San Antonio - Courtyard by Marriott-Medical Ctr., San Antonio - Crockett Hotel, San Antonio - Days Inn, San Antonio - Fairfield - North, San Antonio - Gunter Hotel, San Antonio - Holiday Inn-Airport, San Antonio - Holiday Inn-Market Square, San Antonio - Holiday Inn-North, San Antonio - Holiday Inn-Northwest, San Antonio - Holiday Inn-Riverwalk, San Antonio - La Quinta Hotel-Ingram, San Antonio - La Quinta Hotel-Lackland, San Antonio - La Quinta Hotel-Toepperwein, San Antonio - Lexington Hotel Suites, San Antonio - Marriott Hotel-Proposed, San Antonio - Marriott Inn-North, San Antonio - Proposed Fairfield Inn, San Antonio - La Quinta Inn, San Antonio - Windsor - La Quinta Inn, San Antonio - Wurzbach - Holiday Inn, San Marcos - La Quinta Inn, SAT-Toepperwein - Sheraton Hotel, South Padre Island - La Quinta Inn, Tyler - Sheraton, Tyler - Sheraton Inn, Tyler - Traveler's Choice Inn, Tyler - Hilton Hotel, Waco - Gateway Inn, Wichita Falls - Hilton Hotel, Wichita Falls Utah - Mount Holly Ski Resort, Beaver - Hotel-Proposed, Brigham City - Motel-Proposed, Cedar City - Proposed Mayflower Hotel, Deer Valley - Stein Eriksen Lodge, Deer Valley - Deer Valley Resort, Park City - Omni Yarrow, Park City - Prospector Square Resort, Park City - Yarrow Resort, Park City - Seven Peaks Resort and Hotel, Provo - Comfort Inn, Salt Lake City - Doubletree, Salt Lake City - Hilton Hotel-Airport, Salt Lake City - Holiday Inn, Salt Lake City - Holiday Inn-Salt Palace, Salt Lake City - Hotel Utah, Salt Lake City - Hotel-Proposed, Salt Lake City - La Quinta Inn, Salt Lake City - Nendels Inn, Salt Lake City - New Grande Hotel, Salt Lake City - Red Lion Hotel, Salt Lake City - Sheraton Hotel, Salt Lake City - Super 8, Salt Lake City - University Park Hotel (Desktop Rev), Salt Lake City - Ramada Inn-Proposed, Sandy Vermont - Ramada Inn, Bennington - Bolton Valley Corporation, Bolton Valley - Quality Inn, Brattleboro - Radisson Hotel, Burlington - Smugglers Notch, Cambridge - Inn-Proposed, Essex - Cascade Lodge, Killington - Inn of the Six Mountains, Killington - Mountain Inn, Killington - Equinox Hotel, Manchester - Howard Johnson Inn, Rutland - Quality Inn, Stowe - Conference Center-Proposed, Stratton Mountain - Sugarbush Inn, Sugarbush - Susse Chalet, Williston Virginia - Comfort Inn, Abingdon - Best Western, Alexandria - Comfort Inn, Alexandria - Compri Hotel-Proposed, Alexandria - Embassy Suites, Alexandria - Howard Johnson, Alexandria - Marriott Suites, Alexandria - Ramada Inn, Alexandria - Best Western, Arlington - Gateway Marriott, Arlington - Hyatt Arlington Hotel, Arlington - Hyatt Regency, Arlington - Key Bridge Marriott, Arlington - Marriott Hotel, Arlington - Sheraton Crystal City Hotel, Arlington - Sheraton National Hotel, Arlington - Stouffer Concourse Hotel, Arlington - Mountain Lake Hotel, Blacksburg - Holiday Inn, Bristol - Howard Johnson, Bristol - Days Inn, Carmel Church - Westfields International, Chantilly - Boar's Head Inn, Charlottesville - Cavalier Inn, Charlottesville - Courtyard by Marriott, Charlottesville - Hilton-University, Charlottesville - Holiday Inn-North, Charlottesville - Omni Charlottesville, Charlottesville - Radisson-Proposed, Charlottesville - Super 8, Charlottesville - Days Inn, Chester - Howard Johnson, Chester - Days Inn, Colonial Heights - Holiday Inn, Covington - Embassy Suites, Crystal City - Holiday Inn Crowne Plaza, Crystal City - Hyatt Hotel, Crystal City - Marriott Crystal Gateway Hotel, Crystal City - Comfort Inn-Proposed, Dahlgren - Days Inn, Emporia - Courtyard by Marriott, Fairfax - Embassy Suites, Fairfax - Neighborhood Suites-Proposed, Fairfax - Hampton Inn-Proposed, Fairfax City - Westfields International, Fairfax County - Marriott Hotel, Fairview - Econo Lodge, Farmingville - Comfort Inn-Proposed, Farmville - Comfort Inn, Frederick County - Motel 6, Fredericksburg - Courtyard by Marriott, Hampton - Days Inn, Hampton - Fairfield Inn, Hampton - Courtyard by Marriott, Herndon - Embassy Suites Hotel, Herndon - Ramada Renaissance and Health Club, Herndon - Residence Inn-Proposed, Herndon - Worldgate Marriott Hotel, Herndon - Hotel-Proposed, Hopewell - Keswick Inn, Keswick - Holiday Inn, Lexington - Radisson Hotel, Lynchburg - Courtyard by Marriott, Manassas - Holiday Inn, Marion - Hilton, McLean - Days Inn, Norfolk - Marriott Waterside Hotel, Norfolk - Omni Hotel, Norfolk - Waterfront Hotel - Proposed, Norfolk - 135-Suite Hotel-Proposed, Portsmouth - Waterfront Suite Hotel-Proposed, Portsmouth - Comfort Inn, Princeton - Comfort Inn, Pulaski County - Embassy Suites Hotel, Reston - Hyatt Hotel, Reston - Best Western Kings Quarters, Richmond - Courtyard by Marriott, Richmond - Embassy Suites Hotel, Richmond - Hampton Inn, Richmond - Holiday Inn, Richmond - Howard Johnson Lodge, Richmond - Hyatt House Hotel, Richmond - La Quinta Hotel, Richmond - Marriott Hotel, Richmond - Omni Richmond, Richmond - Radisson Hotel, Richmond - Ramada Renaissance Hotel, Richmond - Residence Inn, Richmond - Days Inn, Richmond (Broad) - Days Inn, Richmond (Byrd) - Holiday Inn, Roanoke - Holiday Inn - Airport, Roanoke - Holiday Inn - Civic Center, Roanoke - Holiday Inn - South, Roanoke - Hotel Roanoke, Roanoke - Howard Johnson, Roanoke - Marriott - Roanoke Airport, Roanoke - Marriott Hotel, Roanoke - Holiday Inn, Salem - Super 8, South Hill - Days Inn, Springfield - Hilton, Springfield - Holiday Inn, Staunton - Stonewall Jackson Hotel, Staunton - Hampton Inn - Proposed, Tyson's Corner - Embassy Suites, Tysons Corner - Marriott Hotel, Tysons Corner - Residence Inn, Tysons Corner - Ritz Carlton-Proposed, Tysons Corner - Courtyard by Marriott, Virginia Beach - Courtyard by Marriott-Lynnhaven, Virginia Beach - Fairfield Inn, Virginia Beach - Hotel-Proposed, Virginia Beach - Pavilion Tower Hotel, Virginia Beach - Ramada Inn - Oceanside, Virginia Beach - International Conference Center, Westfields - Howard Johnson, Wheeling - Fort Magruder Inn, Williamsburg - Governor's Inn, Williamsburg - Holiday Inn-East, Williamsburg - Holiday Inn-West, Williamsburg - Royce Hotel, Williamsburg - Williamsburg Hilton, Williamsburg - Best Western-Proposed, Wytheville Washington - Bellevue Thunderbird Motor Inn, Bellevue - Embassy Suites, Bellevue - Hampton Inn, Bellevue - La Quinta, Bellevue - Residence Inn Seattle-East, Bellevue - Ramada Inn, Bothell - Rattling Spring Hotel, Harpers Ferry - Motel 6, Issaquah - AmeriSuite, Kent - Homecourt Suite Hotel, Kent - Embassy Suite, Lynnwood - Residence Inn-Seattle North, Lynnwood - Red Lion Inn at Pasco, Pasco - Redmond Motel, Redmond - Hampton Inn, Sea Tac - Holiday Inn Airport, Sea Tac - Thunderbird Inn, Sea Tac - Alexis Hotel, Seattle - Courtyard by Marriott-South Center, Seattle - Doubletree Inn at South Center, Seattle - Doubletree Plaza, Seattle - Hampton Inn-Airport, Seattle - Holiday Inn Crowne Plaza, Seattle - Holiday Inn-Sea Tac, Seattle - La Quinta, Seattle - Lake Union Residence Inn, Seattle - Marriott Hotel-Airport, Seattle - Marriott Sea-Tac Hotel, Seattle - Plaza Park Suites, Seattle - Ramada Inn-Airport, Seattle - Red Lion, Seattle - Stouffer Madison Hotel, Seattle - Travelodge-Proposed, Seattle - Westin Hotel, Seattle - Courtyard by Marriott, Spokane - Gateway Hotel, Spokane - Holiday Inn-West, Spokane - Red Lion Inn, Spokane - Super 8, Spokane - Hilton-Village Green, Tacoma - Hotel-Proposed, Tacoma - Park Shore Inn, Tacoma - Tacoma Sheraton Hotel, Tacoma - Embassy Suites Hotel, Tukwila - Hampton Inn, Tukwila - Residence Inn-Seattle South, Tukwila - Red Lion Quay, Vancouver - Residence Inn-Portland North, Vancouver - Super 8, Wenatchee - Thunderbird Motor Inn, Yakima West Virginia - Comfort Inn-Proposed, Charleston - Holiday Inn, Clarksburg - Holiday Inn, Fairmont - Hotel-Proposed, Harpers Ferry - Holiday Inn, Huntington - Comfort Inn-Proposed, Morgantown - Holiday Inn, Morgantown - Motel-Proposed, Morgantown - Comfort Inn, Princeton - Motel-Proposed, Princeton - Hotel-Proposed, Wheeling - Howard Johnson, Wheeling Wisconsin - Super 8, Ashland - Holiday Inn, Beloit - Embassy Suites Hotel-Proposed, Brookfield - Marriott-Milwaukee, Brookfield - Holiday Inn, Eau Claire - Residence Inn, Glendale - Granada Royale-Proposed, Green Bay - Holiday Inn-Downtown, Green Bay - Residence Inn-Proposed, Green Bay - Super 8, Janesville - Super 8, Kenosha - Playboy Resort, Lake Geneva - Concourse Hotel, Madison - Fairfield Inn, Madison - Hampton Inn - East, Madison - Hampton Inn - West, Madison - Compri Hotel-Proposed, Milwaukee - Embassy Suite, Milwaukee - Fairfield Inn, Milwaukee - Holiday Inn-Airport, Milwaukee - Holiday Inn-West, Milwaukee - Hotel and Conv. Ctr. East-Proposed, Milwaukee - Hyatt Regency, Milwaukee - Marc Plaza, Milwaukee - Marriott Inn, Milwaukee - Omni Suite Hotel-Proposed, Milwaukee - Super 8-Airport, Milwaukee - Olympia Village Resort, Oconomowoc - Scotsland Resort, Oconomowoc - Sheraton, Racine - Claridge Motor Inn, Rhinelander - Super 8, Waukesha - Holiday Inn, Wausau - Mead Inn, Wisconsin Rapids Wyoming - Days Inn, Casper - Flying L. Skytel, Cody - Super 8, Cody - Snow King Resort, Jackson - Super 8, Jackson - Wort Hotel, Jackson - Development-Proposed, Jackson Hole - Colter Bay Village, Moran - Jackson Lake Lodge, Moran - Jenny Lake Lodge, Moran - Best Western-Bel Air, Rawlins - Bridger Inn, Rawlins - La Quinta Inn, Rock Springs Western Europe Belgium - Oostkamp Hotel, Bruges - Proposed Residence Inn, Brussels - SAS Royal Hotel, Brussels Denmark - Proposed Hotel, Copenhagen France - The Miramar, Biarritz - Chateau D'arc en Barroi, Haute-Marne - Le Grand, Paris - Royal Monceau, Paris Germany - Cumberland House, Berlin - Munchen Penta Hotel, Munchen Holland - Carlton - Cannes & Amstel, Amsterdam - The Pulitzer Hotel, Amsterdam Spain - Le Meridien, Barcelona - Princess Sophia, Barcelona - Hotel Los Monteros, Marbella - Incosol Spa & Hotel, Marbella - Proposed Hyatt Resort, Marbella United Kingdom - Copthorne Hotel, Aberdeen - Copthorne Hotel, Birmingham - Hyatt Regency, Birmingham - Holiday Inn, Cambridge - Copthorne Hotel, Cardiff - Great Eastern Hotel, England - Copthorne Hotel, Glasgow - Hanbury Manor Hotel, Hertfordshire - 47 Park Street, London - Bailey's Hotel, London - Basil Street Hotel, London - Basil Street Hotel, Knightsbridge, London - Britannic Tower, London - Chelsea Hotel, London - Chesterfield Hotel, London - Chesterfield Hotel, Mayfair, London - Copthorne Hotels, London - Copthorne Tara Hotel, London - Dorchester Mayfair, London - Executive Hotel, London - Marriott Hotel, London - May Fair, London - Plaza Hotel, London - Proposed Hotel Conversion, London - Proposed Hotel-The City, London - Regent Hotel, London - Regent London Hotel, London - Sheraton Belgravia, London - Sheraton Park Tower, London - St. James Court Hotel, London - The Executive Hotel, London - Windsor Hotel, London - Copthorne Hotel, Manchester - Copthorne Hotel, Newcastle - Copthorne Hotel, Slough/Windsor - Swallow Hotel, Stockton - Copthorne Hotel-Effingham Park, Sussex - Copthorne Hotel-Gatwick, Sussex Middle East and North Africa Egypt - Sheraton Anni Cruise Ship, - Sheraton Aton Cruise Ship, - Sheraton Hotp Cruise Ship, - Sheraton Tut Cruise ship, - Aswan Oberol Hotel, Aswan - Cairo Sheraton Hotel, Cairo - Hotel - Proposed, Cairo - Lido Hotel, Cairo - Meridien Hotel, Cairo - Novotel Cairo Airport, Heliopolis, Cairo - Proposed Resort Complex, Hurghada - Luxor Sheraton Hotel, Luxor - Proposed Hotel, Luxor - Fayrouz Village Hotel, Sharm El Sheikh, Sinai - Coral Village Hotel, Nuweiba, Sinai - Hotel - Proposed, Dahab, Sinai - Hotel - Proposed, St. Catherine, Sinai Greece - Athens Hilton & Proposed Hotel, Athens - Caravel Hotel, Athens - Proposed Sargani Hotel & Bungalows, Halkidiki - Rhodes Hotel -Proposed, Rhodes Israel - Proposed Inter-Continental Hotel, Tel Aviv Lebanon - Hotel Market Review, Beruit Morocco - El Minzah Hotel, Tangier Nigeria - Proposed Sheraton Hotel, Port Harcourt Saudi Arabia - Proposed Jeddah Corniche Project, Jeddah Tunisia - Proposed Hotel, Hammamet Turkey - Hotel Conrad, Istanbul Latin America and the Caribbean Bahamas - Eleuthera Joint Venture, Eleuthera - Cape Eleuthera Island Hotel, Eleuthera Island - Eleuthera Joint Venture, Eleuthra - The Montague, Nassau - Paradise Island Hotel, Paradise Island - Resorts Int'l Hotel and Casino, Paradise Island Belize - Journey's End Caribbean Club, Abergris Caye Bermuda - Sonesta Hotel, Bermuda Brazil - Quatro Rodas Hotel, Recife Colombia - Charleston Hotel - Proposed, Barranquilla - Bella Suiza Hotel, Bogota - Hotel & Convention Center -Proposed, Cali - Cartagena Hilton, Cartagena - El Faro de Cartagena Resort Propose, Cartagena - Proposed Indian Sea and Sun Resort, Cartagena - Hotel De Isleno, San Andres Isla - Santamar Hotel, Santa Marta Curacao - Ramada Renaissance Hotel and Casino, Honduras - Inn Of The Sun, Guanaja Jamaica - Holiday Inn-Rose Hall, Montego Bay - Americana Eden II, Ocho Rios Mexico - Posadas de Mexico Hotels, - Americana Condesa Del Mar, Acapulco - Americana El Presidente Hotel, Acapulco - Resort-Proposed, Cabo San Lucas - Palacio Del Margus, Chiconcuac - Omni Hotel, Ixtapa - Fiesta Inn-Proposed, Leon - Karmina Place, Manzanillo - Hotel - Proposed, Mexico City - La Jolla de Mismaloya, Puerta Vallarta Netherland Antilles - Divi Divi Beach Resort, Aruba - Divi Tamarijn Beach Resort, Aruba - Golden Anchor, Bonaire - Resort Hotel-Proposed, Bonaire - Ramada Renaissance Hotel and Casino, Curacao - Cupecoy Beach Club Hotel, St. Maarten - Dawn Beach Hotel, St. Maarten - Dawn Beach Resort, St. Maarten - Mullet Bay Resort, St. Maarten - Oyster Pond Hotel, St. Maarten Puerto Rico - Hyatt Dorado Beach Hotel, Dorado - Hyatt Regency Cerromar Hotel, Dorado - Hotel - Proposed, Fajardo - Hotel Puerto Rico, Fajardo - Westin Resort-Proposed, Palmer - Marriott Resort & Casino-Proposed, Puerto Rico - Carib Inn, San Juan - Dupont Plaza, San Juan - El San Juan Hotel and Casino, San Juan - Howard Johnson Hotel, San Juan - Marriott - Proposed, San Juan - Marriott Update - Proposed, San Juan - Sands Hotel and Casino, San Juan Virgin Islands - Caneel Bay, St. Croix - Carambola Beach Resort, St. Croix - Hotel - Proposed, St. Croix - St. Croix Development, St. Croix - Caneel Bay, St. John - Pineapple Beach Hotel, St. Thomas - Sugar Bay Plantation, St. Thomas - Virgin Grand Hotel, St. Thomas - Virgin Isle Hotel, St. Thomas - Little Dix Bay, Virgin Borda Eastern Europe Croatia - Two Hotels, Dubrovnik Czech Republic - Voronesh Hotel Complex, Brno - Proposed Four Seasons Hotel, Prague Hungary - Proposed Resort Hotel, Babolna - Duna Inter-Continental, Budapest Latvia - Daugava Hotel-Proposed, Riga - Proposed Hotel, Riga Poland - Holiday Inn, Krakow - Marriott Hotel - Proposed, Poznan - Proposed Hotel, Poznan - Radisson Hotel, Szczecin - Bristol Hotel, Warsaw - Holiday Inn, Warsaw - Orbis Joint Venture, Warsaw - Proposed Hotel, Warsaw - Sheraton Hotel - Proposed, Warsaw - Zakopane Resort Complex, Zakopane Russia - Kamiennyi Most Hotel & Business, Moscow - Savoy Hotel, Moscow Asia Korea - Ultrapolis 3000, Seoul Malaysia - UP 3000 Hotel-Proposed, Selangor Singapore - Resort Hotels - Proposed, - Ultrapolis 3000, Singapore West Indies - Proposed Blue Lagoon Resort, St. Martin Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Hospitality Valuation Services Industry Leader Hospitality Valuation Services (HVS) was created in 1980 to satisfy the ever-increasing demand for reliable and well-documented hotel/motel valuations, market studies, and feasibility reports. As the nation's leading real estate appraisal organization devoted exclusively to lodging properties, HVS offers owners, investors, and lenders in-depth valuation and market research expertise. Our professional staff, operating on a worldwide basis with offices in New York, San Francisco, Miami, Boulder, Vancouver, and London, has appraised more than 4,000 hotels and motels in every state and over 32 foreign countries. Each member of Hospitality Valuation Services is well versed in lodging operations. Most have college degrees in hotel administration as well as actual on-the-job hotel experience. Coupled with intense training in real estate appraisal theory and techniques, we are highly qualified to handle the unique characteristics of hostelry valuations. Excellence Through Specialization An important feature of our valuation and feasibility services is specialization. Daily exposure on a global basis to a wide variety of hotel transactions and operating statistics, along with actual buyers and sellers, provides the data to thoroughly document our reports. HVS maintains the industry's largest database of hotel valuation information: o Data on over 4,000 hotel transactions; o Over 3,500 actual financial statements; o Thousands of management contracts, franchise agreements, mortgages, leases, and other similar documents; o Personal contacts at every major hotel company; o Names and addresses of over 10,000 hotel owners, investors, lenders, and operators. Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Innovative research in hotel valuation techniques is set forth in the textbooks we authored for the Appraisal Institute, entitled The Computerized Income Approach to Hotel/Motel Market Studies and Valuations and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations. These publications, along with more than 300 articles, are recognized as the authoritative standard for valuing lodging facilities and performing market feasibility studies. In addition, we have developed Hospitality Valuation Software, a computerized package that assists appraisers and consultants in evaluating market trends and preparing financial forecasts. Full-Service Hotel Consulting With a reputation established by providing highly detailed hotel valuations that are accepted and relied upon by virtually every major hotel owner, lender, and operator, HVS has branched out to offer a full range of consulting services. o HVS Consulting Services: Valuations, market feasibility studies, economic studies, management contract and franchise negotiations, development assistance, and expert testimony. o HVS Executive Search: Recruitment and placement of top-level hotel management personnel. o HVS Eco Services: Environmental audits and assistance in implementing programs including water and energy management, recycling, and green product selection. Provides ECOTEL certifications to environmentally sensitive hotels. o HVS Gaming Services: Specialized market, valuation, and consulting services for casinos and other types of gaming activities. o HEI Hotels: Hotel ownership and management. Long-Term Relationship Hospitality Valuation Services is in business for the long-term. We are dedicated to providing our clients with the highest quality consulting services. Should you require assistance in any areas covered by our expertise, please contact any member of our team at (516) 248-8828. This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. ============= HVS - ------------- INTERNATIONAL ============= ===================================================== ---------------------------- Economic Study and Appraisal ---------------------------- Radisson Plaza ---------------------------- Fort Worth, Texas ---------------------------- Prepared by: Hospitality Valuation Services A Division of Hotel Consulting Services, Inc. 372 Willis Avenue Mineola, NY 11501 516-248-8828 Submitted to: Mr. Shirish Godbole Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 [ Letterhead of HVS International] November 23, 1996 Mr. Shirish Godbole Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 Re: Radisson Plaza Fort Worth, Texas Ref. #9610276 Dear Mr. Godbole: Pursuant to your request, we herewith submit our economic study and appraisal pertaining to the above-captioned property. We have inspected the site and facilities and analyzed the hostelry market conditions in the Tarrant County area. Our report was prepared in accordance with, and is subject to, the requirements of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and the Uniform Standards of Professional Practice (USPAP), as provided by the Appraisal Institute. Based on the available data, our analysis, and our experience in the hotel industry, it is our opinion that the market of the fee simple and leasehold interests in the subject property described in this report, as of January 1, 1997, is: $25,850,000 TWENTY FIVE MILLION EIGHT HUNDRED FIFTY THOUSAND DOLLARS We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings and valuation. The economic study and appraisal is made part hereof, and must remain attached in order for the value opinion set forth to be considered valid. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. Very truly yours, HOSPITALITY VALUATION SERVICES A Division of Hotel Consulting Services, Inc. /s/ Kate B. Henriksen Kate B. Henriksen Consulting and Valuation Analyst /s/ Anne R. Lloyd-Jones, CRE Anne R. Lloyd-Jones, CRE Senior Vice President /s/ Stephen Rushmore, CRE, MAI, CHA Stephen Rushmore, CRE, MAI, CHA President HVS International, Mineola, New York Table of Contents - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table of Contents 1. Executive Summary .................................................. 1 2. Nature of the Assignment ........................................... 3 3. Description of the Land, Improvements, Zoning, Taxes, and Neighborhood .................................... 7 4. Market Area Analysis ............................................... 23 5. Overview of External Forces Affecting the U.S. Lodging Industry .... 33 6. Lodging Market Supply and Demand Analysis .......................... 49 7. Projection of Occupancy and Average Rate ........................... 66 8. Highest and Best Use ............................................... 77 9. Approaches to Value ................................................ 79 10. Income Capitalization Approach ..................................... 82 11. Sales Comparison Approach .......................................... 122 12. Cost Approach ...................................................... 129 13. Reconciliation of Value Indications ................................ 136 14. Statement of Assumptions and Limiting Conditions ................... 140 15. Certification ...................................................... 143 Addenda Photographs of the Subject Property Photographs of the Competitors Legal Description Synopsis of Franchise and License Agreements Synopsis of Ground Leases (West Tower and Parking Garage) Explanation of the Simultaneous Valuation Formula Qualifications Kate B. Henriksen Anne R. Lloyd-Jones, CRE Stephen Rushmore, CRE, MAI, CHA HVS International, Mineola, New York Executive Summary 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 1. Executive Summary Property: Radisson Plaza Location: 815 Main Street Fort Worth, Texas 76102 Date of Inspection: October 21, 1996 Interest Appraised: Fee simple and leasehold Date of Value: January 1, 1997 Land Description Area: +/-2.5 acres, or +/-109,000 square feet Zoning: H - Business District Assessor's Parcel Number: Block 111, Lots 2-3; Block 112, Lots 1-16; Block 114, Lots 9-16; Block 115, Lots 1-8 & 13-16 Improvements Description Age: Constructed in 1921 Property Type: Full-service Guestrooms: 517 Number of Stories: 15 (West Tower) and 13 (East Tower) Food and Beverage Facilities: Texas Cafe (178 seats); Cactus Grill (145 seats); Skylight Lounge (40 seats) Meeting Space: Eight rooms totaling +/-62,738 square feet Parking: Leased underground parking garage across from the West Tower; parking garage on the first five levels of the East Tower Summary of Value Parameters Highest and Best Use (as if vacant): Hold for future development Highest and Best Use (as improved): Lodging facility Marketing Period: Six to nine months Number of Years to Stabilize: Three Stabilized Year: 1999 HVS International, Mineola, New York Executive Summary 2 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Valuation Assumptions Mortgage Interest Rate: 9.5% Amortization Period: 25 years Debt Service Constant: 0.111856 Loan-to-Value Ratio: 70% Stabilized Inflation Rate: 3.5% Equity Yield Rate: 22.0% Terminal Capitalization Rate: 11.5% Brokerage and Legal Fees: 3.0% Holding Period: Ten years Calculated Discount Rate: 14.3% Estimates of Value Income Capitalization Approach: $26,171,000 Sales Comparison Approach: $25,200,000 - $28,300,000 Cost Approach (Replacement Cost): $46,700,000 Market Value Conclusion: $25,850,000 Market Value Conclusion per Room: $50,000 HVS International, Mineola, New York Nature of the Assignment 3 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 2. Nature of the Assignment Subject of the Economic Study and Appraisal The subject of the economic study and appraisal is the fee simple interest in approximately 50,000 square feet (1.15 acres) of land improved with a 517-room, full-service lodging facility known as the Radisson Plaza. This analysis also considers the leasehold interest in a +/-10,000-square-foot (0.23-acre) parcel improved with a portion of the hotel, and the leasehold interest in an underground parking garage situated on roughly +/-49,000 square feet (1.12 acres) of land. The hotel opened in 1921, and a second guestroom tower was added in 1983. In addition to guestrooms, the subject property contains a fitness room, an outdoor swimming pool, a gift shop, two restaurants, a lounge, roughly 62,738 square feet of meeting space, a leased beauty shop, a leased flower shop, a leased airline ticket office, and typical back-of-the-house facilities. The hotel's West Tower occupies the entire block bounded by Eighth Street to the south, Commerce Street to the east, Seventh Street to the north, and Main Street to the west. The East Tower is situated directly across Commerce Street from the West Tower, and the underground parking garage is located directly south and southwest of the West Tower. Municipal jurisdictions governing the property include the City of Fort Worth, Tarrant County, and the State of Texas. The hotel's civic address is 815 Main Street, Fort Worth, Texas, 76102. Objective of the Economic Study and Appraisal The objective of the economic study and appraisal is to evaluate the supply and demand factors affecting the market for transient accommodations in the Fort Worth area for the purpose of estimating the market value of the subject property. Market value is defined by the Office of the Comptroller of the Currency (OCC), 12 CFR, Part 34, 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 and knowledgeably, and assuming the price is not affected by undue stimulus. HVS International, Mineola, New York Nature of the Assignment 4 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. buyer and seller are typically motivated; 2. both parties are well informed or well advised, and acting in what they consider their own best interests; 3. a reasonable time is allowed for exposure in the open market; 4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) Use of the Appraisal This appraisal is being prepared for the use of Morgan Stanley Mortgage Capital, Inc. in connection with their proposed financing of a package of 17 hotels, including the subject property, which are owned by the Ashford Financial Corporation or related entities. The information presented in this report should not be disseminated to the public or third parties without the express written consent of Hospitality Valuation Services. Scope of the Appraisal All information was collected and analyzed by the staff of Hospitality Valuation Services. Data such as historical operating statements, site plans, floor plans, and so forth were supplied by the Ashford Financial Corporation, the Remington Hotel Company, and the subject property's management representatives. Unless noted otherwise, we have inspected the competitive lodging facilities and analyzed the sales summarized in this report, and our value conclusion is based on this investigation and analysis. Property Rights Appraised The property rights appraised are the fee simple ownership of the land and improvements (including the furniture, fixtures, and equipment), as well as the leasehold interest in a portion of the property and in the underground parking garage (which is situated on two other parcels). The subject property is appraised as a going concern (i.e., an open and operating facility). The property rights appraised are the fee simple interest in the land and improvements, including the furniture, fixtures, and equipment, and the (1)Federal Register, Vol. 55, No. 165, August 24, 1990; p. 34696. HVS International, Mineola, New York Nature of the Assignment 5 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= leasehold interest in the improvements, including the furniture, fixtures, and equipment. The fee simple interest is defined as "absolute ownership unencumbered by any other interest or estate subject only to the four powers of government."(1) The leasehold interest is defined as "the right to use and occupy real estate for a stated term and under certain conditions; conveyed by a lease."(2) Method of Study The methodology used to develop this economic study and appraisal is based on the market research and valuation techniques set forth in the textbooks authored by HVS International for the American Institute of Real Estate Appraisers and the Appraisal Institute, entitled The Valuation of Hotels and Motels,(3) Hotels, Motels and Restaurants: Valuations and Market Studies,(4) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations,(5) and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations.(6) The appraisal will consider the three standard approaches to value: income capitalization, sales comparison, and cost. Because lodging facilities are income-producing properties that are normally bought and sold on the basis of capitalization of their anticipated stabilized earning power, the greatest weight is given to the value indicated by the income capitalization approach. We find that most hotel investors employ a similar procedure in formulating their purchase decisions, and thus the income capitalization approach most closely reflects the rationale of typical buyers. When appropriate, the sales comparison and cost approaches are used to test the reasonableness of the results indicated by the income capitalization approach. (1) The Dictionary of Real Estate Appraisal - Second Edition, American Institute of Real Estate Appraisers, Chicago, IL, 1989, p. 120. (2) The Dictionary of Real Estate Appraisal - Second Edition, American Institute of Real Estate Appraisers, Chicago, IL, 1989, p. 177. (3) The Valuation of Hotels and Motels, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1978. (4) Hotels, Motels and Restaurants: Valuations and Market Studies, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1983. (5) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1990. (6) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992. HVS International, Mineola, New York Nature of the Assignment 6 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Ownership, Franchise, and Management A photocopy of the subject property's legal description, which was provided by the Ashford Financial Corporation, is presented in the Addenda to this report; the appraisers assume no responsibility regarding the accuracy of this document. The portion of the subject property now referred to as the West Tower opened in 1921 with close to 800 rooms. The hotel's East Tower was constructed in 1983. Today, the West Tower contains 292 guestrooms, and the East Tower houses 225 units. The property operated as an independent facility known as the Hotel Texas for many years; Hyatt assumed operation at around the time the East Tower opened. In 1991, the property acquired a franchise affiliation with Radisson; at that time, the hotel was owned by Aetna Insurance Company and operated by Rank Hotels North America. The hotel was sold to Fort Tower I Associates Hotel Limited Partnership and Fort Tower II Associates Hotel Limited Partnership on June 13, 1994 for an all-cash purchase price of $8,650,000. The limited partnerships noted above are entities controlled by the Ashford Financial Corporation; Remington Hospitality, Inc., another subsidiary of Ashford, began operating the property on or about June 1, 1994. The subject property operates under a franchise agreement with Radisson; this agreement expires in 2001. The hotel is managed by Remington Hospitality, Inc., and an abstract of this contract is presented in the Addenda to this report. For the purpose of this appraisal, we assume the continued ownership of the subject property by the Ashford Financial Corporation and operation by Remington Hospitality, Inc. as a Radisson Plaza. Marketing Period In light of the renewed interest in hotel investments and the increasing availability of debt and equity capital, we believe that it will take six to nine months to sell the subject property assuming it is placed on the market at the concluded value. Effective Date of the Appraisal The effective date of the appraisal is January 1, 1997. All projections are expressed in inflated dollars, and the value estimate represents 1997 dollars. Date of Inspection The subject property was inspected by Kate B. Henriksen on October 21, 1996. HVS International, Mineola, New York Description of the Land, Improvements 7 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 3. Description of the Land, Improvements, Zoning, Taxes, and Neighborhood LAND The suitability of the land for the operation of a lodging facility is an important consideration affecting the economic viability of a property and its overall value. Factors such as size, topography, access, visibility, and the availability of utilities have a direct impact on the desirability of a particular site. Size and Topography The subject site consists of portions of four blocks of land in the Fort Worth central business district. The hotel's West Tower occupies the entire block formed by Eighth Street to the south, Commerce Street to the east, Seventh Street to the north, and Main Street to the west. The East Tower lies on the western half of the block formed by Commerce Street to the west, Seventh Street to the north, Calhoun Street to the east, and Eighth Street to the south. The leased underground parking garage is located in the western half and the northeastern quadrant of the block formed by Eighth Street to the north, Commerce Street to the east, Ninth Street to the south, and Main Street to the west, as well as the eastern half of the block formed by Eighth Street to the north, Main Street to the east, Ninth Street to the south, and Houston Street to the west. Municipal jurisdictions governing the property include the City of Fort Worth, Tarrant County, and the State of Texas. According to surveys performed by the Tarrant County Tax Assessor's Office, the subject site totals approximately +/-109,000 square feet (or +/-2.5 acres), and is regular in shape; taken together, the various parcels form a rough "S" shape. The site is generally level. Primary vehicular access to the Radisson is provided by Eighth Street and Commerce Street. Overall, the property's size and topography appear suitable for hotel use. The site is fully developed, and there is no excess land available for expansion. Easements The subject property is encumbered by a number of easements regarding the tunnel that extends from the parking garage to the West Tower (under Eighth Street) and the hotel canopy that spans Eighth Street between HVS International, Mineola, New York Description of the Land, Improvements 8 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Commerce Street and Main Street. We assume that these easements will not affect the use or marketability of the subject property. A copy of the easement agreement is included with the legal description, and is presented in the Addenda to this report. Regional Access It is important to analyze a lodging facility's ease of access with respect to regional and local transportation routes and demand generators. The subject site is accessible to a variety of local, county, state, and interstate highways. Interstate 30 is located approximately 12 blocks south of the Radisson; this roadway traverses the center of Fort Worth on an east-west axis and connects the city with Dallas before terminating in Little Rock, Arkansas. North-south transportation from Laredo, Texas to Duluth, Minnesota is available via Interstate 35W, which also crosses the center of Fort Worth. Access to Dallas-Fort Worth International Airport from the downtown district is provided by Texas State Highway 121 (the Airport Freeway), and U.S. Route 287 (the Martin Luther King, Jr. Freeway), which extends from downtown Fort Worth to Interstate 820 (in the southeastern portion of the city). Interstate 20, which crosses the southern portion of Fort Worth, extends from west Texas to Birmingham, Alabama. Interstate 820 forms a horseshoe around the area and intersects I-20 at the city's eastern and western boundaries. This network of highways links downtown Fort Worth with the cities and commercial concentrations throughout the Dallas/Fort Worth metropolitan area. Overall, regional access to the Radisson Plaza is favorable. Local Access and Visibility Local access to the subject property is only average. Many of the streets in downtown Fort Worth carry one-way traffic, necessitating a rather circuitous route for many of the hotel's guests. Although parking in the downtown area is scarce, the Radisson does offer valet parking as well as garages across Eighth Street from the West Tower and in the first five floors of the East Tower. By virtue of the hotel's height, the property is highly visible; however, its signage is placed on the porte cochere and along the skyway, which are too low to be seen until motorists have reached Commerce Street. Airport Access Dallas-Fort Worth International Airport is located roughly 20 miles northeast of the Radisson, within an approximate 25-minute drive. To reach the hotel from the airport, motorists take Highway 121 to its terminus just north of the downtown district. As a result of the proliferation of one-way local routes, motorists must then travel west on Weatherford Street before traveling south on Houston Street for approximately nine blocks to Ninth Street. Travelers then turn east (or left) on Ninth Street and north (or left) on HVS International, Mineola, New York Description of the Land, Improvements 9 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Commerce Street and continue to the Eighth Street intersection. Guests also have the option of using a shuttle service for a minimal fee. Utilities The subject site is served by all necessary utilities, which are provided as follows. ================================================================================ Table 3-1 Available Utilities - -------------------------------------------------------------------------------- Utility Provider ------- -------- Water Forth Worth Water Electricity TU Electric Telephone MCI Sewer Fort Worth Water Gas Lone Star Gas Steam Fort Worth Water - -------------------------------------------------------------------------------- Soil and Subsoil Conditions Geological and soil reports were not provided to the appraisers or made available for review during the preparation of this report. The appraisers are not qualified to evaluate soil conditions other than by a visual inspection of the surface. Nuisances and Hazards The appraisers have not been informed of any site-specific nuisances or hazards, and there were no visible signs of toxic ground contaminants at the time of our inspection. Because the appraisers are not experts in this field, we do not warrant the absence of hazardous waste, and we urge the reader to obtain an independent analysis of this factor. Flood Zone Possible locational hazards include flood potential. According to Flood Insurance Rate Map Number 48439C0290 H, Panel 290 of 595 (dated August 2, 1995) as provided by the Federal Emergency Management Agency, the subject property is located in Flood Zone X. This designation indicates that the hotel is situated outside of the 500-year flood plain. Seismicity Information regarding seismicity was not available, and we assume that the property is not situated in an area of seismic danger. Land Conclusion The subject parcel appears suitable for the operation of a lodging facility. We have analyzed the issues of size, topography, access, visibility, and the availability of utilities, and we note the following advantages and drawbacks. HVS International, Mineola, New York Description of the Land, Improvements 10 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Advantages o The subject property offers valet parking and two parking garages in a neighborhood where parking is scarce. o The hotel enjoys good visibility by virtue of its height. o The property is located only one block north of the Tarrant County Convention Center, a primary demand generator. o The subject property has all necessary utilities in sufficient capacity. Disadvantages o The abundance of one-way roads in the hotel's immediate vicinity can complicate access for motorists. o The signage is relatively low, limiting travelers' ability to identify the hotel from a distance. o The property is located on portions of four separate parcels, thus limiting the ability to connect the lots (either above or below ground). The advantages noted above are important locational characteristics. Although the surrounding infrastructure places some restrictions on the layout of the improvements, the site is considered suitable for its current use. IMPROVEMENTS The quality of a lodging facility's physical improvements has a direct influence on its marketability and attainable occupancy and average rate. The design and functionality of the structure can also affect operating efficiency and overall profitability. This section investigates the subject property's physical improvements and personal property in an effort to determine how they contribute to total value. The following description of the improvements is based on our inspection of the hotel and information provided by management representatives. The Radisson Plaza is a full-service lodging facility containing 517 rentable units, +/-62,738 square feet of meeting space, two restaurants, one lounge, a fitness room, an outdoor swimming pool, a gift shop, an airline ticket counter, a beauty shop, and appropriate back-of-the-house facilities. The property opened in 1921 and an addition was constructed in 1983; reports indicate that the original structure also underwent an extensive renovation at that time. When the hotel was acquired by the Ashford Financial Corporation in mid-1994, it was in extremely poor condition, and a $2,200,000 HVS International, Mineola, New York Description of the Land, Improvements 11 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= renovation was completed subsequent to the sale. This renovation included replacement of carpets in the guestrooms and hallways, replacement of guestroom soft goods, installation of new ceramic bathroom tile in 270 units, refinishing of case goods, and repair and upgrading of the vinyl wall coverings in the guestroom corridors. Meeting rooms on the third floor also received new carpeting, vinyl wallcovering, artwork, and lighting. Airwalls in the Crystal Ballroom were refinished and soundproofed, and a new HVAC system was installed. The hotel is now judged to be in good condition, and management representatives report that all building systems are in working order. The hotel operates under a license agreement with Radisson, and reportedly meets the standards for lodging facilities of that brand. Based on our inspection and information provided by management representatives, the following table summarizes the facilities available at the subject property. HVS International, Mineola, New York Description of the Land, Improvements 12 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 3-2 Facilities Summary - -------------------------------------------------------------------------------- Guestrooms (No. of Units) Kings 246 Double/doubles 259 Suites 12 ----------- Total 517 Food and Beverage Outlets (No. of Seats) Texas Cafe 178 Cactus Grill 145 Skylight Lounge 40 Meeting and Banquet Rooms (Square Footage) Grand Crystal Ballroom 13,624 Texas Ballroom 3,192 Continental Room 1,156 Citizens Room 1,847 General Worth Board Room 378 Tarrant Room 378 Metropolitan Room 644 Pavilion Exhibit Hall 41,519 ----------- Total 62,738 Recreational & Other Amenities Outdoor swimming pool, fitness room, sauna Parking Spaces Valet parking, two parking garages Elevators Six guest, two service/employee, two kitchen Laundry Three washers, four dryers, two folders, one ironer - -------------------------------------------------------------------------------- Layout and Design The subject property's West Tower, which was built in 1921, is a 15-story, brick-covered structure; the 13-story East Tower opened in 1983. The two buildings are connected at the second story by a skywalk over Commerce Street. Another skywalk connects the West Tower to a large office building known as Continental Plaza, which is located directly across Seventh Street from the Radisson. The West Tower also features three below-ground levels. HVS International, Mineola, New York Description of the Land, Improvements 13 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Reports indicate that the West Tower's lower basement levels were once leased as office space, but they are now vacant. Consideration has been given to finding another tenant, or renovating this area for use as additional function space. For the purpose of this analysis, we assume that this space will remain largely vacant, and that the cost of a renovation sufficient enough to attract a tenant or to allow the area to be used as meeting space will offset any potential rental revenue. The upper basement level of the West Tower features an underground connection to a parking garage that the subject property leases from the City of Fort Worth. This level also houses the hotel's maintenance room, laundry, personnel office, purchasing area, storage areas, an employee cafeteria, the employee entrance, and a leased flower shop. The property's two restaurants, the gift shop, a bell stand, and the front desk are all located on the first floor of the West Tower. The second floor houses the Crystal Ballroom and the Skylight Lounge. Facilities situated on the third floor include the Texas Ballroom, the Continental Ballroom, and four small meeting rooms. Standard guestrooms are situated on the fourth through 12th floors of the West Tower; there is no designated 13th floor. Plaza Levels, which offer more upscale guestrooms and suites, occupy the 14th and 15th floors; three small meeting rooms are also available on the 15th floor. The 16th level of the West Tower is currently used for storage, and provides access to the mechanical areas and the rooftop. There are no basement levels in the East Tower. Leased areas are located on the first floor; some of this space is occupied by an American Airlines ticket office and a beauty shop, and the remainder is vacant. Parking facilities comprise the remainder of the first floor as well as the second through fifth floors of the East Tower. In addition to guestrooms, the sixth floor houses the hotel's swimming pool, the fitness center and sauna, and a small vending room. Guestrooms occupy the seventh through 14th floors. Like the West Tower, the East Tower has no designated 13th floor. Lobby The lobby is the located on the ground level of the southern portion of the West Tower. The main entrance, on Eighth Street, provides entry into the lobby, and access to the lobby is also available from Main Street. Upon entering the lobby from Eighth Street, the concierge and front desk are to the right. One set of guestroom elevators is located next to the front desk. An escalator to the second floor is situated to the left as one enters the lobby from the main entrance. The two-story lobby was refurbished in 1994, HVS International, Mineola, New York Description of the Land, Improvements 14 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= before the current owners purchased the property, and it appears to be in good condition. Food and Beverage Outlets Three food and beverage outlets are available at the Radisson: the Texas Cafe, the Cactus Grill, and the Skylight Lounge. The Texas Cafe is a 178-seat restaurant, located across the lobby from the main entrance of the hotel. It serves breakfast and lunch, and offers a buffet during both periods. Lunch and dinner are available in the 145-seat Cactus Grill, which serves American and Southwestern cuisine. This facility is located in the northwest corner of the West Tower, and can be reached from the hotel interior or from Main Street. The two restaurants were refurbished in 1994, and appear to be fairly well maintained. The Skylight Lounge is located on the second floor, and is open only during periods of peak demand. When the Skylight Lounge is not open, the Cactus Grill is a popular alternative for beverage service. In 1994, the Skylight Lounge received new soft goods, carpet, and some new furniture, and the remaining furniture was refinished. The lounge is not enclosed, and by virtue of its location near the Crystal Ballroom, many guests congregate in this space before and after meetings even when beverage service is not available. Meeting and Banquet Space Function space is concentrated on the second and third floors of the West Tower and on the garage level. The subject property has roughly 62,738 square feet of meeting space, the bulk of which is housed in the 41,519-square-foot Pavilion Exhibit Hall. This is a unique space that is actually part of the parking garage, it but can be paneled and floored for use as meeting space. It is also equipped with adequate lighting and air conditioning. Although the Pavilion Exhibit Hall does not receive frequent use, management representatives indicate that it is a unique amenity that other hotels in the market do not provide. The 13,624-square-foot Crystal Ballroom is the largest facility of its type in Fort Worth, and it can accommodate up to 1,200 people banquet-style. A smaller facility known as the Texas Ballroom is located on the third floor, along with four additional meeting rooms. The 15th floor of the West Tower also houses three small meeting rooms. Although an extensive renovation of the meeting space was carried out in late 1994 and early 1995, these areas appear to be in only fair condition. Carpets in the Crystal Ballroom have small stains and are worn in places, HVS International, Mineola, New York Description of the Land, Improvements 15 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= and some of the wallcoverings are torn. In 1996, the ceiling of the Crystal Ballroom was repainted, brass moldings were placed on the partitions, and the banquet chairs were upgraded. The pre-function space received new paint, wall vinyl, and artwork in 1996, and appears to be in good condition. Guestrooms are slightly larger than standard units, and feature a typical layout and design. Most units contain the following furniture and fixtures. o One king bed or two double beds o Two nightstands o Two wall lamps o Clock/radio o Telephone o Small dresser o Color television o Desk with two chairs and a small lamp o Artwork o Vinyl wallcovering o Hard-wired smoke detector o Individual heating, ventilation, and air conditioning control panel o Wall-mounted mirror o Closet and vanity area o Bathroom with tile floor, tile walls, tub/shower combination, commode, and one counter-style sink Overall, the guestrooms and corridors appeared to be in good condition at the time of our inspection. In mid-1995, carpets were replaced in all guestrooms and corridors, guestroom soft goods were replaced, new ceramic tile was installed in 270 bathrooms, and case goods were refinished. Management has set aside approximately 70% of the guestrooms for non-smoking guests; this type of amenity costs very little and requires no structural changes. We expect that the number of rooms allocated for this HVS International, Mineola, New York Description of the Land, Improvements 16 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= purpose will be increased or reduced depending on demand and guest response. Recreational Amenities Recreational amenities at the subject property consist of a fitness room, a sauna, and an outdoor swimming pool. These facilities are located on the sixth floor of the East Tower. Back-of-the-House Space The subject property has one kitchen located in the northern portion of West Tower's main floor. Although the two restaurants have direct kitchen access, the meeting areas do not. Food and supplies for the meeting rooms must be transported up service elevators to service areas adjacent to the meeting space; this creates some problems in terms of keeping food hot, there is insufficient elevator capacity when there are numerous events being staged at once. The bulk of the back-of-the-house space is located on the upper basement level of the West Tower, including maintenance, the laundry, the personnel office, purchasing, storage rooms, and employee areas. This configuration causes some problems for the housekeeping department. All laundry equipment is located in the basement level of the West Tower, and because the East Tower contains no basement and is not equipped with employee elevators, the housekeeping staff must transport laundry from the East Tower guestrooms down the guest elevators, across the skywalk between the buildings, and down the employee elevators in the West Tower to the basement. To help ease this problem, all guestroom floors are equipped with housekeeping closets. The subject property's main administrative offices are located on the second floor of the East Tower, just across the skyway from the West Tower. Vertical Transportation Vertical transportation is provided by six guest elevators (three in each tower), two employee/service elevators in the West Tower, and two kitchen elevators. Heating, Ventilation, and Air Conditioning Heating, ventilation, and air conditioning (HVAC) is provided to the guestrooms by a centralized two-pipe system that employs three boilers and three chillers. Public areas use a centralized system with 28 air handling units. As a result of the property's age, the operating systems often require extensive maintenance. Management representatives indicate that these systems are now in working condition, although one of the chillers is scheduled to be overhauled in the next year. HVS International, Mineola, New York Description of the Land, Improvements 17 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Fire Protection The subject property is equipped with a partial sprinkler system. Single-station smoke alarms are located in all guestrooms, public spaces, and employee areas, and are wired to both the front desk and the fire department. Security Management representatives indicate that there are no unusual safety or security concerns at the Radisson Plaza. Asbestos According to an independent analysis performed by Entrix, Inc. and provided to us by the Ashford Financial Corporation, some asbestos may be present in the subject property's improvements; however, we are not qualified to evaluate the severity of this condition. For the purpose of this analysis, we assume that all asbestos problems have been remedied or are not serious in nature; however, the reader should be advised that any costs associated with asbestos removal or containment could have an unfavorable impact on the hotel's market value. We suggest that interested parties initiate an investigation regarding current asbestos levels and the capital expenditures that may be necessary to remove any asbestos that is present. ADA Conformance Following the January 26, 1992 passage of the Americans with Disabilities Act (ADA), hotels are subject to new physical standards. The appraisers are not experts on ADA compliance, and we render no opinion regarding the subject property's conformance to ADA standards. Capital expenditures that may be necessary to bring the property into accordance with the ADA will reduce our estimate of market value. Any ongoing costs related to ADA regulations are expected to be funded by normal replacement reserves. Improvements Conclusion Overall, the subject property's improvements appear appropriate for hotel use, although some functional obsolescence is apparent as a result of the property's age and design. One example, the East Tower does not have a service elevator, and access to the laundry room from the East Tower is difficult. In addition, the parking garage in the East Tower contains no elevators and provides access to the hotel only from the first floor. Thus, guests who park on the upper levels of the garage must navigate several flights of stairs between the hotel entrance and their vehicles. For the purpose of this appraisal, we assume that the subject property will be maintained in its current condition throughout the ten year holding period. Specifically, our analysis is predicated on the fact that management will employ standard preventive maintenance measures, and that a reserve for replacement fund will be established to cover the cost of any future capital expenditures that may be necessary. HVS International, Mineola, New York Description of the Land, Improvements 18 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Zoning According to the City of Fort Worth's zoning regulations, the subject property is zoned as follows. H - Business District The purpose of the H zoning designation is to provide a specific central business district for more intense application of all commercial uses permitted in other commercial districts, with less restrictive height regulations. Permitted uses in this zoning category include offices and businesses, apartments, garages, publishing and printing buildings, as well as all uses allowed in other commercial districts (including hotels). Based on this information, the subject property appears to conform to local zoning regulations. We assume that all necessary permits and approvals have been secured (including an appropriate liquor license), and that the subject property was constructed in accordance with local zoning ordinances, building codes, and all other applicable regulations. Our zoning analysis should be verified before any physical changes are made to the hotel. Assessed Value and Taxes Property tax is one of the primary revenue sources of municipalities. Based on the concept that the tax burden should be distributed in proportion to the value of all properties within a taxing jurisdiction, a system of assessments is established. Theoretically, the assessed value placed on each parcel bears a definite relationship to market value, so properties of equal market value will have similar assessments and properties with higher and lower values will have proportionately larger and smaller assessments. Depending on the taxing policy of the municipality, property taxes can be based on the value of the real property or the value of the personal property and the real property. Because the objective of assessed value is to maintain a specific value relationship among all properties in a taxing jurisdiction, comparable hotel assessments should be evaluated to determine whether the subject property's assessed value is equitable. The taxing jurisdiction governing the subject property assesses both real and personal property. There is no equalization rate, so the assessed value ratio is reported to be approximately 100% of market value. It is our understanding that properties are reassessed during each even-numbered year. The following table outlines the assessments of the subject property and two comparable hotels in Tarrant County. HVS International, Mineola, New York Description of the Land, Improvements 19 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 3-3 Assessed Value of Comparable Hotels - -------------------------------------------------------------------------------- Total Assessment Assessment per Room ------------------------- ------------------------- No. of Hotel Rooms Land Improvements Land Improvements - ------------------------------------------------------------------------------- Subject Property 517 $2,400,000 $8,767,278 $4,642 $16,958 Worthington 504 6,280,000 10,220,000 12,460 20,278 Remington 300 1,000,000 3,242,218 3,333 10,807 Source: Tarrant County Assessor's Office - -------------------------------------------------------------------------------- Based on the information presented in the previous table, the assessed values of the subject property's land and improvements fall between the range indicated by the comparable properties. The tax rates applicable to the Radisson Plaza are presented in the following table. ================================================================================ Table 3-4 Tax Rates Applicable to the Subject Property - -------------------------------------------------------------------------------- Tax Rate per $100 of Jurisdiction Assessment - --------------------------------------------------------------- City of Fort Worth $0.38 Fort Worth School District 1.46 Tarrant County 0.26 Other 0.56 - --------------------------------------------------------------- Total $2.66 - -------------------------------------------------------------------------------- The subject property's 1996 tax burden is calculated as follows. ================================================================================ Table 3-5 1996 Assessed Value and Tax Burden - --------------------------------------------------------------------------------
Block 111 Block 112 Block 114 Block 115 Total - --------------------------------------------------------------------------------------------------- Land $600,000 $1,800,000 $0 $0 $2,400,000 Improvements 2,679,458 5,567,820 280,000 240,000 8,767,278 Personal Property 0 0 0 0 2,258,402 - --------------------------------------------------------------------------------------------------- Total 3,279,458 7,367,820 280,000 240,000 13,425,680 1996 Tax Rate 2.66 2.66 2.66 2.66 2.66 - --------------------------------------------------------------------------------------------------- Tax Burden (Payable 1/97) $87,234 $195,984 $7,448 $6,384 $357,123 - --------------------------------------------------------------------------------
HVS International, Mineola, New York Description of the Land, Improvements 20 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The following table shows how tax rates in the subject property's jurisdiction have changed since 1991. ================================================================================ Table 3-6 Historical Tax Rates - -------------------------------------------------------------------------------- Tax Rate per $1,000 Percent Year of Assessment Change - -------------------------------------------------------------------- 1991 $2.69 --- 1992 3.31 22.7% 1993 2.93 (11.5) 1994 3.01 2.9 1995 2.98 (1.0) 1996 2.66 (10.7) Avg. Annual Comp. Change, 1991-96 (0.0)% - -------------------------------------------------------------------------------- Although tax rates declined by 10.7% in 1996, there was a reassessment, and all of the comparable properties that we investigated were reassessed at levels ranging from 7.8% and 49.2% higher than previously. Consequently, the subject property's tax burden rose despite the drop in the tax rate. We also note that although there have been annual fluctuations in the tax rate since 1991, they have remained relatively stable between 1991 and 1996. For the purpose of this appraisal, we assume that the subject property's tax burden will increase at the underlying inflation rate of 3.5% annually throughout the projection period, yielding the following forecast. ================================================================================ Table 3-7 Forecast of Property Tax Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - ------------------------------------------------------------------------ Projected Property Taxes (+000) $357 $370 $383 - -------------------------------------------------------------------------------- NEIGHBORHOOD The neighborhood surrounding a lodging facility often has an impact on a hotel's status, image, class, style of operation, and sometimes its ability to attract and properly serve a particular market segment. This section investigates the subject property's neighborhood and evaluates any pertinent locational factors that could affect its occupancy, average rate, food and beverage revenues, and overall profitability. HVS International, Mineola, New York Description of the Land, Improvements 21 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The Radisson is situated in downtown Fort Worth, Texas; the downtown district is situated on a bluff just southeast of a bend in the Trinity River. The neighborhood surrounding the subject property is characterized primarily by commercial office buildings, small retail outlets, restaurants, hotels, and parking facilities. The Tarrant County Convention Center is located just south of Ninth Street and approximately one block south of the hotel, between Commerce and Houston Streets. Immediately across Eighth Street from the subject property's West Tower is a plaza that covers the underground parking garage that the hotel leases from the city. A small office building is located on the southeastern corner of the plaza; this building is home to the Moncrief Oil Company. Immediately across Eighth Street from the East Tower are a Greyhound bus station and a small office building known as Winfield Place. Houston and Main Streets are the main retail corridors in downtown Fort Worth. Across Main Street from the West Tower are Del Frisco's Steakhouse and the TU Electric office building. Continental Plaza, a multi-story office building housing companies such as Overton Bank and Trust, A.G. Edwards, and Burlington Northern - Santa Fe is located immediately across Seventh Street from the subject property's West Tower. As noted earlier, a skywalk connects this building to the second story of the Radisson's West Tower. The competitive hotels in the downtown area are located within blocks of the subject property. The Worthington is situated on Main Street, approximately six blocks north of the Radisson Plaza. The Remington is located on Commerce Street, approximately two blocks northeast of the East Tower, and the Ramada Downtown is located south of the convention center on Commerce Street, roughly nine blocks southeast of the Radisson Plaza. Just north of the subject property is Sundance Square, a 14-block, multi-use development spearheaded by the Bass Brothers. This district offers cinemas, theaters, restaurants, and a variety of retail outlets. Additional office space and the Nancy Lee & Perry R. Bass Performance Hall are also under construction in this district. Overall, the subject property's location near the convention center and various office buildings allows the hotel to draw an adequate share of demand from the meeting and group and commercial market segments. The area is widely perceived as being safe, and pedestrians have no difficulty reaching HVS International, Mineola, New York Description of the Land, Improvements 22 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= various destinations in the downtown district. Overall, the neighborhood surrounding the Radisson Plaza appears appropriate for the operation of a lodging facility. HVS International, Mineola, New York Market Area Analysis 23 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 4. Market Area Analysis The economic vitality of the market surrounding the subject property is an important consideration in forecasting lodging demand and income potential. Economic and demographic trends that reflect the amount of visitation provide a basis from which to project hostelry demand. The purpose of the area analysis is to review available economic and demographic data to determine whether the local market will undergo economic growth, stability, or decline. In addition to predicting the direction of the economy, the rate of change must be quantified. These trends are then correlated based on their propensity to reflect variations in lodging demand with the objective of forecasting the growth or decline in visitation by individual market segment. Market Area Definition The subject property's market area can be defined as the City of Fort Worth; on a broader scale, the market consists of Tarrant County, the Fort Worth-Arlington Metropolitan Statistical Area (MSA), and the Dallas-Fort Worth Consolidated Metropolitan Statistical Area (CMSA). Four counties comprise the Fort Worth-Arlington MSA: Tarrant, Hood, Johnson, and Parker. The MSA is located in northcentral Texas, approximately 30 miles west of Dallas, 270 miles northwest of Houston, and 270 miles northeast of San Antonio. The Dallas-Fort Worth CMSA is often referred to as the "Metroplex," and has a population of over 4,400,000. Economic and Demographic Data Based on fieldwork conducted in the area and our in-house sources, we have evaluated various economic and demographic statistics to determine trends in lodging demand. A primary source of economic and demographic statistics used in this analysis is the Complete Economic and Demographic Data Source published by Woods & Poole Economics, Inc., a well-regarded forecasting service based in Washington, DC. Using a data base containing more than 300 variables for each county in the nation, Woods & Poole employs a sophisticated regional model to forecast economic and demographic trends. Historical statistics are based on census data and information published by the Bureau of Economic Analysis. Projections are formulated by Woods and Poole. All dollar amounts have been AREA MAP [GRAPHIC OMITTED] HVS International, Mineola, New York Market Area Analysis 24 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= adjusted for inflation, and thus growth or decline represents real change in constant dollars. Population Between 1980 and 1995, the populations of the Fort Worth MSA and Tarrant County rose at average annual compounded rates of 2.7% and 2.8%, respectively, while the CMSA, the state, and the nation all registered slower growth rates. The county's population is expected to increase by 2.7% annually from 1995 through the year 2000, while the MSA is expected to achieve a slightly lower rate of growth of 2.6%. Both of these rates are higher than those projected for the CMSA, the state, and the nation. We find that the rate of population growth generally establishes a minimum rate of increase for commercial hotel demand; this observation also holds true for the meeting and group segment if a majority of the meetings are business-oriented. Retail Sales Trends in retail sales reflect changes in population as well as the propensity of residents and visitors to purchase retail goods. Like population trends, retail sales have no direct correlation with hotel room night demand, although they do tend to gauge the economic health and vitality of the market. According to Woods and Poole Economics, retail sales growth in the Fort Worth MSA outpaced that of the CMSA, the state, and the nation between 1980 and 1995, although the statewide gain was higher than that of the MSA from 1990 to 1995. Retail sales in both Tarrant County and the Fort Worth MSA are projected to increase at an average annual compounded rate of 2.6% between 1995 and the year 2000; this compares favorably to the 1.8%, 1.5%, and 0.9% annual increases anticipated for the CMSA, the state, and the nation, respectively. Personal Income Trends in personal income reflect the ability of residents to spend money in the local economy. Between 1980 and 1995, personal income rose at an inflation-adjusted average annual compounded rate of 3.6% in both Tarrant County and the Fort Worth MSA; in both areas, this rate dropped to 3.0% between 1990 and 1995. By comparison, the Dallas-Fort Worth CMSA achieved historical personal income growth of 3.5% annually between 1980 and 1995 and 3.1% between 1990 and 1995. Long-term growth in the State of Texas and the United States was lower, at rates of 2.5% and 2.3%, respectively. Projections indicate average annual compounded gains of 3.8% in the county and the MSA from 1995 through the end of the decade, which is HVS International, Mineola, New York Market Area Analysis 25 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= again higher than the levels anticipated for the CMSA, the state, and the nation as a whole. Work Force Characteristics Although Woods and Poole Economics reports that total employment in the Fort Worth MSA increased at an average annual compounded rate of 3.2% from 1980 to 1995, the 1.9% growth rate reported from 1990 to 1995 was noticeably lower. This is partially attributable to the national recession that marked the early 1990s, as well as military cutbacks at Carswell Air Force Base. In 1995, services was the largest sector in the MSA, accounting for approximately 29.3% of all employment, followed by trade (at 24.3%), manufacturing (at 13.6%), and government (at 11.2%). Forecasts indicate that employment growth in the Fort Worth MSA is expected to remain consistent with short-term historical trends, and an average annual compounded increase of 1.9% is anticipated between 1995 and the year 2000. The services sector is projected to expand slightly (to roughly 30.0% of total employment), again followed by trade (at 24.4%), manufacturing (at 12.8%), and government (at 10.9%) as of the year 2000. Because the local economy is not tied to the prosperity of any single sector, the impact of normal business cycles is cushioned. The major employers in Forth Worth represent a cross section of hotel demand potential. Some are national in scope, while others operate on a more local basis; some are engaged in manufacturing, and others are active in service industries. The following table outlines some of the major employers in Tarrant County. ================================================================================ Table 4-1 Major Employers - -------------------------------------------------------------------------------- No. of Firm Product Employees - -------------------------------------------------------------------------------- American Airlines Commercial Airlines 30,000 Lockheed Martin Tactical Aircraft Systems Aircraft Manufacturing 12,000 Bell Helicoptor Textron Helicoptor Manufacturing 6,262 Harris Methodist Health Systems Health Care 5,115 Radio Shack Retail Electronics 4,310 IBM Computers, Software 3,000 Burlington Northern - Santa Fe Corp. Transportation 2,500 Alcon Laboratories Pharmaceutical 2,300 Tandy Corporation Electronics 2,300 Southwestern Bell Telecommunications 2,100 Source: Fort Worth Chamber of Commerce - -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 26 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Office Space According to Downtown Fort Worth, Inc., a semi-private, non-profit corporation, the inventory of office space in downtown Fort Worth totaled 7,701,192 square feet at year-end 1995. Occupancy rates are much higher for better-quality space, as illustrated by the following table. ================================================================================ Table 4-2 Office Space - Downtown Fort Worth - -------------------------------------------------------------------------------- Average Occupancy Lease Rate Type Rate per Sq. Ft. - -------------------------------------------------------------------------------- Class A 87.95% $14.91 Class B 84.22 10.92 Class C 68.98 9.43 Class D 33.58 10.72 - -------------------------------------------------------------------------------- According to CB Commercial, there are two office buildings under construction in downtown Fort Worth, but the square footage of these projects is unknown. Airport Traffic The subject property's market is served by Dallas-Fort Worth International Airport, which is located within 20 to 25 miles of downtown Fort Worth. At present, this facility is a major hub for American Airlines. Convention Center A multi-use arena known as the Fort Worth/Tarrant County Convention Center opened in the late 1960s. This facility contains approximately 145,000 square feet of exhibit space, an arena with 13,000 permanent seats, and a performance hall seating roughly 3,000 people. From late October through March, the arena is home to the Central Hockey League's Fort Worth Fire; concerts and other special events are also held at this venue. When the center is hosting large conventions, the arena floor may be used to provide 26,000 square feet of additional exhibit space. Coopers and Lybrand recently completed a feasibility study regarding future plans for the convention center, but the results of this analysis have not been made public. Reportedly, a few of the options that were considered include the renovation and/or the reconfiguration of space in the convention center; expansion of the facility; transfer of ownership from the county to the city, to allow the convention center to attract groups that would generate more hotel room nights; and the construction of a 400-room hotel. At this point, comments regarding any of these options are premature. Under any circumstances, it will be a number of years before plans can be HVS International, Mineola, New York Market Area Analysis 27 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= finalized, approvals and financing obtained, and construction completed; consequently, our analysis does not consider any potential changes to the convention center. Tourist Attractions Although Fort Worth is not a primary tourist destination, it does offer a number of attractions. The Stockyards, an area situated just north of the downtown district, provides shopping, dining, and family entertainment in an Old West-style setting. Sundance Square in downtown Fort Worth offers shopping, dining, and entertainment alternatives. The Will Rogers Auditorium is the site of various equestrian shows and rodeos. The area also features the Six Flags Over Texas amusement park in nearby Arlington, the Fort Worth Zoo, and the Water Gardens, a 4.3-acre, man-made "garden" of concrete and waterfalls in downtown Fort Worth. Conclusion Our review of various economic and demographic data indicates that the subject property's market area experienced above-average historical growth, and projections suggest a continuation of these trends. The following table summarizes the economic and demographic trends discussed throughout this section. All figures that reflect dollar amounts have been adjusted for inflation, and thus reflect real change. It should be noted that the percent changes indicated in the following tables are based on unrounded figures, and thus may not calculate exactly. HVS International, Mineola, New York Market Area Analysis 28 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-3 Economic and Demographic Data for the Subject Property's Market Area - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------------------- Long-Term Historical Population (+000) Tarrant County 1980-1995 868.3 1,293.8 2.7% Fort Worth-Arlington MSA 1980-1995 999.3 1,505.3 2.8 Dallas-Fort Worth CMSA 1980-1995 3,069.1 4,453.0 2.5 State of Texas 1980-1995 14,337.8 18,664.4 1.8 United States 1980-1995 227,225.6 262,791.0 1.0 Short-Term Historical Population (+000) Tarrant County 1990-1995 1,176.3 1,293.8 1.9 Fort Worth-Arlington MSA 1990-1995 1,367.8 1,505.3 1.9 Dallas-Fort Worth CMSA 1990-1995 4,057.3 4,453.0 1.9 State of Texas 1990-1995 17,045.4 18,664.4 1.8 United States 1990-1995 249,401.4 262,791.0 1.1 Projected Population (+000) Tarrant County 1995-2000 1,293.8 1,474.5 2.7 Fort Worth-Arlington MSA 1995-2000 1,505.3 1,708.0 2.6 Dallas-Fort Worth CMSA 1995-2000 4,453.0 4,900.0 1.9 State of Texas 1995-2000 18,664.4 20,073.0 1.5 United States 1995-2000 262,791.0 274,758.4 0.9 Long-Term Historical Retail Sales (+000,000) Tarrant County 1980-1995 6,604.3 9,681.9 2.6 Fort Worth-Arlington MSA 1980-1995 7,296.0 10,890.5 2.7 Dallas-Fort Worth CMSA 1980-1995 23,129.6 33,745.4 2.6 State of Texas 1980-1995 97,713.3 124,784.7 1.6 United States 1980-1995 1,340,768.9 1,765,826.1 1.9 Short-Term Historical Retail Sales (+000,000) Tarrant County 1990-1995 8,226.7 9,681.9 3.3 Fort Worth-Arlington MSA 1990-1995 9,194.5 10,890.5 3.4 Dallas-Fort Worth CMSA 1990-1995 28,880.7 33,745.4 3.2 State of Texas 1990-1995 103,868.0 124,784.7 3.7 United States 1990-1995 1,557,380.2 1,765,826.1 2.5 Projected Retail Sales (+000,000) Tarrant County 1995-2000 9,681.9 11,019.0 2.6 Fort Worth-Arlington MSA 1995-2000 10,890.5 12,355.3 2.6 Dallas-Fort Worth CMSA 1995-2000 33,745.4 36,925.5 1.8 State of Texas 1995-2000 124,784.7 134,120.1 1.5 United States 1995-2000 1,765,826.1 1,846,830.4 0.9 Long-Term Historical Retail Sales per Capita Tarrant County 1980-1995 7,606.1 7,483.5 (0.1) Fort Worth-Arlington MSA 1980-1995 7,301.0 7,234.6 (0.1) Dallas-Fort Worth CMSA 1980-1995 7,536.3 7,578.2 0.0 State of Texas 1980-1995 6,815.1 6,685.7 (0.1) United States 1980-1995 5,900.6 6,719.5 0.9
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 29 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-3 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------------------------------ Short-Term Historical Retail Sales per Capita Tarrant County 1990-1995 6,993.5 7,483.5 1.4% Fort Worth-Arlington MSA 1990-1995 6,722.3 7,234.6 1.5 Dallas-Fort Worth CMSA 1990-1995 7,118.1 7,578.2 1.3 State of Texas 1990-1995 6,093.6 6,685.7 1.9 United States 1990-1995 6,244.5 6,719.5 1.5 Projected Retail Sales per Capita Tarrant County 1995-2000 7,483.5 7,472.9 (0.0) Fort Worth-Arlington MSA 1995-2000 7,234.6 7,233.7 (0.0) Dallas-Fort Worth CMSA 1995-2000 7,578.2 7,535.8 (0.1) State of Texas 1995-2000 6,685.7 6,681.6 (0.0) United States 1995-2000 6,719.5 6,721.7 0.0 Long-Term Historical Eating and Drinking Place Sales (+000,000) Tarrant County 1980-1995 635.6 1,123.9 3.9 Fort Worth-Arlington MSA 1980-1995 681.0 1,224.3 4.0 Dallas-Fort Worth CMSA 1980-1995 2,224.6 3,741.1 3.5 State of Texas 1980-1995 8,606.1 13,050.1 2.8 United States 1980-1995 126,131.6 185,035.4 2.6 Short-Term Historical Eating and Drinking Place Sales (+000,000) Tarrant County 1990-1995 917.5 1,123.9 4.1 Fort Worth-Arlington MSA 1990-1995 998.5 1,224.3 4.2 Dallas-Fort Worth CMSA 1990-1995 3,173.2 3,741.1 3.3 State of Texas 1990-1995 10,794.4 13,050.1 3.9 United States 1990-1995 161,197.4 185,035.4 2.8 Projected Eating and Drinking Place Sales (+000,000) Tarrant County 1995-2000 1,123.9 1,316.8 3.2 Fort Worth-Arlington MSA 1995-2000 1,224.3 1,432.0 3.2 Dallas-Fort Worth CMSA 1995-2000 3,741.1 4,201.1 2.3 State of Texas 1995-2000 13,050.1 14,471.7 2.1 United States 1995-2000 185,035.4 199,127.3 1.5 Long-Term Historical Eating and Drinking Place Sales per Capita Tarrant County 1980-1995 732.1 868.7 1.1 Fort Worth-Arlington MSA 1980-1995 681.5 813.3 1.2 Dallas-Fort Worth CMSA 1980-1995 724.8 840.1 1.0 State of Texas 1980-1995 600.2 699.2 1.0 United States 1980-1995 555.1 704.1 1.6 Short-Term Historical Eating and Drinking Place Sales per Capita Tarrant County 1990-1995 779.9 868.7 2.2 Fort Worth-Arlington MSA 1990-1995 730.0 813.3 2.2 Dallas-Fort Worth CMSA 1990-1995 782.1 840.1 1.4 State of Texas 1990-1995 633.3 699.2 2.0 United States 1990-1995 646.3 704.1 1.7
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 30 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-3 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------------------------------ Projected Eating and Drinking Place Sales per Capita Tarrant County 1995-2000 868.7 893.0 0.% Fort Worth-Arlington MSA 1995-2000 813.3 838.4 0.6 Dallas-Fort Worth CMSA 1995-2000 840.1 857.4 0.4 State of Texas 1995-2000 699.2 721.0 0.6 United States 1995-2000 704.1 724.7 0.6 Long-Term Historical Personal Income (+000,000) Tarrant County 1980-1995 13,277.1 22,505.2 3.6 Fort Worth-Arlington MSA 1980-1995 15,001.8 25,578.9 3.6 Dallas-Fort Worth CMSA 1980-1995 48,595.8 81,662.5 3.5 State of Texas 1980-1995 197,605.0 285,315.1 2.5 United States 1980-1995 3,163,874.0 4,443,243.2 2.3 Short-Term Historical Personal Income (+000,000) Tarrant County 1990-1995 19,605.8 22,505.2 2.8 Fort Worth-Arlington MSA 1990-1995 22,217.0 25,578.9 2.9 Dallas-Fort Worth CMSA 1990-1995 70,164.2 81,662.5 3.1 State of Texas 1990-1995 248,474.8 285,315.1 2.8 United States 1990-1995 4,051,714.6 4,443,243.2 1.9 Projected Personal Income (+000,000) Tarrant County 1995-2000 22,505.2 27,130.5 3.8 Fort Worth-Arlington MSA 1995-2000 25,578.9 30,753.7 3.8 Dallas-Fort Worth CMSA 1995-2000 81,662.5 94,764.5 3.0 State of Texas 1995-2000 285,315.1 327,233.2 2.8 United States 1995-2000 4,443,243.2 4,972,219.5 2.3 Long-Term Personal Income per Capita Tarrant County 1980-1995 15,291.0 17,395.0 0.9 Fort Worth-Arlington MSA 1980-1995 15,012.0 16,992.0 0.8 Dallas-Fort Worth CMSA 1980-1995 15,834.0 18,339.0 1.0 State of Texas 1980-1995 13,782.0 15,287.0 0.7 United States 1980-1995 13,924.0 16,908.0 1.3 Short-Term Historical Personal Income per Capita Tarrant County 1990-1995 16,667.0 17,395.0 0.9 Fort Worth-Arlington MSA 1990-1995 16,243.0 16,992.0 0.9 Dallas-Fort Worth CMSA 1990-1995 17,293.0 18,339.0 1.2 State of Texas 1990-1995 14,577.0 15,287.0 1.0 United States 1990-1995 16,246.0 16,908.0 0.8 Projected Personal Income per Capita Tarrant County 1995-2000 17,395.0 18,399.0 1.1 Fort Worth-Arlington MSA 1995-2000 16,992.0 18,005.0 1.2 Dallas-Fort Worth CMSA 1995-2000 18,339.0 19,340.0 1.1 State of Texas 1995-2000 15,287.0 16,302.0 1.3 United States 1995-2000 16,908.0 18,097.0 1.4
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 31 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-3 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------------------------------ Long-Term Historical Employment - Tarrant County (+000) Farming 1980-1995 1.5 1.3 (0.8%) Agricultural Services 1980-1995 1.6 5.7 9.1 Mining 1980-1995 7.6 10.1 1.9 Construction 1980-1995 28.1 39.4 2.3 Manufacturing 1980-1995 101.5 102.8 0.1 Transportation, Communications, & Public Utilities 1980-1995 26.0 58.5 5.6 Total Trade 1980-1995 112.9 183.9 3.3 Wholesale 1980-1995 27.1 40.4 2.7 Retail 1980-1995 85.8 143.5 3.5 Finance, Insurance, & Real Estate 1980-1995 36.5 48.0 1.8 Services 1980-1995 95.5 221.1 5.8 Total Government 1980-1995 57.8 84.6 2.6 Federal Civilian 1980-1995 11.1 14.2 1.7 Federal Military 1980-1995 7.3 5.1 (2.3) State & Local 1980-1995 39.5 65.2 3.4 Total 1980-1995 469.0 755.4 3.2 Short-Term Historical Employment - Tarrant County (+000) Farming 1990-1995 1.3 1.3 0.2 Agricultural Services 1990-1995 4.3 5.7 5.8 Mining 1990-1995 10.6 10.1 (1.0) Construction 1990-1995 32.0 39.4 4.3 Manufacturing 1990-1995 115.0 102.8 (2.2) Transportation, Communications, & Public Utilities 1990-1995 58.7 58.5 (0.1) Total Trade 1990-1995 163.6 183.9 2.4 Wholesale 1990-1995 37.8 40.4 1.4 Retail 1990-1995 125.8 143.5 2.7 Finance, Insurance, & Real Estate 1990-1995 47.0 48.0 0.4 Services 1990-1995 176.7 221.1 4.6 Total Government 1990-1995 76.8 84.6 2.0 Federal Civilian 1990-1995 13.6 14.2 1.0 Federal Military 1990-1995 9.4 5.1 (11.5) State & Local 1990-1995 53.8 65.2 3.9 Total 1990-1995 686.2 755.4 1.9
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 32 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-3 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ---------------------------------------------------------------------------------------------------------------------------------- Projected Employment - Tarrant County (+000) Farming 1995-2000 1.3 1.3 (0.5%) Agricultural Services 1995-2000 5.7 6.6 2.8 Mining 1995-2000 10.1 11.7 3.0 Construction 1995-2000 39.4 41.7 1.1 Manufacturing 1995-2000 102.8 106.1 0.6 Transportation, Communications, & Public Utilities 1995-2000 58.5 68.3 3.1 Total Trade 1995-2000 183.9 202.4 1.9 Wholesale 1995-2000 40.4 44.2 1.8 Retail 1995-2000 143.5 158.1 2.0 Finance, Insurance, & Real Estate 1995-2000 48.0 51.6 1.5 Services 1995-2000 221.1 249.9 2.5 Total Government 1995-2000 84.6 90.8 1.4 Federal Civilian 1995-2000 14.2 15.2 1.3 Federal Military 1995-2000 5.1 5.2 0.2 State & Local 1995-2000 65.2 70.5 1.6 Total 1995-2000 755.4 830.4 1.9
- -------------------------------------------------------------------------------- In later sections of this economic study and appraisal, we will relate these historical and projected growth trends to specific market segments based on their propensity to reflect changes in room night demand in the subject property's area. HVS International, Mineola, New York Overview of External Forces 33 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 5. Overview of External Forces Affecting the U.S. Lodging Industry Introduction Hotel ownership is ultimately the business of creating and enhancing value. To understand the investment potential of lodging facilities, investors must be thoroughly aware of the many forces that can cause changes in the value of their properties. Although some of these forces are internal (such as the layout and design of the facilities, the quality of management, and the condition of the property), others are external (such as the local economic environment and the competitive nature of the market). The risk associated with hotel investment lies largely with the external forces that are beyond the control of ownership and contribute to the variability of future income flows. Investors and appraisers can project financial results by evaluating the historical impact of external forces on hotel values. Successful hotel investors seek opportunities where the risk of external forces can be minimized, thus reducing the uncertainty associated with income expectations. When investors engage in due diligence prior to acquiring a lodging facility, they are primarily interested in trends affecting a limited geographic market area, such as a town, city, or county. A broader overview takes into account national and international travel patterns and trends. An understanding of the general characteristics of the United States hotel market is important because these trends often foreshadow economic and demographic changes in smaller areas. This section of the appraisal will present an overview of the U.S. lodging industry by tracing many of the forces that influence hotel values. Historical economic and demographic data, and industry statistics will be analyzed to provide a basis for projections. Forecasts will be evaluated to determine their reasonableness. The conclusions represent another set of criteria that hotel investors consider in making their acquisition decisions. HVS International, Mineola, New York Overview of External Forces 34 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The Supply and Demand Relationship Most business ventures are influenced by the relationship between supply and demand. In the hotel industry, supply refers to the number of units. A unit consists of one or more rooms and represents the smallest accommodation that can be rented to a guest. Each unit must have a full bath and its own entrance to a public hallway or the building exterior. Demand refers to a room night, which is one unit that is occupied for one night. The supply and demand relationship has a significant influence on a hotel's occupancy and/or average room rate. Occupancy is calculated by dividing the number of rooms that are occupied for a specific period by the total number of rooms that are available during the same period. Average room rate is determined by dividing the total rooms revenue achieved during a specific period by the number of rooms occupied during that period; it also represents the weighted average of all the room rates charged during that period. In a market where demand is increasing faster than supply, occupancies rise and average rate growth generally exceeds inflation. When supply is increasing faster than demand, occupancies fall and average rates typically remain level or decline. Hotels generate revenue based on occupancy and average rate, and thus the supply and demand relationship is an important factor in analyzing profits and value. Hotel occupancy levels have shown definite cycles that reflect the balance between supply and demand. The early 1970s marked the beginning of a hotel building boom reminiscent of the 1920s. Many factors contributed to this expansion, but the two main elements were readily available financing and aggressive chains that were eager to sell franchises. The new construction during the 1970s was made possible by the enormous amount of financing generated by all lenders, particularly real estate investment trusts (REITs). These high-leverage finance companies were created to allow small investors to participate in real estate mortgages and equities. The concept was quickly accepted by Wall Street, and soon billions of dollars were available to finance real estate projects. Many lenders became so overwhelmed with new money that their underwriting procedures broke down and some marginal developments were approved. During the late 1960s and early 1970s, hotel companies actively expanded their chains through franchising. Franchising was a source of new capital, allowing hotel companies to grow and achieve national recognition using the franchisee's financial investment in individual properties. Some franchisors, eager to demonstrate sustained growth and establish a national HVS International, Mineola, New York Overview of External Forces 35 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= presence, employed questionable marketing tactics to sell new franchises. Salespeople were often compensated based on the number of franchises sold, so there was little incentive to discourage developers from investing in poor locations and overbuilt markets. Many lenders and hostelry developers were led to believe that a national franchise would guarantee a successful operation. The combination of readily available financing and aggressive hotel chains eager to sell franchises resulted in overbuilding and development of many poorly located, undercapitalized hostelries managed by inexperienced owners. The bubble burst on the lodging industry when inflation caused construction costs and interest rates to escalate. The 1974 energy crisis drastically reduced travel, and the accompanying recession curtailed business trips, conferences, and conventions. Operators of marginal properties quickly fell behind in their mortgage payments, and lenders were forced to foreclose. As lenders became hostelry owners, they either organized work-out departments headed by experienced hoteliers or engaged professional hotel management companies to assume operational responsibilities. Sales data indicate that lenders who were looking for quick sales to remove nonperforming hotel assets from their books had to lower their prices substantially to attract all-cash buyers. Lenders who were willing to hold on to foreclosed hotels and employ professional management to reposition and improve the properties' operation were generally able to recoup their original investments in three to five years, once the industry began to recover. However, even lenders who repositioned their hotels had to take back favorable purchase-money financing to sell the properties because money from other sources was not available. History has shown that during economic downturns, hotel values generally do not fall in proportion to the properties' declining incomes. Sellers, and particularly lenders who take back hotels through foreclosure, are often unwilling to sell at substantially reduced prices. They are more likely to wait out the downward cycle and dispose of their assets when the market begins to rebound. Thus, appraisers can best reflect market behavior by projecting a facility's net income to a point of recovery and applying the proper discounted cash flow procedure over that time period. The late 1970s was a period of relative calm for the lodging industry. Because most lenders were recovering from the financial wounds inflicted by HVS International, Mineola, New York Overview of External Forces 36 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the 1975 recession, they had little interest in making hotel mortgages. New construction was restrained, and primarily consisted of additions to existing properties and the development of some large, downtown hotels oriented toward the commercial and convention markets. The rebirth of center-city hostelries was a direct result of fuel shortages and the availability of government financing for inner-city redevelopment projects. Highway-oriented properties, on the other hand, were adversely affected by escalating gasoline prices and decreased automobile travel, and these lodging facilities lost some of their appeal among investors and hotel companies. Decreased building activity, the normal retirement of older hostelries from the market, and an improving economy created a favorable supply and demand relationship and record-high occupancy levels from 1979 to 1980. Average room rates increased rapidly as operators took advantage of the excess demand to recoup earlier losses and keep up with inflation. After the decline in hotel development during the late 1970s, the environment appeared suitable for a period of renewed expansion. However, the Federal Reserve tightened the money supply in the early 1980s, sending the prime interest rate up to double-digit levels. Most of the projects that were in the preliminary planning stages but lacked sensible financing were put on hold. Fiscal policy and declining energy prices eventually reduced the national inflation rate. This caused a decline in hotel interest rates beginning in 1983, and suddenly massive amounts of capital were available for real estate investments. Hotel developers who had been out of the market since the mid-1970s rushed to initiate new projects. They were aided by several major real estate development incentives: high occupancies and escalating room rates, readily available debt and equity financing, and unique income tax benefits designed to stimulate the national economy out of a recession. During the early 1980s, trends were generally favorable for new hotel development. Although the recession caused a decline in lodging demand, many markets showed relatively high occupancy levels. Room rates were usually able to keep up with inflation, and the travel industry was expected to boom as a result of a recovering economy. Franchise sellers signed up new prospects aggressively, using product segmentation to justify the saturation of a market with a common brand. HVS International, Mineola, New York Overview of External Forces 37 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Financing was readily available from the savings and loan industry. Following deregulation, these banks were permitted to lend on commercial real estate, such as hotels. Although savings and loans had experience in making loans on single-family homes, few had expertise with commercial properties, and fewer still with hotels. The result was almost identical to the real estate investment trust fiasco the decade before: loan underwriting and administration were inept and sometimes nonexistent, the number of loans made seemed more important than the quality of the real estate and the integrity of the borrower, and short-term funds were often used to finance long-term mortgages. In the early 1990s, the industry suffered the consequences of this lending spree: most major hotel markets became severely overbuilt and many savings and loans went out of business. Another factor contributing to hotel development in the 1980s was the very favorable treatment provided by income tax regulations. By carefully structuring hotel syndications to take advantage of all available tax benefits, investors could virtually recoup their total cash outlay in the first year and reap additional benefits in the future regardless of the economic success of the underlying asset. Because there was little incentive to justify a transaction's economics (i.e., cash flow and reversionary benefits), a number of syndicators overpaid for hotel properties, took out usurious fees, and overloaded their hotels with debt. A change in the tax law in the mid-1980s eliminated many of the benefits associated with hotels, but the overbuilding in most markets was either in progress or had already taken place. By the end of the 1980s, the abuses of the savings and loans had become apparent, but it was too late to reverse the overbuilding. Between 1985 and 1990, approximately 556,000 rooms were added to the U.S. hotel supply. The national economy entered another recession in 1990, and this factor (coupled with overbuilding and the Persian Gulf War in 1991) caused the national hotel occupancy rate to bottom out at 60.9%. In some markets, hotel occupancies were as low as 35%. This supply and demand imbalance was almost identical to the situation in the 1970s that led to numerous hotel failures. As in the REIT days, the number of non-performing loans reached record levels, and lenders moved to a work-out mode of operation in order to foreclose and restructure their hotel investments. Many of the savings and loans were taken over by the government and their hotel assets were sold at auction. HVS International, Mineola, New York Overview of External Forces 38 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= According to the American Council of Life Insurance, which represents major life insurance companies, the number of delinquent hotel loans and the number of hotel loans in foreclosure peaked in 1991. This trend is undergoing a reversal as the U.S. lodging industry begins to recover. Loan restructuring was an attractive alternative to foreclosure during this period, and the number of loans in good standing with restructured terms almost doubled. By 1993, new hotel construction had declined significantly. Lenders, trying to get out from under problematic hotel portfolios, curtailed all real estate lending and would not even consider hotels. The tax benefits associated with lodging facilities had been reduced significantly, and passive investors left the hospitality market entirely. The slowdown in the growth of supply had a beneficial impact on occupancy levels, which started to recover in 1992. Improved occupancies are expected to continue through the late 1990s as increases in lodging demand outpace growth in supply. Beginning in 1991, many lenders and the Resolution Trust Corporation (RTC) sold their oldest and least desirable hotels at liquidation prices. Because virtually no third-party financing was available, most lenders were forced to take back purchase-money mortgages at favorable terms in order to sell these properties without suffering massive write-downs. The newer and more desirable hotels were not put on the market, because their lenders/owners were waiting for values to recover. This course of action significantly reduced the number of transactions involving good-quality lodging facilities. The following table shows the volume of hotel transactions exceeding $10,000,000 between 1990 and 1995. ================================================================================ Table 5-1 Summary of Major Hotel Transactions - -------------------------------------------------------------------------------- Year 1990 1991 1992 1993 1994 1995 - -------------------------------------------------------------------------------- Number of Transactions 130 54 67 52 92 104 Number of Rooms 40,543 16,427 25,187 19,935 33,503 36,951 Average Price Per Room $136,000 $91,000 $85,000 $79,000 $80,000 $83,000 Source: HVS International - -------------------------------------------------------------------------------- In 1991, there were only 54 major hotel sales recorded. This number increased to 67 in 1992 and declined to 52 in 1993, then rose dramatically in HVS International, Mineola, New York Overview of External Forces 39 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 1994 and 1995. During the low-volume years, many sellers remained on the sidelines waiting for values to increase before placing their properties on the market. The jump in 1994 is attributable to a number of factors, including the greater availability of mortgage funds, a return of institutional investors to the market, and a resurgence of investor interest in lodging facilities. The profile of typical hotel buyers has changed somewhat. During the mid-1980s, when tax-driven syndication's were popular, many hotels were purchased by passive investors who hired management companies to operate their properties. These owners had little involvement in day-to-day management decisions, which occasionally led to poor management and financial losses. Today, most buyers of major hotels are owner-operators who bring with them both the acquisition funds (usually from a joint venture partner) and management expertise. We also note that real estate investment trusts (REITs) and public hotel companies (C-Corps) are actively acquiring hotels using funds from public equity stock offerings. The supply of new hotel rooms is expected to increase slowly during the next several years. Lenders are beginning to return to the market, and are making some hotel loans based on conservative criteria. Initially, mortgage funds were available mainly to the budget and economy lodging sectors, for the purpose of refinancing existing properties or assisting buyers in acquisitions. Now, a number of lenders are willing to finance new construction for these small, low-end properties. Although financing is also becoming available for the acquisition of large, full-service hotels, very little has been allocated for new construction. At present, active hotel lenders are not necessarily traditional banks and insurance companies, but may include credit companies and Wall Street securities firms. A number of hotel owners and developers are now constructing budget and economy hotels; a few are planning more upscale, full-service properties. Most lenders are taking a conservative approach to new hotel loans, which should limit new development to those projects that demonstrate true economic feasibility. As a result, severe short-term overbuilding is unlikely. HVS International, Mineola, New York Overview of External Forces 40 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Room Rates The supply and demand relationship has a direct impact on hotel occupancies and an indirect influence on room rate growth. Between 1978 and 1995, hotel room rates increased at an average annual compounded rate of almost 6%. Significant rate growth was recorded during the late 1970s and early 1980s as a result of strong occupancies (70%'s) coupled with a high monetary inflation rate (14%). In recent years, room rate growth slowed as a result of low occupancies and a drop in inflation. Hotel room rates generally increase faster than the Consumer Price Index (CPI) when occupancies are strong or moving upward. When occupancies are low or declining, room rate growth tends to lag behind the CPI; in some cases, rates may remain flat or actually drop. The following table compares the historical and projected annual increase in hotel room rates in the United States to the change in the national CPI. HVS International, Mineola, New York Overview of External Forces 41 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-2 Percent Change in Average Room Rates Versus CPI - U.S. Hotels - -------------------------------------------------------------------------------- Consumer Price Hotel Room Rate Index Hotel Year Percent Change Percent Change Occupancy - ------------------------------------------------------------------ 1973 4.2% 6.2% 70.2% 1974 7.6 11.0 64.0 1975 7.3 9.1 63.7 1976 8.2 5.7 65.8 1977 8.1 6.5 67.3 1978 14.0 7.7 69.2 1979 17.0 11.3 71.9 1980 15.2 13.5 70.6 1981 10.0 10.3 67.9 1982 6.5 6.2 66.7 1983 5.1 3.2 64.4 1984 6.9 4.3 64.0 1985 4.6 3.6 63.1 1986 3.2 1.9 62.5 1987 3.6 3.6 61.9 1988 3.6 4.1 62.3 1989 3.5 4.8 63.2 1990 3.0 5.4 62.4 1991 0.6 4.2 60.9 1992 1.4 3.0 62.1 1993 2.8 3.0 63.1 1994 4.8 2.6 64.7 1995 4.8 2.8 65.5 1996 5.0 3.0 66.0 1997 5.5 3.5 67.0 1998 6.0 4.0 68.0 1999 5.5 4.0 68.0 Sources: Smith Travel Research & HVS International - -------------------------------------------------------------------------------- This table shows two periods when hotel room rate growth failed to keep pace with the CPI. From 1973 to 1975, the hotel industry was suffering from overbuilding related to real estate investment trusts, a recession, and a downturn in travel caused by the oil embargo. The second period of slow room rate growth occurred between 1988 and 1993, when the industry was again affected by overbuilding and a weak economy. The table illustrates that during periods of prosperity, room rates are a good hedge against inflation; this was true even when the CPI increased at double-digit levels. HVS International, Mineola, New York Overview of External Forces 42 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The projections indicate a strong recovery of room rates as the relationship between supply and demand becomes more favorable. Growth is expected to peak in 1998 at 6%, which is significantly higher than the projected gain in the CPI. This may appear high, but a similar trend occurred in 1978, when room rates rose 14.0% and the CPI increased by only 7.7%. Hotels are unique because their room rates can be adjusted at any time. Unlike office space, where rents are typically negotiated for a five-year period, hotel operators are free to base rates on occupancy trends. Using sophisticated yield management programs, modern lodging facilities can ride the demand curve and maximize room rates whenever the market permits. As a result, hotels generally offer significant upside potential during periods of economic prosperity. If lodging facilities can increase room rates faster than the CPI and still maintain occupancies, bottom-line profits usually escalate. If they can raise room rates and occupancy at the same time, profits will grow significantly. The opposite occurs when room rates fail to keep pace with inflation. Because market value is basically a multiple of bottom-line profits, changes caused by fluctuations in occupancy and average rate have a direct impact on value. Rooms Revenue per Available Room (RevPAR) The ability of a hotel to maximize its occupancy and room rate is measured in terms of rooms revenue per available room (RevPAR), which is the product of occupancy and average rate. Between 1978 and 1995, RevPAR in the U.S. lodging industry increased at an average annual compounded rate of approximately 5%. As in the case of average rate, most of the increase occurred during the late 1970s, when occupancies escalated rapidly. The only decline in RevPAR occurred in 1991. Trends in Hotel Sales HVS International constantly monitors hotel markets in order to collect information on sales of lodging facilities. This comprehensive database is known as the Hospitality Market Data Exchange (HMDE). The HMDE includes more than 90% of all hotel sales that took place during this period. The HMDE data shows that the number of transactions peaked at 726 in 1986. This strong activity is largely attributable to pending changes in the tax laws, which made it less favorable to own hotels. It is also possible that forward-thinking investors noted the substantial overbuilding and declining economy and decided to bail out at that time. In 1987 and 1990, the HVS International, Mineola, New York Overview of External Forces 43 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= average sales price per room peaked at $75,000. This was more than twice the 1981 average of $36,000. Following the 1990 peak, hotel prices fell rapidly as occupancies and profits were eroded by the massive number of hotel rooms entering the market. By 1991, the year of the Persian Gulf War, sales prices had fallen to $38,000 per room. Even the highest price per room declined from the record $1,195,652 (for the sale of the Bel Aire Hotel) to $251,816 in 1992. The market hit bottom in 1993 when the average sales price dropped to $36,000 per room. Prices recovered rapidly in 1994 and 1995 as investors became interested in hotels again and more full-service properties were put on the market. In 1995, the average sales price was $61,000 per room. The figures presented in the HMDE represent actual sales prices; no attempt was made to adjust for factors such as favorable or unfavorable financing, forced or liquidation sales, bankruptcy sales, foreclosures, and so forth. As a result, the average price per room does not necessarily reflect market value, which assumes a willing buyer and a willing seller. Many of the transactions that took place during the early 1990s involved unwilling sellers - usually lenders who were forced to liquidate hotel portfolios quickly at prices that were below market levels. Most hotel experts agree that a recovery is underway, and they recommend that owners hold their properties until more favorable conditions prevail. Trends in Hotel Values A more meaningful indicator of trends in hotel value is the Hotel Valuation Index (HVI), developed by HVS International. This index tracks changes in hotel values in 23 major markets and the nation as a whole. It is developed through an income approach, using market area data provided by Smith Travel Research and operational and capitalization rate information from HVS International, and is indexed to the 1986 U.S.A. value (1.0000). The following table sets forth the HVI from 1986 to 1995. HVS International, Mineola, New York Overview of External Forces 44 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-3 Hotel Valuation Index per Room - -------------------------------------------------------------------------------- Valuation Index Per Room
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 ------------------------------------------------------------------------------------------------------- Honolulu 3.3571 4.0357 4.6964 5.2857 5.3214 4.7857 4.9286 4.2857 4.3929 5.6071 New Orleans 1.5357 1.7500 2.2857 2.3929 2.5000 2.6071 3.2857 3.2500 3.8929 4.4286 New York 3.5714 4.1071 4.6429 4.5357 3.9286 3.0357 2.5714 2.5714 3.1429 4.1071 San Francisco 2.5000 3.0893 3.2500 3.0714 2.9286 2.5714 2.5714 2.9643 3.2143 4.0000 Phoenix 1.2143 1.0714 1.1786 1.5357 1.4286 1.2500 1.5000 1.9643 2.3571 3.2143 San Diego 2.8571 2.3571 2.5714 2.6786 2.3929 2.5357 2.5357 2.2143 2.3571 3.0357 Miami 1.4286 1.6071 1.7321 2.1429 2.1786 2.2500 2.5714 2.7857 2.3214 2.9286 Washington, DC 2.1786 2.1786 2.4464 2.6071 2.2500 1.8571 2.0357 2.5000 2.3929 2.8929 Atlanta 1.0714 1.0179 1.0536 1.0357 1.1429 1.1250 1.2857 1.7857 2.1429 2.6786 Minneapolis 0.7321 0.6964 0.7143 0.7143 0.7857 1.0000 1.2857 1.5714 1.8214 2.1786 Chicago 1.4643 1.5000 1.5714 1.5000 1.4286 1.2143 1.2500 1.5000 1.8571 2.1786 Boston 2.3571 2.7143 2.6071 2.1429 1.8214 1.2500 1.3036 1.3214 1.6071 2.1071 Fort Lauderdale 1.4643 1.2679 1.3214 1.4286 1.4821 1.3571 1.7143 1.8929 1.6071 1.9286 Orlando 1.5000 1.6429 1.9286 2.5000 2.5357 1.8929 2.0714 1.7857 1.6071 1.8929 Denver 0.5357 0.4464 0.4643 0.4821 0.7857 0.9268 1.0357 1.3214 1.5000 1.8571 Dallas 0.5536 0.6250 0.6607 0.7321 0.7857 0.7143 0.9643 1.0357 1.3214 1.7143 USA 1.0000 0.9464 1.0536 1.1250 1.0714 0.9214 0.9929 1.1429 1.3214 1.6071 Los Angeles 2.1071 2.2857 2.3929 2.4643 2.1786 1.5714 1.0714 0.9643 1.1964 1.5000 Tampa 0.8393 0.7679 0.8571 1.1429 1.2857 1.0357 1.0714 1.0357 1.1071 1.3214 Anaheim 1.7679 1.7321 1.7500 1.8571 1.6071 1.2857 0.9642 0.9464 0.8393 1.2500 Houston 0.3571 0.4286 0.6964 0.7857 1.1071 1.1607 1.1429 1.0357 1.0000 1.1786 Philadelphia 1.4643 1.5357 1.4286 1.3214 1.0714 0.6786 0.5714 0.6071 0.7500 1.0714 Norfolk 1.1786 1.0536 0.9286 0.7857 0.6429 0.5357 0.6071 0.6429 0.7500 0.9643 Riverside 0.9643 1.2143 1.5714 1.7143 1.4643 1.2500 0.7857 0.5357 0.4286 0.5357
Source: HVS International - -------------------------------------------------------------------------------- The HVI can be used to show the value change in a particular market over time or to show the relative difference in hotel values in various cities. The following table shows the annual change in hotel values in 23 major markets and the United States as a whole. HVS International, Mineola, New York Overview of External Forces 45 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-4 Percent Change in the Hotel Valuation Index - -------------------------------------------------------------------------------- Annual Percent Change
'86-87 '87-88 '88-'89 '89-'90 '90-'91 '91-'92 '92-'93 93-'94 '94-'95 '86-'95 - ----------------------------------------------------------------------------------------------------------- Honolulu 20 % 16 % 13 % 1 % -10 % 3 % -13 % 3 % 28 % 67 % New Orleans 14 31 5 4 4 26 -1 20 14 188 New York 15 13 -2 -13 -23 -15 0 22 31 15 San Francisco 24 5 -5 -5 -12 0 15 8 24 60 Phoenix -12 10 30 -7 -13 20 31 20 36 165 San Diego -18 9 4 -11 6 0 -13 6 29 6 Miami 12 8 24 2 3 14 8 -17 26 105 Washington, DC 0 12 7 -14 -17 10 23 -4 21 33 Atlanta -5 4 -2 10 -2 14 39 20 25 150 Minneapolis -5 3 0 10 27 29 22 16 20 198 Chicago 2 5 -5 -5 -15 3 20 24 17 49 Boston 15 -4 -18 -15 -31 4 1 22 31 -11 Fort Lauderdale -13 4 8 4 -8 26 10 -15 20 32 Orlando 10 17 30 1 -25 9 -14 -10 18 26 Denver -17 4 4 63 18 12 28 14 24 247 Dallas 13 6 11 7 -9 35 7 28 30 210 USA -5 11 7 -5 -14 8 15 16 22 61 Los Angeles 8 5 3 -12 -28 -32 -10 24 25 -29 Tampa -9 12 33 12 -19 3 -3 7 19 57 Anaheim -2 1 6 -13 -20 -25 -2 -11 49 -29 Houston 20 62 13 41 5 -2 -9 -3 18 230 Philadelphia 5 -7 -8 -19 -37 -16 6 24 43 -27 Norfolk -11 -12 -15 -18 -17 13 6 17 29 -18 Riverside 26 29 9 -15 -15 -37 -32 -20 25 -44
Source: HVS International - -------------------------------------------------------------------------------- On a national basis, hotel values rose in 1988 and 1989, then declined in 1990 and dropped by 14% in 1991. A turnaround commenced in 1992, when values increased by 8%; still greater increases of 15% in 1993, 16% in 1994, and 22% in 1995 signaled that a recovery was well underway. In the case of the individual cities, it is obvious that the movement in national hotel values has been offset somewhat by trends in local markets. Between 1986 and 1995, Riverside hotels lost more than 40% of their value, while San Francisco showed a 60% increase. Anaheim, Los Angeles, and Philadelphia also suffered significant drops. Future Trends Most hotel owners, operators and lenders agree that the U.S. lodging industry has emerged from one of the worst periods since the Depression of 1929. Today, there are many indications that signal a strong recovery is underway, and most hotels have experienced a dramatic rise in profitability. Conversely, the hotel industry remains cyclical, and there are long-term trends and risk factors that could have an unfavorable impact on the operating results and investment potential of lodging facilities. The following HVS International, Mineola, New York Overview of External Forces 46 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= list summarizes the positive and negative factors that are likely to influence the U.S. lodging industry in coming years. o No significant amount of new hotel development is likely to occur during the next three to five years. Lenders stopped financing new hotels in the early 1990s because of the high rate of loan defaults, and they are only now starting to make construction loans. Although mortgage funds are available to refinance existing properties and construction loans are being made for economy hotels, mortgages for new hotels in the mid-rate, first-class, and luxury categories are still difficult to secure. This lack of financing is major barrier to entry, and will prevent a number of proposed projects from moving forward. With only a slow increase in supply, hotel occupancies should rebound as fast as the growth in demand permits. o An additional barrier to entry is the current discrepancy between market values and replacement costs for first-class and luxury hotels. In today's market, many upscale hotels are still selling for prices that are below what it would cost to develop a comparable hotel. As a result, there is little justification for building a new hotel when a similar, existing facility is available for sale at some fraction of the cost. Until the gap between market value and replacement cost narrows, there will be minimal new hotel construction in the upper-tier segments. The market values and replacement costs of budget and economy hotels have been in equilibrium for several years which is another reason why new development is proceeding in these segments. o The U.S. economy continues to improve, which suggests that more people are traveling. Many people curtailed their travel plans during the recent recession, and there is likely to be pent-up demand that will be released as consumer confidence escalates. o Minimal additions to the hotel supply coupled with growth in demand should result in further improvement in occupancies during the next several years. o As shown by the historical data, hotel room rates rise rapidly as occupancies escalate. The most frequent complaint that owners and operators had during the recent recession was their inability to achieve average rate gains. Starting in 1994, gains in hotel room rates returned to levels in excess of inflation, foreshadowing enhanced profitability. In real dollars, hotel room rates are expected to return to 1988 levels by 1998. This HVS International, Mineola, New York Overview of External Forces 47 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= is a good indication that hotel values will return to record levels in the next two to four years. o The low cost of capital is another factor that tends to enhance value. Because capitalization rates are tied directly to the price of capital, the lower the cost, the lower the cap rate and the higher the value. The cost of hotel debt capital averaged 10.5% in 1990. Today, similar financing is available at 8.5% to 9.5%. Recent hotel sales support the downward trend in capitalization rates. o Government regulations are becoming increasingly expensive for the U.S. hotel industry. A national health care policy could force small operators to provide better benefits for many more employees, particularly the part-time workers who are used extensively by hotels and restaurants. Environmental laws are becoming stricter and will require hotels to implement recycling, reuse, and conservation procedures. Congress has limited deductions for meals and entertainment expenses, which increases the cost of doing business in hotels and restaurants. Local municipalities use hotel rooms taxes as a source of revenue for general use, and the hotel rooms tax is so high in some areas that it has driven away demand. This is particularly true with respect to meetings and conventions, which can be held in cities that tax accommodations at a lower rate. o Improved technology is rapidly changing the way business is conducted. During the next decade, advances such as video communication, enhanced data transfer, and faster transportation are expected to limit the need for face-to-face meetings and shorten the time that executives are away from their offices. Commercial hotels are bound to be influenced by this trend. Conclusion Interest in hotel acquisition has increased significantly during the past several years. Buyers have concluded that future earnings trends are likely to be favorable, and the risks posed by overbuilding or an economic downturn are small. Some sellers are holding their properties until prices reach a higher level. Consequently, we believe there is pent-up desire to sell once prices begin to approach levels that allow the existing (or restructured) debt to be paid off. The fact that numerous buyers are chasing very few acquisition opportunities has had a favorable impact on recent sales prices. For buyers to be successful in this highly competitive market, their projected operating results HVS International, Mineola, New York Overview of External Forces 48 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= must take into account at least a portion of any upside created from improved performance, particularly if the improvement can be readily achieved through management efficiencies. Capitalization rates based on historical operating income have fallen during the past several years. Hotel buyers in today's market must be aggressive in all of their acquisition assumptions. As a result, hotel values in some parts of the country are approaching the levels registered during the mid-1980s, and a full recovery is expected to occur in the next two to four years. HVS International, Mineola, New York Lodging Market Supply and Demand 49 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 6. Lodging Market Supply and Demand Analysis MARKET FOR TRANSIENT ACCOMMODATIONS The market for transient accommodations is an all-encompassing term referring to the many types of travelers who use lodging facilities in a given area. These travelers represent the market's accommodated room night demand. This section will begin with an analysis of historical demand trends to determine what changes have occurred; the historical number of competitive hotel rooms will then be estimated to evaluate local supply trends. Areawide occupancy levels can be calculated based on the number of hotel rooms available in the market and the demand for lodging accommodations. The total hotel room night demand will be divided into individual market segments to allow us to forecast growth rates based on the economic and demographic data set forth earlier in this report. Historical Supply and Demand Data Smith Travel Research (STR) has compiled historical supply and demand data for the subject property and its competitors. This information is presented in the following table, along with the marketwide occupancy, average rate, and rooms revenue per available room (RevPAR). RevPAR is calculated by multiplying occupancy by average rate, and provides an indication of how well rooms revenue is being maximized. HVS International, Mineola, New York Lodging Market Supply and Demand 50 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-1 Historical Supply and Demand Trends (STR) ================================================================================
Year to Date Avg. Annual ------------------ Comp. Change, 1989 1990 1991 1992 1993 1994 1995 1995 1996 1989-95 - ------------------------------------------------------------------------------------------------------------------------------------ Number of Rooms 2,205 2,205 2,205 2,205 2,205 2,205 2,205 2,205 2,205 Annual Guestroom Supply 804,825 804,825 804,825 804,825 804,825 804,825 804,825 535,815 535,815 Percent Change -- 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -- 0.0% 0.0% Room Night Demand 475,326 508,599 514,522 416,131 467,877 504,423 515,819 363,525 328,503 Percent Change -- 7.0% 1.2% (19.1)% 12.4% 7.8% 2.3% -- (9.6)% 1.4% Occupancy 59.1% 63.2% 63.9% 51.7% 58.1% 62.7% 64.1% 67.8% 61.3% Percent Change -- 7.0% 1.2% (19.1)% 12.4% 7.8% 2.3% -- (9.6)% 1.4% Average Rate $ 60.78 $ 61.53 $ 63.09 $ 59.06 $ 66.10 $ 73.94 $ 80.73 $ 81.46 $ 84.07 Percent Change -- 1.2% 2.5% (6.4)% 11.9% 11.9% 9.2% -- 3.2% 4.8% RevPAR $ 35.90 $ 38.88 $ 40.33 $ 30.54 $ 38.43 $ 46.34 $ 51.74 $ 55.27 $ 51.54 Percent Change -- 8.3% 3.7% (24.3)% 25.8% 20.6% 11.6% -- (6.7)% 6.3%
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Lodging Market Supply and Demand 51 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= It is important to note some limitations of the STR data. Hotels are occasionally added to or removed from the sample, and not every property reports data in a consistent and timely manner; these factors can influence the overall quality of the information by skewing the results. These inconsistencies may also cause the STR data to differ from the results of our competitive survey. Nonetheless, we find that hotel buyers often rely on STR statistics, and thus they are considered relevant to this study. It is important to note that during 1989, 1990, and 1991, the Holiday Inn - Central and the Worthington did not report to Smith Travel Research. In 1991, the Ramada also failed to contribute to the database; in 1992, the Worthington was the only hotel that did not participate in the survey. Statistics for 1993, 1995, and year-to-date 1996 reflect all of the competitive hotels, but the 1994 data exclude the Holiday Inn - Central. In the absence of specific information from all of the market's hotels, the database model assumes that the non-participating hotels achieved occupancy and average rate levels commensurate with the average achieved by the contributing properties. Consequently, if the non-contributing hotels achieve occupancy and/or average rate levels that are materially different from the marketwide average, the STR data can be skewed. Specifically, the subsequent inclusion of actual operating results can cause implied changes in demand or room rates which reflect a change in the weighted average of the data rather than fluctuations in market activity. As illustrated by the previous table, guestroom supply in the subject property's market has remained constant since 1989. As a result of the stable supply, both room night demand and occupancy increased at an average annual compounded rate of 1.4% between 1989 and 1995. The 19.1% drop in occupancy in 1992 can be attributed to a number of factors. First, the national recession and an overall decline in manufacturing activity (particularly with respect to defense-related products) had an unfavorable influence on the Fort Worth economy. We also note that this was the year that the closing of the Carswell Air Force Base was first announced. The base did close, causing a drop in hotel demand, but it has since been restructured as a reserve station for several branches of the U.S. Navy. As indicated above, both the Holiday Inn - Central and the Ramada began to report their operating results to STR in 1992; because both of these hotels were achieving occupancy levels that were lower than marketwide averages, the inclusion of their actual operating data caused contributed to the 19.1% occupancy decline calculated by STR. In reality, the decline in HVS International, Mineola, New York Lodging Market Supply and Demand 52 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= demand is believed to have been less substantial. These factors also influenced the 6.4% reported decline in average rate in 1992. Year-to-date August statistics indicate a 9.6% drop in occupancy, from 67.8% in 1995 to 61.3% in 1996. We again note inconsistencies resulting from the methodology employed by STR, which calculates demand based on the occupancies reported by each participating hotel rather than on the number of occupied room nights. Moreover, the computer model does not adapt easily to changes in a particular hotel's room count. If a certain property reports to STR that it has added guestrooms, the new guestroom count is then used to calculate historical, as well as current, demand levels. As a result, the stated demand levels are skewed, because total demand should be calculated by multiplying the number of available rooms by the reported occupancy rate. As a case in point, the room count of the Ramada increased by roughly 170 guestrooms in 1996, with the reopening of units in the south tower that had been closed following a natural gas explosion a number of years ago. The 1995 occupancy reported by the Ramada Inn (57%) was based on a total of 260 rooms. The year-to-date 1996 occupancy (45%) is calculated on the basis of 430 rooms, and because the number of occupied rooms did not increase by the same magnitude as the number of available rooms, the hotel's occupancy declined substantially. Smith Travel Research calculates demand based on reported occupancy, resulting in a significant implied decrease in demand. Our calculations indicate that demand in the market actually increased by roundly 10%, partially as a result of the availability of the additional rooms at the Ramada. Between 1989 and 1995, average rate increased at a healthy average annual compounded rate of 4.8%. The substantial gain of 11.9% that was recorded in 1993 is partially attributable to the fact that the Worthington (which is the market's rate leader) did not report to STR prior to that year. Consequently, it is not surprising that the marketwide average rate rose dramatically when it was included in the survey, and we do not believe that this jump is reflective of a significant change in market conditions at that time. Likewise, the 11.9% increase reported in 1994 was influenced by the fact that the low-rated Holiday Inn - Central did not report in that year. Nonetheless, the strong increases in average rate achieved between 1993 and 1995 and again in year-to-date 1996 (periods for which the complete data are available) indicates that the market has sustained healthy rate growth in the recent past. HVS International, Mineola, New York Lodging Market Supply and Demand 53 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= According to the data set forth previously, the marketwide RevPAR rose at an average annual compounded rate of 6.3% between 1989 and 1995; however, the numerous inconsistencies in occupancy and average rate growth noted above cast some doubt on the accuracy of this statistic. Demand Analysis Using Market Segmentation For the purpose of demand analysis, the overall market is divided into individual segments based on the nature of travel. Although a market may have various segments, the three primary classifications occurring in most areas are commercial, meeting and group, and leisure. Market segmentation is a useful procedure because individual classifications often exhibit unique characteristics in terms of growth potential, seasonality of demand, average length of stay, double occupancy, facility requirements, price sensitivity, and so forth. By quantifying the room night demand by market segment and analyzing the characteristics of each segment, the overall demand for transient accommodations can be projected. Lodging demand in Forth Worth area is generated primarily by the following three market segments. Segment 1 Commercial Segment 2 Meeting and Group Segment 3 Leisure Based on our fieldwork, area analysis, and knowledge of the local lodging market, we estimate the year-end 1996 distribution of accommodated hotel room night demand as follows. ================================================================================ Table 6-2 Estimated Year-End 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- Marketwide Subject Property ----------------------- ------------------------- Accommodated Percent Accommodated Percent Market Segment Demand of Total Demand of Total - -------------------------------------------------------------------------------- Commercial 128,000 30% 35,000 30% Meeting and Group 233,000 56 75,000 65 Leisure 60,000 14 6,000 5 - -------------------------------------------------------------------------------- Total 420,000 100% 116,000 100% - -------------------------------------------------------------------------------- HVS International, Mineola, New York Lodging Market Supply and Demand 54 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Meetings and groups dominate the market demand; we estimate this segment's year-end 1996 contribution at roundly 56% of the overall occupancy. Commercial guests follow with a 30% share, and leisure travelers contribute the remaining 14%. The Radisson Plaza derives a still larger percentage of its demand from the meeting and group segment (estimated at 65% as of year-end 1996). Commercial demand comprises another 30%, and leisure travelers account for only 5% of the subject property's overall occupancy. Using the distribution of accommodated hotel demand as a starting point, we will analyze the characteristics of each market segment in an effort to determine future trends in room night demand. Commercial Segment The commercial segment consists of individual businesspeople who are visiting various firms in the subject property's market. Commercial demand is strongest Monday through Thursday nights, declines significantly on Friday and Saturday, and increases somewhat on Sunday. The typical length of stay ranges from one to three days, and the rate of double occupancy is a low 1.2 to 1.3 people per room. Commercial demand is relatively constant throughout the year, although some declines are noticeable in late December and during other holiday periods. In general, commercial travelers are not overly rate-sensitive, and will make use of a hotel's food and beverage outlets and recreational facilities. The commercial segment represents a highly desirable and lucrative market that provides a consistent level of demand at relatively high room rates. A number of local, regional, and national firms maintain offices or headquarters in Fort Worth, and contribute to the area's commercial-oriented hotel demand. According to the Fort Worth Chamber of Commerce, American Airlines, Lockheed Martin, Bell Helicopter, Textron IBM, the Burlington Northern - Santa Fe Corporation, the Tandy Corporation, Bass Companies, and Pier 1 Imports all have headquarters or regional offices in or near downtown Fort Worth. Moreover, the potential for demand from this segment is growing. In 1995, with 175 major announcements, the Fort Worth-Arlington area ranked fourth in the nation in terms of the number of new and expanded distribution, manufacturing, and headquarters facilities. The area north of Fort Worth (near Alliance Airport) is expected to undergo significant development during the next few years. This region is rapidly becoming a second commercial center in Fort Worth, and numerous office complexes and industrial parks have opened recently or are planned. There is also renewed interest in the downtown district, which forms the HVS International, Mineola, New York Lodging Market Supply and Demand 55 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= subject property's primary market, as a result of recent developments such as Sundance Square and the outlet mall in Tandy Center. Based on the economic and demographic trends discussed earlier in this report and our interviews with local hoteliers, we estimate that commercial hotel in the local market will increase at a strong rate of 3.0% annually through the year 2000, then stabilize at a growth rate of 2.0% annually in subsequent years. Meeting and Group Segment The meeting and group market includes meetings, seminars, conventions, trade association shows, and similar gatherings of ten or more people. Peak convention demand typically occurs in the spring and fall. Because of vacations, the summer months represent the slowest period for this market segment; winter demand varies. The average length of stay for typical meetings and groups ranges from three to five days. Most commercial groups meet during the weekday period of Monday through Thursday, but associations and social groups will sometimes gather on weekends. Commercial groups tend to have a low double occupancy of 1.3 to 1.5 people per room, while social groups are likely to have double occupancy rates ranging from 1.5 to 1.9. Meeting and group patronage is quite profitable for hotels. Although room rates are discounted for large groups, the property benefits from the use of meeting space and the revenues generated by in-house banquets and cocktail receptions. Facilities that are necessary to attract meetings and groups include function areas with adequate space for breakout, meals, and receptions; recreational amenities; and a sufficient number of guestrooms to house the attendees. In the subject property's market, meeting and group demand is generated primarily by events held at the Fort Worth/Tarrant County Convention Center and groups that use the facilities of local hotels. Management representatives at the Radisson Plaza indicate that they derive meeting and group demand from organizations that are using the convention center as well as in-house groups. Functions typically held at the convention center include religious conventions, state association meetings, performing arts events, and consumer shows. Events held at local are similar in profile, and also include corporate and professional events such as training sessions. Future meeting and group demand is closely related to growth in the commercial segment. Because most meetings have either a direct or an indirect HVS International, Mineola, New York Lodging Market Supply and Demand 56 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= business purpose, the economic considerations that have an impact on commercial travel also affect meeting and group demand. The exception is non-commercial meetings, which are tied to the economic factors that influence leisure travel. It should be noted that meetings and similar events are booked in advance, and thus growth in this segment tends to lag slightly behind increases in commercial demand. Meeting and group demand dominates the Fort Worth area; both the subject property and the overall competitive market draw a majority of their occupancy from this segment. As noted earlier in this report, a feasibility study was completed recently regarding future plans for the convention center, but at the time of our research the results of this study had not been made public. If the convention center is expanded or renovated, it is likely to be a number of years before plans are finalized and all necessary approvals are obtained. Given the speculative nature of this issue, we estimate that meeting and group demand will increase at a moderate rate of 2.0% annually through the year 2000, and then stabilize at a growth rate of 1.5% annually throughout the remainder of the projection period. Leisure Segment The leisure market segment consists of individuals and families who are spending time in the area or passing through en route to other destinations. Their travel purposes may include sightseeing, recreation, visiting friends and relatives, or numerous other non-business activities. Leisure demand is strongest Friday and Saturday nights and all week during holiday periods and the summer months. These peak periods are negatively correlated with commercial visitation, underscoring the stabilizing effect of capturing weekend and summer tourist travel. The typical length of stay ranges from one to four days, depending on the destination and travel purpose, and the rate of double occupancy generally ranges from 1.8 to 2.5 people per room. Leisure travelers tend to be the most price-sensitive segment in the lodging market. They often prefer low-rise accommodations where parking is convenient to the rooms, and they typically demand extensive recreational facilities and amenities. Ease of highway access and proximity to tourist attractions are important locational considerations. Most leisure demand in the subject property's market is generated by the Stockyards National Historical District. We also note that the 1.5-mile Texas Motor Speedway, which will be used for NASCAR racing, is under construction in north Fort Worth, near Alliance Airport, and its first season scheduled for 1997. The opening of this facility is expected to result in HVS International, Mineola, New York Lodging Market Supply and Demand 57 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= an increase in leisure demand in the area. Moreover, the development of Sundance Square, a retail, restaurant, and entertainment district, is drawing more visitors into downtown Fort Worth. As part of the Sundance Square development, private security officers were hired to patrol the streets of the downtown district; this move is intended to enhance the public's perception of safety and increase the number of people visiting the area (particularly after working hours). Future leisure demand is related to the overall economic health of the nation. Trends showing changes in state and regional unemployment and disposable personal income often have a strong impact on non-commercial visitation. Attendance at local attractions can also form a basis for projections. The following table outlines 1995 attendance levels at a variety of events in the Forth Worth area. ================================================================================ Table 6-3 1995 Event Attendance - -------------------------------------------------------------------------------- Event Attendance - -------------------------------------------------------------------------------- Southwestern Exhibition & Livestock Show 789,000 Main Street Fort Worth Arts Festival 350,000 Mayfest 350,000 MasterCard Colonial Golf Tournament 140,000 Chisholm Trail Round-Up/Chief Quanah Parker Comanche Pow-Wow 150,000 Pioneer Days 75,000 Fort Worth International Air Show 75,000 Red Steagall Cowboy Gathering & Western Swing Festival 35,000 Source: Forth Worth Convention and Visitors Bureau - -------------------------------------------------------------------------------- We estimate that leisure demand will increase by 5.0% in 1997 with the opening of the Texas Motor Speedway; this growth rate is expected to decline to 4.0% in 1998, 3.0% in 1999, and 2.0% in the year 2000 before stabilizing at 1.0% annually throughout the remainder of the projection period. Growth Rates The purpose of segmenting the lodging market is to define each major type of demand, identify customer characteristics, and estimate future growth trends. Starting with an analysis of the local area, three segments were defined as representing the subject property's lodging market. Various types of economic and demographic data were then evaluated to determine their propensity to reflect changes in hotel demand. Based on this procedure, HVS International, Mineola, New York Lodging Market Supply and Demand 58 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= we forecast the following average annual compounded market segment growth rates. ================================================================================ Table 6-4 Average Annual Compounded Market Segment Growth Rates - -------------------------------------------------------------------------------- 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Commercial 3.0% 3.0% 3.0% 3.0% 2.0% 2.0% Meeting and Group 2.0 2.0 2.0 2.0 1.5 1.5 Leisure 5.0 4.0 3.0 2.0 1.0 1.0 Overall Annual Growth 2.7% 2.6% 2.5% 2.3% 1.6% 1.6% - -------------------------------------------------------------------------------- These growth rates will be used in subsequent sections of this study to forecast changes in lodging demand. COMPETITION An integral component of the supply and demand relationship that has a direct impact on the availability of lodging demand is the current and anticipated supply of competitive lodging facilities. The Fort Worth area is served by numerous hotels and motels located throughout the region. The Radisson Plaza is located in the downtown district, which can be characterized as a mid-sized urban center. Other concentrations of lodging facilities are located in the northern section of Fort Worth (near Alliance Airport) and along the highways that serve the region. We have identified two properties that are considered primarily competitive with the Radisson Plaza . Including the subject property, these primary competitors total 1,451 rooms. Four additional lodging facilities are judged to be only secondarily competitive; although the facilities, rate structures, or market orientations of these hotels prevent their inclusion among the primarily competitive supply, they do compete with the subject property to some extent; the room count of each secondary competitor has been weighted to reflect this degree of competitiveness. The aggregate weighted room count of the secondary competitors is 513. Primary Competitors The following table summarizes the important operating characteristics of the primary competitors and the aggregate secondary competitors. This information was compiled from personal interviews, inspections, lodging directories, and our in-house library of operating data. The table also sets forth each property's estimated year-end 1996 penetration factors; penetration is the ratio between a specific hotel's operating results and the corresponding data for the market. If the penetration factor is greater than HVS International, Mineola, New York Lodging Market Supply and Demand 59 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 100%, the property is performing better than the market as a whole; conversely, if the penetration is less than 100%, the hotel is performing at a level below the marketwide average. HVS International, Mineola, New York Lodging Market Supply and Demand 60 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-5 Primary Competitors and Aggregate Secondary Competitors - --------------------------------------------------------------------------------
Square Footage Estimated 1996 ---------------------- Market Segmentation Estimated 1995 Meeting ------------------------- ------------------------------ No. of Year Meeting Space Mtg. & Average Property/Location Rooms Opened Space per Room Comm. Group Leisure Occ. Rate RevPAR - ------------------------------------------------------------------------------------------------------------------------------------ Radisson Plaza 815 Main Street 517 1921 62,738* 121 30% 65% 5% 57.0% $72.90 $41.55 Worthington Hotel 200 Main Street 504 1981 55,000 109 35 55 10 67.0 92.00 61.64 Ramada Plaza 1701 Commerce Street 430 1973 20,500 48 20 65 15 59.0 59.00 34.81 - ------------------------------------------------------------------------------------------------------------------------------------ Sub-Totals and Averages 1,451 46,079 93 30% 61% 9% 61.3% $78.39 $48.09 Secondary Competitors 513 32 39 29 56.0 53.45 29.93 - ------------------------------------------------------------------------------------------------------------------------------------ Totals and Averages 1,964 30% 56% 14% 59.8% $71.72 $42.90 - ------------------------------------------------------------------------------------------------------------------------------------ Estimated 1996 ------------------------------------------------------------- Average Occupancy Yield Property/Location Occ. Rate RevPAR Penetration Penetration - --------------------------------------------------------------------------------------------- Radisson Plaza 815 Main Street 61.0% $77.37 $47.20 104.0% 104.9% Worthington Hotel 200 Main Street 71.0 104.00 73.84 121.0 164.2 Ramada Plaza 1701 Commerce Street 45.0 57.00 25.65 76.7 57.0 - --------------------------------------------------------------------------------------------- Sub-Totals and Averages 59.7% $83.82 $50.07 101.8% 111.3% Secondary Competitors 56.0 54.91 30.75 95.5 68.4 - --------------------------------------------------------------------------------------------- Totals and Averages 58.7% $76.66 $44.97 100.0% 100.0% - ---------------------------------------------------------------------------------------------
* Includes 41,519 square feet of exhibition space on the garage level COMPETITION MAP [GRAPHIC OMITTED] HVS International, Mineola, New York Lodging Market Supply and Demand 61 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Our survey of the primary competitors shows a representation of two national chains and one independent hotel. These properties range in size from 430 rooms (at the Ramada) to 517 rooms (at the subject property). As noted earlier, the market has a meeting and group orientation. We estimate the year-end 1996 market segmentation of the primary competitors at 61% meeting and group, 30% commercial, and 9% leisure. We estimate the year-end 1996 occupancy and average rate of the primary competitors at 59.7% and $83.82, yielding RevPAR of $50.07. As indicated by the previous table, there are significant differences in the occupancies achieved by the three hotels. The Worthington is clearly the market leader, with an estimated 1996 occupancy of 71.0%; the subject property follows at 61.0%, and the Ramada's occupancy of 45.0% trails those of its two competitors by a substantial margin. Average rate also covers a wide spread, with the Worthington achieving an estimated 1996 level of $104.00 in 1996, followed by the Radisson Plaza (at $77.37) and the Ramada (at $57.00). Overall, the subject property is expected to have achieved an occupancy penetration of 104.0% in 1996, and a yield penetration of 104.9%. Each primary competitor was inspected and evaluated, and descriptions of our findings are presented below. Worthington The 504-room Worthington Hotel, which is owned by the Bass Brothers, is the market's premier lodging facility. This four-star, four-diamond property opened in 1981 as the Americana Hotel, and became the Worthington in 1985. Facilities and amenities include +/-55,000 square feet of meeting space, four restaurants and lounges, 24-hour room service, and an athletic club with two tennis courts and an indoor swimming pool. Typical king rooms measure roundly 381 square feet, and double/doubles average 414 square feet. The hotel also offers two-level suites with up to +/-2,141 square feet of space. A complete guestroom renovation was completed in 1994 at a reported cost of $20,000,000. Meeting space is scheduled to be renovated and reconfigured in 1997, at an estimated cost of $10,000,000. We estimate the Worthington's year-end 1996 market segmentation at 55% meeting and group, 35% commercial, and 10% leisure. As noted earlier, this property leads the market in terms of occupancy and average rate, with estimated year-end 1996 levels of 71.0% and $104.00. Consequently, its RevPAR is also the highest in the market, at $73.84 in 1996. HVS International, Mineola, New York Lodging Market Supply and Demand 62 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Ramada Plaza In 1973, the Ramada Plaza opened as a 260-room Hilton, and the remaining rooms were added in 1981. The facility closed in 1991 following a foreclosure, and reopened in mid-1992 as a Ramada Inn. It was converted to a Ramada Plaza earlier this year. As noted previously, a natural gas explosion near the hotel caused some damage to the south tower in 1986; until recently, the guestrooms in this tower were in very poor condition and used only during periods of peak demand. At the time of our research, the Ramada was undergoing a renovation of the guestrooms, meeting areas, and fitness room, and the guestrooms in the south tower were being reopened. Facilities at the Ramada now include 430 guestrooms, +/-20,500 square feet of meeting space, a restaurant and lounge, an indoor swimming pool, and a fitness room. As of year-end 1996, we estimate the Ramada's demand segmentation at 65% meeting and group, 20% commercial, and 15% leisure. As discussed earlier in this section, the substantial drop in the Ramada's occupancy (from 59.0% in 1995 to an estimated level of 45.0% in 1996) is primarily the result of the return of the south tower guestrooms to the rentable inventory. We estimate that average rate dropped by approximately two dollars, to reach $57.00 in 1996. Secondary Competitors Four additional lodging facilities are considered to be secondarily competitive with the Radisson Plaza. Although the facilities, rate structures, or market orientations of these hotels prevent their inclusion among the primarily competitive supply, they do compete with the subject property to some extent. The following table summarizes the historical operating characteristics of the secondary competitors. HVS International, Mineola, New York Lodging Market Supply and Demand 63 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-6 Secondary Competitors - --------------------------------------------------------------------------------
Estimated 1996 Market Segmentation Weighted ---------------------------------- Year No. of Percent No. of. Mtg. & Property Opened Rooms Competitive Rooms Comm. Group Leisure - ------------------------------------------------------------------------------------------------------------------- Remington Hotel 1981 300 50 % 150 40 % 40 % 20 % Green Oaks Park Hotel 1965 284 50 142 10 60 30 Holiday Inn - South 1984 247 50 124 50 15 35 Holiday Inn - Central 1973 194 50 97 33 34 33 - ------------------------------------------------------------------------------------------------------------------- Totals and Averages 1,025 513 32 % 39 % 29 % Estimated 1995 Estimated 1996 ----------------------------------------- ---------------------------------------------- Average Average Property Occ. Rate RevPAR Occ. Rate RevPAR - ------------------------------------------------------------------------------------------------------------------------------- Remington Hotel 40 % $35.00 $14.00 50 % $40.00 $20.00 Green Oaks Park Hotel 64 51.00 32.64 65 52.00 33.80 Holiday Inn - South 67 64.00 42.88 64 68.00 43.52 Holiday Inn - Central 55 62.00 34.10 40 64.00 25.60 - ---------------------------------------------------------------------------------------------------------------------------- Totals and Averages 56 % $53.45 $29.93 56 % $54.91 $30.75
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Lodging Market Supply and Demand 64 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The Remington Hotel was built in 1981, and is located just north of the subject property. At present, this 300-room hotel is poor condition. The property was foreclosed upon in 1992, and there have been no capital expenditures since. The property was purchased in September of 1996, and the new owners reportedly plan to invest $2,000,000 in renovations in order to reposition the hotel in the market. The Remington is considered to be 50% competitive with the subject property. The 285-room Green Oaks Park Hotel is located on the west side of Fort Worth. This two-story property was constructed in 1965, and its design includes exterior corridors. Although the building exterior is dated, the interior remains in good condition, and the public areas were renovated during the past two years. By virtue of its large inventory of function space (totaling roughly 13,000 square feet), this property does a large volume of meeting and group business. The Green Oaks Park Hotel is considered 50% competitive with the subject property. The Holiday Inn - South is a 247-room hotel built in 1984. The property accommodates a considerable number of commercial guests, and its year-end 1996 occupancy and average rate are estimated at 64.0% and $68.00. This hotel is considered 50% competitive with the Radisson Plaza. The 192-room Holiday Inn - Central opened in 1973 as a Clarion, and was converted to its current affiliation in September of 1995. As a result of a $1,000,000 renovation that kept a number of rooms out of order for part of the year, this property's year-end 1996 occupancy is estimated at a low 40%. Like the other secondary competitors, the Holiday Inn - Central is considered 50% competitive with the subject property. Proposed Competitors It is important to consider any new hotels that may have an impact on the subject property's operating performance. Based on our fieldwork in the market and our discussions with local hotel operators, developers, and government officials, we have identified one proposed property in the downtown Fort Worth market that is expected to compete with the Radisson Plaza directly. A 203-room Courtyard by Marriott is proposed for the former Blackstone Hotel building located at 601 Main Street in Fort Worth, two blocks north of the subject property. The developer, Historic Resources, Inc. of New Orleans, is in the process of obtaining the necessary approvals. City officials indicate that they believe these approvals will be secured. Moreover, HVS International, Mineola, New York Lodging Market Supply and Demand 65 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= representatives of Marriott International report that the hotel has received all necessary franchise approvals, and they expect the property to open in the spring of 1998. For the purpose of our analysis, we assume that the Courtyard will enter the market on April 1, 1998, and will be 100% competitive with the Radisson Plaza. A number of new hotels are planned or under development in northern Fort Worth, near Alliance Airport and the new Texas Motor Speedway. Because of differences in location and markets served, these hotels are not expected to compete with the subject property directly; however, the presence of additional supply is likely to dilute demand throughout the area to some extent. We have considered this factor in our selection of the subject property's stabilized occupancy and average rate. CONCLUSION Despite some inconsistent data, the local market appears to have undergone slow demand growth since 1989. The economic recession had a significant and unfavorable impact on the market in the early 1990s, but operating performance has improved recently. There have been no supply additions during the 1990s, although a Courtyard by Marriott is expected to open in the spring of 1998, and a number of new projects are proposed for northern Fort Worth, outside of the Radisson's immediate market area. Three segments were defined as representing the subject property's lodging market. After evaluating various economic and demographic trends, we have arrived at a forecast of growth rates in each segment. Overall, room night demand is expected to increase at moderate rates throughout the projection period. Our analysis indicates that two hotels are directly competitive with the Radisson Plaza, and four additional lodging facilities compete on a secondary basis. Overall, we estimate that the competitive market registered a slight dip in occupancy but healthy average rate growth from 1995 to 1996. HVS International, Mineola, New York Projection of Occupancy and 66 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 7. Projection of Occupancy and Average Rate Historical Operating Performance The following table sets forth the subject property's historical occupancy, average rate, and RevPAR. For the purpose of comparison, we have also presented corresponding data (as provided by Smith Travel Research) for the competitive hotels described in the previous section. In addition to the annual percent change calculations, we have determined the subject property's occupancy, average rate, and RevPAR penetration factors. ================================================================================ Table 7-1 Historical Trends - --------------------------------------------------------------------------------
Year-to-Date August ----------------------------- 1993 1994 1995 1995 1996 - ------------------------------------------------------------------------------------------------------------------------- Subject Property Occupancy 62.7% 63.3% 56.7% 56.2% 60.5% Percent Change --- 1.0% (10.4)% --- 7.7% Occupancy Penetration 107.9% 101.0% 88.5% 82.8% 98.7% Average Rate $62.66 $67.44 $72.90 $72.41 $77.74 Percent Change --- 7.6% 8.1% --- 7.4% Average Rate Penetration 94.8% 91.2% 90.3% 88.9% 92.5% RevPAR $39.29 $42.69 $41.33 $40.69 $47.03 Percent Change --- 8.7% (3.2)% --- 15.6% RevPAR Penetration 102.2% 92.1% 79.9% 73.6% 91.3% Areawide (STR) Occupancy 58.1% 62.7% 64.1% 67.8% 61.3% Percent Change --- 7.8% 2.3% --- (9.6)% Average Rate $66.10 $73.94 $80.73 $81.46 $84.07 Percent Change --- 11.9% 9.2% --- 3.2% RevPAR $38.43 $46.34 $51.74 $55.27 $51.54 Percent Change --- 20.6% 11.6% --- (6.7)%
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Projection of Occupancy and 67 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Between 1993 and 1995, the subject property's occupancy fell from 62.7% to 56.7%, but year-to-date August statistics show a higher level of 60.5% in 1996. There was a substantial 10.4% decline in occupancy in 1995, which is partially attributable to the renovation that was underway in that year. Despite this drop, the hotel has maintained consistently strong average rate increases. Although the rate gain in 1995 was not enough to offset the decrease in occupancy, causing RevPAR to decline by 3.2%, year-to-date August figures show an impressive RevPAR increase of 15.6% in 1996. Premise of the Projections To a certain degree, occupancy and rate attainment can be manipulated by management. For example, hotel operators may choose to lower rates in an effort to maximize occupancy. Our forecasts reflect an operating strategy that we believe would be implemented by competent hotel management to achieve an optimal mix of occupancy and average rate. Projected Room Night Demand Lodging demand and occupancy can be projected through a process known as room night analysis. A room night is a unit of hotel demand that equals one room that is occupied for one night. After estimating the number of room nights a hotel can be expected to attract during a 12-month period, we can determine occupancy by dividing the number of room nights of demand captured by the number of room nights available (calculated as the room count x 365). The total annual number of room nights occupied in the competitive hotels equates to the market's accommodated room night demand, as shown in the following table. ================================================================================ Table 7-2 Estimated Year-End 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- Marketwide Subject Property ----------------------- ------------------------ Accommodated Percent Accommodated Percent Market Segment Demand of Total Demand of Total - -------------------------------------------------------------------------------- Commercial 128,000 30% 35,000 30% Meeting and Group 233,000 56 75,000 65 Leisure 60,000 14 6,000 5 - -------------------------------------------------------------------------------- Total 420,000 100% 116,000 100% - -------------------------------------------------------------------------------- Latent Demand The previous table illustrates the accommodated room night demand in the subject property's competitive market. Because this estimate is based on occupancies, it includes only those hotel rooms that were used by guests. Latent demand considers guests who could not be accommodated by the HVS International, Mineola, New York Projection of Occupancy and 68 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= existing competitive supply, and can be divided into unaccommodated demand and induced demand. At present, we have no reason to believe that there is any significant amount of latent demand in the subject property's market. Currently, there is no presence of latent demand in this market. Total Room Night Demand The following table shows the projected annual change in accommodated room night demand in the subject property's competitive market. ================================================================================ Table 7-3 Total Usable Room Night Demand - --------------------------------------------------------------------------------
Historical 1997 1998 1999 2000 2001 2002 - ------------------------------------------------------------------------------------------------------------------------- Commercial Growth Rate --- 3.0% 3.0% 3.0% 3.0% 2.0% 2.0% Accommodated Demand 127,800 131,634 135,583 139,650 143,840 146,717 149,651 Meeting and Group Growth Rate --- 2.0% 2.0% 2.0% 2.0% 1.5% 1.5% Accommodated Demand 232,885 237,543 242,294 247,140 252,083 255,864 259,702 Leisure Growth Rate --- 5.0% 4.0% 3.0% 2.0% 1.0% 1.0% Accommodated Demand 59,772 62,761 65,271 67,229 68,574 69,260 69,953 Totals Commercial 127,800 131,634 135,583 139,650 143,840 146,717 149,651 Meeting and Group 232,885 237,543 242,294 247,140 252,083 255,864 259,702 Leisure 59,772 62,761 65,271 67,229 68,574 69,260 69,953 - ------------------------------------------------------------------------------------------------------------------------- TOTAL DEMAND 420,457 431,938 443,148 454,019 464,497 471,841 479,306 Overall Annual Growth --- 2.7% 2.6% 2.5% 2.3% 1.6% 1.6%
- -------------------------------------------------------------------------------- Guestroom Supply In 1996, the competitive properties provided a weighted total of 1,964 guestrooms. As noted earlier, a 203-room Courtyard by Marriott is proposed for construction in downtown Fort Worth, and is expected to open on April 1, 1998. Because of this mid-year opening, its guestrooms have been phased into the supply. The following table shows the projected competitive supply of available rooms and available room nights. To calculate the annual number of available room nights, the number of available rooms is multiplied by 365. HVS International, Mineola, New York Projection of Occupancy and 69 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-4 Available Rooms and Room Nights - -------------------------------------------------------------------------------- Total Room Overall Night Room Nights Competitive Year Demand Available Occupancy - -------------------------------------------------------------- Historical 420,457 716,678 59% 1997 431,938 716,678 60 1998 443,148 772,523 57 1999 454,019 790,773 57 2000 464,497 790,773 59 2001 471,841 790,773 60 2002 479,306 790,773 61 2003 486,895 790,773 62 - -------------------------------------------------------------------------------- Overall Competitive Occupancy The previous table shows a slight increase in the overall competitive occupancy during the first projection year. In 1998, when the proposed Courtyard is scheduled to open, the occupancy is expected to decline. In the year 2000, when the Courtyard's rooms have been absorbed, occupancy is expected to resume gradual growth. Competitive Index Analysis Competitive indexes are used to analyze the relative market position of each property on the basis of a particular demand segment. The index represents the number of times each year that one room is occupied by one type of traveler (e.g., commercial, meeting and group, or leisure), or the number of room nights actually accommodated per year, per room, per market segment. For example, if a hotel has a commercial competitive index of 190, each room in the property is occupied 190 times a year by a commercial traveler. The competitive index is calculated by dividing a hotel's annual accommodated room night demand in a particular market segment by that property's room count. Competitive indexes will be used to illustrate each property's position in the market based on its ability to compete with other local lodging facilities. Commercial Segment The 1996 commercial segment competitive indexes in the subject property's market are estimated to range from 33 to 91. The Worthington is the most competitive property in this demand segment. The Radisson Plaza maintains an index of 67, followed by the secondary competitors (at an index of 65). The Ramada trails its competitors in the this segment by a considerable margin. As a result of recent renovations and the stabilization of operations following the recent change in ownership, the subject property's commercial HVS International, Mineola, New York Projection of Occupancy and 70 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= segment competitive index is projected to increase to 72 in 1997. The Ramada Plaza was also renovated recently, and we expect its index to increase to a stabilized level of 50% in 1998. Because two of the secondary competitors have been upgraded, the aggregate commercial segment competitive index of the secondary properties is projected to increase to 70 in 1997. When it opens in 1998, the Courtyard by Marriott is anticipated to assume the role of market leader in this segment, increasing to a stabilized index of 175 in its third year of operation. The following table outlines the projected commercial segment competitive indexes of the area's hotels. ================================================================================ Table 7-5 Commercial Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Radisson Plaza 67 72 72 72 72 72 72 Worthington Hotel 91 91 91 91 91 91 91 Ramada Plaza 33 45 50 50 50 50 50 Secondary Competitors 65 70 70 70 70 70 70 Courtyard by Marriott 0 0 155 165 175 175 175 - -------------------------------------------------------------------------------- Meeting and Group Segment Again as a result of recent renovations, we anticipate some changes in the meeting and group segment competitive indexes of the area hotels. The subject property is expected to achieve a stabilized level of 150 in 1997, up from 145 in 1996. The Ramada Plaza is expected to register a gain in 1997 before reaching a stabilized index of 120 in 1998. Upon opening, the Courtyard by Marriott is expected to register a meeting and group segment competitive index of 50, and this level is projected to increase to 55 in 1999 and 60 in subsequent years. Because this hotel will offer a minimal amount of meeting space, it is expected to trail the market in this segment. The following table sets forth the competitive indexes in the meeting and group segment. ================================================================================ Table 7-6 Meeting and Group Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Radisson Plaza 145 150 150 150 150 150 150 Worthington Hotel 143 143 143 143 143 143 143 Ramada Plaza 107 115 120 120 120 120 120 Secondary Competitors 79 79 79 79 79 79 79 Courtyard by Marriott 0 0 50 55 60 60 60 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Projection of Occupancy and 71 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Leisure Segment Recent renovations are also expected to make a number of the area's hotels more attractive to leisure travelers, and we expect the subject property, the Ramada Plaza, and the secondary competitors to register increases in their competitive indexes in this segment. The new Courtyard by Marriott is expected to be relatively successful in attracting this type of business, and it is projected to achieve a leisure segment competitive index of 60 by its third year of operation. The following table illustrates the competitive indexes in the leisure segment. ================================================================================ Table 7-7 Leisure Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Radisson Plaza 11 15 15 15 15 15 15 Worthington Hotel 26 26 26 26 26 26 26 Ramada Plaza 25 30 30 30 30 30 30 Secondary Competitors 59 65 65 65 65 65 65 Courtyard by Marriott 0 0 50 55 60 60 60 - -------------------------------------------------------------------------------- Subject Property's Room Night Capture and Occupancy After the competitive index is calculated, it is adjusted to reflect the property's room count, yielding a figure referred to as the market share adjuster. The market share adjuster of each property is then divided by the total market share adjuster for all of the competitors, resulting in each hotel's market share. By multiplying the projected market share by the area's usable room night demand, we can determine the total number of room nights captured by a specific hotel. Occupancy is then calculated by dividing the projected number of room nights captured by the property's total number of available room nights. Multiplying the subject property's projected market share by the estimated room night demand in each segment results in the following estimate of room nights captured by the hotel. HVS International, Mineola, New York Projection of Occupancy and 72 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-8 Room Nights Captured by the Subject Property - --------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002 - ------------------------------------------------------------------------------------------------ Commercial Demand 131,634 135,583 139,650 143,840 146,717 149,651 Market Share 0.2691 0.2267 0.2140 0.2115 0.2115 0.2115 - ------------------------------------------------------------------------------------------------ Capture 35,426 30,741 29,883 30,424 31,033 31,653 Meeting and Group Demand 237,543 242,294 247,140 252,083 255,864 259,702 Market Share 0.3237 0.3110 0.3067 0.3054 0.3054 0.3054 - ------------------------------------------------------------------------------------------------ Capture 76,897 75,353 75,791 76,998 78,153 79,325 Leisure Demand 62,761 65,271 67,229 68,574 69,260 69,953 Market Share 0.1156 0.1038 0.0991 0.0979 0.0979 0.0979 - ------------------------------------------------------------------------------------------------ Capture 7,257 6,774 6,664 6,710 6,777 6,845
- -------------------------------------------------------------------------------- Dividing the total number of room nights captured by the subject property's number of available room nights per year (calculated as 517 x 365) produces the projected occupancy percentage. ================================================================================ Table 7-9 Calculation of the Subject Property's Projected Occupancy - --------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002 - ------------------------------------------------------------------------------------------------ Room Nights Captured 119,580 112,868 112,338 114,132 115,963 117,823 Available Room Nights 188,705 188,705 188,705 188,705 188,705 188,705 Occupancy 63.37 % 59.81 % 59.53 % 60.48 % 61.45 % 62.44 % Rounded 63 % 60 % 60 % 60 % 61 % 62 %
- -------------------------------------------------------------------------------- For the purpose of forecasting income and expense, we will use the following occupancy levels. HVS International, Mineola, New York Projection of Occupancy and 73 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-10 Occupancy Forecast - -------------------------------------------------------------------------------- Year Occupancy - --------------------------------------------- 1997 63% 1998 60 Stabilized 60 - -------------------------------------------------------------------------------- Although the preceding room night analysis shows the subject property achieving a 62% occupancy in 2002, we have chosen to use a stabilized level of 60%. The stabilized occupancy is intended to reflect the anticipated results of the property over its remaining economic life, given any and all changes in the life cycle of the hotel. Thus, the stabilized occupancy excludes from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusually high or low occupancies. Although the subject property may operate at occupancies above this stabilized level, we believe it equally possible for new competition and temporary economic downturns to force the occupancy below this selected point of stability. AVERAGE RATE ANALYSIS One of the most important considerations in estimating the value of a lodging facility is a supportable forecast of its attainable average rate, which is more formally defined as the average rate per occupied room. Average rate can be calculated by dividing the total rooms revenue achieved during a specified period by the number of rooms sold during the same period. The projected average rate and the anticipated occupancy percentage are used to forecast rooms revenue, which in turn provides the basis for estimating most other income and expense categories. Competitive Positioning The Radisson Plaza 's average rate will be projected using a competitive positioning method. This technique begins with an analysis of the average rates achieved by the subject property and its competitors. These rates establish a range that reflects certain characteristics of the specific market, such as price sensitivity, demand orientation, and occupancy. The subject property's average rate is then compared to those of the hotels to which it is most similar in terms of size, quality, facilities, amenities, market orientation, location, management, image, and affiliation. Adjustments are made to reflect any relevant differences. Although the average rate analysis presented here follows the occupancy projections, these two statistics are highly correlated; in reality, one can not HVS International, Mineola, New York Projection of Occupancy and 74 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= project occupancy without making specific assumptions regarding average rate. This relationship is best illustrated by rooms revenue per available room (RevPAR), which reflects a property's ability to maximize rooms revenue. The following table summarizes the estimated year-end 1996 average rate and RevPAR of the subject property and its primary competitors. ================================================================================ Table 7-11 Estimated Year-End 1996 Average Rate and RevPAR - -------------------------------------------------------------------------------- Property Average Rate RevPAR - -------------------------------------------------------------------------------- Radisson Plaza $77.37 $47.20 Worthington Hotel 104.00 73.84 Ramada Plaza 57.00 25.65 - -------------------------------------------------------------------------------- Average $83.82 $50.07 - -------------------------------------------------------------------------------- We estimate the year-end 1996 average rate of the Radisson Plaza at $77.37, between the $104.00 level registered by the Worthington and the $57.00 rate of the Ramada Plaza. It is our opinion that this rate positioning is beneficial; although the subject property competes well with the Worthington, its substantially lower rates give it an advantage in terms of more price-sensitive consumers. Moreover, because the Worthington's estimated 19956 average rate is more than $25.00 higher than that of the Radisson Plaza, the subject property has considerable potential for future rate increases before reaching the ceiling of what the market will bear. Average Rate Increases It is important to note that hotel room rate increases do not necessarily conform to the underlying monetary inflation rate, because lodging facilities are influenced by market conditions such as the relationship between supply and demand. A hotel's ability to raise room rates is affected by a number of factors, including the following. o Supply and Demand Relationships - The relationship between supply and demand is one of the factors that determine hotel occupancies and average rates. Strong markets where lodging demand is increasing faster than supply are often characterized by rate growth that exceeds inflation. Markets that are overbuilt or suffering from declining demand are unlikely to exhibit any significant increases in average rates. o Inflationary Pressures - Price increases caused by inflation affect hotel room rates by eroding profit margins and encouraging operators to raise HVS International, Mineola, New York Projection of Occupancy and 75 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= prices. This strategy is effective only in markets that are characterized by a healthy supply and demand relationship. o Improving the Competitive Standard - When a new lodging facility enters a mature market, its rates may be set higher than the marketwide average in an effort to justify the development costs. This may allow other competitors to achieve corresponding gains by effectively raising the amount the market will bear. However, if the addition to supply has a severe impact on the occupancy levels of other hotels, price competition may ensue. o Property-Specific Improvements - Changes that make a hotel more or less attractive to guests can have an impact on average rate. An expansion, renovation, upgrading, or the introduction of additional facilities and amenities may enable greater-than-inflationary room rate increases. Likewise, deferred maintenance may make a property less competitive, engendering a decline in room rates. In determining average rate projections, changes that occur prior to occupancy stabilization are generally attributable to factors that are specific to the property and the market. After a hotel achieves a stabilized occupancy, room rates are generally expected to continue to increase at the underlying inflation rate throughout the remainder of the projection period. Between 1993 and 1996, the subject property's average rate has increased at an average annual compounded level of 7.3%, and there was a 6.1% gain from 1995 to 1996. In light of these historical trends, we project the following average rate increases. ================================================================================ Table 7-12 Average Rate Forecast - -------------------------------------------------------------------------------- Marketwide Subject Property --------------------------- ----------------------------------- Rate Rate Projected Year Occupancy Increase Increase Average Rate - -------------------------------------------------------------------------------- Positioned Base --- --- --- $77.37 1997 60 % 4% to 5% 4.0% 80.47 1998 57 1 to 2 1.0 81.28 1999 57 2 to 3 2.0 82.91 2000 59 3 to 4 3.5 85.81 2001 60 3 to 4 3.5 88.81 2002 61 3 to 4 3.5 91.92 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Projection of Occupancy and 76 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= As illustrated by the previous table, we forecast the subject property's average rate to increase to $80.47 in the first projection year, reflecting a 4.0% gain from the estimated year-end 1996 level. Growth is expected to slow to 1.0% in 1998, when the Courtyard by Marriott enters the market, and then increase to 2.0% in 1999, as those rooms are absorbed. In subsequent years, average rate increases are expected to mirror the underlying inflation rate of 3.5% annually. The following table presents our forecast of occupancy and average rate through the stabilized year. ================================================================================ Table 7-13 Forecast of Occupancy and Average Rate - -------------------------------------------------------------------------------- Year Occupancy Average Rate - -------------------------------------------------------- 1997 63 % $80.47 1998 60 81.28 Stabilized 60 82.90 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Highest and Best Use 77 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 8. Highest and Best Use The concept of highest and best use recognized by the Appraisal Institute distinguishes between the highest and best use of the land (as though vacant) and that of the property (as improved). Highest and best use is defined as: The reasonably probable and legal use of vacant land or improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.(1) The concept of highest and best use is the premise upon which value is based, and is a product of competitive forces in the marketplace. The principle of balance holds that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium. This principle applies to relationships among various property components as well as the relationship between the costs of production and the property's productivity. The point of economic balance is achieved when the combination of land and building is optimal (i.e., when no marginal benefit or utility is achieved by adding another unit of capital). The law of increasing returns holds that larger amounts of the agents of production produce greater net income up to a certain point, after which the law of diminishing returns is applied.(2) It is important to recognize that the highest and best use of the land (as though vacant) may differ from the highest and best use of the property (as improved). This may occur when a site has existing improvements and the highest and best use of the land differs from the current use. Nonetheless, the current property use will continue until the value of the land under its highest and best use exceeds the value of the property in its current use, plus the cost to remove the existing improvements. (1) The Appraisal of Real Estate - Tenth Edition, Appraisal Institute, Chicago, IL, 1992, p. 45. (2) Ibid., p. 40. HVS International, Mineola, New York Highest and Best Use 78 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= In consideration of the factors influencing development in the immediate area, it is the appraisers' opinion that the highest and best use of the subject site, as vacant, would be to hold for future development. Based on the fact that the value of the land does not exceed the value of the hotel plus the cost of demolition, it is our further opinion that the subject property's highest and best use, as improved, is its current use as a lodging facility. HVS International, Mineola, New York Approaches to Value 79 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 9. Approaches to Value In appraising real estate for market value, the appraiser has three approaches from which to select: the income capitalization, sales comparison, and cost approaches. Although all three valuation procedures are given consideration, the inherent strengths of each approach and the nature of the subject property must be evaluated to determine which will provide supportable estimates of market value. The appraiser is then free to select one or more of the appropriate approaches in arriving at a final value estimate. The Income Capitalization Approach The income capitalization approach takes a property's projected net income before debt service and allocates this future benefit to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component is calculated. The total of the mortgage component and the equity component equals the value of the property. This approach is often selected as the preferred valuation method for income- producing properties, because it most closely reflects the investment rationale of knowledgeable buyers. The Sales Comparison Approach The sales comparison approach estimates the value of a property by comparing it to similar properties that have been sold on the open market. To obtain a supportable estimate of value, the sales price of a comparable property must be adjusted to reflect any dissimilarities between it and the property being appraised. The sales comparison approach may provide a useful value estimate in the case of simple forms of real estate, such as vacant land and single-family homes, where the properties are homogeneous and the adjustments are few and relatively simple to compute. In the case of complex investments such as shopping centers, office buildings, restaurants, and lodging facilities, where the adjustments are numerous and more difficult to quantify, the sales comparison approach loses much of its reliability. HVS International, Mineola, New York Approaches to Value 80 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Hotel investors typically do not employ the sales comparison approach in reaching their final purchase decisions. Factors such as the lack of recent sales data, the numerous insupportable adjustments that are necessary, and the general inability to determine the true financial terms and human motivations of comparable transactions often make the results of this technique questionable. Although the sales comparison approach may provide a range of values that supports the final estimate, reliance on this method beyond the establishment of broad parameters is rarely justified by the quality of the sales data. The market-derived capitalization rates sometimes used by appraisers are susceptible to the same shortcomings inherent in the sales comparison approach. To substantially reduce the reliability of the income capitalization approach by employing capitalization rates obtained from unsupported market data weakens the final value estimate and ignores the typical investment analysis procedures employed by hotel purchasers. Because appraisers are obligated to mirror the actions of the marketplace, we generally give the sales comparison approach minimal weight in the hotel appraisal process beyond bracketing the final estimate.(1) The Cost Approach The cost approach estimates market value by computing the current cost to replace the property and subtracting any depreciation resulting from physical deterioration, functional obsolescence, and external (or economic) obsolescence. The value of the land, as if vacant and available, is then added to the depreciated value of the improvements to produce a total value estimate. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements grow older and begin to deteriorate, the resultant loss in value becomes increasingly difficult to quantify accurately. We find that knowledgeable hotel buyers base their purchase decisions on economic factors such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, this approach is given minimal weight in the hotel valuation process. As noted in Hotels and Motels: A Guide to Market (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 209. HVS International, Mineola, New York Approaches to Value 81 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Analysis, Investment Analysis, and Valuations, "the cost approach is seldom used to value existing hotels and motels."(1) Reconciliation The final step in the valuation process is the reconciliation and correlation of the value indications. Factors that are considered in assessing the reliability of each approach include the purpose of the appraisal, the nature of the subject property, and the reliability of the data used. In reconciliation, the applicability and supportability of each approach is considered and the range of value indications is examined. The most significant weight is given to the approach that produces the most reliable solution and most closely reflects the criteria used by typical investors. Our nationwide experience with numerous hostelry buyers and sellers indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the investors who constitute the marketplace. For this reason, the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in the hotel valuation process. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 208. HVS International, Mineola, New York Income Capitalization Approach 82 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 10. Income Capitalization Approach The income capitalization approach is based on the principle that the value of a property is indicated by its net return, or what is known as the present worth of future benefits. The future benefits of income-producing properties, such as hotels, are net income before debt service and depreciation (as estimated by a forecast of income and expense) and any anticipated reversionary proceeds from a sale. These future benefits can be converted into an indication of market value through a capitalization process and discounted cash flow analysis. Using the income capitalization approach, the subject property has been valued by analyzing the local market for transient accommodations, examining existing and proposed competition, and developing a forecast of income and expense that reflects current and anticipated income trends and cost components through a stabilized year of operation. The forecast of income and expense is expressed in current dollars for each year. The stabilized year is intended to reflect the anticipated operating results of the property over its remaining economic life, given any or all applicable stages of build-up, plateau, and decline in the life cycle of the hotel. Thus, income and expense estimates from the stabilized year forward exclude from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusual revenues or expenses. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, published by the Appraisal Institute, "of the three valuation approaches available to the appraiser, the income capitalization approach generally provides the most persuasive and supportable conclusions when valuing a lodging facility."(1) This text recommends that using a ten-year forecast and an equity yield rate "most accurately reflects the actions of typical hotel buyers, who purchase properties based (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. HVS International, Mineola, New York Income Capitalization Approach 83 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= on their leveraged discounted cash flow."(1) The simpler procedure of using a ten-year forecast and a discount rate is "less reliable because the derivation of the discount rate has little support. Moreover, it is difficult to adjust the discount rate for changes in the cost of capital."(2) We have used both methods to discount the subject property's projected net income into an estimate of value. Method One is a ten-year discounted cash flow analysis in which the cash flow to equity and the equity reversion are discounted to the present value at the equity yield rate, and the income to the mortgagee is discounted at a mortgage interest rate. The sum of the equity and mortgage values is the total property value. Method Two is a simple ten-year discounted cash flow analysis in which the annual net income before debt service and the reversionary proceeds following a sale at the end of the tenth year are discounted back to the date of the appraisal at an overall discount rate, and then totaled to produce an indication of the present worth of future benefits. To convert the projected income stream into an estimate of value through Method One, the anticipated net income (before debt service and depreciation) is allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. The total of the mortgage component and the equity component equals the value of the property. The process is described as follows. 1. The terms of typical hotel financing are set forth, including interest rate, amortization term, and loan-to-value ratio. 2. An equity yield rate of return is established. Numerous hotel buyers base their equity investments on a ten-year equity yield rate projection that takes into account ownership benefits such as periodic cash flow distributions, residual sale or refinancing distributions that return any property appreciation and mortgage amortization, income tax benefits, and various non-financial considerations such as status and prestige. The equity yield rate is also known as the internal rate of return on equity. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236 (2) Ibid. HVS International, Mineola, New York Income Capitalization Approach 84 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 3. The value of the equity component is calculated by first deducting the annual debt service from the projected net income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value. After deducting the mortgage balance at the end of the tenth year and the typical brokerage and legal costs, the equity residual is discounted back to the date of value at the equity yield rate. The net income to equity for each of the ten projection years is also discounted to the present value. The sum of these discounted values equates to the value of the equity component. Adding the equity component to the initial mortgage balance yields the overall property value. Because the mortgage and the debt service amounts are unknown but the loan-to-value ratio was determined in Step #1, the preceding calculation can be solved through an iterative process or by use of a linear algebraic equation that computes the total property value. The algebraic equation that solves for the total property value using a ten-year mortgage and equity technique was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(1) 4. The value is proven by allocating the total property value between the mortgage and equity components and verifying that the rates of return set forth in Steps #1 and #2 can be met from the projected net income. The process of converting the projected income stream into an estimate of value through Method Two is described as follows. 1. A discount rate is established by evaluating the total property yield derived by Method One. Occasionally, the discount rate may be adjusted slightly based on the total property yields indicated by recent transactions involving hotels similar to the subject property. 2. The reversionary value is calculated by capitalizing the 11th-year net income by the terminal capitalization rate and deducting typical brokerage and legal fees. (1) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Income Capitalization Approach 85 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 3. The ten-year forecast of net income (before debt service and depreciation) and the reversionary value are discounted to the date of value at the rate derived above. Review of Operating History Because the Radisson Plaza is an existing hotel with an established operating performance, its historical income and expense experience can serve as a basis for projections. The subject property opened in 1921, and achieved occupancy levels of 58.5% in 1994 and 56.7% in 1995. The following income and expense statements were provided by the Ashford Financial Corporation, and are unaudited. Where applicable, we have reorganized the statements in accordance with the Uniform System of Accounts for Hotels. HVS International, Mineola, New York Income Capitalization Approach 86 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-1 Historical Operating Performance - --------------------------------------------------------------------------------
1995 1994 (Partial Year) --------------------------------------------------- ---------------------------------------------- No. of Rooms: 517 517 No. of Occupied Rooms: 106,977 61,094 No. of Days Open: 365 202 Occupancy: 56.7% Amount per Amount per 58.5% Amount per Amount per Average Rate: $72.91 Percent Available Occupied $70.25 Percent Available Occupied (+000) of Gross Room Room (+000) of Gross Room Room - ------------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $7,799 66.7 % $15,086 $72.91 $4,292 64.8 % $8,302 $70.25 Food 2,662 22.8 5,148 24.88 1,536 23.2 2,971 25.14 Beverage 350 3.0 676 3.27 249 3.8 481 4.07 Telephone 303 2.6 587 2.84 195 2.9 377 3.19 Valet Parking 445 3.8 861 4.16 286 4.3 552 4.67 Other Income 140 1.2 271 1.31 67 1.0 130 1.10 Total 11,699 100.1 22,629 109.36 6,625 100.0 12,814 108.43 - ------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES* Rooms 1,617 20.7 3,128 15.12 818 19.1 1,582 13.39 Food & Beverage 2,290 76.0 4,429 21.40 1,306 73.2 2,527 21.38 Telephone 187 61.5 361 1.75 98 50.1 189 1.60 Valet Parking 91 20.5 176 0.85 52 18.3 101 0.86 Other Income 15 10.6 29 0.14 8 11.4 15 0.13 Total 4,200 35.9 8,123 39.26 2,282 34.4 4,414 37.35 ------ - ------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 7,500 64.2 14,506 70.10 4,343 65.6 8,399 71.08 - ------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 1,340 11.5 2,591 12.52 717 10.8 1,386 11.73 Management Fee 351 3.0 678 3.28 199 3.0 384 3.25 Marketing 751 6.4 1,452 7.02 250 3.8 483 4.09 Franchise Fees 309 2.6 598 2.89 312 4.7 603 5.11 Property Oper. & Maint. 681 5.8 1,317 6.36 348 5.3 674 5.70 Energy 890 7.6 1,721 8.31 455 6.9 879 7.44 Total 4,321 36.9 8,357 40.39 2,280 34.5 4,410 37.32 - ------------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 3,179 27.3 6,149 29.71 2,063 31.1 3,989 33.76 - ------------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 289 2.5 559 2.70 146 2.2 282 2.38 Insurance 22 0.2 43 0.21 68 1.0 131 1.11 Reserve for Replacement 468 4.0 906 4.38 0 0.0 0 0.00 Equipment Leases 244 2.1 473 2.28 135 2.0 262 2.21 Ground Leases 102 0.9 197 0.95 55 0.8 107 0.91 Total 1,126 9.7 2,178 10.52 404 6.0 781 6.61 =============================================================================================================================== NET INCOME $2,053 17.6 % 3,971 $19.19 $1,659 25.1 % $3,208 $27.15 ===============================================================================================================================
* Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 87 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-2 Historical Operating Performance - --------------------------------------------------------------------------------
Year-to-Date August, 1996 Year-to-Date August, 1995 ------------------------------------------------ -------------------------------------------------- No. of Rooms: 517 517 No. of Occupied Rooms: 76,370 70,579 No. of Days Open: 244 243 Occupancy: 60.5% Amount per Amount per 56.2% Amount per Amount per Average Rate: $77.74 Percent Available Occupied $72.40 Percent Available Occupied (+000) of Gross Room Room (+000) of Gross Room Room - ---------------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $5,937 67.9 % $11,484 $77.74 $5,110 68.6 % $9,884 $72.40 Food 1,798 20.6 3,478 23.55 1,570 21.1 3,037 22.25 Beverage 248 2.8 479 3.24 192 2.6 371 2.72 Telephone 330 3.8 639 4.33 191 2.6 369 2.70 Valet Parking 315 3.6 609 4.12 293 3.9 566 4.15 Other Income 114 1.3 220 1.49 90 1.2 174 1.27 Total 8,742 100.0 16,910 114.47 7,445 100.0 14,401 105.49 - ---------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES* Rooms 1,209 20.4 2,339 15.83 1,059 20.7 2,048 15.01 Food & Beverage 1,565 76.5 3,027 20.49 1,452 82.4 2,808 20.57 Telephone 133 40.3 258 1.74 122 63.9 236 1.73 Valet Parking 61 19.3 118 0.80 61 20.9 118 0.87 Other Income 8 7.5 16 0.11 11 11.8 21 0.15 Total 2,977 34.0 5,758 38.98 2,704 36.3 5,230 38.31 - ---------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 5,766 66.0 11,152 75.50 4,741 63.7 9,171 67.18 - ---------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 839 9.6 1,623 10.99 892 12.0 1,725 12.64 Management Fee 262 3.0 507 3.43 223 3.0 432 3.16 Marketing 444 5.1 859 5.81 492 6.6 952 6.98 Franchise Fees 241 2.8 467 3.16 195 2.6 378 2.77 Property Oper. & Maint. 596 6.8 1,152 7.80 441 5.9 853 6.25 Energy 592 6.8 1,146 7.76 591 7.9 1,143 8.37 Total 2,975 34.1 5,754 38.95 2,835 38.0 5,483 40.17 - ---------------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 2,791 31.9 5,398 36.55 1,906 25.7 3,688 27.01 - ---------------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 212 2.4 410 2.78 199 2.7 385 2.82 Insurance 92 1.1 178 1.21 78 1.0 150 1.10 Reserve for Replacement 350 4.0 676 4.58 298 4.0 576 4.22 Equipment Leases 172 2.0 333 2.26 162 2.2 314 2.30 Ground Leases 70 0.8 134 0.91 68 0.9 131 0.96 Total 896 10.3 1,733 11.73 805 10.8 1,556 11.40 ================================================================================================================================== NET INCOME $1,895 21.6 % $3,665 $24.82 $1,102 14.9 % $2,132 $15.61 ==================================================================================================================================
* Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 88 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Comparable Operating Statements We note that we were unable to obtain a full-year 1994 operating statement as a result of the subject property's change in ownership in that year. However, the historical income and expense statements show that the hotel's revenues and operational efficiency have improved since the time of its acquisition. Year-to-date August statements show that total revenues rose by more than $1,000,000 from 1995 to 1996. Telephone revenues also increased substantially on a year-to-date basis, from $2.70 per occupied room in 1995 to $4.33 in 1996, and our projections have been adjusted accordingly. There was an approximate $34,000 gain in other income from 1995 to 1996, again on a year-to-date August basis; this was partly the result of increased space rentals. In calendar year 1995, departmental expenses equated to 35.9% of revenues, and this ratio declined slightly (to 34.0%) in year-to-date 1996. Telephone expense declined significantly as a percentage of telephone revenue, to reach 40.3% in year-to-date 1996, primarily as a result of the substantial rise in the associated income. We have adjusted our projections to reflect this lower ratio. Likewise, year-to-date other income expense dropped as a percentage of other income from 1995 to 1996, again reflecting greater revenues in this department. Our projections have been adjusted slightly in consideration of this greater efficiency. On a year-to-date August basis, administrative and general expense declined from $1,725 per available room in 1995 to $1,623 in 1996 as greater operational efficiencies were achieved. We have considered this decline in formulating our projections. Marketing expense equated to 6.4% of total revenue in calendar year 1995, and this ratio dropped to 5.1% in year-to-date 1996. House profit rose significantly on a year-to-date basis, from roughly $1,906,000 in 1995 to $2,791,000 in 1996; this reflects the higher revenues and lower expense levels outlined above. A discrepancy should be noted in the insurance expense. According to information received from the Ashford Financial Corporation, the subject property's calendar year 1995 insurance expense was roughly $22,000, while the year-to-date August, 1995 statement shows a level of $78,000. Ashford representatives indicate that this anomaly may be the result of end-of-the-year adjustments made to the insurance ledger. Because of this inconsistency, our base-year income and expense statement shows an insurance expense of $350.00 per available room, which is based on industry standards for full-service hotels. Other fixed expenses remained relatively stable throughout the historical period. As noted earlier in this report, a property HVS International, Mineola, New York Income Capitalization Approach 89 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= tax reassessment took place in 1996, necessitating an upward adjustment of the base-year property tax expense. Forecast of Income and Expense The forecast of income and expense is intended to reflect the appraiser's subjective estimate of how a typical buyer would project the subject property's operating results. Depending on the dynamics of the local market, a typical buyer's projection may be adjusted upward or downward. We have attempted to consider these factors in formulating this forecast. HVS International uses a fixed and variable component model to project a lodging facility's revenue and expense levels. This model is based on the premise that hotel revenues and expenses have one component that is fixed and another that varies directly with occupancy and facility usage. A projection can be made by taking a known level of revenue or expense and calculating its fixed and variable components. The fixed component is then held constant, while the variable component is adjusted for the percent change between the projected occupancy and facility usage and that which produced the known level of revenue or expense. Base-Year Statement of Income and Expense Based on our review of the operating histories of the subject property and comparable hotels, we have derived a base-year statement of income and expense expressed in 1996 dollars. The units of comparison include a percentage of departmental and total revenue, amounts per available room, and amounts per occupied room. The income and expense ratios reflect an occupancy level of 56.7%. The base-year profit and loss statement will be used to determine the relationship between the fixed and variable components. HVS International, Mineola, New York Income Capitalization Approach 90 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-4 Base-Year Statement of Income and Expense - -------------------------------------------------------------------------------- 1995 ------------------------------------------------ No. of Rooms: 517 Occupancy: 56.7% Average Rate: $72.91 Amount per Amount per No. of Occupied Rooms: 106,977 Percent Available Occupied (+000) of Gross Room Room - ----------------------------------------------------------------------------- REVENUE Rooms $7,799 65.6% $15,086 $72.91 Food 2,662 22.4 5,148 24.88 Beverage 384 3.2 744 3.59 Telephone 448 3.8 866 4.18 Valet Parking 445 3.7 861 4.16 Other Income 154 1.3 298 1.44 Total 11,892 100.0 23,003 111.17 - ----------------------------------------------------------------------------- EXPENSES Rooms* 1,617 20.7 3,128 15.12 Food & Beverage* 2,290 75.2 4,429 21.40 Telephone* 224 50.0 433 2.09 Valet Parking* 91 20.5 176 0.85 Other Income* 15 10.0 30 0.14 Administrative & General 1,199 10.1 2,319 11.21 Management Fee 357 3.0 690 3.34 Marketing 643 5.4 1,244 6.01 Franchise Fees 253 2.1 490 2.37 Property Oper. & Maint. 749 6.3 1,448 7.00 Energy 847 7.1 1,639 7.92 Property Taxes 333 2.8 645 3.12 Insurance 181 1.5 350 1.69 Reserve for Replacement 476 4.0 920 4.45 Equipment Leases 244 2.1 473 2.28 Ground Leases 102 0.9 197 0.95 Total 9,622 80.9 18,611 89.94 - ----------------------------------------------------------------------------- NET INCOME $2,270 19.1% $4,392 $21.22 ============================================================================= * Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- Inflation Assumptions The base revenue and expense amounts are inflated to reflect current dollars for each projection year. Although line items can be affected by different factors, we must establish a general rate of inflation that will be applied to most revenue and expense categories. The following table shows inflation estimates made by economists at some noted institutions and corporations. HVS International, Mineola, New York Income Capitalization Approach 91 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-5 Inflation Estimates - -------------------------------------------------------------------------------- Projected Increase in Consumer Price Index (Annualized Rate Versus 12 Months Earlier) ------------------------------------------ November May Source of 1996 of 1997 - -------------------------------------------------------------------------------- Maureen Allyn, Scudder Stevens Clark 3.1% 2.3% Wayne Angell, Bear Stearns 3.0 3.2 Richard Berner, Mellon Bank 2.9 2.8 David Berson, Fannie Mae 2.9 2.8 David Blitzer, S&P 3.0 2.7 Paul Boltz, T. Rowe Price 3.2 3.5 David Bostian, Herzog, Heine, Geduld 2.9 2.5 Philip Braverman, DKB Securities 3.0 2.8 William Brown, J.P. Morgan 3.3 3.2 Rosanne Cahn, CS First Boston 3.1 2.6 James Coons, Huntington National Bank 3.2 3.0 Michael Cosgrove, The Econoclast 3.2 3.3 Dewey Daane, Vanderbilt University 3.4 3.6 Robert Dederick, Northern Trust 3.1 3.4 W.Dudley, Goldman Sachs 3.4 3.2 Michael Englund, MMS Intl. 3.2 3.3 Michael Evans, Evans Group 3.0 3.0 Gail Fosler, Conference Board 3.5 3.6 Maury Harris, Paine Weber, Inc. 2.8 2.8 Tracy Herrick, Jefferies & Co. 3.2 3.6 Stuart Hoffman, PNC Bank 3.1 2.8 William Hummer, Wayne Hummer 2.9 3.0 Edward Hyman, ISI Group 2.8 2.1 Saul Hymans, University of Michigan 2.7 1.7 Mieczyslaw Karczmar, Deutsche Bank 2.8 3.2 Kurt Karl, WEFA Group 2.6 2.3 Irwin Kellner, Chase Manhattan Bank 2.6 2.3 D. Laufenberg, American Express Financial Advisors 3.2 3.4 Michelle Laughlin, Sanwa Securities 3.0 3.2 Carol Leisenring, CoreStates Financial 2.7 2.5 Richard Lemmon, General Motors 3.0 3.0 Mickey Levy, NationsBank Capital Markets 2.6 2.4 David Littmann, Comerica 3.1 3.0 John Lonski, Moody's Investors Service 3.3 3.2 Paul McCulley, UBS Securities 3.0 2.8 John McDevitt, 3M 2.6 2.5 Arnold Moskowitz, Moskowitz Capital 3.1 3.5 John Mueller, LBMC, Inc. 3.2 2.5 David Munro, High Frequency Econ. 3.0 2.5 Carl Palash, MCM MoneyWatch 3.0 3.0 Nicholas Perna, Fleet Financial Group 3.3 3.3 Elliott Platt, Donaldson Lufkin 2.8 2.0 Maria F. Ramirez, MF Ramirez 3.0 3.0 Donald Ratajczak, Georgia State University 3.0 3.3 David Resler, Nomura Securities International 2.9 2.6 Allan Reynolds, Hudson Institute 3.3 3.6 Richard Rippe, Prudential Securities 3.1 3.3 A. Gary Schilling, Schilling & Co. 3.0 3.0 Allen Sinai, Lehman Brothers 3.2 3.4 James Smith, University of North Carolina 2.1 1.9 Susan Sterne, Economic Analysis 2.5 2.5 Donald Straszheim, Merrill Lynch 2.7 2.3 Thomas Synott III, U.S. Trust Company 3.3 3.4 John Williams, Bankers Trust 3.0 3.1 Raymond Worseck, A.G. Edwards 3.6 3.3 David Wyss, DRI/McGraw-Hill 3.0 2.5 Edward Yardeni, Deutsche Morgan Grenfell 2.2 2.0 Mark Zandi, Regional Financial Associates 3.0 3.2 ---- ---- Average 3.0% 2.9% Source: Wall Street Journal, July 1, 1996 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 92 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The preceding table shows inflation forecasts averaging 3.0% and 2.9%. Most of the economists in the sample estimate inflation rates ranging from 2.5% to 3.4%, although several anticipate slightly higher levels. As a further check on these inflation projections, we have reviewed historical increases in the Consumer Price Index. Because the value of real estate is predicated on cash flows over a relatively long period, inflation should be considered from a long-term perspective. Between 1986 and 1994, the national CPI increased at an average annual compounded rate of 3.8%. In consideration of these historical trends, the projections set forth above, and our assessment of probable property appreciation levels, we have selected an annual stabilized inflation rate of 3.5% throughout the projection period. One of the exceptions to this general inflation assumption is the projected growth in average rate. As noted earlier, increases in the subject property's room rate are projected as follows. ================================================================================ Table 10-6 Projected Growth in Average Rate - -------------------------------------------------------------------------------- Increase From Year Previous Year - ------------------------------------------------------------ 1997 4.0% 1998 1.0 1999 2.0 Thereafter 3.5 3.5 - -------------------------------------------------------------------------------- The subject property leases the land housing its underground parking garage, and a portion of the land underneath the West Tower. Ground lease expense has been projected based on the lease terms, and it does not conform to the underlying inflation rates set forth above. Our estimate of the subject property's ground lease expense will be outlined later in this section. Using these inflation assumptions, the base-year income and expense statement (which is expressed in 1996 dollars) is inflated to arrive at projections. Each revenue and expense category will be projected using the inflated base statement to determine the fixed and variable component relationships. Rooms Revenue Rooms revenue is determined by two variables: occupancy and average rate. Earlier in this report, we estimated the subject property's occupancy and average rate as follows. HVS International, Mineola, New York Income Capitalization Approach 93 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-7 Projected Occupancy and Average Rate - -------------------------------------------------------------------------------- 1997 1998 Stabilized - --------------------------------------------------------------------- Projected Occupancy Percentage 63.0% 60.0% 60.0% Projected Average Rate $80.47 $81.28 $82.91 - -------------------------------------------------------------------------------- Rooms revenue is calculated as follows. ================================================================================ Table 10-8 Forecast of Rooms Revenue - -------------------------------------------------------------------------------- Rooms Number Days Revenue Year Occupancy Average Rate of Units in Year (+000) - -------------------------------------------------------------------------------- 1997 63 % x $80.47 x 517 x 365 = $9,567 1998 60 x 81.28 x 517 x 365 = 9,203 Stabilized 60 x 82.91 x 517 x 365 = 9,387 2000 60 x 85.81 x 517 x 365 = 9,716 2001 60 x 88.81 x 517 x 365 = 10,056 - -------------------------------------------------------------------------------- Food and Beverage Revenue Food and beverage revenue is generated by a hotel's restaurants, lounges, coffee shops, snack bars, banquet rooms, and room service. In addition to providing a source of revenue, these outlets serve as an amenity that assists in the sale of guestrooms. With the exception of properties with active lounges or banquet facilities that draw local residents, in-house guests generally represent a substantial percentage of a hotel's food and beverage patrons. The Uniform System of Accounts for Hotels/Eighth Revised Edition defines food revenue as "revenue derived from the sale of food, including coffee, milk, tea and soft drinks. Food sales do not include meals charged on employees' (staff) checks." Beverage revenues are "derived from the sale of beverages." In addition to the revenue generated by the sale of food and beverages, hotels often produce other income that is related to this department, such as meeting room rentals, cover charges, service charges, and miscellaneous banquet revenue. Although food revenue varies directly with changes in occupancy, the small portion generated by banquet sales and outside capture is relatively fixed. The following table shows the projected food revenue and several units of comparison that can be used to check the reasonableness of the forecast. HVS International, Mineola, New York Income Capitalization Approach 94 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-9 Forecast of Food Revenue - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Food Revenue (+000) $ 3,090 $ 3,081 $ 3,188 Percent of Total Revenue 21.6% 22.1% 22.3% Amount per Available Room $ 5,976 $ 5,959 $ 6,167 Amount per Occupied Room $ 25.99 $ 27.21 $ 28.16 - -------------------------------------------------------------------------------- Based on these units of comparison, the projected food revenue appears reasonable when compared with industry standards. Beverage revenue is generated by the sale of alcoholic beverages in a hotel's restaurants and banquet rooms and the sale of alcoholic and nonalcoholic beverages in the bars and lounges. The following table illustrates the forecast of beverage revenue. ================================================================================ Table 10-10 Forecast of Beverage Revenue - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Beverage Revenue (+000) $446 $445 $460 - -------------------------------------------------------------------------------- Telephone Revenue Telephone revenue is generated by hotel guests who charge local and long-distance calls to their rooms, and by individuals who use the property's public telephones. Prior to the early 1980s, hotels were limited to a 15% commission on long-distance calls, which allowed few profits. Deregulation and the development of sophisticated call-accounting equipment have resulted in profitable telephone departments. State-of-the-art equipment is capable of least-cost routing, automatic price billing, and posting telephone charges to guest folios. Hotels can select among various long-distance services, and can also work with any one of a number of Alternative Operator Services (AOS). These systems route and price calls, and may provide additional services. In recent years, the hospitality industry has experienced diverging trends with respect to telephone revenue. Prices per call have increased, in some cases dramatically, yielding departmental profits as high as 50% to 55%. However, the number of long-distance calls billed per occupied room has declined as a result of the extensive use of long-distance carrier services that can be accessed locally or through a toll-free number. When guests charge HVS International, Mineola, New York Income Capitalization Approach 95 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= long-distance calls to their personal or business accounts in this manner, the hotel loses the revenue associated with long-distance tariffs and mark-ups, and only receives an access fee. Most telephone revenue varies directly with changes in occupancy. However, there is a small fixed component consisting of public telephone revenue, which is primarily generated by individuals using the hotel's food, beverage, and meeting facilities. Using this fixed and variable relationship, the subject property's telephone revenue is projected as follows. ================================================================================ Table 10-11 Forecast of Telephone Revenue - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Telephone Revenue (+000) $ 527 $ 522 $ 541 Percent of Total Revenue 3.7% 3.8% 3.8% Amount per Available Room $ 1,020 $ 1,010 $ 1,046 Amount per Occupied Room $ 4.43 $ 4.61 $ 4.78 - -------------------------------------------------------------------------------- Valet Parking Revenue Valet parking revenue is derived from the fees charged to guests who park their cars in the one of the subject property's two garages. In most cases, the daily parking fee is added to the guest's folio. For the purpose of our projections, we have used the historical figure of $445,000 as the base year amount. The following table outlines our forecast of valet parking revenue. ================================================================================ Table 10-12 Forecast of Valet Parking Revenue - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Valet Parking Revenue (+000) $ 493 $ 502 $ 520 Percent of Total Revenue 3.4% 3.6% 3.6% Amount per Available Room $ 954 $ 972 $ 1,006 Amount per Occupied Room $ 4.15 $ 4.43 $ 4.59 - -------------------------------------------------------------------------------- Other Income Other income is derived from sources other than guestrooms, food and beverages, telephone services, and valet parking. Depending on the type of hotel and the facilities and amenities offered, other income may include the following items. o Rentals - stores, office space, concession space, showcases, clubs, and storage. HVS International, Mineola, New York Income Capitalization Approach 96 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= o Commissions from auto rentals, photography, telegrams, and vending services. o Concessions - revenue derived from charges for the privilege of operating departments that could be operated by the hotel. Gift shops, barber shops, and beauty salons are often operated as concessions. o Laundry, dry cleaning, and fax services. o Cash discounts earned - discounts from creditors' accounts for payment within the discount period. This item does not include trade discounts, which are a deduction from the cost of goods sold. o Electronic games and pinball machines. o Forfeited advance deposits and guaranteed no-shows. o Service charges - service charges that are added to a customer's account but are not paid to service personnel. o Interest income - interest from house accounts. o Salvage - revenue from the sale of old or obsolete items. Other income is highly sensitive to changes in occupancy and slightly correlated to food and beverage volume. Using this fixed and variable relationship, the subject property's other income is projected as follows. ================================================================================ Table 10-13 Forecast of Other Income - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Other Income (+000) $ 170 $ 174 $ 180 Percent of Total Revenue 1.2% 1.2% 1.3% Amount per Available Room $ 330 $ 336 $ 348 Amount per Occupied Room $ 1.43 $ 1.54 $ 1.59 - -------------------------------------------------------------------------------- Rooms Expense Rooms expense consists of items related to the sale and upkeep of guestrooms and public space. Salaries, wages, and employee benefits account for a substantial portion of this category. Although payroll varies somewhat with occupancy (because managers can schedule maids, bell personnel, and house cleaners to work when demand requires), much of a hotel's payroll is fixed. Front desk personnel, public area cleaners, the housekeeper, and other supervisors must be maintained at all times. As a HVS International, Mineola, New York Income Capitalization Approach 97 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= result, salaries, wages, and employee benefits are only moderately sensitive to changes in occupancy. Commissions represent remuneration to travel agents for booking rooms. Because these fees are based on a percentage of rooms revenue, they are highly dependent on occupancy and rate. Reservations is a similar expense that reflects the cost of a franchise reservation system that typically bills as a percentage of rooms revenue. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are only slightly affected by changes in volume. In light of these considerations, we project the subject property's rooms expense as follows. ================================================================================ Table 10-14 Forecast of Rooms Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Rooms Expense (+000) $ 1,810 $ 1,835 $ 1,899 Percent of Rooms Revenue 18.9% 19.9% 20.2% Amount per Available Room $ 3,500 $ 3,549 $ 3,674 Amount per Occupied Room $ 15.22 $ 16.21 $ 16.77 - -------------------------------------------------------------------------------- Food and Beverage Expense Food and beverage expenses consist of items necessary for the operation of a hotel's food, beverage, and banquet facilities. Although food and beverage revenues are projected separately and occupy separate categories on a hotel's income and expense statement, the corresponding expenses are combined into a single category. The costs associated with food and beverage sales and payroll are moderately to highly correlated to food and beverage revenues, and comprise a substantial portion of this category. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are very slightly dependent on volume. Although the other expense items are basically fixed, they represent a relatively insignificant factor. After considering the fixed and variable components, we forecast the subject property's food and beverage expense as follows. HVS International, Mineola, New York Income Capitalization Approach 98 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-15 Forecast of Food and Beverage Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Food and Beverage Expense (+000) $ 2,545 $ 2,589 $ 2,679 Ratio to Food and Beverage Revenue 72.0% 73.4% 73.4% Amount per Available Room $ 4,923 $ 5,008 $ 5,182 Amount per Occupied Room $ 21.41 $ 22.87 $ 23.66 - -------------------------------------------------------------------------------- Telephone Expense Telephone expense consists of all costs associated with this department. In the case of small hotels with automated systems, the operation of telephones may be an additional responsibility of front desk personnel; however, most large properties employ full-time operators. The bulk of the telephone expense consists of the cost of local and long-distance calls billed by the telephone companies that provide these services. Because most calls are made by in-house guests, these costs are moderately correlated to occupancy. Unless a particular hotel department incurs high expenses, use of telephone services by hotel employees is charged to this account. The remaining costs, which include salaries, wages, printing, and other expenses, are moderately fixed. The following table illustrates our forecast of telephone expense. ================================================================================ Table 10-16 Forecast of Telephone Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Telephone Expense (+000) $ 249 $ 253 $ 262 Percent of Telephone Revenue 47.3% 48.5% 48.5% Amount per Available Room $ 482 $ 490 $ 507 Amount per Occupied Room $ 2.09 $ 2.23 $ 2.31 - -------------------------------------------------------------------------------- Valet Parking Expense Valet parking expense primarily consists of the salaries and benefits paid to the parking attendants in the garage and at the hotel's main entrance. Our projections, which are presented in the following table, are based on the 1995 expense of $91,000. HVS International, Mineola, New York Income Capitalization Approach 99 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-17 Forecast of Valet Parking Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Valet Parking Expense (+000) $ 99 $ 102 $ 106 Percent of Valet Parking Revenue 20.1% 20.3% 20.3% Amount per Available Room $ 192 $ 197 $ 204 Amount per Occupied Room $ 0.83 $ 0.90 $ 0.94 - -------------------------------------------------------------------------------- Other Income Expense Other income expense consists of costs associated with other income, and is dependent on the nature of the revenue. For example, if a hotel leases its gift shop to an outside operator, the expenses are limited to items such as rental fees and commissions. If the property operates its own gift shop, both revenues and expenses will be higher, and the hotel is responsible for the cost of goods sold, payroll, and so forth. Using a fixed and variable forecasting model, we project the subject property's other income expense as follows. ================================================================================ Table 10-18 Forecast of Other Income Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Other Income Expense (+000) $ 17 $ 17 $ 18 Percent of Other Income Revenue 9.8% 9.9% 9.9% Amount per Available Room $ 32 $ 33 $ 34 Amount per Occupied Room $ 0.14 $ 0.15 $ 0.16 - -------------------------------------------------------------------------------- Administrative and General Expense Administrative and general expense includes the salaries and wages of all administrative personnel who are not directly associated with a particular department. Expense items related to the management and operation of the property are also allocated to this category. Most administrative and general expenses are relatively fixed. The exceptions are cash overages and shortages; commissions on credit card charges; provision for doubtful accounts, which are moderately affected by the number of transactions or total revenue; and salaries, wages, and benefits, which are very slightly influenced by volume. In recent years, several new items have been added to the administrative and general expense category. Human resources includes the cost of HVS International, Mineola, New York Income Capitalization Approach 100 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= recruiting, relocating, and training personnel. Security consists of the cost of contract security for the property and related expenses. The general insurance category includes premiums for liability, fidelity, life, theft coverage, and business interruption insurance. Fire and extended-coverage insurance on the building and contents is a separate insurance expense category. Liability insurance covers third-party actions involving bodily injury and personal property, and is typically based on rooms receipts, meeting and banquet income, and food and beverage revenue. Factors that may have an impact on a hotel's liability expense include the size of the meeting, banquet, and restaurant facilities; the ratio between the amount of alcohol served and total food and beverage sales; the presence of a dance floor; a high-rise structure; a swimming pool; life safety support systems; and the guest transportation services provided by the hotel. Administrative and general expenses at the Radisson Plaza equated to roughly $2,591 per available room in 1995. This level is uncharacteristically high for a large, full-service hotel. Consequently, we estimate the subject property's administrative and general expense at a more reasonable level of roughly $2,319 per available room in the base year. Inflating this amount throughout the projection period yields the following forecast. ================================================================================ Table 10-19 Forecast of Administrative and General Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Admin. & General Expense (+000) $ 1,331 $ 1,352 $ 1,395 Percentage of Total Revenue 9.3% 9.7% 9.8% Amount per Available Room $ 2,574 $ 2,615 $ 2,698 Amount per Occupied Room $ 11.20 $ 11.94 $ 12.32 - -------------------------------------------------------------------------------- Management Fee Management expense consists of the basic fee paid to the type of company that is anticipated to operate the subject property. Some companies provide management services alone, while others also provide a brand name affiliation. When a management company has no brand identification, the property owner often acquires a franchise that provides the necessary image and recognition. Although most hotel management companies employ a fee schedule that includes a basic fee (usually a percentage of total revenue) and an incentive fee (usually a percentage of defined profit), the incentive portion is often subordinated to debt service and does not appear in a forecast of net income before debt service. Basic hotel management fees are almost HVS International, Mineola, New York Income Capitalization Approach 101 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= always based on a percentage of total revenue, which means they have no fixed component. Although the incentive fee does not decrease the cash flow available for debt service, it does reduce the potential cash flow to equity, and must be accounted for in the valuation process. Generally, the most appropriate procedure for handling the impact of the incentive fee on the equity component is to use the projected net income before debt service and incentive fee, but adjust the equity dividend or yield rate upward to reflect this added management cost. The adjusted equity dividend and yield rates will be described later in this section. The subject property is operated by Remington Hospitality, Inc. under a contact that requires a management fee of 3.0% of gross revenues. Based on our review of the current market for management contracts, we are of the opinion that this fee is consistent with prevailing market terms. Applying this management fee structure to the projection of total revenue yields the following forecast of the subject property's management fee. ================================================================================ Table 10-20 Forecast of Management Fee - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Management Fee (+000) $429 $418 $428 - -------------------------------------------------------------------------------- Marketing Expense Marketing expense consists of all costs associated with advertising, sales, and promotion; these activities are intended to attract and retain customers. Marketing can be used to create an image, develop customer awareness, and stimulate patronage of a property's various facilities. The marketing category is unique in that all expense items, with the exception of fees and commissions, are totally controlled by management. Most hotel operators establish an annual marketing budget that sets forth all planned expenditures. If the budget is followed, total marketing expenses can be projected accurately. Marketing expenditures are unusual because although there is a lag period before results are realized, the benefits are often extended over a long period. Depending on the type and scope of the advertising and promotion program implemented, the lag time can be as short as a few weeks or as long as several years. However, the favorable results of an effective marketing HVS International, Mineola, New York Income Capitalization Approach 102 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= campaign tend to linger, and a property often enjoys the benefits of concentrated sales efforts for many months. Marketing expense can be divided into five categories: sales, reservations, advertising and merchandising, other marketing activities, and fees and commissions. Together, these categories include all marketing efforts made by hotel personnel and outside parties. Marketing expenses are fixed with the exception of reservations, fees, and commissions, which are calculated as a percentage of rooms revenue. The subject property's historical marketing expenses are slightly higher than industry standards. In 1995, marketing costs equated to $1,452 per available room, and we have adjusted this figure downward to $1,244 in the base year. Inflating this amount throughout the projection period yields the following forecast. ================================================================================ Table 10-21 Forecast of Marketing Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Marketing Expense (+000) $ 714 $ 725 $ 749 Percentage of Total Revenue 5.0% 5.2% 5.2% Amount per Available Room $ 1,382 $ 1,403 $ 1,448 Amount per Occupied Room $ 6.01 $ 6.41 $ 6.61 - -------------------------------------------------------------------------------- Franchise Fee Franchise expense represents the fees paid to Radisson for the use of the company's name, trademarks, and service marks. The franchise agreement calls for a fee of 3.25% of gross rooms revenue, and based on this formula, the following table sets forth our forecast of franchise fees. ================================================================================ Table 10-22 Forecast of Franchise Fee - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Franchise Fees (+000) $311 $299 $305 - -------------------------------------------------------------------------------- Property Operations and Maintenance Property operations and maintenance expense is another expense category that is largely controlled by management. Except for repairs that are necessary to keep the facility open and prevent damage (e.g., plumbing, heating, and electrical items), most maintenance can be deferred for varying lengths of time. HVS International, Mineola, New York Income Capitalization Approach 103 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Maintenance is an accumulating expense. If management elects to postpone performing a required repair, they have not eliminated or saved the expenditure; they have only deferred payment until a later date. A lodging facility that operates with a lower-than-normal maintenance budget is likely to accumulate a considerable amount of deferred maintenance. The age of a lodging facility has a strong influence on the required level of maintenance. A new or thoroughly renovated property is protected for several years by modern equipment and manufacturers' warranties. However, as a hostelry grows older, maintenance expenses escalate. A well-organized preventive maintenance system often helps delay deterioration, but most facilities face higher property operations and maintenance costs each year, regardless of the occupancy trend. The quality of initial construction can also have a direct impact on future maintenance requirements. The use of high-quality building materials and construction methods generally reduces the need for maintenance expenditures over the long term. Property operations and maintenance is considered an operating expense; as such, it includes only those components that can be expensed, rather than capitalized, under Internal Revenue Service regulations. For example, if a table leg is broken, the repair of that leg is considered an expense and is chargeable to property operations and maintenance. If the table is replaced, it becomes a capital expenditure and does not appear under the property operations and maintenance category. Appraisers account for capital replacement of items such as furniture and equipment in the reserve for replacement account, which is discussed later in this section. Property operations and maintenance costs are relatively fixed, and are projected as follows. ================================================================================ Table 10-23 Forecast of Property Operations and Maintenance Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Prop. Oper. & Maint. Expense (+000) $ 831 $ 844 $ 871 Percentage of Total Revenue 5.8% 6.1% 6.1% Amount per Available Room $ 1,608 $ 1,633 $ 1,685 Amount per Occupied Room $ 6.99 $ 7.46 $ 7.69 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 104 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Energy Expense The energy consumption of a lodging facility takes several forms, including water and space heating, air conditioning, lighting, cooking fuel, and other miscellaneous power requirements. The most common sources of hotel energy are electricity, natural gas, fuel oil, and steam. This category also includes the cost of water service. Total energy cost depends on the source and quantity of fuel used. Electricity tends to be the most expensive source, followed by oil and gas. Although all hotels consume a sizable amount of electricity, many properties supplement their energy requirements with less expensive sources, such as gas and oil, for heating and cooking. A large portion of a hostelry's energy consumption is relatively fixed. Restaurants, kitchens, public areas, and corridors must be continually lighted and climate-controlled, regardless of occupancy. The energy cost of an additional occupied room (i.e., a few hours of light, television, heat, or air conditioning) is minimal. The following table presents our forecast of the subject property's energy expense. ================================================================================ Table 10-24 Forecast of Energy Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Energy Expense (+000) $ 919 $ 945 $ 977 Percentage of Total Revenue 6.4% 6.8% 6.8% Amount per Available Room $ 1,777 $ 1,827 $ 1,889 Amount per Occupied Room $ 7.73 $ 8.34 $ 8.63 - -------------------------------------------------------------------------------- Property Taxes The estimate of property taxes was detailed in a previous section of this report. The following table summarizes these projections. ================================================================================ Table 10-25 Forecast of Property Taxes - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Property Taxes (+000) $357 $370 $383 - -------------------------------------------------------------------------------- Insurance Expense The insurance expense category consists of the cost of insuring the hotel and its contents against damage or destruction by fire, weather, sprinkler leakage, boiler explosion, plate glass breakage, and so forth. It does not include HVS International, Mineola, New York Income Capitalization Approach 105 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= liability coverage, which is a component of administrative and general expense. Insurance rates are based on many factors, including building design and construction, fire detection and extinguishing equipment, fire district, distance from the firehouse, and the area's fire experience. Insurance expenses do not vary with occupancy. As noted previously, there is a discrepancy in the 1995 year-end insurance expense, and thus our projections are calculated from a base year figure of $350 per available room, which reflects industry standards for hotels of this type. In subsequent years, this amount is assumed to increase in tandem with inflation. The following table outlines our projection of insurance expense. ================================================================================ Table 10-26 Forecast of Insurance Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Insurance Expense (+000) $194 $201 $208 - -------------------------------------------------------------------------------- Reserve for Replacement Furniture, fixtures, and equipment are essential to the operation of a lodging facility, and their quality often influences a property's class. This category includes all non-real estate items that are capitalized, rather than expensed. The furniture, fixtures, and equipment of a hotel are exposed to heavy use and must be replaced at regular intervals. The useful life of these items is determined by their quality, durability, and the amount of guest traffic and use. Periodic replacement of furniture, fixtures, and equipment is essential to maintain the quality, image, and income-producing potential of a lodging facility. Because capitalized expenditures are not included in the operating statement but nevertheless affect an owner's cash flow, an appraisal should reflect these expenses in the form of an appropriate reserve for replacement. Our industry experience indicates that a reserve for replacement of 3% to 5% of total revenue is generally sufficient to provide for the timely replacement of furniture, fixtures, and equipment. Because the reserve for replacement is based on a percentage of total revenue, it has no fixed component. HVS International, Mineola, New York Income Capitalization Approach 106 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Based on an analysis of comparable lodging facilities, we believe that a reserve for replacement of 4% of total revenue is sufficient to provide for the periodic replacement of the subject property's furniture, fixtures, and equipment. This amount is consistent with the reserve account contributions currently made by the hotel. The following table summarizes the projected reserve for replacement. ================================================================================ Table 10-27 Forecast of Reserve for Replacement - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Replacement Reserves (+000) $572 $557 $571 - -------------------------------------------------------------------------------- Equipment Leases The subject property leases various equipment, including two copiers, ice machines, televisions, a point-of-sales system, and telephone equipment. We estimate the hotel's base-year equipment lease expense at $244,000, based on historical levels. This figure has been inflated to arrive at the following projections. ================================================================================ Table 10-28 Forecast of Equipment Lease Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Equipment Lease Expense (+000) $262 $271 $280 - -------------------------------------------------------------------------------- Ground Lease The subject property leases land for its underground parking garage and a portion of the West Tower. The lease payments for the northeastern portion of the lot improved with the West Tower are fixed at $30,000 annually throughout the projection period. Pursuant to the terms of the lease, parking garage lease payments are projected at $75,000 in calendar years 1996 through 2000, $80,000 in calendar years 2001 through 2005, and $85,000 in calendar years 2006 though 2010. The following table outlines these projections. HVS International, Mineola, New York Income Capitalization Approach 107 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-29 Forecast of Ground Lease Expense - --------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 - -------------------------------------------------------------------------------------------------------------- Garage $ 75,000 $ 75,000 $ 75,000 $ 75,000 $ 80,000 $ 80,000 $ 80,000 $ 80,000 $ 80,000 $ 85,000 West Tower 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 - -------------------------------------------------------------------------------------------------------------- Total 105,000 105,000 105,000 105,000 110,000 110,000 110,000 110,000 110,000 115,000
- -------------------------------------------------------------------------------- Summary of Projections Based on the preceding analysis, we have formulated a forecast of income and expense. The table on the following page presents a detailed forecast through the stabilized year, including amounts per available room (PAR) and per occupied room (POR). For the purpose of comparison, this table also presents the subject property's most recent full year of operating history. The second table illustrates our ten-year forecast of income and expense in less detail. The forecasts pertain to calendar operating years, and are expressed in inflated dollars for each year. HVS International, Mineola, New York Income Capitalization Approach 108 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-30 Detailed Forecast of Income and Expense through the Stabilized Year and Most Recent Operating History, Radisson Plaza , Fort Worth, Texas - --------------------------------------------------------------------------------
Historical 1995 Results 1997 ------------------------------------------------- ----------------------------------------------- No. of Rooms: 517 517 Occupancy: 56.7% 63.0% Average Rate: $72.91 $80.47 No. of Days Open: 365 Percent 365 Percent No. of Occupied Rooms: 106,977 of 118,884 of (+000) Gross PAR POR (+000) Gross PAR POR - ------------------------------------------------------------------------------------------------------------------------------------ REVENUE Rooms $7,799 66.7% $15,086 $72.91 $9,567 67.0% $18,505 $80.47 Food 2,662 22.8 5,148 24.88 3,090 21.6 5,977 25.99 Beverage 350 3.0 676 3.27 446 3.1 863 3.75 Telephone 303 2.6 587 2.84 527 3.7 1,019 4.43 Valet Parking 445 3.8 861 4.16 493 3.4 954 4.15 Other Income 140 1.2 271 1.31 170 1.2 329 1.43 Total 11,699 100.1 22,629 109.36 14,293 100.0 27,646 120.23 - ------------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL EXPENSES * Rooms 1,617 20.7 3,128 15.12 1,810 18.9 3,501 15.22 Food & Beverage 2,290 76.0 4,429 21.40 2,545 72.0 4,923 21.41 Telephone 187 61.5 361 1.75 249 47.2 482 2.09 Valet Parking 91 20.5 176 0.85 99 20.1 191 0.83 Other Income 15 10.6 29 0.14 17 10.0 33 0.14 Total 4,200 35.9 8,123 39.26 4,720 33.0 9,130 39.70 - ------------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL INCOME 7,500 64.2 14,506 70.10 9,573 67.0 18,516 80.52 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING EXPENSES Administrative & General 1,340 11.5 2,591 12.52 1,331 9.3 2,574 11.20 Management Fee 351 3.0 678 3.28 429 3.0 830 3.61 Marketing 751 6.4 1,452 7.02 714 5.0 1,381 6.01 Franchise Fees 309 2.6 598 2.89 311 2.2 602 2.62 Property Oper. & Maint. 681 5.8 1,317 6.36 831 5.8 1,607 6.99 Energy 890 7.6 1,721 8.31 919 6.4 1,778 7.73 Total 4,321 36.9 8,357 40.39 4,535 31.7 8,772 38.15 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSE PROFIT 3,179 27.3 6,149 29.71 5,038 35.3 9,745 42.38 - ------------------------------------------------------------------------------------------------------------------------------------ FIXED EXPENSES Property Taxes 289 2.5 559 2.70 357 2.5 691 3.00 Insurance 22 0.2 43 0.21 194 1.4 375 1.63 Reserve for Replacement 468 4.0 906 4.38 572 4.0 1,106 4.81 Equipment Leases 244 2.1 473 2.28 262 1.8 507 2.20 Ground Leases 102 0.9 197 0.95 105 0.7 203 0.88 Total 1,126 9.7 2,178 10.52 1,490 10.4 2,882 12.53 - ------------------------------------------------------------------------------------------------------------------------------------ NET INCOME $2,053 17.6% $3,971 $19.19 $3,548 24.9% $6,863 $29.84 ==================================================================================================================================== Food/Rooms 34.1% 32.3% Beverage/Food 13.1% 14.4% Telephone/Rooms 3.9% 5.5% Other Income/Rooms 1.8% 1.8% 1998 Stabilized ----------------------------------------------- ------------------------------------------------ No. of Rooms: 517 517 Occupancy: 60.0% 60.0% Average Rate: $81.28 $82.91 No. of Days Open: 365 Percent 365 Percent No. of Occupied Rooms: 113,223 of 113,223 of (+000) Gross PAR POR (+000) Gross PAR POR - ---------------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $9,203 66.2% $17,801 $81.28 $9,387 65.8% $18,157 $82.91 Food 3,081 22.1 5,959 27.21 3,188 22.3 6,166 28.16 Beverage 445 3.2 861 3.93 460 3.2 890 4.06 Telephone 522 3.7 1,010 4.61 541 3.8 1,046 4.78 Valet Parking 502 3.6 971 4.43 520 3.6 1,006 4.59 Other Income 174 1.2 337 1.54 180 1.3 348 1.59 Total 13,927 100.0 26,938 123.01 14,276 100.0 27,613 126.09 - ---------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES * Rooms 1,835 19.9 3,549 16.21 1,899 20.2 3,673 16.77 Food & Beverage 2,589 73.4 5,008 22.87 2,679 73.4 5,182 23.66 Telephone 253 48.5 489 2.23 262 48.4 507 2.31 Valet Parking 102 20.3 197 0.90 106 20.4 205 0.94 Other Income 17 9.8 33 0.15 18 10.0 35 0.16 Total 4,796 34.4 9,277 42.36 4,964 34.8 9,602 43.84 - ---------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 9,131 65.6 17,662 80.65 9,312 65.2 18,012 82.24 - ---------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 1,352 9.7 2,615 11.94 1,395 9.8 2,698 12.32 Management Fee 418 3.0 809 3.69 428 3.0 828 3.78 Marketing 725 5.2 1,402 6.40 749 5.2 1,449 6.62 Franchise Fees 299 2.1 578 2.64 305 2.1 590 2.69 Property Oper. & Maint. 844 6.1 1,632 7.45 871 6.1 1,685 7.69 Energy 945 6.8 1,828 8.35 977 6.8 1,890 8.63 Total 4,583 32.9 8,865 40.48 4,725 33.0 9,139 41.73 - ---------------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 4,548 32.7 8,797 40.17 4,587 32.2 8,872 40.51 - ---------------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 370 2.7 716 3.27 383 2.7 741 3.38 Insurance 201 1.4 389 1.78 208 1.5 402 1.84 Reserve for Replacement 557 4.0 1,077 4.92 571 4.0 1,104 5.04 Equipment Leases 271 1.9 524 2.39 280 2.0 542 2.47 Ground Leases 105 0.8 203 0.93 105 0.7 203 0.93 Total 1,504 10.8 2,909 13.28 1,547 10.9 2,992 13.66 - ---------------------------------------------------------------------------------------------------------------------------------- NET INCOME $3,044 21.9% $5,888 $26.88 $3,040 21.3% $5,880 $26.85 ================================================================================================================================== Food/Rooms 33.5% 34.0% Beverage/Food 14.4% 14.4% Telephone/Rooms 5.7% 5.8% Other Income/Rooms 1.9% 1.9%
* Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 109 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-31 Ten-Year Forecast of Income and Expense, Radisson Plaza, Fort Worth, Texas - --------------------------------------------------------------------------------
1997 1998 1999 2000 2001 -------------------- -------------------- -------------------- ------------------ ---------------------- No. of Rooms: 517 517 517 517 517 No. of Occupied Rooms: 118,884 113,223 113,223 113,223 113,223 Occupancy: 63.0% % of 60.0% % of 60.0% % of 60.0% % of 60.0% % of Average Rate: $80.47 Gross $81.28 Gross $82.91 Gross $85.81 Gross $88.81 Gross - ------------------------------------------------------------------------------------------------------------------------------------ REVENUE Rooms $9,567 67.0% $9,203 66.2% $9,387 65.8% $9,716 65.8% $10,056 65.8% Food 3,090 21.6 3,081 22.1 3,188 22.3 3,300 22.3 3,416 22.3 Beverage 446 3.1 445 3.2 460 3.2 477 3.2 493 3.2 Telephone 527 3.7 522 3.7 541 3.8 560 3.8 579 3.8 Valet Parking 493 3.4 502 3.6 520 3.6 538 3.6 557 3.6 Other Income 170 1.2 174 1.2 180 1.3 186 1.3 193 1.3 Total 14,293 100.0 13,927 100.0 14,276 100.0 14,777 100.0 15,294 100.0 - ------------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL EXPENSES* Rooms 1,810 18.9 1,835 19.9 1,899 20.2 1,966 20.2 2,035 20.2 Food & Beverage 2,545 72.0 2,589 73.4 2,679 73.4 2,773 73.4 2,870 73.4 Telephone 249 47.2 253 48.5 262 48.4 271 48.4 281 48.5 Valet Parking 99 20.1 102 20.3 106 20.4 109 20.3 113 20.3 Other Income 17 10.0 17 9.8 18 10.0 18 9.7 19 9.8 Total 4,720 33.0 4,796 34.4 4,964 34.8 5,137 34.8 5,318 34.8 - ------------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL INCOME 9,573 67.0 9,131 65.6 9,312 65.2 9,640 65.2 9,976 65.2 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING EXPENSES Administrative & General 1,331 9.3 1,352 9.7 1,395 9.8 1,444 9.8 1,494 9.8 Management Fee 429 3.0 418 3.0 428 3.0 443 3.0 459 3.0 Marketing 714 5.0 725 5.2 749 5.2 775 5.2 802 5.2 Franchise Fees 311 2.2 299 2.1 305 2.1 316 2.1 327 2.1 Property Oper. & Maint. 831 5.8 844 6.1 871 6.1 902 6.1 933 6.1 Energy 919 6.4 945 6.8 977 6.8 1,011 6.8 1,046 6.8 Total 4,535 31.7 4,583 32.9 4,725 33.0 4,891 33.0 5,061 33.0 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSE PROFIT 5,038 35.3 4,548 32.7 4,587 32.2 4,749 32.2 4,915 32.2 - ------------------------------------------------------------------------------------------------------------------------------------ FIXED EXPENSES Property Taxes 357 2.5 370 2.7 383 2.7 396 2.7 410 2.7 Insurance 194 1.4 201 1.4 208 1.5 215 1.5 222 1.5 Reserve for Replacement 572 4.0 557 4.0 571 4.0 591 4.0 612 4.0 Equipment Leases 262 1.8 271 1.9 280 2.0 290 2.0 300 2.0 Ground Leases 105 0.7 105 0.8 105 0.7 105 0.7 110 0.7 Total 1,490 10.4 1,504 10.8 1,547 10.9 1,597 10.9 1,654 10.9 - ------------------------------------------------------------------------------------------------------------------------------------ NET INCOME $3,548 24.9% $3,044 21.9% $3,040 21.3% $3,152 21.3% $3,261 21.3% ==================================================================================================================================== 2002 2003 2004 2005 2006 -------------------- ------------------------ --------------------- ----------------- ------------------- No. of Rooms: 517 517 517 517 517 No. of Occupied Rooms: 113,223 113,223 113,223 113,223 113,223 Occupancy: 60.0% % of 60.0% % of 60.0% % of 60.0% % of 60.0% % of Average Rate: $91.92 Gross $95.14 Gross $98.47 Gross $101.92 Gross $105.48 Gross - ----------------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $10,408 65.8% $10,772 65.8% $11,149 65.8% $11,539 65.8% $11,943 65.8% Food 3,535 22.3 3,659 22.3 3,787 22.3 3,919 22.3 4,057 22.3 Beverage 511 3.2 529 3.2 547 3.2 566 3.2 586 3.2 Telephone 599 3.8 620 3.8 642 3.8 665 3.8 688 3.8 Valet Parking 577 3.6 597 3.6 618 3.6 639 3.6 662 3.6 Other Income 199 1.3 206 1.3 214 1.3 221 1.3 229 1.3 Total 15,829 100.0 16,383 100.0 16,957 100.0 17,549 100.0 18,165 100.0 - ----------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES* Rooms 2,106 20.2 2,179 20.2 2,256 20.2 2,335 20.2 2,416 20.2 Food & Beverage 2,971 73.4 3,075 73.4 3,183 73.4 3,294 73.4 3,409 73.4 Telephone 291 48.6 301 48.5 311 48.4 322 48.4 334 48.5 Valet Parking 117 20.3 121 20.3 125 20.2 130 20.3 134 20.2 Other Income 20 10.1 20 9.7 21 9.8 22 10.0 23 10.0 Total 5,505 34.8 5,696 34.8 5,896 34.8 6,103 34.8 6,316 34.8 - ----------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 10,324 65.2 10,687 65.2 11,061 65.2 11,446 65.2 11,849 65.2 - ----------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 1,546 9.8 1,601 9.8 1,657 9.8 1,715 9.8 1,775 9.8 Management Fee 475 3.0 491 3.0 509 3.0 526 3.0 545 3.0 Marketing 830 5.2 859 5.2 889 5.2 920 5.2 952 5.2 Franchise Fees 338 2.1 350 2.1 362 2.1 375 2.1 388 2.1 Property Oper. & Maint. 966 6.1 1,000 6.1 1,035 6.1 1,071 6.1 1,108 6.1 Energy 1,083 6.8 1,121 6.8 1,160 6.8 1,201 6.8 1,243 6.8 Total 5,238 33.0 5,422 33.0 5,612 33.0 5,808 33.0 6,011 33.0 - ----------------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 5,086 32.2 5,265 32.2 5,449 32.2 5,638 32.2 5,838 32.2 - ----------------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 424 2.7 439 2.7 454 2.7 470 2.7 487 2.7 Insurance 230 1.5 238 1.5 247 1.5 255 1.5 264 1.5 Reserve for Replacement 633 4.0 655 4.0 678 4.0 702 4.0 727 4.0 Equipment Leases 311 2.0 322 2.0 333 2.0 345 2.0 357 2.0 Ground Leases 110 0.7 110 0.7 110 0.6 110 0.6 115 0.6 Total 1,708 10.9 1,764 10.9 1,822 10.8 1,882 10.8 1,950 10.8 - ----------------------------------------------------------------------------------------------------------------------------------- NET INCOME $3,378 21.3% $3,501 21.3% $3,627 21.4% $3,756 21.4% $3,888 21.4% ===================================================================================================================================
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 110 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The conversion of a property's projected net income into an estimate of value is based on the premise that investors typically purchase real estate with a small amount of equity cash (25% to 40%) and a large amount of mortgage financing (60% to 75%). The amounts and terms of available mortgage financing and the rates of return that are required to attract sufficient equity capital form the basis for allocating the net income between the mortgage and equity components and deriving a value estimate. Mortgage Component Data for the mortgage component may be developed from statistics of actual hotel mortgages made by long-term lenders. The American Council of Life Insurance, which represents 20 large life insurance companies, publishes quarterly information pertaining to the hotel mortgages issued by its member companies. The following table summarizes the average mortgage interest rates of the hotel loans made by these lenders. In addition, the average A corporate bond yield (as reported by Moody's Bond Record) is shown for the purpose of comparison. HVS International, Mineola, New York Income Capitalization Approach 111 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-32 Average Mortgage Interest Rates and Average A Corporate Bond Yields - -------------------------------------------------------------------------------- Average A Average Corporate Period Interest Rate Bond Yield - -------------------------------------------------------------------------------- 1st Quarter 1996 7.79 % 7.37 % 4th Quarter 1995 8.44 7.28 3rd Quarter 1995 8.61 7.67 2nd Quarter 1995 9.25 7.87 1st Quarter 1995 9.14 8.50 3rd Quarter 1994 9.64 8.48 2nd Quarter 1994 9.38 8.28 4th Quarter 1993 9.38 7.80 3rd Quarter 1993 8.41 7.28 2nd Quarter 1993 10.53 9.65 4th Quarter 1992 9.43 8.48 3rd Quarter 1992 9.99 8.38 2nd Quarter 1992 9.47 8.79 1st Quarter 1992 10.02 8.81 4th Quarter 1991 10.49 8.97 3rd Quarter 1991 10.03 9.29 2nd Quarter 1991 10.75 9.45 3rd Quarter 1990 10.47 9.89 2nd Quarter 1990 10.58 9.83 4th Quarter 1989 9.96 9.42 3rd Quarter 1989 9.55 9.46 2nd Quarter 1989 10.54 9.93 1st Quarter 1989 10.39 10.16 4th Quarter 1988 10.07 10.03 3rd Quarter 1988 10.66 10.51 2nd Quarter 1988 10.09 10.33 4th Quarter 1987 10.41 10.45 3rd Quarter 1987 10.00 9.95 2nd Quarter 1987 9.81 9.46 1st Quarter 1987 9.43 9.19 4th Quarter 1986 9.44 9.55 3rd Quarter 1986 9.56 9.71 2nd Quarter 1986 9.80 9.91 1st Quarter 1986 10.99 10.62 - -------------------------------------------------------------------------------- Because of the six- to nine-month lag time in reporting and publishing hotel mortgage statistics, it is necessary to update this information to reflect current lending practices. Research by HVS International indicates that there is a close mathematical relationship between the average interest rate of a HVS International, Mineola, New York Income Capitalization Approach 112 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= hotel mortgage and the concurrent yield on an average A corporate bond. Through a regression analysis, this relationship is expressed as follows. Y = 2.76078 + 0.782280 X Where: Y = Estimated Hotel/Motel Mortgage Interest Rate X = Current Average A Corporate Bond Yield (Coefficient of correlation is 96.4%) The average yield on A corporate bonds for the third quarter of 1996, as reported by Moody's Bond Record, was 7.91%. Using a factor of 7.91% in the equation presented above produces an estimated hotel/motel interest rate of 8.95%. In addition to the mortgage interest rate estimate derived from this regression analysis, HVS International constantly monitors the terms of hotel mortgage loans made by our institutional lending clients. In the past year, we have noted an increase in the availability of debt financing, and many lenders have returned to the market. The current level of lending activity represents a significant increase from the restricted environment of the early 1990s. Nonetheless, the market for hotel mortgage loans remains somewhat tight, particularly when compared to the conditions that prevailed in the mid-to late 1980s. In the current lending climate, strong hotel projects that are structured on an economic basis can secure mortgage financing at interest rates ranging from 8% to 11%, depending on the property, location, affiliation, and operator. In the 1980s, when hotel mortgages were widely available, loan-to-value ratios typically ranged from 75% to 80%. Amortization schedules were generally based on 30 years, although the term of the loan was more likely to be seven to ten years. The few loans that were underwritten in the early 1990s were based on far more stringent parameters: loan-to-value ratios declined to a range of 50% to 65%, and amortization periods of 20 to 25 years were most common. With the recent reemergence of hotel financing, loan-to-value requirements and amortization schedules have loosened somewhat. At present, we find that lenders who are active in the market are using loan-to-value ratios of 65% to 75%, and amortization periods of 25 to 30 years. The exact terms offered depend on specific factors such as the property's location, the age and quality of the physical facility, local hostelry market conditions, and HVS International, Mineola, New York Income Capitalization Approach 113 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= (perhaps more significantly) the profile of the borrower. The strongest projects typically command the highest loan-to-value ratios. Based on the preceding analysis of the current lodging industry mortgage market and adjustments for specific factors such as the property's location and conditions in the local hotel market, it is our opinion that a 25-year amortization mortgage with a 9.5% interest rate and a 0.111856 constant is appropriate for the subject property. We believe that a mortgage lender will lend up to 70% of the hotel's market value as determined by this appraisal. Equity Component The remaining capital required for a hotel investment generally comes from the equity investor. The rate of return that an equity investor expects over a ten-year holding period is known as the equity yield. Unlike the equity dividend, which is a short-term rate of return, the equity yield specifically considers a long-term holding period (generally ten years), annual inflation- adjusted cash flows, property appreciation, mortgage amortization, and proceeds from a sale at the end of the holding period. It is difficult to quantify the rate of return required by equity investors who are seeking to purchase hotel properties. To establish an appropriate equity yield rate, HVS International uses two sources of data: past appraisals and investor interviews. Past Appraisals - During the past 12 months, HVS International has appraised more than 400 hotels, including properties located in most major national markets. Each appraisal used a similar mortgage-equity approach in which income is projected and then discounted to a current value at rates reflecting the cost of debt and equity capital. In the case of hotels that were sold subsequent to our valuations, we are able to determine an appropriate equity yield rate by excluding incentive management fees from the projection of income and expense, inserting the projection into a valuation model, and adjusting the appraised value to reflect the actual sales price by modifying the return assumptions. The following table shows a representative sample of hotels that were sold shortly after we appraised them, along with the imputed equity return based on our valuation approach. HVS International, Mineola, New York Income Capitalization Approach 114 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-33 Sample of Hotels Sold - --------------------------------------------------------------------------------
No. of Date of Overall Total Property Equity Hotel City and State Rooms Sale Sales Price Rate Yield Yield - ---------------------------------------------------------------------------------------------------------------------------------- Ritz-Carlton Phoenix, AZ 281 2/94 $23,000,000 11.0% 14.6% 21.7% Marriott Marina Fort Lauderdale, FL 580 2/94 40,000,000 12.2 16.4 26.7 Holiday Inn Edison, NJ 274 3/94 11,803,000 7.8 17.0 26.3 Crescent Hotel Phoenix, AZ 342 3/94 26,000,000 6.5 7.2 2.2 Checkers Hotel Kempinski Los Angeles, CA 173 4/94 12,750,000 3.0 18.3 27.0 Best Western Fireside Inn Cambria, CA 46 4/94 3,377,000 11.7 15.8 24.3 Phoenician Resort Phoenix, AZ 580 4/94 224,000,000 6.6 9.3 8.9 Newark-Fremont Hilton Newark, CA 300 5/94 8,950,000 8.8 14.9 20.7 Radisson Inn Orlando, FL 299 5/94 11,150,000 12.9 18.0 28.2 Westin Kauai Lihue, Kauai, HI 840 6/94 97,400,000 (1.9) 8.1 7.2 Residence Inn Binghamton, NY 72 6/94 6,325,000 10.8 13.9 21.9 Hotel Millenium New York, NY 561 6/94 75,000,000 9.5 14.1 23.0 Best Western Otay Valley Chula Vista, CA 120 7/94 2,350,000 13.2 21.1 31.8 Hampton Inn Islandia, NY 121 7/94 6,572,000 12.6 16.6 28.2 Hampton Inn Willow Grove, PA 150 7/94 10,220,000 11.0 14.3 23.0 Hampton Inn West Palm Beach, FL 136 7/94 4,220,000 10.8 10.8 14.3 Hampton Inn Naples, FL 107 7/94 5,700,000 11.4 11.5 24.9 Hampton Inn Albany, NY 126 7/94 9,204,000 9.3 11.5 15.8 Marriott Hotel South Bend, IN 299 7/94 11,500,000 10.5 13.2 18.9 Marriott SFO Burlingame, CA 684 8/94 61,700,000 10.2 13.2 19.0 Westfields Conference Center Chantilly, VA 340 8/94 46,000,000 12.3 15.9 25.3 Radisson Mark Resort Vail, CO 349 9/94 25,200,000 8.9 15.8 24.1 Marriott East Side New York, NY 664 10/94 55,000,000 8.5 9.7 11.1 Marriott Resort Vail, CO 349 10/94 25,200,000 14.2 18.9 30.5 Marriott Quorum Addison, TX 547 10/94 29,815,000 13.5 18.2 31.8 Sheraton Hotel Hasbrouck Heights, NJ 338 11/94 10,450,000 18.3 21.1 30.7 Sheraton Inn Napa, CA 191 12/94 9,968,000 8.9 13.7 19.8 Marriott Fisherman's Wharf San Francisco, CA 255 12/94 27,755,000 10.8 13.4 19.4 Marriott Hotel Portland, OR 503 12/94 45,000,000 12.9 17.4 30.0 Radisson Inn Springfield, MO 199 12/94 5,800,000 8.2 10.1 11.3 Williamsburg Hilton Williamsburg, VA 291 12/94 15,000,000 15.4 19.0 32.0 Marriott Tech Center Denver, CO 625 12/94 36,000,000 13.7 16.4 27.1 Holiday Inn Sunspree Singer Island, FL 222 12/94 11,900,000 8.6 10.6 12.4 The Plaza New York, NY 805 6/95 325,000,000 7.0 11.0 14.0 Fullerton Suites Fullerton, CA 96 5/95 5,000,000 12.9 18.7 28.5 Residence Inn Baton Rouge, LA 80 6/95 6,518,000 12.7 14.8 21.2 Residence Inn Overland Park, KS 112 6/95 8,500,000 8.9 14.7 20.8 Residence Inn Des Moines, IA 112 6/95 7,660,000 9.8 14.1 19.6 Residence Inn Hunt Valley, MD 96 6/95 6,580,000 12.3 13.6 18.3 Residence Inn Kansas City, MO 112 6/95 6,560,000 10.4 13.2 19.8 Residence Inn Lincoln, NE 120 6/95 7,100,000 10.0 13.7 18.5 Embassy Suites Schaurmburg, IL 209 12/95 17,800,000 10.0 13.5 18.9 Marriott Hotel Andover, MA 293 12/95 24,000,000 9.7 13.5 19.2 Doubletree Suites Valley Forge, PA 229 12/95 28,500,000 10.7 14.2 15.5 Marriott Hotel Tysons Corner, VA 390 12/95 41,100,000 10.7 13.1 18.0 Marriott Hotel Warner Center, CA 461 12/95 57,900,000 6.2 11.6 14.2 Hilton at the Club Pleasanton, CA 294 12/95 22,000,000 10.5 13.4 17.0
Source: HVS International - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 115 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Investor Interviews - HVS International is in constant contact with numerous institutional and individual hotel investors. These sources of equity funds have definite return requirements that can be expressed as an equity yield rate based on a ten-year projection of net income before incentive management fees but after debt service. Based on our surveys and investor interviews, the following table illustrates the range of equity yields generally required by individual and institutional investors. ================================================================================ Table 10-34 Equity Yield Requirements - -------------------------------------------------------------------------------- Source Equity Yield Requirement ------ ------------------------ Individual 20% - 24% Institution 18% - 22% - -------------------------------------------------------------------------------- Based on the assumed 70% loan-to-value ratio, the risk inherent in achieving the projected income stream, and the age, condition, and anticipated market position of the subject property, it is our opinion that an equity investor is likely to require an equity yield rate of 22.0% before payment of incentive management fees. This estimate is well supported by the equity yield requirements presented previously. Terminal Capitalization Rate Inherent in this valuation process is the assumption of a sale at the end of the ten-year holding period. The estimated reversionary sales price as of that date is calculated by capitalizing the projected 11th-year net income by an overall terminal capitalization rate. A percentage for the seller's brokerage and legal fees is deducted from this sales price, and the net proceeds to the equity interest (also known as the equity residual) are calculated by deducting the outstanding mortgage balance from the reversion. To estimate a property's reversionary value, the appraiser must select a terminal capitalization rate and an allocation for brokerage and legal fees. The terminal capitalization rate is an overall rate that is applied to one stabilized year, and thus it inherently incorporates the cost of debt and equity capital. The terminal capitalization rate can be derived through a mortgage and equity band of investment technique which calculates the weighted average cost of the capital used in a hotel investment. Combining the mortgage financing terms derived previously (namely, a 70% loan-to-value ratio and a 0.111856 debt service constant) with a cash-on-cash equity dividend rate of 12% produces the following overall capitalization rate. HVS International, Mineola, New York Income Capitalization Approach 116 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-35 Terminal Capitalization Rate - -------------------------------------------------------------------------------- Percent of Rate of Weighted Value Return Average - --------------------------------------------------------------- Mortgage 70% x 0.11186 = 0.07830 Equity 30% x 0.12000 = 0.03600 --------- Overall Capitalization Rate 0.11430 - -------------------------------------------------------------------------------- Because this overall rate will be used to capitalize net income ten years from the date of value, an upward adjustment is appropriate to reflect the uncertainty inherent in this extended period. For the purpose of this valuation, we will use a terminal capitalization rate of 11.5%. As a point of reference, the terminal capitalization rate can be compared to the going-in rate implied by the subject property's estimated value. The going-in rate reflects the capitalization rate that would be applicable if the hotel were operating at a stabilized level as of the date of value. This rate is calculated by dividing the stabilized net income (expressed in current dollars as of the date of value) by the value indicated by the income capitalization approach. Generally, the terminal capitalization rate is approximately 100 to 200 basis points above the going-in rate. Summary of Valuation Variables The following table summarizes the valuation variables that have been used to estimate the subject property's value via the income capitalization approach. ================================================================================ Table 10-36 Summary of Valuation Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Forecast Loan-to-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.111856 Equity Yield Ye 22.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 11.5% - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 117 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Valuation of the Mortgage and Equity Components The valuation of the mortgage and equity components is accomplished through use of an algebraic equation that calculates the exact amount of debt and equity that the hotel will be able to support based on the anticipated cash flow (as derived from the forecast of income and expense) and the specific return requirements demanded by the mortgage lender (interest) and the equity investor (equity yield). The equation and the calculations associated with this simultaneous valuation formula are set forth in the Addenda to this report. Using the variables summarized above, we estimate the value of the subject property via the income capitalization approach at $26,171,000. Proof of Value The value is proven by calculating the yields to the mortgage and equity components during the projection period. If the mortgagee achieves a 9.5% yield and the equity yield is 22.0%, then $26,171,000 is the correct value by the income capitalization approach. Using the assumed financial structure set forth in the previous calculations, market value can be allocated between the debt and equity as follows. Mortgage Component (70%) $18,319,000 Equity Component (30%) 7,851,000 ----------- Total $26,171,000 The annual debt service is calculated by multiplying the mortgage component by the mortgage constant. Mortgage Component $18,319,000 Mortgage Constant 0.111856 ----------- Annual Debt Service $2,049,085 The cash flow to equity is calculated by deducting the debt service from the projected net income before debt service. HVS International, Mineola, New York Income Capitalization Approach 118 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-37 Forecast of Net Income to Equity - -------------------------------------------------------------------------------- Net Income Available for Net Income Year Debt Service Debt Service to Equity - -------------------------------------------------------------------------------- 1997 $3,548,000 - $2,049,000 = $1,499,000 1998 3,044,000 - 2,049,000 = 995,000 1999 3,040,000 - 2,049,000 = 991,000 2000 3,152,000 - 2,049,000 = 1,103,000 2001 3,261,000 - 2,049,000 = 1,212,000 2002 3,378,000 - 2,049,000 = 1,329,000 2003 3,501,000 - 2,049,000 = 1,452,000 2004 3,627,000 - 2,049,000 = 1,578,000 2005 3,756,000 - 2,049,000 = 1,707,000 2006 3,888,000 - 2,049,000 = 1,839,000 - -------------------------------------------------------------------------------- The equity residual at the end of the tenth year is calculated as follows. Reversionary Value ( $4,024,000 / 0.115 ) $34,991,000 Less: Brokerage and Legal Fees 1,050,000 Less: Mortgage Balance 13,197,000 ----------- Net Sale Proceeds to Equity $20,744,000 The overall property yield (before debt service), the yield to the lender, and the yield to the equity position have been calculated by computer with the following results. ================================================================================ Table 10-38 Overall Property Yields - -------------------------------------------------------------------------------- Projected Yield (Internal Rate of Return) Position Value Over 10-Year Holding Period - ------------------------------------------------------------------------------ Total Property $26,171,000 14.3% Mortgage 18,319,000 9.5 Equity 7,851,000 22.0 - -------------------------------------------------------------------------------- The following tables demonstrate that the property receives its anticipated yields, proving that the $26,171,000 value is correct based on the assumptions used in this approach. HVS International, Mineola, New York Income Capitalization Approach 119 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-39 Total Property Yield - -------------------------------------------------------------------------------- Net Income Before Present Worth of $1 Discounted Year Debt Service Factor at 14.3% Cash Flow ------------------------------------------------------------------------------- 1997 $3,548,000 x 0.874793 = $3,104,000 1998 3,044,000 x 0.765262 = 2,329,000 1999 3,040,000 x 0.669446 = 2,035,000 2000 3,152,000 x 0.585626 = 1,846,000 2001 3,261,000 x 0.512301 = 1,671,000 2002 3,378,000 x 0.448158 = 1,514,000 2003 3,501,000 x 0.392045 = 1,373,000 2004 3,627,000 x 0.342958 = 1,244,000 2005 3,756,000 x 0.300017 = 1,127,000 2006 37,830,000 * x 0.262453 = 9,929,000 ------------- Total Property Value $26,172,000 *Tenth-year net income of $3,888,000 plus sales proceeds of $33,942,000 - -------------------------------------------------------------------------------- ================================================================================ Table 10-40 Mortgage Component Yield - -------------------------------------------------------------------------------- Present Worth of $1 Discounted Year Debt Service Factor at 9.5% Cash Flow - ------------------------------------------------------------------------ 1997 $2,049,000 x 0.914266 = $1,873,000 1998 2,049,000 x 0.835883 = 1,713,000 1999 2,049,000 x 0.764219 = 1,566,000 2000 2,049,000 x 0.698700 = 1,432,000 2001 2,049,000 x 0.638798 = 1,309,000 2002 2,049,000 x 0.584031 = 1,197,000 2003 2,049,000 x 0.533960 = 1,094,000 2004 2,049,000 x 0.488181 = 1,000,000 2005 2,049,000 x 0.446328 = 915,000 2006 15,246,000 * x 0.408062 = 6,221,000 ------------ Value of the Mortgage Component $18,320,000 * Tenth-year debt service of $2,049,000 plus outstanding mortgage balance of $13,197,000 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 120 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-41 Equity Component Yield - -------------------------------------------------------------------------------- Net Income Present Worth of $1 Discounted Year to Equity Factor at 22.0% Cash Flow - --------------------------------------------------------------------- 1997 $1,499,000 x 0.819665 = $1,229,000 1998 995,000 x 0.671851 = 668,000 1999 991,000 x 0.550692 = 546,000 2000 1,103,000 x 0.451383 = 498,000 2001 1,212,000 x 0.369983 = 448,000 2002 1,329,000 x 0.303262 = 403,000 2003 1,452,000 x 0.248573 = 361,000 2004 1,578,000 x 0.203747 = 322,000 2005 1,707,000 x 0.167004 = 285,000 2006 22,584,000 * x 0.136887 = 3,091,000 ----------- Value of the Equity Component $7,851,000 * Tenth-year net income to equity of $1,839,000 plus sales proceeds of $20,745,000 - -------------------------------------------------------------------------------- Valuation Method Two: Discounted Cash Flow The total property yield derived from the previous valuation method was 14.3%. After reviewing the total property yields indicated by recent hotel sales, it is our opinion that a 14.0% discount factor is appropriate for the Radisson Plaza . The following table illustrates the discounted cash flow analysis using this 14.0% factor. HVS International, Mineola, New York Income Capitalization Approach 121 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-42 Discounted Cash Flow Analysis - -------------------------------------------------------------------------------- Discount Net Factor Discounted Year Income at 14.0% Cash Flow - ------------------------------------------------------------------- 1997 $3,548,000 x 0.87719 = $3,112,281 1998 3,044,000 x 0.76947 = 2,342,259 1999 3,040,000 x 0.67497 = 2,051,913 2000 3,152,000 x 0.59208 = 1,866,237 2001 3,261,000 x 0.51937 = 1,693,661 2002 3,378,000 x 0.45559 = 1,538,971 2003 3,501,000 x 0.39964 = 1,399,130 2004 3,627,000 x 0.35056 = 1,271,478 2005 3,756,000 x 0.30751 = 1,155,000 2006 37,829,565 * x 0.26974 = 10,204,291 --------------- Estimated Market Value: $26,635,222 (Say) $26,600,000 Reversion Analysis 11th-Year Net Income $4,024,000 Capitalization Rate 11.5% --------------- Total Sales Proceeds $34,991,304 Less: Brokerage & Legal Fees at 3.0% 1,049,739 --------------- Net Sales Proceeds $33,941,565 *Tenth-year net income of $3,888,000 plus sales proceeds of $33,941,565 - -------------------------------------------------------------------------------- Conclusion Based on our extensive experience in the hotel industry and comprehensive support provided by literature published by the Appraisal Institute, it is our opinion that the valuation procedure embodied by Method One most closely reflects the investment rationale of typical hotel buyers. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis and Valuations,(1) Method Two (which discounts the projected net income and reversion using an overall discount rate, or total property yield) "does not consider the impact of mortgage debt, leverage and the specific equity demands of typical hotel investors. This technique is simple but less reliable because the derivation of the discount rate has little support." In light of this consideration, we have relied on the $26,171,000 value conclusion indicated by Method One. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236 HVS International, Mineola, New York Sales Comparison Approach 122 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 11. Sales Comparison Approach The sales comparison approach is based on the assumption that an informed purchaser will pay no more for a property than the cost to acquire an existing property with equal utility. This approach estimates market value by considering the sales prices indicated by recent transactions involving properties that are similar to the property being appraised. Dissimilarities are resolved with appropriate adjustments; these differences may pertain to the date of sale, the age of the property, location, construction, condition, layout, equipment, size, or external economic factors. The reliability of the sales comparison approach depends on three factors: 1. the availability of timely, comparable sales data; 2. an understanding of the true terms of the sales and the motivation of the buyer and seller; 3. the degree of comparability, or the extent of the adjustments needed to reflect differences between the subject property and the comparable property. In appraising lodging facilities, it is often difficult to find an adequate number of recent sales involving hotels that are truly comparable to the subject property. Consequently, it may be necessary to consider transactions involving properties in different market areas, and the required adjustments greatly diminish the reliability of the conclusions. Moreover, it is virtually impossible for an observer to determine the true motivations of the buyers and sellers involved in transactions. Hotel acquisition often represents a highly ego-driven process in which a number of external, non-market factors influence the purchase price. Unless the appraiser can quantify these influences, there is no way of knowing whether the purchase price paid actually reflects market value. A final consideration is the degree of similarity between the subject property and the comparable; in most cases, the differences are significant enough to require numerous subjective and unsubstantiated adjustments. Each adjustment represents a potential for error, HVS International, Mineola, New York Sales Comparison Approach 123 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= and thus diminishes the reliability of this approach. As a result of these shortcomings, the use of the sales comparison approach in valuing hotels is primarily as a check against the value indicated by the income capitalization approach. Hotel values declined in many areas of the country during the late 1980s and early 1990s, although a rebound began in 1994 and 1995. The downturn, which began in most markets in 1988, was largely attributable to lower operating incomes caused by an oversupply of new hotel rooms constructed during the mid-1980s. Overbuilding resulted in flat or declining average rates and occupancies, which caused revenues to fall. A number of other factors exacerbated the situation. The national recession caused a drop in demand in many markets during the early 1990s, and the Persian Gulf War created a virtual freeze on travel in the beginning of 1991, further limiting hotel demand. Operating costs continued to rise despite poor market conditions, resulting in a decline in the net operating income of hotels throughout the nation. Because operating costs have a large fixed component, many lodging facilities experienced precipitous drops in net income. As bottom-line profits eroded, many hotels were unable to meet debt service, and hundreds of properties entered foreclosure or bankruptcy. Lenders and government agencies soon became hotel owners. Because most financial institutions were preoccupied with their distressed real estate, very little mortgage capital was available and the nation suffered from a well-publicized credit crunch. Most hotel transactions that occurred during the early 1990s were financed by the property owners, who, in most cases, were lenders. In the early 1990s, the primary market participants were owner-operators with the expertise to turn around under-performing properties. Hotels were out of favor with passive investors as a result of the industry's poor operating performance and the uncertainty of future appreciation. The wide disparity in buyer and seller expectations also limited the number of transactions. Many sellers were unwilling to accept the fact that the market value of their hotel investments had declined below the cost of the project or the original investment. Moreover, many owners were faced with a significant tax burden upon sale, further reducing their willingness to settle for a price that was below the original acquisition cost. As a result of these market forces, there was very little sales activity involving large, high-quality hotels. The primary difficulty was the lack of HVS International, Mineola, New York Sales Comparison Approach 124 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= properties available for sale; owners who were not forced to sell opted to wait for prices to recover. The few hotels that did enter the market generally attracted 15 to 20 interested bidders, mostly consisting of owner-operators. As a result of the competition for these few assets, the prices of better-quality hotels began to escalate rapidly. In response, more sellers have been encouraged to place their products on the market. An indicator of this market trend is the number of hotel sales that have occurred during the past few years. HVS International tracks major hotel transactions of more than $10,000,000 on an annual basis. In 1992, the number of major transactions was 67; a slightly lower level of 52 was registered in 1993. This total increased significantly (to 92) in 1994, and the 1995 total is estimated to have been 104. In tandem with escalating prices, hotels are again being considered by traditional financing sources, which had virtually abandoned the hospitality industry by the early 1990s. Although many lenders are still approaching the market with a high degree of caution, it is now possible to obtain third-party financing for hotel transactions. The mortgage loans that are now being made are subject to fairly stringent requirements: loan-to-value ratios remain in the 65% to 75% range. The qualification of the borrower is also a crucial consideration for most lenders. We believe that the upward trend in both pricing and sales activity will continue as financing becomes more available and additional buyers (particularly passive investors) enter the market. Consequently, it is important to consider the date of the transactions used in the sales comparison approach. When the comparable sales are not recent enough to provide an accurate picture of the current market, it may be necessary to make upward adjustments to the values indicated by the sales comparison and income capitalization approaches in recognition of the recent escalation. Comparable Sales Based on information provided by the Hospitality Market Data Exchange and compiled by the six offices of HVS International, the following transactions involved hotels that appear to have some degree of comparability to the subject property. HVS International, Mineola, New York Sales Comparison Approach 125 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #1: -------- Property: Sheraton at Intercontinental Airport Location: Houston, Texas Date of Sale: September, 1996 Sales Price: $21,700,000 Grantor: John Hancock Grantee: HEI Hotels Year Opened: 1983 Number of Rooms: 418 Price per Room: $51,914 Confirmed By: HEI Hotels Sale #2: -------- Property: Baton Rouge Hilton Location: Baton Rouge, Louisiana Date of Sale: May, 1996 Sales Price: $14,500,000 Grantor: Private Family Grantee: Davidson Hotels Year Opened: 1976 Number of Rooms: 298 Price per Room: $48,658 Confirmed By: Davidson Hotels Sale #3: -------- Property: Radisson Bloomington Location: Bloomington, Minnesota Date of Sale: December, 1995 Sales Price: $31,800,000 Grantor: MPI Metric Grantee: LaSalle Partners Year Opened: 1969 Number of Rooms: 580 Price per Room: $54,828 Confirmed By: 1995 Major Sales HVS International, Mineola, New York Sales Comparison Approach 126 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #4: -------- Property: Radisson Twin Towers Location: Orlando, Florida Date of Sale: November, 1995 Sales Price: $37,625,000 Grantor: Bank of America Grantee: MUI Group (Malaysia) Year Opened: 1975 Number of Rooms: 742 Price per Room: $50,708 Sale #5: -------- Property: Denver Radisson Location: Denver, Colorado Date of Sale: January, 1995 Sales Price: 37,000,000 Grantor: Private Seller Grantee: HBE Corporation Year Opened: 1960 Number of Rooms: 740 Price per Room: $50,000 Confirmed By: Adams Mark Hotels (Purchaser) In addition to considering the transactions outlined above, we have also reviewed the 1994 sale of the subject property. The details of this transaction are summarized as follows. Subject Property: ----------------- Property: Radisson Plaza Location: Forth Worth, Texas Date of Sale: June, 1994 Sales Price: $8,650,000 Grantor: Aetna Life insurance Corporation Grantee: Tower I & II Associates Hotel Limited Partnership (an entity controlled by Ashford Financial Corp.) Year Opened: 1921 Number of Rooms: 517 Price per Room: $16,731 HVS International, Mineola, New York Sales Comparison Approach 127 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= In analyzing the sale of the subject property, it is important to consider the terms and conditions pertaining to the transaction. The seller had acquired ownership of the hotel through foreclosure, and was reportedly motivated to dispose of the property. This was an all-cash transaction, and reports indicate that the deal closed extremely quickly. Based on our understanding of the terms of this transaction, we do not believe that this sale was reflective of market value. The relevance of the transaction involving the subject property is also undermined by the significant change in market conditions that occurred between the date of this sale and the date of value of this appraisal. Areawide occupancy and average rate have improved in the intervening months, and this favorable trend is expected to continue. As previously discussed, the market for hotel investments has also improved significantly as a result of changes in lender and investor attitudes. Finally, the property itself has undergone a significant renovation, in which approximately $2,200,000 was spent to upgrade the facilities and amenities. For these reasons, it is our opinion that the June, 1994 sale of the subject property is not a reliable indicator of the hotel's current value. Conclusion Although the sales comparison approach may be useful in providing a value range and reflecting certain market characteristics, its applicability is limited by the numerous possible points of difference between the subject property and other hotels that have sold in recent years. These factors may include location, access, size, services and facilities offered, market conditions, chain affiliation, market orientation, management, rate structure, age, physical condition, date of sale, the highest and best use of the land, and the anticipated profitability of the operation. Circumstances surrounding a sale, such as financing terms, tax considerations, income guarantees, sales of partial interests, duress on the part of the buyer or seller, or a particular deal structure can also cause a disparity between the sales price and pure market value. Moreover, it is often difficult to determine the marketing periods that were necessary to consummate the transactions. It is extremely difficult to quantify the appropriate adjustment factors accurately because of their number and complexity, as well as the difficulty in obtaining specific, detailed information. Any attempt to manipulate the necessary adjustments is insupportable and purely speculative. Because appraisers are expected to reflect the analytical processes and actions of typical buyers and sellers rather than to create a highly subjective valuation approach, the investment rationale of hotel owners is an essential HVS International, Mineola, New York Sales Comparison Approach 128 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= consideration. As specialists in the valuation of hotels, we find that typical buyers purchase properties based on a thorough analysis of the anticipated economic benefits of property ownership, rather than on historical sales data. In light of these factors, it is our opinion that the sales comparison approach is unsuitable for indicating a specific estimate of the subject property's market value; however, this approach may indicate a range of values that can be used to test the reasonableness of the value indicated by the income capitalization approach. Excluding the prior sale of the subject property, the sales prices range from approximately $48,700 to $54,800 per room, or roundly $25,200,000 to $28,300,000 for the 517-unit subject property. The income capitalization approach indicates a value of $26,171,000, which falls within this range. HVS International, Mineola, New York Cost Approach 129 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 12. Cost Approach The cost approach is founded on the principle of substitution, which implies that no prudent person will pay more for a property than the amount needed to acquire a site and construct a building of equal desirability and utility without undue delay. This approach estimates market value by first calculating the current cost of replacing the improvements. Appropriate deductions are made for depreciation resulting from physical deterioration, functional obsolescence, and external (economic) obsolescence, and the land value is added to the depreciated replacement cost to provide an estimate of market value. The cost approach employs the following steps. 1. The current replacement or reproduction cost is estimated. 2. Land value is estimated using techniques such as allocation, extraction, or ground rent capitalization. 3. Accrued depreciation, which can be divided into physical deterioration, functional obsolescence, and external obsolescence, is estimated. 4. Total depreciation is deducted from the subject property's replacement cost, and the land value is added to arrive at an estimate of value via the cost approach. When forming their purchase decisions regarding existing properties, market participants tend to consider the cost of developing a new hotel with optimal physical and functional utility. External conditions, such as a depressed market for real estate, can cause a property to be worth less than its replacement cost as new. The task of estimating the loss in value resulting from incurable functional and external obsolescence is highly subjective. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements age and begin to deteriorate, the loss in value resulting from physical obsolescence becomes increasingly difficult to quantify accurately. Loss in value HVS International, Mineola, New York Cost Approach 130 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= attributable to functional obsolescence can be even more difficult to determine. The subject property's West Tower was constructed in 1921, and thus is more than 75 years old as of the date of this appraisal; the East Tower was added in 1983, and thus is roughly 13 years old. Like any building of this age, the subject property shows certain signs of physical and functional obsolescence, including lack of elevators in the East Tower parking garage and service areas. We also note that additional maintenance is required to keep all systems in working order as the property ages. The depressed hotel market conditions that prevailed in the late 1980s and the early 1990s have also led to a degree of external obsolescence. In our opinion, it is impossible to identify and quantify the impact of these factors on the property's value with any accuracy, so we will only estimate the hotel's replacement cost. Replacement Cost Replacement cost is the current construction cost of a building with the same utility as the subject property, but built with modern materials and according to current construction and design standards. For the purpose of estimating the replacement cost of the subject property, we have used a hotel development cost survey conducted by HVS International. This survey is published annually in a newsletter entitled The Hotel Valuation Journal, and appeared in the May issue of Lodging Hospitality. The survey presents the range of per-room costs associated with various components of hotel development, including the improvements, the furniture, fixtures, and equipment, pre-opening expenses, and operating capital. Statistics are compiled for three broad categories of hotels: luxury, standard, and economy. The results of this survey are presented in the following table. HVS International, Mineola, New York Cost Approach 131 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 12-1 Hotel Development Cost Survey (Amounts per Room) - --------------------------------------------------------------------------------
Improvements Furniture & Equipment Pre-Opening Operating Capital Total Percent Change - ------------------------------------------------------------------------------------------------------------------------------------ 1976 Luxury $32,000 - $55,000 $5,000 - $10,000 $1,000 - $2,000 $1,000 - $1,500 $39,000 - $68,500 --- - --- Standard 20,000 - 32,000 3,000 - 6,000 750 - 1,000 750 - 1,000 24,500 - 40,000 --- --- Economy 8,000 - 15,000 2,000 - 4,000 500 - 1,000 500 - 750 11,000 - 20,750 --- - --- 1979 Luxury 36,000 - 65,000 8,000 - 15,000 1,500 - 3,000 1,500 - 2,000 47,000 - 85,000 6.8 - 8.0 Standard 25,000 - 36,000 5,000 - 10,000 1,000 - 2,000 1,000 - 1,500 32,000 - 49,500 10.2 - 7.9 Economy 10,000 - 20,000 3,000 - 5,000 750 - 1,000 750 - 1,000 14,500 - 27,000 10.6 - 10.0 1981 Luxury 45,000 - 80,000 10,000 - 20,000 2,000 - 3,500 2,000 - 2,500 59,000 - 106,000 12.8 - 12.4 Standard 25,000 - 40,000 7,000 - 13,000 1,200 - 2,500 1,200 - 2,000 34,400 - 57,500 3.8 - 8.1 Economy 13,000 - 25,000 4,000 - 7,000 700 - 1,200 900 - 1,200 18,600 - 34,400 14.1 - 13.7 1983 Luxury 55,000 - 100,000 12,500 - 20,000 2,300 - 4,000 2,000 - 2,800 71,800 - 126,800 10.8 - 9.8 Standard 35,000 - 50,000 9,000 - 15,000 1,400 - 3,000 1,300 - 2,200 46,700 - 70,200 17.9 - 11.0 Economy 18,000 - 32,000 5,000 - 8,000 800 - 1,500 900 - 1,300 24,700 - 42,800 16.4 - 12.2 1985 Luxury 60,000 - 115,000 13,400 - 30,000 3,000 - 5,000 2,100 - 3,100 78,500 - 153,100 4.7 - 10.4 Standard 38,000 - 57,000 9,500 - 16,500 1,900 - 3,600 1,500 - 2,500 50,900 - 79,600 4.5 - 6.7 Economy 20,000 - 36,000 5,000 - 8,800 1,000 - 1,700 1,000 - 1,500 27,000 - 48,000 4.7 - 6.1 1986 Luxury 62,000 - 120,000 13,700 - 30,600 3,100 - 5,200 2,300 - 3,100 81,100 - 158,900 3.3 - 3.8 Standard 39,000 - 60,000 9,700 - 16,800 2,000 - 3,800 1,500 - 2,600 52,200 - 83,200 2.6 - 4.5 Economy 21,000 - 37,000 5,100 - 9,000 1,000 - 1,800 1,100 - 1,500 28,200 - 49,300 4.4 - 2.7 1987 Luxury 63,000 - 122,000 13,800 - 30,900 3,300 - 5,500 2,300 - 3,200 82,400 - 161,600 1.6 - 1.7 Standard 40,000 - 61,000 9,800 - 16,800 2,100 - 3,900 1,500 - 2,600 53,400 - 84,300 2.3 - 1.3 Economy 21,000 - 39,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 28,400 - 51,400 0.7 - 4.3 1988 Luxury 65,000 - 125,000 14,000 - 31,000 3,300 - 5,500 2,300 - 3,200 84,600 - 164,700 2.7 - 1.9 Standard 41,000 - 63,000 10,000 - 17,100 2,100 - 3,900 1,500 - 2,600 54,600 - 86,600 2.2 - 2.7 Economy 22,000 - 40,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 29,400 - 52,400 3.5 - 1.9 1989 Luxury 66,000 - 126,000 15,000 - 32,000 3,300 - 5,500 2,300 - 3,200 86,600 - 166,700 2.4 - 1.2 Standard 41,000 - 64,000 10,500 - 18,000 2,100 - 3,900 1,500 - 2,600 55,100 - 88,500 0.9 - 2.2 Economy 22,000 - 40,000 5,500 - 9,700 1,100 - 1,800 1,100 - 1,500 29,700 - 53,000 1.0 - 1.1 1990 Luxury 67,000 - 128,000 15,400 - 33,000 3,500 - 5,700 2,500 - 3,500 88,400 - 170,200 2.1 - 2.1 Standard 42,000 - 65,000 10,800 - 18,500 2,200 - 4,000 1,600 - 2,800 56,600 - 90,300 2.7 - 2.0 Economy 22,500 - 41,000 5,600 - 10,000 1,200 - 1,800 1,200 - 1,600 30,500 - 54,400 2.7 - 2.6 1991 Luxury 65,000 - 122,000 14,500 - 31,500 3,700 - 5,900 2,600 - 3,600 85,800 - 163,000 (2.9) - (4.2) Standard 40,000 - 63,000 10,000 - 17,800 2,300 - 4,200 1,700 - 2,900 54,000 - 87,900 (4.6) - (2.7) Economy 21,000 - 39,000 5,000 - 9,500 1,300 - 2,000 1,300 - 1,700 28,600 - 52,200 (6.2) - (4.0) 1992 Luxury 64,000 - 120,000 14,200 - 30,900 3,800 - 6,100 2,700 - 3,700 84,700 - 160,700 (1.3) - (1.4) Standard 39,000 - 62,000 9,800 - 17,400 2,300 - 4,400 1,800 - 3,000 52,900 - 86,800 (2.0) - (1.3) Economy 21,000 - 38,000 4,900 - 9,300 1,400 - 2,100 1,300 - 1,800 28,600 - 51,200 0.0 - (1.9) 1993 Luxury 63,000 - 119,000 14,000 - 30,500 3,900 - 6,200 2,800 - 3,800 83,700 - 159,500 (1.2) - (0.7) Standard 39,000 - 61,000 9,700 - 17,200 2,300 - 4,500 1,800 - 3,000 52,800 - 85,700 (0.2) - (1.3) Economy 21,000 - 38,000 4,900 - 9,200 1,400 - 2,100 1,300 - 1,800 28,600 - 51,100 0.0 - (0.2) 1994 Luxury 64,000 - 121,000 14,300 - 31,100 3,900 - 6,200 2,800 - 3,800 85,000 - 162,100 1.6 - 1.6 Standard 40,000 - 63,000 10,000 - 17,600 2,400 - 4,600 1,800 - 3,000 54,200 - 88,200 2.7 - 2.9 Economy 22,000 - 40,000 5,100 - 9,500 1,500 - 2,200 1,300 - 1,800 29,900 - 53,500 4.5 - 4.7 1995 Luxury 65,000 - 124,000 14,800 - 32,300 4,100 - 6,400 2,900 - 4,000 86,800 - 166,700 2.1 - 2.8 Standard 41,000 - 65,000 10,400 - 18,300 2,500 - 4,800 1,900 - 3,100 55,800 - 91,200 3.0 - 3.4 Economy 23,000 - 42,000 5,400 - 9,900 1,600 - 2,300 1,300 - 1,800 31,300 - 56,000 4.7 - 4.7
Average Annual Compounded Percent Change: 1976 - 1995: Luxury 4.3% - 4.8% 1986 - 1995: Luxury 0.8% - 0.5% Standard 4.4% - 4.4% Standard 0.7% - 1.0% Economy 5.7% - 5.4% Economy 1.2% - 1.4% - -------------------------------------------------------------------------------- HVS International, Mineola, New York Cost Approach 132 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= As illustrated by the previous table, hotel development costs rose significantly during the late 1970s and the early 1980s; however, the rate of increase slowed substantially in 1987. In 1991, hotel development costs declined for the first time since 1976. Further drops of as much as 2.0% were registered in 1992. Between 1986 and 1990, average annual compounded increases ranged from 1.7% to 2.5%. Costs rose slowly (at average annual compounded rates ranging from 0.5% to 1.4%) between 1986 and 1995, largely as a result of the declines in 1991, 1992, and 1993. In 1995, hotel development costs started to escalate more rapidly, reaching 4.7% in the economy segment. As more hotels are developed, we expect costs to continue to rise. Because the replacement cost tends to set the upper limit of a particular hotel's value, this figure is relevant to our analysis. We estimate the replacement cost of the subject property as follows, based on the development cost survey discussed earlier. ================================================================================ Table 12-2 Subject Property's Replacement Cost - -------------------------------------------------------------------------------- Cost No. of Hotel Cost per Room Rooms Total Cost - -------------------------------------------------------------- Building $61,500 517 $31,795,500 FF&E 17,000 517 8,789,000 Pre-Opening 4,300 517 2,223,100 Operating Capital 2,700 517 1,395,900 - -------------------------------------------------------------- Total $85,500 $44,203,500 - -------------------------------------------------------------------------------- Ground Lease Approach to Land Valuation Land value may be estimated either by the sales comparison approach, using comparable land sales, or by the ground lease approach, which is based on the economic value generated by an improvement that represents the property's highest and best use. Because it is unusual to find recent sales of comparable vacant land that is slated for imminent hotel development, we have used the ground lease approach to determine the subject property's land value. Hotels are often constructed on leased land, and although lease terms differ somewhat, the basis for the rental calculation is frequently tied to a percentage of revenue. By applying a typical ground lease rental formula to the subject property's stabilized revenues, the appraiser can determine the hotel's economic rent, or what is also known as the income attributable to HVS International, Mineola, New York Cost Approach 133 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the land. Land value is then calculated by dividing the economic rent by an appropriate capitalization rate. The self-adjusting aspect of this approach is key to its reliability. Because the rental formula is tied to a percentage of revenue that inherently reflects both the locational attributes of the site (occupancy and rate) and the allowable density of development, the resulting economic ground rent justly represents the greatest net return to the land over a given period. Because the Radisson Plaza appears to represent the highest and best use of the property, the ground lease approach is an appropriate method of determining land value. We have researched long-term hotel ground leases in search of rental formulas that are based on a percentage of rooms revenue or on a combination of rooms, food, and beverage revenue. This analysis indicates that economic ground rents for hotels similar to the subject property typically range from 2.7% to 7.8% of rooms revenue. Although this range is quite broad, most of the formulas yield rental percentages of between 3.0% and 5.0% of rooms revenue. The land beneath the subject property's West Tower and the parking garage is leased; however, the lease payments are set by a predetermined schedule, and are not calculated based on a percentage of rooms revenue. In order to determine the value of the land that would be transferable upon a sale of the subject property, we have determined the economic ground rent of the entire parcel using the ground lease approach. We then subtracted the actual rent of the leased portion of the site, yielding the total economic ground rent for the portion of the site that is not leased. We then applied a capitalization rate to this figure to determine the value of the fee simple portion of the subject property's land. After considering these comparable ground leases and the locational attributes of the subject property, we believe the appropriate economic ground rental percentage is 4.0% of stabilized rooms revenue. The subject property's stabilized rooms revenue has been deflated to reflect 1997 dollars. The following calculation shows the derivation of the subject property's total economic ground rent. Stabilized Rooms Revenue (1997 Dollars) $8,762,865 Rental Percentage 0.04 ---------- Economic Ground Rent $350,515 HVS International, Mineola, New York Cost Approach 134 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= As illustrated below, the actual rent paid by for the land underlying the West Tower and the parking garage is subtracted from the total economic ground rent. Economic Ground Rent $350,515 Less: Actual Ground Rent 105,000 -------- Net Economic Ground Rent $245,515 Rent generated by a ground lease represents a fairly low-risk income flow. Because the tenant improvements typically amount to more than eight times the value of the land, the risk of default is low. When the ground lease terms are tied to rooms revenue, the landlord is also protected from the adverse effects of inflation. Based on these risk factors and the current cost of long-term capital, we estimate the appropriate ground rental overall capitalization rate at 10.0%. Applying this indicated capitalization rate to the subject property's net economic ground rent yields the following estimate of land value. Economic Ground Rent $245,515 $2,455,146 -------------------- = -------- = Capitalization Rate 0.10 Estimated Land Value (Say) $2,500,000 Replacement Cost Combining the replacement cost of the property with the land value yields the subject property's total replacement cost. ================================================================================ Table 12-3 Total Replacement Cost - -------------------------------------------------------------------------------- Cost of the Improvements and FF&E $44,203,500 Land Value 2,500,000 ------------- Total Replacement Cost $46,703,500 (Say) $46,700,000 - -------------------------------------------------------------------------------- If a property's replacement cost is significantly higher than the values indicated by the income capitalization and sales comparison approaches, it may indicate that an upward adjustment of these values is appropriate. This would also reduce the probability of new hotel development, which is not likely to be feasible under those conditions. This creates an effective barrier to entry for new competition, thus reducing the risk associated with the subject property's income-generating potential. An upward adjustment of HVS International, Mineola, New York Cost Approach 135 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the value indicated by the income capitalization approach is also justified by this barrier to entry. We find that knowledgeable hotel buyers generally base their purchase decisions on economic factors, such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, it is our opinion that the cost approach is inapplicable in estimating the market value of the Radisson Plaza . However, we have estimated the subject property's replacement cost as new, which may set the upper limit of the hotel's value. HVS International, Mineola, New York Reconciliation of Value Indications 136 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 13. Reconciliation of Value Indications The reconciliation, which is the last step in the appraisal process, involves summarizing and correlating the data and procedures employed throughout the analysis. The final conclusion of value is arrived at after reviewing the estimates indicated by the income capitalization, sales comparison, and cost approaches. The relative significance, applicability, and defensibility of each indicated value is considered, and the greatest weight is given to that approach deemed most appropriate for the property being appraised. The purpose of this report is to estimate the market value of the fee simple interest in the subject property. Our appraisal involves a careful analysis of the property itself and the economic, demographic, political, physical, and environmental factors that influence real estate values. Based on the data set forth in this report, the following value indications were developed. Approach Value Indication -------- ---------------- Income Capitalization $26,171,000 Sales Comparison $25,200,000 - $28,300,000 Cost (Replacement Cost) $46,700,000 Income Capitalization Approach To estimate the subject property's value via the income capitalization approach, we analyzed the local market for transient accommodations, examined the competitive environment, projected occupancy and average rate levels, and developed a forecast of income and expense that reflects anticipated income trends and cost components through a stabilized year of operation. The subject property's projected net income before debt service was then allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component was calculated; the total of the mortgage and equity components equates to the value of the property. HVS International, Mineola, New York Reconciliation of Value Indications 137 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Our nationwide experience indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the hotel investors who constitute the marketplace. For this reason, we believe that the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in our final estimate of the subject property's market value. Sales Comparison Approach The sales comparison approach uses actual sales of similar properties to provide an indication of the subject property's value. The strength of this approach is that it measures value based on the investment decisions made by actual buyers and sellers. Although we have investigated a number of sales in an attempt to develop a range of value indications, several adjustments are necessary to render the sales prices applicable to the subject property. These adjustments, which are numerous and highly subjective, diminish the reliability of the sales comparison approach. Furthermore, we find that typical hotel investors employ a sales comparison procedure only to establish broad value parameters. The hotel sales outlined earlier in this report indicate a value range of roundly $48,700 to $54,800 per available room. The income capitalization approach indicates a per-room value of approximately $50,620. This information suggests that a slight downward adjustment of the value indicated by the income capitalization approach may be warranted. Cost Approach To estimate the subject property's value via the cost approach, we estimated the current replacement cost of the property and added the land value. We give the cost approach limited weight in arriving at a final value estimate, because knowledgeable buyers of lodging facilities generally base their purchase decisions on economic factors (such as projected net income and return on investment) rather than on a property's depreciated replacement cost. The replacement cost estimate developed via the cost approach can help to corroborate the results of the income capitalization and sales comparison approaches to value. If the replacement cost is substantially higher or lower than the value indicated by the income capitalization approach, an adjustment of the income capitalization approach value may be necessary. HVS International, Mineola, New York Reconciliation of Value Indications 138 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Value Conclusion Careful consideration has been given to the strengths and weaknesses of the three approaches to value discussed above. In recognition of the purpose of this appraisal, we have given primary weight to the value indicated by the income capitalization approach and made some subjective adjustments based on the sales comparison approach, the replacement cost estimate, and our extensive experience in the hospitality industry. It is our opinion that the market value of the fee simple and leasehold interests in the Radisson Plaza in Fort Worth, Texas, as of January 1, 1997, is: $25,850,000 TWENTY FIVE MILLION EIGHT HUNDRED FIFTY THOUSAND DOLLARS The estimate of market value includes the land, the improvements, and the furniture, fixtures, and equipment. The appraisal assumes that the hotel is open and operational. This value estimate equates to roundly $50,000 per room, which is well supported by market sales and approximately 1.2% lower than the value indicated by the income capitalization approach. The estimate of value assumes either the availability of third-party financing or the willingness and capability of the seller to take back purchase-money financing so that a buyer can obtain the level of debt set forth in the Income Capitalization Approach section of this appraisal. Marketing Period Our estimate of market value assumes a marketing period of six to nine months. Under normal economic conditions, hotels are transferred within this time frame. Personal Property In accordance with the appraisal standards set forth by the Office of the Comptroller of the Currency, it is necessary for bank appraisals to identify and value any personal property, fixtures, or intangible items that are included in the appraisal and discuss their impact on the overall estimate of market value. A hotel's income-generating ability depends on a suitable inventory of furniture, fixtures, and equipment. Removal of these items can decrease the property value by as much as the cost to replace the inventory plus the loss of income incurred while the hotel cannot function. A hotel's personal property consists of a wide variety of components, including bedroom furnishings, bathroom fixtures, restaurant and kitchen equipment, front office and accounting computers, exterior signs, and HVS International, Mineola, New York Reconciliation of Value Indications 139 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= similar items. Our inspection of the Radisson Plaza indicates that the personal property and fixtures are good condition. Based on an annual construction cost survey conducted by HVS International, we estimate the total replacement cost of the subject property's furniture, fixtures, and equipment at $17,000 per available room. Assuming an average useful life of ten years and an effective age of three years, the value of the furniture, fixtures, and equipment currently in place is approximately $11,899 per room, or a total of $6,152,000. Because furniture, fixtures, and equipment are essential to a hotel's income-generating ability and are seldom removed from the property or sold separately, the separation of the personal property component from the real property is not particularly meaningful. The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) stipulates that "...any business interest or other intangible item should be valued separately within the appraisal."(1) Hotels have both business and real estate components; without the business expertise necessary to operate the facility, a hostelry would have little real estate value. (1) Federal Register, Vol. 55, No. 143, July 25, 1990, p. 30205. HVS International, Mineola, New York Statement of Assumptions and 140 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 14. Statement of Assumptions and Limiting Conditions 1. This report is to be used in whole and not in part. 2. No responsibility is assumed for matters of a legal nature, nor do we render any opinion as to title, which is assumed to be marketable and free of any deed restrictions and easements. The property is valued as though free and clear unless otherwise stated. 3. We assume that there are no hidden or unapparent conditions of the sub-soil or structures, such as underground storage tanks, that would render the property more or less valuable. No responsibility is assumed for these conditions or for any engineering that may be required to discover them. 4. We have not considered the presence of potentially hazardous materials such as asbestos, urea formaldehyde foam insulation, PCBs, any form of toxic waste, polychlorinated biphengyls, pesticides, or lead-based paints. The appraisers are not qualified to detect hazardous substances, and we urge the client to retain an expert in this field if desired. 5. The Americans with Disabilities Act (ADA) became effective on January 26, 1992. We have conducted no specific compliance survey to determine whether the subject property is operating in accordance with the various detailed requirements of the ADA. It is possible that the property does not conform to the requirements of the act, and this could have an unfavorable effect on value. Because we have no direct evidence regarding this issue, our estimate of value does not consider possible non-compliance with the ADA. 6. We have made no survey of the property, and we assume no responsibility in connection with such matters. Sketches, photographs, maps, and other exhibits are included to assist the reader in visualizing the property. It is assumed that the use of the land and improvements is HVS International, Mineola, New York Statement of Assumptions and 141 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= within the boundaries of the property described, and that there is no encroachment or trespass unless noted. 7. All information, financial operating statements, estimates, and opinions obtained from parties not employed by HVS International are assumed to be true and correct. We can assume no liability resulting from misinformation. 8. Unless noted, we assume that there are no encroachments, zoning violations, or building violations encumbering the subject property. 9. The property is assumed to be in full compliance with all applicable federal, state, local, and private codes, laws, consents, licenses, and regulations (including a liquor license where appropriate), and that all licenses, permits, certificates, franchises, and so forth can be freely renewed or transferred to a purchaser. 10. All mortgages, liens, encumbrances, leases, and servitudes have been disregarded unless specified otherwise. 11. None of this material may be reproduced in any form without our written permission, and the report cannot be disseminated to the public through advertising, public relations, news, sales, or other media. 12. We are not required to testify or appear in court by reason of this analysis without previous arrangements, and only when our standard per diem fees and travel costs are paid prior to the appearance. 13. If the reader is making a fiduciary or individual investment decision and has any questions concerning the material presented in this report, it is recommended that the reader contact us. 14. We take no responsibility for any events or circumstances that take place subsequent to either the date of value or the date of our field inspection, whichever occurs first. 15. The quality of a lodging facility's on-site management has a direct effect on a property's economic viability and value. The financial forecasts presented in this analysis assume responsible ownership and competent management. Any departure from this assumption may have a significant impact on the projected operating results and the value estimate. 16. The estimated operating results presented in this report are based on an evaluation of the overall economy, and neither take into account nor HVS International, Mineola, New York Statement of Assumptions and 142 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= make provision for the effect of any sharp rise or decline in local or national economic conditions. To the extent that wages and other operating expenses may advance during the economic life of the property, we expect that the prices of rooms, food, beverages, and services will be adjusted to at least offset those advances. We do not warrant that the estimates will be attained, but they have been prepared on the basis of information obtained during the course of this study and are intended to reflect the expectations of a typical hotel buyer. 17. This analysis assumes continuation of all Internal Revenue Service tax code provisions as stated or interpreted on either the date of value or the date of our field inspection, whichever occurs first. 18. Many of the figures presented in this report were generated using sophisticated computer models that make calculations based on numbers carried out to three or more decimal places. In the interest of simplicity, most numbers have been rounded to the nearest tenth of a percent. Thus, these figures may be subject to small rounding errors. 19. It is agreed that our liability to the client is limited to the amount of the fee paid as liquidated damages. Our responsibility is limited to the client, and use of this report by third parties shall be solely at the risk of the client and/or third parties. The use of this report is also subject to the terms and conditions set forth in our engagement letter with the client. 20. Appraising hotels is both a science and an art. Although this analysis employs various mathematical calculations to provide value indications, the final estimate is subjective and may be influenced by our experience and other factors not specifically set forth in this report. 21. Any distribution of the total value between the land and improvements or between partial ownership interests applies only under the stated use. Moreover, separate allocations between components are not valid if this report is used in conjunction with any other analysis. 22. This study was prepared by Hospitality Valuation Services, a division of Hotel Consulting Services, Inc. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of Hotel Consulting Services, Inc. as employees, rather than as individuals. HVS International, Mineola, New York Certification 143 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 15. Certification We, the undersigned appraisers, hereby certify: 1. that the statements and opinions presented in this report, subject to the limiting conditions set forth, are correct to the best of our knowledge and belief; 2. that Kate B. Henriksen personally inspected the property described in this report; Anne R. Lloyd-Jones and Stephen Rushmore participated in the analysis and reviewed the findings, but did not personally inspect the property; 3. that we have no current or contemplated interests in the real estate that is the subject of this report; 4. that we have no personal interest or bias with respect to the subject matter of this report or the parties involved; 5. that this report sets forth all of the limiting conditions (imposed by the terms of this assignment) affecting the analyses, opinions, and conclusions presented herein; 6. that the fee paid for the preparation of this report is not contingent upon our conclusions; 7. that this report has been prepared in accordance with, and is subject to, the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute; 8. that the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives; 9. that this report has been prepared in accordance with the Uniform Standards of Professional Appraisal Practice (as adopted by the Appraisal Foundation); HVS International, Mineola, New York Certification 144 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 10. that no one other than the undersigned prepared the analyses, conclusions, and opinions concerning real estate that are set forth in this appraisal report; 11. that as of the date of this report, Stephen Rushmore has completed the requirements of the continuing education program of the Appraisal Institute; 12. that this appraisal is not based on a requested minimum value, a specific value, or the approval of a loan. /s/ Kate B. Henriksen ----------------------------------- Kate B. Henriksen Consulting and Valuation Analyst Hotel Consulting Services, Inc. /s/ Anne R. Lloyd-Jones, CRE ----------------------------------- Anne R. Lloyd-Jones, CRE Senior Vice President Hotel Consulting Services, Inc. /s/ Stephen Rushmore, CRE, MAI, CHA ----------------------------------- Stephen Rushmore, CRE, MAI, CHA President Hotel Consulting Services, Inc. HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] View of Subject Property looking north [GRAPHIC OMITTED] View of Subject Property lobby HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] A typical double\double guestroom [GRAPHIC OMITTED] Cactus Grill HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Meeting Room HVS International, Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Ramada Plaza [GRAPHIC OMITTED] Worthington Hotel Parcel 4: OVERHEAD PASSAGEWAY Subject to the rights of the City of Fort Worth and subject to the rights of the public to the use and enjoyment of the rights-of-way above and below the following fee simple title in and to, that certain passageway connecting the Hotel Texas Tract and the Executive Wing Tract (which is described in that certain deed between Seller and Fort Tower II Associates Hotel Limited Partnership and dated as of even date herewith) being more particularly described as follows: Part of Commerce Street between Blocks 111 and 112 of "Original Town" of Fort Worth in Tarrant County, Texas and embracing that portion of Commerce Street which the Overhead Passageway connecting the improvements on and being between Blocks 111 and 112 is located, being located above the surface of the following described realty: Commence at the Southeasterly corner of Block 112 being the interestion of the North line of East Eighth Street and the West line of Commerce Street and then run North 30 degrees West, along the East line of Block 112 and the West line of Commerce Street, 10-75/100 feet to a point for the Southwesterly and beginning corner of the parcel being hereby described; Thence North 60 degrees East, crossing Commerce Street generally along the Southerly face of the most Southerly wall of the Overhead Passageway, 79-92/100 feet to the West line of Block 111 for the East line of Commerce Street; Thence North 30 degrees West, along the West line of Block 111 and the East line of Commerce Street, 11-9/10 feet to the Northerly face of the most Northerly wall of the Overhead Passageway; Thence South 60 degrees West, crossing Commerce Street, generally along the Northerly line of the wall of the Overhead Passageway, 73-92/100 feet to the East line of Block 112 for the West line of Commerce Street; Thence South 30 degrees East, along the East Line of Block 112 and the West line of Commerce Street, 11-9/10 feet to the place of beginning and containing 951 square feet; Being the same property described as tract IV of Exhibit "A" in deed to Hunt Hotel/Fort Worth, Ltd., recorded in Volume 6763, page 1413 of the Deed Records of Tarrant County, Texas. STREETS ADJACENT TO HOTEL TRACT AND THE TESCO OFFICE TRACT (5) Subject to the rights of the City of Fort Worth and subject to the rights of the public to use and enjoy the rights-of-way existing on the following described realty, fee simple title in and to that one-half (1/2) portion of Eighth Street, Main Street, Seventh Street and Commerce Street which adjoins the Hotel Texas Tract and the TESCO Office Tract, more particularly described by metes and bounds as follows: Beginning at the Southeasterly corner of Block 112 at the intersection of the Northerly line of Eighth Street and the Westerly line of Commerce Street; Thence North 30 degrees West, along the East line of Block 112 and the Westerly line of Commerce Street, 100 feet to the common East corner of Lots 12 and 13 in Block 112; Thence North 60 degrees East 39-97/100 feet to the middle of Commerce Street; Thence along the middle of Commerce Street: South 29 degrees-59 minutes-30 seconds East 100-01/100 feet; and South 29 degrees-59 minutes-39 seconds East 30-10/100 feet to the middle of Eighth Street; Thence along the middle of Eighth Street: South 60 degrees-07 minutes-49 seconds West 39-95/100 feet; South 60 degrees-no minutes-10 seconds West 200 feet; and South 59 degrees-59 minutes-55 seconds West 39-98/100 feet to the middle of Main Street; Thence along the middle of Main Street: North 29 degrees-57 minutes-59 seconds West 30-01/100 feet; North 30 degrees West 199-994/1000 feet; and North 30 degrees-no minutes-51 seconds West 80-085/1000 feet to the middle of Seventh Street; Thence along the middle of Seventh Street: North 60 degrees-no minutes-21 seconds East 39-98/100 feet; and North 60 degrees-no minutes- 38 seconds East 99-99/100 feet; Thence South 30 degrees East 30-01/100 feet to the North line of Block 112 and the Southerly line of Seventh Street at the common North corner of Lots 8 and 16; (continued) Thence South 60 degrees West, along the North line of Block 112 and the Southerly line of Seventh Street, 100 feet to the Northwesterly corner of Block 112; Thence South 30 degrees East, along the Westerly line of Block 112 and the Easterly line of Main Street, 200 feet to the Southwesterly corner of Block 112; Thence north 60 degrees east, along the southerly line of Block 112 and the northerly line of said Eighth Street, 200 feet to the place of beginning; SAVE AND EXCEPT [ILLEGIBLE] "New Eighth Street" as described below and fee simple title in the City of Fort Worth, Texas, in and to the Tunnel Property Parcel hereinafter described in this Exhibit "A". New Eighth Street Commence at the southwesterly corner of Block 112 of Original Town of Fort Worth in Tarrant County, Texas at the intersection of the northerly line of present Eighth Street and the easterly line of Main Street and then run south 30 degrees east along the said easterly line of Main Street 18-02/100 feet to the northerly side or back of a curb. Thence along the said back of curb: north 62 degrees-44 minutes east 8-31/100 feet to the beginning of a curve to the left with a radius of 6 feet; then along said curve to the left 6-05/100 feet to its end and the beginning of a curve to the right with a radius of 5-25/100 feet; then along said curve to the right 5-03/100 feet to its end; north 59 degrees-53 minutes-14 seconds east 45-25/100 feet to the beginning of a curve to the right with a radius of 6-08/100 feet; then along said curve to the right 6-37/100 feet to its end and the beginning of a curve to the left with a radius of 6-10/100 feet; then along said curve to the left 6-38/100 feet to its end; north 59 degrees-59 minutes-19 seconds east 54-32/100 feet to the beginning of a curve to the left with a radius of 6 feet; then along said curve to the left 6-28/100 feet to its end and the beginning of a curve to the right with a radius of 6 feet; then along said curve to the right 6-29/100 feet to its end; then north 59 degrees-59 minutes-18 seconds east, passing the end of said curb and continuing in all 44 feet to the beginning of a curve to the right with a radius of 5-25/100 feet. Page 2 of 3 Thence along said curve to the right 5-05/100 feet to its end and the beginning of a curve to the left with a radius of 6 feet. Thence along said curve to the left 6-05/100 feet to its end. Thence north 57 degrees-19 minutes-50 seconds each 8-19/100 feet to the westerly line of Commerce Street. Thence south 30 degrees east, along the said westerly line of Commerce Street, 42-02/100 feet to the northeasterly corner of Block 115 of said Original Town of Fort Worth. Thence south 60 degrees-no minutes-10 seconds west, along the northerly line of said Block 115 and the southerly line of Eighth Street, 200 feet to the northwesterly corner of said Block 115 and the said easterly line of Main Street. Thence north 30 degrees west, along the said easterly line of Main Street, 42 feet to the place of beginning THE TUNNEL PROPERTY The Tunnel Property is located under the surface of a certain portion of Eighth Street in the City of Fort Worth, Tarrant County, Texas, commencing approximately 1.5 feet under the surface of such portion of Eighth Street, and being approximately 12 feet in depth, such portion of Eighth Street being more particularly described by metes and bounds as follows: Commencing at the Southwest corner of Block 112 of Original Town of Fort Worth, Tarrant County, Texas, and being for the Easterly line of Main Street and the Northerly line of Eighth Street and then run North 60 degrees East along the Southerly line of said Block 112 and the said Northerly line of Eighth Street 6-68/100 feet to the place of beginning; Thence North 60 degrees East, continuing along the Southerly line of said Block 112 and the said Northerly line of Eighth Street 24-26/100 feet; Thence South 30 degrees East 60-02/100 feet to the Northerly line of said Block 115 of Original Town of Fort Worth, Tarrant County, Texas, and the Southerly line of said Eighth Street; Thence South 60 degrees West, along the said Northerly line of said Block 115 and the said Southerly line of Eighth Street 24-26/100 feet; and Thence North 30 degrees West 60-02/100 feet to the place of beginning; Page 3 of 3 Parcel 9: Column Easement Tract Easement title in and to: Tract 1 - Entrance Column - East End Part of Eighth Street between Main Street and Commerce Street and Blocks 112 and 115 of Original Town of Fort Worth in Tarrant County, Texas. Commence at the Southeast corner of said Block 112 and then run South 30 degrees East 44-98/100 feet and then North 60 degrees East 40/100 feet of a foot to the Northeast and beginning corner of the tract being described. Thence South 30 degrees East 5-46/100 feet. Thence South 60 degrees West 2 feet. Thence North 30 degrees West 5-46/100 feet. Thence North 60 degrees East 2 feet to the place of beginning. Tract 2 - Entrance Column - West End Part of Eighth Street between Main Street and Commerce Street and Blocks 112 and 115 of Original Town of Fort Worth in Tarrant County, Texas. Commence at the southwesterly corner of said Block 112 and then run South 30 degrees East 45-09/100 feet and then North 60 degrees East 29/100 of a foot to the Northwest and beginning corner of the tract being described. Thence North 60 degrees East 2 feet. Thence South 30 degrees East 5-46/100 feet. Thence South 60 degrees West 2 feet. Thence North 30 degrees West 5-46/100 feet to the place of beginning. (continued) Tract 3 - Canopy Support Column Encroachment Part of Eighth Street between Main Street and Commerce Street and Blocks 112 and 115 of Original Town of Fort Worth in Tarrant County, Texas. Commence at the northwesterly corner of said Block 115 at the intersection of the easterly line of Main Street and the southerly line of Eighth Street and then run North 60 degrees-no minutes-10 seconds East along the northerly line of said Block 115 and the southerly line of Eighth Street, 73-61/100 feet and then North 30 degrees-no minutes-41 seconds West, 2-2/10 feet to the Southwest and beginning corner of the tract being described. Thence North 30 degrees-no minutes-41 seconds West 4-5/10 feet. Thence North 60 degrees-no minutes-10 seconds East 53-91/100 feet. Thence South 30 degrees-no minutes-41 seconds East 4-5/10 feet. Thence South 60 degrees-no minutes-10 seconds West 53-91/100 feet to the place of beginning. Being the same easements, rights, titles, interests and estates of Hunt Hotel/Forth Worth, Ltd. created, evidenced, or contained in that certain "Eighth Street Improvements Agreement" (herein so called), by and between Hunt Hotel/Forth Worth, Ltd. And the City of Fort Worth recorded in Volume 7098, page 533 of the Deed Records of Tarrant County, Texas. Page 2 of 2 Parcel 10: THE TUNNEL PROPERTY Easement title in and to: The Tunnel Property is located under the surface of a certain portion of Eighth Street in the City of Fort Worth, Tarrant County, Texas, commencing approximately 1.5 feet under the surface of such portion of Eighth Street, and being approximately 12 feet in depth, such portion of Eighth Street being more particularly described by metes and bounds as follows: Commencing at the Southwest corner of Block 112 of Original Town of Fort Worth, Tarrant County, Texas, and being for the Easterly line of Main Street and the Northerly line of Eighth Street and then run North 60 degrees East along the Southerly line of said Block 112 and the said Northerly line of Eighth Street 6-68/100 feet to the place of beginning; Thence North 60 degrees East, continuing along the Southerly line of said Block 112 and the said Northerly line of Eighth Street 24-26/100 feet; Thence South 30 degrees East 60-02/100 feet to the Northerly line of said Block 115 of Original Town of Fort Worth, Tarrant County, Texas, and the Southerly line of said Eighth Street; Thence South 60 degrees West, along the said Northerly line of said Block 115 and the said Southerly line of Eighth Street 24-26/100 feet; and Thence North 30 degrees West 60-02/100 feet to the place of beginning; Parcel 11: CANOPY EASEMENT TRACT Easement title in and to: Part of Eighth Street between main Street and Commerce Street and Block 112 and 115 of Original Town of Fort Worth in Tarrant County, Texas. Commence at the southwesterly corner of said Block 112 and then run South 30 degrees East along the easterly line of said Main Street 18-02/100 feet to the northerly side or back of a curb and then along the said back of curb North 62 degrees-44 minutes East 8-31/100 feet to the beginning of a curve to the left with a radius of 6 feet; then along said curve to the left 6-05/100 feet to its end and the beginning of a curve to the right with a radius of 5-25/100 feet; then along said curve to the right 5-03/100 feet to its end; North 59 degrees-53 minutes-14 seconds East 45-25/100 feet to the beginning of a curve to the right with a radius of 6-08/100 feet; then along said curve to the right 6-37/100 feet to its end and the beginning of a curve to the left with a radius of 6-10/100 feet; then along said curve to the left 6-38/100 feet to its end for the Northwest and beginning corner of the tract being described. Thence South 30 degrees-no minutes-41 seconds East 40-42/100 feet to the North line of Block 115 in said Original Town of Fort Worth and the southerly line of said Eighth Street, from which the northwesterly corner of Block 115 bears South 60 degrees-no minutes-10 seconds West, 73-61/100 feet. Thence North 60 degrees-no minutes-10 seconds East, along the said northerly line of Block 115 and the southerly line of Eighth Street, 53-91/100 feet. Thence North 30 degrees-no minutes-41 seconds West 40-43/100 feet to the said back of a curb. Thence South 59 degrees-19 minutes-19 seconds West, along said back of curb 53-91/100 feet to the place of beginning. AFTER RECORDING, RETURN TO: CHICAGO TITLE INSURANCE COMPANY 7616 LBJ FREEWAY, SUITE 300 DALLAS, TEXAS 75251 ATTN: SHARON COOPER Exhibit A Parcels 2 and 7 described as follows: Parcel 2: EXECUTIVE WING TRACT A part of Block 111 of "Original Town" of Fort Worth in Tarrant County, Texas, and embracing Lots 1 through 8 in Block 111 (the "Executive Wing Tract") described as Tract II in the deed to Hunt Hotel/Fort Worth, Ltd., recorded in Volume 6763, page 1413 of the Deed Records of Tarrant County, Texas, more particularly described by metes and bounds as follows: Beginning at the Northwesterly corner of Block 111 and Lot 8, being the intersection of the Easterly line of Commerce Street and the Southerly line of East Seventh Street; Thence North 60 degrees East, along the Northerly line of Block 111 and Lot 8 and the Southerly line of East Seventh Street, 100 feet to the common North corner of Lot 8 and Lot 10; Thence South 30 degrees East, along the East line of Lots 8, 7, 6, 5, 4, 3, 2, and 1 and the West line of Lots 10 and 9, a distance of 200 feet to the common South corner of Lots 1 and 9 in the South line of Block 111 and the North line of East Eighth Street; Thence South 60 degrees West, along the Southerly line of Lot 1 and the North line of East Eighth Street, 100 feet to the Southwest corner of Lot 1 and Block 111, being the intersection of the North line of East Eighth Street and the East line of Commerce Street; Thence North 30 degrees West, along the West line of Lots 1, 2, 3, 4, 5, 6, 7 and 8 and the West Line of Block 111 and the East line of Commerce Street, 200 feet to the place of beginning. Exhibit A Parcels 3, 6 & 12 described as follows: Parcel 3: SEIBOLD LEASEHOLD ESTATE A part of Block 112 of "Original Town" of Fort Worth in Tarrant County, Texas, and embracing Lots 13 through 16 in Block 112 (the "Seibold Tract") described in deed dated May 1, 1969, from Continental Realty Corporation to State Reserve Life Insurance Company recorded in Volume 4717, page 873 of the Deed Records of Tarrant County, Texas, more particularly described by metes and bounds as follows: Beginning at the Northeasterly corner of Block 112 and Lot 15, being the interesection of the West line of Commerce Street with the South line of East Seventh Street; Thence South 30 degrees East, along the East line of Lots 16, 15, 14, and 13, and the West line of Commerce Street, 100 feet to the Southeast corner of Lot 12; Thence South 60 degrees West, along the South line of Lot 13 and the North line of Lot 12, a distance of 100 feet to the common corner of Lots 12, 13, 4, and 5; Thence North 30 degrees West, along the West line of Lots 13, 14, 15 and 16 the East line of Lots 5, 6, 7, and 8, a distance of 100 feet to the common North corner of Lot 16 and Lot 8 in the North line of Block 112 and the South line East Seventh Street; Thence North 60 degrees East, along the North line of Lot 16 and the south line of East Seventh Street, 100 feet to the place of beginning. Being the same property as described in that certain deed to Hunt Hotel/Fort Worth, Ltd., recorded in Volume 6763, page 1413 of the aforesaid Deed Records. Parcel 6: STREETS ADJACENT TO THE SEIBOLD TRACT The one-half (1/2) portion of Seventh Street and Commerce Street which adjoins the Seibold Tract, more particularly described by metes and bounds as follows: Beginning at the Northeasterly corner of Block 112 at the intersection of the South line of Seventh Street and the West line of Commerce Street; Thence South 30 degrees East, along the Easterly line of Block 112 and the Westerly line of Commerce Street, 100 feet to the common East corner of Lots 12 and 13 in Block 112; Thence North 60 degrees East 39-97/100 feet to the middle of Commerce Street; Thence along the middle of Commerce Street: North 25 degrees 55 minutes 30 seconds West 99-99/100 feet; and North 29 degrees 59 minutes 04 seconds West 29-96/100 feet to the middle of Seventh Street; Thence along the middle of Seventh Street: South 60 degrees 02 minutes 59 seconds West 39-98/100 feet; and South 60 degrees no minutes 38 seconds West 100-01/100 feet; Thence South 30 degrees East 30-01/100 feet to the North line of Block 112 and the Southerly line of Seventh Street at the common North corner of Lots 8 and 16 in Block 112; Thence North 60 degrees East, along the North line of Block 112 and the Southerly line of Seventh Street, 100 feet to the place of beginning. SUBJECT TO the rights of the City of Forth Worth and subject to the rights of the public to the use and enjoyment of the rights-of-way existing on the realty covered by the leasehold estate under the Seibold Lease. Parcel 12: 7TH STREET BRIDGE PARCEL Easement title in and to: Being a tract of the air estate and right located above the surface of a part of a public street known as Seventh Street, being in the City of Fort Worth in Tarrant County, Texas between Blocks 109 and 112 of Original Town of Fort Worth and being that portion of said air estate and rights above said Seventh Street between elevation 618 feet and 641-33/100 feet above mean sea level City of Fort Worth datum, described by metes and bounds as follows: Beginning at the Southeasterly corner of said Block 109 of the Original Town of Fort Worth at the Northwesterly intersection of Commerce Street and Seventh Street; Thence South 29 degrees-59 minutes-10 seconds East, crossing said Seventh Street, 59-985/1000 feet to the Northeasterly corner of said Block 112 of the Original Town of Fort Worth, and the Southwesterly intersection of Commerce Street and Seventh Street; Thence South 60 degrees West, along the Northerly line of said Block 112 of the Original Town of Fort Worth and the southerly line of Seventh Street, 51-5/10 feet to a point for corner; Thence North 29 degrees-59 minutes-10 seconds West, crossing said Seventh Street, [illegible]-985/1000 feet to the Southerly line of said Block 109 of the Original Town of Fort Worth; and Thence North 60 degrees East, along the Southerly line of said Block 109 of the Original Town of Fort Worth and the Northerly line of Seventh Street, 51-3/10 feet to the place of beginning and containing 3,089 square feet. Being the same rights, titles, interests, and estates of Hunt Hotel/Fort Worth, Ltd. created, evidenced, or contained in (i) that certain "Seventh Street Bridge Agreement" recorded in Volume 7098, Page 534 of the Deed Records of Tarrant County, Texas, and (ii) that certain "Continental Plaza Improvements Agreement" recorded in Volume 7186, Page 1236 of the Deed Records of Tarrant County, Texas. Exhibit A Parcel 8 described as follows: Parcel 8: Parking Garage Leasehold The subsurface leasehold estate created pursuant to that certain lease agreement dated May 22, 1980 by and between the City of Fort Worth as lessor and Hunt Hotel/Fort Worth, Ltd. as lessee, filed under Clerk's File No. 21535 on 3/15/81. Tarrant County Records of Tarrant County, Texas, insofar as said subsurface leasehold estate covers and affects the following described three (3) parcels of real estate: (1) The Easterly 1/2 of Block 114 of Original Town of Fort Worth in Tarrant County, Texas; and embracing Lots 9 through 16 in said Block and the Easterly 1/2 of the alley adjoining said Lots on the West, and being the three tracts described in the deeds to the City of Fort Worth recorded in Volume 8892, Page 1350, Volume [Illegible], Page 1718, and Volume 6834, Page [Illegible] of the Tarrant County Deed Records, described by metes and bounds as follows: Beginning at the Southeasterly corner of said Block 114 at the intersection of the Westerly line of Main Street and the Northerly line of Ninth Street; Thence South [Illegible] degrees West, along the Southerly line of said Block 114 and the said Northerly line of Ninth Street, 100 feet to a point for corner; Thence North 30 degrees West, along the middle of said alley, adjoining Lots 8 through 16 on the West, 200 feet to the Northerly line of said Block 114 and the Southerly line of Eighth Street; Thence North [Illegible] degrees East, along the said Northerly line of Block 114 and the said Southerly line of Eighth Street, 100 feet to the Northeasterly corner of said Block 114 and the said Westerly line of Main Street; and Thence South 30 degrees East, along the Easterly line of said Block 114 and the said Westerly line of Main Street, 200 feet to the place of beginning. (2) A part of Block 115 of the Original Town of Fort Worth in Tarrant County, Texas and embracing all of Lots 5, 6, 7, 8, 13, 14, 15, and 16 and a portion of Lots 1, 2, 3 and 4 in said Block, described by metes and bounds as follows: Beginning at the Northeasterly corner of said Block 115 for the intersection of the Southerly line of Eighth Street and the Westerly line of Commerce Street and from which a tack set in a lead plug bears North 30 degrees West 5 feet and North 60 degrees East 5-4/10 feet; Thence South 30 degrees East, along the Easterly line of said Block 115, along the Easterly line of Lots 16, 15, 14, and 13 for the said Westerly line of Commerce Street, 100 feet to a galvanized spike for the common East corner of Lots 13 and 12; Thence South 60 degrees West, along the common line of said Lots 13 and 12, a distance of 100 feet to a galvanized spike for the common corner of Lots 4, 5, 12 and 13; Thence South 60 degrees West, along the common line of said Lots 13 and 12, a distance of 100 feet to a galvanized spike for the common corner of Lots 4, 5, 12, and 13; Thence South 30 degrees East, along the common line of said Lots 12 and 4, a distance of 9-33/100 feet to a galvanized spike; Thence South [Illegible] degrees West 4-50/100 feet to a galvanized spike; Parcel 7: STREETS ADJACENT TO THE EXECUTIVE WING TRACT The one-half (1/2) portion of Seventh Street, Eighth Street and Commerce Street which adjoins the Executive Wing Tract, more particularly described by metes and bounds as follows: Beginning at the Southwesterly corner of Block 111 at the intersection of the Easterly line of Commerce Street and the Northerly line of Eighth Street; Thence North 60 degrees East, along the Southerly line of Block 111, a distance of 100 feet; Thence South 30 degrees East 30-175/1000 feet to the middle of Eighth Street; Thence along the middle of Eighth Street: South 59 degrees 59 minutes 49 seconds West 100 feet; and South 60 degrees 06 minutes 53 seconds West 39-95/100 feet to the middle of Commerce Street; Thence along the middle of Commerce Street: North 30 degrees no minutes 35 seconds West 30-10/100 feet; North 30 degrees no minutes 26 seconds West, 200 feet; and North 30 degrees West 29-96/100 feet to the middle of Seventh Street; Thence along the middle of Seventh Street: North 60 degrees 01 minute 43 seconds East 39-98/100 feet; and North 60 degrees East 100 feet; Thence South 30 degrees East 29-94/100 feet to the Northerly line of Block 111; Thence South 60 degrees West, along the Northerly line of Block 111 a distance of 100 feet; Thence South 30 degrees East, along the Westerly line of Block 111, a distance of 200 feet to the place of beginning. SUBJECT TO the rights of the City of Forth Worth and subject to the rights of the public to use and enjoy the rights-of-way existing on the described realty. AFTER RECORDING, RETURN TO: CHICAGO TITLE INSURANCE COMPANY 7616 LBJ FREEWAY, SUITE 300 DALLAS, TEXAS 75251 ATTN: SHARON COOPER Thence South 30 degrees-01 minute-44 seconds East, through Lots 4, 3, 2 and 1, a distance of 90-67/100 feet to the Southerly line of Lot 1 and said Block 115 in a Northerly line of Ninth Street from which a "Y" marked on concrete walk bears South 30 degrees-01 minute-44 seconds East 3 feet; Thence South 60 degrees West, along the said Southerly line of Lot 1 and Block 115 and the said Northerly line of Ninth Street, 95-55/100 feet to the Southwesterly corner of said Block 115 for the intersection of said Northerly line of Ninth Street and the Easterly line of Main Street from which a tack set in a lead plug bears South 30 degrees East 3 feet and south [illegible] degrees West 5 feet; Thence North 30 degrees West, along the Westerly line of Lots 1 through [illegible] and the Westerly line of said Block 115 for the said Easterly line of Main Street, 200 feet to the Northwesterly corner of said Block 115 for the intersection of said Easterly line of Main Street, and the said Southerly line of Eighth Street from which a tack set in a lead plug bears South 60 degrees West 5 feet and North 30 degrees West 5 feet; and Thence North 60 degrees East, along the Northerly line of Lots 8 and 16 and the Northerly line of said Block 115 for the said Southerly line of Eighth Street, 200 feet to the place of beginning. (3) The subsurface position of Main Street between Block 114 and Block 115 of the Original Town of Fort Worth, Tarrant County, Texas, being South of the South right-of-way line of 8th Street and North of the North right-of-way line of [illegible] Street. Page 2 of 2 [Letterhead of BROOKES BAKER SURVEYORS] January 10, 1994 Page 1 of 2 Field notes for: - PARCEL 1 HOTEL TEXAS TRACT AND THE TESCO OFFICE TRACT A part of Block 112 of Original Town of Fort Worth in Tarrant County, Texas; and embracing Lots 1 through 4 and Lots 9 through 12 in said Block 112 (the "Hotel Texas Tract") described as Tract One in a deed dated March 1, 1968, from Citizens Hotel Company to fort Worth Chamber Development Corporation, recorded in volume 4584, page 853 of the Deed Records of Tarrant County, Texas, and also embracing Lots 5 through 8 in Block 112 (the "TESCO Office Tract") described as Tract Three in the above described deed to Fort Worth Chamber Development Corporation, all such realty being described as Tract I of Exhibit "A" in a deed to Hunt Hotel/Fort Worth, Ltd., recorded in volume 6763, page 1413 of the Deed Records of Tarrant County, Texas and being more particularly described by metes and bounds as follows: Beginning at the northwesterly corner of Block 112 and Lot 8, being the intersection of the easterly line of Main Street and the southerly line of East Seventh Street from which a tack in lead plug bears north 30 degrees west 5 feet and another tack in lead plug bears south 60 degrees west 5 feet. Thence north 60 degrees east, along the northerly line of said Lot 8 and the said southerly line of East Seventh Street, 100 feet to the common north corner of Lots 8 and 16. Thence south 30 degrees east, along the easterly line of Lots 8, 7, 6 and 5 and the westerly line of Lots 16, 15, 14 and 13, a distance of 100 feet to the common corner of Lots 5, 13, 12 and 4. Thence north 60 degrees east, along the northerly line of Lot 12 and the southerly line of Lot 13, a distance of 100 feet to their common east corner in the westerly line of Commerce Street. Thence south 30 degrees east, along the easterly line of Lots 12, 11, 10 and 9 and the said westerly line of Commerce Street, 100 feet to the southeasterly corner of said Block 112 and Lot 9 from which a tack in lead plug bears north 60 degrees east 5-4/10 feet and south 30 degrees east 5 feet. January 10, 1994 ESTABLISHED 1880 Page 2 of 2 BROOKES BAKER Field notes for: - SURVEYORS PARCEL 1 HOTEL TEXAS TRACT AND THE TESCO OFFICE TRACT Thence south 60 degrees west, along the southerly line of Lots 9 and 1 and the northerly line of farmer East Eighth Street, 200 feet to the southwesterly corner of said Block 11 and Lot 1 from which a tack in lead plug bears south 30 degrees east 5 feet and south 60 degrees west 5 feet. Thence north 30 degrees west, along the westerly line of Lots 1, 2, 3, 4, 5, 6, 7 and 8 and the said easterly line of Main Street, 200 feet to the place of beginning and containing 30,000 square feet. Surveyed December 31, 1993. BROOKES BAKER SURVEYORS STATE OF TEXAS REGISTERED /s/ Don W. Hickey --------------- Don W. Hickey DON W. HICKEY [SEAL] --------------- 1961 PROFESSIONAL LAND SURVEYOR HVS International, Mineola, New York Synopsis of Franchise and License Agreements - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Synopsis of Franchise and License Agreements Date: October 4, 1991 Licensor: Radisson Hotels International, Inc. Licensee: Aetna Life Insurance Company Premises: Radisson Plaza Hotel, Fort Worth, Texas Term: Ten years Renewal: Not available Fees: Initial fee of $30,000 Royalty Fees: Year 1: $150,000 (includes marketing fee) Year 2: $175,000 (includes marketing fee) Years 3-5: 3.00% of gross rooms revenue Years 6+: 3.25% of gross rooms revenue Marketing Fees: Years 3+: 3.50% of gross rooms revenue Licensor Services: Radisson reservation system, orientation and training, technical consulting advice, national and regional directories, and advertising Licensee Obligations: Participate in all advertising and marketing programs, use national 1-800 number, use Radisson signage, participate in SMART program, maintain the hotel in good condition, participate in other Radisson programs Termination: Bankruptcy, felony, breach of contract, or condemnation HVS International, Mineola, New York Synopsis of Ground Lease - West Tower - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Synopsis of Ground Lease - West Tower Date: March 26, 1960, amended July 1, 1979 Lessor: The Seibold Company, et. al. Lessee: Fort Tower I Associates Hotel Limited Partnership Premises: Portion of the site beneath the West Tower Term: Original: 50 years, through May, 2010; Amendment: through May, 2040 Renewal: None Rent: Years 1 - 10: $21,000 Years 11 - 20: $24,000 Years 21 - 50: $30,000 Years 51 - 60: $40,000 Years 61 - 70: $60,000 Years 71 - 80: $80,000 HVS International, Mineola, New York Synopsis of Ground Lease - Parking Garage - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Synopsis of Ground Lease - Parking Garage Date: April 30, 1980 Lessor: The City of Fort Worth Lessee: Fort Tower I Associates Hotel Limited Partnership Premises: Parking garage Term: Original: 50 years, through April, 2030 Renewal: None Rent: April 30, 1980 - December 31, 1985: $60,000 Years 6 - 10: $65,000 Years 11 - 15: $70,000 Years 16 - 20: $75,000 Years 21 - 25: $80,000 Years 26 - 30: $85,000 Years 31 - 35: $90,000 Years 36 - 40: $95,000 Years 41 - 45: $100,000 Years 46 - 50: $105,000 HVS International, Mineola, New York Simultaneous Valuation Formula 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ The Simultaneous Valuation Formula as Used in the Valuation of the Subject Property The algebraic equation, known as the Simultaneous Valuation Formula, that solves for the total property value using a ten-year mortgage equity technique was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of Hospitality Valuation Services. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(1) The process of solving for the value of the mortgage and equity components begins by deducting the annual debt service from the forecasted income before debt service, leaving the net income to equity for each projection year. The net income as of the 11th year is capitalized into a reversionary value using the terminal capitalization rate. The equity residual, which is the total reversionary value less the mortgage balance at that point in time and less any broker and legal costs associated with the sale, is discounted to the date of value at the equity yield rate. The net income to equity for each of the projection years is also discounted back to the date of value. The sum of these discounted values equals the value of the equity component. Because the equity component comprises a specific percentage of the total value, the value of the mortgage and the total property can be computed easily. This process can be expressed in two algebraic equations that set forth the mathematic relationships between the known and unknown variables using the following symbols. (1) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Simultaneous Valuation Formula 2 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= NI = Net income available for debt service V = Value M = Loan-to-value ratio f = Annual debt service constant n = Number of years in the projection period d(e) = Annual cash available to equity d(r) = Residual equity value b = Brokerage and legal cost percentage P = Fraction of loan paid off during the projection period f(p) = Annual constant required to amortize the entire loan during the projection period R(r) = Overall terminal capitalization rate applied to net income to calculate total property reversion (sales price at the end of the projection period) 1/S^n = Current worth of $1 factor (discount factor) at the equity yield rate Using these symbols, the following formulas can be derived to express some of the components comprising this mortgage and equity valuation process. Debt Service - A property's debt service is calculated by first determining the mortgage amount which equals the total value (V) multiplied by the loan-to-value ratio (M). Debt service is derived by multiplying the amount of the mortgage by the annual debt service constant (f). The following formula represents debt service. f x M x V = Debt Service Net Income to Equity (Equity Dividend) - The net income to equity (d(e)) is the property's net income before debt service (NI) less debt service. The following formula represents net income to equity. NI - (f x M x V) = d(e) Reversionary Value - The value of the hotel at the end of the tenth year is calculated by dividing the 11th year's net income before debt service (NI^11) by HVS International, Mineola, New York Simultaneous Valuation Formula 3 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the terminal capitalization rate (R(r)). The following formula represents the property's tenth-year reversionary value. (NI^11/R(r)) = Reversionary Value Brokerage and Legal Costs - When a hotel is sold, certain costs are associated with the transaction. Normally, the broker is paid a commission and the attorney collects legal fees. In the case of hotel transactions, brokerage and legal costs typically range from 1% to 4% of the sales price. Because these expenses reduce the proceeds to the seller, they are usually deducted from the reversionary value in the mortgage equity valuation process. Brokerage and legal costs (b) expressed as a percentage of reversionary value (NI^11/R(r)) is calculated by application of the following formula. b (NI^11/R(r)) = Brokerage and Legal Costs Ending Mortgage Balance - The mortgage balance at the end of the tenth year must be deducted from the total reversionary value (debt and equity) in order to determine the equity residual. The formula used to determine the fraction of a loan remaining (expressed as a percentage of the original loan balance) at any point in time (P) takes the annual debt service constant of the loan over the entire amortization period (f) less the mortgage interest rate (i) and divides it by the annual constant required to amortize the entire loan during the ten-year projection period (f(p)) less the mortgage interest rate. The following formula represents the fraction of a loan paid off (P). (f - i)/(f(p) - i) = P If the fraction of a loan paid off (expressed as a percentage of the initial loan balance) is P, then the remaining loan percentage is expressed as 1 - P. The ending mortgage balance is the fraction of the remaining loan (1 - P) multiplied by the initial loan amount (M x V). The following formula represents the ending mortgage balance. (1 - P) x M x V Equity Residual Value - The value of the equity upon the sale at the end of the projection period (d(r)) is the reversionary value less the brokerage and legal costs and the ending mortgage balance. The following formula represents the equity reversionary value. (NI^11/R(r)) - (b (NI^11/R(r)) - ((1 - P) x M x V) = d(r) HVS International, Mineola, New York Simultaneous Valuation Formula 4 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Annual Cash Flow to Equity - The annual cash flow to equity consists of the equity dividend for each projection year plus the equity residual at the end of the tenth year. The following formula represents the annual cash flow to equity. NI^1 - (f x M x V) = d(e)^1 NI^2 - (f x M x V) = d(e)^2 NI^10 - (f x M x V) = d(e)^10 (NI^11/R(r)) - (b (NI^11/R(r)) - ((1 - P) x M x V) = d(r) Value of the Equity - If the initial amount of the mortgage is calculated by multiplying the loan-to-value ratio (M) by the property value (V), then the equity value is one minus the loan-to-value ratio multiplied by the property value. The following formula represents the value of the equity. (1 - M) V Discounting the Cash Flow to Equity to the Present Value - The cash flow to equity in each of the projection years is discounted to the present value at the equity yield rate (1/S^n). The sum of all these cash flows is the value of the equity (1 - M) V. The following formula represents the calculation of equity as the sum of the discounted cash flows. (d(e)^1 x 1/S^1) + (d(e)^2 x 1/S^2) + . . . + (d(e)^10 x 1/S^10) + (d(r) x 1/S^10) = (1 - M) V Combine Equations: Annual Cash Flow to Equity and Discounting the Cash Flow to Equity to the Present Value - The last step is to arrive at one overall equation that shows that the annual cash flow to equity plus the yearly discounting to the present value equals the value of the equity. ((NI^1 - (f x M x V)) 1/S^1) + ((NI^2 - (f x M x V)) 1/S^2) + . . . ((NI^10 - (f x M x V)) 1/S^10) + (((NI^11/R(r)) - (b (NI^11/R(r))) - ((1 - P) x M x V)) 1/S^10) = (1 -M) V Because the only unknown in this equation is the property's value (V), it can be solved readily. HVS International, Mineola, New York Simultaneous Valuation Formula 5 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Ten-Year Projection of Income and Expense - Because the fixed and variable forecast of income and expense is carried out only to the stabilized year, it is necessary to continue the projection to the 11th year. In most instances, net income before debt service beyond the stabilized year is projected at an assumed inflation rate. By increasing a property's revenue and expenses at the same rate of inflation, net income expressed as a percentage of total revenue will remain constant, and the dollar amount will escalate at the annual inflation rate. Hotel investors are currently using inflation rates of approximately 3.5% annually. The previously presented ten-year forecast of income and expense illustrates the subject property's net income, which is assumed to increase by 3.5% annually subsequent to the hotel's stabilized year of operation. Solving for Value Using the Simultaneous Valuation Formula - In the case of the subject property, the following known variables have been determined. ================================================================================ Table 1 Summary of Known Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Ten-Year Forecast Loan-To-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.111856 Equity Yield Ye 22.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 11.5% The following table illustrates the present worth of a $1 factor at the 22.0% equity yield rate. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Simultaneous Valuation Formula 6 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 2 Present Worth of $1 Factor at Equity Yield Rate - -------------------------------------------------------------------------------- Year Present Worth of $1 Factor @ 22.0% ------------------------------------------------------------------- 1997 0.819665 1998 0.671851 1999 0.550692 2000 0.451383 2001 0.369983 2002 0.303262 2003 0.248573 2004 0.203747 2005 0.167004 2006 0.136887 - -------------------------------------------------------------------------------- Using these known variables, the following intermediary calculations must be made before applying the simultaneous valuation formula. The fraction of the loan paid off during the projection period is calculated as follows. P = (0.111856 - 0.095)/(0.155277 - 0.095) = 0.279638 The annual debt service is calculated as f x M x V. (f x M x V) = 0.111856 0.70 x V = 0.078299 V Inserting the known variables into the hotel valuation formula produces the following: (3,548,000 - 0.078299 V ) x 0.819672 + (3,044,000 - 0.078299 V ) x 0.671862 + (3,040,000 - 0.078299 V ) x 0.550707 + (3,152,000 - 0.078299 V ) x 0.451399 + (3,261,000 - 0.078299 V ) x 0.369999 + (3,378,000 - 0.078299 V ) x 0.303278 + (3,501,000 - 0.078299 V ) x 0.248589 + (3,627,000 - 0.078299 V ) x 0.203761 + (3,756,000 - 0.078299 V ) x 0.167017 + (3,888,000 - 0.078299 V ) x 0.136899 + (((4,024,000/0.115) - (0.03 x (4,024,000/0.115)) - ((1 - 0.279638) x 0.70 x V)) x 0.136899)= ( 1 - 0.70)V HVS International, Mineola, New York Simultaneous Valuation Formula 7 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Like terms are combined as follows. $17,696,860 - 0.376214 = (1 - 0.70)V $17,696,860 = 0.67621 V V = $17,696,860 / 0.67621 V = $26,170,520 Value Indicated by the Income Capitalization Approach (Say) = $26,171,000 HVS International, Mineola, New York Qualifications of Kate B. Henriksen - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Kate B. Henriksen Employment 1996 to present HVS INTERNATIONAL Mineola, New York (Hotel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1992 to 1996 STATLER HOTEL Ithaca, New York Spring, 1996 CORNELL UNIVERSITY, SCHOOL OF HOTEL ADMINISTRATION Ithaca, New York Summer, 1995 WESTGOR & ASSOCIATES, HOTEL AND MOTEL BROKERS OF AMERICA Minneapolis, Minnesota Summer, 1994, 1995 MINNEAPOLIS MARRIOTT SOUTHWEST Minnetonka, Minnesota Summer, 1994 MINNESOTA OFFICE OF TOURISM Saint Paul, Minnesota Education BS - School of Hotel Administration, Cornell University Professional Affiliations Cornell Society of Hotelmen HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Anne R. Lloyd-Jones, CRE Employment 1982 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1981 FAIRMONT HOTEL Dallas, Texas 1979 - 1980 SAGA FOOD SERVICE SWARTHMORE COLLEGE Swarthmore, Pennsylvania 1977 - 1980 DARANNE CATERERS Swarthmore, Pennsylvania Professional Affiliations American Society of Real Estate Counselors - Member (CRE) Appraisal Institute - Candidate for Membership Cornell Society of Hotelmen Education MPS - School of Hotel Administration, Cornell University BA - Swarthmore College Appraisal Institute Course 1A1 - Real Estate Appraisal Principles Course 1A2 - Basic Valuation Procedures Course 1BA - Capitalization Theory and Techniques, Part A Course 1BB - Capitalization Theory and Techniques, Part B Course 2-1 - Case Studies in Real Estate Valuation Course 2-3 - Standards of Professional Practice Course 3-1 - Report Writing HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Corporate and Institutional Clients Served Ashford Financial Corporation Chase Manhattan Bank, N. A. Citibank / Citicorp NA Credit Lyonnais Doubletree Hotels Grand Heritage Hotels Great Western Bank Goldman Sachs Holiday Inns, Inc. Interstate Hotels MassMutual Marriott International / Host Marriott Morgan Stanley OCWEN Financial Services Remington Hotels Sheraton Hotels Starwood Capital Group Starwood Lodging Trust Winegardner & Hammons Wyndham Hotel Company Hotel Chains and Management Companies Appraised or Evaluated Doubletree Hotels Compri Hotels Interstate Hotels Fairmont Hotels Guest Quarters Hilton Hotels Corporation Omni International Hotels Ramada Hotel Corp. Servico Hotel Corp. Winegardner & Hammons Appearance as an Expert Witness Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Jefferson City, Missouri Federal Bankruptcy Court, Columbia, South Carolina Federal Bankruptcy Court, Houston, Texas Federal Bankruptcy Court, New York, New York Federal Bankruptcy Court, San Bernardino, California Federal Bankruptcy Court, Los Angeles, California Federal Bankruptcy Court, Charlotte, North Carolina Federal Bankruptcy Court, Miami, Florida Federal District Court, Central Division, Salt Lake City, Utah Iowa District Court, Story County, Iowa Texas District Court, Harris County, Texas Federal Bankruptcy Court, Tampa, Florida Utah District Court, Salt Lake County, Utah Federal Bankruptcy Court, Newark, New Jersey HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated Arizona - - Wyndham Garden Hotel, Chandler - - Wyndham Garden Hotel - Airport, Phoenix - - Wyndham Garden Hotel - Union Hills, Phoenix - - Canyon Ranch Spa & Fitness Resort, Tucson Alabama - - Holiday Inn, Birmingham - - Proposed Sheraton, Gulf Shores - - Proposed Inn, Mobile - - Holiday Inn, Sheffield California - - Industry Hills Sheraton Hotel, City of Industry - - Piccadilly Inn, Fresno - - Proposed Inn at Foss Creek, Healdsburg - - Sunset Towers Hotel, Hollywood - - Proposed La Quinta, Irvine - - Wyndham Garden Hotel, La Jolla - - Days Inn, La Palma - - Proposed Marriott Courtyard, Palm Springs - - Proposed Club Hilton Hotel, Pleasanton - - Center Pointe Development, San Diego - - Holiday Inn-Embarcadero, San Diego - - Holiday Inn-Harbor View, San Diego - - Seven Seas Lodge, San Diego - - Proposed Fountaingrove Inn, Santa Rosa - - Sheraton Round Barn Inn, Santa Rosa - - Wyndham Garden Hotel, Sunnyvale - - Westlake Plaza Hotel, Thousand Oaks - - Proposed Marriott Courtyard, Torrance Colorado - - Proposed Hotel, Keystone Connecticut - - Holiday Inn, Milford - - Holiday Inn, New Britain District of Columbia - - Grand Hotel, Washington - - Wyndham Bristol Hotel, Washington Florida - - Kon Tiki Village, Kissimmee - - Sheraton Lakeside, Kissimmee - - Holiday Inn, 22nd Street, Miami Beach - - Holiday Inn, 87th Street, Miami Beach - - Holiday Inn, 180th Street, Miami Beach - - Sheraton Resort & Marina, St. Petersburg - - Hilton Hotel, Singer Island - - Royce Hotel, West Palm Beach Georgia - - Marriott Hotel, Atlanta - - Wyndham Garden Hotel, Atlanta - - Holiday Inn, Brunswick - - Holiday Inn, Jekyll Island - - Mullberry Inn, Savannah - - Royal Savannah Inn, Savannah Hawaii - - Hobron in Waikiki, Honolulu Idaho - - Holiday Inn, Boise - - Red Lion Inn, Boise - - Super 8, Boise Illinois - - Ramada Inn, Bloomington - - Proposed Marriott Courtyard, Glenview - - Wyndham Garden Hotel, Naperville Indiana - - Holiday Inn, Bloomington - - Inn at the Four Winds, Bloomington - - Ramada Inn, Bloomington - - Hilton Hotel, Fort Wayne - - Airport Hilton Inn, Indianapolis - - Hilton at the Circle, Indianapolis Iowa - - Holiday Inn, Ames - - Proposed Fairfield Inn, Des Moines HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Kentucky - - Proposed Super 8, London - - Proposed Super 8, Radcliff Louisiana - - Sheraton Inn, Kenner - - Hotel Meridien, New Orleans Maine - - Proposed Hotel, Old Orchard Beach Maryland - - Brookshire Hotel, Baltimore - - Lord Baltimore Hotel, Baltimore - - Hyatt Regency, Bethesda Massachusetts - - Proposed Marriott Courtyard, Andover - - Hyatt Regency, Cambridge - - Proposed Hotel, Franklin - - Sheraton Inn, Hyannis - - Marriott Hotel, Worcester Michigan - - Bay Valley Inn, Bay City - - Hilton Airport, Detroit - - Westin Renaissance Center, Detroit - - Hotel Pontchartrain, Detroit - - Proposed Embassy Suites, Lansing - - Hilton Inn, Northfield - - Holiday Inn, Saginaw Minnesota - - Wyndham Garden Hotel, Bloomington - - Marriott Hotel, Minnetonka Missouri - - Inn at Grand Glaize, Osage Beach - - Bel Air Hilton, St. Louis - - Holiday Inn Riverfront, St. Louis Nebraska - - Holiday Inn Airport, Lincoln - - Holiday Inn Northeast, Lincoln Nebraska (continued) - - Marriott Hotel, Omaha - - Ramada Inn, Omaha - - Red Lion Inn, Omaha Nevada - - Proposed Super 8, Las Vegas New Jersey - - Ramada Inn, Edison - - Marriott Hotel, Hanover - - Headquarters Plaza, Morristown - - Hyatt Regency, New Brunswick - - Holiday Inn, North Brunswick New York - - Hilton Hotel, Albany - - Proposed Embassy Suites, Amherst - - Holiday Inn Arena, Binghamton - - Holiday Inn SUNY, Binghamton - - Proposed Hotel, Binghamton - - Proposed Hilton, Brooklyn - - Marriott Hotel, Dewitt - - Metropole Hotel, Flushing - - Midway Hotel, Flushing - - Ramada Inn, Kingston - - Royce Hotel, La Guardia - - Holiday Inn, Latham - - Proposed Crowne Plaza, Manhattan - - Proposed Prince Street Hotel, Manhattan - - Proposed Roslyn Inn, Roslyn - - Proposed Le Richmonde, Rye Brook - - Hilton Hotel, Syracuse - - Hotel Syracuse, Syracuse - - Proposed Hotel, Watertown North Carolina - - Proposed Inn, Chapel Hill - - Proposed Indep. Center Marriott Hotel, Charlotte - - Royce Hotel, Charlotte - - Howard Johnson's North, Charlotte HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) North Carolina (continued) - - Holiday Inn West, Durham - - Sheraton University Inn, Durham - - Holiday Inn, Fayetteville - - Holiday Inn Downtown, Raleigh Ohio - - Proposed Hyatt Hotel, Cleveland - - Proposed Marriott Hotel, Cleveland Oregon - - Holiday Inn Airport, Portland - - Holiday Inn South, Portland Pennsylvania - - Quality Inn, Allentown - - Holiday Inn, Bensalem - - Proposed Marriott Courtyard, Devon - - Proposed Lafayette Inn, Easton - - Ramada Inn, Erie - - Holiday Inn, Harrisburg - - Marriott Hotel, Harrisburg - - Proposed Super 8, Harrisburg - - Proposed Super 8, Lancaster - - Holiday Inn West, Monroeville - - Days Inn Philadelphia - - Franklin Plaza Hotel, Philadelphia - - Franklin Towne EconoLodge, Philadelphia - - Guest Quarters Hotel, Philadelphia - - Hilton Inn, Northeast, Philadelphia - - Marriott Airport Hotel, Philadelphia - - Holiday Inn Greentree, Pittsburgh - - Holiday Inn Parkway East, Pittsburgh - - Holiday Inn North, Pittsburgh - - Holiday Inn Parkway West, Pittsburgh - - Proposed Hotel, Pittsburgh - - Royce Hotel, Pittsburgh - - Westin William Penn Hotel, Pittsburgh - - Hilton Hotel, Scranton - - Proposed Marriott Courtyard, Valley Forge - - Holiday Inn Meadowlands, Washington - - Ramada Inn, York - - Proposed Super 8, York Rhode Island - - Proposed Hotel, Providence - - Omni Biltmore Hotel, Providence South Carolina - - Proposed Charleston Center Hotel, Charleston - - Proposed Cooper River Inn, Charleston - - Howard Johnson's, Spartanburg - - Proposed Middleton Inn and Conference Center, Charleston - - Best Western, North Charleston - - Proposed Marriott Courtyard, Columbia - - Fairfield Inn, Florence - - Holiday Inn, Florence - - Fairfield Inn, Greenville - - Proposed Marriott Courtyard, Greenville - - Fairfield Inn, Hilton Head - - Holiday Inn, Hilton Head Tennessee - - Hampton Inn, Brentwood - - Proposed Marriott Courtyard, Brentwood - - Howard Johnson's, Chattanooga - - Sheraton Hotel, Chattanooga - - Howard Johnson's, Knoxville - - Proposed Capital Mall Convention Center Hotel, Nashville - - Clarion Maxwell House, Nashville - - Holiday Inn Briley Parkway, Nashville - - Proposed Marriott Courtyard, Nashville - - Sheraton Music City, Nashville - - Stouffer's Nashville Hotel, Nashville - - Proposed Super 8, Nashville - - Union Station Hotel, Nashville - - Wyndham Garden Hotel, Nashville - - Proposed Super 8, Union City HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Texas - - Proposed Marriott Courtyard, Addison - - Proposed Marriott Courtyard, Arlington - - La Mansion, Austin - - Proposed Marriott Courtyard, Bedford - - Airport Hilton, El Paso - - Hotel Meridien, Houston - - Sheraton Hotel, Houston - - Proposed Marriott Courtyard, Las Colinas - - Proposed Marriott Courtyard, North Dallas - - La Mansion Del Norte, San Antonio - - La Mansion Del Rio, San Antonio - - Proposed Marriott Courtyard, San Antonio - - Proposed Marriott Courtyard - Medical Center, San Antonio Utah - - Deer Valley Resort, Park City - - Hilton Inn, Salt Lake City - - Holiday Inn, Salt Lake City - - Sheraton Hotel, Salt Lake City Virginia - - Mountain Lake Hotel, Blacksburg - - Howard Johnson's, Bristol - - Boars Head Inn, Charlottesville - - Proposed Fairfield Inn, Hampton - - Proposed Embassy Suites, Herndon - - Ramada Renaissance, Herndon - - Proposed Marriott Courtyard, Manassas - - Omni Hotel, Norfolk Virginia (continued) - - Proposed Marriott, Norfolk - - Howard Johnson's, Richmond - - Howard Johnson's, Roanoke - - Howard Johnson's, Roanoke Rapids - - Wyndham Hotel, Williamsburg Washington - - Wyndham Garden Hotel, Bothell - - Redmond Hotel, Redmond - - Wyndham Garden Hotel, SeaTac West Virginia Proposed Budget Motel, Princeton Wisconsin - - Proposed Granada Royale, Green Bay - - Holiday Inn-Downtown, Green Bay Canada - - Inn on the Park, Toronto Puerto Rico - - Carib Inn, San Juan Virgin Islands - - Virgin Grand Beach Hotel, St. Thomas Jamaica - - Holiday Inn, Montego Bay HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Stephen Rushmore, CRE, MAI, CHA Employment 1980 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1977 - 1980 1971 - 1974 HELMSLEY-SPEAR HOSPITALITY SERVICES, INC. New York, New York (Real Estate) 1974 - 1977 JAMES E. GIBBONS ASSOCIATES Garden City, New York (Mortgage Banking, Appraisals, Hotel Operations) Affiliated Ownership Interests HVS INTERNATIONAL (SAN FRANCISCO, CALIFORNIA) West coast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (MIAMI, FLORIDA) Southeast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (BOULDER, COLORADO) Midwest office for hotel/motel appraisals and counseling HVS INTERNATIONAL (VANCOUVER, CANADA) Canadian office for hotel/motel appraisals and counseling HVS INTERNATIONAL (LONDON, ENGLAND) European office for hotel/motel appraisals and counseling HVS - EXECUTIVE SEARCH Hotel/motel executive search and human resource consulting HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) HVS - ECO SERVICES Environmental consulting for hotels and motels; administrator of the ECOTEL designation HOSPITALITY EQUITY INVESTORS, INC. Hotel and motel investment and management company TRUMBULL MARRIOTT HOTEL General partner of a 324-room hotel and conference center PRINCETON HOTEL ASSOCIATES General partner of a 128-unit Residence Inn in Princeton, New Jersey SEAVIEW GOLF RESORT ASSOCIATES General partner of a 298-unit, 424-acre Marriott resort in Absecon, New Jersey SHELTON HOTEL ASSOCIATES General partner of a 96-unit Residence Inn in Shelton, Connecticut DANBURY HOTEL ASSOCIATES General partner of a 243-unit Hilton Hotel in Danbury, Connecticut PRUDENTIAL - HEI JOINT VENTURE Joint venture partner with Prudential Insurance Company of America on a 234-unit Embassy Suites in Atlanta, Georgia WESTPORT NORFOLK ASSOCIATES General partner of a 425-unit Omni Hotel in Norfolk, Virginia WESTPORT BWI, LLC General partner of a 310-unit Marriott Hotel in Baltimore, Maryland HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) WESTPORT RARITAN, LLC General partner of a 274-unit Crowne Plaza Hotel in Raritan, New Jersey WESTPORT NOVI, LLC General partner of a 193-unit Hilton Hotel in Novi, Michigan WESTPORT LONG BEACH, LLC General Partner of a 460-unit Sheraton Hotel in Long Beach, California WESTPORT PARK RIDGE, LLC General Partner of a 265-unit hotel and conference center in Valley Forge, Pennsylvania WESTPORT CHARLESTON, LLC General Partner of a 295-unit Hilton Hotel in Charleston, South Carolina HOSPITALITY VALUATION SOFTWARE, INC. Founder of software company that develops and distributes hotel financial analysis software Hotels Managed Sheraton Hotel, Smithtown, New York Marriott Hotel, Baltimore Airport, Maryland Hilton Hotel, Danbury, Connecticut Residence Inn, Princeton, New Jersey Embassy Suites, Atlanta Airport, Georgia Omni Hotel, Norfolk, Virginia Crowne Plaza, Raritan, New Jersey Hilton Hotel, Novi, Michigan Sheraton Hotel, Long Beach, California Hilton Hotel, Charleston, South Carolina Park Ridge Hotel and Conference Center, Valley Forge, Pennsylvania Hilton Hotel, Wilmington, Delaware HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Professional Affiliations American Society of Real Estate Counselors - Member (CRE) - Board of Governors Appraisal Institute - Member (MAI) (SREA) - Developer and Instructor, Hotel Investment and Valuation Seminar - Developer and Instructor, Hotel Computer Valuation Seminar American Hotel and Motel Association - Certified Hotel Administrator (CHA) - Industry Real Estate Financing Advisory Council (IREFAC) International Society of Hospitality Consultants - Member (ISHC) New York University - Adjunct Assistant Professor of Nutrition, Food and Hotel Management Michigan State University - Honorary Faculty, Honorary Alumnus Certified General Appraiser - Arizona, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Illinois, Massachusetts, Michigan, Minnesota, Nebraska, New Jersey, New York, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Virginia Licensed Real Estate Broker - New York, Pennsylvania Board of Advisers - Real Estate Finance Journal - Real Estate Workouts & Asset Management American Arbitration Association - National Real Estate Valuation Council Cornell Society of Hotelmen New York University Masters in Hospitality Management - Advisory Board New York University Hospitality Investment Conference - Board of Advisors Beta Gamma Sigma - National Honor Society in Business and Management HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Endowment Hospitality Valuation Services Professor of Hotel Finance and Real Estate - School of Hotel Administration, Cornell University (currently held by Professor James J. Eyster) Education BS - School of Hotel Administration, Cornell University MBA - Graduate School of Business Administration (Finance), University of Buffalo Candidate for PhD - School of Education, Department of Food Service Management, New York University Partial List of Teaching and Lecture Assignments Cornell University - Computer Valuation Techniques Michigan State University - Hotel Management Contracts University of North Carolina - Hotel Market Studies University of Virginia - Assessing Hotels American Arbitration Association - Real Estate Arbitration American Hotel and Motel Association - Hotel Obsolescence Appraisal Institute - Hotel Valuation (over 50 seminars) International Association of Assessing Officers - Hotel Valuation Montreal Appraisal Society - Total Project Analysis Society of Real Estate Appraisers - Lease Seminar Lodging Hospitality - Lodging Summit Published Books and Seminars Textbooks The Valuation of Hotels and Motels, Appraisal Institute, Chicago, Illinois, 1978 Hotels, Motels and Restaurants: Valuations and Market Studies, Appraisal Institute, Chicago, Illinois, 1983 How to Perform an Economic Feasibility Study of a Proposed Hotel/Motel, American Society of Real Estate Counselors, Chicago, Illinois, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Books and Seminars (continued) Textbooks (continued) Hotel Investments: A Guide for Owners and Lenders, Warren, Gorham and Lamont, Inc., New York, New York, 1990 The Computerized Income Approach to Hotel Market Studies and Valuations, Appraisal Institute, Chicago, Illinois, 1990 Hotel Investments: A Guide for Owners and Lenders, 1992 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotel Investments: A Guide for Owners and Lenders, 1993 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Appraisal Institute, Chicago, Illinois, 1992 Student Manuals The Valuation of Lease Interests, Society of Real Estate Appraisers, Chicago, Illinois, 1976 Hotel-Motel Valuation Seminar, Appraisal Institute, Chicago, Illinois, 1981, 1988, 1990 The Computerized Approach to Hotel Market Studies and Valuations Seminar, Appraisal Institute, Chicago, Illinois, 1991 Demonstration Appraisal Demonstration Appraisal of a Proposed Hotel, Spring Valley, New York, Hospitality Valuation Services, Mineola, New York, 1983, 1990 Chapters The Real Estate Handbook-Second Edition, Dow Jones-Irwin, 1989, "Hotels and Motels" Arbitration of Real Estate Valuation Principles, American Arbitration Association, 1987, "Arbitration in the Hospitality Industry" Ethics in Hospitality Management: A Book of Readings, Educational Institute of the American Hotel and Motel Association, 1992, "Ethics in Hotel Appraising" The Lodging and Food Service Industry, Educational Institute of the American Hotel and Motel Association, 1993, "Insider's Insights" HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles The Appraisal Journal "Using Total Project Analysis to Compete for Investment Capital," October, 1975 "The Appraisal of Food Service Facilities," July, 1980 "Publish and Prosper," October, 1980 "Valuation of Hotels and Motels for Assessment Purposes," April, 1984 "Adjusting Comparable Sales for Hotel Assessment Appeals," July, 1986 "Hotel Business Value and Working Capital: A Clarification," January, 1987 "Ethics in Hotel Appraising," July, 1993 The Appraiser "Hotel-Motel Appraisal Misconceptions Set Straight," January, 1979 "No Conventional Financing Available for Hotels: Rushmore," December, 1979 "Estimating Hotel Land Values Using Comparable Ground Leases," April, 1980 Bulletin of the Cornell Society of Hotelmen "Employment Philosophy for a Consulting Practice," July, 1984 Business Travel News "A Snapshot of a Classic Recovery," July, 1995 The Canadian Appraiser "Hotel/Motel Market Sales Update," Summer, 1987 Capital Sources for Real Estate "Stephen Rushmore Discusses the Future of the Lodging Industry," December, 1994 Cayuga Advisor "Secrets to Success in Consulting," October, 1992 Chapter News and Notes "Quantifying a Hotel's Business Value," November, 1979 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Cornell Hotel & Restaurant Administration Quarterly "A Preliminary Market Study," November, 1974 "How Much is Your Place Worth Today? A Case Study in Hotel - Motel Valuation," May, 1975 "What Can Be Done About Your Hotel's Real Estate Taxes?" May, 1977 "The Appraisal of Lodging Facilities," August, 1978 "The Appraisal of Food Service Facilities," February, 1979 "The Appraisal of Lodging Facilities - Update," November, 1984 "Hotel Sales Prices Down More Than 12%," May, 1991 "Seven Current Hotel Valuation Techniques," August, 1992 "The Valuation of Distressed Hotels," October, 1992 "Hotel Lending in the 1990's: Amateurs Beware," December, 1994 "Investment Values of Lodging Property: Modeling the Effects of Income Taxes and Alternative Lender Criteria," December, 1995 FCI Spec Sheet "Employment Philosophy for a Consulting Practice," September, 1984 Florida Hotel & Motel Journal "Rushmore Reports Rising Hotel Prices," February, 1995 Hotel and Motel Management "Average Rate vs. Project Cost," May 1, 1974 "How to Increase the Marketability of Your Motel," April, 1981 "Tougher Lending, Lower Room Rate Hikes On Way?" June, 1981 "What is That Mortgage Loan Going to Cost You?" August, 1981 "How to Perform a Study of Your Property's Market," October, 1981 "How do High Interest Rates Affect Your Motel's Value?" December, 1981 "How to Buy a Feasibility Study That Works for You," February, 1982 "Settling Lease Conflicts Quickly Through Arbitration," April, 1982 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Hotel and Motel Management (continued) "Are Casino Hotels Really Worth $500,000 Per Room?" June, 1982 "Discount Rates and Internal Rate of Return," August, 1982 "Determining a Property's Extended Life Cycle," November, 1982 "Using Microcomputers for Forecasting," December, 1982 "Update on Hotel Development Costs," January, 1983 "Estimating a Site's Worth by Finding Its Profit Value," June, 1983 "Hotel Construction May Be Slowing Down a Little Bit," April, 1983 "The Investor's Risk Sways to Prevailing Economic Winds," August, 1983 "Is Your Property Tax at as Low a Level as it Should Be?" October, 1983 "The Ultimate Guest Room: Could it Ever Exist Anywhere?" December, 1983 Hotel-Motor Inn Journal A Preventive Maintenance System for Motels," March, 1975 Hotel Valuation Journal "Hotel Valuation Index Peaks During 1989," Fall, 1990 "Hotel Development Costs," Winter, 1991 "Hotel Valuation Index for 1990," Spring, 1991 "Bad Year for Hotel Sales Prices Confirmed," Spring, 1992 "Hotel Sales Prices on the Rise," Fall, 1994 "United States Hotel Values Climb," Spring/Summer, 1995 "It's Time for Franchise Reform," Fall, 1995 Institutions/ Volume Feeding "Greater Risk/Greater Profit Potential: Hotel Management Contract," May, 1973 Lodging Hospitality "How to Finance Renovation Projects," January, 1974 "Controlling Your Real Estate Taxes," July, 1978 "Putting Together a Sound Financial Package," December, 1978 "Favorable Outlook for Lodging Values," December, 1983 "Are Your Property Taxes Too High? (Part I and II)," May and June, 1984 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Development Costs," July, 1984 "The Right Management Contract for You," September, 1984 "Selecting the Firm to Prepare Your Feasibility Study," October, 1984 "A Quick How-To In Hotel Valuation," November, 1984 "Updating Lodging Interest Rates," December, 1984 "Is Your Guest Experience Up to Par?" January, 1985 "How to Perform a Breakeven Analysis," May, 1985 "Evaluating Operating Performance," June, 1985 "Hotel Lenders Toughen Underwriting Requirements," July, 1985 "Don't Forget the Pre-Opening Agreement," August, 1985 "Management Companies Should Participate in Financing," October, 1985 "Current Techniques for Valuing Hotel Land," November, 1985 "Hotel Development Costs," December, 1985 "Sourcing Debt Into the 1990's," January, 1986 "Hotel Valuation Thumb Rule," February, 1986 "Value in Use Versus Value in Exchange," March, 1986 "Stretching Feasibility," April, 1986 "The Management Question," May, 1986 "How to Commission a Feasibility Study," June, 1986 "Macro Trends Affecting Property Values," July, 1986 "Hotel-Motel Market Sales Update," August, 1986 "Financing Alternatives: Zero Coupon Mortgages," September, 1986 "Forecasting Lodging Energy Costs," October, 1986 "Portfolio Financing a Better Way," November, 1986 "Profit by Looking at History," December, 1986 "Why New York Isn't Overbuilt," February, 1987 "How to Discourage Hotel Overbuilding: A Case Study," April, 1987 "Structuring an Incentive Management Fee," June, 1987 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Franchising Questions and Answers," July, 1987 "Comparing Hotel Development Costs," August, 1987 "Understanding Economic Life," September, 1987 "Prices Rise for Lodging Properties," October, 1987 "Management Companies Are Key to Success," November, 1987 "Evaluating a Management Contract Fee Structure," December, 1987 "Check Profits Before Selecting Hotel Operator," January, 1988 "It's a Good Time to Review Your Taxes," February, 1988 "How to Use a Management Company Rating System," March, 1988 "Make Sure Management Contracts Contain These Terms," April, 1988 "Hotel Access and Visibility," May, 1988 "Chain Sale Strategies," July, 1988 "Evaluating a Hotel Franchise," August, 1988 "Evaluating Franchise Fees," September, 1988 "Opportunities in Economy Lodging," October, 1988 "How to Obtain a Hotel Mortgage," November, 1988 "Arbitration in the Hospitality Industry," December, 1988 "Lodging Development Cost Update," January, 1989 "Amenities as Profit Builders," February, 1989 "Hotel Values Mirror the Times," March, 1989 "Forecasting Revenue and Expenses," April, 1989 "Real Estate Jargon Made Simple," May, 1989 "Pricing a Management Contract," June, 1989 "Trends in Valuation," July, 1989 "Rescuing the Distressed Hotel," August, 1989 "Shielding Against Incompetence," September, 1989 "Hotel Valuation Revisited," October, 1989 "New Breed of Hard Budgets," November, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Figuring Cap Rates," December, 1989 "A Glance Backward," January, 1990 "Costs Creeping Up," February, 1990 "Valuing Distressed Properties," March, 1990 "Cap and Discount Rates," April, 1990 "An Open Letter," May, 1990 "Misconceptions About Appraisals," June, 1990 "Hotel Values Still Growing," July, 1990 "Hotel Renovation is Key to `90s," August, 1990 "Time Right for Hotel Leases," September, 1990 "Getting a Fix on Rates," October, 1990 "The Wrinkles of Class," November, 1990 "A Glance Backward," December, 1990 "The Price Dropoff," January, 1991 "The Cost Washout," February, 1991 "Survival of the Fittest," March, 1991 "Looking Out and Up," April, 1991 "The Bottom is in Sight," May, 1991 "The Pitfalls of Liquidation," June, 1991 "Extra! Extra! Hospitality News," July, 1991 "The Art of Hotel Renovation," August, 1991 "No Better Time for a Tax Review," September, 1991 "No Time for Passivity," October, 1991 "What a Franchise Really Costs," November, 1991 "In Case You Hadn't Heard," January, 1992 "Negotiation - The Name of the Game," February, 1992 "Now Could be the Time to Build," March, 1992 "The Well May Stay Dry," April, 1992 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Life Expectancy," May, 1992 "Hotel Values - What a Downer," June, 1992 "How to Make Money Now," July, 1992 "Hotel Chain Class Survey," August, 1992 "Budget Dining with Rushmore," September, 1992 "Bookings Up, Rates Will Follow," October, 1992 "Hospitality Master's Good Preparation," November, 1992 "What's New on the Job Front?" January, 1993 "Where Have All the Hotels Gone?" February, 1993 "Hotel Building Costs Continue to Fall," March, 1993 "Hotel Values Head Upward," April, 1993 "The Rise and Fall of Trophy Hotels," May, 1993 "Hotel Sales and Prices Rebound," June, 1993 "Third Parties Loosening Purse Strings," July, 1993 "Beyond Recycling: The Ecotel," August, 1993 "Time to Reduce Property Taxes," September, 1993 "Lodging: The Way I See It," October, 1993 "Choosing an Appraiser," November, 1993 "Who Needs an Asset Manager?" January, 1994 "Investing by the Numbers," February, 1994 "Fire Your Staff and Lease Them Back," March, 1994 "Published Rates Hint at Recovery," April, 1994 "Now is the Time to Start Building," May, 1994 "Hotel Values Heading Up," June, 1994 "Farewell, Friend," July, 1994 "Sales Prices Creeping Up," August, 1994 "Selecting Green Hotel Supplies," September, 1994 "Don't Write Off Full-Service Hotels," October, 1994 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Lodging REIT's Are on the Rise," November, 1994 "Going Back to the Future," January, 1995 "How much do Managers Make?" March, 1995 "Lodging Transactions Soared in '94," April, 1995 "Hotel Development Costs on the Rise," May, 1995 "Hotel Values up Significantly," June, 1995 "What a Franchise Costs over the Long Term," July, 1995 "Road Food Part II," August, 1995 "It's Time for Franchise Reform," September, 1995 "Extended Stay May Not Extend Your Profits," October, 1995 "The Year as I See It," November, 1995 "Cap Rate 101," January, 1996 Michigan Lodging "Hotel Development Costs," January, 1988 The Mortgage and Real Estate Executives Report "Atlantic City Building Game Involves High Stakes," August, 1979 "How Interest Rates Affect Real Estate Values," June, 1982 "Update on Hotel Development Costs," May 1, 1983 Motel-Hotel Insider "The $100,000 Plus Hotel Room Has Become a Reality," November 19, 1979 "Update on Hotel Development Costs," April 4, 1983 NAIFA - The Appraisal Review "Hotel Valuation Techniques," Vol. 44, 1991 Real Estate Digest "Why Should the Management Team be Important to Hotel Lenders," Fall, 1988 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Finance Journal "What is a Typical Fee for a Hotel Management Contract?" Fall, 1988 "Hotel Franchise Fees," Winter 1989 "Why the Management Team Should be Important to Hotel Lenders," Spring, 1989 "Hotel Values and Costs," Summer, 1989 "Structuring a Hotel Investment," Fall, 1989 "A Guide for Lenders Holding Distressed Hotel Loans," Winter, 1990 "Estimating Current Interest Rates for Hotel Financing," Spring, 1990 "Hotel Valuation Techniques," Summer, 1990 "Now is the Time to Review Your Hotel's Property Taxes," Fall, 1990 "Property Tax Assessments for Hotels and Motels," Winter, 1991 "Putting Together Hotel Management Agreements - Part I," Spring 1991 "Putting Together Hotel Management Agreements - Part II," Summer, 1991 "The 1980s - The Decade of Change," Fall, 1991 "An Overview of the Hotel Industry: Past, Present, and Future," Spring, 1994 Real Estate Forum "Casino Hotels Raise Valuation Questions," November, 1981 Real Estate Investment Ideas "How Fuel and Energy Shortages Should Affect Investment Decisions in the Hospitality Industry," March, 1974 "Upward Trend Continues for Sales Price of Hotel-Motel Properties," May, 1988 "High Prices Paid for Hotel-Motel Properties," February, 1990 Real Estate Issues "Employee Compensation for a Consulting Practice," Fall/Winter, 1985 "Hotel/Motel Market Sales Update," Spring/Summer, 1987 Real Estate Newsletter "Computers in Hotel Appraising," May 15, 1989 Real Estate Investment Ideas "Hotel-Sales Update," Winter, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Review "Valuing Motels and Hotel in the Current Market," Fall, 1972 "Dealing With Distressed Hostelry Loans," Fall, 1975 "The Mortgage Underwriting Consultant Comes of Age," Fall, 1977 "Real Estate Compensation," Winter, 1987 Real Estate Workouts and Asset Management "Stephen Rushmore on Directions in the Hospitality Industry," September, 1992 Real Values "Hotel Construction Cost Update," April, 1986 Restaurant and Hotel Design "How Much Should the Renovation Be?" March, 1986 "14 Notable Hotel Development Firms," December, 1987 Rushmore on Hotel Valuation "Mortgage - Equity," Winter, 1979 "Atlantic City - From Bust to Boom," Winter, 1979 "Mortgage - Equity," Spring, 1979 "Developing Mortgage Data," Spring 1979 "Gasoline and Market Values, " Spring, 1979 "Mortgage - Equity," Fall, 1979 "Quantifying a Hotel's Business Value," Fall, 1979 "What Has Happened to Typical Hotel-Motel Development Costs?," Fall, 1979 "Mortgage-Equity," Winter, 1980 "Extending Hotel Economic Life Through Renovation," Winter, 1980 "Estimating Hotel Land Values Using Comparable Ground Leases," Winter, 1980 "Quantifying the Value of Personal Property to a Going Hotel," Spring, 1980 "Recent Changes in New York City's Hotel Market," Spring, 1980 "Hotel-Motel Economic Lives," Fall, 1980 "Mortgage - Equity," Fall, 1980 "Mortgage - Equity," Winter, 1981 "Developing Mortgage Data," Winter, 1981 "Statistical Support for Food and Beverage Projections," Winter, 1981 "Mortgage - Equity," Spring/Summer, 1981 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Rushmore on Hotel Valuation (continued) "Quantifying a Hotel's Demand," Spring/Summer, 1981 "A Five-Year Overview of Typical Hotel-Motel Development Costs," Spring/Summer, 1981 "Mortgage - Equity," Winter/Spring, 1982 "Update on Hotel Capitalization Rates," Winter/Spring, 1982 "Mortgage - Equity," Summer/Fall, 1982 "Are Casino Hotels Really Worth $500,000 Per Room?" Summer/Fall, 1982 "The Hotel-Motel Life Cycle, Summer/Fall, 1982 "Mortgage - Equity," Winter/Spring, 1983 "Update on Hotel Development Costs," Winter/Spring, 1983 "The Valuation of Hotels and Motels for Assessment Purposes," Winter, 1984 "Hotel Capitalization Rates," Summer, 1984 "Hotel Development Cost Survey," Summer, 1984 "Selecting a Hotel Management Company," Fall, 1984 "Hotel Capitalization Rates," Spring, 1985 "How to Perform a Breakeven Analysis," Spring, 1985 "Hotel Capitalization Rates," Winter, 1986 "Hotel Development Costs," Winter, 1986 "Hotel Valuation Survey," Winter, 1987 "Impact of New Tax Laws on Hotel Values," Winter, 1987 "Hotel-Motel Market Sales Update," Winter, 1987 "Structuring an Incentive Management Fee," Fall, 1987 "Understanding Your Hotel's Economic Life," Fall, 1987 "Hotel Development Costs," Fall, 1987 "Hotel, Motel Market Sales Update," Winter, 1988 "Amenity Creep," Winter, 1989 "Hotel Franchise Fees," Winter, 1989 "Hotel Valuation Index," Fall, 1989 "Latest Trends in Hotel Values," Fall, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Tri-State Real Estate Journal "Across the Nation: Hotel Sale Prices Escalate on Average," December 23, 1994 U.S. Real Estate Week "All-Suites Market Entering Second Phase," May 4, 1987 Valuation "Hotel-Motel Market Sales Update," February, 1987 Quarterly Newsletter Hotel Valuation Journal Professional newsletter with a circulation of 10,000 Real Estate Column Lodging Hospitality Real estate editor for a major monthly hospitality periodical Hospitality Column Real Estate Finance Journal Contributing hospitality editor Computer Software Hospitality Valuation Software Hotel financial software for room night analyses, income and expense forecasts, and valuation calculations - developed and distributed for the Appraisal Institute Hotel-Motel Data Hospitality Market Data Exchange National clearinghouse for information pertaining to hotel and motel transactions Hotel Valuation Index National index of hotel value trends for 24 individual market areas Hospitality Seminar Series Intensive short courses for hotel and restaurant professionals Hotel Franchise Fees Analysis Guide Analysis of hotel franchise fees and costs Hospitality Bibliography Comprehensive literature index of hotel and restaurant books and articles HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Awards Robert H. Armstrong Award For the most significant contribution to The Appraisal Journal in 1975 Activities Commercial pilot, instrument, multi-engine; sailing; skiing Corporate and Institutional Clients Served Aetna Life Insurance AIG Real Estate Investment Aldrich Eastman and Waltch Allstate American Airlines America's Best Inns Arthur Anderson & Company Bankers Trust Company Bank of America Bank of Boston Bank of Montreal Bank of New York Bank of Nova Scotia Bank of Tokyo Bank One-Columbus Banque Indosuez Barclay's Bank Baybank Boston The Beacon Companies Bear, Stearns & Company, Inc. Best Inns Best Western International Boykin Management Co. Bradbury Suites C. Itoh Caesar's World California Dept. of Transportation Chase Lincoln First Bank, N.A. Chase Manhattan Bank Chemical Bank Chrysler Capital Corporation CIGNA Citibank Citicorp Real Estate City of Boston City of Detroit City of Grand Rapids City of Kalamazoo City of Orlando City of Philadelphia City of Santa Monica City of Toronto Columbia Sussex Corporation Continental Illinois National Bank Copley Real Estate Advisors Corporex Development CRI, Inc. Cushman and Wakefield Days Inns Edward J. DeBartolo Corp. HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Deer Valley Ski Corporation Doubletree Hotels Drury Inns Econo Lodge Economic Development Admin. EIE Regent International Embassy Suites Equitable Life Assurance Equitable Real Estate Investment European American Bank Fairmont Hotels Federal Deposit Insurance Corp. First Boston First California Savings First Interstate Bank First National Bank of Chicago Four Seasons Hotels Goldman, Sachs Greater Orlando Aviation Authority Great Western Bank Great Western Savings Guest Quarters Hampton Inns Hilton Hotels, Corp. Hilton International Holiday Corporation Holiday Inns Home Savings of America Howard Johnson's Hudson Hotels Corporation Hyatt Hotels Industrial Bank of Japan Interstate Hotels The Irvine Company ITT Commercial Finance Corp. Japan Airlines JDC (America) Corporation John Q. Hammons John Hancock Life Insurance Johnson & Wales College Kenneth Leventhal & Assoc. Kidder Peabody & Company, Inc. La Quinta Larken, Inc. Lexington Companies Loews Hotels Harry Macklowe Real Estate Marine Midland Bank, N.A. Marriott Corporation MA Bay Transit Authority Massachusetts Mutual Life Mellon Bank Meridien Hotels Merrill Lynch Merrill Lynch Capital Markets Metropolitan Life Insurance Microtel Midlantic Bank HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Mitsubishi Morgan Guaranty Bank & Trust Co. J.P. Morgan Investment Management Morgan Stanley Motel 6, Inc. Mutual Benefit Co. National Westminster Bank New York Life Insurance Nippon Credit Bank Nomura Securities Int'l North American Taisei Corporation Northwestern Mutual Life Omni Hotels Parabas Bank Prime Motor Inns Property Capital Trust Prudential Life Insurance Radisson Hotels Ramada Inns Red Lion Inns Regent International Registry Hotels Residence Inns Resolution Trust Corporation Rhode Island Hospital Trust Ritz-Carlton Hotels Rodeway Inns Rose Associates Salomon Brothers San Antonio Hotel/Motel Assoc. Sanwa Bank Security Pacific Bank Servico Management Corp. Sheraton Hotels Sonesta Hotels Sonnenblick-Goldman Steamboat Ski Corporation Stouffer Hotels Stratton Corporation Sumitomo Bank Summerfield Hotel Corporation Super 8 Hotels Swiss Bank Corporation Taisei Texas Commerce Bancshares, Inc. Tishman Realty Corporation Trans World Airlines Travelers Insurance TraveLodge Trusthouse Forte UBS Securities Union Labor Life United Bank of Switzerland United Inns, Inc. United States Steel Universal Hotels U.S. Air Force U.S. Department of Justice HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) U.S. Department of the Army U.S. Department of the Interior U.S. Economic Development Authority U.S. Trust Company Walt Disney Productions Westin Hotels Williams Hospitality Corporation Winegardner & Hammons Winthrop Financial Associates Wyndham Hotels Zeckendorf Company Appearance as an Expert Witness Administrative Law Court - SEC, Washington, DC Appellate Tax Board, Boston, Massachusetts Arbitration, Wayne, New Jersey Assessment Appeals Board, Los Angeles County, Los Angeles, California Board of Equalization and Review, Washington, District of Columbia (2) Board of Taxation, Atlantic City, New Jersey Bureau de Revision Evaluation Fonciere du Quebec, Montreal, Canada Circuit Court, Orange County, Orlando, Florida Condemnation Review Board, Minneapolis, Minnesota Corporation Committee, Rhode Island State Senate Court of Common Pleas, Allegheny County, Pennsylvania Court of Common Pleas, Franklin County, Ohio Court of Common Pleas, Montgomery, Pennsylvania Court of Common Pleas, Pittsburgh, Pennsylvania Court of Common Pleas, Philadelphia, Pennsylvania Court of Queen's Bench of Alberta, Canada District Court, Arapahoe County, Colorado District Court, Dallas County, Texas District Court, Harris County, Texas District Court, Tarrant County, Texas District Court, Hennepin County, Minneapolis, Minnesota District Court, Knoxville, Tennessee Federal Bankruptcy Court, Oakland, California Federal Bankruptcy Court, Los Angeles, California HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Denver, Colorado Federal Bankruptcy Court, District of Columbia Federal Bankruptcy Court, Miami, Florida (2) Federal Bankruptcy Court, Chicago, Illinois Federal Bankruptcy Court, New Orleans, Louisiana Federal Bankruptcy Court, Greenbelt, Maryland Federal Bankruptcy Court, Baltimore, Maryland Federal Bankruptcy Court, Rockville, Maryland Federal Bankruptcy Court, Boston, Massachusetts Federal Bankruptcy Court, Grand Rapids, Michigan Federal Bankruptcy Court, Las Vegas, Nevada Federal Bankruptcy Court, Newark, New Jersey (2) Federal Bankruptcy Court, Manhattan, New York (2) Federal Bankruptcy Court, Westbury, New York Federal Bankruptcy Court, Philadelphia, Pennsylvania Federal Bankruptcy Court, Reading, Pennsylvania Federal Bankruptcy Court, Salt Lake City, Utah Federal Bankruptcy Court, Madison, Wisconsin (2) Federal District Court, Rochester, New York Federal District Court, Philadelphia, Pennsylvania (2) Judicial Arbitration and Mediation Services, Dallas, Texas Michigan Tax Tribunal, Detroit, Michigan New Jersey Tax Court, Newark, New Jersey (2) Superior Court, District of Columbia Superior Court, Clayton County, Georgia (2) Superior Court of North Carolina Superior Court, Nashua, New Hampshire Supreme Court, New York State, Buffalo, New York Supreme Court, New York State, Manhattan, New York Supreme Court, New York State, Riverhead, New York HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Tax Review Board, San Joaquin County, Stockton, California Tax Review Board, Bangor, Maine Tax Review Board, Schenectady, New York Tax Review Board, Yorktown, New York Tax Review Board, North Carolina Tax Review Board, Philadelphia, Pennsylvania (2) U.S. District Court, Wilmington, Delaware U.S. District Court, Madison, Wisconsin ============================================================================== Partial List of Hotels/Motels, Appraised or Reviewed Internationally North America Canada - Delta Hotel, Calgary - Econo Lodge, Hull - Hotel Lord Berri, Montreal - Hotel Vogue, Montreal - Hyatt Regency, Montreal - Le Ragence Hyatt, Montreal - Holiday Inn, Oshawa, Ontario - Hotel Le Chantecler, Quebec - Bond Place Hotel, Toronto - Carlton Hotel, Toronto - Chelsea Hotel, Toronto - Delta Chelsea Hotel, Toronto - Four Seasons on the Park, Toronto - Inn on the Park, Toronto - Novotel Missisauga, Toronto - Ramada Inn, Toronto - Sutton Hotel, Toronto - Toronto Marriott East, Toronto - Westbury Hotel, Toronto - Burnaby Villa Inn, Vancouver - Four Seasons Hotel, Vancouver - Sheraton Land Mark, Vancouver - Sheraton Plaza 500, Vancouver - Four Seasons Yorkville Hotel, Yorkville United States Alabama - MEI - Birmingham West, Bessemer - Comfort Inn, Birmingham - Courtyard by Marriott, Birmingham - Courtyard by Marriott-Hoover, Birmingham - Courtyard By Marriott/Homewood, Birmingham - Crown Sterling Suites, Birmingham - Fairfield Inn, Birmingham - Holiday Inn, Birmingham - Howard Johnson, Birmingham - Knights Inn, Birmingham - Ramada Inn, Birmingham - Residence Inn by Marriott, Birmingham - Still Waters Resort, Dadeville - Ramada Inn, Gadsden - Sheraton Hotel, Gulf Shores - Courtyard by Marriott, Huntsville - Knights Inn, Huntsville - Marriott Hotel-Proposed, Huntsville - La Quinta Inn, Huntsville University - Days Inn, Mobile - Hotel - Proposed, Mobile - Inn-Proposed, Mobile - Stouffer Riverview, Mobile - Courtyard by Marriott, Montgomery - Fairfield Inn, Montgomery - Holiday Inn-Downtown, Montgomery - Holiday Inn-East, Montgomery - Howard Johnson, Montgomery - La Quinta Inn, Montgomery - Residence Inn, Montgomery - Marriott's Grand Hotel, Point Clear - Holiday Inn, Sheffield - La Quinta, Tuscaloosa - Masters Economy Inn, Tuscaloosa - Proposed Extended Stay, West Mobile Alaska - Barratt Inn, Anchorage - Clarion Hotel, Anchorage - Holiday Inn, Anchorage - Hotel Captain Hook, Anchorage - International Airport Inn, Anchorage - Sheraton Anchorage Hotel, Anchorage Arizona - Holiday Inn, Bullhead City - Embassy Suites, Camelback - Compri Hotel-Proposed, Chandler - Quality Inn, Chandler - Ramada Inn, Chandler - AmeriSuite Hotel-Proposed, Flagstaff - Holiday Inn, Flagstaff - Motel 6, Flagstaff - Rodeway Inn, Flagstaff - Bright Angel Lodge, Grand Canyon - El Tovar Hotel, Grand Canyon - Grand Canyon National Park, Grand Canyon - Kachina Lodge, Grand Canyon - Maswik Lodge, Grand Canyon - Moqui Lodge, Grand Canyon - Phantom Ranch, Grand Canyon - Thunderbird Lodge, Grand Canyon - Yavapai Lodge, Grand Canyon - Hampton Inn-Proposed, Holbrook - Moqui Lodge, Kaibab National Forest - Rodeway Inn, Kingman - Nautical Inn Resort, Lake Havasu City - Lexington Hotel Suites, Mesa - Biosphere II Conference Center, Oracle - Best Western-Per Diem, Phoenix - Bobby McGee's, Phoenix - Caravan Inn, Phoenix - Compri Hotel-Proposed, Phoenix - Courtyard by Marriott-Black Canyon, Phoenix - Courtyard by Marriott-Mesa, Phoenix - Crescent Phoenix Hotel, Phoenix - Crown Sterling Suites, Phoenix - Days Inn, Phoenix - Doubletree Inn at Park Central, Phoenix - Embassy Suites, Phoenix - Embassy Suites-Biltmore, Phoenix - Executive Park Hotel, Phoenix - Fountain Suites Hotel, Phoenix - Granada Royale-Camelhead, Phoenix - Hilton Hotel, Phoenix - Holiday Inn, Phoenix - Hyatt Regency, Phoenix - La Quinta Hotel, Phoenix - Lexington Hotel Suites, Phoenix - Newton's Sands, Phoenix - Phoenician Golf & Tennis Resort, Phoenix - Pointe Hilton at Tapatio Cliffs, Phoenix - Quality Inn, Phoenix - Ramada Inn-Airport, Phoenix - Ramada Inn-East, Phoenix - Ritz Carlton, Phoenix - Sunburst Resort Hotel, Phoenix - Hassayampa Inn, Prescott - Clarion Inn at McCormick Ranch, Scottsdale - Conference Center, Scottsdale - Courtyard by Marriott-Mayo, Scottsdale - Doubletree Inn at Scottsdale Mall, Scottsdale - Fairfield Inn, Scottsdale - Fashion Square Hotel, Scottsdale - Loews Paradise Resort, Scottsdale - Marriott Camelback Inn, Scottsdale - Marriott Mountain Shadows, Scottsdale - Mountain Shadows Resort, Scottsdale - Orange Tree Resort, Scottsdale - Ramada-Valley Ho, Scottsdale - Red Lion's La Posada Resort, Scottsdale - Registry Resort, Scottsdale - Rodeway Inn, Scottsdale - Scottsdale Princess, Scottsdale - Sheraton Scottsdale Resort, Scottsdale - The Phoenician, Scottsdale - Valley Ho, Scottsdale - John Gardiner's Enchantment, Sedona - L'Auberege de Sedona, Sedona - Los Abrigados, Sedona - Orchards Inn, Sedona - Hotel-Proposed, Sierra Vista - Motel 6, Sierra Vista - Temple Bar Resort, Temple Bar - Coachman Inn - Proposed, Tolleson/Phoenix - Tubac Resort, Tubac - Canyon Ranch, Tucson - Coachman Inn-Proposed, Tucson - Courtyard by Marriott, Tucson - Doubletree Inn, Tucson - Embassy Suites, Tucson - Granada Royale Hometel-E. Broadway, Tucson - Hotel Park Tucson-Proposed, Tucson - Lexington Suites Hotel, Tucson - Loews Hotel, Tucson - Resort Hotel-Proposed, Tucson - Rodeway Inn, Tucson - Sunbelt Commerce Center Hotel, Tucson - La Quinta Inn, Tucson East - Bobby McGee's, Tuscon - Radisson Suite Hotel, Tuscon - Ventana Canyon Golf and Racquet, Tuscon - Ramada Inn, Union Hill Arkansas - Sheraton Inn, Fort Smith - Hilton, Hot Springs - Holiday Inn-Lake Hamilton, Hot Springs - Courtyard by Marriott, Little Rock - Holiday Inn, Little Rock - Legacy Hotel, Little Rock - Little Rock Hilton, Little Rock - Masters Economy Inn, Little Rock - Red Carpet Inn, Little Rock - Super 8, Little Rock - Masters Economy Inn, North Little Rock - Masters Economy Inn, Protho-Junction - Holiday Inn, Texarkana California - Hampton Inn, Agoura Hills - Ramada Inn, Agoura Hills - Residence Inn-Proposed, Agoura Hills - Island Motel, Almeda - Anaheim Hilton & Towers, Anaheim - Anaheim Park Motor Inn, Anaheim - Anaheim Plaza Hotel, Anaheim - Best Western Pavillions, Anaheim - Carousel Inn, Anaheim - Conestoga Hotel, Anaheim - Courtyard by Marriott, Anaheim - Crown Sterling Suites, Anaheim - Disneyland Hotel, Anaheim - Golden Forest Motel, Anaheim - Hampton Inn, Anaheim - Hilton, Anaheim - Holiday Inn Anaheim Center, Anaheim - Hotel-Proposed, Anaheim - Marriott Hotel, Anaheim - Pan Pacific Hotel, Anaheim - Pitcairn Motel, Anaheim - Raffles Inn, Anaheim - Ramada Maingate/Disneyland Hotel, Anaheim - Roger Morris Inn, Anaheim - Stovall's Inn, Anaheim - The Station Inn, Anaheim - Travelodge Inn at the Park, Anaheim - AmeriSuite, Anaheim Hills - Comfort Inn, Anahiem - Mansouri Hotel, Antioch - Red Lion, Apple Valley - Hampton Inn, Arcadia - Residence Inn, Arcadia - Hilton Lodge, Arrowhead Lake - Auburn Inn, Auburn - Sleep Inn, Auburn - Allstar Inn, Bakersfield - Clarion Hotel, Bakersfield - Courtyard by Marriott, Bakersfield - Economy Inn, Bakersfield - Ramada Inn, Bakersfield - Red Lion Hotel, Bakersfield - Residence Inn, Bakersfield - Rodeway Inn, Bakersfield - Hilton Hotel, Baldwin Park - San Gabriel Valley Hotel, Baldwin Park - The Hilton Hotel, Baldwin Park - Allstar Inn, Barstow - Economy Inn, Barstow - Marriott Berkeley Marina, Berkeley - Shattuck Hotel, Berkeley - Beverly Hills Hotel, Beverly Hills - Beverly Rodeo Hotel, Beverly Hills - Beverly Wilshire Hotel, Beverly Hills - Hilton Hotel-Cresthil, Beverly Hills - L'Ermitage, Beverly Hills - Peninsula Hotel, Beverly Hills - Best Western, Big Bear Lake - Big Bear Hotel, Big Bear Lake - Big Bear Lake Resort, Big Bear Lake - Big Bear Towering Pines, Big Bear Lake - Motel 6, Big Bear Lake - Post Ranch, Big Sur - Ventana Inn, Big Sur - Rodeway Inn, Blythe - Courtyard by Marriott, Brea - Holiday Inn, Brentwood - Courtyard by Marriott, Buena Park - Fairfield Inn, Buena Park - Hampton Inn, Buena Park - Holiday Inn, Buena Park - Crowne Sterling Suites, Burlingame - Hyatt Regency, Burlingame - Mariott Hotel - SFO, Burlingame - Marriott, Burlingame - Marriott-San Francisco Airport, Burlingame - Radisson Hotel-Proposed, Burlingame - Sheraton Hotel, Burlingame - Courtyard by Marriott, Camarillo - Best Western Fireside Inn, Cambria - Cambria Pines Lodge, Cambria - Residence Inn, Campbell - Hotel-Proposed, Capitola - Resort Hotel, Spa & Conference Ctr., Capitola - Allstar Inn, Carlsbad - Carlsbad Inn, Carlsbad - Inn of America, Carlsbad - La Costa Hotel and Spa, Carlsbad - Olympic Resort Hotel, Carlsbad - Tickle Pink Inn, Carmel - Allstar Inn, Carpinteria - Desert Princess Country Club, Cathedral City - Royce Suites Hotel, Cathedral City - Digger Bay, Central Valley - Marriott Hotel-Proposed, Century City - Westin Century Plaza Hotel, Century City - Neighborhood Inn-Proposed, Chatsworth - Red Lion Hotel, Chico - Otay Valley Inn, Chula Vista - Travelodge-Otay Valley, Chula Vista - Ramada Inn, City of Commerce - Sheraton Hotel, City of Industry - Allstar Inn, Coalinga - Harris Ranch Restaurant/Inn, Coalinga - Howard Johnson, Colton - Best Western Willow Tree Inn, Compton - Concord Hotel, Concord - Hilton Hotel, Concord - The Trees Inn, Concord - Motel 6, Corona - Hotel del Coronado, Coronado - Loews Coronado Bay Resort, Coronado - Madera Village Inn, Corte Madera - Ha' Penny Inn, Costa Mesa - La Quinta Hotel, Costa Mesa - Marriott Suites, Costa Mesa - Red Lion Hotel, Costa Mesa - Residence Inn, Costa Mesa - Pacifica Hotel, Culver City - Ramada Inn, Culver City - Courtyard by Marriott, Cupertino - Doubletree Hotel, Cupertino - Doubletree Hotel, Dana Point - Spa-Proposed, Danville - El Rancho, Davis - Furnace Creek Resort, Death Valley - Stovepipe Wells Village, Death Valley - Hilton, Del Mar - Days Inn, Diamond Bar - Compri Hotel, El Segundo - Proposed Summerfield, El Segundo - Days Inn, Emeryville - Holiday Inn-Bay Bridge, Emeryville - Lyons Restaurant, Emeryville - Budget Motel, Encinitis - Marriott Tenaya Lodge-Proposed, Fishcamp - Holiday Inn, Fort Myers Beach - All Suites Hotel/Athletic Club, Foster City - Clubtel-Proposed, Foster City - Courtyard by Marriott, Foster City - Holiday Inn, Foster City - Courtyard by Marriott, Fremont - Fremont Hotel, Fremont - Motel 6, Fremont - Residence Inn, Fremont - Allstar Inn, Fresno - AmeriSuite, Fresno - Chateau Inn, Fresno - Courtyard by Marriott, Fresno - Economy Inn, Fresno - Hacienda, Fresno - Holiday Inn, Fresno - Holiday Inn-Fresno Airport, Fresno - Howard Johnson Motel, Fresno - Piccadilly Inn, Fresno - Travelers Inn, Fresno - Travelers Lodge, Fresno - Griswold's Hotel, Fullerton - Holiday Inn, Fullerton - Marriott Hotel, Fullerton - Hotel-Proposed, Garden Grove - Hyatt Regency Alicante, Garden Grove - Princess Hotel, Garden Grove - Motel 6, Gilroy - Hyatt Regency-Proposed, Goleta - Allstar Inn, Hacienda Heights - Courtyard by Marriott, Hacienda Heights - Half Moon Bay Lodge, Half Moon Bay - Courtyard by Marriott, Harbor Boulevard - Grosvenor, Harborside-Pt. Loma - Inn at Foss Creek, Healdsburg - Chateau Marmont, Hollywood - Hollywood Palm Hotel, Hollywood - Sunset Towers Hotel, Hollywood - Waterfront Hilton Hotel, Huntington Beach - Compri Hotel, Hutton Centre - Grand Champions Resort, Indian Wells - Stouffer Esmerelda Resort, Indian Wells - Courtyard By Marriott, Irvine - Courtyard by Marriott - Proposed, Irvine - Embassy Suites, Irvine - Hilton Hotel, Irvine - Holiday Inn, Irvine - Hyatt Hotel, Irvine - La Quinta-Proposed, Irvine - Marriott Hotel, Irvine - Marriott-Proposed, Irvine - Registry Hotel, Irvine - Residence Inn-Proposed, Irvine - Amador Inn, Jackson - Embassy Suites, La Jolla - Hotel-Proposed, La Jolla - La Jolla Property, La Jolla - La Jolla Village Inn, La Jolla - Marriott Hotel, La Jolla - Residence Inn, La Jolla - Days Inn-Proposed, La Palma - PGA West Resort - Proposed, La Quinta - Lafayette Park Hotel, Lafayette - Laguna Shores, Laguna Beach - Holiday Inn, Laguna Hills - Ryokan Hotel-Proposed, Laguna Hills - Villa Valencia, Laguna Hills - Ritz Carlton, Laguna Niguel - Lake Mohave Resort, Lake Mohave - Resort at Squaw Creek, Lake Tahoe - Courtyard by Marriott, Larkspur Landing - Hilton, Las Cruces - Surf and Sand Hotel, Leguna Beach - Holiday Inn, Lido Beach - Motel-Proposed, Little Lake - Residence Inn, Livermore - Residence Inn-Proposed, Livermore - Breakers Hotel, Long Beach - Holiday Inn, Long Beach - Holiday Inn Airport, Long Beach - Marriott Hotel-Long Beach Airport, Long Beach - Marriott Hotel-Proposed, Long Beach - Ramada Renaissance Hotel, Long Beach - Residence Inn, Long Beach - Sheraton Long Beach & Office Tower, Long Beach - Airport Park Hotel, Los Angeles - Bel Age, Los Angeles - Biltmore Hotel, Los Angeles - Century Inn, Los Angeles - Checkers Hotel, Los Angeles - Courtyard by Marriott-Irvine Main, Los Angeles - Courtyard by Marriott-LAX Airport, Los Angeles - Crown Sterling Suites, Los Angeles - Days Inn, Los Angeles - Econo Lodge-Proposed, Los Angeles - Embassy Suites, Los Angeles - Embassy Suites-LAX-Proposed, Los Angeles - Four Seasons, Los Angeles - Hampton Inn-LAX, Los Angeles - Herrick and Campbell, Los Angeles - Hilton & Towers-LAX, Los Angeles - Hilton Hotel, Los Angeles - Holiday Inn Crowne Plaza-LAX, Los Angeles - Le Montrose Hotel, Los Angeles - Ma Maison Sofitel, Los Angeles - Macklowe Hotel, Los Angeles - Marriott Century City, Los Angeles - MCA Hotel-Proposed, Los Angeles - New Otani Hotel, Los Angeles - Playa Vista Development, Los Angeles - Stouffer Concourse Hotel, Los Angeles - Westin Bonaventure, Los Angeles - Westwood Marquis Hotel, Los Angeles - Los Gatos Lodge, Los Gatos - Macienda Inn, Los Gatos - Toll House Inn, Los Gatos - Residence Inn, Manhattan Beach - All Suite Hotel, Marina Del Rey - Marina Beach Hotel, Marina del Rey - Marina del Rey Hotel and Marina, Marina del Rey - Marina Suites Hotel, Marina Del Rey - Marriott Marina Del Rey, Marina Del Rey - Residence Inn, Meriden - Quality Suites Hotel - Proposed, Millbrae - Beverly Heritage Hotel, Milpitas - Crown Sterling Suites, Milpitas - Holiday Inn, Milpitas - Courtyard by Marriott, Mira Mesa - Grosvenor, Mission Bay - Motel Orleans, Modesto - Red Lion Hotel, Modesto - Red Lion-Proposed, Modesto - Carmel Mission Inn, Monterey - Doubletree Inn, Monterey - Former Monterey Hilton Hotel, Monterey - Monterey Plaza, Monterey - Plaza Hotel, Monterey - Sheraton Hotel, Monterey - Pebble Beach Company, Monterey County - Inn at Morro Bay, Morro Bay - Residence Inn, Mountain View - Inn at Napa Valley, Napa - Best Western Inn, Napa Valley - Clarion Hotel-Napa Valley, Napa Valley - Silverado, Napa Valley - Ha'Penny Motel, National City - Allstar Inn, Needles - Hilton-Newark/Fremont, Newark - Four Seasons Hotel, Newport Beach - Hotel Meridien, Newport Beach - Hyatt Newporter, Newport Beach - Newporter Resort, Newport Beach - Sheraton, Newport Beach - Days Inn-Proposed, North Hollywood - Northstar, North Lake Tahoe - Ramada Inn, Norwalk - Impact Study - Proposed Hotel, Oakdale - Hilton Inn, Oakland - Holiday Inn, Oakland - Holiday Inn-Oakland Airport, Oakland - Parc Oakland Hotel, Oakland - Resort - Proposed, Olympic Valley - Resort at Squaw Creek-Proposed, Olympic Valley - Clarion Hotel, Ontario - Compri Hotel, Ontario - Fairfield Inn, Ontario - Holiday Inn, Ontario - Lexington Hotel Suites, Ontario - Red Lion Hotel, Ontario - Doubletree Hotel, Orange - Woodfin Suites, Orange - Embassy Suites, Palm Desert - Marriott Desert Springs, Palm Desert - Canyon Resort, Palm Springs - Compri Hotel-Proposed, Palm Springs - Courtyard by Marriott, Palm Springs - Desert Princess, Palm Springs - Grand Champions Resort, Palm Springs - International Hotel and Resort, Palm Springs - Ocotillo Lodge, Palm Springs - Palm Canyon, Palm Springs - PGA West Resort-Proposed, Palm Springs - Spa Hotel at Mineral Springs, Palm Springs - Westin Hotel, Palm Springs - Grosvenor, Palmdale - Super 8, Palmdale - Cowper Square, Palo Alto - Garden Court, Palo Alto - Holiday Inn, Palo Alto - Stanford Park, Palo Alto - Marriott, Paradise Valley - All Suite Hotel-Proposed, Pasadena - Doubletree Hotel, Pasadena - Holiday Inn, Pasadena - Cascade Ranch Lodge, Pescadero - Elk Lodge, Petaluma - Hotel Petaluma, Petaluma - Hilton-Proposed, Pismo Beach - Hilton-Sea Point, Pismo Beach - Holiday Inn, Pismo Beach - Hotel-Proposed, Pismo Beach - Pismo II, Pismo Beach - Fairfield Inn, Placentia - Residence Inn, Placentia - Howard Hughes Center, Playa Vista - Pleasant Hill Inn, Pleasant Hill - Residence Inn, Pleasant Hill - Club Hilton Hotel-Proposed, Pleasanton - Compri Hotel, Pleasanton - Courtyard by Marriott, Pleasanton - Hilton, Pleasanton - Holiday Inn, Pleasanton - Pleasanton Creek, Pleasanton - Shilo Inn - Hilltop, Pomona - Compri Hotel, Rancho Bernardo - Radisson Suites, Rancho Bernardo - Comfort Inn Motel, Rancho Cordova - Courtyard by Marriott, Rancho Cordova - Economy Inn, Rancho Cordova - El Rancho, Rancho Cordova - Quality Suites-Proposed, Rancho Cordova - Sheraton Sunrise, Rancho Cordova - Marriott Rancho Las Palmas, Rancho Mirage - Mission Hills Hotel, Rancho Mirage - Resort Hotel-Proposed, Rancho Mirage - Westin Mission Hills Resort, Rancho Mirage - Bridge Bay Resort, Redding - Grand Manor Inn, Redding - La Quinta Inn, Redding - Motel 6, Redding - Motel Orleans, Redding - Red Lion Inn, Redding - Shasta Inn, Redding - Portofino Hotel & Yacht Club, Redondo Beach - Sheraton, Redondo Beach - Sofitel Redwood Shores, Redwood - Days Inn, Richmond - Best Western Carraige Inn, Ridgecrest - Days Inn, Riverside - Mission Inn-Proposed, Riverside - Omni Mission Inn, Riverside - Sheraton Hotel, Riverside - Red Lion Inn, Rohnert Park - Crown Sterling Suites, S.San Fransicso - Allstar Inn, Sacramento - Arco Arena II-Proposed, Sacramento - Arco Park, Sacramento - Catering Center - Proposed, Sacramento - Clarion Hotel, Sacramento - Compri Hotel-Proposed, Sacramento - Courtyard by Marriott, Sacramento - Courtyard by Marriott-S. Natomas, Sacramento - Hilton Hotel, Sacramento - Holiday Inn-Capital Plaza, Sacramento - Hotel-Proposed, Sacramento - Hyatt Arbitrat, Sacramento - Hyatt Regency, Sacramento - La Quinta Hotel, Sacramento - Motel Orleans, Sacramento - Radisson Hotel, Sacramento - Red Lion Inn, Sacramento - Residence Inn, Sacramento - Sacramento Inn, Sacramento - Sierra Inn, Sacramento - Sterling Hotel, Sacramento - Travelers Inn, Sacramento - Woodlake Inn, Sacramento - Harvest Inn, Saint Helena - Courtyard by Marriott, San Bruno - San Carlos Motel Development, San Carlos - Atlas Hotels/Mission Valley Inn, San Diego - Best Western Seven Seas Motor Lodge, San Diego - Budget Motel of America, San Diego - Catamaran Resort Hotel, San Diego - Center Pointe Development, San Diego - Comfort Inn, San Diego - Courtyard by Marriott-Mira Mesa, San Diego - Doubletree Hotel, San Diego - Embassy Suites, San Diego - Executive Lodge, San Diego - Hanalei Hotel, San Diego - Harbor Island Hotel-Proposed, San Diego - Harborside Inn-Point Loma, San Diego - Harbortown Marina Resort, San Diego - Holiday Inn Montgomery Airport, San Diego - Holiday Inn-Embarcadero, San Diego - Holiday Inn-Harbor View, San Diego - Horton Grand Saddlery, San Diego - Horton Park Plaza Hotel, San Diego - Howard Johnson Hotel, San Diego - Inter-Continental Hotel & Marina, San Diego - Kings Inn, San Diego - La Jolla Village Inn, San Diego - La Quinta Hotel, San Diego - Marriott Hotel-Mission Valley, San Diego - Marriott Twin Towers and Marina, San Diego - Mission Valley Inn, San Diego - Omni Hotel, San Diego - Radisson Hotel, San Diego - Ramada Inn, San Diego - Ramada Limited Suites, San Diego - Ramada Old Town, San Diego - Ramada Rancho Penasquitos, San Diego - Red Lion Inn, San Diego - Regency Plaza Hotel, San Diego - San Diego Marriott, San Diego - Seven Seas Lodge, San Diego - Sheraton Grand, San Diego - Sheraton Harbor Island East, San Diego - Super 8-Point Loma, San Diego - Symphony Towers, San Diego - Town and Country Hotel, San Diego - Travelodge Hotel Plaza, San Diego - U.S. Grant Hotel, San Diego - Westin-Proposed, San Diego - Abagail Inn, San Francisco - Bellevue Hotel, San Francisco - Cable Motor Inn, San Francisco - California Cafe, San Francisco - Campton Place, San Francisco - Cartwright Hotel, San Francisco - Chancellor Hotel, San Francisco - Clarion Inn-San Francisco Airport, San Francisco - Comfort Inn, San Francisco - Courtyard by Marriott-Airport, San Francisco - Embarcadero Inn, San Francisco - Fairmont Hotel, San Francisco - Grand Hyatt, San Francisco - Grosvenor Clift Hotel, San Francisco - Harbor Court Hotel, San Francisco - Hilton Hotel, San Francisco - Holiday Inn - Union Square, San Francisco - Holiday Inn Crowne Plaza, San Francisco - Holiday Inn-Civic Center, San Francisco - Holiday Inn-Fisherman's Wharf, San Francisco - Holiday Inn-Golden Gateway, San Francisco - Holiday Inn-South, San Francisco - Holiday Lodge, San Francisco - Hotel Diva, San Francisco - Hotel Meridien, San Francisco - Hotel Union Square, San Francisco - Hotel-Proposed, San Francisco - Hyatt Fisherman's Wharf, San Francisco - Hyatt Regency Embarcadero, San Francisco - Inn at Fisherman's Wharf, San Francisco - Inn at the Opera, San Francisco - Inn-Proposed, San Francisco - Juliana Hotel, San Francisco - King George Hotel, San Francisco - La Quinta Inn, San Francisco - La Quinta-Airport, San Francisco - Lambourne Hotel, San Francisco - Laurel Motor Inn, San Francisco - Majestic Hotel, San Francisco - Manx Hotel, San Francisco - Mark Twain, San Francisco - Marriott, San Francisco - Marriott San Francisco-Proposed, San Francisco - Marriott-Airport, San Francisco - Orchard Hotel, San Francisco - Pan Pacific Hotel, San Francisco - Parc 55 Hotel, San Francisco - Park Hyatt Hotel, San Francisco - Portman Hotel, San Francisco - Prescott Hotel, San Francisco - Queen Anne Hotel, San Francisco - Ramada Hotel, San Francisco - Regis Hotel, San Francisco - Ritz-Carlton Hotel, San Francisco - San Franciscan, San Francisco - San Francisco Hotel, San Francisco - Savoy Hotel, San Francisco - Sheraton Palace Hotel, San Francisco - Sheraton-Fisherman's Wharf, San Francisco - Sir Francis Drake Hotel, San Francisco - Stanford Court, San Francisco - Stouffer Stanford Court Hotel, San Francisco - Super 8-Fisherman's Wharf, San Francisco - Westin St. Francis, San Francisco - Crowne Sterling Suites, San Francisco - South - Olympic Club Golf Course, San Francisco/San Mateo - Budget Inn, San Jose - Courtyard by Marriott, San Jose - Cozy 8 Arena Hotel, San Jose - Fairmont Hotel, San Jose - Holiday Inn, San Jose - Ramada Renaissance, San Jose - Red Lion Inn, San Jose - Islander Motel, San Leandro - Apple Farm Inn, San Luis Obispo - Embassy Suites, San Luis Obispo - Holiday Inn, San Luis Obispo - Los Nomados Resort, San Luis Obispo - Twin Oaks Golf Course, San Marcos - Dunfey San Mateo Hotel, San Mateo - Compri Hotel-Proposed, San Pedro - Embassy Suites Hotel, San Rafael - Marriott Hotel-Proposed, San Ramon - Residence Inn, San Ramon - AAA Inn, Santa Ana - California Palms Hotel, Santa Ana - Comfort Inn, Santa Ana - Compri Hotel, Santa Ana - Embassy Suites Santa Ana, Santa Ana - Executive Lodge, Santa Ana - Howard Johnson, Santa Ana - Quality Inn, Santa Ana - Ramada Inn-Orange County, Santa Ana - El Encanto Hotel, Santa Barbara - Fess Parker's Red Lion Resort, Santa Barbara - Four Seasons Hotel, Santa Barbara - Montecito Inn, Santa Barbara - San Ysidro Ranch, Santa Barbara - Santa Barbara Inn, Santa Barbara - Biltmore Hotel & Suites, Santa Clara - Days Inn, Santa Clara - Doubletree Hotel, Santa Clara - Embassy Suites, Santa Clara - Inn At Saratoga, Santa Clara - Marriott Hotel, Santa Clara - Quality Suites Hotel, Santa Clara - Dream Inn, Santa Cruz - Hilton, Santa Maria - Motel 6, Santa Maria - Econo Lodge-Proposed, Santa Monica - Holiday Inn, Santa Monica - Holiday Inn at the Pier, Santa Monica - Park Hyatt Hotel, Santa Monica - Santa Monica Beach Hotel, Santa Monica - Santa Monica/Slatkin, Santa Monica - Allstar Inn, Santa Rosa - Doubletree Hotel, Santa Rosa - Fountaingrove Inn, Santa Rosa - Holiday Inn, Santa Rosa - Round Barn Inn-Proposed, Santa Rosa - Sheraton Round Barn, Santa Rosa - Days Inn, Seaside - Embassy Suites, Seaside - Seaside 8 Motel, Seaside - Valley Radisson, Sherman Oaks - Red Lion, Sonoma - Sonoma Mission Inn, Sonoma - Holiday Inn - Proposed, Sonora - Timberwolf Lodge, South Lake Tahoe - Holiday Inn, South San Francisco - Hotel-Proposed, South San Francisco - Meadowood Resort, St. Helena - Hilton Hotel, Stockton - Holiday Inn, Stockton - La Quinta Hotel, Stockton - Motel Orleans, Stockton - Paradise Point Manna, Stockton - Sheraton-Proposed, Stockton - Hilton, Sunnyvale - Holiday Inn, Sunnyvale - Neighborhood Suites, Sunnyvale - Ramada Inn, Sunnyvale - Sunnyvale Hilton, Sunnyvale - Temecula Creek Inn, Temecula Creek - Westlake Plaza Hotel, Thousand Oaks - Courtyard by Marriott, Torrance - Holiday Inn, Torrance - Marriott Hotel, Torrance - Residence Inn, Torrance - Holiday Inn, Union City - MCA Hotel-Proposed, Universal City - Comfort Inn, Vallejo - Holiday Inn, Van Nuys - La Quinta Hotel, Ventura - Ocean Resorts, Ventura - Sheraton, Ventura - Greentree Inn, Victorville - Doubletree Inn, Walnut Creek - Parkside Hotel, Walnut Creek - Ramada Renaissance Hotel, Walnut Creek - Royce Hotel-Proposed, Walnut Creek - Walnut Creek Project, Walnut Creek - Hampton Inn, West Covina - Le Bel Age, West Hollywood - Le Dufy, West Hollywood - Le Mondrian Hotel, West Hollywood - Hilton, Whittler - Hotel & Conference Center-Proposed, Woodland - Marriott Hotel-Woodland Hills, Woodland Hills - Skylonda Retreat, Woodside - Compri Hotel-Proposed, Yorba Linda - Marriott-Tenaya Lodge, Yosemite - Motel Orleans, Yuba City Colorado - Days Inn, Arapahoe - Continental Inn, Aspen - Ritz-Carlton Hotel-Proposed, Aspen - Hampton Inn, Aurora - Holiday Inn, Aurora - Radisson Hotel, Aurora - Radisson Southeast, Aurora - Raffles Hotel, Aurora - Comfort Inn, Avon - Boulder Hotel-Downtown, Boulder - Clarion Hotel, Boulder - Courtyard by Marriott, Boulder - Doubletree Hotel-Proposed, Boulder - Hilton Harvest House, Boulder - Holiday Inn, Boulder - Interlocken Conference Resort-Prop., Boulder - Proposed Golf Course, Boulder - Residence Inn, Boulder - Hilton, Breckenridge - Ski Lodge-Proposed, Breckenridge - Interlocken Conference Center, Broomfield - Interlocken Conference Center-Prop., Broomfield - Embassy Suites, Colorado Springs - Hilton, Colorado Springs - Howard Johnson, Colorado Springs - Le Baron Hotel, Colorado Springs - Marriott, Colorado Springs - Quality Inn, Colorado Springs - Red Lion Inn, Colorado Springs - Sheraton Inn, Colorado Springs - Grand Butte Hotel, Crested Butte - Best Western Regency, Denver - Brown Palace, Denver - Clarion Hotel-Denver Airport, Denver - Courtyard by Marriott-Airport, Denver - Courtyard by Marriott-Southeast, Denver - Days Inn, Denver - Denver Airport Hilton Inn, Denver - Doubletree Hotel, Denver - Embassy Suites, Denver - Embassy Suites-Airport, Denver - Hilton-Technical Center, Denver - Holiday Inn-Downtown, Denver - Holiday Inn-West, Denver - Jackson's Hole Sport, Denver - Marriott-Southeast, Denver - Marriott-West, Denver - Radisson Hotel, Denver - Red Lion Hotel, Denver - Regency Inn, Denver - La Quinta Inn, Denver - Airport - La Quinta, Denver - South - Red Lion Inn, Durango - Hilton-Denver, Englewood - Residence Inn, Englewood - Scanticon Conference Center, Englewood - Marriott Hotel-Proposed, Fort Collins - Holiday Inn, Golden - Marriott-Denver West, Golden - Ramada Inn, Grand Junction - Sheraton-Proposed, Keystone - Compri Hotel, Lakewood - Hampton Inn, Lakewood - Sheraton Inn, Steamboat Springs - Proposed Hotel, Telluride - Days Inn, Vail - Doubletree Hotel, Vail - Lodge at Vail, Vail - Marriott's Mark Resort, Vail - Westin Vail Resort, Vail - Ramada Hotel, Westminster - Winter Park Resort, Winter Park Connecticut - Chester Inn-Chester, Chester - Inn-Proposed, Chester - Super 8-Proposed, Cromwell - Danbury Hilton & Towers, Danbury - Residence Inn, Danbury - Holiday Inn, Darien - Howard Johnson Lodge, Darien - Ramada Inn, Darien - Holiday Inn, East Hartford - Howard Johnson Lodge, East Lyme - Days Inn-Proposed, Enfield - Greenwich Habor Inn, Greenwich - Howard Johnson Lodge, Greenwich - Showboat Inn, Greenwich - Hotel-Proposed, Groton - Hilton Hotel, Hartford - Holiday Inn-Proposed, Hartford - Motel 6, Hartford - Ramada Inn, Hartford - Sheraton Tobacco Valley Inn, Hartford - Summit Hotel, Hartford - Super 8 Motel, Hartford - Susse Chalet, Hartford - Residence Inn By Marriott, Meriden - Holiday Inn, Milford - Susse Chalet, Milford - Howard Johnson Lodge, Mystic - Mystic Ramada Inn, Mystic - Holiday Inn, New Britain - Ramada Inn, New Britain - Colony Inn, New Haven - Holiday Inn, New Haven - Howard Johnson, New Haven - Quality Inn, New Haven - Residence Inn, New Haven - Radisson Hotel, New London - Best Western-Proposed, New Milford - Courtyard by Marriott, Norwalk - Holiday Inn, Norwalk - Howard Johnson, Norwalk - Ramada Inn, Norwalk - Susse Chalet, Rocky Hill - Ramada Hotel-Proposed, Shelton - Residence Inn - Shelton, Shelton - Heritage Village, Southbury - Southbury Hotel, Southbury - Susse Chalet, Southington - Days Inn, Stamford - Executive Hotel, Stamford - Harley Hotel, Stamford - Holiday Inn-Crowne Plaza, Stamford - Inn at Mill River, Stamford - Le Pavillon Hotel, Stamford - Marriott, Stamford - Radisson Tara Hotel, Stamford - Sheraton, Stamford - Best Western-Proposed, Stratford - Stratford Motor Lodge, Stratford - Marriott Hotel, Trumbull - Courtyard by Marriott, Wallingford - Susse Chalet, Wallingford - Howard Johnson Plaza Hotel, Waterbury - Super 8-Proposed, Waterbury - Residence Inn-Proposed, Waterford - Holiday Inn, Westbury - The Island Inn, Westbury - Courtyard by Marriott, Windsor - Sheraton Tobacco Valley Inn, Windsor - Holiday Inn-Proposed, Windsor Locks Delaware - Wilmington Hilton, Claymont - Rusty Rudder, Dewey Beach - Residence Inn-Proposed, Newark - Hilton Hotel, Wilmington - Hotel-Proposed, Wilmington - Marriott Suites, Wilmington - Residence Inn-Proposed, Wilmington District of Columbia - All Suite Hotel - Proposed, Washington - Bellevue Hotel, Washington - Canterbury Hotel, Washington - Capital Hilton, Washington - Capitol Hill Hotel, Washington - Castleton Hotel, Washington - Comfort Inn, Washington - Convention Center Inn, Washington - Dupont Plaza, Washington - Embassy Row Hotel, Washington - Fairfax Hotel, Washington - Fairmont Hotel, Washington - Four Seasons Hotel, Washington - General Scott Inn, Washington - Georgetown Hotel, Washington - Grand Hotel, Washington - Grand Hyatt, Washington - Hampshire House, Washington - Harambee House, Washington - Hay Adams Hotel, Washington - Holiday Inn Crowne Plaza, Washington - Holiday Inn-Capitol, Washington - Holiday Inn-Georgetown, Washington - Holiday Inn-Governor House, Washington - Hotel Washington, Washington - Howard Johnson, Washington - Hyatt Regency-Capitol, Washington - Hyatt-Convention Center, Washington - International Inn, Washington - Intrigue Hotel, Washington - Jefferson Hotel, Washington - Lombardy Tower Apartment Hotel, Washington - Madison Hotel, Washington - Manger Annapolis Hotel, Washington - Manger Hamilton Hotel, Washington - Manger Hay Adams Hotel, Washington - Marriott-Key Bridge, Washington - Mayflower Hotel, Washington - Omni Georgetown Hotel, Washington - Omni Shoreham Hotel, Washington - Park Terrace Hotel, Washington - Phoenix Park Hotel, Washington - Plaza Hotel, Washington - Potomac Hotel Group, Washington - Quality Inn-Capitol Hill, Washington - Quality Inn-Downtown, Washington - Ramada Inn-Central, Washington - Ramada Renaissance Hotel, Washington - Ritz-Carlton, Washington - River Inn, Washington - Riverside Towers, Washington - Sheraton City Centre, Washington - Sheraton Grand Hotel, Washington - Shoreham Hotel, Washington - St. James, Washington - State Plaza, Washington - Statler Hilton Hotel, Washington - Washington Hilton, Washington - Washington Plaza, Washington - Watergate Hotel, Washington - Wyndham Bristol Hotel, Washington Florida - Holiday Inn, Altamonte Springs - La Quinta, Altamonte Springs - Turnberry Isle Resort, Aventura - Boca Raton Hotel and Club, Boca Raton - Boca West, Boca Raton - Deerfield Beach Hilton, Boca Raton - Embassy Suites, Boca Raton - Park Place Suite Hotel, Boca Raton - Petite Suites, Boca Raton - Residence Inn, Boca Raton - Days Inn, Brandenton - South Seas Resort, Captive Island - Days Inn, Clearwater - Days Inn-Proposed, Clearwater - Holiday Inn - Central/Clearwater, Clearwater - La Quinta Inn, Clearwater - Sheraton Sand Key Hotel, Clearwater - Holiday Inn - Gulfview South, Clearwater Beach - Holiday Inn - Surfside North, Clearwater Beach - Howard Johnson, Clermont - Econolodge, Cocoa Beach - Hilton Hotel, Cocoa Beach - Holiday Inn, Cocoa Beach - Howard Johnson, Cocoa Beach - Perkins Restaurant, Cocoa Beach - Coconut Grove Hotel, Coconut Grove - Mayfair House, Coconut Grove - Proposed Hampton Inn, Coconut Grove - Biltmore Hotel, Coral Gables - Holiday Inn, Coral Gables - Holiday Inn (Court), Coral Gables - Plantation Hotel, Crystal River - Sheraton Inn, Cypress Gardens - Budget Inn, Davenport - Daytona Beach Surfside Regency, Daytona Beach - Howard Johnson, Daytona Beach - La Quinta Inn, Daytona Beach - Pirates Cove, Daytona Beach - Sheraton Inn, Daytona Beach - Crown Sterling Suites, Deerfield Beach - Days Inn, Deerfield Beach - Hilton Hotel, Deerfield Beach - Horizon Club, Deerfield Beach - Sheraton Inn, Deland - Hilton Hotel, Disney World - Holiday Inn, Edgewater - Knights Inn, Florida City - AmeriSuites Hotel-Proposed, Fort Lauderdale - Bahia Mar Hotel, Fort Lauderdale - Comfort Suites, Fort Lauderdale - Compri Hotel-Proposed, Fort Lauderdale - Costa Del Sol, Fort Lauderdale - Crown Sterling Suites, Fort Lauderdale - Days Inn, Fort Lauderdale - Embassy Suites Hotel, Fort Lauderdale - Executive House, Fort Lauderdale - Hilton Hotel, Fort Lauderdale - Hilton Inverrary, Fort Lauderdale - Holiday Inn - Galleria, Fort Lauderdale - Holiday Inn - North Beach, Fort Lauderdale - Holiday Inn-Proposed, Fort Lauderdale - Marriott Harbor Beach Hotel, Fort Lauderdale - Marriott Hotel & Marina, Fort Lauderdale - Marriott Hotel-Cypress Road, Fort Lauderdale - Pier 66 Hotel and Marina, Fort Lauderdale - Port Everglades Hotel, Fort Lauderdale - Stouffer Hotel, Fort Lauderdale - Days Inn, Fort Meyers - Courtyard by Marriott, Fort Myers - Holiday Inn, Fort Myers - La Quinta Hotel, Fort Myers - Sheraton Harbor Place-Proposed, Fort Myers - Sheraton Motor Inn, Fort Myers - Proposed Hotel, Fort Myers Beach - American Way, Fort Pierce - Days Inn, Fort Walton Beach - Holiday Inn - Airport, Fort.Lauderdale - Days Inn-University Center, Gainesville - Fairfield Inn, Gainesville - Howard Johnson Lodge-I-75, Gainesville - La Quinta Hotel, Gainesville - University Centre Hotel, Gainesville - Holiday Inn, Hialeah - Motel, Hillsboro Beach - Days Inn, Hollywood - Diplomat Hotel, Hollywood - Holiday Inn, Hollywood - Quality Suites - Oceanside, Indiatlantic - Hilton Inn, Inverrary - Best Inn, Jacksonville - Bradbury Suites-Proposed, Jacksonville - Compri Hotel-Proposed, Jacksonville - Courtyard By Marriott, Jacksonville - Days Inn, Jacksonville - Doubletree Club Hotel, Jacksonville - Hampton Inn, Jacksonville - Hotel-Proposed, Jacksonville - Jacksonville Hotel, Jacksonville - Residence Inn, Jacksonville - Sheraton Hotel, Jacksonville - Wyndham Lakes Hotel, Jacksonville - Sheraton Beach Hotel, Jensen Beach - Howard Johnson, Juno Beach - Hilton Hotel, Jupiter - Key Biscayne, Key Biscayne - Howard Johnson Lodge, Key Largo - Casa Marina Marriott, Key West - Fairfield Inn, Key West - Hampton Inn-Roosevelt Rd., Key West - Holiday Inn, Key West - Hyatt Hotel, Key West - La Concha Holiday Inn, Key West - Pier House Inn and Beach Club, Key West - Reach Hotel, Key West - Santa Maria Hotel, Key West - Timeshare Resort, Key West - Best Western Vacation Lodge, Kissimmee - Days Inn, Kissimmee - Days Inn West, Kissimmee - Days Lodge, Kissimmee - Howard Johnson Plaza Hotel, Kissimmee - Howard Johnson's, Kissimmee - KOA Campground, Kissimmee - Old Town Retail Complex, Kissimmee - Quality Suites, Kissimmee - Quality Suites-Maingate, Kissimmee - Save Inn, Kissimmee - Sheraton Lakeside, Kissimmee - Suite Hotel-Proposed, Kissimmee - Wynfield Inn, Kissimmee - Days Inn, Lake Buena Vista - Embassy Suites-Proposed, Lake Buena Vista - Hilton Hotel-Disney World, Lake Buena Vista - Marriott Orlando World Center, Lake Buena Vista - Days Inn, Lake City - Flagship Inn, Lake County - Travelodge Motel, Lake County - Lake Park Inn, Lake Park - Holiday Inn, Lake Placid - Hampton Inn-Proposed, Lakeland - Hotel-Proposed, Lakeland - Howard Johnson, Lakeland - Resort Hotel-Proposed, Lakeland - Resort-Imperial Lake-Prpsd., Lakeland - Proposed Hotel, Lee County - Sonesta Sanibel Harbour, Lee County - Holiday Inn, Lido Beach - Holiday Inn, Longboat Kay - Holiday Inn - Madiera Beach, Madiera - Howard Johnson, Marathon - Radisson Suite Resort, Marco Island - Holiday Inn, Marianna - Oceanfront Hotel, Melbourne - Quality Suites, Melbourne - Bahia Mar Hotel & Yachting Club, Miami - Biscayne Bay Marriott, Miami - Courtyard by Marriott, Miami - Crown Sterling Suites, Miami - Doral Ocean Beach Resort, Miami - Fairfield Inn, Miami - Hilton Hotel-Proposed, Miami - Holiday Inn Civic Center, Miami - Holiday Inn-Airport (Le Juene Rd.), Miami - Holiday Inn-Calder, Miami - Howard Johnson Hotel-Broad Causeway, Miami - Howard Johnson Hotel-Port of Miami, Miami - Howard Johnson Lodge-Golden Glades, Miami - Howard Johnson Lodge-Int'l Airport, Miami - Hyatt Regency Hotel, Miami - Inter-Continental Hotel, Miami - Jockey Club, Miami - Marriott Hotel-Downtown, Miami - Miami Airport Ramada, Miami - Proposed AmeriSuites, Miami - Propsed Hampton Inn, Miami - Residence Inn-Proposed, Miami - Sheraton River House, Miami - Sofitel Miami, Miami - Alexander Hotel, Miami Beach - Art Deco Hotel, Miami Beach - Cresent Timeshare, Miami Beach - Delano Hotel, Miami Beach - Doral Beach Hotel, Miami Beach - Eden Roc Hotel, Miami Beach - Fontainebleu Hotel, Miami Beach - Holiday Inn, Miami Beach - Holiday Inn-Central, Miami Beach - Holiday Inn-North, Miami Beach - Holiday Inn-Oceanside, Miami Beach - Holiday Inn-South, Miami Beach - Hotel-Proposed, Miami Beach - Nautilus Club Hotel, Miami Beach - Palm Resort on the Ocean, Miami Beach - Pan American Radisson, Miami Beach - Proposed Hotel, Miami Beach - Shelborne Beach Hotel, Miami Beach - Sheraton Beach, Miami Beach - Solymar Hotel-Proposed, Miami Beach - Quality Inn, Naples - Quality Inn-Gulfcoast, Naples - Registry Hotel at Pelican Bay, Naples - Registry Resort-Proposed, Naples - Super 8 Motel-Proposed, Naples - World Tennis Resort, Naples - Hyatt Newporter Hotel, Newport Beach - Hilton Hotel, North Redington Beach - Masters Economy Inn, North Seffner - Amfac Hotel, Orlando - Army lodging-Proposed, Orlando - Comfort Suites Hotel, Orlando - Compri Hotel-Airport-Proposed, Orlando - Compri Hotel-Proposed, Orlando - Courtyard - Orlando Airport, Orlando - Days Inn, Orlando - Days Inn and Lodge-Florida Mall, Orlando - Days Inn Civic Center, Orlando - Days Inn East of Universal Studios, Orlando - Days Inn-E/O Magic Kingdom, Orlando - Days Inn-Proposed, Orlando - Days Inn-Sandlake Road, Orlando - Days Suites-E/O Magic Kingdom, Orlando - Dolphin Hotel-Proposed, Orlando - Dutch Inn, Orlando - Embassy Suites, Orlando - Fairfield Inn, Orlando - Fairfield Inn-Airport, Orlando - Grand Cypress Resort, Orlando - Hampton Inn - Proposed, Orlando - Heritage Inn, Orlando - Holiday Inn Central Park, Orlando - Holiday Inn Crowne Plaza, Orlando - Holiday Inn-Airport, Orlando - Holiday Inn-International Drive, Orlando - Holiday Inn-Lee Road, Orlando - Holiday Inn-Maingate West, Orlando - Holiday Inn-Orange Blossom Trail, Orlando - Howard Johnson - Walt Disney World, Orlando - Howard Johnson-Kirkman, Orlando - Howard Johnson-Lake Holden, Orlando - Howard Johnson-Maingate, Orlando - Hyatt Grand Cypress, Orlando - Hyatt Regency Grand Cypress, Orlando - Hyatt-W. Irlo Bronson Mem. Hwy., Orlando - International Inn, Orlando - Kon Tiki Village, Orlando - La Quinta Hotel-Airport, Orlando - La Quinta Inn, Orlando - Omni Orlando, Orlando - Orlando Airport Hotel-Proposed, Orlando - Orlando Hamiton, Orlando - Orlando Plaza Hotel, Orlando - Orlando Twin Towers Hotel, Orlando - Park Suite Hotel-Proposed, Orlando - Peabody Hotel, Orlando - Princess Hotel and Spa, Orlando - Proposed Wellesley Inn, Orlando - Quality Inn, Orlando - Radisson Hotel-Aquatic Center, Orlando - Regency Inn, Orlando - Residence Inn By Marriott, Orlando - Rodeway Inn, Orlando - Save Inn, Orlando - Sheraton Jetport Inn, Orlando - Sheraton Lakeside, Orlando - Sheraton Twin Towers, Orlando - Sonesta Village Resort, Orlando - Stouffer Orlando Resort, Orlando - Swan Hotel-Proposed, Orlando - Thriftway Motel, Orlando - Wynfield Inn, Orlando - American Way, Osceola - Sheraton Gateway Motel, Osceola - Brazilian Court Hotel, Palm Beach - Heart of Palm Beach Hotel, Palm Beach - Hilton Inn, Palm Beach - Palm Court, Palm Beach - Holiday Inn, Palm Beach Garden - Days Inn, Panama City - Marriott's Bay Point, Panama City - Super 8, Panama City - Days Inn, Pensacola - Hilton Hotel, Pensacola - La Quinta Hotel, Pensacola - Residence Inn, Pensacola - Super 8, Pensacola - Proposed Hampton Inn, Pensacola Beach - Comfort Inn, Perdido Key - La Quinta, Pinellas County - Courtyard by Marriott, Plantation - Holiday Inn Plantation, Plantation - Sheraton Suites, Plantation - Days Inn, Pompano Beach - Palm-Aire Spa Resort, Pompano Beach - Lodge & Bath Club, Ponte Verde - Howard Johnson, Punta Gorda - Days Inn, Riviera Beach - Safety Harbor Spa, Safety Harbor - Holiday Inn, Saint Augustine - Howard Johnson, Saint Augustine - Courtyard by Marriott, Saint Petersburg - Don Ceahsar Beach Resort, Saint Petersburg - Hilton Hotel, Saint Petersburg - Howard Johnson, Saint Petersburg - Ramada Inn, Saint Petersburg - Residence Inn, Saint Petersburg - Saint Petersburg Motel, Saint Petersburg - Sheraton Hotel and Marina, Saint Petersburg - Vinoy Park Hotel, Saint Petersburg - Countryside Inn, Sanford - Days Inn, Sanford - Holiday Inn, Sanford - Azure Tides Resort-Proposed, Sarasota - Days Inn, Sarasota - Holiday Inn-Lido Beach, Sarasota - Proposed Hotel, Sarasota - Holiday Inn, Sebring - Embassy Suites, Singer Island - Hilton, Singer Island - Econo Lodge, Starke - Radisson Pan American Hotel, Sunny Isles - Best Inn, Tallahassee - Courtyard by Marriott, Tallahassee - Days Inn-Tallahassee, Tallahassee - American Way, Tampa - Courtyard by Marriott, Tampa - Days Inn, Tampa - Embassy Suites-Airport, Tampa - Hampton Inn-Airport, Tampa - Hilton-Airport, Tampa - Holiday Inn, Tampa - Holiday Inn Sahal Park, Tampa - Holiday Inn-Airport, Tampa - Manger Motor Inn, Tampa - Marriott Hotel, Tampa - Omni Tampa Hotel at Westshore, Tampa - Ramada Inn, Tampa - Rodeway Inn, Tampa - Saddlebrook Resort, Tampa - Sheraton Grand West, Tampa - Master Economy Inn, Tampa-East(Selfner) - Master Economy Inn, Tampa-North(Zephyrhills) - Days Inn, Vero Beach - Holiday Inn-Countryside, Vero Beach - Holiday Inn-Oceanside, Vero Beach - Saddlebrook Resort, Wesley Chapel - Courtyard by Marriott, West Melbourne - Airport Centre, West Palm Beach - Courtyard by Marriott, West Palm Beach - Days Inn, West Palm Beach - Field Palm Hotel, West Palm Beach - Hilton-Airport, West Palm Beach - Howard Johnson Lodge, West Palm Beach - Hyatt Hotel of the Palm Beaches, West Palm Beach - Royce Hotel, West Palm Beach - Masters Economy Inn, Zephyrhills Georgia - Atlanta Radisson Hotel, Atlanta - Atlanta Terrace Motel, Atlanta - Comfort Inn, Atlanta - Compri Hotel, Atlanta - Courtyard By Marriott-Airport North, Atlanta - Courtyard by Marriott-Airport South, Atlanta - Courtyard by Marriott-Cumberland, Atlanta - Courtyard by Marriott-Executive Pk., Atlanta - Courtyard by Marriott-Gwinnett, Atlanta - Courtyard by Marriott-Jimmy Carter, Atlanta - Courtyard by Marriott-PeachtrDunwdy, Atlanta - Courtyard by Marriott-Perimeter, Atlanta - Courtyard by Marriott-Rosewell, Atlanta - Courtyard by Marriott-Windy Hill, Atlanta - Cresthil Inn-Proposed, Atlanta - Days Inn, Atlanta - Days Inn - Northlake, Atlanta - Doubletree Hotel, Atlanta - Embassy Suites-Atlanta Perimeter, Atlanta - Embassy Suites-Buckhead, Atlanta - Embassy Suites-Galleria, Atlanta - F.W.W. Hotel, Atlanta - Fairfield Inn-Airport, Atlanta - Fairfield Inn-Gwinnett, Atlanta - Fairfield Inn-North Lake, Atlanta - Fairfield Inn-Northwest, Atlanta - Fairfield Inn-Peachtree, Atlanta - Fairfield Inn-South Lake, Atlanta - Hampton Inn-Airport, Atlanta - Hilton Inn, Atlanta - Holiday Inn Crowne Plaza, Atlanta - Holiday Inn-I-20 East, Atlanta - Holiday Inn-I-85 Monroe Drive, Atlanta - Holiday Inn-Perimeter Dunwooody, Atlanta - Hotel-Downtown-Proposed, Atlanta - Hotel-Proposed, Atlanta - Howard Johnson Hotel-Hartsfield, Atlanta - Howard Johnson-Airport, Atlanta - Howard Johnson-Northeast, Atlanta - Howard Johnson-Northwest, Atlanta - Howard Johnson-South, Atlanta - Hyatt Atlanta-Airport, Atlanta - La Quinta - Stone Mountain, Atlanta - La Quinta Hotel, Atlanta - La Quinta Hotel-West, Atlanta - Marriott Atlanta Airport, Atlanta - Marriott Hotel, Atlanta - Marriott Hotel-Downtown, Atlanta - Marriott Marquis, Atlanta - Marriott Suites Hotel-Proposed, Atlanta - Marriott-Perimeter, Atlanta - Master Economy Inn, Atlanta - Motel 6, Atlanta - Neighborhood Inn, Atlanta - Omni International Hotel, Atlanta - Perimeter North Inn, Atlanta - Proposed AmeriSuites, Atlanta - Quality Inn-Central, Atlanta - Radisson Inn, Atlanta - Ramada Inn-Perimeter, Atlanta - Residence Inn by Marriott-Dunwoody, Atlanta - Residence Inn-Airport, Atlanta - Residence Inn-Buckhead, Atlanta - Residence Inn-Northwest, Atlanta - Sheraton Century Center, Atlanta - Sheraton-Airport, Atlanta - Sporting Club at the Concourse, Atlanta - Stouffer Hotel-Proposed, Atlanta - Swissotel, Atlanta - Terrace Motel, Atlanta - Waverly Hotel, Atlanta - Westin Lenox Hotel, Atlanta - Westin Peachtree Plaza, Atlanta - Wyndham Garden Hotel, Atlanta - Hyatt Hotel, Atlanta Airport - Hampton Inn, Atlanta-Buckhead - Courtyard by Marriott, Augusta - Landmark Hotel, Augusta - Masters Economy Inn - Gordon Hwy., Augusta - Masters Economy Inn - Warner Robins, Augusta - Masters Economy Inn - Washington Rd, Augusta - Holiday Inn, Brunswick - Super 8, Brunswick - Days Inn, Calhoun - Super 8, Cartersville - Days Inn, Chamblee - Comfort Inn-Proposed, College Park - Holiday Inn Crowne Plaza, College Park - Courtyard by Marriott, Columbus - La Quinta Inn, Columbus - Super 8, Columbus - Best Inn, Dalton - Days Inn, Dalton - Holiday Inn-Proposed, Decatur - Sheraton Hotel, Decatur - Best Western-Perimeter-North, Doraville - Days Inn - Gwinnett, Duluth - Howard Johnson, Forsyth - Holiday Inn-Proposed, Gwinnett County - Holiday Inn, Jekyll Island - Jekyll Island Inn-Proposed, Jekyll Island - Hilton Hotel, Macon - Master Economy Inn, Macon - Best Inn, Marietta - Courtyard by Marriott-Delk Road, Marietta - Lafayette Hotel, Marietta - Hampton Inn, Marrietta (Atlanta) - Master Economy Inn, McDonough - Courtyard by Marriott-Perimeter, Norcross - Motel 6, Norcross - Hilton Hotel, Peachtree Corners - Super 8, Rome - Best Western, Savannah - Courtyard by Marriott, Savannah - Days Inn, Savannah - Days Inn-Bay Street, Savannah - Days Inn-Mall Blvd., Savannah - Fairfield Inn, Savannah - Hotel-Proposed, Savannah - Mulberry Inn, Savannah - Radisson Hotel-Proposed, Savannah - Royal Savannah, Savannah - Sheraton Savannah Resort & C.C., Savannah - Town and Country Motel, Savannah - Days Inn, Savannah Beach - Howard Johnson, Smyrna - Master Economy Inn, Tilton - Courtyard by Marriott-Northlake, Tucker - Master Economy Inn, Warner Robins - Super 8, Warner Robins Hawaii - Hyatt Regency Waikoloa, Hawaii - Mauna Kea Hotel, Hawaii - Kahala Hilton, Honolulu - Plaza Hotel, Honolulu - Waikiki Beachcomber, Honolulu - Waikiki Hobron, Honolulu - Coco Palms Resort, Kauai - Kauai Surf Hotel, Kauai - Westin Kauai-Kauai Lagoons Resort, Kauai - Westin Kauai-Proposed, Kauai - Kona Village, Kona - Royal Sea Cliff Resort, Kona - Westin Kauai at Kauai Lagoon, Lihue - Hyatt Regency, Maui - Marriott Resort, Maui - Maui Lu Hotel, Maui - Maui Surf Hotel, Maui - Westin Maui, Maui - Hawaiian Regent Hotel-Waikiki Beach, Oahu - Hotel-Proposed-Schofield Barracks, Oahu - Hyatt Regency Waikiki, Oahu - Kiahuna Plantation, Poipu Beach, Kauai - Transient Lodging Facilities, Schofield Barracks - Hilton Hawaiian Village, Waikiki - Grand Hyatt Wailea, Wailea Idaho - Compri Hotel, Boise - Holiday Inn, Boise - Holiday Inn-Airport, Boise - Red Lion Inn, Boise - Super 8, Boise - Motel 6, Coeur d'Alene - Super 8, Coeur d'Alene - Proposed Motel, Coure d'Alene - Super 8, Lewiston - Cotton Tree Inn, Pocatello - Super 8, Sand Point - Busterback Ranch, Sawtooth Valley Illinois - Arlington Park Hilton, Arlington Heights - Church Creek, Arlington Heights - Courtyard by Marriott, Arlington Heights - La Quinta Hotel, Arlington Heights - Hampton Inn-Proposed, Bedford Park - Best Inn, Bloomington - Fairfield Inn-Normal, Bloomington - Holiday Inn, Bloomington - Indian Lakes Resort, Bloomington - Ramada Inn, Bloomington - Super 8, Bloomington - Cresthil-Proposed, Buffalo Grove - Holiday Inn, Champaign - La Quinta Inn, Champaign - Radisson Suites - Champaign, Champaign - Suite Hotel-Proposed, Champaign - Super 8, Champaign - Ambassador West Hotel, Chicago - Americana Congress, Chicago - Conrad Hilton Hotel, Chicago - Courtyard by Marriott-Glenview, Chicago - Courtyard by Marriott-Highland, Chicago - Courtyard by Marriott-Lincoln, Chicago - Courtyard by Marriott-O'Hare, Chicago - Courtyard by Marriott-Waukegan, Chicago - Courtyard by Marriott-Woodale, Chicago - Days Inn, Chicago - Executive House, Chicago - Fairfield Inn-Lansing, Chicago - Fairfield Inn-Willowbrook, Chicago - Fairmont Hotel, Chicago - Guest Quarters Hotel, Chicago - Hilton and Towers, Chicago - Hilton-O'Hare, Chicago - Holiday Inn-Merchandise Mart, Chicago - Howard Johnson-O'Hare Int'l Airport, Chicago - Hyatt Regency, Chicago - Hyatt Suites Hotel, Chicago - Inter-Continental Hotel-Proposed, Chicago - La Quinta Inn - Hoffman Est., Chicago - Le Meridien, Chicago - Lenox House, Chicago - Lincoln Hotel, Chicago - Mark Twain Hotel, Chicago - Marriott-O'Hare, Chicago - Mayfair Regent, Chicago - McClurg Holiday Inn, Chicago - McCormick Inn Hotel, Chicago - Morton Hotel, Chicago - Omni Ambassador East, Chicago - Omni Morton Hotel, Chicago - Palmer House Hotel, Chicago - Ramada Inn - Lakeshore, Chicago - Ramada O'Hare, Chicago - Residence Inn-Deerfield, Chicago - Residence Inn-Lombard, Chicago - Sheraton Hotel-Downtown, Chicago - Sheraton Hotel-Proposed, Chicago - Sheraton O'Hare, Chicago - Sheraton Plaza Hotel, Chicago - Summerfield Suites Hotel, Chicago - Swissotel, Chicago - Tremont Hotel, Chicago - Westin Hotel, Chicago - Whitehall Hotel, Chicago - Hilton Hotel, Collinsville - Holiday Inn, Collinsville - Super 8, Columbus - Super 8, Crystal Lake - Super 8, Decatur - Courtyard by Marriott, Deerfield - Embassy Suites, Deerfield - Marriott Suites Hotel, Deerfield - Holiday Inn-Chicago, Des Plaines - Hotel-Proposed, Des Plaines - Compri Hotel-Proposed, Downers Grove - Radisson Suite Hotel, Downers Grove - Best Inn, Effingham - Ramada Inn, Elgin - Hampton Inn, Elk Grove Village - Marriott Suites, Elk Grove Village - Holiday Inn, Elmhurst - Orrington Hotel, Evanston - Drury Inn, Fairview Heights - Conference Center & Resort-Proposed, Fox Lake - Holiday Inn, Freeport - Hotel-Proposed, Gurnee - La Quinta Hotel, Hoffman Estates - Carson Inn, Itasca - Hamilton Wyndham, Itasca - Nordic Hills, Itasca - Holiday Inn, Joliet - Proposed Harrah's Riverboat, Joliet - Days Inn, Kankakee - Holiday Inn, LaSalle - Marriott Hotel, Lincolnshire - Hilton Inn, Lisle - Holiday Inn Crowne Plaza, Lisle - Embassy Suites, Lombard - Holiday Inn, Macomb - Best Inn, Marion - Best Inn, Mount Vernon - Holiday Inn, Mount Vernon - Ramada Inn, Mount Vernon - Courtyard by Marriott, Naperville - Ramada Inn, Naperville - Sheraton Naperville, Naperville - O'Hareport Hotel, Northlake - Courtyard by Marriott, Oakbrook Terrace - Super 8, Okawville - Fairfield Inn, Peoria - Days Inn, Peru - Super 8, Peru - Courtyard by Marriott, Rockford - Fairfield Inn, Rockford - Hampton Inn, Rockford - Embassy Suites, Rosemont - Quality Inn/Clarion, Rosemont - Sheraton Int'l At O'Hare, Rosemont - Holiday Inn, Salem - Compri Hotel, Schaumburg - Embassy Suites, Schaumburg - Marriott Schaumburg, Schaumburg - Holiday Inn, South Beloit - Ramada Renaissance Hotel, Springfield - Sheraton Inn, Springfield - Super 8-East, Springfield - Super 8-South, Springfield - Jumer's Castle, Urbana - Best Inn, Waukegan - Super 8, Waukegan Indiana - Clarion Fourwinds Inn, Bloomington - Holiday Inn, Bloomington - Inn at the Four Winds, Bloomington - Ramada Inn, Bloomington - Harbor Point Resort, Brookville Lake - Super 8, Columbus - Best Inn, Fort Wayne - Hilton, Fort Wayne - Downtown Hotel, Gary - Sheraton, Gary - Holiday Inn, Goshen - Howard Johnson, Hammond - Quality Inn, Hammond - Courtyard by Marriott-Airport, Indianapolis - Courtyard by Marriott-Carmel, Indianapolis - Courtyard by Marriott-Castleton, Indianapolis - Embassy Suites-Claypool Center, Indianapolis - Fairfield Inn-Castleton, Indianapolis - Fairfield Inn-College Park, Indianapolis - Hampton Inn-Proposed, Indianapolis - Hilton Hotel-Airport, Indianapolis - Hilton Inn-Downtown, Indianapolis - Holiday Inn-South, Indianapolis - Holiday Inn-Southeast, Indianapolis - Knights Inn, Indianapolis - Midway Motor Lodge, Indianapolis - Mohawk Inn, Indianapolis - Motel 6, Indianapolis - Proposed Fairfield Inn, Indianapolis - Proposed Residence Inn, Indianapolis - Radisson, Indianapolis - Ramada-Airport, Indianapolis - Wyndham Garden Hotel, Indianapolis - La Quinta Inn, Indianapolis Airport - Hilton Inn, Jeffersonville - Holiday Inn, La Porte - Days Inn, Lafayette - Holiday Inn, Lafayette - Cotton Mill Inn-Proposed, Madison - Hampton Inn, Merrillville - Holiday Inn Express, Merrillville - La Quinta Inn, Merrillville - Hotel Roberts, Muncie - Radisson Hotel, Muncie - Brown County Inn, Nashville - Holiday Inn, Portage - Knights Inn, Richmond - Holiday Inn, South Bend - Howard Johnson, South Bend - Signature Inn, Terre Haute - Super 8, Terre Haute - Courtyard Conversion, Valparaiso - Holiday Inn, Vincennes Iowa - Holiday Inn-Gateway Center, Ames - Holiday Inn, Cedar Falls - Collins Plaza, Cedar Rapids - Holiday Inn, Cedar Rapids - Roosevelt Hotel, Cedar Rapids - Super 8, Davenport - Courtyard by Marriott, Des Moines - Fairfield Inn, Des Moines - Holiday Inn, Des Moines - Holiday Inn - West, Des Moines - Holiday Inn-Downtown, Des Moines - Holiday Inn-North, Des Moines - Ramada Inn, Des Moines - Super 8-North, Des Moines - Super 8-West, Des Moines - Holiday Inn, Iowa City Kansas - Embassy Suites, Kansas City - Fairfield Inn-Overland Park, Kansas City - Holiday Inn-Mission Overland Park, Kansas City - Fairfield Inn, Kansas City West - Holiday Inn, Lawrence - University Inn, Lawrence - Holiday Inn, Manhattan - Courtyard by Marriott, Overland Park - Hampton Inn-Proposed, Overland Park - Marriott Hotel, Overland Park - Park Inn International, Topeka - Super 8, Topeka - Canterbury Inn, Wichita - Former Sheraton Hotel, Wichita - Hilton-East, Wichita - Marriott Hotel, Wichita - Comfort Inn, Winfield Kentucky - Conference Center-Proposed, Boone County - Howard Johnson, Bowling Green - Brown County Inn, Brown County - Holiday Inn, Corbin - Hotel-Proposed, Covington - Thomas More Centre, Crestville Hill - Comfort Inn, Elizabethtown - Signature Inn, Elkhart - Holiday Inn, Florence - Signature Inn, Florence - Drawbridge Inn, Fort Mitchell - Days Inn, Georgetown - Days Inn, Henderson - Holiday Inn, Henderson - Bluegrass Motor Inn, Lexington - Courtyard by Marriott, Lexington - Holiday Inn, Lexington - Holiday Inn-East, Lexington - Holiday Inn-North, Lexington - Hyatt Hotel, Lexington - Knights Inn, Lexington - Super 8-Proposed, London - Brown Hotel, Louisville - Courtyard by Marriott-East, Louisville - Holiday Inn, Louisville - Holiday Inn South, Louisville - Holiday Inn-Central, Louisville - Holiday Inn-Northeast, Louisville - Ramada Inn, Louisville - Ramada Inn-East, Louisville - Signature Inn, Louisville - Days Inn, Madisonville - Executive Inn, Owensboro - Super 8-Proposed, Radcliff - Holiday Inn, Richmond Louisiana - Howard Johnson, Alexandria - Capital House, Baton Rouge - Convention Center Hotel-Proposed, Baton Rouge - Courtyard by Marriott, Baton Rouge - Crown Sterling Suites, Baton Rouge - Embassy Suites, Baton Rouge - Hilton Hotel, Baton Rouge - Holiday Inn-East, Baton Rouge - Holiday Inn-South, Baton Rouge - Holiday Inn-West, Baton Rouge - La Quinta Inn, Baton Rouge - Prince Murat Hotel, Baton Rouge - Proposed Homewood Suites, Baton Rouge - Quality Inn, Bossier City - Ramada Inn, Hammond - Ramada Inn, Houma - Holiday Inn - New Orleans, Kenner - Sheraton, Kenner - Hilton Hotel, Lafayette - La Quinta Hotel, Lafayette - Gateway Hotel, Metairie - Howard Johnson-Airport, Metairie - Canal Street Hotels L.P., New Orleans - Clarion Hotel, New Orleans - Days Inn, New Orleans - Fairmont Roosevelt Hotel, New Orleans - Hampton Inn-Proposed, New Orleans - Holiday Inn Crowne Plaza, New Orleans - Hostellerie de la Poste, New Orleans - Hotel Meridien, New Orleans - Hyatt Regency, New Orleans - Iberville Hotel, New Orleans - Inter-Continental Hotel, New Orleans - La Quinta Inn, New Orleans - Landmark Bourbon, New Orleans - Le Meridien New Orleans, New Orleans - Maison Dupuy, New Orleans - Marriott Hotel, New Orleans - Omni Royal Orleans, New Orleans - Ramada Inn, New Orleans - Saint Louis Hotel, New Orleans - St. Ann/Marie Antoinette, New Orleans - Warwick, New Orleans - Westin Hotel, New Orleans - Residence Inn, Shreveport - Super 8, Shreveport Maine - Hilton Inn, Bangor - Ramada Inn, Bangor - Residence Inn by Marriott-Proposed, Bangor - Inn By The Sea, Cape Elizabeth - Hotel-Proposed, Orchard Beach - Hotel-Proposed, Portland - Portland Regency, Portland - Ramada Inn, Portland - Sheraton Tara Portland, Portland - Susse Chalet, Portland - Susse Chalet, Portland (In-town) - Keddy's Motor Inn of Maine, Presque Isle - Hampton Inn, South Portland - Sheraton Inn, South Portland Maryland - Budget Hotel-Proposed, Aberdeen - Chesapeake House, Aberdeen - Holiday Inn, Aberdeen - Motel-Proposed, Aberdeen - Annapolis Hotel, Annapolis - Courtyard by Marriott-Riva Road, Annapolis - Governor Calvert House, Annapolis - Historic Inns of Annapolis, Annapolis - Hotel-Proposed, Annapolis - Howard Johnson, Annapolis - Marriott Hotel, Annapolis - Maryland Inn, Annapolis - Quality Royale Hotel, Annapolis - Ramada Hotel, Annapolis - Robert Johnson House, Annapolis - Brookshire Hotel, Baltimore - Courtyard by Marriott-BWI Airport, Baltimore - Days Inn, Baltimore - Harbor Court Hotel, Baltimore - Harrison's at Pier 5, Baltimore - Hilton Hotel, Baltimore - Holiday Inn-Belmont Blvd., Baltimore - Holiday Inn-Cromwell Bridge, Baltimore - Holiday Inn-Glen Burnie, Baltimore - Holiday Inn-Inner Harbor, Baltimore - Holiday Inn-Int'l Airport, Baltimore - Holiday Inn-Moravia Road, Baltimore - Holiday Inn-Pikesville, Baltimore - Holiday Inn-South Glen Burnie, Baltimore - Hotel-Proposed, Baltimore - Howard Johnson-Proposed, Baltimore - Johns Hopkins Hotel-Proposed, Baltimore - Lord Baltimore Hotel, Baltimore - Omni International Hotel, Baltimore - Ramada Inn-I-695 West, Baltimore - Susse Chalet, Baltimore - Susse Chalet Inn-BWI Airport, Baltimore - Susse Chalet Inn-Golden Ring, Baltimore - Bethesda Metro Center, Bethesda - Guest Quarters, Bethesda - Hyatt Regency Hotel, Bethesda - Linden Hill Hotel, Bethesda - Omni Linden Hotel, Bethesda - Residence Inn, Bethesda - Bethseda Metro Center, Bethseda - Guest Quarters, Bethseda - Residence Inn - Proposed, Bethseda - Comfort Suites-Proposed, Bowie - Days Inn, Capital Heights - Residence Inn, Cockneysville - Abbey, College Park - Best Western Maryland, College Park - Holiday Inn, College Park - Sheraton Inn, Dorsey - Days Inn, Easton - Mariner Inn, Easton - Holiday Inn, Frederick - Compri Hotel, Gaithersburg - Marriott Hotel, Gaithersburg - Century XXI Resort, Germantown - Comfort Inn, Germantown - Hampton Inn, Glen Burnie - Residence Inn-Proposed, Greenbelt - Courtyard by Marriott, Hunt Valley - Hunt Valley Embassy Suites, Hunt Valley - Hunt Valley Marriott, Hunt Valley - Susse Chalet Inn, Jessup - Courtyard by Marriott, Landover - Quality Inn-Proposed, Landover - Days Inn, Lanham - Best Western Maryland, Laurel - Days Inn, Laurel - Holiday Inn, Laurel - Susse Chalet, Linthicum - Howard Johnson Plaza Hotel, New Carrollton - Carousel Hotel, Ocean City - Days Inn, Ocean City - Susse Chalet, Oxon Hill - Hotel-Proposed, Prince Georges County - Budget Hotel-Proposed, Rockville - Comfort Inn, Rockville - Courtyard by Marriott, Rockville - Days Inn-Congressional Park, Rockville - Holiday Inn Crowne Plaza, Rockville - Quality Inn-Proposed, Rockville - Ramada Inn, Rockville - Salisbury Hotel, Salisbury - Sheraton Hotel, Salisbury - Courtyard by Marriott, Silver Spring - Quality Inn-Proposed, Silver Spring - Comfort Inn-Proposed, Solomons Island - Holiday Inn, Towson - Quality Inn-Proposed, Westminster Massachusetts - Susse Chalet, Amsbury - Courtyard by Marriott, Andover - Marriott Hotel, Andover - Stouffer Bedford Glen Hotel, Bedford - Anthony's Pier Four, Boston - Battery Wharf Hotel-Proposed, Boston - Boston Harbor Hotel, Boston - Boston World Trade Center, Boston - Bostonian Hotel, Boston - Colonnade Hotel, Boston - Commonwealth Center Hotel, Boston - Compri Hotel-Proposed, Boston - Copley Plaza Hotel, Boston - Courtyard by Marriott-Foxborough, Boston - Econo Lodge-Proposed, Boston - Harborside Conf. Center-Proposed, Boston - Hilton-Back Bay, Boston - Hilton-Logan, Boston - Holiday Inn-Government Center, Boston - Hotel - Proposed, Boston - Hyatt Fan Pier-Proposed, Boston - Hyatt Harborside-Proposed, Boston - Lafayette Hotel, Boston - Lenox Hotel, Boston - Marriott Copley Place, Boston - Meridien Hotel, Boston - Omni Parker House, Boston - Residence Inn, Boston - Ritz-Carlton, Boston - Statler Hilton Hotel, Boston - Tremont House Hotel, Boston - World Trade Center Hotel - Proposed, Boston - Marriott Hotel, Boston/Newton - Sheraton Tara Hotel, Braintree - Ocean Edge Inn & Conference Center, Brewster - Holiday Inn, Brookline - Days Inn, Burlington - Charles Hotel, Cambridge - Hyatt Hotel, Cambridge - Royal Sonesta Hotel, Cambridge - The Charles Hotel, Cambridge - Chatham Bars Inn, Chatham - Chelmsford Radisson Hotel, Chelmsford - Best Western Motor Lodge, Chicopee - Cummington Farm Resort-Proposed, Cummington - Appleton Inn, Danvers - Howard Johnson Hotel, Danvers - Radisson Ferncroft Hotel, Danvers - Residence Inn - Proposed, Danvers - Dedham Comfort Inn, Dedham - Holiday Inn, Dedham - Wequassett Inn, East Harwich - Harbor View Hotel, Edgartown - Kelley House, Edgartown - Airport Inn, Fall River - Sea Crest Hotel, Falmouth - Sheraton Inn, Falmouth - Radisson Hotel, Ferncroft - Sheraton Tara Hotel, Framingham - Hotel-Proposed, Franklin - Hotel-Proposed, Haverhill - Susse Chalet, Holyoke - Dunfey Hyannis Hotel, Hyannis - Heritage House Hotel, Hyannis - Holiday Inn, Hyannis - Sheraton Regal Inn, Hyannis - Tara Hyannis, Hyannis - Canyon Ranch-Berkshires, Lenox - Cranwell Hotel and Conference Ctr., Lenox - Spa/Resort-Proposed, Lenox - Holiday Inn, Leominster - Lexington Sheraton, Lexington - Residence Inn-Proposed, Littleton - Appleton Inn, Lowell - Hilton Hotel, Lowell - Town House Motor Inn, Lowell - Holiday Inn, Marlboro - Susse Chalet, Middleboro - Sheraton Milford Hotel, Milford - Holiday Inn, Natick - Skipper's Inn, New Bedford - Days Inn, Newton - Howard Johnson, Newton - Marriott Hotel, Newton - Sheraton - Wayfarer, Newton - Sheraton Tara, Newton - Susse Chalet, Newton - North Adams Inn, North Adams - Hilton Inn, Northampton - Hotel Northampton, Northampton - Factory Mutual Hotel, Norwood - University Inn, Oxford - Holiday Inn, Peabody - Berkshire Commons Hotel, Pittsfield - Hotel-Proposed, Plymouth - Hawthorne Hotel, Salem - Days Inn, Saugus - Susse Chalet, Seekonk - Howard Johnson, Somerset - Somerset Omni, Somerset - Federal House Inn, South Lee - Holiday Inn, Springfield - Howard Johnson, Springfield - Monarch Place, Springfield - Treadway Inn, Springfield - Publick House, Sturbridge - Sheraton, Sturbridge - Regency Inn of Taunton, Taunton - Holiday Inn, Tewksbury - Susse Chalet, Tewksbury - Susse Chalet, Waltham - Vista Waltham House, Waltham - Hampton Inn, West Springfield - Westford Regency Hotel, Westford - The Westminster Village Inn, Westminster - The Orchards, Williamstown - Treadway Inn, Williamstown - Days Inn, Woburn - Howard Johnson, Woburn - Radisson Hotel, Woburn - Ramada Inn, Woburn - Susse Chalet, Woburn - Marriott Hotel, Worcester - Alladin Motor Inn, Yarmouth - Flagship Motor Inn, Yarmouth - Gull Wing Suites Hotel, Yarmouth Michigan - Motel-Proposed, Adrian - Ramada Inn, Allen Park - Holiday Inn-Alpena, Alpena - Compri Hotel-Proposed, Ann Arbor - Hampton Inn-North, Ann Arbor - Hampton Inn-South, Ann Arbor - Hilton Hotel, Ann Arbor - Holiday Inn-East, Ann Arbor - Holiday Inn-West, Ann Arbor - Residence Inn, Ann Arbor - Sheraton Hotel, Ann Arbor - AmeriSuites Hotel-Proposed, Auburn Hills - Holiday Inn, Auburn Hills - Knights Inn, Battle Creek - Super 8, Battle Creek - Bay Valley Inn, Bay City - Howard Johnson, Belleville - Fairfield Inn-Airport, Charlotte - Courtyard by Marriott, Dearborn - Courtyard by Marriott-Airport, Detroit - Courtyard by Marriott-Auburn Hills, Detroit - Courtyard by Marriott-Livonia, Detroit - Days Inn, Detroit - Downtown Hotel-Proposed, Detroit - Fairfield Inn-Airport, Detroit - Fairfield Inn-Auburn Hills, Detroit - Fairfield Inn-Warren, Detroit - Fairfield Inn-West, Detroit - Golden Harp, Detroit - Hampton Inn, Detroit - Hilton-Airport, Detroit - Hilton-North Field, Detroit - Holiday Inn, Detroit - Holiday Inn-Metro Airport, Detroit - Hotel Pontchartrain, Detroit - Omni Detroit, Detroit - Westin Hotel Renaissance Center, Detroit - Holiday Inn, East Lansing - Holiday Inn-Proposed, East Lansing - Knights Inn, Flint - Amway Hotel, Grand Rapids - Holiday Inn, Grand Rapids - Grand Traverse Resort, Grand Traverse Village - Holiday Inn, Howell - Jackson Hotel, Jackson - Fairfield Inn, Kalamazoo - Hilton-Kalamazoo Center, Kalamazoo - Holiday Inn, Kalamazoo - Radison Plaza Hotel, Kalamazoo - Residence Inn, Kalamazoo - Super 8, Kalamazoo - Embassy Suites-Proposed, Lansing - Holiday Inn, Lansing - Motel 6, Lansing - Quality Suites Hotel, Lansing - Compri Hotel-Proposed, Livonia - Embassy Suites, Livonia - Embassy Suites-Proposed, Livonia - Holiday Inn, Livonia - Marriott Hotel, Livonia - Fairfield Inn, Madison Heights - Residence Inn, Madison Heights - Holiday Inn, Marquette - Knights Inn, Monroe - Comfort Inn-Proposed, Mount Clemens - Holiday Inn, Muskegan - Super 8, Muskegon - Hilton Hotel, Novi - Holiday Inn-Petoskey, Petoskey - Mayflower Hotel, Plymouth - Inn at the Bridge, Port Huron - Radisson Hotel, Romulus - Holiday Inn-East, Saginaw - Super 8, Saginaw - Courtyard by Marriott, Southfield - Embassy Suites, Southfield - Hilton Hotel, Southfield - Marriott Hotel, Southfield - Ramada Inn, Southfield - Residence Inn, Southfield - The Garden Inn, Southfield - Comfort Suites-Proposed, Sterling Heights - Holiday Inn, Sturgis - Grand Traverse Resort, Traverse City - Hampton Inn, Traverse City - Park Place Hotel, Traverse City - Courtyard by Marriott, Troy - Holiday Inn, Troy - Marriott, Troy - Residence Inn, Troy - Courtyard by Marriott, Warren - Days Inn, Warren - Holiday Inn, Warren - Motel 6, Warren - Residence Inn, Warren - Van Dyke Hotel & Conference Center, Warren - Bob Evans Restaurant, Wyoming - Super 8, Wyoming - Radisson Resort-Conference Center, Ypsilanti Minnesota - Embassy Suites, Bloomington - Hilton Airport Hotel, Bloomington - Hilton Hotel, Bloomington - Howard Johnson Lodge, Bloomington - Marriott Hotel, Bloomington - Ramada Inn, Bloomington - Days Inn - Minneapolis, Brooklyn Center - Residence Inn, Eagan - Compri Hotel-Proposed, Minneapolis - Courtyard by Marriott-Eden Prairie, Minneapolis - Courtyard by Marriott-Mendota, Minneapolis - Days Inn, Minneapolis - Dyckman Hotel, Minneapolis - Hilton Inn, Minneapolis - Holiday Inn-Downtown, Minneapolis - Hotel-Proposed, Minneapolis - Luxeford Hotel, Minneapolis - Marquette, Minneapolis - Marriott City Center Hotel, Minneapolis - Marriott-Minnetonka, Minneapolis - Motel 6, Minneapolis - Omni-Northstar, Minneapolis - Radisson Hotel, Minneapolis - Ramada Inn, Minneapolis - Sheraton Minneapolis, Minneapolis - Sofitel, Minneapolis - Motel-Proposed, Montevideo - Days Inn, Plymouth - Hotel-Proposed, Rochester - Howard Johnson, Rochester - Motel 6, Rochester - Radisson Hotel, Rochester - Days Inn, Roseville - Holiday Inn, Saint Paul - Holiday Inn-Town Square, Saint Paul - Hotel-Proposed, Saint Paul - Inn and Expo Center, Saint Paul - World Trade Hotel, Saint Paul - Wayzata Conference Center, Wayzata Mississippi - Howard Johnson, Biloxi - Holiday Inn, Greenwood - Motel 6, Hattlesburg - Hampton Inn, Jackson - Howard Johnson, Jackson - Ramada Inn-Proposed, Jackson - Residence Inn, Jackson - Cabot Lodge, Ridgeland - Holiday Inn, Vicksburg Missouri - Ramada Inn, Columbia - Howard Johnson-North St. Louis, Hazelwood - Super 8, Independence - La Quinta Inn, Jackson - North - Capital Plaza, Jefferson City - Ramada Inn, Jefferson City - Days Inn, Joplin - Super 8, Joplin - Allis Plaza, Kansas City - Americana Hotel, Kansas City - AmeriSuites Hotel-Proposed, Kansas City - Doubletree Hotel, Kansas City - Embassy Suites, Kansas City - Fairfield Inn-West, Kansas City - Hilton - Proposed, Kansas City - Hilton Inn, Kansas City - Historic Suites Hotel, Kansas City - Holiday Inn, Kansas City - Holiday Inn Crowne Plaza, Kansas City - Holiday Inn-Proposed, Kansas City - Proposed Sheraton Hotel, Kansas City - Radisson Suite Hotel, Kansas City - Resort Hotel - Proposed, Kansas City - Marriott-Tan-Tar-A, Lake of the Ozarks - Super 8, Liberty - Super 8, North Kansas City - Inn at Grand Glaize, Osage Beach - Super 8, Saint Joseph - Clarion, Saint Louis - Courtyard by Marriott-Creve Coeur, Saint Louis - Courtyard by Marriott-Downtown, Saint Louis - Courtyard by Marriott-Westport, Saint Louis - Days Inn, Saint Louis - Doubletree Hotel, Saint Louis - Drury Inn, Saint Louis - Embassy Suites, Saint Louis - Fairfield Inn-Hazel, Saint Louis - Henry VIII Hotel, Saint Louis - Hilton Hotel-Bel Air, Saint Louis - Holiday Inn Sports Complex, Saint Louis - Holiday Inn-Airport North, Saint Louis - Holiday Inn-Downtown, Saint Louis - Holiday Inn-Riverfont, Saint Louis - Howard Johnson-South, Saint Louis - Mayfair Hotel, Saint Louis - Omni-St. Louis Station, Saint Louis - Ramada Inn-Westport, Saint Louis - Residence Inn-Chesterfield, Saint Louis - Residence Inn-Richmond Heights, Saint Louis - Ritz-Carlton Hotel, Saint Louis - Sheraton-Airport, Saint Louis - St. Louis Airport Hilton, Saint Louis - St. Louis Airport Radisson Hotel, Saint Louis - St. Louisian Hotel, Saint Louis - Stouffer Concourse Hotel, Saint Louis - Super 8, Saint Louis - Marriott Hotel, Saint Louis County - Holiday Inn, Springfield - Sheraton Inn, Springfield - Super 8, Springfield - Executive Inn & Office Building, St. Louis - Holiday Inn, St. Louis - Howard Johnson Hotel, St. Louis - Hotel-Proposed, Unity Village - Holiday Inn, Wendtzville Montana - Sheraton Hotel, Billings - Super 8, Billings - Super 8, Great Falls - Super 8, Helena - Super 8, Kalispell - Holiday Inn, Missoula - Red Lion Inn, Missoula Nebraska - Holiday Inn, Kearney - Best Western Airport Inn, Lincoln - Holiday Inn-Airport, Lincoln - Holiday Inn-Northeast, Lincoln - Howard Johnson, North Platte - Marriott Hotel, Omaha - Ramada Inn, Omaha - Red Lion Inn, Omaha Nevada - Lake Mead Resort, Boulder City - Ormsby House Hotel and Casino, Carson City - Super 8, Carson City - Doubletree Hotel and Resort, Cathedral City - Best Western Motel - Proposed, Jackpot - Airport Inn, Las Vegas - Aladdin Hotel and Casino, Las Vegas - Alexis Park Resort Hotel, Las Vegas - Casino Hotel-Proposed, Las Vegas - Courtyard by Marriott, Las Vegas - El Rancho Hotel and Casino, Las Vegas - Hotel and Casino-Proposed, Las Vegas - Jockey Club Hotel and Casino, Las Vegas - La Quinta Hotel, Las Vegas - Paradise Resort, Las Vegas - Residence Inn, Las Vegas - Silverbird Casino, Las Vegas - Super 8-Proposed, Las Vegas - The Mirage, Las Vegas - Tropicana Travelodge, Las Vegas - Westward Ho Casino, Las Vegas - Echo Bay Resort, Overton - Holiday Inn, Reno - La Quinta Hotel, Reno - Quality Inn and Casino, Reno - Red Lion Hotel-Proposed, Reno New Hampshire - Sheraton Wayfarer, Bedford - Hampton Inn, Bow - Mount Washington Resort, Bretton Woods - Balsams Hotel, Dixville Notch - Sheraton Inn-Lamie's Tavern, Hampton - Woodbound Inn, Jaffrey - Brickyard Mountain Inn, Laconia - Loon Mountain Hotel, Lincoln - Appleton Inns, Manchester - Holiday Inn Center, Manchester - Sheraton Wayfarer, Manchester - Susse Chalet, Manchester - Clarion Somerset Hotel, Nashua - Hotel-Proposed, Nashua - Tara Sheraton Nashua, Nashua - Wentworth by the Sea, Newcastle - Susse Chalet, Portsmouth - Wentworth-by-the-Sea, Portsmouth - Salem Inn, Salem - Susse Chalet, Salem - Landmarc Lodge-East, Waterville Valley - Landmarc Lodge-West, Waterville Valley - Silver Squirrel Inn, Waterville Valley - Snowy Owl Inn, Waterville Valley - Chalet Susse International, Inc., Wilton New Jersey - Marriott Seaview Golf Resort, Abescon - Howard Johnson Hotel, Absecon - Seaview Country Club, Absecon - Berkeley Carteret Hotel, Asbury Park - Caesar's Hotel and Casino, Atlantic City - Casino Hotel-Proposed, Atlantic City - Deauville Hotel, Atlantic City - Diplomat Hotel, Atlantic City - Hampton Inn, Atlantic City - Harrah's Marina Hotel Casino, Atlantic City - Lafayette Hotel, Atlantic City - Resorts Int'l Hotel and Casino, Atlantic City - Royal Inn, Atlantic City - Sands Hotel and Casino, Atlantic City - Traymore Hotel Site, Atlantic City - Tropicana Hotel and Casino, Atlantic City - World International Hotel, Atlantic City - Bernards Inn, Bernardsville - Hotel-Proposed, Bridgewater - Proposed Hotel, Camden - Cherry Hill Hyatt, Cherry Hill - Cherry Hill Inn, Cherry Hill - Ramada Inn, Clifton - Comfort Suites, E. Rutherford - Ramada Renaissance, East Brunswick - Sheraton Inn, East Brunswick - Sheraton - Per Diem, East Rutherford - Holiday Inn-Raritan Center, Edison - Hotel-Proposed, Edison - Ramada Inn, Edison - Best Western Hotel, Egg Harbor Township - Newark Airport Vista Hotel, Elizabeth - Ramada Inn-Proposed, Elizabeth - Sheraton Inn, Elizabeth - Marriott Suite Hotel-Proposed, Elmwood Park - Howard Johnson, Englewood - Conference Center, Farleigh Dickinson - Motel-Proposed, Flemington - Hamilton Park Conference Center, Florham Park - Courtesy Motel, Fort Lee - Ramada Inn-Proposed, Franklin Township - Playboy Resort, Great Gorge - Marriott Hotel, Hanover - Sheraton Hotel, Hasbrouck Heights - Holiday Inn, Jamesburg - Restaurant at Port Liberte, Jersey City - Harrogate Senior Living Facility, Lakewood - Courtyard by Marriott, Lincroft - Hotel-Proposed, Long Branch - Comfort Inn, Mahwah - Courtyard by Marriott, Mahwah - Residence Inn-Proposed, Mahwah - Economy Lodge - Proposed, Meadowlands - Holiday Inn, Meadowlands - Hotel-Proposed, Meadowlands - Meadowlands Hilton, Meadowlands - Sheraton Hotel, Meadowlands - Forsgate Conference Center, Monroe Township - Conference Center, Morristown - Governor Morris Inn, Morristown - Headquarters Plaza Hotel, Morristown - Pleasantville Farms Conference Cent, Morristown - Howard Johnson Lodge, Mount Holly - Courtyard by Marriott, Mount Laurel - Hilton, Mount Laurel - Days Hotel, New Brunswick - Hyatt Hotel, New Brunswick - Rennaisance Hotel, New Brunswick - Residence Inn - Princeton, New Jersey - Airport Hotel-Proposed, Newark - Courtyard by Marriott-Airport, Newark - Holiday Inn, Newark - Holiday Inn-Airport North, Newark - Hotel-Proposed, Newark - Howard Johnson Hotel, Newark - Days Inn, North Bergen - Holiday Inn, North Brunswick - Port-O-Call, Ocean City - Sting Ray Motel, Ocean City - Hotel-Proposed, Ocean Grove - Spray View Hotel, Ocean Grove - Macy Hotel-Proposed, Paramus - Red Carpet Inn, Paramus - Residence Inn-Proposed, Paramus - Marriott Hotel-Proposed, Park Ridge - Embassy Suites, Parsippany - Hilton, Parsippany - Residence Inn-Proposed, Parsippany - Howard Johnson, Phillipsburg - Hotel-Proposed, Piscataway - Residence Inn-Proposed, Piscataway - Compri Hotel-Proposed, Princeton - Hyatt Regency, Princeton - Marriott Hotel, Princeton - Omni Nassau Inn, Princeton - Treadway Inn, Princeton - Howard Johnson, Ridgefield Park - Hotel-Proposed, Rockleigh - Hotel-Proposed, Roxbury Township - Ramada Inn, Runnemede - Howard Johnson, Saddle Brook - Marriott Hotel, Saddle Brook - Days Inn, Secaucus - Howard Johnson, Secaucus - Ramada Inn, Secaucus - Hilton At Short Hills, Short Hills - Pier 4 Motel, Somers Point - Garden State Convention Center, Somerset - Holiday Inn, Somerset - Marriott Hotel, Somerset - Neighborhood Suites-Proposed, Somerset - Sommerset Plaza Hotel, Somerset - Summerfield Suites Hotel, Sommerset - Hewitt Wellington Hotel, Spring Lake - Hotel-Proposed, Spring Lake - Loews Glenpointe Hotel, Teaneck - Appleton Inn, Tinton Falls - Envoy Inn, Tinton Falls - Hilton Inn, Tinton Falls - Residence Inn, Tinton Falls - Sunrise Suite Hotel, Tinton Falls - Hotel-Proposed, Toms River - Hotel-Proposed, Turnersville - Hotel-Proposed, Wayne - Howard Johnson-Proposed, Wayne - Holiday Inn, Wildwood Crest - Motel, Wrightstown New Mexico - Compri Hotel-Proposed, Albuquerque - Courtyard by Marriott-Airport, Albuquerque - Fairfield Inn-Proposed, Albuquerque - Hampton Inn, Albuquerque - Hilton Hotel, Albuquerque - Holiday Inn, Albuquerque - Marriott Hotel, Albuquerque - Radisson Suite Hotel-Proposed, Albuquerque - Residence Inn, Albuquerque - Rodeway Inn, Albuquerque - Winrock Motor Inn, Albuquerque - La Quinta Inn, Albuquerque - Airport - Corkin's Lodge, Chama - La Quinta Inn, Farmington - Hilton, Las Cruces - Las Cruces Hilton, Las Cruces - Super 8, Las Cruces - Ski Rio Ski Resort, Miracle Mountain - Super 8, Raton - Young's Ranch, Red River - Eldorado Hotel, Santa Fe - Homewood Suites Hotel, Santa Fe - Hotel-Proposed, Santa Fe - Inn at Loretto, Santa Fe - Inn on the Alameda, Santa Fe - La Fonda Hotel, Santa Fe - La Quinta Hotel, Santa Fe - Residence Inn, Santa Fe - Santa Fe Motel, Santa Fe - Sheraton de Santa Fe, Santa Fe New York - Americana Inn, Albany - Desmond Hotel, Albany - Hilton Hotel, Albany - Marriott Hotel, Albany - Sheraton Inn, Albany - Susse Chalet, Albany - VIP Motor Lodge (Howard Johnson), Albany - Embassy Suites-Proposed, Amherst - Holiday Inn, Amherst - Annandale Inn-Proposed, Annandale - Wampus Inn-Proposed, Armonk - Treadway Inn, Batavia - Hampton Inn, Binghamton - Holiday Inn-Arena, Binghamton - Holiday Inn-SUNY, Binghamton - Hotel-Proposed, Binghamton - Howard Johnson, Binghamton - Residence Inn, Binghamton - Sheraton Inn, Binghamton - Eden Motel, Bronx - Days Inn-Proposed, Brookhaven - Residence Inn, Brookhaven - Brooklyn Hotel-Proposed, Brooklyn - Hilton Hotel, Brooklyn - Airport Hotel-Proposed, Buffalo - Buffalo Hotel, Buffalo - Days Hotel-Proposed, Buffalo - Hilton Hotel, Buffalo - Holiday Inn - Midtown, Buffalo - Hyatt Hotel, Buffalo - Hyatt Regency Hotel & Retail Area, Buffalo - Radisson Hotel, Buffalo - Ramada Inn-Airport, Buffalo - Ramada Renaissance Hotel, Buffalo - Residence Inn-Proposed, Buffalo - Sheraton Hotel, Buffalo - Sheraton Inn Buffalo East, Buffalo - Sheraton Inn-Airport, Buffalo - Sheraton Inn, Canadaiqua - Airway Motel, Cheektowaga - Holiday Inn - Airport, Cheektowaga - Holiday Inn - Gateway, Cheektowaga - Quality Inn, Cheektowaga - Sheraton Buffalo, Cheektowga - Steeplechase Park-Proposed, Coney Island - Hilton Inn, Corning - Resort/Conference Center-Proposed, Cornwall - Holiday Inn, Cortland - Roycroft Inn, East Aurora - Hotel-Proposed, East Elmhurst - Susse Chalet, East Greenbush - Nevele Hotel, Ellenville - Int'l Conf./Learning Center-Propose, Ellis Island - Days Inn, Elmsford - Howard Johnson, Elmsford - Neighborhood Suites Hotel-Proposed, Fishkill - Residence Inn, Fishkill - Metropole Hotel, Flushing - Midway Hotel, Flushing - Sheraton - Proposed, Flushing Center - Hotel-Proposed, Garden City - Wyndham Condominium, Garden City - Harrison Conference Center, Glen Clove - Great Neck Hotel, Great Neck - Comfort Inn, Greece - Holiday Inn-Proposed, Greece - Tamarack Lodge, Greenfield Park - Claudio's Restaurant, Greenport - Colonie Hill, Hauppauge - Holiday Inn, Hauppauge - Marriott Wind Watch Hotel & Golf, Hauppauge - Marriott Windwatch, Hauppauge - Ramada Inn, Hauppauge - Residence Inn, Hauppauge - Homewood Suites-Proposed, Henrietta - Howard Johnson, Huntington - Huntington Townhouse, Huntington - Hampton Inn, Islandia - Marriott Wind Watch, Islandia - Hotel-Proposed, Islip - Howard Johnson Hotel, Ithaca - Ramada Inn, Ithaca - Sheraton Inn, Ithaca - JFK Hilton, Jamaica - Howard Johnson, Kingston - Ramada Inn, Kingston - Omni Sagamore, Lake George - Ramada Inn, Lake George - Former Lake Placid Club Hotel, Lake Placid - Hilton Hotel, Lake Placid - Mirror Lake Inn, Lake Placid - Holiday Inn, Latham - Howard Johnson, Latham - Howard Johnson, Liberty - The New Brown's Resort, Loch Sheldrake - Convention Center - Proposed, Long Island - Eastern Nassau/W. Suffolk Hotel, Long Island - Hyatt Hotel-Proposed, Long Island - Motel-Proposed, Lynbrook - Crowne Plaza Hotel, Manhattan - Hotel Mark, Manhattan - Proposed Economy Hotel, Manhattan - Sugar Maples Resort, Maplecrest - Hotel-Proposed, Middletown - Howard Johnson, Middletown - Montauk Yacht Club and Inn, Montauk - Kutsher's Resort, Monticello - Motel-Proposed, Nanuet - Wallkill Valley Inn Project, New Paltz - Hotel-Proposed, New Rochelle - Le Richmond Hotel, New Rochelle - Ramada Plaza Inn and Offices, New Rochelle - Sheraton Inn, New Rochelle - Aberdeen Hotel, New York - American Youth Hostel, New York - Americana Hotel, New York - Ashley Hotel, New York - Astor House-Proposed, New York - Barbizon Plaza Hotel, New York - Barclay Hotel, New York - Battery Park City Hotel-Proposed, New York - Berkshire Place, New York - Best Western Woodward Hotel, New York - Biltmore Hotel, New York - Broadway Crowne Plaza, New York - Carlton House Hotel, New York - Century Paramount Hotel, New York - Chatwal Inn, New York - Chatwal Inn on 45th Street, New York - Chatwal Inn on Park Avenue, New York - Chinatown Hotel-Proposed, New York - Courtyard by Marriott-Proposed, New York - Custom's House, New York - Days Inn, New York - Days Inn-West 57th Street, New York - Doral Inn, New York - Dover Hotel, New York - Downtown Athletic Club, New York - Downtown Conference Center, New York - Drake Hotel, New York - Econo Lodge-Proposed, New York - El Rio Grande, New York - Embassy Suites-Times Square-Propose, New York - Empire Hotel, New York - Essex House, New York - Executive Hotel, New York - Giordano Hotel, New York - Gorham Hotel, New York - Grand Bay at Equitable Center, New York - Grand Hyatt Hotel, New York - Greenwich Street Hotel, New York - Halloran House, New York - Hampton House, New York - Harley Hotel, New York - Helmsley Hotel, New York - Hilton Hotel, New York - Hilton Hotel-Statler, New York - Holiday Inn, New York - Holiday Inn Crowne Plaza-Broadway, New York - Holiday Inn Crowne Plaza-Manhattan, New York - Holland Hotel, New York - Hotel Intercontinental, New York - Hotel Pierre, New York - Hotel-1926 Broadway-Proposed, New York - Hotel-East 57th Street-Proposed, New York - Hotel-Proposed, New York - Hotel-Tenth Avenue-Proposed, New York - Howard Hotel, New York - Howard Johnson, New York - Journey's Court Hotel-Proposed, New York - Journey's End, New York - Kalikow Hotel-Proposed, New York - Kennedy Inn, New York - Lancaster Hotel, New York - Le Meridien Liberty New York, New York - Lowell Hotel, New York - Luxury Hotel-Proposed, New York - Macklowe Hotel, New York - Madison Towers Hotel, New York - Manger Windsor Hotel, New York - Mark Hotel, New York - Marriott East Side, New York - Marriott Financial Center, New York - Marriott Hotel-Proposed, New York - Marriott Marquis, New York - Martinique Hotel, New York - Mayfair Regent, New York - Milford Plaza Hotel, New York - Millennium Hotel, New York - Navarro Hotel, New York - Nova Park-Gotham, New York - Novotel, New York - Omni Berkshire Place, New York - Omni Park Central, New York - Parc Fifty One Hotel, New York - Parker Meridien Hotel, New York - Peninsula Hotel, New York - Penta Hotel, New York - Piccadilly Hotel, New York - Plaza Hotel, New York - President Hotel, New York - Prince George Hotel, New York - Prince Street Hotel-Proposed, New York - Proposed Hotel and Apartments, New York - Proposed Luxury Hotel-Proposed, New York - Quality Inn, New York - Quality Suites, New York - Ramada Inn, New York - Regent Hotel-Proposed, New York - Regent of New York-Proposed, New York - Ritz-Carlton, New York - Roger Smith Winthrop Hotel, New York - Roosevelt Hotel, New York - Russian Tea Room, New York - Sheraton Hotel, New York - Sheraton Motor Inn, New York - Sheraton Park Avenue, New York - Soho Hotel-Proposed, New York - St. Moritz Hotel, New York - St. Regis, New York - Stanhope, New York - Sutton Place Hotel, New York - Taft Hotel, New York - Tenth Avenue Hotels-Proposed, New York - The Pierre Hotel, New York - The Plaza Athenee, New York - Times Square Hotel-Proposed, New York - Timeshare-Proposed, New York - Travel Inn, New York - Tudor Hotel, New York - UN Plaza Suite Hotel-Proposed, New York - Vista International, New York - Waldorf=Astoria Hotel, New York - Warwick Hotel, New York - Westbury Hotel, New York - Westin Plaza Hotel, New York - Woodward Hotel-Proposed, New York - York Club, New York - Howard Johnson Motel & Restaurant, Newburgh - Ramada Inn, Newburgh - Hilton Hotel, Niagara Falls - Howard Johnson, Norwich - Hotel-Proposed, Orangetown - Hudson Valley Conference Center, Ossining - Sheraton Inn, Ossining - Hotel-Proposed, Oswego - Best Western, Painted Post - Lodge on the Green, Painted Post - Residence Inn - Proposed, Parsippany - Senior Living - Proposed, Pearl River - Drum Hill Hotel, Peekskill - Holiday Inn, Plainview - Howard Johnson, Plainview - Pickwick Motor Inn, Plainview - Residence Inn, Plainview - Holiday Inn, Plattsburgh - Motel-Proposed, Port Jefferson - Comfort Inn-Proposed, Poughkeepsie - Courtyard by Marriott, Poughkeepsie - Radison Hotel, Poughkeepsie - Wyndham Hotel, Poughkeepsie - Best Western-LaGuardia Airport, Queens - Crown Motel, Queens - Crowne Plaza-LaGuardia Airport, Queens - Days Inn-LaGuardia Airport, Queens - Executive Inn, Queens - Hilton Inn-LaGuardia Airport, Queens - Hilton-JFK Airport, Queens - Holiday Inn-JFK Airport, Queens - Holiday Inn-LaGuardia Airport, Queens - Howard Johnson, Queens - Jade East Motel, Queens - JFK Plaza Hotel, Queens - Marriott Hotel-JFK Airport, Queens - Marriott-LaGuardia Airport, Queens - Metropole Hotel, Queens - Midway Hotel, Queens - Riviera Hotel, Queens - Royce Hotel-LaGuardia Airport, Queens - Sheraton-LaGuardia East-Proposed, Queens - Adria Hotel, Queens (Bayside) - Holiday Inn, Riverhead - Riverhead Motor Hotel, Riverhead - Americana Hotel, Rochester - Courtyard by Marriott-Wrighton, Rochester - Days Hotel (former Holiday Inn), Rochester - Hilton-Campus, Rochester - Holiday Inn, Rochester - Hotel-Proposed (former St. Bernard), Rochester - Hyatt Hotel, Rochester - Lodge at Woodcliff, Rochester - Omni Suites Hotel, Rochester - Residence Inn, Rochester - Sheraton Inn, Rochester - Stouffer Hotel, Rochester - Town House Inn, Rochester - Limited Service Hotel-Proposed, Rome - Hotel - Proposed, Roslyn - Roslyn Country Club, Roslyn - Courtyard by Marriott, Rye - Le Richemonde Hotel, Ryebrook - Baron's Cove Inn, Sag Harbor - Holiday Inn, Saratoga - Hotel-Proposed, Saratoga Springs - Howard Johnson, Saugerties - Holiday Inn, Schenectady - Ramada Inn, Schenectady - Dering Harbor Inn, Shelter Island - Crowne Plaza-Proposed, Smithtown - Howard Johnson, Smithtown - Sheraton, Smithtown - Raleigh Hotel, South Fallsburg - Hotel-Proposed, Southhold - Susse Chalet, Spring Valley - Executive Motor Inn, Springfield Gardens - Staten Island Hotel, Staten Island - Imperial Htl/Stevensville Golf Crs., Stevensville - Holiday Inn, Suffern - Motel on the Mountain, Suffern - Browns Hotel, Sullivan County - Imperial Hotel, Sullivan County - The New Brown's Resort, Sullivan County - Courtyard by Marriott, Syracuse - Embassy Suites, Syracuse - Hampton Inn, Syracuse - Hilton Inn, Syracuse - Holiday Inn-Downtown, Syracuse - Holiday Inn-Exit 35, Syracuse - Holiday Inn-Exit 36, Syracuse - Holiday Inn-Exit 39, Syracuse - Holiday Inn-I-90, Syracuse - Homewood Suites Hotel-Proposed, Syracuse - Hotel Syracuse, Syracuse - Hotel-Proposed, Syracuse - Marriott Hotel, Syracuse - Residence Inn-Proposed, Syracuse - Sheraton University Inn & Conf.Ctr., Syracuse - Treadway Inn, Syracuse - Courtyard by Marriott, Tarrytown - Tarrytown House Conference Center, Tarrytown - Westchester Marriott, Tarrytown - Embassy Suites - Proposed, Times Square, New York - Marriott Hotel, Uniondale - Sheraton Nassau Hotel, Uniondale - Howard Johnson Hotel, Utica - Howard Johnson, Vestal - Hotel-Proposed, Watertown - Convention Hotel-Proposed, Westbury - Dalts Restaurant, Westbury - Howard Johnson, Westbury - Marriott Hotel, Westchester - Inn-Proposed, Westhampton - Crowne Plaza, White Plains - Hotel-Proposed, White Plains - Howard Johnson, White Plains - Roger Smith Hotel, White Plains - Stouffer Westchester Hotel, White Plains - White Plains Hotel, White Plains - Anton Meadows, Yaphank - Quality Suites, Yorktown - Yorktown Motor Lodge, Yorktown Heights North Carolina - Days Inn - Central, Asheville - Holiday Inn - Airport, Asheville - Holiday Inn - Tunnel, Asheville - Inn on the Plaza, Asheville - Sheraton Inn, Asheville - Days Inn, Ashville - Masters Economy Inn - Rocky Mount, Battlebro - Days Inn, Blowing Rock - All-Suite Hotel-Proposed, Boone - Residence Inn-Proposed, Cary - Carolina Inn, Chapel Hill - Hilton-Proposed, Chapel Hill - Charlotte Registry Hotel-Per Diem, Charlotte - Compri Hotel-Proposed, Charlotte - Courtyard by Marriott, Charlotte - Days Inn, Charlotte - Days Inn-Uptown, Charlotte - Fairfield Inn, Charlotte - Howard Johnson, Charlotte - Howard Johnson Lodge, Charlotte - Knights Inn, Charlotte - Manger Motor Inn, Charlotte - Marriott City Center, Charlotte - Marriott Hotel-Independence Center, Charlotte - Masters Economy Inn - Charlotte No, Charlotte - Masters Economy Inn - Merchandise, Charlotte - Queen City Motel, Charlotte - Residence Inn, Charlotte - Residence Inn-North, Charlotte - Resistry Hotel, Charlotte - Royce Suite Hotel, Charlotte - Sheraton Inn, Charlotte - Conference Center, Clemmons - Sheraton Motel, Dunn - Best Western, Durham - Cricket Inn, Durham - Days Inn, Durham - Dutch Village Inn, Durham - Fairfield Inn, Durham - Holiday Inn-West, Durham - Motel 6, Durham - Sheraton-University Center, Durham - The Duke Inn, Durham - Days Inn, Fayetteville - Fairfield Inn, Fayetteville - Holiday Inn, Fayetteville - Hotel-Proposed, Fayetteville - Knights Inn, Fayetteville - Goldsboro Motel, Goldsboro - Courtyard by Marriott, Greensboro - Days Inn, Greensboro - Embassy Suites, Greensboro - Fairfield Inn, Greensboro - Hilton, Greensboro - Marriott Hotel, Greensboro - Residence Inn, Greensboro - Sheraton Greensboro, Greensboro - Hotel-Proposed, Greenville - Radisson Hotel, High Point - Days Inn, Lumberton - Maggie Valley Country Club, Maggie Valley - Courtyard by Marriott, Raleigh - Fairfield Inn, Raleigh - Hampton Inn, Raleigh - Hilton, Raleigh - Holiday Inn-Downtown, Raleigh - Marriott Hotel-RTP, Raleigh - Raleigh Radisson, Raleigh - Residence Inn, Raleigh - Holiday Inn - Airport, Research Triangle Park - Howard Johnson, Roanoke Rapids - Sheraton Inn, Rocky Mount - Days Inn, Rocky Mountain - Fairfield Inn, Rocky Mountain - Motel 6, Rocky Mountain - Days Inn, Rowland - Sheraton Motel, Selma - Masters Economy Inn, Smithfield - Holiday Inn, Southern Pines - Fairfield Inn, Wilmington - Hilton, Winston/Salem - Holiday Inn, Winston/Salem - Winston Plaza Hotel, Winston/Salem North Dakota - Holiday Inn, Bismark - Radisson Inn, Bismark - Super 8, Bismark - Ramada Hotel, Fargo - Ramada Inn-Proposed, Fargo - Super 8, Grand Forks - Super 8, Minot Ohio - Holiday Inn-Cascade, Akron - Ramada Inn, Akron - Residence Inn, Akron - Aurora Inn and Pine Lake Trout Club, Aurora - Sheraton Inn, Aurora - Woodlands Inn, Aurora - Courtyard by Marriott, Blue Ash - Embassy Suites, Blue Ash - Residence Inn-Proposed, Blue Ash - Best Western, Cambridge - Days Inn, Cambridge - Hilton Hotel, Canton - Super 8, Canton - Best Western Northeast, Cincinnati - Carousel Inn, Cincinnati - Cincinnati Hotel, Cincinnati - Clarion Hotel, Cincinnati - Days Inn, Cincinnati - Embassy Suites-Proposed, Cincinnati - Holiday Inn-Downtown, Cincinnati - Holiday Inn-Eastgate, Cincinnati - Holiday Inn-Northeast, Cincinnati - Holiday Inn-Riverfront, Cincinnati - Holiday Inn-South, Cincinnati - Hotel-Airport-Proposed, Cincinnati - Howard Johnson, Cincinnati - Hyatt, Cincinnati - Knights Inn, Cincinnati - KOA Campground, Cincinnati - Marriott Inn, Cincinnati - Netherland Hilton, Cincinnati - Omni Netherland Plaza, Cincinnati - Proposed Hotel, Cincinnati - Radisson Inn, Cincinnati - Ramada Inn, Cincinnati - Residence Inn, Cincinnati - Residence Inn-North, Cincinnati - Sheraton Inn-Proposed, Cincinnati - Treadway Inn, Cincinnati - Vernon Manor, Cincinnati - AmeriSuite Hotel-Proposed, Cleveland - Downtown Hotel-Proposed, Cleveland - Fairfield Inn-Brook Park, Cleveland - Fairfield Inn-West, Cleveland - Holiday Inn-Airport, Cleveland - Holiday Inn-Lakeside, Cleveland - Hyatt Hotel-Proposed, Cleveland - Marriott Hotel, Cleveland - Sheraton City Center, Cleveland - Sheraton Hopkins, Cleveland - AmeriSuite - Proposed, Columbus - Embassy Suites, Columbus - Fairfield Inn-North, Columbus - Fairfield Inn-West, Columbus - Hilton Inn, Columbus - Holiday Inn-Airport, Columbus - Holiday Inn-City Center, Columbus - Holiday Inn-Worthington, Columbus - Hotel-Proposed, Columbus - Howard Johnson Hotel, Columbus - Howard Johnson-East, Columbus - Howard Johnson-West, Columbus - Knights Inn-West, Columbus - Marriott Hotel, Columbus - Nationwide Hotel, Columbus - Residence Inn-North, Columbus - Sheraton Plaza Hotel, Columbus - Sheraton-North, Columbus - Union Plaza Hotel-Steeplechase, Columbus - University Inn, Columbus - Woodfin Hotel, Columbus - Courtyard by Marriott, Crosswoods - Courtyard by Marriott, Dayton - Daytonian Hilton, Dayton - Fairfield Inn, Dayton - Hope Hotel & Conference Center, Dayton - Knights Inn-North, Dayton - Marriott Hotel, Dayton - Motel 6, Dayton - Ramada Inn, Dayton - Residence Inn-North, Dayton - Residence Inn By Marriott, Dayton South - Courtyard by Marriott, Dublin - Woodfin Suites, Dublin - East Liverpool Motor Lodge, East Liverpool - Howard Johnson, Euclid - Ramada Inn, Fairlawn - Hampton Inn, Independence - Howard Johnson, Lima - Ramada Inn, Lima - Best Western, Mansfield - Holiday Inn, Marietta - Lafayette Hotel, Marietta - Holiday Inn, Middletown - Howard Johnson, Middletown - Regal 8 Inn, Middletown - Sheraton-Proposed, Milford - Super 8, Montrose - Ramada Inn, Sandusky - Days Inn, Sharonville - Holiday Inn-Cincinnati North, Sharonville - Super 8, St. Clairsville - Holiday Inn, Strongsville - Balhalla Hotel, Toledo - Courtyard by Marriott, Toledo - Fairfield Inn-Airport, Toledo - Hilton at the Medical College, Toledo - Hilton Hotel, Toledo - Holiday Inn, Toledo - Knights Inn-West, Toledo - Marriott Portside Hotel, Toledo - Radisson Hotel, Toledo - Sofitel, Toledo - Hampton Inn-Proposed, Wickliffe - Holiday Inn, Youngstown - Hotel-Proposed, Youngstown - Sheraton-Proposed, Youngstown Oklahoma - Fountainhead Resort, Mcintosh County - Residence at the Trails Inn, Norman - Suit Hotel, Norman - Courtyard by Marriott, Oklahoma City - Embassy Suites, Oklahoma City - Holiday Inn, Oklahoma City - Lexington Hotel Suites, Oklahoma City - Lincoln Plaza Hotel, Oklahoma City - Marriott Hotel, Oklahoma City - Meridien Plaza, Oklahoma City - Sheraton Hotel, Oklahoma City - Arrowhead Resort, Pittsburgh County - Camelot Hotel, Tulsa - Doubletree Hotel, Tulsa - Former Holiday Inn, Tulsa - Former Holiday Inn-Downtown, Tulsa - Holiday Inn, Tulsa - Holiday Inn-Convention Center, Tulsa - La Quinta Inn, Tulsa - Marriott Hotel, Tulsa - Mayo Hotel, Tulsa - Residence Inn, Tulsa - Westin Hotel, Tulsa Oregon - Inn At Face Rock, Bandon - Courtyard by Marriott, Beaverton - Red Lion Motel, Bend - Sunriver Lodge and Resort, Bend - Econolodge Motel, Eugene - Valley River Inn, Eugene - Residence Inn Portland-South, Lake Oswego - Big Creek Resort-US Highway 101, Lane County - Embassy Suites, Portland - Holiday Inn Crowne Plaza - Proposed, Portland - Holiday Inn-Airport, Portland - Holiday Inn-South, Portland - Proposed Sheraton Suites, Portland - Red Lion - Jantzen Beach, Portland - Red Lion Inn-Lloyd Center, Portland - Red Lion Inn-Portland Center, Portland - Residence Inn - Proposed, Portland - Vintage Plaza Hotel, Portland - Wells Building, Portland - Execulodge Motel, Salem - Oregon Capital Inn, Salem - Springfield Red Lion Inn, Springfield - Sunriver Resort, Sunriver Pennsylvania - Allentown Hilton Hotel, Allentown - Holiday Inn, Allentown - Proposed Microtel, Allentown - Quality Inn, Allentown - Bedford Springs Hotel, Bedford - Compri Hotel-Proposed, Bensalem - Days Inn-Proposed, Bensalem - Holiday Inn, Bensalem - Residence Inn By Marriott, Berwyn - Econolodge, Bristol - Days Inn, Brookville - Buck Hill Falls Inn, Buck Hill Falls - Howard Johnson, Butler - Holiday Inn, Chambersburg - Days Inn, Clarion - Embassy Suites, Coraopolis - Hydeholde Country House-Proposed, Coraopolis - Days Inn, Danville - Holiday Inn, Dubois - Lafayette Inn-Proposed, Easton - Howard Johnson Hotel, Erie - Ramada Inn, Erie - Holiday Inn, Essington - Quality Suites-Proposed, Essington - Super 8-Proposed, Essington - Howard Johnson, Gibsonia - Compri Hotel-Proposed, Harrisburg - Holiday Inn, Harrisburg - Marriott Hotel, Harrisburg - Penn Harris Inn, Harrisburg - Sheraton Inn, Harrisburg - Super 8-Proposed, Harrisburg - Holiday Inn, Hazleton - Super 8-Proposed, Hazleton - Plaza Valley Forge Hotel, King of Prussia - Radisson Hotel, King of Prussia - Sheraton Hotel, King of Prussia - Valley Forge Complex, King of Prussia - Valley Forge Hilton, King of Prussia - Motel-Proposed, Lake Ariel - Days Inn, Lancaster - Holiday Inn-Route 30E, Lancaster - Holiday Inn-Route 501, Lancaster - Sheraton Lancaster Golf Resort, Lancaster - Super 8-Proposed, Lancaster - Holiday Inn, Lionville - Hilton-Great Valley, Malvern - Summerfield Suite-Proposed, Malvern - Days Inn, Meadville - Hilton Inn, Monroeville - Holiday Inn-West, Monroeville - Economy Hotel, Montgomery Township - Holiday Inn, New Hope - Treadway Inn, Newport - Residence Inn-Proposed, Paoli - Conference Center-Proposed, Penn State - Barclay Hotel, Philadelphia - Bellevue, Philadelphia - Courtyard by Marriott-Devon, Philadelphia - Courtyard-Willow Grove, Philadelphia - Days Inn-Airport, Philadelphia - Econo Lodge-Franklin Towne, Philadelphia - Essex Hotel, Philadelphia - Franklin Motor Inn, Philadelphia - Franklin Plaza Hotel, Philadelphia - Guest Quarters Hotel, Philadelphia - Hampton Inn-Proposed, Philadelphia - Health Club-Proposed, Philadelphia - Hilton Inn, Philadelphia - Hilton Inn-Northeast, Philadelphia - Holiday Inn-City Center, Philadelphia - Holiday Inn-City Line, Philadelphia - Hub Motor Inn, Philadelphia - Hyatt-Proposed, Philadelphia - Marriott Hotel, Philadelphia - Marriott Hotel-Airport, Philadelphia - Omni Philadelphia, Philadelphia - Penn Center Inn, Philadelphia - Quality Inn-Center City, Philadelphia - Residence Inn-Proposed, Philadelphia - Rittenhouse Hotel, Philadelphia - Treadway Mohawk, Philadelphia - Treadway Roosevelt, Philadelphia - Residence Inn, Philadelphia/Berwyn - Clubhouse Inn, Pittsburgh - Courtyard by Marriott, Pittsburgh - Hampton Inn at Playhouse Square, Pittsburgh - Hilton Hotel, Pittsburgh - Holiday Inn-Greentree, Pittsburgh - Holiday Inn-North, Pittsburgh - Holiday Inn-Parkway-East, Pittsburgh - Holiday Inn-Parkway-West, Pittsburgh - Hotel-Proposed, Pittsburgh - Howard Johnson Hotel, Pittsburgh - Marriott Hotel, Pittsburgh - Marriott-Airport, Pittsburgh - Motel 6, Pittsburgh - Quality Inn, Pittsburgh - Royce Hotel-Airport, Pittsburgh - U.S.S. Hotel-Proposed, Pittsburgh - Westin William Penn, Pittsburgh - Courtyard By Marriott, Pittsburgh Airport - Holiday Inn, Reading - Sheraton Hotel, Reading - Hilton at Lackawanna Station, Scranton - Hilton Hotel, Scranton - Sheraton Inn, Stroudsburg - HoJo Inn, Tannersville - Hilton-Northeast, Trevose - Compri Hotel-Proposed, Valley Forge - Courtyard by Marriott, Valley Forge - Holiday Inn-Meadowlands, Washington - Holiday Inn, Wilkes-Barre - Days Inn-Proposed, Williamsport - Hotel-Proposed, Williamsport - Hampton Inn - Proposed, Willow Grove - Holiday Inn-Market Street, York - Holiday Inn-Route 30 and I-83, York - Ramada Inn, York - Super 8-Proposed, York Rhode Island - Cresthil-Proposed, Lincoln - Courtyard by Marriott, Newport - Vanderbilt Hotel-Convention Center, Newport - Quality Inn, North Kingston - Biltmore Plaza, Providence - Convention Center Hotel-Proposed, Providence - Holiday Inn Providence - Downtown, Providence - Hotel-Proposed, Providence - Marriott Hotel, Providence - Sheraton-Airport, Providence - Susse Chalet, Smithfield - Howard Johnson, Warwick - Residence Inn-Proposed, Warwick - Susse Chalet, Warwick South Carolina - Quality Inn Motel, Anderson - Super 8, Anderson - Budget Hotel - Proposed, Charleston - Charleston Center Hotel-Proposed, Charleston - Cooper River Inn, Charleston - Days Inn, Charleston - Francis Marion Hotel, Charleston - Hampton Inn-Proposed, Charleston - Hawthorne Suites Hotel, Charleston - Holiday Inn, Charleston - Holiday Inn-Airport, Charleston - Holiday Inn-Riverview, Charleston - Masters Economy Inn - Mt. Pleasant, Charleston - Masters Economy Inn - Rivers Ave, Charleston - Middleton Inn, Charleston - Omni Charleston, Charleston - Quality Inn, Charleston - Trusthouse Forte, Charleston - Courtyard by Marriott, Columbia - Courtyard by Marriott-Northeast, Columbia - Courtyard by Marriott-Northwest, Columbia - Embassy Suites, Columbia - Marriott Hotel, Columbia - Masters Economy Inn - I-26, Columbia - Masters Economy Inn - Knox Abbot, Columbia - Motel 6, Columbia - Residence Inn, Columbia - Coral Beach Hotel, Coral Beach - Days Inn, Dillon - Save Inn, Fairplay - Fairfield Inn, Florence - Holiday Inn, Florence - Days Inn, Gaffney - Courtyard by Marriott, Greenville - Fairfield Inn, Greenville - Greenville Hilton Hotel, Greenville - Ramada Inn, Greenville - Super 8, Greenwood - Days Inn, Hardeeville - Fairfield Inn, Hilton Head - Hilton Head Inn, Hilton Head - Holiday Inn, Hilton Head - Inter-Continental Hotel, Hilton Head - Islander Inn, Hilton Head - Quality Suites-Proposed, Hilton Head - Residence Inn-Proposed, Hilton Head - Sheraton Inn, Hilton Head - PGA East Resort-Proposed, Kiawah Island - Save Inn, Lake Hartwell - Days Inn, Mt. Pleasant - Coral Beach Hotel, Myrtle Beach - Radisson Hotel, Myrtle Beach - Best Western Inn, North Charleston - Budget Hotel-Proposed, North Charleston - Days Inn, North Charleston - Northwoods Atrium Inn, North Charleston - Days Inn, Santee - Holiday Inn-West, Spartanburg - Howard Johnson, Spartanburg - Residence Inn, Spartanburg South Dakota - Holiday Inn, Aberdeen - Holiday Inn, Rapid City - Holiday Inn, Sioux Falls - Super 8, Sioux Falls - Holiday Inn, Spearfish Tennessee - Ameri Suite Hotel-Proposed, Brentwood - Courtyard by Marriott, Brentwood - Holiday Inn, Bristol - Holiday Inn-Southeast, Chattanooga - Howard Johnson, Chattanooga - Marriott Hotel, Chattanooga - Motel 6, Chattanooga - Sheraton Inn, Chattanooga - Super 8, Chattanooga - Holiday Inn, Cove Lake - Masters Economy Inn, Dickson - Comfort Inn-Proposed, Elizabethton - Park Vista Hotel, Gatlinburg - Holiday Inn-I-40, Jackson - Holiday Inn, Johnson City - Super 8, Johnson City - Fairfield Inn, Johnson Park - Holiday Inn, Kingsport - Courtsouth Healthclub-North, Knoxville - Courtsouth Healthclub-South, Knoxville - Courtsouth Healthclub-West, Knoxville - Days Inn, Knoxville - Hilton Hotel, Knoxville - Howard Johnson-Westhills, Knoxville - Motel 6, Knoxville - Quality Inn, Knoxville - Ramada Inn-West, Knoxville - Rodeway Inn, Knoxville - Courtyard by Marriott, Memphis - Courtyard by Marriott-Airport, Memphis - Holiday Inn - Crowne Plaza, Memphis - Holiday Inn-East, Memphis - Holiday Inn-East Poplar, Memphis - Holiday Inn-I-40-Sycamore View, Memphis - Holiday Inn-Memphis Int'l Airport, Memphis - Hyatt Regency, Memphis - Lexington Hotel Suites, Memphis - Motel 6, Memphis - Omni Hotel, Memphis - Proposed Fairfield Inn, Memphis - Residence Inn, Memphis - La Quinta Inn, Memphis - Airport - Brown County Inn, Nashville - Capital Mall Conv. Center-Proposed, Nashville - Clarion Maxwell House, Nashville - Courtyard by Marriott-Airport, Nashville - Days Inn, Nashville - Doubletree Hotel, Nashville - Grosvenor, Nashville - Hampton Inn, Nashville - Holiday Inn Crowne Plaza, Nashville - Holiday Inn Express, Nashville - Holiday Inn-Briley Parkway, Nashville - Marriott Hotel, Nashville - Nashville Union Station, Nashville - Ramada Inn, Nashville - Sheraton Hotel, Nashville - Sheraton Music City, Nashville - Stouffer Hotel, Nashville - Super 8, Nashville - Union Station Hotel, Nashville - AmeriSuite, Oakridge - Holiday Inn, Oakridge - Super 8-Proposed, Union City Texas - Harvey Hotel, Addison - Days Inn, Amarillo - Motel 6, Amarillo - Radisson Hotel-Proposed, Amarillo - Super 8 Motel, Amarillo - La Quinta Inn, Amarillo - Airport - Courtyard by Marriott, Arlington - Hilton Hotel, Arlington - Holiday Inn, Arlington - Lexington Suites Hotel, Arlington - Compri Hotel-Proposed, Austin - Driskill Hotel, Austin - Embassy Suites-Austin Town Lake, Austin - Embassy Suites-North, Austin - Fairfield North, Austin - Four Seasons Hotel, Austin - Holiday Inn, Austin - Holiday Inn-Austin Town Lake, Austin - La Quinta Inn, Austin - Marriott Hotel, Austin - Proposed Fairfield Inn, Austin - Quality Inn, Austin - Residence South, Austin - La Quinta Inn, Austin - Ben White - Holiday Inn Airport, Austins Cities - Holiday Inn, Bay Town - Hilton Hotel, Beaumont - Holiday Inn, Beaumont - Courtyard by Marriott, Bedford - Holiday Inn, Brownsville - La Quinta Inn, Brownsville - Hilton Hotel, College Station - Ramada Inn, College Station - Holiday Inn, Conroe - Corpus Christi Hotel-Airport, Corpus Christi - Days Inn, Corpus Christi - Hilton - Proposed, Corpus Christi - Holiday Inn, Corpus Christi - Holiday Inn-Airport, Corpus Christi - La Quinta Inn, Corpus Christi - North - La Quinta Inn, Corpus Christi - South - Allstar Inn, Dallas - Ambassador Plaza Hotel, Dallas - Arlington Hilton, Dallas - Bradford Plaza Hotel, Dallas - Bristol Suites, Dallas - Convention Center Hotel-Proposed, Dallas - Courtyard by Marriott, Dallas - Courtyard by Marriott-Northeast, Dallas - Courtyard by Marriott-Plano, Dallas - Courtyard by Marriott-Stemmons, Dallas - Dallas Grand Hotel, Dallas - Doubletree Inn, Dallas - Embassy Suites, Dallas - Fairmont Hotel, Dallas - Harvey Hotel, Dallas - Hilltop, Dallas - Hilton Inn-LBJ, Dallas - Hilton-Arlington, Dallas - Holiday Inn - North, Dallas - Holiday Inn Crowne Plaza, Dallas - Holiday Inn-Brook Hollow, Dallas - Holiday Inn-South, Dallas - Houstonian Hotel, Dallas - Howard Johnson-East, Dallas - Lexington Hotel Suites, Dallas - Loews Anatole Hotel, Dallas - Marriott Hotel-Airport, Dallas - Marriott-Park Central, Dallas - Marriott-Quorum, Dallas - Melrose Hotel, Dallas - Motel 6, Dallas - Omni Melrose Hotel, Dallas - Park Plaza, Dallas - Propsed Hotel - DFW, Dallas - Ramada Inn Convention Center, Dallas - Ramada-Market Center, Dallas - Registry Hotel, Dallas - Residence Inn-Market Center, Dallas - Sheraton Grand, Dallas - Southland Center Hotel, Dallas - Statler Hilton Hotel, Dallas - Summit Hotel, Dallas - Westin Galleria Hotel, Dallas - La Quinta Inn, Dallas - DFW - La Quinta Inn, Dallas - North Park - La Quinta Inn, Dallas - Plano - La Quinta Inn, Dallas - Richardson - Allstar Inn, El Paso - Hilton Inn-Airport, El Paso - La Quinta Hotel-Airport, El Paso - Rodeway Inn, El Paso - Travelers Inn, El Paso - Westin Paso del Norte, El Paso - La Quinta Inn, El Paso - Lomaland - Allstar Inn, Euless - La Quinta Inn, Euless - Allstar Inn, Fort Worth - Courtyard by Marriott, Fort Worth - Days Inn Downtown, Fort Worth - Hilton Hotel, Fort Worth - Holiday Inn-North, Fort Worth - Holiday Inn-South, Fort Worth - Lexington Suites Hotel, Fort Worth - Metro Center Hotel, Fort Worth - Radisson Plaza Hotel, Fort Worth - Residence Inn, Fort Worth - La Quinta Inn, Fort Worth - East - Holiday Inn, Harlingen - La Quinta Inn, HI-LA Marque - Crowne Plaza-Houston Park, Houston - Days Inn, Houston - Days Inn-Hobby, Houston - Doubletree Hotel, Houston - Embassy Suites, Houston - Galleria Gardens, Houston - Harvest House Hotel, Houston - Harvey Hotel Medical Center, Houston - Hilton Inn-West, Houston - Holiday Inn I-10 East, Houston - Holiday Inn-Downtown, Houston - Holiday Inn-East, Houston - Holiday Inn-Greenway Plaza, Houston - Holiday Inn-Hobby, Houston - Holiday Inn-Medical Center, Houston - Holiday Inn-NASA, Houston - Holiday Inn-North, Houston - Holiday Inn-Northwest, Houston - Holiday Inn-Southwest, Houston - Host Hotel International, Houston - Hotel Meridien, Houston - Hotel-Proposed, Houston - Houston House, Houston - Houston Medical Center, Houston - Houston Park 10 Crowne Plaza, Houston - La Quinta Hotel-Astrodome, Houston - La Quinta Hotel-Baytown, Houston - La Quinta Hotel-CY Fair, Houston - La Quinta Hotel-Hobby, Houston - La Quinta Inn-Stafford, Houston - Lexington Hotel Suites, Houston - Marriott Astrodome, Houston - Marriott Hotel, Houston - Marriott Hotel-Medical Center, Houston - Marriott-Airport, Houston - Motel 6, Houston - Remington, Houston - Residence Inn, Houston - Rodeway Inn, Houston - Rodeway Inn-Hobby, Houston - Shamrock Hilton Hotel, Houston - Sheraton Hotel, Houston - Sheraton Houston House, Houston - Sheraton Houston Place Hotel, Houston - Sheraton Town and Country, Houston - Sofitel, Houston - Stouffer Greenway Plaza, Houston - Suite Hotel-Proposed, Houston - Whitehall, Houston - Whitehall Hotel Conversion to HI, Houston - La Quinta Inn, Houston - Sharpstown - La Quinta Inn, Houston - East - La Quinta Inn, Houston - Loop 1960 - La Quinta Inn, Houston - Northwest - La Quinta Inn, Houston- SW Freeway - Holiday Inn, Huntsville - Harvey Hotel DFW, Irvine - Allstar Inn, Irving - Hampton Inn, Irving - Hampton Inn-Proposed, Irving - Harvey Hotel-D/FW Airport, Irving - Holiday Inn-Texas Stadium, Irving - Marriott Hotel, Irving - Holiday Inn, Kingsville - Del Lago Hotel, Lake Conroe - Hilton Inn, Laredo - La Posada, Laredo - Courtyard by Marriott, Las Colinas - La Quinta Inn, Longview - Hilton Inn, Lubbock - Holiday Inn, Lubbock - Residence Inn, Lubbock - La Quinta Inn, Midland - Holiday Inn, New Braunfels - All Star Inn, North Richland Hills - La Quinta Inn, Odessa - Holiday Inn, Orange - Holiday Inn, Paris - Plano Harvey Hotel, Plano - La Quinta Inn, Round Rock - Sheraton Inn, San Angelo - Coachman Inn-Proposed, San Antonio - Courtyard by Marriott-Downtown, San Antonio - Courtyard by Marriott-Medical Ctr., San Antonio - Crockett Hotel, San Antonio - Days Inn, San Antonio - Fairfield - North, San Antonio - Gunter Hotel, San Antonio - Holiday Inn-Airport, San Antonio - Holiday Inn-Market Square, San Antonio - Holiday Inn-North, San Antonio - Holiday Inn-Northwest, San Antonio - Holiday Inn-Riverwalk, San Antonio - La Quinta Hotel-Ingram, San Antonio - La Quinta Hotel-Lackland, San Antonio - La Quinta Hotel-Toepperwein, San Antonio - Lexington Hotel Suites, San Antonio - Marriott Hotel-Proposed, San Antonio - Marriott Inn-North, San Antonio - Proposed Fairfield Inn, San Antonio - La Quinta Inn, San Antonio - Windsor - La Quinta Inn, San Antonio - Wurzbach - Holiday Inn, San Marcos - La Quinta Inn, SAT-Toepperwein - Sheraton Hotel, South Padre Island - La Quinta Inn, Tyler - Sheraton, Tyler - Sheraton Inn, Tyler - Traveler's Choice Inn, Tyler - Hilton Hotel, Waco - Gateway Inn, Wichita Falls - Hilton Hotel, Wichita Falls Utah - Mount Holly Ski Resort, Beaver - Hotel-Proposed, Brigham City - Motel-Proposed, Cedar City - Proposed Mayflower Hotel, Deer Valley - Stein Eriksen Lodge, Deer Valley - Deer Valley Resort, Park City - Omni Yarrow, Park City - Prospector Square Resort, Park City - Yarrow Resort, Park City - Seven Peaks Resort and Hotel, Provo - Comfort Inn, Salt Lake City - Doubletree, Salt Lake City - Hilton Hotel-Airport, Salt Lake City - Holiday Inn, Salt Lake City - Holiday Inn-Salt Palace, Salt Lake City - Hotel Utah, Salt Lake City - Hotel-Proposed, Salt Lake City - La Quinta Inn, Salt Lake City - Nendels Inn, Salt Lake City - New Grande Hotel, Salt Lake City - Red Lion Hotel, Salt Lake City - Sheraton Hotel, Salt Lake City - Super 8, Salt Lake City - University Park Hotel (Desktop Rev), Salt Lake City - Ramada Inn-Proposed, Sandy Vermont - Ramada Inn, Bennington - Bolton Valley Corporation, Bolton Valley - Quality Inn, Brattleboro - Radisson Hotel, Burlington - Smugglers Notch, Cambridge - Inn-Proposed, Essex - Cascade Lodge, Killington - Inn of the Six Mountains, Killington - Mountain Inn, Killington - Equinox Hotel, Manchester - Howard Johnson Inn, Rutland - Quality Inn, Stowe - Conference Center-Proposed, Stratton Mountain - Sugarbush Inn, Sugarbush - Susse Chalet, Williston Virginia - Comfort Inn, Abingdon - Best Western, Alexandria - Comfort Inn, Alexandria - Compri Hotel-Proposed, Alexandria - Embassy Suites, Alexandria - Howard Johnson, Alexandria - Marriott Suites, Alexandria - Ramada Inn, Alexandria - Best Western, Arlington - Gateway Marriott, Arlington - Hyatt Arlington Hotel, Arlington - Hyatt Regency, Arlington - Key Bridge Marriott, Arlington - Marriott Hotel, Arlington - Sheraton Crystal City Hotel, Arlington - Sheraton National Hotel, Arlington - Stouffer Concourse Hotel, Arlington - Mountain Lake Hotel, Blacksburg - Holiday Inn, Bristol - Howard Johnson, Bristol - Days Inn, Carmel Church - Westfields International, Chantilly - Boar's Head Inn, Charlottesville - Cavalier Inn, Charlottesville - Courtyard by Marriott, Charlottesville - Hilton-University, Charlottesville - Holiday Inn-North, Charlottesville - Omni Charlottesville, Charlottesville - Radisson-Proposed, Charlottesville - Super 8, Charlottesville - Days Inn, Chester - Howard Johnson, Chester - Days Inn, Colonial Heights - Holiday Inn, Covington - Embassy Suites, Crystal City - Holiday Inn Crowne Plaza, Crystal City - Hyatt Hotel, Crystal City - Marriott Crystal Gateway Hotel, Crystal City - Comfort Inn-Proposed, Dahlgren - Days Inn, Emporia - Courtyard by Marriott, Fairfax - Embassy Suites, Fairfax - Neighborhood Suites-Proposed, Fairfax - Hampton Inn-Proposed, Fairfax City - Westfields International, Fairfax County - Marriott Hotel, Fairview - Econo Lodge, Farmingville - Comfort Inn-Proposed, Farmville - Comfort Inn, Frederick County - Motel 6, Fredericksburg - Courtyard by Marriott, Hampton - Days Inn, Hampton - Fairfield Inn, Hampton - Courtyard by Marriott, Herndon - Embassy Suites Hotel, Herndon - Ramada Renaissance and Health Club, Herndon - Residence Inn-Proposed, Herndon - Worldgate Marriott Hotel, Herndon - Hotel-Proposed, Hopewell - Keswick Inn, Keswick - Holiday Inn, Lexington - Radisson Hotel, Lynchburg - Courtyard by Marriott, Manassas - Holiday Inn, Marion - Hilton, McLean - Days Inn, Norfolk - Marriott Waterside Hotel, Norfolk - Omni Hotel, Norfolk - Waterfront Hotel - Proposed, Norfolk - 135-Suite Hotel-Proposed, Portsmouth - Waterfront Suite Hotel-Proposed, Portsmouth - Comfort Inn, Princeton - Comfort Inn, Pulaski County - Embassy Suites Hotel, Reston - Hyatt Hotel, Reston - Best Western Kings Quarters, Richmond - Courtyard by Marriott, Richmond - Embassy Suites Hotel, Richmond - Hampton Inn, Richmond - Holiday Inn, Richmond - Howard Johnson Lodge, Richmond - Hyatt House Hotel, Richmond - La Quinta Hotel, Richmond - Marriott Hotel, Richmond - Omni Richmond, Richmond - Radisson Hotel, Richmond - Ramada Renaissance Hotel, Richmond - Residence Inn, Richmond - Days Inn, Richmond (Broad) - Days Inn, Richmond (Byrd) - Holiday Inn, Roanoke - Holiday Inn - Airport, Roanoke - Holiday Inn - Civic Center, Roanoke - Holiday Inn - South, Roanoke - Hotel Roanoke, Roanoke - Howard Johnson, Roanoke - Marriott - Roanoke Airport, Roanoke - Marriott Hotel, Roanoke - Holiday Inn, Salem - Super 8, South Hill - Days Inn, Springfield - Hilton, Springfield - Holiday Inn, Staunton - Stonewall Jackson Hotel, Staunton - Hampton Inn - Proposed, Tyson's Corner - Embassy Suites, Tysons Corner - Marriott Hotel, Tysons Corner - Residence Inn, Tysons Corner - Ritz Carlton-Proposed, Tysons Corner - Courtyard by Marriott, Virginia Beach - Courtyard by Marriott-Lynnhaven, Virginia Beach - Fairfield Inn, Virginia Beach - Hotel-Proposed, Virginia Beach - Pavilion Tower Hotel, Virginia Beach - Ramada Inn - Oceanside, Virginia Beach - International Conference Center, Westfields - Howard Johnson, Wheeling - Fort Magruder Inn, Williamsburg - Governor's Inn, Williamsburg - Holiday Inn-East, Williamsburg - Holiday Inn-West, Williamsburg - Royce Hotel, Williamsburg - Williamsburg Hilton, Williamsburg - Best Western-Proposed, Wytheville Washington - Bellevue Thunderbird Motor Inn, Bellevue - Embassy Suites, Bellevue - Hampton Inn, Bellevue - La Quinta, Bellevue - Residence Inn Seattle-East, Bellevue - Ramada Inn, Bothell - Rattling Spring Hotel, Harpers Ferry - Motel 6, Issaquah - AmeriSuite, Kent - Homecourt Suite Hotel, Kent - Embassy Suite, Lynnwood - Residence Inn-Seattle North, Lynnwood - Red Lion Inn at Pasco, Pasco - Redmond Motel, Redmond - Hampton Inn, Sea Tac - Holiday Inn Airport, Sea Tac - Thunderbird Inn, Sea Tac - Alexis Hotel, Seattle - Courtyard by Marriott-South Center, Seattle - Doubletree Inn at South Center, Seattle - Doubletree Plaza, Seattle - Hampton Inn-Airport, Seattle - Holiday Inn Crowne Plaza, Seattle - Holiday Inn-Sea Tac, Seattle - La Quinta, Seattle - Lake Union Residence Inn, Seattle - Marriott Hotel-Airport, Seattle - Marriott Sea-Tac Hotel, Seattle - Plaza Park Suites, Seattle - Ramada Inn-Airport, Seattle - Red Lion, Seattle - Stouffer Madison Hotel, Seattle - Travelodge-Proposed, Seattle - Westin Hotel, Seattle - Courtyard by Marriott, Spokane - Gateway Hotel, Spokane - Holiday Inn-West, Spokane - Red Lion Inn, Spokane - Super 8, Spokane - Hilton-Village Green, Tacoma - Hotel-Proposed, Tacoma - Park Shore Inn, Tacoma - Tacoma Sheraton Hotel, Tacoma - Embassy Suites Hotel, Tukwila - Hampton Inn, Tukwila - Residence Inn-Seattle South, Tukwila - Red Lion Quay, Vancouver - Residence Inn-Portland North, Vancouver - Super 8, Wenatchee - Thunderbird Motor Inn, Yakima West Virginia - Comfort Inn-Proposed, Charleston - Holiday Inn, Clarksburg - Holiday Inn, Fairmont - Hotel-Proposed, Harpers Ferry - Holiday Inn, Huntington - Comfort Inn-Proposed, Morgantown - Holiday Inn, Morgantown - Motel-Proposed, Morgantown - Comfort Inn, Princeton - Motel-Proposed, Princeton - Hotel-Proposed, Wheeling - Howard Johnson, Wheeling Wisconsin - Super 8, Ashland - Holiday Inn, Beloit - Embassy Suites Hotel-Proposed, Brookfield - Marriott-Milwaukee, Brookfield - Holiday Inn, Eau Claire - Residence Inn, Glendale - Granada Royale-Proposed, Green Bay - Holiday Inn-Downtown, Green Bay - Residence Inn-Proposed, Green Bay - Super 8, Janesville - Super 8, Kenosha - Playboy Resort, Lake Geneva - Concourse Hotel, Madison - Fairfield Inn, Madison - Hampton Inn - East, Madison - Hampton Inn - West, Madison - Compri Hotel-Proposed, Milwaukee - Embassy Suite, Milwaukee - Fairfield Inn, Milwaukee - Holiday Inn-Airport, Milwaukee - Holiday Inn-West, Milwaukee - Hotel and Conv. Ctr. East-Proposed, Milwaukee - Hyatt Regency, Milwaukee - Marc Plaza, Milwaukee - Marriott Inn, Milwaukee - Omni Suite Hotel-Proposed, Milwaukee - Super 8-Airport, Milwaukee - Olympia Village Resort, Oconomowoc - Scotsland Resort, Oconomowoc - Sheraton, Racine - Claridge Motor Inn, Rhinelander - Super 8, Waukesha - Holiday Inn, Wausau - Mead Inn, Wisconsin Rapids Wyoming - Days Inn, Casper - Flying L. Skytel, Cody - Super 8, Cody - Snow King Resort, Jackson - Super 8, Jackson - Wort Hotel, Jackson - Development-Proposed, Jackson Hole - Colter Bay Village, Moran - Jackson Lake Lodge, Moran - Jenny Lake Lodge, Moran - Best Western-Bel Air, Rawlins - Bridger Inn, Rawlins - La Quinta Inn, Rock Springs Western Europe Belgium - Oostkamp Hotel, Bruges - Proposed Residence Inn, Brussels - SAS Royal Hotel, Brussels Denmark - Proposed Hotel, Copenhagen France - The Miramar, Biarritz - Chateau D'arc en Barroi, Haute-Marne - Le Grand, Paris - Royal Monceau, Paris Germany - Cumberland House, Berlin - Munchen Penta Hotel, Munchen Holland - Carlton - Cannes & Amstel, Amsterdam - The Pulitzer Hotel, Amsterdam Spain - Le Meridien, Barcelona - Princess Sophia, Barcelona - Hotel Los Monteros, Marbella - Incosol Spa & Hotel, Marbella - Proposed Hyatt Resort, Marbella United Kingdom - Copthorne Hotel, Aberdeen - Copthorne Hotel, Birmingham - Hyatt Regency, Birmingham - Holiday Inn, Cambridge - Copthorne Hotel, Cardiff - Great Eastern Hotel, England - Copthorne Hotel, Glasgow - Hanbury Manor Hotel, Hertfordshire - 47 Park Street, London - Bailey's Hotel, London - Basil Street Hotel, London - Basil Street Hotel, Knightsbridge, London - Britannic Tower, London - Chelsea Hotel, London - Chesterfield Hotel, London - Chesterfield Hotel, Mayfair, London - Copthorne Hotels, London - Copthorne Tara Hotel, London - Dorchester Mayfair, London - Executive Hotel, London - Marriott Hotel, London - May Fair, London - Plaza Hotel, London - Proposed Hotel Conversion, London - Proposed Hotel-The City, London - Regent Hotel, London - Regent London Hotel, London - Sheraton Belgravia, London - Sheraton Park Tower, London - St. James Court Hotel, London - The Executive Hotel, London - Windsor Hotel, London - Copthorne Hotel, Manchester - Copthorne Hotel, Newcastle - Copthorne Hotel, Slough/Windsor - Swallow Hotel, Stockton - Copthorne Hotel-Effingham Park, Sussex - Copthorne Hotel-Gatwick, Sussex Middle East and North Africa Egypt - Sheraton Anni Cruise Ship, - Sheraton Aton Cruise Ship, - Sheraton Hotp Cruise Ship, - Sheraton Tut Cruise ship, - Aswan Oberol Hotel, Aswan - Cairo Sheraton Hotel, Cairo - Hotel - Proposed, Cairo - Lido Hotel, Cairo - Meridien Hotel, Cairo - Novotel Cairo Airport, Heliopolis, Cairo - Proposed Resort Complex, Hurghada - Luxor Sheraton Hotel, Luxor - Proposed Hotel, Luxor - Fayrouz Village Hotel, Sharm El Sheikh, Sinai - Coral Village Hotel, Nuweiba, Sinai - Hotel - Proposed, Dahab, Sinai - Hotel - Proposed, St. Catherine, Sinai Greece - Athens Hilton & Proposed Hotel, Athens - Caravel Hotel, Athens - Proposed Sargani Hotel & Bungalows, Halkidiki - Rhodes Hotel -Proposed, Rhodes Israel - Proposed Inter-Continental Hotel, Tel Aviv Lebanon - Hotel Market Review, Beruit Morocco - El Minzah Hotel, Tangier Nigeria - Proposed Sheraton Hotel, Port Harcourt Saudi Arabia - Proposed Jeddah Corniche Project, Jeddah Tunisia - Proposed Hotel, Hammamet Turkey - Hotel Conrad, Istanbul Latin America and the Caribbean Bahamas - Eleuthera Joint Venture, Eleuthera - Cape Eleuthera Island Hotel, Eleuthera Island - Eleuthera Joint Venture, Eleuthra - The Montague, Nassau - Paradise Island Hotel, Paradise Island - Resorts Int'l Hotel and Casino, Paradise Island Belize - Journey's End Caribbean Club, Abergris Caye Bermuda - Sonesta Hotel, Bermuda Brazil - Quatro Rodas Hotel, Recife Colombia - Charleston Hotel - Proposed, Barranquilla - Bella Suiza Hotel, Bogota - Hotel & Convention Center -Proposed, Cali - Cartagena Hilton, Cartagena - El Faro de Cartagena Resort Propose, Cartagena - Proposed Indian Sea and Sun Resort, Cartagena - Hotel De Isleno, San Andres Isla - Santamar Hotel, Santa Marta Curacao - Ramada Renaissance Hotel and Casino, Honduras - Inn Of The Sun, Guanaja Jamaica - Holiday Inn-Rose Hall, Montego Bay - Americana Eden II, Ocho Rios Mexico - Posadas de Mexico Hotels, - Americana Condesa Del Mar, Acapulco - Americana El Presidente Hotel, Acapulco - Resort-Proposed, Cabo San Lucas - Palacio Del Margus, Chiconcuac - Omni Hotel, Ixtapa - Fiesta Inn-Proposed, Leon - Karmina Place, Manzanillo - Hotel - Proposed, Mexico City - La Jolla de Mismaloya, Puerta Vallarta Netherland Antilles - Divi Divi Beach Resort, Aruba - Divi Tamarijn Beach Resort, Aruba - Golden Anchor, Bonaire - Resort Hotel-Proposed, Bonaire - Ramada Renaissance Hotel and Casino, Curacao - Cupecoy Beach Club Hotel, St. Maarten - Dawn Beach Hotel, St. Maarten - Dawn Beach Resort, St. Maarten - Mullet Bay Resort, St. Maarten - Oyster Pond Hotel, St. Maarten Puerto Rico - Hyatt Dorado Beach Hotel, Dorado - Hyatt Regency Cerromar Hotel, Dorado - Hotel - Proposed, Fajardo - Hotel Puerto Rico, Fajardo - Westin Resort-Proposed, Palmer - Marriott Resort & Casino-Proposed, Puerto Rico - Carib Inn, San Juan - Dupont Plaza, San Juan - El San Juan Hotel and Casino, San Juan - Howard Johnson Hotel, San Juan - Marriott - Proposed, San Juan - Marriott Update - Proposed, San Juan - Sands Hotel and Casino, San Juan Virgin Islands - Caneel Bay, St. Croix - Carambola Beach Resort, St. Croix - Hotel - Proposed, St. Croix - St. Croix Development, St. Croix - Caneel Bay, St. John - Pineapple Beach Hotel, St. Thomas - Sugar Bay Plantation, St. Thomas - Virgin Grand Hotel, St. Thomas - Virgin Isle Hotel, St. Thomas - Little Dix Bay, Virgin Borda Eastern Europe Croatia - Two Hotels, Dubrovnik Czech Republic - Voronesh Hotel Complex, Brno - Proposed Four Seasons Hotel, Prague Hungary - Proposed Resort Hotel, Babolna - Duna Inter-Continental, Budapest Latvia - Daugava Hotel-Proposed, Riga - Proposed Hotel, Riga Poland - Holiday Inn, Krakow - Marriott Hotel - Proposed, Poznan - Proposed Hotel, Poznan - Radisson Hotel, Szczecin - Bristol Hotel, Warsaw - Holiday Inn, Warsaw - Orbis Joint Venture, Warsaw - Proposed Hotel, Warsaw - Sheraton Hotel - Proposed, Warsaw - Zakopane Resort Complex, Zakopane Russia - Kamiennyi Most Hotel & Business, Moscow - Savoy Hotel, Moscow Asia Korea - Ultrapolis 3000, Seoul Malaysia - UP 3000 Hotel-Proposed, Selangor Singapore - Resort Hotels - Proposed, - Ultrapolis 3000, Singapore West Indies - Proposed Blue Lagoon Resort, St. Martin Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Hospitality Valuation Services Industry Leader Hospitality Valuation Services (HVS) was created in 1980 to satisfy the ever-increasing demand for reliable and well-documented hotel/motel valuations, market studies, and feasibility reports. As the nation's leading real estate appraisal organization devoted exclusively to lodging properties, HVS offers owners, investors, and lenders in-depth valuation and market research expertise. Our professional staff, operating on a worldwide basis with offices in New York, San Francisco, Miami, Boulder, Vancouver, and London, has appraised more than 4,000 hotels and motels in every state and over 32 foreign countries. Each member of Hospitality Valuation Services is well versed in lodging operations. Most have college degrees in hotel administration as well as actual on-the-job hotel experience. Coupled with intense training in real estate appraisal theory and techniques, we are highly qualified to handle the unique characteristics of hostelry valuations. Excellence Through Specialization An important feature of our valuation and feasibility services is specialization. Daily exposure on a global basis to a wide variety of hotel transactions and operating statistics, along with actual buyers and sellers, provides the data to thoroughly document our reports. HVS maintains the industry's largest database of hotel valuation information: o Data on over 4,000 hotel transactions; o Over 3,500 actual financial statements; o Thousands of management contracts, franchise agreements, mortgages, leases, and other similar documents; o Personal contacts at every major hotel company; o Names and addresses of over 10,000 hotel owners, investors, lenders, and operators. Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Innovative research in hotel valuation techniques is set forth in the textbooks we authored for the Appraisal Institute, entitled The Computerized Income Approach to Hotel/Motel Market Studies and Valuations and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations. These publications, along with more than 300 articles, are recognized as the authoritative standard for valuing lodging facilities and performing market feasibility studies. In addition, we have developed Hospitality Valuation Software, a computerized package that assists appraisers and consultants in evaluating market trends and preparing financial forecasts. Full-Service Hotel Consulting With a reputation established by providing highly detailed hotel valuations that are accepted and relied upon by virtually every major hotel owner, lender, and operator, HVS has branched out to offer a full range of consulting services. o HVS Consulting Services: Valuations, market feasibility studies, economic studies, management contract and franchise negotiations, development assistance, and expert testimony. o HVS Executive Search: Recruitment and placement of top-level hotel management personnel. o HVS Eco Services: Environmental audits and assistance in implementing programs including water and energy management, recycling, and green product selection. Provides ECOTEL certifications to environmentally sensitive hotels. o HVS Gaming Services: Specialized market, valuation, and consulting services for casinos and other types of gaming activities. o HEI Hotels: Hotel ownership and management. Long-Term Relationship Hospitality Valuation Services is in business for the long-term. We are dedicated to providing our clients with the highest quality consulting services. Should you require assistance in any areas covered by our expertise, please contact any member of our team at (516) 248-8828. This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. ============= HVS - ------------- International ============= ===================================================== ---------------------------- Economic Study and Appraisal ---------------------------- Howard Johnson - Middletown ---------------------------- Middletown, New York ---------------------------- Prepared by: Hospitality Valuation Services A Division of Hotel Consulting Services, Inc. 372 Willis Avenue Mineola, NY 11501 516-248-8828 Submitted to: Mr. Shirish Godbole Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 [Letterhead of HVS International] December 6, 1996 Mr. Shirish Godbole, Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 Re: Howard Johnson - Middletown Middletown, New York Ref. 9610280 Dear Mr. Godbole: Pursuant to your request, we herewith submit our economic study and appraisal pertaining to the above-captioned property. We have inspected the site and facilities, and have analyzed the hostelry market conditions in the Orange County area. Our report was prepared in accordance with, and is subject to, the requirements of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and the Uniform Standards of Professional Practice (USPAP), as provided by the Appraisal Institute. Based on the available data, our analysis, and our experience in the hotel industry, it is our opinion that the market of the fee simple interest in the subject property described in this report, as of January 1, 1997, is: $3,300,000 THREE MILLION THREE HUNDRED THOUSAND DOLLARS We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings and valuation. The economic study and appraisal is made part hereof, and must remain attached in order for the value opinion set forth to be considered valid. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. Very truly yours, HOSPITALITY VALUATION SERVICES A Division of Hotel Consulting Services, Inc. /s/ Marie K. Laib Marie K. Laib Consulting and Valuation Analyst /s/ Anne R. Lloyd-Jones Anne R. Lloyd-Jones, CRE Senior Vice President /s/ Stephen Rushmore Stephen Rushmore, CRE, MAI, CHA President HVS International, Mineola, New York Table of Contents Howard Johnson - Middletown, Middletown, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table of Contents 1. Executive Summary ........................................... 1 2. Nature of the Assignment .................................... 3 3. Description of the Land, Improvements, Zoning, Taxes and Neighborhood ........................... 7 4. Market Area Analysis ........................................ 21 5. Overview of External Forces Affecting the U.S. Lodging Industry ......................................... 32 6. Lodging Market Supply and Demand Analysis ................... 48 7. Projection of Occupancy and Average Rate .................... 63 8. Highest and Best Use ........................................ 80 9. Approaches to Value ......................................... 82 10. Income Capitalization Approach .............................. 85 11. Sales Comparison Approach ................................... 124 12. Cost Approach ............................................... 131 13. Reconciliation of Value Indications ......................... 138 14. Statement of Assumptions and Limiting Conditions ............ 142 15. Certification ............................................... 146 Addenda Photographs of the Subject Property Photographs of the Competitive Properties Legal Description Synopsis of Franchise and License Agreements Synopsis of Hotel Management Agreement Explanation of the Simultaneous Valuation Formula Qualifications Marie K. Laib Anne Lloyd-Jones, CRE Stephen Rushmore, CRE, MAI, CHA HVS International, Mineola, New York Executive Summary 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 1. Executive Summary Property: Howard Johnson - Middletown Location: 551 Route 211 East Middletown, New York 10940 Date of Inspection: October 16, 1996 Interest Appraised: Fee simple, including land, improvements, and FF&E Date of Value: January 1, 1997 Land Description Area: +/-7.0 acres, or +/-304,920 square feet Zoning: PID - Planned Interchange Development Assessor's Parcel Number: Section 41, Block 1, Lot 39.5 Improvements Age: Opened in 1975 Property Type: Economy-class Guestrooms: 117 Number of Stories: Two Food and Beverage Facilities: Courthouse Restaurant and Lounge (leased) Meeting Space: +/-1,731 square feet Parking: 208 spaces Summary of Value Parameters Highest and Best Use (as if vacant): Hold for future development Highest and Best Use (as improved): As improved Marketing Period: Six to nine months Number of Years to Stabilize: Two Stabilized Year: 1998 HVS International, Mineola, New York Executive Summary 2 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Valuation Assumptions Mortgage Interest Rate: 9.5% Amortization Period: 20 years Debt Service Constant: 0.111856 Loan-to-Value Ratio: 70% Stabilized Inflation Rate: 3.5% Equity Yield Rate: 22% Terminal Capitalization Rate: 12% Brokerage and Legal Fees: 3.0% Holding Period: 10 years Calculated Discount Rate: 14% Estimates of Value Income Capitalization Approach: $3,129,000 Sales Comparison Approach: $2,400,000 - $3,800,000 Cost Approach: $5,800,000 Market Value Conclusion: $3,300,000 Market Value Conclusion per Room: $28,205 HVS International, Mineola, New York Nature of the Assignment 3 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 2. Nature of the Assignment Subject of the Economic Study and Appraisal The subject of the economic study and appraisal is the fee simple interest in a +/-304,920-square-foot (+/-7.0-acre) parcel improved with a 117-room, economy-class lodging facility known as the Howard Johnson - Middletown, which opened in 1975. In addition to guestrooms, the subject property contains +/-1,731 square feet of meeting space, an indoor swimming pool and sauna, and a restaurant and lounge which is currently leased to an independent operator. The hotel is located approximately one-quarter of a mile north of the intersection formed by Route 211 and State Route 17. Municipal jurisdictions governing the property include the City of Middletown, the Town of Wallkill, the County of Orange, and the State of New York. The hotel's civic address is 551 Route 211 East, Middletown, New York, 10940. Objective of the Economic Study and Appraisal The objective of the economic study and appraisal is to evaluate the supply and demand factors affecting the market for transient accommodations in the Middletown area for the purpose of estimating the market value of the subject property. Market value is defined by the Office of the Comptroller of the Currency (OCC), 12 CFR, Part 34, 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 and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. buyer and seller are typically motivated; 2. both parties are well informed or well advised, and acting in what they consider their own best interests; HVS International, Mineola, New York Nature of the Assignment 4 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 3. a reasonable time is allowed for exposure in the open market; 4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) Use of the Appraisal This appraisal is being prepared for use by Morgan Stanley Mortgage Capital, Inc. in connection with their proposed financing of a package of 17 hotels, including the subject property, which are owned by Ashford Financial Corporation or related entities. The information presented in this report should not be disseminated to the public or third parties without the express written consent of HVS International. Scope of the Appraisal All information was collected and analyzed by the staff of HVS International. Data such as historical operating statements, site plans, floor plans, and so forth were supplied by Ashford Financial Corporation and Remington Hotel Company. Unless noted otherwise, we have inspected the competitive lodging facilities and analyzed the sales summarized in this report, and our value conclusion is based on this investigation and analysis. Property Rights Appraised The property rights appraised are the fee simple ownership of the land and improvements, including furniture, fixtures, and equipment. The fee simple interest is defined as, "absolute ownership unencumbered by any other interest or estate subject only to the four powers of government."(2) The subject property has been appraised as a going concern (i.e., an open and operating facility). Method of Study The methodology used to develop this economic study and appraisal is based on the market research and valuation techniques set forth in the textbooks authored by HVS International for the American Institute of Real (1) Federal Register, Vol. 55, No. 165, August 24, 1990; p. 34696. (2) The Dictionary of Real Estate Appraisal - Second Edition, American Institute of Real Estate Appraisers, Chicago, IL, 1989, p. 120. HVS International, Mineola, New York Nature of the Assignment 5 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Estate Appraisers and the Appraisal Institute, entitled, The Valuation of Hotels and Motels,(1) Hotels, Motels and Restaurants: Valuations and Market Studies,(2) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations,(3) and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations.(4) The appraisal will consider the three standard approaches to value: income capitalization, sales comparison, and cost. Because lodging facilities are income-producing properties that are normally bought and sold on the basis of capitalization of their anticipated stabilized earning power, the greatest weight is given to the value indicated by the income capitalization approach. We find that most hotel investors employ a similar procedure in formulating their purchase decisions, and thus the income capitalization approach most closely reflects the rationale of typical buyers. When appropriate, the sales comparison and cost approaches are used to test the reasonableness of the results indicated by the income capitalization approach. Ownership, Franchise, and Management History and Assumptions A copy of the subject property's legal description is presented in the Addenda to this report, and was provided by Middletown New York Hotel Limited Partnership. The appraisers assume no responsibility regarding the accuracy of this legal description. On February 28, 1994, the Chartwell/ G.S.R. Hotels III, Limited Partnership (formed by Middletown New York Hotel Limited Partnership) entered into a purchase agreement with Nippon Credit Bank, Ltd., which held the mortgage loan on the subject property and 14 other hotels. The closing of the sale of the mortgage loan took place on March 25, 1994. Conveyance of the fee simple title to the subject property occurred on or about August 25, 1994. (1) The Valuation of Hotels and Motels, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1978. (2) Hotels, Motels and Restaurants: Valuations and Market Studies, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1983. (3) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1990. (4) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992. HVS International, Mineola, New York Nature of the Assignment 6 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The subject property is operated under a franchise agreement with Howard Johnson Franchise Systems, Inc.; this agreement expires on May 11, 2009. The hotel is also subject to a management agreement with Remington Employers Corporation; an abstract of this contract is presented in the Addenda to this report. Marketing Period In light of the renewed interest in hotel investments and the increasing availability of debt and equity capital, we believe that it will take six to nine months to sell the subject property, assuming that it is placed on the market at the concluded value. Effective Date of the Appraisal The effective date of the appraisal is January 1, 1997. All projections are expressed in inflated dollars, and the value estimate represents 1997 dollars. Date of Inspection The subject property was inspected by Marie K. Laib on October 16, 1996. HVS International, Mineola, New York Description of the Land, Improvements, 7 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 3. Description of the Land, Improvements, Zoning, Taxes, and Neighborhood LAND The suitability of the land for the operation of a lodging facility is an important consideration affecting the economic viability of a property and its overall value. Factors such as size, topography, access, visibility, and the availability of utilities have a direct impact on the desirability of a particular site. Size and Topography The subject site is located approximately one-quarter of a mile north of the intersection formed by Route 211 and State Route 17 (S.R. 17). Municipal jurisdictions governing the property include the City of Middletown, the Town of Wallkill, the County of Orange, and the State of New York. According to tax maps prepared by the Town of Wallkill Assessor's Office, the subject parcel measures approximately 304,920 square feet, or +/-7.0 acres. The subject site is comprised of one parcel identified as Section 41, Block 1, Lot 39.5. The site is irregular in shape, and features +/-364 feet of frontage and access along Route 211 to the south, +/-689 feet abutting a vacant parcel to the north, +/-766 feet abutting a parcel partially improved with a bank to the west, and +/-619 feet abutting a vacant parcel to the east. Primary vehicular access to the property is provided by Route 211. An adjacent vacant parcel to the north, which is also owned by Middletown New York Hotel Limited Partnership, measures +/-6.0 acres, and has not been considered in the appraisal of the subject property. The topography of the parcel is generally flat, with a gentle downward slope from the northwest to southeast - from the rear to the front of the subject site. In conclusion, the size and topography of the subject parcel appear to be well suited for hotel use. HVS International, Mineola, New York Description of the Land, Improvements, 8 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Easements The appraisers were not provided with any information concerning easements affecting the subject property. For the purposes of this appraisal, we have assumed that the property is not encumbered by any unusual or onerous easements which would affect its use or marketability. Regional Access It is important to analyze a lodging facility's ease of access with respect to regional and local transportation routes and demand generators. The subject site is adequately accessible to a variety of local, county, state, and interstate highways. The City of Middletown, located within the Township of Wallkill, is one of three cities in Orange County, and is located in the western portion of the county. The subject property is situated on State Route 211, approximately two miles northeast of the City of Middletown. Interstate 84 is the primary artery in western Orange County, and passes approximately one mile south of the subject property. State Route 17 bisects Interstate 84 approximately one mile south of the subject property and proceeds in a northwesterly direction, where it then intersects with State Route 211, forming Exit 120, which is the exit point when traveling to either the subject property or the City of Middletown. Interstate 84 originates at the Massachusetts Turnpike, and runs primarily east to west through Connecticut and the State of New York - particularly, the northern portion of the New York City metropolitan area - and then terminates in Scranton, Pennsylvania, where it connects with Interstate 81. Interstate 84 is a major commercial route through New York State and New England, and is often used by travelers wishing to avoid the more congested coastal routes - specifically, I-95. State Route 17 originates in Kearney, New Jersey, near the Lincoln Tunnel to Manhattan, and extends northwesterly through the western end of Rockland County, parallel to the New York State Thruway. At Harriman, Route 17 heads westward along the southern tier of New York State, through Middletown and Binghamton, terminating at the Pennsylvania border, near Erie. State Route 211 runs parallel to I-84 and connects the Village of Montgomery, in the Town of Montgomery, located approximately ten miles to the east, with the City of Middletown. The subject property is located on Route 211, just north of the interchange formed by Route 211 and State Route 17. HVS International, Mineola, New York Description of the Land, Improvements, 9 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Overall, regional access to the Howard Johnson - Middletown is considered to be good for a lodging facility of this type. The well-developed network of local and interstate highways increase the subject property's primary market area, and facilitates the capture of transient travelers. Local Access and Visibility Direct access to the subject property for motorists traveling on State Route 17 is accomplished by exiting at Route 211 (Exit 120). Once exited, motorists travel approximately one-quarter of a mile northeast of the exit intersection to the Tower Drive intersection. To access the subject property, which is located on the west side of the road and its median, drivers must make a legal U-turn at the Tower Drive traffic light and travel southwest for one-half block to access the subject property's entrance. After final construction on State Route 211 is completed in the near future, a new, signed entrance directly northwest of the exit intersection will exist. This entrance will be shared by the Howard Johnson - -Middletown and the Middletown Motel and will access a government owned and managed service road parallel to State Route 211 and leading to the subject property. Motorists traveling on I-84 must either access the property via S.R. 17 or local routes. Visibility is considered poor for motorists traveling south on S.R. 17, as motorists do not gain sight of the property until after the exit decision point. For motorists traveling north on S.R. 17, visibility is considered fair. The subject property is not visible from I-84. Overall, the subject site is considered suitable for a property of this type. Airport Access After highway transportation, the second primary mode of transportation into the area is air travel to Stewart Airport, located approximately 20 miles (roughly a 25-minute drive) northeast of the subject property, in Newburgh, New York. The subject property is not considered to be well located with respect to this facility, and does not receive any direct airport-related visitation, such as airline crews or delayed passengers. Access to Local Demand Generators The subject property's proximity to demand generators of transient visitation is good. The following table outlines some of these major demand generators and their respective distances from the subject site. HVS International, Mineola, New York Description of the Land, Improvements, 10 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 3-1 Local Demand Generators - -------------------------------------------------------------------------------- Approximate Distance Approximate Driving Demand Generator from Subject Site (in Miles) Time (in Minutes) - ---------------- ---------------------------- ----------------- U. S. Military Academy - West Point 20.0 30 Big V Supermarkets 8.0 10 Empire Blue Cross/Blue Shield 3.0 5 Horton Memorial Hospital 3.0 5 Minolta 5.0 8 - -------------------------------------------------------------------------------- The subject site is centrally located with regard to many of the area's demand generators. Access to most of the nearby generators of visitation is equal to that of the other competitive lodging facilities. Utilities The subject site is served by all necessary utilities, which are provided as follows. ================================================================================ Table 3-2 Available Utilities - -------------------------------------------------------------------------------- Utility Provider ------- -------- Water Town of Wallkill Electricity Orange and Rockland Utilities, Central Telephone Citizens Oil Wallace Oil Garbage and Trash Allwaste, Inc. - -------------------------------------------------------------------------------- Soil and Subsoil Conditions Geological and soil reports were not provided to the appraisers or made available for review during the preparation of this report. The appraisers are not qualified to evaluate soil conditions other than by a visual inspection of the surface. Nuisances and Hazards The appraisers have not been informed of any site-specific nuisances or hazards, and no signs of toxic ground contaminants were visible at the time of our inspection. Because the appraisers are not experts in this field, we do not warrant the absence of hazardous waste, and we urge the reader to obtain an independent analysis of these factors. HVS International, Mineola, New York Description of the Land, Improvements, 11 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Excess Land The parcel on which the subject property is located appears to be fully developed. Currently, however, there is an small unpaved portion on the eastern corner of the lot. According to management, this portion is proposed to be paved in order to ease congestion and to maximize the size of the existing parking lot. Seismicity Information regarding seismicity was not provided to the appraisers; therefore, we have assumed that the subject property is not situated in an area of seismic danger. Legal Description As noted earlier, a copy of the subject property's legal description, as provided by Remington Employers Corporation, is presented in the Addenda to this report. Land Conclusion The subject parcel appears to be well suited as the site of a lodging facility. We have analyzed the issues of size, topography, access, visibility, and the availability of utilities, and we note the following advantages and disadvantages. Advantages o The subject parcel is a large site with good frontage on State Route 211, and is accessible from State Route 17. o The subject parcel consists of a smooth topography. o A well-developed network of area and interstate highways exist within close proximity to the subject property. o All necessary utilities are available to the subject property. Disadvantages o Visibility of the site from south S.R. 17 is poor. o The subject property is neither visible nor directly accessible from I-84, the nearest interstate. The advantages exhibited by the subject site are all important characteristics of a hotel location. The disadvantage of poor visibility is a common attribute with all of the lodging competitors in the area, and is therefore not considered to be detrimental to the subject property. It is our opinion that the subject parcel is well suited for hotel use. HVS International, Mineola, New York Description of the Land, Improvements, 12 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= IMPROVEMENTS The quality of a lodging facility's physical improvements has a direct influence on its marketability, attainable occupancy, and average rate. The design and functionality of the structure can also affect operating efficiency and overall profitability. This section investigates the subject property's physical improvements and personal property in an effort to determine how they contribute to total value. The following description of the improvements is based on our inspection of the hotel and information provided by Remington Employers Corporation. Howard Johnson - Middletown is a economy-class lodging facility containing 117 rentable units, +/-1,731 square feet of meeting space, a restaurant which is currently leased, and appropriate back-of-the-house facilities. The two-story property opened in 1975, and is 18 years old as of the date of this appraisal. The hotel was acquired by G.S.R. Hotels III, Limited Partnership (formed by Middletown New York Hotel Limited Partnership in February, 1994. At the time of this acquisition, the hotel was in extremely poor condition. Subsequent to the acquisition, the subject property was extensively renovated, at an estimated cost of $600,000. In scope, this renovation included the public areas and the guestrooms. The hotel is now judged to be in relatively good condition, and management representatives report that all of the building systems are in working order. The hotel is operated under a license agreement with Howard Johnson and reportedly meets the standards for lodging facilities of that brand. Based on our inspection and information provided by Remington Employers Corporation, the following table summarizes the facilities available at the subject property. HVS International, Mineola, New York Description of the Land, Improvements, 13 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 3-3 Facilities Summary - -------------------------------------------------------------------------------- Guestrooms: Queen Beds 40 Units Double/Doubles 40 Twin Queens 37 ----- Total 117 Units Meeting and Banquet Rooms: Parlor A 1,023 Square Feet Parlor B 558 Boardroom 150 ----- Total 1,731 Square Feet Food and Beverage Outlets: Courthouse Restaurant (Leased) Recreational & Other Amenities: Indoor Pool, Sauna Parking Spaces: 208 Spaces Life Safety Systems: Hard-wired Smoke Detectors Laundry: Washers: 1 Speed Queen 1 Milnor Dryers: 2 Cumming & Landau 1 Speed Queen Construction Details: Pre-cast Concrete Block Tar-Rubber Membrane Roof System - -------------------------------------------------------------------------------- Property Exterior The hotel structure is set back approximately 150 feet from Route 211. Paved parking areas accommodating 208 vehicles surround the subject improvements. Vehicular access to the subject site is made possible by two roadways: Route 211 and its service road. The service road runs parallel to and north of Route 211, stretching approximately one-quarter of a mile in length. From these roadways, two vehicular entrances to the subject property can be accessed. The main entrance originates directly off Route 211, passes across the service road, and leads directly into the subject property's south parking lot. The second entrance, located approximately 75 feet west of the main entrance, originates only off the service road. Both the main entrance and secondary entrance can be accessed by this service road. HVS International, Mineola, New York Description of the Land, Improvements, 14 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= After entering the site, guests proceed to the hotel's main entrance, which is located behind the hotel's restaurant, on the west side of the structure. Service traffic can gain access to the loading dock, which is located at the southeast side of the subject property. The exterior of the subject property's guestroom wings consists of a mixture of white-and-brown split-face brick. All of the guest units have outside sliding glass doors; those on the second floor are decorated with mock balcony railings. The reception and lobby building is surfaced in white split- face brick, and is covered by the traditional Howard Johnson orange roof. The subject property's restaurant is similar in style to the main lobby building, but features a turquoise-colored roof. Construction and Design The two-story, interior corridor subject property features three wings. The central wing is situated perpendicular to the other two wings, and houses the lobby, meeting room, restaurant and lounge, offices, and guestrooms. The east wing is the most recently constructed section, and includes guestrooms and the indoor swimming pool and sauna. The west wing houses guestrooms only. All three wings are connected on the first floor, and thus, guests can reach all areas without leaving the facility. Lobby The subject property's lobby is located directly behind the hotel's Courthouse Restaurant, and is therefore not highly visible from the subject property's main entrance. The lobby area can be accessed by two outside entrances - the first, facing the northwest parking lot, and the second, facing the hotel's west parking lot. The interior of the subject property's lobby is in good condition following renovations to its carpeting, furniture fabric, fireplace, and front desk area, completed in 1995. Food and Beverage Outlets The Courthouse Restaurant is the subject property's multi-purpose restaurant serving typical American cuisine during breakfast, lunch, and dinner, seven days a week. Operating hours are between 6:00 a.m. and 10 p.m. The breakfast price range is approximately $2.00 to $6.00, the lunch price range is $5.00 to $9.00, and the dinner price range is $6.00 to $18.00. The restaurant offers Friday and Saturday night buffets, as well as Saturday and Sunday brunches. The restaurant, located immediately south of the hotel's lobby area, is currently leased out to an independent operator. According to management, the restaurant will remain leased throughout the projection period. The HVS International, Mineola, New York Description of the Land, Improvements, 15 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Courthouse Restaurant is in fair condition. However, to match the newly renovated conditions of the subject property's guest quarters and public space, the restaurant is in need of renovations. Meeting and Banquet Space The meeting rooms are finished with wall vinyl, recessed lighting, and wall-to-wall carpeting. The finishes are of good quality, and are appropriate for a hotel of this type. The parlor room, which can be divided by a partition, is capable of seating 200 people, auditorium-style, and measures +/-1,731 square feet. The boardroom, furnished with a large, oval table and comfortable seating, accommodates approximately 12 people, and measures 150 square feet. All of the meeting spaces have been recently renovated with new carpeting and fluorescent lighting. These facilities are currently in good condition. Guestrooms The Howard Johnson - Middletown offers 117 guestroom units. Of these 117 units, 40 units each contain one queen bed, 40 units contain two double beds, and the remaining 37 contain twin queen beds. Typical guestrooms are furnished with one or two beds, one or two bedside tables, a desk, a desk chair, two reading chairs or a sleeper sofa, a dresser, and a color television set. Walls are covered with vinyl, and all units feature wall-to-wall carpeting; window treatments consist of draperies with black-out-linings. Guestroom lighting is appropriate for a hotel of this type. Most guestroom bathrooms consist of a separate toilet and vanity area. However, some guestrooms provide bathrooms where the vanity and toilet area are combined. Heating, ventilation and air conditioning (HVAC) are provided by individual units located in the exterior wall of each guestroom unit. At the time of our inspection, the subject property's guestrooms appeared to be in good condition, due to their recently completed and on-going hard and soft goods renovations. Guestroom Corridors Guestroom corridors are wide enough to permit the easy passage of housekeeping and room service carts. The corridors are finished with new carpeting, a neutral wall covering, wall sconces, and emergency lighting, as well as fire doors and extinguishers. Management has created no-smoking sections in all guestroom wings; this type of amenity costs very little, and requires no structural changes. We expect that the number of rooms allocated for this purpose will be increased or reduced depending on demand and guest response. HVS International, Mineola, New York Description of the Land, Improvements, 16 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Recreational Amenities The subject property offers an indoor pool and sauna to its guests. Located on the first floor in the rear of the Howard Johnson, this recreational area was most recently renovated within the past year. Both the pool deck area and the inside surface of the pool have been refinished. New pool-side furnishings have been added, and minor repairs and replacements to the sauna have recently been completed. Back-of-the-House Space The subject property's back-of-the-house space consists of the executive offices, as well as the maintenance and housekeeping departments. The executive offices are conveniently situated behind the front desk area; the additional departments are separately located on the first floor of the structure's central wing. All of the departments appear to be well maintained and are appropriately located with respect to the areas that they serve. In addition, the Courthouse Restaurant's kitchen is readily accessible for those guests needing banquet service and room service. Based on information provided by Remington Employer Corporation, all of the subject property's operating systems are in good working condition. Vertical Transportation The subject property does not provide guest elevators. Heating, Ventilation, and Air Conditioning (HVAC) Heating, ventilation and air conditioning units are in the process of being replaced ten at a time. According to property management, the HVAC units are not a priority at this time, as most of them are currently in reasonably good working order; however, these units will be replaced over the course of the next few years. Fire Protection The subject property currently holds a fire service contract with Simplex. Smoke detectors throughout the improvement are hard-wired to a fire panel located behind the front desk. A copy of this fire contract was not made available to the appraisers. Asbestos According to information provided by management representatives, no asbestos is present in the subject property's improvements; however, we have not been provided with an asbestos report to confirm this assertion. The reader should be advised that any costs associated with asbestos removal or containment may have an unfavorable impact on the hotel's market value, and the estimate set forth in this appraisal reflects our value conclusions prior to the deduction of any such costs. We suggest that interested parties HVS International, Mineola, New York Description of the Land, Improvements, 17 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= initiate an independent analysis regarding current asbestos levels and the capital expenditures necessary to remove any asbestos that is present. ADA Conformance Following the January 26, 1992 passage of the Americans with Disabilities Act (ADA), hotels are subject to new physical standards. The appraisers are not experts on ADA compliance, and we render no opinion regarding the subject property's conformance to ADA standards. Capital expenditures that may be necessary to bring the property into accordance with the ADA will reduce our estimate of market value. Any on-going costs related to ADA regulations are expected to be funded by normal replacement reserves. By the end of 1996, the subject property plans to introduce two guestrooms that will comply with national ADA regulations. These renovations will convert two current hotel guestrooms located on the subject property's first floor. Improvements Conclusion Overall, the subject property's improvements appear appropriate for hotel use. For the purposes of this appraisal, we have assumed that the subject property will be maintained in its present and renovated condition throughout the assumed ten-year holding period. Specifically, it is assumed that hotel management will employ standard preventive maintenance measures, and that a reserve for replacement fund will be established to provide for the cost of any future necessary capital expenditures. ZONING According to the Town of Wallkill zoning regulations and map, the subject property is zoned as follows. PID - Planned Interchange Development. Hotels and motels are expressly permitted in this zoning district, as are various other commercial uses. Based on this information, the subject property appears to conform to local zoning regulations. We assume that all necessary permits and approvals have been secured (including an appropriate liquor license), and that the subject property was constructed in accordance with local zoning ordinances, building codes, and all other applicable regulations. HVS International, Mineola, New York Description of the Land, Improvements, 18 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ASSESSED VALUE AND TAXES Property - or ad valorem - tax is one of the primary revenue sources of municipalities. Based on the concept that the tax burden should be distributed in proportion to the value of all properties within a taxing jurisdiction, a system of assessments is established. Theoretically, the assessed value placed on each parcel bears a definite relationship to market value, so properties with equal market values will have similar assessments and properties with higher and lower values will have proportionately larger and smaller assessments. Depending on the taxing policy of the municipality, property taxes can be based on the value of the real property or the value of the personal property and the real property. Because the objective of assessed value is to maintain a specific value relationship among all properties in a taxing jurisdiction, comparable hotel assessments should be evaluated to determine whether the subject property's assessed value is equitable. The taxing jurisdiction governing the subject property assesses real property; the assessed value ratio is reported to be approximately 40% of market value. Personal property is not taxed in New York State. The 1996/97 tax rates applicable to the subject property are $46.73 for the Middletown school district, and $26.21 for the county, town, fire and highway district, for a total of $72.64, per $1,000 of assessed value. Benefit fee tax rates for water in the Silver Lake and Wallkill areas are based on the number of units at the subject property; the 1996 rates are $20.8095 and $20.018, respectively. Sewer benefit fee tax rates are based on a per-unit basis for the subject property, the tax rate is $10.00 for Silver Lake and $7.50 for Wallkill. Historically, the tax rates have increased at an average annual compounded rate of 3.2% during the period 1992 to 1996. For the purposes of our projections, we have assumed that the tax rate will increase by 3.5% - the typical inflation rate, annually during the projection period. The assessed value for the improved parcel is $1,250,000. The subject property's actual 1995/96 tax burden is approximately $122,871. A review of the assessed values of two comparable hotels located in the Town of Wallkill taxing jurisdiction reveals the following information. HVS International, Mineola, New York Description of the Land, Improvements, 19 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 3-4 Assessed Value of Comparable Hotels - -------------------------------------------------------------------------------- Total Assessment Assessment per Room Number ------------------------ --------------------- Hotel of Rooms Land Improvements Land Improvements - -------------------------------------------------------------------------------- Super 8 82 $126,000 $ 863,100 $1,537 $10,526 Holiday Inn 102 130,000 1,229,400 1,275 12,053 Source: Town of Wallkill Assessor's Office - -------------------------------------------------------------------------------- The Super 8 Motel, located immediately northeast of the subject property, was last assessed in 1982 with a land value of $126,000, an improvement value of $863,100, and a total assessment of $989,100. The Holiday Inn, located on Crystal Run Road, approximately three miles southeast of the subject property, was last assessed in 1996. Its values are more similar to those of the subject property than those of the Super 8. The Holiday Inn's land value is $130,000, and its improvement value is $1,229,400, yielding a total assessment value of $1,359,400. Applying the projected increases to the 1995/96 tax burden yields the following forecast of property taxes for the subject property. ================================================================================ Table 3-5 Forecast of Property Tax Expense (+000) - -------------------------------------------------------------------------------- 1997 Stabilized 1999 - -------------------------------------------------------------------------------- Forecast of Property Taxes $107 $111 $115 - -------------------------------------------------------------------------------- NEIGHBORHOOD The neighborhood surrounding a lodging facility often has an impact on a hotel's status, image, class, style of operation, and sometimes its ability to attract and properly serve a particular market segment. This section investigates the subject property's neighborhood and evaluates any pertinent locational factors that could affect its occupancy, average rate, food and beverage revenues, and overall profitability. The neighborhood surrounding the subject property is characterized by retail outlets, lodging facilities, and restaurants which serve both the local population and the travelers on S.R. 17. To the west of the subject property HVS International, Mineola, New York Description of the Land, Improvements, 20 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= lies Marine Midland Bank, which shares the same access road as the subject property. Beyond the bank are a small, non-chain affiliated motel and State Route 17. To the east are a Super 8 hotel and several small retail outlets. Across Route 211 are an Olive Garden restaurant, a Mobil gas station, a Walmart discount store, and an off-track betting facility. Also located across from the subject property is the entrance to the Galleria Mall, which is not directly visible from the subject property. The neighborhood surrounding the subject property is predominantly residential is character. Route 211 is a six-lane thoroughfare that was recently widened from four lanes, and is currently still under construction; this project moderately disrupts local traffic flow, and is expected to be completed by the end of 1996. Conclusion The immediate neighborhood fronting the Howard Johnson - Middletown consists primarily of retail outlets and restaurants. The general location and condition of the neighborhood are positive attributes for a lodging facility of this type, particularly with respect to travelers on S.R. 17. Overall, the subject property's immediate neighborhood appears to be well suited for a hotel of this type. HVS International, Mineola, New York Market Area Analysis 21 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 4. Market Area Analysis The economic vitality of the market surrounding the subject property is an important consideration in forecasting lodging demand and income potential. Economic and demographic trends that reflect the amount of visitation provide a basis from which to project hostelry demand. The purpose of the market area analysis is to review available economic and demographic data to determine whether the local market will undergo economic growth, stability, or decline. In addition to predicting the direction of the economy, the rate of change must be quantified. These trends are then correlated based on their propensity to reflect variations in lodging demand with the objective of forecasting the amount of growth or decline in transient visitation by individual market segment (e.g., commercial, group and meeting, leisure). Market Area Definition The subject property is situated in the City of Middletown and the Township of Wallkill in Orange County, New York. Orange County is politically divided into 20 towns, three cities, and numerous villages and hamlets. The three cities in Orange County are: Middletown, which is located approximately two miles south of the subject property; Port Jervis, which is 20 miles southwest of the subject property; and Newburgh, which is approximately 25 miles northeast of the subject property. The Town of Wallkill is part of the Newburgh, NY-PA Metropolitan Statistical Area (MSA). Some demand may also originate from surrounding areas, including the New York Counties of Westchester, Putnam, and Rockland and the New Jersey Counties of Passaic and Sussex; however, the impact of these areas is likely to be minimal. Originally agricultural in nature, Orange County has more recently become a focal point of development interest and activity in the greater New York metropolitan area. This trend has been fueled by three primary factors: the availability of a good transportation network; proximity to the densely developed New York metropolitan area; and the relatively low cost of living and doing business, particularly as compared to other counties in the [GRAPHIC OMITTED] LOCATION MAP HVS International, Mineola, New York Market Area Analysis 22 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= region. Development spurred by these factors first became evident in the 1980s, and was focused in business parks situated along S.R. 17, I-84, and the New York State Thruway. Much of this development consisted of warehouse and destination centers, which benefit directly from the highway network. The regional recession of the early 1990s slowed the trend of development somewhat. The opening of the Stewart Airport to commercial traffic in 1990 stimulated further interest in the county particularly, the area around Newburgh. With the advent of the economic recovery, the level of development interest and activity has returned to previous levels. The county now offers more than 25 office and industrial parks as well as a total of 24.5 million square feet of office, manufacturing, and distribution space. Economic and Demographic Data Based on fieldwork conducted in the area, along with in-house data sources, various types of economic and demographic data were evaluated to determine trends in transient demand. A primary source of economic and demographic data utilized in this analysis is the Complete Economic and Demographic Data Source as published by Woods & Poole Economics, Inc., a well-regarded forecasting service based in Washington, DC. Using a database containing over 300 variables for each county within the nation, Woods & Poole utilizes a sophisticated regional modeling method to forecast future economic and demographic trends for each county in the country. The historical data utilized by Woods & Poole includes county level data for each year from 1969 to 1989 for employment, earnings and personal income, as published by the Bureau of Economic Analysis, as well as 1970, 1980, and 1990 census data as published by the Bureau of Census. All economic data for the years 1990 to 2000 and population data for the years from 1991 to 2000 are projected by Woods & Poole. All earnings, personal income and retail sales data in the Woods & Poole database is presented in 1987 constant dollars. It should be noted that the annual percentage changes indicated in Table 4-2 represent changes in unrounded figures, and may not calculate, due to rounding. Population Although there is no direct correlation between the size of an area's population and its specific level of visitation, historical and project population trends often reflect the economic climate of a locale. Between 1980 and 1995, the population of the Newburgh MSA increased by approximately 80,000 people, yielding an average annual compounded increase of 1.7% over the 15-year period, indicating the overall stability of the area's demographic profile. Between 1990 and 1995, the population increased at the HVS International, Mineola, New York Market Area Analysis 23 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= slower average annual compounded growth rate of 1.2%. This short-term data suggests that the area's population is starting to increase at a rate that is more consistent with the national trend, which was 1.1% for the same period. Forecasts for the period of 1995 to 2000 anticipate a nominal increase of 0.5%, which, while lower than historical rates, still exceeds the state projection. We find that the rate of population growth generally establishes a minimum rate of increase for commercial segment hotel demand; this observation also holds true for the group and meeting segment if a majority of the meetings are business oriented. Retail Sales Trends in retail sales reflect both changes in population and the propensity of area inhabitants and visitors to spend money on retail goods. Like population trends, retail sales have no direct correlation with hotel room night demand, but they do tend to gauge the economic health and vitality of the market. Between 1980 and 1995, retail sales in both the Newburgh MSA and Orange County increased at an average annual compounded rate of 2.5% annually. From 1990 to 1995, Orange County and the Newburgh MSA achieved annual growth rates of 1.8% and 1.9%, respectively, which were higher than the 1.2% level recorded by the state as a whole. Projections indicate a slower growth in the Newburgh MSA between 1995 and 2000, at an average annual compounded rate of 0.3% and 0.4% for the county and the MSA, respectively; these rates are lower than both the 0.1% anticipated for the state and the 0.9% national average anticipated for the same period. Personal Income Between 1980 and 1995, personal income in the Newburgh MSA increased at an average annual compounded rate of 3.0%, while New York State registered growth of 1.9% annually. From 1990 to 1995, the Newburgh MSA achieved a growth rate of 1.6% annually, which was significantly higher than the 0.5% increase recorded by the state. Projections indicate a still more rapid increase in the Newburgh MSA between 1995 and 2000, at an average annual compounded rate of 2.0%; this rate is higher than both the 1.3% anticipated for the state, but slightly lower than the 2.3% national average anticipated for the same period. HVS International, Mineola, New York Market Area Analysis 24 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Work Force Characteristics Between 1980 and 1995, a number of employment sectors in the Newburgh MSA increased. The agricultural industry registered the most significant increase, at an average annually compounded rate of 5.3%. Other healthy employment sectors were construction, total trade, and services, which ranged from 2.7% to 4.3% average annually compounded changes. The finance, insurance, and real estate (FIRE), transportation, communications and utilities (TCPU), and total government sectors registered average annual compounded rate increases of 2.3%, 1.3%, and 1.0%, respectively. The only two sectors that registered average annual compounded rate decreases were farm employment (2.1%) and manufacturing (1.8%). Projections indicate that the wholesale trade and services sectors will experience the most significant growth between 1995 and 2000, at 2.3% and 2.0%, respectively. Only two sectors are projected to decrease annually - the farm and manufacturing sectors, at 1.2% and 0.5%, respectively, between 1995 and 2000. The major employers in the Town of Wallkill area represent a cross-section of hotel demand potential. Some are national in scope, while others operate on a more local basis; some are engaged in manufacturing, some are retail, and others are active in transportation. The following table outlines some of the major employers in Orange County. ================================================================================ Table 4-1 Major Employers in Orange County - -------------------------------------------------------------------------------- Number of Firm Employees - -------------------------------------------------------------------------------- Big V Supermarkets 1,829 Horton Memorial Hospital 1,150 Empire Blue Cross/Blue Shield 900 St. Lukes Hospital 950 Yellow Freight System 900 Kolmar Labs 750 Arden Hill Hospital 750 Wakefern 700 IBM 639 Mercy Community Hospital 600 Source: The Orange County Partnership - -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 25 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Office Space Recognized for its industrial and manufacturing businesses, Orange County - as well as the Middletown and Wallkill areas - naturally provide a substantial amount of office space. According to the Orange County Partnership, industrial office space in parks in Orange County has increased substantially in the late 1980s. From 1984 to 1990, total square footage of office space grew from 850,000 to 7,100,000, and in 1995, total space increased to 11,200,000 square feet. Office space for the county not found in a park setting has also grown since 1984, albeit, at a slower rate. In 1984, 750,000 square feet of space was available, compared to today's total of 3,200,000 square feet. Examples of major corporations in Orange County that occupy this office space include Service Merchandise of Montgomery Industrial Park, with 850,000 square feet, Empire Blue Cross/Shield of Crystal Run Corporate Park, with 310,000 square feet, and Tuck Industries of Middletown, with 300,000 square feet of space. The office parks specific to the Middletown/Wallkill area are Sunrise Park, Wilson Field Park, Crystal Run Corporate Park, Mills Heights Industrial Park, and Quickway Industrial Park. Highway Traffic As previously mentioned, the subject property is situated on State Route 211, approximately one-quarter of a mile north of State Route 17 and two miles northwest of the interchange formed by I-84 and State Route 17. According to the New York State Department of Transportation, between 1984 and 1993, traffic volume on State Route 17 has increased; and between 1989 and 1994, volume increased slightly on Interstate 84. The average annual compounded growth rates for S.R. 17 and I-84 during these periods were 4.5% and 1.9%, respectively. Because the New York State Department of Transportation conducts its traffic survey approximately every three years, 1993 and 1994 are the last years for which data has been published. Airport Traffic The subject property is situated within an approximate 25-minute drive southwest of Stewart Airport, which is located in Newburgh, New York. This regional facility is served by American, Delta, and USAir, as well as several commuter carriers. Stewart Airport, which opened to commercial traffic in April of 1990, has grown in popularity in recent years as more business firms have relocated to Rockland and Putnam Counties. According to airport officials, passenger enplanements at Stewart Airport increased at an average annual compounded rate of 4.6% between 1978 and 1983. This growth slowed to 3.9% over the next five-year term as a result of the on-going airport construction, which closed the main runway for four months HVS International, Mineola, New York Market Area Analysis 26 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= during 1986. Between 1992 and 1998, passenger enplanements are expected to increase at an average annual compounded rate of 4.1%. Convention Center The Rockland County Convention and Exhibition Center is located within the Newburgh MSA. However, due to its relatively distant location and the adequate supply of rooms in close proximity to this facility, the convention center does not produce any significant demand for the subject property. Tourist Attractions The Hudson Valley area - and more specifically, the Town of Wallkill area - features a variety of tourist attractions that draw leisure travelers. The most famous attraction in the area is the U.S. Military Academy in West Point, New York. This nationally known, time-honored institution offers a variety of activities. The Information Center, the West Point Museum, and Fort Putnam are all located near the academy. Other attractions include the Orange County Fairgrounds - home to the Orange County Speedway, which features weekly races during the summer months. The Hudson Valley area is also famous for numerous wineries, festivals and fall foliage tours. Festivals offered in the region include: "April in Paris," which is held in Middletown; the Orange County Delaware River Festival, held in Port Jervis; the Renaissance Festival held in Sterling Forest; and the Fall Foliage Festival. Conclusion Our review of various economic and demographic data indicates that the subject property's market area is relatively stable, with slow growth anticipated over the next several years. The following table summarizes the economic and demographic trends discussed throughout this section. All figures that reflect dollar amounts have been adjusted for inflation, and thus, reflect real change. It should be noted that the percent changes indicated in the following tables are based on unrounded figures, and thus, may not calculate exactly. HVS International, Mineola, New York Market Area Analysis 27 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-2 Economic and Demographic Data for the Subject Property's Market Area - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------- Long-Term Historical Population (+,000) Orange County 1980-1995 260.6 321.5 1.4 % Newburgh, NY-PA MSA 1980-1995 279.0 357.7 1.7 State of New York 1980-1995 17,566.4 18,195.7 0.2 United States 1980-1995 227,225.6 262,791.0 1.0 Short-Term Historical Population Orange County 1990-1995 308.8 321.5 0.8 Newburgh, NY-PA MSA 1990-1995 337.4 357.7 1.2 State of New York 1990-1995 18,002.3 18,195.7 0.2 United States 1990-1995 249,401.4 262,791.0 1.1 Projected Population (+,000) Orange County 1995-2000 321.5 326.6 0.3 Newburgh, NY-PA MSA 1995-2000 357.7 366.1 0.5 State of New York 1995-2000 18,195.7 18,314.7 0.1 United States 1995-2000 262,791.0 274,758.4 0.9 Long-Term Historical Retail Sales (+,000,000) Orange County 1980-1995 1,539.7 2,226.9 2.5 Newburgh, NY-PA MSA 1980-1995 1,598.5 2,331.9 2.5 State of New York 1980-1995 91,865.8 108,055.2 1.1 United States 1980-1995 1,340,768.9 1,765,826.1 1.9 Short-Term Historical Retail Sales (+,000,000) Orange County 1990-1995 2,034.8 2,226.9 1.8 Newburgh, NY-PA MSA 1990-1995 2,124.2 2,331.9 1.9 State of New York 1990-1995 101,720.0 108,055.2 1.2 United States 1990-1995 1,557,380.2 1,765,826.1 2.5 Projected Retail Sales (+,000,000) Orange County 1995-2000 2,226.9 2,262.2 0.3 Newburgh, NY-PA MSA 1995-2000 2,331.9 2,376.4 0.4 State of New York 1995-2000 108,055.2 108,691.5 0.1 United States 1995-2000 1,765,826.1 1,846,830.4 0.9 Long-Term Historical Retail Sales Per Capita Orange County 1980-1995 5,907.7 6,925.6 1.1 Newburgh, NY-PA MSA 1980-1995 5,729.2 6,518.6 0.9 State of New York 1980-1995 5,229.6 5,938.5 0.9 United States 1980-1995 5,900.6 6,719.5 0.9 Short-Term Historical Retail Sales Per Capita Orange County 1990-1995 6,589.5 6,925.6 1.0 Newburgh, NY-PA MSA 1990-1995 6,295.0 6,518.6 0.7 State of New York 1990-1995 5,650.4 5,938.5 1.0 United States 1990-1995 6,244.5 6,719.5 1.5
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 28 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-2 Economic and Demographic Data for Subject Property's Market Area (Continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------- Projected Personal Retail Sales Per Capita Orange County 1995-2000 6,925.6 6,927.2 0.0 % Newburgh, NY-PA MSA 1995-2000 6,518.6 6,491.1 (0.1) State of New York 1995-2000 5,938.5 5,934.6 (0.0) United States 1995-2000 6,719.5 6,721.7 0.0 Long-Term Historical Eating and Drinking Place Sales (+,000,000) Orange County 1980-1995 104.6 182.0 3.8 Newburgh, NY-PA MSA 1980-1995 114.6 198.0 3.7 State of New York 1980-1995 9,199.4 11,882.1 1.7 United States 1980-1995 126,131.6 185,035.4 2.6 Short-Term Historical Eating and Drinking Place Sales (+,000,000) Orange County 1990-1995 160.7 182.0 2.5 Newburgh, NY-PA MSA 1990-1995 172.6 198.0 2.8 State of New York 1990-1995 10,874.1 11,882.1 1.8 United States 1990-1995 161,197.4 185,035.4 2.8 Projected Eating and Drinking Place Sales (+,000,000) Orange County 1995-2000 182.0 192.1 1.1 Newburgh, NY-PA MSA 1995-2000 198.0 210.4 1.2 State of New York 1995-2000 11,882.1 12,228.3 0.6 United States 1995-2000 185,035.4 199,127.3 1.5 Long-Term Historical Eating and Drinking Place Sales Per Capita Orange County 1980-1995 401.3 566.0 2.3 Newburgh, NY-PA MSA 1980-1995 410.7 553.6 2.0 State of New York 1980-1995 523.7 653.0 1.5 United States 1980-1995 555.1 704.1 1.6 Short-Term Historical Eating and Drinking Place Sales Per Capita Orange County 1990-1995 520.3 566.0 1.7 Newburgh, NY-PA MSA 1990-1995 511.5 553.6 1.6 State of New York 1990-1995 604.0 653.0 1.6 United States 1990-1995 646.3 704.1 1.7 Projected Eating and Drinking Place Sales Per Capita Orange County 1995-2000 566.0 588.3 0.8 Newburgh, NY-PA MSA 1995-2000 553.6 574.6 0.7 State of New York 1995-2000 653.0 667.7 0.4 United States 1995-2000 704.1 724.7 0.6 Long-Term Historical Personal Income (+,000,000) Orange County 1980-1995 3,511.7 5,288.4 2.8 Newburgh, NY-PA MSA 1980-1995 3,749.4 5,815.0 3.0 State of New York 1980-1995 268,310.1 358,297.4 1.9 United States 1980-1995 3,163,874.0 4,443,243.2 2.3
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 29 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-2 Economic and Demographic Data for Subject Property's Market Area (Continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------- Short-Term Historical Personal Income (+,000,000) Orange County 1990-1995 4,946.0 5,288.4 1.3 % Newburgh, NY-PA MSA 1990-1995 5,373.7 5,815.0 1.6 State of New York 1990-1995 349,724.3 358,297.4 0.5 United States 1990-1995 4,051,714.6 4,443,243.2 1.9 Projected Personal Income (+,000,000) Orange County 1995-2000 5,288.4 5,801.6 1.9 Newburgh, NY-PA MSA 1995-2000 5,815.0 6,409.8 2.0 State of New York 1995-2000 358,297.4 382,633.9 1.3 United States 1995-2000 4,443,243.2 4,972,219.5 2.3 Long-Term Personal Income per Capita Orange County 1980-1995 13,474.0 16,447.0 1.3 Newburgh, NY-PA MSA 1980-1995 13,438.0 16,256.0 1.3 State of New York 1980-1995 15,274.0 19,691.0 1.7 United States 1980-1995 13,924.0 16,908.0 1.3 Short-Term Historical Personal Income per Capita Orange County 1990-1995 16,017.0 16,447.0 0.5 Newburgh, NY-PA MSA 1990-1995 15,925.0 16,256.0 0.4 State of New York 1990-1995 19,427.0 19,691.0 0.3 United States 1990-1995 16,246.0 16,908.0 0.8 Projected Personal Income per Capita Orange County 1995-2000 16,447.0 17,765.0 1.6 Newburgh, NY-PA MSA 1995-2000 16,256.0 17,508.0 1.5 State of New York 1995-2000 19,691.0 20,892.0 1.2 United States 1995-2000 16,908.0 18,097.0 1.4 Long-Term Historical Employment - Orange County (+,000) Farm 1980-1995 2.3 1.7 (2.1) Agriculture Services, Other 1980-1995 0.6 1.3 5.3 Mining 1980-1995 0.1 0.1 0.3 Construction 1980-1995 3.8 6.5 3.6 Manufacturing 1980-1995 17.0 12.9 (1.8) Trans., Comm. & Public Utils 1980-1995 5.9 7.1 1.3 Total Trade 1980-1995 22.1 32.8 2.7 Wholesale Trade 1980-1995 4.2 6.1 2.5 Retail Trade 1980-1995 17.9 26.7 2.7 Finance, Insurance, & Real Estate 1980-1995 6.7 9.5 2.3 Services 1980-1995 21.4 40.1 4.3 Total Government 1980-1995 26.3 30.4 1.0 Federal Civilian Govt 1980-1995 4.6 5.9 1.7 Federal Military Govt 1980-1995 6.7 6.7 (0.0) State & Local Govt 1980-1995 14.9 17.8 1.2 TOTAL 1980-1995 106.2 142.4 2.0
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 30 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-2 Economic and Demographic Data for Subject Property's Market Area (Continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------- Short-Term Historical Employment - Orange County (+,000) Farm 1990-1995 1.8 1.7 (0.7)% Agriculture Services, Other 1990-1995 1.2 1.3 2.4 Mining 1990-1995 0.1 0.1 (3.0) Construction 1990-1995 7.3 6.5 (2.5) Manufacturing 1990-1995 14.7 12.9 (2.6) Trans., Comm. & Public Utils 1990-1995 7.4 7.1 (0.8) Total Trade 1990-1995 32.7 32.8 0.1 Wholesale Trade 1990-1995 6.6 6.1 (1.5) Retail Trade 1990-1995 26.1 26.7 0.4 Finance, Insurance, & Real Estate 1990-1995 9.1 9.5 0.9 Services 1990-1995 33.8 40.1 3.5 Total Government 1990-1995 31.6 30.4 (0.8) Federal Civilian Govt 1990-1995 6.2 5.9 (0.9) Federal Military Govt 1990-1995 7.4 6.7 (1.9) State & Local Govt 1990-1995 18.0 17.8 (0.3) TOTAL 1990-1995 139.7 142.4 0.4 Projected Employment - Orange County (+,000) Farm 1995-2000 1.7 1.6 (1.2) Agriculture Services, Other 1995-2000 1.3 1.4 1.3 Mining 1995-2000 0.1 0.1 0.4 Construction 1995-2000 6.5 6.8 1.1 Manufacturing 1995-2000 12.9 12.6 (0.5) Trans., Comm. & Public Utils 1995-2000 7.1 7.3 0.5 Total Trade 1995-2000 32.8 34.8 1.2 Wholesale Trade 1995-2000 6.1 6.8 2.3 Retail Trade 1995-2000 26.7 27.9 0.9 Finance, Insurance, & Real Estate 1995-2000 9.5 10.1 1.1 Services 1995-2000 40.1 44.2 2.0 Total Government 1995-2000 30.4 30.8 0.3 Federal Civilian Govt 1995-2000 5.9 6.0 0.4 Federal Military Govt 1995-2000 6.7 6.7 0.2 State & Local Govt 1995-2000 17.8 18.0 0.3 TOTAL 1995-2000 142.4 149.7 1.0
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 31 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-2 Economic and Demographic Data for Subject Property's Market Area (Continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Data Point Comp. Change - --------------------------------------------------------------------------------------------------------------------- Traffic Counts Interstate 84 1989/1992/1994 27,000 32,400 29,671 1.9 % State Route 17 1984/1990/1993 28,500 39,200 39,200 4.5 Stewart Airport Historical Passenger Enplanements 1978-1992 197,105 372,420 4.6 Projected Passenger Enplanements 1992-1998 372,420 475,321 4.1 Historical Air Freight 1978-1992 53,120 117,171 5.8 Projected Air Freight 1992-1998 117,171 149,217 4.1
Sources: Woods & Poole Economics, Inc.; New York State Department of Transportation - -------------------------------------------------------------------------------- The Lodging Market Supply and Demand Analysis section of this economic study and appraisal will relate these historical and projected growth trends to specific market segments based on their propensity to reflect changes in lodging demand. This analysis will provide a basis for forecasting changes in room night demand in the subject property's market area. HVS International, Mineola, New York Overview of External Forces 32 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 5. Overview of External Forces Affecting the U.S. Lodging Industry Introduction Hotel ownership is ultimately the business of creating and enhancing value. To understand the investment potential of lodging facilities, investors must be thoroughly aware of the many forces that can cause changes in the value of their properties. Although some of these forces are internal (such as the layout and design of the facilities, the quality of management, and the condition of the property), others are external (such as the local economic environment and the competitive nature of the market). The risk associated with hotel investment lies largely with the external forces that are beyond the control of ownership and contribute to the variability of future income flows. Investors and appraisers can project financial results by evaluating the historical impact of external forces on hotel values. Successful hotel investors seek opportunities where the risk of external forces can be minimized, thus reducing the uncertainty associated with income expectations. When investors engage in due diligence prior to acquiring a lodging facility, they are primarily interested in trends affecting a limited geographic market area, such as a town, city, or county. A broader overview takes into account national and international travel patterns and trends. An understanding of the general characteristics of the United States hotel market is important because these trends often foreshadow economic and demographic changes in smaller areas. This section of the appraisal will present an overview of the U.S. lodging industry by tracing many of the forces that influence hotel values. Historical economic and demographic data, and industry statistics will be analyzed to provide a basis for projections. Forecasts will be evaluated to determine their reasonableness. The conclusions represent another set of criteria that hotel investors consider in making their acquisition decisions. HVS International, Mineola, New York Overview of External Forces 33 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The Supply and Demand Relationship Most business ventures are influenced by the relationship between supply and demand. In the hotel industry, supply refers to the number of units. A unit consists of one or more rooms and represents the smallest accommodation that can be rented to a guest. Each unit must have a full bath and its own entrance to a public hallway or the building exterior. Demand refers to a room night, which is one unit that is occupied for one night. The supply and demand relationship has a significant influence on a hotel's occupancy and/or average room rate. Occupancy is calculated by dividing the number of rooms that are occupied for a specific period by the total number of rooms that are available during the same period. Average room rate is determined by dividing the total rooms revenue achieved during a specific period by the number of rooms occupied during that period; it also represents the weighted average of all the room rates charged during that period. In a market where demand is increasing faster than supply, occupancies rise and average rate growth generally exceeds inflation. When supply is increasing faster than demand, occupancies fall and average rates typically remain level or decline. Hotels generate revenue based on occupancy and average rate, and thus the supply and demand relationship is an important factor in analyzing profits and value. Hotel occupancy levels have shown definite cycles that reflect the balance between supply and demand. The early 1970s marked the beginning of a hotel building boom reminiscent of the 1920s. Many factors contributed to this expansion, but the two main elements were readily available financing and aggressive chains that were eager to sell franchises. The new construction during the 1970s was made possible by the enormous amount of financing generated by all lenders, particularly real estate investment trusts (REITs). These high-leverage finance companies were created to allow small investors to participate in real estate mortgages and equities. The concept was quickly accepted by Wall Street, and soon billions of dollars were available to finance real estate projects. Many lenders became so overwhelmed with new money that their underwriting procedures broke down and some marginal developments were approved. During the late 1960s and early 1970s, hotel companies actively expanded their chains through franchising. Franchising was a source of new capital, allowing hotel companies to grow and achieve national recognition using the franchisee's financial investment in individual properties. Some franchisors, eager to demonstrate sustained growth and establish a national HVS International, Mineola, New York Overview of External Forces 34 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= presence, employed questionable marketing tactics to sell new franchises. Salespeople were often compensated based on the number of franchises sold, so there was little incentive to discourage developers from investing in poor locations and overbuilt markets. Many lenders and hostelry developers were led to believe that a national franchise would guarantee a successful operation. The combination of readily available financing and aggressive hotel chains eager to sell franchises resulted in overbuilding and development of many poorly located, undercapitalized hostelries managed by inexperienced owners. The bubble burst on the lodging industry when inflation caused construction costs and interest rates to escalate. The 1974 energy crisis drastically reduced travel, and the accompanying recession curtailed business trips, conferences, and conventions. Operators of marginal properties quickly fell behind in their mortgage payments, and lenders were forced to foreclose. As lenders became hostelry owners, they either organized work-out departments headed by experienced hoteliers or engaged professional hotel management companies to assume operational responsibilities. Sales data indicate that lenders who were looking for quick sales to remove non-performing hotel assets from their books had to lower their prices substantially to attract all-cash buyers. Lenders who were willing to hold on to foreclosed hotels and employ professional management to reposition and improve the properties' operation were generally able to recoup their original investments in three to five years, once the industry began to recover. However, even lenders who repositioned their hotels had to take back favorable purchase-money financing to sell the properties because money from other sources was not available. History has shown that during economic downturns, hotel values generally do not fall in proportion to the properties' declining incomes. Sellers, and particularly lenders who take back hotels through foreclosure, are often unwilling to sell at substantially reduced prices. They are more likely to wait out the downward cycle and dispose of their assets when the market begins to rebound. Thus, appraisers can best reflect market behavior by projecting a facility's net income to a point of recovery and applying the proper discounted cash flow procedure over that time period. The late 1970s was a period of relative calm for the lodging industry. Because most lenders were recovering from the financial wounds inflicted by HVS International, Mineola, New York Overview of External Forces 35 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= the 1975 recession, they had little interest in making hotel mortgages. New construction was restrained, and primarily consisted of additions to existing properties and the development of some large, downtown hotels oriented toward the commercial and convention markets. The rebirth of center-city hostelries was a direct result of fuel shortages and the availability of government financing for inner-city redevelopment projects. Highway-oriented properties, on the other hand, were adversely affected by escalating gasoline prices and decreased automobile travel, and these lodging facilities lost some of their appeal among investors and hotel companies. Decreased building activity, the normal retirement of older hostelries from the market, and an improving economy created a favorable supply and demand relationship and record-high occupancy levels from 1979 to 1980. Average room rates increased rapidly as operators took advantage of the excess demand to recoup earlier losses and keep up with inflation. After the decline in hotel development during the late 1970s, the environment appeared suitable for a period of renewed expansion. However, the Federal Reserve tightened the money supply in the early 1980s, sending the prime interest rate up to double-digit levels. Most of the projects that were in the preliminary planning stages but lacked sensible financing were put on hold. Fiscal policy and declining energy prices eventually reduced the national inflation rate. This caused a decline in hotel interest rates beginning in 1983, and suddenly massive amounts of capital were available for real estate investments. Hotel developers who had been out of the market since the mid-1970s rushed to initiate new projects. They were aided by several major real estate development incentives: high occupancies and escalating room rates, readily available debt and equity financing, and unique income tax benefits designed to stimulate the national economy out of a recession. During the early 1980s, trends were generally favorable for new hotel development. Although the recession caused a decline in lodging demand, many markets showed relatively high occupancy levels. Room rates were usually able to keep up with inflation, and the travel industry was expected to boom as a result of a recovering economy. Franchise sellers signed up new prospects aggressively, using product segmentation to justify the saturation of a market with a common brand. HVS International, Mineola, New York Overview of External Forces 36 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Financing was readily available from the savings and loan industry. Following deregulation, these banks were permitted to lend on commercial real estate, such as hotels. Although savings and loans had experience in making loans on single-family homes, few had expertise with commercial properties, and fewer still with hotels. The result was almost identical to the real estate investment trust fiasco the decade before: loan underwriting and administration were inept and sometimes nonexistent, the number of loans made seemed more important than the quality of the real estate and the integrity of the borrower, and short-term funds were often used to finance long-term mortgages. In the early 1990s, the industry suffered the consequences of this lending spree: most major hotel markets became severely overbuilt and many savings and loans went out of business. Another factor contributing to hotel development in the 1980s was the very favorable treatment provided by income tax regulations. By carefully structuring hotel syndications to take advantage of all available tax benefits, investors could virtually recoup their total cash outlay in the first year and reap additional benefits in the future regardless of the economic success of the underlying asset. Because there was little incentive to justify a transaction's economics (i.e., cash flow and reversionary benefits), a number of syndicators overpaid for hotel properties, took out usurious fees, and overloaded their hotels with debt. A change in the tax law in the mid-1980s eliminated many of the benefits associated with hotels, but the overbuilding in most markets was either in progress or had already taken place. By the end of the 1980s, the abuses of the savings and loans had become apparent, but it was too late to reverse the overbuilding. Between 1985 and 1990, approximately 556,000 rooms were added to the U.S. hotel supply. The national economy entered another recession in 1990, and this factor (coupled with overbuilding and the Persian Gulf War in 1991) caused the national hotel occupancy rate to bottom out at 60.9%. In some markets, hotel occupancies were as low as 35%. This supply and demand imbalance was almost identical to the situation in the 1970s that led to numerous hotel failures. As in the REIT days, the number of non-performing loans reached record levels, and lenders moved to a work-out mode of operation in order to foreclose and restructure their hotel investments. Many of the savings and loans were taken over by the government and their hotel assets were sold at auction. HVS International, Mineola, New York Overview of External Forces 37 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= According to the American Council of Life Insurance, which represents major life insurance companies, the number of delinquent hotel loans and the number of hotel loans in foreclosure peaked in 1991. This trend is undergoing a reversal as the U.S. lodging industry begins to recover. Loan restructuring was an attractive alternative to foreclosure during this period, and the number of loans in good standing with restructured terms almost doubled. By 1993, new hotel construction had declined significantly. Lenders, trying to get out from under problematic hotel portfolios, curtailed all real estate lending and would not even consider hotels. The tax benefits associated with lodging facilities had been reduced significantly, and passive investors left the hospitality market entirely. The slowdown in the growth of supply had a beneficial impact on occupancy levels, which started to recover in 1992. Improved occupancies are expected to continue through the late 1990s as increases in lodging demand outpace growth in supply. Beginning in 1991, many lenders and the Resolution Trust Corporation (RTC) sold their oldest and least desirable hotels at liquidation prices. Because virtually no third-party financing was available, most lenders were forced to take back purchase-money mortgages at favorable terms in order to sell these properties without suffering massive write-downs. The newer and more desirable hotels were not put on the market, because their lenders/owners were waiting for values to recover. This course of action significantly reduced the number of transactions involving good-quality lodging facilities. The following table shows the volume of hotel transactions exceeding $10,000,000 between 1990 and 1995. ================================================================================ Table 5-1 Summary of Major Hotel Transactions - --------------------------------------------------------------------------------
Year 1990 1991 1992 1993 1994 1995 - ---------------------------------------------------------------------------------------------- Number of Transactions 130 54 67 52 92 104 Number of Rooms 40,543 16,427 25,187 19,935 33,503 36,951 Average Price Per Room $136,000 $ 91,000 $ 85,000 $ 79,000 $ 80,000 $ 83,000
Source: HVS International - -------------------------------------------------------------------------------- HVS International, Mineola, New York Overview of External Forces 38 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= In 1991, there were only 54 major hotel sales recorded. This number increased to 67 in 1992 and declined to 52 in 1993, then rose dramatically in 1994 and 1995. During the low-volume years, many sellers remained on the sidelines waiting for values to increase before placing their properties on the market. The jump in 1994 is attributable to a number of factors, including the greater availability of mortgage funds, a return of institutional investors to the market, and a resurgence of investor interest in lodging facilities. The profile of typical hotel buyers has changed somewhat. During the mid-1980s, when tax-driven syndication's were popular, many hotels were purchased by passive investors who hired management companies to operate their properties. These owners had little involvement in day-to-day management decisions, which occasionally led to poor management and financial losses. Today, most buyers of major hotels are owner-operators who bring with them both the acquisition funds (usually from a joint venture partner) and management expertise. We also note that real estate investment trusts (REITs) and public hotel companies (C-Corps) are actively acquiring hotels using funds from public equity stock offerings. The supply of new hotel rooms is expected to increase slowly during the next several years. Lenders are beginning to return to the market, and are making some hotel loans based on conservative criteria. Initially, mortgage funds were available mainly to the budget and economy lodging sectors, for the purpose of refinancing existing properties or assisting buyers in acquisitions. Now, a number of lenders are willing to finance new construction for these small, low-end properties. Although financing is also becoming available for the acquisition of large, full-service hotels, very little has been allocated for new construction. At present, active hotel lenders are not necessarily traditional banks and insurance companies, but may include credit companies and Wall Street securities firms. A number of hotel owners and developers are now constructing budget and economy hotels; a few are planning more upscale, full-service properties. Most lenders are taking a conservative approach to new hotel loans, which should limit new development to those projects that demonstrate true economic feasibility. As a result, severe short-term overbuilding is unlikely. HVS International, Mineola, New York Overview of External Forces 39 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Room Rates The supply and demand relationship has a direct impact on hotel occupancies and an indirect influence on room rate growth. Between 1978 and 1995, hotel room rates increased at an average annual compounded rate of almost 6%. Significant rate growth was recorded during the late 1970s and early 1980s as a result of strong occupancies (70%'s) coupled with a high monetary inflation rate (14%). In recent years, room rate growth slowed as a result of low occupancies and a drop in inflation. Hotel room rates generally increase faster than the Consumer Price Index (CPI) when occupancies are strong or moving upward. When occupancies are low or declining, room rate growth tends to lag behind the CPI; in some cases, rates may remain flat or actually drop. The following table compares the historical and projected annual increase in hotel room rates in the United States to the change in the national CPI. HVS International, Mineola, New York Overview of External Forces 40 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 5-2 Percent Change in Average Room Rates Versus CPI - U.S. Hotels - -------------------------------------------------------------------------------- Consumer Price Hotel Room Rate Index Hotel Year Percent Change Percent Change Occupancy - -------------------------------------------------------------------------------- 1973 4.2% 6.2% 70.2% 1974 7.6 11.0 64.0 1975 7.3 9.1 63.7 1976 8.2 5.7 65.8 1977 8.1 6.5 67.3 1978 14.0 7.7 69.2 1979 17.0 11.3 71.9 1980 15.2 13.5 70.6 1981 10.0 10.3 67.9 1982 6.5 6.2 66.7 1983 5.1 3.2 64.4 1984 6.9 4.3 64.0 1985 4.6 3.6 63.1 1986 3.2 1.9 62.5 1987 3.6 3.6 61.9 1988 3.6 4.1 62.3 1989 3.5 4.8 63.2 1990 3.0 5.4 62.4 1991 0.6 4.2 60.9 1992 1.4 3.0 62.1 1993 2.8 3.0 63.1 1994 5.2 2.6 64.7 1995 4.8 2.8 65.5 1996* 5.0 3.0 66.0 1997* 5.5 3.5 67.0 1998* 6.0 4.0 68.0 1999* 5.5 4.0 68.0 Sources: Smith Travel Research & HVS International * Projected - -------------------------------------------------------------------------------- This table shows two periods when hotel room rate growth failed to keep pace with the CPI. From 1973 to 1975, the hotel industry was suffering from overbuilding related to real estate investment trusts, a recession, and a downturn in travel caused by the oil embargo. The second period of slow room rate growth occurred between 1988 and 1993, when the industry was again affected by overbuilding and a weak economy. The table illustrates HVS International, Mineola, New York Overview of External Forces 41 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= that during periods of prosperity, room rates are a good hedge against inflation; this was true even when the CPI increased at double-digit levels. The projections indicate a strong recovery of room rates as the relationship between supply and demand becomes more favorable. Growth is expected to peak in 1998 at 6%, which is significantly higher than the projected gain in the CPI. This may appear high, but a similar trend occurred in 1978, when room rates rose 14.0% and the CPI increased by only 7.7%. Hotels are unique because their room rates can be adjusted at any time. Unlike office space, where rents are typically negotiated for a five-year period, hotel operators are free to base rates on occupancy trends. Using sophisticated yield management programs, modern lodging facilities can ride the demand curve and maximize room rates whenever the market permits. As a result, hotels generally offer significant upside potential during periods of economic prosperity. If lodging facilities can increase room rates faster than the CPI and still maintain occupancies, bottom-line profits usually escalate. If they can raise room rates and occupancy at the same time, profits will grow significantly. The opposite occurs when room rates fail to keep pace with inflation. Because market value is basically a multiple of bottom-line profits, changes caused by fluctuations in occupancy and average rate have a direct impact on value. Rooms Revenue per Available Room (RevPAR) The ability of a hotel to maximize its occupancy and room rate is measured in terms of rooms revenue per available room (RevPAR), which is the product of occupancy and average rate. Between 1978 and 1995, RevPAR in the U.S. lodging industry increased at an average annual compounded rate of approximately 5%. As in the case of average rate, most of the increase occurred during the late 1970s, when occupancies escalated rapidly. The only decline in RevPAR occurred in 1991. Trends in Hotel Sales HVS International constantly monitors hotel markets in order to collect information on sales of lodging facilities. This comprehensive database is known as the Hospitality Market Data Exchange (HMDE). The HMDE includes more than 90% of all hotel sales that took place during this period. The HMDE data shows that the number of transactions peaked at 726 in 1986. This strong activity is largely attributable to pending changes in the tax laws, which made it less favorable to own hotels. It is also possible that HVS International, Mineola, New York Overview of External Forces 42 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= forward-thinking investors noted the substantial overbuilding and declining economy and decided to bail out at that time. In 1987 and 1990, the average sales price per room peaked at $75,000. This was more than twice the 1981 average of $36,000. Following the 1990 peak, hotel prices fell rapidly as occupancies and profits were eroded by the massive number of hotel rooms entering the market. By 1991, the year of the Persian Gulf War, sales prices had fallen to $38,000 per room. Even the highest price per room declined from the record $1,195,652 (for the sale of the Bel Aire Hotel) to $251,816 in 1992. The market hit bottom in 1993 when the average sales price dropped to $36,000 per room. Prices recovered rapidly in 1994 and 1995 as investors became interested in hotels again and more full-service properties were put on the market. In 1995, the average sales price was $61,000 per room. The figures presented in the HMDE represent actual sales prices; no attempt was made to adjust for factors such as favorable or unfavorable financing, forced or liquidation sales, bankruptcy sales, foreclosures, and so forth. As a result, the average price per room does not necessarily reflect market value, which assumes a willing buyer and a willing seller. Many of the transactions that took place during the early 1990s involved unwilling sellers - usually lenders who were forced to liquidate hotel portfolios quickly at prices that were below market levels. Most hotel experts agree that a recovery is underway, and they recommend that owners hold their properties until more favorable conditions prevail. Trends in Hotel Values A more meaningful indicator of trends in hotel value is the Hotel Valuation Index (HVI), developed by HVS International. This index tracks changes in hotel values in 23 major markets and the nation as a whole. It is developed through an income approach, using market area data provided by Smith Travel Research and operational and capitalization rate information from HVS International, and is indexed to the 1986 U.S.A. value (1.0000). The following table sets forth the HVI from 1986 to 1995. HVS International, Mineola, New York Overview of External Forces 43 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 5-3 Hotel Valuation Index per Room - --------------------------------------------------------------------------------
Valuation Index Per Room ------------------------ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 ------------------------------------------------------------------------------------------------------ Honolulu 3.3571 4.0357 4.6964 5.2857 5.3214 4.7857 4.9286 4.2857 4.3929 5.6071 New Orleans 1.5357 1.7500 2.2857 2.3929 2.5000 2.6071 3.2857 3.2500 3.8929 4.4286 New York 3.5714 4.1071 4.6429 4.5357 3.9286 3.0357 2.5714 2.5714 3.1429 4.1071 San Francisco 2.5000 3.0893 3.2500 3.0714 2.9286 2.5714 2.5714 2.9643 3.2143 4.0000 Phoenix 1.2143 1.0714 1.1786 1.5357 1.4286 1.2500 1.5000 1.9643 2.3571 3.2143 San Diego 2.8571 2.3571 2.5714 2.6786 2.3929 2.5357 2.5357 2.2143 2.3571 3.0357 Miami 1.4286 1.6071 1.7321 2.1429 2.1786 2.2500 2.5714 2.7857 2.3214 2.9286 Washington, DC 2.1786 2.1786 2.4464 2.6071 2.2500 1.8571 2.0357 2.5000 2.3929 2.8929 Atlanta 1.0714 1.0179 1.0536 1.0357 1.1429 1.1250 1.2857 1.7857 2.1429 2.6786 Minneapolis 0.7321 0.6964 0.7143 0.7143 0.7857 1.0000 1.2857 1.5714 1.8214 2.1786 Chicago 1.4643 1.5000 1.5714 1.5000 1.4286 1.2143 1.2500 1.5000 1.8571 2.1786 Boston 2.3571 2.7143 2.6071 2.1429 1.8214 1.2500 1.3036 1.3214 1.6071 2.1071 Fort Lauderdale 1.4643 1.2679 1.3214 1.4286 1.4821 1.3571 1.7143 1.8929 1.6071 1.9286 Orlando 1.5000 1.6429 1.9286 2.5000 2.5357 1.8929 2.0714 1.7857 1.6071 1.8929 Denver 0.5357 0.4464 0.4643 0.4821 0.7857 0.9268 1.0357 1.3214 1.5000 1.8571 Dallas 0.5536 0.6250 0.6607 0.7321 0.7857 0.7143 0.9643 1.0357 1.3214 1.7143 USA 1.0000 0.9464 1.0536 1.1250 1.0714 0.9214 0.9929 1.1429 1.3214 1.6071 Los Angeles 2.1071 2.2857 2.3929 2.4643 2.1786 1.5714 1.0714 0.9643 1.1964 1.5000 Tampa 0.8393 0.7679 0.8571 1.1429 1.2857 1.0357 1.0714 1.0357 1.1071 1.3214 Anaheim 1.7679 1.7321 1.7500 1.8571 1.6071 1.2857 0.9642 0.9464 0.8393 1.2500 Houston 0.3571 0.4286 0.6964 0.7857 1.1071 1.1607 1.1429 1.0357 1.0000 1.1786 Philadelphia 1.4643 1.5357 1.4286 1.3214 1.0714 0.6786 0.5714 0.6071 0.7500 1.0714 Norfolk 1.1786 1.0536 0.9286 0.7857 0.6429 0.5357 0.6071 0.6429 0.7500 0.9643 Riverside 0.9643 1.2143 1.5714 1.7143 1.4643 1.2500 0.7857 0.5357 0.4286 0.5357
Source: HVS International - -------------------------------------------------------------------------------- The HVI can be used to show the value change in a particular market over time or to show the relative difference in hotel values in various cities. The following table shows the annual change in hotel values in 23 major markets and the United States as a whole. HVS International, Mineola, New York Overview of External Forces 44 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 5-4 Percent Change in the Hotel Valuation Index - --------------------------------------------------------------------------------
Annual Percent Change --------------------- '86-'87 '87-'88 '88-'89 '89-'90 '90-'91 '91-'92 '92-'93 '93-'94 '94-'95 '86-'95 --------------------------------------------------------------------------------------------------------------- Honolulu 20 % 16 % 13 % 1 % -10 % 3 % -13 % 3 % 28 % 67 % New Orleans 14 31 5 4 4 26 -1 20 14 188 New York 15 13 -2 -13 -23 -15 0 22 31 15 San Francisco 24 5 -5 -5 -12 0 15 8 24 60 Phoenix -12 10 30 -7 -13 20 31 20 36 165 San Diego -18 9 4 -11 6 0 -13 6 29 6 Miami 12 8 24 2 3 14 8 -17 26 105 Washington, DC 0 12 7 -14 -17 10 23 -4 21 33 Atlanta -5 4 -2 10 -2 14 39 20 25 150 Minneapolis -5 3 0 10 27 29 22 16 20 198 Chicago 2 5 -5 -5 -15 3 20 24 17 49 Boston 15 -4 -18 -15 -31 4 1 22 31 -11 Fort Lauderdale -13 4 8 4 -8 26 10 -15 20 32 Orlando 10 17 30 1 -25 9 -14 -10 18 26 Denver -17 4 4 63 18 12 28 14 24 247 Dallas 13 6 11 7 -9 35 7 28 30 210 USA -5 11 7 -5 -14 8 15 16 22 61 Los Angeles 8 5 3 -12 -28 -32 -10 24 25 -29 Tampa -9 12 33 12 -19 3 -3 7 19 57 Anaheim -2 1 6 -13 -20 -25 -2 -11 49 -29 Houston 20 62 13 41 5 -2 -9 -3 18 230 Philadelphia 5 -7 -8 -19 -37 -16 6 24 43 -27 Norfolk -11 -12 -15 -18 -17 13 6 17 29 -18 Riverside 26 29 9 -15 -15 -37 -32 -20 25 -44
Source: HVS International - -------------------------------------------------------------------------------- On a national basis, hotel values rose in 1988 and 1989, then declined in 1990 and dropped by 14% in 1991. A turnaround commenced in 1992, when values increased by 8%; still greater increases of 15% in 1993, 16% in 1994, and 22% in 1995 signaled that a recovery was well underway. In the case of the individual cities, it is obvious that the movement in national hotel values has been offset somewhat by trends in local markets. Between 1986 and 1995, Riverside hotels lost more than 40% of their value, while San Francisco showed a 60% increase. Anaheim, Los Angeles, and Philadelphia also suffered significant drops. Future Trends Most hotel owners, operators and lenders agree that the U.S. lodging industry has emerged from one of the worst periods since the Depression of 1929. Today, there are many indications that signal a strong recovery is underway, and most hotels have experienced a dramatic rise in profitability. Conversely, the hotel industry remains cyclical, and there are long-term trends and risk factors that could have an unfavorable impact on the HVS International, Mineola, New York Overview of External Forces 45 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= operating results and investment potential of lodging facilities. The following list summarizes the positive and negative factors that are likely to influence the U.S. lodging industry in coming years. o No significant amount of new hotel development is likely to occur during the next three to five years. Lenders stopped financing new hotels in the early 1990s because of the high rate of loan defaults, and they are only now starting to make construction loans. Although mortgage funds are available to refinance existing properties and construction loans are being made for economy hotels, mortgages for new hotels in the mid-rate, first-class, and luxury categories are still difficult to secure. This lack of financing is major barrier to entry, and will prevent a number of proposed projects from moving forward. With only a slow increase in supply, hotel occupancies should rebound as fast as the growth in demand permits. o An additional barrier to entry is the current discrepancy between market values and replacement costs for first-class and luxury hotels. In today's market, many upscale hotels are still selling for prices that are below what it would cost to develop a comparable hotel. As a result, there is little justification for building a new hotel when a similar, existing facility is available for sale at some fraction of the cost. Until the gap between market value and replacement cost narrows, there will be minimal new hotel construction in the upper-tier segments. The market values and replacement costs of budget and economy hotels have been in equilibrium for several years which is another reason why new development is proceeding in these segments. o The U.S. economy continues to improve, which suggests that more people are traveling. Many people curtailed their travel plans during the recent recession, and there is likely to be pent-up demand that will be released as consumer confidence escalates. o Minimal additions to the hotel supply coupled with growth in demand should result in further improvement in occupancies during the next several years. HVS International, Mineola, New York Overview of External Forces 46 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= o As shown by the historical data, hotel room rates rise rapidly as occupancies escalate. The most frequent complaint that owners and operators had during the recent recession was their inability to achieve average rate gains. Starting in 1994, gains in hotel room rates returned to levels in excess of inflation, foreshadowing enhanced profitability. In real dollars, hotel room rates are expected to return to 1988 levels by 1998. This is a good indication that hotel values will return to record levels in the next two to four years. o The low cost of capital is another factor that tends to enhance value. Because capitalization rates are tied directly to the price of capital, the lower the cost, the lower the cap rate and the higher the value. The cost of hotel debt capital averaged 10.5% in 1990. Today, similar financing is available at 8.5% to 9.5%. Recent hotel sales support the downward trend in capitalization rates. o Government regulations are becoming increasingly expensive for the U.S. hotel industry. A national health care policy could force small operators to provide better benefits for many more employees, particularly the part-time workers who are used extensively by hotels and restaurants. Environmental laws are becoming stricter and will require hotels to implement recycling, reuse, and conservation procedures. Congress has limited deductions for meals and entertainment expenses, which increases the cost of doing business in hotels and restaurants. Local municipalities use hotel rooms taxes as a source of revenue for general use, and the hotel rooms tax is so high in some areas that it has driven away demand. This is particularly true with respect to meetings and conventions, which can be held in cities that tax accommodations at a lower rate. o Improved technology is rapidly changing the way business is conducted. During the next decade, advances such as video communication, enhanced data transfer, and faster transportation are expected to limit the need for face-to-face meetings and shorten the time that executives are away from their offices. Commercial hotels are bound to be influenced by this trend. Conclusion Interest in hotel acquisition has increased significantly during the past several years. Buyers have concluded that future earnings trends are likely to be favorable, and the risks posed by overbuilding or an economic downturn are small. Some sellers are holding their properties until prices reach a higher level. Consequently, we believe there is pent-up desire to sell, once HVS International, Mineola, New York Overview of External Forces 47 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= prices begin to approach levels that allow the existing (or restructured) debt to be paid off. The fact that numerous buyers are chasing very few acquisition opportunities has had a favorable impact on recent sales prices. For buyers to be successful in this highly competitive market, their projected operating results must take into account at least a portion of any upside created from improved performance, particularly if the improvement can be readily achieved through management efficiencies. Capitalization rates based on historical operating income have fallen during the past several years. Hotel buyers in today's market must be aggressive in all of their acquisition assumptions. As a result, hotel values in some parts of the country are approaching the levels registered during the mid-1980s, and a full recovery is expected to occur in the next two to four years. HVS International, Mineola, New York Lodging Market Supply and Demand 48 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 6. Lodging Market Supply and Demand Analysis MARKET FOR TRANSIENT ACCOMMODATIONS The market for transient accommodations is an all-encompassing term referring to the many types of travelers who use lodging facilities in a given area. These travelers represent the market's accommodated room night demand. This section will begin with an analysis of historical demand trends to determine what changes have occurred; the historical number of competitive hotel rooms will then be estimated to evaluate local supply trends. Areawide occupancy levels can be calculated based on the number of hotel rooms available in the market and the demand for lodging accommodations. The total hotel room night demand will be divided into individual market segments to allow us to forecast growth rates based on the economic and demographic data set forth earlier in this report. Historical Supply and Demand Data Historical supply and demand data compiled by Smith Travel Research (STR) would typically be utilized to determine lodging trends for the Middletown hotel market. However, of the four competitive properties in the subject market, only two contribute to Smith Travel Research. Therefore, in order to provide an overview of the local hotel market, the data compiled by STR includes not only the Middletown market area, but the Orange County hotel market as well. The Orange County data considers the trends of hotels located in its three main cities - Middletown, Newburgh, and Port Jervis - as well as the neighboring townships. Because the STR data scrutinizes a less concentrated group of hotels, the results presented are not necessarily representative of the local Middletown/Wallkill hotel market, but rather, are reflective of the general trends in the region over the past seven years. The Smith Travel Research information is presented in the following table, along with the marketwide occupancy, average rate, and rooms revenue per available room (RevPAR). RevPAR is calculated by multiplying occupancy by average rate, and provides an indication of how well rooms revenue is being maximized. HVS International, Mineola, New York Lodging Market Supply and Demand 49 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 6-1 Historical Room Supply and Demand Trends (STR) - --------------------------------------------------------------------------------
1989 1991 1991 1992 1993 1994 1995 - ------------------------------------------------------------------------------------------------------------- Number of Rooms 836 868 964 964 964 964 964 Annual Guestroom Supply 305,140 316,916 351,860 351,860 351,860 351,860 351,860 Percent Change -- 3.9% 11.0% 0.0% 0.0% 0.0% 0.0% Room Night Demand 206,580 218,038 226,950 236,802 223,431 224,839 232,931 Percent Change -- 5.5% 4.1% 4.3% (5.6)% 0.6% 3.6% Occupancy 67.7% 68.8% 64.5% 67.3% 63.5% 63.9% 66.2% Percent Change -- 1.6% (6.3)% 4.3% (5.6)% 0.6% 3.6% Average Rate $59.10 $57.28 $54.46 $54.32 $54.53 $55.77 $57.14 Percent Change -- (3.1)% (4.9)% (0.3)% 0.4% 2.3% 2.5% RevPAR $40.01 $39.41 $35.13 $36.56 $34.63 $35.64 $37.83 Percent Change -- (1.5)% (10.9)% 4.1% (5.3)% 2.9% 6.1%
Year-to-Date ------------------- Average Annual Compounded Growth 1995 1996 1989 - 1995 - ---------------------------------------------------------------- Number of Rooms 964 964 Annual Guestroom Supply 234,252 234,252 Percent Change -- 0.0% 2.4% Room Night Demand 153,904 167,490 Percent Change -- 8.8% 2.0% Occupancy 65.7% 71.5% Percent Change -- 8.8% -0.4% Average Rate $56.94 $57.76 Percent Change -- 1.4% -0.6% RevPAR $37.41 $41.30 Percent Change -- 10.4% -0.9% The 128-unit Comfort Inn Newburgh opened in 1990. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Lodging Market Supply and Demand 50 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= It is important to note some limitations of the STR data. Hotels are occasionally added to or removed from the sample, and not every property reports data in a consistent and timely manner; these factors can influence the overall quality of the information by skewing the results. These inconsistencies may also cause the STR data to differ from the results of our competitive survey. Nonetheless, we find that hotel buyers often rely on STR statistics, and thus, they are considered relevant to this study. As shown in the previous STR table, room night demand has increased at an average annual compounded rate of 2.0% over the period of 1989 to 1995. Concurrently, the areawide supply of guestrooms increased by 2.4%; the imbalance between supply and demand resulted in a 0.4% decrease in occupancy over the six-year period. The average annual compounded rate of 2.0% reflects the increase in demand from 1989 to 1995. However, during 1995 and 1996, local highway expansion resulted in an influx of construction contractors needed for this construction project, which benefited the subject property's local hotel market - particularly, the Super 8 Motel on State Route 211. A majority of the impact of this project was realized in 1996, and explains the large 1996 year-to-date 8.8% increase in room night demand. However, demand from construction workers also influenced 1995, when demand increased by 3.6% over the previous year. Excluding this data from the range, the average annual compounded rate from 1989 to 1994 is only 1.7%. On a calendar-year basis, guestroom supply increased from 836 rooms in 1989 to 868 rooms in 1990, and again to 964 rooms in 1991, as a result of the opening of the 128-unit Comfort Inn Newburgh in October of 1989, which equates to a 15% increase in supply. Concurrently, demand increased by only 9.8%, with the result that occupancy fell by 6.3% in 1991, to 64.5%. The moderate increase in demand which accompanied the opening of the new rooms suggests that the area was then experiencing a limited amount of unaccommodated demand; this interpretation is consistent with the level of occupancy which characterized the market in 1989 and 1990. However, the underlying strength of the market is reflected by the fact that, in 1991, the area did experience growth. In most markets throughout the U.S., 1991 was a year of decreasing demand, due to the combined effects of the deepening national recession and the Gulf War. The data illustrates a 3.1% decrease in average rate in 1990 and a further 4.9% decrease in average daily rate in 1991. These decreases reflect the lower rates offered at the new Comfort Inn, as well as a general increase in HVS International, Mineola, New York Lodging Market Supply and Demand 51 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= rate sensitivity throughout the market. This latter trend, which is directly attributable to the national recession, continued into 1992, when areawide average rates fell by a further 0.3%. Demand recovered in 1992, rising by 4.3%. However, in 1993, demand fell by 5.6%, as the local economy suffered when three major employers in the area - Audas Automotive, Johnson Controls, and the Orange County Shopping Plaza - closed. In addition, the previous owner of the subject property declared bankruptcy, and the Howard Johnson - Middletown was foreclosed by the bank. Occupancy at the hotel, which comprises 12.1% of the areawide supply, reportedly fell dramatically. As a result of these events, in 1993, the occupancy dropped by 5.6%, and a similar decline of 5.3% was realized in RevPAR. In 1994, demand grew by 0.6%, and both occupancy and average rate began to recover from the events of the early 1990s. Further increases were achieved in 1995, although, as previously mentioned, some of the 3.6% increase in demand realized in 1995 is attributable to construction crew activity; the same is true of the 8.8% increase reported for the year-to-date 1996. A positive trend indicated by the more recent data is the increase in average rates which has occurred in 1995 and year-to-date 1996. The construction demand is characterized by extremely low rates, well below the areawide average of $57.00. Thus, the fact that the average rate has climbed during these two years suggests that local hotels are achieving rate growth in all other segments of the market. Demand Analysis Using Market Segmentation For the purpose of demand analysis, the overall market is divided into individual segments based on the nature of travel. Although a market may have various segments, the three primary classifications occurring in most areas are commercial, meeting and group, and leisure. Market segmentation is a useful procedure because individual classifications often exhibit unique characteristics in terms of growth potential, seasonality of demand, average length of stay, double occupancy, facility requirements, price sensitivity, and so forth. By quantifying the room night demand by market segment and analyzing the characteristics of each segment, the overall demand for transient accommodations can be projected. Lodging demand in the Middletown, New York area is generated primarily by the following three market segments. HVS International, Mineola, New York Lodging Market Supply and Demand 52 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Segment 1 Commercial Segment 2 Meeting and Group Segment 3 Leisure Based on our fieldwork, area analysis, and knowledge of the local lodging market, we estimate the 1996 distribution of accommodated hotel room night demand as follows. ================================================================================ Table 6-2 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- 1996 Annual Room Night Demand (Rounded) ------------------------------------------------------- Percentage Percentage Market Segment Marketwide of Total Subject Property of Total - -------------------------------------------------------------------------------- Commercial 57,000 63% 16,000 59% Meeting and Group 8,000 9 3,000 11 Leisure 25,000 28 8,000 30 ------ --- ------ --- Totals 90,000 100% 27,000 100% - -------------------------------------------------------------------------------- According to the previous table, commercial demand currently predominates in the local market area, accounting for approximately 63% of the room night demand, compared to the 59% level registered for this segment at the subject property. Leisure demand follows, with a 28% share of the room night demand, compared to the subject property's 30% share. Meeting and group generates a 9% share of the market, which is similar to the Howard Johnson's 11% total in this segment. Using the distribution of accommodated hotel demand as a starting point, we will analyze the characteristics of each market segment in an effort to determine future trends in room night demand. Commercial Segment The commercial segment consists of individual business people who are visiting various firms in the subject property's market. Commercial demand in the subject property's market is generated primarily by individual business people visiting local firms, manufacturing plants, and retail companies such as Nationwide Insurance, Reynold's Metals Company, Vac Service Corporation, and the retail stores at the Galleria Mall and other local retail centers. A significant portion of commercial demand is generated by HVS International, Mineola, New York Lodging Market Supply and Demand 53 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= construction contractors, due to the volume of road construction currently occurring on Middletown's local highways. Other customers include business travelers passing through the area en route to another destination who stop at local highway-oriented lodging facilities because they provide a convenient resting point. In addition, a smaller portion of commercial demand is comprised of federal and state employees; this government portion is divided between Orange County government offices and the Federal and State Prisons, located in Otisville. We estimate that commercial demand equates to approximately 59% of the subject property's total occupancy. Because the market lacks a selection of full-service lodging facilities that appeal to corporate guests, the subject property should remain competitive in this segment. Commercial demand is strongest Monday through Thursday nights, declines significantly on Friday and Saturday, and increases somewhat on Sunday. The typical length of stay ranges from one to three days, and the rate of double occupancy is a low 1.2 to 1.3 people per room. Commercial demand is relatively constant throughout the year, although some declines are noticeable in late December and during other holiday periods. In general, commercial travelers are not overly rate-sensitive, and will make use of a hotel's food and beverage outlets and recreational facilities. The commercial segment represents a highly desirable and lucrative market that provides a consistent level of demand at relatively high room rates. According to the Chamber of Commerce, in the subject property's market area, a total of 24.5 million square feet of office, manufacturing, and distribution space has been zoned and approved; of this, only 11 million square feet have yet been developed. Growth in total employment has been increasing in the past two years. Currently, the area's unemployment rate is 4.0% - an improvement over last year's 4.5% level. Over 11,000 people are employed in local commercial industries, creating an annual payroll of over $350,000,000. According to sources at the Orange County Partnership, numerous large businesses have recently relocated to the area, and additional businesses are either relocating to Orange County or expanding in the near future. It is estimated that these relocations and expansions will generate approximately 300 new jobs. Several of these companies include Amscan, Remee Products, Metroplex, and Fleurcham. Over the long term, these trends should support a moderate increase in commercial demand. HVS International, Mineola, New York Lodging Market Supply and Demand 54 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Smith Travel Research estimates that total hotel demand in the Orange County market rose by 3.6% in 1995 and by 8.8% in 1996. As previously mentioned, much of this growth is attributed to the influx of demand from construction crews. Because this project is expected to be completed by the end of 1996, we forecast that commercial demand will decrease by 3% in 1997, due to the eventual loss of construction contractors who have completed their work. Thereafter, we project that commercial demand will grow by 3% in 1998 and 1999, and that it will stabilize at 2% thereafter. Meeting and Group Segment The meeting and group market includes meetings, seminars, conventions, trade association shows, and similar gatherings of ten or more people. Peak convention demand typically occurs in the spring and fall. Because of vacations, the summer months represent the slowest period for this market segment; winter demand varies. The average length of stay for typical meetings and groups ranges from three to five days. Most commercial groups meet during the weekday period of Monday through Thursday, but associations and social groups will sometimes gather on weekends. Commercial groups tend to have a low double occupancy of 1.3 to 1.5 people per room, while social groups are likely to have double occupancy rates ranging from 1.5 to 1.9. A majority of the meeting and group demand in the subject property's area is generated by local businesses in the form of exhibits, meetings, seminars, and training sessions. Additional meeting and group demand is generated by non-commercial organizations such as professional societies, state associations, social and theatrical groups, tour groups, sports teams and weddings. Examples of groups visiting the Howard Johnson include theatrical and musical groups that perform at the local Paramount and Lician theaters, as well as a yearly fireman's convention. Meeting and group patronage is quite profitable for hotels. Although room rates are discounted for large groups, the property benefits from the use of meeting space and the revenues generated by in-house banquets and cocktail receptions. Facilities that are necessary to attract meetings and groups include function areas with adequate space for breakout, meals, and receptions; recreational amenities; and a sufficient number of guestrooms to house the attendees. Future meeting and group demand is closely related to growth in the commercial segment. Because most meetings have either a direct or an indirect business purpose, the economic considerations that have an impact on HVS International, Mineola, New York Lodging Market Supply and Demand 55 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= commercial travel also affect meeting and group demand. The exception is non-commercial meetings, which are tied to the economic factors that influence leisure travel. It should be noted that meetings and similar events are booked in advance, and thus, growth in this segment tends to lag slightly behind increases in commercial demand. In light of the above information and the relevant economic and demographic trends, we estimate that meeting and group demand in the subject property's market area will increase by 2% in 1997 through 1999, and that it will stabilize at 1% in 2000 and throughout the remaining projection period. Leisure Segment The leisure market segment consists of individuals and families who are spending time in the area or passing through en route to other destinations. Their travel purposes may include sightseeing, recreation, visiting friends and relatives, or numerous other non-business activities. Leisure demand is strongest Friday and Saturday nights and all week during holiday periods and the summer months. These peak periods are negatively correlated with commercial visitation, underscoring the stabilizing effect of capturing weekend and summer tourist travel. The typical length of stay ranges from one to four days, depending on the destination and travel purpose, and the rate of double occupancy generally ranges from 1.8 to 2.5 people per room. Leisure travelers tend to be the most price-sensitive segment in the lodging market. They often prefer low-rise accommodations where parking is convenient to the rooms, and they typically demand extensive recreational facilities and amenities. Ease of highway access and proximity to tourist attractions are important locational considerations. Leisure demand in the subject property's market is generated by the attractions associated with the Hudson Valley region, including West Point Military Academy, several wineries, fall foliage tours, summer camps, and several Orange County festivals and fairs. Local attractions include Orange County Fairgrounds and Motor Speedway. Most of the leisure travelers who visit the subject property's area arrive during the summer and fall months because of the weather and scenery. During these periods, area hotels frequently reach maximum capacity. Future leisure demand is related to the overall economic health of the nation. Trends showing changes in state and regional unemployment and disposable personal income often have a strong impact on non-commercial visitation. Traffic counts on nearby highways and attendance at local attractions can also form a basis for projections. HVS International, Mineola, New York Lodging Market Supply and Demand 56 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Two indicators of leisure demand, which include traffic counts and airport statistics, have produced growth rates ranging between 1.9% and 4.5% in the past eight years. Based on this data, we estimate that leisure demand in the Middletown market area will increase at an average annual compounded rate of 1% over the projection period. Conclusion The purpose of segmenting the lodging market is to define each major type of demand, identify customer characteristics, and estimate future growth trends. Starting with an analysis of the local area, three segments were defined as representing the subject property's lodging market. Various types of economic and demographic data were then evaluated to determine their propensity to reflect changes in hotel demand. Based on this procedure, we forecast the following average annual compounded market segment growth rates. ================================================================================ Table 6-3 Average Annual Compounded Market Segment Growth Rates - -------------------------------------------------------------------------------- Annual Compounded Growth Rate ----------------------------------------- 1997 1998 1999 2000 2001 2002 - ------------------------------------------------------------------------------- Commercial -3.0% 3.0% 3.0% 2.0% 2.0% 2.0% Meeting and Group 2.0 2.0 2.0 1.0 1.0 1.0 Leisure 1.0 1.0 1.0 1.0 1.0 1.0 Annual Average Growth 1.9% 13.1% 2.1% 1.5% 1.5% 1.5% - -------------------------------------------------------------------------------- These growth rates will be used in subsequent sections of this study to forecast changes in lodging demand. COMPETITION An integral component of the supply and demand relationship that has a direct impact on the availability of lodging demand is the current and anticipated supply of competitive lodging facilities. The Orange County area is served by numerous hotels and motels, a majority of which are located in the principal Cities of Middletown, Newburgh, and Port Jervis. The balance of the county's rooms inventory is situated in the neighboring townships, generally along the highways which traverse Orange County. The subject property is situated in the Middletown market. We have identified three properties that are considered primarily competitive with the Howard Johnson - Middletown. Including those of the subject property, these primary competitors contain a total of 355 rooms. HVS International, Mineola, New York Lodging Market Supply and Demand 57 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Primary Competitors The following table summarizes the important operating characteristics of the primary competitors. This information was compiled from personal interviews, inspections, lodging directories, and our in-house library of operating data. The table also sets forth each property's penetration factors; penetration is the ratio between a specific hotel's operating results and the corresponding data for the market. If the penetration factor is greater than 100%, the property is performing better than the market as a whole; conversely, if the penetration is less than 100%, the hotel is performing at a level below the marketwide average. HVS International, Mineola, New York Lodging Market Supply and Demand 58 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 6-4 Primary Competitors - --------------------------------------------------------------------------------
Estimated 1996 Market Segmentation Estimated 1995 Meeting Meeting ----------------------- -------------------------- Year Number Space Space/Room Meeting Average Property/Location Opened of Rooms (Sq. Ft.) (Sq. Ft.) Comm. & Group Leisure Occupancy Rate RevPAR - ------------------------------------------------------------------------------------------------------------------------------ Subject Property 551 Route 211 East 1978 117 1,731 15 60% 10% 30% 60.9% $49.86 $30.36 Holiday Inn 122 Crystal Run Road 1973 102 2,450 24 60 20 20 68.0 76.00 51.68 Super 8 563 Route 211 East 1981 82 0 0 70 0 30 75.0 39.00 29.25 Days Inn P.O.Box 279, Route 17 M 1988 54 0 0 65 0 35 68.0 55.00 37.40 - ------------------------------------------------------------------------------------------------------------------------------ Totals and Averages 355 1,045 10 63% 9% 28% 67.3% $55.45 $37.30 Estimated 1996 -------------------------------------------------------- Average Occupancy Yield Property/Location Occupancy Rate RevPAR Penetration Penetration - --------------------------------------------------------------------------------------- Subject Property 551 Route 211 East 62.0% $54.00 $33.48 89.5% 86.1% Holiday Inn 122 Crystal Run Road 68.0 76.00 51.68 98.2 132.9 Super 8 563 Route 211 East 82.0 37.00 30.34 118.4 78.0 Days Inn P.O.Box 279, Route 17 M 68.0 58.00 39.44 98.2 101.4 - --------------------------------------------------------------------------------------- Totals and Averages 69.3% $56.15 $38.89 100.0% 100.0%
- -------------------------------------------------------------------------------- [GRAPHIC OMITTED] COMPETITION MAP HVS International, Mineola, New York Lodging Market Supply and Demand 59 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Our survey of the primarily competitive hotels in the Middletown market shows a representation of nationally recognized franchised lodging chains, situated along the state highways, accounting for 355 rooms in the area. These properties range in size from 54 rooms at the Days Inn to 117 rooms at the Howard Johnson - Middletown. Their average age is roughly 16 years. The market demand has a predominantly commercial orientation; in 1996, this segment contributed 63% of the overall occupancy. The leisure segment comprised 28% of the total, followed by the meeting and group segment (at 9%). In 1996, the primary competitors are expected to achieve an annual overall occupancy of 69.3% at an average rate of $56.15, yielding RevPAR of $38.89. The Super 8 achieved the highest occupancy of the primary competitors, at 82%, while the Holiday Inn is estimated to have received the highest average rate and RevPAR, at $76.00 and $51.68, respectively. It should be noted that the Super 8's high occupancy and low rates are largely attributable to the fact that it captured a majority of the local construction clientele. The subject property has been underperforming the market in terms of occupancy in the past two years. According to Table 6-4, the Howard Johnson's estimated occupancies in 1995 and 1996 of 60.9% and 62.0%, respectively, are lower than those of its primary competitors. As result, the subject property's market occupancy penetration is only 89.5%. A large factor causing this below-average performance is most likely because of the recent change in management in 1994 and the frequent changes in general managers thereafter, the lack of an cohesive on-property marketing effort, and the inconvenience caused by the renovations which occurred in 1995 and 1996. However, it should be noted that the completion of the recent renovations have allowed the Howard Johnson to increase its rates from $49.86 in 1995 to $54.00 in 1996. Each primary competitor was inspected and evaluated. Descriptions of our findings are presented below. Holiday Inn The Holiday Inn is a two-story, interior-corridor, full-service hotel that is located at Exit 122, off State Route 17, on Crystal Run Road. The Holiday Inn's somewhat remote and secluded location inhibits highway-oriented patronage; however, all of the competitors suffer from poor visibility, and therefore, this factor is not considered to be a substantial competitive disadvantage for this property. Facilities include 102 guestrooms, a restaurant, a lounge, and both an indoor and an outdoor pool. HVS International, Mineola, New York Lodging Market Supply and Demand 60 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The Holiday Inn has been completing major renovations to the interior of its property since the summer of 1995. These renovations have included new soft goods in the guestrooms, new carpeting and paint in the guestroom corridors, new carpeting and furniture fabric in the restaurant, and a completely renovated lobby area, as well as new carpeting in the meeting rooms. The property is in very good condition, and is owned and operated by Broadway Middletown Hotel Corporation. The Holiday Inn derives approximately 60% of its 1996 room night demand from commercial travelers, while the leisure and the meeting and group segments each contribute 20% of its accommodated demand. In 1996, the Holiday Inn is expected to achieve a 68% occupancy, and the market-leading average rate of $76.00. Super 8 The Super 8 is an 82-room, two-story, interior-corridor, economy lodging facility located on Route 211, approximately one-eighth of a mile northeast of the subject property. Recently, the hotel renovated half of its guestrooms with new carpeting and wall vinyl. The remaining 41 rooms are scheduled for completion by 1997. The Super 8 was constructed in 1981, and is in good condition. Currently, it is owned and operated by Banta Motel Company, Inc. In 1996, the Super 8 achieved an occupancy of 82%, the highest in the market, with an average rate of $37.00, yielding a RevPAR of $30.34. We estimate that in 1996, the Super 8 derived approximately 70% of its occupancy from commercial travelers, and that leisure demanded contributed 30% of the total. Meeting and group demand is not represented at this property, which contains no meeting space. Days Inn The Days Inn is the smallest of the competitors in the market, with only 54 rooms. This one-story, exterior-corridor property suffers from poor visibility from Interstate 84. It is located approximately six miles southwest of the subject property, on Route 17M, and approximately one-half mile southwest of the Interstate 84/Route 17M interchange. Most recently, the Days Inn completely gutted and renovated its four basement-level guestrooms, adding new windows, carpeting and soft goods. The remaining of the Days Inn's guestrooms have not been recently renovated, and are in fair condition, compared to the subject property's guestroom units. In addition, new floor tile was added to the lobby/ reception area of this property. HVS International, Mineola, New York Lodging Market Supply and Demand 61 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= In 1996, the Days Inn derived approximately 65% of its occupancy from commercial travelers, while the leisure segment accounted for 35% of the total demand. Like the Super 8, this property draws no meeting and group demand, as it has no meeting space. The Days Inn achieved an occupancy of 68% and an average rate of $58.00, yielding a RevPAR of $39.44. Proposed Competitors It is important to consider any new hotels that may have an impact on the subject property's operating performance. Based on our fieldwork in the market and our discussions with local hotel operators, developers, and government officials, we have identified two properties that are proposed or under development in the Middletown and Goshen areas. The first hotel project anticipated to impact the subject property's market is the 98-room Best Western Goshen located approximately six miles southeast of the subject property, on Hatsfield Lane, in the Westgate Business Park. This three-story property will have approximately 950 square feet of meeting space, an indoor pool, and a small coffee shop offering a continental breakfast to guests. Presently, it is understood that the property will not offer banquet service, and is scheduled to open on March 1, 1997. This hotel is expected to be secondarily competitive with the subject property. Based on our review of the location and proposed facilities, we anticipate that the Best Western will be 25% competitive with the Howard Johnson - Middletown._ The second of the two proposed hotels is located within the subject property's immediate competitive market - a 100-unit Hampton Inn, which is proposed for development on a site on Crystal Run Road, near the Ballard Road intersection and the Holiday Inn. This project is being developed by Hugh McFarland. According to sources with Promus, this project was approved for development as a Hampton Inn in July of 1995, and is scheduled to begin construction in April of 1997, with an opening scheduled for January of 1998. Officials with the Town of Wallkill report that the project has received the required zoning and planning approvals. The Hampton Inn is expected to be directly competitive with the subject property because of the proximate location and anticipated rate position of the new facility. Moreover, the Hampton Inn brand is extremely strong, and generally impacts older hotels that hold less effective brand affiliations, such as the subject property. As a result, the opening of the Hampton Inn is expected to have a direct impact on the future occupancy of the Howard Johnson - Middletown. However, this impact will be somewhat mitigated HVS International, Mineola, New York Lodging Market Supply and Demand 62 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= by the fact that the Hampton Inn brand is expected to induce some additional demand into the market area through the central reservation system. In order to recognize the probable impact of the development of the Hampton Inn on the subject property, this hotel has been included in our room night analysis. Currently, the City of Middletown is defined by a hotel market that consists of mostly economy-class lodging located on the outskirts of the city, in the Town of Wallkill. Because of these underlying factors, as well as the area's motivation to increase local tourism and the economy, regional land owners and economic development coordinators are currently striving to attract both a downtown Middletown hotel to promote the retail and business locations within the city limits and a new moderate or first class hotel located on the Galleria Mall property. Although we have not explicitly considered the future existence of such hotels into our analysis, it is possible that properties of these types may be erected in the distant future. Conclusion The competitive environment encompassing the subject property is limited in scope, with solely full-service and economy lodging facilities comprising the market. The competitive set contains a total of 355 rooms, and is expected to achieve an overall 1996 occupancy of 69.3%, and an average rate of $56.15. All of the competitive properties derive at least 60% of their demand from the commercial market segment. Leisure demand is strong in the summer and fall, and is accommodated at all of the properties in the subject property's competitive set, while meeting and group demand is limited to the subject property and the Holiday Inn. HVS International, Mineola, New York Projection of Occupancy and 63 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 7. Projection of Occupancy and Average Rate Historical Operating Performance The following table sets forth the subject property's historical occupancy, average rate, and RevPAR. For the purpose of comparison, we have also presented corresponding data (as provided by Smith Travel Research) for the competitive hotels described in the previous section. In addition to the annual percent change calculations, we have determined the subject property's occupancy, average rate, and RevPAR penetration factors. As detailed earlier in the report, the subject property was purchased in 1994. Because of the recent change in ownership and management, many of the historical records are not available to the current owner and operator. Because of the lack of historical data, we were provided with only the operating history for the last nine months of 1994; therefore, we have insufficient data to comment on the historical operating performance of the subject property prior to the indicated period. Based on the information provided and our discussions with on-site management, 1994 occupancy was estimated to be 58.6%, at an average rate of $49.09. Please note that these figures are different from those presented later in the hotel's 1994 operating history, due to the fact that occupancy and average rate were estimated for the 1994 months of January through April. As previously discussed, the subject property underwent a renovation once the property was purchased. As a result, management has been able to slightly increase average rate, and therefore, it is reasonable to assume that average rate was higher in 1994 than in previous years. In terms of areawide performance in occupancy and average rate, data and discussions were outlined in the previous section. HVS International, Mineola, New York Projection of Occupancy and 64 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-1 Historical Trends - -------------------------------------------------------------------------------- Year-to-Date Through September ------------------------------ 1994 1995 1995 1996 - -------------------------------------------------------------------------------- Subject Property Occupancy 58.6% 60.9% 59.9% 62.0% Percent Change -- 4.0% -- 3.5% Occupancy Penetration 91.7% 92.0% 91.2% 86.7% Average Rate $49.09 $49.86 $49.30 $53.69 Percent Change -- 1.6% -- 8.9% Average Rate Penetration 88.0% 87.3% 86.6% 93.0% RevPAR $28.75 $30.35 $29.55 $33.30 Percent Change -- 5.6% -- 12.7% RevPAR Penetration 80.7% 80.2% 79.0% 80.6% Areawide (STR) Occupancy 63.9% 66.2% 65.7% 71.5% Percent Change -- 3.6% -- 8.8% Average Rate $55.77 $57.14 $56.94 $57.76 Percent Change -- 2.5% -- 1.4% RevPAR $35.64 $37.83 $37.41 $41.30 Percent Change -- 6.1% -- 10.4% - -------------------------------------------------------------------------------- As illustrated by the above table, the Middletown, New York market experienced an occupancy increase in 1995, followed by an additional increase in year-to-date 1996. In keeping with the current market trends, the subject property's occupancy also experienced an increase from 58.6% in 1994 to 60.9% in 1995 - a level above the areawide occupancy. Marketwide average rate grew from $55.77 in 1994 to $57.14 in 1995, marking a growth of 2.5%. The subject property, in turn, increased its average rate from $49.06 in 1994 to $49.86 in 1995, marking an increase of only 1.6%. On a RevPAR basis, the subject property fell below the market area's growth rate, with a 5.7% increase from 1994 to 1995, compared to the market's percentage increase of 6.1%. HVS International, Mineola, New York Projection of Occupancy and 65 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= A hotel's occupancy should also be evaluated on a monthly basis to identify seasonality trends. The following table sets forth the subject property's monthly occupancy from 1994 through year-to-date 1996. The first three months of 1994 have been estimated based on information provided by the subject property's management. ================================================================================ Table 7-2 Subject Property's Monthly Occupancy History - -------------------------------------------------------------------------------- 1994 1995 1996 ---- ---- ---- Occupancy % Change Occupancy % Change Occupancy % Change ------------------- ------------------- ------------------- January 44.9% -- 42.2% (6.0)% 42.4% 0.5% February 45.0 -- 41.5 (7.8) 42.4 2.1 March 52.7 -- 47.4 (10.1) 64.3 35.5 April 54.0 -- 51.0 (5.6) 58.2 14.1 May 56.6 -- 59.2 4.6 66.9 13.1 June 63.4 -- 80.3 26.7 75.0 (6.6) July 64.7 -- 79.9 23.5 72.9 (8.7) August 76.3 -- 76.5 0.3 72.4 (5.4) September 73.9 -- 71.7 (3.0) 65.8 (8.3) October 68.5 -- 74.3 8.5 0.0 0.0 November 58.8 -- 65.4 11.2 0.0 0.0 December 43.2 -- 40.1 (7.2) 0.0 0.0 ---- ---- ----- --- --- Full Year 58.6% -- 60.9% 4.0% NA % NA % - -------------------------------------------------------------------------------- On a monthly basis, the subject property's recorded occupancy indicates the seasonal trends that it experiences, which, in general, are identical to those seasons experienced by other area hotels. Peak months realized in the subject property's calendar year are June, July, August, and October, since these months are popular for the leisure market. This popularity is reflected in the recorded occupancy percentages seen above, ranging in level between the mid-60s and the low 80s. Shoulder months include March, April, May, and November, with occupancies ranging in the low 50s to the mid-60s. The slower winter months include December, January, and February, and reflect occupancies in the 40% range. Occupancy levels for 1996 have been recorded on a year-to-date through September basis. Premise of the Projections To a certain degree, occupancy and rate attainment can be manipulated by management. For example, hotel operators may choose to lower rates in an effort to maximize occupancy. Our forecasts reflect an operating strategy HVS International, Mineola, New York Projection of Occupancy and 66 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= that we believe would be implemented by competent hotel management to achieve an optimal mix of occupancy and average rate. Projected Room Night Demand Lodging demand and occupancy can be projected through a process known as room night analysis. A room night is a unit of hotel demand that equals one room that is occupied for one night. After estimating the number of room nights a hotel can be expected to attract during a 12-month period, we can determine occupancy by dividing the number of room nights of demand captured by the number of room nights available (calculated as the room count x 365). The total annual number of room nights occupied in the competitive hotels equates to the market's accommodated room night demand, as shown in the following table. These figures are based on an estimated year end 1996 basis. ================================================================================ Table 7-3 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- 1996 Annual Room Night Demand (Rounded) ------------------------------------------------------- Percentage Percentage Market Segment Marketwide of Total Subject Property of Total - -------------------------------------------------------------------------------- Commercial 57,000 63% 16,000 59% Meeting and Group 8,000 9 3,000 11 Leisure 25,000 28 8,000 30 ------ --- ------ --- Totals 90,000 100% 27,000 100% - -------------------------------------------------------------------------------- Latent Demand The above table illustrates the accommodated room night demand in the subject property's competitive market. Because this estimate is based on occupancies, it includes only those hotel rooms that were used by guests. Latent demand considers guests who could not be accommodated by the existing competitive supply, and can be divided into unaccommodated demand and induced demand. Unaccommodated Demand Unaccommodated demand refers to individuals who are unable to secure accommodations in the market because all of the local hotels are filled. These travelers must defer their trips, settle for less desirable accommodations, or stay in properties located outside the market area. Because this HVS International, Mineola, New York Projection of Occupancy and 67 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= demand did not yield occupied room nights, it is not included in the estimate of historical accommodated room night demand. Unaccommodated demand in the Middletown market area results from the high amount of weekend leisure travel taking place during peak summer months. Approximately 15% of this leisure market is unaccommodated, equating to approximately 3,759 room nights. ================================================================================ Table 7-4 1996 Accommodated and Unaccommodated Demand - -------------------------------------------------------------------------------- Accommodated Room Night Unaccommodated Unaccommodated Market Segment Demand Demand Room Night Demand - -------------------------------------------------------------------------------- Commercial 57,000 0.0% 0 Meeting and Group 8,000 0.0 0 Leisure 25,000 15.0 3,759 ------ ----- Totals 90,000 3,759 - -------------------------------------------------------------------------------- Induced Demand Induced demand represents the additional room nights that are expected to be attracted to the market following the introduction of a new demand generator. Situations that can induce demand include the opening of a new manufacturing plant, the expansion of a convention center, or the addition of a new hotel with a distinct chain affiliation or unique facilities. The Hampton Inn, scheduled to open in January of 1998, is expected to induce some additional demand in the commercial market through its central reservation system. Because of the Hampton Inn's reputation for being an extremely strong brand, it is estimated that approximately 9,125 induced room nights will be phased into the market annually, beginning in 1998. HVS International, Mineola, New York Projection of Occupancy and 68 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-5 Induced Demand Calculation - -------------------------------------------------------------------------------- 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Phase-in: 0% 100% 100% 100% 100% 100% Commercial 0 9,125 9,125 9,125 9,125 9,125 Meeting and Group 0 0 0 0 0 0 Leisure 0 0 0 0 0 0 ----- ----- ----- ----- ----- ----- Totals 0 9,125 9,125 9,125 9,125 9,125 - -------------------------------------------------------------------------------- Total Usable Room Night Demand Total usable room night demand is estimated by combining accommodated demand and usable latent demand. Usable latent demand is that portion of latent demand that can be absorbed based on the number of existing and proposed hotel rooms in the market. In 1997, the commercial market, which included construction employees, will decrease in volume due to the completion of the aforementioned road construction currently taking place on Route 211. The commercial room night demand growth rate is expected to decline by 3.0% in 1997 as a result. Thereafter, commercial growth rates are expected to increase once again in 1998, to 3.0%, until reaching a stabilized level of 2.0% in the Year 2000. The meeting and group room night demand is expected to increase annually at 2.0% until stabilizing in the Year 2000, at 1.0%. The leisure segment's room night demand growth is anticipated to remain stable, at 1.0%, throughout the projection period. Total annual forecasted growth rates range between 1.5% and 2.1%, except in 1998, when the annual growth rate will experience a significant increase. The additional room night contribution made by the new 98-room Best Western Goshen and the new 100-room Hampton Inn will account for this 13.1% gain. The following table shows the projected annual change in accommodated and usable room night demand in the subject property's competitive market. HVS International, Mineola, New York Projection of Occupancy and 69 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-6 Total Usable Room Night Demand - --------------------------------------------------------------------------------
Historical 1997 1998 1999 2000 2001 2002 2003 - ----------------------------------------------------------------------------------------------------- Commercial Growth Rate -- -3.0% 3.0% 3.0% 2.0% 2.0% 2.0% 2.0% Accommodated Demand 56,963 55,254 56,912 58,619 59,791 60,987 62,207 63,451 Usable Latent -- 0 9,125 9,125 9,125 9,125 9,125 9,125 Meeting and Group Growth Rate -- 2.0% 2.0% 2.0% 1.0% 1.0% 1.0% 1.0% Accommodated Demand 7,711 7,865 8,022 8,182 8,264 8,347 8,430 8,514 Usable Latent -- 0 0 0 0 0 0 0 Leisure Growth Rate -- 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% Accommodated Demand 25,061 25,312 25,565 25,821 26,079 26,340 26,603 26,869 Usable Latent -- 3,016 3,835 3,873 3,912 3,951 3,991 4,031 Totals Commercial 56,963 55,254 66,037 67,744 68,916 70,112 71,332 72,576 Meeting and Group 7,711 7,865 8,022 8,182 8,264 8,347 8,430 8,514 Leisure 25,061 28,328 29,400 29,694 29,991 30,291 30,594 30,900 ------ ------ ------- ------- ------- ------- ------- ------- TOTAL DEMAND 89,735 91,447 103,459 105,620 107,171 108,750 110,356 111,990 Annual Forecasted Growth -- 1.9% 13.1% 2.1% 1.5% 1.5% 1.5% 1.5%
- -------------------------------------------------------------------------------- Guestroom Supply In 1996, the competitive properties provided a total of 355 guestrooms. However, because of the new entrants - the 98-room Best Western Goshen and the 100-room Hampton Inn - an additional 198 guestrooms will be available to the public between mid-1997 and the beginning of 1998. The following table shows the projected competitive supply of available rooms and available room nights. To calculate the annual number of available room nights, the number of available rooms is multiplied by 365. HVS International, Mineola, New York Projection of Occupancy and 70 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-7 Available Rooms and Room Nights - -------------------------------------------------------------------------------- Total Overall Room Night Room Nights Competitive Year Demand Available Occupancy - -------------------------------------------------------------------------------- Historical 89,735 129,575 69% 1997 91,447 133,955 68 1998 103,459 172,280 60 1999 105,620 175,200 60 2000 107,171 175,200 61 2001 108,750 175,200 62 2002 110,356 175,200 63 2003 111,990 175,200 64 - -------------------------------------------------------------------------------- Overall Competitive Occupancy The overall competitive occupancy of the immediate market historically and in 1997 produce levels of 69% and 68%, respectively. In 1998, a significant decrease in marketwide occupancy is expected - to a level of 60%, reflecting the dilution of the room night supply by the new entrants. Thereafter, the marketwide occupancy is expected to remain a stable levels in the low- to mid-60 percent range. Competitive Index Analysis Competitive indexes are used to analyze the relative market position of each property on the basis of a particular demand segment. The index represents the number of times each year that one room is occupied by one type of traveler (e.g., commercial, meeting and group, or leisure), or the number of room nights actually accommodated per year, per room, per market segment. For example, if a hotel has a commercial competitive index of 190, each room in the property is occupied 190 times a year by a commercial traveler. The competitive index is calculated by dividing a hotel's annual accommodated room night demand in a particular market segment by that property's room count. Competitive indexes will be used to illustrate each property's position in the market based on its ability to compete with other local lodging facilities. Commercial Segment The historical commercial segment competitive indexes in the market ranged from 136 at the subject property to 210 at the Super 8_ - the most competitive property in the commercial market in 1996. The Days Inn followed in competitiveness, with an index of 161, while the Holiday Inn achieved a competitive index of 149. HVS International, Mineola, New York Projection of Occupancy and 71 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Because of the recent renovations to the subject property's guestrooms and its initiative to implement a more aggressive marketing strategy by hiring a full-time, on-property sales manager, the Howard Johnson's competitive index within the commercial market is expected to rise to 140 in 1997, and to gain an additional five points in 1998. In contrast, the Super 8 is expected to experience a decrease in its commercial competitive index; in 1997, its competitive index is expected to drop 20 points due to the loss, in that year, of road construction contractors, which is currently a significant portion of the Super 8's clientele. The proposed Hampton Inn and the Best Western Goshen will gradually become more competitive within the commercial market as they establish reputations for themselves. Ultimately, the Hampton Inn will achieve a competitive index of 200 in the Year 2000, becoming the market leader, while the Best Western is expected to stabilize with a 140 competitive index in 1999. The Holiday Inn and the Days Inn are not expected to experience any change within the commercial market. The following table shows the projected commercial segment competitive indexes of the competitive set. ================================================================================ Table 7-8 Commercial Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Subject Property 136 140 145 145 145 145 145 Holiday Inn 149 149 149 149 149 149 149 Super 8 210 190 190 190 190 190 190 Days Inn 161 161 161 161 161 161 161 Proposed Hampton Inn 0 0 180 190 200 200 200 Best Western Goshen 0 120 130 140 140 140 140 - -------------------------------------------------------------------------------- Meeting and Group Segment The subject property's guestroom and meeting room renovations are once again responsible for the slight improvement in the Howard Johnson meeting and group competitive index, which rises two points in 1997 and stabilizes thereafter. The Best Western Goshen, entering the market in July, 1997, is not expected to be largely competitive within the subject property's immediate market. The hotel's competitiveness within the meeting and group segment begins at a level of 10, which increases to a level of 15 as it establishes itself in the market. The following table illustrates the competitive indexes in the meeting and group segment. HVS International, Mineola, New York Projection of Occupancy and 72 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-9 Meeting and Group Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Subject Property 23 25 25 25 25 25 25 Holiday Inn 50 50 50 50 50 50 50 Super 8 0 0 0 0 0 0 0 Days Inn 0 0 0 0 0 0 0 Proposed Hampton Inn 0 0 0 0 0 0 0 Best Western Goshen 0 10 12 15 15 15 15 - -------------------------------------------------------------------------------- Leisure Segment The only noticeable changes within the leisure market are the competitive indexes of the new and proposed hotels. Again, as the proposed Hampton Inn and the Best Western Goshen establish their reputations within the market, we expect that they will each experience a rise in competitiveness. The proposed Hampton Inn's competitive level is expected to grow from 80 to 90 between 1998 and 2001, when it will share the market leader position with the Super 8, while the Best Western Goshen will realize growth from 50 to 60 between 1997 and 1999. The proposed Hampton Inn is expected to achieve higher indexes than the Best Western because of its closer proximity to the subject property. The following table illustrates the competitive indexes in the leisure segment. ================================================================================ Table 7-10 Leisure Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Subject Property 68 68 68 68 68 68 68 Holiday Inn 50 50 50 50 50 50 50 Super 8 90 90 90 90 90 90 90 Days Inn 87 87 87 87 87 87 87 Proposed Hampton Inn 0 0 80 85 90 90 90 Best Western Goshen 0 50 55 60 60 60 60 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Projection of Occupancy and 73 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Subject Property's Room Night Capture and Occupancy After the competitive index is calculated, it is adjusted to reflect the property's room count, yielding a figure referred to as the market share adjuster. The market share adjuster of each property is then divided by the total market share adjuster for all of the competitors, resulting in each hotel's market share. By multiplying the projected market share by the area's usable room night demand, we can determine the total number of room nights captured by a specific hotel. Occupancy is then calculated by dividing the projected number of room nights captured by the property's total number of available room nights. Multiplying the subject property's projected market share by the estimated room night demand in each segment results in the following estimate of room nights captured by the hotel. ================================================================================ Table 7-11 Room Nights Captured by the Subject Property - -------------------------------------------------------------------------------- 1997 1998 1999 2000 ------------------------------------------ Commercial Demand 55,254 66,037 67,744 68,916 Market Share 0.2859 0.2225 0.2149 0.2122 Capture 15,797 14,693 14,559 14,626 Meeting and Group Demand 7,865 8,022 8,182 8,264 Market Share 0.3591 0.3514 0.3482 0.3482 Capture 2,824 2,819 2,849 2,878 Leisure Demand 28,328 29,400 29,694 29,991 Market Share 0.3092 0.2349 0.2264 0.2233 Capture 8,758 6,906 6,724 6,696 ------------------------------------------ Total Capture 27,379 24,418 24,133 24,200 - -------------------------------------------------------------------------------- Dividing the total number of room nights captured by the subject property's number of available room nights per year (calculated as 117 x 365) produces the projected occupancy percentage. HVS International, Mineola, New York Projection of Occupancy and 74 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-12 Calculation of the Subject Property's Projected Occupancy - -------------------------------------------------------------------------------- 1997 1998 1999 2000 ------------------------------------------- Total Room Nights Captured/Year 27,379 24,418 24,132 24,200 Available Room Nights 42,705 42,705 42,705 42,705 Occupancy 64.11% 57.18% 56.51% 56.67% Rounded 64% 57% 57% 57% - -------------------------------------------------------------------------------- For the purpose of forecasting income and expense, we will use the following occupancy levels. ================================================================================ Table 7-13 Occupancy Forecast - -------------------------------------------------------------------------------- Year Occupancy ------------------------------------ 1997 64% 1998 57 Stabilized 57 - -------------------------------------------------------------------------------- Although the preceding room night analysis shows the subject property achieving a 58% occupancy in 2002, we have chosen to use a stabilized level of 57_%. The stabilized occupancy is intended to reflect the anticipated results of the property over its remaining economic life, given any and all changes in the life cycle of the hotel. Thus, the stabilized occupancy excludes from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusually high or low occupancies. Although the subject property may operate at occupancies above this stabilized level, we believe that it is equally possible for new competition and temporary economic downturns to force the occupancy below this selected point of stability. AVERAGE RATE ANALYSIS One of the most important considerations in estimating the value of a lodging facility is a supportable forecast of its attainable average rate, which is more formally defined as the average rate per occupied room. Average rate can be calculated by dividing the total rooms revenue achieved during a specified period by the number of rooms sold during the same period. The HVS International, Mineola, New York Projection of Occupancy and 75 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= projected average rate and the anticipated occupancy percentage are used to forecast rooms revenue, which, in turn, provides the basis for estimating most other income and expense categories. Average Rate by Month The following table shows the subject property's monthly occupancy and average rate from 1994 through year-to-date 1996. ================================================================================ Table 7-14 Subject Property's Occupancy and Average Rate by Month - --------------------------------------------------------------------------------
1994 1995 1996 ---- ---- ---- Average Average Average Occupancy % Chg Rate % Chg Occupancy % Chg Rate % Chg Occupancy % Chg Rate % Chg -------------------------------- ----------------------------------- --------------------------------- January 44.9% -- $45.47 -- 42.2% (6.0)% $47.01 3.4 % 42.4% 0.5% $48.33 2.8 % February 45.0 -- 45.47 -- 41.5 (7.8) 50.15 10.3 42.4 2.1 48.62 (3.1) March 52.7 -- 44.41 -- 47.4 (10.1) 50.26 13.2 64.3 35.5 49.62 (1.3) April 54.0 -- 47.98 -- 51.0 (5.6) 49.38 2.9 58.2 14.1 50.50 2.3 May 56.6 -- 50.90 -- 59.2 4.6 50.04 (1.7) 66.9 13.1 55.53 11.0 June 63.4 -- 51.00 -- 80.3 26.7 50.72 (0.5) 75.0 (6.6) 54.10 6.7 July 64.7 -- 51.89 -- 79.9 23.5 48.80 (6.0) 72.9 (8.7) 57.02 16.8 August 76.3 -- 50.10 -- 76.5 0.3 48.02 (4.2) 72.4 (5.4) 60.15 25.3 September 73.9 -- 48.59 -- 71.7 (3.0) 50.02 2.9 65.8 (8.3) 58.33 16.6 October 68.5 -- 52.25 -- 74.3 8.5 51.86 (0.7) -- -- -- -- November 58.8 -- 49.39 -- 65.4 11.2 50.80 2.9 -- -- -- -- December 43.2 -- 47.12 -- 40.1 (7.2) 50.91 8.0 -- -- -- -- ---- ---- ------ --- ---- ---- ------ ---- ---- ---- ------ ---- Weighted Average 58.6% -- $49.06 -- 60.9% 4.0 % $49.86 1.6 % NA % NA % 54.23 8.8 %
- -------------------------------------------------------------------------------- The above table underscores the correlation between a hotel's occupancy and its average rate: as occupancy increases, rates tend to follow. On a monthly basis, the Howard Johnson - Middletown achieves its highest average rates during the summer months, especially in June, July and October. The subject property's occupancy, as mentioned previously in this section, varies in level depending on the season of the year. Average rate, while in general, is parallel to trends in occupancy levels, remains at a fairly stable level in the subject property's case. Average rates in 1995 ranged between $47.01 and $51.86 an approximate $5.00 spread. Year-to-date 1996 rates range from $48.33 to $60.15 - an approximate $12.00 spread. The subject property experienced a rate increase of 1.6% between 1994 and 1995. HVS International, Mineola, New York Projection of Occupancy and 76 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Competitive Positioning The Howard Johnson - Middletown's average rate will be projected using a competitive positioning method. This technique begins with an analysis of the average rates achieved by the subject property and its competitors. These rates establish a range that reflects certain characteristics of the specific market, such as price sensitivity, demand orientation, and occupancy. The subject property's average rate is then compared to those of the hotels to which it is most similar in terms of size, quality, facilities, amenities, market orientation, location, management, image, and affiliation. Adjustments are made to reflect any relevant differences. Competitive Positioning The subject property's average rate will be projected using the market segmentation method. The advantage of this method is its ability to reflect anticipated changes in the subject property's market mix and their impact on average rate. This technique begins with an analysis of the room rates commanded by local hotels in each market segment. Using this information, we can forecast the subject property's rate on a segment-by-segment basis. The projected rate in each segment is then multiplied by the number of room nights the hotel is expected to capture in that segment (as determined earlier in this analysis). These amounts are totaled, yielding the overall rooms revenue. Average rate is then calculated by dividing the property's total rooms revenue by the estimated number of occupied rooms. Although the average rate analysis presented here follows the occupancy projections, these two statistics are highly correlated; in reality, one can not project occupancy without making specific assumptions regarding average rate. This relationship is best illustrated by rooms revenue per available room (RevPAR), which reflects a property's ability to maximize rooms revenue. The following table summarizes the 1996 average rate and RevPAR of the subject property and its competitors. HVS International, Mineola, New York Projection of Occupancy and 77 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-15 1996 Average Rate and RevPAR of the Primary Competitors - -------------------------------------------------------------------------------- 1996 1996 Average Rooms Revenue Property Room Rate Per Available Room - -------------------------------------------------------------------------------- Subject Property $54.00 $33.48 Holiday Inn 76.00 51.68 Super 8 37.00 30.34 Days Inn 58.00 39.44 ------ ------ Averages $56.15 $38.89 - -------------------------------------------------------------------------------- The subject property occupies a mid- to low-range position in terms of average rate and RevPAR compared to the rest of the primary market. At $76.00, the Holiday Inn is the market's rate leader, reflecting the condition of its facilities and its proximity to Middletown corporate parks. The Super 8 commands the lowest rate of $37.00 in the immediate market, due to its ability to attract construction clientele and budget-minded travelers. According to data supplied by Smith Travel Research, areawide average rate increased by 2.3% in 1994 and 2.5% in 1995. However, average rate statistics for year-to-date through August of 1996 for the subject market indicate a 1.4% increase over the corresponding period in 1995. The subject property reported average rate year-to-date gains for 1996 of 8.9%, most likely as a result of its property renovations. We anticipate that rate increase at the subject property will continue at a slow pace in the near term, due to the effect of the new entrants, but will thereafter continue to increase at a normal rate of inflation. Average Rate Increases It is important to note that hotel room rate increases do not necessarily conform to the underlying monetary inflation rate, because lodging facilities are influenced by market conditions such as the relationship between supply and demand. A hotel's ability to raise room rates is affected by a number of factors, including the following. Supply and Demand Relationships - The relationship between supply and demand is one of the factors that determine hotel occupancies and average rates. Strong markets where lodging demand is increasing faster than supply are often characterized by rate growth that exceeds inflation. Markets that are overbuilt or suffering from declining demand are unlikely to exhibit any significant increases in average rates. HVS International, Mineola, New York Projection of Occupancy and 78 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= o Inflationary Pressures - Price increases caused by inflation affect hotel room rates by eroding profit margins and encouraging operators to raise prices. This strategy is effective only in markets that are characterized by a healthy supply and demand relationship. o Improving the Competitive Standard - When a new lodging facility enters a mature market, its rates may be set higher than the marketwide average in an effort to justify the development costs. This temporary condition may allow other competitors to achieve corresponding gains by effectively raising the amount the market will bear. However, if the addition to supply has a severe impact on the occupancy levels of other hotels, price competition may ensue. o Property-Specific Improvements - Changes that make a hotel more or less attractive to guests can have an impact on average rate. An expansion, renovation, upgrading, or the introduction of additional facilities and amenities may enable greater-than-inflationary room rate increases. Likewise, deferred maintenance may make a property less competitive, engendering a decline in room rates. In determining average rate projections, changes that occur prior to occupancy stabilization are generally attributable to factors that are specific to the property and the market. After a hotel achieves a stabilized occupancy, room rates are generally expected to continue to increase at the underlying inflation rate throughout the remainder of the projection period. According to market area and demographic statistics mentioned in the previous market area section, we have decided to use a 3.5% inflation rate. Based on these considerations, the following table shows our projection of average rate increases. HVS International, Mineola, New York Projection of Occupancy and 79 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-16 Average Rate Forecast - -------------------------------------------------------------------------------- Areawide Subject Property's Subject Property's Areawide Rate Rate Projected Year Occupancy Increase Increase Average Rate - ------------------------------------------------------------------------------- Positioned Base --- --- --- $54.00 1997 68% 1% to 3% 2.0% 55.08 1998 60 3 to 4 3.0 56.73 1999 60 3 to 4 3.5 58.72 2000 61 3 to 4 3.5 60.78 2001 62 3 to 4 3.5 62.90 2002 63 3 to 4 3.5 65.11 - -------------------------------------------------------------------------------- In 1997 and 1998, we have chosen subject property average rate increases of 2% and 3%, respectively. These rates are lower than our 3.5% projected inflation rate, due to the impact of the new Best Western Goshen and the proposed Hampton Inn on the subject property's average rate. In 1999 and thereafter, however, the Howard Johnson's average rate is expected to increase at 3.5% annually. HVS International, Mineola, New York Highest and Best Use 80 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 8. Highest and Best Use The concept of highest and best use recognized by the Appraisal Institute distinguishes between the highest and best use of the land (as though vacant) and the property (as improved). Highest and best use is defined as: The reasonably probable and legal use of vacant land or improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.(1) The concept of highest and best use is the premise upon which value is based and is a product of competitive forces in the marketplace. "The principle of balance holds that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium. This principle applies to relationships among various property components as well as the relationship between the costs of production and the property's productivity. The point of economic balance is achieved when the combination of land and building is optimal (i.e., when no marginal benefit or utility is achieved by adding another unit of capital). The law of increasing returns holds that larger amounts of the agents of production produce greater net income up to a certain point, after which the law of diminishing returns is applied." (2) It is important to recognize that the highest and best use of the land (as though vacant) may differ from the highest and best use of the property (as improved). This differential may occur when a site has existing improvements and the highest and best use of the land differs from the current use. Nonetheless, the current property use will continue until the value of the land under its highest and best use exceeds the value of the property in its current use plus the cost to remove the existing improvements. (1) The Appraisal of Real Estate - Tenth Edition, Appraisal Institute, Chicago, IL, 1992, p. 45. (2) Ibid., p. 40. HVS International, Mineola, New York Highest and Best Use 81 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= In consideration of the foregoing factors influencing development in the subject's immediate area, it is the appraisers' opinion that the highest and best use of the subject site, as if vacant, is to hold for future development as dictated by market conditions. Furthermore, it is our opinion that the subject property's highest and best use, as improved, is its current use as a lodging facility. HVS International, Mineola, New York Approaches to Value 82 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 9. Approaches to Value In appraising real estate for market value, the appraiser has three approaches from which to select: the income capitalization, sales comparison, and cost approaches. Although all three valuation procedures are given consideration, the inherent strengths of each approach and the nature of the subject property must be evaluated to determine which will provide supportable estimates of market value. The appraiser is then free to select one or more of the appropriate approaches in arriving at a final value estimate. The Income Capitalization Approach The income capitalization approach takes a property's projected net income before debt service and allocates this future benefit to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component is calculated. The total of the mortgage component and the equity component equals the value of the property. This approach is often selected as the preferred valuation method for income- producing properties, because it most closely reflects the investment rationale of knowledgeable buyers. The Sales Comparison Approach The sales comparison approach estimates the value of a property by comparing it to similar properties that have been sold on the open market. To obtain a supportable estimate of value, the sales price of a comparable property must be adjusted to reflect any dissimilarities between it and the property being appraised. The sales comparison approach may provide a useful value estimate in the case of simple forms of real estate, such as vacant land and single-family homes, where the properties are homogeneous and the adjustments are few and relatively simple to compute. In the case of complex investments such as shopping centers, office buildings, restaurants, and lodging facilities, where the adjustments are numerous and more difficult to quantify, the sales comparison approach loses much of its reliability. HVS International, Mineola, New York Approaches to Value 83 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Hotel investors typically do not employ the sales comparison approach in reaching their final purchase decisions. Factors such as the lack of recent sales data, the numerous insupportable adjustments that are necessary, and the general inability to determine the true financial terms and human motivations of comparable transactions often make the results of this technique questionable. Although the sales comparison approach may provide a range of values that supports the final estimate, reliance on this method beyond the establishment of broad parameters is rarely justified by the quality of the sales data. The market-derived capitalization rates sometimes used by appraisers are susceptible to the same shortcomings inherent in the sales comparison approach. To substantially reduce the reliability of the income capitalization approach by employing capitalization rates obtained from unsupported market data weakens the final value estimate and ignores the typical investment analysis procedures employed by hotel purchasers. Because appraisers are obligated to mirror the actions of the marketplace, we generally give the sales comparison approach minimal weight in the hotel appraisal process beyond bracketing the final estimate.(1) The Cost Approach The cost approach estimates market value by computing the current cost to replace the property and subtracting any depreciation resulting from physical deterioration, functional obsolescence, and external (or economic) obsolescence. The value of the land, as if vacant and available, is then added to the depreciated value of the improvements to produce a total value estimate. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements grow older and begin to deteriorate, the resultant loss in value becomes increasingly difficult to quantify accurately. We find that knowledgeable hotel buyers base their purchase decisions on economic factors such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, this approach is given minimal weight in the (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 209. HVS International, Mineola, New York Approaches to Value 84 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= hotel valuation process. As noted in Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, "the cost approach is seldom used to value existing hotels and motels."(1) Reconciliation The final step in the valuation process is the reconciliation and correlation of the value indications. Factors that are considered in assessing the reliability of each approach include the purpose of the appraisal, the nature of the subject property, and the reliability of the data used. In reconciliation, the applicability and supportability of each approach is considered and the range of value indications is examined. The most significant weight is given to the approach that produces the most reliable solution and most closely reflects the criteria used by typical investors. Our nationwide experience with numerous hostelry buyers and sellers indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the investors who constitute the marketplace. For this reason, the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in the hotel valuation process. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 208. HVS International, Mineola, New York Income Capitalization Approach 85 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 10. Income Capitalization Approach The income capitalization approach is based on the principle that the value of a property is indicated by its net return, or what is known as the present worth of future benefits. The future benefits of income-producing properties, such as hotels, are net income before debt service and depreciation (as estimated by a forecast of income and expense) and any anticipated reversionary proceeds from a sale. These future benefits can be converted into an indication of market value through a capitalization process and discounted cash flow analysis. Using the income capitalization approach, the subject property has been valued by analyzing the local market for transient accommodations, examining existing and proposed competition, and developing a forecast of income and expense that reflects current and anticipated income trends and cost components through a stabilized year of operation. The forecast of income and expense is expressed in current dollars for each year. The stabilized year is intended to reflect the anticipated operating results of the property over its remaining economic life, given any or all applicable stages of build-up, plateau, and decline in the life cycle of the hotel. Thus, income and expense estimates from the stabilized year forward exclude from consideration any abnormal relationship between supply and demand, as well as any non-recurring conditions that may result in unusual revenues or expenses. As stated in the textbook entitled, Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, published by the Appraisal Institute, "of the three valuation approaches available to the appraiser, the income capitalization approach generally provides the most persuasive and supportable conclusions when valuing a lodging facility."(1) This text recommends that using a ten-year forecast and an equity yield rate "most accurately reflects the actions of typical hotel buyers, who purchase properties based (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. HVS International, Mineola, New York Income Capitalization Approach 86 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= on their leveraged discounted cash flow."(1) The simpler procedure of using a ten-year forecast and a discount rate is "less reliable because the derivation of the discount rate has little support. Moreover, it is difficult to adjust the discount rate for changes in the cost of capital."(2) We have used both methods to discount the subject property's projected net income into an estimate of value. Method One is a ten-year discounted cash flow analysis in which the cash flow to equity and the equity reversion are discounted to the present value at the equity yield rate, and the income to the mortgagee is discounted at a mortgage interest rate. The sum of the equity and mortgage values is the total property value. Method Two is a simple ten-year discounted cash flow analysis in which the annual net income before debt service and the reversionary proceeds following a sale at the end of the tenth year are discounted back to the date of the appraisal at an overall discount rate, and then totaled to produce an indication of the present worth of future benefits. To convert the projected income stream into an estimate of value through Method One, the anticipated net income (before debt service and depreciation) is allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. The total of the mortgage component and the equity component equals the value of the property. The process is described as follows. 1. The terms of typical hotel financing are set forth, including interest rate, amortization term, and loan-to-value ratio. 2. An equity yield rate of return is established. Numerous hotel buyers base their equity investments on a ten-year equity yield rate projection that takes into account ownership benefits such as periodic cash flow distributions, residual sale or refinancing distributions that return any property appreciation and mortgage amortization, income tax benefits, and various non-financial considerations such as status and prestige. The equity yield rate is also known as the internal rate of return on equity. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. (2) Ibid. HVS International, Mineola, New York Income Capitalization Approach 87 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 3. The value of the equity component is calculated by first deducting the annual debt service from the projected net income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value. After deducting the mortgage balance at the end of the tenth year and the typical brokerage and legal costs, the equity residual is discounted back to the date of value at the equity yield rate. The net income to equity for each of the ten projection years is also discounted to the present value. The sum of these discounted values equates to the value of the equity component. Adding the equity component to the initial mortgage balance yields the overall property value. Because the mortgage and the debt service amounts are unknown but the loan-to-value ratio was determined in Step #1, the preceding calculation can be solved through an iterative process or by use of a linear algebraic equation that computes the total property value. The algebraic equation that solves for the total property value using a ten-year mortgage and equity technique was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(1) 4. The value is proven by allocating the total property value between the mortgage and equity components and verifying that the rates of return set forth in Steps #1 and #2 can be met from the projected net income. The process of converting the projected income stream into an estimate of value through Method Two is described as follows. 1. A discount rate is established by evaluating the total property yield derived by Method One. Occasionally, the discount rate may be adjusted slightly based on the total property yields indicated by recent transactions involving hotels similar to the subject property. 2. The reversionary value is calculated by capitalizing the 11th-year net income by the terminal capitalization rate and deducting typical brokerage and legal fees. (1) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Income Capitalization Approach 88 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 3. The ten-year forecast of net income (before debt service and depreciation) and the reversionary value are discounted to the date of value at the rate derived above. Review of Operating History As a basis for developing a forecast of income and expense for the subject property, we have reviewed the property's operating history. However, because of the recent change in ownership and management, operating history prior to May, 1994 was not available. The following table represents the subject property's income and expense statements for the period of May to December in 1994 and 1995; the second following table provides year-to-date 1995 and year-to-date 1996 statements representing the months of January through September. The following income and expense statements were provided by the Remington Employers Corporation, and are unaudited. Where applicable, we have reorganized the statements in accordance with the Uniform System of Accounts for Hotels. HVS International, Mineola, New York Income Capitalization Approach 89 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-1 Historical Operating Performance ($+,000) - --------------------------------------------------------------------------------
Calendar Year 1995 1994 (May Through December) ----------------------------------------------- ---------------------------------------------- Total Rooms: 117 117 Occupied Rooms: 25,719 17,144 Complimentary Rooms: 299 334 Days Open: 365 Amount per Amount per 240 Amount per Amount per Occupancy: 60.9% Percentage Available Occupied 62.2% Percentage Available Occupied Average Rate: $49.86 of Revenue Room Room $50.10 of Revenue Room Room - -------------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $1,282 90.0% $10,961 $49.86 $859 90.1% $7,340 $50.09 Telephone 41 2.8 346 1.57 34 3.5 287 1.96 Rental, Laundry, Misc. 66 4.7 567 2.58 39 4.1 336 2.29 Restaurant Rent 36 2.5 305 1.39 21 2.2 180 1.23 Total 1,425 100.0 12,179 55.40 953 99.9 8,142 55.57 - -------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES * Rooms 255 19.9 2,182 9.93 176 20.5 1,504 10.26 Telephone 22 53.1 184 0.84 16 48.4 139 0.95 Rental, Laundry, Misc. 30 44.5 252 1.15 0 0.0 0 0.00 Total 306 21.5 2,618 11.91 192 20.2 1,642 11.21 - -------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 1,119 78.5 9,561 43.49 760 79.7 6,500 44.36 - -------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 147 10.3 1,254 5.71 99 10.4 846 5.77 Management Fee 43 3.0 366 1.66 28 3.0 243 1.66 Marketing 51 3.6 438 1.99 9 1.0 78 0.53 Franchise Fees 40 2.8 344 1.57 44 4.7 379 2.59 Property Oper. & Maint. 65 4.6 555 2.52 67 7.0 574 3.92 Energy 122 8.6 1,043 4.74 69 7.2 590 4.03 Total 468 32.9 4,000 18.19 317 33.3 2,710 18.50 - -------------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 651 45.6 5,561 25.30 443 46.4 3,790 25.86 - -------------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 113 8.0 969 4.41 77 8.1 657 4.48 Insurance 34 2.4 295 1.34 22 2.3 185 1.26 Reserve for Replacement 57 4.0 487 2.22 28 3.0 243 1.66 Equipment Rental 5 0.3 42 0.19 0 0.0 0 0.00 Total 210 14.7 1,793 8.16 127 13.4 1,085 7.40 - -------------------------------------------------------------------------------------------------------------------------------- NET INCOME $441 30.9% $3,768 $17.14 $316 33.0% $2,705 $18.46 ================================================================================================================================
* Departmental expense ratios are expressed as a percentage of departmental revenues. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 90 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-2 Year-to-Date Operating Performance ($+,000) - --------------------------------------------------------------------------------
Year-to-Date Through Sept.: 1995 1996 ----------------------------------------------- ---------------------------------------------- Total Rooms: 117 117 Occupied Rooms: 19,552 19,992 Complimentary Rooms: 172 242 Days Open: 273 Amount per Amount per 274 Amount per Amount per Occupancy: 61.8% Percentage Available Occupied 63.1% Percentage Available Occupied Average Rate: $48.85 of Revenue Room Room $53.57 of Revenue Room Room - -------------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $955 89.7% $8,163 $48.85 $1,071 90.9% $9,154 $53.57 Telephone 32 3.0 273 1.63 39 3.3 331 1.94 Rental, Laundry, Misc. 51 4.8 437 2.62 42 3.6 361 2.11 Restaurant Rent 26 2.5 225 1.34 27 2.3 229 1.34 Total 1,064 100.0 9,098 54.44 1,179 100.1 10,075 58.96 - --------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES * Rooms 188 19.7 1,604 9.60 203 19.0 1,735 10.15 Telephone 17 54.9 150 0.89 21 53.9 179 1.05 Rental, Laundry, Misc. 22 43.0 188 1.13 25 58.6 211 1.24 Total 227 21.3 1,942 11.62 249 21.1 2,125 12.44 - --------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 837 78.7 7,156 42.82 930 79.0 7,950 46.53 - --------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 108 10.2 926 5.54 122 10.3 1,039 6.08 Management Fee 32 3.0 273 1.63 35 3.0 302 1.77 Marketing 38 3.6 325 1.95 44 3.7 377 2.21 Franchise Fees 30 2.8 256 1.53 35 2.9 296 1.73 Property Oper. & Maint. 49 4.6 416 2.49 59 5.0 504 2.95 Energy 95 8.9 810 4.85 110 9.4 943 5.52 Total 352 33.1 3,005 17.98 405 34.3 3,461 20.25 - --------------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 486 45.6 4,151 24.84 525 44.7 4,489 26.28 - --------------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 85 8.0 724 4.33 108 9.2 926 5.42 Insurance 27 2.5 227 1.36 20 1.7 167 0.98 Reserve for Replacement 43 4.0 364 2.18 47 4.0 403 2.36 Equipment Rental 3 0.3 30 0.18 5 0.4 40 0.23 Total 157 14.8 1,345 8.05 180 15.3 1,536 8.99 - --------------------------------------------------------------------------------------------------------------------------------- NET INCOME $328 30.8% $2,806 $16.79 $345 29.4% $2,953 $17.29 =================================================================================================================================
* Departmental expense ratios are expressed as a percentage of departmental revenues. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 91 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Comparable Operating Statements For purposes of comparison, our discussion addresses year-to-date figures for 1994 and 1995, since data is lacking for year-end 1994, thus making a year-end statement comparison difficult. These historical income and expense statements show that the subject property has slightly decreased its overall profitability from year-to-date 1995 to year-to-date 1996. Specifically, the subject property's net income as a percentage of revenue has decreased from 30.8% in year-to-date 1995 to 29.4% in year-to-date 1996, which indicates inconsistent management, as the subject property is dropping a weaker percentage of revenue to the bottom line in a stabilized market. Specifically, the inconsistency in management is a result of the new management in 1994, as well as the high general manager turnover rate that this particular property has been experiencing. In year-to-date 1996, the subject property achieved total revenues of roundly $1.179 million, which included a rooms revenue of roundly $1.1 million, constituting 90.9% of total revenues. In year-to-date 1995, the subject property achieved a rooms revenue of roughly $955,000, which constituted 89.7% of total revenues. Telephone revenue totaled $39,000 in year-to-date 1996 - up from the $32,000 level registered in year-to-date 1995. Other income, identified as Rental, Laundry, Misc. in our statements, which space rentals, laundry, vending, and other miscellaneous items; this line item decreased slightly in year-to-date 1996. Restaurant rent has held fairly steady in both year-to-date 1995 and 1996, equating to overall levels of $26,000 and $27,000, respectively. Departmental expenses equated to 21.1% of total revenues in year-to-date 1996, which was slightly better than the 21.3% level achieved the previous year. Rooms expense of $203,000 - or 19.0% of total revenue in year-to-date 1996 - was lower when compared to the 19.7% level in year-to-date 1995. These rooms expense percentages are comparable to market averages for properties of this type. Every departmental expense - as a percentage of revenue - decreased in year-to-date 1996, with the exception of the rental, laundry, and miscellaneous expense, which increased from $22,000 in year-to-date 1995 to a level of $25,000 in the subsequent year. Operating expenses for year-to-date 1996 equated to 34.3% of total revenue, which was slightly higher than the 33.1% evidenced in year-to-date 1995, which remained at 3.0%. Every operating expense, with the exception of management fee, increased as a percentage of revenue in year-to-date 1996, which indicates that the hotel is becoming less efficient, most likely as a result of the frequent changes in the hotel's management. House profit HVS International, Mineola, New York Income Capitalization Approach 92 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= decreased slightly in year-to-date 1996 to 44.7% of total revenue, compared to its previous level of 45.6% in year-to-date 1995. These levels are comparable to industry averages, indicating that the overall levels obtained by the subject property were fairly good, even though the hotel suffered as a result of its management. Overall, in year-to-date 1996 the subject property registered a net income of $345,000, which is higher than the level of $328,000 registered in year-to-date 1995, but which reflects a decrease in net income as a percentage of gross revenues. Specifically, as a percentage of total revenue, the subject property achieved a level of 29.4% in year-to-date 1996 - down marginally from the 30.8% registered the previous year. Forecast of Income and Expense The forecast of income and expense is intended to reflect the appraisers' subjective estimate of how a typical buyer would project the subject property's future operating results. Depending on the dynamics of the local market, a typical buyer's projection may be adjusted upward or downward. We have attempted to consider these factors in formulating this forecast. HVS International uses a fixed-and-variable component model to project a lodging facility's revenue and expense levels. This model is based on the premise that hotel revenues and expenses have one component that is fixed, and another that varies directly with occupancy and facility usage. A projection can be made by taking a known level of revenue or expense and calculating its fixed and variable components. The fixed component is then held constant, while the variable component is adjusted for the percent change between the projected occupancy and facility usage and that which produced the known level of revenue or expense. Base-Year Statement of Income and Expense Based on our review of the operating histories of the subject property and comparable hotels, we have derived a base-year statement of income and expense expressed in 1996 dollars. The units of comparison include a percentage of departmental and total revenue, amounts per available room, and amounts per occupied room. The income and expense ratios reflect an occupancy level of 61.6%. The base-year profit and loss statement will be used to determine the relationship between the fixed and variable components. HVS International, Mineola, New York Income Capitalization Approach 93 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-3 Base-Year Statement of Income and Expense ($+,000) - -------------------------------------------------------------------------------- Calendar Year: 1995 ----------------------------------------------- Number of Rooms: 117 Occupancy: 60.9% Percent of Amount per Amount per Average Rate: $49.86 Total Available Occupied Occupied Rooms: 25,719 Revenue Room Room - -------------------------------------------------------------------------------- Revenue: Rooms $1,282 90.3% $10,961 $49.86 Telephone 48 3.4 412 1.87 Rental, Laundry, Misc. 54 3.8 465 2.12 Restaurant Rent 35 2.5 299 1.36 Total Revenue 1,420 100.0 12,137 55.21 - -------------------------------------------------------------------------------- Expenses: Rooms * 282 22.0 2,411 10.97 Telephone * 26 53.6 221 1.00 Rental, Laundry, Misc. * 30 54.3 252 1.15 Administrative & General 154 10.9 1,317 5.99 Management Fee 43 3.0 364 1.66 Marketing 73 5.2 626 2.85 Franchise Fees 51 3.6 438 1.99 Property Oper. & Maint. 78 5.5 666 3.03 Energy 140 9.9 1,199 5.46 Property Taxes 100 7.0 854 3.88 Insurance 35 2.5 300 1.36 Reserve for Replacement 57 4.0 485 2.21 Equipment Rental 5 0.3 42 0.19 Total Expenses 1,074 75.6 9,176 41.74 - -------------------------------------------------------------------------------- Net Income $346 24.4% $2,961 $13.47 ================================================================================ * Departmental expense ratios are expressed as a percentage of departmental revenues. - -------------------------------------------------------------------------------- Inflation Assumptions The base revenue and expense amounts are inflated to reflect current dollars for each projection year. Line items can be affected by different factors. We must establish a general rate of inflation that will be applied to most revenue and expense categories. The following table shows inflation estimates made by economists at some noted institutions and corporations. HVS International, Mineola, New York Income Capitalization Approach 94 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-4 Inflation Estimates - -------------------------------------------------------------------------------- Projected Increase in Consumer Price Index (Annualized Rate Versus 12 Months Earlier) ------------------------------------------ November May Source of 1996 of 1997 - -------------------------------------------------------------------------------- Maureen Allyn, Scudder Stevens Clark 3.1 % 2.3 % Wayne Angell, Bear Stearns 3.0 3.2 Richard Berner, Mellon Bank 2.9 2.8 David Berson, Fannie Mae 2.9 2.8 David Blitzer, S&P 3.0 2.7 Paul Boltz, T. Rowe Price 3.2 3.5 David Bostian, Herzog, Heine, Geduld 2.9 2.5 Philip Braverman, DKB Securities 3.0 2.8 William Brown, J.P. Morgan 3.3 3.2 Rosanne Cahn, CS First Boston 3.1 2.6 James Coons, Huntington National Bank 3.2 3.0 Michael Cosgrove, The Econoclast 3.2 3.3 Dewey Daane, Vanderbilt University 3.4 3.6 Robert Dederick, Northern Trust 3.1 3.4 W.Dudley, Goldman Sachs 3.4 3.2 Michael Englund, MMS Intl. 3.2 3.3 Michael Evans, Evans Group 3.0 3.0 Gail Fosler, Conference Board 3.5 3.6 Maury Harris, Paine Weber, Inc. 2.8 2.8 Tracy Herrick, Jefferies & Co. 3.2 3.6 Stuart Hoffman, PNC Bank 3.1 2.8 William Hummer, Wayne Hummer 2.9 3.0 Edward Hyman, ISI Group 2.8 2.1 Saul Hymans, University of Michigan 2.7 1.7 Mieczyslaw Karczmar, Deutsche Bank 2.8 3.2 Kurt Karl, WEFA Group 2.6 2.3 Irwin Kellner, Chase Manhattan Bank 2.6 2.3 D. Laufenberg, Amer. Exp. Finl. Adv. 3.2 3.4 Michelle Laughlin, Sanwa Securities 3.0 3.2 Carol Leisenring, CoreStates Financial 2.7 2.5 Richard Lemmon, General Motors 3.0 3.0 Mickey Levy, NationsBank Capital Markets 2.6 2.4 David Littmann, Comerica 3.1 3.0 John Lonski, Moody's Investors Service 3.3 3.2 Paul McCulley, UBS Securities 3.0 2.8 John McDevitt, 3M 2.6 2.5 Arnold Moskowitz, Moskowitz Capital 3.1 3.5 John Mueller, LBMC, Inc. 3.2 2.5 David Munro, High Frequency Econ. 3.0 2.5 Carl Palash, MCM MoneyWatch 3.0 3.0 Nicholas Perna, Fleet Financial Group 3.3 3.3 Elliott Platt, Donaldson Lufkin 2.8 2.0 Maria F. Ramirez, MF Ramirez 3.0 3.0 Donald Ratajczak, Georgia State University 3.0 3.3 David Resler, Nomura Securities International 2.9 2.6 Allan Reynolds, Hudson Institute 3.3 3.6 Richard Rippe, Prudential Securities 3.1 3.3 A. Gary Schilling, Schilling & Co. 3.0 3.0 Allen Sinai, Lehman Brothers 3.2 3.4 James Smith, University of North Carolina 2.1 1.9 Susan Sterne, Economic Analysis 2.5 2.5 Donald Straszheim, Merrill Lynch 2.7 2.3 Thomas Synott III, U.S. Trust Company 3.3 3.4 John Williams, Bankers Trust 3.0 3.1 Raymond Worseck, A.G. Edwards 3.6 3.3 David Wyss, DRI/McGraw-Hill 3.0 2.5 Edward Yardeni, Deutsche Morgan Grenfell 2.2 2.0 Mark Zandi, Regional Financial Associates 3.0 3.2 ----- ----- Average 3.0 % 2.9 % Source: Wall Street Journal, July 1, 1996 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 95 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The preceding table shows inflation forecasts averaging 3.0% through November of 1996 and 2.9% through May of 1997. Most of the economists in the sample estimate inflation rates ranging from 2.5% to 3.4% for the 12-month period, although several anticipate levels of slightly greater than 3.4%. As a further check on these inflation projections, we have reviewed historical increases in the Consumer Price Index. Because the value of real estate is predicated on cash flows over a relatively long period, inflation should be considered from a long-term perspective. Between 1986 and 1994, the national CPI increased at an average annual compounded rate of 3.8%. In consideration of these historical trends, the projections set forth above, and our assessment of probable property appreciation levels, we have selected an annual stabilized inflation rate of 3.0% in 1998, increasing to 3.5% annually thereafter. One of the exceptions to this general inflation assumption is the projected growth in average rate. As noted earlier, increases in the subject property's room rate are projected as follows. ================================================================================ Table 10-5 Projected Growth in Average Rate - -------------------------------------------------------------------------------- Increase From Year Previous Year ---------------------------------------------------------- 1997 --- % 1998 3.0 1999 3.5 2000 3.5 Thereafter 3.5 - -------------------------------------------------------------------------------- Using these inflation assumptions, the base-year income and expense statement (which is expressed in 1996 dollars) is inflated to arrive at projections. Each revenue and expense category will be projected using the inflated base statement to determine the fixed-and-variable component relationships. HVS International, Mineola, New York Income Capitalization Approach 96 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Rooms Revenue Rooms revenue is determined by two variables: occupancy and average rate. Earlier in this report, we estimated the subject property's occupancy and average rate as follows. ================================================================================ Table 10-6 Projected Occupancy and Average Rate - -------------------------------------------------------------------------------- 1997 Stabilized ----------------------------------------------------------------------- Forecast of Occupancy Percentage 64.0 % 57.0 % Forecast of Average Rate $55.08 $56.73 - -------------------------------------------------------------------------------- Rooms revenue is calculated as follows. ================================================================================ Table 10-7 Forecast of Rooms Revenue - -------------------------------------------------------------------------------- Number Forecast of Calendar Projected Average Number of Days Rooms Revenue Years Occupancy Room Rate of Units in Year (+,000) - -------------------------------------------------------------------------------- 1997 64 % x $ 55.08 x 117 x 365 = $ 1,505 Stabilized 57 x 56.73 x 117 x 365 = 1,381 1999 57 x 58.72 x 117 x 365 = 1,429 - -------------------------------------------------------------------------------- Telephone Revenue Telephone revenue is generated by hotel guests who charge local and long-distance calls to their rooms, and by individuals who use the property's public telephones. Prior to the de-regulation of the telephone industry in the early 1980s, hotels were limited to a 15% commission on long-distance calls, a mark-up that allowed few profits. De-regulation and the development of sophisticated call-accounting equipment have resulted in profitable telephone departments. State-of-the-art equipment is capable of least-cost routing, automatic price billing, and posting telephone charges to guest folios. Hotels can select among various long-distance services, and can also work with any one of a number of Alternative Operator Services (AOS). These systems route and price calls, and may provide additional services. In recent years, the hospitality industry has experienced diverging trends with respect to telephone revenue. Prices per call have increased, in some cases dramatically, yielding departmental profits as high as 50% to 55%. HVS International, Mineola, New York Income Capitalization Approach 97 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= However, the number of long-distance calls billed per occupied room has declined as a result of the extensive use of long-distance carrier services that can be accessed locally or through a toll-free number. When guests charge long-distance calls to their personal or business accounts in this manner, the hotel loses the revenue associated with long-distance tariffs and mark-ups, and receives only an access fee. Most telephone revenue varies directly with changes in occupancy. However, there is a small fixed component consisting of public telephone revenue, which is primarily generated by individuals using the hotel's food, beverage, and meeting facilities. Using this fixed-and-variable relationship, the subject property's telephone revenue is projected as follows. ================================================================================ Table 10-8 Forecast of Telephone Revenue - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Total Telephone Revenue (+,000) $ 54 $ 50 Percent of Total Revenue 3.3% 3.3% Amount Per Available Room $ 462 $ 427 Amount Per Occupied Room $ 1.98 $ 2.05 - -------------------------------------------------------------------------------- Other Income Other income is derived from sources other than guestrooms, food and beverages, and telephone services. Depending on the type of hotel and the facilities and amenities offered, other income may include the following items. o Rentals - stores, office space, concession space, showcases, clubs, and storage. o Commissions from auto rentals, photography, telegrams, and vending services. o Concessions - revenue derived from charges for the privilege of operating departments that could be operated by the hotel. Gift shops, barber shops, and beauty salons are often operated as concessions. o Laundry, dry cleaning, and fax services. o Cash discounts earned - discounts from creditors' accounts for payment within the discount period. This item does not include trade discounts, which are a deduction from the cost of goods sold. HVS International, Mineola, New York Income Capitalization Approach 98 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= o Electronic games and pinball machines. o Forfeited advance deposits and guaranteed no-shows. o Service charges - service charges that are added to a customer's account but are not paid to service personnel. o Interest income - interest from house accounts. o Salvage - revenue from the sale of old or obsolete items. Other income is highly sensitive to changes in occupancy and slightly correlated to food and beverage volume. In the subject property's case, other income is entitled, "Rental, Laundry, and Misc." in the Howard Johnson's operating statements. Using this fixed-and-variable relationship, the subject property's other income is projected as follows. ================================================================================ Table 10-9 Forecast of Other Income (Rental, Laundry, Misc. Revenue) - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Total Rental, Laundry, Misc. Revenue (+,000) $ 59 $ 59 Percent of Total Revenue 3.6% 3.9% Amount Per Available Room $ 504 $ 504 Amount Per Occupied Room $ 2.16 $ 2.42 - -------------------------------------------------------------------------------- Restaurant rent has historically been considered a separate other-income line item. According to the subject property's contract with the restaurant tenant, the lessee agrees and will continue to agree to pay the subject property a minimum guaranteed rental of $35,000 until the expiration of the contract. Therefore, our forecast for the restaurant rent revenue will remain stable into the future. The expiration date of the aforementioned contract extends past the immediate projection period. HVS International, Mineola, New York Income Capitalization Approach 99 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-10 Forecast of Restaurant Rent Revenue - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Total Restaurant Rent (+,000) $ 35 $ 35 Percent of Total Revenue 2.1% 2.3% Amount Per Available Room $ 299 $ 299 Amount Per Occupied Room $ 1.28 $ 1.44 - -------------------------------------------------------------------------------- Rooms Expense Rooms expense consists of items related to the sale and upkeep of guestrooms and public space. Salaries, wages, and employee benefits account for a substantial portion of this category. Although payroll varies somewhat with occupancy (because managers can schedule maids, bell personnel, and house cleaners to work when demand requires), much of a hotel's payroll is fixed. Front desk personnel, public area cleaners, the housekeeper, and other supervisors must be maintained at all times. As a result, salaries, wages, and employee benefits are only moderately sensitive to changes in occupancy. Commissions represent remuneration to travel agents for booking rooms. Because these fees are based on a percentage of rooms revenue, they are highly dependent on occupancy and rate. Reservations is a similar expense that reflects the cost of a franchise reservation system that typically bills as a percentage of rooms revenue. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are only slightly affected by changes in volume. In light of these considerations, we project the subject property's rooms expense as follows. ================================================================================ Table 10-11 Forecast of Rooms Expense - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Total Rooms Expense (+,000) $ 310 $ 306 Percent of Rooms Revenue 20.6% 22.2% Amount per Available Room $ 2,650 $ 2,615 Amount per Occupied Room $ 11.34 $ 12.57 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 100 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Telephone Expense Telephone expense consists of all costs associated with this department. In the case of small hotels with automated systems, the operation of telephones may be an additional responsibility of front desk personnel; however, most large properties employ full-time operators. The bulk of the telephone expense consists of the cost of local and long-distance calls billed by the telephone companies that provide these services. Because most calls are made by in-house guests, these costs are moderately correlated to occupancy. Unless a particular hotel department incurs high expenses, use of telephone services by hotel employees is charged to this account. The remaining costs, which include salaries, wages, printing, and other expenses, are moderately fixed. The following table illustrates our forecast of telephone expense. ================================================================================ Table 10-12 Forecast of Telephone Expense - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Total Telephone Expense (+,000) $ 28 $ 28 Percent of Telephone Revenue 51.9% 56.0% Amount per Available Room $ 239 $ 239 Amount per Occupied Room $ 1.02 $ 1.15 - -------------------------------------------------------------------------------- Other Income Expense Other income expense consists of costs associated with other income, and is dependent on the nature of the revenue. For example, if a hotel leases its gift shop to an outside operator, the expenses are limited to items such as rental fees and commissions. If the property operates its own gift shop, both revenues and expenses will be higher, and the hotel is responsible for the cost of goods sold, payroll, and so forth. Using a fixed-and-variable forecasting model, we project the subject property's other income expense, specifically rental, laundry, and miscellaneous expense, as follows. HVS International, Mineola, New York Income Capitalization Approach 101 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-13 Forecast of Other Income Expense (Rental, Laundry, & Misc. Expense) - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Total Rental, Laundry, Misc. Expense (+,000) $ 32 $ 32 Percent of Rental, Laundry, Misc. Revenue 54.2% 54.2% Amount per Available Room $ 274 $ 274 Amount per Occupied Room $ 1.17 $ 1.31 - -------------------------------------------------------------------------------- Administrative and General Expense Administrative and general expense includes the salaries and wages of all administrative personnel who are not directly associated with a particular department. Expense items related to the management and operation of the property are also allocated to this category. Most administrative and general expenses are relatively fixed. The exceptions are cash overages and shortages; commissions on credit card charges; provision for doubtful accounts, which are moderately affected by the number of transactions or total revenue; and salaries, wages, and benefits, which are very slightly influenced by volume. In recent years, several new items have been added to the administrative and general expense category. Human resources includes the cost of recruiting, relocating, and training personnel. Security consists of the cost of contract security for the property and related expenses. The general insurance category includes premiums for liability, fidelity, life, theft coverage, and business interruption insurance. Fire and extended-coverage insurance on the building and contents is a separate insurance expense category. Liability insurance covers third-party actions involving bodily injury and personal property, and is typically based on rooms receipts, meeting and banquet income, and food and beverage revenue. Factors that may have an impact on a hotel's liability expense include the size of the meeting, banquet, and restaurant facilities; the ratio between the amount of alcohol served and total food and beverage sales; the presence of a dance floor; a high-rise structure; a swimming pool; life safety support systems; and the guest transportation services provided by the hotel. The following table illustrates our forecast of administrative and general expense. HVS International, Mineola, New York Income Capitalization Approach 102 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-14 Forecast of Administrative and General Expense - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Total Administrative & General Expense (+,000) $ 169 $ 169 Percentage of Total Revenue 10.2% 11.1% Amount per Available Room $ 1,444 $ 1,444 Amount per Occupied Room $ 6.18 $ 6.94 - -------------------------------------------------------------------------------- Management Fee Management expense consists of the basic fee paid to the type of company that is anticipated to operate the subject property. Some companies provide management services alone, while others also provide a brand name affiliation. When a management company has no brand identification, the property owner often acquires a franchise that provides the necessary image and recognition. Although most hotel management companies employ a fee schedule that includes a basic fee (usually a percentage of total revenue) and an incentive fee (usually a percentage of defined profit), the incentive portion is often subordinated to debt service and does not appear in a forecast of net income before debt service. Basic hotel management fees are almost always based on a percentage of total revenue, which means they have no fixed component. Although the incentive fee does not decrease the cash flow available for debt service, it does reduce the potential cash flow to equity, and must be accounted for in the valuation process. Generally, the most appropriate procedure for handling the impact of the incentive fee on the equity component is to use the projected net income before debt service and incentive fee, but adjust the equity dividend or yield rate upward to reflect this added management cost. The adjusted equity dividend and yield rates will be described later in this section. The subject property is operated by Remington Employers Corporation. Management fees for Remington equal 3% of total revenue. Based on our review of the current market for management contracts, we are of the opinion that this fee is consistent with prevailing market terms. Applying this management fee structure to the projection of total revenue yields the following forecast of the subject property's management fee. HVS International, Mineola, New York Income Capitalization Approach 103 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-15 Forecast of Management Fee (+,000) - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Management Fee Expense $ 50 $ 46 - -------------------------------------------------------------------------------- Marketing Expense Marketing expense consists of all costs associated with advertising, sales, and promotion; these activities are intended to attract and retain customers. Marketing can be used to create an image, develop customer awareness, and stimulate patronage of a property's various facilities. The marketing category is unique in that all expense items, with the exception of fees and commissions, are totally controlled by management. Most hotel operators establish an annual marketing budget that sets forth all planned expenditures. If the budget is followed, total marketing expenses can be projected accurately. Marketing expenditures are unusual because although there is a lag period before results are realized, the benefits are often extended over a long period. Depending on the type and scope of the advertising and promotion program implemented, the lag time can be as short as a few weeks or as long as several years. However, the favorable results of an effective marketing campaign tend to linger, and a property often enjoys the benefits of concentrated sales efforts for many months. Marketing expense can be divided into five categories: sales, reservations, advertising and merchandising, other marketing activities, and fees and commissions. Together, these categories include all marketing efforts made by hotel personnel and outside parties. Marketing expenses are fixed, with the exception of reservations, fees, and commissions, which are calculated as a percentage of rooms revenue. Based on the location of the subject property, the local market for transient accommodations, the competitive environment, and the hotel's anticipated market segmentation, we have developed the following marketing forecast using a fixed-and-variable component model. HVS International, Mineola, New York Income Capitalization Approach 104 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-16 Forecast of Marketing Expense - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Total Marketing Expense (+,000) $ 81 $ 80 Percentage of Total Revenue 4.9% 5.2% Amount per Available Room $ 692 $ 684 Amount per Occupied Room $ 2.96 $ 3.29 - -------------------------------------------------------------------------------- Franchise Fee Franchise expense represents the fees paid to Howard Johnson Franchise System, Inc. for the use of the company's name, trade marks, and service marks. The following table illustrates the projection of the subject property's franchise fee. ================================================================================ Table 10-17 Forecast of Franchise Fee (+,000) - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Franchise Fees Expense $ 60 $ 55 - -------------------------------------------------------------------------------- Property Operations and Maintenance Property operations and maintenance expense is another expense category that is largely controlled by management. Except for repairs that are necessary to keep the facility open and prevent damage (e.g., plumbing, heating, and electrical items), most maintenance can be deferred for varying lengths of time. Maintenance is an accumulating expense. If management elects to postpone performing a required repair, they have not eliminated or saved the expenditure; they have only deferred payment until a later date. A lodging facility that operates with a lower-than-normal maintenance budget is likely to accumulate a considerable amount of deferred maintenance. The age of a lodging facility has a strong influence on the required level of maintenance. A new or thoroughly renovated property is protected for several years by modern equipment and manufacturers' warranties. However, as a hostelry grows older, maintenance expenses escalate. A well-organized preventive maintenance system often helps delay deterioration, but most facilities face higher property operations and maintenance costs each year, HVS International, Mineola, New York Income Capitalization Approach 105 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= regardless of the occupancy trend. The quality of initial construction can also have a direct impact on future maintenance requirements. The use of high-quality building materials and construction methods generally reduces the need for maintenance expenditures over the long term. Property operations and maintenance is considered an operating expense; as such, it includes only those components that can be expensed, rather than capitalized, under Internal Revenue Service regulations. For example, if a table leg is broken, the repair of that leg is considered an expense and is chargeable to property operations and maintenance. If the table is replaced, it becomes a capital expenditure and does not appear under the property operations and maintenance category. Appraisers account for capital replacement of items such as furniture and equipment in the reserve for replacement account, which is discussed later in this section. Property operations and maintenance costs are relatively fixed, and are projected as follows. ================================================================================ Table 10-18 Forecast of Property Operations and Maintenance Expense - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Total Property Oper. & Maint. Expense (+,000) $ 86 $ 86 Percentage of Total Revenue 5.2% 5.6% Amount per Available Room $ 735 $ 735 Amount per Occupied Room $ 3.15 $ 3.53 - -------------------------------------------------------------------------------- Energy Expense The energy consumption of a lodging facility takes several forms, including water and space heating, air conditioning, lighting, cooking fuel, and other miscellaneous power requirements. The most common sources of hotel energy are electricity, natural gas, fuel oil, and steam. This category also includes the cost of water service. Total energy cost depends on the source and quantity of fuel used. Electricity tends to be the most expensive source, followed by oil and gas. Although all hotels consume a sizable amount of electricity, many properties supplement their energy requirements with less expensive sources, such as gas and oil, for heating and cooking. A large portion of a hostelry's energy consumption is relatively fixed. Restaurants, kitchens, public areas, and corridors must be continually lighted HVS International, Mineola, New York Income Capitalization Approach 106 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= and climate-controlled, regardless of occupancy. The energy cost of an additional occupied room (i.e., a few hours of light, television, heat, or air conditioning) is minimal. The following table presents our forecast of the subject property's energy expense. ================================================================================ Table 10-18 Forecast of Energy Expense - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Total Energy Expense (+,000) $ 152 $ 155 Percentage of Total Revenue 9.2% 10.2% Amount per Available Room $ 1,299 $ 1,325 Amount per Occupied Room $ 5.56 $ 6.37 - -------------------------------------------------------------------------------- Property Taxes The estimate of property taxes was detailed in a previous section of this report. The following table summarizes these projections. ================================================================================ Table 10-20 Forecast of Property Taxes (+,000) - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Forecast of Property Taxes $ 107 $ 111 - -------------------------------------------------------------------------------- Insurance Expense The insurance expense category consists of the cost of insuring the hotel and its contents against damage or destruction by fire, weather, sprinkler leakage, boiler explosion, plate glass breakage, and so forth. It does not include liability coverage, which is a component of administrative and general expense. Insurance rates are based on many factors, including building design and construction, fire detection and extinguishing equipment, fire district, distance from the firehouse, and the area's fire experience. Insurance expenses do not vary with occupancy. Based on historical levels, we project the subject property's insurance expense at approximately $38,000 in 1997 (the first projection period). In subsequent years, this amount is assumed to increase in tandem with inflation. The following table outlines our projection of insurance expense. HVS International, Mineola, New York Income Capitalization Approach 107 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-21 Forecast of Insurance Expense (+,000) - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Forecast of Insurance Expense $ 38 $ 39 - -------------------------------------------------------------------------------- Reserve for Replacement Furniture, fixtures, and equipment are essential to the operation of a lodging facility, and their quality often influences a property's class. This category includes all non-real estate items that are capitalized, rather than expensed. The furniture, fixtures, and equipment of a hotel are exposed to heavy use and must be replaced at regular intervals. The useful life of these items is determined by their quality, durability, and the amount of guest traffic and use. Periodic replacement of furniture, fixtures, and equipment is essential to maintain the quality, image, and income-producing potential of a lodging facility. Because capitalized expenditures are not included in the operating statement but nevertheless affect an owner's cash flow, an appraisal should reflect these expenses in the form of an appropriate reserve for replacement. Our industry experience indicates that a reserve for replacement of 3% to 5% of total revenue is generally sufficient to provide for the timely replacement of furniture, fixtures, and equipment. Because the reserve for replacement is based on a percentage of total revenue, it has no fixed component. Based on an analysis of comparable lodging facilities, we believe that a reserve for replacement of 4% of total revenue is sufficient to provide for the periodic replacement of the subject property's furniture, fixtures, and equipment. This amount is consistent with the reserve account contributions currently made by the hotel. The following table summarizes the projected reserve for replacement. ================================================================================ Table 10-22 Forecast of Reserve for Replacement (+,000) - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Reserve for Replacement Expense $ 66 $ 61 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 108 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Equipment Rental The Howard Johnson lists a separate fixed expense item called equipment rental. According to management, this line item represents the money expended on a newly installed front desk system. The equipment expense item is currently recorded in the subject property's 1995 operating statement at $5,000. This amount is expected to remain fairly stable, increasing into the future at the rate of inflation. ================================================================================ Table 10-23 Forecast of Equipment Rental (+,000) - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Equipment Rental Expense $ 5 $ 5 - -------------------------------------------------------------------------------- Summary of Projections Based on the preceding analysis, we have formulated a forecast of income and expense. The table on the following page presents a detailed forecast through the stabilized year, including amounts per available room (PAR) and per occupied room (POR). For the purpose of comparison, this table also presents the subject property's most recent full year of operating history. The second table illustrates our ten-year forecast of income and expense in less detail. The forecasts pertain to calendar operating years beginning January 1997, and are expressed in inflated dollars for each year. HVS International, Mineola, New York Income Capitalization Approach 109 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-24 Detailed Forecast of Income and Expense through the Stabilized Year and Most Recent Operating History: Howard Johnson - Middletown, Middletown, New York - --------------------------------------------------------------------------------
Historical Operating Results ------------------------------- Calendar Years: 1995 1997 Stabilized Number of Rooms: 117 117 117 Occupancy: 60.9% 64.0% 57.0% Average Rate: $49.86 $55.08 $56.73 Days Open: 365 365 365 Occupied Rooms: 25,719 %Gross PAR POR 27,331 %Gross PAR POR 24,342 %Gross PAR POR - ------------------------------------------------------------------------------------------------------------------------------------ REVENUE Rooms $1,282 90.0% $10,961 $49.86 $1,505 91.0% $12,863 $55.07 $1,381 90.5% $11,803 $56.73 Telephone 41 2.8 346 1.57 54 3.3 462 1.98 50 3.3 427 2.05 Rental, Laundry, Misc. 66 4.7 567 2.58 59 3.6 504 2.16 59 3.9 504 2.42 Restaurant Rent 36 2.5 305 1.39 35 2.1 299 1.28 35 2.3 299 1.44 Total Revenues 1,425 100.0 12,179 55.40 1,653 100.0 14,128 60.48 1,525 100.0 13,034 62.65 - ------------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL EXPENSES * Rooms 255 19.9 2,182 9.93 310 20.6 2,650 11.34 306 22.2 2,615 12.57 Telephone 22 53.1 184 0.84 28 51.9 239 1.02 28 56.0 239 1.15 Rental, Laundry, Misc. 30 44.5 252 1.15 32 54.2 274 1.17 32 54.2 274 1.31 Total Dept. Expenses 306 21.5 2,618 11.91 370 22.4 3,162 13.54 366 24.0 3,128 15.04 - ------------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL INCOME 1,119 78.5 9,561 43.49 1,283 77.6 10,966 46.94 1,159 76.0 9,906 47.61 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING EXPENSES Administrative & General 147 10.3 1,254 5.71 169 10.2 1,444 6.18 169 11.1 1,444 6.94 Management Fee 43 3.0 366 1.66 50 3.0 427 1.83 46 3.0 393 1.89 Marketing 51 3.6 438 1.99 81 4.9 692 2.96 80 5.2 684 3.29 Franchise Fees 40 2.8 344 1.57 60 3.6 513 2.20 55 3.6 470 2.26 Property Oper. & Maint. 65 4.6 555 2.52 86 5.2 735 3.15 86 5.6 735 3.53 Energy 122 8.6 1,043 4.74 152 9.2 1,299 5.56 155 10.2 1,325 6.37 Total Operating Expenses 468 32.9 4,000 18.19 598 36.1 5,111 21.88 591 38.7 5,051 24.28 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSE PROFIT 651 45.6 5,561 25.30 685 41.5 5,855 25.06 568 37.3 4,855 23.33 - ------------------------------------------------------------------------------------------------------------------------------------ FIXED EXPENSES Property Taxes 113 8.0 969 4.41 107 6.5 915 3.91 111 7.3 949 4.56 Insurance 34 2.4 295 1.34 38 2.3 325 1.39 39 2.6 333 1.60 Reserve for Replacement 57 4.0 487 2.22 66 4.0 564 2.41 61 4.0 521 2.51 Equipment Rental 5 0.3 42 0.19 5 0.3 43 0.18 5 0.3 43 0.21 Total 210 14.7 1,793 8.16 216 13.1 1,846 7.90 216 14.2 1,846 8.87 - ------------------------------------------------------------------------------------------------------------------------------------ NET INCOME $ 441 30.9 3,768 $17.14 $ 469 28.4 $ 4,009 $17.16 $ 352 23.1 $ 3,009 $14.46 ==================================================================================================================================== Telephone/Rooms 3.2% 3.6% 3.6% Calendar Years: 1999 2000 2001 Number of Rooms: 117 117 117 Occupancy: 57.0% 57.0% 57.0% Average Rate: $58.72 $60.77 $62.90 Days Open: 365 365 365 Occupied Rooms: 24,342 %Gross PAR POR 24,342 %Gross PAR POR 24,342 %Gross PAR POR - ------------------------------------------------------------------------------------------------------------------------------------ REVENUE Rooms $1,429 90.6% $12,214 $58.71 $1,479 90.7% $12,641 $60.76 1,531 90.7% $13,085 $62.90 Telephone 52 3.3 444 2.14 54 3.3 462 2.22 56 3.3 479 2.30 Rental, Laundry, Misc. 61 3.9 521 2.51 63 3.9 538 2.59 66 3.9 564 2.71 Restaurant Rent 35 2.2 299 1.44 35 2.1 299 1.44 35 2.1 299 1.44 Total Revenues 1,577 100.0 13,479 64.79 1,631 100.0 13,940 67.00 1,688 100.0 14,427 69.35 - ------------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL EXPENSES * Rooms 317 22.2 2,709 13.02 328 22.2 2,803 13.47 339 22.1 2,897 13.93 Telephone 29 55.8 248 1.19 30 55.6 256 1.23 31 55.4 265 1.27 Rental, Laundry, Misc. 33 54.1 282 1.36 35 55.6 299 1.44 36 54.5 308 1.48 Total Dept. Expenses 379 24.0 3,239 15.57 393 24.1 3,359 16.15 406 24.1 3,470 16.68 - ------------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL INCOME 1,198 76.0 10,239 49.22 1,238 75.9 10,581 50.86 1,282 75.9 10,957 52.67 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING EXPENSES Administrative & General 175 11.1 1,496 7.19 181 11.1 1,547 7.44 188 11.1 1,607 7.72 Management Fee 47 3.0 402 1.93 49 3.0 419 2.01 51 3.0 436 2.10 Marketing 83 5.3 709 3.41 86 5.3 735 3.53 89 5.3 761 3.66 Franchise Fees 57 3.6 487 2.34 59 3.6 504 2.42 61 3.6 521 2.51 Property Oper. & Maint. 89 5.6 761 3.66 92 5.6 786 3.78 95 5.6 812 3.90 Energy 161 10.2 1,376 6.61 166 10.2 1,419 6.82 172 10.2 1,470 7.07 Total Operating Expenses 612 38.8 5,231 25.14 633 38.8 5,410 26.00 656 38.8 5,607 26.95 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSE PROFIT 586 37.2 5,009 24.07 605 37.1 5,171 24.85 626 37.1 5,350 25.72 - ------------------------------------------------------------------------------------------------------------------------------------ FIXED EXPENSES Property Taxes 115 7.3 983 4.72 119 7.3 1,017 4.89 123 7.3 1,051 5.05 Insurance 40 2.5 342 1.64 42 2.6 359 1.73 43 2.5 368 1.77 Reserve for Replacement 63 4.0 538 2.59 65 4.0 556 2.67 68 4.0 581 2.79 Equipment Rental 6 0.4 51 0.25 6 0.4 51 0.25 6 0.4 51 0.25 Total 224 14.2 1,915 9.20 232 14.2 1,983 9.53 240 14.2 2,051 9.86 - ------------------------------------------------------------------------------------------------------------------------------------ NET INCOME $ 362 23.0 $ 3,094 $14.87 $ 373 22.9 $ 3,188 $15.32 $ 386 22.9 $ 3,299 $15.86 ==================================================================================================================================== Telephone/Rooms 3.6% 3.7% 3.7%
* Departmental expense ratios are expressed as a percentage of departmental revenues. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 110 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-25 Ten-Year Forecast of Income and Expense: Howard Johnson - Middletown, Middletown, New York - --------------------------------------------------------------------------------
Calendar Years: 1997 1998 1999 2000 2001 --------------- --------------- --------------- --------------- --------------- Number of Rooms: 117 117 117 117 117 Occupied Rooms: 27,331 24,342 24,342 24,342 24,342 Occupancy: 64.0% % of 57.0% % of 57.0% % of 57.0% % of 57.0% % of Average Rate: $55.08 Gross $56.73 Gross $58.72 Gross $60.77 Gross $62.90 Gross - --------------------------- --------------- --------------- --------------- --------------- --------------- REVENUE Rooms $1,505 91.0% $1,381 90.5% $1,429 90.6% $1,479 90.7% $1,531 90.7% Telephone 54 3.3 50 3.3 52 3.3 54 3.3 56 3.3 Rental, Laundry, Misc. 59 3.6 59 3.9 61 3.9 63 3.9 66 3.9 Restaurant Rent 35 2.1 35 2.3 35 2.2 35 2.1 35 2.1 Total 1,653 100.0 1,525 100.0 1,577 100.0 1,631 100.0 1,688 100.0 - --------------------------- --------------- --------------- --------------- --------------- --------------- DEPARTMENTAL EXPENSES * Rooms 310 20.6 306 22.2 317 22.2 328 22.2 339 22.1 Telephone 28 51.9 28 56.0 29 55.8 30 55.6 31 55.4 Rental, Laundry, Misc. 32 54.2 32 54.2 33 54.1 35 55.6 36 54.5 Total 370 22.4 366 24.0 379 24.0 393 24.1 406 24.1 - --------------------------- --------------- --------------- --------------- --------------- --------------- DEPARTMENTAL INCOME 1,283 77.6 1,159 76.0 1,198 76.0 1,238 75.9 1,282 75.9 - --------------------------- --------------- --------------- --------------- --------------- --------------- OPERATING EXPENSES Administrative & General 169 10.2 169 11.1 175 11.1 181 11.1 188 11.1 Management Fee 50 3.0 46 3.0 47 3.0 49 3.0 51 3.0 Marketing 81 4.9 80 5.2 83 5.3 86 5.3 89 5.3 Franchise Fees 60 3.6 55 3.6 57 3.6 59 3.6 61 3.6 Property Oper. & Maint. 86 5.2 86 5.6 89 5.6 92 5.6 95 5.6 Energy 152 9.2 155 10.2 161 10.2 166 10.2 172 10.2 Total 598 36.1 591 38.7 612 38.8 633 38.8 656 38.8 - --------------------------- --------------- --------------- --------------- --------------- --------------- HOUSE PROFIT 685 41.5 568 37.3 586 37.2 605 37.1 626 37.1 - --------------------------- --------------- --------------- --------------- --------------- --------------- FIXED EXPENSES Property Taxes 107 6.5 111 7.3 115 7.3 119 7.3 123 7.3 Insurance 38 2.3 39 2.6 40 2.5 42 2.6 43 2.5 Reserve for Replacement 66 4.0 61 4.0 63 4.0 65 4.0 68 4.0 Equipment Rental 5 0.3 5 0.3 6 0.4 6 0.4 6 0.4 Total 216 13.1 216 14.2 224 14.2 232 14.2 240 14.2 - --------------------------- --------------- --------------- --------------- --------------- --------------- NET INCOME $ 469 28.4% $ 352 23.1% $ 362 23.0% $ 373 22.9% $ 386 22.9% =========================== =============== =============== =============== =============== =============== Calendar Years: 2002 2003 2004 2005 2006 --------------- --------------- --------------- --------------- --------------- Number of Rooms: 117 117 117 117 117 Occupied Rooms: 24,342 24,342 24,342 24,342 24,342 Occupancy: 57.0% % of 57.0% % of 57.0% % of 57.0% % of 57.0% % of Average Rate: $65.10 Gross $67.38 Gross $69.74 Gross $72.18 Gross $74.71 Gross - --------------------------- --------------- --------------- --------------- --------------- --------------- REVENUE Rooms $1,585 90.8% $1,640 90.9% $1,698 90.9% $1,757 91.0% $1,818 91.0% Telephone 58 3.3 60 3.3 62 3.3 64 3.3 66 3.3 Rental, Laundry, Misc. 68 3.9 70 3.9 73 3.9 75 3.9 78 3.9 Restaurant Rent 35 2.0 35 1.9 35 1.9 35 1.8 35 1.8 Total 1,746 100.0 1,805 100.0 1,868 100.0 1,931 100.0 1,997 100.0 - --------------------------- --------------- --------------- --------------- --------------- --------------- DEPARTMENTAL EXPENSES * Rooms 351 22.1 364 22.2 376 22.1 389 22.1 403 22.2 Telephone 32 55.2 33 55.0 34 54.8 36 56.3 37 56.1 Rental, Laundry, Misc. 37 54.4 38 54.3 40 54.8 41 54.7 43 55.1 Total 420 24.1 435 24.1 450 24.1 466 24.1 483 24.2 - --------------------------- --------------- --------------- --------------- --------------- --------------- DEPARTMENTAL INCOME 1,326 75.9 1,370 75.9 1,418 75.9 1,465 75.9 1,514 75.8 - --------------------------- --------------- --------------- --------------- --------------- --------------- OPERATING EXPENSES Administrative & General 194 11.1 201 11.1 208 11.1 215 11.1 223 11.2 Management Fee 52 3.0 54 3.0 56 3.0 58 3.0 60 3.0 Marketing 92 5.3 96 5.3 99 5.3 102 5.3 106 5.3 Franchise Fees 63 3.6 66 3.7 68 3.6 70 3.6 73 3.7 Property Oper. & Maint. 98 5.6 102 5.7 105 5.6 109 5.6 113 5.7 Energy 178 10.2 184 10.2 191 10.2 197 10.2 204 10.2 Total 677 38.8 703 39.0 727 38.8 751 38.8 779 39.1 - --------------------------- --------------- --------------- --------------- --------------- --------------- HOUSE PROFIT 649 37.1 667 36.9 691 37.1 714 37.1 735 36.7 - --------------------------- --------------- --------------- --------------- --------------- --------------- FIXED EXPENSES Property Taxes 127 7.3 132 7.3 136 7.3 141 7.3 146 7.3 Insurance 45 2.6 46 2.5 48 2.6 50 2.6 51 2.6 Reserve for Replacement 70 4.0 72 4.0 75 4.0 77 4.0 80 4.0 Equipment Rental 6 0.3 6 0.3 7 0.4 7 0.4 7 0.4 Total 248 14.2 256 14.2 266 14.2 275 14.2 284 14.2 - --------------------------- --------------- --------------- --------------- --------------- --------------- NET INCOME $ 401 23.0% $ 411 22.8% $ 425 22.8% $ 439 22.7% $ 451 22.6% =========================== =============== =============== =============== =============== ===============
* Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 111 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The conversion of a property's projected net income into an estimate of value is based on the premise that investors typically purchase real estate with a small amount of equity cash (25% to 40%) and a large amount of mortgage financing (60% to 75%). The amounts and terms of available mortgage financing and the rates of return that are required to attract sufficient equity capital form the basis for allocating the net income between the mortgage and equity components and deriving a value estimate. Mortgage Component Data for the mortgage component may be developed from statistics of actual hotel mortgages made by long-term lenders. The American Council of Life Insurance, which represents 20 large life insurance companies, publishes quarterly information pertaining to the hotel mortgages issued by its member companies. The following table summarizes the average mortgage interest rates of the hotel loans made by these lenders. In addition, the A corporate bond yield (as reported by Moody's Bond Record) is shown for the purpose of comparison. HVS International, Mineola, New York Income Capitalization Approach 112 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-26 Average Mortgage Interest Rates and Average A Corporate Bond Yields - -------------------------------------------------------------------------------- Average Average A Corporate Year Interest Rate Bond Yield ---------------------------------------------------------------------- 1st Quarter 1996 7.79 % 7.37 % 4th Quarter 1995 8.44 7.28 3rd Quarter 1995 8.61 7.67 2nd Quarter 1995 9.25 7.87 1st Quarter 1995 9.14 8.50 3rd Quarter 1994 9.64 8.48 2nd Quarter 1994 9.38 8.28 4th Quarter 1993 9.38 7.80 3rd Quarter 1993 8.41 7.28 2nd Quarter 1993 10.53 9.65 4th Quarter 1992 9.43 8.48 3rd Quarter 1992 9.99 8.38 2nd Quarter 1992 9.47 8.79 1st Quarter 1992 10.02 8.81 4th Quarter 1991 10.49 8.97 3rd Quarter 1991 10.03 9.29 2nd Quarter 1991 10.75 9.45 3rd Quarter 1990 10.47 9.89 2nd Quarter 1990 10.58 9.83 4th Quarter 1989 9.96 9.42 3rd Quarter 1989 9.55 9.46 2nd Quarter 1989 10.54 9.93 1st Quarter 1989 10.39 10.16 4th Quarter 1988 10.07 10.03 3rd Quarter 1988 10.66 10.51 2nd Quarter 1988 10.09 10.33 4th Quarter 1987 10.41 10.45 3rd Quarter 1987 10.00 9.95 2nd Quarter 1987 9.81 9.46 1st Quarter 1987 9.43 9.19 4th Quarter 1986 9.44 9.55 3rd Quarter 1986 9.56 9.71 2nd Quarter 1986 9.80 9.91 1st Quarter 1986 10.99 10.62 Sources: American Council of Life Insurance; Moody's Bond Record - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 113 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Because of the six- to nine-month lag time in reporting and publishing hotel mortgage statistics, it is necessary to update this information to reflect current lending practices. Research by HVS International indicates that there is a close mathematical relationship between the average interest rate of a hotel mortgage and the concurrent yield on an average A corporate bond. Through a regression analysis, this relationship is expressed as follows. Y = 2.76078 + 0.782280 X Where: Y = Estimated Hotel/Motel Mortgage Interest Rate X = Current Average A Corporate Bond Yield (Coefficient of correlation is 96.4%) The yield on A corporate bonds for the third quarter of 1996, as reported by Moody's Bond Record, was 7.91%. Using a factor of 7.91% in the equation presented above produces an estimated hotel/motel interest rate of 8.95%. In addition to the mortgage interest rate estimate derived from this regression analysis, HVS International constantly monitors the terms of hotel mortgage loans made by our institutional lending clients. In the past year, we have noted an increase in the availability of debt financing, and many lenders have returned to the market. The current level of lending activity represents a significant increase from the restricted environment of the early 1990s. Nonetheless, the market for hotel mortgage loans remains somewhat tight, particularly when compared to the conditions that prevailed in the mid-to late 1980s. In the current lending climate, strong hotel projects that are structured on an economic basis can secure mortgage financing at interest rates ranging from 8% to 11%, depending on the property, location, affiliation, and operator. In the 1980s, when hotel mortgages were widely available, loan-to-value ratios typically ranged from 75% to 80%. Amortization schedules were generally based on 30 years, although the term of the loan was more likely to be seven to ten years. The few loans that were underwritten in the early 1990s were based on far more stringent parameters: loan-to-value ratios declined to a range of 50% to 65%, and amortization periods of 20 to 25 years were most common. With the recent reemergence of hotel financing, loan-to-value requirements and amortization schedules have loosened somewhat. At present, we find HVS International, Mineola, New York Income Capitalization Approach 114 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= that lenders who are active in the market are using loan-to-value ratios of 65% to 75%, and amortization periods of 25 to 30 years. The exact terms offered depend on specific factors such as the property's location, the age and quality of the physical facility, local hostelry market conditions, and (perhaps more significantly) the profile of the borrower. The strongest projects typically command the highest loan-to-value ratios. Based on the preceding analysis of the current lodging industry mortgage market and adjustments for specific factors such as the property's location and conditions in the local hotel market, it is our opinion that a 9.5% interest, 20-year amortization mortgage with a 0.111856 constant is appropriate for the subject property. We believe that a mortgage lender will lend up to 70% of the hotel's market value as determined by this appraisal. Equity Component The remaining capital required for a hotel investment generally comes from the equity investor. The rate of return that an equity investor expects over a ten-year holding period is known as the equity yield. Unlike the equity dividend, which is a short-term rate of return, the equity yield specifically considers a long-term holding period (generally ten years), annual inflation- adjusted cash flows, property appreciation, mortgage amortization, and proceeds from a sale at the end of the holding period. It is difficult to quantify the rate of return required by equity investors who are seeking to purchase hotel properties. To establish an appropriate equity yield rate, HVS International uses two sources of data: past appraisals and investor interviews. Past Appraisals - During the past 12 months, HVS International has appraised more than 400 hotels, including properties located in most major national markets. Each appraisal used a similar mortgage-equity approach in which income is projected and then discounted to a current value at rates reflecting the cost of debt and equity capital. In the case of hotels that were sold subsequent to our valuations, we are able to determine an appropriate equity yield rate by excluding incentive management fees from the projection of income and expense, inserting the projection into a valuation model, and adjusting the appraised value to reflect the actual sales price by modifying the return assumptions. The following table shows a representative sample of hotels that were sold shortly after we appraised them, along with the imputed equity return based on our valuation approach. HVS International, Mineola, New York Income Capitalization Approach 115 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-27 Sample of Hotels Sold - --------------------------------------------------------------------------------
No. of Date of Overall Total Property Equity Hotel City and State Rooms Sale Sales Price Rate Yield Yield - ------------------------------------------------------------------------------------------------------------------------------------ Ritz-Carlton Phoenix, AZ 281 2/94 $ 23,000,000 11.0% 14.6% 21.7% Marriott Marina Fort Lauderdale, FL 580 2/94 40,000,000 12.2 16.4 26.7 Holiday Inn Edison, NJ 274 3/94 11,803,000 7.8 17.0 26.3 Crescent Hotel Phoenix, AZ 342 3/94 26,000,000 6.5 7.2 2.2 Checkers Hotel Kempinski Los Angeles, CA 173 4/94 12,750,000 3.0 18.3 27.0 Best Western Fireside Inn Cambria, CA 46 4/94 3,377,000 11.7 15.8 24.3 Phoenician Resort Phoenix, AZ 580 4/94 224,000,000 6.6 9.3 8.9 Newark-Fremont Hilton Newark, CA 300 5/94 8,950,000 8.8 14.9 20.7 Radisson Inn Orlando, FL 299 5/94 11,150,000 12.9 18.0 28.2 Westin Kauai Lihue, Kauai, HI 840 6/94 97,400,000 (1.9) 8.1 7.2 Residence Inn Binghamton, NY 72 6/94 6,325,000 10.8 13.9 21.9 Hotel Millenium New York, NY 561 6/94 75,000,000 9.5 14.1 23.0 Best Western Otay Valley Chula Vista, CA 120 7/94 2,350,000 13.2 21.1 31.8 Hampton Inn Islandia, NY 121 7/94 6,572,000 12.6 16.6 28.2 Hampton Inn Willow Grove, PA 150 7/94 10,220,000 11.0 14.3 23.0 Hampton Inn West Palm Beach, FL 136 7/94 4,220,000 10.8 10.8 14.3 Hampton Inn Naples, FL 107 7/94 5,700,000 11.4 11.5 24.9 Hampton Inn Albany, NY 126 7/94 9,204,000 9.3 11.5 15.8 Marriott Hotel South Bend, IN 299 7/94 11,500,000 10.5 13.2 18.9 Marriott SFO Burlingame, CA 684 8/94 61,700,000 10.2 13.2 19.0 Westfields Conference Center Chantilly, VA 340 8/94 46,000,000 12.3 15.9 25.3 Radisson Mark Resort Vail, CO 349 9/94 25,200,000 8.9 15.8 24.1 Marriott East Side New York, NY 664 10/94 55,000,000 8.5 9.7 11.1 Marriott Resort Vail, CO 349 10/94 25,200,000 14.2 18.9 30.5 Marriott Quorum Addison, TX 547 10/94 29,815,000 13.5 18.2 31.8 Sheraton Hotel Hasbrouck Heights, NJ 338 11/94 10,450,000 18.3 21.1 30.7 Sheraton Inn Napa, CA 191 12/94 9,968,000 8.9 13.7 19.8 Marriott Fisherman's Wharf San Francisco, CA 255 12/94 27,755,000 10.8 13.4 19.4 Marriott Hotel Portland, OR 503 12/94 45,000,000 12.9 17.4 30.0 Radisson Inn Springfield, MO 199 12/94 5,800,000 8.2 10.1 11.3 Williamsburg Hilton Williamsburg, VA 291 12/94 15,000,000 15.4 19.0 32.0 Marriott Tech Center Denver, CO 625 12/94 36,000,000 13.7 16.4 27.1 Holiday Inn Sunspree Singer Island, FL 222 12/94 11,900,000 8.6 10.6 12.4 The Plaza New York, NY 805 6/95 325,000,000 7.0 11.0 14.0 Fullerton Suites Fullerton, CA 96 5/95 5,000,000 12.9 18.7 28.5 Residence Inn Baton Rouge, LA 80 6/95 6,518,000 12.7 14.8 21.2 Residence Inn Overland Park, KS 112 6/95 8,500,000 8.9 14.7 20.8 Residence Inn Des Moines, IA 112 6/95 7,660,000 9.8 14.1 19.6 Residence Inn Hunt Valley, MD 96 6/95 6,580,000 12.3 13.6 18.3 Residence Inn Kansas City, MO 112 6/95 6,560,000 10.4 13.2 19.8 Residence Inn Lincoln, NE 120 6/95 7,100,000 10.0 13.7 18.5 Embassy Suites Schaurmburg, IL 209 12/95 17,800,000 10.0 13.5 18.9 Marriott Hotel Andover, MA 293 12/95 24,000,000 9.7 13.5 19.2 Doubletree Suites Valley Forge, PA 229 12/95 28,500,000 10.7 14.2 15.5 Marriott Hotel Tysons Corner, VA 390 12/95 41,100,000 10.7 13.1 18.0 Marriott Hotel Warner Center, CA 461 12/95 57,900,000 6.2 11.6 14.2 Hilton at the Club Pleasanton, CA 294 12/95 22,000,000 10.5 13.4 17.0
Source: HVS International - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 116 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Investor Interviews - HVS International is in constant contact with numerous institutional and individual hotel investors. This source of equity funds has definite return requirements that can be expressed as an equity yield rate based on a ten-year projection of net income before incentive management fees but after debt service. Based on our surveys and investor interviews, the following table illustrates the range of equity yields generally required by individual and institutional investors. ================================================================================ Table 10-28 Equity Yield Requirements - -------------------------------------------------------------------------------- Source Equity Yield Requirement ------ ------------------------ Individual 20% - 24% Institution 18% - 22% - -------------------------------------------------------------------------------- Based on the assumed 70% loan-to-value ratio, the risk inherent in achieving the projected income stream, and the age, condition, and anticipated market position of the subject property, it is our opinion that an equity investor is likely to require an equity yield rate of 22% before payment of incentive management fees. This estimate is well supported by the equity yield requirements presented previously. Terminal Capitalization Rate Inherent in this valuation process is the assumption of a sale at the end of the ten-year holding period. The estimated reversionary sales price as of that date is calculated by capitalizing the projected 11th-year net income by an overall terminal capitalization rate. A percentage for the seller's brokerage and legal fees is deducted from this sales price, and the net proceeds to the equity interest (also known as the equity residual) are calculated by deducting the outstanding mortgage balance from the reversion. To estimate a property's reversionary value, the appraiser must select a terminal capitalization rate and an allocation for brokerage and legal fees. The terminal capitalization rate is an overall rate that is applied to one stabilized year, and thus, it inherently incorporates the cost of debt and equity capital. The terminal capitalization rate can be derived through a mortgage and equity band of investment technique which calculates the weighted average cost of the capital used in a hotel investment. Combining the mortgage financing terms derived previously (namely, a 70% loan-to-value ratio and a HVS International, Mineola, New York Income Capitalization Approach 117 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 0.111856 debt service constant) with a cash-on-cash equity dividend rate of 12% produces the following overall capitalization rate. Percent of Rate of Weighted Value Return Average ---------- ------- -------- Mortgage 0.7 x 0.111856 = 0.07830 Equity 0.3 x 0.078299 = 0.02349 ------- Overall Capitalization Rate 0.10179 Because this overall rate will be used to capitalize net income ten years from the date of value, an upward adjustment is appropriate to reflect the uncertainty inherent in this extended period. For the purpose of this valuation, we will use a terminal capitalization rate of 12%. As a point of reference, the terminal capitalization rate can be compared to the going-in rate implied by the subject property's estimated value. The going-in rate reflects the capitalization rate that would be applicable if the hotel were operating at a stabilized level as of the date of value. This rate is calculated by dividing the stabilized net income (expressed in current dollars as of the date of value) by the value indicated by the income capitalization approach. Generally, the terminal capitalization rate is approximately 100 to 200 basis points above the going-in rate. Summary of Valuation Variables The following table summarizes the valuation variables that have been used to estimate the subject property's value via the income capitalization approach. ================================================================================ Table 10-29 Summary of Valuation Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Ten-Year Forecast Loan-to-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.111856 Equity Yield Ye 22.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 11.5% - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 118 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Valuation of the Mortgage and Equity Components The valuation of the mortgage and equity components is accomplished through use of an algebraic equation that calculates the exact amount of debt and equity that the hotel will be able to support based on the anticipated cash flow (derived from the forecast of income and expense) and the specific return requirements demanded by the mortgage lender (interest) and the equity investor (equity yield). The equation and the calculations associated with this simultaneous valuation formula are set forth in the Addenda to this report. Using the variables summarized above, we estimate the value of the subject property via the income capitalization approach at $3,129,000. Proof of Value The value is proven by calculating the yields to the mortgage and equity components during the projection period. If the mortgagee achieves a 9.5% yield and the equity yield is 22%, then $3,129,000 is the correct value by the income capitalization approach. Using the assumed financial structure set forth in the previous calculations, market value can be allocated between the debt and equity as follows. Mortgage Component (70%) $ 2,191,000 Equity Component (30%) 939,000 ----------- Total $ 3,129,000 The annual debt service is calculated by multiplying the mortgage component by the mortgage constant. Mortgage Component $ 2,191,000 Mortgage Constant 0.111856 ----------- Annual Debt Service $ 245,076 The cash flow to equity is calculated by deducting the debt service from the projected net income before debt service. HVS International, Mineola, New York Income Capitalization Approach 119 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-30 Forecast of Net Income to Equity - -------------------------------------------------------------------------------- Net Income Available for Total Annual Net Income Year Debt Service Debt Service to Equity - -------------------------------------------------------------------------------- 1997 $ 469,000 - $ 245,000 = $ 224,000 1998 352,000 - 245,000 = 107,000 1999 362,000 - 245,000 = 117,000 2000 373,000 - 245,000 = 128,000 2001 386,000 - 245,000 = 141,000 2002 401,000 - 245,000 = 156,000 2003 411,000 - 245,000 = 166,000 2004 425,000 - 245,000 = 180,000 2005 439,000 - 245,000 = 194,000 2006 451,000 - 245,000 = 206,000 - -------------------------------------------------------------------------------- The equity residual at the end of the tenth year is calculated as follows. Reversionary Value ($467,000 / 0.115 ) $ 4,061,000 Less: Brokerage and Legal Fees 122,000 Mortgage Balance 1,578,000 ----------- Net Sale Proceeds to Equity $ 2,361,000 The overall property yield (before debt service), the yield to the lender, and the yield to the equity position have been calculated by computer with the following results. HVS International, Mineola, New York Income Capitalization Approach 120 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-31 Overall Property Yields - -------------------------------------------------------------------------------- Projected Yield (Internal Rate of Return) Position Value Over 10-Year Holding Period - -------------------------------------------------------------------------------- Total Property $3,138,000 14.2% Mortgage 2,196,000 9.4 Equity 941,000 22.0 Note: Whereas the mortgage constant and value are calculated on the basis of monthly mortgage payments, the mortgage yield in this proof assumes single annual payments. As a result, the proof's derived yield may be slightly less than that actually input. - -------------------------------------------------------------------------------- The following tables demonstrate that the property receives its anticipated yields, proving that the $3,129,000 value is correct, based on the assumptions used in this approach. ================================================================================ Table 10-32 Total Property Yield - -------------------------------------------------------------------------------- Net Income Before Present Worth of $1 Discounted Year Debt Service Factor @ 14.2% Cash Flow - -------------------------------------------------------------------------------- 1997 $ 469,000 x 0.875715 = $ 411,000 1998 352,000 x 0.766878 = 270,000 1999 362,000 x 0.671567 = 243,000 2000 373,000 x 0.588101 = 219,000 2001 386,000 x 0.515009 = 199,000 2002 401,000 x 0.451002 = 181,000 2003 411,000 x 0.394949 = 162,000 2004 425,000 x 0.345863 = 147,000 2005 439,000 x 0.302878 = 133,000 2006 4,390,000 * x 0.265235 = 1,164,000 ----------- Total Property Value $ 3,129,000 * 10th year net income of $451,000 plus sales proceeds of $ 3,939,000 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 121 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-33 Mortgage Component Yield - -------------------------------------------------------------------------------- Total Annual Present Worth of $1 Discounted Year Debt Service Factor @ 9.4% Cash Flow - -------------------------------------------------------------------------------- 1997 $ 245,000 x 0.914275 = $ 224,000 1998 245,000 x 0.835899 = 205,000 1999 245,000 x 0.764242 = 187,000 2000 245,000 x 0.698728 = 171,000 2001 245,000 x 0.638830 = 157,000 2002 245,000 x 0.584066 = 143,000 2003 245,000 x 0.533997 = 131,000 2004 245,000 x 0.488221 = 120,000 2005 245,000 x 0.446368 = 109,000 2006 1,823,000 * x 0.408103 = 744,000 ----------- Value of Mortgage Component $ 2,191,000 *10th year debt service of $245,000 plus outstanding mortgage balance of $ 1,578,000 - -------------------------------------------------------------------------------- ================================================================================ Table 10-34 Equity Component Yield - -------------------------------------------------------------------------------- Net Income Present Worth of $1 Discounted Year to Equity Factor @ 22.0% Cash Flow - -------------------------------------------------------------------------------- 1997 $ 224,000 x 0.819654 = $ 184,000 1998 107,000 x 0.671832 = 72,000 1999 117,000 x 0.550669 = 64,000 2000 128,000 x 0.451358 = 58,000 2001 141,000 x 0.369957 = 52,000 2002 156,000 x 0.303237 = 47,000 2003 166,000 x 0.248549 = 41,000 2004 180,000 x 0.203724 = 37,000 2005 194,000 x 0.166983 = 32,000 2006 2,567,000 * x 0.136868 = 351,000 ----------- Value of Equity Component $ 938,000 *10th year net income to equity of $206,000 plus sales proceeds of $ 2,361,000 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 122 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Valuation Method Two: Discounted Cash Flow The total property yield derived from the previous valuation method was 14.2%. After reviewing the total property yields indicated by recent hotel sales, which ranged from 7.2% to 21.1%, it is our opinion that a 14% discount factor would be appropriate for the Howard Johnson - MiddletownHoward Johnson - Middletown. The following table illustrates the discounted cash flow analysis using a 14% discount factor. ================================================================================ Table 10-35 Discounted Cash Flow Analysis - -------------------------------------------------------------------------------- Discount Calendar Net Factor Discounted Year Income @ 14.0% Cash Flow -------------------------------------------------------------- 1997 $ 469,000 0.87719 $ 411,404 1998 352,000 0.76947 270,853 1999 362,000 0.67497 244,340 2000 373,000 0.59208 220,846 2001 386,000 0.51937 200,476 2002 401,000 0.45559 182,690 2003 411,000 0.39964 164,251 2004 425,000 0.35056 148,988 2005 439,000 0.30751 134,996 2006 4,390,043 * 0.26974 1,184,187 Estimated Market Value: $ 3,163,030 (Say): $ 3,200,000 Reversion Analysis 11th Year's Net Income $ 467,000 Capitalization Rate 11.5% Total Sales Proceeds $ 4,060,870 Less: Broker & Legal @ 3.0% 121,826 ----------- Net Sales Proceeds $ 3,939,043 *10th year net income of $451,000 plus sales proceeds of $ 3,939,043 - -------------------------------------------------------------------------------- Conclusion Based on our extensive experience in the hotel industry and comprehensive support provided by literature published by the Appraisal Institute, it is our opinion that the valuation procedure embodied by Method One most closely reflects the investment rationale of typical hotel buyers. As stated in the textbook entitled, Hotels and Motels: A Guide to Market Analysis, HVS International, Mineola, New York Income Capitalization Approach 123 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Investment Analysis and Valuations,(1) Method Two (which discounts the projected net income and reversion using an overall discount rate, or total property yield) "does not consider the impact of mortgage debt, leverage and the specific equity demands of typical hotel investors. . . . This technique is simple but less reliable because the derivation of the discount rate has little support." In light of this consideration, we have relied on the $3,129,000 value conclusion indicated by Method One. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. HVS International, Mineola, New York Sales Comparison Approach 124 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 11. Sales Comparison Approach The sales comparison approach is based on the assumption that an informed purchaser will pay no more for a property than the cost to acquire an existing property with equal utility. This approach estimates market value by considering the sales prices indicated by recent transactions involving properties that are similar to the property being appraised. Dissimilarities are resolved with appropriate adjustments; these differences may pertain to the date of sale, the age of the property, location, construction, condition, layout, equipment, size, or external economic factors. The reliability of the sales comparison approach depends on three factors: 1. the availability of timely, comparable sales data; 2. an understanding of the true terms of the sales and the motivation of the buyer and seller; 3. the degree of comparability, or the extent of the adjustments needed to reflect differences between the subject property and the comparable property. In appraising lodging facilities, it is often difficult to find an adequate number of recent sales involving hotels that are truly comparable to the subject property. Consequently, it may be necessary to consider transactions involving properties in different market areas, and the required adjustments greatly diminish the reliability of the conclusions. Moreover, it is virtually impossible for an observer to determine the true motivations of the buyers and sellers involved in transactions. Hotel acquisition often represents a highly ego-driven process in which a number of external, non-market factors influence the purchase price. Unless the appraiser can quantify these influences, there is no way of knowing whether the purchase price paid actually reflects market value. A final consideration is the degree of similarity between the subject property and the comparable; in most cases, the differences are significant enough to require numerous subjective and unsubstantiated adjustments. Each adjustment represents a potential for error, HVS International, Mineola, New York Sales Comparison Approach 125 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= and thereby diminishes the reliability of this approach. As a result of these shortcomings, the use of the sales comparison approach in valuing hotels is primarily as a check against the value indicated by the income capitalization approach. Hotel values declined in many areas of the country during the late 1980s and early 1990s, although a rebound began in 1994 and 1995. The downturn, which began in most markets in 1988, was largely attributable to lower operating incomes caused by an oversupply of new hotel rooms constructed during the mid-1980s. Overbuilding resulted in flat or declining average rates and occupancies, which caused revenues to fall. A number of other factors exacerbated the situation. The national recession caused a drop in demand in many markets during the early 1990s, and the Persian Gulf War created a virtual freeze on travel in the beginning of 1991, further limiting hotel demand. Operating costs continued to rise despite poor market conditions, resulting in a decline in the net operating income of hotels throughout the nation. Because operating costs have a large fixed component, many lodging facilities experienced precipitous drops in net income. As bottom-line profits eroded, many hotels were unable to meet debt service, and hundreds of properties entered foreclosure or bankruptcy. Lenders and government agencies soon became hotel owners. Because most financial institutions were preoccupied with their distressed real estate, very little mortgage capital was available and the nation suffered from a well-publicized credit crunch. Most hotel transactions that occurred during the early 1990s were financed by the property owners, who, in most cases, were lenders. In the early 1990s, the primary market participants were owner-operators with the expertise to turn around under-performing properties. Hotels were out of favor with passive investors as a result of the industry's poor operating performance and the uncertainty of future appreciation. The wide disparity in buyer and seller expectations also limited the number of transactions. Many sellers were unwilling to accept the fact that the market value of their hotel investments had declined below the cost of the project or the original investment. Moreover, many owners were faced with a significant tax burden upon sale, further reducing their willingness to settle for a price that was below the original acquisition cost. As a result of these market forces, there was very little sales activity involving large, high-quality hotels. The primary difficulty was the lack of HVS International, Mineola, New York Sales Comparison Approach 126 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= properties available for sale; owners who were not forced to sell opted to wait for prices to recover. The few hotels that did enter the market generally attracted 15 to 20 interested bidders, mostly consisting of owner-operators. As a result of the competition for these few assets, the prices of better-quality hotels began to escalate rapidly. In response, more sellers have been encouraged to place their products on the market. An indicator of this market trend is the number of hotel sales that have occurred during the past few years. HVS International tracks major hotel transactions of more than $10,000,000 on an annual basis. In 1992, the number of major transactions was 67; a slightly lower level of 52 was registered in 1993. This total increased significantly (to 92) in 1994, and the 1995 total is estimated to have been 104. In tandem with escalating prices, hotels are again being considered by traditional financing sources, which had virtually abandoned the hospitality industry by the early 1990s. Although many lenders are still approaching the market with a high degree of caution, it is now possible to obtain third-party financing for hotel transactions. The mortgage loans that are now being made are subject to fairly stringent requirements: loan-to-value ratios remain in the 65% to 75% range. The qualification of the borrower is also a crucial consideration for most lenders. We believe that the upward trend in both pricing and sales activity will continue as financing becomes more available and additional buyers (particularly passive investors) enter the market. Consequently, it is important to consider the date of the transactions used in the sales comparison approach. When the comparable sales are not recent enough to provide an accurate picture of the current market, it may be necessary to make upward adjustments to the values indicated by the sales comparison and income capitalization approaches in recognition of the recent escalation. Comparable Sales Based on information provided by the Hospitality Market Data Exchange and compiled by the six offices of HVS International, the following transactions involved hotels that appear to have some degree of comparability to the subject property. HVS International, Mineola, New York Sales Comparison Approach 127 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Sale #1: -------- Property: Super 8 Location: 1220 Dual Highway Hagerstown, MD Date of Sale: September, 1995 Sales Price: $1,585,000 Grantor: Rivett Group Grantee: Mijoe, Inc. Year Opened: 1984 Number of Rooms: 62 Price per Room: $25,565 Sale #2: -------- Property: Ramada Inn Location: 798 E I-10 Service Road Slidell, LA Date of Sale: March, 1995 Sales Price: $3,850,000 Grantor: Sydnay Day Grantee: Capstar Hotels Year Opened: 1978 Number of Rooms: 140 Price per Room: $27,500 Sale #3: -------- Property: Econo Lodge Location: 2451 Riva Road Annapolis, MD Date of Sale: October, 1995 Sales Price: $2,260,000 Grantor: NA Grantee: NA Year Opened: 1984 Number of Rooms: 69 Price per Room: $32,753 HVS International, Mineola, New York Sales Comparison Approach 128 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Sale #4: -------- Property: Quality Inn Location: 6111 Arlington Boulevard Falls Church, VA Date of Sale: August 13, 1995 Sales Price: $3,000,000 Grantor: Third Hotel Associates Grantee: Virginia Hospitality, Inc. Year Opened: 1966 Number of Rooms: 108 Price per Room: $27,778 In addition to considering the above recent transactions, we have also reviewed the sale of the subject property, which occurred in 1994. The details of this transaction are summarized as follows. Subject Property: ----------------- Property: Howard Johnson - Middletown Location: 551 Route 211 East Middletown, NY Date of Sale: March, 1994 Sales Price: $1,696,603 Grantor: Nippon Credit Bank, Ltd. Grantee: Chartwell/G.S.R. Hotels III Limited Partnership, an entity controlled by Ashford Financial Corporation Year Opened: 1975 Number of Rooms: 117 Price per Room: $17,445 In analyzing the sale of the subject property, it is important to consider the terms and conditions pertaining to the transaction. The subject property was acquired by Ashford Financial Corporation from Nippon Credit Bank, Ltd. in March of 1994 as part of a purchase of a mortgage loan secured by 15 hotel properties. The outstanding principal balance of the non-performing HVS International, Mineola, New York Sales Comparison Approach 129 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= mortgage loan at the time of acquisition was $72,840,000, and the purchase price was $18,730,000. At the time of the closing, the mortgage loan was the subject of a settlement agreement between Nippon Credit Bank, Ltd. and Northeast Hotel Association, Inc., which was the owner of the subject property. The settlement agreement called for the conveyance of property deeds in lieu of foreclosure, as well as a cash payment of $2,000,000 for the settlement of guaranty obligations. The above-listed price represents an allocation of the total package price rather than a negotiated value for this single asset. Based on our understanding of the terms of this transaction, we do not believe that this sale was reflective of the market value of the individual hotel. The relevance of the previous transaction involving the subject property is also undermined by the material change in market conditions which occurred between the date of this sale and the present date of value. Areawide occupancy and average rate have improved dramatically in the intervening months, and are forecast to continue this positive trend. As previously discussed, the market for hotel investments has also improved significantly, due to changes in lender and investor attitudes. Finally, the property itself has undergone a significant renovation, with a total of approximately $600,000 spend on upgrading the facilities and amenities. For these reasons, we are of the opinion that the 1994 sale involving the subject property is not a reliable indicator of the current value of the hotel. Conclusion Although the sales comparison approach may be useful in providing a value range and reflecting certain market characteristics, its applicability is limited by the numerous possible points of difference between the subject property and other hotels that have sold in recent years. These factors may include location, access, size, services and facilities offered, market conditions, chain affiliation, market orientation, management, rate structure, age, physical condition, date of sale, the highest and best use of the land, and the anticipated profitability of the operation. Circumstances surrounding a sale, such as financing terms, tax considerations, income guarantees, sales of partial interests, duress on the part of the buyer or seller, or a particular deal structure can also cause a disparity between the sales price and pure market value. Moreover, it is often difficult to determine the marketing periods that were necessary to consummate the transactions. It is extremely difficult to quantify the appropriate adjustment factors accurately because of their number and complexity, as well as the difficulty in obtaining specific, HVS International, Mineola, New York Sales Comparison Approach 130 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= detailed information. Any attempt to manipulate the necessary adjustments is insupportable and purely speculative. Because appraisers are expected to reflect the analytical processes and actions of typical buyers and sellers rather than to create a highly subjective valuation approach, the investment rationale of hotel owners is an essential consideration. As specialists in the valuation of hotels, we find that typical buyers purchase properties based on a thorough analysis of the anticipated economic benefits of property ownership, rather than on historical sales data. In light of these factors, it is our opinion that the sales comparison approach is unsuitable for indicating a specific estimate of the subject property's market value; however, this approach may indicate a range of values that can be used to test the reasonableness of the value indicated by the income capitalization approach. Excluding the prior sale of the subject property, the sales prices range from approximately $20,700 to $32,800 per room, or $2,400,000 to $3,800,000 for the 117-unit subject property. The income capitalization approach indicates a value of $3,129,000, which falls within this range. HVS International, Mineola, New York Cost Approach 131 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 12. Cost Approach The cost approach is founded on the principle of substitution, which implies that no prudent person will pay more for a property than the amount to acquire a site and construct a building of equal desirability and utility without undue delay. This approach estimates market value by first calculating the current cost of replacing the improvements. Appropriate deductions are made for depreciation resulting from physical deterioration, functional obsolescence, and external (economic) obsolescence, and the land value is added to the depreciated replacement cost to provide an estimate of market value. The cost approach employs the following steps. 1. The current replacement or reproduction cost is estimated. 2. Land value is estimated using techniques such as allocation, extraction, or ground rent capitalization. 3. Accrued depreciation, which can be divided into physical deterioration, functional obsolescence, and external obsolescence, is estimated. 4. Total depreciation is deducted from the subject property's replacement cost, and the land value is added to arrive at an estimate of value via the cost approach. When forming their purchase decisions regarding existing properties, market participants tend to consider the cost of developing a new hotel with optimal physical and functional utility. External conditions, such as the depressed market for real estate (and hotels in particular), can cause a property to be worth less than its replacement cost as new. The task of estimating the loss in value resulting from incurable functional and external obsolescence is highly subjective. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements age and begin to deteriorate, the loss in value resulting from physical obsolescence HVS International, Mineola, New York Cost Approach 132 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= becomes increasingly difficult to quantify accurately. Loss in value attributable to functional obsolescence can be even more difficult to determine. The subject property was constructed in 1975, and will be approximately 21 years old as of the date of this appraisal. Currently, the interior of the subject property is in good condition having had recent renovations to its guestrooms, meeting space and public space. However, the exterior of the Howard Johnson needs renovations to update its obsolete appearance. The depressed hotel market conditions that prevailed in the late 1980s and the early 1990s have also led to a degree of external obsolescence. In our opinion, it is impossible to identify and quantify the impact of these factors on the property's value with any accuracy, so we will only estimate the replacement cost of the subject property. Replacement Cost Replacement cost is the current construction cost of a building with the same utility as the subject property, but built with modern materials and according to current construction and design standards. For the purpose of estimating the replacement cost of the subject property, we have used a hotel development cost survey conducted by HVS International. This survey is published annually in a newsletter entitled, The Hotel Valuation Journal, and appeared in the May, 1995, issue of Lodging Hospitality. The survey presents the range of per-room costs associated with various components of hotel development, including the improvements, the furniture, fixtures, and equipment, pre-opening expenses, and operating capital. Statistics are compiled for three broad categories of hotels: luxury, standard, and economy. The results of this survey are presented in the following table. HVS International, Mineola, New York Cost Approach 133 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 12-1 Hotel Development Cost Survey (Amounts per Room) - --------------------------------------------------------------------------------
Improvements Furniture & Equipment Pre-Opening Operating Capital Total Percent Change - ------------------------------------------------------------------------------------------------------------------------------------ 1976 Luxury $32,000 - $55,000 $5,000 - $10,000 $1,000 - $2,000 $1,000 - $1,500 $39,000 - $68,500 --- - --- Standard 20,000 - 32,000 3,000 - 6,000 750 - 1,000 750 - 1,000 24,500 - 40,000 --- - --- Economy 8,000 - 15,000 2,000 - 4,000 500 - 1,000 500 - 750 11,000 - 20,750 --- - --- 1979 Luxury 36,000 - 65,000 8,000 - 15,000 1,500 - 3,000 1,500 - 2,000 47,000 - 85,000 6.8 - 8.0 Standard 25,000 - 36,000 5,000 - 10,000 1,000 - 2,000 1,000 - 1,500 32,000 - 49,500 10.2 - 7.9 Economy 10,000 - 20,000 3,000 - 5,000 750 - 1,000 750 - 1,000 14,500 - 27,000 10.6 - 10.0 1981 Luxury 45,000 - 80,000 10,000 - 20,000 2,000 - 3,500 2,000 - 2,500 59,000 - 106,000 12.8 - 12.4 Standard 25,000 - 40,000 7,000 - 13,000 1,200 - 2,500 1,200 - 2,000 34,400 - 57,500 3.8 - 8.1 Economy 13,000 - 25,000 4,000 - 7,000 700 - 1,200 900 - 1,200 18,600 - 34,400 14.1 - 13.7 1983 Luxury 55,000 - 100,000 12,500 - 20,000 2,300 - 4,000 2,000 - 2,800 71,800 - 126,800 10.8 - 9.8 Standard 35,000 - 50,000 9,000 - 15,000 1,400 - 3,000 1,300 - 2,200 46,700 - 70,200 17.9 - 11.0 Economy 18,000 - 32,000 5,000 - 8,000 800 - 1,500 900 - 1,300 24,700 - 42,800 16.4 - 12.2 1985 Luxury 60,000 - 115,000 13,400 - 30,000 3,000 - 5,000 2,100 - 3,100 78,500 - 153,100 4.7 - 10.4 Standard 38,000 - 57,000 9,500 - 16,500 1,900 - 3,600 1,500 - 2,500 50,900 - 79,600 4.5 - 6.7 Economy 20,000 - 36,000 5,000 - 8,800 1,000 - 1,700 1,000 - 1,500 27,000 - 48,000 4.7 - 6.1 1986 Luxury 62,000 - 120,000 13,700 - 30,600 3,100 - 5,200 2,300 - 3,100 81,100 - 158,900 3.3 - 3.8 Standard 39,000 - 60,000 9,700 - 16,800 2,000 - 3,800 1,500 - 2,600 52,200 - 83,200 2.6 - 4.5 Economy 21,000 - 37,000 5,100 - 9,000 1,000 - 1,800 1,100 - 1,500 28,200 - 49,300 4.4 - 2.7 1987 Luxury 63,000 - 122,000 13,800 - 30,900 3,300 - 5,500 2,300 - 3,200 82,400 - 161,600 1.6 - 1.7 Standard 40,000 - 61,000 9,800 - 16,800 2,100 - 3,900 1,500 - 2,600 53,400 - 84,300 2.3 - 1.3 Economy 21,000 - 39,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 28,400 - 51,400 0.7 - 4.3 1988 Luxury 65,000 - 125,000 14,000 - 31,000 3,300 - 5,500 2,300 - 3,200 84,600 - 164,700 2.7 - 1.9 Standard 41,000 - 63,000 10,000 - 17,100 2,100 - 3,900 1,500 - 2,600 54,600 - 86,600 2.2 - 2.7 Economy 22,000 - 40,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 29,400 - 52,400 3.5 - 1.9 1989 Luxury 66,000 - 126,000 15,000 - 32,000 3,300 - 5,500 2,300 - 3,200 86,600 - 166,700 2.4 - 1.2 Standard 41,000 - 64,000 10,500 - 18,000 2,100 - 3,900 1,500 - 2,600 55,100 - 88,500 0.9 - 2.2 Economy 22,000 - 40,000 5,500 - 9,700 1,100 - 1,800 1,100 - 1,500 29,700 - 53,000 1.0 - 1.1 1990 Luxury 67,000 - 128,000 15,400 - 33,000 3,500 - 5,700 2,500 - 3,500 88,400 - 170,200 2.1 - 2.1 Standard 42,000 - 65,000 10,800 - 18,500 2,200 - 4,000 1,600 - 2,800 56,600 - 90,300 2.7 - 2.0 Economy 22,500 - 41,000 5,600 - 10,000 1,200 - 1,800 1,200 - 1,600 30,500 - 54,400 2.7 - 2.6 1991 Luxury 65,000 - 122,000 14,500 - 31,500 3,700 - 5,900 2,600 - 3,600 85,800 - 163,000 (2.9) - (4.2) Standard 40,000 - 63,000 10,000 - 17,800 2,300 - 4,200 1,700 - 2,900 54,000 - 87,900 (4.6) - (2.7) Economy 21,000 - 39,000 5,000 - 9,500 1,300 - 2,000 1,300 - 1,700 28,600 - 52,200 (6.2) - (4.0) 1992 Luxury 64,000 - 120,000 14,200 - 30,900 3,800 - 6,100 2,700 - 3,700 84,700 - 160,700 (1.3) - (1.4) Standard 39,000 - 62,000 9,800 - 17,400 2,300 - 4,400 1,800 - 3,000 52,900 - 86,800 (2.0) - (1.3) Economy 21,000 - 38,000 4,900 - 9,300 1,400 - 2,100 1,300 - 1,800 28,600 - 51,200 0.0 - (1.9) 1993 Luxury 63,000 - 119,000 14,000 - 30,500 3,900 - 6,200 2,800 - 3,800 83,700 - 159,500 (1.2) - (0.7) Standard 39,000 - 61,000 9,700 - 17,200 2,300 - 4,500 1,800 - 3,000 52,800 - 85,700 (0.2) - (1.3) Economy 21,000 - 38,000 4,900 - 9,200 1,400 - 2,100 1,300 - 1,800 28,600 - 51,100 0.0 - (0.2) 1994 Luxury 64,000 - 121,000 14,300 - 31,100 3,900 - 6,200 2,800 - 3,800 85,000 - 162,100 1.6 - 1.6 Standard 40,000 - 63,000 10,000 - 17,600 2,400 - 4,600 1,800 - 3,000 54,200 - 88,200 2.7 - 2.9 Economy 22,000 - 40,000 5,100 - 9,500 1,500 - 2,200 1,300 - 1,800 29,900 - 53,500 4.5 - 4.7 1995 Luxury 65,000 - 124,000 14,800 - 32,300 4,100 - 6,400 2,900 - 4,000 86,800 - 166,700 2.1 - 2.8 Standard 41,000 - 65,000 10,400 - 18,300 2,500 - 4,800 1,900 - 3,100 55,800 - 91,200 3.0 - 3.4 Economy 23,000 - 42,000 5,400 - 9,900 1,600 - 2,300 1,300 - 1,800 31,300 - 56,000 4.7 - 4.7
Average Annual Compounded Percent Change: 1976 - 1995: Luxury 4.3% - 4.8% 1986 - 1995: Luxury 0.8% - 0.5% Standard 4.4% - 4.4% Standard 0.7% - 1.0% Economy 5.7% - 5.4% Economy 1.2% - 1.4% - -------------------------------------------------------------------------------- HVS International, Mineola, New York Cost Approach 134 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= As illustrated by the previous table, hotel development costs rose significantly during the late 1970s and the early 1980s; however, the rate of increase slowed substantially in 1987. In 1991, hotel development costs declined for the first time since 1976. Further drops of as much as 2.0% were registered in 1992. Between 1986 and 1990, average annual compounded increases ranged from 1.7% to 2.5%. Costs rose slowly (at average annual compounded rates ranging from 0.5% to 1.4%) between 1986 and 1995, largely as a result of the declines in 1991, 1992, and 1993. In 1995, hotel development costs started to escalate more rapidly, reaching 4.7% in the economy segment. As more hotels are developed, we expect costs to continue to rise. Because the replacement cost tends to set the upper limit of a particular hotel's value, this figure is relevant to our analysis. We estimate the replacement cost of the subject property as follows, based on the development cost survey discussed earlier. ================================================================================ Table 12-2 Subject Property's Replacement Cost - -------------------------------------------------------------------------------- Cost No. of Hotel Cost per Room Rooms Total Cost -------------------------------------------------------------------------- Building $30,000 117 $3,510,000 FF&E 7,000 117 819,000 Pre-Opening 2,000 117 234,000 Operating Capital 1,500 117 175,500 -------------------------------------------------------------------------- Totals $40,500 $4,738,500 - -------------------------------------------------------------------------------- Ground Lease Approach to Land Valuation Land value may be estimated either by the sales comparison approach, using comparable land sales, or by the ground lease approach, which is based on the economic value generated by an improvement that represents the property's highest and best use. Because it is unusual to find recent sales of comparable vacant land that is slated for imminent hotel development, we have used the ground lease approach to determine the subject property's land value. Hotels are often constructed on leased land, and although lease terms differ somewhat, the basis for the rental calculation is frequently tied to a percentage of revenue. By applying a typical ground lease rental formula to the HVS International, Mineola, New York Cost Approach 135 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= subject property's stabilized revenues, the appraiser can determine the hotel's economic rent, or what is also known as the income attributable to the land. Land value is then calculated by dividing the economic rent by an appropriate capitalization rate. The self-adjusting aspect of this approach is key to its reliability. Because the rental formula is tied to a percentage of revenue that inherently reflects both the locational attributes of the site (occupancy and rate) and the allowable density of development, the resulting economic ground rent justly represents the greatest net return to the land over a given period. Because the Howard Johnson - Middletown appears to represent the highest and best use of the property, the ground lease approach is an appropriate method of determining land value. We have researched long-term hotel ground leases in search of rental formulas that are based on a percentage of rooms revenue or on a combination of rooms, food, and beverage revenue. This analysis indicates that economic ground rents for hotels similar to the subject property typically range from 2.7% to 7.8% of rooms revenue. Although this range is quite broad, most of the formulas yield rental percentages of between 3% and 5% of rooms revenue. After considering these comparable ground leases and the locational attributes of the subject property, we believe the appropriate economic ground rental percentage is 4% of stabilized rooms revenue. The subject property's stabilized rooms revenue has been deflated to reflect 1996 dollars. The following calculation shows the derivation of the subject property's economic ground rent. Stabilized Rooms Revenue (1996 dollars) $ 1,334,300 Rental Percentage 0.04 ----------- Economic Ground Rent $ 53,372 Rent generated by a ground lease represents a fairly low-risk income flow. Because the tenant improvements typically amount to more than eight times the value of the land, the risk of default is low. When the ground lease terms are tied to rooms revenue, the landlord is also protected from the adverse effects of inflation. Based on these risk factors and the current cost of long-term capital, we estimate the appropriate ground rental overall capitalization rate at 4%. Applying this indicated capitalization rate to the HVS International, Mineola, New York Cost Approach 136 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= subject property's economic ground rent yields the following estimate of land value. Economic Ground Rent $53,372 $ 533,720 ------------------------ = ------------ = Capitalization Rate 0.10 Estimated Land Value (Say) $ 530,000 A new hotel's land value typically ranges from 10% to 20% of the overall value. The estimate of land value presented above is approximately 16.9% of the subject property's total value as indicated by the income capitalization approach. Replacement Cost Combining the replacement cost of the property with the land value yields the subject property's total replacement cost. ================================================================================ Table 12-3 Total Replacement Cost - -------------------------------------------------------------------------------- Cost of the Improvements and FF&E $ 4,738,500 Land Value 530,000 Developer's Profit 526,850 ----------- Total Replacement Cost $ 5,800,000 - -------------------------------------------------------------------------------- If a property's replacement cost is significantly higher than the values indicated by the income capitalization and sales comparison approaches, it may indicate that an upward adjustment of these values is appropriate. This case would also reduce the probability of new hotel development, which is not likely to be feasible under those conditions, and would create an effective barrier to entry for new competition, thereby reducing the risk associated with the subject property's income-generating potential. An upward adjustment of the value indicated by the income capitalization approach is also justified by this barrier to entry. We find that knowledgeable hotel buyers generally base their purchase decisions on economic factors, such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation HVS International, Mineola, New York Cost Approach 137 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= estimates, it is our opinion that the cost approach is inapplicable in estimating the market value of the Howard Johnson - Middletown. However, we have estimated the subject property's replacement cost as new, which may set the upper limit of the hotel's value. HVS International, Mineola, New York Reconciliation of Value Indications 138 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 13. Reconciliation of Value Indications The reconciliation, which is the last step in the appraisal process, involves summarizing and correlating the data and procedures employed throughout the analysis. The final conclusion of value is arrived at after reviewing the estimates indicated by the income capitalization, sales comparison, and cost approaches. The relative significance, applicability, and defensibility of each indicated value is considered, and the greatest weight is given to that approach deemed most appropriate for the property being appraised. The purpose of this report is to estimate the market value of the fee simple interest in the subject property. Our appraisal involves a careful analysis of the property itself and the economic, demographic, political, physical, and environmental factors that influence real estate values. Based on the data set forth in this report, the following value indications were developed. Approach Value Indication Income Capitalization $3,129,000 Sales Comparison $2,400,000 - $3,800,000 Cost (Replacement Cost) $5,800,000 Income Capitalization Approach To estimate the subject property's value via the income capitalization approach, we analyzed the local market for transient accommodations, examined the competitive environment, projected occupancy and average rate levels, and developed a forecast of income and expense that reflects anticipated income trends and cost components through a stabilized year of operation. The subject property's projected net income before debt service was then allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component was calculated; the total of the mortgage and equity components equates to the value of the property. HVS International, Mineola, New York Reconciliation of Value Indications 139 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Our nationwide experience indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the hotel investors who constitute the marketplace. For this reason, we believe that the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in our final estimate of the subject property's market value. Sales Comparison Approach The sales comparison approach uses actual sales of similar properties to provide an indication of the subject property's value. The strength of this approach is that it measures value based on the investment decisions made by actual buyers and sellers. Although we have investigated a number of sales in an attempt to develop a range of value indications, several adjustments are necessary to render the sales prices applicable to the subject property. These adjustments, which are numerous and highly subjective, diminish the reliability of the sales comparison approach. Furthermore, we find that typical hotel investors employ a sales comparison procedure only to establish broad value parameters. The hotel sales outlined earlier in this report indicate an adjusted value range of $17,445 to $32,754 per available room. The income capitalization approach indicates a per-room value of approximately $26,818. This information suggests that a slight upward adjustment of the value indicated by the income capitalization approach may be warranted. Value Conclusion Careful consideration has been given to the strengths and weaknesses of the three approaches to value discussed above. In recognition of the purpose of this appraisal, we have given primary weight to the value indicated by the income capitalization approach and made some subjective adjustments based on the replacement cost estimate, the sales comparison approach, and our extensive experience in the hospitality industry. It is our opinion that the market of the fee simple interest in the Howard Johnson - Middletown - Middletown, as of January 1, 1997, is: $3,300,000 THREE MILLION THREE HUNDRED THOUSAND DOLLARS The estimate of market value includes the land, the improvements, and the furniture, fixtures, and equipment. The appraisal assumes that the hotel is open and operational. HVS International, Mineola, New York Reconciliation of Value Indications 140 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= This value estimate equates to roundly $28,205 per room, which is well supported by market sales, and which is approximately 5% higher than the value indicated by the income capitalization approach. The estimate of value assumes either the availability of third-party financing or the willingness and capability of the seller to take back purchase-money financing so that a buyer can obtain the level of debt set forth in the Income Capitalization Approach section of this appraisal. Marketing Period Our estimate of market value assumes a marketing period of six to nine months. Under normal economic conditions, hotels are transferred within this time frame. Personal Property In accordance with the appraisal standards set forth by the Office of the Comptroller of the Currency, it is necessary for bank appraisals to identify and value any personal property, fixtures, or intangible items that are included in the appraisal and discuss their impact on the overall estimate of market value. A hotel's income-generating ability depends on a suitable inventory of furniture, fixtures, and equipment. Removal of these items can decrease the property value by as much as the cost to replace the inventory plus the loss of income incurred while the hotel cannot function. A hotel's personal property consists of a wide variety of components, including bedroom furnishings, bathroom fixtures, restaurant and kitchen equipment, front office and accounting computers, exterior signs, and similar items. Our inspection of the Howard Johnson - Middletown indicates that the personal property and fixtures are in good condition following the renovations previously mentioned in this report. Based on an annual construction cost survey conducted by HVS International, we estimate the total replacement cost of the subject property's furniture, fixtures, and equipment at $7,000 per available room. Assuming an average useful life of ten years and an effective age of three years, the value of the furniture, fixtures, and equipment currently in place is approximately $2,100 per room, or a total of $245,700. The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) stipulates that ". . . any business interest or other intangible item should be valued separately within the appraisal."(1) Hotels have both (1) Federal Register, Vol. 55, No. 143, July 25, 1990, p. 30205. HVS International, Mineola, New York Reconciliation of Value Indications 141 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= business and real estate components; without the business expertise necessary to operate the facility, a hostelry would have little real estate value. Because furniture, fixtures, and equipment are essential to a hotel's income-generating ability and are seldom removed from the property or sold separately, the separation of the personal property component from the real property is not particularly meaningful. HVS International, Mineola, New York Statement of Assumptions and 142 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 14. Statement of Assumptions and Limiting Conditions 1. This report is to be used in whole and not in part. 2. No responsibility is assumed for matters of a legal nature, nor do we render any opinion as to title, which is assumed to be marketable and free of any deed restrictions and easements. The property is valued as though free and clear unless otherwise stated. 3. We assume that there are no hidden or unapparent conditions of the sub-soil or structures, such as underground storage tanks, that would render the property more or less valuable. No responsibility is assumed for these conditions or for any engineering that may be required to discover them. 4. We have not considered the presence of potentially hazardous materials such as asbestos, urea formaldehyde foam insulation, PCBs, any form of toxic waste, polychlorinated biphengyls, pesticides, or lead-based paints. The appraisers are not qualified to detect hazardous substances, and we urge the client to retain an expert in this field if desired. 5. The Americans with Disabilities Act (ADA) became effective on January 26, 1992. We have conducted no specific compliance survey to determine whether the subject property is operating in accordance with the various detailed requirements of the ADA. It is possible that the property does not conform to the requirements of the act, and this could have an unfavorable effect on value. Because we have no direct evidence regarding this issue, our estimate of value does not consider possible non-compliance with the ADA. HVS International, Mineola, New York Statement of Assumptions and 143 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 6. We have made no survey of the property, and we assume no responsibility in connection with such matters. Sketches, photographs, maps, and other exhibits are included to assist the reader in visualizing the property. It is assumed that the use of the land and improvements is within the boundaries of the property described, and that there is no encroachment or trespass unless noted. 7. All information, financial operating statements, estimates, and opinions obtained from parties not employed by HVS International are assumed to be true and correct. We can assume no liability resulting from misinformation. 8. Unless noted, we assume that there are no encroachments, zoning violations, or building violations encumbering the subject property. 9. The property is assumed to be in full compliance with all applicable federal, state, local, and private codes, laws, consents, licenses, and regulations (including a liquor license where appropriate), and that all licenses, permits, certificates, franchises, and so forth can be freely renewed or transferred to a purchaser. 10. All mortgages, liens, encumbrances, leases, and servitudes have been disregarded unless specified otherwise. 11. None of this material may be reproduced in any form without our written permission, and the report cannot be disseminated to the public through advertising, public relations, news, sales, or other media. 12. We are not required to testify or appear in court by reason of this analysis without previous arrangements, and only when our standard per diem fees and travel costs are paid prior to the appearance. 13. If the reader is making a fiduciary or individual investment decision and has any questions concerning the material presented in this report, it is recommended that the reader contact us. 14. We take no responsibility for any events or circumstances that take place subsequent to either the date of value or the date of our field inspection, whichever occurs first. HVS International, Mineola, New York Statement of Assumptions and 144 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 15. The quality of a lodging facility's on-site management has a direct effect on a property's economic viability and value. The financial forecasts presented in this analysis assume responsible ownership and competent management. Any departure from this assumption may have a significant impact on the projected operating results and the value estimate. 16. The estimated operating results presented in this report are based on an evaluation of the overall economy, and neither take into account nor make provision for the effect of any sharp rise or decline in local or national economic conditions. To the extent that wages and other operating expenses may advance during the economic life of the property, we expect that the prices of rooms, food, beverages, and services will be adjusted to at least offset those advances. We do not warrant that the estimates will be attained, but they have been prepared on the basis of information obtained during the course of this study and are intended to reflect the expectations of a typical hotel buyer. 17. This analysis assumes continuation of all Internal Revenue Service tax code provisions as stated or interpreted on either the date of value or the date of our field inspection, whichever occurs first. 18. Many of the figures presented in this report were generated using sophisticated computer models that make calculations based on numbers carried out to three or more decimal places. In the interest of simplicity, most numbers have been rounded to the nearest tenth of a percent. Thus, these figures may be subject to small rounding errors. 19. It is agreed that our liability to the client is limited to the amount of the fee paid as liquidated damages. Our responsibility is limited to the client, and use of this report by third parties shall be solely at the risk of the client and/or third parties. The use of this report is also subject to the terms and conditions set forth in our engagement letter with the client. 20. Appraising hotels is both a science and an art. Although this analysis employs various mathematical calculations to provide value indications, the final estimate is subjective and may be influenced by our experience and other factors not specifically set forth in this report. HVS International, Mineola, New York Statement of Assumptions and 145 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 21. Any distribution of the total value between the land and improvements or between partial ownership interests applies only under the stated use. Moreover, separate allocations between components are not valid if this report is used in conjunction with any other analysis. 22. This study was prepared by Hospitality Valuation Services, a division of Hotel Consulting Services, Inc. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of Hotel Consulting Services, Inc. as employees, rather than as individuals. HVS International, Mineola, New York Certification 146 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 15. Certification We, the undersigned appraisers, hereby certify: 1. that the statements and opinions presented in this report, subject to the limiting conditions set forth, are correct to the best of our knowledge and belief; 2. that Marie K. Laib personally inspected the property described in this report; Anne R. Lloyd-Jones and Stephen Rushmore participated in the analysis and reviewed the findings, but did not personally inspect the property; 3. that we have no current or contemplated interests in the real estate that is the subject of this report; 4. that we have no personal interest or bias with respect to the subject matter of this report or the parties involved; 5. that this report sets forth all of the limiting conditions (imposed by the terms of this assignment) affecting the analyses, opinions, and conclusions presented herein; 6. that the fee paid for the preparation of this report is not contingent upon our conclusions; 7. that this report has been prepared in accordance with, and is subject to, the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute; 8. that the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives; 9. that this report has been prepared in accordance with the Uniform Standards of Professional Appraisal Practice (as adopted by the Appraisal Foundation); HVS International, Mineola, New York Certification 147 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 10. that no one other than the undersigned prepared the analyses, conclusions, and opinions concerning real estate that are set forth in this appraisal report; 11. that as of the date of this report, Stephen Rushmore has completed the requirements of the continuing education program of the Appraisal Institute; 12. that this appraisal is not based on a requested minimum value, a specific value, or the approval of a loan. /s/ Marie K. Laib ------------------------------------- Marie K. Laib Consulting and Valuation Analyst Hotel Consulting Services, Inc. /s/ Anne R. Lloyd-Jones ------------------------------------- Anne R. Lloyd-Jones, CRE Senior Vice President Hotel Consulting Services, Inc. /s/ Stephen Rushmore ------------------------------------- Stephen Rushmore, CRE, MAI, CHA President Hotel Consulting Services, Inc. HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Main view of the Subject Property [GRAPHIC OMITTED] North view of the central & west guestrooms wings HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] East view of the east guestroom wing [GRAPHIC OMITTED] South view of the central guestroom wing HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] The front desk [GRAPHIC OMITTED] Typical guestroom at the Subject Property HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Subject Property guestroom corridor HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Typical guestroom bath area at the Subject Property HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] The Boardroom [GRAPHIC OMITTED] Subject Property meeting space: Parlors A & B combined HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] The Courthouse restaurant [GRAPHIC OMITTED] The Courthouse lounge HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Subject Property pool area HVS International, Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Days Inn [GRAPHIC OMITTED] The Super 8 HVS International, Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] The Holiday Inn TICOR TITLE GUARANTEE COMPANY SCHEDULE A DESCRIPTION Title No.: 6194-00510 PARCEL I: ALL that certain piece or parcel of land, situate in the Town of Wallkill, County of Orange, State of New York, being more accurately bounded and described as follows: BEGINNING at an iron rod set in the northerly line of New York State Route #211, said rod being the easterly most corner of lands now or formerly of Marine Midland Bank of Southeastern New York, N.A., Liber 1880 cp 256, and runs thence along said lands of Marine Midland, North 11 degrees 50 minutes 52 seconds West 236.9l feet, to an iron rod; thence along said Marine Midland, and lands now or formerly of Nasar, Liber 1597 cp 956, North 46 degrees 51 minutes 40 seconds West 528.63 feet; thence along the lands now or formerly of Middletown Motel Corporation, Liber 1964 cp 418, North 79 degrees 07 minutes 13 seconds East 689.07 feet; thence along lands now or formerly of Saveat Corporation, Liber 2212 cp 430, and lands now or formerly Orange County Industrial Development Agency, Liber 2212 cp 749, South 9 degrees 39 minutes 31 seconds East 619.90 feet; thence along the northerly line of New York State Route 211, the following 3 courses and distances: 1. South 73 degrees 48 minutes 42 seconds West 80.93 feet; 2. South 70 degrees 14 minutes 48 seconds West 202.00 feet; 3. South 74 degrees 42 minutes 50 seconds West 81.34 feet, to the point or place of BEGINNING. HVS International, Mineola, New York Addenda: Synopsis of Hotel 1 Management Agreement - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Synopsis of Hotel Management Agreement Date: May, 1994 Owner: Middletown New York Hotel Limited Partnership Manager: Remington Employers Corporation Premises: Hotel and site Term: 15 years Renewal: The Manager may elect to exercise any such option to renew, and shall give Owner notice to that effect not less than six months prior to the expiration of the current term. Management Fee: 3% of gross revenues Reserve for Replacement: 3% of the premises' gross revenues Termination: May, 2009 HVS International, Mineola, New York Addenda: Synopsis of Franchise 1 and License Agreements - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Synopsis of Franchise and License Agreements Date: May 12, 1994 Licensor: Howard Johnson Franchise Systems, Inc. Licensee: Middletown New York Hotel Limited Partnership Term: 15 years Renewal: Neither party has renewal rights or options. Fees: 4% (of gross room revenue) Franchise Fee 2% (of gross room revenue) Marketing Fee 2.5% (of gross room revenue) Room Sales Charge Licensor Services: Marketing Contribution Reservation System Licensee Obligations: Renovations in compliance with Howard Johnson standards Termination: May 11, 2009 HVS International, Mineola, New York Explanation of the Simultaneous 1 Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Explanation of the Simultaneous Valuation Formula The algebraic equation known as the simultaneous valuation formula, which solves for the total property value using a ten-year mortgage and equity technique, was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(17) The process of solving for the value of the mortgage and equity components begins by deducting the annual debt service from the projected income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value using the terminal capitalization rate. The equity residual, which is the total reversionary value less the mortgage balance at that point in time and less any brokerage and legal costs associated with the sale, is discounted to the date of value at the equity yield rate. The net income to equity for each projection year is also discounted back to the date of value. The sum of these discounted values equals the value of the equity component. Because the equity component comprises a specific percentage of the total value, the value of the mortgage and the total property can be computed easily. (17) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Explanation of the Simultaneous 2 Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= This process can be expressed in two algebraic equations that set forth the mathematical relationships between the known and unknown variables using the following symbols. NI = Net income available for debt service V = Value M = Loan-to-value ratio f = Annual debt service constant n = Number of years in the projection period de = Annual cash available to equity dr = Residual equity value b = Brokerage and legal cost percentage P = Fraction of the loan paid off during the projection period fp = Annual constant required to amortize the entire loan during the projection period Rr = Overall terminal capitalization rate that is applied to net income to calculate the total property reversion (sales price at the end of the projection period) 1/Sn = Present worth of $1 factor (discount factor) at the equity yield rate Using these symbols, the following formulas can be used to express some of the components of this mortgage and equity valuation process. Debt Service - A property's debt service is calculated by first determining the mortgage amount that equals the total value (V) multiplied by the loan-to-value ratio (M). Debt service is derived by multiplying the mortgage amount by the annual debt service constant (f). The following formula represents debt service. f x M x V = Debt Service Net Income to Equity (Equity Dividend) - The net income to equity (de) is the property's net income before debt service (NI) less debt service. The following formula represents the net income to equity. HVS International, Mineola, New York Explanation of the Simultaneous 3 Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= NI - (f x M x V) = d(e) Reversionary Value - The value of the hotel at the end of the tenth year is calculated by dividing the 11th-year net income before debt service (NI11) by the terminal capitalization rate (Rr). The following formula represents the property's tenth-year reversionary value. (NI^11/R(r)) = Reversionary Value Brokerage and Legal Costs - When a hotel is sold, certain costs are associated with the transaction. Normally, the broker is paid a commission and the attorney collects legal fees. In the case of hotel transactions, brokerage and legal costs typically range from 1% to 4% of the sales price. Because these expenses reduce the proceeds to the seller, they are usually deducted from the reversionary value in the mortgage and equity valuation process. Brokerage and legal costs (b), expressed as a percentage of reversionary value (NI^11/R(r)), are calculated by application of the following formula. b (NI^11/R(r)) = Brokerage and Legal Costs Ending Mortgage Balance - The mortgage balance at the end of the tenth year must be deducted from the total reversionary value (debt and equity) in order to determine the equity residual. The formula used to determine the fraction of the loan remaining (expressed as a percentage of the original loan balance) at any point in time (P) takes the annual debt service constant of the loan over the entire amortization period (f) less the mortgage interest rate (i), and divides it by the annual constant required to amortize the entire loan during the ten-year projection period (f(p)) less the mortgage interest rate. The following formula represents the fraction of the loan paid off (P). (f - i)/(f(p) - i) = P HVS International, Mineola, New York Explanation of the Simultaneous 4 Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= If the fraction of the loan paid off (expressed as a percentage of the initial loan balance) is P, then the remaining loan percentage is expressed as 1 - P. The ending mortgage balance is the fraction of the remaining loan (1 - P) multiplied by the initial loan amount (M x V). The following formula represents the ending mortgage balance. (1 - P) x M x V Equity Residual Value - The value of the equity upon the sale at the end of the projection period (d(r)) is the reversionary value less the brokerage and legal costs and the ending mortgage balance. The following formula represents the equity residual value. (NI^11/R(r)) - (b (NI^11/R(r)) - ((1 - P) x M x V) = d(r) Annual Cash Flow to Equity - The annual cash flow to equity consists of the equity dividend for each projection year plus the equity residual at the end of the tenth year. The following formula represents the annual cash flow to equity. NI^1 - (f x M x V) = d(e)^1 NI^2 - (f x M x V) = d(e)^2 NI^10 - (f x M x V) = d(e)^10 (NI^11/R(r)) - (b (NI^11/R(r)) - ((1 - P) x M x V) = d(r) Value of the Equity - If the initial mortgage amount is calculated by multiplying the loan-to-value ratio (M) by the property value (V), then the equity value is one minus the loan-to-value ratio multiplied by the property value. The following formula represents the value of the equity. (1 - M) V HVS International, Mineola, New York Explanation of the Simultaneous 5 Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Discounting the Cash Flow to Equity to the Present Value - The cash flow to equity in each projection year is discounted to the present value at the equity yield rate (1/S^n). The sum of these cash flows is the value of the equity (1 - M) V. The following formula represents the calculation of equity as the sum of the discounted cash flows. (d(e)^1 x 1/S^1) + (d(e)^2 x 1/S^2) + . . . + (d(e)^10 x 1/S^10) + (d(r) x 1/S^10) = (1 - M) V Combining the Equations: Annual Cash Flow to Equity and Discounting the Cash Flow to Equity to the Present Value - The last step is to arrive at one overall equation that shows that the annual cash flow to equity plus the yearly discounting to the present value equals the value of the equity. ((NI^1 - (f x M x V)) 1/S^1) + ((NI^2 - (f x M x V)) 1/S^2) + . . . ((NI^10 - (f x M x V)) 1/S^10) + (((NI^11/R(r)) - (b (NI^11/R(r))) - ((1 - P) x M x V)) 1/S^10) = (1 -M) V Because the property's value (V) is the only unknown, this equation can be solved readily. Ten-Year Projection of Income and Expense - Because the fixed and variable forecast of income and expense is carried out only to the stabilized year, it is necessary to continue the projection to the 11th year. In most cases, net income before debt service beyond the stabilized year is projected at an assumed inflation rate. By increasing a property's revenue and expenses at the same rate of inflation, net income remains constant as a percentage of total revenue, and the dollar amount escalates at the annual inflation rate. Hotel investors are currently using inflation rates of approximately 3.5% annually. The ten-year forecast of income and expense illustrates the subject property's net income, which is assumed to increase by 3.5% annually subsequent to the hotel's stabilized year of operation. Solving for Value Using the Simultaneous Valuation Formula - In the case of the subject property, the following known variables have been determined. HVS International, Mineola, New York Explanation of the Simultaneous 6 Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 1: Summary of Known Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Ten-Year Forecast Loan-to-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.111856 Equity Yield Ye 22.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 11.5% - -------------------------------------------------------------------------------- The following table illustrates the present worth of a $1 factor at the 22% equity yield rate. ================================================================================ Table 2: Present Worth of $1 Factor at the Equity Yield Rate - -------------------------------------------------------------------------------- Present Worth of $1 Calendar Year Factor @22.0% --------------------------------------------------------------- 1997 0.819654 1998 0.671832 1999 0.550669 2000 0.451358 2001 0.369957 2002 0.303237 2003 0.248549 2004 0.203724 2005 0.166983 2006 0.136868 - -------------------------------------------------------------------------------- Using these known variables, the following intermediary calculations must be made before applying the simultaneous valuation formula. The fraction of the loan paid off during the projection period is calculated as follows. P = ( 0.111856 - 0.095 ) / ( 0.155277 - 0.095 ) = 0.279638 The annual debt service is calculated as f x M x V. (f x M x V) = 0.111856 x 0.70 x V = 0.078299 V HVS International, Mineola, New York Explanation of the Simultaneous 7 Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Inserting the known variables into the hotel valuation formula produces the following. ( 469,000 - 0.078299 V ) x 0.819672 + ( 352,000 - 0.078299 V ) x 0.671862 + ( 362,000 - 0.078299 V ) x 0.550707 + ( 373,000 - 0.078299 V ) x 0.451399 + ( 386,000 - 0.078299 V ) x 0.369999 + ( 401,000 - 0.078299 V ) x 0.303278 + ( 411,000 - 0.078299 V ) x 0.248589 + ( 425,000 - 0.078299 V ) x 0.203761 + ( 439,000 - 0.078299 V ) x 0.167017 + ( 451,000 - 0.078299 V ) x 0.136899 + ((( 467,000 / 0.115 ) - ( 0.03 x ( 467,000 / 0.115 )) - (( 1 - 0.279638 ) x 0.70 x V )) x 0.136899 ) = ( 1 - 0.70 ) V Like terms are combined as follows. $2,116,167 - 0.376214 V = (1 - 0.70) V $2,116,167 = 0.67621 V V = $2,116,167 / 0.67621 V = $3,129,437 Total Property Value as Indicated by the Income Capitalization Approach (Say) = $3,100,000 HVS International, Mineola, New York Qualifications of Marie K. Laib - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Marie K. Laib Employment 1996 to present HVS INTERNATIONAL Mineola, New York (Hotel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) Summer, 1995 BRISTOL HOTEL COMPANY Dallas, Texas Education BA - School of Hotel Administration Cornell University HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Anne R. Lloyd-Jones, CRE Employment 1982 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1981 FAIRMONT HOTEL Dallas, Texas 1979 - 1980 SAGA FOOD SERVICE SWARTHMORE COLLEGE Swarthmore, Pennsylvania 1977 - 1980 DARANNE CATERERS Swarthmore, Pennsylvania Professional Affiliations American Society of Real Estate Counselors - Member (CRE) Appraisal Institute - Candidate for Membership Cornell Society of Hotelmen Education MPS - School of Hotel Administration, Cornell University BA - Swarthmore College Appraisal Institute Course 1A1 - Real Estate Appraisal Principles Course 1A2 - Basic Valuation Procedures Course 1BA - Capitalization Theory and Techniques, Part A Course 1BB - Capitalization Theory and Techniques, Part B Course 2-1 - Case Studies in Real Estate Valuation Course 2-3 - Standards of Professional Practice Course 3-1 - Report Writing HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Corporate and Institutional Clients Served Ashford Financial Corporation Chase Manhattan Bank, N. A. Citibank / Citicorp NA Credit Lyonnais Doubletree Hotels Grand Heritage Hotels Great Western Bank Goldman Sachs Holiday Inns, Inc. Interstate Hotels MassMutual Marriott International / Host Marriott Morgan Stanley OCWEN Financial Services Remington Hotels Sheraton Hotels Starwood Capital Group Starwood Lodging Trust Winegardner & Hammons Wyndham Hotel Company Hotel Chains and Management Companies Appraised or Evaluated Doubletree Hotels Compri Hotels Interstate Hotels Fairmont Hotels Guest Quarters Hilton Hotels Corporation Omni International Hotels Ramada Hotel Corp. Servico Hotel Corp. Winegardner & Hammons Appearance as an Expert Witness Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Jefferson City, Missouri Federal Bankruptcy Court, Columbia, South Carolina Federal Bankruptcy Court, Houston, Texas Federal Bankruptcy Court, New York, New York Federal Bankruptcy Court, San Bernardino, California Federal Bankruptcy Court, Los Angeles, California Federal Bankruptcy Court, Charlotte, North Carolina Federal Bankruptcy Court, Miami, Florida Federal District Court, Central Division, Salt Lake City, Utah Iowa District Court, Story County, Iowa Texas District Court, Harris County, Texas Federal Bankruptcy Court, Tampa, Florida Utah District Court, Salt Lake County, Utah Federal Bankruptcy Court, Newark, New Jersey HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated Arizona - - Wyndham Garden Hotel, Chandler - - Wyndham Garden Hotel - Airport, Phoenix - - Wyndham Garden Hotel - Union Hills, Phoenix - - Canyon Ranch Spa & Fitness Resort, Tucson Alabama - - Holiday Inn, Birmingham - - Proposed Sheraton, Gulf Shores - - Proposed Inn, Mobile - - Holiday Inn, Sheffield California - - Industry Hills Sheraton Hotel, City of Industry - - Piccadilly Inn, Fresno - - Proposed Inn at Foss Creek, Healdsburg - - Sunset Towers Hotel, Hollywood - - Proposed La Quinta, Irvine - - Wyndham Garden Hotel, La Jolla - - Days Inn, La Palma - - Proposed Marriott Courtyard, Palm Springs - - Proposed Club Hilton Hotel, Pleasanton - - Center Pointe Development, San Diego - - Holiday Inn-Embarcadero, San Diego - - Holiday Inn-Harbor View, San Diego - - Seven Seas Lodge, San Diego - - Proposed Fountaingrove Inn, Santa Rosa - - Sheraton Round Barn Inn, Santa Rosa - - Wyndham Garden Hotel, Sunnyvale - - Westlake Plaza Hotel, Thousand Oaks - - Proposed Marriott Courtyard, Torrance Colorado - - Proposed Hotel, Keystone Connecticut - - Holiday Inn, Milford - - Holiday Inn, New Britain District of Columbia - - Grand Hotel, Washington - - Wyndham Bristol Hotel, Washington Florida - - Kon Tiki Village, Kissimmee - - Sheraton Lakeside, Kissimmee - - Holiday Inn, 22nd Street, Miami Beach - - Holiday Inn, 87th Street, Miami Beach - - Holiday Inn, 180th Street, Miami Beach - - Sheraton Resort & Marina, St. Petersburg - - Hilton Hotel, Singer Island - - Royce Hotel, West Palm Beach Georgia - - Marriott Hotel, Atlanta - - Wyndham Garden Hotel, Atlanta - - Holiday Inn, Brunswick - - Holiday Inn, Jekyll Island - - Mullberry Inn, Savannah - - Royal Savannah Inn, Savannah Hawaii - - Hobron in Waikiki, Honolulu Idaho - - Holiday Inn, Boise - - Red Lion Inn, Boise - - Super 8, Boise Illinois - - Ramada Inn, Bloomington - - Proposed Marriott Courtyard, Glenview - - Wyndham Garden Hotel, Naperville Indiana - - Holiday Inn, Bloomington - - Inn at the Four Winds, Bloomington - - Ramada Inn, Bloomington - - Hilton Hotel, Fort Wayne - - Airport Hilton Inn, Indianapolis - - Hilton at the Circle, Indianapolis Iowa - - Holiday Inn, Ames - - Proposed Fairfield Inn, Des Moines HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Kentucky - - Proposed Super 8, London - - Proposed Super 8, Radcliff Louisiana - - Sheraton Inn, Kenner - - Hotel Meridien, New Orleans Maine - - Proposed Hotel, Old Orchard Beach Maryland - - Brookshire Hotel, Baltimore - - Lord Baltimore Hotel, Baltimore - - Hyatt Regency, Bethesda Massachusetts - - Proposed Marriott Courtyard, Andover - - Hyatt Regency, Cambridge - - Proposed Hotel, Franklin - - Sheraton Inn, Hyannis - - Marriott Hotel, Worcester Michigan - - Bay Valley Inn, Bay City - - Hilton Airport, Detroit - - Westin Renaissance Center, Detroit - - Hotel Pontchartrain, Detroit - - Proposed Embassy Suites, Lansing - - Hilton Inn, Northfield - - Holiday Inn, Saginaw Minnesota - - Wyndham Garden Hotel, Bloomington - - Marriott Hotel, Minnetonka Missouri - - Inn at Grand Glaize, Osage Beach - - Bel Air Hilton, St. Louis - - Holiday Inn Riverfront, St. Louis Nebraska - - Holiday Inn Airport, Lincoln - - Holiday Inn Northeast, Lincoln Nebraska (continued) - - Marriott Hotel, Omaha - - Ramada Inn, Omaha - - Red Lion Inn, Omaha Nevada - - Proposed Super 8, Las Vegas New Jersey - - Ramada Inn, Edison - - Marriott Hotel, Hanover - - Headquarters Plaza, Morristown - - Hyatt Regency, New Brunswick - - Holiday Inn, North Brunswick New York - - Hilton Hotel, Albany - - Proposed Embassy Suites, Amherst - - Holiday Inn Arena, Binghamton - - Holiday Inn SUNY, Binghamton - - Proposed Hotel, Binghamton - - Proposed Hilton, Brooklyn - - Marriott Hotel, Dewitt - - Metropole Hotel, Flushing - - Midway Hotel, Flushing - - Ramada Inn, Kingston - - Royce Hotel, La Guardia - - Holiday Inn, Latham - - Proposed Crowne Plaza, Manhattan - - Proposed Prince Street Hotel, Manhattan - - Proposed Roslyn Inn, Roslyn - - Proposed Le Richmonde, Rye Brook - - Hilton Hotel, Syracuse - - Hotel Syracuse, Syracuse - - Proposed Hotel, Watertown North Carolina - - Proposed Inn, Chapel Hill - - Proposed Indep. Center Marriott Hotel, Charlotte - - Royce Hotel, Charlotte - - Howard Johnson's North, Charlotte HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) North Carolina (continued) - - Holiday Inn West, Durham - - Sheraton University Inn, Durham - - Holiday Inn, Fayetteville - - Holiday Inn Downtown, Raleigh Ohio - - Proposed Hyatt Hotel, Cleveland - - Proposed Marriott Hotel, Cleveland Oregon - - Holiday Inn Airport, Portland - - Holiday Inn South, Portland Pennsylvania - - Quality Inn, Allentown - - Holiday Inn, Bensalem - - Proposed Marriott Courtyard, Devon - - Proposed Lafayette Inn, Easton - - Ramada Inn, Erie - - Holiday Inn, Harrisburg - - Marriott Hotel, Harrisburg - - Proposed Super 8, Harrisburg - - Proposed Super 8, Lancaster - - Holiday Inn West, Monroeville - - Days Inn Philadelphia - - Franklin Plaza Hotel, Philadelphia - - Franklin Towne EconoLodge, Philadelphia - - Guest Quarters Hotel, Philadelphia - - Hilton Inn, Northeast, Philadelphia - - Marriott Airport Hotel, Philadelphia - - Holiday Inn Greentree, Pittsburgh - - Holiday Inn Parkway East, Pittsburgh - - Holiday Inn North, Pittsburgh - - Holiday Inn Parkway West, Pittsburgh - - Proposed Hotel, Pittsburgh - - Royce Hotel, Pittsburgh - - Westin William Penn Hotel, Pittsburgh - - Hilton Hotel, Scranton - - Proposed Marriott Courtyard, Valley Forge - - Holiday Inn Meadowlands, Washington - - Ramada Inn, York - - Proposed Super 8, York Rhode Island - - Proposed Hotel, Providence - - Omni Biltmore Hotel, Providence South Carolina - - Proposed Charleston Center Hotel, Charleston - - Proposed Cooper River Inn, Charleston - - Howard Johnson's, Spartanburg - - Proposed Middleton Inn and Conference Center, Charleston - - Best Western, North Charleston - - Proposed Marriott Courtyard, Columbia - - Fairfield Inn, Florence - - Holiday Inn, Florence - - Fairfield Inn, Greenville - - Proposed Marriott Courtyard, Greenville - - Fairfield Inn, Hilton Head - - Holiday Inn, Hilton Head Tennessee - - Hampton Inn, Brentwood - - Proposed Marriott Courtyard, Brentwood - - Howard Johnson's, Chattanooga - - Sheraton Hotel, Chattanooga - - Howard Johnson's, Knoxville - - Proposed Capital Mall Convention Center Hotel, Nashville - - Clarion Maxwell House, Nashville - - Holiday Inn Briley Parkway, Nashville - - Proposed Marriott Courtyard, Nashville - - Sheraton Music City, Nashville - - Stouffer's Nashville Hotel, Nashville - - Proposed Super 8, Nashville - - Union Station Hotel, Nashville - - Wyndham Garden Hotel, Nashville - - Proposed Super 8, Union City HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Texas - - Proposed Marriott Courtyard, Addison - - Proposed Marriott Courtyard, Arlington - - La Mansion, Austin - - Proposed Marriott Courtyard, Bedford - - Airport Hilton, El Paso - - Hotel Meridien, Houston - - Sheraton Hotel, Houston - - Proposed Marriott Courtyard, Las Colinas - - Proposed Marriott Courtyard, North Dallas - - La Mansion Del Norte, San Antonio - - La Mansion Del Rio, San Antonio - - Proposed Marriott Courtyard, San Antonio - - Proposed Marriott Courtyard - Medical Center, San Antonio Utah - - Deer Valley Resort, Park City - - Hilton Inn, Salt Lake City - - Holiday Inn, Salt Lake City - - Sheraton Hotel, Salt Lake City Virginia - - Mountain Lake Hotel, Blacksburg - - Howard Johnson's, Bristol - - Boars Head Inn, Charlottesville - - Proposed Fairfield Inn, Hampton - - Proposed Embassy Suites, Herndon - - Ramada Renaissance, Herndon - - Proposed Marriott Courtyard, Manassas - - Omni Hotel, Norfolk Virginia (continued) - - Proposed Marriott, Norfolk - - Howard Johnson's, Richmond - - Howard Johnson's, Roanoke - - Howard Johnson's, Roanoke Rapids - - Wyndham Hotel, Williamsburg Washington - - Wyndham Garden Hotel, Bothell - - Redmond Hotel, Redmond - - Wyndham Garden Hotel, SeaTac West Virginia Proposed Budget Motel, Princeton Wisconsin - - Proposed Granada Royale, Green Bay - - Holiday Inn-Downtown, Green Bay Canada - - Inn on the Park, Toronto Puerto Rico - - Carib Inn, San Juan Virgin Islands - - Virgin Grand Beach Hotel, St. Thomas Jamaica - - Holiday Inn, Montego Bay HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Stephen Rushmore, CRE, MAI, CHA Employment 1980 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1977 - 1980 1971 - 1974 HELMSLEY-SPEAR HOSPITALITY SERVICES, INC. New York, New York (Real Estate) 1974 - 1977 JAMES E. GIBBONS ASSOCIATES Garden City, New York (Mortgage Banking, Appraisals, Hotel Operations) Affiliated Ownership Interests HVS INTERNATIONAL (SAN FRANCISCO, CALIFORNIA) West coast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (MIAMI, FLORIDA) Southeast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (BOULDER, COLORADO) Midwest office for hotel/motel appraisals and counseling HVS INTERNATIONAL (VANCOUVER, CANADA) Canadian office for hotel/motel appraisals and counseling HVS INTERNATIONAL (LONDON, ENGLAND) European office for hotel/motel appraisals and counseling HVS - EXECUTIVE SEARCH Hotel/motel executive search and human resource consulting HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) HVS - ECO SERVICES Environmental consulting for hotels and motels; administrator of the ECOTEL designation HOSPITALITY EQUITY INVESTORS, INC. Hotel and motel investment and management company TRUMBULL MARRIOTT HOTEL General partner of a 324-room hotel and conference center PRINCETON HOTEL ASSOCIATES General partner of a 128-unit Residence Inn in Princeton, New Jersey SEAVIEW GOLF RESORT ASSOCIATES General partner of a 298-unit, 424-acre Marriott resort in Absecon, New Jersey SHELTON HOTEL ASSOCIATES General partner of a 96-unit Residence Inn in Shelton, Connecticut DANBURY HOTEL ASSOCIATES General partner of a 243-unit Hilton Hotel in Danbury, Connecticut PRUDENTIAL - HEI JOINT VENTURE Joint venture partner with Prudential Insurance Company of America on a 234-unit Embassy Suites in Atlanta, Georgia WESTPORT NORFOLK ASSOCIATES General partner of a 425-unit Omni Hotel in Norfolk, Virginia WESTPORT BWI, LLC General partner of a 310-unit Marriott Hotel in Baltimore, Maryland HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) WESTPORT RARITAN, LLC General partner of a 274-unit Crowne Plaza Hotel in Raritan, New Jersey WESTPORT NOVI, LLC General partner of a 193-unit Hilton Hotel in Novi, Michigan WESTPORT LONG BEACH, LLC General Partner of a 460-unit Sheraton Hotel in Long Beach, California WESTPORT PARK RIDGE, LLC General Partner of a 265-unit hotel and conference center in Valley Forge, Pennsylvania WESTPORT CHARLESTON, LLC General Partner of a 295-unit Hilton Hotel in Charleston, South Carolina HOSPITALITY VALUATION SOFTWARE, INC. Founder of software company that develops and distributes hotel financial analysis software Hotels Managed Sheraton Hotel, Smithtown, New York Marriott Hotel, Baltimore Airport, Maryland Hilton Hotel, Danbury, Connecticut Residence Inn, Princeton, New Jersey Embassy Suites, Atlanta Airport, Georgia Omni Hotel, Norfolk, Virginia Crowne Plaza, Raritan, New Jersey Hilton Hotel, Novi, Michigan Sheraton Hotel, Long Beach, California Hilton Hotel, Charleston, South Carolina Park Ridge Hotel and Conference Center, Valley Forge, Pennsylvania Hilton Hotel, Wilmington, Delaware HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Professional Affiliations American Society of Real Estate Counselors - Member (CRE) - Board of Governors Appraisal Institute - Member (MAI) (SREA) - Developer and Instructor, Hotel Investment and Valuation Seminar - Developer and Instructor, Hotel Computer Valuation Seminar American Hotel and Motel Association - Certified Hotel Administrator (CHA) - Industry Real Estate Financing Advisory Council (IREFAC) International Society of Hospitality Consultants - Member (ISHC) New York University - Adjunct Assistant Professor of Nutrition, Food and Hotel Management Michigan State University - Honorary Faculty, Honorary Alumnus Certified General Appraiser - Arizona, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Illinois, Massachusetts, Michigan, Minnesota, Nebraska, New Jersey, New York, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Virginia Licensed Real Estate Broker - New York, Pennsylvania Board of Advisers - Real Estate Finance Journal - Real Estate Workouts & Asset Management American Arbitration Association - National Real Estate Valuation Council Cornell Society of Hotelmen New York University Masters in Hospitality Management - Advisory Board New York University Hospitality Investment Conference - Board of Advisors Beta Gamma Sigma - National Honor Society in Business and Management HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Endowment Hospitality Valuation Services Professor of Hotel Finance and Real Estate - School of Hotel Administration, Cornell University (currently held by Professor James J. Eyster) Education BS - School of Hotel Administration, Cornell University MBA - Graduate School of Business Administration (Finance), University of Buffalo Candidate for PhD - School of Education, Department of Food Service Management, New York University Partial List of Teaching and Lecture Assignments Cornell University - Computer Valuation Techniques Michigan State University - Hotel Management Contracts University of North Carolina - Hotel Market Studies University of Virginia - Assessing Hotels American Arbitration Association - Real Estate Arbitration American Hotel and Motel Association - Hotel Obsolescence Appraisal Institute - Hotel Valuation (over 50 seminars) International Association of Assessing Officers - Hotel Valuation Montreal Appraisal Society - Total Project Analysis Society of Real Estate Appraisers - Lease Seminar Lodging Hospitality - Lodging Summit Published Books and Seminars Textbooks The Valuation of Hotels and Motels, Appraisal Institute, Chicago, Illinois, 1978 Hotels, Motels and Restaurants: Valuations and Market Studies, Appraisal Institute, Chicago, Illinois, 1983 How to Perform an Economic Feasibility Study of a Proposed Hotel/Motel, American Society of Real Estate Counselors, Chicago, Illinois, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Books and Seminars (continued) Textbooks (continued) Hotel Investments: A Guide for Owners and Lenders, Warren, Gorham and Lamont, Inc., New York, New York, 1990 The Computerized Income Approach to Hotel Market Studies and Valuations, Appraisal Institute, Chicago, Illinois, 1990 Hotel Investments: A Guide for Owners and Lenders, 1992 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotel Investments: A Guide for Owners and Lenders, 1993 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Appraisal Institute, Chicago, Illinois, 1992 Student Manuals The Valuation of Lease Interests, Society of Real Estate Appraisers, Chicago, Illinois, 1976 Hotel-Motel Valuation Seminar, Appraisal Institute, Chicago, Illinois, 1981, 1988, 1990 The Computerized Approach to Hotel Market Studies and Valuations Seminar, Appraisal Institute, Chicago, Illinois, 1991 Demonstration Appraisal Demonstration Appraisal of a Proposed Hotel, Spring Valley, New York, Hospitality Valuation Services, Mineola, New York, 1983, 1990 Chapters The Real Estate Handbook-Second Edition, Dow Jones-Irwin, 1989, "Hotels and Motels" Arbitration of Real Estate Valuation Principles, American Arbitration Association, 1987, "Arbitration in the Hospitality Industry" Ethics in Hospitality Management: A Book of Readings, Educational Institute of the American Hotel and Motel Association, 1992, "Ethics in Hotel Appraising" The Lodging and Food Service Industry, Educational Institute of the American Hotel and Motel Association, 1993, "Insider's Insights" HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles The Appraisal Journal "Using Total Project Analysis to Compete for Investment Capital," October, 1975 "The Appraisal of Food Service Facilities," July, 1980 "Publish and Prosper," October, 1980 "Valuation of Hotels and Motels for Assessment Purposes," April, 1984 "Adjusting Comparable Sales for Hotel Assessment Appeals," July, 1986 "Hotel Business Value and Working Capital: A Clarification," January, 1987 "Ethics in Hotel Appraising," July, 1993 The Appraiser "Hotel-Motel Appraisal Misconceptions Set Straight," January, 1979 "No Conventional Financing Available for Hotels: Rushmore," December, 1979 "Estimating Hotel Land Values Using Comparable Ground Leases," April, 1980 Bulletin of the Cornell Society of Hotelmen "Employment Philosophy for a Consulting Practice," July, 1984 Business Travel News "A Snapshot of a Classic Recovery," July, 1995 The Canadian Appraiser "Hotel/Motel Market Sales Update," Summer, 1987 Capital Sources for Real Estate "Stephen Rushmore Discusses the Future of the Lodging Industry," December, 1994 Cayuga Advisor "Secrets to Success in Consulting," October, 1992 Chapter News and Notes "Quantifying a Hotel's Business Value," November, 1979 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Cornell Hotel & Restaurant Administration Quarterly "A Preliminary Market Study," November, 1974 "How Much is Your Place Worth Today? A Case Study in Hotel - Motel Valuation," May, 1975 "What Can Be Done About Your Hotel's Real Estate Taxes?" May, 1977 "The Appraisal of Lodging Facilities," August, 1978 "The Appraisal of Food Service Facilities," February, 1979 "The Appraisal of Lodging Facilities - Update," November, 1984 "Hotel Sales Prices Down More Than 12%," May, 1991 "Seven Current Hotel Valuation Techniques," August, 1992 "The Valuation of Distressed Hotels," October, 1992 "Hotel Lending in the 1990's: Amateurs Beware," December, 1994 "Investment Values of Lodging Property: Modeling the Effects of Income Taxes and Alternative Lender Criteria," December, 1995 FCI Spec Sheet "Employment Philosophy for a Consulting Practice," September, 1984 Florida Hotel & Motel Journal "Rushmore Reports Rising Hotel Prices," February, 1995 Hotel and Motel Management "Average Rate vs. Project Cost," May 1, 1974 "How to Increase the Marketability of Your Motel," April, 1981 "Tougher Lending, Lower Room Rate Hikes On Way?" June, 1981 "What is That Mortgage Loan Going to Cost You?" August, 1981 "How to Perform a Study of Your Property's Market," October, 1981 "How do High Interest Rates Affect Your Motel's Value?" December, 1981 "How to Buy a Feasibility Study That Works for You," February, 1982 "Settling Lease Conflicts Quickly Through Arbitration," April, 1982 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Hotel and Motel Management (continued) "Are Casino Hotels Really Worth $500,000 Per Room?" June, 1982 "Discount Rates and Internal Rate of Return," August, 1982 "Determining a Property's Extended Life Cycle," November, 1982 "Using Microcomputers for Forecasting," December, 1982 "Update on Hotel Development Costs," January, 1983 "Estimating a Site's Worth by Finding Its Profit Value," June, 1983 "Hotel Construction May Be Slowing Down a Little Bit," April, 1983 "The Investor's Risk Sways to Prevailing Economic Winds," August, 1983 "Is Your Property Tax at as Low a Level as it Should Be?" October, 1983 "The Ultimate Guest Room: Could it Ever Exist Anywhere?" December, 1983 Hotel-Motor Inn Journal A Preventive Maintenance System for Motels," March, 1975 Hotel Valuation Journal "Hotel Valuation Index Peaks During 1989," Fall, 1990 "Hotel Development Costs," Winter, 1991 "Hotel Valuation Index for 1990," Spring, 1991 "Bad Year for Hotel Sales Prices Confirmed," Spring, 1992 "Hotel Sales Prices on the Rise," Fall, 1994 "United States Hotel Values Climb," Spring/Summer, 1995 "It's Time for Franchise Reform," Fall, 1995 Institutions/ Volume Feeding "Greater Risk/Greater Profit Potential: Hotel Management Contract," May, 1973 Lodging Hospitality "How to Finance Renovation Projects," January, 1974 "Controlling Your Real Estate Taxes," July, 1978 "Putting Together a Sound Financial Package," December, 1978 "Favorable Outlook for Lodging Values," December, 1983 "Are Your Property Taxes Too High? (Part I and II)," May and June, 1984 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Development Costs," July, 1984 "The Right Management Contract for You," September, 1984 "Selecting the Firm to Prepare Your Feasibility Study," October, 1984 "A Quick How-To In Hotel Valuation," November, 1984 "Updating Lodging Interest Rates," December, 1984 "Is Your Guest Experience Up to Par?" January, 1985 "How to Perform a Breakeven Analysis," May, 1985 "Evaluating Operating Performance," June, 1985 "Hotel Lenders Toughen Underwriting Requirements," July, 1985 "Don't Forget the Pre-Opening Agreement," August, 1985 "Management Companies Should Participate in Financing," October, 1985 "Current Techniques for Valuing Hotel Land," November, 1985 "Hotel Development Costs," December, 1985 "Sourcing Debt Into the 1990's," January, 1986 "Hotel Valuation Thumb Rule," February, 1986 "Value in Use Versus Value in Exchange," March, 1986 "Stretching Feasibility," April, 1986 "The Management Question," May, 1986 "How to Commission a Feasibility Study," June, 1986 "Macro Trends Affecting Property Values," July, 1986 "Hotel-Motel Market Sales Update," August, 1986 "Financing Alternatives: Zero Coupon Mortgages," September, 1986 "Forecasting Lodging Energy Costs," October, 1986 "Portfolio Financing a Better Way," November, 1986 "Profit by Looking at History," December, 1986 "Why New York Isn't Overbuilt," February, 1987 "How to Discourage Hotel Overbuilding: A Case Study," April, 1987 "Structuring an Incentive Management Fee," June, 1987 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Franchising Questions and Answers," July, 1987 "Comparing Hotel Development Costs," August, 1987 "Understanding Economic Life," September, 1987 "Prices Rise for Lodging Properties," October, 1987 "Management Companies Are Key to Success," November, 1987 "Evaluating a Management Contract Fee Structure," December, 1987 "Check Profits Before Selecting Hotel Operator," January, 1988 "It's a Good Time to Review Your Taxes," February, 1988 "How to Use a Management Company Rating System," March, 1988 "Make Sure Management Contracts Contain These Terms," April, 1988 "Hotel Access and Visibility," May, 1988 "Chain Sale Strategies," July, 1988 "Evaluating a Hotel Franchise," August, 1988 "Evaluating Franchise Fees," September, 1988 "Opportunities in Economy Lodging," October, 1988 "How to Obtain a Hotel Mortgage," November, 1988 "Arbitration in the Hospitality Industry," December, 1988 "Lodging Development Cost Update," January, 1989 "Amenities as Profit Builders," February, 1989 "Hotel Values Mirror the Times," March, 1989 "Forecasting Revenue and Expenses," April, 1989 "Real Estate Jargon Made Simple," May, 1989 "Pricing a Management Contract," June, 1989 "Trends in Valuation," July, 1989 "Rescuing the Distressed Hotel," August, 1989 "Shielding Against Incompetence," September, 1989 "Hotel Valuation Revisited," October, 1989 "New Breed of Hard Budgets," November, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Figuring Cap Rates," December, 1989 "A Glance Backward," January, 1990 "Costs Creeping Up," February, 1990 "Valuing Distressed Properties," March, 1990 "Cap and Discount Rates," April, 1990 "An Open Letter," May, 1990 "Misconceptions About Appraisals," June, 1990 "Hotel Values Still Growing," July, 1990 "Hotel Renovation is Key to `90s," August, 1990 "Time Right for Hotel Leases," September, 1990 "Getting a Fix on Rates," October, 1990 "The Wrinkles of Class," November, 1990 "A Glance Backward," December, 1990 "The Price Dropoff," January, 1991 "The Cost Washout," February, 1991 "Survival of the Fittest," March, 1991 "Looking Out and Up," April, 1991 "The Bottom is in Sight," May, 1991 "The Pitfalls of Liquidation," June, 1991 "Extra! Extra! Hospitality News," July, 1991 "The Art of Hotel Renovation," August, 1991 "No Better Time for a Tax Review," September, 1991 "No Time for Passivity," October, 1991 "What a Franchise Really Costs," November, 1991 "In Case You Hadn't Heard," January, 1992 "Negotiation - The Name of the Game," February, 1992 "Now Could be the Time to Build," March, 1992 "The Well May Stay Dry," April, 1992 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Life Expectancy," May, 1992 "Hotel Values - What a Downer," June, 1992 "How to Make Money Now," July, 1992 "Hotel Chain Class Survey," August, 1992 "Budget Dining with Rushmore," September, 1992 "Bookings Up, Rates Will Follow," October, 1992 "Hospitality Master's Good Preparation," November, 1992 "What's New on the Job Front?" January, 1993 "Where Have All the Hotels Gone?" February, 1993 "Hotel Building Costs Continue to Fall," March, 1993 "Hotel Values Head Upward," April, 1993 "The Rise and Fall of Trophy Hotels," May, 1993 "Hotel Sales and Prices Rebound," June, 1993 "Third Parties Loosening Purse Strings," July, 1993 "Beyond Recycling: The Ecotel," August, 1993 "Time to Reduce Property Taxes," September, 1993 "Lodging: The Way I See It," October, 1993 "Choosing an Appraiser," November, 1993 "Who Needs an Asset Manager?" January, 1994 "Investing by the Numbers," February, 1994 "Fire Your Staff and Lease Them Back," March, 1994 "Published Rates Hint at Recovery," April, 1994 "Now is the Time to Start Building," May, 1994 "Hotel Values Heading Up," June, 1994 "Farewell, Friend," July, 1994 "Sales Prices Creeping Up," August, 1994 "Selecting Green Hotel Supplies," September, 1994 "Don't Write Off Full-Service Hotels," October, 1994 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Lodging REIT's Are on the Rise," November, 1994 "Going Back to the Future," January, 1995 "How much do Managers Make?" March, 1995 "Lodging Transactions Soared in '94," April, 1995 "Hotel Development Costs on the Rise," May, 1995 "Hotel Values up Significantly," June, 1995 "What a Franchise Costs over the Long Term," July, 1995 "Road Food Part II," August, 1995 "It's Time for Franchise Reform," September, 1995 "Extended Stay May Not Extend Your Profits," October, 1995 "The Year as I See It," November, 1995 "Cap Rate 101," January, 1996 Michigan Lodging "Hotel Development Costs," January, 1988 The Mortgage and Real Estate Executives Report "Atlantic City Building Game Involves High Stakes," August, 1979 "How Interest Rates Affect Real Estate Values," June, 1982 "Update on Hotel Development Costs," May 1, 1983 Motel-Hotel Insider "The $100,000 Plus Hotel Room Has Become a Reality," November 19, 1979 "Update on Hotel Development Costs," April 4, 1983 NAIFA - The Appraisal Review "Hotel Valuation Techniques," Vol. 44, 1991 Real Estate Digest "Why Should the Management Team be Important to Hotel Lenders," Fall, 1988 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Finance Journal "What is a Typical Fee for a Hotel Management Contract?" Fall, 1988 "Hotel Franchise Fees," Winter 1989 "Why the Management Team Should be Important to Hotel Lenders," Spring, 1989 "Hotel Values and Costs," Summer, 1989 "Structuring a Hotel Investment," Fall, 1989 "A Guide for Lenders Holding Distressed Hotel Loans," Winter, 1990 "Estimating Current Interest Rates for Hotel Financing," Spring, 1990 "Hotel Valuation Techniques," Summer, 1990 "Now is the Time to Review Your Hotel's Property Taxes," Fall, 1990 "Property Tax Assessments for Hotels and Motels," Winter, 1991 "Putting Together Hotel Management Agreements - Part I," Spring 1991 "Putting Together Hotel Management Agreements - Part II," Summer, 1991 "The 1980s - The Decade of Change," Fall, 1991 "An Overview of the Hotel Industry: Past, Present, and Future," Spring, 1994 Real Estate Forum "Casino Hotels Raise Valuation Questions," November, 1981 Real Estate Investment Ideas "How Fuel and Energy Shortages Should Affect Investment Decisions in the Hospitality Industry," March, 1974 "Upward Trend Continues for Sales Price of Hotel-Motel Properties," May, 1988 "High Prices Paid for Hotel-Motel Properties," February, 1990 Real Estate Issues "Employee Compensation for a Consulting Practice," Fall/Winter, 1985 "Hotel/Motel Market Sales Update," Spring/Summer, 1987 Real Estate Newsletter "Computers in Hotel Appraising," May 15, 1989 Real Estate Investment Ideas "Hotel-Sales Update," Winter, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Review "Valuing Motels and Hotel in the Current Market," Fall, 1972 "Dealing With Distressed Hostelry Loans," Fall, 1975 "The Mortgage Underwriting Consultant Comes of Age," Fall, 1977 "Real Estate Compensation," Winter, 1987 Real Estate Workouts and Asset Management "Stephen Rushmore on Directions in the Hospitality Industry," September, 1992 Real Values "Hotel Construction Cost Update," April, 1986 Restaurant and Hotel Design "How Much Should the Renovation Be?" March, 1986 "14 Notable Hotel Development Firms," December, 1987 Rushmore on Hotel Valuation "Mortgage - Equity," Winter, 1979 "Atlantic City - From Bust to Boom," Winter, 1979 "Mortgage - Equity," Spring, 1979 "Developing Mortgage Data," Spring 1979 "Gasoline and Market Values, " Spring, 1979 "Mortgage - Equity," Fall, 1979 "Quantifying a Hotel's Business Value," Fall, 1979 "What Has Happened to Typical Hotel-Motel Development Costs?," Fall, 1979 "Mortgage-Equity," Winter, 1980 "Extending Hotel Economic Life Through Renovation," Winter, 1980 "Estimating Hotel Land Values Using Comparable Ground Leases," Winter, 1980 "Quantifying the Value of Personal Property to a Going Hotel," Spring, 1980 "Recent Changes in New York City's Hotel Market," Spring, 1980 "Hotel-Motel Economic Lives," Fall, 1980 "Mortgage - Equity," Fall, 1980 "Mortgage - Equity," Winter, 1981 "Developing Mortgage Data," Winter, 1981 "Statistical Support for Food and Beverage Projections," Winter, 1981 "Mortgage - Equity," Spring/Summer, 1981 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Rushmore on Hotel Valuation (continued) "Quantifying a Hotel's Demand," Spring/Summer, 1981 "A Five-Year Overview of Typical Hotel-Motel Development Costs," Spring/Summer, 1981 "Mortgage - Equity," Winter/Spring, 1982 "Update on Hotel Capitalization Rates," Winter/Spring, 1982 "Mortgage - Equity," Summer/Fall, 1982 "Are Casino Hotels Really Worth $500,000 Per Room?" Summer/Fall, 1982 "The Hotel-Motel Life Cycle, Summer/Fall, 1982 "Mortgage - Equity," Winter/Spring, 1983 "Update on Hotel Development Costs," Winter/Spring, 1983 "The Valuation of Hotels and Motels for Assessment Purposes," Winter, 1984 "Hotel Capitalization Rates," Summer, 1984 "Hotel Development Cost Survey," Summer, 1984 "Selecting a Hotel Management Company," Fall, 1984 "Hotel Capitalization Rates," Spring, 1985 "How to Perform a Breakeven Analysis," Spring, 1985 "Hotel Capitalization Rates," Winter, 1986 "Hotel Development Costs," Winter, 1986 "Hotel Valuation Survey," Winter, 1987 "Impact of New Tax Laws on Hotel Values," Winter, 1987 "Hotel-Motel Market Sales Update," Winter, 1987 "Structuring an Incentive Management Fee," Fall, 1987 "Understanding Your Hotel's Economic Life," Fall, 1987 "Hotel Development Costs," Fall, 1987 "Hotel, Motel Market Sales Update," Winter, 1988 "Amenity Creep," Winter, 1989 "Hotel Franchise Fees," Winter, 1989 "Hotel Valuation Index," Fall, 1989 "Latest Trends in Hotel Values," Fall, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Tri-State Real Estate Journal "Across the Nation: Hotel Sale Prices Escalate on Average," December 23, 1994 U.S. Real Estate Week "All-Suites Market Entering Second Phase," May 4, 1987 Valuation "Hotel-Motel Market Sales Update," February, 1987 Quarterly Newsletter Hotel Valuation Journal Professional newsletter with a circulation of 10,000 Real Estate Column Lodging Hospitality Real estate editor for a major monthly hospitality periodical Hospitality Column Real Estate Finance Journal Contributing hospitality editor Computer Software Hospitality Valuation Software Hotel financial software for room night analyses, income and expense forecasts, and valuation calculations - developed and distributed for the Appraisal Institute Hotel-Motel Data Hospitality Market Data Exchange National clearinghouse for information pertaining to hotel and motel transactions Hotel Valuation Index National index of hotel value trends for 24 individual market areas Hospitality Seminar Series Intensive short courses for hotel and restaurant professionals Hotel Franchise Fees Analysis Guide Analysis of hotel franchise fees and costs Hospitality Bibliography Comprehensive literature index of hotel and restaurant books and articles HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Awards Robert H. Armstrong Award For the most significant contribution to The Appraisal Journal in 1975 Activities Commercial pilot, instrument, multi-engine; sailing; skiing Corporate and Institutional Clients Served Aetna Life Insurance AIG Real Estate Investment Aldrich Eastman and Waltch Allstate American Airlines America's Best Inns Arthur Anderson & Company Bankers Trust Company Bank of America Bank of Boston Bank of Montreal Bank of New York Bank of Nova Scotia Bank of Tokyo Bank One-Columbus Banque Indosuez Barclay's Bank Baybank Boston The Beacon Companies Bear, Stearns & Company, Inc. Best Inns Best Western International Boykin Management Co. Bradbury Suites C. Itoh Caesar's World California Dept. of Transportation Chase Lincoln First Bank, N.A. Chase Manhattan Bank Chemical Bank Chrysler Capital Corporation CIGNA Citibank Citicorp Real Estate City of Boston City of Detroit City of Grand Rapids City of Kalamazoo City of Orlando City of Philadelphia City of Santa Monica City of Toronto Columbia Sussex Corporation Continental Illinois National Bank Copley Real Estate Advisors Corporex Development CRI, Inc. Cushman and Wakefield Days Inns Edward J. DeBartolo Corp. HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Deer Valley Ski Corporation Doubletree Hotels Drury Inns Econo Lodge Economic Development Admin. EIE Regent International Embassy Suites Equitable Life Assurance Equitable Real Estate Investment European American Bank Fairmont Hotels Federal Deposit Insurance Corp. First Boston First California Savings First Interstate Bank First National Bank of Chicago Four Seasons Hotels Goldman, Sachs Greater Orlando Aviation Authority Great Western Bank Great Western Savings Guest Quarters Hampton Inns Hilton Hotels, Corp. Hilton International Holiday Corporation Holiday Inns Home Savings of America Howard Johnson's Hudson Hotels Corporation Hyatt Hotels Industrial Bank of Japan Interstate Hotels The Irvine Company ITT Commercial Finance Corp. Japan Airlines JDC (America) Corporation John Q. Hammons John Hancock Life Insurance Johnson & Wales College Kenneth Leventhal & Assoc. Kidder Peabody & Company, Inc. La Quinta Larken, Inc. Lexington Companies Loews Hotels Harry Macklowe Real Estate Marine Midland Bank, N.A. Marriott Corporation MA Bay Transit Authority Massachusetts Mutual Life Mellon Bank Meridien Hotels Merrill Lynch Merrill Lynch Capital Markets Metropolitan Life Insurance Microtel Midlantic Bank HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Mitsubishi Morgan Guaranty Bank & Trust Co. J.P. Morgan Investment Management Morgan Stanley Motel 6, Inc. Mutual Benefit Co. National Westminster Bank New York Life Insurance Nippon Credit Bank Nomura Securities Int'l North American Taisei Corporation Northwestern Mutual Life Omni Hotels Parabas Bank Prime Motor Inns Property Capital Trust Prudential Life Insurance Radisson Hotels Ramada Inns Red Lion Inns Regent International Registry Hotels Residence Inns Resolution Trust Corporation Rhode Island Hospital Trust Ritz-Carlton Hotels Rodeway Inns Rose Associates Salomon Brothers San Antonio Hotel/Motel Assoc. Sanwa Bank Security Pacific Bank Servico Management Corp. Sheraton Hotels Sonesta Hotels Sonnenblick-Goldman Steamboat Ski Corporation Stouffer Hotels Stratton Corporation Sumitomo Bank Summerfield Hotel Corporation Super 8 Hotels Swiss Bank Corporation Taisei Texas Commerce Bancshares, Inc. Tishman Realty Corporation Trans World Airlines Travelers Insurance TraveLodge Trusthouse Forte UBS Securities Union Labor Life United Bank of Switzerland United Inns, Inc. United States Steel Universal Hotels U.S. Air Force U.S. Department of Justice HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) U.S. Department of the Army U.S. Department of the Interior U.S. Economic Development Authority U.S. Trust Company Walt Disney Productions Westin Hotels Williams Hospitality Corporation Winegardner & Hammons Winthrop Financial Associates Wyndham Hotels Zeckendorf Company Appearance as an Expert Witness Administrative Law Court - SEC, Washington, DC Appellate Tax Board, Boston, Massachusetts Arbitration, Wayne, New Jersey Assessment Appeals Board, Los Angeles County, Los Angeles, California Board of Equalization and Review, Washington, District of Columbia (2) Board of Taxation, Atlantic City, New Jersey Bureau de Revision Evaluation Fonciere du Quebec, Montreal, Canada Circuit Court, Orange County, Orlando, Florida Condemnation Review Board, Minneapolis, Minnesota Corporation Committee, Rhode Island State Senate Court of Common Pleas, Allegheny County, Pennsylvania Court of Common Pleas, Franklin County, Ohio Court of Common Pleas, Montgomery, Pennsylvania Court of Common Pleas, Pittsburgh, Pennsylvania Court of Common Pleas, Philadelphia, Pennsylvania Court of Queen's Bench of Alberta, Canada District Court, Arapahoe County, Colorado District Court, Dallas County, Texas District Court, Harris County, Texas District Court, Tarrant County, Texas District Court, Hennepin County, Minneapolis, Minnesota District Court, Knoxville, Tennessee Federal Bankruptcy Court, Oakland, California Federal Bankruptcy Court, Los Angeles, California HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Denver, Colorado Federal Bankruptcy Court, District of Columbia Federal Bankruptcy Court, Miami, Florida (2) Federal Bankruptcy Court, Chicago, Illinois Federal Bankruptcy Court, New Orleans, Louisiana Federal Bankruptcy Court, Greenbelt, Maryland Federal Bankruptcy Court, Baltimore, Maryland Federal Bankruptcy Court, Rockville, Maryland Federal Bankruptcy Court, Boston, Massachusetts Federal Bankruptcy Court, Grand Rapids, Michigan Federal Bankruptcy Court, Las Vegas, Nevada Federal Bankruptcy Court, Newark, New Jersey (2) Federal Bankruptcy Court, Manhattan, New York (2) Federal Bankruptcy Court, Westbury, New York Federal Bankruptcy Court, Philadelphia, Pennsylvania Federal Bankruptcy Court, Reading, Pennsylvania Federal Bankruptcy Court, Salt Lake City, Utah Federal Bankruptcy Court, Madison, Wisconsin (2) Federal District Court, Rochester, New York Federal District Court, Philadelphia, Pennsylvania (2) Judicial Arbitration and Mediation Services, Dallas, Texas Michigan Tax Tribunal, Detroit, Michigan New Jersey Tax Court, Newark, New Jersey (2) Superior Court, District of Columbia Superior Court, Clayton County, Georgia (2) Superior Court of North Carolina Superior Court, Nashua, New Hampshire Supreme Court, New York State, Buffalo, New York Supreme Court, New York State, Manhattan, New York Supreme Court, New York State, Riverhead, New York HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Tax Review Board, San Joaquin County, Stockton, California Tax Review Board, Bangor, Maine Tax Review Board, Schenectady, New York Tax Review Board, Yorktown, New York Tax Review Board, North Carolina Tax Review Board, Philadelphia, Pennsylvania (2) U.S. District Court, Wilmington, Delaware U.S. District Court, Madison, Wisconsin ================================================================================ Partial List of Hotels/Motels, Appraised or Reviewed Internationally North America Canada - Delta Hotel, Calgary - Econo Lodge, Hull - Hotel Lord Berri, Montreal - Hotel Vogue, Montreal - Hyatt Regency, Montreal - Le Ragence Hyatt, Montreal - Holiday Inn, Oshawa, Ontario - Hotel Le Chantecler, Quebec - Bond Place Hotel, Toronto - Carlton Hotel, Toronto - Chelsea Hotel, Toronto - Delta Chelsea Hotel, Toronto - Four Seasons on the Park, Toronto - Inn on the Park, Toronto - Novotel Missisauga, Toronto - Ramada Inn, Toronto - Sutton Hotel, Toronto - Toronto Marriott East, Toronto - Westbury Hotel, Toronto - Burnaby Villa Inn, Vancouver - Four Seasons Hotel, Vancouver - Sheraton Land Mark, Vancouver - Sheraton Plaza 500, Vancouver - Four Seasons Yorkville Hotel, Yorkville United States Alabama - MEI - Birmingham West, Bessemer - Comfort Inn, Birmingham - Courtyard by Marriott, Birmingham - Courtyard by Marriott-Hoover, Birmingham - Courtyard By Marriott/Homewood, Birmingham - Crown Sterling Suites, Birmingham - Fairfield Inn, Birmingham - Holiday Inn, Birmingham - Howard Johnson, Birmingham - Knights Inn, Birmingham - Ramada Inn, Birmingham - Residence Inn by Marriott, Birmingham - Still Waters Resort, Dadeville - Ramada Inn, Gadsden - Sheraton Hotel, Gulf Shores - Courtyard by Marriott, Huntsville - Knights Inn, Huntsville - Marriott Hotel-Proposed, Huntsville - La Quinta Inn, Huntsville University - Days Inn, Mobile - Hotel - Proposed, Mobile - Inn-Proposed, Mobile - Stouffer Riverview, Mobile - Courtyard by Marriott, Montgomery - Fairfield Inn, Montgomery - Holiday Inn-Downtown, Montgomery - Holiday Inn-East, Montgomery - Howard Johnson, Montgomery - La Quinta Inn, Montgomery - Residence Inn, Montgomery - Marriott's Grand Hotel, Point Clear - Holiday Inn, Sheffield - La Quinta, Tuscaloosa - Masters Economy Inn, Tuscaloosa - Proposed Extended Stay, West Mobile Alaska - Barratt Inn, Anchorage - Clarion Hotel, Anchorage - Holiday Inn, Anchorage - Hotel Captain Hook, Anchorage - International Airport Inn, Anchorage - Sheraton Anchorage Hotel, Anchorage Arizona - Holiday Inn, Bullhead City - Embassy Suites, Camelback - Compri Hotel-Proposed, Chandler - Quality Inn, Chandler - Ramada Inn, Chandler - AmeriSuite Hotel-Proposed, Flagstaff - Holiday Inn, Flagstaff - Motel 6, Flagstaff - Rodeway Inn, Flagstaff - Bright Angel Lodge, Grand Canyon - El Tovar Hotel, Grand Canyon - Grand Canyon National Park, Grand Canyon - Kachina Lodge, Grand Canyon - Maswik Lodge, Grand Canyon - Moqui Lodge, Grand Canyon - Phantom Ranch, Grand Canyon - Thunderbird Lodge, Grand Canyon - Yavapai Lodge, Grand Canyon - Hampton Inn-Proposed, Holbrook - Moqui Lodge, Kaibab National Forest - Rodeway Inn, Kingman - Nautical Inn Resort, Lake Havasu City - Lexington Hotel Suites, Mesa - Biosphere II Conference Center, Oracle - Best Western-Per Diem, Phoenix - Bobby McGee's, Phoenix - Caravan Inn, Phoenix - Compri Hotel-Proposed, Phoenix - Courtyard by Marriott-Black Canyon, Phoenix - Courtyard by Marriott-Mesa, Phoenix - Crescent Phoenix Hotel, Phoenix - Crown Sterling Suites, Phoenix - Days Inn, Phoenix - Doubletree Inn at Park Central, Phoenix - Embassy Suites, Phoenix - Embassy Suites-Biltmore, Phoenix - Executive Park Hotel, Phoenix - Fountain Suites Hotel, Phoenix - Granada Royale-Camelhead, Phoenix - Hilton Hotel, Phoenix - Holiday Inn, Phoenix - Hyatt Regency, Phoenix - La Quinta Hotel, Phoenix - Lexington Hotel Suites, Phoenix - Newton's Sands, Phoenix - Phoenician Golf & Tennis Resort, Phoenix - Pointe Hilton at Tapatio Cliffs, Phoenix - Quality Inn, Phoenix - Ramada Inn-Airport, Phoenix - Ramada Inn-East, Phoenix - Ritz Carlton, Phoenix - Sunburst Resort Hotel, Phoenix - Hassayampa Inn, Prescott - Clarion Inn at McCormick Ranch, Scottsdale - Conference Center, Scottsdale - Courtyard by Marriott-Mayo, Scottsdale - Doubletree Inn at Scottsdale Mall, Scottsdale - Fairfield Inn, Scottsdale - Fashion Square Hotel, Scottsdale - Loews Paradise Resort, Scottsdale - Marriott Camelback Inn, Scottsdale - Marriott Mountain Shadows, Scottsdale - Mountain Shadows Resort, Scottsdale - Orange Tree Resort, Scottsdale - Ramada-Valley Ho, Scottsdale - Red Lion's La Posada Resort, Scottsdale - Registry Resort, Scottsdale - Rodeway Inn, Scottsdale - Scottsdale Princess, Scottsdale - Sheraton Scottsdale Resort, Scottsdale - The Phoenician, Scottsdale - Valley Ho, Scottsdale - John Gardiner's Enchantment, Sedona - L'Auberege de Sedona, Sedona - Los Abrigados, Sedona - Orchards Inn, Sedona - Hotel-Proposed, Sierra Vista - Motel 6, Sierra Vista - Temple Bar Resort, Temple Bar - Coachman Inn - Proposed, Tolleson/Phoenix - Tubac Resort, Tubac - Canyon Ranch, Tucson - Coachman Inn-Proposed, Tucson - Courtyard by Marriott, Tucson - Doubletree Inn, Tucson - Embassy Suites, Tucson - Granada Royale Hometel-E. Broadway, Tucson - Hotel Park Tucson-Proposed, Tucson - Lexington Suites Hotel, Tucson - Loews Hotel, Tucson - Resort Hotel-Proposed, Tucson - Rodeway Inn, Tucson - Sunbelt Commerce Center Hotel, Tucson - La Quinta Inn, Tucson East - Bobby McGee's, Tuscon - Radisson Suite Hotel, Tuscon - Ventana Canyon Golf and Racquet, Tuscon - Ramada Inn, Union Hill Arkansas - Sheraton Inn, Fort Smith - Hilton, Hot Springs - Holiday Inn-Lake Hamilton, Hot Springs - Courtyard by Marriott, Little Rock - Holiday Inn, Little Rock - Legacy Hotel, Little Rock - Little Rock Hilton, Little Rock - Masters Economy Inn, Little Rock - Red Carpet Inn, Little Rock - Super 8, Little Rock - Masters Economy Inn, North Little Rock - Masters Economy Inn, Protho-Junction - Holiday Inn, Texarkana California - Hampton Inn, Agoura Hills - Ramada Inn, Agoura Hills - Residence Inn-Proposed, Agoura Hills - Island Motel, Almeda - Anaheim Hilton & Towers, Anaheim - Anaheim Park Motor Inn, Anaheim - Anaheim Plaza Hotel, Anaheim - Best Western Pavillions, Anaheim - Carousel Inn, Anaheim - Conestoga Hotel, Anaheim - Courtyard by Marriott, Anaheim - Crown Sterling Suites, Anaheim - Disneyland Hotel, Anaheim - Golden Forest Motel, Anaheim - Hampton Inn, Anaheim - Hilton, Anaheim - Holiday Inn Anaheim Center, Anaheim - Hotel-Proposed, Anaheim - Marriott Hotel, Anaheim - Pan Pacific Hotel, Anaheim - Pitcairn Motel, Anaheim - Raffles Inn, Anaheim - Ramada Maingate/Disneyland Hotel, Anaheim - Roger Morris Inn, Anaheim - Stovall's Inn, Anaheim - The Station Inn, Anaheim - Travelodge Inn at the Park, Anaheim - AmeriSuite, Anaheim Hills - Comfort Inn, Anahiem - Mansouri Hotel, Antioch - Red Lion, Apple Valley - Hampton Inn, Arcadia - Residence Inn, Arcadia - Hilton Lodge, Arrowhead Lake - Auburn Inn, Auburn - Sleep Inn, Auburn - Allstar Inn, Bakersfield - Clarion Hotel, Bakersfield - Courtyard by Marriott, Bakersfield - Economy Inn, Bakersfield - Ramada Inn, Bakersfield - Red Lion Hotel, Bakersfield - Residence Inn, Bakersfield - Rodeway Inn, Bakersfield - Hilton Hotel, Baldwin Park - San Gabriel Valley Hotel, Baldwin Park - The Hilton Hotel, Baldwin Park - Allstar Inn, Barstow - Economy Inn, Barstow - Marriott Berkeley Marina, Berkeley - Shattuck Hotel, Berkeley - Beverly Hills Hotel, Beverly Hills - Beverly Rodeo Hotel, Beverly Hills - Beverly Wilshire Hotel, Beverly Hills - Hilton Hotel-Cresthil, Beverly Hills - L'Ermitage, Beverly Hills - Peninsula Hotel, Beverly Hills - Best Western, Big Bear Lake - Big Bear Hotel, Big Bear Lake - Big Bear Lake Resort, Big Bear Lake - Big Bear Towering Pines, Big Bear Lake - Motel 6, Big Bear Lake - Post Ranch, Big Sur - Ventana Inn, Big Sur - Rodeway Inn, Blythe - Courtyard by Marriott, Brea - Holiday Inn, Brentwood - Courtyard by Marriott, Buena Park - Fairfield Inn, Buena Park - Hampton Inn, Buena Park - Holiday Inn, Buena Park - Crowne Sterling Suites, Burlingame - Hyatt Regency, Burlingame - Mariott Hotel - SFO, Burlingame - Marriott, Burlingame - Marriott-San Francisco Airport, Burlingame - Radisson Hotel-Proposed, Burlingame - Sheraton Hotel, Burlingame - Courtyard by Marriott, Camarillo - Best Western Fireside Inn, Cambria - Cambria Pines Lodge, Cambria - Residence Inn, Campbell - Hotel-Proposed, Capitola - Resort Hotel, Spa & Conference Ctr., Capitola - Allstar Inn, Carlsbad - Carlsbad Inn, Carlsbad - Inn of America, Carlsbad - La Costa Hotel and Spa, Carlsbad - Olympic Resort Hotel, Carlsbad - Tickle Pink Inn, Carmel - Allstar Inn, Carpinteria - Desert Princess Country Club, Cathedral City - Royce Suites Hotel, Cathedral City - Digger Bay, Central Valley - Marriott Hotel-Proposed, Century City - Westin Century Plaza Hotel, Century City - Neighborhood Inn-Proposed, Chatsworth - Red Lion Hotel, Chico - Otay Valley Inn, Chula Vista - Travelodge-Otay Valley, Chula Vista - Ramada Inn, City of Commerce - Sheraton Hotel, City of Industry - Allstar Inn, Coalinga - Harris Ranch Restaurant/Inn, Coalinga - Howard Johnson, Colton - Best Western Willow Tree Inn, Compton - Concord Hotel, Concord - Hilton Hotel, Concord - The Trees Inn, Concord - Motel 6, Corona - Hotel del Coronado, Coronado - Loews Coronado Bay Resort, Coronado - Madera Village Inn, Corte Madera - Ha' Penny Inn, Costa Mesa - La Quinta Hotel, Costa Mesa - Marriott Suites, Costa Mesa - Red Lion Hotel, Costa Mesa - Residence Inn, Costa Mesa - Pacifica Hotel, Culver City - Ramada Inn, Culver City - Courtyard by Marriott, Cupertino - Doubletree Hotel, Cupertino - Doubletree Hotel, Dana Point - Spa-Proposed, Danville - El Rancho, Davis - Furnace Creek Resort, Death Valley - Stovepipe Wells Village, Death Valley - Hilton, Del Mar - Days Inn, Diamond Bar - Compri Hotel, El Segundo - Proposed Summerfield, El Segundo - Days Inn, Emeryville - Holiday Inn-Bay Bridge, Emeryville - Lyons Restaurant, Emeryville - Budget Motel, Encinitis - Marriott Tenaya Lodge-Proposed, Fishcamp - Holiday Inn, Fort Myers Beach - All Suites Hotel/Athletic Club, Foster City - Clubtel-Proposed, Foster City - Courtyard by Marriott, Foster City - Holiday Inn, Foster City - Courtyard by Marriott, Fremont - Fremont Hotel, Fremont - Motel 6, Fremont - Residence Inn, Fremont - Allstar Inn, Fresno - AmeriSuite, Fresno - Chateau Inn, Fresno - Courtyard by Marriott, Fresno - Economy Inn, Fresno - Hacienda, Fresno - Holiday Inn, Fresno - Holiday Inn-Fresno Airport, Fresno - Howard Johnson Motel, Fresno - Piccadilly Inn, Fresno - Travelers Inn, Fresno - Travelers Lodge, Fresno - Griswold's Hotel, Fullerton - Holiday Inn, Fullerton - Marriott Hotel, Fullerton - Hotel-Proposed, Garden Grove - Hyatt Regency Alicante, Garden Grove - Princess Hotel, Garden Grove - Motel 6, Gilroy - Hyatt Regency-Proposed, Goleta - Allstar Inn, Hacienda Heights - Courtyard by Marriott, Hacienda Heights - Half Moon Bay Lodge, Half Moon Bay - Courtyard by Marriott, Harbor Boulevard - Grosvenor, Harborside-Pt. Loma - Inn at Foss Creek, Healdsburg - Chateau Marmont, Hollywood - Hollywood Palm Hotel, Hollywood - Sunset Towers Hotel, Hollywood - Waterfront Hilton Hotel, Huntington Beach - Compri Hotel, Hutton Centre - Grand Champions Resort, Indian Wells - Stouffer Esmerelda Resort, Indian Wells - Courtyard By Marriott, Irvine - Courtyard by Marriott - Proposed, Irvine - Embassy Suites, Irvine - Hilton Hotel, Irvine - Holiday Inn, Irvine - Hyatt Hotel, Irvine - La Quinta-Proposed, Irvine - Marriott Hotel, Irvine - Marriott-Proposed, Irvine - Registry Hotel, Irvine - Residence Inn-Proposed, Irvine - Amador Inn, Jackson - Embassy Suites, La Jolla - Hotel-Proposed, La Jolla - La Jolla Property, La Jolla - La Jolla Village Inn, La Jolla - Marriott Hotel, La Jolla - Residence Inn, La Jolla - Days Inn-Proposed, La Palma - PGA West Resort - Proposed, La Quinta - Lafayette Park Hotel, Lafayette - Laguna Shores, Laguna Beach - Holiday Inn, Laguna Hills - Ryokan Hotel-Proposed, Laguna Hills - Villa Valencia, Laguna Hills - Ritz Carlton, Laguna Niguel - Lake Mohave Resort, Lake Mohave - Resort at Squaw Creek, Lake Tahoe - Courtyard by Marriott, Larkspur Landing - Hilton, Las Cruces - Surf and Sand Hotel, Leguna Beach - Holiday Inn, Lido Beach - Motel-Proposed, Little Lake - Residence Inn, Livermore - Residence Inn-Proposed, Livermore - Breakers Hotel, Long Beach - Holiday Inn, Long Beach - Holiday Inn Airport, Long Beach - Marriott Hotel-Long Beach Airport, Long Beach - Marriott Hotel-Proposed, Long Beach - Ramada Renaissance Hotel, Long Beach - Residence Inn, Long Beach - Sheraton Long Beach & Office Tower, Long Beach - Airport Park Hotel, Los Angeles - Bel Age, Los Angeles - Biltmore Hotel, Los Angeles - Century Inn, Los Angeles - Checkers Hotel, Los Angeles - Courtyard by Marriott-Irvine Main, Los Angeles - Courtyard by Marriott-LAX Airport, Los Angeles - Crown Sterling Suites, Los Angeles - Days Inn, Los Angeles - Econo Lodge-Proposed, Los Angeles - Embassy Suites, Los Angeles - Embassy Suites-LAX-Proposed, Los Angeles - Four Seasons, Los Angeles - Hampton Inn-LAX, Los Angeles - Herrick and Campbell, Los Angeles - Hilton & Towers-LAX, Los Angeles - Hilton Hotel, Los Angeles - Holiday Inn Crowne Plaza-LAX, Los Angeles - Le Montrose Hotel, Los Angeles - Ma Maison Sofitel, Los Angeles - Macklowe Hotel, Los Angeles - Marriott Century City, Los Angeles - MCA Hotel-Proposed, Los Angeles - New Otani Hotel, Los Angeles - Playa Vista Development, Los Angeles - Stouffer Concourse Hotel, Los Angeles - Westin Bonaventure, Los Angeles - Westwood Marquis Hotel, Los Angeles - Los Gatos Lodge, Los Gatos - Macienda Inn, Los Gatos - Toll House Inn, Los Gatos - Residence Inn, Manhattan Beach - All Suite Hotel, Marina Del Rey - Marina Beach Hotel, Marina del Rey - Marina del Rey Hotel and Marina, Marina del Rey - Marina Suites Hotel, Marina Del Rey - Marriott Marina Del Rey, Marina Del Rey - Residence Inn, Meriden - Quality Suites Hotel - Proposed, Millbrae - Beverly Heritage Hotel, Milpitas - Crown Sterling Suites, Milpitas - Holiday Inn, Milpitas - Courtyard by Marriott, Mira Mesa - Grosvenor, Mission Bay - Motel Orleans, Modesto - Red Lion Hotel, Modesto - Red Lion-Proposed, Modesto - Carmel Mission Inn, Monterey - Doubletree Inn, Monterey - Former Monterey Hilton Hotel, Monterey - Monterey Plaza, Monterey - Plaza Hotel, Monterey - Sheraton Hotel, Monterey - Pebble Beach Company, Monterey County - Inn at Morro Bay, Morro Bay - Residence Inn, Mountain View - Inn at Napa Valley, Napa - Best Western Inn, Napa Valley - Clarion Hotel-Napa Valley, Napa Valley - Silverado, Napa Valley - Ha'Penny Motel, National City - Allstar Inn, Needles - Hilton-Newark/Fremont, Newark - Four Seasons Hotel, Newport Beach - Hotel Meridien, Newport Beach - Hyatt Newporter, Newport Beach - Newporter Resort, Newport Beach - Sheraton, Newport Beach - Days Inn-Proposed, North Hollywood - Northstar, North Lake Tahoe - Ramada Inn, Norwalk - Impact Study - Proposed Hotel, Oakdale - Hilton Inn, Oakland - Holiday Inn, Oakland - Holiday Inn-Oakland Airport, Oakland - Parc Oakland Hotel, Oakland - Resort - Proposed, Olympic Valley - Resort at Squaw Creek-Proposed, Olympic Valley - Clarion Hotel, Ontario - Compri Hotel, Ontario - Fairfield Inn, Ontario - Holiday Inn, Ontario - Lexington Hotel Suites, Ontario - Red Lion Hotel, Ontario - Doubletree Hotel, Orange - Woodfin Suites, Orange - Embassy Suites, Palm Desert - Marriott Desert Springs, Palm Desert - Canyon Resort, Palm Springs - Compri Hotel-Proposed, Palm Springs - Courtyard by Marriott, Palm Springs - Desert Princess, Palm Springs - Grand Champions Resort, Palm Springs - International Hotel and Resort, Palm Springs - Ocotillo Lodge, Palm Springs - Palm Canyon, Palm Springs - PGA West Resort-Proposed, Palm Springs - Spa Hotel at Mineral Springs, Palm Springs - Westin Hotel, Palm Springs - Grosvenor, Palmdale - Super 8, Palmdale - Cowper Square, Palo Alto - Garden Court, Palo Alto - Holiday Inn, Palo Alto - Stanford Park, Palo Alto - Marriott, Paradise Valley - All Suite Hotel-Proposed, Pasadena - Doubletree Hotel, Pasadena - Holiday Inn, Pasadena - Cascade Ranch Lodge, Pescadero - Elk Lodge, Petaluma - Hotel Petaluma, Petaluma - Hilton-Proposed, Pismo Beach - Hilton-Sea Point, Pismo Beach - Holiday Inn, Pismo Beach - Hotel-Proposed, Pismo Beach - Pismo II, Pismo Beach - Fairfield Inn, Placentia - Residence Inn, Placentia - Howard Hughes Center, Playa Vista - Pleasant Hill Inn, Pleasant Hill - Residence Inn, Pleasant Hill - Club Hilton Hotel-Proposed, Pleasanton - Compri Hotel, Pleasanton - Courtyard by Marriott, Pleasanton - Hilton, Pleasanton - Holiday Inn, Pleasanton - Pleasanton Creek, Pleasanton - Shilo Inn - Hilltop, Pomona - Compri Hotel, Rancho Bernardo - Radisson Suites, Rancho Bernardo - Comfort Inn Motel, Rancho Cordova - Courtyard by Marriott, Rancho Cordova - Economy Inn, Rancho Cordova - El Rancho, Rancho Cordova - Quality Suites-Proposed, Rancho Cordova - Sheraton Sunrise, Rancho Cordova - Marriott Rancho Las Palmas, Rancho Mirage - Mission Hills Hotel, Rancho Mirage - Resort Hotel-Proposed, Rancho Mirage - Westin Mission Hills Resort, Rancho Mirage - Bridge Bay Resort, Redding - Grand Manor Inn, Redding - La Quinta Inn, Redding - Motel 6, Redding - Motel Orleans, Redding - Red Lion Inn, Redding - Shasta Inn, Redding - Portofino Hotel & Yacht Club, Redondo Beach - Sheraton, Redondo Beach - Sofitel Redwood Shores, Redwood - Days Inn, Richmond - Best Western Carraige Inn, Ridgecrest - Days Inn, Riverside - Mission Inn-Proposed, Riverside - Omni Mission Inn, Riverside - Sheraton Hotel, Riverside - Red Lion Inn, Rohnert Park - Crown Sterling Suites, S.San Fransicso - Allstar Inn, Sacramento - Arco Arena II-Proposed, Sacramento - Arco Park, Sacramento - Catering Center - Proposed, Sacramento - Clarion Hotel, Sacramento - Compri Hotel-Proposed, Sacramento - Courtyard by Marriott, Sacramento - Courtyard by Marriott-S. Natomas, Sacramento - Hilton Hotel, Sacramento - Holiday Inn-Capital Plaza, Sacramento - Hotel-Proposed, Sacramento - Hyatt Arbitrat, Sacramento - Hyatt Regency, Sacramento - La Quinta Hotel, Sacramento - Motel Orleans, Sacramento - Radisson Hotel, Sacramento - Red Lion Inn, Sacramento - Residence Inn, Sacramento - Sacramento Inn, Sacramento - Sierra Inn, Sacramento - Sterling Hotel, Sacramento - Travelers Inn, Sacramento - Woodlake Inn, Sacramento - Harvest Inn, Saint Helena - Courtyard by Marriott, San Bruno - San Carlos Motel Development, San Carlos - Atlas Hotels/Mission Valley Inn, San Diego - Best Western Seven Seas Motor Lodge, San Diego - Budget Motel of America, San Diego - Catamaran Resort Hotel, San Diego - Center Pointe Development, San Diego - Comfort Inn, San Diego - Courtyard by Marriott-Mira Mesa, San Diego - Doubletree Hotel, San Diego - Embassy Suites, San Diego - Executive Lodge, San Diego - Hanalei Hotel, San Diego - Harbor Island Hotel-Proposed, San Diego - Harborside Inn-Point Loma, San Diego - Harbortown Marina Resort, San Diego - Holiday Inn Montgomery Airport, San Diego - Holiday Inn-Embarcadero, San Diego - Holiday Inn-Harbor View, San Diego - Horton Grand Saddlery, San Diego - Horton Park Plaza Hotel, San Diego - Howard Johnson Hotel, San Diego - Inter-Continental Hotel & Marina, San Diego - Kings Inn, San Diego - La Jolla Village Inn, San Diego - La Quinta Hotel, San Diego - Marriott Hotel-Mission Valley, San Diego - Marriott Twin Towers and Marina, San Diego - Mission Valley Inn, San Diego - Omni Hotel, San Diego - Radisson Hotel, San Diego - Ramada Inn, San Diego - Ramada Limited Suites, San Diego - Ramada Old Town, San Diego - Ramada Rancho Penasquitos, San Diego - Red Lion Inn, San Diego - Regency Plaza Hotel, San Diego - San Diego Marriott, San Diego - Seven Seas Lodge, San Diego - Sheraton Grand, San Diego - Sheraton Harbor Island East, San Diego - Super 8-Point Loma, San Diego - Symphony Towers, San Diego - Town and Country Hotel, San Diego - Travelodge Hotel Plaza, San Diego - U.S. Grant Hotel, San Diego - Westin-Proposed, San Diego - Abagail Inn, San Francisco - Bellevue Hotel, San Francisco - Cable Motor Inn, San Francisco - California Cafe, San Francisco - Campton Place, San Francisco - Cartwright Hotel, San Francisco - Chancellor Hotel, San Francisco - Clarion Inn-San Francisco Airport, San Francisco - Comfort Inn, San Francisco - Courtyard by Marriott-Airport, San Francisco - Embarcadero Inn, San Francisco - Fairmont Hotel, San Francisco - Grand Hyatt, San Francisco - Grosvenor Clift Hotel, San Francisco - Harbor Court Hotel, San Francisco - Hilton Hotel, San Francisco - Holiday Inn - Union Square, San Francisco - Holiday Inn Crowne Plaza, San Francisco - Holiday Inn-Civic Center, San Francisco - Holiday Inn-Fisherman's Wharf, San Francisco - Holiday Inn-Golden Gateway, San Francisco - Holiday Inn-South, San Francisco - Holiday Lodge, San Francisco - Hotel Diva, San Francisco - Hotel Meridien, San Francisco - Hotel Union Square, San Francisco - Hotel-Proposed, San Francisco - Hyatt Fisherman's Wharf, San Francisco - Hyatt Regency Embarcadero, San Francisco - Inn at Fisherman's Wharf, San Francisco - Inn at the Opera, San Francisco - Inn-Proposed, San Francisco - Juliana Hotel, San Francisco - King George Hotel, San Francisco - La Quinta Inn, San Francisco - La Quinta-Airport, San Francisco - Lambourne Hotel, San Francisco - Laurel Motor Inn, San Francisco - Majestic Hotel, San Francisco - Manx Hotel, San Francisco - Mark Twain, San Francisco - Marriott, San Francisco - Marriott San Francisco-Proposed, San Francisco - Marriott-Airport, San Francisco - Orchard Hotel, San Francisco - Pan Pacific Hotel, San Francisco - Parc 55 Hotel, San Francisco - Park Hyatt Hotel, San Francisco - Portman Hotel, San Francisco - Prescott Hotel, San Francisco - Queen Anne Hotel, San Francisco - Ramada Hotel, San Francisco - Regis Hotel, San Francisco - Ritz-Carlton Hotel, San Francisco - San Franciscan, San Francisco - San Francisco Hotel, San Francisco - Savoy Hotel, San Francisco - Sheraton Palace Hotel, San Francisco - Sheraton-Fisherman's Wharf, San Francisco - Sir Francis Drake Hotel, San Francisco - Stanford Court, San Francisco - Stouffer Stanford Court Hotel, San Francisco - Super 8-Fisherman's Wharf, San Francisco - Westin St. Francis, San Francisco - Crowne Sterling Suites, San Francisco - South - Olympic Club Golf Course, San Francisco/San Mateo - Budget Inn, San Jose - Courtyard by Marriott, San Jose - Cozy 8 Arena Hotel, San Jose - Fairmont Hotel, San Jose - Holiday Inn, San Jose - Ramada Renaissance, San Jose - Red Lion Inn, San Jose - Islander Motel, San Leandro - Apple Farm Inn, San Luis Obispo - Embassy Suites, San Luis Obispo - Holiday Inn, San Luis Obispo - Los Nomados Resort, San Luis Obispo - Twin Oaks Golf Course, San Marcos - Dunfey San Mateo Hotel, San Mateo - Compri Hotel-Proposed, San Pedro - Embassy Suites Hotel, San Rafael - Marriott Hotel-Proposed, San Ramon - Residence Inn, San Ramon - AAA Inn, Santa Ana - California Palms Hotel, Santa Ana - Comfort Inn, Santa Ana - Compri Hotel, Santa Ana - Embassy Suites Santa Ana, Santa Ana - Executive Lodge, Santa Ana - Howard Johnson, Santa Ana - Quality Inn, Santa Ana - Ramada Inn-Orange County, Santa Ana - El Encanto Hotel, Santa Barbara - Fess Parker's Red Lion Resort, Santa Barbara - Four Seasons Hotel, Santa Barbara - Montecito Inn, Santa Barbara - San Ysidro Ranch, Santa Barbara - Santa Barbara Inn, Santa Barbara - Biltmore Hotel & Suites, Santa Clara - Days Inn, Santa Clara - Doubletree Hotel, Santa Clara - Embassy Suites, Santa Clara - Inn At Saratoga, Santa Clara - Marriott Hotel, Santa Clara - Quality Suites Hotel, Santa Clara - Dream Inn, Santa Cruz - Hilton, Santa Maria - Motel 6, Santa Maria - Econo Lodge-Proposed, Santa Monica - Holiday Inn, Santa Monica - Holiday Inn at the Pier, Santa Monica - Park Hyatt Hotel, Santa Monica - Santa Monica Beach Hotel, Santa Monica - Santa Monica/Slatkin, Santa Monica - Allstar Inn, Santa Rosa - Doubletree Hotel, Santa Rosa - Fountaingrove Inn, Santa Rosa - Holiday Inn, Santa Rosa - Round Barn Inn-Proposed, Santa Rosa - Sheraton Round Barn, Santa Rosa - Days Inn, Seaside - Embassy Suites, Seaside - Seaside 8 Motel, Seaside - Valley Radisson, Sherman Oaks - Red Lion, Sonoma - Sonoma Mission Inn, Sonoma - Holiday Inn - Proposed, Sonora - Timberwolf Lodge, South Lake Tahoe - Holiday Inn, South San Francisco - Hotel-Proposed, South San Francisco - Meadowood Resort, St. Helena - Hilton Hotel, Stockton - Holiday Inn, Stockton - La Quinta Hotel, Stockton - Motel Orleans, Stockton - Paradise Point Manna, Stockton - Sheraton-Proposed, Stockton - Hilton, Sunnyvale - Holiday Inn, Sunnyvale - Neighborhood Suites, Sunnyvale - Ramada Inn, Sunnyvale - Sunnyvale Hilton, Sunnyvale - Temecula Creek Inn, Temecula Creek - Westlake Plaza Hotel, Thousand Oaks - Courtyard by Marriott, Torrance - Holiday Inn, Torrance - Marriott Hotel, Torrance - Residence Inn, Torrance - Holiday Inn, Union City - MCA Hotel-Proposed, Universal City - Comfort Inn, Vallejo - Holiday Inn, Van Nuys - La Quinta Hotel, Ventura - Ocean Resorts, Ventura - Sheraton, Ventura - Greentree Inn, Victorville - Doubletree Inn, Walnut Creek - Parkside Hotel, Walnut Creek - Ramada Renaissance Hotel, Walnut Creek - Royce Hotel-Proposed, Walnut Creek - Walnut Creek Project, Walnut Creek - Hampton Inn, West Covina - Le Bel Age, West Hollywood - Le Dufy, West Hollywood - Le Mondrian Hotel, West Hollywood - Hilton, Whittler - Hotel & Conference Center-Proposed, Woodland - Marriott Hotel-Woodland Hills, Woodland Hills - Skylonda Retreat, Woodside - Compri Hotel-Proposed, Yorba Linda - Marriott-Tenaya Lodge, Yosemite - Motel Orleans, Yuba City Colorado - Days Inn, Arapahoe - Continental Inn, Aspen - Ritz-Carlton Hotel-Proposed, Aspen - Hampton Inn, Aurora - Holiday Inn, Aurora - Radisson Hotel, Aurora - Radisson Southeast, Aurora - Raffles Hotel, Aurora - Comfort Inn, Avon - Boulder Hotel-Downtown, Boulder - Clarion Hotel, Boulder - Courtyard by Marriott, Boulder - Doubletree Hotel-Proposed, Boulder - Hilton Harvest House, Boulder - Holiday Inn, Boulder - Interlocken Conference Resort-Prop., Boulder - Proposed Golf Course, Boulder - Residence Inn, Boulder - Hilton, Breckenridge - Ski Lodge-Proposed, Breckenridge - Interlocken Conference Center, Broomfield - Interlocken Conference Center-Prop., Broomfield - Embassy Suites, Colorado Springs - Hilton, Colorado Springs - Howard Johnson, Colorado Springs - Le Baron Hotel, Colorado Springs - Marriott, Colorado Springs - Quality Inn, Colorado Springs - Red Lion Inn, Colorado Springs - Sheraton Inn, Colorado Springs - Grand Butte Hotel, Crested Butte - Best Western Regency, Denver - Brown Palace, Denver - Clarion Hotel-Denver Airport, Denver - Courtyard by Marriott-Airport, Denver - Courtyard by Marriott-Southeast, Denver - Days Inn, Denver - Denver Airport Hilton Inn, Denver - Doubletree Hotel, Denver - Embassy Suites, Denver - Embassy Suites-Airport, Denver - Hilton-Technical Center, Denver - Holiday Inn-Downtown, Denver - Holiday Inn-West, Denver - Jackson's Hole Sport, Denver - Marriott-Southeast, Denver - Marriott-West, Denver - Radisson Hotel, Denver - Red Lion Hotel, Denver - Regency Inn, Denver - La Quinta Inn, Denver - Airport - La Quinta, Denver - South - Red Lion Inn, Durango - Hilton-Denver, Englewood - Residence Inn, Englewood - Scanticon Conference Center, Englewood - Marriott Hotel-Proposed, Fort Collins - Holiday Inn, Golden - Marriott-Denver West, Golden - Ramada Inn, Grand Junction - Sheraton-Proposed, Keystone - Compri Hotel, Lakewood - Hampton Inn, Lakewood - Sheraton Inn, Steamboat Springs - Proposed Hotel, Telluride - Days Inn, Vail - Doubletree Hotel, Vail - Lodge at Vail, Vail - Marriott's Mark Resort, Vail - Westin Vail Resort, Vail - Ramada Hotel, Westminster - Winter Park Resort, Winter Park Connecticut - Chester Inn-Chester, Chester - Inn-Proposed, Chester - Super 8-Proposed, Cromwell - Danbury Hilton & Towers, Danbury - Residence Inn, Danbury - Holiday Inn, Darien - Howard Johnson Lodge, Darien - Ramada Inn, Darien - Holiday Inn, East Hartford - Howard Johnson Lodge, East Lyme - Days Inn-Proposed, Enfield - Greenwich Habor Inn, Greenwich - Howard Johnson Lodge, Greenwich - Showboat Inn, Greenwich - Hotel-Proposed, Groton - Hilton Hotel, Hartford - Holiday Inn-Proposed, Hartford - Motel 6, Hartford - Ramada Inn, Hartford - Sheraton Tobacco Valley Inn, Hartford - Summit Hotel, Hartford - Super 8 Motel, Hartford - Susse Chalet, Hartford - Residence Inn By Marriott, Meriden - Holiday Inn, Milford - Susse Chalet, Milford - Howard Johnson Lodge, Mystic - Mystic Ramada Inn, Mystic - Holiday Inn, New Britain - Ramada Inn, New Britain - Colony Inn, New Haven - Holiday Inn, New Haven - Howard Johnson, New Haven - Quality Inn, New Haven - Residence Inn, New Haven - Radisson Hotel, New London - Best Western-Proposed, New Milford - Courtyard by Marriott, Norwalk - Holiday Inn, Norwalk - Howard Johnson, Norwalk - Ramada Inn, Norwalk - Susse Chalet, Rocky Hill - Ramada Hotel-Proposed, Shelton - Residence Inn - Shelton, Shelton - Heritage Village, Southbury - Southbury Hotel, Southbury - Susse Chalet, Southington - Days Inn, Stamford - Executive Hotel, Stamford - Harley Hotel, Stamford - Holiday Inn-Crowne Plaza, Stamford - Inn at Mill River, Stamford - Le Pavillon Hotel, Stamford - Marriott, Stamford - Radisson Tara Hotel, Stamford - Sheraton, Stamford - Best Western-Proposed, Stratford - Stratford Motor Lodge, Stratford - Marriott Hotel, Trumbull - Courtyard by Marriott, Wallingford - Susse Chalet, Wallingford - Howard Johnson Plaza Hotel, Waterbury - Super 8-Proposed, Waterbury - Residence Inn-Proposed, Waterford - Holiday Inn, Westbury - The Island Inn, Westbury - Courtyard by Marriott, Windsor - Sheraton Tobacco Valley Inn, Windsor - Holiday Inn-Proposed, Windsor Locks Delaware - Wilmington Hilton, Claymont - Rusty Rudder, Dewey Beach - Residence Inn-Proposed, Newark - Hilton Hotel, Wilmington - Hotel-Proposed, Wilmington - Marriott Suites, Wilmington - Residence Inn-Proposed, Wilmington District of Columbia - All Suite Hotel - Proposed, Washington - Bellevue Hotel, Washington - Canterbury Hotel, Washington - Capital Hilton, Washington - Capitol Hill Hotel, Washington - Castleton Hotel, Washington - Comfort Inn, Washington - Convention Center Inn, Washington - Dupont Plaza, Washington - Embassy Row Hotel, Washington - Fairfax Hotel, Washington - Fairmont Hotel, Washington - Four Seasons Hotel, Washington - General Scott Inn, Washington - Georgetown Hotel, Washington - Grand Hotel, Washington - Grand Hyatt, Washington - Hampshire House, Washington - Harambee House, Washington - Hay Adams Hotel, Washington - Holiday Inn Crowne Plaza, Washington - Holiday Inn-Capitol, Washington - Holiday Inn-Georgetown, Washington - Holiday Inn-Governor House, Washington - Hotel Washington, Washington - Howard Johnson, Washington - Hyatt Regency-Capitol, Washington - Hyatt-Convention Center, Washington - International Inn, Washington - Intrigue Hotel, Washington - Jefferson Hotel, Washington - Lombardy Tower Apartment Hotel, Washington - Madison Hotel, Washington - Manger Annapolis Hotel, Washington - Manger Hamilton Hotel, Washington - Manger Hay Adams Hotel, Washington - Marriott-Key Bridge, Washington - Mayflower Hotel, Washington - Omni Georgetown Hotel, Washington - Omni Shoreham Hotel, Washington - Park Terrace Hotel, Washington - Phoenix Park Hotel, Washington - Plaza Hotel, Washington - Potomac Hotel Group, Washington - Quality Inn-Capitol Hill, Washington - Quality Inn-Downtown, Washington - Ramada Inn-Central, Washington - Ramada Renaissance Hotel, Washington - Ritz-Carlton, Washington - River Inn, Washington - Riverside Towers, Washington - Sheraton City Centre, Washington - Sheraton Grand Hotel, Washington - Shoreham Hotel, Washington - St. James, Washington - State Plaza, Washington - Statler Hilton Hotel, Washington - Washington Hilton, Washington - Washington Plaza, Washington - Watergate Hotel, Washington - Wyndham Bristol Hotel, Washington Florida - Holiday Inn, Altamonte Springs - La Quinta, Altamonte Springs - Turnberry Isle Resort, Aventura - Boca Raton Hotel and Club, Boca Raton - Boca West, Boca Raton - Deerfield Beach Hilton, Boca Raton - Embassy Suites, Boca Raton - Park Place Suite Hotel, Boca Raton - Petite Suites, Boca Raton - Residence Inn, Boca Raton - Days Inn, Brandenton - South Seas Resort, Captive Island - Days Inn, Clearwater - Days Inn-Proposed, Clearwater - Holiday Inn - Central/Clearwater, Clearwater - La Quinta Inn, Clearwater - Sheraton Sand Key Hotel, Clearwater - Holiday Inn - Gulfview South, Clearwater Beach - Holiday Inn - Surfside North, Clearwater Beach - Howard Johnson, Clermont - Econolodge, Cocoa Beach - Hilton Hotel, Cocoa Beach - Holiday Inn, Cocoa Beach - Howard Johnson, Cocoa Beach - Perkins Restaurant, Cocoa Beach - Coconut Grove Hotel, Coconut Grove - Mayfair House, Coconut Grove - Proposed Hampton Inn, Coconut Grove - Biltmore Hotel, Coral Gables - Holiday Inn, Coral Gables - Holiday Inn (Court), Coral Gables - Plantation Hotel, Crystal River - Sheraton Inn, Cypress Gardens - Budget Inn, Davenport - Daytona Beach Surfside Regency, Daytona Beach - Howard Johnson, Daytona Beach - La Quinta Inn, Daytona Beach - Pirates Cove, Daytona Beach - Sheraton Inn, Daytona Beach - Crown Sterling Suites, Deerfield Beach - Days Inn, Deerfield Beach - Hilton Hotel, Deerfield Beach - Horizon Club, Deerfield Beach - Sheraton Inn, Deland - Hilton Hotel, Disney World - Holiday Inn, Edgewater - Knights Inn, Florida City - AmeriSuites Hotel-Proposed, Fort Lauderdale - Bahia Mar Hotel, Fort Lauderdale - Comfort Suites, Fort Lauderdale - Compri Hotel-Proposed, Fort Lauderdale - Costa Del Sol, Fort Lauderdale - Crown Sterling Suites, Fort Lauderdale - Days Inn, Fort Lauderdale - Embassy Suites Hotel, Fort Lauderdale - Executive House, Fort Lauderdale - Hilton Hotel, Fort Lauderdale - Hilton Inverrary, Fort Lauderdale - Holiday Inn - Galleria, Fort Lauderdale - Holiday Inn - North Beach, Fort Lauderdale - Holiday Inn-Proposed, Fort Lauderdale - Marriott Harbor Beach Hotel, Fort Lauderdale - Marriott Hotel & Marina, Fort Lauderdale - Marriott Hotel-Cypress Road, Fort Lauderdale - Pier 66 Hotel and Marina, Fort Lauderdale - Port Everglades Hotel, Fort Lauderdale - Stouffer Hotel, Fort Lauderdale - Days Inn, Fort Meyers - Courtyard by Marriott, Fort Myers - Holiday Inn, Fort Myers - La Quinta Hotel, Fort Myers - Sheraton Harbor Place-Proposed, Fort Myers - Sheraton Motor Inn, Fort Myers - Proposed Hotel, Fort Myers Beach - American Way, Fort Pierce - Days Inn, Fort Walton Beach - Holiday Inn - Airport, Fort.Lauderdale - Days Inn-University Center, Gainesville - Fairfield Inn, Gainesville - Howard Johnson Lodge-I-75, Gainesville - La Quinta Hotel, Gainesville - University Centre Hotel, Gainesville - Holiday Inn, Hialeah - Motel, Hillsboro Beach - Days Inn, Hollywood - Diplomat Hotel, Hollywood - Holiday Inn, Hollywood - Quality Suites - Oceanside, Indiatlantic - Hilton Inn, Inverrary - Best Inn, Jacksonville - Bradbury Suites-Proposed, Jacksonville - Compri Hotel-Proposed, Jacksonville - Courtyard By Marriott, Jacksonville - Days Inn, Jacksonville - Doubletree Club Hotel, Jacksonville - Hampton Inn, Jacksonville - Hotel-Proposed, Jacksonville - Jacksonville Hotel, Jacksonville - Residence Inn, Jacksonville - Sheraton Hotel, Jacksonville - Wyndham Lakes Hotel, Jacksonville - Sheraton Beach Hotel, Jensen Beach - Howard Johnson, Juno Beach - Hilton Hotel, Jupiter - Key Biscayne, Key Biscayne - Howard Johnson Lodge, Key Largo - Casa Marina Marriott, Key West - Fairfield Inn, Key West - Hampton Inn-Roosevelt Rd., Key West - Holiday Inn, Key West - Hyatt Hotel, Key West - La Concha Holiday Inn, Key West - Pier House Inn and Beach Club, Key West - Reach Hotel, Key West - Santa Maria Hotel, Key West - Timeshare Resort, Key West - Best Western Vacation Lodge, Kissimmee - Days Inn, Kissimmee - Days Inn West, Kissimmee - Days Lodge, Kissimmee - Howard Johnson Plaza Hotel, Kissimmee - Howard Johnson's, Kissimmee - KOA Campground, Kissimmee - Old Town Retail Complex, Kissimmee - Quality Suites, Kissimmee - Quality Suites-Maingate, Kissimmee - Save Inn, Kissimmee - Sheraton Lakeside, Kissimmee - Suite Hotel-Proposed, Kissimmee - Wynfield Inn, Kissimmee - Days Inn, Lake Buena Vista - Embassy Suites-Proposed, Lake Buena Vista - Hilton Hotel-Disney World, Lake Buena Vista - Marriott Orlando World Center, Lake Buena Vista - Days Inn, Lake City - Flagship Inn, Lake County - Travelodge Motel, Lake County - Lake Park Inn, Lake Park - Holiday Inn, Lake Placid - Hampton Inn-Proposed, Lakeland - Hotel-Proposed, Lakeland - Howard Johnson, Lakeland - Resort Hotel-Proposed, Lakeland - Resort-Imperial Lake-Prpsd., Lakeland - Proposed Hotel, Lee County - Sonesta Sanibel Harbour, Lee County - Holiday Inn, Lido Beach - Holiday Inn, Longboat Kay - Holiday Inn - Madiera Beach, Madiera - Howard Johnson, Marathon - Radisson Suite Resort, Marco Island - Holiday Inn, Marianna - Oceanfront Hotel, Melbourne - Quality Suites, Melbourne - Bahia Mar Hotel & Yachting Club, Miami - Biscayne Bay Marriott, Miami - Courtyard by Marriott, Miami - Crown Sterling Suites, Miami - Doral Ocean Beach Resort, Miami - Fairfield Inn, Miami - Hilton Hotel-Proposed, Miami - Holiday Inn Civic Center, Miami - Holiday Inn-Airport (Le Juene Rd.), Miami - Holiday Inn-Calder, Miami - Howard Johnson Hotel-Broad Causeway, Miami - Howard Johnson Hotel-Port of Miami, Miami - Howard Johnson Lodge-Golden Glades, Miami - Howard Johnson Lodge-Int'l Airport, Miami - Hyatt Regency Hotel, Miami - Inter-Continental Hotel, Miami - Jockey Club, Miami - Marriott Hotel-Downtown, Miami - Miami Airport Ramada, Miami - Proposed AmeriSuites, Miami - Propsed Hampton Inn, Miami - Residence Inn-Proposed, Miami - Sheraton River House, Miami - Sofitel Miami, Miami - Alexander Hotel, Miami Beach - Art Deco Hotel, Miami Beach - Cresent Timeshare, Miami Beach - Delano Hotel, Miami Beach - Doral Beach Hotel, Miami Beach - Eden Roc Hotel, Miami Beach - Fontainebleu Hotel, Miami Beach - Holiday Inn, Miami Beach - Holiday Inn-Central, Miami Beach - Holiday Inn-North, Miami Beach - Holiday Inn-Oceanside, Miami Beach - Holiday Inn-South, Miami Beach - Hotel-Proposed, Miami Beach - Nautilus Club Hotel, Miami Beach - Palm Resort on the Ocean, Miami Beach - Pan American Radisson, Miami Beach - Proposed Hotel, Miami Beach - Shelborne Beach Hotel, Miami Beach - Sheraton Beach, Miami Beach - Solymar Hotel-Proposed, Miami Beach - Quality Inn, Naples - Quality Inn-Gulfcoast, Naples - Registry Hotel at Pelican Bay, Naples - Registry Resort-Proposed, Naples - Super 8 Motel-Proposed, Naples - World Tennis Resort, Naples - Hyatt Newporter Hotel, Newport Beach - Hilton Hotel, North Redington Beach - Masters Economy Inn, North Seffner - Amfac Hotel, Orlando - Army lodging-Proposed, Orlando - Comfort Suites Hotel, Orlando - Compri Hotel-Airport-Proposed, Orlando - Compri Hotel-Proposed, Orlando - Courtyard - Orlando Airport, Orlando - Days Inn, Orlando - Days Inn and Lodge-Florida Mall, Orlando - Days Inn Civic Center, Orlando - Days Inn East of Universal Studios, Orlando - Days Inn-E/O Magic Kingdom, Orlando - Days Inn-Proposed, Orlando - Days Inn-Sandlake Road, Orlando - Days Suites-E/O Magic Kingdom, Orlando - Dolphin Hotel-Proposed, Orlando - Dutch Inn, Orlando - Embassy Suites, Orlando - Fairfield Inn, Orlando - Fairfield Inn-Airport, Orlando - Grand Cypress Resort, Orlando - Hampton Inn - Proposed, Orlando - Heritage Inn, Orlando - Holiday Inn Central Park, Orlando - Holiday Inn Crowne Plaza, Orlando - Holiday Inn-Airport, Orlando - Holiday Inn-International Drive, Orlando - Holiday Inn-Lee Road, Orlando - Holiday Inn-Maingate West, Orlando - Holiday Inn-Orange Blossom Trail, Orlando - Howard Johnson - Walt Disney World, Orlando - Howard Johnson-Kirkman, Orlando - Howard Johnson-Lake Holden, Orlando - Howard Johnson-Maingate, Orlando - Hyatt Grand Cypress, Orlando - Hyatt Regency Grand Cypress, Orlando - Hyatt-W. Irlo Bronson Mem. Hwy., Orlando - International Inn, Orlando - Kon Tiki Village, Orlando - La Quinta Hotel-Airport, Orlando - La Quinta Inn, Orlando - Omni Orlando, Orlando - Orlando Airport Hotel-Proposed, Orlando - Orlando Hamiton, Orlando - Orlando Plaza Hotel, Orlando - Orlando Twin Towers Hotel, Orlando - Park Suite Hotel-Proposed, Orlando - Peabody Hotel, Orlando - Princess Hotel and Spa, Orlando - Proposed Wellesley Inn, Orlando - Quality Inn, Orlando - Radisson Hotel-Aquatic Center, Orlando - Regency Inn, Orlando - Residence Inn By Marriott, Orlando - Rodeway Inn, Orlando - Save Inn, Orlando - Sheraton Jetport Inn, Orlando - Sheraton Lakeside, Orlando - Sheraton Twin Towers, Orlando - Sonesta Village Resort, Orlando - Stouffer Orlando Resort, Orlando - Swan Hotel-Proposed, Orlando - Thriftway Motel, Orlando - Wynfield Inn, Orlando - American Way, Osceola - Sheraton Gateway Motel, Osceola - Brazilian Court Hotel, Palm Beach - Heart of Palm Beach Hotel, Palm Beach - Hilton Inn, Palm Beach - Palm Court, Palm Beach - Holiday Inn, Palm Beach Garden - Days Inn, Panama City - Marriott's Bay Point, Panama City - Super 8, Panama City - Days Inn, Pensacola - Hilton Hotel, Pensacola - La Quinta Hotel, Pensacola - Residence Inn, Pensacola - Super 8, Pensacola - Proposed Hampton Inn, Pensacola Beach - Comfort Inn, Perdido Key - La Quinta, Pinellas County - Courtyard by Marriott, Plantation - Holiday Inn Plantation, Plantation - Sheraton Suites, Plantation - Days Inn, Pompano Beach - Palm-Aire Spa Resort, Pompano Beach - Lodge & Bath Club, Ponte Verde - Howard Johnson, Punta Gorda - Days Inn, Riviera Beach - Safety Harbor Spa, Safety Harbor - Holiday Inn, Saint Augustine - Howard Johnson, Saint Augustine - Courtyard by Marriott, Saint Petersburg - Don Ceahsar Beach Resort, Saint Petersburg - Hilton Hotel, Saint Petersburg - Howard Johnson, Saint Petersburg - Ramada Inn, Saint Petersburg - Residence Inn, Saint Petersburg - Saint Petersburg Motel, Saint Petersburg - Sheraton Hotel and Marina, Saint Petersburg - Vinoy Park Hotel, Saint Petersburg - Countryside Inn, Sanford - Days Inn, Sanford - Holiday Inn, Sanford - Azure Tides Resort-Proposed, Sarasota - Days Inn, Sarasota - Holiday Inn-Lido Beach, Sarasota - Proposed Hotel, Sarasota - Holiday Inn, Sebring - Embassy Suites, Singer Island - Hilton, Singer Island - Econo Lodge, Starke - Radisson Pan American Hotel, Sunny Isles - Best Inn, Tallahassee - Courtyard by Marriott, Tallahassee - Days Inn-Tallahassee, Tallahassee - American Way, Tampa - Courtyard by Marriott, Tampa - Days Inn, Tampa - Embassy Suites-Airport, Tampa - Hampton Inn-Airport, Tampa - Hilton-Airport, Tampa - Holiday Inn, Tampa - Holiday Inn Sahal Park, Tampa - Holiday Inn-Airport, Tampa - Manger Motor Inn, Tampa - Marriott Hotel, Tampa - Omni Tampa Hotel at Westshore, Tampa - Ramada Inn, Tampa - Rodeway Inn, Tampa - Saddlebrook Resort, Tampa - Sheraton Grand West, Tampa - Master Economy Inn, Tampa-East(Selfner) - Master Economy Inn, Tampa-North(Zephyrhills) - Days Inn, Vero Beach - Holiday Inn-Countryside, Vero Beach - Holiday Inn-Oceanside, Vero Beach - Saddlebrook Resort, Wesley Chapel - Courtyard by Marriott, West Melbourne - Airport Centre, West Palm Beach - Courtyard by Marriott, West Palm Beach - Days Inn, West Palm Beach - Field Palm Hotel, West Palm Beach - Hilton-Airport, West Palm Beach - Howard Johnson Lodge, West Palm Beach - Hyatt Hotel of the Palm Beaches, West Palm Beach - Royce Hotel, West Palm Beach - Masters Economy Inn, Zephyrhills Georgia - Atlanta Radisson Hotel, Atlanta - Atlanta Terrace Motel, Atlanta - Comfort Inn, Atlanta - Compri Hotel, Atlanta - Courtyard By Marriott-Airport North, Atlanta - Courtyard by Marriott-Airport South, Atlanta - Courtyard by Marriott-Cumberland, Atlanta - Courtyard by Marriott-Executive Pk., Atlanta - Courtyard by Marriott-Gwinnett, Atlanta - Courtyard by Marriott-Jimmy Carter, Atlanta - Courtyard by Marriott-PeachtrDunwdy, Atlanta - Courtyard by Marriott-Perimeter, Atlanta - Courtyard by Marriott-Rosewell, Atlanta - Courtyard by Marriott-Windy Hill, Atlanta - Cresthil Inn-Proposed, Atlanta - Days Inn, Atlanta - Days Inn - Northlake, Atlanta - Doubletree Hotel, Atlanta - Embassy Suites-Atlanta Perimeter, Atlanta - Embassy Suites-Buckhead, Atlanta - Embassy Suites-Galleria, Atlanta - F.W.W. Hotel, Atlanta - Fairfield Inn-Airport, Atlanta - Fairfield Inn-Gwinnett, Atlanta - Fairfield Inn-North Lake, Atlanta - Fairfield Inn-Northwest, Atlanta - Fairfield Inn-Peachtree, Atlanta - Fairfield Inn-South Lake, Atlanta - Hampton Inn-Airport, Atlanta - Hilton Inn, Atlanta - Holiday Inn Crowne Plaza, Atlanta - Holiday Inn-I-20 East, Atlanta - Holiday Inn-I-85 Monroe Drive, Atlanta - Holiday Inn-Perimeter Dunwooody, Atlanta - Hotel-Downtown-Proposed, Atlanta - Hotel-Proposed, Atlanta - Howard Johnson Hotel-Hartsfield, Atlanta - Howard Johnson-Airport, Atlanta - Howard Johnson-Northeast, Atlanta - Howard Johnson-Northwest, Atlanta - Howard Johnson-South, Atlanta - Hyatt Atlanta-Airport, Atlanta - La Quinta - Stone Mountain, Atlanta - La Quinta Hotel, Atlanta - La Quinta Hotel-West, Atlanta - Marriott Atlanta Airport, Atlanta - Marriott Hotel, Atlanta - Marriott Hotel-Downtown, Atlanta - Marriott Marquis, Atlanta - Marriott Suites Hotel-Proposed, Atlanta - Marriott-Perimeter, Atlanta - Master Economy Inn, Atlanta - Motel 6, Atlanta - Neighborhood Inn, Atlanta - Omni International Hotel, Atlanta - Perimeter North Inn, Atlanta - Proposed AmeriSuites, Atlanta - Quality Inn-Central, Atlanta - Radisson Inn, Atlanta - Ramada Inn-Perimeter, Atlanta - Residence Inn by Marriott-Dunwoody, Atlanta - Residence Inn-Airport, Atlanta - Residence Inn-Buckhead, Atlanta - Residence Inn-Northwest, Atlanta - Sheraton Century Center, Atlanta - Sheraton-Airport, Atlanta - Sporting Club at the Concourse, Atlanta - Stouffer Hotel-Proposed, Atlanta - Swissotel, Atlanta - Terrace Motel, Atlanta - Waverly Hotel, Atlanta - Westin Lenox Hotel, Atlanta - Westin Peachtree Plaza, Atlanta - Wyndham Garden Hotel, Atlanta - Hyatt Hotel, Atlanta Airport - Hampton Inn, Atlanta-Buckhead - Courtyard by Marriott, Augusta - Landmark Hotel, Augusta - Masters Economy Inn - Gordon Hwy., Augusta - Masters Economy Inn - Warner Robins, Augusta - Masters Economy Inn - Washington Rd, Augusta - Holiday Inn, Brunswick - Super 8, Brunswick - Days Inn, Calhoun - Super 8, Cartersville - Days Inn, Chamblee - Comfort Inn-Proposed, College Park - Holiday Inn Crowne Plaza, College Park - Courtyard by Marriott, Columbus - La Quinta Inn, Columbus - Super 8, Columbus - Best Inn, Dalton - Days Inn, Dalton - Holiday Inn-Proposed, Decatur - Sheraton Hotel, Decatur - Best Western-Perimeter-North, Doraville - Days Inn - Gwinnett, Duluth - Howard Johnson, Forsyth - Holiday Inn-Proposed, Gwinnett County - Holiday Inn, Jekyll Island - Jekyll Island Inn-Proposed, Jekyll Island - Hilton Hotel, Macon - Master Economy Inn, Macon - Best Inn, Marietta - Courtyard by Marriott-Delk Road, Marietta - Lafayette Hotel, Marietta - Hampton Inn, Marrietta (Atlanta) - Master Economy Inn, McDonough - Courtyard by Marriott-Perimeter, Norcross - Motel 6, Norcross - Hilton Hotel, Peachtree Corners - Super 8, Rome - Best Western, Savannah - Courtyard by Marriott, Savannah - Days Inn, Savannah - Days Inn-Bay Street, Savannah - Days Inn-Mall Blvd., Savannah - Fairfield Inn, Savannah - Hotel-Proposed, Savannah - Mulberry Inn, Savannah - Radisson Hotel-Proposed, Savannah - Royal Savannah, Savannah - Sheraton Savannah Resort & C.C., Savannah - Town and Country Motel, Savannah - Days Inn, Savannah Beach - Howard Johnson, Smyrna - Master Economy Inn, Tilton - Courtyard by Marriott-Northlake, Tucker - Master Economy Inn, Warner Robins - Super 8, Warner Robins Hawaii - Hyatt Regency Waikoloa, Hawaii - Mauna Kea Hotel, Hawaii - Kahala Hilton, Honolulu - Plaza Hotel, Honolulu - Waikiki Beachcomber, Honolulu - Waikiki Hobron, Honolulu - Coco Palms Resort, Kauai - Kauai Surf Hotel, Kauai - Westin Kauai-Kauai Lagoons Resort, Kauai - Westin Kauai-Proposed, Kauai - Kona Village, Kona - Royal Sea Cliff Resort, Kona - Westin Kauai at Kauai Lagoon, Lihue - Hyatt Regency, Maui - Marriott Resort, Maui - Maui Lu Hotel, Maui - Maui Surf Hotel, Maui - Westin Maui, Maui - Hawaiian Regent Hotel-Waikiki Beach, Oahu - Hotel-Proposed-Schofield Barracks, Oahu - Hyatt Regency Waikiki, Oahu - Kiahuna Plantation, Poipu Beach, Kauai - Transient Lodging Facilities, Schofield Barracks - Hilton Hawaiian Village, Waikiki - Grand Hyatt Wailea, Wailea Idaho - Compri Hotel, Boise - Holiday Inn, Boise - Holiday Inn-Airport, Boise - Red Lion Inn, Boise - Super 8, Boise - Motel 6, Coeur d'Alene - Super 8, Coeur d'Alene - Proposed Motel, Coure d'Alene - Super 8, Lewiston - Cotton Tree Inn, Pocatello - Super 8, Sand Point - Busterback Ranch, Sawtooth Valley Illinois - Arlington Park Hilton, Arlington Heights - Church Creek, Arlington Heights - Courtyard by Marriott, Arlington Heights - La Quinta Hotel, Arlington Heights - Hampton Inn-Proposed, Bedford Park - Best Inn, Bloomington - Fairfield Inn-Normal, Bloomington - Holiday Inn, Bloomington - Indian Lakes Resort, Bloomington - Ramada Inn, Bloomington - Super 8, Bloomington - Cresthil-Proposed, Buffalo Grove - Holiday Inn, Champaign - La Quinta Inn, Champaign - Radisson Suites - Champaign, Champaign - Suite Hotel-Proposed, Champaign - Super 8, Champaign - Ambassador West Hotel, Chicago - Americana Congress, Chicago - Conrad Hilton Hotel, Chicago - Courtyard by Marriott-Glenview, Chicago - Courtyard by Marriott-Highland, Chicago - Courtyard by Marriott-Lincoln, Chicago - Courtyard by Marriott-O'Hare, Chicago - Courtyard by Marriott-Waukegan, Chicago - Courtyard by Marriott-Woodale, Chicago - Days Inn, Chicago - Executive House, Chicago - Fairfield Inn-Lansing, Chicago - Fairfield Inn-Willowbrook, Chicago - Fairmont Hotel, Chicago - Guest Quarters Hotel, Chicago - Hilton and Towers, Chicago - Hilton-O'Hare, Chicago - Holiday Inn-Merchandise Mart, Chicago - Howard Johnson-O'Hare Int'l Airport, Chicago - Hyatt Regency, Chicago - Hyatt Suites Hotel, Chicago - Inter-Continental Hotel-Proposed, Chicago - La Quinta Inn - Hoffman Est., Chicago - Le Meridien, Chicago - Lenox House, Chicago - Lincoln Hotel, Chicago - Mark Twain Hotel, Chicago - Marriott-O'Hare, Chicago - Mayfair Regent, Chicago - McClurg Holiday Inn, Chicago - McCormick Inn Hotel, Chicago - Morton Hotel, Chicago - Omni Ambassador East, Chicago - Omni Morton Hotel, Chicago - Palmer House Hotel, Chicago - Ramada Inn - Lakeshore, Chicago - Ramada O'Hare, Chicago - Residence Inn-Deerfield, Chicago - Residence Inn-Lombard, Chicago - Sheraton Hotel-Downtown, Chicago - Sheraton Hotel-Proposed, Chicago - Sheraton O'Hare, Chicago - Sheraton Plaza Hotel, Chicago - Summerfield Suites Hotel, Chicago - Swissotel, Chicago - Tremont Hotel, Chicago - Westin Hotel, Chicago - Whitehall Hotel, Chicago - Hilton Hotel, Collinsville - Holiday Inn, Collinsville - Super 8, Columbus - Super 8, Crystal Lake - Super 8, Decatur - Courtyard by Marriott, Deerfield - Embassy Suites, Deerfield - Marriott Suites Hotel, Deerfield - Holiday Inn-Chicago, Des Plaines - Hotel-Proposed, Des Plaines - Compri Hotel-Proposed, Downers Grove - Radisson Suite Hotel, Downers Grove - Best Inn, Effingham - Ramada Inn, Elgin - Hampton Inn, Elk Grove Village - Marriott Suites, Elk Grove Village - Holiday Inn, Elmhurst - Orrington Hotel, Evanston - Drury Inn, Fairview Heights - Conference Center & Resort-Proposed, Fox Lake - Holiday Inn, Freeport - Hotel-Proposed, Gurnee - La Quinta Hotel, Hoffman Estates - Carson Inn, Itasca - Hamilton Wyndham, Itasca - Nordic Hills, Itasca - Holiday Inn, Joliet - Proposed Harrah's Riverboat, Joliet - Days Inn, Kankakee - Holiday Inn, LaSalle - Marriott Hotel, Lincolnshire - Hilton Inn, Lisle - Holiday Inn Crowne Plaza, Lisle - Embassy Suites, Lombard - Holiday Inn, Macomb - Best Inn, Marion - Best Inn, Mount Vernon - Holiday Inn, Mount Vernon - Ramada Inn, Mount Vernon - Courtyard by Marriott, Naperville - Ramada Inn, Naperville - Sheraton Naperville, Naperville - O'Hareport Hotel, Northlake - Courtyard by Marriott, Oakbrook Terrace - Super 8, Okawville - Fairfield Inn, Peoria - Days Inn, Peru - Super 8, Peru - Courtyard by Marriott, Rockford - Fairfield Inn, Rockford - Hampton Inn, Rockford - Embassy Suites, Rosemont - Quality Inn/Clarion, Rosemont - Sheraton Int'l At O'Hare, Rosemont - Holiday Inn, Salem - Compri Hotel, Schaumburg - Embassy Suites, Schaumburg - Marriott Schaumburg, Schaumburg - Holiday Inn, South Beloit - Ramada Renaissance Hotel, Springfield - Sheraton Inn, Springfield - Super 8-East, Springfield - Super 8-South, Springfield - Jumer's Castle, Urbana - Best Inn, Waukegan - Super 8, Waukegan Indiana - Clarion Fourwinds Inn, Bloomington - Holiday Inn, Bloomington - Inn at the Four Winds, Bloomington - Ramada Inn, Bloomington - Harbor Point Resort, Brookville Lake - Super 8, Columbus - Best Inn, Fort Wayne - Hilton, Fort Wayne - Downtown Hotel, Gary - Sheraton, Gary - Holiday Inn, Goshen - Howard Johnson, Hammond - Quality Inn, Hammond - Courtyard by Marriott-Airport, Indianapolis - Courtyard by Marriott-Carmel, Indianapolis - Courtyard by Marriott-Castleton, Indianapolis - Embassy Suites-Claypool Center, Indianapolis - Fairfield Inn-Castleton, Indianapolis - Fairfield Inn-College Park, Indianapolis - Hampton Inn-Proposed, Indianapolis - Hilton Hotel-Airport, Indianapolis - Hilton Inn-Downtown, Indianapolis - Holiday Inn-South, Indianapolis - Holiday Inn-Southeast, Indianapolis - Knights Inn, Indianapolis - Midway Motor Lodge, Indianapolis - Mohawk Inn, Indianapolis - Motel 6, Indianapolis - Proposed Fairfield Inn, Indianapolis - Proposed Residence Inn, Indianapolis - Radisson, Indianapolis - Ramada-Airport, Indianapolis - Wyndham Garden Hotel, Indianapolis - La Quinta Inn, Indianapolis Airport - Hilton Inn, Jeffersonville - Holiday Inn, La Porte - Days Inn, Lafayette - Holiday Inn, Lafayette - Cotton Mill Inn-Proposed, Madison - Hampton Inn, Merrillville - Holiday Inn Express, Merrillville - La Quinta Inn, Merrillville - Hotel Roberts, Muncie - Radisson Hotel, Muncie - Brown County Inn, Nashville - Holiday Inn, Portage - Knights Inn, Richmond - Holiday Inn, South Bend - Howard Johnson, South Bend - Signature Inn, Terre Haute - Super 8, Terre Haute - Courtyard Conversion, Valparaiso - Holiday Inn, Vincennes Iowa - Holiday Inn-Gateway Center, Ames - Holiday Inn, Cedar Falls - Collins Plaza, Cedar Rapids - Holiday Inn, Cedar Rapids - Roosevelt Hotel, Cedar Rapids - Super 8, Davenport - Courtyard by Marriott, Des Moines - Fairfield Inn, Des Moines - Holiday Inn, Des Moines - Holiday Inn - West, Des Moines - Holiday Inn-Downtown, Des Moines - Holiday Inn-North, Des Moines - Ramada Inn, Des Moines - Super 8-North, Des Moines - Super 8-West, Des Moines - Holiday Inn, Iowa City Kansas - Embassy Suites, Kansas City - Fairfield Inn-Overland Park, Kansas City - Holiday Inn-Mission Overland Park, Kansas City - Fairfield Inn, Kansas City West - Holiday Inn, Lawrence - University Inn, Lawrence - Holiday Inn, Manhattan - Courtyard by Marriott, Overland Park - Hampton Inn-Proposed, Overland Park - Marriott Hotel, Overland Park - Park Inn International, Topeka - Super 8, Topeka - Canterbury Inn, Wichita - Former Sheraton Hotel, Wichita - Hilton-East, Wichita - Marriott Hotel, Wichita - Comfort Inn, Winfield Kentucky - Conference Center-Proposed, Boone County - Howard Johnson, Bowling Green - Brown County Inn, Brown County - Holiday Inn, Corbin - Hotel-Proposed, Covington - Thomas More Centre, Crestville Hill - Comfort Inn, Elizabethtown - Signature Inn, Elkhart - Holiday Inn, Florence - Signature Inn, Florence - Drawbridge Inn, Fort Mitchell - Days Inn, Georgetown - Days Inn, Henderson - Holiday Inn, Henderson - Bluegrass Motor Inn, Lexington - Courtyard by Marriott, Lexington - Holiday Inn, Lexington - Holiday Inn-East, Lexington - Holiday Inn-North, Lexington - Hyatt Hotel, Lexington - Knights Inn, Lexington - Super 8-Proposed, London - Brown Hotel, Louisville - Courtyard by Marriott-East, Louisville - Holiday Inn, Louisville - Holiday Inn South, Louisville - Holiday Inn-Central, Louisville - Holiday Inn-Northeast, Louisville - Ramada Inn, Louisville - Ramada Inn-East, Louisville - Signature Inn, Louisville - Days Inn, Madisonville - Executive Inn, Owensboro - Super 8-Proposed, Radcliff - Holiday Inn, Richmond Louisiana - Howard Johnson, Alexandria - Capital House, Baton Rouge - Convention Center Hotel-Proposed, Baton Rouge - Courtyard by Marriott, Baton Rouge - Crown Sterling Suites, Baton Rouge - Embassy Suites, Baton Rouge - Hilton Hotel, Baton Rouge - Holiday Inn-East, Baton Rouge - Holiday Inn-South, Baton Rouge - Holiday Inn-West, Baton Rouge - La Quinta Inn, Baton Rouge - Prince Murat Hotel, Baton Rouge - Proposed Homewood Suites, Baton Rouge - Quality Inn, Bossier City - Ramada Inn, Hammond - Ramada Inn, Houma - Holiday Inn - New Orleans, Kenner - Sheraton, Kenner - Hilton Hotel, Lafayette - La Quinta Hotel, Lafayette - Gateway Hotel, Metairie - Howard Johnson-Airport, Metairie - Canal Street Hotels L.P., New Orleans - Clarion Hotel, New Orleans - Days Inn, New Orleans - Fairmont Roosevelt Hotel, New Orleans - Hampton Inn-Proposed, New Orleans - Holiday Inn Crowne Plaza, New Orleans - Hostellerie de la Poste, New Orleans - Hotel Meridien, New Orleans - Hyatt Regency, New Orleans - Iberville Hotel, New Orleans - Inter-Continental Hotel, New Orleans - La Quinta Inn, New Orleans - Landmark Bourbon, New Orleans - Le Meridien New Orleans, New Orleans - Maison Dupuy, New Orleans - Marriott Hotel, New Orleans - Omni Royal Orleans, New Orleans - Ramada Inn, New Orleans - Saint Louis Hotel, New Orleans - St. Ann/Marie Antoinette, New Orleans - Warwick, New Orleans - Westin Hotel, New Orleans - Residence Inn, Shreveport - Super 8, Shreveport Maine - Hilton Inn, Bangor - Ramada Inn, Bangor - Residence Inn by Marriott-Proposed, Bangor - Inn By The Sea, Cape Elizabeth - Hotel-Proposed, Orchard Beach - Hotel-Proposed, Portland - Portland Regency, Portland - Ramada Inn, Portland - Sheraton Tara Portland, Portland - Susse Chalet, Portland - Susse Chalet, Portland (In-town) - Keddy's Motor Inn of Maine, Presque Isle - Hampton Inn, South Portland - Sheraton Inn, South Portland Maryland - Budget Hotel-Proposed, Aberdeen - Chesapeake House, Aberdeen - Holiday Inn, Aberdeen - Motel-Proposed, Aberdeen - Annapolis Hotel, Annapolis - Courtyard by Marriott-Riva Road, Annapolis - Governor Calvert House, Annapolis - Historic Inns of Annapolis, Annapolis - Hotel-Proposed, Annapolis - Howard Johnson, Annapolis - Marriott Hotel, Annapolis - Maryland Inn, Annapolis - Quality Royale Hotel, Annapolis - Ramada Hotel, Annapolis - Robert Johnson House, Annapolis - Brookshire Hotel, Baltimore - Courtyard by Marriott-BWI Airport, Baltimore - Days Inn, Baltimore - Harbor Court Hotel, Baltimore - Harrison's at Pier 5, Baltimore - Hilton Hotel, Baltimore - Holiday Inn-Belmont Blvd., Baltimore - Holiday Inn-Cromwell Bridge, Baltimore - Holiday Inn-Glen Burnie, Baltimore - Holiday Inn-Inner Harbor, Baltimore - Holiday Inn-Int'l Airport, Baltimore - Holiday Inn-Moravia Road, Baltimore - Holiday Inn-Pikesville, Baltimore - Holiday Inn-South Glen Burnie, Baltimore - Hotel-Proposed, Baltimore - Howard Johnson-Proposed, Baltimore - Johns Hopkins Hotel-Proposed, Baltimore - Lord Baltimore Hotel, Baltimore - Omni International Hotel, Baltimore - Ramada Inn-I-695 West, Baltimore - Susse Chalet, Baltimore - Susse Chalet Inn-BWI Airport, Baltimore - Susse Chalet Inn-Golden Ring, Baltimore - Bethesda Metro Center, Bethesda - Guest Quarters, Bethesda - Hyatt Regency Hotel, Bethesda - Linden Hill Hotel, Bethesda - Omni Linden Hotel, Bethesda - Residence Inn, Bethesda - Bethseda Metro Center, Bethseda - Guest Quarters, Bethseda - Residence Inn - Proposed, Bethseda - Comfort Suites-Proposed, Bowie - Days Inn, Capital Heights - Residence Inn, Cockneysville - Abbey, College Park - Best Western Maryland, College Park - Holiday Inn, College Park - Sheraton Inn, Dorsey - Days Inn, Easton - Mariner Inn, Easton - Holiday Inn, Frederick - Compri Hotel, Gaithersburg - Marriott Hotel, Gaithersburg - Century XXI Resort, Germantown - Comfort Inn, Germantown - Hampton Inn, Glen Burnie - Residence Inn-Proposed, Greenbelt - Courtyard by Marriott, Hunt Valley - Hunt Valley Embassy Suites, Hunt Valley - Hunt Valley Marriott, Hunt Valley - Susse Chalet Inn, Jessup - Courtyard by Marriott, Landover - Quality Inn-Proposed, Landover - Days Inn, Lanham - Best Western Maryland, Laurel - Days Inn, Laurel - Holiday Inn, Laurel - Susse Chalet, Linthicum - Howard Johnson Plaza Hotel, New Carrollton - Carousel Hotel, Ocean City - Days Inn, Ocean City - Susse Chalet, Oxon Hill - Hotel-Proposed, Prince Georges County - Budget Hotel-Proposed, Rockville - Comfort Inn, Rockville - Courtyard by Marriott, Rockville - Days Inn-Congressional Park, Rockville - Holiday Inn Crowne Plaza, Rockville - Quality Inn-Proposed, Rockville - Ramada Inn, Rockville - Salisbury Hotel, Salisbury - Sheraton Hotel, Salisbury - Courtyard by Marriott, Silver Spring - Quality Inn-Proposed, Silver Spring - Comfort Inn-Proposed, Solomons Island - Holiday Inn, Towson - Quality Inn-Proposed, Westminster Massachusetts - Susse Chalet, Amsbury - Courtyard by Marriott, Andover - Marriott Hotel, Andover - Stouffer Bedford Glen Hotel, Bedford - Anthony's Pier Four, Boston - Battery Wharf Hotel-Proposed, Boston - Boston Harbor Hotel, Boston - Boston World Trade Center, Boston - Bostonian Hotel, Boston - Colonnade Hotel, Boston - Commonwealth Center Hotel, Boston - Compri Hotel-Proposed, Boston - Copley Plaza Hotel, Boston - Courtyard by Marriott-Foxborough, Boston - Econo Lodge-Proposed, Boston - Harborside Conf. Center-Proposed, Boston - Hilton-Back Bay, Boston - Hilton-Logan, Boston - Holiday Inn-Government Center, Boston - Hotel - Proposed, Boston - Hyatt Fan Pier-Proposed, Boston - Hyatt Harborside-Proposed, Boston - Lafayette Hotel, Boston - Lenox Hotel, Boston - Marriott Copley Place, Boston - Meridien Hotel, Boston - Omni Parker House, Boston - Residence Inn, Boston - Ritz-Carlton, Boston - Statler Hilton Hotel, Boston - Tremont House Hotel, Boston - World Trade Center Hotel - Proposed, Boston - Marriott Hotel, Boston/Newton - Sheraton Tara Hotel, Braintree - Ocean Edge Inn & Conference Center, Brewster - Holiday Inn, Brookline - Days Inn, Burlington - Charles Hotel, Cambridge - Hyatt Hotel, Cambridge - Royal Sonesta Hotel, Cambridge - The Charles Hotel, Cambridge - Chatham Bars Inn, Chatham - Chelmsford Radisson Hotel, Chelmsford - Best Western Motor Lodge, Chicopee - Cummington Farm Resort-Proposed, Cummington - Appleton Inn, Danvers - Howard Johnson Hotel, Danvers - Radisson Ferncroft Hotel, Danvers - Residence Inn - Proposed, Danvers - Dedham Comfort Inn, Dedham - Holiday Inn, Dedham - Wequassett Inn, East Harwich - Harbor View Hotel, Edgartown - Kelley House, Edgartown - Airport Inn, Fall River - Sea Crest Hotel, Falmouth - Sheraton Inn, Falmouth - Radisson Hotel, Ferncroft - Sheraton Tara Hotel, Framingham - Hotel-Proposed, Franklin - Hotel-Proposed, Haverhill - Susse Chalet, Holyoke - Dunfey Hyannis Hotel, Hyannis - Heritage House Hotel, Hyannis - Holiday Inn, Hyannis - Sheraton Regal Inn, Hyannis - Tara Hyannis, Hyannis - Canyon Ranch-Berkshires, Lenox - Cranwell Hotel and Conference Ctr., Lenox - Spa/Resort-Proposed, Lenox - Holiday Inn, Leominster - Lexington Sheraton, Lexington - Residence Inn-Proposed, Littleton - Appleton Inn, Lowell - Hilton Hotel, Lowell - Town House Motor Inn, Lowell - Holiday Inn, Marlboro - Susse Chalet, Middleboro - Sheraton Milford Hotel, Milford - Holiday Inn, Natick - Skipper's Inn, New Bedford - Days Inn, Newton - Howard Johnson, Newton - Marriott Hotel, Newton - Sheraton - Wayfarer, Newton - Sheraton Tara, Newton - Susse Chalet, Newton - North Adams Inn, North Adams - Hilton Inn, Northampton - Hotel Northampton, Northampton - Factory Mutual Hotel, Norwood - University Inn, Oxford - Holiday Inn, Peabody - Berkshire Commons Hotel, Pittsfield - Hotel-Proposed, Plymouth - Hawthorne Hotel, Salem - Days Inn, Saugus - Susse Chalet, Seekonk - Howard Johnson, Somerset - Somerset Omni, Somerset - Federal House Inn, South Lee - Holiday Inn, Springfield - Howard Johnson, Springfield - Monarch Place, Springfield - Treadway Inn, Springfield - Publick House, Sturbridge - Sheraton, Sturbridge - Regency Inn of Taunton, Taunton - Holiday Inn, Tewksbury - Susse Chalet, Tewksbury - Susse Chalet, Waltham - Vista Waltham House, Waltham - Hampton Inn, West Springfield - Westford Regency Hotel, Westford - The Westminster Village Inn, Westminster - The Orchards, Williamstown - Treadway Inn, Williamstown - Days Inn, Woburn - Howard Johnson, Woburn - Radisson Hotel, Woburn - Ramada Inn, Woburn - Susse Chalet, Woburn - Marriott Hotel, Worcester - Alladin Motor Inn, Yarmouth - Flagship Motor Inn, Yarmouth - Gull Wing Suites Hotel, Yarmouth Michigan - Motel-Proposed, Adrian - Ramada Inn, Allen Park - Holiday Inn-Alpena, Alpena - Compri Hotel-Proposed, Ann Arbor - Hampton Inn-North, Ann Arbor - Hampton Inn-South, Ann Arbor - Hilton Hotel, Ann Arbor - Holiday Inn-East, Ann Arbor - Holiday Inn-West, Ann Arbor - Residence Inn, Ann Arbor - Sheraton Hotel, Ann Arbor - AmeriSuites Hotel-Proposed, Auburn Hills - Holiday Inn, Auburn Hills - Knights Inn, Battle Creek - Super 8, Battle Creek - Bay Valley Inn, Bay City - Howard Johnson, Belleville - Fairfield Inn-Airport, Charlotte - Courtyard by Marriott, Dearborn - Courtyard by Marriott-Airport, Detroit - Courtyard by Marriott-Auburn Hills, Detroit - Courtyard by Marriott-Livonia, Detroit - Days Inn, Detroit - Downtown Hotel-Proposed, Detroit - Fairfield Inn-Airport, Detroit - Fairfield Inn-Auburn Hills, Detroit - Fairfield Inn-Warren, Detroit - Fairfield Inn-West, Detroit - Golden Harp, Detroit - Hampton Inn, Detroit - Hilton-Airport, Detroit - Hilton-North Field, Detroit - Holiday Inn, Detroit - Holiday Inn-Metro Airport, Detroit - Hotel Pontchartrain, Detroit - Omni Detroit, Detroit - Westin Hotel Renaissance Center, Detroit - Holiday Inn, East Lansing - Holiday Inn-Proposed, East Lansing - Knights Inn, Flint - Amway Hotel, Grand Rapids - Holiday Inn, Grand Rapids - Grand Traverse Resort, Grand Traverse Village - Holiday Inn, Howell - Jackson Hotel, Jackson - Fairfield Inn, Kalamazoo - Hilton-Kalamazoo Center, Kalamazoo - Holiday Inn, Kalamazoo - Radison Plaza Hotel, Kalamazoo - Residence Inn, Kalamazoo - Super 8, Kalamazoo - Embassy Suites-Proposed, Lansing - Holiday Inn, Lansing - Motel 6, Lansing - Quality Suites Hotel, Lansing - Compri Hotel-Proposed, Livonia - Embassy Suites, Livonia - Embassy Suites-Proposed, Livonia - Holiday Inn, Livonia - Marriott Hotel, Livonia - Fairfield Inn, Madison Heights - Residence Inn, Madison Heights - Holiday Inn, Marquette - Knights Inn, Monroe - Comfort Inn-Proposed, Mount Clemens - Holiday Inn, Muskegan - Super 8, Muskegon - Hilton Hotel, Novi - Holiday Inn-Petoskey, Petoskey - Mayflower Hotel, Plymouth - Inn at the Bridge, Port Huron - Radisson Hotel, Romulus - Holiday Inn-East, Saginaw - Super 8, Saginaw - Courtyard by Marriott, Southfield - Embassy Suites, Southfield - Hilton Hotel, Southfield - Marriott Hotel, Southfield - Ramada Inn, Southfield - Residence Inn, Southfield - The Garden Inn, Southfield - Comfort Suites-Proposed, Sterling Heights - Holiday Inn, Sturgis - Grand Traverse Resort, Traverse City - Hampton Inn, Traverse City - Park Place Hotel, Traverse City - Courtyard by Marriott, Troy - Holiday Inn, Troy - Marriott, Troy - Residence Inn, Troy - Courtyard by Marriott, Warren - Days Inn, Warren - Holiday Inn, Warren - Motel 6, Warren - Residence Inn, Warren - Van Dyke Hotel & Conference Center, Warren - Bob Evans Restaurant, Wyoming - Super 8, Wyoming - Radisson Resort-Conference Center, Ypsilanti Minnesota - Embassy Suites, Bloomington - Hilton Airport Hotel, Bloomington - Hilton Hotel, Bloomington - Howard Johnson Lodge, Bloomington - Marriott Hotel, Bloomington - Ramada Inn, Bloomington - Days Inn - Minneapolis, Brooklyn Center - Residence Inn, Eagan - Compri Hotel-Proposed, Minneapolis - Courtyard by Marriott-Eden Prairie, Minneapolis - Courtyard by Marriott-Mendota, Minneapolis - Days Inn, Minneapolis - Dyckman Hotel, Minneapolis - Hilton Inn, Minneapolis - Holiday Inn-Downtown, Minneapolis - Hotel-Proposed, Minneapolis - Luxeford Hotel, Minneapolis - Marquette, Minneapolis - Marriott City Center Hotel, Minneapolis - Marriott-Minnetonka, Minneapolis - Motel 6, Minneapolis - Omni-Northstar, Minneapolis - Radisson Hotel, Minneapolis - Ramada Inn, Minneapolis - Sheraton Minneapolis, Minneapolis - Sofitel, Minneapolis - Motel-Proposed, Montevideo - Days Inn, Plymouth - Hotel-Proposed, Rochester - Howard Johnson, Rochester - Motel 6, Rochester - Radisson Hotel, Rochester - Days Inn, Roseville - Holiday Inn, Saint Paul - Holiday Inn-Town Square, Saint Paul - Hotel-Proposed, Saint Paul - Inn and Expo Center, Saint Paul - World Trade Hotel, Saint Paul - Wayzata Conference Center, Wayzata Mississippi - Howard Johnson, Biloxi - Holiday Inn, Greenwood - Motel 6, Hattlesburg - Hampton Inn, Jackson - Howard Johnson, Jackson - Ramada Inn-Proposed, Jackson - Residence Inn, Jackson - Cabot Lodge, Ridgeland - Holiday Inn, Vicksburg Missouri - Ramada Inn, Columbia - Howard Johnson-North St. Louis, Hazelwood - Super 8, Independence - La Quinta Inn, Jackson - North - Capital Plaza, Jefferson City - Ramada Inn, Jefferson City - Days Inn, Joplin - Super 8, Joplin - Allis Plaza, Kansas City - Americana Hotel, Kansas City - AmeriSuites Hotel-Proposed, Kansas City - Doubletree Hotel, Kansas City - Embassy Suites, Kansas City - Fairfield Inn-West, Kansas City - Hilton - Proposed, Kansas City - Hilton Inn, Kansas City - Historic Suites Hotel, Kansas City - Holiday Inn, Kansas City - Holiday Inn Crowne Plaza, Kansas City - Holiday Inn-Proposed, Kansas City - Proposed Sheraton Hotel, Kansas City - Radisson Suite Hotel, Kansas City - Resort Hotel - Proposed, Kansas City - Marriott-Tan-Tar-A, Lake of the Ozarks - Super 8, Liberty - Super 8, North Kansas City - Inn at Grand Glaize, Osage Beach - Super 8, Saint Joseph - Clarion, Saint Louis - Courtyard by Marriott-Creve Coeur, Saint Louis - Courtyard by Marriott-Downtown, Saint Louis - Courtyard by Marriott-Westport, Saint Louis - Days Inn, Saint Louis - Doubletree Hotel, Saint Louis - Drury Inn, Saint Louis - Embassy Suites, Saint Louis - Fairfield Inn-Hazel, Saint Louis - Henry VIII Hotel, Saint Louis - Hilton Hotel-Bel Air, Saint Louis - Holiday Inn Sports Complex, Saint Louis - Holiday Inn-Airport North, Saint Louis - Holiday Inn-Downtown, Saint Louis - Holiday Inn-Riverfont, Saint Louis - Howard Johnson-South, Saint Louis - Mayfair Hotel, Saint Louis - Omni-St. Louis Station, Saint Louis - Ramada Inn-Westport, Saint Louis - Residence Inn-Chesterfield, Saint Louis - Residence Inn-Richmond Heights, Saint Louis - Ritz-Carlton Hotel, Saint Louis - Sheraton-Airport, Saint Louis - St. Louis Airport Hilton, Saint Louis - St. Louis Airport Radisson Hotel, Saint Louis - St. Louisian Hotel, Saint Louis - Stouffer Concourse Hotel, Saint Louis - Super 8, Saint Louis - Marriott Hotel, Saint Louis County - Holiday Inn, Springfield - Sheraton Inn, Springfield - Super 8, Springfield - Executive Inn & Office Building, St. Louis - Holiday Inn, St. Louis - Howard Johnson Hotel, St. Louis - Hotel-Proposed, Unity Village - Holiday Inn, Wendtzville Montana - Sheraton Hotel, Billings - Super 8, Billings - Super 8, Great Falls - Super 8, Helena - Super 8, Kalispell - Holiday Inn, Missoula - Red Lion Inn, Missoula Nebraska - Holiday Inn, Kearney - Best Western Airport Inn, Lincoln - Holiday Inn-Airport, Lincoln - Holiday Inn-Northeast, Lincoln - Howard Johnson, North Platte - Marriott Hotel, Omaha - Ramada Inn, Omaha - Red Lion Inn, Omaha Nevada - Lake Mead Resort, Boulder City - Ormsby House Hotel and Casino, Carson City - Super 8, Carson City - Doubletree Hotel and Resort, Cathedral City - Best Western Motel - Proposed, Jackpot - Airport Inn, Las Vegas - Aladdin Hotel and Casino, Las Vegas - Alexis Park Resort Hotel, Las Vegas - Casino Hotel-Proposed, Las Vegas - Courtyard by Marriott, Las Vegas - El Rancho Hotel and Casino, Las Vegas - Hotel and Casino-Proposed, Las Vegas - Jockey Club Hotel and Casino, Las Vegas - La Quinta Hotel, Las Vegas - Paradise Resort, Las Vegas - Residence Inn, Las Vegas - Silverbird Casino, Las Vegas - Super 8-Proposed, Las Vegas - The Mirage, Las Vegas - Tropicana Travelodge, Las Vegas - Westward Ho Casino, Las Vegas - Echo Bay Resort, Overton - Holiday Inn, Reno - La Quinta Hotel, Reno - Quality Inn and Casino, Reno - Red Lion Hotel-Proposed, Reno New Hampshire - Sheraton Wayfarer, Bedford - Hampton Inn, Bow - Mount Washington Resort, Bretton Woods - Balsams Hotel, Dixville Notch - Sheraton Inn-Lamie's Tavern, Hampton - Woodbound Inn, Jaffrey - Brickyard Mountain Inn, Laconia - Loon Mountain Hotel, Lincoln - Appleton Inns, Manchester - Holiday Inn Center, Manchester - Sheraton Wayfarer, Manchester - Susse Chalet, Manchester - Clarion Somerset Hotel, Nashua - Hotel-Proposed, Nashua - Tara Sheraton Nashua, Nashua - Wentworth by the Sea, Newcastle - Susse Chalet, Portsmouth - Wentworth-by-the-Sea, Portsmouth - Salem Inn, Salem - Susse Chalet, Salem - Landmarc Lodge-East, Waterville Valley - Landmarc Lodge-West, Waterville Valley - Silver Squirrel Inn, Waterville Valley - Snowy Owl Inn, Waterville Valley - Chalet Susse International, Inc., Wilton New Jersey - Marriott Seaview Golf Resort, Abescon - Howard Johnson Hotel, Absecon - Seaview Country Club, Absecon - Berkeley Carteret Hotel, Asbury Park - Caesar's Hotel and Casino, Atlantic City - Casino Hotel-Proposed, Atlantic City - Deauville Hotel, Atlantic City - Diplomat Hotel, Atlantic City - Hampton Inn, Atlantic City - Harrah's Marina Hotel Casino, Atlantic City - Lafayette Hotel, Atlantic City - Resorts Int'l Hotel and Casino, Atlantic City - Royal Inn, Atlantic City - Sands Hotel and Casino, Atlantic City - Traymore Hotel Site, Atlantic City - Tropicana Hotel and Casino, Atlantic City - World International Hotel, Atlantic City - Bernards Inn, Bernardsville - Hotel-Proposed, Bridgewater - Proposed Hotel, Camden - Cherry Hill Hyatt, Cherry Hill - Cherry Hill Inn, Cherry Hill - Ramada Inn, Clifton - Comfort Suites, E. Rutherford - Ramada Renaissance, East Brunswick - Sheraton Inn, East Brunswick - Sheraton - Per Diem, East Rutherford - Holiday Inn-Raritan Center, Edison - Hotel-Proposed, Edison - Ramada Inn, Edison - Best Western Hotel, Egg Harbor Township - Newark Airport Vista Hotel, Elizabeth - Ramada Inn-Proposed, Elizabeth - Sheraton Inn, Elizabeth - Marriott Suite Hotel-Proposed, Elmwood Park - Howard Johnson, Englewood - Conference Center, Farleigh Dickinson - Motel-Proposed, Flemington - Hamilton Park Conference Center, Florham Park - Courtesy Motel, Fort Lee - Ramada Inn-Proposed, Franklin Township - Playboy Resort, Great Gorge - Marriott Hotel, Hanover - Sheraton Hotel, Hasbrouck Heights - Holiday Inn, Jamesburg - Restaurant at Port Liberte, Jersey City - Harrogate Senior Living Facility, Lakewood - Courtyard by Marriott, Lincroft - Hotel-Proposed, Long Branch - Comfort Inn, Mahwah - Courtyard by Marriott, Mahwah - Residence Inn-Proposed, Mahwah - Economy Lodge - Proposed, Meadowlands - Holiday Inn, Meadowlands - Hotel-Proposed, Meadowlands - Meadowlands Hilton, Meadowlands - Sheraton Hotel, Meadowlands - Forsgate Conference Center, Monroe Township - Conference Center, Morristown - Governor Morris Inn, Morristown - Headquarters Plaza Hotel, Morristown - Pleasantville Farms Conference Cent, Morristown - Howard Johnson Lodge, Mount Holly - Courtyard by Marriott, Mount Laurel - Hilton, Mount Laurel - Days Hotel, New Brunswick - Hyatt Hotel, New Brunswick - Rennaisance Hotel, New Brunswick - Residence Inn - Princeton, New Jersey - Airport Hotel-Proposed, Newark - Courtyard by Marriott-Airport, Newark - Holiday Inn, Newark - Holiday Inn-Airport North, Newark - Hotel-Proposed, Newark - Howard Johnson Hotel, Newark - Days Inn, North Bergen - Holiday Inn, North Brunswick - Port-O-Call, Ocean City - Sting Ray Motel, Ocean City - Hotel-Proposed, Ocean Grove - Spray View Hotel, Ocean Grove - Macy Hotel-Proposed, Paramus - Red Carpet Inn, Paramus - Residence Inn-Proposed, Paramus - Marriott Hotel-Proposed, Park Ridge - Embassy Suites, Parsippany - Hilton, Parsippany - Residence Inn-Proposed, Parsippany - Howard Johnson, Phillipsburg - Hotel-Proposed, Piscataway - Residence Inn-Proposed, Piscataway - Compri Hotel-Proposed, Princeton - Hyatt Regency, Princeton - Marriott Hotel, Princeton - Omni Nassau Inn, Princeton - Treadway Inn, Princeton - Howard Johnson, Ridgefield Park - Hotel-Proposed, Rockleigh - Hotel-Proposed, Roxbury Township - Ramada Inn, Runnemede - Howard Johnson, Saddle Brook - Marriott Hotel, Saddle Brook - Days Inn, Secaucus - Howard Johnson, Secaucus - Ramada Inn, Secaucus - Hilton At Short Hills, Short Hills - Pier 4 Motel, Somers Point - Garden State Convention Center, Somerset - Holiday Inn, Somerset - Marriott Hotel, Somerset - Neighborhood Suites-Proposed, Somerset - Sommerset Plaza Hotel, Somerset - Summerfield Suites Hotel, Sommerset - Hewitt Wellington Hotel, Spring Lake - Hotel-Proposed, Spring Lake - Loews Glenpointe Hotel, Teaneck - Appleton Inn, Tinton Falls - Envoy Inn, Tinton Falls - Hilton Inn, Tinton Falls - Residence Inn, Tinton Falls - Sunrise Suite Hotel, Tinton Falls - Hotel-Proposed, Toms River - Hotel-Proposed, Turnersville - Hotel-Proposed, Wayne - Howard Johnson-Proposed, Wayne - Holiday Inn, Wildwood Crest - Motel, Wrightstown New Mexico - Compri Hotel-Proposed, Albuquerque - Courtyard by Marriott-Airport, Albuquerque - Fairfield Inn-Proposed, Albuquerque - Hampton Inn, Albuquerque - Hilton Hotel, Albuquerque - Holiday Inn, Albuquerque - Marriott Hotel, Albuquerque - Radisson Suite Hotel-Proposed, Albuquerque - Residence Inn, Albuquerque - Rodeway Inn, Albuquerque - Winrock Motor Inn, Albuquerque - La Quinta Inn, Albuquerque - Airport - Corkin's Lodge, Chama - La Quinta Inn, Farmington - Hilton, Las Cruces - Las Cruces Hilton, Las Cruces - Super 8, Las Cruces - Ski Rio Ski Resort, Miracle Mountain - Super 8, Raton - Young's Ranch, Red River - Eldorado Hotel, Santa Fe - Homewood Suites Hotel, Santa Fe - Hotel-Proposed, Santa Fe - Inn at Loretto, Santa Fe - Inn on the Alameda, Santa Fe - La Fonda Hotel, Santa Fe - La Quinta Hotel, Santa Fe - Residence Inn, Santa Fe - Santa Fe Motel, Santa Fe - Sheraton de Santa Fe, Santa Fe New York - Americana Inn, Albany - Desmond Hotel, Albany - Hilton Hotel, Albany - Marriott Hotel, Albany - Sheraton Inn, Albany - Susse Chalet, Albany - VIP Motor Lodge (Howard Johnson), Albany - Embassy Suites-Proposed, Amherst - Holiday Inn, Amherst - Annandale Inn-Proposed, Annandale - Wampus Inn-Proposed, Armonk - Treadway Inn, Batavia - Hampton Inn, Binghamton - Holiday Inn-Arena, Binghamton - Holiday Inn-SUNY, Binghamton - Hotel-Proposed, Binghamton - Howard Johnson, Binghamton - Residence Inn, Binghamton - Sheraton Inn, Binghamton - Eden Motel, Bronx - Days Inn-Proposed, Brookhaven - Residence Inn, Brookhaven - Brooklyn Hotel-Proposed, Brooklyn - Hilton Hotel, Brooklyn - Airport Hotel-Proposed, Buffalo - Buffalo Hotel, Buffalo - Days Hotel-Proposed, Buffalo - Hilton Hotel, Buffalo - Holiday Inn - Midtown, Buffalo - Hyatt Hotel, Buffalo - Hyatt Regency Hotel & Retail Area, Buffalo - Radisson Hotel, Buffalo - Ramada Inn-Airport, Buffalo - Ramada Renaissance Hotel, Buffalo - Residence Inn-Proposed, Buffalo - Sheraton Hotel, Buffalo - Sheraton Inn Buffalo East, Buffalo - Sheraton Inn-Airport, Buffalo - Sheraton Inn, Canadaiqua - Airway Motel, Cheektowaga - Holiday Inn - Airport, Cheektowaga - Holiday Inn - Gateway, Cheektowaga - Quality Inn, Cheektowaga - Sheraton Buffalo, Cheektowga - Steeplechase Park-Proposed, Coney Island - Hilton Inn, Corning - Resort/Conference Center-Proposed, Cornwall - Holiday Inn, Cortland - Roycroft Inn, East Aurora - Hotel-Proposed, East Elmhurst - Susse Chalet, East Greenbush - Nevele Hotel, Ellenville - Int'l Conf./Learning Center-Propose, Ellis Island - Days Inn, Elmsford - Howard Johnson, Elmsford - Neighborhood Suites Hotel-Proposed, Fishkill - Residence Inn, Fishkill - Metropole Hotel, Flushing - Midway Hotel, Flushing - Sheraton - Proposed, Flushing Center - Hotel-Proposed, Garden City - Wyndham Condominium, Garden City - Harrison Conference Center, Glen Clove - Great Neck Hotel, Great Neck - Comfort Inn, Greece - Holiday Inn-Proposed, Greece - Tamarack Lodge, Greenfield Park - Claudio's Restaurant, Greenport - Colonie Hill, Hauppauge - Holiday Inn, Hauppauge - Marriott Wind Watch Hotel & Golf, Hauppauge - Marriott Windwatch, Hauppauge - Ramada Inn, Hauppauge - Residence Inn, Hauppauge - Homewood Suites-Proposed, Henrietta - Howard Johnson, Huntington - Huntington Townhouse, Huntington - Hampton Inn, Islandia - Marriott Wind Watch, Islandia - Hotel-Proposed, Islip - Howard Johnson Hotel, Ithaca - Ramada Inn, Ithaca - Sheraton Inn, Ithaca - JFK Hilton, Jamaica - Howard Johnson, Kingston - Ramada Inn, Kingston - Omni Sagamore, Lake George - Ramada Inn, Lake George - Former Lake Placid Club Hotel, Lake Placid - Hilton Hotel, Lake Placid - Mirror Lake Inn, Lake Placid - Holiday Inn, Latham - Howard Johnson, Latham - Howard Johnson, Liberty - The New Brown's Resort, Loch Sheldrake - Convention Center - Proposed, Long Island - Eastern Nassau/W. Suffolk Hotel, Long Island - Hyatt Hotel-Proposed, Long Island - Motel-Proposed, Lynbrook - Crowne Plaza Hotel, Manhattan - Hotel Mark, Manhattan - Proposed Economy Hotel, Manhattan - Sugar Maples Resort, Maplecrest - Hotel-Proposed, Middletown - Howard Johnson, Middletown - Montauk Yacht Club and Inn, Montauk - Kutsher's Resort, Monticello - Motel-Proposed, Nanuet - Wallkill Valley Inn Project, New Paltz - Hotel-Proposed, New Rochelle - Le Richmond Hotel, New Rochelle - Ramada Plaza Inn and Offices, New Rochelle - Sheraton Inn, New Rochelle - Aberdeen Hotel, New York - American Youth Hostel, New York - Americana Hotel, New York - Ashley Hotel, New York - Astor House-Proposed, New York - Barbizon Plaza Hotel, New York - Barclay Hotel, New York - Battery Park City Hotel-Proposed, New York - Berkshire Place, New York - Best Western Woodward Hotel, New York - Biltmore Hotel, New York - Broadway Crowne Plaza, New York - Carlton House Hotel, New York - Century Paramount Hotel, New York - Chatwal Inn, New York - Chatwal Inn on 45th Street, New York - Chatwal Inn on Park Avenue, New York - Chinatown Hotel-Proposed, New York - Courtyard by Marriott-Proposed, New York - Custom's House, New York - Days Inn, New York - Days Inn-West 57th Street, New York - Doral Inn, New York - Dover Hotel, New York - Downtown Athletic Club, New York - Downtown Conference Center, New York - Drake Hotel, New York - Econo Lodge-Proposed, New York - El Rio Grande, New York - Embassy Suites-Times Square-Propose, New York - Empire Hotel, New York - Essex House, New York - Executive Hotel, New York - Giordano Hotel, New York - Gorham Hotel, New York - Grand Bay at Equitable Center, New York - Grand Hyatt Hotel, New York - Greenwich Street Hotel, New York - Halloran House, New York - Hampton House, New York - Harley Hotel, New York - Helmsley Hotel, New York - Hilton Hotel, New York - Hilton Hotel-Statler, New York - Holiday Inn, New York - Holiday Inn Crowne Plaza-Broadway, New York - Holiday Inn Crowne Plaza-Manhattan, New York - Holland Hotel, New York - Hotel Intercontinental, New York - Hotel Pierre, New York - Hotel-1926 Broadway-Proposed, New York - Hotel-East 57th Street-Proposed, New York - Hotel-Proposed, New York - Hotel-Tenth Avenue-Proposed, New York - Howard Hotel, New York - Howard Johnson, New York - Journey's Court Hotel-Proposed, New York - Journey's End, New York - Kalikow Hotel-Proposed, New York - Kennedy Inn, New York - Lancaster Hotel, New York - Le Meridien Liberty New York, New York - Lowell Hotel, New York - Luxury Hotel-Proposed, New York - Macklowe Hotel, New York - Madison Towers Hotel, New York - Manger Windsor Hotel, New York - Mark Hotel, New York - Marriott East Side, New York - Marriott Financial Center, New York - Marriott Hotel-Proposed, New York - Marriott Marquis, New York - Martinique Hotel, New York - Mayfair Regent, New York - Milford Plaza Hotel, New York - Millennium Hotel, New York - Navarro Hotel, New York - Nova Park-Gotham, New York - Novotel, New York - Omni Berkshire Place, New York - Omni Park Central, New York - Parc Fifty One Hotel, New York - Parker Meridien Hotel, New York - Peninsula Hotel, New York - Penta Hotel, New York - Piccadilly Hotel, New York - Plaza Hotel, New York - President Hotel, New York - Prince George Hotel, New York - Prince Street Hotel-Proposed, New York - Proposed Hotel and Apartments, New York - Proposed Luxury Hotel-Proposed, New York - Quality Inn, New York - Quality Suites, New York - Ramada Inn, New York - Regent Hotel-Proposed, New York - Regent of New York-Proposed, New York - Ritz-Carlton, New York - Roger Smith Winthrop Hotel, New York - Roosevelt Hotel, New York - Russian Tea Room, New York - Sheraton Hotel, New York - Sheraton Motor Inn, New York - Sheraton Park Avenue, New York - Soho Hotel-Proposed, New York - St. Moritz Hotel, New York - St. Regis, New York - Stanhope, New York - Sutton Place Hotel, New York - Taft Hotel, New York - Tenth Avenue Hotels-Proposed, New York - The Pierre Hotel, New York - The Plaza Athenee, New York - Times Square Hotel-Proposed, New York - Timeshare-Proposed, New York - Travel Inn, New York - Tudor Hotel, New York - UN Plaza Suite Hotel-Proposed, New York - Vista International, New York - Waldorf=Astoria Hotel, New York - Warwick Hotel, New York - Westbury Hotel, New York - Westin Plaza Hotel, New York - Woodward Hotel-Proposed, New York - York Club, New York - Howard Johnson Motel & Restaurant, Newburgh - Ramada Inn, Newburgh - Hilton Hotel, Niagara Falls - Howard Johnson, Norwich - Hotel-Proposed, Orangetown - Hudson Valley Conference Center, Ossining - Sheraton Inn, Ossining - Hotel-Proposed, Oswego - Best Western, Painted Post - Lodge on the Green, Painted Post - Residence Inn - Proposed, Parsippany - Senior Living - Proposed, Pearl River - Drum Hill Hotel, Peekskill - Holiday Inn, Plainview - Howard Johnson, Plainview - Pickwick Motor Inn, Plainview - Residence Inn, Plainview - Holiday Inn, Plattsburgh - Motel-Proposed, Port Jefferson - Comfort Inn-Proposed, Poughkeepsie - Courtyard by Marriott, Poughkeepsie - Radison Hotel, Poughkeepsie - Wyndham Hotel, Poughkeepsie - Best Western-LaGuardia Airport, Queens - Crown Motel, Queens - Crowne Plaza-LaGuardia Airport, Queens - Days Inn-LaGuardia Airport, Queens - Executive Inn, Queens - Hilton Inn-LaGuardia Airport, Queens - Hilton-JFK Airport, Queens - Holiday Inn-JFK Airport, Queens - Holiday Inn-LaGuardia Airport, Queens - Howard Johnson, Queens - Jade East Motel, Queens - JFK Plaza Hotel, Queens - Marriott Hotel-JFK Airport, Queens - Marriott-LaGuardia Airport, Queens - Metropole Hotel, Queens - Midway Hotel, Queens - Riviera Hotel, Queens - Royce Hotel-LaGuardia Airport, Queens - Sheraton-LaGuardia East-Proposed, Queens - Adria Hotel, Queens (Bayside) - Holiday Inn, Riverhead - Riverhead Motor Hotel, Riverhead - Americana Hotel, Rochester - Courtyard by Marriott-Wrighton, Rochester - Days Hotel (former Holiday Inn), Rochester - Hilton-Campus, Rochester - Holiday Inn, Rochester - Hotel-Proposed (former St. Bernard), Rochester - Hyatt Hotel, Rochester - Lodge at Woodcliff, Rochester - Omni Suites Hotel, Rochester - Residence Inn, Rochester - Sheraton Inn, Rochester - Stouffer Hotel, Rochester - Town House Inn, Rochester - Limited Service Hotel-Proposed, Rome - Hotel - Proposed, Roslyn - Roslyn Country Club, Roslyn - Courtyard by Marriott, Rye - Le Richemonde Hotel, Ryebrook - Baron's Cove Inn, Sag Harbor - Holiday Inn, Saratoga - Hotel-Proposed, Saratoga Springs - Howard Johnson, Saugerties - Holiday Inn, Schenectady - Ramada Inn, Schenectady - Dering Harbor Inn, Shelter Island - Crowne Plaza-Proposed, Smithtown - Howard Johnson, Smithtown - Sheraton, Smithtown - Raleigh Hotel, South Fallsburg - Hotel-Proposed, Southhold - Susse Chalet, Spring Valley - Executive Motor Inn, Springfield Gardens - Staten Island Hotel, Staten Island - Imperial Htl/Stevensville Golf Crs., Stevensville - Holiday Inn, Suffern - Motel on the Mountain, Suffern - Browns Hotel, Sullivan County - Imperial Hotel, Sullivan County - The New Brown's Resort, Sullivan County - Courtyard by Marriott, Syracuse - Embassy Suites, Syracuse - Hampton Inn, Syracuse - Hilton Inn, Syracuse - Holiday Inn-Downtown, Syracuse - Holiday Inn-Exit 35, Syracuse - Holiday Inn-Exit 36, Syracuse - Holiday Inn-Exit 39, Syracuse - Holiday Inn-I-90, Syracuse - Homewood Suites Hotel-Proposed, Syracuse - Hotel Syracuse, Syracuse - Hotel-Proposed, Syracuse - Marriott Hotel, Syracuse - Residence Inn-Proposed, Syracuse - Sheraton University Inn & Conf.Ctr., Syracuse - Treadway Inn, Syracuse - Courtyard by Marriott, Tarrytown - Tarrytown House Conference Center, Tarrytown - Westchester Marriott, Tarrytown - Embassy Suites - Proposed, Times Square, New York - Marriott Hotel, Uniondale - Sheraton Nassau Hotel, Uniondale - Howard Johnson Hotel, Utica - Howard Johnson, Vestal - Hotel-Proposed, Watertown - Convention Hotel-Proposed, Westbury - Dalts Restaurant, Westbury - Howard Johnson, Westbury - Marriott Hotel, Westchester - Inn-Proposed, Westhampton - Crowne Plaza, White Plains - Hotel-Proposed, White Plains - Howard Johnson, White Plains - Roger Smith Hotel, White Plains - Stouffer Westchester Hotel, White Plains - White Plains Hotel, White Plains - Anton Meadows, Yaphank - Quality Suites, Yorktown - Yorktown Motor Lodge, Yorktown Heights North Carolina - Days Inn - Central, Asheville - Holiday Inn - Airport, Asheville - Holiday Inn - Tunnel, Asheville - Inn on the Plaza, Asheville - Sheraton Inn, Asheville - Days Inn, Ashville - Masters Economy Inn - Rocky Mount, Battlebro - Days Inn, Blowing Rock - All-Suite Hotel-Proposed, Boone - Residence Inn-Proposed, Cary - Carolina Inn, Chapel Hill - Hilton-Proposed, Chapel Hill - Charlotte Registry Hotel-Per Diem, Charlotte - Compri Hotel-Proposed, Charlotte - Courtyard by Marriott, Charlotte - Days Inn, Charlotte - Days Inn-Uptown, Charlotte - Fairfield Inn, Charlotte - Howard Johnson, Charlotte - Howard Johnson Lodge, Charlotte - Knights Inn, Charlotte - Manger Motor Inn, Charlotte - Marriott City Center, Charlotte - Marriott Hotel-Independence Center, Charlotte - Masters Economy Inn - Charlotte No, Charlotte - Masters Economy Inn - Merchandise, Charlotte - Queen City Motel, Charlotte - Residence Inn, Charlotte - Residence Inn-North, Charlotte - Resistry Hotel, Charlotte - Royce Suite Hotel, Charlotte - Sheraton Inn, Charlotte - Conference Center, Clemmons - Sheraton Motel, Dunn - Best Western, Durham - Cricket Inn, Durham - Days Inn, Durham - Dutch Village Inn, Durham - Fairfield Inn, Durham - Holiday Inn-West, Durham - Motel 6, Durham - Sheraton-University Center, Durham - The Duke Inn, Durham - Days Inn, Fayetteville - Fairfield Inn, Fayetteville - Holiday Inn, Fayetteville - Hotel-Proposed, Fayetteville - Knights Inn, Fayetteville - Goldsboro Motel, Goldsboro - Courtyard by Marriott, Greensboro - Days Inn, Greensboro - Embassy Suites, Greensboro - Fairfield Inn, Greensboro - Hilton, Greensboro - Marriott Hotel, Greensboro - Residence Inn, Greensboro - Sheraton Greensboro, Greensboro - Hotel-Proposed, Greenville - Radisson Hotel, High Point - Days Inn, Lumberton - Maggie Valley Country Club, Maggie Valley - Courtyard by Marriott, Raleigh - Fairfield Inn, Raleigh - Hampton Inn, Raleigh - Hilton, Raleigh - Holiday Inn-Downtown, Raleigh - Marriott Hotel-RTP, Raleigh - Raleigh Radisson, Raleigh - Residence Inn, Raleigh - Holiday Inn - Airport, Research Triangle Park - Howard Johnson, Roanoke Rapids - Sheraton Inn, Rocky Mount - Days Inn, Rocky Mountain - Fairfield Inn, Rocky Mountain - Motel 6, Rocky Mountain - Days Inn, Rowland - Sheraton Motel, Selma - Masters Economy Inn, Smithfield - Holiday Inn, Southern Pines - Fairfield Inn, Wilmington - Hilton, Winston/Salem - Holiday Inn, Winston/Salem - Winston Plaza Hotel, Winston/Salem North Dakota - Holiday Inn, Bismark - Radisson Inn, Bismark - Super 8, Bismark - Ramada Hotel, Fargo - Ramada Inn-Proposed, Fargo - Super 8, Grand Forks - Super 8, Minot Ohio - Holiday Inn-Cascade, Akron - Ramada Inn, Akron - Residence Inn, Akron - Aurora Inn and Pine Lake Trout Club, Aurora - Sheraton Inn, Aurora - Woodlands Inn, Aurora - Courtyard by Marriott, Blue Ash - Embassy Suites, Blue Ash - Residence Inn-Proposed, Blue Ash - Best Western, Cambridge - Days Inn, Cambridge - Hilton Hotel, Canton - Super 8, Canton - Best Western Northeast, Cincinnati - Carousel Inn, Cincinnati - Cincinnati Hotel, Cincinnati - Clarion Hotel, Cincinnati - Days Inn, Cincinnati - Embassy Suites-Proposed, Cincinnati - Holiday Inn-Downtown, Cincinnati - Holiday Inn-Eastgate, Cincinnati - Holiday Inn-Northeast, Cincinnati - Holiday Inn-Riverfront, Cincinnati - Holiday Inn-South, Cincinnati - Hotel-Airport-Proposed, Cincinnati - Howard Johnson, Cincinnati - Hyatt, Cincinnati - Knights Inn, Cincinnati - KOA Campground, Cincinnati - Marriott Inn, Cincinnati - Netherland Hilton, Cincinnati - Omni Netherland Plaza, Cincinnati - Proposed Hotel, Cincinnati - Radisson Inn, Cincinnati - Ramada Inn, Cincinnati - Residence Inn, Cincinnati - Residence Inn-North, Cincinnati - Sheraton Inn-Proposed, Cincinnati - Treadway Inn, Cincinnati - Vernon Manor, Cincinnati - AmeriSuite Hotel-Proposed, Cleveland - Downtown Hotel-Proposed, Cleveland - Fairfield Inn-Brook Park, Cleveland - Fairfield Inn-West, Cleveland - Holiday Inn-Airport, Cleveland - Holiday Inn-Lakeside, Cleveland - Hyatt Hotel-Proposed, Cleveland - Marriott Hotel, Cleveland - Sheraton City Center, Cleveland - Sheraton Hopkins, Cleveland - AmeriSuite - Proposed, Columbus - Embassy Suites, Columbus - Fairfield Inn-North, Columbus - Fairfield Inn-West, Columbus - Hilton Inn, Columbus - Holiday Inn-Airport, Columbus - Holiday Inn-City Center, Columbus - Holiday Inn-Worthington, Columbus - Hotel-Proposed, Columbus - Howard Johnson Hotel, Columbus - Howard Johnson-East, Columbus - Howard Johnson-West, Columbus - Knights Inn-West, Columbus - Marriott Hotel, Columbus - Nationwide Hotel, Columbus - Residence Inn-North, Columbus - Sheraton Plaza Hotel, Columbus - Sheraton-North, Columbus - Union Plaza Hotel-Steeplechase, Columbus - University Inn, Columbus - Woodfin Hotel, Columbus - Courtyard by Marriott, Crosswoods - Courtyard by Marriott, Dayton - Daytonian Hilton, Dayton - Fairfield Inn, Dayton - Hope Hotel & Conference Center, Dayton - Knights Inn-North, Dayton - Marriott Hotel, Dayton - Motel 6, Dayton - Ramada Inn, Dayton - Residence Inn-North, Dayton - Residence Inn By Marriott, Dayton South - Courtyard by Marriott, Dublin - Woodfin Suites, Dublin - East Liverpool Motor Lodge, East Liverpool - Howard Johnson, Euclid - Ramada Inn, Fairlawn - Hampton Inn, Independence - Howard Johnson, Lima - Ramada Inn, Lima - Best Western, Mansfield - Holiday Inn, Marietta - Lafayette Hotel, Marietta - Holiday Inn, Middletown - Howard Johnson, Middletown - Regal 8 Inn, Middletown - Sheraton-Proposed, Milford - Super 8, Montrose - Ramada Inn, Sandusky - Days Inn, Sharonville - Holiday Inn-Cincinnati North, Sharonville - Super 8, St. Clairsville - Holiday Inn, Strongsville - Balhalla Hotel, Toledo - Courtyard by Marriott, Toledo - Fairfield Inn-Airport, Toledo - Hilton at the Medical College, Toledo - Hilton Hotel, Toledo - Holiday Inn, Toledo - Knights Inn-West, Toledo - Marriott Portside Hotel, Toledo - Radisson Hotel, Toledo - Sofitel, Toledo - Hampton Inn-Proposed, Wickliffe - Holiday Inn, Youngstown - Hotel-Proposed, Youngstown - Sheraton-Proposed, Youngstown Oklahoma - Fountainhead Resort, Mcintosh County - Residence at the Trails Inn, Norman - Suit Hotel, Norman - Courtyard by Marriott, Oklahoma City - Embassy Suites, Oklahoma City - Holiday Inn, Oklahoma City - Lexington Hotel Suites, Oklahoma City - Lincoln Plaza Hotel, Oklahoma City - Marriott Hotel, Oklahoma City - Meridien Plaza, Oklahoma City - Sheraton Hotel, Oklahoma City - Arrowhead Resort, Pittsburgh County - Camelot Hotel, Tulsa - Doubletree Hotel, Tulsa - Former Holiday Inn, Tulsa - Former Holiday Inn-Downtown, Tulsa - Holiday Inn, Tulsa - Holiday Inn-Convention Center, Tulsa - La Quinta Inn, Tulsa - Marriott Hotel, Tulsa - Mayo Hotel, Tulsa - Residence Inn, Tulsa - Westin Hotel, Tulsa Oregon - Inn At Face Rock, Bandon - Courtyard by Marriott, Beaverton - Red Lion Motel, Bend - Sunriver Lodge and Resort, Bend - Econolodge Motel, Eugene - Valley River Inn, Eugene - Residence Inn Portland-South, Lake Oswego - Big Creek Resort-US Highway 101, Lane County - Embassy Suites, Portland - Holiday Inn Crowne Plaza - Proposed, Portland - Holiday Inn-Airport, Portland - Holiday Inn-South, Portland - Proposed Sheraton Suites, Portland - Red Lion - Jantzen Beach, Portland - Red Lion Inn-Lloyd Center, Portland - Red Lion Inn-Portland Center, Portland - Residence Inn - Proposed, Portland - Vintage Plaza Hotel, Portland - Wells Building, Portland - Execulodge Motel, Salem - Oregon Capital Inn, Salem - Springfield Red Lion Inn, Springfield - Sunriver Resort, Sunriver Pennsylvania - Allentown Hilton Hotel, Allentown - Holiday Inn, Allentown - Proposed Microtel, Allentown - Quality Inn, Allentown - Bedford Springs Hotel, Bedford - Compri Hotel-Proposed, Bensalem - Days Inn-Proposed, Bensalem - Holiday Inn, Bensalem - Residence Inn By Marriott, Berwyn - Econolodge, Bristol - Days Inn, Brookville - Buck Hill Falls Inn, Buck Hill Falls - Howard Johnson, Butler - Holiday Inn, Chambersburg - Days Inn, Clarion - Embassy Suites, Coraopolis - Hydeholde Country House-Proposed, Coraopolis - Days Inn, Danville - Holiday Inn, Dubois - Lafayette Inn-Proposed, Easton - Howard Johnson Hotel, Erie - Ramada Inn, Erie - Holiday Inn, Essington - Quality Suites-Proposed, Essington - Super 8-Proposed, Essington - Howard Johnson, Gibsonia - Compri Hotel-Proposed, Harrisburg - Holiday Inn, Harrisburg - Marriott Hotel, Harrisburg - Penn Harris Inn, Harrisburg - Sheraton Inn, Harrisburg - Super 8-Proposed, Harrisburg - Holiday Inn, Hazleton - Super 8-Proposed, Hazleton - Plaza Valley Forge Hotel, King of Prussia - Radisson Hotel, King of Prussia - Sheraton Hotel, King of Prussia - Valley Forge Complex, King of Prussia - Valley Forge Hilton, King of Prussia - Motel-Proposed, Lake Ariel - Days Inn, Lancaster - Holiday Inn-Route 30E, Lancaster - Holiday Inn-Route 501, Lancaster - Sheraton Lancaster Golf Resort, Lancaster - Super 8-Proposed, Lancaster - Holiday Inn, Lionville - Hilton-Great Valley, Malvern - Summerfield Suite-Proposed, Malvern - Days Inn, Meadville - Hilton Inn, Monroeville - Holiday Inn-West, Monroeville - Economy Hotel, Montgomery Township - Holiday Inn, New Hope - Treadway Inn, Newport - Residence Inn-Proposed, Paoli - Conference Center-Proposed, Penn State - Barclay Hotel, Philadelphia - Bellevue, Philadelphia - Courtyard by Marriott-Devon, Philadelphia - Courtyard-Willow Grove, Philadelphia - Days Inn-Airport, Philadelphia - Econo Lodge-Franklin Towne, Philadelphia - Essex Hotel, Philadelphia - Franklin Motor Inn, Philadelphia - Franklin Plaza Hotel, Philadelphia - Guest Quarters Hotel, Philadelphia - Hampton Inn-Proposed, Philadelphia - Health Club-Proposed, Philadelphia - Hilton Inn, Philadelphia - Hilton Inn-Northeast, Philadelphia - Holiday Inn-City Center, Philadelphia - Holiday Inn-City Line, Philadelphia - Hub Motor Inn, Philadelphia - Hyatt-Proposed, Philadelphia - Marriott Hotel, Philadelphia - Marriott Hotel-Airport, Philadelphia - Omni Philadelphia, Philadelphia - Penn Center Inn, Philadelphia - Quality Inn-Center City, Philadelphia - Residence Inn-Proposed, Philadelphia - Rittenhouse Hotel, Philadelphia - Treadway Mohawk, Philadelphia - Treadway Roosevelt, Philadelphia - Residence Inn, Philadelphia/Berwyn - Clubhouse Inn, Pittsburgh - Courtyard by Marriott, Pittsburgh - Hampton Inn at Playhouse Square, Pittsburgh - Hilton Hotel, Pittsburgh - Holiday Inn-Greentree, Pittsburgh - Holiday Inn-North, Pittsburgh - Holiday Inn-Parkway-East, Pittsburgh - Holiday Inn-Parkway-West, Pittsburgh - Hotel-Proposed, Pittsburgh - Howard Johnson Hotel, Pittsburgh - Marriott Hotel, Pittsburgh - Marriott-Airport, Pittsburgh - Motel 6, Pittsburgh - Quality Inn, Pittsburgh - Royce Hotel-Airport, Pittsburgh - U.S.S. Hotel-Proposed, Pittsburgh - Westin William Penn, Pittsburgh - Courtyard By Marriott, Pittsburgh Airport - Holiday Inn, Reading - Sheraton Hotel, Reading - Hilton at Lackawanna Station, Scranton - Hilton Hotel, Scranton - Sheraton Inn, Stroudsburg - HoJo Inn, Tannersville - Hilton-Northeast, Trevose - Compri Hotel-Proposed, Valley Forge - Courtyard by Marriott, Valley Forge - Holiday Inn-Meadowlands, Washington - Holiday Inn, Wilkes-Barre - Days Inn-Proposed, Williamsport - Hotel-Proposed, Williamsport - Hampton Inn - Proposed, Willow Grove - Holiday Inn-Market Street, York - Holiday Inn-Route 30 and I-83, York - Ramada Inn, York - Super 8-Proposed, York Rhode Island - Cresthil-Proposed, Lincoln - Courtyard by Marriott, Newport - Vanderbilt Hotel-Convention Center, Newport - Quality Inn, North Kingston - Biltmore Plaza, Providence - Convention Center Hotel-Proposed, Providence - Holiday Inn Providence - Downtown, Providence - Hotel-Proposed, Providence - Marriott Hotel, Providence - Sheraton-Airport, Providence - Susse Chalet, Smithfield - Howard Johnson, Warwick - Residence Inn-Proposed, Warwick - Susse Chalet, Warwick South Carolina - Quality Inn Motel, Anderson - Super 8, Anderson - Budget Hotel - Proposed, Charleston - Charleston Center Hotel-Proposed, Charleston - Cooper River Inn, Charleston - Days Inn, Charleston - Francis Marion Hotel, Charleston - Hampton Inn-Proposed, Charleston - Hawthorne Suites Hotel, Charleston - Holiday Inn, Charleston - Holiday Inn-Airport, Charleston - Holiday Inn-Riverview, Charleston - Masters Economy Inn - Mt. Pleasant, Charleston - Masters Economy Inn - Rivers Ave, Charleston - Middleton Inn, Charleston - Omni Charleston, Charleston - Quality Inn, Charleston - Trusthouse Forte, Charleston - Courtyard by Marriott, Columbia - Courtyard by Marriott-Northeast, Columbia - Courtyard by Marriott-Northwest, Columbia - Embassy Suites, Columbia - Marriott Hotel, Columbia - Masters Economy Inn - I-26, Columbia - Masters Economy Inn - Knox Abbot, Columbia - Motel 6, Columbia - Residence Inn, Columbia - Coral Beach Hotel, Coral Beach - Days Inn, Dillon - Save Inn, Fairplay - Fairfield Inn, Florence - Holiday Inn, Florence - Days Inn, Gaffney - Courtyard by Marriott, Greenville - Fairfield Inn, Greenville - Greenville Hilton Hotel, Greenville - Ramada Inn, Greenville - Super 8, Greenwood - Days Inn, Hardeeville - Fairfield Inn, Hilton Head - Hilton Head Inn, Hilton Head - Holiday Inn, Hilton Head - Inter-Continental Hotel, Hilton Head - Islander Inn, Hilton Head - Quality Suites-Proposed, Hilton Head - Residence Inn-Proposed, Hilton Head - Sheraton Inn, Hilton Head - PGA East Resort-Proposed, Kiawah Island - Save Inn, Lake Hartwell - Days Inn, Mt. Pleasant - Coral Beach Hotel, Myrtle Beach - Radisson Hotel, Myrtle Beach - Best Western Inn, North Charleston - Budget Hotel-Proposed, North Charleston - Days Inn, North Charleston - Northwoods Atrium Inn, North Charleston - Days Inn, Santee - Holiday Inn-West, Spartanburg - Howard Johnson, Spartanburg - Residence Inn, Spartanburg South Dakota - Holiday Inn, Aberdeen - Holiday Inn, Rapid City - Holiday Inn, Sioux Falls - Super 8, Sioux Falls - Holiday Inn, Spearfish Tennessee - Ameri Suite Hotel-Proposed, Brentwood - Courtyard by Marriott, Brentwood - Holiday Inn, Bristol - Holiday Inn-Southeast, Chattanooga - Howard Johnson, Chattanooga - Marriott Hotel, Chattanooga - Motel 6, Chattanooga - Sheraton Inn, Chattanooga - Super 8, Chattanooga - Holiday Inn, Cove Lake - Masters Economy Inn, Dickson - Comfort Inn-Proposed, Elizabethton - Park Vista Hotel, Gatlinburg - Holiday Inn-I-40, Jackson - Holiday Inn, Johnson City - Super 8, Johnson City - Fairfield Inn, Johnson Park - Holiday Inn, Kingsport - Courtsouth Healthclub-North, Knoxville - Courtsouth Healthclub-South, Knoxville - Courtsouth Healthclub-West, Knoxville - Days Inn, Knoxville - Hilton Hotel, Knoxville - Howard Johnson-Westhills, Knoxville - Motel 6, Knoxville - Quality Inn, Knoxville - Ramada Inn-West, Knoxville - Rodeway Inn, Knoxville - Courtyard by Marriott, Memphis - Courtyard by Marriott-Airport, Memphis - Holiday Inn - Crowne Plaza, Memphis - Holiday Inn-East, Memphis - Holiday Inn-East Poplar, Memphis - Holiday Inn-I-40-Sycamore View, Memphis - Holiday Inn-Memphis Int'l Airport, Memphis - Hyatt Regency, Memphis - Lexington Hotel Suites, Memphis - Motel 6, Memphis - Omni Hotel, Memphis - Proposed Fairfield Inn, Memphis - Residence Inn, Memphis - La Quinta Inn, Memphis - Airport - Brown County Inn, Nashville - Capital Mall Conv. Center-Proposed, Nashville - Clarion Maxwell House, Nashville - Courtyard by Marriott-Airport, Nashville - Days Inn, Nashville - Doubletree Hotel, Nashville - Grosvenor, Nashville - Hampton Inn, Nashville - Holiday Inn Crowne Plaza, Nashville - Holiday Inn Express, Nashville - Holiday Inn-Briley Parkway, Nashville - Marriott Hotel, Nashville - Nashville Union Station, Nashville - Ramada Inn, Nashville - Sheraton Hotel, Nashville - Sheraton Music City, Nashville - Stouffer Hotel, Nashville - Super 8, Nashville - Union Station Hotel, Nashville - AmeriSuite, Oakridge - Holiday Inn, Oakridge - Super 8-Proposed, Union City Texas - Harvey Hotel, Addison - Days Inn, Amarillo - Motel 6, Amarillo - Radisson Hotel-Proposed, Amarillo - Super 8 Motel, Amarillo - La Quinta Inn, Amarillo - Airport - Courtyard by Marriott, Arlington - Hilton Hotel, Arlington - Holiday Inn, Arlington - Lexington Suites Hotel, Arlington - Compri Hotel-Proposed, Austin - Driskill Hotel, Austin - Embassy Suites-Austin Town Lake, Austin - Embassy Suites-North, Austin - Fairfield North, Austin - Four Seasons Hotel, Austin - Holiday Inn, Austin - Holiday Inn-Austin Town Lake, Austin - La Quinta Inn, Austin - Marriott Hotel, Austin - Proposed Fairfield Inn, Austin - Quality Inn, Austin - Residence South, Austin - La Quinta Inn, Austin - Ben White - Holiday Inn Airport, Austins Cities - Holiday Inn, Bay Town - Hilton Hotel, Beaumont - Holiday Inn, Beaumont - Courtyard by Marriott, Bedford - Holiday Inn, Brownsville - La Quinta Inn, Brownsville - Hilton Hotel, College Station - Ramada Inn, College Station - Holiday Inn, Conroe - Corpus Christi Hotel-Airport, Corpus Christi - Days Inn, Corpus Christi - Hilton - Proposed, Corpus Christi - Holiday Inn, Corpus Christi - Holiday Inn-Airport, Corpus Christi - La Quinta Inn, Corpus Christi - North - La Quinta Inn, Corpus Christi - South - Allstar Inn, Dallas - Ambassador Plaza Hotel, Dallas - Arlington Hilton, Dallas - Bradford Plaza Hotel, Dallas - Bristol Suites, Dallas - Convention Center Hotel-Proposed, Dallas - Courtyard by Marriott, Dallas - Courtyard by Marriott-Northeast, Dallas - Courtyard by Marriott-Plano, Dallas - Courtyard by Marriott-Stemmons, Dallas - Dallas Grand Hotel, Dallas - Doubletree Inn, Dallas - Embassy Suites, Dallas - Fairmont Hotel, Dallas - Harvey Hotel, Dallas - Hilltop, Dallas - Hilton Inn-LBJ, Dallas - Hilton-Arlington, Dallas - Holiday Inn - North, Dallas - Holiday Inn Crowne Plaza, Dallas - Holiday Inn-Brook Hollow, Dallas - Holiday Inn-South, Dallas - Houstonian Hotel, Dallas - Howard Johnson-East, Dallas - Lexington Hotel Suites, Dallas - Loews Anatole Hotel, Dallas - Marriott Hotel-Airport, Dallas - Marriott-Park Central, Dallas - Marriott-Quorum, Dallas - Melrose Hotel, Dallas - Motel 6, Dallas - Omni Melrose Hotel, Dallas - Park Plaza, Dallas - Propsed Hotel - DFW, Dallas - Ramada Inn Convention Center, Dallas - Ramada-Market Center, Dallas - Registry Hotel, Dallas - Residence Inn-Market Center, Dallas - Sheraton Grand, Dallas - Southland Center Hotel, Dallas - Statler Hilton Hotel, Dallas - Summit Hotel, Dallas - Westin Galleria Hotel, Dallas - La Quinta Inn, Dallas - DFW - La Quinta Inn, Dallas - North Park - La Quinta Inn, Dallas - Plano - La Quinta Inn, Dallas - Richardson - Allstar Inn, El Paso - Hilton Inn-Airport, El Paso - La Quinta Hotel-Airport, El Paso - Rodeway Inn, El Paso - Travelers Inn, El Paso - Westin Paso del Norte, El Paso - La Quinta Inn, El Paso - Lomaland - Allstar Inn, Euless - La Quinta Inn, Euless - Allstar Inn, Fort Worth - Courtyard by Marriott, Fort Worth - Days Inn Downtown, Fort Worth - Hilton Hotel, Fort Worth - Holiday Inn-North, Fort Worth - Holiday Inn-South, Fort Worth - Lexington Suites Hotel, Fort Worth - Metro Center Hotel, Fort Worth - Radisson Plaza Hotel, Fort Worth - Residence Inn, Fort Worth - La Quinta Inn, Fort Worth - East - Holiday Inn, Harlingen - La Quinta Inn, HI-LA Marque - Crowne Plaza-Houston Park, Houston - Days Inn, Houston - Days Inn-Hobby, Houston - Doubletree Hotel, Houston - Embassy Suites, Houston - Galleria Gardens, Houston - Harvest House Hotel, Houston - Harvey Hotel Medical Center, Houston - Hilton Inn-West, Houston - Holiday Inn I-10 East, Houston - Holiday Inn-Downtown, Houston - Holiday Inn-East, Houston - Holiday Inn-Greenway Plaza, Houston - Holiday Inn-Hobby, Houston - Holiday Inn-Medical Center, Houston - Holiday Inn-NASA, Houston - Holiday Inn-North, Houston - Holiday Inn-Northwest, Houston - Holiday Inn-Southwest, Houston - Host Hotel International, Houston - Hotel Meridien, Houston - Hotel-Proposed, Houston - Houston House, Houston - Houston Medical Center, Houston - Houston Park 10 Crowne Plaza, Houston - La Quinta Hotel-Astrodome, Houston - La Quinta Hotel-Baytown, Houston - La Quinta Hotel-CY Fair, Houston - La Quinta Hotel-Hobby, Houston - La Quinta Inn-Stafford, Houston - Lexington Hotel Suites, Houston - Marriott Astrodome, Houston - Marriott Hotel, Houston - Marriott Hotel-Medical Center, Houston - Marriott-Airport, Houston - Motel 6, Houston - Remington, Houston - Residence Inn, Houston - Rodeway Inn, Houston - Rodeway Inn-Hobby, Houston - Shamrock Hilton Hotel, Houston - Sheraton Hotel, Houston - Sheraton Houston House, Houston - Sheraton Houston Place Hotel, Houston - Sheraton Town and Country, Houston - Sofitel, Houston - Stouffer Greenway Plaza, Houston - Suite Hotel-Proposed, Houston - Whitehall, Houston - Whitehall Hotel Conversion to HI, Houston - La Quinta Inn, Houston - Sharpstown - La Quinta Inn, Houston - East - La Quinta Inn, Houston - Loop 1960 - La Quinta Inn, Houston - Northwest - La Quinta Inn, Houston- SW Freeway - Holiday Inn, Huntsville - Harvey Hotel DFW, Irvine - Allstar Inn, Irving - Hampton Inn, Irving - Hampton Inn-Proposed, Irving - Harvey Hotel-D/FW Airport, Irving - Holiday Inn-Texas Stadium, Irving - Marriott Hotel, Irving - Holiday Inn, Kingsville - Del Lago Hotel, Lake Conroe - Hilton Inn, Laredo - La Posada, Laredo - Courtyard by Marriott, Las Colinas - La Quinta Inn, Longview - Hilton Inn, Lubbock - Holiday Inn, Lubbock - Residence Inn, Lubbock - La Quinta Inn, Midland - Holiday Inn, New Braunfels - All Star Inn, North Richland Hills - La Quinta Inn, Odessa - Holiday Inn, Orange - Holiday Inn, Paris - Plano Harvey Hotel, Plano - La Quinta Inn, Round Rock - Sheraton Inn, San Angelo - Coachman Inn-Proposed, San Antonio - Courtyard by Marriott-Downtown, San Antonio - Courtyard by Marriott-Medical Ctr., San Antonio - Crockett Hotel, San Antonio - Days Inn, San Antonio - Fairfield - North, San Antonio - Gunter Hotel, San Antonio - Holiday Inn-Airport, San Antonio - Holiday Inn-Market Square, San Antonio - Holiday Inn-North, San Antonio - Holiday Inn-Northwest, San Antonio - Holiday Inn-Riverwalk, San Antonio - La Quinta Hotel-Ingram, San Antonio - La Quinta Hotel-Lackland, San Antonio - La Quinta Hotel-Toepperwein, San Antonio - Lexington Hotel Suites, San Antonio - Marriott Hotel-Proposed, San Antonio - Marriott Inn-North, San Antonio - Proposed Fairfield Inn, San Antonio - La Quinta Inn, San Antonio - Windsor - La Quinta Inn, San Antonio - Wurzbach - Holiday Inn, San Marcos - La Quinta Inn, SAT-Toepperwein - Sheraton Hotel, South Padre Island - La Quinta Inn, Tyler - Sheraton, Tyler - Sheraton Inn, Tyler - Traveler's Choice Inn, Tyler - Hilton Hotel, Waco - Gateway Inn, Wichita Falls - Hilton Hotel, Wichita Falls Utah - Mount Holly Ski Resort, Beaver - Hotel-Proposed, Brigham City - Motel-Proposed, Cedar City - Proposed Mayflower Hotel, Deer Valley - Stein Eriksen Lodge, Deer Valley - Deer Valley Resort, Park City - Omni Yarrow, Park City - Prospector Square Resort, Park City - Yarrow Resort, Park City - Seven Peaks Resort and Hotel, Provo - Comfort Inn, Salt Lake City - Doubletree, Salt Lake City - Hilton Hotel-Airport, Salt Lake City - Holiday Inn, Salt Lake City - Holiday Inn-Salt Palace, Salt Lake City - Hotel Utah, Salt Lake City - Hotel-Proposed, Salt Lake City - La Quinta Inn, Salt Lake City - Nendels Inn, Salt Lake City - New Grande Hotel, Salt Lake City - Red Lion Hotel, Salt Lake City - Sheraton Hotel, Salt Lake City - Super 8, Salt Lake City - University Park Hotel (Desktop Rev), Salt Lake City - Ramada Inn-Proposed, Sandy Vermont - Ramada Inn, Bennington - Bolton Valley Corporation, Bolton Valley - Quality Inn, Brattleboro - Radisson Hotel, Burlington - Smugglers Notch, Cambridge - Inn-Proposed, Essex - Cascade Lodge, Killington - Inn of the Six Mountains, Killington - Mountain Inn, Killington - Equinox Hotel, Manchester - Howard Johnson Inn, Rutland - Quality Inn, Stowe - Conference Center-Proposed, Stratton Mountain - Sugarbush Inn, Sugarbush - Susse Chalet, Williston Virginia - Comfort Inn, Abingdon - Best Western, Alexandria - Comfort Inn, Alexandria - Compri Hotel-Proposed, Alexandria - Embassy Suites, Alexandria - Howard Johnson, Alexandria - Marriott Suites, Alexandria - Ramada Inn, Alexandria - Best Western, Arlington - Gateway Marriott, Arlington - Hyatt Arlington Hotel, Arlington - Hyatt Regency, Arlington - Key Bridge Marriott, Arlington - Marriott Hotel, Arlington - Sheraton Crystal City Hotel, Arlington - Sheraton National Hotel, Arlington - Stouffer Concourse Hotel, Arlington - Mountain Lake Hotel, Blacksburg - Holiday Inn, Bristol - Howard Johnson, Bristol - Days Inn, Carmel Church - Westfields International, Chantilly - Boar's Head Inn, Charlottesville - Cavalier Inn, Charlottesville - Courtyard by Marriott, Charlottesville - Hilton-University, Charlottesville - Holiday Inn-North, Charlottesville - Omni Charlottesville, Charlottesville - Radisson-Proposed, Charlottesville - Super 8, Charlottesville - Days Inn, Chester - Howard Johnson, Chester - Days Inn, Colonial Heights - Holiday Inn, Covington - Embassy Suites, Crystal City - Holiday Inn Crowne Plaza, Crystal City - Hyatt Hotel, Crystal City - Marriott Crystal Gateway Hotel, Crystal City - Comfort Inn-Proposed, Dahlgren - Days Inn, Emporia - Courtyard by Marriott, Fairfax - Embassy Suites, Fairfax - Neighborhood Suites-Proposed, Fairfax - Hampton Inn-Proposed, Fairfax City - Westfields International, Fairfax County - Marriott Hotel, Fairview - Econo Lodge, Farmingville - Comfort Inn-Proposed, Farmville - Comfort Inn, Frederick County - Motel 6, Fredericksburg - Courtyard by Marriott, Hampton - Days Inn, Hampton - Fairfield Inn, Hampton - Courtyard by Marriott, Herndon - Embassy Suites Hotel, Herndon - Ramada Renaissance and Health Club, Herndon - Residence Inn-Proposed, Herndon - Worldgate Marriott Hotel, Herndon - Hotel-Proposed, Hopewell - Keswick Inn, Keswick - Holiday Inn, Lexington - Radisson Hotel, Lynchburg - Courtyard by Marriott, Manassas - Holiday Inn, Marion - Hilton, McLean - Days Inn, Norfolk - Marriott Waterside Hotel, Norfolk - Omni Hotel, Norfolk - Waterfront Hotel - Proposed, Norfolk - 135-Suite Hotel-Proposed, Portsmouth - Waterfront Suite Hotel-Proposed, Portsmouth - Comfort Inn, Princeton - Comfort Inn, Pulaski County - Embassy Suites Hotel, Reston - Hyatt Hotel, Reston - Best Western Kings Quarters, Richmond - Courtyard by Marriott, Richmond - Embassy Suites Hotel, Richmond - Hampton Inn, Richmond - Holiday Inn, Richmond - Howard Johnson Lodge, Richmond - Hyatt House Hotel, Richmond - La Quinta Hotel, Richmond - Marriott Hotel, Richmond - Omni Richmond, Richmond - Radisson Hotel, Richmond - Ramada Renaissance Hotel, Richmond - Residence Inn, Richmond - Days Inn, Richmond (Broad) - Days Inn, Richmond (Byrd) - Holiday Inn, Roanoke - Holiday Inn - Airport, Roanoke - Holiday Inn - Civic Center, Roanoke - Holiday Inn - South, Roanoke - Hotel Roanoke, Roanoke - Howard Johnson, Roanoke - Marriott - Roanoke Airport, Roanoke - Marriott Hotel, Roanoke - Holiday Inn, Salem - Super 8, South Hill - Days Inn, Springfield - Hilton, Springfield - Holiday Inn, Staunton - Stonewall Jackson Hotel, Staunton - Hampton Inn - Proposed, Tyson's Corner - Embassy Suites, Tysons Corner - Marriott Hotel, Tysons Corner - Residence Inn, Tysons Corner - Ritz Carlton-Proposed, Tysons Corner - Courtyard by Marriott, Virginia Beach - Courtyard by Marriott-Lynnhaven, Virginia Beach - Fairfield Inn, Virginia Beach - Hotel-Proposed, Virginia Beach - Pavilion Tower Hotel, Virginia Beach - Ramada Inn - Oceanside, Virginia Beach - International Conference Center, Westfields - Howard Johnson, Wheeling - Fort Magruder Inn, Williamsburg - Governor's Inn, Williamsburg - Holiday Inn-East, Williamsburg - Holiday Inn-West, Williamsburg - Royce Hotel, Williamsburg - Williamsburg Hilton, Williamsburg - Best Western-Proposed, Wytheville Washington - Bellevue Thunderbird Motor Inn, Bellevue - Embassy Suites, Bellevue - Hampton Inn, Bellevue - La Quinta, Bellevue - Residence Inn Seattle-East, Bellevue - Ramada Inn, Bothell - Rattling Spring Hotel, Harpers Ferry - Motel 6, Issaquah - AmeriSuite, Kent - Homecourt Suite Hotel, Kent - Embassy Suite, Lynnwood - Residence Inn-Seattle North, Lynnwood - Red Lion Inn at Pasco, Pasco - Redmond Motel, Redmond - Hampton Inn, Sea Tac - Holiday Inn Airport, Sea Tac - Thunderbird Inn, Sea Tac - Alexis Hotel, Seattle - Courtyard by Marriott-South Center, Seattle - Doubletree Inn at South Center, Seattle - Doubletree Plaza, Seattle - Hampton Inn-Airport, Seattle - Holiday Inn Crowne Plaza, Seattle - Holiday Inn-Sea Tac, Seattle - La Quinta, Seattle - Lake Union Residence Inn, Seattle - Marriott Hotel-Airport, Seattle - Marriott Sea-Tac Hotel, Seattle - Plaza Park Suites, Seattle - Ramada Inn-Airport, Seattle - Red Lion, Seattle - Stouffer Madison Hotel, Seattle - Travelodge-Proposed, Seattle - Westin Hotel, Seattle - Courtyard by Marriott, Spokane - Gateway Hotel, Spokane - Holiday Inn-West, Spokane - Red Lion Inn, Spokane - Super 8, Spokane - Hilton-Village Green, Tacoma - Hotel-Proposed, Tacoma - Park Shore Inn, Tacoma - Tacoma Sheraton Hotel, Tacoma - Embassy Suites Hotel, Tukwila - Hampton Inn, Tukwila - Residence Inn-Seattle South, Tukwila - Red Lion Quay, Vancouver - Residence Inn-Portland North, Vancouver - Super 8, Wenatchee - Thunderbird Motor Inn, Yakima West Virginia - Comfort Inn-Proposed, Charleston - Holiday Inn, Clarksburg - Holiday Inn, Fairmont - Hotel-Proposed, Harpers Ferry - Holiday Inn, Huntington - Comfort Inn-Proposed, Morgantown - Holiday Inn, Morgantown - Motel-Proposed, Morgantown - Comfort Inn, Princeton - Motel-Proposed, Princeton - Hotel-Proposed, Wheeling - Howard Johnson, Wheeling Wisconsin - Super 8, Ashland - Holiday Inn, Beloit - Embassy Suites Hotel-Proposed, Brookfield - Marriott-Milwaukee, Brookfield - Holiday Inn, Eau Claire - Residence Inn, Glendale - Granada Royale-Proposed, Green Bay - Holiday Inn-Downtown, Green Bay - Residence Inn-Proposed, Green Bay - Super 8, Janesville - Super 8, Kenosha - Playboy Resort, Lake Geneva - Concourse Hotel, Madison - Fairfield Inn, Madison - Hampton Inn - East, Madison - Hampton Inn - West, Madison - Compri Hotel-Proposed, Milwaukee - Embassy Suite, Milwaukee - Fairfield Inn, Milwaukee - Holiday Inn-Airport, Milwaukee - Holiday Inn-West, Milwaukee - Hotel and Conv. Ctr. East-Proposed, Milwaukee - Hyatt Regency, Milwaukee - Marc Plaza, Milwaukee - Marriott Inn, Milwaukee - Omni Suite Hotel-Proposed, Milwaukee - Super 8-Airport, Milwaukee - Olympia Village Resort, Oconomowoc - Scotsland Resort, Oconomowoc - Sheraton, Racine - Claridge Motor Inn, Rhinelander - Super 8, Waukesha - Holiday Inn, Wausau - Mead Inn, Wisconsin Rapids Wyoming - Days Inn, Casper - Flying L. Skytel, Cody - Super 8, Cody - Snow King Resort, Jackson - Super 8, Jackson - Wort Hotel, Jackson - Development-Proposed, Jackson Hole - Colter Bay Village, Moran - Jackson Lake Lodge, Moran - Jenny Lake Lodge, Moran - Best Western-Bel Air, Rawlins - Bridger Inn, Rawlins - La Quinta Inn, Rock Springs Western Europe Belgium - Oostkamp Hotel, Bruges - Proposed Residence Inn, Brussels - SAS Royal Hotel, Brussels Denmark - Proposed Hotel, Copenhagen France - The Miramar, Biarritz - Chateau D'arc en Barroi, Haute-Marne - Le Grand, Paris - Royal Monceau, Paris Germany - Cumberland House, Berlin - Munchen Penta Hotel, Munchen Holland - Carlton - Cannes & Amstel, Amsterdam - The Pulitzer Hotel, Amsterdam Spain - Le Meridien, Barcelona - Princess Sophia, Barcelona - Hotel Los Monteros, Marbella - Incosol Spa & Hotel, Marbella - Proposed Hyatt Resort, Marbella United Kingdom - Copthorne Hotel, Aberdeen - Copthorne Hotel, Birmingham - Hyatt Regency, Birmingham - Holiday Inn, Cambridge - Copthorne Hotel, Cardiff - Great Eastern Hotel, England - Copthorne Hotel, Glasgow - Hanbury Manor Hotel, Hertfordshire - 47 Park Street, London - Bailey's Hotel, London - Basil Street Hotel, London - Basil Street Hotel, Knightsbridge, London - Britannic Tower, London - Chelsea Hotel, London - Chesterfield Hotel, London - Chesterfield Hotel, Mayfair, London - Copthorne Hotels, London - Copthorne Tara Hotel, London - Dorchester Mayfair, London - Executive Hotel, London - Marriott Hotel, London - May Fair, London - Plaza Hotel, London - Proposed Hotel Conversion, London - Proposed Hotel-The City, London - Regent Hotel, London - Regent London Hotel, London - Sheraton Belgravia, London - Sheraton Park Tower, London - St. James Court Hotel, London - The Executive Hotel, London - Windsor Hotel, London - Copthorne Hotel, Manchester - Copthorne Hotel, Newcastle - Copthorne Hotel, Slough/Windsor - Swallow Hotel, Stockton - Copthorne Hotel-Effingham Park, Sussex - Copthorne Hotel-Gatwick, Sussex Middle East and North Africa Egypt - Sheraton Anni Cruise Ship, - Sheraton Aton Cruise Ship, - Sheraton Hotp Cruise Ship, - Sheraton Tut Cruise ship, - Aswan Oberol Hotel, Aswan - Cairo Sheraton Hotel, Cairo - Hotel - Proposed, Cairo - Lido Hotel, Cairo - Meridien Hotel, Cairo - Novotel Cairo Airport, Heliopolis, Cairo - Proposed Resort Complex, Hurghada - Luxor Sheraton Hotel, Luxor - Proposed Hotel, Luxor - Fayrouz Village Hotel, Sharm El Sheikh, Sinai - Coral Village Hotel, Nuweiba, Sinai - Hotel - Proposed, Dahab, Sinai - Hotel - Proposed, St. Catherine, Sinai Greece - Athens Hilton & Proposed Hotel, Athens - Caravel Hotel, Athens - Proposed Sargani Hotel & Bungalows, Halkidiki - Rhodes Hotel -Proposed, Rhodes Israel - Proposed Inter-Continental Hotel, Tel Aviv Lebanon - Hotel Market Review, Beruit Morocco - El Minzah Hotel, Tangier Nigeria - Proposed Sheraton Hotel, Port Harcourt Saudi Arabia - Proposed Jeddah Corniche Project, Jeddah Tunisia - Proposed Hotel, Hammamet Turkey - Hotel Conrad, Istanbul Latin America and the Caribbean Bahamas - Eleuthera Joint Venture, Eleuthera - Cape Eleuthera Island Hotel, Eleuthera Island - Eleuthera Joint Venture, Eleuthra - The Montague, Nassau - Paradise Island Hotel, Paradise Island - Resorts Int'l Hotel and Casino, Paradise Island Belize - Journey's End Caribbean Club, Abergris Caye Bermuda - Sonesta Hotel, Bermuda Brazil - Quatro Rodas Hotel, Recife Colombia - Charleston Hotel - Proposed, Barranquilla - Bella Suiza Hotel, Bogota - Hotel & Convention Center -Proposed, Cali - Cartagena Hilton, Cartagena - El Faro de Cartagena Resort Propose, Cartagena - Proposed Indian Sea and Sun Resort, Cartagena - Hotel De Isleno, San Andres Isla - Santamar Hotel, Santa Marta Curacao - Ramada Renaissance Hotel and Casino, Honduras - Inn Of The Sun, Guanaja Jamaica - Holiday Inn-Rose Hall, Montego Bay - Americana Eden II, Ocho Rios Mexico - Posadas de Mexico Hotels, - Americana Condesa Del Mar, Acapulco - Americana El Presidente Hotel, Acapulco - Resort-Proposed, Cabo San Lucas - Palacio Del Margus, Chiconcuac - Omni Hotel, Ixtapa - Fiesta Inn-Proposed, Leon - Karmina Place, Manzanillo - Hotel - Proposed, Mexico City - La Jolla de Mismaloya, Puerta Vallarta Netherland Antilles - Divi Divi Beach Resort, Aruba - Divi Tamarijn Beach Resort, Aruba - Golden Anchor, Bonaire - Resort Hotel-Proposed, Bonaire - Ramada Renaissance Hotel and Casino, Curacao - Cupecoy Beach Club Hotel, St. Maarten - Dawn Beach Hotel, St. Maarten - Dawn Beach Resort, St. Maarten - Mullet Bay Resort, St. Maarten - Oyster Pond Hotel, St. Maarten Puerto Rico - Hyatt Dorado Beach Hotel, Dorado - Hyatt Regency Cerromar Hotel, Dorado - Hotel - Proposed, Fajardo - Hotel Puerto Rico, Fajardo - Westin Resort-Proposed, Palmer - Marriott Resort & Casino-Proposed, Puerto Rico - Carib Inn, San Juan - Dupont Plaza, San Juan - El San Juan Hotel and Casino, San Juan - Howard Johnson Hotel, San Juan - Marriott - Proposed, San Juan - Marriott Update - Proposed, San Juan - Sands Hotel and Casino, San Juan Virgin Islands - Caneel Bay, St. Croix - Carambola Beach Resort, St. Croix - Hotel - Proposed, St. Croix - St. Croix Development, St. Croix - Caneel Bay, St. John - Pineapple Beach Hotel, St. Thomas - Sugar Bay Plantation, St. Thomas - Virgin Grand Hotel, St. Thomas - Virgin Isle Hotel, St. Thomas - Little Dix Bay, Virgin Borda Eastern Europe Croatia - Two Hotels, Dubrovnik Czech Republic - Voronesh Hotel Complex, Brno - Proposed Four Seasons Hotel, Prague Hungary - Proposed Resort Hotel, Babolna - Duna Inter-Continental, Budapest Latvia - Daugava Hotel-Proposed, Riga - Proposed Hotel, Riga Poland - Holiday Inn, Krakow - Marriott Hotel - Proposed, Poznan - Proposed Hotel, Poznan - Radisson Hotel, Szczecin - Bristol Hotel, Warsaw - Holiday Inn, Warsaw - Orbis Joint Venture, Warsaw - Proposed Hotel, Warsaw - Sheraton Hotel - Proposed, Warsaw - Zakopane Resort Complex, Zakopane Russia - Kamiennyi Most Hotel & Business, Moscow - Savoy Hotel, Moscow Asia Korea - Ultrapolis 3000, Seoul Malaysia - UP 3000 Hotel-Proposed, Selangor Singapore - Resort Hotels - Proposed, - Ultrapolis 3000, Singapore West Indies - Proposed Blue Lagoon Resort, St. Martin Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Hospitality Valuation Services Industry Leader Hospitality Valuation Services (HVS) was created in 1980 to satisfy the ever-increasing demand for reliable and well-documented hotel/motel valuations, market studies, and feasibility reports. As the nation's leading real estate appraisal organization devoted exclusively to lodging properties, HVS offers owners, investors, and lenders in-depth valuation and market research expertise. Our professional staff, operating on a worldwide basis with offices in New York, San Francisco, Miami, Boulder, Vancouver, and London, has appraised more than 4,000 hotels and motels in every state and over 32 foreign countries. Each member of Hospitality Valuation Services is well versed in lodging operations. Most have college degrees in hotel administration as well as actual on-the-job hotel experience. Coupled with intense training in real estate appraisal theory and techniques, we are highly qualified to handle the unique characteristics of hostelry valuations. Excellence Through Specialization An important feature of our valuation and feasibility services is specialization. Daily exposure on a global basis to a wide variety of hotel transactions and operating statistics, along with actual buyers and sellers, provides the data to thoroughly document our reports. HVS maintains the industry's largest database of hotel valuation information: o Data on over 4,000 hotel transactions; o Over 3,500 actual financial statements; o Thousands of management contracts, franchise agreements, mortgages, leases, and other similar documents; o Personal contacts at every major hotel company; o Names and addresses of over 10,000 hotel owners, investors, lenders, and operators. Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Innovative research in hotel valuation techniques is set forth in the textbooks we authored for the Appraisal Institute, entitled The Computerized Income Approach to Hotel/Motel Market Studies and Valuations and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations. These publications, along with more than 300 articles, are recognized as the authoritative standard for valuing lodging facilities and performing market feasibility studies. In addition, we have developed Hospitality Valuation Software, a computerized package that assists appraisers and consultants in evaluating market trends and preparing financial forecasts. Full-Service Hotel Consulting With a reputation established by providing highly detailed hotel valuations that are accepted and relied upon by virtually every major hotel owner, lender, and operator, HVS has branched out to offer a full range of consulting services. o HVS Consulting Services: Valuations, market feasibility studies, economic studies, management contract and franchise negotiations, development assistance, and expert testimony. o HVS Executive Search: Recruitment and placement of top-level hotel management personnel. o HVS Eco Services: Environmental audits and assistance in implementing programs including water and energy management, recycling, and green product selection. Provides ECOTEL certifications to environmentally sensitive hotels. o HVS Gaming Services: Specialized market, valuation, and consulting services for casinos and other types of gaming activities. o HEI Hotels: Hotel ownership and management. Long-Term Relationship Hospitality Valuation Services is in business for the long-term. We are dedicated to providing our clients with the highest quality consulting services. Should you require assistance in any areas covered by our expertise, please contact any member of our team at (516) 248-8828. This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. ============= HVS - ------------- INTERNATIONAL ============= ===================================================== ---------------------------- Economic Study and Appraisal ---------------------------- Howard Johnson Westbury ---------------------------- Jericho, New York ---------------------------- Prepared by: Hospitality Valuation Services Division of Hotel Consulting Services, Inc. 372 Willis Avenue Mineola, New York 11501 516-248-8828 Submitted to: Mr. Shirish Godbole Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, New York 10036 [Letterhead of HVS International] November 5, 1996 Mr. Shirish Godbole Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, New York 10036 Re: Howard Johnson Westbury Jericho, New York Reference #9610281 Dear Mr. Godbole: Pursuant to your request, we herewith submit our economic study and appraisal pertaining to the above-captioned property. We have inspected the site and facilities and analyzed the hostelry market conditions in the central Nassau County area. Our report was prepared in accordance with, and is subject to, the requirements of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and the Uniform Standards of Professional Appraisal Practice (USPAP), as provided by the Appraisal Institute. Based on the available data, our analysis, and our experience in the hotel industry, it is our opinion that the market value of the fee simple (subject to an overlease) interest in the subject property described in this report, as of January 1, 1997, is: $3,800,000 THREE MILLION EIGHT HUNDRED THOUSAND DOLLARS We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings and valuation. The economic study and appraisal is made part hereof, and must remain attached in order for the value opinion set forth to be considered valid. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. Very truly yours, HOSPITALITY VALUATION SERVICES A Division of Hotel Consulting Services, Inc. /s/ Sean A. Hehir Sean A. Hehir Consulting and Valuation Analyst /s/ Anne R. Lloyd-Jones, CRE Anne R. Lloyd-Jones, CRE Senior Vice President /s/ Stephen Rushmore, CRE, MAI, CHA Stephen Rushmore, CRE, MAI, CHA President HVS International, Mineola, New York Table of Contents - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table of Contents 1. Executive Summary ...................................................... 1 2. Nature of the Assignment ............................................... 3 3. Description of the Land, Improvements, Zoning, Taxes, and Neighborhood . 7 4. Market Area Analysis ................................................... 22 5. Overview of External Forces Affecting the U.S. Lodging Industry ........ 38 6. Lodging Market Supply and Demand Analysis .............................. 54 7. Projection of Occupancy and Average Rate ............................... 69 8. Highest and Best Use ................................................... 85 9. Approaches to Value .................................................... 87 10. Income Capitalization Approach ........................................ 90 11. Sales Comparison Approach ............................................. 126 12. Cost Approach ......................................................... 134 13. Reconciliation of Value Indications ................................... 141 14. Statement of Assumptions and Limiting Conditions ...................... 145 15. Certification ......................................................... 148 Addenda Photographs of the Subject Property Photographs of the Competition Legal Description Synopsis of Hotel Management Agreement Synopsis of Overlease Agreement Explanation of the Simultaneous Valuation Formula Qualifications Sean A. Hehir Anne R. Lloyd-Jones, CRE Stephen Rushmore, CRE, MAI, CHA HVS International, Mineola, New York Executive Summary 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 1. Executive Summary Property: Howard Johnson Westbury Location: 120 Jericho Turnpike Jericho, New York 11753 Date of Inspection: October 15, 1996 Interest Appraised: Fee simple, subject to an overlease Date of Value: January 1, 1997 Land Description Area: +/-1.68 acres, or +/-73,180 square feet Zoning: Zoning F - Neighborhood Business District Assessor's Parcel Number: Section 17-Block 16-Lot 47 Improvements Description Age: Constructed in 1967 Property Type: Limited-service Guestrooms: 80 Number of Stories: Two stories Food and Beverage Facilities: None Meeting Space: One room, +/-800 square feet Parking: 100 spaces (around the perimeter of the building) Summary of Value Parameters Highest and Best Use (as if vacant): Transient lodging facility Highest and Best Use (as improved): Transient lodging facility Marketing Period: Six to nine months Number of Years to Stabilize: Two Stabilized Year: 1998 HVS International, Mineola, New York Executive Summary 2 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Valuation Assumptions Mortgage Interest Rate: 9.5% Amortization Period: 20 years Debt Service Constant: 0.111856 Loan-to-Value Ratio: 70% Stabilized Inflation Rate: 3.5% Equity Yield Rate: 22% Terminal Capitalization Rate: 11% Brokerage and Legal Fees: 3% Holding Period: 10 years Calculated Discount Rate: 14.38% Estimates of Value Income Capitalization Approach: $3,700,000 Sales Comparison Approach: $2,700,000 to $4,400,000 Cost Approach (Replacement Cost): $4,600,000 Market Value Conclusion: $3,800,000 Market Value Conclusion per Room: $47,500 HVS International, Mineola, New York Nature of the Assignment 3 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 2. Nature of the Assignment Subject of the Economic Study and Appraisal The subject of the economic study and appraisal is the fee simple (subject to an overlease) interest in a +/-73,180-square-foot (+/-1.68-acre) parcel improved with an 80-room, limited-service lodging facility known as the Howard Johnson Westbury, which opened in 1967. In addition to guestrooms, the subject property contains a lobby, an outdoor swimming pool, approximately 800 square feet of meeting space, and all other facilities and amenities typical of a limited-service hotel. The property is located off Exit 40W of the Long Island Expressway, at the southwest corner of the intersection formed by the southern service road of the Long Island Expressway and Jericho Turnpike. Municipal jurisdictions governing the property include the Village of Jericho, the Town of Oyster Bay, the County of Nassau, and the State of New York. Although the subject property carries a Westbury name, it is actually located in Jericho. The Westbury name is used in an attempt to capitalize on perceived marketing benefits associated with this location. The hotel's civic address is 120 Jericho Turnpike, Jericho, New York, 11753. Objective of the Economic Study and Appraisal The objective of the economic study and appraisal is to evaluate the supply and demand factors affecting the market for transient accommodations in the central Nassau County area for the purpose of estimating the market value of the subject property. Market value is defined by the Office of the Comptroller of the Currency (OCC), 12 CFR, Part 34, 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 and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: HVS International, Mineola, New York Nature of the Assignment 4 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 1. buyer and seller are typically motivated; 2. both parties are well informed or well advised, and acting in what they consider their own best interests; 3. a reasonable time is allowed for exposure in the open market; 4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) Use of the Appraisal This appraisal is being prepared for use by Morgan Stanley Mortgage Capital, Inc. in connection with its proposed financing of a package of 17 hotels, including the subject property, which are owned by Ashford Financial Corporation or related entities. The information presented in this report should not be disseminated to the public or third parties without the express written consent of Hospitality Valuation Services. Scope of the Appraisal All information was collected and analyzed by the staff of Hospitality Valuation Services. Data such as historical operating statements, site plans, floor plans, and so forth were supplied by Ashford Financial Corporation. Unless noted otherwise, we have inspected the competitive lodging facilities and analyzed the sales summarized in this report, and our value conclusion is based on this investigation and analysis. Property Rights Appraised The property rights appraised are the fee simple ownership of the land and improvements, including the furniture, fixtures, and equipment. The fee simple interest is defined as "absolute ownership unencumbered by any other interest or estate subject only to the four powers of government."(2) The subject property is appraised as a going concern (i.e., an open and operating facility). It must be noted that the subject property is encumbered with an overlease, where the current owner of the fee simple interest also holds the sublease position of the property; a separate entity holds the sandwich lease position. Details of this lease, which is referred to as an overlease, are included as an addendum to this report. (1) Federal Register, Vol. 55, No. 165, August 24, 1990, p. 34696. (2) The Dictionary of Real Estate Appraisal - Second Edition, American Institute of Real Estate Appraisers, Chicago, IL, 1989, p. 120. HVS International, Mineola, New York Nature of the Assignment 5 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Method of Study The methodology used to develop this economic study and appraisal is based on the market research and valuation techniques set forth in the textbooks authored by HVS International for the American Institute of Real Estate Appraisers and the Appraisal Institute, entitled The Valuation of Hotels and Motels,(3) Hotels, Motels and Restaurants: Valuations and Market Studies,(4) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations,(5) and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations.(6) The appraisal will consider the three standard approaches to value: income capitalization, sales comparison, and cost. Because lodging facilities are income-producing properties that are normally bought and sold on the basis of capitalization of their anticipated stabilized earning power, the greatest weight is given to the value indicated by the income capitalization approach. We find that most hotel investors employ a similar procedure in formulating their purchase decisions, and thus the income capitalization approach most closely reflects the rationale of typical buyers. When appropriate, the sales comparison and cost approaches are used to test the reasonableness of the results indicated by the income capitalization approach. Ownership, Franchise, and Management History and Assumptions A photocopy of the subject property's legal description, which was provided by Ashford Financial Corporation, is presented as an addendum to this report; the appraisers assume no responsibility regarding the accuracy of this legal description. According to records maintained at the Nassau County Tax Assessor's office, the subject property was previously owned from the mid-1980s by Northeast Hotel Associates. On May 12, 1994, Westbury New York Hotel Limited Partnership (formed by Ashford Financial Corporation) acquired the fee simple interest in the subject property from Northeast Hotel Associates for a reported price of $2,785,641. In addition to the fee simple ownership, Westbury New York Hotel Limited Partnership also assumed the (3) The Valuation of Hotels and Motels, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1978. (4) Hotels, Motels and Restaurants: Valuations and Market Studies, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1983. (5) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1990. (6) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992. HVS International, Mineola, New York Nature of the Assignment 6 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= sublease position of Northeast Hotel Associates with Jacob Goldfarb and Malka R. Goldfarb. The sublease arrangement stipulates that Westbury New York Hotel Limited Partnership must pay an annual sublease fee of $51,400, payable in monthly installments, to Jacob Goldfarb and Malka R. Goldfarb through November of 2014. The subject property is operated under a franchise agreement with Howard Johnson; this agreement expires on May 12, 2009. Additionally, the hotel is subject to a management agreement with Remington Hotel Company; an abstract of this contract is presented as an addendum to this report. Marketing Period In light of the renewed interest in hotel investments and the increasing availability of debt and equity capital, we believe that it will take six to nine months to sell the subject property assuming it is placed on the market at the concluded value. Effective Date of the Appraisal The effective date of the appraisal is January 1, 1997. All projections are expressed in inflated dollars, and the value estimate represents 1997 dollars. Date of Inspection The subject property was inspected by Sean A. Hehir on October 15, 1996. HVS International, Mineola, New York Description of the Land, Improvements 7 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 3. Description of the Land, Improvements, Zoning, Taxes, and Neighborhood LAND The suitability of the land for the operation of a lodging facility is an important consideration affecting the economic viability of a property and its overall value. Factors such as size, topography, access, visibility, and the availability of utilities have a direct impact on the desirability of a particular site. Size and Topography The subject site is located off Exit 40W of the Long Island Expressway, at the southwest corner of the intersection formed by the southern service road of the Long Island Expressway and Jericho Turnpike. Municipal jurisdictions governing the property include the Village of Jericho, the Town of Oyster Bay, the County of Nassau, and the State of New York. According to the subject property's 1995/96 real estate tax bill and representatives of the Nassau County Tax Assessor's Office, the subject parcel measures approximately 1.68 acres, or +/-73,180 square feet and is generally triangular in shape. Jericho Turnpike extends in an east/west direction along the subject property's southern border. The eastbound southern service road of the Long Island Expressway extends in a southeast/northwest direction along the property's northeast border. Parking facilities, a gas station, and an International House of Pancakes (IHOP) restaurant are situated along the subject property's western periphery. Primary vehicular access to the property is provided by both the southern service road of the Long Island Expressway and Jericho Turnpike. Topographically, the subject parcel and the surrounding area slope downward slightly from west to east, and the size and topography of the subject parcel appear well suited for its current use. The site appears to be fully developed, with no excess land for expansion. HVS International, Mineola, New York Description of the Land, Improvements 8 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Easements The appraisers were not provided with any information concerning easements affecting the subject property. For the purposes of this appraisal, we have assumed that the property is not encumbered by any unusual or onerous easements that would affect its use or marketability. Regional Access It is important to analyze a lodging facility's ease of access with respect to regional and local transportation routes and demand generators. The subject site is readily accessible to a variety of local, county, state, and interstate highways. Long Island's highway system is highly developed, placing the subject property within close driving distance of most western Suffolk County and Nassau County destinations via the Long Island Expressway (I-495), Northern State Parkway, Southern State Parkway, and Jericho Turnpike (State Route 25). Of these roadways, the Long Island Expressway is the only one that extends almost the entire length of the island. The following description of the area's major roadways demonstrates that it is well serviced by a variety of vehicular routes. The Long Island Expressway (I-495) is a major east/west interstate thoroughfare that connects Long Island with New York City and beyond. This expressway is paralleled by two-lane service roads on its northern and southern sides throughout most of Queens and Nassau Counties; the service roads are only partially constructed in Suffolk County. The availability of a service road in the vicinity of the subject property affords the site improved access, and thus represents a locational advantage. Northern State Parkway is a six-lane, limited-access route. This highway originates at Veterans Memorial Highway (State Route 454) in Suffolk County and continues westward through western Suffolk County and Nassau County. Northern State Parkway becomes the Grand Central Parkway at the Nassau/Queens border and terminates at the Triborough Bridge, which provides access to Manhattan and Interstate 95. From the subject property, motorists can reach the Northern State Parkway via local thoroughfares, including Brush Hollow Road, which intersects the parkway approximately one mile south of the hotel. Southern State Parkway is a six-lane, limited-access highway that provides east/west transportation along the southern shore of Long Island. The route originates in East Islip and extends west to the Nassau/Queens border, where it intersects the Cross Island Parkway (which provides access to the Long Island Expressway and Grand Central Parkway) and the Belt Parkway (which provides access to John F. Kennedy International Airport and HVS International, Mineola, New York Description of the Land, Improvements 9 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Brooklyn). Southern State Parkway intersects Meadowbrook Parkway approximately five miles southwest of the subject property. With the exception of the Cross Island Parkway in Queens County, the Meadowbrook is the westernmost north/south parkway on Long Island, and links the major east/west arteries. This route originates at Jones Beach State Park and continues north to the Northern State Parkway. Access to the subject property from the Meadowbrook Parkway can be accomplished via the Northern State Parkway, and thence from Jericho Turnpike. Jericho Turnpike (Route 25) is a major east/west New York State thoroughfare improved with a variety of commercial uses. The subject property is located at the juncture of the Long Island Expressway and Jericho Turnpike. Other roads that converge at this juncture include Brush Hollow Road and Cantiague Rock Road. Overall, regional access to the Howard Johnson Westbury is considered to be very good. Local Access and Visibility Local access to the subject property is provided by both Jericho Turnpike and the southern service road of the Long Island Expressway. Eastbound motorists traveling on the Long Island Expressway use Exit 40W, follow the southern service road for a short distance, and make a right turn into the subject property. Westbound travelers also use Exit 40W, loop around the interchange, and proceed directly onto Jericho Turnpike, making a right turn into the subject property. Access to the subject hotel from Jericho Turnpike is convenient. Westbound travelers make a right turn at the subject property, shortly after passing under the interchange of the Long Island Expressway. A turnpike divider prevents direct access to the subject property for eastbound motorists; guests must travel past the subject property and execute a U-turn, arriving at the hotel from the other direction. However, the subject property is considered to have good access, as a result of its frontage on two major roadways. In the vicinity of the subject property, Brush Hollow Road intersects with Jericho Turnpike just southeast of the site. At roughly the same location, Brush Hollow Road and Jericho Turnpike intersect with Cantiague Rock Road. Brush Hollow Road leads to the Westbury Music Fair, which is located approximately one mile southwest of the subject property, and to the Northern State Parkway. Cantiague Rock Road leads to Cantiague Park. The subject property is not very visible from the Long Island Expressway; the hotel's signage can only be seen once you are almost parallel with the HVS International, Mineola, New York Description of the Land, Improvements 10 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= subject property, thus making it too late to exit. Visibility of the subject property from Jericho Turnpike, however, is excellent, as the property fronts this roadway. The distinguishing and well-recognized orange trademark of Howard Johnson captures the attention of motorists passing the hotel. Although visibility of the subject property from the Long Island Expressway is limited, this is not considered to be a serious detriment. Like most hotels on Long Island, the Howard Johnson Westbury does not attract a substantial amount of demand from passing motorists. All destinations on Long Island can be reached within one or two hours, and thus highway traffic does not produce a significant number of hotel guests. Overall, the subject site is appropriate for hotel use in terms of capacity, configuration, access, and visibility. Airport Access The subject property is within easy access of the three major airports on Long Island: John F. Kennedy International, La Guardia, and MacArthur. John F. Kennedy International Airport is approximately 20 miles southwest of the subject site and can be accessed from the subject property by traveling west on the Long Island Expressway, and then south on the Belt Parkway. La Guardia is roughly 20 miles northwest of the subject site and is accessible by traveling west on the Long Island Expressway, and then north on the Grand Central Parkway. Long Island's MacArthur Airport is located approximately 20 miles east of the subject property and is accessible by traveling east on the Long Island Expressway, and then southeast on Route 16. Utilities The subject site is served by all necessary utilities, which are provided as follows. ================================================================================ Table 3-1 Available Utilities - -------------------------------------------------------------------------------- Utility Provider ------- -------- Water Jericho Water District Electricity LILCO Telephone NYNEX Sewer Nassau County Sewer District Garbage and Trash Jamaica Ash - -------------------------------------------------------------------------------- HVS International, Mineola, New York Description of the Land, Improvements 11 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Soil and Subsoil Conditions According to the Preliminary Environmental Site Assessment and Limited Asbestos Survey prepared by Certified Engineering & Testing Company, Inc., dated November 24, 1993, four leaking underground storage tank (LUST) sites with "clean-up in progress/required" status are located within one-half mile to the northeast of the subject property. In addition, these sites are hydraulically upgradient from the subject site. Additionally, a 550-gallon No. 2 fuel oil underground storage tank (UST), which was installed in 1978 during the construction of the east wing building, was identified on the subject site. The construction of the UST is unknown, and the tank has no spill/overfill prevention, thus representing a potential environmental concern for the subject site. The appraisers are not qualified to evaluate soil conditions other than by a visual inspection of the surface. Based on the findings of this environmental study, we urge concerned individuals to seek further assistance from qualified engineers. For the purpose of this report, we expressly do not consider the negative effect such findings may have on the subject property. It must be noted, however, that any environmental containment of the subject property could have an unfavorable impact on the hotel's market value, and the estimate set forth in this appraisal reflects our value conclusions prior to the deduction of any such costs. Nuisances and Hazards According to the same environmental assessment report cited above, the non-friable asbestos-containing vinyl floor tiles of the east wing first floor corridor, with an approximate total area of 250 square feet, contain asbestos. Because the appraisers are not experts in this field, we urge the reader to obtain an independent analysis to further investigate this possible environmental concern. As noted previously, any environmental containment could have an unfavorable impact on the subject property's market value, and the estimate set forth in this appraisal report reflects our value conclusions prior to the deduction of any such cost. Flood Zone As indicated by the Federal Emergency Management Agency (FEMA) Community Panel Number 360483D, dated June 19, 1992, the subject property is located in Flood Zone C, an area of minimal flooding. Seismicity At the time of writing this report, information on the seismicity of the subject property was not available; for the purposes of this report, we have assumed that the subject property is not located in an area of seismic danger. HVS International, Mineola, New York Description of the Land, Improvements 12 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Legal Description As noted earlier, a copy of the subject property's legal description, as provided by Ashford Financial Corporation, is presented as an addendum to this report. Conclusion The subject parcel appears well suited as the site of a lodging facility. We have analyzed the issues of size, topography, access, visibility, and the availability of utilities, and we note the following advantages and disadvantages. Advantages o The subject site features frontage on two major commercial thoroughfares. o The surrounding neighborhood is characterized by a concentration of potential demand generators. o Regional access is favorable. o Direct local access is provided by Jericho Turnpike and the Long Island Expressway. o All necessary utilities are available. Disadvantages o Preliminary environmental study reports potential environmental containments that may adversely affect the market value of the subject property. o The site is not easily visible from the Long Island Expressway. The disadvantage of limited visibility is surmountable, and the advantages represent desirable locational attributes. Therefore, we believe that the subject parcel is well suited for hotel use. The impact of the potential environmental contamination may warrant further consideration but does not presently detract from the site's utility as a lodging facility. IMPROVEMENTS The quality of a lodging facility's physical improvements has a direct influence on its marketability and attainable occupancy and average rate. The design and functionality of the structure can also affect operating efficiency and overall profitability. This section investigates the subject property's physical improvements and personal property in an effort to determine how they contribute to total value. The following description of the HVS International, Mineola, New York Description of the Land, Improvements 13 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= improvements is based on our inspection of the hotel and information provided by Ashford Financial Corporation. The Howard Johnson Westbury is a limited-service lodging facility containing 80 rentable units, +/-800 square feet of meeting space, an outdoor swimming pool, and appropriate back-of-the-house facilities. The two-story property opened in 1967 and is roughly 29 years old as of the date of this appraisal. In May of 1994, the hotel was acquired by Westbury New York Hotel Limited Partnership, an entity formed by Ashford Financial Corporation. At the time of this transaction, the hotel was in extremely poor condition. Subsequent to the acquisition, the subject property was extensively renovated, at an estimated cost of $340,487 in 1994 and $22,690 in 1995. In scope, this renovation included the exterior of the building, public areas, and guestrooms. Management representatives report that all building systems are in good working order. The hotel is operated under a license agreement with Howard Johnson and reportedly meets the standards for lodging facilities of that brand. Based on our inspection and information provided by Ashford Financial Corporation, the following table summarizes the facilities available at the subject property. HVS International, Mineola, New York Description of the Land, Improvements 14 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 3-2 Facilities Summary - -------------------------------------------------------------------------------- Guestrooms King Beds 6 Units Queens 42 Double Queens 32 ---- Total 80 Units Meeting and Banquet Rooms 800 Square Feet ---- Total 800 Square Feet Recreational and Other Amenities Outdoor swimming pool Parking Spaces 100 surface spaces Elevators N/A Life Safety Systems Hard wired smoke detectors with battery back-up and fire detectors Not sprinklered Laundry 2 Washers 3 Dryers Construction Details Concrete masonry blocks Rubber membrane roof Interior guestroom corridors Carpeting in the guestrooms and corridors Tile floor covering in guest bathrooms Vinyl covering on the interior walls - -------------------------------------------------------------------------------- Property Exterior The hotel structure is situated in the southern portion of the site. Paved parking areas accommodating approximately 100 vehicles are located around the perimeter of the building. Vehicular access to the subject property is provided by both Jericho Turnpike and the southern service road of the Long Island Expressway. Eastbound motorists traveling on the Long Island Expressway use Exit 40W, HVS International, Mineola, New York Description of the Land, Improvements 15 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= follow the southern service road for a short distance, and make a right turn into the subject property. Westbound travelers also use Exit 40W, loop around the interchange, and proceed directly onto Jericho Turnpike, making a right turn into the subject property. Access to the subject hotel from Jericho Turnpike is convenient. Westbound travelers make a right turn at the subject property, shortly after passing under the interchange of the Long Island Expressway. A turnpike divider prevents direct access to the subject property for eastbound motorists; guests must travel past the subject property and execute a U-turn, arriving at the hotel from the other direction. However, the subject property is considered to have good access, as a result of its frontage on two major roadways. After entering the site, guests proceed to the hotel's main entrance, which is housed in a traditional Howard Johnson-style gatehouse located in the southeastern portion of the site, immediately in front of the main entrance to the property. Both the exterior of the subject property and the pavement appear to be in good condition, with no apparent signs of disrepair. Construction and Design The subject property comprises two buildings connected by an enclosed corridor. In terms of layout, the property consists of a U-shaped structure with an outdoor swimming pool in the center. The west wing was originally constructed in 1967 and contains 58 guestrooms, while the east wing, which was added in 1978, houses 22 rentable guestrooms. Reportedly, in August of 1986, a natural gas explosion caused extensive damage at the subject property. Until early 1987, approximately 60 guestrooms were reportedly out of order. Lobby The subject property's front desk, lobby, and manager's office are housed in the brick-and-glass, orange-roofed gatehouse situated in the southeastern portion of the site. A renovation is planned for the gatehouse in November of 1996; approximately $38,000 will be spent modernizing the building's roof. Meeting and Banquet Space The subject property's meeting room is located in the west guestroom wing and is approximately 800 square feet in size. No major renovations have taken place in this room, nor are any planned for the immediate future. At the time of our inspection, the meeting room appeared to be in good condition, showing no signs of disrepair. HVS International, Mineola, New York Description of the Land, Improvements 16 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Guestrooms Of the 58 guestrooms in the west wing, 33 are furnished with two queen-size beds, 24 contain one queen-size bed, and one is handicap accessible with one queen-size bed. The rooms facing the pool area to the east are slightly larger than those on the opposite side of the guestroom building. All west-facing rooms in the west wing are reportedly furnished with two queen-size beds. Guestrooms in the east building are furnished with a Thermosol whirlpool. In addition, these rooms are equipped with a coffee maker. Sixteen guestrooms are furnished with queen-size beds, while the remaining six rooms feature king-size beds. The guestrooms in this wing are reportedly all the same size. All of the guestroom televisions are older models that operate with channel switch knobs. TV remote controls are currently available in all rooms to prevent inconvenience for guests. However, these units are being replaced in the near future. The subject property's guestrooms are of a typical layout and configuration; in addition to beds, the guestrooms contain bedside tables, lamps, two chairs, a writing desk, a dresser, draperies with black-out lining and sheers, and a color television. Most of the bathrooms are finished with ceramic tile floors, while the remaining units have linoleum tile. Each guestroom reportedly contains a hard-wired smoke detector with battery back-up. Because of the low-rise concrete construction of the building, the structure is not sprinklered. Pull stations and fire extinguishers are located at various points throughout the property. At the time of our inspection, the subject property's guestrooms appeared to be in a good and well-maintained condition. Guestroom Corridors Guestroom corridors are wide enough to permit the easy passage of housekeeping and room service carts. The corridors are finished with relatively new carpet, which was replaced in the 1994/95 renovation. Corridor lighting is sufficient and appears to be in good condition, and the lighting style appears appropriate to the hallway's finishes. Vending and ice machines are also provided for guests of the hotel. Recreational Amenities An outdoor swimming pool is located in the center of the U-shaped courtyard. HVS International, Mineola, New York Description of the Land, Improvements 17 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Back-of-the-House Space The subject property features an in-house laundry facility, which includes two washing machines and three dryers. We were informed by management that the hotel is in need of a third washing machine to adequately handle the laundry load. Although the washing machines and dryers appear dated, they are reported to be in good working condition. Vertical Transportation Vertical transportation is provided by three stairwells. One is positioned in the western wing of the building, while the remaining two stairwells are located in the eastern wing. All three stairwells appear to be well maintained. Heating, Ventilation, and Air Conditioning Guestrooms at the subject property are cooled by in-room, through-the-wall cooling units that reportedly are in working order. Public areas are cooled by individual air-conditioning units; hence, the subject property does not require chillers. Electricity is used to heat the property. Based on information provided by Ashford Financial Corporation, all of the subject property's HVAC operating systems are adequate to maintain the operation of the hotel. Fire Protection The subject property is reportedly fully compliant with all fire standards. All of the hotel's guestrooms and public areas are fully sprinklered, and guestrooms feature heat detectors, and hard-wired smoke alarms with battery back-up. The property's fire alarm is wired to a central dispatch station. The subject property employs a security guard to be on site during the evening hours, from 10 p.m. to 6 a.m. Doors feature a TESA electronic locking system, which contributes to the security of the hotel. Given the subject property's location proximate to Jericho Turnpike and the Long Island Expressway, the property is at times a target of crime given the relatively easy escape route. However, according to management, crime is not a significant issue at the subject property, and the on-staff guard is reportedly sufficient to deter enough criminal activity so that this issue does not effect the competitive level of the subject property. Asbestos According to the same environmental assessment report cited previously in this report, the non-friable asbestos-containing vinyl floor tiles in the east wing first floor corridor, with an approximate total area of 250 square feet, contain asbestos. Because the appraisers are not experts in this field, we urge the reader to obtain an independent analysis to further investigate this possible environmental concern. As noted previously, any environmental containment could have an unfavorable impact on the subject property's HVS International, Mineola, New York Description of the Land, Improvements 18 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= market value, and the estimate set forth in this appraisal report reflects our value conclusions prior to the deduction of any such costs. ADA Conformance Following the January 26, 1992, passage of the Americans with Disabilities Act (ADA), hotels are subject to new physical standards. The appraisers are not experts on ADA compliance, and we render no opinion regarding the subject property's conformance to ADA standards. Capital expenditures that may be necessary to bring the property into accordance with the ADA will reduce our estimate of market value. Any ongoing costs related to ADA regulations are expected to be funded by normal replacement reserves. Conclusion Overall, the subject property's improvements appear appropriate for hotel use. For the purposes of this appraisal, we have assumed that the subject property will be maintained in its present condition throughout the assumed ten-year holding period. Specifically, it is assumed that hotel management will employ standard preventive maintenance measures, and that a reserve for replacement fund will be established to fund the cost of any future necessary capital expenditures. ZONING According to the Nassau County zoning regulations and map (dated October, 1993), the subject property is zoned as follows. Zoning F - Neighborhood Business District Section 462C of the zoning ordinance states that under a Zoning F - Neighborhood Business District zone, hotels, inns, motels, tourist cabins, lodging facilities, and boarding houses are permitted when approved by the town board as a special exception after a public hearing. Based on this information, the subject property appears to conform to local zoning regulations. We assume that all necessary permits and approvals have been secured (including an appropriate liquor license), and that the subject property was constructed in accordance with local zoning ordinances, building codes, and all other applicable regulations. Our zoning analysis should be verified before any physical changes are made to the hotel. ASSESSED VALUE AND TAXES Property (or ad valorem) tax is one of the primary revenue sources of municipalities. Based on the concept that the tax burden should be distributed in proportion to the value of all properties within a taxing jurisdiction, a system of assessments is established. Theoretically, the assessed value placed on each parcel bears a definite relationship to market value, so properties with equal market values will have similar assessments, and properties with higher and lower values will have proportionately larger and HVS International, Mineola, New York Description of the Land, Improvements 19 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= smaller assessments. Depending on the taxing policy of the municipality, property taxes can be based on the value of the real property or the value of the personal property and the real property. The Howard Johnson Westbury is subject to real estate taxes only; these are payable to the Town of Oyster Bay and the Jericho School District. Property taxes on Long Island are extremely high, which increases the operating expenses of hotels located in this area. Both of the subject property's taxing jurisdictions base tax amounts on the assessment set by Nassau County; this assessment reportedly equals 8% of the property's 1986 market value. The total assessment of the subject property for 1995/96 equates to $183,900. Of this amount, $79,270 is attributed to the land and $104,630 to the improvements. The subject hotel's property assessment has not changed over the past five years. Town taxes are payable in January and June, and school taxes (which are based on a fiscal year) are payable in October and March. Based on the current assessment and the tax rates of $39.017 per $100 assessed value in the Jericho School District and $30.617 per $100 assessed value in the Town of Oyster Bay, the subject property's 1995/96 tax burden is calculated at approximately $128,057. The combined tax rates of the school district and the town increased at an average annual compounded rate of 4.4% between 1990 and 1995. Our projections assume a 4.0% annual increase in the subject property's overall tax burden. The tax rates applicable to the subject property are presented in the following table. ================================================================================ Table 3-3 Tax Rates Applicable to the Subject Property - -------------------------------------------------------------------------------- Tax Rate per $100 Jurisdiction of Assessment ----------------------------------------- Jericho School District $39.02 General Taxes 30.62 ------------ Total $69.63 - -------------------------------------------------------------------------------- Applying the projected increases to the 1995/96 tax burden yields the following forecast of property taxes for the subject property. HVS International, Mineola, New York Description of the Land, Improvements 20 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 3-4 Forecast of Property Tax Expense - -------------------------------------------------------------------------------- 1997 Stabilized - ---------------------------------------------------------------- Forecast Property Taxes (+000) $137 $144 - -------------------------------------------------------------------------------- NEIGHBORHOOD The neighborhood surrounding a lodging facility often has an impact on a hotel's status, image, class, style of operation, and sometimes its ability to attract and properly serve a particular market segment. This section investigates the subject property's neighborhood and evaluates any pertinent locational factors that could affect its occupancy, average rate, food and beverage revenues, and overall profitability. The neighborhood surrounding the Howard Johnson Westbury is characterized by a mixture of commercial, retail, residential, and office developments. The subject property is located along a commercial-strip portion of Jericho Turnpike (Route 25), a major Long Island east/west artery. Neighboring improvements along Jericho Turnpike include an IHOP restaurant, an Exxon gas station, a Wendy's fast-food restaurant, a Staples store, a Home Depot, low-rise office buildings, and the Edgewater Motel. Brush Hollow Road and Cantiague Rock Road intersect with Jericho Turnpike in the immediate vicinity of the subject property; developments along these two roadways include Getty Storage, High Fives, ACME Bus Corp., the College House, Inc., John Hassell, Inc., EAB Bank, and Westbury Music Fair. Residential developments are located northeast and southwest of the subject property. Jericho Quad/Chemical Bank and Jericho Plaza, two large office complexes, are located northeast of the subject property. Cantiague Park, located approximately one mile southeast of the subject property, offers a nine-hole golf course, tennis courts, and various other recreational facilities. Southwest of the hotel, along Old Country Road, is a large concentration of retail stores and shopping centers. The Roosevelt Field Shopping Center, which is the largest shopping mall on Long Island and one of the largest malls in the nation, has frontage along this roadway. Some of the other retail developments in this corridor, which has seen considerable retail expansion in the last three years, include Fortunoff's, K-Mart, Tops Appliance City, Price Club, and various free-standing restaurants. HVS International, Mineola, New York Description of the Land, Improvements 21 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Conclusion Overall, the neighborhood surrounding the Howard Johnson Westbury appears well suited for the operation of a lodging facility. A base level of lodging demand for the subject property is provided by the Jericho Plaza office complex and a number of service and manufacturing companies situated nearby. The hotel's proximity to Cantiague Park and the retail stores along Old Country Road provides guests with leisure and shopping alternatives. In general, the subject property's frontage and convenient access from Jericho Turnpike and the Long Island Expressway increase its desirability for hotel use, and its favorable location and the character of the surrounding neighborhood also make the site appropriate for hotel operation. HVS International, Mineola, New York Market Area Analysis 22 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 4. Market Area Analysis The economic vitality of the market surrounding the subject property is an important consideration in forecasting lodging demand and income potential. Economic and demographic trends that reflect the amount of visitation provide a basis from which to project hostelry demand. The purpose of the area analysis is to review available economic and demographic data to determine whether the local market will undergo economic growth, stability, or decline. In addition to predicting the direction of the economy, the rate of change must be quantified. These trends are then correlated based on their propensity to reflect variations in lodging demand with the objective of forecasting the growth or decline in visitation by individual market segment. Market Area Definition The subject property is located on Long Island, in the southeastern portion of New York State. The hotel is situated in the Village of Jericho, in the Town of Oyster Bay, and its primary market consists of Nassau County and the Nassau-Suffolk, New York Metropolitan Statistical Area (MSA). Long Island is approximately 118 miles long and 25 miles across at its widest point; at roughly 1,396 square miles of land area, it is the largest island adjoining the continental United States. The island is bounded by the Atlantic Ocean to the south and east, Long Island Sound to the north, and the East River and Upper New York Bay to the west. The area developed from a sparsely populated agricultural region in the 18th century to a major suburban metropolitan center. The character of Long Island changes markedly from urban to suburban to rural over its length. The Queens and Brooklyn boroughs of New York City occupy the western end of the island; Nassau and Suffolk Counties comprise the middle and eastern portions. In the popular sense, Long Island refers only to Nassau and Suffolk Counties, which occupy roughly 929 square miles and contain 67% of the island's total land mass. AREA MAP [GRAPHIC OMITTED] HVS International, Mineola, New York Market Area Analysis 23 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The proximity of Nassau and Suffolk Counties to New York City has been the primary factor in the development of Long Island. New York City, which consists of five boroughs, is the most densely populated city in the United States and serves as a global center for trade, commerce, and industry. New York and its surrounding suburbs are the central hub of a megalopolis that extends along the eastern seaboard from Boston, Massachusetts, to Philadelphia, Baltimore, and Washington, DC. Economic and Demographic Data Based on fieldwork conducted in the area and our in-house sources, we have evaluated various economic and demographic statistics to determine trends in lodging demand. A primary source of economic and demographic statistics used in this analysis is the Complete Economic and Demographic Data Source published by Woods & Poole Economics, Inc., a well-regarded forecasting service based in Washington, DC. Using a data base containing more than 300 variables for each county in the nation, Woods & Poole employs a sophisticated regional model to forecast economic and demographic trends. Historical statistics are based on census data and information published by the Bureau of Economic Analysis. Projections are formulated by Woods & Poole. All dollar amounts have been adjusted for inflation, and thus growth or decline represents real change in constant dollars. Population Between 1980 and 1995, Nassau County registered an average annual compounded decline in population of 0.1%, as compared to the MSA, the state, and the nation as a whole, which registered positive growth rates of 0.1%, 0.2%, and 1.0%, respectively. The population decline in Nassau County can be attributed to the area's relatively more expensive housing costs when compared to the other statistical areas. Between 1990 and 1995, as well as between 1995 and 2000, similar trends were registered or are forecasted. Nassau County is anticipated to experience a 0.2% decline in population between 1995 and 2000, while the state and the nation are projected to expand at average annual rates of 0.1%, and 0.9%, respectively. Although there is no direct relationship between population and hotel demand, we find that the rate of population growth generally establishes a minimum rate of increase for an area's commercial segment lodging demand. This observation also holds true for the meeting and group segment if a majority of the meetings are business oriented. Retail Sales Trends in retail sales reflect both changes in population and the propensity of area inhabitants and visitors to spend money on retail goods. Like population trends, retail sales have no direct correlation with hotel room night HVS International, Mineola, New York Market Area Analysis 24 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= demand, but they do tend to gauge the economic health and vitality of the market. Between 1980 and 1995, retail sales in Nassau County increased at an average annual compounded rate of 1.3%, which was higher than the state at 1.1%, and below the levels achieved by the MSA at 1.6% and the nation at 1.9%. Nassau County and the MSA each experienced growth in retail sales between 1990 and 1995 of 1.3%, compounded annually, while the state and the nation as a whole registered gains of 1.2% and 2.5%, respectively. Retail sales in Nassau County are anticipated to contract at an annual average compounded rate of 0.2% between 1995 and 2000. During the same period, the MSA is anticipated to show no increase, while the state and the nation are expected to register increases of 0.1%, and 0.9%, respectively. According to these projections, no expansion in retail sales activity is anticipated for the Nassau County region over the next five years. As stated earlier, retail sales have no direct correlation with hotel room night demand; however, they do represent economic activity in the market. Personal Income Personal income is similar to disposable income, and is defined as gross income available after taxes for the purchase of goods and services (i.e., available spending money). Personal income gauges the economic health of the local population and reflects market quality and the general ability to buy. Personal income in Nassau County, between 1980 and 1995, increased at an average annual compounded rate of 1.6%. However, these levels are lower than those attained by the MSA, the state, and the nation, which registered annual growth of 1.9%, 1.9%, and 2.3%, respectively, during this period. Between 1990 and 1995, the region and the nation underwent a period of economic downturn, and personal income growth rates slowed accordingly, with Nassau County recording a 0.4% annual decline. However, the MSA, the state, and the nation, registered positive growth during this short-term historical period of 0.1%, 0.5%, and 1.9%, respectively, per year. Projections for the period between 1995 and 2000 indicate a recovery of the economy. Personal income in Nassau County is expected to grow by 1.3% annually, while the MSA, the state, and the nation are anticipated to increase by 1.7%, 1.3%, and 2.3%, respectively. Per capita personal income levels in both Nassau County and the Nassau-Suffolk, NY MSA are considerably higher than levels for the nation. This relationship suggests that Long Island residents have more money available to spend on retail goods and services than do typical Americans. This HVS International, Mineola, New York Market Area Analysis 25 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= increased spending ability contributes to a favorable environment for local commercial establishments, and restaurants in particular. It should be noted, however, that personal income does not take into account cost-of-living factors; as a result, it is possible for local residents to have higher income levels without enjoying greater affluence if the cost of necessities is greater than it is in other parts of the nation. Work Force Characteristics The most rapid long-term historical growth in both the county and the MSA between 1980 and 1995 occurred in the services and FIRE (finance, insurance, and real estate) sectors. However, between 1990 and 1995, most of the sectors in the county and the MSA experienced declines, with the exception of the services sector, which expanded by 1.1% per year. The greatest drops were apparent in the mining, construction, manufacturing, and federal government sectors; more limited defense spending on a national level and the region's historical reliance on defense contracts are largely responsible for the downward trends in manufacturing and federal government employment on Long Island. Overall employment declined by 0.9%, compounded annually, in Nassau County during this recessionary period. Between 1995 and 2000, overall employment levels are expected to remain unchanged. The lack of change in projected employment reflects stabilization of the local economy following the expansion in the 1980s and the recession that characterized the early 1990s. A favorable characteristic is the diversification of the Long Island economy. Services, trade, and government are the largest employment sectors in both the county and the MSA. Nassau County's FIRE sector is proportionately larger than that of the MSA, which reflects the county's predominately white-collar orientation. Suffolk County exhibits more dependence on manufacturing, particularly in high-technology fields. The major employers on Long Island represent a cross-section of hotel demand potential. Some are national in scope, while others operate on a more local basis; some are engaged in manufacturing, and others are active in research and development. Although this diversification may not maximize the area's lodging demand, it does tend to stabilize the local economy during its various cycles. The following table presents some of the major employers on Long Island. HVS International, Mineola, New York Market Area Analysis 26 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-1 Major Employers - -------------------------------------------------------------------------------- Number of Firm Product Employees - ------------------------------------------------------------------------------ Diocese of Rockville Center Religious Institution 12,500 North Shore Health System Medical Care 11,002 Waldbaum's Supermarket 6,500 Long Island Rail Road Transportation 6,068 Long Island Lighting Company Electricity/Gas 5,947 Long Island Jewish Medical Center Medical Care 5,880 Northrop Grumman Aerospace Manufacturers 5,000 Chemical Banking Financial Institution 4,500 King Kullen Supermarket 4,500 NYNEX Communications 4,500 Pathmark Supermarket 4,500 Chase Manhattan Financial Institution 4,000 Macy's East Merchandising 4,000 Newsday Daily Newspaper 4,000 Winthrop University Hospital Medical Care 3,350 Brookhaven National Lab Research and Development 3,200 United Parcel Service Delivery Service 3,200 Source: Long Island Almanac 1996 - -------------------------------------------------------------------------------- As illustrated by the preceding table, Northrop Grumman, a major defense contractor, is currently the area's seventh-largest employer. In the late 1980s and early 1990s, Grumman was the largest firm on Long Island, employing more than 19,000 people. Cutbacks have occurred since that time as a result of both the end of the cold war and pressures to reduce the federal deficit. It is difficult to quantify the number of jobs lost at the small supply and distribution companies that relied on Grumman for a majority of their business. In early March, 1994, the Martin Marietta Corporation of Bethesda, Maryland, announced that it would purchase Grumman for approximately $55 per share of stock. Within the week, Northrop, based in Los Angeles, indicated that it would beat Martin Marietta's offer and would pay approximately $60 per share. Grumman did not solicit a takeover bid from Northrop, preferring instead to be bought by Martin Marietta. However, Martin Marietta would not raise its offer of $55 a share. Northrop eventually raised its final offer to $62. Grumman was officially acquired by Northrop Corporation on April 15, 1994. Reports indicate that the existing Grumman facilities will remain on Long Island, and current employment HVS International, Mineola, New York Market Area Analysis 27 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= levels are believed to be stable. However, future changes in defense spending could affect this employment sector. Office Space One of the economic indicators that best reflect lodging demand is the trend in occupied office space. Firms that occupy office space generally exhibit a strong propensity to attract commercial visitation. Although it is difficult to quantify commercial hotel demand based on the amount of occupied office space, trends that cause an increase or decrease in the amount of occupied space may have a proportional impact on commercial lodging demand, and a less direct effect on meeting demand. Cushman and Wakefield subdivides office space in Nassau County into the western, central, and eastern districts. The subject property is located in eastern Nassau County, which includes the municipalities of Jericho, Eastern Westbury, Woodbury, Syosset, and Plainview. Of the three office space districts in Nassau County, the western area maintained the lowest level of year-end 1995 inventory, at 4,540,276 square feet. The overall Nassau County inventory was reported at 18,139,248 square feet at the end of 1995, and the Long Island total was 26,039,938 square feet. The office vacancy rate for Long Island was 15.9% at year-end 1995. According to Cushman and Wakefield, Nassau County has undergone no new office space construction since 1992, and its 1995 vacancy rate of 15.8% was the second lowest since 1992. The eastern Nassau district registered the highest office vacancy percentage in the county, at 18.8%. Highway Traffic The subject property occupies a prominent location adjacent to the Long Island Expressway and Jericho Turnpike. The amount of traffic passing through a market area can have a direct impact on commercial and leisure demand and an indirect effect on meeting demand. According to a 1991 Traffic Volume Flow Map for Nassau County depicting average annual daily traffic, traffic counts for Jericho Turnpike, near the site of the subject property totaled 37,400, and traffic counts near Exit 40W on the Long Island Expressway totaled 128,200. Because this data is relatively outdated, minimum weight has been given to highway traffic statistics in analyzing the economic trends of the subject property's market area. Airport Traffic Airport passenger counts are important indicators of lodging demand. Depending on the type and location of a particular airfield, a sizable percentage of arriving passenger may have need for hotel and motel HVS International, Mineola, New York Market Area Analysis 28 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= accommodations. Trends showing changes in passenger counts also reflect local business activity and the overall economic health of an area. The two major airports in the New York area are John F. Kennedy International Airport and LaGuardia Airport; smaller facilities on Long Island include MacArthur Airport and Republic Field, which have minimal effect on the subject property. Between 1968 and 1994, passenger enplanements at Kennedy and LaGuardia Airports declined at average annual compounded rates of 1.5% and 2.7%, respectively. From 1993 to 1994, Kennedy registered a strong 7.5% increase, and LaGuardia achieved a 4.7% gain. Because airport traffic often exhibits a high degree of correlation with lodging demand, these trends hold particular significance. Leisure Travel Although beaches and other attractions are available in the subject property's area, leisure travel does not contribute a large percentage of local hotel demand. Most leisure travel to Long Island consists of day trips rather than overnight stays. Most of the areas that do attract leisure-oriented lodging demand are situated on the eastern tip of the island, on the North and South Forks. Some tourist attractions on Long Island include the Animal Farm, which offers a petting farm and pony rides; the Brookhaven National Laboratory, an exhibit center and science museum; the Cold Spring Harbor Fish Hatchery; the Fire Island Lighthouse; the Hamptons, a seaside resort community; Hargrave Vineyards, where tours and wine tastings are available; the children's zoo at the Long Island Game Farm; Sagamore Hill, the former home of Theodore Roosevelt; and the Shrine of Our Lady of the Island, a religious sanctuary. Numerous state and county parks are located across the island, and many offer swimming and ice skating. Golf is available at 113 private and public courses, bicycling trails are available in numerous locations, and camping, boating, and fishing are popular recreational activities. Small game hunting is permitted in season. Retail Space Although the subject property is located within the eastern Nassau district categorized by Cushman & Wakefield's statistical research, it is relatively close to the central Nassau district, which includes the municipalities of Garden City, Mineola, Mitchell Field, and Carle Place, and the Roosevelt Field area. Because of the proximity of the central Nassau district and the rich array of retail development it offers, it is important to analyze this area's attractions and activities, which provide guests of the subject property with an array of shopping and dining alternatives. HVS International, Mineola, New York Market Area Analysis 29 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Built in 1956, Roosevelt Field Mall contains +/-2,200,000 gross leasable square feet and is currently ranked the fourth-largest retail mall in the United States by the International Council of Shopping Centers. In April of 1993, a 22-month, $150-million renovation, which included the construction of a second story, the addition of a 14-tenant, 850-seat food court, and a significant cosmetic renovation, was completed and resulted in an increase in the number of stores from 140 to 225. The mall is currently anchored by Macy's, JC Penney, Stern's, and Bloomingdale's. An additional 400,000 square feet has been added to the mall. Corporate Property Investors, owners of the mall, recently completed a 168,000-square-foot, second-story addition. This expansion houses 50 new stores, which opened in October of 1996; among these 50 stores are FAO Schwartz, Polo, and Pottery Barn. A 225,000-square-foot Nordstrom store, scheduled to open in August of 1997, is under construction on the east side of the mall on land Nordstrom has leased from Corporate Property Investors. The expansion and renovation of the mall triggered a significant amount of new retail development in the surrounding area. Fortunoff's, a leading specialty housewares and jewelry retailer approximately one mile east of the mall, has expanded the shopping area immediately surrounding its main store. The Price Club Plaza, the first phase of Fortunoff's The Source, opened with a +/-153,000-square-foot Price Club and a +/-250,000-square-foot complex containing Marshall's, Sports Authority, and K-Mart. Additional retail spaces in the area include the +/-30,000-square-foot Borders Books and Music outlet. Several restaurants, including a California Pizza Kitchen, a Ruby Tuesdays, and an Olive Garden, have opened in the past two years. The second phase of Fortunoff's The Source is under construction, and according to the developers of the project, Simon Properties Group, it will include a +/-720,000-square-foot enclosed mall, of which +/-200,000 square feet is allocated to the expansion of Fortunoff's, and the remaining space will be for smaller retail stores. In addition to the mall structure, a three-story parking garage designed to accommodate approximately 3,000 vehicles will be constructed. Additional parking areas for approximately 1,000 vehicles will be available in front of the mall. Anchor stores at The Source will include a 35,000-square-foot Off 5th Saks Fifth Avenue Outlet and a 45,000-square-foot Nordstrom Rack outlet store. Space has also been committed by Just for Feet for a 19,000-square-foot shoe store and Virgin Megastore for a 25,000-square-foot record and video store, as well as by Loehmann's, the Cheesecake Factory, Innovation, Cosmetics Plus, 47th St. HVS International, Mineola, New York Market Area Analysis 30 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Photo, Bertolini's, Rainforest Cafe, and Old Navy - the Gap's latest retail concept. This retail project is scheduled to open during the summer of 1997 and will encompass the existing 32-year-old, 212,000-square-foot Fortunoff's store. Roosevelt Raceway, a 172-acre former horse-racing venue located in Westbury, was closed several years ago. This area is currently being redeveloped into the $500-million-plus, 2.6-million-square-foot Roosevelt Center office/retail/housing complex by MCS Realty Corporation, which took title to the raceway in November of 1994. The first phase of the Roosevelt Center project entailed the construction of +/-525,000 square feet of retail space, including a +/-185,000-square-foot Incredible Universe consumer electronic store, a +/-127,000-square-foot Home Depot Expo Design Center, a Homeplace home furnishing and appliance store, and a Modell's sporting goods store. Office Depot, Babies "R" Us, a Creativity art supply center, three restaurants (Chili's, Cozymel's, and the Macaroni Grill), and a ten-screen, 3,000-seat Sony Theater have also opened on the site. The Roosevelt Raceway flea market, which once accommodated up to 2,000 vendors, was forced to close in December of 1995 to clear the way for housing and office development. Housing development incorporated in this project will involve the construction of senior housing, townhouses, and multiple-dwelling living units. Residential space at Roosevelt Center is expected to be fully developed by 1999, with total residential absorption occurring within one year thereafter. Current efforts are concentrated on commercial development. A total of five buildings are planned in the office portion of the Roosevelt Center property, which is zoned for approximately 900,000 square feet of office and exhibition space, plus 110,000 square feet of hotel suites. According to one of the three partners of the Roosevelt Center project, construction of a three-story, 150,000-square-foot office building should start by the end of 1996, and if demand warrants it, construction of two additional buildings totaling more than 300,000 square feet would begin as well. Development is also occurring within the +/-1,265.5-acre Mitchell Field area. The county received ownership of the former airbase in 1963 with the stipulation that it be developed for the public good. Hofstra University now occupies +/-157 acres in the southwest corner, and Nassau Community College HVS International, Mineola, New York Market Area Analysis 31 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= is on +/-225 acres. Nassau Veterans Memorial Coliseum, interior roadways, and parklands have together used up several hundred more acres. The remaining area consists primarily of office and industrial space, which, to date, comprises +/-4.2 million square feet. Nassau Veterans Memorial Coliseum, one of the most prominent improvements in the area, was constructed by Nassau County in 1972. This multi-purpose facility can accommodate many different forms of activity. Up to 17,000 people can be accommodated in the main arena, and the functional exhibition hall covers +/-60,000 gross square feet; parking is available for more than 6,000 cars. The coliseum is the home arena for the New York Islanders of the National Hockey League. In addition, many sports events, shows, and concerts are held in the arena every year, and carnivals, fairs, and outdoor exhibitions are hosted in the facility's extensive parking area. It should be noted that there has been some discussion of the privatization of the coliseum; although currently managed by a professional third-party management company (Spectacor Management Group), the coliseum is still owned by Nassau County. Options currently being discussed include converting the coliseum into a 300- to 400-room hotel and incorporating the coliseum area as part of Hofstra University's sports complex. Plans are currently underway to construct senior housing within Mitchell Field; the Meadows, a co-op with 438 two-bedroom apartments in 34 two-story buildings, is to be built on a 20-acre tract in East Meadow. This project also has limited commercial office space and will induce only a marginal amount of commercial and meeting and group demand. The project will, however, help sustain leisure demand. In addition, the Nassau legislature has approved a scaled-down plan for a soccer stadium and athletic park at Mitchell Field in preparation for the 1998 Goodwill Games. Reportedly, the $22.6-million project will encompass a variety of improvements, including an 8,000-seat soccer stadium and a 2,500-seat baseball arena. Facilities for track and field competition will be incorporated into the soccer stadium. The Goodwill Games, a quadrennial international competition, will bring in $300 million to the county, and the soccer stadium could make the county a legitimate contender for the Women's World Games, the Empire State Games, and Women's World Cup Soccer. Such sporting events generate room nights and help to sustain leisure demand. HVS International, Mineola, New York Market Area Analysis 32 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= As evidenced by the projects summarized above, central Nassau County has become a major retail hub. As a result of the recent recession and a decline in high-paying defense and manufacturing jobs, much of the new retail development has centered around discount stores that offer minimal services. However, the renovation of Roosevelt Field in 1993 and 1996 and the addition of a number of upscale specialty stores is an exception to this pattern. The surge in retail development in central Nassau County and throughout Long island suggests an anticipated rebound from the recent recession, and is a favorable indicator of hotel demand growth. Conclusion Our review of various economic and demographic data indicates that the local economy experienced strong growth during the early to mid-1980s, which moderated in the latter part of the decade; as a result of the regional and national recessions, declines were evident in the early 1990s. Projections indicate that economic expansion is likely to resume. Although these trends suggest that local lodging demand will not increase as dramatically as it did during the 1980s, slight gains are anticipated. The table on the following pages summarizes the economic and demographic trends discussed throughout this section. All figures that reflect dollar amounts have been adjusted for inflation, and thus reflect real change. It should be noted that the percent changes indicated in the following tables are based on unrounded figures, and thus may not calculate exactly. HVS International, Mineola, New York Market Area Analysis 33 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-2 Economic and Demographic Data for the Subject Property's Market Area - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ---------------------------------------------------------------------------------------------------------------- Long-Term Historical Population (+000) Nassau County 1980-1995 1,321.1 1,299.9 (0.1%) Nassau-Suffolk, NY MSA 1980-1995 2,606.8 2,652.7 0.1 New York-North New Jersey-Long Island, NY-NJ-CT-PA CMSA 1980-1995 18,844.2 19,725.4 0.3 State of New York 1980-1995 17,566.4 18,195.7 0.2 United States 1980-1995 227,225.6 262,791.0 1.0 Short-Term Historical Population (+000) Nassau County 1990-1995 1,286.1 1,299.9 0.2 Nassau-Suffolk, NY MSA 1990-1995 2,608.7 2,652.7 0.3 New York-North New Jersey-Long Island, NY-NJ-CT-PA CMSA 1990-1995 19,470.4 19,725.4 0.3 State of New York 1990-1995 18,002.3 18,195.7 0.2 United States 1990-1995 249,401.4 262,791.0 1.1 Projected Population (+000) Nassau County 1995-2000 1,299.9 1,287.1 (0.2) Nassau-Suffolk, NY MSA 1995-2000 2,652.7 2,657.2 0.0 New York-North New Jersey-Long Island, NY-NJ-CT-PA CMSA 1995-2000 19,725.4 19,827.7 0.1 State of New York 1995-2000 18,195.7 18,314.7 0.1 United States 1995-2000 262,791.0 274,758.4 0.9 Long-Term Historical Retail Sales (+000,000) Nassau County 1980-1995 10,278.2 12,449.9 1.3 Nassau-Suffolk, NY MSA 1980-1995 17,537.0 22,328.1 1.6 New York-North New Jersey-Long Island, NY-NJ-CT-PA CMSA 1980-1995 105,476.9 127,771.9 1.3 State of New York 1980-1995 91,865.8 108,055.2 1.1 United States 1980-1995 1,340,768.9 1,765,826.1 1.9 Short-Term Historical Retail Sales (+000,000) Nassau County 1990-1995 11,699.8 12,449.9 1.3 Nassau-Suffolk, NY MSA 1990-1995 20,977.4 22,328.1 1.3 New York-North New Jersey-Long Island, NY-NJ-CT-PA CMSA 1990-1995 120,093.1 127,771.9 1.2 State of New York 1990-1995 101,720.0 108,055.2 1.2 United States 1990-1995 1,557,380.2 1,765,826.1 2.5 Projected Retail Sales (+000,000) Nassau County 1995-2000 12,449.9 12,328.6 (0.2) Nassau-Suffolk, NY MSA 1995-2000 22,328.1 22,334.3 0.0 New York-North New Jersey-Long Island, NY-NJ-CT-PA CMSA 1995-2000 127,771.9 128,377.0 0.1 State of New York 1995-2000 108,055.2 108,691.5 0.1 United States 1995-2000 1,765,826.1 1,846,830.4 0.9 Long-Term Historical Retail Sales Per Capita Nassau County 1980-1995 7,780.2 9,577.7 1.4 Nassau-Suffolk, NY MSA 1980-1995 6,727.4 8,417.1 1.5 New York-North New Jersey-Long Island, NY-NJ-CT-PA CMSA 1980-1995 5,597.3 6,477.5 1.0 State of New York 1980-1995 5,229.6 5,938.5 0.9 United States 1980-1995 5,900.6 6,719.5 0.9
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 34 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-2 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - --------------------------------------------------------------------------------------------------------------- Short-Term Historical Retail Sales Per Capita Nassau County 1990-1995 9,097.3 9,577.7 1.0% Nassau-Suffolk, NY MSA 1990-1995 8,041.4 8,417.1 0.9 New York-North New Jersey-Long Island, NY-NJ-CT-PA CMSA 1990-1995 6,168.0 6,477.5 1.0 State of New York 1990-1995 5,650.4 5,938.5 1.0 United States 1990-1995 6,244.5 6,719.5 1.5 Projected Personal Retail Sales Per Capita Nassau County 1995-2000 9,577.7 9,578.8 0.0 Nassau-Suffolk, NY MSA 1995-2000 8,417.1 8,405.2 (0.0) New York-North New Jersey-Long Island, NY-NJ-CT-PA CMSA 1995-2000 6,477.5 6,474.6 (0.0) State of New York 1995-2000 5,938.5 5,934.6 (0.0) United States 1995-2000 6,719.5 6,721.7 0.0 Long-Term Historical Eating and Drinking Place Sales (+000,000) Nassau County 1980-1995 812.9 993.7 1.3 Nassau-Suffolk, NY MSA 1980-1995 1,362.0 1,821.9 2.0 New York-North New Jersey-Long Island, NY-NJ-CT-PA CMSA 1980-1995 10,199.7 13,183.6 1.7 State of New York 1980-1995 9,199.4 11,882.1 1.7 United States 1980-1995 126,131.6 185,035.4 2.6 Short-Term Historical Eating and Drinking Place Sales (+000,000) Nassau County 1990-1995 951.1 993.7 0.9 Nassau-Suffolk, NY MSA 1990-1995 1,676.7 1,821.9 1.7 New York-North New Jersey-Long Island, NY-NJ-CT-PA CMSA 1990-1995 12,105.4 13,183.6 1.7 State of New York 1990-1995 10,874.1 11,882.1 1.8 United States 1990-1995 161,197.4 185,035.4 2.8 Projected Eating and Drinking Place Sales (+000,000) Nassau County 1995-2000 993.7 998.3 0.1 Nassau-Suffolk, NY MSA 1995-2000 1,821.9 1,866.8 0.5 New York-North New Jersey-Long Island, NY-NJ-CT-PA CMSA 1995-2000 13,183.6 13,497.4 0.5 State of New York 1995-2000 11,882.1 12,228.3 0.6 United States 1995-2000 185,035.4 199,127.3 1.5 Long-Term Historical Eating and Drinking Place Sales Per Capita Nassau County 1980-1995 615.3 764.4 1.5 Nassau-Suffolk, NY MSA 1980-1995 522.5 686.8 1.8 New York-North New Jersey-Long Island, NY-NJ-CT-PA CMSA 1980-1995 541.3 668.4 1.4 State of New York 1980-1995 523.7 653.0 1.5 United States 1980-1995 555.1 704.1 1.6 Short-Term Historical Eating and Drinking Place Sales Per Capita Nassau County 1990-1995 739.5 764.4 0.7 Nassau-Suffolk, NY MSA 1990-1995 642.7 686.8 1.3 New York-North New Jersey-Long Island, NY-NJ-CT-PA CMSA 1990-1995 621.7 668.4 1.5 State of New York 1990-1995 604.0 653.0 1.6 United States 1990-1995 646.3 704.1 1.7
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 35 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-2 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - --------------------------------------------------------------------------------------------------------------- Projected Eating and Drinking Place Sales Per Capita Nassau County 1995-2000 764.4 775.6 0.3% Nassau-Suffolk, NY MSA 1995-2000 686.8 702.6 0.5 New York-North New Jersey-Long Island, NY-NJ-CT-PA CMSA 1995-2000 668.4 680.7 0.4 State of New York 1995-2000 653.0 667.7 0.4 United States 1995-2000 704.1 724.7 0.6 Long-Term Historical Personal Income (+000,000) Nassau County 1980-1995 26,854.4 34,236.3 1.6 Nassau-Suffolk, NY MSA 1980-1995 46,050.4 61,056.6 1.9 New York-North New Jersey-Long Island, NY-NJ-CT-PA CMSA 1980-1995 316,226.9 439,766.7 2.2 State of New York 1980-1995 268,310.1 358,297.4 1.9 United States 1980-1995 3,163,874.0 4,443,243.2 2.3 Short-Term Historical Personal Income (+000,000) Nassau County 1990-1995 34,957.9 34,236.3 (0.4) Nassau-Suffolk, NY MSA 1990-1995 60,694.9 61,056.6 0.1 New York-North New Jersey-Long Island, NY-NJ-CT-PA CMSA 1990-1995 427,531.9 439,766.7 0.6 State of New York 1990-1995 349,724.3 358,297.4 0.5 United States 1990-1995 4,051,714.6 4,443,243.2 1.9 Projected Personal Income (+000,000) Nassau County 1995-2000 34,236.3 36,523.8 1.3 Nassau-Suffolk, NY MSA 1995-2000 61,056.6 66,527.7 1.7 New York-North New Jersey-Long Island, NY-NJ-CT-PA CMSA 1995-2000 439,766.7 472,116.9 1.4 State of New York 1995-2000 358,297.4 382,633.9 1.3 United States 1995-2000 4,443,243.2 4,972,219.5 2.3 Long-Term Personal Income per Capita Nassau County 1980-1995 20,328.0 26,338.0 1.7 Nassau-Suffolk, NY MSA 1980-1995 17,666.0 23,017.0 1.8 New York-North New Jersey-Long Island, NY-NJ-CT-PA CMSA 1980-1995 16,781.0 22,294.0 1.9 State of New York 1980-1995 15,274.0 19,691.0 1.7 United States 1980-1995 13,924.0 16,908.0 1.3 Short-Term Historical Personal Income per Capita Nassau County 1990-1995 27,182.0 26,338.0 (0.6) Nassau-Suffolk, NY MSA 1990-1995 23,267.0 23,017.0 (0.2) New York-North New Jersey-Long Island, NY-NJ-CT-PA CMSA 1990-1995 21,958.0 22,294.0 0.3 State of New York 1990-1995 19,427.0 19,691.0 0.3 United States 1990-1995 16,246.0 16,908.0 0.8 Projected Personal Income per Capita Nassau County 1995-2000 26,338.0 28,377.0 1.5 Nassau-Suffolk, NY MSA 1995-2000 23,017.0 25,037.0 1.7 New York-North New Jersey-Long Island, NY-NJ-CT-PA CMSA 1995-2000 22,294.0 23,811.0 1.3 State of New York 1995-2000 19,691.0 20,892.0 1.2 United States 1995-2000 16,908.0 18,097.0 1.4
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 36 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-2 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - --------------------------------------------------------------------------------------------------------------- Long-Term Historical Employment - Nassau County (+000) Farm 1980-1995 0.2 0.1 (2.7)% Agriculture Services, Other 1980-1995 6.1 4.8 (1.6) Mining 1980-1995 1.1 0.4 (7.1) Construction 1980-1995 26.2 26.2 0.0 Manufacturing 1980-1995 90.2 50.6 (3.8) Trans., Comm. & Public Utils. 1980-1995 26.8 29.4 0.6 Total Trade 1980-1995 174.3 166.7 (0.3) Wholesale Trade 1980-1995 54.0 45.3 (1.2) Retail Trade 1980-1995 120.2 121.4 0.1 Finance, Insurance, & Real Estate 1980-1995 69.3 84.7 1.4 Services 1980-1995 190.2 270.5 2.4 Total Government 1980-1995 80.7 79.5 (0.1) Federal Civilian Govt. 1980-1995 6.9 8.8 1.7 Federal Military Govt. 1980-1995 4.1 3.7 (0.6) State & Local Govt. 1980-1995 69.8 67.0 (0.3) TOTAL 1980-1995 665.1 712.8 0.5 Short-Term Historical Employment - Nassau County (+000) Farm 1990-1995 0.1 0.1 0.0 Agriculture Services, Other 1990-1995 4.6 4.8 0.8 Mining 1990-1995 0.5 0.4 (7.6) Construction 1990-1995 31.6 26.2 (3.6) Manufacturing 1990-1995 67.0 50.6 (5.5) Trans., Comm. & Public Utils. 1990-1995 31.8 29.4 (1.6) Total Trade 1990-1995 176.0 166.7 (1.1) Wholesale Trade 1990-1995 51.3 45.3 (2.5) Retail Trade 1990-1995 124.7 121.4 (0.5) Finance, Insurance, & Real Estate 1990-1995 93.2 84.7 (1.9) Services 1990-1995 255.5 270.5 1.1 Total Government 1990-1995 85.9 79.5 (1.5) Federal Civilian Govt. 1990-1995 10.3 8.8 (3.1) Federal Military Govt. 1990-1995 4.2 3.7 (2.5) State & Local Govt. 1990-1995 71.4 67.0 (1.3) TOTAL 1990-1995 746.2 712.8 (0.9)
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 37 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-2 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - --------------------------------------------------------------------------------------------------------------- Projected Employment - Nassau County (+000) Farm 1995-2000 0.1 0.1 (0.8)% Agriculture Services, Other 1995-2000 4.8 4.2 (2.5) Mining 1995-2000 0.4 0.4 0.4 Construction 1995-2000 26.2 26.3 0.0 Manufacturing 1995-2000 50.6 45.5 (2.1) Trans., Comm. & Public Utils. 1995-2000 29.4 29.7 0.2 Total Trade 1995-2000 166.7 159.8 (0.8) Wholesale Trade 1995-2000 45.3 45.0 (0.1) Retail Trade 1995-2000 121.4 114.8 (1.1) Finance, Insurance, & Real Estate 1995-2000 84.7 87.9 0.7 Services 1995-2000 270.5 278.4 0.6 Total Government 1995-2000 79.5 79.6 0.0 Federal Civilian Govt. 1995-2000 8.8 8.6 (0.4) Federal Military Govt. 1995-2000 3.7 3.7 0.2 State & Local Govt. 1995-2000 67.0 67.2 0.1 TOTAL 1995-2000 712.8 711.8 (0.0)
Source: Woods & Poole Economics, Inc. - -------------------------------------------------------------------------------- The Lodging Market Supply and Demand Analysis section of this economic study and appraisal will relate these historical and projected growth trends to specific market segments based on their propensity to reflect visitation. This analysis will provide a basis for forecasting changes in room night demand in the subject property's area. HVS International, Mineola, New York Overview of External Forces 38 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 5. Overview of External Forces Affecting the U.S. Lodging Industry Introduction Hotel ownership is ultimately the business of creating and enhancing value. To understand the investment potential of lodging facilities, investors must be thoroughly aware of the many forces that can cause changes in the value of their properties. Although some of these forces are internal (such as the layout and design of the facilities, the quality of management, and the condition of the property), others are external (such as the local economic environment and the competitive nature of the market). The risk associated with hotel investment lies largely with the external forces that are beyond the control of ownership and contribute to the variability of future income flows. Investors and appraisers can project financial results by evaluating the historical impact of external forces on hotel values. Successful hotel investors seek opportunities where the risk of external forces can be minimized, thus reducing the uncertainty associated with income expectations. When investors engage in due diligence prior to acquiring a lodging facility, they are primarily interested in trends affecting a limited geographic market area, such as a town, city, or county. A broader overview takes into account national and international travel patterns and trends. An understanding of the general characteristics of the United States hotel market is important because these trends often foreshadow economic and demographic changes in smaller areas. This section of the appraisal will present an overview of the U.S. lodging industry by tracing many of the forces that influence hotel values. Historical economic and demographic data, and industry statistics will be analyzed to provide a basis for projections. Forecasts will be evaluated to determine their reasonableness. The conclusions represent another set of criteria that hotel investors consider in making their acquisition decisions. HVS International, Mineola, New York Overview of External Forces 39 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The Supply and Demand Relationship Most business ventures are influenced by the relationship between supply and demand. In the hotel industry, supply refers to the number of units. A unit consists of one or more rooms and represents the smallest accommodation that can be rented to a guest. Each unit must have a full bath and its own entrance to a public hallway or the building exterior. Demand refers to a room night, which is one unit that is occupied for one night. The supply and demand relationship has a significant influence on a hotel's occupancy and/or average room rate. Occupancy is calculated by dividing the number of rooms that are occupied for a specific period by the total number of rooms that are available during the same period. Average room rate is determined by dividing the total rooms revenue achieved during a specific period by the number of rooms occupied during that period; it also represents the weighted average of all the room rates charged during that period. In a market where demand is increasing faster than supply, occupancies rise and average rate growth generally exceeds inflation. When supply is increasing faster than demand, occupancies fall and average rates typically remain level or decline. Hotels generate revenue based on occupancy and average rate, and thus the supply and demand relationship is an important factor in analyzing profits and value. Hotel occupancy levels have shown definite cycles that reflect the balance between supply and demand. The early 1970s marked the beginning of a hotel building boom reminiscent of the 1920s. Many factors contributed to this expansion, but the two main elements were readily available financing and aggressive chains that were eager to sell franchises. The new construction during the 1970s was made possible by the enormous amount of financing generated by all lenders, particularly real estate investment trusts (REITs). These high-leverage finance companies were created to allow small investors to participate in real estate mortgages and equities. The concept was quickly accepted by Wall Street, and soon billions of dollars were available to finance real estate projects. Many lenders became so overwhelmed with new money that their underwriting procedures broke down and some marginal developments were approved. During the late 1960s and early 1970s, hotel companies actively expanded their chains through franchising. Franchising was a source of new capital, allowing hotel companies to grow and achieve national recognition using the franchisee's financial investment in individual properties. Some franchisors, eager to demonstrate sustained growth and establish a national HVS International, Mineola, New York Overview of External Forces 40 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= presence, employed questionable marketing tactics to sell new franchises. Salespeople were often compensated based on the number of franchises sold, so there was little incentive to discourage developers from investing in poor locations and overbuilt markets. Many lenders and hostelry developers were led to believe that a national franchise would guarantee a successful operation. The combination of readily available financing and aggressive hotel chains eager to sell franchises resulted in overbuilding and development of many poorly located, undercapitalized hostelries managed by inexperienced owners. The bubble burst on the lodging industry when inflation caused construction costs and interest rates to escalate. The 1974 energy crisis drastically reduced travel, and the accompanying recession curtailed business trips, conferences, and conventions. Operators of marginal properties quickly fell behind in their mortgage payments, and lenders were forced to foreclose. As lenders became hostelry owners, they either organized work-out departments headed by experienced hoteliers or engaged professional hotel management companies to assume operational responsibilities. Sales data indicate that lenders who were looking for quick sales to remove nonperforming hotel assets from their books had to lower their prices substantially to attract all-cash buyers. Lenders who were willing to hold on to foreclosed hotels and employ professional management to reposition and improve the properties' operation were generally able to recoup their original investments in three to five years, once the industry began to recover. However, even lenders who repositioned their hotels had to take back favorable purchase-money financing to sell the properties because money from other sources was not available. History has shown that during economic downturns, hotel values generally do not fall in proportion to the properties' declining incomes. Sellers, and particularly lenders who take back hotels through foreclosure, are often unwilling to sell at substantially reduced prices. They are more likely to wait out the downward cycle and dispose of their assets when the market begins to rebound. Thus, appraisers can best reflect market behavior by projecting a facility's net income to a point of recovery and applying the proper discounted cash flow procedure over that time period. The late 1970s was a period of relative calm for the lodging industry. Because most lenders were recovering from the financial wounds inflicted by HVS International, Mineola, New York Overview of External Forces 41 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the 1975 recession, they had little interest in making hotel mortgages. New construction was restrained, and primarily consisted of additions to existing properties and the development of some large, downtown hotels oriented toward the commercial and convention markets. The rebirth of center-city hostelries was a direct result of fuel shortages and the availability of government financing for inner-city redevelopment projects. Highway-oriented properties, on the other hand, were adversely affected by escalating gasoline prices and decreased automobile travel, and these lodging facilities lost some of their appeal among investors and hotel companies. Decreased building activity, the normal retirement of older hostelries from the market, and an improving economy created a favorable supply and demand relationship and record-high occupancy levels from 1979 to 1980. Average room rates increased rapidly as operators took advantage of the excess demand to recoup earlier losses and keep up with inflation. After the decline in hotel development during the late 1970s, the environment appeared suitable for a period of renewed expansion. However, the Federal Reserve tightened the money supply in the early 1980s, sending the prime interest rate up to double-digit levels. Most of the projects that were in the preliminary planning stages but lacked sensible financing were put on hold. Fiscal policy and declining energy prices eventually reduced the national inflation rate. This caused a decline in hotel interest rates beginning in 1983, and suddenly massive amounts of capital were available for real estate investments. Hotel developers who had been out of the market since the mid-1970s rushed to initiate new projects. They were aided by several major real estate development incentives: high occupancies and escalating room rates, readily available debt and equity financing, and unique income tax benefits designed to stimulate the national economy out of a recession. During the early 1980s, trends were generally favorable for new hotel development. Although the recession caused a decline in lodging demand, many markets showed relatively high occupancy levels. Room rates were usually able to keep up with inflation, and the travel industry was expected to boom as a result of a recovering economy. Franchise sellers signed up new prospects aggressively, using product segmentation to justify the saturation of a market with a common brand. HVS International, Mineola, New York Overview of External Forces 42 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Financing was readily available from the savings and loan industry. Following deregulation, these banks were permitted to lend on commercial real estate, such as hotels. Although savings and loans had experience in making loans on single-family homes, few had expertise with commercial properties, and fewer still with hotels. The result was almost identical to the real estate investment trust fiasco the decade before: loan underwriting and administration were inept and sometimes nonexistent, the number of loans made seemed more important than the quality of the real estate and the integrity of the borrower, and short-term funds were often used to finance long-term mortgages. In the early 1990s, the industry suffered the consequences of this lending spree: most major hotel markets became severely overbuilt and many savings and loans went out of business. Another factor contributing to hotel development in the 1980s was the very favorable treatment provided by income tax regulations. By carefully structuring hotel syndications to take advantage of all available tax benefits, investors could virtually recoup their total cash outlay in the first year and reap additional benefits in the future regardless of the economic success of the underlying asset. Because there was little incentive to justify a transaction's economics (i.e., cash flow and reversionary benefits), a number of syndicators overpaid for hotel properties, took out usurious fees, and overloaded their hotels with debt. A change in the tax law in the mid-1980s eliminated many of the benefits associated with hotels, but the overbuilding in most markets was either in progress or had already taken place. By the end of the 1980s, the abuses of the savings and loans had become apparent, but it was too late to reverse the overbuilding. Between 1985 and 1990, approximately 556,000 rooms were added to the U.S. hotel supply. The national economy entered another recession in 1990, and this factor (coupled with overbuilding and the Persian Gulf War in 1991) caused the national hotel occupancy rate to bottom out at 60.9%. In some markets, hotel occupancies were as low as 35%. This supply and demand imbalance was almost identical to the situation in the 1970s that led to numerous hotel failures. As in the REIT days, the number of non-performing loans reached record levels, and lenders moved to a work-out mode of operation in order to foreclose and restructure their hotel investments. Many of the savings and loans were taken over by the government and their hotel assets were sold at auction. HVS International, Mineola, New York Overview of External Forces 43 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= According to the American Council of Life Insurance, which represents major life insurance companies, the number of delinquent hotel loans and the number of hotel loans in foreclosure peaked in 1991. This trend is undergoing a reversal as the U.S. lodging industry begins to recover. Loan restructuring was an attractive alternative to foreclosure during this period, and the number of loans in good standing with restructured terms almost doubled. By 1993, new hotel construction had declined significantly. Lenders, trying to get out from under problematic hotel portfolios, curtailed all real estate lending and would not even consider hotels. The tax benefits associated with lodging facilities had been reduced significantly, and passive investors left the hospitality market entirely. The slowdown in the growth of supply had a beneficial impact on occupancy levels, which started to recover in 1992. Improved occupancies are expected to continue through the late 1990s as increases in lodging demand outpace growth in supply. Beginning in 1991, many lenders and the Resolution Trust Corporation (RTC) sold their oldest and least desirable hotels at liquidation prices. Because virtually no third-party financing was available, most lenders were forced to take back purchase-money mortgages at favorable terms in order to sell these properties without suffering massive write-downs. The newer and more desirable hotels were not put on the market, because their lenders/owners were waiting for values to recover. This course of action significantly reduced the number of transactions involving good-quality lodging facilities. The following table shows the volume of hotel transactions exceeding $10,000,000 between 1990 and 1995. ================================================================================ Table 5-1 Summary of Major Hotel Transactions - -------------------------------------------------------------------------------- Year 1990 1991 1992 1993 1994 1995 - -------------------------------------------------------------------------------- Number of Transactions 130 54 67 52 92 104 Number of Rooms 40,543 16,427 25,187 19,935 33,503 36,951 Average Price Per Room $136,000 $91,000 $85,000 $79,000 $80,000 $83,000 Source: HVS International - -------------------------------------------------------------------------------- HVS International, Mineola, New York Overview of External Forces 44 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= In 1991, there were only 54 major hotel sales recorded. This number increased to 67 in 1992 and declined to 52 in 1993, then rose dramatically in 1994 and 1995. During the low-volume years, many sellers remained on the sidelines waiting for values to increase before placing their properties on the market. The jump in 1994 is attributable to a number of factors, including the greater availability of mortgage funds, a return of institutional investors to the market, and a resurgence of investor interest in lodging facilities. The profile of typical hotel buyers has changed somewhat. During the mid-1980s, when tax-driven syndication's were popular, many hotels were purchased by passive investors who hired management companies to operate their properties. These owners had little involvement in day-to-day management decisions, which occasionally led to poor management and financial losses. Today, most buyers of major hotels are owner-operators who bring with them both the acquisition funds (usually from a joint venture partner) and management expertise. We also note that real estate investment trusts (REITs) and public hotel companies (C-Corps) are actively acquiring hotels using funds from public equity stock offerings. The supply of new hotel rooms is expected to increase slowly during the next several years. Lenders are beginning to return to the market, and are making some hotel loans based on conservative criteria. Initially, mortgage funds were available mainly to the budget and economy lodging sectors, for the purpose of refinancing existing properties or assisting buyers in acquisitions. Now, a number of lenders are willing to finance new construction for these small, low-end properties. Although financing is also becoming available for the acquisition of large, full-service hotels, very little has been allocated for new construction. At present, active hotel lenders are not necessarily traditional banks and insurance companies, but may include credit companies and Wall Street securities firms. A number of hotel owners and developers are now constructing budget and economy hotels; a few are planning more upscale, full-service properties. Most lenders are taking a conservative approach to new hotel loans, which should limit new development to those projects that demonstrate true economic feasibility. As a result, severe short-term overbuilding is unlikely. HVS International, Mineola, New York Overview of External Forces 45 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Room Rates The supply and demand relationship has a direct impact on hotel occupancies and an indirect influence on room rate growth. Between 1978 and 1995, hotel room rates increased at an average annual compounded rate of almost 6%. Significant rate growth was recorded during the late 1970s and early 1980s as a result of strong occupancies (70%'s) coupled with a high monetary inflation rate (14%). In recent years, room rate growth slowed as a result of low occupancies and a drop in inflation. Hotel room rates generally increase faster than the Consumer Price Index (CPI) when occupancies are strong or moving upward. When occupancies are low or declining, room rate growth tends to lag behind the CPI; in some cases, rates may remain flat or actually drop. The following table compares the historical and projected annual increase in hotel room rates in the United States to the change in the national CPI. HVS International, Mineola, New York Overview of External Forces 46 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-2 Percent Change in Average Room Rates Versus CPI - U.S. Hotels - -------------------------------------------------------------------------------- Consumer Price Hotel Room Rate Index Hotel Year Percent Change Percent Change Occupancy - -------------------------------------------------------------------------------- 1973 4.2% 6.2% 70.2% 1974 7.6 11.0 64.0 1975 7.3 9.1 63.7 1976 8.2 5.7 65.8 1977 8.1 6.5 67.3 1978 14.0 7.7 69.2 1979 17.0 11.3 71.9 1980 15.2 13.5 70.6 1981 10.0 10.3 67.9 1982 6.5 6.2 66.7 1983 5.1 3.2 64.4 1984 6.9 4.3 64.0 1985 4.6 3.6 63.1 1986 3.2 1.9 62.5 1987 3.6 3.6 61.9 1988 3.6 4.1 62.3 1989 3.5 4.8 63.2 1990 3.0 5.4 62.4 1991 0.6 4.2 60.9 1992 1.4 3.0 62.1 1993 2.8 3.0 63.1 1994 5.2 2.6 64.7 1995 4.8 2.8 65.5 1996* 5.0 3.0 66.0 1997* 5.5 3.5 67.0 1998* 6.0 4.0 68.0 1999* 5.5 4.0 68.0 - -------------------------------------------------------------------------------- Source: Smith Travel Research & HVS International * Projected - -------------------------------------------------------------------------------- This table shows two periods when hotel room rate growth failed to keep pace with the CPI. From 1973 to 1975, the hotel industry was suffering from overbuilding related to real estate investment trusts, a recession, and a downturn in travel caused by the oil embargo. The second period of slow room rate growth occurred between 1988 and 1993, when the industry was again affected by overbuilding and a weak economy. The table illustrates HVS International, Mineola, New York Overview of External Forces 47 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= that during periods of prosperity, room rates are a good hedge against inflation; this was true even when the CPI increased at double-digit levels. The projections indicate a strong recovery of room rates as the relationship between supply and demand becomes more favorable. Growth is expected to peak in 1998 at 6%, which is significantly higher than the projected gain in the CPI. This may appear high, but a similar trend occurred in 1978, when room rates rose 14.0% and the CPI increased by only 7.7%. Hotels are unique because their room rates can be adjusted at any time. Unlike office space, where rents are typically negotiated for a five-year period, hotel operators are free to base rates on occupancy trends. Using sophisticated yield management programs, modern lodging facilities can ride the demand curve and maximize room rates whenever the market permits. As a result, hotels generally offer significant upside potential during periods of economic prosperity. If lodging facilities can increase room rates faster than the CPI and still maintain occupancies, bottom-line profits usually escalate. If they can raise room rates and occupancy at the same time, profits will grow significantly. The opposite occurs when room rates fail to keep pace with inflation. Because market value is basically a multiple of bottom-line profits, changes caused by fluctuations in occupancy and average rate have a direct impact on value. Rooms Revenue per Available Room (RevPAR) The ability of a hotel to maximize its occupancy and room rate is measured in terms of rooms revenue per available room (RevPAR), which is the product of occupancy and average rate. Between 1978 and 1995, RevPAR in the U.S. lodging industry increased at an average annual compounded rate of approximately 5%. As in the case of average rate, most of the increase occurred during the late 1970s, when occupancies escalated rapidly. The only decline in RevPAR occurred in 1991. Trends in Hotel Sales HVS International constantly monitors hotel markets in order to collect information on sales of lodging facilities. This comprehensive database is known as the Hospitality Market Data Exchange (HMDE). The HMDE includes more than 90% of all hotel sales that took place during this period. The HMDE data shows that the number of transactions peaked at 726 in 1986. This strong activity is largely attributable to pending changes in the tax laws, which made it less favorable to own hotels. It is also possible that forward-thinking investors noted the substantial overbuilding and HVS International, Mineola, New York Overview of External Forces 48 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= declining economy and decided to bail out at that time. In 1987 and 1990, the average sales price per room peaked at $75,000. This was more than twice the 1981 average of $36,000. Following the 1990 peak, hotel prices fell rapidly as occupancies and profits were eroded by the massive number of hotel rooms entering the market. By 1991, the year of the Persian Gulf War, sales prices had fallen to $38,000 per room. Even the highest price per room declined from the record $1,195,652 (for the sale of the Bel Air Hotel) to $251,816 in 1992. The market hit bottom in 1993 when the average sales price dropped to $36,000 per room. Prices recovered rapidly in 1994 and 1995 as investors became interested in hotels again and more full-service properties were put on the market. In 1995, the average sales price was $61,000 per room. The figures presented in the HMDE represent actual sales prices; no attempt was made to adjust for factors such as favorable or unfavorable financing, forced or liquidation sales, bankruptcy sales, foreclosures, and so forth. As a result, the average price per room does not necessarily reflect market value, which assumes a willing buyer and a willing seller. Many of the transactions that took place during the early 1990s involved unwilling sellers - usually lenders who were forced to liquidate hotel portfolios quickly at prices that were below market levels. Most hotel experts agree that a recovery is underway, and they recommend that owners hold their properties until more favorable conditions prevail. Trends in Hotel Values A more meaningful indicator of trends in hotel value is the Hotel Valuation Index (HVI), developed by HVS International. This index tracks changes in hotel values in 23 major markets and the nation as a whole. It is developed through an income approach, using market area data provided by Smith Travel Research and operational and capitalization rate information from HVS International, and is indexed to the 1986 U.S.A. value (1.0000). The following table sets forth the HVI from 1986 to 1995. HVS International, Mineola, New York Overview of External Forces 49 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-3 Hotel Valuation Index per Room - --------------------------------------------------------------------------------
Valuation Index Per Room ------------------------ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 -------------------------------------------------------------------------------------- Honolulu 3.3571 4.0357 4.6964 5.2857 5.3214 4.7857 4.9286 4.2857 4.3929 5.6071 New Orleans 1.5357 1.7500 2.2857 2.3929 2.5000 2.6071 3.2857 3.2500 3.8929 4.4286 New York 3.5714 4.1071 4.6429 4.5357 3.9286 3.0357 2.5714 2.5714 3.1429 4.1071 San Francisco 2.5000 3.0893 3.2500 3.0714 2.9286 2.5714 2.5714 2.9643 3.2143 4.0000 Phoenix 1.2143 1.0714 1.1786 1.5357 1.4286 1.2500 1.5000 1.9643 2.3571 3.2143 San Diego 2.8571 2.3571 2.5714 2.6786 2.3929 2.5357 2.5357 2.2143 2.3571 3.0357 Miami 1.4286 1.6071 1.7321 2.1429 2.1786 2.2500 2.5714 2.7857 2.3214 2.9286 Washington, DC 2.1786 2.1786 2.4464 2.6071 2.2500 1.8571 2.0357 2.5000 2.3929 2.8929 Atlanta 1.0714 1.0179 1.0536 1.0357 1.1429 1.1250 1.2857 1.7857 2.1429 2.6786 Minneapolis 0.7321 0.6964 0.7143 0.7143 0.7857 1.0000 1.2857 1.5714 1.8214 2.1786 Chicago 1.4643 1.5000 1.5714 1.5000 1.4286 1.2143 1.2500 1.5000 1.8571 2.1786 Boston 2.3571 2.7143 2.6071 2.1429 1.8214 1.2500 1.3036 1.3214 1.6071 2.1071 Fort Lauderdale 1.4643 1.2679 1.3214 1.4286 1.4821 1.3571 1.7143 1.8929 1.6071 1.9286 Orlando 1.5000 1.6429 1.9286 2.5000 2.5357 1.8929 2.0714 1.7857 1.6071 1.8929 Denver 0.5357 0.4464 0.4643 0.4821 0.7857 0.9268 1.0357 1.3214 1.5000 1.8571 Dallas 0.5536 0.6250 0.6607 0.7321 0.7857 0.7143 0.9643 1.0357 1.3214 1.7143 USA 1.0000 0.9464 1.0536 1.1250 1.0714 0.9214 0.9929 1.1429 1.3214 1.6071 Los Angeles 2.1071 2.2857 2.3929 2.4643 2.1786 1.5714 1.0714 0.9643 1.1964 1.5000 Tampa 0.8393 0.7679 0.8571 1.1429 1.2857 1.0357 1.0714 1.0357 1.1071 1.3214 Anaheim 1.7679 1.7321 1.7500 1.8571 1.6071 1.2857 0.9642 0.9464 0.8393 1.2500 Houston 0.3571 0.4286 0.6964 0.7857 1.1071 1.1607 1.1429 1.0357 1.0000 1.1786 Philadelphia 1.4643 1.5357 1.4286 1.3214 1.0714 0.6786 0.5714 0.6071 0.7500 1.0714 Norfolk 1.1786 1.0536 0.9286 0.7857 0.6429 0.5357 0.6071 0.6429 0.7500 0.9643 Riverside 0.9643 1.2143 1.5714 1.7143 1.4643 1.2500 0.7857 0.5357 0.4286 0.5357
Source: HVS International - -------------------------------------------------------------------------------- The HVI can be used to show the value change in a particular market over time or to show the relative difference in hotel values in various cities. The following table shows the annual change in hotel values in 23 major markets and the United States as a whole. HVS International, Mineola, New York Overview of External Forces 50 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-4 Percent Change in the Hotel Valuation Index - --------------------------------------------------------------------------------
Annual Percent Change --------------------- '86-87 '87-88 '88-'89 '89-'90 '90-'91 '91-'92 '92-'93 '93-'94 '94-'95 '86-'95 -------------------------------------------------------------------------------------------------- Honolulu 20 % 16 % 13 % 1 % -10 % 3 % -13 % 3 % 28 % 67 % New Orleans 14 31 5 4 4 26 -1 20 14 188 New York 15 13 -2 -13 -23 -15 0 22 31 15 San Francisco 24 5 -5 -5 -12 0 15 8 24 60 Phoenix -12 10 30 -7 -13 20 31 20 36 165 San Diego -18 9 4 -11 6 0 -13 6 29 6 Miami 12 8 24 2 3 14 8 -17 26 105 Washington, DC 0 12 7 -14 -17 10 23 -4 21 33 Atlanta -5 4 -2 10 -2 14 39 20 25 150 Minneapolis -5 3 0 10 27 29 22 16 20 198 Chicago 2 5 -5 -5 -15 3 20 24 17 49 Boston 15 -4 -18 -15 -31 4 1 22 31 -11 Fort Lauderdale -13 4 8 4 -8 26 10 -15 20 32 Orlando 10 17 30 1 -25 9 -14 -10 18 26 Denver -17 4 4 63 18 12 28 14 24 247 Dallas 13 6 11 7 -9 35 7 28 30 210 USA -5 11 7 -5 -14 8 15 16 22 61 Los Angeles 8 5 3 -12 -28 -32 -10 24 25 -29 Tampa -9 12 33 12 -19 3 -3 7 19 57 Anaheim -2 1 6 -13 -20 -25 -2 -11 49 -29 Houston 20 62 13 41 5 -2 -9 -3 18 230 Philadelphia 5 -7 -8 -19 -37 -16 6 24 43 -27 Norfolk -11 -12 -15 -18 -17 13 6 17 29 -18 Riverside 26 29 9 -15 -15 -37 -32 -20 25 -44
Source: HVS International - -------------------------------------------------------------------------------- On a national basis, hotel values rose in 1988 and 1989, then declined in 1990 and dropped by 14% in 1991. A turnaround commenced in 1992, when values increased by 8%; still greater increases of 15% in 1993, 16% in 1994, and 22% in 1995 signaled that a recovery was well underway. In the case of the individual cities, it is obvious that the movement in national hotel values has been offset somewhat by trends in local markets. Between 1986 and 1995, Riverside hotels lost more than 40% of their value, while San Francisco showed a 60% increase. Anaheim, Los Angeles, and Philadelphia also suffered significant drops. Future Trends Most hotel owners, operators and lenders agree that the U.S. lodging industry has emerged from one of the worst periods since the Depression of 1929. Today, there are many indications that signal a strong recovery is underway, and most hotels have experienced a dramatic rise in profitability. Conversely, the hotel industry remains cyclical, and there are long-term trends and risk factors that could have an unfavorable impact on the operating results and investment potential of lodging facilities. The following list HVS International, Mineola, New York Overview of External Forces 51 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= summarizes the positive and negative factors that are likely to influence the U.S. lodging industry in coming years. o No significant amount of new hotel development is likely to occur during the next three to five years. Lenders stopped financing new hotels in the early 1990s because of the high rate of loan defaults, and they are only now starting to make construction loans. Although mortgage funds are available to refinance existing properties and construction loans are being made for economy hotels, mortgages for new hotels in the mid-rate, first-class, and luxury categories are still difficult to secure. This lack of financing is major barrier to entry, and will prevent a number of proposed projects from moving forward. With only a slow increase in supply, hotel occupancies should rebound as fast as the growth in demand permits. o An additional barrier to entry is the current discrepancy between market values and replacement costs for first-class and luxury hotels. In today's market, many upscale hotels are still selling for prices that are below what it would cost to develop a comparable hotel. As a result, there is little justification for building a new hotel when a similar, existing facility is available for sale at some fraction of the cost. Until the gap between market value and replacement cost narrows, there will be minimal new hotel construction in the upper-tier segments. The market values and replacement costs of budget and economy hotels have been in equilibrium for several years which is another reason why new development is proceeding in these segments. o The U.S. economy continues to improve, which suggests that more people are traveling. Many people curtailed their travel plans during the recent recession, and there is likely to be pent-up demand that will be released as consumer confidence escalates. o Minimal additions to the hotel supply coupled with growth in demand should result in further improvement in occupancies during the next several years. o As shown by the historical data, hotel room rates rise rapidly as occupancies escalate. The most frequent complaint that owners and operators had during the recent recession was their inability to achieve average rate gains. Starting in 1994, gains in hotel room rates returned to levels in excess of inflation, foreshadowing enhanced profitability. In real dollars, hotel room rates are expected to return to 1988 levels by 1998. This is a HVS International, Mineola, New York Overview of External Forces 52 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= good indication that hotel values will return to record levels in the next two to four years. o The low cost of capital is another factor that tends to enhance value. Because capitalization rates are tied directly to the price of capital, the lower the cost, the lower the cap rate and the higher the value. The cost of hotel debt capital averaged 10.5% in 1990. Today, similar financing is available at 8.5% to 9.5%. Recent hotel sales support the downward trend in capitalization rates. o Government regulations are becoming increasingly expensive for the U.S. hotel industry. A national health care policy could force small operators to provide better benefits for many more employees, particularly the part-time workers who are used extensively by hotels and restaurants. Environmental laws are becoming stricter and will require hotels to implement recycling, reuse, and conservation procedures. Congress has limited deductions for meals and entertainment expenses, which increases the cost of doing business in hotels and restaurants. Local municipalities use hotel rooms taxes as a source of revenue for general use, and the hotel rooms tax is so high in some areas that it has driven away demand. This is particularly true with respect to meetings and conventions, which can be held in cities that tax accommodations at a lower rate. o Improved technology is rapidly changing the way business is conducted. During the next decade, advances such as video communication, enhanced data transfer, and faster transportation are expected to limit the need for face-to-face meetings and shorten the time that executives are away from their offices. Commercial hotels are bound to be influenced by this trend. Conclusion Interest in hotel acquisition has increased significantly during the past several years. Buyers have concluded that future earnings trends are likely to be favorable, and the risks posed by overbuilding or an economic downturn are small. Some sellers are holding their properties until prices reach a higher level. Consequently, we believe there is pent-up desire to sell once prices begin to approach levels that allow the existing (or restructured) debt to be paid off. The fact that numerous buyers are chasing very few acquisition opportunities has had a favorable impact on recent sales prices. For buyers to be successful in this highly competitive market, their projected operating results HVS International, Mineola, New York Overview of External Forces 53 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= must take into account at least a portion of any upside created from improved performance, particularly if the improvement can be readily achieved through management efficiencies. Capitalization rates based on historical operating income have fallen during the past several years. Hotel buyers in today's market must be aggressive in all of their acquisition assumptions. As a result, hotel values in some parts of the country are approaching the levels registered during the mid-1980s, and a full recovery is expected to occur in the next two to four years. HVS International, Mineola, New York Lodging Market Supply and Demand 54 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 6. Lodging Market Supply and Demand Analysis MARKET FOR TRANSIENT ACCOMMODATIONS The market for transient accommodations is an all-encompassing term referring to the many types of travelers who use lodging facilities in a given area. These travelers represent the market's accommodated room night demand. This section will begin with an analysis of historical demand trends to determine what changes have occurred; the historical number of competitive hotel rooms will then be estimated to evaluate local supply trends. Areawide occupancy levels can be calculated based on the number of hotel rooms available in the market and the demand for lodging accommodations. The total hotel room night demand will be divided into individual market segments to allow us to forecast growth rates based on the economic and demographic data set forth earlier in this report. Historical Supply and Demand Data Smith Travel Research (STR) has compiled historical supply and demand data for the subject property and its competitors. This information is presented in the following table, along with the marketwide occupancy, average rate, and rooms revenue per available room (RevPAR). RevPAR is calculated by multiplying occupancy by average rate, and provides an indication of how well rooms revenue is being maximized. HVS International, Mineola, New York Lodging Market Supply and Demand 55 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-1 Historical Supply and Demand Trends (STR) - --------------------------------------------------------------------------------
Year to Date Average Annual (August) Compounded -------------- Growth 1989 1990 1991 1992 1993 1994 1995 1995 1996 1989 - 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Number of Rooms 561 561 561 561 561 582 643 643 640 Annual Guestroom Supply 204,675 204,675 204,675 204,675 204,675 212,309 234,695 156,249 156,249 Percent Change -- 0.0% 0.0% 0.0% 0.0% 3.7% 10.5% -- 0.0% 2.3% Room Night Demand 132,425 125,466 117,279 125,875 136,109 137,152 166,633 109,999 114,062 Percent Change -- (5.3)% (6.5)% 7.3% 8.1% 0.8% 21.5% -- 3.7% 3.9% Occupancy 64.7% 61.3% 57.3% 61.5% 66.5% 64.6% 71.0% 70.4% 73.0% Percent Change -- (5.3)% (6.5)% 7.3% 8.1% (2.9%) 9.9% -- 3.7% 1.6% Average Rate $81.41 $79.11 $71.24 $65.72 $66.32 $65.09 $67.52 $66.34 $70.15 Percent Change -- (2.8)% (9.9)% (7.7)% 0.9% (1.9%) 3.7% -- 5.7% (3.1)% RevPAR $52.67 $48.49 $40.82 $40.42 $44.10 $42.05 $47.94 $46.70 $51.21 Percent Change -- (7.9)% (15.8)% (1.0)% 9.1% (4.7%) 14.0% -- 9.6% (1.6)%
Note: The 82-unit Fairfield Inn opened in October of 1994 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Lodging Market Supply and Demand 56 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= It is important to note some limitations of the STR data. Hotels are occasionally added to or removed from the sample, and not every property reports data in a consistent and timely manner; these factors can influence the overall quality of the information by skewing the results. These inconsistencies may also cause the STR data to differ from the results of our competitive survey. Nonetheless, we find that hotel buyers often rely on STR statistics, and thus they are considered relevant to this study. As indicated by the preceding table, room supply in the competitive market has remained fairly stable over the past six years, except for the opening on October 15, 1994, of a Fairfield Inn, approximately five miles northeast of the subject property. The increase in guestroom supply from 1994 to 1995 is attributable to the fact that the Fairfield Inn was open for a full year in 1995, as opposed to only two and one-half months in 1994. In 1990 and 1991, the competitive market registered decreases of 5.3% and 6.5%, respectively, in room demand, which can be attributed to the nationwide recession and the Persian Gulf War. Lodging demand recovered substantially in 1992, recording a strong 7.3% increase. It must be noted, however, that average rates for this year registered a significant drop of 7.7%, which may have contributed to the strong demand level. Room night demand increased significantly, by 8.1%, in 1993, indicative of a continued recovery from the economic downturn. It is important to note that January, 1993, was an exceptional month weather-wise, with the Blizzard of 1993 storming through the region. Local hotels recorded significant occupancy levels as many travelers were stranded in the area. Considering the additional room supply in the market, along with the exceptional occupancy level in January of 1993, the slight increase of 0.8% in 1994 does not suggest that the market experienced a significant slowing trend. Concrete evidence of the market's relative strength is demonstrated by the 21.5% increase in demand reported in 1995. A majority of this remarkable increase in occupancy can be attributed to the opening of the Fairfield Inn in October of 1994, which increased the areawide room supply by 14.6%. The addition of these rooms to the market supported this increase in demand as this new property was able to accommodate the demand that had previously been unaccommodated by the existing hotels. The balance of the increase can be ascribed to the area's continued recovery from the economic recession experienced during the early years of the decade. HVS International, Mineola, New York Lodging Market Supply and Demand 57 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= In the first eight months of 1996, demand increased by 3.7% over the corresponding period in 1995. This further growth can be attributed to the continuing improvement in the regional economy and the resulting higher demand for hotel accommodations. Between 1989 and 1995, room night demand rose at an average annual compounded rate of 3.9%. The overall change in occupancy from 64.7% in 1989 to 71.0% in 1995 equates to an average annual compounded growth rate of 1.6%. Average rate declined by 2.8% in 1990, and then plummeted by 9.9% in 1991, reflective of the nationwide recession and the Persian Gulf War. Moreover, Grumman, a major defense contractor and at one time the largest employer on Long Island, underwent significant cutbacks in 1991 as a result of a nationwide scale-back of the defense budget following the declaration of the Cold War's end. The overall economy in the region was devastated. Local lodging facilities reacted to the negative economic climate by decreasing average rates in an effort to maintain occupancy levels. Average rates registered a further 7.7% decline in 1992; this strategy was somewhat successful as occupancy in that year rose by 7.3%, resulting in a minimal 1.0% decrease in RevPAR. As occupancy levels continued to rise in 1993, the market made some cautious attempts to recover average rates, which increased 0.9% in that year. Reflective of the cautious reaction to the additional room supply in the market following the opening of the Fairfield Inn, average rate decreased by 1.9% in 1994. In 1995 and year-to-date (through August) 1996, areawide occupancy surpassed the 70% mark for the first time since the 1980s. In response to this healthy demand level, hotel management took an aggressive position with respect to average rates. As a result, the market registered a 3.7% increase in average rate in 1995; a further gain of 5.7% was recorded in year-to-date 1996 when compared to results for the corresponding months of 1995. However, it must be noted that the areawide average rate remains well below the peak rate of $81.41 achieved in 1989. Overall, average rate in the market declined at an average annual compounded rate of 3.1% between 1989 and 1995. Demand Analysis Using Market Segmentation For the purpose of demand analysis, the overall market is divided into individual segments based on the nature of travel. Although a market may have various segments, the three primary classifications occurring in most areas are commercial, meeting and group, and leisure. HVS International, Mineola, New York Lodging Market Supply and Demand 58 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Market segmentation is a useful procedure because individual classifications often exhibit unique characteristics in terms of growth potential, seasonality of demand, average length of stay, double occupancy, facility requirements, price sensitivity, and so forth. By quantifying the room night demand by market segment and analyzing the characteristics of each segment, the overall demand for transient accommodations can be projected. Lodging demand in Nassau County is generated primarily by the following three market segments. Segment 1 Commercial Segment 2 Meeting and Group Segment 3 Leisure Based on our fieldwork, area analysis, and knowledge of the local lodging market, we estimate the year-end 1996 distribution of accommodated hotel room night demand as follows. ================================================================================ Table 6-2 Estimated Year-end 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- 1996 Annual Room Night Demand (Rounded) -------------------------------------------------------- Percentage Percentage Market Segment Market Wide of Total Subject Property of Total - -------------------------------------------------------------------------------- Commercial 113,000 61% 14,000 56% Meeting and Group 13,000 7 0 0 Leisure 59,000 32 11,000 44 ------- --- ------ --- Total 185,000 100% 25,000 100% - -------------------------------------------------------------------------------- Commercial demand predominates in the local market area, accounting for approximately 61% of the room night demand in 1996. Leisure demand shows a relatively strong presence, capturing approximately 32% of the market. Meeting and group demand recorded a 7% share of the room night demand. The subject property's market segmentation differs from that of the market as a whole, largely due to the limited meeting space available at the hotel. Furthermore, the hotel demonstrates a stronger orientation to the leisure segment than the market as a whole and a somewhat weaker presence in the commercial segment. This leisure orientation is due to the nature of the Howard Johnson affiliation, which is generally perceived to be somewhat weak in the commercial segment, and stronger in the leisure segment of the market. HVS International, Mineola, New York Lodging Market Supply and Demand 59 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Using the distribution of accommodated hotel demand as a starting point, we will analyze the characteristics of each market segment in an effort to determine future trends in room night demand. Commercial Segment The commercial segment consists of individual business people who are visiting various firms in the subject property's market. Commercial demand is strongest Monday through Thursday nights, declines significantly on Friday and Saturday, and increases somewhat on Sunday. The typical length of stay ranges from one to three days, and the rate of double occupancy is a low 1.2 to 1.3 persons per room. Commercial demand is relatively constant throughout the year, although some declines are noticeable in late December and during other holiday periods. Business travelers tend not to be particularly rate-sensitive, and will make use of a hotel's food and beverage outlets and recreational facilities. The commercial segment represents a highly desirable and lucrative market that provides a consistent level of demand at relatively high room rates. Future commercial demand potential is tied to the business and economic health of the surrounding area. During the past ten years, the economies of Nassau County and Long Island as a whole have shown moderately favorable growth trends, although economic trends indicate a considerable slowing in the early 1990s. Commercial business is forecasted to contribute approximately 61% of the competitive market's total year-end 1996 room night demand. According to local hotel representatives, major commercial demand generators in the area include companies located in the 200/300 Jericho Quad/Chemical Bank office complex and the One and Two Jericho Plaza office complex, as well as other manufacturing and service companies that are situated in the area. These firms represent various economic sectors, including services, manufacturing, and FIRE (finance, insurance, and real estate). This diversity is significant because the area's major sources of commercial demand are not tied to the health of one particular industry. We generally find a multiplier effect between employment growth in certain sectors and the increase in commercial lodging demand (i.e., one new FIRE employee will correspond to more than one new visitor). In conjunction with the recent trend of slower growth in the local economy, commercial demand increases have become more moderate. As the national and international economies improve and prominent local businesses increase their production and employment levels, commercial hotel demand is HVS International, Mineola, New York Lodging Market Supply and Demand 60 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= expected to rebound quickly. According to data provided by Smith Travel Research, total hotel demand in the competitive market rose at an average annual compounded growth rate of 3.9% between 1989 and 1995. However, this growth rate includes the 21.5% surge in demand recorded in 1995 as a result of the opening of the Fairfield Inn. Over the long term, growth from this segment is expected to be more moderate. Accordingly, we project that commercial demand (which comprises more than 61% of the total market) will increase by 3% in 1997 and 1998. Thereafter, we project demand in this segment to stabilize at 2% annual growth throughout the remainder of the projection period. Meeting and Group Segment The meeting and group market includes meetings, seminars, conventions, trade association shows, and similar gatherings of ten or more people. Peak convention demand typically occurs in the spring and fall. Because of vacations, the summer months represent the slowest period for this market segment; winter demand varies. The average length of stay for typical meetings and groups ranges from three to five days. Most commercial groups meet during the weekday period of Monday through Thursday, but associations and social groups will sometimes gather on weekends. Commercial groups tend to have a low double occupancy of 1.3 to 1.5 persons per room, while social groups are likely to have double occupancy rates ranging from 1.5 to 1.9. Meeting and group demand in Nassau County is generated primarily by local businesses, and include functions such as training sessions, product announcements, meetings, and seminars. Most of these meetings are small, and range from 15 to 20 people. Non-commercial groups, such as civic associations and professional societies, are a secondary source of meeting and group demand. These types of meetings often range from 75 to 250 people. Most of the meetings and group functions in Nassau County are held at local hotels. Because the subject property is a limited-service facility and offers only two small meeting rooms totaling approximately 800 square feet of space, participation in this segment is inherently limited. Moreover, based on our discussions with on-site management of the subject property, participation in this segment is considered minimal. Meeting and group patronage is quite profitable for hotels. Although room rates are discounted for large groups, the property benefits from the use of meeting space and the revenues generated by in-house banquets and cocktail receptions. Facilities that are necessary to attract meetings and groups include function areas with adequate space for breakout sessions, meals, HVS International, Mineola, New York Lodging Market Supply and Demand 61 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= and receptions; recreational amenities; and a sufficient number of guestrooms to house the attendees. Future meeting and group demand is closely related to growth in the commercial segment. Because most meetings have either a direct or an indirect business purpose, the economic considerations that have an impact on commercial travel also affect meeting and group demand. The exception is non-commercial meetings, which are tied to the economic factors that influence leisure travel. It should be noted that meetings and similar events are booked in advance, and thus growth in this segment tends to lag slightly behind increases in commercial demand. In light of this information and the relevant economic and demographic trends, we estimate that meeting and group demand in the subject property's market area will increase by 2% in 1997 and stabilize at the same rate annually thereafter. Leisure Segment The leisure market segment consists of individuals and families who are spending time in the area or passing through en route to other destinations. Their travel purposes may include sightseeing, recreation, visiting friends and relatives, or numerous other non-business activities. Leisure demand is strongest Friday and Saturday nights and all week during holiday periods and the summer months. These peak periods are negatively correlated with commercial visitation, underscoring the stabilizing effect of capturing weekend and summer tourist travel. The typical length of stay ranges from one to four days, depending on the destination and travel purpose, and the rate of double occupancy generally ranges from 1.8 to 2.5 persons per room. Leisure travelers tend to be the most price-sensitive segment in the lodging market. They often prefer low-rise accommodations where parking is convenient to the rooms, and they typically demand extensive recreational facilities and amenities. Ease of highway access and proximity to tourist attractions are important locational considerations. Within the subject property's market area, leisure demand consists primarily of people attending events at the Westbury Music Fair, the Nassau Coliseum, or Hofstra University, or visiting friends and relatives. Additionally, leisure demand is also generated during the summer months by persons visiting the local beaches; because of the subject property's location along the Long Island Expressway and Jericho Turnpike and its proximity to the Meadowbrook Parkway (a main access road to the south shore beaches), the subject property is well suited for capturing this type of demand. HVS International, Mineola, New York Lodging Market Supply and Demand 62 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Future leisure demand is related to the overall economic health of the nation. Trends showing changes in state and regional unemployment and disposable personal income often have a strong impact on non-commercial visitation. Based on our economic and demographic analysis of the area and our review of the operating histories of the individual properties within the market, we have forecasted growth in this segment of 1% annually throughout the projection period. Conclusion The purpose of segmenting the lodging market is to define each major type of demand, identify customer characteristics, and estimate future growth trends. Starting with an analysis of the local area, three segments were defined as representing the subject property's lodging market. Various types of economic and demographic data were then evaluated to determine their propensity to reflect changes in hotel demand. Based on this procedure, we forecast the following average annual compounded market segment growth rates. ================================================================================ Table 6-3 Average Annual Compounded Market Segment Growth Rates - -------------------------------------------------------------------------------- Annual Compounded Growth Rate --------------------------------------- 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Commercial 3.0% 3.0% 2.0% 2.0% 2.0% 2.0% Meeting and Group 2.0 2.0 2.0 2.0 2.0 2.0 Leisure 1.0 1.0 1.0 1.0 1.0 1.0 Annual Average Growth (6.2)% 7.1% 1.8% 1.8% 1.8% 1.8% - -------------------------------------------------------------------------------- The Plainview Plaza, one of the subjeoperty's primary competitors, plans to close 72 of its guestrooms in 1997 for renovations; following the renovation, this block of rooms will reopen in 1998 as 36 suites. With 72 fewer guestrooms in the market during the renovation process, we anticipate an overall decline in demand of 6.2%, as much of the demand previously accommodated by these rooms will be displaced. With the reopening of the new suites in 1998, some of this demand is expected to be recaptured. This recapture, together with the underlying growth in the market, results in a total increase of 7.1% in 1998. These growth rates will be used in subsequent sections of this study to forecast changes in lodging demand. HVS International, Mineola, New York Lodging Market Supply and Demand 63 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= COMPETITION An integral component of the supply and demand relationship that has a direct impact on the availability of lodging demand is the current and anticipated supply of competitive lodging facilities. The Nassau County area is served by numerous hotels and motels located throughout the region. Unlike many other suburban market areas, these properties are not concentrated in clusters, but rather are spread throughout the area, generally proximate to the major highways that serve Long Island. We have identified five properties that are considered primarily competitive with the Howard Johnson Westbury_. These hotels have been selected based on their proximity to the subject property and, more significantly, to the demand generators that the Howard Johnson Westbury_ serves. Including the subject property, these primary competitors totaled 684 guestrooms in estimated year-end 1996. Primary Competitors The following table summarizes the important operating characteristics of the primary competitors. This information was compiled from personal interviews, inspections, lodging directories, and our in-house library of operating data. The table also sets forth each property's penetration factors; penetration is the ratio between a specific hotel's operating results and the corresponding data for the market. If the penetration factor is greater than 100%, the property is performing better than the market as a whole; conversely, if the penetration is less than 100%, the hotel is performing at a level below the marketwide average. HVS International, Mineola, New York Lodging Market Supply and Demand 64 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-4 Competitive Lodging Facilities - --------------------------------------------------------------------------------
Estimated 1996 Market Segmentation Estimated 1995 ------------------------- ---------------------------- Year Number Meeting Meeting Mtg.& Average Property/Location Opened of Rooms Space Space/Room Comm. Group Leisure Occupancy Rate RevPAR - ------------------------------------------------------------------------------------------------------------------------------------ Subject Property 120 Jericho Turnpike, Westbury 1967 80 800 10 55% 0% 45% 82.5% $65.28 $53.86 Fairfield Inn 24 Oak Drive, Syosset 1994 82 805 10 75 0 25 73.0 68.00 49.64 Holiday Inn 369 Old Country Road, Westbury 1973 153 4,600 30 50 20 30 80.0 90.00 72.00 Ramada Limited 8030 Jericho Turnpike, Woodbury 1972 102 1,342 13 60 0 40 75.0 60.00 45.00 Quality Inn 7940 Jerich Turnpike, Woodbury 1965 85 0 0 60 0 40 74.0 54.00 39.96 Plainview Plaza 150 Sunnyside Blvd, Plainview 1962 182 2,575 14 70 10 20 53.0 56.00 29.68 - ------------------------------------------------------------------------------------------------------------------------------------ Totals/Averages 684 61% 7% 32% 70.8% $67.72 $47.93 - ------------------------------------------------------------------------------------------------------------------------------------ Estimated 1996 ------------------------------------------------------ Average Occupancy Yield Property/Location Occupancy Rate RevPAR Penetration Penetration - ----------------------------------------------------------------------------------------------- Subject Property 120 Jericho Turnpike, Westbury 84.1% $67.67 $56.92 113.3% 109.1% Fairfield Inn 24 Oak Drive, Syosset 80.0 70.00 56.00 107.7 107.4 Holiday Inn 369 Old Country Road, Westbury 82.0 92.00 75.44 110.4 144.6 Ramada Limited 8030 Jericho Turnpike, Woodbury 76.0 62.00 47.12 102.3 90.3 Quality Inn 7940 Jerich Turnpike, Woodbury 74.0 56.00 41.44 99.6 79.4 Plainview Plaza 150 Sunnyside Blvd, Plainview 60.0 61.00 36.60 80.8 70.2 - ----------------------------------------------------------------------------------------------- Totals/Averages 74.3% $70.24 $52.16 100.0% 100.0% - -----------------------------------------------------------------------------------------------
[GRAPHIC OMITTED] COMPETITION MAP HVS International, Mineola, New York Lodging Market Supply and Demand 65 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Our survey of the primarily competitive hotels in the subject property's market shows that these properties range in size from 80 rooms (subject property) to 182 rooms (Plainview Plaza). The market demand has a strong commercial orientation; in 1996, this segment contributed 61% of the overall occupancy. The leisure segment accounted for 32% of the total, followed by the meeting and group segment at 7%. By year-end 1996, the primary competitors are forecast to achieve an overall occupancy of 74.3% at an average rate of $70.24, equating to a RevPAR of $52.16. This represents a significant improvement over the comparable data for the previous year. The greatest occupancy gains were reported by the Plainview Plaza and the Fairfield Inn. With the exception of the Plainview Plaza, which exhibited stronger growth, all properties in the market are expected to achieve an estimated $2.00 increase in average rate. In terms of occupancy, the subject property is the market leader in the competitive set, registering an 82.5% level in 1995, and an estimated 84.1% for year-end 1996. This high occupancy can be attributed to the subject property's superior location, as well as to the relatively small number of rooms. It is important to note that the subject property is one of the older properties in the market and is therefore more susceptible to any new competition moving into the area. In estimated year-end 1996, the subject property achieved a RevPAR of $56.92, which was higher than the $52.16 average for the competitive set, resulting in a yield penetration of 109.1%. Each primary competitor was inspected and evaluated. Descriptions of our findings are presented below. Fairfield Inn The Fairfield Inn opened in Syosset, approximately five miles northeast of the subject property, on October 15, 1994. This property was originally constructed as a senior citizen home in 1991. However, due to the economic downturn of the Long Island market, the facility reportedly never opened. In response to the recent recovery of the regional economy, the facility was converted for transient use. The property contains 82 guestrooms and one small meeting room that can accommodate approximately 20 persons. Recreational facilities include a small fitness room and a game room. The hotel is currently owned by Gold Crest Properties and managed by Green Brier Inns. We estimate that the Fairfield Inn will derive approximately 75% of its year-end 1996 demand from the commercial segment and the remaining 25% from leisure travelers. Because of its limited amount of meeting space, the property derives minimal demand from the meeting and group HVS International, Mineola, New York Lodging Market Supply and Demand 66 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= segment. This property benefits from its affiliation as a Fairfield Inn by Marriott, which is one of the most successful limited-service brands in the market today. Holiday Inn The Holiday Inn is situated on Old Country Road in Westbury. In this location, the hotel is proximate to the concentrations of retail space (including Roosevelt Field and the redeveloped Roosevelt Raceway) that are the focal point of retail activity for all of Long Island. This property is owned and operated by Westbury Hotel Operators under a franchise agreement with Holiday Inn Worldwide; the restaurant and meeting facilities are leased to an independent third party. The Holiday Inn contains 153 guestrooms. Meeting space is situated on a below-ground level and consists of three rooms that can accommodate 200 persons. Additional amenities include a restaurant, a lounge, an outdoor swimming pool, and a sauna. We estimate that for year-end 1996, the Holiday Inn will derive approximately 50% of its occupancy from the commercial segment, 20% from meeting and group demand, and 30% from leisure travelers. Ramada Limited The Ramada Limited is located in Woodbury, approximately six miles northeast of the subject property, on Jericho Turnpike. Currently underway at this property is a renovation that encompasses the replacement of some of the soft goods in all guestrooms and the installation of electronic door locks on all guestroom doors. The Ramada Limited reportedly was constructed in 1972. The hotel was operated as a full-service property known as the Ramada Inn until 1990 when the food and beverage outlets were closed and the hotel was renamed the Ramada Limited. According to management of the Ramada Limited, the hotel was previously operated by Crossroad Hospitality. However, the management contract was not renewed in September of 1994. The hotel is currently independently owned and operated by BDSP Holding Corporation. This facility offers two meeting rooms with a maximum capacity of 60 people. We estimate that the Ramada Limited will derive approximately 60% of its year-end 1996 room nights from the commercial segment, while the remaining 40% will be generated by leisure travelers. Quality Inn The Quality Inn is located in Woodbury, approximately six miles northeast of the subject property. This hotel had reportedly not been renovated for about six or seven years and thus represented a very tired facility. The HVS International, Mineola, New York Lodging Market Supply and Demand 67 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Quality Inn was purchased by Woodbury Hotel Associates in December of 1995 and is now undergoing extensive renovations. The scope of the renovations encompasses a new hotel lobby, guestroom beds, vanity units, showers, and soft goods. New HVAC units are being installed in all of the guestrooms as well as electronic door locks and televisions. New case goods are to be installed in all of the guestrooms some time in the near future. The parking lot was recently resurfaced as part of the renovation process. The Quality Inn features exterior corridors, and its location is set back from a Chinese restaurant on Jericho Turnpike. Although a tall billboard sign is situated along Jericho Turnpike to assist motorists in locating the hotel, visibility of the property is inherently limited. We estimate that the Quality Inn will derive approximately 60% of its year-end 1996 demand from commercial business. The remaining 40% will be generated by leisure travelers. Plainview Plaza The Plainview Plaza is located approximately seven miles northeast of the subject property, along the southern service road of the Long Island Expressway. As a result of its location, the property enjoys excellent visibility from the expressway. In addition to 182 guestrooms, the hotel contains an outdoor swimming pool and meeting space that can accommodate up to 200 people. A 100-seat restaurant and a 70-seat lounge are also available. The Plainview Plaza was formerly affiliated with Howard Johnson. However, in January of 1995, the affiliation was discontinued. According to our discussions with current management of this property, the hotel replaced the draperies and bedspreads in all guestrooms at the end of 1994. Approximately $350,000 was spent in 1995 to further maintain the property. In 1997, the Plainview Plaza will once again undergo renovations. A 72-room guestroom wing will be converted into an all-suite wing housing 36 suites; these units are scheduled to open in 1998. We estimate that the property will derive approximately 70% of its year-end 1996 occupancy from commercial demand, 10% from attendees of meeting and group functions, and the remaining 20% from leisure travelers. Proposed Competitors Based on our fieldwork in the market and our discussions with local hotel operators, developers, and government officials, there appear to be no hotel properties proposed or under construction that are likely to compete with the subject property. However, numerous hotel companies and developers have expressed a high level of interest in the Nassau County market area. Moreover, the high areawide occupancy levels suggest that the addition of new supply should be prudently factored into an occupancy forecast. Our HVS International, Mineola, New York Lodging Market Supply and Demand 68 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= experience indicates that once markets surpass occupancies levels in the mid-70% range, there is often some demand that cannot be accommodated by the existing hotels. Moreover, investors and developers rapidly become interested in such strong markets, particularly when the area is characterized by a degree of economic growth, thus increasing the likelihood of construction. In light of these factors and the cyclical nature of the lodging industry, we have included a hypothetical 100-room, limited-service hotel that is projected to be directly competitive with the subject property and is assumed to be open by January 1, 1999. The inclusion of such a facility will enable us to develop a more realistic model of the probable future trends in occupancy in the subject market area, and thus a more reliable estimate of stabilized occupancy for the subject property. Conclusion According to data supplied by Smith Travel Research, marketwide demand increased significantly in 1995, by 21.5%, and grew a further 3.7% in year-to-date (August) 1996. Marketwide average rates also posted healthy gains, rising from $65.09 in 1994 to $67.52 in 1995. Year-to-date statistics show a 5.7% gain, with average rate growing from $66.34 in year-to-date 1995 to $70.15 in year-to date 1996. A majority of the area's lodging demand is generated by commercial travelers, who will constitute roughly 61% of the total year-end 1996 occupancy. All of the competitive hotels derived at least 50% of their demand from commercial business. Leisure demand contributed roughly 32% of the total, and the meeting and group market segment accounted for the remaining 7%. We have not identified any new hotels, proposed or under construction, that are likely to be competitive with the subject property. However, we have incorporated the opening of a hypothetical 100-room, limited-service hotel into our analysis as of January 1, 1999, as we believe the strength of the market will result in future additions to the local lodging supply. HVS International, Mineola, New York Projection of Occupancy and 69 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 7. Projection of Occupancy and Average Rate Historical Operating Performance The following table sets forth the subject property's historical occupancy, average rate, and RevPAR. For the purpose of comparison, we have also presented corresponding data (as provided by Smith Travel Research) for the competitive hotels described in the previous section. In addition to the annual percent change calculations, we have determined the subject property's occupancy, average rate, and RevPAR penetration factors. HVS International, Mineola, New York Projection of Occupancy and 70 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-1 Historical Trends - -------------------------------------------------------------------------------- Year to Date (August) 1994 1995 1995 1996 - -------------------------------------------------------------------------------- Subject Property Occupancy 73.8% 82.5% 80.3% 84.9% Percent Change NA% 11.8% -- 5.7% Occupancy Penetration 114.2% 116.2% 114.1% 116.3% Average Rate $ 62.46 $ 65.28 $ 64.20 $ 67.64 Percent Change N/A% 4.5% -- 5.4% Average Rate Penetration 96.0% 96.7% 96.8% 96.4% RevPAR $ 46.08 $ 53.87 $ 51.58 $ 57.43 Percent Change N/A% 16.9% -- 11.3% RevPAR Penetration 109.6% 112.4% 110.4% 112.1% Areawide (STR) Occupancy 64.6% 71.0% 70.4% 73.0% Percent Change (2.9)% 9.9% -- 3.7% Average Rate $ 65.09 $ 67.52 $ 66.34 $ 70.15 Percent Change (1.9)% 3.7% -- 5.7% RevPAR $ 42.05 $ 47.94 $ 46.70 $ 51.21 Percent Change (4.7)% 14.0% -- 9.6% - -------------------------------------------------------------------------------- Operating data for the subject property was available only for calendar years 1994 and 1995, and for year-to-date (through August) 1996. The preceding table shows that the subject property outperformed the market in terms of occupancy in 1994, 1995, and year-to-date 1996. However, this performance was not matched in terms of average rate, as the subject property registered average rates that were lower than the market averages in 1994 and 1995. In year-to-date 1996, the subject property's average rate performance improved when compared to the corresponding eight months of 1995. As a result of the subject property's greater-than-marketwide occupancies, the hotel has consistently recorded RevPAR levels higher than the market average. HVS International, Mineola, New York Projection of Occupancy and 71 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The hotel's penetration rates have followed a similar trend, with occupancy penetration rate remaining above the hotel's fair share (100%) in 1994, 1995, and year-to-date 1996. Because of the hotel's below-market average rate, its penetration rate did not reached a fair share level (100%) during the historical period. As a result of this combination of strong occupancy and below-market average rate, RevPAR penetration levels have consistently been above the hotel's fair share of 100%. A hotel's occupancy should also be evaluated on a monthly basis to identify seasonality trends. The following table sets forth the subject property's monthly occupancy from 1994 through year-to-date (August) 1996. ================================================================================ Table 7-2 Subject Property's Monthly Occupancy History - -------------------------------------------------------------------------------- 1994 1995 1996 Year to Date ---- ---- ----------------- Occupancy Occupancy % Change Occupancy % Change --------- --------- -------- --------- -------- January 56.2% 56.2% 0.0% 68.3% 21.5% February 67.5 67.5 0.0 75.9 12.4 March 76.9 76.9 0.0 79.1 2.9 April 75.5 75.5 0.0 91.3 20.9 May 87.2 85.2 (2.3) 88.0 3.3 June 88.3 92.4 4.6 89.7 (2.9) July 80.0 90.7 13.4 89.8 (1.0) August 84.6 97.3 15.0 96.7 (0.6) September 78.7 90.9 15.5 0.0 0.0 October 69.3 92.1 32.9 0.0 0.0 November 63.3 85.5 35.1 0.0 0.0 December 57.6 79.0 37.2 0.0 0.0 ----- ----- ----- ---- ---- Full Year 73.8% 82.5% 11.8% N/A% N/A% - -------------------------------------------------------------------------------- The subject property's peak season is in the spring and summer, from March through the end of September, with occupancies percentages in the 80s and 90s during this period. The fall months - September, October, and November - also perform well, with occupancies in 1995 reaching levels in the mid 80% to low 90% range. These higher occupancy levels are attributed to the influx of commercial travelers in Nassau County during the mid to late summer. As mentioned in earlier sections of the report, occupancy levels are increasing due to the improved economy and more favorable economic climate. In the subject market area, occupancy declines moderately HVS International, Mineola, New York Projection of Occupancy and 72 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= during the winter months owing to reduced commercial and leisure business. Premise of the Projections To a certain degree, occupancy and rate attainment can be manipulated by management. For example, hotel operators may choose to lower rates in an effort to maximize occupancy. Our forecasts reflect an operating strategy that we believe would be implemented by competent hotel management to achieve an optimal mix of occupancy and average rate. Projected Room Night Demand Lodging demand and occupancy can be projected through a process known as room night analysis. A room night is a unit of hotel demand that equals one room that is occupied for one night. After estimating the number of room nights a hotel can be expected to attract during a 12-month period, we can determine occupancy by dividing the number of room nights of demand captured by the number of room nights available (calculated as the room count x 365). The total annual number of room nights occupied in the competitive hotels equates to the market's estimated year-end 1996 accommodated room night demand, as shown in the following table. ================================================================================ Table 7-3 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- 1996 Annual Room Night Demand (Rounded) ----------------------------------------------------------- Percentage Percentage Market Segment Marketwide of Total Subject Property of Total - -------------------------------------------------------------------------------- Commercial 113,000 61% 14,000 56% Meeting and Group 13,000 7 0 0 Leisure 59,000 32 11,000 44 ------- --- ------ --- Total 185,000 100% 25,000 100% - -------------------------------------------------------------------------------- Latent Demand The previous table illustrates the accommodated room night demand in the subject property's competitive market. Because this estimate is based on occupancies, it includes only those hotel rooms that were used by guests. Latent demand considers guests who could not be accommodated by the existing competitive supply, and can be divided into unaccommodated demand and induced demand. HVS International, Mineola, New York Projection of Occupancy and 73 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Unaccommodated Demand Unaccommodated demand refers to individuals who are unable to secure accommodations in the market because all of the local hotels are filled. These travelers must defer their trips, settle for less desirable accommodations, or stay in properties located outside the market area. Because this demand did not yield occupied room nights, it is not included in the estimate of historical accommodated room night demand. Induced Demand Induced demand represents the additional room nights that are expected to be attracted to the market following the introduction of a new demand generator. Situations that can induce demand include the opening of a new manufacturing plant, the expansion of a convention center, or the addition of a new hotel with a distinct chain affiliation or unique facilities. As mentioned in a previous section of this report, the Old Country Road corridor has been the focus of several new retail developments. Although we believe that there might be some induced demand entering the market as a result of the opening of these large retail stores, for the purpose of this report, we did not incorporate any induced demand into our room night analysis as a result of the new development; however, we did consider this factor in our final selection of a stabilized occupancy level. It should be noted, however, that marketwide demand will be reduced by an estimated 15,800 room nights in 1997. This reduction reflects the planned renovation at the Plainview Plaza, whereby 72 standard guestrooms will be removed from the supply and converted into 36 suites. We have shown 50% of the demand returning in 1998, when the 36 suites are scheduled to open; however the balance of 50% will remain unaccommodated. These calculations are shown in the following table. ================================================================================ Table 7-4 Induced Demand Calculation - -------------------------------------------------------------------------------- 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Phase-in: (100)% (50)% (50)% (50)% (50)% (50)% Commercial (11,000) (5,500) (5,500) (5,500) (5,500) (5,500) Meeting and Group (1,600) (800) (800) (800) (800) (800) Leisure (3,200) (1,600) (1,600) (1,600) (1,600) (1,600) ------- ------- ------- ------- -------- ------- Total (15,800) (7,900) (7,900) (7,900) (7,900) (7,900) - -------------------------------------------------------------------------------- HVS International, Mineola, New York Projection of Occupancy and 74 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Total Usable Room Night Demand Total usable room night demand is estimated by combining accommodated demand and usable latent demand. Usable latent demand is that portion of latent demand that can be absorbed based on the number of existing and proposed hotel rooms in the market. The following table shows the projected annual change in accommodated and usable room night demand in the subject property's competitive market. ================================================================================ Table 7-5 Total Usable Room Night Demand - --------------------------------------------------------------------------------
Historical 1997 1998 1999 2000 2001 2002 2003 - ------------------------------------------------------------------------------------------------------------------------ Commercial Growth Rate -- 3.0% 3.0% 2.0% 2.0% 2.0% 2.0% 2.0% Accommodated Demand 113,026 116,417 119,910 122,308 124,754 127,249 129,794 132,390 Usable Latent -- (11,000) (5,500) (5,500) (5,500) (5,500) (5,500) (5,500) Meeting and Group Growth Rate -- 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Accommodated Demand 13,145 13,408 13,676 13,950 14,229 14,514 14,804 15,100 Usable Latent -- (1,600) (800) (800) (800) (800) (800) (800) Leisure Growth Rate -- 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% Accommodated Demand 59,252 59,845 60,443 61,047 61,657 62,274 62,897 63,526 Usable Latent -- (3,200) (1,600) (1,600) (1,600) (1,600) (1,600) (1,600) Totals Commercial 113,026 105,417 114,410 116,808 119,254 121,749 124,294 126,890 Meeting and Group 13,145 11,808 12,876 13,150 13,429 13,714 14,004 14,300 Leisure 59,252 56,645 58,843 59,447 60,057 60,674 61,297 61,926 Airline 0 0 0 0 0 0 0 0 -------- -------- -------- -------- -------- -------- -------- -------- TOTAL DEMAND 185,423 173,870 186,129 189,405 192,740 196,137 199,595 203,116 Annual Forecasted Growth (6.2)% 7.1% 1.8% 1.8% 1.8% 1.8% 1.8%
- -------------------------------------------------------------------------------- Guestroom Supply In estimated year-end 1996, the competitive properties provided a total of 684 guestrooms. The room supply is expected to change in 1997 with the closure of 72 guestrooms at the Plainview Plaza hotel for renovation, and the reopening of 36 renovated suites in 1998. As discussed earlier in the section entitled Lodging Market Supply and Demand Analysis, we have included a hypothetical 100-room, limited-service hotel that is projected to be directly competitive with the subject property and is assumed to be open by HVS International, Mineola, New York Projection of Occupancy and 75 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= January 1, 1999. With these changes, room supply is projected to increase to 748 rooms in 1999. The following table shows the projected competitive supply of available rooms and available room nights. To calculate the annual number of available room nights, the number of available rooms is multiplied by 365. ================================================================================ Table 7-6 Available Rooms and Room Nights - -------------------------------------------------------------------------------- Total Room Overall Night Room Nights Competitive Year Demand Available Occupancy ---------------------------------------------------------- Historical 185,423 249,660 74% 1997 173,870 223,380 78 1998 186,129 236,520 79 1999 189,405 273,020 69 2000 192,740 273,020 71 2001 196,137 273,020 72 2002 199,595 273,020 73 2003 203,116 273,020 74 - -------------------------------------------------------------------------------- Overall Competitive Occupancy With forecasted growth in demand, overall competitive occupancy is expected to increase from 74% in year-end 1996 to 79% by 1998. However, with the opening of the hypothetical property in 1999, the projected increase in room supply is expected to adversely impact areawide occupancy by ten percentage points, dropping overall occupancy to 69% in that year. From the year 2000 and beyond, growth in room demand is expected to fully absorb the increase in room supply occurring in 1999, and overall competitive occupancy is expected to increase steadily. Competitive Index Analysis Competitive indexes are used to analyze the relative market position of each property on the basis of a particular demand segment. The index represents the number of times each year that one room is occupied by one type of traveler (e.g., commercial, meeting and group, or leisure), or the number of room nights actually accommodated per year, per room, per market segment. For example, if a hotel has a commercial competitive index of 190, each room in the property is occupied 190 times a year by a commercial traveler. The competitive index is calculated by dividing a hotel's annual accommodated room night demand in a particular market segment by that property's room count. Competitive indexes will be used to illustrate HVS International, Mineola, New York Projection of Occupancy and 76 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= each property's position in the market based on its ability to compete with other local lodging facilities. Commercial Segment The historical commercial segment competitive indexes in the subject property's market ranged from 153 to 219. With an index of 219, the Fairfield Inn was the most competitive property in the commercial market in year-end 1996. At 169, the subject property ranked second, followed by the Ramada Limited at 166. We have assumed that the subject property has reached stabilization at 169 and shall maintain the same index throughout the projection period. Indexes for the Fairfield Inn, the Holiday Inn, and the Ramada Limited are also expected to remain unchanged during the projection period; these properties are not planning any significant renovations in the next few years that would alter their competitiveness. Current renovations at the Plainview Plaza and the Quality Inn are expected to increase their competitiveness in the commercial market during the projection period. The proposed hypothetical hotel has been given a stabilized competitive index similar to that for the Fairfield Inn, as we believe that if a new hotel were to open in the market, it would probably be a property with a positioning similar to that of a Fairfield Inn, a Hampton Inn, or a Marriott Courtyard. ================================================================================ Table 7-7 Commercial Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Subject Property 169 169 169 169 169 169 Fairfield Inn 219 219 219 219 219 219 Holiday Inn 150 150 150 150 150 150 Ramada Limited 166 166 166 166 166 166 Quality Inn 162 170 175 175 175 175 Plainview Plaza 153 155 156 156 156 156 Proposed Hotel 0 0 0 190 200 220 - -------------------------------------------------------------------------------- Meeting and Group Segment There are only two hotels in the market with facilities capable of accommodating large meetings and groups: the Holiday Inn and the Plainview Plaza. The Holiday Inn contains meeting space that can accommodate up to 200 people. Although more of a tourist hotel, the Plainview Plaza offers meeting facilities with a 200-person, theater-style capacity, and a ballroom that can be divided into three rooms through the use of air walls. With the recent renovation of the Plainview Plaza, we believe that this hotel will be HVS International, Mineola, New York Projection of Occupancy and 77 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= able to participate more extensively in the meeting and group segment. Because the subject property offers only 800 square feet of meeting space, participation in this segment is inherently limited. Based on our conversations with management of the subject property, the Howard Johnson Westbury derives negligible demand from this segment. The following table illustrates the competitive indexes in the meeting and group segment. ================================================================================ Table 7-8 Meeting and Group Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Subject Property 0 0 0 0 0 0 Fairfield Inn 0 0 0 0 0 0 Holiday Inn 60 60 60 60 60 60 Ramada Limited 0 0 0 0 0 0 Quality Inn 0 0 0 0 0 0 Plainview Plaza 22 25 26 26 26 26 Proposed Hotel 0 0 0 0 0 0 - -------------------------------------------------------------------------------- Leisure Segment With an index of 138, the subject property was the most competitive property in the leisure market in estimated year-end 1996. The Ramada Limited was the second-most competitive at 111, followed by the Quality Inn, which achieved a competitive index of 108 in year-end 1996. The subject property's lack of participation in the meeting and group segment, and orientation towards the commercial and leisure market segments explain the subject property's strength in the leisure segment. We have assumed that the subject property has reached stabilization at 138 and have forecast that the hotel will maintain this historical level throughout the projection period. Additionally, the Fairfield Inn, the Holiday Inn, and the Ramada Limited will also retain the same indexes through the projection period, as no changes or renovations are planned at these properties that would increase their competitiveness in the leisure segment. Current renovations at the Plainview Plaza and the Quality Inn are expected to increase the competitiveness of these properties in the leisure market during the projection period. The proposed hypothetical hotel has been given a stabilized competitive index similar to that of the Fairfield Inn; as noted previously, we believe that if a new hotel were to open in the HVS International, Mineola, New York Projection of Occupancy and 78 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= market, it would most likely be a property with a positioning similar to that of a Fairfield Inn, a Hampton Inn, or a Marriott Courtyard. The following table illustrates the competitive indexes in the leisure segment. ================================================================================ Table 7-9 Leisure Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Subject Property 138 138 138 138 138 138 Fairfield Inn 73 73 73 73 73 73 Holiday Inn 90 90 90 90 90 90 Ramada Limited 111 111 111 111 111 111 Quality Inn 108 110 115 115 115 115 Plainview Plaza 44 54 60 60 60 60 Proposed Hotel 0 0 0 60 70 75 - -------------------------------------------------------------------------------- Subject Property's Room Night Capture and Occupancy After the competitive index is calculated, it is adjusted to reflect the property's room count, yielding a figure referred to as the market share adjuster. The market share adjuster of each property is then divided by the total market share adjuster for all of the competitors, resulting in each hotel's market share. By multiplying the projected market share by the area's usable room night demand, we can determine the total number of room nights captured by a specific hotel. Occupancy is then calculated by dividing the projected number of room nights captured by the property's total number of available room nights. Multiplying the subject property's projected market share by the estimated room night demand in each segment results in the following estimate of room nights captured by the hotel. HVS International, Mineola, New York Projection of Occupancy and 79 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-10 Room Nights Captured by the Subject Property - -------------------------------------------------------------------------------- 1997 1998 1999 2000 2001 2002 ------------------------------------------------------------- Commercial Demand 105,417 114,410 116,808 119,254 121,749 124,294 Market Share 0.1314 0.1240 0.1056 0.1048 0.1032 0.1032 -------- --------- --------- -------- -------- ------- Capture 13,856 14,190 12,337 12,497 12,564 12,827 Meeting and Group Demand 11,808 12,876 13,150 13,429 13,714 14,004 Market Share 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 -------- --------- --------- -------- -------- ------- Capture 0 0 0 0 0 0 Leisure Demand 56,645 58,843 59,447 60,057 60,674 61,297 Market Share 0.1923 0.1820 0.1656 0.1632 0.1620 0.1608 -------- --------- --------- -------- -------- ------- Capture 10,893 10,711 9,846 9,800 9,828 9,857 Total Capture 24,749 24,900 22,183 22,298 22,393 22,684 - -------------------------------------------------------------------------------- Dividing the total number of room nights captured by the subject property's number of available room nights per year (calculated as 80 x 365) produces the projected occupancy percentage. ================================================================================ Table 7-11 Calculation of the Subject Property's Projected Occupancy - -------------------------------------------------------------------------------- 1997 1998 1999 2000 2001 2002 ------------------------------------------------------ Total Room Nights Captured/Year 24,749 24,901 22,183 22,297 22,392 22,684 Available Room Nights 29,200 29,200 29,200 29,200 29,200 29,200 Occupancy 84.76% 85.28% 75.97% 76.36% 76.68% 77.68% Rounded 85% 85% 76% 76% 77% 78% - -------------------------------------------------------------------------------- For the purpose of forecasting income and expense, we will use the following occupancy levels. HVS International, Mineola, New York Projection of Occupancy and 80 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-12 Occupancy Forecast - -------------------------------------------------------------------------------- Year Occupancy ------------------------------- 1997 85% Stabilized 78 - -------------------------------------------------------------------------------- Although the preceding room night analysis shows the subject property achieving a 85% occupancy in 1998, we have chosen to use a stabilized level of 78%. The stabilized occupancy is intended to reflect the anticipated results of the property over its remaining economic life, given any and all changes in the life cycle of the hotel. Thus, the stabilized occupancy excludes from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusually high or low occupancies. Although the subject property may operate at occupancies above this stabilized level, we believe it equally possible for new competition and temporary economic downturns to force the occupancy below this selected point of stability. AVERAGE RATE ANALYSIS One of the most important considerations in estimating the value of a lodging facility is a supportable forecast of its attainable average rate, which is more formally defined as the average rate per occupied room. Average rate can be calculated by dividing the total rooms revenue achieved during a specified period by the number of rooms sold during the same period. The projected average rate and the anticipated occupancy percentage are used to forecast rooms revenue, which in turn provides the basis for estimating most other income and expense categories. Average Rate by Month The following table shows the subject property's monthly occupancy and average rate for calendar years 1994 and 1995 and year-to-date 1996, through August. HVS International, Mineola, New York Projection of Occupancy and 81 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-13 Subject Property's Occupancy and Average Rate by Month - --------------------------------------------------------------------------------
1994 1995 1996 Year to Date ---- ---- ----------------- Average Average Average Occupancy Rate Occupancy % Chg Rate % Chg Occupancy % Chg Rate % Chg ------------------ ---------------------------------- ---------------------------------- January 56.2% $59.67 56.2% 0.0% $59.67 0.0% 68.3% 21.5% $65.05 9.0% February 67.5 59.30 67.5 0.0 59.30 0.0 75.9 12.4 65.31 10.1 March 76.9 62.42 76.9 0.0 62.42 0.0 79.1 2.9 66.40 6.4 April 75.5 64.09 75.5 0.0 64.09 0.0 91.3 20.9 63.15 (1.5) May 87.2 60.72 85.2 (2.3) 67.92 11.9 88.0 3.3 67.01 (1.3) June 88.3 58.94 92.4 4.6 66.53 12.9 89.7 (2.9) 71.02 6.7 July 80.0 63.58 90.7 13.4 65.63 3.2 89.8 (1.0) 70.31 7.1 August 84.6 63.26 97.3 15.0 64.64 2.2 96.7 (0.6) 71.28 10.3 September 78.7 64.62 90.9 15.5 66.45 2.8 NA NA NA NA October 69.3 64.49 92.1 32.9 68.56 6.3 NA NA NA NA November 63.3 60.99 85.5 35.1 67.43 10.6 NA NA NA NA December 57.6 67.93 79.0 37.2 66.52 (2.1) NA NA NA NA Weighted Average 73.8% $62.46 82.5% 11.8% $65.28 4.5% NA% NA% NA NA% ---- ----- ---- ---- ----- --- ---- ---- ----- ----
- -------------------------------------------------------------------------------- The previous table underscores the correlation between a hotel's occupancy and its average rate: as occupancy increases, rates tend to follow. On a monthly basis, the Howard Johnson Westbury's average rate fluctuates_, generally showing the highest levels in May, June, October, and November, when commercial travel is at its peak. The subject property recorded average rates over $70 for the first time since 1994 in June, July, and August of 1996. With the exception of April and May of 1996 and December of 1995, the subject property has registered consistent positive growth in average rate. Consistent increases in occupancy have also been recorded, with the exception of May of 1995 and June and July of 1996. Competitive Positioning The Howard Johnson Westbury's average rate will be projected using a competitive positioning method. This technique begins with an analysis of the average rates achieved by the subject property and its competitors. These rates establish a range that reflects certain characteristics of the specific market, such as price sensitivity, demand orientation, and occupancy. The subject property's average rate is then compared to those of the hotels to which it is most similar in terms of size, quality, facilities, amenities, market orientation, location, management, image, and affiliation. Adjustments are made to reflect any relevant differences. HVS International, Mineola, New York Projection of Occupancy and 82 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Although the average rate analysis presented here follows the occupancy projections, these two statistics are highly correlated; in reality, one can not project occupancy without making specific assumptions regarding average rate. This relationship is best illustrated by rooms revenue per available room (RevPAR), which reflects a property's ability to maximize rooms revenue. The following table summarizes the estimated year-end 1996 average rate and RevPAR of the subject property and its competitors. ================================================================================ Table 7-14 Estimated Year-end 1996 Average Rate and RevPAR of the Primary Competitors - -------------------------------------------------------------------------------- 1996 1996 Average Rooms Revenue Property Room Rate Per Available Room ------------------------------------------------------------------------ Subject Property $67.67 $56.92 Fairfield Inn 70.00 56.00 Holiday Inn 92.00 75.44 Ramada Limited 62.00 47.12 Quality Inn 56.00 41.44 Plainview Plaza 61.00 36.60 ------ ------ Average $70.24 $52.16 ------------------------------------------------------------------------ As the preceding table indicates, the Holiday Inn registered the highest average rate, $92.00, in the market in estimated year-end 1996, followed, at some distance, by the Fairfield Inn with $70.00. The subject property placed third, with a $67.67 average rate. This competitive position is reasonable for the subject property given that the Holiday Inn is a full-service hotel, and the Fairfield Inn is the newest facility in the market. Although the Plainview Plaza is a full-service hotel, it is operated as an independent hotel, without a franchise, and thus has experienced difficulties in achieving high occupancies and average rates. The recent and planned renovations at the Plainview Plaza are expected to assist the hotel in achieving higher average rates. Average Rate Increases It is important to note that hotel room rate increases do not necessarily conform to the underlying monetary inflation rate, because lodging facilities are influenced by market conditions such as the relationship between supply and demand. A hotel's ability to raise room rates is affected by a number of factors, including the following. HVS International, Mineola, New York Projection of Occupancy and 83 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= o Supply and Demand Relationships - The relationship between supply and demand is one of the factors that determine hotel occupancies and average rates. Strong markets where lodging demand is increasing faster than supply are often characterized by rate growth that exceeds inflation. Markets that are overbuilt or suffering from declining demand are unlikely to exhibit any significant increases in average rates. o Inflationary Pressures - Price increases caused by inflation affect hotel room rates by eroding profit margins and encouraging operators to raise prices. This strategy is effective only in markets that are characterized by a healthy supply and demand relationship. o Improving the Competitive Standard - When a new lodging facility enters a mature market, its rates may be set higher than the marketwide average in an effort to justify the development costs. This may allow other competitors to achieve corresponding gains by effectively raising the amount the market will bear. However, if the addition to supply has a severe impact on the occupancy levels of other hotels, price competition may ensue. o Property-Specific Improvements - Changes that make a hotel more or less attractive to guests can have an impact on average rate. An expansion, renovation, upgrading, or the introduction of additional facilities and amenities may enable greater-than-inflationary room rate increases. Likewise, deferred maintenance may make a property less competitive, engendering a decline in room rates. In determining average rate projections, changes that occur prior to occupancy stabilization are generally attributable to factors that are specific to the property and the market. After a hotel achieves a stabilized occupancy, room rates are generally expected to continue to increase at the underlying inflation rate throughout the remainder of the projection period. Statistics provided by Smith Travel Research has indicated strong average rate growth in the past two years, with average rate increasing 3.7% in 1995. Furthermore average rates in the market have increased by 5.7% in 1996 over 1995 levels. The subject property has experienced a 5.4% increase in average rate in 1996 over 1995. Based on these considerations, the following table shows our projection of average rate increases. HVS International, Mineola, New York Projection of Occupancy and 84 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-15 Average Rate Forecast - -------------------------------------------------------------------------------- Areawide Subject Property's Subject Property's Areawide Rate Rate Projected Year Occupancy Increase Increase Average Rate - -------------------------------------------------------------------------------- Positioned Base -- -- -- $67.67 1997 78 % 5% to 7% 4.0% 70.38 1998 79 4 to 6 4.0 73.20 1999 69 4 to 5 3.5 75.76 2000 71 3 to 4 3.5 78.41 2001 72 3 to 4 3.5 81.16 2002 73 3 to 4 3.5 84.00 - -------------------------------------------------------------------------------- To derive a forecast of average rate for the subject property, we have recognized the strong level of demand in the market. We anticipate that the subject property's average rate will increase by 4% in the first two projection years, then slow somewhat and stabilize at a growth rate of 3.5% in 1999, equivalent to the underlying inflationary rate. The following occupancy and average rate levels will be used to project the subject property's rooms revenue. ================================================================================ Table 7-16 Forecast of Occupancy and Average Rate - -------------------------------------------------------------------------------- Year Occupancy Average Rate -------------------------------------------------- 1997 85 % $70.38 Stabilized 78 73.20 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Highest and Best Use 85 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 8. Highest and Best Use The concept of highest and best use recognized by the Appraisal Institute distinguishes between the highest and best use of the land (as though vacant) and that of the property (as improved). Highest and best use is defined as: The reasonably probable and legal use of vacant land or improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.(7) The concept of highest and best use is the premise upon which value is based, and is a product of competitive forces in the marketplace. The principle of balance holds that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium. This principle applies to relationships among various property components as well as the relationship between the costs of production and the property's productivity. The point of economic balance is achieved when the combination of land and building is optimal (i.e., when no marginal benefit or utility is achieved by adding another unit of capital). The law of increasing returns holds that larger amounts of the agents of production produce greater net income up to a certain point, after which the law of diminishing returns is applied.(8) It is important to recognize that the highest and best use of the land (as though vacant) may differ from the highest and best use of the property (as improved). This may occur when a site has existing improvements and the highest and best use of the land differs from the current use. Nonetheless, the current property use will continue until the value of the land under its highest and best use exceeds the value of the property in its current use, plus the cost to remove the existing improvements. (7) The Appraisal of Real Estate - Tenth Edition, Appraisal Institute, Chicago, IL, 1992, p. 45. (8) Ibid., p. 40. HVS International, Mineola, New York Highest and Best Use 86 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= In consideration of the factors influencing development in the immediate area, it is the appraisers' opinion that the highest and best use of the subject site, as vacant, would be its current use as a transient lodging facility. Based on the fact that the value of the land does not exceed the value of the hotel plus the cost of demolition, it is our opinion that the subject property's highest and best use, as improved, is its current use as a lodging facility. HVS International, Mineola, New York Approaches to Value 87 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 9. Approaches to Value In appraising real estate for market value, the appraiser has three approaches from which to select: the income capitalization, sales comparison, and cost approaches. Although all three valuation procedures are given consideration, the inherent strengths of each approach and the nature of the subject property must be evaluated to determine which will provide supportable estimates of market value. The appraiser is then free to select one or more of the appropriate approaches in arriving at a final value estimate. The Income Capitalization Approach The income capitalization approach takes a property's projected net income before debt service and allocates this future benefit to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component is calculated. The total of the mortgage component and the equity component equals the value of the property. This approach is often selected as the preferred valuation method for income-producing properties, because it most closely reflects the investment rationale of knowledgeable buyers. The Sales Comparison Approach The sales comparison approach estimates the value of a property by comparing it to similar properties that have been sold on the open market. To obtain a supportable estimate of value, the sales price of a comparable property must be adjusted to reflect any dissimilarities between it and the property being appraised. The sales comparison approach may provide a useful value estimate in the case of simple forms of real estate, such as vacant land and single-family homes, where the properties are homogeneous and the adjustments are few and relatively simple to compute. In the case of complex investments such as shopping centers, office buildings, restaurants, and lodging facilities, where the adjustments are numerous and more difficult to quantify, the sales comparison approach loses much of its reliability. HVS International, Mineola, New York Approaches to Value 88 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Hotel investors typically do not employ the sales comparison approach in reaching their final purchase decisions. Factors such as the lack of recent sales data, the numerous insupportable adjustments that are necessary, and the general inability to determine the true financial terms and human motivations of comparable transactions often make the results of this technique questionable. Although the sales comparison approach may provide a range of values that supports the final estimate, reliance on this method beyond the establishment of broad parameters is rarely justified by the quality of the sales data. The market-derived capitalization rates sometimes used by appraisers are susceptible to the same shortcomings inherent in the sales comparison approach. To substantially reduce the reliability of the income capitalization approach by employing capitalization rates obtained from unsupported market data weakens the final value estimate and ignores the typical investment analysis procedures employed by hotel purchasers. Because appraisers are obligated to mirror the actions of the marketplace, we generally give the sales comparison approach minimal weight in the hotel appraisal process beyond bracketing the final estimate.(9) The Cost Approach The cost approach estimates market value by computing the current cost to replace the property and subtracting any depreciation resulting from physical deterioration, functional obsolescence, and external (or economic) obsolescence. The value of the land, as if vacant and available, is then added to the depreciated value of the improvements to produce a total value estimate. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements grow older and begin to deteriorate, the resultant loss in value becomes increasingly difficult to quantify accurately. We find that knowledgeable hotel buyers base their purchase decisions on economic factors, such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, this approach is given minimal weight in the hotel valuation process. As noted in Hotels and Motels: A Guide to Market (9) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 209. HVS International, Mineola, New York Approaches to Value 89 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Analysis, Investment Analysis, and Valuations, "the cost approach is seldom used to value existing hotels and motels."(10) Reconciliation The final step in the valuation process is the reconciliation and correlation of the value indications. Factors that are considered in assessing the reliability of each approach include the purpose of the appraisal, the nature of the subject property, and the reliability of the data used. In reconciliation, the applicability and supportability of each approach are considered, and the range of value indications is examined. The most significant weight is given to the approach that produces the most reliable solution and most closely reflects the criteria used by typical investors. Our nationwide experience with numerous hostelry buyers and sellers indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the investors who constitute the marketplace. For this reason, the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in the hotel valuation process. (10) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 208. HVS International, Mineola, New York Income Capitalization Approach 90 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 10. Income Capitalization Approach The income capitalization approach is based on the principle that the value of a property is indicated by its net return, or what is known as the present worth of future benefits. The future benefits of income-producing properties, such as hotels, are net income before debt service and depreciation (as estimated by a forecast of income and expense) and any anticipated reversionary proceeds from a sale. These future benefits can be converted into an indication of market value through a capitalization process and discounted cash flow analysis. Using the income capitalization approach, the subject property has been valued by analyzing the local market for transient accommodations, examining existing and proposed competition, and developing a forecast of income and expense that reflects current and anticipated income trends and cost components through a stabilized year of operation. The forecast of income and expense is expressed in current dollars for each year. The stabilized year is intended to reflect the anticipated operating results of the property over its remaining economic life, given any or all applicable stages of build-up, plateau, and decline in the life cycle of the hotel. Thus, income and expense estimates from the stabilized year forward exclude from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusual revenues or expenses. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, published by the Appraisal Institute, "of the three valuation approaches available to the appraiser, the income capitalization approach generally provides the most persuasive and supportable conclusions when valuing a lodging facility."(11) This text recommends that using a ten-year forecast and an equity yield rate "most accurately reflects the actions of typical hotel buyers, who purchase properties based (11) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p.236. HVS International, Mineola, New York Income Capitalization Approach 91 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= on their leveraged discounted cash flow."(12) The simpler procedure of using a ten-year forecast and a discount rate is "less reliable because the derivation of the discount rate has little support. Moreover, it is difficult to adjust the discount rate for changes in the cost of capital."(13) We have used both methods to discount the subject property's projected net income into an estimate of value. Method One is a ten-year discounted cash flow analysis in which the cash flow to equity and the equity reversion are discounted to the present value at the equity yield rate, and the income to the mortgagee is discounted at a mortgage interest rate. The sum of the equity and mortgage values is the total property value. Method Two is a simple ten-year discounted cash flow analysis in which the annual net income before debt service and the reversionary proceeds following a sale at the end of the tenth year are discounted back to the date of the appraisal at an overall discount rate, and then totaled to produce an indication of the present worth of future benefits. To convert the projected income stream into an estimate of value through Method One, the anticipated net income (before debt service and depreciation) is allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. The total of the mortgage component and the equity component equals the value of the property. The process is described as follows. 1. The terms of typical hotel financing are set forth, including interest rate, amortization term, and loan-to-value ratio. 2. An equity yield rate of return is established. Numerous hotel buyers base their equity investments on a ten-year equity yield rate projection that takes into account ownership benefits such as periodic cash flow distributions, residual sale or refinancing distributions that return any property appreciation and mortgage amortization, income tax benefits, and various non-financial considerations such as status and prestige. The equity yield rate is also known as the internal rate of return on equity. (12) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. (13) Ibid. HVS International, Mineola, New York Income Capitalization Approach 92 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 3. The value of the equity component is calculated by first deducting the annual debt service from the projected net income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value. After deducting the mortgage balance at the end of the tenth year and the typical brokerage and legal costs, the equity residual is discounted back to the date of value at the equity yield rate. The net income to equity for each of the ten projection years is also discounted to the present value. The sum of these discounted values equates to the value of the equity component. Adding the equity component to the initial mortgage balance yields the overall property value. Because the mortgage and the debt service amounts are unknown but the loan-to-value ratio was determined in Step #1, the preceding calculation can be solved through an iterative process or by use of a linear algebraic equation that computes the total property value. The algebraic equation that solves for the total property value using a ten-year mortgage and equity technique was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."14 4. The value is proven by allocating the total property value between the mortgage and equity components and verifying that the rates of return set forth in Steps #1 and #2 can be met from the projected net income. The process of converting the projected income stream into an estimate of value through Method Two is described as follows. 1. A discount rate is established by evaluating the total property yield derived by Method One. Occasionally, the discount rate may be adjusted slightly based on the total property yields indicated by recent transactions involving hotels similar to the subject property. 2. The reversionary value is calculated by capitalizing the 11th-year net income by the terminal capitalization rate and deducting typical brokerage and legal fees. (14) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Income Capitalization Approach 93 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 3. The ten-year forecast of net income (before debt service and depreciation) and the reversionary value are discounted to the date of value at the rate derived above. Review of Operating History Because the Howard Johnson Westbury is an existing hotel with an established operating performance, its historical income and expense experience can serve as a basis for projections. The subject property opened in 1967 and achieved occupancy levels of 72.7% in 1994 and 82.5% in 1995. The following income and expense statements were provided by Ashford Financial Corporation and are unaudited. Where applicable, we have reorganized the statements in accordance with the Uniform System of Accounts for Hotels. HVS International, Mineola, New York Income Capitalization Approach 94 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-1 Historical Operating Performance - --------------------------------------------------------------------------------
Year: 1995 1994 Total Rooms: 80 80 Occupied Rooms: 24,094 14,243 Complimentary Rooms: 409 251 Days Open: 365 245 Occupancy: 82.5% Amount per Amount per 72.7% Amount per Amount per Average Rate: $65.29 Percentage Available Occupied $62.94 Percentage Available Occupied (+000) of Revenue Room Room (+000) of Revenue Room Room - ------------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $1,546 95.4% $19,331 $64.18 $ 881 95.9% $11,009 $61.83 Telephone 61 3.7 757 2.51 28 3.1 350 1.97 Other Income 15 0.9 185 12.45 10 1.1 122 0.69 Total 1,622 100.0 20,273 67.31 919 100.1 11,481 64.49 - ------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES* Rooms 300 19.4 3,751 12.45 183 20.8 2,285 12.84 Telephone 27 44.1 334 1.11 17 62.1 218 1.22 Other Income 0 0.0 0 0.00 0 1.1 1 0.01 Total 327 20.1 4,084 13.56 200 21.8 2,504 14.07 - ------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 1,295 79.9 16,188 53.75 718 78.3 8,977 50.42 - ------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 192 11.8 2,395 7.95 116 12.7 1,454 8.17 Management Fee 49 3.0 608 2.02 28 3.0 346 1.94 Marketing 70 4.3 870 2.89 15 1.6 188 1.05 Franchise Fees 49 3.0 608 2.02 44 4.8 554 3.11 Property Oper. & Maint. 115 7.1 1,439 4.78 54 5.9 675 3.79 Energy 111 6.8 1,383 4.59 72 7.8 901 5.06 Total 584 36.0 7,302 24.25 329 35.8 4,118 23.13 - ------------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 711 43.9 8,886 29.50 389 42.5 4,859 27.29 - ------------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 154 9.5 1,926 6.40 72 7.9 901 5.06 Insurance 19 1.2 234 0.78 18 2.0 225 1.26 Reserve for Replacement 65 4.0 811 2.69 28 3.0 345 1.94 Ground Lease 51 3.2 643 2.13 34 3.7 428 2.41 Fixed 2 0 0.0 0 0.00 1 0.1 15 0.09 Total 289 17.9 3,613 12.00 153 16.7 1,915 10.75 - ------------------------------------------------------------------------------------------------------------------------------- NET INCOME $ 422 26.0% $5,273 $17.50 $ 236 25.8% $2,944 $16.54 ===============================================================================================================================
*Departmental expense ratios are expressed as a percentage of departmental revenues. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 95 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-2 Historical Operating Performance - --------------------------------------------------------------------------------
Year: 1995 YTD 1996 YTD Total Rooms: 80 80 Occupied Rooms: 15,310 16,220 Complimentary Rooms: 0 0 Days Open: 242 243 Occupancy: 79.1% Amount per Amount per 83.4% Amount per Amount per Average Rate: $64.46 Percentage Available Occupied $67.87 Percentage Available Occupied (+000) of Revenue Room Room (+000) of Revenue Room Room - ------------------------------------------------------------------------------------------------------------------------------ REVENUE Rooms $ 987 95.3% $12,336 $64.46 $1,101 95.6% $13,761 $67.87 Telephone 40 3.9 504 2.63 42 3.7 528 2.60 Other Income 8 0.8 106 0.55 9 0.8 109 0.54 Total 1,036 100.0 12,946 67.65 1,152 100.1 14,398 71.01 - ------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL EXPENSES* Rooms 189 19.1 2,362 12.34 216 19.6 2,700 13.32 Telephone 17 42.0 212 1.11 24 55.9 295 1.46 Other Income 0 0.0 0 0.00 0 0.0 0 0.00 Total 206 19.9 2,574 13.45 240 20.8 2,995 14.77 - ------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL INCOME 830 80.1 10,371 54.19 912 79.3 11,403 56.24 - ------------------------------------------------------------------------------------------------------------------------------ OPERATING EXPENSES Administrative & General 125 12.0 1,556 8.13 131 11.4 1,642 8.10 Management Fee 31 3.0 388 2.03 35 3.0 432 2.13 Marketing 44 4.3 555 2.90 50 4.3 624 3.08 Franchise Fees 31 3.0 388 2.03 36 3.1 444 2.19 Property Oper. & Maint 73 7.1 915 4.78 65 5.6 813 4.01 Energy 75 7.2 933 4.88 76 6.6 947 4.67 Total 379 36.6 4,736 24.75 392 34.0 4,902 24.18 - ------------------------------------------------------------------------------------------------------------------------------ HOUSE PROFIT 451 43.5 5,635 29.44 520 45.3 6,501 32.06 - ------------------------------------------------------------------------------------------------------------------------------ FIXED EXPENSES Property Taxes 110 10.6 1,375 7.18 83 7.2 1,039 5.12 Insurance 12 1.2 154 0.81 13 1.1 165 0.81 Reserve for Replacement 41 4.0 518 2.71 46 4.0 576 2.84 Ground Lease 34 3.3 428 2.24 34 3.0 431 2.12 Fixed 2 0 0.0 0 0.00 0 0.0 0 0.00 Total 198 19.1 2,475 12.93 177 15.3 2,210 10.90 - ------------------------------------------------------------------------------------------------------------------------------ NET INCOME $ 253 24.4% $3,160 $16.51 $ 343 30.0% $4,291 $21.16 ==============================================================================================================================
* Departmental expense ratios are expressed as a percentage of departmental revenues. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 96 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= These historical income and expense statements show that operating efficiencies were achieved in the rooms department in 1995; rooms expense declined from 20.8% of the corresponding revenue in 1994 to 19.4% in 1995. Efficiencies have also been achieved in the telephone department; expenses in this department were 62.1% of telephone revenue in 1994, and 44.1% in 1995. Operating expenses have remained relatively stable; declines achieved in property operations and maintenance for year-to-date 1996 are attributed to costs for some of the on-site renovations being allocated to this department. Operating results for year-to-date (through August) indicate that efficiencies have been achieved in fixed expenses, with a decline from 19.1% of total revenue in year-to-date 1995 to 15.3% for the corresponding period in 1996. This decline is mainly attributable to a decline in property taxes between the two time periods. Forecast of Income and Expense The forecast of income and expense is intended to reflect the appraisers' subjective estimate of how a typical buyer would project the subject property's future operating results. Depending on the dynamics of the local market, a typical buyer's projection may be adjusted upward or downward. We have attempted to consider these factors in formulating this forecast. HVS International uses a fixed and variable component model to project a lodging facility's revenue and expense levels. This model is based on the premise that hotel revenues and expenses have one component that is fixed and another that varies directly with occupancy and facility usage. A projection can be made by taking a known level of revenue or expense and calculating its fixed and variable components. The fixed component is then held constant, while the variable component is adjusted for the percent change between the projected occupancy and facility usage and that which produced the known level of revenue or expense. Base-Year Statement of Income and Expense Based on our review of the operating histories of the subject property and comparable hotels, we have derived a base-year statement of income and expense expressed in 1995 dollars. The units of comparison include a percentage of departmental and total revenue, amounts per available room, and amounts per occupied room. The income and expense ratios reflect an occupancy level of 82.5%. The base-year profit and loss statement will be used to determine the relationship between the fixed and variable components. HVS International, Mineola, New York Income Capitalization Approach 97 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-3 Base-Year Statement of Income and Expense - -------------------------------------------------------------------------------- Year: 1995 Number of Rooms: 80 Occupancy: 82.5% Average Rate: $65.29 Percent of Amount per Amount per Occupied Rooms: 24,094 Total Available Occupied (+000) Revenue Room Room - -------------------------------------------------------------------------------- Revenue Rooms $ 1,573 95.5% $19,665 $ 65.29 Telephone 59 3.6 742 2.46 Other Income 15 0.9 185 0.61 Total Revenue $ 1,647 100.0 $20,591 $ 68.37 - -------------------------------------------------------------------------------- Expenses Rooms* $ 338 21.5% $ 4,228 $ 14.04 Telephone* 31 53.0 393 1.31 Administrative & General 192 11.6 2,395 7.95 Management Fee 49 3.0 618 2.05 Marketing 70 4.2 870 2.89 Franchise Fees 63 3.8 787 2.61 Property Oper. & Maint 104 6.3 1,295 4.30 Energy 111 6.7 1,383 4.59 Property Taxes 126 7.6 1,573 5.22 Insurance 24 1.5 300 1.00 Reserve for Replacement 66 4.0 824 2.73 Ground Lease 51 3.1 643 2.13 Total Expenses $ 1,225 74.3% $15,307 $ 50.83 - -------------------------------------------------------------------------------- Net Income $ 423 25.7% $ 5,284 $ 17.54 ================================================================================ * Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- Inflation Assumptions The base revenue and expense amounts are inflated to reflect current dollars for each projection year. Line items can be affected by different factors. We must establish a general rate of inflation that will be applied to most revenue and expense categories. The following table shows inflation estimates made by economists at some noted institutions and corporations. HVS International, Mineola, New York Income Capitalization Approach 98 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-4 Inflation Estimates - -------------------------------------------------------------------------------- Projected Increase in Consumer Price Index (Annualized Rate Versus 12 Months Earlier) ------------------------------- November May Source of 1996 of 1997 - ------------------------------------------------------------------------------ Maureen Allyn, Scudder Stevens Clark 3.1% 2.3% Wayne Angell, Bear Stearns 3.0 3.2 Richard Berner, Mellon Bank 2.9 2.8 David Berson, Fannie Mae 2.9 2.8 David Blitzer, S&P 3.0 2.7 Paul Boltz, T. Rowe Price 3.2 3.5 David Bostian, Herzog, Heine, Geduld 2.9 2.5 Philip Braverman, DKB Securities 3.0 2.8 William Brown, J.P. Morgan 3.3 3.2 Rosanne Cahn, CS First Boston 3.1 2.6 James Coons, Huntington National Bank 3.2 3.0 Michael Cosgrove, The Econoclast 3.2 3.3 Dewey Daane, Vanderbilt University 3.4 3.6 Robert Dederick, Northern Trust 3.1 3.4 W.Dudley, Goldman Sachs 3.4 3.2 Michael Englund, MMS Intl. 3.2 3.3 Michael Evans, Evans Group 3.0 3.0 Gail Fosler, Conference Board 3.5 3.6 Maury Harris, Paine Webber, Inc. 2.8 2.8 Tracy Herrick, Jefferies & Co. 3.2 3.6 Stuart Hoffman, PNC Bank 3.1 2.8 William Hummer, Wayne Hummer 2.9 3.0 Edward Hyman, ISI Group 2.8 2.1 Saul Hymans, University of Michigan 2.7 1.7 Mieczyslaw Karczmar, Deutsche Bank 2.8 3.2 Kurt Karl, WEFA Group 2.6 2.3 Irwin Kellner, Chase Manhattan Bank 2.6 2.3 D. Laufenberg, American Express Financial Advisors 3.2 3.4 Michelle Laughlin, Sanwa Securities 3.0 3.2 Carol Leisenring, CoreStates Financial 2.7 2.5 Richard Lemmon, General Motors 3.0 3.0 Mickey Levy, NationsBank Capital Markets 2.6 2.4 David Littmann, Comerica 3.1 3.0 John Lonski, Moody's Investors Service 3.3 3.2 Paul McCulley, UBS Securities 3.0 2.8 John McDevitt, 3M 2.6 2.5 Arnold Moskowitz, Moskowitz Capital 3.1 3.5 John Mueller, LBMC, Inc. 3.2 2.5 David Munro, High Frequency Econ. 3.0 2.5 Carl Palash, MCM MoneyWatch 3.0 3.0 Nicholas Perna, Fleet Financial Group 3.3 3.3 Elliott Platt, Donaldson Lufkin 2.8 2.0 Maria F. Ramirez, MF Ramirez 3.0 3.0 Donald Ratajczak, Georgia State University 3.0 3.3 David Resler, Nomura Securities International 2.9 2.6 Allan Reynolds, Hudson Institute 3.3 3.6 Richard Rippe, Prudential Securities 3.1 3.3 A. Gary Schilling, Schilling & Co. 3.0 3.0 Allen Sinai, Lehman Brothers 3.2 3.4 James Smith, University of North Carolina 2.1 1.9 Susan Sterne, Economic Analysis 2.5 2.5 Donald Straszheim, Merrill Lynch 2.7 2.3 Thomas Synott III, U.S. Trust Company 3.3 3.4 John Williams, Bankers Trust 3.0 3.1 Raymond Worseck, A.G. Edwards 3.6 3.3 David Wyss, DRI/McGraw-Hill 3.0 2.5 Edward Yardeni, Deutsche Morgan Grenfell 2.2 2.0 Mark Zandi, Regional Financial Associates 3.0 3.2 --- --- Averages 3.0% 2.9% Source: Wall Street Journal, July 1, 1996 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 99 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The preceding table shows inflation forecasts averaging 3.0% through November of 1996 and 2.9% through May of 1997. Most of the economists in the sample estimate inflation rates ranging from 2.5% to 3.4% for the 12-month period, although several anticipate levels of slightly greater than 3.4%. As a further check on these inflation projections, we have reviewed historical increases in the Consumer Price Index. Because the value of real estate is predicated on cash flows over a relatively long period, inflation should be considered from a long-term perspective. Between 1986 and 1995, the national CPI increased at an average annual compounded rate of 3.7%. In consideration of these historical trends, the projections set forth above, and our assessment of probable property appreciation levels, we have selected a stabilized inflation rate of 3.5% in 1999, and annually thereafter. One of the exceptions to this general inflation assumption is the projected growth in average rate. As noted earlier, increases in the subject property's room rate are projected as follows. ================================================================================ Table 10-5 Projected Growth in Average Rate - -------------------------------------------------------------------------------- Increase From Year Previous Year ----------------------------------------------- 1997 4.0% 1998 4.0 1999 3.5 2000 3.5 Thereafter 3.5 - -------------------------------------------------------------------------------- Using these inflation assumptions, the base-year income and expense statement (which is expressed in 1995 dollars) is inflated to arrive at projections. Each revenue and expense category will be projected using the inflated base statement to determine the fixed and variable component relationships. HVS International, Mineola, New York Income Capitalization Approach 100 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Rooms Revenue Rooms revenue is determined by two variables: occupancy and average rate. Earlier in this report, we estimated the subject property's occupancy and average rate as follows. ================================================================================ Table 10-6 Projected Occupancy and Average Rate - -------------------------------------------------------------------------------- 1997 Stabilized ----------------------------------------------------------------------- Forecast Occupancy Percentage 85.0% 78.0% Forecast Average Rate $70.38 $73.20 ----------------------------------------------------------------------- Rooms revenue is calculated as follows. ================================================================================ Table 10-7 Forecast of Rooms Revenue - --------------------------------------------------------------------------------
Number Forecast Calendar Projected Average Number of Days Rooms Year: Occupancy Room Rate of Units in Year Revenue - -------------------------------------------------------------------------------------------- 1997 85.0% X $ 70.38 X 80 X 365 = $ 1,747 Stabilized 78.0 X 73.20 X 80 X 365 = 1,667 1999 78.0 X 75.76 X 80 X 365 = 1,726 - --------------------------------------------------------------------------------------------
Telephone Revenue Telephone revenue is generated by hotel guests who charge local and long-distance calls to their rooms, and by individuals who use the property's public telephones. Prior to the deregulation of the telephone industry in the early 1980s, hotels were limited to a 15% commission on long-distance calls, a mark-up that allowed few profits. Deregulation and the development of sophisticated call-accounting equipment have resulted in profitable telephone departments. State-of-the-art equipment is capable of least-cost routing, automatic price billing, and posting telephone charges to guest folios. Hotels can select among various long-distance services, and can also work with any one of a number of Alternative Operator Services (AOS). These systems route and price calls, and may provide additional services. In recent years, the hospitality industry has experienced diverging trends with respect to telephone revenue. Prices per call have increased, in some cases dramatically, yielding departmental profits as high as 50% to 55%. However, the number of long-distance calls billed per occupied room has declined as a result of the extensive use of long-distance carrier services that can be accessed locally or through a toll-free number. When guests charge HVS International, Mineola, New York Income Capitalization Approach 101 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= long-distance calls to their personal or business accounts in this manner, the hotel loses the revenue associated with long-distance tariffs and mark-ups, and only receives an access fee. Most telephone revenue varies directly with changes in occupancy. However, there is a small fixed component consisting of public telephone revenue, which is primarily generated by individuals using the hotel's food, beverage, and meeting facilities. Using this fixed and variable relationship, the subject property's telephone revenue is projected as follows. ================================================================================ Table 10-8 Forecast of Telephone Revenue - -------------------------------------------------------------------------------- 1997 Stabilized --------------------------------------------------------------------------- Total Telephone Revenue (+000) $ 65 $ 63 Percent of Total Revenue 3.6% 3.6% Amount Per Available Room $ 816 $ 782 Amount Per Occupied Room $ 2.62 $ 2.77 - -------------------------------------------------------------------------------- Other Income Other income is derived from sources other than guestrooms, food and beverages, and telephone services. Depending on the type of hotel and the facilities and amenities offered, other income may include the following items. o Rentals - stores, office space, concession space, showcases, clubs, and storage. o Commissions from auto rentals, photography, telegrams, and vending services. o Concessions - revenue derived from charges for the privilege of operating departments that could be operated by the hotel. Gift shops, barber shops, and beauty salons are often operated as concessions. o Laundry, dry cleaning, and fax services. o Cash discounts earned - discounts from creditors' accounts for payment within the discount period. This item does not include trade discounts, which are a deduction from the cost of goods sold. o Electronic games and pinball machines. o Forfeited advance deposits and guaranteed no-shows. HVS International, Mineola, New York Income Capitalization Approach 102 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= o Service charges - service charges that are added to a customer's account but are not paid to service personnel. o Interest income - interest from house accounts. o Salvage - revenue from the sale of old or obsolete items. Other income is highly sensitive to changes in occupancy and slightly correlated to food and beverage volume. Using this fixed and variable relationship, the subject property's other income is projected as follows. ================================================================================ Table 10-9 Forecast of Other Income - -------------------------------------------------------------------------------- 1997 Stabilized ---------------------------------------------------------------------- Total Other Income (+000) $ 16 $ 16 Percent of Total Revenue 0.9% 0.9% Amount Per Available Room $ 200 $ 201 Amount Per Occupied Room $ 0.64 $ 0.70 - -------------------------------------------------------------------------------- Rooms Expense Rooms expense consists of items related to the sale and upkeep of guestrooms and public space. Salaries, wages, and employee benefits account for a substantial portion of this category. Although payroll varies somewhat with occupancy (because managers can schedule maids, bell personnel, and house cleaners to work when demand requires), much of a hotel's payroll is fixed. Front desk personnel, public area cleaners, the housekeeper, and other supervisors must be maintained at all times. As a result, salaries, wages, and employee benefits are only moderately sensitive to changes in occupancy. Commissions represent remuneration to travel agents for booking rooms. Because these fees are based on a percentage of rooms revenue, they are highly dependent on occupancy and rate. Reservations is a similar expense that reflects the cost of a franchise reservation system that typically bills as a percentage of rooms revenue. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are only slightly affected by changes in volume. In light of these considerations, we project the subject property's rooms expense as follows. HVS International, Mineola, New York Income Capitalization Approach 103 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-10 Forecast of Rooms Expense - -------------------------------------------------------------------------------- 1997 Stabilized ----------------------------------------------------------------------- Total Rooms Expense (+000) $ 367 $ 367 Percent of Rooms Revenue 21.0% 22.0% Amount per Available Room $4,584 $4,585 Amount per Occupied Room $14.79 $16.11 - -------------------------------------------------------------------------------- Telephone Expense Telephone expense consists of all costs associated with this department. In the case of small hotels with automated systems, the operation of telephones may be an additional responsibility of front desk personnel; however, most large properties employ full-time operators. The bulk of the telephone expense consists of the cost of local and long-distance calls billed by the telephone companies that provide these services. Because most calls are made by in-house guests, these costs are moderately correlated to occupancy. Unless a particular hotel department incurs high expenses, use of telephone services by hotel employees is charged to this account. The remaining costs, which include salaries, wages, printing, and other expenses, are moderately fixed. The following table illustrates our forecast of telephone expense. ================================================================================ Table 10-11 Forecast of Telephone Expense - -------------------------------------------------------------------------------- 1997 Stabilized ----------------------------------------------------------------------- Total Telephone Expense (+000) $ 34 $ 34 Percent of Telephone Revenue 52.3% 54.4% Amount per Available Room $ 425 $ 429 Amount per Occupied Room $ 1.37 $ 1.49 - -------------------------------------------------------------------------------- Administrative and General Expense Administrative and general expense includes the salaries and wages of all administrative personnel who are not directly associated with a particular department. Expense items related to the management and operation of the property are also allocated to this category. Most administrative and general expenses are relatively fixed. The exceptions are cash overages and shortages; commissions on credit card charges; provision for doubtful accounts, which are moderately affected by the number of transactions or total revenue; and salaries, wages, and benefits, which are very slightly influenced by volume. HVS International, Mineola, New York Income Capitalization Approach 104 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= In recent years, several new items have been added to the administrative and general expense category. Human resources includes the cost of recruiting, relocating, and training personnel. Security consists of the cost of contract security for the property and related expenses. The general insurance category includes premiums for liability, fidelity, life, theft coverage, and business interruption insurance. Fire and extended-coverage insurance on the building and contents is a separate insurance expense category. Liability insurance covers third-party actions involving bodily injury and personal property, and is typically based on rooms receipts, meeting and banquet income, and food and beverage revenue. Factors that may have an impact on a hotel's liability expense include the size of the meeting, banquet, and restaurant facilities; the ratio between the amount of alcohol served and total food and beverage sales; the presence of a dance floor; a high-rise structure; a swimming pool; life safety support systems; and the guest transportation services provided by the hotel. The following table illustrates our forecast of administrative and general expense. ================================================================================ Table 10-12 Forecast of Administrative and General Expense - -------------------------------------------------------------------------------- 1997 Stabilized ------------------------------------------------------------------------- Total Administrative & General Expense (+000) $ 207 $ 210 Percentage of Total Revenue 11.3% 12.0% Amount per Available Room $2,588 $2,625 Amount per Occupied Room $ 8.36 $ 9.20 - -------------------------------------------------------------------------------- Management Fee Management expense consists of the basic fee paid to the type of company that is anticipated to operate the subject property. Some companies provide management services alone, while others also provide a brand name affiliation. When a management company has no brand identification, the property owner often acquires a franchise that provides the necessary image and recognition. Although most hotel management companies employ a fee schedule that includes a basic fee (usually a percentage of total revenue) and an incentive fee (usually a percentage of defined profit), the incentive portion is often subordinated to debt service and does not appear in a forecast of net income before debt service. Basic hotel management fees are almost always based on a percentage of total revenue, which means they have no fixed component. HVS International, Mineola, New York Income Capitalization Approach 105 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Although the incentive fee does not decrease the cash flow available for debt service, it does reduce the potential cash flow to equity, and must be accounted for in the valuation process. Generally, the most appropriate procedure for handling the impact of the incentive fee on the equity component is to use the projected net income before debt service and incentive fee, but adjust the equity dividend or yield rate upward to reflect this added management cost. The adjusted equity dividend and yield rates will be described later in this section. The subject property is operated by Remington Hotel Company, and management fees equal 3% of total revenues. Based on our review of the current market for management contracts, we are of the opinion that this fee is consistent with prevailing market terms. Applying this management fee structure to the projection of total revenue yields the following forecast of the subject property's management fee. ================================================================================ Table 10-13 Forecast of Management Fee - -------------------------------------------------------------------------------- 1997 Stabilized ------------------------------------------------------------------ Management Fees Expense (+000) $ 55 $ 52 - -------------------------------------------------------------------------------- Marketing Expense Marketing expense consists of all costs associated with advertising, sales, and promotion; these activities are intended to attract and retain customers. Marketing can be used to create an image, develop customer awareness, and stimulate patronage of a property's various facilities. The marketing category is unique in that all expense items, with the exception of fees and commissions, are totally controlled by management. Most hotel operators establish an annual marketing budget that sets forth all planned expenditures. If the budget is followed, total marketing expenses can be projected accurately. Marketing expenditures are unusual because although there is a lag period before results are realized, the benefits are often extended over a long period. Depending on the type and scope of the advertising and promotion program implemented, the lag time can be as short as a few weeks or as long as several years. However, the favorable results of an effective marketing campaign tend to linger, and a property often enjoys the benefits of concentrated sales efforts for many months. HVS International, Mineola, New York Income Capitalization Approach 106 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Marketing expense can be divided into five categories: sales, reservations, advertising and merchandising, other marketing activities, and fees and commissions. Together, these categories include all marketing efforts made by hotel personnel and outside parties. Marketing expenses are fixed with the exception of reservations, fees, and commissions, which are calculated as a percentage of rooms revenue. Based on the location of the subject property, the local market for transient accommodations, the competitive environment, and the hotel's anticipated market segmentation, we have developed the following marketing forecast using a fixed and variable component model. ================================================================================ Table 10-14 Forecast of Marketing Expense - -------------------------------------------------------------------------------- 1997 Stabilized ----------------------------------------------------------------- Total Marketing Expense (+000) $ 75 $ 76 Percentage of Total Revenue 4.1% 4.4% Amount per Available Room $ 942 $ 952 Amount per Occupied Room $3.04 $3.34 - -------------------------------------------------------------------------------- Franchise Fee Franchise expense represents the fees paid to Howard Johnson for the use of the company's name, trade marks, and service marks. The following table illustrates the projection of the subject property's franchise fee. ================================================================================ Table 10-15 Forecast of Franchise Fee - -------------------------------------------------------------------------------- 1997 Stabilized ------------------------------------------------------------------ Franchise Fees Expense (+000) $ 70 $ 67 - -------------------------------------------------------------------------------- Property Operations and Maintenance Property operations and maintenance expense is another expense category that is largely controlled by management. Except for repairs that are necessary to keep the facility open and prevent damage (e.g., plumbing, heating, and electrical items), most maintenance can be deferred for varying lengths of time. Maintenance is an accumulating expense. If management elects to postpone performing a required repair, they have not eliminated or saved the expenditure; they have only deferred payment until a later date. A lodging facility HVS International, Mineola, New York Income Capitalization Approach 107 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= that operates with a lower-than-normal maintenance budget is likely to accumulate a considerable amount of deferred maintenance. The age of a lodging facility has a strong influence on the required level of maintenance. A new or thoroughly renovated property is protected for several years by modern equipment and manufacturers' warranties. However, as a hostelry grows older, maintenance expenses escalate. A well-organized preventive maintenance system often helps delay deterioration, but most facilities face higher property operations and maintenance costs each year, regardless of the occupancy trend. The quality of initial construction can also have a direct impact on future maintenance requirements. The use of high-quality building materials and construction methods generally reduces the need for maintenance expenditures over the long term. Property operations and maintenance is considered an operating expense; as such, it includes only those components that can be expensed, rather than capitalized, under Internal Revenue Service regulations. For example, if a table leg is broken, the repair of that leg is considered an expense and is chargeable to property operations and maintenance. If the table is replaced, it becomes a capital expenditure and does not appear under the property operations and maintenance category. Appraisers account for capital replacement of items such as furniture and equipment in the reserve for replacement account, which is discussed later in this section. Property operations and maintenance costs are relatively fixed, and are projected as follows. ================================================================================ Table 10-16 Forecast of Property Operations and Maintenance Expense - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Total Property Oper. & Maint. Expense (+000) $ 112 $ 113 Percentage of Total Revenue 6.1% 6.5% Amount per Available Room $ 1,402 $ 1,417 Amount per Occupied Room $ 4.52 $ 4.98 - -------------------------------------------------------------------------------- Energy Expense The energy consumption of a lodging facility takes several forms, including water and space heating, air conditioning, lighting, cooking fuel, and other miscellaneous power requirements. The most common sources of hotel energy are electricity, natural gas, fuel oil, and steam. This category also includes the cost of water service. HVS International, Mineola, New York Income Capitalization Approach 108 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Total energy cost depends on the source and quantity of fuel used. Electricity tends to be the most expensive source, followed by oil and gas. Although all hotels consume a sizable amount of electricity, many properties supplement their energy requirements with less expensive sources, such as gas and oil, for heating and cooking. A large portion of a hostelry's energy consumption is relatively fixed. Restaurants, kitchens, public areas, and corridors must be continually lighted and climate-controlled, regardless of occupancy. The energy cost of an additional occupied room (i.e., a few hours of light, television, heat, or air conditioning) is minimal. The following table presents our forecast of the subject property's energy expense. ================================================================================ Table 10-17 Forecast of Energy Expense - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Total Energy Expense (+000) $ 119 $ 122 Percentage of Total Revenue 6.5% 7.0% Amount per Available Room $ 1,487 $ 1,527 Amount per Occupied Room $ 4.79 $ 5.36 - -------------------------------------------------------------------------------- Property Taxes The estimate of property taxes was detailed in a previous section of this report. The following table summarizes these projections. ================================================================================ Table 10-18 Forecast of Property Taxes - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Forecast Property Taxes (+000) $ 137 $ 144 - -------------------------------------------------------------------------------- Insurance Expense The insurance expense category consists of the cost of insuring the hotel and its contents against damage or destruction by fire, weather, sprinkler leakage, boiler explosion, plate glass breakage, and so forth. It does not include liability coverage, which is a component of administrative and general expense. Insurance rates are based on many factors, including building design and construction, fire detection and extinguishing equipment, fire district, distance from the firehouse, and the area's fire experience. Insurance expenses do not vary with occupancy. HVS International, Mineola, New York Income Capitalization Approach 109 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Based on historical levels, we project the subject property's insurance expense at approximately $26,000 in 1997 (the first projection period). In subsequent years, this amount is assumed to increase in tandem with inflation. The following table outlines our projection of insurance expense. ================================================================================ Table 10-19 Forecast of Insurance Expense - -------------------------------------------------------------------------------- 1997 Stabilized ---------------------------------------------------------------- Forecast Insurance (+000) $ 26 $ 27 - -------------------------------------------------------------------------------- Reserve for Replacement Furniture, fixtures, and equipment are essential to the operation of a lodging facility, and their quality often influences a property's class. This category includes all non-real estate items that are capitalized, rather than expensed. The furniture, fixtures, and equipment of a hotel are exposed to heavy use and must be replaced at regular intervals. The useful life of these items is determined by their quality, durability, and the amount of guest traffic and use. Periodic replacement of furniture, fixtures, and equipment is essential to maintain the quality, image, and income-producing potential of a lodging facility. Because capitalized expenditures are not included in the operating statement but nevertheless affect an owner's cash flow, an appraisal should reflect these expenses in the form of an appropriate reserve for replacement. Our industry experience indicates that a reserve for replacement of 3% to 5% of total revenue is generally sufficient to provide for the timely replacement of furniture, fixtures, and equipment. Because the reserve for replacement is based on a percentage of total revenue, it has no fixed component. Based on an analysis of comparable lodging facilities, we believe that a reserve for replacement of 4% of total revenue is sufficient to provide for the periodic replacement of the subject property's furniture, fixtures, and equipment. This amount is consistent with the reserve account contributions currently made by the hotel. The following table summarizes the projected reserve for replacement. HVS International, Mineola, New York Income Capitalization Approach 110 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-20 Forecast of Reserve for Replacement - -------------------------------------------------------------------------------- 1997 Stabilized -------------------------------------------------------------------- Reserve for Replacement Expense (+000) $ 73 $ 70 - -------------------------------------------------------------------------------- Ground Lease Despite the fee simple ownership of the subject property, the property is encumbered by an overlease agreement that was entered into on August 22, 1966. Ownership is required to pay Jacob Goldfarb and Malka R. Goldfarb $4,283 a month, or approximately $51,400 per annum. This contract has been renewed twice; the current term extends to November 25, 2014. Summary of Projections Based on the preceding analysis, we have formulated a forecast of income and expense. The table on the following page presents a detailed forecast through the stabilized year, including amounts per available room (PAR) and per occupied room (POR). For the purpose of comparison, this table also presents the subject property's most recent full year of operating history. The second table illustrates our ten-year forecast of income and expense in less detail. The forecasts pertain to calendar operating years beginning January 1, 1997, and are expressed in inflated dollars for each year. HVS International, Mineola, New York Income Capitalization Approach 111 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-21 Detailed Forecast of Income and Expense through the Stabilized Year and Most Recent Operating History, Howard Johnson Westbury, Jericho, New York - --------------------------------------------------------------------------------
Historical Operating Results -------------------------------------------- Calendar Years Ending: 1995 1997 Stabilized Number of Rooms: 80 80 80 Occupancy: 82.5% 85.0% 78.0% Average Rate: $65.29 $70.38 $73.20 Days Open: 365 365 365 Occupied Rooms: 24,094 %Gross PAR POR 24,820 %Gross PAR POR 22,776 - ----------------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $1,546 95.4% $19,331 $64.18 $1,747 95.5% $21,838 $70.39 $1,667 Telephone 61 3.7 757 2.51 65 3.6 813 2.62 63 Other Income 15 0.9 185 0.61 16 0.9 200 0.64 16 Total Revenues 1,622 100.0 20,273 67.31 1,828 100.0 22,850 73.65 1,746 - ----------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES * Rooms 300 19.4 3,751 12.45 367 21.0 4,588 14.79 367 Telephone 27 44.1 334 1.11 34 52.3 425 1.37 34 Total Dept. Expenses 327 20.1 4,084 13.56 401 21.9 5,013 16.16 401 - ----------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 1,295 79.9 16,188 53.75 1,427 78.1 17,838 57.49 1,345 - ----------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 192 11.8 2,395 7.95 207 11.3 2,588 8.34 210 Management Fee 49 3.0 608 2.02 55 3.0 688 2.22 52 Marketing 70 4.3 870 2.89 75 4.1 938 3.02 76 Franchise Fees 49 3.0 608 2.02 70 3.8 875 2.82 67 Property Oper. & Maint. 115 7.1 1,439 4.78 112 6.1 1,400 4.51 113 Energy 111 6.8 1,383 4.59 119 6.5 1,488 4.79 122 Total Operating Expenses 584 36.0 7,302 24.25 638 34.8 7,975 25.71 640 - ----------------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 711 43.9 8,886 29.50 789 43.3 9,863 31.79 705 - ----------------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 154 9.5 1,926 6.40 137 7.5 1,713 5.52 144 Insurance 19 1.2 234 0.78 26 1.4 325 1.05 27 Reserve for Replacement 65 4.0 811 2.69 73 4.0 913 2.94 70 Ground Lease 51 3.2 643 2.13 51 2.8 638 2.05 51 Total 289 17.9 3,613 12.00 287 15.7 3,588 11.56 292 - ----------------------------------------------------------------------------------------------------------------------------------- NET INCOME $422 26.0 5,272 $17.51 $502 27.6 $6,275 $20.23 $413 =================================================================================================================================== Telephone/Rooms 3.9% 3.7% 3.8% Other Income/Rooms 1.0% 0.9% 1.0%
Calendar Years Ending: Number of Rooms: Occupancy: Average Rate: Days Open: Occupied Rooms: %Gross PAR POR - ------------------------------------------------------------------- REVENUE Rooms 95.5% $20,838 $73.19 Telephone 3.6 788 2.77 Other Income 0.9 200 0.70 Total Revenues 100.0 21,825 76.66 - ------------------------------------------------------------------ DEPARTMENTAL EXPENSES * Rooms 22.0 4,588 16.11 Telephone 54.0 425 1.49 Total Dept. Expenses 23.0 5,013 17.61 - ------------------------------------------------------------------ DEPARTMENTAL INCOME 77.0 16,813 59.05 - ------------------------------------------------------------------ OPERATING EXPENSES Administrative & General 12.0 2,625 9.22 Management Fee 3.0 650 2.28 Marketing 4.4 950 3.34 Franchise Fees 3.8 838 2.94 Property Oper. & Maint. 6.5 1,413 4.96 Energy 7.0 1,525 5.36 Total Operating Expenses 36.7 8,000 28.10 - ------------------------------------------------------------------ HOUSE PROFIT 40.3 8,813 30.95 - ------------------------------------------------------------------ FIXED EXPENSES Property Taxes 8.2 1,800 6.32 Insurance 1.5 338 1.19 Reserve for Replacement 4.0 875 3.07 Ground Lease 2.9 638 2.24 Total 16.6 3,650 12.82 - ------------------------------------------------------------------ NET INCOME 23.7 $5,163 $18.13 ================================================================== - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 112 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-22 Ten-Year Forecast of Income and Expense, Howard Johnson Westbury, Jericho, New York ($+000) - --------------------------------------------------------------------------------
Calendar Years Ending: 1997 1998 1999 2000 2001 ------------------- -------------------- -------------------- ------------------- ------------------- Number of Rooms: 80 80 80 80 80 Occupied Rooms: 24,820 22,776 22,776 22,776 22,776 Occupancy: 85.0% % of 78.0% % of 78.0% % of 78.0% % of 78.0% % of Average Rate: $70.38 Gross $73.20 Gross $75.76 Gross $78.41 Gross $81.16 Gross - ---------------------------- ------------------- -------------------- -------------------- ------------------- ------------------- REVENUE Rooms $1,747 95.5% $1,667 95.5% $1,726 95.5% $1,786 95.5% $1,848 95.5% Telephone 65 3.6 63 3.6 65 3.6 67 3.6 69 3.6 Other Income 16 0.9 16 0.9 17 0.9 17 0.9 18 0.9 Total 1,828 100.0 1,746 100.0 1,808 100.0 1,870 100.0 1,935 100.0 - ---------------------------- ------------------- -------------------- -------------------- ------------------- ------------------- DEPARTMENTAL EXPENSES Rooms 367 21.0 367 22.0 380 22.0 393 22.0 407 22.0 Telephone 34 52.3 34 54.0 35 53.8 37 55.2 38 55.1 Total 401 21.9 401 23.0 415 23.0 430 23.0 445 23.0 - ---------------------------- ------------------- -------------------- -------------------- ------------------- ------------------- DEPARTMENTAL INCOME 1,427 78.1 1,345 77.0 1,393 77.0 1,440 77.0 1,490 77.0 - ---------------------------- ------------------- -------------------- -------------------- ------------------- ------------------- OPERATING EXPENSES Administrative & General 207 11.3 210 12.0 217 12.0 225 12.0 232 12.0 Management Fee 55 3.0 52 3.0 54 3.0 56 3.0 58 3.0 Marketing 75 4.1 76 4.4 79 4.4 82 4.4 84 4.3 Franchise Fees 70 3.8 67 3.8 69 3.8 71 3.8 74 3.8 Property Oper. & Maint. 112 6.1 113 6.5 117 6.5 121 6.5 126 6.5 Energy 119 6.5 122 7.0 126 7.0 131 7.0 135 7.0 Total 638 34.8 640 36.7 662 36.7 686 36.7 709 36.6 - ---------------------------- ------------------- -------------------- -------------------- ------------------- ------------------- HOUSE PROFIT 789 43.3 705 40.3 731 40.3 754 40.3 781 40.4 - ---------------------------- ------------------- -------------------- -------------------- ------------------- ------------------- FIXED EXPENSES Property Taxes 137 7.5 144 8.2 150 8.3 157 8.4 164 8.5 Insurance 26 1.4 27 1.5 28 1.5 29 1.6 30 1.6 Reserve for Replacement 73 4.0 70 4.0 72 4.0 75 4.0 77 4.0 Ground Lease 51 2.8 51 2.9 51 2.8 51 2.7 51 2.6 Total 287 15.7 292 16.6 301 16.6 312 16.7 322 16.7 - ---------------------------- ------------------- -------------------- -------------------- ------------------- ------------------- NET INCOME $502 27.6% $413 23.7% $430 23.7% $442 23.6% $459 23.7% ============================ =================== ==================== ==================== =================== =================== Calendar Years Ending: 2002 2003 2004 2005 2006 ------------------ ------------------ ------------------ ------------------- ------------------- Number of Rooms: 80 80 80 80 80 Occupied Rooms: 22,776 22,776 22,776 22,776 22,776 Occupancy: 78.0% % of 78.0% % of 78.0% % of 78.0% % of 78.0% % of Average Rate: $84.00 Gross $86.94 Gross $89.98 Gross $93.13 Gross $96.39 Gross - ---------------------------- ------------------ ------------------ ------------------ ------------------- ------------------- REVENUE Rooms $1,913 95.5% $1,980 95.5% $2,049 95.5% $2,121 95.5% $2,195 95.5% Telephone 72 3.6 74 3.6 77 3.6 80 3.6 82 3.6 Other Income 18 0.9 19 0.9 20 0.9 20 0.9 21 0.9 Total 2,003 100.0 2,073 100.0 2,146 100.0 2,221 100.0 2,298 100.0 - ---------------------------- ------------------ ------------------ ------------------ ------------------- ------------------- DEPARTMENTAL EXPENSES Rooms 421 22.0 436 22.0 451 22.0 467 22.0 483 22.0 Telephone 39 54.2 41 55.4 42 54.5 44 55.0 45 54.9 Total 460 23.0 477 23.0 493 23.0 511 23.0 528 23.0 - ---------------------------- ------------------ ------------------ ------------------ ------------------- ------------------- DEPARTMENTAL INCOME 1,543 77.0 1,596 77.0 1,653 77.0 1,710 77.0 1,770 77.0 - ---------------------------- ------------------ ------------------ ------------------ ------------------- ------------------- OPERATING EXPENSES Administrative & General 241 12.0 249 12.0 258 12.0 267 12.0 276 12.0 Management Fee 60 3.0 62 3.0 64 3.0 67 3.0 69 3.0 Marketing 87 4.3 90 4.3 94 4.4 97 4.4 100 4.4 Franchise Fees 77 3.8 79 3.8 82 3.8 85 3.8 88 3.8 Property Oper. & Maint. 130 6.5 135 6.5 139 6.5 144 6.5 149 6.5 Energy 140 7.0 145 7.0 150 7.0 155 7.0 161 7.0 Total 735 36.6 760 36.6 787 36.7 815 36.7 843 36.7 - ---------------------------- ------------------ ------------------ ------------------ ------------------- ------------------- HOUSE PROFIT 808 40.4 836 40.4 866 40.3 895 40.3 927 40.3 - ---------------------------- ------------------ ------------------ ------------------ ------------------- ------------------- FIXED EXPENSES Property Taxes 171 8.5 179 8.6 187 8.7 195 8.8 204 8.9 Insurance 31 1.5 32 1.5 33 1.5 34 1.5 35 1.5 Reserve for Replacement 80 4.0 83 4.0 86 4.0 89 4.0 92 4.0 Ground Lease 51 2.5 51 2.5 51 2.4 51 2.3 51 2.2 Total 333 16.5 345 16.6 357 16.6 369 16.6 382 16.6 - ---------------------------- ------------------ ------------------ ------------------ ------------------- ------------------- NET INCOME $475 23.9% $491 23.8% $509 23.7% $526 23.7 $545 23.7% ============================ ================== ================== ================== =================== ===================
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 113 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The conversion of a property's projected net income into an estimate of value is based on the premise that investors typically purchase real estate with a small amount of equity cash (25% to 40%) and a large amount of mortgage financing (60% to 75%). The amounts and terms of available mortgage financing and the rates of return that are required to attract sufficient equity capital form the basis for allocating the net income between the mortgage and equity components and deriving a value estimate. Mortgage Component Data for the mortgage component may be developed from statistics of actual hotel mortgages made by long-term lenders. The American Council of Life Insurance, which represents 20 large life insurance companies, publishes quarterly information pertaining to the hotel mortgages issued by its member companies. The following table summarizes the average mortgage interest rates of the hotel loans made by these lenders. In addition, the A corporate bond yield (as reported by Moody's Bond Record) is shown for the purpose of comparison. HVS International, Mineola, New York Income Capitalization Approach 114 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-23 Average Mortgage Interest Rates and Average A Corporate Bond Yields - -------------------------------------------------------------------------------- Average A Average Corporate Period Interest Rate Bond Yield - -------------------------------------------------------------------------------- 1st Quarter 1996 7.79 % 7.37 % 4th Quarter 1995 8.44 7.28 3rd Quarter 1995 8.61 7.67 2nd Quarter 1995 9.25 7.87 1st Quarter 1995 9.14 8.50 3rd Quarter 1994 9.64 8.48 2nd Quarter 1994 9.38 8.28 4th Quarter 1993 9.38 7.80 3rd Quarter 1993 8.41 7.28 2nd Quarter 1993 10.53 9.65 4th Quarter 1992 9.43 8.48 3rd Quarter 1992 9.99 8.38 2nd Quarter 1992 9.47 8.79 1st Quarter 1992 10.02 8.81 4th Quarter 1991 10.49 8.97 3rd Quarter 1991 10.03 9.29 2nd Quarter 1991 10.75 9.45 3rd Quarter 1990 10.47 9.89 2nd Quarter 1990 10.58 9.83 4th Quarter 1989 9.96 9.42 3rd Quarter 1989 9.55 9.46 2nd Quarter 1989 10.54 9.93 1st Quarter 1989 10.39 10.16 4th Quarter 1988 10.07 10.03 3rd Quarter 1988 10.66 10.51 2nd Quarter 1988 10.09 10.33 4th Quarter 1987 10.41 10.45 3rd Quarter 1987 10.00 9.95 2nd Quarter 1987 9.81 9.46 1st Quarter 1987 9.43 9.19 4th Quarter 1986 9.44 9.55 3rd Quarter 1986 9.56 9.71 2nd Quarter 1986 9.80 9.91 1st Quarter 1986 10.99 10.62 Sources: American Council of Life Insurance; Moody's Bond Record - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 115 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Because of the six- to nine-month lag time in reporting and publishing hotel mortgage statistics, it is necessary to update this information to reflect current lending practices. Research by HVS International indicates that there is a close mathematical relationship between the average interest rate of a hotel mortgage and the concurrent yield on an average A corporate bond. Through a regression analysis, this relationship is expressed as follows. Y = 2.76078 + 0.782280 X Where: Y = Estimated Hotel/Motel Mortgage Interest Rate X = Current Average A Corporate Bond Yield (Coefficient of correlation is 96.4%) The yield on A corporate bonds for the third quarter of 1996, as reported by Moody's Bond Record, was 7.91%. Using a factor of 7.91 in the equation presented above produces an estimated hotel/motel interest rate of 8.95%. In addition to the mortgage interest rate estimate derived from this regression analysis, HVS International constantly monitors the terms of hotel mortgage loans made by our institutional lending clients. In the past year, we have noted an increase in the availability of debt financing, and many lenders have returned to the market. The current level of lending activity represents a significant increase from the restricted environment of the early 1990s. Nonetheless, the market for hotel mortgage loans remains somewhat tight, particularly when compared to the conditions that prevailed in the mid-to late 1980s. In the current lending climate, strong hotel projects that are structured on an economic basis can secure mortgage financing at interest rates ranging from 8% to 11%, depending on the property, location, affiliation, and operator. In the 1980s, when hotel mortgages were widely available, loan-to-value ratios typically ranged from 75% to 80%. Amortization schedules were generally based on 30 years, although the term of the loan was more likely to be seven to ten years. The few loans that were underwritten in the early 1990s were based on far more stringent parameters: loan-to-value ratios declined to a range of 50% to 65%, and amortization periods of 20 to 25 years were most common. With the recent re-emergence of hotel financing, loan-to-value requirements and amortization schedules have loosened somewhat. At present, we find that lenders who are active in the market are using loan-to-value ratios of HVS International, Mineola, New York Income Capitalization Approach 116 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 65% to 75%, and amortization periods of 25 to 30 years. The exact terms offered depend on specific factors, such as the property's location, the age and quality of the physical facility, local hostelry market conditions, and (perhaps more significantly) the profile of the borrower. The strongest projects typically command the highest loan-to-value ratios. Based on the preceding analysis of the current lodging industry mortgage market and adjustments for specific factors, such as the property's location and conditions in the local hotel market, it is our opinion that a 9.5% interest, 20-year amortization mortgage with a 0.111856 constant is appropriate for the subject property. We believe that a mortgage lender will lend up to 70% of the hotel's market value as determined by this appraisal. Equity Component The remaining capital required for a hotel investment generally comes from the equity investor. The rate of return that an equity investor expects over a ten-year holding period is known as the equity yield. Unlike the equity dividend, which is a short-term rate of return, the equity yield specifically considers a long-term holding period (generally ten years), annual inflation- adjusted cash flows, property appreciation, mortgage amortization, and proceeds from a sale at the end of the holding period. It is difficult to quantify the rate of return required by equity investors who are seeking to purchase hotel properties. To establish an appropriate equity yield rate, HVS International uses two sources of data: past appraisals and investor interviews. Past Appraisals - During the past 12 months, HVS International has appraised more than 400 hotels, including properties located in most major national markets. Each appraisal used a similar mortgage-equity approach in which income is projected and then discounted to a current value at rates reflecting the cost of debt and equity capital. In the case of hotels that were sold subsequent to our valuations, we are able to determine an appropriate equity yield rate by excluding incentive management fees from the projection of income and expense, inserting the projection into a valuation model, and adjusting the appraised value to reflect the actual sales price by modifying the return assumptions. The following table shows a representative sample of hotels that were sold shortly after we appraised them, along with the imputed equity return based on our valuation approach. HVS International, Mineola, New York Income Capitalization Approach 117 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-24 Sample of Hotels Sold - --------------------------------------------------------------------------------
No. of Date of Overall Total Property Hotel City and State Rooms Sale Sales Price Rate Yield - ------------------------------------------------------------------------------------------------------------------------- Ritz-Carlton Phoenix, AZ 281 2/94 $23,000,000 11.0% 14.6% Marriott Marina Fort Lauderdale, FL 580 2/94 40,000,000 12.2 16.4 Holiday Inn Edison, NJ 274 3/94 11,803,000 7.8 17.0 Crescent Hotel Phoenix, AZ 342 3/94 26,000,000 6.5 7.2 Checkers Hotel Kempinski Los Angeles, CA 173 4/94 12,750,000 3.0 18.3 Best Western Fireside Inn Cambria, CA 46 4/94 3,377,000 11.7 15.8 Phoenician Resort Phoenix, AZ 580 4/94 224,000,000 6.6 9.3 Newark-Fremont Hilton Newark, CA 300 5/94 8,950,000 8.8 14.9 Radisson Inn Orlando, FL 299 5/94 11,150,000 12.9 18.0 Westin Kauai Lihue, Kauai, HI 840 6/94 97,400,000 (1.9) 8.1 Residence Inn Binghamton, NY 72 6/94 6,325,000 10.8 13.9 Hotel Millenium New York, NY 561 6/94 75,000,000 9.5 14.1 Best Western Otay Valley Chula Vista, CA 120 7/94 2,350,000 13.2 21.1 Hampton Inn Islandia, NY 121 7/94 6,572,000 12.6 16.6 Hampton Inn Willow Grove, PA 150 7/94 10,220,000 11.0 14.3 Hampton Inn West Palm Beach, FL 136 7/94 4,220,000 10.8 10.8 Hampton Inn Naples, FL 107 7/94 5,700,000 11.4 11.5 Hampton Inn Albany, NY 126 7/94 9,204,000 9.3 11.5 Marriott Hotel South Bend, IN 299 7/94 11,500,000 10.5 13.2 Marriott SFO Burlingame, CA 684 8/94 61,700,000 10.2 13.2 Westfields Conference Center Chantilly, VA 340 8/94 46,000,000 12.3 15.9 Radisson Mark Resort Vail, CO 349 9/94 25,200,000 8.9 15.8 Marriott East Side New York, NY 664 10/94 55,000,000 8.5 9.7 Marriott Resort Vail, CO 349 10/94 25,200,000 14.2 18.9 Marriott Quorum Addison, TX 547 10/94 29,815,000 13.5 18.2 Sheraton Hotel Hasbrouck Heights, NJ 338 11/94 10,450,000 18.3 21.1 Sheraton Inn Napa, CA 191 12/94 9,968,000 8.9 13.7 Marriott Fisherman's Wharf San Francisco, CA 255 12/94 27,755,000 10.8 13.4 Marriott Hotel Portland, OR 503 12/94 45,000,000 12.9 17.4 Radisson Inn Springfield, MO 199 12/94 5,800,000 8.2 10.1 Williamsburg Hilton Williamsburg, VA 291 12/94 15,000,000 15.4 19.0 Marriott Tech Center Denver, CO 625 12/94 36,000,000 13.7 16.4 Holiday Inn Sunspree Singer Island, FL 222 12/94 11,900,000 8.6 10.6 The Plaza New York, NY 805 6/95 325,000,000 7.0 11.0 Fullerton Suites Fullerton, CA 96 5/95 5,000,000 12.9 18.7 Residence Inn Baton Rouge, LA 80 6/95 6,518,000 12.7 14.8 Residence Inn Overland Park, KS 112 6/95 8,500,000 8.9 14.7 Residence Inn Des Moines, IA 112 6/95 7,660,000 9.8 14.1 Residence Inn Hunt Valley, MD 96 6/95 6,580,000 12.3 13.6 Residence Inn Kansas City, MO 112 6/95 6,560,000 10.4 13.2 Residence Inn Lincoln, NE 120 6/95 7,100,000 10.0 13.7 Embassy Suites Schaurmburg, IL 209 12/95 17,800,000 10.0 13.5 Marriott Hotel Andover, MA 293 12/95 24,000,000 9.7 13.5 Doubletree Suites Valley Forge, PA 229 12/95 28,500,000 10.7 14.2 Marriott Hotel Tysons Corner, VA 390 12/95 41,100,000 10.7 13.1 Marriott Hotel Warner Center, CA 461 12/95 57,900,000 6.2 11.6 Hilton at the Club Pleasanton, CA 294 12/95 22,000,000 10.5 13.4
Source: HVS International - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 118 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Investor Interviews - HVS International is in constant contact with numerous institutional and individual hotel investors. This source of equity funds has definite return requirements that can be expressed as an equity yield rate based on a ten-year projection of net income before incentive management fees but after debt service. Based on our surveys and investor interviews, the following table illustrates the range of equity yields generally required by individual and institutional investors. ================================================================================ Table 10-25 Equity Yield Requirements - -------------------------------------------------------------------------------- Source Equity Yield Requirement ------ ------------------------ Individual 20% - 24% Institution 18% - 22% - -------------------------------------------------------------------------------- Based on the assumed 70% loan-to-value ratio, the risk inherent in achieving the projected income stream, and the age, condition, and anticipated market position of the subject property, it is our opinion that an equity investor is likely to require an equity yield rate of 22% before payment of incentive management fees. This estimate is well supported by the equity yield requirements presented previously. Terminal Capitalization Rate Inherent in this valuation process is the assumption of a sale at the end of the ten-year holding period. The estimated reversionary sales price as of that date is calculated by capitalizing the projected 11th-year net income by an overall terminal capitalization rate. A percentage for the seller's brokerage and legal fees is deducted from this sales price, and the net proceeds to the equity interest (also known as the equity residual) are calculated by deducting the outstanding mortgage balance from the reversion. To estimate a property's reversionary value, the appraiser must select a terminal capitalization rate and an allocation for brokerage and legal fees. The terminal capitalization rate is an overall rate that is applied to one stabilized year, and thus it inherently incorporates the cost of debt and equity capital. The terminal capitalization rate can be derived through a mortgage and equity band of investment technique which calculates the weighted average cost of the capital used in a hotel investment. Combining the mortgage financing terms derived previously (namely, a 70% loan-to-value ratio and a 0.111856 debt service constant) with a cash-on-cash equity dividend rate of 12% produces the following overall capitalization rate. HVS International, Mineola, New York Income Capitalization Approach 119 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Percent of Rate of Weighted Value Return Average ---------------- --------------- ------------- Mortgage 0.70 X 0.111856 = 0.07830 Equity 0.30 X 0.130000 = 0.03900 ------------- Overall Capitalization Rate 0.11730 Because this overall rate will be used to capitalize net income ten years from the date of value, an upward adjustment is appropriate to reflect the uncertainty inherent in this extended period. For the purpose of this valuation, we will use a terminal capitalization rate of 11%. As a point of reference, the terminal capitalization rate can be compared to the going-in rate implied by the subject property's estimated value. The going-in rate reflects the capitalization rate that would be applicable if the hotel were operating at a stabilized level as of the date of value. This rate is calculated by dividing the stabilized net income (expressed in current dollars as of the date of value) by the value indicated by the income capitalization approach. Generally, the terminal capitalization rate is approximately 100 to 200 basis points above the going-in rate. Summary of Valuation Variables The following table summarizes the valuation variables that have been used to estimate the subject property's value via the income capitalization approach. ================================================================================ Table 10-26 Summary of Valuation Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Ten-Year Forecast Loan-To-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.111856 Equity Yield Ye 22.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 11.0% - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 120 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Valuation of the Mortgage and Equity Components The valuation of the mortgage and equity components is accomplished through use of an algebraic equation that calculates the exact amount of debt and equity that the hotel will be able to support based on the anticipated cash flow (derived from the forecast of income and expense) and the specific return requirements demanded by the mortgage lender (interest) and the equity investor (equity yield). The equation and the calculations associated with this simultaneous valuation formula are set forth as an addendum to this report. Using the variables summarized above, we estimate the value of the subject property via the income capitalization approach at roundly $3,700,000. Proof of Value The value is proven by calculating the yields to the mortgage and equity components during the projection period. If the mortgagee achieves a 9.5% yield and the equity yield is 22%, then $3,700,000 is the correct value by the income capitalization approach. Using the assumed financial structure set forth in the previous calculations, market value can be allocated between the debt and equity as follows. Mortgage Component (70%) $2,596,000 Equity Component (30%) 1,113,000 -------------- Total $3,709,000 The annual debt service is calculated by multiplying the mortgage component by the mortgage constant. Mortgage Component $2,596,000 Mortgage Constant 0.111856 --------------- Annual Debt Service $290,378 (Say) $290,000 The cash flow to equity is calculated by deducting the debt service from the projected net income before debt service. HVS International, Mineola, New York Income Capitalization Approach 121 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-27 Forecast of Net Income to Equity - -------------------------------------------------------------------------------- Net Income Available for Total Annual Net Income Year Debt Service Debt Service to Equity - ------------------------------------------------------------------------------- 1997 $ 502,000 - $ 290,000 = $ 212,000 1998 413,000 - 290,000 = 123,000 1999 430,000 - 290,000 = 140,000 2000 442,000 - 290,000 = 152,000 2001 459,000 - 290,000 = 169,000 2002 475,000 - 290,000 = 185,000 2003 491,000 - 290,000 = 201,000 2004 509,000 - 290,000 = 219,000 2005 526,000 - 290,000 = 236,000 2006 545,000 - 290,000 = 255,000 - -------------------------------------------------------------------------------- The equity residual at the end of the tenth year is calculated as follows. Reversionary Value ($564,000 /0.110) $5,127,000 Less: Brokerage and Legal Fees 154,000 Mortgage Balance 1,870,000 --------------- Net Sale Proceeds to Equity $3,103,000 The overall property yield (before debt service), the yield to the lender, and the yield to the equity position have been calculated by computer with the following results. HVS International, Mineola, New York Income Capitalization Approach 122 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-28 Overall Property Yields - -------------------------------------------------------------------------------- Projected Yield (Internal Rate of Return) Position Value Over 10-Year Holding Period --------------------------------------------------------------------- Total Property $3,709,000 14.4% Mortgage 2,596,000 9.4 Equity 1,113,000 22.0 Note: Whereas the mortgage constant and value are calculated on the basis of monthly mortgage payments, the mortgage yield in this proof assumes single annual payments. As a result, the proof's derived yield may be slightly less than that actually input. - -------------------------------------------------------------------------------- The following tables demonstrate that the property receives its anticipated yields, proving that the $3,700,000 value is correct based on the assumptions used in this approach. ================================================================================ Table 10-29 Total Property Yield - -------------------------------------------------------------------------------- Net Income before Present Worth of $1 Discounted Year Debt Service Factor @ 14.4% Cash Flow - -------------------------------------------------------------------------------- 1997 $ 502,000 x 0.874288 = $ 439,000 1998 413,000 x 0.764379 = 316,000 1999 430,000 x 0.668288 = 287,000 2000 442,000 x 0.584276 = 258,000 2001 459,000 x 0.510825 = 234,000 2002 475,000 x 0.446608 = 212,000 2003 491,000 x 0.390464 = 192,000 2004 509,000 x 0.341378 = 174,000 2005 526,000 x 0.298463 = 157,000 2006 5,518,000 * x 0.260942 = 1,440,000 ------------- Total Property Value $ 3,709,000 *10th year net income of $545,000 plus sales proceeds of $ 4,973,000 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 123 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-30 Mortgage Component Yield - -------------------------------------------------------------------------------- Total Annual Present Worth of $1 Discounted Year Debt Service Factor @ 9.4% Cash Flow - -------------------------------------------------------------------------------- 1997 $ 290,000 x 0.914400 = $ 265,000 1998 290,000 x 0.836128 = 242,000 1999 290,000 x 0.764555 = 222,000 2000 290,000 x 0.699110 = 203,000 2001 290,000 x 0.639266 = 185,000 2002 290,000 x 0.584545 = 170,000 2003 290,000 x 0.534508 = 155,000 2004 290,000 x 0.488754 = 142,000 2005 290,000 x 0.446917 = 130,000 2006 2,161,000 * x 0.408661 = 883,000 ---------------- Value Of Mortgage Component $ 2,597,000 *10th year debt service of $290,000 plus outstanding mortgage balance of $1,870,000 - -------------------------------------------------------------------------------- ================================================================================ Table 10-31 Equity Component Yield - -------------------------------------------------------------------------------- Net Income Present Worth of $1 Discounted Year to Equity Factor @ 22.0% Cash Flow - -------------------------------------------------------------------------------- 1997 $ 212,000 x 0.819487 = $ 174,000 1998 123,000 x 0.671559 = 83,000 1999 140,000 x 0.550333 = 77,000 2000 152,000 x 0.450991 = 69,000 2001 169,000 x 0.369581 = 62,000 2002 185,000 x 0.302867 = 56,000 2003 201,000 x 0.248195 = 50,000 2004 219,000 x 0.203393 = 45,000 2005 236,000 x 0.166678 = 39,000 2006 3,358,000 * x 0.136590 = 459,000 -------------- Value of Equity Component $ 1,114,000 *10th year net income to equity of $255,000 plus sales proceeds of $ 3,103,000 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 124 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Valuation Method Two: Discounted Cash Flow The total property yield derived from the previous valuation method was 14.38%. After reviewing the total property yields indicated by recent hotel sales, which ranged from 6% to 18%, it is our opinion that a 14% discount factor would be appropriate for the Howard Johnson Westbury. The following table illustrates the discounted cash flow analysis using a 14% discount factor. ================================================================================ Table 10-32 Discounted Cash Flow Analysis - -------------------------------------------------------------------------------- Discount Net Factor Discounted Calendar Year Income @ 14.0% Cash Flow - --------------------------------------------------------------------------- 1997 $502,000 0.87719 $440,351 1998 413,000 0.76947 317,790 1999 430,000 0.67497 290,238 2000 442,000 0.59208 261,699 2001 459,000 0.51937 238,390 2002 475,000 0.45559 216,404 2003 491,000 0.39964 196,222 2004 509,000 0.35056 178,435 2005 526,000 0.30751 161,749 2006 5,518,455 * 0.26974 1,488,569 Estimated Market Value: $3,789,847 (Say:) $3,800,000 Reversion Analysis 11th Year's Net Income $564,000 Capitalization Rate 11.0% Total Sales Proceeds $5,127,273 Less: Broker & Legal @ 3.0% 153,818 ---------------- Net Sales Proceeds $4,973,455 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 125 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Conclusion Based on our extensive experience in the hotel industry and comprehensive support provided by literature published by the Appraisal Institute, it is our opinion that the valuation procedure embodied by Method One most closely reflects the investment rationale of typical hotel buyers. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis and Valuations,(15) Method Two (which discounts the projected net income and reversion using an overall discount rate, or total property yield) "does not consider the impact of mortgage debt, leverage and the specific equity demands of typical hotel investors. This technique is simple but less reliable because the derivation of the discount rate has little support." In light of this consideration, we have relied on the $3,700,000 value conclusion indicated by Method One. (15) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. HVS International, Mineola, New York Sales Comparison Approach 126 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 11. Sales Comparison Approach The sales comparison approach is based on the assumption that an informed purchaser will pay no more for a property than the cost to acquire an existing property with equal utility. This approach estimates market value by considering the sales prices indicated by recent transactions involving properties that are similar to the property being appraised. Dissimilarities are resolved with appropriate adjustments; these differences may pertain to the date of sale, the age of the property, location, construction, condition, layout, equipment, size, or external economic factors. The reliability of the sales comparison approach depends on three factors: 1. the availability of timely, comparable sales data; 2. an understanding of the true terms of the sales and the motivation of the buyer and seller; 3. the degree of comparability, or the extent of the adjustments needed to reflect differences between the subject property and the comparable property. In appraising lodging facilities, it is often difficult to find an adequate number of recent sales involving hotels that are truly comparable to the subject property. Consequently, it may be necessary to consider transactions involving properties in different market areas, and the required adjustments greatly diminish the reliability of the conclusions. Moreover, it is virtually impossible for an observer to determine the true motivations of the buyers and sellers involved in transactions. Hotel acquisition often represents a highly ego-driven process in which a number of external, non-market factors influence the purchase price. Unless the appraiser can quantify these influences, there is no way of knowing whether the purchase price paid actually reflects market value. A final consideration is the degree of similarity between the subject property and the comparable; in most cases, the differences are significant enough to require numerous subjective and unsubstantiated adjustments. Each adjustment represents a potential for error, HVS International, Mineola, New York Sales Comparison Approach 127 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= and thus diminishes the reliability of this approach. As a result of these shortcomings, the use of the sales comparison approach in valuing hotels is primarily as a check against the value indicated by the income capitalization approach. Hotel values declined in many areas of the country during the late 1980s and early 1990s, although a rebound began in 1994 and 1995. The downturn, which began in most markets in 1988, was largely attributable to lower operating incomes caused by an oversupply of new hotel rooms constructed during the mid-1980s. Overbuilding resulted in flat or declining average rates and occupancies, which caused revenues to fall. A number of other factors exacerbated the situation. The national recession caused a drop in demand in many markets during the early 1990s, and the Persian Gulf War created a virtual freeze on travel in the beginning of 1991, further limiting hotel demand. Operating costs continued to rise despite poor market conditions, resulting in a decline in the net operating income of hotels throughout the nation. Because operating costs have a large fixed component, many lodging facilities experienced precipitous drops in net income. As bottom-line profits eroded, many hotels were unable to meet debt service, and hundreds of properties entered foreclosure or bankruptcy. Lenders and government agencies soon became hotel owners. Because most financial institutions were preoccupied with their distressed real estate, very little mortgage capital was available, and the nation suffered from a well-publicized credit crunch. Most hotel transactions that occurred during the early 1990s were financed by the property owners, who, in most cases, were lenders. In the early 1990s, the primary market participants were owner-operators with the expertise to turn around under-performing properties. Hotels were out of favor with passive investors as a result of the industry's poor operating performance and the uncertainty of future appreciation. The wide disparity in buyer and seller expectations also limited the number of transactions. Many sellers were unwilling to accept the fact that the market value of their hotel investments had declined below the cost of the project or the original investment. Moreover, many owners were faced with a significant tax burden upon sale, further reducing their willingness to settle for a price that was below the original acquisition cost. As a result of these market forces, there was very little sales activity involving large, high-quality hotels. The primary difficulty was the lack of HVS International, Mineola, New York Sales Comparison Approach 128 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= properties available for sale; owners who were not forced to sell opted to wait for prices to recover. The few hotels that did enter the market generally attracted 15 to 20 interested bidders, mostly consisting of owner-operators. As a result of the competition for these few assets, the prices of better-quality hotels began to escalate rapidly. In response, more sellers have been encouraged to place their products on the market. An indicator of this market trend is the number of hotel sales that have occurred during the past few years. HVS International tracks major hotel transactions of more than $10,000,000 on an annual basis. In 1992, the number of major transactions was 67; a slightly lower level of 52 was registered in 1993. This total increased significantly (to 92) in 1994, and the 1995 total is estimated to have been 104. In tandem with escalating prices, hotels are again being considered by traditional financing sources, which had virtually abandoned the hospitality industry by the early 1990s. Although many lenders are still approaching the market with a high degree of caution, it is now possible to obtain third-party financing for hotel transactions. The mortgage loans that are now being made are subject to fairly stringent requirements: loan-to-value ratios remain in the 65% to 75% range. The qualification of the borrower is also a crucial consideration for most lenders. We believe that the upward trend in both pricing and sales activity will continue as financing becomes more available and additional buyers (particularly passive investors) enter the market. Consequently, it is important to consider the date of the transactions used in the sales comparison approach. When the comparable sales are not recent enough to provide an accurate picture of the current market, it may be necessary to make upward adjustments to the values indicated by the sales comparison and income capitalization approaches in recognition of the recent escalation. Comparable Sales Based on information provided by the Hospitality Market Data Exchange and compiled by the six offices of HVS International, the following transactions involved hotels that appear to have some degree of comparability to the subject property. HVS International, Mineola, New York Sales Comparison Approach 129 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #1: Property: Quality Inn Location: Woodbury, New York Date of Sale: August, 1995 Sales Price: $2,900,000 Grantor: The Estate of Frederick Phillips, et al. Grantee: Woodbury Realty Associates Year Opened: 1961 Number of Rooms: 85 Price per Room: $34,118 Confirmed By: Goodman Marks Associates Comments: This property is located on Jericho Turnpike in Woodbury. The purchase price includes the furniture, fixtures, and equipment, and the property is subject to a long-term lease for a restaurant on the premises. Sale #2: Property: Comfort Inn Location: 7625 Imperial Way Fogelsville, Pennsylvania Date of Sale: March, 1995 Sales Price: $7,000,000 Grantor: Solow Hotel Corporation Grantee: Innkeepers USA, L.P. Year Opened: 1990 Number of Rooms: 127 Price per Room: $55,118 Confirmed By: Pratt, White, and Whitney, Real Estate Appraisers and Consultants HVS International, Mineola, New York Sales Comparison Approach 130 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #3: Property: Comfort Inn Location: 629 Frontage Road Augusta, Georgia Date of Sale: May, 1995 Sales Price: $6,000,000 Grantor: International Management & Investment Corporation Grantee: Winston Hotels Year Opened: 1989 Number of Rooms: 123 Price per Room: $48,780 Confirmed By: Schultz, Carr, Bissette & Associates Comments: The purchaser reportedly paid a premium for this property in order to obtain the remaining properties in the portfolio. Sale #4: Property: Hampton Inn Location: 6109 Glenwood Avenue Raleigh, North Carolina Date of Sale: May, 1995 Sales Price: $6,700,000 Grantor: IMIC (International Management and Investment Corporation). Grantee: Winston Hotels, Inc. Year Opened: 1986 Number of Rooms: 141 Price per Room: $47,518 Confirmed By: Schultz, Carr, Bissette & Associates Comments: The property features an outdoor swimming pool. HVS International, Mineola, New York Sales Comparison Approach 131 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= In addition to considering the preceding recent transactions, we have also reviewed the sale of the subject property, which occurred in 1994. The details of this transaction are summarized as follows. Subject Property: Property: Howard Johnson Westbury Location: Jericho, NY Date of Sale: May, 1994 Sales Price: $3,148,818 Grantor: Northeast Hotel Associates Grantee: Westbury New York Hotel Limited Partnership (an entity controlled by Ashford Financial Corporation) Year Opened: 1967 Number of Rooms: 80 Price per Room: $39,360 Comments: The sales price represents the allocated purchase price for the property and included an amount equivalent to $363,177 allocated to upgrade the facility subsequent to the sale. The renovation costs included capital expenditures for 1994 and 1995. In analyzing the sale of the subject property, it is important to consider the terms and conditions pertaining to the transaction. The subject property was acquired by Ashford Financial Corporation from Nippon Credit Bank, Ltd. in March of 1994 as part of a purchase of a mortgage loan secured by 15 hotel properties. The outstanding principal balance of the nonperforming mortgage loan at the time of acquisition was $72,840,000, and the purchase price was $18,730,000. At the time of the closing, the mortgage loan was the subject of a settlement agreement between Nippon Credit Bank, Ltd. and Northeast Hotel Association, Inc., which was the owner of the subject property. The settlement agreement called for the conveyance of property deeds in lieu of foreclosure as well as a cash payment of $2,000,000 for the settlement of guaranty obligations. The above-listed price represents an allocation of the total package price rather than a negotiated value for this single asset. Based on our understanding of the terms of this transaction, we do not believe that this sale was reflective of the market value of the individual hotel. HVS International, Mineola, New York Sales Comparison Approach 132 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The relevance of the previous transaction involving the subject property is also undermined by the material change in market conditions that has occurred since the date of this sale. Areawide occupancy and average rate have improved dramatically in the intervening months, and are forecast to continue this positive trend. As previously discussed, the market for hotel investments has also improved significantly because of changes in lender and investor attitudes. Finally, the property itself has undergone a significant renovation, with approximately $370,000 spent on upgrading the facilities and amenities. For these reasons, we are of the opinion that the May, 1994, sale involving the subject property is not a reliable indicator of the current value of the hotel. Conclusion Although the sales comparison approach may be useful in providing a value range and reflecting certain market characteristics, its applicability is limited by the numerous possible points of difference between the subject property and other hotels that have sold in recent years. These factors may include location, access, size, services and facilities offered, market conditions, chain affiliation, market orientation, management, rate structure, age, physical condition, date of sale, the highest and best use of the land, and the anticipated profitability of the operation. Circumstances surrounding a sale, such as financing terms, tax considerations, income guarantees, sales of partial interests, duress on the part of the buyer or seller, or a particular deal structure can also cause a disparity between the sales price and pure market value. Moreover, it is often difficult to determine the marketing periods that were necessary to consummate the transactions. It is extremely difficult to quantify the appropriate adjustment factors accurately because of their number and complexity, as well as the difficulty in obtaining specific, detailed information. Any attempt to manipulate the necessary adjustments is insupportable and purely speculative. Because appraisers are expected to reflect the analytical processes and actions of typical buyers and sellers rather than to create a highly subjective valuation approach, the investment rationale of hotel owners is an essential consideration. As specialists in the valuation of hotels, we find that typical buyers purchase properties based on a thorough analysis of the anticipated economic benefits of property ownership, rather than on historical sales data. In light of these factors, it is our opinion that the sales comparison approach is unsuitable for indicating a specific estimate of the subject property's market value; however, this approach may indicate a range of values that can HVS International, Mineola, New York Sales Comparison Approach 133 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= be used to test the reasonableness of the value indicated by the income capitalization approach. Excluding the sale of the subject property, the sales prices range from approximately $34,100 to $55,100 per room, or roundly $2,700,000 to $4,400,000 for the 80-unit subject property. The income capitalization approach indicates a value of $3,700,000, which falls within this range. HVS International, Mineola, New York Cost Approach 134 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 12. Cost Approach The cost approach is founded on the principle of substitution, which implies that no prudent person will pay more for a property than the amount to acquire a site and construct a building of equal desirability and utility without undue delay. This approach estimates market value by first calculating the current cost of replacing the improvements. Appropriate deductions are made for depreciation resulting from physical deterioration, functional obsolescence, and external (economic) obsolescence, and the land value is added to the depreciated replacement cost to provide an estimate of market value. The cost approach employs the following steps. 1. The current replacement or reproduction cost is estimated. 2. Land value is estimated using techniques such as allocation, extraction, or ground rent capitalization. 3. Accrued depreciation, which can be divided into physical deterioration, functional obsolescence, and external obsolescence, is estimated. 4. Total depreciation is deducted from the subject property's replacement cost, and the land value is added to arrive at an estimate of value via the cost approach. When forming their purchase decisions regarding existing properties, market participants tend to consider the cost of developing a new hotel with optimal physical and functional utility. External conditions, such as the depressed market for real estate (and hotels in particular), can cause a property to be worth less than its replacement cost as new. The task of estimating the loss in value resulting from incurable functional and external obsolescence is highly subjective. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements age and begin to deteriorate, the loss in value resulting from physical obsolescence HVS International, Mineola, New York Cost Approach 135 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= becomes increasingly difficult to quantify accurately. Loss in value attributable to functional obsolescence can be even more difficult to determine. The subject property was constructed in 1967, and will be approximately 29 years old as of the date of this appraisal. As a result of renovations that occurred in 1994 and 1995, the hotel is in relatively good condition. Further renovations are scheduled to take place later in 1996, when the gatehouse, which houses the reception and administrative offices, will undergo a refurbishment. The subject property features interior corridors and an outdoor swimming pool. We also note that the depressed hotel market conditions that prevailed in the late 1980s and the early 1990s have also led to a degree of external obsolescence. In our opinion, it is impossible to identify and quantify the impact of these factors on the property's value with any accuracy, so we will only estimate the replacement cost of the subject property. Replacement Cost Replacement Cost Replacement cost is the current construction cost of a building with the same utility as the subject property, but built with modern materials and according to current construction and design standards. For the purpose of estimating the replacement cost of the subject property, we have used a hotel development cost survey conducted by HVS International. This survey is published annually in a newsletter entitled The Hotel Valuation Journal, and appeared in the May, 1996, issue of Lodging Hospitality. The survey presents the range of per-room costs associated with various components of hotel development, including the improvements, the furniture, fixtures, and equipment, pre-opening expenses, and operating capital. Statistics are compiled for three broad categories of hotels: luxury, standard, and economy. The results of this survey are presented in the following table. HVS International, Mineola, New York Cost Approach 136 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 12-1 Hotel Development Cost Survey (Amounts per Room) - --------------------------------------------------------------------------------
Improvements Furniture & Equipment Pre-Opening Operating Capital Total Percent Change - ------------------------------------------------------------------------------------------------------------------------------------ 1976 Luxury $32,000 - $55,000 $5,000 - $10,000 $1,000 - $2,000 $1,000 - $1,500 $39,000 - $68,500 --- - --- Standard 20,000 - 32,000 3,000 - 6,000 750 - 1,000 750 - 1,000 24,500 - 40,000 --- --- Economy 8,000 - 15,000 2,000 - 4,000 500 - 1,000 500 - 750 11,000 - 20,750 --- - --- 1979 Luxury 36,000 - 65,000 8,000 - 15,000 1,500 - 3,000 1,500 - 2,000 47,000 - 85,000 6.8 - 8.0 Standard 25,000 - 36,000 5,000 - 10,000 1,000 - 2,000 1,000 - 1,500 32,000 - 49,500 10.2 - 7.9 Economy 10,000 - 20,000 3,000 - 5,000 750 - 1,000 750 - 1,000 14,500 - 27,000 10.6 - 10.0 1981 Luxury 45,000 - 80,000 10,000 - 20,000 2,000 - 3,500 2,000 - 2,500 59,000 - 106,000 12.8 - 12.4 Standard 25,000 - 40,000 7,000 - 13,000 1,200 - 2,500 1,200 - 2,000 34,400 - 57,500 3.8 - 8.1 Economy 13,000 - 25,000 4,000 - 7,000 700 - 1,200 900 - 1,200 18,600 - 34,400 14.1 - 13.7 1983 Luxury 55,000 - 100,000 12,500 - 20,000 2,300 - 4,000 2,000 - 2,800 71,800 - 126,800 10.8 - 9.8 Standard 35,000 - 50,000 9,000 - 15,000 1,400 - 3,000 1,300 - 2,200 46,700 - 70,200 17.9 - 11.0 Economy 18,000 - 32,000 5,000 - 8,000 800 - 1,500 900 - 1,300 24,700 - 42,800 16.4 - 12.2 1985 Luxury 60,000 - 115,000 13,400 - 30,000 3,000 - 5,000 2,100 - 3,100 78,500 - 153,100 4.7 - 10.4 Standard 38,000 - 57,000 9,500 - 16,500 1,900 - 3,600 1,500 - 2,500 50,900 - 79,600 4.5 - 6.7 Economy 20,000 - 36,000 5,000 - 8,800 1,000 - 1,700 1,000 - 1,500 27,000 - 48,000 4.7 - 6.1 1986 Luxury 62,000 - 120,000 13,700 - 30,600 3,100 - 5,200 2,300 - 3,100 81,100 - 158,900 3.3 - 3.8 Standard 39,000 - 60,000 9,700 - 16,800 2,000 - 3,800 1,500 - 2,600 52,200 - 83,200 2.6 - 4.5 Economy 21,000 - 37,000 5,100 - 9,000 1,000 - 1,800 1,100 - 1,500 28,200 - 49,300 4.4 - 2.7 1987 Luxury 63,000 - 122,000 13,800 - 30,900 3,300 - 5,500 2,300 - 3,200 82,400 - 161,600 1.6 - 1.7 Standard 40,000 - 61,000 9,800 - 16,800 2,100 - 3,900 1,500 - 2,600 53,400 - 84,300 2.3 - 1.3 Economy 21,000 - 39,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 28,400 - 51,400 0.7 - 4.3 1988 Luxury 65,000 - 125,000 14,000 - 31,000 3,300 - 5,500 2,300 - 3,200 84,600 - 164,700 2.7 - 1.9 Standard 41,000 - 63,000 10,000 - 17,100 2,100 - 3,900 1,500 - 2,600 54,600 - 86,600 2.2 - 2.7 Economy 22,000 - 40,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 29,400 - 52,400 3.5 - 1.9 1989 Luxury 66,000 - 126,000 15,000 - 32,000 3,300 - 5,500 2,300 - 3,200 86,600 - 166,700 2.4 - 1.2 Standard 41,000 - 64,000 10,500 - 18,000 2,100 - 3,900 1,500 - 2,600 55,100 - 88,500 0.9 - 2.2 Economy 22,000 - 40,000 5,500 - 9,700 1,100 - 1,800 1,100 - 1,500 29,700 - 53,000 1.0 - 1.1 1990 Luxury 67,000 - 128,000 15,400 - 33,000 3,500 - 5,700 2,500 - 3,500 88,400 - 170,200 2.1 - 2.1 Standard 42,000 - 65,000 10,800 - 18,500 2,200 - 4,000 1,600 - 2,800 56,600 - 90,300 2.7 - 2.0 Economy 22,500 - 41,000 5,600 - 10,000 1,200 - 1,800 1,200 - 1,600 30,500 - 54,400 2.7 - 2.6 1991 Luxury 65,000 - 122,000 14,500 - 31,500 3,700 - 5,900 2,600 - 3,600 85,800 - 163,000 (2.9) - (4.2) Standard 40,000 - 63,000 10,000 - 17,800 2,300 - 4,200 1,700 - 2,900 54,000 - 87,900 (4.6) - (2.7) Economy 21,000 - 39,000 5,000 - 9,500 1,300 - 2,000 1,300 - 1,700 28,600 - 52,200 (6.2) - (4.0) 1992 Luxury 64,000 - 120,000 14,200 - 30,900 3,800 - 6,100 2,700 - 3,700 84,700 - 160,700 (1.3) - (1.4) Standard 39,000 - 62,000 9,800 - 17,400 2,300 - 4,400 1,800 - 3,000 52,900 - 86,800 (2.0) - (1.3) Economy 21,000 - 38,000 4,900 - 9,300 1,400 - 2,100 1,300 - 1,800 28,600 - 51,200 0.0 - (1.9) 1993 Luxury 63,000 - 119,000 14,000 - 30,500 3,900 - 6,200 2,800 - 3,800 83,700 - 159,500 (1.2) - (0.7) Standard 39,000 - 61,000 9,700 - 17,200 2,300 - 4,500 1,800 - 3,000 52,800 - 85,700 (0.2) - (1.3) Economy 21,000 - 38,000 4,900 - 9,200 1,400 - 2,100 1,300 - 1,800 28,600 - 51,100 0.0 - (0.2) 1994 Luxury 64,000 - 121,000 14,300 - 31,100 3,900 - 6,200 2,800 - 3,800 85,000 - 162,100 1.6 - 1.6 Standard 40,000 - 63,000 10,000 - 17,600 2,400 - 4,600 1,800 - 3,000 54,200 - 88,200 2.7 - 2.9 Economy 22,000 - 40,000 5,100 - 9,500 1,500 - 2,200 1,300 - 1,800 29,900 - 53,500 4.5 - 4.7 1995 Luxury 65,000 - 124,000 14,800 - 32,300 4,100 - 6,400 2,900 - 4,000 86,800 - 166,700 2.1 - 2.8 Standard 41,000 - 65,000 10,400 - 18,300 2,500 - 4,800 1,900 - 3,100 55,800 - 91,200 3.0 - 3.4 Economy 23,000 - 42,000 5,400 - 9,900 1,600 - 2,300 1,300 - 1,800 31,300 - 56,000 4.7 - 4.7
Average Annual Compounded Percent Change: 1976 - 1995: Luxury 4.3% - 4.8% 1986 - 1995: Luxury 0.8% - 0.5% Standard 4.4% - 4.4% Standard 0.7% - 1.0% Economy 5.7% - 5.4% Economy 1.2% - 1.4% - -------------------------------------------------------------------------------- HVS International, Mineola, New York Cost Approach 137 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= As illustrated by the previous table, hotel development costs rose significantly during the late 1970s and the early 1980s; however, the rate of increase slowed substantially in 1987. In 1991, hotel development costs declined for the first time since 1976. Further drops of as much as 2.0% were registered in 1992. Between 1986 and 1990, average annual compounded increases ranged from 1.7% to 2.5%. Costs rose slowly (at average annual compounded rates ranging from 0.5% to 1.4%) between 1986 and 1995, largely as a result of the declines in 1991, 1992, and 1993. In 1995, hotel development costs started to escalate more rapidly, reaching 4.7% in the economy segment. As more hotels are developed, we expect costs to continue to rise. Because the replacement cost tends to set the upper limit of a particular hotel's value, this figure is relevant to our analysis. We estimate the replacement cost of the subject property as follows, based on the development cost survey discussed earlier. ================================================================================ Table 12-2 Subject Property's Replacement Cost - -------------------------------------------------------------------------------- Cost No. of Hotel Cost per Room Rooms Total Cost - --------------------------------------------------------------------------- Building $42,000 80 $3,360,000 FF&E 9,000 80 720,000 Pre-Opening 2,000 80 160,000 Operating Capital 1,800 80 144,000 - --------------------------------------------------------------------------- Total $54,800 $4,384,000 - -------------------------------------------------------------------------------- Ground Lease Approach to Land Valuation Land value may be estimated either by the sales comparison approach, using comparable land sales, or by the ground lease approach, which is based on the economic value generated by an improvement that represents the property's highest and best use. Because it is unusual to find recent sales of comparable vacant land that is slated for imminent hotel development, we have used the ground lease approach to determine the subject property's land value. Hotels are often constructed on leased land, and although lease terms differ somewhat, the basis for the rental calculation is frequently tied to a percentage of revenue. By applying a typical ground lease rental formula to the subject property's stabilized revenues, the appraiser can determine the HVS International, Mineola, New York Cost Approach 138 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= hotel's economic rent, or what is also known as the income attributable to the land. Land value is then calculated by dividing the economic rent by an appropriate capitalization rate. The self-adjusting aspect of this approach is key to its reliability. Because the rental formula is tied to a percentage of revenue that inherently reflects both the locational attributes of the site (occupancy and rate) and the allowable density of development, the resulting economic ground rent justly represents the greatest net return to the land over a given period. Because the Howard Johnson Westbury appears to represent the highest and best use of the property, the ground lease approach is an appropriate method of determining land value. We have researched long-term hotel ground leases in search of rental formulas that are based on a percentage of rooms revenue or on a combination of rooms, food, and beverage revenue. This analysis indicates that economic ground rents for hotels similar to the subject property typically range from 2.7% to 7.8% of rooms revenue. Although this range is quite broad, most of the formulas yield rental percentages of between 4.0% and 5.0% of rooms revenue. After considering these comparable ground leases and the locational attributes of the subject property, we believe the appropriate economic ground rental percentage is 4.5% of stabilized rooms revenue. The subject property's stabilized rooms revenue has been deflated to reflect 1997 dollars. The following calculation shows the derivation of the subject property's economic ground rent. Stabilized Rooms Revenue (1997 dollars) $1,610,628 Rental Percentage 0.045 ---------- Economic Ground Rent $72,478 Rent generated by a ground lease represents a fairly low-risk income flow. Because the tenant improvements typically amount to more than eight times the value of the land, the risk of default is low. When the ground lease terms are tied to rooms revenue, the landlord is also protected from the adverse effects of inflation. It is important to note that a portion of the subject property's land is subject to a ground lease. However, lease payments are not calculated as a percentage of rooms revenue; rather, they are set according to a predetermined HVS International, Mineola, New York Cost Approach 139 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= schedule. In order to determine the value of the land that would be transferable upon sale of the subject property, we have determined the economic ground rent of the entire parcel using the ground lease approach. We then subtracted from the total estimate of the property's economic ground rent the actual rent of the leased portion of the subject site, resulting in the total economic ground rent for the portion of the subject site that is not leased, calculated as follows. $72,478 - $51,400 = $21,078 We then applied a capitalization rate to this figure to determine the value of the fee simple portion of the land upon which the subject property is situated. Based on the risk factors outlined previously and the current cost of long-term capital, we estimate the appropriate ground rental overall capitalization rate at 10%. Applying this indicated capitalization rate yields the following estimate of land value for the portion of the site that is not leased. Economic Ground Rent (Less Lease Rental) = $21,078 = $210,783 - ----------------------------------------- ------------ Capitalization Rate 0.10 Estimated Land Value (Say) $211,000 A new hotel's land value typically ranges from 10% to 20% of the overall value. The estimate of land value presented above is approximately 6.0% of the subject property's total value as indicated by the income capitalization approach and reflects the applicable overlease. Replacement Cost Combining the replacement cost of the property with the land value yields the subject property's total replacement cost. ================================================================================ Table 12-3 Total Replacement Cost - -------------------------------------------------------------------------------- Cost of the Improvements and FF&E $4,384,000 Land Value 211,000 -------------- Total Replacement Cost $4,595,000 Total Replacement Cost (Say) $4,600,000 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Cost Approach 140 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= If a property's replacement cost is significantly higher than the values indicated by the income capitalization and sales comparison approaches, it may indicate that an upward adjustment of these values is appropriate. This would also reduce the probability of new hotel development, which is not likely to be feasible under those conditions. This creates an effective barrier to entry for new competition, thus reducing the risk associated with the subject property's income-generating potential. An upward adjustment of the value indicated by the income capitalization approach is also justified by this barrier to entry. We find that knowledgeable hotel buyers generally base their purchase decisions on economic factors, such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, it is our opinion that the cost approach is inapplicable in estimating the market value of the Howard Johnson Westbury. However, we have estimated the subject property's replacement cost as new, which may set the upper limit of the hotel's value. HVS International, Mineola, New York Reconciliation of Value Indications 141 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 13. Reconciliation of Value Indications The reconciliation, which is the last step in the appraisal process, involves summarizing and correlating the data and procedures employed throughout the analysis. The final conclusion of value is arrived at after reviewing the estimates indicated by the income capitalization, sales comparison, and cost approaches. The relative significance, applicability, and defensibility of each indicated value is considered, and the greatest weight is given to that approach deemed most appropriate for the property being appraised. The purpose of this report is to estimate the market value of the fee simple interest in the subject property. Our appraisal involves a careful analysis of the property itself and the economic, demographic, political, physical, and environmental factors that influence real estate values. Based on the data set forth in this report, the following value indications were developed. Approach Value Indication -------- ---------------- Income Capitalization $3,700,000 Sales Comparison $2,700,000 to $4,400,000 Cost (Replacement Cost) $4,600,000 Income Capitalization Approach To estimate the subject property's value via the income capitalization approach, we analyzed the local market for transient accommodations, examined the competitive environment, projected occupancy and average rate levels, and developed a forecast of income and expense that reflects anticipated income trends and cost components through a stabilized year of operation. The subject property's projected net income before debt service was then allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component was calculated; the total of the mortgage and equity components equates to the value of the property. HVS International, Mineola, New York Reconciliation of Value Indications 142 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Our nationwide experience indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the hotel investors who constitute the marketplace. For this reason, we believe that the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in our final estimate of the subject property's market value. Sales Comparison Approach The sales comparison approach uses actual sales of similar properties to provide an indication of the subject property's value. The strength of this approach is that it measures value based on the investment decisions made by actual buyers and sellers. Although we have investigated a number of sales in an attempt to develop a range of value indications, several adjustments are necessary to render the sales prices applicable to the subject property. These adjustments, which are numerous and highly subjective, diminish the reliability of the sales comparison approach. Furthermore, we find that typical hotel investors employ a sales comparison procedure only to establish broad value parameters. The hotel sales outlined earlier in this report indicate a value range of $34,100 to $55,100 per available room. The income capitalization approach indicates a per-room value of approximately $46,300. This information suggests that a slight upward adjustment of the value indicated by the income capitalization approach may be warranted. Cost Approach To estimate the subject property's value via the cost approach, we estimated the current replacement cost of the property and added the land value. We give the cost approach limited weight in arriving at a final value estimate, because knowledgeable buyers of lodging facilities generally base their purchase decisions on economic factors (such as projected net income and return on investment) rather than on a property's depreciated replacement cost. The replacement cost estimate developed via the cost approach can help to corroborate the results of the income capitalization and sales comparison approaches to value. If the replacement cost is substantially higher or lower than the value indicated by the income capitalization approach, an upward or downward adjustment of the income capitalization approach value may be necessary. In the case of the subject property, the replacement cost is slightly higher than the value indicated by the income capitalization approach or the sales comparison approach. This suggests that a slight HVS International, Mineola, New York Reconciliation of Value Indications 143 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= upwards adjustment to the value indicated by the income capitalization approach may be warranted. Value Conclusion Careful consideration has been given to the strengths and weaknesses of the three approaches to value discussed above. In recognition of the purpose of this appraisal, we have given primary weight to the value indicated by the income capitalization approach and made some subjective adjustments based on the replacement cost estimate, the sales comparison approach, and our extensive experience in the hospitality industry. It is our opinion that the market value of the fee simple (subject to an overlease) interest in the Howard Johnson Westbury - Jericho, as of January 1, 1997, is: $3,800,000 THREE MILLION EIGHT HUNDRED THOUSAND DOLLARS The estimate of market value includes the land, the improvements, and the furniture, fixtures, and equipment. The appraisal assumes that the hotel is open and operational. This value estimate equates to roundly $47,500 per room, which is well supported by market sales and approximately 2.6% higher than the value indicated by the income capitalization approach. The estimate of value assumes either the availability of third-party financing or the willingness and capability of the seller to take back purchase-money financing so that a buyer can obtain the level of debt set forth in the Income Capitalization Approach section of this appraisal. Marketing Period Our estimate of market value assumes a marketing period of six to nine months. Under normal economic conditions, hotels are transferred within this time frame. Personal Property In accordance with the appraisal standards set forth by the Office of the Comptroller of the Currency, it is necessary for bank appraisals to identify and value any personal property, fixtures, or intangible items that are included in the appraisal and discuss their impact on the overall estimate of market value. A hotel's income-generating ability depends on a suitable inventory of furniture, fixtures, and equipment. Removal of these items can decrease the property value by as much as the cost to replace the inventory plus the loss of income incurred while the hotel cannot function. HVS International, Mineola, New York Reconciliation of Value Indications 144 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= A hotel's personal property consists of a wide variety of components, including bedroom furnishings, bathroom fixtures, restaurant and kitchen equipment, front office and accounting computers, exterior signs, and similar items. Our inspection of the Howard Johnson Westbury indicates that the personal property and fixtures are in fair condition. Based on an annual construction cost survey conducted by HVS International, we estimate the total replacement cost of the subject property's furniture, fixtures, and equipment at $9,000 per available room. Assuming an average useful life of ten years and an effective age of six years, the value of the furniture, fixtures, and equipment currently in place is approximately $3,600 per room, or a total of $288,000. The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) stipulates that "...any business interest or other intangible item should be valued separately within the appraisal."(16) Hotels have both business and real estate components; without the business expertise necessary to operate the facility, a hostelry would have little real estate value. Because furniture, fixtures, and equipment are essential to a hotel's income-generating ability and are seldom removed from the property or sold separately, the separation of the personal property component from the real property is not particularly meaningful. (16) Federal Register, Vol. 55, No. 143, July 25, 1990, p. 30205. HVS International, Mineola, New York Statement of Assumptions and 145 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 14. Statement of Assumptions and Limiting Conditions 1. This report is to be used in whole and not in part. 2. No responsibility is assumed for matters of a legal nature, nor do we render any opinion as to title, which is assumed to be marketable and free of any deed restrictions and easements. The property is valued as though free and clear unless otherwise stated. 3. We assume that there are no hidden or unapparent conditions of the sub-soil or structures, such as underground storage tanks, that would render the property more or less valuable. No responsibility is assumed for these conditions or for any engineering that may be required to discover them. 4. We have not considered the presence of potentially hazardous materials such as asbestos, urea formaldehyde foam insulation, PCBs, any form of toxic waste, polychlorinated biphengyls, pesticides, or lead-based paints. The appraisers are not qualified to detect hazardous substances, and we urge the client to retain an expert in this field if desired. 5. The Americans with Disabilities Act (ADA) became effective on January 26, 1992. We have conducted no specific compliance survey to determine whether the subject property is operating in accordance with the various detailed requirements of the ADA. It is possible that the property does not conform to the requirements of the act, and this could have an unfavorable effect on value. Because we have no direct evidence regarding this issue, our estimate of value does not consider possible non-compliance with the ADA. 6. We have made no survey of the property, and we assume no responsibility in connection with such matters. Sketches, photographs, maps, and other exhibits are included to assist the reader in visualizing the property. It is assumed that the use of the land and improvements is HVS International, Mineola, New York Statement of Assumptions and 146 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= within the boundaries of the property described, and that there is no encroachment or trespass unless noted. 7. All information, financial operating statements, estimates, and opinions obtained from parties not employed by HVS International are assumed to be true and correct. We can assume no liability resulting from misinformation. 8. Unless noted, we assume that there are no encroachments, zoning violations, or building violations encumbering the subject property. 9. The property is assumed to be in full compliance with all applicable federal, state, local, and private codes, laws, consents, licenses, and regulations (including a liquor license where appropriate), and that all licenses, permits, certificates, franchises, and so forth can be freely renewed or transferred to a purchaser. 10. All mortgages, liens, encumbrances, leases, and servitudes have been disregarded unless specified otherwise. 11. None of this material may be reproduced in any form without our written permission, and the report cannot be disseminated to the public through advertising, public relations, news, sales, or other media. 12. We are not required to testify or appear in court by reason of this analysis without previous arrangements, and only when our standard per diem fees and travel costs are paid prior to the appearance. 13. If the reader is making a fiduciary or individual investment decision and has any questions concerning the material presented in this report, it is recommended that the reader contact us. 14. We take no responsibility for any events or circumstances that take place subsequent to either the date of value or the date of our field inspection, whichever occurs first. 15. The quality of a lodging facility's on-site management has a direct effect on a property's economic viability and value. The financial forecasts presented in this analysis assume responsible ownership and competent management. Any departure from this assumption may have a significant impact on the projected operating results and the value estimate. 16. The estimated operating results presented in this report are based on an evaluation of the overall economy, and neither take into account nor HVS International, Mineola, New York Statement of Assumptions and 147 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= make provision for the effect of any sharp rise or decline in local or national economic conditions. To the extent that wages and other operating expenses may advance during the economic life of the property, we expect that the prices of rooms, food, beverages, and services will be adjusted to at least offset those advances. We do not warrant that the estimates will be attained, but they have been prepared on the basis of information obtained during the course of this study and are intended to reflect the expectations of a typical hotel buyer. 17. This analysis assumes continuation of all Internal Revenue Service tax code provisions as stated or interpreted on either the date of value or the date of our field inspection, whichever occurs first. 18. Many of the figures presented in this report were generated using sophisticated computer models that make calculations based on numbers carried out to three or more decimal places. In the interest of simplicity, most numbers have been rounded to the nearest tenth of a percent. Thus, these figures may be subject to small rounding errors. 19. It is agreed that our liability to the client is limited to the amount of the fee paid as liquidated damages. Our responsibility is limited to the client, and use of this report by third parties shall be solely at the risk of the client and/or third parties. The use of this report is also subject to the terms and conditions set forth in our engagement letter with the client. 20. Appraising hotels is both a science and an art. Although this analysis employs various mathematical calculations to provide value indications, the final estimate is subjective and may be influenced by our experience and other factors not specifically set forth in this report. 21. Any distribution of the total value between the land and improvements or between partial ownership interests applies only under the stated use. Moreover, separate allocations between components are not valid if this report is used in conjunction with any other analysis. 22. This study was prepared by Hospitality Valuation Services, a division of Hotel Consulting Services, Inc. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of Hotel Consulting Services, Inc. as employees, rather than as individuals. HVS International, Mineola, New York Certification 148 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 15. Certification 1. We, the undersigned appraisers, hereby certify: 2. that the statements and opinions presented in this report, subject to the limiting conditions set forth, are correct to the best of our knowledge and belief; 3. that Sean A. Hehir personally inspected the property described in this report; that Anne R. Lloyd-Jones and Stephen Rushmore participated in the analysis and reviewed the findings but did not personally inspect the property; 4. that we have no current or contemplated interests in the real estate that is the subject of this report; 5. that we have no personal interest or bias with respect to the subject matter of this report or the parties involved; 6. that this report sets forth all of the limiting conditions (imposed by the terms of this assignment) affecting the analyses, opinions, and conclusions presented herein; 7. that the fee paid for the preparation of this report is not contingent upon our conclusions; 8. that this report has been prepared in accordance with, and is subject to, the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute; 9. that the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives; HVS International, Mineola, New York Certification 149 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 10. that this report has been prepared in accordance with the Uniform Standards of Professional Appraisal Practice (as adopted by the Appraisal Foundation); 11. that no one other than the undersigned prepared the analyses, conclusions, and opinions concerning real estate that are set forth in this appraisal report; 12. that as of the date of this report, Stephen Rushmore has completed the requirements of the continuing education program of the Appraisal Institute; 13. that this appraisal is not based on a requested minimum value, a specific value, or the approval of a loan. /s/ Sean A. Hehir ----------------------------------- Sean A. Hehir Consulting and Valuation Analyst Hotel Consulting Services, Inc. /s/ Anne R. Lloyd-Jones ----------------------------------- Anne R. Lloyd-Jones, CRE Senior Vice President Hotel Consulting Services, Inc. /s/ Stephen Rushmore ----------------------------------- Stephen Rushmore, CRE, MAI, CHA President Hotel Consulting Services, Inc. HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Subject Property [GRAPHIC OMITTED] Lobby HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Standard Guestroom [GRAPHIC OMITTED] Guestroom with Jacuzzi HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Corridor HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Typical Bathroom HVS International, Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Holiday Inn Westbury [GRAPHIC OMITTED] Fairfield Inn Syosset HVS International, Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Quality Inn Westbury [GRAPHIC OMITTED] Ramada Limited Woodbury HVS International, Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Plainview Plaza Howard Johnson Lodge - Westbury, NY WESTBURY SCHEDULE A ALL THAT CERTAIN PLOT, PIECE OR PARCEL OF LAND, SITUATE, LYING AND BEING AT JERICHO, TOWN OF OYSTER BAY, COUNTY 0F NASSAU AND STATE OF NEW YORK, BOUNDED AND DESCRIBED AS FOLLOWS: BEGINNING AT THE CORNER FORMED BY THE INTERSECTION OF THE NORTHERLY SIDE OF JERICHO TURNPIKE WITH THE SOUTHERLY SIDE 0F SOUTH SERVICE ROAD - LONG ISLAND EXPRESSWAYS; RUNNING THENCE WESTERLY ALONG THE NORTHERLY SIDE OF JERICHO TURNPIKE ON THE ARC OF A CURVE BEARING TO THE RIGHT HAVING A RADIUS OF 738.90 FEET A DISTANCE OF 297.27 FEET; RUNNING THENCE SOUTH 57 DEGREES 57 MINUTES 43 SECONDS WEST STILL ALONG THE NORTHERLY SIDE OF JERICHO TURNPIKE 70.03 FEET; RUNNING THENCE NORTH 32 DEGREES 01 MINUTES 47 SECONDS WEST 302.99 FEET TO THE SOUTHERLY SIDE OF SOUTH SERVICE ROAD LONG ISLAND EXPRESSWAY; RUNNING THENCE NORTH 73 DEGREES 53 MINUTES 58 SECONDS EAST ALONG SAID SOUTHERLY SIDE OF SOUTH SERVICE ROAD - LONG ISLAND EXPRESSWAY 40.56 FEET; RUNNING THENCE EASTERLY ALONG THE SOUTHERLY SIDE OF SOUTH SERVICE ROAD - LONG ISLAND EXPRESSWAY ON THE ARC OF A CURVE BEARING TO THE RIGHT HAVING A RADIUS OF 673.38 FEET A DISTANCE OF 373.80 FEET; RUNNING THENCE SOUTH 68 DEGREES 44 MINUTES 50 SECONDS EAST STILL ALONG THE SOUTHERLY SIDE OF SOUTH SERVICE ROAD - LONG ISLAND EXPRESSWAY 30.26 FEET TO THE CORNER, THE POINT OR PLACE OF BEGINNING. FOR INFORMATION ONLY: SECTION 17 BLOCK 16 LOT 47 HVS International, Mineola, New York Synopsis of Hotel Management Agreement - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Synopsis of Hotel Management Agreement Date: May, 1994 Owner: Westbury New York Hotel Limited Partnership (Ashford Financial Corporation) Manager: Remington Hotel Company Premises: Howard Johnson Westbury Jericho, New York Term: 15 years Renewal: Operator option for two successive periods of five years Management Fee: 3% of gross revenues Reserve for Replacement: 3% of gross revenues Termination: 1) Upon default by owner or manager 2) Upon death or incapacitation of Archie Bennett, Jr., President of Remington Hotel Company 3) Upon sale of property (owner's option) HVS International, Mineola, New York Synopsis of Overlease Agreement - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Synopsis of Overlease Agreement Lessor: Westbury New York Hotel Limited Partnership Lessee: Jacob Goldfarb and Malka R. Goldfarb Sublessee: Westbury New York Hotel Limited Partnership Term: 25 years Extension Options: First extension option - 15 years Second extension option - through November 25, 2014 Rent: $51,400 annually, payable in monthly installments HVS International, Mineola, New York Simultaneous Valuation Formula 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ The Simultaneous Valuation Formula as Used in the Valuation of the Subject Property The algebraic equation, known as the Simultaneous Valuation Formula, that solves for the total property value using a ten-year mortgage equity technique was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of Hospitality Valuation Services. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(1) The process of solving for the value of the mortgage and equity components begins by deducting the annual debt service from the forecasted income before debt service, leaving the net income to equity for each projection year. The net income as of the 11th year is capitalized into a reversionary value using the terminal capitalization rate. The equity residual, which is the total reversionary value less the mortgage balance at that point in time and less any broker and legal costs associated with the sale, is discounted to the date of value at the equity yield rate. The net income to equity for each of the projection years is also discounted back to the date of value. The sum of these discounted values equals the value of the equity component. Because the equity component comprises a specific percentage of the total value, the value of the mortgage and the total property can be computed easily. This process can be expressed in two algebraic equations that set forth the mathematic relationships between the known and unknown variables using the following symbols. (1) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Simultaneous Valuation Formula 2 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= NI = Net income available for debt service V = Value M = Loan-to-value ratio f = Annual debt service constant n = Number of years in the projection period d(e) = Annual cash available to equity d(r) = Residual equity value b = Brokerage and legal cost percentage P = Fraction of loan paid off during the projection period f(p) = Annual constant required to amortize the entire loan during the projection period R(r) = Overall terminal capitalization rate applied to net income to calculate total property reversion (sales price at the end of the projection period) 1/S^n = Current worth of $1 factor (discount factor) at the equity yield rate Using these symbols, the following formulas can be derived to express some of the components comprising this mortgage and equity valuation process. Debt Service - A property's debt service is calculated by first determining the mortgage amount which equals the total value (V) multiplied by the loan-to-value ratio (M). Debt service is derived by multiplying the amount of the mortgage by the annual debt service constant (f). The following formula represents debt service. f x M x V = Debt Service Net Income to Equity (Equity Dividend) - The net income to equity (d(e)) is the property's net income before debt service (NI) less debt service. The following formula represents net income to equity. NI - (f x M x V) = d(e) HVS International, Mineola, New York Simultaneous Valuation Formula 3 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Reversionary Value - The value of the hotel at the end of the tenth year is calculated by dividing the 11th year's net income before debt service (NI^11) by the terminal capitalization rate (R(r)). The following formula represents the property's tenth-year reversionary value. (NI^11/R(r)) = Reversionary Value Brokerage and Legal Costs - When a hotel is sold, certain costs are associated with the transaction. Normally, the broker is paid a commission and the attorney collects legal fees. In the case of hotel transactions, brokerage and legal costs typically range from 1% to 4% of the sales price. Because these expenses reduce the proceeds to the seller, they are usually deducted from the reversionary value in the mortgage equity valuation process. Brokerage and legal costs (b) expressed as a percentage of reversionary value (NI^11/R(r)) is calculated by application of the following formula. b (NI^11/R(r)) = Brokerage and Legal Costs Ending Mortgage Balance - The mortgage balance at the end of the tenth year must be deducted from the total reversionary value (debt and equity) in order to determine the equity residual. The formula used to determine the fraction of a loan remaining (expressed as a percentage of the original loan balance) at any point in time (P) takes the annual debt service constant of the loan over the entire amortization period (f) less the mortgage interest rate (i) and divides it by the annual constant required to amortize the entire loan during the ten-year projection period (f(p)) less the mortgage interest rate. The following formula represents the fraction of a loan paid off (P). (f - i)/(f(p) - i) = P If the fraction of a loan paid off (expressed as a percentage of the initial loan balance) is P, then the remaining loan percentage is expressed as 1 - P. The ending mortgage balance is the fraction of the remaining loan (1 - P) multiplied by the initial loan amount (M x V). The following formula represents the ending mortgage balance. (1 - P) x M x V HVS International, Mineola, New York Simultaneous Valuation Formula 4 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Equity Residual Value - The value of the equity upon the sale at the end of the projection period (d(r)) is the reversionary value less the brokerage and legal costs and the ending mortgage balance. The following formula represents the equity reversionary value. (NI^11/R(r)) - (b (NI^11/R(r)) - ((1 - P) x M x V) = d(r) Annual Cash Flow to Equity - The annual cash flow to equity consists of the equity dividend for each projection year plus the equity residual at the end of the tenth year. The following formula represents the annual cash flow to equity. NI^1 - (f x M x V) = d(e)^1 NI^2 - (f x M x V) = d(e)^2 NI^10 - (f x M x V) = d(e)^10 (NI^11/R(r)) - (b (NI^11/R(r)) - ((1 - P) x M x V) = d(r) Value of the Equity - If the initial amount of the mortgage is calculated by multiplying the loan-to-value ratio (M) by the property value (V), then the equity value is one minus the loan-to-value ratio multiplied by the property value. The following formula represents the value of the equity. (1 - M) V Discounting the Cash Flow to Equity to the Present Value - The cash flow to equity in each of the projection years is discounted to the present value at the equity yield rate (1/S^n). The sum of all these cash flows is the value of the equity (1 - M) V. The following formula represents the calculation of equity as the sum of the discounted cash flows. (d(e)^1 x 1/S^1) + (d(e)^2 x 1/S^2) + . . . + (d(e)^10 x 1/S^10) + (d(r) x 1/S^10) = (1 - M) V HVS International, Mineola, New York Simultaneous Valuation Formula 5 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Combine Equations: Annual Cash Flow to Equity and Discounting the Cash Flow to Equity to the Present Value - The last step is to arrive at one overall equation that shows that the annual cash flow to equity plus the yearly discounting to the present value equals the value of the equity. ((NI^1 - (f x M x V)) 1/S^1) + ((NI^2 - (f x M x V)) 1/S^2) + . . . ((NI^10 - (f x M x V)) 1/S^10) + (((NI^11/R(r)) - (b (NI^11/R(r))) - ((1 - P) x M x V)) 1/S^10) = (1 -M) V Because the only unknown in this equation is the property's value (V), it can be readily solved. Ten-Year Projection of Income and Expense - Because the fixed and variable forecast of income and expense is carried out only to the stabilized year, it is necessary to continue the projection to the 11th year. In most instances, net income before debt service beyond the stabilized year is projected at an assumed inflation rate. By increasing a property's revenue and expenses at the same rate of inflation, net income expressed as a percentage of total revenue will remain constant, and the dollar amount will escalate at the annual inflation rate. Hotel investors are currently using inflation rates of approximately 3.5% annually. The previously presented ten-year forecast of income and expense illustrates the subject property's net income, which is assumed to increase by 3.5% annually subsequent to the hotel's stabilized year of operation. Solving for Value Using the Simultaneous Valuation Formula - In the case of the subject property, the following known variables have been determined. ================================================================================ Table 1 Summary of Known Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Ten-Year Forecast Loan-To-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.111856 Equity Yield Ye 22.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 11.0% - -------------------------------------------------------------------------------- HVS International, Mineola, New York Simultaneous Valuation Formula 6 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The following table illustrates the present worth of a $1 factor at the 22% equity yield rate. ================================================================================ Table 2 Present Worth of $1 Factor at Equity Yield Rate - -------------------------------------------------------------------------------- Calendar Year Ending: Present Worth of $1 Factor @ 22.0% ------------------------------------------------------------------- 1997 0.819487 1998 0.671559 1999 0.550333 2000 0.450991 2001 0.369581 2002 0.302867 2003 0.248195 2004 0.203393 2005 0.166678 2006 0.136590 - -------------------------------------------------------------------------------- Using these known variables, the following intermediary calculations must be made before applying the simultaneous valuation formula. The fraction of the loan paid off during the projection period is calculated as follows. P = (0.111856 - 0.095)/(0.155277 - 0.095) = 0.279638 The annual debt service is calculated as f x M x V. (f x M x V) = 0.111856 0.70 x V = 0.078299 V Inserting the known variables into the hotel valuation formula produces the following: HVS International, Mineola, New York Simultaneous Valuation Formula 7 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= (502,000 - 0.078299 V ) x 0.819672 + (413,000 - 0.078299 V ) x 0.671862 + (430,000 - 0.078299 V ) x 0.550707 + (442,000 - 0.078299 V ) x 0.451399 + (459,000 - 0.078299 V ) x 0.369999 + (475,000 - 0.078299 V ) x 0.303278 + (491,000 - 0.078299 V ) x 0.248589 + (509,000 - 0.078299 V ) x 0.203761 + (526,000 - 0.078299 V ) x 0.167017 + (545,000 - 0.078299 V ) x 0.136899 + (((564,000/0.110) - (0.03 x (564,000/0.110)) - ((1 - 0.279638) x 0.70 x V)) x 0.136899)= ( 1 - 0.70)V Combine Like Terms $2,508,260 - 0.376214 = (1 - 0.70)V $2,508,260 = 0.67621 V V = $2,508,260 / 0.67621 V = $3,709,272 Total Property Value as Indicated by the Income Capitalization Approach (Say) = $3,700,000 HVS International, Mineola, New York Qualifications of Sean A. Hehir - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Sean A. Hehir Employment 1996 to present HVS INTERNATIONAL Mineola, New York (Hotel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) Summer, 1996 THE HILTON AT SHORT HILLS Short Hills, New Jersey 1995 to 1996 THE STATLER HOTEL AND JW MARRIOTT EXECUTIVE EDUCATION CENTER Ithaca, New York 1993 HOTEL DE CHAILLY Montreux, Switzerland 1992 HOTEL BAUR AU LAC Zurich, Switzerland Education BS - School of Hotel Administration, Cornell University University of Nevada at Las Vegas Hotel Institute Montreux, Montreux, Switzerland Professional Cornell Society of Hotelmen Affiliations HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Anne R. Lloyd-Jones, CRE Employment 1982 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1981 FAIRMONT HOTEL Dallas, Texas 1979 - 1980 SAGA FOOD SERVICE SWARTHMORE COLLEGE Swarthmore, Pennsylvania 1977 - 1980 DARANNE CATERERS Swarthmore, Pennsylvania Professional Affiliations American Society of Real Estate Counselors - Member (CRE) Appraisal Institute - Candidate for Membership Cornell Society of Hotelmen Education MPS - School of Hotel Administration, Cornell University BA - Swarthmore College Appraisal Institute Course 1A1 - Real Estate Appraisal Principles Course 1A2 - Basic Valuation Procedures Course 1BA - Capitalization Theory and Techniques, Part A Course 1BB - Capitalization Theory and Techniques, Part B Course 2-1 - Case Studies in Real Estate Valuation Course 2-3 - Standards of Professional Practice Course 3-1 - Report Writing HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Corporate and Institutional Clients Served Ashford Financial Corporation Chase Manhattan Bank, N. A. Citibank / Citicorp NA Credit Lyonnais Doubletree Hotels Grand Heritage Hotels Great Western Bank Goldman Sachs Holiday Inns, Inc. Interstate Hotels MassMutual Marriott International / Host Marriott Morgan Stanley OCWEN Financial Services Remington Hotels Sheraton Hotels Starwood Capital Group Starwood Lodging Trust Winegardner & Hammons Wyndham Hotel Company Hotel Chains and Management Companies Appraised or Evaluated Doubletree Hotels Compri Hotels Interstate Hotels Fairmont Hotels Guest Quarters Hilton Hotels Corporation Omni International Hotels Ramada Hotel Corp. Servico Hotel Corp. Winegardner & Hammons Appearance as an Expert Witness Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Jefferson City, Missouri Federal Bankruptcy Court, Columbia, South Carolina Federal Bankruptcy Court, Houston, Texas Federal Bankruptcy Court, New York, New York Federal Bankruptcy Court, San Bernardino, California Federal Bankruptcy Court, Los Angeles, California Federal Bankruptcy Court, Charlotte, North Carolina Federal Bankruptcy Court, Miami, Florida Federal District Court, Central Division, Salt Lake City, Utah Iowa District Court, Story County, Iowa Texas District Court, Harris County, Texas Federal Bankruptcy Court, Tampa, Florida Utah District Court, Salt Lake County, Utah Federal Bankruptcy Court, Newark, New Jersey HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated Arizona - - Wyndham Garden Hotel, Chandler - - Wyndham Garden Hotel - Airport, Phoenix - - Wyndham Garden Hotel - Union Hills, Phoenix - - Canyon Ranch Spa & Fitness Resort, Tucson Alabama - - Holiday Inn, Birmingham - - Proposed Sheraton, Gulf Shores - - Proposed Inn, Mobile - - Holiday Inn, Sheffield California - - Industry Hills Sheraton Hotel, City of Industry - - Piccadilly Inn, Fresno - - Proposed Inn at Foss Creek, Healdsburg - - Sunset Towers Hotel, Hollywood - - Proposed La Quinta, Irvine - - Wyndham Garden Hotel, La Jolla - - Days Inn, La Palma - - Proposed Marriott Courtyard, Palm Springs - - Proposed Club Hilton Hotel, Pleasanton - - Center Pointe Development, San Diego - - Holiday Inn-Embarcadero, San Diego - - Holiday Inn-Harbor View, San Diego - - Seven Seas Lodge, San Diego - - Proposed Fountaingrove Inn, Santa Rosa - - Sheraton Round Barn Inn, Santa Rosa - - Wyndham Garden Hotel, Sunnyvale - - Westlake Plaza Hotel, Thousand Oaks - - Proposed Marriott Courtyard, Torrance Colorado - - Proposed Hotel, Keystone Connecticut - - Holiday Inn, Milford - - Holiday Inn, New Britain District of Columbia - - Grand Hotel, Washington - - Wyndham Bristol Hotel, Washington Florida - - Kon Tiki Village, Kissimmee - - Sheraton Lakeside, Kissimmee - - Holiday Inn, 22nd Street, Miami Beach - - Holiday Inn, 87th Street, Miami Beach - - Holiday Inn, 180th Street, Miami Beach - - Sheraton Resort & Marina, St. Petersburg - - Hilton Hotel, Singer Island - - Royce Hotel, West Palm Beach Georgia - - Marriott Hotel, Atlanta - - Wyndham Garden Hotel, Atlanta - - Holiday Inn, Brunswick - - Holiday Inn, Jekyll Island - - Mullberry Inn, Savannah - - Royal Savannah Inn, Savannah Hawaii - - Hobron in Waikiki, Honolulu Idaho - - Holiday Inn, Boise - - Red Lion Inn, Boise - - Super 8, Boise Illinois - - Ramada Inn, Bloomington - - Proposed Marriott Courtyard, Glenview - - Wyndham Garden Hotel, Naperville Indiana - - Holiday Inn, Bloomington - - Inn at the Four Winds, Bloomington - - Ramada Inn, Bloomington - - Hilton Hotel, Fort Wayne - - Airport Hilton Inn, Indianapolis - - Hilton at the Circle, Indianapolis Iowa - - Holiday Inn, Ames - - Proposed Fairfield Inn, Des Moines HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Kentucky - - Proposed Super 8, London - - Proposed Super 8, Radcliff Louisiana - - Sheraton Inn, Kenner - - Hotel Meridien, New Orleans Maine - - Proposed Hotel, Old Orchard Beach Maryland - - Brookshire Hotel, Baltimore - - Lord Baltimore Hotel, Baltimore - - Hyatt Regency, Bethesda Massachusetts - - Proposed Marriott Courtyard, Andover - - Hyatt Regency, Cambridge - - Proposed Hotel, Franklin - - Sheraton Inn, Hyannis - - Marriott Hotel, Worcester Michigan - - Bay Valley Inn, Bay City - - Hilton Airport, Detroit - - Westin Renaissance Center, Detroit - - Hotel Pontchartrain, Detroit - - Proposed Embassy Suites, Lansing - - Hilton Inn, Northfield - - Holiday Inn, Saginaw Minnesota - - Wyndham Garden Hotel, Bloomington - - Marriott Hotel, Minnetonka Missouri - - Inn at Grand Glaize, Osage Beach - - Bel Air Hilton, St. Louis - - Holiday Inn Riverfront, St. Louis Nebraska - - Holiday Inn Airport, Lincoln - - Holiday Inn Northeast, Lincoln Nebraska (continued) - - Marriott Hotel, Omaha - - Ramada Inn, Omaha - - Red Lion Inn, Omaha Nevada - - Proposed Super 8, Las Vegas New Jersey - - Ramada Inn, Edison - - Marriott Hotel, Hanover - - Headquarters Plaza, Morristown - - Hyatt Regency, New Brunswick - - Holiday Inn, North Brunswick New York - - Hilton Hotel, Albany - - Proposed Embassy Suites, Amherst - - Holiday Inn Arena, Binghamton - - Holiday Inn SUNY, Binghamton - - Proposed Hotel, Binghamton - - Proposed Hilton, Brooklyn - - Marriott Hotel, Dewitt - - Metropole Hotel, Flushing - - Midway Hotel, Flushing - - Ramada Inn, Kingston - - Royce Hotel, La Guardia - - Holiday Inn, Latham - - Proposed Crowne Plaza, Manhattan - - Proposed Prince Street Hotel, Manhattan - - Proposed Roslyn Inn, Roslyn - - Proposed Le Richmonde, Rye Brook - - Hilton Hotel, Syracuse - - Hotel Syracuse, Syracuse - - Proposed Hotel, Watertown North Carolina - - Proposed Inn, Chapel Hill - - Proposed Indep. Center Marriott Hotel, Charlotte - - Royce Hotel, Charlotte - - Howard Johnson's North, Charlotte HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) North Carolina (continued) - - Holiday Inn West, Durham - - Sheraton University Inn, Durham - - Holiday Inn, Fayetteville - - Holiday Inn Downtown, Raleigh Ohio - - Proposed Hyatt Hotel, Cleveland - - Proposed Marriott Hotel, Cleveland Oregon - - Holiday Inn Airport, Portland - - Holiday Inn South, Portland Pennsylvania - - Quality Inn, Allentown - - Holiday Inn, Bensalem - - Proposed Marriott Courtyard, Devon - - Proposed Lafayette Inn, Easton - - Ramada Inn, Erie - - Holiday Inn, Harrisburg - - Marriott Hotel, Harrisburg - - Proposed Super 8, Harrisburg - - Proposed Super 8, Lancaster - - Holiday Inn West, Monroeville - - Days Inn Philadelphia - - Franklin Plaza Hotel, Philadelphia - - Franklin Towne EconoLodge, Philadelphia - - Guest Quarters Hotel, Philadelphia - - Hilton Inn, Northeast, Philadelphia - - Marriott Airport Hotel, Philadelphia - - Holiday Inn Greentree, Pittsburgh - - Holiday Inn Parkway East, Pittsburgh - - Holiday Inn North, Pittsburgh - - Holiday Inn Parkway West, Pittsburgh - - Proposed Hotel, Pittsburgh - - Royce Hotel, Pittsburgh - - Westin William Penn Hotel, Pittsburgh - - Hilton Hotel, Scranton - - Proposed Marriott Courtyard, Valley Forge - - Holiday Inn Meadowlands, Washington - - Ramada Inn, York - - Proposed Super 8, York Rhode Island - - Proposed Hotel, Providence - - Omni Biltmore Hotel, Providence South Carolina - - Proposed Charleston Center Hotel, Charleston - - Proposed Cooper River Inn, Charleston - - Howard Johnson's, Spartanburg - - Proposed Middleton Inn and Conference Center, Charleston - - Best Western, North Charleston - - Proposed Marriott Courtyard, Columbia - - Fairfield Inn, Florence - - Holiday Inn, Florence - - Fairfield Inn, Greenville - - Proposed Marriott Courtyard, Greenville - - Fairfield Inn, Hilton Head - - Holiday Inn, Hilton Head Tennessee - - Hampton Inn, Brentwood - - Proposed Marriott Courtyard, Brentwood - - Howard Johnson's, Chattanooga - - Sheraton Hotel, Chattanooga - - Howard Johnson's, Knoxville - - Proposed Capital Mall Convention Center Hotel, Nashville - - Clarion Maxwell House, Nashville - - Holiday Inn Briley Parkway, Nashville - - Proposed Marriott Courtyard, Nashville - - Sheraton Music City, Nashville - - Stouffer's Nashville Hotel, Nashville - - Proposed Super 8, Nashville - - Union Station Hotel, Nashville - - Wyndham Garden Hotel, Nashville - - Proposed Super 8, Union City HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Texas - - Proposed Marriott Courtyard, Addison - - Proposed Marriott Courtyard, Arlington - - La Mansion, Austin - - Proposed Marriott Courtyard, Bedford - - Airport Hilton, El Paso - - Hotel Meridien, Houston - - Sheraton Hotel, Houston - - Proposed Marriott Courtyard, Las Colinas - - Proposed Marriott Courtyard, North Dallas - - La Mansion Del Norte, San Antonio - - La Mansion Del Rio, San Antonio - - Proposed Marriott Courtyard, San Antonio - - Proposed Marriott Courtyard - Medical Center, San Antonio Utah - - Deer Valley Resort, Park City - - Hilton Inn, Salt Lake City - - Holiday Inn, Salt Lake City - - Sheraton Hotel, Salt Lake City Virginia - - Mountain Lake Hotel, Blacksburg - - Howard Johnson's, Bristol - - Boars Head Inn, Charlottesville - - Proposed Fairfield Inn, Hampton - - Proposed Embassy Suites, Herndon - - Ramada Renaissance, Herndon - - Proposed Marriott Courtyard, Manassas - - Omni Hotel, Norfolk Virginia (continued) - - Proposed Marriott, Norfolk - - Howard Johnson's, Richmond - - Howard Johnson's, Roanoke - - Howard Johnson's, Roanoke Rapids - - Wyndham Hotel, Williamsburg Washington - - Wyndham Garden Hotel, Bothell - - Redmond Hotel, Redmond - - Wyndham Garden Hotel, SeaTac West Virginia Proposed Budget Motel, Princeton Wisconsin - - Proposed Granada Royale, Green Bay - - Holiday Inn-Downtown, Green Bay Canada - - Inn on the Park, Toronto Puerto Rico - - Carib Inn, San Juan Virgin Islands - - Virgin Grand Beach Hotel, St. Thomas Jamaica - - Holiday Inn, Montego Bay HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Stephen Rushmore, CRE, MAI, CHA Employment 1980 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1977 - 1980 1971 - 1974 HELMSLEY-SPEAR HOSPITALITY SERVICES, INC. New York, New York (Real Estate) 1974 - 1977 JAMES E. GIBBONS ASSOCIATES Garden City, New York (Mortgage Banking, Appraisals, Hotel Operations) Affiliated Ownership Interests HVS INTERNATIONAL (SAN FRANCISCO, CALIFORNIA) West coast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (MIAMI, FLORIDA) Southeast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (BOULDER, COLORADO) Midwest office for hotel/motel appraisals and counseling HVS INTERNATIONAL (VANCOUVER, CANADA) Canadian office for hotel/motel appraisals and counseling HVS INTERNATIONAL (LONDON, ENGLAND) European office for hotel/motel appraisals and counseling HVS - EXECUTIVE SEARCH Hotel/motel executive search and human resource consulting HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) HVS - ECO SERVICES Environmental consulting for hotels and motels; administrator of the ECOTEL designation HOSPITALITY EQUITY INVESTORS, INC. Hotel and motel investment and management company TRUMBULL MARRIOTT HOTEL General partner of a 324-room hotel and conference center PRINCETON HOTEL ASSOCIATES General partner of a 128-unit Residence Inn in Princeton, New Jersey SEAVIEW GOLF RESORT ASSOCIATES General partner of a 298-unit, 424-acre Marriott resort in Absecon, New Jersey SHELTON HOTEL ASSOCIATES General partner of a 96-unit Residence Inn in Shelton, Connecticut DANBURY HOTEL ASSOCIATES General partner of a 243-unit Hilton Hotel in Danbury, Connecticut PRUDENTIAL - HEI JOINT VENTURE Joint venture partner with Prudential Insurance Company of America on a 234-unit Embassy Suites in Atlanta, Georgia WESTPORT NORFOLK ASSOCIATES General partner of a 425-unit Omni Hotel in Norfolk, Virginia WESTPORT BWI, LLC General partner of a 310-unit Marriott Hotel in Baltimore, Maryland HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) WESTPORT RARITAN, LLC General partner of a 274-unit Crowne Plaza Hotel in Raritan, New Jersey WESTPORT NOVI, LLC General partner of a 193-unit Hilton Hotel in Novi, Michigan WESTPORT LONG BEACH, LLC General Partner of a 460-unit Sheraton Hotel in Long Beach, California WESTPORT PARK RIDGE, LLC General Partner of a 265-unit hotel and conference center in Valley Forge, Pennsylvania WESTPORT CHARLESTON, LLC General Partner of a 295-unit Hilton Hotel in Charleston, South Carolina HOSPITALITY VALUATION SOFTWARE, INC. Founder of software company that develops and distributes hotel financial analysis software Hotels Managed Sheraton Hotel, Smithtown, New York Marriott Hotel, Baltimore Airport, Maryland Hilton Hotel, Danbury, Connecticut Residence Inn, Princeton, New Jersey Embassy Suites, Atlanta Airport, Georgia Omni Hotel, Norfolk, Virginia Crowne Plaza, Raritan, New Jersey Hilton Hotel, Novi, Michigan Sheraton Hotel, Long Beach, California Hilton Hotel, Charleston, South Carolina Park Ridge Hotel and Conference Center, Valley Forge, Pennsylvania Hilton Hotel, Wilmington, Delaware HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Professional Affiliations American Society of Real Estate Counselors - Member (CRE) - Board of Governors Appraisal Institute - Member (MAI) (SREA) - Developer and Instructor, Hotel Investment and Valuation Seminar - Developer and Instructor, Hotel Computer Valuation Seminar American Hotel and Motel Association - Certified Hotel Administrator (CHA) - Industry Real Estate Financing Advisory Council (IREFAC) International Society of Hospitality Consultants - Member (ISHC) New York University - Adjunct Assistant Professor of Nutrition, Food and Hotel Management Michigan State University - Honorary Faculty, Honorary Alumnus Certified General Appraiser - Arizona, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Illinois, Massachusetts, Michigan, Minnesota, Nebraska, New Jersey, New York, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Virginia Licensed Real Estate Broker - New York, Pennsylvania Board of Advisers - Real Estate Finance Journal - Real Estate Workouts & Asset Management American Arbitration Association - National Real Estate Valuation Council Cornell Society of Hotelmen New York University Masters in Hospitality Management - Advisory Board New York University Hospitality Investment Conference - Board of Advisors Beta Gamma Sigma - National Honor Society in Business and Management HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Endowment Hospitality Valuation Services Professor of Hotel Finance and Real Estate - School of Hotel Administration, Cornell University (currently held by Professor James J. Eyster) Education BS - School of Hotel Administration, Cornell University MBA - Graduate School of Business Administration (Finance), University of Buffalo Candidate for PhD - School of Education, Department of Food Service Management, New York University Partial List of Teaching and Lecture Assignments Cornell University - Computer Valuation Techniques Michigan State University - Hotel Management Contracts University of North Carolina - Hotel Market Studies University of Virginia - Assessing Hotels American Arbitration Association - Real Estate Arbitration American Hotel and Motel Association - Hotel Obsolescence Appraisal Institute - Hotel Valuation (over 50 seminars) International Association of Assessing Officers - Hotel Valuation Montreal Appraisal Society - Total Project Analysis Society of Real Estate Appraisers - Lease Seminar Lodging Hospitality - Lodging Summit Published Books and Seminars Textbooks The Valuation of Hotels and Motels, Appraisal Institute, Chicago, Illinois, 1978 Hotels, Motels and Restaurants: Valuations and Market Studies, Appraisal Institute, Chicago, Illinois, 1983 How to Perform an Economic Feasibility Study of a Proposed Hotel/Motel, American Society of Real Estate Counselors, Chicago, Illinois, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Books and Seminars (continued) Textbooks (continued) Hotel Investments: A Guide for Owners and Lenders, Warren, Gorham and Lamont, Inc., New York, New York, 1990 The Computerized Income Approach to Hotel Market Studies and Valuations, Appraisal Institute, Chicago, Illinois, 1990 Hotel Investments: A Guide for Owners and Lenders, 1992 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotel Investments: A Guide for Owners and Lenders, 1993 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Appraisal Institute, Chicago, Illinois, 1992 Student Manuals The Valuation of Lease Interests, Society of Real Estate Appraisers, Chicago, Illinois, 1976 Hotel-Motel Valuation Seminar, Appraisal Institute, Chicago, Illinois, 1981, 1988, 1990 The Computerized Approach to Hotel Market Studies and Valuations Seminar, Appraisal Institute, Chicago, Illinois, 1991 Demonstration Appraisal Demonstration Appraisal of a Proposed Hotel, Spring Valley, New York, Hospitality Valuation Services, Mineola, New York, 1983, 1990 Chapters The Real Estate Handbook-Second Edition, Dow Jones-Irwin, 1989, "Hotels and Motels" Arbitration of Real Estate Valuation Principles, American Arbitration Association, 1987, "Arbitration in the Hospitality Industry" Ethics in Hospitality Management: A Book of Readings, Educational Institute of the American Hotel and Motel Association, 1992, "Ethics in Hotel Appraising" The Lodging and Food Service Industry, Educational Institute of the American Hotel and Motel Association, 1993, "Insider's Insights" HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles The Appraisal Journal "Using Total Project Analysis to Compete for Investment Capital," October, 1975 "The Appraisal of Food Service Facilities," July, 1980 "Publish and Prosper," October, 1980 "Valuation of Hotels and Motels for Assessment Purposes," April, 1984 "Adjusting Comparable Sales for Hotel Assessment Appeals," July, 1986 "Hotel Business Value and Working Capital: A Clarification," January, 1987 "Ethics in Hotel Appraising," July, 1993 The Appraiser "Hotel-Motel Appraisal Misconceptions Set Straight," January, 1979 "No Conventional Financing Available for Hotels: Rushmore," December, 1979 "Estimating Hotel Land Values Using Comparable Ground Leases," April, 1980 Bulletin of the Cornell Society of Hotelmen "Employment Philosophy for a Consulting Practice," July, 1984 Business Travel News "A Snapshot of a Classic Recovery," July, 1995 The Canadian Appraiser "Hotel/Motel Market Sales Update," Summer, 1987 Capital Sources for Real Estate "Stephen Rushmore Discusses the Future of the Lodging Industry," December, 1994 Cayuga Advisor "Secrets to Success in Consulting," October, 1992 Chapter News and Notes "Quantifying a Hotel's Business Value," November, 1979 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Cornell Hotel & Restaurant Administration Quarterly "A Preliminary Market Study," November, 1974 "How Much is Your Place Worth Today? A Case Study in Hotel - Motel Valuation," May, 1975 "What Can Be Done About Your Hotel's Real Estate Taxes?" May, 1977 "The Appraisal of Lodging Facilities," August, 1978 "The Appraisal of Food Service Facilities," February, 1979 "The Appraisal of Lodging Facilities - Update," November, 1984 "Hotel Sales Prices Down More Than 12%," May, 1991 "Seven Current Hotel Valuation Techniques," August, 1992 "The Valuation of Distressed Hotels," October, 1992 "Hotel Lending in the 1990's: Amateurs Beware," December, 1994 "Investment Values of Lodging Property: Modeling the Effects of Income Taxes and Alternative Lender Criteria," December, 1995 FCI Spec Sheet "Employment Philosophy for a Consulting Practice," September, 1984 Florida Hotel & Motel Journal "Rushmore Reports Rising Hotel Prices," February, 1995 Hotel and Motel Management "Average Rate vs. Project Cost," May 1, 1974 "How to Increase the Marketability of Your Motel," April, 1981 "Tougher Lending, Lower Room Rate Hikes On Way?" June, 1981 "What is That Mortgage Loan Going to Cost You?" August, 1981 "How to Perform a Study of Your Property's Market," October, 1981 "How do High Interest Rates Affect Your Motel's Value?" December, 1981 "How to Buy a Feasibility Study That Works for You," February, 1982 "Settling Lease Conflicts Quickly Through Arbitration," April, 1982 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Hotel and Motel Management (continued) "Are Casino Hotels Really Worth $500,000 Per Room?" June, 1982 "Discount Rates and Internal Rate of Return," August, 1982 "Determining a Property's Extended Life Cycle," November, 1982 "Using Microcomputers for Forecasting," December, 1982 "Update on Hotel Development Costs," January, 1983 "Estimating a Site's Worth by Finding Its Profit Value," June, 1983 "Hotel Construction May Be Slowing Down a Little Bit," April, 1983 "The Investor's Risk Sways to Prevailing Economic Winds," August, 1983 "Is Your Property Tax at as Low a Level as it Should Be?" October, 1983 "The Ultimate Guest Room: Could it Ever Exist Anywhere?" December, 1983 Hotel-Motor Inn Journal A Preventive Maintenance System for Motels," March, 1975 Hotel Valuation Journal "Hotel Valuation Index Peaks During 1989," Fall, 1990 "Hotel Development Costs," Winter, 1991 "Hotel Valuation Index for 1990," Spring, 1991 "Bad Year for Hotel Sales Prices Confirmed," Spring, 1992 "Hotel Sales Prices on the Rise," Fall, 1994 "United States Hotel Values Climb," Spring/Summer, 1995 "It's Time for Franchise Reform," Fall, 1995 Institutions/ Volume Feeding "Greater Risk/Greater Profit Potential: Hotel Management Contract," May, 1973 Lodging Hospitality "How to Finance Renovation Projects," January, 1974 "Controlling Your Real Estate Taxes," July, 1978 "Putting Together a Sound Financial Package," December, 1978 "Favorable Outlook for Lodging Values," December, 1983 "Are Your Property Taxes Too High? (Part I and II)," May and June, 1984 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Development Costs," July, 1984 "The Right Management Contract for You," September, 1984 "Selecting the Firm to Prepare Your Feasibility Study," October, 1984 "A Quick How-To In Hotel Valuation," November, 1984 "Updating Lodging Interest Rates," December, 1984 "Is Your Guest Experience Up to Par?" January, 1985 "How to Perform a Breakeven Analysis," May, 1985 "Evaluating Operating Performance," June, 1985 "Hotel Lenders Toughen Underwriting Requirements," July, 1985 "Don't Forget the Pre-Opening Agreement," August, 1985 "Management Companies Should Participate in Financing," October, 1985 "Current Techniques for Valuing Hotel Land," November, 1985 "Hotel Development Costs," December, 1985 "Sourcing Debt Into the 1990's," January, 1986 "Hotel Valuation Thumb Rule," February, 1986 "Value in Use Versus Value in Exchange," March, 1986 "Stretching Feasibility," April, 1986 "The Management Question," May, 1986 "How to Commission a Feasibility Study," June, 1986 "Macro Trends Affecting Property Values," July, 1986 "Hotel-Motel Market Sales Update," August, 1986 "Financing Alternatives: Zero Coupon Mortgages," September, 1986 "Forecasting Lodging Energy Costs," October, 1986 "Portfolio Financing a Better Way," November, 1986 "Profit by Looking at History," December, 1986 "Why New York Isn't Overbuilt," February, 1987 "How to Discourage Hotel Overbuilding: A Case Study," April, 1987 "Structuring an Incentive Management Fee," June, 1987 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Franchising Questions and Answers," July, 1987 "Comparing Hotel Development Costs," August, 1987 "Understanding Economic Life," September, 1987 "Prices Rise for Lodging Properties," October, 1987 "Management Companies Are Key to Success," November, 1987 "Evaluating a Management Contract Fee Structure," December, 1987 "Check Profits Before Selecting Hotel Operator," January, 1988 "It's a Good Time to Review Your Taxes," February, 1988 "How to Use a Management Company Rating System," March, 1988 "Make Sure Management Contracts Contain These Terms," April, 1988 "Hotel Access and Visibility," May, 1988 "Chain Sale Strategies," July, 1988 "Evaluating a Hotel Franchise," August, 1988 "Evaluating Franchise Fees," September, 1988 "Opportunities in Economy Lodging," October, 1988 "How to Obtain a Hotel Mortgage," November, 1988 "Arbitration in the Hospitality Industry," December, 1988 "Lodging Development Cost Update," January, 1989 "Amenities as Profit Builders," February, 1989 "Hotel Values Mirror the Times," March, 1989 "Forecasting Revenue and Expenses," April, 1989 "Real Estate Jargon Made Simple," May, 1989 "Pricing a Management Contract," June, 1989 "Trends in Valuation," July, 1989 "Rescuing the Distressed Hotel," August, 1989 "Shielding Against Incompetence," September, 1989 "Hotel Valuation Revisited," October, 1989 "New Breed of Hard Budgets," November, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Figuring Cap Rates," December, 1989 "A Glance Backward," January, 1990 "Costs Creeping Up," February, 1990 "Valuing Distressed Properties," March, 1990 "Cap and Discount Rates," April, 1990 "An Open Letter," May, 1990 "Misconceptions About Appraisals," June, 1990 "Hotel Values Still Growing," July, 1990 "Hotel Renovation is Key to `90s," August, 1990 "Time Right for Hotel Leases," September, 1990 "Getting a Fix on Rates," October, 1990 "The Wrinkles of Class," November, 1990 "A Glance Backward," December, 1990 "The Price Dropoff," January, 1991 "The Cost Washout," February, 1991 "Survival of the Fittest," March, 1991 "Looking Out and Up," April, 1991 "The Bottom is in Sight," May, 1991 "The Pitfalls of Liquidation," June, 1991 "Extra! Extra! Hospitality News," July, 1991 "The Art of Hotel Renovation," August, 1991 "No Better Time for a Tax Review," September, 1991 "No Time for Passivity," October, 1991 "What a Franchise Really Costs," November, 1991 "In Case You Hadn't Heard," January, 1992 "Negotiation - The Name of the Game," February, 1992 "Now Could be the Time to Build," March, 1992 "The Well May Stay Dry," April, 1992 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Life Expectancy," May, 1992 "Hotel Values - What a Downer," June, 1992 "How to Make Money Now," July, 1992 "Hotel Chain Class Survey," August, 1992 "Budget Dining with Rushmore," September, 1992 "Bookings Up, Rates Will Follow," October, 1992 "Hospitality Master's Good Preparation," November, 1992 "What's New on the Job Front?" January, 1993 "Where Have All the Hotels Gone?" February, 1993 "Hotel Building Costs Continue to Fall," March, 1993 "Hotel Values Head Upward," April, 1993 "The Rise and Fall of Trophy Hotels," May, 1993 "Hotel Sales and Prices Rebound," June, 1993 "Third Parties Loosening Purse Strings," July, 1993 "Beyond Recycling: The Ecotel," August, 1993 "Time to Reduce Property Taxes," September, 1993 "Lodging: The Way I See It," October, 1993 "Choosing an Appraiser," November, 1993 "Who Needs an Asset Manager?" January, 1994 "Investing by the Numbers," February, 1994 "Fire Your Staff and Lease Them Back," March, 1994 "Published Rates Hint at Recovery," April, 1994 "Now is the Time to Start Building," May, 1994 "Hotel Values Heading Up," June, 1994 "Farewell, Friend," July, 1994 "Sales Prices Creeping Up," August, 1994 "Selecting Green Hotel Supplies," September, 1994 "Don't Write Off Full-Service Hotels," October, 1994 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Lodging REIT's Are on the Rise," November, 1994 "Going Back to the Future," January, 1995 "How much do Managers Make?" March, 1995 "Lodging Transactions Soared in '94," April, 1995 "Hotel Development Costs on the Rise," May, 1995 "Hotel Values up Significantly," June, 1995 "What a Franchise Costs over the Long Term," July, 1995 "Road Food Part II," August, 1995 "It's Time for Franchise Reform," September, 1995 "Extended Stay May Not Extend Your Profits," October, 1995 "The Year as I See It," November, 1995 "Cap Rate 101," January, 1996 Michigan Lodging "Hotel Development Costs," January, 1988 The Mortgage and Real Estate Executives Report "Atlantic City Building Game Involves High Stakes," August, 1979 "How Interest Rates Affect Real Estate Values," June, 1982 "Update on Hotel Development Costs," May 1, 1983 Motel-Hotel Insider "The $100,000 Plus Hotel Room Has Become a Reality," November 19, 1979 "Update on Hotel Development Costs," April 4, 1983 NAIFA - The Appraisal Review "Hotel Valuation Techniques," Vol. 44, 1991 Real Estate Digest "Why Should the Management Team be Important to Hotel Lenders," Fall, 1988 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Finance Journal "What is a Typical Fee for a Hotel Management Contract?" Fall, 1988 "Hotel Franchise Fees," Winter 1989 "Why the Management Team Should be Important to Hotel Lenders," Spring, 1989 "Hotel Values and Costs," Summer, 1989 "Structuring a Hotel Investment," Fall, 1989 "A Guide for Lenders Holding Distressed Hotel Loans," Winter, 1990 "Estimating Current Interest Rates for Hotel Financing," Spring, 1990 "Hotel Valuation Techniques," Summer, 1990 "Now is the Time to Review Your Hotel's Property Taxes," Fall, 1990 "Property Tax Assessments for Hotels and Motels," Winter, 1991 "Putting Together Hotel Management Agreements - Part I," Spring 1991 "Putting Together Hotel Management Agreements - Part II," Summer, 1991 "The 1980s - The Decade of Change," Fall, 1991 "An Overview of the Hotel Industry: Past, Present, and Future," Spring, 1994 Real Estate Forum "Casino Hotels Raise Valuation Questions," November, 1981 Real Estate Investment Ideas "How Fuel and Energy Shortages Should Affect Investment Decisions in the Hospitality Industry," March, 1974 "Upward Trend Continues for Sales Price of Hotel-Motel Properties," May, 1988 "High Prices Paid for Hotel-Motel Properties," February, 1990 Real Estate Issues "Employee Compensation for a Consulting Practice," Fall/Winter, 1985 "Hotel/Motel Market Sales Update," Spring/Summer, 1987 Real Estate Newsletter "Computers in Hotel Appraising," May 15, 1989 Real Estate Investment Ideas "Hotel-Sales Update," Winter, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Review "Valuing Motels and Hotel in the Current Market," Fall, 1972 "Dealing With Distressed Hostelry Loans," Fall, 1975 "The Mortgage Underwriting Consultant Comes of Age," Fall, 1977 "Real Estate Compensation," Winter, 1987 Real Estate Workouts and Asset Management "Stephen Rushmore on Directions in the Hospitality Industry," September, 1992 Real Values "Hotel Construction Cost Update," April, 1986 Restaurant and Hotel Design "How Much Should the Renovation Be?" March, 1986 "14 Notable Hotel Development Firms," December, 1987 Rushmore on Hotel Valuation "Mortgage - Equity," Winter, 1979 "Atlantic City - From Bust to Boom," Winter, 1979 "Mortgage - Equity," Spring, 1979 "Developing Mortgage Data," Spring 1979 "Gasoline and Market Values, " Spring, 1979 "Mortgage - Equity," Fall, 1979 "Quantifying a Hotel's Business Value," Fall, 1979 "What Has Happened to Typical Hotel-Motel Development Costs?," Fall, 1979 "Mortgage-Equity," Winter, 1980 "Extending Hotel Economic Life Through Renovation," Winter, 1980 "Estimating Hotel Land Values Using Comparable Ground Leases," Winter, 1980 "Quantifying the Value of Personal Property to a Going Hotel," Spring, 1980 "Recent Changes in New York City's Hotel Market," Spring, 1980 "Hotel-Motel Economic Lives," Fall, 1980 "Mortgage - Equity," Fall, 1980 "Mortgage - Equity," Winter, 1981 "Developing Mortgage Data," Winter, 1981 "Statistical Support for Food and Beverage Projections," Winter, 1981 "Mortgage - Equity," Spring/Summer, 1981 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Rushmore on Hotel Valuation (continued) "Quantifying a Hotel's Demand," Spring/Summer, 1981 "A Five-Year Overview of Typical Hotel-Motel Development Costs," Spring/Summer, 1981 "Mortgage - Equity," Winter/Spring, 1982 "Update on Hotel Capitalization Rates," Winter/Spring, 1982 "Mortgage - Equity," Summer/Fall, 1982 "Are Casino Hotels Really Worth $500,000 Per Room?" Summer/Fall, 1982 "The Hotel-Motel Life Cycle, Summer/Fall, 1982 "Mortgage - Equity," Winter/Spring, 1983 "Update on Hotel Development Costs," Winter/Spring, 1983 "The Valuation of Hotels and Motels for Assessment Purposes," Winter, 1984 "Hotel Capitalization Rates," Summer, 1984 "Hotel Development Cost Survey," Summer, 1984 "Selecting a Hotel Management Company," Fall, 1984 "Hotel Capitalization Rates," Spring, 1985 "How to Perform a Breakeven Analysis," Spring, 1985 "Hotel Capitalization Rates," Winter, 1986 "Hotel Development Costs," Winter, 1986 "Hotel Valuation Survey," Winter, 1987 "Impact of New Tax Laws on Hotel Values," Winter, 1987 "Hotel-Motel Market Sales Update," Winter, 1987 "Structuring an Incentive Management Fee," Fall, 1987 "Understanding Your Hotel's Economic Life," Fall, 1987 "Hotel Development Costs," Fall, 1987 "Hotel, Motel Market Sales Update," Winter, 1988 "Amenity Creep," Winter, 1989 "Hotel Franchise Fees," Winter, 1989 "Hotel Valuation Index," Fall, 1989 "Latest Trends in Hotel Values," Fall, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Tri-State Real Estate Journal "Across the Nation: Hotel Sale Prices Escalate on Average," December 23, 1994 U.S. Real Estate Week "All-Suites Market Entering Second Phase," May 4, 1987 Valuation "Hotel-Motel Market Sales Update," February, 1987 Quarterly Newsletter Hotel Valuation Journal Professional newsletter with a circulation of 10,000 Real Estate Column Lodging Hospitality Real estate editor for a major monthly hospitality periodical Hospitality Column Real Estate Finance Journal Contributing hospitality editor Computer Software Hospitality Valuation Software Hotel financial software for room night analyses, income and expense forecasts, and valuation calculations - developed and distributed for the Appraisal Institute Hotel-Motel Data Hospitality Market Data Exchange National clearinghouse for information pertaining to hotel and motel transactions Hotel Valuation Index National index of hotel value trends for 24 individual market areas Hospitality Seminar Series Intensive short courses for hotel and restaurant professionals Hotel Franchise Fees Analysis Guide Analysis of hotel franchise fees and costs Hospitality Bibliography Comprehensive literature index of hotel and restaurant books and articles HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Awards Robert H. Armstrong Award For the most significant contribution to The Appraisal Journal in 1975 Activities Commercial pilot, instrument, multi-engine; sailing; skiing Corporate and Institutional Clients Served Aetna Life Insurance AIG Real Estate Investment Aldrich Eastman and Waltch Allstate American Airlines America's Best Inns Arthur Anderson & Company Bankers Trust Company Bank of America Bank of Boston Bank of Montreal Bank of New York Bank of Nova Scotia Bank of Tokyo Bank One-Columbus Banque Indosuez Barclay's Bank Baybank Boston The Beacon Companies Bear, Stearns & Company, Inc. Best Inns Best Western International Boykin Management Co. Bradbury Suites C. Itoh Caesar's World California Dept. of Transportation Chase Lincoln First Bank, N.A. Chase Manhattan Bank Chemical Bank Chrysler Capital Corporation CIGNA Citibank Citicorp Real Estate City of Boston City of Detroit City of Grand Rapids City of Kalamazoo City of Orlando City of Philadelphia City of Santa Monica City of Toronto Columbia Sussex Corporation Continental Illinois National Bank Copley Real Estate Advisors Corporex Development CRI, Inc. Cushman and Wakefield Days Inns Edward J. DeBartolo Corp. HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Deer Valley Ski Corporation Doubletree Hotels Drury Inns Econo Lodge Economic Development Admin. EIE Regent International Embassy Suites Equitable Life Assurance Equitable Real Estate Investment European American Bank Fairmont Hotels Federal Deposit Insurance Corp. First Boston First California Savings First Interstate Bank First National Bank of Chicago Four Seasons Hotels Goldman, Sachs Greater Orlando Aviation Authority Great Western Bank Great Western Savings Guest Quarters Hampton Inns Hilton Hotels, Corp. Hilton International Holiday Corporation Holiday Inns Home Savings of America Howard Johnson's Hudson Hotels Corporation Hyatt Hotels Industrial Bank of Japan Interstate Hotels The Irvine Company ITT Commercial Finance Corp. Japan Airlines JDC (America) Corporation John Q. Hammons John Hancock Life Insurance Johnson & Wales College Kenneth Leventhal & Assoc. Kidder Peabody & Company, Inc. La Quinta Larken, Inc. Lexington Companies Loews Hotels Harry Macklowe Real Estate Marine Midland Bank, N.A. Marriott Corporation MA Bay Transit Authority Massachusetts Mutual Life Mellon Bank Meridien Hotels Merrill Lynch Merrill Lynch Capital Markets Metropolitan Life Insurance Microtel Midlantic Bank HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Mitsubishi Morgan Guaranty Bank & Trust Co. J.P. Morgan Investment Management Morgan Stanley Motel 6, Inc. Mutual Benefit Co. National Westminster Bank New York Life Insurance Nippon Credit Bank Nomura Securities Int'l North American Taisei Corporation Northwestern Mutual Life Omni Hotels Parabas Bank Prime Motor Inns Property Capital Trust Prudential Life Insurance Radisson Hotels Ramada Inns Red Lion Inns Regent International Registry Hotels Residence Inns Resolution Trust Corporation Rhode Island Hospital Trust Ritz-Carlton Hotels Rodeway Inns Rose Associates Salomon Brothers San Antonio Hotel/Motel Assoc. Sanwa Bank Security Pacific Bank Servico Management Corp. Sheraton Hotels Sonesta Hotels Sonnenblick-Goldman Steamboat Ski Corporation Stouffer Hotels Stratton Corporation Sumitomo Bank Summerfield Hotel Corporation Super 8 Hotels Swiss Bank Corporation Taisei Texas Commerce Bancshares, Inc. Tishman Realty Corporation Trans World Airlines Travelers Insurance TraveLodge Trusthouse Forte UBS Securities Union Labor Life United Bank of Switzerland United Inns, Inc. United States Steel Universal Hotels U.S. Air Force U.S. Department of Justice HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) U.S. Department of the Army U.S. Department of the Interior U.S. Economic Development Authority U.S. Trust Company Walt Disney Productions Westin Hotels Williams Hospitality Corporation Winegardner & Hammons Winthrop Financial Associates Wyndham Hotels Zeckendorf Company Appearance as an Expert Witness Administrative Law Court - SEC, Washington, DC Appellate Tax Board, Boston, Massachusetts Arbitration, Wayne, New Jersey Assessment Appeals Board, Los Angeles County, Los Angeles, California Board of Equalization and Review, Washington, District of Columbia (2) Board of Taxation, Atlantic City, New Jersey Bureau de Revision Evaluation Fonciere du Quebec, Montreal, Canada Circuit Court, Orange County, Orlando, Florida Condemnation Review Board, Minneapolis, Minnesota Corporation Committee, Rhode Island State Senate Court of Common Pleas, Allegheny County, Pennsylvania Court of Common Pleas, Franklin County, Ohio Court of Common Pleas, Montgomery, Pennsylvania Court of Common Pleas, Pittsburgh, Pennsylvania Court of Common Pleas, Philadelphia, Pennsylvania Court of Queen's Bench of Alberta, Canada District Court, Arapahoe County, Colorado District Court, Dallas County, Texas District Court, Harris County, Texas District Court, Tarrant County, Texas District Court, Hennepin County, Minneapolis, Minnesota District Court, Knoxville, Tennessee Federal Bankruptcy Court, Oakland, California Federal Bankruptcy Court, Los Angeles, California HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Denver, Colorado Federal Bankruptcy Court, District of Columbia Federal Bankruptcy Court, Miami, Florida (2) Federal Bankruptcy Court, Chicago, Illinois Federal Bankruptcy Court, New Orleans, Louisiana Federal Bankruptcy Court, Greenbelt, Maryland Federal Bankruptcy Court, Baltimore, Maryland Federal Bankruptcy Court, Rockville, Maryland Federal Bankruptcy Court, Boston, Massachusetts Federal Bankruptcy Court, Grand Rapids, Michigan Federal Bankruptcy Court, Las Vegas, Nevada Federal Bankruptcy Court, Newark, New Jersey (2) Federal Bankruptcy Court, Manhattan, New York (2) Federal Bankruptcy Court, Westbury, New York Federal Bankruptcy Court, Philadelphia, Pennsylvania Federal Bankruptcy Court, Reading, Pennsylvania Federal Bankruptcy Court, Salt Lake City, Utah Federal Bankruptcy Court, Madison, Wisconsin (2) Federal District Court, Rochester, New York Federal District Court, Philadelphia, Pennsylvania (2) Judicial Arbitration and Mediation Services, Dallas, Texas Michigan Tax Tribunal, Detroit, Michigan New Jersey Tax Court, Newark, New Jersey (2) Superior Court, District of Columbia Superior Court, Clayton County, Georgia (2) Superior Court of North Carolina Superior Court, Nashua, New Hampshire Supreme Court, New York State, Buffalo, New York Supreme Court, New York State, Manhattan, New York Supreme Court, New York State, Riverhead, New York HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Tax Review Board, San Joaquin County, Stockton, California Tax Review Board, Bangor, Maine Tax Review Board, Schenectady, New York Tax Review Board, Yorktown, New York Tax Review Board, North Carolina Tax Review Board, Philadelphia, Pennsylvania (2) U.S. District Court, Wilmington, Delaware U.S. District Court, Madison, Wisconsin ============================================================================== Partial List of Hotels/Motels, Appraised or Reviewed Internationally North America Canada - Delta Hotel, Calgary - Econo Lodge, Hull - Hotel Lord Berri, Montreal - Hotel Vogue, Montreal - Hyatt Regency, Montreal - Le Ragence Hyatt, Montreal - Holiday Inn, Oshawa, Ontario - Hotel Le Chantecler, Quebec - Bond Place Hotel, Toronto - Carlton Hotel, Toronto - Chelsea Hotel, Toronto - Delta Chelsea Hotel, Toronto - Four Seasons on the Park, Toronto - Inn on the Park, Toronto - Novotel Missisauga, Toronto - Ramada Inn, Toronto - Sutton Hotel, Toronto - Toronto Marriott East, Toronto - Westbury Hotel, Toronto - Burnaby Villa Inn, Vancouver - Four Seasons Hotel, Vancouver - Sheraton Land Mark, Vancouver - Sheraton Plaza 500, Vancouver - Four Seasons Yorkville Hotel, Yorkville United States Alabama - MEI - Birmingham West, Bessemer - Comfort Inn, Birmingham - Courtyard by Marriott, Birmingham - Courtyard by Marriott-Hoover, Birmingham - Courtyard By Marriott/Homewood, Birmingham - Crown Sterling Suites, Birmingham - Fairfield Inn, Birmingham - Holiday Inn, Birmingham - Howard Johnson, Birmingham - Knights Inn, Birmingham - Ramada Inn, Birmingham - Residence Inn by Marriott, Birmingham - Still Waters Resort, Dadeville - Ramada Inn, Gadsden - Sheraton Hotel, Gulf Shores - Courtyard by Marriott, Huntsville - Knights Inn, Huntsville - Marriott Hotel-Proposed, Huntsville - La Quinta Inn, Huntsville University - Days Inn, Mobile - Hotel - Proposed, Mobile - Inn-Proposed, Mobile - Stouffer Riverview, Mobile - Courtyard by Marriott, Montgomery - Fairfield Inn, Montgomery - Holiday Inn-Downtown, Montgomery - Holiday Inn-East, Montgomery - Howard Johnson, Montgomery - La Quinta Inn, Montgomery - Residence Inn, Montgomery - Marriott's Grand Hotel, Point Clear - Holiday Inn, Sheffield - La Quinta, Tuscaloosa - Masters Economy Inn, Tuscaloosa - Proposed Extended Stay, West Mobile Alaska - Barratt Inn, Anchorage - Clarion Hotel, Anchorage - Holiday Inn, Anchorage - Hotel Captain Hook, Anchorage - International Airport Inn, Anchorage - Sheraton Anchorage Hotel, Anchorage Arizona - Holiday Inn, Bullhead City - Embassy Suites, Camelback - Compri Hotel-Proposed, Chandler - Quality Inn, Chandler - Ramada Inn, Chandler - AmeriSuite Hotel-Proposed, Flagstaff - Holiday Inn, Flagstaff - Motel 6, Flagstaff - Rodeway Inn, Flagstaff - Bright Angel Lodge, Grand Canyon - El Tovar Hotel, Grand Canyon - Grand Canyon National Park, Grand Canyon - Kachina Lodge, Grand Canyon - Maswik Lodge, Grand Canyon - Moqui Lodge, Grand Canyon - Phantom Ranch, Grand Canyon - Thunderbird Lodge, Grand Canyon - Yavapai Lodge, Grand Canyon - Hampton Inn-Proposed, Holbrook - Moqui Lodge, Kaibab National Forest - Rodeway Inn, Kingman - Nautical Inn Resort, Lake Havasu City - Lexington Hotel Suites, Mesa - Biosphere II Conference Center, Oracle - Best Western-Per Diem, Phoenix - Bobby McGee's, Phoenix - Caravan Inn, Phoenix - Compri Hotel-Proposed, Phoenix - Courtyard by Marriott-Black Canyon, Phoenix - Courtyard by Marriott-Mesa, Phoenix - Crescent Phoenix Hotel, Phoenix - Crown Sterling Suites, Phoenix - Days Inn, Phoenix - Doubletree Inn at Park Central, Phoenix - Embassy Suites, Phoenix - Embassy Suites-Biltmore, Phoenix - Executive Park Hotel, Phoenix - Fountain Suites Hotel, Phoenix - Granada Royale-Camelhead, Phoenix - Hilton Hotel, Phoenix - Holiday Inn, Phoenix - Hyatt Regency, Phoenix - La Quinta Hotel, Phoenix - Lexington Hotel Suites, Phoenix - Newton's Sands, Phoenix - Phoenician Golf & Tennis Resort, Phoenix - Pointe Hilton at Tapatio Cliffs, Phoenix - Quality Inn, Phoenix - Ramada Inn-Airport, Phoenix - Ramada Inn-East, Phoenix - Ritz Carlton, Phoenix - Sunburst Resort Hotel, Phoenix - Hassayampa Inn, Prescott - Clarion Inn at McCormick Ranch, Scottsdale - Conference Center, Scottsdale - Courtyard by Marriott-Mayo, Scottsdale - Doubletree Inn at Scottsdale Mall, Scottsdale - Fairfield Inn, Scottsdale - Fashion Square Hotel, Scottsdale - Loews Paradise Resort, Scottsdale - Marriott Camelback Inn, Scottsdale - Marriott Mountain Shadows, Scottsdale - Mountain Shadows Resort, Scottsdale - Orange Tree Resort, Scottsdale - Ramada-Valley Ho, Scottsdale - Red Lion's La Posada Resort, Scottsdale - Registry Resort, Scottsdale - Rodeway Inn, Scottsdale - Scottsdale Princess, Scottsdale - Sheraton Scottsdale Resort, Scottsdale - The Phoenician, Scottsdale - Valley Ho, Scottsdale - John Gardiner's Enchantment, Sedona - L'Auberege de Sedona, Sedona - Los Abrigados, Sedona - Orchards Inn, Sedona - Hotel-Proposed, Sierra Vista - Motel 6, Sierra Vista - Temple Bar Resort, Temple Bar - Coachman Inn - Proposed, Tolleson/Phoenix - Tubac Resort, Tubac - Canyon Ranch, Tucson - Coachman Inn-Proposed, Tucson - Courtyard by Marriott, Tucson - Doubletree Inn, Tucson - Embassy Suites, Tucson - Granada Royale Hometel-E. Broadway, Tucson - Hotel Park Tucson-Proposed, Tucson - Lexington Suites Hotel, Tucson - Loews Hotel, Tucson - Resort Hotel-Proposed, Tucson - Rodeway Inn, Tucson - Sunbelt Commerce Center Hotel, Tucson - La Quinta Inn, Tucson East - Bobby McGee's, Tuscon - Radisson Suite Hotel, Tuscon - Ventana Canyon Golf and Racquet, Tuscon - Ramada Inn, Union Hill Arkansas - Sheraton Inn, Fort Smith - Hilton, Hot Springs - Holiday Inn-Lake Hamilton, Hot Springs - Courtyard by Marriott, Little Rock - Holiday Inn, Little Rock - Legacy Hotel, Little Rock - Little Rock Hilton, Little Rock - Masters Economy Inn, Little Rock - Red Carpet Inn, Little Rock - Super 8, Little Rock - Masters Economy Inn, North Little Rock - Masters Economy Inn, Protho-Junction - Holiday Inn, Texarkana California - Hampton Inn, Agoura Hills - Ramada Inn, Agoura Hills - Residence Inn-Proposed, Agoura Hills - Island Motel, Almeda - Anaheim Hilton & Towers, Anaheim - Anaheim Park Motor Inn, Anaheim - Anaheim Plaza Hotel, Anaheim - Best Western Pavillions, Anaheim - Carousel Inn, Anaheim - Conestoga Hotel, Anaheim - Courtyard by Marriott, Anaheim - Crown Sterling Suites, Anaheim - Disneyland Hotel, Anaheim - Golden Forest Motel, Anaheim - Hampton Inn, Anaheim - Hilton, Anaheim - Holiday Inn Anaheim Center, Anaheim - Hotel-Proposed, Anaheim - Marriott Hotel, Anaheim - Pan Pacific Hotel, Anaheim - Pitcairn Motel, Anaheim - Raffles Inn, Anaheim - Ramada Maingate/Disneyland Hotel, Anaheim - Roger Morris Inn, Anaheim - Stovall's Inn, Anaheim - The Station Inn, Anaheim - Travelodge Inn at the Park, Anaheim - AmeriSuite, Anaheim Hills - Comfort Inn, Anahiem - Mansouri Hotel, Antioch - Red Lion, Apple Valley - Hampton Inn, Arcadia - Residence Inn, Arcadia - Hilton Lodge, Arrowhead Lake - Auburn Inn, Auburn - Sleep Inn, Auburn - Allstar Inn, Bakersfield - Clarion Hotel, Bakersfield - Courtyard by Marriott, Bakersfield - Economy Inn, Bakersfield - Ramada Inn, Bakersfield - Red Lion Hotel, Bakersfield - Residence Inn, Bakersfield - Rodeway Inn, Bakersfield - Hilton Hotel, Baldwin Park - San Gabriel Valley Hotel, Baldwin Park - The Hilton Hotel, Baldwin Park - Allstar Inn, Barstow - Economy Inn, Barstow - Marriott Berkeley Marina, Berkeley - Shattuck Hotel, Berkeley - Beverly Hills Hotel, Beverly Hills - Beverly Rodeo Hotel, Beverly Hills - Beverly Wilshire Hotel, Beverly Hills - Hilton Hotel-Cresthil, Beverly Hills - L'Ermitage, Beverly Hills - Peninsula Hotel, Beverly Hills - Best Western, Big Bear Lake - Big Bear Hotel, Big Bear Lake - Big Bear Lake Resort, Big Bear Lake - Big Bear Towering Pines, Big Bear Lake - Motel 6, Big Bear Lake - Post Ranch, Big Sur - Ventana Inn, Big Sur - Rodeway Inn, Blythe - Courtyard by Marriott, Brea - Holiday Inn, Brentwood - Courtyard by Marriott, Buena Park - Fairfield Inn, Buena Park - Hampton Inn, Buena Park - Holiday Inn, Buena Park - Crowne Sterling Suites, Burlingame - Hyatt Regency, Burlingame - Mariott Hotel - SFO, Burlingame - Marriott, Burlingame - Marriott-San Francisco Airport, Burlingame - Radisson Hotel-Proposed, Burlingame - Sheraton Hotel, Burlingame - Courtyard by Marriott, Camarillo - Best Western Fireside Inn, Cambria - Cambria Pines Lodge, Cambria - Residence Inn, Campbell - Hotel-Proposed, Capitola - Resort Hotel, Spa & Conference Ctr., Capitola - Allstar Inn, Carlsbad - Carlsbad Inn, Carlsbad - Inn of America, Carlsbad - La Costa Hotel and Spa, Carlsbad - Olympic Resort Hotel, Carlsbad - Tickle Pink Inn, Carmel - Allstar Inn, Carpinteria - Desert Princess Country Club, Cathedral City - Royce Suites Hotel, Cathedral City - Digger Bay, Central Valley - Marriott Hotel-Proposed, Century City - Westin Century Plaza Hotel, Century City - Neighborhood Inn-Proposed, Chatsworth - Red Lion Hotel, Chico - Otay Valley Inn, Chula Vista - Travelodge-Otay Valley, Chula Vista - Ramada Inn, City of Commerce - Sheraton Hotel, City of Industry - Allstar Inn, Coalinga - Harris Ranch Restaurant/Inn, Coalinga - Howard Johnson, Colton - Best Western Willow Tree Inn, Compton - Concord Hotel, Concord - Hilton Hotel, Concord - The Trees Inn, Concord - Motel 6, Corona - Hotel del Coronado, Coronado - Loews Coronado Bay Resort, Coronado - Madera Village Inn, Corte Madera - Ha' Penny Inn, Costa Mesa - La Quinta Hotel, Costa Mesa - Marriott Suites, Costa Mesa - Red Lion Hotel, Costa Mesa - Residence Inn, Costa Mesa - Pacifica Hotel, Culver City - Ramada Inn, Culver City - Courtyard by Marriott, Cupertino - Doubletree Hotel, Cupertino - Doubletree Hotel, Dana Point - Spa-Proposed, Danville - El Rancho, Davis - Furnace Creek Resort, Death Valley - Stovepipe Wells Village, Death Valley - Hilton, Del Mar - Days Inn, Diamond Bar - Compri Hotel, El Segundo - Proposed Summerfield, El Segundo - Days Inn, Emeryville - Holiday Inn-Bay Bridge, Emeryville - Lyons Restaurant, Emeryville - Budget Motel, Encinitis - Marriott Tenaya Lodge-Proposed, Fishcamp - Holiday Inn, Fort Myers Beach - All Suites Hotel/Athletic Club, Foster City - Clubtel-Proposed, Foster City - Courtyard by Marriott, Foster City - Holiday Inn, Foster City - Courtyard by Marriott, Fremont - Fremont Hotel, Fremont - Motel 6, Fremont - Residence Inn, Fremont - Allstar Inn, Fresno - AmeriSuite, Fresno - Chateau Inn, Fresno - Courtyard by Marriott, Fresno - Economy Inn, Fresno - Hacienda, Fresno - Holiday Inn, Fresno - Holiday Inn-Fresno Airport, Fresno - Howard Johnson Motel, Fresno - Piccadilly Inn, Fresno - Travelers Inn, Fresno - Travelers Lodge, Fresno - Griswold's Hotel, Fullerton - Holiday Inn, Fullerton - Marriott Hotel, Fullerton - Hotel-Proposed, Garden Grove - Hyatt Regency Alicante, Garden Grove - Princess Hotel, Garden Grove - Motel 6, Gilroy - Hyatt Regency-Proposed, Goleta - Allstar Inn, Hacienda Heights - Courtyard by Marriott, Hacienda Heights - Half Moon Bay Lodge, Half Moon Bay - Courtyard by Marriott, Harbor Boulevard - Grosvenor, Harborside-Pt. Loma - Inn at Foss Creek, Healdsburg - Chateau Marmont, Hollywood - Hollywood Palm Hotel, Hollywood - Sunset Towers Hotel, Hollywood - Waterfront Hilton Hotel, Huntington Beach - Compri Hotel, Hutton Centre - Grand Champions Resort, Indian Wells - Stouffer Esmerelda Resort, Indian Wells - Courtyard By Marriott, Irvine - Courtyard by Marriott - Proposed, Irvine - Embassy Suites, Irvine - Hilton Hotel, Irvine - Holiday Inn, Irvine - Hyatt Hotel, Irvine - La Quinta-Proposed, Irvine - Marriott Hotel, Irvine - Marriott-Proposed, Irvine - Registry Hotel, Irvine - Residence Inn-Proposed, Irvine - Amador Inn, Jackson - Embassy Suites, La Jolla - Hotel-Proposed, La Jolla - La Jolla Property, La Jolla - La Jolla Village Inn, La Jolla - Marriott Hotel, La Jolla - Residence Inn, La Jolla - Days Inn-Proposed, La Palma - PGA West Resort - Proposed, La Quinta - Lafayette Park Hotel, Lafayette - Laguna Shores, Laguna Beach - Holiday Inn, Laguna Hills - Ryokan Hotel-Proposed, Laguna Hills - Villa Valencia, Laguna Hills - Ritz Carlton, Laguna Niguel - Lake Mohave Resort, Lake Mohave - Resort at Squaw Creek, Lake Tahoe - Courtyard by Marriott, Larkspur Landing - Hilton, Las Cruces - Surf and Sand Hotel, Leguna Beach - Holiday Inn, Lido Beach - Motel-Proposed, Little Lake - Residence Inn, Livermore - Residence Inn-Proposed, Livermore - Breakers Hotel, Long Beach - Holiday Inn, Long Beach - Holiday Inn Airport, Long Beach - Marriott Hotel-Long Beach Airport, Long Beach - Marriott Hotel-Proposed, Long Beach - Ramada Renaissance Hotel, Long Beach - Residence Inn, Long Beach - Sheraton Long Beach & Office Tower, Long Beach - Airport Park Hotel, Los Angeles - Bel Age, Los Angeles - Biltmore Hotel, Los Angeles - Century Inn, Los Angeles - Checkers Hotel, Los Angeles - Courtyard by Marriott-Irvine Main, Los Angeles - Courtyard by Marriott-LAX Airport, Los Angeles - Crown Sterling Suites, Los Angeles - Days Inn, Los Angeles - Econo Lodge-Proposed, Los Angeles - Embassy Suites, Los Angeles - Embassy Suites-LAX-Proposed, Los Angeles - Four Seasons, Los Angeles - Hampton Inn-LAX, Los Angeles - Herrick and Campbell, Los Angeles - Hilton & Towers-LAX, Los Angeles - Hilton Hotel, Los Angeles - Holiday Inn Crowne Plaza-LAX, Los Angeles - Le Montrose Hotel, Los Angeles - Ma Maison Sofitel, Los Angeles - Macklowe Hotel, Los Angeles - Marriott Century City, Los Angeles - MCA Hotel-Proposed, Los Angeles - New Otani Hotel, Los Angeles - Playa Vista Development, Los Angeles - Stouffer Concourse Hotel, Los Angeles - Westin Bonaventure, Los Angeles - Westwood Marquis Hotel, Los Angeles - Los Gatos Lodge, Los Gatos - Macienda Inn, Los Gatos - Toll House Inn, Los Gatos - Residence Inn, Manhattan Beach - All Suite Hotel, Marina Del Rey - Marina Beach Hotel, Marina del Rey - Marina del Rey Hotel and Marina, Marina del Rey - Marina Suites Hotel, Marina Del Rey - Marriott Marina Del Rey, Marina Del Rey - Residence Inn, Meriden - Quality Suites Hotel - Proposed, Millbrae - Beverly Heritage Hotel, Milpitas - Crown Sterling Suites, Milpitas - Holiday Inn, Milpitas - Courtyard by Marriott, Mira Mesa - Grosvenor, Mission Bay - Motel Orleans, Modesto - Red Lion Hotel, Modesto - Red Lion-Proposed, Modesto - Carmel Mission Inn, Monterey - Doubletree Inn, Monterey - Former Monterey Hilton Hotel, Monterey - Monterey Plaza, Monterey - Plaza Hotel, Monterey - Sheraton Hotel, Monterey - Pebble Beach Company, Monterey County - Inn at Morro Bay, Morro Bay - Residence Inn, Mountain View - Inn at Napa Valley, Napa - Best Western Inn, Napa Valley - Clarion Hotel-Napa Valley, Napa Valley - Silverado, Napa Valley - Ha'Penny Motel, National City - Allstar Inn, Needles - Hilton-Newark/Fremont, Newark - Four Seasons Hotel, Newport Beach - Hotel Meridien, Newport Beach - Hyatt Newporter, Newport Beach - Newporter Resort, Newport Beach - Sheraton, Newport Beach - Days Inn-Proposed, North Hollywood - Northstar, North Lake Tahoe - Ramada Inn, Norwalk - Impact Study - Proposed Hotel, Oakdale - Hilton Inn, Oakland - Holiday Inn, Oakland - Holiday Inn-Oakland Airport, Oakland - Parc Oakland Hotel, Oakland - Resort - Proposed, Olympic Valley - Resort at Squaw Creek-Proposed, Olympic Valley - Clarion Hotel, Ontario - Compri Hotel, Ontario - Fairfield Inn, Ontario - Holiday Inn, Ontario - Lexington Hotel Suites, Ontario - Red Lion Hotel, Ontario - Doubletree Hotel, Orange - Woodfin Suites, Orange - Embassy Suites, Palm Desert - Marriott Desert Springs, Palm Desert - Canyon Resort, Palm Springs - Compri Hotel-Proposed, Palm Springs - Courtyard by Marriott, Palm Springs - Desert Princess, Palm Springs - Grand Champions Resort, Palm Springs - International Hotel and Resort, Palm Springs - Ocotillo Lodge, Palm Springs - Palm Canyon, Palm Springs - PGA West Resort-Proposed, Palm Springs - Spa Hotel at Mineral Springs, Palm Springs - Westin Hotel, Palm Springs - Grosvenor, Palmdale - Super 8, Palmdale - Cowper Square, Palo Alto - Garden Court, Palo Alto - Holiday Inn, Palo Alto - Stanford Park, Palo Alto - Marriott, Paradise Valley - All Suite Hotel-Proposed, Pasadena - Doubletree Hotel, Pasadena - Holiday Inn, Pasadena - Cascade Ranch Lodge, Pescadero - Elk Lodge, Petaluma - Hotel Petaluma, Petaluma - Hilton-Proposed, Pismo Beach - Hilton-Sea Point, Pismo Beach - Holiday Inn, Pismo Beach - Hotel-Proposed, Pismo Beach - Pismo II, Pismo Beach - Fairfield Inn, Placentia - Residence Inn, Placentia - Howard Hughes Center, Playa Vista - Pleasant Hill Inn, Pleasant Hill - Residence Inn, Pleasant Hill - Club Hilton Hotel-Proposed, Pleasanton - Compri Hotel, Pleasanton - Courtyard by Marriott, Pleasanton - Hilton, Pleasanton - Holiday Inn, Pleasanton - Pleasanton Creek, Pleasanton - Shilo Inn - Hilltop, Pomona - Compri Hotel, Rancho Bernardo - Radisson Suites, Rancho Bernardo - Comfort Inn Motel, Rancho Cordova - Courtyard by Marriott, Rancho Cordova - Economy Inn, Rancho Cordova - El Rancho, Rancho Cordova - Quality Suites-Proposed, Rancho Cordova - Sheraton Sunrise, Rancho Cordova - Marriott Rancho Las Palmas, Rancho Mirage - Mission Hills Hotel, Rancho Mirage - Resort Hotel-Proposed, Rancho Mirage - Westin Mission Hills Resort, Rancho Mirage - Bridge Bay Resort, Redding - Grand Manor Inn, Redding - La Quinta Inn, Redding - Motel 6, Redding - Motel Orleans, Redding - Red Lion Inn, Redding - Shasta Inn, Redding - Portofino Hotel & Yacht Club, Redondo Beach - Sheraton, Redondo Beach - Sofitel Redwood Shores, Redwood - Days Inn, Richmond - Best Western Carraige Inn, Ridgecrest - Days Inn, Riverside - Mission Inn-Proposed, Riverside - Omni Mission Inn, Riverside - Sheraton Hotel, Riverside - Red Lion Inn, Rohnert Park - Crown Sterling Suites, S.San Fransicso - Allstar Inn, Sacramento - Arco Arena II-Proposed, Sacramento - Arco Park, Sacramento - Catering Center - Proposed, Sacramento - Clarion Hotel, Sacramento - Compri Hotel-Proposed, Sacramento - Courtyard by Marriott, Sacramento - Courtyard by Marriott-S. Natomas, Sacramento - Hilton Hotel, Sacramento - Holiday Inn-Capital Plaza, Sacramento - Hotel-Proposed, Sacramento - Hyatt Arbitrat, Sacramento - Hyatt Regency, Sacramento - La Quinta Hotel, Sacramento - Motel Orleans, Sacramento - Radisson Hotel, Sacramento - Red Lion Inn, Sacramento - Residence Inn, Sacramento - Sacramento Inn, Sacramento - Sierra Inn, Sacramento - Sterling Hotel, Sacramento - Travelers Inn, Sacramento - Woodlake Inn, Sacramento - Harvest Inn, Saint Helena - Courtyard by Marriott, San Bruno - San Carlos Motel Development, San Carlos - Atlas Hotels/Mission Valley Inn, San Diego - Best Western Seven Seas Motor Lodge, San Diego - Budget Motel of America, San Diego - Catamaran Resort Hotel, San Diego - Center Pointe Development, San Diego - Comfort Inn, San Diego - Courtyard by Marriott-Mira Mesa, San Diego - Doubletree Hotel, San Diego - Embassy Suites, San Diego - Executive Lodge, San Diego - Hanalei Hotel, San Diego - Harbor Island Hotel-Proposed, San Diego - Harborside Inn-Point Loma, San Diego - Harbortown Marina Resort, San Diego - Holiday Inn Montgomery Airport, San Diego - Holiday Inn-Embarcadero, San Diego - Holiday Inn-Harbor View, San Diego - Horton Grand Saddlery, San Diego - Horton Park Plaza Hotel, San Diego - Howard Johnson Hotel, San Diego - Inter-Continental Hotel & Marina, San Diego - Kings Inn, San Diego - La Jolla Village Inn, San Diego - La Quinta Hotel, San Diego - Marriott Hotel-Mission Valley, San Diego - Marriott Twin Towers and Marina, San Diego - Mission Valley Inn, San Diego - Omni Hotel, San Diego - Radisson Hotel, San Diego - Ramada Inn, San Diego - Ramada Limited Suites, San Diego - Ramada Old Town, San Diego - Ramada Rancho Penasquitos, San Diego - Red Lion Inn, San Diego - Regency Plaza Hotel, San Diego - San Diego Marriott, San Diego - Seven Seas Lodge, San Diego - Sheraton Grand, San Diego - Sheraton Harbor Island East, San Diego - Super 8-Point Loma, San Diego - Symphony Towers, San Diego - Town and Country Hotel, San Diego - Travelodge Hotel Plaza, San Diego - U.S. Grant Hotel, San Diego - Westin-Proposed, San Diego - Abagail Inn, San Francisco - Bellevue Hotel, San Francisco - Cable Motor Inn, San Francisco - California Cafe, San Francisco - Campton Place, San Francisco - Cartwright Hotel, San Francisco - Chancellor Hotel, San Francisco - Clarion Inn-San Francisco Airport, San Francisco - Comfort Inn, San Francisco - Courtyard by Marriott-Airport, San Francisco - Embarcadero Inn, San Francisco - Fairmont Hotel, San Francisco - Grand Hyatt, San Francisco - Grosvenor Clift Hotel, San Francisco - Harbor Court Hotel, San Francisco - Hilton Hotel, San Francisco - Holiday Inn - Union Square, San Francisco - Holiday Inn Crowne Plaza, San Francisco - Holiday Inn-Civic Center, San Francisco - Holiday Inn-Fisherman's Wharf, San Francisco - Holiday Inn-Golden Gateway, San Francisco - Holiday Inn-South, San Francisco - Holiday Lodge, San Francisco - Hotel Diva, San Francisco - Hotel Meridien, San Francisco - Hotel Union Square, San Francisco - Hotel-Proposed, San Francisco - Hyatt Fisherman's Wharf, San Francisco - Hyatt Regency Embarcadero, San Francisco - Inn at Fisherman's Wharf, San Francisco - Inn at the Opera, San Francisco - Inn-Proposed, San Francisco - Juliana Hotel, San Francisco - King George Hotel, San Francisco - La Quinta Inn, San Francisco - La Quinta-Airport, San Francisco - Lambourne Hotel, San Francisco - Laurel Motor Inn, San Francisco - Majestic Hotel, San Francisco - Manx Hotel, San Francisco - Mark Twain, San Francisco - Marriott, San Francisco - Marriott San Francisco-Proposed, San Francisco - Marriott-Airport, San Francisco - Orchard Hotel, San Francisco - Pan Pacific Hotel, San Francisco - Parc 55 Hotel, San Francisco - Park Hyatt Hotel, San Francisco - Portman Hotel, San Francisco - Prescott Hotel, San Francisco - Queen Anne Hotel, San Francisco - Ramada Hotel, San Francisco - Regis Hotel, San Francisco - Ritz-Carlton Hotel, San Francisco - San Franciscan, San Francisco - San Francisco Hotel, San Francisco - Savoy Hotel, San Francisco - Sheraton Palace Hotel, San Francisco - Sheraton-Fisherman's Wharf, San Francisco - Sir Francis Drake Hotel, San Francisco - Stanford Court, San Francisco - Stouffer Stanford Court Hotel, San Francisco - Super 8-Fisherman's Wharf, San Francisco - Westin St. Francis, San Francisco - Crowne Sterling Suites, San Francisco - South - Olympic Club Golf Course, San Francisco/San Mateo - Budget Inn, San Jose - Courtyard by Marriott, San Jose - Cozy 8 Arena Hotel, San Jose - Fairmont Hotel, San Jose - Holiday Inn, San Jose - Ramada Renaissance, San Jose - Red Lion Inn, San Jose - Islander Motel, San Leandro - Apple Farm Inn, San Luis Obispo - Embassy Suites, San Luis Obispo - Holiday Inn, San Luis Obispo - Los Nomados Resort, San Luis Obispo - Twin Oaks Golf Course, San Marcos - Dunfey San Mateo Hotel, San Mateo - Compri Hotel-Proposed, San Pedro - Embassy Suites Hotel, San Rafael - Marriott Hotel-Proposed, San Ramon - Residence Inn, San Ramon - AAA Inn, Santa Ana - California Palms Hotel, Santa Ana - Comfort Inn, Santa Ana - Compri Hotel, Santa Ana - Embassy Suites Santa Ana, Santa Ana - Executive Lodge, Santa Ana - Howard Johnson, Santa Ana - Quality Inn, Santa Ana - Ramada Inn-Orange County, Santa Ana - El Encanto Hotel, Santa Barbara - Fess Parker's Red Lion Resort, Santa Barbara - Four Seasons Hotel, Santa Barbara - Montecito Inn, Santa Barbara - San Ysidro Ranch, Santa Barbara - Santa Barbara Inn, Santa Barbara - Biltmore Hotel & Suites, Santa Clara - Days Inn, Santa Clara - Doubletree Hotel, Santa Clara - Embassy Suites, Santa Clara - Inn At Saratoga, Santa Clara - Marriott Hotel, Santa Clara - Quality Suites Hotel, Santa Clara - Dream Inn, Santa Cruz - Hilton, Santa Maria - Motel 6, Santa Maria - Econo Lodge-Proposed, Santa Monica - Holiday Inn, Santa Monica - Holiday Inn at the Pier, Santa Monica - Park Hyatt Hotel, Santa Monica - Santa Monica Beach Hotel, Santa Monica - Santa Monica/Slatkin, Santa Monica - Allstar Inn, Santa Rosa - Doubletree Hotel, Santa Rosa - Fountaingrove Inn, Santa Rosa - Holiday Inn, Santa Rosa - Round Barn Inn-Proposed, Santa Rosa - Sheraton Round Barn, Santa Rosa - Days Inn, Seaside - Embassy Suites, Seaside - Seaside 8 Motel, Seaside - Valley Radisson, Sherman Oaks - Red Lion, Sonoma - Sonoma Mission Inn, Sonoma - Holiday Inn - Proposed, Sonora - Timberwolf Lodge, South Lake Tahoe - Holiday Inn, South San Francisco - Hotel-Proposed, South San Francisco - Meadowood Resort, St. Helena - Hilton Hotel, Stockton - Holiday Inn, Stockton - La Quinta Hotel, Stockton - Motel Orleans, Stockton - Paradise Point Manna, Stockton - Sheraton-Proposed, Stockton - Hilton, Sunnyvale - Holiday Inn, Sunnyvale - Neighborhood Suites, Sunnyvale - Ramada Inn, Sunnyvale - Sunnyvale Hilton, Sunnyvale - Temecula Creek Inn, Temecula Creek - Westlake Plaza Hotel, Thousand Oaks - Courtyard by Marriott, Torrance - Holiday Inn, Torrance - Marriott Hotel, Torrance - Residence Inn, Torrance - Holiday Inn, Union City - MCA Hotel-Proposed, Universal City - Comfort Inn, Vallejo - Holiday Inn, Van Nuys - La Quinta Hotel, Ventura - Ocean Resorts, Ventura - Sheraton, Ventura - Greentree Inn, Victorville - Doubletree Inn, Walnut Creek - Parkside Hotel, Walnut Creek - Ramada Renaissance Hotel, Walnut Creek - Royce Hotel-Proposed, Walnut Creek - Walnut Creek Project, Walnut Creek - Hampton Inn, West Covina - Le Bel Age, West Hollywood - Le Dufy, West Hollywood - Le Mondrian Hotel, West Hollywood - Hilton, Whittler - Hotel & Conference Center-Proposed, Woodland - Marriott Hotel-Woodland Hills, Woodland Hills - Skylonda Retreat, Woodside - Compri Hotel-Proposed, Yorba Linda - Marriott-Tenaya Lodge, Yosemite - Motel Orleans, Yuba City Colorado - Days Inn, Arapahoe - Continental Inn, Aspen - Ritz-Carlton Hotel-Proposed, Aspen - Hampton Inn, Aurora - Holiday Inn, Aurora - Radisson Hotel, Aurora - Radisson Southeast, Aurora - Raffles Hotel, Aurora - Comfort Inn, Avon - Boulder Hotel-Downtown, Boulder - Clarion Hotel, Boulder - Courtyard by Marriott, Boulder - Doubletree Hotel-Proposed, Boulder - Hilton Harvest House, Boulder - Holiday Inn, Boulder - Interlocken Conference Resort-Prop., Boulder - Proposed Golf Course, Boulder - Residence Inn, Boulder - Hilton, Breckenridge - Ski Lodge-Proposed, Breckenridge - Interlocken Conference Center, Broomfield - Interlocken Conference Center-Prop., Broomfield - Embassy Suites, Colorado Springs - Hilton, Colorado Springs - Howard Johnson, Colorado Springs - Le Baron Hotel, Colorado Springs - Marriott, Colorado Springs - Quality Inn, Colorado Springs - Red Lion Inn, Colorado Springs - Sheraton Inn, Colorado Springs - Grand Butte Hotel, Crested Butte - Best Western Regency, Denver - Brown Palace, Denver - Clarion Hotel-Denver Airport, Denver - Courtyard by Marriott-Airport, Denver - Courtyard by Marriott-Southeast, Denver - Days Inn, Denver - Denver Airport Hilton Inn, Denver - Doubletree Hotel, Denver - Embassy Suites, Denver - Embassy Suites-Airport, Denver - Hilton-Technical Center, Denver - Holiday Inn-Downtown, Denver - Holiday Inn-West, Denver - Jackson's Hole Sport, Denver - Marriott-Southeast, Denver - Marriott-West, Denver - Radisson Hotel, Denver - Red Lion Hotel, Denver - Regency Inn, Denver - La Quinta Inn, Denver - Airport - La Quinta, Denver - South - Red Lion Inn, Durango - Hilton-Denver, Englewood - Residence Inn, Englewood - Scanticon Conference Center, Englewood - Marriott Hotel-Proposed, Fort Collins - Holiday Inn, Golden - Marriott-Denver West, Golden - Ramada Inn, Grand Junction - Sheraton-Proposed, Keystone - Compri Hotel, Lakewood - Hampton Inn, Lakewood - Sheraton Inn, Steamboat Springs - Proposed Hotel, Telluride - Days Inn, Vail - Doubletree Hotel, Vail - Lodge at Vail, Vail - Marriott's Mark Resort, Vail - Westin Vail Resort, Vail - Ramada Hotel, Westminster - Winter Park Resort, Winter Park Connecticut - Chester Inn-Chester, Chester - Inn-Proposed, Chester - Super 8-Proposed, Cromwell - Danbury Hilton & Towers, Danbury - Residence Inn, Danbury - Holiday Inn, Darien - Howard Johnson Lodge, Darien - Ramada Inn, Darien - Holiday Inn, East Hartford - Howard Johnson Lodge, East Lyme - Days Inn-Proposed, Enfield - Greenwich Habor Inn, Greenwich - Howard Johnson Lodge, Greenwich - Showboat Inn, Greenwich - Hotel-Proposed, Groton - Hilton Hotel, Hartford - Holiday Inn-Proposed, Hartford - Motel 6, Hartford - Ramada Inn, Hartford - Sheraton Tobacco Valley Inn, Hartford - Summit Hotel, Hartford - Super 8 Motel, Hartford - Susse Chalet, Hartford - Residence Inn By Marriott, Meriden - Holiday Inn, Milford - Susse Chalet, Milford - Howard Johnson Lodge, Mystic - Mystic Ramada Inn, Mystic - Holiday Inn, New Britain - Ramada Inn, New Britain - Colony Inn, New Haven - Holiday Inn, New Haven - Howard Johnson, New Haven - Quality Inn, New Haven - Residence Inn, New Haven - Radisson Hotel, New London - Best Western-Proposed, New Milford - Courtyard by Marriott, Norwalk - Holiday Inn, Norwalk - Howard Johnson, Norwalk - Ramada Inn, Norwalk - Susse Chalet, Rocky Hill - Ramada Hotel-Proposed, Shelton - Residence Inn - Shelton, Shelton - Heritage Village, Southbury - Southbury Hotel, Southbury - Susse Chalet, Southington - Days Inn, Stamford - Executive Hotel, Stamford - Harley Hotel, Stamford - Holiday Inn-Crowne Plaza, Stamford - Inn at Mill River, Stamford - Le Pavillon Hotel, Stamford - Marriott, Stamford - Radisson Tara Hotel, Stamford - Sheraton, Stamford - Best Western-Proposed, Stratford - Stratford Motor Lodge, Stratford - Marriott Hotel, Trumbull - Courtyard by Marriott, Wallingford - Susse Chalet, Wallingford - Howard Johnson Plaza Hotel, Waterbury - Super 8-Proposed, Waterbury - Residence Inn-Proposed, Waterford - Holiday Inn, Westbury - The Island Inn, Westbury - Courtyard by Marriott, Windsor - Sheraton Tobacco Valley Inn, Windsor - Holiday Inn-Proposed, Windsor Locks Delaware - Wilmington Hilton, Claymont - Rusty Rudder, Dewey Beach - Residence Inn-Proposed, Newark - Hilton Hotel, Wilmington - Hotel-Proposed, Wilmington - Marriott Suites, Wilmington - Residence Inn-Proposed, Wilmington District of Columbia - All Suite Hotel - Proposed, Washington - Bellevue Hotel, Washington - Canterbury Hotel, Washington - Capital Hilton, Washington - Capitol Hill Hotel, Washington - Castleton Hotel, Washington - Comfort Inn, Washington - Convention Center Inn, Washington - Dupont Plaza, Washington - Embassy Row Hotel, Washington - Fairfax Hotel, Washington - Fairmont Hotel, Washington - Four Seasons Hotel, Washington - General Scott Inn, Washington - Georgetown Hotel, Washington - Grand Hotel, Washington - Grand Hyatt, Washington - Hampshire House, Washington - Harambee House, Washington - Hay Adams Hotel, Washington - Holiday Inn Crowne Plaza, Washington - Holiday Inn-Capitol, Washington - Holiday Inn-Georgetown, Washington - Holiday Inn-Governor House, Washington - Hotel Washington, Washington - Howard Johnson, Washington - Hyatt Regency-Capitol, Washington - Hyatt-Convention Center, Washington - International Inn, Washington - Intrigue Hotel, Washington - Jefferson Hotel, Washington - Lombardy Tower Apartment Hotel, Washington - Madison Hotel, Washington - Manger Annapolis Hotel, Washington - Manger Hamilton Hotel, Washington - Manger Hay Adams Hotel, Washington - Marriott-Key Bridge, Washington - Mayflower Hotel, Washington - Omni Georgetown Hotel, Washington - Omni Shoreham Hotel, Washington - Park Terrace Hotel, Washington - Phoenix Park Hotel, Washington - Plaza Hotel, Washington - Potomac Hotel Group, Washington - Quality Inn-Capitol Hill, Washington - Quality Inn-Downtown, Washington - Ramada Inn-Central, Washington - Ramada Renaissance Hotel, Washington - Ritz-Carlton, Washington - River Inn, Washington - Riverside Towers, Washington - Sheraton City Centre, Washington - Sheraton Grand Hotel, Washington - Shoreham Hotel, Washington - St. James, Washington - State Plaza, Washington - Statler Hilton Hotel, Washington - Washington Hilton, Washington - Washington Plaza, Washington - Watergate Hotel, Washington - Wyndham Bristol Hotel, Washington Florida - Holiday Inn, Altamonte Springs - La Quinta, Altamonte Springs - Turnberry Isle Resort, Aventura - Boca Raton Hotel and Club, Boca Raton - Boca West, Boca Raton - Deerfield Beach Hilton, Boca Raton - Embassy Suites, Boca Raton - Park Place Suite Hotel, Boca Raton - Petite Suites, Boca Raton - Residence Inn, Boca Raton - Days Inn, Brandenton - South Seas Resort, Captive Island - Days Inn, Clearwater - Days Inn-Proposed, Clearwater - Holiday Inn - Central/Clearwater, Clearwater - La Quinta Inn, Clearwater - Sheraton Sand Key Hotel, Clearwater - Holiday Inn - Gulfview South, Clearwater Beach - Holiday Inn - Surfside North, Clearwater Beach - Howard Johnson, Clermont - Econolodge, Cocoa Beach - Hilton Hotel, Cocoa Beach - Holiday Inn, Cocoa Beach - Howard Johnson, Cocoa Beach - Perkins Restaurant, Cocoa Beach - Coconut Grove Hotel, Coconut Grove - Mayfair House, Coconut Grove - Proposed Hampton Inn, Coconut Grove - Biltmore Hotel, Coral Gables - Holiday Inn, Coral Gables - Holiday Inn (Court), Coral Gables - Plantation Hotel, Crystal River - Sheraton Inn, Cypress Gardens - Budget Inn, Davenport - Daytona Beach Surfside Regency, Daytona Beach - Howard Johnson, Daytona Beach - La Quinta Inn, Daytona Beach - Pirates Cove, Daytona Beach - Sheraton Inn, Daytona Beach - Crown Sterling Suites, Deerfield Beach - Days Inn, Deerfield Beach - Hilton Hotel, Deerfield Beach - Horizon Club, Deerfield Beach - Sheraton Inn, Deland - Hilton Hotel, Disney World - Holiday Inn, Edgewater - Knights Inn, Florida City - AmeriSuites Hotel-Proposed, Fort Lauderdale - Bahia Mar Hotel, Fort Lauderdale - Comfort Suites, Fort Lauderdale - Compri Hotel-Proposed, Fort Lauderdale - Costa Del Sol, Fort Lauderdale - Crown Sterling Suites, Fort Lauderdale - Days Inn, Fort Lauderdale - Embassy Suites Hotel, Fort Lauderdale - Executive House, Fort Lauderdale - Hilton Hotel, Fort Lauderdale - Hilton Inverrary, Fort Lauderdale - Holiday Inn - Galleria, Fort Lauderdale - Holiday Inn - North Beach, Fort Lauderdale - Holiday Inn-Proposed, Fort Lauderdale - Marriott Harbor Beach Hotel, Fort Lauderdale - Marriott Hotel & Marina, Fort Lauderdale - Marriott Hotel-Cypress Road, Fort Lauderdale - Pier 66 Hotel and Marina, Fort Lauderdale - Port Everglades Hotel, Fort Lauderdale - Stouffer Hotel, Fort Lauderdale - Days Inn, Fort Meyers - Courtyard by Marriott, Fort Myers - Holiday Inn, Fort Myers - La Quinta Hotel, Fort Myers - Sheraton Harbor Place-Proposed, Fort Myers - Sheraton Motor Inn, Fort Myers - Proposed Hotel, Fort Myers Beach - American Way, Fort Pierce - Days Inn, Fort Walton Beach - Holiday Inn - Airport, Fort.Lauderdale - Days Inn-University Center, Gainesville - Fairfield Inn, Gainesville - Howard Johnson Lodge-I-75, Gainesville - La Quinta Hotel, Gainesville - University Centre Hotel, Gainesville - Holiday Inn, Hialeah - Motel, Hillsboro Beach - Days Inn, Hollywood - Diplomat Hotel, Hollywood - Holiday Inn, Hollywood - Quality Suites - Oceanside, Indiatlantic - Hilton Inn, Inverrary - Best Inn, Jacksonville - Bradbury Suites-Proposed, Jacksonville - Compri Hotel-Proposed, Jacksonville - Courtyard By Marriott, Jacksonville - Days Inn, Jacksonville - Doubletree Club Hotel, Jacksonville - Hampton Inn, Jacksonville - Hotel-Proposed, Jacksonville - Jacksonville Hotel, Jacksonville - Residence Inn, Jacksonville - Sheraton Hotel, Jacksonville - Wyndham Lakes Hotel, Jacksonville - Sheraton Beach Hotel, Jensen Beach - Howard Johnson, Juno Beach - Hilton Hotel, Jupiter - Key Biscayne, Key Biscayne - Howard Johnson Lodge, Key Largo - Casa Marina Marriott, Key West - Fairfield Inn, Key West - Hampton Inn-Roosevelt Rd., Key West - Holiday Inn, Key West - Hyatt Hotel, Key West - La Concha Holiday Inn, Key West - Pier House Inn and Beach Club, Key West - Reach Hotel, Key West - Santa Maria Hotel, Key West - Timeshare Resort, Key West - Best Western Vacation Lodge, Kissimmee - Days Inn, Kissimmee - Days Inn West, Kissimmee - Days Lodge, Kissimmee - Howard Johnson Plaza Hotel, Kissimmee - Howard Johnson's, Kissimmee - KOA Campground, Kissimmee - Old Town Retail Complex, Kissimmee - Quality Suites, Kissimmee - Quality Suites-Maingate, Kissimmee - Save Inn, Kissimmee - Sheraton Lakeside, Kissimmee - Suite Hotel-Proposed, Kissimmee - Wynfield Inn, Kissimmee - Days Inn, Lake Buena Vista - Embassy Suites-Proposed, Lake Buena Vista - Hilton Hotel-Disney World, Lake Buena Vista - Marriott Orlando World Center, Lake Buena Vista - Days Inn, Lake City - Flagship Inn, Lake County - Travelodge Motel, Lake County - Lake Park Inn, Lake Park - Holiday Inn, Lake Placid - Hampton Inn-Proposed, Lakeland - Hotel-Proposed, Lakeland - Howard Johnson, Lakeland - Resort Hotel-Proposed, Lakeland - Resort-Imperial Lake-Prpsd., Lakeland - Proposed Hotel, Lee County - Sonesta Sanibel Harbour, Lee County - Holiday Inn, Lido Beach - Holiday Inn, Longboat Kay - Holiday Inn - Madiera Beach, Madiera - Howard Johnson, Marathon - Radisson Suite Resort, Marco Island - Holiday Inn, Marianna - Oceanfront Hotel, Melbourne - Quality Suites, Melbourne - Bahia Mar Hotel & Yachting Club, Miami - Biscayne Bay Marriott, Miami - Courtyard by Marriott, Miami - Crown Sterling Suites, Miami - Doral Ocean Beach Resort, Miami - Fairfield Inn, Miami - Hilton Hotel-Proposed, Miami - Holiday Inn Civic Center, Miami - Holiday Inn-Airport (Le Juene Rd.), Miami - Holiday Inn-Calder, Miami - Howard Johnson Hotel-Broad Causeway, Miami - Howard Johnson Hotel-Port of Miami, Miami - Howard Johnson Lodge-Golden Glades, Miami - Howard Johnson Lodge-Int'l Airport, Miami - Hyatt Regency Hotel, Miami - Inter-Continental Hotel, Miami - Jockey Club, Miami - Marriott Hotel-Downtown, Miami - Miami Airport Ramada, Miami - Proposed AmeriSuites, Miami - Propsed Hampton Inn, Miami - Residence Inn-Proposed, Miami - Sheraton River House, Miami - Sofitel Miami, Miami - Alexander Hotel, Miami Beach - Art Deco Hotel, Miami Beach - Cresent Timeshare, Miami Beach - Delano Hotel, Miami Beach - Doral Beach Hotel, Miami Beach - Eden Roc Hotel, Miami Beach - Fontainebleu Hotel, Miami Beach - Holiday Inn, Miami Beach - Holiday Inn-Central, Miami Beach - Holiday Inn-North, Miami Beach - Holiday Inn-Oceanside, Miami Beach - Holiday Inn-South, Miami Beach - Hotel-Proposed, Miami Beach - Nautilus Club Hotel, Miami Beach - Palm Resort on the Ocean, Miami Beach - Pan American Radisson, Miami Beach - Proposed Hotel, Miami Beach - Shelborne Beach Hotel, Miami Beach - Sheraton Beach, Miami Beach - Solymar Hotel-Proposed, Miami Beach - Quality Inn, Naples - Quality Inn-Gulfcoast, Naples - Registry Hotel at Pelican Bay, Naples - Registry Resort-Proposed, Naples - Super 8 Motel-Proposed, Naples - World Tennis Resort, Naples - Hyatt Newporter Hotel, Newport Beach - Hilton Hotel, North Redington Beach - Masters Economy Inn, North Seffner - Amfac Hotel, Orlando - Army lodging-Proposed, Orlando - Comfort Suites Hotel, Orlando - Compri Hotel-Airport-Proposed, Orlando - Compri Hotel-Proposed, Orlando - Courtyard - Orlando Airport, Orlando - Days Inn, Orlando - Days Inn and Lodge-Florida Mall, Orlando - Days Inn Civic Center, Orlando - Days Inn East of Universal Studios, Orlando - Days Inn-E/O Magic Kingdom, Orlando - Days Inn-Proposed, Orlando - Days Inn-Sandlake Road, Orlando - Days Suites-E/O Magic Kingdom, Orlando - Dolphin Hotel-Proposed, Orlando - Dutch Inn, Orlando - Embassy Suites, Orlando - Fairfield Inn, Orlando - Fairfield Inn-Airport, Orlando - Grand Cypress Resort, Orlando - Hampton Inn - Proposed, Orlando - Heritage Inn, Orlando - Holiday Inn Central Park, Orlando - Holiday Inn Crowne Plaza, Orlando - Holiday Inn-Airport, Orlando - Holiday Inn-International Drive, Orlando - Holiday Inn-Lee Road, Orlando - Holiday Inn-Maingate West, Orlando - Holiday Inn-Orange Blossom Trail, Orlando - Howard Johnson - Walt Disney World, Orlando - Howard Johnson-Kirkman, Orlando - Howard Johnson-Lake Holden, Orlando - Howard Johnson-Maingate, Orlando - Hyatt Grand Cypress, Orlando - Hyatt Regency Grand Cypress, Orlando - Hyatt-W. Irlo Bronson Mem. Hwy., Orlando - International Inn, Orlando - Kon Tiki Village, Orlando - La Quinta Hotel-Airport, Orlando - La Quinta Inn, Orlando - Omni Orlando, Orlando - Orlando Airport Hotel-Proposed, Orlando - Orlando Hamiton, Orlando - Orlando Plaza Hotel, Orlando - Orlando Twin Towers Hotel, Orlando - Park Suite Hotel-Proposed, Orlando - Peabody Hotel, Orlando - Princess Hotel and Spa, Orlando - Proposed Wellesley Inn, Orlando - Quality Inn, Orlando - Radisson Hotel-Aquatic Center, Orlando - Regency Inn, Orlando - Residence Inn By Marriott, Orlando - Rodeway Inn, Orlando - Save Inn, Orlando - Sheraton Jetport Inn, Orlando - Sheraton Lakeside, Orlando - Sheraton Twin Towers, Orlando - Sonesta Village Resort, Orlando - Stouffer Orlando Resort, Orlando - Swan Hotel-Proposed, Orlando - Thriftway Motel, Orlando - Wynfield Inn, Orlando - American Way, Osceola - Sheraton Gateway Motel, Osceola - Brazilian Court Hotel, Palm Beach - Heart of Palm Beach Hotel, Palm Beach - Hilton Inn, Palm Beach - Palm Court, Palm Beach - Holiday Inn, Palm Beach Garden - Days Inn, Panama City - Marriott's Bay Point, Panama City - Super 8, Panama City - Days Inn, Pensacola - Hilton Hotel, Pensacola - La Quinta Hotel, Pensacola - Residence Inn, Pensacola - Super 8, Pensacola - Proposed Hampton Inn, Pensacola Beach - Comfort Inn, Perdido Key - La Quinta, Pinellas County - Courtyard by Marriott, Plantation - Holiday Inn Plantation, Plantation - Sheraton Suites, Plantation - Days Inn, Pompano Beach - Palm-Aire Spa Resort, Pompano Beach - Lodge & Bath Club, Ponte Verde - Howard Johnson, Punta Gorda - Days Inn, Riviera Beach - Safety Harbor Spa, Safety Harbor - Holiday Inn, Saint Augustine - Howard Johnson, Saint Augustine - Courtyard by Marriott, Saint Petersburg - Don Ceahsar Beach Resort, Saint Petersburg - Hilton Hotel, Saint Petersburg - Howard Johnson, Saint Petersburg - Ramada Inn, Saint Petersburg - Residence Inn, Saint Petersburg - Saint Petersburg Motel, Saint Petersburg - Sheraton Hotel and Marina, Saint Petersburg - Vinoy Park Hotel, Saint Petersburg - Countryside Inn, Sanford - Days Inn, Sanford - Holiday Inn, Sanford - Azure Tides Resort-Proposed, Sarasota - Days Inn, Sarasota - Holiday Inn-Lido Beach, Sarasota - Proposed Hotel, Sarasota - Holiday Inn, Sebring - Embassy Suites, Singer Island - Hilton, Singer Island - Econo Lodge, Starke - Radisson Pan American Hotel, Sunny Isles - Best Inn, Tallahassee - Courtyard by Marriott, Tallahassee - Days Inn-Tallahassee, Tallahassee - American Way, Tampa - Courtyard by Marriott, Tampa - Days Inn, Tampa - Embassy Suites-Airport, Tampa - Hampton Inn-Airport, Tampa - Hilton-Airport, Tampa - Holiday Inn, Tampa - Holiday Inn Sahal Park, Tampa - Holiday Inn-Airport, Tampa - Manger Motor Inn, Tampa - Marriott Hotel, Tampa - Omni Tampa Hotel at Westshore, Tampa - Ramada Inn, Tampa - Rodeway Inn, Tampa - Saddlebrook Resort, Tampa - Sheraton Grand West, Tampa - Master Economy Inn, Tampa-East(Selfner) - Master Economy Inn, Tampa-North(Zephyrhills) - Days Inn, Vero Beach - Holiday Inn-Countryside, Vero Beach - Holiday Inn-Oceanside, Vero Beach - Saddlebrook Resort, Wesley Chapel - Courtyard by Marriott, West Melbourne - Airport Centre, West Palm Beach - Courtyard by Marriott, West Palm Beach - Days Inn, West Palm Beach - Field Palm Hotel, West Palm Beach - Hilton-Airport, West Palm Beach - Howard Johnson Lodge, West Palm Beach - Hyatt Hotel of the Palm Beaches, West Palm Beach - Royce Hotel, West Palm Beach - Masters Economy Inn, Zephyrhills Georgia - Atlanta Radisson Hotel, Atlanta - Atlanta Terrace Motel, Atlanta - Comfort Inn, Atlanta - Compri Hotel, Atlanta - Courtyard By Marriott-Airport North, Atlanta - Courtyard by Marriott-Airport South, Atlanta - Courtyard by Marriott-Cumberland, Atlanta - Courtyard by Marriott-Executive Pk., Atlanta - Courtyard by Marriott-Gwinnett, Atlanta - Courtyard by Marriott-Jimmy Carter, Atlanta - Courtyard by Marriott-PeachtrDunwdy, Atlanta - Courtyard by Marriott-Perimeter, Atlanta - Courtyard by Marriott-Rosewell, Atlanta - Courtyard by Marriott-Windy Hill, Atlanta - Cresthil Inn-Proposed, Atlanta - Days Inn, Atlanta - Days Inn - Northlake, Atlanta - Doubletree Hotel, Atlanta - Embassy Suites-Atlanta Perimeter, Atlanta - Embassy Suites-Buckhead, Atlanta - Embassy Suites-Galleria, Atlanta - F.W.W. Hotel, Atlanta - Fairfield Inn-Airport, Atlanta - Fairfield Inn-Gwinnett, Atlanta - Fairfield Inn-North Lake, Atlanta - Fairfield Inn-Northwest, Atlanta - Fairfield Inn-Peachtree, Atlanta - Fairfield Inn-South Lake, Atlanta - Hampton Inn-Airport, Atlanta - Hilton Inn, Atlanta - Holiday Inn Crowne Plaza, Atlanta - Holiday Inn-I-20 East, Atlanta - Holiday Inn-I-85 Monroe Drive, Atlanta - Holiday Inn-Perimeter Dunwooody, Atlanta - Hotel-Downtown-Proposed, Atlanta - Hotel-Proposed, Atlanta - Howard Johnson Hotel-Hartsfield, Atlanta - Howard Johnson-Airport, Atlanta - Howard Johnson-Northeast, Atlanta - Howard Johnson-Northwest, Atlanta - Howard Johnson-South, Atlanta - Hyatt Atlanta-Airport, Atlanta - La Quinta - Stone Mountain, Atlanta - La Quinta Hotel, Atlanta - La Quinta Hotel-West, Atlanta - Marriott Atlanta Airport, Atlanta - Marriott Hotel, Atlanta - Marriott Hotel-Downtown, Atlanta - Marriott Marquis, Atlanta - Marriott Suites Hotel-Proposed, Atlanta - Marriott-Perimeter, Atlanta - Master Economy Inn, Atlanta - Motel 6, Atlanta - Neighborhood Inn, Atlanta - Omni International Hotel, Atlanta - Perimeter North Inn, Atlanta - Proposed AmeriSuites, Atlanta - Quality Inn-Central, Atlanta - Radisson Inn, Atlanta - Ramada Inn-Perimeter, Atlanta - Residence Inn by Marriott-Dunwoody, Atlanta - Residence Inn-Airport, Atlanta - Residence Inn-Buckhead, Atlanta - Residence Inn-Northwest, Atlanta - Sheraton Century Center, Atlanta - Sheraton-Airport, Atlanta - Sporting Club at the Concourse, Atlanta - Stouffer Hotel-Proposed, Atlanta - Swissotel, Atlanta - Terrace Motel, Atlanta - Waverly Hotel, Atlanta - Westin Lenox Hotel, Atlanta - Westin Peachtree Plaza, Atlanta - Wyndham Garden Hotel, Atlanta - Hyatt Hotel, Atlanta Airport - Hampton Inn, Atlanta-Buckhead - Courtyard by Marriott, Augusta - Landmark Hotel, Augusta - Masters Economy Inn - Gordon Hwy., Augusta - Masters Economy Inn - Warner Robins, Augusta - Masters Economy Inn - Washington Rd, Augusta - Holiday Inn, Brunswick - Super 8, Brunswick - Days Inn, Calhoun - Super 8, Cartersville - Days Inn, Chamblee - Comfort Inn-Proposed, College Park - Holiday Inn Crowne Plaza, College Park - Courtyard by Marriott, Columbus - La Quinta Inn, Columbus - Super 8, Columbus - Best Inn, Dalton - Days Inn, Dalton - Holiday Inn-Proposed, Decatur - Sheraton Hotel, Decatur - Best Western-Perimeter-North, Doraville - Days Inn - Gwinnett, Duluth - Howard Johnson, Forsyth - Holiday Inn-Proposed, Gwinnett County - Holiday Inn, Jekyll Island - Jekyll Island Inn-Proposed, Jekyll Island - Hilton Hotel, Macon - Master Economy Inn, Macon - Best Inn, Marietta - Courtyard by Marriott-Delk Road, Marietta - Lafayette Hotel, Marietta - Hampton Inn, Marrietta (Atlanta) - Master Economy Inn, McDonough - Courtyard by Marriott-Perimeter, Norcross - Motel 6, Norcross - Hilton Hotel, Peachtree Corners - Super 8, Rome - Best Western, Savannah - Courtyard by Marriott, Savannah - Days Inn, Savannah - Days Inn-Bay Street, Savannah - Days Inn-Mall Blvd., Savannah - Fairfield Inn, Savannah - Hotel-Proposed, Savannah - Mulberry Inn, Savannah - Radisson Hotel-Proposed, Savannah - Royal Savannah, Savannah - Sheraton Savannah Resort & C.C., Savannah - Town and Country Motel, Savannah - Days Inn, Savannah Beach - Howard Johnson, Smyrna - Master Economy Inn, Tilton - Courtyard by Marriott-Northlake, Tucker - Master Economy Inn, Warner Robins - Super 8, Warner Robins Hawaii - Hyatt Regency Waikoloa, Hawaii - Mauna Kea Hotel, Hawaii - Kahala Hilton, Honolulu - Plaza Hotel, Honolulu - Waikiki Beachcomber, Honolulu - Waikiki Hobron, Honolulu - Coco Palms Resort, Kauai - Kauai Surf Hotel, Kauai - Westin Kauai-Kauai Lagoons Resort, Kauai - Westin Kauai-Proposed, Kauai - Kona Village, Kona - Royal Sea Cliff Resort, Kona - Westin Kauai at Kauai Lagoon, Lihue - Hyatt Regency, Maui - Marriott Resort, Maui - Maui Lu Hotel, Maui - Maui Surf Hotel, Maui - Westin Maui, Maui - Hawaiian Regent Hotel-Waikiki Beach, Oahu - Hotel-Proposed-Schofield Barracks, Oahu - Hyatt Regency Waikiki, Oahu - Kiahuna Plantation, Poipu Beach, Kauai - Transient Lodging Facilities, Schofield Barracks - Hilton Hawaiian Village, Waikiki - Grand Hyatt Wailea, Wailea Idaho - Compri Hotel, Boise - Holiday Inn, Boise - Holiday Inn-Airport, Boise - Red Lion Inn, Boise - Super 8, Boise - Motel 6, Coeur d'Alene - Super 8, Coeur d'Alene - Proposed Motel, Coure d'Alene - Super 8, Lewiston - Cotton Tree Inn, Pocatello - Super 8, Sand Point - Busterback Ranch, Sawtooth Valley Illinois - Arlington Park Hilton, Arlington Heights - Church Creek, Arlington Heights - Courtyard by Marriott, Arlington Heights - La Quinta Hotel, Arlington Heights - Hampton Inn-Proposed, Bedford Park - Best Inn, Bloomington - Fairfield Inn-Normal, Bloomington - Holiday Inn, Bloomington - Indian Lakes Resort, Bloomington - Ramada Inn, Bloomington - Super 8, Bloomington - Cresthil-Proposed, Buffalo Grove - Holiday Inn, Champaign - La Quinta Inn, Champaign - Radisson Suites - Champaign, Champaign - Suite Hotel-Proposed, Champaign - Super 8, Champaign - Ambassador West Hotel, Chicago - Americana Congress, Chicago - Conrad Hilton Hotel, Chicago - Courtyard by Marriott-Glenview, Chicago - Courtyard by Marriott-Highland, Chicago - Courtyard by Marriott-Lincoln, Chicago - Courtyard by Marriott-O'Hare, Chicago - Courtyard by Marriott-Waukegan, Chicago - Courtyard by Marriott-Woodale, Chicago - Days Inn, Chicago - Executive House, Chicago - Fairfield Inn-Lansing, Chicago - Fairfield Inn-Willowbrook, Chicago - Fairmont Hotel, Chicago - Guest Quarters Hotel, Chicago - Hilton and Towers, Chicago - Hilton-O'Hare, Chicago - Holiday Inn-Merchandise Mart, Chicago - Howard Johnson-O'Hare Int'l Airport, Chicago - Hyatt Regency, Chicago - Hyatt Suites Hotel, Chicago - Inter-Continental Hotel-Proposed, Chicago - La Quinta Inn - Hoffman Est., Chicago - Le Meridien, Chicago - Lenox House, Chicago - Lincoln Hotel, Chicago - Mark Twain Hotel, Chicago - Marriott-O'Hare, Chicago - Mayfair Regent, Chicago - McClurg Holiday Inn, Chicago - McCormick Inn Hotel, Chicago - Morton Hotel, Chicago - Omni Ambassador East, Chicago - Omni Morton Hotel, Chicago - Palmer House Hotel, Chicago - Ramada Inn - Lakeshore, Chicago - Ramada O'Hare, Chicago - Residence Inn-Deerfield, Chicago - Residence Inn-Lombard, Chicago - Sheraton Hotel-Downtown, Chicago - Sheraton Hotel-Proposed, Chicago - Sheraton O'Hare, Chicago - Sheraton Plaza Hotel, Chicago - Summerfield Suites Hotel, Chicago - Swissotel, Chicago - Tremont Hotel, Chicago - Westin Hotel, Chicago - Whitehall Hotel, Chicago - Hilton Hotel, Collinsville - Holiday Inn, Collinsville - Super 8, Columbus - Super 8, Crystal Lake - Super 8, Decatur - Courtyard by Marriott, Deerfield - Embassy Suites, Deerfield - Marriott Suites Hotel, Deerfield - Holiday Inn-Chicago, Des Plaines - Hotel-Proposed, Des Plaines - Compri Hotel-Proposed, Downers Grove - Radisson Suite Hotel, Downers Grove - Best Inn, Effingham - Ramada Inn, Elgin - Hampton Inn, Elk Grove Village - Marriott Suites, Elk Grove Village - Holiday Inn, Elmhurst - Orrington Hotel, Evanston - Drury Inn, Fairview Heights - Conference Center & Resort-Proposed, Fox Lake - Holiday Inn, Freeport - Hotel-Proposed, Gurnee - La Quinta Hotel, Hoffman Estates - Carson Inn, Itasca - Hamilton Wyndham, Itasca - Nordic Hills, Itasca - Holiday Inn, Joliet - Proposed Harrah's Riverboat, Joliet - Days Inn, Kankakee - Holiday Inn, LaSalle - Marriott Hotel, Lincolnshire - Hilton Inn, Lisle - Holiday Inn Crowne Plaza, Lisle - Embassy Suites, Lombard - Holiday Inn, Macomb - Best Inn, Marion - Best Inn, Mount Vernon - Holiday Inn, Mount Vernon - Ramada Inn, Mount Vernon - Courtyard by Marriott, Naperville - Ramada Inn, Naperville - Sheraton Naperville, Naperville - O'Hareport Hotel, Northlake - Courtyard by Marriott, Oakbrook Terrace - Super 8, Okawville - Fairfield Inn, Peoria - Days Inn, Peru - Super 8, Peru - Courtyard by Marriott, Rockford - Fairfield Inn, Rockford - Hampton Inn, Rockford - Embassy Suites, Rosemont - Quality Inn/Clarion, Rosemont - Sheraton Int'l At O'Hare, Rosemont - Holiday Inn, Salem - Compri Hotel, Schaumburg - Embassy Suites, Schaumburg - Marriott Schaumburg, Schaumburg - Holiday Inn, South Beloit - Ramada Renaissance Hotel, Springfield - Sheraton Inn, Springfield - Super 8-East, Springfield - Super 8-South, Springfield - Jumer's Castle, Urbana - Best Inn, Waukegan - Super 8, Waukegan Indiana - Clarion Fourwinds Inn, Bloomington - Holiday Inn, Bloomington - Inn at the Four Winds, Bloomington - Ramada Inn, Bloomington - Harbor Point Resort, Brookville Lake - Super 8, Columbus - Best Inn, Fort Wayne - Hilton, Fort Wayne - Downtown Hotel, Gary - Sheraton, Gary - Holiday Inn, Goshen - Howard Johnson, Hammond - Quality Inn, Hammond - Courtyard by Marriott-Airport, Indianapolis - Courtyard by Marriott-Carmel, Indianapolis - Courtyard by Marriott-Castleton, Indianapolis - Embassy Suites-Claypool Center, Indianapolis - Fairfield Inn-Castleton, Indianapolis - Fairfield Inn-College Park, Indianapolis - Hampton Inn-Proposed, Indianapolis - Hilton Hotel-Airport, Indianapolis - Hilton Inn-Downtown, Indianapolis - Holiday Inn-South, Indianapolis - Holiday Inn-Southeast, Indianapolis - Knights Inn, Indianapolis - Midway Motor Lodge, Indianapolis - Mohawk Inn, Indianapolis - Motel 6, Indianapolis - Proposed Fairfield Inn, Indianapolis - Proposed Residence Inn, Indianapolis - Radisson, Indianapolis - Ramada-Airport, Indianapolis - Wyndham Garden Hotel, Indianapolis - La Quinta Inn, Indianapolis Airport - Hilton Inn, Jeffersonville - Holiday Inn, La Porte - Days Inn, Lafayette - Holiday Inn, Lafayette - Cotton Mill Inn-Proposed, Madison - Hampton Inn, Merrillville - Holiday Inn Express, Merrillville - La Quinta Inn, Merrillville - Hotel Roberts, Muncie - Radisson Hotel, Muncie - Brown County Inn, Nashville - Holiday Inn, Portage - Knights Inn, Richmond - Holiday Inn, South Bend - Howard Johnson, South Bend - Signature Inn, Terre Haute - Super 8, Terre Haute - Courtyard Conversion, Valparaiso - Holiday Inn, Vincennes Iowa - Holiday Inn-Gateway Center, Ames - Holiday Inn, Cedar Falls - Collins Plaza, Cedar Rapids - Holiday Inn, Cedar Rapids - Roosevelt Hotel, Cedar Rapids - Super 8, Davenport - Courtyard by Marriott, Des Moines - Fairfield Inn, Des Moines - Holiday Inn, Des Moines - Holiday Inn - West, Des Moines - Holiday Inn-Downtown, Des Moines - Holiday Inn-North, Des Moines - Ramada Inn, Des Moines - Super 8-North, Des Moines - Super 8-West, Des Moines - Holiday Inn, Iowa City Kansas - Embassy Suites, Kansas City - Fairfield Inn-Overland Park, Kansas City - Holiday Inn-Mission Overland Park, Kansas City - Fairfield Inn, Kansas City West - Holiday Inn, Lawrence - University Inn, Lawrence - Holiday Inn, Manhattan - Courtyard by Marriott, Overland Park - Hampton Inn-Proposed, Overland Park - Marriott Hotel, Overland Park - Park Inn International, Topeka - Super 8, Topeka - Canterbury Inn, Wichita - Former Sheraton Hotel, Wichita - Hilton-East, Wichita - Marriott Hotel, Wichita - Comfort Inn, Winfield Kentucky - Conference Center-Proposed, Boone County - Howard Johnson, Bowling Green - Brown County Inn, Brown County - Holiday Inn, Corbin - Hotel-Proposed, Covington - Thomas More Centre, Crestville Hill - Comfort Inn, Elizabethtown - Signature Inn, Elkhart - Holiday Inn, Florence - Signature Inn, Florence - Drawbridge Inn, Fort Mitchell - Days Inn, Georgetown - Days Inn, Henderson - Holiday Inn, Henderson - Bluegrass Motor Inn, Lexington - Courtyard by Marriott, Lexington - Holiday Inn, Lexington - Holiday Inn-East, Lexington - Holiday Inn-North, Lexington - Hyatt Hotel, Lexington - Knights Inn, Lexington - Super 8-Proposed, London - Brown Hotel, Louisville - Courtyard by Marriott-East, Louisville - Holiday Inn, Louisville - Holiday Inn South, Louisville - Holiday Inn-Central, Louisville - Holiday Inn-Northeast, Louisville - Ramada Inn, Louisville - Ramada Inn-East, Louisville - Signature Inn, Louisville - Days Inn, Madisonville - Executive Inn, Owensboro - Super 8-Proposed, Radcliff - Holiday Inn, Richmond Louisiana - Howard Johnson, Alexandria - Capital House, Baton Rouge - Convention Center Hotel-Proposed, Baton Rouge - Courtyard by Marriott, Baton Rouge - Crown Sterling Suites, Baton Rouge - Embassy Suites, Baton Rouge - Hilton Hotel, Baton Rouge - Holiday Inn-East, Baton Rouge - Holiday Inn-South, Baton Rouge - Holiday Inn-West, Baton Rouge - La Quinta Inn, Baton Rouge - Prince Murat Hotel, Baton Rouge - Proposed Homewood Suites, Baton Rouge - Quality Inn, Bossier City - Ramada Inn, Hammond - Ramada Inn, Houma - Holiday Inn - New Orleans, Kenner - Sheraton, Kenner - Hilton Hotel, Lafayette - La Quinta Hotel, Lafayette - Gateway Hotel, Metairie - Howard Johnson-Airport, Metairie - Canal Street Hotels L.P., New Orleans - Clarion Hotel, New Orleans - Days Inn, New Orleans - Fairmont Roosevelt Hotel, New Orleans - Hampton Inn-Proposed, New Orleans - Holiday Inn Crowne Plaza, New Orleans - Hostellerie de la Poste, New Orleans - Hotel Meridien, New Orleans - Hyatt Regency, New Orleans - Iberville Hotel, New Orleans - Inter-Continental Hotel, New Orleans - La Quinta Inn, New Orleans - Landmark Bourbon, New Orleans - Le Meridien New Orleans, New Orleans - Maison Dupuy, New Orleans - Marriott Hotel, New Orleans - Omni Royal Orleans, New Orleans - Ramada Inn, New Orleans - Saint Louis Hotel, New Orleans - St. Ann/Marie Antoinette, New Orleans - Warwick, New Orleans - Westin Hotel, New Orleans - Residence Inn, Shreveport - Super 8, Shreveport Maine - Hilton Inn, Bangor - Ramada Inn, Bangor - Residence Inn by Marriott-Proposed, Bangor - Inn By The Sea, Cape Elizabeth - Hotel-Proposed, Orchard Beach - Hotel-Proposed, Portland - Portland Regency, Portland - Ramada Inn, Portland - Sheraton Tara Portland, Portland - Susse Chalet, Portland - Susse Chalet, Portland (In-town) - Keddy's Motor Inn of Maine, Presque Isle - Hampton Inn, South Portland - Sheraton Inn, South Portland Maryland - Budget Hotel-Proposed, Aberdeen - Chesapeake House, Aberdeen - Holiday Inn, Aberdeen - Motel-Proposed, Aberdeen - Annapolis Hotel, Annapolis - Courtyard by Marriott-Riva Road, Annapolis - Governor Calvert House, Annapolis - Historic Inns of Annapolis, Annapolis - Hotel-Proposed, Annapolis - Howard Johnson, Annapolis - Marriott Hotel, Annapolis - Maryland Inn, Annapolis - Quality Royale Hotel, Annapolis - Ramada Hotel, Annapolis - Robert Johnson House, Annapolis - Brookshire Hotel, Baltimore - Courtyard by Marriott-BWI Airport, Baltimore - Days Inn, Baltimore - Harbor Court Hotel, Baltimore - Harrison's at Pier 5, Baltimore - Hilton Hotel, Baltimore - Holiday Inn-Belmont Blvd., Baltimore - Holiday Inn-Cromwell Bridge, Baltimore - Holiday Inn-Glen Burnie, Baltimore - Holiday Inn-Inner Harbor, Baltimore - Holiday Inn-Int'l Airport, Baltimore - Holiday Inn-Moravia Road, Baltimore - Holiday Inn-Pikesville, Baltimore - Holiday Inn-South Glen Burnie, Baltimore - Hotel-Proposed, Baltimore - Howard Johnson-Proposed, Baltimore - Johns Hopkins Hotel-Proposed, Baltimore - Lord Baltimore Hotel, Baltimore - Omni International Hotel, Baltimore - Ramada Inn-I-695 West, Baltimore - Susse Chalet, Baltimore - Susse Chalet Inn-BWI Airport, Baltimore - Susse Chalet Inn-Golden Ring, Baltimore - Bethesda Metro Center, Bethesda - Guest Quarters, Bethesda - Hyatt Regency Hotel, Bethesda - Linden Hill Hotel, Bethesda - Omni Linden Hotel, Bethesda - Residence Inn, Bethesda - Bethseda Metro Center, Bethseda - Guest Quarters, Bethseda - Residence Inn - Proposed, Bethseda - Comfort Suites-Proposed, Bowie - Days Inn, Capital Heights - Residence Inn, Cockneysville - Abbey, College Park - Best Western Maryland, College Park - Holiday Inn, College Park - Sheraton Inn, Dorsey - Days Inn, Easton - Mariner Inn, Easton - Holiday Inn, Frederick - Compri Hotel, Gaithersburg - Marriott Hotel, Gaithersburg - Century XXI Resort, Germantown - Comfort Inn, Germantown - Hampton Inn, Glen Burnie - Residence Inn-Proposed, Greenbelt - Courtyard by Marriott, Hunt Valley - Hunt Valley Embassy Suites, Hunt Valley - Hunt Valley Marriott, Hunt Valley - Susse Chalet Inn, Jessup - Courtyard by Marriott, Landover - Quality Inn-Proposed, Landover - Days Inn, Lanham - Best Western Maryland, Laurel - Days Inn, Laurel - Holiday Inn, Laurel - Susse Chalet, Linthicum - Howard Johnson Plaza Hotel, New Carrollton - Carousel Hotel, Ocean City - Days Inn, Ocean City - Susse Chalet, Oxon Hill - Hotel-Proposed, Prince Georges County - Budget Hotel-Proposed, Rockville - Comfort Inn, Rockville - Courtyard by Marriott, Rockville - Days Inn-Congressional Park, Rockville - Holiday Inn Crowne Plaza, Rockville - Quality Inn-Proposed, Rockville - Ramada Inn, Rockville - Salisbury Hotel, Salisbury - Sheraton Hotel, Salisbury - Courtyard by Marriott, Silver Spring - Quality Inn-Proposed, Silver Spring - Comfort Inn-Proposed, Solomons Island - Holiday Inn, Towson - Quality Inn-Proposed, Westminster Massachusetts - Susse Chalet, Amsbury - Courtyard by Marriott, Andover - Marriott Hotel, Andover - Stouffer Bedford Glen Hotel, Bedford - Anthony's Pier Four, Boston - Battery Wharf Hotel-Proposed, Boston - Boston Harbor Hotel, Boston - Boston World Trade Center, Boston - Bostonian Hotel, Boston - Colonnade Hotel, Boston - Commonwealth Center Hotel, Boston - Compri Hotel-Proposed, Boston - Copley Plaza Hotel, Boston - Courtyard by Marriott-Foxborough, Boston - Econo Lodge-Proposed, Boston - Harborside Conf. Center-Proposed, Boston - Hilton-Back Bay, Boston - Hilton-Logan, Boston - Holiday Inn-Government Center, Boston - Hotel - Proposed, Boston - Hyatt Fan Pier-Proposed, Boston - Hyatt Harborside-Proposed, Boston - Lafayette Hotel, Boston - Lenox Hotel, Boston - Marriott Copley Place, Boston - Meridien Hotel, Boston - Omni Parker House, Boston - Residence Inn, Boston - Ritz-Carlton, Boston - Statler Hilton Hotel, Boston - Tremont House Hotel, Boston - World Trade Center Hotel - Proposed, Boston - Marriott Hotel, Boston/Newton - Sheraton Tara Hotel, Braintree - Ocean Edge Inn & Conference Center, Brewster - Holiday Inn, Brookline - Days Inn, Burlington - Charles Hotel, Cambridge - Hyatt Hotel, Cambridge - Royal Sonesta Hotel, Cambridge - The Charles Hotel, Cambridge - Chatham Bars Inn, Chatham - Chelmsford Radisson Hotel, Chelmsford - Best Western Motor Lodge, Chicopee - Cummington Farm Resort-Proposed, Cummington - Appleton Inn, Danvers - Howard Johnson Hotel, Danvers - Radisson Ferncroft Hotel, Danvers - Residence Inn - Proposed, Danvers - Dedham Comfort Inn, Dedham - Holiday Inn, Dedham - Wequassett Inn, East Harwich - Harbor View Hotel, Edgartown - Kelley House, Edgartown - Airport Inn, Fall River - Sea Crest Hotel, Falmouth - Sheraton Inn, Falmouth - Radisson Hotel, Ferncroft - Sheraton Tara Hotel, Framingham - Hotel-Proposed, Franklin - Hotel-Proposed, Haverhill - Susse Chalet, Holyoke - Dunfey Hyannis Hotel, Hyannis - Heritage House Hotel, Hyannis - Holiday Inn, Hyannis - Sheraton Regal Inn, Hyannis - Tara Hyannis, Hyannis - Canyon Ranch-Berkshires, Lenox - Cranwell Hotel and Conference Ctr., Lenox - Spa/Resort-Proposed, Lenox - Holiday Inn, Leominster - Lexington Sheraton, Lexington - Residence Inn-Proposed, Littleton - Appleton Inn, Lowell - Hilton Hotel, Lowell - Town House Motor Inn, Lowell - Holiday Inn, Marlboro - Susse Chalet, Middleboro - Sheraton Milford Hotel, Milford - Holiday Inn, Natick - Skipper's Inn, New Bedford - Days Inn, Newton - Howard Johnson, Newton - Marriott Hotel, Newton - Sheraton - Wayfarer, Newton - Sheraton Tara, Newton - Susse Chalet, Newton - North Adams Inn, North Adams - Hilton Inn, Northampton - Hotel Northampton, Northampton - Factory Mutual Hotel, Norwood - University Inn, Oxford - Holiday Inn, Peabody - Berkshire Commons Hotel, Pittsfield - Hotel-Proposed, Plymouth - Hawthorne Hotel, Salem - Days Inn, Saugus - Susse Chalet, Seekonk - Howard Johnson, Somerset - Somerset Omni, Somerset - Federal House Inn, South Lee - Holiday Inn, Springfield - Howard Johnson, Springfield - Monarch Place, Springfield - Treadway Inn, Springfield - Publick House, Sturbridge - Sheraton, Sturbridge - Regency Inn of Taunton, Taunton - Holiday Inn, Tewksbury - Susse Chalet, Tewksbury - Susse Chalet, Waltham - Vista Waltham House, Waltham - Hampton Inn, West Springfield - Westford Regency Hotel, Westford - The Westminster Village Inn, Westminster - The Orchards, Williamstown - Treadway Inn, Williamstown - Days Inn, Woburn - Howard Johnson, Woburn - Radisson Hotel, Woburn - Ramada Inn, Woburn - Susse Chalet, Woburn - Marriott Hotel, Worcester - Alladin Motor Inn, Yarmouth - Flagship Motor Inn, Yarmouth - Gull Wing Suites Hotel, Yarmouth Michigan - Motel-Proposed, Adrian - Ramada Inn, Allen Park - Holiday Inn-Alpena, Alpena - Compri Hotel-Proposed, Ann Arbor - Hampton Inn-North, Ann Arbor - Hampton Inn-South, Ann Arbor - Hilton Hotel, Ann Arbor - Holiday Inn-East, Ann Arbor - Holiday Inn-West, Ann Arbor - Residence Inn, Ann Arbor - Sheraton Hotel, Ann Arbor - AmeriSuites Hotel-Proposed, Auburn Hills - Holiday Inn, Auburn Hills - Knights Inn, Battle Creek - Super 8, Battle Creek - Bay Valley Inn, Bay City - Howard Johnson, Belleville - Fairfield Inn-Airport, Charlotte - Courtyard by Marriott, Dearborn - Courtyard by Marriott-Airport, Detroit - Courtyard by Marriott-Auburn Hills, Detroit - Courtyard by Marriott-Livonia, Detroit - Days Inn, Detroit - Downtown Hotel-Proposed, Detroit - Fairfield Inn-Airport, Detroit - Fairfield Inn-Auburn Hills, Detroit - Fairfield Inn-Warren, Detroit - Fairfield Inn-West, Detroit - Golden Harp, Detroit - Hampton Inn, Detroit - Hilton-Airport, Detroit - Hilton-North Field, Detroit - Holiday Inn, Detroit - Holiday Inn-Metro Airport, Detroit - Hotel Pontchartrain, Detroit - Omni Detroit, Detroit - Westin Hotel Renaissance Center, Detroit - Holiday Inn, East Lansing - Holiday Inn-Proposed, East Lansing - Knights Inn, Flint - Amway Hotel, Grand Rapids - Holiday Inn, Grand Rapids - Grand Traverse Resort, Grand Traverse Village - Holiday Inn, Howell - Jackson Hotel, Jackson - Fairfield Inn, Kalamazoo - Hilton-Kalamazoo Center, Kalamazoo - Holiday Inn, Kalamazoo - Radison Plaza Hotel, Kalamazoo - Residence Inn, Kalamazoo - Super 8, Kalamazoo - Embassy Suites-Proposed, Lansing - Holiday Inn, Lansing - Motel 6, Lansing - Quality Suites Hotel, Lansing - Compri Hotel-Proposed, Livonia - Embassy Suites, Livonia - Embassy Suites-Proposed, Livonia - Holiday Inn, Livonia - Marriott Hotel, Livonia - Fairfield Inn, Madison Heights - Residence Inn, Madison Heights - Holiday Inn, Marquette - Knights Inn, Monroe - Comfort Inn-Proposed, Mount Clemens - Holiday Inn, Muskegan - Super 8, Muskegon - Hilton Hotel, Novi - Holiday Inn-Petoskey, Petoskey - Mayflower Hotel, Plymouth - Inn at the Bridge, Port Huron - Radisson Hotel, Romulus - Holiday Inn-East, Saginaw - Super 8, Saginaw - Courtyard by Marriott, Southfield - Embassy Suites, Southfield - Hilton Hotel, Southfield - Marriott Hotel, Southfield - Ramada Inn, Southfield - Residence Inn, Southfield - The Garden Inn, Southfield - Comfort Suites-Proposed, Sterling Heights - Holiday Inn, Sturgis - Grand Traverse Resort, Traverse City - Hampton Inn, Traverse City - Park Place Hotel, Traverse City - Courtyard by Marriott, Troy - Holiday Inn, Troy - Marriott, Troy - Residence Inn, Troy - Courtyard by Marriott, Warren - Days Inn, Warren - Holiday Inn, Warren - Motel 6, Warren - Residence Inn, Warren - Van Dyke Hotel & Conference Center, Warren - Bob Evans Restaurant, Wyoming - Super 8, Wyoming - Radisson Resort-Conference Center, Ypsilanti Minnesota - Embassy Suites, Bloomington - Hilton Airport Hotel, Bloomington - Hilton Hotel, Bloomington - Howard Johnson Lodge, Bloomington - Marriott Hotel, Bloomington - Ramada Inn, Bloomington - Days Inn - Minneapolis, Brooklyn Center - Residence Inn, Eagan - Compri Hotel-Proposed, Minneapolis - Courtyard by Marriott-Eden Prairie, Minneapolis - Courtyard by Marriott-Mendota, Minneapolis - Days Inn, Minneapolis - Dyckman Hotel, Minneapolis - Hilton Inn, Minneapolis - Holiday Inn-Downtown, Minneapolis - Hotel-Proposed, Minneapolis - Luxeford Hotel, Minneapolis - Marquette, Minneapolis - Marriott City Center Hotel, Minneapolis - Marriott-Minnetonka, Minneapolis - Motel 6, Minneapolis - Omni-Northstar, Minneapolis - Radisson Hotel, Minneapolis - Ramada Inn, Minneapolis - Sheraton Minneapolis, Minneapolis - Sofitel, Minneapolis - Motel-Proposed, Montevideo - Days Inn, Plymouth - Hotel-Proposed, Rochester - Howard Johnson, Rochester - Motel 6, Rochester - Radisson Hotel, Rochester - Days Inn, Roseville - Holiday Inn, Saint Paul - Holiday Inn-Town Square, Saint Paul - Hotel-Proposed, Saint Paul - Inn and Expo Center, Saint Paul - World Trade Hotel, Saint Paul - Wayzata Conference Center, Wayzata Mississippi - Howard Johnson, Biloxi - Holiday Inn, Greenwood - Motel 6, Hattlesburg - Hampton Inn, Jackson - Howard Johnson, Jackson - Ramada Inn-Proposed, Jackson - Residence Inn, Jackson - Cabot Lodge, Ridgeland - Holiday Inn, Vicksburg Missouri - Ramada Inn, Columbia - Howard Johnson-North St. Louis, Hazelwood - Super 8, Independence - La Quinta Inn, Jackson - North - Capital Plaza, Jefferson City - Ramada Inn, Jefferson City - Days Inn, Joplin - Super 8, Joplin - Allis Plaza, Kansas City - Americana Hotel, Kansas City - AmeriSuites Hotel-Proposed, Kansas City - Doubletree Hotel, Kansas City - Embassy Suites, Kansas City - Fairfield Inn-West, Kansas City - Hilton - Proposed, Kansas City - Hilton Inn, Kansas City - Historic Suites Hotel, Kansas City - Holiday Inn, Kansas City - Holiday Inn Crowne Plaza, Kansas City - Holiday Inn-Proposed, Kansas City - Proposed Sheraton Hotel, Kansas City - Radisson Suite Hotel, Kansas City - Resort Hotel - Proposed, Kansas City - Marriott-Tan-Tar-A, Lake of the Ozarks - Super 8, Liberty - Super 8, North Kansas City - Inn at Grand Glaize, Osage Beach - Super 8, Saint Joseph - Clarion, Saint Louis - Courtyard by Marriott-Creve Coeur, Saint Louis - Courtyard by Marriott-Downtown, Saint Louis - Courtyard by Marriott-Westport, Saint Louis - Days Inn, Saint Louis - Doubletree Hotel, Saint Louis - Drury Inn, Saint Louis - Embassy Suites, Saint Louis - Fairfield Inn-Hazel, Saint Louis - Henry VIII Hotel, Saint Louis - Hilton Hotel-Bel Air, Saint Louis - Holiday Inn Sports Complex, Saint Louis - Holiday Inn-Airport North, Saint Louis - Holiday Inn-Downtown, Saint Louis - Holiday Inn-Riverfont, Saint Louis - Howard Johnson-South, Saint Louis - Mayfair Hotel, Saint Louis - Omni-St. Louis Station, Saint Louis - Ramada Inn-Westport, Saint Louis - Residence Inn-Chesterfield, Saint Louis - Residence Inn-Richmond Heights, Saint Louis - Ritz-Carlton Hotel, Saint Louis - Sheraton-Airport, Saint Louis - St. Louis Airport Hilton, Saint Louis - St. Louis Airport Radisson Hotel, Saint Louis - St. Louisian Hotel, Saint Louis - Stouffer Concourse Hotel, Saint Louis - Super 8, Saint Louis - Marriott Hotel, Saint Louis County - Holiday Inn, Springfield - Sheraton Inn, Springfield - Super 8, Springfield - Executive Inn & Office Building, St. Louis - Holiday Inn, St. Louis - Howard Johnson Hotel, St. Louis - Hotel-Proposed, Unity Village - Holiday Inn, Wendtzville Montana - Sheraton Hotel, Billings - Super 8, Billings - Super 8, Great Falls - Super 8, Helena - Super 8, Kalispell - Holiday Inn, Missoula - Red Lion Inn, Missoula Nebraska - Holiday Inn, Kearney - Best Western Airport Inn, Lincoln - Holiday Inn-Airport, Lincoln - Holiday Inn-Northeast, Lincoln - Howard Johnson, North Platte - Marriott Hotel, Omaha - Ramada Inn, Omaha - Red Lion Inn, Omaha Nevada - Lake Mead Resort, Boulder City - Ormsby House Hotel and Casino, Carson City - Super 8, Carson City - Doubletree Hotel and Resort, Cathedral City - Best Western Motel - Proposed, Jackpot - Airport Inn, Las Vegas - Aladdin Hotel and Casino, Las Vegas - Alexis Park Resort Hotel, Las Vegas - Casino Hotel-Proposed, Las Vegas - Courtyard by Marriott, Las Vegas - El Rancho Hotel and Casino, Las Vegas - Hotel and Casino-Proposed, Las Vegas - Jockey Club Hotel and Casino, Las Vegas - La Quinta Hotel, Las Vegas - Paradise Resort, Las Vegas - Residence Inn, Las Vegas - Silverbird Casino, Las Vegas - Super 8-Proposed, Las Vegas - The Mirage, Las Vegas - Tropicana Travelodge, Las Vegas - Westward Ho Casino, Las Vegas - Echo Bay Resort, Overton - Holiday Inn, Reno - La Quinta Hotel, Reno - Quality Inn and Casino, Reno - Red Lion Hotel-Proposed, Reno New Hampshire - Sheraton Wayfarer, Bedford - Hampton Inn, Bow - Mount Washington Resort, Bretton Woods - Balsams Hotel, Dixville Notch - Sheraton Inn-Lamie's Tavern, Hampton - Woodbound Inn, Jaffrey - Brickyard Mountain Inn, Laconia - Loon Mountain Hotel, Lincoln - Appleton Inns, Manchester - Holiday Inn Center, Manchester - Sheraton Wayfarer, Manchester - Susse Chalet, Manchester - Clarion Somerset Hotel, Nashua - Hotel-Proposed, Nashua - Tara Sheraton Nashua, Nashua - Wentworth by the Sea, Newcastle - Susse Chalet, Portsmouth - Wentworth-by-the-Sea, Portsmouth - Salem Inn, Salem - Susse Chalet, Salem - Landmarc Lodge-East, Waterville Valley - Landmarc Lodge-West, Waterville Valley - Silver Squirrel Inn, Waterville Valley - Snowy Owl Inn, Waterville Valley - Chalet Susse International, Inc., Wilton New Jersey - Marriott Seaview Golf Resort, Abescon - Howard Johnson Hotel, Absecon - Seaview Country Club, Absecon - Berkeley Carteret Hotel, Asbury Park - Caesar's Hotel and Casino, Atlantic City - Casino Hotel-Proposed, Atlantic City - Deauville Hotel, Atlantic City - Diplomat Hotel, Atlantic City - Hampton Inn, Atlantic City - Harrah's Marina Hotel Casino, Atlantic City - Lafayette Hotel, Atlantic City - Resorts Int'l Hotel and Casino, Atlantic City - Royal Inn, Atlantic City - Sands Hotel and Casino, Atlantic City - Traymore Hotel Site, Atlantic City - Tropicana Hotel and Casino, Atlantic City - World International Hotel, Atlantic City - Bernards Inn, Bernardsville - Hotel-Proposed, Bridgewater - Proposed Hotel, Camden - Cherry Hill Hyatt, Cherry Hill - Cherry Hill Inn, Cherry Hill - Ramada Inn, Clifton - Comfort Suites, E. Rutherford - Ramada Renaissance, East Brunswick - Sheraton Inn, East Brunswick - Sheraton - Per Diem, East Rutherford - Holiday Inn-Raritan Center, Edison - Hotel-Proposed, Edison - Ramada Inn, Edison - Best Western Hotel, Egg Harbor Township - Newark Airport Vista Hotel, Elizabeth - Ramada Inn-Proposed, Elizabeth - Sheraton Inn, Elizabeth - Marriott Suite Hotel-Proposed, Elmwood Park - Howard Johnson, Englewood - Conference Center, Farleigh Dickinson - Motel-Proposed, Flemington - Hamilton Park Conference Center, Florham Park - Courtesy Motel, Fort Lee - Ramada Inn-Proposed, Franklin Township - Playboy Resort, Great Gorge - Marriott Hotel, Hanover - Sheraton Hotel, Hasbrouck Heights - Holiday Inn, Jamesburg - Restaurant at Port Liberte, Jersey City - Harrogate Senior Living Facility, Lakewood - Courtyard by Marriott, Lincroft - Hotel-Proposed, Long Branch - Comfort Inn, Mahwah - Courtyard by Marriott, Mahwah - Residence Inn-Proposed, Mahwah - Economy Lodge - Proposed, Meadowlands - Holiday Inn, Meadowlands - Hotel-Proposed, Meadowlands - Meadowlands Hilton, Meadowlands - Sheraton Hotel, Meadowlands - Forsgate Conference Center, Monroe Township - Conference Center, Morristown - Governor Morris Inn, Morristown - Headquarters Plaza Hotel, Morristown - Pleasantville Farms Conference Cent, Morristown - Howard Johnson Lodge, Mount Holly - Courtyard by Marriott, Mount Laurel - Hilton, Mount Laurel - Days Hotel, New Brunswick - Hyatt Hotel, New Brunswick - Rennaisance Hotel, New Brunswick - Residence Inn - Princeton, New Jersey - Airport Hotel-Proposed, Newark - Courtyard by Marriott-Airport, Newark - Holiday Inn, Newark - Holiday Inn-Airport North, Newark - Hotel-Proposed, Newark - Howard Johnson Hotel, Newark - Days Inn, North Bergen - Holiday Inn, North Brunswick - Port-O-Call, Ocean City - Sting Ray Motel, Ocean City - Hotel-Proposed, Ocean Grove - Spray View Hotel, Ocean Grove - Macy Hotel-Proposed, Paramus - Red Carpet Inn, Paramus - Residence Inn-Proposed, Paramus - Marriott Hotel-Proposed, Park Ridge - Embassy Suites, Parsippany - Hilton, Parsippany - Residence Inn-Proposed, Parsippany - Howard Johnson, Phillipsburg - Hotel-Proposed, Piscataway - Residence Inn-Proposed, Piscataway - Compri Hotel-Proposed, Princeton - Hyatt Regency, Princeton - Marriott Hotel, Princeton - Omni Nassau Inn, Princeton - Treadway Inn, Princeton - Howard Johnson, Ridgefield Park - Hotel-Proposed, Rockleigh - Hotel-Proposed, Roxbury Township - Ramada Inn, Runnemede - Howard Johnson, Saddle Brook - Marriott Hotel, Saddle Brook - Days Inn, Secaucus - Howard Johnson, Secaucus - Ramada Inn, Secaucus - Hilton At Short Hills, Short Hills - Pier 4 Motel, Somers Point - Garden State Convention Center, Somerset - Holiday Inn, Somerset - Marriott Hotel, Somerset - Neighborhood Suites-Proposed, Somerset - Sommerset Plaza Hotel, Somerset - Summerfield Suites Hotel, Sommerset - Hewitt Wellington Hotel, Spring Lake - Hotel-Proposed, Spring Lake - Loews Glenpointe Hotel, Teaneck - Appleton Inn, Tinton Falls - Envoy Inn, Tinton Falls - Hilton Inn, Tinton Falls - Residence Inn, Tinton Falls - Sunrise Suite Hotel, Tinton Falls - Hotel-Proposed, Toms River - Hotel-Proposed, Turnersville - Hotel-Proposed, Wayne - Howard Johnson-Proposed, Wayne - Holiday Inn, Wildwood Crest - Motel, Wrightstown New Mexico - Compri Hotel-Proposed, Albuquerque - Courtyard by Marriott-Airport, Albuquerque - Fairfield Inn-Proposed, Albuquerque - Hampton Inn, Albuquerque - Hilton Hotel, Albuquerque - Holiday Inn, Albuquerque - Marriott Hotel, Albuquerque - Radisson Suite Hotel-Proposed, Albuquerque - Residence Inn, Albuquerque - Rodeway Inn, Albuquerque - Winrock Motor Inn, Albuquerque - La Quinta Inn, Albuquerque - Airport - Corkin's Lodge, Chama - La Quinta Inn, Farmington - Hilton, Las Cruces - Las Cruces Hilton, Las Cruces - Super 8, Las Cruces - Ski Rio Ski Resort, Miracle Mountain - Super 8, Raton - Young's Ranch, Red River - Eldorado Hotel, Santa Fe - Homewood Suites Hotel, Santa Fe - Hotel-Proposed, Santa Fe - Inn at Loretto, Santa Fe - Inn on the Alameda, Santa Fe - La Fonda Hotel, Santa Fe - La Quinta Hotel, Santa Fe - Residence Inn, Santa Fe - Santa Fe Motel, Santa Fe - Sheraton de Santa Fe, Santa Fe New York - Americana Inn, Albany - Desmond Hotel, Albany - Hilton Hotel, Albany - Marriott Hotel, Albany - Sheraton Inn, Albany - Susse Chalet, Albany - VIP Motor Lodge (Howard Johnson), Albany - Embassy Suites-Proposed, Amherst - Holiday Inn, Amherst - Annandale Inn-Proposed, Annandale - Wampus Inn-Proposed, Armonk - Treadway Inn, Batavia - Hampton Inn, Binghamton - Holiday Inn-Arena, Binghamton - Holiday Inn-SUNY, Binghamton - Hotel-Proposed, Binghamton - Howard Johnson, Binghamton - Residence Inn, Binghamton - Sheraton Inn, Binghamton - Eden Motel, Bronx - Days Inn-Proposed, Brookhaven - Residence Inn, Brookhaven - Brooklyn Hotel-Proposed, Brooklyn - Hilton Hotel, Brooklyn - Airport Hotel-Proposed, Buffalo - Buffalo Hotel, Buffalo - Days Hotel-Proposed, Buffalo - Hilton Hotel, Buffalo - Holiday Inn - Midtown, Buffalo - Hyatt Hotel, Buffalo - Hyatt Regency Hotel & Retail Area, Buffalo - Radisson Hotel, Buffalo - Ramada Inn-Airport, Buffalo - Ramada Renaissance Hotel, Buffalo - Residence Inn-Proposed, Buffalo - Sheraton Hotel, Buffalo - Sheraton Inn Buffalo East, Buffalo - Sheraton Inn-Airport, Buffalo - Sheraton Inn, Canadaiqua - Airway Motel, Cheektowaga - Holiday Inn - Airport, Cheektowaga - Holiday Inn - Gateway, Cheektowaga - Quality Inn, Cheektowaga - Sheraton Buffalo, Cheektowga - Steeplechase Park-Proposed, Coney Island - Hilton Inn, Corning - Resort/Conference Center-Proposed, Cornwall - Holiday Inn, Cortland - Roycroft Inn, East Aurora - Hotel-Proposed, East Elmhurst - Susse Chalet, East Greenbush - Nevele Hotel, Ellenville - Int'l Conf./Learning Center-Propose, Ellis Island - Days Inn, Elmsford - Howard Johnson, Elmsford - Neighborhood Suites Hotel-Proposed, Fishkill - Residence Inn, Fishkill - Metropole Hotel, Flushing - Midway Hotel, Flushing - Sheraton - Proposed, Flushing Center - Hotel-Proposed, Garden City - Wyndham Condominium, Garden City - Harrison Conference Center, Glen Clove - Great Neck Hotel, Great Neck - Comfort Inn, Greece - Holiday Inn-Proposed, Greece - Tamarack Lodge, Greenfield Park - Claudio's Restaurant, Greenport - Colonie Hill, Hauppauge - Holiday Inn, Hauppauge - Marriott Wind Watch Hotel & Golf, Hauppauge - Marriott Windwatch, Hauppauge - Ramada Inn, Hauppauge - Residence Inn, Hauppauge - Homewood Suites-Proposed, Henrietta - Howard Johnson, Huntington - Huntington Townhouse, Huntington - Hampton Inn, Islandia - Marriott Wind Watch, Islandia - Hotel-Proposed, Islip - Howard Johnson Hotel, Ithaca - Ramada Inn, Ithaca - Sheraton Inn, Ithaca - JFK Hilton, Jamaica - Howard Johnson, Kingston - Ramada Inn, Kingston - Omni Sagamore, Lake George - Ramada Inn, Lake George - Former Lake Placid Club Hotel, Lake Placid - Hilton Hotel, Lake Placid - Mirror Lake Inn, Lake Placid - Holiday Inn, Latham - Howard Johnson, Latham - Howard Johnson, Liberty - The New Brown's Resort, Loch Sheldrake - Convention Center - Proposed, Long Island - Eastern Nassau/W. Suffolk Hotel, Long Island - Hyatt Hotel-Proposed, Long Island - Motel-Proposed, Lynbrook - Crowne Plaza Hotel, Manhattan - Hotel Mark, Manhattan - Proposed Economy Hotel, Manhattan - Sugar Maples Resort, Maplecrest - Hotel-Proposed, Middletown - Howard Johnson, Middletown - Montauk Yacht Club and Inn, Montauk - Kutsher's Resort, Monticello - Motel-Proposed, Nanuet - Wallkill Valley Inn Project, New Paltz - Hotel-Proposed, New Rochelle - Le Richmond Hotel, New Rochelle - Ramada Plaza Inn and Offices, New Rochelle - Sheraton Inn, New Rochelle - Aberdeen Hotel, New York - American Youth Hostel, New York - Americana Hotel, New York - Ashley Hotel, New York - Astor House-Proposed, New York - Barbizon Plaza Hotel, New York - Barclay Hotel, New York - Battery Park City Hotel-Proposed, New York - Berkshire Place, New York - Best Western Woodward Hotel, New York - Biltmore Hotel, New York - Broadway Crowne Plaza, New York - Carlton House Hotel, New York - Century Paramount Hotel, New York - Chatwal Inn, New York - Chatwal Inn on 45th Street, New York - Chatwal Inn on Park Avenue, New York - Chinatown Hotel-Proposed, New York - Courtyard by Marriott-Proposed, New York - Custom's House, New York - Days Inn, New York - Days Inn-West 57th Street, New York - Doral Inn, New York - Dover Hotel, New York - Downtown Athletic Club, New York - Downtown Conference Center, New York - Drake Hotel, New York - Econo Lodge-Proposed, New York - El Rio Grande, New York - Embassy Suites-Times Square-Propose, New York - Empire Hotel, New York - Essex House, New York - Executive Hotel, New York - Giordano Hotel, New York - Gorham Hotel, New York - Grand Bay at Equitable Center, New York - Grand Hyatt Hotel, New York - Greenwich Street Hotel, New York - Halloran House, New York - Hampton House, New York - Harley Hotel, New York - Helmsley Hotel, New York - Hilton Hotel, New York - Hilton Hotel-Statler, New York - Holiday Inn, New York - Holiday Inn Crowne Plaza-Broadway, New York - Holiday Inn Crowne Plaza-Manhattan, New York - Holland Hotel, New York - Hotel Intercontinental, New York - Hotel Pierre, New York - Hotel-1926 Broadway-Proposed, New York - Hotel-East 57th Street-Proposed, New York - Hotel-Proposed, New York - Hotel-Tenth Avenue-Proposed, New York - Howard Hotel, New York - Howard Johnson, New York - Journey's Court Hotel-Proposed, New York - Journey's End, New York - Kalikow Hotel-Proposed, New York - Kennedy Inn, New York - Lancaster Hotel, New York - Le Meridien Liberty New York, New York - Lowell Hotel, New York - Luxury Hotel-Proposed, New York - Macklowe Hotel, New York - Madison Towers Hotel, New York - Manger Windsor Hotel, New York - Mark Hotel, New York - Marriott East Side, New York - Marriott Financial Center, New York - Marriott Hotel-Proposed, New York - Marriott Marquis, New York - Martinique Hotel, New York - Mayfair Regent, New York - Milford Plaza Hotel, New York - Millennium Hotel, New York - Navarro Hotel, New York - Nova Park-Gotham, New York - Novotel, New York - Omni Berkshire Place, New York - Omni Park Central, New York - Parc Fifty One Hotel, New York - Parker Meridien Hotel, New York - Peninsula Hotel, New York - Penta Hotel, New York - Piccadilly Hotel, New York - Plaza Hotel, New York - President Hotel, New York - Prince George Hotel, New York - Prince Street Hotel-Proposed, New York - Proposed Hotel and Apartments, New York - Proposed Luxury Hotel-Proposed, New York - Quality Inn, New York - Quality Suites, New York - Ramada Inn, New York - Regent Hotel-Proposed, New York - Regent of New York-Proposed, New York - Ritz-Carlton, New York - Roger Smith Winthrop Hotel, New York - Roosevelt Hotel, New York - Russian Tea Room, New York - Sheraton Hotel, New York - Sheraton Motor Inn, New York - Sheraton Park Avenue, New York - Soho Hotel-Proposed, New York - St. Moritz Hotel, New York - St. Regis, New York - Stanhope, New York - Sutton Place Hotel, New York - Taft Hotel, New York - Tenth Avenue Hotels-Proposed, New York - The Pierre Hotel, New York - The Plaza Athenee, New York - Times Square Hotel-Proposed, New York - Timeshare-Proposed, New York - Travel Inn, New York - Tudor Hotel, New York - UN Plaza Suite Hotel-Proposed, New York - Vista International, New York - Waldorf=Astoria Hotel, New York - Warwick Hotel, New York - Westbury Hotel, New York - Westin Plaza Hotel, New York - Woodward Hotel-Proposed, New York - York Club, New York - Howard Johnson Motel & Restaurant, Newburgh - Ramada Inn, Newburgh - Hilton Hotel, Niagara Falls - Howard Johnson, Norwich - Hotel-Proposed, Orangetown - Hudson Valley Conference Center, Ossining - Sheraton Inn, Ossining - Hotel-Proposed, Oswego - Best Western, Painted Post - Lodge on the Green, Painted Post - Residence Inn - Proposed, Parsippany - Senior Living - Proposed, Pearl River - Drum Hill Hotel, Peekskill - Holiday Inn, Plainview - Howard Johnson, Plainview - Pickwick Motor Inn, Plainview - Residence Inn, Plainview - Holiday Inn, Plattsburgh - Motel-Proposed, Port Jefferson - Comfort Inn-Proposed, Poughkeepsie - Courtyard by Marriott, Poughkeepsie - Radison Hotel, Poughkeepsie - Wyndham Hotel, Poughkeepsie - Best Western-LaGuardia Airport, Queens - Crown Motel, Queens - Crowne Plaza-LaGuardia Airport, Queens - Days Inn-LaGuardia Airport, Queens - Executive Inn, Queens - Hilton Inn-LaGuardia Airport, Queens - Hilton-JFK Airport, Queens - Holiday Inn-JFK Airport, Queens - Holiday Inn-LaGuardia Airport, Queens - Howard Johnson, Queens - Jade East Motel, Queens - JFK Plaza Hotel, Queens - Marriott Hotel-JFK Airport, Queens - Marriott-LaGuardia Airport, Queens - Metropole Hotel, Queens - Midway Hotel, Queens - Riviera Hotel, Queens - Royce Hotel-LaGuardia Airport, Queens - Sheraton-LaGuardia East-Proposed, Queens - Adria Hotel, Queens (Bayside) - Holiday Inn, Riverhead - Riverhead Motor Hotel, Riverhead - Americana Hotel, Rochester - Courtyard by Marriott-Wrighton, Rochester - Days Hotel (former Holiday Inn), Rochester - Hilton-Campus, Rochester - Holiday Inn, Rochester - Hotel-Proposed (former St. Bernard), Rochester - Hyatt Hotel, Rochester - Lodge at Woodcliff, Rochester - Omni Suites Hotel, Rochester - Residence Inn, Rochester - Sheraton Inn, Rochester - Stouffer Hotel, Rochester - Town House Inn, Rochester - Limited Service Hotel-Proposed, Rome - Hotel - Proposed, Roslyn - Roslyn Country Club, Roslyn - Courtyard by Marriott, Rye - Le Richemonde Hotel, Ryebrook - Baron's Cove Inn, Sag Harbor - Holiday Inn, Saratoga - Hotel-Proposed, Saratoga Springs - Howard Johnson, Saugerties - Holiday Inn, Schenectady - Ramada Inn, Schenectady - Dering Harbor Inn, Shelter Island - Crowne Plaza-Proposed, Smithtown - Howard Johnson, Smithtown - Sheraton, Smithtown - Raleigh Hotel, South Fallsburg - Hotel-Proposed, Southhold - Susse Chalet, Spring Valley - Executive Motor Inn, Springfield Gardens - Staten Island Hotel, Staten Island - Imperial Htl/Stevensville Golf Crs., Stevensville - Holiday Inn, Suffern - Motel on the Mountain, Suffern - Browns Hotel, Sullivan County - Imperial Hotel, Sullivan County - The New Brown's Resort, Sullivan County - Courtyard by Marriott, Syracuse - Embassy Suites, Syracuse - Hampton Inn, Syracuse - Hilton Inn, Syracuse - Holiday Inn-Downtown, Syracuse - Holiday Inn-Exit 35, Syracuse - Holiday Inn-Exit 36, Syracuse - Holiday Inn-Exit 39, Syracuse - Holiday Inn-I-90, Syracuse - Homewood Suites Hotel-Proposed, Syracuse - Hotel Syracuse, Syracuse - Hotel-Proposed, Syracuse - Marriott Hotel, Syracuse - Residence Inn-Proposed, Syracuse - Sheraton University Inn & Conf.Ctr., Syracuse - Treadway Inn, Syracuse - Courtyard by Marriott, Tarrytown - Tarrytown House Conference Center, Tarrytown - Westchester Marriott, Tarrytown - Embassy Suites - Proposed, Times Square, New York - Marriott Hotel, Uniondale - Sheraton Nassau Hotel, Uniondale - Howard Johnson Hotel, Utica - Howard Johnson, Vestal - Hotel-Proposed, Watertown - Convention Hotel-Proposed, Westbury - Dalts Restaurant, Westbury - Howard Johnson, Westbury - Marriott Hotel, Westchester - Inn-Proposed, Westhampton - Crowne Plaza, White Plains - Hotel-Proposed, White Plains - Howard Johnson, White Plains - Roger Smith Hotel, White Plains - Stouffer Westchester Hotel, White Plains - White Plains Hotel, White Plains - Anton Meadows, Yaphank - Quality Suites, Yorktown - Yorktown Motor Lodge, Yorktown Heights North Carolina - Days Inn - Central, Asheville - Holiday Inn - Airport, Asheville - Holiday Inn - Tunnel, Asheville - Inn on the Plaza, Asheville - Sheraton Inn, Asheville - Days Inn, Ashville - Masters Economy Inn - Rocky Mount, Battlebro - Days Inn, Blowing Rock - All-Suite Hotel-Proposed, Boone - Residence Inn-Proposed, Cary - Carolina Inn, Chapel Hill - Hilton-Proposed, Chapel Hill - Charlotte Registry Hotel-Per Diem, Charlotte - Compri Hotel-Proposed, Charlotte - Courtyard by Marriott, Charlotte - Days Inn, Charlotte - Days Inn-Uptown, Charlotte - Fairfield Inn, Charlotte - Howard Johnson, Charlotte - Howard Johnson Lodge, Charlotte - Knights Inn, Charlotte - Manger Motor Inn, Charlotte - Marriott City Center, Charlotte - Marriott Hotel-Independence Center, Charlotte - Masters Economy Inn - Charlotte No, Charlotte - Masters Economy Inn - Merchandise, Charlotte - Queen City Motel, Charlotte - Residence Inn, Charlotte - Residence Inn-North, Charlotte - Resistry Hotel, Charlotte - Royce Suite Hotel, Charlotte - Sheraton Inn, Charlotte - Conference Center, Clemmons - Sheraton Motel, Dunn - Best Western, Durham - Cricket Inn, Durham - Days Inn, Durham - Dutch Village Inn, Durham - Fairfield Inn, Durham - Holiday Inn-West, Durham - Motel 6, Durham - Sheraton-University Center, Durham - The Duke Inn, Durham - Days Inn, Fayetteville - Fairfield Inn, Fayetteville - Holiday Inn, Fayetteville - Hotel-Proposed, Fayetteville - Knights Inn, Fayetteville - Goldsboro Motel, Goldsboro - Courtyard by Marriott, Greensboro - Days Inn, Greensboro - Embassy Suites, Greensboro - Fairfield Inn, Greensboro - Hilton, Greensboro - Marriott Hotel, Greensboro - Residence Inn, Greensboro - Sheraton Greensboro, Greensboro - Hotel-Proposed, Greenville - Radisson Hotel, High Point - Days Inn, Lumberton - Maggie Valley Country Club, Maggie Valley - Courtyard by Marriott, Raleigh - Fairfield Inn, Raleigh - Hampton Inn, Raleigh - Hilton, Raleigh - Holiday Inn-Downtown, Raleigh - Marriott Hotel-RTP, Raleigh - Raleigh Radisson, Raleigh - Residence Inn, Raleigh - Holiday Inn - Airport, Research Triangle Park - Howard Johnson, Roanoke Rapids - Sheraton Inn, Rocky Mount - Days Inn, Rocky Mountain - Fairfield Inn, Rocky Mountain - Motel 6, Rocky Mountain - Days Inn, Rowland - Sheraton Motel, Selma - Masters Economy Inn, Smithfield - Holiday Inn, Southern Pines - Fairfield Inn, Wilmington - Hilton, Winston/Salem - Holiday Inn, Winston/Salem - Winston Plaza Hotel, Winston/Salem North Dakota - Holiday Inn, Bismark - Radisson Inn, Bismark - Super 8, Bismark - Ramada Hotel, Fargo - Ramada Inn-Proposed, Fargo - Super 8, Grand Forks - Super 8, Minot Ohio - Holiday Inn-Cascade, Akron - Ramada Inn, Akron - Residence Inn, Akron - Aurora Inn and Pine Lake Trout Club, Aurora - Sheraton Inn, Aurora - Woodlands Inn, Aurora - Courtyard by Marriott, Blue Ash - Embassy Suites, Blue Ash - Residence Inn-Proposed, Blue Ash - Best Western, Cambridge - Days Inn, Cambridge - Hilton Hotel, Canton - Super 8, Canton - Best Western Northeast, Cincinnati - Carousel Inn, Cincinnati - Cincinnati Hotel, Cincinnati - Clarion Hotel, Cincinnati - Days Inn, Cincinnati - Embassy Suites-Proposed, Cincinnati - Holiday Inn-Downtown, Cincinnati - Holiday Inn-Eastgate, Cincinnati - Holiday Inn-Northeast, Cincinnati - Holiday Inn-Riverfront, Cincinnati - Holiday Inn-South, Cincinnati - Hotel-Airport-Proposed, Cincinnati - Howard Johnson, Cincinnati - Hyatt, Cincinnati - Knights Inn, Cincinnati - KOA Campground, Cincinnati - Marriott Inn, Cincinnati - Netherland Hilton, Cincinnati - Omni Netherland Plaza, Cincinnati - Proposed Hotel, Cincinnati - Radisson Inn, Cincinnati - Ramada Inn, Cincinnati - Residence Inn, Cincinnati - Residence Inn-North, Cincinnati - Sheraton Inn-Proposed, Cincinnati - Treadway Inn, Cincinnati - Vernon Manor, Cincinnati - AmeriSuite Hotel-Proposed, Cleveland - Downtown Hotel-Proposed, Cleveland - Fairfield Inn-Brook Park, Cleveland - Fairfield Inn-West, Cleveland - Holiday Inn-Airport, Cleveland - Holiday Inn-Lakeside, Cleveland - Hyatt Hotel-Proposed, Cleveland - Marriott Hotel, Cleveland - Sheraton City Center, Cleveland - Sheraton Hopkins, Cleveland - AmeriSuite - Proposed, Columbus - Embassy Suites, Columbus - Fairfield Inn-North, Columbus - Fairfield Inn-West, Columbus - Hilton Inn, Columbus - Holiday Inn-Airport, Columbus - Holiday Inn-City Center, Columbus - Holiday Inn-Worthington, Columbus - Hotel-Proposed, Columbus - Howard Johnson Hotel, Columbus - Howard Johnson-East, Columbus - Howard Johnson-West, Columbus - Knights Inn-West, Columbus - Marriott Hotel, Columbus - Nationwide Hotel, Columbus - Residence Inn-North, Columbus - Sheraton Plaza Hotel, Columbus - Sheraton-North, Columbus - Union Plaza Hotel-Steeplechase, Columbus - University Inn, Columbus - Woodfin Hotel, Columbus - Courtyard by Marriott, Crosswoods - Courtyard by Marriott, Dayton - Daytonian Hilton, Dayton - Fairfield Inn, Dayton - Hope Hotel & Conference Center, Dayton - Knights Inn-North, Dayton - Marriott Hotel, Dayton - Motel 6, Dayton - Ramada Inn, Dayton - Residence Inn-North, Dayton - Residence Inn By Marriott, Dayton South - Courtyard by Marriott, Dublin - Woodfin Suites, Dublin - East Liverpool Motor Lodge, East Liverpool - Howard Johnson, Euclid - Ramada Inn, Fairlawn - Hampton Inn, Independence - Howard Johnson, Lima - Ramada Inn, Lima - Best Western, Mansfield - Holiday Inn, Marietta - Lafayette Hotel, Marietta - Holiday Inn, Middletown - Howard Johnson, Middletown - Regal 8 Inn, Middletown - Sheraton-Proposed, Milford - Super 8, Montrose - Ramada Inn, Sandusky - Days Inn, Sharonville - Holiday Inn-Cincinnati North, Sharonville - Super 8, St. Clairsville - Holiday Inn, Strongsville - Balhalla Hotel, Toledo - Courtyard by Marriott, Toledo - Fairfield Inn-Airport, Toledo - Hilton at the Medical College, Toledo - Hilton Hotel, Toledo - Holiday Inn, Toledo - Knights Inn-West, Toledo - Marriott Portside Hotel, Toledo - Radisson Hotel, Toledo - Sofitel, Toledo - Hampton Inn-Proposed, Wickliffe - Holiday Inn, Youngstown - Hotel-Proposed, Youngstown - Sheraton-Proposed, Youngstown Oklahoma - Fountainhead Resort, Mcintosh County - Residence at the Trails Inn, Norman - Suit Hotel, Norman - Courtyard by Marriott, Oklahoma City - Embassy Suites, Oklahoma City - Holiday Inn, Oklahoma City - Lexington Hotel Suites, Oklahoma City - Lincoln Plaza Hotel, Oklahoma City - Marriott Hotel, Oklahoma City - Meridien Plaza, Oklahoma City - Sheraton Hotel, Oklahoma City - Arrowhead Resort, Pittsburgh County - Camelot Hotel, Tulsa - Doubletree Hotel, Tulsa - Former Holiday Inn, Tulsa - Former Holiday Inn-Downtown, Tulsa - Holiday Inn, Tulsa - Holiday Inn-Convention Center, Tulsa - La Quinta Inn, Tulsa - Marriott Hotel, Tulsa - Mayo Hotel, Tulsa - Residence Inn, Tulsa - Westin Hotel, Tulsa Oregon - Inn At Face Rock, Bandon - Courtyard by Marriott, Beaverton - Red Lion Motel, Bend - Sunriver Lodge and Resort, Bend - Econolodge Motel, Eugene - Valley River Inn, Eugene - Residence Inn Portland-South, Lake Oswego - Big Creek Resort-US Highway 101, Lane County - Embassy Suites, Portland - Holiday Inn Crowne Plaza - Proposed, Portland - Holiday Inn-Airport, Portland - Holiday Inn-South, Portland - Proposed Sheraton Suites, Portland - Red Lion - Jantzen Beach, Portland - Red Lion Inn-Lloyd Center, Portland - Red Lion Inn-Portland Center, Portland - Residence Inn - Proposed, Portland - Vintage Plaza Hotel, Portland - Wells Building, Portland - Execulodge Motel, Salem - Oregon Capital Inn, Salem - Springfield Red Lion Inn, Springfield - Sunriver Resort, Sunriver Pennsylvania - Allentown Hilton Hotel, Allentown - Holiday Inn, Allentown - Proposed Microtel, Allentown - Quality Inn, Allentown - Bedford Springs Hotel, Bedford - Compri Hotel-Proposed, Bensalem - Days Inn-Proposed, Bensalem - Holiday Inn, Bensalem - Residence Inn By Marriott, Berwyn - Econolodge, Bristol - Days Inn, Brookville - Buck Hill Falls Inn, Buck Hill Falls - Howard Johnson, Butler - Holiday Inn, Chambersburg - Days Inn, Clarion - Embassy Suites, Coraopolis - Hydeholde Country House-Proposed, Coraopolis - Days Inn, Danville - Holiday Inn, Dubois - Lafayette Inn-Proposed, Easton - Howard Johnson Hotel, Erie - Ramada Inn, Erie - Holiday Inn, Essington - Quality Suites-Proposed, Essington - Super 8-Proposed, Essington - Howard Johnson, Gibsonia - Compri Hotel-Proposed, Harrisburg - Holiday Inn, Harrisburg - Marriott Hotel, Harrisburg - Penn Harris Inn, Harrisburg - Sheraton Inn, Harrisburg - Super 8-Proposed, Harrisburg - Holiday Inn, Hazleton - Super 8-Proposed, Hazleton - Plaza Valley Forge Hotel, King of Prussia - Radisson Hotel, King of Prussia - Sheraton Hotel, King of Prussia - Valley Forge Complex, King of Prussia - Valley Forge Hilton, King of Prussia - Motel-Proposed, Lake Ariel - Days Inn, Lancaster - Holiday Inn-Route 30E, Lancaster - Holiday Inn-Route 501, Lancaster - Sheraton Lancaster Golf Resort, Lancaster - Super 8-Proposed, Lancaster - Holiday Inn, Lionville - Hilton-Great Valley, Malvern - Summerfield Suite-Proposed, Malvern - Days Inn, Meadville - Hilton Inn, Monroeville - Holiday Inn-West, Monroeville - Economy Hotel, Montgomery Township - Holiday Inn, New Hope - Treadway Inn, Newport - Residence Inn-Proposed, Paoli - Conference Center-Proposed, Penn State - Barclay Hotel, Philadelphia - Bellevue, Philadelphia - Courtyard by Marriott-Devon, Philadelphia - Courtyard-Willow Grove, Philadelphia - Days Inn-Airport, Philadelphia - Econo Lodge-Franklin Towne, Philadelphia - Essex Hotel, Philadelphia - Franklin Motor Inn, Philadelphia - Franklin Plaza Hotel, Philadelphia - Guest Quarters Hotel, Philadelphia - Hampton Inn-Proposed, Philadelphia - Health Club-Proposed, Philadelphia - Hilton Inn, Philadelphia - Hilton Inn-Northeast, Philadelphia - Holiday Inn-City Center, Philadelphia - Holiday Inn-City Line, Philadelphia - Hub Motor Inn, Philadelphia - Hyatt-Proposed, Philadelphia - Marriott Hotel, Philadelphia - Marriott Hotel-Airport, Philadelphia - Omni Philadelphia, Philadelphia - Penn Center Inn, Philadelphia - Quality Inn-Center City, Philadelphia - Residence Inn-Proposed, Philadelphia - Rittenhouse Hotel, Philadelphia - Treadway Mohawk, Philadelphia - Treadway Roosevelt, Philadelphia - Residence Inn, Philadelphia/Berwyn - Clubhouse Inn, Pittsburgh - Courtyard by Marriott, Pittsburgh - Hampton Inn at Playhouse Square, Pittsburgh - Hilton Hotel, Pittsburgh - Holiday Inn-Greentree, Pittsburgh - Holiday Inn-North, Pittsburgh - Holiday Inn-Parkway-East, Pittsburgh - Holiday Inn-Parkway-West, Pittsburgh - Hotel-Proposed, Pittsburgh - Howard Johnson Hotel, Pittsburgh - Marriott Hotel, Pittsburgh - Marriott-Airport, Pittsburgh - Motel 6, Pittsburgh - Quality Inn, Pittsburgh - Royce Hotel-Airport, Pittsburgh - U.S.S. Hotel-Proposed, Pittsburgh - Westin William Penn, Pittsburgh - Courtyard By Marriott, Pittsburgh Airport - Holiday Inn, Reading - Sheraton Hotel, Reading - Hilton at Lackawanna Station, Scranton - Hilton Hotel, Scranton - Sheraton Inn, Stroudsburg - HoJo Inn, Tannersville - Hilton-Northeast, Trevose - Compri Hotel-Proposed, Valley Forge - Courtyard by Marriott, Valley Forge - Holiday Inn-Meadowlands, Washington - Holiday Inn, Wilkes-Barre - Days Inn-Proposed, Williamsport - Hotel-Proposed, Williamsport - Hampton Inn - Proposed, Willow Grove - Holiday Inn-Market Street, York - Holiday Inn-Route 30 and I-83, York - Ramada Inn, York - Super 8-Proposed, York Rhode Island - Cresthil-Proposed, Lincoln - Courtyard by Marriott, Newport - Vanderbilt Hotel-Convention Center, Newport - Quality Inn, North Kingston - Biltmore Plaza, Providence - Convention Center Hotel-Proposed, Providence - Holiday Inn Providence - Downtown, Providence - Hotel-Proposed, Providence - Marriott Hotel, Providence - Sheraton-Airport, Providence - Susse Chalet, Smithfield - Howard Johnson, Warwick - Residence Inn-Proposed, Warwick - Susse Chalet, Warwick South Carolina - Quality Inn Motel, Anderson - Super 8, Anderson - Budget Hotel - Proposed, Charleston - Charleston Center Hotel-Proposed, Charleston - Cooper River Inn, Charleston - Days Inn, Charleston - Francis Marion Hotel, Charleston - Hampton Inn-Proposed, Charleston - Hawthorne Suites Hotel, Charleston - Holiday Inn, Charleston - Holiday Inn-Airport, Charleston - Holiday Inn-Riverview, Charleston - Masters Economy Inn - Mt. Pleasant, Charleston - Masters Economy Inn - Rivers Ave, Charleston - Middleton Inn, Charleston - Omni Charleston, Charleston - Quality Inn, Charleston - Trusthouse Forte, Charleston - Courtyard by Marriott, Columbia - Courtyard by Marriott-Northeast, Columbia - Courtyard by Marriott-Northwest, Columbia - Embassy Suites, Columbia - Marriott Hotel, Columbia - Masters Economy Inn - I-26, Columbia - Masters Economy Inn - Knox Abbot, Columbia - Motel 6, Columbia - Residence Inn, Columbia - Coral Beach Hotel, Coral Beach - Days Inn, Dillon - Save Inn, Fairplay - Fairfield Inn, Florence - Holiday Inn, Florence - Days Inn, Gaffney - Courtyard by Marriott, Greenville - Fairfield Inn, Greenville - Greenville Hilton Hotel, Greenville - Ramada Inn, Greenville - Super 8, Greenwood - Days Inn, Hardeeville - Fairfield Inn, Hilton Head - Hilton Head Inn, Hilton Head - Holiday Inn, Hilton Head - Inter-Continental Hotel, Hilton Head - Islander Inn, Hilton Head - Quality Suites-Proposed, Hilton Head - Residence Inn-Proposed, Hilton Head - Sheraton Inn, Hilton Head - PGA East Resort-Proposed, Kiawah Island - Save Inn, Lake Hartwell - Days Inn, Mt. Pleasant - Coral Beach Hotel, Myrtle Beach - Radisson Hotel, Myrtle Beach - Best Western Inn, North Charleston - Budget Hotel-Proposed, North Charleston - Days Inn, North Charleston - Northwoods Atrium Inn, North Charleston - Days Inn, Santee - Holiday Inn-West, Spartanburg - Howard Johnson, Spartanburg - Residence Inn, Spartanburg South Dakota - Holiday Inn, Aberdeen - Holiday Inn, Rapid City - Holiday Inn, Sioux Falls - Super 8, Sioux Falls - Holiday Inn, Spearfish Tennessee - Ameri Suite Hotel-Proposed, Brentwood - Courtyard by Marriott, Brentwood - Holiday Inn, Bristol - Holiday Inn-Southeast, Chattanooga - Howard Johnson, Chattanooga - Marriott Hotel, Chattanooga - Motel 6, Chattanooga - Sheraton Inn, Chattanooga - Super 8, Chattanooga - Holiday Inn, Cove Lake - Masters Economy Inn, Dickson - Comfort Inn-Proposed, Elizabethton - Park Vista Hotel, Gatlinburg - Holiday Inn-I-40, Jackson - Holiday Inn, Johnson City - Super 8, Johnson City - Fairfield Inn, Johnson Park - Holiday Inn, Kingsport - Courtsouth Healthclub-North, Knoxville - Courtsouth Healthclub-South, Knoxville - Courtsouth Healthclub-West, Knoxville - Days Inn, Knoxville - Hilton Hotel, Knoxville - Howard Johnson-Westhills, Knoxville - Motel 6, Knoxville - Quality Inn, Knoxville - Ramada Inn-West, Knoxville - Rodeway Inn, Knoxville - Courtyard by Marriott, Memphis - Courtyard by Marriott-Airport, Memphis - Holiday Inn - Crowne Plaza, Memphis - Holiday Inn-East, Memphis - Holiday Inn-East Poplar, Memphis - Holiday Inn-I-40-Sycamore View, Memphis - Holiday Inn-Memphis Int'l Airport, Memphis - Hyatt Regency, Memphis - Lexington Hotel Suites, Memphis - Motel 6, Memphis - Omni Hotel, Memphis - Proposed Fairfield Inn, Memphis - Residence Inn, Memphis - La Quinta Inn, Memphis - Airport - Brown County Inn, Nashville - Capital Mall Conv. Center-Proposed, Nashville - Clarion Maxwell House, Nashville - Courtyard by Marriott-Airport, Nashville - Days Inn, Nashville - Doubletree Hotel, Nashville - Grosvenor, Nashville - Hampton Inn, Nashville - Holiday Inn Crowne Plaza, Nashville - Holiday Inn Express, Nashville - Holiday Inn-Briley Parkway, Nashville - Marriott Hotel, Nashville - Nashville Union Station, Nashville - Ramada Inn, Nashville - Sheraton Hotel, Nashville - Sheraton Music City, Nashville - Stouffer Hotel, Nashville - Super 8, Nashville - Union Station Hotel, Nashville - AmeriSuite, Oakridge - Holiday Inn, Oakridge - Super 8-Proposed, Union City Texas - Harvey Hotel, Addison - Days Inn, Amarillo - Motel 6, Amarillo - Radisson Hotel-Proposed, Amarillo - Super 8 Motel, Amarillo - La Quinta Inn, Amarillo - Airport - Courtyard by Marriott, Arlington - Hilton Hotel, Arlington - Holiday Inn, Arlington - Lexington Suites Hotel, Arlington - Compri Hotel-Proposed, Austin - Driskill Hotel, Austin - Embassy Suites-Austin Town Lake, Austin - Embassy Suites-North, Austin - Fairfield North, Austin - Four Seasons Hotel, Austin - Holiday Inn, Austin - Holiday Inn-Austin Town Lake, Austin - La Quinta Inn, Austin - Marriott Hotel, Austin - Proposed Fairfield Inn, Austin - Quality Inn, Austin - Residence South, Austin - La Quinta Inn, Austin - Ben White - Holiday Inn Airport, Austins Cities - Holiday Inn, Bay Town - Hilton Hotel, Beaumont - Holiday Inn, Beaumont - Courtyard by Marriott, Bedford - Holiday Inn, Brownsville - La Quinta Inn, Brownsville - Hilton Hotel, College Station - Ramada Inn, College Station - Holiday Inn, Conroe - Corpus Christi Hotel-Airport, Corpus Christi - Days Inn, Corpus Christi - Hilton - Proposed, Corpus Christi - Holiday Inn, Corpus Christi - Holiday Inn-Airport, Corpus Christi - La Quinta Inn, Corpus Christi - North - La Quinta Inn, Corpus Christi - South - Allstar Inn, Dallas - Ambassador Plaza Hotel, Dallas - Arlington Hilton, Dallas - Bradford Plaza Hotel, Dallas - Bristol Suites, Dallas - Convention Center Hotel-Proposed, Dallas - Courtyard by Marriott, Dallas - Courtyard by Marriott-Northeast, Dallas - Courtyard by Marriott-Plano, Dallas - Courtyard by Marriott-Stemmons, Dallas - Dallas Grand Hotel, Dallas - Doubletree Inn, Dallas - Embassy Suites, Dallas - Fairmont Hotel, Dallas - Harvey Hotel, Dallas - Hilltop, Dallas - Hilton Inn-LBJ, Dallas - Hilton-Arlington, Dallas - Holiday Inn - North, Dallas - Holiday Inn Crowne Plaza, Dallas - Holiday Inn-Brook Hollow, Dallas - Holiday Inn-South, Dallas - Houstonian Hotel, Dallas - Howard Johnson-East, Dallas - Lexington Hotel Suites, Dallas - Loews Anatole Hotel, Dallas - Marriott Hotel-Airport, Dallas - Marriott-Park Central, Dallas - Marriott-Quorum, Dallas - Melrose Hotel, Dallas - Motel 6, Dallas - Omni Melrose Hotel, Dallas - Park Plaza, Dallas - Propsed Hotel - DFW, Dallas - Ramada Inn Convention Center, Dallas - Ramada-Market Center, Dallas - Registry Hotel, Dallas - Residence Inn-Market Center, Dallas - Sheraton Grand, Dallas - Southland Center Hotel, Dallas - Statler Hilton Hotel, Dallas - Summit Hotel, Dallas - Westin Galleria Hotel, Dallas - La Quinta Inn, Dallas - DFW - La Quinta Inn, Dallas - North Park - La Quinta Inn, Dallas - Plano - La Quinta Inn, Dallas - Richardson - Allstar Inn, El Paso - Hilton Inn-Airport, El Paso - La Quinta Hotel-Airport, El Paso - Rodeway Inn, El Paso - Travelers Inn, El Paso - Westin Paso del Norte, El Paso - La Quinta Inn, El Paso - Lomaland - Allstar Inn, Euless - La Quinta Inn, Euless - Allstar Inn, Fort Worth - Courtyard by Marriott, Fort Worth - Days Inn Downtown, Fort Worth - Hilton Hotel, Fort Worth - Holiday Inn-North, Fort Worth - Holiday Inn-South, Fort Worth - Lexington Suites Hotel, Fort Worth - Metro Center Hotel, Fort Worth - Radisson Plaza Hotel, Fort Worth - Residence Inn, Fort Worth - La Quinta Inn, Fort Worth - East - Holiday Inn, Harlingen - La Quinta Inn, HI-LA Marque - Crowne Plaza-Houston Park, Houston - Days Inn, Houston - Days Inn-Hobby, Houston - Doubletree Hotel, Houston - Embassy Suites, Houston - Galleria Gardens, Houston - Harvest House Hotel, Houston - Harvey Hotel Medical Center, Houston - Hilton Inn-West, Houston - Holiday Inn I-10 East, Houston - Holiday Inn-Downtown, Houston - Holiday Inn-East, Houston - Holiday Inn-Greenway Plaza, Houston - Holiday Inn-Hobby, Houston - Holiday Inn-Medical Center, Houston - Holiday Inn-NASA, Houston - Holiday Inn-North, Houston - Holiday Inn-Northwest, Houston - Holiday Inn-Southwest, Houston - Host Hotel International, Houston - Hotel Meridien, Houston - Hotel-Proposed, Houston - Houston House, Houston - Houston Medical Center, Houston - Houston Park 10 Crowne Plaza, Houston - La Quinta Hotel-Astrodome, Houston - La Quinta Hotel-Baytown, Houston - La Quinta Hotel-CY Fair, Houston - La Quinta Hotel-Hobby, Houston - La Quinta Inn-Stafford, Houston - Lexington Hotel Suites, Houston - Marriott Astrodome, Houston - Marriott Hotel, Houston - Marriott Hotel-Medical Center, Houston - Marriott-Airport, Houston - Motel 6, Houston - Remington, Houston - Residence Inn, Houston - Rodeway Inn, Houston - Rodeway Inn-Hobby, Houston - Shamrock Hilton Hotel, Houston - Sheraton Hotel, Houston - Sheraton Houston House, Houston - Sheraton Houston Place Hotel, Houston - Sheraton Town and Country, Houston - Sofitel, Houston - Stouffer Greenway Plaza, Houston - Suite Hotel-Proposed, Houston - Whitehall, Houston - Whitehall Hotel Conversion to HI, Houston - La Quinta Inn, Houston - Sharpstown - La Quinta Inn, Houston - East - La Quinta Inn, Houston - Loop 1960 - La Quinta Inn, Houston - Northwest - La Quinta Inn, Houston- SW Freeway - Holiday Inn, Huntsville - Harvey Hotel DFW, Irvine - Allstar Inn, Irving - Hampton Inn, Irving - Hampton Inn-Proposed, Irving - Harvey Hotel-D/FW Airport, Irving - Holiday Inn-Texas Stadium, Irving - Marriott Hotel, Irving - Holiday Inn, Kingsville - Del Lago Hotel, Lake Conroe - Hilton Inn, Laredo - La Posada, Laredo - Courtyard by Marriott, Las Colinas - La Quinta Inn, Longview - Hilton Inn, Lubbock - Holiday Inn, Lubbock - Residence Inn, Lubbock - La Quinta Inn, Midland - Holiday Inn, New Braunfels - All Star Inn, North Richland Hills - La Quinta Inn, Odessa - Holiday Inn, Orange - Holiday Inn, Paris - Plano Harvey Hotel, Plano - La Quinta Inn, Round Rock - Sheraton Inn, San Angelo - Coachman Inn-Proposed, San Antonio - Courtyard by Marriott-Downtown, San Antonio - Courtyard by Marriott-Medical Ctr., San Antonio - Crockett Hotel, San Antonio - Days Inn, San Antonio - Fairfield - North, San Antonio - Gunter Hotel, San Antonio - Holiday Inn-Airport, San Antonio - Holiday Inn-Market Square, San Antonio - Holiday Inn-North, San Antonio - Holiday Inn-Northwest, San Antonio - Holiday Inn-Riverwalk, San Antonio - La Quinta Hotel-Ingram, San Antonio - La Quinta Hotel-Lackland, San Antonio - La Quinta Hotel-Toepperwein, San Antonio - Lexington Hotel Suites, San Antonio - Marriott Hotel-Proposed, San Antonio - Marriott Inn-North, San Antonio - Proposed Fairfield Inn, San Antonio - La Quinta Inn, San Antonio - Windsor - La Quinta Inn, San Antonio - Wurzbach - Holiday Inn, San Marcos - La Quinta Inn, SAT-Toepperwein - Sheraton Hotel, South Padre Island - La Quinta Inn, Tyler - Sheraton, Tyler - Sheraton Inn, Tyler - Traveler's Choice Inn, Tyler - Hilton Hotel, Waco - Gateway Inn, Wichita Falls - Hilton Hotel, Wichita Falls Utah - Mount Holly Ski Resort, Beaver - Hotel-Proposed, Brigham City - Motel-Proposed, Cedar City - Proposed Mayflower Hotel, Deer Valley - Stein Eriksen Lodge, Deer Valley - Deer Valley Resort, Park City - Omni Yarrow, Park City - Prospector Square Resort, Park City - Yarrow Resort, Park City - Seven Peaks Resort and Hotel, Provo - Comfort Inn, Salt Lake City - Doubletree, Salt Lake City - Hilton Hotel-Airport, Salt Lake City - Holiday Inn, Salt Lake City - Holiday Inn-Salt Palace, Salt Lake City - Hotel Utah, Salt Lake City - Hotel-Proposed, Salt Lake City - La Quinta Inn, Salt Lake City - Nendels Inn, Salt Lake City - New Grande Hotel, Salt Lake City - Red Lion Hotel, Salt Lake City - Sheraton Hotel, Salt Lake City - Super 8, Salt Lake City - University Park Hotel (Desktop Rev), Salt Lake City - Ramada Inn-Proposed, Sandy Vermont - Ramada Inn, Bennington - Bolton Valley Corporation, Bolton Valley - Quality Inn, Brattleboro - Radisson Hotel, Burlington - Smugglers Notch, Cambridge - Inn-Proposed, Essex - Cascade Lodge, Killington - Inn of the Six Mountains, Killington - Mountain Inn, Killington - Equinox Hotel, Manchester - Howard Johnson Inn, Rutland - Quality Inn, Stowe - Conference Center-Proposed, Stratton Mountain - Sugarbush Inn, Sugarbush - Susse Chalet, Williston Virginia - Comfort Inn, Abingdon - Best Western, Alexandria - Comfort Inn, Alexandria - Compri Hotel-Proposed, Alexandria - Embassy Suites, Alexandria - Howard Johnson, Alexandria - Marriott Suites, Alexandria - Ramada Inn, Alexandria - Best Western, Arlington - Gateway Marriott, Arlington - Hyatt Arlington Hotel, Arlington - Hyatt Regency, Arlington - Key Bridge Marriott, Arlington - Marriott Hotel, Arlington - Sheraton Crystal City Hotel, Arlington - Sheraton National Hotel, Arlington - Stouffer Concourse Hotel, Arlington - Mountain Lake Hotel, Blacksburg - Holiday Inn, Bristol - Howard Johnson, Bristol - Days Inn, Carmel Church - Westfields International, Chantilly - Boar's Head Inn, Charlottesville - Cavalier Inn, Charlottesville - Courtyard by Marriott, Charlottesville - Hilton-University, Charlottesville - Holiday Inn-North, Charlottesville - Omni Charlottesville, Charlottesville - Radisson-Proposed, Charlottesville - Super 8, Charlottesville - Days Inn, Chester - Howard Johnson, Chester - Days Inn, Colonial Heights - Holiday Inn, Covington - Embassy Suites, Crystal City - Holiday Inn Crowne Plaza, Crystal City - Hyatt Hotel, Crystal City - Marriott Crystal Gateway Hotel, Crystal City - Comfort Inn-Proposed, Dahlgren - Days Inn, Emporia - Courtyard by Marriott, Fairfax - Embassy Suites, Fairfax - Neighborhood Suites-Proposed, Fairfax - Hampton Inn-Proposed, Fairfax City - Westfields International, Fairfax County - Marriott Hotel, Fairview - Econo Lodge, Farmingville - Comfort Inn-Proposed, Farmville - Comfort Inn, Frederick County - Motel 6, Fredericksburg - Courtyard by Marriott, Hampton - Days Inn, Hampton - Fairfield Inn, Hampton - Courtyard by Marriott, Herndon - Embassy Suites Hotel, Herndon - Ramada Renaissance and Health Club, Herndon - Residence Inn-Proposed, Herndon - Worldgate Marriott Hotel, Herndon - Hotel-Proposed, Hopewell - Keswick Inn, Keswick - Holiday Inn, Lexington - Radisson Hotel, Lynchburg - Courtyard by Marriott, Manassas - Holiday Inn, Marion - Hilton, McLean - Days Inn, Norfolk - Marriott Waterside Hotel, Norfolk - Omni Hotel, Norfolk - Waterfront Hotel - Proposed, Norfolk - 135-Suite Hotel-Proposed, Portsmouth - Waterfront Suite Hotel-Proposed, Portsmouth - Comfort Inn, Princeton - Comfort Inn, Pulaski County - Embassy Suites Hotel, Reston - Hyatt Hotel, Reston - Best Western Kings Quarters, Richmond - Courtyard by Marriott, Richmond - Embassy Suites Hotel, Richmond - Hampton Inn, Richmond - Holiday Inn, Richmond - Howard Johnson Lodge, Richmond - Hyatt House Hotel, Richmond - La Quinta Hotel, Richmond - Marriott Hotel, Richmond - Omni Richmond, Richmond - Radisson Hotel, Richmond - Ramada Renaissance Hotel, Richmond - Residence Inn, Richmond - Days Inn, Richmond (Broad) - Days Inn, Richmond (Byrd) - Holiday Inn, Roanoke - Holiday Inn - Airport, Roanoke - Holiday Inn - Civic Center, Roanoke - Holiday Inn - South, Roanoke - Hotel Roanoke, Roanoke - Howard Johnson, Roanoke - Marriott - Roanoke Airport, Roanoke - Marriott Hotel, Roanoke - Holiday Inn, Salem - Super 8, South Hill - Days Inn, Springfield - Hilton, Springfield - Holiday Inn, Staunton - Stonewall Jackson Hotel, Staunton - Hampton Inn - Proposed, Tyson's Corner - Embassy Suites, Tysons Corner - Marriott Hotel, Tysons Corner - Residence Inn, Tysons Corner - Ritz Carlton-Proposed, Tysons Corner - Courtyard by Marriott, Virginia Beach - Courtyard by Marriott-Lynnhaven, Virginia Beach - Fairfield Inn, Virginia Beach - Hotel-Proposed, Virginia Beach - Pavilion Tower Hotel, Virginia Beach - Ramada Inn - Oceanside, Virginia Beach - International Conference Center, Westfields - Howard Johnson, Wheeling - Fort Magruder Inn, Williamsburg - Governor's Inn, Williamsburg - Holiday Inn-East, Williamsburg - Holiday Inn-West, Williamsburg - Royce Hotel, Williamsburg - Williamsburg Hilton, Williamsburg - Best Western-Proposed, Wytheville Washington - Bellevue Thunderbird Motor Inn, Bellevue - Embassy Suites, Bellevue - Hampton Inn, Bellevue - La Quinta, Bellevue - Residence Inn Seattle-East, Bellevue - Ramada Inn, Bothell - Rattling Spring Hotel, Harpers Ferry - Motel 6, Issaquah - AmeriSuite, Kent - Homecourt Suite Hotel, Kent - Embassy Suite, Lynnwood - Residence Inn-Seattle North, Lynnwood - Red Lion Inn at Pasco, Pasco - Redmond Motel, Redmond - Hampton Inn, Sea Tac - Holiday Inn Airport, Sea Tac - Thunderbird Inn, Sea Tac - Alexis Hotel, Seattle - Courtyard by Marriott-South Center, Seattle - Doubletree Inn at South Center, Seattle - Doubletree Plaza, Seattle - Hampton Inn-Airport, Seattle - Holiday Inn Crowne Plaza, Seattle - Holiday Inn-Sea Tac, Seattle - La Quinta, Seattle - Lake Union Residence Inn, Seattle - Marriott Hotel-Airport, Seattle - Marriott Sea-Tac Hotel, Seattle - Plaza Park Suites, Seattle - Ramada Inn-Airport, Seattle - Red Lion, Seattle - Stouffer Madison Hotel, Seattle - Travelodge-Proposed, Seattle - Westin Hotel, Seattle - Courtyard by Marriott, Spokane - Gateway Hotel, Spokane - Holiday Inn-West, Spokane - Red Lion Inn, Spokane - Super 8, Spokane - Hilton-Village Green, Tacoma - Hotel-Proposed, Tacoma - Park Shore Inn, Tacoma - Tacoma Sheraton Hotel, Tacoma - Embassy Suites Hotel, Tukwila - Hampton Inn, Tukwila - Residence Inn-Seattle South, Tukwila - Red Lion Quay, Vancouver - Residence Inn-Portland North, Vancouver - Super 8, Wenatchee - Thunderbird Motor Inn, Yakima West Virginia - Comfort Inn-Proposed, Charleston - Holiday Inn, Clarksburg - Holiday Inn, Fairmont - Hotel-Proposed, Harpers Ferry - Holiday Inn, Huntington - Comfort Inn-Proposed, Morgantown - Holiday Inn, Morgantown - Motel-Proposed, Morgantown - Comfort Inn, Princeton - Motel-Proposed, Princeton - Hotel-Proposed, Wheeling - Howard Johnson, Wheeling Wisconsin - Super 8, Ashland - Holiday Inn, Beloit - Embassy Suites Hotel-Proposed, Brookfield - Marriott-Milwaukee, Brookfield - Holiday Inn, Eau Claire - Residence Inn, Glendale - Granada Royale-Proposed, Green Bay - Holiday Inn-Downtown, Green Bay - Residence Inn-Proposed, Green Bay - Super 8, Janesville - Super 8, Kenosha - Playboy Resort, Lake Geneva - Concourse Hotel, Madison - Fairfield Inn, Madison - Hampton Inn - East, Madison - Hampton Inn - West, Madison - Compri Hotel-Proposed, Milwaukee - Embassy Suite, Milwaukee - Fairfield Inn, Milwaukee - Holiday Inn-Airport, Milwaukee - Holiday Inn-West, Milwaukee - Hotel and Conv. Ctr. East-Proposed, Milwaukee - Hyatt Regency, Milwaukee - Marc Plaza, Milwaukee - Marriott Inn, Milwaukee - Omni Suite Hotel-Proposed, Milwaukee - Super 8-Airport, Milwaukee - Olympia Village Resort, Oconomowoc - Scotsland Resort, Oconomowoc - Sheraton, Racine - Claridge Motor Inn, Rhinelander - Super 8, Waukesha - Holiday Inn, Wausau - Mead Inn, Wisconsin Rapids Wyoming - Days Inn, Casper - Flying L. Skytel, Cody - Super 8, Cody - Snow King Resort, Jackson - Super 8, Jackson - Wort Hotel, Jackson - Development-Proposed, Jackson Hole - Colter Bay Village, Moran - Jackson Lake Lodge, Moran - Jenny Lake Lodge, Moran - Best Western-Bel Air, Rawlins - Bridger Inn, Rawlins - La Quinta Inn, Rock Springs Western Europe Belgium - Oostkamp Hotel, Bruges - Proposed Residence Inn, Brussels - SAS Royal Hotel, Brussels Denmark - Proposed Hotel, Copenhagen France - The Miramar, Biarritz - Chateau D'arc en Barroi, Haute-Marne - Le Grand, Paris - Royal Monceau, Paris Germany - Cumberland House, Berlin - Munchen Penta Hotel, Munchen Holland - Carlton - Cannes & Amstel, Amsterdam - The Pulitzer Hotel, Amsterdam Spain - Le Meridien, Barcelona - Princess Sophia, Barcelona - Hotel Los Monteros, Marbella - Incosol Spa & Hotel, Marbella - Proposed Hyatt Resort, Marbella United Kingdom - Copthorne Hotel, Aberdeen - Copthorne Hotel, Birmingham - Hyatt Regency, Birmingham - Holiday Inn, Cambridge - Copthorne Hotel, Cardiff - Great Eastern Hotel, England - Copthorne Hotel, Glasgow - Hanbury Manor Hotel, Hertfordshire - 47 Park Street, London - Bailey's Hotel, London - Basil Street Hotel, London - Basil Street Hotel, Knightsbridge, London - Britannic Tower, London - Chelsea Hotel, London - Chesterfield Hotel, London - Chesterfield Hotel, Mayfair, London - Copthorne Hotels, London - Copthorne Tara Hotel, London - Dorchester Mayfair, London - Executive Hotel, London - Marriott Hotel, London - May Fair, London - Plaza Hotel, London - Proposed Hotel Conversion, London - Proposed Hotel-The City, London - Regent Hotel, London - Regent London Hotel, London - Sheraton Belgravia, London - Sheraton Park Tower, London - St. James Court Hotel, London - The Executive Hotel, London - Windsor Hotel, London - Copthorne Hotel, Manchester - Copthorne Hotel, Newcastle - Copthorne Hotel, Slough/Windsor - Swallow Hotel, Stockton - Copthorne Hotel-Effingham Park, Sussex - Copthorne Hotel-Gatwick, Sussex Middle East and North Africa Egypt - Sheraton Anni Cruise Ship, - Sheraton Aton Cruise Ship, - Sheraton Hotp Cruise Ship, - Sheraton Tut Cruise ship, - Aswan Oberol Hotel, Aswan - Cairo Sheraton Hotel, Cairo - Hotel - Proposed, Cairo - Lido Hotel, Cairo - Meridien Hotel, Cairo - Novotel Cairo Airport, Heliopolis, Cairo - Proposed Resort Complex, Hurghada - Luxor Sheraton Hotel, Luxor - Proposed Hotel, Luxor - Fayrouz Village Hotel, Sharm El Sheikh, Sinai - Coral Village Hotel, Nuweiba, Sinai - Hotel - Proposed, Dahab, Sinai - Hotel - Proposed, St. Catherine, Sinai Greece - Athens Hilton & Proposed Hotel, Athens - Caravel Hotel, Athens - Proposed Sargani Hotel & Bungalows, Halkidiki - Rhodes Hotel -Proposed, Rhodes Israel - Proposed Inter-Continental Hotel, Tel Aviv Lebanon - Hotel Market Review, Beruit Morocco - El Minzah Hotel, Tangier Nigeria - Proposed Sheraton Hotel, Port Harcourt Saudi Arabia - Proposed Jeddah Corniche Project, Jeddah Tunisia - Proposed Hotel, Hammamet Turkey - Hotel Conrad, Istanbul Latin America and the Caribbean Bahamas - Eleuthera Joint Venture, Eleuthera - Cape Eleuthera Island Hotel, Eleuthera Island - Eleuthera Joint Venture, Eleuthra - The Montague, Nassau - Paradise Island Hotel, Paradise Island - Resorts Int'l Hotel and Casino, Paradise Island Belize - Journey's End Caribbean Club, Abergris Caye Bermuda - Sonesta Hotel, Bermuda Brazil - Quatro Rodas Hotel, Recife Colombia - Charleston Hotel - Proposed, Barranquilla - Bella Suiza Hotel, Bogota - Hotel & Convention Center -Proposed, Cali - Cartagena Hilton, Cartagena - El Faro de Cartagena Resort Propose, Cartagena - Proposed Indian Sea and Sun Resort, Cartagena - Hotel De Isleno, San Andres Isla - Santamar Hotel, Santa Marta Curacao - Ramada Renaissance Hotel and Casino, Honduras - Inn Of The Sun, Guanaja Jamaica - Holiday Inn-Rose Hall, Montego Bay - Americana Eden II, Ocho Rios Mexico - Posadas de Mexico Hotels, - Americana Condesa Del Mar, Acapulco - Americana El Presidente Hotel, Acapulco - Resort-Proposed, Cabo San Lucas - Palacio Del Margus, Chiconcuac - Omni Hotel, Ixtapa - Fiesta Inn-Proposed, Leon - Karmina Place, Manzanillo - Hotel - Proposed, Mexico City - La Jolla de Mismaloya, Puerta Vallarta Netherland Antilles - Divi Divi Beach Resort, Aruba - Divi Tamarijn Beach Resort, Aruba - Golden Anchor, Bonaire - Resort Hotel-Proposed, Bonaire - Ramada Renaissance Hotel and Casino, Curacao - Cupecoy Beach Club Hotel, St. Maarten - Dawn Beach Hotel, St. Maarten - Dawn Beach Resort, St. Maarten - Mullet Bay Resort, St. Maarten - Oyster Pond Hotel, St. Maarten Puerto Rico - Hyatt Dorado Beach Hotel, Dorado - Hyatt Regency Cerromar Hotel, Dorado - Hotel - Proposed, Fajardo - Hotel Puerto Rico, Fajardo - Westin Resort-Proposed, Palmer - Marriott Resort & Casino-Proposed, Puerto Rico - Carib Inn, San Juan - Dupont Plaza, San Juan - El San Juan Hotel and Casino, San Juan - Howard Johnson Hotel, San Juan - Marriott - Proposed, San Juan - Marriott Update - Proposed, San Juan - Sands Hotel and Casino, San Juan Virgin Islands - Caneel Bay, St. Croix - Carambola Beach Resort, St. Croix - Hotel - Proposed, St. Croix - St. Croix Development, St. Croix - Caneel Bay, St. John - Pineapple Beach Hotel, St. Thomas - Sugar Bay Plantation, St. Thomas - Virgin Grand Hotel, St. Thomas - Virgin Isle Hotel, St. Thomas - Little Dix Bay, Virgin Borda Eastern Europe Croatia - Two Hotels, Dubrovnik Czech Republic - Voronesh Hotel Complex, Brno - Proposed Four Seasons Hotel, Prague Hungary - Proposed Resort Hotel, Babolna - Duna Inter-Continental, Budapest Latvia - Daugava Hotel-Proposed, Riga - Proposed Hotel, Riga Poland - Holiday Inn, Krakow - Marriott Hotel - Proposed, Poznan - Proposed Hotel, Poznan - Radisson Hotel, Szczecin - Bristol Hotel, Warsaw - Holiday Inn, Warsaw - Orbis Joint Venture, Warsaw - Proposed Hotel, Warsaw - Sheraton Hotel - Proposed, Warsaw - Zakopane Resort Complex, Zakopane Russia - Kamiennyi Most Hotel & Business, Moscow - Savoy Hotel, Moscow Asia Korea - Ultrapolis 3000, Seoul Malaysia - UP 3000 Hotel-Proposed, Selangor Singapore - Resort Hotels - Proposed, - Ultrapolis 3000, Singapore West Indies - Proposed Blue Lagoon Resort, St. Martin Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Hospitality Valuation Services Industry Leader Hospitality Valuation Services (HVS) was created in 1980 to satisfy the ever-increasing demand for reliable and well-documented hotel/motel valuations, market studies, and feasibility reports. As the nation's leading real estate appraisal organization devoted exclusively to lodging properties, HVS offers owners, investors, and lenders in-depth valuation and market research expertise. Our professional staff, operating on a worldwide basis with offices in New York, San Francisco, Miami, Boulder, Vancouver, and London, has appraised more than 4,000 hotels and motels in every state and over 32 foreign countries. Each member of Hospitality Valuation Services is well versed in lodging operations. Most have college degrees in hotel administration as well as actual on-the-job hotel experience. Coupled with intense training in real estate appraisal theory and techniques, we are highly qualified to handle the unique characteristics of hostelry valuations. Excellence Through Specialization An important feature of our valuation and feasibility services is specialization. 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Long-Term Relationship Hospitality Valuation Services is in business for the long-term. We are dedicated to providing our clients with the highest quality consulting services. Should you require assistance in any areas covered by our expertise, please contact any member of our team at (516) 248-8828. This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study of: RAEFORD-HOKE VILLAGE 234 Cole Avenue Raeford, Hoke County, North Carolina Prepared By: O. Marshall Dodds, MAI Date of Market Study: April 30, 1997 [LETTERHEAD OF O. MARSHALL DODDS COMPANY, INC.] May 6, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Raeford-Hoke Village 234 Cole Avenue Raeford, Hoke County, North Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on April 30, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 73,530 square feet of leaseable area. The center was constructed in 1982. The anchor tenants are Food Lion and Revco. The subject property is currently 100 percent occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds ---------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) OMD:mm EXECUTIVE SUMMARY ================================================================================ Regional Perspective Raeford is the county seat of Hoke County. The city is located in the eastern section of North Carolina. The county is bound by Moore County and Hartley County on the north; by Cumberland County on the east; by Robeson County on the south; and Scotland County and portions of Moore County on the west. The Fort Bragg Military Base is located to the north of Raeford and Hoke County. I-95 is located to the east of Fayetteville, which is approximately 20 miles east of Raeford. Lumberton is approximately 30 miles to the southeast. Raleigh is located approximately 75 miles north with Wilmington being 115 miles east. The unemployment rate for Hoke County as of 1994 (most recent) was 7.2% and North Carolina had an unemployment rate of 4.2%. The population of Hoke County in 1995 (most recent) was 27,627 and 8.4 percent of the population were over 65 years of age. The average per capita income was $11,921 in 1993 (most recent). Neighborhood and Site The subject neighborhood is located in the western section of Raeford on US Highway #401 Business. The Hoke County High School is located in the subject neighborhood on the south side of Harris Avenue. Country Side Apartments are located across Cole Avenue from the subject property. Other commercial uses include Burger King, Days Inn, McDonald's, Five Star Entertainment (movies), Kentucky Fried Chicken, Hardee's, BP convenience market/self-service gasoline station, Progressive Savings and Loan, ABC Package Store, J's Pizza House, Advance Auto Parts and Subway. Commercial properties are concentrated on the major thoroughfare with residential properties being located off of this thoroughfare. There are a few multi-family properties in the neighborhood. The business district of Raeford is located approximately one and a half miles to the east of the subject property. It is typical of most downtown sections with several municipal buildings. Many of the older buildings have been renovated and are being used as retail stores in the downtown area. Physical features are as follows: 1. Size 9.31 acres or 405,544 square feet 2. Identity 234 Cole Avenue TMS 9424-12-01-119 3. Shape irregular 4. Topography generally level 5. Accessibility good from either direction 6. Utilities municipal Physical Description Building features are as follows: 1. Size (net) 73,530 square feet 2. Layout & Design 1 story-food store, drug store, three shops 3. Parking Spaces 366 4.98 per 1,000 square feet of net area 4. Construction brick and glass front with concrete block on side and rear and metal seamed roof 1 Market Position and Marketability Conclusions The City of Raeford contains two retail centers. In addition to the subject, the Edinborough Center is located on Harris Avenue at Main Street. It was built in 1973 and contains five stores that have an average rental rate of $4.00. There is a Family Dollar store located across the street from this center. No new properties are under construction or planned for this area at this time. Since there are no other centers in Raeford rentals from the surrounding cities were used in this market study. Red Springs is located to the southeast of Raeford. The Red Springs Commons is a new center and the only center in Red Springs. It contains 40,450 square feet and is located at the intersection of Highway #211 and McArthur Street. This is a neighborhood center that contains four stores and first opened in 1996. It currently operates at 100 percent occupancy. The shops are rented at $8.00 per square foot. Fayetteville is approximately 30 miles from subject. Westin Centre is located on the outskirts of Fayetteville towards Raeford just off of US Highway #211 on Cliffdale Road. Food Lion and Revco are the anchor tenants in this center that was built in 1995. It contains 75,000 square feet of space and is currently 100 percent occupied with outlots for lease. Shops are rented at $12.00 per square foot with $1.00 for CAM. Lumberton is approximately 30 miles to the southeast of Raeford and centered around I-95. The Lumber River Village is located in Lumberton and contains 56,500 square feet. It was constructed in 1985 and expanded in 1987. Food Lion and Revco Drugs are the anchor tenants in this center. Occupancy is currently at 100 percent. The rental range is from $5.40 to $7.00 per square foot. The subject property is in the middle of the neighborhood being located on US Highway #401 Business. The location of subject is convenient to the single family dwellings that are located throughout the neighborhood. US Highway #401 is the major traffic artery running through the area. The Hoke County High School is located in the subject neighborhood as well as the Army National Guard. The Raeford-Hoke Village has three stores with rental rates ranging from $3.00 to $6.50 per square foot. These are thought to be reasonable rental rates for the neighborhood because this center is located in more heavily traveled area of Raeford and is newer than the other comparable located in Raeford. The rental rate for the Food Lion is $6.41 per square foot while the rental rate for the Revco Drug Store is $6.38 per square foot. Overage rentals are being received from both of these anchor tenants. The subject property is presently operating at a high occupancy rate. The location of subject is strategic within the neighborhood and convenient to the shoppers throughout the neighborhood. Trends The subject property is located in the western section of Raeford. The neighborhood is continuing to develop and contains several single family dwellings. Commercial developments are located along the major traffic arteries. The demand and desirability for the neighborhood has been good. All trends are favorable at this time and expected to continue. 2 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================ I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Raeford-Hoke Village Edinborough Center Red Springs Commons Westin Centre -------------------- -------------------- -------------------- -------------------- b. Street Harris Avenue at Highway #211 at 234 Cole Avenue Main Street McArthur Street 9535 Cliffdale Road -------------------- -------------------- -------------------- -------------------- c. City Raeford, NC Raeford, NC Red Springs, NC Fayetteville, NC -------------------- -------------------- -------------------- -------------------- d. Distance from subject N/A 2 miles 12 miles 18 miles -------------------- -------------------- -------------------- -------------------- e. Contact Deborah Morrow, Edens Avant, Inc. ARCO Realty Zimmer Development Rob Neill, President -------------------- -------------------- -------------------- -------------------- f. Phone (803) 779-4420 (910)273-3767 (910) 763-4669 (704) 643-9933 -------------------- -------------------- -------------------- -------------------- 2. Attributes a. Year built 1982 1973 1996 1995 -------------------- -------------------- -------------------- -------------------- b. Net sq. Ft. 73,530 52,600 40,450 75,000 -------------------- -------------------- -------------------- -------------------- c. # building 1 1 1 1 -------------------- -------------------- -------------------- -------------------- d. # stories 1 1 1 1 -------------------- -------------------- -------------------- -------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A N/A -------------------- -------------------- -------------------- -------------------- f. # elevators N/A N/A N/A N/A -------------------- -------------------- -------------------- -------------------- g. Parking Adequate Adequate Adequate Adequate -------------------- -------------------- -------------------- -------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block -------------------- -------------------- -------------------- -------------------- I. Vacancy % 0% 0% 0% 0% -------------------- -------------------- -------------------- -------------------- j. Anchors, if Retail Bo's Supermarket, Food Lion, Revco Maxway Food Lion, Revco Food Lion, Revco -------------------- -------------------- -------------------- --------------------
COMPARABLE 4 ------------ 1. Identification a. Name Lumber River Village ----------------------- b. Street US Highway #301 at I-95 ----------------------- c. City Lumberton, NC ----------------------- d. Distance from subject 30 miles ----------------------- e. Contact Ann Coffman, Leasing Agent ----------------------- f. Phone (704) 525-8700 ----------------------- 2. Attributes a. Year built 1985, Expanded 1987 ----------------------- b. Net sq. Ft. 56,500 ----------------------- c. # building 1 ----------------------- d. # stories 1 ----------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A ----------------------- f. # elevators N/A ----------------------- g. Parking Adequate ----------------------- h. Construction Type Brick/Concrete Block ----------------------- I. Vacancy % 0% ----------------------- j. Anchors, if Retail Food Lion, Revco ----------------------- Comments: Comparables #2, #3 and #4 are located outside of subject neighborhood because there are only two centers in Raeford. Comparable #1 is older than subject with expansions having been completed in 1987 to Comparable #4. All of the comparables are experiencing 100 percent occupancy rates at this time. 3 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================ B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A N/A N/A --------------------- ------------------- ------------------- ------------------- b. Shop Space $3.00 - $6.50 $4.00 - $6.00 $8.00 $12.00 --------------------- ------------------- ------------------- ------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net --------------------- ------------------- ------------------- ------------------- 3. Rent Concessions None None None None --------------------- ------------------- ------------------- ------------------- 4. Effective Rent $3.00 - $6.50 $4.00 - $6.00 $8.00 $12.00 --------------------- ------------------- ------------------- ------------------- 5. TI Allowance None None None None --------------------- ------------------- ------------------- ------------------- 6. Expense Stop None None None None --------------------- ------------------- ------------------- ------------------- 7. Length of Lease Term 6 to 10 years (shops) 3 - 5 years (shops) 3 - 5 years (shops) 3 - 5 years (shops) --------------------- ------------------- ------------------- ------------------- 8. Commissions 5.00% - 7.00% 5.00% to 7.00% 5.00% - 7.00% 5.00% to 7.00% --------------------- ------------------- ------------------- ------------------- 9. Percentage Rent Bo's Supermarket, (per lease terms) Food Lion, Revco Maxway Food Lion, Revco Food Lion, Revco --------------------- ------------------- ------------------- ------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A --------------------- ------------------- ------------------- ------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A --------------------- ------------------- ------------------- ------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Inferior Similar Similar --------------------- ------------------- ------------------- -------------------
COMPARABLE 4 ------------ 1. Asking Rental Rate a. Anchor Space N/A ---------------------- b. Shop Space $5.40 - $7.00 ---------------------- 2. Lease Type (Gross/Net) Triple Net ---------------------- 3. Rent Concessions None ---------------------- 4. Effective Rent $5.40 - $7.00 ---------------------- 5. TI Allowance None ---------------------- 6. Expense Stop None ---------------------- 7. Length of Lease Term 3 - 5 years (shops) ---------------------- 8. Commissions 5.00% to 7.00% ---------------------- 9. Percentage Rent (per lease terms) Food Lion, Revco ---------------------- 10. Historical Annual Absorption/sq.ft. N/A ---------------------- 11. Annual Operating Expense psf (Including taxes) N/A ---------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) Similar ---------------------- D. EXPLAIN RANKING/COMMENTS: Subject is located in a more heavily traveled and newer area of Raeford than Comparables #1. Also, Comparable #1 is older than subject therefore it is ranked inferior. Comparable #2 is ranked similar to subject because it is located in a small town such as subject and even though it is a newer center, Comparable #2 is smaller than subject. The rental rates that are being received are slightly higher than those of subject. The other shopping centers have been rated as similar and are thought to be so with subject. Comparables #2, #3 and #4 also have the same anchor tenants as subject. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Edinborough Center Location: Harris Avenue at Main Street Raeford, NC Year Built: 1973 Total Size: 52,600 SF Vacant Space: None Vacancy Rate: 0% Rental Rate Range: $4.00 - $6.00 (estimated - leasing agent declined to reveal rental rates) Tenant Expenses: Triple Net Remarks: Bo's Supermarket and Maxway are the major tenants. Located on Harris Avenue and Main Street in a less desirable area of Raeford. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Red Springs Commons Location: Highway #211 at McArthur Street Red Springs, NC Year Built: 1996 Total Size: 40,540 SF Vacant Space: None Vacancy Rate: 0% Rental Rate Range: $8.00 Tenant Expenses: Triple Net Remarks: Major tenants are Food Lion and Revco. This is the only center in Red Springs and has recently been constructed. It has operated at a high occupancy rate. 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Westin Centre Location: 9535 Cliffdale Road Fayetteville, NC Year Built: 1995 Total Size: 75,000 SF Vacant Space: None Vacancy Rate: 0% Rental Rate Range: $12.00 plus $1.00 per square foot for CAM which includes real estate taxes and hazard insurance. Tenant Expenses: Triple Net Remarks: This center was built in 1995. Food Lion and Revco Drugs are the anchor tenants. This center has operated at a high occupancy level since opening. 7 Comparable Rental No. 4 ================================================================================ [GRAPHIC OMITTED] Name: Lumber River Village Location: US Highway #301 at I-95 Lumberton, NC Year Built: 1985, Expanded 1987 Total Size: 56,500 SF Vacant Space: None Vacancy Rate: 0% Rental Rate Range: $5.40 - $7.00 Tenant Expenses: Triple Net Remarks: This center was expanded in 1987. Food Lion and Revco are the anchor tenants in the center. Lumber River Village is located in close proximity to I-95 which is a heavily traveled interstate running in a north/south direction. 8 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================ II. SALES COMPARABLES
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Raeford-Hoke Village St. Andrews Crossing Eastage Shopping Center One Norman Center -------------------- -------------------- ----------------------- ----------------------- b. Street Address NWC Whiskey Rd. & 19706 One Norman 234 Cole Avenue 817 St. Andrews Road Eastgate Dr. Blvd. -------------------- -------------------- ----------------------- ----------------------- c. City Raeford, NC Columbia, SC Aiken, SC Cornelius, NC -------------------- -------------------- ----------------------- ----------------------- d. Distance from Subject N/A 150 miles 200 miles 120 miles -------------------- -------------------- ----------------------- ----------------------- 2. Attributes a. Year Built 1982 1994 1995 1993 -------------------- -------------------- ----------------------- ----------------------- b. Net sq. feet 73,530 66,910 SF 75,716 SF 54,185 SF -------------------- -------------------- ----------------------- ----------------------- c. # Buildings 1 1 1 1 -------------------- -------------------- ----------------------- ----------------------- d. # of Stories 1 1 1 1 -------------------- -------------------- ----------------------- ----------------------- e. Vacancy % 0% 0% 7.21% 6.98% -------------------- -------------------- ----------------------- ----------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 $4,650,000 -------------------- -------------------- ----------------------- ----------------------- b. Sales Price PSF N/A $97.89 $88.16 $85.82 -------------------- -------------------- ----------------------- ----------------------- c. Cap. Rate N/A 9.69% 9.86% 9.68% -------------------- -------------------- ----------------------- ----------------------- d. Date N/A 05-25-94 09-28-95 10-12-95 -------------------- -------------------- ----------------------- ----------------------- e. NOI at time of Sale N/A $634,797 $782,704 $474,591 -------------------- -------------------- ----------------------- ----------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A Superior Similar Similar -------------------- -------------------- ----------------------- -----------------------
COMPARABLE 4 ------------ 1. Identification a. Name Paw Creek Commons ----------------------- b. Street Address E/S Little Rock Road at Freedom Drive ----------------------- c. City Charlotte, NC ----------------------- d. Distance from Subject 110 miles ----------------------- 2. Attributes a. Year Built 1996 ----------------------- b. Net sq. feet 66,050 SF ----------------------- c. # Buildings 1 ----------------------- d. # of Stories 1 ----------------------- e. Vacancy % 2.73% ----------------------- 3. Sales Information a. Sales Price $5,384,000 ----------------------- b. Sales Price PSF $77.52 ----------------------- c. Cap. Rate 9.61% ----------------------- d. Date 03-25-97 ----------------------- e. NOI at time of Sale $517,412 ----------------------- 4. Rank Relative to Subject (inferior, similar, superior) Superior ----------------------- Explain Ranking/Comments: Comparables #1 and #4 are ranked superior to subject. The reason for this is because of the location of these comparables being superior to subject. Also, these comparables are newer than subject. Comparable # 3 is located in a commercial area that is approximately the same size as subject and is similar. However, Comparable #3 is smaller than subject. 9 COMPARABLE SHOPPING CENTER SALES Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS 6012 -1 -1 NAME St. Andrews Crossing LOCATION St. Andrews Road and I-26, Columbia, SC GRANTOR Hayley-Redd, L.P. GRANTEE F.A.C. Properties DEED REFERENCE Book 1199, Page 331 DATE May 25, 1994 SALES PRICE $6,550,000 ADJUSTED SALES PRICE $6,550,000 SIZE BUILDING 66,910 SALES PRICE PER S.F. $97.89 SIZE LAND (ACRES) 8.08 SIZE LAND (S.F.) 351,965 YEAR BUILT 1994 LAND/BUILDING RATIO 5.26 To 1 UTILITIES All available VERIFICATION Deed ZONING Commercial FINANCING Market EFFECTIVE GROSS INCOME $686,905 EGIM 9.54 NET OPERATING INCOME $634,797 OVERALL RATE 9.69% VERIFICATION Public Records TYPE OF PURCHASER Private Investor COMMENTS This was an arms length sale. This neighborhood shopping center is anchored by Kroger and is located in a good commercial area with good accessibility and fair exposure. The construction is brick veneer and concrete block. (503) 10 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] NAME Eastgate Shopping Center LOCATION Northwest Corner of Whiskey Road and Eastgate Drive, Aiken, SC GRANTOR PDG Aiken Partners, LP GRANTEE Southeast U.S. Retail, LP DATE Sep 28, 1995 SALES PRICE $6,675,000 SIZE BUILDING 75,716 SALES PRICE PER S.F. $88.16 SIZE LAND (ACRES) 8.79 SIZE LAND (S.F.) 382,892 YEAR BUILT 1995 LAND/BUILDING RATIO 5.06 To 1 UTILITIES All available VERIFICATION Public Records ZONING Commercial FINANCING Cash to seller GROSS POTENTIAL INCOME $782,704 EFFECTIVE GROSS INCOME $782,704 GROSS INCOME MULTIPLE 8.53 EGIM 8.53 NET OPERATING INCOME $657,896 OVERALL RATE 9.86% TYPE OF PURCHASER Private Investor COMMENTS Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. (643) 11 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] NAME One Norman Center LOCATION 19706 One Norman Boulevard, Cornelius, Mecklenburg County, NC GRANTOR One Norman Center, LP GRANTEE Lucky Realty DEED REFERENCE Book 8325, Page 721 DATE Oct 12, 1995 SALES PRICE $4,650,000 SIZE BUILDING 54,185 SALES PRICE PER S.F. $85.82 SIZE LAND (ACRES) 5.69 SIZE LAND (S.F.) 247,856 YEAR BUILT 1993 LAND/BUILDING RATIO 4.57 To 1 UTILITIES All Public VERIFICATION Public Records ZONING CUB-2 FINANCING Cash to Seller GROSS POTENTIAL INCOME $474,591 EFFECTIVE GROSS INCOME $474,591 GROSS INCOME MULTIPLE 9.80 EGIM 9.80 NET OPERATING INCOME $450,188 OVERALL RATE 9.68% TYPE OF PURCHASER Private Investor COMMENTS This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot. Triple net lease. (716) 12 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] TMS 59 -231 -22 ,23 pt. NAME Paw Creek Commons LOCATION East side of Little Rock Road at Freedom Drive, Charlotte, NC GRANTOR Paw Creek, LLC GRANTEE Frastacky and Associates DATE Mar 25, 1997 SALES PRICE $5,120,000 ADJUSTED SALES PRICE $5,384,000 SIZE BUILDING 66,050 SALES PRICE PER S.F. $77.52 SIZE LAND (ACRES) 9.82 SIZE LAND (S.F.) 427,759 YEAR BUILT 1996 LAND/BUILDING RATIO 6.48 To 1 UTILITIES Municipal VERIFICATION Public Records ZONING CC, Commercial Center FINANCING Cash to seller GROSS POTENTIAL INCOME $568,840 EFFECTIVE GROSS INCOME $552,054 GROSS INCOME MULTIPLE 9.00 EGIM 9.27 NET OPERATING INCOME $517,412 OVERALL RATE 9.61% TYPE OF PURCHASER Private Investor COMMENTS The overall rate of 10.10 percent has been adjusted down by 50 basis points since the sales contract is pre-construction. The major tenants are Winn Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. Anchor income is 79.41 percent of gross income. (793) 13 ADDENDA o Hoke County Demographics o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 USA COUNTIES 1996 Geographic Area: Hoke, NC (37093) Table: GENERAL PROFILE - -------------------------------------------------------------------------------- POPULATION AND HOUSING (Bureau of the Census) Total resident population: 1995 .......................................................... 27,627 Percent 65 years and over .................................. 8.4 1990 .......................................................... 22,856 1980 .......................................................... 20,383 Occupied housing units, 1990 ..................................... 7,405 Percent owner occupied ......................................... 75.3 BIRTHS AND DEATHS (National Center for Health Statistics) Births, 1993 ..................................................... 413 Per 1,000 resident population .................................. 16.5 Percent to mothers under 20 years of age ....................... 24.2 Deaths, 1993 ..................................................... 190 Per 1,000 resident population .................................. 7.6 Infant deaths per 1,000 live births, 1993 ........................ 14.5 EDUCATION (Bureau of the Census) Persons 25 years and over, 1990 .................................. 13,267 Percent high school graduates .................................. 55.7 Percent college graduates ...................................... 8.4 LABOR FORCE (Bureau of Labor Statistics) Civilian labor force, 1994 ....................................... 9,770 Percent unemployed ............................................. 7.2 PRIVATE NONFARM ESTABLISHMENTS (Bureau of the Census) Total establishments, 1993 ....................................... 271 Percent retail trade ........................................... 33.6 Percent services ............................................... 31.0 Paid employees, 1993 (pay period including March 12) ............. 5,309 Annual payroll, 1993 ($1,000) .................................... 92,106 PERSONAL INCOME (Bureau of Economic Analysis) Total personal income, 1993 ($1,000) ............................. 299,056 Per capita (dollars) ........................................... 11,921 AGRICULTURE (Bureau of the Census) Number of farms, 1992 ............................................ 173 Land in farms as percent of total land ......................... 23 RETAIL TRADE (Bureau of the Census) Retail sales, 1992 ($1,000) ...................................... 60,964 Per capita (dollars) ........................................... 2,541 COMMERCIAL AND SAVINGS BANKS (Fed. Deposit Insurance Corp.) Number of offices, June 30, 1994 ................................. 4 Total deposits ($1,000) ........................................ 69,940 SOCIAL PROGRAMS (Social Security Administration) Total Social Security recipients, December 1993 .................. 3,280 Retired workers ................................................ 1,660 Supplementary Security Income recipients, December 1994 .......... 813 FEDERAL FUNDS AND GRANTS (Bureau of the Census) Total direct expenditures or obligations per capita: 1994 (dollars) ................................................. 2,336 1990 (dollars) ................................................. 1,873 - -------------------------------------------------------------------------------- (NA) Not available. (D) Avoid disclosure of confidential information. (X) Not applicable. (S) Does not meet publication standards. (Z) Value > 0 but < half unit of measure shown. NOTE: 0 data may indicate geographic/data footnotes. Source: U.S. Bureau of the Census, USA Counties 1996 CD-ROM. [GRAPHIC OMITTED] Comparable Rentals Map [GRAPHIC OMITTED] Comparable Sales Map [GRAPHIC OMITTED] Building Sketch Date: 04/08/97 Page 142 EDENS & AVANT, INC. Retai1 Custom Rent Roll Property: RAEFORD-HOKE VILLAGE 234 COLE AVENUE RAEFORD, NC 28376-0000 Column Legends: Tenant/Property MISC column: K - Kiosk P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------- B.C. MOORE & SONS INC. MOORE'S 678- 10 20,800 10/13/94 10/31/04 3.00 11/01/94 62,400.00 - -------------------------------------------------------------------------------------------------------------------- FOOD LION #127 678- 20 31,880 08/01/95 07/31/15 2.77 02/01/83 88,269.96 3.50 02/10/94 111,669.96 6.41 08/01/95 204,369.96 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------- REVCO #4313 REVCO DISCOUNT DRUG CENTERS I 678- 30 8,450 12/01/82 11/30/02 0.00 0.00 5.50 01/01/83 46,474.92 6.38 04/01/95 53,886.24 - -------------------------------------------------------------------------------------------------------------------- SUPER 10 STORE #195 VARIETY WHOLESALERS, INC. 678- 40 6,000 05/01/94 04/30/00 3.00 05/01/91 18,000.00 0.00 0.00 4.25 05/01/94 25,500.00 4.68 05/01/97 28,080.00 - -------------------------------------------------------------------------------------------------------------------- CATO CORPORATION #210 CATO 678- 60 6,400 08/01/94 01/31/00 3.34 11/01/90 21,396.00 0.00 0.00 6.50 12/01/94 41,600.04 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied. ..... 73,530 Current Annual Base Rent 387,756.24 Available ..... 0 Total ......... 73,530 - ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Beqin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- B.C. MOORE & SONS INC. None 0 None 0 None 0 11/01/04 10/31/09 3.30 2.00 2,000,000 MOORE'S - ----------------------------------------------------------------------------------------------------------------------------------- FOOD LION #127 PRS 1983 None 0 Full 0 08/01/15 07/31/20 6.55 1.00 20,437,000 08/01/20 07/31/25 6.68 1.00 7,735,000 08/01/25 07/31/30 6.82 1.00 0 08/01/30 07/31/35 6.96 1.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- REVCO #4313 REVCO DISCOUNT DRUG CENTERS I PRS 1983 PRS 1988 Full 0 12/01/97 11/30/02 6.37 2.00 1,267,500 12/01/02 11/30/07 6.88 2.00 0 12/01/07 11/30/12 7.32 2.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- SUPER 10 STORE #195 VARIETY WHOLESALERS, INC. PRS 1987 PRS 1987 Full 0 05/01/97 04/30/00 4.68 2.50 960,000 0.00 2.50 0 Y 0.00 2.50 1,020,000 Y 0.00 2.50 1,123,200 Y - ----------------------------------------------------------------------------------------------------------------------------------- CATO CORPORATION #210 Full 0 Full 0 Full 0 02/01/00 01/31/05 7.00 5.00 1,040,000 CATO 02/01/05 01/31/10 7.50 4.00 0 Y 02/01/10 01/31/15 8.00 4.00 1,040,000 Y 0.00 4.00 0 Y
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] [US Highway #401 Business - Facing North] [GRAPHIC OMITTED] [US Highway #401 Business - Facing South] [GRAPHIC OMITTED] [Cole Avenue - Facing West] [GRAPHIC OMITTED] [Cole Avenue - Facing Subject] [GRAPHIC OMITTED] [Cole Avenue - In Front of Subject - Facing East] [GRAPHIC OMITTED] [Subject - Front View] [GRAPHIC OMITTED] [Subject - Side View] [GRAPHIC OMITTED] [Subject - Rear View] [GRAPHIC OMITTED] [Subject - Rear View] This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. Market Study of: EDGECOMBE SQUARE SHOPPING CENTER 1102-1110 Western Boulevard Tarboro, Edgecombe County, North Carolina Prepared By: O. Marshall Dodds, MAI Date of Market Study: April 28, 1997 [LETTERHEAD OF O. MARSHALL DODDS COMPANY, INC.] May 5, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Edgecombe Square Shopping Center 1102-1110 Western Boulevard Tarboro, Edgecombe County, North Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on April 28, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 85,740 square feet of leaseable area. The center was constructed in 1990 and the anchor tenants are Food Lion and Revco. Roses vacated a 50,040 square foot store and Food Lion is negotiating with the owners to expand into the former Roses space as of the date of this market study. The subject property is currently 41.64 percent occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds ---------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) OMD:mm EXECUTIVE SUMMARY ================================================================================ Regional Perspective Tarboro is the county seat of Edgecombe County. Being situated on the Tar River, the city is at the intersection of US Highway #64 and #258 in eastern North Carolina. From Tarboro, the capital city of Raleigh is approximately 65 miles southwest and Charlotte is approximately 240 miles to the southwest. The unemployment rate for Edgecombe County as of 1994 (most recent) was 6.8% and North Carolina had an unemployment rate of 4.0%. The population of Edgecombe County in 1995 was 56,371 and 12.8 percent of the population was over 65 years of age. The average per capita income was $15,432 in 1993 (most recent). Industry and agricultural play an important role in the Edgecombe County economy. Retail sales in the county totaled $366 million in 1995. Also, 56 percent of the land in the county is attributed to farming. Neighborhood and Site The subject neighborhood is located in the Town of Tarboro near the intersection of Western Boulevard and Howard Avenue. The Tarboro High School is located at this intersection. Westgate Nursing Home is located across Western Boulevard from the subject property. The Parkhill Mall is also located in the neighborhood. Other commercial uses include Kentucky Fried Chicken, Golden Corral, Advance Auto Parts, Beverly Health Care Center (in the rear of subject), Burger King, and an Amoco convenience market/self-service gasoline station. Commercial properties are concentrated around the intersection of Western Boulevard and Howard Avenue with residential properties being located off of these thoroughfares. Subdivisions in the area include Edgecombe Hills, Barrington Woods, Clifton Ridge, Woodgreen, Speight Forest, Sunset Estates, Fairview and others. Multi-family projects include Deerridge Apartments, Edgewood Place, Georgetown Apartments, Hendrix Park and others. The Sprint Communications Facility is also located in the neighborhood along Western Boulevard approximately 1/2 a block from the subject property. Several medical facilities are concentrated around the intersection of Hospital Drive and North Main Street. Also, a BB&T branch bank is currently under construction as of the date of this market study. The Edgecombe Community College is located on Wilson Street to the west of subject property. The business district of Tarboro is located approximately two miles to the east of the subject property. It is typical of most downtown sections with several municipal buildings. Many of the older buildings have been renovated and are being used as retail stores and restaurants in the downtown area. The Albemarle Retirement Center is also located in downtown Tarboro at the intersection of Trade Street and Grandville Street. Physical features are as follows: 1. Size 9.62 acres or 419,047 square feet 2. Identity 1102-1110 Western Boulevard TMS 4728-64-6676-00 3. Shape irregular 4. Topography generally level 5. Accessibility good from either direction 6. Utilities municipal 1 Physical Description Building features are as follows: 1. Size (net) 85,740 square feet 2. Layout & Design 1 story-food store, drug store, two shops 3. Parking Spaces 506 5.90 per 1,000 square feet of net area 4. Construction brick and glass front with concrete block on side and rear and metal seamed roof Market Position and Marketability Conclusions The Tarboro area contains four retail structures. Parkhill Mall measures 213,000 square feet and is located at the intersection of Western Boulevard and Howard Avenue which is one block north of subject. Renovations to the front of the building are being made as of the date of this market study. Pic-N-Pay recently relocated from a small store to a larger store in this center. Also, the Fairview Shopping Center is located on North Main Street and it contains 60,000 square feet with one vacant store. The Tarboro Shopping Center is located on St. Andrews Street and contains approximately 120,000 square feet. Food Lion is expected to expand its store in this center to 32,000 square feet by the spring of 1997. No new properties are under construction or planned for this area at this time. The subject property is in the middle of the neighborhood being around the intersection of Western Boulevard and Howard Avenue. The location of subject is convenient to the single family and multi-family dwellings that are located throughout the neighborhood. Western Boulevard and Howard Avenue are the major traffic arteries running through the area. The Parkhill Mall is located approximately 1/2 a block from subject. This center has Belk and K-Mart as the major tenant and the rental rate for the shops ranges from $3.00 to $7.00 per square foot. The anchor tenant in the Fairview Shopping Center is Piggly Wiggly. The rental rate for the shops ranges from $2.00 to $7.00 per square foot. The major tenants in the Tarboro Shopping Center are Food Lion and Eckerd Drug Stores. The rental rate for the shops ranges from approximately $2.00 to $7.00 per square foot. The subject property has two shops with rental rates of $8.00 and $9.66 per square foot. These are thought to be reasonable rental rates for the neighborhood because this is a newer center and it is located in a more desirable area of Tarboro. The rental rate for the Food Lion is $6.00 per square foot while the rental rate for the Revco Drug Store is $8.00 per square foot. Overage rentals are being received from both of these anchor tenants. The subject property is presently operating at a low occupancy rate since the Roses store was vacated. However, it is thought that Food Lion will negotiate a new contract to expand into the former Roses space. The location of subject is strategic within the neighborhood and convenient to the shoppers throughout the neighborhood. Trends The subject property is located in the eastern section of Tarboro. The neighborhood is continuing to develop and contains several single family and multi-family dwellings. Commercial developments are located along the major traffic arteries. The Tarboro High School and Edgecombe Community College are located in the neighborhood. The demand and desirability for the neighborhood has been good. All trends are favorable at this time and expected to continue. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Edgecombe Square Parkhill Mall Fairview SHC Tarboro SHC ---------------------- ------------------------ ------------------------- ---------------------- b. Street 1102-1110 Western St. Andrews St. & Boulevard Western Boulevard North Main Street Hope Lodge ---------------------- ------------------------ ------------------------- ---------------------- c. City Tarboro, NC Tarboro, NC Tarboro, NC Tarboro, NC ---------------------- ------------------------ ------------------------- ---------------------- d. Distance from subject N/A 1 block 2 miles 2 1/2miles --------------------- ----------------------- ------------------------ ---------------------- e. Contact Edens Avant, Inc. Jim Bullock, Owner R.M. Fountain, Jr. Tammie Leggett ---------------------- ------------------------ ------------------------- ---------------------- f. Phone (803) 779-4420 (919) 823-6231 (919) 823-2138 ---------------------- ------------------------ ------------------------- ---------------------- 2. Attributes a. Year built 1967, Expanded & Renovated 1989, 1990 1971, Renovated 1989 1945 Currently Expanding ---------------------- ------------------------ ------------------------- ---------------------- b. Net sq. Ft. 85,740 213,000 60,000 120,000 ---------------------- ------------------------ ------------------------- ---------------------- c. # building 2 2, Enclosed (T-Shaped) 1 1 ---------------------- ------------------------ ------------------------- ---------------------- d. # stories 1 1 1 1 ---------------------- ------------------------ ------------------------- ---------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A N/A ---------------------- ------------------------ ------------------------- ---------------------- f. # elevators N/A N/A N/A N/A ---------------------- ------------------------ ------------------------- ---------------------- g. Parking Adequate Adequate Adequate Adequate ---------------------- ------------------------ ------------------------- ---------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ---------------------- ------------------------ ------------------------- ---------------------- I. Vacancy % 58.36% 10% 2.5% 36% ---------------------- ------------------------ ------------------------- ---------------------- j. Anchors, if Retail Food Lion, Revco Belk, K-Mart Piggly Wiggly, Auto Zone Food Lion, Eckerd ---------------------- ------------------------ ------------------------- ----------------------
Comments: These comparable rentals are located close to subject neighborhood and are the only shopping centers in Tarboro. All of these centers are relatively old with renovations having been completed in 1989 to Comparable #1 and Comparable #3 and current expansions under way to Comparable #3. Comparable #3 is experiencing a low occupancy rate at this time. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A N/A N/A ---------------- ------------------ ------------------- ------------------ b. Shop Space $8.00 - $9.66 $3.00 - $7.00 $2.00 - $7.00 $2.00 - $7.00 ---------------- ------------------ ------------------- ------------------ 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net ---------------- ------------------ ------------------- ------------------ 3. Rent Concessions None None None None ---------------- ------------------ ------------------- ------------------ 4. Effective Rent $8.00 - $9.66 $3.00 - $7.00 $2.00 - $7.00 $2.00 - $7.00 ---------------- ------------------ ------------------- ------------------ 5. TI Allowance None None None None ---------------- ------------------ ------------------- ------------------ 6. Expense Stop None None None None ---------------- ------------------ ------------------- ------------------ 7. Length of Lease Term 3 years (shop) 3 - 5 years (shop) 3 - 5 years (shop) 3 - 5 years (shop) ---------------- ------------------ ------------------- ------------------ 8. Commissions 5.00% - 7.00% 5.00% to 7.00% 5.00% - 7.00% 5.00% to 7.00% ---------------- ------------------ ------------------- ------------------ 9. Percentage Rent (per lease terms) Food Lion, Revco Belk, K-Mart Piggly Wiggly, Auto Food Lion, Eckerd Zone ---------------- ------------------ ------------------- ------------------ 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A ---------------- ------------------ ------------------- ------------------ 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A ---------------- ------------------ ------------------- ------------------ C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Superior Inferior Inferior ---------------- ------------------ ------------------- ------------------
D. EXPLAIN RANKING/COMMENTS: Subject is the newest shopping center for the market. Comparable #1 is a significantly larger center and is an enclosed center with Belk as a major tenant that is significant with respect to customer attraction. The rental rates that are being received are slightly higher than those of subject. The other shopping centers have been rated as inferior and are thought to be so with subject because of age and condition. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Parkhill Mall Location: Western Boulevard Tarboro, NC Year Built: 1971, Renovated in 1989 Total Size: 213,000 SF Vacant Space: 21,300 SF Vacancy Rate: 10% Rental Range: $3.00 - $7.00 Tenant Expenses: Triple Net Remarks: Belk and K-Mart are the major tenants. Located on Western Boulevard and Howard Avenue. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Fairview Shopping Center Location: North Main Street Tarboro, NC Year Built: 1945 Total Size: 60,000 SF Vacant Space: 1,500 SF Vacancy Rate: 2.5% Rental Range: $2.00 - $7.00 Tenant Expenses: Triple Net Remarks: Major tenants are Piggly Wiggly and Auto Zone. This is an older center but has operated at a relatively high occupancy rate for the market. 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Tarboro Shopping Center Location: St. Andrews Street and Hope Lodge Tarboro, NC Year Built: 1967, Expanded and Renovated in 1989, Currently under expansion Total Size: 120,000 SF Vacant Space: 43,200 SF Vacancy Rate: 36% Rental Range: $2.00 - $7.00 Tenant Expenses: Triple Net Remarks: This center was expanded in 1989 and Food Lion is in the process of expanding their store to 32,000 square feet. A Pizza Inn restaurant occupies an outlot. 7 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Edgecombe Square St. Andrews Crossing Eastage Shopping Center One Norman Center ----------------- -------------------- ----------------------- ----------------- b. Street Address 1102-1110 Western NWC Whiskey Rd. & 19706 One Norman Boulevard 817 St. Andrews Road Eastgate Dr. Blvd. ----------------- -------------------- ----------------------- ----------------- c. City Tarboro, NC Columbia, SC Aiken, SC Cornelius, NC ----------------- -------------------- ----------------------- ----------------- d. Distance from Subject N/A 280 miles 330 miles 220 miles ----------------- -------------------- ----------------------- ----------------- 2. Attributes a. Year Built 1990 1994 1995 1993 ----------------- -------------------- ----------------------- ----------------- b. Net sq. feet 85,740 66,910 SF 75,716 SF 54,185 SF ----------------- -------------------- ----------------------- ----------------- c. # Buildings 2 1 1 1 ----------------- -------------------- ----------------------- ----------------- d. # of Stories 1 1 1 1 ----------------- -------------------- ----------------------- ----------------- e. Vacancy % 58.36% 0% 7.21% 6.98% ----------------- -------------------- ----------------------- ----------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 $4,650,000 ----------------- -------------------- ----------------------- ----------------- b. Sales Price PSF N/A $97.89 $88.16 $85.82 ----------------- -------------------- ----------------------- ----------------- c. Cap. Rate N/A 9.69% 9.86% 9.68% ----------------- -------------------- ----------------------- ----------------- d. Date N/A 05-25-94 09-28-95 10-12-95 ----------------- -------------------- ----------------------- ----------------- e. NOI at time of Sale N/A $634,797 $782,704 $474,591 ----------------- -------------------- ----------------------- ----------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A superior superior similar ----------------- -------------------- ----------------------- -----------------
COMPARABLE 4 ------------ 1. Identification a. Name Paw Creek Commons ----------------------- b. Street Address E/S Little Rock Road at Freedom Drive ----------------------- c. City Charlotte, NC ----------------------- d. Distance from Subject 220 miles ----------------------- 2. Attributes a. Year Built 1996 ----------------------- b. Net sq. feet 66,050 SF ----------------------- c. # Buildings 1 ----------------------- d. # of Stories 1 ----------------------- e. Vacancy % 2.73% ----------------------- 3. Sales Information a. Sales Price $5,120,000 ----------------------- b. Sales Price PSF $77.52 ----------------------- c. Cap. Rate 9.60% ----------------------- d. Date 03-25-97 ----------------------- e. NOI at time of Sale $517,412 ----------------------- 4. Rank Relative to Subject (inferior, similar, superior) superior ----------------------- Explain Ranking/Comments: Comparables #1, #2 and #4 are ranked superior to subject. The reason for this is because of the location of these comparables being superior to subject. Also, Comparables #1, #2 and #4 are newer than subject. Comparable # 3 is located in a commercial area that is larger than subject, but it is similar. Also, Comparable #3 is smaller than subject. 8 COMPARABLE SHOPPING CENTER SALES Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS 6012 -1 -1 NAME St. Andrews Crossing LOCATION St. Andrews Road and I-26, Columbia, SC GRANTOR Hayley-Redd, L.P. GRANTEE F.A.C. Properties DEED REFERENCE Book 1199, Page 331 DATE May 25, 1994 SALES PRICE $6,550,000 ADJUSTED SALES PRICE $6,550,000 SIZE BUILDING 66,910 SALES PRICE PER S.F. $97.89 SIZE LAND (ACRES) 8.08 SIZE LAND (S.F.) 351,965 YEAR BUILT 1994 LAND/BUILDING RATIO 5.26 To 1 UTILITIES All available VERIFICATION Deed ZONING Commercial FINANCING Market EFFECTIVE GROSS INCOME $686,905 EGIM 9.54 NET OPERATING INCOME $634,797 OVERALL RATE 9.69% VERIFICATION Public Records TYPE OF PURCHASER Private Investor COMMENTS This was an arms length sale. This neighborhood shopping center is anchored by Kroger and is located in a good commercial area with good accessibility and fair exposure. The construction is brick veneer and concrete block. (503) 9 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] NAME Eastgate Shopping Center LOCATION Northwest Corner of Whiskey Road and Eastgate Drive, Aiken, SC GRANTOR PDG Aiken Partners, LP GRANTEE Southeast U.S. Retail, LP DATE Sep 28, 1995 SALES PRICE $6,675,000 SIZE BUILDING 75,716 SALES PRICE PER S.F. $88.16 SIZE LAND (ACRES) 8.79 SIZE LAND (S.F.) 382,892 YEAR BUILT 1995 LAND/BUILDING RATIO 5.06 To 1 UTILITIES All available VERIFICATION Public Records ZONING Commercial FINANCING Cash to seller GROSS POTENTIAL INCOME $782,704 EFFECTIVE GROSS INCOME $782,704 GROSS INCOME MULTIPLE 8.53 EGIM 8.53 NET OPERATING INCOME $657,896 OVERALL RATE 9.86% TYPE OF PURCHASER Private Investor COMMENTS Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. (643) 10 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] NAME One Norman Center LOCATION 19706 One Norman Boulevard, Cornelius, Mecklenburg County, NC GRANTOR One Norman Center, LP GRANTEE Lucky Realty DEED REFERENCE Book 8325, Page 721 DATE Oct 12, 1995 SALES PRICE $4,650,000 SIZE BUILDING 54,185 SALES PRICE PER S.F. $85.82 SIZE LAND (ACRES) 5.69 SIZE LAND (S.F.) 247,856 YEAR BUILT 1993 LAND/BUILDING RATIO 4.57 To 1 UTILITIES All Public VERIFICATION Public Records ZONING CUB-2 FINANCING Cash to Seller GROSS POTENTIAL INCOME $474,591 EFFECTIVE GROSS INCOME $474,591 GROSS INCOME MULTIPLE 9.80 EGIM 9.80 NET OPERATING INCOME $450,188 OVERALL RATE 9.68% TYPE OF PURCHASER Private Investor COMMENTS This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot. Triple net lease. (716) 11 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] TMS 59 -231 -22 ,23 pt. NAME Paw Creek Commons LOCATION East side of Little Rock Road at Freedom Drive, Charlotte, NC GRANTOR Paw Creek, LLC GRANTEE Frastacky and Associates DATE Mar 25, 1997 SALES PRICE $5,120,000 ADJUSTED SALES PRICE $5,120,000 SIZE BUILDING 66,050 SALES PRICE PER S.F. $77.52 SIZE LAND (ACRES) 9.82 SIZE LAND (S.F.) 427,759 YEAR BUILT 1996 LAND/BUILDING RATIO 6.48 To 1 UTILITIES Municipal VERIFICATION Public Records ZONING CC, Commercial Center FINANCING Cash to seller GROSS POTENTIAL INCOME $568,840 EFFECTIVE GROSS INCOME $552,054 GROSS INCOME MULTIPLE 9.00 EGIM 9.27 NET OPERATING INCOME $517,412 OVERALL RATE 9.60% TYPE OF PURCHASER Private Investor COMMENTS The overall rate of 10.10 percent has been adjusted down by 50 basis points since the sales contract is pre-construction. The major tenants are Winn Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. Anchor income is 79.41 percent of gross income. (793) 12 ADDENDA o Edgecombe County Demographics o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 13 [SEAL] DEMOGRAPHICS
Nash Edgecombe County Edgecombe County Per Per County Nash County Edgecombe Nash County City Capita Capita Unemployment Unemployment County Retail Retail Sales Year Population Income Income Rate Rate Sales 1986 47,214 $10,448 $12,758 6.8% 5.7% $308,845,000 $ 731,875, 1987 49,171 11,146 13,455 6.4% 5.6% 318,754,000 753,992, 1988 49,551 11,827 14,819 4.9% 4.5% 336,217,000 806,760, 1989 50,346 12,430 15,529 4.5% 4.2% 363,164,000 891,903, 1990 49,438 13,095 16,565 5.1% 4.2% 345,005,000 891,124, 1991 49,952 13,888 16,969 7.4% 6.3% 397,366,000 866,500, 1992 50,734 14,673 17,445 8.0% 7.0% 395,337,000 900,485, 1993 51,266 15,432 18,074 6.7% 5.9% 361,391,000 960,878, 1994 53,808 n/a n/a 6.8% 5.0% 330,362,000 1,036,442 1995 54,800 n/a n/a n/a n/a 366,846,000 1,140,571
|_| Source: Provided by North Carolina Office of Planning & State Data Center |_| n/a - not available USA COUNTIES 1996 Geographic Area: Edgecombe, NC (37065) Table: GENERAL PROFILE POPULATION AND HOUSING (Bureau of the Census) Total resident population: 1995 ................................................................. 56,371 Percent 65 years and over ........................................ 12.8 1990 ................................................................. 56,692 1980 ................................................................. 55,988 Occupied housing units, 1990 ......................................... 20,319 Percent owner occupied ............................................. 61.8 BIRTHS AND DEATHS (National Center for Health Statistics) Births, 1993 ......................................................... 936 Per 1,000 resident population ...................................... 16.7 Percent to mothers under 20 years of age ........................... 21.0 Deaths, 1993 ......................................................... 655 Per 1,000 resident population ...................................... 11.7 Infant deaths per 1,000 live births, 1993 ............................ 21.4 EDUCATION (Bureau of the Census) Persons 25 years and over, 1990 ...................................... 35,259 Percent high school graduates ...................................... 58.5 Percent college graduates .......................................... 8.1 LABOR FORCE (Bureau of Labor Statistics) Civilian labor force, 1994 ........................................... 27,562 Percent unemployed ................................................. 6.8 PRIVATE NONFARM ESTABLISHMENTS (Bureau of the Census) Total establishments, 1993 ........................................... 999 Percent retail trade ............................................... 27.0 Percent services ................................................... 32.8 Paid employees, 1993 (pay period including March 12) ................. 21,902 Annual payroll, 1993 ($1,000) ........................................ 479,735 PERSONAL INCOME (Bureau of Economic Analysis) Total personal income, 1993 ($1,000) ................................. 865,189 Per capita (dollars) ............................................... 15,432 AGRICULTURE (Bureau of the Census) Number of farms, 1992 ................................................ 376 Land in farms as percent of total land ............................. 56 RETAIL TRADE (Bureau of the Census) Retail sales, 1992 ($1,000) .......................................... 237,421 Per capita (dollars) ............................................... 4,221 COMMERCIAL AND SAVINGS BANKS (Fed. Deposit Insurance Corp.) Number of offices, June 30, 1994 ..................................... 14 Total deposits ($1,000) ............................................ 228,420 SOCIAL PROGRAMS (Social Security Administration) Total Social Security recipients, December 1993 ...................... 11,125 Retired workers .................................................... 5,945 Supplementary Security Income recipients, December 1994 .............. 3,041 FEDERAL FUNDS AND GRANTS (Bureau of the Census) Total direct expenditures or obligations per capita: 1994 (dollars) ..................................................... 4,089 1990 (dollars) ..................................................... 2,526 (NA) Not available. (D) Avoid disclosure of confidential information. (X) Not applicable. (S) Does not meet publication standards. (Z) Value > 0 but < half unit of measure shown. NOTE: 0 data may indicate geographic/data footnotes. Source: U.S. Bureau of the Census, USA Counties 1996 CD-ROM. [GRAPHIC OMITTED] [Comparable Rental Map] [GRAPHIC OMITTED] [Comparable Sales Map] [GRAPHIC OMITTED] [Building Sketch] Date: 04/08/97 Page 109 EDENS & AVANT, INC Retail (Custom Rent Roll) Property: EDGECOMBE SQUARE 1102-1110 WESTERN BOULEVARD TARBORO, NC 27886-0000 Column Legends: Tenant/Property MISC column: K - Kiosk P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- --------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - --------------------------------------------------------------------------------------------------------------------- FOOD LION #0838 FOOD LION INC 645- 10 25,000 11/03/90 11/02/15 0.00 0.00 6.00 01/01/91 150,000.00 0.00 0.00 0.00 0.00 - --------------------------------------------------------------------------------------------------------------------- REVCO #2581 REVCO DISCOUNT DRUG CENTER, I 645- 20 8,450 11/03/90 11/30/00 7.85 01/01/91 66,332.40 8.00 12/01/93 67,599.96 0.00 0.00 0.00 0.00 0.00 0.00 - --------------------------------------------------------------------------------------------------------------------- LITTLE CAESAR'S PIZZA ASMG INC. 645- 30 1,250 07/01/95 06/30/98 9.75 01/01/91 12,187.56 8.00 07/01/95 9,999.96 - --------------------------------------------------------------------------------------------------------------------- SUBWAY REAL ESTATE CORP. SUBWAY REAL ESTATE CORP. 645- 40 1,000 04/01/96 03/31/99 0.00 0.00 9.66 06/01/91 9,660.00 Available 645- 50 50,040 0.00 0.00 - --------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied ...... 35,700 Current Annual Base Rent 237,259.92 Available ..... 50,040 Total ......... 85,740 - --------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - --------------------------------------------------------------------------------------------------------------------------------- FOOD LION $0838 FOOD LION INC Full 0 PRS 1991 Fixed 0 11/03/15 11/02/20 6.00 1.00 0 Y 11/03/20 11/02/20 6.00 1.00 15,000,000 Y 11/03/25 11/02/30 6.00 1.00 0 Y 11/03/30 11/02/35 6.00 1.00 0 Y - --------------------------------------------------------------------------------------------------------------------------------- REVCO #2581 REVCO DISCOUNT DRUG CENTER, I Full 0 PRS 1991 Full 0 12/01/00 11/30/05 8.00 2.00 2,211,083 12/01/05 11/30/10 8.00 2.00 2,253,333 12/01/10 11/30/15 8.00 2.00 0 12/01/15 11/30/20 8.00 2.00 0 12/01/20 11/30/25 8.00 2.00 0 - --------------------------------------------------------------------------------------------------------------------------------- LITTLE CAESAR'S PIZZA ASMG INC. Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - --------------------------------------------------------------------------------------------------------------------------------- SUBWAY REAL ESTATE CORP. SUBWAY REAL ESTATE CORP. Full 0 Full 0 Full 0 04/01/96 03/31/01 0.00 0.00 0 0.00 0.00 0 Available 0 0 0 0.00 0.00 0 - ---------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Western Boulevard - Facing Northwest [GRAPHIC OMITTED] Western Boulevard - Facing Southeast [GRAPHIC OMITTED] Hunterhill Road - Facing Southeast [GRAPHIC OMITTED] Hunterhill Road - Facing Northwest [GRAPHIC OMITTED] Access Road adjacent to Subject - Facing Western Boulevard [GRAPHIC OMITTED] Access Road adjacent to Subject - Facing Subject and Beverly Health Care Center [GRAPHIC OMITTED] Front View of Subject Property [GRAPHIC OMITTED] Front View of Subject - Former Roses Store [GRAPHIC OMITTED] Side View of Subject [GRAPHIC OMITTED] Rear View of Subject This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. Market Study of: NORTHSIDE PLAZA SHOPPING CENTER 1600 North Garnett Street Henderson, Vance County, North Carolina Prepared By: O. Marshall Dodds, MAI Date of Market Study: April 28, 1997 [LOGO] [LETTERHEAD OF O. MARSHALL DODDS COMPANY, INC.] May 5, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Northside Plaza Shopping Center 1600 North Garnett Street Henderson, Vance County, North Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on April 28, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 66,090 square feet of leaseable area. The center was constructed in 1981 and remodeled in 1995. The anchor tenants are Food Lion and Revco. The subject property is currently 92.79 percent occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds ---------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) OMD:mm EXECUTIVE SUMMARY ================================================================================ Regional Perspective Henderson is the county seat of Vance County. The city is at the intersection of two major railroads in northeastern North Carolina. From Henderson, the capital city of Raleigh is approximately 45 miles southwest and Durham is approximately 40 miles to the southwest. The unemployment rate for Vance County as of 1996 was 8.1% and North Carolina had an unemployment rate of 4.2%. The population of Vance County in 1995 (most recent) was 40,720 and 12.7 percent of the population were over 65 years of age. The average per capita income was $15,726 in 1993 (most recent). Industry and agricultural play an important role in the Vance County economy. Retail sales in the county totaled $418 million for fiscal year 1995-96. Also, 42 percent of the land in the county is attributed to farming. Neighborhood and Site The subject neighborhood is located in Henderson near the intersection of US Highway #1 Business and Garnett Street. The Henderson Institute Historical Museum is located in the subject neighborhood. Kings Plaza (Roses) is located across Garnett Street from the subject property. Other commercial uses include Burger King, Scottish Inn, Howard Johnson, Quality Inn, Budget Host Inn, PD Quix (Drive-thru), Winoco convenience market/self-service gasoline station, NationsBank, and Michael's Barber Shop. Commercial properties are concentrated on the major thoroughfares with residential properties being located off of these thoroughfares. There are also multi-family properties in the neighborhood. The business district of Henderson is located approximately two miles to the southwest of the subject property. It is typical of most downtown sections with several municipal buildings. Many of the older buildings have been renovated and are being used as retail stores in the downtown area. Physical features are as follows: 1. Size 7.61 acres or 331,492 square feet 2. Identity 1600 North Garnett Street TMS 44-06-01 3. Shape irregular 4. Topography generally level 5. Accessibility good from either direction 6. Utilities municipal Physical Description Building features are as follows: 1. Size (net) 66,090 square feet 2. Layout & Design 1 story-food store, drug store, eight shops 3. Parking Spaces 350 5.30 per 1,000 square feet of net area 4. Construction brick and glass front with concrete block on side and rear and metal seamed roof 1 Market Position and Marketability Conclusions The Henderson area contains approximately 11 retail structures. Henderson Mall measures 220,000 square feet and is located at 1200 Dabney Drive. It was built in 1969, expanded in 1984 and renovated in 1990. This is an enclosed mall with approximately 30 stores that has an average rental rate of $8.00 - $10.00. Also, the Henderson Square is a large center in Henderson. It contains 343,257 square feet is located at the intersection of Run Creek Road, Dabney Drive and I-85. This is a regional center that is L-shaped with 14 stores that first opened in 1995 and currently operates at 100 occupancy. A new center, Dabney West Shopping Center, was recently constructed at the intersection of I-85 and Dabney Drive across from Henderson Marketplace. Winn Dixie is the anchor tenant with Bojangles and Denny's occupying outlots. In addition to the previously presented larger malls, this study focuses on the following centers that are closer in size to the subject. The Dabney Drive Shopping Center is located on US #1 Business at Dabney Drive and contains approximately 41,600 square feet. Food Lion and Revco are the major tenants in this center which currently has no space available. The Henderson Marketplace is located on Dabney Drive at Beckford Drive. Byrd's Supermarket and Revco are the anchor tenants in this center with a 98 percent occupancy rate. It was constructed in 1991 and expanded in 1994. Also, Vance Square is located in Henderson and contains 38,000 square feet. It was constructed in 1973 and renovated in 1985. This center appears to have suffered some occupancy problems recently. Winn Dixie and Revco Drugs vacated their stores. There is presently 22,700 square feet available in the larger shop and 7,000 square feet available in the smaller one. Golden Corral also closed its restaurant on an outlot. Kings Plaza is located on Norlina Road (or Garnett Street). It contains 86,000 square feet and was constructed in 1970. It was also expanded in 1986. Roses and Home Bazaar are the only tenants currently occupying stores in this center. According to the customer service representative at the Roses store, A&P vacated their store less than a year ago. No new properties are under construction or planned for this area at this time. The subject property is in the middle of the neighborhood being around the intersection of US Highway #1 Business and Garnett Street. The location of subject is convenient to the single family and multi-family dwellings that are located throughout the neighborhood. US Highway #1 and Garnett Street are the major traffic arteries running through the area. The Kings Plaza is located across Garnett Street from subject. This center has Roses as the major tenant and the rental rate for the shops is $5.00 per square foot. The anchor tenant in the Vance Square is Carolina Carpet. The average rental rate for the shops is $4.00 per square foot. The major tenants in the Dabney Drive Shopping Center are Food Lion and Revco Drug Stores. The rental rate for the shops ranges from approximately $5.00 to $8.00 per square foot. The anchor tenants in the Henderson Marketplace are Byrd's and Revco Drug Stores. The rental rate for the shops in this center ranges from $6.00 - $10.00. The subject property has eight shops with rental rates ranging from $3.75 and $7.00 per square foot. These are thought to be reasonable rental rates for the neighborhood because this center is located in less heavily traveled area of Henderson and this center is relatively older than the other comparables. The rental rate for the Food Lion is $3.68 per square foot while the rental rate for the Revco Drug Store is $6.30 per square foot. Overage rentals are being received from both of these anchor tenants. The subject property is presently operating at a high occupancy rate. The location of subject is strategic within the neighborhood and convenient to the shoppers throughout the neighborhood. Trends The subject property is located in the northeastern section of Henderson. The neighborhood is continuing to develop and contains several single family and multi-family dwellings. Commercial developments are located along the major traffic arteries. The demand and desirability for the neighborhood has been good. All trends are favorable at this time and expected to continue. 2 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================ I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Northside Plaza Dabney Drive SHC Henderson Marketplace Vance Square ---------------------- -------------------- --------------------- --------------------- b. Street US Highway #1 and Dabney Drive at Raleigh and 1600 North Garnett St. Dabney Drive Beckford Drive Old Oxford Rds. ---------------------- -------------------- --------------------- --------------------- c. City Henderson, NC Henderson, NC Henderson, NC Henderson, NC ---------------------- -------------------- --------------------- --------------------- d. Distance from subject N/A 2 1/2miles 2 1/2miles 2 miles ---------------------- -------------------- --------------------- --------------------- e. Contact Mark Pitney, VP Rick Palamar, Edens Avant, Inc. (Kane Realty) Chase Development Louis Mann, GM ---------------------- -------------------- --------------------- --------------------- f. Phone (803) 779-4420 (919) 833-7755 (919) 492-8990 (919) 946-7447 ---------------------- -------------------- --------------------- --------------------- 2. Attributes a. Year built 1981, Remodeled 1995 1985 1991, Expanded 1994 1973, Renovated 1985 ---------------------- -------------------- --------------------- --------------------- b. Net sq. Ft. 66,090 41,600 100,000 38,000 ---------------------- -------------------- --------------------- --------------------- c. # building 1, L-Shaped 1 1, Barbell Shaped 1, Rectangular Shaped ---------------------- -------------------- --------------------- --------------------- d. # stories 1 1 1 1 ---------------------- -------------------- --------------------- --------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A N/A ---------------------- -------------------- --------------------- --------------------- f. # elevators N/A N/A N/A N/A ---------------------- -------------------- --------------------- --------------------- g. Parking Adequate Adequate Adequate Adequate ---------------------- -------------------- --------------------- --------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ---------------------- -------------------- --------------------- --------------------- I. Vacancy % 7.21% 0% 2.0% 76.84% ---------------------- -------------------- --------------------- --------------------- j. Anchors, if Retail Food Lion, Revco Food Lion, Revco Byrd's, Revco Carolina Carpet ---------------------- -------------------- --------------------- ---------------------
COMPARABLE 4 ------------ 1. Identification a. Name Kings Plaza ----------------------- b. Street Norlina Road (also Garnett Street) ----------------------- c. City Henderson, NC ----------------------- d. Distance from subject Across the street ----------------------- e. Contact Wayne Eisenbaum, Vice President ----------------------- f. Phone (860)233-6221 ----------------------- 2. Attributes a. Year built 1970, Expanded 1986 ----------------------- b. Net sq. Ft. 86,000 ----------------------- c. # building 1 ----------------------- d. # stories 1 ----------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A ----------------------- f. # elevators N/A ----------------------- g. Parking Adequate ----------------------- h. Construction Type Brick/Concrete Block ----------------------- I. Vacancy % 30% ----------------------- j. Anchors, if Retail Roses ----------------------- Comments: These comparable rentals are located close to subject neighborhood. Comparables #3 and #4 are older than subject with renovations having been completed in 1985 to Comparable #3. Expansions were completed in 1994 to Comparable #2 and 1986 to Comparable #4. Comparables #3 and #4 are experiencing low occupancy rate at this time due to vacancies of the anchor tenants. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A N/A N/A N/A ---------------- ------------------- ------------------- ------------------- ------------------- b. Shop Space $3.75 - $7.00 $5.00 - $10.00 $6.00 - $10.00 $4.00 (Average) $5.00 (Average) ---------------- ------------------- ------------------- ------------------- ------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net Triple Net ---------------- ------------------- ------------------- ------------------- ------------------- 3. Rent Concessions None None None None None ---------------- ------------------- ------------------- ------------------- ------------------- 4. Effective Rent $5.00 - $7.00 $5.00 - $10.00 $6.00 - $10.00 $4.00 $5.00 ---------------- ------------------- ------------------- ------------------- ------------------- 5. TI Allowance None None None None None ---------------- ------------------- ------------------- ------------------- ------------------- 6. Expense Stop None None None None None ---------------- ------------------- ------------------- ------------------- ------------------- 7. Length of Lease Term 3 years (shops) 3 - 5 years (shops) 3 - 5 years (shops) 3 - 5 years (shops) 3 - 5 years (shops) ---------------- ------------------- ------------------- ------------------- ------------------- 8. Commissions 5.00% - 7.00% 5.00% to 7.00% 5.00% - 7.00% 5.00% to 7.00% 5.00% to 7.00% ---------------- ------------------- ------------------- ------------------- ------------------- 9. Percentage Rent (per lease terms) Food Lion, Revco Food Lion, Revco Byrd's, Revco Carolina Carpet Roses ---------------- ------------------- ------------------- ------------------- ------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A N/A ---------------- ------------------- ------------------- ------------------- ------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A N/A ---------------- ------------------- ------------------- ------------------- ------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Similar Superior Inferior Inferior ---------------- ------------------- ------------------- ------------------- -------------------
D. EXPLAIN RANKING/COMMENTS: Subject is located in a less heavily traveled area of Henderson than Comparables #1 and #2. Comparable #2 is ranked superior to subject because it is a somewhat larger and newer center. The rental rates that are being received are slightly higher than those of subject. The other shopping centers have been rated as inferior or similar and are thought to be so with subject. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Dabney Drive Shopping Center Location: US Highway #1 Business at Dabney Drive Henderson, NC Year Built: 1985 Total Size: 41,600 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $5.00 - $10.00 Tenant Expenses: Triple Net Remarks: Food Lion and Revco are the major tenants. Located on US Highway #1 Business and Dabney Drive which are heavily traveled thoroughfares. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Henderson Marketplace Location: Dabney Drive at Beckford Drive Henderson, NC Year Built: 1991, Expanded in 1994 Total Size: 100,000 SF Vacant Space: 2,000 SF Vacancy Rate: 2.0% Rental Range: $6.00 - $10.00 Tenant Expenses: Triple Net Remarks: Major tenants are Byrd's and Revco. This is one of the newest centers in Henderson and has operated at a high occupancy rate. 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Vance Square Location: Raleigh Road at Oxford Road Henderson, NC Year Built: 1973, Renovated 1985 Total Size: 38,000 SF Vacant Space: 29,200 SF Vacancy Rate: 76.84% Average Rental Rate: $4.00 Tenant Expenses: Triple Net Remarks: This center was renovated in 1985. Winn Dixie and Revco Drugs have vacated their stores. Carolina Carpet is currently the only tenant in the main building of the center. Tastee Freeze and Pizza Hut occupy outlots. Golden Corral vacated their restaurant on one outlot. 7 Comparable Rental No. 4 ================================================================================ [GRAPHIC OMITTED] Name: Kings Plaza Location: Norlina Road Henderson, NC Year Built: 1970, Expanded 1986 Total Size: 86,000 SF Vacant Space: 25,792 SF Vacancy Rate: 30% Average Rental Rate: $5.00 Tenant Expenses: Triple Net Remarks: This center was expanded in 1986. A&P supermarket has vacated its store. Roses is currently the only tenant in the center. Kings Plaza is located across the street from the subject. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Northside Plaza St. Andrews Crossing Eastage Shopping Center One Norman Center ------------------- -------------------- ----------------------- ------------------ b. Street Address NWC Whiskey Rd. & 19706 One Norman 1600 Garnett Street 817 St. Andrews Road Eastgate Dr. Blvd. ------------------- -------------------- ----------------------- ------------------ c. City Henderson, NC Columbia, SC Aiken, SC Cornelius, NC ------------------- -------------------- ----------------------- ------------------ d. Distance from Subject N/A 250 miles 310 miles 170 miles ------------------- -------------------- ----------------------- ------------------ 2. Attributes a. Year Built 1982 1994 1995 1993 ------------------- -------------------- ----------------------- ------------------ b. Net sq. feet 66,090 66,910 SF 75,716 SF 54,185 SF ------------------- -------------------- ----------------------- ------------------ c. # Buildings 1, L-shaped 1 1 1 ------------------- -------------------- ----------------------- ------------------ d. # of Stories 1 1 1 1 ------------------- -------------------- ----------------------- ------------------ e. Vacancy % 7.21% 0% 7.21% 6.98% ------------------- -------------------- ----------------------- ------------------ 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 $4,650,000 ------------------- -------------------- ----------------------- ------------------ b. Sales Price PSF N/A $97.89 $88.16 $85.82 ------------------- -------------------- ----------------------- ------------------ c. Cap. Rate N/A 9.69% 9.86% 9.68% ------------------- -------------------- ----------------------- ------------------ d. Date N/A 05-25-94 09-28-95 10-12-95 ------------------- -------------------- ----------------------- ------------------ e. NOI at time of Sale N/A $634,797 $782,704 $474,591 ------------------- -------------------- ----------------------- ------------------ 4. Rank Relative to Subject (inferior, similar, superior) N/A Superior Superior Similar ------------------- -------------------- ----------------------- ------------------
COMPARABLE 4 ------------ 1. Identification a. Name Paw Creek Commons -------------------- b. Street Address E/S Little Rock Road at Freedom Drive -------------------- c. City Charlotte, NC -------------------- d. Distance from Subject 170 miles -------------------- 2. Attributes a. Year Built 1996 -------------------- b. Net sq. feet 66,050 SF -------------------- c. # Buildings 1 -------------------- d. # of Stories 1 -------------------- e. Vacancy % 2.73% -------------------- 3. Sales Information a. Sales Price $5,384,000 -------------------- b. Sales Price PSF $77.52 -------------------- c. Cap. Rate 9.61% -------------------- d. Date 03-25-97 -------------------- e. NOI at time of Sale $517,412 -------------------- 4. Rank Relative to Subject (inferior, similar, superior) Superior -------------------- Explain Ranking/Comments: Comparables #1, #2 and #4 are ranked superior to subject. The reason for this is because of the location of these comparables being superior to subject. Also, these comparables are newer than subject. Comparable # 3 is located in a commercial area that is approximately the same size as subject and is similar. However, Comparable #3 is smaller than subject. 9 COMPARABLE SHOPPING CENTER SALES Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS 6012 -1 -1 NAME St. Andrews Crossing LOCATION St. Andrews Road and I-26, Columbia, SC GRANTOR Hayley-Redd, L.P. GRANTEE F.A.C. Properties DEED REFERENCE Book 1199, Page 331 DATE May 25, 1994 SALES PRICE $6,550,000 ADJUSTED SALES PRICE $6,550,000 SIZE BUILDING 66,910 SALES PRICE PER S.F. $97.89 SIZE LAND (ACRES) 8.08 SIZE LAND (S.F.) 351,965 YEAR BUILT 1994 LAND/BUILDING RATIO 5.26 To 1 UTILITIES All available VERIFICATION Deed ZONING Commercial FINANCING Market EFFECTIVE GROSS INCOME $686,905 EGIM 9.54 NET OPERATING INCOME $634,797 OVERALL RATE 9.69% VERIFICATION Public Records TYPE OF PURCHASER Private Investor COMMENTS This was an arms length sale. This neighborhood shopping center is anchored by Kroger and is located in a good commercial area with good accessibility and fair exposure. The construction is brick veneer and concrete block. (503) 10 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] NAME Eastgate Shopping Center LOCATION Northwest Corner of Whiskey Road and Eastgate Drive, Aiken, SC GRANTOR PDG Aiken Partners, LP GRANTEE Southeast U.S. Retail, LP DATE Sep 28, 1995 SALES PRICE $6,675,000 SIZE BUILDING 75,716 SALES PRICE PER S.F. $88.16 SIZE LAND (ACRES) 8.79 SIZE LAND (S.F.) 382,892 YEAR BUILT 1995 LAND/BUILDING RATIO 5.06 To 1 UTILITIES All available VERIFICATION Public Records ZONING Commercial FINANCING Cash to seller GROSS POTENTIAL INCOME $782,704 EFFECTIVE GROSS INCOME $782,704 GROSS INCOME MULTIPLE 8.53 EGIM 8.53 NET OPERATING INCOME $657,896 OVERALL RATE 9.86% TYPE OF PURCHASER Private Investor COMMENTS Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. (643) 11 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] NAME One Norman Center LOCATION 19706 One Norman Boulevard, Cornelius, Mecklenburg County, NC GRANTOR One Norman Center, LP GRANTEE Lucky Realty DEED REFERENCE Book 8325, Page 721 DATE Oct 12, 1995 SALES PRICE $4,650,000 SIZE BUILDING 54,185 SALES PRICE PER S.F. $85.82 SIZE LAND (ACRES) 5.69 SIZE LAND (S.F.) 247,856 YEAR BUILT 1993 LAND/BUILDING RATIO 4.57 To 1 UTILITIES All Public VERIFICATION Public Records ZONING CUB-2 FINANCING Cash to Seller GROSS POTENTIAL INCOME $474,591 EFFECTIVE GROSS INCOME $474,591 GROSS INCOME MULTIPLE 9.80 EGIM 9.80 NET OPERATING INCOME $450,188 OVERALL RATE 9.68% TYPE OF PURCHASER Private Investor COMMENTS This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot. Triple net lease. (716) 12 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] TMS 59 -231 -22 ,23 pt. NAME Paw Creek Commons LOCATION East side of Little Rock Road at Freedom Drive, Charlotte, NC GRANTOR Paw Creek, LLC GRANTEE Frastacky and Associates DATE Mar 25, 1997 SALES PRICE $5,120,000 ADJUSTED SALES PRICE $5,384,000 SIZE BUILDING 66,050 SALES PRICE PER S.F. $77.52 SIZE LAND (ACRES) 9.82 SIZE LAND (S.F.) 427,759 YEAR BUILT 1996 LAND/BUILDING RATIO 6.48 To 1 UTILITIES Municipal VERIFICATION Public Records ZONING CC, Commercial Center FINANCING Cash to seller GROSS POTENTIAL INCOME $568,840 EFFECTIVE GROSS INCOME $552,054 GROSS INCOME MULTIPLE 9.00 EGIM 9.27 NET OPERATING INCOME $517,412 OVERALL RATE 9.61% TYPE OF PURCHASER Private Investor COMMENTS The overall rate of 10.10 percent has been adjusted down by 50 basis points since the sales contract is pre-construction. The major tenants are Winn Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. Anchor income is 79.41 percent of gross income. (793) 13 ADDENDA o Vance County Demographics o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 USA COUNTIES 1996 Geographic Area: Vance, NC (37181) Table: GENERAL PROFILE - -------------------------------------------------------------------------------- POPULATION AND HOUSING (Bureau of the Census) Total resident population: 1995 ........................................................... 40,720 Percent 65 years and over .................................... 12.7 1990 ........................................................... 38,892 1980 ........................................................... 36,748 Occupied housing units, 1990 ...................................... 14,166 Percent owner occupied ......................................... 65.3 BIRTHS AND DEATHS (National Center for Health Statistics) Births, 1993 ..................................................... 687 Per 1,000 resident population .................................. 17.2 Percent to mothers under 20 years of age ....................... 18.9 Deaths, 1993 ..................................................... 458 Per 1,000 resident population .................................. 11.4 Infant deaths per 1,000 live births, 1993 ........................ 4.4 EDUCATION (Bureau of the Census) Persons 25 years and over, 1990 .................................. 24,370 Percent high school graduates .................................. 57.1 Percent college graduates ...................................... 9.5 LABOR FORCE (Bureau of Labor Statistics) Civilian labor force, 1994 ....................................... 19,643 Percent unemployed ............................................. 7.8 PRIVATE NONFARM ESTABLISHMENTS (Bureau of the Census) Total establishments, 1993 ....................................... 885 Percent retail trade ........................................... 32.8 Percent services ............................................... 29.9 Paid employees, 1993 (pay period including March 12) ............. 14,352 Annual payroll, 1993 ($1,000) .................................... 261,231 PERSONAL INCOME (Bureau of Economic Analysis) Total personal income, 1993 ($1,000) ............................. 629,317 Per capita (dollars) ........................................... 15,726 AGRICULTURE (Bureau of the Census) Number of farms, 1992 ............................................ 289 Land in farms as percent of total land ......................... 42 RETAIL TRADE (Bureau of the Census) Retail sales, 1992 ($1,000) ...................................... 322,887 Per capita (dollars) ........................................... 8,127 COMMERCIAL AND SAVINGS BANKS (Fed. Deposit Insurance Corp.) Number of offices, June 30, 1994 ................................. 9 Total deposits ($l,000) ........................................ 296,148 SOCIAL PROGRAMS (Social Security Administration) Total Social Security recipients, December 1993 .................. 8,075 Retired workers ................................................ 4,395 Supplementary Security Income recipients, December 1994 .......... 2,180 FEDERAL FUNDS AND GRANTS (Bureau of the Census) Total direct expenditures or obligations per capita: 1994 (dollars) ................................................. 3,698 1990 (dollars) ................................................. 2,431 - -------------------------------------------------------------------------------- (NA) Not available. (D) Avoid disclosure of confidential information. (X) Not applicable. (S) Does not meet publication standards. (Z) Value > 0 but < half unit of measure shown. NOTE: 0 data may indicate geographic/data footnotes. Source: U.S. Bureau of the Census, USA Counties 1996 CD-ROM. [GRAPHIC OMITTED] Comparable Rentals Map [GRAPHIC OMITTED] Comparable Sales Map [GRAPHIC OMITTED] Building Sketch Date: 04/08/97 Page 3 EDENS & AVANT, INC. Retai1 Custom Rent Roll Property: NORTHSIDE PLAZA - HENDERSON 1600 NORTH GARNETT STREET HENDERSON, NC 27536-0000 Column Legends: Tenant/Property MISC column: K - Kiosk P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------- NORTHSIDE ELECTRONICS NORMAN HATHCOCK, BILL HISSONG 602-25 0 P 09/01/95 09/30/98 0.00 06/01/93 1,200.00 - -------------------------------------------------------------------------------------------------------------------- NORTHSIDE ELECTRONICS NORMAN & JOHN HATHCOCK, BILL 602-30 4,800 08/01/92 09/30/98 0.00 0.00 6.00 09/01/92 28,800.00 - -------------------------------------------------------------------------------------------------------------------- FOOD LION #105 602-50 32,320 02/01/94 09/30/01 2.63 09/30/81 85,050.00 3.68 02/10/94 119,001.96 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------- REVCO #2546 REVCO DISCOUNT STORE OF NC, I 602-60 8,450 11/01/8l 10/31/01 5.50 11/01/81 46,475.04 0.00 0.00 1.52 02/01/96 12,820.80 4.16 02/09/96 35,184.24 5.75 03/01/96 48,587.52 6.30 11/01/96 53,235.00 - -------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Beqin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- NORTHSIDE ELECTRONICS NORMAN HATHCOCK, BILL HISSONG None 0 None 0 None 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- NORTHSIDE ELECTRONICS NORMAN & JOHN HATHCOCK, BILL Full 0 Full 0 Full 0 10/01/95 09/30/98 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- FOOD LION #105 PRS 1982 None 0 Full 0 10/01/01 09/30/06 10.51 1.00 8,505.000 Y 10/01/06 09/30/11 10.86 1.00 11,900,200 Y 10/01/11 09/30/16 11.21 1.00 0 Y 10/01/16 09/30/21 11.56 1.00 0 Y 10/01/21 09/30/26 11.92 1.00 0 Y 10/01/26 09/30/31 12.27 1.00 0 Y 10/01/31 09/30/36 12.62 1.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- REVCO #2546 REVCO DISCOUNT STORE OF NC, I PRS 1982 PRS 1987 Full 0 11/01/96 10/31/01 6.30 2.00 1,267,500 11/01/01 10/31/06 6.91 2.00 0 11/01/06 10/31/11 7.57 2.00 0 0.00 2.00 0 0.00 2.00 0 0.00 2.00 0 - -----------------------------------------------------------------------------------------------------------------------------------
Date: 04/08/97 Page 4 EDENS & AVANT, INC. Retai1 Custom Rent Roll Property: NORTHSIDE PLAZA - HENDERSON 1600 NORTH GARNETT STREET HENDERSON, NC 27536-0000 Column Legends: Tenant/Property MISC column: K - Kiosk P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------- CHINA GARDEN SHAO WANG & YUN-YU ZHENG 602-70 2,400 05/01/96 04/30/01 5.25 05/01/96 12,600.00 0.00 0.00 6.00 05/01/99 14,400.00 - -------------------------------------------------------------------------------------------------------------------- SUBWAY #6023 SUBWAY SOUTH INC. 602-80 2,027 04/01/94 03/31/97 0.00 0.00 7.32 04/01/93 14,832.00 7.53 04/01/94 15,263.28 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------- Available 602-90 3,652 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------- BENEFICIAL FINANCE BENEFICIAL NORTH CAROLINA, IN 602-100 2,135 04/01/86 03/31/01 6.32 04/01/91 13,503.84 0.00 0.00 0.00 0.00 6.32 04/01/96 13,503.84 6.65 04/01/99 14,197.80 - -------------------------------------------------------------------------------------------------------------------- ASSOCIATED SERVICES CORP. F/K/A ALVEMARLE SERVICES/THE 602-110 1,995 12/01/87 11/30/97 6.00 12/01/90 11,970.00 0.00 0.00 7.00 12/01/93 13,965.00 - -------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Beqin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- CHINA GARDEN SHAO WANG & YUN-YU ZHENG Full 0 Full 0 Full 0 05/01/01 04/30/06 7.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- SUBWAY #6023 SUBWAY SOUTH INC. PRS 1988 PRS 1988 Full 0 04/01/94 03/31/97 7.53 0.00 0 04/01/97 03/31/00 0.00 0.00 0 04/01/94 03/31/95 3.76 0.00 0 04/01/95 03/31/96 3.76 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- BENEFICIAL FINANCE BENEFICIAL NORTH CAROLINA, IN Full 0 Full 0 Full 0 04/01/91 03/31/96 6.32 0.00 0 04/01/01 03/31/06 7.25 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- ASSOCIATED SERVICES CORP. F/K/A ALVEMARLE SERVICES/THE PRS 1987 PRS 1987 Full 0 12/01/97 11/30/02 0.00 0.00 0 12/01/02 11/30/07 0.00 0.00 0 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------------
Date: 04/08/97 Page 5 EDENS & AVANT, INC. Retai1 Custom Rent Roll Property: NORTHSIDE PLAZA - HENDERSON 1600 NORTH GARNETT STREET HENDERSON, NC 27536-0000 Column Legends: Tenant/Property MISC column: K - Kiosk P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------- DOLLAR GENERAL #2250 DOLGENCORP, INC. 602-120 7,200 02/01/96 01/31/99 2.59 03/11/96 18,640.44 3.75 04/01/96 27,000.00 - -------------------------------------------------------------------------------------------------------------------- Available 602-130 1,067 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------- PD QUIX RESTAURANT VENTURES INTERNATI 602-150 0 P 03/01/95 02/28/00 0.00 03/01/90 12,000.00 0.00 03/01/95 14,400.00 0.00 0.00 Available 602-9999 44 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied .... 61,327 Current Annual Base Rent 283,705.80 Available ... 4,763 Total ....... 66,090 - ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Beqin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- DOLLAR GENERAL #2250 DOLGENCORP, INC. Full 0 Full 0 Full 0 02/01/99 01/31/02 4.16 2.50 900,000 0.00 2.50 0 - ----------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- PD QUIX RESTAURANT VENTURES INTERNATI None 0 None 0 None 0 03/01/95 02/28/00 0.00 2.00 400,000 03/01/00 02/28/05 0.00 2.00 0 03/01/05 02/28/10 0.00 2.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Garrett Street - Facing Northeast [GRAPHIC OMITTED] Garrett Street - Facing Southwest [GRAPHIC OMITTED] Front View of Subject [GRAPHIC OMITTED] Side View of Subject [GRAPHIC OMITTED] Rear View of Subject This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. Market Study of: RALEIGH BOULEVARD SHOPPING CENTER 1100 Raleigh Boulevard Raleigh, Wake County, North Carolina Prepared By: O. Marshall Dodds, MAI Date of Market Study: April 29, 1997 [LETTERHEAD OF O. MARSHALL DODDS COMPANY, INC.] May 1, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Raleigh Boulevard Shopping Center 1100 Raleigh Boulevard Raleigh, Wake County, North Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on April 29, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 72,232 square feet of leaseable area. The center was constructed in 1990 and the anchor tenants are Food Lion and Eckerd Drug Store. The subject property is currently 94.46 percent occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds, MAI ------------------------------ O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY ================================================================================ Regional Perspective Raleigh is the capital of the state of North Carolina and the county seat of Wake County. It occupies an area of 93.9 square miles, with the county occupying an area of 854.36 square miles. The city is located in central North Carolina within fifteen minutes of the Research Triangle Park, which is the nation's largest planned research and development park. In addition to Raleigh, Wake County has eleven other municipalities including Wake Forest, Rolesville, Garner, Wendell, Apex and Knightdale. Raleigh is located between I-95 and I-85 and approximately 23 miles southeast of Durham, 78 miles southeast of Greensboro and 143 miles northeast of Charlotte. Major highways serving the area include I-40, US Highways #1, #401, #64 and #70 and NC Highways #50 and #54. Also, a 31 mile beltline around the city was completed in 1983. The unemployment rate for Wake County as of July 1994 was 3.5% and North Carolina had an unemployment rate of 4.5%. The population of Raleigh in 1993 was 230,418 which represented a 53.35 percent increase over the 1980 Census estimate. Neighborhood and Site The subject neighborhood is located in the eastern section of the City of Raleigh near the intersection of Raleigh Boulevard and Crabtree Boulevard. The neighborhood is continuously growing and there are a number of single family and multi-family dwellings located throughout the neighborhood. Commercial properties are located along the major traffic arteries. The Raleigh North Millbank Court Apartments is located in the neighborhood across Raleigh Boulevard from the subject. Several single family residential subdivisions are located in the neighborhood including Heritage Heights, Lions Way and Madonna Acres. The Mary E. Phillips High School and St. Augustine College are located at the intersection of Oakwood Avenue and Milburnie Road in the immediate neighborhood. The downtown area of Raleigh and the state capitol complex are located to the southwest of the subject neighborhood. Physical features are as follows: 1. Size 8.72 acres or 379,843 square feet 2. Identity 1100 Raleigh Boulevard TMS 525-2027 3. Shape irregular 4. Topography generally level 5. Accessibility good from either direction 6. Utilities municipal Physical Description Building features are as follows: 1. Size (net) 72,232 square feet 2. Layout & Design 1 story-food store, drug store, 15 shops 3. Parking Spaces 360 4.98 per 1,000 square of net area 4. Construction brick and glass front with concrete block on side and rear and metal seamed roof 1 Market Position and Marketability Conclusions The shopping center market within the area of subject is healthy at this time. Subject is part of eastern Wake County area. In a survey published by the Triangle Business Journal, there are approximately 20 shopping centers with approximately 2,162,000 square feet in the same area as subject. The available square feet for the first quarter of 1997 consists of approximately 168,000 square feet with the availability rate being 7.78%. According to the survey, there is one center under construction at this time in the same submarket as subject in the City of Garner which is south of the subject neighborhood. It will contain approximately 110,000 square feet and is expected to be completed by February of 1998. [GRAPHIC OMITTED] The subject property is in the middle of the neighborhood being at the intersection of Raleigh Boulevard and Glascock Street. The location of subject is convenient to the single family and multi-family dwellings that are located throughout the neighborhood. The Mary E. Phillips High School and St. Augustine College are located in the subject neighborhood and are thought to have aided in the overall development of the neighborhood. The Southgate Plaza is located at the intersection of Cross Link Road and Rock Quarry Road. This center is very similar to subject with respect to size and location. It was built in 1985 and the rental rate range for the shops is $6.00 - - $9.00 per square foot on a triple net basis. The anchor tenants are Winn Dixie and Eckerd Drugs. The Walnut Creek Shopping Center is located at the intersection of Poole Road and the I-440 Beltline. It was built in 1988 and has a rental range for the shops of $8.00 - $11.50. Food Lion and Revco Drugs are the anchor tenants in this center. The Raleigh Oaks Shopping Center is located on Lake Wheeler Road and contains 60,400 square feet. It was built in 1989 and has an average rental rate of $9.00 per square foot for the shops. The leasing agent for this property stated that this rate was somewhat low because this center is located in a less desirable area of Raleigh. Food Lion and Rite Aid are the major tenants in this center. At the time of inspection, the Food Lion store was expanding. The Knightdale Crossing Shopping Center is located at the intersection of US Highway #64 and Smithfield Road in Knightdale, North Carolina which is approximately 5 miles east of Raleigh. This center contains 91,825 square feet. Winn Dixie and Revco are the anchor tenants and the rental range for the shops is from $6.00 to $9.00 per square foot. The subject property has 15 shops with a rental range from $4.38 - $11.35 per square foot. The lease with H&R Block expires April 30, 1997 but it is thought that they will exercise a renewal option until the year 2000. The majority of the leases have rental rates between $6.00 and $9.00 per square foot. It is thought that these are reasonable rental rates for the neighborhood. Also, an Advance Auto Parts store occupies an outlot to the subject property and is also thought to have a reasonable rental rate for the neighborhood at $9.25 per square foot. Food Lion has a rate of $6.10 per square foot and Eckerd Drugs has a rate of $8.75 per square foot, but overage rents are being paid by both of these tenants. The subject property has operated at a high occupancy rate with only 4,000 square feet available at this time for a vacancy rate of 5.54 percent. The location of subject is strategic within the neighborhood and convenient to shoppers throughout the neighborhood. 2 Trends The subject property is located in the eastern section of Wake County. The neighborhood is continuing to develop with several single family and multi-family dwellings and some industrial use. Commercial developments are located along the major traffic arteries. The Mary Phillips High School and St. Augustine College are located in the neighborhood. The demand and desirability for the neighborhood has been good. All trends are favorable at this time and expected to continue. 3 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 1. Identification a. Name Raleigh Boulevard SHC Southgate Plaza Walnut Creek SHC ------------------------ ------------------------ ------------------------- b. Street Cross Link Road at Poole Road at I-440 1100 Raleigh Boulevard Rock Quarry Road Beltline ------------------------ ------------------------ ------------------------- c. City Raleigh, NC Raleigh, NC Raleigh, NC ------------------------ ------------------------ ------------------------- d. Distance from subject N/A 3 miles 3 miles ------------------------ ------------------------ ------------------------- e. Contact Edens Avant, Inc. York Properties Rosen & Associates ------------------------ ------------------------ ------------------------- f. Phone (803) 779-4420 (919) 821-1350 (516) 822-5350 ------------------------ ------------------------ ------------------------- 2. Attributes a. Year built 1990 1985 1988 ------------------------ ------------------------ ------------------------- b. Net sq. Ft. 72,232 70,452 56,470 ------------------------ ------------------------ ------------------------- c. # building 1 2, L-shaped 1 ------------------------ ------------------------ ------------------------- d. #stories 1 1 1 ------------------------ ------------------------ ------------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A ------------------------ ------------------------ ------------------------- f. # elevators N/A N/A N/A ------------------------ ------------------------ ------------------------- g. Parking Adequate Adequate Adequate ------------------------ ------------------------ ------------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ------------------------ ------------------------ ------------------------- I. Vacancy % 5.54% 0% 0% ------------------------ ------------------------ ------------------------- j. Anchors, if Retail Food Lion, Eckerds Winn Dixie, Eckerd Food Lion, Revco ------------------------ ------------------------ ------------------------- COMPARABLE 3 COMPARABLE 4 1. Identification a. Name Raleigh Oaks SHC Knightdale Crossing ---------------------- ----------------------- b. Street US Highway #64 and Lake Wheeler Road Smithfield Road ---------------------- ----------------------- c. City Raleigh, NC Knightdale, NC ---------------------- ----------------------- d. Distance from subject 3 miles 10 miles ---------------------- ----------------------- e. Contact Hunter & Associates Drucker & Falk ---------------------- ----------------------- f. Phone (919) 821-8023 (919) 846-7300 ---------------------- ----------------------- 2. Attributes a. Year built 1989 1986 ---------------------- ----------------------- b. Net sq. Ft. 60,400 91,825 ---------------------- ----------------------- c. # building 1 2 ---------------------- ----------------------- d. #stories 1 1 ---------------------- ----------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A ---------------------- ----------------------- f. # elevators N/A N/A ---------------------- ----------------------- g. Parking Adequate Adequate ---------------------- ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block ---------------------- ----------------------- I. Vacancy % 2.15% 1.63% ---------------------- ----------------------- j. Anchors, if Retail Food Lion, Rite Aid Winn Dixie, Revco ---------------------- -----------------------
Comments: These comparable rentals are located in Raleigh and Knightdale relatively close to subject neighborhood. All of these centers were built in the mid to late 80's with expansion taking place to Comparable #3 at the time of this study. All of the comparables are experiencing high occupancy rates at this time. 4 PROPERTY INSPECTION FORM COMMERCIAL
B. RENTAL INFORMATION SUBJECT COMPARABLE 1 COMPARABLE 2 1. Asking Rental Rate a. Anchor Space N/A N/A N/A ------------------------ ------------------------ ------------------------ b. Shop Space $4.38 - $11.35 $6.00 - $9.00 $8.00 - $11.50 ------------------------ ------------------------ ------------------------ 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ------------------------ ------------------------ ------------------------ 3. Rent Concessions None None None ------------------------ ------------------------ ------------------------ 4. Effective Rent $6.00 - $9.00 $6.00 - $9.00 $8.00 - $11.50 ------------------------ ------------------------ ------------------------ 5. TI Allowance None None None ------------------------ ------------------------ ------------------------ 6. Expense Stop None None None ------------------------ ------------------------ ------------------------ 7. Length of Lease Term 3 -5 years (shop) 3 - 5 years (shop) 3 - 5 years (shop) ------------------------ ------------------------ ------------------------ 8. Commissions 5.00% - 7.00% 5.00% to 7.00% 5.00% - 7.00% ------------------------ ------------------------ ------------------------ 9. Percentage Rent (per lease terms) Food Lion, Eckerd Winn Dixie, Eckerd Food Lion, Revco ------------------------ ------------------------ ------------------------ 10. Historical Annual Absorption/sq.ft. N/A N/A N/A ------------------------ ------------------------ ------------------------ 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A ------------------------ ------------------------ ------------------------ C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Similar Similar ------------------------ ------------------------ ------------------------
B. RENTAL INFORMATION COMPARABLE 3 COMPARABLE 4 1. Asking Rental Rate a. Anchor Space N/A N/A ------------------------ ----------------------- b. Shop Space $9.00 $6.00 - $9.00 ------------------------ ----------------------- 2. Lease Type (Gross/Net Triple Net Triple Net ------------------------ ----------------------- 3. Rent Concessions None None ------------------------ ----------------------- 4. Effective Rent $9.00 $6.00 - $9.00 ------------------------ ----------------------- 5. TI Allowance $1.78 None ------------------------ ----------------------- 6. Expense Stop None None ------------------------ ----------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 - 5 years (shop) ------------------------ ----------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% ------------------------ ----------------------- 9. Percentage Rent (per lease terms) Food Lion, Rite Aid Winn Dixie, Revco ------------------------ ----------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A ------------------------ ----------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A ------------------------ ----------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) Similar Superior ------------------------ ----------------------- D. EXPLAIN RANKING/COMMENTS: Subject is the one of the newest shopping center in this submarket. Comparable #4 is a larger center than subject and is located in Knightdale which is a suburb of Raleigh. The rental rates that are being received are in the same range as the subject. Also, the center is located on US Highway #64 which is a more heavily traveled thoroughfare. The other shopping centers have been rated as similar and are thought to be so with subject. 5 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Southgate Plaza Location: Cross Link Road at Rock Quarry Road Raleigh, NC Year Built: 1985 Total Size: 70,452 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $6.00 - $9.00 Tenant Expenses: Triple Net Remarks: Winn Dixie and Eckerd Drugs are the major tenants. Located on Cross Link Road and Rock Quarry Road. Has operated at a high occupancy level. 6 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Walnut Creek Shopping Center Location: Poole Road at I-440 Beltline Raleigh, NC Year Built: 1988 Total Size: 56,470 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $8.00 - $11.50 Tenant Expenses: Triple Net Remarks: Major tenants are Food Lion and Revco Drugs. A McDonald's fast food restaurant occupies the outlot. This center is also located in close proximity to the Walnut Creek Ampitheater and off of a major thoroughfare (I-440 Beltline). 7 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Raleigh Oaks Shopping Center Location: Lake Wheeler Road Raleigh, NC Year Built: 1989 Total Size: 60,400 SF Vacant Space: 1,300 SF Vacancy Rate: 2.15% Average Rental Rate: $9.00 Tenant Expenses: Triple Net Remarks: This center is in the process of expansion. The leasing agent stated that the rental rates are somewhat low for the city because the center is located in a less desirable area. 8 Comparable Rental No. 4 ================================================================================ [GRAPHIC OMITTED] Name: Knightdale Crossing Location: US Highway #64 at Smithfield Road Knightdale, NC Year Built: 1986 Total Size: 91,825 SF Vacant Space: Approximately 1,500 SF Vacancy Rate: 1.63% Local Rent Range: $6.00 - $9.00 Tenant Expenses: Triple Net Remarks: This center is located off of a heavily traveled thoroughfare (US Highway #64). It is located in a suburb of Raleigh. 9 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 1. Identification a. Name Raleigh Boulevard SHC St. Andrews Crossing Eastage Shopping Center ------------------------ ------------------------ -------------------------- b. Street Address NWC Whiskey Rd. & 1100 Raleigh Boulevard 817 St. Andrews Road Eastgate Dr. ------------------------ ------------------------ -------------------------- c. City Raleigh, NC Columbia, SC Aiken, SC ------------------------ ------------------------ -------------------------- d. Distance from Subject N/A 205 miles 261 miles ------------------------ ------------------------ -------------------------- 2. Attributes a. Year Built 1990 1994 1995 ------------------------ ------------------------ -------------------------- b. Net sq. feet 72,232 66,910 SF 75,716 SF ------------------------ ------------------------ -------------------------- c. # Buildings 1 1 1 ------------------------ ------------------------ -------------------------- d. # of Stories 1 1 1 ------------------------ ------------------------ -------------------------- e. Vacancy % 5.54% 0% 7.21% ------------------------ ------------------------ -------------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 ------------------------ ------------------------ -------------------------- b. Sales Price PSF N/A $97.89 $88.16 ------------------------ ------------------------ -------------------------- c. Cap. Rate N/A 9.69% 9.86% ------------------------ ------------------------ -------------------------- d. Date N/A 05-25-94 09-28-95 ------------------------ ------------------------ -------------------------- e. NOI at time of Sale N/A $634,797 $782,704 ------------------------ ------------------------ -------------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A Similar Similar ------------------------ ------------------------ --------------------------
COMPARABLE 3 COMPARABLE 4 1. Identification a. Name One Norman Center Paw Creek Commons ----------------------- ----------------------- b. Street Address 19706 One Norman E/S Little Rock Road Blvd. at Freedom Drive ----------------------- ----------------------- c. City Cornelius, NC Charlotte, NC ----------------------- ----------------------- d. Distance from Subject142 miles 142 miles ----------------------- ----------------------- 2. Attributes a. Year Built 1993 1996 ----------------------- ----------------------- b. Net sq. feet 54,185 SF 66,050 SF ----------------------- ----------------------- c. # Buildings 1 1 ----------------------- ----------------------- d. # of Stories 1 1 ----------------------- ----------------------- e. Vacancy % 6.98% 2.73% ----------------------- ----------------------- 3. Sales Information a. Sales Price $4,650,000 $5,120,000 ----------------------- ----------------------- b. Sales Price PSF $85.82 $77.52 ----------------------- ----------------------- c. Cap. Rate 9.68% 9.60% ----------------------- ----------------------- d. Date 10-12-95 03-25-97 ----------------------- ----------------------- e. NOI at time of Sale $474,591 $517,412 ----------------------- ----------------------- 4. Rank Relative to Subject (inferior, similar, superior) Similar Similar ----------------------- ----------------------- Explain Ranking/Comments: All of these comparables ranked similar to subject and are relatively the same size as subject. They are, however, newer than subject. 10 COMPARABLE SHOPPING CENTER SALES Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS 6012 -1 -1 NAME St. Andrews Crossing LOCATION St. Andrews Road and I-26, Columbia, SC GRANTOR Hayley-Redd, L.P. GRANTEE F.A.C. Properties DEED REFERENCE Book 1199, Page 331 DATE May 25, 1994 SALES PRICE $6,550,000 ADJUSTED SALES PRICE $6,550,000 SIZE BUILDING 66,910 SALES PRICE PER S.F. $97.89 SIZE LAND (ACRES) 8.08 SIZE LAND (S.F.) 351,965 YEAR BUILT 1994 LAND/BUILDING RATIO 5.26 To 1 UTILITIES All available VERIFICATION Deed ZONING Commercial FINANCING Market EFFECTIVE GROSS INCOME $686,905 EGIM 9.54 NET OPERATING INCOME $634,797 OVERALL RATE 9.69% VERIFICATION Public Records TYPE OF PURCHASER Private Investor COMMENTS This was an arms length sale. This neighborhood shopping center is anchored by Kroger and is located in a good commercial area with good accessibility and fair exposure. The construction is brick veneer and concrete block. (503) 11 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] NAME Eastgate Shopping Center LOCATION Northwest Corner of Whiskey Road and Eastgate Drive, Aiken, SC GRANTOR PDG Aiken Partners, LP GRANTEE Southeast U.S. Retail, LP DATE Sep 28, 1995 SALES PRICE $6,675,000 SIZE BUILDING 75,716 SALES PRICE PER S.F. $88.16 SIZE LAND (ACRES) 8.79 SIZE LAND (S.F.) 382,892 YEAR BUILT 1995 LAND/BUILDING RATIO 5.06 To 1 UTILITIES All available VERIFICATION Public Records ZONING Commercial FINANCING Cash to seller GROSS POTENTIAL INCOME $782,704 EFFECTIVE GROSS INCOME $782,704 GROSS INCOME MULTIPLE 8.53 EGIM 8.53 NET OPERATING INCOME $657,896 OVERALL RATE 9.86% TYPE OF PURCHASER Private Investor COMMENTS Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. (643) 12 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] NAME One Norman Center LOCATION 19706 One Norman Boulevard, Cornelius, Mecklenburg County, NC GRANTOR One Norman Center, LP GRANTEE Lucky Realty DEED REFERENCE Book 8325, Page 721 DATE Oct 12, 1995 SALES PRICE $4,650,000 SIZE BUILDING 54,185 SALES PRICE PER S.F. $85.82 SIZE LAND (ACRES) 5.69 SIZE LAND (S.F.) 247,856 YEAR BUILT 1993 LAND/BUILDING RATIO 4.57 To 1 UTILITIES All Public VERIFICATION Public Records ZONING CUB-2 FINANCING Cash to Seller GROSS POTENTIAL INCOME $474,591 EFFECTIVE GROSS INCOME $474,591 GROSS INCOME MULTIPLE 9.80 EGIM 9.80 NET OPERATING INCOME $450,188 OVERALL RATE 9.68% TYPE OF PURCHASER Private Investor COMMENTS This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot. Triple net lease. (716) 13 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] TMS 59 -231 -22 ,23 pt. NAME Paw Creek Commons LOCATION East side of Little Rock Road at Freedom Drive, Charlotte, NC GRANTOR Paw Creek, LLC GRANTEE Frastacky and Associates DATE Mar 25, 1997 SALES PRICE $5,120,000 ADJUSTED SALES PRICE $5,120,000 SIZE BUILDING 66,050 SALES PRICE PER S.F. $77.52 SIZE LAND (ACRES) 9.82 SIZE LAND (S.F.) 427,759 YEAR BUILT 1996 LAND/BUILDING RATIO 6.48 To 1 UTILITIES Municipal VERIFICATION Public Records ZONING CC, Commercial Center FINANCING Cash to seller GROSS POTENTIAL INCOME $568,840 EFFECTIVE GROSS INCOME $552,054 GROSS INCOME MULTIPLE 9.00 EGIM 9.27 NET OPERATING INCOME $517,412 OVERALL RATE 9.60% TYPE OF PURCHASER Private Investor COMMENTS The overall rate of 10.10 percent has been adjusted down by 50 basis points since the sales contract is pre-construction. The major tenants are Winn Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. Anchor income is 79.41 percent of gross income. (793) 14 ADDENDA o Wake County Demographics o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 15 USA COUNTIES 1996 Geographic Area: Wake, NC (37183) Table: GENERAL PROFILE POPULATION AND HOUSING (Bureau of the Census) Total resident population: 1995 ....................................................... 513,639 Percent 65 years and over .................................. 7.9 1990 ....................................................... 426,301 1980 ....................................................... 301,429 Occupied housing units, 1990 ................................... 165,743 Percent owner occupied ....................................... 60.9 BIRTHS AND DEATHS (National Center for Health Statistics) Births, 1993 ................................................... 7,361 Per 1,000 resident population ................................ 15.5 Percent to mothers under 20 years of age ..................... 7.1 Deaths, 1993 ................................................... 2,738 Per 1,000 resident population ................................ 5.7 Infant deaths per 1,000 live births, 1993 ...................... 9.8 EDUCATION (Bureau of the Census) Persons 25 years and over, 1990 ................................ 271,387 Percent high school graduates ................................ 85.4 Percent college graduates .................................... 35.3 LABOR FORCE (Bureau of Labor Statistics) Civilian labor force, 1994 ..................................... 288,588 Percent unemployed ........................................... 3.0 PRIVATE NONFARM ESTABLISHMENTS (Bureau of the Census) Total establishments, 1993 ..................................... 14,957 Percent retail trade ......................................... 22.4 Percent services ............................................. 37.2 Paid employees, 1993 (pay period including March 12)~ .......... 227,468 Annual payroll, 1993 ($1,000) .................................. 5,541,855 PERSONAL INCOME (Bureau of Economic Analysis) Total personal income, 1993 ($1,000) ........................... 11,401,354 Per capita (dollars) ......................................... 23,959 AGRICULTURE (Bureau of the Census) Number of farms, 1992 .......................................... 833 Land in farms as percent of total land ....................... 22 RETAIL TRADE (Bureau of the Census) Retail sales, 1992 ($1,000) .................................... 4,381,013 Per capita (dollars) ......................................... 9,554 COMMERCIAL AND SAVINGS BANKS (Fed. Deposit Insurance Corp.) Number of offices, June 30, 1994 ............................... 166 Total deposits ($1,000) ...................................... 4,213,104 SOCIAL PROGRAMS (Social Security Administration) Total Social Security recipients, December 1993 ................ 52,775 Retired workers .............................................. 32,255 Supplementary Security Income recipients, December 1994 ........ 7,456 FEDERAL FUNDS AND GRANTS (Bureau of the Census) Total direct expenditures or obligations per capita: 1994 (dollars) ............................................... 4,529 1990 (dollars) ............................................... 3,867 (NA) Not available. (D) Avoid disclosure of confidential information. (X) Not applicable. (S) Does not meet publication standards. (Z) Value > 0 but < half unit of measure shown. NOTE: 0 data may indicate geographic/data footnotes. Source: U.S. Bureau of the Census, USA Counties 1996 CD-ROM. [GRAPHIC OMITTED] COMPARABLE RENTAL MAP [GRAPHIC OMITTED] COMPARABLE SALES MAP [GRAPHIC OMITTED] BUILDING SKETCH Date: 04/08/97 Page 143 EDENS & AVANT, INC. Retail Custom Rent Roll Property: RALEIGH BOULEVARD 1100 RALEIGH BOULEVARD RALEIGH, NC 27610 Co1umn Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TSD - To be Determined CPI - Consumer Price Index
- ----------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ----------------------------------------------------------------------------------------------------------------- H&R BLOCK H&R BLOCK EASTERN TAX SERVICE 680- 10 1,400 12/01/93 04/30/97 0.00 0.00 0.00 0.00 7.50 12/01/93 10,500.00 - ----------------------------------------------------------------------------------------------------------------- PORTIA'S HAIR SALON 680- 20 1,400 01/01/95 12/31/97 6.30 01/01/93 8,820.00 7.00 01/01/94 9,804.00 7.71 01/01/94 10,800.00 8.53 01/01/96 11,940.00 9.43 01/01/97 13,200.00 - ----------------------------------------------------------------------------------------------------------------- Available 680- 30 4,000 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------- FAMILY DOLLAR STORE #281 FAMILY DOLLAR STORES OF NC, I 680- 35 8,000 09/01/93 12/31/03 4.38 09/01/93 35,000.04 4.59 01/01/04 36,750.00 4.82 01/01/09 38,587.56 5.06 01/01/14 40,516.92 5.32 01/01/19 42,542.76 - ----------------------------------------------------------------------------------------------------------------- BEAUTY MART KWANG SUK KIM 680- 40 2,800 12/01/93 11/30/97 0.00 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcent of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk. - ----------------------------------------------------------------------------------------------------------------------------------- H&R BLOCK H&R BLOCK EASTERN TAX SERVICE Full 0 Full 0 Full 0 05/01/97 04/30/00 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- PORTIA'S HAIR SALON Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- FAMILY DOLLAR STORE #281 FAMILY DOLLAR STORES OF NC, I PRS 1994 PRS 1994 Full 0 01/01/04 12/31/09 4.59 3.00 1,166,700 Y 01/01/10 12/31/15 4.82 3.00 1,225,000 Y 01/01/16 12/31/20 5.06 3.00 1,286,300 Y 01/01/21 12/31/25 5.32 3.00 1,350,600 Y 0.00 3.00 1,418,100 Y - ----------------------------------------------------------------------------------------------------------------------------------- BEAUTY MART KWANG SUK KIM Full 0 Full 0 Full 0 12/01/95 11/30/97 0.00 0.00 0 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------------
Date: 04/08/97 Page 144 EDENS & AVANT, INC. Retail Custom Rent Roll Property: RALEIGH BOULEVARD 1100 RALEIGH BOULEVARD RALEIGH, NC 27610 Co1umn Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TSD - To be Determined CPI - Consumer Price Index
- ----------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ----------------------------------------------------------------------------------------------------------------- BEAUTY MART KWANG SUK KIM 680- 40 2,800 12/01/93 11/30/97 6.00 12/01/93 16,800.00 7.00 12/01/95 19,599.96 - ----------------------------------------------------------------------------------------------------------------- RENTERS CHOICE, INC. #371 RENTERS CHOICE, INC. 680- 50 3,350 03/01/92 08/31/01 0.00 0.00 0.00 0.00 6.60 09/01/93 22,116.00 7.10 09/01/94 23,784.00 7.60 09/01/95 25,464.00 8.10 09/01/96 27,132.00 8.10 09/01/97 27,135.00 8.50 09/01/98 28,474.92 9.10 09/01/00 30,484.92 - ----------------------------------------------------------------------------------------------------------------- FOOD LION #757 FOOD LION #757 680- 70 25,000 02/25/90 02/24/10 0.00 0.00 6.10 03/01/91 152,499.96 0.00 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------- SUPER 10 STORE #122 VARIETY WHOLESALERS INC. 680- 80 6,042 04/01/90 02/28/00 5.59 04/01/90 33,800.04 4.48 08/01/93 27,040.08 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcent of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk. - -------------------------------------------------------------------------------------------------------------------------------- BEAUTY MART KWANG SUK KIM Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------ RENTERS CHOICE, INC. #371 Full 0 Full 0 Full 0 09/01/95 08/31/97 7.60 0.00 0 RENTERS CHOICE, INC. 09/01/97 08/31/01 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - -------------------------------------------------------------------------------------------------------------------------------- FOOD LION #757 FOOD LION #757 Full 0 None 0 Fixed 0 03/01/11 02/28/16 6.40 1.00 15,250,000 03/01/16 02/28/21 6.71 1.00 0 03/01/21 02/28/26 7.02 1.00 0 03/01/26 02/28/31 7.32 1.00 0 - -------------------------------------------------------------------------------------------------------------------------------- SUPER 10 STORE #122 VARIETY WHOLESALERS INC. PRS 1989 PRS 1989 Fixed 0 0.00 0.00 0 0.00 0.00 0 - --------------------------------------------------------------------------------------------------------------------------------
Date: 04/08/97 Page 145 EDENS & AVANT, INC. Retail Custom Rent Roll Property: RALEIGH BOULEVARD 1100 RALEIGH BOULEVARD RALEIGH, NC 27610 Co1umn Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TSD - To be Determined CPI - Consumer Price Index
- ----------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ----------------------------------------------------------------------------------------------------------------- SUBWAY #13926 SUBWAY REAL ESTATE CORP. 680- 90 1,400 09/01/93 08/31/99 0.00 0.00 7.00 12/01/93 9,800.04 0.00 0.00 7.84 09/01/96 10,980.00 - ----------------------------------------------------------------------------------------------------------------- BOULEVARD GOLD EXCHANGE DONALD R. SULT 680- 100 1,400 01/01/97 12/31/99 0.00 0.00 0.00 0.00 9.00 01/01/93 12,600.00 9.43 01/01/96 13,200.00 9.50 01/01/97 13,299.96 9.75 01/01/98 13,650.00 - ----------------------------------------------------------------------------------------------------------------- FOXY NAILS THI QUANG PHAM, NGUYET T. TRA 680- 110 1,400 12/01/96 11/30/99 0.00 0.00 0.00 0.00 9.00 12/01/96 12,600.00 9.50 12/01/97 13,299.96 - ----------------------------------------------------------------------------------------------------------------- LAM'S GARDEN RESTAURANT LAM'S GARDEN RESTAURANT 680- 120 1,400 11/15/92 12/31/02 3.25 06/01/93 4,548.00 6.50 12/01/93 9,096.00 7.50 01/01/96 10,500.00 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcent of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk. - ----------------------------------------------------------------------------------------------------------------------------------- SUBWAY #13926 SUBWAY REAL ESTATE CORP. Full 0 Full 0 Full 0 09/01/96 08/31/99 7.84 0.00 0 09/01/99 08/31/03 9.05 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- BOULEVARD GOLD EXCHANGE DONALD R. SULT Full 0 Full 0 Full 0 01/01/00 12/31/02 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- FOXY NAILS THI QUANG PHAM, NGUYET T. TRA Full 0 Full 0 Full 0 12/01/99 11/30/02 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- LAM'S GARDEN RESTAURANT LAM'S GARDEN RESTAURANT Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------------
Date: 04/08/97 Page 146 EDENS & AVANT, INC. Retail Custom Rent Roll Property: RALEIGH BOULEVARD 1100 RALEIGH BOULEVARD RALEIGH, NC 27610 Co1umn Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TSD - To be Determined CPI - Consumer Price Index
- ----------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ----------------------------------------------------------------------------------------------------------------- LAM'S GARDEN RESTAURANT LAM'S GARDEN RESTAURANT 680- 120 1,400 11/15/92 12/31/02 8.00 01/01/99 11,196.00 9.00 01/01/01 12,600.00 - ----------------------------------------------------------------------------------------------------------------- INTERNATIONAL, INC. RALEIGH CHECK CASHING 680- 130 1,400 05/01/95 04/30/98 9.00 05/01/95 12,600.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------- NEW YORK SEAFOOD MARKET MS. KRISTIE L. BANKS, AN UNMA 680- 140 1,400 01/01/97 12/31/99 7.00 09/01/92 9,804.00 9.00 01/01/94 12,600.00 10.00 01/01/95 14,004.00 10.50 01/01/96 14,700.00 11.25 01/01/97 15,750.00 - ----------------------------------------------------------------------------------------------------------------- ECKERD'S #1055 JACK ECKERD CORP. 680- 150 8,640 06/24/90 01/31/11 0.00 0.00 6.75 07/01/90 58,320.00 7.50 04/01/94 64,800.00 0.00 0.00 8.75 06/01/95 75,600.00 9.00 06/01/00 77,760.00 9.17 06/01/05 79,200.00 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcent of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk. - ----------------------------------------------------------------------------------------------------------------------------------- LAM'S GARDEN RESTAURANT LAM'S GARDEN RESTAURANT Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- INTERNATIONAL, INC. RALEIGH CHECK CASHING Full 0 Full 0 Full 0 05/01/98 04/30/01 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- NEW YORK SEAFOOD MARKET MS. KRISTIE L. BANKS, AN UNMAA Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- ECKERD'S #1055 JACK ECKERD CORP. Full 0 Full 0 Fixed 0 06/24/10 06/23/15 9.75 2.00 0 Y 06/24/15 06/23/20 10.25 2.00 2,916,000 Y 06/24/20 06/23/25 10.75 2.00 3,240,000 Y 06/24/25 06/23/30 11.25 2.00 0 Y 0.00 2.00 3,780,000 Y 0.00 2.00 3,888,000 Y 0.00 2.00 3,960,000 Y - -----------------------------------------------------------------------------------------------------------------------------------
Date: 04/08/97 Page 147 EDENS & AVANT, INC. Retail Custom Rent Roll Property: RALEIGH BOULEVARD 1100 RALEIGH BOULEVARD RALEIGH, NC 27610 Co1umn Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TSD - To be Determined CPI - Consumer Price Index
- ----------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ----------------------------------------------------------------------------------------------------------------- MR. FREEZE RECORDS ELLIOTT MCKINNIE 680- 160 1,000 01/01/95 12/31/97 6.70 02/01/92 6,696.00 7.60 01/01/94 7,596.00 9.00 01/01/95 9,000.00 - ----------------------------------------------------------------------------------------------------------------- SPIN-N-PIN DRYCLEANERS F/K/A RALEIGH BLVD LAUNDRY & 680- 170 2,200 01/01/97 12/31/01 12.00 08/09/90 26,400.00 0.00 0.00 8.35 11/01/92 18,369.96 9.35 01/01/94 20,569.92 10.35 01/01/95 22,770.00 11.35 01/01/96 24,969.96 12.00 01/01/99 26,400.00 - ----------------------------------------------------------------------------------------------------------------- ADVANCE AUTO #4146 ADVANCE STORES INC. 680- 180 0 P 04/05/96 12/31/05 0.00 05/01/96 64,749.96 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcent of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk. - ----------------------------------------------------------------------------------------------------------------------------------- MR. FREEZE RECORDS ELLIOTT MCKINNIE Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- SPIN-N-PIN DRYCLEANERS F/K/A RALEIGH BLVD LAUNDRY & Full 0 Full 0 Full 0 01/01/02 08/31/01 0.00 6.00 440,000 Y 0.00 6.00 0 Y 0.00 6.00 306,200 Y 0.00 6.00 342,800 Y 0.00 6.00 379,500 Y 0.00 6.00 416,200 Y 0.00 6.00 440,000 Y - ----------------------------------------------------------------------------------------------------------------------------------- SPIN-N-PIN DRYCLEANERS F/K/A RALEIGH BLVD LAUNDRY & Full 0 Full 0 Full 0 01/01/02 08/31/01 0.00 6.00 440,000 Y ADVANCE AUTO #4146 ADVANCE STORES INC. Full 0 Full 0 None 0 01/01/06 12/31/10 10.17 2.50 2,590,000 Y 01/01/11 12/31/15 11.19 2.50 0 Y - -----------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Raleigh Boulevard - Facing North [GRAPHIC OMITTED] Raleigh Boulevard - Facing South [GRAPHIC OMITTED] Glascock Street - Facing East [GRAPHIC OMITTED] Glascock Street - Facing West [GRAPHIC OMITTED] Front View of Subject Property [GRAPHIC OMITTED] View of Subject Property from Glascock Street [GRAPHIC OMITTED] View of Shops from Raleigh Boulevard [GRAPHIC OMITTED] Side View of Subject Property [GRAPHIC OMITTED] Rear View of Subject Property [GRAPHIC OMITTED] Rear View of Subject Property [GRAPHIC OMITTED] Rear View of Subject Property [GRAPHIC OMITTED] View of Advance Auto Part store from Raleigh Boulevard - Outlot This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study of: BELVEDERE PLAZA 3100 North Main Street Anderson, Anderson County, South Carolina Prepared By: O. Marshall Dodds, MAI Date of Market Study: May 8, 1997 [Letterhead of O. MARSHALL DODDS CO., INC.] May 12, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Belvedere Plaza 3100 North Main Street Anderson, Anderson County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 8, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 158,739 square feet of leasable area. The center was originally constructed in 1965 with an addition being built in 1976 and a renovation in 1992. It originally had a food store, drug store, variety store and shops. At this time, there are not any strong anchor tenants such as Wal-Mart, Winn- Dixie Stores, Revco or similar type tenants, but there are a number of small shops and there are two occupants that are occupying large stores which are Hamrick's and Farmer's Furniture. The subject property is currently 72.65 percent occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds, MAI ------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) OMD:mm EXECUTIVE SUMMARY ================================================================================ Regional Perspective Anderson is situated in the Western portion of South Carolina. I-85 runs through the county as well as extending into Georgia and extends north through South Carolina and North Carolina. There are more than 163 manufacturing and allied firms in Anderson. The principal industries within the county are textile, clothing, sewing machines, fiberglass, fishing tackle and automobile tires. The major companies are BASF Corporation, Owens Corning Fiberglass, Bosch Corporation and Michelin Corporation. The unemployment rate for Anderson County as of 1994(most recent) was 5.8 percent while the statewide rate was 6.3 percent for that year. Neighborhood and Site The neighborhood is located in the northern portion of Anderson on North Main Street. The downtown area is located to the south and I-85 is located to the north. This neighborhood has experienced significant growth over the past ten to fifteen years. Also, their were commercial developments that were constructed in this neighborhood during the 1960's. The Anderson Mall is located on Main Street at Mall Road with the major tenants being Sears, JC Penny's and Belk's. Other developments located in the neighborhood include Pruitt Shopping Center, the Bi-Lo Shopping Center, the Market Place Shopping Center, the Northtown Plaza (Wal-Mart Superstore, Sam's Club and shops). The Boulevard Market Fair was constructed on North Main Street during 1995 with the major tenants being K-Mart and Publix. There are older developments and also newer developments in the neighborhood. Some of the properties such as Belvedere Plaza have been renovated during the past few years. Physical features are as follows: 1. Size 16.5 acres or 703,494 square feet 2. Identity 3100 North Main Street TMS #122-13-01-002 3. Shape irregular 4. Topography slopes upward away from North Main Street towards the rear of the site 5. Accessability good 6. Utilities municipal Physical Description Building features are as follows: 1. Size (net) 158,739 square feet 2. Layout & Design 1 story-variety store, furniture store, shops 3. Parking Spaces 914, 5.76 per 1,000 square of net area 4. Construction brick and glass front with concrete block on side and rear and metal seamed roof 1 Market Position and Marketability Conclusions The subject property is located in the northern portion of the City of Anderson. This is the shopping area within the city. There are newer shopping centers such as Northtown Plaza with Sam's Club, Wal-Mart Superstore and shops that was constructed in 1994 and the Boulevard Market Fair being constructed in 1995 having K-Mart, Publix and shops as the major tenants. The Anderson Mall is located within the neighborhood as well as the Market Square Shopping Center. Several other small strip centers are located throughout the immediate neighborhood as well as Lowe's Home Improvement Center and Rex Appliance Store. The subject property is located in this neighborhood and was renovated in 1992. The occupancy rate at this time is 72.65% with most of the vacancies being in the smaller shops. The rental range for subject property in these small shops from $3.25 to $10.50 per square foot. The Market Place has Winn-Dixie as the major tenant and the shops are being rented from $7.00 to $9.50 per square foot. Mall Parade Center is located on North Main Street at Mall Road. There are not any major tenants in this center, but the rental rates are ranging from $10.00 to $12.00 per square foot. Mall Corners is located on North Main Street and this is a strip center without any anchor tenants. The rental rates for the stores are ranging from $10.00 to $12.00 per square foot. The Crossroad Plaza is located in the southwestern section of the city with major tenants being Wal-Mart, Ingles and Revco. The rental rates for the shops in this center range from $8.00 to $10.50 per square foot. The subject property has Hamrick's and Farmer's Furniture occupying large stores with the rents being $3.50 per square foot for Farmer's Furniture and $4.25 for Hamrick's. The shop space ranges from $3.25 to $10.50 per square foot. These rental rates are reasonable for subject neighborhood. The current vacancy rate for subject property is expected to improve. There are no known new shopping centers planned for the northern portion of the neighborhood. Trends The subject property is located in northern portion of the City of Anderson. The development has been good over the past 30 years with commercial type properties along North Main Street. Single family dwellings are located off the major traffic arteries as well as multi-family properties. The demand and desirability for the neighborhood has been good. All trends are favorable at this time and expected to continue. 2 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================ I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Belvedere Plaza Market Place Mall Parade Center ------------------------ -------------------------- ----------------------------- b. Street 3100 North Main St. North Main St. North Main St. at Mall Rd. ------------------------ -------------------------- ----------------------------- c. City Anderson, SC Anderson, SC Anderson, SC ------------------------ -------------------------- ----------------------------- d. Distance from subject N/A 4 Blocks 3 Blocks ------------------------ -------------------------- ----------------------------- e. Contact Edens Avant, Inc. Langsten Real Estate, Inc. Berry Realtors ------------------------ -------------------------- ----------------------------- f. Phone 803-799-4420 864-369-2848 404-255-6994 ------------------------ -------------------------- ----------------------------- 2. Attributes a. Year built 1965 (Rehab. 1992) 1975 1988 ------------------------ -------------------------- ----------------------------- b. Net sq. Ft. 158,739 60,000 13,347 ------------------------ -------------------------- ----------------------------- c. # building 3 1 1 ------------------------ -------------------------- ----------------------------- d. #stories 1 1 1 ------------------------ -------------------------- ----------------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A ------------------------ -------------------------- ----------------------------- f. # elevators N/A N/A N/A ------------------------ -------------------------- ----------------------------- g. Parking Adequate Adequate Adequate ------------------------ -------------------------- ----------------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ------------------------ -------------------------- ----------------------------- i. Vacancy % 27.35% 0% 0% ------------------------ -------------------------- ----------------------------- Hamrick's, Farmer's j. Anchors, if Retail Furniture, McDonald's Winn-Dixie, Revco N/A ------------------------ -------------------------- -----------------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification Mall Corners Crossroad Plaza a. Name ---------------------- ----------------------- North Main St. Pearman Dairy Rd. b. Street ---------------------- ----------------------- Anderson, SC Anderson, SC c. City ---------------------- ----------------------- 2 Blocks 3.5 miles d. Distance from subject ---------------------- ----------------------- Developers Diversified e. Contact ---------------------- ----------------------- 910-799-9293 f. Phone ---------------------- ----------------------- 2. Attributes 1988 1990 a. Year built ---------------------- ----------------------- 10,000 163,809 b. Net sq. Ft. ---------------------- ----------------------- 1 1 c. # building ---------------------- ----------------------- 1 1 d. #stories ---------------------- ----------------------- e. Avg. Floor plate size N/A N/A (sq. Ft.), if office ---------------------- ----------------------- N/A N/A f. # elevators ---------------------- ----------------------- Adequate Adequate g. Parking ---------------------- ----------------------- Brick/Concrete Block Brick/Concrete Block h. Construction Type ---------------------- ----------------------- 0% 4.0% i. Vacancy % ---------------------- ----------------------- Wal-Mart, Ingles, N/A Revco j. Anchors, if Retail ---------------------- ----------------------- Comments: Comparables # 1, #2 and #3 are located in the immediate neighborhood of subject while Comparable #4 is located in the southwestern section of the city. Comparables #1 and #4 are anchored by major tenants whereas Comparables #2 and #3 are smaller and do not have anchor tenants. These comparables do give an indication of the rental rates for the neighborhood. Subject property is generating rental rates somewhat less than these shopping centers, but subject does not have a strong anchor tenants such as Comparables #1 and #2. Comparables #2 and #3 are much smaller. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Asking Rental Rate a. Anchor Space $3.50 - $4.25 N/A N/A ------------------------ ------------------------ ------------------------ b. Shop Space $3.25 - $10.50 $7.00 - $9.50 $10.00 - $12.00 ------------------------ ------------------------ ------------------------ 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ------------------------ ------------------------ ------------------------ 3. Rent Concessions None None None ------------------------ ------------------------ ------------------------ 4. Effective Rent $3.25- $10.50 $7.00 - $9.50 $10.00 - $12.00 ------------------------ ------------------------ ------------------------ 5. TI Allowance None None None ------------------------ ------------------------ ------------------------ 6. Expense Stop None None None ------------------------ ------------------------ ------------------------ 7. Length of Lease Term 3 - 5 years (shop) 3 - 5 years (shop) 3 - 5 years (shop) ------------------------ ------------------------ ------------------------ 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% ------------------------ ------------------------ ------------------------ 9. Percentage Rent (per lease terms) None None None ------------------------ ------------------------ ------------------------ 10. Historical Annual Absorption/sq.ft. N/A N/A N/A ------------------------ ------------------------ ------------------------ 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A ------------------------ ------------------------ ------------------------ C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A similar similar ------------------------ ------------------------ ------------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A ---------------------- ---------------------- b. Shop Space $10.00 - $12.00 $8.00 - $10.50 ---------------------- ---------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net ---------------------- ---------------------- 3. Rent Concessions None None ---------------------- ---------------------- 4. Effective Rent $10.00 - $12.00 $8.00 - $10.50 ---------------------- ---------------------- 5. TI Allowance None None ---------------------- ---------------------- 6. Expense Stop None None ---------------------- ---------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 - 5 years (shop) ---------------------- ---------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% ---------------------- ---------------------- 9. Percentage Rent (per lease terms) None None ---------------------- ---------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A ---------------------- ---------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A ---------------------- ---------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) similar similar ---------------------- ---------------------- D. EXPLAIN RANKING/COMMENTS: The comparables that have been used are considered to be similar to subject. The rental rates for these comparables are slightly higher than the rental rates for subject, but the similarities for the properties does exist. Subject property is a very large property containing approximately 158,739 square feet. The rental rates being achieved at subject property are slightly lower than these comparables. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Market Place Location: N. Main Steet Anderson, SC Year Built: 1975 Total Size: 60,000 SF Vacant Space: None Vacancy Rate: 0 % Rental Range: $7.00 to $9.50 per square foot Tenant Expenses: Remarks: This center is anchored with Winn-Dixie. Exposure from N. Main Street is good. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Mall Parade Center Location: North Main Street at Mall Road Anderson, South Carolina Year Built: 1988 Total Size: 13,347 SF Vacant Space: None Vacancy Rate: 0 % Rental Range: $10.00 to $12.00 Tenant Expenses: Triple Net Remarks: This is a strip center for specialty stores. There are 10 in this center. Tenants are Subway, NationsCredit, Star Nails, The News, Unique, First Family Loans, Mail Boxes, Etc., Security Pacific Financial Services, Nationwide Insurance and American Fast Photo & Camera. 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Mall Corners Location: North Main Street Anderson, South Carolina Year Built: 1988 Total Size: 10,000 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $10.00 - $12.00 PSF Tenant Expenses: Triple Net Remarks: This strip center has operated at a high occupancy rate. Tenants are LensCrafters, Turner's Jewelers, Heavenly Ham and One-Way Eyeglasses. Heavenly Ham relocated from the Mall Parade Center across the street. 7 Comparable Rental No. 4 ================================================================================ [GRAPHIC OMITTED] Name: Crossroad Plaza Location: Pearman Dairy Road Anderson, South Carolina Year Built: 1990 Total Size: 163,809 SF Vacant Space: 6,552 SF Vacancy Rate: 4.0% Local Rent Range: $8.00 - $10.50 PSF Tenant Expenses: Triple Net Remarks: There are two vacant shops in this center. The major tenants are Wal- Mart, Ingles and Revco. A local furniture store is having its grand opening as of the date of this study. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES ================================================================================
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Belvedere Plaza St. Andrews Crossing Eastgate Shopping Center ------------------------ ------------------------ -------------------------- NWC Whiskey Rd. & b. Street Address 3100 North Main St. 817 St. Andrews Road Eastgate Dr. ------------------------ ------------------------ -------------------------- c. City Anderson, SC Columbia, SC Aiken, SC ------------------------ ------------------------ -------------------------- d. Distance from Subject N/A 117 miles 97 miles ------------------------ ------------------------ -------------------------- 2. Attributes a. Year Built 1961 (Rehab. 1992) 1994 1995 ------------------------ ------------------------ -------------------------- b. Net sq. feet 158,739 SF 66,910 SF 75,716 SF ------------------------ ------------------------ -------------------------- c. # Buildings 3 1 1 ------------------------ ------------------------ -------------------------- d. # of Stories 1 1 1 ------------------------ ------------------------ -------------------------- e. Vacancy % 27.35% 0% 7.21% ------------------------ ------------------------ -------------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 ------------------------ ------------------------ -------------------------- b. Sales Price PSF N/A $97.89 $88.16 ------------------------ ------------------------ -------------------------- c. Date N/A 05-25-94 09-28-95 ------------------------ ------------------------ -------------------------- d. NOI at time of Sale N/A $634,797 $782,704 ------------------------ ------------------------ -------------------------- e. Cap. Rate N/A 9.69% 9.86% ------------------------ ------------------------ -------------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A superior similar ------------------------ ------------------------ --------------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name One Norman Center Paw Creek Commons -------------------- ---------------------- 19706 One Norman E/S Little Rock Road b. Street Address Blvd. at Freedom Drive -------------------- ---------------------- c. City Cornelius, NC Charlotte, NC -------------------- ---------------------- d. Distance from Subject 130 miles 127 miles -------------------- ---------------------- 2. Attributes a. Year Built 1993 1996 -------------------- ---------------------- b. Net sq. feet 54,185 SF 66,050 SF -------------------- ---------------------- c. # Buildings 1 1 -------------------- ---------------------- d. # of Stories 1 1 -------------------- ---------------------- e. Vacancy % 6.98% 2.73% -------------------- ---------------------- 3. Sales Information a. Sales Price $4,650,000 $5,384,000 -------------------- ---------------------- b. Sales Price PSF $85.82 $77.52 -------------------- ---------------------- c. Date 10-12-95 03-25-97 -------------------- ---------------------- d. NOI at time of Sale $474,591 $517,412 -------------------- ---------------------- e. Cap. Rate 9.68% 9.61% -------------------- ---------------------- 4. Rank Relative to Subject (inferior, similar, superior) similar superior -------------------- ---------------------- Explain Ranking/Comments: The comparable sales that have been used with subject property are centers that have large stores that were formerly occupied by Wal- Mart. These centers will be renovated and the Wal-Mart stores will be divided into smaller stores in the future. Subject property has two or three large stores, but there are a number of smaller stores in subject. It is thought that the sales can be used to make comparison with subject. 9 COMPARABLE IMPROVED SALES Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS 6012 -1 -1 NAME St. Andrews Crossing LOCATION St. Andrews Road and I-26, Columbia, SC GRANTOR Hayley-Redd, L.P. GRANTEE F.A.C. Properties DEED REFERENCE Book 1199, Page 331 DATE May 25, 1994 SALES PRICE $6,550,000 ADJUSTED SALES PRICE $6,550,000 SIZE BUILDING 66,910 SALES PRICE PER S.F. $97.89 SIZE LAND (ACRES) 8.08 SIZE LAND (S.F.) 351,965 YEAR BUILT 1994 LAND/BUILDING RATIO 5.26 To 1 UTILITIES All available VERIFICATION Deed ZONING Commercial FINANCING Market EFFECTIVE GROSS INCOME $686,905 EGIM 9.54 NET OPERATING INCOME $634,797 OVERALL RATE 9.69% VERIFICATION Public Records TYPE OF PURCHASER Private Investor COMMENTS This was an arms length sale. This neighborhood shopping center is anchored by Kroger and is located in a good commercial area with good accessibility and fair exposure. The construction is brick veneer and concrete block. (503) 10 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] NAME Eastgate Shopping Center LOCATION Northwest Corner of Whiskey Road and Eastgate Drive, Aiken, SC GRANTOR PDG Aiken Partners, LP GRANTEE Southeast U.S. Retail, LP DATE Sep 28, 1995 SALES PRICE $6,675,000 SIZE BUILDING 75,716 SALES PRICE PER S.F. $88.16 SIZE LAND (ACRES) 8.79 SIZE LAND (S.F.) 382,892 YEAR BUILT 1995 LAND/BUILDING RATIO 5.06 To 1 UTILITIES All available VERIFICATION Public Records ZONING Commercial FINANCING Cash to seller GROSS POTENTIAL INCOME $782,704 EFFECTIVE GROSS INCOME $782,704 GROSS INCOME MULTIPLE 8.53 EGIM 8.53 NET OPERATING INCOME $657,896 OVERALL RATE 9.86% TYPE OF PURCHASER Private Investor COMMENTS Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. (643) 11 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] NAME One Norman Center LOCATION 19706 One Norman Boulevard, Cornelius, Mecklenburg County, NC GRANTOR One Norman Center, LP GRANTEE Lucky Realty DEED REFERENCE Book 8325, Page 721 DATE Oct 12, 1995 SALES PRICE $4,650,000 SIZE BUILDING 54,185 SALES PRICE PER S.F. $85.82 SIZE LAND (ACRES) 5.69 SIZE LAND (S.F.) 247,856 YEAR BUILT 1993 LAND/BUILDING RATIO 4.57 To 1 UTILITIES All Public VERIFICATION Public Records ZONING CUB-2 FINANCING Cash to Seller GROSS POTENTIAL INCOME $474,591 EFFECTIVE GROSS INCOME $474,591 GROSS INCOME MULTIPLE 9.80 EGIM 9.80 NET OPERATING INCOME $450,188 OVERALL RATE 9.68% TYPE OF PURCHASER Private Investor COMMENTS This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot. Triple net lease. (716) 12 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] TMS 59 -231 -22 ,23 pt. NAME Paw Creek Commons LOCATION East side of Little Rock Road at Freedom Drive, Charlotte, NC GRANTOR Paw Creek, LLC GRANTEE Frastacky and Associates DATE Mar 25, 1997 SALES PRICE $5,120,000 ADJUSTED SALES PRICE $5,384,000 SIZE BUILDING 66,050 SALES PRICE PER S.F. $77.52 SIZE LAND (ACRES) 9.82 SIZE LAND (S.F.) 427,759 YEAR BUILT 1996 LAND/BUILDING RATIO 6.48 To 1 UTILITIES Municipal VERIFICATION Public Records ZONING CC, Commercial Center FINANCING Cash to seller GROSS POTENTIAL INCOME $568,840 EFFECTIVE GROSS INCOME $552,054 GROSS INCOME MULTIPLE 9.00 EGIM 9.27 NET OPERATING INCOME $517,412 OVERALL RATE 9.61% TYPE OF PURCHASER Private Investor COMMENTS The overall rate of 10.10 percent has been adjusted down by 50 basis points since the sales contract is pre-construction. The major tenants are Winn Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. Anchor income is 79.41 percent of gross income. (793) 13 ADDENDA o Anderson County Demographics o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 USA COUNTIES 1996 Geographic Area: Anderson, SC (45007) Table: GENERAL PROFILE - -------------------------------------------------------------------------------- POPULATION AND HOUSING (Bureau of the Census) Total resident population: 1995 ........................................................ 154,478 Percent 65 years and over ................................. 13.5 1990 ........................................................ 145,177 1980 ........................................................ 133,235 Occupied housing units, 1990 .................................... 55,481 Percent owner occupied ...................................... 75.2 BIRTHS AND DEATHS (National Center for Health Statistics) Births, 1993 ................................................ 1,972 Per 1,000 resident population ............................. 13.1 Percent to mothers under 20 years of age .................. 19.7 Deaths, 1993 ................................................ 1,480 Per 1,000 resident population ............................. 9.8 Infant deaths per 1,000 live births, 1993 ................... 14.7 EDUCATION (Bureau of the Census) Persons 25 years and over, 1990 ............................. 95,330 Percent high school graduates ............................. 64.0 Percent college graduates ................................. 12.9 LABOR FORCE (Bureau of Labor Statistics) Civilian labor force, 1994 .................................. 80,372 Percent unemployed ........................................ 5.8 PRIVATE NONFARM ESTABLISHMENTS (Bureau of the Census) Total establishments, 1993 .................................. 3,202 Percent retail trade ...................................... 29.2 Percent services .......................................... 32.1 Paid employees, 1993 (pay period including March 12) ........ 49,199 Annual payroll, 1993 ($1,000) ............................... 968,525 PERSONAL INCOME (Bureau of Economic Analysis) Total personal income, 1993 ($1,000) ........................ 2,495,247 Per capita (dollars) ...................................... 16,545 AGRICULTURE (Bureau of the Census) Number of farms, 1992 ....................................... 1,076 Land in farms as percent of total land .................... 35 RETAIL TRADE (Bureau of the Census) Retail sales, 1992 ($1,000) ................................. 1,062,066 Per capita (dollars) ...................................... 7,172 COMMERCIAL AND SAVINGS BANKS (Fed. Deposit Insurance Corp.) Number of offices, June 30, 1994 ............................ 39 Total deposits ($1,000) ................................... 79l,6l0 SOCIAL PROGRAMS (Social Security Administration) Total Social Security recipients, December 1993 ............. 29,995 Retired workers ........................................... 18,435 Supplementary Security Income recipients, December 1994 ..... 3,177 FEDERAL FUNDS AND GRANTS (Bureau of the Census) Total direct expenditures or obligations per capita: 1994 (dollars) ............................................ 2,955 1990 (dollars) ............................................ 2,305 - -------------------------------------------------------------------------------- (NA) Not available. (D) Avoid disclosure of confidential information. (X) Not applicable. (S) Does not meet publication standards. (Z) Value > 0 but < half unit of measure shown. NOTE: 0 data may indicate geographic/data footnotes. Source: U.S. Bureau of the Census, USA Counties 1996 CD-ROM. [GRAPHIC OMITTED] COMPARABLE RENTALS MAP [GRAPHIC OMITTED] COMPARABLE SALES MAP SITE PLAN BELVEDERE PLAZA [GRAPHIC OMITTED] EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 40 Property: BELVEDERE PLAZA 3100 NORTH MAIN STREET ANDERSON, SC 29621 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- FARMERS FURNITURE WAREHOUSE WAREHOUSE HOME FURNISHINGS DI 619-40 5,000 02/01/93 01/31/99 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- PIER 1 IMPORTS #427 PIER 1 IMPORTS (U.S.) INC. 619-45 9,094 11/09/94 11/30/04 8.94 12/01/94 80,703.00 9.44 12/01/97 85,186.44 9.94 12/01/00 89,670.00 - ------------------------------------------------------------------------------------------------------------------------- HAMRICK'S INC. HAMRICK'S INC., A.S.C. CORP. 619-50 40,860 08/16/90 08/31/00 0.00 0.00 4.25 10/01/90 173,655.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- SIMPLY 6 SIMPLY FASHION STORES, LTD. 619-60 6,000 11/01/93 10/31/98 3.25 11/01/93 19,500.00 - ------------------------------------------------------------------------------------------------------------------------- Available 619-65 3,000 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- DIAMONDS-N-GOLD DIRECT T.W. TOWNSEND/J.W. SITZMAN/M. 619-70 2,000 10/13/94 10/31/97 7.80 12/01/94 15,600.00 - ------------------------------------------------------------------------------------------------------------------------- HOBBYTOWN USA LAWRENCE S. HENRY 619-80 2,232 06/01/93 05/31/99 0.00 0.00 7.25 07/01/92 16,182.00 7.50 06/01/94 16,740.00 8.00 06/01/95 17,856.00 8.50 06/01/96 18,972.00 - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ FARMERS FURNITURE WAREHOUSE WAREHOUSE HOME FURNISHINGS DI Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ PIER 1 IMPORTS #427 PIER 1 IMPORTS (U.S.) INC. Full 0 Full 0 Full 0 12/01/04 11/30/09 10.50 0.00 0 12/01/09 11/30/14 11.00 0.00 0 12/01/14 11/30/19 11.50 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ HAMRICK'S INC. HAMRICK'S INC., A.S.C. CORP. PRS 1990 None 0 Full 0 09/01/00 08/31/05 0.00 0.00 0 09/01/05 08/31/10 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ SIMPLY 6 SIMPLY FASHION STORES, LTD. PRS 1994 PRS 1994 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ DIAMONDS-N-GOLD DIRECT T.W. TOWNSEND/J.W. SITZMAN/M. Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ HOBBYTOWN USA LAWRENCE S. HENRY Full 0 Full 0 Full 0 06/01/96 05/31/99 0.00 0.00 0 06/01/96 05/31/99 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 41 Property: BELVEDERE PLAZA 3100 NORTH MAIN STREET ANDERSON, SC 29621 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- TRANSOUTH FINANCIAL CORP. ASSOCIATES CORP. OF NORTH AME 619-90 1,800 01/01/95 02/28/00 0.00 0.00 0.00 0.00 8.00 01/01/95 14,400.00 - ------------------------------------------------------------------------------------------------------------------------- BENEFICIAL FINANCE BENEFICIAL SOUTH CAROLINA, IN 619-100 2,000 04/08/97 04/30/02 8.50 04/01/97 16,999.92 0.00 0.00 9.00 04/01/98 18,000.00 - ------------------------------------------------------------------------------------------------------------------------- BOOK WAREHOUSE OF ANDERSON EATON & SON BOOK PEDDLERS, IN 619-110 2,200 07/01/96 06/30/99 0.00 0.00 7.50 02/01/93 16,500.00 8.50 07/01/96 18,699.96 - ------------------------------------------------------------------------------------------------------------------------- HOME CURTAIN, BED & BATH A BUS. OF TEXTILE OUTLET OF A 619-120 4,669 02/01/92 01/31/02 5.00 02/01/92 23,340.00 5.25 02/01/93 24,504.00 5.50 02/01/94 25,680.00 5.75 02/01/95 26,844.00 6.00 02/01/96 28,020.00 6.25 02/01/97 29,181.24 6.50 02/01/98 30,348.48 6.75 02/01/99 31,515.72 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ TRANSOUTH FINANCIAL CORP. ASSOCIATES CORP. OF NORTH AME Full 0 Full 0 Full 0 03/01/00 02/28/05 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ BENEFICIAL FINANCE BENEFICIAL SOUTH CAROLINA, IN Full 0 Full 0 Full 0 04/08/02 04/07/07 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ BOOK WAREHOUSE OF ANDERSON EATON & SON BOOK PEDDLERS, IN Full 0 Full 0 Full 0 07/01/99 06/30/02 0.00 5.00 0 Y 0.00 5.00 330,000 Y 0.00 5.00 374,000 Y - ------------------------------------------------------------------------------------------------------------------------------------ HOME CURTAIN, BED & BATH A BUS. OF TEXTILE OUTLET OF A Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 42 Property: BELVEDERE PLAZA 3100 NORTH MAIN STREET ANDERSON, SC 29621 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- HOME CURTAIN, BED & BATH A BUS. OF TEXTILE OUTLET OF A 619-120 4,669 02/01/92 01/31/02 7.00 02/01/00 32,682.96 7.25 02/01/01 33,850.20 - ------------------------------------------------------------------------------------------------------------------------- CLASSIC WINDOW DESIGN, INC. CLASSIC WINDOW DESIGN, INC. 619-130 750 03/12/97 03/31/00 0.00 0.00 10.50 04/01/97 7,875.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- Available 619-140 8,204 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- PIECE GOODS #0300 PIECE GOODS SHOPS CO., L.P. 619-150 7,000 11/01/91 10/31/01 0.00 0.00 5.14 12/01/91 36,000.00 0.00 0.00 5.71 11/01/96 39,999.96 - ------------------------------------------------------------------------------------------------------------------------- Available 619-160 10,319 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- FARMERS FURNITURE WAREHOUSE HOME FURNISHINGS DI 619-180 17,400 02/01/93 01/31/99 0.00 0.00 3.25 02/01/93 56,550.00 3.50 02/01/96 60,900.00 - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ HOME CURTAIN, BED & BATH A BUS. OF TEXTILE OUTLET OF A Full 0 Full 0 Full 0 0.00 0.00 0 Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ CLASSIC WINDOW DESIGN, INC. CLASSIC WINDOW DESIGN, INC. Full 0 Full 0 Full 0 09/15/88 09/14/91 0.00 0.00 0 09/15/91 09/14/94 0.00 0.00 0 04/01/00 03/31/03 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ PIECE GOODS #0300 PIECE GOODS SHOPS CO., L.P. Full 0 Full 0 Full 0 11/01/01 10/31/06 6.43 4.00 650,000 11/01/06 10/31/11 7.29 4.00 750,000 0.00 4.00 850,000 0.00 4.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ FARMERS FURNITURE WAREHOUSE HOME FURNISHINGS DI Fixed 0 PRS 1991 Fixed 0 02/01/99 01/31/02 3.75 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 43 Property: BELVEDERE PLAZA 3100 NORTH MAIN STREET ANDERSON, SC 29621 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- Available 619- 190 7,200 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- Available 619- 195 4,516 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- CATHERINES, INC. CATHERINES STORES CORPORATION 619- 200 2,825 07/01/91 06/30/01 0.00 0.00 0.00 0.00 8.00 07/01/93 22,599.96 8.50 07/01/96 24,012.48 9.00 07/01/98 25,425.00 - ------------------------------------------------------------------------------------------------------------------------- Available 619- 210 4,000 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- Available 619- 220 2,320 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- Available 619- 230 1,400 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- BELVEDERE LIQUOR STORE MR. ALVIN T. FLEISHMAN 619- 240 1,470 05/01/95 04/30/98 7.00 06/01/91 10,290.00 7.60 05/01/94 11,178.00 8.00 05/01/95 11,760.00 - ------------------------------------------------------------------------------------------------------------------------- Available 619- 245 2,450 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ CATHERINES, INC. CATHERINES STORES CORPORATION Full 0 Full 0 Full 0 07/01/96 06/30/01 8.50 5.00 500,000 0.00 5.00 600,000 0.00 5.00 0 0.00 5.00 0 0.00 5.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ BELVEDERE LIQUOR STORE MR. ALVIN T. FLEISHMAN Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 44 Property: BELVEDERE PLAZA 3100 NORTH MAIN STREET ANDERSON, SC 29621 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- PLEJ'S OSTROW TEXTILE CO., INC. 619- 250 8,100 06/01/87 05/31/98 0.00 0.00 4.30 06/01/92 34,830.00 4.80 06/01/95 38,880.00 - ------------------------------------------------------------------------------------------------------------------------- MCDONALD'S MCDONALD'S CORPORATION 619- 260 0 P 02/06/92 02/05/02 0.00 06/01/92 42,420.00 0.00 03/01/97 51,600.00 - ------------------------------------------------------------------------------------------------------------------------- BLIMPIE'S BLIMPIE, E.S.C., INC. 619- 280 2,000 P 10/01/93 09/30/03 0.00 0.00 0.00 0.00 8.50 10/01/93 17,000.04 9.50 10/01/98 18,999.96 - ------------------------------------------------------------------------------------------------------------------------- BLOCKBUSTER #92566 - BELVEDER 619- 290 0 P 09/01/89 08/31/99 0.00 0.00 0.00 10/01/89 82,880.04 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ PLEJ'S OSTROW TEXTILE CO., INC. PRS 1987 None 0 Fixed 0 06/01/92 05/31/95 4.30 2.50 0 Y 06/01/95 05/31/98 4.80 2.50 1,393,200 Y 0.00 2.50 1,555,200 Y - ------------------------------------------------------------------------------------------------------------------------------------ MCDONALD'S MCDONALD'S CORPORATION None 0 None 0 None 0 02/06/97 02/05/02 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ BLIMPIE'S BLIMPIE, E.S.C., INC. Full 0 Full 0 Full 0 10/01/03 09/30/08 0.00 6.00 425,000 10/01/08 09/30/13 0.00 6.00 0 0.00 6.00 0 0.00 6.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ BLOCKBUSTER #92566 - BELVEDER Full 0 Full 0 Full 0 09/01/94 08/31/99 0.00 0.00 0 09/01/99 08/31/04 14.89 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied 115,330 Current Annual Base Rent 722,618.64 Available 43,409 Total.... 158,739
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] North Main Street - Facing North [GRAPHIC OMITTED] North Main Street - Facing South [GRAPHIC OMITTED] Front View of Subject from Outlot [GRAPHIC OMITTED] Front View of Subject [GRAPHIC OMITTED] Front View of Subject [GRAPHIC OMITTED] Wiew of Former Farmer's Furniture store located to the rear of subject [GRAPHIC OMITTED] Front and Side View of Subject [GRAPHIC OMITTED] Rear View of Subject [GRAPHIC OMITTED] Rear View of Subject [GRAPHIC OMITTED] Rear View of Subject Rear View of Subject [GRAPHIC OMITTED] This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study of: LAKESIDE SQUARE AND LAKESIDE PLAZA SHOPPING CENTER 300 and 302 Pearman Dairy Road Anderson, Anderson County, South Carolina Prepared By: O. Marshall Dodds, MAI Date of Market Study: May 8, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] May 12, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Lakeside Square and Lakeside Plaza Shopping Center 300 and 302 Pearman Dairy Road Anderson, Anderson County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 8, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of Lakeside Square which is a neighborhood shopping center that contains 48,441 square feet of leasable area and Lakeside Plaza with 137,507 square feet. Lakeside Square was constructed in 1975 and 1976 while Lakeside Plaza was constructed in 1979-1980 with renovations having been completed in 1991. The anchor tenants at Lakeside Square are Dollar General and Babcock Home Furnishings Center and this center is currently 33.53% occupied. The anchor tenants at Lakeside Plaza are Bi-Lo, Big Lots and Revco and this center is experiencing a 96 percent occupancy rate. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds --------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) OMD:mm [LOGO] EXECUTIVE SUMMARY ================================================================================ Regional Perspective Anderson is situated in the Western portion of South Carolina. I-85 runs through the county as well as extending into Georgia and extends north through South Carolina and North Carolina. There are more than 163 manufacturing and allied firms in Anderson. The principal industries within the county are textile, clothing, sewing machines, fiberglass, fishing tackle and automobile tires. The major companies are BASF Corporation, Owens Corning Fiberglass, Bosch Corporation and Michelin Corporation. The unemployment rate for Anderson County as of 1994 (most recent) was 5.8 percent while the statewide rate was 6.3 percent for that year. Neighborhood and Site The neighborhood is located to the west of the downtown area of Anderson and is around the intersection of Pearman Dairy Road and West Whitner Street. The makeup of the neighborhood consists of commercial type properties along the major traffic arteries and single family residential properties off of the major traffic arteries. There are several multi-family projects that are located throughout the neighborhood. The Lakeside Square Shopping Center is located adjacent to the Lakeside Plaza Shopping Center. The major tenants in the Lakeside Plaza Shopping Center are Bi-Lo Stores, Revco Drugs, Family Dollar Stores, and local tenants. The former Wal-Mart Store now has Big Lots occupying approximately 1/2 of the store with the remainder being vacant. Physical features for Lakeside Square Shopping Center are as follows: 1. Size 5.19 acres or 183,605 SF 2. Identity 300 Pearman Dairy Road TMS# 123-05-03-002 3. Shape Irregular 4. Topography Slopes downward away from Pearman Dairy Road, but is level from the mid portion to the rear 5. Accessibility Good 6. Utilities Municipal Physical Description Building features for the Lakeside Square Shopping Center are as follows: 1. Size (net) 48,441 SF 2. Layout & Design One story - vacant food store, variety store, furniture store, Radio Shack, and three vacant shops 3. Parking Spaces 198 4.09 per 1,000 SF of net area 4. Construction Brick and glass front with concrete block on side and rear and metal seam roof. 1 [LOGO] Physical features for Lakeside Plaza Shopping Center are as follows: 1. Size 12.26 acres or 534,046 SF 2. Identity 300 Pearman Dairy Road TMS# 123-05-03-007 3. Shape Irregular 4. Topography Slopes downward away from Pearman Dairy Road 5. Accessibility Good 6. Utilities Municipal Physical Description Building features for the Lakeside Plaza Shopping Center are as follows: 1. Size (net) 137,507 SF 2. Layout & Design One story - food store, variety store, drug store and four vacant shops 3. Parking Spaces 682 4.96 per 1,000 SF of net area 4. Construction Brick and glass front with concrete block on side and rear and metal seam roof. Market Position and Marketability Conclusions The subject property is located in the western section of Anderson along Pearman Dairy Road at the intersection with Whitner Street. Most of the growth or retail facilities is located in the northern portion of Anderson along North Main Street which is US Highway #76-178. The centers in this area include the Anderson Mall, Belvedere Shopping Center, Pruitt Shopping Center, Marketplace Shopping Center and Northtown Plaza. The Boulevard Market Fair Shopping Center was constructed on North Main Street during 1995 with the major tenants being K-Mart and Publix Supermarket. The Northtown Shopping Center has Wal-Mart and Sam's Wholesale Club as major tenants with approximately 30,000 square feet of shops. Subject property is an older shopping center, but the Crossroads Shopping Center is located in subject neighborhood and was constructed in 1990. The major tenants are Wal-Mart, Ingles and Revco. The shop space is being rented for $8.00 to $10.50 per square foot. The Belvedere Plaza is located on North Main Street in the northern portion of Anderson. This shopping center was renovated in 1992. The anchors are Hamrick's, Farmer's Furniture and McDonald's. The rental rates for the shops range from $3.25 to $10.50 per square foot. The Marketplace is located on North Main Street in the northern portion of Anderson. This center was constructed in 1975 and contains 60,000 square feet. The rental rates for the shops range from $7.50 to $9.50 per square foot. The Watson Village is located on South Main Street and would be considered to be in subject neighborhood. This center was constructed in 1968 and contains 60,000 square feet. The major tenants are Alrenco and Heileg-Meyers furniture store. The rental rates for the shops range from $5.00 to $8.00 per square foot. 2 [LOGO] Subject property is an old center and Wal-Mart was a former tenant in this center, but has moved out and is located in the Crossroads Plaza and a Wal-Mart Superstore was constructed in the Northtown Plaza. Portions of the Wal-Mart Store have been subleased to Big Lots. There is a Bi-Lo store in subject. The section of subject that fronts along Pearman Dairy Road has a high vacancy rate at this time as Winn-Dixie has vacated the store and the lease has expired. The rental rates been achieved at Lakeside Square range from $3.00 to $3.39 per square foot. There are vacancies, but it is thought that these can be occupied by other tenants in the future. The rental rates for the shops in the Lakeside Plaza range from $3.62 to $10.40 per square foot. The rental rate being received from Bi-Lo is $5.86. Revco is currently paying $4.00 per square foot and Big Lots is paying $2.75 for a portion of the Wal-Mart space. Trends The subject property is located in an older stabilized area. The growth for new retail space is occurring on the north side of Anderson. It is thought that the stability for subject neighborhood will be maintained and that the vacant space in subject property can be rented, but it will not be to the tenants that can pay high rental rates. These rental rates should remain about the same. 3 [LOGO] PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A. PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification Lakeside Square & a. Name Lakeside Plaza SHC Crossroad Plaza Belvedere Plaza -------------------------- ------------------------ ------------------------ 300 & 302 Hwy. 28 Bypass at b. Street Pearman Dairy Rd. Sayre St. 3100 North Main St. -------------------------- ------------------------ ------------------------ c. City Anderson, SC Anderson, SC Anderson, SC -------------------------- ------------------------ ------------------------ d. Distance from subject N/A 2 miles 3 miles -------------------------- ------------------------ ------------------------ e. Contact Edens Avant, Inc. Developers Diversified Edens Avant, Inc. -------------------------- ------------------------ ------------------------ f. Phone 803-779-4420 910-799-9293 803-799-4420 -------------------------- ------------------------ ------------------------ 2. Attributes Lakeside Square-1975 a. Year built Lakeside Plaza-1979 1990 1961 (Rehab. 1992) -------------------------- ------------------------ ------------------------ Lakeside Square-48,441 b. Net sq. Ft. Lakeside Plaza-137,507 163,809 158,739 -------------------------- ------------------------ ------------------------ c. # building 2 1 3 -------------------------- ------------------------ ------------------------ d. #stories 1 1 1 -------------------------- ------------------------ ------------------------ e. Avg. Floor plate size (SF), if office N/A N/A N/A -------------------------- ------------------------ ------------------------ f. # elevators N/A N/A N/A -------------------------- ------------------------ ------------------------ g. Parking Adequate Adequate Adequate -------------------------- ------------------------ ------------------------ h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block -------------------------- ------------------------ ------------------------ i. Vacancy % Lakeside Square-66.47% Lakeside Plaza-4.0% 4.00% 27.35% -------------------------- ------------------------ ------------------------ j. Anchors, if Retail Lakeside Square-Babcock Lakeside Plaza-Bi-Lo, Wal-Mart, Ingles, Hamrick's, Farmer's Big Lots, Revco Revco Furniture, McDonald's -------------------------- ------------------------ ------------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Market Place Watson Village ------------------------- ----------------------- b. Street North Main St. South Main Street ------------------------- ----------------------- c. City Anderson, SC Anderson, SC ------------------------- ----------------------- d. Distance from subject 3.5 miles 3 miles ------------------------- ----------------------- e. Contact Langsten Real Estate Dr. Charles W. Burt ------------------------- ----------------------- f. Phone 864-369-2848 864-225-3176 ------------------------- ----------------------- 2. Attributes a. Year built 1975 1968 ------------------------- ----------------------- b. Net sq. Ft. 60,000 60,000 ------------------------- ----------------------- c. # building 1 1 ------------------------- ----------------------- d. #stories 1 1 ------------------------- ----------------------- e. Avg. Floor plate size (SF), if office N/A N/A ------------------------- ----------------------- f. # elevators N/A N/A ------------------------- ----------------------- g. Parking Adequate N/A ------------------------- ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block ------------------------- ----------------------- i. Vacancy % 0% 6.21% ------------------------- ----------------------- j. Anchors, if Retail Alrenco, Heileg- Winn-Dixie, Revco Meyers ------------------------- -----------------------
Comments: Comparables #2 and #3 are located to the north of subject with Comparables #1 and #4 being located to the south of subject. Comparable #1 is the newest center surveyed. 4 [LOGO] PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Asking Rental Rate Lakeside Square-$3.39 a. Anchor Space Plaza - $2.75-$5.86 N/A $3.50 - $4.25 ------------------------- ------------------------- ------------------------ Lakeside Square - $3.00 b. Shop Space Plaza - $3.62-$10.40 $8.00 - $10.50 $3.25 - $10.50 ------------------------- ------------------------- ------------------------ 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ------------------------- ------------------------- ------------------------ 3. Rent Concessions None None None ------------------------- ------------------------- ------------------------ 4. Effective Rent $3.00 - $10.40 $8.00 - $10.50 $3.25 - $10.50 ------------------------- ------------------------- ------------------------ 5. TI Allowance None None None ------------------------- ------------------------- ------------------------ 6. Expense Stop None None None ------------------------- ------------------------- ------------------------ 7. Length of Lease Term 3 - 5 years (shop) 3 - 5 years (shop) 3 - 5 years (shop) ------------------------- ------------------------- ------------------------ 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% - 7.00% ------------------------- ------------------------- ------------------------ 9. Percentage Rent Wal-Mart, Ingles, Hamricks, Farmer's (per lease terms) Big Lots, Bi-Lo Revco Furniture, McDonalds ------------------------- ------------------------- ------------------------ 10. Historical Annual Absorption/sq.ft. N/A N/A N/A ------------------------- ------------------------- ------------------------ 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A ------------------------- ------------------------- ------------------------ C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A superior similar ------------------------- ------------------------- ------------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A ----------------------- ----------------------- b. Shop Space $7.50 - $9.50 $5.00 - $8.00 ----------------------- ----------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net ----------------------- ----------------------- 3. Rent Concessions None None ----------------------- ----------------------- 4. Effective Rent $7.50 - $9.50 $5.00 - $8.00 ----------------------- ----------------------- 5. TI Allowance None None ----------------------- ----------------------- 6. Expense Stop None None ----------------------- ----------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 - 5 years (shop) ----------------------- ----------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% ----------------------- ----------------------- 9. Percentage Rent (per lease terms) Winn-Dixie, Revco Alrenco ----------------------- ----------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A ----------------------- ----------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A ----------------------- ----------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) similar similar ----------------------- -----------------------
D. EXPLAIN RANKING/COMMENTS: Comparable #1 is thought to be superior to subject due to age and condition. Also, Wal-Mart is thought to be a high credit tenant. Comparables #2 and #4 have also lost major tenants which is the primary reason they are considered similar to subject. 5 [LOGO] LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Crossroad Plaza Location: Pearman Dairy Road Anderson, South Carolina Year Built: 1990 Total Size: 163,809 SF Vacant Space: 6,552 SF Vacancy Rate: 4.0% Local Rent Range: $8.00 - $10.50 PSF Tenant Expenses: Triple Net Remarks: There are two vacant shops in this center. The major tenants are Wal-Mart, Ingles and Revco. A local furniture store is having its grand opening as of the date of this study. 6 [LOGO] Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Belvedere Plaza Location: 3100 N. Main Street Anderson, South Carolina Year Built: 1961 - Renovated in 1992 Total Size: 158,739 SF Vacant Space: 4,342 SF Vacancy Rate: 27.35% Rental Range: $3.25 to $10.50 PSF Tenant Expenses: Triple Net Remarks: This is an older center but was renovated in 1992. The center has a good appearance and is enjoying a high occupancy rate. 7 [LOGO] Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Market Place Location: N. Main Street Anderson, South Carolina Year Built: 1975 Total Size: 60,000 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $7.50 to $9.50 PSF Tenant Expenses: Triple Net Remarks: This center is anchored with Winn-Dixie and Revco. Exposure from N. Main Street is good. 8 [LOGO] Comparable Rental No. 4 ================================================================================ [GRAPHIC OMITTED] Name: Watson Village Location: South Main Street at Schockley Ferry Road Anderson, South Carolina Year Built: 1968 Total Size: 60,000 SF Vacant Space: 3,726 SF Vacancy Rate: 6.21% Local Rent Range: $5.00 - $8.00 SF Tenant Expenses: Triple Net Remarks: This is an older center in which Winn-Dixie has vacated and Alrenco is now the major tenant. Most of the other tenants are small shops. 9 [LOGO] PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification Lakeside Square & Lexington Triangle a. Name Lakeside Plaza SHC Barnwell Plaza Village ------------------------- ------------------------ ------------------------- Sunset Blvd. & Lake b. Street Address 302 Pearman Road 1019 Dunbarton Blvd. Dr. ------------------------- ------------------------ ------------------------- c. City Anderson, SC Barnwell, SC Lexington, SC ------------------------- ------------------------ ------------------------- d. Distance from Subject N/A 175 miles 125 miles ------------------------- ------------------------ ------------------------- 2. Attributes a. Year Built 1979 1985 1985 ------------------------- ------------------------ ------------------------- b. Net sq. feet 185,946 70,725 115,754 ------------------------- ------------------------ ------------------------- c. # Buildings 2 1 1 ------------------------- ------------------------ ------------------------- d. # of Stories 1 1 1 ------------------------- ------------------------ ------------------------- e. Vacancy % 20.30% 9.00% 1.3% ------------------------- ------------------------ ------------------------- 3. Sales Information a. Sales Price N/A $2,860,620 $4,489,380 ------------------------- ------------------------ ------------------------- b. Sales Price PSF N/A $40.45 $38.78 ------------------------- ------------------------ ------------------------- c. Date N/A 01-01-95 01-31-95 ------------------------- ------------------------ ------------------------- d. NOI at time of Sale N/A 330,327 480,919 ------------------------- ------------------------ ------------------------- e. Cap. Rate N/A 11.55% 10.71% ------------------------- ------------------------ ------------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A similar similar ------------------------- ------------------------ -------------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Hampton Plaza Cumberland Plaza --------------------- ------------------------- 2864 Wilma 209 New Swithville b. Street Address Randolph Blvd. Hwy. --------------------- ------------------------- c. City Clarksville, TN McMinnville, TN --------------------- ------------------------- d. Distance from Subject 435 miles 315 miles --------------------- ------------------------- 2. Attributes a. Year Built 1988 1988 --------------------- ------------------------- b. Net sq. feet 189,302 143,951 --------------------- ------------------------- c. # Buildings 1 1 --------------------- ------------------------- d. # of Stories 1 1 --------------------- ------------------------- e. Vacancy % 0% 4.3% --------------------- ------------------------- 3. Sales Information a. Sales Price $6,150,000 $5,225,050 --------------------- ------------------------- b. Sales Price PSF $23.24 $36.30 --------------------- ------------------------- c. Date 12-26-95 12-26-95 --------------------- ------------------------- d. NOI at time of Sale 753,627 693,726 --------------------- ------------------------- e. Cap. Rate 12.25% 13.28% --------------------- ------------------------- 4. Rank Relative to Subject (inferior, similar, superior) similar similar --------------------- -------------------------
Explain Ranking/Comments: Subject is thought to be similar to all of these comparables with respect to size and age. Also, all of these comparables are located in towns which are approximately the same size as subject. 10 [LOGO] COMPARABLE IMPROVED SALES Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS 072- 06- 04- 11, 20 NAME Barnwell Plaza LOCATION 1019 Dunbarton Boulevard, Barnwell, SC GRANTOR 1994 N1 SC Associates, LP GRANTEE Tri Centers, LP DEED REFERENCE Book 282/Page 137 DATE Jan 31, 1995 SALES PRICE $2,860,620 ADJUSTED SALES PRICE $2,860,620 SIZE BUILDING 70,725 SALES PRICE PER S.F. $40.45 SIZE LAND (ACRES) 11.28 SIZE LAND (S.F.) 491,357 YEAR BUILT 1985 LAND/BUILDING RATIO 6.95 To 1 UTILITIES All available VERIFICATION Appraiser ZONING Commercial FINANCING Cash to seller EFFECTIVE GROSS INCOME $399,045 GROSS INCOME MULTIPLE 7.17 EGIM 7.17 NET OPERATING INCOME $330,327 OVERALL RATE 11.55% TYPE OF PURCHASER Private Investor COMMENTS: This is a good quality community shopping center located in the town of Barnwell in Barnwell County (pop. 20,000) in western South Carolina. Approximately 91% of the center was comprised of anchor space, including Wal-Mart (34,875 SF), Food Lion (21,000 SF) and Revco Drugs (8,450 SF). The income and expense data here is based on the center's actual performance at the time of sale, and include approximately $0.50 SF in overage rents from Wal-Mart and $0.10 SF in reserves. (590) 11 [LOGO] Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] NAME Lexington Triangle Village LOCATION U.S. 378 and North Lake Drive (SC #6), Lexington, SC GRANTOR 1994 N1 SC Associates GRANTEE Tri Centers, LP DEED REFERENCE Book 3260, Page 199 DATE Jan 31, 1995 SALES PRICE $4,489,380 ADJUSTED SALES PRICE $4,489,380 SIZE BUILDING 115,754 SALES PRICE PER S.F. $38.78 SIZE LAND (ACRES) 12.51 SIZE LAND (S.F.) 544,936 YEAR BUILT 1985 LAND/BUILDING RATIO 4.71 To 1 VERIFICATION Public Records ZONING Commercial FINANCING Cash to seller EFFECTIVE GROSS INCOME $607,469 GROSS INCOME MULTIPLE 7.39 EGIM 7.39 NET OPERATING INCOME $480,919 OVERALL RATE 10.71% TYPE OF PURCHASER Private Investor COMMENTS: This center is anchored by Wal-Mart (65,904 SF) and Food Lion (25,000 SF) and there are 7 local shops totaling 24,850 SF (21.5 percent). At the time of sale, the center was 98.7 percent occupied with only 2,000 SF vacant. Wal-Mart has a base rent of $3.55 and the lease expires 11/05. Currently, Wal-Mart is paying about $0.50 per SF overage rent and Wal-Mart is expected to leave the center in the near future as no expansion room is available. The estimated cap rate excludes potential overage rent form Wal-Mart and only excludes income from the 2,000 SF vacant bay. Projected expenses include $0.10 per SF reserves. The center is masonry with brick front and metal mansard canopy roof and in average condition. No outparcels were included with this sale. (763) 12 [LOGO] Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] NAME Hampton Plaza LOCATION 2864 Wilma Rudolph Boulevard, Clarksville, TN GRANTOR Aetna Life Insurance Company GRANTEE Hampton II, LP DEED REFERENCE Book 580, Page 1793 DATE Dec 26, 1995 SALES PRICE $6,150,000 ADJUSTED SALES PRICE $6,150,000 SIZE BUILDING 189,302 SALES PRICE PER S.F. $32.49 SIZE LAND (ACRES) 23.24 SIZE LAND (S.F.) 1,012,334 YEAR BUILT 1988 LAND/BUILDING RATIO 5.35 To 1 UTILITIES All available VERIFICATION Public Records ZONING C-3, Shopping Center District FINANCING Cash to seller EFFECTIVE GROSS INCOME $937,119 GROSS INCOME MULTIPLE 6.37 EGIM 6.56 NET OPERATING INCOME $753,627 OVERALL RATE 12.25% TYPE OF PURCHASER Private Investor COMMENTS: This is a community shopping center with Wal-Mart as a major tenant prior to a new Wal-Mart Superstore being built on the same block. While Wal-Mart remains liable for the lease, the store is vacant. The remainder of the center is occupied. (759) 13 [LOGO] Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] NAME Cumberland Plaza LOCATION 209 New Smithville Highway, McMinnville, TN GRANTOR Aetna Life Insurance GRANTEE Cumberland II, LP DEED REFERENCE Book 287, Page 204 DATE Dec 26, 1995 SALES PRICE $5,225,050 ADJUSTED SALES PRICE $5,225,050 SIZE BUILDING 143,951 SALES PRICE PER S.F. $36.30 SIZE LAND (ACRES) 19.64 SIZE LAND (S.F.) 855,518 YEAR BUILT 1988 LAND/BUILDING RATIO 5.94 To 1 UTILITIES All available VERIFICATION Public Records ZONING C-3, Highway Commercial District FINANCING Cash to seller EFFECTIVE GROSS INCOME $875,830 GROSS INCOME MULTIPLE 5.79 EGIM 5.97 NET OPERATING INCOME $693,726 OVERALL RATE 13.28% TYPE OF PURCHASER Private Investor COMMENTS: This is a community shopping center. Wal-Mart was the major tenant and remains liable for the lease for the remaining term. A new Wal-Mart Superstore was built one block west of this property. 14 (762) [LOGO] ADDENDA o Anderson County Demographics o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject [LOGO] USA COUNTIES 1996 Geographic Area: Anderson, SC (45007) Table: GENERAL PROFILE - -------------------------------------------------------------------------------- POPULATION AND HOUSING (Bureau of the Census) Total resident population: 1995 .......................................................... 154,478 Percent 65 years and over ................................... 13.5 1990 .......................................................... 145,177 1980 .......................................................... 133,235 Occupied housing units, 1990 .................................... 55,481 Percent owner occupied ........................................ 75.2 BIRTHS AND DEATHS (National Center for Health Statistics) Births, 1993 .................................................... 1,972 Per 1,000 resident population ................................. 13.1 Percent to mothers under 20 years of age ...................... 19.7 Deaths, 1993 .................................................... 1,480 Per 1,000 resident population ................................. 9.8 Infant deaths per 1,000 live births, 1993 ....................... 14.7 EDUCATION (Bureau of the Census) Persons 25 years and over, 1990 ................................. 95,330 Percent high school graduates ................................. 64.0 Percent college graduates ..................................... 12.9 LABOR FORCE (Bureau of Labor Statistics) Civilian labor force, 1994 ...................................... 80,372 Percent unemployed ............................................ 5.8 PRIVATE NONFARM ESTABLISHMENTS (Bureau of the Census) Total establishments, 1993 ...................................... 3,202 Percent retail trade .......................................... 29.2 Percent services .............................................. 32.1 Paid employees, 1993 (pay period including March 12) ............ 49,199 Annual payroll, 1993 ($1,000) ................................... 968,525 PERSONAL INCOME (Bureau of Economic Analysis) Total personal income, 1993 ($1,000) ............................ 2,495,247 Per capita (dollars) .......................................... 16,545 AGRICULTURE (Bureau of the Census) Number of farms, 1992 ........................................... 1,076 Land in farms as percent of total land ........................ 35 RETAIL TRADE (Bureau of the Census) Retail sales, 1992 ($1,000) ..................................... 1,062,066 Per capita (dollars) .......................................... 7,172 COMMERCIAL AND SAVINGS BANKS (Fed. Deposit Insurance Corp.) Number of offices, June 30, 1994 ................................ 39 Total deposits ($1,OO0) ....................................... 791,610 SOCIAL PROGRAMS (Social Security Administration) Total Social Security recipients, December 1993 ................. 29,995 Retired workers ............................................... 18,435 Supplementary Security Income recipients, December 1994 ......... 3,177 FEDERAL FUNDS AND GRANTS (Bureau of the Census) Total direct expenditures or obligations per capita: 1994 (dollars) ................................................ 2,955 1990 (dollars) ................................................ 2,305 - -------------------------------------------------------------------------------- (NA) Not available. (D) Avoid disclosure of confidential information. (X) Not applicable. (S) Does not meet publication standards. (Z) Value > 0 but < half unit of measure shown. NOTE: 0 data may indicate geographic/data footnotes. Source: U.S. Bureau of the Census, USA Counties 1996 CD-ROM. [GRAPHIC OMITTED] COMPARABLE RENTALS MAP [GRAPHIC OMITTED] COMPARABLE SALES MAP [GRAPHIC OMITTED] SITE PLAN [LOGO] Date: 04/08/97 EDENS & AVANT, INC. Page 189 Retail Custom Rent Roll Property: LAKESIDE SQUARE 300 PEARMAN DAIRY ROAD ANDERSON, SC 29625 Column Legends: Tenant/Propert MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- Available 706- 10 22,720 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- DOLLAR GENERAL #2920 DOLGENCORP, INC. 706- 20 7,000 07/01/96 06/30/99 3.00 07/01/96 21,000.00 - ------------------------------------------------------------------------------------------------------------------------- BADCOCK HOME FURNISHINGS CENT JAMES F. MILLS 706- 30 7,440 01/01/94 12/31/98 3.06 01/01/96 22,800.00 3.23 07/01/96 24,000.00 3.39 01/01/97 25,200.00 3.55 07/01/97 26,400.00 3.71 01/01/98 27,600.00 3.87 07/01/98 28,800.00 - ------------------------------------------------------------------------------------------------------------------------- Available 706- 40 5,484 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- Available 706- 50 3,997 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- RADIO SHACK TANDY CORPORATION 706- 60 1,800 02/01/94 01/31/97 3.00 02/01/94 5,400.00 - ------------------------------------------------------------------------------------------------------------------------- Available 706- 9999 0 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ---------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- DOLLAR GENERAL #2920 DOLGENCORP, INC. Fixed 0 Fixed 0 Fixed 0 0.00 3.00 70,000 Y - ----------------------------------------------------------------------------------------------------------------------------------- BADCOCK HOME FURNISHINGS CENT JAMES F. MILLS None 0 None 0 None 0 01/01/99 12/31/03 4.03 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- RADIO SHACK TANDY CORPORATION PRS 1979 None 0 Fixed 0 0.00 2.50 216,000 Y - ----------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------------
Square Feet: Occupied.. 16,240 Current Annual Base Rent 51,600.00 Available. 32,201 Total..... 48,441 [LOGO] Date: 04/08/97 EDENS & AVANT, INC. Page 184 Retail Custom Rent Roll Property: LAKESIDE SHOPPING CENTER 302 PEARMAN DAIRY ROAD ANDERSON, SC 29625 Column Legends: Tenant/Propert MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- TIMELY MONEY SERVICE JOAN MARIES & SEAVY MADE BROWN 705- 10 490 01/01/97 12/31/99 9.00 01/01/97 4,410.00 - ------------------------------------------------------------------------------------------------------------------------- Available 705- 15 1,029 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- Available 705- 20 1,078 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- CHRISTIAN BOOK STORE, THE WILLIAM THOMAS DAVIS 705- 25 1,181 10/01/94 09/30/97 7.12 10/01/94 8,409.12 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- RAINBOW RECORDS MARK HAMBREE 705- 30 1,763 10/01/91 09/30/97 8.34 10/01/94 14,703.96 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- Available 705- 40 1,755 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- Available 705- 50 1,690 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- WAL-MART KUHN'S BIG K STORES CORP. (SU 705- 60 50,000 11/01/79 01/31/00 2.75 11/01/79 137,499.96 0.00 0.00
- ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- TIMELY MONEY SERVICE JOAN MARIES & SEAVY MADE BROWN Full 0 Full 0 Full 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- CHRISTIAN BOOK STORE, THE WILLIAM THOMAS DAVIS Full 0 Full 0 Full 0 10/01/96 09/30/97 0.00 0.00 0 10/01/97 09/30/98 0.00 0.00 0 10/01/98 09/30/99 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- RAINBOW RECORDS MARK HAMBREE Full 0 Full 0 Fixed 0 10/01/94 09/30/97 0.00 0.00 0 10/01/97 09/30/00 0.00 0.00 0 10/01/00 09/30/03 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- WAL-MART KUHN'S BIG K STORES CORP. (SU PRS 1980 None 0 Full 0 02/01/00 01/31/06 2.75 1.50 9,166,700 Y 02/01/06 01/31/11 2.75 1.50 0 Y
[LOGO] Date: 04/08/97 EDENS & AVANT, INC. Page 185 Retail Custom Rent Roll Property: LAKESIDE SHOPPING CENTER 302 PEARMAN DAIRY ROAD ANDERSON, SC 29625 Column Legends: Tenant/Propert MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- WAL-MART KUHN'S BIG K STORES CORP. (SU 705- 60 50,000 11/01/79 01/31/00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- FAMILY DOLLAR STORES #256 FAMILY DOLLAR STORES OF ANDER 705- 70 7,020 01/01/85 12/31/00 3.62 01/01/96 25,440.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- ACE TV RENTALS SOUTH CAROLINA RENTALS, INC. 705- 80 3,300 11/01/96 10/31/01 8.60 11/01/95 28,386.96 0.00 0.00 9.00 11/01/96 29,700.00 9.25 11/01/99 30,525.00 - ------------------------------------------------------------------------------------------------------------------------- BI-LO STORE #110 BI-LO INC. 705- 90 37,801 11/01/91 10/31/11 5.86 11/01/91 221,603.88 6.11 11/01/01 231,074.16 0.00 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- WAL-MART KUHN'S BIG K STORES CORP. (SU PRS 1980 None 0 Full 0 02/01/11 01/31/16 2.75 1.50 0 Y 02/01/16 01/31/21 2.75 1.50 0 Y 02/01/21 01/31/26 2.75 1.50 0 Y 02/01/26 01/31/31 2.75 1.50 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- FAMILY DOLLAR STORES #256 FAMILY DOLLAR STORES OF ANDER PRS 1980 None 0 None 0 01/01/91 12/31/95 3.62 2.50 1,017,600 Y 01/01/96 12/31/00 3.62 2.50 0 Y 01/01/01 12/31/05 3.62 2.50 0 Y 01/01/06 12/31/10 3.62 2.50 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- ACE TV RENTALS SOUTH CAROLINA RENTALS, INC. Full 0 Full 0 Full 0 11/01/96 10/31/01 0.00 0.00 0 11/01/01 10/31/06 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- BI-LO STORE #110 BI-LO INC. Full 0 Full 0 Full 0 11/01/11 10/31/16 6.11 1.00 22,160,400 Y 11/01/16 10/31/21 6.11 1.00 23,107,400 Y 11/01/21 10/31/26 6.11 1.00 0 Y 11/01/26 10/31/31 6.11 1.00 0 Y 11/01/31 10/31/36 6.11 1.00 0 Y
[LOGO] Date: 04/08/97 EDENS & AVANT, INC. Page 186 Retail Custom Rent Roll Property: LAKESIDE SHOPPING CENTER 302 PEARMAN DAIRY ROAD ANDERSON, SC 29625 Column Legends: Tenant/Propert MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- BI-LO STORE #110 BI-LO INC. 705- 90 37,801 11/01/91 10/31/11 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- REVCO #846 FAY'S DRUG COMPANY, INC. 705- 100 10,800 01/01/81 02/28/01 4.00 03/01/81 43,200.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- AUTO ZONE #171 AUTOZONE DEVELOPMENT CORPORAT 705- 110 5,500 12/01/83 11/30/99 4.55 12/01/93 24,999.96 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- NEW CHINA GARDEN YONG-KU LI 705- 120 2,500 03/01/95 02/28/00 6.00 03/01/95 15,000.00 0.00 0.00 6.18 03/01/96 15,456.00 6.36 03/01/97 15,912.00 6.56 03/01/98 16,392.00 6.75 03/01/99 16,884.00 - ------------------------------------------------------------------------------------------------------------------------- SUN-BRITE COIN LAUNDRY SANDRA R. BRAKE 705- 130 1,600 12/01/96 04/30/02 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- BI-LO STORE #110 BI-LO INC. Full 0 Full 0 Full 0 11/01/36 10/31/41 6.11 1.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- REVCO #846 FAY'S DRUG COMPANY, INC. PRS 1981 None 0 Full 0 03/01/01 02/28/06 4.00 2.00 2,160,000 Y 03/01/06 02/28/11 4.00 2.00 0 Y 03/01/11 02/28/16 4.00 2.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- AUTO ZONE #171 AUTOZONE DEVELOPMENT CORPORAT Full 0 Full 0 Full 0 12/01/88 11/30/90 4.55 2.00 1,250,000 Y 12/01/90 11/30/93 4.55 2.00 0 Y 12/01/93 11/30/96 4.55 2.00 0 Y 12/01/96 11/30/99 4.55 2.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- NEW CHINA GARDEN YONG-KU LI Full 0 Full 0 Full 0 03/01/00 02/28/05 7.02 0.00 0 03/01/05 02/28/10 8.54 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- SUN-BRITE COIN LAUNDRY SANDRA R. BRAKE Full 0 Full 0 Full 0 05/01/02 04/30/07 0.00 0.00 0 05/01/07 04/30/12 0.00 0.00 0
[LOGO] Date: 04/08/97 EDENS & AVANT, INC. Page 187 Retail Custom Rent Roll Property: LAKESIDE SHOPPING CENTER 302 PEARMAN DAIRY ROAD ANDERSON, SC 29625 Column Legends: Tenant/Propert MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- SUN-BRITE COIN LAUNDRY SANDRA R. BRAKE 705- 130 1,600 12/01/96 04/30/02 0.00 0.00 8.00 05/01/97 12,800.04 8.50 05/01/00 13,599.96 - ------------------------------------------------------------------------------------------------------------------------- TAE KWON DO, INC. EUNG S. MOON 705- 140 3,200 01/01/96 12/31/98 3.50 01/01/96 11,199.96 0.00 0.00 5.37 07/01/96 17,199.96 7.75 11/01/96 24,799.92 7.75 01/01/97 24,799.92 7.75 01/01/98 24,799.92 - ------------------------------------------------------------------------------------------------------------------------- PIC-A-FLICK VIDEO JAMES W. KEITH, JR. 705- 150 5,600 01/01/94 12/31/99 8.59 01/01/94 48,108.36 0.00 0.00 0.00 0.00 0.00 0.00 9.45 01/01/97 52,908.36 9.35 01/01/97 52,322.24 - ------------------------------------------------------------------------------------------------------------------------- SUBWAY #1239 SUBWAY SANDWICH SHOPS, INC. 705- 160 1,200 08/01/85 07/30/00 10.40 08/01/95 12,474.84 0.00 0.00
- ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- SUN-BRITE COIN LAUNDRY SANDRA R. BRAKE Full 0 Full 0 Full 0 05/01/12 04/30/19 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- TAE KWON DO, INC. EUNG S. MOON Full 0 Full 0 Full 0 01/01/99 12/31/01 0.00 0.00 0 01/01/02 12/31/04 0.00 0.00 0 01/01/05 12/31/07 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- PIC-A-FLICK VIDEO JAMES W. KEITH, JR. Full 0 Full 0 Full 0 01/01/97 12/31/99 0.00 0.00 0 01/01/00 12/31/02 0.00 0.00 0 01/01/03 12/31/08 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- SUBWAY #1239 SUBWAY SANDWICH SHOPS, INC. PRS 1986 PRS 1986 Fixed 0 08/01/95 07/30/00 0.00 0.00 0 08/01/00 07/30/05 0.00 0.00 0
[LOGO] Date: 04/08/97 EDENS & AVANT, INC. Page 188 Retail Custom Rent Roll Property: LAKESIDE SHOPPING CENTER 302 PEARMAN DAIRY ROAD ANDERSON, SC 29625 Column Legends: Tenant/Propert MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- SUBWAY #1239 SUBWAY SANDWICH SHOPS, INC. 705- 160 1,200 08/01/85 07/30/00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- SUBWAY #1239 SUBWAY SANDWICH SHOPS, INC. PRS 1986 PRS 1986 Fixed 0 08/01/05 07/30/10 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------------
Square Feet: Occupied.. 131,955 Current Annual Base Rent 615,485.00 Available. 5,552 Total..... 137,507 [LOGO] PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Pearman Dairy Road - Facing North [GRAPHIC OMITTED] Pearman Dairy Road - Facing South [LOGO] [GRAPHIC OMITTED] Whitner Street - Facing West [GRAPHIC OMITTED] Whitner Street - Facing East [LOGO] [GRAPHIC OMITTED] Front View of Subject - Lakeside Plaza Shopping Center [GRAPHIC OMITTED] Front View of Subject - Lakeside Plaza Shopping Center (former Wal-Mart store) [LOGO] [GRAPHIC OMITTED] View of shops on outlot to Lakeside Plaza Shopping Center [GRAPHIC OMITTED] Rear view of Lakeside Plaza Shopping Center [LOGO] [GRAPHIC OMITTED] Front View of Subject - Lakeside Square Shopping Center (former Winn Dixie store) [GRAPHIC OMITTED] Front View of Subject - Lakeside Square Shopping Center [LOGO] [GRAPHIC OMITTED] Side View of Subject - Lakeside Square Shopping Center [GRAPHIC OMITTED] Rear View of Subject - Lakeside Square Shopping Center This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study of: SOUTH SQUARE SHOPPING CENTER 1730 Airport Road Lancaster, Lancaster County, South Carolina Prepared By: O. Marshall Dodds, MAI Date of Market Study: May 13, 1997 [Letterhead of O. MARSHALL DODDS CO., INC.] May 14, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study South Square Shopping Center 1730 Airport Road Lancaster, Lancaster County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 13,1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 44,350 square feet of leaseable area. The center was constructed in 1992 and the anchor tenants are Food Lion and Revco. The subject property is currently 100 percent occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds ------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) OMD:mm EXECUTIVE SUMMARY ================================================================================ Regional Perspective Lancaster is the county seat of Lancaster County and is located in the north central region of South Carolina. The city is served by US Highways #521, #21 and #601 and SC Highways #903, #9 and #200. I-77 is located 18 miles to the south in Great Falls. Charlotte is located approximately 39 miles to the north and Columbia is located 55 miles to the south. The population of Lancaster County in 1995 (most recent) was 56,000 and 10,000 for the City of Lancaster. The fastest growing segments of the population are those over the age of 65 and the middle adult groups. The average per capita income for Lancaster County was $15,583 in 1993 (most recent). Manufacturing continues to be the dominant occupation, although the last ten years have seen substantial declines in both durable and nondurable goods manufacturing. The unemployment rate for Lancaster County as of March, 1997 was 5.4% which fell from 6.5% in February of 1997. South Carolina had an unemployment rate of 5.3%in March. Neighborhood and Site The subject neighborhood is located in the southern portion of the Lancaster. The major traffic arteries running through the neighborhood are Airport Road which is also SC Highway #914 and Great Falls Road which is SC Highway #200. Several single family dwellings are located in the subject neighborhood as well as multi-family properties. Subdivisions in the area include Santarosa, Starmount Acres and Erwinwood Acres. South Middle School and Brooklyn Springs Elementary are located to the north of the subject off SC Highway #200. The Lancaster Country Club is located to the south of the subject on SC Highway #914. Other commercial uses include a Piggly Wiggly anchored shopping center, an Amoco convenience market/self-service gasoline station, an Exxon and The Beverage Warehouse. Commercial properties are concentrated on the major thoroughfares with residential properties being located off of these thoroughfares. The intersection of SC Highway #914 and SC Highway #200 is more or less the middle of the subject neighborhood. Physical features are as follows: 1. Size 6.277 acres or 273,426 square feet 2. Identity 1730 Airport Road TMS # 86E-B-14 and # 86E-15 3. Shape irregular 4. Topography generally level 5. Accessibility good from either direction 6. Utilities municipal 1 Physical Description Building features are as follows: 1. Size (net) 44,350 square feet 2. Layout & Design 1 story-food store, drug store and four shops 3. Parking Spaces 220 4.97 per 1,000 square feet of net area 4. Construction brick and glass front with concrete block on side and rear and metal seamed roof Market Position and Marketability Conclusions The Lancaster area contains approximately seven retail structures. The North Park Square and Westgate Shopping Center are two older centers that were built in the 1960's. The majority of the tenants have moved out. The Westgate Shopping Center contains a total of 76,000 square feet with Crown Cinemas as its only tenant. Food Lion was formerly the anchor in the North Park Square but has vacated their store and the locals vacated shortly after. The Lancaster Shopping Center measures 29,047 square feet and is located at 403-411 Meeting Street in close proximity to downtown Lancaster. It was built in 1963 and expanded in 1987. The rental rate range is from $5.25 to $7.75 per square foot. Tenants include Harris Teeter, Garris Jewelry and Mobley Drugs. The Lancer Center is also located in Lancaster. It contains 171,396 square feet and is located on Highway #9 By-Pass. This is a community type center that first opened in 1987 and was expanded in 1993. This center is currently 100 percent occupied with such tenants as Wal-Mart, Bi-Lo, Revco and Cato Fashions and a rental rate range of $6.75 to $9.50 per square foot. The Lancaster Square is located on North Main Street in a heavily traveled area of Lancaster near SC Highway #9. It was constructed in 1972 and expanded to include Belk and JC Penney stores for a total of 90,000 square feet. Recently, Winn Dixie relocated to a center across the street and Food Lion has occupied the space. This center is currently 100 percent occupied with a rental rate range of $8.00 to $10.00. The Lancaster Plaza contains 77,400 square feet and was constructed in 1971. Bi-Lo and Revco Drugs are the anchor tenants and this center is located in a heavily traveled area of Lancaster on US Highway #9. Rental rates range from $3.50 to $5.75 per square foot and as of the date of this study, this center was 100 percent occupied. No new properties are under construction or planned for this area at this time. The subject property is in the middle of the neighborhood in the southern portion of Lancaster. The location of subject is convenient to the single family and multi-family dwellings that are located throughout the neighborhood. SC Highways #200 and #914 are the major traffic arteries running through the area. The subject property has five shops with rental rates ranging from $7.50 to $9.00 per square foot. These are thought to be reasonable rental rates for the neighborhood because this center is the newest in Lancaster and has maintained a high occupancy rate. The rental rate for the Food Lion is $7.15 per square foot while the Revco Drug Store pays $7.75 per square foot. Overage rentals are not being received from any of these tenants at this time. The subject property is presently operating at a high occupancy rate. The location of subject is strategic within the neighborhood and convenient to the shoppers throughout the neighborhood. Trends The subject property is located in the southern section of Lancaster. The neighborhood is continuing to develop and contains several single family and multi-family dwellings. Commercial developments are located along the major traffic arteries. The demand and desirability for the neighborhood has been good. All trends are favorable at this time and expected to continue. 2 PROPERTY INSPECTION FORM COMMERCIAL
==================================================================================================================================== I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name South Square SHC Lancaster SHC Lancer Center ------------------------- ---------------------- ------------------------ b. Street 1730 Airport Road 403-411 Meeting St. Highway #9 Bypass ------------------------- ---------------------- ------------------------ c. City Lancaster, SC Lancaster, SC Lancaster, SC ------------------------- ---------------------- ------------------------ d. Distance from subject N/A 3 miles 5 miles ------------------------- ---------------------- ------------------------ e. Contact Edens & Avant, Inc. IRT Property Co. Wyatt Development ------------------------- ---------------------- ------------------------ f. Phone (803) 779-4420 (770) 955-4406 (803) 649-3975 ------------------------- ---------------------- ------------------------ 2. Attributes a. Year built 1992 1963 1987, Expanded in 1993 ------------------------- ---------------------- ------------------------ b. Net sq. Ft. 44,350 29,047 171,396 ------------------------- ---------------------- ------------------------ c. # building 1 1 1 ------------------------- ---------------------- ------------------------ d. #stories 1 1 1 ------------------------- ---------------------- ------------------------ e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A ------------------------- ---------------------- ------------------------ f. # elevators N/A N/A N/A ------------------------- ---------------------- ------------------------ g. Parking Adequate Adequate Adequate ------------------------- ---------------------- ------------------------ h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ------------------------- ---------------------- ------------------------ I. Vacancy % 0% 0% 0% ------------------------- ---------------------- ------------------------ j. Anchors, if Retail Food Lion, Revco Harris Teeter Wal-Mart, Bi-Lo, Revco ------------------------- ---------------------- ------------------------
Comments: All of the comparables are located in Lancaster, South Carolina and are all experiencing 100 percent occupancy rates at this time. Subject is the newest center in this market area. I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Lancaster Square Lancaster Plaza ---------------------- ---------------------- b. Street North Main Street Highway #9 Bypass ---------------------- ---------------------- c. City Lancaster, SC Lancaster, SC ---------------------- ---------------------- d. Distance from subject 51/2miles 6 miles ---------------------- ---------------------- e. Contact Development Assoc. IRT Property Co. ---------------------- ---------------------- f. Phone N/A (770) 955-4406 ---------------------- ---------------------- 2. Attributes a. Year built 1972 1971 ---------------------- ---------------------- b. Net sq. Ft. 90,000 77,400 ---------------------- ---------------------- c. # building 1 1 ---------------------- ---------------------- d. #stories 1 1 ---------------------- ---------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A ---------------------- ---------------------- f. # elevators N/A N/A ---------------------- ---------------------- g. Parking Adequate Adequate ---------------------- ---------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block ---------------------- ---------------------- I. Vacancy % 0% 0% ---------------------- ---------------------- Food Lion, Belk, j. Anchors, if Retail JC Penney, Eckerd Bi-Lo, Revco ---------------------- ---------------------- 3 PROPERTY INSPECTION FORM COMMERCIAL
==================================================================================================================================== B. RENTAL INFORMATION SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A N/A ----------------------- ------------------------ ---------------------- b. Shop Space $7.50 - $9.00 $5.25 - $7.75 $6.75 - $9.50 ----------------------- ------------------------ ---------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ----------------------- ------------------------ ---------------------- 3. Rent Concessions None None None ----------------------- ------------------------ ---------------------- 4. Effective Rent $7.50 - $9.00 $5.25 - $7.75 $6.75 - $9.50 ----------------------- ------------------------ ---------------------- 5. TI Allowance None None None ----------------------- ------------------------ ---------------------- 6. Expense Stop None None None ----------------------- ------------------------ ---------------------- 7. Length of Lease Term 3 - 5 years (shops) 3 - 5 years (shops) 3 - 5 years (shops) ----------------------- ------------------------ ---------------------- 8. Commissions 5.00% - 7.00% 5.00% to 7.00% 5.00% - 7.00% ----------------------- ------------------------ ---------------------- 9. Percentage Rent (per lease terms) None None None ----------------------- ------------------------ ---------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A ----------------------- ------------------------ ---------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A ----------------------- ------------------------ ---------------------- C. RANK RELATIVE TO SUBJECT (inferior,similar, superior) N/A Inferior Superior ----------------------- ------------------------ ----------------------
D. EXPLAIN RANKING/COMMENTS: Comparables #2 and #3 are ranked superior to subject because they are located in a more heavily traveled area of Lancaster and are larger centers than subject. Comparables #1 and #4 are ranked inferior to subject because they are significantly older centers and Comparable #1 is smaller than subject. COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A ---------------------- --------------------- b. Shop Space $8.00 - $10.00 $3.50 - $5.75 ---------------------- --------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net ---------------------- --------------------- 3. Rent Concessions None None ---------------------- --------------------- 4. Effective Rent $8.00 - $10.00 $3.50 - $5.75 ---------------------- --------------------- 5. TI Allowance None None ---------------------- --------------------- 6. Expense Stop None None ---------------------- --------------------- 7. Length of Lease Term 3 - 5 years (shops) 3 - 5 years (shops) ---------------------- --------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% ---------------------- --------------------- 9. Percentage Rent (per lease terms) None None ---------------------- --------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A ---------------------- --------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A ---------------------- --------------------- C. RANK RELATIVE TO SUBJECT (inferior,similar, superior) Superior Inferior ---------------------- --------------------- 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Lancaster Shopping Center Location: 403-411 Meeting Street Lancaster, SC Year Built: 1963, Expanded 1987 Total Size: 29,047 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $5.25 - $7.75 Tenant Expenses: Triple Net Remarks: Harris Teeter is the major tenant. Located on Meeting Street which is in close proximity to the downtown area of Lancaster. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Lancer Center Location: Highway #9 By-Pass Lancaster, SC Year Built: 1987 Total Size: 171,396 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $6.75 - $9.50 Tenant Expenses: Triple Net Remarks: Major tenants are Wal-Mart, Bi-Lo and Revco. This center is located on a heavily traveled thoroughfare and has operated at a high occupancy rate. 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Lancaster Square Location: North Main Street Lancaster, SC Year Built: 1972 Total Size: 90,000 SF Vacant Space: None Vacancy Rate: 0% Average Rental Rate: $8.00 - $10.00 Tenant Expenses: Triple Net Remarks: This center was constructed in 1972 and when Winn Dixie vacated their store, Food Lion occupied the space. Belk and JC Penney's are also located in this center. 7 Comparable Rental No. 4 ================================================================================ [GRAPHIC OMITTED] Name: Lancaster Plaza Location: Highway #9 By-Pass Lancaster, SC Year Built: 1971 Total Size: 77,400 SF Vacant Space: None Vacancy Rate: 0% Average Rental Rate: $3.50 - $5.75 Tenant Expenses: Triple Net Remarks: This center was constructed in 1971. Bi-Lo and Revco are the major tenants. 8 PROPERTY INSPECTION FORM COMMERCIAL
==================================================================================================================================== II. SALES COMPARABLES SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name South Square SHC St. Andrews Crossing Eastage Shopping Center ------------------------ ------------------------ -------------------------- b. Street Address NWC Whiskey Rd. & 1730 Airport Road 817 St. Andrews Road Eastgate Dr. ------------------------ ------------------------ -------------------------- c. City Lancaster, SC Columbia, SC Aiken, SC ------------------------ ------------------------ -------------------------- d. Distance from Subject N/A 61 miles 112 miles ------------------------ ------------------------ -------------------------- 2. Attributes a. Year Built 1992 1994 1995 ------------------------ ------------------------ -------------------------- b. Net sq. feet 44,350 66,910 SF 75,716 SF ------------------------ ------------------------ -------------------------- c. # Buildings 1 1 1 ------------------------ ------------------------ -------------------------- d. # of Stories 1 1 1 ------------------------ ------------------------ -------------------------- e. Vacancy % 0% 0% 7.21% ------------------------ ------------------------ -------------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 ------------------------ ------------------------ -------------------------- b. Sales Price PSF N/A $97.89 $88.16 ------------------------ ------------------------ -------------------------- c. Cap. Rate N/A 9.69% 9.86% ------------------------ ------------------------ -------------------------- d. Date N/A 05-25-94 09-28-95 ------------------------ ------------------------ -------------------------- e. NOI at time of Sale N/A $634,797 $782,704 ------------------------ ------------------------ -------------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A Superior Superior ------------------------ ------------------------ --------------------------
Explain Ranking/Comments: Comparables #1, #2 and #4 are ranked superior to subject. The reason for this is because of the location of these comparables being superior to subject. Also, these comparables are newer than subject. Comparable # 3 is located in a commercial area that is approximately the same size as subject and is similar. COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name One Norman Center Paw Creek Commons ----------------------- -------------------- b. Street Address 19706 One Norman Blvd. E/S Little Rock Road at Freedom Drive ----------------------- -------------------- c. City Cornelius, NC Charlotte, NC ----------------------- -------------------- d. Distance from Subject 45 miles 38 miles ----------------------- -------------------- 2. Attributes a. Year Built 1993 1996 ----------------------- -------------------- b. Net sq. feet 54,185 SF 66,050 SF ----------------------- -------------------- c. # Buildings 1 1 ----------------------- -------------------- d. # of Stories 1 1 ----------------------- -------------------- e. Vacancy % 6.98% 2.73% ----------------------- -------------------- 3. Sales Information a. Sales Price $4,650,000 $5,384,000 ----------------------- -------------------- b. Sales Price PSF $85.82 $77.52 ----------------------- -------------------- c. Cap. Rate 9.68% 9.61% ----------------------- -------------------- d. Date 10-12-95 03-25-97 ----------------------- -------------------- e. NOI at time of Sale $474,591 $517,412 ----------------------- -------------------- 4. Rank Relative to Subject (inferior, similar, superior) Similar Superior ----------------------- -------------------- 9 COMPARABLE SHOPPING CENTER SALES Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS 6012 -1 -1 NAME St. Andrews Crossing LOCATION St. Andrews Road and I-26, Columbia, SC GRANTOR Hayley-Redd, L.P. GRANTEE F.A.C. Properties DEED REFERENCE Book 1199, Page 331 DATE May 25, 1994 SALES PRICE $6,550,000 ADJUSTED SALES PRICE $6,550,000 SIZE BUILDING 66,910 SALES PRICE PER S.F. $97.89 SIZE LAND (ACRES) 8.08 SIZE LAND (S.F.) 351,965 YEAR BUILT 1994 LAND/BUILDING RATIO 5.26 To 1 UTILITIES All available VERIFICATION Deed ZONING Commercial FINANCING Market EFFECTIVE GROSS INCOME $686,905 EGIM 9.54 NET OPERATING INCOME $634,797 OVERALL RATE 9.69% VERIFICATION Public Records TYPE OF PURCHASER Private Investor COMMENTS This was an arms length sale. This neighborhood shopping center is anchored by Kroger and is located in a good commercial area with good accessibility and fair exposure. The construction is brick veneer and concrete block. (503) 10 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] NAME Eastgate Shopping Center LOCATION Northwest Corner of Whiskey Road and Eastgate Drive, Aiken, SC GRANTOR PDG Aiken Partners, LP GRANTEE Southeast U.S. Retail, LP DATE Sep 28, 1995 SALES PRICE $6,675,000 SIZE BUILDING 75,716 SALES PRICE PER S.F. $88.16 SIZE LAND (ACRES) 8.79 SIZE LAND (S.F.) 382,892 YEAR BUILT 1995 LAND/BUILDING RATIO 5.06 To 1 UTILITIES All available VERIFICATION Public Records ZONING Commercial FINANCING Cash to seller GROSS POTENTIAL INCOME $782,704 EFFECTIVE GROSS INCOME $782,704 GROSS INCOME MULTIPLE 8.53 EGIM 8.53 NET OPERATING INCOME $657,896 OVERALL RATE 9.86% TYPE OF PURCHASER Private Investor COMMENTS Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. (643) 11 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] NAME One Norman Center LOCATION 19706 One Norman Boulevard, Cornelius, Mecklenburg County, NC GRANTOR One Norman Center, LP GRANTEE Lucky Realty DEED REFERENCE Book 8325, Page 721 DATE Oct 12, 1995 SALES PRICE $4,650,000 SIZE BUILDING 54,185 SALES PRICE PER S.F. $85.82 SIZE LAND (ACRES) 5.69 SIZE LAND (S.F.) 247,856 YEAR BUILT 1993 LAND/BUILDING RATIO 4.57 To 1 UTILITIES All Public VERIFICATION Public Records ZONING CUB-2 FINANCING Cash to Seller GROSS POTENTIAL INCOME $474,591 EFFECTIVE GROSS INCOME $474,591 GROSS INCOME MULTIPLE 9.80 EGIM 9.80 NET OPERATING INCOME $450,188 OVERALL RATE 9.68% TYPE OF PURCHASER Private Investor COMMENTS This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot. Triple net lease. (716) 12 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] TMS 59 -231 -22 ,23 pt. NAME Paw Creek Commons LOCATION East side of Little Rock Road at Freedom Drive, Charlotte, NC GRANTOR Paw Creek, LLC GRANTEE Frastacky and Associates DATE Mar 25, 1997 SALES PRICE $5,120,000 ADJUSTED SALES PRICE $5,384,000 SIZE BUILDING 66,050 SALES PRICE PER S.F. $77.52 SIZE LAND (ACRES) 9.82 SIZE LAND (S.F.) 427,759 YEAR BUILT 1996 LAND/BUILDING RATIO 6.48 To 1 UTILITIES Municipal VERIFICATION Public Records ZONING CC, Commercial Center FINANCING Cash to seller GROSS POTENTIAL INCOME $568,840 EFFECTIVE GROSS INCOME $552,054 GROSS INCOME MULTIPLE 9.00 EGIM 9.27 NET OPERATING INCOME $517,412 OVERALL RATE 9.61% TYPE OF PURCHASER Private Investor COMMENTS The overall rate of 10.10 percent has been adjusted down by 50 basis points since the sales contract is pre-construction. The major tenants are Winn Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. Anchor income is 79.41 percent of gross income. (793) 13 ADDENDA Lancaster County Demographics Comparables Rental Map Comparables Sales Map Building Layout Rent Roll Photographs of Subject USA COUNTIES 1996 Geographic Area: Lancaster, SC (45057) Table: GENERAL PROFILE - -------------------------------------------------------------------------------- POPULATION AND HOUSING (Bureau of the Census) Total resident population: 1995 ..................................................... 56,325 Percent 65 years and over .............................. 12.3 1990 ..................................................... 54,516 1980 ..................................................... 53,361 Occupied housing units, 1990 ............................... 19,778 Percent owner occupied ................................... 74.8 BIRTHS AND DEATHS (National Center for Health Statistics) Births, 1993 ............................................... 775 Per 1,000 resident population ............................ 13.9 Percent to mothers under 20 years of age ................. 19.0 Deaths, 1993 ............................................... 523 Per 1,000 resident population ............................ 9.4 Infant deaths per 1,000 live births, 1993 .................. 12.9 EDUCATION (Bureau of the Census) Persons 25 years and over, 1990 ............................ 34,417 Percent high school graduates ............................ 60.0 Percent college graduates ................................ 9.6 LABOR FORCE (Bureau of Labor Statistics) Civilian labor force, 1994 ................................. 29,895 Percent unemployed ....................................... 7.7 PRIVATE NONFARM ESTABLISHMENTS (Bureau of the Census) Total establishments, 1993 ................................. 1,059 Percent retail trade ..................................... 30.1 Percent services ......................................... 33.0 Paid employees, 1993 (pay period including March 12) ....... 16,846 Annual payroll, 1993 ($1,000) .............................. 323,305 PERSONAL INCOME (Bureau of Economic Analysis) Total personal income, 1993 ($1,000) ....................... 867,176 Per capita (dollars) ..................................... 15,583 AGRICULTURE (Bureau of the Census) Number of farms, 1992 ...................................... 444 Land in farms as percent of total land ................... 17 RETAIL TRADE (Bureau of the Census) Retail sales, 1992 ($1,000) ................................ 313,876 Per capita (dollars) ..................................... 5,684 COMMERCIAL AND SAVINGS BANKS (Fed. Deposit Insurance Corp.) Number of offices, June 30, 1994 ........................... 8 Total deposits ($1,000) .................................. 205,773 SOCIAL PROGRAMS (Social Security Administration) Total Social Security recipients, December 1993 ............ 9,705 Retired workers .......................................... 5,780 Supplementary Security Income recipients, December 1994 .... 1,295 FEDERAL FUNDS AND GRANTS (Bureau of the Census) Total direct expenditures or obligations per capita: 1994 (dollars) ........................................... 2,692 1990 (dollars) ........................................... 1,982 - -------------------------------------------------------------------------------- (NA) Not available. (D) Avoid disclosure of confidential information. (X) Not applicable. (S) Does not meet publication standards. (Z) Value > 0 but < half unit of measure shown. NOTE: 0 data may indicate geographic/data footnotes. Source: U.S. Bureau of the Census, USA Counties 1996 CD-ROM. LANCASTER COUNTY OVERVIEW December, 1996 LOCATION POPULATION (1995 estimate) - -------- ---------- Region: North Central Lancaster County 56,000 County: Lancaster Municipalities: County Seat: Lancaster Town of Heath Springs 945 Town of Kershaw 1,879 City of Lancaster 10,000 Miles to: Charlotte 39 Columbia 55 (2000 estimate) New York 664 --------------- Miami 702 Lancaster County 59,000 Atlanta 247 San Francisco 2770 GOVERNMENT ---------- Type City Government: Council CLIMATE Council Members: 7 (district election) - ------- Length of Terms: 4 years Average Temperature Annual 61.4 Type County Government: January 43.1 Council/Administrator July 79.1 Council Members: 7 (district election) Mean Temperature Length of Terms: 4 years High 79.1 Low 43.1 Emergency Medical Service: Average Humidity Stations: 4 1:00 a.m. 76.0 Full-time personnel: 27 1:00 p.m. 49.4 Part-time personnel: 27 7:00 a.m. 83.0 *Convalescent (non-emergency) crew 7:00 p.m. 61.0 on duty Mon.-Fri., 8:00 a.m.- 5:00 pm. *Paramedic on every call Mean Yearly Precipitation 43.2" Heat Degree Days 3,342 hours Fire Department: Cool Degree Days 1,546 hours Full-time Personnel 22 Volunteer Personnel 20 TRANSPORTATION Fire Insurance Rating 4 - -------------- Volunteer Fire Depts: 19 Highways Serving the Area: U.S.: U.S. 521, U.S. 21, U.S. 601 City Police Department: S.C.: S.C. 9, S.C. 903, S.C. 200 Employees 46 1-77 South: 18 miles (Great Falls) Equipped Cars 21 1-77 North: 23 miles (Rock Hill) County Sheriff's Department: Employees 77 Equipped Cars 44 Per Capita Income - ----------------- $15,583 - Lancaster County, 1993 $16,861 - South Carolina, 1993 Source: 1995 S.C. Statistical Abstract Median household E.B.l.* - ------------------------ $27,569 - Lancaster County, 1995 $28,022 - South Carolina, 1995 Households by E.B.I.: * - ----------------------- 25.9% $20,000-$34,999 19.7% $35,000-$49,999 18.5% $50,000 and over *After tax figure-Effective Buying Income Source: 1996 Sales and Marketing Management Third quarter, 1995 ACCRA Cost of Living Index showed Lancaster County living costs for mid-management family lowest among 35 areas in Ga., N.C. and S.C. participating in Survey. Nationwide, of 322 communities, Lancaster was sixth lowest. Copy of Survey available at Chamber office. Labor Force: (DEC. 1996) - ------------ Lancaster County: 27,730 Non-Manufacturing Emp.: 11,820 Manufacturing Emp.: 6,760 Unemployment Rate: 5.1% Sector Employment (1995)*: - -------------------------- Construction 4.3% Manufacturing 38.2% Transportation/Public Util. 2.3% Wholesale/Retail Trade 22.4% Financial/Ins./Real Estate 4.4% Government 12.9% Service 15.5% Source: S.C.Employment Security Commission FINANCIAL INSTITUTIONS - ---------------------- Number of Banks: 5 BB&T - 283-9936 Bank of Heath Springs - 273-2016 First Citizens Bank - 285-7431 First Palmetto Savings Bank - 285-6978 Wachovia Bank - 286-3321 Number of Credit Unions: 2 Bowater Carolina Fed. Credit Union - 285-2001 Founders Federal Credit Union - 283-5900 TAXES ----- Property Taxes - Mills - 1996: City County School* TOTAL ---- ------ ------- 140.4 (65 + 170.5) 235.5 *first $100,000 of residential property value exempted from school taxes Assessment Ratio: City County Residential 4% 4% Agriculture 4% 4% Other Prop. 6% 6% Industrial 10.5% 10.5% Personal 10.5% 10.5% Public Util. 9.5% 9.5% Trans. 9.5% 9.5% STATE TAXES ----------- Corporate Income 5% Retail Sales 6% Intangibles N/A Individual Income Min: 2% - Max. 7% SCHOOLS ------- District Serving Area: LANCASTER Number of Public Schools: Elementary: 10 Middle: 4 Secondary: 4 Lancaster County Vocational School Number of Pupils: 10,870 Number of Teachers: 741 Colleges, Universities, Technical Schools, and other schools serving the area: University of South Carolina Lancaster University of South Carolina (Columbia) Wingate College (Monroe, N.C.) Winthrop University (Rock Hill) York Technical College (Rock Hill) CHURCHES -------- Protestant: 100+ Catholic: 1 Ind./Non-denominational: 10 [GRAPHIC OMITTED] COMPARABLE RENTALS MAP [GRAPHIC OMITTED] COMPARABLE SALES MAP SITE PLAN [GRAPHIC OMITTED] SOUTH SQUARE SHOPPING CENTER EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 140 Property: SOUTH SQUARE SHOPPING CENTER 1730 AIRPORT ROAD LANCASTER, SC 29720-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- DOUBLE EIGHT CHINESE F/K/A CHINA 88 676- 10 1,200 11/21/94 11/30/04 0.00 0.00 0.00 0.00 7.00 12/01/94 8,400.00 7.50 12/01/96 9,000.00 8.00 12/01/97 9,600.00 9.60 12/01/99 11,520.00 - ------------------------------------------------------------------------------------------------------------------------- SUBWAY REAL ESTATE CORP. 676- 20 1,200 12/01/92 11/30/97 0.00 0.00 0.00 0.00 8.00 01/01/93 9,600.00 0.00 0.00 8.50 12/01/95 10,200.00 9.00 12/01/96 10,800.00 - ------------------------------------------------------------------------------------------------------------------------- FOOD LION #1209 676- 30 29,000 12/02/92 12/01/17 0.00 0.00 7.15 01/01/93 207,350.04 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ DOUBLE EIGHT CHINESE Full 0 Full 0 Full 0 12/01/04 11/30/09 0.00 0.00 0 F/K/A CHINA 88 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ SUBWAY REAL ESTATE CORP. Full 0 Full 0 Full 0 12/01/95 11/30/97 8.50 0.00 0 12/01/97 11/30/00 0.00 0.00 0 12/01/00 11/30/03 0.00 0.00 0 0.00 0.00 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ FOOD LION #1209 Full 0 PRS 1993 Fixed 0 12/02/18 12/01/23 7.15 0.00 0 12/02/23 12/01/28 7.15 0.00 0 12/02/28 12/01/33 7.15 0.00 0 12/02/33 12/01/38 7.15 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 141 Property: SOUTH SQUARE SHOPPING CENTER 1730 AIRPORT ROAD LANCASTER, SC 29720-000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- REVCO #2476 676-40 8,450 10/25/92 10/31/02 7.25 11/01/92 65,487.48 - ------------------------------------------------------------------------------------------------------------------------- ENERGY VIDEO 676-50 3,000 12/01/92 11/30/97 7.25 12/01/92 23,250.00 DOUG CRENSHAW 8.25 12/01/95 24,750.00 8.75 12/01/96 26,250.00 - ------------------------------------------------------------------------------------------------------------------------- TONY'S PIZZA 676-60 1,500 04/01/93 03/31/98 8.50 04/01/93 12,750.00 - ------------------------------------------------------------------------------------------------------------------------- WACHOVIA BANK OF SC 676-70 0 02/01/97 01/31/00 0.00 03/01/97 7,200.00 WACHOVIA BANK OF SC, N.A. 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ REVCO #2476 Full 0 Full 0 Full 0 11/01/02 10/31/07 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ ENERGY VIDEO Full 0 Full 0 Full 0 0.00 0.00 0 DOUG CRENSHAW 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ TONY'S PIZZA Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ WACHOVIA BANK OF SC WACHOVIA BANK OF SC, N.A None 0 None 0 None 0 02/01/00 01/31/03 0.00 0.00 0 02/01/03 01/31/06 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 44,350 Current Annual Base Rent 338,837.52 Available. 0 Total... 44,350
PHOTOGRAPHS OF SUBJECT PROPERTY - ------------------------------- [GRAPHIC OMITTED] Airport Road - Facing Northwest [GRAPHIC OMITTED] Airport Road - Facing Southeast [GRAPHIC OMITTED] View of Entrance to Subject Property from Airport Road [GRAPHIC OMITTED] View of Entrance to Subject Property from Barton Road [GRAPHIC OMITTED] Front View of Subject Property [GRAPHIC OMITTED] Front View of Subject Property [GRAPHIC OMITTED] Side View of Subject Property [GRAPHIC OMITTED] Rear View of Subject Property [GRAPHIC OMITTED] Rear View of Subject Property This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study of: CLOVER PLAZA SHOPPING CENTER 809 Bethel Road Clover, York County, South Carolina Prepared By: O. Marshall Dodds, MAI Date of Market Study: May 13, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] May 14, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Clover Plaza 809 Bethel Road Clover, York County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 13,1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 45,575 square feet of leaseable area. The center was constructed in 1990 and the anchor tenants are Food Lion and Revco. The subject property is currently 97.86 percent occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds ------------------------------ O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) OMD:mm EXECUTIVE SUMMARY ================================================================================ Regional Perspective Clover is located in York County which is located in the north central portion of the state. The town is served by US Highway #321 and SC Highway #55. Two interstate highways are located nearby, with I-85 being 13 miles to the north and I-77 being located 20 miles to the east. York is located ten miles to the south; Gastonia is located 12 miles to the north; Charlotte is located 28 miles to the northeast; and Rock Hill is located 21 miles to the southeast. The unemployment rate for York County as of March, 1997 was 5.0% and South Carolina had an unemployment rate of 5.5%. The population of York County in 1995 (most recent) was 143,825 and 10.8 percent of the population were over 65 years of age. The average per capita income was $18,617 in 1993 (most recent). Retail sales in the county totaled $896 million for 1992. Neighborhood and Site The subject neighborhood is located in the eastern portion of the Town of Clover. The subject site and adjacent properties were annexed into the Town of Clover around the time of construction of the subject. The major traffic artery running through the neighborhood is Bethel Street, which is also SC Highway #55. This is the major thoroughfare which connects the Town of Clover with Rock Hill via SC Highway #274. Several single family dwellings are located in the subject neighborhood. Multi-family properties in the area include the Yorktown Apartments and Stonegate Apartments (to the rear of subject). Commercial uses include Killian's Service Center, which is located across the street from subject, Clover Chevrolet-Geo, McLean's Garage, Charleston Family Seafood, and Nicol's Amoco convenience market/self-service gasoline station. The Clover School District Administrative Building, Clover High School and Clover Junior High are relatively new facilities that are located one mile from subject. Commercial properties are concentrated on the major thoroughfares with residential properties being located off of these thoroughfares. The intersection of Main Street and Bethel Street is more or less the middle of the downtown area of Clover. There is a shopping center located on the west side of South Main Street, approximately one block from the intersection with Bethel Street. Tenants in this center are Community Cash, Rite Aid Drugs and Family Dollar. There are also several convenience markets, such as Fast Fare, located along Main Street, as well as Hardee's and several privately owned restaurants. Physical features are as follows: 1. Size 6.31 acres or 274,864 square feet 2. Identity 809 Bethel Road TMS #10-3-8-22 3. Shape irregular 4. Topography generally level, below street grade to the rear of site 5. Accessibility good from either direction 6. Utilities municipal 1 Physical Description Building features are as follows: 1. Size (net) 45,575 square feet 2. Layout & Design 1 story-food store, drug store and six shops 3. Parking Spaces 263 5.77 per 1,000 square feet of net area 4. Construction brick and glass front with concrete block on side and rear and metal seamed roof Market Position and Marketability Conclusions The Town of Clover contains two retail structures. In addition to the subject, there is a shopping center located on the west side of South Main Street, approximately one block from the intersection with Bethel Street. Tenants in this center are Community Cash, Rite Aid Drugs and Family Dollar. It is, however, a much older center than subject and not considered comparable. No new properties are under construction or planned for this area at this time. The City of York is located approximately ten miles to the south of Clover and is considered to be slightly larger. The York Village is located in York and contains 39,585 square feet. It was constructed in 1981 with Food Lion and Eckerd Drugs as the anchor tenants and three smaller shops. This center is currently 100 percent occupied. The rental range is from $4.00 to $7.00 per square foot. Another center, York Plaza, is located across Liberty Street from the York Village. This center was constructed in 1973 and expanded in 1992 to contain 70,100 square feet. The anchor tenants for this center are Bi-Lo and Revco. There are five smaller shops with such tenants as Radio Shack, Family Dollar and Advance Auto. The rental rate range for this center is $4.00 to $6.00. It is also 100 percent occupied as of the date of this study. There is currently one center planned in York at the intersection of US Highway #321 and SC Highway #161. It will contain a Winn Dixie Marketplace and local shops. The City of Gastonia is located approximately 12 miles to the north of Clover and is considered larger than Clover. It is also in relatively close proximity to Charlotte, North Carolina. There are more than 20 shopping centers located in Gastonia with the most comparable to subject being included in this study. The Food Lion Plaza is located at the intersection of Neal Hawkins Road and Union Road. This center contains 60,000 square feet with Food Lion as the anchor tenant. There are also eleven smaller shops with a rental range of $8.00 to $11.00 per square foot. This center is currently 100 percent occupied. The Robinwood Crossing Shopping Center is also located in Gastonia adjacent to the Food Lion Plaza with Harris Teeter and Eckerd Drugs as major tenants. It was constructed in 1984 and expanded in 1992. There is one vacant store in this center that was previously occupied by Rakin Hardware. The size is 49,900 square feet with a rental rate range of $10.00 to $12.00 per square foot. The Union Hudson Crossing is a center that was constructed in 1992 and contains 61,000 square feet. Anchor tenants are Bi-Lo and Revco Drugs with a rental rate range of $8.50 to $11.00 per square foot for the seven shops. The Davis Park Center was constructed in 1992 and contains 42,680 square feet of space. The major tenant in this center is Bi-Lo with three smaller shops that have a rental rate range of $6.50 to $7.75 per square foot. This center is currently 100 percent occupied. The Diane 29 Shopping Center is located on US Highway #29/74 at Edgewood Road. It contains 29,000 square feet of leaseable area with Food Lion being the anchor tenant. It was built in 1992 and has a rental rate range of $8.00 to $11.50 per square foot. The subject property is in the middle of the neighborhood in the Town of Clover. The location of subject is convenient to the single family and multi-family dwellings that are located throughout the neighborhood. SC Highway #55 is the major traffic artery running through the area. 2 Six shops in the subject property have rental rates ranging from $7.60 to $9.50 per square foot. These are thought to be reasonable rental rates for the neighborhood because this center is the newest in Clover and has maintained a relatively high occupancy rate. The rental rate for the Food Lion is $5.46 per square foot while the Revco Drug Store pays $7.08 per square foot. Overage rentals are being received from both anchor tenants. The subject property is presently operating at a high occupancy rate. The location of subject is strategic within the neighborhood and convenient to the shoppers throughout the neighborhood. Trends The subject property is located in the eastern section of the Town of Clover. The neighborhood is continuing to develop and contains several single family and multi-family dwellings. Commercial developments are located along the major traffic arteries. The demand and desirability for the neighborhood has been good. All trends are favorable at this time and expected to continue. 3 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================ I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 1. Identification a. Name Clover Plaza York Village York Plaza -------------------- -------------------- -------------------- b. Street 809 Bethel Road Liberty Street Liberty Street -------------------- -------------------- -------------------- c. City Clover, SC York, SC York, SC -------------------- -------------------- -------------------- d. Distance from subject N/A 10 miles 10 miles -------------------- -------------------- -------------------- e. Contact Edens & Avant, Inc. McQueen Properties Garrett & Garrett -------------------- -------------------- -------------------- f. Phone (803) 779-4420 (704) 372-2768 (864) 862-3501 -------------------- -------------------- -------------------- 2. Attributes a. Year built 1990 1981 1973, Expanded 1992 -------------------- -------------------- -------------------- b. Net sq. Ft. 45,575 39,585 70,100 -------------------- -------------------- -------------------- c. # building 1 1 1 -------------------- -------------------- -------------------- d. #stories 1 1 1 -------------------- -------------------- -------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A -------------------- -------------------- -------------------- f. # elevators N/A N/A N/A -------------------- -------------------- -------------------- g. Parking Adequate Adequate Adequate -------------------- -------------------- -------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block -------------------- -------------------- -------------------- I. Vacancy % 2.14% 0% 0% -------------------- -------------------- -------------------- j. Anchors, if Retail Food Lion, Revco Food Lion, Eckerd Bi-Lo, Revco -------------------- -------------------- --------------------
COMPARABLE 3 COMPARABLE 4 1. Identification a. Name Davis Park Center Robinwood Crossing -------------------- --------------------- W. Hudson Blvd at Neal Hawkins at b. Street Davis Park Road Union Road -------------------- --------------------- c. City Gastonia, NC Gastonia, NC -------------------- --------------------- d. Distance from subject 15 miles 15 miles -------------------- --------------------- e. Contact Hampton Dev. Co. -------------------- --------------------- f. Phone (803) 232-3210 (704) 375-1000 -------------------- --------------------- 2. Attributes a. Year built 1993 1984, Expanded 1992 -------------------- --------------------- b. Net sq. Ft. 42,680 49,900 -------------------- --------------------- c. # building 1 1 -------------------- --------------------- d. #stories 1 1 -------------------- --------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A -------------------- --------------------- f. # elevators N/A N/A -------------------- --------------------- g. Parking Adequate Adequate -------------------- --------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block -------------------- --------------------- I. Vacancy % 0% 15% -------------------- --------------------- j. Anchors, if Retail Bi-Lo Harris Teeter, Eckerd -------------------- --------------------- Comments: Comparables #1 and #2 are located in York, South Carolina which is a small town slightly larger than Clover. Comparables #3 and #4 are located in Gastonia, North Carolina which is significantly larger than Clover and approximately 15 miles from Charlotte, North Carolina. All of the comparables are experiencing 100 percent occupancy rates at this time. 4 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================
B. RENTAL INFORMATION SUBJECT COMPARABLE 1 COMPARABLE 2 1. Asking Rental Rate a. Anchor Space N/A N/A N/A ------------------- ------------------- ------------------- b. Shop Space $7.60 - $9.50 $4.00 - $7.00 $4.00 - $6.00 ------------------- ------------------- ------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ------------------- ------------------- ------------------- 3. Rent Concessions None None None ------------------- ------------------- ------------------- 4. Effective Rent $7.60 - $9.50 $4.00 - $7.00 $4.00 - $6.00 ------------------- ------------------- ------------------- 5. TI Allowance None None None ------------------- ------------------- ------------------- 6. Expense Stop None None None ------------------- ------------------- ------------------- 7. Length of Lease Term 3 - 5 years (shops) 3 - 5 years (shops) 3 - 5 years (shops) ------------------- ------------------- ------------------- 8. Commissions 5.00% - 7.00% 5.00% to 7.00% 5.00% - 7.00% ------------------- ------------------- ------------------- 9. Percentage Rent (per lease terms) Food Lion, Revco Food Lion, Eckerd Bi-Lo, Revco ------------------- ------------------- ------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A ------------------- ------------------- ------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A ------------------- ------------------- ------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Similar Similar ------------------- ------------------- -------------------
B. RENTAL INFORMATION COMPARABLE 3 COMPARABLE 4 1. Asking Rental Rate a. Anchor Space N/A N/A ------------------- ---------------------- b. Shop Space $6.50 - $7.75 $10.00 - $12.00 ------------------- ---------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net ------------------- ---------------------- 3. Rent Concessions None None ------------------- ---------------------- 4. Effective Rent $6.50 - $7.75 $10.00 - $12.00 ------------------- ---------------------- 5. TI Allowance None None ------------------- ---------------------- 6. Expense Stop None None ------------------- ---------------------- 7. Length of Lease Term 3 - 5 years (shops) 3 - 5 years (shops) ------------------- ---------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% ------------------- ---------------------- 9. Percentage Rent (per lease terms) Bi-Lo Harris Teeter, Eckerd ------------------- ---------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A ------------------- ---------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A ------------------- ---------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) Superior Superior ------------------- ---------------------- D. EXPLAIN RANKING/COMMENTS: Comparables #3 and #4 are ranked superior to subject because they are located in a larger city than subject. However, these centers are generally similar in size and age. 5 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: York Village Location: Liberty Street York, SC Year Built: 1981 Total Size: 39,585 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $4.00 - $7.00 Tenant Expenses: Triple Net Remarks: Food Lion and Eckerd are the major tenants. Located on Liberty Street which is a heavily traveled road. 6 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: York Plaza Location: Liberty Street York, SC Year Built: 1973, Expanded 1992 Total Size: 70,100 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $4.00 - $6.00 Tenant Expenses: Triple Net Remarks: Major tenants are Bi-Lo and Revco. This center is located across the street from Comparable #1 and has operated at a high occupancy rate. 7 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Davis Park Center Location: W. Hudson Boulevard at Davis Park Road Gastonia, NC Year Built: 1993 Total Size: 42,680 SF Vacant Space: None Vacancy Rate: 0% Average Rental Rate: $6.50 - $7.75 Tenant Expenses: Triple Net Remarks: This center was constructed in 1993 and has Bi-Lo as the major tenant. 8 Comparable Rental No. 4 ================================================================================ [GRAPHIC OMITTED] Name: Robinwood Crossing Location: Neal Hawkins at Union Road Gastonia, NC Year Built: 1984, Expanded in 1992 Total Size: 49,900 SF Vacant Space: 7,485 SF Vacancy Rate: 15% Average Rental Rate: $10.00 - $12.00 Tenant Expenses: Triple Net Remarks: This center was constructed in 1984 and expanded in 1992. Harris Teeter and Eckerd are the major tenants. Rakin Hardware has vacated their store. 9 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================
II. SALES COMPARABLES SUBJECT COMPARABLE 1 COMPARABLE 2 1. Identification a. Name Clover Plaza Davis Park Center Belmont Village ---------------- -------------------- ------------------- W. Hudson Blvd. at Wilkinson Blvd. at b. Street Address 809 Bethel Road Davis Park Road North Main Street ---------------- -------------------- ------------------- c. City Clover, SC Gastonia, NC Belmont, NC ---------------- -------------------- ------------------- d. Distance from Subject N/A 15 miles 25 miles ---------------- -------------------- ------------------- 2. Attributes a. Year Built 1990 1993 1994 ---------------- -------------------- ------------------- b. Net sq. feet 45,575 42,680 60,003 SF ---------------- -------------------- ------------------- c. # Buildings 1 1 1 ---------------- -------------------- ------------------- d. # of Stories 1 1 1 ---------------- -------------------- ------------------- e. Vacancy % 2.14% 0% 0% ---------------- -------------------- ------------------- 3. Sales Information a. Sales Price N/A $3,150,000 $5,050,000 ---------------- -------------------- ------------------- b. Sales Price PSF N/A $66.34 $84.16 ---------------- -------------------- ------------------- c. Date N/A 12-30-94 11-03-94 ---------------- -------------------- ------------------- d. Cap. Rate N/A 10.1% 9.8% ---------------- -------------------- ------------------- e. NOI at time of Sale N/A $317,187 $496,750 ---------------- -------------------- ------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A Superior Superior ---------------- -------------------- -------------------
II. SALES COMPARABLES COMPARABLE 3 COMPARABLE 4 1. Identification a. Name One Norman Center Paw Creek Commons ---------------------- --------------------- 19706 One Norman Blvd. E/S Little Rock Road b. Street Address at Freedom Drive ---------------------- --------------------- c. City Cornelius, NC Charlotte, NC ---------------------- --------------------- d. Distance from Subject 45 miles 30 miles ---------------------- --------------------- 2. Attributes a. Year Built 1993 1996 ---------------------- --------------------- b. Net sq. feet 54,185 SF 66,050 SF ---------------------- --------------------- c. # Buildings 1 1 ---------------------- --------------------- d. # of Stories 1 1 ---------------------- --------------------- e. Vacancy % 6.98% 2.73% ---------------------- --------------------- 3. Sales Information a. Sales Price $4,650,000 $5,384,000 ---------------------- --------------------- b. Sales Price PSF $85.82 $77.52 ---------------------- --------------------- c. Date 10-12-95 03-25-97 ---------------------- --------------------- d. Cap. Rate 9.68% $517,412 ---------------------- --------------------- e. NOI at time of Sale $474,591 9.61% ---------------------- --------------------- 4. Rank Relative to Subject (inferior, similar, superior) Similar Superior ---------------------- --------------------- Explain Ranking/Comments: Comparables #1 and #4 are ranked superior to subject because they are located in larger cities and are newer centers than subject. Comparable #2 is ranked superior because it is larger than subject and newer. Comparable #3 is believed to be similar to subject being located in a small town and being approximately the same size. 10 COMPARABLE SHOPPING CENTER SALES ================================================================================ Comparable Sale No. 1 [GRAPHIC OMITTED] NAME Davis Park Center LOCATION NW Corner W. Hudson Blvd. & Davis Park Rd. Gastonia, Gaston County, NC GRANTOR P. Edwin Good, et al GRANTEE US Retail Income Fund, LP DEED REFERENCE Book 2427, Page 543 DATE Dec 30, 1994 SALES PRICE $3,150,000 ADJUSTED SALES PRICE $3,150,000 SIZE BUILDING 47,480 SALES PRICE PER S.F. $66.34 SIZE LAND (ACRES) 4.90 SIZE LAND (S.F.) 213,444 YEAR BUILT 1993 LAND/BUILDING RATIO 4.50 To 1 UTILITIES All Available VERIFICATION Public Records ZONING Commercial FINANCING Cash to Seller - Loan assumption from Jefferson-Pilot EFFECTIVE GROSS INCOME $341,378 GROSS INCOME MULTIPLE 9.23 EGIM 9.23 NET OPERATING INCOME $317,187 OVERALL RATE 10.07% TYPE OF PURCHASER Private Investor COMMENTS This is a neighborhood shopping center - Bi-Lo (42,680 SF; rent - $7.38/SF) is the major tenant. Local tenants occupancy 4,800 SF. Their rents range from $6.50 to $7.75 per square foot. The center was 100 percent occupied and in excellent condition at the time of sale. (434) 11 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] NAME Belmont Village LOCATION NE Corner Wilkinson Blvd. (US Hwy. #74) & North Main St. Belmont, Gaston County, NC GRANTOR Belmont Investments, LP GRANTEE US Retail Income Fund, LP DEED REFERENCE Book 2419, Page 989 DATE Nov 3, 1994 SALES PRICE $5,050,000 ADJUSTED SALES PRICE $5,050,000 SIZE BUILDING 60,003 SALES PRICE PER S.F. $84.16 SIZE LAND (ACRES) 6.77 SIZE LAND (S.F.) 294,901 YEAR BUILT 1994 LAND/BUILDING RATIO 4.91 To 1 UTILITIES All Available VERIFICATION Public Records ZONING Commercial FINANCING Cash to Seller EFFECTIVE GROSS INCOME $526,823 EGIM 9.59 NET OPERATING INCOME $496,750 OVERALL RATE 9.84% TYPE OF PURCHASER Private Investor COMMENTS This is a neighborhood shopping center. Bi-Lo is the major tenant (42,680 SF). Six local shops (7,672 SF). Advanced Auto Parts Store built on outparcel. (433) 12 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] NAME One Norman Center LOCATION 19706 One Norman Boulevard, Cornelius, Mecklenburg County, NC GRANTOR One Norman Center, LP GRANTEE Lucky Realty DEED REFERENCE Book 8325, Page 721 DATE Oct 12, 1995 SALES PRICE $4,650,000 SIZE BUILDING 54,185 SALES PRICE PER S.F. $85.82 SIZE LAND (ACRES) 5.69 SIZE LAND (S.F.) 247,856 YEAR BUILT 1993 LAND/BUILDING RATIO 4.57 To 1 UTILITIES All Public VERIFICATION Public Records ZONING CUB-2 FINANCING Cash to Seller GROSS POTENTIAL INCOME $474,591 EFFECTIVE GROSS INCOME $474,591 GROSS INCOME MULTIPLE 9.80 EGIM 9.80 NET OPERATING INCOME $450,188 OVERALL RATE 9.68% TYPE OF PURCHASER Private Investor COMMENTS This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot. Triple net lease. (716) 13 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] TMS 59 -231 -22 ,23 pt. NAME Paw Creek Commons LOCATION East side of Little Rock Road at Freedom Drive, Charlotte, NC GRANTOR Paw Creek, LLC GRANTEE Frastacky and Associates DATE Mar 25, 1997 SALES PRICE $5,120,000 ADJUSTED SALES PRICE $5,384,000 SIZE BUILDING 66,050 SALES PRICE PER S.F. $77.52 SIZE LAND (ACRES) 9.82 SIZE LAND (S.F.) 427,759 YEAR BUILT 1996 LAND/BUILDING RATIO 6.48 To 1 UTILITIES Municipal VERIFICATION Public Records ZONING CC, Commercial Center FINANCING Cash to seller GROSS POTENTIAL INCOME $568,840 EFFECTIVE GROSS INCOME $552,054 GROSS INCOME MULTIPLE 9.00 EGIM 9.27 NET OPERATING INCOME $517,412 OVERALL RATE 9.61% TYPE OF PURCHASER Private Investor COMMENTS The overall rate of 10.10 percent has been adjusted down by 50 basis points since the sales contract is pre-construction. The major tenants are Winn Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. Anchor income is 79.41 percent of gross income. (793) 14 ADDENDA o York County Demographics o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 15 USA COUNTIES 1996 Geographic Area: York, SC (45091) Table: GENERAL PROFILE - -------------------------------------------------------------------------------- POPULATION AND HOUSING (Bureau of the Census) Total resident population: 1995 .................................................... 143,825 Percent 65 years and over.............................. 10.8 1990 .................................................... 131,497 1980 .................................................... 106,720 Occupied housing units, 1990................................. 47,006 Percent owner occupied.................................... 71.9 BIRTHS AND DEATHS (National Center for Health Statistics) Births, 1993................................................. 1,974 Per 1,000 resident population............................. 14.2 Percent to mothers under 20 years of age.................. 15.7 Deaths, 1993................................................. 1,160 Per 1,000 resident population............................. 8.3 Infant deaths per 1,000 live births, 1993.................... 11.7 EDUCATION (Bureau of the Census) Persons 25 years and over, 1990.............................. 81,753 Percent high school graduates............................. 67.5 Percent college graduates................................. 16.9 LABOR FORCE (Bureau of Labor Statistics) Civilian labor force, 1994................................... 79,049 Percent unemployed........................................ 5.0 PRIVATE NONFARM ESTABLISHMENTS (Bureau of the Census) Total establishments, 1993................................... 3,086 Percent retail trade...................................... 25.8 Percent services.......................................... 33.0 Paid employees, 1993 (pay period including March 12)......... 41,162 Annual payroll, 1993 ($1,000)................................ 936,115 PERSONAL INCOME (Bureau of Economic Analysis) Total personal income, 1993 ($1,000)......................... 2,590,370 Per capita (dollars)...................................... 18,617 AGRICULTURE (Bureau of the Census) Number of farms, 1992........................................ 677 Land in farms as percent of total land.................... 28 RETAIL TRADE (Bureau of the Census) Retail sales, 1992 ($1,000).................................. 896,368 Per capita (dollars)...................................... 6,551 COMMERCIAL AND SAVINGS BANKS (Fed. Deposit Insurance Corp.) Number of offices, June 30, 1994............................. 41 Total deposits ($1,000)................................... 734,825 SOCIAL PROGRAMS (Social Security Administration) Total Social Security recipients, December 1993.............. 21,490 Retired workers........................................... 13,610 Supplementary Security Income recipients, December 1994...... 2,213 FEDERAL FUNDS AND GRANTS (Bureau of the Census) Total direct expenditures or obligations per capita: 1994 (dollars)............................................ 2,350 1990 (dollars)............................................ 1,766 - -------------------------------------------------------------------------------- (NA) Not available. (D) Avoid disclosure of confidential information. (X) Not applicable. (S) Does not meet publication standards. (Z) Value > 0 but < half unit of measure shown. NOTE: 0 data may indicate geographic/data footnotes. Source: U.S. Bureau of the Census, USA Counties 1996 CD-ROM. [GRAPHIC OMITTED] COMPARABLE RENTALS MAP [GRAPHIC OMITTED] COMPARABLE SALES MAP [GRAPHIC OMITTED] Site Plan EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 124 Property: CLOVER PLAZA 809 BETHEL ROAD CLOVER, SC 29710-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- CLOVER PLAZA WASHERETTE JAMES F. CARROLL 652- 10 1,625 01/01/96 12/31/00 7.90 01/01/96 12,837.60 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- DOLLAR STORE STEPHEN GIBSON 652- 20 1,300 04/25/95 10/31/99 7.60 05/01/95 9,879.96 - -------------------------------------------------------------------------------------------------------------------------- SUBWAY REAL ESTATE CORP. SUBWAY REAL ESTATE CORP. 652- 30 1,300 09/01/91 08/31/99 0.00 0.00 0.00 0.00 0.00 0.00 9.00 04/01/93 11,700.00 9.50 09/01/96 12,349.92 9.75 09/01/97 12,675.00 10.00 09/01/98 12,999.96 - -------------------------------------------------------------------------------------------------------------------------- TONY'S PIZZA TONY'S PIZZA 652- 40 1,300 01/01/91 01/31/99 0.00 0.00 8.15 02/01/91 10,596.00 0.00 0.00 8.75 02/01/96 11,375.04 - -------------------------------------------------------------------------------------------------------------------------- Available 652- 50 975 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ CLOVER PLAZA WASHERETTE JAMES F. CARROLL Full 0 Full 0 Full 0 01/01/01 12/31/05 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ DOLLAR STORE STEPHEN GIBSON Full 0 Full 0 Full 0 0.00 5.00 197,600 Y - ------------------------------------------------------------------------------------------------------------------------------------ SUBWAY REAL ESTATE CORP. SUBWAY REAL ESTATE CORP. Full 0 Full 0 Full 0 09/01/94 08/31/96 8.30 0.00 0 09/01/96 08/31/99 9.50 0.00 0 09/01/99 08/31/02 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ TONY'S PIZZA TONY'S PIZZA Full 0 Full 0 Full 0 02/01/96 01/31/99 0.00 5.00 300,000 02/01/99 01/31/02 0.00 5.00 0 0.00 5.00 0 0.00 5.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 125 Property: CLOVER PLAZA 809 BETHEL ROAD CLOVER, SC 29710-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- FOOD LION #841 FOOD LION, INC. 652- 70 29,000 08/11/90 08/10/10 0.00 0.00 4.96 10/01/90 143,750.04 0.00 0.00 5.46 01/10/97 158,375.04 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- REVCO #4036 REVCO DISCOUNT DRUG CENTERS, 652- 80 8,450 08/01/90 07/31/00 7.08 09/01/90 59,826.00 0.00 0.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- CLOVER DRYCLEANING YONG KI KIM 652- 90 1,625 12/01/96 11/30/99 1.55 11/25/96 2,518.68 7.75 12/01/96 12,593.76 - -------------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied.. 44,600 Current Annual Base Rent 277,237.32 Available. 975 Total..... 45,575 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ FOOD LION #841 FOOD LION, INC. Full 0 PRS 1995 Full 0 08/11/35 08/10/40 5.46 1.00 0 Y 08/11/45 08/10/50 5.46 0.01 257,879 Y 08/11/10 08/10/15 5.46 0.01 0 Y 08/11/15 08/10/20 5.46 0.01 1583750400 Y 08/11/20 08/10/25 5.46 0.01 0 Y 08/11/25 08/10/30 5.46 0.01 0 Y 08/11/30 08/10/35 5.46 0.01 0 Y 08/11/40 08/11/45 5.46 0.01 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ REVCO #4036 REVCO DISCOUNT DRUG CENTERS, Full 0 Full 0 Full 0 08/01/00 07/31/05 7.08 2.00 1,976,666 08/01/05 07/31/10 7.08 2.00 0 08/01/10 07/31/15 7.08 2.00 0 08/01/15 07/31/20 7.08 2.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ CLOVER DRYCLEANING YONG KI KIM Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Bethel Road - Facing West [GRAPHIC OMITTED] Bethel Road - Facing East [GRAPHIC OMITTED] Front View of Subject Property [GRAPHIC OMITTED] Front View of Subject Property [GRAPHIC OMITTED] View of Entrance from Bethel Road [GRAPHIC OMITTED] Side and Rear View of Subject Property [GRAPHIC OMITTED] Rear View of Subject Property PHOTOGRAPH OF PROPOSED PROPERTY [GRAPHIC OMITTED] View of Site of Proposed Winn Dixie Marketplace and Shops in York, SC This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study of: TRI-COUNTY PLAZA SHOPPING CENTER 1075 Franklin Springs Road Royston/Franklin Springs, Franklin County, Georgia Prepared By: O. Marshall Dodds, MAI Date of Market Study: May 8, 1997 [LETTERHEAD OF O. MARSHALL DODDS, CO., INC.] May 12, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Tri-County Plaza 1075 Franklin Springs Road Royston/Franklin Springs, Franklin County, Georgia Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 8,1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 63,510 square feet of leaseable area. The center was constructed in 1986 and the anchor tenant is Bi-Lo. Rite Aid has vacated their 6,720 square foot store. The subject property is currently 89.4 percent occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds ---------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) OMD:mm EXECUTIVE SUMMARY ================================================================================ Regional Perspective Franklin County is located in northeast Georgia in the foothills of the Appalachian Mountains on Lake Hartwell. The county is served by I-85, which links Atlanta's metro area with Greenville, South Carolina and with Charlotte, North Carolina. Atlanta's center is 80 miles to the southwest, while Greenville is 49 miles and Charlotte is 146 miles to the northeast. The county seat is located in the center of the county at Carnesville. Other incorporated cities in Franklin County are Lavonia (9 miles northeast), Canon (10 miles east), Royston (10 miles southeast), and Franklin Springs (8 miles southeast). Royston and Franklin Springs are adjacent cities. Franklin County is served by I-85 and US Highway #29, along with numerous Georgia Highways. Total public road mileage is 652, with 417 miles being paved, ranking it in the top third of Georgia's counties for percent paved. The unemployment rate for Franklin County as of 1994 was 5.0% and Georgia had an unemployment rate of 5.2%. The population of Franklin County in 1995 (most recent) was 17,701 and 15.5 percent of the population were over 65 years of age. The average per capita income was $17,529 in 1993 (most recent). Industry and agricultural play an important role in the Franklin County economy. Retail sales in the county totaled $144 million for 1992. Also, 44 percent of the land in the county is attributed to farming. Neighborhood and Site The subject neighborhood is located in the southeastern portion of Franklin County in the cities of Royston and Franklin Springs. The Ty Cobb Memorial and Emmanuel College are located in the subject neighborhood. One shopping center in addition to the subject property is located in the neighborhood, with that being Dill's Plaza located on the south side of US Highway #29, just east of the subject property. This center is approximately 25 years old and has a local supermarket as the major tenant. Although it is 100 percent occupied at the time of this study, rents in this center are very low in comparison with the rents that would be associated with a newer shopping center. Other commercial uses include Burger King, Arby's, Amoco convenience market/self-service gasoline station, Western Auto, Watkin's Chevrolet-Olds, Tri-City Motors, BP and Huddle House. Commercial properties are concentrated on the major thoroughfares with residential properties being located off of these thoroughfares. The major traffic artery running through the neighborhood would be US Highway #29. This is a heavily traveled road running in an east-west direction. Construction was completed a few years ago to widen this highway from two to three lanes through the neighborhood, in order to alleviate some of the traffic congestion. Physical features are as follows: 1. Size 12.263 acres or 534,176 square feet 2. Identity 1075 Franklin Springs Road TMS #178-63 and #178-63A 3. Shape irregular 4. Topography generally level 5. Accessibility good from either direction 6. Utilities municipal 1 Physical Description Building features are as follows: 1. Size (net) 63,510 square feet 2. Layout & Design 1 story-food store, vacant drug store, nine shops 3. Parking Spaces 322 5.07 per 1,000 square feet of net area 4. Construction brick and glass front with concrete block on side and rear and metal seamed roof Market Position and Marketability Conclusions The City of Royston contains two retail structures. In addition to the subject, Dill's Plaza is located in Royston and contains 76,000 square feet. It was constructed in 1971. Dill's Food City is the anchor tenant in this center with 21 shops. Presently, this center is 100 percent occupied with rental rates ranging from $2.00 to $3.00. No new properties are under construction or planned for this area at this time. The City of Lavonia is located approximately 12 miles to the north of Royston and is considered to be approximately the same size as Royston. It contains three shopping centers. The Silo Shopping Center contains 56,720 square feet and was constructed in 1986. Lavonia Foods, Farmer's Furniture and Rite Aid are the anchor tenants in this center with seven smaller shops. This center is currently 100 percent occupied. The rental range is from $6.00 to $7.00 per square foot. Another Dill's Plaza is located in Lavonia with the anchor tenant being Dill's Food City. There are seven smaller shops and the rental rate range for this center is thought to be approximately $2.00 to $3.00. It is also 100 percent occupied as of the date of this study. The third center located in Lavonia is the Suburban Shopping Center which first opened in 1962 and contains approximately 23,600 square feet. There are eight small shops in addition to the anchor tenant which is Foodland. The rental range for this center is from $2.00 to $3.00 per square foot. The City of Toccoa is located approximately 35 miles to the northwest of Royston and is slightly larger than Royston. It contains five shopping centers and a free-standing Wal-Mart store. The Stephens Plaza is located on the major thoroughfare in Toccoa, Big A Road. This center first opened in 1989 and contains 47,850 square feet with Bi-Lo as the anchor tenant. There are also nine smaller shops with a rental range of $6.00 to $11.30 per square foot. This center is currently 100 percent occupied. The Towne Plaza is also located in Toccoa on Big A Road with Quality Foods and Eckerd Drugs as major tenants. It was constructed in 1975. There are four vacant stores in this center and Wal-Mart vacated its store several years ago. The Toccoa Plaza is an older center that is in need of renovation. The YMCA occupies a store as well as the Salvation Army. Bi-Lo and Eckerd Drugs vacated this center as did most of the shops afterward. The Big A Shopping Center was constructed in 1973 and contains 90,000 square feet of space. The major tenant in this center is Save-A-Lot and there are two vacant stores. The Ingles Plaza is one of the newest centers in Toccoa having been built in 1986. Ingles, Revco and a free-standing Belk store are the tenants in this center. In the late 1980's, a tornado damaged the Revco center which was subsequently rebuilt. The subject property is in the middle of the neighborhood. The location of subject is convenient to the single family dwellings that are located throughout the neighborhood. US Highway #29 is the major traffic artery running through the area. 2 The subject property has nine shops with rental rates ranging from $2.00 to $10.00 per square foot. These are thought to be reasonable rental rates for the neighborhood because this center is the newest in Royston and has maintained a relatively high occupancy rate. The rental rate for the Bi-Lo is $5.15 per square foot while the Rite Aid Drug Store is currently vacant. Overage rentals are being received from Bi-Lo. The subject property is presently operating at a high occupancy rate. The location of subject is strategic within the neighborhood and convenient to the shoppers throughout the neighborhood. Trends The subject property is located in the southeastern section of Franklin County. The neighborhood is continuing to develop and contains several single family dwellings. Commercial developments are located along the major traffic arteries. The demand and desirability for the neighborhood has been good. All trends are favorable at this time and expected to continue. 3 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================ I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Tri-County Plaza Dill's Plaza Silo Shopping Center Stephens Plaza --------------------- -------------------- ---------------------------- --------------------- b. Street Cook Street at 1075 Franklin Springs Highway #29 I-85 at Highway #17 Big A Road --------------------- -------------------- ---------------------------- --------------------- c. City Royston, GA Royston, GA Lavonia, GA Toccoa, GA --------------------- -------------------- ---------------------------- --------------------- d. Distance from subject N/A 1/2 mile 18 miles 35 miles --------------------- -------------------- ---------------------------- --------------------- e. Contact Edens & Avant, Inc. Anderson Dilworth N/A Edens & Avant, Inc. --------------------- -------------------- ---------------------------- --------------------- f. Phone (803) 779-4420 (414) 245-8423 N/A (803) 779-4420 --------------------- -------------------- ---------------------------- --------------------- 2. Attributes a. Year built 1986 1971 1986 1989 --------------------- -------------------- ---------------------------- --------------------- b. Net sq. Ft. 63,510 76,000 56,720 47,850 --------------------- -------------------- ---------------------------- --------------------- c. # building 1 2 1 1 --------------------- -------------------- ---------------------------- --------------------- d. #stories 1 1 1 1 --------------------- -------------------- ---------------------------- --------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A N/A --------------------- -------------------- ---------------------------- --------------------- f. # elevators N/A N/A N/A N/A --------------------- -------------------- ---------------------------- --------------------- g. Parking Adequate Adequate Adequate Adequate --------------------- -------------------- ---------------------------- --------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block --------------------- -------------------- ---------------------------- --------------------- I. Vacancy % 10.6% 0% 0% 0% --------------------- -------------------- ---------------------------- --------------------- j. Anchors, if Retail Bi-Lo Dill's Food City Farmers Furniture, Rite Aid Bi-Lo --------------------- -------------------- ---------------------------- ---------------------
Comments: Comparable #1 is located in subject neighborhood. Comparables #2 and #3 are located in towns similar to subject's in northeast Georgia. All of the comparables are experiencing 100 percent occupancy rates at this time. 4 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================ B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A N/A N/A --------------------- -------------------- ---------------------------- ---------------------- b. Shop Space $2.00 - $10.00 $2.00 - $3.00 $6.00 - $7.00 $6.00 - $11.30 --------------------- -------------------- ---------------------------- ---------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net --------------------- -------------------- ---------------------------- ---------------------- 3. Rent Concessions None None None None --------------------- -------------------- ---------------------------- ---------------------- 4. Effective Rent $2.00 - $10.00 $2.00 - $3.00 $6.00 - $7.00 $6.00 - $11.30 --------------------- -------------------- ---------------------------- ---------------------- 5. TI Allowance None None None None --------------------- -------------------- ---------------------------- ---------------------- 6. Expense Stop None None None None --------------------- -------------------- ---------------------------- ---------------------- 7. Length of Lease Term 3 years (shops) 3 - 5 years (shops) 3 - 5 years (shops) 3 - 5 years (shops) --------------------- -------------------- ---------------------------- ---------------------- 8. Commissions 5.00% - 7.00% 5.00% to 7.00% 5.00% - 7.00% 5.00% to 7.00% --------------------- -------------------- ---------------------------- ---------------------- 9. Percentage Rent (per lease terms) Bi-Lo Dill's Food City Farmers Furniture, Rite Aid Bi-Lo --------------------- -------------------- ---------------------------- ---------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A --------------------- -------------------- ---------------------------- ---------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A --------------------- -------------------- ---------------------------- ---------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Inferior Similar Similar --------------------- -------------------- ---------------------------- ----------------------
D.EXPLAIN RANKING/COMMENTS: Subject is located in smaller city than Comparable #3. However, the centers are generally similar in size and number of tenants. Comparable #1 is ranked inferior to subject because it is an older center than subject. The rental rates that are being received are lower than those of subject. The other shopping centers have been rated as similar and are thought to be so with subject. 5 LOCAL RENTAL COMPARABLES - ------------------------ Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Dill's Plaza Location: Cook Street at Highway #29 Royston, GA Year Built: 1971 Total Size: 76,000 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $2.00 - $3.00 Tenant Expenses: Triple Net Remarks: Dill's Food City is the major tenant. Located on US Highway #29 and Cook Street which are heavily traveled roads. 6 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Silo Shopping Center Location: I-85 at Highway #17 Lavonia, GA Year Built: 1986 Total Size: 56,720 Vacant Space: None Vacancy Rate: 0% Rental Range: $6.00 - $7.00 Tenant Expenses: Triple Net Remarks: Major tenants are Farmer's Furniture and Rite Aid Pharmacy. This is one of the newest centers in Lavonia and has operated at a high occupancy rate. 7 Comparable Rental No. 3 ================================================================================ Name: Stephens Plaza Location: Big A Road Toccoa, GA Year Built: 1989 Total Size: 47,850 SF Vacant Space: None Vacancy Rate: 0% Average Rental Rate: $6.00 - $11.30 Tenant Expenses: Triple Net Remarks: This center was constructed in 1989 and is one of the newest centers in Toccoa. Bi-Lo is the major tenant. 8 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================ II. SALES COMPARABLES
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification Lexington Triangle a. Name Tri-County Plaza Barnwell Plaza Village Hampton Plaza ---------------------- -------------------- ----------------------- ------------------- 2864 Wilma Randolph b. Street Address 1075 Franklin Springs 1019 Dunbarton Blvd. Sunset Blvd. & Lake Dr. Blvd. ---------------------- -------------------- ----------------------- ------------------- c. City Royston, GA Barnwell, SC Lexington, SC Clarksville, TN ---------------------- -------------------- ----------------------- ------------------- d. Distance from Subject N/A 120 miles 100 miles 200 miles ---------------------- -------------------- ----------------------- ------------------- 2. Attributes a. Year Built 1986 1985 1985 1988 ---------------------- -------------------- ----------------------- ------------------- b. Net sq. feet 63,510 70,725 115,754 189,302 ---------------------- -------------------- ----------------------- ------------------- c. # Buildings 1 1 1 1 ---------------------- -------------------- ----------------------- ------------------- d. # of Stories 1 1 1 1 ---------------------- -------------------- ----------------------- ------------------- e. Vacancy % 10.6% 9.00% 1.3% 0% ---------------------- -------------------- ----------------------- ------------------- 3. Sales Information a. Sales Price N/A $2,860,620 $4,489,380 $6,150,000 ---------------------- -------------------- ----------------------- ------------------- b. Sales Price PSF N/A $40.45 $38.78 $23.24 ---------------------- -------------------- ----------------------- ------------------- c. Cap. Rate N/A 01-01-95 01-31-95 12-26-95 ---------------------- -------------------- ----------------------- ------------------- d. Date N/A 330,327 480,919 753,627 ---------------------- -------------------- ----------------------- ------------------- e. NOI at time of Sale N/A 11.55% 10.71% 12.25% ---------------------- -------------------- ----------------------- ------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A similar similar superior ---------------------- -------------------- ----------------------- -------------------
SUBJECT COMPARABLE 4 ------- ------------ 1. Identification a. Name Tri-County Plaza Cumberland Plaza ---------------------- ------------------ 209 New Swithville b. Street Address 1075 Franklin Springs Hwy. ---------------------- ------------------ c. City Royston, GA McMinnville, TN ---------------------- ------------------ d. Distance from Subject N/A 215 miles ---------------------- ------------------ 2. Attributes a. Year Built 1986 1988 ---------------------- ------------------ b. Net sq. feet 63,510 143,951 ---------------------- ------------------ c. # Buildings 1 1 ---------------------- ------------------ d. # of Stories 1 1 ---------------------- ------------------ e. Vacancy % 10.6% 4.3% ---------------------- ------------------ 3. Sales Information a. Sales Price N/A $5,225,050 ---------------------- ------------------ b. Sales Price PSF N/A $36.30 ---------------------- ------------------ c. Cap. Rate N/A 12-26-95 ---------------------- ------------------ d. Date N/A 693,726 ---------------------- ------------------ e. NOI at time of Sale N/A 13.28% ---------------------- ------------------ 4. Rank Relative to Subject (inferior, similar, superior) N/A superior ---------------------- ------------------ Explain Ranking/Comments: Comparables #3 and #4 are ranked superior to subject. The reason for this is because of the size and location of these comparables being superior to subject. Comparable #1 is located in a commercial area that is the same size as subject. 9 COMPARABLE IMPROVED SALES - ------------------------- Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS 072- 06- 04- 11, 20 NAME Barnwell Plaza LOCATION 1019 Dunbarton Boulevard, Barnwell, SC GRANTOR 1994 N1 SC Associates, LP GRANTEE Tri Centers, LP DEED REFERENCE Book 282/Page 137 DATE Jan 31, 1995 SALES PRICE $2,860,620 ADJUSTED SALES PRICE $2,860,620 SIZE BUILDING 70,725 SALES PRICE PER S.F. $40.45 SIZE LAND (ACRES) 11.28 SIZE LAND (S.F.) 491,357 YEAR BUILT 1985 LAND/BUILDING RATIO 6.95 To 1 ZONING Commercial FINANCING Cash to seller EFFECTIVE GROSS INCOME $399,045 GROSS INCOME MULTIPLE 7.17 EGIM 7.17 NET OPERATING INCOME $330,327 OVERALL RATE 11.55% TYPE OF PURCHASER Private Investor COMMENTS: This is a good quality community shopping center located in the town of Barnwell in Barnwell County (pop. 20,000) in western South Carolina. Approximately 91% of the center was comprised of anchor space, including Wal-Mart (34,875 SF), Food Lion (21,000 SF) and Revco Drugs (8,450 SF). The income and expense data here is based on the center's actual performance at the time of sale, and include approximately $0.50 SF in overage rents from Wal-Mart and $0.10 SF in reserves. (590) 10 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] NAME Lexington Triangle Village LOCATION U.S. 378 and North Lake Drive (SC #6), Lexington, SC GRANTOR 1994 N1 SC Associates GRANTEE Tri Centers, LP DEED REFERENCE Book 3260, Page 199 DATE Jan 31, 1995 SALES PRICE $4,489,380 ADJUSTED SALES PRICE $4,489,380 SIZE BUILDING 115,754 SALES PRICE PER S.F. $38.78 SIZE LAND (ACRES) 12.51 SIZE LAND (S.F.) 544,936 YEAR BUILT 1985 LAND/BUILDING RATIO 4.71 To 1 VERIFICATION Public Records ZONING Commercial FINANCING Cash to seller EFFECTIVE GROSS INCOME $607,469 GROSS INCOME MULTIPLE 7.39 EGIM 7.39 NET OPERATING INCOME $480,919 OVERALL RATE 10.71% TYPE OF PURCHASER Private Investor COMMENTS: This center is anchored by Wal-Mart (65,904 SF) and Food Lion (25,000 SF) and there are 7 local shops totaling 24,850 SF (21.5 percent). At the time of sale, the center was 98.7 percent occupied with only 2,000 SF vacant. Wal-Mart has a base rent of $3.55 and the lease expires 11/05. Currently, Wal-Mart is paying about $0.50 per SF overage rent and Wal-Mart is expected to leave the center in the near future as no expansion room is available. The estimated cap rate excludes potential overage rent form Wal-Mart and only excludes income from the 2,000 SF vacant bay. Projected expenses include $0.10 per SF reserves. The center is masonry with brick front and metal mansard canopy roof and in average condition. No outparcels were included with this sale. (763) 11 Comparable Sale No. 3 [GRAPHIC OMITTED] NAME Hampton Plaza LOCATION 2864 Wilma Rudolph Boulevard, Clarksville, TN GRANTOR Aetna Life Insurance Company GRANTEE Hampton II, LP DEED REFERENCE Book 580, Page 1793 DATE Dec 26, 1995 SALES PRICE $6,150,000 ADJUSTED SALES PRICE $6,150,000 SIZE BUILDING 189,302 SALES PRICE PER S.F. $32.49 SIZE LAND (ACRES) 23.24 SIZE LAND (S.F.) 1,012,334 YEAR BUILT 1988 LAND/BUILDING RATIO 5.35 To 1 UTILITIES All available VERIFICATION Public Records ZONING C-3, Shopping Center District FINANCING Cash to seller EFFECTIVE GROSS INCOME $937,119 GROSS INCOME MULTIPLE 6.37 EGIM 6.56 NET OPERATING INCOME $753,627 OVERALL RATE 12.25% TYPE OF PURCHASER Private Investor COMMENTS: This is a community shopping center with Wal-Mart as a major tenant prior to a new Wal-Mart Superstore being built on the same block. While Wal-Mart remains liable for the lease, the store is vacant. The remainder of the center is occupied. (759) 12 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] NAME Cumberland Plaza LOCATION 209 New Smithville Highway, McMinnville, TN GRANTOR Aetna Life Insurance GRANTEE Cumberland II, LP DEED REFERENCE Book 287, Page 204 DATE Dec 26, 1995 SALES PRICE $5,225,050 ADJUSTED SALES PRICE $5,225,050 SIZE BUILDING 143,951 SALES PRICE PER S.F. $36.30 SIZE LAND (ACRES) 19.64 SIZE LAND (S.F.) 855,518 YEAR BUILT 1988 LAND/BUILDING RATIO 5.94 To 1 UTILITIES All available VERIFICATION Public Records ZONING C-3, Highway Commercial District FINANCING Cash to seller EFFECTIVE GROSS INCOME $875,830 GROSS INCOME MULTIPLE 5.79 EGIM 5.97 NET OPERATING INCOME $693,726 OVERALL RATE 13.28% TYPE OF PURCHASER Private Investor COMMENTS: This is a community shopping center. Wal-Mart was the major tenant and remains liable for the lease for the remaining term. A new Wal-Mart Superstore was built one block west of this property. (762) 13 ADDENDA o Franklin County Demographics o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 USA COUNTIES 1996 Geographic Area: Franklin, GA (13119) Table: GENERAL PROFILE - -------------------------------------------------------------------------------- POPULATION AND HOUSING (Bureau of the Census) Total resident population: 1995 ............................................................. 17,701 Percent 65 years and over ..................................... 15.5 1990 ............................................................. 16,650 1980 ............................................................. 15,185 Occupied housing units, 1990 ..................................... 6,365 Percent owner occupied ........................................ 78.0 BIRTHS AND DEATHS (National Center for Health Statistics) Births, 1993 ..................................................... 255 Per 1,000 resident population ................................. 14.7 Percent to mothers under 20 years of age ...................... 20.4 Deaths, 1993 ..................................................... 205 Per 1,000 resident population ................................. 11.8 Infant deaths per 1,000 live births, 1993 ........................ 3.9 EDUCATION (Bureau of the Census) Persons 25 years and over, 1990 .................................. 10,891 Percent high school graduates ................................. 54.1 Percent college graduates ..................................... 9.5 LABOR FORCE (Bureau of Labor Statistics) Civilian labor force, 1994 ....................................... 8,959 Percent unemployed ............................................ 5.0 PRIVATE NONFARM ESTABLISHMENTS (Bureau of the Census) Total establishments, 1993 ....................................... 393 Percent retail trade .......................................... 30.3 Percent services .............................................. 27.0 Paid employees, 1993 (pay period including March 12) ............. 4,417 Annual payroll, 1993 ($1,000) .................................... 71,505 PERSONAL INCOME (Bureau of Economic Analysis) Total personal income, 1993 ($1,000) ............................. 304,389 Per capita (dollars) .......................................... 17,529 AGRICULTURE (Bureau of the Census) Number of farms, 1992 ............................................ 666 Land in farms as percent of total land ........................ 44 RETAIL TRADE (Bureau of the Census) Retail sales, 1992 ($1,000) ...................................... 144,644 Per capita (dollars) .......................................... 8,433 COMMERCIAL AND SAVINGS BANKS (Fed. Deposit Insurance Corp.) Number of offices, June 30, 1994 ................................. 11 Total deposits ($1,000) ....................................... 222,782 SOCIAL PROGRAMS (Social Security Administration) Total Social Security recipients, December 1993 .................. 4,125 Retired workers ............................................... 2,475 Supplementary Security Income recipients, December 1994 .......... 750 FEDERAL FUNDS AND GRANTS (Bureau of the Census) Total direct expenditures or obligations per capita: 1994 (dollars) ................................................ 3,694 1990 (dollars) ................................................ 2,672 - -------------------------------------------------------------------------------- (NA) Not available. (D) Avoid disclosure of confidential information. (X) Not applicable. (S) Does not meet publication standards. (Z) Value > 0 but < half unit of measure shown. NOTE: 0 data may indicate geographic/data footnotes. Source: U.S. Bureau of the Census, USA Counties 1996 CD-ROM. [GRAPHIC OMITTED] COMPARABLE RENTALS MAP [GRAPHIC OMITTED] COMPARABLE SALES MAP [GRAPHIC OMITTED] Site Plan for TRI-COUNTY PLAZA EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 112 Property: TRI-COUNTY PLAZA - (NEW) 1075 FRANKLIN SPRINGS ROAD ROYSTON, GA 30662-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- --------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - --------------------------------------------------------------------------------------------------------------------------- BI-LO, INC. #173 BI-LO, INC. 647- 10 25,590 04/23/86 04/30/06 4.75 04/23/86 121,599.96 0.00 0.00 4.95 05/01/91 126,720.00 0.00 0.00 0.00 0.00 5.15 05/01/96 131,840.00 5.40 05/01/01 138,240.00 - --------------------------------------------------------------------------------------------------------------------------- Available 647- 30 4,550 0.00 0.00 - --------------------------------------------------------------------------------------------------------------------------- VIDEO SUPERSTORE SCOTT ENTERTAINMENT INC. 647- 30 4,550 11/01/94 10/31/97 0.00 0.00 0.00 0.00 4.25 11/01/92 19,337.40 4.50 11/01/93 20,475.00 5.00 11/01/94 22,752.00 - --------------------------------------------------------------------------------------------------------------------------- VARIETY WHOLESALERS #804 VARIETY WHOLESALERS, INC. (MAX 647- 60 14,300 04/01/96 03/31/99 1.68 05/01/90 24,000.00 2.00 04/01/96 28,599.96 - --------------------------------------------------------------------------------------------------------------------------- SHOE SHOW THE SHOE SHOW OF ROCKY MOUNT, 647- 70 2,800 04/01/97 03/31/02 6.00 05/01/92 16,800.00 - --------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ BI-LO, INC. #173 BI-LO, INC. Full 0 Full 0 Full 0 05/01/06 04/30/16 5.95 0.75 16,213,000 Y 05/01/11 04/30/16 6.25 0.75 0 Y 05/01/16 04/30/21 6.55 0.75 16,896,000 Y 05/01/21 04/30/26 6.85 0.75 0 Y 05/01/26 04/30/31 7.20 0.75 0 Y 05/01/31 04/30/36 7.55 0.75 17,578,700 Y 0.00 0.75 18,432,000 Y - ------------------------------------------------------------------------------------------------------------------------------------ Available 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ VIDEO SUPERSTORE SCOTT ENTERTAINMENT INC. Full 0 Full 0 Full 0 11/01/97 10/31/00 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ VARIETY WHOLESALERS #804 VARIETY WHOLESALERS, INC. (MAX PRS 1990 PRS 1990 Full 0 0.00 3.00 800,000 Y 0.00 3.00 953,300 Y - ------------------------------------------------------------------------------------------------------------------------------------ SHOE SHOW THE SHOE SHOW OF ROCKY MOUNT, Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 113 Property: TRI-COUNTY PLAZA - (NEW) 1075 FRANKLIN SPRINGS ROAD ROYSTON, GA 30662-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- --------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - --------------------------------------------------------------------------------------------------------------------------- SHOE SHOW THE SHOE SHOW OF ROCKY MOUNT, 647- 70 2,800 04/01/97 03/31/02 6.80 04/01/97 19,040.04 - --------------------------------------------------------------------------------------------------------------------------- CLOTHING STORE (TO BE NAMED) RHONDA SORRELLS 647- 80 1,050 01/01/97 12/31/99 5.50 01/01/97 5,775.00 6.00 01/01/98 6,300.00 6.25 01/01/99 6,562.56 - --------------------------------------------------------------------------------------------------------------------------- GOLDEN IMAGE MR. WILLIAM WOODALL AND DENIS 647- 90 1,000 05/01/94 04/30/97 6.00 05/01/94 6,000.00 - --------------------------------------------------------------------------------------------------------------------------- ADAM & EVE HAIR DESIGN GRANT TYNER 647- 100 900 02/01/96 01/31/99 10.00 02/01/96 9,000.00 - --------------------------------------------------------------------------------------------------------------------------- PIZZA KING MR. DONALD E. JOHNSON 647- 110 1,800 06/01/94 05/31/97 0.00 0.00 0.00 0.00 4.50 06/01/94 8,100.00 5.00 06/01/95 9,000.00 6.00 06/01/96 10,800.00 - --------------------------------------------------------------------------------------------------------------------------- PEKING PALACE ANTHONY VUONG OF VUONG'S MANA 647- 130 3,600 01/15/94 08/31/98 0.00 0.00 0.00 0.00 4.60 09/01/93 16,560.00 6.77 05/01/94 24,360.00 7.27 09/01/96 26,160.00 - --------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ SHOE SHOW THE SHOE SHOW OF ROCKY MOUNT, Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ CLOTHING STORE (TO BE NAMED) RHONDA SORRELLS Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ GOLDEN IMAGE MR. WILLIAM WOODALL AND DENIS Full 0 Full 0 Full 0 0.00 5.00 175,000 - ------------------------------------------------------------------------------------------------------------------------------------ ADAM & EVE HAIR DESIGN GRANT TYNER Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ PIZZA KING MR. DONALD E. JOHNSON Full 0 Full 0 Full 0 06/01/97 05/31/00 0.00 5.00 225,000 0.00 5.00 0 0.00 5.00 0 0.00 5.00 0 0.00 5.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ PEKING PALACE ANTHONY VUONG OF VUONG'S MANA Full 0 Full 0 Full 0 09/01/98 08/31/03 0.00 3.00 592,000 0.00 3.00 0 0.00 3.00 0 0.00 3.00 0 0.00 3.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 114 Property: TRI-COUNTY PLAZA - (NEW) 1075 FRANKLIN SPRINGS ROAD ROYSTON, GA 30662-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- --------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - --------------------------------------------------------------------------------------------------------------------------- FIRST FRANKLIN FINANCIAL CORP 1ST FRANKLIN FINANCIAL CORPOR 647- 160 1,200 09/01/94 08/31/99 0.00 0.00 6.00 09/01/92 7,200.00 0.00 0.00 7.00 09/01/94 8,400.00 8.00 09/01/97 9,600.00 - --------------------------------------------------------------------------------------------------------------------------- Square Feet: Occ 56,790 Current Annual Base Rent 268,367.04 Ava 6,720 Total..... 63,510 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ FIRST FRANKLIN FINANCIAL CORP 1ST FRANKLIN FINANCIAL CORPOR PRS 1989 PRS 1989 Full 0 09/01/94 08/31/99 7.00 0.00 0 09/01/99 08/31/04 8.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY - ------------------------------- [GRAPHIC OMITTED] US Highway #29 - Facing West [GRAPHIC OMITTED] US Highway #29 - Facing East [GRAPHIC OMITTED] View of Entrance to Subject from US Highway #29 [GRAPHIC OMITTED] View of Entrance to Subject from Springdale Drive [GRAPHIC OMITTED] Front view of Subject Property [GRAPHIC OMITTED] Front View of Subject Property [GRAPHIC OMITTED] Side View of Subject Property [GRAPHIC OMITTED] Rear View of Subject Property [GRAPHIC OMITTED] Rear View of Subject Property This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study of: STEPHENS PLAZA SHOPPING CENTER 328 South Big A Road Toccoa, Stephens County, Georgia Prepared By: O. Marshall Dodds, MAI Date of Market Study: May 8, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] May 12, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Stephens Plaza 328 South Big A Road Toccoa, Stephens County, Georgia Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 8,1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 47,850 square feet of leaseable area. The center was constructed in 1989 and the anchor tenant is Bi-Lo with nine smaller shops. The subject property is currently 100 percent occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds ------------------------------ O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) OMD:mm EXECUTIVE SUMMARY ================================================================================ Regional Perspective The City of Toccoa is the county seat of Stephens County, Georgia. It is located in northeast Georgia adjacent to the South Carolina line at the head waters of Lake Hartwell and is approximately 100 miles northeast of Atlanta's metro area and 63 miles southwest of Greenville, South Carolina. Toccoa is on the main line of Norfolk-Southern Railway and is 15 miles north of I-85. Highways serving the area include US Highway #124, and Georgia Highways #13, #17, #106 and #184. The unemployment rate for Stephens County as of 1994 was 5.1% and Georgia had an unemployment rate of 5.2%. The population of Stephens County in 1995 (most recent) was 25,000 and 15.9 percent of the population were over 65 years of age. The average per capita income was $15,577 in 1993 (most recent). Retail sales in the county totaled $171 million for 1992. Neighborhood and Site The subject neighborhood is located in the eastern central portion of Toccoa around the intersection of Big A Road and Curreahee Street. The Toccoa Chamber of Commerce is located in the subject neighborhood. Other commercial uses include Wendy's, Arby's, Subway, Amoco and BP convenience markets/self-service gasoline stations, Badcock Home Furnishings, Shoney's restaurant and inn, Taco Bell, Little Ceasar's Pizza, Baskin Robbins, McDonald's, the Ingle's Plaza, Pizza Hut and others. Commercial properties are concentrated on the major thoroughfares with residential properties being located off of these thoroughfares. A few of the residential subdivisions located in the subject neighborhood include Hillendale, Meadowbrook, Pine Valley, Poplar Street, Valley Drive, Green Acres and Ridgeview Heights. The major traffic artery running through the neighborhood would be Georgia Highway #17 or Big A Road. This is a heavily traveled road running in an southeast-northwest direction. The downtown central business district is located just northwest of the subject neighborhood. It is typical of most downtown sections with several municipal buildings such as the Stephens County Courthouse, City Hall and Post Office. There is an open pedestrian mall located along two blocks of the downtown area. The railroad generally runs in an east-west direction, with the train station being located in the downtown area. The subject neighborhood has historically been the commercial sector of the county, with commercial developments dating back to the 1970's, such as the Big A Shopping Center. Physical features are as follows: 1. Size 6.64 acres or 289,238 square feet 2. Identity 328 South Big A Road TMS #T-20 Parcel #7 3. Shape irregular 4. Topography generally level, sloping downward from Big A Road 5. Accessibility good from either direction 6. Utilities municipal Physical Description Building features are as follows: 1. Size (net) 47,850 square feet 2. Layout & Design 1 story-food store and nine shops 3. Parking Spaces 264 5.52 per 1,000 square feet of net area 4. Construction brick and glass front with concrete block on side and rear and metal seamed roof Market Position and Marketability Conclusions The City of Toccoa contains five shopping centers and a free-standing Wal-Mart store. In addition to the subject, the Towne Plaza is also located in Toccoa on Big A Road with Quality Foods and Eckerd Drugs as major tenants. It was constructed in 1975. There are four vacant stores in this center and Wal-Mart vacated its store several years ago. The Toccoa Plaza is an older center that is in need of renovation. The YMCA occupies a store as well as the Salvation Army. Bi-Lo and Eckerd Drugs vacated this center as did most of the shops afterward. The Big A Shopping Center was constructed in 1973 and contains 90,000 square feet of space. The major tenant in this center is Save-A-Lot and there are two vacant stores. The Ingles Plaza is one of the newest centers in Toccoa having been built in 1986. Ingles, Revco and a free-standing Belk store are the tenants in this center. In the late 1980's, a tornado damaged the Revco center which was subsequently rebuilt. No new properties are under construction or planned for this area at this time. The City of Lavonia is located approximately 20 miles to the south of Toccoa and is considered to be smaller than Toccoa. It contains three shopping centers. The Silo Shopping Center contains 56,720 square feet and was constructed in 1986. Lavonia Foods, Farmer's Furniture and Rite Aid are the anchor tenants in this center with seven smaller shops. This center is currently 100 percent occupied. The rental range is from $6.00 to $7.00 per square foot. Dill's Plaza is located in Lavonia with the anchor tenant being Dill's Food City. There are seven smaller shops and the rental rate range for this center is thought to be approximately $2.00 to $3.00. It is also 100 percent occupied as of the date of this study. The third center located in Lavonia is the Suburban Shopping Center which first opened in 1962 and contains approximately 23,600 square feet. There are eight small shops in addition to the anchor tenant which is Foodland. The rental range for this center is from $2.00 to $3.00 per square foot. The subject property is in the middle of the neighborhood. The location of subject is convenient to the single family and multi-family dwellings that are located throughout the neighborhood. Georgia Highway #17 is the major traffic artery running through the area. The subject property has nine shops with rental rates ranging from $6.00 to $11.30 per square foot. These are thought to be reasonable rental rates for the neighborhood because this center is the one of the newest in Toccoa and has maintained a relatively high occupancy rate. The rental rate for the Bi-Lo is $5.95 per square foot. Overage rentals are being received from Bi-Lo. The subject property is presently operating at a high occupancy rate. The location of subject is strategic within the neighborhood and convenient to the shoppers throughout the neighborhood. Trends The subject property is located in the eastern central section of Toccoa. The neighborhood is continuing to develop and contains several single family as well as multi-family dwellings. Commercial developments are located along the major traffic arteries. The demand and desirability for the neighborhood has been good. All trends are favorable at this time and expected to continue. 2 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================
I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Stephens Plaza Towne Plaza Big A SHC Silo Shopping Center -------------------- ---------------------- --------------------- ---------------------------- Big A Road at b. Street Big A Road South Big A Road Collins Road I-85 at Highway #17 -------------------- ---------------------- --------------------- ---------------------------- c. City Toccoa, GA Toccoa, GA Toccoa, GA Lavonia, GA -------------------- ---------------------- --------------------- ---------------------------- d. Distance from subject N/A 1/2 mile 1/2 mile 20 miles -------------------- ---------------------- --------------------- ---------------------------- e. Contact Edens & Avant, Inc. George Bright Blake P. Garrett, Jr. N/A -------------------- ---------------------- --------------------- ---------------------------- f. Phone (803) 779-4420 (423) 755-8830 (864) 862-3501 N/A -------------------- ---------------------- --------------------- ---------------------------- 2. Attributes a. Year built 1989 1975 1973 1986 -------------------- ---------------------- --------------------- ---------------------------- b. Net sq. Ft. 47,850 73,000 90,000 56,720 -------------------- ---------------------- --------------------- ---------------------------- c. # building 1 1 2 1 -------------------- ---------------------- --------------------- ---------------------------- d. #stories 1 1 1 1 -------------------- ---------------------- --------------------- ---------------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A N/A -------------------- ---------------------- --------------------- ---------------------------- f. # elevators N/A N/A N/A N/A -------------------- ---------------------- --------------------- ---------------------------- g. Parking Adequate Adequate Adequate Adequate -------------------- ---------------------- --------------------- ---------------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block -------------------- ---------------------- --------------------- ---------------------------- I. Vacancy % 0% 14.38% 7.2% 0% -------------------- ---------------------- --------------------- ---------------------------- j. Anchors, if Retail Bi-Lo Quality Foods, Eckerd Save-A-Lot Foods Farmers Furniture, Rite Aid -------------------- ---------------------- --------------------- ----------------------------
Comments: Comparables #1 and #2 are located in subject neighborhood. Comparable #3 is located in Lavonia which is similar to Toccoa in northeast Georgia. Comparables #2 and #3 are experiencing relatively high occupancy rates at this time. 3 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================
B. RENTAL INFORMATION SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A N/A N/A ------------------- ----------------------- -------------------- --------------------------- b. Shop Space $6.00 - $11.30 $5.00 - $8.00 $4.00 - $7.50 $6.00 - $7.00 ------------------- ----------------------- -------------------- --------------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net ------------------- ----------------------- -------------------- --------------------------- 3. Rent Concessions None None None None ------------------- ----------------------- -------------------- --------------------------- 4. Effective Rent $6.00 - $11.30 $5.00 - $8.00 $4.00 - $7.50 $6.00 - $7.00 ------------------- ----------------------- -------------------- --------------------------- 5. TI Allowance None None None None ------------------- ----------------------- -------------------- --------------------------- 6. Expense Stop None None None None ------------------- ----------------------- -------------------- --------------------------- 7. Length of Lease Term 3 - 5 years (shops) 3 - 5 years (shops) 3 - 5 years (shops) 3 - 5 years (shops) ------------------- ----------------------- -------------------- --------------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% - 7.00% 5.00% - 7.00% ------------------- ----------------------- -------------------- --------------------------- 9. Percentage Rent Farmers Furniture, Rite (per lease terms) Bi-Lo Quality Foods, Eckerd Save-A-Lot Foods Aid ------------------- ----------------------- -------------------- --------------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A ------------------- ----------------------- -------------------- --------------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A ------------------- ----------------------- -------------------- --------------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Inferior Inferior Similar ------------------- ---------------------- -------------------- ---------------------------
D. EXPLAIN RANKING/COMMENTS: Subject is located in a larger city than Comparable #3. However, the centers are generally similar in size and number of tenants. Comparables #1 and #2 are ranked inferior to subject because they are older centers than subject. The rental rates that are being received are lower than those of subject. Also, the Bi-Lo which occupies space at subject is a high credit tenant. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Towne Plaza Location: South Big A Road Toccoa, GA Year Built: 1975 Total Size: 73,000 SF Vacant Space: 10,497 SF Vacancy Rate: 14.38% Rental Range: $5.00 - $8.00 Tenant Expenses: Triple Net Remarks: Quality Foods and Eckerd are the major tenants. Located on Georgia Highway #17 which is a heavily traveled road. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Big A Shopping Center Location: Big A Road at Collins Road Toccoa, GA Year Built: 1973 Total Size: 90,000 SF Vacant Space: 6,480 SF Vacancy Rate: 7.2% Rental Range: $4.00 - $7.50 Tenant Expenses: Triple Net Remarks: Major tenant is Save-A-Lot Foods. This is an older center in Toccoa. 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Silo Shopping Center Location: I-85 at Highway #17 Lavonia, GA Year Built: 1986 Total Size: 56,720 Vacant Space: None Vacancy Rate: 0% Rental Range: $6.00 - $7.00 Tenant Expenses: Triple Net Remarks: Major tenants are Farmer's Furniture and Rite Aid Pharmacy. This is one of the newest centers in Lavonia and has operated at a high occupancy rate. 7 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================
II. SALES COMPARABLES SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification Lexington Triangle a. Name Stephens Plaza Barnwell Plaza Village ------------------------ ------------------------ -------------------------- b. Street Address Big A Road 1019 Dunbarton Blvd. Sunset Blvd. & Lake Dr. ------------------------ ------------------------ -------------------------- c. City Toccoa, GA Barnwell, SC Lexington, SC ------------------------ ------------------------ -------------------------- d. Distance from Subject N/A 120 miles 100 miles ------------------------ ------------------------ -------------------------- 2. Attributes a. Year Built 1989 1985 1985 ------------------------ ------------------------ -------------------------- b. Net sq. feet 47,850 70,725 115,754 ------------------------ ------------------------ -------------------------- c. # Buildings 1 1 1 ------------------------ ------------------------ -------------------------- d. # of Stories 1 1 1 ------------------------ ------------------------ -------------------------- e. Vacancy % 0% 9.00% 1.3% ------------------------ ------------------------ -------------------------- 3. Sales Information a. Sales Price N/A $2,860,620 $4,489,380 ------------------------ ------------------------ -------------------------- b. Sales Price PSF N/A $40.45 $38.78 ------------------------ ------------------------ -------------------------- c. Cap. Rate N/A 01-01-95 01-31-95 ------------------------ ------------------------ -------------------------- d. Date N/A 330,327 480,919 ------------------------ ------------------------ -------------------------- e. NOI at time of Sale N/A 11.55% 10.71% ------------------------ ------------------------ -------------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A similar similar ------------------------ ------------------------ -------------------------- II. SALES COMPARABLES COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Hampton Plaza Cumberland Plaza ----------------------- ---------------------- 2864 Wilma Randolph 209 New Swithville b. Street Address Blvd. Hwy. ----------------------- ---------------------- c. City Clarksville, TN McMinnville, TN ----------------------- ---------------------- d. Distance from Subject 200 miles 215 miles ----------------------- ---------------------- 2. Attributes a. Year Built 1988 1988 ----------------------- ---------------------- b. Net sq. feet 189,302 143,951 ----------------------- ---------------------- c. # Buildings 1 1 ----------------------- ---------------------- d. # of Stories 1 1 ----------------------- ---------------------- e. Vacancy % 0% 4.3% ----------------------- ---------------------- 3. Sales Information a. Sales Price $6,150,000 $5,225,050 ----------------------- ---------------------- b. Sales Price PSF $23.24 $36.30 ----------------------- ---------------------- c. Cap. Rate 12-26-95 12-26-95 ----------------------- ---------------------- d. Date 753,627 693,726 ----------------------- ---------------------- e. NOI at time of Sale 12.25% 13.28% ----------------------- ---------------------- 4. Rank Relative to Subject (inferior, similar, superior) superior superior ----------------------- ---------------------- Explain Ranking/Comments: Comparables #3 and #4 are ranked superior to subject. The reason for this is because of the size and location of these comparables being superior to subject. Comparable #1 is located in a commercial area that is the same size as subject.
8 COMPARABLE IMPROVED SALES Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS 072- 06- 04- 11, 20 NAME Barnwell Plaza LOCATION 1019 Dunbarton Boulevard, Barnwell, SC GRANTOR 1994 N1 SC Associates, LP GRANTEE Tri Centers, LP DEED REFERENCE Book 282/Page 137 DATE Jan 31, 1995 SALES PRICE $2,860,620 ADJUSTED SALES PRICE $2,860,620 SIZE BUILDING 70,725 SALES PRICE PER S.F. $40.45 SIZE LAND (ACRES) 11.28 SIZE LAND (S.F.) 491,357 YEAR BUILT 1985 LAND/BUILDING RATIO 6.95 To 1 ZONING Commercial FINANCING Cash to seller EFFECTIVE GROSS INCOME $399,045 GROSS INCOME MULTIPLE 7.17 EGIM 7.17 NET OPERATING INCOME $330,327 OVERALL RATE 11.55% TYPE OF PURCHASER Private Investor COMMENTS: This is a good quality community shopping center located in the town of Barnwell in Barnwell County (pop. 20,000) in western South Carolina. Approximately 91% of the center was comprised of anchor space, including Wal-Mart (34,875 SF), Food Lion (21,000 SF) and Revco Drugs (8,450 SF). The income and expense data here is based on the center's actual performance at the time of sale, and include approximately $0.50 SF in overage rents from Wal-Mart and $0.10 SF in reserves. (590) 9 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] NAME Lexington Triangle Village LOCATION U.S. 378 and North Lake Drive (SC #6), Lexington, SC GRANTOR 1994 N1 SC Associates GRANTEE Tri Centers, LP DEED REFERENCE Book 3260, Page 199 DATE Jan 31, 1995 SALES PRICE $4,489,380 ADJUSTED SALES PRICE $4,489,380 SIZE BUILDING 115,754 SALES PRICE PER S.F. $38.78 SIZE LAND (ACRES) 12.51 SIZE LAND (S.F.) 544,936 YEAR BUILT 1985 LAND/BUILDING RATIO 4.71 To 1 VERIFICATION Public Records ZONING Commercial FINANCING Cash to seller EFFECTIVE GROSS INCOME $607,469 GROSS INCOME MULTIPLE 7.39 EGIM 7.39 NET OPERATING INCOME $480,919 OVERALL RATE 10.71% TYPE OF PURCHASER Private Investor COMMENTS: This center is anchored by Wal-Mart (65,904 SF) and Food Lion (25,000 SF) and there are 7 local shops totaling 24,850 SF (21.5 percent). At the time of sale, the center was 98.7 percent occupied with only 2,000 SF vacant. Wal-Mart has a base rent of $3.55 and the lease expires 11/05. Currently, Wal-Mart is paying about $0.50 per SF overage rent and Wal-Mart is expected to leave the center in the near future as no expansion room is available. The estimated cap rate excludes potential overage rent form Wal-Mart and only excludes income from the 2,000 SF vacant bay. Projected expenses include $0.10 per SF reserves. The center is masonry with brick front and metal mansard canopy roof and in average condition. No outparcels were included with this sale. (763) 10 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] NAME Hampton Plaza LOCATION 2864 Wilma Rudolph Boulevard, Clarksville, TN GRANTOR Aetna Life Insurance Company GRANTEE Hampton II, LP DEED REFERENCE Book 580, Page 1793 DATE Dec 26, 1995 SALES PRICE $6,150,000 ADJUSTED SALES PRICE $6,150,000 SIZE BUILDING 189,302 SALES PRICE PER S.F. $32.49 SIZE LAND (ACRES) 23.24 SIZE LAND (S.F.) 1,012,334 YEAR BUILT 1988 LAND/BUILDING RATIO 5.35 To 1 UTILITIES All available VERIFICATION Public Records ZONING C-3, Shopping Center District FINANCING Cash to seller EFFECTIVE GROSS INCOME $937,119 GROSS INCOME MULTIPLE 6.37 EGIM 6.56 NET OPERATING INCOME $753,627 OVERALL RATE 12.25% TYPE OF PURCHASER Private Investor COMMENTS: This is a community shopping center with Wal-Mart as a major tenant prior to a new Wal-Mart Superstore being built on the same block. While Wal-Mart remains liable for the lease, the store is vacant. The remainder of the center is occupied. (759) 11 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] NAME Cumberland Plaza LOCATION 209 New Smithville Highway, McMinnville, TN GRANTOR Aetna Life Insurance GRANTEE Cumberland II, LP DEED REFERENCE Book 287, Page 204 DATE Dec 26, 1995 SALES PRICE $5,225,050 ADJUSTED SALES PRICE $5,225,050 SIZE BUILDING 143,951 SALES PRICE PER S.F. $36.30 SIZE LAND (ACRES) 19.64 SIZE LAND (S.F.) 855,518 YEAR BUILT 1988 LAND/BUILDING RATIO 5.94 To 1 UTILITIES All available VERIFICATION Public Records ZONING C-3, Highway Commercial District FINANCING Cash to seller EFFECTIVE GROSS INCOME $875,830 GROSS INCOME MULTIPLE 5.79 EGIM 5.97 NET OPERATING INCOME $693,726 OVERALL RATE 13.28% TYPE OF PURCHASER Private Investor COMMENTS: This is a community shopping center. Wal-Mart was the major tenant and remains liable for the lease for the remaining term. A new Wal-Mart Superstore was built one block west of this property. (762) 12 ADDENDA o Stephens County Demographics o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 13 USA COUNTIES 1996 Geographic Area: Stephens, GA (13257) Table: GENERAL PROFILE - -------------------------------------------------------------------------------- POPULATION AND HOUSING (Bureau of the Census) Total resident population: 1995 ............................................................. 25,000 Percent 65 years and over ...................................... 15.9 1990 ............................................................. 23,436 1980 ............................................................. 21,761 Occupied housing units, 1990 ....................................... 8,949 Percent owner occupied ........................................... 72.9 BIRTHS AND DEATHS (National Center for Health Statistics) Births, 1993 ....................................................... 323 Per 1,000 resident population .................................... 13.2 Percent to mothers under 20 years of age ......................... 15.5 Deaths, 1993 ....................................................... 252 Per 1,000 resident population .................................... 10.3 Infant deaths per 1,000 live births, 1993 .......................... 21.7 EDUCATION (Bureau of the Census) Persons 25 years and over, 1990 .................................... 15,013 Percent high school graduates .................................... 60.1 Percent college graduates ........................................ 13.1 LABOR FORCE (Bureau of Labor Statistics) Civilian labor force, 1994 ......................................... 12,280 Percent unemployed ............................................... 5.1 PRIVATE NONFARM ESTABLISHMENTS (Bureau of the Census) Total establishments, 1993 ......................................... 586 Percent retail trade ............................................. 28.0 Percent services ................................................. 30.5 Paid employees, 1993 (pay period including March 12) ............... 10,008 Annual payroll, 1993 ($1,000) ...................................... 174,423 PERSONAL INCOME (Bureau of Economic Analysis) Total personal income, 1993 ($1,000) ............................... 380,581 Per capita (dollars) ............................................. 15,577 AGRICULTURE (Bureau of the Census) Number of farms, 1992 .............................................. 172 Land in farms as percent of total land ........................... 14 RETAIL TRADE (Bureau of the Census) Retail sales, 1992 ($1,000) ........................................ 171,523 Per capita (dollars) ............................................. 7,135 COMMERCIAL AND SAVINGS BANKS (Fed. Deposit Insurance Corp.) Number of offices, June 30, 1994 5 Total deposits ($1,000) .......................................... 152,610 SOCIAL PROGRAMS (Social Security Administration) Total Social Security recipients, December 1993 .................... 5,505 Retired workers .................................................. 3,245 Supplementary Security Income recipients, December 1994 ............ 991 FEDERAL FUNDS AND GRANTS (Bureau of the Census) Total direct expenditures or obligations per capita: 1994 (dollars) ................................................... 3,509 1990 (dollars) ................................................... 2,730 - -------------------------------------------------------------------------------- (NA) Not available. (D) Avoid disclosure of confidential information. (X) Not applicable. (S) Does not meet publication standards. (Z) Value > 0 but < half unit of measure shown. NOTE: 0 data may indicate geographic/data footnotes. Source: U.S. Bureau of the Census, USA Counties 1996 CD-ROM. [GRAPHIC OMITTED] COMPARABLE RENTALS MAP [GRAPHIC OMITTED] COMPARABLE SALES MAP --------- SITE PLAN --------- [GRAPHIC OMITTED] EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 117 Property: STEPHENS PLAZA 328 SOUTH BIG A ROAD TOCCOA, GA 30577-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ ALL STAR VIDEO, INC. ALL STAR VIDEO, INC. 649-10 4,225 06/12/97 06/30/02 0.32 06/12/97 1,337.92 0.00 0.00 6.00 07/01/97 25,350.00 6.50 07/01/00 27,462.48 - ------------------------------------------------------------------------------------------------------------------------ CELLULAR ONE CELLCO PARTNERSHIP/BELL ATLAN 649-20 1,300 03/17/96 03/31/99 0.00 0.00 0.00 0.00 0.00 0.00 8.00 04/01/96 10,400.04 - ------------------------------------------------------------------------------------------------------------------------ TOCCOA CLINIC MEDICAL ASSOC. TOCCOA CLINIC MEDICAL ASSOCIA 649-30 1,625 02/12/97 02/28/01 8.00 03/01/97 13,000.08 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ BAMBOO HOUSE STEPHEN LEUNG RESTAURANT MGMT 649-40 2,400 03/01/93 02/28/98 0.00 0.00 0.00 0.00 7.18 03/01/93 17,220.00 7.43 03/01/94 17,820.00 7.68 03/01/96 18,420.00 - ------------------------------------------------------------------------------------------------------------------------ STEWART PHOTO J.F. STEWART STEWART DISCOUNT 649-60 1,500 08/01/94 07/31/97 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ ALL STAR VIDEO, INC. ALL STAR VIDEO, INC. Full 0 Full 0 Full 0 07/01/02 06/30/05 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ CELLULAR ONE CELLCO PARTNERSHIP/BELL ATLAN Full 0 Full 0 Full 0 04/01/99 03/31/02 0.00 0.00 0 09/30/97 09/30/97 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ TOCCOA CLINIC MEDICAL ASSOC. TOCCOA CLINIC MEDICAL ASSOCIA Full 0 Full 0 Full 0 03/01/01 02/28/04 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ BAMBOO HOUSE STEPHEN LEUNG RESTAURANT MGMT Full 0 Full 0 Full 0 03/01/98 02/28/03 0.00 3.00 600,000 0.00 3.00 0 0.00 3.00 0 0.00 3.00 0 0.00 3.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ STEWART PHOTO J.F. STEWART STEWART DISCOUNT Full 0 Full 0 Full 0 08/01/97 07/31/99 0.00 0.00 0
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 118 Property: STEPHENS PLAZA 328 SOUTH BIG A ROAD TOCCOA, GA 30577-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tax Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent Recov - -------------------------------------------------------------------------------------------------------------------------------- STEWART PHOTO J.F. STEWART STEWART DISCOUNT 649-60 1,500 08/01/94 07/31/97 0.00 0.00 Full 6.00 08/01/92 9,000.00 6.36 08/01/94 9,540.00 - -------------------------------------------------------------------------------------------------------------------------------- GOLD CRAFT JEWELERS JOSEPH W. LAVELLE 649-70 1,200 02/01/95 01/31/98 0.00 0.00 Full 8.25 03/01/92 9,900.00 - -------------------------------------------------------------------------------------------------------------------------------- ARMY/MARINE RECRUITING OFFICE DACA21-5-94-0500 649-80 1,200 09/28/94 09/27/99 11.30 12/30/94 13,560.00 None - -------------------------------------------------------------------------------------------------------------------------------- MOUNTAIN MUSIC MR. MIKE SUTTON 649-90 3,000 05/01/95 04/30/00 0.00 0.00 Full 0.00 0.00 6.00 05/01/95 18,000.00 6.50 05/01/98 19,500.00 - -------------------------------------------------------------------------------------------------------------------------------- BI-LO, INC. STORE #278 BI-LO, INC 649-100 25,000 12/30/89 12/29/09 5.95 12/30/89 148,749.96 Full 0.00 0.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------------- CATO #77 THE CATO CORPORATION 649-110 6,400 07/12/94 01/31/01 0.00 0.00 Full 3.56 01/01/95 22,800.00 - -------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - -------------------------------------------------------------------------------------------------------------------------------- STEWART PHOTO J.F. STEWART STEWART DISCOUNT 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - -------------------------------------------------------------------------------------------------------------------------------- GOLD CRAFT JEWELERS JOSEPH W. LAVELLE 0 Full 0 Full 0 02/01/98 01/31/01 0.00 3.00 350,000 0.00 3.00 0 - -------------------------------------------------------------------------------------------------------------------------------- ARMY/MARINE RECRUITING OFFICE DACA21-5-94-0500 0 None 0 Fixed 0 0.00 0.00 0 - -------------------------------------------------------------------------------------------------------------------------------- MOUNTAIN MUSIC MR. MIKE SUTTON 0 Full 0 Full 0 05/01/00 04/30/05 0.00 5.00 450,000 0.00 5.00 0 0.00 5.00 0 0.00 5.00 0 - -------------------------------------------------------------------------------------------------------------------------------- BI-LO, INC. STORE #278 BI-LO, INC 0 PRS 1990 Fixed 0 12/30/09 12/29/14 5.95 1.00 14,875,000 Y 12/30/14 12/29/19 5.95 1.00 0 Y 12/30/19 12/29/24 5.95 1.00 0 Y 12/30/24 12/29/29 5.95 1.00 0 Y - -------------------------------------------------------------------------------------------------------------------------------- CATO #77 THE CATO CORPORATION 0 Full 0 Full 0 02/01/01 01/31/06 7.93 5.00 0 Y 02/01/06 01/31/11 8.50 5.00 456,000 Y
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 119 Property: STEPHENS PLAZA 328 SOUTH BIG A ROAD TOCCOA, GA 30577-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ CATO #77 THE CATO CORPORATION 649-110 6,400 07/12/94 01/31/01 7.50 4/01/96 48,000.00 - ------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 47,850 Current Annual Base Rent 289,570.08 Available. 0 Total..... 47,850 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ CATO #77 THE CATO CORPORATION Full 0 Full 0 Full 0 02/01/11 01/31/16 9.00 5.00 960,000 Y - ------------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Georgia Highway #17 (Big A Road) - Facing Northwest [GRAPHIC OMITTED] Georgia Highway #17 (Big A Road) - Facing Southease [GRAPHIC OMITTED] Front View of Subject [GRAPHIC OMITTED] Front View of Subject [GRAPHIC OMITTED] Front View of Subject [GRAPHIC OMITTED] Front and Side View of Subject [GRAPHIC OMITTED] Rear View of Subject This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study of: NORTHSIDE PLAZA 318 North Boulevard at Jasper Street Clinton, Sampson County, North Carolina Prepared By: O. Marshall Dodds, MAI Date of Market Study: April 30, 1997 [LETTERHEAD OF O. MARSHALL DODDS COMPANY, INC.] May 1, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Northside Plaza 318 North Boulevard at Jasper Street Clinton, Sampson County, North Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on April 30, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 80,030 square feet of leaseable area. The center was constructed in 1982 and the anchor tenants are Food Lion and Revco. The subject property is currently 92.15 percent occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds ---------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) OMD:mm EXECUTIVE SUMMARY ================================================================================ Regional Perspective Clinton is the county seat of Sampson County which is the largest county in North Carolina with respect to size. Being situated in the southeastern part of the state Sampson County is in an area known as the coastal plains. From Sampson County, the capital city of Raleigh is approximately 60 miles northwest and Wilmington, at the coast, is approximately 57 miles to the east. The unemployment rate for Sampson County as of 1994 was 5.3% and North Carolina had an unemployment rate of 4.0%. The population of Sampson County as provided by the Chamber of Commerce was 51,177 with a median age of 36.7 years. The average per capita income was $22,158. Industry and agricultural play an important role in the Sampson County economy. Sampson County ranked #1 in agriculture with an annual income of $513.5 million. Neighborhood and Site The subject neighborhood is located in the northern section of the City of Clinton near the intersection of North Boulevard and Beaman Street. The neighborhood is continuously growing and there are a number of single family dwellings located throughout the neighborhood. Commercial properties are located along US Highway #701 Business and SC Highway #403. The Sampson Regional Medical Center is also located in the neighborhood along Beaman Street. Several industries are situated to the west of the subject property including Fujicone Industries which is located in the Sampson Southeast Business Complex on North Boulevard which is being widened just west of the subject as of the date of this market study. The business district of Clinton is located approximately two miles to the south of the subject property. Physical features are as follows: 1. Size 9.77 acres or 425,581 square feet 2. Identity 318 North Boulevard and Jasper Street TMS 12-0759020-01 3. Shape irregular 4. Topography generally level 5. Accessibility good from either direction 6. Utilities municipal Physical Description Building features are as follows: 1. Size (net) 80,030 square feet 2. Layout & Design 1 story-food store, drug store, seven shops 3. Parking Spaces 476 5.95 per 1,000 square of net area 4. Construction brick and glass front with concrete block on side and rear and metal seamed roof 1 Market Position and Marketability Conclusions The Clinton area contains 5 retail structures. Coharie Plaza measures 126,605 square feet and is located at the intersection of Highways 24 and 421/ 701 which is in the southwestern section of Clinton. D.A. Kelly's (women's clothing) recently vacated a store in this center. Also, the Shamrock Plaza is located at this intersection and it contains 29,200 square feet. The Clinton Plaza is located on Northeast Boulevard or US Highway #701 Business and contains approximately 100,000 square feet. Advance Auto Parts and Family Dollar Stores recently occupied space in this center. First Union National Bank and Glam-O-Rama Dry Cleaners are located on outlots. The Jordan Shopping Center is located near the intersection of US Highway #701 Business and NC Highway #403 across from Clinton Plaza. It contains 93,150 square feet with two vacant stores. No new properties are under construction or planned for this area at this time. The subject property is in the middle of the neighborhood being around the intersection of North Boulevard and Beaman Street. The location of subject is convenient to the single family dwellings that are located throughout the neighborhood. North Boulevard and Beaman Street are the major traffic arteries running through the area. The Jordan Shopping Center is located approximately two miles from subject near the intersection of US Highway #701 Business and NC Highway #403. This center has Piggly Wiggly as the major tenant and the rental rate for the shops ranges from $4.75 to $5.00 per square foot. The Clinton Plaza is across the street from the Jordan Shopping Center. The major tenants are Advance Auto Parts and Family Dollar. The rental rate for the shops ranges from $5.00 to $6.00 per square foot. The Coharie Plaza is located at the intersection of NC Highway #24 and US Highway #421/701. The major tenants are Belk, Roses and Revco Drug Store. D.A. Kelly's has recently vacated their store. The rental rate for the shops ranges from approximately $6.00 to $7.00 per square foot. The Shamrock Plaza is located almost adjacent to the Coharie Plaza. The major tenants are Piggly Wiggly and Eckerd Drug Store. The rental rate for the shops ranges from $4.50 to $5.00 per square foot. The subject property has six shops with rental rates ranging from $2.25 to $6.75 per square foot. However, the majority of the rental rates range from $4.00 to $6.75 per square foot for the shops. These are thought to be reasonable rental rates for the neighborhood. The rental rate for the Food Lion is $7.27 per square foot while the rental rate for the Revco Drug Store is $5.75 per square foot. Overage rentals are being received from the Revco Store. The subject property has operated at a high occupancy rate and the developer/owner has renovated the center since it was originally constructed. The location of subject is strategic within the neighborhood and convenient to the shoppers throughout the neighborhood. Trends The subject property is located in the northern section of Clinton. The neighborhood is continuing to develop with several single family dwellings and some industrial use. Commercial developments are located along the major traffic arteries. The Sampson County Medical Center is located in the neighborhood. The demand and desirability for the neighborhood has been good. All trends are favorable at this time and expected to continue. 2 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================ I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Northside Plaza Shamrock Plaza Clinton Plaza Jordan SHC -------------------- ---------------------- ---------------------- -------------------- b. Street 318 North Blvd. at NC Hwy. #24 and US US Hwy. #701 N & Jasper St. Hwy. #701/421 Northeast Boulevard NC Hwy. #403 -------------------- ---------------------- ---------------------- -------------------- c. City Clinton, NC Clinton, NC Clinton, NC Clinton, NC -------------------- ---------------------- ---------------------- -------------------- d. Distance from subject N/A 3 miles 2 miles 2 miles -------------------- ---------------------- ---------------------- -------------------- e. Contact Jesse & Elmon Lindsay, Cope Commercial Realty Edens Avant, Inc. Owner Company Jordan SHC, Inc. -------------------- ---------------------- ---------------------- -------------------- f. Phone (803) 779-4420 (910) 592-7611 (919) 778-5555 (910) 592-5481 -------------------- ---------------------- ---------------------- -------------------- 2. Attributes a. Year built 1959 Expanded & 1982 1973, Renovated 1986 1975 Renovated in 1986 -------------------- ---------------------- ---------------------- -------------------- b. Net sq. Ft. 80,030 29,200 100,000 93,150 -------------------- ---------------------- ---------------------- -------------------- c. # building 1 1 3 1 -------------------- ---------------------- ---------------------- -------------------- d. #stories 1 1 1 1 -------------------- ---------------------- ---------------------- -------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A N/A -------------------- ---------------------- ---------------------- -------------------- f. # elevators N/A N/A N/A N/A -------------------- ---------------------- ---------------------- -------------------- g. Parking Adequate Adequate Adequate Adequate -------------------- ---------------------- ---------------------- -------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block -------------------- ---------------------- ---------------------- -------------------- I. Vacancy % 7.85% 0% 0% 6.44% -------------------- ---------------------- ---------------------- -------------------- j. Anchors, if Retail Food Lion, Revco Piggly Wiggly , Eckerd Advance Auto, Family $ Piggly Wiggly -------------------- ---------------------- ---------------------- --------------------
COMPARABLE 4 ------------ 1. Identification a. Name Coharie Plaza ----------------------- b. Street NC Hwy. #24 & US Hwy. #701/421 ----------------------- c. City Clinton, NC ----------------------- d. Distance from subject 3 miles ----------------------- e. Contact Faison ----------------------- f. Phone (704) 331-2500 ----------------------- 2. Attributes a. Year built 1977 ----------------------- b. Net sq. Ft. 126,205 ----------------------- c. # building 1 ----------------------- d. #stories 1 ----------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A ----------------------- f. # elevators N/A ----------------------- g. Parking Adequate ----------------------- h. Construction Type Brick/Concrete Block ----------------------- I. Vacancy % 2.77% ----------------------- j. Anchors, if Retail Belk, Roses, Revco ----------------------- Comments: These comparable rentals are located close to subject neighborhood. All of these centers are relatively old with renovations having been completed in 1986 to Comparable #2 and Comparable #4. The Clinton Plaza recently gained two new tenants as Advance Auto Parts relocated from The Jordan Shopping Center across the street and Family Dollar is now occupying a store. Comparables #1, #2 and #4 are experiencing high occupancy rates at this time. 3 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================ B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A N/A N/A N/A ----------------- --------------------- -------------------- ------------------ -------------------- b. Shop Space $2.25 - $6.75 $4.50 - $5.00 $5.00 - $6.00 $4.75 - $5.00 $6.00 - $7.00 ----------------- --------------------- -------------------- ------------------ -------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net Triple Net ----------------- --------------------- -------------------- ------------------ -------------------- 3. Rent Concessions None None None None None ----------------- --------------------- -------------------- ------------------ -------------------- 4. Effective Rent $2.25 - $6.75 $4.50 - $5.00 $5.00 - $6.00 $4.75 - $5.00 $6.00 - $7.00 ----------------- --------------------- -------------------- ------------------ -------------------- 5. TI Allowance None None None None None ----------------- --------------------- -------------------- ------------------ -------------------- 6. Expense Stop None None None None None ----------------- --------------------- -------------------- ------------------ -------------------- 7. Length of Lease Term 3 -5 years (shop) 3 - 5 years (shop) 3 - 5 years (shop) 3 - 5 years (shop) 3 - 5 years (shop) ----------------- --------------------- -------------------- ------------------ -------------------- 8. Commissions 5.00% - 7.00% 5.00% to 7.00% 5.00% - 7.00% 5.00% to 7.00% 5.00% to 7.00% ----------------- --------------------- -------------------- ------------------ -------------------- 9. Percentage Rent (per lease terms) Food Lion, Revco Piggly Wiggly, Eckerd Advance Auto, Piggly Wiggly Belk, Roses, Revco Family $ ----------------- --------------------- -------------------- ------------------ -------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A N/A ----------------- --------------------- -------------------- ------------------ -------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A N/A ----------------- --------------------- -------------------- ------------------ -------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Inferior Inferior Similar Superior ----------------- --------------------- -------------------- ------------------ --------------------
D. EXPLAIN RANKING/COMMENTS: Subject is the newest shopping center for the market. Comparable #4 is a significantly larger center and has an additional anchor, Belk, that is significant with respect to customer attraction. The rental rates that are being received are slightly higher than subject. Also, the center is located at the intersection of two major thoroughfares. The other shopping centers have been rated as inferior or similar and are thought to be so with subject. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Shamrock Plaza Location: NC Highway #24 and US Highway #701/421 Clinton, NC Year Built: 1973, Renovated in 1986 Total Size: 29,200 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $4.50 - $5.00 Tenant Expenses: Triple Net Remarks: Piggly Wiggly and Eckerd are the major tenants. Located on NC Highway #24 and US Highway #701/421. Has operated at a high occupancy level. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Clinton Plaza Location: Northeast Boulevard Clinton, NC Year Built: 1975 Total Size: 100,000 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $5.00 - $6.00 Tenant Expenses: Triple Net Remarks: Major tenants are Advance Auto Parts and Family Dollar. Two tenants recently occupied stores in this center. A bank and a dry cleaners occupy outlots. 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Jordan Shopping Center Location: US Highway #701 N and NC Highway #403 Clinton, NC Year Built: 1959, Expanded and renovated in 1986 Total Size: 93,150 SF Vacant Space: Approximately 6,000 SF Vacancy Rate: 6.44% Rental Range: $4.75 - $5.00 Tenant Expenses: Triple Net Remarks: This center was expanded in 1986. Recently Advance Auto Parts relocated to the center across the street. Several other tenants have moved out, but were replaced.. 7 Comparable Rental No. 4 ================================================================================ [GRAPHIC OMITTED] Name: Coharie Plaza Location: NC Highway #24 at US Highway #701/421 Clinton, NC Year Built: 1977 Total Size: 126,205 SF Vacant Space: Approximately 3,500 SF Vacancy Rate: 2.77% Local Rent Range: $6.00 - $7.00 Tenant Expenses: Triple Net Remarks: D.A. Kelly's (clothing store) recently vacated their store and it remains vacant. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Northside Plaza St. Andrews Crossing Eastage Shopping Center One Norman Center ------------------- -------------------- ----------------------- ----------------- b. Street Address 318 North Boulevard NWC Whiskey Rd. & 19706 One Norman at Jasper Street 817 St. Andrews Road Eastgate Dr. Blvd. ------------------- -------------------- ----------------------- ----------------- c. City Clinton, NC Columbia, SC Aiken, SC Cornelius, NC ------------------- -------------------- ----------------------- ----------------- d. Distance from Subject N/A 157 miles 213 miles 141 miles ------------------- -------------------- ----------------------- ----------------- 2. Attributes a. Year Built 1982 1994 1995 1993 ------------------- -------------------- ----------------------- ----------------- b. Net sq. feet 80,030 66,910 SF 75,716 SF 54,185 SF ------------------- -------------------- ----------------------- ----------------- c. # Buildings 1 1 1 1 ------------------- -------------------- ----------------------- ----------------- d. # of Stories 1 1 1 1 ------------------- -------------------- ----------------------- ----------------- e. Vacancy % 7.85% 0% 7.21% 6.98% ------------------- -------------------- ----------------------- ----------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 $4,650,000 ------------------- -------------------- ----------------------- ----------------- b. Sales Price PSF N/A $97.89 $88.16 $85.82 ------------------- -------------------- ----------------------- ----------------- c. Cap. Rate N/A 9.69% 9.86% 9.68% ------------------- -------------------- ----------------------- ----------------- d. Date N/A 05-25-94 09-28-95 10-12-95 ------------------- -------------------- ----------------------- ----------------- e. NOI at time of Sale N/A $634,797 $782,704 $474,591 ------------------- -------------------- ----------------------- ----------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A superior similar similar ------------------- -------------------- ----------------------- -----------------
COMPARABLE 4 ------------ 1. Identification a. Name Paw Creek Commons ----------------------- b. Street Address E/S Little Rock Road at Freedom Drive ----------------------- c. City Charlotte, NC ----------------------- d. Distance from Subject 141 miles ----------------------- 2. Attributes a. Year Built 1996 ----------------------- b. Net sq. feet 66,050 SF ----------------------- c. # Buildings 1 ----------------------- d. # of Stories 1 ----------------------- e. Vacancy % 2.73% ----------------------- 3. Sales Information a. Sales Price $5,120,000 ----------------------- b. Sales Price PSF $77.52 ----------------------- c. Cap. Rate 9.60% ----------------------- d. Date 03-25-97 ----------------------- e. NOI at time of Sale $517,412 ----------------------- 4. Rank Relative to Subject (inferior, similar, superior) superior ----------------------- Explain Ranking/Comments: Comparables #1 and #4 are ranked superior to subject. The reason for this is because of the location of these comparables being superior to subject. Comparable No. 3 is located in a commercial area that is larger than subject, but it is similar. Comparable No. 2 is similar to subject. 9 COMPARABLE SHOPPING CENTER SALES Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS 6012 -1 -1 NAME St. Andrews Crossing LOCATION St. Andrews Road and I-26, Columbia, SC GRANTOR Hayley-Redd, L.P. GRANTEE F.A.C. Properties DEED REFERENCE Book 1199, Page 331 DATE May 25, 1994 SALES PRICE $6,550,000 ADJUSTED SALES PRICE $6,550,000 SIZE BUILDING 66,910 SALES PRICE PER S.F. $97.89 SIZE LAND (ACRES) 8.08 SIZE LAND (S.F.) 351,965 YEAR BUILT 1994 LAND/BUILDING RATIO 5.26 To 1 UTILITIES All available VERIFICATION Deed ZONING Commercial FINANCING Market EFFECTIVE GROSS INCOME $686,905 EGIM 9.54 NET OPERATING INCOME $634,797 OVERALL RATE 9.69% VERIFICATION Public Records TYPE OF PURCHASER Private Investor COMMENTS This was an arms length sale. This neighborhood shopping center is anchored by Kroger and is located in a good commercial area with good accessibility and fair exposure. The construction is brick veneer and concrete block. (503) 10 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] NAME Eastgate Shopping Center LOCATION Northwest Corner of Whiskey Road and Eastgate Drive, Aiken, SC GRANTOR PDG Aiken Partners, LP GRANTEE Southeast U.S. Retail, LP DATE Sep 28, 1995 SALES PRICE $6,675,000 SIZE BUILDING 75,716 SALES PRICE PER S.F. $88.16 SIZE LAND (ACRES) 8.79 SIZE LAND (S.F.) 382,892 YEAR BUILT 1995 LAND/BUILDING RATIO 5.06 To 1 UTILITIES All available VERIFICATION Public Records ZONING Commercial FINANCING Cash to seller GROSS POTENTIAL INCOME $782,704 EFFECTIVE GROSS INCOME $782,704 GROSS INCOME MULTIPLE 8.53 EGIM 8.53 NET OPERATING INCOME $657,896 OVERALL RATE 9.86% TYPE OF PURCHASER Private Investor COMMENTS Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. (643) 11 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] NAME One Norman Center LOCATION 19706 One Norman Boulevard, Cornelius, Mecklenburg County, NC GRANTOR One Norman Center, LP GRANTEE Lucky Realty DEED REFERENCE Book 8325, Page 721 DATE Oct 12, 1995 SALES PRICE $4,650,000 SIZE BUILDING 54,185 SALES PRICE PER S.F. $85.82 SIZE LAND (ACRES) 5.69 SIZE LAND (S.F.) 247,856 YEAR BUILT 1993 LAND/BUILDING RATIO 4.57 To 1 UTILITIES All Public VERIFICATION Public Records ZONING CUB-2 FINANCING Cash to Seller GROSS POTENTIAL INCOME $474,591 EFFECTIVE GROSS INCOME $474,591 GROSS INCOME MULTIPLE 9.80 EGIM 9.80 NET OPERATING INCOME $450,188 OVERALL RATE 9.68% TYPE OF PURCHASER Private Investor COMMENTS This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot. Triple net lease. (716) 12 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] TMS 59 -231 -22 ,23 pt. NAME Paw Creek Commons LOCATION East side of Little Rock Road at Freedom Drive, Charlotte, NC GRANTOR Paw Creek, LLC GRANTEE Frastacky and Associates DATE Mar 25, 1997 SALES PRICE $5,120,000 ADJUSTED SALES PRICE $5,120,000 SIZE BUILDING 66,050 SALES PRICE PER S.F. $77.52 SIZE LAND (ACRES) 9.82 SIZE LAND (S.F.) 427,759 YEAR BUILT 1996 LAND/BUILDING RATIO 6.48 To 1 UTILITIES Municipal VERIFICATION Public Records ZONING CC, Commercial Center FINANCING Cash to seller GROSS POTENTIAL INCOME $568,840 EFFECTIVE GROSS INCOME $552,054 GROSS INCOME MULTIPLE 9.00 EGIM 9.27 NET OPERATING INCOME $517,412 OVERALL RATE 9.60% TYPE OF PURCHASER Private Investor COMMENTS The overall rate of 10.10 percent has been adjusted down by 50 basis points since the sales contract is pre-construction. The major tenants are Winn Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. Anchor income is 79.41 percent of gross income. (793) 13 ADDENDA o Sampson County Demographics o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 USA COUNTIES 1996 Geographic Area: Sampson, NC (37163) Table: GENERAL PROFILE POPULATION AND HOUSING (Bureau or the Census) Total resident population: 1995 ........................................................... 50,485 Percent 65 years and over ................................... 14.3 1990 ........................................................... 47,297 1980 ........................................................... 49,687 Occupied housing units, 1996 ..................................... 17,526 Percent owner occupied ......................................... 72.9 BIRTHS AND DEATHS (National Center for Health Statistics) Births, 1993 ..................................................... 697 Per 1,000 resident population .................................. 14.1 Percent to mothers under 20 years of age ....................... 19.5 Deaths, 1993 ..................................................... 554 Per 1,000 resident population .................................. 11.2 Infant deaths per 1,000 live births, 1993 ........................ 8.6 EDUCATION (Bureau of the Census) Persons 25 years and over, 1990 .................................. 30,496 Percent high school graduates .................................. 61.3 Percent college graduates ................................... 8.1 LABOR FORCE (Bureau of Labor Statistics) Civilian labor force, 1994 ..................................... 22,562 Percent unemployed .......................................... 5.3 PRIVATE NONFARM ESTABLISHMENTS (Bureau of the Census) Total establishments, 1993 ..................................... 978 Percent retail trade ........................................ 28.7 Percent services ............................................ 27.7 Paid employees, 1993 (pay period including March 13) ............. 11,948 Annual payroll, 1993 ($1,000) .................................... 212,168 PERSONAL INCOME (Bureau of Economic Analysis) Total personal income, 1993 ($1,000) ............................. 942,450 Per capita (dollars) .......................................... 19,123 AGRICULTURE (Bureau of the Census) Number of farms, 1992 ............................................ 1,342 Land in farms as percent of total land ........................ 44 RETAIL TRADE (Bureau of the Census) Retail sales, 1992 ($1,000) ...................................... 268,793 Per capita (dollars) .......................................... 5,528 COMMERCIAL AND SAVINGS BANKS (Fed. Deposit Insurance Corp.) Number of offices, June 30, 1994 ................................. 20 Total Deposits ($1,000) ....................................... 315,459 SOCIAL PROGRAMS (Social Security Administration) Total Social Security recipients, December 1993 .................. 9,840 Retired workers ............................................... 5,295 Supplementary Security Income recipients, December 1994 .......... 2,092 FEDERAL FUNDS AND GRANTS (Bureau of the Census) Total direct expenditures or obligations per capita: 1994 (dollars) ................................................ 3,475 1990 (dollars) ................................................ 2,537 - -------------------------------------------------------------------------------- (NA) Not available. (D) Avoid disclosure of confidential information. (X) Net applicable. (S) Does not meet publication standards. (Z) Value > 0 but < half unit of measure shown. NOTE: 0 data may indicate geographic/data footnotes. Source: U.S. Bureau of the Census, USA Counties 1996 CD-ROM. [GRAPHIC OMITTED] Comparable Rental Map [GRAPHIC OMITTED] Comparable Sales Map [GRAPHIC OMITTED] Building Sketch Date: 04/08/97 Page 190 EDENS & AVANT, INC Retail Custom Rent Roll Property: NORTHSIDE PLAZA CLINTON (NEW) 318 NORTH BLVD & JASPER STREET CLINTON, NC Column Legends: Tenant/Property MISC column: K - Kiosk P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------- CLINITON QUALITY FLORIST JAMES EDWARD DUDLEY, JR. 707- 10 3,200 04/01/95 03/31/98 0.00 0.00 3.75 04/01/95 12,000.00 4.31 04/01/97 13,800.00 - -------------------------------------------------------------------------------------------------------------------- MAXWAY VARIETY WHOLESALERS, INC. 707- 20 15,000 05/19/96 06/30/01 2.25 06/01/96 33,750.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------- ANN'S SEW-N-VAC FRANCES ANN THORNTON 707- 30 3,980 07/12/96 07/30/99 0.00 0.00 2.56 12/01/92 10,200.00 2.71 10/01/93 10,800.00 3.02 10/01/94 12,000.00 4.45 08/01/96 17,730.00 - -------------------------------------------------------------------------------------------------------------------- Available 707- 40 6,280 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------- DOLLAR GENERAL #2316 DOLGENCORP, INC. 707- 5O 8,400 02/01/96 01/31/99 3.00 04/01/96 25,200.00 - -------------------------------------------------------------------------------------------------------------------- FOOD LION #114 FOOD LION, INC. 707- 60 30,720 06/01/96 05/31/16 3.38 02/01/83 103,950.00 3.86 11/10/94 118,650.00 7.27 06/10/96 223,451.40 - --------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Beqin End SF/YR Typ Over Brk - --------------------------------------------------------------------------------------------------------------------------------- CLINTON QUALITY FLORIST JAMES EDWARD DUDLEY, JR. PRS 1995 PRS 1995 Full 0 04/01/98 03/31/01 0.00 4.00 23,000 0.00 4.00 0 0.00 4.00 0 - --------------------------------------------------------------------------------------------------------------------------------- MAXWAY VARIETY WHOLESALERS, INC. PRS 1996 PRS 1996 Fixed 0 07/01/01 06/30/06 2.58 3.00 1,125,000 Y 0.00 3.00 0 Y - --------------------------------------------------------------------------------------------------------------------------------- ANN'S SEW-N-VAC FRANCES ANN THORNTON Full 0 Full 0 Full 0 08/01/99 07/31/02 0.00 4.00 450,000 0.00 4.00 0 0.00 4.00 0 0.00 4.00 0 0.00 4.00 0 - --------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - --------------------------------------------------------------------------------------------------------------------------------- DOLLAR GENERAL #2316 DOLGENCORP, INC. Full 0 Full 0 Full 0 04/01/99 03/31/02 3.36 2.50 840,000 - --------------------------------------------------------------------------------------------------------------------------------- FOOD LION #114 FOOD LION, INC. PRS 1983 None 0 Full 0 06/01/16 05/31/21 7.63 1.00 9,030,000 06/01/21 05/31/26 8.00 1.00 22,341,350 06/01/26 05/31/31 8.36 1.00 0
Date: 04/08/97 Page 191 EDENS & AVANT, INC Retail Custom Rent Roll Property: NORTHSIDE PLAZA CLINTON (NEW) 318 NORTH BLVD & JASPER STREET CLINTON, NC Column Legends: Tenant/Property MISC column: K - Kiosk P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------- FOOD LION #114 FOOD LION, INC. 707- 60 30,720 06/01/96 05/31/16 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------- REVCO #4314 REVCO DISCOUNT DRUG CENTERS 0 707- 70 8,450 12/01/82 11/30/02 5.50 01/01/83 46,474.92 0.00 0.00 0.00 0.00 5.75 03/01/96 48,587.40 6.30 12/01/97 53,234.88 - -------------------------------------------------------------------------------------------------------------------- AGAPE PICTURES & MIRRORS, INC 707- 80 2,000 07/20/96 07/31/99 6.75 08/01/96 13,500.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------- J.C. PENNEY STORE #3685 J.C. PENNY COMPANY, INC. 707- 90 2,000 09/01/96 08/31/01 6.00 09/01/88 12,000.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied ...... 73,750 Current Annual Base Rent 388,018.80 Available ..... 6,280 Total ......... 80,030 - ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- FOOD LION #114 FOOD LION, INC. PRS 1983 None 0 Full 0 06/01/31 05/31/36 8.72 1.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- REVCO #4314 REVCO DISCOUNT DRUG CENTERS 0 PRS 1983 PRS 1988 Full 0 12/01/97 11/30/02 6.31 2.00 1,267,500 12/01/02 11/30/07 6.90 2.00 0 12/01/07 11/30/12 7.57 2.00 0 0.00 2.00 0 0.00 2.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- AGAPE PICTURES & MIRRORS, INC Full 0 Full 0 Full 0 08/01/99 07/31/02 0.00 4.00 350,000 0.00 4.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- J.C. PENNEY STORE #3685 J.C. PENNY COMPANY, INC. Full 0 Full 0 Full 0 09/01/01 08/31/04 0.00 0.00 0 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] North Boulevard - Facing West [GRAPHIC OMITTED] North Boulevard - Facing East [GRAPHIC OMITTED] Jasper Street - Facing North [GRAPHIC OMITTED] Jasper Street - Facing South [GRAPHIC OMITTED] Front View of Subject [GRAPHIC OMITTED] View of Subject from Jasper Street [GRAPHIC OMITTED] Side View of Subject Propery [GRAPHIC OMITTED] Rear View of Subject Propery This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. ============= HVS - ------------- INTERNATIONAL ============= ===================================================== ---------------------------------- Economic Study and Appraisal ---------------------------------- Holiday Inn Select - Beverly Hills ---------------------------------- Los Angeles, California ---------------------------------- Prepared by: Hospitality Valuation Services A Division of Hotel Consulting Services, Inc. 372 Willis Avenue Mineola, NY 11501 516-248-8828 Submitted to: Mr. Shirish Godbole Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 [Letterhead of HVS International] December 6, 1996 Mr. Shirish Godbole, Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 Re: Holiday Inn Select Los Angeles, California Ref. #9610268 Dear Mr. Godbole: Pursuant to your request, we herewith submit our economic study and appraisal pertaining to the above-captioned property. We have inspected the site and facilities and analyzed the hostelry market conditions in the Los Angeles area. Our report was prepared in accordance with, and is subject to, the requirements of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and the Uniform Standards of Professional Practice (USPAP), as provided by the Appraisal Institute. Based on the available data, our analysis, and our experience in the hotel industry, it is our opinion that the market of the fee simple interest in the subject property described in this report, as of January 1, 1997, is: $15,600,000 FIFTEEN MILLION SIX HUNDRED THOUSAND DOLLARS We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings and valuation. The economic study and appraisal is made part hereof, and must remain attached in order for the value opinion set forth to be considered valid. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. Very truly yours, HOSPITALITY VALUATION SERVICES A Division of Hotel Consulting Services, Inc. /s/ Manav G. Thadani Manav G. Thadani Consulting and Valuation Analyst /s/ Anne R. Lloyd-Jones Anne R. Lloyd-Jones, CRE Senior Vice President /s/ Stephen Rushmore Stephen Rushmore, CRE, MAI, CHA President HVS International, Mineola, New York Table of Contents - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table of Contents 1. Executive Summary.........................................................1 2. Nature of the Assignment..................................................3 3. Description of the Land, Improvements, Zoning Taxes and Neighborhood.................................................7 4. Market Area Analysis.....................................................23 5. Overview of External Forces Affecting the U.S. Lodging Industry..........38 6. Lodging Market Supply and Demand Analysis................................54 7. Projection of Occupancy and Average Rate.................................75 8. Highest and Best Use.....................................................94 9. Approaches to Value......................................................96 10. Income Capitalization Approach ..........................................99 11. Sales Comparison Approach...............................................138 12. Cost Approach...........................................................147 13. Reconciliation of Value Indications.....................................153 14. Statement of Assumptions and Limiting Conditions........................157 15. Certification...........................................................161 Addenda Photographs of the Subject Property Photographs of the Competitive Properties Legal Description Synopsis of Franchise and License Agreements Synopsis of Hotel Management Agreement Explanation of the Simultaneous Valuation Formula Qualifications Manav G. Thadani Anne R. Lloyd-Jones, CRE Stephen Rushmore, CRE, MAI, CHA HVS International, Mineola, New York Executive Summary 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 1. Executive Summary Property: Holiday Inn Select - Beverly Hills Location: 1150 South Beverly Drive Los Angeles, California 90035 Date of Inspection: October 16, 1996 Interest Appraised: Fee simple Date of Value: January 1, 1997 Land Description Area: +/-1.64 acres, or +/-71,447 square feet Zoning: C-2 - Commercial District Assessor's Parcel Number: 4430-031-040 Improvements Description Age: Constructed in 1973 Property Type: Full-service Guestrooms: 260 Number of Stories: 12 stories Food and Beverage Facilities: Fontaine's Restaurant: 155 seats Lobby Lounge: 95 seats Meeting Space: Seven rooms, +/-5,017 square feet Parking: 265 spaces, in a detached, five-story indoor parking garage Summary of Value Parameters Highest and Best Use (as if vacant): Transient lodging facility Highest and Best Use (as improved): Transient lodging facility Marketing Period: Six to nine months Number of Years to Stabilize: Three Stabilized Year: 1999 HVS International, Mineola, New York Executive Summary 2 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Valuation Assumptions Mortgage Interest Rate: 9.5% Amortization Period: 20 years Debt Service Constant: 0.104844 Loan-to-Value Ratio: 70% Stabilized Inflation Rate: 3.5% Equity Yield Rate: 21% Terminal Capitalization Rate: 11% Brokerage and Legal Fees: 3.0% Holding Period: 10 years Calculated Discount Rate: 13.87% Estimates of Value Income Capitalization Approach: $15,448,000 Sales Comparison Approach: $13,700,000 - $19,300,000 Cost Approach (Replacement Cost): $21,460,000 Market Value Conclusion: $15,600,000 Market Value Conclusion per Room: $60,000 HVS International, Mineola, New York Nature of the Assignment 3 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 2. Nature of the Assignment Subject of the Economic Study and Appraisal The subject of the economic study and appraisal is the fee simple interest in a +/-71,447-square-foot (+/-1.64-acre) parcel improved with a 260-room, full-service lodging facility known as the Holiday Inn Select - Beverly Hills, which opened in 1973. In addition to guestrooms, the subject property contains a full-service restaurant, a lobby lounge, approximately 5,017 square feet of meeting space, an outdoor swimming pool, a gift shop, a detached, five-story indoor garage structure that is currently leased to a third party, and back-of-the-house facilities usually found in this type of property. The hotel is located on South Beverly Drive, between Pico Boulevard and Elm Drive, in the City of Los Angeles on three contiguous parcels of land that contain an aggregate land area of +/-1.64 acres. Municipal jurisdictions governing the property include the City and County of Los Angeles, and the State of California. The hotel's civic address is 1150 South Beverly Drive, Los Angeles, California, 90035. Objective of the Economic Study and Appraisal The objective of the economic study and appraisal is to evaluate the supply and demand factors affecting the market for transient accommodations in the Los Angeles area for the purpose of estimating the fee simple interest in the market value of the subject property. Market value is defined by the Office of the Comptroller of the Currency (OCC), 12 CFR, Part 34, 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 and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. buyer and seller are typically motivated; HVS International, Mineola, New York Nature of the Assignment 4 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 2. both parties are well informed or well advised, and acting in what they consider their own best interests; 3. a reasonable time is allowed for exposure in the open market; 4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) Use of the Appraisal This appraisal is being prepared for use by Morgan Stanley Mortgage Capital, Inc. in connection with their proposed financing of a package of 17 hotels, including the subject property, which are owned by Ashford Financial Corporation or related entities. The information presented in this report should not be disseminated to the public or third parties without the express written consent of Hospitality Valuation Services. Scope of the Appraisal All information was collected and analyzed by the staff of Hospitality Valuation Services. Data such as historical operating statements, site plans, floor plans, and so forth were supplied by Ashford Financial Corporation and Remington Hotel Company. Unless noted otherwise, we have inspected the competitive lodging facilities, and have analyzed the sales summarized in this report, and our value conclusion is based on this investigation and analysis. Property Rights Appraised The property rights appraised are the fee simple ownership of the land and improvements, including the furniture, fixtures, and equipment. The fee simple interest is defined as "absolute ownership unencumbered by any other interest or estate subject only to the four powers of government." The subject property is appraised as a going concern (i.e., an open and operating facility). (1) Federal Register, Vol. 55, No. 165, August 24, 1990; p. 34696. HVS International, Mineola, New York Nature of the Assignment 5 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Method of Study The methodology used to develop this economic study and appraisal is based on the market research and valuation techniques set forth in the textbooks authored by HVS International for the American Institute of Real Estate Appraisers and the Appraisal Institute, entitled, The Valuation of Hotels and Motels,(1) Hotels, Motels and Restaurants: Valuations and Market Studies,(2) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations,(3) and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations.(4) The appraisal will consider the three standard approaches to value: income capitalization, sales comparison, and cost. Because lodging facilities are income-producing properties that are normally bought and sold on the basis of capitalization of their anticipated stabilized earning power, the greatest weight is given to the value indicated by the income capitalization approach. We find that most hotel investors employ a similar procedure in formulating their purchase decisions, and thus, the income capitalization approach most closely reflects the rationale of typical buyers. When appropriate, the sales comparison and cost approaches are used to test the reasonableness of the results indicated by the income capitalization approach. Ownership, Franchise, and Management History and Assumptions A photocopy of the subject property's legal description, which was provided by Ashford Financial Corporation, is presented in the Addenda to this report; the appraisers assume no responsibility regarding the accuracy of this legal description. The Holiday Inn Select - Beverly Hills was originally built by the Ramada Hotel Operating Company (RHOC), and opened as a Ramada Inn in 1973. RHOC operated this facility until its sale as part of a larger package of ten hotels to the Ramada Assured Income Associates, L.P. in 1987. The subject (1) The Valuation of Hotels and Motels, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1978. (2) Hotels, Motels and Restaurants: Valuations and Market Studies, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1983. (3) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1990. (4) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992. HVS International, Mineola, New York Nature of the Assignment 6 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= property's current owners "BH California Hotel Limited Partnership" - an entity controlled by Ashford Financial purchased the property from Ramada Assured Income Associates, L.P., in October of 1994. According to information provided by Ashford Financial Corporation, the subject property was one of six Ramada properties purchased as a package from Ramada Assured Income Associates, L.P., which is a Lehman Brothers investment partnership. The total package was acquired in October, 1994 for a price of $20,250,000, using all equity financing. At the time of the transaction, the group of hotels was generating virtually no operating income, and all were in extremely poor condition. The previous owners were reportedly strongly motivated to sell, due to the poor performance of the hotels. The subject property is operated under a franchise agreement with Holiday Inn; this agreement expires in February, 2005. The hotel is also subject to a management agreement with Remington Hotel Company; an abstract of this contract is presented in the Addenda to this report. Marketing Period In light of the renewed interest in hotel investments and the increasing availability of debt and equity capital, we believe that it will take six to nine months to sell the subject property, assuming that it is placed on the market at the concluded value. Effective Date of the Appraisal The effective date of the appraisal is January 1, 1997. All projections are expressed in inflated dollars, and the value estimate represents 1996 dollars. Date of Inspection The subject property was inspected by Manav G. Thadani on October 16, 1996. HVS International, Mineola, New York Description of the Land, Improvements 7 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 3. Description of the Land, Improvements, Zoning, Taxes, and Neighborhood LAND The suitability of the land for the operation of a lodging facility is an important consideration affecting the economic viability of a property and its overall value. Factors such as size, topography, access, visibility, and the availability of utilities have a direct impact on the desirability of a particular site. Size and Topography The subject site is located at the northeast intersection formed by Pico Boulevard and South Beverly Drive. The property is approximately two blocks south of the Beverly Hills city line. Municipal jurisdictions governing the property include the City and County of Los Angeles, and the State of California. According to a site survey by Mollenhauer, Higashi & Moore Inc., the subject parcel measures approximately 71,447 square feet, or +/-1.64 acres. The subject site comprises of three contiguous parcels. The subject property's northern boundary line comprises of approximately 375 linear feet of frontage on South Beverly Drive. Primary vehicular access to the property is provided by South Beverly Drive. The topography of the parcel is generally flat and at grade level with surrounding parcels and roadways. Overall, the size and topography of the subject parcel appear to be well suited for its current use. The site is fully developed, with no excess land available for expansion. Easements The appraisers were not provided with any information concerning easements effecting the subject property. For the purposes of this appraisal, we have assumed that the property is not encumbered by any unusual or onerous easements which would effect its use or marketability. HVS International, Mineola, New York Description of the Land, Improvements 8 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Regional Access It is important to analyze a lodging facility's ease of access with respect to regional and local transportation routes and demand generators. The subject site which is located along the north-south residential/commercial artery known as South Beverly Drive, is accessible to a variety of local, county, state, and interstate highways. South Beverly Drive is lined primarily with apartment buildings, retail shops and commercial development, and cuts across Pico Boulevard in the south and through Wilshire Boulevard and Santa Monica Boulevard in the north. The property is one half block south of the City line for the City of Beverly Hills, and less than a mile from Rodeo Drive. Pico Boulevard, Wilshire Boulevard and Santa Monica Boulevard are three of the main avenues linking West Hollywood, Hollywood, and Beverly Hills traffic with Interstate 405 (I-405, also known as the San Diego Freeway) and U.S. Highway 101 (U.S. 101, also known as the Hollywood Freeway), as well as the neighboring communities of Hollywood, Century City, Westwood Village, Bel Air, and Santa Monica. These major boulevards carry local and tourist traffic into the general vicinity of the subject property. South Beverly Drive is a four-lane, dual-directional roadway, with left-turn lanes provided at major intersections. Most other surrounding roadways are residential in nature and are two-way streets with one lane in each direction. Some street parking is available in front of the subject property; Traffic signals or signs exist at all major intersections, including the intersection of Pico Boulevard, just south of the subject property. The visibility of the subject structure is good from Beverly Drive, the subject property blends in well with the surrounding improvements, is well landscaped, and has good signage, thereby making it somewhat easier to distinguish the property as a hotel. The site is approximately three miles east of I-405, the San Diego Freeway, and one mile north of Interstate 10, which is known as the Santa Monica Freeway. Santa Monica Boulevard, which is less than one mile north of the subject property, is designated as State Highway 2. U.S. Highway 101, known as the Hollywood Freeway, can be accessed approximately six miles east of the subject property. Despite its sprawling nature, the Los Angeles area is well served by a number of major roadways and interstate highways, rendering most points within the area easily accessible. Interstate 5 (I-5), which is known as the HVS International, Mineola, New York Description of the Land, Improvements 9 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Golden State Freeway, bisects downtown Los Angeles, and leads to San Diego to the south and to Sacramento and San Francisco in northern California. Interstate 210 (I-210), known as the Harbor Freeway, connects Pasadena and downtown Los Angeles with Long Beach. Interstate 405 connects the San Fernando Valley, the West Los Angeles area, and Los Angeles International Airport to Orange County and San Diego to the south. U.S. 101 has its southern origin in downtown Los Angeles, extends through Hollywood and North Hollywood, and continues westward to Ventura and Thousand Oaks before proceeding northward to San Francisco and northern California. Interstate 10, which originates in Santa Monica and intersects I-405, I-110, and I-5, is a major east-west connector through downtown Los Angeles. Overall, regional access to the Holiday Inn Select is considered to be adequate. Airport Access The greater Los Angeles area has three major airports: Los Angeles International Airport (LAX); John Wayne Airport, in Orange County; and the Glendale-Burbank-Pasadena Airport, located in Burbank. The airport that is of primary importance is LAX, located approximately ten miles south of the subject property. Although the distance from the airport is only ten miles, the traveling time between the airport and the subject property can take an extended amount of time, due to the heavy Los Angeles traffic patterns. Access to the LAX airport is via any of the three access roadways - Pico, Wilshire or Santa Monica Boulevards to I-405, heading south. Access to Local Demand Generators The Holiday Inn Select is situated in close proximity of the area's primary generators of lodging demand. The following table outlines some of these major demand generators and their respective distances from the subject site. HVS International, Mineola, New York Description of the Land, Improvements 10 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 3-1 Local Demand Generators - -------------------------------------------------------------------------------- Approximate Distance from Subject Approximate Driving Demand Generator Site (in Miles) Time (in Minutes) ---------------- --------------- ----------------- Beverly Hills Rodeo Drive 0.7 2 Beverly Hills Wilshire Boulevard 0.6 2 Century City Financial District 1.2 5 UCLA Campus 2.0 15 Sunset Boulevard (Holly wood) 3.0 15 Universal Studios 5.0 20 Downtown Los Angeles 9.0 30 - -------------------------------------------------------------------------------- Utilities The subject site is served by all necessary utilities, which are provided as follows. ================================================================================ Table 3-2 Available Utilities - -------------------------------------------------------------------------------- Utility Provider ------- -------- Water City of Los Angeles Electricity Department of Water & Power Telephone Telecom USA Gas Southern California Garbage and Trash City of Los Angeles - -------------------------------------------------------------------------------- Soil and Subsoil Conditions Geological and soil reports were not provided to the appraisers or made available for review during the preparation of this report. The appraisers are not qualified to evaluate soil conditions, other than by a visual inspection of the surface. Nuisances and Hazards The appraisers have not been informed of any site-specific nuisances or hazards, and no signs of toxic ground contaminants were visible at the time of our inspection. Because the appraisers are not experts in this field, we do not warrant the absence of hazardous waste, and we urge the reader to obtain an independent analysis of these factors. Flood Zone Possible locational hazards include flood potential. According to the West Los Angeles Department of Engineering, the subject property is located HVS International, Mineola, New York Description of the Land, Improvements 11 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= within zone C, which is defined as an area of minimal flooding, based on the National Flood Insurance Rate Map for West Los Angeles, Community Panel Number 0601370017 C, dated December 2, 1980. Seismicity The subject property is located on the border of Beverly Hills. Accordingly, The City of Beverly Hills is not identified as containing any principal faults zoned for special study under the Alquist-Priolo Special Studies Zones Act of 1972, which precludes ground rupture from occurring in the subject property's immediate area, but not the effects of ground shaking or liquefaction. The closest principal fault to the subject property is the Newport-Inglewood fault, which extends on a north-south axis approximately two miles east of the subject site. Although the appraisers are not qualified to evaluate the structural integrity of the subject property, according to current management, little, if any, damage was sustained during the earthquake of January 17, 1994 and the associated aftershocks. Legal Description As noted earlier, a copy of the subject property's legal description, as provided by Ashford Financial Corporation, is presented in the Addenda to this report. Land Conclusion The subject parcel appears to be excellent as the site of a lodging facility. We have analyzed the issues of size, topography, access, visibility, and the availability of utilities, and we note the following advantages and disadvantages. Advantages o The subject property is conveniently situated proximate to its demand generators o Visibility at the subject property is considered to be excellent from South Beverly Drive o Rodeo Drive, Wilshire Boulevard and Santa Monica Boulevard are all within walking distance of the subject property. Disadvantages o Most of the roadways leading in and out of the subject property market area are highly traversed thoroughfares and at times are congested with motorist. HVS International, Mineola, New York Description of the Land, Improvements 12 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= o Although the Los Angeles International Airport (LAX) is situated only 10 miles away, the traveling time can be as long as 60 minutes, due to traffic. The advantages noted above are important locational characteristics for the subject property, and we believe that the benefits of the site outweigh its drawback. IMPROVEMENTS The quality of a lodging facility's physical improvements has a direct influence on its marketability and attainable occupancy and average rate. The design and functionality of the structure can also affect operating efficiency and overall profitability. This section investigates the subject property's physical improvements and personal property in an effort to determine how they contribute to total value. The following description of the improvements is based on our inspection of the hotel and information provided by the property management. The Holiday Inn Select is a full-service lodging facility containing 260 rentable units, +/-4,562 square feet of meeting space, a full-service restaurant, lobby lounge, outdoor swimming pool, hotel gift shop, a garage structure, and appropriate back-of-the-house facilities. The 12-story property opened in 1973, and is 23 years old, as of the date of this appraisal. The hotel was acquired by Ashford Financial Corporation in October, 1994. At the time of this acquisition, the hotel was in extremely poor condition. Subsequent to the acquisition, the subject property was extensively renovated, at an estimated cost of $3.2 million dollars over the last three years. In scope, this renovation included the exterior of the building, public areas, and the guestrooms. The hotel is now judged to be in good condition, and management representatives report that all of the building systems are in good working order. The hotel is operated under a license agreement with Holiday Inn Franchising, Inc., and reportedly meets the standards for lodging facilities of that brand. Based on our inspection and information provided by the property management, the following table summarizes the facilities available at the subject property. HVS International, Mineola, New York Description of the Land, Improvements 13 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 3-3 Facilities Summary - --------------------------------------------------------------------------------
Guestrooms King Beds 101 Units Double/Doubles 147 King Suites 6 Double Suites 4 Handicap 2 --------- Total 260 Units Food and Beverage Outlets Fontaine's Restaurant 155 Seats Lobby Lounge 95 Meeting and Banquet Rooms Del Rey Ballroom (Divided into 3) 3,192 Square Feet Bel Air 925 Century 300 Doheny 300 Santa Monica 300 --------- Total 5,017 Square Feet Recreational & Other Amenities Outdoor Swimming Pool Exercise Room Parking Spaces 265 In detached 5-story, indoor parking garage Life Safety Systems Property is partially sprinklered. Single-station smoke alarms in all guestrooms Fire alarm wired to front desk Laundry Washer 1 85-lbs. Washers 2 50-lbs. each Four Dryers 4 75-lbs. each Construction Details Foundation Poured Concrete Floor Slabs Steel & Poured in-place concrete Extrerior Walls Textured aggregate facade affixed to light-weight panels attached to metal studs Windows Aluminium Frame Roof Conventional built-up asphalt
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Description of the Land, Improvements 14 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Capital Improvements The Holiday Inn Select - Beverly Hills was originally built by the Ramada Hotel Operating Company (RHOC), and opened as a Ramada Inn in 1973. In October, 1994 the subject property was acquired by its current owners "BH California Hotel Limited Partnership" - an entity controlled by Ashford Financial. Following the sale, the property was converted into a Holiday Inn Select. The owners have since spent approximately $1,472,000 each in 1994 and 1995. In addition, another $278,000 has been spent on the property in 1996. These renovations, totaling approximately $3.2 million, have included extensive renovations covering the guestrooms, public areas, and the property exterior. Out of this amount, approximately $1.6 million was spent on guestroom refurbishment. Property Exterior The hotel structure is situated on the east side of South Beverly Drive. In addition to the main 12-story hotel structure, the subject property has a detached five-story parking garage located adjacent to and on the south side of the main building which accommodates approximately 265 automobiles. Entrance and exit at the subject property is gained by the main entrance from South Beverly Drive on the western side of the subject property. Service traffic can gain access to the loading dock area, which is located toward the back of the hotel, on its eastern border. Access to this area is via a narrow alley, which is part of the subject property. As part of the recently completed renovation, the subject property's management has spent approximately $300,000 on improving the exterior of the building. A large portion of this amount - or approximately $163,000 - was spent on power washing and re-caulking the property's exterior. Other expenses included upgrading the landscaping near the entrance and the porte cochere, improved lighting in the garage areas, repairing and sealing of the parking pavement, some roof repair work, and better directional signage to the subject property. Lobby The subject property's front desk and lobby are located on the ground floor, and can be accessed from the main entrance by a set of double doors. The lobby is finished with carpeting and ceramic floor tiles, vinyl wall coverings, an acoustical tile ceiling, and recessed incandescent lighting fixtures. The registration desk is located on the south wall of the front lobby, and is equipped with a computerized reservation and billing system. Other facilities located in the vicinity of the lobby are the main public restrooms, public telephones, the gift shop, and a large seating area furnished with sofas, arm chairs, tables, and potted plants. Three passenger elevators are located on HVS International, Mineola, New York Description of the Land, Improvements 15 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the northeastern portion of the front lobby, and cannot be seen from the front desk. At present, the condition of the lobby can be described as good. As part of the recently completed $3.2-million renovation project, the lobby area received new area rugs; in addition, the lights and lamps in the lobby were replaced; the phone area was upgraded to add two additional telephone booths, the ceiling was re-painted, and the seating area furniture was re-upholstered. According to the capital expenditure plan, approximately $25,000 was spent in the lobby renovation process. Food and Beverage Outlets Fontaine's restaurant is the subject property's multi-purpose restaurant, which serves breakfast, lunch and dinner seven days a week. The restaurant is located north of the front desk area, and is accessible to guests via a long corridor running along the western wall of the subject property. As part of the renovation process, approximately $28,000 was spent on renovating the restaurant. These renovations included new carpeting, re-furnished chairs, re-upholstered banquettes, paint work, and careful decorations consisting of wall murals and plants. At present, the condition of the restaurant can be described as excellent. In addition to the full-service restaurant, the subject property also has a lobby lounge, which is open from afternoon until late evening. This lounge is located directly opposite the front desk area. Approximately $41,000 was spent in the renovation of the lounge area, which included actual construction and re-designing of the lounge, new tables and chairs, and carpeting. At the time of our property tour, the restaurant and lounge both appeared to be in good condition. Meeting and Banquet Space The subject property's function space is located exclusively on the second floor. The largest of these rooms is the Main Ballroom, which can be broken out into three smaller function areas. In addition to the main ballroom, the subject property has four additional small meeting rooms. Management reported that these rooms have been recently re-furbished. As part of the recently completed renovations, the subject property's meeting rooms received new wall vinyl, lighting, carpeting, and chairs, as well as new airwalls. In addition to the meeting rooms, the second floor also contains a relatively fair amount of pre-function space, the executive offices, and a small exercise room. Management reported that as part of the renovation process, approximately $125,000 has been spent on renovating the meeting space areas. These HVS International, Mineola, New York Description of the Land, Improvements 16 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= expenses included carpeting ($10,000), new chairs ($23,500), new table linen ($12,300), wall treatment ($6,000), movable walls ($35,000), new doors ($7,128), a PA system ($3,000), and other minor expenses totaling $18,000. Guestrooms The guestroom floors are all laid out in the same plan. The corridors are double loaded with guestrooms, and are I-shaped, extending the full length of the building. Typical guestroom finishes include double or king beds, dressers, night stands, coffee table, television set, telephone with data ports, an iron and ironing board, and coffee makers. All of the guest bathrooms contain a standard, three-fixture bath-shower combination and a toilet. In addition, all of the bathrooms are equipped with a vanity counter top, a half-length mirror, and a wash basin. At the time of our inspection, the subject property's guestrooms appeared to be in excellent condition. The recently concluded renovations of guestrooms included new case and hard goods, carpeting, new air-conditioning units, television sets, and phones with data ports. According to the capital expenditure plan, approximately $1,371,000 was spent in renovating the guestrooms. Another $230,000 was spent in refurbishing the guest bathrooms. A summarized list of these expenses for the guestrooms can be seen in the following table. HVS International, Mineola, New York Description of the Land, Improvements 17 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 3-4 Guestroom Renovations - -------------------------------------------------------------------------------- Guestrooms AC Units $ 245,520 Paint ceilings 23,000 VWC, 12th Floor 14,400 Television sets 94,500 Bedsets 90,000 Carpeting 162,000 Case Goods 220,000 Seating 130,000 Lamps 42,000 Artwork 30,000 Bedspreads 31,000 Draperies 120,000 Bath Hardware 32,500 Suite Parlors 32,000 Paint Doors and Frames 26,000 Vanity Lights 20,800 Other Miscellaneous 57,660 ---------- Total $1,371,380 Bathrooms Bath Light and Soffit $ 26,000 Bath VWC 26,000 Bath Hardware 52,000 Toe Hardware 33,800 Make-up Mirrors 16,000 Ironing Board & Holders 13,000 Other Miscellaneous 63,200 ---------- Total $ 230,000 - -------------------------------------------------------------------------------- Guestroom Corridors Guestroom corridors are wide enough to permit the easy passage of housekeeping and room service carts. The corridors are finished with wall vinyl and wall carpeting, both of which were replaced during the renovations; approximately $80,000 was spent on corridor carpeting, and another $10,000 on wall vinyl. In addition, management indicted that new lighting and room number signs were also installed. Each guestroom floor has a vending area that contains an ice machine and the maid's closet; the latter is equipped with a laundry chute. HVS International, Mineola, New York Description of the Land, Improvements 18 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Recreational Amenities The only recreational activities the subject property offers are an outdoor swimming pool and an indoor exercise room. The swimming pool is located just outside Fontaine's restaurant. The management recently completed a $21,000 project to re-plaster and re-surface the pool deck. An additional $9,000 was spend on pool furniture and landscaping. As previously mentioned, the subject property's exercise room is located on the second floor, next to the ballroom. At the time of our site inspection, the exercise room and the pool both appeared to be in fair to good condition. Back-of-the-House Space The subject property's back-of-the-house areas are located on three separate levels. All of the mechanical and housekeeping rooms are located in the basement. The kitchen is located on the lobby level, adjacent to the restaurant and the lobby lounge. The administrative offices are housed on either the lobby level or the second floor, while the front office and most of the marketing offices are located at the southeast side of the lobby, and the executive offices are located on the second floor. The design and layout of the kitchen and housekeeping department are good with respect to the restaurants and meeting room areas. The only deficiency is the lack of a service elevators. Housekeeping and food and beverage departments are forced to use the guest elevators to transport linens and food and beverages. According to the capital improvement plan, management spent approximately $20,500 on a new washer and an ironer. An additional $10,000 was spent on miscellaneous kitchen equipment. Based on information provided by the property management, all of the subject property's operating systems are presently in good working condition. Vertical Transportation The subject property is served by three guest elevators. As previously mentioned, the subject property does not have a service elevator. This lack is considered to be a deficiency, as both housekeeping and food and beverage staff must use the guest elevators. At the time of our property inspection, these elevators appeared to be in fair condition; management recently installed new paneling and lights. Heating, Ventilation, and Air Conditioning (HVAC) Heating and air-conditioning is provided to the guestrooms by individual air conditioning units, which were recently replaced in all of the guestrooms. These units are through-the-wall units that run independently. The public space areas are heated and cooled by a centralized system. All of the plant and equipment machinery is located in the basement HVS International, Mineola, New York Description of the Land, Improvements 19 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= of the building. At the time of our inspection, property management reported that all of the HVAC equipment was in running order. Fire Protection The subject property has two internal fire escapes. These fire escapes can be accessed at each floor level, and extend the full height of the building, terminating at the ground floor level, with direct external access. The property is partially sprinklered. The guestrooms are not sprinklered; however, they do contain smoke detectors that are hard-wired to the main fire control station, which is located near the front desk. The fire hose standpipes are located in each exit stairwell. Asbestos According to information provided by management representatives, no asbestos is present in the subject property's improvements; however, we have not been provided with an asbestos report to confirm this assertion. The reader should be advised that any costs associated with asbestos removal or containment may have an unfavorable impact on the hotel's market value, and the estimate set forth in this appraisal reflects our value conclusions prior to the deduction of any such costs. We suggest that interested parties initiate an independent analysis regarding current asbestos levels and the capital expenditures necessary to remove any asbestos that is present. ADA Conformance Following the January 26, 1992 passage of the Americans with Disabilities Act (ADA), hotels are subject to new physical standards. The appraisers are not experts on ADA compliance, and we render no opinion regarding the subject property's conformance to ADA standards. Capital expenditures that may be necessary to bring the property into accordance with the ADA will reduce our estimate of market value. Any on-going costs related to ADA regulations are expected to be funded by normal replacement reserves. Improvements Conclusion Overall, the subject property's improvements appear appropriate for hotel use. With the completion of renovations in the amount of approximately $3.2 million, the subject property's overall condition can be described to be good, and very competitive with its competitors. For the purposes of this appraisal, we have assumed that the subject property will be maintained in its present condition throughout the assumed ten year holding period. Specifically, it is assumed that hotel management will employ standard preventive maintenance measures, and that a reserve for replacement fund HVS International, Mineola, New York Description of the Land, Improvements 20 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= will be established which will fund the cost of any future necessary capital expenditures. ZONING According to the City of Los Angeles Department of Zoning Regulations, the subject property is zoned as follows. C2 - 1VL Commercial District. The subject property is located within the C2 District - a sub-classification of the CR - Limited Commercial District. The C2 District is intended to promote commercial and office developments such as banks, clubs, hotels, churches, schools, businesses, and professional child care facilities. Permitted uses after special approval include: auto service stations, amusement parks, hospitals, and second-hand businesses. The 1VL zoning classification specifies a height restriction; the maximum building height for this zoning appears to be unlimited. Based on this information, the subject property appears to conform to local zoning regulations. We assume that all necessary permits and approvals have been secured (including an appropriate liquor license), and that the subject property was constructed in accordance with local zoning ordinances, building codes, and all other applicable regulations. Our zoning analysis should be verified before any physical changes are made to the hotel. ASSESSED VALUE AND TAXES Property - or ad valorem - tax is one of the primary revenue sources of municipalities. Based on the concept that the tax burden should be distributed in proportion to the value of all properties within a taxing jurisdiction, a system of assessments is established. Theoretically, the assessed value placed on each parcel bears a definite relationship to market value, so properties with equal market values will have similar assessments, and properties with higher and lower values will have proportionately larger and smaller assessments. Depending on the taxing policy of the municipality, property taxes can be based on the value of the real property alone, or the value of the personal property and the real property. The taxing jurisdiction governing the subject property assesses real and personal property. According to the provisions of the Jarvis-Gann Amendment (Proposition 13), properties in California are assessed at 100% of fair market value, property taxes can increase by no more than 2% each year, HVS International, Mineola, New York Description of the Land, Improvements 21 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= and property taxes are limited to 1% of the market value of business property. Under the terms of Proposition 13, a sale of the subject property triggers a reassessment of the hotel, with the sale price forming the basis of the new assessment. The purpose of this appraisal is to estimate market value; market value inherently assumes the sale of the property as of the date of value. If such a sale were to occur, the hotel's assessed value would be adjusted to be in line with the sales price. However, this appraisal is being prepared for the use of Morgan Stanley in connection with their financing of this hotel, and the property will continue to be owned by Ashford Financial Corporation. As no sale will occur as of the date of value, we have assumed that the assessed value will remain at the historical levels, increasing by 2% per year, as provided by Proposition 13. The resultant tax burden will be utilized in our forecast of income and expense. According to the Los Angeles County Tax Assessor's Office, the subject property is identified by the following parcel number. Map: 4330; Lot: 031; Block: 040 According to the Los Angeles County Tax Assessor's Office, the subject property was assessed in 1995 at $6,494,000 (land) and $9,805,408 (improvements). The total assessed value in 1995 for the property was $16,300,000. Every 1,000 units of this value is multiplied by the tax rate. The 1995 tax rate for the subject property's jurisdiction was 1.03% per thousand. The results of these calculations yields a 1995 tax burden of approximately $212,000 for the subject hotel. As mentioned above, we have assumed that the assessed value will remain at the historical levels, increasing by 2% per year, as provided by Proposition 13. Applying the projected changes to the 1995 tax burden yields the following forecast for property taxes for the subject property. ================================================================================ Table 10-1 Forecast of Property Tax Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Forecast of Property Taxes (+,000) $221 $225 $230 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Description of the Land, Improvements 22 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The subject property's tax burden is anticipated to be $221,000 in the first year of the projection period. Thereafter, it is forecasted to increase by 2% annually - the maximum legally permissible rate of assessment increase in the State of California. NEIGHBORHOOD The neighborhood surrounding a lodging facility often has an impact on a hotel's status, image, class, style of operation, and sometimes its ability to attract and properly serve a particular market segment. This section investigates the subject property's neighborhood and evaluates any pertinent locational factors that could affect its occupancy, average rate, food and beverage revenues, and overall profitability. The neighborhood surrounding the subject property is characterized by high-income residential housing, light commercial land uses, and high-end retail establishments. The subject property is located approximately two blocks south of the boundary line of the City of Beverly Hills - one of Los Angeles's most prominent areas. As such, Beverly Hills is the number one tourist destination in Los Angeles, and boasts of some of the finest retail shopping in the world. Most of the upper-end retail establishments are located approximately five blocks northwest of the subject property, at the intersection of Wilshire Boulevard and Rodeo Drive. Another area which is important to the subject property's lodging neighborhood is Century City, located approximately one mile west of the subject property. The immediate neighborhood is characterized by a high concentration of small businesses, many of which deal with re-constructive plastic surgery. A bank and a commercial building are located immediately south of the subject property. Neighborhood Conclusion The neighborhood surrounding the Holiday Inn Select appears favorable, based on demand for lodging properties. The subject property appears to be in an excellent location in terms of access to and from all major roadways servicing West Los Angeles and the Los Angeles area as a whole. Its close proximity to both the City of Beverly Hills and Century City is an additional advantage for the subject property. HVS International, Mineola, New York Market Area Analysis 23 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 4. Market Area Analysis The economic vitality of the market surrounding the subject property is an important consideration in forecasting lodging demand and income potential. Economic and demographic trends that reflect the amount of visitation provide a basis from which to project hostelry demand. The purpose of the area analysis is to review available economic and demographic data to determine whether the local market will undergo economic growth, stability, or decline. In addition to predicting the direction of the economy, the rate of change must be quantified. These trends are then correlated based on their propensity to reflect variations in lodging demand with the objective of forecasting the growth or decline in visitation by individual market segment. Market Area Definition The subject property is situated in the City and County of Los Angeles, and the State of California. The Los Angeles-Long Beach Metropolitan Statistical Area (MSA) encompasses all of Los Angeles County, and is used as a basis for studying demographic and economic changes in the subject market area. Los Angeles County is one of five counties comprising the Los Angeles Basin. Located along the southern portion of California's western coastline, Los Angeles County covers approximately 4,080 square miles. The county includes the Islands of Santa Catalina and San Clemente, and is bordered by the Pacific Ocean, as well as by Ventura, San Bernardino, and Orange Counties. The Los Angeles-Riverside-Orange County Consolidated Metropolitan Statistical Area (CMSA) comprises the three metropolitan statistical areas of Los Angeles-Long Beach, Anaheim-Santa Ana, and Riverside-San Bernardino. The subject property is located approximately two blocks south of the Beverly Hills city line; the City of Beverly Hills is surrounded by the Greater Los Angeles area. The Beverly Hills area has long been known as the most prestigious residential and commercial address in the United States. Million-dollar homes, exclusive shopping, and celebrity gatherings are probably more strongly associated with this area than with any other city in HVS International, Mineola, New York Market Area Analysis 24 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the nation. The western region of Los Angeles is of particular importance to the subject property, and includes, in addition to Beverly Hills, the communities of Bel Air, Brentwood, Century City, Westwood, West Los Angeles, and West Hollywood. These cities comprise the West Los Angeles area, or, as it is referred to locally, the Westside. The primary market for the subject property is both urban and suburban in character and can be defined as Southern California and, specifically, as the cities and towns that constitute the Westside of Los Angeles County. The Greater Los Angeles area, representing the second-largest metropolitan area in the nation, has historically experienced some of the strongest demographic and economic growth rates in the nation. In the early 1990s, however, the Southern California economy was adversely affected by the national economic recession and reductions in defense spending, which negatively impacted aerospace manufacturing and ancillary defense organizations. Reduced need for national security has further warranted the scheduled closure of numerous military installations throughout California - an on-going process which is expected to have a profound negative impact on local economies. Also, in recent years, state population growth has outpaced job growth, creating excess demand for public services and fiscal problems for California governments. Finally, overbuilt real estate markets and the subsequent failure of numerous savings and loan firms and commercial banks have exacerbated economic decline. The effects of economic decline vary by region within the state. Economic and Demographic Data Based on fieldwork conducted in the area and our in-house sources, we have evaluated various economic and demographic statistics to determine trends in lodging demand. A primary source of economic and demographic statistics used in this analysis is the Complete Economic and Demographic Data Source published by Woods & Poole Economics, Inc. - a well-regarded forecasting service based in Washington, DC. Using a data base containing more than 300 variables for each county in the nation, Woods & Poole employs a sophisticated regional model to forecast economic and demographic trends. Historical statistics are based on census data and information published by the Bureau of Economic Analysis. Projections are formulated by Woods & Poole. All dollar amounts have been adjusted for inflation, and thus, growth or decline represents real change in constant dollars. HVS International, Mineola, New York Market Area Analysis 25 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Population We find that the rate of population growth generally establishes a minimum rate of increase for commercial hotel demand; this observation also holds true for the meeting and convention segment, if a majority of the meetings are business-oriented. According to statistics provided by Woods & Poole Economics, the population of Los Angeles County increased at an average annual compounded rate of 1.3% between 1980 and 1995, and 0.6% per year from 1990 to 1995. Projections for the period between 1995 and 2000 indicate that the rate of population growth in the area will be weaker comparable with the short-term historical growth, with 0.2% annual growth anticipated. Population growth for the county has been historically lower comparable with that in the State of California, and below the growth experienced in the United States as a whole. Projections indicate the same trend, but with annual gains that are slower than those experienced over the long-term historical period. Los Angeles County's population is expected to show an average annual compounded increase of 0.2% from 1995 to 2000, while the State of California experiences 1.1% annual growth, and the United States anticipates smaller gains of 0.9% per year. Given that population increases in excess of job creation rates was one of the factors that contributed to the statewide recession of the early 1990s, the projected low level of population growth for the county is viewed as a positive factor for the local economy. Retail Sales Retail sales levels reflect both population trends and the propensity to spend money on retail goods. There is no direct correlation between retail sales and hotel demand; however, retail sales trends tend to gauge the economic health and vitality of the market. Retail sales growth should cause local businesses to prosper and make it more likely for new firms to enter the market, thus causing an increase in the demand for lodging facilities. In areas where tourism is a significant economic factor, retail sales also reflect the amount of visitation. Retail sales in Los Angeles County increased at an average annual compounded rate of 1.4% between 1990 and 1995, compared to a higher growth experienced by the State of California and the nation of 2.1% and 2.5%, respectively. Projections for the period between 1995 and 2000 indicate that retail sales growth in the county will increase 0.2% annually, compared to 1.1% for the state, and 0.9% for the United States. HVS International, Mineola, New York Market Area Analysis 26 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Personal Income Of greater significance to our analysis of future market conditions are the statistics pertaining to growth in personal income. According to the procedures outlined in National Income and Product Accounts, personal income is calculated by totaling earned income (wages, salaries, other labor income, and proprietor's income), non-earned income, and residence adjustments and subtracting personal contributions to social insurance. Trends in personal income reflect the spending ability of local residents. Like population trends, personal income has no direct correlation with hotel room night demand within a defined area, but rather tends to gauge the economic health and vitality of the market. According to Woods & Poole Economics, Inc., personal income in Los Angeles County increased at an average annual compounded rate of 1.7% between 1980 and 1995, which was below the national average of 2.3%. Personal income in the county between 1990 and 1995 exhibited a markedly slower annual growth rate of 0.1%. Projections indicate a significant upswing, with increases of 1.5% per year expected. These statistics appear to indicate improving economic conditions for the county. Personal income levels for the State of California and the United States are also expected to reflect healthy increases, with annual gains of 2.4% and 2.3%, respectively, projected between 1995 and 2000. Work Force Characteristics The key economic indicator at the regional level is employment. The characteristics of an area's work force provide an indication of the type and amount of transient visitation likely to be generated by local businesses. Particular significance should be placed on the wholesale trade and services sectors, which tend to have the greatest impact on lodging demand. The following table sets forth the Los Angeles County work force distribution by business sector for 1980 to 1995, 1990 to 1995, and 1995 to 2000. HVS International, Mineola, New York Market Area Analysis 27 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-1 Wage and Salary by Standard Industrial Classification for Los Angeles County +(,000) - --------------------------------------------------------------------------------
Percent Percent Percent Percent Industry 1980 of Total 1990 of Total 1995 of Total 2000 of Total - -------------------------------------------------------------------------------------------------------------------------------- Farm 8.4 0.2% 11.6 0.2% 8.5 0.2% 8.4 0.2% Agriculture Services, Other 29.9 0.7 27.9 0.5 29.1 0.6 28.1 0.6 Mining 15.9 0.4 13.2 0.2 9.6 0.2 9.8 0.2 Construction 153.0 3.5 214.0 4.0 173.7 3.5 172.5 3.4 Manufacturing 938.6 21.7 894.0 16.6 702.2 14.1 685.2 13.5 Trans., Comm. & Public Utils. 214.1 5.0 248.5 4.6 236.8 4.7 231.6 4.6 Total Trade 934.2 21.6 1,128.8 21.0 1,025.1 20.5 1,009.9 20.0 Wholesale Trade 287.0 6.6 339.4 6.3 293.4 5.9 290.2 5.7 Retail Trade 647.3 15.0 789.3 14.7 731.7 14.7 719.7 14.2 Finance, Insurance, & Real Estate 382.6 8.9 484.3 9.0 432.5 8.7 447.6 8.8 Services 1,134.3 26.3 1,784.0 33.2 1,808.2 36.2 1,898.4 37.5 Total Government 508.0 11.8 572.3 10.6 564.9 11.3 569.1 11.2 Federal Civilian Govt. 74.7 1.7 74.6 1.4 70.5 1.4 65.1 1.3 Federal Military Govt. 29.7 0.7 43.0 0.8 33.0 0.7 32.2 0.6 State & Local Govt. 403.6 9.3 454.7 8.5 461.4 9.2 471.7 9.3 ------- ----- ------- ----- ------- ----- ------- ----- TOTAL 4,319.0 100.0% 5,378.6 100.0% 4,990.6 100.0% 5,060.5 100.0% Average Annual Compounded --------------------------------- Percent Change Industry 1980-1995 1990-1995 1995-2000 - ---------------------------------------------------------------------- Farm 0.1% (6.0)% (0.3)% Agriculture Services, Other (0.2) 0.8 (0.7) Mining (3.3) (6.1) 0.3 Construction 0.8 (4.1) (0.1) Manufacturing (1.9) (4.7) (0.5) Trans., Comm. & Public Utils. 0.7 (1.0) (0.4) Total Trade 0.6 (1.9) (0.3) Wholesale Trade 0.1 (2.9) (0.2) Retail Trade 0.8 (1.5) (0.3) Finance, Insurance, & Real Estate 0.8 (2.2) 0.7 Services 3.2 0.3 1.0 Total Government 0.7 (0.3) 0.1 Federal Civilian Govt. (0.4) (1.1) (1.6) Federal Military Govt. 0.7 (5.2) (0.5) State & Local Govt. 0.9 0.3 0.4 --- --- --- TOTAL 1.0% (1.5)% (0.3)
Source: Woods and Poole Economics, Inc. - -------------------------------------------------------------------------------- Based on the above table, an increase of 1.0%, compounded annually, in total employment was experienced in Los Angeles County between 1980 and 1995; employment actually declined between 1990 and 1995, and a 1.5% annual decrease. Employment is projected to increase slowly - by 0.3% - between 1995 and 2000. The decline in employment from 1990 to 1995 is reflective of the recession suffered by California in the early 1990s, as previously discussed. In conjunction with the military downsizings and base closures affecting California in general after the end of the Cold War, employment in the federal government and military sectors declined at average annual compounded rates of 1.1% and 5.2%, respectively, between 1990 and 1995. Employment in the federal military government sector is projected to continue to drop severely from 1995 to 2000, at an anticipated rate of decline of 0.5% per year. Locally however, signs of economic recovery began to appear in 1994. According to Jack Kyser, Chief Economist at the Economic Development Corporation of Los Angeles County, Inc., the recovery that is underway in California is being driven by a variety of forces, including international trade, motion picture/television production, tourism, wholesale trade, the resale housing market, and even a modest upturn in new home HVS International, Mineola, New York Market Area Analysis 28 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= construction. Factors suggesting a promising economic outlook include Los Angeles's advantageous location on the Pacific Rim, one of the world's most rapidly developing areas. The North American Free Trade Agreement, intended to establish the largest free-trade block in the world, is anticipated to catalyze manufacturing and related growth. Expansions are underway at both the Port of Los Angeles and the Port of Long Beach, as well as at the Los Angeles International Airport. According to economists, increased trade will equate to increased travel. Furthermore, in response to the current economic imbalance, supply and demand forces are expected to lower the cost of living and conducting business in the state. State governing bodies have already drafted legislation to curtail the state's "anti-business" reputation, including investment, research and development, and tax incentives. Lodging demand, which has already demonstrated a considerable resurgence, is expected to mirror the trend of the overall state economy, with healthy, gradual expansion over the long term. The entertainment industry, which is estimated to employ directly and indirectly 450,000 people, continues to be the region's economic juggernaut. The entertainment industry is anticipated to continue contributing to the local economy, as major plans for expansions have been announced. MCA has announced plans for a $3-billion expansion at Universal City; Sony is investing roughly $100 million in its lot in Culver City; and Warner Brothers reportedly intends to expand its lots in Burbank. The entertainment industry, in fueling the recovery for the region, has surprisingly taken over as the primary economic growth force. After suffering tumultuous attrition since 1991, the once-ailing aerospace and defense industry received a significant boost in 1995. Long Beach-based McDonnell Douglas received an order for 80 C-17 cargo planes from the U.S. Air Force. The order is estimated to affect 10,000 workers. McDonnell Douglas and Seattle-based Boeing jointly received a $6-billion order from Saudi Arabia for 61 commercial aircraft. Such development in the local and regional economy is considered to be a positive trend, and is expected to have a beneficial impact on lodging demand. The major employers in immediate vicinity of the subject property's market area represent a cross section of hotel demand potential. Some are national in scope, while others operate on a more local basis; some are engaged in services, and others are active in the entertainment industry. The following table outlines some of the major employers in Los Angeles/Beverly Hills market area. HVS International, Mineola, New York Market Area Analysis 29 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-2 Major Employers - -------------------------------------------------------------------------------- Company Business/Product Employees - -------------------------------------------------------------------------------- Fox Entertainment, Inc. Entertainment >1,000 City of Beverly Hills Government 900 Beverly Hilton Hotel Hotel 680 Regent Beverly Wilshire Hotel 600 Beverly Hills Unified School District Education 600 Nieman-Marcus Retail 500 Beverly Hills Hotel Hotel 425 William Morris Agency Talent Agency 400 Creative Artists Agency Talent Agency 375 City National Bank Finance 370 Saks Fifth Avenue Retail 325 Peninsula Beverly Hills Hotel 310 Shapell Industries, Inc. Development 309 Advance Building Maintenence Building Maintenance 300 Hilton Hotels Corporation Hotel Company, Headquarters 300 International Creative Management Talent Agency 280 Source: Beverly Hills Chamber of Commerce - -------------------------------------------------------------------------------- Office Space Office space vacancy rates have been declining both in the West Los Angeles area, where the subject property is located, as well as in the City of Beverly Hills, bordering the subject property. According to Grubb & Ellis, the office vacancy level fell to 14.9% in 1995 for Beverly Hills, which was slightly lower than the total vacancy level for the entire West Los Angeles area, at 15.2%. Airport Traffic Airport passenger counts are an important indicator of transient lodging demand. Depending on the type of service provided by a particular airfield, a sizable percentage of arriving passengers may require hotel accommodations. Trends in passenger counts also reflect local business activity and the overall economic health of an area. The subject property is located within approximately ten miles of the Los Angeles International Airport (LAX). Total passenger volume at LAX increased at an average annual compounded rate of 3.3% between 1980 and 1995. In 1991, passenger activity dropped a minimal 0.3%; however, since 1992, total passenger volume has grown each year, with 1995 recording a healthy 5.6% increase. Overall, the pattern of growth illustrated by the HVS International, Mineola, New York Market Area Analysis 30 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= passenger traffic trends at Los Angeles International Airports is a favorable economic trend for the subject property. Leisure Travel Leisure demand in the subject property's market is generated primarily by tourists and others visiting the Los Angeles area. The area's proximity to Hollywood and the related entertainment industry attractions, together with the high profile image of Beverly Hills and the residents thereof, generate a significant amount of tourism and leisure demand each year. This demand is both national and international in nature, and includes individuals utilizing rooms purchased through a travel package which typically includes airfare, lodging and transportation (usually a rental car). Tourist Attractions Tourism is an identifiable source of employment, business profits, and lodging demand generation in California. Two of the nation's leading visitor attractions - - Disneyland and Knott's Berry Farm - are located in the nearby Orange County. In addition, Universal Studios and other Hollywood studios are situated in the Los Angeles. These attractions alone serve more than 20 million visitors annually. Because of the national recession, tourism-related visitation to Los Angeles County declined slightly in the early 1990s; however, the City of Beverly Hills has experienced positive growth trends over the past few years. In addition, the city's famed shopping district continue to attract visitors to Beverly Hills, creating significant leisure demand for the subject property. Conclusion Our review of various economic and demographic data indicates that the subject property's market area can expect to benefit from stable growth, barring any unforeseen downturns or upswings in the economy. The following table summarizes the economic and demographic trends discussed throughout this section. All figures that reflect dollar amounts have been adjusted for inflation, and thus, reflect real change. It should be noted that the percent changes indicated in the following tables are based on unrounded figures, and thus, may not calculate exactly. HVS International, Mineola, New York Market Area Analysis 31 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-3 Economic and Demographic Data for the Subject Property's Market Area - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------ Long-Term Historical Population (+,000) Los Angeles County 1980-1995 7,502.5 9,167.9 1.3% Los Angeles-Long Beach, CA MSA 1980-1995 7,502.5 9,167.9 1.3 Los Angeles-Riverside-Orange County, CA CMSA 1980-1995 11,556.2 15,440.7 2.0 State of California 1980-1995 23,792.8 31,809.5 2.0 United States 1980-1995 227,225.6 262,791.0 1.0 Short-Term Historical Population (+,000) Los Angeles County 1990-1995 8,881.3 9,167.9 0.6 Los Angeles-Long Beach, CA MSA 1990-1995 8,881.3 9,167.9 0.6 Los Angeles-Riverside-Orange County, CA CMSA 1990-1995 14,599.8 15,440.7 1.1 State of California 1990-1995 29,905.4 31,809.5 1.2 United States 1990-1995 249,401.4 262,791.0 1.1 Projected Population (+,000) Los Angeles County 1995-2000 9,167.9 9,255.5 0.2 Los Angeles-Long Beach, CA MSA 1995-2000 9,167.9 9,255.5 0.2 Los Angeles-Riverside-Orange County, CA CMSA 1995-2000 15,440.7 16,121.4 0.9 State of California 1995-2000 31,809.5 33,677.8 1.1 United States 1995-2000 262,791.0 274,758.4 0.9 Long-Term Historical Retail Sales (+,000,000) Los Angeles County 1980-1995 48,207.5 57,694.3 1.2 Los Angeles-Long Beach, CA MSA 1980-1995 48,207.5 57,694.3 1.2 Los Angeles-Riverside-Orange County, CA CMSA 1980-1995 74,863.7 99,715.6 1.9 State of California 1980-1995 154,157.0 208,913.4 2.0 United States 1980-1995 1,340,768.9 1,765,826.1 1.9 Short-Term Historical Retail Sales (+,000,000) Los Angeles County 1990-1995 53,917.5 57,694.3 1.4 Los Angeles-Long Beach, CA MSA 1990-1995 53,917.5 57,694.3 1.4 Los Angeles-Riverside-Orange County, CA CMSA 1990-1995 91,141.2 99,715.6 1.8 State of California 1990-1995 187,935.6 208,913.4 2.1 United States 1990-1995 1,557,380.2 1,765,826.1 2.5 Projected Retail Sales (+,000,000) Los Angeles County 1995-2000 57,694.3 58,175.4 0.2 Los Angeles-Long Beach, CA MSA 1995-2000 57,694.3 58,175.4 0.2 Los Angeles-Riverside-Orange County, CA CMSA 1995-2000 99,715.6 104,102.9 0.9 State of California 1995-2000 208,913.4 221,038.5 1.1 United States 1995-2000 1,765,826.1 1,846,830.4 0.9 Long-Term Historical Retail Sales Per Capita Los Angeles County 1980-1995 6,425.6 6,293.1 (0.1) Los Angeles-Long Beach, CA MSA 1980-1995 6,425.6 6,293.1 (0.1) Los Angeles-Riverside-Orange County, CA CMSA 1980-1995 6,478.2 6,458.0 (0.0) State of California 1980-1995 6,479.1 6,567.6 0.1 United States 1980-1995 5,900.6 6,719.5 0.9
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 32 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-3 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------------------------ Short-Term Historical Retail Sales Per Capita Los Angeles County 1990-1995 6,070.9 6,293.1 0.7% Los Angeles-Long Beach, CA MSA 1990-1995 6,070.9 6,293.1 0.7 Los Angeles-Riverside-Orange County, CA CMSA 1990-1995 6,242.6 6,458.0 0.7 State of California 1990-1995 6,284.3 6,567.6 0.9 United States 1990-1995 6,244.5 6,719.5 1.5 Projected Personal Retail Sales Per Capita Los Angeles County 1995-2000 6,293.1 6,285.5 (0.0) Los Angeles-Long Beach, CA MSA 1995-2000 6,293.1 6,285.5 (0.0) Los Angeles-Riverside-Orange County, CA CMSA 1995-2000 6,458.0 6,457.4 (0.0) State of California 1995-2000 6,567.6 6,563.3 (0.0) United States 1995-2000 6,719.5 6,721.7 0.0 Long-Term Historical Eating and Drinking Place Sales (+,000,000) Los Angeles County 1980-1995 5,228.0 6,885.5 1.9 Los Angeles-Long Beach, CA MSA 1980-1995 5,228.0 6,885.5 1.9 Los Angeles-Riverside-Orange County, CA CMSA 1980-1995 8,043.3 11,493.2 2.4 State of California 1980-1995 16,496.4 24,107.7 2.6 United States 1980-1995 126,131.6 185,035.4 2.6 Short-Term Historical Eating and Drinking Place Sales (+,000,000) Los Angeles County 1990-1995 6,330.1 6,885.5 1.7 Los Angeles-Long Beach, CA MSA 1990-1995 6,330.1 6,885.5 1.7 Los Angeles-Riverside-Orange County, CA CMSA 1990-1995 10,415.7 11,493.2 2.0 State of California 1990-1995 21,487.0 24,107.7 2.3 United States 1990-1995 161,197.4 185,035.4 2.8 Projected Eating and Drinking Place Sales (+,000,000) Los Angeles County 1995-2000 6,885.5 7,162.7 0.8 Los Angeles-Long Beach, CA MSA 1995-2000 6,885.5 7,162.7 0.8 Los Angeles-Riverside-Orange County, CA CMSA 1995-2000 11,493.2 12,369.8 1.5 State of California 1995-2000 24,107.7 26,276.2 1.7 United States 1995-2000 185,035.4 199,127.3 1.5 Long-Term Historical Eating and Drinking Place Sales Per Capita Los Angeles County 1980-1995 696.8 751.0 0.5 Los Angeles-Long Beach, CA MSA 1980-1995 696.8 751.0 0.5 Los Angeles-Riverside-Orange County, CA CMSA 1980-1995 696.0 744.3 0.4 State of California 1980-1995 693.3 757.9 0.6 United States 1980-1995 555.1 704.1 1.6 Short-Term Historical Eating and Drinking Place Sales Per Capita Los Angeles County 1990-1995 712.8 751.0 1.1 Los Angeles-Long Beach, CA MSA 1990-1995 712.8 751.0 1.1 Los Angeles-Riverside-Orange County, CA CMSA 1990-1995 713.4 744.3 0.9 State of California 1990-1995 718.5 757.9 1.1 United States 1990-1995 646.3 704.1 1.7
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 33 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-3 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - --------------------------------------------------------------------------------------------------------------------- Projected Eating and Drinking Place Sales Per Capita Los Angeles County 1995-2000 751.0 773.9 0.6% Los Angeles-Long Beach, CA MSA 1995-2000 751.0 773.9 0.6 Los Angeles-Riverside-Orange County, CA CMSA 1995-2000 744.3 767.3 0.6 State of California 1995-2000 757.9 780.2 0.6 United States 1995-2000 704.1 724.7 0.6 Long-Term Historical Personal Income (+,000,000) Los Angeles County 1980-1995 124,705.7 160,992.6 1.7 Los Angeles-Long Beach, CA MSA 1980-1995 124,705.7 160,992.6 1.7 Los Angeles-Riverside-Orange County, CA CMSA 1980-1995 191,005.0 270,385.0 2.3 State of California 1980-1995 389,309.0 568,838.9 2.6 United States 1980-1995 3,163,874.0 4,443,243.2 2.3 Short-Term Historical Personal Income (+,000,000) Los Angeles County 1990-1995 160,353.5 160,992.6 0.1 Los Angeles-Long Beach, CA MSA 1990-1995 160,353.5 160,992.6 0.1 Los Angeles-Riverside-Orange County, CA CMSA 1990-1995 262,501.3 270,385.0 0.6 State of California 1990-1995 537,579.6 568,838.9 1.1 United States 1990-1995 4,051,714.6 4,443,243.2 1.9 Projected Personal Income (+,000,000) Los Angeles County 1995-2000 160,992.6 173,579.9 1.5 Los Angeles-Long Beach, CA MSA 1995-2000 160,992.6 173,579.9 1.5 Los Angeles-Riverside-Orange County, CA CMSA 1995-2000 270,385.0 301,062.6 2.2 State of California 1995-2000 568,838.9 641,646.6 2.4 United States 1995-2000 4,443,243.2 4,972,219.5 2.3 Long-Term Personal Income per Capita Los Angeles County 1980-1995 16,622.0 17,560.0 0.4 Los Angeles-Long Beach, CA MSA 1980-1995 16,622.0 17,560.0 0.4 Los Angeles-Riverside-Orange County, CA CMSA 1980-1995 16,528.0 17,511.0 0.4 State of California 1980-1995 16,362.0 17,883.0 0.6 United States 1980-1995 13,924.0 16,908.0 1.3 Short-Term Historical Personal Income per Capita Los Angeles County 1990-1995 18,055.0 17,560.0 (0.6) Los Angeles-Long Beach, CA MSA 1990-1995 18,055.0 17,560.0 (0.6) Los Angeles-Riverside-Orange County, CA CMSA 1990-1995 17,980.0 17,511.0 (0.5) State of California 1990-1995 17,976.0 17,883.0 (0.1) United States 1990-1995 16,246.0 16,908.0 0.8 Projected Personal Income per Capita Los Angeles County 1995-2000 17,560.0 18,754.0 1.3 Los Angeles-Long Beach, CA MSA 1995-2000 17,560.0 18,754.0 1.3 Los Angeles-Riverside-Orange County, CA CMSA 1995-2000 17,511.0 18,675.0 1.3 State of California 1995-2000 17,883.0 19,053.0 1.3 United States 1995-2000 16,908.0 18,097.0 1.4
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 34 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-3 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - -------------------------------------------------------------------------------------------------------------------- Long-Term Historical Employment - Los Angeles County (+,000) Farm 1980-1995 8.4 8.5 0.1% Agriculture Services, Other 1980-1995 29.9 29.1 (0.2) Mining 1980-1995 15.9 9.6 (3.3) Construction 1980-1995 153.0 173.7 0.8 Manufacturing 1980-1995 938.6 702.2 (1.9) Trans., Comm. & Public Utils 1980-1995 214.1 236.8 0.7 Total Trade 1980-1995 934.2 1,025.1 0.6 Wholesale Trade 1980-1995 287.0 293.4 0.1 Retail Trade 1980-1995 647.3 731.7 0.8 Finance, Insurance, & Real Estate 1980-1995 382.6 432.5 0.8 Services 1980-1995 1,134.3 1,808.2 3.2 Total Government 1980-1995 508.0 564.9 0.7 Federal Civilian Govt 1980-1995 74.7 70.5 (0.4) Federal Military Govt 1980-1995 29.7 33.0 0.7 State & Local Govt 1980-1995 403.6 461.4 0.9 TOTAL 1980-1995 4,319.0 4,990.6 1.0 Short-Term Historical Employment - Los Angeles County (+,000) Farm 1990-1995 11.6 8.5 (6.0) Agriculture Services, Other 1990-1995 27.9 29.1 0.8 Mining 1990-1995 13.2 9.6 (6.1) Construction 1990-1995 214.0 173.7 (4.1) Manufacturing 1990-1995 894.0 702.2 (4.7) Trans., Comm. & Public Utils 1990-1995 248.5 236.8 (1.0) Total Trade 1990-1995 1,128.8 1,025.1 (1.9) Wholesale Trade 1990-1995 339.4 293.4 (2.9) Retail Trade 1990-1995 789.3 731.7 (1.5) Finance, Insurance, & Real Estate 1990-1995 484.3 432.5 (2.2) Services 1990-1995 1,784.0 1,808.2 0.3 Total Government 1990-1995 572.3 564.9 (0.3) Federal Civilian Govt 1990-1995 74.6 70.5 (1.1) Federal Military Govt 1990-1995 43.0 33.0 (5.2) State & Local Govt 1990-1995 454.7 461.4 0.3 TOTAL 1990-1995 5,378.6 4,990.6 (1.5)
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 35 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-3 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - -------------------------------------------------------------------------------------------------------- Projected Employment - Los Angeles County (+,000) Farm 1995-2000 8.5 8.4 (0.3%) Agriculture Services, Other 1995-2000 29.1 28.1 (0.7) Mining 1995-2000 9.6 9.8 0.3 Construction 1995-2000 173.7 172.5 (0.1) Manufacturing 1995-2000 702.2 685.2 (0.5) Trans., Comm. & Public Utils 1995-2000 236.8 231.6 (0.4) Total Trade 1995-2000 1,025.1 1,009.9 (0.3) Wholesale Trade 1995-2000 293.4 290.2 (0.2) Retail Trade 1995-2000 731.7 719.7 (0.3) Finance, Insurance, & Real Estate 1995-2000 432.5 447.6 0.7 Services 1995-2000 1,808.2 1,898.4 1.0 Total Government 1995-2000 564.9 569.1 0.1 Federal Civilian Govt 1995-2000 70.5 65.1 (1.6) Federal Military Govt 1995-2000 33.0 32.2 (0.5) State & Local Govt 1995-2000 461.4 471.7 0.4 TOTAL 1995-2000 4,990.6 5,060.5 0.3
Source: Woods & Poole Economics, Inc. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 36 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-3 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Office Space: - ------------ Rentable Available Net Asking Monthly Rents Square Square Vacancy Absorption -------------------- Year Feet Feet Rate 1994 Low High - ----------------------------------------------------------------------------------------------- Beverly Hills 1989 4,814,000 535,000 11.1% 152,000 $1.45 $3.25 1990 5,189,000 1,034,000 19.9 (81,000) 2.00 3.35 1991 5,523,000 1,257,000 22.8 34,000 1.50 3.50 1992 5,525,000 1,136,000 20.6 125,000 1.50 3.50 1993 5,416,000 1,280,000 23.6 (150,000) 1.60 2.80 1994 5,100,000 1,120,000 22.0 65,000 1.45 2.75 1995 4,923,000 735,000 14.9 200,000 2.15 West Los Angeles Total 1989 40,214,000 5,433,000 13.5% 1,728,000 $1.00 $4.00 1990 42,240,000 6,441,000 15.2 570,000 1.25 4.30 1991 43,863,000 8,829,000 20.1 181,000 0.95 3.95 1992 44,088,000 8,383,000 19.0 1,000,000 0.99 3.95 1993 44,134,000 8,190,000 18.6 165,000 1.00 3.60 1994 43,280,000 7,255,000 16.8 735,000 1.00 3.50 1995 42,703,000 6,491,000 15.2 314,000 1.86
Source: Grubb & Ellis Airport Statistics: - ------------------ Passenger Year Traffic Totals % Change - ------------------------------------------ 1980 33,040,032 --- 1981 32,722,534 (1.0)% 1982 32,383,105 (1.0) 1983 33,426,731 3.2 1984 34,361,715 2.8 1985 37,647,983 9.6 1986 41,417,867 10.0 1987 44,873,113 8.3 1988 44,398,611 (1.1) 1989 44,967,221 1.3 1990 45,810,221 1.9 1991 45,668,204 (0.3) 1992 46,964,555 2.8 1993 47,844,794 1.9 1994 51,050,275 6.7 1995 53,909,223 5.6 Annual Average Compounded Percent Change, 1980-95: 3.3% Source: Los Angeles Department of Airports Projected Airport Statistics: - ---------------------------- Passenger Year Traffic Totals % Change - -------------------------------------------- 1996 57,600,000 --- 1997 59,100,000 2.6% 1998 60,500,000 2.4 1999 62,100,000 2.6 2000 63,700,000 2.6 Annual Average Compounded Percent Change, 1996-2000: 0.3% Source: Federal Aviation Administration - -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 37 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The Lodging Market Supply and Demand Analysis section of this economic study and appraisal will relate these historical and projected growth trends to specific market segments based on their propensity to reflect visitation. This analysis will provide a basis for forecasting changes in room night demand in the subject property's area. HVS International, Mineola, New York Overview of External Forces 38 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 5. Overview of External Forces Affecting the U.S. Lodging Industry Introduction Hotel ownership is ultimately the business of creating and enhancing value. To understand the investment potential of lodging facilities, investors must be thoroughly aware of the many forces that can cause changes in the value of their properties. Although some of these forces are internal (such as the layout and design of the facilities, the quality of management, and the condition of the property), others are external (such as the local economic environment and the competitive nature of the market). The risk associated with hotel investment lies largely with the external forces that are beyond the control of ownership and contribute to the variability of future income flows. Investors and appraisers can project financial results by evaluating the historical impact of external forces on hotel values. Successful hotel investors seek opportunities where the risk of external forces can be minimized, thus reducing the uncertainty associated with income expectations. When investors engage in due diligence prior to acquiring a lodging facility, they are primarily interested in trends affecting a limited geographic market area, such as a town, city, or county. A broader overview takes into account national and international travel patterns and trends. An understanding of the general characteristics of the United States hotel market is important because these trends often foreshadow economic and demographic changes in smaller areas. This section of the appraisal will present an overview of the U.S. lodging industry by tracing many of the forces that influence hotel values. Historical economic and demographic data, and industry statistics will be analyzed to provide a basis for projections. Forecasts will be evaluated to determine their reasonableness. The conclusions represent another set of criteria that hotel investors consider in making their acquisition decisions. HVS International, Mineola, New York Overview of External Forces 39 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The Supply and Demand Relationship Most business ventures are influenced by the relationship between supply and demand. In the hotel industry, supply refers to the number of units. A unit consists of one or more rooms and represents the smallest accommodation that can be rented to a guest. Each unit must have a full bath and its own entrance to a public hallway or the building exterior. Demand refers to a room night, which is one unit that is occupied for one night. The supply and demand relationship has a significant influence on a hotel's occupancy and/or average room rate. Occupancy is calculated by dividing the number of rooms that are occupied for a specific period by the total number of rooms that are available during the same period. Average room rate is determined by dividing the total rooms revenue achieved during a specific period by the number of rooms occupied during that period; it also represents the weighted average of all the room rates charged during that period. In a market where demand is increasing faster than supply, occupancies rise and average rate growth generally exceeds inflation. When supply is increasing faster than demand, occupancies fall and average rates typically remain level or decline. Hotels generate revenue based on occupancy and average rate, and thus the supply and demand relationship is an important factor in analyzing profits and value. Hotel occupancy levels have shown definite cycles that reflect the balance between supply and demand. The early 1970s marked the beginning of a hotel building boom reminiscent of the 1920s. Many factors contributed to this expansion, but the two main elements were readily available financing and aggressive chains that were eager to sell franchises. The new construction during the 1970s was made possible by the enormous amount of financing generated by all lenders, particularly real estate investment trusts (REITs). These high-leverage finance companies were created to allow small investors to participate in real estate mortgages and equities. The concept was quickly accepted by Wall Street, and soon billions of dollars were available to finance real estate projects. Many lenders became so overwhelmed with new money that their underwriting procedures broke down and some marginal developments were approved. During the late 1960s and early 1970s, hotel companies actively expanded their chains through franchising. Franchising was a source of new capital, allowing hotel companies to grow and achieve national recognition using the franchisee's financial investment in individual properties. Some franchisors, eager to demonstrate sustained growth and establish a national HVS International, Mineola, New York Overview of External Forces 40 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= presence, employed questionable marketing tactics to sell new franchises. Salespeople were often compensated based on the number of franchises sold, so there was little incentive to discourage developers from investing in poor locations and overbuilt markets. Many lenders and hostelry developers were led to believe that a national franchise would guarantee a successful operation. The combination of readily available financing and aggressive hotel chains eager to sell franchises resulted in overbuilding and development of many poorly located, undercapitalized hostelries managed by inexperienced owners. The bubble burst on the lodging industry when inflation caused construction costs and interest rates to escalate. The 1974 energy crisis drastically reduced travel, and the accompanying recession curtailed business trips, conferences, and conventions. Operators of marginal properties quickly fell behind in their mortgage payments, and lenders were forced to foreclose. As lenders became hostelry owners, they either organized work-out departments headed by experienced hoteliers or engaged professional hotel management companies to assume operational responsibilities. Sales data indicate that lenders who were looking for quick sales to remove non-performing hotel assets from their books had to lower their prices substantially to attract all-cash buyers. Lenders who were willing to hold on to foreclosed hotels and employ professional management to reposition and improve the properties' operation were generally able to recoup their original investments in three to five years, once the industry began to recover. However, even lenders who repositioned their hotels had to take back favorable purchase-money financing to sell the properties because money from other sources was not available. History has shown that during economic downturns, hotel values generally do not fall in proportion to the properties' declining incomes. Sellers, and particularly lenders who take back hotels through foreclosure, are often unwilling to sell at substantially reduced prices. They are more likely to wait out the downward cycle and dispose of their assets when the market begins to rebound. Thus, appraisers can best reflect market behavior by projecting a facility's net income to a point of recovery and applying the proper discounted cash flow procedure over that time period. The late 1970s was a period of relative calm for the lodging industry. Because most lenders were recovering from the financial wounds inflicted by HVS International, Mineola, New York Overview of External Forces 41 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the 1975 recession, they had little interest in making hotel mortgages. New construction was restrained, and primarily consisted of additions to existing properties and the development of some large, downtown hotels oriented toward the commercial and convention markets. The rebirth of center-city hostelries was a direct result of fuel shortages and the availability of government financing for inner-city redevelopment projects. Highway-oriented properties, on the other hand, were adversely affected by escalating gasoline prices and decreased automobile travel, and these lodging facilities lost some of their appeal among investors and hotel companies. Decreased building activity, the normal retirement of older hostelries from the market, and an improving economy created a favorable supply and demand relationship and record-high occupancy levels from 1979 to 1980. Average room rates increased rapidly as operators took advantage of the excess demand to recoup earlier losses and keep up with inflation. After the decline in hotel development during the late 1970s, the environment appeared suitable for a period of renewed expansion. However, the Federal Reserve tightened the money supply in the early 1980s, sending the prime interest rate up to double-digit levels. Most of the projects that were in the preliminary planning stages but lacked sensible financing were put on hold. Fiscal policy and declining energy prices eventually reduced the national inflation rate. This caused a decline in hotel interest rates beginning in 1983, and suddenly massive amounts of capital were available for real estate investments. Hotel developers who had been out of the market since the mid-1970s rushed to initiate new projects. They were aided by several major real estate development incentives: high occupancies and escalating room rates, readily available debt and equity financing, and unique income tax benefits designed to stimulate the national economy out of a recession. During the early 1980s, trends were generally favorable for new hotel development. Although the recession caused a decline in lodging demand, many markets showed relatively high occupancy levels. Room rates were usually able to keep up with inflation, and the travel industry was expected to boom as a result of a recovering economy. Franchise sellers signed up new prospects aggressively, using product segmentation to justify the saturation of a market with a common brand. HVS International, Mineola, New York Overview of External Forces 42 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Financing was readily available from the savings and loan industry. Following deregulation, these banks were permitted to lend on commercial real estate, such as hotels. Although savings and loans had experience in making loans on single-family homes, few had expertise with commercial properties, and fewer still with hotels. The result was almost identical to the real estate investment trust fiasco the decade before: loan underwriting and administration were inept and sometimes nonexistent, the number of loans made seemed more important than the quality of the real estate and the integrity of the borrower, and short-term funds were often used to finance long-term mortgages. In the early 1990s, the industry suffered the consequences of this lending spree: most major hotel markets became severely overbuilt and many savings and loans went out of business. Another factor contributing to hotel development in the 1980s was the very favorable treatment provided by income tax regulations. By carefully structuring hotel syndications to take advantage of all available tax benefits, investors could virtually recoup their total cash outlay in the first year and reap additional benefits in the future regardless of the economic success of the underlying asset. Because there was little incentive to justify a transaction's economics (i.e., cash flow and reversionary benefits), a number of syndicators overpaid for hotel properties, took out usurious fees, and overloaded their hotels with debt. A change in the tax law in the mid-1980s eliminated many of the benefits associated with hotels, but the overbuilding in most markets was either in progress or had already taken place. By the end of the 1980s, the abuses of the savings and loans had become apparent, but it was too late to reverse the overbuilding. Between 1985 and 1990, approximately 556,000 rooms were added to the U.S. hotel supply. The national economy entered another recession in 1990, and this factor (coupled with overbuilding and the Persian Gulf War in 1991) caused the national hotel occupancy rate to bottom out at 60.9%. In some markets, hotel occupancies were as low as 35%. This supply and demand imbalance was almost identical to the situation in the 1970s that led to numerous hotel failures. As in the REIT days, the number of non-performing loans reached record levels, and lenders moved to a work-out mode of operation in order to foreclose and restructure their hotel investments. Many of the savings and loans were taken over by the government and their hotel assets were sold at auction. HVS International, Mineola, New York Overview of External Forces 43 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= According to the American Council of Life Insurance, which represents major life insurance companies, the number of delinquent hotel loans and the number of hotel loans in foreclosure peaked in 1991. This trend is undergoing a reversal as the U.S. lodging industry begins to recover. Loan restructuring was an attractive alternative to foreclosure during this period, and the number of loans in good standing with restructured terms almost doubled. By 1993, new hotel construction had declined significantly. Lenders, trying to get out from under problematic hotel portfolios, curtailed all real estate lending and would not even consider hotels. The tax benefits associated with lodging facilities had been reduced significantly, and passive investors left the hospitality market entirely. The slowdown in the growth of supply had a beneficial impact on occupancy levels, which started to recover in 1992. Improved occupancies are expected to continue through the late 1990s as increases in lodging demand outpace growth in supply. Beginning in 1991, many lenders and the Resolution Trust Corporation (RTC) sold their oldest and least desirable hotels at liquidation prices. Because virtually no third-party financing was available, most lenders were forced to take back purchase-money mortgages at favorable terms in order to sell these properties without suffering massive write-downs. The newer and more desirable hotels were not put on the market, because their lenders/owners were waiting for values to recover. This course of action significantly reduced the number of transactions involving good-quality lodging facilities. The following table shows the volume of hotel transactions exceeding $10,000,000 between 1990 and 1995. ================================================================================ Table 5-1 Summary of Major Hotel Transactions - --------------------------------------------------------------------------------
Year 1990 1991 1992 1993 1994 1995 - ---------------------------------------------------------------------------------------- Number of Transactions 130 54 67 52 92 104 Number of Rooms 40,543 16,427 25,187 19,935 33,503 36,951 Average Price Per Room $136,000 $ 91,000 $ 85,000 $792,000 $ 80,000 $ 83,000
Source: HVS International - -------------------------------------------------------------------------------- HVS International, Mineola, New York Overview of External Forces 44 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= In 1991, there were only 54 major hotel sales recorded. This number increased to 67 in 1992 and declined to 52 in 1993, then rose dramatically in 1994 and 1995. During the low-volume years, many sellers remained on the sidelines waiting for values to increase before placing their properties on the market. The jump in 1994 is attributable to a number of factors, including the greater availability of mortgage funds, a return of institutional investors to the market, and a resurgence of investor interest in lodging facilities. The profile of typical hotel buyers has changed somewhat. During the mid-1980s, when tax-driven syndication's were popular, many hotels were purchased by passive investors who hired management companies to operate their properties. These owners had little involvement in day-to-day management decisions, which occasionally led to poor management and financial losses. Today, most buyers of major hotels are owner-operators who bring with them both the acquisition funds (usually from a joint venture partner) and management expertise. We also note that real estate investment trusts (REITs) and public hotel companies (C-Corps) are actively acquiring hotels using funds from public equity stock offerings. The supply of new hotel rooms is expected to increase slowly during the next several years. Lenders are beginning to return to the market, and are making some hotel loans based on conservative criteria. Initially, mortgage funds were available mainly to the budget and economy lodging sectors, for the purpose of refinancing existing properties or assisting buyers in acquisitions. Now, a number of lenders are willing to finance new construction for these small, low-end properties. Although financing is also becoming available for the acquisition of large, full-service hotels, very little has been allocated for new construction. At present, active hotel lenders are not necessarily traditional banks and insurance companies, but may include credit companies and Wall Street securities firms. A number of hotel owners and developers are now constructing budget and economy hotels; a few are planning more upscale, full-service properties. Most lenders are taking a conservative approach to new hotel loans, which should limit new development to those projects that demonstrate true economic feasibility. As a result, severe short-term overbuilding is unlikely. HVS International, Mineola, New York Overview of External Forces 45 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Room Rates The supply and demand relationship has a direct impact on hotel occupancies and an indirect influence on room rate growth. Between 1978 and 1995, hotel room rates increased at an average annual compounded rate of almost 6%. Significant rate growth was recorded during the late 1970s and early 1980s as a result of strong occupancies (70%'s) coupled with a high monetary inflation rate (14%). In recent years, room rate growth slowed as a result of low occupancies and a drop in inflation. Hotel room rates generally increase faster than the Consumer Price Index (CPI) when occupancies are strong or moving upward. When occupancies are low or declining, room rate growth tends to lag behind the CPI; in some cases, rates may remain flat or actually drop. The following table compares the historical and projected annual increase in hotel room rates in the United States to the change in the national CPI. HVS International, Mineola, New York Overview of External Forces 46 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-2 Percent Change in Average Room Rates Versus CPI - U.S. Hotels - -------------------------------------------------------------------------------- Consumer Price Hotel Room Rate Index Hotel Year Percent Change Percent Change Occupancy ------------------------------------------------------------------- 1973 4.2% 6.2% 70.2% 1974 7.6 11.0 64.0 1975 7.3 9.1 63.7 1976 8.2 5.7 65.8 1977 8.1 6.5 67.3 1978 14.0 7.7 69.2 1979 17.0 11.3 71.9 1980 15.2 13.5 70.6 1981 10.0 10.3 67.9 1982 6.5 6.2 66.7 1983 5.1 3.2 64.4 1984 6.9 4.3 64.0 1985 4.6 3.6 63.1 1986 3.2 1.9 62.5 1987 3.6 3.6 61.9 1988 3.6 4.1 62.3 1989 3.5 4.8 63.2 1990 3.0 5.4 62.4 1991 0.6 4.2 60.9 1992 1.4 3.0 62.1 1993 2.8 3.0 63.1 1994 4.8 2.6 64.7 1995 4.8 2.8 65.5 1996* 5.0 3.0 66.0 1997* 5.5 3.5 67.0 1998* 6.0 4.0 68.0 1999* 5.5 4.0 68.0 Source: Smith Travel Research & HVS International * Projected - -------------------------------------------------------------------------------- This table shows two periods when hotel room rate growth failed to keep pace with the CPI. From 1973 to 1975, the hotel industry was suffering from overbuilding related to real estate investment trusts, a recession, and a downturn in travel caused by the oil embargo. The second period of slow room rate growth occurred between 1988 and 1993, when the industry was again affected by overbuilding and a weak economy. The table illustrates HVS International, Mineola, New York Overview of External Forces 47 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= that during periods of prosperity, room rates are a good hedge against inflation; this was true even when the CPI increased at double-digit levels. The projections indicate a strong recovery of room rates as the relationship between supply and demand becomes more favorable. Growth is expected to peak in 1998 at 6%, which is significantly higher than the projected gain in the CPI. This may appear high, but a similar trend occurred in 1978, when room rates rose 14.0% and the CPI increased by only 7.7%. Hotels are unique because their room rates can be adjusted at any time. Unlike office space, where rents are typically negotiated for a five-year period, hotel operators are free to base rates on occupancy trends. Using sophisticated yield management programs, modern lodging facilities can ride the demand curve and maximize room rates whenever the market permits. As a result, hotels generally offer significant upside potential during periods of economic prosperity. If lodging facilities can increase room rates faster than the CPI and still maintain occupancies, bottom-line profits usually escalate. If they can raise room rates and occupancy at the same time, profits will grow significantly. The opposite occurs when room rates fail to keep pace with inflation. Because market value is basically a multiple of bottom-line profits, changes caused by fluctuations in occupancy and average rate have a direct impact on value. Rooms Revenue per Available Room (RevPAR) The ability of a hotel to maximize its occupancy and room rate is measured in terms of rooms revenue per available room (RevPAR), which is the product of occupancy and average rate. Between 1978 and 1995, RevPAR in the U.S. lodging industry increased at an average annual compounded rate of approximately 5%. As in the case of average rate, most of the increase occurred during the late 1970s, when occupancies escalated rapidly. The only decline in RevPAR occurred in 1991. Trends in Hotel Sales HVS International constantly monitors hotel markets in order to collect information on sales of lodging facilities. This comprehensive database is known as the Hospitality Market Data Exchange (HMDE). The HMDE includes more than 90% of all hotel sales that took place during this period. The HMDE data shows that the number of transactions peaked at 726 in 1986. This strong activity is largely attributable to pending changes in the tax laws, which made it less favorable to own hotels. It is also possible that HVS International, Mineola, New York Overview of External Forces 48 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= forward-thinking investors noted the substantial overbuilding and declining economy and decided to bail out at that time. In 1987 and 1990, the average sales price per room peaked at $75,000. This was more than twice the 1981 average of $36,000. Following the 1990 peak, hotel prices fell rapidly as occupancies and profits were eroded by the massive number of hotel rooms entering the market. By 1991, the year of the Persian Gulf War, sales prices had fallen to $38,000 per room. Even the highest price per room declined from the record $1,195,652 (for the sale of the Bel Aire Hotel) to $251,816 in 1992. The market hit bottom in 1993 when the average sales price dropped to $36,000 per room. Prices recovered rapidly in 1994 and 1995 as investors became interested in hotels again and more full-service properties were put on the market. In 1995, the average sales price was $61,000 per room. The figures presented in the HMDE represent actual sales prices; no attempt was made to adjust for factors such as favorable or unfavorable financing, forced or liquidation sales, bankruptcy sales, foreclosures, and so forth. As a result, the average price per room does not necessarily reflect market value, which assumes a willing buyer and a willing seller. Many of the transactions that took place during the early 1990s involved unwilling sellers - usually lenders who were forced to liquidate hotel portfolios quickly at prices that were below market levels. Most hotel experts agree that a recovery is underway, and they recommend that owners hold their properties until more favorable conditions prevail. Trends in Hotel Values A more meaningful indicator of trends in hotel value is the Hotel Valuation Index (HVI), developed by HVS International. This index tracks changes in hotel values in 23 major markets and the nation as a whole. It is developed through an income approach, using market area data provided by Smith Travel Research and operational and capitalization rate information from HVS International, and is indexed to the 1986 U.S.A. value (1.0000). The following table sets forth the HVI from 1986 to 1995. HVS International, Mineola, New York Overview of External Forces 49 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-3 Hotel Valuation Index per Room - --------------------------------------------------------------------------------
Valuation Index Per Room ------------------------ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 --------------------------------------------------------------------------------------- Honolulu 3.3571 4.0357 4.6964 5.2857 5.3214 4.7857 4.9286 4.2857 4.3929 5.6071 New Orleans 1.5357 1.7500 2.2857 2.3929 2.5000 2.6071 3.2857 3.2500 3.8929 4.4286 New York 3.5714 4.1071 4.6429 4.5357 3.9286 3.0357 2.5714 2.5714 3.1429 4.1071 San Francisco 2.5000 3.0893 3.2500 3.0714 2.9286 2.5714 2.5714 2.9643 3.2143 4.0000 Phoenix 1.2143 1.0714 1.1786 1.5357 1.4286 1.2500 1.5000 1.9643 2.3571 3.2143 San Diego 2.8571 2.3571 2.5714 2.6786 2.3929 2.5357 2.5357 2.2143 2.3571 3.0357 Miami 1.4286 1.6071 1.7321 2.1429 2.1786 2.2500 2.5714 2.7857 2.3214 2.9286 Washington, DC 2.1786 2.1786 2.4464 2.6071 2.2500 1.8571 2.0357 2.5000 2.3929 2.8929 Atlanta 1.0714 1.0179 1.0536 1.0357 1.1429 1.1250 1.2857 1.7857 2.1429 2.6786 Minneapolis 0.7321 0.6964 0.7143 0.7143 0.7857 1.0000 1.2857 1.5714 1.8214 2.1786 Chicago 1.4643 1.5000 1.5714 1.5000 1.4286 1.2143 1.2500 1.5000 1.8571 2.1786 Boston 2.3571 2.7143 2.6071 2.1429 1.8214 1.2500 1.3036 1.3214 1.6071 2.1071 Fort Lauderdale 1.4643 1.2679 1.3214 1.4286 1.4821 1.3571 1.7143 1.8929 1.6071 1.9286 Orlando 1.5000 1.6429 1.9286 2.5000 2.5357 1.8929 2.0714 1.7857 1.6071 1.8929 Denver 0.5357 0.4464 0.4643 0.4821 0.7857 0.9268 1.0357 1.3214 1.5000 1.8571 Dallas 0.5536 0.6250 0.6607 0.7321 0.7857 0.7143 0.9643 1.0357 1.3214 1.7143 USA 1.0000 0.9464 1.0536 1.1250 1.0714 0.9214 0.9929 1.1429 1.3214 1.6071 Los Angeles 2.1071 2.2857 2.3929 2.4643 2.1786 1.5714 1.0714 0.9643 1.1964 1.5000 Tampa 0.8393 0.7679 0.8571 1.1429 1.2857 1.0357 1.0714 1.0357 1.1071 1.3214 Anaheim 1.7679 1.7321 1.7500 1.8571 1.6071 1.2857 0.9642 0.9464 0.8393 1.2500 Houston 0.3571 0.4286 0.6964 0.7857 1.1071 1.1607 1.1429 1.0357 1.0000 1.1786 Philadelphia 1.4643 1.5357 1.4286 1.3214 1.0714 0.6786 0.5714 0.6071 0.7500 1.0714 Norfolk 1.1786 1.0536 0.9286 0.7857 0.6429 0.5357 0.6071 0.6429 0.7500 0.9643 Riverside 0.9643 1.2143 1.5714 1.7143 1.4643 1.2500 0.7857 0.5357 0.4286 0.5357
Source: HVS International - -------------------------------------------------------------------------------- The HVI can be used to show the value change in a particular market over time or to show the relative difference in hotel values in various cities. The following table shows the annual change in hotel values in 23 major markets and the United States as a whole. HVS International, Mineola, New York Overview of External Forces 50 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-4 Percent Change in the Hotel Valuation Index - --------------------------------------------------------------------------------
Annual Percent Change '86-87 '87-88 '88-'89 '89-'90 '90-'91 '91-'92 '92-'93 '93-'94 '94-'95 '86-'95 ----------------------------------------------------------------------------------------------- Honolulu 20% 16% 13% 1% -10% 3% -13% 3% 28% 67% New Orleans 14 31 5 4 4 26 -1 20 14 188 New York 15 13 -2 -13 -23 -15 0 22 31 15 San Francisco 24 5 -5 -5 -12 0 15 8 24 60 Phoenix -12 10 30 -7 -13 20 31 20 36 165 San Diego -18 9 4 -11 6 0 -13 6 29 6 Miami 12 8 24 2 3 14 8 -17 26 105 Washington, DC 0 12 7 -14 -17 10 23 -4 21 33 Atlanta -5 4 -2 10 -2 14 39 20 25 150 Minneapolis -5 3 0 10 27 29 22 16 20 198 Chicago 2 5 -5 -5 -15 3 20 24 17 49 Boston 15 -4 -18 -15 -31 4 1 22 31 -11 Fort Lauderdale -13 4 8 4 -8 26 10 -15 20 32 Orlando 10 17 30 1 -25 9 -14 -10 18 26 Denver -17 4 4 63 18 12 28 14 24 247 Dallas 13 6 11 7 -9 35 7 28 30 210 USA -5 11 7 -5 -14 8 15 16 22 61 Los Angeles 8 5 3 -12 -28 -32 -10 24 25 -29 Tampa -9 12 33 12 -19 3 -3 7 19 57 Anaheim -2 1 6 -13 -20 -25 -2 -11 49 -29 Houston 20 62 13 41 5 -2 -9 -3 18 230 Philadelphia 5 -7 -8 -19 -37 -16 6 24 43 -27 Norfolk -11 -12 -15 -18 -17 13 6 17 29 -18 Riverside 26 29 9 -15 -15 -37 -32 -20 25 -44
Source: HVS International - -------------------------------------------------------------------------------- On a national basis, hotel values rose in 1988 and 1989, then declined in 1990 and dropped by 14% in 1991. A turnaround commenced in 1992, when values increased by 8%; still greater increases of 15% in 1993, 16% in 1994, and 22% in 1995 signaled that a recovery was well underway. In the case of the individual cities, it is obvious that the movement in national hotel values has been offset somewhat by trends in local markets. Between 1986 and 1995, Riverside hotels lost more than 40% of their value, while San Francisco showed a 60% increase. Anaheim, Los Angeles, and Philadelphia also suffered significant drops. Future Trends Most hotel owners, operators and lenders agree that the U.S. lodging industry has emerged from one of the worst periods since the Depression of 1929. Today, there are many indications that signal a strong recovery is underway, and most hotels have experienced a dramatic rise in profitability. Conversely, the hotel industry remains cyclical, and there are long-term trends and risk factors that could have an unfavorable impact on the HVS International, Mineola, New York Overview of External Forces 51 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= operating results and investment potential of lodging facilities. The following list summarizes the positive and negative factors that are likely to influence the U.S. lodging industry in coming years. O No significant amount of new hotel development is likely to occur during the next three to five years. Lenders stopped financing new hotels in the early 1990s because of the high rate of loan defaults, and they are only now starting to make construction loans. Although mortgage funds are available to refinance existing properties and construction loans are being made for economy hotels, mortgages for new hotels in the mid-rate, first-class, and luxury categories are still difficult to secure. This lack of financing is major barrier to entry, and will prevent a number of proposed projects from moving forward. With only a slow increase in supply, hotel occupancies should rebound as fast as the growth in demand permits. O An additional barrier to entry is the current discrepancy between market values and replacement costs for first-class and luxury hotels. In today's market, many upscale hotels are still selling for prices that are below what it would cost to develop a comparable hotel. As a result, there is little justification for building a new hotel when a similar, existing facility is available for sale at some fraction of the cost. Until the gap between market value and replacement cost narrows, there will be minimal new hotel construction in the upper-tier segments. The market values and replacement costs of budget and economy hotels have been in equilibrium for several years which is another reason why new development is proceeding in these segments. O The U.S. economy continues to improve, which suggests that more people are traveling. Many people curtailed their travel plans during the recent recession, and there is likely to be pent-up demand that will be released as consumer confidence escalates. O Minimal additions to the hotel supply coupled with growth in demand should result in further improvement in occupancies during the next several years. HVS International, Mineola, New York Overview of External Forces 52 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= o As shown by the historical data, hotel room O rates rise rapidly as occupancies escalate. The most frequent complaint that owners and operators had during the recent recession was their inability to achieve average rate gains. Starting in 1994, gains in hotel room rates returned to levels in excess of inflation, foreshadowing enhanced profitability. In real dollars, hotel room rates are expected to return to 1988 levels by 1998. This is a good indication that hotel values will return to record levels in the next two to four years. O The low cost of capital is another factor that tends to enhance value. Because capitalization rates are tied directly to the price of capital, the lower the cost, the lower the cap rate and the higher the value. The cost of hotel debt capital averaged 10.5% in 1990. Today, similar financing is available at 8.5% to 9.5%. Recent hotel sales support the downward trend in capitalization rates. O Government regulations are becoming increasingly expensive for the U.S. hotel industry. A national health care policy could force small operators to provide better benefits for many more employees, particularly the part-time workers who are used extensively by hotels and restaurants. Environmental laws are becoming stricter and will require hotels to implement recycling, reuse, and conservation procedures. Congress has limited deductions for meals and entertainment expenses, which increases the cost of doing business in hotels and restaurants. Local municipalities use hotel rooms taxes as a source of revenue for general use, and the hotel rooms tax is so high in some areas that it has driven away demand. This is particularly true with respect to meetings and conventions, which can be held in cities that tax accommodations at a lower rate. O Improved technology is rapidly changing the way business is conducted. During the next decade, advances such as video communication, enhanced data transfer, and faster transportation are expected to limit the need for face-to-face meetings and shorten the time that executives are away from their offices. Commercial hotels are bound to be influenced by this trend. Conclusion Interest in hotel acquisition has increased significantly during the past several years. Buyers have concluded that future earnings trends are likely to be favorable, and the risks posed by overbuilding or an economic downturn are small. Some sellers are holding their properties until prices reach a higher level. Consequently, we believe there is pent-up desire to sell, once HVS International, Mineola, New York Overview of External Forces 53 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= prices begin to approach levels that allow the existing (or restructured) debt to be paid off. The fact that numerous buyers are chasing very few acquisition opportunities has had a favorable impact on recent sales prices. For buyers to be successful in this highly competitive market, their projected operating results must take into account at least a portion of any upside created from improved performance, particularly if the improvement can be readily achieved through management efficiencies. Capitalization rates based on historical operating income have fallen during the past several years. Hotel buyers in today's market must be aggressive in all of their acquisition assumptions. As a result, hotel values in some parts of the country are approaching the levels registered during the mid-1980s, and a full recovery is expected to occur in the next two to four years. HVS International, Mineola, New York Lodging Market Supply and Demand 54 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 6. Lodging Market Supply and Demand Analysis MARKET FOR TRANSIENT ACCOMMODATIONS The market for transient accommodations is an all-encompassing term referring to the many types of travelers who use lodging facilities in a given area. These travelers represent the market's accommodated-room night demand. This section will begin with an analysis of historical demand trends to determine what changes have occurred; the historical number of competitive hotel rooms will then be estimated to evaluate local supply trends. Areawide occupancy levels can be calculated based on the number of hotel rooms available in the market and the demand for lodging accommodations. The total hotel room night demand will be divided into individual market segments to allow us to forecast growth rates based on the economic and demographic data set forth earlier in this report. Historical Supply and Demand Data Smith Travel Research (STR) has compiled historical supply and demand data for the subject property and its competitors. This information is presented in the following table, along with the marketwide occupancy, average rate, and rooms revenue per available room (RevPAR). RevPAR is calculated by multiplying occupancy by average rate, and provides an indication of how well rooms revenue is being maximized. HVS International, Mineola, New York Lodging Market Supply and Demand 55 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-1 Historical Room Supply and Demand Trends (STR) - --------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 - -------------------------------------------------------------------------------------------------------- Number of Rooms 1,606 1,634* 1,634 1,634 1,634 1,634 1,634 Annual Guestroom Supply 586,085 596,410 596,410 596,410 596,410 596,410 596,410 Percent Change -- 1.8% 0.0% 0.0% 0.0% 0.0% 0.0% Room Night Demand 404,399 406,752 370,371 396,016 380,510 386,474 416,294 Percent Change -- 0.6% -8.9% 6.9% -3.9% 1.6% 7.7% Occupancy 69.0% 68.2% 62.1% 66.4% 63.8% 64.8% 69.8% Percent Change -- -1.2% -8.9% 6.9% -3.9% 1.6% 7.7% Average Rate $77.90 $78.56 $77.71 $72.86 $76.57 $79.39 $79.68 Percent Change -- 0.8% -1.1% -6.2% 5.1% 3.7% 0.4% RevPAR $53.75 $53.58 $48.26 $48.38 $48.85 $51.44 $55.62 Percent Change -- -0.3% -9.9% 0.3% 1.0% 5.3% 8.1%
Year-to-Date Through August Average Annual --------------------------- Compounded Growth 1995 1996 1989 - 1995 - ------------------------------------------------------------------------- Number of Rooms 1,634 1,627 Annual Guestroom Supply 397,062 --- 397,062 Percent Change -- 0.0% 0.3% Room Night Demand 278,738 302,958 Percent Change -- 8.7% 0.5% Occupancy 70.2% 76.3% Percent Change -- 8.7% 0.2% Average Rate $80.30 $85.50 Percent Change -- 6.5% 0.4% RevPAR $56.37 $65.24 Percent Change -- 15.7% 0.6% * The 175-room Ramada West Hollywood opened in March of 1989. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Lodging Market Supply and Demand 56 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= It is important to note some limitations of the STR data. Hotels are occasionally added to or removed from the sample, and not every property reports data in a consistent and timely manner; these factors can influence the overall quality of the information by skewing the results. These inconsistencies may also cause the STR data to differ from the results of our competitive survey. Nonetheless, we find that hotel buyers often rely on STR statistics, and thus, they are considered relevant to this study. In the subject property's market, all hotels reported to Smith Travel. However, we were unable to include the Holiday Inn Hollywood, due to the large number of Holiday Inn properties in the subject properties competitive set and STR restrictions concerning brand representation - i.e., no one brand can comprise more than 35% of the total supply. Over the past six years, supply has remained stable throughout the projection period, with the exception of 1990, when supply increased by 28 rooms as a result of the opening of the 175-room Ramada West Hollywood in 1989. The increase of 28 rooms reflects the first full year of operation for this property in 1990. During the same period, demand in the subject property's competitive market has increased marginally, with a compounded growth of 0.5% over the six-year period. Demand declined by 8.9% in 1991, as a result of the negative impact of the Persian Gulf War, as well as the deepening of the national recession. In 1992, the market recovered much of the lost demand, registering an increase of 6.9%. This increase in demand was also partially attributable to it being an election year, which reportedly causes a surge in demand in the subject market area as a result of fund raising and other campaign activities. In 1993, with the economic recession actually deepening in California, demand fell again by 3.9%. The last two years reflect the beginnings of the economic recovery in the state, as the demand increased by 1.6% and 7.7% in 1994 and 1995, respectively. Year-to-date through August figures reflect a even better picture, with growth of 8.7%. The overall room night demand resulted in occupancy increasing from 69.0% in 1989 to 69.8% in 1995. Between 1989 and 1995 average rates increased by a 0.4% compounded growth rate. In both 1991 and 1992, the areawide average rate decreased - by 1.1% and 6.2%, respectively. In large part, this trend may be attributed to the response of local hotel management to the decline in occupancy that occurred in 1991, and represents the initiative to increase occupancy by offering lower prices. Average rates recovered significantly in 1993 and 1994, with the 1994 average surpassing that achieved in 1989. A more moderate HVS International, Mineola, New York Lodging Market Supply and Demand 57 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= increase (0.4%) was recorded in 1995; however, the concurrent surge in occupancy resulted in a substantial 8.1% increase in RevPAR. Figures for the average rate for the year-to-date through August 1996 indicate an increase of 6.5% over the same period. This rise is a reflection of a stronger Californian economy, which is confirmed in both occupancy and average rate trends for the year. The occupancy and average trends in the Beverly Hills market resulted in the RevPAR increasing by a compounded growth rate of 0.6% for the six year period between 1989 and 1995. However, as with occupancy and average rate, the pattern of growth indicates an accelerating positive trend, and suggests that the market may expect to experience stronger than historical average rates of increase over the near term, as the current cycle evolves. Demand Analysis Using Market Segmentation For the purpose of demand analysis, the overall market is divided into individual segments based on the nature of travel. Although a market may have various segments, the three primary classifications occurring in most areas are commercial, meeting and group, and leisure. Market segmentation is a useful procedure because individual classifications often exhibit unique characteristics in terms of growth potential, seasonality of demand, average length of stay, double occupancy, facility requirements, price sensitivity, and so forth. By quantifying the room night demand by market segment and analyzing the characteristics of each segment, the overall demand for transient accommodations can be projected. Lodging demand in Beverly Hills market area is generated primarily by the following four market segments. Segment 1 Commercial Segment 2 Meeting and Group Segment 3 Leisure Segment 4 Airline Based on our fieldwork, area analysis, and knowledge of the local lodging market, we estimate the 1996 distribution of accommodated hotel room night demand as follows. HVS International, Mineola, New York Lodging Market Supply and Demand 58 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-2 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- 1996 Annual Room Night Demand (Rounded) ---------------------------------------------------------- Percentage Percentage Market Segment Marketwide of Total Subject Property of Total - -------------------------------------------------------------------------------- Commercial 155,000 37% 9,000 13% Meeting and Group 46,000 11 5,000 7 Leisure 162,000 38 40,000 55 Airline 60,000 15 18,000 25 ------- --- ------ --- Totals 424,000 100% 72,000 100% - -------------------------------------------------------------------------------- Leisure demand predominated in the competitive market in 1996, constituting 38% of total room night demand, which and followed closely by the commercial segment at 37%, airline segment at 15%, and the meeting and group segment at 10%. Room night demand at the subject property was somewhat different, and was dominated by the leisure segment at 55%, followed by the airline segment at 25%, the commercial segment at 13%, and meeting and group segment, at 7% of the subject property's demand. Using the distribution of accommodated hotel demand as a starting point, we will analyze the characteristics of each market segment in an effort to determine future trends in room night demand. Commercial Segment The commercial segment consists of individual businesspeople who are visiting various firms in the subject property's market. Commercial demand is strongest Monday through Thursday nights, declines significantly on Friday and Saturday, and increases somewhat on Sunday. The typical length of stay ranges from one to three days, and the rate of double occupancy is a low 1.2 to 1.3 people per room. Commercial demand is relatively constant throughout the year, although some declines are noticeable in late December and during other holiday periods. In general, commercial travelers are not overly rate-sensitive, and will make use of a hotel's food and beverage outlets and recreational facilities. The commercial segment represents a highly desirable and lucrative market that provides a consistent level of demand at relatively high room rates. Commercial demand in the subject property's market is generated by a wide variety of corporations, with the entertainment industry exhibiting HVS International, Mineola, New York Lodging Market Supply and Demand 59 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= some dominance. The area also offers a high concentration of retail outlets, with high recognition stores such as Neiman Marcus, Saks Fifth Avenue, and Barney's New York. The subject property along with most of its competitors derive a majority of their commercial demand from the immediate Beverly Hills market area. In recent years Beverly Hills has become headquarters to corporations such as the Hilton Hotel Corporation, the City National Bank, and Playboy Enterprises Inc. In addition to these above-mentioned corporations, Beverly Hills has long been associated with the concept of being the world headquarters for the business of entertainment, for this is where the industry's performers, agents, producers, bank entertainment divisions, lawyers, and accountants congregate. The Motion Picture Academy and the industry libraries and museums are also headquartered here. The four largest talent agencies are located in Beverly Hills, along with over 600 entertainment-related firms that have business licenses from the City of Beverly Hills. Immediately adjacent is the Fox Studios, the largest employer for the Beverly Hills area; whereas the studios of Sony pictures/MGM, Viacom/Paramount, Universal, Culver, Sunset-Grover, Raleigh, Hanna-Barbera Productions, KCOP, KTLA, KTTV, and CBS Television City are within the five-mile business circle. The area immediately surrounding the subject property also has a high concentration of medical business, which specialize in rehabilitation facilities and plastic surgery clinics. All these demand generators provide the Beverly Hills market with commercial demand. The commercial segment at the subject property has been fairly low, at 13%, compared to the rest of the competitive market, which is able to generate approximately 37% of its business from this segment. This low percentage can be attributed to the historically poor condition of the hotel and its consequent inability to attract and serve the commercial segment of the market. The completion of the renovation, together with the reflagging of the hotel as a Holiday Inn Select -- a brand which is well regarded by business travelers -- should enable the property to significantly improve its competitive position in the local market. Such an improvement will have a beneficial affect on average rate as this segment is characterized by some of the highest rates in the market. We generally find a multiplier effect between employment growth in certain sectors and the increase in commercial lodging demand (i.e., one new FIRE employee will correspond to more than one new visitor). In conjunction with the recent strengthening of the California economy as the recession abates, commercial demand in the local area has increased at an HVS International, Mineola, New York Lodging Market Supply and Demand 60 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= accelerating pace. Smith Travel Research estimates that total hotel demand in the competitive market rose by an average annual compounded rate of 0.6% between 1989 and 1995; however, total demand increased by 7.7% in 1995 and by 8.7% in the year-to-date through August of 1996. We project that commercial demand (which comprises more than 37% of the total market) will increase by 3.0% over the remainder of the decade before stabilizing at 2.5% annually in subsequent years. Meeting and Group Segment The meeting and group market includes meetings, seminars, conventions, trade association shows, and similar gatherings of ten or more people. Peak convention demand typically occurs in the spring and fall. Because of vacations, the summer months represent the slowest period for this market segment; winter demand varies. The average length of stay for typical meetings and groups ranges from three to five days. Most commercial groups meet during the weekday period of Monday through Thursday, but associations and social groups will sometimes gather on weekends. Commercial groups tend to have a low double occupancy of 1.3 to 1.5 people per room, while social groups are likely to have double occupancy rates ranging from 1.5 to 1.9. Meeting and group demand in the subject property's market as a whole is fairly low. Most of this demand is generated by the higher rated hotels in the Beverly Hills market, and is generally related to the entertainment industry as well as higher profile businesses located in the region. In 1996, the subject property derived approximately 7% of its room night demand from this segment, as compared to 11% for the market as a whole. Most of the subject property's meeting and group demand is generated by tour and travel business. Additional meeting and group demand is generated through SMERF, Corporate, contract and association businesses. Meeting and group patronage is quite profitable for hotels. Although room rates are discounted for large groups, the property benefits from the use of meeting space and the revenues generated by in-house banquets and cocktail receptions. Facilities that are necessary to attract meetings and groups include function areas with adequate space for breakout, meals, and receptions; recreational amenities; and a sufficient number of guestrooms to house the attendees. Future meeting and group demand is closely related to growth in the commercial segment. Because most meetings have either a direct or an indirect business purpose, the economic considerations that have an impact on HVS International, Mineola, New York Lodging Market Supply and Demand 61 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= commercial travel also affect meeting and group demand. The exception is non-commercial meetings, which are tied to the economic factors that influence leisure travel. It should be noted that meetings and similar events are booked in advance, and thus, growth in this segment tends to lag slightly behind increases in commercial demand. Based on the economic and demographic data pertaining to commercial demand, as previously discussed, we estimate that meeting and group demand in the Beverly Hills market area will also increase at a stable rate. Specifically, we project meeting and group room night demand to increase by 2.0% through the Year 2000. Thereafter, we project meeting and group demand growth to stabilize at 1.5%, beginning in 2001. Leisure Segment The leisure market segment consists of individuals and families who are spending time in the area or passing through en route to other destinations. Their travel purposes may include sightseeing, recreation, visiting friends and relatives, or numerous other non-business activities. Leisure demand is strongest Friday and Saturday nights and all week during holiday periods and the summer months. These peak periods are negatively correlated with commercial visitation, underscoring the stabilizing effect of capturing weekend and summer tourist travel. The typical length of stay ranges from one to four days, depending on the destination and travel purpose, and the rate of double occupancy generally ranges from 1.8 to 2.5 people per room. Leisure travelers tend to be the most price-sensitive segment in the lodging market. They often prefer low-rise accommodations where parking is convenient to the rooms, and they typically demand extensive recreational facilities and amenities. Ease of highway access and proximity to tourist attractions are important locational considerations. Leisure demand in the subject property's market is generated primarily by tourists and others visiting the Los Angeles area. The area's proximity to Hollywood and the related entertainment industry attractions, together with the high profile image of Beverly Hills and the residents thereof, generate a significant amount of tourism and leisure demand each year. This demand is both national and international in nature, and includes individuals utilizing rooms purchased through a travel package which typically includes airfare, lodging and transportation (usually a rental car). Leisure demand predominates the Beverly Hills market, accounting for 38% of the total demand. However, the subject property receives roundly 55% HVS International, Mineola, New York Lodging Market Supply and Demand 62 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= of its room night demand from this segment. A majority of this demand consists of the aforementioned package tours, which are generally characterized by a relatively low rate. Historically, the hotel has relied on this segment of the market due to its inability to compete successfully in the more profitable segments of the market. With the completion of the renovation and the concurrent upgrade in the hotel's brand affiliation, the Holiday Inn should be able to decrease its reliance on the low rated component of this segment, replacing this business with the more desirable commercial segment. Future leisure demand is related to the overall economic health of the nation. Trends showing changes in state and regional unemployment and disposable personal income often have a strong impact on non-commercial visitation. Traffic counts on nearby highways and attendance at local attractions can also form a basis for projections. With the Californian economy as well as the national economy picking up, the number of visitors coming into the Beverly Hills market has grown in the last two years. Based on our review of the economic and demographic data and trends pertaining to the subject property's market for leisure demand, it is anticipated that leisure demand will grow at a rate of 1% annually throughout the projection period. Airline Segment Airline demand is generated by flight crews and delayed passengers. The airlines typically contract rooms in nearby lodging facilities for extended periods to ensure the availability of accommodations for their crews. Because they are able to guarantee a specific level of usage on a daily basis, airlines can usually negotiate deeply discounted room rates. This type of demand is advantageous because it provides a base level of occupancy over a long period that normally includes weekends and slow seasons. The occupancy benefit is offset by low contract room rates, which have an adverse impact on average rate. Skilled hotel operators use airline patronage to fill in during periods of low occupancy, and quickly displace this demand when higher-rated market segments offer better potential. The subject property received 25% of its room night demand in 1996 from the airline segment. This demand is derived from a contract with Northwest Airlines for approximately 25 rooms a night, which represents a reduction from the 40 rooms per night utilized by Northwest staff in 1995. However, although the contract is for 25 rooms, this year, the airline has frequently continued to use as many as 55 rooms per night. In addition, HVS International, Mineola, New York Lodging Market Supply and Demand 63 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= during the first half of 1996, the subject property maintained a contract with Aeroflot for an additional 22 rooms per night. This contract was terminated in May of this year. All these airline contracts resulted in the subject property actually accommodating more airline rooms in 1996 than in any previous year. Although these room nights have bolstered occupancy, the hotel's average rate has been adversely affected, as the year-to-date average rate for this segment is $39.00, as compared to the roundly $70.00 average rate achieved in the leisure and meeting and group segment and the $90.00 average achieved in the commercial segment. As previously mentioned, the completion of the recent renovation and reflagging of the hotel as a Holiday Inn are expected to result in an improved competitive position for the hotel, particularly with respect to the commercial segment of the market. As the property realizes growth in this market segment, management is anticipated to decrease reliance on the lower rated airline contract segment. This process has already been initiated with the termination of the Aeroflot contract, and is expected to continue as the Holiday Inn's management limits the number of additional (over 40) room nights accepted from Northwest. At present, only one other hotel among the primary competitors currently accommodates airline contract demand. Moreover, the market is sufficiently strong that we do not anticipate any other hotels will accept this demand in the near future. As a result, the decrease in contract room night demand accommodated by the subject property is expected to result in a decrease in total airline contract demand in the market. In recognition of this anticipated market dynamic, we have projected a decline of 8.0% in 1997 for the airline segment. Subsequently, airline demand is expected to remain stable, and thus, no change is forecasted. Conclusion The purpose of segmenting the lodging market is to define each major type of demand, identify customer characteristics, and estimate future growth trends. Starting with an analysis of the local area, four segments were defined as representing the subject property's lodging market. Various types of economic and demographic data were then evaluated to determine their propensity to reflect changes in hotel demand. Based on this procedure, we forecast the following average annual compounded market segment growth rates. HVS International, Mineola, New York Lodging Market Supply and Demand 64 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-3 Average Annual Compounded Market Segment Growth Rates - -------------------------------------------------------------------------------- Annual Compounded Growth Rates ----------------------------------- 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Commercial 3.0% 3.0% 3.0% 3.0% 2.0% 2.0% Meeting and Group 2.0 2.0 2.0 2.0 1.5 1.5 Leisure 1.0 1.0 1.0 1.0 1.0 1.0 Airline -8.0 0.0 0.0 0.0 0.0 0.0 Annual Average Growth 0.6% 3.3% 3.2% 1.7% 1.3% 1.3% - -------------------------------------------------------------------------------- These growth rates will be used in subsequent sections of this study to forecast changes in lodging demand. COMPETITION An integral component of the supply and demand relationship that has a direct impact on the availability of lodging demand is the current and anticipated supply of competitive lodging facilities. The Beverly Hills lodging market is characterized by many of Los Angeles's most renowned lodging facilities, as well as numerous other first class and full-service hotels. Beverly Hills enjoys a reputation as a world-class leader in the travel and hospitality industry. For group functions, Beverly Hills and the surrounding Westside Los Angeles area is one of the world's largest luxury hotel venues with 6,600 deluxe rooms within a five-mile radius. Moreover, metropolitan Los Angeles is one of the largest hotels market in the world with 91,000 total rooms. When major functions or international events come to Los Angeles, their senior representatives most frequently stay in Beverly Hills, while the larger body of delegates are placed in surrounding properties. The subject property along with its competitive properties are uniquely placed in the Beverly Hills market, as they offer an opportunity for some of the lower rated business to continue to enjoy the benefits of Beverly Hills. We have identified five properties that are considered primarily competitive with the Holiday Inn Select. Including the subject property, these primary competitors total 1,495 rooms. Four additional lodging facilities are judged to be only secondarily competitive; although the facilities, rate structures, or market orientations of these hotels prevent their inclusion among the primarily competitive supply, they do compete with the subject property to some extent. The room count of each secondary competitor has been weighted to reflect the degree to which it competes with the Holiday HVS International, Mineola, New York Lodging Market Supply and Demand 65 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Inn Select; the aggregate weighted room count of the secondary competitors is 322 guestrooms. Primary Competitors The following table summarizes the important operating characteristics of the primary competitors and the aggregate secondary competitors. This information was compiled from personal interviews, inspections, lodging directories, and our in-house library of operating data. The table also sets forth each property's penetration factors; penetration is the ratio between a specific hotel's operating results and the corresponding data for the market. If the penetration factor is greater than 100%, the property is performing better than the market as a whole; conversely, if the penetration is less than 100%, the hotel is performing at a level below the marketwide average. HVS International, Mineola, New York Lodging Market Supply and Demand 66 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-4 Primary Competitors and Aggregate Secondary Competitors - --------------------------------------------------------------------------------
Estimated 1996 Market Segmentation Estimated 1995 ---------------------------------- --------------------------- Year Number Meeting Meeting Meeting Average Property/Location Opened of Rooms Space Space/Room Comm. & Group Leisure Airline Occupancy Rate RevPAR - ------------------------------------------------------------------------------------------------------------------------------------ Subject Property 1150 S. Beverly Drive 1971 260 4,945 19 13 7 55 25 68.1 $58.54 $39.87 Marriott Courtyard * 10320 W. Olympic Blvd 1988 134 400 3 75 5 20 0 75.0 95.00 71.25 Holiday Inn Express ** 10330 W. Olympic Blvd 1987 47 -- -- 70 0 30 0 38.0 83.00 31.54 Doubletree Westwood *** 10740 Wilshire Blvd 1963 295 7,000 24 35 15 15 35 78.0 68.00 53.04 Ramada West Hollywood 8585 Santa Monica Blvd 1989 175 400 2 45 5 50 0 71.0 81.00 57.51 Hyatt on Sunset 8401 Sunset Blvd 1972 262 4,000 15 40 8 52 0 77.0 78.00 60.06 - ------------------------------------------------------------------------------------------------------------------------------------ Sub-Totals and Averages 1,173 2,791 11 39 9 38 15 72.6% $73.82 $53.59 Secondary Competition 322 -- -- 29 20 38 13 70.0% $77.83 $54.48 Totals and Averages 1,495 -- -- 37 11 38 14 71.9% $74.65 $53.71 Estimated 1996 --------------------------------------------------------- Average Occupancy Yield Property/Location Occupancy Rate RevPAR Penetration Penetration - ------------------------------------------------------------------------------------ Subject Property 1150 S. Beverly Drive 77.0 $64.50 $49.67 99.0 80.2 Marriott Courtyard * 10320 W. Olympic Blvd 79.0 101.00 79.79 101.6 128.9 Holiday Inn Express ** 10330 W. Olympic Blvd 64.0 93.00 59.52 82.3 96.1 Doubletree Westwood *** 10740 Wilshire Blvd 83.0 70.00 58.10 106.8 93.8 Ramada West Hollywood 8585 Santa Monica Blvd 79.0 90.00 71.10 101.6 114.8 Hyatt on Sunset 8401 Sunset Blvd 80.0 85.00 68.00 102.9 109.8 - ------------------------------------------------------------------------------------ Sub-Totals and Averages 79.2 $79.45 $62.92 101.9 101.6 Secondary Competition 73.0 $80.40 $58.70 93.9 94.8 Totals and Averages 77.7 $79.65 $61.92 100.0 100.0
* This property originally opened as a Days Inn and converted into the Chesterfield Hotel before converting into the Marriott Courtyard two years ago ** The Holiday Inn Express was the old Century City Inn Hotel, which converted in April, 1996 to a Holiday Inn Express *** The Doubletree Hotel was the old Holiday Inn Westwood, which recently converted in July, 1996 - -------------------------------------------------------------------------------- COMPETITION MAP [GRAPHIC OMITTED] HVS International, Mineola, New York Lodging Market Supply and Demand 67 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Our survey of the primarily competitive hotels in the Beverly Hills market show many of the nationally recognized full service and limited service properties in the neighboring competitive market. These properties range in size from 47 to 295 rooms, and their ages range from 7 to 33 years. The market demand has a commercial orientation; in 1996, this segment contributed 39% of the overall occupancy. The leisure segment comprised 38% of the total, followed by the airline segment at 15%, and the meeting and group segment, at 9%. In 1996, the primary competitors achieved an overall occupancy of 79.2% at an average rate of $79.45, yielding a RevPAR of $62.92. The Doubletree Westwood was the market leader in terms of occupancy, achieving an 83% occupancy in 1996. Like the subject property, the Doubletree relies heavily on airline segment of the market, which explains the relatively low average rate. The Hyatt on Sunset achieved the second-highest occupancy, at 80%, followed by the Courtyard by Marriott and the Ramada West Hollywood, with occupancies of 79% each. The subject property is estimated to achieve an annual occupancy of 77%. The Holiday Inn Express seems to be the weakest product in the market, with an occupancy of only 64%. However, this occupancy level is deceptive, as this property is expected to improve its competitiveness in the following year. The property operated last year as the Century City Inn, and had achieved only 38% in 1995. The subject property is the weakest competitor among both its primary and secondary competitors in terms of average rate and RevPAR. We estimate that it will finish the year at $64.50. In 1996, it is estimated that the Courtyard by Marriott will achieve the highest average rate, at $101.00, followed by the Holiday Inn Express, at $93.00, the Ramada West Hollywood, at $90.00, and the Hyatt on Sunset, at $85.00. As previously mentioned, the subject property's poor rate performance is substantially influenced by the large component of airline contract demand. Additionally, the Holiday Inn is also the weakest competitor in the commercial segment, which is by far the highest rated segment in the market. Due to the subject property's poor occupancy and average rate performances, it registered the lowest RevPAR in the entire competitive set. In 1996, its RevPAR was $49.67, compared to the primary competitors, which achieved $62.92; these figures reflect an overall yield penetration of 80.2%. Each primary competitor was inspected and evaluated. Descriptions of our findings are presented below. HVS International, Mineola, New York Lodging Market Supply and Demand 68 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Courtyard by Marriott The Courtyard by Marriott is located approximately two miles northwest of the subject property, on Olympic Boulevard. This 134-room property opened in 1988 as a Days Inn, and converted to the Chesterfield Inn a year later. In 1994, this property became the Courtyard by Marriott. Management reports that this latter change resulted in a significant increase in both occupancy and average rate. Amenities at the property include a small meeting room and a lounge. The hotel is one of the few hotels which provide free parking in the Beverly Hills lodging market. In 1995, this property room count had been 135. In 1996, one room was converted into an office, and the room count was lowered to 134. The Courtyard by Marriott competes with the subject property due to its proximate location, primarily in the leisure and commercial segments of the market. Because of this property's position in the Century City business district, this property more convenient to many of the corporations in the surrounding area. It is therefore able to generate significantly higher commercial business as well as receive higher average rates on corporate accounts. In 1996, this property achieved an occupancy of 79%, at an average rate of $101.00. In 1996, management reported that this property spent approximately $750,000 on renovations, which included replacement of all guestroom carpeting and soft goods. Some upgrades were also carried out in terms of hard goods. In terms of guestroom and public appearance, this property is comparable to the subject property. Holiday Inn Express The Holiday Inn Express is located adjacent to the Courtyard by Marriott. This 47-room property opened in 1987, and until recently, was known as the Century City Hotel. The property does not offer any meeting facilities, although it does provide free parking and free continental breakfast in the morning. Like the Courtyard by Marriott, this property competes with the subject property due to its location, and in the leisure and commercial segments. The close proximity to many of the corporations in the surrounding area allows this property to achieve a fair amount of commercial business as well as to receive higher average rates. In 1996, the year in which the conversion to a Holiday Inn affiliation occurred, this property achieved an occupancy of 64% at an average rate of $93.00. Its occupancy next year is expected to improve, as the hotel becomes increasingly competitive in the market. HVS International, Mineola, New York Lodging Market Supply and Demand 69 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= In 1996, the new ownership reported that this property spent approximately $400,000 on renovations, which included the renovation of all guestroom hard and soft goods. In terms of guestroom appearance, this property is comparable to the subject property. Doubletree Westwood The Doubletree Westwood is located approximately three miles northwest of the subject property on Wiltshire Boulevard. This 295-room property opened in 1963, and until July of this year, operated as the Holiday Inn Westwood. The Doubletree is a full-service property with approximately 7,000 square feet of meeting space, a restaurant, an exercise room, and other amenities typically found at a full service hotel. Like the subject property, the Doubletree receives a fair amount of its business from the airline segment. It competes with the subject property in the other segments of the market. Because of this property's location in the Westwood business district, the Doubletree is relatively close to many of the corporations in the surrounding area, and is therefore able to capture a significantly higher amount of commercial business, and to receive higher average rates from that segment. However, its high dependence on airline rooms brings its overall average rate down. In 1996, this property achieved an occupancy of 83%, at an average rate of $70.00. Management at this property was unable to inform us about any recent or planned renovations for the Doubletree. In terms of guestroom and public appearance this property is comparable to the subject property. Ramada West Hollywood The Ramada West Hollywood is located approximately four miles northeast of the subject property on Santa Monica Boulevard. This 175-room property opened in 1989. The property has a leased out Pizzeria Uno restaurant, a small meeting room, and an indoor swimming pool. The Ramada West Hollywood competes with the subject property primarily for leisure business. Its close proximity to the various entertainment attractions in Hollywood, make this property a highly desirable leisure destination hotel. However, the Ramada also derives a fair amount of commercial business through the entertainment industry, which help it push its average rates up. In 1996, this property achieved an occupancy of 79% at an average rate of $90.00. In 1996, management reported that this property spent approximately $750,000 on renovations, including replacement of all guestroom carpeting HVS International, Mineola, New York Lodging Market Supply and Demand 70 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= and soft goods. Some upgrades were also carried out in terms of hard goods. Later this year, the property is expected to undergo renovations in its lobby area, which at present looks outdated. In terms of guestroom appearance, this property is comparable to the subject property. Hyatt on Sunset The Hyatt by Sunset is located approximately four miles northeast of the subject property, on Olympic Boulevard. This 262-room property opened in 1962. Amenities at the property include 4,000 square feet of meeting space, a full-service restaurant, a sports bar, a business center and an indoor swimming pool. The Hyatt by Sunset has a market orientation very similar to that of the Ramada West Hollywood, due to its location and proximity to the Hollywood area, which make this property a highly desirable leisure destination hotel. However, this property also derives a fair amount of commercial business through the entertainment industry, which helps it to push its average rates up. In 1996, this property achieved an occupancy of 80%, at an average rate of $85.00. Management at this property was unable to provide information concerning any recent or proposed renovations at the Hyatt. In terms of guestroom and public appearance this property is comparable to the subject property. Secondary Competitors The secondary competitive set is comprised of four lodging properties, which contain a combined total of 930 rooms. However, we have weighted each property separately, based on each hotels' degree of competitiveness with the hotels in the primary set. We estimate that the Holiday Inn Hollywood and the Holiday Inn Brentwood are most competitive at 40% each. These hotels are located further away from the subject property's immediate lodging market. However, due to their similar franchise affiliations, they do tend to compete with the subject property for some leisure and commercial business. The Hotel Beverly Prescott is geographically the closest hotel to the subject property. Due to its upscale, luxury orientation and higher average rates, we consider this property to be only 20% competitive with the subject property. The Radisson Beverly Pavilion is the final property included in the secondary set due to its close proximity to the subject property. Like the Beverly Prescott, the upscale orientation of this hotel, and the resultant higher average rate, limits the degree to which the Radisson competes with the subject property. As a result, this property was HVS International, Mineola, New York Lodging Market Supply and Demand 71 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= considered to be only 20% competitive. The combined weighted room count of these properties was 322 guestrooms. In 1996, the secondary competitors are estimated to achieve a combined occupancy of 73% at an average rate of $80.40. The following table summarizes the important operating characteristics of the subject property's secondary competitors. This information was compiled from personal interviews, inspections, lodging directories, and our in-house library of operating data. HVS International, Mineola, New York Lodging Market Supply and Demand 72 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-5 Secondary Competitors - --------------------------------------------------------------------------------
Estimated 1996 Market Segmentation --------------------------------------- Number Percentage Competitive Mtg. & Property of Rooms Competitive Rooms Comm. Group Leisure Airline - ---------------------------------------------------------------------------------------------------------- Holiday Inn Hollywood 470 40% 188 10% 20% 50% 20% Holiday Inn Brentwood 211 40 84 60 20 20 0 Hotel Beverly Prescott 139 20 28 60 30 10 0 Radisson Beverly Pavilion 110 20 22 70 10 20 0 ----------------------------------------------------------------------------- Totals and Averages 930 322 29% 20% 38% 13% Estimated 1995 Estimated 1996 ---------------------------------- ---------------------------------- Average Average Property Occupancy Rate RevPAR Occupancy Rate RevPAR - ------------------------------------------------------------------------------------------------------- Holiday Inn Hollywood 74% $67.00 $49.58 79% $70.00 $55.30 Holiday Inn Brentwood 55 71.00 39.05 50 71.00 35.50 Hotel Beverly Prescott 77 130.00 100.10 87 127.00 110.49 Radisson Beverly Pavilion 78 119.00 92.82 85 124.00 105.40 -------------------------------------------------------------------------- Totals and Averages 70% $77.83 $54.48 73% $80.40 $58.70
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Lodging Market Supply and Demand 73 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Proposed Competitors It is important to consider any new or proposed hotels that might have an impact on the market area as a whole and the subject property in particular. Based on our fieldwork and our discussions with local hotel operators, developers, and government officials, we have concluded that no properties are proposed or under development in the Beverly Hills area. Given the strong lodging market in the immediate vicinity of Beverly Hills area, and the high 77.7% occupancy anticipated for the entire market for year-end 1996, we believe that there is a strong likelihood of another property or additional rooms entering the Beverly Hills market in the foreseeable future. In addition, there are appropriately zoned sites where hotel development is considered possible, in the subject property's market area. Therefore, after taking all these factors into consideration, we have assumed that an additional 220-room property will open in the market in July of 1998. We expect that this proposed hotel will be 100% competitive with the subject property. Conclusion A review of historical demand trends in the subject property's area indicates that the market has shown signs of recovery from 1994 onwards, corresponding to the economic recovery in the southern California area, which lagged behind that of the nation as a whole. According to Smith Travel Research, strong growth has continued through August of 1996. While supply has remained constant over recent years, growth in demand has driven occupancy upwards, and hotels in the market are now pursuing average rate increases. Based on our review of the local area, three market segments were defined within the subject property's lodging market. Growth rates for each market segment were forecasted based upon an analysis of the economic and demographic trends that appeared to significantly impact lodging demand. In general, demand is anticipated to increase at moderate rates throughout the projection period. The exception is the airline segment, which is forecast to decrease in 1997 as the subject property reduces its dependence on this segment of the market. We have identified five properties that are considered competitive with the subject hotel. The subject property is underperforming in the market and is not attaining its fair share in terms of occupancy, average rate, and RevPAR. Since 1994, the subject property had put in $3.2 million dollars to upgrade its product and services. These upgrades, along with a stronger market, have been extremely positive for the subject property. However, its current HVS International, Mineola, New York Lodging Market Supply and Demand 74 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= market orientation is focused more towards the lower-rated airline and leisure segments. Therefore, the subject property has the lowest average rate in its entire competitive set. Now that its facilities are comparable or superior to those of its competitors, we expect management to pursue average rates increases through both increased prices and changes in market segmentation toward greater emphasis on the higher-rated, more profitable segments of the market. HVS International, Mineola, New York Projection of Occupancy and 75 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 7. Projection of Occupancy and Average Rate Historical Operating Performance The following table sets forth the subject property's historical occupancy, average rate, and rooms revenue per available room (RevPAR). For the purpose of comparison, we have also presented corresponding data (as provided by Smith Travel Research) for the competitive hotels described in the previous section. In addition to the annual percent change calculations, we have determined the subject property's occupancy, average rate, and RevPAR penetration factors. HVS International, Mineola, New York Projection of Occupancy and 76 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-1 Historical Trends - -------------------------------------------------------------------------------- Year-to-Date Through August --------------------------- 1995 1996 1996 - -------------------------------------------------------------------------------- Subject Property Occupancy 68.1% 66.2% 80.4% Percent Change -- -- 21.5% Occupancy Penetration 97.6% 94.3% 105.4% Average Rate $58.54 $59.06 $63.17 Percent Change -- -- 7.0% Average Rate Penetration 73.5% 73.5% 73.9% RevPAR $39.88 $39.08 $50.80 Percent Change -- -- 30.0% RevPAR Penetration 71.7% 69.3% 77.9% Areawide (STR) Occupancy 69.8% 70.2% 76.3% Percent Change 7.7% -- 8.7% Average Rate $79.68 $80.30 $85.50 Percent Change 0.4% -- 6.5% RevPAR $55.62 $56.37 $65.24 Percent Change 8.1% -- 15.7% - -------------------------------------------------------------------------------- Occupancies and average rates for the subject property were not made available to us before 1995. The previous table indicates, that in 1995, the Holiday Inn Express underperformed the market as a whole, both in terms of occupancy and average rates. Year-to-date 1996 reflects a higher occupancy at the subject property, as compared to the areawide occupancy for the same period. The subject property's occupancy penetration is at 105.4% in year-to-date 1996, as compared to 94.3% in the previous year over the same period. In terms of average rates, the subject property has remained stable between 1995 and 1996. Our market research and review of the comparable hotels have indicated that from a physical and locational standpoint, the newly renovated subject property should be able too achieve its fair share of the market. We believe HVS International, Mineola, New York Projection of Occupancy and 77 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= that the prior performance of the hotel resulted primarily from poor management, deferred maintenance, and a weak marketing effort. A hotel's occupancy should also be evaluated on a monthly basis to identify seasonality trends. The following table sets forth the subject property's monthly occupancy from 1995 through 1996. ================================================================================ Table 7-2 Subject Property's Monthly Occupancy History - -------------------------------------------------------------------------------- 1995 1996 ---- ---- Occupancy % Change Occupancy % Change --------------------------------------------- January 67.7% 0.0% 77.7% 14.8% February 58.4 0.0 69.7 19.4 March 61.5 0.0 79.1 28.6 April 56.9 0.0 82.5 44.9 May 57.4 0.0 81.6 42.2 June 61.6 0.0 81.1 31.7 July 76.2 0.0 83.2 9.2 August 88.5 0.0 87.5 (1.1) September 78.3 0.0 76.9 (1.7) October 66.9 0.0 76.1 13.7 November 72.3 0.0 73.7* 2.0 December 70.8 0.0 59.6* (15.9) ------ ----- ------ ------ Full Year 68.1% 0.0% 77.4% 13.7% * Projected 1996 - -------------------------------------------------------------------------------- As illustrated by the previous table, the subject property exhibits a certain degree of seasonality. Occupancies have usually peaked around August and the summer months. According to management, the subject property's occupancy was significantly higher in 1996, primarily due to the additional airline rooms which the subject property picked up in year-end 1995 through the middle of 1996. The subject property highest occupancy was in August, with an occupancy of 87.5%. December was the slowest period, with an occupancy of 59.6%. Premise of the Projections To a certain degree, occupancy and rate attainment can be manipulated by management. For example, hotel operators may choose to lower rates in an effort to maximize occupancy. Our forecasts reflect an operating strategy that we believe would be implemented by competent hotel management to achieve an optimal mix of occupancy and average rate. HVS International, Mineola, New York Projection of Occupancy and 78 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Projected Room Night Demand Lodging demand and occupancy can be projected through a process known as room night analysis. A room night is a unit of hotel demand that equals one room that is occupied for one night. After estimating the number of room nights a hotel can be expected to attract during a 12-month period, we can determine occupancy by dividing the number of room nights of demand captured by the number of room nights available (calculated as the room count x 365). The total annual number of room nights occupied in the competitive hotels equates to the market's accommodated room night demand, as shown in the following table. ================================================================================ Table 7-3 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- 1996 Annual Room Night Demand (Rounded) ---------------------------------------------------------- Percentage Percentage Market Segment Marketwide of Total Subject Property of Total - -------------------------------------------------------------------------------- Commercial 155,000 37% 9,000 13% Meeting and Group 46,000 11 5,000 7 Leisure 162,000 38 40,000 55 Airline 60,000 15 18,000 25 ------- --- ------ --- Totals 424,000 100% 72,000 100% - -------------------------------------------------------------------------------- Latent Demand The previous table illustrates the accommodated room night demand in the subject property's competitive market. Because this estimate is based on occupancies, it includes only those hotel rooms that were used by guests. Latent demand considers guests who could not be accommodated by the existing competitive supply, and can be divided into unaccommodated demand and induced demand. We were unable to find any unaccommodated demand. However, we believe that the subject property's market area should be able to induce some demand into the area. Induced Demand Induced demand represents the additional room nights that are expected to be attracted to the market following the introduction of a new demand generator. Situations that can induce demand include the opening of a new manufacturing plant, the expansion of a convention center, or the addition of a new hotel with a distinct chain affiliation or unique facilities. HVS International, Mineola, New York Projection of Occupancy and 79 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Induced demand in the subject property's market area is expected to come into the market, with the opening of the new 220-room proposed property. We have projected this property will open in July of 1998. Therefore, we have forecasted induced demand to be phased in at 50% in the first year, and at 100% thereafter. Most of these additional room nights are projected to come through the commercial segment. We have projected that approximately 4,250 additional room nights would be generated in 1998 in the commercial segment. Another 1,500 room nights are expected to be generated in the leisure segment, and 750 in the meeting and group segment. ================================================================================ Table 7-4 Induced Demand Calculation - -------------------------------------------------------------------------------- 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Phase-in: 0% 50% 100% 100% 100% 100% Commercial 0 4,250 8,500 8,500 8,500 8,500 Meeting and Group 0 750 1,500 1,500 1,500 1,500 Leisure 0 1,500 3,000 3,000 3,000 3,000 Airline 0 0 0 0 0 0 ------ ------ ------ ------ ------ ------ Totals 0 6,500 13,000 13,000 13,000 13,000 - -------------------------------------------------------------------------------- Total Usable Room Night Demand Total usable room night demand is estimated by combining accommodated demand and usable latent demand. Usable latent demand is that portion of latent demand that can be absorbed based on the number of existing and proposed hotel rooms in the market. The following table shows the projected annual change in accommodated and usable room night demand in the subject property's competitive market. HVS International, Mineola, New York Projection of Occupancy and 80 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-5 Total Usable Room Night Demand - --------------------------------------------------------------------------------
Historical 1997 1998 1999 2000 2001 2002 2003 - ------------------------------------------------------------------------------------------------------------------------ Commercial Growth Rate -- 3.0% 3.0% 3.0% 3.0% 2.0% 2.0% 2.0% Accommodated Demand 155,503 160,168 164,973 169,922 175,020 178,520 182,090 185,732 Usable Latent -- 0 4,250 8,500 8,500 8,500 8,500 8,500 Meeting and Group Growth Rate -- 2.0% 2.0% 2.0% 2.0% 15.% 1.5% 1.5% Accommodated Demand 46,352 47,279 48,225 49,190 50,174 50,927 51,691 52,466 Usable Latent -- 0 750 1,500 1,500 1,500 1,500 1,500 Leisure Growth Rate -- 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% Accommodated Demand 162,068 163,689 165,326 166,979 168,649 170,335 172,038 173,758 Usable Latent -- 0 1,500 3,000 3,000 3,000 3,000 3,000 Airline Growth Rate -- -8.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Accommodated Demand 60,377 55,547 55,547 55,547 55,547 55,547 55,547 55,547 Usable Latent -- 0 0 0 0 0 0 0 Totals Commercial 155,503 160,168 169,223 178,422 183,520 187,020 190,590 194,232 Meeting and Group 46,352 47,279 48,975 50,690 51,674 52,427 53,191 53,966 Leisure 162,068 163,689 166,826 169,979 171,649 173,335 175,038 176,758 Airline 60,377 55,547 55,547 55,547 55,547 55,547 55,547 55,547 ------- ------- ------- ------- ------- ------- ------- ------- TOTAL DEMAND 424,300 426,683 440,571 454,638 462,390 468,329 474,366 480,503 Annual Forecasted Growth -- 0.6% 3.3% 3.2% 1.7% 1.3% 1.3% 1.3%
- -------------------------------------------------------------------------------- Guestroom Supply In 1996, the competitive properties provided a weighted total of 1,495 guestrooms. This number is expected to increase by 111 rooms in 1998 to 1,606 guestrooms, to reflect the opening of the 220-room proposed property. In 1999, the count is expected to rise further, to 1,715 guestrooms, reflecting the first full-year opening of the proposed property. The following table shows the projected competitive supply of available rooms and available room nights. To calculate the annual number of available room nights, the number of available rooms is multiplied by 365. HVS International, Mineola, New York Projection of Occupancy and 81 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-6 Available Rooms and Room Nights - -------------------------------------------------------------------------------- Total Room Overall Night Room Nights Competitive Year Demand Available Occupancy ---------------------------------------------------------------- Historical 424,300 545,748 78% 1997 426,683 545,748 78 1998 440,571 586,263 75 1999 454,638 626,048 73 2000 462,390 626,048 74 2001 468,329 626,048 75 2002 474,366 626,048 76 2003 480,503 626,048 77 - -------------------------------------------------------------------------------- Overall Competitive Occupancy As illustrated in the above table, the overall competitive occupancy was roundly 78% in 1996. With new supply coming into the market in 1998, we expect overall occupancies to decline in 1998 and 1999. After which we expect the marketwide occupancies to continue to grow over the next several years. Competitive Index Analysis Competitive indexes are used to analyze the relative market position of each property on the basis of a particular demand segment. The index represents the number of times each year that one room is occupied by one type of traveler (e.g., commercial, meeting and group, leisure, or airline), or the number of room nights actually accommodated per year, per room, per market segment. For example, if a hotel has a commercial competitive index of 190, each room in the property is occupied 190 times a year by a commercial traveler. The competitive index is calculated by dividing a hotel's annual accommodated room night demand in a particular market segment by that property's room count. Competitive indexes will be used to illustrate each property's position in the market based on its ability to compete with other local lodging facilities. Commercial Segment The historical commercial segment competitive indexes in the subject property's market ranged from 37 to 216. The Courtyard by Marriott was the most competitive property in the commercial market in 1996, with an index of 216. The Holiday Inn Express, the Ramada West Hollywood, the Hyatt on Sunset, and the Doubletree Westwood followed with 164, 130, 117, and HVS International, Mineola, New York Projection of Occupancy and 82 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 106, respectively. The secondary competitors has a competitive index of 77 and the subject property came in last with 37. With the renovations completed at the subject property, we expect this property to dramatically improve its competitiveness in the next few years. We have projected its competitiveness to increase to 75 and 100 in 1997 and 1998, respectively. Similarly, the Holiday Inn Express, which recently acquired this affiliation, is expected to improve its competitive index to 175 and 185 in 1997 and 1998, respectively. The Ramada West is expected to increase from 130 to 132 in 1997. The only other change in the market is the opening of the new property in 1998. We expect the commercial index of this new property to be 165 in 1998, which is expected to further increase to 170 and 180 in 1999 and 2000, respectively. The following table shows the projected commercial segment competitive indexes of the area's hotels. ================================================================================ Table 7-7 Commercial Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Subject Property 37 75 100 100 100 100 100 Marriott Courtyard 216 216 216 216 216 216 216 Holiday Inn Express 164 175 185 185 185 185 185 Doubletree Westwood 106 115 125 125 125 125 125 Ramada West Hollywood 130 132 132 132 132 132 132 Hyatt on Sunset 117 117 117 117 117 117 117 Secondary 77 77 77 77 77 77 77 Proposed New Property 0 0 165 170 180 180 180 - -------------------------------------------------------------------------------- Meeting and Group Segment The historical meeting and group segment competitive indexes in the subject property's market ranged from 0 to 54. The secondary competitors were_ the most competitive property in the meeting and group market in 1996, with an index of 54. The Doubletree Westwood, the Hyatt on Sunset, and the subject property followed with 45, 23, and 20, respectively. The Courtyard by Marriott and the Ramada West Hollywood both followed with 14. The Holiday Inn Express has no meeting space. The only other change in the market is the opening of the new property in 1998. We expect the meeting and group index of this new property to be 20 in 1998, and to further increase to 25 by 1999. The following table shows the projected commercial segment competitive indexes of the area's hotels. HVS International, Mineola, New York Projection of Occupancy and 83 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-8 Meeting and Group Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Subject Property 20 20 20 20 20 20 20 Marriott Courtyard 14 14 14 14 14 14 14 Holiday Inn Express 0 0 0 0 0 0 0 Doubletree Westwood 45 45 45 45 45 45 45 Ramada West Hollywood 14 14 14 14 14 14 14 Hyatt on Sunset 23 23 23 23 23 23 23 Secondary 54 54 54 54 54 54 54 Proposed New Property 0 0 20 25 25 25 25 - -------------------------------------------------------------------------------- Leisure Segment The historical leisure segment competitive indexes in the subject property's market ranged from 45 to 155. The subject property was the most competitive property in the leisure market in 1996, with an index of 155. The Hyatt on Sunset, the Ramada West Hollywood, the secondary competitors, the Holiday Inn Express, the Courtyard by Marriott, and the Doubletree Westwood followed, with 152, 144, 101, 70, 58 and 45, respectively. With the renovations completed at the subject property, we expect this property to dramatically improve its competitiveness in the other segment, and try and reduce its dependence on this segment. Therefore, we have projected a decline in its competitiveness to decrease to 125 and 100 in 1997 and 1998, respectively. The only other change in the market is the opening of the new property in 1998. We expect the commercial index of this new property to be 165 in 1998, and to further increase to 170 and 180 in 1999 and 2000, respectively. The following table shows the projected commercial segment competitive indexes of the area's hotels. HVS International, Mineola, New York Projection of Occupancy and 84 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-9 Leisure Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Subject Property 155 125 100 100 100 100 100 Marriott Courtyard 58 58 58 58 58 58 58 Holiday Inn Express 70 80 90 90 90 90 90 Doubletree Westwood 45 45 45 45 45 45 45 Ramada West Hollywood 144 144 144 144 144 144 144 Hyatt on Sunset 152 152 152 152 152 152 152 Secondary 101 101 101 101 101 101 101 Proposed New Property 0 0 65 75 80 80 80 - -------------------------------------------------------------------------------- Airline Segment As a hotel's occupancy improves, its reliance on airline demand generally diminishes. Because this segment commands deeply discounted rates, operators prefer to accommodate more lucrative types of demand whenever possible. Only three hotels have historically had any airline business. The historical airline segment competitive indexes in the subject property's market ranged from 34 to 106. The Doubletree Westwood was the most competitive property in the airline market in 1996, with an index of 106. The subject property and the secondary competitors followed with 70 and 34, respectively. The subject property and the Doubletree are both expected to reduce their dependence on this segment for room nights. We have projected that the competitive index for the subject property would decline to 60 in 1997, and in the case of the Doubletree Westwood it will decline to 100 in 1997 and to 95 in 1998. The secondary competitors competitiveness is expected to go up slightly to 40 in 1997 and to 50 in 1998. HVS International, Mineola, New York Projection of Occupancy and 85 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-10 Airline Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Subject Property 70 60 60 60 60 60 60 Marriott Courtyard 0 0 0 0 0 0 0 Holiday Inn Express 0 0 0 0 0 0 0 Doubletree Westwood 106 100 95 95 95 95 95 Ramada West Hollywood 0 0 0 0 0 0 0 Hyatt on Sunset 0 0 0 0 0 0 0 Secondary 34 40 50 50 50 50 50 Proposed New Property 0 0 0 0 0 0 0 - -------------------------------------------------------------------------------- Subject Property's Room Night Capture and Occupancy After the competitive index is calculated, it is adjusted to reflect the property's room count, yielding a figure referred to as the market share adjuster. The market share adjuster of each property is then divided by the total market share adjuster for all of the competitors, resulting in each hotel's market share. By multiplying the projected market share by the area's usable room night demand, we can determine the total number of room nights captured by a specific hotel. Occupancy is then calculated by dividing the projected number of room nights captured by the property's total number of available room nights. Multiplying the subject property's projected market share by the estimated room night demand in each segment results in the following estimate of room nights captured by the hotel. HVS International, Mineola, New York Projection of Occupancy and 86 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-11 Room Nights Captured by the Subject Property - -------------------------------------------------------------------------------- 1997 1998 1999 2000 2001 2002 --------------------------------------------------------- Commercial Demand 160,168 169,223 178,422 183,520 187,020 190,590 Market Share 0.1153 0.1317 0.1201 0.1189 0.1189 0.1189 Capture 18,464 22,290 21,429 21,820 22,236 22,661 Meeting and Group Demand 47,279 48,975 50,690 51,674 52,427 53,191 Market Share 0.1125 0.1073 0.1005 0.1005 0.1005 0.1005 Capture 5,318 5,257 5,096 5,195 5,270 5,347 Leisure Demand 163,689 166,826 169,979 171,649 173,335 175,038 Market Share 0.2098 0.1666 0.1572 0.1562 0.1562 0.1562 Capture 34,350 27,794 26,729 26,813 27,077 27,343 Airline Demand 55,547 55,547 55,547 55,547 55,547 55,547 Market Share 0.2690 0.2612 0.2612 0.2612 0.2612 0.2612 Capture 14,943 14,506 14,506 14,506 14,506 14,506 ------- ------- ------- ------- ------- ------- Total Capture 73,075 69,846 67,760 68,334 69,089 69,856 - -------------------------------------------------------------------------------- Dividing the total number of room nights captured by the subject property's number of available room nights per year (calculated as 260 x 365) produces the projected occupancy percentage. ================================================================================ Table 7-12 Calculation of the Subject Property's Projected Occupancy - -------------------------------------------------------------------------------- 1997 1998 1999 2000 2001 2002 --------------------------------------------------------- Total Room Nights Captured/Year 73,075 69,847 67,760 68,334 69,089 69,857 Available Room Nights 94,900 94,900 94,900 94,900 94,900 94,900 Occupancy 77.00% 73.60% 71.40% 72.01% 72.80% 73.61% Rounded 77% 74% 71% 72% 73% 74% - -------------------------------------------------------------------------------- For the purpose of forecasting income and expense, we will use the following occupancy levels. HVS International, Mineola, New York Projection of Occupancy and 87 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-13 Occupancy Forecast - -------------------------------------------------------------------------------- Year Occupancy ------------------------- 1997 77% 1998 73 Stabilized 73 - -------------------------------------------------------------------------------- Although the preceding room night analysis shows the subject property achieving a 74% occupancy in 2002, we have chosen to use a stabilized level of 73%. The occupancy's for the subject property between 1998 and 2002 fluctuate between 71% and 74%. We have chosen to take the average during this five-year period, and reflect it as the subject property's stabilized occupancy. The stabilized occupancy is intended to reflect the anticipated results of the property over its remaining economic life, given any and all changes in the life cycle of the hotel. Thus, the stabilized occupancy excludes from consideration any abnormal relationship between supply and demand, as well as any non-recurring conditions that may result in unusually high or low occupancies. Although the subject property may operate at occupancies above this stabilized level, we believe that it is equally possible for new competition and temporary economic downturns to force the occupancy below this selected point of stability. AVERAGE RATE ANALYSIS One of the most important considerations in estimating the value of a lodging facility is a supportable forecast of its attainable average rate, which is more formally defined as the average rate per occupied room. Average rate can be calculated by dividing the total rooms revenue achieved during a specified period by the number of rooms sold during the same period. The projected average rate and the anticipated occupancy percentage are used to forecast rooms revenue, which, in turn, provides the basis for estimating most other income and expense categories. HVS International, Mineola, New York Projection of Occupancy and 88 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Average Rate by Month The following table shows the subject property's monthly occupancy and average rate from 1995 through 1996. ================================================================================ Table 7-14 Subject Property's Occupancy and Average Rate by Month - --------------------------------------------------------------------------------
1995 1996 ----------------------------------------------------------------------------------- Average Average Occupancy % Chg Rate % Chg Occupancy % Chg Rate % Chg --------------------------------------- ----------------------------------------- January 67.7% -- $58.96 -- 77.7% 14.8% $58.60 (0.6%) February 58.4 -- 59.43 -- 69.7 19.4 64.92 9.2 March 61.5 -- 61.34 -- 79.1 28.6 61.43 0.1 April 56.9 -- 57.08 -- 82.5 44.9 60.88 6.7 May 57.4 -- 61.18 -- 81.6 42.2 59.66 (2.5) June 61.6 -- 56.32 -- 81.1 31.7 64.80 15.1 July 76.2 -- 56.99 -- 83.2 9.2 65.74 15.4 August 88.5 -- 60.82 -- 87.5 (1.1) 69.01 13.5 September 78.3 -- 59.89 -- 76.9 (1.7) 65.34 9.1 October 66.9 -- 61.28 -- 76.1 13.7 68.00 11.0 November 72.3 -- 54.51 -- 73.7 2.0 69.13 26.8 December 70.8 -- 54.68 -- 59.6 (15.9) 67.06 22.6 ---- ----- ---- ----- ----- ---- Weighted Average 68.1% $58.54 77.4% 13.7% 64.47 10.1%
* Projected - -------------------------------------------------------------------------------- The previous table underscores the correlation between a hotel's occupancy and its average rate: as occupancy increases, rates tend to follow. On a monthly basis, the Holiday Inn Select achieves its highest average rate during August. Market Segmentation Method The subject property's average rate will be projected using the market segmentation method. The advantage of this method is its ability to reflect anticipated changes in the subject property's market mix and their impact on average rate. This technique begins with an analysis of the room rates commanded by local hotels in each market segment. Using this information, we can forecast the subject property's rate on a segment-by-segment basis. The projected rate in each segment is then multiplied by the number of room nights the hotel is expected to capture in that segment (as determined earlier in this analysis). These amounts are totaled, yielding the HVS International, Mineola, New York Projection of Occupancy and 89 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= overall rooms revenue. Average rate is then calculated by dividing the property's total rooms revenue by the estimated number of occupied rooms. Although the average rate analysis presented here follows the occupancy projections, these two statistics are highly correlated; in reality, one can not project occupancy without making specific assumptions regarding average rate. This relationship is best illustrated by RevPAR, which reflects a property's ability to maximize rooms revenue. The following table summarizes the 1996 average rate and RevPAR of the subject property and its competitors. ================================================================================ Table 7-15 1996 Average Rate and RevPAR of the Primary Competitors - -------------------------------------------------------------------------------- 1996 1996 Average Rooms Revenue Property Room Rate Per Available Room - -------------------------------------------------------------------------------- Subject Property $ 64.50 $49.67 Marriott Courtyard 101.00 79.79 Holiday Inn Express 93.00 59.52 Doubletree Westwood 70.00 58.10 Ramada West Hollywood 90.00 71.10 Hyatt on Sunset 85.00 68.00 ------- ------- Averages $ 79.45 $62.92 - -------------------------------------------------------------------------------- The above table demonstrates that the subject property is the weakest property in terms of RevPAR among its competitive set, realizing $49.67 in 1996. The Courtyard by Marriott was the market leader at $79.79, a result of its leading position in the market in terms of average rates. The Ramada West Hollywood, Hyatt on Sunset, Holiday Inn Express and the Doubletree Westwood trailed, with RevPAR levels of $71.10, $68.00, $59.52 and $58.10, respectively. HVS International, Mineola, New York Projection of Occupancy and 90 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Average Rate Increases It is important to note that hotel room rate increases do not necessarily conform to the underlying monetary inflation rate, because lodging facilities are influenced by market conditions such as the relationship between supply and demand. A hotel's ability to raise room rates is affected by a number of factors, including the following. o Supply and Demand Relationships - The relationship between supply and demand is one of the factors that determine hotel occupancies and average rates. Strong markets where lodging demand is increasing faster than supply are often characterized by rate growth that exceeds inflation. Markets that are overbuilt or suffering from declining demand are unlikely to exhibit any significant increases in average rates. o Inflationary Pressures - Price increases caused by inflation affect hotel room rates by eroding profit margins and encouraging operators to raise prices. This strategy is effective only in markets that are characterized by a healthy supply and demand relationship. o Improving the Competitive Standard - When a new lodging facility enters a mature market, its rates may be set higher than the marketwide average in an effort to justify the development costs. This temporary condition may allow other competitors to achieve corresponding gains by effectively raising the amount the market will bear. However, if the addition to supply has a severe impact on the occupancy levels of other hotels, price competition may ensue. o Property-Specific Improvements - Changes that make a hotel more or less attractive to guests can have an impact on average rate. An expansion, renovation, upgrading, or the introduction of additional facilities and amenities may enable greater-than-inflationary room rate increases. Likewise, deferred maintenance may make a property less competitive, engendering a decline in room rates. In determining average rate projections, changes that occur prior to occupancy stabilization are generally attributable to factors that are specific to the property and the market. After a hotel achieves a stabilized occupancy, room rates are generally expected to continue to increase at the underlying inflation rate throughout the remainder of the projection period. HVS International, Mineola, New York Projection of Occupancy and 91 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Average Rates by Market Segment Average rate can be projected by considering anticipated changes in the subject property's demand mix and the rates that can be commanded in each market segment. The Holiday Inn Select's historical average rates are set forth in the following table. To project average rate, we have applied growth factors to the hotel's 1996 rates in each market segment. The following table outlines these growth factors. ================================================================================ Table 7-16 1996 Average Rate by Market Segment and Assumed Growth Factors - -------------------------------------------------------------------------------- Projected Growth Rates -------------------------------------- 1996 Market Segment Average Rate 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Commercial $90.00 4.0% 3.5% 3.5% 3.5% 3.5% Meeting and Group 70.00 3.5% 3.5% 3.5% 3.5% 3.5% Leisure 70.00 4.0% 3.5% 3.5% 3.5% 3.5% Airline 39.00 0.0% 2.0% 3.0% 3.5% 3.5% - -------------------------------------------------------------------------------- As stated previously, the subject property's historical average rate has been much lower than that achieved by its primary competitors. Calendar year 1996 witnessed the highest occupancy level for the area in recent years, and the subject property is making strong gains in 1996 according to year-to-date statistics. It is our opinion that Holiday Inn -Select will soon reach a saturation point in terms of occupancy. However, given its low average rate as compared to most of the competitors, the subject property is in a position to aggressively push room rates. The Holiday Inn affiliation, along with the recently completed rooms renovation, should go a long way towards achieving average rate growth. We expect strong gains to be made in 1997 and into the next, after which we project a slowing of average rate growth as the hotel narrows the gap between it and its primary competitors. Following 2000, the stabilized year, we expect average rate to increase at inflationary levels. We project average rate in the commercial segment to increase by 4.0% in 1997 to reflect strong increases in corporate and rack room rates; this growth is forecast to slow to 3.5% in 1998, stabilizing to the underlying monetary inflation rate of 3.5% each year thereafter. Average rate in the meeting and group segment is projected to increase by 3.5% in 1997, and to remain at the same throughout the projection period. Average rate in the leisure sector is projected to increase by 4% in 1997. This growth is the HVS International, Mineola, New York Projection of Occupancy and 92 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= anticipated result of substantial rate increases in the regular pleasure and package rooms segments within the leisure segment. Rate projections for 1998 and thereafter are expected to increase at the annual inflation rate of 3.5%. The airline segment is not expected to see any growth in average rates, as contracts have already been signed into the next year. However, we have projected 2.0% growth rate in 1998 and 3.0% in 1999, before stabilizing at 3.5% in the Year 2000. To project average rate, the growth factors are applied to the 1996 average rates estimated for Holiday Inn - Select in each market segment. The resulting amounts are multiplied by the projected room night demand in each segment, as illustrated by the following table. ================================================================================ Table 7-17 Forecast of Average Rate by Market Segment - --------------------------------------------------------------------------------
Group/ Weighted Percent Commercial Meeting Leisure Airline Total Average Rate Change - ----------------------------------------------------------------------------------------------------------- Historical Demand 9,499 5,115 40,190 18,268 73,073 Segment Rate $90.00 $70.00 $70.00 $39.00 Revenue $854,954 $358,058 $2,813,311 $712,462 $4,738,784 $64.85 -- 1997 Demand 18,464 5,318 34,350 14,943 73,075 Segment Rate $93.61 $72.46 $72.81 $39.00 Revenue $1,728,413 $385,325 $2,500,944 $582,777 $5,197,458 $71.12 9.7% 1998 Demand 22,290 5,257 27,794 14,506 69,847 Segment Rate $96.89 $74.99 $75.36 $39.78 Revenue $2,159,594 $394,237 $2,094,443 $577,049 $5,225,322 $74.81 5.2% 1999 Demand 21,429 5,096 26,729 14,506 67,760 Segment Rate $100.28 $77.62 $77.99 $40.97 Revenue $2,148,841 $395,538 $2,084,686 $594,360 $5,223,425 $77.09 3.0% 2000 Demand 21,820 5,195 26,813 14,506 68,334 Segment Rate $103.79 $80.33 $80.72 $42.41 Revenue $2,264,631 $417,335 $2,164,430 $615,163 $5,461,559 $79.92 3.7%
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Projection of Occupancy and 93 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Based on the preceding analysis, the following table summarizes the occupancy and average rates that will be used to project the subject property's rooms revenue. ================================================================================ Table 7-18 Forecast of Occupancy and Average Rate - -------------------------------------------------------------------------------- Year Occupancy Average Rate --------------------------------------- 1997 77% $71.12 1998 73 74.81 Stabilized 73 77.09 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Highest and Best Use 94 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 8. Highest and Best Use The concept of highest and best use recognized by the Appraisal Institute distinguishes between the highest and best use of the land (as though vacant) and that of the property (as improved). Highest and best use is defined as: The reasonably probable and legal use of vacant land or improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.(1) The concept of highest and best use is the premise upon which value is based, and is a product of competitive forces in the marketplace. The principle of balance holds that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium. This principle applies to relationships among various property components as well as the relationship between the costs of production and the property's productivity. The point of economic balance is achieved when the combination of land and building is optimal (i.e., when no marginal benefit or utility is achieved by adding another unit of capital). The law of increasing returns holds that larger amounts of the agents of production produce greater net income up to a certain point, after which the law of diminishing returns is applied.(2) It is important to recognize that the highest and best use of the land (as though vacant) may differ from the highest and best use of the property (as improved). This differential may occur when a site has existing improvements and the highest and best use of the land differs from the current use. Nonetheless, the current property use will continue until the value of the land under its highest and best use exceeds the value of the property in its current use, plus the cost to remove the existing improvements. (1) The Appraisal of Real Estate - Tenth Edition, Appraisal Institute, Chicago, IL, 1992, p. 45. (2) Ibid., p. 40. HVS International, Mineola, New York Highest and Best Use 95 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= In consideration of the factors influencing development in the immediate area, it is the appraisers' opinion that the highest and best use of the subject site, as vacant, would be as a transient lodging facility. Based on the fact that the value of the land does not exceed the value of the hotel plus the cost of demolition, it is our opinion that the subject property's highest and best use, as improved, is its current use as a transient lodging facility. HVS International, Mineola, New York Approaches to Value 96 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 9. Approaches to Value In appraising real estate for market value, the appraiser has three approaches from which to select: the income capitalization, sales comparison, and cost approaches. Although all three valuation procedures are given consideration, the inherent strengths of each approach and the nature of the subject property must be evaluated to determine which will provide supportable estimates of market value. The appraiser is then free to select one or more of the appropriate approaches in arriving at a final value estimate. The Income Capitalization Approach The income capitalization approach takes a property's projected net income before debt service and allocates this future benefit to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component is calculated. The total of the mortgage component and the equity component equals the value of the property. This approach is often selected as the preferred valuation method for income-producing properties, because it most closely reflects the investment rationale of knowledgeable buyers. The Sales Comparison Approach The sales comparison approach estimates the value of a property by comparing it to similar properties that have been sold on the open market. To obtain a supportable estimate of value, the sales price of a comparable property must be adjusted to reflect any dissimilarities between it and the property being appraised. The sales comparison approach may provide a useful value estimate in the case of simple forms of real estate, such as vacant land and single-family homes, where the properties are homogeneous and the adjustments are few and relatively simple to compute. In the case of complex investments such as shopping centers, office buildings, restaurants, and lodging facilities, where the adjustments are numerous and more difficult to quantify, the sales comparison approach loses much of its reliability. HVS International, Mineola, New York Approaches to Value 97 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Hotel investors typically do not employ the sales comparison approach in reaching their final purchase decisions. Factors such as the lack of recent sales data, the numerous insupportable adjustments that are necessary, and the general inability to determine the true financial terms and human motivations of comparable transactions often make the results of this technique questionable. Although the sales comparison approach may provide a range of values that supports the final estimate, reliance on this method beyond the establishment of broad parameters is rarely justified by the quality of the sales data. The market-derived capitalization rates sometimes used by appraisers are susceptible to the same shortcomings inherent in the sales comparison approach. To substantially reduce the reliability of the income capitalization approach by employing capitalization rates obtained from unsupported market data weakens the final value estimate and ignores the typical investment analysis procedures employed by hotel purchasers. Because appraisers are obligated to mirror the actions of the marketplace, we generally give the sales comparison approach minimal weight in the hotel appraisal process beyond bracketing the final estimate.(1) The Cost Approach The cost approach estimates market value by computing the current cost to replace the property and subtracting any depreciation resulting from physical deterioration, functional obsolescence, and external (or economic) obsolescence. The value of the land, as if vacant and available, is then added to the depreciated value of the improvements to produce a total value estimate. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements grow older and begin to deteriorate, the resultant loss in value becomes increasingly difficult to quantify accurately. We find that knowledgeable hotel buyers base their purchase decisions on economic factors such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, this approach is given minimal weight in the (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 209. HVS International, Mineola, New York Approaches to Value 98 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= hotel valuation process. As noted in Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, "the cost approach is seldom used to value existing hotels and motels."(1) Reconciliation The final step in the valuation process is the reconciliation and correlation of the value indications. Factors that are considered in assessing the reliability of each approach include the purpose of the appraisal, the nature of the subject property, and the reliability of the data used. In reconciliation, the applicability and supportability of each approach is considered and the range of value indications is examined. The most significant weight is given to the approach that produces the most reliable solution and most closely reflects the criteria used by typical investors. Our nationwide experience with numerous hostelry buyers and sellers indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the investors who constitute the marketplace. For this reason, the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in the hotel valuation process. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 208. HVS International, Mineola, New York Income Capitalization Approach 99 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 10. Income Capitalization Approach The income capitalization approach is based on the principle that the value of a property is indicated by its net return, or what is known as the present worth of future benefits. The future benefits of income-producing properties, such as hotels, are net income before debt service and depreciation (as estimated by a forecast of income and expense) and any anticipated reversionary proceeds from a sale. These future benefits can be converted into an indication of market value through a capitalization process and discounted cash flow analysis. Using the income capitalization approach, the subject property has been valued by analyzing the local market for transient accommodations, examining existing and proposed competition, and developing a forecast of income and expense that reflects current and anticipated income trends and cost components through a stabilized year of operation. The forecast of income and expense is expressed in current dollars for each year. The stabilized year is intended to reflect the anticipated operating results of the property over its remaining economic life, given any or all applicable stages of build-up, plateau, and decline in the life cycle of the hotel. Thus, income and expense estimates from the stabilized year forward exclude from consideration any abnormal relationship between supply and demand, as well as any non-recurring conditions that may result in unusual revenues or expenses. As stated in the textbook entitled, Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, published by the Appraisal Institute, "of the three valuation approaches available to the appraiser, the income capitalization approach generally provides the most persuasive and supportable conclusions when valuing a lodging facility."(1) This text recommends that using a ten-year forecast and an equity yield rate "most accurately reflects the actions of typical hotel buyers, who purchase properties based (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. HVS International, Mineola, New York Income Capitalization Approach 100 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= on their leveraged discounted cash flow."(1) The simpler procedure of using a ten-year forecast and a discount rate is "less reliable because the derivation of the discount rate has little support. Moreover, it is difficult to adjust the discount rate for changes in the cost of capital."(2) We have used both methods to discount the subject property's projected net income into an estimate of value. Method One is a ten-year discounted cash flow analysis in which the cash flow to equity and the equity reversion are discounted to the present value at the equity yield rate, and the income to the mortgagee is discounted at a mortgage interest rate. The sum of the equity and mortgage values is the total property value. Method Two is a simple ten-year discounted cash flow analysis in which the annual net income before debt service and the reversionary proceeds following a sale at the end of the tenth year are discounted back to the date of the appraisal at an overall discount rate, and then totaled to produce an indication of the present worth of future benefits. To convert the projected income stream into an estimate of value through Method One, the anticipated net income (before debt service and depreciation) is allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. The total of the mortgage component and the equity component equals the value of the property. The process is described as follows. 1. The terms of typical hotel financing are set forth, including interest rate, amortization term, and loan-to-value ratio. 2. An equity yield rate of return is established. Numerous hotel buyers base their equity investments on a ten-year equity yield rate projection that takes into account ownership benefits such as periodic cash flow distributions, residual sale or refinancing distributions that return any property appreciation and mortgage amortization, income tax benefits, and various non-financial considerations such as status and prestige. The equity yield rate is also known as the internal rate of return on equity. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. (2) Ibid. HVS International, Mineola, New York Income Capitalization Approach 101 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 3. The value of the equity component is calculated by first deducting the annual debt service from the projected net income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value. After deducting the mortgage balance at the end of the tenth year and the typical brokerage and legal costs, the equity residual is discounted back to the date of value at the equity yield rate. The net income to equity for each of the ten projection years is also discounted to the present value. The sum of these discounted values equates to the value of the equity component. Adding the equity component to the initial mortgage balance yields the overall property value. Because the mortgage and the debt service amounts are unknown but the loan-to-value ratio was determined in Step #1, the preceding calculation can be solved through an iterative process or by use of a linear algebraic equation that computes the total property value. The algebraic equation that solves for the total property value using a ten-year mortgage and equity technique was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(1) 4. The value is proven by allocating the total property value between the mortgage and equity components and verifying that the rates of return set forth in Steps #1 and #2 can be met from the projected net income. The process of converting the projected income stream into an estimate of value through Method Two is described as follows. 1. A discount rate is established by evaluating the total property yield derived by Method One. Occasionally, the discount rate may be adjusted slightly based on the total property yields indicated by recent transactions involving hotels similar to the subject property. (1) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Income Capitalization Approach 102 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 2. The reversionary value is calculated by capitalizing the 11th-year net income by the terminal capitalization rate and deducting typical brokerage and legal fees. 3. The ten-year forecast of net income (before debt service and depreciation) and the reversionary value are discounted to the date of value at the rate derived above. Review of Operating History Because the Holiday Inn Select is an existing hotel with an established operating performance, its historical income and expense experience can serve as a basis for projections. The subject property opened in 1973, and achieved occupancy levels of 58.9% in 1994 and 68.1% in 1995. The statement for 1994 reflects only a partial year; complete 1994 statements were not provided to us, as the subject property had different owners at that time. The following income and expense statements were provided by the Ashford Financial Corporation, and are unaudited. Where applicable, we have reorganized the statements in accordance with the Uniform System of Accounts for Hotels. HVS International, Mineola, New York Income Capitalization Approach 103 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-1 Historical Operating Performance ($+,000) - --------------------------------------------------------------------------------
Calendar Year: 1995 1994* -------------------------------------------------------------------------------------------- Total Rooms: 260 64 Occupied Rooms: 64,663 13,453 Complimentary Rooms: 3,853 316 Days Open: 365 Amount per Amount per 365 Amount per Amount pe Occupancy: 68.1% Percentage Avilable Occupied 58.9% Percentage Available Occupied Average Rate: $58.54 of Revenue Room Room $60.00 of Revenue Room Room - ----------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $3,785 76.7% $14,559 $58.54 $807 74.8% $12,592 $60.00 Food 742 15.0 2,854 11.48 161 14.9 2,516 11.99 Beverage 146 3.0 560 2.25 44 4.1 683 3.25 Telephone 190 3.9 731 2.94 50 4.6 773 3.68 Other Income 74 1.5 286 1.15 18 1.6 276 1.32 Total 4,938 100.1 18,991 76.36 1,079 100.0 16,840 80.24 - ----------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES ** Rooms 1,026 27.1 3,945 15.86 222 27.5 3,461 16.49 Food & Beverage 758 85.3 2,914 11.71 99 48.4 1,547 7.37 Telephone 98 51.7 378 1.52 21 43.0 333 1.59 Other Income 51 68.9 197 0.79 2 12.3 34 0.16 Total 1,933 39.1 7,434 29.89 345 31.9 5,375 25.61 - ----------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 3,005 61.0 11,557 46.47 735 68.1 11,465 54.63 - ----------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 604 12.2 2,321 9.33 110 10.2 1,709 8.15 Management Fee 148 3.0 571 2.30 32 3.0 507 2.41 Marketing 249 5.1 959 3.86 48 4.4 744 3.55 Franchise Fees 195 4.0 750 3.02 39 3.6 609 2.90 Property Oper. & Maint. 251 5.1 967 3.89 52 4.8 814 3.88 Energy 270 5.5 1,038 4.17 86 8.0 1,340 6.38 Total 1,718 34.9 6,607 26.56 367 34.0 5,723 27.27 - ----------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 1,287 26.1 4,950 19.91 368 34.1 5,742 27.36 - ----------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 212 4.3 816 3.28 56 5.2 870 4.14 Insurance 304 6.1 1,168 4.70 42 3.9 661 3.15 Total 516 10.4 1,984 7.98 98 9.1 1,530 7.29 ============================================================================================================================= NET INCOME $771 15.7% $2,966 $11.93 $270 25.0% $4,212 $20.07 =============================================================================================================================
* Complete Operating Statements are not available for 1994 or previous years, due to change in Ownership. ** Departmental expense ratios are expressed as a percentage of departmental revenues. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 104 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-2 Historical Operating Performance ($+,000) - --------------------------------------------------------------------------------
Calendar Year: 1996 1995 --------------------------------------------------------------------------------------------- Total Rooms: 260 260 Occupied Rooms: 50,992 41,813 Complimentary Rooms: 527 3,347 Days Open: 244 Amount per Amount per 243 Amount per Amount per Occupancy: 81.2% Percentage Avilable Occupied 71.5% Percentage Available Occupied Average Rate: $63.18 of Revenue Room Room $59.06 of Revenue Room Room - ---------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $3,222 78.3% $12,391 $63.18 $2,470 78.2% $9,498 $59.06 Food 568 13.8 2,185 11.14 452 14.3 1,740 10.82 Beverage 134 3.2 514 2.62 76 2.4 294 1.83 Telephone 162 3.9 622 3.17 120 3.8 463 2.88 Other Income 28 0.7 106 0.54 37 1.2 144 0.89 Total 4,112 99.9 15,817 80.65 3,156 99.9 12,139 75.48 - ---------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES * Rooms 722 22.4 2,777 14.16 639 25.9 2,456 15.27 Food & Beverage 580 82.6 2,229 11.36 471 89.0 1,811 11.26 Telephone 85 52.5 327 1.67 60 49.8 230 1.43 Other Income 9 32.9 35 0.18 24 64.0 92 0.57 Total 1,396 33.9 5,367 27.37 1,193 37.8 4,590 28.54 - ---------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 2,717 66.0 10,449 53.28 1,963 62.1 7,549 46.94 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 442 10.7 1,699 8.66 357 11.3 1,372 8.53 Management Fee 123 3.0 475 2.42 95 3.0 365 2.27 Marketing 182 4.4 702 3.58 149 4.7 572 3.55 Franchise Fees 177 4.3 681 3.47 123 3.9 473 2.94 Property Oper. & Maint. 187 4.5 718 3.66 161 5.1 620 3.85 Energy 191 4.7 736 3.75 178 5.7 686 4.27 Total 1,302 31.6 5,009 25.54 1,063 33.7 4,088 25.42 - ---------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 1,414 34.4 5,440 27.74 900 28.4 3,461 21.52 - ---------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 135 3.3 518 2.64 145 4.6 556 3.46 Insurance 107 2.6 410 2.09 206 6.5 791 4.92 Total 241 5.9 927 4.73 350 11.1 1,347 8.38 ============================================================================================================================ NET INCOME $1,173 28.5% $4,513 $23.01 $550 17.3% $2,114 $13.14 ============================================================================================================================
* Departmental expense ratios are expressed as a percentage of departmental revenues. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 105 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Comparable Operating Statements These historical income and expense statements show that the subject property's operating performance has been improving over the last two year period. As previously mentioned, management was unable to provide us with operating statements for 1994. However, we have been able to see significant differences in the statistics between year-to-date through August, 1995 and the corresponding 1996 period. The subject property's room revenue increased substantially in 1996 over the same period from last year, which was primarily due to the increase in occupancy and average rates. During the same period, the subject property's management was able to reduce departmental expenses as well. The subject property's 1996 year-to-date rooms expense went down from 25.9% of rooms revenue in year-to-date, 1995 to 22.4% of rooms revenue in year-to-date 1996. Food and beverage revenue also declined - from 89.0% to 82.6% during the same period. While departmental expenses have fallen at the subject property, the hotel's operating expenses have fluctuated somewhat; these expenses accounted for 34.1% of total revenue in year-to-date 1995, and 31.6% in year-to-date 1996. As a result of a decline in overall expenses and an increase in revenue over the past two years, the subject property's net income has soared. In terms of net revenue, the subject property's net revenue went up from $550,000 in year-to-date 1995 to $1,173,000 in year-to-date 1996, or, in terms of percentage of revenue, from 17.3% in year-to-date 1995 to 28.5% in year-to-date 1996. We have evaluated each revenue and expense category and have compared the subject property's historical operating results with those of similar lodging facilities. We note that the property's fixed expenses are low when compared to such costs at comparable hotels. Also, in 1996, the expenses for most categories were lower, due to the high occupancy level, which resulted in the variable cost being lower for many of the expenses. Overall, we believe that the subject property's management has exercised good control over the hotel's operating performance. Forecast of Income and Expense The forecast of income and expense is intended to reflect the appraiser's subjective estimate of how a typical buyer would project the subject property's future operating results. Depending on the dynamics of the local market, a typical buyer's projection may be adjusted upward or downward. We have attempted to consider these factors in formulating this forecast. HVS International, Mineola, New York Income Capitalization Approach 106 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= HVS International uses a fixed-and-variable component model to project a lodging facility's revenue and expense levels. This model is based on the premise that hotel revenues and expenses have one component that is fixed, and another that varies directly with occupancy and facility usage. A projection can be made by taking a known level of revenue or expense and calculating its fixed and variable components. The fixed component is then held constant, while the variable component is adjusted for the percent change between the projected occupancy and facility usage and that which produced the known level of revenue or expense. Base-Year Statement of Income and Expense Based on our review of the operating histories of the subject property and comparable hotels, we have derived a base-year statement of income and expense expressed in 1996 dollars. The units of comparison include a percentage of departmental and total revenue, amounts per available room, and amounts per occupied room. The income and expense ratios reflect an occupancy level of 68.1%. The base-year profit and loss statement will be used to determine the relationship between the fixed and variable components. HVS International, Mineola, New York Income Capitalization Approach 107 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-3 Base-Year Statement of Income and Expense ($+,000) - -------------------------------------------------------------------------------- Calendar Year: 1995 ------------------------------------------------------- Number of Rooms: 260 Occupancy: 68.1% Percent of Amount per Amount per Average Rate: $58.54 Total Available Occupied Occupied Rooms: 64,663 Revenue Room Room - -------------------------------------------------------------------------------- Revenue: Rooms $3,785 76.2% $14,559 $58.54 Food 776 15.6 2,984 12.00 Beverage 178 3.6 684 2.75 Telephone 189 3.8 728 2.93 Other Income 38 0.8 146 0.59 Total Revenue 4,966 100.0 19,101 76.80 - -------------------------------------------------------------------------------- Expenses: Rooms* 1,026 27.1 3,945 15.86 Food & Beverage* 758 79.4 2,914 11.71 Telephone* 98 52.0 378 1.52 Other Income* 15 40.1 58 0.23 Administrative & General 584 11.8 2,245 9.02 Management Fee 149 3.0 573 2.30 Marketing 239 4.8 921 3.70 Franchise Fees 189 3.8 728 2.93 Property Oper. & Maint. 251 5.1 967 3.89 Energy 270 5.4 1,038 4.17 Property Taxes 212 4.3 815 3.28 Insurance 160 3.2 615 2.47 Reserve for Replacement 199 4.0 764 3.07 Total Expenses 4,150 83.6 15,961 64.18 - -------------------------------------------------------------------------------- Net Income $817 16.4% $3,141 $12.63 ================================================================================ * Departmental expense ratios are expressed as a percentage of departmental revenues. - -------------------------------------------------------------------------------- Inflation Assumptions The base revenue and expense amounts are inflated to reflect current dollars for each projection year. Line items can be affected by different factors. We must establish a general rate of inflation that will be applied to most revenue and expense categories. The following table shows inflation estimates made by economists at some noted institutions and corporations. HVS International, Mineola, New York Income Capitalization Approach 108 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-4 Inflation Estimates - --------------------------------------------------------------------------------
Projected Increase in Consumer Price Index (Annualized Rate Versus 12 Months Earlier) ------------------------------------------ November May Source of 1996 of 1997 - --------------------------------------------------------------------------------------------------------- Maureen Allyn, Scudder Stevens Clark 3.1% 2.3% Wayne Angell, Bear Stearns 3.0 3.2 Richard Berner, Mellon Bank 2.9 2.8 David Berson, Fannie Mae 2.9 2.8 David Blitzer, S&P 3.0 2.7 Paul Boltz, T. Rowe Price 3.2 3.5 David Bostian, Herzog, Heine, Geduld 2.9 2.5 Philip Braverman, DKB Securities 3.0 2.8 William Brown, J.P. Morgan 3.3 3.2 Rosanne Cahn, CS First Boston 3.1 2.6 James Coons, Huntington National Bank 3.2 3.0 Michael Cosgrove, The Econoclast 3.2 3.3 Dewey Daane, Vanderbilt University 3.4 3.6 Robert Dederick, Northern Trust 3.1 3.4 W.Dudley, Goldman Sachs 3.4 3.2 Michael Englund, MMS Intl 3.2 3.3 Michael Evans, Evans Group 3.0 3.0 Gail Fosler, Conference Board 3.5 3.6 Maury Harris, Paine Webber, Inc. 2.8 2.8 Tracy Herrick, Jefferies & Co. 3.2 3.6 Stuart Hoffman, PNC Bank 3.1 2.8 William Hummer, Wayne Hummer 2.9 3.0 Edward Hyman, ISI Group 2.8 2.1 Saul Hymans, University of Michigan 2.7 1.7 Mieczyslaw Karczmar, Deutsche Bank 2.8 3.2 Kurt Karl, WEFA Group 2.6 2.3 Irwin Kellner, Chase Manhattan Bank 2.6 2.3 D. Laufenberg, American Express Financial Advisors 3.2 3.4 Michelle Laughlin, Sanwa Securities 3.0 3.2 Carol Leisenring, CoreStates Financial 2.7 2.5 Richard Lemmon, General Motors 3.0 3.0 Mickey Levy, NationsBank Capital Markets 2.6 2.4 David Littmann, Comerica 3.1 3.0 John Lonski, Moody's Investors Service 3.3 3.2 Paul McCulley, UBS Securities 3.0 2.8 John McDevitt, 3M 2.6 2.5 Arnold Moskowitz, Moskowitz Capital 3.1 3.5 John Mueller, LBMC, Inc. 3.2 2.5 David Munro, High Frequency Econ 3.0 2.5 Carl Palash, MCM MoneyWatch 3.0 3.0 Nicholas Perna, Fleet Financial Group 3.3 3.3 Elliott Platt, Donaldson Lufkin 2.8 2.0 Maria F. Ramirez, MF Ramirez 3.0 3.0 Donald Ratajczak, Georgia State University 3.0 3.3 David Resler, Nomura Securities International 2.9 2.6 Allan Reynolds, Hudson Institute 3.3 3.6 Richard Rippe, Prudential Securities 3.1 3.3 A. Gary Schilling, Schilling & Co. 3.0 3.0 Allen Sinai, Lehman Brothers 3.2 3.4 James Smith, University of North Carolina 2.1 1.9 Susan Sterne, Economic Analysis 2.5 2.5 Donald Straszheim, Merrill Lynch 2.7 2.3 Thomas Synott III, U.S. Trust Company 3.3 3.4 John Williams, Bankers Trust 3.0 3.1 Raymond Worseck, A.G. Edwards 3.6 3.3 David Wyss, DRI/McGraw-Hill 3.0 2.5 Edward Yardeni, Deutsche Morgan Grenfell 2.2 2.0 Mark Zandi, Regional Financial Associates 3.0 3.2 ----- ----- Averages 3.0% 2.9%
Source: Wall Street Journal, July 1, 1996 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 109 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The preceding table shows inflation forecasts averaging 3.0% through November of 1996 and 2.9% through May of 1997. Most of the economists in the sample estimate inflation rates ranging from 2.5% to 3.4% for the 12-month period, although several anticipate levels of slightly greater than 3.4%. As a further check on these inflation projections, we have reviewed historical increases in the Consumer Price Index. Because the value of real estate is predicated on cash flows over a relatively long period, inflation should be considered from a long-term perspective. Between 1986 and 1994, the national CPI increased at an average annual compounded rate of 3.8%. In consideration of these historical trends, the projections set forth above, and our assessment of probable property appreciation levels, we have selected an annual stabilized inflation rate of 3.5% throughout the projection period. One of the exceptions to this general inflation assumption is the projected growth in average rate. As noted earlier, increases in the subject property's room rate are projected as follows. ================================================================================ Table 10-5 Projected Growth in Average Rate - -------------------------------------------------------------------------------- Increase From Year Previous Year ------------------------------------------ 1997 6.5% 1998 5.5 1999 3.5 2000 3.5 Thereafter 3.5 - -------------------------------------------------------------------------------- Using these inflation assumptions, the base-year income and expense statement, which is expressed in 1996 dollars, is inflated to arrive at projections. Each revenue and expense category will be projected using the inflated base statement to determine the fixed-and-variable component relationships. HVS International, Mineola, New York Income Capitalization Approach 110 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Rooms Revenue Rooms revenue is determined by two variables: occupancy and average rate. Earlier in this report, we estimated the subject property's occupancy and average rate as follows. ================================================================================ Table 10-6 Projected Occupancy and Average Rate - -------------------------------------------------------------------------------- 1997 1998 Stabilized ---------------------------------------------------------------------- Forecast Occupancy Percentage 77.0% 73.0% 73.0% Forecast Average Rate $71.12 $74.81 $77.09 - -------------------------------------------------------------------------------- Rooms revenue is calculated as follows. ================================================================================ Table 10-7 Forecast of Rooms Revenue - --------------------------------------------------------------------------------
Number of Forecast Calendar Years Projected Average Number Days in Rooms Ending: Occupancy Room Rate of Units in Year Revenue - ---------------------------------------------------------------------------------------- 1997 77% X $71.12 X 260 X 365 = $5,197 1998 73 X 74.81 X 260 X 365 = 5,183 Stabilized 73 X 77.09 X 260 X 365 = 5,341
- -------------------------------------------------------------------------------- Food and Beverage Revenue Food and beverage revenue is generated by a hotel's restaurants, lounges, coffee shops, snack bars, banquet rooms, and room service. In addition to providing a source of revenue, these outlets serve as an amenity that assists in the sale of guestrooms. With the exception of properties with active lounges or banquet facilities that draw local residents, in-house guests generally represent a substantial percentage of a hotel's food and beverage patrons. The Uniform System of Accounts for Hotels/Eighth Revised Edition defines food revenue as, "revenue derived from the sale of food, including coffee, milk, tea and soft drinks. Food sales do not include meals charged on employees' (staff) checks." Beverage revenues are "derived from the sale of beverages." In addition to the revenue generated by the sale of food and beverages, hotels often produce other income that is related to this department, such as meeting room rentals, cover charges, service charges, and miscellaneous banquet revenue. HVS International, Mineola, New York Income Capitalization Approach 111 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Although food revenue varies directly with changes in occupancy, the small portion generated by banquet sales and outside capture is relatively fixed. Food revenue was projected based on this relationship between the fixed and variable components. The following table shows the projected food revenue and several units of comparison that can be used to check the reasonableness of the forecast. ================================================================================ Table 10-8 Forecast of Food Revenue - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Total Food Revenue (+,000) $ 912 $ 906 $ 938 Percent of Total Revenue 13.9% 13.8% 13.9% Per Available Room $3,509 $3,486 $3,608 Per Occupied Room $12.48 $13.08 $13.54 - -------------------------------------------------------------------------------- Based on these units of comparison, the projected food revenue appears reasonable when compared with industry standards. Beverage Revenue Beverage revenue is generated by the sale of alcoholic beverages in a hotel's restaurants and banquet rooms and the sale of alcoholic and nonalcoholic beverages in the bars and lounges. Based on an analysis of comparable lodging facilities, beverage revenue is estimated to average approximately 23% of food revenue. Thus, beverage revenue is projected by multiplying the projected food revenue by 23%. The following table illustrates the forecast of beverage revenue. ================================================================================ Table 10-9 Forecast of Beverage Revenue - -------------------------------------------------------------------------------- 1997 1998 Stabilized ------------------------------------------------------------------------- Total Beverage Revenue (+,000) $209 $208 $215 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 112 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Telephone Revenue Telephone revenue is generated by hotel guests who charge local and long-distance calls to their rooms, and by individuals who use the property's public telephones. Prior to the de-regulation of the telephone industry in the early 1980s, hotels were limited to a 15% commission on long-distance calls, a mark-up that allowed few profits. De-regulation and the development of sophisticated call-accounting equipment have resulted in profitable telephone departments. State-of-the-art equipment is capable of least-cost routing, automatic price billing, and posting telephone charges to guest folios. Hotels can select among various long-distance services, and can also work with any one of a number of Alternative Operator Services (AOS). These systems route and price calls, and may provide additional services. In recent years, the hospitality industry has experienced diverging trends with respect to telephone revenue. Prices per call have increased, in some cases dramatically, yielding departmental profits as high as 50% to 55%. However, the number of long-distance calls billed per occupied room has declined as a result of the extensive use of long-distance carrier services that can be accessed locally or through a toll-free number. When guests charge long-distance calls to their personal or business accounts in this manner, the hotel loses the revenue associated with long-distance tariffs and mark-ups, and only receives an access fee. Most telephone revenue varies directly with changes in occupancy. However, there is a small fixed component consisting of public telephone revenue, which is primarily generated by individuals using the hotel's food, beverage, and meeting facilities. Using this fixed-and-variable relationship, the subject property's telephone revenue is projected as follows. ================================================================================ Table 10-10 Forecast of Telephone Revenue - -------------------------------------------------------------------------------- 1997 1998 Stabilized ----------------------------------------------------------------------- -- Total Telephone Revenue (+,000) $ 227 $ 223 $ 231 Percent of Total Revenue 3.4% 3.4% 3.4% Amount Per Available Room $ 871 $ 859 $ 889 Amount Per Occupied Room $3.11 $3.22 $3.33 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 113 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Other Income Other income is derived from sources other than guestrooms, food and beverages, and telephone services. Depending on the type of hotel and the facilities and amenities offered, other income may include the following items. o Rentals - stores, office space, concession space, showcases, clubs, and storage. o Commissions from auto rentals, photography, telegrams, and vending services. o Concessions - revenue derived from charges for the privilege of operating departments that could be operated by the hotel. Gift shops, barber shops, and beauty salons are often operated as concessions. o Laundry, dry cleaning, and fax services. o Cash discounts earned - discounts from creditors' accounts for payment within the discount period. This item does not include trade discounts, which are a deduction from the cost of goods sold. o Electronic games and pinball machines. o Forfeited advance deposits and guaranteed no-shows. o Service charges - service charges that are added to a customer's account but are not paid to service personnel. o Interest income - interest from house accounts. o Salvage - revenue from the sale of old or obsolete items. Other income is highly sensitive to changes in occupancy and slightly correlated to food and beverage volume. Using this fixed-and-variable relationship, the subject property's other income is projected as follows. ================================================================================ Table 10-11 Forecast of Other Income - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Total Other Income (+,000) $ 41 $ 42 $ 43 Percent of Total Revenue 0.6% 0.7% 0.7% Amount Per Available Room $ 162 $ 165 $ 171 Amount Per Occupied Room $0.57 $0.62 $0.64 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 114 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Rooms Expense Rooms expense consists of items related to the sale and upkeep of guestrooms and public space. Salaries, wages, and employee benefits account for a substantial portion of this category. Although payroll varies somewhat with occupancy (because managers can schedule maids, bell personnel, and house cleaners to work when demand requires), much of a hotel's payroll is fixed. Front desk personnel, public area cleaners, the housekeeper, and other supervisors must be maintained at all times. As a result, salaries, wages, and employee benefits are only moderately sensitive to changes in occupancy. Commissions represent remuneration to travel agents for booking rooms. Because these fees are based on a percentage of rooms revenue, they are highly dependent on occupancy and rate. Reservations is a similar expense that reflects the cost of a franchise reservation system that typically bills as a percentage of rooms revenue. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are only slightly affected by changes in volume. In light of these considerations, we project the subject property's rooms expense as follows. ================================================================================ Table 10-12 Forecast of Rooms Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized --------------------------------------------------------------------------- Total Rooms Expense (+,000) $1,156 $1,170 $1,211 Percent of Rooms Revenue 22.2% 22.6% 22.7% Amount per Available Room $4,446 $4,499 $4,657 Amount per Occupied Room $15.82 $16.89 $17.48 - -------------------------------------------------------------------------------- Food and Beverage Expense Food and beverage expenses consist of items necessary for the operation of a hotel's food, beverage, and banquet facilities. Although food and beverage revenues are projected separately and occupy separate categories on a hotel's income and expense statement, the corresponding expenses are combined into a single category. The costs associated with food and beverage sales and payroll are moderately to highly correlated to food and beverage revenues, and comprise a substantial portion of this category. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are very slightly dependent on volume. Although the other expense items are basically fixed, they HVS International, Mineola, New York Income Capitalization Approach 115 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= represent a relatively insignificant factor. After considering the fixed and variable components, we forecast the subject property's food and beverage expense as follows. ================================================================================ Table 10-13 Forecast of Food and Beverage Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Total F&B Expense (+,000) $ 847 $ 860 $ 890 Percent of Food and Beverage Revenue 75.6% 77.2% 77.2% Amount per Available Room $3,258 $3,308 $3,424 Amount per Occupied Room $11.59 $12.41 $12.85 - -------------------------------------------------------------------------------- Telephone Expense Telephone expense consists of all costs associated with this department. In the case of small hotels with automated systems, the operation of telephones may be an additional responsibility of front desk personnel; however, most large properties employ full-time operators. The bulk of the telephone expense consists of the cost of local and long-distance calls billed by the telephone companies that provide these services. Because most calls are made by in-house guests, these costs are moderately correlated to occupancy. Unless a particular hotel department incurs high expenses, use of telephone services by hotel employees is charged to this account. The remaining costs, which include salaries, wages, printing, and other expenses, are moderately fixed. The following table illustrates our forecast of telephone expense. ================================================================================ Table 10-14 Forecast of Telephone Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Total Telephone Expense (+,000) $ 110 $ 112 $ 116 Percent of Telephone Revenue 48.6% 50.1% 50.1% Amount per Available Room $ 425 $ 430 $ 445 Amount per Occupied Room $1.51 $1.62 $1.67 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 116 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Other Income Expense Other income expense consists of costs associated with other income, and is dependent on the nature of the revenue. For example, if a hotel leases its gift shop to an outside operator, the expenses are limited to items such as rental fees and commissions. If the property operates its own gift shop, both revenues and expenses will be higher, and the hotel is responsible for the cost of goods sold, payroll, and so forth. Using a fixed-and-variable forecasting model, we project the subject property's other income expense as follows. ================================================================================ Table 10-15 Forecast of Other Income Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Total Other Income Expense (+,000) $ 17 $ 17 $ 18 Percent of Other Income Revenue 39.4% 39.7% 39.9% Amount per Available Room $ 64 $ 66 $ 67 Amount per Occupied Room $0.23 $0.25 $0.26 - -------------------------------------------------------------------------------- Administrative and General Expense Administrative and general expense includes the salaries and wages of all administrative personnel who are not directly associated with a particular department. Expense items related to the management and operation of the property are also allocated to this category. Most administrative and general expenses are relatively fixed. The exceptions are cash overages and shortages; commissions on credit card charges; provision for doubtful accounts, which are moderately affected by the number of transactions or total revenue; and salaries, wages, and benefits, which are very slightly influenced by volume. In recent years, several new items have been added to the administrative and general expense category. Human resources includes the cost of recruiting, relocating, and training personnel. Security consists of the cost of contract security for the property and related expenses. The general insurance category includes premiums for liability, fidelity, life, theft coverage, and business interruption insurance. Fire and extended-coverage insurance on the building and contents is a separate insurance expense category. Liability insurance covers third-party actions involving bodily injury and personal property, and is typically based on rooms receipts, meeting and banquet income, and food and beverage revenue. Factors that HVS International, Mineola, New York Income Capitalization Approach 117 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= may have an impact on a hotel's liability expense include the size of the meeting, banquet, and restaurant facilities; the ratio between the amount of alcohol served and total food and beverage sales; the presence of a dance floor; a high-rise structure; a swimming pool; life safety support systems; and the guest transportation services provided by the hotel. The following table illustrates our forecast of administrative and general expense. ================================================================================ Table 10-16 Forecast of Administrative and General Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - ------------------------------------------------------------------------------- Total Administrative & General Expense (+,000) $ 670 $ 684 $ 707 Percentage of Total Revenue 10.2% 10.4% 10.5% Amount per Available Room $2,577 $2,631 $2,719 Amount per Occupied Room $ 9.17 $ 9.88 $10.21 - -------------------------------------------------------------------------------- Management Fee Management expense consists of the basic fee paid to the type of company that is anticipated to operate the subject property. Some companies provide management services alone, while others also provide a brand name affiliation. When a management company has no brand identification, the property owner often acquires a franchise that provides the necessary image and recognition. Although most hotel management companies employ a fee schedule that includes a basic fee (usually a percentage of total revenue) and an incentive fee (usually a percentage of defined profit), the incentive portion is often subordinated to debt service and does not appear in a forecast of net income before debt service. Basic hotel management fees are almost always based on a percentage of total revenue, which means they have no fixed component. Although the incentive fee does not decrease the cash flow available for debt service, it does reduce the potential cash flow to equity, and must be accounted for in the valuation process. Generally, the most appropriate procedure for handling the impact of the incentive fee on the equity component is to use the projected net income before debt service and incentive fee, but adjust the equity dividend or yield rate upward to reflect this added management cost. The adjusted equity dividend and yield rates will be described later in this section. HVS International, Mineola, New York Income Capitalization Approach 118 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The subject property is operated by Remington Hotel Company. A management contract, which was signed in October, 1994, stipulates a 15-year term, with an extension clause allowing two successive five-year periods. Based on historical levels, we have projected a management fee of 3.0% of total revenue for the subject property. Based on our review of the current market for management contracts, we are of the opinion that this fee is consistent with prevailing market terms. Applying this management fee structure to the projection of total revenue yields the following forecast of the subject property's management fee. ================================================================================ Table 10-17 Forecast of Management Fee - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Management Fee Expense (+,000) $198 $197 $203 - -------------------------------------------------------------------------------- Marketing Expense Marketing expense consists of all costs associated with advertising, sales, and promotion; these activities are intended to attract and retain customers. Marketing can be used to create an image, develop customer awareness, and stimulate patronage of a property's various facilities. The marketing category is unique in that all expense items, with the exception of fees and commissions, are totally controlled by management. Most hotel operators establish an annual marketing budget that sets forth all planned expenditures. If the budget is followed, total marketing expenses can be projected accurately. Marketing expenditures are unusual because although there is a lag period before results are realized, the benefits are often extended over a long period. Depending on the type and scope of the advertising and promotion program implemented, the lag time can be as short as a few weeks or as long as several years. However, the favorable results of an effective marketing campaign tend to linger, and a property often enjoys the benefits of concentrated sales efforts for many months. Marketing expense can be divided into five categories: sales, reservations, advertising and merchandising, other marketing activities, and fees and commissions. Together, these categories include all marketing efforts made by hotel personnel and outside parties. Marketing expenses are fixed, with HVS International, Mineola, New York Income Capitalization Approach 119 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the exception of reservations, fees, and commissions, which are calculated as a percentage of rooms revenue. Based on the location of the subject property, the local market for transient accommodations, the competitive environment, and the hotel's anticipated market segmentation, we have developed the following marketing forecast using a fixed-and-variable component model. ================================================================================ Table 10-18 Forecast of Marketing Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Total Marketing Expense (+,000) $ 275 $ 281 $ 290 Percentage of Total Revenue 4.2% 4.3% 4.3% Amount per Available Room $1,057 $1,080 $1,116 Amount per Occupied Room $ 3.76 $ 4.05 $ 4.19 - -------------------------------------------------------------------------------- Franchise Fee Franchise expense represents the fees paid to Holiday Inn Franchising Inc. for the use of the company's name, trade marks, and service marks. The current franchise agreement, which expires in January of 2005, stipulates a franchise (royalty) fee of 5.0% of gross rooms revenue. The following table illustrates the projection of the subject property's franchise fee. ================================================================================ Table 10-19 Forecast of Franchise Fee - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Franchise Fee Expense (+,000) $260 $259 $267 - -------------------------------------------------------------------------------- Property Operations and Maintenance Property operations and maintenance expense is another expense category that is largely controlled by management. Except for repairs that are necessary to keep the facility open and prevent damage (e.g., plumbing, heating, and electrical items), most maintenance can be deferred for varying lengths of time. Maintenance is an accumulating expense. If management elects to postpone performing a required repair, they have not eliminated or saved the expenditure; they have only deferred payment until a later date. A lodging facility HVS International, Mineola, New York Income Capitalization Approach 120 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= that operates with a lower-than-normal maintenance budget is likely to accumulate a considerable amount of deferred maintenance. The age of a lodging facility has a strong influence on the required level of maintenance. A new or thoroughly renovated property is protected for several years by modern equipment and manufacturers' warranties. However, as a hostelry grows older, maintenance expenses escalate. A well-organized preventive maintenance system often helps delay deterioration, but most facilities face higher property operations and maintenance costs each year, regardless of the occupancy trend. The quality of initial construction can also have a direct impact on future maintenance requirements. The use of high-quality building materials and construction methods generally reduces the need for maintenance expenditures over the long term. Property operations and maintenance is considered an operating expense; as such, it includes only those components that can be expensed, rather than capitalized, under Internal Revenue Service regulations. For example, if a table leg is broken, the repair of that leg is considered an expense and is chargeable to property operations and maintenance. If the table is replaced, it becomes a capital expenditure and does not appear under the property operations and maintenance category. Appraisers account for capital replacement of items such as furniture and equipment in the reserve for replacement account, which is discussed later in this section. Property operations and maintenance costs are relatively fixed, and are projected as follows. ================================================================================ Table 10-20 Forecast of Property Operations and Maintenance Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total Property Oper. & Maint. Expense (+,000) $ 289 $ 295 $ 305 Percentage of Total Revenue 4.4% 4.5% 4.5% Amount per Available Room $1,110 $1,134 $1,172 Amount per Occupied Room $ 3.95 $ 4.26 $ 4.40 - -------------------------------------------------------------------------------- Energy Expense The energy consumption of a lodging facility takes several forms, including water and space heating, air conditioning, lighting, cooking fuel, and other miscellaneous power requirements. The most common sources of hotel energy are electricity, natural gas, fuel oil, and steam. This category also includes the cost of water service. HVS International, Mineola, New York Income Capitalization Approach 121 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Total energy cost depends on the source and quantity of fuel used. Electricity tends to be the most expensive source, followed by oil and gas. Although all hotels consume a sizable amount of electricity, many properties supplement their energy requirements with less expensive sources, such as gas and oil, for heating and cooking. A large portion of a hostelry's energy consumption is relatively fixed. Restaurants, kitchens, public areas, and corridors must be continually lighted and climate-controlled, regardless of occupancy. The energy cost of an additional occupied room (i.e., a few hours of light, television, heat, or air conditioning) is minimal. The following table presents our forecast of the subject property's energy expense. ================================================================================ Table 10-21 Forecast of Energy Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Total Energy Expense (+,000) $ 296 $ 305 $ 315 Percentage of Total Revenue 4.5% 4.6% 4.7% Amount per Available Room $1,138 $1,173 $1,213 Amount per Occupied Room $ 4.05 $ 4.40 $ 4.55 - -------------------------------------------------------------------------------- Property Taxes The estimate of property taxes was detailed in a previous section of this report. The following table summarizes these projections. ================================================================================ Table 10-22 Forecast of Property Taxes - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Forecast of Property Taxes (+,000) $221 $225 $230 - -------------------------------------------------------------------------------- Insurance Expense The insurance expense category consists of the cost of insuring the hotel and its contents against damage or destruction by fire, weather, sprinkler leakage, boiler explosion, plate glass breakage, and so forth. It does not include liability coverage, which is a component of administrative and general expense. HVS International, Mineola, New York Income Capitalization Approach 122 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Insurance rates are based on many factors, including building design and construction, fire detection and extinguishing equipment, fire district, distance from the firehouse, and the area's fire experience. Insurance expenses do not vary with occupancy. Based on historical levels, we project the subject property's insurance expense at approximately $615 per available room in 1997 - the first projection period. In subsequent years, this amount is assumed to increase in tandem with inflation. The following table outlines our projection of insurance expense. ================================================================================ Table 10-23 Forecast of Insurance Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Forecast of Insurance Expense (+,000) $171 $177 $184 - -------------------------------------------------------------------------------- Reserve for Replacement Furniture, fixtures, and equipment are essential to the operation of a lodging facility, and their quality often influences a property's class. This category includes all non-real estate items that are capitalized, rather than expensed. The furniture, fixtures, and equipment of a hotel are exposed to heavy use and must be replaced at regular intervals. The useful life of these items is determined by their quality, durability, and the amount of guest traffic and use. Periodic replacement of furniture, fixtures, and equipment is essential to maintain the quality, image, and income-producing potential of a lodging facility. Because capitalized expenditures are not included in the operating statement but nevertheless affect an owner's cash flow, an appraisal should reflect these expenses in the form of an appropriate reserve for replacement. Our industry experience indicates that a reserve for replacement of 3% to 5% of total revenue is generally sufficient to provide for the timely replacement of furniture, fixtures, and equipment. Because the reserve for replacement is based on a percentage of total revenue, it has no fixed component. Based on an analysis of comparable lodging facilities, we believe that a reserve for replacement of 4% of total revenue is sufficient to provide for the periodic replacement of the subject property's furniture, fixtures, and equipment. This amount is consistent with the reserve account contributions HVS International, Mineola, New York Income Capitalization Approach 123 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= currently made by the hotel. The following table summarizes the projected reserve for replacement. ================================================================================ Table 10-24 Forecast of Reserve for Replacement - -------------------------------------------------------------------------------- 1997 1998 Stabilized -------------------------------------------------------------------------- Reserve for Replacement Expense (+,000) $263 $263 $271 - -------------------------------------------------------------------------------- Summary of Projections Based on the preceding analysis, we have formulated a forecast of income and expense. The table on the following page presents a detailed forecast through the stabilized year, including amounts per available room (PAR) and per occupied room (POR). For the purpose of comparison, this table also presents the subject property's most recent full year of operating history. The second table illustrates our ten-year forecast of income and expense in less detail. The forecasts pertain to calendar operating years beginning 1997, and are expressed in inflated dollars for each year. HVS International, Mineola, New York Income Capitalization Approach 124 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-25 Detailed Forecast of Income and Expense through the Stabilized Year and Most Recent Operating History: Holiday Inn Select, Los Angeles, California - --------------------------------------------------------------------------------
Historical Operating Results ------------------------------------ Calendar Years: 1995 1997 Number of Rooms: 260 260 Occupancy: 68.1% 77.0% Average Rate: $58.54 $71.12 Days Open: 365 365 Occupied Rooms: 64,663 % Gross PAR POR 73,073 % Gross PAR POR - -------------------------------------------------------------------------------------------------------- REVENUE Rooms $3,785 76.7% $14,559 $58.54 $5,197 79.0% $19,988 $71.12 Food 742 15.0 2,854 11.48 912 13.8 3,508 12.48 Beverage 146 3.0 560 2.25 209 3.2 804 2.86 Telephone 190 3.9 731 2.94 227 3.4 873 3.11 Other Income 74 1.5 286 1.15 42 0.6 162 0.57 Total Revenues 4,938 100.1 18,991 76.36 6,587 100.0 25,335 90.14 - -------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES * Rooms 1,026 27.1 3,945 15.86 1,156 22.2 4,446 15.82 Food & Beverage 758 85.3 2,914 11.71 847 75.6 3,258 11.59 Telephone 98 51.7 378 1.52 110 48.5 423 1.51 Other Income 51 68.9 197 0.79 17 40.5 65 0.23 Total Dept. Expenses 1,933 39.1 7,434 29.89 2,130 32.3 8,192 29.15 - -------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 3,005 61.0 11,557 46.47 4,457 67.7 17,142 60.99 - -------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 604 12.2 2,321 9.33 670 10.2 2,577 9.17 Management Fee 148 3.0 571 2.30 198 3.0 762 2.71 Marketing 249 5.1 959 3.86 275 4.2 1,058 3.76 Franchise Fees 195 4.0 750 3.02 260 3.9 1,000 3.56 Property Oper. & Maint. 251 5.1 967 3.89 289 4.4 1,112 3.95 Energy 270 5.5 1,038 4.17 296 4.5 1,138 4.05 Total Operating Expenses 1,718 34.9 6,607 26.56 1,988 30.2 7,646 27.21 - -------------------------------------------------------------------------------------------------------- HOUSE PROFIT 1,287 26.1 4,951 19.91 2,469 37.5 9,496 33.79 - -------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 212 4.3 816 3.28 221 3.4 850 3.02 Insurance 304 6.1 1,168 4.70 171 2.6 658 2.34 Reserve for Replacement 0.0 0.00 263 4.0 1,012 3.60 Total 516 10.4 1,984 7.98 655 10.0 2,519 8.96 - -------------------------------------------------------------------------------------------------------- NET INCOME $771 15.7% $2,967 $11.93 $1,814 27.5% $6,977 $24.82 ======================================================================================================== Food/Rooms 19.6% 17.5% Beverage/Food 19.6% 22.9% Telephone/Rooms 5.0% 4.4% Other Income/Rooms 2.0% 0.8% Calendar Years: 1998 Stabilized Number of Rooms: 260 260 Occupancy: 73.0% 73.0% Average Rate: $74.81 $77.09 Days Open: 365 365 Occupied Rooms: 69,277 % Gross PAR POR 69,277 % Gross - ------------------------------------------------------------------------------------- REVENUE Rooms $5,183 78.9% $19,935 $74.82 $5,341 78.8% Food 906 13.8 3,485 13.08 938 13.9 Beverage 208 3.2 800 3.00 215 3.2 Telephone 223 3.4 858 3.22 231 3.4 Other Income 43 0.7 165 0.62 44 0.7 Total Revenues 6,563 100.0 25,242 94.74 6,769 100.0 - ------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES * Rooms 1,170 22.6 4,500 16.89 1,211 22.7 Food & Beverage 860 77.2 3,308 12.41 890 77.2 Telephone 112 50.2 431 1.62 116 50.2 Other Income 17 39.5 65 0.25 18 40.9 Total Dept. Expenses 2,159 32.9 8,304 31.16 2,235 33.0 - ------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 4,404 67.1 16,938 63.57 4,534 67.0 - ------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 684 10.4 2,631 9.87 707 10.4 Management Fee 197 3.0 758 2.84 203 3.0 Marketing 281 4.3 1,081 4.06 290 4.3 Franchise Fees 259 3.9 996 3.74 267 3.9 Property Oper. & Maint. 295 4.5 1,135 4.26 305 4.5 Energy 305 4.6 1,173 4.40 315 4.7 Total Operating Expenses 2,021 30.7 7,773 29.17 2,087 30.8 - ------------------------------------------------------------------------------------- HOUSE PROFIT 2,383 36.4 9,165 34.40 2,447 36.2 - ------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 225 3.4 867 3.25 230 3.4 Insurance 177 2.7 681 2.55 184 2.7 Reserve for Replacement 263 4.0 1,012 3.80 271 4.0 Total 665 10.1 2,559 9.61 685 10.1 - ------------------------------------------------------------------------------------- NET INCOME $1,718 26.3% $6,606 $24.79 $1,762 26.1 ===================================================================================== Food/Rooms 17.5% 17.6% Beverage/Food 23.0% 22.9% Telephone/Rooms 4.3% 4.3% Other Income/Rooms 0.8% 0.8%
* Departmental expense ratios are expressed as a percentage of departmental revenues. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 125 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Table 10-26 Ten-Year Forecast of Income and Expense: Holiday Inn Select, Los Angeles, California - --------------------------------------------------------------------------------
Calendar Years Ending: 1997 1998 1999 2000 2001 --------------- --------------- --------------- --------------- -------- ------ Number of Rooms: 260 260 260 260 260 Occupied Rooms: 73,073 69,277 69,277 69,277 69,277 Occupancy: 77.0% % of 73.0% % of 73.0% % of 73.0% % of 73.0% % of Average Rate: $71.12 Gross $74.81 Gross $77.09 Gross $79.79 Gross $82.58 Gross - --------------------------- --------------- --------------- --------------- --------------- -------- ------ REVENUE Rooms $5,197 79.0% $5,183 78.9% $5,341 78.8% $5,527 78.8% $5,721 78.8% Food 912 13.8 906 13.8 938 13.9 971 13.9 1,005 13.9 Beverage 209 3.2 208 3.2 215 3.2 223 3.2 230 3.2 Telephone 227 3.4 223 3.4 231 3.4 239 3.4 248 3.4 Other Income 42 0.6 43 0.7 44 0.7 46 0.7 48 0.7 Total 6,587 100.0 6,563 100.0 6,769 100.0 7,006 100.0 7,252 100.0 - --------------------------- --------------- --------------- --------------- --------------- -------- ------ DEPARTMENTAL EXPENSES * Rooms 1,156 22.2 1,170 22.6 1,211 22.7 1,253 22.7 1,297 22.7 Food & Beverage 847 75.6 860 77.2 890 77.2 922 77.2 954 77.2 Telephone 110 48.5 112 50.2 116 50.2 120 50.2 124 50.0 Other Income 17 40.5 17 39.5 18 40.9 18 39.1 19 39.6 Total 2,130 32.3 2,159 32.9 2,235 33.0 2,313 33.0 2,394 33.0 - --------------------------- --------------- --------------- --------------- --------------- -------- ------ DEPARTMENTAL INCOME 4,457 67.7 4,404 67.1 4,534 67.0 4,693 67.0 4,858 67.0 - --------------------------- --------------- --------------- --------------- --------------- -------- ------ OPERATING EXPENSES Administrative & General 670 10.2 684 10.4 707 10.4 732 10.4 758 10.5 Management Fee 198 3.0 197 3.0 203 3.0 210 3.0 218 3.0 Marketing 275 4.2 281 4.3 290 4.3 300 4.3 311 4.3 Franchise Fees 260 3.9 259 3.9 267 3.9 276 3.9 286 3.9 Property Oper. & Maint. 289 4.4 295 4.5 305 4.5 315 4.5 326 4.5 Energy 296 4.5 305 4.6 315 4.7 327 4.7 338 4.7 Total 1,988 30.2 2,021 30.7 2,087 30.8 2,160 30.8 2,237 30.9 - --------------------------- --------------- --------------- --------------- --------------- -------- ------ HOUSE PROFIT 2,469 37.5 2,383 36.4 2,447 36.2 2,533 36.2 2,621 36.1 - --------------------------- --------------- --------------- --------------- --------------- -------- ------ FIXED EXPENSES Property Taxes 221 3.4 225 3.4 230 3.4 235 3.3 239 3.3 Insurance 171 2.6 177 2.7 184 2.7 190 2.7 197 2.7 Reserve for Replacement 263 4.0 263 4.0 271 4.0 280 4.0 290 4.0 Total 655 10.0 665 10.1 685 10.1 705 10.0 726 10.0 - --------------------------- --------------- --------------- --------------- --------------- -------- ------ NET INCOME $1,814 27.5% $1,718 26.3% $1,762 26.1% $1,828 26.2% $1,895 26.1% =========================== =============== =============== =============== =============== ======== ====== Calendar Years Ending: 2002 2003 2004 2005 2006 --------------- --------------- --------------- --------------- -------- ------ Number of Rooms: 260 260 260 260 260 Occupied Rooms: 69,277 69,277 69,277 69,277 69,277 Occupancy: 73.0% % of 73.0% % of 73.0% % of 73.0% % of 73.0% % of Average Rate: $85.47 Gross $88.46 Gross $91.56 Gross $94.76 Gross $98.08 Gross - --------------------------- --------------- --------------- --------------- --------------- -------- ------ REVENUE Rooms $5,921 78.8% $6,128 78.8% $6,343 78.8% $6,565 78.8% $6,795 78.8% Food 1,040 13.9 1,077 13.9 1,114 13.9 1,153 13.9 1,194 13.9 Beverage 238 3.2 247 3.2 255 3.2 264 3.2 274 3.2 Telephone 256 3.4 265 3.4 275 3.4 284 3.4 294 3.4 Other Income 49 0.7 51 0.7 53 0.7 55 0.7 56 0.7 Total 7,504 100.0 7,768 100.0 8,040 100.0 8,321 100.0 8,613 100.0 - --------------------------- --------------- --------------- --------------- --------------- -------- ------ DEPARTMENTAL EXPENSES * Rooms 1,342 22.7 1,389 22.7 1,438 22.7 1,488 22.7 1,540 22.7 Food & Beverage 987 77.2 1,022 77.2 1,057 77.2 1,094 77.2 1,133 77.2 Telephone 128 50.0 133 50.2 138 50.2 142 50.0 147 50.0 Other Income 20 40.8 20 39.2 21 39.6 22 40.0 22 39.3 Total 2,477 33.0 2,564 33.0 2,654 33.0 2,746 33.0 2,842 33.0 - --------------------------- --------------- --------------- --------------- --------------- -------- ------ DEPARTMENTAL INCOME 5,027 67.0 5,204 67.0 5,386 67.0 5,575 67.0 5,771 67.0 - --------------------------- --------------- --------------- --------------- --------------- -------- ------ OPERATING EXPENSES Administrative & General 784 10.4 812 10.5 840 10.4 870 10.5 900 10.4 Management Fee 225 3.0 233 3.0 241 3.0 250 3.0 258 3.0 Marketing 322 4.3 333 4.3 345 4.3 357 4.3 369 4.3 Franchise Fees 296 3.9 306 3.9 317 3.9 328 3.9 340 3.9 Property Oper. & Maint> 338 4.5 350 4.5 362 4.5 375 4.5 388 4.5 Energy 350 4.7 362 4.7 375 4.7 388 4.7 401 4.7 Total 2,315 30.8 2,396 30.9 2,480 30.8 2,568 30.9 2,656 30.8 - --------------------------- --------------- --------------- --------------- --------------- -------- ------ HOUSE PROFIT 2,712 36.2 2,808 36.1 2,906 36.2 3,007 36.1 3,115 36.2 - --------------------------- --------------- --------------- --------------- --------------- -------- ------ FIXED EXPENSES Property Taxes 244 3.3 249 3.2 254 3.2 259 3.1 264 3.1 Insurance 203 2.7 211 2.7 218 2.7 226 2.7 233 2.7 Reserve for Replacement 300 4.0 311 4.0 322 4.0 333 4.0 345 4.0 Total 747 10.0 771 9.9 794 9.9 818 9.8 842 9.8 =========================== =============== =============== =============== =============== ======== ====== NET INCOME $1,965 26.2% $2,037 26.2% $2,112 26.3% $2,189 26.3% $2,273 26.4% =========================== =============== =============== =============== =============== ======== ======
* Departmental expense ratios are expressed as a percentage of departmental revenues. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 126 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The conversion of a property's projected net income into an estimate of value is based on the premise that investors typically purchase real estate with a small amount of equity cash (25% to 40%) and a large amount of mortgage financing (60% to 75%). The amounts and terms of available mortgage financing and the rates of return that are required to attract sufficient equity capital form the basis for allocating the net income between the mortgage and equity components and deriving a value estimate. Mortgage Component Data for the mortgage component may be developed from statistics of actual hotel mortgages made by long-term lenders. The American Council of Life Insurance, which represents 20 large life insurance companies, publishes quarterly information pertaining to the hotel mortgages issued by its member companies. The following table summarizes the average mortgage interest rates of the hotel loans made by these lenders. In addition, the A corporate bond yield (as reported by Moody's Bond Record) is shown for the purpose of comparison. HVS International, Mineola, New York Income Capitalization Approach 127 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-27 Average Mortgage Interest Rates and Average A Corporate Bond Yields - -------------------------------------------------------------------------------- Average Average A Corporate Year Interest Rate Bond Yield ------------------------------------------------------------- 1st Quarter 1996 7.79% 7.37% 4th Quarter 1995 8.44 7.28 3rd Quarter 1995 8.61 7.67 2nd Quarter 1995 9.25 7.87 1st Quarter 1995 9.14 8.50 3rd Quarter 1994 9.64 8.48 2nd Quarter 1994 9.38 8.28 4th Quarter 1993 9.38 7.80 3rd Quarter 1993 8.41 7.28 2nd Quarter 1993 10.53 9.65 4th Quarter 1992 9.43 8.48 3rd Quarter 1992 9.99 8.38 2nd Quarter 1992 9.47 8.79 1st Quarter 1992 10.02 8.81 4th Quarter 1991 10.49 8.97 3rd Quarter 1991 10.03 9.29 2nd Quarter 1991 10.75 9.45 3rd Quarter 1990 10.47 9.89 2nd Quarter 1990 10.58 9.83 4th Quarter 1989 9.96 9.42 3rd Quarter 1989 9.55 9.46 2nd Quarter 1989 10.54 9.93 1st Quarter 1989 10.39 10.16 4th Quarter 1988 10.07 10.03 3rd Quarter 1988 10.66 10.51 2nd Quarter 1988 10.09 10.33 4th Quarter 1987 10.41 10.45 3rd Quarter 1987 10.00 9.95 2nd Quarter 1987 9.81 9.46 1st Quarter 1987 9.43 9.19 4th Quarter 1986 9.44 9.55 3rd Quarter 1986 9.56 9.71 2nd Quarter 1986 9.80 9.91 1st Quarter 1986 10.99 10.62 Sources: American Council of Life Insurance; Moody's Bond Record - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 128 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Because of the six- to nine-month lag time in reporting and publishing hotel mortgage statistics, it is necessary to update this information to reflect current lending practices. Research by HVS International indicates that there is a close mathematical relationship between the average interest rate of a hotel mortgage and the concurrent yield on an average A corporate bond. Through a regression analysis, this relationship is expressed as follows. Y = 2.76078 + 0.782280 X Where: Y = Estimated Hotel/Motel Mortgage Interest Rate X = Current Average A Corporate Bond Yield (Coefficient of correlation is 96.4%) The yield on A corporate bonds for the third quarter of 1996, as reported by Moody's Bond Record, was 7.91%. Using a factor of 7.91% in the equation presented above produces an estimated hotel/motel interest rate of 8.95%. In addition to the mortgage interest rate estimate derived from this regression analysis, HVS International constantly monitors the terms of hotel mortgage loans made by our institutional lending clients. In the past year, we have noted an increase in the availability of debt financing, and many lenders have returned to the market. The current level of lending activity represents a significant increase from the restricted environment of the early 1990s. Nonetheless, the market for hotel mortgage loans remains somewhat tight, particularly when compared to the conditions that prevailed in the mid-to late 1980s. In the current lending climate, strong hotel projects that are structured on an economic basis can secure mortgage financing at interest rates ranging from 8% to 11%, depending on the property, location, affiliation, and operator. In the 1980s, when hotel mortgages were widely available, loan-to-value ratios typically ranged from 75% to 80%. Amortization schedules were generally based on 30 years, although the term of the loan was more likely to be seven to ten years. The few loans that were underwritten in the early 1990s were based on far more stringent parameters: loan-to-value ratios declined to a range of 50% to 65%, and amortization periods of 20 to 25 years were most common. With the recent reemergence of hotel financing, loan-to-value requirements and amortization schedules have loosened somewhat. At present, we find HVS International, Mineola, New York Income Capitalization Approach 129 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= that lenders who are active in the market are using loan-to-value ratios of 65% to 75%, and amortization periods of 25 to 30 years. The exact terms offered depend on specific factors such as the property's location, the age and quality of the physical facility, local hostelry market conditions, and (perhaps more significantly) the profile of the borrower. The strongest projects typically command the highest loan-to-value ratios. Based on the preceding analysis of the current lodging industry mortgage market and adjustments for specific factors such as the property's location and conditions in the local hotel market, it is our opinion that a 9.5% interest, 20-year amortization mortgage with a 0.104844 constant is appropriate for the subject property. We believe that a mortgage lender will lend up to 70% of the hotel's market value as determined by this appraisal. Equity Component The remaining capital required for a hotel investment generally comes from the equity investor. The rate of return that an equity investor expects over a ten-year holding period is known as the equity yield. Unlike the equity dividend, which is a short-term rate of return, the equity yield specifically considers a long-term holding period (generally ten years), annual inflation- adjusted cash flows, property appreciation, mortgage amortization, and proceeds from a sale at the end of the holding period. It is difficult to quantify the rate of return required by equity investors who are seeking to purchase hotel properties. To establish an appropriate equity yield rate, HVS International uses two sources of data: past appraisals, and investor interviews. Past Appraisals - During the past 12 months, HVS International has appraised more than 400 hotels, including properties located in most major national markets. Each appraisal used a similar mortgage-equity approach in which income is projected and then discounted to a current value at rates reflecting the cost of debt and equity capital. In the case of hotels that were sold subsequent to our valuations, we are able to determine an appropriate equity yield rate by excluding incentive management fees from the projection of income and expense, inserting the projection into a valuation model, and adjusting the appraised value to reflect the actual sales price by modifying the return assumptions. The following table shows a representative sample of hotels that were sold shortly after we appraised them, along with the imputed equity return based on our valuation approach. HVS International, Mineola, New York Income Capitalization Approach 130 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-28 Sample of Hotels Sold - --------------------------------------------------------------------------------
No. of Date of Overall Total Property Equity Hotel City and State Rooms Sale Sales Price Rate Yield Yield - ----------------------------------------------------------------------------------------------------------------------------- Ritz-Carlton Phoenix, AZ 281 2/94 $ 23,000,000 11.0% 14.6% 21.7% Marriott Marina Fort Lauderdale, FL 580 2/94 40,000,000 12.2 16.4 26.7 Holiday Inn Edison, NJ 274 3/94 11,803,000 7.8 17.0 26.3 Crescent Hotel Phoenix, AZ 342 3/94 26,000,000 6.5 7.2 2.2 Checkers Hotel Kempinski Los Angeles, CA 173 4/94 12,750,000 3.0 18.3 27.0 Best Western Fireside Inn Cambria, CA 46 4/94 3,377,000 11.7 15.8 24.3 Phoenician Resort Phoenix, AZ 580 4/94 224,000,000 6.6 9.3 8.9 Newark-Fremont Hilton Newark, CA 300 5/94 8,950,000 8.8 14.9 20.7 Radisson Inn Orlando, FL 299 5/94 11,150,000 12.9 18.0 28.2 Westin Kauai Lihue, Kauai, HI 840 6/94 97,400,000 (1.9) 8.1 7.2 Residence Inn Binghamton, NY 72 6/94 6,325,000 10.8 13.9 21.9 Hotel Millenium New York, NY 561 6/94 75,000,000 9.5 14.1 23.0 Best Western Otay Valley Chula Vista, CA 120 7/94 2,350,000 13.2 21.1 31.8 Hampton Inn Islandia, NY 121 7/94 6,572,000 12.6 16.6 28.2 Hampton Inn Willow Grove, PA 150 7/94 10,220,000 11.0 14.3 23.0 Hampton Inn West Palm Beach, FL 136 7/94 4,220,000 10.8 10.8 14.3 Hampton Inn Naples, FL 107 7/94 5,700,000 11.4 11.5 24.9 Hampton Inn Albany, NY 126 7/94 9,204,000 9.3 11.5 15.8 Marriott Hotel South Bend, IN 299 7/94 11,500,000 10.5 13.2 18.9 Marriott SFO Burlingame, CA 684 8/94 61,700,000 10.2 13.2 19.0 Westfields Conference Center Chantilly, VA 340 8/94 46,000,000 12.3 15.9 25.3 Radisson Mark Resort Vail, CO 349 9/94 25,200,000 8.9 15.8 24.1 Marriott East Side New York, NY 664 10/94 55,000,000 8.5 9.7 11.1 Marriott Resort Vail, CO 349 10/94 25,200,000 14.2 18.9 30.5 Marriott Quorum Addison, TX 547 10/94 29,815,000 13.5 18.2 31.8 Sheraton Hotel Hasbrouck Heights, NJ 338 11/94 10,450,000 18.3 21.1 30.7 Sheraton Inn Napa, CA 191 12/94 9,968,000 8.9 13.7 19.8 Marriott Fisherman's Wharf San Francisco, CA 255 12/94 27,755,000 10.8 13.4 19.4 Marriott Hotel Portland, OR 503 12/94 45,000,000 12.9 17.4 30.0 Radisson Inn Springfield, MO 199 12/94 5,800,000 8.2 10.1 11.3 Williamsburg Hilton Williamsburg, VA 291 12/94 15,000,000 15.4 19.0 32.0 Marriott Tech Center Denver, CO 625 12/94 36,000,000 13.7 16.4 27.1 Holiday Inn Sunspree Singer Island, FL 222 12/94 11,900,000 8.6 10.6 12.4 The Plaza New York, NY 805 6/95 325,000,000 7.0 11.0 14.0 Fullerton Suites Fullerton, CA 96 5/95 5,000,000 12.9 18.7 28.5 Residence Inn Baton Rouge, LA 80 6/95 6,518,000 12.7 14.8 21.2 Residence Inn Overland Park, KS 112 6/95 8,500,000 8.9 14.7 20.8 Residence Inn Des Moines, IA 112 6/95 7,660,000 9.8 14.1 19.6 Residence Inn Hunt Valley, MD 96 6/95 6,580,000 12.3 13.6 18.3 Residence Inn Kansas City, MO 112 6/95 6,560,000 10.4 13.2 19.8 Residence Inn Lincoln, NE 120 6/95 7,100,000 10.0 13.7 18.5 Embassy Suites Schaurmburg, IL 209 12/95 17,800,000 10.0 13.5 18.9 Marriott Hotel Andover, MA 293 12/95 24,000,000 9.7 13.5 19.2 Doubletree Suites Valley Forge, PA 229 12/95 28,500,000 10.7 14.2 15.5 Marriott Hotel Tysons Corner, VA 390 12/95 41,100,000 10.7 13.1 18.0 Marriott Hotel Warner Center, CA 461 12/95 57,900,000 6.2 11.6 14.2 Hilton at the Club Pleasanton, CA 294 12/95 22,000,000 10.5 13.4 17.0
Source: HVS International - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 131 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Investor Interviews - HVS International is in constant contact with numerous institutional and individual hotel investors. This source of equity funds has definite return requirements that can be expressed as an equity yield rate based on a ten-year projection of net income before incentive management fees but after debt service. Based on our surveys and investor interviews, the following table illustrates the range of equity yields generally required by individual and institutional investors. ================================================================================ Table 10-29 Equity Yield Requirements - -------------------------------------------------------------------------------- Source Equity Yield Requirement ------ ------------------------ Individual 20% - 24% Institution 18% - 22% - -------------------------------------------------------------------------------- Based on the assumed 70% loan-to-value ratio, the risk inherent in achieving the projected income stream, and the age, condition, and anticipated market position of the subject property, it is our opinion that an equity investor is likely to require an equity yield rate of 21% before payment of incentive management fees. This estimate is well supported by the equity yield requirements presented previously. Terminal Capitalization Rate Inherent in this valuation process is the assumption of a sale at the end of the ten-year holding period. The estimated reversionary sales price as of that date is calculated by capitalizing the projected 11th-year net income by an overall terminal capitalization rate. A percentage for the seller's brokerage and legal fees is deducted from this sales price, and the net proceeds to the equity interest (also known as the equity residual) are calculated by deducting the outstanding mortgage balance from the reversion. To estimate a property's reversionary value, the appraiser must select a terminal capitalization rate and an allocation for brokerage and legal fees. The terminal capitalization rate is an overall rate that is applied to one stabilized year, and thus, it inherently incorporates the cost of debt and equity capital. The terminal capitalization rate can be derived through a mortgage and equity band of investment technique which calculates the weighted average cost of the capital used in a hotel investment. Combining the mortgage financing terms derived previously (namely, a 70% loan-to-value ratio and a HVS International, Mineola, New York Income Capitalization Approach 132 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 0.104844 debt service constant) with a cash-on-cash equity dividend rate of 12% produces the following overall capitalization rate. Percent of Rate of Weighted Value Return Average ---------- ------- -------- Mortgage 70 x 0.10484 = 7.33905 Equity 30 x 0.12000 = 3.60000 -------- Overall Capitalization Rate 10.93905 Because this overall rate will be used to capitalize net income ten years from the date of value, an upward adjustment is appropriate to reflect the uncertainty inherent in this extended period. For the purpose of this valuation, we will use a terminal capitalization rate of 11%. As previously discussed, a sale of the property triggers a reassessment of the hotel. In order to recognize the impact of the change in the assessment which would result from the assumed sale at the end of the tenth year, we have added the tax rate to the calculated terminal cap rate. The resulting "loaded" tax rate will be applied to the 11th-year net income before property taxes. As a point of reference, the terminal capitalization rate can be compared to the going-in rate implied by the subject property's estimated value. The going-in rate reflects the capitalization rate that would be applicable if the hotel were operating at a stabilized level as of the date of value. This rate is calculated by dividing the stabilized net income (expressed in current dollars as of the date of value) by the value indicated by the income capitalization approach. Generally, the terminal capitalization rate is approximately 100 to 200 basis points above the going-in rate. Summary of Valuation Variables The following table summarizes the valuation variables that have been used to estimate the subject property's value via the income capitalization approach. HVS International, Mineola, New York Income Capitalization Approach 133 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-30 Summary of Valuation Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Ten-Year Forecast Loan-to-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.104844 Equity Yield Ye 21.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 12.4% - -------------------------------------------------------------------------------- Valuation of the Mortgage and Equity Components The valuation of the mortgage and equity components is accomplished through use of an algebraic equation that calculates the exact amount of debt and equity that the hotel will be able to support based on the anticipated cash flow (derived from the forecast of income and expense) and the specific return requirements demanded by the mortgage lender (interest) and the equity investor (equity yield). The equation and the calculations associated with this simultaneous valuation formula are set forth in the Addenda to this report. Using the variables summarized above, we estimate the value of the subject property via the income capitalization approach to be $15,448,000. Proof of Value The value is proven by calculating the yields to the mortgage and equity components during the projection period. If the mortgagee achieves a 9.5% yield and the equity yield is 21%, then $15,448,000 is the correct value by the income capitalization approach. Using the assumed financial structure set forth in the previous calculations, market value can be allocated between the debt and equity as follows. Mortgage Component (70%) $ 10,814,000 Equity Component (30%) 4,634,000 ------------ Total $ 15,448,000 HVS International, Mineola, New York Income Capitalization Approach 134 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The annual debt service is calculated by multiplying the mortgage component by the mortgage constant. Mortgage Component $10,814,000 Mortgage Constant 0.104844 ----------- Annual Debt Service $1,133,779 The cash flow to equity is calculated by deducting the debt service from the projected net income before debt service. ================================================================================ Table 10-31 Forecast of Net Income to Equity - -------------------------------------------------------------------------------- Net Income Available for Total Annual Net Income Year Debt Service Debt Service to Equity - -------------------------------------------------------------------------------- 1997 $1,814,000 - $1,134,000 = $680,000 1998 1,718,000 - 1,134,000 = 584,000 1999 1,762,000 - 1,134,000 = 628,000 2000 1,828,000 - 1,134,000 = 694,000 2001 1,895,000 - 1,134,000 = 761,000 2002 1,965,000 - 1,134,000 = 831,000 2003 2,037,000 - 1,134,000 = 903,000 2004 2,112,000 - 1,134,000 = 978,000 2005 2,189,000 - 1,134,000 = 1,055,000 2006 2,273,000 - 1,134,000 = 1,139,000 - -------------------------------------------------------------------------------- The equity residual at the end of the tenth year is calculated as follows. Reversionary Value ($2,546,000 / 0.124) $20,607,000 Less: Brokerage and Legal Fees 618,000 Mortgage Balance 9,048,000 ----------- Net Sale Proceeds to Equity $10,941,000 The overall property yield (before debt service), the yield to the lender, and the yield to the equity position have been calculated by computer with the following results. HVS International, Mineola, New York Income Capitalization Approach 135 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-32 Overall Property Yields - -------------------------------------------------------------------------------- Projected Yield (Internal Rate of Return) Position Value Over 10-Year Holding Period ------------------------------------------------------------- Total Property $15,448,000 13.8% Mortgage 10,814,000 9.4 Equity 4,634,000 21.0 Note: Whereas the mortgage constant and value are calculated on the basis of monthly mortgage payments, the mortgage yield in this proof assumes single annual payments. As a result, the proof's derived yield may be slightly less than that actually input. - -------------------------------------------------------------------------------- The following tables demonstrate that the property receives its anticipated yields, proving that the $15,448,000 value is correct, based on the assumptions used in this approach. ================================================================================ Table 10-33 Total Property Yield - -------------------------------------------------------------------------------- Net Income Before Present Worth of $1 Discounted Year Debt Service Factor @ 13.8% Cash Flow - -------------------------------------------------------------------------------- 1997 $ 1,814,000 x 0.878510 = $ 1,594,000 1998 1,718,000 x 0.771779 = 1,326,000 1999 1,762,000 x 0.678016 = 1,195,000 2000 1,828,000 x 0.595643 = 1,089,000 2001 1,895,000 x 0.523278 = 992,000 2002 1,965,000 x 0.459705 = 903,000 2003 2,037,000 x 0.403855 = 823,000 2004 2,112,000 x 0.354791 = 749,000 2005 2,189,000 x 0.311687 = 682,000 2006 22,262,000* x 0.273820 = 6,096,000 ---------- Total Property Value $15,449,000 *10th year net income of $2,273,000 plus sales proceeds of $19,989,000 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 136 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-34 Mortgage Component Yield - -------------------------------------------------------------------------------- Total Annual Present Worth of $1 Discounted Year Debt Service Factor @ 9.4% Cash Flow - -------------------------------------------------------------------------------- 1997 $1,134,000 x 0.913796 = $ 1,036,000 1998 1,134,000 x 0.835024 = 947,000 1999 1,134,000 x 0.763041 = 865,000 2000 1,134,000 x 0.697264 = 791,000 2001 1,134,000 x 0.637158 = 723,000 2002 1,134,000 x 0.582232 = 660,000 2003 1,134,000 x 0.532042 = 603,000 2004 1,134,000 x 0.486178 = 551,000 2005 1,134,000 x 0.444267 = 504,000 2006 10,181,000* x 0.405970 = 4,133,000 ---------- Value of Mortgage Component $10,813,000 *10th year debt service of $1,134,000 plus outstanding mortgage balance of $ 9,048,000 - -------------------------------------------------------------------------------- ================================================================================ Table 10-35 Equity Component Yield - -------------------------------------------------------------------------------- Net Income Present Worth of $1 Discounted Year to Equity Factor @ 21.0% Cash Flow - -------------------------------------------------------------------------------- 1997 $680,000 x 0.826473 = $ 562,000 1998 584,000 x 0.683058 = 399,000 1999 628,000 x 0.564530 = 355,000 2000 694,000 x 0.466569 = 324,000 2001 761,000 x 0.385607 = 293,000 2002 831,000 x 0.318694 = 265,000 2003 903,000 x 0.263392 = 238,000 2004 978,000 x 0.217686 = 213,000 2005 1,055,000 x 0.179912 = 190,000 2006 12,080,000* x 0.148693 = 1,796,000 ---------- Value of Equity Component $ 4,635,000 *10th year net income to equity of $1,139,000 plus sales proceeds of $10,941,000 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 137 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Valuation Method Two: Discounted Cash Flow The total property yield derived from the previous valuation method was 13.87%. After reviewing the total property yields indicated by recent hotel sales, it is our opinion that a 14% discount factor would be appropriate for the Holiday Inn Select. The following table illustrates the discounted cash flow analysis using a 14.0% discount factor. ================================================================================ Table 10-36 Discounted Cash Flow Analysis - -------------------------------------------------------------------------------- Discount Net Factor Discounted Calendar Year Income @ 14.0% Cash Flow --------------------------------------------------- 1997 $ 1,814,000 0.87719 $ 1,591,228 1998 1,718,000 0.76947 1,321,945 1999 1,762,000 0.67497 1,189,300 2000 1,828,000 0.59208 1,082,323 2001 1,895,000 0.51937 984,204 2002 1,965,000 0.45559 895,228 2003 2,037,000 0.39964 814,061 2004 2,112,000 0.35056 740,381 2005 2,189,000 0.30751 673,135 2006 22,261,830 * 0.26974 6,004,991 Estimated Market Value: $15,296,795 (Say:) $15,300,000 Reversion Analysis 11th Year's Net Income $2,546,000 Capitalization Rate 12.4% Total Sales Proceeds $20,607,042 Less: Broker & Legal @ 3.0% 618,211 ----------- Net Sales Proceeds $19,988,830 * 10th year net income of $2,273,000 plus sales proceeds of $19,988,830 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 138 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Conclusion Based on our extensive experience in the hotel industry and comprehensive support provided by literature published by the Appraisal Institute, it is our opinion that the valuation procedure embodied by Method One most closely reflects the investment rationale of typical hotel buyers. As stated in the textbook entitled, Hotels and Motels: A Guide to Market Analysis, Investment Analysis and Valuations,(1) Method Two (which discounts the projected net income and reversion using an overall discount rate, or total property yield) "does not consider the impact of mortgage debt, leverage and the specific equity demands of typical hotel investors. . . . This technique is simple but less reliable because the derivation of the discount rate has little support." In light of this consideration, we have relied on the $15,448,000 value conclusion indicated by Method One. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. HVS International, Mineola, New York Sales Comparison Approach 139 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 11. Sales Comparison Approach The sales comparison approach is based on the assumption that an informed purchaser will pay no more for a property than the cost to acquire an existing property with equal utility. This approach estimates market value by considering the sales prices indicated by recent transactions involving properties that are similar to the property being appraised. Dissimilarities are resolved with appropriate adjustments; these differences may pertain to the date of sale, the age of the property, location, construction, condition, layout, equipment, size, or external economic factors. The reliability of the sales comparison approach depends on three factors: 1. the availability of timely, comparable sales data; 2. an understanding of the true terms of the sales and the motivation of the buyer and seller; 3. the degree of comparability, or the extent of the adjustments needed to reflect differences between the subject property and the comparable property. In appraising lodging facilities, it is often difficult to find an adequate number of recent sales involving hotels that are truly comparable to the subject property. Consequently, it may be necessary to consider transactions involving properties in different market areas, and the required adjustments greatly diminish the reliability of the conclusions. Moreover, it is virtually impossible for an observer to determine the true motivations of the buyers and sellers involved in transactions. Hotel acquisition often represents a highly ego-driven process in which a number of external, non-market factors influence the purchase price. Unless the appraiser can quantify these influences, there is no way of knowing whether the purchase price paid actually reflects market value. A final consideration is the degree of similarity between the subject property and the comparable; in most cases, the differences are significant enough to require numerous subjective and unsubstantiated adjustments. Each adjustment represents a potential for error, HVS International, Mineola, New York Sales Comparison Approach 140 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= and thus diminishes the reliability of this approach. As a result of these shortcomings, the use of the sales comparison approach in valuing hotels is primarily as a check against the value indicated by the income capitalization approach. Hotel values declined in many areas of the country during the late 1980s and early 1990s, although a rebound began in 1994 and 1995. The downturn, which began in most markets in 1988, was largely attributable to lower operating incomes caused by an oversupply of new hotel rooms constructed during the mid-1980s. Overbuilding resulted in flat or declining average rates and occupancies, which caused revenues to fall. A number of other factors exacerbated the situation. The national recession caused a drop in demand in many markets during the early 1990s, and the Persian Gulf War created a virtual freeze on travel in the beginning of 1991, further limiting hotel demand. Operating costs continued to rise despite poor market conditions, resulting in a decline in the net operating income of hotels throughout the nation. Because operating costs have a large fixed component, many lodging facilities experienced precipitous drops in net income. As bottom-line profits eroded, many hotels were unable to meet debt service, and hundreds of properties entered foreclosure or bankruptcy. Lenders and government agencies soon became hotel owners. Because most financial institutions were preoccupied with their distressed real estate, very little mortgage capital was available and the nation suffered from a well-publicized credit crunch. Most hotel transactions that occurred during the early 1990s were financed by the property owners, who, in most cases, were lenders. In the early 1990s, the primary market participants were owner-operators with the expertise to turn around under-performing properties. Hotels were out of favor with passive investors as a result of the industry's poor operating performance and the uncertainty of future appreciation. The wide disparity in buyer and seller expectations also limited the number of transactions. Many sellers were unwilling to accept the fact that the market value of their hotel investments had declined below the cost of the project or the original investment. Moreover, many owners were faced with a significant tax burden upon sale, further reducing their willingness to settle for a price that was below the original acquisition cost. As a result of these market forces, there was very little sales activity involving large, high-quality hotels. The primary difficulty was the lack of HVS International, Mineola, New York Sales Comparison Approach 141 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= properties available for sale; owners who were not forced to sell opted to wait for prices to recover. The few hotels that did enter the market generally attracted 15 to 20 interested bidders, mostly consisting of owner-operators. As a result of the competition for these few assets, the prices of better-quality hotels began to escalate rapidly. In response, more sellers have been encouraged to place their products on the market. An indicator of this market trend is the number of hotel sales that have occurred during the past few years. HVS International tracks major hotel transactions of more than $10,000,000 on an annual basis. In 1992, the number of major transactions was 67; a slightly lower level of 52 was registered in 1993. This total increased significantly (to 92) in 1994, and the 1995 total is estimated to have been 104. In tandem with escalating prices, hotels are again being considered by traditional financing sources, which had virtually abandoned the hospitality industry by the early 1990s. Although many lenders are still approaching the market with a high degree of caution, it is now possible to obtain third-party financing for hotel transactions. The mortgage loans that are now being made are subject to fairly stringent requirements: loan-to-value ratios remain in the 65% to 75% range. The qualification of the borrower is also a crucial consideration for most lenders. We believe that the upward trend in both pricing and sales activity will continue as financing becomes more available and additional buyers (particularly passive investors) enter the market. Consequently, it is important to consider the date of the transactions used in the sales comparison approach. When the comparable sales are not recent enough to provide an accurate picture of the current market, it may be necessary to make upward adjustments to the values indicated by the sales comparison and income capitalization approaches in recognition of the recent escalation. Comparable Sales Based on information provided by the Hospitality Market Data Exchange and compiled by the six offices of HVS International, the following transactions involved hotels that appear to have some degree of comparability to the subject property. HVS International, Mineola, New York Sales Comparison Approach 142 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #1: Property: Hilton Hotel Location: Ontario, CA Date of Sale: November, 1996 Sales Price: $18,500,000 Grantor: MS Vickers, LP Grantee: HEI Hotels Year Opened: 1985 Number of Rooms: 308 Price per Room: $63,065 Confirmed By: HEI Hotels Terms of the sale: All-cash transaction Sale #2: Property: Doubletree Hotel Location: Santa Rosa, CA Date of Sale: October, 1996 Sales Price: $15,500,000 Grantor: Santa Rosco Grantee: HEI Hotels Year Opened: 1985 Number of Rooms: 245 Price per Room: $63,265 Confirmed By: HEI Hotels Terms of the sale: All-cash transaction HVS International, Mineola, New York Sales Comparison Approach 143 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #3: Property: Del Mar Hilton Location: Del Mar, CA Date of Sale: March, 1996 Sales Price: $14,450,000 Grantor: Travelers Insurance Group Grantee: Patriot American Hospitality, Inc. Year Opened: 1987 Number of Rooms: 245 Price per Room: $58,978 Confirmed By: Patriot American Hospitality, Inc. Sale #4: Property: Radisson Plaza Location: Irvine, CA Date of Sale: February, 1996 Sales Price: $20,000,000 Grantor: N/A Grantee: Equistar Year Opened: N/A Number of Rooms: 289 Price per Room: $69,204 HVS International, Mineola, New York Sales Comparison Approach 144 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #5: Property: Mondrian Hotel Location: West Hollywood, California Date of Sale: February, 1995 Sales Price: $17,400,000 Grantor: Crosslands FSB Grantee: Morgan Hotel Group/Ian Schrager Year Opened: N/A Number of Rooms: 234 Price per Room: $74,359 Confirmed By: Hotels Motels Brokers of America Comments: Converted from apartments in 1985. Sale #6: Property: Holiday Inn Park Center Plaza Location: San Jose, California Date of Sale: November, 1995 Sales Price: 14,400,000 Grantor: Holiday Inn Park Center Plaza, c/o Mayfair Packing Company Grantee: America General Hospitality Year Opened: N/A Number of Rooms: 235 Price per Room: $52,766 HVS International, Mineola, New York Sales Comparison Approach 145 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= In addition to considering the above recent transactions, we have also reviewed the sale of the subject property, which occurred in October of 1994. The details of this transaction are summarized as follows. Subject Property: Property: Holiday Inn Select Location: 1150 South Beverly Drive Beverly Hills, California Date of Sale: October, 1994 Sales Price: $6,100,000 Grantor: Ramada Assured Income Associates, L.P. Grantee: BH California Hotel Limited Partnership Year Opened: 1973 Number of Rooms: 260 Price per Room: $23,462 Confirmed By: Ashford Financial Corporation In analyzing the sale of the subject property, it is important to consider the terms and conditions pertaining to the transaction. According to information provided by Ashford Financial Corporation, the subject property was one of six Ramada Inns purchased as a package from an investment partnership sponsored by Lehman Brothers. The above-listed price represents an allocation of the total package price rather than a negotiated value for this single asset. The total package price was $20,250,000, and was paid in cas, using all equity financing. At the time of the transaction, the group of hotels was generating virtually no operating income, and all were in extremely poor condition. The previous owners were reportedly strongly motivated to sell due to the poor performance of the hotels. Based on our understanding of the circumstances of this transaction, we do not believe that this sale was reflective of market value. The relevance of the previous transaction involving the subject property is also undermined by the materially change in market conditions which occurred between the date of this sale and the present date of value. Areawide occupancy and average rate have improved dramatically in the intervening months, and are forecast to continue this positive trend. As previously discussed, the market for hotel investments has also improved significantly, due to changes in lender and investor attitudes. Finally, the HVS International, Mineola, New York Sales Comparison Approach 146 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= property itself has undergone a significant renovation, with a total of $3.2 million spend on upgrading the facilities and amenities. For these reasons, we are of the opinion that the October, 1994 sale involving the subject property is not a reliable indicator of the current value of the hotel. Conclusion Although the sales comparison approach may be useful in providing a value range and reflecting certain market characteristics, its applicability is limited by the numerous possible points of difference between the subject property and other hotels that have sold in recent years. These factors may include location, access, size, services and facilities offered, market conditions, chain affiliation, market orientation, management, rate structure, age, physical condition, date of sale, the highest and best use of the land, and the anticipated profitability of the operation. Circumstances surrounding a sale, such as financing terms, tax considerations, income guarantees, sales of partial interests, duress on the part of the buyer or seller, or a particular deal structure can also cause a disparity between the sales price and pure market value. Moreover, it is often difficult to determine the marketing periods that were necessary to consummate the transactions. It is extremely difficult to quantify the appropriate adjustment factors accurately because of their number and complexity, as well as the difficulty in obtaining specific, detailed information. Any attempt to manipulate the necessary adjustments is insupportable and purely speculative. Because appraisers are expected to reflect the analytical processes and actions of typical buyers and sellers rather than to create a highly subjective valuation approach, the investment rationale of hotel owners is an essential consideration. As specialists in the valuation of hotels, we find that typical buyers purchase properties based on a thorough analysis of the anticipated economic benefits of property ownership, rather than on historical sales data. In light of these factors, it is our opinion that the sales comparison approach is unsuitable for indicating a specific estimate of the subject property's market value; however, this approach may indicate a range of values that can be used to test the reasonableness of the value indicated by the income capitalization approach. Excluding the prior sale of the subject property, the sales prices range from approximately $52,800 to $74,400 per room, or $13,700,000 to $19,300,000 for the 260-unit subject property. The income capitalization approach indicates a value of $15,448,000, which falls within this range. HVS International, Mineola, New York Cost Approach 147 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 12. Cost Approach The cost approach is founded on the principle of substitution, which implies that no prudent person will pay more for a property than the amount to acquire a site and construct a building of equal desirability and utility without undue delay. This approach estimates market value by first calculating the current cost of replacing the improvements. Appropriate deductions are made for depreciation resulting from physical deterioration, functional obsolescence, and external (economic) obsolescence, and the land value is added to the depreciated replacement cost to provide an estimate of market value. The cost approach employs the following steps. 1. The current replacement or reproduction cost is estimated. 2. Land value is estimated using techniques such as allocation, extraction, or ground rent capitalization. 3. Accrued depreciation, which can be divided into physical deterioration, functional obsolescence, and external obsolescence, is estimated. 4. Total depreciation is deducted from the subject property's replacement cost, and the land value is added to arrive at an estimate of value via the cost approach. When forming their purchase decisions regarding existing properties, market participants tend to consider the cost of developing a new hotel with optimal physical and functional utility. External conditions, such as the depressed market for real estate (and hotels in particular), can cause a property to be worth less than its replacement cost as new. The task of estimating the loss in value resulting from incurable functional and external obsolescence is highly subjective. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements age and begin to deteriorate, the loss in value resulting from physical obsolescence HVS International, Mineola, New York Cost Approach 148 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= becomes increasingly difficult to quantify accurately. Loss in value attributable to functional obsolescence can be even more difficult to determine. The subject property was constructed in 1973, and will be approximately 23 years old as of the date of this appraisal. The property is in moderate to good physical condition after undergoing a $3.2-million renovation in 1995. The depressed hotel market conditions that prevailed in the late 1980s and the early 1990s have also led to a degree of external obsolescence. In our opinion, it is impossible to identify and quantify the impact of these factors on the property's value with any accuracy, so we will estimate only the replacement cost of the subject property. Replacement Cost Replacement cost is the current construction cost of a building with the same utility as the subject property, but built with modern materials and according to current construction and design standards. For the purpose of estimating the replacement cost of the subject property, we have used a hotel development cost survey conducted by HVS International. This survey is published annually in a newsletter entitled, The Hotel Valuation Journal, and appeared in the May, 1995, issue of Lodging Hospitality. The survey presents the range of per-room costs associated with various components of hotel development, including the improvements, the furniture, fixtures, and equipment, pre-opening expenses, and operating capital. Statistics are compiled for three broad categories of hotels: luxury, standard, and economy. The results of this survey are presented in the following table. HVS International, Mineola, New York Cost Approach 149 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 12-1 Hotel Development Cost Survey (Amounts per Room) - --------------------------------------------------------------------------------
Improvements Furniture & Equipment Pre-Opening Operating Capital Total Percent Change - ------ ------------------------------------------------------------------ ---------------------------------------------------------- 1976 Luxury $32,000 - $55,000 $5,000 - $10,000 $1,000 - $2,000 $1,000 - $1,500 $39,000 - $68,500 -- - -- Standard 20,000 - 32,000 3,000 - 6,000 750 - 1,000 750 - 1,000 24,500 - 40,000 -- - -- Economy 8,000 - 15,000 2,000 - 4,000 500 - 1,000 500 - 750 11,000 - 20,750 -- - -- 1979 Luxury 36,000 - 65,000 8,000 - 15,000 1,500 - 3,000 1,500 - 2,000 47,000 - 85,000 6.8 - 8.0 Standard 25,000 - 36,000 5,000 - 10,000 1,000 - 2,000 1,000 - 1,500 32,000 - 49,500 10.2 - 7.9 Economy 10,000 - 20,000 3,000 - 5,000 750 - 1,000 750 - 1,000 14,500 - 27,000 10.6 - 10.0 1981 Luxury 45,000 - 80,000 10,000 - 20,000 2,000 - 3,500 2,000 - 2,500 59,000 - 106,000 12.8 - 12.4 Standard 25,000 - 40,000 7,000 - 13,000 1,200 - 2,500 1,200 - 2,000 34,400 - 57,500 3.8 - 8.1 Economy 13,000 - 25,000 4,000 - 7,000 700 - 1,200 900 - 1,200 18,600 - 34,400 14.1 - 13.7 1983 Luxury 55,000 - 100,000 12,500 - 20,000 2,300 - 4,000 2,000 - 2,800 71,800 - 126,800 10.8 - 9.8 Standard 35,000 - 50,000 9,000 - 15,000 1,400 - 3,000 1,300 - 2,200 46,700 - 70,200 17.9 - 11.0 Economy 18,000 - 32,000 5,000 - 8,000 800 - 1,500 900 - 1,300 24,700 - 42,800 16.4 - 12.2 1985 Luxury 60,000 - 115,000 13,400 - 30,000 3,000 - 5,000 2,100 - 3,100 78,500 - 153,100 4.7 - 10.4 Standard 38,000 - 57,000 9,500 - 16,500 1,900 - 3,600 1,500 - 2,500 50,900 - 79,600 4.5 - 6.7 Economy 20,000 - 36,000 5,000 - 8,800 1,000 - 1,700 1,000 - 1,500 27,000 - 48,000 4.7 - 6.1 1986 Luxury 62,000 - 120,000 13,700 - 30,600 3,100 - 5,200 2,300 - 3,100 81,100 - 158,900 3.3 - 3.8 Standard 39,000 - 60,000 9,700 - 16,800 2,000 - 3,800 1,500 - 2,600 52,200 - 83,200 2.6 - 4.5 Economy 21,000 - 37,000 5,100 - 9,000 1,000 - 1,800 1,100 - 1,500 28,200 - 49,300 4.4 - 2.7 1987 Luxury 63,000 - 122,000 13,800 - 30,900 3,300 - 5,500 2,300 - 3,200 82,400 - 161,600 1.6 - 1.7 Standard 40,000 - 61,000 9,800 - 16,800 2,100 - 3,900 1,500 - 2,600 53,400 - 84,300 2.3 - 1.3 Economy 21,000 - 39,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 28,400 - 51,400 0.7 - 4.3 1988 Luxury 65,000 - 125,000 14,000 - 31,000 3,300 - 5,500 2,300 - 3,200 84,600 - 164,700 2.7 - 1.9 Standard 41,000 - 63,000 10,000 - 17,100 2,100 - 3,900 1,500 - 2,600 54,600 - 86,600 2.2 - 2.7 Economy 22,000 - 40,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 29,400 - 52,400 3.5 - 1.9 1989 Luxury 66,000 - 126,000 15,000 - 32,000 3,300 - 5,500 2,300 - 3,200 86,600 - 166,700 2.4 - 1.2 Standard 41,000 - 64,000 10,500 - 18,000 2,100 - 3,900 1,500 - 2,600 55,100 - 88,500 0.9 - 2.2 Economy 22,000 - 40,000 5,500 - 9,700 1,100 - 1,800 1,100 - 1,500 29,700 - 53,000 1.0 - 1.1 1990 Luxury 67,000 - 128,000 15,400 - 33,000 3,500 - 5,700 2,500 - 3,500 88,400 - 170,200 2.1 - 2.1 Standard 42,000 - 65,000 10,800 - 18,500 2,200 - 4,000 1,600 - 2,800 56,600 - 90,300 2.7 - 2.0 Economy 22,500 - 41,000 5,600 - 10,000 1,200 - 1,800 1,200 - 1,600 30,500 - 54,400 2.7 - 2.6 1991 Luxury 65,000 - 122,000 14,500 - 31,500 3,700 - 5,900 2,600 - 3,600 85,800 - 163,000 (2.9) - (4.2) Standard 40,000 - 63,000 10,000 - 17,800 2,300 - 4,200 1,700 - 2,900 54,000 - 87,900 (4.6) - (2.7) Economy 21,000 - 39,000 5,000 - 9,500 1,300 - 2,000 1,300 - 1,700 28,600 - 52,200 (6.2) - (4.0) 1992 Luxury 64,000 - 120,000 14,200 - 30,900 3,800 - 6,100 2,700 - 3,700 84,700 - 160,700 (1.3) - (1.4) Standard 39,000 - 62,000 9,800 - 17,400 2,300 - 4,400 1,800 - 3,000 52,900 - 86,800 (2.0) - (1.3) Economy 21,000 - 38,000 4,900 - 9,300 1,400 - 2,100 1,300 - 1,800 28,600 - 51,200 0.0 - (1.9) 1993 Luxury 63,000 - 119,000 14,000 - 30,500 3,900 - 6,200 2,800 - 3,800 83,700 - 159,500 (1.2) - (0.7) Standard 39,000 - 61,000 9,700 - 17,200 2,300 - 4,500 1,800 - 3,000 52,800 - 85,700 (0.2) - (1.3) Economy 21,000 - 38,000 4,900 - 9,200 1,400 - 2,100 1,300 - 1,800 28,600 - 51,100 0.0 - (0.2) 1994 Luxury 64,000 - 121,000 14,300 - 31,100 3,900 - 6,200 2,800 - 3,800 85,000 - 162,100 1.6 - 1.6 Standard 40,000 - 63,000 10,000 - 17,600 2,400 - 4,600 1,800 - 3,000 54,200 - 88,200 2.7 - 2.9 Economy 22,000 - 40,000 5,100 - 9,500 1,500 - 2,200 1,300 - 1,800 29,900 - 53,500 4.5 - 4.7 1995 Luxury 65,000 - 124,000 14,800 - 32,300 4,100 - 6,400 2,900 - 4,000 86,800 - 166,700 2.1 - 2.8 Standard 41,000 - 65,000 10,400 - 18,300 2,500 - 4,800 1,900 - 3,100 55,800 - 91,200 3.0 - 3.4 Economy 23,000 - 42,000 5,400 - 9,900 1,600 - 2,300 1,300 - 1,800 31,300 - 56,000 4.7 - 4.7
Average Annual Compounded Percent Change: 1976 - 1995: Luxury 4.3% - 4.8% 1986 - 1995: Luxury 0.8% - 0.5% Standard 4.4% - 4.4% Standard 0.7% - 1.0% Economy 5.7% - 5.4% Economy 1.2% - 1.4% - -------------------------------------------------------------------------------- HVS International, Mineola, New York Cost Approach 150 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= As illustrated by the previous table, hotel development costs rose significantly during the late 1970s and the early 1980s; however, the rate of increase slowed substantially in 1987. In 1991, hotel development costs declined for the first time since 1976. Further drops of as much as 2.0% were registered in 1992. Between 1986 and 1990, average annual compounded increases ranged from 1.7% to 2.5%. Costs rose slowly - at average annual compounded rates ranging from 0.5% to 1.4% - between 1986 and 1995, largely as a result of the declines in 1991, 1992, and 1993. In 1995, hotel development costs started to escalate more rapidly, reaching 4.7% in the economy segment. As more hotels are developed, we expect costs to continue to rise. Because the replacement cost tends to set the upper limit of a particular hotel's value, this figure is relevant to our analysis. We estimate the replacement cost of the subject property as follows, based on the development cost survey discussed earlier. ================================================================================ Table 12-2 Subject Property's Replacement Cost - -------------------------------------------------------------------------------- Cost No. of Hotel Cost per Room Rooms Total Cost ------------------------------------------------------------- Building $51,000 260 $13,260,000 FF&E 15,000 260 3,900,000 Pre-Opening 3,500 260 910,000 Operating Capital 2,500 260 650,000 ------------------------------------------------------------- Totals $72,000 $18,720,000 - -------------------------------------------------------------------------------- Ground Lease Approach to Land Valuation Land value may be estimated either by the sales comparison approach, using comparable land sales, or by the ground lease approach, which is based on the economic value generated by an improvement that represents the property's highest and best use. Because it is unusual to find recent sales of comparable vacant land that is slated for imminent hotel development, we have used the ground lease approach to determine the subject property's land value. Hotels are often constructed on leased land, and although lease terms differ somewhat, the basis for the rental calculation is frequently tied to a percentage of revenue. By applying a typical ground lease rental formula to the subject property's stabilized revenues, the appraiser can determine the HVS International, Mineola, New York Cost Approach 151 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= hotel's economic rent, or what is also known as the income attributable to the land. Land value is then calculated by dividing the economic rent by an appropriate capitalization rate. The self-adjusting aspect of this approach is key to its reliability. Because the rental formula is tied to a percentage of revenue that inherently reflects both the locational attributes of the site (occupancy and rate) and the allowable density of development, the resulting economic ground rent justly represents the greatest net return to the land over a given period. Because the Holiday Inn Select appears to represent the highest and best use of the property, the ground lease approach is an appropriate method of determining land value. We have researched long-term hotel ground leases in search of rental formulas that are based on a percentage of rooms revenue or on a combination of rooms, food, and beverage revenue. This analysis indicates that economic ground rents for hotels similar to the subject property typically range from 2.7% to 7.9% of rooms revenue. Although this range is quite broad, most of the formulas yield rental percentages of between 5.0% and 6.0% of rooms revenue. After considering these comparable ground leases and the locational attributes of the subject property, we believe the appropriate economic ground rental percentage is 5.5% of stabilized rooms revenue. The subject property's stabilized rooms revenue has been deflated to reflect 1996 dollars. The following calculation shows the derivation of the subject property's economic ground rent. Stabilized Rooms Revenue (in 1996 dollars) $ 4,987,748 Rent Percentage 5.50% ----------- Economic Ground Rent $ 274,326 Rent generated by a ground lease represents a fairly low-risk income flow. Because the tenant improvements typically amount to more than eight times the value of the land, the risk of default is low. When the ground lease terms are tied to rooms revenue, the landlord is also protected from the adverse effects of inflation. Based on these risk factors and the current cost of long-term capital, we estimate the appropriate ground rental overall capitalization rate at 10%. Applying this indicated capitalization rate to the subject property's economic ground rent yields the following estimate of land value. HVS International, Mineola, New York Cost Approach 152 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Economic Ground Rent $274,326 $2,743,261 ------------------------ = -------- = Capitalization 0.10 Estimated Land Value (Say) $2,700,000 A new hotel's land value typically ranges from 10% to 20% of the overall value. The estimate of land value presented above is approximately 17.3% of the subject property's total value as indicated by the income capitalization approach. Replacement Cost Combining the replacement cost of the property with the land value yields the subject property's total replacement cost. ================================================================================ Table 12-3 Total Replacement Cost - -------------------------------------------------------------------------------- Cost of the Improvements and FF&E $18,720,000 Land Value 2,740,000 ----------- Total Replacement Cost $21,460,000 - -------------------------------------------------------------------------------- If a property's replacement cost is significantly higher than the values indicated by the income capitalization and sales comparison approaches, it may indicate that an upward adjustment of these values is appropriate. This would also reduce the probability of new hotel development, which is not likely to be feasible under those conditions. This case creates an effective barrier to entry for new competition, thereby reducing the risk associated with the subject property's income-generating potential. An upward adjustment of the value indicated by the income capitalization approach is also justified by this barrier to entry. We find that knowledgeable hotel buyers generally base their purchase decisions on economic factors, such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, it is our opinion that the cost approach is inapplicable in estimating the market value of the Holiday Inn Select. However, we have estimated the subject property's replacement cost as new, which may set the upper limit of the hotel's value. HVS International, Mineola, New York Reconciliation of Value Indications 153 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 13. Reconciliation of Value Indications The reconciliation, which is the last step in the appraisal process, involves summarizing and correlating the data and procedures employed throughout the analysis. The final conclusion of value is arrived at after reviewing the estimates indicated by the income capitalization, sales comparison, and cost approaches. The relative significance, applicability, and defensibility of each indicated value is considered, and the greatest weight is given to that approach deemed most appropriate for the property being appraised. The purpose of this report is to estimate the market value of the fee simple interest in the subject property. Our appraisal involves a careful analysis of the property itself and the economic, demographic, political, physical, and environmental factors that influence real estate values. Based on the data set forth in this report, the following value indications were developed. Approach Value Indication -------- ---------------- Income Capitalization $15,448,000 Sales Comparison $13,700,000 - $19,300,000 Cost (Replacement Cost) $21,460,000 Income Capitalization Approach To estimate the subject property's value via the income capitalization approach, we analyzed the local market for transient accommodations, examined the competitive environment, projected occupancy and average rate levels, and developed a forecast of income and expense that reflects anticipated income trends and cost components through a stabilized year of operation. The subject property's projected net income before debt service was then allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component was calculated; the total of the mortgage and equity components equates to the value of the property. HVS International, Mineola, New York Statement of Assumptions and 157 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 14. Statement of Assumptions and Limiting Conditions 1. This report is to be used in whole and not in part. 2. No responsibility is assumed for matters of a legal nature, nor do we render any opinion as to title, which is assumed to be marketable and free of any deed restrictions and easements. The property is valued as though free and clear unless otherwise stated. 3. We assume that there are no hidden or unapparent conditions of the sub-soil or structures, such as underground storage tanks, that would render the property more or less valuable. No responsibility is assumed for these conditions or for any engineering that may be required to discover them. 4. We have not considered the presence of potentially hazardous materials such as asbestos, urea formaldehyde foam insulation, PCBs, any form of toxic waste, polychlorinated biphengyls, pesticides, or lead-based paints. The appraisers are not qualified to detect hazardous substances, and we urge the client to retain an expert in this field if desired. 5. The Americans with Disabilities Act (ADA) became effective on January 26, 1992. We have conducted no specific compliance survey to determine whether the subject property is operating in accordance with the various detailed requirements of the ADA. It is possible that the property does not conform to the requirements of the act, and this could have an unfavorable effect on value. Because we have no direct evidence regarding this issue, our estimate of value does not consider possible non-compliance with the ADA. HVS International, Mineola, New York Statement of Assumptions and 158 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 6. We have made no survey of the property, and we assume no responsibility in connection with such matters. Sketches, photographs, maps, and other exhibits are included to assist the reader in visualizing the property. It is assumed that the use of the land and improvements is within the boundaries of the property described, and that there is no encroachment or trespass unless noted. 7. All information, financial operating statements, estimates, and opinions obtained from parties not employed by HVS International are assumed to be true and correct. We can assume no liability resulting from misinformation. 8. Unless noted, we assume that there are no encroachments, zoning violations, or building violations encumbering the subject property. 9. The property is assumed to be in full compliance with all applicable federal, state, local, and private codes, laws, consents, licenses, and regulations (including a liquor license where appropriate), and that all licenses, permits, certificates, franchises, and so forth can be freely renewed or transferred to a purchaser. 10. All mortgages, liens, encumbrances, leases, and servitudes have been disregarded unless specified otherwise. 11. None of this material may be reproduced in any form without our written permission, and the report cannot be disseminated to the public through advertising, public relations, news, sales, or other media. 12. We are not required to testify or appear in court by reason of this analysis without previous arrangements, and only when our standard per diem fees and travel costs are paid prior to the appearance. 13. If the reader is making a fiduciary or individual investment decision and has any questions concerning the material presented in this report, it is recommended that the reader contact us. 14. We take no responsibility for any events or circumstances that take place subsequent to either the date of value or the date of our field inspection, whichever occurs first. HVS International, Mineola, New York Statement of Assumptions and 159 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 15. The quality of a lodging facility's on-site management has a direct effect on a property's economic viability and value. The financial forecasts presented in this analysis assume responsible ownership and competent management. Any departure from this assumption may have a significant impact on the projected operating results and the value estimate. 16. The estimated operating results presented in this report are based on an evaluation of the overall economy, and neither take into account nor make provision for the effect of any sharp rise or decline in local or national economic conditions. To the extent that wages and other operating expenses may advance during the economic life of the property, we expect that the prices of rooms, food, beverages, and services will be adjusted to at least offset those advances. We do not warrant that the estimates will be attained, but they have been prepared on the basis of information obtained during the course of this study and are intended to reflect the expectations of a typical hotel buyer. 17. This analysis assumes continuation of all Internal Revenue Service tax code provisions as stated or interpreted on either the date of value or the date of our field inspection, whichever occurs first. 18. Many of the figures presented in this report were generated using sophisticated computer models that make calculations based on numbers carried out to three or more decimal places. In the interest of simplicity, most numbers have been rounded to the nearest tenth of a percent. Thus, these figures may be subject to small rounding errors. 19. It is agreed that our liability to the client is limited to the amount of the fee paid as liquidated damages. Our responsibility is limited to the client, and use of this report by third parties shall be solely at the risk of the client and/or third parties. The use of this report is also subject to the terms and conditions set forth in our engagement letter with the client. 20. Appraising hotels is both a science and an art. Although this analysis employs various mathematical calculations to provide value indications, the final estimate is subjective and may be influenced by our experience and other factors not specifically set forth in this report. HVS International, Mineola, New York Statement of Assumptions and 160 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 21. Any distribution of the total value between the land and improvements or between partial ownership interests applies only under the stated use. Moreover, separate allocations between components are not valid if this report is used in conjunction with any other analysis. 22. This study was prepared by Hospitality Valuation Services, a division of Hotel Consulting Services, Inc. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of Hotel Consulting Services, Inc. as employees, rather than as individuals. HVS International, Mineola, New York Certification 161 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 15. Certification We, the undersigned appraisers, hereby certify: 1. that the statements and opinions presented in this report, subject to the limiting conditions set forth, are correct to the best of our knowledge and belief; 2. that Manav G. Thadani personally inspected the property described in this report; Anne R. Lloyd-Jones and Stephen Rushmore participated in the analysis, but did not personally inspect the property; 3. that we have no current or contemplated interests in the real estate that is the subject of this report; 4. that we have no personal interest or bias with respect to the subject matter of this report or the parties involved; 5. that this report sets forth all of the limiting conditions (imposed by the terms of this assignment) affecting the analyses, opinions, and conclusions presented herein; 6. that the fee paid for the preparation of this report is not contingent upon our conclusions; 7. that this report has been prepared in accordance with, and is subject to, the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute; 8. that the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives; 9. that this report has been prepared in accordance with the Uniform Standards of Professional Appraisal Practice (as adopted by the Appraisal Foundation); HVS International, Mineola, New York Certification 162 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 10. that no one other than the undersigned prepared the analyses, conclusions, and opinions concerning real estate that are set forth in this appraisal report; 11. that as of the date of this report, Stephen Rushmore has completed the requirements of the continuing education program of the Appraisal Institute; 12. that this appraisal is not based on a requested minimum value, a specific value, or the approval of a loan. /s/ Manav G. Thadani ------------------------------------ Manav G. Thadani Consulting and Valuation Analyst Hotel Consulting Services, Inc. /s/ Anne R. Lloyd Jones ------------------------------------ Anne R. Lloyd Jones, CRE Senior Vice President Hotel Consulting Services, Inc. /s/ Stephen Rushmore ------------------------------------ Stephen Rushmore, CRE, MAI, CHA President Hotel Consulting Services, Inc. HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] View of the Subject Property HVS International, Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Courtyard by Marriott [GRAPHIC OMITTED] Doubletree Hotel HVS International, Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Holiday Inn Express [GRAPHIC OMITTED] Ramada West Hollywood Beverly Hills, CA Lega1 Description PARCEL 1: LOT 5 OF TRACT 30913, IN THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 798 PAGES 37 TO 40 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. PARCEL 2: THOSE PORTIONS OF LOTS 1 AND 6 OF TRACT 30913, IN THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 798 PAGES 37 TO 40 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, LYING WESTERLY OF THE SOUTHERLY PROLONGATION OF THAT CERTAIN COURSE SHOWN ALONG THE WESTERLY LINE OF SAID LOT 6, AS HAVING A BEARING AND LENGTH OF NORTH 0 DEGREES 05 MINUTES 49 SECONDS EAST 90.47 FEET. PARCEL 3: LOTS 1 AND 6 OF TRACT 30913, IN THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 798, PAGES 38 TO 40 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. EXCEPT THOSE PORTIONS OF SAID LOTS 1 AND 6, LYING WESTERLY OF THE SOUTHERLY PROLONGATION OF THAT CERTAIN COURSE SHOWN ALONG THE WESTERLY LINE OF SAID LOT 6, AS HAVING A BEARING AND LENGTH OF NORTH 0 DEGREES 05 MINUTES 49 SECONDS EAST 90.47 FEET. EXCEPT FROM THAT PORTION OF LOT 1, INCLUDED WITHIN THE LINES OF LOT 1639 OF TRACT NO. 6380, RECORDED IN BOOK 69 PAGES 11 TO 20 INCLUSIVE OF MAPS, ALL OIL, GAS, MINERALS AND OTHER HYDROCARBON SUBSTANCES IN AND UNDER SAID LAND, BUT WITHOUT RIGHT OF ENTRY FOR EXTRACTION OF SAME, AS RESERVED IN DEED FROM JULIUS L. SAMSON AND SYLVIA SAMSON, HUSBAND AND WIFE, AS JOINT TENANTS, RECORDED FEBRUARY 21, 1963 IN BOOK D-1934, PAGES 148, OFFICIAL RECORDS. ALSO EXCEPT FROM THAT PORTION OF LOT 1, INCLUDED WITHIN THE LINES OF LOT 1640 OF TRACT 6380, AS PER MAP RECORDED IN BOOK 69 PAGES 11 TO 20 INCLUSIVE OF MAPS, ALL OIL AND OR MINERALS, WITHOUT ANY RIGHT OF SURFACE ENTRY ON SAID LAND OR THE SUBSURFACE OF SAID LAND ABOVE A DEPTH OF 500 FEET, AS RESERVED IN DEED FROM DOUGLAS KLEIN AND MATILDA KLEIN, HUSBAND AND WIFE, RECORDED AUGUST 12, 1959 IN BOOK D-568 PAGE 720, OFFICIAL RECORDS. HVS International, Mineola, New York Addenda: Synopsis of Franchise 1 and License Agreements - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Synopsis of Franchise and License Agreements Date: February 6, 1995 Licensor: Holiday Inn Franchising, Inc. Licensee: BH California Hotel Limited Partnership Premises: Holiday Inn Select - Beverly Hills Term: Ten Years Renewal: No extension clause in the agreement Fees: 5.0% of gross rooms revenue Licensor Obligations: Marketing Contribution Reservation System Licensee Obligations: Renovations in compliance with Holiday Inn - Select standards Termination: January, 2005 HVS International, Mineola, New York Addenda: Synopsis of Hotel 1 Management Agreement - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Synopsis of Hotel Management Agreement Date: October 1, 1994 Owner: BH California Hotel Limited Partnership Manager: Remington Hospitality, Inc Premises: Holiday Inn - Select Term: Fifteen Years Renewal: Option to extend for two successive five-year periods. The Manager may elect to exercise any such option to renew, and shall give Owner notice to that effect not less than six months prior to the expiration of the current term. Management Fee: 3.0% of gross rvenues Reserve for Replacement: 3% of the premises' gross revenues Termination: September, 2009 HVS International, Mineola, New York Addenda: Explanation of the 1 Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Explanation of the Simultaneous Valuation Formula The algebraic equation known as the simultaneous valuation formula, which solves for the total property value using a ten-year mortgage and equity technique, was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(17) The process of solving for the value of the mortgage and equity components begins by deducting the annual debt service from the projected income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value using the terminal capitalization rate. The equity residual, which is the total reversionary value less the mortgage balance at that point in time and less any brokerage and legal costs associated with the sale, is discounted to the date of value at the equity yield rate. The net income to equity for each projection year is also discounted back to the date of value. The sum of these discounted values equals the value of the equity component. Because the equity component comprises a specific percentage of the total value, the value of the mortgage and the total property can be computed easily. (17) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Addenda: Explanation of the 2 Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= This process can be expressed in two algebraic equations that set forth the mathematical relationships between the known and unknown variables using the following symbols. NI = Net income available for debt service V = Value M = Loan-to-value ratio f = Annual debt service constant n = Number of years in the projection period de = Annual cash available to equity dr = Residual equity value b = Brokerage and legal cost percentage P = Fraction of the loan paid off during the projection period fp = Annual constant required to amortize the entire loan during the projection period Rr = Overall terminal capitalization rate that is applied to net income to calculate the total property reversion (sales price at the end of the projection period) 1/Sn = Present worth of $1 factor (discount factor) at the equity yield rate Using these symbols, the following formulas can be used to express some of the components of this mortgage and equity valuation process. Debt Service - A property's debt service is calculated by first determining the mortgage amount that equals the total value (V) multiplied by the loan-to-value ratio (M). Debt service is derived by multiplying the mortgage amount by the annual debt service constant (f). The following formula represents debt service. f x M x V = Debt Service Net Income to Equity (Equity Dividend) - The net income to equity (de) is the property's net income before debt service (NI) less debt service. The following formula represents the net income to equity. HVS International, Mineola, New York Addenda: Explanation of the 3 Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= NI - (f x M x V) = de Reversionary Value - The value of the hotel at the end of the tenth year is calculated by dividing the 11th-year net income before debt service (NI11) by the terminal capitalization rate (Rr). The following formula represents the property's tenth-year reversionary value. (NI^11/Rr) = Reversionary Value Brokerage and Legal Costs - When a hotel is sold, certain costs are associated with the transaction. Normally, the broker is paid a commission and the attorney collects legal fees. In the case of hotel transactions, brokerage and legal costs typically range from 1% to 4% of the sales price. Because these expenses reduce the proceeds to the seller, they are usually deducted from the reversionary value in the mortgage and equity valuation process. Brokerage and legal costs (b), expressed as a percentage of reversionary value (NI^11/Rr), are calculated by application of the following formula. b (NI^11/Rr) = Brokerage and Legal Costs Ending Mortgage Balance - The mortgage balance at the end of the tenth year must be deducted from the total reversionary value (debt and equity) in order to determine the equity residual. The formula used to determine the fraction of the loan remaining (expressed as a percentage of the original loan balance) at any point in time (P) takes the annual debt service constant of the loan over the entire amortization period (f) less the mortgage interest rate (i), and divides it by the annual constant required to amortize the entire loan during the ten-year projection period (fp) less the mortgage interest rate. The following formula represents the fraction of the loan paid off (P). (f - i)/(fp - i) = P HVS International, Mineola, New York Addenda: Explanation of the 4 Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= If the fraction of the loan paid off (expressed as a percentage of the initial loan balance) is P, then the remaining loan percentage is expressed as 1 - P. The ending mortgage balance is the fraction of the remaining loan (1 - P) multiplied by the initial loan amount (M x V). The following formula represents the ending mortgage balance. (1 - P) x M x V Equity Residual Value - The value of the equity upon the sale at the end of the projection period (dr) is the reversionary value less the brokerage and legal costs and the ending mortgage balance. The following formula represents the equity residual value. (NI^11/Rr) - (b (NI^11/Rr) - ((1 - P) x M x V) = dr Annual Cash Flow to Equity - The annual cash flow to equity consists of the equity dividend for each projection year plus the equity residual at the end of the tenth year. The following formula represents the annual cash flow to equity. NI^1 - (f x M x V) = de^1 NI^2 - (f x M x V) = de^2 NI^10 - (f x M x V) = de^10 (NI^11/Rr) - (b (NI^11/Rr) - ((1 - P) x M x V) = dr Value of the Equity - If the initial mortgage amount is calculated by multiplying the loan-to-value ratio (M) by the property value (V), then the equity value is one minus the loan-to-value ratio multiplied by the property value. The following formula represents the value of the equity. (1 - M) V HVS International, Mineola, New York Addenda: Explanation of the 5 Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Discounting the Cash Flow to Equity to the Present Value - The cash flow to equity in each projection year is discounted to the present value at the equity yield rate (1/Sn). The sum of these cash flows is the value of the equity (1 - M) V. The following formula represents the calculation of equity as the sum of the discounted cash flows. (de^1 x 1/S^1) + (de^2 x 1/S^2) + . . . + (de^10 x 1/S^10) + (dr x 1/S^10) = (1 - M) V Combining the Equations: Annual Cash Flow to Equity and Discounting the Cash Flow to Equity to the Present Value - The last step is to arrive at one overall equation that shows that the annual cash flow to equity plus the yearly discounting to the present value equals the value of the equity. ((NI^1 - (f x M x V)) 1/S^1) + ((NI^2 - (f x M x V)) 1/S^2) + . . . ((NI^10 - (f x M x V)) 1/S^10) + (((NI^11/Rr) - (b (NI^11/Rr)) - ((1 - P) x M x V)) 1/S^10) = (1 -M) V Because the property's value (V) is the only unknown, this equation can be solved readily. Ten-Year Projection of Income and Expense - Because the fixed and variable forecast of income and expense is carried out only to the stabilized year, it is necessary to continue the projection to the 11th year. In most cases, net income before debt service beyond the stabilized year is projected at an assumed inflation rate. By increasing a property's revenue and expenses at the same rate of inflation, net income remains constant as a percentage of total revenue, and the dollar amount escalates at the annual inflation rate. Hotel investors are currently using inflation rates of approximately 3.5% annually. The ten-year forecast of income and expense illustrates the subject property's net income, which is assumed to increase by 3.5% annually subsequent to the hotel's stabilized year of operation. Solving for Value Using the Simultaneous Valuation Formula - In the case of the subject property, the following known variables have been determined. HVS International, Mineola, New York Addenda: Explanation of the 6 Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 1: Summary of Known Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Ten-Year Forecast Loan-to-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.104844 Equity Yield Ye 21.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 12.4% - -------------------------------------------------------------------------------- The following table illustrates the present worth of a $1 factor at the 21% equity yield rate. ================================================================================ Table 2: Present Worth of $1 Factor at the Equity Yield Rate - -------------------------------------------------------------------------------- Present Worth of $1 Calendar Year Factor @21.0% ------------------------------------------------------------- 1997 0.826473 1998 0.683058 1999 0.564530 2000 0.466569 2001 0.385607 2002 0.318694 2003 0.263392 2004 0.217686 2005 0.179912 2006 0.148693 - -------------------------------------------------------------------------------- Using these known variables, the following intermediary calculations must be made before applying the simultaneous valuation formula. The fraction of the loan paid off during the projection period is calculated as follows. P = ( 0.104844 - 0.095 ) / ( 0.155277 - 0.095 ) = 0.163306 The annual debt service is calculated as f x M x V. (f x M x V) = 0.104844 x 0.70 x V = 0.073391 V HVS International, Mineola, New York Addenda: Explanation of the 7 Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Inserting the known variables into the hotel valuation formula produces the following. (1,814,000 - 0.073391 V ) x 0.826446 + (1,718,000 - 0.073391 V ) x 0.683013 + (1,762,000 - 0.073391 V ) x 0.564474 + (1,828,000 - 0.073391 V ) x 0.466507 + (1,895,000 - 0.073391 V ) x 0.385543 + (1,965,000 - 0.073391 V ) x 0.318631 + (2,037,000 - 0.073391 V ) x 0.263331 + (2,112,000 - 0.073391 V ) x 0.217629 + (2,189,000 - 0.073391 V ) x 0.179859 + (2,273,000 - 0.073391 V ) x 0.148644 + (((2,546,000 / 0.124 ) - ( 0.03 x (2,546,000/ 0.124 )) - (( 1 - 0.163306 ) x 0.70 x V )) x 0.148644 ) = ( 1 - 0.70 ) V Like terms are combined as follows. $10,575,512 - 0.384589 V = (1 - 0.70) V $10,575,512 = 0.68459 V V = $10,575,512 / 0.68459 V = $15,447,964 Total Property Value as Indicated by the Income Capitalization Approach (Say) = $15,400,000 HVS International, Mineola, New York Qualifications of Manav G. Thadani - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Manav G. Thadani Employment 1995 to present HVS INTERNATIONAL Mineola, New York (Hotel Valuations, Market Studies, Feasibility Reports and Investment Counseling) 1993 to 1995 NEW YORK UNIVERSITY New York, New York Teaching Fellow, Dept. of Food & Hotel Management 1994 CLUB QUARTERS New York, New York 1993 SHERATON CENTER & TOWERS New York, New York 1992 THE PENINSULA New York, New York 1991 HOLIDAY INN CROWNE PLAZA New York, New York 1990 SHERATON MANHATTAN New York, New York 1988 - 1989 THE OBEROI New Delhi, India Education MA/BS - Hotel and Restaurant Management, School of Education, New York University HVS International, Mineola, New York Qualifications of Manav G. Thadani - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Corporate and Institutional Clients Served Alden Capital Markets, Inc. Aldrich Eastman Waltch Amerigold Everest IV L.P. Ashford Financial Corporation Bear Steams Best Western International CIGNA Columbia Sussex, Inc. Credit West Gibson, Dunn & Crutcher Goldman Sachs Mortgage Company HEI Hotels Holiday Inn International Hotels of Distinction, Inc. Mardeck, Ltd. Morgan Stanley Nomura Securities Ocwen Financial Corporation RCI International Shaner Hotel Group, Inc. Starwood Capital Group, L.P. Super 8 Motels, Inc. HVS International, Mineola, New York Qualifications of Manav G. Thadani - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated Arizona - - Doubletree, Tucson - - Holiday Inn City Center, Tucson - - Hotel Park Tucson, Tucson Arkansas - - Horseshoe Bend Resort, Horseshoe Bend California - - Holiday Inn Select, Beverly Hills - - Marriott's Laguna Cliffs Resort, Dana Point - - Embassy Suites Palm Desert, Palm Desert - - Marriott Desert Springs Resort & Spa, Palm Desert Connecticut - - Holiday Inn Express, East Windsor District of Columbia - - Best Western Downtown Capitol Hill, Washington - - Best Western New Hampshire Suites, Washington - - Best Western Skyline Inn, Washington - - River Inn, Washington Georgia - - Days Inn - Downtown, Atlanta Illinois - - Omni Orrington, Evanston Maryland - - Best Western Capital Beltway, Lanham New Jersey - - Holiday Inn, Bridgeport - - Governor Morris Hotel & Conference Center, Morristown New York - - Econolodge, Canandaigua - - Comfort Inn, Jamestown - - Melville Marriott, Melville Ohio - - Embassy Suites, Columbus - - Proposed Hampton Inn, Elyria - - Holiday Inn, Elyria Pennsylvania - - Best Western City Center, Philadelphia West Virginia - - Super 8, Dunbar - - Super 8, Elkins - - Super 8, Weston Virginia - - Best Western, Leesburg - - Comfort Inn, Lynchburg - - Embassy Suites, Tysons Corner HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Anne R. Lloyd-Jones, CRE Employment 1982 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1981 FAIRMONT HOTEL Dallas, Texas 1979 - 1980 SAGA FOOD SERVICE SWARTHMORE COLLEGE Swarthmore, Pennsylvania 1977 - 1980 DARANNE CATERERS Swarthmore, Pennsylvania Professional Affiliations American Society of Real Estate Counselors - Member (CRE) Appraisal Institute - Candidate for Membership Cornell Society of Hotelmen Education MPS - School of Hotel Administration, Cornell University BA - Swarthmore College Appraisal Institute Course 1A1 - Real Estate Appraisal Principles Course 1A2 - Basic Valuation Procedures Course 1BA - Capitalization Theory and Techniques, Part A Course 1BB - Capitalization Theory and Techniques, Part B Course 2-1 - Case Studies in Real Estate Valuation Course 2-3 - Standards of Professional Practice Course 3-1 - Report Writing HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Corporate and Institutional Clients Served Ashford Financial Corporation Chase Manhattan Bank, N. A. Citibank / Citicorp NA Credit Lyonnais Doubletree Hotels Grand Heritage Hotels Great Western Bank Goldman Sachs Holiday Inns, Inc. Interstate Hotels MassMutual Marriott International / Host Marriott Morgan Stanley OCWEN Financial Services Remington Hotels Sheraton Hotels Starwood Capital Group Starwood Lodging Trust Winegardner & Hammons Wyndham Hotel Company Hotel Chains and Management Companies Appraised or Evaluated Doubletree Hotels Compri Hotels Interstate Hotels Fairmont Hotels Guest Quarters Hilton Hotels Corporation Omni International Hotels Ramada Hotel Corp. Servico Hotel Corp. Winegardner & Hammons Appearance as an Expert Witness Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Jefferson City, Missouri Federal Bankruptcy Court, Columbia, South Carolina Federal Bankruptcy Court, Houston, Texas Federal Bankruptcy Court, New York, New York Federal Bankruptcy Court, San Bernardino, California Federal Bankruptcy Court, Los Angeles, California Federal Bankruptcy Court, Charlotte, North Carolina Federal Bankruptcy Court, Miami, Florida Federal District Court, Central Division, Salt Lake City, Utah Iowa District Court, Story County, Iowa Texas District Court, Harris County, Texas Federal Bankruptcy Court, Tampa, Florida Utah District Court, Salt Lake County, Utah Federal Bankruptcy Court, Newark, New Jersey HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated Arizona - - Wyndham Garden Hotel, Chandler - - Wyndham Garden Hotel - Airport, Phoenix - - Wyndham Garden Hotel - Union Hills, Phoenix - - Canyon Ranch Spa & Fitness Resort, Tucson Alabama - - Holiday Inn, Birmingham - - Proposed Sheraton, Gulf Shores - - Proposed Inn, Mobile - - Holiday Inn, Sheffield California - - Industry Hills Sheraton Hotel, City of Industry - - Piccadilly Inn, Fresno - - Proposed Inn at Foss Creek, Healdsburg - - Sunset Towers Hotel, Hollywood - - Proposed La Quinta, Irvine - - Wyndham Garden Hotel, La Jolla - - Days Inn, La Palma - - Proposed Marriott Courtyard, Palm Springs - - Proposed Club Hilton Hotel, Pleasanton - - Center Pointe Development, San Diego - - Holiday Inn-Embarcadero, San Diego - - Holiday Inn-Harbor View, San Diego - - Seven Seas Lodge, San Diego - - Proposed Fountaingrove Inn, Santa Rosa - - Sheraton Round Barn Inn, Santa Rosa - - Wyndham Garden Hotel, Sunnyvale - - Westlake Plaza Hotel, Thousand Oaks - - Proposed Marriott Courtyard, Torrance Colorado - - Proposed Hotel, Keystone Connecticut - - Holiday Inn, Milford - - Holiday Inn, New Britain District of Columbia - - Grand Hotel, Washington - - Wyndham Bristol Hotel, Washington Florida - - Kon Tiki Village, Kissimmee - - Sheraton Lakeside, Kissimmee - - Holiday Inn, 22nd Street, Miami Beach - - Holiday Inn, 87th Street, Miami Beach - - Holiday Inn, 180th Street, Miami Beach - - Sheraton Resort & Marina, St. Petersburg - - Hilton Hotel, Singer Island - - Royce Hotel, West Palm Beach Georgia - - Marriott Hotel, Atlanta - - Wyndham Garden Hotel, Atlanta - - Holiday Inn, Brunswick - - Holiday Inn, Jekyll Island - - Mullberry Inn, Savannah - - Royal Savannah Inn, Savannah Hawaii - - Hobron in Waikiki, Honolulu Idaho - - Holiday Inn, Boise - - Red Lion Inn, Boise - - Super 8, Boise Illinois - - Ramada Inn, Bloomington - - Proposed Marriott Courtyard, Glenview - - Wyndham Garden Hotel, Naperville Indiana - - Holiday Inn, Bloomington - - Inn at the Four Winds, Bloomington - - Ramada Inn, Bloomington - - Hilton Hotel, Fort Wayne - - Airport Hilton Inn, Indianapolis - - Hilton at the Circle, Indianapolis Iowa - - Holiday Inn, Ames - - Proposed Fairfield Inn, Des Moines HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Kentucky - - Proposed Super 8, London - - Proposed Super 8, Radcliff Louisiana - - Sheraton Inn, Kenner - - Hotel Meridien, New Orleans Maine - - Proposed Hotel, Old Orchard Beach Maryland - - Brookshire Hotel, Baltimore - - Lord Baltimore Hotel, Baltimore - - Hyatt Regency, Bethesda Massachusetts - - Proposed Marriott Courtyard, Andover - - Hyatt Regency, Cambridge - - Proposed Hotel, Franklin - - Sheraton Inn, Hyannis - - Marriott Hotel, Worcester Michigan - - Bay Valley Inn, Bay City - - Hilton Airport, Detroit - - Westin Renaissance Center, Detroit - - Hotel Pontchartrain, Detroit - - Proposed Embassy Suites, Lansing - - Hilton Inn, Northfield - - Holiday Inn, Saginaw Minnesota - - Wyndham Garden Hotel, Bloomington - - Marriott Hotel, Minnetonka Missouri - - Inn at Grand Glaize, Osage Beach - - Bel Air Hilton, St. Louis - - Holiday Inn Riverfront, St. Louis Nebraska - - Holiday Inn Airport, Lincoln - - Holiday Inn Northeast, Lincoln Nebraska (continued) - - Marriott Hotel, Omaha - - Ramada Inn, Omaha - - Red Lion Inn, Omaha Nevada - - Proposed Super 8, Las Vegas New Jersey - - Ramada Inn, Edison - - Marriott Hotel, Hanover - - Headquarters Plaza, Morristown - - Hyatt Regency, New Brunswick - - Holiday Inn, North Brunswick New York - - Hilton Hotel, Albany - - Proposed Embassy Suites, Amherst - - Holiday Inn Arena, Binghamton - - Holiday Inn SUNY, Binghamton - - Proposed Hotel, Binghamton - - Proposed Hilton, Brooklyn - - Marriott Hotel, Dewitt - - Metropole Hotel, Flushing - - Midway Hotel, Flushing - - Ramada Inn, Kingston - - Royce Hotel, La Guardia - - Holiday Inn, Latham - - Proposed Crowne Plaza, Manhattan - - Proposed Prince Street Hotel, Manhattan - - Proposed Roslyn Inn, Roslyn - - Proposed Le Richmonde, Rye Brook - - Hilton Hotel, Syracuse - - Hotel Syracuse, Syracuse - - Proposed Hotel, Watertown North Carolina - - Proposed Inn, Chapel Hill - - Proposed Indep. Center Marriott Hotel, Charlotte - - Royce Hotel, Charlotte - - Howard Johnson's North, Charlotte HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) North Carolina (continued) - - Holiday Inn West, Durham - - Sheraton University Inn, Durham - - Holiday Inn, Fayetteville - - Holiday Inn Downtown, Raleigh Ohio - - Proposed Hyatt Hotel, Cleveland - - Proposed Marriott Hotel, Cleveland Oregon - - Holiday Inn Airport, Portland - - Holiday Inn South, Portland Pennsylvania - - Quality Inn, Allentown - - Holiday Inn, Bensalem - - Proposed Marriott Courtyard, Devon - - Proposed Lafayette Inn, Easton - - Ramada Inn, Erie - - Holiday Inn, Harrisburg - - Marriott Hotel, Harrisburg - - Proposed Super 8, Harrisburg - - Proposed Super 8, Lancaster - - Holiday Inn West, Monroeville - - Days Inn Philadelphia - - Franklin Plaza Hotel, Philadelphia - - Franklin Towne EconoLodge, Philadelphia - - Guest Quarters Hotel, Philadelphia - - Hilton Inn, Northeast, Philadelphia - - Marriott Airport Hotel, Philadelphia - - Holiday Inn Greentree, Pittsburgh - - Holiday Inn Parkway East, Pittsburgh - - Holiday Inn North, Pittsburgh - - Holiday Inn Parkway West, Pittsburgh - - Proposed Hotel, Pittsburgh - - Royce Hotel, Pittsburgh - - Westin William Penn Hotel, Pittsburgh - - Hilton Hotel, Scranton - - Proposed Marriott Courtyard, Valley Forge - - Holiday Inn Meadowlands, Washington - - Ramada Inn, York - - Proposed Super 8, York Rhode Island - - Proposed Hotel, Providence - - Omni Biltmore Hotel, Providence South Carolina - - Proposed Charleston Center Hotel, Charleston - - Proposed Cooper River Inn, Charleston - - Howard Johnson's, Spartanburg - - Proposed Middleton Inn and Conference Center, Charleston - - Best Western, North Charleston - - Proposed Marriott Courtyard, Columbia - - Fairfield Inn, Florence - - Holiday Inn, Florence - - Fairfield Inn, Greenville - - Proposed Marriott Courtyard, Greenville - - Fairfield Inn, Hilton Head - - Holiday Inn, Hilton Head Tennessee - - Hampton Inn, Brentwood - - Proposed Marriott Courtyard, Brentwood - - Howard Johnson's, Chattanooga - - Sheraton Hotel, Chattanooga - - Howard Johnson's, Knoxville - - Proposed Capital Mall Convention Center Hotel, Nashville - - Clarion Maxwell House, Nashville - - Holiday Inn Briley Parkway, Nashville - - Proposed Marriott Courtyard, Nashville - - Sheraton Music City, Nashville - - Stouffer's Nashville Hotel, Nashville - - Proposed Super 8, Nashville - - Union Station Hotel, Nashville - - Wyndham Garden Hotel, Nashville - - Proposed Super 8, Union City HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Texas - - Proposed Marriott Courtyard, Addison - - Proposed Marriott Courtyard, Arlington - - La Mansion, Austin - - Proposed Marriott Courtyard, Bedford - - Airport Hilton, El Paso - - Hotel Meridien, Houston - - Sheraton Hotel, Houston - - Proposed Marriott Courtyard, Las Colinas - - Proposed Marriott Courtyard, North Dallas - - La Mansion Del Norte, San Antonio - - La Mansion Del Rio, San Antonio - - Proposed Marriott Courtyard, San Antonio - - Proposed Marriott Courtyard - Medical Center, San Antonio Utah - - Deer Valley Resort, Park City - - Hilton Inn, Salt Lake City - - Holiday Inn, Salt Lake City - - Sheraton Hotel, Salt Lake City Virginia - - Mountain Lake Hotel, Blacksburg - - Howard Johnson's, Bristol - - Boars Head Inn, Charlottesville - - Proposed Fairfield Inn, Hampton - - Proposed Embassy Suites, Herndon - - Ramada Renaissance, Herndon - - Proposed Marriott Courtyard, Manassas - - Omni Hotel, Norfolk Virginia (continued) - - Proposed Marriott, Norfolk - - Howard Johnson's, Richmond - - Howard Johnson's, Roanoke - - Howard Johnson's, Roanoke Rapids - - Wyndham Hotel, Williamsburg Washington - - Wyndham Garden Hotel, Bothell - - Redmond Hotel, Redmond - - Wyndham Garden Hotel, SeaTac West Virginia Proposed Budget Motel, Princeton Wisconsin - - Proposed Granada Royale, Green Bay - - Holiday Inn-Downtown, Green Bay Canada - - Inn on the Park, Toronto Puerto Rico - - Carib Inn, San Juan Virgin Islands - - Virgin Grand Beach Hotel, St. Thomas Jamaica - - Holiday Inn, Montego Bay HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Stephen Rushmore, CRE, MAI, CHA Employment 1980 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1977 - 1980 1971 - 1974 HELMSLEY-SPEAR HOSPITALITY SERVICES, INC. New York, New York (Real Estate) 1974 - 1977 JAMES E. GIBBONS ASSOCIATES Garden City, New York (Mortgage Banking, Appraisals, Hotel Operations) Affiliated Ownership Interests HVS INTERNATIONAL (SAN FRANCISCO, CALIFORNIA) West coast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (MIAMI, FLORIDA) Southeast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (BOULDER, COLORADO) Midwest office for hotel/motel appraisals and counseling HVS INTERNATIONAL (VANCOUVER, CANADA) Canadian office for hotel/motel appraisals and counseling HVS INTERNATIONAL (LONDON, ENGLAND) European office for hotel/motel appraisals and counseling HVS - EXECUTIVE SEARCH Hotel/motel executive search and human resource consulting HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) HVS - ECO SERVICES Environmental consulting for hotels and motels; administrator of the ECOTEL designation HOSPITALITY EQUITY INVESTORS, INC. Hotel and motel investment and management company TRUMBULL MARRIOTT HOTEL General partner of a 324-room hotel and conference center PRINCETON HOTEL ASSOCIATES General partner of a 128-unit Residence Inn in Princeton, New Jersey SEAVIEW GOLF RESORT ASSOCIATES General partner of a 298-unit, 424-acre Marriott resort in Absecon, New Jersey SHELTON HOTEL ASSOCIATES General partner of a 96-unit Residence Inn in Shelton, Connecticut DANBURY HOTEL ASSOCIATES General partner of a 243-unit Hilton Hotel in Danbury, Connecticut PRUDENTIAL - HEI JOINT VENTURE Joint venture partner with Prudential Insurance Company of America on a 234-unit Embassy Suites in Atlanta, Georgia WESTPORT NORFOLK ASSOCIATES General partner of a 425-unit Omni Hotel in Norfolk, Virginia WESTPORT BWI, LLC General partner of a 310-unit Marriott Hotel in Baltimore, Maryland HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) WESTPORT RARITAN, LLC General partner of a 274-unit Crowne Plaza Hotel in Raritan, New Jersey WESTPORT NOVI, LLC General partner of a 193-unit Hilton Hotel in Novi, Michigan WESTPORT LONG BEACH, LLC General Partner of a 460-unit Sheraton Hotel in Long Beach, California WESTPORT PARK RIDGE, LLC General Partner of a 265-unit hotel and conference center in Valley Forge, Pennsylvania WESTPORT CHARLESTON, LLC General Partner of a 295-unit Hilton Hotel in Charleston, South Carolina HOSPITALITY VALUATION SOFTWARE, INC. Founder of software company that develops and distributes hotel financial analysis software Hotels Managed Sheraton Hotel, Smithtown, New York Marriott Hotel, Baltimore Airport, Maryland Hilton Hotel, Danbury, Connecticut Residence Inn, Princeton, New Jersey Embassy Suites, Atlanta Airport, Georgia Omni Hotel, Norfolk, Virginia Crowne Plaza, Raritan, New Jersey Hilton Hotel, Novi, Michigan Sheraton Hotel, Long Beach, California Hilton Hotel, Charleston, South Carolina Park Ridge Hotel and Conference Center, Valley Forge, Pennsylvania Hilton Hotel, Wilmington, Delaware HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Professional Affiliations American Society of Real Estate Counselors - Member (CRE) - Board of Governors Appraisal Institute - Member (MAI) (SREA) - Developer and Instructor, Hotel Investment and Valuation Seminar - Developer and Instructor, Hotel Computer Valuation Seminar American Hotel and Motel Association - Certified Hotel Administrator (CHA) - Industry Real Estate Financing Advisory Council (IREFAC) International Society of Hospitality Consultants - Member (ISHC) New York University - Adjunct Assistant Professor of Nutrition, Food and Hotel Management Michigan State University - Honorary Faculty, Honorary Alumnus Certified General Appraiser - Arizona, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Illinois, Massachusetts, Michigan, Minnesota, Nebraska, New Jersey, New York, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Virginia Licensed Real Estate Broker - New York, Pennsylvania Board of Advisers - Real Estate Finance Journal - Real Estate Workouts & Asset Management American Arbitration Association - National Real Estate Valuation Council Cornell Society of Hotelmen New York University Masters in Hospitality Management - Advisory Board New York University Hospitality Investment Conference - Board of Advisors Beta Gamma Sigma - National Honor Society in Business and Management HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Endowment Hospitality Valuation Services Professor of Hotel Finance and Real Estate - School of Hotel Administration, Cornell University (currently held by Professor James J. Eyster) Education BS - School of Hotel Administration, Cornell University MBA - Graduate School of Business Administration (Finance), University of Buffalo Candidate for PhD - School of Education, Department of Food Service Management, New York University Partial List of Teaching and Lecture Assignments Cornell University - Computer Valuation Techniques Michigan State University - Hotel Management Contracts University of North Carolina - Hotel Market Studies University of Virginia - Assessing Hotels American Arbitration Association - Real Estate Arbitration American Hotel and Motel Association - Hotel Obsolescence Appraisal Institute - Hotel Valuation (over 50 seminars) International Association of Assessing Officers - Hotel Valuation Montreal Appraisal Society - Total Project Analysis Society of Real Estate Appraisers - Lease Seminar Lodging Hospitality - Lodging Summit Published Books and Seminars Textbooks The Valuation of Hotels and Motels, Appraisal Institute, Chicago, Illinois, 1978 Hotels, Motels and Restaurants: Valuations and Market Studies, Appraisal Institute, Chicago, Illinois, 1983 How to Perform an Economic Feasibility Study of a Proposed Hotel/Motel, American Society of Real Estate Counselors, Chicago, Illinois, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Books and Seminars (continued) Textbooks (continued) Hotel Investments: A Guide for Owners and Lenders, Warren, Gorham and Lamont, Inc., New York, New York, 1990 The Computerized Income Approach to Hotel Market Studies and Valuations, Appraisal Institute, Chicago, Illinois, 1990 Hotel Investments: A Guide for Owners and Lenders, 1992 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotel Investments: A Guide for Owners and Lenders, 1993 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Appraisal Institute, Chicago, Illinois, 1992 Student Manuals The Valuation of Lease Interests, Society of Real Estate Appraisers, Chicago, Illinois, 1976 Hotel-Motel Valuation Seminar, Appraisal Institute, Chicago, Illinois, 1981, 1988, 1990 The Computerized Approach to Hotel Market Studies and Valuations Seminar, Appraisal Institute, Chicago, Illinois, 1991 Demonstration Appraisal Demonstration Appraisal of a Proposed Hotel, Spring Valley, New York, Hospitality Valuation Services, Mineola, New York, 1983, 1990 Chapters The Real Estate Handbook-Second Edition, Dow Jones-Irwin, 1989, "Hotels and Motels" Arbitration of Real Estate Valuation Principles, American Arbitration Association, 1987, "Arbitration in the Hospitality Industry" Ethics in Hospitality Management: A Book of Readings, Educational Institute of the American Hotel and Motel Association, 1992, "Ethics in Hotel Appraising" The Lodging and Food Service Industry, Educational Institute of the American Hotel and Motel Association, 1993, "Insider's Insights" HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles The Appraisal Journal "Using Total Project Analysis to Compete for Investment Capital," October, 1975 "The Appraisal of Food Service Facilities," July, 1980 "Publish and Prosper," October, 1980 "Valuation of Hotels and Motels for Assessment Purposes," April, 1984 "Adjusting Comparable Sales for Hotel Assessment Appeals," July, 1986 "Hotel Business Value and Working Capital: A Clarification," January, 1987 "Ethics in Hotel Appraising," July, 1993 The Appraiser "Hotel-Motel Appraisal Misconceptions Set Straight," January, 1979 "No Conventional Financing Available for Hotels: Rushmore," December, 1979 "Estimating Hotel Land Values Using Comparable Ground Leases," April, 1980 Bulletin of the Cornell Society of Hotelmen "Employment Philosophy for a Consulting Practice," July, 1984 Business Travel News "A Snapshot of a Classic Recovery," July, 1995 The Canadian Appraiser "Hotel/Motel Market Sales Update," Summer, 1987 Capital Sources for Real Estate "Stephen Rushmore Discusses the Future of the Lodging Industry," December, 1994 Cayuga Advisor "Secrets to Success in Consulting," October, 1992 Chapter News and Notes "Quantifying a Hotel's Business Value," November, 1979 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Cornell Hotel & Restaurant Administration Quarterly "A Preliminary Market Study," November, 1974 "How Much is Your Place Worth Today? A Case Study in Hotel - Motel Valuation," May, 1975 "What Can Be Done About Your Hotel's Real Estate Taxes?" May, 1977 "The Appraisal of Lodging Facilities," August, 1978 "The Appraisal of Food Service Facilities," February, 1979 "The Appraisal of Lodging Facilities - Update," November, 1984 "Hotel Sales Prices Down More Than 12%," May, 1991 "Seven Current Hotel Valuation Techniques," August, 1992 "The Valuation of Distressed Hotels," October, 1992 "Hotel Lending in the 1990's: Amateurs Beware," December, 1994 "Investment Values of Lodging Property: Modeling the Effects of Income Taxes and Alternative Lender Criteria," December, 1995 FCI Spec Sheet "Employment Philosophy for a Consulting Practice," September, 1984 Florida Hotel & Motel Journal "Rushmore Reports Rising Hotel Prices," February, 1995 Hotel and Motel Management "Average Rate vs. Project Cost," May 1, 1974 "How to Increase the Marketability of Your Motel," April, 1981 "Tougher Lending, Lower Room Rate Hikes On Way?" June, 1981 "What is That Mortgage Loan Going to Cost You?" August, 1981 "How to Perform a Study of Your Property's Market," October, 1981 "How do High Interest Rates Affect Your Motel's Value?" December, 1981 "How to Buy a Feasibility Study That Works for You," February, 1982 "Settling Lease Conflicts Quickly Through Arbitration," April, 1982 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Hotel and Motel Management (continued) "Are Casino Hotels Really Worth $500,000 Per Room?" June, 1982 "Discount Rates and Internal Rate of Return," August, 1982 "Determining a Property's Extended Life Cycle," November, 1982 "Using Microcomputers for Forecasting," December, 1982 "Update on Hotel Development Costs," January, 1983 "Estimating a Site's Worth by Finding Its Profit Value," June, 1983 "Hotel Construction May Be Slowing Down a Little Bit," April, 1983 "The Investor's Risk Sways to Prevailing Economic Winds," August, 1983 "Is Your Property Tax at as Low a Level as it Should Be?" October, 1983 "The Ultimate Guest Room: Could it Ever Exist Anywhere?" December, 1983 Hotel-Motor Inn Journal A Preventive Maintenance System for Motels," March, 1975 Hotel Valuation Journal "Hotel Valuation Index Peaks During 1989," Fall, 1990 "Hotel Development Costs," Winter, 1991 "Hotel Valuation Index for 1990," Spring, 1991 "Bad Year for Hotel Sales Prices Confirmed," Spring, 1992 "Hotel Sales Prices on the Rise," Fall, 1994 "United States Hotel Values Climb," Spring/Summer, 1995 "It's Time for Franchise Reform," Fall, 1995 Institutions/ Volume Feeding "Greater Risk/Greater Profit Potential: Hotel Management Contract," May, 1973 Lodging Hospitality "How to Finance Renovation Projects," January, 1974 "Controlling Your Real Estate Taxes," July, 1978 "Putting Together a Sound Financial Package," December, 1978 "Favorable Outlook for Lodging Values," December, 1983 "Are Your Property Taxes Too High? (Part I and II)," May and June, 1984 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Development Costs," July, 1984 "The Right Management Contract for You," September, 1984 "Selecting the Firm to Prepare Your Feasibility Study," October, 1984 "A Quick How-To In Hotel Valuation," November, 1984 "Updating Lodging Interest Rates," December, 1984 "Is Your Guest Experience Up to Par?" January, 1985 "How to Perform a Breakeven Analysis," May, 1985 "Evaluating Operating Performance," June, 1985 "Hotel Lenders Toughen Underwriting Requirements," July, 1985 "Don't Forget the Pre-Opening Agreement," August, 1985 "Management Companies Should Participate in Financing," October, 1985 "Current Techniques for Valuing Hotel Land," November, 1985 "Hotel Development Costs," December, 1985 "Sourcing Debt Into the 1990's," January, 1986 "Hotel Valuation Thumb Rule," February, 1986 "Value in Use Versus Value in Exchange," March, 1986 "Stretching Feasibility," April, 1986 "The Management Question," May, 1986 "How to Commission a Feasibility Study," June, 1986 "Macro Trends Affecting Property Values," July, 1986 "Hotel-Motel Market Sales Update," August, 1986 "Financing Alternatives: Zero Coupon Mortgages," September, 1986 "Forecasting Lodging Energy Costs," October, 1986 "Portfolio Financing a Better Way," November, 1986 "Profit by Looking at History," December, 1986 "Why New York Isn't Overbuilt," February, 1987 "How to Discourage Hotel Overbuilding: A Case Study," April, 1987 "Structuring an Incentive Management Fee," June, 1987 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Franchising Questions and Answers," July, 1987 "Comparing Hotel Development Costs," August, 1987 "Understanding Economic Life," September, 1987 "Prices Rise for Lodging Properties," October, 1987 "Management Companies Are Key to Success," November, 1987 "Evaluating a Management Contract Fee Structure," December, 1987 "Check Profits Before Selecting Hotel Operator," January, 1988 "It's a Good Time to Review Your Taxes," February, 1988 "How to Use a Management Company Rating System," March, 1988 "Make Sure Management Contracts Contain These Terms," April, 1988 "Hotel Access and Visibility," May, 1988 "Chain Sale Strategies," July, 1988 "Evaluating a Hotel Franchise," August, 1988 "Evaluating Franchise Fees," September, 1988 "Opportunities in Economy Lodging," October, 1988 "How to Obtain a Hotel Mortgage," November, 1988 "Arbitration in the Hospitality Industry," December, 1988 "Lodging Development Cost Update," January, 1989 "Amenities as Profit Builders," February, 1989 "Hotel Values Mirror the Times," March, 1989 "Forecasting Revenue and Expenses," April, 1989 "Real Estate Jargon Made Simple," May, 1989 "Pricing a Management Contract," June, 1989 "Trends in Valuation," July, 1989 "Rescuing the Distressed Hotel," August, 1989 "Shielding Against Incompetence," September, 1989 "Hotel Valuation Revisited," October, 1989 "New Breed of Hard Budgets," November, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Figuring Cap Rates," December, 1989 "A Glance Backward," January, 1990 "Costs Creeping Up," February, 1990 "Valuing Distressed Properties," March, 1990 "Cap and Discount Rates," April, 1990 "An Open Letter," May, 1990 "Misconceptions About Appraisals," June, 1990 "Hotel Values Still Growing," July, 1990 "Hotel Renovation is Key to `90s," August, 1990 "Time Right for Hotel Leases," September, 1990 "Getting a Fix on Rates," October, 1990 "The Wrinkles of Class," November, 1990 "A Glance Backward," December, 1990 "The Price Dropoff," January, 1991 "The Cost Washout," February, 1991 "Survival of the Fittest," March, 1991 "Looking Out and Up," April, 1991 "The Bottom is in Sight," May, 1991 "The Pitfalls of Liquidation," June, 1991 "Extra! Extra! Hospitality News," July, 1991 "The Art of Hotel Renovation," August, 1991 "No Better Time for a Tax Review," September, 1991 "No Time for Passivity," October, 1991 "What a Franchise Really Costs," November, 1991 "In Case You Hadn't Heard," January, 1992 "Negotiation - The Name of the Game," February, 1992 "Now Could be the Time to Build," March, 1992 "The Well May Stay Dry," April, 1992 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Life Expectancy," May, 1992 "Hotel Values - What a Downer," June, 1992 "How to Make Money Now," July, 1992 "Hotel Chain Class Survey," August, 1992 "Budget Dining with Rushmore," September, 1992 "Bookings Up, Rates Will Follow," October, 1992 "Hospitality Master's Good Preparation," November, 1992 "What's New on the Job Front?" January, 1993 "Where Have All the Hotels Gone?" February, 1993 "Hotel Building Costs Continue to Fall," March, 1993 "Hotel Values Head Upward," April, 1993 "The Rise and Fall of Trophy Hotels," May, 1993 "Hotel Sales and Prices Rebound," June, 1993 "Third Parties Loosening Purse Strings," July, 1993 "Beyond Recycling: The Ecotel," August, 1993 "Time to Reduce Property Taxes," September, 1993 "Lodging: The Way I See It," October, 1993 "Choosing an Appraiser," November, 1993 "Who Needs an Asset Manager?" January, 1994 "Investing by the Numbers," February, 1994 "Fire Your Staff and Lease Them Back," March, 1994 "Published Rates Hint at Recovery," April, 1994 "Now is the Time to Start Building," May, 1994 "Hotel Values Heading Up," June, 1994 "Farewell, Friend," July, 1994 "Sales Prices Creeping Up," August, 1994 "Selecting Green Hotel Supplies," September, 1994 "Don't Write Off Full-Service Hotels," October, 1994 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Lodging REIT's Are on the Rise," November, 1994 "Going Back to the Future," January, 1995 "How much do Managers Make?" March, 1995 "Lodging Transactions Soared in '94," April, 1995 "Hotel Development Costs on the Rise," May, 1995 "Hotel Values up Significantly," June, 1995 "What a Franchise Costs over the Long Term," July, 1995 "Road Food Part II," August, 1995 "It's Time for Franchise Reform," September, 1995 "Extended Stay May Not Extend Your Profits," October, 1995 "The Year as I See It," November, 1995 "Cap Rate 101," January, 1996 Michigan Lodging "Hotel Development Costs," January, 1988 The Mortgage and Real Estate Executives Report "Atlantic City Building Game Involves High Stakes," August, 1979 "How Interest Rates Affect Real Estate Values," June, 1982 "Update on Hotel Development Costs," May 1, 1983 Motel-Hotel Insider "The $100,000 Plus Hotel Room Has Become a Reality," November 19, 1979 "Update on Hotel Development Costs," April 4, 1983 NAIFA - The Appraisal Review "Hotel Valuation Techniques," Vol. 44, 1991 Real Estate Digest "Why Should the Management Team be Important to Hotel Lenders," Fall, 1988 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Finance Journal "What is a Typical Fee for a Hotel Management Contract?" Fall, 1988 "Hotel Franchise Fees," Winter 1989 "Why the Management Team Should be Important to Hotel Lenders," Spring, 1989 "Hotel Values and Costs," Summer, 1989 "Structuring a Hotel Investment," Fall, 1989 "A Guide for Lenders Holding Distressed Hotel Loans," Winter, 1990 "Estimating Current Interest Rates for Hotel Financing," Spring, 1990 "Hotel Valuation Techniques," Summer, 1990 "Now is the Time to Review Your Hotel's Property Taxes," Fall, 1990 "Property Tax Assessments for Hotels and Motels," Winter, 1991 "Putting Together Hotel Management Agreements - Part I," Spring 1991 "Putting Together Hotel Management Agreements - Part II," Summer, 1991 "The 1980s - The Decade of Change," Fall, 1991 "An Overview of the Hotel Industry: Past, Present, and Future," Spring, 1994 Real Estate Forum "Casino Hotels Raise Valuation Questions," November, 1981 Real Estate Investment Ideas "How Fuel and Energy Shortages Should Affect Investment Decisions in the Hospitality Industry," March, 1974 "Upward Trend Continues for Sales Price of Hotel-Motel Properties," May, 1988 "High Prices Paid for Hotel-Motel Properties," February, 1990 Real Estate Issues "Employee Compensation for a Consulting Practice," Fall/Winter, 1985 "Hotel/Motel Market Sales Update," Spring/Summer, 1987 Real Estate Newsletter "Computers in Hotel Appraising," May 15, 1989 Real Estate Investment Ideas "Hotel-Sales Update," Winter, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Review "Valuing Motels and Hotel in the Current Market," Fall, 1972 "Dealing With Distressed Hostelry Loans," Fall, 1975 "The Mortgage Underwriting Consultant Comes of Age," Fall, 1977 "Real Estate Compensation," Winter, 1987 Real Estate Workouts and Asset Management "Stephen Rushmore on Directions in the Hospitality Industry," September, 1992 Real Values "Hotel Construction Cost Update," April, 1986 Restaurant and Hotel Design "How Much Should the Renovation Be?" March, 1986 "14 Notable Hotel Development Firms," December, 1987 Rushmore on Hotel Valuation "Mortgage - Equity," Winter, 1979 "Atlantic City - From Bust to Boom," Winter, 1979 "Mortgage - Equity," Spring, 1979 "Developing Mortgage Data," Spring 1979 "Gasoline and Market Values, " Spring, 1979 "Mortgage - Equity," Fall, 1979 "Quantifying a Hotel's Business Value," Fall, 1979 "What Has Happened to Typical Hotel-Motel Development Costs?," Fall, 1979 "Mortgage-Equity," Winter, 1980 "Extending Hotel Economic Life Through Renovation," Winter, 1980 "Estimating Hotel Land Values Using Comparable Ground Leases," Winter, 1980 "Quantifying the Value of Personal Property to a Going Hotel," Spring, 1980 "Recent Changes in New York City's Hotel Market," Spring, 1980 "Hotel-Motel Economic Lives," Fall, 1980 "Mortgage - Equity," Fall, 1980 "Mortgage - Equity," Winter, 1981 "Developing Mortgage Data," Winter, 1981 "Statistical Support for Food and Beverage Projections," Winter, 1981 "Mortgage - Equity," Spring/Summer, 1981 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Rushmore on Hotel Valuation (continued) "Quantifying a Hotel's Demand," Spring/Summer, 1981 "A Five-Year Overview of Typical Hotel-Motel Development Costs," Spring/Summer, 1981 "Mortgage - Equity," Winter/Spring, 1982 "Update on Hotel Capitalization Rates," Winter/Spring, 1982 "Mortgage - Equity," Summer/Fall, 1982 "Are Casino Hotels Really Worth $500,000 Per Room?" Summer/Fall, 1982 "The Hotel-Motel Life Cycle, Summer/Fall, 1982 "Mortgage - Equity," Winter/Spring, 1983 "Update on Hotel Development Costs," Winter/Spring, 1983 "The Valuation of Hotels and Motels for Assessment Purposes," Winter, 1984 "Hotel Capitalization Rates," Summer, 1984 "Hotel Development Cost Survey," Summer, 1984 "Selecting a Hotel Management Company," Fall, 1984 "Hotel Capitalization Rates," Spring, 1985 "How to Perform a Breakeven Analysis," Spring, 1985 "Hotel Capitalization Rates," Winter, 1986 "Hotel Development Costs," Winter, 1986 "Hotel Valuation Survey," Winter, 1987 "Impact of New Tax Laws on Hotel Values," Winter, 1987 "Hotel-Motel Market Sales Update," Winter, 1987 "Structuring an Incentive Management Fee," Fall, 1987 "Understanding Your Hotel's Economic Life," Fall, 1987 "Hotel Development Costs," Fall, 1987 "Hotel, Motel Market Sales Update," Winter, 1988 "Amenity Creep," Winter, 1989 "Hotel Franchise Fees," Winter, 1989 "Hotel Valuation Index," Fall, 1989 "Latest Trends in Hotel Values," Fall, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Tri-State Real Estate Journal "Across the Nation: Hotel Sale Prices Escalate on Average," December 23, 1994 U.S. Real Estate Week "All-Suites Market Entering Second Phase," May 4, 1987 Valuation "Hotel-Motel Market Sales Update," February, 1987 Quarterly Newsletter Hotel Valuation Journal Professional newsletter with a circulation of 10,000 Real Estate Column Lodging Hospitality Real estate editor for a major monthly hospitality periodical Hospitality Column Real Estate Finance Journal Contributing hospitality editor Computer Software Hospitality Valuation Software Hotel financial software for room night analyses, income and expense forecasts, and valuation calculations - developed and distributed for the Appraisal Institute Hotel-Motel Data Hospitality Market Data Exchange National clearinghouse for information pertaining to hotel and motel transactions Hotel Valuation Index National index of hotel value trends for 24 individual market areas Hospitality Seminar Series Intensive short courses for hotel and restaurant professionals Hotel Franchise Fees Analysis Guide Analysis of hotel franchise fees and costs Hospitality Bibliography Comprehensive literature index of hotel and restaurant books and articles HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Awards Robert H. Armstrong Award For the most significant contribution to The Appraisal Journal in 1975 Activities Commercial pilot, instrument, multi-engine; sailing; skiing Corporate and Institutional Clients Served Aetna Life Insurance AIG Real Estate Investment Aldrich Eastman and Waltch Allstate American Airlines America's Best Inns Arthur Anderson & Company Bankers Trust Company Bank of America Bank of Boston Bank of Montreal Bank of New York Bank of Nova Scotia Bank of Tokyo Bank One-Columbus Banque Indosuez Barclay's Bank Baybank Boston The Beacon Companies Bear, Stearns & Company, Inc. Best Inns Best Western International Boykin Management Co. Bradbury Suites C. Itoh Caesar's World California Dept. of Transportation Chase Lincoln First Bank, N.A. Chase Manhattan Bank Chemical Bank Chrysler Capital Corporation CIGNA Citibank Citicorp Real Estate City of Boston City of Detroit City of Grand Rapids City of Kalamazoo City of Orlando City of Philadelphia City of Santa Monica City of Toronto Columbia Sussex Corporation Continental Illinois National Bank Copley Real Estate Advisors Corporex Development CRI, Inc. Cushman and Wakefield Days Inns Edward J. DeBartolo Corp. HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Deer Valley Ski Corporation Doubletree Hotels Drury Inns Econo Lodge Economic Development Admin. EIE Regent International Embassy Suites Equitable Life Assurance Equitable Real Estate Investment European American Bank Fairmont Hotels Federal Deposit Insurance Corp. First Boston First California Savings First Interstate Bank First National Bank of Chicago Four Seasons Hotels Goldman, Sachs Greater Orlando Aviation Authority Great Western Bank Great Western Savings Guest Quarters Hampton Inns Hilton Hotels, Corp. Hilton International Holiday Corporation Holiday Inns Home Savings of America Howard Johnson's Hudson Hotels Corporation Hyatt Hotels Industrial Bank of Japan Interstate Hotels The Irvine Company ITT Commercial Finance Corp. Japan Airlines JDC (America) Corporation John Q. Hammons John Hancock Life Insurance Johnson & Wales College Kenneth Leventhal & Assoc. Kidder Peabody & Company, Inc. La Quinta Larken, Inc. Lexington Companies Loews Hotels Harry Macklowe Real Estate Marine Midland Bank, N.A. Marriott Corporation MA Bay Transit Authority Massachusetts Mutual Life Mellon Bank Meridien Hotels Merrill Lynch Merrill Lynch Capital Markets Metropolitan Life Insurance Microtel Midlantic Bank HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Mitsubishi Morgan Guaranty Bank & Trust Co. J.P. Morgan Investment Management Morgan Stanley Motel 6, Inc. Mutual Benefit Co. National Westminster Bank New York Life Insurance Nippon Credit Bank Nomura Securities Int'l North American Taisei Corporation Northwestern Mutual Life Omni Hotels Parabas Bank Prime Motor Inns Property Capital Trust Prudential Life Insurance Radisson Hotels Ramada Inns Red Lion Inns Regent International Registry Hotels Residence Inns Resolution Trust Corporation Rhode Island Hospital Trust Ritz-Carlton Hotels Rodeway Inns Rose Associates Salomon Brothers San Antonio Hotel/Motel Assoc. Sanwa Bank Security Pacific Bank Servico Management Corp. Sheraton Hotels Sonesta Hotels Sonnenblick-Goldman Steamboat Ski Corporation Stouffer Hotels Stratton Corporation Sumitomo Bank Summerfield Hotel Corporation Super 8 Hotels Swiss Bank Corporation Taisei Texas Commerce Bancshares, Inc. Tishman Realty Corporation Trans World Airlines Travelers Insurance TraveLodge Trusthouse Forte UBS Securities Union Labor Life United Bank of Switzerland United Inns, Inc. United States Steel Universal Hotels U.S. Air Force U.S. Department of Justice HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) U.S. Department of the Army U.S. Department of the Interior U.S. Economic Development Authority U.S. Trust Company Walt Disney Productions Westin Hotels Williams Hospitality Corporation Winegardner & Hammons Winthrop Financial Associates Wyndham Hotels Zeckendorf Company Appearance as an Expert Witness Administrative Law Court - SEC, Washington, DC Appellate Tax Board, Boston, Massachusetts Arbitration, Wayne, New Jersey Assessment Appeals Board, Los Angeles County, Los Angeles, California Board of Equalization and Review, Washington, District of Columbia (2) Board of Taxation, Atlantic City, New Jersey Bureau de Revision Evaluation Fonciere du Quebec, Montreal, Canada Circuit Court, Orange County, Orlando, Florida Condemnation Review Board, Minneapolis, Minnesota Corporation Committee, Rhode Island State Senate Court of Common Pleas, Allegheny County, Pennsylvania Court of Common Pleas, Franklin County, Ohio Court of Common Pleas, Montgomery, Pennsylvania Court of Common Pleas, Pittsburgh, Pennsylvania Court of Common Pleas, Philadelphia, Pennsylvania Court of Queen's Bench of Alberta, Canada District Court, Arapahoe County, Colorado District Court, Dallas County, Texas District Court, Harris County, Texas District Court, Tarrant County, Texas District Court, Hennepin County, Minneapolis, Minnesota District Court, Knoxville, Tennessee Federal Bankruptcy Court, Oakland, California Federal Bankruptcy Court, Los Angeles, California HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Denver, Colorado Federal Bankruptcy Court, District of Columbia Federal Bankruptcy Court, Miami, Florida (2) Federal Bankruptcy Court, Chicago, Illinois Federal Bankruptcy Court, New Orleans, Louisiana Federal Bankruptcy Court, Greenbelt, Maryland Federal Bankruptcy Court, Baltimore, Maryland Federal Bankruptcy Court, Rockville, Maryland Federal Bankruptcy Court, Boston, Massachusetts Federal Bankruptcy Court, Grand Rapids, Michigan Federal Bankruptcy Court, Las Vegas, Nevada Federal Bankruptcy Court, Newark, New Jersey (2) Federal Bankruptcy Court, Manhattan, New York (2) Federal Bankruptcy Court, Westbury, New York Federal Bankruptcy Court, Philadelphia, Pennsylvania Federal Bankruptcy Court, Reading, Pennsylvania Federal Bankruptcy Court, Salt Lake City, Utah Federal Bankruptcy Court, Madison, Wisconsin (2) Federal District Court, Rochester, New York Federal District Court, Philadelphia, Pennsylvania (2) Judicial Arbitration and Mediation Services, Dallas, Texas Michigan Tax Tribunal, Detroit, Michigan New Jersey Tax Court, Newark, New Jersey (2) Superior Court, District of Columbia Superior Court, Clayton County, Georgia (2) Superior Court of North Carolina Superior Court, Nashua, New Hampshire Supreme Court, New York State, Buffalo, New York Supreme Court, New York State, Manhattan, New York Supreme Court, New York State, Riverhead, New York HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Tax Review Board, San Joaquin County, Stockton, California Tax Review Board, Bangor, Maine Tax Review Board, Schenectady, New York Tax Review Board, Yorktown, New York Tax Review Board, North Carolina Tax Review Board, Philadelphia, Pennsylvania (2) U.S. District Court, Wilmington, Delaware U.S. District Court, Madison, Wisconsin ============================================================================== Partial List of Hotels/Motels, Appraised or Reviewed Internationally North America Canada - Delta Hotel, Calgary - Econo Lodge, Hull - Hotel Lord Berri, Montreal - Hotel Vogue, Montreal - Hyatt Regency, Montreal - Le Ragence Hyatt, Montreal - Holiday Inn, Oshawa, Ontario - Hotel Le Chantecler, Quebec - Bond Place Hotel, Toronto - Carlton Hotel, Toronto - Chelsea Hotel, Toronto - Delta Chelsea Hotel, Toronto - Four Seasons on the Park, Toronto - Inn on the Park, Toronto - Novotel Missisauga, Toronto - Ramada Inn, Toronto - Sutton Hotel, Toronto - Toronto Marriott East, Toronto - Westbury Hotel, Toronto - Burnaby Villa Inn, Vancouver - Four Seasons Hotel, Vancouver - Sheraton Land Mark, Vancouver - Sheraton Plaza 500, Vancouver - Four Seasons Yorkville Hotel, Yorkville United States Alabama - MEI - Birmingham West, Bessemer - Comfort Inn, Birmingham - Courtyard by Marriott, Birmingham - Courtyard by Marriott-Hoover, Birmingham - Courtyard By Marriott/Homewood, Birmingham - Crown Sterling Suites, Birmingham - Fairfield Inn, Birmingham - Holiday Inn, Birmingham - Howard Johnson, Birmingham - Knights Inn, Birmingham - Ramada Inn, Birmingham - Residence Inn by Marriott, Birmingham - Still Waters Resort, Dadeville - Ramada Inn, Gadsden - Sheraton Hotel, Gulf Shores - Courtyard by Marriott, Huntsville - Knights Inn, Huntsville - Marriott Hotel-Proposed, Huntsville - La Quinta Inn, Huntsville University - Days Inn, Mobile - Hotel - Proposed, Mobile - Inn-Proposed, Mobile - Stouffer Riverview, Mobile - Courtyard by Marriott, Montgomery - Fairfield Inn, Montgomery - Holiday Inn-Downtown, Montgomery - Holiday Inn-East, Montgomery - Howard Johnson, Montgomery - La Quinta Inn, Montgomery - Residence Inn, Montgomery - Marriott's Grand Hotel, Point Clear - Holiday Inn, Sheffield - La Quinta, Tuscaloosa - Masters Economy Inn, Tuscaloosa - Proposed Extended Stay, West Mobile Alaska - Barratt Inn, Anchorage - Clarion Hotel, Anchorage - Holiday Inn, Anchorage - Hotel Captain Hook, Anchorage - International Airport Inn, Anchorage - Sheraton Anchorage Hotel, Anchorage Arizona - Holiday Inn, Bullhead City - Embassy Suites, Camelback - Compri Hotel-Proposed, Chandler - Quality Inn, Chandler - Ramada Inn, Chandler - AmeriSuite Hotel-Proposed, Flagstaff - Holiday Inn, Flagstaff - Motel 6, Flagstaff - Rodeway Inn, Flagstaff - Bright Angel Lodge, Grand Canyon - El Tovar Hotel, Grand Canyon - Grand Canyon National Park, Grand Canyon - Kachina Lodge, Grand Canyon - Maswik Lodge, Grand Canyon - Moqui Lodge, Grand Canyon - Phantom Ranch, Grand Canyon - Thunderbird Lodge, Grand Canyon - Yavapai Lodge, Grand Canyon - Hampton Inn-Proposed, Holbrook - Moqui Lodge, Kaibab National Forest - Rodeway Inn, Kingman - Nautical Inn Resort, Lake Havasu City - Lexington Hotel Suites, Mesa - Biosphere II Conference Center, Oracle - Best Western-Per Diem, Phoenix - Bobby McGee's, Phoenix - Caravan Inn, Phoenix - Compri Hotel-Proposed, Phoenix - Courtyard by Marriott-Black Canyon, Phoenix - Courtyard by Marriott-Mesa, Phoenix - Crescent Phoenix Hotel, Phoenix - Crown Sterling Suites, Phoenix - Days Inn, Phoenix - Doubletree Inn at Park Central, Phoenix - Embassy Suites, Phoenix - Embassy Suites-Biltmore, Phoenix - Executive Park Hotel, Phoenix - Fountain Suites Hotel, Phoenix - Granada Royale-Camelhead, Phoenix - Hilton Hotel, Phoenix - Holiday Inn, Phoenix - Hyatt Regency, Phoenix - La Quinta Hotel, Phoenix - Lexington Hotel Suites, Phoenix - Newton's Sands, Phoenix - Phoenician Golf & Tennis Resort, Phoenix - Pointe Hilton at Tapatio Cliffs, Phoenix - Quality Inn, Phoenix - Ramada Inn-Airport, Phoenix - Ramada Inn-East, Phoenix - Ritz Carlton, Phoenix - Sunburst Resort Hotel, Phoenix - Hassayampa Inn, Prescott - Clarion Inn at McCormick Ranch, Scottsdale - Conference Center, Scottsdale - Courtyard by Marriott-Mayo, Scottsdale - Doubletree Inn at Scottsdale Mall, Scottsdale - Fairfield Inn, Scottsdale - Fashion Square Hotel, Scottsdale - Loews Paradise Resort, Scottsdale - Marriott Camelback Inn, Scottsdale - Marriott Mountain Shadows, Scottsdale - Mountain Shadows Resort, Scottsdale - Orange Tree Resort, Scottsdale - Ramada-Valley Ho, Scottsdale - Red Lion's La Posada Resort, Scottsdale - Registry Resort, Scottsdale - Rodeway Inn, Scottsdale - Scottsdale Princess, Scottsdale - Sheraton Scottsdale Resort, Scottsdale - The Phoenician, Scottsdale - Valley Ho, Scottsdale - John Gardiner's Enchantment, Sedona - L'Auberege de Sedona, Sedona - Los Abrigados, Sedona - Orchards Inn, Sedona - Hotel-Proposed, Sierra Vista - Motel 6, Sierra Vista - Temple Bar Resort, Temple Bar - Coachman Inn - Proposed, Tolleson/Phoenix - Tubac Resort, Tubac - Canyon Ranch, Tucson - Coachman Inn-Proposed, Tucson - Courtyard by Marriott, Tucson - Doubletree Inn, Tucson - Embassy Suites, Tucson - Granada Royale Hometel-E. Broadway, Tucson - Hotel Park Tucson-Proposed, Tucson - Lexington Suites Hotel, Tucson - Loews Hotel, Tucson - Resort Hotel-Proposed, Tucson - Rodeway Inn, Tucson - Sunbelt Commerce Center Hotel, Tucson - La Quinta Inn, Tucson East - Bobby McGee's, Tuscon - Radisson Suite Hotel, Tuscon - Ventana Canyon Golf and Racquet, Tuscon - Ramada Inn, Union Hill Arkansas - Sheraton Inn, Fort Smith - Hilton, Hot Springs - Holiday Inn-Lake Hamilton, Hot Springs - Courtyard by Marriott, Little Rock - Holiday Inn, Little Rock - Legacy Hotel, Little Rock - Little Rock Hilton, Little Rock - Masters Economy Inn, Little Rock - Red Carpet Inn, Little Rock - Super 8, Little Rock - Masters Economy Inn, North Little Rock - Masters Economy Inn, Protho-Junction - Holiday Inn, Texarkana California - Hampton Inn, Agoura Hills - Ramada Inn, Agoura Hills - Residence Inn-Proposed, Agoura Hills - Island Motel, Almeda - Anaheim Hilton & Towers, Anaheim - Anaheim Park Motor Inn, Anaheim - Anaheim Plaza Hotel, Anaheim - Best Western Pavillions, Anaheim - Carousel Inn, Anaheim - Conestoga Hotel, Anaheim - Courtyard by Marriott, Anaheim - Crown Sterling Suites, Anaheim - Disneyland Hotel, Anaheim - Golden Forest Motel, Anaheim - Hampton Inn, Anaheim - Hilton, Anaheim - Holiday Inn Anaheim Center, Anaheim - Hotel-Proposed, Anaheim - Marriott Hotel, Anaheim - Pan Pacific Hotel, Anaheim - Pitcairn Motel, Anaheim - Raffles Inn, Anaheim - Ramada Maingate/Disneyland Hotel, Anaheim - Roger Morris Inn, Anaheim - Stovall's Inn, Anaheim - The Station Inn, Anaheim - Travelodge Inn at the Park, Anaheim - AmeriSuite, Anaheim Hills - Comfort Inn, Anahiem - Mansouri Hotel, Antioch - Red Lion, Apple Valley - Hampton Inn, Arcadia - Residence Inn, Arcadia - Hilton Lodge, Arrowhead Lake - Auburn Inn, Auburn - Sleep Inn, Auburn - Allstar Inn, Bakersfield - Clarion Hotel, Bakersfield - Courtyard by Marriott, Bakersfield - Economy Inn, Bakersfield - Ramada Inn, Bakersfield - Red Lion Hotel, Bakersfield - Residence Inn, Bakersfield - Rodeway Inn, Bakersfield - Hilton Hotel, Baldwin Park - San Gabriel Valley Hotel, Baldwin Park - The Hilton Hotel, Baldwin Park - Allstar Inn, Barstow - Economy Inn, Barstow - Marriott Berkeley Marina, Berkeley - Shattuck Hotel, Berkeley - Beverly Hills Hotel, Beverly Hills - Beverly Rodeo Hotel, Beverly Hills - Beverly Wilshire Hotel, Beverly Hills - Hilton Hotel-Cresthil, Beverly Hills - L'Ermitage, Beverly Hills - Peninsula Hotel, Beverly Hills - Best Western, Big Bear Lake - Big Bear Hotel, Big Bear Lake - Big Bear Lake Resort, Big Bear Lake - Big Bear Towering Pines, Big Bear Lake - Motel 6, Big Bear Lake - Post Ranch, Big Sur - Ventana Inn, Big Sur - Rodeway Inn, Blythe - Courtyard by Marriott, Brea - Holiday Inn, Brentwood - Courtyard by Marriott, Buena Park - Fairfield Inn, Buena Park - Hampton Inn, Buena Park - Holiday Inn, Buena Park - Crowne Sterling Suites, Burlingame - Hyatt Regency, Burlingame - Mariott Hotel - SFO, Burlingame - Marriott, Burlingame - Marriott-San Francisco Airport, Burlingame - Radisson Hotel-Proposed, Burlingame - Sheraton Hotel, Burlingame - Courtyard by Marriott, Camarillo - Best Western Fireside Inn, Cambria - Cambria Pines Lodge, Cambria - Residence Inn, Campbell - Hotel-Proposed, Capitola - Resort Hotel, Spa & Conference Ctr., Capitola - Allstar Inn, Carlsbad - Carlsbad Inn, Carlsbad - Inn of America, Carlsbad - La Costa Hotel and Spa, Carlsbad - Olympic Resort Hotel, Carlsbad - Tickle Pink Inn, Carmel - Allstar Inn, Carpinteria - Desert Princess Country Club, Cathedral City - Royce Suites Hotel, Cathedral City - Digger Bay, Central Valley - Marriott Hotel-Proposed, Century City - Westin Century Plaza Hotel, Century City - Neighborhood Inn-Proposed, Chatsworth - Red Lion Hotel, Chico - Otay Valley Inn, Chula Vista - Travelodge-Otay Valley, Chula Vista - Ramada Inn, City of Commerce - Sheraton Hotel, City of Industry - Allstar Inn, Coalinga - Harris Ranch Restaurant/Inn, Coalinga - Howard Johnson, Colton - Best Western Willow Tree Inn, Compton - Concord Hotel, Concord - Hilton Hotel, Concord - The Trees Inn, Concord - Motel 6, Corona - Hotel del Coronado, Coronado - Loews Coronado Bay Resort, Coronado - Madera Village Inn, Corte Madera - Ha' Penny Inn, Costa Mesa - La Quinta Hotel, Costa Mesa - Marriott Suites, Costa Mesa - Red Lion Hotel, Costa Mesa - Residence Inn, Costa Mesa - Pacifica Hotel, Culver City - Ramada Inn, Culver City - Courtyard by Marriott, Cupertino - Doubletree Hotel, Cupertino - Doubletree Hotel, Dana Point - Spa-Proposed, Danville - El Rancho, Davis - Furnace Creek Resort, Death Valley - Stovepipe Wells Village, Death Valley - Hilton, Del Mar - Days Inn, Diamond Bar - Compri Hotel, El Segundo - Proposed Summerfield, El Segundo - Days Inn, Emeryville - Holiday Inn-Bay Bridge, Emeryville - Lyons Restaurant, Emeryville - Budget Motel, Encinitis - Marriott Tenaya Lodge-Proposed, Fishcamp - Holiday Inn, Fort Myers Beach - All Suites Hotel/Athletic Club, Foster City - Clubtel-Proposed, Foster City - Courtyard by Marriott, Foster City - Holiday Inn, Foster City - Courtyard by Marriott, Fremont - Fremont Hotel, Fremont - Motel 6, Fremont - Residence Inn, Fremont - Allstar Inn, Fresno - AmeriSuite, Fresno - Chateau Inn, Fresno - Courtyard by Marriott, Fresno - Economy Inn, Fresno - Hacienda, Fresno - Holiday Inn, Fresno - Holiday Inn-Fresno Airport, Fresno - Howard Johnson Motel, Fresno - Piccadilly Inn, Fresno - Travelers Inn, Fresno - Travelers Lodge, Fresno - Griswold's Hotel, Fullerton - Holiday Inn, Fullerton - Marriott Hotel, Fullerton - Hotel-Proposed, Garden Grove - Hyatt Regency Alicante, Garden Grove - Princess Hotel, Garden Grove - Motel 6, Gilroy - Hyatt Regency-Proposed, Goleta - Allstar Inn, Hacienda Heights - Courtyard by Marriott, Hacienda Heights - Half Moon Bay Lodge, Half Moon Bay - Courtyard by Marriott, Harbor Boulevard - Grosvenor, Harborside-Pt. Loma - Inn at Foss Creek, Healdsburg - Chateau Marmont, Hollywood - Hollywood Palm Hotel, Hollywood - Sunset Towers Hotel, Hollywood - Waterfront Hilton Hotel, Huntington Beach - Compri Hotel, Hutton Centre - Grand Champions Resort, Indian Wells - Stouffer Esmerelda Resort, Indian Wells - Courtyard By Marriott, Irvine - Courtyard by Marriott - Proposed, Irvine - Embassy Suites, Irvine - Hilton Hotel, Irvine - Holiday Inn, Irvine - Hyatt Hotel, Irvine - La Quinta-Proposed, Irvine - Marriott Hotel, Irvine - Marriott-Proposed, Irvine - Registry Hotel, Irvine - Residence Inn-Proposed, Irvine - Amador Inn, Jackson - Embassy Suites, La Jolla - Hotel-Proposed, La Jolla - La Jolla Property, La Jolla - La Jolla Village Inn, La Jolla - Marriott Hotel, La Jolla - Residence Inn, La Jolla - Days Inn-Proposed, La Palma - PGA West Resort - Proposed, La Quinta - Lafayette Park Hotel, Lafayette - Laguna Shores, Laguna Beach - Holiday Inn, Laguna Hills - Ryokan Hotel-Proposed, Laguna Hills - Villa Valencia, Laguna Hills - Ritz Carlton, Laguna Niguel - Lake Mohave Resort, Lake Mohave - Resort at Squaw Creek, Lake Tahoe - Courtyard by Marriott, Larkspur Landing - Hilton, Las Cruces - Surf and Sand Hotel, Leguna Beach - Holiday Inn, Lido Beach - Motel-Proposed, Little Lake - Residence Inn, Livermore - Residence Inn-Proposed, Livermore - Breakers Hotel, Long Beach - Holiday Inn, Long Beach - Holiday Inn Airport, Long Beach - Marriott Hotel-Long Beach Airport, Long Beach - Marriott Hotel-Proposed, Long Beach - Ramada Renaissance Hotel, Long Beach - Residence Inn, Long Beach - Sheraton Long Beach & Office Tower, Long Beach - Airport Park Hotel, Los Angeles - Bel Age, Los Angeles - Biltmore Hotel, Los Angeles - Century Inn, Los Angeles - Checkers Hotel, Los Angeles - Courtyard by Marriott-Irvine Main, Los Angeles - Courtyard by Marriott-LAX Airport, Los Angeles - Crown Sterling Suites, Los Angeles - Days Inn, Los Angeles - Econo Lodge-Proposed, Los Angeles - Embassy Suites, Los Angeles - Embassy Suites-LAX-Proposed, Los Angeles - Four Seasons, Los Angeles - Hampton Inn-LAX, Los Angeles - Herrick and Campbell, Los Angeles - Hilton & Towers-LAX, Los Angeles - Hilton Hotel, Los Angeles - Holiday Inn Crowne Plaza-LAX, Los Angeles - Le Montrose Hotel, Los Angeles - Ma Maison Sofitel, Los Angeles - Macklowe Hotel, Los Angeles - Marriott Century City, Los Angeles - MCA Hotel-Proposed, Los Angeles - New Otani Hotel, Los Angeles - Playa Vista Development, Los Angeles - Stouffer Concourse Hotel, Los Angeles - Westin Bonaventure, Los Angeles - Westwood Marquis Hotel, Los Angeles - Los Gatos Lodge, Los Gatos - Macienda Inn, Los Gatos - Toll House Inn, Los Gatos - Residence Inn, Manhattan Beach - All Suite Hotel, Marina Del Rey - Marina Beach Hotel, Marina del Rey - Marina del Rey Hotel and Marina, Marina del Rey - Marina Suites Hotel, Marina Del Rey - Marriott Marina Del Rey, Marina Del Rey - Residence Inn, Meriden - Quality Suites Hotel - Proposed, Millbrae - Beverly Heritage Hotel, Milpitas - Crown Sterling Suites, Milpitas - Holiday Inn, Milpitas - Courtyard by Marriott, Mira Mesa - Grosvenor, Mission Bay - Motel Orleans, Modesto - Red Lion Hotel, Modesto - Red Lion-Proposed, Modesto - Carmel Mission Inn, Monterey - Doubletree Inn, Monterey - Former Monterey Hilton Hotel, Monterey - Monterey Plaza, Monterey - Plaza Hotel, Monterey - Sheraton Hotel, Monterey - Pebble Beach Company, Monterey County - Inn at Morro Bay, Morro Bay - Residence Inn, Mountain View - Inn at Napa Valley, Napa - Best Western Inn, Napa Valley - Clarion Hotel-Napa Valley, Napa Valley - Silverado, Napa Valley - Ha'Penny Motel, National City - Allstar Inn, Needles - Hilton-Newark/Fremont, Newark - Four Seasons Hotel, Newport Beach - Hotel Meridien, Newport Beach - Hyatt Newporter, Newport Beach - Newporter Resort, Newport Beach - Sheraton, Newport Beach - Days Inn-Proposed, North Hollywood - Northstar, North Lake Tahoe - Ramada Inn, Norwalk - Impact Study - Proposed Hotel, Oakdale - Hilton Inn, Oakland - Holiday Inn, Oakland - Holiday Inn-Oakland Airport, Oakland - Parc Oakland Hotel, Oakland - Resort - Proposed, Olympic Valley - Resort at Squaw Creek-Proposed, Olympic Valley - Clarion Hotel, Ontario - Compri Hotel, Ontario - Fairfield Inn, Ontario - Holiday Inn, Ontario - Lexington Hotel Suites, Ontario - Red Lion Hotel, Ontario - Doubletree Hotel, Orange - Woodfin Suites, Orange - Embassy Suites, Palm Desert - Marriott Desert Springs, Palm Desert - Canyon Resort, Palm Springs - Compri Hotel-Proposed, Palm Springs - Courtyard by Marriott, Palm Springs - Desert Princess, Palm Springs - Grand Champions Resort, Palm Springs - International Hotel and Resort, Palm Springs - Ocotillo Lodge, Palm Springs - Palm Canyon, Palm Springs - PGA West Resort-Proposed, Palm Springs - Spa Hotel at Mineral Springs, Palm Springs - Westin Hotel, Palm Springs - Grosvenor, Palmdale - Super 8, Palmdale - Cowper Square, Palo Alto - Garden Court, Palo Alto - Holiday Inn, Palo Alto - Stanford Park, Palo Alto - Marriott, Paradise Valley - All Suite Hotel-Proposed, Pasadena - Doubletree Hotel, Pasadena - Holiday Inn, Pasadena - Cascade Ranch Lodge, Pescadero - Elk Lodge, Petaluma - Hotel Petaluma, Petaluma - Hilton-Proposed, Pismo Beach - Hilton-Sea Point, Pismo Beach - Holiday Inn, Pismo Beach - Hotel-Proposed, Pismo Beach - Pismo II, Pismo Beach - Fairfield Inn, Placentia - Residence Inn, Placentia - Howard Hughes Center, Playa Vista - Pleasant Hill Inn, Pleasant Hill - Residence Inn, Pleasant Hill - Club Hilton Hotel-Proposed, Pleasanton - Compri Hotel, Pleasanton - Courtyard by Marriott, Pleasanton - Hilton, Pleasanton - Holiday Inn, Pleasanton - Pleasanton Creek, Pleasanton - Shilo Inn - Hilltop, Pomona - Compri Hotel, Rancho Bernardo - Radisson Suites, Rancho Bernardo - Comfort Inn Motel, Rancho Cordova - Courtyard by Marriott, Rancho Cordova - Economy Inn, Rancho Cordova - El Rancho, Rancho Cordova - Quality Suites-Proposed, Rancho Cordova - Sheraton Sunrise, Rancho Cordova - Marriott Rancho Las Palmas, Rancho Mirage - Mission Hills Hotel, Rancho Mirage - Resort Hotel-Proposed, Rancho Mirage - Westin Mission Hills Resort, Rancho Mirage - Bridge Bay Resort, Redding - Grand Manor Inn, Redding - La Quinta Inn, Redding - Motel 6, Redding - Motel Orleans, Redding - Red Lion Inn, Redding - Shasta Inn, Redding - Portofino Hotel & Yacht Club, Redondo Beach - Sheraton, Redondo Beach - Sofitel Redwood Shores, Redwood - Days Inn, Richmond - Best Western Carraige Inn, Ridgecrest - Days Inn, Riverside - Mission Inn-Proposed, Riverside - Omni Mission Inn, Riverside - Sheraton Hotel, Riverside - Red Lion Inn, Rohnert Park - Crown Sterling Suites, S.San Fransicso - Allstar Inn, Sacramento - Arco Arena II-Proposed, Sacramento - Arco Park, Sacramento - Catering Center - Proposed, Sacramento - Clarion Hotel, Sacramento - Compri Hotel-Proposed, Sacramento - Courtyard by Marriott, Sacramento - Courtyard by Marriott-S. Natomas, Sacramento - Hilton Hotel, Sacramento - Holiday Inn-Capital Plaza, Sacramento - Hotel-Proposed, Sacramento - Hyatt Arbitrat, Sacramento - Hyatt Regency, Sacramento - La Quinta Hotel, Sacramento - Motel Orleans, Sacramento - Radisson Hotel, Sacramento - Red Lion Inn, Sacramento - Residence Inn, Sacramento - Sacramento Inn, Sacramento - Sierra Inn, Sacramento - Sterling Hotel, Sacramento - Travelers Inn, Sacramento - Woodlake Inn, Sacramento - Harvest Inn, Saint Helena - Courtyard by Marriott, San Bruno - San Carlos Motel Development, San Carlos - Atlas Hotels/Mission Valley Inn, San Diego - Best Western Seven Seas Motor Lodge, San Diego - Budget Motel of America, San Diego - Catamaran Resort Hotel, San Diego - Center Pointe Development, San Diego - Comfort Inn, San Diego - Courtyard by Marriott-Mira Mesa, San Diego - Doubletree Hotel, San Diego - Embassy Suites, San Diego - Executive Lodge, San Diego - Hanalei Hotel, San Diego - Harbor Island Hotel-Proposed, San Diego - Harborside Inn-Point Loma, San Diego - Harbortown Marina Resort, San Diego - Holiday Inn Montgomery Airport, San Diego - Holiday Inn-Embarcadero, San Diego - Holiday Inn-Harbor View, San Diego - Horton Grand Saddlery, San Diego - Horton Park Plaza Hotel, San Diego - Howard Johnson Hotel, San Diego - Inter-Continental Hotel & Marina, San Diego - Kings Inn, San Diego - La Jolla Village Inn, San Diego - La Quinta Hotel, San Diego - Marriott Hotel-Mission Valley, San Diego - Marriott Twin Towers and Marina, San Diego - Mission Valley Inn, San Diego - Omni Hotel, San Diego - Radisson Hotel, San Diego - Ramada Inn, San Diego - Ramada Limited Suites, San Diego - Ramada Old Town, San Diego - Ramada Rancho Penasquitos, San Diego - Red Lion Inn, San Diego - Regency Plaza Hotel, San Diego - San Diego Marriott, San Diego - Seven Seas Lodge, San Diego - Sheraton Grand, San Diego - Sheraton Harbor Island East, San Diego - Super 8-Point Loma, San Diego - Symphony Towers, San Diego - Town and Country Hotel, San Diego - Travelodge Hotel Plaza, San Diego - U.S. Grant Hotel, San Diego - Westin-Proposed, San Diego - Abagail Inn, San Francisco - Bellevue Hotel, San Francisco - Cable Motor Inn, San Francisco - California Cafe, San Francisco - Campton Place, San Francisco - Cartwright Hotel, San Francisco - Chancellor Hotel, San Francisco - Clarion Inn-San Francisco Airport, San Francisco - Comfort Inn, San Francisco - Courtyard by Marriott-Airport, San Francisco - Embarcadero Inn, San Francisco - Fairmont Hotel, San Francisco - Grand Hyatt, San Francisco - Grosvenor Clift Hotel, San Francisco - Harbor Court Hotel, San Francisco - Hilton Hotel, San Francisco - Holiday Inn - Union Square, San Francisco - Holiday Inn Crowne Plaza, San Francisco - Holiday Inn-Civic Center, San Francisco - Holiday Inn-Fisherman's Wharf, San Francisco - Holiday Inn-Golden Gateway, San Francisco - Holiday Inn-South, San Francisco - Holiday Lodge, San Francisco - Hotel Diva, San Francisco - Hotel Meridien, San Francisco - Hotel Union Square, San Francisco - Hotel-Proposed, San Francisco - Hyatt Fisherman's Wharf, San Francisco - Hyatt Regency Embarcadero, San Francisco - Inn at Fisherman's Wharf, San Francisco - Inn at the Opera, San Francisco - Inn-Proposed, San Francisco - Juliana Hotel, San Francisco - King George Hotel, San Francisco - La Quinta Inn, San Francisco - La Quinta-Airport, San Francisco - Lambourne Hotel, San Francisco - Laurel Motor Inn, San Francisco - Majestic Hotel, San Francisco - Manx Hotel, San Francisco - Mark Twain, San Francisco - Marriott, San Francisco - Marriott San Francisco-Proposed, San Francisco - Marriott-Airport, San Francisco - Orchard Hotel, San Francisco - Pan Pacific Hotel, San Francisco - Parc 55 Hotel, San Francisco - Park Hyatt Hotel, San Francisco - Portman Hotel, San Francisco - Prescott Hotel, San Francisco - Queen Anne Hotel, San Francisco - Ramada Hotel, San Francisco - Regis Hotel, San Francisco - Ritz-Carlton Hotel, San Francisco - San Franciscan, San Francisco - San Francisco Hotel, San Francisco - Savoy Hotel, San Francisco - Sheraton Palace Hotel, San Francisco - Sheraton-Fisherman's Wharf, San Francisco - Sir Francis Drake Hotel, San Francisco - Stanford Court, San Francisco - Stouffer Stanford Court Hotel, San Francisco - Super 8-Fisherman's Wharf, San Francisco - Westin St. Francis, San Francisco - Crowne Sterling Suites, San Francisco - South - Olympic Club Golf Course, San Francisco/San Mateo - Budget Inn, San Jose - Courtyard by Marriott, San Jose - Cozy 8 Arena Hotel, San Jose - Fairmont Hotel, San Jose - Holiday Inn, San Jose - Ramada Renaissance, San Jose - Red Lion Inn, San Jose - Islander Motel, San Leandro - Apple Farm Inn, San Luis Obispo - Embassy Suites, San Luis Obispo - Holiday Inn, San Luis Obispo - Los Nomados Resort, San Luis Obispo - Twin Oaks Golf Course, San Marcos - Dunfey San Mateo Hotel, San Mateo - Compri Hotel-Proposed, San Pedro - Embassy Suites Hotel, San Rafael - Marriott Hotel-Proposed, San Ramon - Residence Inn, San Ramon - AAA Inn, Santa Ana - California Palms Hotel, Santa Ana - Comfort Inn, Santa Ana - Compri Hotel, Santa Ana - Embassy Suites Santa Ana, Santa Ana - Executive Lodge, Santa Ana - Howard Johnson, Santa Ana - Quality Inn, Santa Ana - Ramada Inn-Orange County, Santa Ana - El Encanto Hotel, Santa Barbara - Fess Parker's Red Lion Resort, Santa Barbara - Four Seasons Hotel, Santa Barbara - Montecito Inn, Santa Barbara - San Ysidro Ranch, Santa Barbara - Santa Barbara Inn, Santa Barbara - Biltmore Hotel & Suites, Santa Clara - Days Inn, Santa Clara - Doubletree Hotel, Santa Clara - Embassy Suites, Santa Clara - Inn At Saratoga, Santa Clara - Marriott Hotel, Santa Clara - Quality Suites Hotel, Santa Clara - Dream Inn, Santa Cruz - Hilton, Santa Maria - Motel 6, Santa Maria - Econo Lodge-Proposed, Santa Monica - Holiday Inn, Santa Monica - Holiday Inn at the Pier, Santa Monica - Park Hyatt Hotel, Santa Monica - Santa Monica Beach Hotel, Santa Monica - Santa Monica/Slatkin, Santa Monica - Allstar Inn, Santa Rosa - Doubletree Hotel, Santa Rosa - Fountaingrove Inn, Santa Rosa - Holiday Inn, Santa Rosa - Round Barn Inn-Proposed, Santa Rosa - Sheraton Round Barn, Santa Rosa - Days Inn, Seaside - Embassy Suites, Seaside - Seaside 8 Motel, Seaside - Valley Radisson, Sherman Oaks - Red Lion, Sonoma - Sonoma Mission Inn, Sonoma - Holiday Inn - Proposed, Sonora - Timberwolf Lodge, South Lake Tahoe - Holiday Inn, South San Francisco - Hotel-Proposed, South San Francisco - Meadowood Resort, St. Helena - Hilton Hotel, Stockton - Holiday Inn, Stockton - La Quinta Hotel, Stockton - Motel Orleans, Stockton - Paradise Point Manna, Stockton - Sheraton-Proposed, Stockton - Hilton, Sunnyvale - Holiday Inn, Sunnyvale - Neighborhood Suites, Sunnyvale - Ramada Inn, Sunnyvale - Sunnyvale Hilton, Sunnyvale - Temecula Creek Inn, Temecula Creek - Westlake Plaza Hotel, Thousand Oaks - Courtyard by Marriott, Torrance - Holiday Inn, Torrance - Marriott Hotel, Torrance - Residence Inn, Torrance - Holiday Inn, Union City - MCA Hotel-Proposed, Universal City - Comfort Inn, Vallejo - Holiday Inn, Van Nuys - La Quinta Hotel, Ventura - Ocean Resorts, Ventura - Sheraton, Ventura - Greentree Inn, Victorville - Doubletree Inn, Walnut Creek - Parkside Hotel, Walnut Creek - Ramada Renaissance Hotel, Walnut Creek - Royce Hotel-Proposed, Walnut Creek - Walnut Creek Project, Walnut Creek - Hampton Inn, West Covina - Le Bel Age, West Hollywood - Le Dufy, West Hollywood - Le Mondrian Hotel, West Hollywood - Hilton, Whittler - Hotel & Conference Center-Proposed, Woodland - Marriott Hotel-Woodland Hills, Woodland Hills - Skylonda Retreat, Woodside - Compri Hotel-Proposed, Yorba Linda - Marriott-Tenaya Lodge, Yosemite - Motel Orleans, Yuba City Colorado - Days Inn, Arapahoe - Continental Inn, Aspen - Ritz-Carlton Hotel-Proposed, Aspen - Hampton Inn, Aurora - Holiday Inn, Aurora - Radisson Hotel, Aurora - Radisson Southeast, Aurora - Raffles Hotel, Aurora - Comfort Inn, Avon - Boulder Hotel-Downtown, Boulder - Clarion Hotel, Boulder - Courtyard by Marriott, Boulder - Doubletree Hotel-Proposed, Boulder - Hilton Harvest House, Boulder - Holiday Inn, Boulder - Interlocken Conference Resort-Prop., Boulder - Proposed Golf Course, Boulder - Residence Inn, Boulder - Hilton, Breckenridge - Ski Lodge-Proposed, Breckenridge - Interlocken Conference Center, Broomfield - Interlocken Conference Center-Prop., Broomfield - Embassy Suites, Colorado Springs - Hilton, Colorado Springs - Howard Johnson, Colorado Springs - Le Baron Hotel, Colorado Springs - Marriott, Colorado Springs - Quality Inn, Colorado Springs - Red Lion Inn, Colorado Springs - Sheraton Inn, Colorado Springs - Grand Butte Hotel, Crested Butte - Best Western Regency, Denver - Brown Palace, Denver - Clarion Hotel-Denver Airport, Denver - Courtyard by Marriott-Airport, Denver - Courtyard by Marriott-Southeast, Denver - Days Inn, Denver - Denver Airport Hilton Inn, Denver - Doubletree Hotel, Denver - Embassy Suites, Denver - Embassy Suites-Airport, Denver - Hilton-Technical Center, Denver - Holiday Inn-Downtown, Denver - Holiday Inn-West, Denver - Jackson's Hole Sport, Denver - Marriott-Southeast, Denver - Marriott-West, Denver - Radisson Hotel, Denver - Red Lion Hotel, Denver - Regency Inn, Denver - La Quinta Inn, Denver - Airport - La Quinta, Denver - South - Red Lion Inn, Durango - Hilton-Denver, Englewood - Residence Inn, Englewood - Scanticon Conference Center, Englewood - Marriott Hotel-Proposed, Fort Collins - Holiday Inn, Golden - Marriott-Denver West, Golden - Ramada Inn, Grand Junction - Sheraton-Proposed, Keystone - Compri Hotel, Lakewood - Hampton Inn, Lakewood - Sheraton Inn, Steamboat Springs - Proposed Hotel, Telluride - Days Inn, Vail - Doubletree Hotel, Vail - Lodge at Vail, Vail - Marriott's Mark Resort, Vail - Westin Vail Resort, Vail - Ramada Hotel, Westminster - Winter Park Resort, Winter Park Connecticut - Chester Inn-Chester, Chester - Inn-Proposed, Chester - Super 8-Proposed, Cromwell - Danbury Hilton & Towers, Danbury - Residence Inn, Danbury - Holiday Inn, Darien - Howard Johnson Lodge, Darien - Ramada Inn, Darien - Holiday Inn, East Hartford - Howard Johnson Lodge, East Lyme - Days Inn-Proposed, Enfield - Greenwich Habor Inn, Greenwich - Howard Johnson Lodge, Greenwich - Showboat Inn, Greenwich - Hotel-Proposed, Groton - Hilton Hotel, Hartford - Holiday Inn-Proposed, Hartford - Motel 6, Hartford - Ramada Inn, Hartford - Sheraton Tobacco Valley Inn, Hartford - Summit Hotel, Hartford - Super 8 Motel, Hartford - Susse Chalet, Hartford - Residence Inn By Marriott, Meriden - Holiday Inn, Milford - Susse Chalet, Milford - Howard Johnson Lodge, Mystic - Mystic Ramada Inn, Mystic - Holiday Inn, New Britain - Ramada Inn, New Britain - Colony Inn, New Haven - Holiday Inn, New Haven - Howard Johnson, New Haven - Quality Inn, New Haven - Residence Inn, New Haven - Radisson Hotel, New London - Best Western-Proposed, New Milford - Courtyard by Marriott, Norwalk - Holiday Inn, Norwalk - Howard Johnson, Norwalk - Ramada Inn, Norwalk - Susse Chalet, Rocky Hill - Ramada Hotel-Proposed, Shelton - Residence Inn - Shelton, Shelton - Heritage Village, Southbury - Southbury Hotel, Southbury - Susse Chalet, Southington - Days Inn, Stamford - Executive Hotel, Stamford - Harley Hotel, Stamford - Holiday Inn-Crowne Plaza, Stamford - Inn at Mill River, Stamford - Le Pavillon Hotel, Stamford - Marriott, Stamford - Radisson Tara Hotel, Stamford - Sheraton, Stamford - Best Western-Proposed, Stratford - Stratford Motor Lodge, Stratford - Marriott Hotel, Trumbull - Courtyard by Marriott, Wallingford - Susse Chalet, Wallingford - Howard Johnson Plaza Hotel, Waterbury - Super 8-Proposed, Waterbury - Residence Inn-Proposed, Waterford - Holiday Inn, Westbury - The Island Inn, Westbury - Courtyard by Marriott, Windsor - Sheraton Tobacco Valley Inn, Windsor - Holiday Inn-Proposed, Windsor Locks Delaware - Wilmington Hilton, Claymont - Rusty Rudder, Dewey Beach - Residence Inn-Proposed, Newark - Hilton Hotel, Wilmington - Hotel-Proposed, Wilmington - Marriott Suites, Wilmington - Residence Inn-Proposed, Wilmington District of Columbia - All Suite Hotel - Proposed, Washington - Bellevue Hotel, Washington - Canterbury Hotel, Washington - Capital Hilton, Washington - Capitol Hill Hotel, Washington - Castleton Hotel, Washington - Comfort Inn, Washington - Convention Center Inn, Washington - Dupont Plaza, Washington - Embassy Row Hotel, Washington - Fairfax Hotel, Washington - Fairmont Hotel, Washington - Four Seasons Hotel, Washington - General Scott Inn, Washington - Georgetown Hotel, Washington - Grand Hotel, Washington - Grand Hyatt, Washington - Hampshire House, Washington - Harambee House, Washington - Hay Adams Hotel, Washington - Holiday Inn Crowne Plaza, Washington - Holiday Inn-Capitol, Washington - Holiday Inn-Georgetown, Washington - Holiday Inn-Governor House, Washington - Hotel Washington, Washington - Howard Johnson, Washington - Hyatt Regency-Capitol, Washington - Hyatt-Convention Center, Washington - International Inn, Washington - Intrigue Hotel, Washington - Jefferson Hotel, Washington - Lombardy Tower Apartment Hotel, Washington - Madison Hotel, Washington - Manger Annapolis Hotel, Washington - Manger Hamilton Hotel, Washington - Manger Hay Adams Hotel, Washington - Marriott-Key Bridge, Washington - Mayflower Hotel, Washington - Omni Georgetown Hotel, Washington - Omni Shoreham Hotel, Washington - Park Terrace Hotel, Washington - Phoenix Park Hotel, Washington - Plaza Hotel, Washington - Potomac Hotel Group, Washington - Quality Inn-Capitol Hill, Washington - Quality Inn-Downtown, Washington - Ramada Inn-Central, Washington - Ramada Renaissance Hotel, Washington - Ritz-Carlton, Washington - River Inn, Washington - Riverside Towers, Washington - Sheraton City Centre, Washington - Sheraton Grand Hotel, Washington - Shoreham Hotel, Washington - St. James, Washington - State Plaza, Washington - Statler Hilton Hotel, Washington - Washington Hilton, Washington - Washington Plaza, Washington - Watergate Hotel, Washington - Wyndham Bristol Hotel, Washington Florida - Holiday Inn, Altamonte Springs - La Quinta, Altamonte Springs - Turnberry Isle Resort, Aventura - Boca Raton Hotel and Club, Boca Raton - Boca West, Boca Raton - Deerfield Beach Hilton, Boca Raton - Embassy Suites, Boca Raton - Park Place Suite Hotel, Boca Raton - Petite Suites, Boca Raton - Residence Inn, Boca Raton - Days Inn, Brandenton - South Seas Resort, Captive Island - Days Inn, Clearwater - Days Inn-Proposed, Clearwater - Holiday Inn - Central/Clearwater, Clearwater - La Quinta Inn, Clearwater - Sheraton Sand Key Hotel, Clearwater - Holiday Inn - Gulfview South, Clearwater Beach - Holiday Inn - Surfside North, Clearwater Beach - Howard Johnson, Clermont - Econolodge, Cocoa Beach - Hilton Hotel, Cocoa Beach - Holiday Inn, Cocoa Beach - Howard Johnson, Cocoa Beach - Perkins Restaurant, Cocoa Beach - Coconut Grove Hotel, Coconut Grove - Mayfair House, Coconut Grove - Proposed Hampton Inn, Coconut Grove - Biltmore Hotel, Coral Gables - Holiday Inn, Coral Gables - Holiday Inn (Court), Coral Gables - Plantation Hotel, Crystal River - Sheraton Inn, Cypress Gardens - Budget Inn, Davenport - Daytona Beach Surfside Regency, Daytona Beach - Howard Johnson, Daytona Beach - La Quinta Inn, Daytona Beach - Pirates Cove, Daytona Beach - Sheraton Inn, Daytona Beach - Crown Sterling Suites, Deerfield Beach - Days Inn, Deerfield Beach - Hilton Hotel, Deerfield Beach - Horizon Club, Deerfield Beach - Sheraton Inn, Deland - Hilton Hotel, Disney World - Holiday Inn, Edgewater - Knights Inn, Florida City - AmeriSuites Hotel-Proposed, Fort Lauderdale - Bahia Mar Hotel, Fort Lauderdale - Comfort Suites, Fort Lauderdale - Compri Hotel-Proposed, Fort Lauderdale - Costa Del Sol, Fort Lauderdale - Crown Sterling Suites, Fort Lauderdale - Days Inn, Fort Lauderdale - Embassy Suites Hotel, Fort Lauderdale - Executive House, Fort Lauderdale - Hilton Hotel, Fort Lauderdale - Hilton Inverrary, Fort Lauderdale - Holiday Inn - Galleria, Fort Lauderdale - Holiday Inn - North Beach, Fort Lauderdale - Holiday Inn-Proposed, Fort Lauderdale - Marriott Harbor Beach Hotel, Fort Lauderdale - Marriott Hotel & Marina, Fort Lauderdale - Marriott Hotel-Cypress Road, Fort Lauderdale - Pier 66 Hotel and Marina, Fort Lauderdale - Port Everglades Hotel, Fort Lauderdale - Stouffer Hotel, Fort Lauderdale - Days Inn, Fort Meyers - Courtyard by Marriott, Fort Myers - Holiday Inn, Fort Myers - La Quinta Hotel, Fort Myers - Sheraton Harbor Place-Proposed, Fort Myers - Sheraton Motor Inn, Fort Myers - Proposed Hotel, Fort Myers Beach - American Way, Fort Pierce - Days Inn, Fort Walton Beach - Holiday Inn - Airport, Fort.Lauderdale - Days Inn-University Center, Gainesville - Fairfield Inn, Gainesville - Howard Johnson Lodge-I-75, Gainesville - La Quinta Hotel, Gainesville - University Centre Hotel, Gainesville - Holiday Inn, Hialeah - Motel, Hillsboro Beach - Days Inn, Hollywood - Diplomat Hotel, Hollywood - Holiday Inn, Hollywood - Quality Suites - Oceanside, Indiatlantic - Hilton Inn, Inverrary - Best Inn, Jacksonville - Bradbury Suites-Proposed, Jacksonville - Compri Hotel-Proposed, Jacksonville - Courtyard By Marriott, Jacksonville - Days Inn, Jacksonville - Doubletree Club Hotel, Jacksonville - Hampton Inn, Jacksonville - Hotel-Proposed, Jacksonville - Jacksonville Hotel, Jacksonville - Residence Inn, Jacksonville - Sheraton Hotel, Jacksonville - Wyndham Lakes Hotel, Jacksonville - Sheraton Beach Hotel, Jensen Beach - Howard Johnson, Juno Beach - Hilton Hotel, Jupiter - Key Biscayne, Key Biscayne - Howard Johnson Lodge, Key Largo - Casa Marina Marriott, Key West - Fairfield Inn, Key West - Hampton Inn-Roosevelt Rd., Key West - Holiday Inn, Key West - Hyatt Hotel, Key West - La Concha Holiday Inn, Key West - Pier House Inn and Beach Club, Key West - Reach Hotel, Key West - Santa Maria Hotel, Key West - Timeshare Resort, Key West - Best Western Vacation Lodge, Kissimmee - Days Inn, Kissimmee - Days Inn West, Kissimmee - Days Lodge, Kissimmee - Howard Johnson Plaza Hotel, Kissimmee - Howard Johnson's, Kissimmee - KOA Campground, Kissimmee - Old Town Retail Complex, Kissimmee - Quality Suites, Kissimmee - Quality Suites-Maingate, Kissimmee - Save Inn, Kissimmee - Sheraton Lakeside, Kissimmee - Suite Hotel-Proposed, Kissimmee - Wynfield Inn, Kissimmee - Days Inn, Lake Buena Vista - Embassy Suites-Proposed, Lake Buena Vista - Hilton Hotel-Disney World, Lake Buena Vista - Marriott Orlando World Center, Lake Buena Vista - Days Inn, Lake City - Flagship Inn, Lake County - Travelodge Motel, Lake County - Lake Park Inn, Lake Park - Holiday Inn, Lake Placid - Hampton Inn-Proposed, Lakeland - Hotel-Proposed, Lakeland - Howard Johnson, Lakeland - Resort Hotel-Proposed, Lakeland - Resort-Imperial Lake-Prpsd., Lakeland - Proposed Hotel, Lee County - Sonesta Sanibel Harbour, Lee County - Holiday Inn, Lido Beach - Holiday Inn, Longboat Kay - Holiday Inn - Madiera Beach, Madiera - Howard Johnson, Marathon - Radisson Suite Resort, Marco Island - Holiday Inn, Marianna - Oceanfront Hotel, Melbourne - Quality Suites, Melbourne - Bahia Mar Hotel & Yachting Club, Miami - Biscayne Bay Marriott, Miami - Courtyard by Marriott, Miami - Crown Sterling Suites, Miami - Doral Ocean Beach Resort, Miami - Fairfield Inn, Miami - Hilton Hotel-Proposed, Miami - Holiday Inn Civic Center, Miami - Holiday Inn-Airport (Le Juene Rd.), Miami - Holiday Inn-Calder, Miami - Howard Johnson Hotel-Broad Causeway, Miami - Howard Johnson Hotel-Port of Miami, Miami - Howard Johnson Lodge-Golden Glades, Miami - Howard Johnson Lodge-Int'l Airport, Miami - Hyatt Regency Hotel, Miami - Inter-Continental Hotel, Miami - Jockey Club, Miami - Marriott Hotel-Downtown, Miami - Miami Airport Ramada, Miami - Proposed AmeriSuites, Miami - Propsed Hampton Inn, Miami - Residence Inn-Proposed, Miami - Sheraton River House, Miami - Sofitel Miami, Miami - Alexander Hotel, Miami Beach - Art Deco Hotel, Miami Beach - Cresent Timeshare, Miami Beach - Delano Hotel, Miami Beach - Doral Beach Hotel, Miami Beach - Eden Roc Hotel, Miami Beach - Fontainebleu Hotel, Miami Beach - Holiday Inn, Miami Beach - Holiday Inn-Central, Miami Beach - Holiday Inn-North, Miami Beach - Holiday Inn-Oceanside, Miami Beach - Holiday Inn-South, Miami Beach - Hotel-Proposed, Miami Beach - Nautilus Club Hotel, Miami Beach - Palm Resort on the Ocean, Miami Beach - Pan American Radisson, Miami Beach - Proposed Hotel, Miami Beach - Shelborne Beach Hotel, Miami Beach - Sheraton Beach, Miami Beach - Solymar Hotel-Proposed, Miami Beach - Quality Inn, Naples - Quality Inn-Gulfcoast, Naples - Registry Hotel at Pelican Bay, Naples - Registry Resort-Proposed, Naples - Super 8 Motel-Proposed, Naples - World Tennis Resort, Naples - Hyatt Newporter Hotel, Newport Beach - Hilton Hotel, North Redington Beach - Masters Economy Inn, North Seffner - Amfac Hotel, Orlando - Army lodging-Proposed, Orlando - Comfort Suites Hotel, Orlando - Compri Hotel-Airport-Proposed, Orlando - Compri Hotel-Proposed, Orlando - Courtyard - Orlando Airport, Orlando - Days Inn, Orlando - Days Inn and Lodge-Florida Mall, Orlando - Days Inn Civic Center, Orlando - Days Inn East of Universal Studios, Orlando - Days Inn-E/O Magic Kingdom, Orlando - Days Inn-Proposed, Orlando - Days Inn-Sandlake Road, Orlando - Days Suites-E/O Magic Kingdom, Orlando - Dolphin Hotel-Proposed, Orlando - Dutch Inn, Orlando - Embassy Suites, Orlando - Fairfield Inn, Orlando - Fairfield Inn-Airport, Orlando - Grand Cypress Resort, Orlando - Hampton Inn - Proposed, Orlando - Heritage Inn, Orlando - Holiday Inn Central Park, Orlando - Holiday Inn Crowne Plaza, Orlando - Holiday Inn-Airport, Orlando - Holiday Inn-International Drive, Orlando - Holiday Inn-Lee Road, Orlando - Holiday Inn-Maingate West, Orlando - Holiday Inn-Orange Blossom Trail, Orlando - Howard Johnson - Walt Disney World, Orlando - Howard Johnson-Kirkman, Orlando - Howard Johnson-Lake Holden, Orlando - Howard Johnson-Maingate, Orlando - Hyatt Grand Cypress, Orlando - Hyatt Regency Grand Cypress, Orlando - Hyatt-W. Irlo Bronson Mem. Hwy., Orlando - International Inn, Orlando - Kon Tiki Village, Orlando - La Quinta Hotel-Airport, Orlando - La Quinta Inn, Orlando - Omni Orlando, Orlando - Orlando Airport Hotel-Proposed, Orlando - Orlando Hamiton, Orlando - Orlando Plaza Hotel, Orlando - Orlando Twin Towers Hotel, Orlando - Park Suite Hotel-Proposed, Orlando - Peabody Hotel, Orlando - Princess Hotel and Spa, Orlando - Proposed Wellesley Inn, Orlando - Quality Inn, Orlando - Radisson Hotel-Aquatic Center, Orlando - Regency Inn, Orlando - Residence Inn By Marriott, Orlando - Rodeway Inn, Orlando - Save Inn, Orlando - Sheraton Jetport Inn, Orlando - Sheraton Lakeside, Orlando - Sheraton Twin Towers, Orlando - Sonesta Village Resort, Orlando - Stouffer Orlando Resort, Orlando - Swan Hotel-Proposed, Orlando - Thriftway Motel, Orlando - Wynfield Inn, Orlando - American Way, Osceola - Sheraton Gateway Motel, Osceola - Brazilian Court Hotel, Palm Beach - Heart of Palm Beach Hotel, Palm Beach - Hilton Inn, Palm Beach - Palm Court, Palm Beach - Holiday Inn, Palm Beach Garden - Days Inn, Panama City - Marriott's Bay Point, Panama City - Super 8, Panama City - Days Inn, Pensacola - Hilton Hotel, Pensacola - La Quinta Hotel, Pensacola - Residence Inn, Pensacola - Super 8, Pensacola - Proposed Hampton Inn, Pensacola Beach - Comfort Inn, Perdido Key - La Quinta, Pinellas County - Courtyard by Marriott, Plantation - Holiday Inn Plantation, Plantation - Sheraton Suites, Plantation - Days Inn, Pompano Beach - Palm-Aire Spa Resort, Pompano Beach - Lodge & Bath Club, Ponte Verde - Howard Johnson, Punta Gorda - Days Inn, Riviera Beach - Safety Harbor Spa, Safety Harbor - Holiday Inn, Saint Augustine - Howard Johnson, Saint Augustine - Courtyard by Marriott, Saint Petersburg - Don Ceahsar Beach Resort, Saint Petersburg - Hilton Hotel, Saint Petersburg - Howard Johnson, Saint Petersburg - Ramada Inn, Saint Petersburg - Residence Inn, Saint Petersburg - Saint Petersburg Motel, Saint Petersburg - Sheraton Hotel and Marina, Saint Petersburg - Vinoy Park Hotel, Saint Petersburg - Countryside Inn, Sanford - Days Inn, Sanford - Holiday Inn, Sanford - Azure Tides Resort-Proposed, Sarasota - Days Inn, Sarasota - Holiday Inn-Lido Beach, Sarasota - Proposed Hotel, Sarasota - Holiday Inn, Sebring - Embassy Suites, Singer Island - Hilton, Singer Island - Econo Lodge, Starke - Radisson Pan American Hotel, Sunny Isles - Best Inn, Tallahassee - Courtyard by Marriott, Tallahassee - Days Inn-Tallahassee, Tallahassee - American Way, Tampa - Courtyard by Marriott, Tampa - Days Inn, Tampa - Embassy Suites-Airport, Tampa - Hampton Inn-Airport, Tampa - Hilton-Airport, Tampa - Holiday Inn, Tampa - Holiday Inn Sahal Park, Tampa - Holiday Inn-Airport, Tampa - Manger Motor Inn, Tampa - Marriott Hotel, Tampa - Omni Tampa Hotel at Westshore, Tampa - Ramada Inn, Tampa - Rodeway Inn, Tampa - Saddlebrook Resort, Tampa - Sheraton Grand West, Tampa - Master Economy Inn, Tampa-East(Selfner) - Master Economy Inn, Tampa-North(Zephyrhills) - Days Inn, Vero Beach - Holiday Inn-Countryside, Vero Beach - Holiday Inn-Oceanside, Vero Beach - Saddlebrook Resort, Wesley Chapel - Courtyard by Marriott, West Melbourne - Airport Centre, West Palm Beach - Courtyard by Marriott, West Palm Beach - Days Inn, West Palm Beach - Field Palm Hotel, West Palm Beach - Hilton-Airport, West Palm Beach - Howard Johnson Lodge, West Palm Beach - Hyatt Hotel of the Palm Beaches, West Palm Beach - Royce Hotel, West Palm Beach - Masters Economy Inn, Zephyrhills Georgia - Atlanta Radisson Hotel, Atlanta - Atlanta Terrace Motel, Atlanta - Comfort Inn, Atlanta - Compri Hotel, Atlanta - Courtyard By Marriott-Airport North, Atlanta - Courtyard by Marriott-Airport South, Atlanta - Courtyard by Marriott-Cumberland, Atlanta - Courtyard by Marriott-Executive Pk., Atlanta - Courtyard by Marriott-Gwinnett, Atlanta - Courtyard by Marriott-Jimmy Carter, Atlanta - Courtyard by Marriott-PeachtrDunwdy, Atlanta - Courtyard by Marriott-Perimeter, Atlanta - Courtyard by Marriott-Rosewell, Atlanta - Courtyard by Marriott-Windy Hill, Atlanta - Cresthil Inn-Proposed, Atlanta - Days Inn, Atlanta - Days Inn - Northlake, Atlanta - Doubletree Hotel, Atlanta - Embassy Suites-Atlanta Perimeter, Atlanta - Embassy Suites-Buckhead, Atlanta - Embassy Suites-Galleria, Atlanta - F.W.W. Hotel, Atlanta - Fairfield Inn-Airport, Atlanta - Fairfield Inn-Gwinnett, Atlanta - Fairfield Inn-North Lake, Atlanta - Fairfield Inn-Northwest, Atlanta - Fairfield Inn-Peachtree, Atlanta - Fairfield Inn-South Lake, Atlanta - Hampton Inn-Airport, Atlanta - Hilton Inn, Atlanta - Holiday Inn Crowne Plaza, Atlanta - Holiday Inn-I-20 East, Atlanta - Holiday Inn-I-85 Monroe Drive, Atlanta - Holiday Inn-Perimeter Dunwooody, Atlanta - Hotel-Downtown-Proposed, Atlanta - Hotel-Proposed, Atlanta - Howard Johnson Hotel-Hartsfield, Atlanta - Howard Johnson-Airport, Atlanta - Howard Johnson-Northeast, Atlanta - Howard Johnson-Northwest, Atlanta - Howard Johnson-South, Atlanta - Hyatt Atlanta-Airport, Atlanta - La Quinta - Stone Mountain, Atlanta - La Quinta Hotel, Atlanta - La Quinta Hotel-West, Atlanta - Marriott Atlanta Airport, Atlanta - Marriott Hotel, Atlanta - Marriott Hotel-Downtown, Atlanta - Marriott Marquis, Atlanta - Marriott Suites Hotel-Proposed, Atlanta - Marriott-Perimeter, Atlanta - Master Economy Inn, Atlanta - Motel 6, Atlanta - Neighborhood Inn, Atlanta - Omni International Hotel, Atlanta - Perimeter North Inn, Atlanta - Proposed AmeriSuites, Atlanta - Quality Inn-Central, Atlanta - Radisson Inn, Atlanta - Ramada Inn-Perimeter, Atlanta - Residence Inn by Marriott-Dunwoody, Atlanta - Residence Inn-Airport, Atlanta - Residence Inn-Buckhead, Atlanta - Residence Inn-Northwest, Atlanta - Sheraton Century Center, Atlanta - Sheraton-Airport, Atlanta - Sporting Club at the Concourse, Atlanta - Stouffer Hotel-Proposed, Atlanta - Swissotel, Atlanta - Terrace Motel, Atlanta - Waverly Hotel, Atlanta - Westin Lenox Hotel, Atlanta - Westin Peachtree Plaza, Atlanta - Wyndham Garden Hotel, Atlanta - Hyatt Hotel, Atlanta Airport - Hampton Inn, Atlanta-Buckhead - Courtyard by Marriott, Augusta - Landmark Hotel, Augusta - Masters Economy Inn - Gordon Hwy., Augusta - Masters Economy Inn - Warner Robins, Augusta - Masters Economy Inn - Washington Rd, Augusta - Holiday Inn, Brunswick - Super 8, Brunswick - Days Inn, Calhoun - Super 8, Cartersville - Days Inn, Chamblee - Comfort Inn-Proposed, College Park - Holiday Inn Crowne Plaza, College Park - Courtyard by Marriott, Columbus - La Quinta Inn, Columbus - Super 8, Columbus - Best Inn, Dalton - Days Inn, Dalton - Holiday Inn-Proposed, Decatur - Sheraton Hotel, Decatur - Best Western-Perimeter-North, Doraville - Days Inn - Gwinnett, Duluth - Howard Johnson, Forsyth - Holiday Inn-Proposed, Gwinnett County - Holiday Inn, Jekyll Island - Jekyll Island Inn-Proposed, Jekyll Island - Hilton Hotel, Macon - Master Economy Inn, Macon - Best Inn, Marietta - Courtyard by Marriott-Delk Road, Marietta - Lafayette Hotel, Marietta - Hampton Inn, Marrietta (Atlanta) - Master Economy Inn, McDonough - Courtyard by Marriott-Perimeter, Norcross - Motel 6, Norcross - Hilton Hotel, Peachtree Corners - Super 8, Rome - Best Western, Savannah - Courtyard by Marriott, Savannah - Days Inn, Savannah - Days Inn-Bay Street, Savannah - Days Inn-Mall Blvd., Savannah - Fairfield Inn, Savannah - Hotel-Proposed, Savannah - Mulberry Inn, Savannah - Radisson Hotel-Proposed, Savannah - Royal Savannah, Savannah - Sheraton Savannah Resort & C.C., Savannah - Town and Country Motel, Savannah - Days Inn, Savannah Beach - Howard Johnson, Smyrna - Master Economy Inn, Tilton - Courtyard by Marriott-Northlake, Tucker - Master Economy Inn, Warner Robins - Super 8, Warner Robins Hawaii - Hyatt Regency Waikoloa, Hawaii - Mauna Kea Hotel, Hawaii - Kahala Hilton, Honolulu - Plaza Hotel, Honolulu - Waikiki Beachcomber, Honolulu - Waikiki Hobron, Honolulu - Coco Palms Resort, Kauai - Kauai Surf Hotel, Kauai - Westin Kauai-Kauai Lagoons Resort, Kauai - Westin Kauai-Proposed, Kauai - Kona Village, Kona - Royal Sea Cliff Resort, Kona - Westin Kauai at Kauai Lagoon, Lihue - Hyatt Regency, Maui - Marriott Resort, Maui - Maui Lu Hotel, Maui - Maui Surf Hotel, Maui - Westin Maui, Maui - Hawaiian Regent Hotel-Waikiki Beach, Oahu - Hotel-Proposed-Schofield Barracks, Oahu - Hyatt Regency Waikiki, Oahu - Kiahuna Plantation, Poipu Beach, Kauai - Transient Lodging Facilities, Schofield Barracks - Hilton Hawaiian Village, Waikiki - Grand Hyatt Wailea, Wailea Idaho - Compri Hotel, Boise - Holiday Inn, Boise - Holiday Inn-Airport, Boise - Red Lion Inn, Boise - Super 8, Boise - Motel 6, Coeur d'Alene - Super 8, Coeur d'Alene - Proposed Motel, Coure d'Alene - Super 8, Lewiston - Cotton Tree Inn, Pocatello - Super 8, Sand Point - Busterback Ranch, Sawtooth Valley Illinois - Arlington Park Hilton, Arlington Heights - Church Creek, Arlington Heights - Courtyard by Marriott, Arlington Heights - La Quinta Hotel, Arlington Heights - Hampton Inn-Proposed, Bedford Park - Best Inn, Bloomington - Fairfield Inn-Normal, Bloomington - Holiday Inn, Bloomington - Indian Lakes Resort, Bloomington - Ramada Inn, Bloomington - Super 8, Bloomington - Cresthil-Proposed, Buffalo Grove - Holiday Inn, Champaign - La Quinta Inn, Champaign - Radisson Suites - Champaign, Champaign - Suite Hotel-Proposed, Champaign - Super 8, Champaign - Ambassador West Hotel, Chicago - Americana Congress, Chicago - Conrad Hilton Hotel, Chicago - Courtyard by Marriott-Glenview, Chicago - Courtyard by Marriott-Highland, Chicago - Courtyard by Marriott-Lincoln, Chicago - Courtyard by Marriott-O'Hare, Chicago - Courtyard by Marriott-Waukegan, Chicago - Courtyard by Marriott-Woodale, Chicago - Days Inn, Chicago - Executive House, Chicago - Fairfield Inn-Lansing, Chicago - Fairfield Inn-Willowbrook, Chicago - Fairmont Hotel, Chicago - Guest Quarters Hotel, Chicago - Hilton and Towers, Chicago - Hilton-O'Hare, Chicago - Holiday Inn-Merchandise Mart, Chicago - Howard Johnson-O'Hare Int'l Airport, Chicago - Hyatt Regency, Chicago - Hyatt Suites Hotel, Chicago - Inter-Continental Hotel-Proposed, Chicago - La Quinta Inn - Hoffman Est., Chicago - Le Meridien, Chicago - Lenox House, Chicago - Lincoln Hotel, Chicago - Mark Twain Hotel, Chicago - Marriott-O'Hare, Chicago - Mayfair Regent, Chicago - McClurg Holiday Inn, Chicago - McCormick Inn Hotel, Chicago - Morton Hotel, Chicago - Omni Ambassador East, Chicago - Omni Morton Hotel, Chicago - Palmer House Hotel, Chicago - Ramada Inn - Lakeshore, Chicago - Ramada O'Hare, Chicago - Residence Inn-Deerfield, Chicago - Residence Inn-Lombard, Chicago - Sheraton Hotel-Downtown, Chicago - Sheraton Hotel-Proposed, Chicago - Sheraton O'Hare, Chicago - Sheraton Plaza Hotel, Chicago - Summerfield Suites Hotel, Chicago - Swissotel, Chicago - Tremont Hotel, Chicago - Westin Hotel, Chicago - Whitehall Hotel, Chicago - Hilton Hotel, Collinsville - Holiday Inn, Collinsville - Super 8, Columbus - Super 8, Crystal Lake - Super 8, Decatur - Courtyard by Marriott, Deerfield - Embassy Suites, Deerfield - Marriott Suites Hotel, Deerfield - Holiday Inn-Chicago, Des Plaines - Hotel-Proposed, Des Plaines - Compri Hotel-Proposed, Downers Grove - Radisson Suite Hotel, Downers Grove - Best Inn, Effingham - Ramada Inn, Elgin - Hampton Inn, Elk Grove Village - Marriott Suites, Elk Grove Village - Holiday Inn, Elmhurst - Orrington Hotel, Evanston - Drury Inn, Fairview Heights - Conference Center & Resort-Proposed, Fox Lake - Holiday Inn, Freeport - Hotel-Proposed, Gurnee - La Quinta Hotel, Hoffman Estates - Carson Inn, Itasca - Hamilton Wyndham, Itasca - Nordic Hills, Itasca - Holiday Inn, Joliet - Proposed Harrah's Riverboat, Joliet - Days Inn, Kankakee - Holiday Inn, LaSalle - Marriott Hotel, Lincolnshire - Hilton Inn, Lisle - Holiday Inn Crowne Plaza, Lisle - Embassy Suites, Lombard - Holiday Inn, Macomb - Best Inn, Marion - Best Inn, Mount Vernon - Holiday Inn, Mount Vernon - Ramada Inn, Mount Vernon - Courtyard by Marriott, Naperville - Ramada Inn, Naperville - Sheraton Naperville, Naperville - O'Hareport Hotel, Northlake - Courtyard by Marriott, Oakbrook Terrace - Super 8, Okawville - Fairfield Inn, Peoria - Days Inn, Peru - Super 8, Peru - Courtyard by Marriott, Rockford - Fairfield Inn, Rockford - Hampton Inn, Rockford - Embassy Suites, Rosemont - Quality Inn/Clarion, Rosemont - Sheraton Int'l At O'Hare, Rosemont - Holiday Inn, Salem - Compri Hotel, Schaumburg - Embassy Suites, Schaumburg - Marriott Schaumburg, Schaumburg - Holiday Inn, South Beloit - Ramada Renaissance Hotel, Springfield - Sheraton Inn, Springfield - Super 8-East, Springfield - Super 8-South, Springfield - Jumer's Castle, Urbana - Best Inn, Waukegan - Super 8, Waukegan Indiana - Clarion Fourwinds Inn, Bloomington - Holiday Inn, Bloomington - Inn at the Four Winds, Bloomington - Ramada Inn, Bloomington - Harbor Point Resort, Brookville Lake - Super 8, Columbus - Best Inn, Fort Wayne - Hilton, Fort Wayne - Downtown Hotel, Gary - Sheraton, Gary - Holiday Inn, Goshen - Howard Johnson, Hammond - Quality Inn, Hammond - Courtyard by Marriott-Airport, Indianapolis - Courtyard by Marriott-Carmel, Indianapolis - Courtyard by Marriott-Castleton, Indianapolis - Embassy Suites-Claypool Center, Indianapolis - Fairfield Inn-Castleton, Indianapolis - Fairfield Inn-College Park, Indianapolis - Hampton Inn-Proposed, Indianapolis - Hilton Hotel-Airport, Indianapolis - Hilton Inn-Downtown, Indianapolis - Holiday Inn-South, Indianapolis - Holiday Inn-Southeast, Indianapolis - Knights Inn, Indianapolis - Midway Motor Lodge, Indianapolis - Mohawk Inn, Indianapolis - Motel 6, Indianapolis - Proposed Fairfield Inn, Indianapolis - Proposed Residence Inn, Indianapolis - Radisson, Indianapolis - Ramada-Airport, Indianapolis - Wyndham Garden Hotel, Indianapolis - La Quinta Inn, Indianapolis Airport - Hilton Inn, Jeffersonville - Holiday Inn, La Porte - Days Inn, Lafayette - Holiday Inn, Lafayette - Cotton Mill Inn-Proposed, Madison - Hampton Inn, Merrillville - Holiday Inn Express, Merrillville - La Quinta Inn, Merrillville - Hotel Roberts, Muncie - Radisson Hotel, Muncie - Brown County Inn, Nashville - Holiday Inn, Portage - Knights Inn, Richmond - Holiday Inn, South Bend - Howard Johnson, South Bend - Signature Inn, Terre Haute - Super 8, Terre Haute - Courtyard Conversion, Valparaiso - Holiday Inn, Vincennes Iowa - Holiday Inn-Gateway Center, Ames - Holiday Inn, Cedar Falls - Collins Plaza, Cedar Rapids - Holiday Inn, Cedar Rapids - Roosevelt Hotel, Cedar Rapids - Super 8, Davenport - Courtyard by Marriott, Des Moines - Fairfield Inn, Des Moines - Holiday Inn, Des Moines - Holiday Inn - West, Des Moines - Holiday Inn-Downtown, Des Moines - Holiday Inn-North, Des Moines - Ramada Inn, Des Moines - Super 8-North, Des Moines - Super 8-West, Des Moines - Holiday Inn, Iowa City Kansas - Embassy Suites, Kansas City - Fairfield Inn-Overland Park, Kansas City - Holiday Inn-Mission Overland Park, Kansas City - Fairfield Inn, Kansas City West - Holiday Inn, Lawrence - University Inn, Lawrence - Holiday Inn, Manhattan - Courtyard by Marriott, Overland Park - Hampton Inn-Proposed, Overland Park - Marriott Hotel, Overland Park - Park Inn International, Topeka - Super 8, Topeka - Canterbury Inn, Wichita - Former Sheraton Hotel, Wichita - Hilton-East, Wichita - Marriott Hotel, Wichita - Comfort Inn, Winfield Kentucky - Conference Center-Proposed, Boone County - Howard Johnson, Bowling Green - Brown County Inn, Brown County - Holiday Inn, Corbin - Hotel-Proposed, Covington - Thomas More Centre, Crestville Hill - Comfort Inn, Elizabethtown - Signature Inn, Elkhart - Holiday Inn, Florence - Signature Inn, Florence - Drawbridge Inn, Fort Mitchell - Days Inn, Georgetown - Days Inn, Henderson - Holiday Inn, Henderson - Bluegrass Motor Inn, Lexington - Courtyard by Marriott, Lexington - Holiday Inn, Lexington - Holiday Inn-East, Lexington - Holiday Inn-North, Lexington - Hyatt Hotel, Lexington - Knights Inn, Lexington - Super 8-Proposed, London - Brown Hotel, Louisville - Courtyard by Marriott-East, Louisville - Holiday Inn, Louisville - Holiday Inn South, Louisville - Holiday Inn-Central, Louisville - Holiday Inn-Northeast, Louisville - Ramada Inn, Louisville - Ramada Inn-East, Louisville - Signature Inn, Louisville - Days Inn, Madisonville - Executive Inn, Owensboro - Super 8-Proposed, Radcliff - Holiday Inn, Richmond Louisiana - Howard Johnson, Alexandria - Capital House, Baton Rouge - Convention Center Hotel-Proposed, Baton Rouge - Courtyard by Marriott, Baton Rouge - Crown Sterling Suites, Baton Rouge - Embassy Suites, Baton Rouge - Hilton Hotel, Baton Rouge - Holiday Inn-East, Baton Rouge - Holiday Inn-South, Baton Rouge - Holiday Inn-West, Baton Rouge - La Quinta Inn, Baton Rouge - Prince Murat Hotel, Baton Rouge - Proposed Homewood Suites, Baton Rouge - Quality Inn, Bossier City - Ramada Inn, Hammond - Ramada Inn, Houma - Holiday Inn - New Orleans, Kenner - Sheraton, Kenner - Hilton Hotel, Lafayette - La Quinta Hotel, Lafayette - Gateway Hotel, Metairie - Howard Johnson-Airport, Metairie - Canal Street Hotels L.P., New Orleans - Clarion Hotel, New Orleans - Days Inn, New Orleans - Fairmont Roosevelt Hotel, New Orleans - Hampton Inn-Proposed, New Orleans - Holiday Inn Crowne Plaza, New Orleans - Hostellerie de la Poste, New Orleans - Hotel Meridien, New Orleans - Hyatt Regency, New Orleans - Iberville Hotel, New Orleans - Inter-Continental Hotel, New Orleans - La Quinta Inn, New Orleans - Landmark Bourbon, New Orleans - Le Meridien New Orleans, New Orleans - Maison Dupuy, New Orleans - Marriott Hotel, New Orleans - Omni Royal Orleans, New Orleans - Ramada Inn, New Orleans - Saint Louis Hotel, New Orleans - St. Ann/Marie Antoinette, New Orleans - Warwick, New Orleans - Westin Hotel, New Orleans - Residence Inn, Shreveport - Super 8, Shreveport Maine - Hilton Inn, Bangor - Ramada Inn, Bangor - Residence Inn by Marriott-Proposed, Bangor - Inn By The Sea, Cape Elizabeth - Hotel-Proposed, Orchard Beach - Hotel-Proposed, Portland - Portland Regency, Portland - Ramada Inn, Portland - Sheraton Tara Portland, Portland - Susse Chalet, Portland - Susse Chalet, Portland (In-town) - Keddy's Motor Inn of Maine, Presque Isle - Hampton Inn, South Portland - Sheraton Inn, South Portland Maryland - Budget Hotel-Proposed, Aberdeen - Chesapeake House, Aberdeen - Holiday Inn, Aberdeen - Motel-Proposed, Aberdeen - Annapolis Hotel, Annapolis - Courtyard by Marriott-Riva Road, Annapolis - Governor Calvert House, Annapolis - Historic Inns of Annapolis, Annapolis - Hotel-Proposed, Annapolis - Howard Johnson, Annapolis - Marriott Hotel, Annapolis - Maryland Inn, Annapolis - Quality Royale Hotel, Annapolis - Ramada Hotel, Annapolis - Robert Johnson House, Annapolis - Brookshire Hotel, Baltimore - Courtyard by Marriott-BWI Airport, Baltimore - Days Inn, Baltimore - Harbor Court Hotel, Baltimore - Harrison's at Pier 5, Baltimore - Hilton Hotel, Baltimore - Holiday Inn-Belmont Blvd., Baltimore - Holiday Inn-Cromwell Bridge, Baltimore - Holiday Inn-Glen Burnie, Baltimore - Holiday Inn-Inner Harbor, Baltimore - Holiday Inn-Int'l Airport, Baltimore - Holiday Inn-Moravia Road, Baltimore - Holiday Inn-Pikesville, Baltimore - Holiday Inn-South Glen Burnie, Baltimore - Hotel-Proposed, Baltimore - Howard Johnson-Proposed, Baltimore - Johns Hopkins Hotel-Proposed, Baltimore - Lord Baltimore Hotel, Baltimore - Omni International Hotel, Baltimore - Ramada Inn-I-695 West, Baltimore - Susse Chalet, Baltimore - Susse Chalet Inn-BWI Airport, Baltimore - Susse Chalet Inn-Golden Ring, Baltimore - Bethesda Metro Center, Bethesda - Guest Quarters, Bethesda - Hyatt Regency Hotel, Bethesda - Linden Hill Hotel, Bethesda - Omni Linden Hotel, Bethesda - Residence Inn, Bethesda - Bethseda Metro Center, Bethseda - Guest Quarters, Bethseda - Residence Inn - Proposed, Bethseda - Comfort Suites-Proposed, Bowie - Days Inn, Capital Heights - Residence Inn, Cockneysville - Abbey, College Park - Best Western Maryland, College Park - Holiday Inn, College Park - Sheraton Inn, Dorsey - Days Inn, Easton - Mariner Inn, Easton - Holiday Inn, Frederick - Compri Hotel, Gaithersburg - Marriott Hotel, Gaithersburg - Century XXI Resort, Germantown - Comfort Inn, Germantown - Hampton Inn, Glen Burnie - Residence Inn-Proposed, Greenbelt - Courtyard by Marriott, Hunt Valley - Hunt Valley Embassy Suites, Hunt Valley - Hunt Valley Marriott, Hunt Valley - Susse Chalet Inn, Jessup - Courtyard by Marriott, Landover - Quality Inn-Proposed, Landover - Days Inn, Lanham - Best Western Maryland, Laurel - Days Inn, Laurel - Holiday Inn, Laurel - Susse Chalet, Linthicum - Howard Johnson Plaza Hotel, New Carrollton - Carousel Hotel, Ocean City - Days Inn, Ocean City - Susse Chalet, Oxon Hill - Hotel-Proposed, Prince Georges County - Budget Hotel-Proposed, Rockville - Comfort Inn, Rockville - Courtyard by Marriott, Rockville - Days Inn-Congressional Park, Rockville - Holiday Inn Crowne Plaza, Rockville - Quality Inn-Proposed, Rockville - Ramada Inn, Rockville - Salisbury Hotel, Salisbury - Sheraton Hotel, Salisbury - Courtyard by Marriott, Silver Spring - Quality Inn-Proposed, Silver Spring - Comfort Inn-Proposed, Solomons Island - Holiday Inn, Towson - Quality Inn-Proposed, Westminster Massachusetts - Susse Chalet, Amsbury - Courtyard by Marriott, Andover - Marriott Hotel, Andover - Stouffer Bedford Glen Hotel, Bedford - Anthony's Pier Four, Boston - Battery Wharf Hotel-Proposed, Boston - Boston Harbor Hotel, Boston - Boston World Trade Center, Boston - Bostonian Hotel, Boston - Colonnade Hotel, Boston - Commonwealth Center Hotel, Boston - Compri Hotel-Proposed, Boston - Copley Plaza Hotel, Boston - Courtyard by Marriott-Foxborough, Boston - Econo Lodge-Proposed, Boston - Harborside Conf. Center-Proposed, Boston - Hilton-Back Bay, Boston - Hilton-Logan, Boston - Holiday Inn-Government Center, Boston - Hotel - Proposed, Boston - Hyatt Fan Pier-Proposed, Boston - Hyatt Harborside-Proposed, Boston - Lafayette Hotel, Boston - Lenox Hotel, Boston - Marriott Copley Place, Boston - Meridien Hotel, Boston - Omni Parker House, Boston - Residence Inn, Boston - Ritz-Carlton, Boston - Statler Hilton Hotel, Boston - Tremont House Hotel, Boston - World Trade Center Hotel - Proposed, Boston - Marriott Hotel, Boston/Newton - Sheraton Tara Hotel, Braintree - Ocean Edge Inn & Conference Center, Brewster - Holiday Inn, Brookline - Days Inn, Burlington - Charles Hotel, Cambridge - Hyatt Hotel, Cambridge - Royal Sonesta Hotel, Cambridge - The Charles Hotel, Cambridge - Chatham Bars Inn, Chatham - Chelmsford Radisson Hotel, Chelmsford - Best Western Motor Lodge, Chicopee - Cummington Farm Resort-Proposed, Cummington - Appleton Inn, Danvers - Howard Johnson Hotel, Danvers - Radisson Ferncroft Hotel, Danvers - Residence Inn - Proposed, Danvers - Dedham Comfort Inn, Dedham - Holiday Inn, Dedham - Wequassett Inn, East Harwich - Harbor View Hotel, Edgartown - Kelley House, Edgartown - Airport Inn, Fall River - Sea Crest Hotel, Falmouth - Sheraton Inn, Falmouth - Radisson Hotel, Ferncroft - Sheraton Tara Hotel, Framingham - Hotel-Proposed, Franklin - Hotel-Proposed, Haverhill - Susse Chalet, Holyoke - Dunfey Hyannis Hotel, Hyannis - Heritage House Hotel, Hyannis - Holiday Inn, Hyannis - Sheraton Regal Inn, Hyannis - Tara Hyannis, Hyannis - Canyon Ranch-Berkshires, Lenox - Cranwell Hotel and Conference Ctr., Lenox - Spa/Resort-Proposed, Lenox - Holiday Inn, Leominster - Lexington Sheraton, Lexington - Residence Inn-Proposed, Littleton - Appleton Inn, Lowell - Hilton Hotel, Lowell - Town House Motor Inn, Lowell - Holiday Inn, Marlboro - Susse Chalet, Middleboro - Sheraton Milford Hotel, Milford - Holiday Inn, Natick - Skipper's Inn, New Bedford - Days Inn, Newton - Howard Johnson, Newton - Marriott Hotel, Newton - Sheraton - Wayfarer, Newton - Sheraton Tara, Newton - Susse Chalet, Newton - North Adams Inn, North Adams - Hilton Inn, Northampton - Hotel Northampton, Northampton - Factory Mutual Hotel, Norwood - University Inn, Oxford - Holiday Inn, Peabody - Berkshire Commons Hotel, Pittsfield - Hotel-Proposed, Plymouth - Hawthorne Hotel, Salem - Days Inn, Saugus - Susse Chalet, Seekonk - Howard Johnson, Somerset - Somerset Omni, Somerset - Federal House Inn, South Lee - Holiday Inn, Springfield - Howard Johnson, Springfield - Monarch Place, Springfield - Treadway Inn, Springfield - Publick House, Sturbridge - Sheraton, Sturbridge - Regency Inn of Taunton, Taunton - Holiday Inn, Tewksbury - Susse Chalet, Tewksbury - Susse Chalet, Waltham - Vista Waltham House, Waltham - Hampton Inn, West Springfield - Westford Regency Hotel, Westford - The Westminster Village Inn, Westminster - The Orchards, Williamstown - Treadway Inn, Williamstown - Days Inn, Woburn - Howard Johnson, Woburn - Radisson Hotel, Woburn - Ramada Inn, Woburn - Susse Chalet, Woburn - Marriott Hotel, Worcester - Alladin Motor Inn, Yarmouth - Flagship Motor Inn, Yarmouth - Gull Wing Suites Hotel, Yarmouth Michigan - Motel-Proposed, Adrian - Ramada Inn, Allen Park - Holiday Inn-Alpena, Alpena - Compri Hotel-Proposed, Ann Arbor - Hampton Inn-North, Ann Arbor - Hampton Inn-South, Ann Arbor - Hilton Hotel, Ann Arbor - Holiday Inn-East, Ann Arbor - Holiday Inn-West, Ann Arbor - Residence Inn, Ann Arbor - Sheraton Hotel, Ann Arbor - AmeriSuites Hotel-Proposed, Auburn Hills - Holiday Inn, Auburn Hills - Knights Inn, Battle Creek - Super 8, Battle Creek - Bay Valley Inn, Bay City - Howard Johnson, Belleville - Fairfield Inn-Airport, Charlotte - Courtyard by Marriott, Dearborn - Courtyard by Marriott-Airport, Detroit - Courtyard by Marriott-Auburn Hills, Detroit - Courtyard by Marriott-Livonia, Detroit - Days Inn, Detroit - Downtown Hotel-Proposed, Detroit - Fairfield Inn-Airport, Detroit - Fairfield Inn-Auburn Hills, Detroit - Fairfield Inn-Warren, Detroit - Fairfield Inn-West, Detroit - Golden Harp, Detroit - Hampton Inn, Detroit - Hilton-Airport, Detroit - Hilton-North Field, Detroit - Holiday Inn, Detroit - Holiday Inn-Metro Airport, Detroit - Hotel Pontchartrain, Detroit - Omni Detroit, Detroit - Westin Hotel Renaissance Center, Detroit - Holiday Inn, East Lansing - Holiday Inn-Proposed, East Lansing - Knights Inn, Flint - Amway Hotel, Grand Rapids - Holiday Inn, Grand Rapids - Grand Traverse Resort, Grand Traverse Village - Holiday Inn, Howell - Jackson Hotel, Jackson - Fairfield Inn, Kalamazoo - Hilton-Kalamazoo Center, Kalamazoo - Holiday Inn, Kalamazoo - Radison Plaza Hotel, Kalamazoo - Residence Inn, Kalamazoo - Super 8, Kalamazoo - Embassy Suites-Proposed, Lansing - Holiday Inn, Lansing - Motel 6, Lansing - Quality Suites Hotel, Lansing - Compri Hotel-Proposed, Livonia - Embassy Suites, Livonia - Embassy Suites-Proposed, Livonia - Holiday Inn, Livonia - Marriott Hotel, Livonia - Fairfield Inn, Madison Heights - Residence Inn, Madison Heights - Holiday Inn, Marquette - Knights Inn, Monroe - Comfort Inn-Proposed, Mount Clemens - Holiday Inn, Muskegan - Super 8, Muskegon - Hilton Hotel, Novi - Holiday Inn-Petoskey, Petoskey - Mayflower Hotel, Plymouth - Inn at the Bridge, Port Huron - Radisson Hotel, Romulus - Holiday Inn-East, Saginaw - Super 8, Saginaw - Courtyard by Marriott, Southfield - Embassy Suites, Southfield - Hilton Hotel, Southfield - Marriott Hotel, Southfield - Ramada Inn, Southfield - Residence Inn, Southfield - The Garden Inn, Southfield - Comfort Suites-Proposed, Sterling Heights - Holiday Inn, Sturgis - Grand Traverse Resort, Traverse City - Hampton Inn, Traverse City - Park Place Hotel, Traverse City - Courtyard by Marriott, Troy - Holiday Inn, Troy - Marriott, Troy - Residence Inn, Troy - Courtyard by Marriott, Warren - Days Inn, Warren - Holiday Inn, Warren - Motel 6, Warren - Residence Inn, Warren - Van Dyke Hotel & Conference Center, Warren - Bob Evans Restaurant, Wyoming - Super 8, Wyoming - Radisson Resort-Conference Center, Ypsilanti Minnesota - Embassy Suites, Bloomington - Hilton Airport Hotel, Bloomington - Hilton Hotel, Bloomington - Howard Johnson Lodge, Bloomington - Marriott Hotel, Bloomington - Ramada Inn, Bloomington - Days Inn - Minneapolis, Brooklyn Center - Residence Inn, Eagan - Compri Hotel-Proposed, Minneapolis - Courtyard by Marriott-Eden Prairie, Minneapolis - Courtyard by Marriott-Mendota, Minneapolis - Days Inn, Minneapolis - Dyckman Hotel, Minneapolis - Hilton Inn, Minneapolis - Holiday Inn-Downtown, Minneapolis - Hotel-Proposed, Minneapolis - Luxeford Hotel, Minneapolis - Marquette, Minneapolis - Marriott City Center Hotel, Minneapolis - Marriott-Minnetonka, Minneapolis - Motel 6, Minneapolis - Omni-Northstar, Minneapolis - Radisson Hotel, Minneapolis - Ramada Inn, Minneapolis - Sheraton Minneapolis, Minneapolis - Sofitel, Minneapolis - Motel-Proposed, Montevideo - Days Inn, Plymouth - Hotel-Proposed, Rochester - Howard Johnson, Rochester - Motel 6, Rochester - Radisson Hotel, Rochester - Days Inn, Roseville - Holiday Inn, Saint Paul - Holiday Inn-Town Square, Saint Paul - Hotel-Proposed, Saint Paul - Inn and Expo Center, Saint Paul - World Trade Hotel, Saint Paul - Wayzata Conference Center, Wayzata Mississippi - Howard Johnson, Biloxi - Holiday Inn, Greenwood - Motel 6, Hattlesburg - Hampton Inn, Jackson - Howard Johnson, Jackson - Ramada Inn-Proposed, Jackson - Residence Inn, Jackson - Cabot Lodge, Ridgeland - Holiday Inn, Vicksburg Missouri - Ramada Inn, Columbia - Howard Johnson-North St. Louis, Hazelwood - Super 8, Independence - La Quinta Inn, Jackson - North - Capital Plaza, Jefferson City - Ramada Inn, Jefferson City - Days Inn, Joplin - Super 8, Joplin - Allis Plaza, Kansas City - Americana Hotel, Kansas City - AmeriSuites Hotel-Proposed, Kansas City - Doubletree Hotel, Kansas City - Embassy Suites, Kansas City - Fairfield Inn-West, Kansas City - Hilton - Proposed, Kansas City - Hilton Inn, Kansas City - Historic Suites Hotel, Kansas City - Holiday Inn, Kansas City - Holiday Inn Crowne Plaza, Kansas City - Holiday Inn-Proposed, Kansas City - Proposed Sheraton Hotel, Kansas City - Radisson Suite Hotel, Kansas City - Resort Hotel - Proposed, Kansas City - Marriott-Tan-Tar-A, Lake of the Ozarks - Super 8, Liberty - Super 8, North Kansas City - Inn at Grand Glaize, Osage Beach - Super 8, Saint Joseph - Clarion, Saint Louis - Courtyard by Marriott-Creve Coeur, Saint Louis - Courtyard by Marriott-Downtown, Saint Louis - Courtyard by Marriott-Westport, Saint Louis - Days Inn, Saint Louis - Doubletree Hotel, Saint Louis - Drury Inn, Saint Louis - Embassy Suites, Saint Louis - Fairfield Inn-Hazel, Saint Louis - Henry VIII Hotel, Saint Louis - Hilton Hotel-Bel Air, Saint Louis - Holiday Inn Sports Complex, Saint Louis - Holiday Inn-Airport North, Saint Louis - Holiday Inn-Downtown, Saint Louis - Holiday Inn-Riverfont, Saint Louis - Howard Johnson-South, Saint Louis - Mayfair Hotel, Saint Louis - Omni-St. Louis Station, Saint Louis - Ramada Inn-Westport, Saint Louis - Residence Inn-Chesterfield, Saint Louis - Residence Inn-Richmond Heights, Saint Louis - Ritz-Carlton Hotel, Saint Louis - Sheraton-Airport, Saint Louis - St. Louis Airport Hilton, Saint Louis - St. Louis Airport Radisson Hotel, Saint Louis - St. Louisian Hotel, Saint Louis - Stouffer Concourse Hotel, Saint Louis - Super 8, Saint Louis - Marriott Hotel, Saint Louis County - Holiday Inn, Springfield - Sheraton Inn, Springfield - Super 8, Springfield - Executive Inn & Office Building, St. Louis - Holiday Inn, St. Louis - Howard Johnson Hotel, St. Louis - Hotel-Proposed, Unity Village - Holiday Inn, Wendtzville Montana - Sheraton Hotel, Billings - Super 8, Billings - Super 8, Great Falls - Super 8, Helena - Super 8, Kalispell - Holiday Inn, Missoula - Red Lion Inn, Missoula Nebraska - Holiday Inn, Kearney - Best Western Airport Inn, Lincoln - Holiday Inn-Airport, Lincoln - Holiday Inn-Northeast, Lincoln - Howard Johnson, North Platte - Marriott Hotel, Omaha - Ramada Inn, Omaha - Red Lion Inn, Omaha Nevada - Lake Mead Resort, Boulder City - Ormsby House Hotel and Casino, Carson City - Super 8, Carson City - Doubletree Hotel and Resort, Cathedral City - Best Western Motel - Proposed, Jackpot - Airport Inn, Las Vegas - Aladdin Hotel and Casino, Las Vegas - Alexis Park Resort Hotel, Las Vegas - Casino Hotel-Proposed, Las Vegas - Courtyard by Marriott, Las Vegas - El Rancho Hotel and Casino, Las Vegas - Hotel and Casino-Proposed, Las Vegas - Jockey Club Hotel and Casino, Las Vegas - La Quinta Hotel, Las Vegas - Paradise Resort, Las Vegas - Residence Inn, Las Vegas - Silverbird Casino, Las Vegas - Super 8-Proposed, Las Vegas - The Mirage, Las Vegas - Tropicana Travelodge, Las Vegas - Westward Ho Casino, Las Vegas - Echo Bay Resort, Overton - Holiday Inn, Reno - La Quinta Hotel, Reno - Quality Inn and Casino, Reno - Red Lion Hotel-Proposed, Reno New Hampshire - Sheraton Wayfarer, Bedford - Hampton Inn, Bow - Mount Washington Resort, Bretton Woods - Balsams Hotel, Dixville Notch - Sheraton Inn-Lamie's Tavern, Hampton - Woodbound Inn, Jaffrey - Brickyard Mountain Inn, Laconia - Loon Mountain Hotel, Lincoln - Appleton Inns, Manchester - Holiday Inn Center, Manchester - Sheraton Wayfarer, Manchester - Susse Chalet, Manchester - Clarion Somerset Hotel, Nashua - Hotel-Proposed, Nashua - Tara Sheraton Nashua, Nashua - Wentworth by the Sea, Newcastle - Susse Chalet, Portsmouth - Wentworth-by-the-Sea, Portsmouth - Salem Inn, Salem - Susse Chalet, Salem - Landmarc Lodge-East, Waterville Valley - Landmarc Lodge-West, Waterville Valley - Silver Squirrel Inn, Waterville Valley - Snowy Owl Inn, Waterville Valley - Chalet Susse International, Inc., Wilton New Jersey - Marriott Seaview Golf Resort, Abescon - Howard Johnson Hotel, Absecon - Seaview Country Club, Absecon - Berkeley Carteret Hotel, Asbury Park - Caesar's Hotel and Casino, Atlantic City - Casino Hotel-Proposed, Atlantic City - Deauville Hotel, Atlantic City - Diplomat Hotel, Atlantic City - Hampton Inn, Atlantic City - Harrah's Marina Hotel Casino, Atlantic City - Lafayette Hotel, Atlantic City - Resorts Int'l Hotel and Casino, Atlantic City - Royal Inn, Atlantic City - Sands Hotel and Casino, Atlantic City - Traymore Hotel Site, Atlantic City - Tropicana Hotel and Casino, Atlantic City - World International Hotel, Atlantic City - Bernards Inn, Bernardsville - Hotel-Proposed, Bridgewater - Proposed Hotel, Camden - Cherry Hill Hyatt, Cherry Hill - Cherry Hill Inn, Cherry Hill - Ramada Inn, Clifton - Comfort Suites, E. Rutherford - Ramada Renaissance, East Brunswick - Sheraton Inn, East Brunswick - Sheraton - Per Diem, East Rutherford - Holiday Inn-Raritan Center, Edison - Hotel-Proposed, Edison - Ramada Inn, Edison - Best Western Hotel, Egg Harbor Township - Newark Airport Vista Hotel, Elizabeth - Ramada Inn-Proposed, Elizabeth - Sheraton Inn, Elizabeth - Marriott Suite Hotel-Proposed, Elmwood Park - Howard Johnson, Englewood - Conference Center, Farleigh Dickinson - Motel-Proposed, Flemington - Hamilton Park Conference Center, Florham Park - Courtesy Motel, Fort Lee - Ramada Inn-Proposed, Franklin Township - Playboy Resort, Great Gorge - Marriott Hotel, Hanover - Sheraton Hotel, Hasbrouck Heights - Holiday Inn, Jamesburg - Restaurant at Port Liberte, Jersey City - Harrogate Senior Living Facility, Lakewood - Courtyard by Marriott, Lincroft - Hotel-Proposed, Long Branch - Comfort Inn, Mahwah - Courtyard by Marriott, Mahwah - Residence Inn-Proposed, Mahwah - Economy Lodge - Proposed, Meadowlands - Holiday Inn, Meadowlands - Hotel-Proposed, Meadowlands - Meadowlands Hilton, Meadowlands - Sheraton Hotel, Meadowlands - Forsgate Conference Center, Monroe Township - Conference Center, Morristown - Governor Morris Inn, Morristown - Headquarters Plaza Hotel, Morristown - Pleasantville Farms Conference Cent, Morristown - Howard Johnson Lodge, Mount Holly - Courtyard by Marriott, Mount Laurel - Hilton, Mount Laurel - Days Hotel, New Brunswick - Hyatt Hotel, New Brunswick - Rennaisance Hotel, New Brunswick - Residence Inn - Princeton, New Jersey - Airport Hotel-Proposed, Newark - Courtyard by Marriott-Airport, Newark - Holiday Inn, Newark - Holiday Inn-Airport North, Newark - Hotel-Proposed, Newark - Howard Johnson Hotel, Newark - Days Inn, North Bergen - Holiday Inn, North Brunswick - Port-O-Call, Ocean City - Sting Ray Motel, Ocean City - Hotel-Proposed, Ocean Grove - Spray View Hotel, Ocean Grove - Macy Hotel-Proposed, Paramus - Red Carpet Inn, Paramus - Residence Inn-Proposed, Paramus - Marriott Hotel-Proposed, Park Ridge - Embassy Suites, Parsippany - Hilton, Parsippany - Residence Inn-Proposed, Parsippany - Howard Johnson, Phillipsburg - Hotel-Proposed, Piscataway - Residence Inn-Proposed, Piscataway - Compri Hotel-Proposed, Princeton - Hyatt Regency, Princeton - Marriott Hotel, Princeton - Omni Nassau Inn, Princeton - Treadway Inn, Princeton - Howard Johnson, Ridgefield Park - Hotel-Proposed, Rockleigh - Hotel-Proposed, Roxbury Township - Ramada Inn, Runnemede - Howard Johnson, Saddle Brook - Marriott Hotel, Saddle Brook - Days Inn, Secaucus - Howard Johnson, Secaucus - Ramada Inn, Secaucus - Hilton At Short Hills, Short Hills - Pier 4 Motel, Somers Point - Garden State Convention Center, Somerset - Holiday Inn, Somerset - Marriott Hotel, Somerset - Neighborhood Suites-Proposed, Somerset - Sommerset Plaza Hotel, Somerset - Summerfield Suites Hotel, Sommerset - Hewitt Wellington Hotel, Spring Lake - Hotel-Proposed, Spring Lake - Loews Glenpointe Hotel, Teaneck - Appleton Inn, Tinton Falls - Envoy Inn, Tinton Falls - Hilton Inn, Tinton Falls - Residence Inn, Tinton Falls - Sunrise Suite Hotel, Tinton Falls - Hotel-Proposed, Toms River - Hotel-Proposed, Turnersville - Hotel-Proposed, Wayne - Howard Johnson-Proposed, Wayne - Holiday Inn, Wildwood Crest - Motel, Wrightstown New Mexico - Compri Hotel-Proposed, Albuquerque - Courtyard by Marriott-Airport, Albuquerque - Fairfield Inn-Proposed, Albuquerque - Hampton Inn, Albuquerque - Hilton Hotel, Albuquerque - Holiday Inn, Albuquerque - Marriott Hotel, Albuquerque - Radisson Suite Hotel-Proposed, Albuquerque - Residence Inn, Albuquerque - Rodeway Inn, Albuquerque - Winrock Motor Inn, Albuquerque - La Quinta Inn, Albuquerque - Airport - Corkin's Lodge, Chama - La Quinta Inn, Farmington - Hilton, Las Cruces - Las Cruces Hilton, Las Cruces - Super 8, Las Cruces - Ski Rio Ski Resort, Miracle Mountain - Super 8, Raton - Young's Ranch, Red River - Eldorado Hotel, Santa Fe - Homewood Suites Hotel, Santa Fe - Hotel-Proposed, Santa Fe - Inn at Loretto, Santa Fe - Inn on the Alameda, Santa Fe - La Fonda Hotel, Santa Fe - La Quinta Hotel, Santa Fe - Residence Inn, Santa Fe - Santa Fe Motel, Santa Fe - Sheraton de Santa Fe, Santa Fe New York - Americana Inn, Albany - Desmond Hotel, Albany - Hilton Hotel, Albany - Marriott Hotel, Albany - Sheraton Inn, Albany - Susse Chalet, Albany - VIP Motor Lodge (Howard Johnson), Albany - Embassy Suites-Proposed, Amherst - Holiday Inn, Amherst - Annandale Inn-Proposed, Annandale - Wampus Inn-Proposed, Armonk - Treadway Inn, Batavia - Hampton Inn, Binghamton - Holiday Inn-Arena, Binghamton - Holiday Inn-SUNY, Binghamton - Hotel-Proposed, Binghamton - Howard Johnson, Binghamton - Residence Inn, Binghamton - Sheraton Inn, Binghamton - Eden Motel, Bronx - Days Inn-Proposed, Brookhaven - Residence Inn, Brookhaven - Brooklyn Hotel-Proposed, Brooklyn - Hilton Hotel, Brooklyn - Airport Hotel-Proposed, Buffalo - Buffalo Hotel, Buffalo - Days Hotel-Proposed, Buffalo - Hilton Hotel, Buffalo - Holiday Inn - Midtown, Buffalo - Hyatt Hotel, Buffalo - Hyatt Regency Hotel & Retail Area, Buffalo - Radisson Hotel, Buffalo - Ramada Inn-Airport, Buffalo - Ramada Renaissance Hotel, Buffalo - Residence Inn-Proposed, Buffalo - Sheraton Hotel, Buffalo - Sheraton Inn Buffalo East, Buffalo - Sheraton Inn-Airport, Buffalo - Sheraton Inn, Canadaiqua - Airway Motel, Cheektowaga - Holiday Inn - Airport, Cheektowaga - Holiday Inn - Gateway, Cheektowaga - Quality Inn, Cheektowaga - Sheraton Buffalo, Cheektowga - Steeplechase Park-Proposed, Coney Island - Hilton Inn, Corning - Resort/Conference Center-Proposed, Cornwall - Holiday Inn, Cortland - Roycroft Inn, East Aurora - Hotel-Proposed, East Elmhurst - Susse Chalet, East Greenbush - Nevele Hotel, Ellenville - Int'l Conf./Learning Center-Propose, Ellis Island - Days Inn, Elmsford - Howard Johnson, Elmsford - Neighborhood Suites Hotel-Proposed, Fishkill - Residence Inn, Fishkill - Metropole Hotel, Flushing - Midway Hotel, Flushing - Sheraton - Proposed, Flushing Center - Hotel-Proposed, Garden City - Wyndham Condominium, Garden City - Harrison Conference Center, Glen Clove - Great Neck Hotel, Great Neck - Comfort Inn, Greece - Holiday Inn-Proposed, Greece - Tamarack Lodge, Greenfield Park - Claudio's Restaurant, Greenport - Colonie Hill, Hauppauge - Holiday Inn, Hauppauge - Marriott Wind Watch Hotel & Golf, Hauppauge - Marriott Windwatch, Hauppauge - Ramada Inn, Hauppauge - Residence Inn, Hauppauge - Homewood Suites-Proposed, Henrietta - Howard Johnson, Huntington - Huntington Townhouse, Huntington - Hampton Inn, Islandia - Marriott Wind Watch, Islandia - Hotel-Proposed, Islip - Howard Johnson Hotel, Ithaca - Ramada Inn, Ithaca - Sheraton Inn, Ithaca - JFK Hilton, Jamaica - Howard Johnson, Kingston - Ramada Inn, Kingston - Omni Sagamore, Lake George - Ramada Inn, Lake George - Former Lake Placid Club Hotel, Lake Placid - Hilton Hotel, Lake Placid - Mirror Lake Inn, Lake Placid - Holiday Inn, Latham - Howard Johnson, Latham - Howard Johnson, Liberty - The New Brown's Resort, Loch Sheldrake - Convention Center - Proposed, Long Island - Eastern Nassau/W. Suffolk Hotel, Long Island - Hyatt Hotel-Proposed, Long Island - Motel-Proposed, Lynbrook - Crowne Plaza Hotel, Manhattan - Hotel Mark, Manhattan - Proposed Economy Hotel, Manhattan - Sugar Maples Resort, Maplecrest - Hotel-Proposed, Middletown - Howard Johnson, Middletown - Montauk Yacht Club and Inn, Montauk - Kutsher's Resort, Monticello - Motel-Proposed, Nanuet - Wallkill Valley Inn Project, New Paltz - Hotel-Proposed, New Rochelle - Le Richmond Hotel, New Rochelle - Ramada Plaza Inn and Offices, New Rochelle - Sheraton Inn, New Rochelle - Aberdeen Hotel, New York - American Youth Hostel, New York - Americana Hotel, New York - Ashley Hotel, New York - Astor House-Proposed, New York - Barbizon Plaza Hotel, New York - Barclay Hotel, New York - Battery Park City Hotel-Proposed, New York - Berkshire Place, New York - Best Western Woodward Hotel, New York - Biltmore Hotel, New York - Broadway Crowne Plaza, New York - Carlton House Hotel, New York - Century Paramount Hotel, New York - Chatwal Inn, New York - Chatwal Inn on 45th Street, New York - Chatwal Inn on Park Avenue, New York - Chinatown Hotel-Proposed, New York - Courtyard by Marriott-Proposed, New York - Custom's House, New York - Days Inn, New York - Days Inn-West 57th Street, New York - Doral Inn, New York - Dover Hotel, New York - Downtown Athletic Club, New York - Downtown Conference Center, New York - Drake Hotel, New York - Econo Lodge-Proposed, New York - El Rio Grande, New York - Embassy Suites-Times Square-Propose, New York - Empire Hotel, New York - Essex House, New York - Executive Hotel, New York - Giordano Hotel, New York - Gorham Hotel, New York - Grand Bay at Equitable Center, New York - Grand Hyatt Hotel, New York - Greenwich Street Hotel, New York - Halloran House, New York - Hampton House, New York - Harley Hotel, New York - Helmsley Hotel, New York - Hilton Hotel, New York - Hilton Hotel-Statler, New York - Holiday Inn, New York - Holiday Inn Crowne Plaza-Broadway, New York - Holiday Inn Crowne Plaza-Manhattan, New York - Holland Hotel, New York - Hotel Intercontinental, New York - Hotel Pierre, New York - Hotel-1926 Broadway-Proposed, New York - Hotel-East 57th Street-Proposed, New York - Hotel-Proposed, New York - Hotel-Tenth Avenue-Proposed, New York - Howard Hotel, New York - Howard Johnson, New York - Journey's Court Hotel-Proposed, New York - Journey's End, New York - Kalikow Hotel-Proposed, New York - Kennedy Inn, New York - Lancaster Hotel, New York - Le Meridien Liberty New York, New York - Lowell Hotel, New York - Luxury Hotel-Proposed, New York - Macklowe Hotel, New York - Madison Towers Hotel, New York - Manger Windsor Hotel, New York - Mark Hotel, New York - Marriott East Side, New York - Marriott Financial Center, New York - Marriott Hotel-Proposed, New York - Marriott Marquis, New York - Martinique Hotel, New York - Mayfair Regent, New York - Milford Plaza Hotel, New York - Millennium Hotel, New York - Navarro Hotel, New York - Nova Park-Gotham, New York - Novotel, New York - Omni Berkshire Place, New York - Omni Park Central, New York - Parc Fifty One Hotel, New York - Parker Meridien Hotel, New York - Peninsula Hotel, New York - Penta Hotel, New York - Piccadilly Hotel, New York - Plaza Hotel, New York - President Hotel, New York - Prince George Hotel, New York - Prince Street Hotel-Proposed, New York - Proposed Hotel and Apartments, New York - Proposed Luxury Hotel-Proposed, New York - Quality Inn, New York - Quality Suites, New York - Ramada Inn, New York - Regent Hotel-Proposed, New York - Regent of New York-Proposed, New York - Ritz-Carlton, New York - Roger Smith Winthrop Hotel, New York - Roosevelt Hotel, New York - Russian Tea Room, New York - Sheraton Hotel, New York - Sheraton Motor Inn, New York - Sheraton Park Avenue, New York - Soho Hotel-Proposed, New York - St. Moritz Hotel, New York - St. Regis, New York - Stanhope, New York - Sutton Place Hotel, New York - Taft Hotel, New York - Tenth Avenue Hotels-Proposed, New York - The Pierre Hotel, New York - The Plaza Athenee, New York - Times Square Hotel-Proposed, New York - Timeshare-Proposed, New York - Travel Inn, New York - Tudor Hotel, New York - UN Plaza Suite Hotel-Proposed, New York - Vista International, New York - Waldorf=Astoria Hotel, New York - Warwick Hotel, New York - Westbury Hotel, New York - Westin Plaza Hotel, New York - Woodward Hotel-Proposed, New York - York Club, New York - Howard Johnson Motel & Restaurant, Newburgh - Ramada Inn, Newburgh - Hilton Hotel, Niagara Falls - Howard Johnson, Norwich - Hotel-Proposed, Orangetown - Hudson Valley Conference Center, Ossining - Sheraton Inn, Ossining - Hotel-Proposed, Oswego - Best Western, Painted Post - Lodge on the Green, Painted Post - Residence Inn - Proposed, Parsippany - Senior Living - Proposed, Pearl River - Drum Hill Hotel, Peekskill - Holiday Inn, Plainview - Howard Johnson, Plainview - Pickwick Motor Inn, Plainview - Residence Inn, Plainview - Holiday Inn, Plattsburgh - Motel-Proposed, Port Jefferson - Comfort Inn-Proposed, Poughkeepsie - Courtyard by Marriott, Poughkeepsie - Radison Hotel, Poughkeepsie - Wyndham Hotel, Poughkeepsie - Best Western-LaGuardia Airport, Queens - Crown Motel, Queens - Crowne Plaza-LaGuardia Airport, Queens - Days Inn-LaGuardia Airport, Queens - Executive Inn, Queens - Hilton Inn-LaGuardia Airport, Queens - Hilton-JFK Airport, Queens - Holiday Inn-JFK Airport, Queens - Holiday Inn-LaGuardia Airport, Queens - Howard Johnson, Queens - Jade East Motel, Queens - JFK Plaza Hotel, Queens - Marriott Hotel-JFK Airport, Queens - Marriott-LaGuardia Airport, Queens - Metropole Hotel, Queens - Midway Hotel, Queens - Riviera Hotel, Queens - Royce Hotel-LaGuardia Airport, Queens - Sheraton-LaGuardia East-Proposed, Queens - Adria Hotel, Queens (Bayside) - Holiday Inn, Riverhead - Riverhead Motor Hotel, Riverhead - Americana Hotel, Rochester - Courtyard by Marriott-Wrighton, Rochester - Days Hotel (former Holiday Inn), Rochester - Hilton-Campus, Rochester - Holiday Inn, Rochester - Hotel-Proposed (former St. Bernard), Rochester - Hyatt Hotel, Rochester - Lodge at Woodcliff, Rochester - Omni Suites Hotel, Rochester - Residence Inn, Rochester - Sheraton Inn, Rochester - Stouffer Hotel, Rochester - Town House Inn, Rochester - Limited Service Hotel-Proposed, Rome - Hotel - Proposed, Roslyn - Roslyn Country Club, Roslyn - Courtyard by Marriott, Rye - Le Richemonde Hotel, Ryebrook - Baron's Cove Inn, Sag Harbor - Holiday Inn, Saratoga - Hotel-Proposed, Saratoga Springs - Howard Johnson, Saugerties - Holiday Inn, Schenectady - Ramada Inn, Schenectady - Dering Harbor Inn, Shelter Island - Crowne Plaza-Proposed, Smithtown - Howard Johnson, Smithtown - Sheraton, Smithtown - Raleigh Hotel, South Fallsburg - Hotel-Proposed, Southhold - Susse Chalet, Spring Valley - Executive Motor Inn, Springfield Gardens - Staten Island Hotel, Staten Island - Imperial Htl/Stevensville Golf Crs., Stevensville - Holiday Inn, Suffern - Motel on the Mountain, Suffern - Browns Hotel, Sullivan County - Imperial Hotel, Sullivan County - The New Brown's Resort, Sullivan County - Courtyard by Marriott, Syracuse - Embassy Suites, Syracuse - Hampton Inn, Syracuse - Hilton Inn, Syracuse - Holiday Inn-Downtown, Syracuse - Holiday Inn-Exit 35, Syracuse - Holiday Inn-Exit 36, Syracuse - Holiday Inn-Exit 39, Syracuse - Holiday Inn-I-90, Syracuse - Homewood Suites Hotel-Proposed, Syracuse - Hotel Syracuse, Syracuse - Hotel-Proposed, Syracuse - Marriott Hotel, Syracuse - Residence Inn-Proposed, Syracuse - Sheraton University Inn & Conf.Ctr., Syracuse - Treadway Inn, Syracuse - Courtyard by Marriott, Tarrytown - Tarrytown House Conference Center, Tarrytown - Westchester Marriott, Tarrytown - Embassy Suites - Proposed, Times Square, New York - Marriott Hotel, Uniondale - Sheraton Nassau Hotel, Uniondale - Howard Johnson Hotel, Utica - Howard Johnson, Vestal - Hotel-Proposed, Watertown - Convention Hotel-Proposed, Westbury - Dalts Restaurant, Westbury - Howard Johnson, Westbury - Marriott Hotel, Westchester - Inn-Proposed, Westhampton - Crowne Plaza, White Plains - Hotel-Proposed, White Plains - Howard Johnson, White Plains - Roger Smith Hotel, White Plains - Stouffer Westchester Hotel, White Plains - White Plains Hotel, White Plains - Anton Meadows, Yaphank - Quality Suites, Yorktown - Yorktown Motor Lodge, Yorktown Heights North Carolina - Days Inn - Central, Asheville - Holiday Inn - Airport, Asheville - Holiday Inn - Tunnel, Asheville - Inn on the Plaza, Asheville - Sheraton Inn, Asheville - Days Inn, Ashville - Masters Economy Inn - Rocky Mount, Battlebro - Days Inn, Blowing Rock - All-Suite Hotel-Proposed, Boone - Residence Inn-Proposed, Cary - Carolina Inn, Chapel Hill - Hilton-Proposed, Chapel Hill - Charlotte Registry Hotel-Per Diem, Charlotte - Compri Hotel-Proposed, Charlotte - Courtyard by Marriott, Charlotte - Days Inn, Charlotte - Days Inn-Uptown, Charlotte - Fairfield Inn, Charlotte - Howard Johnson, Charlotte - Howard Johnson Lodge, Charlotte - Knights Inn, Charlotte - Manger Motor Inn, Charlotte - Marriott City Center, Charlotte - Marriott Hotel-Independence Center, Charlotte - Masters Economy Inn - Charlotte No, Charlotte - Masters Economy Inn - Merchandise, Charlotte - Queen City Motel, Charlotte - Residence Inn, Charlotte - Residence Inn-North, Charlotte - Resistry Hotel, Charlotte - Royce Suite Hotel, Charlotte - Sheraton Inn, Charlotte - Conference Center, Clemmons - Sheraton Motel, Dunn - Best Western, Durham - Cricket Inn, Durham - Days Inn, Durham - Dutch Village Inn, Durham - Fairfield Inn, Durham - Holiday Inn-West, Durham - Motel 6, Durham - Sheraton-University Center, Durham - The Duke Inn, Durham - Days Inn, Fayetteville - Fairfield Inn, Fayetteville - Holiday Inn, Fayetteville - Hotel-Proposed, Fayetteville - Knights Inn, Fayetteville - Goldsboro Motel, Goldsboro - Courtyard by Marriott, Greensboro - Days Inn, Greensboro - Embassy Suites, Greensboro - Fairfield Inn, Greensboro - Hilton, Greensboro - Marriott Hotel, Greensboro - Residence Inn, Greensboro - Sheraton Greensboro, Greensboro - Hotel-Proposed, Greenville - Radisson Hotel, High Point - Days Inn, Lumberton - Maggie Valley Country Club, Maggie Valley - Courtyard by Marriott, Raleigh - Fairfield Inn, Raleigh - Hampton Inn, Raleigh - Hilton, Raleigh - Holiday Inn-Downtown, Raleigh - Marriott Hotel-RTP, Raleigh - Raleigh Radisson, Raleigh - Residence Inn, Raleigh - Holiday Inn - Airport, Research Triangle Park - Howard Johnson, Roanoke Rapids - Sheraton Inn, Rocky Mount - Days Inn, Rocky Mountain - Fairfield Inn, Rocky Mountain - Motel 6, Rocky Mountain - Days Inn, Rowland - Sheraton Motel, Selma - Masters Economy Inn, Smithfield - Holiday Inn, Southern Pines - Fairfield Inn, Wilmington - Hilton, Winston/Salem - Holiday Inn, Winston/Salem - Winston Plaza Hotel, Winston/Salem North Dakota - Holiday Inn, Bismark - Radisson Inn, Bismark - Super 8, Bismark - Ramada Hotel, Fargo - Ramada Inn-Proposed, Fargo - Super 8, Grand Forks - Super 8, Minot Ohio - Holiday Inn-Cascade, Akron - Ramada Inn, Akron - Residence Inn, Akron - Aurora Inn and Pine Lake Trout Club, Aurora - Sheraton Inn, Aurora - Woodlands Inn, Aurora - Courtyard by Marriott, Blue Ash - Embassy Suites, Blue Ash - Residence Inn-Proposed, Blue Ash - Best Western, Cambridge - Days Inn, Cambridge - Hilton Hotel, Canton - Super 8, Canton - Best Western Northeast, Cincinnati - Carousel Inn, Cincinnati - Cincinnati Hotel, Cincinnati - Clarion Hotel, Cincinnati - Days Inn, Cincinnati - Embassy Suites-Proposed, Cincinnati - Holiday Inn-Downtown, Cincinnati - Holiday Inn-Eastgate, Cincinnati - Holiday Inn-Northeast, Cincinnati - Holiday Inn-Riverfront, Cincinnati - Holiday Inn-South, Cincinnati - Hotel-Airport-Proposed, Cincinnati - Howard Johnson, Cincinnati - Hyatt, Cincinnati - Knights Inn, Cincinnati - KOA Campground, Cincinnati - Marriott Inn, Cincinnati - Netherland Hilton, Cincinnati - Omni Netherland Plaza, Cincinnati - Proposed Hotel, Cincinnati - Radisson Inn, Cincinnati - Ramada Inn, Cincinnati - Residence Inn, Cincinnati - Residence Inn-North, Cincinnati - Sheraton Inn-Proposed, Cincinnati - Treadway Inn, Cincinnati - Vernon Manor, Cincinnati - AmeriSuite Hotel-Proposed, Cleveland - Downtown Hotel-Proposed, Cleveland - Fairfield Inn-Brook Park, Cleveland - Fairfield Inn-West, Cleveland - Holiday Inn-Airport, Cleveland - Holiday Inn-Lakeside, Cleveland - Hyatt Hotel-Proposed, Cleveland - Marriott Hotel, Cleveland - Sheraton City Center, Cleveland - Sheraton Hopkins, Cleveland - AmeriSuite - Proposed, Columbus - Embassy Suites, Columbus - Fairfield Inn-North, Columbus - Fairfield Inn-West, Columbus - Hilton Inn, Columbus - Holiday Inn-Airport, Columbus - Holiday Inn-City Center, Columbus - Holiday Inn-Worthington, Columbus - Hotel-Proposed, Columbus - Howard Johnson Hotel, Columbus - Howard Johnson-East, Columbus - Howard Johnson-West, Columbus - Knights Inn-West, Columbus - Marriott Hotel, Columbus - Nationwide Hotel, Columbus - Residence Inn-North, Columbus - Sheraton Plaza Hotel, Columbus - Sheraton-North, Columbus - Union Plaza Hotel-Steeplechase, Columbus - University Inn, Columbus - Woodfin Hotel, Columbus - Courtyard by Marriott, Crosswoods - Courtyard by Marriott, Dayton - Daytonian Hilton, Dayton - Fairfield Inn, Dayton - Hope Hotel & Conference Center, Dayton - Knights Inn-North, Dayton - Marriott Hotel, Dayton - Motel 6, Dayton - Ramada Inn, Dayton - Residence Inn-North, Dayton - Residence Inn By Marriott, Dayton South - Courtyard by Marriott, Dublin - Woodfin Suites, Dublin - East Liverpool Motor Lodge, East Liverpool - Howard Johnson, Euclid - Ramada Inn, Fairlawn - Hampton Inn, Independence - Howard Johnson, Lima - Ramada Inn, Lima - Best Western, Mansfield - Holiday Inn, Marietta - Lafayette Hotel, Marietta - Holiday Inn, Middletown - Howard Johnson, Middletown - Regal 8 Inn, Middletown - Sheraton-Proposed, Milford - Super 8, Montrose - Ramada Inn, Sandusky - Days Inn, Sharonville - Holiday Inn-Cincinnati North, Sharonville - Super 8, St. Clairsville - Holiday Inn, Strongsville - Balhalla Hotel, Toledo - Courtyard by Marriott, Toledo - Fairfield Inn-Airport, Toledo - Hilton at the Medical College, Toledo - Hilton Hotel, Toledo - Holiday Inn, Toledo - Knights Inn-West, Toledo - Marriott Portside Hotel, Toledo - Radisson Hotel, Toledo - Sofitel, Toledo - Hampton Inn-Proposed, Wickliffe - Holiday Inn, Youngstown - Hotel-Proposed, Youngstown - Sheraton-Proposed, Youngstown Oklahoma - Fountainhead Resort, Mcintosh County - Residence at the Trails Inn, Norman - Suit Hotel, Norman - Courtyard by Marriott, Oklahoma City - Embassy Suites, Oklahoma City - Holiday Inn, Oklahoma City - Lexington Hotel Suites, Oklahoma City - Lincoln Plaza Hotel, Oklahoma City - Marriott Hotel, Oklahoma City - Meridien Plaza, Oklahoma City - Sheraton Hotel, Oklahoma City - Arrowhead Resort, Pittsburgh County - Camelot Hotel, Tulsa - Doubletree Hotel, Tulsa - Former Holiday Inn, Tulsa - Former Holiday Inn-Downtown, Tulsa - Holiday Inn, Tulsa - Holiday Inn-Convention Center, Tulsa - La Quinta Inn, Tulsa - Marriott Hotel, Tulsa - Mayo Hotel, Tulsa - Residence Inn, Tulsa - Westin Hotel, Tulsa Oregon - Inn At Face Rock, Bandon - Courtyard by Marriott, Beaverton - Red Lion Motel, Bend - Sunriver Lodge and Resort, Bend - Econolodge Motel, Eugene - Valley River Inn, Eugene - Residence Inn Portland-South, Lake Oswego - Big Creek Resort-US Highway 101, Lane County - Embassy Suites, Portland - Holiday Inn Crowne Plaza - Proposed, Portland - Holiday Inn-Airport, Portland - Holiday Inn-South, Portland - Proposed Sheraton Suites, Portland - Red Lion - Jantzen Beach, Portland - Red Lion Inn-Lloyd Center, Portland - Red Lion Inn-Portland Center, Portland - Residence Inn - Proposed, Portland - Vintage Plaza Hotel, Portland - Wells Building, Portland - Execulodge Motel, Salem - Oregon Capital Inn, Salem - Springfield Red Lion Inn, Springfield - Sunriver Resort, Sunriver Pennsylvania - Allentown Hilton Hotel, Allentown - Holiday Inn, Allentown - Proposed Microtel, Allentown - Quality Inn, Allentown - Bedford Springs Hotel, Bedford - Compri Hotel-Proposed, Bensalem - Days Inn-Proposed, Bensalem - Holiday Inn, Bensalem - Residence Inn By Marriott, Berwyn - Econolodge, Bristol - Days Inn, Brookville - Buck Hill Falls Inn, Buck Hill Falls - Howard Johnson, Butler - Holiday Inn, Chambersburg - Days Inn, Clarion - Embassy Suites, Coraopolis - Hydeholde Country House-Proposed, Coraopolis - Days Inn, Danville - Holiday Inn, Dubois - Lafayette Inn-Proposed, Easton - Howard Johnson Hotel, Erie - Ramada Inn, Erie - Holiday Inn, Essington - Quality Suites-Proposed, Essington - Super 8-Proposed, Essington - Howard Johnson, Gibsonia - Compri Hotel-Proposed, Harrisburg - Holiday Inn, Harrisburg - Marriott Hotel, Harrisburg - Penn Harris Inn, Harrisburg - Sheraton Inn, Harrisburg - Super 8-Proposed, Harrisburg - Holiday Inn, Hazleton - Super 8-Proposed, Hazleton - Plaza Valley Forge Hotel, King of Prussia - Radisson Hotel, King of Prussia - Sheraton Hotel, King of Prussia - Valley Forge Complex, King of Prussia - Valley Forge Hilton, King of Prussia - Motel-Proposed, Lake Ariel - Days Inn, Lancaster - Holiday Inn-Route 30E, Lancaster - Holiday Inn-Route 501, Lancaster - Sheraton Lancaster Golf Resort, Lancaster - Super 8-Proposed, Lancaster - Holiday Inn, Lionville - Hilton-Great Valley, Malvern - Summerfield Suite-Proposed, Malvern - Days Inn, Meadville - Hilton Inn, Monroeville - Holiday Inn-West, Monroeville - Economy Hotel, Montgomery Township - Holiday Inn, New Hope - Treadway Inn, Newport - Residence Inn-Proposed, Paoli - Conference Center-Proposed, Penn State - Barclay Hotel, Philadelphia - Bellevue, Philadelphia - Courtyard by Marriott-Devon, Philadelphia - Courtyard-Willow Grove, Philadelphia - Days Inn-Airport, Philadelphia - Econo Lodge-Franklin Towne, Philadelphia - Essex Hotel, Philadelphia - Franklin Motor Inn, Philadelphia - Franklin Plaza Hotel, Philadelphia - Guest Quarters Hotel, Philadelphia - Hampton Inn-Proposed, Philadelphia - Health Club-Proposed, Philadelphia - Hilton Inn, Philadelphia - Hilton Inn-Northeast, Philadelphia - Holiday Inn-City Center, Philadelphia - Holiday Inn-City Line, Philadelphia - Hub Motor Inn, Philadelphia - Hyatt-Proposed, Philadelphia - Marriott Hotel, Philadelphia - Marriott Hotel-Airport, Philadelphia - Omni Philadelphia, Philadelphia - Penn Center Inn, Philadelphia - Quality Inn-Center City, Philadelphia - Residence Inn-Proposed, Philadelphia - Rittenhouse Hotel, Philadelphia - Treadway Mohawk, Philadelphia - Treadway Roosevelt, Philadelphia - Residence Inn, Philadelphia/Berwyn - Clubhouse Inn, Pittsburgh - Courtyard by Marriott, Pittsburgh - Hampton Inn at Playhouse Square, Pittsburgh - Hilton Hotel, Pittsburgh - Holiday Inn-Greentree, Pittsburgh - Holiday Inn-North, Pittsburgh - Holiday Inn-Parkway-East, Pittsburgh - Holiday Inn-Parkway-West, Pittsburgh - Hotel-Proposed, Pittsburgh - Howard Johnson Hotel, Pittsburgh - Marriott Hotel, Pittsburgh - Marriott-Airport, Pittsburgh - Motel 6, Pittsburgh - Quality Inn, Pittsburgh - Royce Hotel-Airport, Pittsburgh - U.S.S. Hotel-Proposed, Pittsburgh - Westin William Penn, Pittsburgh - Courtyard By Marriott, Pittsburgh Airport - Holiday Inn, Reading - Sheraton Hotel, Reading - Hilton at Lackawanna Station, Scranton - Hilton Hotel, Scranton - Sheraton Inn, Stroudsburg - HoJo Inn, Tannersville - Hilton-Northeast, Trevose - Compri Hotel-Proposed, Valley Forge - Courtyard by Marriott, Valley Forge - Holiday Inn-Meadowlands, Washington - Holiday Inn, Wilkes-Barre - Days Inn-Proposed, Williamsport - Hotel-Proposed, Williamsport - Hampton Inn - Proposed, Willow Grove - Holiday Inn-Market Street, York - Holiday Inn-Route 30 and I-83, York - Ramada Inn, York - Super 8-Proposed, York Rhode Island - Cresthil-Proposed, Lincoln - Courtyard by Marriott, Newport - Vanderbilt Hotel-Convention Center, Newport - Quality Inn, North Kingston - Biltmore Plaza, Providence - Convention Center Hotel-Proposed, Providence - Holiday Inn Providence - Downtown, Providence - Hotel-Proposed, Providence - Marriott Hotel, Providence - Sheraton-Airport, Providence - Susse Chalet, Smithfield - Howard Johnson, Warwick - Residence Inn-Proposed, Warwick - Susse Chalet, Warwick South Carolina - Quality Inn Motel, Anderson - Super 8, Anderson - Budget Hotel - Proposed, Charleston - Charleston Center Hotel-Proposed, Charleston - Cooper River Inn, Charleston - Days Inn, Charleston - Francis Marion Hotel, Charleston - Hampton Inn-Proposed, Charleston - Hawthorne Suites Hotel, Charleston - Holiday Inn, Charleston - Holiday Inn-Airport, Charleston - Holiday Inn-Riverview, Charleston - Masters Economy Inn - Mt. Pleasant, Charleston - Masters Economy Inn - Rivers Ave, Charleston - Middleton Inn, Charleston - Omni Charleston, Charleston - Quality Inn, Charleston - Trusthouse Forte, Charleston - Courtyard by Marriott, Columbia - Courtyard by Marriott-Northeast, Columbia - Courtyard by Marriott-Northwest, Columbia - Embassy Suites, Columbia - Marriott Hotel, Columbia - Masters Economy Inn - I-26, Columbia - Masters Economy Inn - Knox Abbot, Columbia - Motel 6, Columbia - Residence Inn, Columbia - Coral Beach Hotel, Coral Beach - Days Inn, Dillon - Save Inn, Fairplay - Fairfield Inn, Florence - Holiday Inn, Florence - Days Inn, Gaffney - Courtyard by Marriott, Greenville - Fairfield Inn, Greenville - Greenville Hilton Hotel, Greenville - Ramada Inn, Greenville - Super 8, Greenwood - Days Inn, Hardeeville - Fairfield Inn, Hilton Head - Hilton Head Inn, Hilton Head - Holiday Inn, Hilton Head - Inter-Continental Hotel, Hilton Head - Islander Inn, Hilton Head - Quality Suites-Proposed, Hilton Head - Residence Inn-Proposed, Hilton Head - Sheraton Inn, Hilton Head - PGA East Resort-Proposed, Kiawah Island - Save Inn, Lake Hartwell - Days Inn, Mt. Pleasant - Coral Beach Hotel, Myrtle Beach - Radisson Hotel, Myrtle Beach - Best Western Inn, North Charleston - Budget Hotel-Proposed, North Charleston - Days Inn, North Charleston - Northwoods Atrium Inn, North Charleston - Days Inn, Santee - Holiday Inn-West, Spartanburg - Howard Johnson, Spartanburg - Residence Inn, Spartanburg South Dakota - Holiday Inn, Aberdeen - Holiday Inn, Rapid City - Holiday Inn, Sioux Falls - Super 8, Sioux Falls - Holiday Inn, Spearfish Tennessee - Ameri Suite Hotel-Proposed, Brentwood - Courtyard by Marriott, Brentwood - Holiday Inn, Bristol - Holiday Inn-Southeast, Chattanooga - Howard Johnson, Chattanooga - Marriott Hotel, Chattanooga - Motel 6, Chattanooga - Sheraton Inn, Chattanooga - Super 8, Chattanooga - Holiday Inn, Cove Lake - Masters Economy Inn, Dickson - Comfort Inn-Proposed, Elizabethton - Park Vista Hotel, Gatlinburg - Holiday Inn-I-40, Jackson - Holiday Inn, Johnson City - Super 8, Johnson City - Fairfield Inn, Johnson Park - Holiday Inn, Kingsport - Courtsouth Healthclub-North, Knoxville - Courtsouth Healthclub-South, Knoxville - Courtsouth Healthclub-West, Knoxville - Days Inn, Knoxville - Hilton Hotel, Knoxville - Howard Johnson-Westhills, Knoxville - Motel 6, Knoxville - Quality Inn, Knoxville - Ramada Inn-West, Knoxville - Rodeway Inn, Knoxville - Courtyard by Marriott, Memphis - Courtyard by Marriott-Airport, Memphis - Holiday Inn - Crowne Plaza, Memphis - Holiday Inn-East, Memphis - Holiday Inn-East Poplar, Memphis - Holiday Inn-I-40-Sycamore View, Memphis - Holiday Inn-Memphis Int'l Airport, Memphis - Hyatt Regency, Memphis - Lexington Hotel Suites, Memphis - Motel 6, Memphis - Omni Hotel, Memphis - Proposed Fairfield Inn, Memphis - Residence Inn, Memphis - La Quinta Inn, Memphis - Airport - Brown County Inn, Nashville - Capital Mall Conv. Center-Proposed, Nashville - Clarion Maxwell House, Nashville - Courtyard by Marriott-Airport, Nashville - Days Inn, Nashville - Doubletree Hotel, Nashville - Grosvenor, Nashville - Hampton Inn, Nashville - Holiday Inn Crowne Plaza, Nashville - Holiday Inn Express, Nashville - Holiday Inn-Briley Parkway, Nashville - Marriott Hotel, Nashville - Nashville Union Station, Nashville - Ramada Inn, Nashville - Sheraton Hotel, Nashville - Sheraton Music City, Nashville - Stouffer Hotel, Nashville - Super 8, Nashville - Union Station Hotel, Nashville - AmeriSuite, Oakridge - Holiday Inn, Oakridge - Super 8-Proposed, Union City Texas - Harvey Hotel, Addison - Days Inn, Amarillo - Motel 6, Amarillo - Radisson Hotel-Proposed, Amarillo - Super 8 Motel, Amarillo - La Quinta Inn, Amarillo - Airport - Courtyard by Marriott, Arlington - Hilton Hotel, Arlington - Holiday Inn, Arlington - Lexington Suites Hotel, Arlington - Compri Hotel-Proposed, Austin - Driskill Hotel, Austin - Embassy Suites-Austin Town Lake, Austin - Embassy Suites-North, Austin - Fairfield North, Austin - Four Seasons Hotel, Austin - Holiday Inn, Austin - Holiday Inn-Austin Town Lake, Austin - La Quinta Inn, Austin - Marriott Hotel, Austin - Proposed Fairfield Inn, Austin - Quality Inn, Austin - Residence South, Austin - La Quinta Inn, Austin - Ben White - Holiday Inn Airport, Austins Cities - Holiday Inn, Bay Town - Hilton Hotel, Beaumont - Holiday Inn, Beaumont - Courtyard by Marriott, Bedford - Holiday Inn, Brownsville - La Quinta Inn, Brownsville - Hilton Hotel, College Station - Ramada Inn, College Station - Holiday Inn, Conroe - Corpus Christi Hotel-Airport, Corpus Christi - Days Inn, Corpus Christi - Hilton - Proposed, Corpus Christi - Holiday Inn, Corpus Christi - Holiday Inn-Airport, Corpus Christi - La Quinta Inn, Corpus Christi - North - La Quinta Inn, Corpus Christi - South - Allstar Inn, Dallas - Ambassador Plaza Hotel, Dallas - Arlington Hilton, Dallas - Bradford Plaza Hotel, Dallas - Bristol Suites, Dallas - Convention Center Hotel-Proposed, Dallas - Courtyard by Marriott, Dallas - Courtyard by Marriott-Northeast, Dallas - Courtyard by Marriott-Plano, Dallas - Courtyard by Marriott-Stemmons, Dallas - Dallas Grand Hotel, Dallas - Doubletree Inn, Dallas - Embassy Suites, Dallas - Fairmont Hotel, Dallas - Harvey Hotel, Dallas - Hilltop, Dallas - Hilton Inn-LBJ, Dallas - Hilton-Arlington, Dallas - Holiday Inn - North, Dallas - Holiday Inn Crowne Plaza, Dallas - Holiday Inn-Brook Hollow, Dallas - Holiday Inn-South, Dallas - Houstonian Hotel, Dallas - Howard Johnson-East, Dallas - Lexington Hotel Suites, Dallas - Loews Anatole Hotel, Dallas - Marriott Hotel-Airport, Dallas - Marriott-Park Central, Dallas - Marriott-Quorum, Dallas - Melrose Hotel, Dallas - Motel 6, Dallas - Omni Melrose Hotel, Dallas - Park Plaza, Dallas - Propsed Hotel - DFW, Dallas - Ramada Inn Convention Center, Dallas - Ramada-Market Center, Dallas - Registry Hotel, Dallas - Residence Inn-Market Center, Dallas - Sheraton Grand, Dallas - Southland Center Hotel, Dallas - Statler Hilton Hotel, Dallas - Summit Hotel, Dallas - Westin Galleria Hotel, Dallas - La Quinta Inn, Dallas - DFW - La Quinta Inn, Dallas - North Park - La Quinta Inn, Dallas - Plano - La Quinta Inn, Dallas - Richardson - Allstar Inn, El Paso - Hilton Inn-Airport, El Paso - La Quinta Hotel-Airport, El Paso - Rodeway Inn, El Paso - Travelers Inn, El Paso - Westin Paso del Norte, El Paso - La Quinta Inn, El Paso - Lomaland - Allstar Inn, Euless - La Quinta Inn, Euless - Allstar Inn, Fort Worth - Courtyard by Marriott, Fort Worth - Days Inn Downtown, Fort Worth - Hilton Hotel, Fort Worth - Holiday Inn-North, Fort Worth - Holiday Inn-South, Fort Worth - Lexington Suites Hotel, Fort Worth - Metro Center Hotel, Fort Worth - Radisson Plaza Hotel, Fort Worth - Residence Inn, Fort Worth - La Quinta Inn, Fort Worth - East - Holiday Inn, Harlingen - La Quinta Inn, HI-LA Marque - Crowne Plaza-Houston Park, Houston - Days Inn, Houston - Days Inn-Hobby, Houston - Doubletree Hotel, Houston - Embassy Suites, Houston - Galleria Gardens, Houston - Harvest House Hotel, Houston - Harvey Hotel Medical Center, Houston - Hilton Inn-West, Houston - Holiday Inn I-10 East, Houston - Holiday Inn-Downtown, Houston - Holiday Inn-East, Houston - Holiday Inn-Greenway Plaza, Houston - Holiday Inn-Hobby, Houston - Holiday Inn-Medical Center, Houston - Holiday Inn-NASA, Houston - Holiday Inn-North, Houston - Holiday Inn-Northwest, Houston - Holiday Inn-Southwest, Houston - Host Hotel International, Houston - Hotel Meridien, Houston - Hotel-Proposed, Houston - Houston House, Houston - Houston Medical Center, Houston - Houston Park 10 Crowne Plaza, Houston - La Quinta Hotel-Astrodome, Houston - La Quinta Hotel-Baytown, Houston - La Quinta Hotel-CY Fair, Houston - La Quinta Hotel-Hobby, Houston - La Quinta Inn-Stafford, Houston - Lexington Hotel Suites, Houston - Marriott Astrodome, Houston - Marriott Hotel, Houston - Marriott Hotel-Medical Center, Houston - Marriott-Airport, Houston - Motel 6, Houston - Remington, Houston - Residence Inn, Houston - Rodeway Inn, Houston - Rodeway Inn-Hobby, Houston - Shamrock Hilton Hotel, Houston - Sheraton Hotel, Houston - Sheraton Houston House, Houston - Sheraton Houston Place Hotel, Houston - Sheraton Town and Country, Houston - Sofitel, Houston - Stouffer Greenway Plaza, Houston - Suite Hotel-Proposed, Houston - Whitehall, Houston - Whitehall Hotel Conversion to HI, Houston - La Quinta Inn, Houston - Sharpstown - La Quinta Inn, Houston - East - La Quinta Inn, Houston - Loop 1960 - La Quinta Inn, Houston - Northwest - La Quinta Inn, Houston- SW Freeway - Holiday Inn, Huntsville - Harvey Hotel DFW, Irvine - Allstar Inn, Irving - Hampton Inn, Irving - Hampton Inn-Proposed, Irving - Harvey Hotel-D/FW Airport, Irving - Holiday Inn-Texas Stadium, Irving - Marriott Hotel, Irving - Holiday Inn, Kingsville - Del Lago Hotel, Lake Conroe - Hilton Inn, Laredo - La Posada, Laredo - Courtyard by Marriott, Las Colinas - La Quinta Inn, Longview - Hilton Inn, Lubbock - Holiday Inn, Lubbock - Residence Inn, Lubbock - La Quinta Inn, Midland - Holiday Inn, New Braunfels - All Star Inn, North Richland Hills - La Quinta Inn, Odessa - Holiday Inn, Orange - Holiday Inn, Paris - Plano Harvey Hotel, Plano - La Quinta Inn, Round Rock - Sheraton Inn, San Angelo - Coachman Inn-Proposed, San Antonio - Courtyard by Marriott-Downtown, San Antonio - Courtyard by Marriott-Medical Ctr., San Antonio - Crockett Hotel, San Antonio - Days Inn, San Antonio - Fairfield - North, San Antonio - Gunter Hotel, San Antonio - Holiday Inn-Airport, San Antonio - Holiday Inn-Market Square, San Antonio - Holiday Inn-North, San Antonio - Holiday Inn-Northwest, San Antonio - Holiday Inn-Riverwalk, San Antonio - La Quinta Hotel-Ingram, San Antonio - La Quinta Hotel-Lackland, San Antonio - La Quinta Hotel-Toepperwein, San Antonio - Lexington Hotel Suites, San Antonio - Marriott Hotel-Proposed, San Antonio - Marriott Inn-North, San Antonio - Proposed Fairfield Inn, San Antonio - La Quinta Inn, San Antonio - Windsor - La Quinta Inn, San Antonio - Wurzbach - Holiday Inn, San Marcos - La Quinta Inn, SAT-Toepperwein - Sheraton Hotel, South Padre Island - La Quinta Inn, Tyler - Sheraton, Tyler - Sheraton Inn, Tyler - Traveler's Choice Inn, Tyler - Hilton Hotel, Waco - Gateway Inn, Wichita Falls - Hilton Hotel, Wichita Falls Utah - Mount Holly Ski Resort, Beaver - Hotel-Proposed, Brigham City - Motel-Proposed, Cedar City - Proposed Mayflower Hotel, Deer Valley - Stein Eriksen Lodge, Deer Valley - Deer Valley Resort, Park City - Omni Yarrow, Park City - Prospector Square Resort, Park City - Yarrow Resort, Park City - Seven Peaks Resort and Hotel, Provo - Comfort Inn, Salt Lake City - Doubletree, Salt Lake City - Hilton Hotel-Airport, Salt Lake City - Holiday Inn, Salt Lake City - Holiday Inn-Salt Palace, Salt Lake City - Hotel Utah, Salt Lake City - Hotel-Proposed, Salt Lake City - La Quinta Inn, Salt Lake City - Nendels Inn, Salt Lake City - New Grande Hotel, Salt Lake City - Red Lion Hotel, Salt Lake City - Sheraton Hotel, Salt Lake City - Super 8, Salt Lake City - University Park Hotel (Desktop Rev), Salt Lake City - Ramada Inn-Proposed, Sandy Vermont - Ramada Inn, Bennington - Bolton Valley Corporation, Bolton Valley - Quality Inn, Brattleboro - Radisson Hotel, Burlington - Smugglers Notch, Cambridge - Inn-Proposed, Essex - Cascade Lodge, Killington - Inn of the Six Mountains, Killington - Mountain Inn, Killington - Equinox Hotel, Manchester - Howard Johnson Inn, Rutland - Quality Inn, Stowe - Conference Center-Proposed, Stratton Mountain - Sugarbush Inn, Sugarbush - Susse Chalet, Williston Virginia - Comfort Inn, Abingdon - Best Western, Alexandria - Comfort Inn, Alexandria - Compri Hotel-Proposed, Alexandria - Embassy Suites, Alexandria - Howard Johnson, Alexandria - Marriott Suites, Alexandria - Ramada Inn, Alexandria - Best Western, Arlington - Gateway Marriott, Arlington - Hyatt Arlington Hotel, Arlington - Hyatt Regency, Arlington - Key Bridge Marriott, Arlington - Marriott Hotel, Arlington - Sheraton Crystal City Hotel, Arlington - Sheraton National Hotel, Arlington - Stouffer Concourse Hotel, Arlington - Mountain Lake Hotel, Blacksburg - Holiday Inn, Bristol - Howard Johnson, Bristol - Days Inn, Carmel Church - Westfields International, Chantilly - Boar's Head Inn, Charlottesville - Cavalier Inn, Charlottesville - Courtyard by Marriott, Charlottesville - Hilton-University, Charlottesville - Holiday Inn-North, Charlottesville - Omni Charlottesville, Charlottesville - Radisson-Proposed, Charlottesville - Super 8, Charlottesville - Days Inn, Chester - Howard Johnson, Chester - Days Inn, Colonial Heights - Holiday Inn, Covington - Embassy Suites, Crystal City - Holiday Inn Crowne Plaza, Crystal City - Hyatt Hotel, Crystal City - Marriott Crystal Gateway Hotel, Crystal City - Comfort Inn-Proposed, Dahlgren - Days Inn, Emporia - Courtyard by Marriott, Fairfax - Embassy Suites, Fairfax - Neighborhood Suites-Proposed, Fairfax - Hampton Inn-Proposed, Fairfax City - Westfields International, Fairfax County - Marriott Hotel, Fairview - Econo Lodge, Farmingville - Comfort Inn-Proposed, Farmville - Comfort Inn, Frederick County - Motel 6, Fredericksburg - Courtyard by Marriott, Hampton - Days Inn, Hampton - Fairfield Inn, Hampton - Courtyard by Marriott, Herndon - Embassy Suites Hotel, Herndon - Ramada Renaissance and Health Club, Herndon - Residence Inn-Proposed, Herndon - Worldgate Marriott Hotel, Herndon - Hotel-Proposed, Hopewell - Keswick Inn, Keswick - Holiday Inn, Lexington - Radisson Hotel, Lynchburg - Courtyard by Marriott, Manassas - Holiday Inn, Marion - Hilton, McLean - Days Inn, Norfolk - Marriott Waterside Hotel, Norfolk - Omni Hotel, Norfolk - Waterfront Hotel - Proposed, Norfolk - 135-Suite Hotel-Proposed, Portsmouth - Waterfront Suite Hotel-Proposed, Portsmouth - Comfort Inn, Princeton - Comfort Inn, Pulaski County - Embassy Suites Hotel, Reston - Hyatt Hotel, Reston - Best Western Kings Quarters, Richmond - Courtyard by Marriott, Richmond - Embassy Suites Hotel, Richmond - Hampton Inn, Richmond - Holiday Inn, Richmond - Howard Johnson Lodge, Richmond - Hyatt House Hotel, Richmond - La Quinta Hotel, Richmond - Marriott Hotel, Richmond - Omni Richmond, Richmond - Radisson Hotel, Richmond - Ramada Renaissance Hotel, Richmond - Residence Inn, Richmond - Days Inn, Richmond (Broad) - Days Inn, Richmond (Byrd) - Holiday Inn, Roanoke - Holiday Inn - Airport, Roanoke - Holiday Inn - Civic Center, Roanoke - Holiday Inn - South, Roanoke - Hotel Roanoke, Roanoke - Howard Johnson, Roanoke - Marriott - Roanoke Airport, Roanoke - Marriott Hotel, Roanoke - Holiday Inn, Salem - Super 8, South Hill - Days Inn, Springfield - Hilton, Springfield - Holiday Inn, Staunton - Stonewall Jackson Hotel, Staunton - Hampton Inn - Proposed, Tyson's Corner - Embassy Suites, Tysons Corner - Marriott Hotel, Tysons Corner - Residence Inn, Tysons Corner - Ritz Carlton-Proposed, Tysons Corner - Courtyard by Marriott, Virginia Beach - Courtyard by Marriott-Lynnhaven, Virginia Beach - Fairfield Inn, Virginia Beach - Hotel-Proposed, Virginia Beach - Pavilion Tower Hotel, Virginia Beach - Ramada Inn - Oceanside, Virginia Beach - International Conference Center, Westfields - Howard Johnson, Wheeling - Fort Magruder Inn, Williamsburg - Governor's Inn, Williamsburg - Holiday Inn-East, Williamsburg - Holiday Inn-West, Williamsburg - Royce Hotel, Williamsburg - Williamsburg Hilton, Williamsburg - Best Western-Proposed, Wytheville Washington - Bellevue Thunderbird Motor Inn, Bellevue - Embassy Suites, Bellevue - Hampton Inn, Bellevue - La Quinta, Bellevue - Residence Inn Seattle-East, Bellevue - Ramada Inn, Bothell - Rattling Spring Hotel, Harpers Ferry - Motel 6, Issaquah - AmeriSuite, Kent - Homecourt Suite Hotel, Kent - Embassy Suite, Lynnwood - Residence Inn-Seattle North, Lynnwood - Red Lion Inn at Pasco, Pasco - Redmond Motel, Redmond - Hampton Inn, Sea Tac - Holiday Inn Airport, Sea Tac - Thunderbird Inn, Sea Tac - Alexis Hotel, Seattle - Courtyard by Marriott-South Center, Seattle - Doubletree Inn at South Center, Seattle - Doubletree Plaza, Seattle - Hampton Inn-Airport, Seattle - Holiday Inn Crowne Plaza, Seattle - Holiday Inn-Sea Tac, Seattle - La Quinta, Seattle - Lake Union Residence Inn, Seattle - Marriott Hotel-Airport, Seattle - Marriott Sea-Tac Hotel, Seattle - Plaza Park Suites, Seattle - Ramada Inn-Airport, Seattle - Red Lion, Seattle - Stouffer Madison Hotel, Seattle - Travelodge-Proposed, Seattle - Westin Hotel, Seattle - Courtyard by Marriott, Spokane - Gateway Hotel, Spokane - Holiday Inn-West, Spokane - Red Lion Inn, Spokane - Super 8, Spokane - Hilton-Village Green, Tacoma - Hotel-Proposed, Tacoma - Park Shore Inn, Tacoma - Tacoma Sheraton Hotel, Tacoma - Embassy Suites Hotel, Tukwila - Hampton Inn, Tukwila - Residence Inn-Seattle South, Tukwila - Red Lion Quay, Vancouver - Residence Inn-Portland North, Vancouver - Super 8, Wenatchee - Thunderbird Motor Inn, Yakima West Virginia - Comfort Inn-Proposed, Charleston - Holiday Inn, Clarksburg - Holiday Inn, Fairmont - Hotel-Proposed, Harpers Ferry - Holiday Inn, Huntington - Comfort Inn-Proposed, Morgantown - Holiday Inn, Morgantown - Motel-Proposed, Morgantown - Comfort Inn, Princeton - Motel-Proposed, Princeton - Hotel-Proposed, Wheeling - Howard Johnson, Wheeling Wisconsin - Super 8, Ashland - Holiday Inn, Beloit - Embassy Suites Hotel-Proposed, Brookfield - Marriott-Milwaukee, Brookfield - Holiday Inn, Eau Claire - Residence Inn, Glendale - Granada Royale-Proposed, Green Bay - Holiday Inn-Downtown, Green Bay - Residence Inn-Proposed, Green Bay - Super 8, Janesville - Super 8, Kenosha - Playboy Resort, Lake Geneva - Concourse Hotel, Madison - Fairfield Inn, Madison - Hampton Inn - East, Madison - Hampton Inn - West, Madison - Compri Hotel-Proposed, Milwaukee - Embassy Suite, Milwaukee - Fairfield Inn, Milwaukee - Holiday Inn-Airport, Milwaukee - Holiday Inn-West, Milwaukee - Hotel and Conv. Ctr. East-Proposed, Milwaukee - Hyatt Regency, Milwaukee - Marc Plaza, Milwaukee - Marriott Inn, Milwaukee - Omni Suite Hotel-Proposed, Milwaukee - Super 8-Airport, Milwaukee - Olympia Village Resort, Oconomowoc - Scotsland Resort, Oconomowoc - Sheraton, Racine - Claridge Motor Inn, Rhinelander - Super 8, Waukesha - Holiday Inn, Wausau - Mead Inn, Wisconsin Rapids Wyoming - Days Inn, Casper - Flying L. Skytel, Cody - Super 8, Cody - Snow King Resort, Jackson - Super 8, Jackson - Wort Hotel, Jackson - Development-Proposed, Jackson Hole - Colter Bay Village, Moran - Jackson Lake Lodge, Moran - Jenny Lake Lodge, Moran - Best Western-Bel Air, Rawlins - Bridger Inn, Rawlins - La Quinta Inn, Rock Springs Western Europe Belgium - Oostkamp Hotel, Bruges - Proposed Residence Inn, Brussels - SAS Royal Hotel, Brussels Denmark - Proposed Hotel, Copenhagen France - The Miramar, Biarritz - Chateau D'arc en Barroi, Haute-Marne - Le Grand, Paris - Royal Monceau, Paris Germany - Cumberland House, Berlin - Munchen Penta Hotel, Munchen Holland - Carlton - Cannes & Amstel, Amsterdam - The Pulitzer Hotel, Amsterdam Spain - Le Meridien, Barcelona - Princess Sophia, Barcelona - Hotel Los Monteros, Marbella - Incosol Spa & Hotel, Marbella - Proposed Hyatt Resort, Marbella United Kingdom - Copthorne Hotel, Aberdeen - Copthorne Hotel, Birmingham - Hyatt Regency, Birmingham - Holiday Inn, Cambridge - Copthorne Hotel, Cardiff - Great Eastern Hotel, England - Copthorne Hotel, Glasgow - Hanbury Manor Hotel, Hertfordshire - 47 Park Street, London - Bailey's Hotel, London - Basil Street Hotel, London - Basil Street Hotel, Knightsbridge, London - Britannic Tower, London - Chelsea Hotel, London - Chesterfield Hotel, London - Chesterfield Hotel, Mayfair, London - Copthorne Hotels, London - Copthorne Tara Hotel, London - Dorchester Mayfair, London - Executive Hotel, London - Marriott Hotel, London - May Fair, London - Plaza Hotel, London - Proposed Hotel Conversion, London - Proposed Hotel-The City, London - Regent Hotel, London - Regent London Hotel, London - Sheraton Belgravia, London - Sheraton Park Tower, London - St. James Court Hotel, London - The Executive Hotel, London - Windsor Hotel, London - Copthorne Hotel, Manchester - Copthorne Hotel, Newcastle - Copthorne Hotel, Slough/Windsor - Swallow Hotel, Stockton - Copthorne Hotel-Effingham Park, Sussex - Copthorne Hotel-Gatwick, Sussex Middle East and North Africa Egypt - Sheraton Anni Cruise Ship, - Sheraton Aton Cruise Ship, - Sheraton Hotp Cruise Ship, - Sheraton Tut Cruise ship, - Aswan Oberol Hotel, Aswan - Cairo Sheraton Hotel, Cairo - Hotel - Proposed, Cairo - Lido Hotel, Cairo - Meridien Hotel, Cairo - Novotel Cairo Airport, Heliopolis, Cairo - Proposed Resort Complex, Hurghada - Luxor Sheraton Hotel, Luxor - Proposed Hotel, Luxor - Fayrouz Village Hotel, Sharm El Sheikh, Sinai - Coral Village Hotel, Nuweiba, Sinai - Hotel - Proposed, Dahab, Sinai - Hotel - Proposed, St. Catherine, Sinai Greece - Athens Hilton & Proposed Hotel, Athens - Caravel Hotel, Athens - Proposed Sargani Hotel & Bungalows, Halkidiki - Rhodes Hotel -Proposed, Rhodes Israel - Proposed Inter-Continental Hotel, Tel Aviv Lebanon - Hotel Market Review, Beruit Morocco - El Minzah Hotel, Tangier Nigeria - Proposed Sheraton Hotel, Port Harcourt Saudi Arabia - Proposed Jeddah Corniche Project, Jeddah Tunisia - Proposed Hotel, Hammamet Turkey - Hotel Conrad, Istanbul Latin America and the Caribbean Bahamas - Eleuthera Joint Venture, Eleuthera - Cape Eleuthera Island Hotel, Eleuthera Island - Eleuthera Joint Venture, Eleuthra - The Montague, Nassau - Paradise Island Hotel, Paradise Island - Resorts Int'l Hotel and Casino, Paradise Island Belize - Journey's End Caribbean Club, Abergris Caye Bermuda - Sonesta Hotel, Bermuda Brazil - Quatro Rodas Hotel, Recife Colombia - Charleston Hotel - Proposed, Barranquilla - Bella Suiza Hotel, Bogota - Hotel & Convention Center -Proposed, Cali - Cartagena Hilton, Cartagena - El Faro de Cartagena Resort Propose, Cartagena - Proposed Indian Sea and Sun Resort, Cartagena - Hotel De Isleno, San Andres Isla - Santamar Hotel, Santa Marta Curacao - Ramada Renaissance Hotel and Casino, Honduras - Inn Of The Sun, Guanaja Jamaica - Holiday Inn-Rose Hall, Montego Bay - Americana Eden II, Ocho Rios Mexico - Posadas de Mexico Hotels, - Americana Condesa Del Mar, Acapulco - Americana El Presidente Hotel, Acapulco - Resort-Proposed, Cabo San Lucas - Palacio Del Margus, Chiconcuac - Omni Hotel, Ixtapa - Fiesta Inn-Proposed, Leon - Karmina Place, Manzanillo - Hotel - Proposed, Mexico City - La Jolla de Mismaloya, Puerta Vallarta Netherland Antilles - Divi Divi Beach Resort, Aruba - Divi Tamarijn Beach Resort, Aruba - Golden Anchor, Bonaire - Resort Hotel-Proposed, Bonaire - Ramada Renaissance Hotel and Casino, Curacao - Cupecoy Beach Club Hotel, St. Maarten - Dawn Beach Hotel, St. Maarten - Dawn Beach Resort, St. Maarten - Mullet Bay Resort, St. Maarten - Oyster Pond Hotel, St. Maarten Puerto Rico - Hyatt Dorado Beach Hotel, Dorado - Hyatt Regency Cerromar Hotel, Dorado - Hotel - Proposed, Fajardo - Hotel Puerto Rico, Fajardo - Westin Resort-Proposed, Palmer - Marriott Resort & Casino-Proposed, Puerto Rico - Carib Inn, San Juan - Dupont Plaza, San Juan - El San Juan Hotel and Casino, San Juan - Howard Johnson Hotel, San Juan - Marriott - Proposed, San Juan - Marriott Update - Proposed, San Juan - Sands Hotel and Casino, San Juan Virgin Islands - Caneel Bay, St. Croix - Carambola Beach Resort, St. Croix - Hotel - Proposed, St. Croix - St. Croix Development, St. Croix - Caneel Bay, St. John - Pineapple Beach Hotel, St. Thomas - Sugar Bay Plantation, St. Thomas - Virgin Grand Hotel, St. Thomas - Virgin Isle Hotel, St. Thomas - Little Dix Bay, Virgin Borda Eastern Europe Croatia - Two Hotels, Dubrovnik Czech Republic - Voronesh Hotel Complex, Brno - Proposed Four Seasons Hotel, Prague Hungary - Proposed Resort Hotel, Babolna - Duna Inter-Continental, Budapest Latvia - Daugava Hotel-Proposed, Riga - Proposed Hotel, Riga Poland - Holiday Inn, Krakow - Marriott Hotel - Proposed, Poznan - Proposed Hotel, Poznan - Radisson Hotel, Szczecin - Bristol Hotel, Warsaw - Holiday Inn, Warsaw - Orbis Joint Venture, Warsaw - Proposed Hotel, Warsaw - Sheraton Hotel - Proposed, Warsaw - Zakopane Resort Complex, Zakopane Russia - Kamiennyi Most Hotel & Business, Moscow - Savoy Hotel, Moscow Asia Korea - Ultrapolis 3000, Seoul Malaysia - UP 3000 Hotel-Proposed, Selangor Singapore - Resort Hotels - Proposed, - Ultrapolis 3000, Singapore West Indies - Proposed Blue Lagoon Resort, St. Martin Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Hospitality Valuation Services Industry Leader Hospitality Valuation Services (HVS) was created in 1980 to satisfy the ever-increasing demand for reliable and well-documented hotel/motel valuations, market studies, and feasibility reports. As the nation's leading real estate appraisal organization devoted exclusively to lodging properties, HVS offers owners, investors, and lenders in-depth valuation and market research expertise. Our professional staff, operating on a worldwide basis with offices in New York, San Francisco, Miami, Boulder, Vancouver, and London, has appraised more than 4,000 hotels and motels in every state and over 32 foreign countries. Each member of Hospitality Valuation Services is well versed in lodging operations. Most have college degrees in hotel administration as well as actual on-the-job hotel experience. Coupled with intense training in real estate appraisal theory and techniques, we are highly qualified to handle the unique characteristics of hostelry valuations. Excellence Through Specialization An important feature of our valuation and feasibility services is specialization. Daily exposure on a global basis to a wide variety of hotel transactions and operating statistics, along with actual buyers and sellers, provides the data to thoroughly document our reports. HVS maintains the industry's largest database of hotel valuation information: o Data on over 4,000 hotel transactions; o Over 3,500 actual financial statements; o Thousands of management contracts, franchise agreements, mortgages, leases, and other similar documents; o Personal contacts at every major hotel company; o Names and addresses of over 10,000 hotel owners, investors, lenders, and operators. Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Innovative research in hotel valuation techniques is set forth in the textbooks we authored for the Appraisal Institute, entitled The Computerized Income Approach to Hotel/Motel Market Studies and Valuations and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations. These publications, along with more than 300 articles, are recognized as the authoritative standard for valuing lodging facilities and performing market feasibility studies. In addition, we have developed Hospitality Valuation Software, a computerized package that assists appraisers and consultants in evaluating market trends and preparing financial forecasts. Full-Service Hotel Consulting With a reputation established by providing highly detailed hotel valuations that are accepted and relied upon by virtually every major hotel owner, lender, and operator, HVS has branched out to offer a full range of consulting services. o HVS Consulting Services: Valuations, market feasibility studies, economic studies, management contract and franchise negotiations, development assistance, and expert testimony. o HVS Executive Search: Recruitment and placement of top-level hotel management personnel. o HVS Eco Services: Environmental audits and assistance in implementing programs including water and energy management, recycling, and green product selection. Provides ECOTEL certifications to environmentally sensitive hotels. o HVS Gaming Services: Specialized market, valuation, and consulting services for casinos and other types of gaming activities. o HEI Hotels: Hotel ownership and management. Long-Term Relationship Hospitality Valuation Services is in business for the long-term. We are dedicated to providing our clients with the highest quality consulting services. Should you require assistance in any areas covered by our expertise, please contact any member of our team at (516) 248-8828. This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. ============= HVS - ------------- International ============= ===================================================== ---------------------------- Economic Study and Appraisal ---------------------------- Holiday Inn Select ---------------------------- Clark, New Jersey ---------------------------- Prepared by: Hospitality Valuation Services A Division of Hotel Consulting Services, Inc. 372 Willis Avenue Mineola, NY 11501 516-248-8828 Submitted to: Mr. Shirish Godbole Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 [Letterhead of HVS International] December 30, 1996 Mr. Shirish Godbole Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 Re: Holiday Inn Select Clark, New Jersey Ref. #9610269 Dear Mr. Godbole: Pursuant to your request, we herewith submit our economic study and appraisal pertaining to the above-captioned property. We have inspected the site and facilities and analyzed the hostelry market conditions in the Union County area. Our report was prepared in accordance with, and is subject to, the requirements of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and the Uniform Standards of Professional Practice (USPAP), as provided by the Appraisal Institute. Based on the available data, our analysis, and our experience in the hotel industry, it is our opinion that the market value of the fee simple interest in the subject property described in this report, as of January 1, 1997, is: $10,700,000 TEN MILLION SEVEN HUNDRED THOUSAND DOLLARS We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings and valuation. The economic study and appraisal is made part hereof, and must remain attached in order for the value opinion set forth to be considered valid. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. Very truly yours, HOSPITALITY VALUATION SERVICES A Division of Hotel Consulting Services, Inc. /s/ Rodney G. Clough Rodney G. Clough Consulting and Valuation Analyst /s/ Anne R. Lloyd-Jones Anne R. Lloyd-Jones, CRE Senior Vice President /s/ Stephen Rushmore Stephen Rushmore, CRE, MAI, CHA President HVS International, Mineola, New York Table of Contents - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table of Contents 1. Executive Summary ........................................... 1 2. Nature of the Assignment .................................... 3 3. Description of the Land, Improvements, Zoning, Taxes and Neighborhood ........................... 7 4. Market Area Analysis ........................................ 23 5. Overview of External Forces Affecting the U.S. Lodging Industry ......................................... 44 6. Lodging Market Supply and Demand Analysis ................... 60 7. Projection of Occupancy and Average Rate .................... 78 8. Highest and Best Use ........................................ 91 9. Approaches to Value ......................................... 93 10. Income Capitalization Approach .............................. 96 11. Sales Comparison Approach ................................... 133 12. Cost Approach ............................................... 142 13. Reconciliation of Value Indications ......................... 148 14. Statement of Assumptions and Limiting Conditions ............ 152 15. Certification ............................................... 155 Addenda Photographs of the Subject Property Photographs of the Competitive Properties Legal Description HVS International, Mineola, New York Table of Contents - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Addenda (continued) Synopsis of Holiday Inn License Agreement Synopsis of Hotel Management Agreement Explanation of the Simultaneous Valuation Formula Qualifications Rodney G. Clough Anne R. Lloyd-Jones, CRE Stephen Rushmore, CRE, MAI, CHA HVS International, Mineola, New York Executive Summary 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 1. Executive Summary Property: Holiday Inn Select Location: 36 Valley Road Clark, New Jersey 07066 Date of Inspection: October 24, 1996 Interest Appraised: Fee simple Date of Value: January 1, 1997 Land Description - ---------------- Area: +/-5.0007 acres, or +/-217,830 square feet Zoning: COH - Commercial Office, Multi-Story Assessor's Parcel Number: 154-03,05,07 Improvements Description - ------------------------ Age: Constructed in 1973 Property Type: Full-service Guestrooms: 191 Number of Stories: Six stories Food and Beverage Facilities: One restaurant and one lounge Meeting Space: 8 rooms, 7,493 square feet Parking: 267 spaces (around the perimeter of the building) Summary of Value Parameters - --------------------------- Highest and Best Use (as if vacant): Transient lodging facility Highest and Best Use (as improved): Transient lodging facility Marketing Period: Six to nine months Number of Years to Stabilize: Four Stabilized Year: 2000 HVS International, Mineola, New York Executive Summary 2 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Valuation Assumptions - --------------------- Mortgage Interest Rate: 9.5% Amortization Period: 20 years Debt Service Constant: 0.111856 Loan-to-Value Ratio: 70% Stabilized Inflation Rate: 3.5% Equity Yield Rate: 22% Terminal Capitalization Rate: 11% Brokerage and Legal Fees: 3.0% Holding Period: 10 years Calculated Discount Rate: 14.56% Estimates of Value - ------------------ Income Capitalization Approach: $11,100,000 Sales Comparison Approach: $9,500,000 - $12,700,000 Cost Approach (Replacement Cost): $15,500,000 Market Value Conclusion: $10,700,000 Market Value Conclusion per Room: $56,000 HVS International, Mineola, New York Nature of the Assignment 3 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 2. Nature of the Assignment Subject of the Economic Study and Appraisal The subject of the economic study and appraisal is the fee simple interest in a +/-217,830-square-foot (+/-5.0007-acre) parcel improved with a 191-room, full-service lodging facility known as the Holiday Inn Select, which opened in 1973. In addition to guestrooms, the subject property contains 7,493 square feet of meeting space, a restaurant, a lounge, an outdoor pool with outdoor grill area, a gift shop, an exercise room, and appropriate back-of-the-house facilities. The hotel is located northeast of the intersection of Walnut and Valley Roads. The hotel is just south of the Garden State Parkway; and, given the height of the structure, is visible from the Parkway. Municipal jurisdictions governing the property include the City of Clark, Union County, and the State of New Jersey. The hotel's civic address is 36 Valley Road, Clark, New Jersey, 07066. Objective of the Economic Study and Appraisal The objective of the economic study and appraisal is to evaluate the supply and demand factors affecting the market for transient accommodations in the Clark area for the purpose of estimating the market value of the subject property. Market value is defined by the Office of the Comptroller of the Currency (OCC), 12 CFR, Part 34, 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 and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. buyer and seller are typically motivated; 2. both parties are well informed or well advised, and acting in what they consider their own best interests; HVS International, Mineola, New York Nature of the Assignment 4 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 3. a reasonable time is allowed for exposure in the open market; 4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) Use of the Appraisal This appraisal is being prepared for use by Morgan Stanley Mortgage Capital, Inc. in connection with their proposed financing of a package of 17 hotels, including the subject property, which are owned by Ashford Financial Corporation or related entities. The information presented in this report should not be disseminated to the public or third parties without the express written consent of HVS International. Scope of the Appraisal All information was collected and analyzed by the staff of HVS International. Data such as historical operating statements, site plans, floor plans, and so forth were supplied by Ashford Financial Corporation and Remington Hotel Company. Unless noted otherwise, we have inspected the competitive lodging facilities and analyzed the sales summarized in this report, and our value conclusion is based on this investigation and analysis. Property Rights Appraised The property rights appraised are the fee simple ownership of the land and improvements, including the furniture, fixtures, and equipment. The fee simple interest is defined as "absolute ownership unencumbered by any other interest or estate subject only to the four powers of government."(2) The subject property is appraised as a going concern (i.e., an open and operating facility). Method of Study The methodology used to develop this economic study and appraisal is based on the market research and valuation techniques set forth in the textbooks authored by HVS International for the American Institute of Real Estate Appraisers and the Appraisal Institute, entitled The Valuation of Hotels and Motels,(3) Hotels, Motels and Restaurants: Valuations and Market Studies,(4) The (1) Federal Register, Vol. 55, No. 165, August 24, 1990; p. 34696. (2) The Dictionary of Real Estate Appraisal - Second Edition, American Institute of Real Estate Appraisers, Chicago, IL, 1989, p. 120. (3) The Valuation of Hotels and Motels, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1978. (4) Hotels, Motels and Restaurants: Valuations and Market Studies, Stephen Rushmore, HVS International, Mineola, New York Nature of the Assignment 5 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Computerized Income Approach to Hotel/Motel Market Studies and Valuations,(1) and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations.(2) The appraisal will consider the three standard approaches to value: income capitalization, sales comparison, and cost. Because lodging facilities are income-producing properties that are normally bought and sold on the basis of capitalization of their anticipated stabilized earning power, the greatest weight is given to the value indicated by the income capitalization approach. We find that most hotel investors employ a similar procedure in formulating their purchase decisions, and thus the income capitalization approach most closely reflects the rationale of typical buyers. When appropriate, the sales comparison and cost approaches are used to test the reasonableness of the results indicated by the income capitalization approach. Ownership, Franchise, and Management History and Assumptions A photocopy of the subject property's legal description, which was provided by Ashford Financial Corporation, is presented in the Addenda to this report; the appraisers assume no responsibility regarding the accuracy of this legal description. Current title is held by Clark New Jersey Hotel Limited Partnership - an entity controlled by Ashford Financial Corporation. The subject property was purchased from a RTC Mortgage Trust on August 24, 1995. The letter of intent was signed with JCF Partners, as asset manager for the RTC Mortgage Trust. The subject property is operated under a franchise agreement with Holiday Inn; this agreement expires on April 1, 2006. The hotel is also subject to a management agreement with Remington Clark Employers Corporation; an abstract of this contract is presented in the Addenda to this report. Marketing Period In light of the renewed interest in hotel investments and the increasing availability of debt and equity capital, we believe that it will take six to nine months to sell the subject property assuming it is placed on the market at the concluded value. American Institute of Real Estate Appraisers, Chicago, IL, 1983. (1) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1990. (2) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992. HVS International, Mineola, New York Nature of the Assignment 6 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Effective Date of the Appraisal The effective date of the appraisal is January 1, 1997. All projections are expressed in inflated dollars, and the value estimate represents 1997 dollars. Date of Inspection The subject property was inspected by Rodney G. Clough on October 24, 1996. HVS International, Mineola, New York Description of the Land, Improvements, 7 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 3. Description of the Land, Improvements, Zoning, Taxes, and Neighborhood LAND The suitability of the land for the operation of a lodging facility is an important consideration affecting the economic viability of a property and its overall value. Factors such as size, topography, access, visibility, and the availability of utilities have a direct impact on the desirability of a particular site. Size and Topography The subject site is located along the southeast side of the Garden State Parkway at exit 135. The site is bordered to the east by Walnut Avenue and to the south by Valley Road; the topography of the parcel is generally flat. Municipal jurisdictions governing the property include the City of Clark, Union County, and the State of New Jersey. According to a the Clark Township Tax Assessor's Office, the subject parcel measures approximately +/-217,830 square feet, or +/-5.0007 acres. The site is irregular in shape and features the following frontages: 340.4 feet to the southeast, along Walnut Street; 145.13 feet to the south, along the curve between Walnut Street and Valley Road; 189.79 feet along Valley Road to the southwest; 276.02 feet along the northern border of the property (inclusive of some frontage along the Garden State Parkway); and 361.75 feet along the eastern border of the property. Primary vehicular access to the property is provided by Walnut Street, secondary vehicular access is provided by Valley Road. In conclusion, size and topography of the subject parcel appear appropriate for hotel use. The site is fully developed, with no excess land available for expansion. Easements The appraisers were not provided with any information concerning easements affecting the subject property. For the purposes of this appraisal, we have assumed that the property is not encumbered by any unusual or onerous easements which would affect its use or marketability. HVS International, Mineola, New York Description of the Land, Improvements, 8 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Regional Access It is important to analyze a lodging facility's ease of access with respect to regional and local transportation routes and demand generators. Several local routes serve the subject property's area. Union County is extremely well served by a mixture of interstate, state, county, and local roadways. These roadways include the Garden State Parkway, and Interstates 95 (also known as the New Jersey Turnpike) 78, and 287. Of these, the most important insofar as the subject property is concerned is the Garden State Parkway. The subject property enjoys frontage along the Garden State Parkway. This parkway is a toll road that extends on a north/south axis, roughly paralleling the New Jersey coastline from I-87, the New York State Thruway, in New York State (to the north) to Cape May, at New Jersey's southern tip. The Garden State Parkway provides access along New Jersey's eastern shoreline, and intersects with other major highways, such as I-78, I-95, U.S. Highways 202 and 9, and the Atlantic City Expressway. Located approximately ten miles to the south of the subject property is the Garden State Parkway's intersection with Interstate 95, which provides a major link between northern New Jersey and New York City. At its intersection with I-80, I-95 leads northbound motorists directly to the George Washington Bridge, from which Manhattan's West Side can be accessed. I-95 then continues northward through the Bronx, intersecting I-87 (known as the Major Deegan Expressway) and I-295 (which channels traffic to access Long Island), and continues northward through the New York County of Westchester, and on into Connecticut and the New England States. To the south of its intersection with I-80, I-95 is known as the New Jersey Turnpike, and provides access throughout the State of New Jersey; this highway then continues southward, roughly paralleling the Eastern Seaboard, as far as Miami, Florida. Interstate 78 intersects the Garden State Parkway approximately 12 miles north of the subject property. This interstate commences in Harrisburg, Pennsylvania and traverses east to its termination point in Newark, New Jersey. Interstate 287 intersects the Garden State Parkway approximately 2 miles south of the Parkway's intersection with Interstate 95 (12 miles south of the subject property). To the northeast, Interstate 287 provides regional access to Staten Island and eventually the boroughs of Brooklyn, Queens, and the Bronx in New York City. To the west, Interstate 287 follows the western border of the greater Newark metropolitan area, eventually HVS International, Mineola, New York Description of the Land, Improvements, 9 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= continuing north to its intersection with Interstate 87 (the Interstate 287 termination point). Given the subject property's location proximate to the Garden State Parkway, regional access to the Holiday Inn Select is considered excellent. Local Access and Visibility Motorists utilize exit 135 to access the Clark area of New Jersey from the Garden State Parkway. After exiting, motorists encounter a traffic circle which provides access to various local roads and on-ramps to the Garden State Parkway. Hence, given the multitude of road choices that can be taken from the circle, coupled with the various on-ramps of local and interstate traffic, access from this circle to the subject property (as well as from the subject property to the parkway) can be initially confusing. Motorists traveling northbound on the Garden State Parkway take exit 135 and follow the traffic circle at the end of the exit ramp to the Valley Road exit (the second possible exit choice). The subject property is then located to the northeast, to the left of the driver. Motorists traveling southbound on the parkway utilize the similarly numbered exit and follow the traffic circle at the end of the exit ramp to the Valley Road exit (the fourth possible exit choice). Signage for this Valley Road exit (and all other exits) exists to assist drivers. To reach the parkway from the subject property, motorists exit right onto Valley Road and drive in a northwesterly direction to the traffic circle. The first exit provides access to the northbound parkway, and the third exit provides access to the southbound parkway. Visibility of the subject property is favorable. The six-story structure is visible from the Parkway, and adequate signage exists along Valley Road and Walnut Avenue. Given the close proximity of the subject property to this traffic circle, and the proximity of the site to the Garden State Parkway, local access to the subject property is considered excellent and the visibility of the subject property is considered favorable. Airport Access I-78 provides access to the subject property from Newark International Airport, located roughly five miles to the east of the I-78/Garden State Parkway intersection. Although further from the subject property, access is also possible from John F. Kennedy and LaGuardia International Airports. HVS International, Mineola, New York Description of the Land, Improvements, 10 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Utilities The subject site is served by all necessary utilities, which are provided as follows. ================================================================================ Table 3-1 Available Utilities - -------------------------------------------------------------------------------- Utility Provider ------- -------- Water Clark Township Electricity Public Service Electricity and Gas Local Telephone Bell Atlantic Long Distance Telephone AT&T Sewer and Storm Drainage Clark Township Garbage and Trash Demarco Cable Television Comsast - -------------------------------------------------------------------------------- Soil and Subsoil Conditions Geological and soil reports were not provided to the appraisers or made available for review during the preparation of this report. The appraisers are not qualified to evaluate soil conditions other than by a visual inspection of the surface. Nuisances and Hazards The appraisers have not been informed of any site-specific nuisances or hazards, and there were no visible signs of toxic ground contaminants at the time of our inspection. Because the appraisers are not experts in this field, we do not warrant the absence of hazardous waste, and we urge the reader to obtain an independent analysis of these factors. Legal Description As noted earlier, a copy of the subject property's legal description, as provided by Ashford Financial Corporation, is presented in the Addenda to this report. Conclusion The subject parcel appears appropriate as the site of a lodging facility. We have analyzed the issues of size, topography, access, visibility, and the availability of utilities, and we note the following advantages and disadvantages. Advantages o The site size is large enough to allow for sufficient parking and other related hotel uses. o The site enjoys a favorable location along the Garden State Parkway, and is easily accessible from Newark International Airport. HVS International, Mineola, New York Description of the Land, Improvements, 11 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= o The site is visible to motorists traveling both directions on the Garden State Parkway. o The site is served by all necessary utilities. Disadvantages o The local access traffic circle can be confusing for motorists. The advantages noted above are important locational characteristics. In conclusion, the site appears favorable for the location of a transient lodging facility. IMPROVEMENTS The quality of a lodging facility's physical improvements has a direct influence on its marketability and attainable occupancy and average rate. The design and functionality of the structure can also affect operating efficiency and overall profitability. This section investigates the subject property's physical improvements and personal property in an effort to determine how they contribute to total value. The following description of the improvements is based on our inspection of the hotel and information provided by Ashford Financial Corporation. Holiday Inn Select is a full-service lodging facility containing 191 rentable units, 7,493 square feet of meeting space, a restaurant, a lounge, an outdoor pool with outdoor grill area, a gift shop, an exercise room, and the appropriate back-of-the-house facilities. The six-story property opened in 1973, and is 23 years old as of the date of this appraisal. The hotel was acquired by Clark New Jersey Hotel Limited Partnership - an entity controlled by Ashford Financial Corporation in August of 1995. At the time of this acquisition, the hotel was in extremely poor condition. Subsequent to the acquisition, the subject property was extensively renovated at an estimated cost of $3,200,000. In scope, this renovation included the exterior of the building, public areas and the guestrooms. The hotel is now judged to be in excellent condition, and management representatives report that all building systems are in working order. The hotel is operated under a license agreement with Holiday Inn and reportedly meets the standards for lodging facilities of that brand. Based on our inspection and information provided by Ashford Financial Corporation, the following table summarizes the facilities available at the subject property. HVS International, Mineola, New York Description of the Land, Improvements, 12 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 3-2 Facilities Summary - -------------------------------------------------------------------------------- Guestrooms King Beds 95 Units Double/Doubles 96 Parlor 1 ------ Total 192 Units Food and Beverage Outlets Hunter's Grill 110 Restaurant Seating 50 Bar Seating Meeting and Banquet Rooms Clarktown Ballroom 2,054 Square Feet Suite C 624 Scotchwood 897 Woodbridge 1,274 Westfield 624 Mountainside 624 Cranford 650 Springfield 650 Berkley 720 ------ Total 7,493 Square Feet Recreational & Other Amenities Outdoor Swimming Pool with Grill Area Exercise Room Parking Spaces 267 Outdoor spaces Elevators Guest 2 Service 0 Life Safety Systems Battery operated smoke detectors in all guestrooms Hardwired smoke detectors in public spaces Building sprinklered in all guestrooms and public spaces Pull stations and fire extinguishers throughout Laundry Washers 3 Dryers 3 - -------------------------------------------------------------------------------- Property Exterior The hotel structure is situated on the northwestern portion of the site. Paved parking areas accommodating 267 vehicles are located around the perimeter of the building, with the majority of the spaces situated east and south of the hotel structure. The pavement is in good condition. The property's exterior appears to be in excellent condition and was repainted subsequent to the hotel's purchase by its current owners. Due to the hotel's HVS International, Mineola, New York Description of the Land, Improvements, 13 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= relatively new affiliation, signage is new and appears to be in excellent condition. Primary vehicular access to the subject site is provided via Valley Road, along the southwestern border of the site; and secondary access is provided via Walnut Road, along the southeastern border of the site. Along Walnut Road there are actually two entrances, there is an entrance near the eastern corner of the site and an entrance near the southern corner of the site. Most guests are coming from the Parkway; hence, guests approach the hotel from the northwest. After entering the site, guests proceed to the hotel's main entrance, which is located along the southern side of the hotel building. Service traffic can gain access to the loading dock, which is located along the northern side of the building. Construction and Design The subject property design includes a six-story tower with a four-story wing, and one extension emanating from this tower: the porte cochere at the hotel's main entrance along the southeastern side of the main tower. The main six-story tower aligns in a southwest/northeast direction, and the four-story extension emanates from the southwestern edge of the main tower. The guestrooms are double loaded off interior corridors. Reportedly, the main tower was originally designed to be constructed with more levels; however, when local officials protested, the construction was halted at six levels and an additional wing was added to incorporate the remaining guestrooms. This late change to the buildings design is apparent in the S-shaped hallway that connects the wing to the main tower on levels one through four. It is important to note that the hotel structure does not feature any one- or two-story extensions for meeting space; the hotel's meeting space is contained within the hotel tower. Due to the configuration of columns within the hotel structure, the largest available meeting space is limited in size. This is an important issue of functional obsolescence. Management reports no structural, plumbing, or electrical problems with the subject property. Although there was some water leakage with one storm during the last year, the roof is reportedly in superior condition. Lobby As stated previously, the porte cochere is situated along the southeastern side of the building. The lobby is located directly northwest of this porte cochere. Guests reach the lobby through one set of double doors (motion-sensored, electronically opened) which first leads to a breezeway, and then HVS International, Mineola, New York Description of the Land, Improvements, 14 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= a second set of double doors (also electronic) which leads to the lobby. Directly in front of the guest is the front desk. To the left of the guest is the main first floor hallway which provides access to the gift shop, hotel offices, a bank of public telephones, and the first floor guestrooms of the south wing. To the right of the guest is the lobby seating area and a public hallway (following the northwestern side of the lobby) which provides access to the guestroom elevators, public restrooms, an additional bank of public telephones, the restaurant and bar, a secondary hotel entrance, and a public stairwell leading to the second floor meeting space. The lobby features ten seats (including one sofa), plants, various tables, framed artwork, and is in excellent condition after its renovation in 1995. The lobby also features windows overlooking the entrance to the hotel. The hotel's property management system utilized at the front desk is Multisystems Incorporated. The subject property's features a Navigator telephone system. Food and Beverage Outlets As stated previously, northeast of the lobby is the entrance to the hotel's restaurant and lounge (there is no separate exterior entrance), Hunter's Grill. The restaurant and lounge areas feature separate entrances, and a distinctly different decor and ambiance. The restaurant is the subject property's multi-purpose restaurant, serving breakfast, lunch and dinner seven days a week (6 AM to 11 PM). This area was similarly renovated with the other areas of the hotel and appears to be in excellent condition; management hopes to add more plants to the room in 1997. The restaurant features a main dining level and two raised dining areas which add depth and interest to the room. The room features glass-top tables and a stationary buffet which is used each morning for the hotel's breakfast service. The bar is adjacent to the restaurant and is open during the afternoon and evening hours (11 AM - 1 AM). The bar and immediate bar seating is raised (similar to the raised areas of the restaurant) above the remaining area of the bar; this remaining area accommodates the bar's dance floor, additional seating, a jukebox, and a small stage area. The wall between the hallway and the lounge features several windows; management plans to add awnings over these windows in 1997 to add to the decorative scheme of the hallway. Management also plans to add signage for the restaurant and bar; currently there is no signage identifying the outlets as the Hunter's Grill. The bar appears to be in excellent condition. HVS International, Mineola, New York Description of the Land, Improvements, 15 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Meeting and Banquet Space Except for the 720-square-foot Berkeley room, the subject property's function space is located on the second floor of the hotel. The meeting space remains in superior condition after the renovation of the hotel. The ballroom features new carpet, wallcovering, and lighting fixtures. A dance floor is available for social functions; all standard audio-visual can be contracted through an on-site servicing company. The ballroom is divisible into two sections and is in superior condition; management plans to add wall light sconces and chandeliers in 1997. The ballroom features a small break-out area which also appears in excellent condition. This area features a variety of attractive artwork, furniture, and plants, as well as a water fountain, men's and women's restrooms, and three public telephones. Drawbacks of the ballroom space include its limited size (the largest capacity is 160 for a banquet), lack of direct back-of-house access, and limited pre-function area. These drawbacks, however, can be overcome by using the space directly across from the ballroom (the Scotchwood room) for pre-function and by using the northern most entrance to the ballroom as a back-of-house entrance. The only drawback that is impossible to surmount is the space's limited size; this is an issue of functional obsolescence that would require a significant capital investment to overcome. The limited size inhibits many larger meetings and events; hence, the subject property is unlikely to obtain its fair share in the meeting and group market. Given the superior quality of the space, however, the hotel is still able to achieve a healthy penetration into this market and is popular for training and small corporate meetings. One additional meeting room is situated directly adjacent to the hotel restaurant. Given the close proximity to the hotel kitchen; this room is most often used for small banquets or formal private dinners. This space is attractively decorated and features superior lighting fixtures and finishes. Guestrooms The subject property features 191 guestrooms, 95 of which contain king beds and 96 of which contain two double beds. The remaining room is a parlor room which connects to a room with a king bed. In 1995, all guestroom bedroom areas received a complete renovation which included all case goods and soft goods. Bathrooms also received new wallpaper and other cosmetic refurbishments. The following is a list of the furniture featured in a standard king guestroom: HVS International, Mineola, New York Description of the Land, Improvements, 16 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= o King-sized bed with headboard o Two nightstands with lamps o Desk with chair and lamp o Television (25-inch screen, remote controlled) o Armoire with lamp o Wall mirror o Framed artwork o Clothes hanging rack Rooms with two double beds feature similar furniture, with one less nightstand. Guest bathrooms are standard and in fair condition; while the renovation addressed wallcovering, each bathroom's floor, vanity, sink, toilet, bathtub, and bath tile are reportedly from the original construction and appear worn and dated. Upgrades for the bathrooms are planned by management in the near future. Extra features in the subject property guestrooms include clock radios, two phones with dataports, coffee machines with complimentary coffee, luggage racks, oversized televisions, hairdryers, and make-up mirrors. Guestroom Corridors Guestroom corridors are wide enough to permit the easy passage of housekeeping and room service carts. The corridors are finished with relatively new carpet and wall finishes which were replaced in the previous renovation. Although corridor lighting is sufficient and appears to be in good condition, its style appears dated when compared to the hallway's recently updated finishes; management reports that 1997 planned capital improvements include the updating of these fixtures. Vending and ice machines are also provided on each guestroom floor of the hotel. Approximately 75% of the hotel's guestrooms (106 units) are non-smoking. This type of amenity costs very little and requires no structural changes. We expect that the number of rooms allocated for this purpose will be increased or reduced depending on demand and guest response. HVS International, Mineola, New York Description of the Land, Improvements, 17 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Recreational Amenities The subject property's recreational amenities include an outdoor pool with grill and an exercise facility. Access to the pool is provided by a small public hallway extending from the lobby, just north of the front desk. The pool deck is scheduled to be refinished in 1997. Overall, the pool area appears to be in good condition. The small public hallway features a small men's and women's bathroom. These bathrooms are dated in appearance; 1997 capital improvements include a re-coloring of the wall tiles, a new floor, and new mirrors. The exercise room located on the fourth level contains two stationary bicycles, two treadmills, and two Stairmasters. Extra features include bottled water, a television, a courtesy phone, and a wall clock. All equipment is reportedly in good working order. This room, open twenty-four hours, was originally a guestroom before its conversion to its present use; the bathroom features a scale and paper towel dispenser. Back-of-the-House Space Back-of-the-house space appears to be adequate for the operation of this property. The main kitchen features a hot line, a separate pantry section, two walk-in coolers, one small freezer, and a receiving area. Overall, the kitchen appears to be in good working order. The main kitchen also features a dumb waiter which transports food to the second floor holding kitchen. This additional kitchen is located in the northeastern corner of the hotel, north of the Scotchwood Room. Prior to the renovation, the Scotchwood Room and the Ballroom were one large room; hence, the room was able to accommodate larger banquets. Therefore, this second floor kitchen was once used as a banquet kitchen. With the renovation and subsequent division of this larger room into two smaller rooms, this kitchen is now primarily used as a holding kitchen. The subject property features an in-house laundry facility which contains three laundry machines and three dryers. Two of the laundry machines are manufactured by Continental (85-pound capacity); these were purchased during the renovation. The other is made by Milnor; its age was not readily known. The dryers are manufactured by Huebsch, one of which was added since the renovation (120-pound capacity). The ages of the older Milnor dryers were unavailable. The subject property also features one ironer. Vertical Transportation Vertical transportation is provided by two elevators (2,500 pound capacity each) and three stairwells. These elevators are utilized both for service staff and guests which is one aspect of the building's functional obsolescence. HVS International, Mineola, New York Description of the Land, Improvements, 18 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The Armor elevator cabs were renovated last year and appear to be in good condition. Scheduled 1997 upgrades to the cabs include the installation of phones. There is one stairwell located at each end of the hotel tower. Heating, Ventilation, and Air Conditioning The subject property guestrooms are cooled by in-room through-the-wall heating and cooling units that are in working order. Public areas are heated and cooled by the subject property chillers and heated by hot-water coil units. The subject property features one new boiler, and one water chiller (its age was unavailable). The boiler reportedly handles the needed water heating capacity of the subject property. Based on information provided by Ashford Financial, all of the subject property's operating systems are in sufficient working order to maintain the operation of the hotel. Fire Protection The subject property is reportedly fully compliant with all fire standards. The building is fully sprinklered in all guestrooms and public areas, and guestrooms feature battery operated smoke alarms (hardwired in public areas). Guestroom hallways and all public areas feature pull stations and fire extinguishers. Security The subject property employs a security guard to be on site during the evening hours (11 PM to 7 AM). Doors feature a Tesa electronic locking system which contributes to the security of the hotel. Given its location proximate to the Parkway ( a convenient escape route), the subject property is at times a target of crime. According to management, however, crime is not a significant issue and the on-staff guard is sufficient to deter enough crime so that it does not affect the competitive level of the property. Asbestos According to information provided by management representatives, there is no asbestos present in the subject property's improvements; however, we have not been provided with an asbestos report to confirm this assertion. The reader should be advised that any costs associated with asbestos removal or containment may have an unfavorable impact on the hotel's market value, and the estimate set forth in this appraisal reflects our value conclusions prior to the deduction of any such costs. We suggest that interested parties initiate an independent analysis regarding current asbestos levels and the capital expenditures necessary to remove any asbestos that is present. HVS International, Mineola, New York Description of the Land, Improvements, 19 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ADA Conformance Following the January 26, 1992 passage of the Americans with Disabilities Act (ADA), hotels are subject to new physical standards. The appraisers are not experts on ADA compliance, and we render no opinion regarding the subject property's conformance to ADA standards. Capital expenditures that may be necessary to bring the property into accordance with the ADA will reduce our estimate of market value. Any ongoing costs related to ADA regulations are expected to be funded by normal replacement reserves. Conclusion Overall, the subject property's improvements appear appropriate for hotel use. The hotel's lobby, meeting space, guestroom bedroom areas, and guestroom corridors are in excellent condition and have been maintained well since the 1995 renovation. Issues to be addressed in the near future include the pool and pool public restrooms, and the guest bathrooms. For the purposes of this appraisal, we have assumed that the subject property will be maintained in its present condition throughout the assumed ten-year holding period. Specifically, it is assumed that hotel management will employ standard preventive maintenance measures, and that a reserve for replacement fund will be established which will fund the cost of any future necessary capital expenditures. ZONING According to the Township of Clark zoning regulations and map, the subject property is zoned as follows. COH - Commercial Office, Multi-Story This zoning provision allows general commercial uses including motor inns and hotels, theaters, and multi-family housing specifically designed for and limited to occupancy by senior citizens. Based on this information, the subject property appears to conform to local zoning regulations. We assume that all necessary permits and approvals have been secured (including an appropriate liquor license), and that the subject property was constructed in accordance with local zoning ordinances, building codes, and all other applicable regulations. Our zoning analysis should be verified before any physical changes are made to the hotel. ASSESSED VALUE AND TAXES Property (or ad valorem) tax is one of the primary revenue sources of municipalities. Based on the concept that the tax burden should be distributed in proportion to the value of all properties within a taxing jurisdiction, a system of assessments is established. Theoretically, the assessed value placed on each parcel bears a definite relationship to market value, so properties with equal market values will have similar assessments and HVS International, Mineola, New York Description of the Land, Improvements, 20 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= properties with higher and lower values will have proportionately larger and smaller assessments. Depending on the taxing policy of the municipality, property taxes can be based on the value of the real property or the value of the personal property and the real property. Because the objective of assessed value is to maintain a specific value relationship among all properties in a taxing jurisdiction, comparable hotel assessments should be evaluated to determine whether the subject property's assessed value is equitable. The historical assessed value of the subject property has not changed since January 1, 1985 (this value is $10,121,378). According to the Clark Township Tax Assessors Office, a reassessment is not expected in the short-term future. Hence, for the purposes of our projections, we have assumed that the assessment of the subject property is appropriate at its current level. The assessment ratios and tax rates applicable to the subject property are presented in the following table. These are also used to calculate the historical tax burden of the subject property. ================================================================================ Table 3-3 Historical Assessment Ratios, Tax Rates, and Tax Burdens Applicable to the Subject Property - -------------------------------------------------------------------------------- Assessment Tax Rate Percent Year Assessed Valuation Ratio (per $100) Total Tax Change - -------------------------------------------------------------------------------- 1985 10,121,378 100.00 % 2.20 $222,670 --- 1986 10,121,378 98.16 2.39 237,450 6.6 % 1987 10,121,378 86.63 2.47 216,573 (8.8) 1988 10,121,378 72.85 2.62 193,184 (10.8) 1989 10,121,378 63.10 3.07 196,068 1.5 1990 10,121,378 60.16 3.36 204,591 4.3 1991 10,121,378 58.05 3.41 200,353 (2.1) 1992 10,121,378 59.83 3.51 212,552 6.1 1993 10,121,378 59.92 3.84 232,886 9.6 1994 10,121,378 59.35 3.95 237,278 1.9 1995 10,121,378 58.85 4.11 244,809 3.2 1996 10,121,378 58.33 4.13 243,827 (0.4) Percent Change 1991 - 1996: 0.1 % 3.9 % 4.0 % Percent Change 1994 - 1996: (0.9) 2.3 1.4 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Description of the Land, Improvements, 21 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The above table illustrates that assessment ratio has decreased in recent years, by 0.9% compounded annually between 1994 and 1996; however, the ratio increased slightly by 0.1% compounded annually between 1991 and 1996. These trends illustrate that the assessment ratio is stable and is proximate to 59%. The above table also illustrates that the tax rate in this jurisdiction has fluctuated in recent years; the rate has grown by 3.9% compounded annually between 1991 and 1996, and by 2.3% compounded annually between 1994 and 1995. For the purposes of this appraisal, we have assumed that the assessment ratio will remain stable, and we have also assumed the tax rate will increase by 1% in 1997, by 2% in 1998, and then by inflation for the remaining projection period. Applying these projected increases to the 1996 tax burden yields the following forecast of property taxes for the subject property. ================================================================================ Table 3-4 Forecast of Property Tax Expense (+000) - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized - -------------------------------------------------------------------------------- Forecast Property Taxes $246 $251 $260 $269 - -------------------------------------------------------------------------------- NEIGHBORHOOD The neighborhood surrounding a lodging facility often has an impact on a hotel's status, image, class, style of operation, and sometimes its ability to attract and properly serve a particular market segment. This section investigates the subject property's neighborhood and evaluates any pertinent locational factors that could affect its occupancy, average rate, food and beverage revenues, and overall profitability. As previously stated, the subject property is southeast of the Garden State Parkway, proximate to exit 135. Given this superior accessibility, this intersection area is developed with various commercial and industrial uses as well as residential communities. Directly east of the subject property (across Walnut Street) are several buildings associated with Star Metal Products; further east of these buildings is a residential area. North of the Star Metal Product buildings is the office building 67 Walnut. Adjacent and to the north of the subject property is the office building 60 Walnut. North of the 60 Walnut and 67 Walnut office buildings is the overpass of the Garden State Parkway. Past this overpass is the Cali Center, a large office complex, and the United States Gypsum Company (a gypsum processing industrial plant). Two gas stations are also HVS International, Mineola, New York Description of the Land, Improvements, 22 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= located proximate to the gypsum plant. North of the gypsum plant is the Hyatt Clark Industries Company. This site is currently vacant and a golf course if proposed for development on this site. An opening date for the course has not yet been set and construction has not commenced. South of the subject property is an area characterized by residences. Southeast of the subject property is the Mother Seton Regional High School (across Valley Road). Directly adjacent to the subject property and to the northwest is the Clark Printing Company and the Union County Baptist Church. Northwest of these developments is the Garden State Parkway and traffic circle discussed in the accessibility section of this report. Northwest of the Garden State Parkway is a neighborhood characterized by retail uses that features a Bradlees, Marshalls, liquor store, bank, McDonalds, and Burger King. This area also features a large vacant site; the construction of a large Shoprite has begun which is due to open next year. The site was previously improved with the Clarktown Inn, a motorlodge. This construction illustrates the strength of the local economy and bodes well for the continued improvement of the immediate neighborhood. Conclusion The neighborhood surrounding the Holiday Inn Select appears favorable for the operation of a full-service lodging facility. HVS International, Mineola, New York Market Area Analysis 23 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 4. Market Area Analysis The economic vitality of the market surrounding the subject property is an important consideration in forecasting lodging demand and income potential. Economic and demographic trends that reflect the amount of visitation provide a basis from which to project hostelry demand. The purpose of the area analysis is to review available economic and demographic data to determine whether the local market will undergo economic growth, stability, or decline. In addition to predicting the direction of the economy, the rate of change must be quantified. These trends are then correlated based on their propensity to reflect variations in lodging demand with the objective of forecasting the growth or decline in visitation by individual market segment. Market Area Definition The Holiday Inn Select is situated in the township of Clark, in the southern portion of Union County, New Jersey. The area's major economic influences are provided by the Newark Metropolitan Statistical Area (MSA); also included in this area are Essex, Morris, Sussex, and Warren Counties. Traditionally, New Jersey has been economically driven by the industrial, manufacturing and transportation industries which are fueled by the readily accessible deep water ports, airports and major highways linking the area to its sources of raw materials. New Jersey's economy, marked by modest but steady growth for the past two years, is in its 52nd month of a recovery that economists and labor analysts expect to continue into next year. The fallout of mergers and acquisitions in the telecommunication, pharmaceutical and banking industries has been compensated by the creation of new jobs in financial and business services, healthcare, and technology-related businesses. The subject property's extended neighborhood is highly developed with commercial, retail, industrial, transportation-related and residential uses. [GRAPHIC OMITTED] AREA MAP HVS International, Mineola, New York Market Area Analysis 24 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= New York - Northeastern New Jersey Region Economic Overview The following summary is excerpted from Regional Economy - Review and Outlook for the New York - New Jersey Metropolitan Region -April 1996, published by the Port Authority of New York and New Jersey. The regional recovery has proved to be resilient despite the negative effects of higher interest rates, slower growth in the United States and leading international economies, and continued restructuring in key regional industries like banking, bio-medical and defense. Although growth slowed noticeably though most of 1995, the NY-NJ region's gradual economic recovery continued for a third year. Total jobs rose 62,100 in 1995, up 0.9 percent, following a 1.1 percent increase in 1994. However, trends in total jobs mask the sweeping changes underway in public and private sector employment throughout the region. During 1995, while government jobs declined 2.0%, private employment rose 1.7% in the New York suburbs, 1.6% in Northern New Jersey, and 1.2% in New York City. Importantly, the similar performance of the geographic subsectors of the region reinforces strong regional economic integration that has become well established since the onset of the 1989-1992 recession. A slowing regional economy in 1995 occurred in conjunction with sluggish growth in the United States through the year and persistent weakness in key international markets, such as Japan and Mexico, which are significant partners for trade and investment in the region. Regional gains were also dampened by the cumulative effect of rising interest rates last year, which negatively affected profits and bonuses on Wall Street, as well as new construction activity. Regional consumers turned increasing cautious through the year, leading to a disappointing performance in retail sales during the critical holiday season. With many signals pointing to slower growth throughout the nation, long-term interest rates began to ease significantly in the second half of 1995, setting the state for a pick-up in growth later in 1996 and into 1997. Despite lingering weakness in Japan and Mexico, the international sector has been an important foundation for continued regional growth, as witnessed by the record levels of international travel, tourism, and merchandise trade in 1995. Furthermore, regional wages began to pick up to a 5% growth rate from 2.5% at the close of 1994, according to the most recent data, and are expected to gain with the improved profitability of the securities sector. HVS International, Mineola, New York Market Area Analysis 25 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The outlook is decidedly mixed over the short term as the significant restructuring of leading banking, telecommunications, bio-medical, and manufacturing corporations in the regional partially offsets expected jobs growth. In spite of the headlines generated by these losses, overall gains will continue in areas such as services, financial market activity, international trade, tourism, and the multimedia and entertainment sectors. Importantly, these sectors, which been the source for many of the 250,000 private jobs generated in the region since the depths of the recession in late 1992, are well positioned to take advantage of the improved growth expected in the United States and the leading international economies in the next few years. In addition to the Regional Economy - Review and Outlook for the New York - New Jersey Metropolitan Region - April 1996, published by the Port Authority of New York and New Jersey, additional information has been provided by the Bureau of Labor Statistics, New York Department of Labor, Smith Travel Research, The New Jersey Star Ledger, and Con Edison's Forecasting Newsletter (Third and Fourth Quarters) for this analysis. REGIONAL EMPLOYMENT Within the New York-New Jersey region, employment continued to rise, as regional jobs gained 62,100, (public and private jobs) or 0.9%, during 1995. This performance represented a small decrease from the 1.1% gain in 1994. On a month-to-month basis, modest increases in growth rates associated with mild winter conditions in January and February of 1995 were realized. Employment growth in the region was noticeably slower during the spring of 1995. The following table illustrates the change in employment for the major sectors in the Northern New Jersey region, illustrating 1985 to 1995 data. The following information has been provided by the State of New Jersey Department of Labor. HVS International, Mineola, New York Market Area Analysis 26 - -------------------------------------------------------------------------------- ================================================================================ Table 4-1 Northern New Jersey Region Wage and Salary Employment by Major Industry (+000) - --------------------------------------------------------------------------------
Percent Percent Percent Percent Wholesale & Percent Year Total Change Construction Change Manufacturing Change TCPU Change Retail Trade Change - ----------------------------------------------------------------------------------------------------------------------------------- 1985 2,225.0 --- 82.9 --- 520.2 --- 172.2 --- 527.4 --- 1986 7,880.8 254.2 % 89.9 8.4 % 501.9 (3.5)% 176.8 2.7 % 540.4 2.5 % 1987 8,033.2 1.9 94.3 4.9 491.7 (2.0) 180.7 2.2 554.4 2.6 1988 8,473.8 5.5 99.8 5.8 479.6 (2.5) 178.2 (1.4) 564.0 1.7 1989 8,511.5 0.4 96.6 (3.2) 461.2 (3.8) 179.9 1.0 565.3 0.2 1990 8,384.1 (1.5) 87.2 (9.7) 427.7 (7.3) 176.9 (1.7) 546.6 (3.3) 1991 8,001.1 (4.6) 73.2 (16.1) 401.0 (6.2) 172.5 (2.5) 519.5 (5.0) 1992 7,829.0 (2.2) 64.2 (12.3) 379.7 (5.3) 171.8 (0.4) 507.2 (2.4) 1993 7,862.6 0.4 66.6 3.7 368.8 (2.9) 175.9 2.4 505.8 (0.3) 1994 7,941.6 1.0 69.4 4.2 363.0 (1.6) 182.2 3.6 514.1 1.6 1995 8,016.9 0.9 70.3 1.3 355.6 (2.0) 183.6 0.8 523.3 1.8 Annual Average Change: 1985 to 1995 13.7 % (1.6)% 10.9 % (3.7)% 0.6 % (0.1)% 1990 to 1995 (0.9) (4.2) 21.3 (3.6) 0.7 (0.9) 1994 to 1995 0.9 1.3 26.7 (2.0) 0.8 1.8
Percent Services Percent Percent Year FIRE Change & Misc. Change Government Change - -------------------------------------------------------------------------------- 1985 136.9 --- 484.2 --- 301.2 --- 1986 148.2 8.3 % 505.4 4.4 % 296.9 (1.4)% 1987 158.9 7.2 525.2 3.9 298.5 0.5 1988 165.1 3.9 544.5 3.7 302.0 1.2 1989 171.5 3.9 572.3 5.1 307.2 1.7 1990 166.8 (2.7) 580.4 1.4 309.9 0.9 1991 159.0 (4.7) 566.7 (2.4) 306.8 (1.0) 1992 158.8 (0.1) 574.3 1.3 307.7 0.3 1993 161.4 1.6 592.4 3.2 309.0 0.4 1994 162.9 0.9 609.9 3.0 310.1 0.4 1995 162.1 (0.5) 637.0 4.4 311.5 0.5 Annual Average Change: 1985 to 1995 1.7 % 2.8 % 0.3 % 1990 to 1995 (0.6) 1.9 0.1 1994 to 1995 (0.5) 4.4 0.5 Source: NYS & NJS Departments of Labor - -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 27 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Since the regional economic recovery began inclusive of the greater New Jersey-New York region, the eight counties of Northern New Jersey (including the subject property's county) have paced well above the aggregate average; this particular trend has labeled the area a "break out" economy. Northern New Jersey added 31,800 jobs to its employment base which equated to a 1.4% growth rate. The new jobs represented over one half the 1995 job growth in the NY-NJ region. Even with that impressive accomplishment, the Northern New Jersey economy slowed with each successive quarter in 1995. Private sector employment expanded faster than total employment. The Northern New Jersey private sector gained 30,200 jobs for a growth rate of 1.6%. This performance was almost one-third of the private sector jobs added region wide. The gains spread across four sectors: service, wholesale and retail trade, TCPU, and construction. The job losses were concentrated in manufacturing and FIRE. Growth continued to slow in the transportation, communication, public utilities (TCPU) sector as continued layoffs at phone companies and energy utilities offset gains in transportation employment. Manufacturing employment continued to decline, losing 7,400 jobs - or 2.0% - in 1995. The region's wholesale and retail trade sector continued to rebound strongly in 1995, gaining 9,200 jobs, or 1.8%. According to the Departments of Labor for New York and New Jersey, construction employment totals, which were severely affected by the recession, continued to rise, with a gain of 9,000 - or 1.3% - in 1995. The slight increase in public sector employment continued in 1995, with an increase of 0.5%. Employment in the Northern New Jersey Region In addition to reviewing employment trends for the New York-New Jersey region as a whole, we have also reviewed data for the Northern New Jersey area. Employment data for this review is based on information provided by the Port Authority of New York and New Jersey and the New Jersey Star Ledger. These most recent available employment statistics were through July of 1996. Job gains in the eight-county Northeastern New Jersey area, consisting of Bergen, Essex, Hudson, Middlesex, Morris, Passaic, Somerset and Union Counties, drove the regional recovery. Following employment growth of 29,700, or 1.4%, in 1994, the increase in employment increased 2.0% in Northeastern New Jersey in the first half of 1995. By midyear-1996, New HVS International, Mineola, New York Market Area Analysis 28 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Jersey had a net gain of 18,600 jobs and was on pace to match last year's gain of 36,600 jobs (statewide). The Counties of Hudson and Bergen led the overall employment gains in Northeastern New Jersey. Services sector job growth was strong, at 3.5%, and construction job growth, which benefited from the mild winter conditions, was 6.8%. Job growth for the first half of 1995 increased 2.0%, outperforming 1994. The rise in overall job growth is attributable to the wholesale-retail trade and FIRE sectors, which had significant gains throughout 1994. Job reductions in the telecommunications and energy components of TCPU detracted from the pace of total job growth. Manufacturing jobs fell 1.5%, with the largest losses occurring in the Counties of Bergen, Passaic, Middlesex, and Somerset. Similar to 1994, some divergence in the rates of job growth took place among the several labor markets that make up the eight-county Northeastern New Jersey sector. Growth was strongest in the more recently developed areas of Somerset and Middlesex Counties, along the more rapidly growing highway corridors in the periphery of the region, and at the Hudson County waterfront. Labor Force According to figures provided by the New Jersey Star Ledger, unemployment rates in the state of New Jersey declined during the first six months of 1996, averaging 6.1%, compared to 6.7% for the first six months in 1995. The state has regained 200,000 jobs or about 75% of the 262,000 jobs lost during the last recession. According to information provided by the Port Authority of New York and New Jersey, unemployment rates also fell in the urbanized counties of Northern New Jersey. In Hudson County, the rate of unemployment fell to 9.4% in the first half of 1995, from 10.0% last year. Passaic County's unemployment rate stood at 8.9% - down from 10.1% at mid-1994. Essex County's rate was 7.9% in the first six months of 1995, compared to 8.9% in 1994. Regional unemployment rates in the suburban areas were at or below the national average the first half of 1995. In the New York suburbs, joblessness eased consistently throughout the first six months of the year, averaging 4.9%. The suburban counties of Northern New Jersey averaged 5.3% - also HVS International, Mineola, New York Market Area Analysis 29 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= all at or below the nation's average rate of unemployment. Somerset County boasted the region's lowest jobless rate, at 4.0%. Construction Contracts and Starts The value of new construction contracts awarded during the year, reported by F. W. Dodge, is an indicator of the planned construction activity and employment demand over time, as work is completed on these projects. During the first six months of 1995, total planned spending on new construction awards in the New York-New Jersey region rose by 3.8%, compared to a 2.0% increase in 1994. In inflation-adjusted dollars, actual regional construction activities remained quite low, totaling $5.3 billion. This amount represented the lowest level of construction spending since the $4.8 billion recorded in 1977. In the Northern New Jersey area, total construction spending decreased by 2.6% during the first half of 1995. Nationally, F. W. Dodge reported a 2.0% decrease in total construction spending, compared to 1994. In Northern New Jersey, a 1.0% increase in the first six months of 1995 was recorded in commercial/industrial construction spending over 1994 levels. Residential construction spending in Northeastern New Jersey also experienced considerable gains, increasing by 17.8% in the first half of 1995. Infrastructure construction spending in the region decreased by 6.0%, compared to a 12% increase in 1994. Gains were recorded in all parts of the region except infrastructure construction. Nationally, infrastructure spending increased by 1%, compared with 1994 levels. Office Market The New Jersey Star Ledger reports that gradual recovery in office market conditions continued in much of the Northern and central New Jersey region during the first half of 1996, with overall vacancy rates falling to their lowest level since 1987. After three consecutive quarters of increased occupancy, the overall vacancy rate for the two regions stands at 17.9%, down 2% from a year ago. But Class A vacancy hit its lowest point in a decade, at 13.4%, with several sub-markets reporting Class A vacancy below 10%. Approximately 81% of the 1.5 million square feet of office space absorbed throughout the entire region was in Class A space. Overall, space came off the market at a rate 14% higher than in the first six months of 1995. The Central New Jersey counties of Hunterdon, Mercer, Middlesex, Monmouth, Somerset, and Union (the subject property's county) reported that the second quarter 1996 ended with 1 million more square feet of space occupied than at the beginning of the year. The Central New Jersey market HVS International, Mineola, New York Market Area Analysis 30 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= had the highest rate of absorption of any market in the New York area. It also realized the largest lease transaction during the second quarter, when Hoechst Celanese, a chemical company, expanded by taking another 207,727 square feet of space at 30 Independence Drive, Warren Township. The following table illustrates a summary of the Woodbridge/Edison/ Metropark Office Market for 1995. The data was compiled by JGT Associates and illustrates that overall vacancy was 22.2%, while Class A office space vacancy was 15.4%. ================================================================================ Table 4-2 Woodbridge/Edison/Metropark Office Market (1995) - -------------------------------------------------------------------------------- Class A Class B Class C Overall - ------------------------------------------------------------------------------ Total Space 2,661,944 2,502,967 1,108,970 6,273,881 Available Space 409,296 717,402 268,809 1,395,507 Vacancy Rate 15.4% 28.7% 24.2% 22.2% Source: JGT Associates - -------------------------------------------------------------------------------- ================================================================================ Figure 4-1 Woodbridge/Edison/Metropark Office Market (1995) - -------------------------------------------------------------------------------- [THE TABLE ABOVE WAS DEPICTED AS A BAR GRAPH IN THE PRINTED MATERIAL] [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Residential Market Rising interest rates in 1994 meant higher mortgages rates which, in turn, depressed regional housing markets in the first six months of 1995. The largest drop in sales was registered in the fourth quarter of 1994 with the peak of 30-year mortgage rates at 9.1%, according to the National HVS International, Mineola, New York Market Area Analysis 31 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Association of Realtors. For the first six months of 1995, total sales in select residential locations of the region - including Northern New Jersey, Westchester and Nassau Counties, and the western portion of Suffolk County - were still more than 10% lower than the comparable period a year ago. However, the rate of decline has been easing. Residential mortgage rates had moved downward to just over 7.5% by June, 1995. International Activity According to the New Jersey Star Ledger, international trade continued to become a more important part of New Jersey's economy in 1995, with exports of $18.3 billion, up $1.5 billion from 1994 and $3.9 billion from 1993. Exports grew to 7.1% of the state's gross domestic product, an increase of 0.9% from 1994. Total jobs related to international trade in New Jersey now number roughly 850,000, according to the Bureau of Labor Statistics. According to the New York and New Jersey Port Authority, international investment activity in the region has quickened. Leading foreign economies with ties to the region have begun to recover. In addition, the low value of the dollar has made investment in U.S. assets a bargain. According to information from the Port Authority of New York and New Jersey, office leasing activity by foreign tenants totaled 1.2 million square feet in the first half of 1995, compared to 1.9 million square feet leased in all of 1994. Firms from Switzerland and the U.K. represented more than half the leasing activity in 1995. German, Japanese, and Canadian firms have also signed leases for significant amounts of office space in the region. International investors also purchased office buildings in the region. Purchases amounted to 1.3 million square feet of space, led by investors from Russia and Israel. Office buildings are not the only real estate asset that foreign investors purchased. Investors from 17 nations own 42 hotels, which comprise 29% of the total transient room inventory. Investors from Japan, Hong Kong, and the U.K. made more than half of this total investment. Major Business and Industry The relatively low land cost (when compared to Manhattan), quality of living, and favorable accessibility make the Newark and northern New Jersey region a popular location for major corporations to establish operations and corporate headquarters. These offices, as well as other regional installations, are the major source for lodging demand in the market of the subject property. This discussion includes a sample of some of these corporate headquarters in the general vicinity of the subject property. HVS International, Mineola, New York Market Area Analysis 32 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Companies with corporate headquarters in New Jersey and north of Newark (in the Paramus and Woodcliff Lake area) include the Federal Paper Board, A & P, Toys R Us, TW Services, Hertz, Ingersoll-Rand, and Becton Dickinson. The Interstate 287 southern corridor (including the cities of Parsippany through Basking Ridge) features many companies with headquarters including BASF, Armco, Warner-Lambert, Allied Signal, AT&T, and Schering-Plough. Companies with headquarters in the Wayne and Fairfield area (approximately half-way between the I-287 corridor to the southwest and the Paramus area to the northeast) include American Cyanamid, GAF, Union Camp, Grand Union, Noritsu, and Ricoh. Lastly, company headquarters south of Newark in the general area encompassing Edison to the south through Clark to the north include Merk, Hanson Industries, Engelhard, Johnson and Johnson, and Supermarkets General. Economic and Demographic Data We have evaluated various economic and demographic statistics to determine trends in lodging demand. Much of this evaluation has been discussed thus far in this section of the report. However, we have also included a discussion of the area's population, retail sales, and personal income below. The source of data used in this section of analysis is the Complete Economic and Demographic Data Source published by Woods & Poole Economics, Inc., a well-regarded forecasting service based in Washington, DC. Using a data base containing more than 300 variables for each county in the nation, Woods & Poole employs a sophisticated regional model to forecast economic and demographic trends. Historical statistics are based on census data and information published by the Bureau of Economic Analysis. Projections are formulated by Woods and Poole. All dollar amounts have been adjusted for inflation, and thus growth or decline represents real change in constant dollars. Population According to Woods & Poole Economics, Inc., the statewide population increased at an average annual compounded rate of 0.5% between 1980 and 1995; an identical growth rate was registered from 1990 to 1995. These figures fall below the national gains of 1.0% and 1.1% for these respective periods. While population declined for Union County and the Newark, NJ MSA on an annual compounded basis by 0.1% between 1980 and 1995, population has expanded on an annual compounded basis for these two areas by 0.1% and 0.2%, respectively, between 1990 and 1995. Projections indicate that population increases from 1995 through the year 2000 will closely mirror recent trends, and fall below national gains. Union County is projected to experience a decline in population with an average HVS International, Mineola, New York Market Area Analysis 33 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= annual compounded decline of 0.2% during this period, and the MSA is anticipated to achieve slightly higher increases of 0.1% annually. Forecasts for the state as a whole are similar to those of the MSA, and indicate an average annual compounded population increase of 0.4% between 1995 and 2000. The United States population is anticipated to expand by 0.9% annually through the end of the decade. We find that the rate of population growth generally establishes a minimum rate of increase for commercial hotel demand; this observation also holds true for the meeting and convention segment if a majority of the meetings are business-oriented. Retail Sales Retail sales levels reflect both population trends and the propensity to spend money on retail goods. There is no direct correlation between retail sales and hotel demand; however, retail sales trends tend to gauge the economic health and vitality of the market. Retail sales growth should cause local businesses to prosper and make it more likely for new firms to enter the market. Information from Woods & Poole Economics, Inc. reveals that between 1980 and 1995, retail sales in Union County rose at an inflation-adjusted average annual compounded rate of 0.5%; the Newark, NJ MSA registered a moderately higher growth rate during this period of 0.9%. Retail sales levels for the state slightly surpassed this mark, with an increase of 1.6% annually, and the national growth rate of 1.9% annually was 1.0% higher than that registered by the MSA. From 1990 to 1995, retail sales growth recovered in all of the areas surveyed except for the state, which illustrates the effect of national trends on the MSA and County. Average annual compounded growth rates expanded to 0.7% annually in Union County, 1.2% in the Newark, NJ MSA, and declined to 1.5% in New Jersey. The national retail sales expanded by 2.5%, annually, between 1990 and 1995. Countywide retail sales are projected to slow to an average annual compounded decline of 0.2% between 1995 and 2000, which illustrates the expected stabilization of the regional economy. The MSA and the state are expected to maintain higher growth rates of 0.1% and 0.4% annually, respectively, falling short of the anticipated national gain of 0.9% per year. HVS International, Mineola, New York Market Area Analysis 34 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Personal Income According to the procedures outlined in the National Income and Product Accounts, personal income is calculated by totaling earned income (wages, salaries, other labor income, and proprietor's income), non-earned income, and residence adjustments and subtracting personal contributions to social insurance. Trends in personal income reflect the spending ability of local residents. Woods & Poole Economics, Inc. reports that personal income rose at average annual compounded rates of 1.5% in Union County and 2.0% in the Newark, NJ MSA between 1980 and 1995. New Jersey maintained similarly high increases of 2.4% annually. The 2.3% average annual compounded increase in the United States was largely similar to those achieved in the subject property's market area. Once again, the recession and related events caused slower personal income growth in all areas between 1990 and 1995. During this period, average annual compounded growth rates were 0.9% in Union County, while the state and the Newark, NJ MSA achieved growth rates of 1.0%, each respectively, compounded annually. Between 1990 and 1995, the nation maintained personal income growth of 1.9% annually. Personal income growth in Union County is projected at an average annual compounded rate of 0.9% between 1995 and 2000; this anticipated growth suggests a stabilized economic climate through the remainder of the decade. Increases in the MSA is projected at 1.4% (higher than the short-term historical level) and a growth rate of 2.0% for the state (lower than the short-term historical level) illustrate the projected strength for the greater Newark metropolitan area. Personal income growth in the United States is anticipated to occur at an average annual compounded rate of 2.3% from 1995 through the year 2000. Highway Traffic The subject property occupies a prominent location adjacent to the Garden State Parkway. The quantity of highway traffic passing through a market area is a relevant factor that has a direct impact on transient commercial and leisure demand and an indirect effect on meeting demand. HVS International, Mineola, New York Market Area Analysis 35 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-3 Traffic Counts - -------------------------------------------------------------------------------- Garden State Percent Year Parkway(1) Change -------------------------------------------------------- 1992 174,400 -- 1993 184,800 6.0 % 1994 183,600 (0.6) 1995 186,400 1.5 Avg. Annual Comp. Percent Change, 1992 - 1995 2.2 % (1) At the exit numbered 136 (subject property is at exit 135) Source: Data Development, New Jersey Department of Transportation - -------------------------------------------------------------------------------- Between 1992 and 1993, traffic volume increased by 6.0% and then declined by 0.6% in 1994. Traffic volume stabilized in 1995 with a growth rate of 1.5%. This stabilizing traffic volume may be attributed to the healthy economy of the surrounding area, which should have a positive impact on the demand for transient accommodations. Airport Traffic Airport passenger counts are important indicators of transient lodging demand. Depending on the type and location of a particular airfield, a sizable percentage of arriving passengers may have need for hotel and motel accommodations. Trends showing changes in passenger counts also reflect local business activity and the overall economic health of an area. New York is one of the most important transportation centers in the United States, and the subject property's proximity to New York City positions it as a viable lodging alternative to visitors to New York City. There are three major commercial airports servicing the New York Metropolitan area including: John F. Kennedy (JFK) International Airport, LaGuardia Airport and Newark International Airport. Combined, these three airports serviced over 78 million passengers in 1995. Over the past five years, the region has exhibited positive growth in airport passenger traffic, reflecting an average annual increase of 3.7%. New York City is a major destination for international business and tourism travel. International passenger traffic accounted for nearly 30 percent of total passenger volume into the city in 1995. International traffic has reflected strong growth over the last several years. HVS International, Mineola, New York Market Area Analysis 36 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Development activities at both Kennedy and Newark Airports are expected to boost airport traffic at both airports. These plans are targeted to make both airports more accessible to the public and/or expand existing facilities. The JFK Redevelopment Plan consists of expansion to the existing facilities at Kennedy Airport. A new terminal is being constructed at the site of the former Eastern Air Lines facility, in addition to expansion of the existing terminals. Another major planned development is the construction of a people mover. This would allow for connection of the airport to mass transit systems such as the Long Island Railroad and New York City mass transit. Development plans at Newark International Airport include the construction of a monorail. The monorail is intended to provide easier transportation between points throughout the airport. The following tables illustrate the historical passenger volume handled by the three New York area international airports. HVS International, Mineola, New York Market Area Analysis 37 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-4 Growth at the Three New York Area Airports (Total Arrivals and Departures) - -------------------------------------------------------------------------------- Percent Percent Percent Year JFK Change LaGuardia Change Newark Change - -------------------------------------------------------------------------------- 1968 19,573,628 --- 10,481,999 --- 6,716,584 --- 1969 19,507,694 (0.3)% 11,736,383 12.0 % 7,130,537 6.2 % 1970 19,096,705 (2.1) 11,845,141 0.9 6,460,489 (9.4) 1971 19,310,714 1.1 12,796,002 8.0 6,105,054 (5.5) 1972 20,725,700 7.3 14,234,735 11.2 6,752,395 10.6 1973 31,389,159 51.5 14,027,360 (1.5) 6,835,203 1.2 1974 20,216,436 (35.6) 13,703,028 (2.3) 6,451,857 (5.6) 1975 19,475,761 (3.7) 13,185,753 (3.8) 6,265,797 (2.9) 1976 21,032,973 8.0 14,088,797 6.8 6,752,726 7.8 1977 22,545,497 7.2 15,087,530 7.1 7,303,604 8.2 1978 24,860,753 10.3 17,094,972 13.3 8,469,465 16.0 1979 26,976,675 8.5 18,391,035 7.6 9,296,942 9.8 1980 26,796,066 (0.7) 17,467,962 (5.0) 9,223,260 (0.8) 1981 25,752,719 (3.9) 18,146,191 3.9 10,181,865 10.4 1982 26,452,508 2.7 18,516,891 2.0 11,731,062 15.2 1983 27,904,474 5.5 18,813,397 1.6 17,411,253 48.4 1984 29,934,779 7.3 20,302,511 7.9 23,654,163 35.9 1985 28,945,000 (3.3) 20,542,000 1.2 28,577,000 20.8 1986 27,224,000 (5.9) 22,189,000 8.0 29,433,000 3.0 1987 30,192,000 10.9 24,226,000 9.2 23,475,000 (20.2) 1988 31,166,000 3.2 24,159,000 (0.3) 22,496,000 (4.2) 1989 30,323,000 (2.7) 23,158,000 (4.1) 20,928,000 (7.0) 1990 29,794,000 (1.7) 22,795,000 (1.6) 22,255,000 6.3 1991 26,229,068 (12.0) 19,654,344 (13.8) 22,276,396 0.1 1992 27,767,073 5.9 19,656,145 0.0 24,285,164 9.0 1993 26,796,843 (3.5) 19,804,566 0.8 25,809,413 6.3 1994 28,809,322 7.5 20,730,467 4.7 28,020,482 8.6 1995 30,829,781 7.0 20,599,394 (0.6) 26,626,231 (5.0) Average Annual Compounded Growth 1968 - 1995 1.7 % 2.5 % 5.2 % 1980 - 1995 0.9 1.1 7.3 1990 - 1995 0.7 (2.0) 3.7 Source: Port Authority of New York and New Jersey - Aviation Department - -------------------------------------------------------------------------------- Tourist Attractions Although commercial activity is an important component of the area economy, the greater New York area is also a major tourism destination. The subject property will often benefit from tourism related directly to New York City; tour groups will often utilize greater-Newark area guestroom HVS International, Mineola, New York Market Area Analysis 38 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= supply due to the cheaper room rates (when compared to New York City) that are available. Leisure travel in the subject property's market area is also affected by events occurring at the Meadowlands Sports Complex. The complex was constructed in 1976 on a 750-acre site for approximately $450 million. The project was entirely financed by the sale of bonds issued by the New Jersey Sports and Exposition Authority, at no expense to the taxpayers. Surplus operating revenues from the complex are turned over to the State of New Jersey General Fund, to which the complex has contributed more than $60 million to date. The three major facilities of the complex are Giants Stadium, Brendan Byrne Arena and Meadowlands Racetrack. The following table illustrates the total attendance within the Meadowlands Sports Complex. The significant increase in attendees at Giants Stadium in 1994 represents the World Cup Soccer tournament that was held that year. Because this is not an annual event, the large average annual compounded growth at Giants Stadium is not indicative of future trends. ================================================================================ Table 4-5 Meadowlands Sports Complex Annual Attendance - -------------------------------------------------------------------------------- Brendan Meadowlands Total Year Giants Stadium Byrne Arena Racetrack Attendance - -------------------------------------------------------------------------------- 1985 2,200,000 2,100,000 2,800,000 7,100,000 1986 1,750,000 2,000,000 2,400,000 6,150,000 1987 1,700,000 2,200,000 2,600,000 6,500,000 1988 2,700,000 2,400,000 2,400,000 7,500,000 1989 2,100,000 2,300,000 2,200,000 6,600,000 1990 2,200,000 2,400,000 2,000,000 6,600,000 1991 2,300,000 2,000,000 2,000,000 6,300,000 1992 2,200,000 1,900,000 2,500,000 6,600,000 1993 2,000,000 1,900,000 2,000,000 5,900,000 1994 3,200,000 2,500,000 1,850,000 7,550,000 1995 1,600,000 2,300,000 1,600,000 5,500,000 Average Annual Compounded Growth - -------------------------------- 1985 - 1995 -3.1 % 0.9 % -5.4 % -2.5 1990 - 1995 -6.2 -0.8 -4.4 -3.6 Source: New Jersey Sports & Exposition Authority - -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 39 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Woods and Poole Data The following table summarizes the economic and demographic trends discussed throughout this section. All figures that reflect dollar amounts have been adjusted for inflation, and thus reflect real change. It should be noted that the percent changes indicated in the following tables are based on unrounded figures, and thus may not calculate exactly. HVS International, Mineola, New York Market Area Analysis 40 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-6 Economic and Demographic Data for the Subject Property's Market Area - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------- Long-Term Historical Population (+000) Union County 1980-1995 504.4 495.4 (0.1)% Newark, NJ MSA 1980-1995 1,962.7 1,935.5 (0.1) State of New Jersey 1980-1995 7,377.0 7,938.8 0.5 United States 1980-1995 227,225.6 262,791.0 1.0 Short-Term Historical Population (+000) Union County 1990-1995 493.6 495.4 0.1 Newark, NJ MSA 1990-1995 1,915.9 1,935.5 0.2 State of New Jersey 1990-1995 7,740.1 7,938.8 0.5 United States 1990-1995 249,401.4 262,791.0 1.1 Projected Population (+000) Union County 1995-2000 495.4 490.8 (0.2) Newark, NJ MSA 1995-2000 1,935.5 1,943.2 0.1 State of New Jersey 1995-2000 7,938.8 8,107.5 0.4 United States 1995-2000 262,791.0 274,758.4 0.9 Long-Term Historical Retail Sales (+000,000) Union County 1980-1995 3,058.2 3,301.2 0.5 Newark, NJ MSA 1980-1995 11,175.0 12,779.9 0.9 State of New Jersey 1980-1995 45,469.7 57,963.4 1.6 United States 1980-1995 1,340,768.9 1,765,826.1 1.9 Short-Term Historical Retail Sales (+000,000) Union County 1990-1995 3,188.7 3,301.2 0.7 Newark, NJ MSA 1990-1995 12,045.4 12,779.9 1.2 State of New Jersey 1990-1995 53,923.1 57,963.4 1.5 United States 1990-1995 1,557,380.2 1,765,826.1 2.5 Projected Retail Sales (+000,000) Union County 1995-2000 3,301.2 3,267.3 (0.2) Newark, NJ MSA 1995-2000 12,779.9 12,827.5 0.1 State of New Jersey 1995-2000 57,963.4 59,157.0 0.4 United States 1995-2000 1,765,826.1 1,846,830.4 0.9 Long-Term Historical Retail Sales Per Capita Union County 1980-1995 6,063.3 6,663.9 0.6 Newark, NJ MSA 1980-1995 5,693.5 6,602.8 1.0 State of New Jersey 1980-1995 6,163.7 7,301.3 1.1 United States 1980-1995 5,900.6 6,719.5 0.9 Short-Term Historical Retail Sales Per Capita Union County 1990-1995 6,460.1 6,663.9 0.6 Newark, NJ MSA 1990-1995 6,287.1 6,602.8 1.0 State of New Jersey 1990-1995 6,966.8 7,301.3 0.9 United States 1990-1995 6,244.5 6,719.5 1.5
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 41 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-6 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------- Projected Personal Retail Sales Per Capita Union County 1995-2000 6,663.9 6,656.7 (0.0) Newark, NJ MSA 1995-2000 6,602.8 6,601.3 (0.0) State of New Jersey 1995-2000 7,301.3 7,296.6 (0.0) United States 1995-2000 6,719.5 6,721.7 0.0 Long-Term Historical Eating and Drinking Place Sales (+000,000) Union County 1980-1995 265.6 279.2 0.3 Newark, NJ MSA 1980-1995 965.0 1,240.2 1.7 State of New Jersey 1980-1995 3,991.7 5,226.8 1.8 United States 1980-1995 126,131.6 185,035.4 2.6 Short-Term Historical Eating and Drinking Place Sales (+000,000) Union County 1990-1995 270.7 279.2 0.6 Newark, NJ MSA 1990-1995 1,132.5 1,240.2 1.8 State of New Jersey 1990-1995 4,781.7 5,226.8 1.8 United States 1990-1995 161,197.4 185,035.4 2.8 Projected Eating and Drinking Place Sales (+000,000) Union County 1995-2000 279.2 284.0 0.3 Newark, NJ MSA 1995-2000 1,240.2 1,277.3 0.6 State of New Jersey 1995-2000 5,226.8 5,482.5 1.0 United States 1995-2000 185,035.4 199,127.3 1.5 Long-Term Historical Eating and Drinking Place Sales Per Capita Union County 1980-1995 526.6 563.6 0.5 Newark, NJ MSA 1980-1995 491.6 640.8 1.8 State of New Jersey 1980-1995 541.1 658.4 1.3 United States 1980-1995 555.1 704.1 1.6 Short-Term Historical Eating and Drinking Place Sales Per Capita Union County 1990-1995 548.3 563.6 0.6 Newark, NJ MSA 1990-1995 591.1 640.8 1.6 State of New Jersey 1990-1995 617.8 658.4 1.3 United States 1990-1995 646.3 704.1 1.7 Projected Eating and Drinking Place Sales Per Capita Union County 1995-2000 563.6 578.7 0.5 Newark, NJ MSA 1995-2000 640.8 657.3 0.5 State of New Jersey 1995-2000 658.4 676.2 0.5 United States 1995-2000 704.1 724.7 0.6 Long-Term Historical Personal Income (+000,000) Union County 1980-1995 9,190.9 11,496.9 1.5 Newark, NJ MSA 1980-1995 33,086.9 44,463.4 2.0 State of New Jersey 1980-1995 120,336.5 171,425.6 2.4 United States 1980-1995 3,163,874.0 4,443,243.2 2.3
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 42 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-6 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------- Short-Term Historical Personal Income (+000,000) Union County 1990-1995 11,015.8 11,496.9 0.9 Newark, NJ MSA 1990-1995 42,408.4 44,463.4 1.0 State of New Jersey 1990-1995 162,895.3 171,425.6 1.0 United States 1990-1995 4,051,714.6 4,443,243.2 1.9 Projected Personal Income (+000,000) Union County 1995-2000 11,496.9 12,028.9 0.9 Newark, NJ MSA 1995-2000 44,463.4 47,610.8 1.4 State of New Jersey 1995-2000 171,425.6 188,925.7 2.0 United States 1995-2000 4,443,243.2 4,972,219.5 2.3 Long-Term Personal Income per Capita Union County 1980-1995 18,222.0 23,208.0 1.6 Newark, NJ MSA 1980-1995 16,857.0 22,972.0 2.1 State of New Jersey 1980-1995 16,312.0 21,593.0 1.9 United States 1980-1995 13,924.0 16,908.0 1.3 Short-Term Historical Personal Income per Capita Union County 1990-1995 22,318.0 23,208.0 0.8 Newark, NJ MSA 1990-1995 22,135.0 22,972.0 0.7 State of New Jersey 1990-1995 21,046.0 21,593.0 0.5 United States 1990-1995 16,246.0 16,908.0 0.8 Projected Personal Income per Capita Union County 1995-2000 23,208.0 24,507.0 1.1 Newark, NJ MSA 1995-2000 22,972.0 24,501.0 1.3 State of New Jersey 1995-2000 21,593.0 23,303.0 1.5 United States 1995-2000 16,908.0 18,097.0 1.4 Long-Term Historical Employment - Union County (+000) Farm 1980-1995 0.3 0.1 (5.2) Agriculture Services, Other 1980-1995 1.0 1.4 2.4 Mining 1980-1995 0.3 0.1 (8.5) Construction 1980-1995 14.0 13.4 (0.3) Manufacturing 1980-1995 84.9 48.4 (3.7) Trans., Comm. & Public Utils. 1980-1995 22.5 22.1 (0.1) Total Trade 1980-1995 62.4 54.5 (0.9) Wholesale Trade 1980-1995 27.9 20.0 (2.2) Retail Trade 1980-1995 34.6 34.5 (0.0) Finance, Insurance, & Real Estate 1980-1995 20.5 22.8 0.7 Services 1980-1995 64.2 89.2 2.2 Total Government 1980-1995 31.0 29.9 (0.2) Federal Civilian Govt. 1980-1995 2.7 2.6 (0.2) Federal Military Govt. 1980-1995 1.7 1.3 (1.6) State & Local Govt. 1980-1995 26.6 26.0 (0.2) TOTAL 1980-1995 301.2 282.0 (0.4)
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 43 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-6 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------- Short-Term Historical Employment - Union County (+000) Farm 1990-1995 0.1 0.1 (2.4) Agriculture Services, Other 1990-1995 1.1 1.4 5.7 Mining 1990-1995 0.2 0.1 (17.6) Construction 1990-1995 13.2 13.4 0.3 Manufacturing 1990-1995 58.2 48.4 (3.6) Trans., Comm. & Public Utils. 1990-1995 22.0 22.1 0.2 Total Trade 1990-1995 60.2 54.5 (2.0) Wholesale Trade 1990-1995 23.0 20.0 (2.8) Retail Trade 1990-1995 37.1 34.5 (1.5) Finance, Insurance, & Real Estate 1990-1995 25.6 22.8 (2.4) Services 1990-1995 87.1 89.2 0.5 Total Government 1990-1995 29.4 29.9 0.4 Federal Civilian Govt. 1990-1995 2.7 2.6 (1.2) Federal Military Govt. 1990-1995 1.5 1.3 (2.3) State & Local Govt. 1990-1995 25.2 26.0 0.7 TOTAL 1990-1995 297.1 282.0 (1.0) Projected Employment - Union County (+000) Farm 1995-2000 0.1 0.1 (0.8) Agriculture Services, Other 1995-2000 1.4 1.3 (1.0) Mining 1995-2000 0.1 0.1 0.5 Construction 1995-2000 13.4 12.7 (1.1) Manufacturing 1995-2000 48.4 44.2 (1.8) Trans., Comm. & Public Utils. 1995-2000 22.1 22.0 (0.1) Total Trade 1995-2000 54.5 50.8 (1.4) Wholesale Trade 1995-2000 20.0 18.7 (1.3) Retail Trade 1995-2000 34.5 32.1 (1.4) Finance, Insurance, & Real Estate 1995-2000 22.8 23.2 0.4 Services 1995-2000 89.2 90.7 0.3 Total Government 1995-2000 29.9 29.7 (0.2) Federal Civilian Govt. 1995-2000 2.6 2.5 (0.9) Federal Military Govt. 1995-2000 1.3 1.3 0.2 State & Local Govt. 1995-2000 26.0 25.9 (0.1) TOTAL 1995-2000 282.0 274.9 (0.5)
Source: Woods and Poole Economics, Inc. - -------------------------------------------------------------------------------- Subsequent sections of this economic study and appraisal will relate these historical and projected growth trends to specific market segments based on their propensity to reflect visitation. This analysis will provide a basis for forecasting changes in room night demand in the subject property's area. HVS International, Mineola, New York Overview of External Forces 44 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 5. Overview of External Forces Affecting the U.S. Lodging Industry Introduction Hotel ownership is ultimately the business of creating and enhancing value. To understand the investment potential of lodging facilities, investors must be thoroughly aware of the many forces that can cause changes in the value of their properties. Although some of these forces are internal (such as the layout and design of the facilities, the quality of management, and the condition of the property), others are external (such as the local economic environment and the competitive nature of the market). The risk associated with hotel investment lies largely with the external forces that are beyond the control of ownership and contribute to the variability of future income flows. Investors and appraisers can project financial results by evaluating the historical impact of external forces on hotel values. Successful hotel investors seek opportunities where the risk of external forces can be minimized, thus reducing the uncertainty associated with income expectations. When investors engage in due diligence prior to acquiring a lodging facility, they are primarily interested in trends affecting a limited geographic market area, such as a town, city, or county. A broader overview takes into account national and international travel patterns and trends. An understanding of the general characteristics of the United States hotel market is important because these trends often foreshadow economic and demographic changes in smaller areas. This section of the appraisal will present an overview of the U.S. lodging industry by tracing many of the forces that influence hotel values. Historical economic and demographic data, and industry statistics will be analyzed to provide a basis for projections. Forecasts will be evaluated to determine their reasonableness. The conclusions represent another set of criteria that hotel investors consider in making their acquisition decisions. HVS International, Mineola, New York Overview of External Forces 45 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The Supply and Demand Relationship Most business ventures are influenced by the relationship between supply and demand. In the hotel industry, supply refers to the number of units. A unit consists of one or more rooms and represents the smallest accommodation that can be rented to a guest. Each unit must have a full bath and its own entrance to a public hallway or the building exterior. Demand refers to a room night, which is one unit that is occupied for one night. The supply and demand relationship has a significant influence on a hotel's occupancy and/or average room rate. Occupancy is calculated by dividing the number of rooms that are occupied for a specific period by the total number of rooms that are available during the same period. Average room rate is determined by dividing the total rooms revenue achieved during a specific period by the number of rooms occupied during that period; it also represents the weighted average of all the room rates charged during that period. In a market where demand is increasing faster than supply, occupancies rise and average rate growth generally exceeds inflation. When supply is increasing faster than demand, occupancies fall and average rates typically remain level or decline. Hotels generate revenue based on occupancy and average rate, and thus the supply and demand relationship is an important factor in analyzing profits and value. Hotel occupancy levels have shown definite cycles that reflect the balance between supply and demand. The early 1970s marked the beginning of a hotel building boom reminiscent of the 1920s. Many factors contributed to this expansion, but the two main elements were readily available financing and aggressive chains that were eager to sell franchises. The new construction during the 1970s was made possible by the enormous amount of financing generated by all lenders, particularly real estate investment trusts (REITs). These high-leverage finance companies were created to allow small investors to participate in real estate mortgages and equities. The concept was quickly accepted by Wall Street, and soon billions of dollars were available to finance real estate projects. Many lenders became so overwhelmed with new money that their underwriting procedures broke down and some marginal developments were approved. During the late 1960s and early 1970s, hotel companies actively expanded their chains through franchising. Franchising was a source of new capital, allowing hotel companies to grow and achieve national recognition using the franchisee's financial investment in individual properties. Some franchisors, eager to demonstrate sustained growth and establish a national HVS International, Mineola, New York Overview of External Forces 46 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= presence, employed questionable marketing tactics to sell new franchises. Salespeople were often compensated based on the number of franchises sold, so there was little incentive to discourage developers from investing in poor locations and overbuilt markets. Many lenders and hostelry developers were led to believe that a national franchise would guarantee a successful operation. The combination of readily available financing and aggressive hotel chains eager to sell franchises resulted in overbuilding and development of many poorly located, undercapitalized hostelries managed by inexperienced owners. The bubble burst on the lodging industry when inflation caused construction costs and interest rates to escalate. The 1974 energy crisis drastically reduced travel, and the accompanying recession curtailed business trips, conferences, and conventions. Operators of marginal properties quickly fell behind in their mortgage payments, and lenders were forced to foreclose. As lenders became hostelry owners, they either organized work-out departments headed by experienced hoteliers or engaged professional hotel management companies to assume operational responsibilities. Sales data indicate that lenders who were looking for quick sales to remove nonperforming hotel assets from their books had to lower their prices substantially to attract all-cash buyers. Lenders who were willing to hold on to foreclosed hotels and employ professional management to reposition and improve the properties' operation were generally able to recoup their original investments in three to five years, once the industry began to recover. However, even lenders who repositioned their hotels had to take back favorable purchase-money financing to sell the properties because money from other sources was not available. History has shown that during economic downturns, hotel values generally do not fall in proportion to the properties' declining incomes. Sellers, and particularly lenders who take back hotels through foreclosure, are often unwilling to sell at substantially reduced prices. They are more likely to wait out the downward cycle and dispose of their assets when the market begins to rebound. Thus, appraisers can best reflect market behavior by projecting a facility's net income to a point of recovery and applying the proper discounted cash flow procedure over that time period. The late 1970s was a period of relative calm for the lodging industry. Because most lenders were recovering from the financial wounds inflicted by HVS International, Mineola, New York Overview of External Forces 47 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= the 1975 recession, they had little interest in making hotel mortgages. New construction was restrained, and primarily consisted of additions to existing properties and the development of some large, downtown hotels oriented toward the commercial and convention markets. The rebirth of center-city hostelries was a direct result of fuel shortages and the availability of government financing for inner-city redevelopment projects. Highway-oriented properties, on the other hand, were adversely affected by escalating gasoline prices and decreased automobile travel, and these lodging facilities lost some of their appeal among investors and hotel companies. Decreased building activity, the normal retirement of older hostelries from the market, and an improving economy created a favorable supply and demand relationship and record-high occupancy levels from 1979 to 1980. Average room rates increased rapidly as operators took advantage of the excess demand to recoup earlier losses and keep up with inflation. After the decline in hotel development during the late 1970s, the environment appeared suitable for a period of renewed expansion. However, the Federal Reserve tightened the money supply in the early 1980s, sending the prime interest rate up to double-digit levels. Most of the projects that were in the preliminary planning stages but lacked sensible financing were put on hold. Fiscal policy and declining energy prices eventually reduced the national inflation rate. This caused a decline in hotel interest rates beginning in 1983, and suddenly massive amounts of capital were available for real estate investments. Hotel developers who had been out of the market since the mid-1970s rushed to initiate new projects. They were aided by several major real estate development incentives: high occupancies and escalating room rates, readily available debt and equity financing, and unique income tax benefits designed to stimulate the national economy out of a recession. During the early 1980s, trends were generally favorable for new hotel development. Although the recession caused a decline in lodging demand, many markets showed relatively high occupancy levels. Room rates were usually able to keep up with inflation, and the travel industry was expected to boom as a result of a recovering economy. Franchise sellers signed up new prospects aggressively, using product segmentation to justify the saturation of a market with a common brand. HVS International, Mineola, New York Overview of External Forces 48 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Financing was readily available from the savings and loan industry. Following deregulation, these banks were permitted to lend on commercial real estate, such as hotels. Although savings and loans had experience in making loans on single-family homes, few had expertise with commercial properties, and fewer still with hotels. The result was almost identical to the real estate investment trust fiasco the decade before: loan underwriting and administration were inept and sometimes nonexistent, the number of loans made seemed more important than the quality of the real estate and the integrity of the borrower, and short-term funds were often used to finance long-term mortgages. In the early 1990s, the industry suffered the consequences of this lending spree: most major hotel markets became severely overbuilt and many savings and loans went out of business. Another factor contributing to hotel development in the 1980s was the very favorable treatment provided by income tax regulations. By carefully structuring hotel syndications to take advantage of all available tax benefits, investors could virtually recoup their total cash outlay in the first year and reap additional benefits in the future regardless of the economic success of the underlying asset. Because there was little incentive to justify a transaction's economics (i.e., cash flow and reversionary benefits), a number of syndicators overpaid for hotel properties, took out usurious fees, and overloaded their hotels with debt. A change in the tax law in the mid-1980s eliminated many of the benefits associated with hotels, but the overbuilding in most markets was either in progress or had already taken place. By the end of the 1980s, the abuses of the savings and loans had become apparent, but it was too late to reverse the overbuilding. Between 1985 and 1990, approximately 556,000 rooms were added to the U.S. hotel supply. The national economy entered another recession in 1990, and this factor (coupled with overbuilding and the Persian Gulf War in 1991) caused the national hotel occupancy rate to bottom out at 60.9%. In some markets, hotel occupancies were as low as 35%. This supply and demand imbalance was almost identical to the situation in the 1970s that led to numerous hotel failures. As in the REIT days, the number of non-performing loans reached record levels, and lenders moved to a work-out mode of operation in order to foreclose and restructure their hotel investments. Many of the savings and loans were taken over by the government and their hotel assets were sold at auction. HVS International, Mineola, New York Overview of External Forces 49 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= According to the American Council of Life Insurance, which represents major life insurance companies, the number of delinquent hotel loans and the number of hotel loans in foreclosure peaked in 1991. This trend is undergoing a reversal as the U.S. lodging industry begins to recover. Loan restructuring was an attractive alternative to foreclosure during this period, and the number of loans in good standing with restructured terms almost doubled. By 1993, new hotel construction had declined significantly. Lenders, trying to get out from under problematic hotel portfolios, curtailed all real estate lending and would not even consider hotels. The tax benefits associated with lodging facilities had been reduced significantly, and passive investors left the hospitality market entirely. The slowdown in the growth of supply had a beneficial impact on occupancy levels, which started to recover in 1992. Improved occupancies are expected to continue through the late 1990s as increases in lodging demand outpace growth in supply. Beginning in 1991, many lenders and the Resolution Trust Corporation (RTC) sold their oldest and least desirable hotels at liquidation prices. Because virtually no third-party financing was available, most lenders were forced to take back purchase-money mortgages at favorable terms in order to sell these properties without suffering massive write-downs. The newer and more desirable hotels were not put on the market, because their lenders/owners were waiting for values to recover. This course of action significantly reduced the number of transactions involving good-quality lodging facilities. The following table shows the volume of hotel transactions exceeding $10,000,000 between 1990 and 1995. ================================================================================ Table 5-1 Summary of Major Hotel Transactions - --------------------------------------------------------------------------------
Year 1990 1991 1992 1993 1994 1995 - ---------------------------------------------------------------------------------------------- Number of Transactions 130 54 67 52 92 104 Number of Rooms 40,543 16,427 25,187 19,935 33,503 36,951 Average Price Per Room $136,000 $ 91,000 $ 85,000 $ 79,000 $ 80,000 $ 83,000
Source: HVS International - -------------------------------------------------------------------------------- HVS International, Mineola, New York Overview of External Forces 50 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= In 1991, there were only 54 major hotel sales recorded. This number increased to 67 in 1992 and declined to 52 in 1993, then rose dramatically in 1994 and 1995. During the low-volume years, many sellers remained on the sidelines waiting for values to increase before placing their properties on the market. The jump in 1994 is attributable to a number of factors, including the greater availability of mortgage funds, a return of institutional investors to the market, and a resurgence of investor interest in lodging facilities. The profile of typical hotel buyers has changed somewhat. During the mid-1980s, when tax-driven syndication's were popular, many hotels were purchased by passive investors who hired management companies to operate their properties. These owners had little involvement in day-to-day management decisions, which occasionally led to poor management and financial losses. Today, most buyers of major hotels are owner-operators who bring with them both the acquisition funds (usually from a joint venture partner) and management expertise. We also note that real estate investment trusts (REITs) and public hotel companies (C-Corps) are actively acquiring hotels using funds from public equity stock offerings. The supply of new hotel rooms is expected to increase slowly during the next several years. Lenders are beginning to return to the market, and are making some hotel loans based on conservative criteria. Initially, mortgage funds were available mainly to the budget and economy lodging sectors, for the purpose of refinancing existing properties or assisting buyers in acquisitions. Now, a number of lenders are willing to finance new construction for these small, low-end properties. Although financing is also becoming available for the acquisition of large, full-service hotels, very little has been allocated for new construction. At present, active hotel lenders are not necessarily traditional banks and insurance companies, but may include credit companies and Wall Street securities firms. A number of hotel owners and developers are now constructing budget and economy hotels; a few are planning more upscale, full-service properties. Most lenders are taking a conservative approach to new hotel loans, which should limit new development to those projects that demonstrate true economic feasibility. As a result, severe short-term overbuilding is unlikely. HVS International, Mineola, New York Overview of External Forces 51 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Room Rates The supply and demand relationship has a direct impact on hotel occupancies and an indirect influence on room rate growth. Between 1978 and 1995, hotel room rates increased at an average annual compounded rate of almost 6%. Significant rate growth was recorded during the late 1970s and early 1980s as a result of strong occupancies (70%'s) coupled with a high monetary inflation rate (14%). In recent years, room rate growth slowed as a result of low occupancies and a drop in inflation. Hotel room rates generally increase faster than the Consumer Price Index (CPI) when occupancies are strong or moving upward. When occupancies are low or declining, room rate growth tends to lag behind the CPI; in some cases, rates may remain flat or actually drop. The following table compares the historical and projected annual increase in hotel room rates in the United States to the change in the national CPI. HVS International, Mineola, New York Overview of External Forces 52 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 5-2 Percent Change in Average Room Rates Versus CPI - U.S. Hotels - -------------------------------------------------------------------------------- Consumer Price Hotel Room Rate Index Hotel Year Percent Change Percent Change Occupancy - -------------------------------------------------------------------------------- 1973 4.2% 6.2% 70.2% 1974 7.6 11.0 64.0 1975 7.3 9.1 63.7 1976 8.2 5.7 65.8 1977 8.1 6.5 67.3 1978 14.0 7.7 69.2 1979 17.0 11.3 71.9 1980 15.2 13.5 70.6 1981 10.0 10.3 67.9 1982 6.5 6.2 66.7 1983 5.1 3.2 64.4 1984 6.9 4.3 64.0 1985 4.6 3.6 63.1 1986 3.2 1.9 62.5 1987 3.6 3.6 61.9 1988 3.6 4.1 62.3 1989 3.5 4.8 63.2 1990 3.0 5.4 62.4 1991 0.6 4.2 60.9 1992 1.4 3.0 62.1 1993 2.8 3.0 63.1 1994 4.8 2.6 64.7 1995 4.8 2.8 65.5 1996 5.0 3.0 66.0 1997 5.5 3.5 67.0 1998 6.0 4.0 68.0 1999 5.5 4.0 68.0 Sources: Smith Travel Research & HVS International - -------------------------------------------------------------------------------- This table shows two periods when hotel room rate growth failed to keep pace with the CPI. From 1973 to 1975, the hotel industry was suffering from overbuilding related to real estate investment trusts, a recession, and a downturn in travel caused by the oil embargo. The second period of slow room rate growth occurred between 1988 and 1993, when the industry was again affected by overbuilding and a weak economy. The table illustrates HVS International, Mineola, New York Overview of External Forces 53 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= that during periods of prosperity, room rates are a good hedge against inflation; this was true even when the CPI increased at double-digit levels. The projections indicate a strong recovery of room rates as the relationship between supply and demand becomes more favorable. Growth is expected to peak in 1998 at 6%, which is significantly higher than the projected gain in the CPI. This may appear high, but a similar trend occurred in 1978, when room rates rose 14.0% and the CPI increased by only 7.7%. Hotels are unique because their room rates can be adjusted at any time. Unlike office space, where rents are typically negotiated for a five-year period, hotel operators are free to base rates on occupancy trends. Using sophisticated yield management programs, modern lodging facilities can ride the demand curve and maximize room rates whenever the market permits. As a result, hotels generally offer significant upside potential during periods of economic prosperity. If lodging facilities can increase room rates faster than the CPI and still maintain occupancies, bottom-line profits usually escalate. If they can raise room rates and occupancy at the same time, profits will grow significantly. The opposite occurs when room rates fail to keep pace with inflation. Because market value is basically a multiple of bottom-line profits, changes caused by fluctuations in occupancy and average rate have a direct impact on value. Rooms Revenue per Available Room (RevPAR) The ability of a hotel to maximize its occupancy and room rate is measured in terms of rooms revenue per available room (RevPAR), which is the product of occupancy and average rate. Between 1978 and 1995, RevPAR in the U.S. lodging industry increased at an average annual compounded rate of approximately 5%. As in the case of average rate, most of the increase occurred during the late 1970s, when occupancies escalated rapidly. The only decline in RevPAR occurred in 1991. Trends in Hotel Sales Hospitality Valuation Services constantly monitors hotel markets in order to collect information on sales of lodging facilities. This comprehensive database is known as the Hospitality Market Data Exchange (HMDE). The HMDE includes more than 90% of all hotel sales that took place during this period. The HMDE data shows that the number of transactions peaked at 726 in 1986. This strong activity is largely attributable to pending changes in the tax laws, which made it less favorable to own hotels. It is also possible that HVS International, Mineola, New York Overview of External Forces 54 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= forward-thinking investors noted the substantial overbuilding and declining economy and decided to bail out at that time. In 1987 and 1990, the average sales price per room peaked at $75,000. This was more than twice the 1981 average of $36,000. Following the 1990 peak, hotel prices fell rapidly as occupancies and profits were eroded by the massive number of hotel rooms entering the market. By 1991, the year of the Persian Gulf War, sales prices had fallen to $38,000 per room. Even the highest price per room declined from the record $1,195,652 (for the sale of the Bel Air Hotel) to $251,816 in 1992. The market hit bottom in 1993 when the average sales price dropped to $36,000 per room. Prices recovered rapidly in 1994 and 1995 as investors became interested in hotels again and more full-service properties were put on the market. In 1995, the average sales price was $61,000 per room. The figures presented in the HMDE represent actual sales prices; no attempt was made to adjust for factors such as favorable or unfavorable financing, forced or liquidation sales, bankruptcy sales, foreclosures, and so forth. As a result, the average price per room does not necessarily reflect market value, which assumes a willing buyer and a willing seller. Many of the transactions that took place during the early 1990s involved unwilling sellers - usually lenders who were forced to liquidate hotel portfolios quickly at prices that were below market levels. Most hotel experts agree that a recovery is underway, and they recommend that owners hold their properties until more favorable conditions prevail. Trends in Hotel Values A more meaningful indicator of trends in hotel value is the Hotel Valuation Index (HVI), developed by Hospitality Valuation Services. This index tracks changes in hotel values in 23 major markets and the nation as a whole. It is developed through an income approach, using market area data provided by Smith Travel Research and operational and capitalization rate information from Hospitality Valuation Services, and is indexed to the 1986 U.S.A. value (1.0000). The following table sets forth the HVI from 1986 to 1995. HVS International, Mineola, New York Overview of External Forces 55 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 5-3 Hotel Valuation Index per Room - --------------------------------------------------------------------------------
Valuation Index Per Room ------------------------ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 ------------------------------------------------------------------------------------------------------ Honolulu 3.3571 4.0357 4.6964 5.2857 5.3214 4.7857 4.9286 4.2857 4.3929 5.6071 New Orleans 1.5357 1.7500 2.2857 2.3929 2.5000 2.6071 3.2857 3.2500 3.8929 4.4286 New York 3.5714 4.1071 4.6429 4.5357 3.9286 3.0357 2.5714 2.5714 3.1429 4.1071 San Francisco 2.5000 3.0893 3.2500 3.0714 2.9286 2.5714 2.5714 2.9643 3.2143 4.0000 Phoenix 1.2143 1.0714 1.1786 1.5357 1.4286 1.2500 1.5000 1.9643 2.3571 3.2143 San Diego 2.8571 2.3571 2.5714 2.6786 2.3929 2.5357 2.5357 2.2143 2.3571 3.0357 Miami 1.4286 1.6071 1.7321 2.1429 2.1786 2.2500 2.5714 2.7857 2.3214 2.9286 Washington, DC 2.1786 2.1786 2.4464 2.6071 2.2500 1.8571 2.0357 2.5000 2.3929 2.8929 Atlanta 1.0714 1.0179 1.0536 1.0357 1.1429 1.1250 1.2857 1.7857 2.1429 2.6786 Minneapolis 0.7321 0.6964 0.7143 0.7143 0.7857 1.0000 1.2857 1.5714 1.8214 2.1786 Chicago 1.4643 1.5000 1.5714 1.5000 1.4286 1.2143 1.2500 1.5000 1.8571 2.1786 Boston 2.3571 2.7143 2.6071 2.1429 1.8214 1.2500 1.3036 1.3214 1.6071 2.1071 Fort Lauderdale 1.4643 1.2679 1.3214 1.4286 1.4821 1.3571 1.7143 1.8929 1.6071 1.9286 Orlando 1.5000 1.6429 1.9286 2.5000 2.5357 1.8929 2.0714 1.7857 1.6071 1.8929 Denver 0.5357 0.4464 0.4643 0.4821 0.7857 0.9268 1.0357 1.3214 1.5000 1.8571 Dallas 0.5536 0.6250 0.6607 0.7321 0.7857 0.7143 0.9643 1.0357 1.3214 1.7143 USA 1.0000 0.9464 1.0536 1.1250 1.0714 0.9214 0.9929 1.1429 1.3214 1.6071 Los Angeles 2.1071 2.2857 2.3929 2.4643 2.1786 1.5714 1.0714 0.9643 1.1964 1.5000 Tampa 0.8393 0.7679 0.8571 1.1429 1.2857 1.0357 1.0714 1.0357 1.1071 1.3214 Anaheim 1.7679 1.7321 1.7500 1.8571 1.6071 1.2857 0.9642 0.9464 0.8393 1.2500 Houston 0.3571 0.4286 0.6964 0.7857 1.1071 1.1607 1.1429 1.0357 1.0000 1.1786 Philadelphia 1.4643 1.5357 1.4286 1.3214 1.0714 0.6786 0.5714 0.6071 0.7500 1.0714 Norfolk 1.1786 1.0536 0.9286 0.7857 0.6429 0.5357 0.6071 0.6429 0.7500 0.9643 Riverside 0.9643 1.2143 1.5714 1.7143 1.4643 1.2500 0.7857 0.5357 0.4286 0.5357
Source: Hospitality Valuation Services - -------------------------------------------------------------------------------- The HVI can be used to show the value change in a particular market over time or to show the relative difference in hotel values in various cities. The following table shows the annual change in hotel values in 23 major markets and the United States as a whole. HVS International, Mineola, New York Overview of External Forces 56 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 5-4 Percent Change in the Hotel Valuation Index - --------------------------------------------------------------------------------
Annual Percent Change --------------------- '86-'87 '87-'88 '88-'89 '89-'90 '90-'91 '91-'92 '92-'93 '93-'94 '94-'95 '86-'95 --------------------------------------------------------------------------------------------------------------- Honolulu 20 % 16 % 13 % 1 % -10 % 3 % -13 % 3 % 28 % 67 % New Orleans 14 31 5 4 4 26 -1 20 14 188 New York 15 13 -2 -13 -23 -15 0 22 31 15 San Francisco 24 5 -5 -5 -12 0 15 8 24 60 Phoenix -12 10 30 -7 -13 20 31 20 36 165 San Diego -18 9 4 -11 6 0 -13 6 29 6 Miami 12 8 24 2 3 14 8 -17 26 105 Washington, DC 0 12 7 -14 -17 10 23 -4 21 33 Atlanta -5 4 -2 10 -2 14 39 20 25 150 Minneapolis -5 3 0 10 27 29 22 16 20 198 Chicago 2 5 -5 -5 -15 3 20 24 17 49 Boston 15 -4 -18 -15 -31 4 1 22 31 -11 Fort Lauderdale -13 4 8 4 -8 26 10 -15 20 32 Orlando 10 17 30 1 -25 9 -14 -10 18 26 Denver -17 4 4 63 18 12 28 14 24 247 Dallas 13 6 11 7 -9 35 7 28 30 210 USA -5 11 7 -5 -14 8 15 16 22 61 Los Angeles 8 5 3 -12 -28 -32 -10 24 25 -29 Tampa -9 12 33 12 -19 3 -3 7 19 57 Anaheim -2 1 6 -13 -20 -25 -2 -11 49 -29 Houston 20 62 13 41 5 -2 -9 -3 18 230 Philadelphia 5 -7 -8 -19 -37 -16 6 24 43 -27 Norfolk -11 -12 -15 -18 -17 13 6 17 29 -18 Riverside 26 29 9 -15 -15 -37 -32 -20 25 -44
Source: Hospitality Valuation Services - -------------------------------------------------------------------------------- On a national basis, hotel values rose in 1988 and 1989, then declined in 1990 and dropped by 14% in 1991. A turnaround commenced in 1992, when values increased by 8%; still greater increases of 15% in 1993, 16% in 1994, and 22% in 1995 signaled that a recovery was well underway. In the case of the individual cities, it is obvious that the movement in national hotel values has been offset somewhat by trends in local markets. Between 1986 and 1995, Riverside hotels lost more than 40% of their value, while San Francisco showed a 60% increase. Anaheim, Los Angeles, and Philadelphia also suffered significant drops. Future Trends Most hotel owners, operators and lenders agree that the U.S. lodging industry has emerged from one of the worst periods since the Depression of 1929. Today, there are many indications that signal a strong recovery is HVS International, Mineola, New York Overview of External Forces 57 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= underway, and most hotels have experienced a dramatic rise in profitability. Conversely, the hotel industry remains cyclical, and there are long-term trends and risk factors that could have an unfavorable impact on the operating results and investment potential of lodging facilities. The following list summarizes the positive and negative factors that are likely to influence the U.S. lodging industry in coming years. o No significant amount of new hotel development is likely to occur during the next three to five years. Lenders stopped financing new hotels in the early 1990s because of the high rate of loan defaults, and they are only now starting to make construction loans. Although mortgage funds are available to refinance existing properties and construction loans are being made for economy hotels, mortgages for new hotels in the mid-rate, first-class, and luxury categories are still difficult to secure. This lack of financing is major barrier to entry, and will prevent a number of proposed projects from moving forward. With only a slow increase in supply, hotel occupancies should rebound as fast as the growth in demand permits. o An additional barrier to entry is the current discrepancy between market values and replacement costs for first-class and luxury hotels. In today's market, many upscale hotels are still selling for prices that are below what it would cost to develop a comparable hotel. As a result, there is little justification for building a new hotel when a similar, existing facility is available for sale at some fraction of the cost. Until the gap between market value and replacement cost narrows, there will be minimal new hotel construction in the upper-tier segments. The market values and replacement costs of budget and economy hotels have been in equilibrium for several years which is another reason why new development is proceeding in these segments. o The U.S. economy continues to improve, which suggests that more people are traveling. Many people curtailed their travel plans during the recent recession, and there is likely to be pent-up demand that will be released as consumer confidence escalates. o Minimal additions to the hotel supply coupled with growth in demand should result in further improvement in occupancies during the next several years. o As shown by the historical data, hotel room rates rise rapidly as occupancies escalate. The most frequent complaint that owners and operators HVS International, Mineola, New York Overview of External Forces 58 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= had during the recent recession was their inability to achieve average rate gains. Starting in 1994, gains in hotel room rates returned to levels in excess of inflation, foreshadowing enhanced profitability. In real dollars, hotel room rates are expected to return to 1988 levels by 1998. This is a good indication that hotel values will return to record levels in the next two to four years. o The low cost of capital is another factor that tends to enhance value. Because capitalization rates are tied directly to the price of capital, the lower the cost, the lower the cap rate and the higher the value. The cost of hotel debt capital averaged 10.5% in 1990. Today, similar financing is available at 8.5% to 9.5%. Recent hotel sales support the downward trend in capitalization rates. o Government regulations are becoming increasingly expensive for the U.S. hotel industry. A national health care policy could force small operators to provide better benefits for many more employees, particularly the part-time workers who are used extensively by hotels and restaurants. Environmental laws are becoming stricter and will require hotels to implement recycling, reuse, and conservation procedures. Congress has limited deductions for meals and entertainment expenses, which increases the cost of doing business in hotels and restaurants. Local municipalities use hotel rooms taxes as a source of revenue for general use, and the hotel rooms tax is so high in some areas that it has driven away demand. This is particularly true with respect to meetings and conventions, which can be held in cities that tax accommodations at a lower rate. o Improved technology is rapidly changing the way business is conducted. During the next decade, advances such as video communication, enhanced data transfer, and faster transportation are expected to limit the need for face-to-face meetings and shorten the time that executives are away from their offices. Commercial hotels are bound to be influenced by this trend. Conclusion Interest in hotel acquisition has increased significantly during the past several years. Buyers have concluded that future earnings trends are likely to be favorable, and the risks posed by overbuilding or an economic downturn are small. Some sellers are holding their properties until prices reach a higher level. Consequently, we believe there is pent-up desire to sell once prices begin to approach levels that allow the existing (or restructured) debt to be paid off. HVS International, Mineola, New York Overview of External Forces 59 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The fact that numerous buyers are chasing very few acquisition opportunities has had a favorable impact on recent sales prices. For buyers to be successful in this highly competitive market, their projected operating results must take into account at least a portion of any upside created from improved performance, particularly if the improvement can be readily achieved through management efficiencies. Capitalization rates based on historical operating income have fallen during the past several years. Hotel buyers in today's market must be aggressive in all of their acquisition assumptions. As a result, hotel values in some parts of the country are approaching the levels registered during the mid-1980s, and a full recovery is expected to occur in the next two to four years. HVS International, Mineola, New York Lodging Market Supply and Demand 60 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 6. Lodging Market Supply and Demand Analysis MARKET FOR TRANSIENT ACCOMMODATIONS The market for transient accommodations is an all-encompassing term referring to the many types of travelers who use lodging facilities in a given area. These travelers represent the market's accommodated room night demand. This section will begin with an analysis of historical demand trends to determine what changes have occurred; the historical number of competitive hotel rooms will then be estimated to evaluate local supply trends. Areawide occupancy levels can be calculated based on the number of hotel rooms available in the market and the demand for lodging accommodations. The total hotel room night demand will be divided into individual market segments to allow us to forecast growth rates based on the economic and demographic data set forth earlier in this report. Historical Supply and Demand Data Smith Travel Research (STR) has compiled historical supply and demand data for the subject property and its competitors. This information is presented in the following table, along with the marketwide occupancy, average rate, and rooms revenue per available room (RevPAR). RevPAR is calculated by multiplying occupancy by average rate, and provides an indication of how well rooms revenue is being maximized. HVS International, Mineola, New York Lodging Market Supply and Demand 61 Analysis - -------------------------------------------------------------------------------- ================================================================================ Table 6-1 Historical Room Supply and Demand Trends (STR) - --------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 - ---------------------------------------------------------------------------------------------------------------------------------- Number of Rooms 1,225 1,225 1,225 1,225 1,225 1,225 1,225 Annual Guestroom Supply 447,125 447,125 447,125 447,125 447,125 447,125 447,125 Percent Change --- 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Room Night Demand 277,218 284,372 279,453 278,112 300,915 310,305 302,257 Percent Change --- 2.6% (1.7)% (0.5)% 8.2% 3.1% (2.6)% Occupancy 62.0% 63.6% 62.5% 62.2% 67.3% 69.4% 67.6% Percent Change --- 2.6% (1.7)% (0.5)% 8.2% 3.1% (2.6)% Average Rate $67.89 $65.41 $65.57 $66.77 $67.05 $76.32 $70.08 Percent Change --- (3.7)% 0.2% 1.8% 0.4% 13.8% (8.2)% RevPAR $42.09 $41.60 $40.98 $41.53 $45.12 $52.97 $47.37 Percent Change --- (1.2)% (1.5)% 1.3% 8.7% 17.4% (10.6)% - ----------------------------------------------------------------------------------------------------------------------------------
Year-to-Date, August -------------------- Average Annual Compounded Growth 1995 1996 1989 - 1995 - ------------------------------------------------------------------- Number of Rooms 1,225 1,225 Annual Guestroom Supply 297,675 297,675 Percent Change --- 0.0% 0.0% Room Night Demand 197,656 209,861 Percent Change --- 6.2% 1.5% Occupancy 66.4% 70.5% Percent Change --- 6.2% 1.5% Average Rate $75.78 $82.42 Percent Change --- 8.8% 0.5% RevPAR $50.32 $58.11 Percent Change --- 15.5% 2.0% Source: Smith Travel Research - -------------------------------------------------------------------------------- HVS International, Mineola, New York Lodging Market Supply and Demand 62 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= It is important to note some limitations of the STR data. Hotels are occasionally added to or removed from the sample, and not every property reports data in a consistent and timely manner; these factors can influence the overall quality of the information by skewing the results. These inconsistencies may also cause the STR data to differ from the results of our competitive survey. Nonetheless, we find that hotel buyers often rely on STR statistics, and thus they are considered relevant to this study. The preceding table indicates that the number of primarily competitive guestrooms included in the Clark-Woodbridge, New Jersey area survey remained constant at 1,225 from 1989 through 1995. Demand declined by 1.7% in 1991 and 0.5% in 1992; these downturns were the result of the recession which affected the nation during this period exacerbated, in 1991, by the Persian Gulf War which caused a downturn in travel throughout the U.S.. The impact of the recession on the subject market area was compounded by the dynamics of the regional hotel market and particularly the market in New York City. During the recession of the early 1990s, New York City's hotels suffered from a lack of demand, and decreased their rates in order to attract a wider array of business and thus sustain reasonable occupancy levels. As a result, tour groups and other area leisure demand, which had previously opted for the lower rates outside the CBD, were able to attain low enough rates within the city and thus used New York City hotels. With the recent upswing in the economy, both occupancy levels and average room rates in New York City have rebounded considerably, and many of these guests have again been displaced out of the city by higher rated business. Furthermore, demand in Manhattan is now strong enough to generate overflow to all of the suburban area markets. The subject property's lodging market is benefiting from this situation, as the hotels in northern New Jersey offer a reasonable alternative to the hotels in the city. Demand recovered in 1993, with an 8.2% increase, as the economy began to rebound. In 1994, the increase in room night demand was moderate at a level of 3.1%; in 1994 roundly 32,000 more room nights were accommodated in the market than in 1992. It is important to note that 1994 represents an exceptional year for the greater New Jersey market; in addition to the strengthening economy, a number of New York City citywide events were held, such as the World Cup Soccer matches at Giants Stadium and the Gay Games, which generated a large number of overflow demand for the subject property's market. As a result of these events, demand decreased in 1995 by 2.6% to reflect a more typical room night demand level. As the economy in New Jersey continues to improve and the improved HVS International, Mineola, New York Lodging Market Supply and Demand 63 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= room product at the subject property has allowed the accommodation more demand in the competitive set, year-to-date trends through August illustrate a growth rate of 6.2% in room demand. Demand grew at an average annual compounded rate of 1.5% between 1989 and 1995. Because supply remained stable, changes in occupancy mirrored the shifts in demand. The weak demand experienced in 1991, 1992, and 1995 did not allow the hotel supply to increase average rates at levels above or in tandem with inflationary levels. Except for 1994 (which was an exceptional year for reasons listed above), which illustrated 13.8% average rate growth, the competitive hotels maintained an average annual rate growth of 0.5% during the historical period. The weakest year was in 1995 (with a decline of 8.2%), a result of a market adjustment following the atypical year in hotel demand and average rate growth seen in 1994. Year-to-date trends for 1996 illustrate true economic strengthening, with an 8.8% increase in average rate over the similar period in 1995. RevPAR rose at an average annual compounded rate of 2.0% between 1989 and 1995, with the strongest increase of 17.4% experienced in 1994. The weakest RevPAR change was in 1995 (at 10.6%) which illustrates the market correction after the strong 1994 performance. The increase of 15.5% registered for year-to-date 1996 suggests improvement in overall market conditions. Demand Analysis Using Market Segmentation For the purpose of demand analysis, the overall market is divided into individual segments based on the nature of travel. Although a market may have various segments, the three primary classifications occurring in most areas are commercial, meeting and group, and leisure. Market segmentation is a useful procedure because individual classifications often exhibit unique characteristics in terms of growth potential, seasonality of demand, average length of stay, double occupancy, facility requirements, price sensitivity, and so forth. By quantifying the room night demand by market segment and analyzing the characteristics of each segment, the overall demand for transient accommodations can be projected. Lodging demand in Clark, New Jersey is generated primarily by the following three market segments. Segment 1 Commercial Segment 2 Meeting and Group Segment 3 Leisure HVS International, Mineola, New York Lodging Market Supply and Demand 64 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Based on our fieldwork, area analysis, and knowledge of the local lodging market, we estimate the 1996 estimated year-end distribution of accommodated hotel room night demand as follows. ================================================================================ Table 6-2 1996 Estimated Year-end Accommodated Room Night Demand - -------------------------------------------------------------------------------- 1996 Annual Room Night Demand (Rounded) ------------------------------------------------------- Percentage Percentage Market Segment Market Wide of Total Subject Property of Total - -------------------------------------------------------------------------------- Commercial 131,000 51% 21,000 50% Meeting and Group 88,000 34 8,000 19 Leisure 40,000 15 13,000 31 ------- --- ------ --- Total 259,000 100% 42,000 100% - -------------------------------------------------------------------------------- Commercial demand predominates in the local market, accounting for approximately 51% of the estimated 1996 room night demand. Meeting and group demand followed, with a 34% share. Leisure rooms contributed the remaining 15% of room night demand. The subject property's segmentation differed from that of the competitive market to some degree. Approximately 50% of the Holiday Inn Select's 1996 estimated year-end occupancy is attributable to the commercial segment; leisure rooms accounted for 31% and the meeting and group segment contributed the remaining 19%. Using the distribution of accommodated hotel demand as a starting point, we will analyze the characteristics of each market segment in an effort to determine future trends in room night demand. Commercial Segment The commercial segment consists of individual business people who are visiting various firms in the subject property's market. Commercial demand is strongest Monday through Thursday nights, declines significantly on Friday and Saturday, and increases somewhat on Sunday. The typical length of stay ranges from one to three days, and the rate of double occupancy is a low 1.2 to 1.3 people per room. Commercial demand is relatively constant throughout the year, although some declines are noticeable in late December and during other holiday periods. In general, commercial travelers are not overly rate-sensitive, and will make use of a hotel's food and beverage outlets and recreational facilities. The commercial segment represents a highly desirable and lucrative market that provides a consistent level of demand at relatively high room rates. HVS International, Mineola, New York Lodging Market Supply and Demand 65 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Because of the improved room product of the subject property, the Holiday Inn - Clark is favorably positioned to benefit from the improving New Jersey economic outlook. As New York City hotel demand continues to improve, the area will also benefit from increased demand overflow. Additionally, the room products of the Sheraton and Hilton are tired, and area corporations and groups are reportedly anxious to try something new. Area corporate demand is generated by a variety of corporations with offices and corporate headquarters generally situated within a 10 mile radius of the subject property. Some of these installations include the following: Merck Pharmaceuticals, Hanson Industries, Engelhard, Johnson and Johnson, and Supermarkets General. A number of small industrial plants, high-rise office buildings, and warehouses which generate commercial demand are also located in the subject property's immediate area. Based on our analysis of the Union County economy, together with a review of national economic trends, we estimate that commercial demand will increase by 4.0% for the first projection year, by 3.5% the following year, by 3.0% the next year, and at a conservative level of 2.0% per annum throughout the remainder of our projection period. Meeting and Group Segment The meeting and group market includes meetings, seminars, conventions, trade association shows, and similar gatherings of ten or more people. Peak convention demand typically occurs in the spring and fall. Because of vacations, the summer months represent the slowest period for this market segment; winter demand varies. The average length of stay for typical meetings and groups ranges from three to five days. Most commercial groups meet during the weekday period of Monday through Thursday, but associations and social groups will sometimes gather on weekends. Commercial groups tend to have a low double occupancy of 1.3 to 1.5 people per room, while social groups are likely to have double occupancy rates ranging from 1.5 to 1.9. Meeting and group patronage is quite profitable for hotels. Although room rates are discounted for large groups, the property benefits from the use of meeting space and the revenues generated by in-house banquets and cocktail receptions. Facilities that are necessary to attract meetings and groups include function areas with adequate space for breakout, meals, and receptions; recreational amenities; and a sufficient number of guestrooms to house the attendees. HVS International, Mineola, New York Lodging Market Supply and Demand 66 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Area meeting demand is largely generated by local corporations; meetings typically involve training or company planning. Meeting demand is also generated by the New Jersey Convention and Expo Center, located near the Crowne Plaza in the Raritan Center (a secondary competitor of the subject property). Given the subject property's recent renovation, it is expected that the subject property will be assigned as a overflow hotel for the Center. Because of its improved overall product inclusive of the meeting space, the subject property should be able to capture close to its fair share of the smaller corporate meetings market. Future meeting and group demand is closely related to growth in the commercial segment. Because most meetings have either a direct or an indirect business purpose, the economic considerations that have an impact on commercial travel also affect meeting and group demand. The exception is non-commercial meetings, which are tied to the economic factors that influence leisure travel. It should be noted that meetings and similar events are booked in advance, and thus growth in this segment tends to lag slightly behind increases in commercial demand. We believe that growth in the meeting and group segment will occur at the rate of 3.0% in 1997, at 2.5% in 1998, at 2.0% in 1999, and at 1.0% per annum throughout the remaining projection period. Leisure Segment The leisure market segment consists of individuals and families who are spending time in the area or passing through en route to other destinations. Their travel purposes may include sightseeing, recreation, visiting friends and relatives, or numerous other non-business activities. Leisure demand is strongest Friday and Saturday nights and all week during holiday periods and the summer months. These peak periods are negatively correlated with commercial visitation, underscoring the stabilizing effect of capturing weekend and summer tourist travel. The typical length of stay ranges from one to four days, depending on the destination and travel purpose, and the rate of double occupancy generally ranges from 1.8 to 2.5 people per room. Leisure travelers tend to be the most price-sensitive segment in the lodging market. They often prefer low-rise accommodations where parking is convenient to the rooms, and they typically demand extensive recreational facilities and amenities. Ease of highway access and proximity to tourist attractions are important locational considerations. The greater Newark area offers a variety of local attractions including the Meadowlands Sports Complex which was discussed previously in this HVS International, Mineola, New York Lodging Market Supply and Demand 67 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= report. Although the subject property houses leisure demand related to these local attractions, the majority of leisure demand is generated by tourists visiting New York City. As mentioned previously, with the economy strengthening, New York City hotels are charging increasingly higher room rates (together with already present higher lodging taxes); this trend gives hotels situated outside of Manhattan a competitive sales advantage. These hotels, including the subject property and its competitors, offer reasonable room rates in comparison to room rates offered in Manhattan; the resulting room prices are very attractive to tour groups and other area leisure demand. Leisure demand should therefore remain strong in the short-term given the current upswing in the economic cycle. Future leisure demand is related to the overall economic health of the nation. Trends showing changes in state and regional unemployment and disposable personal income often have a strong impact on non-commercial visitation. Traffic counts on nearby highways and attendance at local attractions can also form a basis for projections. Based upon our review of the local area and national trends, we estimate that leisure demand should increase at a rate of 4% in 1997, and gradually decline to a 1% growth rate in 2000 and throughout the remaining projection period. Conclusion The purpose of segmenting the lodging market is to define each major type of demand, identify customer characteristics, and estimate future growth trends. Starting with an analysis of the local area, three segments were defined as representing the subject property's lodging market. Various types of economic and demographic data were then evaluated to determine their propensity to reflect changes in hotel demand. Based on this procedure, we forecast the following average annual compounded market segment growth rates. HVS International, Mineola, New York Lodging Market Supply and Demand 68 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 6-3 Average Annual Compounded Market Segment Growth Rates - -------------------------------------------------------------------------------- Annual Compounded Growth Rate ----------------------------------------- 1997 1998 1999 2000 2001 2002 - ------------------------------------------------------------------------------- Commercial 4.0% 3.5% 3.0% 2.0% 2.0% 2.0% Meeting and Group 3.0 2.5 2.0 1.0 1.0 1.0 Leisure 4.0 3.0 2.0 1.0 1.0 1.0 Annual Average Growth 3.7% 3.1% 5.1% 1.5% 1.5% 1.5% - -------------------------------------------------------------------------------- These growth rates will be used in subsequent sections of this study to forecast changes in lodging demand. Please note that the average annual growth rate of 5.1% in 1999 reflects the opening of an assumed proposed hotel. This assumption is discussed in greater detail later in this section of the report. With the opening of this hotel, a greater amount of market demand can be accommodated which currently cannot be, due to limited hotel room supply during peak demand nights (typically Tuesday and Wednesday nights in this particular market). Therefore, the growth rate reflects this assumed change in the market. COMPETITION An integral component of the supply and demand relationship that has a direct impact on the availability of lodging demand is the current and anticipated supply of competitive lodging facilities. The New Jersey suburban area is served by a wide array of hotels and motels. The subject property is situated in the Woodbridge market area; additional concentrations of lodging facilities are located in the Secaucus/Meadowlands area, in the vicinity of Newark Airport, near the major concentrations of office space in the area, and along the highways which serve as major arteries through the region. We have identified two properties that are considered primarily competitive with the Holiday Inn Select. Including the subject property, these primary competitors total 644 rooms. Two additional lodging facilities are judged to be only secondarily competitive; although the facilities, rate structures, or market orientations of these hotels prevent their inclusion among the primarily competitive supply, they do compete with the subject property to some extent. The room count of each secondary competitor has been weighted to reflect the degree to which it competes with the Holiday Inn Select; the aggregate weighted room count of the secondary competitors is 355. HVS International, Mineola, New York Lodging Market Supply and Demand 69 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Primary Competitors The following table summarizes the important operating characteristics of the primary competitors and the aggregate secondary competitors. This information was compiled from personal interviews, inspections, lodging directories, and our in-house library of operating data. The table also sets forth each property's penetration factors; penetration is the ratio between a specific hotel's operating results and the corresponding data for the market. If the penetration factor is greater than 100%, the property is performing better than the market as a whole; conversely, if the penetration is less than 100%, the hotel is performing at a level below the marketwide average. HVS International, Mineola, New York Lodging Market Supply and Demand 70 Analysis - -------------------------------------------------------------------------------- ================================================================================ Table 6-4 Primary Competitors and Aggregate Secondary Competitors - --------------------------------------------------------------------------------
Estimated 1996 Market Segmentation Estimated 1995 Meeting Meeting ----------------------- -------------------------- Year Number Space Space/Room Meeting Average Property/Location Opened of Rooms (Sq. Ft.) (Sq. Ft.) Comm. & Group Leisure Occupancy Rate Rev PAR - -------------------------------------------------------------------------------------------------------------------------- Subject Property 36 Valley Road 1973 191 7,493 39 50% 20% 30% 61.0% $55.00 $33.55 Woodbridge Hilton 120 Wood Avenue South 1984 200 16,811 84 60 30 10 77.0 82.00 63.14 Woodbridge Sheraton 515 Route 1 South 1986 253 18,500 73 50 40 10 82.0 86.00 70.52 - -------------------------------------------------------------------------------------------------------------------------- Sub-Totals and Averages 644 14,268 65 53% 32% 15% 74.2% $77.15 $57.26 Secondary Competition 355 45% 38% 17% 59.0% $71.35 $42.10 Totals/Averages 999 51% 34% 15% 68.7% $75.39 $51.78 - --------------------------------------------------------------------------------------------------------------------------
Estimated 1996 ------------------------------------------------------- Average Occupancy Yield Property/Location Occupancy Rate Rev PAR Penetration Penetration - -------------------------------------------------------------------------------- Subject Property 36 Valley Road 60.0% $76.00 $45.60 84.5% 79.3% Woodbridge Hilton 120 Wood Avenue South 79.0 89.00 70.31 111.3 122.3 Woodbridge Sheraton 515 Route 1 South 84.0 88.00 73.92 118.4 128.6 - -------------------------------------------------------------------------------- Sub-Totals and Averages 75.3% $85.49 $64.40 106.1% 112.0% Secondary Competition 63.0% $71.28 $44.90 88.8% 78.1% Totals/Averages 71.0% $81.00 $57.49 100.0% 100.0% - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] COMPETITION MAP HVS International, Mineola, New York Lodging Market Supply and Demand 71 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Our survey of the primarily competitive market shows a representation of nationally-recognized, franchised lodging chains. The hotels range in size from 191 to 253 rooms and in age from 10 to 23 years. The market demand has a strong corporate orientation, which results in commercial representing the majority of the demand in the market. In addition, several properties enjoy considerable meeting and group business. As a result of its proximity to the New York City area, this market is able to capture some leisure business as well. For estimated year-end 1996, the primary competitors achieved an overall occupancy of 75.3% at an average rate of $85.49, yielding RevPAR of $64.40. The Woodbridge Sheraton is forecast to maintain the highest occupancy in 1996, at 84%, which equates to an occupancy penetration of 118.4%. This strong performance is due to this hotel's quantity of meeting space (the most in the market at 18,500 square feet), which allows the property to maximize its occupancy given its secondary corporate location. The Woodbridge Hilton follows with an occupancy of 79% and an occupancy penetration rate of 111.3%. In both 1995 and 1996, the subject property has achieved the lowest occupancy and average rate among the primary competitors. This poor performance, which is effectively measured by the occupancy and yield penetration rates of 84.5% and 79.3%, respectively, is a result of the hotel's historically poor image in the local market. In large part, this image is attributable to the inferior condition of the physical facilities prior to the completion of the recent renovation. The completion of the recent renovation, together with an effective marketing effort, should enable the subject property to achieve an improved competitive position within the market area. However, with 7,493 total square feet and its largest room just over 2,000 square feet, the property meeting space inventory is low by market standards. This will hinder the property's ability to compete in the meeting and group segment; the competitive properties illustrated in the previous table feature over twice the available space of the subject property. Furthermore, the subject property has a tertiary location in respect to local demand generators when compared to the primary competition. Therefore, its location and meeting capacity are expected to hinder its ability to reach a 100% RevPAR penetration level in the future. HVS International, Mineola, New York Lodging Market Supply and Demand 72 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Each primary competitor was inspected and evaluated. Descriptions of our findings are presented below. Woodbridge Hilton The Hilton is a 10-story, full-service, first-class lodging facility which opened in 1984. The property is managed by the Hemisphere Management Company under a license agreement with Hilton Hotels. The Hilton features 200 guestrooms, 3 restaurants (Spats for American food, Romulus for Northern Italian cuisine, and Le Cafe Metro for casual fare), 2 cocktail lounges, and 16,811 square feet of meeting space in 14 meeting rooms. The meeting and banquet space includes the Metropolitan Ballroom (3,600 square feet) which can accommodate up to 400 for a reception and 300 for a banquet. Additional facilities include an indoor swimming pool, a health club with hot tub, business center, and gift shop. Guestrooms feature hair dryers, telephones with voice mail, work stations with personal computer jacks, on-command movies, and express check-out. The high average rate achieved at the Hilton is evidence of its superior position in the market; the property has the premier location in the area, within the Metro Park corporate complex located south of the subject property. The Hilton also features a superior level of construction and array of facilities and amenities than the subject property, although the product is nevertheless in need of a renovation. These factors allow the property to attract considerable patronage primarily from the transient and commercial and the meeting and group segments. The Hilton currently derives approximately 60% of its occupancy from the commercial segment, 30% from the meeting and group segment, 10% from the leisure segment. The hotel enjoys the second highest occupancy and yield penetration in the market; 1996 estimated year-end occupancy penetration is 111.3%, while yield is projected to be 122.3%. Woodbridge Sheraton The Sheraton is a multi-story, full-service, first-class lodging facility which opened in 1986. The property is owned by Woodbridge Place Associates and managed by Inn of America under a Sheraton franchise affiliation. In addition to the Sheraton's 253 guestrooms, the hotel features three restaurants (Prestos for casual fare, the American Grill Steakhouse and Pub for American cuisine, and Allen's for Italian fine dining), one cocktail lounge, and approximately 18,500 square feet of meeting space in 15 meeting rooms of varying configurations. The meeting and banquet space includes the Grand Ballroom (6,800 square feet) which can accommodate up to 900 for a reception and 600 for a banquet. Additional facilities include a business center, an indoor swimming pool, a Jacuzzi, a health club, a gift shop, and a HVS International, Mineola, New York Lodging Market Supply and Demand 73 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= florist. Guestrooms feature coffee makers, two telephones with dataport computer access, hairdryers, On Command video, irons and ironing boards; two floors of Club Level Rooms feature bathrobes and spring water. This property is the meeting and group leader in the market, primarily as a function of its meeting space capacity. Also, its high quality physical plant and proximity to the Metro Center allow the property to penetrate the market at a level superior to the subject property. The Sheraton currently derives approximately 50% of its occupancy from the commercial segment, 40% from the meeting and group segment, and 10% from the leisure segment. The hotel enjoys the highest occupancy and yield penetration in the market; 1996 estimated year-end occupancy penetration is 118.4%, while yield is projected to be 128.6%. Secondary Competitors Secondary competitors of the subject property comprise two full-service hotels: the Holiday Inn Springfield and the Crowne Plaza Edison. The Holiday Inn Springfield is located along the Route 22 corridor northwest of the subject property. The Crowne Plaza is located south of the subject property in the Raritan Center in Edison, New Jersey. Due to their distance from the subject property and differences in market segmentation, these properties are considered 75% competitive with the primary competitors. The Holiday Inn Springfield is a full-service property, located along the Route 22 corridor. This property features 199 rooms and roundly 6,000 square feet of meeting space. The property is in the process of undergoing a major renovation which includes all case and soft goods including new carpet throughout. The property is owned and managed by the Holly Hill Corporation and operates under a Holiday Inn franchise. The property's demand is commercial in nature; approximately 75% of its demand is derived from this segment. Of this 75% of demand, 30% is construction related from development along the Route 22 corridor. The remaining 25% of overall demand is 20% leisure and 5% meeting and group. The Holiday Inn is expecting to increase occupancy by 5% this year for a projected year-end occupancy of 59% in 1996, while average rate remains stable at roundly $64. Increases in average rate were constrained due to the low-rated construction business accommodated by the property. The Crowne Plaza - Edison is also full-service property, located in the heart of the Raritan Center Industrial Park. This property features 274 rooms and roundly 3,900 square feet of meeting space. The property underwent a renovation in 1995 which included all case and soft goods. Guestroom HVS International, Mineola, New York Lodging Market Supply and Demand 74 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= wallpaper is scheduled for replacement in 1997. The property is owned by a Prudential and HEI joint venture and is managed by HEI; the property operates under a Crown Plaza franchise. Due to the hotel's location in an industrial park (with little commercial segment hotel demand generated from its tenants) and its proximate location to the New Jersey Convention and Expo Center, the property's demand is meeting and group in nature. Approximately 60% of its demand is derived from this segment, while the remaining 40% of demand comprises 25% commercial and 15% leisure. Management expects year-end occupancy to be approximately 66% (4% over 1995 occupancy) and average rate to remain stable at roundly $76. Increases in average rate were not experienced in 1996 due to an increased accommodation of lower-rated tour and travel business during the typically weaker demand days of the week. The following table illustrates the operating statistics of the two secondary competitors. HVS International, Mineola, New York Lodging Market Supply and Demand 75 Analysis - -------------------------------------------------------------------------------- ================================================================================ Table 6-5 Secondary Competitors - --------------------------------------------------------------------------------
Estimated 1996 Market Segmentation Estimated 1995 ----------------------- --------------------------------- Number of Percentage Weighted Mtg. & Average Property Rooms Competitive Rm. Count Comm. Conv. Leisure Occupancy Rate Rev PAR - ---------------------------------------------------------------------------------------- --------------------------------- Holiday Inn - Springfield 199 75% 149.25 75% 5% 20% 54% $64.00 $34.56 Crowne Plaza - Edison 274 75 205.5 25 60 15 62 76.00 47.12 - ---------------------------------------------------------------------------------------- --------------------------------- Totals/Averages 473 354.75 45% 38% 17% 59% $71.35 $42.10 - ---------------------------------------------------------------------------------------- ---------------------------------
Estimated 1996 ------------------------------- Average Property Occupancy Rate Rev PAR - ----------------------------------------------------------- Holiday Inn - Springfield 59% $64.00 $37.76 Crowne Plaza - Edison 66 76.00 50.16 - ----------------------------------------------------------- Totals/Averages 63% $71.28 $44.90 - ----------------------------------------------------------- HVS International, Mineola, New York Lodging Market Supply and Demand 76 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Proposed Competitors Based on our fieldwork in the market and our discussions with local hotel operators, developers, and government officials, there appear to be no properties proposed or under construction that are likely to compete with the Holiday Inn - Clark. However, it should be noted that the competitive market registers a healthy occupancy of roundly 71% for estimated year-end 1996. Our experience indicates that once markets surpass occupancies of 70%, there is often some demand that cannot be accommodated by the existing hotels. Moreover, investors and developers rapidly become interested in such strong markets, particularly when the area is characterized by a degree of economic growth, thus increasing the likelihood of new construction. In light of these factors and in recognition of the cyclical nature of the lodging industry, we assume that a 125-room, limited-service hotel (such as a Courtyard, Wingate Inn or Ameri-Suites) will enter the local lodging supply in January of 1999. It is also important to note that many limited-service hotels are outperforming their full-service counterparts, and as a result of the lower cost of operations, they often achieve higher yields. The selection of the January, 1999 opening date takes into account the relatively short time frame required to construct a limited-service hotel. As the national economy improves and hotel financing becomes more readily available, the development process can be further hastened. Conclusion A review of historical demand trends in the subject property's area indicates that the market has shown signs of recovery from 1992 onwards, corresponding to the economic recovery nationwide. According to Smith Travel Research, these growth patterns have continued through August of 1996. While supply has remained constant over recent years, growth in demand has driven occupancy upwards, allowing the hotels in the market to follow with average rate increases. Based on our review of the local area, three market segments were defined within the subject property's lodging market. Growth rates for each market segment were forecasted based upon an analysis of the economic and demographic trends that appeared to significantly impact lodging demand. In general, demand is anticipated to increase at moderate rates throughout the projection period. We have identified two properties that are considered competitive with the subject hotel. The subject property is under-performing in the market and is not attaining its fair share in terms of occupancy, average rate, and HVS International, Mineola, New York Lodging Market Supply and Demand 77 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= RevPAR. The completion of the recent renovations is expected to enable the property to achieve an improved competitive position, although the property's tertiary location and limited meeting space will likely limit the hotel's success, particularly in the meeting and group segment of the market. HVS International, Mineola, New York Projection of Occupancy and 78 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 7. Projection of Occupancy and Average Rate Historical Operating Performance The following table sets forth the subject property's historical occupancy, average rate, and RevPAR. For the purpose of comparison, we have also presented corresponding data (as provided by Smith Travel Research) for the competitive hotels described in the previous section. As noted earlier, the Holiday Inn - Clark was sold in August of 1995. As a result of the recent change in ownership and management, many of the historical records are not available. We were provided with the operating history for the last four months of 1995 and the first eight months of 1996, but we are unable to comment on the hotel's performance prior to that time. During the first eight months of 1996, the subject property achieved an occupancy of 52.7%, and an average rate of $75.94. When compared to trends illustrated by the market (as compiled by Smith Travel Research), these operating statistics equated to an occupancy penetration of 74.8% and an average rate penetration of 91.0%. This equated to a yield penetration of 68%. Premise of the Projections To a certain degree, occupancy and rate attainment can be manipulated by management. For example, hotel operators may choose to lower rates in an effort to maximize occupancy. Our forecasts reflect an operating strategy that we believe would be implemented by competent hotel management to achieve an optimal mix of occupancy and average rate. Projected Room Night Demand Lodging demand and occupancy can be projected through a process known as room night analysis. A room night is a unit of hotel demand that equals one room that is occupied for one night. After estimating the number of room nights a hotel can be expected to attract during a 12-month period, we can determine occupancy by dividing the number of room nights of demand captured by the number of room nights available (calculated as the room count x 365). HVS International, Mineola, New York Projection of Occupancy and 79 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The total annual number of room nights occupied in the competitive hotels equates to the market's accommodated room night demand, as shown in the following table. ================================================================================ Table 7-1 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- 1996 Annual Room Night Demand (Rounded) ------------------------------------------------------- Percentage Percentage Market Segment Market Wide of Total Subject Property of Total - -------------------------------------------------------------------------------- Commercial 131,000 51% 21,000 50% Meeting and Group 88,000 34 8,000 19 Leisure 40,000 15 13,000 31 ------- --- ------ --- Total 259,000 100% 42,000 100% - -------------------------------------------------------------------------------- Latent Demand The previous table illustrates the accommodated room night demand in the subject property's competitive market. Because this estimate is based on occupancies, it includes only those hotel rooms that were used by guests. Latent demand considers guests who could not be accommodated by the existing competitive supply, and can be divided into unaccommodated demand and induced demand. Unaccommodated Demand Unaccommodated demand refers to individuals who are unable to secure accommodations in the market because all of the local hotels are filled. These travelers must defer their trips, settle for less desirable accommodations, or stay in properties located outside the market area. Because this demand did not yield occupied room nights, it is not included in the estimate of historical accommodated room night demand. Currently, the subject property and its competitors generally fill during the mid-week (Monday through Wednesday nights). This trend suggests unaccommodated demand during these days of the week. Furthermore, as mentioned previously, it should be noted that the competitive market is expected to register a healthy occupancy of roundly 71.0% by year-end 1996. Our experience indicates that once markets surpass occupancies of 70%, there is often some demand that cannot be accommodated by the existing hotels. In this analysis, we estimate that approximately 5.0% of commercial demand is unaccommodated in this market. HVS International, Mineola, New York Projection of Occupancy and 80 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-2 1996 Accommodated and Unaccommodated Demand - -------------------------------------------------------------------------------- Accommodated Room Night Unaccommodated Unaccommodated Market Segment Demand Demand Percentage Room Night Demand - -------------------------------------------------------------------------------- Commercial 131,000 5.0% 6,540 Meeting and Group 88,000 0.0 0 Leisure 40,000 0.0 0 ------- ----- Total 259,000 6,540 - -------------------------------------------------------------------------------- Total Usable Room Night Demand Total usable room night demand is estimated by combining accommodated demand and usable latent demand. Usable latent demand is that portion of latent demand that can be absorbed based on the number of existing and proposed hotel rooms in the market. The following table shows the projected annual change in accommodated and usable room night demand in the subject property's competitive market. The unaccommodated demand will be able to be accommodated when the hypothetical proposed property enters the market in 1999. HVS International, Mineola, New York Projection of Occupancy and 81 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-3 Total Usable Room Night Demand - --------------------------------------------------------------------------------
Historical 1997 1998 1999 2000 2001 2002 2003 - -------------------------------------------------------------------------------------------------------- Commercial Growth Rate ----- 4.0% 3.5% 3.0% 2.0% 2.0% 2.0% 2.0% Accommodated Demand 130,798 136,030 140,791 145,015 147,915 150,873 153,890 156,968 Usable Latent ----- 0 0 7,251 7,396 7,544 7,695 7,849 Meeting and Group Growth Rate ----- 3.0% 2.5% 2.0% 1.0% 1.0% 1.0% 1.0% Accommodated Demand 88,012 90,652 92,918 94,776 95,724 96,681 97,648 98,624 Usable Latent ----- 0 0 0 0 0 0 0 Leisure Growth Rate ----- 4.0% 3.0% 2.0% 1.0% 1.0% 1.0% 1.0% Accommodated Demand 39,931 41,528 42,774 43,629 44,065 44,506 44,951 45,401 Usable Latent ----- 0 0 0 0 0 0 0 Airline Growth Rate ----- 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Accommodated Demand 0 0 0 0 0 0 0 0 Usable Latent ----- 0 0 0 0 0 0 0 Totals Commercial 130,798 136,030 140,791 152,266 155,311 158,417 161,585 164,817 Meeting and Group 88,012 90,652 92,918 94,776 95,724 96,681 97,648 98,624 Leisure 39,931 41,528 42,774 43,629 44,065 44,506 44,951 45,401 Airline 0 0 0 0 0 0 0 0 ------- ------- ------- ------- ------- ------- ------- ------- TOTAL DEMAND 258,741 268,210 276,483 290,671 295,100 299,604 304,184 308,842 Annual Forecasted Growth 3.7% 3.1% 5.1% 1.5% 1.5% 1.5% 1.5%
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Projection of Occupancy and 82 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Guestroom Supply In 1996, the competitive properties provided a weighted total of 999 guestrooms. Based on our research and discussions with local planning officials, there are no new hotels proposed or under construction in the area. However, as a result of the market's relatively high occupancy, we assume that a 125-room, limited-service hotel will open on January 1, 1999. This new property is projected to add 45,625 rooms to the guestroom supply in 1999. The following table shows the projected competitive supply of available rooms and available room nights. To calculate the annual number of available room nights, the number of available rooms is multiplied by 365. ================================================================================ Table 7-4 Available Rooms and Room Nights - -------------------------------------------------------------------------------- Total Room Overall Night Room Nights Competitive Year Demand Available Occupancy - -------------------------------------------------------------------------------- Historical 258,741 364,544 71% 1997 268,210 364,544 74 1998 276,483 364,544 76 1999 290,671 410,169 71 2000 295,100 410,169 72 2001 299,604 410,169 73 2002 304,184 410,169 74 2003 308,842 410,169 75 - -------------------------------------------------------------------------------- Overall Competitive Occupancy In developing our forecasts, we have attempted to mirror long-term cyclical patterns in the lodging industry. The previous table illustrates that the overall competitive occupancy is expected to reach 76% by 1998. Following the assumed opening of the 125-room, limited-service hotel in January of 1999, this level is expected to decline to 71% in 1999 and grow to 72% in 2000. The overall competitive occupancy is projected to recover after 2000, reaching a level of 75% in 2003. Competitive Index Analysis Competitive indexes are used to analyze the relative market position of each property on the basis of a particular demand segment. The index represents the number of times each year that one room is occupied by one type of traveler (e.g., commercial, meeting and group, leisure, or airline), or the number of room nights actually accommodated per year, per room, per market segment. For example, if a hotel has a commercial competitive index of 190, each room in the property is occupied 190 times a year by a commercial traveler. The competitive index is calculated by dividing a hotel's annual accommodated room night demand in a particular market segment by that property's room count. Competitive indexes will be used to illustrate HVS International, Mineola, New York Projection of Occupancy and 83 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= each property's position in the market based on its ability to compete with other local lodging facilities. Commercial Segment The historical commercial segment competitive indexes in the subject property's market range from 103 to 173. The Woodbridge Hilton is the most competitive property in the commercial market in 1996, with an index of 173, followed by the Woodbridge Sheraton (at 153). The subject property's commercial segment index of 110 is higher than the aggregate index of the secondary competitors (at 103). As a result of the recent renovation and the continued repositioning of the subject property, we expect the subject property to penetrate the commercial market more effectively. To reflect the more focused management strategy and improved facilities, the subject property's commercial segment competitive index is projected to increase to 130 in 1997, 140 in 1998, and 145 in 1999 and remain at this level in subsequent years. This stabilized level is lower than that of the Woodbridge Hilton and Sheraton; these properties are expected to remain the leaders in this particular segment (until the opening of the proposed hotel) due to their respective locations in or near the Metro Center and their superior product quality. The new limited-service hotel is expected to attain a stabilized commercial segment index of 200 in 2001, which is the highest in the market. This commercial market strength is attributed to two major factors: the newness of the hotel will allow the hotel to offer the highest quality product in the market, and the proposed hotel's assumed lack of meeting space will result in a strengthened commercial market orientation. The following table shows the projected commercial segment competitive indexes of the area's hotels. ================================================================================ Table 7-5 Commercial Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Subject Property 110 130 140 145 145 145 Woodbridge Hilton 173 173 173 173 173 173 Woodbridge Sheraton 153 153 153 153 153 153 Secondary 103 103 103 103 103 103 Proposed Hotel --- --- --- 190 195 200 - -------------------------------------------------------------------------------- Meeting and Group Segment As a result of their relatively large inventory of function space (at 16,811 square feet and 18,500 square feet, respectively) the Woodbridge Hilton and the Woodbridge Sheraton are the most competitive properties in this HVS International, Mineola, New York Projection of Occupancy and 84 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= segment. When comparing both the Sheraton and the Hilton, the Sheraton has the most meeting space in the market and has a secondary commercial location (when compared to the Hilton); therefore, the Sheraton is more competitive in this market than the Hilton. Again as a result of the renovation that took place in 1995, the subject property's meeting and group competitive index is expected to increase to 60 in 1997, 65 in 1998, and 70 in 1999. Because the subject property lacks the amount of meeting space offered by its primary competitors (the subject property also lacks the accompanying space functionality), the subject property will not maintain a strong competitive position in this segment. The proposed hotel is expected to achieve a stabilized index of 50 in this segment, which is below the subject property; because the proposed property is limited-service in nature, it is not expected to be very competitive in this segment. No other changes are anticipated. ================================================================================ Table 7-6 Meeting and Group Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Subject Property 44 60 65 70 70 70 Woodbridge Hilton 87 87 87 87 87 87 Woodbridge Sheraton 123 123 123 123 123 123 Secondary 88 88 88 88 88 88 Proposed Hotel --- --- --- 40 45 50 - -------------------------------------------------------------------------------- Leisure Segment We anticipate the subject property's leisure segment competitive index to decline to 60 in 1997, and to 55 in 1998, as leisure demand is displaced due to a greater amount of accommodated commercial and meeting and group demand at the subject. The proposed hotel is expected to reach a stabilized index of 50 in this segment, which would position this hotel just below the competitive level of the subject property in the leisure segment. This leisure segment index is considered appropriate given the limited-service nature of the proposed hotel; the lack of meeting space inherent in most limited-service hotel designs typically leads to more marketing efforts towards the leisure traveler and less efforts towards meeting and group traveler. No other changes are expected in this segment. The following table illustrates the competitive indexes in the leisure segment. HVS International, Mineola, New York Projection of Occupancy and 85 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-7 Leisure Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Subject Property 66 60 55 55 55 55 Woodbridge Hilton 29 29 29 29 29 29 Woodbridge Sheraton 31 31 31 31 31 31 Secondary 39 39 39 39 39 39 Proposed Hotel --- --- --- 40 45 50 - -------------------------------------------------------------------------------- Subject Property's Room Night Capture and Occupancy After the competitive index is calculated, it is adjusted to reflect the property's room count, yielding a figure referred to as the market share adjuster. The market share adjuster of each property is then divided by the total market share adjuster for all of the competitors, resulting in each hotel's market share. By multiplying the projected market share by the area's usable room night demand, we can determine the total number of room nights captured by a specific hotel. Occupancy is then calculated by dividing the projected number of room nights captured by the property's total number of available room nights. Multiplying the subject property's projected market share by the estimated room night demand in each segment results in the following estimate of room nights captured by the hotel. HVS International, Mineola, New York Projection of Occupancy and 86 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-8 Room Nights Captured by the Subject Property - -------------------------------------------------------------------------------- 1997 1998 1999 2000 2001 ------------------------------------------------------ Commercial Demand 136,030 140,791 152,266 155,311 158,417 Market Share 0.1844 0.1958 0.1717 0.1710 0.1704 Capture 25,079 27,563 26,145 26,565 26,992 Meeting and Group Demand 90,652 92,918 94,776 95,724 96,681 Market Share 0.1257 0.1347 0.1363 0.1354 0.1346 Capture 11,392 12,518 12,916 12,963 13,010 Leisure Demand 41,528 42,774 43,629 44,065 44,506 Market Share 0.2943 0.2766 0.2444 0.2409 0.2375 Capture 12,222 11,830 10,663 10,615 10,570 ------- ------- ------- ------- ------- Total Capture 48,693 51,911 49,724 50,143 50,572 - -------------------------------------------------------------------------------- Dividing the total number of room nights captured by the subject property's number of available room nights per year (calculated as 191 x 365) produces the projected occupancy percentage. ================================================================================ Table 7-9 Calculation of the Subject Property's Projected Occupancy - -------------------------------------------------------------------------------- 1997 1998 1999 2000 2001 ------------------------------------------------------ Total Room Nights Captured/Year 48,693 51,911 49,724 50,143 50,572 Available Room Nights 69,715 69,715 69,715 69,715 69,715 Occupancy 69.85% 74.46% 71.32% 71.93% 72.54% Rounded 70% 74% 71% 72% 73% - -------------------------------------------------------------------------------- For the purpose of forecasting income and expense, we will use the following occupancy levels. HVS International, Mineola, New York Projection of Occupancy and 87 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-10 Occupancy Forecast - -------------------------------------------------------------------------------- Year Occupancy ------------------------------------ 1997 70% 1998 74 1999 71 Stabilized 72 - -------------------------------------------------------------------------------- Although the preceding room night analysis shows the subject property achieving a 73% occupancy in 2001, we have chosen to use a stabilized level of 72%. The stabilized occupancy is intended to reflect the anticipated results of the property over its remaining economic life, given any and all changes in the life cycle of the hotel. Thus, the stabilized occupancy excludes from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusually high or low occupancies. Although the subject property may operate at occupancies above this stabilized level, we believe it equally possible for new competition and temporary economic downturns to force the occupancy below this selected point of stability. AVERAGE RATE ANALYSIS One of the most important considerations in estimating the value of a lodging facility is a supportable forecast of its attainable average rate, which is more formally defined as the average rate per occupied room. Average rate can be calculated by dividing the total rooms revenue achieved during a specified period by the number of rooms sold during the same period. The projected average rate and the anticipated occupancy percentage are used to forecast rooms revenue, which in turn provides the basis for estimating most other income and expense categories. Competitive Positioning The Holiday Inn Select's average rate will be projected using a competitive positioning method. This technique begins with an analysis of the average rates achieved by the subject property and its competitors. These rates establish a range that reflects certain characteristics of the specific market, such as price sensitivity, demand orientation, and occupancy. The subject property's average rate is then compared to those of the hotels to which it is most similar in terms of size, quality, facilities, amenities, market orientation, location, management, image, and affiliation. Adjustments are made to reflect any relevant differences. HVS International, Mineola, New York Projection of Occupancy and 88 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Although the average rate analysis presented here follows the occupancy projections, these two statistics are highly correlated; in reality, one can not project occupancy without making specific assumptions regarding average rate. This relationship is best illustrated by rooms revenue per available room (RevPAR), which reflects a property's ability to maximize rooms revenue. The following table summarizes the 1996 average rate and RevPAR of the subject property and its competitors. ================================================================================ Table 7-11 1996 Average Rate and RevPAR of the Primary Competitors - -------------------------------------------------------------------------------- 1996 1996 Average Rooms Revenue Property Room Rate Per Available Room - -------------------------------------------------------------------------------- Subject Property $76.00 $45.60 Woodbridge Hilton 89.00 70.31 Woodbridge Sheraton 88.00 73.92 ------ ------ Average $85.49 $64.40 - -------------------------------------------------------------------------------- The Woodbridge Hilton maintains the highest average rate in 1996 (projected at $89 for 1996 year-end), closely followed by the Woodbridge Sheraton (at $88). The subject property trails with a projected 1996 year-end rate of $76. This discounted rate is largely due to the historically poor positioning of the hotel. While the subject property has made great strides in average rate growth since the renovation, management has had to employ some rate discounting in order to become newly re-established in the local commercial market. As the visibility of the current hotel product improves in 1997, the hotel should be able to maintain average rate growth slightly in excess of the market during the short-term. Average Rate Increases It is important to note that hotel room rate increases do not necessarily conform to the underlying monetary inflation rate, because lodging facilities are influenced by market conditions such as the relationship between supply and demand. A hotel's ability to raise room rates is affected by a number of factors, including the following. o Supply and Demand Relationships - The relationship between supply and demand is one of the factors that determine hotel occupancies and average rates. Strong markets where lodging demand is increasing faster than supply are often characterized by rate growth that exceeds inflation. Markets that are overbuilt or suffering from declining demand are unlikely to exhibit any significant increases in average rates. HVS International, Mineola, New York Projection of Occupancy and 89 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= o Inflationary Pressures - Price increases caused by inflation affect hotel room rates by eroding profit margins and encouraging operators to raise prices. This strategy is effective only in markets that are characterized by a healthy supply and demand relationship. o Improving the Competitive Standard - When a new lodging facility enters a mature market, its rates may be set higher than the marketwide average in an effort to justify the development costs. This may allow other competitors to achieve corresponding gains by effectively raising the amount the market will bear. However, if the addition to supply has a severe impact on the occupancy levels of other hotels, price competition may ensue. o Property-Specific Improvements - Changes that make a hotel more or less attractive to guests can have an impact on average rate. An expansion, renovation, upgrading, or the introduction of additional facilities and amenities may enable greater-than-inflationary room rate increases. Likewise, deferred maintenance may make a property less competitive, engendering a decline in room rates. In determining average rate projections, changes that occur prior to occupancy stabilization are generally attributable to factors that are specific to the property and the market. After a hotel achieves a stabilized occupancy, room rates are generally expected to continue to increase at the underlying inflation rate throughout the remainder of the projection period. Our forecast of the subject property's average rate recognizes the recent renovation, which has enhanced the hotel's ability to compete with other local lodging facilities. We have also taken into account the re-positioning of the hotel's marketing efforts. Marketwide average rates rose by 13.8% in 1994, declined by 8.2% in 1995 (this adjustment was to reflect a more realistic average rate level after extraordinary growth 1994), and recovered with an 8.8% growth rate for year-to-date 1996 (according to Smith Travel Research). In consideration of these trends, as well as the improving market image of the property and market re-positioning, we believe it is reasonable to expect the Holiday Inn Select's average rate to increase by 7.0% in 1997. In the second projection year, while demand remains strong and supply remains constant, we expect an increase of 5.0% in average rate. From the third projection year onward, average rate gains are expected to stabilize at the underlying inflation rate of 3.5% annually. Based on these considerations, the following table shows our projection of average rate increases. HVS International, Mineola, New York Projection of Occupancy and 90 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-12 Average Rate Forecast - -------------------------------------------------------------------------------- Areawide Subject Property's Subject Property's Areawide Rate Rate Projected Year Occupancy Increase Increase Average Rate - ------------------------------------------------------------------------------- Positioned Base --- --- --- $76.00 1997 74% 4% to 6% 7.0% 81.34 1998 76 4 to 6 5.0 85.40 1999 71 3 to 4 3.5 88.39 Stabilized 72 3 to 4 3.5 91.48 - -------------------------------------------------------------------------------- The following average rates will be used to project the subject property's rooms revenue. ================================================================================ Table 7-13 Forecast of Occupancy and Average Rate - -------------------------------------------------------------------------------- Year Occupancy Average Rate ------------------------------------------------------------------- 1997 70% $81.34 1998 74 $85.40 1999 71 $88.39 Stabilized 72 $91.48 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Highest and Best Use 91 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 8. Highest and Best Use The concept of highest and best use recognized by the Appraisal Institute distinguishes between the highest and best use of the land (as though vacant) and that of the property (as improved). Highest and best use is defined as: The reasonably probable and legal use of vacant land or improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.(1) The concept of highest and best use is the premise upon which value is based, and is a product of competitive forces in the marketplace. The principle of balance holds that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium. This principle applies to relationships among various property components as well as the relationship between the costs of production and the property's productivity. The point of economic balance is achieved when the combination of land and building is optimal (i.e., when no marginal benefit or utility is achieved by adding another unit of capital). The law of increasing returns holds that larger amounts of the agents of production produce greater net income up to a certain point, after which the law of diminishing returns is applied.(2) It is important to recognize that the highest and best use of the land (as though vacant) may differ from the highest and best use of the property (as improved). This may occur when a site has existing improvements and the highest and best use of the land differs from the current use. Nonetheless, the current property use will continue until the value of the land under its highest and best use exceeds the value of the property in its current use, plus the cost to remove the existing improvements. (1) The Appraisal of Real Estate - Tenth Edition, Appraisal Institute, Chicago, IL, 1992, p. 45. (2) Ibid., p. 40. HVS International, Mineola, New York Highest and Best Use 92 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= In consideration of the factors influencing development in the immediate area, it is the appraisers' opinion that the highest and best use of the subject site, as vacant, would be as a transient lodging facility. Based on the fact that the value of the land does not exceed the value of the hotel plus the cost of demolition, it is our opinion that the subject property's highest and best use, as improved, is its current use as a lodging facility. HVS International, Mineola, New York Approaches to Value 93 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 9. Approaches to Value In appraising real estate for market value, the appraiser has three approaches from which to select: the income capitalization, sales comparison, and cost approaches. Although all three valuation procedures are given consideration, the inherent strengths of each approach and the nature of the subject property must be evaluated to determine which will provide supportable estimates of market value. The appraiser is then free to select one or more of the appropriate approaches in arriving at a final value estimate. The Income Capitalization Approach The income capitalization approach takes a property's projected net income before debt service and allocates this future benefit to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component is calculated. The total of the mortgage component and the equity component equals the value of the property. This approach is often selected as the preferred valuation method for income-producing properties, because it most closely reflects the investment rationale of knowledgeable buyers. The Sales Comparison Approach The sales comparison approach estimates the value of a property by comparing it to similar properties that have been sold on the open market. To obtain a supportable estimate of value, the sales price of a comparable property must be adjusted to reflect any dissimilarities between it and the property being appraised. The sales comparison approach may provide a useful value estimate in the case of simple forms of real estate, such as vacant land and single-family homes, where the properties are homogeneous and the adjustments are few and relatively simple to compute. In the case of complex investments such as shopping centers, office buildings, restaurants, and lodging facilities, where the adjustments are numerous and more difficult to quantify, the sales comparison approach loses much of its reliability. HVS International, Mineola, New York Approaches to Value 94 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Hotel investors typically do not employ the sales comparison approach in reaching their final purchase decisions. Factors such as the lack of recent sales data, the numerous insupportable adjustments that are necessary, and the general inability to determine the true financial terms and human motivations of comparable transactions often make the results of this technique questionable. Although the sales comparison approach may provide a range of values that supports the final estimate, reliance on this method beyond the establishment of broad parameters is rarely justified by the quality of the sales data. The market-derived capitalization rates sometimes used by appraisers are susceptible to the same shortcomings inherent in the sales comparison approach. To substantially reduce the reliability of the income capitalization approach by employing capitalization rates obtained from unsupported market data weakens the final value estimate and ignores the typical investment analysis procedures employed by hotel purchasers. Because appraisers are obligated to mirror the actions of the marketplace, we generally give the sales comparison approach minimal weight in the hotel appraisal process beyond bracketing the final estimate.(1) The Cost Approach The cost approach estimates market value by computing the current cost to replace the property and subtracting any depreciation resulting from physical deterioration, functional obsolescence, and external (or economic) obsolescence. The value of the land, as if vacant and available, is then added to the depreciated value of the improvements to produce a total value estimate. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements grow older and begin to deteriorate, the resultant loss in value becomes increasingly difficult to quantify accurately. We find that knowledgeable hotel buyers base their purchase decisions on economic factors such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, this approach is given minimal weight in the hotel valuation process. As noted in Hotels and Motels: A Guide to Market (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 209. HVS International, Mineola, New York Approaches to Value 95 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Analysis, Investment Analysis, and Valuations, "the cost approach is seldom used to value existing hotels and motels."(1) Reconciliation The final step in the valuation process is the reconciliation and correlation of the value indications. Factors that are considered in assessing the reliability of each approach include the purpose of the appraisal, the nature of the subject property, and the reliability of the data used. In reconciliation, the applicability and supportability of each approach is considered and the range of value indications is examined. The most significant weight is given to the approach that produces the most reliable solution and most closely reflects the criteria used by typical investors. Our nationwide experience with numerous hostelry buyers and sellers indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the investors who constitute the marketplace. For this reason, the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in the hotel valuation process. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 208. HVS International, Mineola, New York Income Capitalization Approach 96 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 10. Income Capitalization Approach The income capitalization approach is based on the principle that the value of a property is indicated by its net return, or what is known as the present worth of future benefits. The future benefits of income-producing properties, such as hotels, are net income before debt service and depreciation (as estimated by a forecast of income and expense) and any anticipated reversionary proceeds from a sale. These future benefits can be converted into an indication of market value through a capitalization process and discounted cash flow analysis. Using the income capitalization approach, the subject property has been valued by analyzing the local market for transient accommodations, examining existing and proposed competition, and developing a forecast of income and expense that reflects current and anticipated income trends and cost components through a stabilized year of operation. The forecast of income and expense is expressed in current dollars for each year. The stabilized year is intended to reflect the anticipated operating results of the property over its remaining economic life, given any or all applicable stages of build-up, plateau, and decline in the life cycle of the hotel. Thus, income and expense estimates from the stabilized year forward exclude from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusual revenues or expenses. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, published by the Appraisal Institute, "of the three valuation approaches available to the appraiser, the income capitalization approach generally provides the most persuasive and supportable conclusions when valuing a lodging facility."(1) This text recommends that using a ten-year forecast and an equity yield rate "most accurately reflects the actions of typical hotel buyers, who purchase properties based (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. HVS International, Mineola, New York Income Capitalization Approach 97 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= on their leveraged discounted cash flow."(1) The simpler procedure of using a ten-year forecast and a discount rate is "less reliable because the derivation of the discount rate has little support. Moreover, it is difficult to adjust the discount rate for changes in the cost of capital."(2) We have used both methods to discount the subject property's projected net income into an estimate of value. Method One is a ten-year discounted cash flow analysis in which the cash flow to equity and the equity reversion are discounted to the present value at the equity yield rate, and the income to the mortgagee is discounted at a mortgage interest rate. The sum of the equity and mortgage values is the total property value. Method Two is a simple ten-year discounted cash flow analysis in which the annual net income before debt service and the reversionary proceeds following a sale at the end of the tenth year are discounted back to the date of the appraisal at an overall discount rate, and then totaled to produce an indication of the present worth of future benefits. To convert the projected income stream into an estimate of value through Method One, the anticipated net income (before debt service and depreciation) is allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. The total of the mortgage component and the equity component equals the value of the property. The process is described as follows. 1. The terms of typical hotel financing are set forth, including interest rate, amortization term, and loan-to-value ratio. 2. An equity yield rate of return is established. Numerous hotel buyers base their equity investments on a ten-year equity yield rate projection that takes into account ownership benefits such as periodic cash flow distributions, residual sale or refinancing distributions that return any property appreciation and mortgage amortization, income tax benefits, and various non-financial considerations such as status and prestige. The equity yield rate is also known as the internal rate of return on equity. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236 (2) Ibid. HVS International, Mineola, New York Income Capitalization Approach 98 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 3. The value of the equity component is calculated by first deducting the annual debt service from the projected net income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value. After deducting the mortgage balance at the end of the tenth year and the typical brokerage and legal costs, the equity residual is discounted back to the date of value at the equity yield rate. The net income to equity for each of the ten projection years is also discounted to the present value. The sum of these discounted values equates to the value of the equity component. Adding the equity component to the initial mortgage balance yields the overall property value. 4. Because the mortgage and the debt service amounts are unknown but the loan-to-value ratio was determined in Step #1, the preceding calculation can be solved through an iterative process or by use of a linear algebraic equation that computes the total property value. The algebraic equation that solves for the total property value using a ten-year mortgage and equity technique was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(1) 5. The value is proven by allocating the total property value between the mortgage and equity components and verifying that the rates of return set forth in Steps #1 and #2 can be met from the projected net income. The process of converting the projected income stream into an estimate of value through Method Two is described as follows. 1. A discount rate is established by evaluating the total property yield derived by Method One. Occasionally, the discount rate may be adjusted slightly based on the total property yields indicated by recent transactions involving hotels similar to the subject property. 2. The reversionary value is calculated by capitalizing the 11th-year net income by the terminal capitalization rate and deducting typical brokerage and legal fees. (1) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Income Capitalization Approach 99 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 3. The ten-year forecast of net income (before debt service and depreciation) and the reversionary value are discounted to the date of value at the rate derived above. Review of Operating History Because the Holiday Inn Select is an existing hotel with an established operating performance, its historical income and expense experience can serve as a basis for projections. The following table presents the Holiday Inn Select's unaudited income and expense statement from January through August, 1996. As a result of a recent change in the hotel's ownership and management, prior statements are not available. Where applicable, we have reorganized the statements in accordance with the Uniform System of Accounts for Hotels. HVS International, Mineola, New York Income Capitalization Approach 100 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-1 Historical Operating Performance - -------------------------------------------------------------------------------- Partial Year Ending August: 1996 Total Rooms: 191 Occupied Rooms: 21,356 Complimentary Rooms: 871 Days Open: 212 Occupancy: 52.7% Amount per Amount per Average Rate: $75.94 Percentage Available Occupied (+000) of Revenue Room Room - -------------------------------------------------------------------------------- REVENUE Rooms $1,622 71.5% $8,491 $75.94 Food 385 16.9 2,014 18.01 Beverage 160 7.0 835 7.47 Telephone 73 3.2 382 3.42 Net Other Income 31 1.3 160 17.22 Total 2,269 99.9 11,882 106.27 - -------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES Rooms 368 22.7 1,926 17.22 Food & Beverage 575 105.6 3,009 26.91 Telephone 40 55.5 212 1.90 Total 983 43.3 5,147 46.03 - -------------------------------------------------------------------------------- DEPARTMENTAL INCOME 1,286 56.6 6,735 60.24 - -------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 311 13.7 1,628 14.56 Management Fee 63 2.8 330 2.96 Marketing 193 8.5 1,010 9.04 Franchise Fees 52 2.3 270 2.42 Property Oper. & Maint. 185 8.1 967 8.65 Energy 165 7.3 864 7.73 Total 969 42.7 5,071 45.35 - -------------------------------------------------------------------------------- HOUSE PROFIT 318 13.9 1,664 14.89 - -------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 176 7.8 921 8.24 Insurance 27 1.2 139 1.24 Reserve for Replacement 84 3.7 441 3.94 Total 287 12.7 1,501 13.42 - -------------------------------------------------------------------------------- NET INCOME $31 1.2 163 $1.47 ================================================================================ - -------------------------------------------------------------------------------- Several changes are expected by management that will improve the operating efficiency of the hotel; hence, this partial year statement does not adequately represent the operating potential of the hotel. Our adjustments are HVS International, Mineola, New York Income Capitalization Approach 101 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= based on comparable operating statements as well as the 1997 operating budget for the subject property. The most significant revenue adjustments include the expected improvements in the food and beverage department. We expect the banquet department to increase its sales with improved marketability and an establishment in the market. Furthermore, we expect the restaurant and bar to increase revenues to be more in line with comparable operations. Increases reflected in net other income stem largely from the operating budget for the subject property. We expect departmental expenses in the food and beverage department to be brought in line with industry averages and comparable operations. We have made a considerable downward adjustment to account for this expected efficiency. Added efficiency will also result from increased volume in restaurant, bar, and banquet activity. Significant adjustments in the administrative and general, marketing, property operations and maintenance, and energy operating expense categories were made. Again, these were made based on comparable operations, current franchise and marketing agreements, and the 1997 operating budget of the subject property. Forecast of Income and Expense The forecast of income and expense is intended to reflect the appraiser's subjective estimate of how a typical buyer would project the subject property's future operating results. Depending on the dynamics of the local market, a typical buyer's projection may be adjusted upward or downward. We have attempted to consider these factors in formulating this forecast. HVS International uses a fixed and variable component model to project a lodging facility's revenue and expense levels. This model is based on the premise that hotel revenues and expenses have one component that is fixed and another that varies directly with occupancy and facility usage. A projection can be made by taking a known level of revenue or expense and calculating its fixed and variable components. The fixed component is then held constant, while the variable component is adjusted for the percent change between the projected occupancy and facility usage and that which produced the known level of revenue or expense. Base-Year Statement of Income and Expense Based on our review of the operating histories of the subject property and comparable hotels, we have derived a base-year statement of income and expense expressed in 1996 dollars. The units of comparison include a HVS International, Mineola, New York Income Capitalization Approach 102 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= percentage of departmental and total revenue, amounts per available room, and amounts per occupied room. The income and expense ratios reflect an occupancy level of 72.0%. The base-year profit and loss statement will be used to determine the relationship between the fixed and variable components. HVS International, Mineola, New York Income Capitalization Approach 103 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-3 Base-Year Statement of Income and Expense - -------------------------------------------------------------------------------- Forecasted Year Ending: 1996 Number of Rooms: 191 Occupancy: 72.0% Average Rate: $75.94 Percent of Amount per Amount per Occupied Rooms: 50,195 Total Available Occupied (+000) Revenue Room Room - -------------------------------------------------------------------------------- Revenue: Rooms $3,812 59.9% $19,956 $75.94 Food 1,807 28.4 9,461 36.00 Beverage 452 7.1 2,365 9.00 Telephone 176 2.8 920 3.50 Net Other Income 114 1.8 599 2.28 Total Revenue $6,360 100.0 $33,301 $126.72 - -------------------------------------------------------------------------------- Expenses: Rooms* $915 24.0% $4,790 $18.23 Food & Beverage* 1,852 82.0 9,697 36.90 Telephone* 97 55.0 506 1.93 Administrative & General 668 10.5 3,497 13.31 Management Fee 191 3.0 999 3.80 Marketing 350 5.5 1,832 6.97 Franchise Fees 191 3.0 998 3.80 Property Oper. & Maint. 210 3.3 1,100 4.19 Energy 277 4.4 1,450 5.52 Property Taxes 244 3.8 1,277 4.86 Insurance 67 1.1 350 1.33 Reserve for Replacement 254 4.0 1,332 5.07 Total Expenses $5,315 83.6% $27,826 $105.88 - -------------------------------------------------------------------------------- Net Income $1,046 16.4% $5,475 $20.83 ================================================================================ * Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- Inflation Assumptions The base revenue and expense amounts are inflated to reflect current dollars for each projection year. Line items can be affected by different factors. We must establish a general rate of inflation that will be applied to most revenue and expense categories. The following table shows inflation estimates made by economists at some noted institutions and corporations. HVS International, Mineola, New York Income Capitalization Approach 104 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-4 Inflation Estimates - -------------------------------------------------------------------------------- Projected Increase in Consumer Price Index (Annualized Rate Versus 12 Months Earlier) ------------------------------------------ November May Source of 1996 of 1997 - -------------------------------------------------------------------------------- Maureen Allyn, Scudder Stevens Clark 3.1% 2.3% Wayne Angell, Bear Stearns 3.0 3.2 Richard Berner, Mellon Bank 2.9 2.8 David Berson, Fannie Mae 2.9 2.8 David Blitzer, S&P 3.0 2.7 Paul Boltz, T. Rowe Price 3.2 3.5 David Bostian, Herzog, Heine, Geduld 2.9 2.5 Philip Braverman, DKB Securities 3.0 2.8 William Brown, J.P. Morgan 3.3 3.2 Rosanne Cahn, CS First Boston 3.1 2.6 James Coons, Huntington National Bank 3.2 3.0 Michael Cosgrove, The Econoclast 3.2 3.3 Dewey Daane, Vanderbilt University 3.4 3.6 Robert Dederick, Northern Trust 3.1 3.4 W.Dudley, Goldman Sachs 3.4 3.2 Michael Englund, MMS Intl. 3.2 3.3 Michael Evans, Evans Group 3.0 3.0 Gail Fosler, Conference Board 3.5 3.6 Maury Harris, Paine Weber, Inc. 2.8 2.8 Tracy Herrick, Jefferies & Co. 3.2 3.6 Stuart Hoffman, PNC Bank 3.1 2.8 William Hummer, Wayne Hummer 2.9 3.0 Edward Hyman, ISI Group 2.8 2.1 Saul Hymans, University of Michigan 2.7 1.7 Mieczyslaw Karczmar, Deutsche Bank 2.8 3.2 Kurt Karl, WEFA Group 2.6 2.3 Irwin Kellner, Chase Manhattan Bank 2.6 2.3 D. Laufenberg, American Express Financial Advisors 3.2 3.4 Michelle Laughlin, Sanwa Securities 3.0 3.2 Carol Leisenring, CoreStates Financial 2.7 2.5 Richard Lemmon, General Motors 3.0 3.0 Mickey Levy, NationsBank Capital Markets 2.6 2.4 David Littmann, Comerica 3.1 3.0 John Lonski, Moody's Investors Service 3.3 3.2 Paul McCulley, UBS Securities 3.0 2.8 John McDevitt, 3M 2.6 2.5 Arnold Moskowitz, Moskowitz Capital 3.1 3.5 John Mueller, LBMC, Inc. 3.2 2.5 David Munro, High Frequency Econ. 3.0 2.5 Carl Palash, MCM MoneyWatch 3.0 3.0 Nicholas Perna, Fleet Financial Group 3.3 3.3 Elliott Platt, Donaldson Lufkin 2.8 2.0 Maria F. Ramirez, MF Ramirez 3.0 3.0 Donald Ratajczak, Georgia State University 3.0 3.3 David Resler, Nomura Securities International 2.9 2.6 Allan Reynolds, Hudson Institute 3.3 3.6 Richard Rippe, Prudential Securities 3.1 3.3 A. Gary Schilling, Schilling & Co. 3.0 3.0 Allen Sinai, Lehman Brothers 3.2 3.4 James Smith, University of North Carolina 2.1 1.9 Susan Sterne, Economic Analysis 2.5 2.5 Donald Straszheim, Merrill Lynch 2.7 2.3 Thomas Synott III, U.S. Trust Company 3.3 3.4 John Williams, Bankers Trust 3.0 3.1 Raymond Worseck, A.G. Edwards 3.6 3.3 David Wyss, DRI/McGraw-Hill 3.0 2.5 Edward Yardeni, Deutsche Morgan Grenfell 2.2 2.0 Mark Zandi, Regional Financial Associates 3.0 3.2 ----- ----- Averages 3.0% 2.9% Source: Wall Street Journal, July 1, 1996 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 105 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The preceding table shows inflation forecasts averaging 3.0% through November, 1996 and 2.9% through May, 1997. Most of the economists in the sample estimate inflation rates ranging from 2.5% to 3.4% for the 12-month period, although several anticipate levels of slightly greater than 3.4%. As a further check on these inflation projections, we have reviewed historical increases in the Consumer Price Index. Because the value of real estate is predicated on cash flows over a relatively long period, inflation should be considered from a long-term perspective. Between 1986 and 1994, the national CPI increased at an average annual compounded rate of 3.8%. In consideration of these historical trends, the projections set forth above, and our assessment of probable property appreciation levels, we have selected an annual stabilized inflation rate of 3.5%. One of the exceptions to this general inflation assumption is the projected growth in average rate. As noted earlier, increases in the subject property's room rate are projected as follows. ================================================================================ Table 10-5 Projected Growth in Average Rate - -------------------------------------------------------------------------------- Increase From Year Previous Year ---------------------------------------------------------- 1997 --- 1998 5.0% 1999 3.5 2000 3.5 Thereafter 3.5 - -------------------------------------------------------------------------------- The remaining exception to this assumption is the property tax increases during the first two years of projections. As summarized earlier in this report, these increases are forecast to be 1% in 1997, 2% in 1998, and 3.5% thereafter. Using these inflation assumptions, the base-year income and expense statement (which is expressed in 1996 dollars) is inflated to arrive at projections. Each revenue and expense category will be projected using the inflated base statement to determine the fixed and variable component relationships. HVS International, Mineola, New York Income Capitalization Approach 106 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Rooms Revenue Rooms revenue is determined by two variables: occupancy and average rate. Earlier in this report, we estimated the subject property's occupancy and average rate as follows. ================================================================================ Table 10-6 Projected Occupancy and Average Rate - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized - -------------------------------------------------------------------------------- Forecast Occupancy Percentage 70.0% 74.0% 71.0% 72.0% Forecast Average Rate $81.34 $85.40 $88.39 $91.48 - -------------------------------------------------------------------------------- Rooms revenue is calculated as follows. ================================================================================ Table 10-7 Forecast of Rooms Revenue - -------------------------------------------------------------------------------- Number of Rooms Calendar Years Projected Average Number Days in Revenue Ending: Occupancy Room Rate of Units in Year (+000) - -------------------------------------------------------------------------------- 1997 70.0 X $81.34 X 191 X 365 = $3,969 1998 74.0 X 85.40 X 191 X 365 = 4,406 1999 71.0 X 88.39 X 191 X 365 = 4,375 Stabilized 72.0 X 91.48 X 191 X 365 = 4,592 - -------------------------------------------------------------------------------- Food and Beverage Revenue Food and beverage revenue is generated by a hotel's restaurants, lounges, coffee shops, snack bars, banquet rooms, and room service. In addition to providing a source of revenue, these outlets serve as an amenity that assists in the sale of guestrooms. With the exception of properties with active lounges or banquet facilities that draw local residents, in-house guests generally represent a substantial percentage of a hotel's food and beverage patrons. The Uniform System of Accounts for Hotels/Eighth Revised Edition defines food revenue as "revenue derived from the sale of food, including coffee, milk, tea and soft drinks. Food sales do not include meals charged on employees' (staff) checks." Beverage revenues are "derived from the sale of beverages." In addition to the revenue generated by the sale of food and beverages, hotels often produce other income that is related to this department, such as meeting room rentals, cover charges, service charges, and miscellaneous banquet revenue. HVS International, Mineola, New York Income Capitalization Approach 107 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Although food revenue varies directly with changes in occupancy, the small portion generated by banquet sales and outside capture is relatively fixed. Food revenue was projected based on this relationship between the fixed and variable components. The following table shows the projected food revenue and several units of comparison that can be used to check the reasonableness of the forecast. ================================================================================ Table 10-8 Forecast of Food Revenue - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized - -------------------------------------------------------------------------------- Total Food Revenue (+000) $ 1,831 $ 1,976 $ 1,983 $ 2,074 Percent of Total Revenue 28.0% 27.5% 27.6% 27.6% Per Available Room $ 9,589 $ 10,347 $ 10,381 $ 10,858 Per Occupied Room $ 37.52 $ 38.30 $ 40.06 $ 41.32 - -------------------------------------------------------------------------------- Based on these units of comparison, the projected food revenue appears reasonable when compared with industry standards. Beverage Revenue Beverage revenue is generated by the sale of alcoholic beverages in a hotel's restaurants and banquet rooms and the sale of alcoholic and nonalcoholic beverages in the bars and lounges. Based on an analysis of comparable lodging facilities, beverage revenue is estimated to average approximately 25% of food revenue. Thus, beverage revenue is projected by multiplying the projected food revenue by 25%. The following table illustrates the forecast of beverage revenue. ================================================================================ Table 10-9 Forecast of Beverage Revenue - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized - -------------------------------------------------------------------------------- Total Beverage Revenue (+000) $ 458 $ 494 $ 496 $ 519 - -------------------------------------------------------------------------------- Telephone Revenue Telephone revenue is generated by hotel guests who charge local and long-distance calls to their rooms, and by individuals who use the property's public telephones. Prior to the deregulation of the telephone industry in the early 1980s, hotels were limited to a 15% commission on long-distance calls, a mark-up that allowed few profits. Deregulation and the development of sophisticated call-accounting equipment have resulted in profitable HVS International, Mineola, New York Income Capitalization Approach 108 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= telephone departments. State-of-the-art equipment is capable of least-cost routing, automatic price billing, and posting telephone charges to guest folios. Hotels can select among various long-distance services, and can also work with any one of a number of Alternative Operator Services (AOS). These systems route and price calls, and may provide additional services. In recent years, the hospitality industry has experienced diverging trends with respect to telephone revenue. Prices per call have increased, in some cases dramatically, yielding departmental profits as high as 50% to 55%. However, the number of long-distance calls billed per occupied room has declined as a result of the extensive use of long-distance carrier services that can be accessed locally or through a toll-free number. When guests charge long-distance calls to their personal or business accounts in this manner, the hotel loses the revenue associated with long-distance tariffs and mark-ups, and only receives an access fee. Most telephone revenue varies directly with changes in occupancy. However, there is a small fixed component consisting of public telephone revenue, which is primarily generated by individuals using the hotel's food, beverage, and meeting facilities. Using this fixed and variable relationship, the subject property's telephone revenue is projected as follows. ================================================================================ Table 10-10 Forecast of Telephone Revenue - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized - -------------------------------------------------------------------------------- Total Telephone Revenue (+000) $ 177 $ 193 $ 192 $ 202 Percent of Total Revenue 2.7% 2.7% 2.7% 2.7% Amount Per Available Room $ 928 $ 1,010 $ 1,007 $ 1,056 Amount Per Occupied Room $ 3.63 $ 3.74 $ 3.88 $ 4.02 - -------------------------------------------------------------------------------- Net Other Income Other income is derived from sources other than guestrooms, food and beverages, and telephone services. Depending on the type of hotel and the facilities and amenities offered, other income may include the following items. o Rentals - stores, office space, concession space, showcases, clubs, and storage. o Commissions from auto rentals, photography, telegrams, and vending services. HVS International, Mineola, New York Income Capitalization Approach 109 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= o Concessions - revenue derived from charges for the privilege of operating departments that could be operated by the hotel. Gift shops, barber shops, and beauty salons are often operated as concessions. o Laundry, dry cleaning, and fax services. o Cash discounts earned - discounts from creditors' accounts for payment within the discount period. This item does not include trade discounts, which are a deduction from the cost of goods sold. o Electronic games and pinball machines. o Forfeited advance deposits and guaranteed no-shows. o Service charges - service charges that are added to a customer's account but are not paid to service personnel. o Interest income - interest from house accounts. o Salvage - revenue from the sale of old or obsolete items. Other income is highly sensitive to changes in occupancy and slightly correlated to food and beverage volume. Using this fixed and variable relationship, the subject property's other income is projected as follows. ================================================================================ Table 10-11 Forecast of Net Other Income - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized - -------------------------------------------------------------------------------- Total Net Other Income (+000) $ 117 $ 124 $ 126 $ 131 Percent of Total Revenue 1.8% 1.7% 1.8% 1.7% Amount Per Available Room $ 615 $ 647 $ 661 $ 687 Amount Per Occupied Room $ 2.40 $ 2.40 $ 2.55 $ 2.61 - -------------------------------------------------------------------------------- Rooms Expense Rooms expense consists of items related to the sale and upkeep of guestrooms and public space. Salaries, wages, and employee benefits account for a substantial portion of this category. Although payroll varies somewhat with occupancy (because managers can schedule maids, bell personnel, and house cleaners to work when demand requires), much of a hotel's payroll is fixed. Front desk personnel, public area cleaners, the housekeeper, and other supervisors must be maintained at all times. As a result, salaries, wages, and employee benefits are only moderately sensitive to changes in occupancy. HVS International, Mineola, New York Income Capitalization Approach 110 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Commissions represent remuneration to travel agents for booking rooms. Because these fees are based on a percentage of rooms revenue, they are highly dependent on occupancy and rate. Reservations is a similar expense that reflects the cost of a franchise reservation system that typically bills as a percentage of rooms revenue. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are only slightly affected by changes in volume. In light of these considerations, we project the subject property's rooms expense as follows. ================================================================================ Table 10-12 Forecast of Rooms Expense - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized - -------------------------------------------------------------------------------- Total Rooms Expense (+000) $ 936 $ 991 $ 1,009 $ 1,050 Percent of Rooms Revenue 23.6% 22.5% 23.1% 22.9% Amount per Available Room $ 4,903 $ 5,188 $ 5,281 $ 5,497 Amount per Occupied Room $ 19.18 $ 19.21 $ 20.38 $ 20.92 - -------------------------------------------------------------------------------- Food and Beverage Expense Food and beverage expenses consist of items necessary for the operation of a hotel's food, beverage, and banquet facilities. Although food and beverage revenues are projected separately and occupy separate categories on a hotel's income and expense statement, the corresponding expenses are combined into a single category. The costs associated with food and beverage sales and payroll are moderately to highly correlated to food and beverage revenues, and comprise a substantial portion of this category. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are very slightly dependent on volume. Although the other expense items are basically fixed, they represent a relatively insignificant factor. After considering the fixed and variable components, we forecast the subject property's food and beverage expense as follows. HVS International, Mineola, New York Income Capitalization Approach 111 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-13 Forecast of Food and Beverage Expense - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized - -------------------------------------------------------------------------------- Total F&B Expense (+000) $ 1,899 $ 2,003 $ 2,044 $ 2,126 Percent of Food and Beverage Revenue 83.0% 81.1% 82.5% 82.0% Amount per Available Room $ 9,943 $10,486 $10,703 $11,130 Amount per Occupied Room $ 38.91 $ 38.83 $ 41.29 $ 42.35 - -------------------------------------------------------------------------------- Telephone Expense Telephone expense consists of all costs associated with this department. In the case of small hotels with automated systems, the operation of telephones may be an additional responsibility of front desk personnel; however, most large properties employ full-time operators. The bulk of the telephone expense consists of the cost of local and long-distance calls billed by the telephone companies that provide these services. Because most calls are made by in-house guests, these costs are moderately correlated to occupancy. Unless a particular hotel department incurs high expenses, use of telephone services by hotel employees is charged to this account. The remaining costs, which include salaries, wages, printing, and other expenses, are moderately fixed. The following table illustrates our forecast of telephone expense. ================================================================================ Table 10-14 Forecast of Telephone Expense - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized - -------------------------------------------------------------------------------- Total Telephone Expense (+000) $ 99 $ 105 $ 107 $ 111 Percent of Telephone Revenue 55.9% 54.2% 55.5% 54.9% Amount per Available Room $ 518 $ 547 $ 558 $ 581 Amount per Occupied Room $ 2.03 $ 2.04 $ 2.16 $ 2.21 - -------------------------------------------------------------------------------- Administrative and General Expense Administrative and general expense includes the salaries and wages of all administrative personnel who are not directly associated with a particular department. Expense items related to the management and operation of the property are also allocated to this category. Most administrative and general expenses are relatively fixed. The exceptions are cash overages and shortages; commissions on credit card charges; provision for doubtful accounts, which are moderately affected by the number of transactions or total revenue; and salaries, wages, and benefits, which are very slightly influenced by volume. HVS International, Mineola, New York Income Capitalization Approach 112 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= In recent years, several new items have been added to the administrative and general expense category. Human resources includes the cost of recruiting, relocating, and training personnel. Security consists of the cost of contract security for the property and related expenses. The general insurance category includes premiums for liability, fidelity, life, theft coverage, and business interruption insurance. Fire and extended-coverage insurance on the building and contents is a separate insurance expense category. Liability insurance covers third-party actions involving bodily injury and personal property, and is typically based on rooms receipts, meeting and banquet income, and food and beverage revenue. Factors that may have an impact on a hotel's liability expense include the size of the meeting, banquet, and restaurant facilities; the ratio between the amount of alcohol served and total food and beverage sales; the presence of a dance floor; a high-rise structure; a swimming pool; life safety support systems; and the guest transportation services provided by the hotel. The following table illustrates our forecast of administrative and general expense. ================================================================================ Table 10-15 Forecast of Administrative and General Expense - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized - -------------------------------------------------------------------------------- Total Administrative & General Exp. (+000) $ 690 $ 727 $ 744 $ 773 Percentage of Total Revenue 10.5% 10.1% 10.4% 10.3% Amount per Available Room $ 3,613 $ 3,806 $ 3,895 $ 4,047 Amount per Occupied Room $ 14.15 $ 14.10 $ 15.04 $ 15.41 - -------------------------------------------------------------------------------- Management Fee Management expense consists of the basic fee paid to the type of company that is anticipated to operate the subject property. Some companies provide management services alone, while others also provide a brand name affiliation. When a management company has no brand identification, the property owner often acquires a franchise that provides the necessary image and recognition. Although most hotel management companies employ a fee schedule that includes a basic fee (usually a percentage of total revenue) and an incentive fee (usually a percentage of defined profit), the incentive portion is often subordinated to debt service and does not appear in a forecast of net income before debt service. Basic hotel management fees are almost always based on a percentage of total revenue, which means they have no fixed component. HVS International, Mineola, New York Income Capitalization Approach 113 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Although the incentive fee does not decrease the cash flow available for debt service, it does reduce the potential cash flow to equity, and must be accounted for in the valuation process. Generally, the most appropriate procedure for handling the impact of the incentive fee on the equity component is to use the projected net income before debt service and incentive fee, but adjust the equity dividend or yield rate upward to reflect this added management cost. The adjusted equity dividend and yield rates will be described later in this section. The subject property is operated by Remington Clark Employers Corporation; the management contract allows for a sum equal to 3% of gross revenues to be paid as a management fee. Based on our review of the current market for management contracts, we are of the opinion that this fee is consistent with prevailing market terms. Applying this management fee structure to the projection of total revenue yields the following forecast of the subject property's management fee. ================================================================================ Table 10-16 Forecast of Management Fee - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized - -------------------------------------------------------------------------------- Management Fee Expense (+000) $ 197 $ 216 $ 215 $ 226 - -------------------------------------------------------------------------------- Marketing Expense Marketing expense consists of all costs associated with advertising, sales, and promotion; these activities are intended to attract and retain customers. Marketing can be used to create an image, develop customer awareness, and stimulate patronage of a property's various facilities. The marketing category is unique in that all expense items, with the exception of fees and commissions, are totally controlled by management. Most hotel operators establish an annual marketing budget that sets forth all planned expenditures. If the budget is followed, total marketing expenses can be projected accurately. Marketing expenditures are unusual because although there is a lag period before results are realized, the benefits are often extended over a long period. Depending on the type and scope of the advertising and promotion program implemented, the lag time can be as short as a few weeks or as long as several years. However, the favorable results of an effective marketing campaign tend to linger, and a property often enjoys the benefits of concentrated sales efforts for many months. HVS International, Mineola, New York Income Capitalization Approach 114 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Marketing expense can be divided into five categories: sales, reservations, advertising and merchandising, other marketing activities, and fees and commissions. Together, these categories include all marketing efforts made by hotel personnel and outside parties. Marketing expenses are fixed with the exception of reservations, fees, and commissions, which are calculated as a percentage of rooms revenue. Based on the location of the subject property, the local market for transient accommodations, the competitive environment, and the hotel's anticipated market segmentation, we have developed the following marketing forecast using a fixed and variable component model. ================================================================================ Table 10-17 Forecast of Marketing Expense - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized - -------------------------------------------------------------------------------- Total Marketing Expense (+000) $ 362 $ 381 $ 390 $ 405 Percentage of Total Revenue 5.5% 5.3% 5.4% 5.4% Amount per Available Room $ 1,893 $ 1,995 $ 2,041 $ 2,121 Amount per Occupied Room $ 7.41 $ 7.39 $ 7.88 $ 8.07 - -------------------------------------------------------------------------------- Franchise Fee Franchise expense represents the fees paid to Holiday Inns Franchising for the use of the company's name, trade marks, and service marks. The following table illustrates the projection of the subject property's franchise fee. ================================================================================ Table 10-18 Forecast of Franchise Fee - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized - -------------------------------------------------------------------------------- Franchise Fees Expense (+000) $ 198 $ 220 $ 219 $ 230 - -------------------------------------------------------------------------------- Property Operations and Maintenance Property operations and maintenance expense is another expense category that is largely controlled by management. Except for repairs that are necessary to keep the facility open and prevent damage (e.g., plumbing, heating, and electrical items), most maintenance can be deferred for varying lengths of time. Maintenance is an accumulating expense. If management elects to postpone performing a required repair, they have not eliminated or saved the expenditure; they have only deferred payment until a later date. A lodging facility HVS International, Mineola, New York Income Capitalization Approach 115 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= that operates with a lower-than-normal maintenance budget is likely to accumulate a considerable amount of deferred maintenance. The age of a lodging facility has a strong influence on the required level of maintenance. A new or thoroughly renovated property is protected for several years by modern equipment and manufacturers' warranties. However, as a hostelry grows older, maintenance expenses escalate. A well-organized preventive maintenance system often helps delay deterioration, but most facilities face higher property operations and maintenance costs each year, regardless of the occupancy trend. The quality of initial construction can also have a direct impact on future maintenance requirements. The use of high-quality building materials and construction methods generally reduces the need for maintenance expenditures over the long term. Property operations and maintenance is considered an operating expense; as such, it includes only those components that can be expensed, rather than capitalized, under Internal Revenue Service regulations. For example, if a table leg is broken, the repair of that leg is considered an expense and is chargeable to property operations and maintenance. If the table is replaced, it becomes a capital expenditure and does not appear under the property operations and maintenance category. Appraisers account for capital replacement of items such as furniture and equipment in the reserve for replacement account, which is discussed later in this section. Property operations and maintenance costs are relatively fixed, and are projected as follows. ================================================================================ Table 10-19 Forecast of Property Operations and Maintenance Expense - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized - -------------------------------------------------------------------------------- Total Property Oper. & Maint. Exp. (+000) $ 217 $ 229 $ 234 $ 243 Percentage of Total Revenue 3.3% 3.2% 3.3% 3.2% Amount per Available Room $ 1,137 $ 1,198 $ 1,226 $ 1,274 Amount per Occupied Room $ 4.45 $ 4.44 $ 4.73 $ 4.85 - -------------------------------------------------------------------------------- Energy Expense The energy consumption of a lodging facility takes several forms, including water and space heating, air conditioning, lighting, cooking fuel, and other miscellaneous power requirements. The most common sources of hotel energy are electricity, natural gas, fuel oil, and steam. This category also includes the cost of water service. HVS International, Mineola, New York Income Capitalization Approach 116 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Total energy cost depends on the source and quantity of fuel used. Electricity tends to be the most expensive source, followed by oil and gas. Although all hotels consume a sizable amount of electricity, many properties supplement their energy requirements with less expensive sources, such as gas and oil, for heating and cooking. A large portion of a hostelry's energy consumption is relatively fixed. Restaurants, kitchens, public areas, and corridors must be continually lighted and climate-controlled, regardless of occupancy. The energy cost of an additional occupied room (i.e., a few hours of light, television, heat, or air conditioning) is minimal. The following table presents our forecast of the subject property's energy expense. ================================================================================ Table 10-20 Forecast of Energy Expense - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized - -------------------------------------------------------------------------------- Total Energy Expense $ 287 $ 298 $ 308 $ 319 Percentage of Total Revenue 4.4% 4.1% 4.3% 4.2% Amount per Available Room $ 1,500 $ 1,562 $ 1,611 $ 1,669 Amount per Occupied Room $ 5.87 $ 5.78 $ 6.21 $ 6.35 - -------------------------------------------------------------------------------- Property Taxes The estimate of property taxes was detailed in a previous section of this report. The following table summarizes these projections. ================================================================================ Table 10-21 Forecast of Property Taxes - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized - -------------------------------------------------------------------------------- Forecast Property Taxes (+000) $ 246 $ 251 $ 260 $ 269 - -------------------------------------------------------------------------------- Insurance Expense The insurance expense category consists of the cost of insuring the hotel and its contents against damage or destruction by fire, weather, sprinkler leakage, boiler explosion, plate glass breakage, and so forth. It does not include liability coverage, which is a component of administrative and general expense. Insurance rates are based on many factors, including building design and construction, fire detection and extinguishing equipment, fire district, distance from the firehouse, and the area's fire experience. Insurance expenses do not vary with occupancy. HVS International, Mineola, New York Income Capitalization Approach 117 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Based on historical levels, we project the subject property's insurance expense to be approximately $69,000 in 1997 (the first projection period). In subsequent years, this amount is assumed to increase in tandem with inflation. The following table outlines our projection of insurance expense. ================================================================================ Table 10-22 Forecast of Insurance Expense - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized - -------------------------------------------------------------------------------- Forecast Insurance Expense (+000) $ 69 $ 72 $ 74 $ 77 - -------------------------------------------------------------------------------- Reserve for Replacement Furniture, fixtures, and equipment are essential to the operation of a lodging facility, and their quality often influences a property's class. This category includes all non-real estate items that are capitalized, rather than expensed. The furniture, fixtures, and equipment of a hotel are exposed to heavy use and must be replaced at regular intervals. The useful life of these items is determined by their quality, durability, and the amount of guest traffic and use. Periodic replacement of furniture, fixtures, and equipment is essential to maintain the quality, image, and income-producing potential of a lodging facility. Because capitalized expenditures are not included in the operating statement but nevertheless affect an owner's cash flow, an appraisal should reflect these expenses in the form of an appropriate reserve for replacement. Our industry experience indicates that a reserve for replacement of 3% to 5% of total revenue is generally sufficient to provide for the timely replacement of furniture, fixtures, and equipment. Because the reserve for replacement is based on a percentage of total revenue, it has no fixed component. Based on an analysis of comparable lodging facilities, we believe that a reserve for replacement of 4% of total revenue is sufficient to provide for the periodic replacement of the subject property's furniture, fixtures, and equipment. This amount is consistent with the reserve account contributions currently made by the hotel. The following table summarizes the projected reserve for replacement. ================================================================================ Table 10-23 Forecast of Reserve for Replacement - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized - -------------------------------------------------------------------------------- Reserve for Replacement Expense (+000) $ 262 $ 288 $ 287 $ 301 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 118 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Summary of Projections Based on the preceding analysis, we have formulated a forecast of income and expense. The table on the following page presents a detailed forecast through the stabilized year, including amounts per available room (PAR) and per occupied room (POR). For the purpose of comparison, this table also presents the subject property's most recent full year of operating history. The second table illustrates our ten-year forecast of income and expense in less detail. The forecasts pertain to calendar operating years beginning in 1997, and are expressed in inflated dollars for each year. HVS International, Mineola, New York Income Capitalization Approach 119 - -------------------------------------------------------------------------------- ================================================================================ Table 10-24 Detailed Forecast of Income and Expense through the Stabilized Year and Most Recent Operating History, Holiday Inn Select, Clark, New Jersey (+000) - --------------------------------------------------------------------------------
Historical Operating Results ------------------------------- Calendar Years: 1996 1997 1998 Number of Rooms: 191 191 191 Occupancy: 52.7% 70.0% 74.0% Average Rate: $75.94 $81.34 $85.40 Days Open: 212 365 365 Occupied Rooms: 21,356 %Gross PAR POR 48,801 %Gross PAR POR 51,589 %Gross PAR POR - ------------------------------------------------------------------------------------------------------------------------------------ REVENUE Rooms $1,622 71.5% $8,491 $75.94 $3,969 60.6% $20,780 $81.33 $4,406 61.2% $23,068 $85.41 Food 385 16.9 2,014 18.01 1,831 27.9 9,586 37.52 1,976 27.5 10,346 38.30 Beverage 160 7.0 835 7.47 458 7.0 2,398 9.39 494 6.9 2,586 9.58 Telephone 73 3.2 382 3.42 177 2.7 927 3.63 193 2.7 1,010 3.74 Net Other Income 31 1.3 160 1.43 117 1.8 613 2.40 124 1.7 649 2.40 Total Revenues 2,269 99.9 11,882 106.27 6,552 100.0 34,304 134.26 7,193 100.0 37,660 139.43 - ------------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL EXPENSES * Rooms 368 22.7 1,926 17.22 936 23.6 4,901 19.18 991 22.5 5,188 19.21 Food & Beverage 575 105.6 3,009 26.91 1,899 83.0 9,942 38.91 2,003 81.1 10,487 38.83 Telephone 40 55.5 212 1.90 99 55.9 518 2.03 105 54.4 550 2.04 Total Dept. Expenses 983 43.3 5,147 46.03 2,934 44.8 15,361 60.12 3,099 43.1 16,225 60.07 - ------------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL INCOME 1,286 56.6 6,735 60.24 3,618 55.2 18,942 74.14 4,094 56.9 21,435 79.36 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING EXPENSES Administrative & General 311 13.7 1,628 14.56 690 10.5 3,613 14.14 727 10.1 3,806 14.09 Management Fee 63 2.8 330 2.96 197 3.0 1,031 4.04 216 3.0 1,131 4.19 Marketing 193 8.5 1,010 9.04 362 5.5 1,895 7.42 381 5.3 1,995 7.39 Franchise Fees 52 2.3 270 2.42 198 3.0 1,037 4.06 220 3.1 1,152 4.26 Property Oper. & Maint. 185 8.1 967 8.65 217 3.3 1,136 4.45 229 3.2 1,199 4.44 Energy 165 7.3 864 7.73 287 4.4 1,503 5.88 298 4.1 1,560 5.78 Total Operating Expenses 969 42.7 5,071 45.35 1,951 29.7 10,215 39.98 2,071 28.8 10,843 40.14 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSE PROFIT 318 13.9 1,664 14.88 1,667 25.5 8,728 34.16 2,023 28.1 10,592 39.21 - ------------------------------------------------------------------------------------------------------------------------------------ FIXED EXPENSES Property Taxes 176 7.8 921 8.24 246 3.8 1,288 5.04 251 3.5 1,314 4.87 Insurance 27 1.2 139 1.24 69 1.1 361 1.41 72 1.0 377 1.40 Reserve for Replacement 84 3.7 441 3.94 262 4.0 1,372 5.37 288 4.0 1,508 5.58 Total 287 12.7 1,501 13.42 577 8.9 3,021 11.82 611 8.5 3,199 11.84 - ------------------------------------------------------------------------------------------------------------------------------------ NET INCOME $31 1.2 163 $1.46 $1,090 16.6 $5,707 $22.34 $1,412 19.6 $7,393 $27.37 ==================================================================================================================================== Food/Rooms 23.7% 46.1% 44.8% Beverage/Food 41.5% 25.0% 25.0% Telephone/Rooms 4.5% 4.5% 4.4% Other Income/Rooms 1.9% 2.9% 2.8% - ------------------------------------------------------------------------------------------------------------------------------------ Calendar Years: 1999 Stabilized Number of Rooms: 191 191 Occupancy: 71.0% 72.0% Average Rate: $88.39 $91.48 Days Open: 365 365 Occupied Rooms: 49,498 %Gross PAR POR 50,195 %Gross PAR POR - --------------------------------------------------------------------------------------------------- REVENUE Rooms $4,375 61.0% $22,906 $88.39 $4,592 61.1% $24,042 $91.48 Food 1,983 27.6 10,382 40.06 2,074 27.6 10,859 41.32 Beverage 496 6.9 2,597 10.02 519 6.9 2,717 10.34 Telephone 192 2.7 1,005 3.88 202 2.7 1,058 4.02 Net Other Income 126 1.8 660 2.55 131 1.7 686 2.61 Total Revenues 7,172 100.0 37,550 144.90 7,518 100.0 39,361 149.78 - --------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES * Rooms 1,009 23.1 5,283 20.38 1,050 22.9 5,497 20.92 Food & Beverage 2,044 82.5 10,702 41.29 2,126 82.0 11,131 42.35 Telephone 107 55.7 560 2.16 111 55.0 581 2.21 Total Dept. Expenses 3,160 44.1 16,545 63.84 3,287 43.7 17,209 65.48 - --------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 4,012 55.9 21,005 81.05 4,231 56.3 22,152 84.29 - --------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 744 10.4 3,895 15.03 773 10.3 4,047 15.40 Management Fee 215 3.0 1,126 4.34 226 3.0 1,183 4.50 Marketing 390 5.4 2,042 7.88 405 5.4 2,120 8.07 Franchise Fees 219 3.1 1,147 4.42 230 3.1 1,204 4.58 Property Oper. & Maint. 234 3.3 1,225 4.73 243 3.2 1,272 4.84 Energy 308 4.3 1,613 6.22 319 4.2 1,670 6.36 Total Operating Expenses 2,110 29.5 11,047 42.63 2,196 29.2 11,497 43.75 - --------------------------------------------------------------------------------------------------- HOUSE PROFIT 1,902 26.4 9,958 38.43 2,035 27.1 10,654 40.54 - --------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 260 3.6 1,361 5.25 269 3.6 1,408 5.36 Insurance 74 1.0 387 1.50 77 1.0 403 1.53 Reserve for Replacement 287 4.0 1,503 5.80 301 4.0 1,576 6.00 Total 621 8.6 3,251 12.55 647 8.6 3,387 12.89 - --------------------------------------------------------------------------------------------------- NET INCOME $1,281 17.8 $6,707 $25.88 $1,388 18.5 $7,267 $27.65 =================================================================================================== Food/Rooms 45.3% 45.2% Beverage/Food 25.0% 25.0% Telephone/Rooms 4.4% 4.4% Other Income/Rooms 2.9% 2.9% - ---------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 120 - -------------------------------------------------------------------------------- ================================================================================ Table 10-25 Ten-Year Forecast of Income and Expense, Holiday Inn Select, Clark, New Jersey (+000) - --------------------------------------------------------------------------------
Calendar Years Ending: 1997 1998 1999 2000 2001 --------------- --------------- --------------- --------------- --------------- Number of Rooms: 191 191 191 191 191 Occupied Rooms: 48,801 51,589 49,498 50,195 50,195 Occupancy: 70.0% % of 74.0% % of 71.0% % of 72.0% % of 72.0% % of Average Rate: $81.34 Gross $85.40 Gross $88.39 Gross $91.48 Gross $94.69 Gross - --------------------------- --------------- --------------- ---------------- ---------------- --------------- REVENUE Rooms $3,969 60.6% $4,406 61.2% $4,375 61.0% $4,592 61.1% $4,753 61.1% Food 1,831 27.9 1,976 27.5 1,983 27.6 2,074 27.6 2,146 27.6 Beverage 458 7.0 494 6.9 496 6.9 519 6.9 537 6.9 Telephone 177 2.7 193 2.7 192 2.7 202 2.7 209 2.7 Net Other Income 117 1.8 124 1.7 126 1.8 131 1.7 136 1.7 Total 6,552 100.0 7,193 100.0 7,172 100.0 7,518 100.0 7,781 100.0 - --------------------------- --------------- --------------- ---------------- ---------------- --------------- DEPARTMENTAL EXPENSES Rooms 936 23.6 991 22.5 1,009 23.1 1,050 22.9 1,087 22.9 Food & Beverage 1,899 83.0 2,003 81.1 2,044 82.5 2,126 82.0 2,200 82.0 Telephone 99 55.9 105 54.4 107 55.7 111 55.0 115 55.0 Total 2,934 44.8 3,099 43.1 3,160 44.1 3,287 43.7 3,402 43.7 - --------------------------- --------------- --------------- ---------------- ---------------- --------------- DEPARTMENTAL INCOME 3,618 55.2 4,094 56.9 4,012 55.9 4,231 56.3 4,379 56.3 - --------------------------- --------------- --------------- ---------------- ---------------- --------------- OPERATING EXPENSES Administrative & General 690 10.5 727 10.1 744 10.4 773 10.3 800 10.3 Management Fee 197 3.0 216 3.0 215 3.0 226 3.0 233 3.0 Marketing 362 5.5 381 5.3 390 5.4 405 5.4 419 5.4 Franchise Fees 198 3.0 220 3.1 219 3.1 230 3.1 238 3.1 Property Oper. & Maint 217 3.3 229 3.2 234 3.3 243 3.2 252 3.2 Energy 287 4.4 298 4.1 308 4.3 319 4.2 330 4.2 Total 1,951 29.7 2,071 28.8 2,110 29.5 2,196 29.2 2,272 29.2 - --------------------------- --------------- --------------- ---------------- ---------------- --------------- HOUSE PROFIT 1,667 25.5 2,023 28.1 1,902 26.4 2,035 27.1 2,107 27.1 - --------------------------- --------------- --------------- ---------------- ---------------- --------------- FIXED EXPENSES Property Taxes 246 3.8 251 3.5 260 3.6 269 3.6 279 3.6 Insurance 69 1.1 72 1.0 74 1.0 77 1.0 79 1.0 Reserve for Replacement 262 4.0 288 4.0 287 4.0 301 4.0 311 4.0 Total 577 8.9 611 8.5 621 8.6 647 8.6 669 8.6 - --------------------------- --------------- --------------- ---------------- ---------------- --------------- NET INCOME $1,090 16.6% $1,412 19.6% $1,281 17.8% $1,388 18.5% $1,438 18.5% =========================== =============== =============== ================ ================ =============== Calendar Years Ending: 2002 2003 2004 2005 2006 --------------- ---------------- ---------------- ---------------- ---------------- Number of Rooms: 191 191 191 191 191 Occupied Rooms: 50,195 50,195 50,195 50,195 50,195 Occupancy: 72.0% % of 72.0% % of 72.0% % of 72.0% % of 72.0% % of Average Rate: $98.00 Gross $101.43 Gross $104.98 Gross $108.65 Gross $112.46 Gross - --------------------------- --------------- ---------------- ---------------- ---------------- ---------------- REVENUE Rooms $4,919 61.0% $5,091 61.1% $5,269 61.0% $5,454 61.1% $5,645 61.1% Food 2,221 27.6 2,299 27.6 2,380 27.6 2,463 27.6 2,549 27.6 Beverage 555 6.9 575 6.9 595 6.9 616 6.9 637 6.9 Telephone 216 2.7 224 2.7 231 2.7 239 2.7 248 2.7 Net Other Income 141 1.8 145 1.7 151 1.8 156 1.7 161 1.7 Total 8,052 100.0 8,334 100.0 8,626 100.0 8,928 100.0 9,240 100.0 - --------------------------- --------------- ---------------- ---------------- ---------------- ---------------- DEPARTMENTAL EXPENSES Rooms 1,125 22.9 1,164 22.9 1,205 22.9 1,247 22.9 1,291 22.9 Food & Beverage 2,277 82.0 2,357 82.0 2,439 82.0 2,525 82.0 2,613 82.0 Telephone 119 55.1 123 54.9 127 55.0 132 55.2 136 54.8 Total 3,521 43.7 3,644 43.7 3,771 43.7 3,904 43.7 4,040 43.7 - --------------------------- --------------- ---------------- ---------------- ---------------- ---------------- DEPARTMENTAL INCOME 4,531 56.3 4,690 56.3 4,855 56.3 5,024 56.3 5,200 56.3 - --------------------------- --------------- ---------------- ---------------- ---------------- ---------------- OPERATING EXPENSES Administrative & General 828 10.3 857 10.3 887 10.3 918 10.3 951 10.3 Management Fee 242 3.0 250 3.0 259 3.0 268 3.0 277 3.0 Marketing 434 5.4 449 5.4 465 5.4 481 5.4 498 5.4 Franchise Fees 246 3.1 255 3.1 263 3.0 273 3.1 282 3.1 Property Oper. & Maint 261 3.2 270 3.2 279 3.2 289 3.2 299 3.2 Energy 341 4.2 353 4.2 366 4.2 379 4.2 392 4.2 Total 2,352 29.2 2,434 29.2 2,519 29.1 2,608 29.2 2,699 29.2 - --------------------------- --------------- ---------------- ---------------- ---------------- ---------------- HOUSE PROFIT 2,179 27.1 2,256 27.1 2,336 27.2 2,416 27.1 2,501 27.1 - --------------------------- --------------- ---------------- ---------------- ---------------- ---------------- FIXED EXPENSES Property Taxes 288 3.6 298 3.6 309 3.6 320 3.6 331 3.6 Insurance 82 1.0 85 1.0 88 1.0 91 1.0 94 1.0 Reserve for Replacement 322 4.0 333 4.0 345 4.0 357 4.0 370 4.0 Total 692 8.6 716 8.6 742 8.6 768 8.6 795 8.6 - --------------------------- --------------- ---------------- ---------------- ---------------- ---------------- NET INCOME $1,487 18.5% $1,540 18.5% $1,594 18.6% $1,648 18.5% $1,706 18.5% =========================== =============== ================ ================ ================ ================
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 121 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The conversion of a property's projected net income into an estimate of value is based on the premise that investors typically purchase real estate with a small amount of equity cash (25% to 40%) and a large amount of mortgage financing (60% to 75%). The amounts and terms of available mortgage financing and the rates of return that are required to attract sufficient equity capital form the basis for allocating the net income between the mortgage and equity components and deriving a value estimate. Mortgage Component Data for the mortgage component may be developed from statistics of actual hotel mortgages made by long-term lenders. The American Council of Life Insurance, which represents 20 large life insurance companies, publishes quarterly information pertaining to the hotel mortgages issued by its member companies. The following table summarizes the average mortgage interest rates of the hotel loans made by these lenders. In addition, the A corporate bond yield (as reported by Moody's Bond Record) is shown for the purpose of comparison. HVS International, Mineola, New York Income Capitalization Approach 122 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-26 Average Mortgage Interest Rates and Average A Corporate Bond Yields - -------------------------------------------------------------------------------- Average A Average Corporate Period Interest Rate Bond Yield ---------------------------------------------------------------------- 1st Quarter 1996 7.79% 7.37% 4th Quarter 1995 8.44 7.28 3rd Quarter 1995 8.61 7.67 2nd Quarter 1995 9.25 7.87 1st Quarter 1995 9.14 8.50 3rd Quarter 1994 9.64 8.48 2nd Quarter 1994 9.38 8.28 4th Quarter 1993 9.38 7.80 3rd Quarter 1993 8.41 7.28 2nd Quarter 1993 10.53 9.65 4th Quarter 1992 9.43 8.48 3rd Quarter 1992 9.99 8.38 2nd Quarter 1992 9.47 8.79 1st Quarter 1992 10.02 8.81 4th Quarter 1991 10.49 8.97 3rd Quarter 1991 10.03 9.29 2nd Quarter 1991 10.75 9.45 3rd Quarter 1990 10.47 9.89 2nd Quarter 1990 10.58 9.83 4th Quarter 1989 9.96 9.42 3rd Quarter 1989 9.55 9.46 2nd Quarter 1989 10.54 9.93 1st Quarter 1989 10.39 10.16 4th Quarter 1988 10.07 10.03 3rd Quarter 1988 10.66 10.51 2nd Quarter 1988 10.09 10.33 4th Quarter 1987 10.41 10.45 3rd Quarter 1987 10.00 9.95 2nd Quarter 1987 9.81 9.46 1st Quarter 1987 9.43 9.19 4th Quarter 1986 9.44 9.55 3rd Quarter 1986 9.56 9.71 2nd Quarter 1986 9.80 9.91 1st Quarter 1986 10.99 10.62 Sources: American Council of Life Insurance; Moody's Bond Record - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 123 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Because of the six- to nine-month lag time in reporting and publishing hotel mortgage statistics, it is necessary to update this information to reflect current lending practices. Research by HVS International indicates that there is a close mathematical relationship between the average interest rate of a hotel mortgage and the concurrent yield on an average A corporate bond. Through a regression analysis, this relationship is expressed as follows. Y = 2.76078 + 0.782280 X Where: Y = Estimated Hotel/Motel Mortgage Interest Rate X = Current Average A Corporate Bond Yield (Coefficient of correlation is 96.4%) The yield on A corporate bonds for the third quarter of 1996 as reported by Moody's Bond Record, was 7.91%. Using a factor of 7.91% in the equation presented above produces an estimated hotel/motel interest rate of 8.95%. In addition to the mortgage interest rate estimate derived from this regression analysis, HVS International constantly monitors the terms of hotel mortgage loans made by our institutional lending clients. In the past year, we have noted an increase in the availability of debt financing, and many lenders have returned to the market. The current level of lending activity represents a significant increase from the restricted environment of the early 1990s. Nonetheless, the market for hotel mortgage loans remains somewhat tight, particularly when compared to the conditions that prevailed in the mid-to late 1980s. In the current lending climate, strong hotel projects that are structured on an economic basis can secure mortgage financing at interest rates ranging from 8% to 11%, depending on the property, location, affiliation, and operator. In the 1980s, when hotel mortgages were widely available, loan-to-value ratios typically ranged from 75% to 80%. Amortization schedules were generally based on 30 years, although the term of the loan was more likely to be seven to ten years. The few loans that were underwritten in the early 1990s were based on far more stringent parameters: loan-to-value ratios declined to a range of 50% to 65%, and amortization periods of 20 to 25 years were most common. With the recent reemergence of hotel financing, loan-to-value requirements and amortization schedules have loosened somewhat. At present, we find that lenders who are active in the market are using loan-to-value ratios of HVS International, Mineola, New York Income Capitalization Approach 124 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 65% to 75%, and amortization periods of 25 to 30 years. The exact terms offered depend on specific factors such as the property's location, the age and quality of the physical facility, local hostelry market conditions, and (perhaps more significantly) the profile of the borrower. The strongest projects typically command the highest loan-to-value ratios. Based on the preceding analysis of the current lodging industry mortgage market and adjustments for specific factors such as the property's location and conditions in the local hotel market, it is our opinion that a 9.5% interest, 20-year amortization mortgage with a 0.111856 constant is appropriate for the subject property. We believe that a mortgage lender will lend up to 70% of the hotel's market value as determined by this appraisal. Equity Component The remaining capital required for a hotel investment generally comes from the equity investor. The rate of return that an equity investor expects over a ten-year holding period is known as the equity yield. Unlike the equity dividend, which is a short-term rate of return, the equity yield specifically considers a long-term holding period (generally ten years), annual inflation- adjusted cash flows, property appreciation, mortgage amortization, and proceeds from a sale at the end of the holding period. It is difficult to quantify the rate of return required by equity investors who are seeking to purchase hotel properties. To establish an appropriate equity yield rate, HVS International uses two sources of data: past appraisals and investor interviews. Past Appraisals - During the past 12 months, HVS International has appraised more than 400 hotels, including properties located in most major national markets. Each appraisal used a similar mortgage-equity approach in which income is projected and then discounted to a current value at rates reflecting the cost of debt and equity capital. In the case of hotels that were sold subsequent to our valuations, we are able to determine an appropriate equity yield rate by excluding incentive management fees from the projection of income and expense, inserting the projection into a valuation model, and adjusting the appraised value to reflect the actual sales price by modifying the return assumptions. The following table shows a representative sample of hotels that were sold shortly after we appraised them, along with the imputed equity return based on our valuation approach. HVS International, Mineola, New York Income Capitalization Approach 125 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-27 Sample of Hotels Sold - --------------------------------------------------------------------------------
No. of Date of Overall Total Property Hotel City and State Rooms Sale Sales Price Rate Yield - -------------------------------------------------------------------------------------------------------------------------- Ritz-Carlton Phoenix, AZ 281 2/94 $ 23,000,000 11.0% 14.6% Marriott Marina Fort Lauderdale, FL 580 2/94 40,000,000 12.2 16.4 Holiday Inn Edison, NJ 274 3/94 11,803,000 7.8 17.0 Crescent Hotel Phoenix, AZ 342 3/94 26,000,000 6.5 7.2 Checkers Hotel Kempinski Los Angeles, CA 173 4/94 12,750,000 3.0 18.3 Best Western Fireside Inn Cambria, CA 46 4/94 3,377,000 11.7 15.8 Phoenician Resort Phoenix, AZ 580 4/94 224,000,000 6.6 9.3 Newark-Fremont Hilton Newark, CA 300 5/94 8,950,000 8.8 14.9 Radisson Inn Orlando, FL 299 5/94 11,150,000 12.9 18.0 Westin Kauai Lihue, Kauai, HI 840 6/94 97,400,000 (1.9) 8.1 Residence Inn Binghamton, NY 72 6/94 6,325,000 10.8 13.9 Hotel Millenium New York, NY 561 6/94 75,000,000 9.5 14.1 Best Western Otay Valley Chula Vista, CA 120 7/94 2,350,000 13.2 21.1 Hampton Inn Islandia, NY 121 7/94 6,572,000 12.6 16.6 Hampton Inn Willow Grove, PA 150 7/94 10,220,000 11.0 14.3 Hampton Inn West Palm Beach, FL 136 7/94 4,220,000 10.8 10.8 Hampton Inn Naples, FL 107 7/94 5,700,000 11.4 11.5 Hampton Inn Albany, NY 126 7/94 9,204,000 9.3 11.5 Marriott Hotel South Bend, IN 299 7/94 11,500,000 10.5 13.2 Marriott SFO Burlingame, CA 684 8/94 61,700,000 10.2 13.2 Westfields Conference Center Chantilly, VA 340 8/94 46,000,000 12.3 15.9 Radisson Mark Resort Vail, CO 349 9/94 25,200,000 8.9 15.8 Marriott East Side New York, NY 664 10/94 55,000,000 8.5 9.7 Marriott Resort Vail, CO 349 10/94 25,200,000 14.2 18.9 Marriott Quorum Addison, TX 547 10/94 29,815,000 13.5 18.2 Sheraton Hotel Hasbrouck Heights, NJ 338 11/94 10,450,000 18.3 21.1 Sheraton Inn Napa, CA 191 12/94 9,968,000 8.9 13.7 Marriott Fisherman's Wharf San Francisco, CA 255 12/94 27,755,000 10.8 13.4 Marriott Hotel Portland, OR 503 12/94 45,000,000 12.9 17.4 Radisson Inn Springfield, MO 199 12/94 5,800,000 8.2 10.1 Williamsburg Hilton Williamsburg, VA 291 12/94 15,000,000 15.4 19.0 Marriott Tech Center Denver, CO 625 12/94 36,000,000 13.7 16.4 Holiday Inn Sunspree Singer Island, FL 222 12/94 11,900,000 8.6 10.6 The Plaza New York, NY 805 6/95 325,000,000 7.0 11.0 Fullerton Suites Fullerton, CA 96 5/95 5,000,000 12.9 18.7 Residence Inn Baton Rouge, LA 80 6/95 6,518,000 12.7 14.8 Residence Inn Overland Park, KS 112 6/95 8,500,000 8.9 14.7 Residence Inn Des Moines, IA 112 6/95 7,660,000 9.8 14.1 Residence Inn Hunt Valley, MD 96 6/95 6,580,000 12.3 13.6 Residence Inn Kansas City, MO 112 6/95 6,560,000 10.4 13.2 Residence Inn Lincoln, NE 120 6/95 7,100,000 10.0 13.7 Embassy Suites Schaurmburg, IL 209 12/95 17,800,000 10.0 13.5 Marriott Hotel Andover, MA 293 12/95 24,000,000 9.7 13.5 Doubletree Suites Valley Forge, PA 229 12/95 28,500,000 10.7 14.2 Marriott Hotel Tysons Corner, VA 390 12/95 41,100,000 10.7 13.1 Marriott Hotel Warner Center, CA 461 12/95 57,900,000 6.2 11.6 Hilton at the Club Pleasanton, CA 294 12/95 22,000,000 10.5 13.4
Source: HVS International - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 126 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Investor Interviews - HVS International is in constant contact with numerous institutional and individual hotel investors. This source of equity funds has definite return requirements that can be expressed as an equity yield rate based on a ten-year projection of net income before incentive management fees but after debt service. Based on our surveys and investor interviews, the following table illustrates the range of equity yields generally required by individual and institutional investors. ================================================================================ Table 10-28 Equity Yield Requirements - -------------------------------------------------------------------------------- Source Equity Yield Requirement ------ ------------------------ Individual 20% - 24% Institution 18% - 22% - -------------------------------------------------------------------------------- Based on the assumed 70% loan-to-value ratio, the risk inherent in achieving the projected income stream, and the age, condition, and anticipated market position of the subject property, it is our opinion that an equity investor is likely to require an equity yield rate of 22% before payment of incentive management fees. This estimate is well supported by the equity yield requirements presented previously. Terminal Capitalization Rate Inherent in this valuation process is the assumption of a sale at the end of the ten-year holding period. The estimated reversionary sales price as of that date is calculated by capitalizing the projected 11th-year net income by an overall terminal capitalization rate. A percentage for the seller's brokerage and legal fees is deducted from this sales price, and the net proceeds to the equity interest (also known as the equity residual) are calculated by deducting the outstanding mortgage balance from the reversion. To estimate a property's reversionary value, the appraiser must select a terminal capitalization rate and an allocation for brokerage and legal fees. The terminal capitalization rate is an overall rate that is applied to one stabilized year, and thus it inherently incorporates the cost of debt and equity capital. The terminal capitalization rate can be derived through a mortgage and equity band of investment technique which calculates the weighted average cost of the capital used in a hotel investment. Combining the mortgage financing terms derived previously (namely, a 70% loan-to-value ratio and a 0.111856 debt service constant) with a cash-on-cash equity dividend rate of 12% produces the following overall capitalization rate. HVS International, Mineola, New York Income Capitalization Approach 127 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Percent of Rate of Weighted Value Return Average ---------- ------- -------- Mortgage 70 x 0.11186 = 7.82990 Equity 30 x 0.12000 = 3.60000 -------- Overall Capitalization Rate 11.42990 Because this overall rate will be used to capitalize net income ten years from the date of value, an downward adjustment is appropriate to reflect the uncertainty inherent in this extended period. For the purpose of this valuation, we will use a terminal capitalization rate of 11%. As a point of reference, the terminal capitalization rate can be compared to the going-in rate implied by the subject property's estimated value. The going-in rate reflects the capitalization rate that would be applicable if the hotel were operating at a stabilized level as of the date of value. This rate is calculated by dividing the stabilized net income (expressed in current dollars as of the date of value) by the value indicated by the income capitalization approach. Generally, the terminal capitalization rate is approximately 100 to 200 basis points above the going-in rate. Summary of Valuation Variables The following table summarizes the valuation variables that have been used to estimate the subject property's value via the income capitalization approach. ================================================================================ Table 10-29 Summary of Valuation Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Ten-Year Forecast Loan-to-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.111856 Equity Yield Ye 22.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 11.0% - -------------------------------------------------------------------------------- Valuation of the Mortgage and Equity Components The valuation of the mortgage and equity components is accomplished through use of an algebraic equation that calculates the exact amount of debt and equity that the hotel will be able to support based on the anticipated cash flow (derived from the forecast of income and expense) and the specific return requirements demanded by the mortgage lender (interest) HVS International, Mineola, New York Income Capitalization Approach 128 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= and the equity investor (equity yield). The equation and the calculations associated with this simultaneous valuation formula are set forth in the Addenda to this report. Using the variables summarized above, we estimate the value of the subject property via the income capitalization approach at $11,100,000. Proof of Value The value is proven by calculating the yields to the mortgage and equity components during the projection period. If the mortgagee achieves a 9.5% yield and the equity yield is 22%, then $11,100,000 is the correct value by the income capitalization approach. Using the assumed financial structure set forth in the previous calculations, market value can be allocated between the debt and equity as follows. Mortgage Component (70%) $ 7,769,000 Equity Component (30%) 3,330,000 ----------- Total $11,099,000 The annual debt service is calculated by multiplying the mortgage component by the mortgage constant. Mortgage Component $ 7,769,000 Mortgage Constant 0.111856 ----------- Annual Debt Service $ 869,007 The cash flow to equity is calculated by deducting the debt service from the projected net income before debt service. HVS International, Mineola, New York Income Capitalization Approach 129 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-30 Forecast of Net Income to Equity - -------------------------------------------------------------------------------- Net Income Available for Total Annual Net Income Year Debt Service Debt Service to Equity - -------------------------------------------------------------------------------- 1997 $1,090,000 - $ 869,000 = $ 221,000 1998 1,412,000 - 869,000 = 543,000 1999 1,281,000 - 869,000 = 412,000 2000 1,388,000 - 869,000 = 519,000 2001 1,438,000 - 869,000 = 569,000 2002 1,487,000 - 869,000 = 618,000 2003 1,540,000 - 869,000 = 671,000 2004 1,594,000 - 869,000 = 725,000 2005 1,648,000 - 869,000 = 779,000 2006 1,706,000 - 869,000 = 837,000 - -------------------------------------------------------------------------------- The equity residual at the end of the tenth year is calculated as follows. Reversionary Value ($1,766,000 / 0.110 ) $16,055,000 Less: Brokerage and Legal Fees 482,000 Mortgage Balance 5,597,000 ----------- Net Sale Proceeds to Equity $ 9,976,000 The overall property yield (before debt service), the yield to the lender, and the yield to the equity position have been calculated by computer with the following results. ================================================================================ Table 10-31 Overall Property Yields - -------------------------------------------------------------------------------- Projected Yield (Internal Rate of Return) Position Value Over 10-Year Holding Period - -------------------------------------------------------------------------------- Total Property $11,099,000 14.6% Mortgage 7,769,000 9.4 Equity 3,330,000 22.0 Note: Whereas the mortgage constant and value are calculated on the basis of monthly mortgage payments, the mortgage yield in this proof assumes single annual payments. As a result, the proof's derived yield may be slightly less than that actually input. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 130 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The following tables demonstrate that the property receives its anticipated yields, proving that the $11,100,000 value is correct based on the assumptions used in this approach. ================================================================================ Table 10-32 Total Property Yield - -------------------------------------------------------------------------------- Net Income before Present Worth of $1 Discounted Year Debt Service Factor @ 14.6% Cash Flow - -------------------------------------------------------------------------------- 1997 $ 1,090,000 x 0.872579 = $ 951,000 1998 1,412,000 x 0.761395 = 1,075,000 1999 1,281,000 x 0.664377 = 851,000 2000 1,388,000 x 0.579722 = 805,000 2001 1,438,000 x 0.505853 = 727,000 2002 1,487,000 x 0.441397 = 656,000 2003 1,540,000 x 0.385154 = 593,000 2004 1,594,000 x 0.336077 = 536,000 2005 1,648,000 x 0.293254 = 483,000 2006 17,279,000 * x 0.255887 = 4,421,000 ----------- Total Property Value $11,098,000 * 10th year net income of $1,706,000 plus sales proceeds of $15,573,000 - -------------------------------------------------------------------------------- ================================================================================ Table 10-33 Mortgage Component Yield - -------------------------------------------------------------------------------- Total Annual Present Worth of $1 Discounted Year Debt Service Factor @ 9.4% Cash Flow - -------------------------------------------------------------------------------- 1997 $ 869,000 x 0.914267 = $ 794,000 1998 869,000 x 0.835885 = 726,000 1999 869,000 x 0.764223 = 664,000 2000 869,000 x 0.698704 = 607,000 2001 869,000 x 0.638802 = 555,000 2002 869,000 x 0.584036 = 508,000 2003 869,000 x 0.533965 = 464,000 2004 869,000 x 0.488187 = 424,000 2005 869,000 x 0.446334 = 388,000 2006 6,466,000 * x 0.408068 = 2,639,000 ---------- Value Of Mortgage Component $7,769,000 * 10th year debt service of $869,000 plus outstanding mortgage balance of $5,597,000 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 131 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-34 Equity Component Yield - -------------------------------------------------------------------------------- Net Income Present Worth of $1 Discounted Year to Equity Factor @ 22.0% Cash Flow - -------------------------------------------------------------------------------- 1997 $ 221,000 x 0.819664 = $ 181,000 1998 543,000 x 0.671849 = 365,000 1999 412,000 x 0.550691 = 227,000 2000 519,000 x 0.451381 = 234,000 2001 569,000 x 0.369981 = 211,000 2002 618,000 x 0.303260 = 187,000 2003 671,000 x 0.248572 = 167,000 2004 725,000 x 0.203745 = 148,000 2005 779,000 x 0.167003 = 130,000 2006 10,813,000 * x 0.136886 = 1,480,000 ---------- Value of Equity Component $3,330,000 * 10th year net income to equity of $837,000 plus sales proceeds of $9,976,000 - -------------------------------------------------------------------------------- Valuation Method Two: Discounted Cash Flow The total property yield derived from the previous valuation method was 14.6%. After reviewing the total property yields indicated by recent hotel sales, which ranged from 14% to 16%, it is our opinion that a 15% discount factor would be appropriate for the Holiday Inn Select. The following table illustrates the discounted cash flow analysis using a 15% discount factor. HVS International, Mineola, New York Income Capitalization Approach 132 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-35 Discounted Cash Flow Analysis - -------------------------------------------------------------------------------- Discount Calendar Net Factor Discounted Year Income @ 15.0% Cash Flow -------------------------------------------------------------- 1997 $ 1,090,000 0.86957 $ 947,826 1998 1,412,000 0.75614 1,067,675 1999 1,281,000 0.65752 842,278 2000 1,388,000 0.57175 793,594 2001 1,438,000 0.49718 714,940 2002 1,487,000 0.43233 642,871 2003 1,540,000 0.37594 578,943 2004 1,594,000 0.32690 521,081 2005 1,648,000 0.28426 468,464 2006 17,278,909 * 0.24718 4,271,082 Estimated Market Value: $10,848,755 (Say): $10,800,000 Reversion Analysis ------------------ 11th Year's Net Income $ 1,766,000 Capitalization Rate 11.0% Total Sales Proceeds $16,054,545 Less: Broker & Legal @ 3.0% 481,636 * 10th year net income of $1,706,000 plus sales proceeds of $15,572,909 - -------------------------------------------------------------------------------- Conclusion Based on our extensive experience in the hotel industry and comprehensive support provided by literature published by the Appraisal Institute, it is our opinion that the valuation procedure embodied by Method One most closely reflects the investment rationale of typical hotel buyers. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis and Valuations,(1) Method Two (which discounts the projected net income and reversion using an overall discount rate, or total property yield) "does not consider the impact of mortgage debt, leverage and the specific equity demands of typical hotel investors...This technique is simple but less reliable because the derivation of the discount rate has little support." In light of this consideration, we have relied on the $11,100,000 value conclusion indicated by Method One. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236 HVS International, Mineola, New York Sales Comparison Approach 133 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 11. Sales Comparison Approach The sales comparison approach is based on the assumption that an informed purchaser will pay no more for a property than the cost to acquire an existing property with equal utility. This approach estimates market value by considering the sales prices indicated by recent transactions involving properties that are similar to the property being appraised. Dissimilarities are resolved with appropriate adjustments; these differences may pertain to the date of sale, the age of the property, location, construction, condition, layout, equipment, size, or external economic factors. The reliability of the sales comparison approach depends on three factors: 1. the availability of timely, comparable sales data; 2. an understanding of the true terms of the sales and the motivation of the buyer and seller; 3. the degree of comparability, or the extent of the adjustments needed to reflect differences between the subject property and the comparable property. In appraising lodging facilities, it is often difficult to find an adequate number of recent sales involving hotels that are truly comparable to the subject property. Consequently, it may be necessary to consider transactions involving properties in different market areas, and the required adjustments greatly diminish the reliability of the conclusions. Moreover, it is virtually impossible for an observer to determine the true motivations of the buyers and sellers involved in transactions. Hotel acquisition often represents a highly ego-driven process in which a number of external, non-market factors influence the purchase price. Unless the appraiser can quantify these influences, there is no way of knowing whether the purchase price paid actually reflects market value. A final consideration is the degree of similarity between the subject property and the comparable; in most cases, the differences are significant enough to require numerous subjective and unsubstantiated adjustments. Each adjustment represents a potential for error, HVS International, Mineola, New York Sales Comparison Approach 134 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= and thus diminishes the reliability of this approach. As a result of these shortcomings, the use of the sales comparison approach in valuing hotels is primarily as a check against the value indicated by the income capitalization approach. Hotel values declined in many areas of the country during the late 1980s and early 1990s, although a rebound began in 1994 and 1995. The downturn, which began in most markets in 1988, was largely attributable to lower operating incomes caused by an oversupply of new hotel rooms constructed during the mid-1980s. Overbuilding resulted in flat or declining average rates and occupancies, which caused revenues to fall. A number of other factors exacerbated the situation. The national recession caused a drop in demand in many markets during the early 1990s, and the Persian Gulf War created a virtual freeze on travel in the beginning of 1991, further limiting hotel demand. Operating costs continued to rise despite poor market conditions, resulting in a decline in the net operating income of hotels throughout the nation. Because operating costs have a large fixed component, many lodging facilities experienced precipitous drops in net income. As bottom-line profits eroded, many hotels were unable to meet debt service, and hundreds of properties entered foreclosure or bankruptcy. Lenders and government agencies soon became hotel owners. Because most financial institutions were preoccupied with their distressed real estate, very little mortgage capital was available and the nation suffered from a well-publicized credit crunch. Most hotel transactions that occurred during the early 1990s were financed by the property owners, who, in most cases, were lenders. In the early 1990s, the primary market participants were owner-operators with the expertise to turn around under-performing properties. Hotels were out of favor with passive investors as a result of the industry's poor operating performance and the uncertainty of future appreciation. The wide disparity in buyer and seller expectations also limited the number of transactions. Many sellers were unwilling to accept the fact that the market value of their hotel investments had declined below the cost of the project or the original investment. Moreover, many owners were faced with a significant tax burden upon sale, further reducing their willingness to settle for a price that was below the original acquisition cost. As a result of these market forces, there was very little sales activity involving large, high-quality hotels. The primary difficulty was the lack of HVS International, Mineola, New York Sales Comparison Approach 135 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= properties available for sale; owners who were not forced to sell opted to wait for prices to recover. The few hotels that did enter the market generally attracted 15 to 20 interested bidders, mostly consisting of owner-operators. As a result of the competition for these few assets, the prices of better-quality hotels began to escalate rapidly. In response, more sellers have been encouraged to place their products on the market. An indicator of this market trend is the number of hotel sales that have occurred during the past few years. HVS International tracks major hotel transactions of more than $10,000,000 on an annual basis. In 1992, the number of major transactions was 67; a slightly lower level of 52 was registered in 1993. This total increased significantly (to 92) in 1994, and the 1995 total is estimated to have been 104. In tandem with escalating prices, hotels are again being considered by traditional financing sources, which had virtually abandoned the hospitality industry by the early 1990s. Although many lenders are still approaching the market with a high degree of caution, it is now possible to obtain third-party financing for hotel transactions. The mortgage loans that are now being made are subject to fairly stringent requirements: loan-to-value ratios remain in the 65% to 75% range. The qualification of the borrower is also a crucial consideration for most lenders. We believe that the upward trend in both pricing and sales activity will continue as financing becomes more available and additional buyers (particularly passive investors) enter the market. Consequently, it is important to consider the date of the transactions used in the sales comparison approach. When the comparable sales are not recent enough to provide an accurate picture of the current market, it may be necessary to make upward adjustments to the values indicated by the sales comparison and income capitalization approaches in recognition of the recent escalation. Comparable Sales Based on information provided by the Hospitality Market Data Exchange and compiled by the six offices of HVS International, the following transactions involved hotels that appear to have some degree of comparability to the subject property. HVS International, Mineola, New York Sales Comparison Approach 136 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Sale #1: -------- Property: Marriott Forestal Village Location: 201 Village Boulevard Princeton, NJ Date of Sale: September, 1996 Sales Price: $19,600,000 Grantor: Gale and Wentworth Grantee: Starwood Lodging Trust Year Opened: 1989 Number of Rooms: 294 Price per Room: $66,667 Confirmed By: Starwood Lodging Trust Comments: This property is located in Princeton's Forrestal Village, near the New Jersey Turnpike and Routes 1 and 295. The improvements include two restaurants, two lounges, a swimming pool, a health club, and meeting facilities. This sale represented an all-cash transaction. HVS International, Mineola, New York Sales Comparison Approach 137 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Sale #2: -------- Property: Radisson Somerset Location: 200 Atrium Drive Somerset, NJ Date of Sale: January, 1996 Sales Price: $18,000,000 Grantor: SA Associates Grantee: Thayer Lodging Year Opened: 1983 Number of Rooms: 361 Price per Room: $49,861 Confirmed By: John Hamilton, Doubletree Comments: This hotel was scheduled to be converted to a Doubletree. The property is adjacent to the Garden State Exhibition Center, which generates a significant portion of the hotel's demand. A $3 million renovation was planned to include the development of a conference center style facility on the second floor of the property. The management contract was terminated but all fees were paid for by the buyer. This sale represented an all-cash, fee simple transaction. HVS International, Mineola, New York Sales Comparison Approach 138 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Sale #3: -------- Property: Somerset Marriott Location: 110 Davidson Avenue Somerset, NJ Date of Sale: August, 1995 Sales Price: $25,000,000 Grantor: Metric Realty Investors Grantee: Equistar Year Opened: 1978 Number of Rooms: 435 Price per Room: $57,471 Confirmed By: Equistar Comments: The improvements include a swimming pool and 12,000 square feet of meeting space. Renovations of $3 million were anticipated at the time of the sale to upgrade guestrooms and public space. The property was switched from a Marriott corporate managed property to a franchise. However, there were no reported management contract termination fees associated with the sale. This sale represented an all-cash, fee simple transaction. HVS International, Mineola, New York Sales Comparison Approach 139 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Sale #4: -------- Property: Comfort Inn Location: 7625 Imperial Way Fogelsville, PA Date of Sale: March 23, 1995 Sales Price: $7,000,000 Grantor: Solow Hotel Corporation Grantee: Innkeepers USA, L.P. Year Opened: 1990 Number of Rooms: 127 Price per Room: $55,118 Confirmed By: Pratt, White, & Whitney - Real Estate Appraisers and Consultants Comments: In addition to guestrooms, improvements include a lounge and conference room. Sale #5: -------- Property: Stouffer's Park Ridge Hotel Location: 480 North Gulph Road King of Prussia, PA Date of Sale: August 10, 1995 Sales Price: $16,500,000 Grantor: Citicorp Grantee: HEI Hotels Year Opened: 1973 Number of Rooms: 265 Price per Room: $62,264 Confirmed By: HEI Comments: This property underwent a $4 million renovation prior to the sale. Because of the renovation, management changes, and operating concept changes, the historical operating data is not considered germane. HVS International, Mineola, New York Sales Comparison Approach 140 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= In addition to considering the above recent transactions, we have also reviewed the sale of the subject property, which occurred in 1995. The details of this transaction are summarized as follows: Subject Property: ----------------- Property: Ramada Hotel (now the Holiday Inn Select) Location: 36 Valley Road Clark, NJ Date of Sale: August 24, 1995 Sales Price: $3,750,000 Grantor: RTC Mortgage Trust Grantee: Clark New Jersey Hotel Limited Partnership - an entity controlled by Ashford Financial Corporation Year Opened: 1973 Number of Rooms: 191 Price per Room: +/-$18,848 Confirmed By: Ashford Financial Corporation In analyzing the sale of the subject property, it is important to consider the terms and conditions pertaining to the transaction. The seller had acquired this hotel through foreclosure and, in keeping with the brief of the RTC, was strongly motivated to dispose of the property quickly. Ashford purchased the property for all cash, using only equity funds. Based on our understanding of the terms of this transaction, we believe this transaction represents a distressed sale and was reflective of market value. The relevance of the previous transaction involving the subject property is also undermined by the material change in market conditions which occurred between the date of this sale and the present date of value. Areawide occupancy and average rate have improved dramatically in the intervening months, and are forecast to continue this positive trend. As previously discussed, the market for hotel investments has also improved significantly, due to changes in lender and investor attitudes. Finally, the property itself has undergone a significant renovation, with a total of $3,200,000 spent on upgrading the facilities and amenities. For these reasons, we are of the opinion that the August, 1995 sale involving the subject property is not a reliable indicator of the current value of the hotel. HVS International, Mineola, New York Sales Comparison Approach 141 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Conclusion Although the sales comparison approach may be useful in providing a value range and reflecting certain market characteristics, its applicability is limited by the numerous possible points of difference between the subject property and other hotels that have sold in recent years. These factors may include location, access, size, services and facilities offered, market conditions, chain affiliation, market orientation, management, rate structure, age, physical condition, date of sale, the highest and best use of the land, and the anticipated profitability of the operation. Circumstances surrounding a sale, such as financing terms, tax considerations, income guarantees, sales of partial interests, duress on the part of the buyer or seller, or a particular deal structure can also cause a disparity between the sales price and pure market value. Moreover, it is often difficult to determine the marketing periods that were necessary to consummate the transactions. It is extremely difficult to quantify the appropriate adjustment factors accurately because of their number and complexity, as well as the difficulty in obtaining specific, detailed information. Any attempt to manipulate the necessary adjustments is insupportable and purely speculative. Because appraisers are expected to reflect the analytical processes and actions of typical buyers and sellers rather than to create a highly subjective valuation approach, the investment rationale of hotel owners is an essential consideration. As specialists in the valuation of hotels, we find that typical buyers purchase properties based on a thorough analysis of the anticipated economic benefits of property ownership, rather than on historical sales data. In light of these factors, it is our opinion that the sales comparison approach is unsuitable for indicating a specific estimate of the subject property's market value; however, this approach may indicate a range of values that can be used to test the reasonableness of the value indicated by the income capitalization approach. Excluding the prior sale of the subject property, the sales prices range from approximately $49,900 to $66,700 per room, or $9,500,000 - - $12,700,000 for the 191-unit subject property. The income capitalization approach indicates a value of $11,100,000, which falls within this range. HVS International, Mineola, New York Cost Approach 142 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 12. Cost Approach The cost approach is founded on the principle of substitution, which implies that no prudent person will pay more for a property than the amount to acquire a site and construct a building of equal desirability and utility without undue delay. This approach estimates market value by first calculating the current cost of replacing the improvements. Appropriate deductions are made for depreciation resulting from physical deterioration, functional obsolescence, and external (economic) obsolescence, and the land value is added to the depreciated replacement cost to provide an estimate of market value. The cost approach employs the following steps. 1. The current replacement or reproduction cost is estimated. 2. Land value is estimated using techniques such as allocation, extraction, or ground rent capitalization. 3. Accrued depreciation, which can be divided into physical deterioration, functional obsolescence, and external obsolescence, is estimated. 4. Total depreciation is deducted from the subject property's replacement cost, and the land value is added to arrive at an estimate of value via the cost approach. When forming their purchase decisions regarding existing properties, market participants tend to consider the cost of developing a new hotel with optimal physical and functional utility. External conditions, such as the depressed market for real estate (and hotels in particular), can cause a property to be worth less than its replacement cost as new. The task of estimating the loss in value resulting from incurable functional and external obsolescence is highly subjective. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements age and begin to deteriorate, the loss in value resulting from physical obsolescence HVS International, Mineola, New York Cost Approach 143 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= becomes increasingly difficult to quantify accurately. Loss in value attributable to functional obsolescence can be even more difficult to determine. The subject property was constructed in 1973, and will be approximately 24 years old as of the date of this appraisal. After the recent renovation, the subject property has considerably improved its room and public space product. However, the property still suffers from considerable functional obsolescence, the majority of which exists in the meeting space (discussed earlier in this report). In summary, because the meeting space is held within the hotel tower on the second floor, the largest space can only accommodate limited-size groups. This restricts the hotel's ability to compete in this segment of the Saddle Brook-Woodbridge meeting and group market. The depressed hotel market conditions that prevailed in the late 1980s and the early 1990s have also led to a degree of external obsolescence. In our opinion, it is impossible to identify and quantify the impact of these factors on the property's value with any accuracy, so we will only estimate the replacement cost of the subject property. Replacement Cost Replacement cost is the current construction cost of a building with the same utility as the subject property, but built with modern materials and according to current construction and design standards. For the purpose of estimating the replacement cost of the subject property, we have used a hotel development cost survey conducted by HVS International. This survey is published annually in a newsletter entitled The Hotel Valuation Journal, and appeared in the May, 1995, issue of Lodging Hospitality. The survey presents the range of per-room costs associated with various components of hotel development, including the improvements, the furniture, fixtures, and equipment, pre-opening expenses, and operating capital. Statistics are compiled for three broad categories of hotels: luxury, standard, and economy. The results of this survey are presented in the following table. HVS International, Mineola, New York Cost Approach 144 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 12-1 Hotel Development Cost Survey (Amounts per Room) - --------------------------------------------------------------------------------
Improvements Furniture & Equipment Pre-Opening Operating Capital Total Percent Change - ------------------------------------------------------------------------------------------------------------------------------------ 1976 Luxury $32,000 - $55,000 $5,000 - $10,000 $1,000 - $2,000 $1,000 - $1,500 $39,000 - $68,500 --- - --- Standard 20,000 - 32,000 3,000 - 6,000 750 - 1,000 750 - 1,000 24,500 - 40,000 --- - --- Economy 8,000 - 15,000 2,000 - 4,000 500 - 1,000 500 - 750 11,000 - 20,750 --- - --- 1979 Luxury 36,000 - 65,000 8,000 - 15,000 1,500 - 3,000 1,500 - 2,000 47,000 - 85,000 6.8 - 8.0 Standard 25,000 - 36,000 5,000 - 10,000 1,000 - 2,000 1,000 - 1,500 32,000 - 49,500 10.2 - 7.9 Economy 10,000 - 20,000 3,000 - 5,000 750 - 1,000 750 - 1,000 14,500 - 27,000 10.6 - 10.0 1981 Luxury 45,000 - 80,000 10,000 - 20,000 2,000 - 3,500 2,000 - 2,500 59,000 - 106,000 12.8 - 12.4 Standard 25,000 - 40,000 7,000 - 13,000 1,200 - 2,500 1,200 - 2,000 34,400 - 57,500 3.8 - 8.1 Economy 13,000 - 25,000 4,000 - 7,000 700 - 1,200 900 - 1,200 18,600 - 34,400 14.1 - 13.7 1983 Luxury 55,000 - 100,000 12,500 - 20,000 2,300 - 4,000 2,000 - 2,800 71,800 - 126,800 10.8 - 9.8 Standard 35,000 - 50,000 9,000 - 15,000 1,400 - 3,000 1,300 - 2,200 46,700 - 70,200 17.9 - 11.0 Economy 18,000 - 32,000 5,000 - 8,000 800 - 1,500 900 - 1,300 24,700 - 42,800 16.4 - 12.2 1985 Luxury 60,000 - 115,000 13,400 - 30,000 3,000 - 5,000 2,100 - 3,100 78,500 - 153,100 4.7 - 10.4 Standard 38,000 - 57,000 9,500 - 16,500 1,900 - 3,600 1,500 - 2,500 50,900 - 79,600 4.5 - 6.7 Economy 20,000 - 36,000 5,000 - 8,800 1,000 - 1,700 1,000 - 1,500 27,000 - 48,000 4.7 - 6.1 1986 Luxury 62,000 - 120,000 13,700 - 30,600 3,100 - 5,200 2,300 - 3,100 81,100 - 158,900 3.3 - 3.8 Standard 39,000 - 60,000 9,700 - 16,800 2,000 - 3,800 1,500 - 2,600 52,200 - 83,200 2.6 - 4.5 Economy 21,000 - 37,000 5,100 - 9,000 1,000 - 1,800 1,100 - 1,500 28,200 - 49,300 4.4 - 2.7 1987 Luxury 63,000 - 122,000 13,800 - 30,900 3,300 - 5,500 2,300 - 3,200 82,400 - 161,600 1.6 - 1.7 Standard 40,000 - 61,000 9,800 - 16,800 2,100 - 3,900 1,500 - 2,600 53,400 - 84,300 2.3 - 1.3 Economy 21,000 - 39,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 28,400 - 51,400 0.7 - 4.3 1988 Luxury 65,000 - 125,000 14,000 - 31,000 3,300 - 5,500 2,300 - 3,200 84,600 - 164,700 2.7 - 1.9 Standard 41,000 - 63,000 10,000 - 17,100 2,100 - 3,900 1,500 - 2,600 54,600 - 86,600 2.2 - 2.7 Economy 22,000 - 40,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 29,400 - 52,400 3.5 - 1.9 1989 Luxury 66,000 - 126,000 15,000 - 32,000 3,300 - 5,500 2,300 - 3,200 86,600 - 166,700 2.4 - 1.2 Standard 41,000 - 64,000 10,500 - 18,000 2,100 - 3,900 1,500 - 2,600 55,100 - 88,500 0.9 - 2.2 Economy 22,000 - 40,000 5,500 - 9,700 1,100 - 1,800 1,100 - 1,500 29,700 - 53,000 1.0 - 1.1 1990 Luxury 67,000 - 128,000 15,400 - 33,000 3,500 - 5,700 2,500 - 3,500 88,400 - 170,200 2.1 - 2.1 Standard 42,000 - 65,000 10,800 - 18,500 2,200 - 4,000 1,600 - 2,800 56,600 - 90,300 2.7 - 2.0 Economy 22,500 - 41,000 5,600 - 10,000 1,200 - 1,800 1,200 - 1,600 30,500 - 54,400 2.7 - 2.6 1991 Luxury 65,000 - 122,000 14,500 - 31,500 3,700 - 5,900 2,600 - 3,600 85,800 - 163,000 (2.9) - (4.2) Standard 40,000 - 63,000 10,000 - 17,800 2,300 - 4,200 1,700 - 2,900 54,000 - 87,900 (4.6) - (2.7) Economy 21,000 - 39,000 5,000 - 9,500 1,300 - 2,000 1,300 - 1,700 28,600 - 52,200 (6.2) - (4.0) 1992 Luxury 64,000 - 120,000 14,200 - 30,900 3,800 - 6,100 2,700 - 3,700 84,700 - 160,700 (1.3) - (1.4) Standard 39,000 - 62,000 9,800 - 17,400 2,300 - 4,400 1,800 - 3,000 52,900 - 86,800 (2.0) - (1.3) Economy 21,000 - 38,000 4,900 - 9,300 1,400 - 2,100 1,300 - 1,800 28,600 - 51,200 0.0 - (1.9) 1993 Luxury 63,000 - 119,000 14,000 - 30,500 3,900 - 6,200 2,800 - 3,800 83,700 - 159,500 (1.2) - (0.7) Standard 39,000 - 61,000 9,700 - 17,200 2,300 - 4,500 1,800 - 3,000 52,800 - 85,700 (0.2) - (1.3) Economy 21,000 - 38,000 4,900 - 9,200 1,400 - 2,100 1,300 - 1,800 28,600 - 51,100 0.0 - (0.2) 1994 Luxury 64,000 - 121,000 14,300 - 31,100 3,900 - 6,200 2,800 - 3,800 85,000 - 162,100 1.6 - 1.6 Standard 40,000 - 63,000 10,000 - 17,600 2,400 - 4,600 1,800 - 3,000 54,200 - 88,200 2.7 - 2.9 Economy 22,000 - 40,000 5,100 - 9,500 1,500 - 2,200 1,300 - 1,800 29,900 - 53,500 4.5 - 4.7 1995 Luxury 65,000 - 124,000 14,800 - 32,300 4,100 - 6,400 2,900 - 4,000 86,800 - 166,700 2.1 - 2.8 Standard 41,000 - 65,000 10,400 - 18,300 2,500 - 4,800 1,900 - 3,100 55,800 - 91,200 3.0 - 3.4 Economy 23,000 - 42,000 5,400 - 9,900 1,600 - 2,300 1,300 - 1,800 31,300 - 56,000 4.7 - 4.7
Average Annual Compounded Percent Change: 1976 - 1995: Luxury 4.3% - 4.8% 1986 - 1995: Luxury 0.8% - 0.5% Standard 4.4% - 4.4% Standard 0.7% - 1.0% Economy 5.7% - 5.4% Economy 1.2% - 1.4% - -------------------------------------------------------------------------------- HVS International, Mineola, New York Cost Approach 145 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= As illustrated by the previous table, hotel development costs rose significantly during the late 1970s and the early 1980s; however, the rate of increase slowed substantially in 1987. In 1991, hotel development costs declined for the first time since 1976. Further drops of as much as 2.0% were registered in 1992. Between 1986 and 1990, average annual compounded increases ranged from 1.7% to 2.5%. Costs rose slowly (at average annual compounded rates ranging from 0.5% to 1.4%) between 1986 and 1995, largely as a result of the declines in 1991, 1992, and 1993. In 1995, hotel development costs started to escalate more rapidly, reaching 4.7% in the economy segment. As more hotels are developed, we expect costs to continue to rise. Because the replacement cost tends to set the upper limit of a particular hotel's value, this figure is relevant to our analysis. We estimate the replacement cost of the subject property as follows, based on the development cost survey discussed earlier. ================================================================================ Table 12-2 Subject Property's Replacement Cost - -------------------------------------------------------------------------------- Cost No. of Hotel Cost per Room Rooms Total Cost -------------------------------------------------------------------------- Building $50,000 191 $ 9,550,000 FF&E 15,000 191 2,865,000 Pre-Opening 3,500 191 668,500 Operating Capital 2,700 191 515,700 -------------------------------------------------------------------------- Total $71,200 $13,599,200 - -------------------------------------------------------------------------------- Ground Lease Approach to Land Valuation Land value may be estimated either by the sales comparison approach, using comparable land sales, or by the ground lease approach, which is based on the economic value generated by an improvement that represents the property's highest and best use. Because it is unusual to find recent sales of comparable vacant land that is slated for imminent hotel development, we have used the ground lease approach to determine the subject property's land value. Hotels are often constructed on leased land, and although lease terms differ somewhat, the basis for the rental calculation is frequently tied to a percentage of revenue. By applying a typical ground lease rental formula to the subject property's stabilized revenues, the appraiser can determine the hotel's economic rent, or what is also known as the income attributable to the HVS International, Mineola, New York Cost Approach 146 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= land. Land value is then calculated by dividing the economic rent by an appropriate capitalization rate. The self-adjusting aspect of this approach is key to its reliability. Because the rental formula is tied to a percentage of revenue that inherently reflects both the locational attributes of the site (occupancy and rate) and the allowable density of development, the resulting economic ground rent justly represents the greatest net return to the land over a given period. Because the Holiday Inn Select appears to represent the highest and best use of the property, the ground lease approach is an appropriate method of determining land value. We have researched long-term hotel ground leases in search of rental formulas that are based on a percentage of rooms revenue or on a combination of rooms, food, and beverage revenue. This analysis indicates that economic ground rents for hotels similar to the subject property typically range from 2.7% to 7.8% of rooms revenue. Although this range is quite broad, most of the formulas yield rental percentages of between 4.0% and 5.0% of rooms revenue. After considering these comparable ground leases and the locational attributes of the subject property, we believe the appropriate economic ground rental percentage is 4.5% of stabilized rooms revenue. The subject property's stabilized rooms revenue has been deflated to reflect 1997 dollars. The following calculation shows the derivation of the subject property's economic ground rent. Stabilized Rooms Revenue (1996 dollars) $ 4,141,721 Rental Percentage 0.045 ----------- Economic Ground Rent $ 186,377 Rent generated by a ground lease represents a fairly low-risk income flow. Because the tenant improvements typically amount to more than eight times the value of the land, the risk of default is low. When the ground lease terms are tied to rooms revenue, the landlord is also protected from the adverse effects of inflation. Based on these risk factors and the current cost of long-term capital, we estimate the appropriate ground rental overall capitalization rate at 10%. Applying this indicated capitalization rate to the subject property's economic ground rent yields the following estimate of land value. HVS International, Mineola, New York Cost Approach 147 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Economic Ground Rent $186,377 $1,863,774 ------------------------ = ------------ = Capitalization Rate 0.10 Estimated Land Value (Say) $1,860,000 A new hotel's land value typically ranges from 10% to 20% of the overall value. The estimate of land value presented above is approximately 14% of the subject property's total value as indicated by the income capitalization approach. Replacement Cost Combining the replacement cost of the property with the land value yields the subject property's total replacement cost. ================================================================================ Table 12-3 Total Replacement Cost - -------------------------------------------------------------------------------- Cost of the Improvements and FF&E $13,599,200 Land Value 1,860,000 ----------- Total Replacement Cost $15,459,200 Total Replacement Cost (Say) $15,500,000 - -------------------------------------------------------------------------------- If a property's replacement cost is significantly higher than the values indicated by the income capitalization and sales comparison approaches, it may indicate that an upward adjustment of these values is appropriate. This would also reduce the probability of new hotel development, which is not likely to be feasible under those conditions. This creates an effective barrier to entry for new competition, thus reducing the risk associated with the subject property's income-generating potential. An upward adjustment of the value indicated by the income capitalization approach is also justified by this barrier to entry. We find that knowledgeable hotel buyers generally base their purchase decisions on economic factors, such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, it is our opinion that the cost approach is inapplicable in estimating the market value of the Holiday Inn Select. However, we have estimated the subject property's replacement cost as new, which may set the upper limit of the hotel's value. HVS International, Mineola, New York Reconciliation of Value Indications 148 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 13. Reconciliation of Value Indications The reconciliation, which is the last step in the appraisal process, involves summarizing and correlating the data and procedures employed throughout the analysis. The final conclusion of value is arrived at after reviewing the estimates indicated by the income capitalization, sales comparison, and cost approaches. The relative significance, applicability, and defensibility of each indicated value is considered, and the greatest weight is given to that approach deemed most appropriate for the property being appraised. The purpose of this report is to estimate the market value of the fee simple interest in the subject property. Our appraisal involves a careful analysis of the property itself and the economic, demographic, political, physical, and environmental factors that influence real estate values. Based on the data set forth in this report, the following value indications were developed. Approach Value Indication -------- ---------------- Income Capitalization $11,100,000 Sales Comparison $9,500,000 - $12,700,000 Cost (Replacement Cost) $15,500,000 Income Capitalization Approach To estimate the subject property's value via the income capitalization approach, we analyzed the local market for transient accommodations, examined the competitive environment, projected occupancy and average rate levels, and developed a forecast of income and expense that reflects anticipated income trends and cost components through a stabilized year of operation. The subject property's projected net income before debt service was then allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component was calculated; the total of the mortgage and equity components equates to the value of the property. HVS International, Mineola, New York Reconciliation of Value Indications 149 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Our nationwide experience indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the hotel investors who constitute the marketplace. For this reason, we believe that the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in our final estimate of the subject property's market value. Sales Comparison Approach The sales comparison approach uses actual sales of similar properties to provide an indication of the subject property's value. The strength of this approach is that it measures value based on the investment decisions made by actual buyers and sellers. Although we have investigated a number of sales in an attempt to develop a range of value indications, several adjustments are necessary to render the sales prices applicable to the subject property. These adjustments, which are numerous and highly subjective, diminish the reliability of the sales comparison approach. Furthermore, we find that typical hotel investors employ a sales comparison procedure only to establish broad value parameters. The hotel sales outlined earlier in this report indicate a value range of $49,861 to $66,667 per available room. The income capitalization approach indicates a per-room value of approximately $58,000. This information suggests that a slight downward adjustment of the value indicated by the income capitalization approach may be warranted. Cost Approach To estimate the subject property's value via the cost approach, we estimated the current replacement cost of the property and added the land value. We give the cost approach limited weight in arriving at a final value estimate, because knowledgeable buyers of lodging facilities generally base their purchase decisions on economic factors (such as projected net income and return on investment) rather than on a property's depreciated replacement cost. The replacement cost estimate developed via the cost approach can help to corroborate the results of the income capitalization and sales comparison approaches to value. If the replacement cost is substantially higher or lower than the value indicated by the income capitalization approach, an upward or downward adjustment of the income capitalization approach value may be necessary. In the case of the subject property, the replacement cost was higher than the value indicated by the income capitalization approach; therefore, this would limit to a certain extent the downward adjustment indicated by the sales comparison approach. HVS International, Mineola, New York Reconciliation of Value Indications 150 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Value Conclusion Careful consideration has been given to the strengths and weaknesses of the three approaches to value discussed above. In recognition of the purpose of this appraisal, we have given primary weight to the value indicated by the income capitalization approach and made some subjective adjustments based on the replacement cost estimate, the sales comparison approach, and our extensive experience in the hospitality industry. It is our opinion that the market value of the fee simple interest in the Holiday Inn Select - Clark, as of January 1, 1997, is: $10,700,000 TEN MILLION SEVEN HUNDRED THOUSAND DOLLARS The estimate of market value includes the land, the improvements, and the furniture, fixtures, and equipment. The appraisal assumes that the hotel is open and operational. This value estimate equates to roundly $56,000 per room, which is well supported by market sales and roundly 3.7% lower than the value indicated by the income capitalization approach. The estimate of value assumes either the availability of third-party financing or the willingness and capability of the seller to take back purchase-money financing so that a buyer can obtain the level of debt set forth in the Income Capitalization Approach section of this appraisal. Marketing Period Our estimate of market value assumes a marketing period of six to nine months. Under normal economic conditions, hotels are transferred within this time frame. Personal Property In accordance with the appraisal standards set forth by the Office of the Comptroller of the Currency, it is necessary for bank appraisals to identify and value any personal property, fixtures, or intangible items that are included in the appraisal and discuss their impact on the overall estimate of market value. A hotel's income-generating ability depends on a suitable inventory of furniture, fixtures, and equipment. Removal of these items can decrease the property value by as much as the cost to replace the inventory plus the loss of income incurred while the hotel cannot function. A hotel's personal property consists of a wide variety of components, including bedroom furnishings, bathroom fixtures, restaurant and kitchen equipment, front office and accounting computers, exterior signs, and HVS International, Mineola, New York Reconciliation of Value Indications 151 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= similar items. Our inspection of the Holiday Inn Select indicates that the personal property and fixtures are in superior condition Based on an annual construction cost survey conducted by HVS International, we estimate the total replacement cost of the subject property's furniture, fixtures, and equipment at $15,000 per available room. Assuming an average useful life of ten years and an effective age of one year (the subject property was renovated earlier this year), the value of the furniture, fixtures, and equipment currently in place is approximately $13,500 per room, or a total of $2,578,000. The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) stipulates that "...any business interest or other intangible item should be valued separately within the appraisal."(1) Hotels have both business and real estate components; without the business expertise necessary to operate the facility, a hostelry would have little real estate value. Because furniture, fixtures, and equipment are essential to a hotel's income-generating ability and are seldom removed from the property or sold separately, the separation of the personal property component from the real property is not particularly meaningful. (1) Federal Register, Vol. 55, No. 143, July 25, 1990, p. 30205. HVS International, Mineola, New York Statement of Assumptions and 152 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 14. Statement of Assumptions and Limiting Conditions 1. This report is to be used in whole and not in part. 2. No responsibility is assumed for matters of a legal nature, nor do we render any opinion as to title, which is assumed to be marketable and free of any deed restrictions and easements. The property is valued as though free and clear unless otherwise stated. 3. We assume that there are no hidden or unapparent conditions of the sub-soil or structures, such as underground storage tanks, that would render the property more or less valuable. No responsibility is assumed for these conditions or for any engineering that may be required to discover them. 4. We have not considered the presence of potentially hazardous materials such as asbestos, urea formaldehyde foam insulation, PCBs, any form of toxic waste, polychlorinated biphengyls, pesticides, or lead-based paints. The appraisers are not qualified to detect hazardous substances, and we urge the client to retain an expert in this field if desired. 5. The Americans with Disabilities Act (ADA) became effective on January 26, 1992. We have conducted no specific compliance survey to determine whether the subject property is operating in accordance with the various detailed requirements of the ADA. It is possible that the property does not conform to the requirements of the act, and this could have an unfavorable effect on value. Because we have no direct evidence regarding this issue, our estimate of value does not consider possible non-compliance with the ADA. 6. We have made no survey of the property, and we assume no responsibility in connection with such matters. Sketches, photographs, maps, and other exhibits are included to assist the reader in visualizing the property. It is assumed that the use of the land and improvements is HVS International, Mineola, New York Statement of Assumptions and 153 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= within the boundaries of the property described, and that there is no encroachment or trespass unless noted. 7. All information, financial operating statements, estimates, and opinions obtained from parties not employed by HVS International are assumed to be true and correct. We can assume no liability resulting from misinformation. 8. Unless noted, we assume that there are no encroachments, zoning violations, or building violations encumbering the subject property. 9. The property is assumed to be in full compliance with all applicable federal, state, local, and private codes, laws, consents, licenses, and regulations (including a liquor license where appropriate), and that all licenses, permits, certificates, franchises, and so forth can be freely renewed or transferred to a purchaser. 10. All mortgages, liens, encumbrances, leases, and servitudes have been disregarded unless specified otherwise. 11. None of this material may be reproduced in any form without our written permission, and the report cannot be disseminated to the public through advertising, public relations, news, sales, or other media. 12. We are not required to testify or appear in court by reason of this analysis without previous arrangements, and only when our standard per diem fees and travel costs are paid prior to the appearance. 13. If the reader is making a fiduciary or individual investment decision and has any questions concerning the material presented in this report, it is recommended that the reader contact us. 14. We take no responsibility for any events or circumstances that take place subsequent to either the date of value or the date of our field inspection, whichever occurs first. 15. The quality of a lodging facility's on-site management has a direct effect on a property's economic viability and value. The financial forecasts presented in this analysis assume responsible ownership and competent management. Any departure from this assumption may have a significant impact on the projected operating results and the value estimate. 16. The estimated operating results presented in this report are based on an evaluation of the overall economy, and neither take into account nor HVS International, Mineola, New York Statement of Assumptions and 154 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= make provision for the effect of any sharp rise or decline in local or national economic conditions. To the extent that wages and other operating expenses may advance during the economic life of the property, we expect that the prices of rooms, food, beverages, and services will be adjusted to at least offset those advances. We do not warrant that the estimates will be attained, but they have been prepared on the basis of information obtained during the course of this study and are intended to reflect the expectations of a typical hotel buyer. 17. This analysis assumes continuation of all Internal Revenue Service tax code provisions as stated or interpreted on either the date of value or the date of our field inspection, whichever occurs first. 18. Many of the figures presented in this report were generated using sophisticated computer models that make calculations based on numbers carried out to three or more decimal places. In the interest of simplicity, most numbers have been rounded to the nearest tenth of a percent. Thus, these figures may be subject to small rounding errors. 19. It is agreed that our liability to the client is limited to the amount of the fee paid as liquidated damages. Our responsibility is limited to the client, and use of this report by third parties shall be solely at the risk of the client and/or third parties. The use of this report is also subject to the terms and conditions set forth in our engagement letter with the client. 20. Appraising hotels is both a science and an art. Although this analysis employs various mathematical calculations to provide value indications, the final estimate is subjective and may be influenced by our experience and other factors not specifically set forth in this report. 21. Any distribution of the total value between the land and improvements or between partial ownership interests applies only under the stated use. Moreover, separate allocations between components are not valid if this report is used in conjunction with any other analysis. 22. This study was prepared by Hospitality Valuation Services, a division of Hotel Consulting Services, Inc. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of Hotel Consulting Services, Inc. as employees, rather than as individuals. HVS International, Mineola, New York Certification 155 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 15. Certification We, the undersigned appraisers, hereby certify: 1. that the statements and opinions presented in this report, subject to the limiting conditions set forth, are correct to the best of our knowledge and belief; 2. that Rodney G. Clough personally inspected the property described in this report; that Anne R. Lloyd-Jones and Stephen Rushmore participated in the analysis and reviewed the findings but did not personally inspect the property; 3. that we have no current or contemplated interests in the real estate that is the subject of this report; 4. that we have no personal interest or bias with respect to the subject matter of this report or the parties involved; 5. that this report sets forth all of the limiting conditions (imposed by the terms of this assignment) affecting the analyses, opinions, and conclusions presented herein; 6. that the fee paid for the preparation of this report is not contingent upon our conclusions; 7. that this report has been prepared in accordance with, and is subject to, the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute; 8. that the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives; 9. that this report has been prepared in accordance with the Uniform Standards of Professional Appraisal Practice (as adopted by the Appraisal Foundation); HVS International, Mineola, New York Certification 156 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 10. that no one other than the undersigned prepared the analyses, conclusions, and opinions concerning real estate that are set forth in this appraisal report; 11. that as of the date of this report, Stephen Rushmore has completed the requirements of the continuing education program of the Appraisal Institute; 12. that this appraisal is not based on a requested minimum value, a specific value, or the approval of a loan. /s/ Rodney G. Clough ------------------------------- Rodney G. Clough Consulting and Valuation Analyst Hotel Consulting Services, Inc. /s/ Anne R. Lloyd-Jones ------------------------------- Anne R. Lloyd-Jones, CRE Senior Vice President Hotel Consulting Services, Inc. /s/ Stephen Rushmore ------------------------------- Stephen Rushmore, CRE, MAI, CHA President Hotel Consulting Services, Inc. HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= [GRAPHIC OMITTED] View of the Subject Property's Lobby [GRAPHIC OMITTED] View of the Subject Property's standard guestroom HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= [GRAPHIC OMITTED] Subject Property standard Bathroom [GRAPHIC OMITTED] Subject Property Ballroom HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= [GRAPHIC OMITTED] Subject Property's Hunter's Grill Restaurant HVS International, Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= [GRAPHIC OMITTED] Woodbridge Hilton [GRAPHIC OMITTED] Woodbridge Sheraton Title No. 61151 DESCRIPTION ALL that certain tract, lot and parcel of land lying and being in the Township of Clark, County of Union and State of New Jersey, being more particularly described as follows: BEGINNING at a point being the intersection of the westerly line of Walnut Avenue, as widened, with the southerly right of way line of Bloodgood Branch of the Lehigh Valley Railroad and running; thence 1. South 04 degrees 57 minutes O5 seconds east along said widened westerly line of Walnut Avenue 323.95 feet to a point of curvature; thence 2. Southerly and westerly on a curve to the right having a radius of 75.00 feet, an arc distance of 145.13 feet, to a point of tangency, in the northerly line of Valley Road, as widened; thence 3. North 74 degrees 04 minutes 40 seconds west along said line of Valley Road, 439.03 feet to a point in the easterly line of Lot 02 Block 154 on the Clark Township tax map; thence 4. North 17 degrees 27 minutes 00 seconds east along said easterly line 131.93 feet; thence 5. North 36 degrees 45 minutes 30 seconds west along the northeasterly line of said Lot 02 Block 154, 45.37 feet to a point in the southeasterly line of Lot 1 Block 154 on said tax map; thence 6. North 41 degrees 38 minutes 00 seconds east along said southeasterly line of Lot 01, 9.12 feet to the northeast corner of Lot 0l Block 154 on said tax map; thence 7. North 68 degrees 06 minutes 30 seconds west along the northerly line of said Lot 01, Block 154, 17.16 feet to the most easterly corner of Lot 08, Block 154 on said tax map; thence 8. North 36 degrees 45 minutes 30 seconds west along the northeasterly line of said Lot 08 Block 154, 78.31 feet to a point in the southerly line of the Garden State Parkway; thence 9. North 49 degrees 55 minutes 00 seconds east along the same 276.02 feet to a point in the southerly right of way line of Bloodgood Branch of Lehigh Valley Railroad; thence continued ........ For conveyancing only, if intended to be conveyed: Together with all rights, title and interest of, in and to any streets and roads abutting the above described premises, to the center line thereof. Title No. 61151 DESCRIPTION (continued - page two) 10. Southeasterly, along said Railroad line, on a curve to the left having a radius of 1,179.28 feet an arc distance of 351.05 feet to the point of BEGINNING. NOT FOR POLICY Said premises are known as 36 Valley Road, Clark, New Jersey designated as Block 154 Lots 3, 6 and 7 on the tax Map of the Township of Clark. For conveyancing only, if intended to be conveyed: Together with all rights, title and interest of, in and to any streets and roads abutting the above described premises, to the center line thereof. HVS International, Mineola, New York Addendum - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Synopsis of Holiday Inn License Agreement Date: August 25, 1994 Licensor: Holiday Inns Franchising, Inc. Licensee: Clark New Jersey Hotel Limited Partnership - an entity controlled by Ashford Financial Corporation Premises: 36 Valley Road, Clark, New Jersey Term: 15 years Renewal: No renewal rights conveyed Fees: Royalty: 5% of gross room revenues Marketing Fees: 1.5% of gross room revenues Reservation Contribution: 1.0% of gross room revenues Monthly Holidex fee of $5.97 for each guestroom at the hotel Licensor Services: Reservation services, training, marketing and operations consulting, maintenance of standards Licensee Obligations: Various operational requirements, upgrades Termination: Upon default HVS International, Mineola, New York Addendum - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Synopsis of Hotel Management Agreement Date: August 24, 1995 Owner: Clark New Jersey Hotel Limited Partnership - an entity controlled by Ashford Financial Corporation Manager: Remington Clark Employers Corporation Premises: 36 Valley Road, Clark, New Jersey Term: 15 years Renewal: 2 five-year extensions Management Fee: 3% of gross revenues Reserve for Replacement: 3% of gross revenues Termination: Under various conditions of default HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Explanation of the Simultaneous Valuation Formula The algebraic equation known as the simultaneous valuation formula, which solves for the total property value using a ten-year mortgage and equity technique, was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(17) The process of solving for the value of the mortgage and equity components begins by deducting the annual debt service from the projected income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value using the terminal capitalization rate. The equity residual, which is the total reversionary value less the mortgage balance at that point in time and less any brokerage and legal costs associated with the sale, is discounted to the date of value at the equity yield rate. The net income to equity for each projection year is also discounted back to the date of value. The sum of these discounted values equals the value of the equity component. Because the equity component comprises a specific percentage of the total value, the value of the mortgage and the total property can be computed easily. This process can be expressed in two algebraic equations that set forth the mathematical relationships between the known and unknown variables using the following symbols. (17) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= NI = Net income available for debt service V = Value M = Loan-to-value ratio f = Annual debt service constant n = Number of years in the projection period d(e) = Annual cash available to equity d(r) = Residual equity value b = Brokerage and legal cost percentage P = Fraction of the loan paid off during the projection period f(p) = Annual constant required to amortize the entire loan during the projection period R(r) = Overall terminal capitalization rate that is applied to net income to calculate the total property reversion (sales price at the end of the projection period) 1/S(n) = Present worth of $1 factor (discount factor) at the equity yield rate Using these symbols, the following formulas can be used to express some of the components of this mortgage and equity valuation process. Debt Service - A property's debt service is calculated by first determining the mortgage amount that equals the total value (V) multiplied by the loan-to-value ratio (M). Debt service is derived by multiplying the mortgage amount by the annual debt service constant (f). The following formula represents debt service. f x M x V = Debt Service Net Income to Equity (Equity Dividend) - The net income to equity (d(e)) is the property's net income before debt service (NI) less debt service. The following formula represents the net income to equity. NI - (f x M x V) = d(e) Reversionary Value - The value of the hotel at the end of the tenth year is calculated by dividing the 11th-year net income before debt service (NI^11) by HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= the terminal capitalization rate (R(r)). The following formula represents the property's tenth-year reversionary value. (NI^11/R(r)) = Reversionary Value Brokerage and Legal Costs - When a hotel is sold, certain costs are associated with the transaction. Normally, the broker is paid a commission and the attorney collects legal fees. In the case of hotel transactions, brokerage and legal costs typically range from 1% to 4% of the sales price. Because these expenses reduce the proceeds to the seller, they are usually deducted from the reversionary value in the mortgage and equity valuation process. Brokerage and legal costs (b), expressed as a percentage of reversionary value (NI^11/R(r)), are calculated by application of the following formula. b(NI^11/R(r)) = Brokerage and Legal Costs Ending Mortgage Balance - The mortgage balance at the end of the tenth year must be deducted from the total reversionary value (debt and equity) in order to determine the equity residual. The formula used to determine the fraction of the loan remaining (expressed as a percentage of the original loan balance) at any point in time (P) takes the annual debt service constant of the loan over the entire amortization period (f) less the mortgage interest rate (i), and divides it by the annual constant required to amortize the entire loan during the ten-year projection period (f(p)) less the mortgage interest rate. The following formula represents the fraction of the loan paid off (P). (f - i)/(f(p) - i) = P If the fraction of the loan paid off (expressed as a percentage of the initial loan balance) is P, then the remaining loan percentage is expressed as 1 - P. The ending mortgage balance is the fraction of the remaining loan (1 - P) multiplied by the initial loan amount (M x V). The following formula represents the ending mortgage balance. (1 - P) x M x V Equity Residual Value - The value of the equity upon the sale at the end of the projection period (d(r)) is the reversionary value less the brokerage and legal costs and the ending mortgage balance. The following formula represents the equity residual value. (NI^11/R(r)) - (b (NI^11/R(r)) - ((1 - P) x M x V) = d(r) HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Annual Cash Flow to Equity - The annual cash flow to equity consists of the equity dividend for each projection year plus the equity residual at the end of the tenth year. The following formula represents the annual cash flow to equity. NI^1 - (f x M x V) = d(e)^1 NI^2 - (f x M x V) = d(e)^2 NI^10 - (f x M x V) = d(e)^10 (NI^11/R(r)) - (b (NI^11/R(r)) - ((1 - P) x M x V) = d(r) Value of the Equity - If the initial mortgage amount is calculated by multiplying the loan-to-value ratio (M) by the property value (V), then the equity value is one minus the loan-to-value ratio multiplied by the property value. The following formula represents the value of the equity. (1 - M) V Discounting the Cash Flow to Equity to the Present Value - The cash flow to equity in each projection year is discounted to the present value at the equity yield rate (1/S^n). The sum of these cash flows is the value of the equity (1 - M) V. The following formula represents the calculation of equity as the sum of the discounted cash flows. (d(e)^1 x 1/S^1) + (d(e)^2 x 1/S^2) + . . . + (d(e)^10 x 1/S^10) + (d(r) x 1/S^10) = (1 - M) V Combining the Equations: Annual Cash Flow to Equity and Discounting the Cash Flow to Equity to the Present Value - The last step is to arrive at one overall equation that shows that the annual cash flow to equity plus the yearly discounting to the present value equals the value of the equity. ((NI^1 - (f x M x V)) 1/S^1) + ((NI^2 - (f x M x V)) 1/S^2) + . . . ((NI^10 - (f x M x V)) 1/S^10) + (((NI^11/R(r)) - (b (NI^11/R(r))) - ((1 - P) x M x V)) 1/S^10) = (1 - M) V Because the only unknown in this equation is the property's value (V), it can be solved readily. HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Ten-Year Projection of Income and Expense - Because the fixed and variable forecast of income and expense is carried out only to the stabilized year, it is necessary to continue the projection to the 11th year. In most cases, net income before debt service beyond the stabilized year is projected at an assumed inflation rate. By increasing a property's revenue and expenses at the same rate of inflation, net income remains constant as a percentage of total revenue, and the dollar amount escalates at the annual inflation rate. Hotel investors are currently using inflation rates of approximately 3.5% annually. The ten-year forecast of income and expense illustrates the subject property's net income, which is assumed to increase by 3.5% annually subsequent to the hotel's stabilized year of operation. Solving for Value Using the Simultaneous Valuation Formula - In the case of the subject property, the following known variables have been determined. ================================================================================ Table 1: Summary of Known Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Ten-Year Forecast Loan-to-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.111856 Equity Yield Ye 22.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 11.0% - -------------------------------------------------------------------------------- The following table illustrates the present worth of a $1 factor at the 22% equity yield rate. HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 2: Present Worth of $1 Factor at the Equity Yield Rate - -------------------------------------------------------------------------------- Calendar Year Present Worth of $1 Ending Factor @22.0% --------------------------------------------------------------- 1997 0.819664 1998 0.671849 1999 0.550691 2000 0.451381 2001 0.369981 2002 0.303260 2003 0.248572 2004 0.203745 2005 0.167003 2006 0.136886 - -------------------------------------------------------------------------------- Using these known variables, the following intermediary calculations must be made before applying the simultaneous valuation formula. The fraction of the loan paid off during the projection period is calculated as follows. P = ( 0.111856 - 0.095 ) / ( 0.155277 - 0.095 ) = 0.279638 The annual debt service is calculated as f x M x V. (f x M x V) = 0.111856 x 0.70 x V = 0.078299 V Inserting the known variables into the hotel valuation formula produces the following. ( 1,090,000 - 0.078299 V ) x 0.819672 + ( 1,412,000 - 0.078299 V ) x 0.671862 + ( 1,281,000 - 0.078299 V ) x 0.550707 + ( 1,388,000 - 0.078299 V ) x 0.451399 + ( 1,438,000 - 0.078299 V ) x 0.369999 + ( 1,487,000 - 0.078299 V ) x 0.303278 + ( 1,540,000 - 0.078299 V ) x 0.248589 + ( 1,594,000 - 0.078299 V ) x 0.203761 + ( 1,648,000 - 0.078299 V ) x 0.167017 + ( 1,706,000 - 0.078299 V ) x 0.136899 + ((( 1,766,000 / 0.110 ) - ( 0.03 x ( 1,766,000 / 0.110 )) - (( 1 - 0.279638 ) x 0.70 x V )) x 0.136899 ) = ( 1 - 0.70 ) V HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Like terms are combined as follows. $7,505,483 - 0.376214 V = (1 - 0.70) V $7,505,483 = 0.67621 V V = $ 7,505,483 / 0.67621 V = $11,099,279 Total Property Value as Indicated by the Income Capitalization Approach (Say) = $11,100,000 HVS International, Mineola, New York Qualifications of Rodney G. Clough - -------------------------------------------------------------------------------- ============= HVS INTERNATIONAL ============= ================================================================================ Rodney G. Clough Employment 1995 to present HVS INTERNATIONAL Mineola, New York (Hotel Valuations, Market Studies, Feasibility Reports and Investment Counseling) 1994 THE MIRAGE HOTEL AND CASINO Las Vegas, Nevada Summer, 1993 HYATT REGENCY DENVER DOWNTOWN Denver, Colorado 1991 THE STATLER HOTEL AND JW MARRIOTT EXECUTIVE EDUCATION CENTER Ithaca, New York 1988 UNIVERSITY OF COLORADO CATERING Boulder, Colorado Education BS - School of Hotel Administration, Cornell University (Managing Director, HEC 69) Professional Cornell Society of Hotelmen Affiliations Examples of Bay County Conference Center Keenan & Hewitt Corporate and Planning Authority Mountain Spa Development Institutional Capitol Hotel Group OCWEN Financial Corporation Clients Served City of Portsmouth ITT Sheraton Fairmont Hotel Management Co. Samoth, Inc. Grand Heritage Hotels Sumitomo Bank Ltd. HVS International, Mineola, New York Qualifications of Rodney G. Clough - -------------------------------------------------------------------------------- ============= HVS INTERNATIONAL ============= ================================================================================ Examples of Hotels Florida Appraised or Evaluated - Floridan Hotel, Tampa - Proposed Sheraton, Tampa - Grenelefe Golf and Tennis Resort, Haines City Illinois - The Fairmont, Chicago - Days Inn, Chicago Kansas - Broadview Hotel, Wichita Massachusetts - Copley Plaza Hotel, Boston Michigan - Proposed Conference Center, Bay City Nevada - Proposed Mountain Spa Resort, Las Vegas New York - Hotel Gregory, Brooklyn - LaGuardia Ramada, East Elmhurst - Staten Island Hotel, Staten Island South Carolina - Proposed Inn, Charleston Texas - Proposed Sheraton, San Antonio - Holiday Inn Riverwalk North, San Antonio - Crossroads Inn, San Antonio Virginia - Doubletree Hotel, Crystal City - Proposed Downtown Hotel, Portsmouth HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Anne R. Lloyd-Jones, CRE Employment 1982 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1981 FAIRMONT HOTEL Dallas, Texas 1979 - 1980 SAGA FOOD SERVICE SWARTHMORE COLLEGE Swarthmore, Pennsylvania 1977 - 1980 DARANNE CATERERS Swarthmore, Pennsylvania Professional Affiliations American Society of Real Estate Counselors - Member (CRE) Appraisal Institute - Candidate for Membership Cornell Society of Hotelmen Education MPS - School of Hotel Administration, Cornell University BA - Swarthmore College Appraisal Institute Course 1A1 - Real Estate Appraisal Principles Course 1A2 - Basic Valuation Procedures Course 1BA - Capitalization Theory and Techniques, Part A Course 1BB - Capitalization Theory and Techniques, Part B Course 2-1 - Case Studies in Real Estate Valuation Course 2-3 - Standards of Professional Practice Course 3-1 - Report Writing HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Corporate and Institutional Clients Served Ashford Financial Corporation Chase Manhattan Bank, N. A. Citibank / Citicorp NA Credit Lyonnais Doubletree Hotels Grand Heritage Hotels Great Western Bank Goldman Sachs Holiday Inns, Inc. Interstate Hotels MassMutual Marriott International / Host Marriott Morgan Stanley OCWEN Financial Services Remington Hotels Sheraton Hotels Starwood Capital Group Starwood Lodging Trust Winegardner & Hammons Wyndham Hotel Company Hotel Chains and Management Companies Appraised or Evaluated Doubletree Hotels Compri Hotels Interstate Hotels Fairmont Hotels Guest Quarters Hilton Hotels Corporation Omni International Hotels Ramada Hotel Corp. Servico Hotel Corp. Winegardner & Hammons Appearance as an Expert Witness Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Jefferson City, Missouri Federal Bankruptcy Court, Columbia, South Carolina Federal Bankruptcy Court, Houston, Texas Federal Bankruptcy Court, New York, New York Federal Bankruptcy Court, San Bernardino, California Federal Bankruptcy Court, Los Angeles, California Federal Bankruptcy Court, Charlotte, North Carolina Federal Bankruptcy Court, Miami, Florida Federal District Court, Central Division, Salt Lake City, Utah Iowa District Court, Story County, Iowa Texas District Court, Harris County, Texas Federal Bankruptcy Court, Tampa, Florida Utah District Court, Salt Lake County, Utah Federal Bankruptcy Court, Newark, New Jersey HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated Arizona - - Wyndham Garden Hotel, Chandler - - Wyndham Garden Hotel - Airport, Phoenix - - Wyndham Garden Hotel - Union Hills, Phoenix - - Canyon Ranch Spa & Fitness Resort, Tucson Alabama - - Holiday Inn, Birmingham - - Proposed Sheraton, Gulf Shores - - Proposed Inn, Mobile - - Holiday Inn, Sheffield California - - Industry Hills Sheraton Hotel, City of Industry - - Piccadilly Inn, Fresno - - Proposed Inn at Foss Creek, Healdsburg - - Sunset Towers Hotel, Hollywood - - Proposed La Quinta, Irvine - - Wyndham Garden Hotel, La Jolla - - Days Inn, La Palma - - Proposed Marriott Courtyard, Palm Springs - - Proposed Club Hilton Hotel, Pleasanton - - Center Pointe Development, San Diego - - Holiday Inn-Embarcadero, San Diego - - Holiday Inn-Harbor View, San Diego - - Seven Seas Lodge, San Diego - - Proposed Fountaingrove Inn, Santa Rosa - - Sheraton Round Barn Inn, Santa Rosa - - Wyndham Garden Hotel, Sunnyvale - - Westlake Plaza Hotel, Thousand Oaks - - Proposed Marriott Courtyard, Torrance Colorado - - Proposed Hotel, Keystone Connecticut - - Holiday Inn, Milford - - Holiday Inn, New Britain District of Columbia - - Grand Hotel, Washington - - Wyndham Bristol Hotel, Washington Florida - - Kon Tiki Village, Kissimmee - - Sheraton Lakeside, Kissimmee - - Holiday Inn, 22nd Street, Miami Beach - - Holiday Inn, 87th Street, Miami Beach - - Holiday Inn, 180th Street, Miami Beach - - Sheraton Resort & Marina, St. Petersburg - - Hilton Hotel, Singer Island - - Royce Hotel, West Palm Beach Georgia - - Marriott Hotel, Atlanta - - Wyndham Garden Hotel, Atlanta - - Holiday Inn, Brunswick - - Holiday Inn, Jekyll Island - - Mullberry Inn, Savannah - - Royal Savannah Inn, Savannah Hawaii - - Hobron in Waikiki, Honolulu Idaho - - Holiday Inn, Boise - - Red Lion Inn, Boise - - Super 8, Boise Illinois - - Ramada Inn, Bloomington - - Proposed Marriott Courtyard, Glenview - - Wyndham Garden Hotel, Naperville Indiana - - Holiday Inn, Bloomington - - Inn at the Four Winds, Bloomington - - Ramada Inn, Bloomington - - Hilton Hotel, Fort Wayne - - Airport Hilton Inn, Indianapolis - - Hilton at the Circle, Indianapolis Iowa - - Holiday Inn, Ames - - Proposed Fairfield Inn, Des Moines HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Kentucky - - Proposed Super 8, London - - Proposed Super 8, Radcliff Louisiana - - Sheraton Inn, Kenner - - Hotel Meridien, New Orleans Maine - - Proposed Hotel, Old Orchard Beach Maryland - - Brookshire Hotel, Baltimore - - Lord Baltimore Hotel, Baltimore - - Hyatt Regency, Bethesda Massachusetts - - Proposed Marriott Courtyard, Andover - - Hyatt Regency, Cambridge - - Proposed Hotel, Franklin - - Sheraton Inn, Hyannis - - Marriott Hotel, Worcester Michigan - - Bay Valley Inn, Bay City - - Hilton Airport, Detroit - - Westin Renaissance Center, Detroit - - Hotel Pontchartrain, Detroit - - Proposed Embassy Suites, Lansing - - Hilton Inn, Northfield - - Holiday Inn, Saginaw Minnesota - - Wyndham Garden Hotel, Bloomington - - Marriott Hotel, Minnetonka Missouri - - Inn at Grand Glaize, Osage Beach - - Bel Air Hilton, St. Louis - - Holiday Inn Riverfront, St. Louis Nebraska - - Holiday Inn Airport, Lincoln - - Holiday Inn Northeast, Lincoln Nebraska (continued) - - Marriott Hotel, Omaha - - Ramada Inn, Omaha - - Red Lion Inn, Omaha Nevada - - Proposed Super 8, Las Vegas New Jersey - - Ramada Inn, Edison - - Marriott Hotel, Hanover - - Headquarters Plaza, Morristown - - Hyatt Regency, New Brunswick - - Holiday Inn, North Brunswick New York - - Hilton Hotel, Albany - - Proposed Embassy Suites, Amherst - - Holiday Inn Arena, Binghamton - - Holiday Inn SUNY, Binghamton - - Proposed Hotel, Binghamton - - Proposed Hilton, Brooklyn - - Marriott Hotel, Dewitt - - Metropole Hotel, Flushing - - Midway Hotel, Flushing - - Ramada Inn, Kingston - - Royce Hotel, La Guardia - - Holiday Inn, Latham - - Proposed Crowne Plaza, Manhattan - - Proposed Prince Street Hotel, Manhattan - - Proposed Roslyn Inn, Roslyn - - Proposed Le Richmonde, Rye Brook - - Hilton Hotel, Syracuse - - Hotel Syracuse, Syracuse - - Proposed Hotel, Watertown North Carolina - - Proposed Inn, Chapel Hill - - Proposed Indep. Center Marriott Hotel, Charlotte - - Royce Hotel, Charlotte - - Howard Johnson's North, Charlotte HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) North Carolina (continued) - - Holiday Inn West, Durham - - Sheraton University Inn, Durham - - Holiday Inn, Fayetteville - - Holiday Inn Downtown, Raleigh Ohio - - Proposed Hyatt Hotel, Cleveland - - Proposed Marriott Hotel, Cleveland Oregon - - Holiday Inn Airport, Portland - - Holiday Inn South, Portland Pennsylvania - - Quality Inn, Allentown - - Holiday Inn, Bensalem - - Proposed Marriott Courtyard, Devon - - Proposed Lafayette Inn, Easton - - Ramada Inn, Erie - - Holiday Inn, Harrisburg - - Marriott Hotel, Harrisburg - - Proposed Super 8, Harrisburg - - Proposed Super 8, Lancaster - - Holiday Inn West, Monroeville - - Days Inn Philadelphia - - Franklin Plaza Hotel, Philadelphia - - Franklin Towne EconoLodge, Philadelphia - - Guest Quarters Hotel, Philadelphia - - Hilton Inn, Northeast, Philadelphia - - Marriott Airport Hotel, Philadelphia - - Holiday Inn Greentree, Pittsburgh - - Holiday Inn Parkway East, Pittsburgh - - Holiday Inn North, Pittsburgh - - Holiday Inn Parkway West, Pittsburgh - - Proposed Hotel, Pittsburgh - - Royce Hotel, Pittsburgh - - Westin William Penn Hotel, Pittsburgh - - Hilton Hotel, Scranton - - Proposed Marriott Courtyard, Valley Forge - - Holiday Inn Meadowlands, Washington - - Ramada Inn, York - - Proposed Super 8, York Rhode Island - - Proposed Hotel, Providence - - Omni Biltmore Hotel, Providence South Carolina - - Proposed Charleston Center Hotel, Charleston - - Proposed Cooper River Inn, Charleston - - Howard Johnson's, Spartanburg - - Proposed Middleton Inn and Conference Center, Charleston - - Best Western, North Charleston - - Proposed Marriott Courtyard, Columbia - - Fairfield Inn, Florence - - Holiday Inn, Florence - - Fairfield Inn, Greenville - - Proposed Marriott Courtyard, Greenville - - Fairfield Inn, Hilton Head - - Holiday Inn, Hilton Head Tennessee - - Hampton Inn, Brentwood - - Proposed Marriott Courtyard, Brentwood - - Howard Johnson's, Chattanooga - - Sheraton Hotel, Chattanooga - - Howard Johnson's, Knoxville - - Proposed Capital Mall Convention Center Hotel, Nashville - - Clarion Maxwell House, Nashville - - Holiday Inn Briley Parkway, Nashville - - Proposed Marriott Courtyard, Nashville - - Sheraton Music City, Nashville - - Stouffer's Nashville Hotel, Nashville - - Proposed Super 8, Nashville - - Union Station Hotel, Nashville - - Wyndham Garden Hotel, Nashville - - Proposed Super 8, Union City HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Texas - - Proposed Marriott Courtyard, Addison - - Proposed Marriott Courtyard, Arlington - - La Mansion, Austin - - Proposed Marriott Courtyard, Bedford - - Airport Hilton, El Paso - - Hotel Meridien, Houston - - Sheraton Hotel, Houston - - Proposed Marriott Courtyard, Las Colinas - - Proposed Marriott Courtyard, North Dallas - - La Mansion Del Norte, San Antonio - - La Mansion Del Rio, San Antonio - - Proposed Marriott Courtyard, San Antonio - - Proposed Marriott Courtyard - Medical Center, San Antonio Utah - - Deer Valley Resort, Park City - - Hilton Inn, Salt Lake City - - Holiday Inn, Salt Lake City - - Sheraton Hotel, Salt Lake City Virginia - - Mountain Lake Hotel, Blacksburg - - Howard Johnson's, Bristol - - Boars Head Inn, Charlottesville - - Proposed Fairfield Inn, Hampton - - Proposed Embassy Suites, Herndon - - Ramada Renaissance, Herndon - - Proposed Marriott Courtyard, Manassas - - Omni Hotel, Norfolk Virginia (continued) - - Proposed Marriott, Norfolk - - Howard Johnson's, Richmond - - Howard Johnson's, Roanoke - - Howard Johnson's, Roanoke Rapids - - Wyndham Hotel, Williamsburg Washington - - Wyndham Garden Hotel, Bothell - - Redmond Hotel, Redmond - - Wyndham Garden Hotel, SeaTac West Virginia Proposed Budget Motel, Princeton Wisconsin - - Proposed Granada Royale, Green Bay - - Holiday Inn-Downtown, Green Bay Canada - - Inn on the Park, Toronto Puerto Rico - - Carib Inn, San Juan Virgin Islands - - Virgin Grand Beach Hotel, St. Thomas Jamaica - - Holiday Inn, Montego Bay HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Stephen Rushmore, CRE, MAI, CHA Employment 1980 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1977 - 1980 1971 - 1974 HELMSLEY-SPEAR HOSPITALITY SERVICES, INC. New York, New York (Real Estate) 1974 - 1977 JAMES E. GIBBONS ASSOCIATES Garden City, New York (Mortgage Banking, Appraisals, Hotel Operations) Affiliated Ownership Interests HVS INTERNATIONAL (SAN FRANCISCO, CALIFORNIA) West coast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (MIAMI, FLORIDA) Southeast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (BOULDER, COLORADO) Midwest office for hotel/motel appraisals and counseling HVS INTERNATIONAL (VANCOUVER, CANADA) Canadian office for hotel/motel appraisals and counseling HVS INTERNATIONAL (LONDON, ENGLAND) European office for hotel/motel appraisals and counseling HVS - EXECUTIVE SEARCH Hotel/motel executive search and human resource consulting HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) HVS - ECO SERVICES Environmental consulting for hotels and motels; administrator of the ECOTEL designation HOSPITALITY EQUITY INVESTORS, INC. Hotel and motel investment and management company TRUMBULL MARRIOTT HOTEL General partner of a 324-room hotel and conference center PRINCETON HOTEL ASSOCIATES General partner of a 128-unit Residence Inn in Princeton, New Jersey SEAVIEW GOLF RESORT ASSOCIATES General partner of a 298-unit, 424-acre Marriott resort in Absecon, New Jersey SHELTON HOTEL ASSOCIATES General partner of a 96-unit Residence Inn in Shelton, Connecticut DANBURY HOTEL ASSOCIATES General partner of a 243-unit Hilton Hotel in Danbury, Connecticut PRUDENTIAL - HEI JOINT VENTURE Joint venture partner with Prudential Insurance Company of America on a 234-unit Embassy Suites in Atlanta, Georgia WESTPORT NORFOLK ASSOCIATES General partner of a 425-unit Omni Hotel in Norfolk, Virginia WESTPORT BWI, LLC General partner of a 310-unit Marriott Hotel in Baltimore, Maryland HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) WESTPORT RARITAN, LLC General partner of a 274-unit Crowne Plaza Hotel in Raritan, New Jersey WESTPORT NOVI, LLC General partner of a 193-unit Hilton Hotel in Novi, Michigan WESTPORT LONG BEACH, LLC General Partner of a 460-unit Sheraton Hotel in Long Beach, California WESTPORT PARK RIDGE, LLC General Partner of a 265-unit hotel and conference center in Valley Forge, Pennsylvania WESTPORT CHARLESTON, LLC General Partner of a 295-unit Hilton Hotel in Charleston, South Carolina HOSPITALITY VALUATION SOFTWARE, INC. Founder of software company that develops and distributes hotel financial analysis software Hotels Managed Sheraton Hotel, Smithtown, New York Marriott Hotel, Baltimore Airport, Maryland Hilton Hotel, Danbury, Connecticut Residence Inn, Princeton, New Jersey Embassy Suites, Atlanta Airport, Georgia Omni Hotel, Norfolk, Virginia Crowne Plaza, Raritan, New Jersey Hilton Hotel, Novi, Michigan Sheraton Hotel, Long Beach, California Hilton Hotel, Charleston, South Carolina Park Ridge Hotel and Conference Center, Valley Forge, Pennsylvania Hilton Hotel, Wilmington, Delaware HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Professional Affiliations American Society of Real Estate Counselors - Member (CRE) - Board of Governors Appraisal Institute - Member (MAI) (SREA) - Developer and Instructor, Hotel Investment and Valuation Seminar - Developer and Instructor, Hotel Computer Valuation Seminar American Hotel and Motel Association - Certified Hotel Administrator (CHA) - Industry Real Estate Financing Advisory Council (IREFAC) International Society of Hospitality Consultants - Member (ISHC) New York University - Adjunct Assistant Professor of Nutrition, Food and Hotel Management Michigan State University - Honorary Faculty, Honorary Alumnus Certified General Appraiser - Arizona, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Illinois, Massachusetts, Michigan, Minnesota, Nebraska, New Jersey, New York, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Virginia Licensed Real Estate Broker - New York, Pennsylvania Board of Advisers - Real Estate Finance Journal - Real Estate Workouts & Asset Management American Arbitration Association - National Real Estate Valuation Council Cornell Society of Hotelmen New York University Masters in Hospitality Management - Advisory Board New York University Hospitality Investment Conference - Board of Advisors Beta Gamma Sigma - National Honor Society in Business and Management HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Endowment Hospitality Valuation Services Professor of Hotel Finance and Real Estate - School of Hotel Administration, Cornell University (currently held by Professor James J. Eyster) Education BS - School of Hotel Administration, Cornell University MBA - Graduate School of Business Administration (Finance), University of Buffalo Candidate for PhD - School of Education, Department of Food Service Management, New York University Partial List of Teaching and Lecture Assignments Cornell University - Computer Valuation Techniques Michigan State University - Hotel Management Contracts University of North Carolina - Hotel Market Studies University of Virginia - Assessing Hotels American Arbitration Association - Real Estate Arbitration American Hotel and Motel Association - Hotel Obsolescence Appraisal Institute - Hotel Valuation (over 50 seminars) International Association of Assessing Officers - Hotel Valuation Montreal Appraisal Society - Total Project Analysis Society of Real Estate Appraisers - Lease Seminar Lodging Hospitality - Lodging Summit Published Books and Seminars Textbooks The Valuation of Hotels and Motels, Appraisal Institute, Chicago, Illinois, 1978 Hotels, Motels and Restaurants: Valuations and Market Studies, Appraisal Institute, Chicago, Illinois, 1983 How to Perform an Economic Feasibility Study of a Proposed Hotel/Motel, American Society of Real Estate Counselors, Chicago, Illinois, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Books and Seminars (continued) Textbooks (continued) Hotel Investments: A Guide for Owners and Lenders, Warren, Gorham and Lamont, Inc., New York, New York, 1990 The Computerized Income Approach to Hotel Market Studies and Valuations, Appraisal Institute, Chicago, Illinois, 1990 Hotel Investments: A Guide for Owners and Lenders, 1992 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotel Investments: A Guide for Owners and Lenders, 1993 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Appraisal Institute, Chicago, Illinois, 1992 Student Manuals The Valuation of Lease Interests, Society of Real Estate Appraisers, Chicago, Illinois, 1976 Hotel-Motel Valuation Seminar, Appraisal Institute, Chicago, Illinois, 1981, 1988, 1990 The Computerized Approach to Hotel Market Studies and Valuations Seminar, Appraisal Institute, Chicago, Illinois, 1991 Demonstration Appraisal Demonstration Appraisal of a Proposed Hotel, Spring Valley, New York, Hospitality Valuation Services, Mineola, New York, 1983, 1990 Chapters The Real Estate Handbook-Second Edition, Dow Jones-Irwin, 1989, "Hotels and Motels" Arbitration of Real Estate Valuation Principles, American Arbitration Association, 1987, "Arbitration in the Hospitality Industry" Ethics in Hospitality Management: A Book of Readings, Educational Institute of the American Hotel and Motel Association, 1992, "Ethics in Hotel Appraising" The Lodging and Food Service Industry, Educational Institute of the American Hotel and Motel Association, 1993, "Insider's Insights" HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles The Appraisal Journal "Using Total Project Analysis to Compete for Investment Capital," October, 1975 "The Appraisal of Food Service Facilities," July, 1980 "Publish and Prosper," October, 1980 "Valuation of Hotels and Motels for Assessment Purposes," April, 1984 "Adjusting Comparable Sales for Hotel Assessment Appeals," July, 1986 "Hotel Business Value and Working Capital: A Clarification," January, 1987 "Ethics in Hotel Appraising," July, 1993 The Appraiser "Hotel-Motel Appraisal Misconceptions Set Straight," January, 1979 "No Conventional Financing Available for Hotels: Rushmore," December, 1979 "Estimating Hotel Land Values Using Comparable Ground Leases," April, 1980 Bulletin of the Cornell Society of Hotelmen "Employment Philosophy for a Consulting Practice," July, 1984 Business Travel News "A Snapshot of a Classic Recovery," July, 1995 The Canadian Appraiser "Hotel/Motel Market Sales Update," Summer, 1987 Capital Sources for Real Estate "Stephen Rushmore Discusses the Future of the Lodging Industry," December, 1994 Cayuga Advisor "Secrets to Success in Consulting," October, 1992 Chapter News and Notes "Quantifying a Hotel's Business Value," November, 1979 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Cornell Hotel & Restaurant Administration Quarterly "A Preliminary Market Study," November, 1974 "How Much is Your Place Worth Today? A Case Study in Hotel - Motel Valuation," May, 1975 "What Can Be Done About Your Hotel's Real Estate Taxes?" May, 1977 "The Appraisal of Lodging Facilities," August, 1978 "The Appraisal of Food Service Facilities," February, 1979 "The Appraisal of Lodging Facilities - Update," November, 1984 "Hotel Sales Prices Down More Than 12%," May, 1991 "Seven Current Hotel Valuation Techniques," August, 1992 "The Valuation of Distressed Hotels," October, 1992 "Hotel Lending in the 1990's: Amateurs Beware," December, 1994 "Investment Values of Lodging Property: Modeling the Effects of Income Taxes and Alternative Lender Criteria," December, 1995 FCI Spec Sheet "Employment Philosophy for a Consulting Practice," September, 1984 Florida Hotel & Motel Journal "Rushmore Reports Rising Hotel Prices," February, 1995 Hotel and Motel Management "Average Rate vs. Project Cost," May 1, 1974 "How to Increase the Marketability of Your Motel," April, 1981 "Tougher Lending, Lower Room Rate Hikes On Way?" June, 1981 "What is That Mortgage Loan Going to Cost You?" August, 1981 "How to Perform a Study of Your Property's Market," October, 1981 "How do High Interest Rates Affect Your Motel's Value?" December, 1981 "How to Buy a Feasibility Study That Works for You," February, 1982 "Settling Lease Conflicts Quickly Through Arbitration," April, 1982 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Hotel and Motel Management (continued) "Are Casino Hotels Really Worth $500,000 Per Room?" June, 1982 "Discount Rates and Internal Rate of Return," August, 1982 "Determining a Property's Extended Life Cycle," November, 1982 "Using Microcomputers for Forecasting," December, 1982 "Update on Hotel Development Costs," January, 1983 "Estimating a Site's Worth by Finding Its Profit Value," June, 1983 "Hotel Construction May Be Slowing Down a Little Bit," April, 1983 "The Investor's Risk Sways to Prevailing Economic Winds," August, 1983 "Is Your Property Tax at as Low a Level as it Should Be?" October, 1983 "The Ultimate Guest Room: Could it Ever Exist Anywhere?" December, 1983 Hotel-Motor Inn Journal A Preventive Maintenance System for Motels," March, 1975 Hotel Valuation Journal "Hotel Valuation Index Peaks During 1989," Fall, 1990 "Hotel Development Costs," Winter, 1991 "Hotel Valuation Index for 1990," Spring, 1991 "Bad Year for Hotel Sales Prices Confirmed," Spring, 1992 "Hotel Sales Prices on the Rise," Fall, 1994 "United States Hotel Values Climb," Spring/Summer, 1995 "It's Time for Franchise Reform," Fall, 1995 Institutions/ Volume Feeding "Greater Risk/Greater Profit Potential: Hotel Management Contract," May, 1973 Lodging Hospitality "How to Finance Renovation Projects," January, 1974 "Controlling Your Real Estate Taxes," July, 1978 "Putting Together a Sound Financial Package," December, 1978 "Favorable Outlook for Lodging Values," December, 1983 "Are Your Property Taxes Too High? (Part I and II)," May and June, 1984 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Development Costs," July, 1984 "The Right Management Contract for You," September, 1984 "Selecting the Firm to Prepare Your Feasibility Study," October, 1984 "A Quick How-To In Hotel Valuation," November, 1984 "Updating Lodging Interest Rates," December, 1984 "Is Your Guest Experience Up to Par?" January, 1985 "How to Perform a Breakeven Analysis," May, 1985 "Evaluating Operating Performance," June, 1985 "Hotel Lenders Toughen Underwriting Requirements," July, 1985 "Don't Forget the Pre-Opening Agreement," August, 1985 "Management Companies Should Participate in Financing," October, 1985 "Current Techniques for Valuing Hotel Land," November, 1985 "Hotel Development Costs," December, 1985 "Sourcing Debt Into the 1990's," January, 1986 "Hotel Valuation Thumb Rule," February, 1986 "Value in Use Versus Value in Exchange," March, 1986 "Stretching Feasibility," April, 1986 "The Management Question," May, 1986 "How to Commission a Feasibility Study," June, 1986 "Macro Trends Affecting Property Values," July, 1986 "Hotel-Motel Market Sales Update," August, 1986 "Financing Alternatives: Zero Coupon Mortgages," September, 1986 "Forecasting Lodging Energy Costs," October, 1986 "Portfolio Financing a Better Way," November, 1986 "Profit by Looking at History," December, 1986 "Why New York Isn't Overbuilt," February, 1987 "How to Discourage Hotel Overbuilding: A Case Study," April, 1987 "Structuring an Incentive Management Fee," June, 1987 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Franchising Questions and Answers," July, 1987 "Comparing Hotel Development Costs," August, 1987 "Understanding Economic Life," September, 1987 "Prices Rise for Lodging Properties," October, 1987 "Management Companies Are Key to Success," November, 1987 "Evaluating a Management Contract Fee Structure," December, 1987 "Check Profits Before Selecting Hotel Operator," January, 1988 "It's a Good Time to Review Your Taxes," February, 1988 "How to Use a Management Company Rating System," March, 1988 "Make Sure Management Contracts Contain These Terms," April, 1988 "Hotel Access and Visibility," May, 1988 "Chain Sale Strategies," July, 1988 "Evaluating a Hotel Franchise," August, 1988 "Evaluating Franchise Fees," September, 1988 "Opportunities in Economy Lodging," October, 1988 "How to Obtain a Hotel Mortgage," November, 1988 "Arbitration in the Hospitality Industry," December, 1988 "Lodging Development Cost Update," January, 1989 "Amenities as Profit Builders," February, 1989 "Hotel Values Mirror the Times," March, 1989 "Forecasting Revenue and Expenses," April, 1989 "Real Estate Jargon Made Simple," May, 1989 "Pricing a Management Contract," June, 1989 "Trends in Valuation," July, 1989 "Rescuing the Distressed Hotel," August, 1989 "Shielding Against Incompetence," September, 1989 "Hotel Valuation Revisited," October, 1989 "New Breed of Hard Budgets," November, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Figuring Cap Rates," December, 1989 "A Glance Backward," January, 1990 "Costs Creeping Up," February, 1990 "Valuing Distressed Properties," March, 1990 "Cap and Discount Rates," April, 1990 "An Open Letter," May, 1990 "Misconceptions About Appraisals," June, 1990 "Hotel Values Still Growing," July, 1990 "Hotel Renovation is Key to `90s," August, 1990 "Time Right for Hotel Leases," September, 1990 "Getting a Fix on Rates," October, 1990 "The Wrinkles of Class," November, 1990 "A Glance Backward," December, 1990 "The Price Dropoff," January, 1991 "The Cost Washout," February, 1991 "Survival of the Fittest," March, 1991 "Looking Out and Up," April, 1991 "The Bottom is in Sight," May, 1991 "The Pitfalls of Liquidation," June, 1991 "Extra! Extra! Hospitality News," July, 1991 "The Art of Hotel Renovation," August, 1991 "No Better Time for a Tax Review," September, 1991 "No Time for Passivity," October, 1991 "What a Franchise Really Costs," November, 1991 "In Case You Hadn't Heard," January, 1992 "Negotiation - The Name of the Game," February, 1992 "Now Could be the Time to Build," March, 1992 "The Well May Stay Dry," April, 1992 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Life Expectancy," May, 1992 "Hotel Values - What a Downer," June, 1992 "How to Make Money Now," July, 1992 "Hotel Chain Class Survey," August, 1992 "Budget Dining with Rushmore," September, 1992 "Bookings Up, Rates Will Follow," October, 1992 "Hospitality Master's Good Preparation," November, 1992 "What's New on the Job Front?" January, 1993 "Where Have All the Hotels Gone?" February, 1993 "Hotel Building Costs Continue to Fall," March, 1993 "Hotel Values Head Upward," April, 1993 "The Rise and Fall of Trophy Hotels," May, 1993 "Hotel Sales and Prices Rebound," June, 1993 "Third Parties Loosening Purse Strings," July, 1993 "Beyond Recycling: The Ecotel," August, 1993 "Time to Reduce Property Taxes," September, 1993 "Lodging: The Way I See It," October, 1993 "Choosing an Appraiser," November, 1993 "Who Needs an Asset Manager?" January, 1994 "Investing by the Numbers," February, 1994 "Fire Your Staff and Lease Them Back," March, 1994 "Published Rates Hint at Recovery," April, 1994 "Now is the Time to Start Building," May, 1994 "Hotel Values Heading Up," June, 1994 "Farewell, Friend," July, 1994 "Sales Prices Creeping Up," August, 1994 "Selecting Green Hotel Supplies," September, 1994 "Don't Write Off Full-Service Hotels," October, 1994 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Lodging REIT's Are on the Rise," November, 1994 "Going Back to the Future," January, 1995 "How much do Managers Make?" March, 1995 "Lodging Transactions Soared in '94," April, 1995 "Hotel Development Costs on the Rise," May, 1995 "Hotel Values up Significantly," June, 1995 "What a Franchise Costs over the Long Term," July, 1995 "Road Food Part II," August, 1995 "It's Time for Franchise Reform," September, 1995 "Extended Stay May Not Extend Your Profits," October, 1995 "The Year as I See It," November, 1995 "Cap Rate 101," January, 1996 Michigan Lodging "Hotel Development Costs," January, 1988 The Mortgage and Real Estate Executives Report "Atlantic City Building Game Involves High Stakes," August, 1979 "How Interest Rates Affect Real Estate Values," June, 1982 "Update on Hotel Development Costs," May 1, 1983 Motel-Hotel Insider "The $100,000 Plus Hotel Room Has Become a Reality," November 19, 1979 "Update on Hotel Development Costs," April 4, 1983 NAIFA - The Appraisal Review "Hotel Valuation Techniques," Vol. 44, 1991 Real Estate Digest "Why Should the Management Team be Important to Hotel Lenders," Fall, 1988 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Finance Journal "What is a Typical Fee for a Hotel Management Contract?" Fall, 1988 "Hotel Franchise Fees," Winter 1989 "Why the Management Team Should be Important to Hotel Lenders," Spring, 1989 "Hotel Values and Costs," Summer, 1989 "Structuring a Hotel Investment," Fall, 1989 "A Guide for Lenders Holding Distressed Hotel Loans," Winter, 1990 "Estimating Current Interest Rates for Hotel Financing," Spring, 1990 "Hotel Valuation Techniques," Summer, 1990 "Now is the Time to Review Your Hotel's Property Taxes," Fall, 1990 "Property Tax Assessments for Hotels and Motels," Winter, 1991 "Putting Together Hotel Management Agreements - Part I," Spring 1991 "Putting Together Hotel Management Agreements - Part II," Summer, 1991 "The 1980s - The Decade of Change," Fall, 1991 "An Overview of the Hotel Industry: Past, Present, and Future," Spring, 1994 Real Estate Forum "Casino Hotels Raise Valuation Questions," November, 1981 Real Estate Investment Ideas "How Fuel and Energy Shortages Should Affect Investment Decisions in the Hospitality Industry," March, 1974 "Upward Trend Continues for Sales Price of Hotel-Motel Properties," May, 1988 "High Prices Paid for Hotel-Motel Properties," February, 1990 Real Estate Issues "Employee Compensation for a Consulting Practice," Fall/Winter, 1985 "Hotel/Motel Market Sales Update," Spring/Summer, 1987 Real Estate Newsletter "Computers in Hotel Appraising," May 15, 1989 Real Estate Investment Ideas "Hotel-Sales Update," Winter, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Review "Valuing Motels and Hotel in the Current Market," Fall, 1972 "Dealing With Distressed Hostelry Loans," Fall, 1975 "The Mortgage Underwriting Consultant Comes of Age," Fall, 1977 "Real Estate Compensation," Winter, 1987 Real Estate Workouts and Asset Management "Stephen Rushmore on Directions in the Hospitality Industry," September, 1992 Real Values "Hotel Construction Cost Update," April, 1986 Restaurant and Hotel Design "How Much Should the Renovation Be?" March, 1986 "14 Notable Hotel Development Firms," December, 1987 Rushmore on Hotel Valuation "Mortgage - Equity," Winter, 1979 "Atlantic City - From Bust to Boom," Winter, 1979 "Mortgage - Equity," Spring, 1979 "Developing Mortgage Data," Spring 1979 "Gasoline and Market Values, " Spring, 1979 "Mortgage - Equity," Fall, 1979 "Quantifying a Hotel's Business Value," Fall, 1979 "What Has Happened to Typical Hotel-Motel Development Costs?," Fall, 1979 "Mortgage-Equity," Winter, 1980 "Extending Hotel Economic Life Through Renovation," Winter, 1980 "Estimating Hotel Land Values Using Comparable Ground Leases," Winter, 1980 "Quantifying the Value of Personal Property to a Going Hotel," Spring, 1980 "Recent Changes in New York City's Hotel Market," Spring, 1980 "Hotel-Motel Economic Lives," Fall, 1980 "Mortgage - Equity," Fall, 1980 "Mortgage - Equity," Winter, 1981 "Developing Mortgage Data," Winter, 1981 "Statistical Support for Food and Beverage Projections," Winter, 1981 "Mortgage - Equity," Spring/Summer, 1981 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Rushmore on Hotel Valuation (continued) "Quantifying a Hotel's Demand," Spring/Summer, 1981 "A Five-Year Overview of Typical Hotel-Motel Development Costs," Spring/Summer, 1981 "Mortgage - Equity," Winter/Spring, 1982 "Update on Hotel Capitalization Rates," Winter/Spring, 1982 "Mortgage - Equity," Summer/Fall, 1982 "Are Casino Hotels Really Worth $500,000 Per Room?" Summer/Fall, 1982 "The Hotel-Motel Life Cycle, Summer/Fall, 1982 "Mortgage - Equity," Winter/Spring, 1983 "Update on Hotel Development Costs," Winter/Spring, 1983 "The Valuation of Hotels and Motels for Assessment Purposes," Winter, 1984 "Hotel Capitalization Rates," Summer, 1984 "Hotel Development Cost Survey," Summer, 1984 "Selecting a Hotel Management Company," Fall, 1984 "Hotel Capitalization Rates," Spring, 1985 "How to Perform a Breakeven Analysis," Spring, 1985 "Hotel Capitalization Rates," Winter, 1986 "Hotel Development Costs," Winter, 1986 "Hotel Valuation Survey," Winter, 1987 "Impact of New Tax Laws on Hotel Values," Winter, 1987 "Hotel-Motel Market Sales Update," Winter, 1987 "Structuring an Incentive Management Fee," Fall, 1987 "Understanding Your Hotel's Economic Life," Fall, 1987 "Hotel Development Costs," Fall, 1987 "Hotel, Motel Market Sales Update," Winter, 1988 "Amenity Creep," Winter, 1989 "Hotel Franchise Fees," Winter, 1989 "Hotel Valuation Index," Fall, 1989 "Latest Trends in Hotel Values," Fall, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Tri-State Real Estate Journal "Across the Nation: Hotel Sale Prices Escalate on Average," December 23, 1994 U.S. Real Estate Week "All-Suites Market Entering Second Phase," May 4, 1987 Valuation "Hotel-Motel Market Sales Update," February, 1987 Quarterly Newsletter Hotel Valuation Journal Professional newsletter with a circulation of 10,000 Real Estate Column Lodging Hospitality Real estate editor for a major monthly hospitality periodical Hospitality Column Real Estate Finance Journal Contributing hospitality editor Computer Software Hospitality Valuation Software Hotel financial software for room night analyses, income and expense forecasts, and valuation calculations - developed and distributed for the Appraisal Institute Hotel-Motel Data Hospitality Market Data Exchange National clearinghouse for information pertaining to hotel and motel transactions Hotel Valuation Index National index of hotel value trends for 24 individual market areas Hospitality Seminar Series Intensive short courses for hotel and restaurant professionals Hotel Franchise Fees Analysis Guide Analysis of hotel franchise fees and costs Hospitality Bibliography Comprehensive literature index of hotel and restaurant books and articles HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Awards Robert H. Armstrong Award For the most significant contribution to The Appraisal Journal in 1975 Activities Commercial pilot, instrument, multi-engine; sailing; skiing Corporate and Institutional Clients Served Aetna Life Insurance AIG Real Estate Investment Aldrich Eastman and Waltch Allstate American Airlines America's Best Inns Arthur Anderson & Company Bankers Trust Company Bank of America Bank of Boston Bank of Montreal Bank of New York Bank of Nova Scotia Bank of Tokyo Bank One-Columbus Banque Indosuez Barclay's Bank Baybank Boston The Beacon Companies Bear, Stearns & Company, Inc. Best Inns Best Western International Boykin Management Co. Bradbury Suites C. Itoh Caesar's World California Dept. of Transportation Chase Lincoln First Bank, N.A. Chase Manhattan Bank Chemical Bank Chrysler Capital Corporation CIGNA Citibank Citicorp Real Estate City of Boston City of Detroit City of Grand Rapids City of Kalamazoo City of Orlando City of Philadelphia City of Santa Monica City of Toronto Columbia Sussex Corporation Continental Illinois National Bank Copley Real Estate Advisors Corporex Development CRI, Inc. Cushman and Wakefield Days Inns Edward J. DeBartolo Corp. HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Deer Valley Ski Corporation Doubletree Hotels Drury Inns Econo Lodge Economic Development Admin. EIE Regent International Embassy Suites Equitable Life Assurance Equitable Real Estate Investment European American Bank Fairmont Hotels Federal Deposit Insurance Corp. First Boston First California Savings First Interstate Bank First National Bank of Chicago Four Seasons Hotels Goldman, Sachs Greater Orlando Aviation Authority Great Western Bank Great Western Savings Guest Quarters Hampton Inns Hilton Hotels, Corp. Hilton International Holiday Corporation Holiday Inns Home Savings of America Howard Johnson's Hudson Hotels Corporation Hyatt Hotels Industrial Bank of Japan Interstate Hotels The Irvine Company ITT Commercial Finance Corp. Japan Airlines JDC (America) Corporation John Q. Hammons John Hancock Life Insurance Johnson & Wales College Kenneth Leventhal & Assoc. Kidder Peabody & Company, Inc. La Quinta Larken, Inc. Lexington Companies Loews Hotels Harry Macklowe Real Estate Marine Midland Bank, N.A. Marriott Corporation MA Bay Transit Authority Massachusetts Mutual Life Mellon Bank Meridien Hotels Merrill Lynch Merrill Lynch Capital Markets Metropolitan Life Insurance Microtel Midlantic Bank HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Mitsubishi Morgan Guaranty Bank & Trust Co. J.P. Morgan Investment Management Morgan Stanley Motel 6, Inc. Mutual Benefit Co. National Westminster Bank New York Life Insurance Nippon Credit Bank Nomura Securities Int'l North American Taisei Corporation Northwestern Mutual Life Omni Hotels Parabas Bank Prime Motor Inns Property Capital Trust Prudential Life Insurance Radisson Hotels Ramada Inns Red Lion Inns Regent International Registry Hotels Residence Inns Resolution Trust Corporation Rhode Island Hospital Trust Ritz-Carlton Hotels Rodeway Inns Rose Associates Salomon Brothers San Antonio Hotel/Motel Assoc. Sanwa Bank Security Pacific Bank Servico Management Corp. Sheraton Hotels Sonesta Hotels Sonnenblick-Goldman Steamboat Ski Corporation Stouffer Hotels Stratton Corporation Sumitomo Bank Summerfield Hotel Corporation Super 8 Hotels Swiss Bank Corporation Taisei Texas Commerce Bancshares, Inc. Tishman Realty Corporation Trans World Airlines Travelers Insurance TraveLodge Trusthouse Forte UBS Securities Union Labor Life United Bank of Switzerland United Inns, Inc. United States Steel Universal Hotels U.S. Air Force U.S. Department of Justice HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) U.S. Department of the Army U.S. Department of the Interior U.S. Economic Development Authority U.S. Trust Company Walt Disney Productions Westin Hotels Williams Hospitality Corporation Winegardner & Hammons Winthrop Financial Associates Wyndham Hotels Zeckendorf Company Appearance as an Expert Witness Administrative Law Court - SEC, Washington, DC Appellate Tax Board, Boston, Massachusetts Arbitration, Wayne, New Jersey Assessment Appeals Board, Los Angeles County, Los Angeles, California Board of Equalization and Review, Washington, District of Columbia (2) Board of Taxation, Atlantic City, New Jersey Bureau de Revision Evaluation Fonciere du Quebec, Montreal, Canada Circuit Court, Orange County, Orlando, Florida Condemnation Review Board, Minneapolis, Minnesota Corporation Committee, Rhode Island State Senate Court of Common Pleas, Allegheny County, Pennsylvania Court of Common Pleas, Franklin County, Ohio Court of Common Pleas, Montgomery, Pennsylvania Court of Common Pleas, Pittsburgh, Pennsylvania Court of Common Pleas, Philadelphia, Pennsylvania Court of Queen's Bench of Alberta, Canada District Court, Arapahoe County, Colorado District Court, Dallas County, Texas District Court, Harris County, Texas District Court, Tarrant County, Texas District Court, Hennepin County, Minneapolis, Minnesota District Court, Knoxville, Tennessee Federal Bankruptcy Court, Oakland, California Federal Bankruptcy Court, Los Angeles, California HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Denver, Colorado Federal Bankruptcy Court, District of Columbia Federal Bankruptcy Court, Miami, Florida (2) Federal Bankruptcy Court, Chicago, Illinois Federal Bankruptcy Court, New Orleans, Louisiana Federal Bankruptcy Court, Greenbelt, Maryland Federal Bankruptcy Court, Baltimore, Maryland Federal Bankruptcy Court, Rockville, Maryland Federal Bankruptcy Court, Boston, Massachusetts Federal Bankruptcy Court, Grand Rapids, Michigan Federal Bankruptcy Court, Las Vegas, Nevada Federal Bankruptcy Court, Newark, New Jersey (2) Federal Bankruptcy Court, Manhattan, New York (2) Federal Bankruptcy Court, Westbury, New York Federal Bankruptcy Court, Philadelphia, Pennsylvania Federal Bankruptcy Court, Reading, Pennsylvania Federal Bankruptcy Court, Salt Lake City, Utah Federal Bankruptcy Court, Madison, Wisconsin (2) Federal District Court, Rochester, New York Federal District Court, Philadelphia, Pennsylvania (2) Judicial Arbitration and Mediation Services, Dallas, Texas Michigan Tax Tribunal, Detroit, Michigan New Jersey Tax Court, Newark, New Jersey (2) Superior Court, District of Columbia Superior Court, Clayton County, Georgia (2) Superior Court of North Carolina Superior Court, Nashua, New Hampshire Supreme Court, New York State, Buffalo, New York Supreme Court, New York State, Manhattan, New York Supreme Court, New York State, Riverhead, New York HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Tax Review Board, San Joaquin County, Stockton, California Tax Review Board, Bangor, Maine Tax Review Board, Schenectady, New York Tax Review Board, Yorktown, New York Tax Review Board, North Carolina Tax Review Board, Philadelphia, Pennsylvania (2) U.S. District Court, Wilmington, Delaware U.S. District Court, Madison, Wisconsin ============================================================================== Partial List of Hotels/Motels, Appraised or Reviewed Internationally North America Canada - Delta Hotel, Calgary - Econo Lodge, Hull - Hotel Lord Berri, Montreal - Hotel Vogue, Montreal - Hyatt Regency, Montreal - Le Ragence Hyatt, Montreal - Holiday Inn, Oshawa, Ontario - Hotel Le Chantecler, Quebec - Bond Place Hotel, Toronto - Carlton Hotel, Toronto - Chelsea Hotel, Toronto - Delta Chelsea Hotel, Toronto - Four Seasons on the Park, Toronto - Inn on the Park, Toronto - Novotel Missisauga, Toronto - Ramada Inn, Toronto - Sutton Hotel, Toronto - Toronto Marriott East, Toronto - Westbury Hotel, Toronto - Burnaby Villa Inn, Vancouver - Four Seasons Hotel, Vancouver - Sheraton Land Mark, Vancouver - Sheraton Plaza 500, Vancouver - Four Seasons Yorkville Hotel, Yorkville United States Alabama - MEI - Birmingham West, Bessemer - Comfort Inn, Birmingham - Courtyard by Marriott, Birmingham - Courtyard by Marriott-Hoover, Birmingham - Courtyard By Marriott/Homewood, Birmingham - Crown Sterling Suites, Birmingham - Fairfield Inn, Birmingham - Holiday Inn, Birmingham - Howard Johnson, Birmingham - Knights Inn, Birmingham - Ramada Inn, Birmingham - Residence Inn by Marriott, Birmingham - Still Waters Resort, Dadeville - Ramada Inn, Gadsden - Sheraton Hotel, Gulf Shores - Courtyard by Marriott, Huntsville - Knights Inn, Huntsville - Marriott Hotel-Proposed, Huntsville - La Quinta Inn, Huntsville University - Days Inn, Mobile - Hotel - Proposed, Mobile - Inn-Proposed, Mobile - Stouffer Riverview, Mobile - Courtyard by Marriott, Montgomery - Fairfield Inn, Montgomery - Holiday Inn-Downtown, Montgomery - Holiday Inn-East, Montgomery - Howard Johnson, Montgomery - La Quinta Inn, Montgomery - Residence Inn, Montgomery - Marriott's Grand Hotel, Point Clear - Holiday Inn, Sheffield - La Quinta, Tuscaloosa - Masters Economy Inn, Tuscaloosa - Proposed Extended Stay, West Mobile Alaska - Barratt Inn, Anchorage - Clarion Hotel, Anchorage - Holiday Inn, Anchorage - Hotel Captain Hook, Anchorage - International Airport Inn, Anchorage - Sheraton Anchorage Hotel, Anchorage Arizona - Holiday Inn, Bullhead City - Embassy Suites, Camelback - Compri Hotel-Proposed, Chandler - Quality Inn, Chandler - Ramada Inn, Chandler - AmeriSuite Hotel-Proposed, Flagstaff - Holiday Inn, Flagstaff - Motel 6, Flagstaff - Rodeway Inn, Flagstaff - Bright Angel Lodge, Grand Canyon - El Tovar Hotel, Grand Canyon - Grand Canyon National Park, Grand Canyon - Kachina Lodge, Grand Canyon - Maswik Lodge, Grand Canyon - Moqui Lodge, Grand Canyon - Phantom Ranch, Grand Canyon - Thunderbird Lodge, Grand Canyon - Yavapai Lodge, Grand Canyon - Hampton Inn-Proposed, Holbrook - Moqui Lodge, Kaibab National Forest - Rodeway Inn, Kingman - Nautical Inn Resort, Lake Havasu City - Lexington Hotel Suites, Mesa - Biosphere II Conference Center, Oracle - Best Western-Per Diem, Phoenix - Bobby McGee's, Phoenix - Caravan Inn, Phoenix - Compri Hotel-Proposed, Phoenix - Courtyard by Marriott-Black Canyon, Phoenix - Courtyard by Marriott-Mesa, Phoenix - Crescent Phoenix Hotel, Phoenix - Crown Sterling Suites, Phoenix - Days Inn, Phoenix - Doubletree Inn at Park Central, Phoenix - Embassy Suites, Phoenix - Embassy Suites-Biltmore, Phoenix - Executive Park Hotel, Phoenix - Fountain Suites Hotel, Phoenix - Granada Royale-Camelhead, Phoenix - Hilton Hotel, Phoenix - Holiday Inn, Phoenix - Hyatt Regency, Phoenix - La Quinta Hotel, Phoenix - Lexington Hotel Suites, Phoenix - Newton's Sands, Phoenix - Phoenician Golf & Tennis Resort, Phoenix - Pointe Hilton at Tapatio Cliffs, Phoenix - Quality Inn, Phoenix - Ramada Inn-Airport, Phoenix - Ramada Inn-East, Phoenix - Ritz Carlton, Phoenix - Sunburst Resort Hotel, Phoenix - Hassayampa Inn, Prescott - Clarion Inn at McCormick Ranch, Scottsdale - Conference Center, Scottsdale - Courtyard by Marriott-Mayo, Scottsdale - Doubletree Inn at Scottsdale Mall, Scottsdale - Fairfield Inn, Scottsdale - Fashion Square Hotel, Scottsdale - Loews Paradise Resort, Scottsdale - Marriott Camelback Inn, Scottsdale - Marriott Mountain Shadows, Scottsdale - Mountain Shadows Resort, Scottsdale - Orange Tree Resort, Scottsdale - Ramada-Valley Ho, Scottsdale - Red Lion's La Posada Resort, Scottsdale - Registry Resort, Scottsdale - Rodeway Inn, Scottsdale - Scottsdale Princess, Scottsdale - Sheraton Scottsdale Resort, Scottsdale - The Phoenician, Scottsdale - Valley Ho, Scottsdale - John Gardiner's Enchantment, Sedona - L'Auberege de Sedona, Sedona - Los Abrigados, Sedona - Orchards Inn, Sedona - Hotel-Proposed, Sierra Vista - Motel 6, Sierra Vista - Temple Bar Resort, Temple Bar - Coachman Inn - Proposed, Tolleson/Phoenix - Tubac Resort, Tubac - Canyon Ranch, Tucson - Coachman Inn-Proposed, Tucson - Courtyard by Marriott, Tucson - Doubletree Inn, Tucson - Embassy Suites, Tucson - Granada Royale Hometel-E. Broadway, Tucson - Hotel Park Tucson-Proposed, Tucson - Lexington Suites Hotel, Tucson - Loews Hotel, Tucson - Resort Hotel-Proposed, Tucson - Rodeway Inn, Tucson - Sunbelt Commerce Center Hotel, Tucson - La Quinta Inn, Tucson East - Bobby McGee's, Tuscon - Radisson Suite Hotel, Tuscon - Ventana Canyon Golf and Racquet, Tuscon - Ramada Inn, Union Hill Arkansas - Sheraton Inn, Fort Smith - Hilton, Hot Springs - Holiday Inn-Lake Hamilton, Hot Springs - Courtyard by Marriott, Little Rock - Holiday Inn, Little Rock - Legacy Hotel, Little Rock - Little Rock Hilton, Little Rock - Masters Economy Inn, Little Rock - Red Carpet Inn, Little Rock - Super 8, Little Rock - Masters Economy Inn, North Little Rock - Masters Economy Inn, Protho-Junction - Holiday Inn, Texarkana California - Hampton Inn, Agoura Hills - Ramada Inn, Agoura Hills - Residence Inn-Proposed, Agoura Hills - Island Motel, Almeda - Anaheim Hilton & Towers, Anaheim - Anaheim Park Motor Inn, Anaheim - Anaheim Plaza Hotel, Anaheim - Best Western Pavillions, Anaheim - Carousel Inn, Anaheim - Conestoga Hotel, Anaheim - Courtyard by Marriott, Anaheim - Crown Sterling Suites, Anaheim - Disneyland Hotel, Anaheim - Golden Forest Motel, Anaheim - Hampton Inn, Anaheim - Hilton, Anaheim - Holiday Inn Anaheim Center, Anaheim - Hotel-Proposed, Anaheim - Marriott Hotel, Anaheim - Pan Pacific Hotel, Anaheim - Pitcairn Motel, Anaheim - Raffles Inn, Anaheim - Ramada Maingate/Disneyland Hotel, Anaheim - Roger Morris Inn, Anaheim - Stovall's Inn, Anaheim - The Station Inn, Anaheim - Travelodge Inn at the Park, Anaheim - AmeriSuite, Anaheim Hills - Comfort Inn, Anahiem - Mansouri Hotel, Antioch - Red Lion, Apple Valley - Hampton Inn, Arcadia - Residence Inn, Arcadia - Hilton Lodge, Arrowhead Lake - Auburn Inn, Auburn - Sleep Inn, Auburn - Allstar Inn, Bakersfield - Clarion Hotel, Bakersfield - Courtyard by Marriott, Bakersfield - Economy Inn, Bakersfield - Ramada Inn, Bakersfield - Red Lion Hotel, Bakersfield - Residence Inn, Bakersfield - Rodeway Inn, Bakersfield - Hilton Hotel, Baldwin Park - San Gabriel Valley Hotel, Baldwin Park - The Hilton Hotel, Baldwin Park - Allstar Inn, Barstow - Economy Inn, Barstow - Marriott Berkeley Marina, Berkeley - Shattuck Hotel, Berkeley - Beverly Hills Hotel, Beverly Hills - Beverly Rodeo Hotel, Beverly Hills - Beverly Wilshire Hotel, Beverly Hills - Hilton Hotel-Cresthil, Beverly Hills - L'Ermitage, Beverly Hills - Peninsula Hotel, Beverly Hills - Best Western, Big Bear Lake - Big Bear Hotel, Big Bear Lake - Big Bear Lake Resort, Big Bear Lake - Big Bear Towering Pines, Big Bear Lake - Motel 6, Big Bear Lake - Post Ranch, Big Sur - Ventana Inn, Big Sur - Rodeway Inn, Blythe - Courtyard by Marriott, Brea - Holiday Inn, Brentwood - Courtyard by Marriott, Buena Park - Fairfield Inn, Buena Park - Hampton Inn, Buena Park - Holiday Inn, Buena Park - Crowne Sterling Suites, Burlingame - Hyatt Regency, Burlingame - Mariott Hotel - SFO, Burlingame - Marriott, Burlingame - Marriott-San Francisco Airport, Burlingame - Radisson Hotel-Proposed, Burlingame - Sheraton Hotel, Burlingame - Courtyard by Marriott, Camarillo - Best Western Fireside Inn, Cambria - Cambria Pines Lodge, Cambria - Residence Inn, Campbell - Hotel-Proposed, Capitola - Resort Hotel, Spa & Conference Ctr., Capitola - Allstar Inn, Carlsbad - Carlsbad Inn, Carlsbad - Inn of America, Carlsbad - La Costa Hotel and Spa, Carlsbad - Olympic Resort Hotel, Carlsbad - Tickle Pink Inn, Carmel - Allstar Inn, Carpinteria - Desert Princess Country Club, Cathedral City - Royce Suites Hotel, Cathedral City - Digger Bay, Central Valley - Marriott Hotel-Proposed, Century City - Westin Century Plaza Hotel, Century City - Neighborhood Inn-Proposed, Chatsworth - Red Lion Hotel, Chico - Otay Valley Inn, Chula Vista - Travelodge-Otay Valley, Chula Vista - Ramada Inn, City of Commerce - Sheraton Hotel, City of Industry - Allstar Inn, Coalinga - Harris Ranch Restaurant/Inn, Coalinga - Howard Johnson, Colton - Best Western Willow Tree Inn, Compton - Concord Hotel, Concord - Hilton Hotel, Concord - The Trees Inn, Concord - Motel 6, Corona - Hotel del Coronado, Coronado - Loews Coronado Bay Resort, Coronado - Madera Village Inn, Corte Madera - Ha' Penny Inn, Costa Mesa - La Quinta Hotel, Costa Mesa - Marriott Suites, Costa Mesa - Red Lion Hotel, Costa Mesa - Residence Inn, Costa Mesa - Pacifica Hotel, Culver City - Ramada Inn, Culver City - Courtyard by Marriott, Cupertino - Doubletree Hotel, Cupertino - Doubletree Hotel, Dana Point - Spa-Proposed, Danville - El Rancho, Davis - Furnace Creek Resort, Death Valley - Stovepipe Wells Village, Death Valley - Hilton, Del Mar - Days Inn, Diamond Bar - Compri Hotel, El Segundo - Proposed Summerfield, El Segundo - Days Inn, Emeryville - Holiday Inn-Bay Bridge, Emeryville - Lyons Restaurant, Emeryville - Budget Motel, Encinitis - Marriott Tenaya Lodge-Proposed, Fishcamp - Holiday Inn, Fort Myers Beach - All Suites Hotel/Athletic Club, Foster City - Clubtel-Proposed, Foster City - Courtyard by Marriott, Foster City - Holiday Inn, Foster City - Courtyard by Marriott, Fremont - Fremont Hotel, Fremont - Motel 6, Fremont - Residence Inn, Fremont - Allstar Inn, Fresno - AmeriSuite, Fresno - Chateau Inn, Fresno - Courtyard by Marriott, Fresno - Economy Inn, Fresno - Hacienda, Fresno - Holiday Inn, Fresno - Holiday Inn-Fresno Airport, Fresno - Howard Johnson Motel, Fresno - Piccadilly Inn, Fresno - Travelers Inn, Fresno - Travelers Lodge, Fresno - Griswold's Hotel, Fullerton - Holiday Inn, Fullerton - Marriott Hotel, Fullerton - Hotel-Proposed, Garden Grove - Hyatt Regency Alicante, Garden Grove - Princess Hotel, Garden Grove - Motel 6, Gilroy - Hyatt Regency-Proposed, Goleta - Allstar Inn, Hacienda Heights - Courtyard by Marriott, Hacienda Heights - Half Moon Bay Lodge, Half Moon Bay - Courtyard by Marriott, Harbor Boulevard - Grosvenor, Harborside-Pt. Loma - Inn at Foss Creek, Healdsburg - Chateau Marmont, Hollywood - Hollywood Palm Hotel, Hollywood - Sunset Towers Hotel, Hollywood - Waterfront Hilton Hotel, Huntington Beach - Compri Hotel, Hutton Centre - Grand Champions Resort, Indian Wells - Stouffer Esmerelda Resort, Indian Wells - Courtyard By Marriott, Irvine - Courtyard by Marriott - Proposed, Irvine - Embassy Suites, Irvine - Hilton Hotel, Irvine - Holiday Inn, Irvine - Hyatt Hotel, Irvine - La Quinta-Proposed, Irvine - Marriott Hotel, Irvine - Marriott-Proposed, Irvine - Registry Hotel, Irvine - Residence Inn-Proposed, Irvine - Amador Inn, Jackson - Embassy Suites, La Jolla - Hotel-Proposed, La Jolla - La Jolla Property, La Jolla - La Jolla Village Inn, La Jolla - Marriott Hotel, La Jolla - Residence Inn, La Jolla - Days Inn-Proposed, La Palma - PGA West Resort - Proposed, La Quinta - Lafayette Park Hotel, Lafayette - Laguna Shores, Laguna Beach - Holiday Inn, Laguna Hills - Ryokan Hotel-Proposed, Laguna Hills - Villa Valencia, Laguna Hills - Ritz Carlton, Laguna Niguel - Lake Mohave Resort, Lake Mohave - Resort at Squaw Creek, Lake Tahoe - Courtyard by Marriott, Larkspur Landing - Hilton, Las Cruces - Surf and Sand Hotel, Leguna Beach - Holiday Inn, Lido Beach - Motel-Proposed, Little Lake - Residence Inn, Livermore - Residence Inn-Proposed, Livermore - Breakers Hotel, Long Beach - Holiday Inn, Long Beach - Holiday Inn Airport, Long Beach - Marriott Hotel-Long Beach Airport, Long Beach - Marriott Hotel-Proposed, Long Beach - Ramada Renaissance Hotel, Long Beach - Residence Inn, Long Beach - Sheraton Long Beach & Office Tower, Long Beach - Airport Park Hotel, Los Angeles - Bel Age, Los Angeles - Biltmore Hotel, Los Angeles - Century Inn, Los Angeles - Checkers Hotel, Los Angeles - Courtyard by Marriott-Irvine Main, Los Angeles - Courtyard by Marriott-LAX Airport, Los Angeles - Crown Sterling Suites, Los Angeles - Days Inn, Los Angeles - Econo Lodge-Proposed, Los Angeles - Embassy Suites, Los Angeles - Embassy Suites-LAX-Proposed, Los Angeles - Four Seasons, Los Angeles - Hampton Inn-LAX, Los Angeles - Herrick and Campbell, Los Angeles - Hilton & Towers-LAX, Los Angeles - Hilton Hotel, Los Angeles - Holiday Inn Crowne Plaza-LAX, Los Angeles - Le Montrose Hotel, Los Angeles - Ma Maison Sofitel, Los Angeles - Macklowe Hotel, Los Angeles - Marriott Century City, Los Angeles - MCA Hotel-Proposed, Los Angeles - New Otani Hotel, Los Angeles - Playa Vista Development, Los Angeles - Stouffer Concourse Hotel, Los Angeles - Westin Bonaventure, Los Angeles - Westwood Marquis Hotel, Los Angeles - Los Gatos Lodge, Los Gatos - Macienda Inn, Los Gatos - Toll House Inn, Los Gatos - Residence Inn, Manhattan Beach - All Suite Hotel, Marina Del Rey - Marina Beach Hotel, Marina del Rey - Marina del Rey Hotel and Marina, Marina del Rey - Marina Suites Hotel, Marina Del Rey - Marriott Marina Del Rey, Marina Del Rey - Residence Inn, Meriden - Quality Suites Hotel - Proposed, Millbrae - Beverly Heritage Hotel, Milpitas - Crown Sterling Suites, Milpitas - Holiday Inn, Milpitas - Courtyard by Marriott, Mira Mesa - Grosvenor, Mission Bay - Motel Orleans, Modesto - Red Lion Hotel, Modesto - Red Lion-Proposed, Modesto - Carmel Mission Inn, Monterey - Doubletree Inn, Monterey - Former Monterey Hilton Hotel, Monterey - Monterey Plaza, Monterey - Plaza Hotel, Monterey - Sheraton Hotel, Monterey - Pebble Beach Company, Monterey County - Inn at Morro Bay, Morro Bay - Residence Inn, Mountain View - Inn at Napa Valley, Napa - Best Western Inn, Napa Valley - Clarion Hotel-Napa Valley, Napa Valley - Silverado, Napa Valley - Ha'Penny Motel, National City - Allstar Inn, Needles - Hilton-Newark/Fremont, Newark - Four Seasons Hotel, Newport Beach - Hotel Meridien, Newport Beach - Hyatt Newporter, Newport Beach - Newporter Resort, Newport Beach - Sheraton, Newport Beach - Days Inn-Proposed, North Hollywood - Northstar, North Lake Tahoe - Ramada Inn, Norwalk - Impact Study - Proposed Hotel, Oakdale - Hilton Inn, Oakland - Holiday Inn, Oakland - Holiday Inn-Oakland Airport, Oakland - Parc Oakland Hotel, Oakland - Resort - Proposed, Olympic Valley - Resort at Squaw Creek-Proposed, Olympic Valley - Clarion Hotel, Ontario - Compri Hotel, Ontario - Fairfield Inn, Ontario - Holiday Inn, Ontario - Lexington Hotel Suites, Ontario - Red Lion Hotel, Ontario - Doubletree Hotel, Orange - Woodfin Suites, Orange - Embassy Suites, Palm Desert - Marriott Desert Springs, Palm Desert - Canyon Resort, Palm Springs - Compri Hotel-Proposed, Palm Springs - Courtyard by Marriott, Palm Springs - Desert Princess, Palm Springs - Grand Champions Resort, Palm Springs - International Hotel and Resort, Palm Springs - Ocotillo Lodge, Palm Springs - Palm Canyon, Palm Springs - PGA West Resort-Proposed, Palm Springs - Spa Hotel at Mineral Springs, Palm Springs - Westin Hotel, Palm Springs - Grosvenor, Palmdale - Super 8, Palmdale - Cowper Square, Palo Alto - Garden Court, Palo Alto - Holiday Inn, Palo Alto - Stanford Park, Palo Alto - Marriott, Paradise Valley - All Suite Hotel-Proposed, Pasadena - Doubletree Hotel, Pasadena - Holiday Inn, Pasadena - Cascade Ranch Lodge, Pescadero - Elk Lodge, Petaluma - Hotel Petaluma, Petaluma - Hilton-Proposed, Pismo Beach - Hilton-Sea Point, Pismo Beach - Holiday Inn, Pismo Beach - Hotel-Proposed, Pismo Beach - Pismo II, Pismo Beach - Fairfield Inn, Placentia - Residence Inn, Placentia - Howard Hughes Center, Playa Vista - Pleasant Hill Inn, Pleasant Hill - Residence Inn, Pleasant Hill - Club Hilton Hotel-Proposed, Pleasanton - Compri Hotel, Pleasanton - Courtyard by Marriott, Pleasanton - Hilton, Pleasanton - Holiday Inn, Pleasanton - Pleasanton Creek, Pleasanton - Shilo Inn - Hilltop, Pomona - Compri Hotel, Rancho Bernardo - Radisson Suites, Rancho Bernardo - Comfort Inn Motel, Rancho Cordova - Courtyard by Marriott, Rancho Cordova - Economy Inn, Rancho Cordova - El Rancho, Rancho Cordova - Quality Suites-Proposed, Rancho Cordova - Sheraton Sunrise, Rancho Cordova - Marriott Rancho Las Palmas, Rancho Mirage - Mission Hills Hotel, Rancho Mirage - Resort Hotel-Proposed, Rancho Mirage - Westin Mission Hills Resort, Rancho Mirage - Bridge Bay Resort, Redding - Grand Manor Inn, Redding - La Quinta Inn, Redding - Motel 6, Redding - Motel Orleans, Redding - Red Lion Inn, Redding - Shasta Inn, Redding - Portofino Hotel & Yacht Club, Redondo Beach - Sheraton, Redondo Beach - Sofitel Redwood Shores, Redwood - Days Inn, Richmond - Best Western Carraige Inn, Ridgecrest - Days Inn, Riverside - Mission Inn-Proposed, Riverside - Omni Mission Inn, Riverside - Sheraton Hotel, Riverside - Red Lion Inn, Rohnert Park - Crown Sterling Suites, S.San Fransicso - Allstar Inn, Sacramento - Arco Arena II-Proposed, Sacramento - Arco Park, Sacramento - Catering Center - Proposed, Sacramento - Clarion Hotel, Sacramento - Compri Hotel-Proposed, Sacramento - Courtyard by Marriott, Sacramento - Courtyard by Marriott-S. Natomas, Sacramento - Hilton Hotel, Sacramento - Holiday Inn-Capital Plaza, Sacramento - Hotel-Proposed, Sacramento - Hyatt Arbitrat, Sacramento - Hyatt Regency, Sacramento - La Quinta Hotel, Sacramento - Motel Orleans, Sacramento - Radisson Hotel, Sacramento - Red Lion Inn, Sacramento - Residence Inn, Sacramento - Sacramento Inn, Sacramento - Sierra Inn, Sacramento - Sterling Hotel, Sacramento - Travelers Inn, Sacramento - Woodlake Inn, Sacramento - Harvest Inn, Saint Helena - Courtyard by Marriott, San Bruno - San Carlos Motel Development, San Carlos - Atlas Hotels/Mission Valley Inn, San Diego - Best Western Seven Seas Motor Lodge, San Diego - Budget Motel of America, San Diego - Catamaran Resort Hotel, San Diego - Center Pointe Development, San Diego - Comfort Inn, San Diego - Courtyard by Marriott-Mira Mesa, San Diego - Doubletree Hotel, San Diego - Embassy Suites, San Diego - Executive Lodge, San Diego - Hanalei Hotel, San Diego - Harbor Island Hotel-Proposed, San Diego - Harborside Inn-Point Loma, San Diego - Harbortown Marina Resort, San Diego - Holiday Inn Montgomery Airport, San Diego - Holiday Inn-Embarcadero, San Diego - Holiday Inn-Harbor View, San Diego - Horton Grand Saddlery, San Diego - Horton Park Plaza Hotel, San Diego - Howard Johnson Hotel, San Diego - Inter-Continental Hotel & Marina, San Diego - Kings Inn, San Diego - La Jolla Village Inn, San Diego - La Quinta Hotel, San Diego - Marriott Hotel-Mission Valley, San Diego - Marriott Twin Towers and Marina, San Diego - Mission Valley Inn, San Diego - Omni Hotel, San Diego - Radisson Hotel, San Diego - Ramada Inn, San Diego - Ramada Limited Suites, San Diego - Ramada Old Town, San Diego - Ramada Rancho Penasquitos, San Diego - Red Lion Inn, San Diego - Regency Plaza Hotel, San Diego - San Diego Marriott, San Diego - Seven Seas Lodge, San Diego - Sheraton Grand, San Diego - Sheraton Harbor Island East, San Diego - Super 8-Point Loma, San Diego - Symphony Towers, San Diego - Town and Country Hotel, San Diego - Travelodge Hotel Plaza, San Diego - U.S. Grant Hotel, San Diego - Westin-Proposed, San Diego - Abagail Inn, San Francisco - Bellevue Hotel, San Francisco - Cable Motor Inn, San Francisco - California Cafe, San Francisco - Campton Place, San Francisco - Cartwright Hotel, San Francisco - Chancellor Hotel, San Francisco - Clarion Inn-San Francisco Airport, San Francisco - Comfort Inn, San Francisco - Courtyard by Marriott-Airport, San Francisco - Embarcadero Inn, San Francisco - Fairmont Hotel, San Francisco - Grand Hyatt, San Francisco - Grosvenor Clift Hotel, San Francisco - Harbor Court Hotel, San Francisco - Hilton Hotel, San Francisco - Holiday Inn - Union Square, San Francisco - Holiday Inn Crowne Plaza, San Francisco - Holiday Inn-Civic Center, San Francisco - Holiday Inn-Fisherman's Wharf, San Francisco - Holiday Inn-Golden Gateway, San Francisco - Holiday Inn-South, San Francisco - Holiday Lodge, San Francisco - Hotel Diva, San Francisco - Hotel Meridien, San Francisco - Hotel Union Square, San Francisco - Hotel-Proposed, San Francisco - Hyatt Fisherman's Wharf, San Francisco - Hyatt Regency Embarcadero, San Francisco - Inn at Fisherman's Wharf, San Francisco - Inn at the Opera, San Francisco - Inn-Proposed, San Francisco - Juliana Hotel, San Francisco - King George Hotel, San Francisco - La Quinta Inn, San Francisco - La Quinta-Airport, San Francisco - Lambourne Hotel, San Francisco - Laurel Motor Inn, San Francisco - Majestic Hotel, San Francisco - Manx Hotel, San Francisco - Mark Twain, San Francisco - Marriott, San Francisco - Marriott San Francisco-Proposed, San Francisco - Marriott-Airport, San Francisco - Orchard Hotel, San Francisco - Pan Pacific Hotel, San Francisco - Parc 55 Hotel, San Francisco - Park Hyatt Hotel, San Francisco - Portman Hotel, San Francisco - Prescott Hotel, San Francisco - Queen Anne Hotel, San Francisco - Ramada Hotel, San Francisco - Regis Hotel, San Francisco - Ritz-Carlton Hotel, San Francisco - San Franciscan, San Francisco - San Francisco Hotel, San Francisco - Savoy Hotel, San Francisco - Sheraton Palace Hotel, San Francisco - Sheraton-Fisherman's Wharf, San Francisco - Sir Francis Drake Hotel, San Francisco - Stanford Court, San Francisco - Stouffer Stanford Court Hotel, San Francisco - Super 8-Fisherman's Wharf, San Francisco - Westin St. Francis, San Francisco - Crowne Sterling Suites, San Francisco - South - Olympic Club Golf Course, San Francisco/San Mateo - Budget Inn, San Jose - Courtyard by Marriott, San Jose - Cozy 8 Arena Hotel, San Jose - Fairmont Hotel, San Jose - Holiday Inn, San Jose - Ramada Renaissance, San Jose - Red Lion Inn, San Jose - Islander Motel, San Leandro - Apple Farm Inn, San Luis Obispo - Embassy Suites, San Luis Obispo - Holiday Inn, San Luis Obispo - Los Nomados Resort, San Luis Obispo - Twin Oaks Golf Course, San Marcos - Dunfey San Mateo Hotel, San Mateo - Compri Hotel-Proposed, San Pedro - Embassy Suites Hotel, San Rafael - Marriott Hotel-Proposed, San Ramon - Residence Inn, San Ramon - AAA Inn, Santa Ana - California Palms Hotel, Santa Ana - Comfort Inn, Santa Ana - Compri Hotel, Santa Ana - Embassy Suites Santa Ana, Santa Ana - Executive Lodge, Santa Ana - Howard Johnson, Santa Ana - Quality Inn, Santa Ana - Ramada Inn-Orange County, Santa Ana - El Encanto Hotel, Santa Barbara - Fess Parker's Red Lion Resort, Santa Barbara - Four Seasons Hotel, Santa Barbara - Montecito Inn, Santa Barbara - San Ysidro Ranch, Santa Barbara - Santa Barbara Inn, Santa Barbara - Biltmore Hotel & Suites, Santa Clara - Days Inn, Santa Clara - Doubletree Hotel, Santa Clara - Embassy Suites, Santa Clara - Inn At Saratoga, Santa Clara - Marriott Hotel, Santa Clara - Quality Suites Hotel, Santa Clara - Dream Inn, Santa Cruz - Hilton, Santa Maria - Motel 6, Santa Maria - Econo Lodge-Proposed, Santa Monica - Holiday Inn, Santa Monica - Holiday Inn at the Pier, Santa Monica - Park Hyatt Hotel, Santa Monica - Santa Monica Beach Hotel, Santa Monica - Santa Monica/Slatkin, Santa Monica - Allstar Inn, Santa Rosa - Doubletree Hotel, Santa Rosa - Fountaingrove Inn, Santa Rosa - Holiday Inn, Santa Rosa - Round Barn Inn-Proposed, Santa Rosa - Sheraton Round Barn, Santa Rosa - Days Inn, Seaside - Embassy Suites, Seaside - Seaside 8 Motel, Seaside - Valley Radisson, Sherman Oaks - Red Lion, Sonoma - Sonoma Mission Inn, Sonoma - Holiday Inn - Proposed, Sonora - Timberwolf Lodge, South Lake Tahoe - Holiday Inn, South San Francisco - Hotel-Proposed, South San Francisco - Meadowood Resort, St. Helena - Hilton Hotel, Stockton - Holiday Inn, Stockton - La Quinta Hotel, Stockton - Motel Orleans, Stockton - Paradise Point Manna, Stockton - Sheraton-Proposed, Stockton - Hilton, Sunnyvale - Holiday Inn, Sunnyvale - Neighborhood Suites, Sunnyvale - Ramada Inn, Sunnyvale - Sunnyvale Hilton, Sunnyvale - Temecula Creek Inn, Temecula Creek - Westlake Plaza Hotel, Thousand Oaks - Courtyard by Marriott, Torrance - Holiday Inn, Torrance - Marriott Hotel, Torrance - Residence Inn, Torrance - Holiday Inn, Union City - MCA Hotel-Proposed, Universal City - Comfort Inn, Vallejo - Holiday Inn, Van Nuys - La Quinta Hotel, Ventura - Ocean Resorts, Ventura - Sheraton, Ventura - Greentree Inn, Victorville - Doubletree Inn, Walnut Creek - Parkside Hotel, Walnut Creek - Ramada Renaissance Hotel, Walnut Creek - Royce Hotel-Proposed, Walnut Creek - Walnut Creek Project, Walnut Creek - Hampton Inn, West Covina - Le Bel Age, West Hollywood - Le Dufy, West Hollywood - Le Mondrian Hotel, West Hollywood - Hilton, Whittler - Hotel & Conference Center-Proposed, Woodland - Marriott Hotel-Woodland Hills, Woodland Hills - Skylonda Retreat, Woodside - Compri Hotel-Proposed, Yorba Linda - Marriott-Tenaya Lodge, Yosemite - Motel Orleans, Yuba City Colorado - Days Inn, Arapahoe - Continental Inn, Aspen - Ritz-Carlton Hotel-Proposed, Aspen - Hampton Inn, Aurora - Holiday Inn, Aurora - Radisson Hotel, Aurora - Radisson Southeast, Aurora - Raffles Hotel, Aurora - Comfort Inn, Avon - Boulder Hotel-Downtown, Boulder - Clarion Hotel, Boulder - Courtyard by Marriott, Boulder - Doubletree Hotel-Proposed, Boulder - Hilton Harvest House, Boulder - Holiday Inn, Boulder - Interlocken Conference Resort-Prop., Boulder - Proposed Golf Course, Boulder - Residence Inn, Boulder - Hilton, Breckenridge - Ski Lodge-Proposed, Breckenridge - Interlocken Conference Center, Broomfield - Interlocken Conference Center-Prop., Broomfield - Embassy Suites, Colorado Springs - Hilton, Colorado Springs - Howard Johnson, Colorado Springs - Le Baron Hotel, Colorado Springs - Marriott, Colorado Springs - Quality Inn, Colorado Springs - Red Lion Inn, Colorado Springs - Sheraton Inn, Colorado Springs - Grand Butte Hotel, Crested Butte - Best Western Regency, Denver - Brown Palace, Denver - Clarion Hotel-Denver Airport, Denver - Courtyard by Marriott-Airport, Denver - Courtyard by Marriott-Southeast, Denver - Days Inn, Denver - Denver Airport Hilton Inn, Denver - Doubletree Hotel, Denver - Embassy Suites, Denver - Embassy Suites-Airport, Denver - Hilton-Technical Center, Denver - Holiday Inn-Downtown, Denver - Holiday Inn-West, Denver - Jackson's Hole Sport, Denver - Marriott-Southeast, Denver - Marriott-West, Denver - Radisson Hotel, Denver - Red Lion Hotel, Denver - Regency Inn, Denver - La Quinta Inn, Denver - Airport - La Quinta, Denver - South - Red Lion Inn, Durango - Hilton-Denver, Englewood - Residence Inn, Englewood - Scanticon Conference Center, Englewood - Marriott Hotel-Proposed, Fort Collins - Holiday Inn, Golden - Marriott-Denver West, Golden - Ramada Inn, Grand Junction - Sheraton-Proposed, Keystone - Compri Hotel, Lakewood - Hampton Inn, Lakewood - Sheraton Inn, Steamboat Springs - Proposed Hotel, Telluride - Days Inn, Vail - Doubletree Hotel, Vail - Lodge at Vail, Vail - Marriott's Mark Resort, Vail - Westin Vail Resort, Vail - Ramada Hotel, Westminster - Winter Park Resort, Winter Park Connecticut - Chester Inn-Chester, Chester - Inn-Proposed, Chester - Super 8-Proposed, Cromwell - Danbury Hilton & Towers, Danbury - Residence Inn, Danbury - Holiday Inn, Darien - Howard Johnson Lodge, Darien - Ramada Inn, Darien - Holiday Inn, East Hartford - Howard Johnson Lodge, East Lyme - Days Inn-Proposed, Enfield - Greenwich Habor Inn, Greenwich - Howard Johnson Lodge, Greenwich - Showboat Inn, Greenwich - Hotel-Proposed, Groton - Hilton Hotel, Hartford - Holiday Inn-Proposed, Hartford - Motel 6, Hartford - Ramada Inn, Hartford - Sheraton Tobacco Valley Inn, Hartford - Summit Hotel, Hartford - Super 8 Motel, Hartford - Susse Chalet, Hartford - Residence Inn By Marriott, Meriden - Holiday Inn, Milford - Susse Chalet, Milford - Howard Johnson Lodge, Mystic - Mystic Ramada Inn, Mystic - Holiday Inn, New Britain - Ramada Inn, New Britain - Colony Inn, New Haven - Holiday Inn, New Haven - Howard Johnson, New Haven - Quality Inn, New Haven - Residence Inn, New Haven - Radisson Hotel, New London - Best Western-Proposed, New Milford - Courtyard by Marriott, Norwalk - Holiday Inn, Norwalk - Howard Johnson, Norwalk - Ramada Inn, Norwalk - Susse Chalet, Rocky Hill - Ramada Hotel-Proposed, Shelton - Residence Inn - Shelton, Shelton - Heritage Village, Southbury - Southbury Hotel, Southbury - Susse Chalet, Southington - Days Inn, Stamford - Executive Hotel, Stamford - Harley Hotel, Stamford - Holiday Inn-Crowne Plaza, Stamford - Inn at Mill River, Stamford - Le Pavillon Hotel, Stamford - Marriott, Stamford - Radisson Tara Hotel, Stamford - Sheraton, Stamford - Best Western-Proposed, Stratford - Stratford Motor Lodge, Stratford - Marriott Hotel, Trumbull - Courtyard by Marriott, Wallingford - Susse Chalet, Wallingford - Howard Johnson Plaza Hotel, Waterbury - Super 8-Proposed, Waterbury - Residence Inn-Proposed, Waterford - Holiday Inn, Westbury - The Island Inn, Westbury - Courtyard by Marriott, Windsor - Sheraton Tobacco Valley Inn, Windsor - Holiday Inn-Proposed, Windsor Locks Delaware - Wilmington Hilton, Claymont - Rusty Rudder, Dewey Beach - Residence Inn-Proposed, Newark - Hilton Hotel, Wilmington - Hotel-Proposed, Wilmington - Marriott Suites, Wilmington - Residence Inn-Proposed, Wilmington District of Columbia - All Suite Hotel - Proposed, Washington - Bellevue Hotel, Washington - Canterbury Hotel, Washington - Capital Hilton, Washington - Capitol Hill Hotel, Washington - Castleton Hotel, Washington - Comfort Inn, Washington - Convention Center Inn, Washington - Dupont Plaza, Washington - Embassy Row Hotel, Washington - Fairfax Hotel, Washington - Fairmont Hotel, Washington - Four Seasons Hotel, Washington - General Scott Inn, Washington - Georgetown Hotel, Washington - Grand Hotel, Washington - Grand Hyatt, Washington - Hampshire House, Washington - Harambee House, Washington - Hay Adams Hotel, Washington - Holiday Inn Crowne Plaza, Washington - Holiday Inn-Capitol, Washington - Holiday Inn-Georgetown, Washington - Holiday Inn-Governor House, Washington - Hotel Washington, Washington - Howard Johnson, Washington - Hyatt Regency-Capitol, Washington - Hyatt-Convention Center, Washington - International Inn, Washington - Intrigue Hotel, Washington - Jefferson Hotel, Washington - Lombardy Tower Apartment Hotel, Washington - Madison Hotel, Washington - Manger Annapolis Hotel, Washington - Manger Hamilton Hotel, Washington - Manger Hay Adams Hotel, Washington - Marriott-Key Bridge, Washington - Mayflower Hotel, Washington - Omni Georgetown Hotel, Washington - Omni Shoreham Hotel, Washington - Park Terrace Hotel, Washington - Phoenix Park Hotel, Washington - Plaza Hotel, Washington - Potomac Hotel Group, Washington - Quality Inn-Capitol Hill, Washington - Quality Inn-Downtown, Washington - Ramada Inn-Central, Washington - Ramada Renaissance Hotel, Washington - Ritz-Carlton, Washington - River Inn, Washington - Riverside Towers, Washington - Sheraton City Centre, Washington - Sheraton Grand Hotel, Washington - Shoreham Hotel, Washington - St. James, Washington - State Plaza, Washington - Statler Hilton Hotel, Washington - Washington Hilton, Washington - Washington Plaza, Washington - Watergate Hotel, Washington - Wyndham Bristol Hotel, Washington Florida - Holiday Inn, Altamonte Springs - La Quinta, Altamonte Springs - Turnberry Isle Resort, Aventura - Boca Raton Hotel and Club, Boca Raton - Boca West, Boca Raton - Deerfield Beach Hilton, Boca Raton - Embassy Suites, Boca Raton - Park Place Suite Hotel, Boca Raton - Petite Suites, Boca Raton - Residence Inn, Boca Raton - Days Inn, Brandenton - South Seas Resort, Captive Island - Days Inn, Clearwater - Days Inn-Proposed, Clearwater - Holiday Inn - Central/Clearwater, Clearwater - La Quinta Inn, Clearwater - Sheraton Sand Key Hotel, Clearwater - Holiday Inn - Gulfview South, Clearwater Beach - Holiday Inn - Surfside North, Clearwater Beach - Howard Johnson, Clermont - Econolodge, Cocoa Beach - Hilton Hotel, Cocoa Beach - Holiday Inn, Cocoa Beach - Howard Johnson, Cocoa Beach - Perkins Restaurant, Cocoa Beach - Coconut Grove Hotel, Coconut Grove - Mayfair House, Coconut Grove - Proposed Hampton Inn, Coconut Grove - Biltmore Hotel, Coral Gables - Holiday Inn, Coral Gables - Holiday Inn (Court), Coral Gables - Plantation Hotel, Crystal River - Sheraton Inn, Cypress Gardens - Budget Inn, Davenport - Daytona Beach Surfside Regency, Daytona Beach - Howard Johnson, Daytona Beach - La Quinta Inn, Daytona Beach - Pirates Cove, Daytona Beach - Sheraton Inn, Daytona Beach - Crown Sterling Suites, Deerfield Beach - Days Inn, Deerfield Beach - Hilton Hotel, Deerfield Beach - Horizon Club, Deerfield Beach - Sheraton Inn, Deland - Hilton Hotel, Disney World - Holiday Inn, Edgewater - Knights Inn, Florida City - AmeriSuites Hotel-Proposed, Fort Lauderdale - Bahia Mar Hotel, Fort Lauderdale - Comfort Suites, Fort Lauderdale - Compri Hotel-Proposed, Fort Lauderdale - Costa Del Sol, Fort Lauderdale - Crown Sterling Suites, Fort Lauderdale - Days Inn, Fort Lauderdale - Embassy Suites Hotel, Fort Lauderdale - Executive House, Fort Lauderdale - Hilton Hotel, Fort Lauderdale - Hilton Inverrary, Fort Lauderdale - Holiday Inn - Galleria, Fort Lauderdale - Holiday Inn - North Beach, Fort Lauderdale - Holiday Inn-Proposed, Fort Lauderdale - Marriott Harbor Beach Hotel, Fort Lauderdale - Marriott Hotel & Marina, Fort Lauderdale - Marriott Hotel-Cypress Road, Fort Lauderdale - Pier 66 Hotel and Marina, Fort Lauderdale - Port Everglades Hotel, Fort Lauderdale - Stouffer Hotel, Fort Lauderdale - Days Inn, Fort Meyers - Courtyard by Marriott, Fort Myers - Holiday Inn, Fort Myers - La Quinta Hotel, Fort Myers - Sheraton Harbor Place-Proposed, Fort Myers - Sheraton Motor Inn, Fort Myers - Proposed Hotel, Fort Myers Beach - American Way, Fort Pierce - Days Inn, Fort Walton Beach - Holiday Inn - Airport, Fort.Lauderdale - Days Inn-University Center, Gainesville - Fairfield Inn, Gainesville - Howard Johnson Lodge-I-75, Gainesville - La Quinta Hotel, Gainesville - University Centre Hotel, Gainesville - Holiday Inn, Hialeah - Motel, Hillsboro Beach - Days Inn, Hollywood - Diplomat Hotel, Hollywood - Holiday Inn, Hollywood - Quality Suites - Oceanside, Indiatlantic - Hilton Inn, Inverrary - Best Inn, Jacksonville - Bradbury Suites-Proposed, Jacksonville - Compri Hotel-Proposed, Jacksonville - Courtyard By Marriott, Jacksonville - Days Inn, Jacksonville - Doubletree Club Hotel, Jacksonville - Hampton Inn, Jacksonville - Hotel-Proposed, Jacksonville - Jacksonville Hotel, Jacksonville - Residence Inn, Jacksonville - Sheraton Hotel, Jacksonville - Wyndham Lakes Hotel, Jacksonville - Sheraton Beach Hotel, Jensen Beach - Howard Johnson, Juno Beach - Hilton Hotel, Jupiter - Key Biscayne, Key Biscayne - Howard Johnson Lodge, Key Largo - Casa Marina Marriott, Key West - Fairfield Inn, Key West - Hampton Inn-Roosevelt Rd., Key West - Holiday Inn, Key West - Hyatt Hotel, Key West - La Concha Holiday Inn, Key West - Pier House Inn and Beach Club, Key West - Reach Hotel, Key West - Santa Maria Hotel, Key West - Timeshare Resort, Key West - Best Western Vacation Lodge, Kissimmee - Days Inn, Kissimmee - Days Inn West, Kissimmee - Days Lodge, Kissimmee - Howard Johnson Plaza Hotel, Kissimmee - Howard Johnson's, Kissimmee - KOA Campground, Kissimmee - Old Town Retail Complex, Kissimmee - Quality Suites, Kissimmee - Quality Suites-Maingate, Kissimmee - Save Inn, Kissimmee - Sheraton Lakeside, Kissimmee - Suite Hotel-Proposed, Kissimmee - Wynfield Inn, Kissimmee - Days Inn, Lake Buena Vista - Embassy Suites-Proposed, Lake Buena Vista - Hilton Hotel-Disney World, Lake Buena Vista - Marriott Orlando World Center, Lake Buena Vista - Days Inn, Lake City - Flagship Inn, Lake County - Travelodge Motel, Lake County - Lake Park Inn, Lake Park - Holiday Inn, Lake Placid - Hampton Inn-Proposed, Lakeland - Hotel-Proposed, Lakeland - Howard Johnson, Lakeland - Resort Hotel-Proposed, Lakeland - Resort-Imperial Lake-Prpsd., Lakeland - Proposed Hotel, Lee County - Sonesta Sanibel Harbour, Lee County - Holiday Inn, Lido Beach - Holiday Inn, Longboat Kay - Holiday Inn - Madiera Beach, Madiera - Howard Johnson, Marathon - Radisson Suite Resort, Marco Island - Holiday Inn, Marianna - Oceanfront Hotel, Melbourne - Quality Suites, Melbourne - Bahia Mar Hotel & Yachting Club, Miami - Biscayne Bay Marriott, Miami - Courtyard by Marriott, Miami - Crown Sterling Suites, Miami - Doral Ocean Beach Resort, Miami - Fairfield Inn, Miami - Hilton Hotel-Proposed, Miami - Holiday Inn Civic Center, Miami - Holiday Inn-Airport (Le Juene Rd.), Miami - Holiday Inn-Calder, Miami - Howard Johnson Hotel-Broad Causeway, Miami - Howard Johnson Hotel-Port of Miami, Miami - Howard Johnson Lodge-Golden Glades, Miami - Howard Johnson Lodge-Int'l Airport, Miami - Hyatt Regency Hotel, Miami - Inter-Continental Hotel, Miami - Jockey Club, Miami - Marriott Hotel-Downtown, Miami - Miami Airport Ramada, Miami - Proposed AmeriSuites, Miami - Propsed Hampton Inn, Miami - Residence Inn-Proposed, Miami - Sheraton River House, Miami - Sofitel Miami, Miami - Alexander Hotel, Miami Beach - Art Deco Hotel, Miami Beach - Cresent Timeshare, Miami Beach - Delano Hotel, Miami Beach - Doral Beach Hotel, Miami Beach - Eden Roc Hotel, Miami Beach - Fontainebleu Hotel, Miami Beach - Holiday Inn, Miami Beach - Holiday Inn-Central, Miami Beach - Holiday Inn-North, Miami Beach - Holiday Inn-Oceanside, Miami Beach - Holiday Inn-South, Miami Beach - Hotel-Proposed, Miami Beach - Nautilus Club Hotel, Miami Beach - Palm Resort on the Ocean, Miami Beach - Pan American Radisson, Miami Beach - Proposed Hotel, Miami Beach - Shelborne Beach Hotel, Miami Beach - Sheraton Beach, Miami Beach - Solymar Hotel-Proposed, Miami Beach - Quality Inn, Naples - Quality Inn-Gulfcoast, Naples - Registry Hotel at Pelican Bay, Naples - Registry Resort-Proposed, Naples - Super 8 Motel-Proposed, Naples - World Tennis Resort, Naples - Hyatt Newporter Hotel, Newport Beach - Hilton Hotel, North Redington Beach - Masters Economy Inn, North Seffner - Amfac Hotel, Orlando - Army lodging-Proposed, Orlando - Comfort Suites Hotel, Orlando - Compri Hotel-Airport-Proposed, Orlando - Compri Hotel-Proposed, Orlando - Courtyard - Orlando Airport, Orlando - Days Inn, Orlando - Days Inn and Lodge-Florida Mall, Orlando - Days Inn Civic Center, Orlando - Days Inn East of Universal Studios, Orlando - Days Inn-E/O Magic Kingdom, Orlando - Days Inn-Proposed, Orlando - Days Inn-Sandlake Road, Orlando - Days Suites-E/O Magic Kingdom, Orlando - Dolphin Hotel-Proposed, Orlando - Dutch Inn, Orlando - Embassy Suites, Orlando - Fairfield Inn, Orlando - Fairfield Inn-Airport, Orlando - Grand Cypress Resort, Orlando - Hampton Inn - Proposed, Orlando - Heritage Inn, Orlando - Holiday Inn Central Park, Orlando - Holiday Inn Crowne Plaza, Orlando - Holiday Inn-Airport, Orlando - Holiday Inn-International Drive, Orlando - Holiday Inn-Lee Road, Orlando - Holiday Inn-Maingate West, Orlando - Holiday Inn-Orange Blossom Trail, Orlando - Howard Johnson - Walt Disney World, Orlando - Howard Johnson-Kirkman, Orlando - Howard Johnson-Lake Holden, Orlando - Howard Johnson-Maingate, Orlando - Hyatt Grand Cypress, Orlando - Hyatt Regency Grand Cypress, Orlando - Hyatt-W. Irlo Bronson Mem. Hwy., Orlando - International Inn, Orlando - Kon Tiki Village, Orlando - La Quinta Hotel-Airport, Orlando - La Quinta Inn, Orlando - Omni Orlando, Orlando - Orlando Airport Hotel-Proposed, Orlando - Orlando Hamiton, Orlando - Orlando Plaza Hotel, Orlando - Orlando Twin Towers Hotel, Orlando - Park Suite Hotel-Proposed, Orlando - Peabody Hotel, Orlando - Princess Hotel and Spa, Orlando - Proposed Wellesley Inn, Orlando - Quality Inn, Orlando - Radisson Hotel-Aquatic Center, Orlando - Regency Inn, Orlando - Residence Inn By Marriott, Orlando - Rodeway Inn, Orlando - Save Inn, Orlando - Sheraton Jetport Inn, Orlando - Sheraton Lakeside, Orlando - Sheraton Twin Towers, Orlando - Sonesta Village Resort, Orlando - Stouffer Orlando Resort, Orlando - Swan Hotel-Proposed, Orlando - Thriftway Motel, Orlando - Wynfield Inn, Orlando - American Way, Osceola - Sheraton Gateway Motel, Osceola - Brazilian Court Hotel, Palm Beach - Heart of Palm Beach Hotel, Palm Beach - Hilton Inn, Palm Beach - Palm Court, Palm Beach - Holiday Inn, Palm Beach Garden - Days Inn, Panama City - Marriott's Bay Point, Panama City - Super 8, Panama City - Days Inn, Pensacola - Hilton Hotel, Pensacola - La Quinta Hotel, Pensacola - Residence Inn, Pensacola - Super 8, Pensacola - Proposed Hampton Inn, Pensacola Beach - Comfort Inn, Perdido Key - La Quinta, Pinellas County - Courtyard by Marriott, Plantation - Holiday Inn Plantation, Plantation - Sheraton Suites, Plantation - Days Inn, Pompano Beach - Palm-Aire Spa Resort, Pompano Beach - Lodge & Bath Club, Ponte Verde - Howard Johnson, Punta Gorda - Days Inn, Riviera Beach - Safety Harbor Spa, Safety Harbor - Holiday Inn, Saint Augustine - Howard Johnson, Saint Augustine - Courtyard by Marriott, Saint Petersburg - Don Ceahsar Beach Resort, Saint Petersburg - Hilton Hotel, Saint Petersburg - Howard Johnson, Saint Petersburg - Ramada Inn, Saint Petersburg - Residence Inn, Saint Petersburg - Saint Petersburg Motel, Saint Petersburg - Sheraton Hotel and Marina, Saint Petersburg - Vinoy Park Hotel, Saint Petersburg - Countryside Inn, Sanford - Days Inn, Sanford - Holiday Inn, Sanford - Azure Tides Resort-Proposed, Sarasota - Days Inn, Sarasota - Holiday Inn-Lido Beach, Sarasota - Proposed Hotel, Sarasota - Holiday Inn, Sebring - Embassy Suites, Singer Island - Hilton, Singer Island - Econo Lodge, Starke - Radisson Pan American Hotel, Sunny Isles - Best Inn, Tallahassee - Courtyard by Marriott, Tallahassee - Days Inn-Tallahassee, Tallahassee - American Way, Tampa - Courtyard by Marriott, Tampa - Days Inn, Tampa - Embassy Suites-Airport, Tampa - Hampton Inn-Airport, Tampa - Hilton-Airport, Tampa - Holiday Inn, Tampa - Holiday Inn Sahal Park, Tampa - Holiday Inn-Airport, Tampa - Manger Motor Inn, Tampa - Marriott Hotel, Tampa - Omni Tampa Hotel at Westshore, Tampa - Ramada Inn, Tampa - Rodeway Inn, Tampa - Saddlebrook Resort, Tampa - Sheraton Grand West, Tampa - Master Economy Inn, Tampa-East(Selfner) - Master Economy Inn, Tampa-North(Zephyrhills) - Days Inn, Vero Beach - Holiday Inn-Countryside, Vero Beach - Holiday Inn-Oceanside, Vero Beach - Saddlebrook Resort, Wesley Chapel - Courtyard by Marriott, West Melbourne - Airport Centre, West Palm Beach - Courtyard by Marriott, West Palm Beach - Days Inn, West Palm Beach - Field Palm Hotel, West Palm Beach - Hilton-Airport, West Palm Beach - Howard Johnson Lodge, West Palm Beach - Hyatt Hotel of the Palm Beaches, West Palm Beach - Royce Hotel, West Palm Beach - Masters Economy Inn, Zephyrhills Georgia - Atlanta Radisson Hotel, Atlanta - Atlanta Terrace Motel, Atlanta - Comfort Inn, Atlanta - Compri Hotel, Atlanta - Courtyard By Marriott-Airport North, Atlanta - Courtyard by Marriott-Airport South, Atlanta - Courtyard by Marriott-Cumberland, Atlanta - Courtyard by Marriott-Executive Pk., Atlanta - Courtyard by Marriott-Gwinnett, Atlanta - Courtyard by Marriott-Jimmy Carter, Atlanta - Courtyard by Marriott-PeachtrDunwdy, Atlanta - Courtyard by Marriott-Perimeter, Atlanta - Courtyard by Marriott-Rosewell, Atlanta - Courtyard by Marriott-Windy Hill, Atlanta - Cresthil Inn-Proposed, Atlanta - Days Inn, Atlanta - Days Inn - Northlake, Atlanta - Doubletree Hotel, Atlanta - Embassy Suites-Atlanta Perimeter, Atlanta - Embassy Suites-Buckhead, Atlanta - Embassy Suites-Galleria, Atlanta - F.W.W. Hotel, Atlanta - Fairfield Inn-Airport, Atlanta - Fairfield Inn-Gwinnett, Atlanta - Fairfield Inn-North Lake, Atlanta - Fairfield Inn-Northwest, Atlanta - Fairfield Inn-Peachtree, Atlanta - Fairfield Inn-South Lake, Atlanta - Hampton Inn-Airport, Atlanta - Hilton Inn, Atlanta - Holiday Inn Crowne Plaza, Atlanta - Holiday Inn-I-20 East, Atlanta - Holiday Inn-I-85 Monroe Drive, Atlanta - Holiday Inn-Perimeter Dunwooody, Atlanta - Hotel-Downtown-Proposed, Atlanta - Hotel-Proposed, Atlanta - Howard Johnson Hotel-Hartsfield, Atlanta - Howard Johnson-Airport, Atlanta - Howard Johnson-Northeast, Atlanta - Howard Johnson-Northwest, Atlanta - Howard Johnson-South, Atlanta - Hyatt Atlanta-Airport, Atlanta - La Quinta - Stone Mountain, Atlanta - La Quinta Hotel, Atlanta - La Quinta Hotel-West, Atlanta - Marriott Atlanta Airport, Atlanta - Marriott Hotel, Atlanta - Marriott Hotel-Downtown, Atlanta - Marriott Marquis, Atlanta - Marriott Suites Hotel-Proposed, Atlanta - Marriott-Perimeter, Atlanta - Master Economy Inn, Atlanta - Motel 6, Atlanta - Neighborhood Inn, Atlanta - Omni International Hotel, Atlanta - Perimeter North Inn, Atlanta - Proposed AmeriSuites, Atlanta - Quality Inn-Central, Atlanta - Radisson Inn, Atlanta - Ramada Inn-Perimeter, Atlanta - Residence Inn by Marriott-Dunwoody, Atlanta - Residence Inn-Airport, Atlanta - Residence Inn-Buckhead, Atlanta - Residence Inn-Northwest, Atlanta - Sheraton Century Center, Atlanta - Sheraton-Airport, Atlanta - Sporting Club at the Concourse, Atlanta - Stouffer Hotel-Proposed, Atlanta - Swissotel, Atlanta - Terrace Motel, Atlanta - Waverly Hotel, Atlanta - Westin Lenox Hotel, Atlanta - Westin Peachtree Plaza, Atlanta - Wyndham Garden Hotel, Atlanta - Hyatt Hotel, Atlanta Airport - Hampton Inn, Atlanta-Buckhead - Courtyard by Marriott, Augusta - Landmark Hotel, Augusta - Masters Economy Inn - Gordon Hwy., Augusta - Masters Economy Inn - Warner Robins, Augusta - Masters Economy Inn - Washington Rd, Augusta - Holiday Inn, Brunswick - Super 8, Brunswick - Days Inn, Calhoun - Super 8, Cartersville - Days Inn, Chamblee - Comfort Inn-Proposed, College Park - Holiday Inn Crowne Plaza, College Park - Courtyard by Marriott, Columbus - La Quinta Inn, Columbus - Super 8, Columbus - Best Inn, Dalton - Days Inn, Dalton - Holiday Inn-Proposed, Decatur - Sheraton Hotel, Decatur - Best Western-Perimeter-North, Doraville - Days Inn - Gwinnett, Duluth - Howard Johnson, Forsyth - Holiday Inn-Proposed, Gwinnett County - Holiday Inn, Jekyll Island - Jekyll Island Inn-Proposed, Jekyll Island - Hilton Hotel, Macon - Master Economy Inn, Macon - Best Inn, Marietta - Courtyard by Marriott-Delk Road, Marietta - Lafayette Hotel, Marietta - Hampton Inn, Marrietta (Atlanta) - Master Economy Inn, McDonough - Courtyard by Marriott-Perimeter, Norcross - Motel 6, Norcross - Hilton Hotel, Peachtree Corners - Super 8, Rome - Best Western, Savannah - Courtyard by Marriott, Savannah - Days Inn, Savannah - Days Inn-Bay Street, Savannah - Days Inn-Mall Blvd., Savannah - Fairfield Inn, Savannah - Hotel-Proposed, Savannah - Mulberry Inn, Savannah - Radisson Hotel-Proposed, Savannah - Royal Savannah, Savannah - Sheraton Savannah Resort & C.C., Savannah - Town and Country Motel, Savannah - Days Inn, Savannah Beach - Howard Johnson, Smyrna - Master Economy Inn, Tilton - Courtyard by Marriott-Northlake, Tucker - Master Economy Inn, Warner Robins - Super 8, Warner Robins Hawaii - Hyatt Regency Waikoloa, Hawaii - Mauna Kea Hotel, Hawaii - Kahala Hilton, Honolulu - Plaza Hotel, Honolulu - Waikiki Beachcomber, Honolulu - Waikiki Hobron, Honolulu - Coco Palms Resort, Kauai - Kauai Surf Hotel, Kauai - Westin Kauai-Kauai Lagoons Resort, Kauai - Westin Kauai-Proposed, Kauai - Kona Village, Kona - Royal Sea Cliff Resort, Kona - Westin Kauai at Kauai Lagoon, Lihue - Hyatt Regency, Maui - Marriott Resort, Maui - Maui Lu Hotel, Maui - Maui Surf Hotel, Maui - Westin Maui, Maui - Hawaiian Regent Hotel-Waikiki Beach, Oahu - Hotel-Proposed-Schofield Barracks, Oahu - Hyatt Regency Waikiki, Oahu - Kiahuna Plantation, Poipu Beach, Kauai - Transient Lodging Facilities, Schofield Barracks - Hilton Hawaiian Village, Waikiki - Grand Hyatt Wailea, Wailea Idaho - Compri Hotel, Boise - Holiday Inn, Boise - Holiday Inn-Airport, Boise - Red Lion Inn, Boise - Super 8, Boise - Motel 6, Coeur d'Alene - Super 8, Coeur d'Alene - Proposed Motel, Coure d'Alene - Super 8, Lewiston - Cotton Tree Inn, Pocatello - Super 8, Sand Point - Busterback Ranch, Sawtooth Valley Illinois - Arlington Park Hilton, Arlington Heights - Church Creek, Arlington Heights - Courtyard by Marriott, Arlington Heights - La Quinta Hotel, Arlington Heights - Hampton Inn-Proposed, Bedford Park - Best Inn, Bloomington - Fairfield Inn-Normal, Bloomington - Holiday Inn, Bloomington - Indian Lakes Resort, Bloomington - Ramada Inn, Bloomington - Super 8, Bloomington - Cresthil-Proposed, Buffalo Grove - Holiday Inn, Champaign - La Quinta Inn, Champaign - Radisson Suites - Champaign, Champaign - Suite Hotel-Proposed, Champaign - Super 8, Champaign - Ambassador West Hotel, Chicago - Americana Congress, Chicago - Conrad Hilton Hotel, Chicago - Courtyard by Marriott-Glenview, Chicago - Courtyard by Marriott-Highland, Chicago - Courtyard by Marriott-Lincoln, Chicago - Courtyard by Marriott-O'Hare, Chicago - Courtyard by Marriott-Waukegan, Chicago - Courtyard by Marriott-Woodale, Chicago - Days Inn, Chicago - Executive House, Chicago - Fairfield Inn-Lansing, Chicago - Fairfield Inn-Willowbrook, Chicago - Fairmont Hotel, Chicago - Guest Quarters Hotel, Chicago - Hilton and Towers, Chicago - Hilton-O'Hare, Chicago - Holiday Inn-Merchandise Mart, Chicago - Howard Johnson-O'Hare Int'l Airport, Chicago - Hyatt Regency, Chicago - Hyatt Suites Hotel, Chicago - Inter-Continental Hotel-Proposed, Chicago - La Quinta Inn - Hoffman Est., Chicago - Le Meridien, Chicago - Lenox House, Chicago - Lincoln Hotel, Chicago - Mark Twain Hotel, Chicago - Marriott-O'Hare, Chicago - Mayfair Regent, Chicago - McClurg Holiday Inn, Chicago - McCormick Inn Hotel, Chicago - Morton Hotel, Chicago - Omni Ambassador East, Chicago - Omni Morton Hotel, Chicago - Palmer House Hotel, Chicago - Ramada Inn - Lakeshore, Chicago - Ramada O'Hare, Chicago - Residence Inn-Deerfield, Chicago - Residence Inn-Lombard, Chicago - Sheraton Hotel-Downtown, Chicago - Sheraton Hotel-Proposed, Chicago - Sheraton O'Hare, Chicago - Sheraton Plaza Hotel, Chicago - Summerfield Suites Hotel, Chicago - Swissotel, Chicago - Tremont Hotel, Chicago - Westin Hotel, Chicago - Whitehall Hotel, Chicago - Hilton Hotel, Collinsville - Holiday Inn, Collinsville - Super 8, Columbus - Super 8, Crystal Lake - Super 8, Decatur - Courtyard by Marriott, Deerfield - Embassy Suites, Deerfield - Marriott Suites Hotel, Deerfield - Holiday Inn-Chicago, Des Plaines - Hotel-Proposed, Des Plaines - Compri Hotel-Proposed, Downers Grove - Radisson Suite Hotel, Downers Grove - Best Inn, Effingham - Ramada Inn, Elgin - Hampton Inn, Elk Grove Village - Marriott Suites, Elk Grove Village - Holiday Inn, Elmhurst - Orrington Hotel, Evanston - Drury Inn, Fairview Heights - Conference Center & Resort-Proposed, Fox Lake - Holiday Inn, Freeport - Hotel-Proposed, Gurnee - La Quinta Hotel, Hoffman Estates - Carson Inn, Itasca - Hamilton Wyndham, Itasca - Nordic Hills, Itasca - Holiday Inn, Joliet - Proposed Harrah's Riverboat, Joliet - Days Inn, Kankakee - Holiday Inn, LaSalle - Marriott Hotel, Lincolnshire - Hilton Inn, Lisle - Holiday Inn Crowne Plaza, Lisle - Embassy Suites, Lombard - Holiday Inn, Macomb - Best Inn, Marion - Best Inn, Mount Vernon - Holiday Inn, Mount Vernon - Ramada Inn, Mount Vernon - Courtyard by Marriott, Naperville - Ramada Inn, Naperville - Sheraton Naperville, Naperville - O'Hareport Hotel, Northlake - Courtyard by Marriott, Oakbrook Terrace - Super 8, Okawville - Fairfield Inn, Peoria - Days Inn, Peru - Super 8, Peru - Courtyard by Marriott, Rockford - Fairfield Inn, Rockford - Hampton Inn, Rockford - Embassy Suites, Rosemont - Quality Inn/Clarion, Rosemont - Sheraton Int'l At O'Hare, Rosemont - Holiday Inn, Salem - Compri Hotel, Schaumburg - Embassy Suites, Schaumburg - Marriott Schaumburg, Schaumburg - Holiday Inn, South Beloit - Ramada Renaissance Hotel, Springfield - Sheraton Inn, Springfield - Super 8-East, Springfield - Super 8-South, Springfield - Jumer's Castle, Urbana - Best Inn, Waukegan - Super 8, Waukegan Indiana - Clarion Fourwinds Inn, Bloomington - Holiday Inn, Bloomington - Inn at the Four Winds, Bloomington - Ramada Inn, Bloomington - Harbor Point Resort, Brookville Lake - Super 8, Columbus - Best Inn, Fort Wayne - Hilton, Fort Wayne - Downtown Hotel, Gary - Sheraton, Gary - Holiday Inn, Goshen - Howard Johnson, Hammond - Quality Inn, Hammond - Courtyard by Marriott-Airport, Indianapolis - Courtyard by Marriott-Carmel, Indianapolis - Courtyard by Marriott-Castleton, Indianapolis - Embassy Suites-Claypool Center, Indianapolis - Fairfield Inn-Castleton, Indianapolis - Fairfield Inn-College Park, Indianapolis - Hampton Inn-Proposed, Indianapolis - Hilton Hotel-Airport, Indianapolis - Hilton Inn-Downtown, Indianapolis - Holiday Inn-South, Indianapolis - Holiday Inn-Southeast, Indianapolis - Knights Inn, Indianapolis - Midway Motor Lodge, Indianapolis - Mohawk Inn, Indianapolis - Motel 6, Indianapolis - Proposed Fairfield Inn, Indianapolis - Proposed Residence Inn, Indianapolis - Radisson, Indianapolis - Ramada-Airport, Indianapolis - Wyndham Garden Hotel, Indianapolis - La Quinta Inn, Indianapolis Airport - Hilton Inn, Jeffersonville - Holiday Inn, La Porte - Days Inn, Lafayette - Holiday Inn, Lafayette - Cotton Mill Inn-Proposed, Madison - Hampton Inn, Merrillville - Holiday Inn Express, Merrillville - La Quinta Inn, Merrillville - Hotel Roberts, Muncie - Radisson Hotel, Muncie - Brown County Inn, Nashville - Holiday Inn, Portage - Knights Inn, Richmond - Holiday Inn, South Bend - Howard Johnson, South Bend - Signature Inn, Terre Haute - Super 8, Terre Haute - Courtyard Conversion, Valparaiso - Holiday Inn, Vincennes Iowa - Holiday Inn-Gateway Center, Ames - Holiday Inn, Cedar Falls - Collins Plaza, Cedar Rapids - Holiday Inn, Cedar Rapids - Roosevelt Hotel, Cedar Rapids - Super 8, Davenport - Courtyard by Marriott, Des Moines - Fairfield Inn, Des Moines - Holiday Inn, Des Moines - Holiday Inn - West, Des Moines - Holiday Inn-Downtown, Des Moines - Holiday Inn-North, Des Moines - Ramada Inn, Des Moines - Super 8-North, Des Moines - Super 8-West, Des Moines - Holiday Inn, Iowa City Kansas - Embassy Suites, Kansas City - Fairfield Inn-Overland Park, Kansas City - Holiday Inn-Mission Overland Park, Kansas City - Fairfield Inn, Kansas City West - Holiday Inn, Lawrence - University Inn, Lawrence - Holiday Inn, Manhattan - Courtyard by Marriott, Overland Park - Hampton Inn-Proposed, Overland Park - Marriott Hotel, Overland Park - Park Inn International, Topeka - Super 8, Topeka - Canterbury Inn, Wichita - Former Sheraton Hotel, Wichita - Hilton-East, Wichita - Marriott Hotel, Wichita - Comfort Inn, Winfield Kentucky - Conference Center-Proposed, Boone County - Howard Johnson, Bowling Green - Brown County Inn, Brown County - Holiday Inn, Corbin - Hotel-Proposed, Covington - Thomas More Centre, Crestville Hill - Comfort Inn, Elizabethtown - Signature Inn, Elkhart - Holiday Inn, Florence - Signature Inn, Florence - Drawbridge Inn, Fort Mitchell - Days Inn, Georgetown - Days Inn, Henderson - Holiday Inn, Henderson - Bluegrass Motor Inn, Lexington - Courtyard by Marriott, Lexington - Holiday Inn, Lexington - Holiday Inn-East, Lexington - Holiday Inn-North, Lexington - Hyatt Hotel, Lexington - Knights Inn, Lexington - Super 8-Proposed, London - Brown Hotel, Louisville - Courtyard by Marriott-East, Louisville - Holiday Inn, Louisville - Holiday Inn South, Louisville - Holiday Inn-Central, Louisville - Holiday Inn-Northeast, Louisville - Ramada Inn, Louisville - Ramada Inn-East, Louisville - Signature Inn, Louisville - Days Inn, Madisonville - Executive Inn, Owensboro - Super 8-Proposed, Radcliff - Holiday Inn, Richmond Louisiana - Howard Johnson, Alexandria - Capital House, Baton Rouge - Convention Center Hotel-Proposed, Baton Rouge - Courtyard by Marriott, Baton Rouge - Crown Sterling Suites, Baton Rouge - Embassy Suites, Baton Rouge - Hilton Hotel, Baton Rouge - Holiday Inn-East, Baton Rouge - Holiday Inn-South, Baton Rouge - Holiday Inn-West, Baton Rouge - La Quinta Inn, Baton Rouge - Prince Murat Hotel, Baton Rouge - Proposed Homewood Suites, Baton Rouge - Quality Inn, Bossier City - Ramada Inn, Hammond - Ramada Inn, Houma - Holiday Inn - New Orleans, Kenner - Sheraton, Kenner - Hilton Hotel, Lafayette - La Quinta Hotel, Lafayette - Gateway Hotel, Metairie - Howard Johnson-Airport, Metairie - Canal Street Hotels L.P., New Orleans - Clarion Hotel, New Orleans - Days Inn, New Orleans - Fairmont Roosevelt Hotel, New Orleans - Hampton Inn-Proposed, New Orleans - Holiday Inn Crowne Plaza, New Orleans - Hostellerie de la Poste, New Orleans - Hotel Meridien, New Orleans - Hyatt Regency, New Orleans - Iberville Hotel, New Orleans - Inter-Continental Hotel, New Orleans - La Quinta Inn, New Orleans - Landmark Bourbon, New Orleans - Le Meridien New Orleans, New Orleans - Maison Dupuy, New Orleans - Marriott Hotel, New Orleans - Omni Royal Orleans, New Orleans - Ramada Inn, New Orleans - Saint Louis Hotel, New Orleans - St. Ann/Marie Antoinette, New Orleans - Warwick, New Orleans - Westin Hotel, New Orleans - Residence Inn, Shreveport - Super 8, Shreveport Maine - Hilton Inn, Bangor - Ramada Inn, Bangor - Residence Inn by Marriott-Proposed, Bangor - Inn By The Sea, Cape Elizabeth - Hotel-Proposed, Orchard Beach - Hotel-Proposed, Portland - Portland Regency, Portland - Ramada Inn, Portland - Sheraton Tara Portland, Portland - Susse Chalet, Portland - Susse Chalet, Portland (In-town) - Keddy's Motor Inn of Maine, Presque Isle - Hampton Inn, South Portland - Sheraton Inn, South Portland Maryland - Budget Hotel-Proposed, Aberdeen - Chesapeake House, Aberdeen - Holiday Inn, Aberdeen - Motel-Proposed, Aberdeen - Annapolis Hotel, Annapolis - Courtyard by Marriott-Riva Road, Annapolis - Governor Calvert House, Annapolis - Historic Inns of Annapolis, Annapolis - Hotel-Proposed, Annapolis - Howard Johnson, Annapolis - Marriott Hotel, Annapolis - Maryland Inn, Annapolis - Quality Royale Hotel, Annapolis - Ramada Hotel, Annapolis - Robert Johnson House, Annapolis - Brookshire Hotel, Baltimore - Courtyard by Marriott-BWI Airport, Baltimore - Days Inn, Baltimore - Harbor Court Hotel, Baltimore - Harrison's at Pier 5, Baltimore - Hilton Hotel, Baltimore - Holiday Inn-Belmont Blvd., Baltimore - Holiday Inn-Cromwell Bridge, Baltimore - Holiday Inn-Glen Burnie, Baltimore - Holiday Inn-Inner Harbor, Baltimore - Holiday Inn-Int'l Airport, Baltimore - Holiday Inn-Moravia Road, Baltimore - Holiday Inn-Pikesville, Baltimore - Holiday Inn-South Glen Burnie, Baltimore - Hotel-Proposed, Baltimore - Howard Johnson-Proposed, Baltimore - Johns Hopkins Hotel-Proposed, Baltimore - Lord Baltimore Hotel, Baltimore - Omni International Hotel, Baltimore - Ramada Inn-I-695 West, Baltimore - Susse Chalet, Baltimore - Susse Chalet Inn-BWI Airport, Baltimore - Susse Chalet Inn-Golden Ring, Baltimore - Bethesda Metro Center, Bethesda - Guest Quarters, Bethesda - Hyatt Regency Hotel, Bethesda - Linden Hill Hotel, Bethesda - Omni Linden Hotel, Bethesda - Residence Inn, Bethesda - Bethseda Metro Center, Bethseda - Guest Quarters, Bethseda - Residence Inn - Proposed, Bethseda - Comfort Suites-Proposed, Bowie - Days Inn, Capital Heights - Residence Inn, Cockneysville - Abbey, College Park - Best Western Maryland, College Park - Holiday Inn, College Park - Sheraton Inn, Dorsey - Days Inn, Easton - Mariner Inn, Easton - Holiday Inn, Frederick - Compri Hotel, Gaithersburg - Marriott Hotel, Gaithersburg - Century XXI Resort, Germantown - Comfort Inn, Germantown - Hampton Inn, Glen Burnie - Residence Inn-Proposed, Greenbelt - Courtyard by Marriott, Hunt Valley - Hunt Valley Embassy Suites, Hunt Valley - Hunt Valley Marriott, Hunt Valley - Susse Chalet Inn, Jessup - Courtyard by Marriott, Landover - Quality Inn-Proposed, Landover - Days Inn, Lanham - Best Western Maryland, Laurel - Days Inn, Laurel - Holiday Inn, Laurel - Susse Chalet, Linthicum - Howard Johnson Plaza Hotel, New Carrollton - Carousel Hotel, Ocean City - Days Inn, Ocean City - Susse Chalet, Oxon Hill - Hotel-Proposed, Prince Georges County - Budget Hotel-Proposed, Rockville - Comfort Inn, Rockville - Courtyard by Marriott, Rockville - Days Inn-Congressional Park, Rockville - Holiday Inn Crowne Plaza, Rockville - Quality Inn-Proposed, Rockville - Ramada Inn, Rockville - Salisbury Hotel, Salisbury - Sheraton Hotel, Salisbury - Courtyard by Marriott, Silver Spring - Quality Inn-Proposed, Silver Spring - Comfort Inn-Proposed, Solomons Island - Holiday Inn, Towson - Quality Inn-Proposed, Westminster Massachusetts - Susse Chalet, Amsbury - Courtyard by Marriott, Andover - Marriott Hotel, Andover - Stouffer Bedford Glen Hotel, Bedford - Anthony's Pier Four, Boston - Battery Wharf Hotel-Proposed, Boston - Boston Harbor Hotel, Boston - Boston World Trade Center, Boston - Bostonian Hotel, Boston - Colonnade Hotel, Boston - Commonwealth Center Hotel, Boston - Compri Hotel-Proposed, Boston - Copley Plaza Hotel, Boston - Courtyard by Marriott-Foxborough, Boston - Econo Lodge-Proposed, Boston - Harborside Conf. Center-Proposed, Boston - Hilton-Back Bay, Boston - Hilton-Logan, Boston - Holiday Inn-Government Center, Boston - Hotel - Proposed, Boston - Hyatt Fan Pier-Proposed, Boston - Hyatt Harborside-Proposed, Boston - Lafayette Hotel, Boston - Lenox Hotel, Boston - Marriott Copley Place, Boston - Meridien Hotel, Boston - Omni Parker House, Boston - Residence Inn, Boston - Ritz-Carlton, Boston - Statler Hilton Hotel, Boston - Tremont House Hotel, Boston - World Trade Center Hotel - Proposed, Boston - Marriott Hotel, Boston/Newton - Sheraton Tara Hotel, Braintree - Ocean Edge Inn & Conference Center, Brewster - Holiday Inn, Brookline - Days Inn, Burlington - Charles Hotel, Cambridge - Hyatt Hotel, Cambridge - Royal Sonesta Hotel, Cambridge - The Charles Hotel, Cambridge - Chatham Bars Inn, Chatham - Chelmsford Radisson Hotel, Chelmsford - Best Western Motor Lodge, Chicopee - Cummington Farm Resort-Proposed, Cummington - Appleton Inn, Danvers - Howard Johnson Hotel, Danvers - Radisson Ferncroft Hotel, Danvers - Residence Inn - Proposed, Danvers - Dedham Comfort Inn, Dedham - Holiday Inn, Dedham - Wequassett Inn, East Harwich - Harbor View Hotel, Edgartown - Kelley House, Edgartown - Airport Inn, Fall River - Sea Crest Hotel, Falmouth - Sheraton Inn, Falmouth - Radisson Hotel, Ferncroft - Sheraton Tara Hotel, Framingham - Hotel-Proposed, Franklin - Hotel-Proposed, Haverhill - Susse Chalet, Holyoke - Dunfey Hyannis Hotel, Hyannis - Heritage House Hotel, Hyannis - Holiday Inn, Hyannis - Sheraton Regal Inn, Hyannis - Tara Hyannis, Hyannis - Canyon Ranch-Berkshires, Lenox - Cranwell Hotel and Conference Ctr., Lenox - Spa/Resort-Proposed, Lenox - Holiday Inn, Leominster - Lexington Sheraton, Lexington - Residence Inn-Proposed, Littleton - Appleton Inn, Lowell - Hilton Hotel, Lowell - Town House Motor Inn, Lowell - Holiday Inn, Marlboro - Susse Chalet, Middleboro - Sheraton Milford Hotel, Milford - Holiday Inn, Natick - Skipper's Inn, New Bedford - Days Inn, Newton - Howard Johnson, Newton - Marriott Hotel, Newton - Sheraton - Wayfarer, Newton - Sheraton Tara, Newton - Susse Chalet, Newton - North Adams Inn, North Adams - Hilton Inn, Northampton - Hotel Northampton, Northampton - Factory Mutual Hotel, Norwood - University Inn, Oxford - Holiday Inn, Peabody - Berkshire Commons Hotel, Pittsfield - Hotel-Proposed, Plymouth - Hawthorne Hotel, Salem - Days Inn, Saugus - Susse Chalet, Seekonk - Howard Johnson, Somerset - Somerset Omni, Somerset - Federal House Inn, South Lee - Holiday Inn, Springfield - Howard Johnson, Springfield - Monarch Place, Springfield - Treadway Inn, Springfield - Publick House, Sturbridge - Sheraton, Sturbridge - Regency Inn of Taunton, Taunton - Holiday Inn, Tewksbury - Susse Chalet, Tewksbury - Susse Chalet, Waltham - Vista Waltham House, Waltham - Hampton Inn, West Springfield - Westford Regency Hotel, Westford - The Westminster Village Inn, Westminster - The Orchards, Williamstown - Treadway Inn, Williamstown - Days Inn, Woburn - Howard Johnson, Woburn - Radisson Hotel, Woburn - Ramada Inn, Woburn - Susse Chalet, Woburn - Marriott Hotel, Worcester - Alladin Motor Inn, Yarmouth - Flagship Motor Inn, Yarmouth - Gull Wing Suites Hotel, Yarmouth Michigan - Motel-Proposed, Adrian - Ramada Inn, Allen Park - Holiday Inn-Alpena, Alpena - Compri Hotel-Proposed, Ann Arbor - Hampton Inn-North, Ann Arbor - Hampton Inn-South, Ann Arbor - Hilton Hotel, Ann Arbor - Holiday Inn-East, Ann Arbor - Holiday Inn-West, Ann Arbor - Residence Inn, Ann Arbor - Sheraton Hotel, Ann Arbor - AmeriSuites Hotel-Proposed, Auburn Hills - Holiday Inn, Auburn Hills - Knights Inn, Battle Creek - Super 8, Battle Creek - Bay Valley Inn, Bay City - Howard Johnson, Belleville - Fairfield Inn-Airport, Charlotte - Courtyard by Marriott, Dearborn - Courtyard by Marriott-Airport, Detroit - Courtyard by Marriott-Auburn Hills, Detroit - Courtyard by Marriott-Livonia, Detroit - Days Inn, Detroit - Downtown Hotel-Proposed, Detroit - Fairfield Inn-Airport, Detroit - Fairfield Inn-Auburn Hills, Detroit - Fairfield Inn-Warren, Detroit - Fairfield Inn-West, Detroit - Golden Harp, Detroit - Hampton Inn, Detroit - Hilton-Airport, Detroit - Hilton-North Field, Detroit - Holiday Inn, Detroit - Holiday Inn-Metro Airport, Detroit - Hotel Pontchartrain, Detroit - Omni Detroit, Detroit - Westin Hotel Renaissance Center, Detroit - Holiday Inn, East Lansing - Holiday Inn-Proposed, East Lansing - Knights Inn, Flint - Amway Hotel, Grand Rapids - Holiday Inn, Grand Rapids - Grand Traverse Resort, Grand Traverse Village - Holiday Inn, Howell - Jackson Hotel, Jackson - Fairfield Inn, Kalamazoo - Hilton-Kalamazoo Center, Kalamazoo - Holiday Inn, Kalamazoo - Radison Plaza Hotel, Kalamazoo - Residence Inn, Kalamazoo - Super 8, Kalamazoo - Embassy Suites-Proposed, Lansing - Holiday Inn, Lansing - Motel 6, Lansing - Quality Suites Hotel, Lansing - Compri Hotel-Proposed, Livonia - Embassy Suites, Livonia - Embassy Suites-Proposed, Livonia - Holiday Inn, Livonia - Marriott Hotel, Livonia - Fairfield Inn, Madison Heights - Residence Inn, Madison Heights - Holiday Inn, Marquette - Knights Inn, Monroe - Comfort Inn-Proposed, Mount Clemens - Holiday Inn, Muskegan - Super 8, Muskegon - Hilton Hotel, Novi - Holiday Inn-Petoskey, Petoskey - Mayflower Hotel, Plymouth - Inn at the Bridge, Port Huron - Radisson Hotel, Romulus - Holiday Inn-East, Saginaw - Super 8, Saginaw - Courtyard by Marriott, Southfield - Embassy Suites, Southfield - Hilton Hotel, Southfield - Marriott Hotel, Southfield - Ramada Inn, Southfield - Residence Inn, Southfield - The Garden Inn, Southfield - Comfort Suites-Proposed, Sterling Heights - Holiday Inn, Sturgis - Grand Traverse Resort, Traverse City - Hampton Inn, Traverse City - Park Place Hotel, Traverse City - Courtyard by Marriott, Troy - Holiday Inn, Troy - Marriott, Troy - Residence Inn, Troy - Courtyard by Marriott, Warren - Days Inn, Warren - Holiday Inn, Warren - Motel 6, Warren - Residence Inn, Warren - Van Dyke Hotel & Conference Center, Warren - Bob Evans Restaurant, Wyoming - Super 8, Wyoming - Radisson Resort-Conference Center, Ypsilanti Minnesota - Embassy Suites, Bloomington - Hilton Airport Hotel, Bloomington - Hilton Hotel, Bloomington - Howard Johnson Lodge, Bloomington - Marriott Hotel, Bloomington - Ramada Inn, Bloomington - Days Inn - Minneapolis, Brooklyn Center - Residence Inn, Eagan - Compri Hotel-Proposed, Minneapolis - Courtyard by Marriott-Eden Prairie, Minneapolis - Courtyard by Marriott-Mendota, Minneapolis - Days Inn, Minneapolis - Dyckman Hotel, Minneapolis - Hilton Inn, Minneapolis - Holiday Inn-Downtown, Minneapolis - Hotel-Proposed, Minneapolis - Luxeford Hotel, Minneapolis - Marquette, Minneapolis - Marriott City Center Hotel, Minneapolis - Marriott-Minnetonka, Minneapolis - Motel 6, Minneapolis - Omni-Northstar, Minneapolis - Radisson Hotel, Minneapolis - Ramada Inn, Minneapolis - Sheraton Minneapolis, Minneapolis - Sofitel, Minneapolis - Motel-Proposed, Montevideo - Days Inn, Plymouth - Hotel-Proposed, Rochester - Howard Johnson, Rochester - Motel 6, Rochester - Radisson Hotel, Rochester - Days Inn, Roseville - Holiday Inn, Saint Paul - Holiday Inn-Town Square, Saint Paul - Hotel-Proposed, Saint Paul - Inn and Expo Center, Saint Paul - World Trade Hotel, Saint Paul - Wayzata Conference Center, Wayzata Mississippi - Howard Johnson, Biloxi - Holiday Inn, Greenwood - Motel 6, Hattlesburg - Hampton Inn, Jackson - Howard Johnson, Jackson - Ramada Inn-Proposed, Jackson - Residence Inn, Jackson - Cabot Lodge, Ridgeland - Holiday Inn, Vicksburg Missouri - Ramada Inn, Columbia - Howard Johnson-North St. Louis, Hazelwood - Super 8, Independence - La Quinta Inn, Jackson - North - Capital Plaza, Jefferson City - Ramada Inn, Jefferson City - Days Inn, Joplin - Super 8, Joplin - Allis Plaza, Kansas City - Americana Hotel, Kansas City - AmeriSuites Hotel-Proposed, Kansas City - Doubletree Hotel, Kansas City - Embassy Suites, Kansas City - Fairfield Inn-West, Kansas City - Hilton - Proposed, Kansas City - Hilton Inn, Kansas City - Historic Suites Hotel, Kansas City - Holiday Inn, Kansas City - Holiday Inn Crowne Plaza, Kansas City - Holiday Inn-Proposed, Kansas City - Proposed Sheraton Hotel, Kansas City - Radisson Suite Hotel, Kansas City - Resort Hotel - Proposed, Kansas City - Marriott-Tan-Tar-A, Lake of the Ozarks - Super 8, Liberty - Super 8, North Kansas City - Inn at Grand Glaize, Osage Beach - Super 8, Saint Joseph - Clarion, Saint Louis - Courtyard by Marriott-Creve Coeur, Saint Louis - Courtyard by Marriott-Downtown, Saint Louis - Courtyard by Marriott-Westport, Saint Louis - Days Inn, Saint Louis - Doubletree Hotel, Saint Louis - Drury Inn, Saint Louis - Embassy Suites, Saint Louis - Fairfield Inn-Hazel, Saint Louis - Henry VIII Hotel, Saint Louis - Hilton Hotel-Bel Air, Saint Louis - Holiday Inn Sports Complex, Saint Louis - Holiday Inn-Airport North, Saint Louis - Holiday Inn-Downtown, Saint Louis - Holiday Inn-Riverfont, Saint Louis - Howard Johnson-South, Saint Louis - Mayfair Hotel, Saint Louis - Omni-St. Louis Station, Saint Louis - Ramada Inn-Westport, Saint Louis - Residence Inn-Chesterfield, Saint Louis - Residence Inn-Richmond Heights, Saint Louis - Ritz-Carlton Hotel, Saint Louis - Sheraton-Airport, Saint Louis - St. Louis Airport Hilton, Saint Louis - St. Louis Airport Radisson Hotel, Saint Louis - St. Louisian Hotel, Saint Louis - Stouffer Concourse Hotel, Saint Louis - Super 8, Saint Louis - Marriott Hotel, Saint Louis County - Holiday Inn, Springfield - Sheraton Inn, Springfield - Super 8, Springfield - Executive Inn & Office Building, St. Louis - Holiday Inn, St. Louis - Howard Johnson Hotel, St. Louis - Hotel-Proposed, Unity Village - Holiday Inn, Wendtzville Montana - Sheraton Hotel, Billings - Super 8, Billings - Super 8, Great Falls - Super 8, Helena - Super 8, Kalispell - Holiday Inn, Missoula - Red Lion Inn, Missoula Nebraska - Holiday Inn, Kearney - Best Western Airport Inn, Lincoln - Holiday Inn-Airport, Lincoln - Holiday Inn-Northeast, Lincoln - Howard Johnson, North Platte - Marriott Hotel, Omaha - Ramada Inn, Omaha - Red Lion Inn, Omaha Nevada - Lake Mead Resort, Boulder City - Ormsby House Hotel and Casino, Carson City - Super 8, Carson City - Doubletree Hotel and Resort, Cathedral City - Best Western Motel - Proposed, Jackpot - Airport Inn, Las Vegas - Aladdin Hotel and Casino, Las Vegas - Alexis Park Resort Hotel, Las Vegas - Casino Hotel-Proposed, Las Vegas - Courtyard by Marriott, Las Vegas - El Rancho Hotel and Casino, Las Vegas - Hotel and Casino-Proposed, Las Vegas - Jockey Club Hotel and Casino, Las Vegas - La Quinta Hotel, Las Vegas - Paradise Resort, Las Vegas - Residence Inn, Las Vegas - Silverbird Casino, Las Vegas - Super 8-Proposed, Las Vegas - The Mirage, Las Vegas - Tropicana Travelodge, Las Vegas - Westward Ho Casino, Las Vegas - Echo Bay Resort, Overton - Holiday Inn, Reno - La Quinta Hotel, Reno - Quality Inn and Casino, Reno - Red Lion Hotel-Proposed, Reno New Hampshire - Sheraton Wayfarer, Bedford - Hampton Inn, Bow - Mount Washington Resort, Bretton Woods - Balsams Hotel, Dixville Notch - Sheraton Inn-Lamie's Tavern, Hampton - Woodbound Inn, Jaffrey - Brickyard Mountain Inn, Laconia - Loon Mountain Hotel, Lincoln - Appleton Inns, Manchester - Holiday Inn Center, Manchester - Sheraton Wayfarer, Manchester - Susse Chalet, Manchester - Clarion Somerset Hotel, Nashua - Hotel-Proposed, Nashua - Tara Sheraton Nashua, Nashua - Wentworth by the Sea, Newcastle - Susse Chalet, Portsmouth - Wentworth-by-the-Sea, Portsmouth - Salem Inn, Salem - Susse Chalet, Salem - Landmarc Lodge-East, Waterville Valley - Landmarc Lodge-West, Waterville Valley - Silver Squirrel Inn, Waterville Valley - Snowy Owl Inn, Waterville Valley - Chalet Susse International, Inc., Wilton New Jersey - Marriott Seaview Golf Resort, Abescon - Howard Johnson Hotel, Absecon - Seaview Country Club, Absecon - Berkeley Carteret Hotel, Asbury Park - Caesar's Hotel and Casino, Atlantic City - Casino Hotel-Proposed, Atlantic City - Deauville Hotel, Atlantic City - Diplomat Hotel, Atlantic City - Hampton Inn, Atlantic City - Harrah's Marina Hotel Casino, Atlantic City - Lafayette Hotel, Atlantic City - Resorts Int'l Hotel and Casino, Atlantic City - Royal Inn, Atlantic City - Sands Hotel and Casino, Atlantic City - Traymore Hotel Site, Atlantic City - Tropicana Hotel and Casino, Atlantic City - World International Hotel, Atlantic City - Bernards Inn, Bernardsville - Hotel-Proposed, Bridgewater - Proposed Hotel, Camden - Cherry Hill Hyatt, Cherry Hill - Cherry Hill Inn, Cherry Hill - Ramada Inn, Clifton - Comfort Suites, E. Rutherford - Ramada Renaissance, East Brunswick - Sheraton Inn, East Brunswick - Sheraton - Per Diem, East Rutherford - Holiday Inn-Raritan Center, Edison - Hotel-Proposed, Edison - Ramada Inn, Edison - Best Western Hotel, Egg Harbor Township - Newark Airport Vista Hotel, Elizabeth - Ramada Inn-Proposed, Elizabeth - Sheraton Inn, Elizabeth - Marriott Suite Hotel-Proposed, Elmwood Park - Howard Johnson, Englewood - Conference Center, Farleigh Dickinson - Motel-Proposed, Flemington - Hamilton Park Conference Center, Florham Park - Courtesy Motel, Fort Lee - Ramada Inn-Proposed, Franklin Township - Playboy Resort, Great Gorge - Marriott Hotel, Hanover - Sheraton Hotel, Hasbrouck Heights - Holiday Inn, Jamesburg - Restaurant at Port Liberte, Jersey City - Harrogate Senior Living Facility, Lakewood - Courtyard by Marriott, Lincroft - Hotel-Proposed, Long Branch - Comfort Inn, Mahwah - Courtyard by Marriott, Mahwah - Residence Inn-Proposed, Mahwah - Economy Lodge - Proposed, Meadowlands - Holiday Inn, Meadowlands - Hotel-Proposed, Meadowlands - Meadowlands Hilton, Meadowlands - Sheraton Hotel, Meadowlands - Forsgate Conference Center, Monroe Township - Conference Center, Morristown - Governor Morris Inn, Morristown - Headquarters Plaza Hotel, Morristown - Pleasantville Farms Conference Cent, Morristown - Howard Johnson Lodge, Mount Holly - Courtyard by Marriott, Mount Laurel - Hilton, Mount Laurel - Days Hotel, New Brunswick - Hyatt Hotel, New Brunswick - Rennaisance Hotel, New Brunswick - Residence Inn - Princeton, New Jersey - Airport Hotel-Proposed, Newark - Courtyard by Marriott-Airport, Newark - Holiday Inn, Newark - Holiday Inn-Airport North, Newark - Hotel-Proposed, Newark - Howard Johnson Hotel, Newark - Days Inn, North Bergen - Holiday Inn, North Brunswick - Port-O-Call, Ocean City - Sting Ray Motel, Ocean City - Hotel-Proposed, Ocean Grove - Spray View Hotel, Ocean Grove - Macy Hotel-Proposed, Paramus - Red Carpet Inn, Paramus - Residence Inn-Proposed, Paramus - Marriott Hotel-Proposed, Park Ridge - Embassy Suites, Parsippany - Hilton, Parsippany - Residence Inn-Proposed, Parsippany - Howard Johnson, Phillipsburg - Hotel-Proposed, Piscataway - Residence Inn-Proposed, Piscataway - Compri Hotel-Proposed, Princeton - Hyatt Regency, Princeton - Marriott Hotel, Princeton - Omni Nassau Inn, Princeton - Treadway Inn, Princeton - Howard Johnson, Ridgefield Park - Hotel-Proposed, Rockleigh - Hotel-Proposed, Roxbury Township - Ramada Inn, Runnemede - Howard Johnson, Saddle Brook - Marriott Hotel, Saddle Brook - Days Inn, Secaucus - Howard Johnson, Secaucus - Ramada Inn, Secaucus - Hilton At Short Hills, Short Hills - Pier 4 Motel, Somers Point - Garden State Convention Center, Somerset - Holiday Inn, Somerset - Marriott Hotel, Somerset - Neighborhood Suites-Proposed, Somerset - Sommerset Plaza Hotel, Somerset - Summerfield Suites Hotel, Sommerset - Hewitt Wellington Hotel, Spring Lake - Hotel-Proposed, Spring Lake - Loews Glenpointe Hotel, Teaneck - Appleton Inn, Tinton Falls - Envoy Inn, Tinton Falls - Hilton Inn, Tinton Falls - Residence Inn, Tinton Falls - Sunrise Suite Hotel, Tinton Falls - Hotel-Proposed, Toms River - Hotel-Proposed, Turnersville - Hotel-Proposed, Wayne - Howard Johnson-Proposed, Wayne - Holiday Inn, Wildwood Crest - Motel, Wrightstown New Mexico - Compri Hotel-Proposed, Albuquerque - Courtyard by Marriott-Airport, Albuquerque - Fairfield Inn-Proposed, Albuquerque - Hampton Inn, Albuquerque - Hilton Hotel, Albuquerque - Holiday Inn, Albuquerque - Marriott Hotel, Albuquerque - Radisson Suite Hotel-Proposed, Albuquerque - Residence Inn, Albuquerque - Rodeway Inn, Albuquerque - Winrock Motor Inn, Albuquerque - La Quinta Inn, Albuquerque - Airport - Corkin's Lodge, Chama - La Quinta Inn, Farmington - Hilton, Las Cruces - Las Cruces Hilton, Las Cruces - Super 8, Las Cruces - Ski Rio Ski Resort, Miracle Mountain - Super 8, Raton - Young's Ranch, Red River - Eldorado Hotel, Santa Fe - Homewood Suites Hotel, Santa Fe - Hotel-Proposed, Santa Fe - Inn at Loretto, Santa Fe - Inn on the Alameda, Santa Fe - La Fonda Hotel, Santa Fe - La Quinta Hotel, Santa Fe - Residence Inn, Santa Fe - Santa Fe Motel, Santa Fe - Sheraton de Santa Fe, Santa Fe New York - Americana Inn, Albany - Desmond Hotel, Albany - Hilton Hotel, Albany - Marriott Hotel, Albany - Sheraton Inn, Albany - Susse Chalet, Albany - VIP Motor Lodge (Howard Johnson), Albany - Embassy Suites-Proposed, Amherst - Holiday Inn, Amherst - Annandale Inn-Proposed, Annandale - Wampus Inn-Proposed, Armonk - Treadway Inn, Batavia - Hampton Inn, Binghamton - Holiday Inn-Arena, Binghamton - Holiday Inn-SUNY, Binghamton - Hotel-Proposed, Binghamton - Howard Johnson, Binghamton - Residence Inn, Binghamton - Sheraton Inn, Binghamton - Eden Motel, Bronx - Days Inn-Proposed, Brookhaven - Residence Inn, Brookhaven - Brooklyn Hotel-Proposed, Brooklyn - Hilton Hotel, Brooklyn - Airport Hotel-Proposed, Buffalo - Buffalo Hotel, Buffalo - Days Hotel-Proposed, Buffalo - Hilton Hotel, Buffalo - Holiday Inn - Midtown, Buffalo - Hyatt Hotel, Buffalo - Hyatt Regency Hotel & Retail Area, Buffalo - Radisson Hotel, Buffalo - Ramada Inn-Airport, Buffalo - Ramada Renaissance Hotel, Buffalo - Residence Inn-Proposed, Buffalo - Sheraton Hotel, Buffalo - Sheraton Inn Buffalo East, Buffalo - Sheraton Inn-Airport, Buffalo - Sheraton Inn, Canadaiqua - Airway Motel, Cheektowaga - Holiday Inn - Airport, Cheektowaga - Holiday Inn - Gateway, Cheektowaga - Quality Inn, Cheektowaga - Sheraton Buffalo, Cheektowga - Steeplechase Park-Proposed, Coney Island - Hilton Inn, Corning - Resort/Conference Center-Proposed, Cornwall - Holiday Inn, Cortland - Roycroft Inn, East Aurora - Hotel-Proposed, East Elmhurst - Susse Chalet, East Greenbush - Nevele Hotel, Ellenville - Int'l Conf./Learning Center-Propose, Ellis Island - Days Inn, Elmsford - Howard Johnson, Elmsford - Neighborhood Suites Hotel-Proposed, Fishkill - Residence Inn, Fishkill - Metropole Hotel, Flushing - Midway Hotel, Flushing - Sheraton - Proposed, Flushing Center - Hotel-Proposed, Garden City - Wyndham Condominium, Garden City - Harrison Conference Center, Glen Clove - Great Neck Hotel, Great Neck - Comfort Inn, Greece - Holiday Inn-Proposed, Greece - Tamarack Lodge, Greenfield Park - Claudio's Restaurant, Greenport - Colonie Hill, Hauppauge - Holiday Inn, Hauppauge - Marriott Wind Watch Hotel & Golf, Hauppauge - Marriott Windwatch, Hauppauge - Ramada Inn, Hauppauge - Residence Inn, Hauppauge - Homewood Suites-Proposed, Henrietta - Howard Johnson, Huntington - Huntington Townhouse, Huntington - Hampton Inn, Islandia - Marriott Wind Watch, Islandia - Hotel-Proposed, Islip - Howard Johnson Hotel, Ithaca - Ramada Inn, Ithaca - Sheraton Inn, Ithaca - JFK Hilton, Jamaica - Howard Johnson, Kingston - Ramada Inn, Kingston - Omni Sagamore, Lake George - Ramada Inn, Lake George - Former Lake Placid Club Hotel, Lake Placid - Hilton Hotel, Lake Placid - Mirror Lake Inn, Lake Placid - Holiday Inn, Latham - Howard Johnson, Latham - Howard Johnson, Liberty - The New Brown's Resort, Loch Sheldrake - Convention Center - Proposed, Long Island - Eastern Nassau/W. Suffolk Hotel, Long Island - Hyatt Hotel-Proposed, Long Island - Motel-Proposed, Lynbrook - Crowne Plaza Hotel, Manhattan - Hotel Mark, Manhattan - Proposed Economy Hotel, Manhattan - Sugar Maples Resort, Maplecrest - Hotel-Proposed, Middletown - Howard Johnson, Middletown - Montauk Yacht Club and Inn, Montauk - Kutsher's Resort, Monticello - Motel-Proposed, Nanuet - Wallkill Valley Inn Project, New Paltz - Hotel-Proposed, New Rochelle - Le Richmond Hotel, New Rochelle - Ramada Plaza Inn and Offices, New Rochelle - Sheraton Inn, New Rochelle - Aberdeen Hotel, New York - American Youth Hostel, New York - Americana Hotel, New York - Ashley Hotel, New York - Astor House-Proposed, New York - Barbizon Plaza Hotel, New York - Barclay Hotel, New York - Battery Park City Hotel-Proposed, New York - Berkshire Place, New York - Best Western Woodward Hotel, New York - Biltmore Hotel, New York - Broadway Crowne Plaza, New York - Carlton House Hotel, New York - Century Paramount Hotel, New York - Chatwal Inn, New York - Chatwal Inn on 45th Street, New York - Chatwal Inn on Park Avenue, New York - Chinatown Hotel-Proposed, New York - Courtyard by Marriott-Proposed, New York - Custom's House, New York - Days Inn, New York - Days Inn-West 57th Street, New York - Doral Inn, New York - Dover Hotel, New York - Downtown Athletic Club, New York - Downtown Conference Center, New York - Drake Hotel, New York - Econo Lodge-Proposed, New York - El Rio Grande, New York - Embassy Suites-Times Square-Propose, New York - Empire Hotel, New York - Essex House, New York - Executive Hotel, New York - Giordano Hotel, New York - Gorham Hotel, New York - Grand Bay at Equitable Center, New York - Grand Hyatt Hotel, New York - Greenwich Street Hotel, New York - Halloran House, New York - Hampton House, New York - Harley Hotel, New York - Helmsley Hotel, New York - Hilton Hotel, New York - Hilton Hotel-Statler, New York - Holiday Inn, New York - Holiday Inn Crowne Plaza-Broadway, New York - Holiday Inn Crowne Plaza-Manhattan, New York - Holland Hotel, New York - Hotel Intercontinental, New York - Hotel Pierre, New York - Hotel-1926 Broadway-Proposed, New York - Hotel-East 57th Street-Proposed, New York - Hotel-Proposed, New York - Hotel-Tenth Avenue-Proposed, New York - Howard Hotel, New York - Howard Johnson, New York - Journey's Court Hotel-Proposed, New York - Journey's End, New York - Kalikow Hotel-Proposed, New York - Kennedy Inn, New York - Lancaster Hotel, New York - Le Meridien Liberty New York, New York - Lowell Hotel, New York - Luxury Hotel-Proposed, New York - Macklowe Hotel, New York - Madison Towers Hotel, New York - Manger Windsor Hotel, New York - Mark Hotel, New York - Marriott East Side, New York - Marriott Financial Center, New York - Marriott Hotel-Proposed, New York - Marriott Marquis, New York - Martinique Hotel, New York - Mayfair Regent, New York - Milford Plaza Hotel, New York - Millennium Hotel, New York - Navarro Hotel, New York - Nova Park-Gotham, New York - Novotel, New York - Omni Berkshire Place, New York - Omni Park Central, New York - Parc Fifty One Hotel, New York - Parker Meridien Hotel, New York - Peninsula Hotel, New York - Penta Hotel, New York - Piccadilly Hotel, New York - Plaza Hotel, New York - President Hotel, New York - Prince George Hotel, New York - Prince Street Hotel-Proposed, New York - Proposed Hotel and Apartments, New York - Proposed Luxury Hotel-Proposed, New York - Quality Inn, New York - Quality Suites, New York - Ramada Inn, New York - Regent Hotel-Proposed, New York - Regent of New York-Proposed, New York - Ritz-Carlton, New York - Roger Smith Winthrop Hotel, New York - Roosevelt Hotel, New York - Russian Tea Room, New York - Sheraton Hotel, New York - Sheraton Motor Inn, New York - Sheraton Park Avenue, New York - Soho Hotel-Proposed, New York - St. Moritz Hotel, New York - St. Regis, New York - Stanhope, New York - Sutton Place Hotel, New York - Taft Hotel, New York - Tenth Avenue Hotels-Proposed, New York - The Pierre Hotel, New York - The Plaza Athenee, New York - Times Square Hotel-Proposed, New York - Timeshare-Proposed, New York - Travel Inn, New York - Tudor Hotel, New York - UN Plaza Suite Hotel-Proposed, New York - Vista International, New York - Waldorf=Astoria Hotel, New York - Warwick Hotel, New York - Westbury Hotel, New York - Westin Plaza Hotel, New York - Woodward Hotel-Proposed, New York - York Club, New York - Howard Johnson Motel & Restaurant, Newburgh - Ramada Inn, Newburgh - Hilton Hotel, Niagara Falls - Howard Johnson, Norwich - Hotel-Proposed, Orangetown - Hudson Valley Conference Center, Ossining - Sheraton Inn, Ossining - Hotel-Proposed, Oswego - Best Western, Painted Post - Lodge on the Green, Painted Post - Residence Inn - Proposed, Parsippany - Senior Living - Proposed, Pearl River - Drum Hill Hotel, Peekskill - Holiday Inn, Plainview - Howard Johnson, Plainview - Pickwick Motor Inn, Plainview - Residence Inn, Plainview - Holiday Inn, Plattsburgh - Motel-Proposed, Port Jefferson - Comfort Inn-Proposed, Poughkeepsie - Courtyard by Marriott, Poughkeepsie - Radison Hotel, Poughkeepsie - Wyndham Hotel, Poughkeepsie - Best Western-LaGuardia Airport, Queens - Crown Motel, Queens - Crowne Plaza-LaGuardia Airport, Queens - Days Inn-LaGuardia Airport, Queens - Executive Inn, Queens - Hilton Inn-LaGuardia Airport, Queens - Hilton-JFK Airport, Queens - Holiday Inn-JFK Airport, Queens - Holiday Inn-LaGuardia Airport, Queens - Howard Johnson, Queens - Jade East Motel, Queens - JFK Plaza Hotel, Queens - Marriott Hotel-JFK Airport, Queens - Marriott-LaGuardia Airport, Queens - Metropole Hotel, Queens - Midway Hotel, Queens - Riviera Hotel, Queens - Royce Hotel-LaGuardia Airport, Queens - Sheraton-LaGuardia East-Proposed, Queens - Adria Hotel, Queens (Bayside) - Holiday Inn, Riverhead - Riverhead Motor Hotel, Riverhead - Americana Hotel, Rochester - Courtyard by Marriott-Wrighton, Rochester - Days Hotel (former Holiday Inn), Rochester - Hilton-Campus, Rochester - Holiday Inn, Rochester - Hotel-Proposed (former St. Bernard), Rochester - Hyatt Hotel, Rochester - Lodge at Woodcliff, Rochester - Omni Suites Hotel, Rochester - Residence Inn, Rochester - Sheraton Inn, Rochester - Stouffer Hotel, Rochester - Town House Inn, Rochester - Limited Service Hotel-Proposed, Rome - Hotel - Proposed, Roslyn - Roslyn Country Club, Roslyn - Courtyard by Marriott, Rye - Le Richemonde Hotel, Ryebrook - Baron's Cove Inn, Sag Harbor - Holiday Inn, Saratoga - Hotel-Proposed, Saratoga Springs - Howard Johnson, Saugerties - Holiday Inn, Schenectady - Ramada Inn, Schenectady - Dering Harbor Inn, Shelter Island - Crowne Plaza-Proposed, Smithtown - Howard Johnson, Smithtown - Sheraton, Smithtown - Raleigh Hotel, South Fallsburg - Hotel-Proposed, Southhold - Susse Chalet, Spring Valley - Executive Motor Inn, Springfield Gardens - Staten Island Hotel, Staten Island - Imperial Htl/Stevensville Golf Crs., Stevensville - Holiday Inn, Suffern - Motel on the Mountain, Suffern - Browns Hotel, Sullivan County - Imperial Hotel, Sullivan County - The New Brown's Resort, Sullivan County - Courtyard by Marriott, Syracuse - Embassy Suites, Syracuse - Hampton Inn, Syracuse - Hilton Inn, Syracuse - Holiday Inn-Downtown, Syracuse - Holiday Inn-Exit 35, Syracuse - Holiday Inn-Exit 36, Syracuse - Holiday Inn-Exit 39, Syracuse - Holiday Inn-I-90, Syracuse - Homewood Suites Hotel-Proposed, Syracuse - Hotel Syracuse, Syracuse - Hotel-Proposed, Syracuse - Marriott Hotel, Syracuse - Residence Inn-Proposed, Syracuse - Sheraton University Inn & Conf.Ctr., Syracuse - Treadway Inn, Syracuse - Courtyard by Marriott, Tarrytown - Tarrytown House Conference Center, Tarrytown - Westchester Marriott, Tarrytown - Embassy Suites - Proposed, Times Square, New York - Marriott Hotel, Uniondale - Sheraton Nassau Hotel, Uniondale - Howard Johnson Hotel, Utica - Howard Johnson, Vestal - Hotel-Proposed, Watertown - Convention Hotel-Proposed, Westbury - Dalts Restaurant, Westbury - Howard Johnson, Westbury - Marriott Hotel, Westchester - Inn-Proposed, Westhampton - Crowne Plaza, White Plains - Hotel-Proposed, White Plains - Howard Johnson, White Plains - Roger Smith Hotel, White Plains - Stouffer Westchester Hotel, White Plains - White Plains Hotel, White Plains - Anton Meadows, Yaphank - Quality Suites, Yorktown - Yorktown Motor Lodge, Yorktown Heights North Carolina - Days Inn - Central, Asheville - Holiday Inn - Airport, Asheville - Holiday Inn - Tunnel, Asheville - Inn on the Plaza, Asheville - Sheraton Inn, Asheville - Days Inn, Ashville - Masters Economy Inn - Rocky Mount, Battlebro - Days Inn, Blowing Rock - All-Suite Hotel-Proposed, Boone - Residence Inn-Proposed, Cary - Carolina Inn, Chapel Hill - Hilton-Proposed, Chapel Hill - Charlotte Registry Hotel-Per Diem, Charlotte - Compri Hotel-Proposed, Charlotte - Courtyard by Marriott, Charlotte - Days Inn, Charlotte - Days Inn-Uptown, Charlotte - Fairfield Inn, Charlotte - Howard Johnson, Charlotte - Howard Johnson Lodge, Charlotte - Knights Inn, Charlotte - Manger Motor Inn, Charlotte - Marriott City Center, Charlotte - Marriott Hotel-Independence Center, Charlotte - Masters Economy Inn - Charlotte No, Charlotte - Masters Economy Inn - Merchandise, Charlotte - Queen City Motel, Charlotte - Residence Inn, Charlotte - Residence Inn-North, Charlotte - Resistry Hotel, Charlotte - Royce Suite Hotel, Charlotte - Sheraton Inn, Charlotte - Conference Center, Clemmons - Sheraton Motel, Dunn - Best Western, Durham - Cricket Inn, Durham - Days Inn, Durham - Dutch Village Inn, Durham - Fairfield Inn, Durham - Holiday Inn-West, Durham - Motel 6, Durham - Sheraton-University Center, Durham - The Duke Inn, Durham - Days Inn, Fayetteville - Fairfield Inn, Fayetteville - Holiday Inn, Fayetteville - Hotel-Proposed, Fayetteville - Knights Inn, Fayetteville - Goldsboro Motel, Goldsboro - Courtyard by Marriott, Greensboro - Days Inn, Greensboro - Embassy Suites, Greensboro - Fairfield Inn, Greensboro - Hilton, Greensboro - Marriott Hotel, Greensboro - Residence Inn, Greensboro - Sheraton Greensboro, Greensboro - Hotel-Proposed, Greenville - Radisson Hotel, High Point - Days Inn, Lumberton - Maggie Valley Country Club, Maggie Valley - Courtyard by Marriott, Raleigh - Fairfield Inn, Raleigh - Hampton Inn, Raleigh - Hilton, Raleigh - Holiday Inn-Downtown, Raleigh - Marriott Hotel-RTP, Raleigh - Raleigh Radisson, Raleigh - Residence Inn, Raleigh - Holiday Inn - Airport, Research Triangle Park - Howard Johnson, Roanoke Rapids - Sheraton Inn, Rocky Mount - Days Inn, Rocky Mountain - Fairfield Inn, Rocky Mountain - Motel 6, Rocky Mountain - Days Inn, Rowland - Sheraton Motel, Selma - Masters Economy Inn, Smithfield - Holiday Inn, Southern Pines - Fairfield Inn, Wilmington - Hilton, Winston/Salem - Holiday Inn, Winston/Salem - Winston Plaza Hotel, Winston/Salem North Dakota - Holiday Inn, Bismark - Radisson Inn, Bismark - Super 8, Bismark - Ramada Hotel, Fargo - Ramada Inn-Proposed, Fargo - Super 8, Grand Forks - Super 8, Minot Ohio - Holiday Inn-Cascade, Akron - Ramada Inn, Akron - Residence Inn, Akron - Aurora Inn and Pine Lake Trout Club, Aurora - Sheraton Inn, Aurora - Woodlands Inn, Aurora - Courtyard by Marriott, Blue Ash - Embassy Suites, Blue Ash - Residence Inn-Proposed, Blue Ash - Best Western, Cambridge - Days Inn, Cambridge - Hilton Hotel, Canton - Super 8, Canton - Best Western Northeast, Cincinnati - Carousel Inn, Cincinnati - Cincinnati Hotel, Cincinnati - Clarion Hotel, Cincinnati - Days Inn, Cincinnati - Embassy Suites-Proposed, Cincinnati - Holiday Inn-Downtown, Cincinnati - Holiday Inn-Eastgate, Cincinnati - Holiday Inn-Northeast, Cincinnati - Holiday Inn-Riverfront, Cincinnati - Holiday Inn-South, Cincinnati - Hotel-Airport-Proposed, Cincinnati - Howard Johnson, Cincinnati - Hyatt, Cincinnati - Knights Inn, Cincinnati - KOA Campground, Cincinnati - Marriott Inn, Cincinnati - Netherland Hilton, Cincinnati - Omni Netherland Plaza, Cincinnati - Proposed Hotel, Cincinnati - Radisson Inn, Cincinnati - Ramada Inn, Cincinnati - Residence Inn, Cincinnati - Residence Inn-North, Cincinnati - Sheraton Inn-Proposed, Cincinnati - Treadway Inn, Cincinnati - Vernon Manor, Cincinnati - AmeriSuite Hotel-Proposed, Cleveland - Downtown Hotel-Proposed, Cleveland - Fairfield Inn-Brook Park, Cleveland - Fairfield Inn-West, Cleveland - Holiday Inn-Airport, Cleveland - Holiday Inn-Lakeside, Cleveland - Hyatt Hotel-Proposed, Cleveland - Marriott Hotel, Cleveland - Sheraton City Center, Cleveland - Sheraton Hopkins, Cleveland - AmeriSuite - Proposed, Columbus - Embassy Suites, Columbus - Fairfield Inn-North, Columbus - Fairfield Inn-West, Columbus - Hilton Inn, Columbus - Holiday Inn-Airport, Columbus - Holiday Inn-City Center, Columbus - Holiday Inn-Worthington, Columbus - Hotel-Proposed, Columbus - Howard Johnson Hotel, Columbus - Howard Johnson-East, Columbus - Howard Johnson-West, Columbus - Knights Inn-West, Columbus - Marriott Hotel, Columbus - Nationwide Hotel, Columbus - Residence Inn-North, Columbus - Sheraton Plaza Hotel, Columbus - Sheraton-North, Columbus - Union Plaza Hotel-Steeplechase, Columbus - University Inn, Columbus - Woodfin Hotel, Columbus - Courtyard by Marriott, Crosswoods - Courtyard by Marriott, Dayton - Daytonian Hilton, Dayton - Fairfield Inn, Dayton - Hope Hotel & Conference Center, Dayton - Knights Inn-North, Dayton - Marriott Hotel, Dayton - Motel 6, Dayton - Ramada Inn, Dayton - Residence Inn-North, Dayton - Residence Inn By Marriott, Dayton South - Courtyard by Marriott, Dublin - Woodfin Suites, Dublin - East Liverpool Motor Lodge, East Liverpool - Howard Johnson, Euclid - Ramada Inn, Fairlawn - Hampton Inn, Independence - Howard Johnson, Lima - Ramada Inn, Lima - Best Western, Mansfield - Holiday Inn, Marietta - Lafayette Hotel, Marietta - Holiday Inn, Middletown - Howard Johnson, Middletown - Regal 8 Inn, Middletown - Sheraton-Proposed, Milford - Super 8, Montrose - Ramada Inn, Sandusky - Days Inn, Sharonville - Holiday Inn-Cincinnati North, Sharonville - Super 8, St. Clairsville - Holiday Inn, Strongsville - Balhalla Hotel, Toledo - Courtyard by Marriott, Toledo - Fairfield Inn-Airport, Toledo - Hilton at the Medical College, Toledo - Hilton Hotel, Toledo - Holiday Inn, Toledo - Knights Inn-West, Toledo - Marriott Portside Hotel, Toledo - Radisson Hotel, Toledo - Sofitel, Toledo - Hampton Inn-Proposed, Wickliffe - Holiday Inn, Youngstown - Hotel-Proposed, Youngstown - Sheraton-Proposed, Youngstown Oklahoma - Fountainhead Resort, Mcintosh County - Residence at the Trails Inn, Norman - Suit Hotel, Norman - Courtyard by Marriott, Oklahoma City - Embassy Suites, Oklahoma City - Holiday Inn, Oklahoma City - Lexington Hotel Suites, Oklahoma City - Lincoln Plaza Hotel, Oklahoma City - Marriott Hotel, Oklahoma City - Meridien Plaza, Oklahoma City - Sheraton Hotel, Oklahoma City - Arrowhead Resort, Pittsburgh County - Camelot Hotel, Tulsa - Doubletree Hotel, Tulsa - Former Holiday Inn, Tulsa - Former Holiday Inn-Downtown, Tulsa - Holiday Inn, Tulsa - Holiday Inn-Convention Center, Tulsa - La Quinta Inn, Tulsa - Marriott Hotel, Tulsa - Mayo Hotel, Tulsa - Residence Inn, Tulsa - Westin Hotel, Tulsa Oregon - Inn At Face Rock, Bandon - Courtyard by Marriott, Beaverton - Red Lion Motel, Bend - Sunriver Lodge and Resort, Bend - Econolodge Motel, Eugene - Valley River Inn, Eugene - Residence Inn Portland-South, Lake Oswego - Big Creek Resort-US Highway 101, Lane County - Embassy Suites, Portland - Holiday Inn Crowne Plaza - Proposed, Portland - Holiday Inn-Airport, Portland - Holiday Inn-South, Portland - Proposed Sheraton Suites, Portland - Red Lion - Jantzen Beach, Portland - Red Lion Inn-Lloyd Center, Portland - Red Lion Inn-Portland Center, Portland - Residence Inn - Proposed, Portland - Vintage Plaza Hotel, Portland - Wells Building, Portland - Execulodge Motel, Salem - Oregon Capital Inn, Salem - Springfield Red Lion Inn, Springfield - Sunriver Resort, Sunriver Pennsylvania - Allentown Hilton Hotel, Allentown - Holiday Inn, Allentown - Proposed Microtel, Allentown - Quality Inn, Allentown - Bedford Springs Hotel, Bedford - Compri Hotel-Proposed, Bensalem - Days Inn-Proposed, Bensalem - Holiday Inn, Bensalem - Residence Inn By Marriott, Berwyn - Econolodge, Bristol - Days Inn, Brookville - Buck Hill Falls Inn, Buck Hill Falls - Howard Johnson, Butler - Holiday Inn, Chambersburg - Days Inn, Clarion - Embassy Suites, Coraopolis - Hydeholde Country House-Proposed, Coraopolis - Days Inn, Danville - Holiday Inn, Dubois - Lafayette Inn-Proposed, Easton - Howard Johnson Hotel, Erie - Ramada Inn, Erie - Holiday Inn, Essington - Quality Suites-Proposed, Essington - Super 8-Proposed, Essington - Howard Johnson, Gibsonia - Compri Hotel-Proposed, Harrisburg - Holiday Inn, Harrisburg - Marriott Hotel, Harrisburg - Penn Harris Inn, Harrisburg - Sheraton Inn, Harrisburg - Super 8-Proposed, Harrisburg - Holiday Inn, Hazleton - Super 8-Proposed, Hazleton - Plaza Valley Forge Hotel, King of Prussia - Radisson Hotel, King of Prussia - Sheraton Hotel, King of Prussia - Valley Forge Complex, King of Prussia - Valley Forge Hilton, King of Prussia - Motel-Proposed, Lake Ariel - Days Inn, Lancaster - Holiday Inn-Route 30E, Lancaster - Holiday Inn-Route 501, Lancaster - Sheraton Lancaster Golf Resort, Lancaster - Super 8-Proposed, Lancaster - Holiday Inn, Lionville - Hilton-Great Valley, Malvern - Summerfield Suite-Proposed, Malvern - Days Inn, Meadville - Hilton Inn, Monroeville - Holiday Inn-West, Monroeville - Economy Hotel, Montgomery Township - Holiday Inn, New Hope - Treadway Inn, Newport - Residence Inn-Proposed, Paoli - Conference Center-Proposed, Penn State - Barclay Hotel, Philadelphia - Bellevue, Philadelphia - Courtyard by Marriott-Devon, Philadelphia - Courtyard-Willow Grove, Philadelphia - Days Inn-Airport, Philadelphia - Econo Lodge-Franklin Towne, Philadelphia - Essex Hotel, Philadelphia - Franklin Motor Inn, Philadelphia - Franklin Plaza Hotel, Philadelphia - Guest Quarters Hotel, Philadelphia - Hampton Inn-Proposed, Philadelphia - Health Club-Proposed, Philadelphia - Hilton Inn, Philadelphia - Hilton Inn-Northeast, Philadelphia - Holiday Inn-City Center, Philadelphia - Holiday Inn-City Line, Philadelphia - Hub Motor Inn, Philadelphia - Hyatt-Proposed, Philadelphia - Marriott Hotel, Philadelphia - Marriott Hotel-Airport, Philadelphia - Omni Philadelphia, Philadelphia - Penn Center Inn, Philadelphia - Quality Inn-Center City, Philadelphia - Residence Inn-Proposed, Philadelphia - Rittenhouse Hotel, Philadelphia - Treadway Mohawk, Philadelphia - Treadway Roosevelt, Philadelphia - Residence Inn, Philadelphia/Berwyn - Clubhouse Inn, Pittsburgh - Courtyard by Marriott, Pittsburgh - Hampton Inn at Playhouse Square, Pittsburgh - Hilton Hotel, Pittsburgh - Holiday Inn-Greentree, Pittsburgh - Holiday Inn-North, Pittsburgh - Holiday Inn-Parkway-East, Pittsburgh - Holiday Inn-Parkway-West, Pittsburgh - Hotel-Proposed, Pittsburgh - Howard Johnson Hotel, Pittsburgh - Marriott Hotel, Pittsburgh - Marriott-Airport, Pittsburgh - Motel 6, Pittsburgh - Quality Inn, Pittsburgh - Royce Hotel-Airport, Pittsburgh - U.S.S. Hotel-Proposed, Pittsburgh - Westin William Penn, Pittsburgh - Courtyard By Marriott, Pittsburgh Airport - Holiday Inn, Reading - Sheraton Hotel, Reading - Hilton at Lackawanna Station, Scranton - Hilton Hotel, Scranton - Sheraton Inn, Stroudsburg - HoJo Inn, Tannersville - Hilton-Northeast, Trevose - Compri Hotel-Proposed, Valley Forge - Courtyard by Marriott, Valley Forge - Holiday Inn-Meadowlands, Washington - Holiday Inn, Wilkes-Barre - Days Inn-Proposed, Williamsport - Hotel-Proposed, Williamsport - Hampton Inn - Proposed, Willow Grove - Holiday Inn-Market Street, York - Holiday Inn-Route 30 and I-83, York - Ramada Inn, York - Super 8-Proposed, York Rhode Island - Cresthil-Proposed, Lincoln - Courtyard by Marriott, Newport - Vanderbilt Hotel-Convention Center, Newport - Quality Inn, North Kingston - Biltmore Plaza, Providence - Convention Center Hotel-Proposed, Providence - Holiday Inn Providence - Downtown, Providence - Hotel-Proposed, Providence - Marriott Hotel, Providence - Sheraton-Airport, Providence - Susse Chalet, Smithfield - Howard Johnson, Warwick - Residence Inn-Proposed, Warwick - Susse Chalet, Warwick South Carolina - Quality Inn Motel, Anderson - Super 8, Anderson - Budget Hotel - Proposed, Charleston - Charleston Center Hotel-Proposed, Charleston - Cooper River Inn, Charleston - Days Inn, Charleston - Francis Marion Hotel, Charleston - Hampton Inn-Proposed, Charleston - Hawthorne Suites Hotel, Charleston - Holiday Inn, Charleston - Holiday Inn-Airport, Charleston - Holiday Inn-Riverview, Charleston - Masters Economy Inn - Mt. Pleasant, Charleston - Masters Economy Inn - Rivers Ave, Charleston - Middleton Inn, Charleston - Omni Charleston, Charleston - Quality Inn, Charleston - Trusthouse Forte, Charleston - Courtyard by Marriott, Columbia - Courtyard by Marriott-Northeast, Columbia - Courtyard by Marriott-Northwest, Columbia - Embassy Suites, Columbia - Marriott Hotel, Columbia - Masters Economy Inn - I-26, Columbia - Masters Economy Inn - Knox Abbot, Columbia - Motel 6, Columbia - Residence Inn, Columbia - Coral Beach Hotel, Coral Beach - Days Inn, Dillon - Save Inn, Fairplay - Fairfield Inn, Florence - Holiday Inn, Florence - Days Inn, Gaffney - Courtyard by Marriott, Greenville - Fairfield Inn, Greenville - Greenville Hilton Hotel, Greenville - Ramada Inn, Greenville - Super 8, Greenwood - Days Inn, Hardeeville - Fairfield Inn, Hilton Head - Hilton Head Inn, Hilton Head - Holiday Inn, Hilton Head - Inter-Continental Hotel, Hilton Head - Islander Inn, Hilton Head - Quality Suites-Proposed, Hilton Head - Residence Inn-Proposed, Hilton Head - Sheraton Inn, Hilton Head - PGA East Resort-Proposed, Kiawah Island - Save Inn, Lake Hartwell - Days Inn, Mt. Pleasant - Coral Beach Hotel, Myrtle Beach - Radisson Hotel, Myrtle Beach - Best Western Inn, North Charleston - Budget Hotel-Proposed, North Charleston - Days Inn, North Charleston - Northwoods Atrium Inn, North Charleston - Days Inn, Santee - Holiday Inn-West, Spartanburg - Howard Johnson, Spartanburg - Residence Inn, Spartanburg South Dakota - Holiday Inn, Aberdeen - Holiday Inn, Rapid City - Holiday Inn, Sioux Falls - Super 8, Sioux Falls - Holiday Inn, Spearfish Tennessee - Ameri Suite Hotel-Proposed, Brentwood - Courtyard by Marriott, Brentwood - Holiday Inn, Bristol - Holiday Inn-Southeast, Chattanooga - Howard Johnson, Chattanooga - Marriott Hotel, Chattanooga - Motel 6, Chattanooga - Sheraton Inn, Chattanooga - Super 8, Chattanooga - Holiday Inn, Cove Lake - Masters Economy Inn, Dickson - Comfort Inn-Proposed, Elizabethton - Park Vista Hotel, Gatlinburg - Holiday Inn-I-40, Jackson - Holiday Inn, Johnson City - Super 8, Johnson City - Fairfield Inn, Johnson Park - Holiday Inn, Kingsport - Courtsouth Healthclub-North, Knoxville - Courtsouth Healthclub-South, Knoxville - Courtsouth Healthclub-West, Knoxville - Days Inn, Knoxville - Hilton Hotel, Knoxville - Howard Johnson-Westhills, Knoxville - Motel 6, Knoxville - Quality Inn, Knoxville - Ramada Inn-West, Knoxville - Rodeway Inn, Knoxville - Courtyard by Marriott, Memphis - Courtyard by Marriott-Airport, Memphis - Holiday Inn - Crowne Plaza, Memphis - Holiday Inn-East, Memphis - Holiday Inn-East Poplar, Memphis - Holiday Inn-I-40-Sycamore View, Memphis - Holiday Inn-Memphis Int'l Airport, Memphis - Hyatt Regency, Memphis - Lexington Hotel Suites, Memphis - Motel 6, Memphis - Omni Hotel, Memphis - Proposed Fairfield Inn, Memphis - Residence Inn, Memphis - La Quinta Inn, Memphis - Airport - Brown County Inn, Nashville - Capital Mall Conv. Center-Proposed, Nashville - Clarion Maxwell House, Nashville - Courtyard by Marriott-Airport, Nashville - Days Inn, Nashville - Doubletree Hotel, Nashville - Grosvenor, Nashville - Hampton Inn, Nashville - Holiday Inn Crowne Plaza, Nashville - Holiday Inn Express, Nashville - Holiday Inn-Briley Parkway, Nashville - Marriott Hotel, Nashville - Nashville Union Station, Nashville - Ramada Inn, Nashville - Sheraton Hotel, Nashville - Sheraton Music City, Nashville - Stouffer Hotel, Nashville - Super 8, Nashville - Union Station Hotel, Nashville - AmeriSuite, Oakridge - Holiday Inn, Oakridge - Super 8-Proposed, Union City Texas - Harvey Hotel, Addison - Days Inn, Amarillo - Motel 6, Amarillo - Radisson Hotel-Proposed, Amarillo - Super 8 Motel, Amarillo - La Quinta Inn, Amarillo - Airport - Courtyard by Marriott, Arlington - Hilton Hotel, Arlington - Holiday Inn, Arlington - Lexington Suites Hotel, Arlington - Compri Hotel-Proposed, Austin - Driskill Hotel, Austin - Embassy Suites-Austin Town Lake, Austin - Embassy Suites-North, Austin - Fairfield North, Austin - Four Seasons Hotel, Austin - Holiday Inn, Austin - Holiday Inn-Austin Town Lake, Austin - La Quinta Inn, Austin - Marriott Hotel, Austin - Proposed Fairfield Inn, Austin - Quality Inn, Austin - Residence South, Austin - La Quinta Inn, Austin - Ben White - Holiday Inn Airport, Austins Cities - Holiday Inn, Bay Town - Hilton Hotel, Beaumont - Holiday Inn, Beaumont - Courtyard by Marriott, Bedford - Holiday Inn, Brownsville - La Quinta Inn, Brownsville - Hilton Hotel, College Station - Ramada Inn, College Station - Holiday Inn, Conroe - Corpus Christi Hotel-Airport, Corpus Christi - Days Inn, Corpus Christi - Hilton - Proposed, Corpus Christi - Holiday Inn, Corpus Christi - Holiday Inn-Airport, Corpus Christi - La Quinta Inn, Corpus Christi - North - La Quinta Inn, Corpus Christi - South - Allstar Inn, Dallas - Ambassador Plaza Hotel, Dallas - Arlington Hilton, Dallas - Bradford Plaza Hotel, Dallas - Bristol Suites, Dallas - Convention Center Hotel-Proposed, Dallas - Courtyard by Marriott, Dallas - Courtyard by Marriott-Northeast, Dallas - Courtyard by Marriott-Plano, Dallas - Courtyard by Marriott-Stemmons, Dallas - Dallas Grand Hotel, Dallas - Doubletree Inn, Dallas - Embassy Suites, Dallas - Fairmont Hotel, Dallas - Harvey Hotel, Dallas - Hilltop, Dallas - Hilton Inn-LBJ, Dallas - Hilton-Arlington, Dallas - Holiday Inn - North, Dallas - Holiday Inn Crowne Plaza, Dallas - Holiday Inn-Brook Hollow, Dallas - Holiday Inn-South, Dallas - Houstonian Hotel, Dallas - Howard Johnson-East, Dallas - Lexington Hotel Suites, Dallas - Loews Anatole Hotel, Dallas - Marriott Hotel-Airport, Dallas - Marriott-Park Central, Dallas - Marriott-Quorum, Dallas - Melrose Hotel, Dallas - Motel 6, Dallas - Omni Melrose Hotel, Dallas - Park Plaza, Dallas - Propsed Hotel - DFW, Dallas - Ramada Inn Convention Center, Dallas - Ramada-Market Center, Dallas - Registry Hotel, Dallas - Residence Inn-Market Center, Dallas - Sheraton Grand, Dallas - Southland Center Hotel, Dallas - Statler Hilton Hotel, Dallas - Summit Hotel, Dallas - Westin Galleria Hotel, Dallas - La Quinta Inn, Dallas - DFW - La Quinta Inn, Dallas - North Park - La Quinta Inn, Dallas - Plano - La Quinta Inn, Dallas - Richardson - Allstar Inn, El Paso - Hilton Inn-Airport, El Paso - La Quinta Hotel-Airport, El Paso - Rodeway Inn, El Paso - Travelers Inn, El Paso - Westin Paso del Norte, El Paso - La Quinta Inn, El Paso - Lomaland - Allstar Inn, Euless - La Quinta Inn, Euless - Allstar Inn, Fort Worth - Courtyard by Marriott, Fort Worth - Days Inn Downtown, Fort Worth - Hilton Hotel, Fort Worth - Holiday Inn-North, Fort Worth - Holiday Inn-South, Fort Worth - Lexington Suites Hotel, Fort Worth - Metro Center Hotel, Fort Worth - Radisson Plaza Hotel, Fort Worth - Residence Inn, Fort Worth - La Quinta Inn, Fort Worth - East - Holiday Inn, Harlingen - La Quinta Inn, HI-LA Marque - Crowne Plaza-Houston Park, Houston - Days Inn, Houston - Days Inn-Hobby, Houston - Doubletree Hotel, Houston - Embassy Suites, Houston - Galleria Gardens, Houston - Harvest House Hotel, Houston - Harvey Hotel Medical Center, Houston - Hilton Inn-West, Houston - Holiday Inn I-10 East, Houston - Holiday Inn-Downtown, Houston - Holiday Inn-East, Houston - Holiday Inn-Greenway Plaza, Houston - Holiday Inn-Hobby, Houston - Holiday Inn-Medical Center, Houston - Holiday Inn-NASA, Houston - Holiday Inn-North, Houston - Holiday Inn-Northwest, Houston - Holiday Inn-Southwest, Houston - Host Hotel International, Houston - Hotel Meridien, Houston - Hotel-Proposed, Houston - Houston House, Houston - Houston Medical Center, Houston - Houston Park 10 Crowne Plaza, Houston - La Quinta Hotel-Astrodome, Houston - La Quinta Hotel-Baytown, Houston - La Quinta Hotel-CY Fair, Houston - La Quinta Hotel-Hobby, Houston - La Quinta Inn-Stafford, Houston - Lexington Hotel Suites, Houston - Marriott Astrodome, Houston - Marriott Hotel, Houston - Marriott Hotel-Medical Center, Houston - Marriott-Airport, Houston - Motel 6, Houston - Remington, Houston - Residence Inn, Houston - Rodeway Inn, Houston - Rodeway Inn-Hobby, Houston - Shamrock Hilton Hotel, Houston - Sheraton Hotel, Houston - Sheraton Houston House, Houston - Sheraton Houston Place Hotel, Houston - Sheraton Town and Country, Houston - Sofitel, Houston - Stouffer Greenway Plaza, Houston - Suite Hotel-Proposed, Houston - Whitehall, Houston - Whitehall Hotel Conversion to HI, Houston - La Quinta Inn, Houston - Sharpstown - La Quinta Inn, Houston - East - La Quinta Inn, Houston - Loop 1960 - La Quinta Inn, Houston - Northwest - La Quinta Inn, Houston- SW Freeway - Holiday Inn, Huntsville - Harvey Hotel DFW, Irvine - Allstar Inn, Irving - Hampton Inn, Irving - Hampton Inn-Proposed, Irving - Harvey Hotel-D/FW Airport, Irving - Holiday Inn-Texas Stadium, Irving - Marriott Hotel, Irving - Holiday Inn, Kingsville - Del Lago Hotel, Lake Conroe - Hilton Inn, Laredo - La Posada, Laredo - Courtyard by Marriott, Las Colinas - La Quinta Inn, Longview - Hilton Inn, Lubbock - Holiday Inn, Lubbock - Residence Inn, Lubbock - La Quinta Inn, Midland - Holiday Inn, New Braunfels - All Star Inn, North Richland Hills - La Quinta Inn, Odessa - Holiday Inn, Orange - Holiday Inn, Paris - Plano Harvey Hotel, Plano - La Quinta Inn, Round Rock - Sheraton Inn, San Angelo - Coachman Inn-Proposed, San Antonio - Courtyard by Marriott-Downtown, San Antonio - Courtyard by Marriott-Medical Ctr., San Antonio - Crockett Hotel, San Antonio - Days Inn, San Antonio - Fairfield - North, San Antonio - Gunter Hotel, San Antonio - Holiday Inn-Airport, San Antonio - Holiday Inn-Market Square, San Antonio - Holiday Inn-North, San Antonio - Holiday Inn-Northwest, San Antonio - Holiday Inn-Riverwalk, San Antonio - La Quinta Hotel-Ingram, San Antonio - La Quinta Hotel-Lackland, San Antonio - La Quinta Hotel-Toepperwein, San Antonio - Lexington Hotel Suites, San Antonio - Marriott Hotel-Proposed, San Antonio - Marriott Inn-North, San Antonio - Proposed Fairfield Inn, San Antonio - La Quinta Inn, San Antonio - Windsor - La Quinta Inn, San Antonio - Wurzbach - Holiday Inn, San Marcos - La Quinta Inn, SAT-Toepperwein - Sheraton Hotel, South Padre Island - La Quinta Inn, Tyler - Sheraton, Tyler - Sheraton Inn, Tyler - Traveler's Choice Inn, Tyler - Hilton Hotel, Waco - Gateway Inn, Wichita Falls - Hilton Hotel, Wichita Falls Utah - Mount Holly Ski Resort, Beaver - Hotel-Proposed, Brigham City - Motel-Proposed, Cedar City - Proposed Mayflower Hotel, Deer Valley - Stein Eriksen Lodge, Deer Valley - Deer Valley Resort, Park City - Omni Yarrow, Park City - Prospector Square Resort, Park City - Yarrow Resort, Park City - Seven Peaks Resort and Hotel, Provo - Comfort Inn, Salt Lake City - Doubletree, Salt Lake City - Hilton Hotel-Airport, Salt Lake City - Holiday Inn, Salt Lake City - Holiday Inn-Salt Palace, Salt Lake City - Hotel Utah, Salt Lake City - Hotel-Proposed, Salt Lake City - La Quinta Inn, Salt Lake City - Nendels Inn, Salt Lake City - New Grande Hotel, Salt Lake City - Red Lion Hotel, Salt Lake City - Sheraton Hotel, Salt Lake City - Super 8, Salt Lake City - University Park Hotel (Desktop Rev), Salt Lake City - Ramada Inn-Proposed, Sandy Vermont - Ramada Inn, Bennington - Bolton Valley Corporation, Bolton Valley - Quality Inn, Brattleboro - Radisson Hotel, Burlington - Smugglers Notch, Cambridge - Inn-Proposed, Essex - Cascade Lodge, Killington - Inn of the Six Mountains, Killington - Mountain Inn, Killington - Equinox Hotel, Manchester - Howard Johnson Inn, Rutland - Quality Inn, Stowe - Conference Center-Proposed, Stratton Mountain - Sugarbush Inn, Sugarbush - Susse Chalet, Williston Virginia - Comfort Inn, Abingdon - Best Western, Alexandria - Comfort Inn, Alexandria - Compri Hotel-Proposed, Alexandria - Embassy Suites, Alexandria - Howard Johnson, Alexandria - Marriott Suites, Alexandria - Ramada Inn, Alexandria - Best Western, Arlington - Gateway Marriott, Arlington - Hyatt Arlington Hotel, Arlington - Hyatt Regency, Arlington - Key Bridge Marriott, Arlington - Marriott Hotel, Arlington - Sheraton Crystal City Hotel, Arlington - Sheraton National Hotel, Arlington - Stouffer Concourse Hotel, Arlington - Mountain Lake Hotel, Blacksburg - Holiday Inn, Bristol - Howard Johnson, Bristol - Days Inn, Carmel Church - Westfields International, Chantilly - Boar's Head Inn, Charlottesville - Cavalier Inn, Charlottesville - Courtyard by Marriott, Charlottesville - Hilton-University, Charlottesville - Holiday Inn-North, Charlottesville - Omni Charlottesville, Charlottesville - Radisson-Proposed, Charlottesville - Super 8, Charlottesville - Days Inn, Chester - Howard Johnson, Chester - Days Inn, Colonial Heights - Holiday Inn, Covington - Embassy Suites, Crystal City - Holiday Inn Crowne Plaza, Crystal City - Hyatt Hotel, Crystal City - Marriott Crystal Gateway Hotel, Crystal City - Comfort Inn-Proposed, Dahlgren - Days Inn, Emporia - Courtyard by Marriott, Fairfax - Embassy Suites, Fairfax - Neighborhood Suites-Proposed, Fairfax - Hampton Inn-Proposed, Fairfax City - Westfields International, Fairfax County - Marriott Hotel, Fairview - Econo Lodge, Farmingville - Comfort Inn-Proposed, Farmville - Comfort Inn, Frederick County - Motel 6, Fredericksburg - Courtyard by Marriott, Hampton - Days Inn, Hampton - Fairfield Inn, Hampton - Courtyard by Marriott, Herndon - Embassy Suites Hotel, Herndon - Ramada Renaissance and Health Club, Herndon - Residence Inn-Proposed, Herndon - Worldgate Marriott Hotel, Herndon - Hotel-Proposed, Hopewell - Keswick Inn, Keswick - Holiday Inn, Lexington - Radisson Hotel, Lynchburg - Courtyard by Marriott, Manassas - Holiday Inn, Marion - Hilton, McLean - Days Inn, Norfolk - Marriott Waterside Hotel, Norfolk - Omni Hotel, Norfolk - Waterfront Hotel - Proposed, Norfolk - 135-Suite Hotel-Proposed, Portsmouth - Waterfront Suite Hotel-Proposed, Portsmouth - Comfort Inn, Princeton - Comfort Inn, Pulaski County - Embassy Suites Hotel, Reston - Hyatt Hotel, Reston - Best Western Kings Quarters, Richmond - Courtyard by Marriott, Richmond - Embassy Suites Hotel, Richmond - Hampton Inn, Richmond - Holiday Inn, Richmond - Howard Johnson Lodge, Richmond - Hyatt House Hotel, Richmond - La Quinta Hotel, Richmond - Marriott Hotel, Richmond - Omni Richmond, Richmond - Radisson Hotel, Richmond - Ramada Renaissance Hotel, Richmond - Residence Inn, Richmond - Days Inn, Richmond (Broad) - Days Inn, Richmond (Byrd) - Holiday Inn, Roanoke - Holiday Inn - Airport, Roanoke - Holiday Inn - Civic Center, Roanoke - Holiday Inn - South, Roanoke - Hotel Roanoke, Roanoke - Howard Johnson, Roanoke - Marriott - Roanoke Airport, Roanoke - Marriott Hotel, Roanoke - Holiday Inn, Salem - Super 8, South Hill - Days Inn, Springfield - Hilton, Springfield - Holiday Inn, Staunton - Stonewall Jackson Hotel, Staunton - Hampton Inn - Proposed, Tyson's Corner - Embassy Suites, Tysons Corner - Marriott Hotel, Tysons Corner - Residence Inn, Tysons Corner - Ritz Carlton-Proposed, Tysons Corner - Courtyard by Marriott, Virginia Beach - Courtyard by Marriott-Lynnhaven, Virginia Beach - Fairfield Inn, Virginia Beach - Hotel-Proposed, Virginia Beach - Pavilion Tower Hotel, Virginia Beach - Ramada Inn - Oceanside, Virginia Beach - International Conference Center, Westfields - Howard Johnson, Wheeling - Fort Magruder Inn, Williamsburg - Governor's Inn, Williamsburg - Holiday Inn-East, Williamsburg - Holiday Inn-West, Williamsburg - Royce Hotel, Williamsburg - Williamsburg Hilton, Williamsburg - Best Western-Proposed, Wytheville Washington - Bellevue Thunderbird Motor Inn, Bellevue - Embassy Suites, Bellevue - Hampton Inn, Bellevue - La Quinta, Bellevue - Residence Inn Seattle-East, Bellevue - Ramada Inn, Bothell - Rattling Spring Hotel, Harpers Ferry - Motel 6, Issaquah - AmeriSuite, Kent - Homecourt Suite Hotel, Kent - Embassy Suite, Lynnwood - Residence Inn-Seattle North, Lynnwood - Red Lion Inn at Pasco, Pasco - Redmond Motel, Redmond - Hampton Inn, Sea Tac - Holiday Inn Airport, Sea Tac - Thunderbird Inn, Sea Tac - Alexis Hotel, Seattle - Courtyard by Marriott-South Center, Seattle - Doubletree Inn at South Center, Seattle - Doubletree Plaza, Seattle - Hampton Inn-Airport, Seattle - Holiday Inn Crowne Plaza, Seattle - Holiday Inn-Sea Tac, Seattle - La Quinta, Seattle - Lake Union Residence Inn, Seattle - Marriott Hotel-Airport, Seattle - Marriott Sea-Tac Hotel, Seattle - Plaza Park Suites, Seattle - Ramada Inn-Airport, Seattle - Red Lion, Seattle - Stouffer Madison Hotel, Seattle - Travelodge-Proposed, Seattle - Westin Hotel, Seattle - Courtyard by Marriott, Spokane - Gateway Hotel, Spokane - Holiday Inn-West, Spokane - Red Lion Inn, Spokane - Super 8, Spokane - Hilton-Village Green, Tacoma - Hotel-Proposed, Tacoma - Park Shore Inn, Tacoma - Tacoma Sheraton Hotel, Tacoma - Embassy Suites Hotel, Tukwila - Hampton Inn, Tukwila - Residence Inn-Seattle South, Tukwila - Red Lion Quay, Vancouver - Residence Inn-Portland North, Vancouver - Super 8, Wenatchee - Thunderbird Motor Inn, Yakima West Virginia - Comfort Inn-Proposed, Charleston - Holiday Inn, Clarksburg - Holiday Inn, Fairmont - Hotel-Proposed, Harpers Ferry - Holiday Inn, Huntington - Comfort Inn-Proposed, Morgantown - Holiday Inn, Morgantown - Motel-Proposed, Morgantown - Comfort Inn, Princeton - Motel-Proposed, Princeton - Hotel-Proposed, Wheeling - Howard Johnson, Wheeling Wisconsin - Super 8, Ashland - Holiday Inn, Beloit - Embassy Suites Hotel-Proposed, Brookfield - Marriott-Milwaukee, Brookfield - Holiday Inn, Eau Claire - Residence Inn, Glendale - Granada Royale-Proposed, Green Bay - Holiday Inn-Downtown, Green Bay - Residence Inn-Proposed, Green Bay - Super 8, Janesville - Super 8, Kenosha - Playboy Resort, Lake Geneva - Concourse Hotel, Madison - Fairfield Inn, Madison - Hampton Inn - East, Madison - Hampton Inn - West, Madison - Compri Hotel-Proposed, Milwaukee - Embassy Suite, Milwaukee - Fairfield Inn, Milwaukee - Holiday Inn-Airport, Milwaukee - Holiday Inn-West, Milwaukee - Hotel and Conv. Ctr. East-Proposed, Milwaukee - Hyatt Regency, Milwaukee - Marc Plaza, Milwaukee - Marriott Inn, Milwaukee - Omni Suite Hotel-Proposed, Milwaukee - Super 8-Airport, Milwaukee - Olympia Village Resort, Oconomowoc - Scotsland Resort, Oconomowoc - Sheraton, Racine - Claridge Motor Inn, Rhinelander - Super 8, Waukesha - Holiday Inn, Wausau - Mead Inn, Wisconsin Rapids Wyoming - Days Inn, Casper - Flying L. Skytel, Cody - Super 8, Cody - Snow King Resort, Jackson - Super 8, Jackson - Wort Hotel, Jackson - Development-Proposed, Jackson Hole - Colter Bay Village, Moran - Jackson Lake Lodge, Moran - Jenny Lake Lodge, Moran - Best Western-Bel Air, Rawlins - Bridger Inn, Rawlins - La Quinta Inn, Rock Springs Western Europe Belgium - Oostkamp Hotel, Bruges - Proposed Residence Inn, Brussels - SAS Royal Hotel, Brussels Denmark - Proposed Hotel, Copenhagen France - The Miramar, Biarritz - Chateau D'arc en Barroi, Haute-Marne - Le Grand, Paris - Royal Monceau, Paris Germany - Cumberland House, Berlin - Munchen Penta Hotel, Munchen Holland - Carlton - Cannes & Amstel, Amsterdam - The Pulitzer Hotel, Amsterdam Spain - Le Meridien, Barcelona - Princess Sophia, Barcelona - Hotel Los Monteros, Marbella - Incosol Spa & Hotel, Marbella - Proposed Hyatt Resort, Marbella United Kingdom - Copthorne Hotel, Aberdeen - Copthorne Hotel, Birmingham - Hyatt Regency, Birmingham - Holiday Inn, Cambridge - Copthorne Hotel, Cardiff - Great Eastern Hotel, England - Copthorne Hotel, Glasgow - Hanbury Manor Hotel, Hertfordshire - 47 Park Street, London - Bailey's Hotel, London - Basil Street Hotel, London - Basil Street Hotel, Knightsbridge, London - Britannic Tower, London - Chelsea Hotel, London - Chesterfield Hotel, London - Chesterfield Hotel, Mayfair, London - Copthorne Hotels, London - Copthorne Tara Hotel, London - Dorchester Mayfair, London - Executive Hotel, London - Marriott Hotel, London - May Fair, London - Plaza Hotel, London - Proposed Hotel Conversion, London - Proposed Hotel-The City, London - Regent Hotel, London - Regent London Hotel, London - Sheraton Belgravia, London - Sheraton Park Tower, London - St. James Court Hotel, London - The Executive Hotel, London - Windsor Hotel, London - Copthorne Hotel, Manchester - Copthorne Hotel, Newcastle - Copthorne Hotel, Slough/Windsor - Swallow Hotel, Stockton - Copthorne Hotel-Effingham Park, Sussex - Copthorne Hotel-Gatwick, Sussex Middle East and North Africa Egypt - Sheraton Anni Cruise Ship, - Sheraton Aton Cruise Ship, - Sheraton Hotp Cruise Ship, - Sheraton Tut Cruise ship, - Aswan Oberol Hotel, Aswan - Cairo Sheraton Hotel, Cairo - Hotel - Proposed, Cairo - Lido Hotel, Cairo - Meridien Hotel, Cairo - Novotel Cairo Airport, Heliopolis, Cairo - Proposed Resort Complex, Hurghada - Luxor Sheraton Hotel, Luxor - Proposed Hotel, Luxor - Fayrouz Village Hotel, Sharm El Sheikh, Sinai - Coral Village Hotel, Nuweiba, Sinai - Hotel - Proposed, Dahab, Sinai - Hotel - Proposed, St. Catherine, Sinai Greece - Athens Hilton & Proposed Hotel, Athens - Caravel Hotel, Athens - Proposed Sargani Hotel & Bungalows, Halkidiki - Rhodes Hotel -Proposed, Rhodes Israel - Proposed Inter-Continental Hotel, Tel Aviv Lebanon - Hotel Market Review, Beruit Morocco - El Minzah Hotel, Tangier Nigeria - Proposed Sheraton Hotel, Port Harcourt Saudi Arabia - Proposed Jeddah Corniche Project, Jeddah Tunisia - Proposed Hotel, Hammamet Turkey - Hotel Conrad, Istanbul Latin America and the Caribbean Bahamas - Eleuthera Joint Venture, Eleuthera - Cape Eleuthera Island Hotel, Eleuthera Island - Eleuthera Joint Venture, Eleuthra - The Montague, Nassau - Paradise Island Hotel, Paradise Island - Resorts Int'l Hotel and Casino, Paradise Island Belize - Journey's End Caribbean Club, Abergris Caye Bermuda - Sonesta Hotel, Bermuda Brazil - Quatro Rodas Hotel, Recife Colombia - Charleston Hotel - Proposed, Barranquilla - Bella Suiza Hotel, Bogota - Hotel & Convention Center -Proposed, Cali - Cartagena Hilton, Cartagena - El Faro de Cartagena Resort Propose, Cartagena - Proposed Indian Sea and Sun Resort, Cartagena - Hotel De Isleno, San Andres Isla - Santamar Hotel, Santa Marta Curacao - Ramada Renaissance Hotel and Casino, Honduras - Inn Of The Sun, Guanaja Jamaica - Holiday Inn-Rose Hall, Montego Bay - Americana Eden II, Ocho Rios Mexico - Posadas de Mexico Hotels, - Americana Condesa Del Mar, Acapulco - Americana El Presidente Hotel, Acapulco - Resort-Proposed, Cabo San Lucas - Palacio Del Margus, Chiconcuac - Omni Hotel, Ixtapa - Fiesta Inn-Proposed, Leon - Karmina Place, Manzanillo - Hotel - Proposed, Mexico City - La Jolla de Mismaloya, Puerta Vallarta Netherland Antilles - Divi Divi Beach Resort, Aruba - Divi Tamarijn Beach Resort, Aruba - Golden Anchor, Bonaire - Resort Hotel-Proposed, Bonaire - Ramada Renaissance Hotel and Casino, Curacao - Cupecoy Beach Club Hotel, St. Maarten - Dawn Beach Hotel, St. Maarten - Dawn Beach Resort, St. Maarten - Mullet Bay Resort, St. Maarten - Oyster Pond Hotel, St. Maarten Puerto Rico - Hyatt Dorado Beach Hotel, Dorado - Hyatt Regency Cerromar Hotel, Dorado - Hotel - Proposed, Fajardo - Hotel Puerto Rico, Fajardo - Westin Resort-Proposed, Palmer - Marriott Resort & Casino-Proposed, Puerto Rico - Carib Inn, San Juan - Dupont Plaza, San Juan - El San Juan Hotel and Casino, San Juan - Howard Johnson Hotel, San Juan - Marriott - Proposed, San Juan - Marriott Update - Proposed, San Juan - Sands Hotel and Casino, San Juan Virgin Islands - Caneel Bay, St. Croix - Carambola Beach Resort, St. Croix - Hotel - Proposed, St. Croix - St. Croix Development, St. Croix - Caneel Bay, St. John - Pineapple Beach Hotel, St. Thomas - Sugar Bay Plantation, St. Thomas - Virgin Grand Hotel, St. Thomas - Virgin Isle Hotel, St. Thomas - Little Dix Bay, Virgin Borda Eastern Europe Croatia - Two Hotels, Dubrovnik Czech Republic - Voronesh Hotel Complex, Brno - Proposed Four Seasons Hotel, Prague Hungary - Proposed Resort Hotel, Babolna - Duna Inter-Continental, Budapest Latvia - Daugava Hotel-Proposed, Riga - Proposed Hotel, Riga Poland - Holiday Inn, Krakow - Marriott Hotel - Proposed, Poznan - Proposed Hotel, Poznan - Radisson Hotel, Szczecin - Bristol Hotel, Warsaw - Holiday Inn, Warsaw - Orbis Joint Venture, Warsaw - Proposed Hotel, Warsaw - Sheraton Hotel - Proposed, Warsaw - Zakopane Resort Complex, Zakopane Russia - Kamiennyi Most Hotel & Business, Moscow - Savoy Hotel, Moscow Asia Korea - Ultrapolis 3000, Seoul Malaysia - UP 3000 Hotel-Proposed, Selangor Singapore - Resort Hotels - Proposed, - Ultrapolis 3000, Singapore West Indies - Proposed Blue Lagoon Resort, St. Martin Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Hospitality Valuation Services Industry Leader Hospitality Valuation Services (HVS) was created in 1980 to satisfy the ever-increasing demand for reliable and well-documented hotel/motel valuations, market studies, and feasibility reports. As the nation's leading real estate appraisal organization devoted exclusively to lodging properties, HVS offers owners, investors, and lenders in-depth valuation and market research expertise. Our professional staff, operating on a worldwide basis with offices in New York, San Francisco, Miami, Boulder, Vancouver, and London, has appraised more than 4,000 hotels and motels in every state and over 32 foreign countries. Each member of Hospitality Valuation Services is well versed in lodging operations. Most have college degrees in hotel administration as well as actual on-the-job hotel experience. Coupled with intense training in real estate appraisal theory and techniques, we are highly qualified to handle the unique characteristics of hostelry valuations. Excellence Through Specialization An important feature of our valuation and feasibility services is specialization. Daily exposure on a global basis to a wide variety of hotel transactions and operating statistics, along with actual buyers and sellers, provides the data to thoroughly document our reports. HVS maintains the industry's largest database of hotel valuation information: o Data on over 4,000 hotel transactions; o Over 3,500 actual financial statements; o Thousands of management contracts, franchise agreements, mortgages, leases, and other similar documents; o Personal contacts at every major hotel company; o Names and addresses of over 10,000 hotel owners, investors, lenders, and operators. Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Innovative research in hotel valuation techniques is set forth in the textbooks we authored for the Appraisal Institute, entitled The Computerized Income Approach to Hotel/Motel Market Studies and Valuations and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations. These publications, along with more than 300 articles, are recognized as the authoritative standard for valuing lodging facilities and performing market feasibility studies. In addition, we have developed Hospitality Valuation Software, a computerized package that assists appraisers and consultants in evaluating market trends and preparing financial forecasts. Full-Service Hotel Consulting With a reputation established by providing highly detailed hotel valuations that are accepted and relied upon by virtually every major hotel owner, lender, and operator, HVS has branched out to offer a full range of consulting services. o HVS Consulting Services: Valuations, market feasibility studies, economic studies, management contract and franchise negotiations, development assistance, and expert testimony. o HVS Executive Search: Recruitment and placement of top-level hotel management personnel. o HVS Eco Services: Environmental audits and assistance in implementing programs including water and energy management, recycling, and green product selection. Provides ECOTEL certifications to environmentally sensitive hotels. o HVS Gaming Services: Specialized market, valuation, and consulting services for casinos and other types of gaming activities. o HEI Hotels: Hotel ownership and management. Long-Term Relationship Hospitality Valuation Services is in business for the long-term. We are dedicated to providing our clients with the highest quality consulting services. Should you require assistance in any areas covered by our expertise, please contact any member of our team at (516) 248-8828. This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. ============= HVS - ------------- INTERNATIONAL ============= ===================================================== ---------------------------- Economic Study and Appraisal ---------------------------- Ramada Plaza Hotel ---------------------------- Woburn, Massachusetts ---------------------------- Prepared by: Hospitality Valuation Services A Division of Hotel Consulting Services, Inc. 372 Willis Avenue Mineola, NY 11501 516-248-8828 Submitted to: Mr. Shirish Godbole President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 [Letterhead of HVS International] January 2, 1997 Mr. Shirish Godbole Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 Re: Ramada Plaza Hotel Woburn, Massachusetts Ref. #9610283 Dear Mr. Godbole: Pursuant to your request, we herewith submit our economic study and appraisal pertaining to the above-captioned property. We have inspected the site and facilities and analyzed the hostelry market conditions in the Middlesex area. Our report was prepared in accordance with, and is subject to, the requirements of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and the Uniform Standards of Professional Practice (USPAP), as provided by the Appraisal Institute. Based on the available data, our analysis, and our experience in the hotel industry, it is our opinion that the market value of the fee simple interest in the subject property described in this report, as of January 1, 1997, is: $6,000,000 SIX MILLION DOLLARS We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings and valuation. The economic study and appraisal is made part hereof, and must remain attached in order for the value opinion set forth to be considered valid. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. Very truly yours, HOSPITALITY VALUATION SERVICES A Division of Hotel Consulting Services, Inc. /s/ Robert Wong Robert Wong Consulting and Valuation Analyst /s/ Anne R. Lloyd-Jones Anne R. Lloyd-Jones, CRE Senior Vice President /s/ Stephen Rushmore Stephen Rushmore, CRE, MAI, CHA President HVS International, Mineola, New York Table of Contents - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table of Contents 1. Executive Summary ......................................... 1 2. Nature of the Assignment .................................. 3 3. Description of the Land, Improvements, Zoning, Taxes and Neighborhood ............................ 7 4. Market Area Analysis ...................................... 24 5. Overview of External Forces Affecting the U.S. Lodging Industry ..................................... 37 6. Lodging Market Supply and Demand Analysis ................. 53 7. Projection of Occupancy and Average Rate .................. 72 8. Highest and Best Use ...................................... 86 9. Approaches to Value ....................................... 88 10. Income Capitalization Approach ............................ 91 11. Sales Comparison Approach ................................. 130 12. Cost Approach ............................................. 138 13. Reconciliation of Value Indications ....................... 144 14. Statement of Assumptions and Limiting Conditions .......... 148 15. Certification ............................................. 151 Addenda Photographs of the Subject Property Photographs of the Competition Legal Description HVS International, Mineola, New York Table of Contents - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Addenda (continued) Synopsis of Franchise and License Agreements Synopsis of Hotel Management Agreement Explanation of the Simultaneous Valuation Formula Qualifications Robert Wong Anne R. Lloyd-Jones, CRE Stephen Rushmore, CRE, MAI, CHA HVS International, Mineola, New York Executive Summary 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 1. Executive Summary Property: Ramada Plaza Hotel Location: 15 Middlesex Canal Park Road Woburn, Massachusetts 01801 Date of Inspection: October 17, 1996 Interest Appraised: Fee simple Date of Value: January 1, 1997 Land Description Area: +/-7.497 acres, or +/-326,555 square feet Zoning: B-I Interstate Business Assessor's Parcel Number: 14-69190-54576-00 Improvements Description Age: Constructed in 1972 Property Type: Full-service Guestrooms: 196 Number of Stories: One and four stories Food and Beverage Facilities: Cafe Fennel and Juliet's Meeting Space: Six rooms, +/-5,330 square feet Parking: 402 surface parking spaces Summary of Value Parameters Highest and Best Use (as if vacant): Transient lodging facility Highest and Best Use (as improved): Transient lodging facility Marketing Period: Six months to one year Number of Years to Stabilize: Four Stabilized Year: 2000 HVS International, Mineola, New York Executive Summary 2 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Valuation Assumptions Mortgage Interest Rate: 9.5% Amortization Period: 20 years Debt Service Constant: 0.111856 Loan-to-Value Ratio: 70% Stabilized Inflation Rate: 3.5% Equity Yield Rate: 22% Terminal Capitalization Rate: 12% Brokerage and Legal Fees: 3% Holding Period: 10 years Calculated Discount Rate: 14.52% Estimates of Value Income Capitalization Approach: $5,970,000 Sales Comparison Approach: $4,800,000 - $7,500,000 Cost Approach (Replacement Cost): $12,600,000 Market Value Conclusion: $6,000,000 Market Value Conclusion per Room: $30,600 HVS International, Mineola, New York Nature of the Assignment 3 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 2. Nature of the Assignment Subject of the Economic Study and Appraisal The subject of the economic study and appraisal is the fee simple interest in a +/-326,555-square-foot (+/-7.497-acre) parcel improved with a 196-room, full-service lodging facility known as the Ramada Plaza Hotel, which opened in 1972. In addition to guestrooms, the subject property contains a restaurant, lounge, 5,330 square feet of meeting and banquet space, an indoor swimming pool, exercise room, and other facilities typically found in a full-service transient lodging facility. The hotel is located at the southwest quadrant of the intersection formed by Main Street (Route 38) and Interstate 95 (Route 128). Municipal jurisdictions governing the property include the City of Woburn, County of Middlesex, and the Commonwealth of Massachusetts. The hotel's civic address is 15 Middlesex Canal Park Road, Woburn, Massachusetts, 01801. Objective of the Economic Study and Appraisal The objective of the economic study and appraisal is to evaluate the supply and demand factors affecting the market for transient accommodations in the Woburn area for the purpose of estimating the market value of the subject property. Market value is defined by the Office of the Comptroller of the Currency (OCC), 12 CFR, Part 34, 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 and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. buyer and seller are typically motivated; 2. both parties are well informed or well advised, and acting in what they consider their own best interests; HVS International, Mineola, New York Nature of the Assignment 4 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 3. a reasonable time is allowed for exposure in the open market; 4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) Use of the Appraisal This appraisal is being prepared for use by Morgan Stanley Mortgage Capital, Inc. in connection with their proposed financing of a package of 17 hotels, including the subject property, which are owned by Ashford Financial Corporation or related entities. The information presented in this report should not be disseminated to the public or third parties without the express written consent of Hospitality Valuation Services. Scope of the Appraisal All information was collected and analyzed by the staff of Hospitality Valuation Services. Data such as historical operating statements, site plans, floor plans, and so forth were supplied by Ashford Financial Corporation and Remington Hotel Company. Unless noted otherwise, we have inspected the competitive lodging facilities and analyzed the sales summarized in this report, and our value conclusion is based on this investigation and analysis. Property Rights Appraised The property rights appraised are the fee simple ownership of the land and improvements, including the furniture, fixtures, and equipment. The fee simple interest is defined as "absolute ownership unencumbered by any other interest or estate subject only to the four powers of government."(2) Although Ashford Financial Corporation currently holds only the leasehold interest in the property, the company plans to exercise a buyout option in the ground lease, which allows it to acquire ownership of the land. According to Ashford Financial Corporation, the buyout will occur prior to the January 1, 1997 date of value of this appraisal. The subject property is appraised as a going concern (i.e., an open and operating facility). Method of Study The methodology used to develop this economic study and appraisal is based on the market research and valuation techniques set forth in the textbooks authored by HVS International for the American Institute of Real (1) Federal Register, Vol. 55, No. 165, August 24, 1990; p. 34696. (2) The Dictionary of Real Estate Appraisal - Second Edition, American Institute of Real Estate Appraisers, Chicago, IL, 1989, p. 120. HVS International, Mineola, New York Nature of the Assignment 5 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Estate Appraisers and the Appraisal Institute, entitled The Valuation of Hotels and Motels,(1) Hotels, Motels and Restaurants: Valuations and Market Studies,(2) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations,(3) and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations.(4) The appraisal will consider the three standard approaches to value: income capitalization, sales comparison, and cost. Because lodging facilities are income-producing properties that are normally bought and sold on the basis of capitalization of their anticipated stabilized earning power, the greatest weight is given to the value indicated by the income capitalization approach. We find that most hotel investors employ a similar procedure in formulating their purchase decisions, and thus the income capitalization approach most closely reflects the rationale of typical buyers. When appropriate, the sales comparison and cost approaches are used to test the reasonableness of the results indicated by the income capitalization approach. Ownership, Franchise, and Management History and Assumptions A photocopy of the subject property's legal description, which was provided by Ashford Financial Corporation, is presented in the Addenda to this report; the appraisers assume no responsibility regarding the accuracy of this legal description. According to records maintained at the City of Woburn Tax Assessor's Office and information provided by Ashford Financial Corporation, the subject property's land is owned by Mystic Development Corporation, formerly known as Mystic Disposal Corporation. The leasehold interest in the property was acquired by Ramada Assured Income Associates, L.P., which is an investment partnership created and controlled by Lehman Brothers, in 1987 for a sales price of $7,537,000 from the Ramada Hotel Operating Company, which built the hotel in 1972. (1) The Valuation of Hotels and Motels, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1978. (2) Hotels, Motels and Restaurants: Valuations and Market Studies, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1983. (3) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1990. (4) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992. HVS International, Mineola, New York Nature of the Assignment 6 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= In October, 1994, Ashford Financial Corporation acquired the leasehold interest of the subject property as part of a package of six hotels from Ramada Assured Income Associates, L.P. The total price for the portfolio was $20,250,000, and the allocated price for subject property was $2,750,000. At the time of the sale, Ashford Financial Corporation also entered into an agreement for the assignment and assumption of the ground lease between Ramada Assured Income Associates, L.P. and Mystic Development Corporation. The current ownership entity of the leasehold interest is Woburn Massachusetts Hotel II Limited Partnership, which is controlled by Ashford Financial Corporation. The subject property is operated under a franchise agreement with Ramada; this agreement expires on October 2, 2009. The hotel is also subject to a management agreement with Remington Hospitality, Inc.; an abstract of this contract is presented in the Addenda to this report. For the purposes of this appraisal, we have assumed the fee simple ownership of the subject property by Ashford Financial Corporation and the operation of the property by Remington Hospitality, Inc. as a Ramada Plaza Hotel. Marketing Period In light of the renewed interest in hotel investments and the increasing availability of debt and equity capital, we believe that it will take six months to one year to sell the subject property assuming it is placed on the market at the concluded value. Effective Date of the Appraisal The effective date of the appraisal is January 1, 1997. All projections are expressed in inflated dollars, and the value estimate represents 1997 dollars. Date of Inspection The subject property was inspected by Robert Wong and Anne Lloyd Jones on October 17, 1996. HVS International, Mineola, New York Description of the Land, Improvements 7 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 3. Description of the Land, Improvements, Zoning, Taxes, and Neighborhood LAND The suitability of the land for the operation of a lodging facility is an important consideration affecting the economic viability of a property and its overall value. Factors such as size, topography, access, visibility, and the availability of utilities have a direct impact on the desirability of a particular site. Size and Topography The subject site is located on the southwest quadrant of the intersection formed by Main Street (Route 38) and Interstate 95 (Route 128), in the northern section of the City of Woburn. Municipal jurisdictions governing the property include the City of Woburn, the County of Middlesex, and the State of Massachusetts. According to a August 25, 1994 survey prepared by Des Lauriers and Associates, Inc., the subject parcel measures approximately +/-326,555 square feet, or +/-7.497 acres. The subject site is generally rectangular in shape and features approximately 437 feet of frontage along Middlesex Canal Park Road. The subject parcel is bounded by Interstate 95 to the north, Middlesex Canal to the east, an improved parcel to the west, and Middlesex Canal Park Road to the south. Primary vehicular access to the property is provided by Middlesex Canal Park Road. The topography of the parcel is generally flat. In conclusion, size and topography of the subject parcel appear well-suited for hotel use. The site is fully developed, with no excess land available for expansion. Easements The appraisers were not provided with any information concerning easements affecting the subject property. For the purpose of this appraisal, we have assumed that the property is not encumbered by any unusual or onerous easements which would affect its use or marketability. HVS International, Mineola, New York Description of the Land, Improvements 8 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Regional Access It is important to analyze a lodging facility's ease of access with respect to regional and local transportation routes and demand generators. The subject site is readily accessible to a variety of local, county, state, and interstate highways. The Ramada Plaza Hotel is strategically located in proximity to the intersection of two of Massachusetts' major roadways: Interstate 95, which is known locally as Route 128, and Interstate 93. Interstate 95 (I-95) - a transnational highway connecting the City of Miami, Florida in the south to the Maine-Canadian border to the north - also serves as an important north/south artery serving the area. The subject property is located approximately three-quarters of a mile southeast of the intersection of Interstates 93 and 95. In the vicinity of the City of Woburn, I-95 extends in an east/west direction. This highway has become a major commercial corridor, with high-technology businesses proliferating along this route over the last decade. State Route 128, which runs conjointly with I-95 in the greater Boston area, serves a significant amount of interstate, inter-regional, and commutational motorists. From the City of Woburn, State Route 128 extends in a northeasterly direction to Gloucester at the far northeastern portion of the commonwealth. Southward from the City of Woburn, State Route 128 (I-95) serves as an inner beltway, partially encircling the western side of the City of Boston before terminating near Dedham, where I-95 continues southward through Providence, Rhode Island and along the eastern coast of the United States to Florida. Interstate 93, which abuts the subject property, is a six-lane, limited-access, divided highway that originates south of Boston and stretches north, eventually connecting with Interstate 91 in northern Vermont, along the New Hampshire-Vermont border. Interstate 93 is the primary north/south route connecting Boston to points north; during the summertime this roadway is popular with leisure travelers journeying between the Boston metropolitan area and New Hampshire. Overall, by virtue of its location along Interstate 95 and its close proximity to Interstate 93, regional access to the Ramada Plaza Hotel is considered to be highly favorable. HVS International, Mineola, New York Description of the Land, Improvements 9 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Local Access and Visibility Primary access to the subject property is provided by Middlesex Canal Park Road, which is a service road extending off of Main Street in a westerly direction. Main Street, which is also known as Route 38, is Woburn's major north-south roadway and extends from northern Boston, through Downtown Woburn, and to Interstate 495, which lies approximately eleven miles north of Woburn. Motorists traveling Interstate 95 exit at the I-95/Main Street interchange, circle around the interchange rotary to the southern Main Street exit, proceed south on Main Street, and turn right onto Middlesex Canal Park Road. While the subject property is somewhat visible from northbound I-95, it is not from the southbound lanes. The subject property is also not visible from Main Street. However, a proprietary sign located at the intersection of Main Street and Middlesex Canal Park Road facilitates local access to the hotel and minimizes any adverse effects resulting from the subject property's poor visibility from main roadways. Once motorists are on Middlesex Canal Park Road, the hotel is visible. Overall, the subject site is considered desirable for hotel use. Airport Access Logan International Airport is located approximately 17 miles southeast of the subject site. Access to the subject property is provided by Interstates 93 and 95. Motorists travel on northbound I-93, and then southbound on I-95, before following the same instructions as set forth previously. Access to Local Demand Generators The Ramada Plaza Hotel is situated in close proximity to the area's primary generators of lodging demand. The following table outlines some of these major demand generators and their distance from the subject site. ================================================================================ Table 3-1 Local Demand Generators - -------------------------------------------------------------------------------- Approximate Distance Approximate Driving Demand Generator from Subject Site (in Miles) Time (in Minutes) ---------------- ---------------------------- ----------------- Lahey Clinic 2 5 Cummings Business Park 2 5 Unicorn Business Park 3 8 Woburn Commerce Center 2 5 Hanscom Air Force Base 5 10 Marshalls 7 15 W.R. Grace 5 10 Downtown Boston 15 20 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Description of the Land, Improvements 10 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The subject site is proximate to the area's demand generators and is well-suited for its use as a transient lodging facility. Utilities The subject site is served by all necessary utilities, which are provided as follows. ================================================================================ Table 3-2 Available Utilities - -------------------------------------------------------------------------------- Utility Provider ------- -------- Water City of Woburn Electricity Boston Edison Co. Telephone NYNEX (local service) MCI (long distance service) Sewer City of Woburn Gas Boston Gas Co. - -------------------------------------------------------------------------------- Soil and Subsoil Conditions Geological and soil reports were not provided to the appraisers or made available for review during the preparation of this report. The appraisers are not qualified to evaluate soil conditions other than by a visual inspection of the surface. Nuisances and Hazards The appraisers have not been informed of any site-specific nuisances or hazards, and there were no visible signs of toxic ground contaminants at the time of our inspection. Because the appraisers are not experts in this field, we do not warrant the absence of hazardous waste, and we urge the reader to obtain an independent analysis of these factors. Flood Zone Possible locational hazards include flood potential. According to the Federal Emergency Management Agency (FEMA) Community Panel Number 250229 0003 B, dated July 2, 1980, the subject property is located within Flood Zone C, an area of minimal flooding. Seismicity Information pertaining to the seismicity of the subject site was not provided to the appraisers. We have assumed that the subject site is not situated in an area of seismic danger. Legal Description As noted earlier, a copy of the subject property's legal description, as provided by Ashford Financial Corporation, is presented in the Addenda to this report. HVS International, Mineola, New York Description of the Land, Improvements 11 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Conclusion The subject parcel appears well-suited as the site of a lodging facility. We have analyzed the issues of size, topography, access, visibility, and the availability of utilities, and we note the following advantages and disadvantages. Advantages o The subject site consists of flat topography. o A well-developed network of area and interstate highways exists in close proximity to the subject property. o All necessary utilities are available to the subject property. o The subject site is in close proximity to area demand generators. Disadvantages o Visibility of the subject property from main roadways is poor. o Logan International Airport is located 15 miles away from the subject property, making airport access only fair. The advantages noted above are important locational characteristics. Although visibility of the subject property and airport access are poor, the advantages outweigh the disadvantages, and we believe that the site is well-suited for hotel use. IMPROVEMENTS The quality of a lodging facility's physical improvements has a direct influence on its marketability and attainable occupancy and average rate. The design and functionality of the structure can also affect operating efficiency and overall profitability. This section investigates the subject property's physical improvements and personal property in an effort to determine how they contribute to total value. The following description of the improvements is based on our inspection of the hotel and information provided by Ashford Financial Corporation. Ramada Plaza Hotel is a full-service lodging facility containing 196 rentable units, +/-5,330 of meeting and banquet space, a restaurant and lounge, an indoor swimming pool, an exercise room, a game room, and appropriate back-of-the-house facilities. The one- and four-story property opened in 1972, and is approximately 25 years old as of the date of this appraisal. The hotel was acquired by Ashford Financial Corporation in October, 1994. At the time of this acquisition, the hotel was in extremely poor condition. HVS International, Mineola, New York Description of the Land, Improvements 12 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Subsequent to the acquisition, the subject property was extensively renovated in 1995 at an estimated cost of $1.4 million. In scope, this renovation included the exterior of the building, public areas and the guestrooms. The hotel is now judged to be in relatively good condition, and management representatives report that all building systems are in good working order. The hotel is operated under a license agreement with Ramada and reportedly meets the standards for lodging facilities of that brand. Based on our inspection and information provided by Ashford Financial Corporation, the following table summarizes the facilities available at the subject property. HVS International, Mineola, New York Description of the Land, Improvements 13 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 3-3 Facilities Summary - -------------------------------------------------------------------------------- Year Built 1972 Number of Buildings One Entrance Porte Cochere Guestrooms King Beds 72 Units Double/Doubles 122 Suites 2 ---------------------------- Total 196 Units Corridors Double-loaded, interior Food and Beverage Outlets Cafe Fennel 100 Seats Juliet's 120 Meeting and Banquet Rooms Grand Ballroom 3,168 Square Feet Hospitality 134 456 Boardroom 210 425.5 Boardroom 410 425.5 Boardroom 310 427.5 Executive Boardroom 427.5 Pool Area NA ---------------------------- Total 5,330 Square Feet Recreational & Other Amenities Indoor Swimming Pool Exercise Room Game Room Parking Spaces 402 Elevators Four Life Safety Systems Hardwired Smoke Detectors Laundry Washers One 55-pound, LPSO One 75-pound, Tristar Dryers Three 75-pound, Drymaster Construction Details Foundation Poured Concrete Slab on Grade; Frost Walls; Pilings Framing Steel; Poured-in-Place Concrete; Concrete Block Exterior Walls Brick on Concrete Block Roof Steel Trusses with Concrete Deck; Asphalt Covering - -------------------------------------------------------------------------------- Property Exterior The hotel structure is situated near the center of the subject parcel. Paved parking areas accommodating 402 vehicles are located around the periphery of the hotel structure. Vehicular access to the subject site is provided by two driveways, each situated on the southern corners of the site along Middlesex Canal Park Road. After entering the site, guests proceed to the HVS International, Mineola, New York Description of the Land, Improvements 14 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= hotel's main entrance, which is located on the southern side of the hotel; the main entrance features a porte cochere. Service traffic can gain access to the loading dock, which is located on the western side of the building, by entering the site at the southwestern driveway and proceeding north to the dock. Based on our inspection, the subject property's exterior appears to be in good condition and appropriate for hotel use. The parking areas and landscaping are well-maintained, and vehicular flow on the subject site is convenient. Construction and Design The Ramada Plaza Hotel features two wings. The one-story commercial wing located on the western side of the hotel structure houses the hotel's restaurant, lounge, ballroom, swimming pool, kitchen, and some back-of-the-house space. Situated east of the commercial wing is the L-shaped, four-story guestroom tower, which contains the hotel's lobby, guestrooms, meeting rooms, administrative offices, exercise room, game room, and additional back-of-the-house space. A courtyard with two concrete patio areas, a volleyball court, and several small lawn areas is located between the two hotel wings. Combining the two wings, the hotel structure's footprint measures approximately 48,213 square feet. The subject property's foundation and floor structure features poured concrete slab on grade, frost walls, and reinforced concrete pilings. The structure's framing consists of steel columns, poured-in-place concrete, and load-bearing concrete block; the exterior walls are constructed of brick on concrete block. The roofs feature precast concrete slabs supported by steel trusses and covered with asphalt. Management reports that leaks in the guestroom tower roof have been addressed, and that the roof over the pool area is in need of flashing work. In sum, the building structure is reported to be in good condition, and our inspection revealed no visible signs of damage. Lobby Situated on the first floor in the southwestern corner of the guestroom tower and immediately north of the main entrance, the hotel's main lobby acts as the focal point of the hotel and provides access to other areas of the property. The lobby features an open, airy, two-story high ceiling which enables the second floor corridor to overlook the lobby area. As guests enter the lobby from the main entrance, the front desk is located in front of them, along the northern wall of the lobby. A marble walkway extends from the entrance to the front desk, and a carpeted seating area furnished HVS International, Mineola, New York Description of the Land, Improvements 15 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= with traditional-style furniture is situated on each side of the walkway. Located in the northeast corner of the lobby is the corridor leading to the guestrooms; the corridor leading to the commercial wing is situated in the northwest corner. The lobby's walls are finished with wall vinyl, and the ceiling consists of square, acoustical tiles surrounding a large, rectangular, brass lighting matrix. Decorative accents include framed artwork, artificial floral arrangements, and a large mirror on the eastern and western walls. Management reports that the lobby was renovated in 1995. The renovations included new carpeting, refinishing of the marble flooring, new wall vinyl, replacement of the furniture, and upgrades to the lighting and artwork. As a result, the lobby is currently in good condition. Food and Beverage Outlets Cafe Fennel is the subject property's full-service restaurant. Located in the southern end of the commercial wing, the restaurant seats 100 and serves breakfast, lunch and dinner seven days a week. The restaurant, which also features a salad bar, is directly accessible to the main kitchen. Renovations to the restaurant in 1995 included new carpeting and wall vinyl, re-upholstering of the furniture, and upgrades to various decorative treatments. In 1996, carpeting was replaced in the entry and foyer area, and new artwork and accessories were purchased. Located adjacent to Cafe Fennel is the subject property's lounge, Juliet's. The lounge seats 120; is equipped with a dance floor, mini-stage, six hanging televisions, two video games, and a popcorn maker; and is open from noon to midnight everyday. As part of the hotel's extensive renovations in 1995, the lounge received new carpeting, re-upholstering of its bar stools and chairs, and repainting of the walls. Both the restaurant and lounge can be accessed from the lobby via a corridor or from dedicated exterior entrances located on the southern side of the commercial wing. As a result of the renovations, the restaurant and lounge are in good condition. Meeting and Banquet Space The subject property's function space is located in both the commercial and guestroom wings. The 3168-square-foot Grand Ballroom is located in the northern end of the commercial wing. The ballroom can be partitioned into four meeting rooms and features direct access to the hotel's kitchen. In 1995, the ballroom's carpeting and wallcovering were replaced, new banquet chairs were purchased, and the wall partitions were repaired. The lighting in the ballroom was replaced in 1996. HVS International, Mineola, New York Description of the Land, Improvements 16 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The hotel also contains five meeting and conference rooms in the southwestern end of the guestroom tower. The Hospitality 134 Room and the Executive Boardroom 115 are located on the first floor, while Boardrooms 210, 310, and 410 are stacked in floors two through four. All of the meeting rooms received new carpeting and bathroom floors in 1995; replacement of wall vinyl is slated for 1996 or 1997. Our inspection indicated the meeting rooms to be in fair condition, although the planned refinishing of the walls should improve the appearance of the rooms. Should demand dictate, the pool deck and outdoor courtyard area can be used for social functions and events. These supplementary banquet spaces are equipped with patio furniture and are conducive for dinner and cocktail parties. Guestrooms The subject property features 196 guestrooms: 122 with two double beds, 72 with king-size beds, and 2 suites. In addition, management reports that approximately 100 rooms are non-smoking, and $9,260 has been budgeted to convert several guestrooms into handicapped-accessible rooms. We expect that the number of rooms allocated for these two purposes will be increased or reduced depending on ADA regulations, demand and guest response. Guestrooms in the subject property's tower are double-loaded and are of the standard configuration, which consists of one room with a bathroom situated to the left or right of the doorway entrance. Guestrooms are typically furnished with the following items. o One king or two double beds o Armoire with remote-controlled, color television o Desk with chair o Nightstand with alarm clock/radio and touch-tone telephone o Floor lamp, table lamps, and wall-mounted lamps o Lounge chair and Ottoman o Coffee maker o Closet with luggage rack o Assorted artwork o Wall-mounted mirror o Wall-to-wall carpeting HVS International, Mineola, New York Description of the Land, Improvements 17 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= o Vinyl wallcovering o Popcorn ceiling o Cloth drapery Additionally, each guestroom contains a vanity immediately outside the bathroom, and eight of the guestrooms feature refrigerators and microwave ovens. The guest bathrooms feature a vanity countertop with a sink, a commode and a combination shower-and-tub unit. Each bathroom is also equipped with a wall-mounted hair dryer. Finishes include tiled floors, vinyl-and-tile wallcovering, and popcorn ceilings. Although the guestrooms were completely renovated in 1995, including the replacement of all soft and hard goods as well as some case goods, additional upgrades are planned for 1996. Capital plans call for the refinishing of guestroom walls, the replacement of artwork, the painting of guestroom doors, and the installation of make-up mirrors in the bathrooms. At the time of our inspection, the subject property's guestrooms appeared to be in relatively good condition; however, some of the furniture - such as the desk, armoire, and nightstand - appears dated and may need replacement in the near future. Guestroom Corridors Guestroom corridors are wide enough to permit the easy passage of housekeeping and room service carts. The corridors are finished with carpeted floors, vinyl wallcovering, and acoustical-tiled ceilings. The carpeting and lighting in the corridors were replaced in 1995; future plans call for the refinishing of the walls on floors one and four in 1996, floor three in 1997, and possibly floor two in 1998. Additionally, because the current lighting is inadequate, the capital budget for 1996 includes the installation of additional sconces. Each floor contains a housekeeping storage closet as well as ice and vending machines. Recreational Amenities The Ramada Plaza Hotel's recreational amenities include an indoor, heated swimming pool, an exercise room, and a game room. The swimming pool is located in the eastern portion of the commercial wing, while the exercise room and game room are located on the first floor of the southern portion of the guestroom tower. The pool lining was repainted in 1996, and the renovations in 1995 included resurfacing the pool deck and purchasing new poolside furniture. The exercise room received new carpeting and exercise equipment in 1995. All of the subject property's recreational facilities are in good condition. HVS International, Mineola, New York Description of the Land, Improvements 18 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Back-of-the-House Space The subject property's back-of-the-house facilities are located in both of the commercial and guestroom wings. The hotel's kitchen is conveniently situated between the restaurant and ballroom, thus facilitating the efficient flow of service traffic. Administrative offices are located on the first and second floors of the southwestern corner of the guestroom wing in close proximity to the front desk. The hotel's laundry facility is situated on the first floor of the northwestern corner of the guestroom tower, and is conveniently close to one of the elevators. Stacked above the laundry room are housekeeping storage rooms on each floor. The employee cafeteria, engineering office, and boiler room are stacked from the second through the fourth floor, respectively, in the southern portion of the guestroom tower. Based on information provided by Ashford Financial Corporation, the subject property's operating systems are in good working order. Vertical Transportation Vertical transportation in the subject property's guestroom tower is provided by four hydraulic elevators with capacities of 2,200 pounds. One elevator core containing two elevators is situated in the southern end of the guestroom wing, one is located in the mid-section of the wing, and the other is situated at the northern end. The property does not contain an elevator designated solely for service traffic. Supplementary vertical transportation is provided by four stairwells, which are conveniently located in the guestroom tower. Heating, Ventilation, and Air Conditioning The subject property's heating, ventilation, and air conditioning (HVAC) are provided by individual, through-the-wall, electrical units for the guestrooms and centralized, gas- and electrical-powered HVAC units for the public areas. The guestroom HVAC units were newly installed in 1994. The property's management indicate that all HVAC equipment is in good working condition. Fire Protection The Ramada Plaza Hotel's guestrooms and public areas are equipped with hardwired smoke detectors as well as heat detectors. The hotel's guestrooms, however, are not serviced by a sprinkler system. Given that the guestroom tower is four-stories tall, the lack of a sprinkler system is highly disadvantageous and poses a life safety risk to the hotel's guests. Security The subject property utilizes electronic door locks. Security is further enhanced by restricted access through peripheral entrances to the hotel. Only guests and service staff with electronically-coded key cards can gain access to the hotel through exterior entrances located away from the lobby area. The hotel's front desk is fully staffed 24-hours per day. HVS International, Mineola, New York Description of the Land, Improvements 19 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Asbestos According to information provided by management representatives, there is no asbestos present in the subject property's improvements; however, we have not been provided with an asbestos report to confirm this assertion. The reader should be advised that any costs associated with asbestos removal or containment may have an unfavorable impact on the hotel's market value, and the estimate set forth in this appraisal reflects our value conclusions prior to the deduction of any such costs. We suggest that interested parties initiate an independent analysis regarding current asbestos levels and the capital expenditures necessary to remove any asbestos that is present. ADA Conformance Following the January 26, 1992 passage of the Americans with Disabilities Act (ADA), hotels are subject to new physical standards. The appraisers are not experts on ADA compliance, and we render no opinion regarding the subject property's conformance to ADA standards. Capital expenditures that may be necessary to bring the property into accordance with the ADA will reduce our estimate of market value. Any ongoing costs related to ADA regulations are expected to be funded by normal replacement reserves. Conclusion Overall, the subject property's improvements appear appropriate for hotel use. For the purposes of this appraisal, we have assumed that the subject property will be maintained in its present condition throughout the assumed ten year holding period. Specifically, it is assumed that hotel management will employ standard preventive maintenance measures, and that a reserve for replacement fund will be established which will fund the cost of any future necessary capital expenditures. ZONING According to the City of Woburn zoning regulations and map (dated April 19, 1985), the subject property is zoned as follows. BI - Interstate Business Conforming uses under this zoning designation include mobile homes, public schools, child care centers, small retail establishments, restaurants, business and professional offices, and retail and service uses in connection with a hotel or motel. Hotels and motels require a special use permit under the BI zoning classification. In the case of the subject property, a special use permit was obtained; hence, the subject property appears to conform to local zoning regulations. We assume that all necessary permits and approvals have been secured (including an appropriate liquor license), and that the subject property was constructed in accordance with local zoning HVS International, Mineola, New York Description of the Land, Improvements 20 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ordinances, building codes, and all other applicable regulations. Our zoning analysis should be verified before any physical changes are made to the hotel. ASSESSED VALUE AND TAXES Property (or ad valorem) tax is one of the primary revenue sources of municipalities. Based on the concept that the tax burden should be distributed in proportion to the value of all properties within a taxing jurisdiction, a system of assessments is established. Theoretically, the assessed value placed on each parcel bears a definite relationship to market value, so properties with equal market values will have similar assessments and properties with higher and lower values will have proportionately larger and smaller assessments. Depending on the taxing policy of the municipality, property taxes can be based on the value of the real property or the value of the personal property and the real property. Because the objective of assessed value is to maintain a specific value relationship among all properties in a taxing jurisdiction, comparable hotel assessments should be evaluated to determine whether the subject property's assessed value is equitable. The taxing jurisdiction governing the subject property assesses real and personal property. The assessed value ratio is reported to be approximately 100% of market value. A review of the assessed values of six comparable hotels located in the Woburn taxing jurisdiction reveals the following information. ================================================================================ Table 3-4 Assessed Value of Comparable Hotels - -------------------------------------------------------------------------------- Total Assessment Assessment per Room Number ------------------------- --------------------- Hotel of Rooms Land Improvements Land Improvements - -------------------------------------------------------------------------------- Subject Property 196 $1,816,000 $5,959,000 $9,265 $30,403 Howard Johnson 100 $1,703,000 $1,747,000 $17,030 $17,470 Crowne Plaza Hotel 345 $1,797,000 $15,192,000 $5,209 $44,035 Courtyard by Marriott 120 1,072,000 5,589,000 8,933 46,575 Red Roof Inn 159 2,845,000 2,836,000 17,893 17,836 Comfort Inn 100 852,000 2,562,000 8,520 25,620 Suisse Chalet 129 887,000 2,156,000 6,876 16,713 Source: City of Woburn Assessor's Office - -------------------------------------------------------------------------------- As indicated in the preceding table, the subject property's land value per room ranked third behind that of the Red Roof Inn and the Howard Johnson. The subject property's improvements value per room ranked third HVS International, Mineola, New York Description of the Land, Improvements 21 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= behind that of the Courtyard by Marriott and the Crowne Plaza Hotel. Based on its location and the condition and level of its facilities, the assessed land and improvement values for the Ramada Plaza Hotel appear reasonable. The subject property's personal property assessment totals $594,300. Based on a total real and personal property assessment of $8,369,300 and a tax rate of $23.09 per $1,000 of assessment, the subject property's 1995/96 tax burden is calculated as follows. $8,369,000 X $0.02309 = $193,240 The following table illustrates the historical changes in the real and personal property tax rates for the subject property's governing jurisdiction. ================================================================================ Table 3-5 Tax Rates Applicable to the Subject Property - -------------------------------------------------------------------------------- Tax Rate per $1,000 Percent Change from Year of Assessment Previous Year ----------------------------------------------------- 1991/92 $17.74 1992/93 19.39 9.3% 1993/94 20.16 4.0 1994/95 21.38 6.1 1995/96 23.09 8.0 Annual Compounded Rate 6.8% Source: City of Woburn Assessor's Office - -------------------------------------------------------------------------------- Historically, the applicable tax rates have increased at an annual compounded rate of 6.8%. For the purpose of this appraisal, and in recognition of the potential for increases in the subject property's assessed value, we have forecasted the subjected property's tax burden to increase at an annual rate of 6.0% for the first three projection years. From 2000 and beyond, property taxes are projected to increase at the underlying rate of inflation of 3.5%. Applying the projected increases to the 1995/96 tax burden yields the following forecast of property taxes for the subject property. HVS International, Mineola, New York Description of the Land, Improvements 22 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 3-6 Forecast of Property Tax Expense - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized 2001 - ------------------------------------------------------------------------------- Forecast Property Taxes (+000) $210 $222 $230 $238 $247 - -------------------------------------------------------------------------------- NEIGHBORHOOD The neighborhood surrounding a lodging facility often has an impact on a hotel's status, image, class, style of operation, and sometimes its ability to attract and properly serve a particular market segment. This section investigates the subject property's neighborhood and evaluates any pertinent locational factors that could affect its occupancy, average rate, food and beverage revenues, and overall profitability. The neighborhood surrounding the subject property lies within the Interstate 95 (Route 128) commercial corridor and is characterized by a mix of commercial and residential development. A number of medium-sized office parks and retail shopping centers, which were primarily developed within the past 15 years, are situated along this corridor. Many of the companies located in this corridor are high technology companies, research and development firms, and defense contractors. The areas situated further north or south of Interstate 95 consists mostly of single-family housing and apartment complexes. The principal commercial developments in the area are located in the vicinity of the I-93/I-95 interchange, and are directly accessible from the subject property. Some of the companies located at this intersection are EDS, Alpha Industries, Inc., and Environmental Products and Services, Inc. Located less than two miles east of the subject property is Cummings Park, which is a large business park tenanted by a number of companies including Elliott Corporation, Theta Systems, the Access Group, and the Professional Development Group. Another major business park - Unicorn Park - is located less than three miles southeast of the property and consists of a variety of small financial, insurance, and real estate firms. In addition to the office parks located in Woburn, the areas along Interstate 95 in the City of Burlington have experienced major commercial development in the past ten years. In the immediate vicinity of the subject property, Baldwin Park, which comprises approximately 110,300 square feet of office space, is situated on the northeast quadrant of the intersection of Main Street and Interstate 95. A retail strip mall is located on the northwest quadrant of the same HVS International, Mineola, New York Description of the Land, Improvements 23 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= intersection, and immediately east of the shopping center is a newly developed office park. The southeast quadrant of the intersection is comprised of Forest Park and residential housing. Situated in the southwest quadrant is the subject property, Showcase Cinema (which lies immediately west of the subject property), Gateway Children's Learning Center to the east of the subject property, and several residential homes along Main Street. The area to the south of the subject property across Middlesex Canal Park Road is characterized by woodlands sparsely developed with residential homes. Conclusion The neighborhood surrounding the Ramada Plaza Hotel appears well-suited for the operation of a transient lodging facility. The subject property benefits from its close proximity to office parks and businesses located near the I-95/I-93 interchange as well as along the I-95 commercial corridor extending from Burlington through Woburn. Additionally, a number of shopping centers and restaurants are situated in the area and support the operation of a transient lodging facility. HVS International, Mineola, New York Market Area Analysis 24 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 4. Market Area Analysis The economic vitality of the market surrounding the subject property is an important consideration in forecasting lodging demand and income potential. Economic and demographic trends that reflect the amount of visitation provide a basis from which to project hostelry demand. The purpose of the area analysis is to review available economic and demographic data to determine whether the local market will undergo economic growth, stability, or decline. In addition to predicting the direction of the economy, the rate of change must be quantified. These trends are then correlated based on their propensity to reflect variations in lodging demand with the objective of forecasting the growth or decline in visitation by individual market segment. Market Area Definition The market area encompassing the subject property can broadly be defined as the Boston-Worcester-Lawrence-Lowell-Brockton Metropolitan Statistical Area (MSA). The Boston MSA, the largest in the commonwealth, with roughly 64% of the total population, is comprised of Suffolk, Essex, Middlesex, Norfolk, Plymouth, and Worcester Counties. More specifically, the subject property's market area can be described as northern suburban Boston and the State Route 128 (I-95) corridor. For the purpose of generally defining the geographical/economic boundaries within the area, three major market areas exist within the greater Boston metropolitan area: the Route 128 corridor, the Route 495 corridor, and the inner urban market. The subject property is located in close proximity to the intersection of Route 128 and Interstate 93. Woburn's economy is closely tied to the trends occurring both in the central Boston area and along Route 128's high-technology area. For this reason, the market area analysis will include relevant data for both the City of Boston and suburban Boston. In most cases, the Boston metropolitan area is the market for which pertinent information on the economic and demographic trends that will affect the subject property is available. [GRAPHIC OMITTED] AREA MAP HVS International, Mineola, New York Market Area Analysis 25 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= In the early to middle 1980s, the Massachusetts area underwent a period of strong economic growth, often referred to as the "Massachusetts Miracle." This period of economic success can be attributed to a boom in industrial and high-technology manufacturing as well as to an increase in tourism and a sharing in the rapid expansion of the national financial service industry. In the early 1990s, however, downturns in the computer and high-technology fields had a negative impact on the area's economy. The area's economic problems were further exacerbated by the difficulties on Wall Street and in the region's depository institutions. As a result of the recent revival of the nation's economy as a whole, however, Woburn's economy - as demonstrated by Smith Travel Research statistics and the commercial developments planned for the City of Woburn - is pulling out of its economic difficulties. According to the Planning Department of the City of Woburn, an extensive development project is scheduled to begin construction in 1998 or 1999, with completion projected for the year 2001. The project is planned on a site roughly five miles northwest of the subject property, on Commerce Way. According to city officials, $10 million in state funds have been allocated for the project, and 170 acres of land have been zoned for business parks on the site. Moreover, restaurants, a commuter rail stop, and a commuter parking garage are planned for the site. The Logan Airport Bus Terminal and the train station providing access to Boston will be relocated there as well. Plans are also being reviewed to build an exit ramp from Interstate 93 that would lead directly into the proposed development. Presently, the proposed site is a superfund site which is scheduled for clean-up in 1997. Economic and Demographic Data Based on fieldwork conducted in the area and our in-house sources, we have evaluated various economic and demographic statistics to determine trends in lodging demand. A primary source of economic and demographic statistics used in this analysis is the Complete Economic and Demographic Data Source published by Woods & Poole Economics, Inc., a well-regarded forecasting service based in Washington, DC. Using a data base containing more than 300 variables for each county in the nation, Woods & Poole employs a sophisticated regional model to forecast economic and demographic trends. Historical statistics are based on census data and information published by the Bureau of Economic Analysis. Projections are formulated by Woods and Poole. All dollar amounts have been adjusted for inflation, and thus growth or decline represents real change in constant dollars. HVS International, Mineola, New York Market Area Analysis 26 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Population Between 1980 and 1995, Middlesex County registered an average annual compounded population growth of 0.2%, which was lower than the rates registered by the MSA, the commonwealth, and the nation, which achieved rates of 0.5%, 0.4%, and 1.0%, respectively. Between 1990 and 1995, population growth in the county, the MSA, and the commonwealth slowed to 0.1%, 0.2%, and 0.1%, respectively, despite increased population growth in the nation (1.1%). The slowed population growth in Massachusetts can be attributed to the economic recession that gripped the commonwealth in the early 1990s. Projections for the period 1995 to 2000 call for a relatively slow rate of population growth for Middlesex County and increased rates of growth for the MSA, the commonwealth, and the nation. Population in Middlesex County is expected to increase by an average annual compounded rate of 0.1%, while the MSA, commonwealth, and nation are anticipated to increase by 0.4%, 0.3%, and 0.9%, respectively. We find that the rate of population growth generally establishes a minimum rate of increase for commercial hotel demand; this observation also holds true for the meeting and convention segment if a majority of the meetings are business-oriented. Retail Sales Retail sales in Middlesex County increased at a real average annual compounded rate of 1.1% between 1980 and 1995, a level that was lower than the gains registered by the MSA, at 1.6%, the commonwealth, at 1.4%, and the nation, at 1.9%. Between 1990 and 1995, the county, MSA and commonwealth experienced slower retail sales growth as a result of the regional recession. During this period, Middlesex County registered retail sales growth of 0.3%, while the Boston MSA and Massachusetts experienced growth of 0.6% and 0.5%, respectively. Although retail sales growth declined in these three areas, the nation achieved a higher rate of growth of 2.5%. Retail sales in all four areas of evaluation are projected to increase at lower rates between 1995 and 2000. Retail sales in Middlesex County are projected to increase at an average annual compounded rate of 0.1%, and the MSA, commonwealth, and nation are expected to show average annual growth in retail sales of 0.4%, 0.2%, and 0.9%. Overall, retail sales trends indicate slowing economic growth in the subject property's market area as well as in the nation as a whole. HVS International, Mineola, New York Market Area Analysis 27 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Personal Income Between 1980 and 1995, total personal income in Middlesex County increased at an average annual compounded rate of 2.7%, after adjustment for inflation. Growth in personal income in Middlesex outpaced those of the MSA, commonwealth, and nation, which experienced growth of 2.5%, 2.3%, and 2.3%, respectively. Although slower growth was achieved between 1990 and 1995, projections call for improved personal income growth in the next five years. Middlesex County is anticipated to achieve real gains of 1.6% annually between 1995 and 2000. During the same period, personal income in the MSA, the commonwealth, and the nation is projected to increase at rates of 1.8%, 1.6%, and 2.3%, respectively. Overall, the projected growth in total personal income is a favorable economic indicator for businesses in Middlesex County. In terms of per capita personal income, projections for Middlesex County indicate a higher level than those anticipated for the Boston MSA, Massachusetts and the United States. This relationship suggests that Middlesex County residents will have more money available to spend on retail goods and services than do typical Americans. This increased spending ability contributes to a favorable environment for local commercial establishments, and restaurants in particular. It should be noted, however, that personal income does not take into account cost-of-living factors; as a result, it is possible for local residents to have higher income levels without enjoying greater affluence if the cost of necessities is greater than it is in other parts of the nation. Work Force Characteristics The greatest long-term historical employment growth in Middlesex County occurred in the services and agricultural services sectors, which achieved growth rates of 3.6% and 3.4%, respectively between 1980 and 1995. Between 1990 and 1995, most of the sectors in the county experienced declines, with the exception of services, agricultural services, and transportation, communications and utilities sectors. The greatest drops occurred in the federal military, manufacturing, and mining sectors. Overall employment decreased between 1990 and 1995 at an average annual compounded rate of 0.4% in Middlesex County. Employment is expected to rebound slightly between 1995 and 2000, with total employment forecasted to increase annually at 0.3%. The strongest gains in employment are projected to occur in the mining and services sectors, which are forecasted to increase at rates of 3.0% and 0.9%, respectively. These moderate employment gains reflect stabilization of the local economy HVS International, Mineola, New York Market Area Analysis 28 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= following the dramatic expansion in the 1980s and the recession that characterized the early 1990s. A favorable characteristic is the diversification of the MSA economy, with services, trade, manufacturing, and government as the largest employment sectors in 1995. Because the local economy is not tied to the prosperity of any single sector, the impact of business cycles is somewhat cushioned. Furthermore, the downturn in high-technology industries that occurred in the early 1990s resulted in a diminished dependence on this industrial sector; nevertheless, the high-technology firms in the region remain a dominant influence on the area's economy. The major employers in Woburn represent a cross-section of hotel demand potential. Some are national in scope, while others operate on a more local basis; some are engaged in manufacturing, and others are active in retail distribution. The following table outlines some of the major employers in Woburn. ================================================================================ Table 4-1 Major Employers - -------------------------------------------------------------------------------- Number of Firm Product Employees --------------------------------------------------------- Marshalls Retail 600 W.R. Grace Retail 500 General Foods Food 200 Cummings Properties Commercial Real Estate 100 Source: Executive Office of Communities & Development - -------------------------------------------------------------------------------- Office Space The City of Woburn is an industrial town containing a number of industrial parks that are owned by both the public and private sectors. According to the Planning Department of the City of Woburn, the 1995 vacancy rate for business parks in the city is estimated at below 7%, an improvement over vacancy levels in recent years that is attributable to the economic revival and the lack of new construction. With the planned development on Commerce Way, city officials anticipate significant growth in the future. Highway Traffic The subject property occupies a prominent location, proximate to the intersection of Interstates 93 and 95. Access to the property is provided by Interstate 95, via the Route 38 exit. The amount of traffic passing through a HVS International, Mineola, New York Market Area Analysis 29 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= market area can have a direct impact on commercial and leisure demand and an indirect effect on meeting demand. At the time of preparing this appraisal, no information on the volume of traffic entering or exiting the Route 38 exit ramps was available. According to representatives of the Massachusetts Department of Transportation, the only information available is the daily traffic counts on Interstate 95 in the vicinity of the intersection of Interstates 93 and 95. For southbound Interstate 95, the latest statistics available are for 1995 and show 171,650 vehicles utilizing Interstate 95 per day. As mentioned previously, given the proximity of Woburn to the City of Boston, the latest developments in Boston do have some effect on the subject property's market area. Major road construction is currently underway in the City of Boston. The $7.7-billion Central Artery/Third Harbor Tunnel project -the largest highway initiative in the history of the commonwealth - will replace the six-lane, elevated section of the Central Artery (I-93) in downtown Boston with a largely underground, eight- to ten-lane section extending from the Southeast Expressway (I-93) to Charlestown. This project also involves extending I-90 (the Massachusetts Turnpike) to Logan Airport via a new seaport access road that will pass through commercial land in south Boston, and constructing a four-lane tunnel across Boston Harbor. Completion of this project should improve access between Logan Airport and downtown Boston dramatically. The project is expected to double traffic capacity both through the city and across the harbor, thus alleviating one of the most congested urban traffic areas in the nation and providing the city with a safer and wider traffic configuration. The Central Artery depression will create over 27 acres of new green space, including the area abutting Atlantic Avenue. Work began in early 1994 on the relocation of utility infrastructures and on wall construction near Quincy Market to clear a path for the proposed project. Currently, work is occurring below ground near South Station and Quincy Market to construct the tunnel itself; the estimated completion date of the artery depression is late 1999. The construction of the 1.3-mile third harbor tunnel began in 1992. According to the Massachusetts Department of Transportation, the tunnel is currently open to commercial traffic only, and should relieve some traffic congestion. The tunnel is four lanes wide, doubling the present cross-harbor capacity to eight lanes. Although it is unclear as to when the tunnel will permit passenger vehicles, it is hoped that the tunnel will enable airport-bound drivers from the west and south, who comprise 70% of HVS International, Mineola, New York Market Area Analysis 30 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= airport traffic, to bypass downtown Boston and the existing Sumner and Callahan tunnels, thereby alleviating traffic congestion to and from the city. Airport Traffic The main airport serving the City of Woburn is Logan International Airport, located roughly 17 miles southeast of the subject property. The airport is utilized by more than 40 major domestic airlines and international carriers that offer non-stop service to the business centers of Europe and Asia. In 1995, the airport served more than 24 million arriving and departing passengers, making it the 10th busiest airport in the country for passenger service. The airport also handled more than 800 million pounds of cargo and mail during the same year, making it the 12th busiest airport in the country in terms of cargo service. Currently, Logan International Airport is undergoing an expansion and upgrading, which may continue until 2010. This $1.5-billion modernization program - known as Logan 2000 - consists of roughly 30 projects, and is intended to ensure the facility's economic contribution to the greater Boston area and the New England region well into the 21st Century. According to the Massachusetts Port Authority, the projects include improvements to the passenger terminals, roadways, parking facilities, public transportation and passenger amenities. Specifically, Terminal A will be replaced with a modern concourse to accommodate wide-bodied jets, ultimately expanding the number of gates that can handle these larger aircraft from 45 to 70. Terminal E will receive an expanded customs hall to be located on what is now the Terminal E parking lot. While the old customs facility could handle only 600 international passengers per hour, the new one will be able to handle 3,000. In addition, a new central terminal will connect to both the new Terminal A and the customs hall in Terminal E. The aforementioned Boston Tunnel project will, upon completion, surface at the airport, thereby significantly improving access to Logan. The following table shows historical passenger counts at Logan International Airport. HVS International, Mineola, New York Market Area Analysis 31 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-2 Logan International Airport Passenger Statistics - -------------------------------------------------------------------------------- Domestic Jet Domestic Commuter International Total Percent Year Passengers Passengers Passengers Passengers Change - ------------------------------------------------------------------------------- 1986 18,640,863 1,233,531 2,058,686 21,933,080 --- 1987 19,316,103 1,365,371 2,687,528 23,369,002 6.5% 1988 19,237,619 1,400,674 3,093,630 23,731,923 1.6% 1989 17,689,413 1,348,616 3,235,831 22,273,860 -6.1% 1990 17,968,410 1,550,837 3,358,944 22,878,191 2.7% 1991 16,585,359 1,771,873 3,092,911 21,450,143 -6.2% 1992 17,083,755 2,067,965 3,571,418 22,723,138 5.9% 1993 17,722,509 2,277,059 3,580,158 23,579,726 3.8% 1994 18,774,177 2,035,166 3,658,835 24,468,178 3.8% 1995 18,596,080 2,120,262 3,475,753 24,192,095 -1.1% Average Annual Compounded Change 1986-1995 1.1% Source: Massachusetts Port Authority, Aviation Department - -------------------------------------------------------------------------------- With 1.1% in average annual compounded growth, Logan International Airport has not witnessed any strong growth in passenger count over the past ten years. The number of domestic jet passengers has remained steady, while increases have been achieved in the number of domestic commuter and international passengers. This lack of strong growth is a consequence of the airport operating at capacity; growth should occur in the future as the expansion projects at Logan International Airport are completed. Convention Center The nearest convention center, the John B. Hynes Veterans Memorial Convention Center, is located in the City of Boston. Because of the large number of hotels located in the city, and Woburn's distance from downtown Boston, hotels in the subject property's area do not enjoy significant overflow generated by the convention center. Tourist Attractions Woburn is a historic site and contains a number of historic attractions, including the Baldwin Mansion and the Count Rumford House. The majority of leisure travelers who stay in Woburn, however, commute to Boston to visit the city's numerous tourist attractions. The subject property's strategic location along Interstate 93, which provides direct access to Boston, enhances its ability to attract leisure travelers. Boston is a popular destination because it offers a wide variety of visitor attractions. The area's educational, medical, and scientific institutions are a HVS International, Mineola, New York Market Area Analysis 32 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= magnet for scholars, researchers, and scientists. Visitors are attracted by local sports teams and recreational activities. Numerous golf courses are available in the outlying suburban area, and miles of Atlantic beaches are located within a few miles of the city. For cultural entertainment, Boston offers many museums, a planetarium, an aquarium, and a variety of historic attractions. Visitors also enjoy symphony concerts, opera, and the theater. The city offers ample restaurants. Some of the most popular historic attractions include the Old South Church, the Boston Tea Party Ship and Museum, Faneuil Hall, Quincy Market, the Boston Massacre Site, the Old South Meeting House, the Bunker Hill Pavilion, Trinity Church, the Paul Revere House, Boston Common, the U.S.S. Constitution, and the Old North Church. Cultural attractions include the Museum of Fine Arts, the Isabella Stewart Gardner Museum, and the world-famous Boston Pops. Other attractions include Newbury Street, the John Hancock Observatory, and the New England Aquarium. There are 68 colleges and universities in the Boston metropolitan area with an enrollment of approximately 275,000 students. Two out of three of the undergraduates enrolled in Boston's most prestigious colleges and universities (Boston College, Boston University, Harvard University, Massachusetts Institute of Technology, Northeastern, and Tufts) come from areas outside Massachusetts. These institutions generate strong leisure visitation during the weekends when school is in session, and particularly during commencement and parents' weekends. During the week, the schools and the medical hospitals host guest lecturers, continuing educational seminars, and meetings and banquets, much of which attract attendees who require overnight accommodations. Conclusion Our review of various economic and demographic data indicates that the subject property's market area has recovered from the recession of the early 1990s, with economic growth stabilizing. With the planned development on Commerce Way, the economy of the City of Woburn is anticipated to grow at a moderate pace. The following table summarizes the economic and demographic trends discussed throughout this section. All figures that reflect dollar amounts have been adjusted for inflation, and thus reflect real change. It should be noted that the percent changes indicated in the following tables are based on unrounded figures, and thus may not calculate exactly. HVS International, Mineola, New York Market Area Analysis 33 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-3 Economic and Demographic Data for the Subject Property's Market Area
Avg. Annual Data Type Period Data Point Data Point Comp. Change - -------------------------------------------------------------------------------------------------------------------- Long-Term Historical Population (+000) Middlesex County 1980-1995 1,369.4 1,404.6 0.2% Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1980-1995 5,348.9 5,754.9 0.5 State of Massachusetts 1980-1995 5,748.4 6,057.9 0.4 United States 1980-1995 227,225.6 262,791.0 1.0 Short-Term Historical Population (+000) Middlesex County 1990-1995 1,398.3 1,404.6 0.1 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1990-1995 5,688.4 5,754.9 0.2 State of Massachusetts 1990-1995 6,018.4 6,057.9 0.1 United States 1990-1995 249,401.4 262,791.0 1.1 Projected Population (+000) Middlesex County 1995-2000 1,404.6 1,410.3 0.1 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1995-2000 5,754.9 5,874.5 0.4 State of Massachusetts 1995-2000 6,057.9 6,137.0 0.3 United States 1995-2000 262,791.0 274,758.4 0.9 Long-Term Historical Retail Sales (+000,000) Middlesex County 1980-1995 8,547.6 10,122.4 1.1 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1980-1995 33,570.2 42,615.7 1.6 State of Massachusetts 1980-1995 35,625.3 43,503.2 1.3 United States 1980-1995 1,340,768.9 1,765,826.1 1.9 Short-Term Historical Retail Sales (+000,000) Middlesex County 1990-1995 9,987.3 10,122.4 0.3 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1990-1995 41,364.4 42,615.7 0.6 State of Massachusetts 1990-1995 42,531.0 43,503.2 0.5 United States 1990-1995 1,557,380.2 1,765,826.1 2.5 Projected Retail Sales (+000,000) Middlesex County 1995-2000 10,122.4 10,148.1 0.1 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1995-2000 42,615.7 43,528.2 0.4 State of Massachusetts 1995-2000 43,503.2 44,042.8 0.2 United States 1995-2000 1,765,826.1 1,846,830.4 0.9 Long-Term Historical Retail Sales Per Capita Middlesex County 1980-1995 6,241.8 7,206.4 1.0 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1980-1995 6,276.1 7,405.2 1.1 State of Massachusetts 1980-1995 6,197.4 7,181.2 1.0 United States 1980-1995 5,900.6 6,719.5 0.9 Short-Term Historical Retail Sales Per Capita Middlesex County 1990-1995 7,142.4 7,206.4 0.2 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1990-1995 7,271.7 7,405.2 0.4 State of Massachusetts 1990-1995 7,066.8 7,181.2 0.3 United States 1990-1995 6,244.5 6,719.5 1.5
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 34 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-3 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------------------------ Projected Personal Retail Sales Per Capita Middlesex County 1995-2000 7,206.4 7,195.9 (0.0) Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1995-2000 7,405.2 7,409.7 0.0 State of Massachusetts 1995-2000 7,181.2 7,176.6 (0.0) United States 1995-2000 6,719.5 6,721.7 0.0 Long-Term Historical Eating and Drinking Place Sales (+000,000) Middlesex County 1980-1995 795.9 1,061.3 1.9 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1980-1995 3,389.3 4,693.3 2.2 State of Massachusetts 1980-1995 3,709.2 5,043.2 2.1 United States 1980-1995 126,131.6 185,035.4 2.6 Short-Term Historical Eating and Drinking Place Sales (+000,000) Middlesex County 1990-1995 989.1 1,061.3 1.4 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1990-1995 4,407.3 4,693.3 1.3 State of Massachusetts 1990-1995 4,750.3 5,043.2 1.2 United States 1990-1995 161,197.4 185,035.4 2.8 Projected Eating and Drinking Place Sales (+000,000) Middlesex County 1995-2000 1,061.3 1,092.5 0.6 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1995-2000 4,693.3 4,883.0 0.8 State of Massachusetts 1995-2000 5,043.2 5,221.0 0.7 United States 1995-2000 185,035.4 199,127.3 1.5 Long-Term Historical Eating and Drinking Place Sales Per Capita Middlesex County 1980-1995 581.2 755.5 1.8 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1980-1995 633.6 815.5 1.7 State of Massachusetts 1980-1995 645.2 832.5 1.7 United States 1980-1995 555.1 704.1 1.6 Short-Term Historical Eating and Drinking Place Sales Per Capita Middlesex County 1990-1995 707.4 755.5 1.3 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1990-1995 774.8 815.5 1.0 State of Massachusetts 1990-1995 789.3 832.5 1.1 United States 1990-1995 646.3 704.1 1.7 Projected Eating and Drinking Place Sales Per Capita Middlesex County 1995-2000 755.5 774.7 0.5 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1995-2000 815.5 831.2 0.4 State of Massachusetts 1995-2000 832.5 850.7 0.4 United States 1995-2000 704.1 724.7 0.6 Long-Term Historical Personal Income (+000,000) Middlesex County 1980-1995 22,135.6 32,881.8 2.7 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1980-1995 80,572.5 116,135.5 2.5 State of Massachusetts 1980-1995 85,728.2 120,350.9 2.3 United States 1980-1995 3,163,874.0 4,443,243.2 2.3
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 35 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-3 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------------------ Short-Term Historical Personal Income (+000,000) Middlesex County 1990-1995 31,480.0 32,881.8 0.9 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1990-1995 111,831.4 116,135.5 0.8 State of Massachusetts 1990-1995 116,527.4 120,350.9 0.6 United States 1990-1995 4,051,714.6 4,443,243.2 1.9 Projected Personal Income (+000,000) Middlesex County 1995-2000 32,881.8 35,681.4 1.6 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1995-2000 116,135.5 126,766.0 1.8 State of Massachusetts 1995-2000 120,350.9 130,482.7 1.6 United States 1995-2000 4,443,243.2 4,972,219.5 2.3 Long-Term Personal Income per Capita Middlesex County 1980-1995 16,164.0 23,409.0 2.5 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1980-1995 15,064.0 20,180.0 2.0 State of Massachusetts 1980-1995 14,913.0 19,867.0 1.9 United States 1980-1995 13,924.0 16,908.0 1.3 Short-Term Historical Personal Income per Capita Middlesex County 1990-1995 22,513.0 23,409.0 0.8 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1990-1995 19,660.0 20,180.0 0.5 State of Massachusetts 1990-1995 19,362.0 19,867.0 0.5 United States 1990-1995 16,246.0 16,908.0 0.8 Projected Personal Income per Capita Middlesex County 1995-2000 23,409.0 25,301.0 1.6 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1995-2000 20,180.0 21,579.0 1.3 State of Massachusetts 1995-2000 19,867.0 21,262.0 1.4 United States 1995-2000 16,908.0 18,097.0 1.4 Long-Term Historical Employment - Middlesex County (+000) Farm 1980-1995 2.8 1.6 (3.5) Agriculture Services, Other 1980-1995 3.2 5.3 3.4 Mining 1980-1995 0.5 0.6 1.6 Construction 1980-1995 29.2 35.9 1.4 Manufacturing 1980-1995 202.4 139.3 (2.5) Trans., Comm. & Public Utils 1980-1995 27.7 30.3 0.6 Total Trade 1980-1995 161.5 182.7 0.8 Wholesale Trade 1980-1995 43.7 51.9 1.2 Retail Trade 1980-1995 117.8 130.8 0.7 Finance, Insurance, & Real Estate 1980-1995 41.1 51.5 1.5 Services 1980-1995 229.8 392.2 3.6 Total Government 1980-1995 95.8 87.3 (0.6) Federal Civilian Govt 1980-1995 15.0 15.3 0.1 Federal Military Govt 1980-1995 14.4 11.6 (1.5) State & Local Govt 1980-1995 66.4 60.4 (0.6) TOTAL 1980-1995 794.0 926.7 1.0
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 36 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-3 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------------------------- Short-Term Historical Employment - Middlesex County (+000) Farm 1990-1995 1.8 1.6 (1.3) Agriculture Services, Other 1990-1995 5.1 5.3 0.5 Mining 1990-1995 0.7 0.6 (3.4) Construction 1990-1995 38.3 35.9 (1.3) Manufacturing 1990-1995 168.9 139.3 (3.8) Trans., Comm. & Public Utils 1990-1995 30.0 30.3 0.2 Total Trade 1990-1995 194.3 182.7 (1.2) Wholesale Trade 1990-1995 58.8 51.9 (2.5) Retail Trade 1990-1995 135.5 130.8 (0.7) Finance, Insurance, & Real Estate 1990-1995 55.5 51.5 (1.5) Services 1990-1995 358.1 392.2 1.8 Total Government 1990-1995 94.2 87.3 (1.5) Federal Civilian Govt 1990-1995 15.5 15.3 (0.2) Federal Military Govt 1990-1995 14.4 11.6 (4.2) State & Local Govt 1990-1995 64.4 60.4 (1.3) TOTAL 1990-1995 946.9 926.7 (0.4) Projected Employment - Middlesex County (+000) Farm 1995-2000 1.6 1.5 (1.3) Agriculture Services, Other 1995-2000 5.3 5.1 (0.4) Mining 1995-2000 0.6 0.7 3.0 Construction 1995-2000 35.9 35.8 (0.0) Manufacturing 1995-2000 139.3 134.7 (0.7) Trans., Comm. & Public Utils 1995-2000 30.3 30.2 (0.0) Total Trade 1995-2000 182.7 181.5 (0.1) Wholesale Trade 1995-2000 51.9 51.4 (0.2) Retail Trade 1995-2000 130.8 130.2 (0.1) Finance, Insurance, & Real Estate 1995-2000 51.5 52.8 0.5 Services 1995-2000 392.2 410.4 0.9 Total Government 1995-2000 87.3 88.3 0.2 Federal Civilian Govt 1995-2000 15.3 15.4 0.1 Federal Military Govt 1995-2000 11.6 11.7 0.2 State & Local Govt 1995-2000 60.4 61.2 0.3 TOTAL 1995-2000 926.7 941.2 0.3
- -------------------------------------------------------------------------------- Subsequent sections of this economic study and appraisal will relate these historical and projected growth trends to specific market segments based on their propensity to reflect visitation. This analysis will provide a basis for forecasting changes in room night demand in the subject property's area. HVS International, Mineola, New York Overview of External Forces 37 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 5. Overview of External Forces Affecting the U.S. Lodging Industry Introduction Hotel ownership is ultimately the business of creating and enhancing value. To understand the investment potential of lodging facilities, investors must be thoroughly aware of the many forces that can cause changes in the value of their properties. Although some of these forces are internal (such as the layout and design of the facilities, the quality of management, and the condition of the property), others are external (such as the local economic environment and the competitive nature of the market). The risk associated with hotel investment lies largely with the external forces that are beyond the control of ownership and contribute to the variability of future income flows. Investors and appraisers can project financial results by evaluating the historical impact of external forces on hotel values. Successful hotel investors seek opportunities where the risk of external forces can be minimized, thus reducing the uncertainty associated with income expectations. When investors engage in due diligence prior to acquiring a lodging facility, they are primarily interested in trends affecting a limited geographic market area, such as a town, city, or county. A broader overview takes into account national and international travel patterns and trends. An understanding of the general characteristics of the United States hotel market is important because these trends often foreshadow economic and demographic changes in smaller areas. This section of the appraisal will present an overview of the U.S. lodging industry by tracing many of the forces that influence hotel values. Historical economic and demographic data, and industry statistics will be analyzed to provide a basis for projections. Forecasts will be evaluated to determine their reasonableness. The conclusions represent another set of criteria that hotel investors consider in making their acquisition decisions. HVS International, Mineola, New York Overview of External Forces 38 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The Supply and Demand Relationship Most business ventures are influenced by the relationship between supply and demand. In the hotel industry, supply refers to the number of units. A unit consists of one or more rooms and represents the smallest accommodation that can be rented to a guest. Each unit must have a full bath and its own entrance to a public hallway or the building exterior. Demand refers to a room night, which is one unit that is occupied for one night. The supply and demand relationship has a significant influence on a hotel's occupancy and/or average room rate. Occupancy is calculated by dividing the number of rooms that are occupied for a specific period by the total number of rooms that are available during the same period. Average room rate is determined by dividing the total rooms revenue achieved during a specific period by the number of rooms occupied during that period; it also represents the weighted average of all the room rates charged during that period. In a market where demand is increasing faster than supply, occupancies rise and average rate growth generally exceeds inflation. When supply is increasing faster than demand, occupancies fall and average rates typically remain level or decline. Hotels generate revenue based on occupancy and average rate, and thus the supply and demand relationship is an important factor in analyzing profits and value. Hotel occupancy levels have shown definite cycles that reflect the balance between supply and demand. The early 1970s marked the beginning of a hotel building boom reminiscent of the 1920s. Many factors contributed to this expansion, but the two main elements were readily available financing and aggressive chains that were eager to sell franchises. The new construction during the 1970s was made possible by the enormous amount of financing generated by all lenders, particularly real estate investment trusts (REITs). These high-leverage finance companies were created to allow small investors to participate in real estate mortgages and equities. The concept was quickly accepted by Wall Street, and soon billions of dollars were available to finance real estate projects. Many lenders became so overwhelmed with new money that their underwriting procedures broke down and some marginal developments were approved. During the late 1960s and early 1970s, hotel companies actively expanded their chains through franchising. Franchising was a source of new capital, allowing hotel companies to grow and achieve national recognition using the franchisee's financial investment in individual properties. Some franchisors, eager to demonstrate sustained growth and establish a national HVS International, Mineola, New York Overview of External Forces 39 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= presence, employed questionable marketing tactics to sell new franchises. Salespeople were often compensated based on the number of franchises sold, so there was little incentive to discourage developers from investing in poor locations and overbuilt markets. Many lenders and hostelry developers were led to believe that a national franchise would guarantee a successful operation. The combination of readily available financing and aggressive hotel chains eager to sell franchises resulted in overbuilding and development of many poorly located, undercapitalized hostelries managed by inexperienced owners. The bubble burst on the lodging industry when inflation caused construction costs and interest rates to escalate. The 1974 energy crisis drastically reduced travel, and the accompanying recession curtailed business trips, conferences, and conventions. Operators of marginal properties quickly fell behind in their mortgage payments, and lenders were forced to foreclose. As lenders became hostelry owners, they either organized work-out departments headed by experienced hoteliers or engaged professional hotel management companies to assume operational responsibilities. Sales data indicate that lenders who were looking for quick sales to remove nonperforming hotel assets from their books had to lower their prices substantially to attract all-cash buyers. Lenders who were willing to hold on to foreclosed hotels and employ professional management to reposition and improve the properties' operation were generally able to recoup their original investments in three to five years, once the industry began to recover. However, even lenders who repositioned their hotels had to take back favorable purchase-money financing to sell the properties because money from other sources was not available. History has shown that during economic downturns, hotel values generally do not fall in proportion to the properties' declining incomes. Sellers, and particularly lenders who take back hotels through foreclosure, are often unwilling to sell at substantially reduced prices. They are more likely to wait out the downward cycle and dispose of their assets when the market begins to rebound. Thus, appraisers can best reflect market behavior by projecting a facility's net income to a point of recovery and applying the proper discounted cash flow procedure over that time period. The late 1970s was a period of relative calm for the lodging industry. Because most lenders were recovering from the financial wounds inflicted by HVS International, Mineola, New York Overview of External Forces 40 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the 1975 recession, they had little interest in making hotel mortgages. New construction was restrained, and primarily consisted of additions to existing properties and the development of some large, downtown hotels oriented toward the commercial and convention markets. The rebirth of center-city hostelries was a direct result of fuel shortages and the availability of government financing for inner-city redevelopment projects. Highway-oriented properties, on the other hand, were adversely affected by escalating gasoline prices and decreased automobile travel, and these lodging facilities lost some of their appeal among investors and hotel companies. Decreased building activity, the normal retirement of older hostelries from the market, and an improving economy created a favorable supply and demand relationship and record-high occupancy levels from 1979 to 1980. Average room rates increased rapidly as operators took advantage of the excess demand to recoup earlier losses and keep up with inflation. After the decline in hotel development during the late 1970s, the environment appeared suitable for a period of renewed expansion. However, the Federal Reserve tightened the money supply in the early 1980s, sending the prime interest rate up to double-digit levels. Most of the projects that were in the preliminary planning stages but lacked sensible financing were put on hold. Fiscal policy and declining energy prices eventually reduced the national inflation rate. This caused a decline in hotel interest rates beginning in 1983, and suddenly massive amounts of capital were available for real estate investments. Hotel developers who had been out of the market since the mid-1970s rushed to initiate new projects. They were aided by several major real estate development incentives: high occupancies and escalating room rates, readily available debt and equity financing, and unique income tax benefits designed to stimulate the national economy out of a recession. During the early 1980s, trends were generally favorable for new hotel development. Although the recession caused a decline in lodging demand, many markets showed relatively high occupancy levels. Room rates were usually able to keep up with inflation, and the travel industry was expected to boom as a result of a recovering economy. Franchise sellers signed up new prospects aggressively, using product segmentation to justify the saturation of a market with a common brand. HVS International, Mineola, New York Overview of External Forces 41 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Financing was readily available from the savings and loan industry. Following deregulation, these banks were permitted to lend on commercial real estate, such as hotels. Although savings and loans had experience in making loans on single-family homes, few had expertise with commercial properties, and fewer still with hotels. The result was almost identical to the real estate investment trust fiasco the decade before: loan underwriting and administration were inept and sometimes nonexistent, the number of loans made seemed more important than the quality of the real estate and the integrity of the borrower, and short-term funds were often used to finance long-term mortgages. In the early 1990s, the industry suffered the consequences of this lending spree: most major hotel markets became severely overbuilt and many savings and loans went out of business. Another factor contributing to hotel development in the 1980s was the very favorable treatment provided by income tax regulations. By carefully structuring hotel syndications to take advantage of all available tax benefits, investors could virtually recoup their total cash outlay in the first year and reap additional benefits in the future regardless of the economic success of the underlying asset. Because there was little incentive to justify a transaction's economics (i.e., cash flow and reversionary benefits), a number of syndicators overpaid for hotel properties, took out usurious fees, and overloaded their hotels with debt. A change in the tax law in the mid-1980s eliminated many of the benefits associated with hotels, but the overbuilding in most markets was either in progress or had already taken place. By the end of the 1980s, the abuses of the savings and loans had become apparent, but it was too late to reverse the overbuilding. Between 1985 and 1990, approximately 556,000 rooms were added to the U.S. hotel supply. The national economy entered another recession in 1990, and this factor (coupled with overbuilding and the Persian Gulf War in 1991) caused the national hotel occupancy rate to bottom out at 60.9%. In some markets, hotel occupancies were as low as 35%. This supply and demand imbalance was almost identical to the situation in the 1970s that led to numerous hotel failures. As in the REIT days, the number of non-performing loans reached record levels, and lenders moved to a work-out mode of operation in order to foreclose and restructure their hotel investments. Many of the savings and loans were taken over by the government and their hotel assets were sold at auction. HVS International, Mineola, New York Overview of External Forces 42 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= According to the American Council of Life Insurance, which represents major life insurance companies, the number of delinquent hotel loans and the number of hotel loans in foreclosure peaked in 1991. This trend is undergoing a reversal as the U.S. lodging industry begins to recover. Loan restructuring was an attractive alternative to foreclosure during this period, and the number of loans in good standing with restructured terms almost doubled. By 1993, new hotel construction had declined significantly. Lenders, trying to get out from under problematic hotel portfolios, curtailed all real estate lending and would not even consider hotels. The tax benefits associated with lodging facilities had been reduced significantly, and passive investors left the hospitality market entirely. The slowdown in the growth of supply had a beneficial impact on occupancy levels, which started to recover in 1992. Improved occupancies are expected to continue through the late 1990s as increases in lodging demand outpace growth in supply. Beginning in 1991, many lenders and the Resolution Trust Corporation (RTC) sold their oldest and least desirable hotels at liquidation prices. Because virtually no third-party financing was available, most lenders were forced to take back purchase-money mortgages at favorable terms in order to sell these properties without suffering massive write-downs. The newer and more desirable hotels were not put on the market, because their lenders/owners were waiting for values to recover. This course of action significantly reduced the number of transactions involving good-quality lodging facilities. The following table shows the volume of hotel transactions exceeding $10,000,000 between 1990 and 1995. ================================================================================ Table 5-1 Summary of Major Hotel Transactions - -------------------------------------------------------------------------------- Year 1990 1991 1992 1993 1994 1995 - -------------------------------------------------------------------------------- Number of Transactions 130 54 67 52 92 104 Number of Rooms 40,543 16,427 25,187 19,935 33,503 36,951 Average Price Per Room $136,000 $91,000 $85,000 $79,000 $80,000 $83,000 Source: HVS International - -------------------------------------------------------------------------------- In 1991, there were only 54 major hotel sales recorded. This number increased to 67 in 1992 and declined to 52 in 1993, then rose dramatically in HVS International, Mineola, New York Overview of External Forces 43 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 1994 and 1995. During the low-volume years, many sellers remained on the sidelines waiting for values to increase before placing their properties on the market. The jump in 1994 is attributable to a number of factors, including the greater availability of mortgage funds, a return of institutional investors to the market, and a resurgence of investor interest in lodging facilities. The profile of typical hotel buyers has changed somewhat. During the mid-1980s, when tax-driven syndication's were popular, many hotels were purchased by passive investors who hired management companies to operate their properties. These owners had little involvement in day-to-day management decisions, which occasionally led to poor management and financial losses. Today, most buyers of major hotels are owner-operators who bring with them both the acquisition funds (usually from a joint venture partner) and management expertise. We also note that real estate investment trusts (REITs) and public hotel companies (C-Corps) are actively acquiring hotels using funds from public equity stock offerings. The supply of new hotel rooms is expected to increase slowly during the next several years. Lenders are beginning to return to the market, and are making some hotel loans based on conservative criteria. Initially, mortgage funds were available mainly to the budget and economy lodging sectors, for the purpose of refinancing existing properties or assisting buyers in acquisitions. Now, a number of lenders are willing to finance new construction for these small, low-end properties. Although financing is also becoming available for the acquisition of large, full-service hotels, very little has been allocated for new construction. At present, active hotel lenders are not necessarily traditional banks and insurance companies, but may include credit companies and Wall Street securities firms. A number of hotel owners and developers are now constructing budget and economy hotels; a few are planning more upscale, full-service properties. Most lenders are taking a conservative approach to new hotel loans, which should limit new development to those projects that demonstrate true economic feasibility. As a result, severe short-term overbuilding is unlikely. HVS International, Mineola, New York Overview of External Forces 44 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Room Rates The supply and demand relationship has a direct impact on hotel occupancies and an indirect influence on room rate growth. Between 1978 and 1995, hotel room rates increased at an average annual compounded rate of almost 6%. Significant rate growth was recorded during the late 1970s and early 1980s as a result of strong occupancies (70%'s) coupled with a high monetary inflation rate (14%). In recent years, room rate growth slowed as a result of low occupancies and a drop in inflation. Hotel room rates generally increase faster than the Consumer Price Index (CPI) when occupancies are strong or moving upward. When occupancies are low or declining, room rate growth tends to lag behind the CPI; in some cases, rates may remain flat or actually drop. The following table compares the historical and projected annual increase in hotel room rates in the United States to the change in the national CPI. HVS International, Mineola, New York Overview of External Forces 45 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-2 Percent Change in Average Room Rates Versus CPI - U.S. Hotels - -------------------------------------------------------------------------------- Consumer Price Hotel Room Rate Index Hotel Year Percent Change Percent Change Occupancy -------------------------------------------------------------- 1973 4.2% 6.2% 70.2% 1974 7.6 11.0 64.0 1975 7.3 9.1 63.7 1976 8.2 5.7 65.8 1977 8.1 6.5 67.3 1978 14.0 7.7 69.2 1979 17.0 11.3 71.9 1980 15.2 13.5 70.6 1981 10.0 10.3 67.9 1982 6.5 6.2 66.7 1983 5.1 3.2 64.4 1984 6.9 4.3 64.0 1985 4.6 3.6 63.1 1986 3.2 1.9 62.5 1987 3.6 3.6 61.9 1988 3.6 4.1 62.3 1989 3.5 4.8 63.2 1990 3.0 5.4 62.4 1991 0.6 4.2 60.9 1992 1.4 3.0 62.1 1993 2.8 3.0 63.1 1994 5.2 2.6 64.7 1995 4.8 2.8 65.5 1996 5.0 3.0 66.0 1997 5.5 3.5 67.0 1998 6.0 4.0 68.0 1999* 5.5 4.0 68.0 Sources: Smith Travel Research & HVS International *Projected - -------------------------------------------------------------------------------- This table shows two periods when hotel room rate growth failed to keep pace with the CPI. From 1973 to 1975, the hotel industry was suffering from overbuilding related to real estate investment trusts, a recession, and a downturn in travel caused by the oil embargo. The second period of slow room rate growth occurred between 1988 and 1993, when the industry was again affected by overbuilding and a weak economy. The table illustrates that during periods of prosperity, room rates are a good hedge against inflation; this was true even when the CPI increased at double-digit levels. HVS International, Mineola, New York Overview of External Forces 46 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The projections indicate a strong recovery of room rates as the relationship between supply and demand becomes more favorable. Growth is expected to peak in 1998 at 6%, which is significantly higher than the projected gain in the CPI. This may appear high, but a similar trend occurred in 1978, when room rates rose 14.0% and the CPI increased by only 7.7%. Hotels are unique because their room rates can be adjusted at any time. Unlike office space, where rents are typically negotiated for a five-year period, hotel operators are free to base rates on occupancy trends. Using sophisticated yield management programs, modern lodging facilities can ride the demand curve and maximize room rates whenever the market permits. As a result, hotels generally offer significant upside potential during periods of economic prosperity. If lodging facilities can increase room rates faster than the CPI and still maintain occupancies, bottom-line profits usually escalate. If they can raise room rates and occupancy at the same time, profits will grow significantly. The opposite occurs when room rates fail to keep pace with inflation. Because market value is basically a multiple of bottom-line profits, changes caused by fluctuations in occupancy and average rate have a direct impact on value. Rooms Revenue per Available Room (RevPAR) The ability of a hotel to maximize its occupancy and room rate is measured in terms of rooms revenue per available room (RevPAR), which is the product of occupancy and average rate. Between 1978 and 1995, RevPAR in the U.S. lodging industry increased at an average annual compounded rate of approximately 5%. As in the case of average rate, most of the increase occurred during the late 1970s, when occupancies escalated rapidly. The only decline in RevPAR occurred in 1991. Trends in Hotel Sales HVS International constantly monitors hotel markets in order to collect information on sales of lodging facilities. This comprehensive database is known as the Hospitality Market Data Exchange (HMDE). The HMDE includes more than 90% of all hotel sales that took place during this period. The HMDE data shows that the number of transactions peaked at 726 in 1986. This strong activity is largely attributable to pending changes in the tax laws, which made it less favorable to own hotels. It is also possible that forward-thinking investors noted the substantial overbuilding and declining economy and decided to bail out at that time. In 1987 and 1990, the HVS International, Mineola, New York Overview of External Forces 47 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= average sales price per room peaked at $75,000. This was more than twice the 1981 average of $36,000. Following the 1990 peak, hotel prices fell rapidly as occupancies and profits were eroded by the massive number of hotel rooms entering the market. By 1991, the year of the Persian Gulf War, sales prices had fallen to $38,000 per room. Even the highest price per room declined from the record $1,195,652 (for the sale of the Bel Aire Hotel) to $251,816 in 1992. The market hit bottom in 1993 when the average sales price dropped to $36,000 per room. Prices recovered rapidly in 1994 and 1995 as investors became interested in hotels again and more full-service properties were put on the market. In 1995, the average sales price was $61,000 per room. The figures presented in the HMDE represent actual sales prices; no attempt was made to adjust for factors such as favorable or unfavorable financing, forced or liquidation sales, bankruptcy sales, foreclosures, and so forth. As a result, the average price per room does not necessarily reflect market value, which assumes a willing buyer and a willing seller. Many of the transactions that took place during the early 1990s involved unwilling sellers - usually lenders who were forced to liquidate hotel portfolios quickly at prices that were below market levels. Most hotel experts agree that a recovery is underway, and they recommend that owners hold their properties until more favorable conditions prevail. Trends in Hotel Values A more meaningful indicator of trends in hotel value is the Hotel Valuation Index (HVI), developed by HVS International. This index tracks changes in hotel values in 23 major markets and the nation as a whole. It is developed through an income approach, using market area data provided by Smith Travel Research and operational and capitalization rate information from HVS International, and is indexed to the 1986 U.S.A. value (1.0000). The following table sets forth the HVI from 1986 to 1995. HVS International, Mineola, New York Overview of External Forces 48 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-3 Hotel Valuation Index per Room - -------------------------------------------------------------------------------- Valuation Index Per Room ------------------------
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 ------------------------------------------------------------------------------------------------------- Honolulu 3.3571 4.0357 4.6964 5.2857 5.3214 4.7857 4.9286 4.2857 4.3929 5.6071 New Orleans 1.5357 1.7500 2.2857 2.3929 2.5000 2.6071 3.2857 3.2500 3.8929 4.4286 New York 3.5714 4.1071 4.6429 4.5357 3.9286 3.0357 2.5714 2.5714 3.1429 4.1071 San Francisco 2.5000 3.0893 3.2500 3.0714 2.9286 2.5714 2.5714 2.9643 3.2143 4.0000 Phoenix 1.2143 1.0714 1.1786 1.5357 1.4286 1.2500 1.5000 1.9643 2.3571 3.2143 San Diego 2.8571 2.3571 2.5714 2.6786 2.3929 2.5357 2.5357 2.2143 2.3571 3.0357 Miami 1.4286 1.6071 1.7321 2.1429 2.1786 2.2500 2.5714 2.7857 2.3214 2.9286 Washington, DC 2.1786 2.1786 2.4464 2.6071 2.2500 1.8571 2.0357 2.5000 2.3929 2.8929 Atlanta 1.0714 1.0179 1.0536 1.0357 1.1429 1.1250 1.2857 1.7857 2.1429 2.6786 Minneapolis 0.7321 0.6964 0.7143 0.7143 0.7857 1.0000 1.2857 1.5714 1.8214 2.1786 Chicago 1.4643 1.5000 1.5714 1.5000 1.4286 1.2143 1.2500 1.5000 1.8571 2.1786 Boston 2.3571 2.7143 2.6071 2.1429 1.8214 1.2500 1.3036 1.3214 1.6071 2.1071 Fort Lauderdale 1.4643 1.2679 1.3214 1.4286 1.4821 1.3571 1.7143 1.8929 1.6071 1.9286 Orlando 1.5000 1.6429 1.9286 2.5000 2.5357 1.8929 2.0714 1.7857 1.6071 1.8929 Denver 0.5357 0.4464 0.4643 0.4821 0.7857 0.9268 1.0357 1.3214 1.5000 1.8571 Dallas 0.5536 0.6250 0.6607 0.7321 0.7857 0.7143 0.9643 1.0357 1.3214 1.7143 USA 1.0000 0.9464 1.0536 1.1250 1.0714 0.9214 0.9929 1.1429 1.3214 1.6071 Los Angeles 2.1071 2.2857 2.3929 2.4643 2.1786 1.5714 1.0714 0.9643 1.1964 1.5000 Tampa 0.8393 0.7679 0.8571 1.1429 1.2857 1.0357 1.0714 1.0357 1.1071 1.3214 Anaheim 1.7679 1.7321 1.7500 1.8571 1.6071 1.2857 0.9642 0.9464 0.8393 1.2500 Houston 0.3571 0.4286 0.6964 0.7857 1.1071 1.1607 1.1429 1.0357 1.0000 1.1786 Philadelphia 1.4643 1.5357 1.4286 1.3214 1.0714 0.6786 0.5714 0.6071 0.7500 1.0714 Norfolk 1.1786 1.0536 0.9286 0.7857 0.6429 0.5357 0.6071 0.6429 0.7500 0.9643 Riverside 0.9643 1.2143 1.5714 1.7143 1.4643 1.2500 0.7857 0.5357 0.4286 0.5357 Source: HVS International - -------------------------------------------------------------------------------------------------------------------------
The HVI can be used to show the value change in a particular market over time or to show the relative difference in hotel values in various cities. The following table shows the annual change in hotel values in 23 major markets and the United States as a whole. HVS International, Mineola, New York Overview of External Forces 49 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-4 Percent Change in the Hotel Valuation Index - -------------------------------------------------------------------------------- Annual Percent Change ---------------------
'86-87 '87-88 '88-'89 '89-'90 '90-'91 '91-'92 '92-'93 93-'94 '94-'95 '86-'95 ---------------------------------------------------------------------------------------- Honolulu 20% 16% 13% 1% -10% 3% -13% 3% 28% 67% New Orleans 14 31 5 4 4 26 -1 20 14 188 New York 15 13 -2 -13 -23 -15 0 22 31 15 San Francisco 24 5 -5 -5 -12 0 15 8 24 60 Phoenix -12 10 30 -7 -13 20 31 20 36 165 San Diego -18 9 4 -11 6 0 -13 6 29 6 Miami 12 8 24 2 3 14 8 -17 26 105 Washington, DC 0 12 7 -14 -17 10 23 -4 21 33 Atlanta -5 4 -2 10 -2 14 39 20 25 150 Minneapolis -5 3 0 10 27 29 22 16 20 198 Chicago 2 5 -5 -5 -15 3 20 24 17 49 Boston 15 -4 -18 -15 -31 4 1 22 31 -11 Fort Lauderdale -13 4 8 4 -8 26 10 -15 20 32 Orlando 10 17 30 1 -25 9 -14 -10 18 26 Denver -17 4 4 63 18 12 28 14 24 247 Dallas 13 6 11 7 -9 35 7 28 30 210 USA -5 11 7 -5 -14 8 15 16 22 61 Los Angeles 8 5 3 -12 -28 -32 -10 24 25 -29 Tampa -9 12 33 12 -19 3 -3 7 19 57 Anaheim -2 1 6 -13 -20 -25 -2 -11 49 -29 Houston 20 62 13 41 5 -2 -9 -3 18 230 Philadelphia 5 -7 -8 -19 -37 -16 6 24 43 -27 Norfolk -11 -12 -15 -18 -17 13 6 17 29 -18 Riverside 26 29 9 -15 -15 -37 -32 -20 25 -44 Source: HVS International - ----------------------------------------------------------------------------------------------------------
On a national basis, hotel values rose in 1988 and 1989, then declined in 1990 and dropped by 14% in 1991. A turnaround commenced in 1992, when values increased by 8%; still greater increases of 15% in 1993, 16% in 1994, and 22% in 1995 signaled that a recovery was well underway. In the case of the individual cities, it is obvious that the movement in national hotel values has been offset somewhat by trends in local markets. Between 1986 and 1995, Riverside hotels lost more than 40% of their value, while San Francisco showed a 60% increase. Anaheim, Los Angeles, and Philadelphia also suffered significant drops. Future Trends Most hotel owners, operators and lenders agree that the U.S. lodging industry has emerged from one of the worst periods since the Depression of 1929. Today, there are many indications that signal a strong recovery is underway, and most hotels have experienced a dramatic rise in profitability. Conversely, the hotel industry remains cyclical, and there are long-term trends and risk factors that could have an unfavorable impact on the operating results and investment potential of lodging facilities. The following HVS International, Mineola, New York Overview of External Forces 50 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= list summarizes the positive and negative factors that are likely to influence the U.S. lodging industry in coming years. o No significant amount of new hotel development is likely to occur during the next three to five years. Lenders stopped financing new hotels in the early 1990s because of the high rate of loan defaults, and they are only now starting to make construction loans. Although mortgage funds are available to refinance existing properties and construction loans are being made for economy hotels, mortgages for new hotels in the mid-rate, first-class, and luxury categories are still difficult to secure. This lack of financing is major barrier to entry, and will prevent a number of proposed projects from moving forward. With only a slow increase in supply, hotel occupancies should rebound as fast as the growth in demand permits. o An additional barrier to entry is the current discrepancy between market values and replacement costs for first-class and luxury hotels. In today's market, many upscale hotels are still selling for prices that are below what it would cost to develop a comparable hotel. As a result, there is little justification for building a new hotel when a similar, existing facility is available for sale at some fraction of the cost. Until the gap between market value and replacement cost narrows, there will be minimal new hotel construction in the upper-tier segments. The market values and replacement costs of budget and economy hotels have been in equilibrium for several years which is another reason why new development is proceeding in these segments. o The U.S. economy continues to improve, which suggests that more people are traveling. Many people curtailed their travel plans during the recent recession, and there is likely to be pent-up demand that will be released as consumer confidence escalates. o Minimal additions to the hotel supply coupled with growth in demand should result in further improvement in occupancies during the next several years. o As shown by the historical data, hotel room rates rise rapidly as occupancies escalate. The most frequent complaint that owners and operators had during the recent recession was their inability to achieve average rate gains. Starting in 1994, gains in hotel room rates returned to levels in excess of inflation, foreshadowing enhanced profitability. In real dollars, hotel room rates are expected to return to 1988 levels by 1998. This HVS International, Mineola, New York Overview of External Forces 51 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= is a good indication that hotel values will return to record levels in the next two to four years. o The low cost of capital is another factor that tends to enhance value. Because capitalization rates are tied directly to the price of capital, the lower the cost, the lower the cap rate and the higher the value. The cost of hotel debt capital averaged 10.5% in 1990. Today, similar financing is available at 8.5% to 9.5%. Recent hotel sales support the downward trend in capitalization rates. o Government regulations are becoming increasingly expensive for the U.S. hotel industry. A national health care policy could force small operators to provide better benefits for many more employees, particularly the part-time workers who are used extensively by hotels and restaurants. Environmental laws are becoming stricter and will require hotels to implement recycling, reuse, and conservation procedures. Congress has limited deductions for meals and entertainment expenses, which increases the cost of doing business in hotels and restaurants. Local municipalities use hotel rooms taxes as a source of revenue for general use, and the hotel rooms tax is so high in some areas that it has driven away demand. This is particularly true with respect to meetings and conventions, which can be held in cities that tax accommodations at a lower rate. o Improved technology is rapidly changing the way business is conducted. During the next decade, advances such as video communication, enhanced data transfer, and faster transportation are expected to limit the need for face-to-face meetings and shorten the time that executives are away from their offices. Commercial hotels are bound to be influenced by this trend. Conclusion Interest in hotel acquisition has increased significantly during the past several years. Buyers have concluded that future earnings trends are likely to be favorable, and the risks posed by overbuilding or an economic downturn are small. Some sellers are holding their properties until prices reach a higher level. Consequently, we believe there is pent-up desire to sell once prices begin to approach levels that allow the existing (or restructured) debt to be paid off. The fact that numerous buyers are chasing very few acquisition opportunities has had a favorable impact on recent sales prices. For buyers to be successful in this highly competitive market, their projected operating results HVS International, Mineola, New York Overview of External Forces 52 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= must take into account at least a portion of any upside created from improved performance, particularly if the improvement can be readily achieved through management efficiencies. Capitalization rates based on historical operating income have fallen during the past several years. Hotel buyers in today's market must be aggressive in all of their acquisition assumptions. As a result, hotel values in some parts of the country are approaching the levels registered during the mid-1980s, and a full recovery is expected to occur in the next two to four years. HVS International, Mineola, New York Lodging Market Supply and Demand 53 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 6. Lodging Market Supply and Demand Analysis MARKET FOR TRANSIENT ACCOMMODATIONS The market for transient accommodations is an all-encompassing term referring to the many types of travelers who use lodging facilities in a given area. These travelers represent the market's accommodated room night demand. This section will begin with an analysis of historical demand trends to determine what changes have occurred; the historical number of competitive hotel rooms will then be estimated to evaluate local supply trends. Areawide occupancy levels can be calculated based on the number of hotel rooms available in the market and the demand for lodging accommodations. The total hotel room night demand will be divided into individual market segments to allow us to forecast growth rates based on the economic and demographic data set forth earlier in this report. Historical Supply and Demand Data Smith Travel Research (STR) has compiled historical supply and demand data for the subject property and its competitors. This information is presented in the following table, along with the marketwide occupancy, average rate, and rooms revenue per available room (RevPAR). RevPAR is calculated by multiplying occupancy by average rate, and provides an indication of how well rooms revenue is being maximized. HVS International, Mineola, New York Lodging Market Supply and Demand 54 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-1 Historical Room Supply and Demand Trends (STR) - --------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 - ----------------------------------------------------------------------------------------------------- Number of Rooms 1,537 1,855 1,884 1,884 1,884 1,884 1,884 Annual Guestroom Supply 561,005 676,903 687,660 687,660 687,660 687,660 687,660 Percent Change -- 20.7% 1.6% 0.0% 0.0% 0.0% 0.0% Room Night Demand 399,997 411,557 409,158 429,100 446,979 475,173 479,299 Percent Change -- 2.9% (0.6)% 4.9% 4.2% 6.3% 0.9% Occupancy 71.3% 60.8% 59.5% 62.4% 65.0% 69.1% 69.7% Percent Change -- (14.7)% (2.1)% 4.9% 4.2% 6.3% 0.9% Average Rate $81.07 $78.57 $71.27 $68.47 $67.25 $69.67 $74.60 Percent Change -- (3.1)% (9.3)% (3.9)% (1.8)% 3.6% 7.1% RevPAR $57.80 $47.77 $42.41 $42.73 $43.71 $48.14 $52.00 Percent Change -- (17.4)% (11.2)% 0.8% 2.3% 10.1% 8.0% Year to Date ----------------------------- Average Annual Average Annual Compounded Growth Compounded Growth 1995 1996 1989 - 1995 1992 - 1995 - --------------------------------------------------------------------------------------------- Number of Rooms 1,884 1,884 Annual Guestroom Supply 457,812 459,696 Percent Change -- 0.4% 3.5% 0.0% Room Night Demand 315,432 326,384 Percent Change -- 3.5% 3.1% 3.8% Occupancy 68.9% 71.0% Percent Change -- 3.0% -0.4% 3.8% Average Rate $72.47 $80.73 Percent Change -- 11.4% -1.4% 2.9% RevPAR $49.93 $57.32 Percent Change -- 14.8% -1.7% 6.8%
The 347-room Crowne Plaza Hotel opened in February of 1990 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Lodging Market Supply and Demand 55 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= It is important to note some limitations of the STR data. Hotels are occasionally added to or removed from the sample, and not every property reports data in a consistent and timely manner; these factors can influence the overall quality of the information by skewing the results. These inconsistencies may also cause the STR data to differ from the results of our competitive survey. Nonetheless, we find that hotel buyers often rely on STR statistics, and thus they are considered relevant to this study. As indicated in the preceding table, room supply in the market area has remained relatively stable in recent years. The only change to the room supply occurred in 1990, when the 347-room Crowne Plaza opened. Because the Crowne Plaza opened in February of 1990, an addition to the room supply of 318 rooms was reflected in 1990, while the total 347 rooms was reflected in 1991. These additions equated to increases in room supply of 20.7% and 1.6% in 1990 and 1991, respectively. With the exception of 1991, room night demand has shown increases in each year since 1989. The 0.6% decrease in room demand in 1991 can be attributed to the nationwide recession that occurred in that year as well as the Persian Gulf War, both of which adversely affected travel. The market recovered in 1992, when demand climbed by 4.9%, and continued to show growth in 1993 and 1994, when demand increased by 4.2% and 6.3%, respectively. Although growth in demand slowed to 0.9% in 1995, year-to-date data through August, 1996 indicates an increase in demand of 3.0%. Between 1989 and 1995, room night demand increased by an average annual compounded rate of 3.1%. Although growth in demand has resulted in corresponding growth in occupancy since 1992 (as a result of stable room supply), demand and supply dynamics adversely impacted occupancy in 1990 and 1991. When the Crowne Plaza Hotel opened in 1990, demand did not grow sufficiently to absorb the expansion in room supply. As supply increased by 20.7%, demand only grew by 2.9%, resulting in a severe decline in market occupancy of 14.7%. In 1991, occupancy decreased by 2.1% due to an 1.6% increase in room supply and a 0.6% decrease in room night demand. Despite growth in demand in 1990 and in each year since 1992, the market has not yet fully absorbed the addition of the Crowne Plaza Hotel, as indicated by the 1995 market occupancy of 69.7%, which lags behind the 1989 occupancy level of 71.3%. The overall drop in occupancy from 71.3% in 1989 to 69.7% in 1995 represents an average annual compounded decline of 0.4%. With year-to- HVS International, Mineola, New York Lodging Market Supply and Demand 56 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= date 1996 data indicating a 3.0% increase in demand, occupancy appears to be climbing near the 1989 occupancy level. In response to the opening of the Crowne Plaza and the resulting decline in occupancy, as well as the recession that occurred in 1991, hotels in the market lowered rates in an effort to gain a competitive advantage and thus boost occupancy. Average rate in the market declined in each year between 1990 and 1993, with the greatest decrease occurring in 1991, when average rate decreased by 9.3%. As occupancy neared the 70% level in 1994 and 1995, average rate increased by 3.6% and 7.1%, respectively. Year-to-date data indicates an 11.4% average rate increase over the same period in 1995. Overall, average rate in the market declined at an average annual compounded rate of 1.4% from 1989 to 1995. Our analysis of STR indicates that while the market suffered a severe downturn in the early 1990s - as a result of a dilution of demand from increased supply, the national recession, and the Gulf Crisis - the area lodging market has nearly recovered to 1989 levels. Room demand and occupancy demonstrated fairly strong growth between 1992 and 1995, with both increasing at an average annual compounded rate of 3.8%. Growth in average rate has followed demand and occupancy growth. While average rate increased at an average annual compounded rate of 2.9% from 1992 to 1995, the strongest growth has occurred since 1995, with average rate increasing 7.1% in 1995 and 11.4% for year-to-date August, 1996. Demand Analysis Using Market Segmentation For the purpose of demand analysis, the overall market is divided into individual segments based on the nature of travel. Although a market may have various segments, the three primary classifications occurring in most areas are commercial, meeting and group, and leisure. Market segmentation is a useful procedure because individual classifications often exhibit unique characteristics in terms of growth potential, seasonality of demand, average length of stay, double occupancy, facility requirements, price sensitivity, and so forth. By quantifying the room night demand by market segment and analyzing the characteristics of each segment, the overall demand for transient accommodations can be projected. Lodging demand in the Woburn area is generated primarily by the following three market segments. HVS International, Mineola, New York Lodging Market Supply and Demand 57 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Segment 1 Commercial Segment 2 Meeting and Group Segment 3 Leisure Based on our fieldwork, area analysis, and knowledge of the local lodging market, we estimate the 1996 distribution of accommodated hotel room night demand as follows. ================================================================================ Table 6-2 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- 1996 Annual Room Night Demand (Rounded) ----------------------------------------------------------- Percentage Percentage Market Segment Market Wide of Total Subject Property of Total - -------------------------------------------------------------------------------- Commercial 285,000 69% 22,000 50% Meeting and Group 58,000 14 15,000 35 Leisure 71,000 17 7,000 15 --------- ------ --------- ------ Total 414,000 100% 44,000 100% - -------------------------------------------------------------------------------- Commercial demand predominates in the local lodging market, accounting for approximately 69% of the 1996 room night demand. Leisure demand follows the commercial segment with a 17% share of room night demand, while meeting and group demand contributes a relatively strong 14% of the estimated 1996 total. The subject property's demand segmentation differs from that of the market in the commercial and meeting and group segments. Approximately 50% of the Ramada Plaza Hotel's occupancy is derived from the commercial segment, roughly 19% below the market's commercial segmentation. This lower amount of commercial demand is offset by demand generated from the meeting and group segment, which comprises 35% of the subject property's demand, a figure substantially higher than the market's share. This can be attributed to the subject property's strong participation in the tour and travel group demand, which comprises approximately 28% of its room night demand. However, because negotiated room rates for tour groups tend to be significantly lower than the rates the hotel obtains from other types of travelers, such as business travelers, too much reliance on this segment can adversely impact the hotel's average rate. The remainder of the Ramada's demand is derived from the leisure segment, which comprises roughly 15% of the subject property's demand. HVS International, Mineola, New York Lodging Market Supply and Demand 58 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Using the distribution of accommodated hotel demand as a starting point, we will analyze the characteristics of each market segment in an effort to determine future trends in room night demand. Commercial Segment The commercial segment consists of individual businesspeople who are visiting various firms in the subject property's market. Commercial demand is strongest Monday through Thursday nights, declines significantly on Friday and Saturday, and increases somewhat on Sunday. The typical length of stay ranges from one to three days, and the rate of double occupancy is a low 1.2 to 1.3 people per room. Commercial demand is relatively constant throughout the year, although some declines are noticeable in late December and during other holiday periods. In general, commercial travelers are not overly rate-sensitive, and will make use of a hotel's food and beverage outlets and recreational facilities. The commercial segment represents a highly desirable and lucrative market that provides a consistent level of demand at relatively high room rates. Commercial demand in the subject property's market is generated by a wide variety of corporations, with the computer industry and other high-technology employers exhibiting some dominance. Many of the companies are located in the business parks situated along the Interstate 95 corridor and in the vicinity of the I-93/I-95 interchange. Firms that generate lodging demand in the area include Sybase, IBM, USA Today, AW Chesterton, Hewlett Packard, Lahey Hitchcock Clinic, McDonnell Douglas, and Motorola. The subject property is located in close proximity to Cummings and Unicorn business parks, which provide a strong commercial demand base. Also providing demand is Hanscom Air Force Base, which has increased its work force by roughly 300 people in recent years as a result of personnel transfers from closed federal bases. As previously noted, the area has suffered from the effects of defense cutbacks and the nationwide recession, which curtailed commercial activity in the area in the early 1990s. However, indications of a full economic recovery are evident with the proposed IndustryPlex business park development on Commerce Way and the low commercial vacancy rates in Woburn as indicated by city planning officials. Based on the economic and demographic data presented earlier in the Market Area Analysis section, we estimate that commercial hotel demand in the Woburn market rose at rates ranging from 5% to 6% annually during the early 1980s, followed by a period of decline as a result of the dramatic downturns which affected the high-tech industries in the region. In HVS International, Mineola, New York Lodging Market Supply and Demand 59 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= conjunction with the recovery from the national recession of the early 1990s and slower growth in the local economy, commercial demand in the recent past has increased more moderately. As the national and international economy continue to improve and prominent local businesses increase their production and employment levels, commercial hotel demand is expected to grow steadily. Smith Travel Research estimates that total hotel demand in the competitive market rose by an average annual compounded rate of 3.8% between 1992 and 1995. We project that commercial demand (which comprises approximately 69% of the total market) will increase by 3% in 1997. Thereafter, we project continued commercial demand growth of 3% during 1998 and 1999 before stabilizing at 2% annually in subsequent years. Meeting and Group Segment The meeting and group market includes meetings, seminars, conventions, trade association shows, and similar gatherings of ten or more people. Peak convention demand typically occurs in the spring and fall. Because of vacations, the summer months represent the slowest period for this market segment; winter demand varies. The average length of stay for typical meetings and groups ranges from three to five days. Most commercial groups meet during the weekday period of Monday through Thursday, but associations and social groups will sometimes gather on weekends. Commercial groups tend to have a low double occupancy of 1.3 to 1.5 people per room, while social groups are likely to have double occupancy rates ranging from 1.5 to 1.9. Meeting and group demand in Woburn is generated primarily by local businesses and includes functions such as training sessions, product announcements, meetings, and seminars. Most of these meetings are small, and range from 15 to 20 persons. Non-commercial groups such as civic associations and professional societies are a secondary source of meeting and group demand. These types of meetings often range from 75 to 250 persons. Most of the meetings and group functions in Woburn are held at local hotels. Because the subject property offers only +/-5,330 square feet of meeting space, participation in this segment is inherently limited. However, as mentioned earlier, the subject property does achieve a significant amount of non-business related group demand from tour groups visiting the Boston area. Meeting and group patronage can be quite profitable for hotels. Although room rates are discounted for large groups, the property benefits from the use of meeting space and the revenues generated by in-house banquets and HVS International, Mineola, New York Lodging Market Supply and Demand 60 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= cocktail receptions. Facilities that are necessary to attract meetings and groups include function areas with adequate space for breakout, meals, and receptions; recreational amenities; and a sufficient number of guestrooms to house the attendees. Future meeting and group demand is closely related to growth in the commercial segment. Because most meetings have either a direct or an indirect business purpose, the economic considerations that have an impact on commercial travel also affect meeting and group demand. The exception is non-commercial meetings, which are tied to the economic factors that influence leisure travel. It should be noted that meetings and similar events are booked in advance, and thus growth in this segment tends to lag slightly behind increases in commercial demand. Historically, meeting and group demand in the Woburn area is estimated to have increased at a rate slower than the overall average annual compounded rate of 3.8% achieved by the market. In light of this information and the relevant economic and demographic trends, we estimate that meeting and group demand in the subject property's market area will increase by a stable rate of 2% annually. Leisure Segment The leisure market segment consists of individuals and families who are spending time in the area or passing through en route to other destinations. Their travel purposes may include sightseeing, recreation, visiting friends and relatives, or numerous other non-business activities. Leisure demand is strongest Friday and Saturday nights and all week during holiday periods and the summer months. These peak periods are negatively correlated with commercial visitation, underscoring the stabilizing effect of capturing weekend and summer tourist travel. The typical length of stay ranges from one to four days, depending on the destination and travel purpose, and the rate of double occupancy generally ranges from 1.8 to 2.5 people per room. Leisure travelers tend to be the most price-sensitive segment in the lodging market. They often prefer low-rise accommodations where parking is convenient to the rooms, and they typically demand extensive recreational facilities and amenities. Ease of highway access and proximity to tourist attractions are important locational considerations. Leisure demand in the subject property's market is generated by travelers who stay in Woburn to visit local attractions or by travelers who are visiting Boston but select lodging accommodations in Woburn. These travelers are generally drawn to the Woburn market area by its proximity and ease of access to the many tourist HVS International, Mineola, New York Lodging Market Supply and Demand 61 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= attractions in the Boston area, together with the availability of significantly lower rates than those charged by hotels in the city itself. Future leisure demand is related to the overall economic health of the nation. Trends showing changes in state and regional unemployment and disposable personal income often have a strong impact on non-commercial visitation. Traffic counts on nearby highways and attendance at local attractions can also form a basis for projections. Although Middlesex County residents enjoy considerable disposable income, there are few leisure attractions in the subject property's immediate neighborhood. In addition, the ongoing construction at Logan Airport and on Boston's highways is anticipated to create traffic congestion and cause travel inconveniences; therefore, we do not anticipate significant growth in this segment. In light of these factors and the overall commercial orientation of the area, we estimate that future leisure demand will increase at a rate of 1% throughout the projection period. Conclusion The purpose of segmenting the lodging market is to define each major type of demand, identify customer characteristics, and estimate future growth trends. Starting with an analysis of the local area, three segments were defined as representing the subject property's lodging market. Various types of economic and demographic data were then evaluated to determine their propensity to reflect changes in hotel demand. Based on this procedure, we forecast the following average annual compounded market segment growth rates. HVS International, Mineola, New York Lodging Market Supply and Demand 62 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-3 Average Annual Compounded Market Segment Growth Rates - -------------------------------------------------------------------------------- Annual Compounded Growth Rate -------------------------------------------- 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Commercial 3.0% 3.0% 3.0% 2.0% 2.0% 2.0% Meeting and Group 2.0 2.0 2.0 2.0 2.0 2.0 Leisure 1.0 1.0 1.0 1.0 1.0 1.0 Annual Average Growth 2.5% 2.5% 2.5% 1.8% 1.8% 1.8% - -------------------------------------------------------------------------------- These growth rates will be used in subsequent sections of this study to forecast changes in lodging demand. COMPETITION An integral component of the supply and demand relationship that has a direct impact on the availability of lodging demand is the current and anticipated supply of competitive lodging facilities. The suburban region of the greater Boston metropolitan area is served by a wide array of lodging facilities. In general, these hotel are situated near or within the larger concentration of office space and/or along the major highways which serve the region. The subject property is located along Interstate 95, less than two miles west of Interstate 93. In this location, the subject Ramada competes with other hotels situated along Interstates 95 and 93 for demand generated by the businesses located along these corridors. We have identified seven properties that are considered primarily competitive with the Ramada Plaza Hotel. Including the subject property, these primary competitors total 1,281 rooms. Two additional lodging facilities are judged to be only secondarily competitive; although the facilities, rate structures, or market orientations of these hotels prevent their inclusion among the primarily competitive supply, they do compete with the subject property to some extent. The room count of each secondary competitor has been weighted to reflect the degree to which it competes with the Ramada Plaza Hotel; the aggregate weighted room count of the secondary competitors is 300 rooms. Primary Competitors The following table summarizes the important operating characteristics of the primary competitors and the aggregate secondary competitors. This information was compiled from personal interviews, inspections, lodging directories, and our in-house library of operating data. The table also sets forth each property's penetration factors; penetration is the ratio between a HVS International, Mineola, New York Lodging Market Supply and Demand 63 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= specific hotel's operating results and the corresponding data for the market. If the penetration factor is greater than 100%, the property is performing better than the market as a whole; conversely, if the penetration is less than 100%, the hotel is performing at a level below the marketwide average. HVS International, Mineola, New York Lodging Market Supply and Demand 64 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-4 Primary Competitors and Aggregate Secondary Competitors - --------------------------------------------------------------------------------
Estimated 1996 Market Segmentation Estimated 1995 ------------------------ -------------------------------- Number Year Meeting Meeting Meeting Average Property/Location of Rooms Opened Space Space/Room Comm. & Group Leisure Occupancy Rate Rev PAR - ------------------------------------------------------------------------------------------------------------------------------------ Subject Property 15 Middlesex Canal Park 196 1974 5,330 27 50% 35% 15% 59.5% $51.45 $30.61 Crowne Plaza Hotel 2 Forbes Road 345 1990 9,300 27 70 15 15 63.0 84.00 52.92 Courtyard by Marriott 240 Mishawum Road 120 1986 Minimal N/A 80 5 15 83.0 85.00 70.55 Comfort Inn 315 Mishawum Road 100 1975 Minimal N/A 70 5 25 68.0 56.00 38.08 Red Roof Inn 19 Commerce Way 159 1974 Minimal N/A 75 5 20 73.0 55.00 40.15 Suisse Chalet 285 Mishawum Road 129 1984 Minimal N/A 70 10 20 60.0 50.00 30.00 Howard Johnson Woburn 1 Mack Road 100 1972 4,431 44 58 10 32 69.0 59.00 40.71 Howard Johnson Burlington 98 Middlesex Turnpike 132 1968 Minimal N/A 75 5 20 69.0 69.00 47.61 - ------------------------------------------------------------------------------------------------------------------------------------ Sub-Totals and Averages 1,281 -- -- -- 69% 13% 19% 66.8% $66.82 $44.61 Secondary Competition 300 -- -- -- 70% 19% 11% 75.0% $97.33 $73.00 Totals/Averages 1,581 -- -- -- 69% 14% 17% 68.2% $73.14 $49.91 - ------------------------------------------------------------------------------------------------------------------------------------ Estimated 1996 -------------------------------------------------------------- Average Occupancy Yield Property/Location Occupancy Rate Rev PAR Penetration Penetration - ---------------------------------------------------------------------------------------------- Subject Property 15 Middlesex Canal Park 61.0% $62.00 $37.82 85.0% 66.7% Crowne Plaza Hotel 2 Forbes Road 73.0 90.00 65.70 101.7 115.9 Courtyard by Marriott 240 Mishawum Road 81.0 92.00 74.52 112.9 131.4 Comfort Inn 315 Mishawum Road 67.0 57.00 38.19 93.4 67.4 Red Roof Inn 19 Commerce Way 75.0 52.00 39.00 104.5 68.8 Suisse Chalet 285 Mishawum Road 63.0 51.00 32.13 87.8 56.7 Howard Johnson Woburn 1 Mack Road 74.0 65.00 48.10 103.1 84.8 Howard Johnson Burlington 98 Middlesex Turnpike 69.0 75.00 51.75 96.1 91.3 - ---------------------------------------------------------------------------------------------- Sub-Totals and Averages 70.4% $71.93 $50.61 98.0% 89.3% Secondary Competition 78.0% $106.27 $82.89 108.7% 146.2% Totals/Averages 71.8% $79.00 $56.70 100.0% 100.0% - ----------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- [GRAPHIC OMITTED] COMPETITION MAP HVS International, Mineola, New York Lodging Market Supply and Demand 65 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Our survey of the primarily competitive hotels in the Woburn market shows a representation of nationally recognized, franchised lodging chains. These properties range in size from 100 to 345 rooms and their ages range from 6 to 28 years old. The market demand has a commercial orientation; in 1996, this segment is estimated to contribute 69% of the overall occupancy. The leisure segment comprised 19% of the total, followed by the meeting and group segment (at 13%). In 1996, the primary competitors achieved an overall occupancy of 70.4% at an average rate of $71.93, yielding RevPAR of $50.61. In terms of occupancy, average rate, and RevPAR, the subject property is underperforming in the market. The Ramada Plaza Hotel is achieving the lowest occupancy in the competitive set of hotels; and, as indicated by the 85% occupancy penetration, the hotel is not attaining its fair share of the market. The subject property's average rate ranks near the middle of the competitive set, as does its RevPAR, which is estimated to be $37.82 for 1996. This equates to a yield penetration of 66.7% as compared to the total market, including the secondary competitors. Excluding the secondary competitors, which are by far the strongest performers in the market, the subject property's 1995 yield penetration was 75.0%, which ranks fifth among the eight competitive properties. The clear market leader is the Courtyard by Marriott, which boasts an occupancy penetration of 112.9 and a yield penetration of 131.4. The Courtyard's leading position in the market can be attributed to its strong brand name, well-maintained facilities, and ability to capture higher-end commercial demand. The Suisse Chalet is the poorest performer in the market; this property's low occupancy and average rate can be attributed to its less recognized brand name and its greater distance from an I-95 exit in comparison to its competitors. Each primary competitor was inspected and evaluated. Descriptions of our findings are presented below. Crowne Plaza Hotel Woburn Owned and operated by Columbia Sussex Corp., the Crowne Plaza Hotel is located on the southwest quadrant of the intersection of Interstates 93 and 95, less than two miles east of the subject property. The Crowne Plaza Hotel is the newest hotel property in the market and features 345 guestrooms, a restaurant, two lounges, approximately 9,300 square feet of meeting and banquet space, an indoor pool and spa, and a fitness center. The property has undergone minor renovations in recent years, including the HVS International, Mineola, New York Lodging Market Supply and Demand 66 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= replacement of carpeting in the public areas and the upgrading of soft goods in the guestrooms. Visibility of the hotel is fair from Interstate 93, and, because the property is situated along a side street somewhat distant from the interstate exits, access to the property is also fair. We estimate the Crowne Plaza Hotel's 1996 occupancy and average rate to be 73% and $90. The property's demand segmentation consists of 70% commercial demand, 15% meeting and group demand, and 15% leisure demand. Although the Crown Plaza Hotel offers superior amenities and a higher rate structure than the subject property, it is considered directly competitive with the Ramada Plaza Hotel due to the significant overlap in the targeted markets of each property, especially in the commercial segment. Courtyard by Marriott Woburn The Courtyard by Marriott is housed in a residential-style structure designed to resemble an 18th-century manor house. The property is located on the northern side of I-95 on the same road as the Suisse Chalet and the Comfort Inn. The Courtyard is roughly one mile northeast of the subject property and features 120 guestrooms, two small meeting rooms, a dining area, and an outdoor swimming pool. Visibility of the hotel is excellent from Interstate 95; however, the property is located relatively far from the highway exits in comparison to its competitors. Located directly across the street from the property are the Logan Airport Bus Terminal and the Boston commuter train station. As discussed earlier, the Courtyard is currently the market leader in terms of occupancy, average rate, and RevPAR. Its 1996 occupancy and average rate is estimated to be 81% and $92. We estimate that the property derives 80% of its demand from the commercial segment, 15% from leisure travelers, and 5% from meeting and group participants. Comfort Inn Woburn The Comfort Inn is located across from the Red Roof Inn and in close proximity to the Suisse Chalet. The leasehold interest of the property was sold to Innkeepers, Inc. in August of 1996 from 128 Motel Corp. The property is scheduled to be converted to a Hampton Inn and will close in November for renovations for a period of approximately eight months. Facilities at the Comfort Inn include 100 rooms, a restaurant, and a lounge. Visibility of the property is excellent from I-95 and access is highly favorable. With the planned renovations and the re-flagging of the property to a Hampton Inn (a very strong, highly recognized brand), the property should HVS International, Mineola, New York Lodging Market Supply and Demand 67 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= be able to improve its position in the market. The property's 1996 occupancy and average rate are estimated to be 67% and $57, respectively. We estimate that the property derives 70% of its room night demand from commercial travelers, 25% from leisure demand, and 5% from group and meeting attendees. Red Roof Inn Woburn The Red Roof Inn is strategically located near the intersection of Interstates 93 and 95, roughly one mile north of the subject property. Formerly a Days Inn, the property was acquired by Red Roof, Inc. in November of 1995. The new owner subsequently renovated the property, including the removal of the restaurant and meeting and banquet space, the refurbishing of the guestrooms, and the upgrading of the exterior. The property features 159 guestrooms, one meeting room with a maximum capacity of 25, and an indoor, heated swimming pool. The adjacent land where the former restaurant and function space were situated is currently being leased to a national restaurant company that is constructing a restaurant named On the Border, which will feature Mexican cuisine. Although management representatives report a loss of some corporate contract business as a result of the conversion from a Days Inn to a Red Roof Inn, the property is expected to maintain its leading occupancy position in the primary competitive set of hotels. Visibility of the property from Interstate 95 is poor, however access to the property is favorable due to its close proximity to the interstate exit. We estimate the property's occupancy to be 75% and its average to be $52 in 1996. In addition, we estimate that the property derives 75% of its demand from the commercial segment, followed by 20% from the leisure segment, and 5% from the meeting and group segment. Suisse Chalet Woburn The Suisse Chalet is owned by Telahc Properties L.P. and managed by Suisse Chalet International, Inc. Like the Red Roof Inn, this property is located near the I-93/I-95 interchange. In addition, this property is situated in close proximity to the Logan Airport Bus Terminal and the Boston commuter train station. According to management representatives, the hotel underwent a $400,000 renovation of the guestrooms and hallways in 1994 and a $30,000 upgrading of its lobby in 1995. As a result, the facilities - which include 129 guestrooms and an outdoor swimming pool - are comparable to those found in the competitive hotels. Visibility of the Suisse Chalet from Interstate 95 is excellent; however, access to the property is less favorable than that of the Red Roof Inn and the HVS International, Mineola, New York Lodging Market Supply and Demand 68 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Comfort Inn, both of which are situated closer to the interstate exit. The 1996 occupancy and average rate is estimated to be 63% and $51, respectively. We estimate that 70% of the property's demand is generated from the commercial segment, 10% from the meeting and group segment, and 20% from leisure travelers. Howard Johnson Woburn Owned and managed by the same entities as the subject property, the Howard Johnson Woburn is located at the intersection of I-93 and Montvale Avenue, approximately two miles southeast of the subject property. The property features 100 guestrooms, over 4,400 square feet of meeting and banquet space, an indoor swimming pool, and a restaurant and lounge that are leased to Home Fries, Inc. The property was renovated in 1994 and 1995, including the repainting of the exterior, the upgrading of the guestrooms' soft and hard goods, the replacement of guestroom climate control systems, and the refinishing of the function space and public areas. Visibility of the Howard Johnson from I-93 is favorable, and the property is located immediately off the highway exit, rendering excellent access to the property. The property's 1996 occupancy and average rate are estimated to be 74% and $65, respectively. In addition, we estimate that the property derives 58% of its demand from the commercial segment, 32% from leisure travelers, and 10% from meeting and group attendees. Howard Johnson Burlington The Howard Johnson Burlington is located on Middlesex Turnpike, opposite the Burlington Mall in the City of Burlington, approximately three miles southwest of the subject property. The property is owned and managed by the Crystal Group and features 132 guestrooms, a restaurant, a lounge, a swimming pool, and a fitness room. Although the property is the oldest of the primary competitive set, continual maintenance and upgrading of the guestrooms has allowed the property to remain highly competitive. The current franchise agreement expires within two years and management representatives report that it has not been decided whether the Howard Johnson brand will be retained. Although this property ranks as one of the top performing Howard Johnsons in the country, ownership and management are concerned about the brand's reputation and appeal, especially to young corporate professionals. Reportedly, HFS has offered the property interest-free financing for funds to completely renovate the property's interior and exterior. Visibility of the property from Middlesex Turnpike is excellent because the property is situated on a slope above the grade of the road. We estimate HVS International, Mineola, New York Lodging Market Supply and Demand 69 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the property's occupancy and average rate to be 69% and $75 in 1996. The property's demand segmentation consists of 75% commercial demand, 20% leisure, and 5% meeting and group demand. Secondary Competitors The subject property's secondary competitors consist of two hotels , both of which are full-service properties that feature higher room rate structures and more luxurious amenities. Formerly a Days Inn, the 180-room Wyndham Garden Hotel is located just southeast of the I-95/Middlesex Turnpike intersection, less than three miles southwest of the subject property. The 419-room Marriott Burlington is situated on the northern side of I-95, approximately two miles west of the subject property. The two full-service properties are considered to be 50% competitive with the subject property. These secondary competitors are estimated to capture 70% of their demand from business travelers, 19% from meeting and group attendees, and 11% from leisure travelers. HVS International, Mineola, New York Lodging Market Supply and Demand 70 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-5 Secondary Competitors - --------------------------------------------------------------------------------
Estimated 1996 Market Segmentation Estimated 1995 Weighted ----------------------- ------------------------------ Number Percentage Number Meeting Average Property of Rooms Competitive of Rooms Comm. & Group Leisure Occupancy Rate Rev PAR - ----------------------------------------------------------------------------------------------------------------- Wyndham Garden Hotel 180 50% 90 70% 15% 15% 69% $80.00 $55.20 Marriott Burlington 419 50 210 70 20 10 77 104.00 80.08 - ----------------------------------------------------------------------------------------------------------------- Totals/Averages 599 300 70% 19% 11% 75% $97.33 $73.00
Estimated 1996 ------------------------------ Average Property Occupancy Rate Rev PAR - ----------------------------------------------------- Wyndham Garden Hotel 68% $93.00 $63.24 Marriott Burlington 82 111.00 91.02 - ----------------------------------------------------- Totals/Averages 78% $106.27 $82.89 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Lodging Market Supply and Demand 71 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Proposed Competitors It is important to consider any new hotels that may have an impact on the subject property's operating performance. Based on our fieldwork in the market and our discussions with local hotel operators, developers, and government officials, we have identified one property that is proposed or under development in the Woburn area. It is reported that a 101-room Sierra Suites will be developed on 827 Main Street, just north of Interstate 95, roughly one-half mile north of the subject property. The Woburn Planning Department reports that approval of the project appears favorable and that construction should start in Spring of 1997, with the opening of the hotel slated for the Summer of 1998. Based on the extended stay nature of the Sierra Suites product, the proposed property's close proximity to the subject property, and the likely overlap of targeted commercial markets, it is our opinion that the Sierra Suites will be 60% competitive with the subject property. Conclusion A review of historical demand trends in the subject property's area indicates that the market has shown signs of recovery from 1992 onwards, corresponding to the economic recovery nationwide. According to Smith Travel Research, these growth patterns have continued through August of 1996. While supply has remained constant over recent years, growth in demand has driven occupancy upwards, allowing the hotels in the market to follow with average rate increases. Based on our review of the local area, three market segments were defined within the subject property's lodging market. Growth rates for each market segment were forecasted based upon an analysis of the economic and demographic trends that appeared to significantly impact lodging demand. In general, demand is anticipated to increase at moderate rates throughout the projection period. We have identified seven properties that are considered competitive with the subject hotel. The subject property is underperforming in the market and is not attaining its fair share in terms of occupancy, average rate, and RevPAR. Despite the completed renovations and the recent upgrade to the Ramada Plaza Hotel flag, it is unclear whether the subject property will be able to gain competitive advantages over its competitors. We have also identified one proposed property in the area; due to the nature of the proposed product and its location, we have deemed it to be relatively competitive with the subject property. HVS International, Mineola, New York Projection of Occupancy and 72 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 7. Projection of Occupancy and Average Rate Historical Operating Performance The following table sets forth the subject property's historical occupancy, average rate, and RevPAR. For the purpose of comparison, we have also presented corresponding data (as provided by Smith Travel Research) for the competitive hotels described in the previous section. In addition to the annual percent change calculations, we have determined the subject property's occupancy, average rate, and RevPAR penetration factors. HVS International, Mineola, New York Projection of Occupancy and 73 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-1 Historical Trends - -------------------------------------------------------------------------------- Year to Date ------------------- 1994* 1995 1995 1996 --------------------------------------------------------------- Subject Property Occupancy 59.0% 59.5% 55.3% 62.0% Percent Change -- 0.8% -- 12.1% Occupancy Penetration 85.4% 85.4% 80.3% 87.3% Average Rate $48.00 $51.45 $49.02 $60.70 Percent Change -- 7.2% -- 23.8% Average Rate Penetration 68.9% 69.0% 67.6% 75.2% RevPAR $28.32 $30.61 $27.11 $37.63 Percent Change -- 8.1% -- 38.8% RevPAR Penetration 58.8% 58.9% 54.3% 65.7% Areawide (STR) Occupancy 69.1% 69.7% 68.9% 71.0% Percent Change -- 0.9% -- 3.0% Average Rate $69.67 $74.60 $72.47 $80.73 Percent Change -- 7.1% -- 11.4% RevPAR $48.14 $52.00 $49.93 $57.32 Percent Change -- 8.0% -- 14.8% * Due to a change in ownership in October, 1994, occupancy and average rate are estimated for calendar year 1994 - -------------------------------------------------------------------------------- As indicated in the preceding table, the subject property has been underperforming the market. In terms of occupancy, the subject property experienced a slight increase of 0.8% in 1995, which almost mirrored that of the area (0.9%); year-to-date 1996 data reveals that the subject property registered a significantly higher occupancy growth of 12.1% as compared to the market (3.0%). The subject Ramada however, has consistently been unable to capturing its fair share of room night demand, as indicated by occupancy penetrations of below 100% in each year. Like occupancy, the subject property's average rate increased at approximately the same rate in 1995 as that of the area's. Through August, 1996, the HVS International, Mineola, New York Projection of Occupancy and 74 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= subject property experienced average rate growth of 23.8% over the same period in 1995, which was substantially higher than the 11.4% rate growth registered by the market. Although the subject property's average penetration has hovered below 70%, the strong increase in average rate achieved in 1996 has improved its penetration to 75.2%. As a result of the subject property's low occupancy and average rate, its RevPAR has trailed that of the area's since 1994, as indicated by its RevPAR penetration, which has been below 60% until 1996. The low occupancy, average rate, and RevPAR penetrations exhibited by the subject Ramada reveal that the hotel has underperformed the market since 1994. The property has, however, benefited from the change in management and the extensive renovations completed in 1995, as indicated by the strong increases in occupancy and average rate experienced in 1996. Premise of the Projections To a certain degree, occupancy and rate attainment can be manipulated by management. For example, hotel operators may choose to lower rates in an effort to maximize occupancy. Our forecasts reflect an operating strategy that we believe would be implemented by competent hotel management to achieve an optimal mix of occupancy and average rate. Projected Room Night Demand Lodging demand and occupancy can be projected through a process known as room night analysis. A room night is a unit of hotel demand that equals one room that is occupied for one night. After estimating the number of room nights a hotel can be expected to attract during a 12-month period, we can determine occupancy by dividing the number of room nights of demand captured by the number of room nights available (calculated as the room count x 365). HVS International, Mineola, New York Projection of Occupancy and 75 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The total annual number of room nights occupied in the competitive hotels equates to the market's accommodated room night demand, as shown in the following table. ================================================================================ Table 7-2 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- 1996 Annual Room Night Demand(Rounded) ----------------------------------------------------------- Percentage Percentage Market Segment Market Wide of Total Subject Property of Total - -------------------------------------------------------------------------------- Commercial 285,000 69% 22,000 50% Meeting and Group 58,000 14 15,000 35 Leisure 71,000 17 7,000 15 ------- ------- ------- ------- Total 414,000 100% 44,000 100% - -------------------------------------------------------------------------------- Latent Demand The previous table illustrates the accommodated room night demand in the subject property's competitive market. Because this estimate is based on occupancies, it includes only those hotel rooms that were used by guests. Latent demand considers guests who could not be accommodated by the existing competitive supply, and can be divided into unaccommodated demand and induced demand. Based on our field work and discussions with the area hotel's general managers, an insignificant amount of latent demand exists in the Woburn lodging market. Total Usable Room Night Demand Total usable room night demand is estimated by combining accommodated demand and usable latent demand. Usable latent demand is that portion of latent demand that can be absorbed based on the number of existing and proposed hotel rooms in the market. Because no latent demand has been identified for the Woburn market, the total usable room night demand consists solely of the accommodated demand. Using the projected demand growth rates set forth in the section entitled Lodging Market Supply and Demand Analysis, the accommodated room night demand in each market segment is forecasted. The following table shows the projected annual change in accommodated and usable room night demand in the subject property's competitive market. HVS International, Mineola, New York Projection of Occupancy and 76 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-3 Total Usable Room Night Demand - --------------------------------------------------------------------------------
Historical 1997 1998 1999 2000 2001 2002 2003 - ---------------------------------------------------- ---------------------------------------------------------- Growth Rate -- 3.0% 3.0% 3.0% 2.0% 2.0% 2.0% 2.0% Accommodated Demand 285,392 293,954 302,773 311,856 318,093 324,455 330,944 337,563 Usable Latent -- 0 0 0 0 0 0 0 Growth Rate -- 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Accommodated Demand 57,503 58,653 59,826 61,023 62,243 63,488 64,758 66,053 Usable Latent -- 0 0 0 0 0 0 0 Growth Rate -- 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% Accommodated Demand 71,349 72,062 72,783 73,511 74,246 74,988 75,738 76,495 Usable Latent -- 0 0 0 0 0 0 0 ------- ------- ------- ------- ------- ------- ------- ------- TOTAL DEMAND 414,244 424,669 435,382 446,390 454,582 462,931 471,440 480,111 Annual Forecasted Growth 2.5% 2.5% 2.5% 1.8% 1.8% 1.8% 1.8%
- -------------------------------------------------------------------------------- Guestroom Supply In 1996, the competitive properties provided a weighted total of 1,581 guestrooms. As a result of the temporary closing of the Comfort Inn, the room count will decline to 1,531. In 1998 and 1999, the weighted total of guestrooms will increase to 1,612 and 1,642 rooms as the 101-room Sierra Suites opens. The following table shows the projected competitive supply of available rooms and available room nights. To calculate the annual number of available room nights, the number of available rooms is multiplied by 365. HVS International, Mineola, New York Projection of Occupancy and 77 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-4 Available Rooms and Room Nights - -------------------------------------------------------------------------------- Total Room Overall Night Room Nights Competitive Year Demand Available Occupancy ----------------------------------------------------------- Historical 414,244 577,182 72% 1997a 424,669 558,932 76 1998a 435,382 588,497 74 1999a 446,390 599,447 74 2000a 454,582 599,447 76 2001a 462,931 599,447 77 2002a 471,440 599,447 79 2003a 480,111 599,447 80 - -------------------------------------------------------------------------------- Overall Competitive Occupancy Based on the projected room night demand and the changes in room supply, overall competitive occupancy is expected to increase in 1997 to 76%, before declining to 74% in 1998 and 1999. The 4% climb in 1997 can be attributed to the temporary closing of the Comfort Inn, which caused room supply to contract while demand expanded. However, with the reopening of the Comfort Inn and the opening of the proposed Sierra Suites, growth in room supply is expected to outpace growth in demand, causing occupancy to decrease by 2%. However, as the additional rooms are absorbed by increasing demand, occupancy should improve in 2000 and thereafter. Competitive Index Analysis Competitive indexes are used to analyze the relative market position of each property on the basis of a particular demand segment. The index represents the number of times each year that one room is occupied by one type of traveler (e.g., commercial, meeting and group, leisure, or airline), or the number of room nights actually accommodated per year, per room, per market segment. For example, if a hotel has a commercial competitive index of 190, each room in the property is occupied 190 times a year by a commercial traveler. The competitive index is calculated by dividing a hotel's annual accommodated room night demand in a particular market segment by that property's room count. Competitive indexes will be used to illustrate each property's position in the market based on its ability to compete with other local lodging facilities. Commercial Segment The historical commercial segment competitive indexes in the subject property's market ranged from 111 to 237. The Courtyard by Marriott was the most competitive property in the commercial market in 1996, with an index of 237; this can be attributed to the property's superior level of amenities and strong franchise affiliation. The Red Roof Inn and Crowne Plaza Hotel HVS International, Mineola, New York Projection of Occupancy and 78 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= followed with indexes of 205 and 187, respectively. The subject property was the least competitive hotel in the commercial segment due to its heavy reliance on the meeting and group segment. The competitive indexes of each property is expected to remain constant throughout the projection period. The proposed Sierra Suites is projected to achieve a stabilized competitive index of 190, which places it third, behind the Courtyard and Red Roof Inn. Suite-type hotel products are typically very strong in the commercial segment; therefore, the Sierra Suites should be able to outperform a majority of the competitive hotels in the area. The following table shows the projected commercial segment competitive indexes of the area's hotels. ================================================================================ Table 7-5 Commercial Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Subject Property 111 111 111 111 111 111 111 Crowne Plaza Hotel 187 187 187 187 187 187 187 Courtyard by Marriott 237 237 237 237 237 237 237 Comfort Inn 171 171 171 171 171 171 171 Red Roof Inn 205 205 205 205 205 205 205 Suisse Chalet 161 161 161 161 161 161 161 Howard Johnson Woburn 157 157 157 157 157 157 157 Howard Johnson Burlington 189 189 189 189 189 189 189 Secondary 199 199 199 199 199 199 199 Sierra Suites 0 0 170 180 190 190 190 - -------------------------------------------------------------------------------- Meeting and Group Segment Due to its ability to attract a significant amount of group and tour business, the subject property was the market leader in the meeting and group segment, with a competitive index of 78. The competitiveness of each property in this segment is expected to remain constant. Because suite hotels typically exhibit minimal competitiveness in the meeting and group segment, the proposed Sierra Suites is forecasted to stabilize at a competitive index of 15. The following table illustrates the competitive indexes in the meeting and group segment. HVS International, Mineola, New York Projection of Occupancy and 79 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-6 Meeting and Group Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Subject Property 78 78 78 78 78 78 78 Crowne Plaza Hotel 40 40 40 40 40 40 40 Courtyard by Marriott 15 15 15 15 15 15 15 Comfort Inn 12 12 12 12 12 12 12 Red Roof Inn 14 14 14 14 14 14 14 Suisse Chalet 23 23 23 23 23 23 23 Howard Johnson Woburn 27 27 27 27 27 27 27 Howard Johnson Burlington 13 13 13 13 13 13 13 Secondary 53 53 53 53 53 53 53 Sierra Suites 0 0 10 13 15 15 15 - -------------------------------------------------------------------------------- Leisure Segment With a competitive index of 86, the Howard Johnson Woburn was the market leader in the leisure segment. The subject property, which attained a competitive index of 33, was the least competitive property in this segment. Like the two other segments, no changes in the competitiveness of the hotels are expected in future years. The proposed Sierra Suites is expected to be moderately competitive in the leisure segment. The following table illustrates the competitive indexes in the leisure segment. ================================================================================ Table 7-7 Leisure Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Subject Property 33 33 33 33 33 33 33 Crowne Plaza Hotel 40 40 40 40 40 40 40 Courtyard by Marriott 44 44 44 44 44 44 44 Comfort Inn 61 61 61 61 61 61 61 Red Roof Inn 55 55 55 55 55 55 55 Suisse Chalet 46 46 46 46 46 46 46 Howard Johnson Woburn 86 86 86 86 86 86 86 Howard Johnson Burlington 50 50 50 50 50 50 50 Secondary 32 32 32 32 32 32 32 Sierra Suites 0 0 35 40 45 45 45 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Projection of Occupancy and 80 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Subject Property's Room Night Capture and Occupancy After the competitive index is calculated, it is adjusted to reflect the property's room count, yielding a figure referred to as the market share adjuster. The market share adjuster of each property is then divided by the total market share adjuster for all of the competitors, resulting in each hotel's market share. By multiplying the projected market share by the area's usable room night demand, we can determine the total number of room nights captured by a specific hotel. Occupancy is then calculated by dividing the projected number of room nights captured by the property's total number of available room nights. Multiplying the subject property's projected market share by the estimated room night demand in each segment results in the following estimate of room nights captured by the hotel. ================================================================================ Table 7-8 Room Nights Captured by the Subject Property - -------------------------------------------------------------------------------- 1997 1998 1999 2000 2001 2002 -------------------------------------------------- Commercial Demand 293,954 302,773 311,856 318,093 324,455 330,944 Market Share 0.0785 0.0748 0.0734 0.0732 0.0732 0.0732 Capture 23,085 22,647 22,878 23,287 23,753 24,228 Meeting and Group Demand 58,653 59,826 61,023 62,243 63,488 64,758 Market Share 0.2681 0.2639 0.2617 0.2612 0.2612 0.2612 Capture 15,727 15,790 15,973 16,258 16,583 16,915 Leisure Demand 72,062 72,783 73,511 74,246 74,988 75,738 Market Share 0.0950 0.0896 0.0879 0.0875 0.0875 0.0875 Capture 6,846 6,518 6,462 6,500 6,565 6,630 ------- ------- ------- ------- ------- ------- Total Capture 45,658 44,956 45,313 46,045 46,901 47,774 - -------------------------------------------------------------------------------- Dividing the total number of room nights captured by the subject property's number of available room nights per year (calculated as 196 x 365) produces the projected occupancy percentage. HVS International, Mineola, New York Projection of Occupancy and 81 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-9 Calculation of the Subject Property's Projected Occupancy - -------------------------------------------------------------------------------- 1997 1998 1999 2000 2001 2002 --------------------------------------------------------- Total Room Nights Captured/Year 45,658 44,955 45,313 46,045 46,901 47,773 Available Room Nights 71,540 71,540 71,540 71,540 71,540 71,540 Occupancy 63.82% 62.84% 63.34% 64.36% 65.56% 66.78% Rounded 64% 63% 63% 64% 66% 67% - -------------------------------------------------------------------------------- For the purpose of forecasting income and expense, we will use the following occupancy levels. ================================================================================ Table 7-10 Occupancy Forecast - -------------------------------------------------------------------------------- Year Occupancy -------------------------- 1997 64% 1998 63 1999 63 Stabilized 64 2001 66 - -------------------------------------------------------------------------------- Although the preceding room night analysis shows the subject property achieving a 66% occupancy in 2001, we have chosen to use a stabilized level of 64%. The stabilized occupancy is intended to reflect the anticipated results of the property over its remaining economic life, given any and all changes in the life cycle of the hotel. Thus, the stabilized occupancy excludes from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusually high or low occupancies. Although the subject property may operate at occupancies above this stabilized level, we believe it equally possible for new competition and temporary economic downturns to force the occupancy below this selected point of stability. AVERAGE RATE ANALYSIS One of the most important considerations in estimating the value of a lodging facility is a supportable forecast of its attainable average rate, which is more formally defined as the average rate per occupied room. Average rate can be calculated by dividing the total rooms revenue achieved during a specified period by the number of rooms sold during the same period. The projected average rate and the anticipated occupancy percentage are used HVS International, Mineola, New York Projection of Occupancy and 82 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= to forecast rooms revenue, which in turn provides the basis for estimating most other income and expense categories. Competitive Positioning The Ramada Plaza Hotel's average rate will be projected using a competitive positioning method. This technique begins with an analysis of the average rates achieved by the subject property and its competitors. These rates establish a range that reflects certain characteristics of the specific market, such as price sensitivity, demand orientation, and occupancy. The subject property's average rate is then compared to those of the hotels to which it is most similar in terms of size, quality, facilities, amenities, market orientation, location, management, image, and affiliation. Adjustments are made to reflect any relevant differences. Although the average rate analysis presented here follows the occupancy projections, these two statistics are highly correlated; in reality, one can not project occupancy without making specific assumptions regarding average rate. This relationship is best illustrated by rooms revenue per available room (RevPAR), which reflects a property's ability to maximize rooms revenue. The following table summarizes the 1996 average rate and RevPAR of the subject property and its competitors. ================================================================================ Table 7-11 1996 Average Rate and RevPAR of the Primary Competitors - -------------------------------------------------------------------------------- 1996 1996 Average Rooms Revenue Property Room Rate Per Available Room ---------------------------------------------------------- Subject Property $62.00 $37.82 Crowne Plaza Hotel 90.00 65.70 Courtyard by Marriott 92.00 74.52 Comfort Inn 57.00 38.19 Red Roof Inn 52.00 39.00 Suisse Chalet 51.00 32.13 Howard Johnson Woburn 65.00 48.10 Howard Johnson Burlington 75.00 51.75 ------ ------ Average $71.93 $50.61 - -------------------------------------------------------------------------------- In 1996, the subject property achieved an average rate that was slightly higher than those of the Comfort Inn, Red Roof Inn, and Suisse Chalet, all of which are limited-service properties. The subject Ramada's RevPAR also achieved similar levels as the same three limited-service hotels. As a full-service hotel, the subject property's average rate should be positioned closer HVS International, Mineola, New York Projection of Occupancy and 83 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= to those of the Howard Johnson's and Crowne Plaza's. However, because the subject property generates a substantial amount of its demand from tour and travel groups - a highly rate-sensitive segment - it cannot attain as high an average rate as a property that focuses on business-related travelers, who typically are less rate-sensitive. The subject property's management reports that it has implemented strategies to capture more demand from the commercial segment in an effort to alter its demand mix and attain a higher average rate. Since a relatively substantial margin exists between the average rate of the subject property and those of the properties ranked above it, there is upside potential for strong increases in the subject property's average rate. Average Rate Increases It is important to note that hotel room rate increases do not necessarily conform to the underlying monetary inflation rate, because lodging facilities are influenced by market conditions such as the relationship between supply and demand. A hotel's ability to raise room rates is affected by a number of factors, including the following. o Supply and Demand Relationships - The relationship between supply and demand is one of the factors that determine hotel occupancies and average rates. Strong markets where lodging demand is increasing faster than supply are often characterized by rate growth that exceeds inflation. Markets that are overbuilt or suffering from declining demand are unlikely to exhibit any significant increases in average rates. o Inflationary Pressures - Price increases caused by inflation affect hotel room rates by eroding profit margins and encouraging operators to raise prices. This strategy is effective only in markets that are characterized by a healthy supply and demand relationship. o Improving the Competitive Standard - When a new lodging facility enters a mature market, its rates may be set higher than the marketwide average in an effort to justify the development costs. This may allow other competitors to achieve corresponding gains by effectively raising the amount the market will bear. However, if the addition to supply has a severe impact on the occupancy levels of other hotels, price competition may ensue. o Property-Specific Improvements - Changes that make a hotel more or less attractive to guests can have an impact on average rate. An expansion, renovation, upgrading, or the introduction of additional facilities and amenities may enable greater-than-inflationary room rate increases. HVS International, Mineola, New York Projection of Occupancy and 84 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Likewise, deferred maintenance may make a property less competitive, engendering a decline in room rates. In determining average rate projections, changes that occur prior to occupancy stabilization are generally attributable to factors that are specific to the property and the market. After a hotel achieves a stabilized occupancy, room rates are generally expected to continue to increase at the underlying inflation rate throughout the remainder of the projection period. As discussed earlier in this report, the market has experienced strong growth in average rate in recent years. According to STR data, average rate in the area increased by 3.6% in 1994 and 7.1% in 1995. Furthermore, year-to-date 1996 data indicates a 11.4% growth in average rate over 1995. Through August 1996, the subject property achieved an average rate increase of 23.8% as a result of the recently completed renovations and the property's efforts to garner demand from segments characterized by higher room rates. Although the subject property and the area have shown strong growth in average rate in recent years, as the market achieves a full recovery from the early 1990s, increases in average rate should become more moderate. Based on these considerations, the following table shows our projection of average rate increases. ================================================================================ Table 7-12 Average Rate Forecast - -------------------------------------------------------------------------------- Areawide Subject Property's Subject Property's Areawide Rate Rate Projected Year Occupancy Increase Increase Average Rate - -------------------------------------------------------------------------------- Positioned Base -- -- -- $62.00 1997 76% 5% to 7% 7.0% 66.35 1998 74 3 to 4 5.0 69.67 1999 74 3 to 4 4.0 72.46 2000 76 3 to 4 3.5 74.99 2001 77 3 to 4 3.5 77.62 2002 79 3 to 4 3.5 80.33 - -------------------------------------------------------------------------------- As the above table illustrates, we have forecasted the areawide increase in average rate at 5% to 7%. The subject property is expected to experience average rate growth of 7% as it continues to reap benefits from its renovations and as it increases its efforts to gain a larger share of the commercial segment. In 1998 and 1999, we project growth rates of 5.0% and 4.0%, HVS International, Mineola, New York Projection of Occupancy and 85 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= respectively. In 2000 and thereafter, the subject Ramada's average rate is expected to increase in tandem with the underlying rate of inflation of 3.5%. The following average rates will be used to project the subject property's rooms revenue. ================================================================================ Table 7-13 Forecast of Occupancy and Average Rate Year Ocupancy Average Rate ------------------------------------------- 1997 64% $66.35 1998 63 $69.67 1999 63 $72.46 Stabilized 64 $74.99 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Highest and Best Use 86 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 8. Highest and Best Use The concept of highest and best use recognized by the Appraisal Institute distinguishes between the highest and best use of the land (as though vacant) and that of the property (as improved). Highest and best use is defined as: The reasonably probable and legal use of vacant land or improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.(1) The concept of highest and best use is the premise upon which value is based, and is a product of competitive forces in the marketplace. The principle of balance holds that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium. This principle applies to relationships among various property components as well as the relationship between the costs of production and the property's productivity. The point of economic balance is achieved when the combination of land and building is optimal (i.e., when no marginal benefit or utility is achieved by adding another unit of capital). The law of increasing returns holds that larger amounts of the agents of production produce greater net income up to a certain point, after which the law of diminishing returns is applied.(2) It is important to recognize that the highest and best use of the land (as though vacant) may differ from the highest and best use of the property (as improved). This may occur when a site has existing improvements and the highest and best use of the land differs from the current use. Nonetheless, the current property use will continue until the value of the land under its highest and best use exceeds the value of the property in its current use, plus the cost to remove the existing improvements. (1) The Appraisal of Real Estate - Tenth Edition, Appraisal Institute, Chicago, IL, 1992, p. 45. (2) Ibid., p. 40. HVS International, Mineola, New York Highest and Best Use 87 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= In consideration of the factors influencing development in the immediate area, it is the appraisers' opinion that the highest and best use of the subject site, as vacant, is its current use as a transient lodging facility. Based on the fact that the value of the land does not exceed the value of the hotel plus the cost of demolition, it is our opinion that the subject property's highest and best use, as improved, is its current use as a lodging facility. HVS International, Mineola, New York Approaches to Value 88 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 9. Approaches to Value In appraising real estate for market value, the appraiser has three approaches from which to select: the income capitalization, sales comparison, and cost approaches. Although all three valuation procedures are given consideration, the inherent strengths of each approach and the nature of the subject property must be evaluated to determine which will provide supportable estimates of market value. The appraiser is then free to select one or more of the appropriate approaches in arriving at a final value estimate. The Income Capitalization Approach The income capitalization approach takes a property's projected net income before debt service and allocates this future benefit to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component is calculated. The total of the mortgage component and the equity component equals the value of the property. This approach is often selected as the preferred valuation method for income-producing properties, because it most closely reflects the investment rationale of knowledgeable buyers. The Sales Comparison Approach The sales comparison approach estimates the value of a property by comparing it to similar properties that have been sold on the open market. To obtain a supportable estimate of value, the sales price of a comparable property must be adjusted to reflect any dissimilarities between it and the property being appraised. The sales comparison approach may provide a useful value estimate in the case of simple forms of real estate, such as vacant land and single-family homes, where the properties are homogeneous and the adjustments are few and relatively simple to compute. In the case of complex investments such as shopping centers, office buildings, restaurants, and lodging facilities, where the adjustments are numerous and more difficult to quantify, the sales comparison approach loses much of its reliability. HVS International, Mineola, New York Approaches to Value 89 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Hotel investors typically do not employ the sales comparison approach in reaching their final purchase decisions. Factors such as the lack of recent sales data, the numerous insupportable adjustments that are necessary, and the general inability to determine the true financial terms and human motivations of comparable transactions often make the results of this technique questionable. Although the sales comparison approach may provide a range of values that supports the final estimate, reliance on this method beyond the establishment of broad parameters is rarely justified by the quality of the sales data. The market-derived capitalization rates sometimes used by appraisers are susceptible to the same shortcomings inherent in the sales comparison approach. To substantially reduce the reliability of the income capitalization approach by employing capitalization rates obtained from unsupported market data weakens the final value estimate and ignores the typical investment analysis procedures employed by hotel purchasers. Because appraisers are obligated to mirror the actions of the marketplace, we generally give the sales comparison approach minimal weight in the hotel appraisal process beyond bracketing the final estimate.(1) The Cost Approach The cost approach estimates market value by computing the current cost to replace the property and subtracting any depreciation resulting from physical deterioration, functional obsolescence, and external (or economic) obsolescence. The value of the land, as if vacant and available, is then added to the depreciated value of the improvements to produce a total value estimate. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements grow older and begin to deteriorate, the resultant loss in value becomes increasingly difficult to quantify accurately. We find that knowledgeable hotel buyers base their purchase decisions on economic factors such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, this approach is given minimal weight in the hotel valuation process. As noted in Hotels and Motels: A Guide to Market (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 209. HVS International, Mineola, New York Approaches to Value 90 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Analysis, Investment Analysis, and Valuations, "the cost approach is seldom used to value existing hotels and motels."10 Reconciliation The final step in the valuation process is the reconciliation and correlation of the value indications. Factors that are considered in assessing the reliability of each approach include the purpose of the appraisal, the nature of the subject property, and the reliability of the data used. In reconciliation, the applicability and supportability of each approach is considered and the range of value indications is examined. The most significant weight is given to the approach that produces the most reliable solution and most closely reflects the criteria used by typical investors. Our nationwide experience with numerous hostelry buyers and sellers indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the investors who constitute the marketplace. For this reason, the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in the hotel valuation process. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 208. HVS International, Mineola, New York Income Capitalization Approach 91 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 10. Income Capitalization Approach The income capitalization approach is based on the principle that the value of a property is indicated by its net return, or what is known as the present worth of future benefits. The future benefits of income-producing properties, such as hotels, are net income before debt service and depreciation (as estimated by a forecast of income and expense) and any anticipated reversionary proceeds from a sale. These future benefits can be converted into an indication of market value through a capitalization process and discounted cash flow analysis. Using the income capitalization approach, the subject property has been valued by analyzing the local market for transient accommodations, examining existing and proposed competition, and developing a forecast of income and expense that reflects current and anticipated income trends and cost components through a stabilized year of operation. The forecast of income and expense is expressed in current dollars for each year. The stabilized year is intended to reflect the anticipated operating results of the property over its remaining economic life, given any or all applicable stages of build-up, plateau, and decline in the life cycle of the hotel. Thus, income and expense estimates from the stabilized year forward exclude from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusual revenues or expenses. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, published by the Appraisal Institute, "of the three valuation approaches available to the appraiser, the income capitalization approach generally provides the most persuasive and supportable conclusions when valuing a lodging facility."(1) This text recommends that using a ten-year forecast and an equity yield rate "most accurately reflects the actions of typical hotel buyers, who purchase properties based (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. HVS International, Mineola, New York Income Capitalization Approach 92 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= on their leveraged discounted cash flow."(1) The simpler procedure of using a ten-year forecast and a discount rate is "less reliable because the derivation of the discount rate has little support. Moreover, it is difficult to adjust the discount rate for changes in the cost of capital."(1) We have used both methods to discount the subject property's projected net income into an estimate of value. Method One is a ten-year discounted cash flow analysis in which the cash flow to equity and the equity reversion are discounted to the present value at the equity yield rate, and the income to the mortgagee is discounted at a mortgage interest rate. The sum of the equity and mortgage values is the total property value. Method Two is a simple ten-year discounted cash flow analysis in which the annual net income before debt service and the reversionary proceeds following a sale at the end of the tenth year are discounted back to the date of the appraisal at an overall discount rate, and then totaled to produce an indication of the present worth of future benefits. To convert the projected income stream into an estimate of value through Method One, the anticipated net income (before debt service and depreciation) is allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. The total of the mortgage component and the equity component equals the value of the property. The process is described as follows. 1. The terms of typical hotel financing are set forth, including interest rate, amortization term, and loan-to-value ratio. 2. An equity yield rate of return is established. Numerous hotel buyers base their equity investments on a ten-year equity yield rate projection that takes into account ownership benefits such as periodic cash flow distributions, residual sale or refinancing distributions that return any property appreciation and mortgage amortization, income tax benefits, and various non-financial considerations such as status and prestige. The equity yield rate is also known as the internal rate of return on equity. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236 (2) Ibid. HVS International, Mineola, New York Income Capitalization Approach 93 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 3. The value of the equity component is calculated by first deducting the annual debt service from the projected net income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value. After deducting the mortgage balance at the end of the tenth year and the typical brokerage and legal costs, the equity residual is discounted back to the date of value at the equity yield rate. The net income to equity for each of the ten projection years is also discounted to the present value. The sum of these discounted values equates to the value of the equity component. Adding the equity component to the initial mortgage balance yields the overall property value. Because the mortgage and the debt service amounts are unknown but the loan-to-value ratio was determined in Step #1, the preceding calculation can be solved through an iterative process or by use of a linear algebraic equation that computes the total property value. The algebraic equation that solves for the total property value using a ten-year mortgage and equity technique was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(1) 4. The value is proven by allocating the total property value between the mortgage and equity components and verifying that the rates of return set forth in Steps #1 and #2 can be met from the projected net income. The process of converting the projected income stream into an estimate of value through Method Two is described as follows. 1. A discount rate is established by evaluating the total property yield derived by Method One. Occasionally, the discount rate may be adjusted slightly based on the total property yields indicated by recent transactions involving hotels similar to the subject property. 2. The reversionary value is calculated by capitalizing the 11th-year net income by the terminal capitalization rate and deducting typical brokerage and legal fees. (1) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Income Capitalization Approach 94 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 3. The ten-year forecast of net income (before debt service and depreciation) and the reversionary value are discounted to the date of value at the rate derived above. Review of Operating History Because the Ramada Plaza Hotel is an existing hotel with an established operating performance, its historical income and expense experience can serve as a basis for projections. The subject property opened in 1972, and achieved an occupancy level of in 59.5% in 1995. The following income and expense statements were provided by the Ashford Financial Corporation, and are unaudited. Where applicable, we have reorganized the statements in accordance with the Uniform System of Accounts for Hotels. Because Ashford Financial Corporation acquired the company in October of 1994, income and expense statements were not available for the entire calendar year 1994. Consequently, our projection of income and expense will focus primarily on the 1995 statements as well as year-to-date statements for 1996 and 1995. HVS International, Mineola, New York Income Capitalization Approach 95 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-1 Historical Operating Performance - --------------------------------------------------------------------------------
Calendar Year Ending: 1995 1994 Total Rooms: 196 196 Occupied Rooms: 40,380 8,307 Complimentary Rooms: 2,220 300 Days Open: 365 90 Occupancy: 59.5% Amount per Amount per 48.8% Amount per Amount per Average Rate: $51.45 Percentage Available Occupied $54.62 Percentage Available Occupied (+000) of Revenue Room Room (+000) of Revenue Room Room - ------------------------------------------------------------------------------------------------------------------------------ Rooms $ 2,078 64.4% $ 10,600 $51.45 $454 60.8% $2,315 $54.62 Food 810 25.1 4,132 20.06 171 22.9 872 20.58 Beverage 254 7.9 1,298 6.30 86 11.6 441 10.41 Telephone 67 2.1 340 1.65 26 3.5 134 3.16 Other Income 15 0.5 78 14.54 9 1.2 47 1.10 Total 3,224 100.0 16,448 79.84 747 100.0 3,809 89.87 - ------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL EXPENSES Rooms 587 28.3 2,995 14.54 115 25.3 586 13.83 Food & Beverage 793 74.5 4,045 19.63 190 73.9 971 22.91 Telephone 41 61.5 209 1.02 11 41.7 56 1.32 Other Income 4 23.3 18 0.09 1 9.9 5 0.11 Total 1,424 44.2 7,267 35.28 317 42.5 1,617 38.16 - ------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL INCOME 1,799 55.8 9,181 44.56 430 57.5 2,191 51.71 - ------------------------------------------------------------------------------------------------------------------------------ OPERATING EXPENSES Administrative & General 426 13.2 2,172 10.54 83 11.1 421 9.94 Management Fee 97 3.0 494 2.40 22 3.0 114 2.70 Marketing 216 6.7 1,104 5.36 33 4.4 166 3.93 Franchise Fees 61 1.9 311 1.51 13 1.7 66 1.56 Property Oper. & Maint 222 6.9 1,134 5.51 48 6.4 245 5.78 Energy 353 11.0 1,803 8.75 67 8.9 340 8.03 Total 1,376 42.7 7,018 34.06 265 35.5 1,353 31.93 - ------------------------------------------------------------------------------------------------------------------------------ HOUSE PROFIT 424 13.1 2,163 10.50 164 22.0 838 19.78 - ------------------------------------------------------------------------------------------------------------------------------ FIXED EXPENSES Property Taxes 234 7.3 1,195 5.80 44 5.9 223 5.27 Insurance 47 1.5 240 1.16 12 1.7 64 1.50 Reserve for Replacement 129 4.0 658 3.19 0 0.0 0 0.00 Rent 86 2.7 439 2.13 22 2.9 110 2.59 Total 496 15.5 2,532 12.29 78 10.5 397 9.36 - ------------------------------------------------------------------------------------------------------------------------------ NET INCOME ($ 72) -2.4 (369) ($1.79) $ 87 11.5 $ 441 $10.42 ==============================================================================================================================
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 96 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-2 Historical Operating Performance - --------------------------------------------------------------------------------
Calendar Year Ending: Year-to-Date through August, 1996 Year-to-Date through August, 1995 Total Rooms: 196 196 Occupied Rooms: 28,621 24,953 Complimentary Rooms: 1,047 1,509 Days Open: 244 244 Occupancy: 62.0% Amount per Amount per 55.3% Amount per Amount per Average Rate: $60.70 Percentage Available Occupied $49.02 Percentage Available Occupied (+000) of Revenue Room Room (+000) of Revenue Room Room - ------------------------------------------------------------------------------------------------------------------------------ REVENUE Rooms $1,737 64.0% $8,864 $60.70 $1,223 66.3% $6,241 $49.02 Food 637 23.4 3,248 22.24 449 24.3 2,289 17.98 Beverage 232 8.6 1,185 8.11 134 7.2 682 5.35 Telephone 67 2.5 340 2.33 34 1.8 173 1.36 Other Income 42 1.6 216 1.48 5 0.3 26 0.20 Total 2,715 100.1 13,853 94.87 1,844 99.9 9,410 73.91 - ------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL EXPENSES Rooms 467 26.9 2,383 16.32 347 28.4 1,771 13.91 Food & Beverage 635 73.1 3,239 22.18 447 76.7 2,279 17.90 Telephone 29 43.6 148 1.02 25 74.8 129 1.02 Other Income 36 85.9 186 1.27 2 34.8 9 0.07 Total 1,167 43.0 5,956 40.78 821 44.5 4,188 32.90 - ------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL INCOME 1,548 57.1 7,897 54.08 1,024 55.4 5,222 41.02 - ------------------------------------------------------------------------------------------------------------------------------ OPERATING EXPENSES Administrative & General 274 10.1 1,398 9.58 279 15.1 1,425 11.19 Management Fee 82 3.0 417 2.86 55 3.0 282 2.22 Marketing 171 6.3 870 5.96 126 6.8 643 5.05 Franchise Fees 53 1.9 269 1.84 36 1.9 183 1.44 Property Oper. & Maint 158 5.8 807 5.53 147 8.0 750 5.89 Energy 335 12.3 1,709 11.70 239 12.9 1,218 9.57 Total 1,072 39.4 5,471 37.46 882 47.7 4,501 35.35 - ------------------------------------------------------------------------------------------------------------------------------ HOUSE PROFIT 476 17.7 2,426 16.62 141 7.7 721 5.67 - ------------------------------------------------------------------------------------------------------------------------------ FIXED EXPENSES Property Taxes 141 5.2 719 4.92 140 7.6 715 5.62 Insurance 33 1.2 167 1.15 33 1.8 167 1.31 Reserve for Replacement 109 4.0 556 3.81 74 4.0 376 2.96 Rent 56 2.1 285 1.95 61 3.3 311 2.45 Total 338 12.5 1,727 11.83 308 16.7 1,570 12.33 - ------------------------------------------------------------------------------------------------------------------------------ NET INCOME $ 137 5.2 $ 699 $ 4.79 ($ 166) -9.0 ($ 849) ($6.66) ==============================================================================================================================
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 97 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Comparable Operating Statements These historical income and expense statements show that the subject property has significantly improved its operational performance since 1995. Although the Ramada lost money in 1995, year-to-date statements show that the property has attained a net income of $137,000 through August, 1996. The reversal in performance can be attributed to management's ability to substantially increase income while controlling expenses. After a full year of becoming acquainted with the hotel and the Woburn lodging market, management appears to be approaching stabilized efficiencies in its second full year of operation. Based on the year-to-date statements through August, 1995 and 1996, the subject property's total revenue increased from $1,844,000 in 1995 to $2,715,000 in 1996 as a result of significant improvement in both occupancy and average rate; this equates to an increase of roughly 47%. Contributing to this increase in total revenue are a rooms revenue increase of 42% and combined food and beverage revenue growth of 49%. Additionally, telephone revenue increased by 97%, while other income climbed from $5,000 in 1995 to $42,000 in 1996. With substantial growth in occupancy, average rate, and revenue, the subject property has taken advantage of economies of scale. Despite increases in departmental expenses on a per occupied room basis, rooms, food and beverage, and telephone departmental expenses as a percentage of departmental revenue declined from 1995 to 1996. Rooms departmental expense decreased from 28.4% of rooms revenue in 1995 to 26.9% in 1996. Food and beverage expense dropped by 3.6%, while telephone expense declined from 74.8% of telephone revenue in 1995 to 43.6% in 1996. In total, departmental expenses as a percentage of total revenue decreased from 44.5% in 1995 to 43.0% in 1996. Similarly, operating expenses as a percentage of total revenue decreased significantly from 47.7% in 1995 to 39.4% in 1996. Although this drop in the operating expense ratio is predominantly a result of a strong revenue increase, it does indicate that management has been effective in controlling expenses and improving its profit margins. The most significant decreases in operating expenses occurred in administrative and general expenses, which decreased from 15.1% of total revenue in 1995 to 10.1% in 1996, and property operations and maintenance expenses, which declined from 8.0% to 5.8%. It is important to note that the subject property's energy expense is remarkably higher than those of comparable properties, which range from 4% to 8% of total revenue. Although efforts were made to discover the cause of the HVS International, Mineola, New York Income Capitalization Approach 98 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= extraordinary energy expenses, none were found; furthermore, an analysis provided by Ashford Financial Corporation indicates that future energy expenses will remain higher than those of comparable hotels. Consequently, our projection of energy expense will be based on the subject property's historical levels. Overall, as a result of significant revenue growth and enhanced operating efficiency, the subject property attained a year-to-date 1996 net income level of $137,000 in comparison to a net loss of $166,000 during the same period in 1995. Based on the Ramada Plaza Hotel's recent trends in operating performance, we expect the property to achieve additional operating efficiencies in the immediate future. Forecast of Income and Expense The forecast of income and expense is intended to reflect the appraiser's subjective estimate of how a typical buyer would project the subject property's future operating results. Depending on the dynamics of the local market, a typical buyer's projection may be adjusted upward or downward. We have attempted to consider these factors in formulating this forecast. HVS International uses a fixed and variable component model to project a lodging facility's revenue and expense levels. This model is based on the premise that hotel revenues and expenses have one component that is fixed and another that varies directly with occupancy and facility usage. A projection can be made by taking a known level of revenue or expense and calculating its fixed and variable components. The fixed component is then held constant, while the variable component is adjusted for the percent change between the projected occupancy and facility usage and that which produced the known level of revenue or expense. Base-Year Statement of Income and Expense Based on our review of the operating histories of the subject property and comparable hotels, we have derived a base-year statement of income and expense expressed in 1995 dollars. The units of comparison include a percentage of departmental and total revenue, amounts per available room, and amounts per occupied room. The income and expense ratios reflect an occupancy level of 59.5%. The base-year profit and loss statement will be used to determine the relationship between the fixed and variable components. HVS International, Mineola, New York Income Capitalization Approach 99 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-4 Base-Year Statement of Income and Expense - -------------------------------------------------------------------------------- Calendar Year Ending: 1995 Number of Rooms: 196 Occupancy: 59.5% Average Rate: $51.45 Percent of Amount per Amount per Occupied Rooms: 40,380 Total Available Occupied (+000) Revenue Room Room - -------------------------------------------------------------------------------- Revenue: Rooms $2,078 58.8% $10,600 $51.45 Food 956 27.1 4,876 23.67 Beverage 343 9.7 1,752 8.51 Telephone 100 2.8 511 2.48 Other Income 54 1.5 276 1.34 Total Revenue $3,531 100.0 $18,015 $87.44 - -------------------------------------------------------------------------------- Expenses: Rooms* $675 32.5% $3,444 $16.72 Food & Beverage* 951 73.2 4,854 23.56 Telephone* 53 53.3 272 1.32 Other Income* 4 6.6 18 0.09 Administrative & General 426 12.1 2,172 10.54 Management Fee 106 3.0 540 2.62 Marketing 216 6.1 1,104 5.36 Franchise Fees 83 2.4 424 2.06 Property Oper. & Maint 212 6.0 1,081 5.25 Energy 405 11.5 2,066 10.03 Property Taxes 187 5.3 953 4.62 Insurance 69 1.9 350 1.70 Reserve for Replacement 141 4.0 721 3.50 Total Expenses $3,528 99.9% $17,999 $87.36 - -------------------------------------------------------------------------------- Net Income $3 0.1% $16 $0.08 ================================================================================ * Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- Inflation Assumptions The base revenue and expense amounts are inflated to reflect current dollars for each projection year. Line items can be affected by different factors. We must establish a general rate of inflation that will be applied to most revenue and expense categories. The following table shows inflation estimates made by economists at some noted institutions and corporations. HVS International, Mineola, New York Income Capitalization Approach 100 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-5 Inflation Estimates - -------------------------------------------------------------------------------- Projected Increase in Consumer Price Index (Annualized Rate Versus 12 Months Earlier) ------------------------------------------ November May Source of 1996 of 1997 - -------------------------------------------------------------------------------- Maureen Allyn, Scudder Stevens Clark 3.1% 2.3% Wayne Angell, Bear Stearns 3.0 3.2 Richard Berner, Mellon Bank 2.9 2.8 David Berson, Fannie Mae 2.9 2.8 David Blitzer, S&P 3.0 2.7 Paul Boltz, T. Rowe Price 3.2 3.5 David Bostian, Herzog, Heine, Geduld 2.9 2.5 Philip Braverman, DKB Securities 3.0 2.8 William Brown, J.P. Morgan 3.3 3.2 Rosanne Cahn, CS First Boston 3.1 2.6 James Coons, Huntington National Bank 3.2 3.0 Michael Cosgrove, The Econoclast 3.2 3.3 Dewey Daane, Vanderbilt University 3.4 3.6 Robert Dederick, Northern Trust 3.1 3.4 W.Dudley, Goldman Sachs 3.4 3.2 Michael Englund, MMS Intl. 3.2 3.3 Michael Evans, Evans Group 3.0 3.0 Gail Fosler, Conference Board 3.5 3.6 Maury Harris, Paine Weber, Inc. 2.8 2.8 Tracy Herrick, Jefferies & Co. 3.2 3.6 Stuart Hoffman, PNC Bank 3.1 2.8 William Hummer, Wayne Hummer 2.9 3.0 Edward Hyman, ISI Group 2.8 2.1 Saul Hymans, University of Michigan 2.7 1.7 Mieczyslaw Karczmar, Deutsche Bank 2.8 3.2 Kurt Karl, WEFA Group 2.6 2.3 Irwin Kellner, Chase Manhattan Bank 2.6 2.3 D. Laufenberg, American Express Financial Advisors 3.2 3.4 Michelle Laughlin, Sanwa Securities 3.0 3.2 Carol Leisenring, CoreStates Financial 2.7 2.5 Richard Lemmon, General Motors 3.0 3.0 Mickey Levy, NationsBank Capital Markets 2.6 2.4 David Littmann, Comerica 3.1 3.0 John Lonski, Moody's Investors Service 3.3 3.2 Paul McCulley, UBS Securities 3.0 2.8 John McDevitt, 3M 2.6 2.5 Arnold Moskowitz, Moskowitz Capital 3.1 3.5 John Mueller, LBMC, Inc. 3.2 2.5 David Munro, High Frequency Econ. 3.0 2.5 Carl Palash, MCM MoneyWatch 3.0 3.0 Nicholas Perna, Fleet Financial Group 3.3 3.3 Elliott Platt, Donaldson Lufkin 2.8 2.0 Maria F. Ramirez, MF Ramirez 3.0 3.0 Donald Ratajczak, Georgia State University 3.0 3.3 David Resler, Nomura Securities International 2.9 2.6 Allan Reynolds, Hudson Institute 3.3 3.6 Richard Rippe, Prudential Securities 3.1 3.3 A. Gary Schilling, Schilling & Co. 3.0 3.0 Allen Sinai, Lehman Brothers 3.2 3.4 James Smith, University of North Carolina 2.1 1.9 Susan Sterne, Economic Analysis 2.5 2.5 Donald Straszheim, Merrill Lynch 2.7 2.3 Thomas Synott III, U.S. Trust Company 3.3 3.4 John Williams, Bankers Trust 3.0 3.1 Raymond Worseck, A.G. Edwards 3.6 3.3 David Wyss, DRI/McGraw-Hill 3.0 2.5 Edward Yardeni, Deutsche Morgan Grenfell 2.2 2.0 Mark Zandi, Regional Financial Associates 3.0 3.2 ---- ---- Average 3.0% 2.9% Source: Wall Street Journal, July 1, 1996 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 101 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The preceding table shows inflation forecasts averaging 3.0% through November of 1996 and 2.9% through May of 1997. Most of the economists in the sample estimate inflation rates ranging from 2.5% to 3.4% for the 12-month period, although several anticipate levels of slightly greater than 3.4%. As a further check on these inflation projections, we have reviewed historical increases in the Consumer Price Index. Because the value of real estate is predicated on cash flows over a relatively long period, inflation should be considered from a long-term perspective. Between 1986 and 1994, the national CPI increased at an average annual compounded rate of 3.8%. In consideration of these historical trends, the projections set forth above, and our assessment of probable property appreciation levels, we have selected an annual stabilized inflation rate of 3.5% throughout the projection period. One of the exceptions to this general inflation assumption is the projected growth in average rate. As noted earlier, increases in the subject property's room rate are projected as follows. ================================================================================ Table 10-6 Projected Growth in Average Rate - -------------------------------------------------------------------------------- Increase From Year Previous Year ------------------------------- 1997 7.0% 1998 5.0 1999 4.0 2000 3.5 Thereafter 3.5 - -------------------------------------------------------------------------------- Another exception is the projected rate of growth for the Ramada Plaza Hotel's property taxes. As discussed earlier in this report, property taxes are forecasted to increase by 6.0% in the first three projection years. From 2000 and beyond, property taxes are expected to increase in tandem with the underlying rate of inflation of 3.5%. Using these inflation assumptions, the base-year income and expense statement (which is expressed in 1995 dollars) is inflated to arrive at projections. Each revenue and expense category will be projected using the inflated base statement to determine the fixed and variable component relationships. HVS International, Mineola, New York Income Capitalization Approach 102 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Rooms Revenue Rooms revenue is determined by two variables: occupancy and average rate. Earlier in this report, we estimated the subject property's occupancy and average rate as follows. ================================================================================ Table 10-7 Projected Occupancy and Average Rate - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized 2001 - -------------------------------------------------------------------------------- Forecast Occupancy Percentage 64.0% 63.0% 63.0% 64.0% 64.0% Forecast Average Rate $66.35 $69.67 $72.46 $74.99 $77.62 - -------------------------------------------------------------------------------- Rooms revenue is calculated as follows. ================================================================================ Table 10-8 Forecast of Rooms Revenue (+000) - --------------------------------------------------------------------------------
Number of Forecast Calendar Years Projected Average Number Days in Rooms Ending: Occupancy Room Rate of Units in Year Revenue - ---------------------------------------------------------------------------------------- 1997 64.0 X $66.35 X 196 X 365 = $3,038 1998 63.0 X 69.67 X 196 X 365 = 3,140 1999 63.0 X 72.46 X 196 X 365 = 3,266 Stabilized 64.0 X 74.99 X 196 X 365 = 3,434 2001 64.0 X 77.62 X 196 X 365 = 3,554
- -------------------------------------------------------------------------------- Food and Beverage Revenue Food and beverage revenue is generated by a hotel's restaurants, lounges, coffee shops, snack bars, banquet rooms, and room service. In addition to providing a source of revenue, these outlets serve as an amenity that assists in the sale of guestrooms. With the exception of properties with active lounges or banquet facilities that draw local residents, in-house guests generally represent a substantial percentage of a hotel's food and beverage patrons. The Uniform System of Accounts for Hotels/Eighth Revised Edition defines food revenue as "revenue derived from the sale of food, including coffee, milk, tea and soft drinks. Food sales do not include meals charged on employees' (staff) checks." Beverage revenues are "derived from the sale of beverages." In addition to the revenue generated by the sale of food and beverages, hotels often produce other income that is related to this department, such as meeting room rentals, cover charges, service charges, and miscellaneous banquet revenue. HVS International, Mineola, New York Income Capitalization Approach 103 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Although food revenue varies directly with changes in occupancy, the small portion generated by banquet sales and outside capture is relatively fixed. Food revenue was projected based on this relationship between the fixed and variable components. The following table shows the projected food revenue and several units of comparison that can be used to check the reasonableness of the forecast. ================================================================================ Table 10-9 Forecast of Food Revenue - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized 2001 - -------------------------------------------------------------------------------- Total Food Revenue (+000) $1,081 $1,106 $1,145 $1,199 $1,241 Percent of Total Revenue 23.1% 22.9% 22.9% 22.8% 22.8% Per Available Room $5,517 $5,642 $5,840 $6,117 $6,331 Per Occupied Room $23.61 $24.54 $25.40 $26.19 $27.10 - -------------------------------------------------------------------------------- Based on these units of comparison, the projected food revenue appears reasonable when compared with industry standards. Beverage Revenue Beverage revenue is generated by the sale of alcoholic beverages in a hotel's restaurants and banquet rooms and the sale of alcoholic and nonalcoholic beverages in the bars and lounges. Based on an analysis of comparable lodging facilities, beverage revenue is estimated to average approximately 35.9% of food revenue. Thus, beverage revenue is projected by multiplying the projected food revenue by 35.9%. The following table illustrates the forecast of beverage revenue. ================================================================================ Table 10-10 Forecast of Beverage Revenue - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized 2001 - -------------------------------------------------------------------------------- Total Beverage Revenue (+000) $388 $397 $411 $431 $446 - -------------------------------------------------------------------------------- Telephone Revenue Telephone revenue is generated by hotel guests who charge local and long-distance calls to their rooms, and by individuals who use the property's public telephones. Prior to the deregulation of the telephone industry in the early 1980s, hotels were limited to a 15% commission on long-distance calls, a mark-up that allowed few profits. Deregulation and the development of sophisticated call-accounting equipment have resulted in profitable HVS International, Mineola, New York Income Capitalization Approach 104 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= telephone departments. State-of-the-art equipment is capable of least-cost routing, automatic price billing, and posting telephone charges to guest folios. Hotels can select among various long-distance services, and can also work with any one of a number of Alternative Operator Services (AOS). These systems route and price calls, and may provide additional services. In recent years, the hospitality industry has experienced diverging trends with respect to telephone revenue. Prices per call have increased, in some cases dramatically, yielding departmental profits as high as 50% to 55%. However, the number of long-distance calls billed per occupied room has declined as a result of the extensive use of long-distance carrier services that can be accessed locally or through a toll-free number. When guests charge long-distance calls to their personal or business accounts in this manner, the hotel loses the revenue associated with long-distance tariffs and mark-ups, and only receives an access fee. Most telephone revenue varies directly with changes in occupancy. However, there is a small fixed component consisting of public telephone revenue, which is primarily generated by individuals using the hotel's food, beverage, and meeting facilities. Using this fixed and variable relationship, the subject property's telephone revenue is projected as follows. ================================================================================ Table 10-11 Forecast of Telephone Revenue - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized 2001 - ------------------------------------------------------------------------------- Total Telephone Revenue (+000) $ 114 $ 117 $ 121 $ 127 $ 131 Percent of Total Revenue 2.4% 2.4% 2.4% 2.4% 2.4% Amount Per Available Room $ 584 $ 596 $ 616 $ 647 $ 670 Amount Per Occupied Room $2.49 $2.60 $2.68 $2.77 $2.86 - -------------------------------------------------------------------------------- Other Income Other income is derived from sources other than guestrooms, food and beverages, and telephone services. Depending on the type of hotel and the facilities and amenities offered, other income may include the following items. o Rentals - stores, office space, concession space, showcases, clubs, and storage. o Commissions from auto rentals, photography, telegrams, and vending services. HVS International, Mineola, New York Income Capitalization Approach 105 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= o Concessions - revenue derived from charges for the privilege of operating departments that could be operated by the hotel. Gift shops, barber shops, and beauty salons are often operated as concessions. o Laundry, dry cleaning, and fax services. o Cash discounts earned - discounts from creditors' accounts for payment within the discount period. This item does not include trade discounts, which are a deduction from the cost of goods sold. o Electronic games and pinball machines. o Forfeited advance deposits and guaranteed no-shows. p Service charges - service charges that are added to a customer's account but are not paid to service personnel. o Interest income - interest from house accounts. o Salvage - revenue from the sale of old or obsolete items. Other income is highly sensitive to changes in occupancy and slightly correlated to food and beverage volume. Using this fixed and variable relationship, the subject property's other income is projected as follows. ================================================================================ Table 10-12 Forecast of Other Income - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized 2001 - ------------------------------------------------------------------------------- Total Other Income (+000) $ 59 $ 61 $ 63 $ 66 $ 68 Percent of Total Revenue 1.3% 1.3% 1.3% 1.2% 1.3% Amount Per Available Room $ 302 $ 311 $ 322 $ 335 $ 347 Amount Per Occupied Room $1.29 $1.35 $1.40 $1.44 $1.49 - -------------------------------------------------------------------------------- Rooms Expense Rooms expense consists of items related to the sale and upkeep of guestrooms and public space. Salaries, wages, and employee benefits account for a substantial portion of this category. Although payroll varies somewhat with occupancy (because managers can schedule maids, bell personnel, and house cleaners to work when demand requires), much of a hotel's payroll is fixed. Front desk personnel, public area cleaners, the housekeeper, and other supervisors must be maintained at all times. As a result, salaries, wages, and employee benefits are only moderately sensitive to changes in occupancy. HVS International, Mineola, New York Income Capitalization Approach 106 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Commissions represent remuneration to travel agents for booking rooms. Because these fees are based on a percentage of rooms revenue, they are highly dependent on occupancy and rate. Reservations is a similar expense that reflects the cost of a franchise reservation system that typically bills as a percentage of rooms revenue. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are only slightly affected by changes in volume. In light of these considerations, we project the subject property's rooms expense as follows. ================================================================================ Table 10-13 Forecast of Rooms Expense - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized 2001 - -------------------------------------------------------------------------------- Total Rooms Expense (+000) $ 745 $ 766 $ 793 $ 826 $ 855 Percent of Rooms Revenue 24.5% 24.4% 24.3% 24.0% 24.1% Amount per Available Room $3,800 $3,908 $4,044 $4,214 $4,361 Amount per Occupied Room $16.64 $17.37 $17.99 $18.46 $19.09 - -------------------------------------------------------------------------------- Food and Beverage Expense Food and beverage expenses consist of items necessary for the operation of a hotel's food, beverage, and banquet facilities. Although food and beverage revenues are projected separately and occupy separate categories on a hotel's income and expense statement, the corresponding expenses are combined into a single category. The costs associated with food and beverage sales and payroll are moderately to highly correlated to food and beverage revenues, and comprise a substantial portion of this category. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are very slightly dependent on volume. Although the other expense items are basically fixed, they represent a relatively insignificant factor. After considering the fixed and variable components, we forecast the subject property's food and beverage expense as follows. HVS International, Mineola, New York Income Capitalization Approach 107 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-14 Forecast of Food and Beverage Expense - --------------------------------------------------------------------------------
1997 1998 1999 Stabilized 2001 - ------------------------------------------------------------------------------------------------ Total F&B Expense (+000) $1,045 $1,075 $1,113 $1,159 $1,199 Percent of Food and Beverage Revenue 71.1% 71.6% 71.5% 71.1% 71.1% Amount per Available Room $5,330 $5,487 $5,680 $5,912 $6,118 Amount per Occupied Room $22.82 $23.85 $24.69 $25.31 $26.19
- -------------------------------------------------------------------------------- Telephone Expense Telephone expense consists of all costs associated with this department. In the case of small hotels with automated systems, the operation of telephones may be an additional responsibility of front desk personnel; however, most large properties employ full-time operators. The bulk of the telephone expense consists of the cost of local and long-distance calls billed by the telephone companies that provide these services. Because most calls are made by in-house guests, these costs are moderately correlated to occupancy. Unless a particular hotel department incurs high expenses, use of telephone services by hotel employees is charged to this account. The remaining costs, which include salaries, wages, printing, and other expenses, are moderately fixed. The following table illustrates our forecast of telephone expense. ================================================================================ Table 10-15 Forecast of Telephone Expense - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized 2001 - -------------------------------------------------------------------------------- Total Telephone Expense (+000) $ 59 $ 60 $ 62 $ 65 $ 67 Percent of Telephone Revenue 51.4% 51.6% 51.6% 51.2% 51.3% Amount per Available Room $ 299 $ 308 $ 319 $ 332 $ 343 Amount per Occupied Room $1.29 $1.33 $1.38 $1.42 $1.46 - -------------------------------------------------------------------------------- Other Income Expense Other income expense consists of costs associated with other income, and is dependent on the nature of the revenue. For example, if a hotel leases its gift shop to an outside operator, the expenses are limited to items such as rental fees and commissions. If the property operates its own gift shop, both revenues and expenses will be higher, and the hotel is responsible for the cost of goods sold, payroll, and so forth. Using a fixed and variable forecasting model, we project the subject property's other income expense as follows. HVS International, Mineola, New York Income Capitalization Approach 108 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-16 Forecast of Other Income Expense - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized 2001 - -------------------------------------------------------------------------------- Total Other Income Expense (+000) $ 4 $ 4 $ 4 $ 4 $ 4 Percent of Other Income Revenue 6.5% 6.5% 6.5% 6.4% 6.5% Amount per Available Room $ 20 $ 20 $ 21 $ 22 $ 22 Amount per Occupied Room $0.09 $0.09 $0.09 $0.09 $0.09 - -------------------------------------------------------------------------------- Administrative and General Expense Administrative and general expense includes the salaries and wages of all administrative personnel who are not directly associated with a particular department. Expense items related to the management and operation of the property are also allocated to this category. Most administrative and general expenses are relatively fixed. The exceptions are cash overages and shortages; commissions on credit card charges; provision for doubtful accounts, which are moderately affected by the number of transactions or total revenue; and salaries, wages, and benefits, which are very slightly influenced by volume. In recent years, several new items have been added to the administrative and general expense category. Human resources includes the cost of recruiting, relocating, and training personnel. Security consists of the cost of contract security for the property and related expenses. The general insurance category includes premiums for liability, fidelity, life, theft coverage, and business interruption insurance. Fire and extended-coverage insurance on the building and contents is a separate insurance expense category. Liability insurance covers third-party actions involving bodily injury and personal property, and is typically based on rooms receipts, meeting and banquet income, and food and beverage revenue. Factors that may have an impact on a hotel's liability expense include the size of the meeting, banquet, and restaurant facilities; the ratio between the amount of alcohol served and total food and beverage sales; the presence of a dance floor; a high-rise structure; a swimming pool; life safety support systems; and the guest transportation services provided by the hotel. The following table illustrates our forecast of administrative and general expense. HVS International, Mineola, New York Income Capitalization Approach 109 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-17 Forecast of Administrative and General Expense - --------------------------------------------------------------------------------
1997 1998 1999 Stabilized 2001 - -------------------------------------------------------------------------------------------------------- Total Administrative & General Exp. (+000) $ 488 $ 505 $ 523 $ 544 $ 563 Percentage of Total Revenue 10.4% 10.5% 10.4% 10.3% 10.3% Amount per Available Room $2,490 $2,577 $2,668 $2,776 $2,872 Amount per Occupied Room $10.67 $11.20 $11.60 $11.88 $12.30
- -------------------------------------------------------------------------------- Management Fee Management expense consists of the basic fee paid to the type of company that is anticipated to operate the subject property. Some companies provide management services alone, while others also provide a brand name affiliation. When a management company has no brand identification, the property owner often acquires a franchise that provides the necessary image and recognition. Although most hotel management companies employ a fee schedule that includes a basic fee (usually a percentage of total revenue) and an incentive fee (usually a percentage of defined profit), the incentive portion is often subordinated to debt service and does not appear in a forecast of net income before debt service. Basic hotel management fees are almost always based on a percentage of total revenue, which means they have no fixed component. Although the incentive fee does not decrease the cash flow available for debt service, it does reduce the potential cash flow to equity, and must be accounted for in the valuation process. Generally, the most appropriate procedure for handling the impact of the incentive fee on the equity component is to use the projected net income before debt service and incentive fee, but adjust the equity dividend or yield rate upward to reflect this added management cost. The adjusted equity dividend and yield rates will be described later in this section. The subject property is operated by Remington Hospitality, Inc.. According to the management agreement between Woburn Massachusetts Hotel II Limited Partnership and Remington Hospitality, Inc., a fee of 3% of gross revenues is due to the management company. Based on our review of the current market for management contracts, we are of the opinion that this fee is consistent with prevailing market terms. Applying this management fee structure to the projection of total revenue yields the following forecast of the subject property's management fee. HVS International, Mineola, New York Income Capitalization Approach 110 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-18 Forecast of Management Fee - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized 2001 - -------------------------------------------------------------------------------- Management Fee Expense (+000) $140 $145 $150 $158 $163 - -------------------------------------------------------------------------------- Marketing Expense Marketing expense consists of all costs associated with advertising, sales, and promotion; these activities are intended to attract and retain customers. Marketing can be used to create an image, develop customer awareness, and stimulate patronage of a property's various facilities. The marketing category is unique in that all expense items, with the exception of fees and commissions, are totally controlled by management. Most hotel operators establish an annual marketing budget that sets forth all planned expenditures. If the budget is followed, total marketing expenses can be projected accurately. Marketing expenditures are unusual because although there is a lag period before results are realized, the benefits are often extended over a long period. Depending on the type and scope of the advertising and promotion program implemented, the lag time can be as short as a few weeks or as long as several years. However, the favorable results of an effective marketing campaign tend to linger, and a property often enjoys the benefits of concentrated sales efforts for many months. Marketing expense can be divided into five categories: sales, reservations, advertising and merchandising, other marketing activities, and fees and commissions. Together, these categories include all marketing efforts made by hotel personnel and outside parties. Marketing expenses are fixed with the exception of reservations, fees, and commissions, which are calculated as a percentage of rooms revenue. Based on the location of the subject property, the local market for transient accommodations, the competitive environment, and the hotel's anticipated market segmentation, we have developed the following marketing forecast using a fixed and variable component model. HVS International, Mineola, New York Income Capitalization Approach 111 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-19 Forecast of Marketing Expense - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized 2001 - -------------------------------------------------------------------------------- Total Marketing Expense (+000) $ 248 $ 257 $ 266 $ 277 $ 286 Percentage of Total Revenue 5.3% 5.3% 5.3% 5.3% 5.3% Amount per Available Room $1,267 $1,309 $1,356 $1,411 $1,460 Amount per Occupied Room $ 5.42 $ 5.69 $ 5.90 $ 6.04 $ 6.25 - -------------------------------------------------------------------------------- Franchise Fee Franchise expense represents the fees paid to Ramada for the use of the company's name, trade marks, and service marks. The following table illustrates the projection of the subject property's franchise fee. ================================================================================ Table 10-20 Forecast of Franchise Fee - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized 2001 - -------------------------------------------------------------------------------- Franchise Fees Expense (+000) $122 $126 $131 $137 $142 - -------------------------------------------------------------------------------- Property Operations and Maintenance Property operations and maintenance expense is another expense category that is largely controlled by management. Except for repairs that are necessary to keep the facility open and prevent damage (e.g., plumbing, heating, and electrical items), most maintenance can be deferred for varying lengths of time. Maintenance is an accumulating expense. If management elects to postpone performing a required repair, they have not eliminated or saved the expenditure; they have only deferred payment until a later date. A lodging facility that operates with a lower-than-normal maintenance budget is likely to accumulate a considerable amount of deferred maintenance. The age of a lodging facility has a strong influence on the required level of maintenance. A new or thoroughly renovated property is protected for several years by modern equipment and manufacturers' warranties. However, as a hostelry grows older, maintenance expenses escalate. A well-organized preventive maintenance system often helps delay deterioration, but most facilities face higher property operations and maintenance costs each year, regardless of the occupancy trend. The quality of initial construction can also have a direct impact on future maintenance requirements. The use of high- HVS International, Mineola, New York Income Capitalization Approach 112 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= quality building materials and construction methods generally reduces the need for maintenance expenditures over the long term. Property operations and maintenance is considered an operating expense; as such, it includes only those components that can be expensed, rather than capitalized, under Internal Revenue Service regulations. For example, if a table leg is broken, the repair of that leg is considered an expense and is chargeable to property operations and maintenance. If the table is replaced, it becomes a capital expenditure and does not appear under the property operations and maintenance category. Appraisers account for capital replacement of items such as furniture and equipment in the reserve for replacement account, which is discussed later in this section. Property operations and maintenance costs are relatively fixed, and are projected as follows. ================================================================================ Table 10-21 Forecast of Property Operations and Maintenance Expense - --------------------------------------------------------------------------------
1997 1998 1999 Stabilized 2001 - ------------------------------------------------------------------------------------------------- Total Property Oper. & Maint. Exp. (+000) $243 $251 $260 $271 $280 Percentage of Total Revenue 5.2% 5.2% 5.2% 5.2% 5.2% Amount per Available Room $1,240 $1,282 $1,328 $1,382 $1,430 Amount per Occupied Room $5.31 $5.57 $5.78 $5.91 $6.12
- -------------------------------------------------------------------------------- Energy Expense The energy consumption of a lodging facility takes several forms, including water and space heating, air conditioning, lighting, cooking fuel, and other miscellaneous power requirements. The most common sources of hotel energy are electricity, natural gas, fuel oil, and steam. This category also includes the cost of water service. Total energy cost depends on the source and quantity of fuel used. Electricity tends to be the most expensive source, followed by oil and gas. Although all hotels consume a sizable amount of electricity, many properties supplement their energy requirements with less expensive sources, such as gas and oil, for heating and cooking. A large portion of a hostelry's energy consumption is relatively fixed. Restaurants, kitchens, public areas, and corridors must be continually lighted and climate-controlled, regardless of occupancy. The energy cost of an additional occupied room (i.e., a few hours of light, television, heat, or air conditioning) is minimal. The following table presents our forecast of the subject property's energy expense. HVS International, Mineola, New York Income Capitalization Approach 113 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-22 Forecast of Energy Expense - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized 2001 - -------------------------------------------------------------------------------- Total Energy Expense (+000) $444 $459 $476 $493 $511 Percentage of Total Revenue 9.5% 9.5% 9.5% 9.4% 9.4% Amount per Available Room $2,266 $2,344 $2,427 $2,517 $2,605 Amount per Occupied Room $9.70 $10.19 $10.56 $10.77 $11.15 - -------------------------------------------------------------------------------- Property Taxes The estimate of property taxes was detailed in a previous section of this report. The following table summarizes these projections. ================================================================================ Table 10-23 Forecast of Property Taxes - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized 2001 - -------------------------------------------------------------------------------- Forecast Property Taxes (+000) $210 $222 $230 $238 $247 - -------------------------------------------------------------------------------- Insurance Expense The insurance expense category consists of the cost of insuring the hotel and its contents against damage or destruction by fire, weather, sprinkler leakage, boiler explosion, plate glass breakage, and so forth. It does not include liability coverage, which is a component of administrative and general expense. Insurance rates are based on many factors, including building design and construction, fire detection and extinguishing equipment, fire district, distance from the firehouse, and the area's fire experience. Insurance expenses do not vary with occupancy. Based on historical levels, we project the subject property's insurance expense at approximately $210,000 in 1997. In subsequent years, this amount is assumed to increase in tandem with inflation. The following table outlines our projection of insurance expense. HVS International, Mineola, New York Income Capitalization Approach 114 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-24 Forecast of Insurance Expense - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized 2001 - -------------------------------------------------------------------------------- Forecast Insurance Expense (+000) $73 $76 $79 $81 $84 - -------------------------------------------------------------------------------- Reserve for Replacement Furniture, fixtures, and equipment are essential to the operation of a lodging facility, and their quality often influences a property's class. This category includes all non-real estate items that are capitalized, rather than expensed. The furniture, fixtures, and equipment of a hotel are exposed to heavy use and must be replaced at regular intervals. The useful life of these items is determined by their quality, durability, and the amount of guest traffic and use. Periodic replacement of furniture, fixtures, and equipment is essential to maintain the quality, image, and income-producing potential of a lodging facility. Because capitalized expenditures are not included in the operating statement but nevertheless affect an owner's cash flow, an appraisal should reflect these expenses in the form of an appropriate reserve for replacement. Our industry experience indicates that a reserve for replacement of 3% to 5% of total revenue is generally sufficient to provide for the timely replacement of furniture, fixtures, and equipment. Because the reserve for replacement is based on a percentage of total revenue, it has no fixed component. Based on an analysis of comparable lodging facilities, we believe that a reserve for replacement of 4% of total revenue is sufficient to provide for the periodic replacement of the subject property's furniture, fixtures, and equipment. This amount is consistent with the reserve account contributions currently made by the hotel. The following table summarizes the projected reserve for replacement. ================================================================================ Table 10-25 Forecast of Reserve for Replacement - -------------------------------------------------------------------------------- 1997 1998 1999 Stabilized 2001 - -------------------------------------------------------------------------------- Reserve for Replacement Exp. (+000) $187 $193 $200 $210 $218 - -------------------------------------------------------------------------------- Ground Rent Because Ashford Financial Corporation currently holds the leasehold interest in the subject property, the Ramada Plaza Hotel has historically incurred ground rent. However, as noted earlier, a purchase option exists in the ground lease involving the subject property whereby the lessee, or assignee HVS International, Mineola, New York Income Capitalization Approach 115 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= of the lease, can purchase the real property for $450,000 if exercised after March 1, 1992. Representatives of Ashford Financial Corporation has reported that the option will be exercised prior to the date of value of this appraisal. Consequently, we have omitted ground rent in our projection of income and expense. Summary of Projections Based on the preceding analysis, we have formulated a forecast of income and expense. The table on the following page presents a detailed forecast through the stabilized year, including amounts per available room (PAR) and per occupied room (POR). For the purpose of comparison, this table also presents the subject property's most recent full year of operating history. The second table illustrates our ten-year forecast of income and expense in less detail. The forecasts pertain to calendar operating years beginning January 1, 1997, and are expressed in inflated dollars for each year. HVS International, Mineola, New York Income Capitalization Approach 116 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-26 Detailed Forecast of Income and Expense through the Stabilized Year and Most Recent Operating History, Ramada Plaza Hotel, Woburn, Massachusetts (+000) - --------------------------------------------------------------------------------
Historical Operating Results ----------------------------------- Calendar Years Ending: 1995 1997 Number of Rooms: 196 196 Occupancy: 59.5% 64.0% Average Rate: $51.45 $66.35 Days Open: 365 365 Occupied Rooms: 40,380 % Gross PAR POR 45,786 % Gross PAR POR - ---------------------------------------------------------------------------------------------------------- REVENUE Rooms $2,078 64.4% $10,600 $51.45 $3,038 64.9% $15,500 $66.35 Food 810 25.1 4,132 20.06 1,081 23.1 5,515 23.61 Beverage 254 7.9 1,298 6.30 388 8.3 1,980 8.47 Telephone 67 2.1 340 1.65 114 2.4 582 2.49 Other Income 15 0.5 78 0.38 59 1.3 301 1.29 Total Revenues 3,224 100.0 16,448 79.84 4,680 100.0 23,878 102.22 - ---------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES * Rooms 587 28.3 2,995 14.54 762 25.1 3,888 16.64 Food & Beverage 793 74.5 4,045 19.63 1,045 71.1 5,332 22.82 Telephone 41 61.5 209 1.02 59 51.8 301 1.29 Other Income 4 23.3 18 0.09 4 6.8 20 0.09 Total Dept. Expenses 1,424 44.2 7,267 35.28 1,870 40.0 9,541 40.84 - ---------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 1,799 55.8 9,181 44.56 2,810 60.0 14,337 61.37 - ---------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 426 13.2 2,172 10.54 488 10.4 2,490 10.66 Management Fee 97 3.0 494 2.40 140 3.0 714 3.06 Marketing 216 6.7 1,104 5.36 248 5.3 1,265 5.42 Franchise Fees 61 1.9 311 1.51 122 2.6 622 2.66 Property Oper. & Maint 222 6.9 1,134 5.51 243 5.2 1,240 5.31 Energy 353 11.0 1,803 8.75 444 9.5 2,265 9.70 Total Operating Expenses 1,376 42.7 7,018 34.06 1,685 36.0 8,597 36.80 - ---------------------------------------------------------------------------------------------------------- HOUSE PROFIT 424 13.1 2,163 10.50 1,125 24.0 5,740 24.57 - ---------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 234 7.3 1,195 5.80 210 4.5 1,071 4.59 Insurance 47 1.5 240 1.16 73 1.6 372 1.59 Reserve for Replacement 129 4.0 658 3.19 187 4.0 954 4.08 Rent 86 2.7 439 2.13 0 0.0 0 0.00 Total 496 15.5 2,532 12.29 470 10.1 2,398 10.27 - ---------------------------------------------------------------------------------------------------------- NET INCOME ($72) (2.4) (369) ($1.79) $655 13.9 $3,342 $14.31 ========================================================================================================== Food/Rooms 39.0% 35.6% Beverage/Food 31.4% 35.9% Telephone/Rooms 3.2% 3.8% Other Income/Rooms 0.7% 1.9% Calendar Years Ending: 1998 1999 Number of Rooms: 196 196 Occupancy: 63.0% 63.0% Average Rate: $69.67 $72.46 Days Open: 365 365 Occupied Rooms: 445,070 % Gross PAR POR 45,070 % Gross PAR POR - ------------------------------------------------------------------------------------------------------- REVENUE Rooms $3,140 65.2% $16,020 $69.67 $3,266 65.2% $16,663 $72.46 Food 1,106 22.9 5,643 24.54 1,145 22.9 5,842 25.40 Beverage 397 8.2 2,026 8.81 411 8.2 2,097 9.12 Telephone 117 2.4 597 2.60 121 2.4 617 2.68 Other Income 61 1.3 311 1.35 63 1.3 321 1.40 Total Revenues 4,821 100.0 24,597 106.97 5,006 100.0 25,541 111.07 - ------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES * Rooms 783 24.9 3,995 17.37 811 24.8 4,138 17.99 Food & Beverage 1,075 71.5 5,485 23.85 1,113 71.5 5,679 24.69 Telephone 60 51.3 306 1.33 62 51.2 316 1.38 Other Income 4 6.6 20 0.09 4 6.3 20 0.09 Total Dept. Expenses 1,922 39.9 9,806 42.64 1,990 39.8 10,153 44.15 - ------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 2,899 60.1 14,791 64.32 3,016 60.2 15,388 66.92 - ------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 505 10.5 2,577 11.20 523 10.4 2,668 11.60 Management Fee 145 3.0 740 3.22 150 3.0 765 3.33 Marketing 257 5.3 1,311 5.70 266 5.3 1,357 5.90 Franchise Fees 126 2.6 643 2.80 131 2.6 668 2.91 Property Oper. & Maint 251 5.2 1,281 5.57 260 5.2 1,327 5.77 Energy 459 9.5 2,342 10.18 476 9.5 2,429 10.56 Total Operating Expenses 1,743 36.1 8,893 38.67 1,806 36.0 9,214 40.07 - ------------------------------------------------------------------------------------------------------- HOUSE PROFIT 1,156 24.0 5,898 25.65 1,210 24.2 6,173 26.85 - ------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 222 4.6 1,133 4.93 230 4.6 1,173 5.10 Insurance 76 1.6 388 1.69 79 1.6 403 1.75 Reserve for Replacement 193 4.0 985 4.28 200 4.0 1,020 4.44 Rent 0 0.0 0 0.00 0 0.0 0 0.00 Total 491 10.2 2,505 10.89 509 10.2 2,597 11.29 - ------------------------------------------------------------------------------------------------------- NET INCOME $665 13.8 $3,393 $14.75 $701 14.0 $3,577 $15.55 ======================================================================================================= Food/Rooms 35.2% 35.1% Beverage/Food 35.9% 35.9% Telephone/Rooms 3.7% 3.7% Other Income/Rooms 1.9% 1.9% Calendar Years Ending: Stabilized 2001 Number of Rooms: 196 196 Occupancy: 64.0% 64.0% Average Rate: $74.99 $77.62 Days Open: 365 365 Occupied Rooms: 45,786 % Gross PAR POR 45,786 % Gross PAR POR - ---------------------------------------------------------------------------------------------------------- REVENUE Rooms $3,434 65.3% $17,520 $75.00 3,554 65.3% $18,133 $77.62 Food 1,199 22.8 6,117 26.19 1,241 22.8 6,332 27.10 Beverage 431 8.2 2,199 9.41 446 8.2 2,276 9.74 Telephone 127 2.4 648 2.77 131 2.4 668 2.86 Other Income 66 1.3 337 1.44 68 1.3 347 1.49 Total Revenues 5,257 100.0 26,821 114.82 5,440 100.0 27,755 118.81 - ---------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES * Rooms 845 24.6 4,311 18.46 874 24.6 4,459 19.09 Food & Beverage 1,159 71.1 5,913 25.31 1,199 71.1 6,117 26.19 Telephone 65 51.2 332 1.42 67 51.1 342 1.46 Other Income 4 6.1 20 0.09 4 5.9 20 0.09 Total Dept. Expenses 2,073 39.4 10,577 45.28 2,144 39.4 10,939 46.83 - ---------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 3,184 60.6 16,245 69.54 3,296 60.6 16,816 71.99 - ---------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 544 10.3 2,776 11.88 563 10.3 2,872 12.30 Management Fee 158 3.0 806 3.45 163 3.0 832 3.56 Marketing 277 5.3 1,413 6.05 286 5.3 1,459 6.25 Franchise Fees 137 2.6 699 2.99 142 2.6 724 3.10 Property Oper. & Maint 271 5.2 1,383 5.92 280 5.1 1,429 6.12 Energy 493 9.4 2,515 10.77 511 9.4 2,607 11.16 Total Operating Expenses 1,880 35.8 9,592 41.06 1,945 35.7 9,923 42.48 - ---------------------------------------------------------------------------------------------------------- HOUSE PROFIT 1,304 24.8 6,653 28.48 1,351 24.9 6,893 29.51 - ---------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 238 4.5 1,214 5.20 247 4.5 1,260 5.39 Insurance 81 1.5 413 1.77 84 1.5 429 1.83 Reserve for Replacement 210 4.0 1,071 4.59 218 4.0 1,112 4.76 Rent 0 0.0 0 0.00 0 0.0 0 0.00 Total 529 10.0 2,699 11.55 549 10.0 2,801 11.99 - ---------------------------------------------------------------------------------------------------------- NET INCOME $775 14.8 $3,954 $16.93 $802 14.9 $4,092 $17.52 ========================================================================================================== Food/Rooms 34.9% 34.9% Beverage/Food 35.9% 35.9% Telephone/Rooms 3.7% 3.7% Other Income/Rooms 1.9% 1.9%
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 117 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-27 Ten-Year Forecast of Income and Expense, Ramada Plaza Hotel, Woburn, Massachusetts (+000) - --------------------------------------------------------------------------------
Calendar Years Ending: 1997 1998 1999 2000 2001 2002 --------------- --------------- --------------- --------------- --------------- --------------- Number of Rooms: 196 196 196 196 196 196 Occupied Rooms: 45,786 45,070 45,070 45,786 45,786 45,786 Occupancy: 64.0% % of 63.0% % of 63.0% % of 64.0% % of 64.0% % of 64.0% % of Average Rate: $66.35 Gross $69.67 Gross $72.46 Gross $74.99 Gross $77.62 Gross $80.33 Gross - ------------------------ --------------- --------------- --------------- --------------- --------------- --------------- REVENUE Rooms $3,038 64.9% $3,140 65.2% $3,266 65.2% $3,434 65.3% $3,554 65.3% $3,678 65.4% Food 1,081 23.1 1,106 22.9 1,145 22.9 1,199 22.8 1,241 22.8 1,284 22.8 Beverage 388 8.3 397 8.2 411 8.2 431 8.2 446 8.2 461 8.2 Telephone 114 2.4 117 2.4 121 2.4 127 2.4 131 2.4 136 2.4 Other Income 59 1.3 61 1.3 63 1.3 66 1.3 68 1.3 70 1.2 Total 4,680 100.0 4,821 100.0 5,006 100.0 5,257 100.0 5,440 100.0 5,629 100.0 - ------------------------ --------------- --------------- --------------- --------------- --------------- --------------- DEPARTMENTAL EXPENSES Rooms 762 25.1 783 24.9 811 24.8 845 24.6 874 24.6 905 24.6 Food & Beverage 1,045 71.1 1,075 71.5 1,113 71.5 1,159 71.1 1,199 71.1 1,241 71.1 Telephone 59 51.8 60 51.3 62 51.2 65 51.2 67 51.1 70 51.5 Other Income 4 6.8 4 6.6 4 6.3 4 6.1 4 5.9 5 7.1 Total 1,870 40.0 1,922 39.9 1,990 39.8 2,073 39.4 2,144 39.4 2,221 39.5 - ------------------------ --------------- --------------- --------------- --------------- --------------- --------------- DEPARTMENTAL INCOME 2,810 60.0 2,899 60.1 3,016 60.2 3,184 60.6 3,296 60.6 3,408 60.5 - ------------------------ --------------- --------------- --------------- --------------- --------------- --------------- OPERATING EXPENSES Administrative & General 488 10.4 505 10.5 523 10.4 544 10.3 563 10.3 583 10.4 Management Fee 140 3.0 145 3.0 150 3.0 158 3.0 163 3.0 169 3.0 Marketing 248 5.3 257 5.3 266 5.3 277 5.3 286 5.3 296 5.3 Franchise Fees 122 2.6 126 2.6 131 2.6 137 2.6 142 2.6 147 2.6 Property Oper. & Maint 243 5.2 251 5.2 260 5.2 271 5.2 280 5.1 290 5.2 Energy 444 9.5 459 9.5 476 9.5 493 9.4 511 9.4 528 9.4 Total 1,685 36.0 1,743 36.1 1,806 36.0 1,880 35.8 1,945 35.7 2,013 35.9 - ------------------------ --------------- --------------- --------------- --------------- --------------- --------------- HOUSE PROFIT 1,125 24.0 1,156 24.0 1,210 24.2 1,304 24.8 1,351 24.9 1,395 24.6 - ------------------------ --------------- --------------- --------------- --------------- --------------- --------------- FIXED EXPENSES Property Taxes 210 4.5 222 4.6 230 4.6 238 4.5 247 4.5 255 4.5 Insurance 73 1.6 76 1.6 79 1.6 81 1.5 84 1.5 87 1.5 Reserve for Replacement 187 4.0 193 4.0 200 4.0 210 4.0 218 4.0 225 4.0 Total 470 10.1 491 10.2 509 10.2 529 10.0 549 10.0 567 10.0 - ------------------------ --------------- --------------- --------------- --------------- --------------- --------------- NET INCOME $655 13.9% $665 13.8% $701 14.0% $775 14.8% $802 14.9% $828 14.6% ======================== =============== =============== =============== =============== =============== =============== Calendar Years Ending: 2003 2004 2005 2006 --------------- --------------- --------------- ---------------- Number of Rooms: 196 196 196 196 Occupied Rooms: 45,786 45,786 45,786 45,786 Occupancy: 64.0% % of 64.0% % of 64.0% % of 64.0% % of Average Rate: $83.15 Gross $86.06 Gross $89.07 Gross $92.19 Gross - ------------------------ --------------- --------------- --------------- ---------------- REVENUE Rooms $3,807 65.3% $3,940 65.4% $4,078 65.4% $4,221% 65.3% Food 1,329 22.8 1,376 22.8 1,424 22.8 1,474 22.8 Beverage 478 8.2 494 8.2 512 8.2 530 8.2 Telephone 141 2.4 146 2.4 151 2.4 156 2.4 Other Income 73 1.3 75 1.2 78 1.2 81 1.3 Total 5,828 100.0 6,031 100.0 6,243 100.0 6,462 100.0 - ------------------------ --------------- --------------- --------------- ---------------- DEPARTMENTAL EXPENSES Rooms 937 24.6 969 24.6 1,003 24.6 1,038 24.6 Food & Beverage 1,285 71.1 1,329 71.1 1,376 71.1 1,424 71.1 Telephone 72 51.1 75 51.4 77 51.0 80 51.3 Other Income 5 6.8 5 6.7 5 6.4 5 6.2 Total 2,299 39.4 2,378 39.4 2,461 39.4 2,547 39.4 - ------------------------ --------------- --------------- --------------- ---------------- DEPARTMENTAL INCOME 3,529 60.6 3,653 60.6 3,782 60.6 3,915 60.6 - ------------------------ --------------- --------------- --------------- ---------------- OPERATING EXPENSES Administrative & General 603 10.3 624 10.3 646 10.3 669 10.4 Management Fee 175 3.0 181 3.0 187 3.0 194 3.0 Marketing 307 5.3 317 5.3 328 5.3 340 5.3 Franchise Fees 152 2.6 158 2.6 163 2.6 169 2.6 Property Oper. & Maint 300 5.1 311 5.2 322 5.2 333 5.2 Energy 547 9.4 566 9.4 586 9.4 606 9.4 Total 2,084 35.7 2,157 35.8 2,232 35.8 2,311 35.9 - ------------------------ --------------- --------------- --------------- ---------------- HOUSE PROFIT 1,445 24.9 1,496 24.8 1,550 24.8 1,604 24.7 - ------------------------ --------------- --------------- --------------- ---------------- FIXED EXPENSES Property Taxes 264 4.5 273 4.5 283 4.5 293 4.5 Insurance 90 1.5 94 1.6 97 1.6 100 1.5 Reserve for Replacement 233 4.0 241 4.0 250 4.0 258 4.0 Total 587 10.0 608 10.1 630 10.1 651 10.0 - ------------------------ --------------- --------------- --------------- ---------------- NET INCOME $858 14.9% $888 14.7% $920 14.7% $953 4.7% ======================== =============== =============== =============== ================
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 118 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The conversion of a property's projected net income into an estimate of value is based on the premise that investors typically purchase real estate with a small amount of equity cash (25% to 40%) and a large amount of mortgage financing (60% to 75%). The amounts and terms of available mortgage financing and the rates of return that are required to attract sufficient equity capital form the basis for allocating the net income between the mortgage and equity components and deriving a value estimate. Mortgage Component Data for the mortgage component may be developed from statistics of actual hotel mortgages made by long-term lenders. The American Council of Life Insurance, which represents 20 large life insurance companies, publishes quarterly information pertaining to the hotel mortgages issued by its member companies. The following table summarizes the average mortgage interest rates of the hotel loans made by these lenders. In addition, the A corporate bond yield (as reported by Moody's Bond Record) is shown for the purpose of comparison. HVS International, Mineola, New York Income Capitalization Approach 119 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-28 Average Mortgage Interest Rates and Average A Corporate Bond Yields - -------------------------------------------------------------------------------- Average A Average Corporate Year Interest Rate Bond Yield ---------------------------------------------------------- 1st Quarter 1996 7.79% 7.37% 4th Quarter 1995 8.44 7.28 3rd Quarter 1995 8.61 7.67 2nd Quarter 1995 9.25 7.87 1st Quarter 1995 9.14 8.50 3rd Quarter 1994 9.64 8.48 2nd Quarter 1994 9.38 8.28 4th Quarter 1993 9.38 7.80 3rd Quarter 1993 8.41 7.28 2nd Quarter 1993 10.53 9.65 4th Quarter 1992 9.43 8.48 3rd Quarter 1992 9.99 8.38 2nd Quarter 1992 9.47 8.79 1st Quarter 1992 10.02 8.81 4th Quarter 1991 10.49 8.97 3rd Quarter 1991 10.03 9.29 2nd Quarter 1991 10.75 9.45 3rd Quarter 1990 10.47 9.89 2nd Quarter 1990 10.58 9.83 4th Quarter 1989 9.96 9.42 3rd Quarter 1989 9.55 9.46 2nd Quarter 1989 10.54 9.93 1st Quarter 1989 10.39 10.16 4th Quarter 1988 10.07 10.03 3rd Quarter 1988 10.66 10.51 2nd Quarter 1988 10.09 10.33 4th Quarter 1987 10.41 10.45 3rd Quarter 1987 10.00 9.95 2nd Quarter 1987 9.81 9.46 1st Quarter 1987 9.43 9.19 4th Quarter 1986 9.44 9.55 3rd Quarter 1986 9.56 9.71 2nd Quarter 1986 9.80 9.91 1st Quarter 1986 10.99 10.62 Sources: American Council of Life Insurance; Mood's Bond Record - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 120 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Because of the six- to nine-month lag time in reporting and publishing hotel mortgage statistics, it is necessary to update this information to reflect current lending practices. Research by HVS International indicates that there is a close mathematical relationship between the average interest rate of a hotel mortgage and the concurrent yield on an average A corporate bond. Through a regression analysis, this relationship is expressed as follows. Y = 2.76078 + 0.782280 X Where: Y = Estimated Hotel/Motel Mortgage Interest Rate X = Current Average A Corporate Bond Yield (Coefficient of correlation is 96.4%) The yield on A corporate bonds for the third quarter of 1996, as reported by Moody's Bond Record, was 7.91%. Using a factor of 7.91% in the equation presented above produces an estimated hotel/motel interest rate of 8.95%. In addition to the mortgage interest rate estimate derived from this regression analysis, HVS International constantly monitors the terms of hotel mortgage loans made by our institutional lending clients. In the past year, we have noted an increase in the availability of debt financing, and many lenders have returned to the market. The current level of lending activity represents a significant increase from the restricted environment of the early 1990s. Nonetheless, the market for hotel mortgage loans remains somewhat tight, particularly when compared to the conditions that prevailed in the mid-to late 1980s. In the current lending climate, strong hotel projects that are structured on an economic basis can secure mortgage financing at interest rates ranging from 8% to 11%, depending on the property, location, affiliation, and operator. In the 1980s, when hotel mortgages were widely available, loan-to-value ratios typically ranged from 75% to 80%. Amortization schedules were generally based on 30 years, although the term of the loan was more likely to be seven to ten years. The few loans that were underwritten in the early 1990s were based on far more stringent parameters: loan-to-value ratios declined to a range of 50% to 65%, and amortization periods of 20 to 25 years were most common. With the recent reemergence of hotel financing, loan-to-value requirements and amortization schedules have loosened somewhat. At present, we find that lenders who are active in the market are using loan-to-value ratios of HVS International, Mineola, New York Income Capitalization Approach 121 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 65% to 75%, and amortization periods of 25 to 30 years. The exact terms offered depend on specific factors such as the property's location, the age and quality of the physical facility, local hostelry market conditions, and (perhaps more significantly) the profile of the borrower. The strongest projects typically command the highest loan-to-value ratios. Based on the preceding analysis of the current lodging industry mortgage market and adjustments for specific factors such as the property's location and conditions in the local hotel market, it is our opinion that a 9.5% interest, 20-year amortization mortgage with a 0.111856 constant is appropriate for the subject property. We believe that a mortgage lender will lend up to 70% of the hotel's market value as determined by this appraisal. Equity Component The remaining capital required for a hotel investment generally comes from the equity investor. The rate of return that an equity investor expects over a ten-year holding period is known as the equity yield. Unlike the equity dividend, which is a short-term rate of return, the equity yield specifically considers a long-term holding period (generally ten years), annual inflation- adjusted cash flows, property appreciation, mortgage amortization, and proceeds from a sale at the end of the holding period. It is difficult to quantify the rate of return required by equity investors who are seeking to purchase hotel properties. To establish an appropriate equity yield rate, HVS International uses two sources of data: past appraisals and investor interviews. Past Appraisals - During the past 12 months, HVS International has appraised more than 400 hotels, including properties located in most major national markets. Each appraisal used a similar mortgage-equity approach in which income is projected and then discounted to a current value at rates reflecting the cost of debt and equity capital. In the case of hotels that were sold subsequent to our valuations, we are able to determine an appropriate equity yield rate by excluding incentive management fees from the projection of income and expense, inserting the projection into a valuation model, and adjusting the appraised value to reflect the actual sales price by modifying the return assumptions. The following table shows a representative sample of hotels that were sold shortly after we appraised them, along with the imputed equity return based on our valuation approach. HVS International, Mineola, New York Income Capitalization Approach 122 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-29 Sample of Hotels Sold - --------------------------------------------------------------------------------
No. of Date of Overall Total Property Equity Hotel City and State Rooms Sale Sales Price Rate Yield Yield - ---------------------------------------------------------------------------------------------------------------------------------- Ritz-Carlton Phoenix, AZ 281 2/94 $23,000,000 11.0% 14.6% 21.7% Marriott Marina Fort Lauderdale, FL 580 2/94 40,000,000 12.2 16.4 26.7 Holiday Inn Edison, NJ 274 3/94 11,803,000 7.8 17.0 26.3 Crescent Hotel Phoenix, AZ 342 3/94 26,000,000 6.5 7.2 2.2 Checkers Hotel Kempinski Los Angeles, CA 173 4/94 12,750,000 3.0 18.3 27.0 Best Western Fireside Inn Cambria, CA 46 4/94 3,377,000 11.7 15.8 24.3 Phoenician Resort Phoenix, AZ 580 4/94 224,000,000 6.6 9.3 8.9 Newark-Fremont Hilton Newark, CA 300 5/94 8,950,000 8.8 14.9 20.7 Radisson Inn Orlando, FL 299 5/94 11,150,000 12.9 18.0 28.2 Westin Kauai Lihue, Kauai, HI 840 6/94 97,400,000 (1.9) 8.1 7.2 Residence Inn Binghamton, NY 72 6/94 6,325,000 10.8 13.9 21.9 Hotel Millenium New York, NY 561 6/94 75,000,000 9.5 14.1 23.0 Best Western Otay Valley Chula Vista, CA 120 7/94 2,350,000 13.2 21.1 31.8 Hampton Inn Islandia, NY 121 7/94 6,572,000 12.6 16.6 28.2 Hampton Inn Willow Grove, PA 150 7/94 10,220,000 11.0 14.3 23.0 Hampton Inn West Palm Beach, FL 136 7/94 4,220,000 10.8 10.8 14.3 Hampton Inn Naples, FL 107 7/94 5,700,000 11.4 11.5 24.9 Hampton Inn Albany, NY 126 7/94 9,204,000 9.3 11.5 15.8 Marriott Hotel South Bend, IN 299 7/94 11,500,000 10.5 13.2 18.9 Marriott SFO Burlingame, CA 684 8/94 61,700,000 10.2 13.2 19.0 Westfields Conference Center Chantilly, VA 340 8/94 46,000,000 12.3 15.9 25.3 Radisson Mark Resort Vail, CO 349 9/94 25,200,000 8.9 15.8 24.1 Marriott East Side New York, NY 664 10/94 55,000,000 8.5 9.7 11.1 Marriott Resort Vail, CO 349 10/94 25,200,000 14.2 18.9 30.5 Marriott Quorum Addison, TX 547 10/94 29,815,000 13.5 18.2 31.8 Sheraton Hotel Hasbrouck Heights, NJ 338 11/94 10,450,000 18.3 21.1 30.7 Sheraton Inn Napa, CA 191 12/94 9,968,000 8.9 13.7 19.8 Marriott Fisherman's Wharf San Francisco, CA 255 12/94 27,755,000 10.8 13.4 19.4 Marriott Hotel Portland, OR 503 12/94 45,000,000 12.9 17.4 30.0 Radisson Inn Springfield, MO 199 12/94 5,800,000 8.2 10.1 11.3 Williamsburg Hilton Williamsburg, VA 291 12/94 15,000,000 15.4 19.0 32.0 Marriott Tech Center Denver, CO 625 12/94 36,000,000 13.7 16.4 27.1 Holiday Inn Sunspree Singer Island, FL 222 12/94 11,900,000 8.6 10.6 12.4 The Plaza New York, NY 805 6/95 325,000,000 7.0 11.0 14.0 Fullerton Suites Fullerton, CA 96 5/95 5,000,000 12.9 18.7 28.5 Residence Inn Baton Rouge, LA 80 6/95 6,518,000 12.7 14.8 21.2 Residence Inn Overland Park, KS 112 6/95 8,500,000 8.9 14.7 20.8 Residence Inn Des Moines, IA 112 6/95 7,660,000 9.8 14.1 19.6 Residence Inn Hunt Valley, MD 96 6/95 6,580,000 12.3 13.6 18.3 Residence Inn Kansas City, MO 112 6/95 6,560,000 10.4 13.2 19.8 Residence Inn Lincoln, NE 120 6/95 7,100,000 10.0 13.7 18.5 Embassy Suites Schaurmburg, IL 209 12/95 17,800,000 10.0 13.5 18.9 Marriott Hotel Andover, MA 293 12/95 24,000,000 9.7 13.5 19.2 Doubletree Suites Valley Forge, PA 229 12/95 28,500,000 10.7 14.2 15.5 Marriott Hotel Tysons Corner, VA 390 12/95 41,100,000 10.7 13.1 18.0 Marriott Hotel Warner Center, CA 461 12/95 57,900,000 6.2 11.6 14.2 Hilton at the Club Pleasanton, CA 294 12/95 22,000,000 10.5 13.4 17.0
Source: HVS International - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 123 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Investor Interviews - HVS International is in constant contact with numerous institutional and individual hotel investors. This source of equity funds has definite return requirements that can be expressed as an equity yield rate based on a ten-year projection of net income before incentive management fees but after debt service. Based on our surveys and investor interviews, the following table illustrates the range of equity yields generally required by individual and institutional investors. ================================================================================ Table 10-30 Equity Yield Requirements - -------------------------------------------------------------------------------- Source Equity Yield Requirement ------ ------------------------ Individual 20% - 24% Institution 18% - 22% - -------------------------------------------------------------------------------- Based on the assumed 70% loan-to-value ratio, the risk inherent in achieving the projected income stream, and the age, condition, and anticipated market position of the subject property, it is our opinion that an equity investor is likely to require an equity yield rate of 22% before payment of incentive management fees. This estimate is well supported by the equity yield requirements presented previously. Terminal Capitalization Rate Inherent in this valuation process is the assumption of a sale at the end of the ten-year holding period. The estimated reversionary sales price as of that date is calculated by capitalizing the projected 11th-year net income by an overall terminal capitalization rate. A percentage for the seller's brokerage and legal fees is deducted from this sales price, and the net proceeds to the equity interest (also known as the equity residual) are calculated by deducting the outstanding mortgage balance from the reversion. To estimate a property's reversionary value, the appraiser must select a terminal capitalization rate and an allocation for brokerage and legal fees. The terminal capitalization rate is an overall rate that is applied to one stabilized year, and thus it inherently incorporates the cost of debt and equity capital. The terminal capitalization rate can be derived through a mortgage and equity band of investment technique which calculates the weighted average cost of the capital used in a hotel investment. Combining the mortgage financing terms derived previously (namely, a 70% loan-to-value ratio and a 0.111856 debt service constant) with a cash-on-cash equity dividend rate of 12% produces the following overall capitalization rate. HVS International, Mineola, New York Income Capitalization Approach 124 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Percent of Rate of Weighted Value Return Average ---------- ------- -------- Mortgage 70% X 0.11186 = 0.07830 Equity 30% X 0.12000 = 0.03600 -------- Overall Capitalization Rate 0.11430 Because this overall rate will be used to capitalize net income ten years from the date of value, an upward adjustment is appropriate to reflect the uncertainty inherent in this extended period. For the purpose of this valuation, we will use a terminal capitalization rate of 12%. As a point of reference, the terminal capitalization rate can be compared to the going-in rate implied by the subject property's estimated value. The going-in rate reflects the capitalization rate that would be applicable if the hotel were operating at a stabilized level as of the date of value. This rate is calculated by dividing the stabilized net income (expressed in current dollars as of the date of value) by the value indicated by the income capitalization approach. Generally, the terminal capitalization rate is approximately 100 to 200 basis points above the going-in rate. Summary of Valuation Variables The following table summarizes the valuation variables that have been used to estimate the subject property's value via the income capitalization approach. ================================================================================ Table 10-31 Summary of Valuation Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Ten-Year Forecast Loan-To-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.111856 Equity Yield Ye 22.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 12.0% - -------------------------------------------------------------------------------- Valuation of the Mortgage and Equity Components The valuation of the mortgage and equity components is accomplished through use of an algebraic equation that calculates the exact amount of debt and equity that the hotel will be able to support based on the anticipated cash flow (derived from the forecast of income and expense) and the specific return requirements demanded by the mortgage lender (interest) HVS International, Mineola, New York Income Capitalization Approach 125 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= and the equity investor (equity yield). The equation and the calculations associated with this simultaneous valuation formula are set forth in the Addenda to this report. Using the variables summarized above, we estimate the value of the subject property via the income capitalization approach at $5,970,000. Proof of Value The value is proven by calculating the yields to the mortgage and equity components during the projection period. If the mortgagee achieves a 9.5%yield and the equity yield is 22%, then $5,970,000 is the correct value by the income capitalization approach. Using the assumed financial structure set forth in the previous calculations, market value can be allocated between the debt and equity as follows. Mortgage Component(70%) $4,179,000 Equity Component(30%) 1,791,000 ------------- Total $5,970,000 The annual debt service is calculated by multiplying the mortgage component by the mortgage constant. Mortgage Component $4,179,000 Mortgage Constant 0.111856 ------------- Annual Debt Service $467,445 The cash flow to equity is calculated by deducting the debt service from the projected net income before debt service. HVS International, Mineola, New York Income Capitalization Approach 126 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-32 Forecast of Net Income to Equity - -------------------------------------------------------------------------------- Net Income Available for Total Annual Net Income Year Debt Service Debt Service to Equity - -------------------------------------------------------------------------------- 1997 $655,000 - $467,000 = $188,000 1998 665,000 - 467,000 = 198,000 1999 701,000 - 467,000 = 234,000 2000 775,000 - 467,000 = 308,000 2001 802,000 - 467,000 = 335,000 2002 828,000 - 467,000 = 361,000 2003 858,000 - 467,000 = 391,000 2004 888,000 - 467,000 = 421,000 2005 920,000 - 467,000 = 453,000 2006 953,000 - 467,000 = 486,000 The equity residual at the end of the tenth year is calculated as follows. Reversionary Value ( $986,000 /0.120) $8,217,000 Less: Brokerage and Legal Fees 247,000 Mortgage Balance 3,010,000 ------------ Net Sale Proceeds to Equity $4,960,000 The overall property yield (before debt service), the yield to the lender, and the yield to the equity position have been calculated by computer with the following results. ================================================================================ Table 10-33 Overall Property Yields - -------------------------------------------------------------------------------- Projected Yield (Internal Rate of Return) Position Value Over 10-Year Holding Period --------------------------------------------------------------- Total Property $5,970,000 14.5% Mortgage 4,179,000 9.4 Equity 1,791,000 22.0 Note: Whereas the mortgage constant and value are calculated on the basis of monthly mortgage payments, the mortgage yield in this proof assumes single annual payments. As a result, the proof's derived yield may be slightly less than that actually input. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 127 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The following tables demonstrate that the property receives its anticipated yields, proving that the $5,970,000 value is correct based on the assumptions used in this approach. ================================================================================ Table 10-34 Total Property Yield - -------------------------------------------------------------------------------- Net Income before Present Worth of $1 Discounted Year Debt Service Factor @ 14.5% Cash Flow - ------------------------------------------------------------------------------- 1997 $ 655,000 x 0.873110 = $ 572,000 1998 665,000 x 0.762321 = 507,000 1999 701,000 x 0.665590 = 467,000 2000 775,000 x 0.581133 = 450,000 2001 802,000 x 0.507393 = 407,000 2002 828,000 x 0.443010 = 367,000 2003 858,000 x 0.386796 = 332,000 2004 888,000 x 0.337716 = 300,000 2005 920,000 x 0.294863 = 271,000 2006 8,923,000* x 0.257448 = 2,297,000 ---------- Total Property Val $5,970,000 *10th year net income of $953,000 plus sales proceeds of $7,970,000 - -------------------------------------------------------------------------------- ================================================================================ Table 10-35 Mortgage Component Yield - -------------------------------------------------------------------------------- Total Annual Present Worth of $1 Discounted Year Debt Service Factor @ 9.4% Cash Flow - -------------------------------------------------------------------------------- 1997 $ 467,000 x 0.914346 = $ 427,000 1998 467,000 x 0.836028 = 390,000 1999 467,000 x 0.764418 = 357,000 2000 467,000 x 0.698943 = 326,000 2001 467,000 x 0.639075 = 298,000 2002 467,000 x 0.584336 = 273,000 2003 467,000 x 0.534285 = 250,000 2004 467,000 x 0.488521 = 228,000 2005 467,000 x 0.446677 = 209,000 2006 3,478,000* x 0.408417 = 1,420,000 ---------- Value Of Mortgage $4,178,000 *10th year debt service of $467,000 plus outstanding mortgage balance of $3,010,000 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 128 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-36 Equity Component Yield - --------------------------------------------------------------------------------
Net Income Present Worth of $1 Discounted Year to Equity Factor @ 22.0% Cash Flow - ---------------------------------------------------------------------------------------- 1997 $ 188,000 x 0.819565 = $ 154,000 1998 198,000 x 0.671686 = 133,000 1999 234,000 x 0.550490 = 129,000 2000 308,000 x 0.451162 = 139,000 2001 335,000 x 0.369756 = 124,000 2002 361,000 x 0.303039 = 109,000 2003 391,000 x 0.248360 = 97,000 2004 421,000 x 0.203547 = 86,000 2005 453,000 x 0.166820 = 76,000 2006 5,446,000* x 0.136720 = 745,000 ---------- Value of Equity Component $1,792,000 *10th year net income to equity of $486,000 plus sales proceeds of $4,960,000
- -------------------------------------------------------------------------------- Valuation Method Two: Discounted Cash Flow The total property yield derived from the previous valuation method was 14.5%. After reviewing the total property yields indicated by recent hotel sales, which ranged from 7.2% to 21.1%, it is our opinion that a 15.0% discount factor would be appropriate for the Ramada Plaza Hotel. The following table illustrates the discounted cash flow analysis using a 15.0% discount factor. HVS International, Mineola, New York Income Capitalization Approach 129 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-37 Discounted Cash Flow Analysis - -------------------------------------------------------------------------------- Discount Net Factor Discounted Calendar Year Income @ 15.0% Cash Flow --------------------------------------------------------------- 1997 $655,000 0.86957 $569,565 1998 665,000 0.75614 502,836 1999 701,000 0.65752 460,919 2000 775,000 0.57175 443,109 2001 802,000 0.49718 398,736 2002 828,000 0.43233 357,967 2003 858,000 0.37594 322,554 2004 888,000 0.32690 290,289 2005 920,000 0.28426 261,521 2006 8,923,167* 0.24718 2,205,670 Estimated Market Value: $5,813,166 (Say:) $5,800,000 Reversion Analysis 11th Year's Net Income $986,000 Capitalization Rate 12.0% Total Sales Proceeds $8,216,667 Less: Broker & Legal @ 3.0% 246,500 * 10th year net income of $953,000 plus sales proceed of $7,970,167 - -------------------------------------------------------------------------------- Conclusion Based on our extensive experience in the hotel industry and comprehensive support provided by literature published by the Appraisal Institute, it is our opinion that the valuation procedure embodied by Method One most closely reflects the investment rationale of typical hotel buyers. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis and Valuations,(1) Method Two (which discounts the projected net income and reversion using an overall discount rate, or total property yield) "does not consider the impact of mortgage debt, leverage and the specific equity demands of typical hotel investors...This technique is simple but less reliable because the derivation of the discount rate has little support." In light of this consideration, we have relied on the $5,970,000 value conclusion indicated by Method One. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236 HVS International, Mineola, New York Sales Comparison Approach 130 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 11. Sales Comparison Approach The sales comparison approach is based on the assumption that an informed purchaser will pay no more for a property than the cost to acquire an existing property with equal utility. This approach estimates market value by considering the sales prices indicated by recent transactions involving properties that are similar to the property being appraised. Dissimilarities are resolved with appropriate adjustments; these differences may pertain to the date of sale, the age of the property, location, construction, condition, layout, equipment, size, or external economic factors. The reliability of the sales comparison approach depends on three factors: 1. the availability of timely, comparable sales data; 2. an understanding of the true terms of the sales and the motivation of the buyer and seller; 3. the degree of comparability, or the extent of the adjustments needed to reflect differences between the subject property and the comparable property. In appraising lodging facilities, it is often difficult to find an adequate number of recent sales involving hotels that are truly comparable to the subject property. Consequently, it may be necessary to consider transactions involving properties in different market areas, and the required adjustments greatly diminish the reliability of the conclusions. Moreover, it is virtually impossible for an observer to determine the true motivations of the buyers and sellers involved in transactions. Hotel acquisition often represents a highly ego-driven process in which a number of external, non-market factors influence the purchase price. Unless the appraiser can quantify these influences, there is no way of knowing whether the purchase price paid actually reflects market value. A final consideration is the degree of similarity between the subject property and the comparable; in most cases, the differences are significant enough to require numerous subjective and unsubstantiated adjustments. Each adjustment represents a potential for error, HVS International, Mineola, New York Sales Comparison Approach 131 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= and thus diminishes the reliability of this approach. As a result of these shortcomings, the use of the sales comparison approach in valuing hotels is primarily as a check against the value indicated by the income capitalization approach. Hotel values declined in many areas of the country during the late 1980s and early 1990s, although a rebound began in 1994 and 1995. The downturn, which began in most markets in 1988, was largely attributable to lower operating incomes caused by an oversupply of new hotel rooms constructed during the mid-1980s. Overbuilding resulted in flat or declining average rates and occupancies, which caused revenues to fall. A number of other factors exacerbated the situation. The national recession caused a drop in demand in many markets during the early 1990s, and the Persian Gulf War created a virtual freeze on travel in the beginning of 1991, further limiting hotel demand. Operating costs continued to rise despite poor market conditions, resulting in a decline in the net operating income of hotels throughout the nation. Because operating costs have a large fixed component, many lodging facilities experienced precipitous drops in net income. As bottom-line profits eroded, many hotels were unable to meet debt service, and hundreds of properties entered foreclosure or bankruptcy. Lenders and government agencies soon became hotel owners. Because most financial institutions were preoccupied with their distressed real estate, very little mortgage capital was available and the nation suffered from a well-publicized credit crunch. Most hotel transactions that occurred during the early 1990s were financed by the property owners, who, in most cases, were lenders. In the early 1990s, the primary market participants were owner-operators with the expertise to turn around under-performing properties. Hotels were out of favor with passive investors as a result of the industry's poor operating performance and the uncertainty of future appreciation. The wide disparity in buyer and seller expectations also limited the number of transactions. Many sellers were unwilling to accept the fact that the market value of their hotel investments had declined below the cost of the project or the original investment. Moreover, many owners were faced with a significant tax burden upon sale, further reducing their willingness to settle for a price that was below the original acquisition cost. As a result of these market forces, there was very little sales activity involving large, high-quality hotels. The primary difficulty was the lack of HVS International, Mineola, New York Sales Comparison Approach 132 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= properties available for sale; owners who were not forced to sell opted to wait for prices to recover. The few hotels that did enter the market generally attracted 15 to 20 interested bidders, mostly consisting of owner-operators. As a result of the competition for these few assets, the prices of better-quality hotels began to escalate rapidly. In response, more sellers have been encouraged to place their products on the market. An indicator of this market trend is the number of hotel sales that have occurred during the past few years. HVS International tracks major hotel transactions of more than $10,000,000 on an annual basis. In 1992, the number of major transactions was 67; a slightly lower level of 52 was registered in 1993. This total increased significantly (to 92) in 1994, and the 1995 total is estimated to have been 104. In tandem with escalating prices, hotels are again being considered by traditional financing sources, which had virtually abandoned the hospitality industry by the early 1990s. Although many lenders are still approaching the market with a high degree of caution, it is now possible to obtain third-party financing for hotel transactions. The mortgage loans that are now being made are subject to fairly stringent requirements: loan-to-value ratios remain in the 65% to 75% range. The qualification of the borrower is also a crucial consideration for most lenders. We believe that the upward trend in both pricing and sales activity will continue as financing becomes more available and additional buyers (particularly passive investors) enter the market. Consequently, it is important to consider the date of the transactions used in the sales comparison approach. When the comparable sales are not recent enough to provide an accurate picture of the current market, it may be necessary to make upward adjustments to the values indicated by the sales comparison and income capitalization approaches in recognition of the recent escalation. Comparable Sales Based on information provided by the Hospitality Market Data Exchange and compiled by the six offices of HVS International, the following transactions involved hotels that appear to have some degree of comparability to the subject property. HVS International, Mineola, New York Sales Comparison Approach 133 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #1: Property: Ramada Hotel Location: Montvale, New Jersey Date of Sale: May, 1996 Sales Price: $6,700,000 Grantor: Lennar Corporation Grantee: Gami Lovale Year Opened: 1970 Number of Rooms: 187 Price per Room: $35,829 Confirmed By: Grantee Sale #2: Property: Days Inn Location: Burlington, Massachusetts Date of Sale: June, 1995 Sales Price: $4,200,000 Grantor: The First National Bank of Boston Grantee: Burlington Garden Partners Level I, LP Year Opened: 1969 Number of Rooms: 173 Price per Room: $24,277 Confirmed By: Coleman & Sons, Waltham, MA Comments: The buyer subsequently spent $4 million to renovate and convert the property into a Wyndham Garden Hotel. HVS International, Mineola, New York Sales Comparison Approach 134 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #3: Property: Ramada Inn Location: Germantown, Maryland Date of Sale: May, 1995 Sales Price: $5,350,000 Grantor: Goldenrod Limited Partnership Grantee: Inn Keepers USA Limited Partnership Year Opened: NA Number of Rooms: 180 Price per Room: $29,722 Confirmed By: Eastdil Corp. Comments: This property was subsequently renovated and converted to a Hampton Inn. Sale #4: Property: Quality Inn Location: Woodbury New York Date of Sale: August, 1995 Sales Price: $2,900,000 Grantor: The Estate of Frederick Phillips, et. al. Grantee: Woodbury Realty Associates Year Opened: 1961 Number of Rooms: 85 Price per Room: $34,118 Confirmed By: Goodman Marks Associates Comments: This property is located on Jericho Turnpike in Woodbury. The purchase price includes the furniture, fixtures and equipment, and is subject to a long-term lease for a restaurant on the premises. HVS International, Mineola, New York Sales Comparison Approach 135 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #5: Property: Holiday Inn Location: Waterbury, Connecticut Date of Sale: June, 1995 Sales Price: $7,850,000 Grantor: Buckingham Development Corporation Grantee: Oakdale College Limited Partnership Year Opened: 1990 Number of Rooms: 205 Price per Room: $38,293 Confirmed By: Arthur Anderson In addition to considering the above recent transactions, we have also reviewed the sale of the subject property, which occurred in 1994. The details of this transaction are summarized as follows: Subject Property: Property: Ramada Inn Location: Woburn, Massachusetts Date of Sale: October, 1994 Sales Price: $2,753,768 Grantor: Ramada Assured Income Associates, L.P. Grantee: Woburn Massachusetts Hotel II Limited Partnership (subsidiary of Ashford Financial Corporation) Year Opened: 1972 Number of Rooms: 196 Price per Room: $14,050 Confirmed By: Grantee HVS International, Mineola, New York Sales Comparison Approach 136 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= In analyzing the sale of the subject property, it is important to consider the terms and conditions pertaining to the transaction. According to information provided by Ashford Financial Corporation, the subject property was one of six Ramada Inns purchased as a package from an investment partnership sponsored by Lehman Brothers. The above-listed price represents an allocation of the total package price rather than a negotiated value for this single asset. The total package price was $20,250,000, and was paid in cash, using all equity financing. At the time of the transaction, the group of hotels was generating virtually no operating income, and all were in extremely poor condition. The previous owners were reportedly strongly motivated to sell due to the poor performance of the hotels. Based on our understanding of the circumstances of this transaction, we do not believe that this sale was reflective of market value. The relevance of the previous transaction involving the subject property is also undermined by the material change in market conditions which occurred between the date of this sale and the present date of value. Areawide occupancy and average rate have improved dramatically in the intervening months, and are forecast to continue this positive trend. As previously discussed, the market for hotel investments has also improved significantly, due to changes in lender and investor attitudes. Finally, the property itself has undergone a significant renovation, with a total of $1,431,413 spent on upgrading the facilities and amenities in 1995. Capital expenditures for 1996 are estimated to total $252,161. For these reasons, we are of the opinion that the 1994 sale involving the subject property is not a reliable indicator of the current value of the hotel. Conclusion Although the sales comparison approach may be useful in providing a value range and reflecting certain market characteristics, its applicability is limited by the numerous possible points of difference between the subject property and other hotels that have sold in recent years. These factors may include location, access, size, services and facilities offered, market conditions, chain affiliation, market orientation, management, rate structure, age, physical condition, date of sale, the highest and best use of the land, and the anticipated profitability of the operation. Circumstances surrounding a sale, such as financing terms, tax considerations, income guarantees, sales of partial interests, duress on the part of the buyer or seller, or a particular deal structure can also cause a disparity between the sales price and pure market value. Moreover, it is often difficult to determine the marketing periods that were necessary to consummate the transactions. It is extremely difficult to quantify the appropriate adjustment factors accurately because of HVS International, Mineola, New York Sales Comparison Approach 137 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= their number and complexity, as well as the difficulty in obtaining specific, detailed information. Any attempt to manipulate the necessary adjustments is insupportable and purely speculative. Because appraisers are expected to reflect the analytical processes and actions of typical buyers and sellers rather than to create a highly subjective valuation approach, the investment rationale of hotel owners is an essential consideration. As specialists in the valuation of hotels, we find that typical buyers purchase properties based on a thorough analysis of the anticipated economic benefits of property ownership, rather than on historical sales data. In light of these factors, it is our opinion that the sales comparison approach is unsuitable for indicating a specific estimate of the subject property's market value; however, this approach may indicate a range of values that can be used to test the reasonableness of the value indicated by the income capitalization approach. Excluding the prior sale of the subject property, the sales prices range from approximately $24,400 to $38,300 per room or $4,800,000 to $7,500,000 for the 196-unit subject property. The income capitalization approach indicates a value of $5,970,000, which falls within this range. HVS International, Mineola, New York Cost Approach 138 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 12. Cost Approach The cost approach is founded on the principle of substitution, which implies that no prudent person will pay more for a property than the amount to acquire a site and construct a building of equal desirability and utility without undue delay. This approach estimates market value by first calculating the current cost of replacing the improvements. Appropriate deductions are made for depreciation resulting from physical deterioration, functional obsolescence, and external (economic) obsolescence, and the land value is added to the depreciated replacement cost to provide an estimate of market value. The cost approach employs the following steps. 1. The current replacement or reproduction cost is estimated. 2. Land value is estimated using techniques such as allocation, extraction, or ground rent capitalization. 3. Accrued depreciation, which can be divided into physical deterioration, functional obsolescence, and external obsolescence, is estimated. 4. Total depreciation is deducted from the subject property's replacement cost, and the land value is added to arrive at an estimate of value via the cost approach. When forming their purchase decisions regarding existing properties, market participants tend to consider the cost of developing a new hotel with optimal physical and functional utility. External conditions, such as the depressed market for real estate (and hotels in particular), can cause a property to be worth less than its replacement cost as new. The task of estimating the loss in value resulting from incurable functional and external obsolescence is highly subjective. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements age and begin to deteriorate, the loss in value resulting from physical obsolescence HVS International, Mineola, New York Cost Approach 139 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= becomes increasingly difficult to quantify accurately. Loss in value attributable to functional obsolescence can be even more difficult to determine. The subject property was constructed in 1972, and will be approximately 25 years old as of the date of this appraisal. The property appeared to be in good condition at the time of our inspection. The depressed hotel market conditions that prevailed in the late 1980s and the early 1990s have also led to a degree of external obsolescence. In our opinion, it is impossible to identify and quantify the impact of these factors on the property's value with any accuracy, so we will only estimate the replacement cost of the subject property. Replacement Cost Replacement cost is the current construction cost of a building with the same utility as the subject property, but built with modern materials and according to current construction and design standards. For the purpose of estimating the replacement cost of the subject property, we have used a hotel development cost survey conducted by HVS International. This survey is published annually in a newsletter entitled The Hotel Valuation Journal, and appeared in the May, 1995, issue of Lodging Hospitality. The survey presents the range of per-room costs associated with various components of hotel development, including the improvements, the furniture, fixtures, and equipment, pre-opening expenses, and operating capital. Statistics are compiled for three broad categories of hotels: luxury, standard, and economy. The results of this survey are presented in the following table. HVS International, Mineola, New York Cost Approach 140 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 12-1 Hotel Development Cost Survey (Amounts per Room) - --------------------------------------------------------------------------------
Improvements Furniture & Equipment Pre-Opening Operating Capital Total Percent Change - ------------------------------------------------------------------------------------------------------------------------------------ 1976 Luxury $32,000 - $55,000 $5,000 - $10,000 $1,000 - $2,000 $1,000 - $1,500 $39,000 - $68,500 --- - --- Standard 20,000 - 32,000 3,000 - 6,000 750 - 1,000 750 - 1,000 24,500 - 40,000 --- --- Economy 8,000 - 15,000 2,000 - 4,000 500 - 1,000 500 - 750 11,000 - 20,750 --- - --- 1979 Luxury 36,000 - 65,000 8,000 - 15,000 1,500 - 3,000 1,500 - 2,000 47,000 - 85,000 6.8 - 8.0 Standard 25,000 - 36,000 5,000 - 10,000 1,000 - 2,000 1,000 - 1,500 32,000 - 49,500 10.2 - 7.9 Economy 10,000 - 20,000 3,000 - 5,000 750 - 1,000 750 - 1,000 14,500 - 27,000 10.6 - 10.0 1981 Luxury 45,000 - 80,000 10,000 - 20,000 2,000 - 3,500 2,000 - 2,500 59,000 - 106,000 12.8 - 12.4 Standard 25,000 - 40,000 7,000 - 13,000 1,200 - 2,500 1,200 - 2,000 34,400 - 57,500 3.8 - 8.1 Economy 13,000 - 25,000 4,000 - 7,000 700 - 1,200 900 - 1,200 18,600 - 34,400 14.1 - 13.7 1983 Luxury 55,000 - 100,000 12,500 - 20,000 2,300 - 4,000 2,000 - 2,800 71,800 - 126,800 10.8 - 9.8 Standard 35,000 - 50,000 9,000 - 15,000 1,400 - 3,000 1,300 - 2,200 46,700 - 70,200 17.9 - 11.0 Economy 18,000 - 32,000 5,000 - 8,000 800 - 1,500 900 - 1,300 24,700 - 42,800 16.4 - 12.2 1985 Luxury 60,000 - 115,000 13,400 - 30,000 3,000 - 5,000 2,100 - 3,100 78,500 - 153,100 4.7 - 10.4 Standard 38,000 - 57,000 9,500 - 16,500 1,900 - 3,600 1,500 - 2,500 50,900 - 79,600 4.5 - 6.7 Economy 20,000 - 36,000 5,000 - 8,800 1,000 - 1,700 1,000 - 1,500 27,000 - 48,000 4.7 - 6.1 1986 Luxury 62,000 - 120,000 13,700 - 30,600 3,100 - 5,200 2,300 - 3,100 81,100 - 158,900 3.3 - 3.8 Standard 39,000 - 60,000 9,700 - 16,800 2,000 - 3,800 1,500 - 2,600 52,200 - 83,200 2.6 - 4.5 Economy 21,000 - 37,000 5,100 - 9,000 1,000 - 1,800 1,100 - 1,500 28,200 - 49,300 4.4 - 2.7 1987 Luxury 63,000 - 122,000 13,800 - 30,900 3,300 - 5,500 2,300 - 3,200 82,400 - 161,600 1.6 - 1.7 Standard 40,000 - 61,000 9,800 - 16,800 2,100 - 3,900 1,500 - 2,600 53,400 - 84,300 2.3 - 1.3 Economy 21,000 - 39,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 28,400 - 51,400 0.7 - 4.3 1988 Luxury 65,000 - 125,000 14,000 - 31,000 3,300 - 5,500 2,300 - 3,200 84,600 - 164,700 2.7 - 1.9 Standard 41,000 - 63,000 10,000 - 17,100 2,100 - 3,900 1,500 - 2,600 54,600 - 86,600 2.2 - 2.7 Economy 22,000 - 40,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 29,400 - 52,400 3.5 - 1.9 1989 Luxury 66,000 - 126,000 15,000 - 32,000 3,300 - 5,500 2,300 - 3,200 86,600 - 166,700 2.4 - 1.2 Standard 41,000 - 64,000 10,500 - 18,000 2,100 - 3,900 1,500 - 2,600 55,100 - 88,500 0.9 - 2.2 Economy 22,000 - 40,000 5,500 - 9,700 1,100 - 1,800 1,100 - 1,500 29,700 - 53,000 1.0 - 1.1 1990 Luxury 67,000 - 128,000 15,400 - 33,000 3,500 - 5,700 2,500 - 3,500 88,400 - 170,200 2.1 - 2.1 Standard 42,000 - 65,000 10,800 - 18,500 2,200 - 4,000 1,600 - 2,800 56,600 - 90,300 2.7 - 2.0 Economy 22,500 - 41,000 5,600 - 10,000 1,200 - 1,800 1,200 - 1,600 30,500 - 54,400 2.7 - 2.6 1991 Luxury 65,000 - 122,000 14,500 - 31,500 3,700 - 5,900 2,600 - 3,600 85,800 - 163,000 (2.9) - (4.2) Standard 40,000 - 63,000 10,000 - 17,800 2,300 - 4,200 1,700 - 2,900 54,000 - 87,900 (4.6) - (2.7) Economy 21,000 - 39,000 5,000 - 9,500 1,300 - 2,000 1,300 - 1,700 28,600 - 52,200 (6.2) - (4.0) 1992 Luxury 64,000 - 120,000 14,200 - 30,900 3,800 - 6,100 2,700 - 3,700 84,700 - 160,700 (1.3) - (1.4) Standard 39,000 - 62,000 9,800 - 17,400 2,300 - 4,400 1,800 - 3,000 52,900 - 86,800 (2.0) - (1.3) Economy 21,000 - 38,000 4,900 - 9,300 1,400 - 2,100 1,300 - 1,800 28,600 - 51,200 0.0 - (1.9) 1993 Luxury 63,000 - 119,000 14,000 - 30,500 3,900 - 6,200 2,800 - 3,800 83,700 - 159,500 (1.2) - (0.7) Standard 39,000 - 61,000 9,700 - 17,200 2,300 - 4,500 1,800 - 3,000 52,800 - 85,700 (0.2) - (1.3) Economy 21,000 - 38,000 4,900 - 9,200 1,400 - 2,100 1,300 - 1,800 28,600 - 51,100 0.0 - (0.2) 1994 Luxury 64,000 - 121,000 14,300 - 31,100 3,900 - 6,200 2,800 - 3,800 85,000 - 162,100 1.6 - 1.6 Standard 40,000 - 63,000 10,000 - 17,600 2,400 - 4,600 1,800 - 3,000 54,200 - 88,200 2.7 - 2.9 Economy 22,000 - 40,000 5,100 - 9,500 1,500 - 2,200 1,300 - 1,800 29,900 - 53,500 4.5 - 4.7 1995 Luxury 65,000 - 124,000 14,800 - 32,300 4,100 - 6,400 2,900 - 4,000 86,800 - 166,700 2.1 - 2.8 Standard 41,000 - 65,000 10,400 - 18,300 2,500 - 4,800 1,900 - 3,100 55,800 - 91,200 3.0 - 3.4 Economy 23,000 - 42,000 5,400 - 9,900 1,600 - 2,300 1,300 - 1,800 31,300 - 56,000 4.7 - 4.7
Average Annual Compounded Percent Change: 1976 - 1995: Luxury 4.3% - 4.8% 1986 - 1995: Luxury 0.8% - 0.5% Standard 4.4% - 4.4% Standard 0.7% - 1.0% Economy 5.7% - 5.4% Economy 1.2% - 1.4% - -------------------------------------------------------------------------------- HVS International, Mineola, New York Cost Approach 141 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= As illustrated by the previous table, hotel development costs rose significantly during the late 1970s and the early 1980s; however, the rate of increase slowed substantially in 1987. In 1991, hotel development costs declined for the first time since 1976. Further drops of as much as 2.0% were registered in 1992. Between 1986 and 1990, average annual compounded increases ranged from 1.7% to 2.5%. Costs rose slowly (at average annual compounded rates ranging from 0.5% to 1.4%) between 1986 and 1995, largely as a result of the declines in 1991, 1992, and 1993. In 1995, hotel development costs started to escalate more rapidly, reaching 4.7% in the economy segment. As more hotels are developed, we expect costs to continue to rise. Because the replacement cost tends to set the upper limit of a particular hotel's value, this figure is relevant to our analysis. We estimate the replacement cost of the subject property as follows, based on the development cost survey discussed earlier. ================================================================================ Table 12-2 Subject Property's Replacement Cost - -------------------------------------------------------------------------------- Cost No. of Hotel Cost per Room Rooms Total Cost -------------------------------------------------------------------- Building $42,500 196 $8,330,000 FF&E 11,000 196 2,156,000 Pre-Opening 2,500 196 490,000 Operating Capital 1,900 196 372,400 -------------------------------------------------------------------- Total $57,900 $11,348,400 - -------------------------------------------------------------------------------- Ground Lease Approach to Land Valuation Land value may be estimated either by the sales comparison approach, using comparable land sales, or by the ground lease approach, which is based on the economic value generated by an improvement that represents the property's highest and best use. Because it is unusual to find recent sales of comparable vacant land that is slated for imminent hotel development, we have used the ground lease approach to determine the subject property's land value. Hotels are often constructed on leased land, and although lease terms differ somewhat, the basis for the rental calculation is frequently tied to a percentage of revenue. By applying a typical ground lease rental formula to the subject property's stabilized revenues, the appraiser can determine the hotel's economic rent, or what is also known as the income attributable to the HVS International, Mineola, New York Cost Approach 142 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= land. Land value is then calculated by dividing the economic rent by an appropriate capitalization rate. The self-adjusting aspect of this approach is key to its reliability. Because the rental formula is tied to a percentage of revenue that inherently reflects both the locational attributes of the site (occupancy and rate) and the allowable density of development, the resulting economic ground rent justly represents the greatest net return to the land over a given period. Because the Ramada Plaza Hotel appears to represent the highest and best use of the property, the ground lease approach is an appropriate method of determining land value. We have researched long-term hotel ground leases in search of rental formulas that are based on a percentage of rooms revenue or on a combination of rooms, food, and beverage revenue. This analysis indicates that economic ground rents for hotels similar to the subject property typically range from 2.7% to 7.8% of rooms revenue. Although this range is quite broad, most of the formulas yield rental percentages of between 3.0% and 4.5% of rooms revenue. After considering these comparable ground leases and the locational attributes of the subject property, we believe the appropriate economic ground rental percentage is 4.0% of stabilized rooms revenue. The subject property's stabilized rooms revenue has been deflated to reflect 1997 dollars. The following calculation shows the derivation of the subject property's economic ground rent. Stabilized Rooms Revenue (1997 dollars) $3,097,271 Rental Percentage 0.04 ----------- Economic Ground Rent $ 123,891 Rent generated by a ground lease represents a fairly low-risk income flow. Because the tenant improvements typically amount to more than eight times the value of the land, the risk of default is low. When the ground lease terms are tied to rooms revenue, the landlord is also protected from the adverse effects of inflation. Based on these risk factors and the current cost of long-term capital, we estimate the appropriate ground rental overall capitalization rate at 10%. Applying this indicated capitalization rate to the subject property's economic ground rent yields the following estimate of land value. HVS International, Mineola, New York Cost Approach 143 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Economic Ground Rent $123,891 $1,238,909 ----------------------- = --------- = Capitalization Rate 0.10 Estimated Land Value (Say) $1,240,000 A new hotel's land value typically ranges from 10% to 20% of the overall value. The estimate of land value presented above is approximately 20.8% of the subject property's total value as indicated by the income capitalization approach. Replacement Cost Combining the replacement cost of the property with the land value yields the subject property's total replacement cost. ================================================================================ Table 12-3 Total Replacement Cost - -------------------------------------------------------------------------------- Cost of the Improvements and FF&E $11,348,400 Land Value 1,240,000 ------------ Total Replacement Cost $12,588,400 Total Replacement Cost (Say) 12,600,000 - -------------------------------------------------------------------------------- If a property's replacement cost is significantly higher than the values indicated by the income capitalization and sales comparison approaches, it may indicate that an upward adjustment of these values is appropriate. This would also reduce the probability of new hotel development, which is not likely to be feasible under those conditions. This creates an effective barrier to entry for new competition, thus reducing the risk associated with the subject property's income-generating potential. An upward adjustment of the value indicated by the income capitalization approach is also justified by this barrier to entry. We find that knowledgeable hotel buyers generally base their purchase decisions on economic factors, such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, it is our opinion that the cost approach is inapplicable in estimating the market value of the Ramada Plaza Hotel. However, we have estimated the subject property's replacement cost as new, which may set the upper limit of the hotel's value. HVS International, Mineola, New York Reconciliation of Value Indications 144 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 13. Reconciliation of Value Indications The reconciliation, which is the last step in the appraisal process, involves summarizing and correlating the data and procedures employed throughout the analysis. The final conclusion of value is arrived at after reviewing the estimates indicated by the income capitalization, sales comparison, and cost approaches. The relative significance, applicability, and defensibility of each indicated value is considered, and the greatest weight is given to that approach deemed most appropriate for the property being appraised. The purpose of this report is to estimate the market value of the fee simple interest in the subject property. Our appraisal involves a careful analysis of the property itself and the economic, demographic, political, physical, and environmental factors that influence real estate values. Based on the data set forth in this report, the following value indications were developed. Approach Value Indication -------- ---------------- Income Capitalization $5,970,000 Sales Comparison $4,800,000 - $7,500,000 Cost (Replacement Cost) $12,600,000 Income Capitalization Approach To estimate the subject property's value via the income capitalization approach, we analyzed the local market for transient accommodations, examined the competitive environment, projected occupancy and average rate levels, and developed a forecast of income and expense that reflects anticipated income trends and cost components through a stabilized year of operation. The subject property's projected net income before debt service was then allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component was calculated; the total of the mortgage and equity components equates to the value of the property. HVS International, Mineola, New York Reconciliation of Value Indications 145 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Our nationwide experience indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the hotel investors who constitute the marketplace. For this reason, we believe that the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in our final estimate of the subject property's market value. Sales Comparison Approach The sales comparison approach uses actual sales of similar properties to provide an indication of the subject property's value. The strength of this approach is that it measures value based on the investment decisions made by actual buyers and sellers. Although we have investigated a number of sales in an attempt to develop a range of value indications, several adjustments are necessary to render the sales prices applicable to the subject property. These adjustments, which are numerous and highly subjective, diminish the reliability of the sales comparison approach. Furthermore, we find that typical hotel investors employ a sales comparison procedure only to establish broad value parameters. The hotel sales outlined earlier in this report indicate an adjusted value range of $24,400 to $38,300 per available room. The income capitalization approach indicates a per-room value of approximately $30,500. This information suggests that a slight upward adjustment of the value indicated by the income capitalization approach may be warranted. Cost Approach To estimate the subject property's value via the cost approach, we estimated the current replacement cost of the property and added the land value. We give the cost approach limited weight in arriving at a final value estimate, because knowledgeable buyers of lodging facilities generally base their purchase decisions on economic factors (such as projected net income and return on investment) rather than on a property's depreciated replacement cost. The replacement cost estimate developed via the cost approach can help to corroborate the results of the income capitalization and sales comparison approaches to value. If the replacement cost is substantially higher or lower than the value indicated by the income capitalization approach, an upward or downward adjustment of the income capitalization approach value may be necessary. The estimated replacement cost for the subject property is substantially higher than the value indicated by the income capitalization approach, and represents a barrier to entry for prospective hotel HVS International, Mineola, New York Reconciliation of Value Indications 146 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= developers. Consequently, a slight upward adjustment of the value arrived at by the income capitalization approach is warranted. Value Conclusion Careful consideration has been given to the strengths and weaknesses of the three approaches to value discussed above. In recognition of the purpose of this appraisal, we have given primary weight to the value indicated by the income capitalization approach and made some subjective adjustments based on the replacement cost estimate, the sales comparison approach, and our extensive experience in the hospitality industry. It is our opinion that the market value of the fee simple interest in the Ramada Plaza Hotel - Woburn, as of January 1, 1997, is: $6,000,000 SIX MILLION DOLLARS The estimate of market value includes the land, the improvements, and the furniture, fixtures, and equipment. The appraisal assumes that the hotel is open and operational. This value estimate equates to roundly $30,600 per room, which is well supported by market sales and approximately 0.5% higher than the value indicated by the income capitalization approach. The estimate of value assumes either the availability of third-party financing or the willingness and capability of the seller to take back purchase-money financing so that a buyer can obtain the level of debt set forth in the Income Capitalization Approach section of this appraisal. Marketing Period Our estimate of market value assumes a marketing period of six months to one year. Under normal economic conditions, hotels are transferred within this time frame. Personal Property In accordance with the appraisal standards set forth by the Office of the Comptroller of the Currency, it is necessary for bank appraisals to identify and value any personal property, fixtures, or intangible items that are included in the appraisal and discuss their impact on the overall estimate of market value. A hotel's income-generating ability depends on a suitable inventory of furniture, fixtures, and equipment. Removal of these items can decrease the property value by as much as the cost to replace the inventory plus the loss of income incurred while the hotel cannot function. HVS International, Mineola, New York Reconciliation of Value Indications 147 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= A hotel's personal property consists of a wide variety of components, including bedroom furnishings, bathroom fixtures, restaurant and kitchen equipment, front office and accounting computers, exterior signs, and similar items. Our inspection of the Ramada Plaza Hotel indicates that the personal property and fixtures are in fairly good condition. Based on an annual construction cost survey conducted by HVS International, we estimate the total replacement cost of the subject property's furniture, fixtures, and equipment at $11,000 per available room. Assuming an average useful life of ten years and an effective age of four years, the value of the furniture, fixtures, and equipment currently in place is approximately $6,600 per room, or a total of $1,294,000. The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) stipulates that "...any business interest or other intangible item should be valued separately within the appraisal."(1) Hotels have both business and real estate components; without the business expertise necessary to operate the facility, a hostelry would have little real estate value. Because furniture, fixtures, and equipment are essential to a hotel's income-generating ability and are seldom removed from the property or sold separately, the separation of the personal property component from the real property is not particularly meaningful. (1) Federal Register, Vol. 55, No. 143, July 25, 1990, p. 30205. HVS International, Mineola, New York Statement of Assumptions and 148 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 14. Statement of Assumptions and Limiting Conditions 1. This report is to be used in whole and not in part. 2. No responsibility is assumed for matters of a legal nature, nor do we render any opinion as to title, which is assumed to be marketable and free of any deed restrictions and easements. The property is valued as though free and clear unless otherwise stated. 3. We assume that there are no hidden or unapparent conditions of the sub-soil or structures, such as underground storage tanks, that would render the property more or less valuable. No responsibility is assumed for these conditions or for any engineering that may be required to discover them. 4. We have not considered the presence of potentially hazardous materials such as asbestos, urea formaldehyde foam insulation, PCBs, any form of toxic waste, polychlorinated biphengyls, pesticides, or lead-based paints. The appraisers are not qualified to detect hazardous substances, and we urge the client to retain an expert in this field if desired. 5. The Americans with Disabilities Act (ADA) became effective on January 26, 1992. We have conducted no specific compliance survey to determine whether the subject property is operating in accordance with the various detailed requirements of the ADA. It is possible that the property does not conform to the requirements of the act, and this could have an unfavorable effect on value. Because we have no direct evidence regarding this issue, our estimate of value does not consider possible non-compliance with the ADA. 6. We have made no survey of the property, and we assume no responsibility in connection with such matters. Sketches, photographs, maps, and other exhibits are included to assist the reader in visualizing the property. It is assumed that the use of the land and improvements is HVS International, Mineola, New York Statement of Assumptions and 149 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= within the boundaries of the property described, and that there is no encroachment or trespass unless noted. 7. All information, financial operating statements, estimates, and opinions obtained from parties not employed by HVS International are assumed to be true and correct. We can assume no liability resulting from misinformation. 8. Unless noted, we assume that there are no encroachments, zoning violations, or building violations encumbering the subject property. 9. The property is assumed to be in full compliance with all applicable federal, state, local, and private codes, laws, consents, licenses, and regulations (including a liquor license where appropriate), and that all licenses, permits, certificates, franchises, and so forth can be freely renewed or transferred to a purchaser. 10. All mortgages, liens, encumbrances, leases, and servitudes have been disregarded unless specified otherwise. 11. None of this material may be reproduced in any form without our written permission, and the report cannot be disseminated to the public through advertising, public relations, news, sales, or other media. 12. We are not required to testify or appear in court by reason of this analysis without previous arrangements, and only when our standard per diem fees and travel costs are paid prior to the appearance. 13. If the reader is making a fiduciary or individual investment decision and has any questions concerning the material presented in this report, it is recommended that the reader contact us. 14. We take no responsibility for any events or circumstances that take place subsequent to either the date of value or the date of our field inspection, whichever occurs first. 15. The quality of a lodging facility's on-site management has a direct effect on a property's economic viability and value. The financial forecasts presented in this analysis assume responsible ownership and competent management. Any departure from this assumption may have a significant impact on the projected operating results and the value estimate. 16. The estimated operating results presented in this report are based on an evaluation of the overall economy, and neither take into account nor HVS International, Mineola, New York Statement of Assumptions and 150 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= make provision for the effect of any sharp rise or decline in local or national economic conditions. To the extent that wages and other operating expenses may advance during the economic life of the property, we expect that the prices of rooms, food, beverages, and services will be adjusted to at least offset those advances. We do not warrant that the estimates will be attained, but they have been prepared on the basis of information obtained during the course of this study and are intended to reflect the expectations of a typical hotel buyer. 17. This analysis assumes continuation of all Internal Revenue Service tax code provisions as stated or interpreted on either the date of value or the date of our field inspection, whichever occurs first. 18. Many of the figures presented in this report were generated using sophisticated computer models that make calculations based on numbers carried out to three or more decimal places. In the interest of simplicity, most numbers have been rounded to the nearest tenth of a percent. Thus, these figures may be subject to small rounding errors. 19. It is agreed that our liability to the client is limited to the amount of the fee paid as liquidated damages. Our responsibility is limited to the client, and use of this report by third parties shall be solely at the risk of the client and/or third parties. The use of this report is also subject to the terms and conditions set forth in our engagement letter with the client. 20. Appraising hotels is both a science and an art. Although this analysis employs various mathematical calculations to provide value indications, the final estimate is subjective and may be influenced by our experience and other factors not specifically set forth in this report. 21. Any distribution of the total value between the land and improvements or between partial ownership interests applies only under the stated use. Moreover, separate allocations between components are not valid if this report is used in conjunction with any other analysis. 22. This study was prepared by Hospitality Valuation Services, a division of Hotel Consulting Services, Inc. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of Hotel Consulting Services, Inc. as employees, rather than as individuals. HVS International, Mineola, New York Certification 151 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 15. Certification We, the undersigned appraisers, hereby certify: 1. that the statements and opinions presented in this report, subject to the limiting conditions set forth, are correct to the best of our knowledge and belief; 2. that Stephen Rushmore personally inspected the property described in this report; 3. that we have no current or contemplated interests in the real estate that is the subject of this report; 4. that we have no personal interest or bias with respect to the subject matter of this report or the parties involved; 5. that this report sets forth all of the limiting conditions (imposed by the terms of this assignment) affecting the analyses, opinions, and conclusions presented herein; 6. that the fee paid for the preparation of this report is not contingent upon our conclusions; 7. that this report has been prepared in accordance with, and is subject to, the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute; 8. that the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives; 9. that this report has been prepared in accordance with the Uniform Standards of Professional Appraisal Practice (as adopted by the Appraisal Foundation); HVS International, Mineola, New York Certification 152 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 10. that no one other than the undersigned prepared the analyses, conclusions, and opinions concerning real estate that are set forth in this appraisal report; 11. that as of the date of this report, Stephen Rushmore has completed the requirements of the continuing education program of the Appraisal Institute; 12. that this appraisal is not based on a requested minimum value, a specific value, or the approval of a loan. /s/ Robert Wong --------------------------------------- Robert Wong Consulting and Valuation Analyst /s/ Anne R. Lloyd-Jones --------------------------------------- Anne R. Lloyd-Jones, CRE Senior Vice President /s/ Stephen Rushmore --------------------------------------- Stephen Rushmore, CRE, MAI, CHA President Hotel Consulting Services, Inc. HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Exterior view of Subject Property [GRAPHIC OMITTED] Lobby HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Standard King Guestroom [GRAPHIC OMITTED] Guestroom Vanity area HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Standard Private Guest Bathroom HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Subject Property's Restaurant, Cafe Fennel [GRAPHIC OMITTED] Subject Property's Lounge, Juliet's HVS International, Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Red Roof Inn [GRAPHIC OMITTED] Comfort Inn Woburn HVS International, Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Howard Johnson Woburn [GRAPHIC OMITTED] Howard Johnson Burlington HVS International, Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Susse Chalet Woburn [GRAPHIC OMITTED] Courtyard by Marriott Woburn HVS International, Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Crown Plaza Hotel Woburn Ramada Inn Woburn, MA Legal Description The land in Woburn, Middlesex County, Massachusetts, shown as Lot 6 on plan by Lawrence C. Allen, Surveyor, dated March 20, 1972 filed with the Land Court as Plan 24503C, a copy of a portion of which is filed with the South Registry District of Middlesex County with Certificate No. 137176 in Registration Book 816, Page 26, together with, as appurtenant to said Lot 6, the right to use in common with all others from time to time entitled thereto that portion of the area marked "WAY" on said plan (the same being the area marked "PRIVATE WAY 60'") on Land Court Plan No. 24503C1 filed in the Land Court at Boston Massachusetts extenting from the southwesterly corner of said Lot 6 to the public way easterly of said Lot 6 as shown on said Land Court No. 24503C1. HVS International, Mineola, New York Addendum - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Synopsis of Franchise and License Agreements Date: October 3, 1994 Licensor: Ramada Franchise Systems, Inc. Licensee: Woburn Massachusetts Hotel II Limited Partnership Premises: Hotel on 15 Middlesex Canal Park Road, Woburn, Massachusetts Term: 15 years; expires October 2, 2009 Renewal: None Fees: Initial fee equal to $350 Royalty fee equal to 4% of gross room revenues Ramada Inter-National Services Assessment Fee equal to 4.5% of gross room revenues Licensor Services: Reservation system; marketing; manager training program; Ramada Inter-National Association Licensee Obligations: Proper bookkeeping; carrying of insurance; proper upkeep of facilities Termination: Upon default of either party; licensee termination with liquidated damages in the amount of the accrued royalties during the preceding 12 full calendar months. HVS International, Mineola, New York Addendum - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Synopsis of Hotel Management Agreement Date: October 1, 1994 Owner: Woburn Massachusetts Hotel II Limited Partnership Manager: Remington Hospitality, Inc. Premises: Hotel located on 15 Middlesex Canal Park Road, Woburn, Massachusetts Term: 15 years Renewal: Operator option for two successive periods of five years Management Fee: 3% of gross revenues Reserve for Replacement: 3% of gross revenues Termination: Upon default by either party; upon sale of property; and upon the death or incapacitation of Archie Bennett, Jr., President of Remington Hotel Corporation. HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Explanation of the Simultaneous Valuation Formula The algebraic equation known as the simultaneous valuation formula, which solves for the total property value using a ten-year mortgage and equity technique, was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(17) The process of solving for the value of the mortgage and equity components begins by deducting the annual debt service from the projected income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value using the terminal capitalization rate. The equity residual, which is the total reversionary value less the mortgage balance at that point in time and less any brokerage and legal costs associated with the sale, is discounted to the date of value at the equity yield rate. The net income to equity for each projection year is also discounted back to the date of value. The sum of these discounted values equals the value of the equity component. Because the equity component comprises a specific percentage of the total value, the value of the mortgage and the total property can be computed easily. This process can be expressed in two algebraic equations that set forth the mathematical relationships between the known and unknown variables using the following symbols. (17) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= NI = Net income available for debt service V = Value M = Loan-to-value ratio f = Annual debt service constant n = Number of years in the projection period de = Annual cash available to equity dr = Residual equity value b = Brokerage and legal cost percentage P = Fraction of the loan paid off during the projection period fp = Annual constant required to amortize the entire loan during the projection period Rr = Overall terminal capitalization rate that is applied to net income to calculate the total property reversion (sales price at the end of the projection period) 1/Sn = Present worth of $1 factor (discount factor) at the equity yield rate Using these symbols, the following formulas can be used to express some of the components of this mortgage and equity valuation process. Debt Service - A property's debt service is calculated by first determining the mortgage amount that equals the total value (V) multiplied by the loan-to-value ratio (M). Debt service is derived by multiplying the mortgage amount by the annual debt service constant (f). The following formula represents debt service. f x M x V = Debt Service Net Income to Equity (Equity Dividend) - The net income to equity (d(e)) is the property's net income before debt service (NI) less debt service. The following formula represents the net income to equity. NI - (f x M x V) = de Reversionary Value - The value of the hotel at the end of the tenth year is calculated by dividing the 11th-year net income before debt service (NI^11) by HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the terminal capitalization rate (R(r)). The following formula represents the property's tenth-year reversionary value. (NI^11/R(r)) = Reversionary Value Brokerage and Legal Costs - When a hotel is sold, certain costs are associated with the transaction. Normally, the broker is paid a commission and the attorney collects legal fees. In the case of hotel transactions, brokerage and legal costs typically range from 1% to 4% of the sales price. Because these expenses reduce the proceeds to the seller, they are usually deducted from the reversionary value in the mortgage and equity valuation process. Brokerage and legal costs (b), expressed as a percentage of reversionary value (NI^11R(r)), are calculated by application of the following formula. b (NI^11/R(r)) = Brokerage and Legal Costs Ending Mortgage Balance - The mortgage balance at the end of the tenth year must be deducted from the total reversionary value (debt and equity) in order to determine the equity residual. The formula used to determine the fraction of the loan remaining (expressed as a percentage of the original loan balance) at any point in time (P) takes the annual debt service constant of the loan over the entire amortization period (f) less the mortgage interest rate (i), and divides it by the annual constant required to amortize the entire loan during the ten-year projection period (f(p)) less the mortgage interest rate. The following formula represents the fraction of the loan paid off (P). (f - i)/(f(p) - i) = P If the fraction of the loan paid off (expressed as a percentage of the initial loan balance) is P, then the remaining loan percentage is expressed as 1 - P. The ending mortgage balance is the fraction of the remaining loan (1 - P) multiplied by the initial loan amount (M x V). The following formula represents the ending mortgage balance. (1 - P) x M x V Equity Residual Value - The value of the equity upon the sale at the end of the projection period (d(r)) is the reversionary value less the brokerage and legal costs and the ending mortgage balance. The following formula represents the equity residual value. (NI^11/R(r)) - (b (NI^11/R(r)) - ((1 - P) x M x V) = d(r) HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Annual Cash Flow to Equity - The annual cash flow to equity consists of the equity dividend for each projection year plus the equity residual at the end of the tenth year. The following formula represents the annual cash flow to equity. NI^1 - (f x M x V) = d(e)^1 NI^2 - (f x M x V) = d(e)^2 NI^10 - (f x M x V) = d(e)^10 (NI^11/Rr) - (b (NI^11/R(r)) - ((1 - P) x M x V) = d(r) Value of the Equity - If the initial mortgage amount is calculated by multiplying the loan-to-value ratio (M) by the property value (V), then the equity value is one minus the loan-to-value ratio multiplied by the property value. The following formula represents the value of the equity. (1 - M) V Discounting the Cash Flow to Equity to the Present Value - The cash flow to equity in each projection year is discounted to the present value at the equity yield rate (1/S(n)). The sum of these cash flows is the value of the equity (1 - M) V. The following formula represents the calculation of equity as the sum of the discounted cash flows. (d(e)^1 x 1/S^1) + (d(e)^2 x 1/S^2) + . . . + (d(e)^10 x 1/S^10) + (d(r) x 1/S^10) = (1 - M) V Combining the Equations: Annual Cash Flow to Equity and Discounting the Cash Flow to Equity to the Present Value - The last step is to arrive at one overall equation that shows that the annual cash flow to equity plus the yearly discounting to the present value equals the value of the equity. ((NI^1 - (f x M x V)) 1/S^1) + ((NI^2 - (f x M x V)) 1/S^2) + . . . ((NI^10 - (f x M x V)) 1/S^10) + (((NI^11/R(r)) - (b (NI^11/R(r))) - ((1 - P) x M x V)) 1/S^10) = (1 -M) V Because the only unknown in this equation is the property's value (V), it can be solved readily. HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Ten-Year Projection of Income and Expense - Because the fixed and variable forecast of income and expense is carried out only to the stabilized year, it is necessary to continue the projection to the 11th year. In most cases, net income before debt service beyond the stabilized year is projected at an assumed inflation rate. By increasing a property's revenue and expenses at the same rate of inflation, net income remains constant as a percentage of total revenue, and the dollar amount escalates at the annual inflation rate. Hotel investors are currently using inflation rates of approximately 3.5% annually. The ten-year forecast of income and expense illustrates the subject property's net income, which is assumed to increase by 3.5% annually subsequent to the hotel's stabilized year of operation. Solving for Value Using the Simultaneous Valuation Formula - In the case of the subject property, the following known variables have been determined. ================================================================================ Table 1: Summary of Known Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Ten-Year Forecast Loan-To-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.111856 Equity Yield Ye 22.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 12.0% - -------------------------------------------------------------------------------- The following table illustrates the present worth of a $1 factor at the 22% equity yield rate. HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 2: Present Worth of $1 Factor at the Equity Yield Rate - -------------------------------------------------------------------------------- Calendar Year Present Worth of $1 Ending: Factor @22.0% -------------------------------------- 1997 0.819565 1998 0.671686 1999 0.550490 2000 0.451162 2001 0.369756 2002 0.303039 2003 0.248360 2004 0.203547 2005 0.166820 2006 0.136720 - -------------------------------------------------------------------------------- Using these known variables, the following intermediary calculations must be made before applying the simultaneous valuation formula. The fraction of the loan paid off during the projection period is calculated as follows. P = ( 0.111856 - 0.095 )/( 0.155277 - 0.095 ) = 0.279638 The annual debt service is calculated as f x M x V. (f x M x V)= 0.111856 x 0.70 x V = 0.078299 V Inserting the known variables into the hotel valuation formula produces the following. ( 655,000 - 0.078299 V ) x 0.819672 + ( 665,000 - 0.078299 V ) x 0.671862 + ( 701,000 - 0.078299 V ) x 0.550707 + ( 775,000 - 0.078299 V ) x 0.451399 + ( 802,000 - 0.078299 V ) x 0.369999 + ( 828,000 - 0.078299 V ) x 0.303278 + ( 858,000 - 0.078299 V ) x 0.248589 + ( 888,000 - 0.078299 V ) x 0.203761 + ( 920,000 - 0.078299 V ) x 0.167017 + ( 953,000 - 0.078299 V ) x 0.136899 + ((( 986,000 / 0.120 ) - ( 0.03 x ( 986,000 / 0.120 )) - ((1 - 0.279638 ) x 0.70 x V)) x 0.136899 )=(1- 0.70 )V HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Like terms are combined as follows. $4,036,869 - 0.376214 V = (1 - 0.70)V $4,036,869 = 0.67621 V V = $4,036,869 / 0.67621 V = $5,969,813 Total Property Value as Indicated by the Income Capitalization Approach (Say) = $6,000,000 HVS International, Mineola, New York Qualifications of Robert Wong - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Robert Wong Employment 1996 to present HVS INTERNATIONAL Mineola, New York (Hotel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1992 to 1996 CORNELL UNIVERSITY, SCHOOL OF HOTEL ADMINISTRATION Ithaca, New York 1987 to 1992 DRAGON WYCK RESTAURANTS Sheboygan, Wisconsin Summer, 1992 HOLIDAY INN Madison, Wisconsin Education BS - School of Hotel Administration, Cornell University Professional Affiliations Cornell Society of Hotelmen HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Anne R. Lloyd-Jones, CRE Employment 1982 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1981 FAIRMONT HOTEL Dallas, Texas 1979 - 1980 SAGA FOOD SERVICE SWARTHMORE COLLEGE Swarthmore, Pennsylvania 1977 - 1980 DARANNE CATERERS Swarthmore, Pennsylvania Professional Affiliations American Society of Real Estate Counselors - Member (CRE) Appraisal Institute - Candidate for Membership Cornell Society of Hotelmen Education MPS - School of Hotel Administration, Cornell University BA - Swarthmore College Appraisal Institute Course 1A1 - Real Estate Appraisal Principles Course 1A2 - Basic Valuation Procedures Course 1BA - Capitalization Theory and Techniques, Part A Course 1BB - Capitalization Theory and Techniques, Part B Course 2-1 - Case Studies in Real Estate Valuation Course 2-3 - Standards of Professional Practice Course 3-1 - Report Writing HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Corporate and Institutional Clients Served Ashford Financial Corporation Chase Manhattan Bank, N. A. Citibank / Citicorp NA Credit Lyonnais Doubletree Hotels Grand Heritage Hotels Great Western Bank Goldman Sachs Holiday Inns, Inc. Interstate Hotels MassMutual Marriott International / Host Marriott Morgan Stanley OCWEN Financial Services Remington Hotels Sheraton Hotels Starwood Capital Group Starwood Lodging Trust Winegardner & Hammons Wyndham Hotel Company Hotel Chains and Management Companies Appraised or Evaluated Doubletree Hotels Compri Hotels Interstate Hotels Fairmont Hotels Guest Quarters Hilton Hotels Corporation Omni International Hotels Ramada Hotel Corp. Servico Hotel Corp. Winegardner & Hammons Appearance as an Expert Witness Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Jefferson City, Missouri Federal Bankruptcy Court, Columbia, South Carolina Federal Bankruptcy Court, Houston, Texas Federal Bankruptcy Court, New York, New York Federal Bankruptcy Court, San Bernardino, California Federal Bankruptcy Court, Los Angeles, California Federal Bankruptcy Court, Charlotte, North Carolina Federal Bankruptcy Court, Miami, Florida Federal District Court, Central Division, Salt Lake City, Utah Iowa District Court, Story County, Iowa Texas District Court, Harris County, Texas Federal Bankruptcy Court, Tampa, Florida Utah District Court, Salt Lake County, Utah Federal Bankruptcy Court, Newark, New Jersey HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated Arizona - - Wyndham Garden Hotel, Chandler - - Wyndham Garden Hotel - Airport, Phoenix - - Wyndham Garden Hotel - Union Hills, Phoenix - - Canyon Ranch Spa & Fitness Resort, Tucson Alabama - - Holiday Inn, Birmingham - - Proposed Sheraton, Gulf Shores - - Proposed Inn, Mobile - - Holiday Inn, Sheffield California - - Industry Hills Sheraton Hotel, City of Industry - - Piccadilly Inn, Fresno - - Proposed Inn at Foss Creek, Healdsburg - - Sunset Towers Hotel, Hollywood - - Proposed La Quinta, Irvine - - Wyndham Garden Hotel, La Jolla - - Days Inn, La Palma - - Proposed Marriott Courtyard, Palm Springs - - Proposed Club Hilton Hotel, Pleasanton - - Center Pointe Development, San Diego - - Holiday Inn-Embarcadero, San Diego - - Holiday Inn-Harbor View, San Diego - - Seven Seas Lodge, San Diego - - Proposed Fountaingrove Inn, Santa Rosa - - Sheraton Round Barn Inn, Santa Rosa - - Wyndham Garden Hotel, Sunnyvale - - Westlake Plaza Hotel, Thousand Oaks - - Proposed Marriott Courtyard, Torrance Colorado - - Proposed Hotel, Keystone Connecticut - - Holiday Inn, Milford - - Holiday Inn, New Britain District of Columbia - - Grand Hotel, Washington - - Wyndham Bristol Hotel, Washington Florida - - Kon Tiki Village, Kissimmee - - Sheraton Lakeside, Kissimmee - - Holiday Inn, 22nd Street, Miami Beach - - Holiday Inn, 87th Street, Miami Beach - - Holiday Inn, 180th Street, Miami Beach - - Sheraton Resort & Marina, St. Petersburg - - Hilton Hotel, Singer Island - - Royce Hotel, West Palm Beach Georgia - - Marriott Hotel, Atlanta - - Wyndham Garden Hotel, Atlanta - - Holiday Inn, Brunswick - - Holiday Inn, Jekyll Island - - Mullberry Inn, Savannah - - Royal Savannah Inn, Savannah Hawaii - - Hobron in Waikiki, Honolulu Idaho - - Holiday Inn, Boise - - Red Lion Inn, Boise - - Super 8, Boise Illinois - - Ramada Inn, Bloomington - - Proposed Marriott Courtyard, Glenview - - Wyndham Garden Hotel, Naperville Indiana - - Holiday Inn, Bloomington - - Inn at the Four Winds, Bloomington - - Ramada Inn, Bloomington - - Hilton Hotel, Fort Wayne - - Airport Hilton Inn, Indianapolis - - Hilton at the Circle, Indianapolis Iowa - - Holiday Inn, Ames - - Proposed Fairfield Inn, Des Moines HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Kentucky - - Proposed Super 8, London - - Proposed Super 8, Radcliff Louisiana - - Sheraton Inn, Kenner - - Hotel Meridien, New Orleans Maine - - Proposed Hotel, Old Orchard Beach Maryland - - Brookshire Hotel, Baltimore - - Lord Baltimore Hotel, Baltimore - - Hyatt Regency, Bethesda Massachusetts - - Proposed Marriott Courtyard, Andover - - Hyatt Regency, Cambridge - - Proposed Hotel, Franklin - - Sheraton Inn, Hyannis - - Marriott Hotel, Worcester Michigan - - Bay Valley Inn, Bay City - - Hilton Airport, Detroit - - Westin Renaissance Center, Detroit - - Hotel Pontchartrain, Detroit - - Proposed Embassy Suites, Lansing - - Hilton Inn, Northfield - - Holiday Inn, Saginaw Minnesota - - Wyndham Garden Hotel, Bloomington - - Marriott Hotel, Minnetonka Missouri - - Inn at Grand Glaize, Osage Beach - - Bel Air Hilton, St. Louis - - Holiday Inn Riverfront, St. Louis Nebraska - - Holiday Inn Airport, Lincoln - - Holiday Inn Northeast, Lincoln Nebraska (continued) - - Marriott Hotel, Omaha - - Ramada Inn, Omaha - - Red Lion Inn, Omaha Nevada - - Proposed Super 8, Las Vegas New Jersey - - Ramada Inn, Edison - - Marriott Hotel, Hanover - - Headquarters Plaza, Morristown - - Hyatt Regency, New Brunswick - - Holiday Inn, North Brunswick New York - - Hilton Hotel, Albany - - Proposed Embassy Suites, Amherst - - Holiday Inn Arena, Binghamton - - Holiday Inn SUNY, Binghamton - - Proposed Hotel, Binghamton - - Proposed Hilton, Brooklyn - - Marriott Hotel, Dewitt - - Metropole Hotel, Flushing - - Midway Hotel, Flushing - - Ramada Inn, Kingston - - Royce Hotel, La Guardia - - Holiday Inn, Latham - - Proposed Crowne Plaza, Manhattan - - Proposed Prince Street Hotel, Manhattan - - Proposed Roslyn Inn, Roslyn - - Proposed Le Richmonde, Rye Brook - - Hilton Hotel, Syracuse - - Hotel Syracuse, Syracuse - - Proposed Hotel, Watertown North Carolina - - Proposed Inn, Chapel Hill - - Proposed Indep. Center Marriott Hotel, Charlotte - - Royce Hotel, Charlotte - - Howard Johnson's North, Charlotte HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) North Carolina (continued) - - Holiday Inn West, Durham - - Sheraton University Inn, Durham - - Holiday Inn, Fayetteville - - Holiday Inn Downtown, Raleigh Ohio - - Proposed Hyatt Hotel, Cleveland - - Proposed Marriott Hotel, Cleveland Oregon - - Holiday Inn Airport, Portland - - Holiday Inn South, Portland Pennsylvania - - Quality Inn, Allentown - - Holiday Inn, Bensalem - - Proposed Marriott Courtyard, Devon - - Proposed Lafayette Inn, Easton - - Ramada Inn, Erie - - Holiday Inn, Harrisburg - - Marriott Hotel, Harrisburg - - Proposed Super 8, Harrisburg - - Proposed Super 8, Lancaster - - Holiday Inn West, Monroeville - - Days Inn Philadelphia - - Franklin Plaza Hotel, Philadelphia - - Franklin Towne EconoLodge, Philadelphia - - Guest Quarters Hotel, Philadelphia - - Hilton Inn, Northeast, Philadelphia - - Marriott Airport Hotel, Philadelphia - - Holiday Inn Greentree, Pittsburgh - - Holiday Inn Parkway East, Pittsburgh - - Holiday Inn North, Pittsburgh - - Holiday Inn Parkway West, Pittsburgh - - Proposed Hotel, Pittsburgh - - Royce Hotel, Pittsburgh - - Westin William Penn Hotel, Pittsburgh - - Hilton Hotel, Scranton - - Proposed Marriott Courtyard, Valley Forge - - Holiday Inn Meadowlands, Washington - - Ramada Inn, York - - Proposed Super 8, York Rhode Island - - Proposed Hotel, Providence - - Omni Biltmore Hotel, Providence South Carolina - - Proposed Charleston Center Hotel, Charleston - - Proposed Cooper River Inn, Charleston - - Howard Johnson's, Spartanburg - - Proposed Middleton Inn and Conference Center, Charleston - - Best Western, North Charleston - - Proposed Marriott Courtyard, Columbia - - Fairfield Inn, Florence - - Holiday Inn, Florence - - Fairfield Inn, Greenville - - Proposed Marriott Courtyard, Greenville - - Fairfield Inn, Hilton Head - - Holiday Inn, Hilton Head Tennessee - - Hampton Inn, Brentwood - - Proposed Marriott Courtyard, Brentwood - - Howard Johnson's, Chattanooga - - Sheraton Hotel, Chattanooga - - Howard Johnson's, Knoxville - - Proposed Capital Mall Convention Center Hotel, Nashville - - Clarion Maxwell House, Nashville - - Holiday Inn Briley Parkway, Nashville - - Proposed Marriott Courtyard, Nashville - - Sheraton Music City, Nashville - - Stouffer's Nashville Hotel, Nashville - - Proposed Super 8, Nashville - - Union Station Hotel, Nashville - - Wyndham Garden Hotel, Nashville - - Proposed Super 8, Union City HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Texas - - Proposed Marriott Courtyard, Addison - - Proposed Marriott Courtyard, Arlington - - La Mansion, Austin - - Proposed Marriott Courtyard, Bedford - - Airport Hilton, El Paso - - Hotel Meridien, Houston - - Sheraton Hotel, Houston - - Proposed Marriott Courtyard, Las Colinas - - Proposed Marriott Courtyard, North Dallas - - La Mansion Del Norte, San Antonio - - La Mansion Del Rio, San Antonio - - Proposed Marriott Courtyard, San Antonio - - Proposed Marriott Courtyard - Medical Center, San Antonio Utah - - Deer Valley Resort, Park City - - Hilton Inn, Salt Lake City - - Holiday Inn, Salt Lake City - - Sheraton Hotel, Salt Lake City Virginia - - Mountain Lake Hotel, Blacksburg - - Howard Johnson's, Bristol - - Boars Head Inn, Charlottesville - - Proposed Fairfield Inn, Hampton - - Proposed Embassy Suites, Herndon - - Ramada Renaissance, Herndon - - Proposed Marriott Courtyard, Manassas - - Omni Hotel, Norfolk Virginia (continued) - - Proposed Marriott, Norfolk - - Howard Johnson's, Richmond - - Howard Johnson's, Roanoke - - Howard Johnson's, Roanoke Rapids - - Wyndham Hotel, Williamsburg Washington - - Wyndham Garden Hotel, Bothell - - Redmond Hotel, Redmond - - Wyndham Garden Hotel, SeaTac West Virginia Proposed Budget Motel, Princeton Wisconsin - - Proposed Granada Royale, Green Bay - - Holiday Inn-Downtown, Green Bay Canada - - Inn on the Park, Toronto Puerto Rico - - Carib Inn, San Juan Virgin Islands - - Virgin Grand Beach Hotel, St. Thomas Jamaica - - Holiday Inn, Montego Bay HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Stephen Rushmore, CRE, MAI, CHA Employment 1980 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1977 - 1980 1971 - 1974 HELMSLEY-SPEAR HOSPITALITY SERVICES, INC. New York, New York (Real Estate) 1974 - 1977 JAMES E. GIBBONS ASSOCIATES Garden City, New York (Mortgage Banking, Appraisals, Hotel Operations) Affiliated Ownership Interests HVS INTERNATIONAL (SAN FRANCISCO, CALIFORNIA) West coast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (MIAMI, FLORIDA) Southeast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (BOULDER, COLORADO) Midwest office for hotel/motel appraisals and counseling HVS INTERNATIONAL (VANCOUVER, CANADA) Canadian office for hotel/motel appraisals and counseling HVS INTERNATIONAL (LONDON, ENGLAND) European office for hotel/motel appraisals and counseling HVS - EXECUTIVE SEARCH Hotel/motel executive search and human resource consulting HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) HVS - ECO SERVICES Environmental consulting for hotels and motels; administrator of the ECOTEL designation HOSPITALITY EQUITY INVESTORS, INC. Hotel and motel investment and management company TRUMBULL MARRIOTT HOTEL General partner of a 324-room hotel and conference center PRINCETON HOTEL ASSOCIATES General partner of a 128-unit Residence Inn in Princeton, New Jersey SEAVIEW GOLF RESORT ASSOCIATES General partner of a 298-unit, 424-acre Marriott resort in Absecon, New Jersey SHELTON HOTEL ASSOCIATES General partner of a 96-unit Residence Inn in Shelton, Connecticut DANBURY HOTEL ASSOCIATES General partner of a 243-unit Hilton Hotel in Danbury, Connecticut PRUDENTIAL - HEI JOINT VENTURE Joint venture partner with Prudential Insurance Company of America on a 234-unit Embassy Suites in Atlanta, Georgia WESTPORT NORFOLK ASSOCIATES General partner of a 425-unit Omni Hotel in Norfolk, Virginia WESTPORT BWI, LLC General partner of a 310-unit Marriott Hotel in Baltimore, Maryland HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) WESTPORT RARITAN, LLC General partner of a 274-unit Crowne Plaza Hotel in Raritan, New Jersey WESTPORT NOVI, LLC General partner of a 193-unit Hilton Hotel in Novi, Michigan WESTPORT LONG BEACH, LLC General Partner of a 460-unit Sheraton Hotel in Long Beach, California WESTPORT PARK RIDGE, LLC General Partner of a 265-unit hotel and conference center in Valley Forge, Pennsylvania WESTPORT CHARLESTON, LLC General Partner of a 295-unit Hilton Hotel in Charleston, South Carolina HOSPITALITY VALUATION SOFTWARE, INC. Founder of software company that develops and distributes hotel financial analysis software Hotels Managed Sheraton Hotel, Smithtown, New York Marriott Hotel, Baltimore Airport, Maryland Hilton Hotel, Danbury, Connecticut Residence Inn, Princeton, New Jersey Embassy Suites, Atlanta Airport, Georgia Omni Hotel, Norfolk, Virginia Crowne Plaza, Raritan, New Jersey Hilton Hotel, Novi, Michigan Sheraton Hotel, Long Beach, California Hilton Hotel, Charleston, South Carolina Park Ridge Hotel and Conference Center, Valley Forge, Pennsylvania Hilton Hotel, Wilmington, Delaware HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Professional Affiliations American Society of Real Estate Counselors - Member (CRE) - Board of Governors Appraisal Institute - Member (MAI) (SREA) - Developer and Instructor, Hotel Investment and Valuation Seminar - Developer and Instructor, Hotel Computer Valuation Seminar American Hotel and Motel Association - Certified Hotel Administrator (CHA) - Industry Real Estate Financing Advisory Council (IREFAC) International Society of Hospitality Consultants - Member (ISHC) New York University - Adjunct Assistant Professor of Nutrition, Food and Hotel Management Michigan State University - Honorary Faculty, Honorary Alumnus Certified General Appraiser - Arizona, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Illinois, Massachusetts, Michigan, Minnesota, Nebraska, New Jersey, New York, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Virginia Licensed Real Estate Broker - New York, Pennsylvania Board of Advisers - Real Estate Finance Journal - Real Estate Workouts & Asset Management American Arbitration Association - National Real Estate Valuation Council Cornell Society of Hotelmen New York University Masters in Hospitality Management - Advisory Board New York University Hospitality Investment Conference - Board of Advisors Beta Gamma Sigma - National Honor Society in Business and Management HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Endowment Hospitality Valuation Services Professor of Hotel Finance and Real Estate - School of Hotel Administration, Cornell University (currently held by Professor James J. Eyster) Education BS - School of Hotel Administration, Cornell University MBA - Graduate School of Business Administration (Finance), University of Buffalo Candidate for PhD - School of Education, Department of Food Service Management, New York University Partial List of Teaching and Lecture Assignments Cornell University - Computer Valuation Techniques Michigan State University - Hotel Management Contracts University of North Carolina - Hotel Market Studies University of Virginia - Assessing Hotels American Arbitration Association - Real Estate Arbitration American Hotel and Motel Association - Hotel Obsolescence Appraisal Institute - Hotel Valuation (over 50 seminars) International Association of Assessing Officers - Hotel Valuation Montreal Appraisal Society - Total Project Analysis Society of Real Estate Appraisers - Lease Seminar Lodging Hospitality - Lodging Summit Published Books and Seminars Textbooks The Valuation of Hotels and Motels, Appraisal Institute, Chicago, Illinois, 1978 Hotels, Motels and Restaurants: Valuations and Market Studies, Appraisal Institute, Chicago, Illinois, 1983 How to Perform an Economic Feasibility Study of a Proposed Hotel/Motel, American Society of Real Estate Counselors, Chicago, Illinois, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Books and Seminars (continued) Textbooks (continued) Hotel Investments: A Guide for Owners and Lenders, Warren, Gorham and Lamont, Inc., New York, New York, 1990 The Computerized Income Approach to Hotel Market Studies and Valuations, Appraisal Institute, Chicago, Illinois, 1990 Hotel Investments: A Guide for Owners and Lenders, 1992 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotel Investments: A Guide for Owners and Lenders, 1993 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Appraisal Institute, Chicago, Illinois, 1992 Student Manuals The Valuation of Lease Interests, Society of Real Estate Appraisers, Chicago, Illinois, 1976 Hotel-Motel Valuation Seminar, Appraisal Institute, Chicago, Illinois, 1981, 1988, 1990 The Computerized Approach to Hotel Market Studies and Valuations Seminar, Appraisal Institute, Chicago, Illinois, 1991 Demonstration Appraisal Demonstration Appraisal of a Proposed Hotel, Spring Valley, New York, Hospitality Valuation Services, Mineola, New York, 1983, 1990 Chapters The Real Estate Handbook-Second Edition, Dow Jones-Irwin, 1989, "Hotels and Motels" Arbitration of Real Estate Valuation Principles, American Arbitration Association, 1987, "Arbitration in the Hospitality Industry" Ethics in Hospitality Management: A Book of Readings, Educational Institute of the American Hotel and Motel Association, 1992, "Ethics in Hotel Appraising" The Lodging and Food Service Industry, Educational Institute of the American Hotel and Motel Association, 1993, "Insider's Insights" HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles The Appraisal Journal "Using Total Project Analysis to Compete for Investment Capital," October, 1975 "The Appraisal of Food Service Facilities," July, 1980 "Publish and Prosper," October, 1980 "Valuation of Hotels and Motels for Assessment Purposes," April, 1984 "Adjusting Comparable Sales for Hotel Assessment Appeals," July, 1986 "Hotel Business Value and Working Capital: A Clarification," January, 1987 "Ethics in Hotel Appraising," July, 1993 The Appraiser "Hotel-Motel Appraisal Misconceptions Set Straight," January, 1979 "No Conventional Financing Available for Hotels: Rushmore," December, 1979 "Estimating Hotel Land Values Using Comparable Ground Leases," April, 1980 Bulletin of the Cornell Society of Hotelmen "Employment Philosophy for a Consulting Practice," July, 1984 Business Travel News "A Snapshot of a Classic Recovery," July, 1995 The Canadian Appraiser "Hotel/Motel Market Sales Update," Summer, 1987 Capital Sources for Real Estate "Stephen Rushmore Discusses the Future of the Lodging Industry," December, 1994 Cayuga Advisor "Secrets to Success in Consulting," October, 1992 Chapter News and Notes "Quantifying a Hotel's Business Value," November, 1979 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Cornell Hotel & Restaurant Administration Quarterly "A Preliminary Market Study," November, 1974 "How Much is Your Place Worth Today? A Case Study in Hotel - Motel Valuation," May, 1975 "What Can Be Done About Your Hotel's Real Estate Taxes?" May, 1977 "The Appraisal of Lodging Facilities," August, 1978 "The Appraisal of Food Service Facilities," February, 1979 "The Appraisal of Lodging Facilities - Update," November, 1984 "Hotel Sales Prices Down More Than 12%," May, 1991 "Seven Current Hotel Valuation Techniques," August, 1992 "The Valuation of Distressed Hotels," October, 1992 "Hotel Lending in the 1990's: Amateurs Beware," December, 1994 "Investment Values of Lodging Property: Modeling the Effects of Income Taxes and Alternative Lender Criteria," December, 1995 FCI Spec Sheet "Employment Philosophy for a Consulting Practice," September, 1984 Florida Hotel & Motel Journal "Rushmore Reports Rising Hotel Prices," February, 1995 Hotel and Motel Management "Average Rate vs. Project Cost," May 1, 1974 "How to Increase the Marketability of Your Motel," April, 1981 "Tougher Lending, Lower Room Rate Hikes On Way?" June, 1981 "What is That Mortgage Loan Going to Cost You?" August, 1981 "How to Perform a Study of Your Property's Market," October, 1981 "How do High Interest Rates Affect Your Motel's Value?" December, 1981 "How to Buy a Feasibility Study That Works for You," February, 1982 "Settling Lease Conflicts Quickly Through Arbitration," April, 1982 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Hotel and Motel Management (continued) "Are Casino Hotels Really Worth $500,000 Per Room?" June, 1982 "Discount Rates and Internal Rate of Return," August, 1982 "Determining a Property's Extended Life Cycle," November, 1982 "Using Microcomputers for Forecasting," December, 1982 "Update on Hotel Development Costs," January, 1983 "Estimating a Site's Worth by Finding Its Profit Value," June, 1983 "Hotel Construction May Be Slowing Down a Little Bit," April, 1983 "The Investor's Risk Sways to Prevailing Economic Winds," August, 1983 "Is Your Property Tax at as Low a Level as it Should Be?" October, 1983 "The Ultimate Guest Room: Could it Ever Exist Anywhere?" December, 1983 Hotel-Motor Inn Journal A Preventive Maintenance System for Motels," March, 1975 Hotel Valuation Journal "Hotel Valuation Index Peaks During 1989," Fall, 1990 "Hotel Development Costs," Winter, 1991 "Hotel Valuation Index for 1990," Spring, 1991 "Bad Year for Hotel Sales Prices Confirmed," Spring, 1992 "Hotel Sales Prices on the Rise," Fall, 1994 "United States Hotel Values Climb," Spring/Summer, 1995 "It's Time for Franchise Reform," Fall, 1995 Institutions/ Volume Feeding "Greater Risk/Greater Profit Potential: Hotel Management Contract," May, 1973 Lodging Hospitality "How to Finance Renovation Projects," January, 1974 "Controlling Your Real Estate Taxes," July, 1978 "Putting Together a Sound Financial Package," December, 1978 "Favorable Outlook for Lodging Values," December, 1983 "Are Your Property Taxes Too High? (Part I and II)," May and June, 1984 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Development Costs," July, 1984 "The Right Management Contract for You," September, 1984 "Selecting the Firm to Prepare Your Feasibility Study," October, 1984 "A Quick How-To In Hotel Valuation," November, 1984 "Updating Lodging Interest Rates," December, 1984 "Is Your Guest Experience Up to Par?" January, 1985 "How to Perform a Breakeven Analysis," May, 1985 "Evaluating Operating Performance," June, 1985 "Hotel Lenders Toughen Underwriting Requirements," July, 1985 "Don't Forget the Pre-Opening Agreement," August, 1985 "Management Companies Should Participate in Financing," October, 1985 "Current Techniques for Valuing Hotel Land," November, 1985 "Hotel Development Costs," December, 1985 "Sourcing Debt Into the 1990's," January, 1986 "Hotel Valuation Thumb Rule," February, 1986 "Value in Use Versus Value in Exchange," March, 1986 "Stretching Feasibility," April, 1986 "The Management Question," May, 1986 "How to Commission a Feasibility Study," June, 1986 "Macro Trends Affecting Property Values," July, 1986 "Hotel-Motel Market Sales Update," August, 1986 "Financing Alternatives: Zero Coupon Mortgages," September, 1986 "Forecasting Lodging Energy Costs," October, 1986 "Portfolio Financing a Better Way," November, 1986 "Profit by Looking at History," December, 1986 "Why New York Isn't Overbuilt," February, 1987 "How to Discourage Hotel Overbuilding: A Case Study," April, 1987 "Structuring an Incentive Management Fee," June, 1987 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Franchising Questions and Answers," July, 1987 "Comparing Hotel Development Costs," August, 1987 "Understanding Economic Life," September, 1987 "Prices Rise for Lodging Properties," October, 1987 "Management Companies Are Key to Success," November, 1987 "Evaluating a Management Contract Fee Structure," December, 1987 "Check Profits Before Selecting Hotel Operator," January, 1988 "It's a Good Time to Review Your Taxes," February, 1988 "How to Use a Management Company Rating System," March, 1988 "Make Sure Management Contracts Contain These Terms," April, 1988 "Hotel Access and Visibility," May, 1988 "Chain Sale Strategies," July, 1988 "Evaluating a Hotel Franchise," August, 1988 "Evaluating Franchise Fees," September, 1988 "Opportunities in Economy Lodging," October, 1988 "How to Obtain a Hotel Mortgage," November, 1988 "Arbitration in the Hospitality Industry," December, 1988 "Lodging Development Cost Update," January, 1989 "Amenities as Profit Builders," February, 1989 "Hotel Values Mirror the Times," March, 1989 "Forecasting Revenue and Expenses," April, 1989 "Real Estate Jargon Made Simple," May, 1989 "Pricing a Management Contract," June, 1989 "Trends in Valuation," July, 1989 "Rescuing the Distressed Hotel," August, 1989 "Shielding Against Incompetence," September, 1989 "Hotel Valuation Revisited," October, 1989 "New Breed of Hard Budgets," November, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Figuring Cap Rates," December, 1989 "A Glance Backward," January, 1990 "Costs Creeping Up," February, 1990 "Valuing Distressed Properties," March, 1990 "Cap and Discount Rates," April, 1990 "An Open Letter," May, 1990 "Misconceptions About Appraisals," June, 1990 "Hotel Values Still Growing," July, 1990 "Hotel Renovation is Key to `90s," August, 1990 "Time Right for Hotel Leases," September, 1990 "Getting a Fix on Rates," October, 1990 "The Wrinkles of Class," November, 1990 "A Glance Backward," December, 1990 "The Price Dropoff," January, 1991 "The Cost Washout," February, 1991 "Survival of the Fittest," March, 1991 "Looking Out and Up," April, 1991 "The Bottom is in Sight," May, 1991 "The Pitfalls of Liquidation," June, 1991 "Extra! Extra! Hospitality News," July, 1991 "The Art of Hotel Renovation," August, 1991 "No Better Time for a Tax Review," September, 1991 "No Time for Passivity," October, 1991 "What a Franchise Really Costs," November, 1991 "In Case You Hadn't Heard," January, 1992 "Negotiation - The Name of the Game," February, 1992 "Now Could be the Time to Build," March, 1992 "The Well May Stay Dry," April, 1992 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Life Expectancy," May, 1992 "Hotel Values - What a Downer," June, 1992 "How to Make Money Now," July, 1992 "Hotel Chain Class Survey," August, 1992 "Budget Dining with Rushmore," September, 1992 "Bookings Up, Rates Will Follow," October, 1992 "Hospitality Master's Good Preparation," November, 1992 "What's New on the Job Front?" January, 1993 "Where Have All the Hotels Gone?" February, 1993 "Hotel Building Costs Continue to Fall," March, 1993 "Hotel Values Head Upward," April, 1993 "The Rise and Fall of Trophy Hotels," May, 1993 "Hotel Sales and Prices Rebound," June, 1993 "Third Parties Loosening Purse Strings," July, 1993 "Beyond Recycling: The Ecotel," August, 1993 "Time to Reduce Property Taxes," September, 1993 "Lodging: The Way I See It," October, 1993 "Choosing an Appraiser," November, 1993 "Who Needs an Asset Manager?" January, 1994 "Investing by the Numbers," February, 1994 "Fire Your Staff and Lease Them Back," March, 1994 "Published Rates Hint at Recovery," April, 1994 "Now is the Time to Start Building," May, 1994 "Hotel Values Heading Up," June, 1994 "Farewell, Friend," July, 1994 "Sales Prices Creeping Up," August, 1994 "Selecting Green Hotel Supplies," September, 1994 "Don't Write Off Full-Service Hotels," October, 1994 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Lodging REIT's Are on the Rise," November, 1994 "Going Back to the Future," January, 1995 "How much do Managers Make?" March, 1995 "Lodging Transactions Soared in '94," April, 1995 "Hotel Development Costs on the Rise," May, 1995 "Hotel Values up Significantly," June, 1995 "What a Franchise Costs over the Long Term," July, 1995 "Road Food Part II," August, 1995 "It's Time for Franchise Reform," September, 1995 "Extended Stay May Not Extend Your Profits," October, 1995 "The Year as I See It," November, 1995 "Cap Rate 101," January, 1996 Michigan Lodging "Hotel Development Costs," January, 1988 The Mortgage and Real Estate Executives Report "Atlantic City Building Game Involves High Stakes," August, 1979 "How Interest Rates Affect Real Estate Values," June, 1982 "Update on Hotel Development Costs," May 1, 1983 Motel-Hotel Insider "The $100,000 Plus Hotel Room Has Become a Reality," November 19, 1979 "Update on Hotel Development Costs," April 4, 1983 NAIFA - The Appraisal Review "Hotel Valuation Techniques," Vol. 44, 1991 Real Estate Digest "Why Should the Management Team be Important to Hotel Lenders," Fall, 1988 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Finance Journal "What is a Typical Fee for a Hotel Management Contract?" Fall, 1988 "Hotel Franchise Fees," Winter 1989 "Why the Management Team Should be Important to Hotel Lenders," Spring, 1989 "Hotel Values and Costs," Summer, 1989 "Structuring a Hotel Investment," Fall, 1989 "A Guide for Lenders Holding Distressed Hotel Loans," Winter, 1990 "Estimating Current Interest Rates for Hotel Financing," Spring, 1990 "Hotel Valuation Techniques," Summer, 1990 "Now is the Time to Review Your Hotel's Property Taxes," Fall, 1990 "Property Tax Assessments for Hotels and Motels," Winter, 1991 "Putting Together Hotel Management Agreements - Part I," Spring 1991 "Putting Together Hotel Management Agreements - Part II," Summer, 1991 "The 1980s - The Decade of Change," Fall, 1991 "An Overview of the Hotel Industry: Past, Present, and Future," Spring, 1994 Real Estate Forum "Casino Hotels Raise Valuation Questions," November, 1981 Real Estate Investment Ideas "How Fuel and Energy Shortages Should Affect Investment Decisions in the Hospitality Industry," March, 1974 "Upward Trend Continues for Sales Price of Hotel-Motel Properties," May, 1988 "High Prices Paid for Hotel-Motel Properties," February, 1990 Real Estate Issues "Employee Compensation for a Consulting Practice," Fall/Winter, 1985 "Hotel/Motel Market Sales Update," Spring/Summer, 1987 Real Estate Newsletter "Computers in Hotel Appraising," May 15, 1989 Real Estate Investment Ideas "Hotel-Sales Update," Winter, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Review "Valuing Motels and Hotel in the Current Market," Fall, 1972 "Dealing With Distressed Hostelry Loans," Fall, 1975 "The Mortgage Underwriting Consultant Comes of Age," Fall, 1977 "Real Estate Compensation," Winter, 1987 Real Estate Workouts and Asset Management "Stephen Rushmore on Directions in the Hospitality Industry," September, 1992 Real Values "Hotel Construction Cost Update," April, 1986 Restaurant and Hotel Design "How Much Should the Renovation Be?" March, 1986 "14 Notable Hotel Development Firms," December, 1987 Rushmore on Hotel Valuation "Mortgage - Equity," Winter, 1979 "Atlantic City - From Bust to Boom," Winter, 1979 "Mortgage - Equity," Spring, 1979 "Developing Mortgage Data," Spring 1979 "Gasoline and Market Values, " Spring, 1979 "Mortgage - Equity," Fall, 1979 "Quantifying a Hotel's Business Value," Fall, 1979 "What Has Happened to Typical Hotel-Motel Development Costs?," Fall, 1979 "Mortgage-Equity," Winter, 1980 "Extending Hotel Economic Life Through Renovation," Winter, 1980 "Estimating Hotel Land Values Using Comparable Ground Leases," Winter, 1980 "Quantifying the Value of Personal Property to a Going Hotel," Spring, 1980 "Recent Changes in New York City's Hotel Market," Spring, 1980 "Hotel-Motel Economic Lives," Fall, 1980 "Mortgage - Equity," Fall, 1980 "Mortgage - Equity," Winter, 1981 "Developing Mortgage Data," Winter, 1981 "Statistical Support for Food and Beverage Projections," Winter, 1981 "Mortgage - Equity," Spring/Summer, 1981 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Rushmore on Hotel Valuation (continued) "Quantifying a Hotel's Demand," Spring/Summer, 1981 "A Five-Year Overview of Typical Hotel-Motel Development Costs," Spring/Summer, 1981 "Mortgage - Equity," Winter/Spring, 1982 "Update on Hotel Capitalization Rates," Winter/Spring, 1982 "Mortgage - Equity," Summer/Fall, 1982 "Are Casino Hotels Really Worth $500,000 Per Room?" Summer/Fall, 1982 "The Hotel-Motel Life Cycle, Summer/Fall, 1982 "Mortgage - Equity," Winter/Spring, 1983 "Update on Hotel Development Costs," Winter/Spring, 1983 "The Valuation of Hotels and Motels for Assessment Purposes," Winter, 1984 "Hotel Capitalization Rates," Summer, 1984 "Hotel Development Cost Survey," Summer, 1984 "Selecting a Hotel Management Company," Fall, 1984 "Hotel Capitalization Rates," Spring, 1985 "How to Perform a Breakeven Analysis," Spring, 1985 "Hotel Capitalization Rates," Winter, 1986 "Hotel Development Costs," Winter, 1986 "Hotel Valuation Survey," Winter, 1987 "Impact of New Tax Laws on Hotel Values," Winter, 1987 "Hotel-Motel Market Sales Update," Winter, 1987 "Structuring an Incentive Management Fee," Fall, 1987 "Understanding Your Hotel's Economic Life," Fall, 1987 "Hotel Development Costs," Fall, 1987 "Hotel, Motel Market Sales Update," Winter, 1988 "Amenity Creep," Winter, 1989 "Hotel Franchise Fees," Winter, 1989 "Hotel Valuation Index," Fall, 1989 "Latest Trends in Hotel Values," Fall, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Tri-State Real Estate Journal "Across the Nation: Hotel Sale Prices Escalate on Average," December 23, 1994 U.S. Real Estate Week "All-Suites Market Entering Second Phase," May 4, 1987 Valuation "Hotel-Motel Market Sales Update," February, 1987 Quarterly Newsletter Hotel Valuation Journal Professional newsletter with a circulation of 10,000 Real Estate Column Lodging Hospitality Real estate editor for a major monthly hospitality periodical Hospitality Column Real Estate Finance Journal Contributing hospitality editor Computer Software Hospitality Valuation Software Hotel financial software for room night analyses, income and expense forecasts, and valuation calculations - developed and distributed for the Appraisal Institute Hotel-Motel Data Hospitality Market Data Exchange National clearinghouse for information pertaining to hotel and motel transactions Hotel Valuation Index National index of hotel value trends for 24 individual market areas Hospitality Seminar Series Intensive short courses for hotel and restaurant professionals Hotel Franchise Fees Analysis Guide Analysis of hotel franchise fees and costs Hospitality Bibliography Comprehensive literature index of hotel and restaurant books and articles HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Awards Robert H. Armstrong Award For the most significant contribution to The Appraisal Journal in 1975 Activities Commercial pilot, instrument, multi-engine; sailing; skiing Corporate and Institutional Clients Served Aetna Life Insurance AIG Real Estate Investment Aldrich Eastman and Waltch Allstate American Airlines America's Best Inns Arthur Anderson & Company Bankers Trust Company Bank of America Bank of Boston Bank of Montreal Bank of New York Bank of Nova Scotia Bank of Tokyo Bank One-Columbus Banque Indosuez Barclay's Bank Baybank Boston The Beacon Companies Bear, Stearns & Company, Inc. Best Inns Best Western International Boykin Management Co. Bradbury Suites C. Itoh Caesar's World California Dept. of Transportation Chase Lincoln First Bank, N.A. Chase Manhattan Bank Chemical Bank Chrysler Capital Corporation CIGNA Citibank Citicorp Real Estate City of Boston City of Detroit City of Grand Rapids City of Kalamazoo City of Orlando City of Philadelphia City of Santa Monica City of Toronto Columbia Sussex Corporation Continental Illinois National Bank Copley Real Estate Advisors Corporex Development CRI, Inc. Cushman and Wakefield Days Inns Edward J. DeBartolo Corp. HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Deer Valley Ski Corporation Doubletree Hotels Drury Inns Econo Lodge Economic Development Admin. EIE Regent International Embassy Suites Equitable Life Assurance Equitable Real Estate Investment European American Bank Fairmont Hotels Federal Deposit Insurance Corp. First Boston First California Savings First Interstate Bank First National Bank of Chicago Four Seasons Hotels Goldman, Sachs Greater Orlando Aviation Authority Great Western Bank Great Western Savings Guest Quarters Hampton Inns Hilton Hotels, Corp. Hilton International Holiday Corporation Holiday Inns Home Savings of America Howard Johnson's Hudson Hotels Corporation Hyatt Hotels Industrial Bank of Japan Interstate Hotels The Irvine Company ITT Commercial Finance Corp. Japan Airlines JDC (America) Corporation John Q. Hammons John Hancock Life Insurance Johnson & Wales College Kenneth Leventhal & Assoc. Kidder Peabody & Company, Inc. La Quinta Larken, Inc. Lexington Companies Loews Hotels Harry Macklowe Real Estate Marine Midland Bank, N.A. Marriott Corporation MA Bay Transit Authority Massachusetts Mutual Life Mellon Bank Meridien Hotels Merrill Lynch Merrill Lynch Capital Markets Metropolitan Life Insurance Microtel Midlantic Bank HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Mitsubishi Morgan Guaranty Bank & Trust Co. J.P. Morgan Investment Management Morgan Stanley Motel 6, Inc. Mutual Benefit Co. National Westminster Bank New York Life Insurance Nippon Credit Bank Nomura Securities Int'l North American Taisei Corporation Northwestern Mutual Life Omni Hotels Parabas Bank Prime Motor Inns Property Capital Trust Prudential Life Insurance Radisson Hotels Ramada Inns Red Lion Inns Regent International Registry Hotels Residence Inns Resolution Trust Corporation Rhode Island Hospital Trust Ritz-Carlton Hotels Rodeway Inns Rose Associates Salomon Brothers San Antonio Hotel/Motel Assoc. Sanwa Bank Security Pacific Bank Servico Management Corp. Sheraton Hotels Sonesta Hotels Sonnenblick-Goldman Steamboat Ski Corporation Stouffer Hotels Stratton Corporation Sumitomo Bank Summerfield Hotel Corporation Super 8 Hotels Swiss Bank Corporation Taisei Texas Commerce Bancshares, Inc. Tishman Realty Corporation Trans World Airlines Travelers Insurance TraveLodge Trusthouse Forte UBS Securities Union Labor Life United Bank of Switzerland United Inns, Inc. United States Steel Universal Hotels U.S. Air Force U.S. Department of Justice HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) U.S. Department of the Army U.S. Department of the Interior U.S. Economic Development Authority U.S. Trust Company Walt Disney Productions Westin Hotels Williams Hospitality Corporation Winegardner & Hammons Winthrop Financial Associates Wyndham Hotels Zeckendorf Company Appearance as an Expert Witness Administrative Law Court - SEC, Washington, DC Appellate Tax Board, Boston, Massachusetts Arbitration, Wayne, New Jersey Assessment Appeals Board, Los Angeles County, Los Angeles, California Board of Equalization and Review, Washington, District of Columbia (2) Board of Taxation, Atlantic City, New Jersey Bureau de Revision Evaluation Fonciere du Quebec, Montreal, Canada Circuit Court, Orange County, Orlando, Florida Condemnation Review Board, Minneapolis, Minnesota Corporation Committee, Rhode Island State Senate Court of Common Pleas, Allegheny County, Pennsylvania Court of Common Pleas, Franklin County, Ohio Court of Common Pleas, Montgomery, Pennsylvania Court of Common Pleas, Pittsburgh, Pennsylvania Court of Common Pleas, Philadelphia, Pennsylvania Court of Queen's Bench of Alberta, Canada District Court, Arapahoe County, Colorado District Court, Dallas County, Texas District Court, Harris County, Texas District Court, Tarrant County, Texas District Court, Hennepin County, Minneapolis, Minnesota District Court, Knoxville, Tennessee Federal Bankruptcy Court, Oakland, California Federal Bankruptcy Court, Los Angeles, California HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Denver, Colorado Federal Bankruptcy Court, District of Columbia Federal Bankruptcy Court, Miami, Florida (2) Federal Bankruptcy Court, Chicago, Illinois Federal Bankruptcy Court, New Orleans, Louisiana Federal Bankruptcy Court, Greenbelt, Maryland Federal Bankruptcy Court, Baltimore, Maryland Federal Bankruptcy Court, Rockville, Maryland Federal Bankruptcy Court, Boston, Massachusetts Federal Bankruptcy Court, Grand Rapids, Michigan Federal Bankruptcy Court, Las Vegas, Nevada Federal Bankruptcy Court, Newark, New Jersey (2) Federal Bankruptcy Court, Manhattan, New York (2) Federal Bankruptcy Court, Westbury, New York Federal Bankruptcy Court, Philadelphia, Pennsylvania Federal Bankruptcy Court, Reading, Pennsylvania Federal Bankruptcy Court, Salt Lake City, Utah Federal Bankruptcy Court, Madison, Wisconsin (2) Federal District Court, Rochester, New York Federal District Court, Philadelphia, Pennsylvania (2) Judicial Arbitration and Mediation Services, Dallas, Texas Michigan Tax Tribunal, Detroit, Michigan New Jersey Tax Court, Newark, New Jersey (2) Superior Court, District of Columbia Superior Court, Clayton County, Georgia (2) Superior Court of North Carolina Superior Court, Nashua, New Hampshire Supreme Court, New York State, Buffalo, New York Supreme Court, New York State, Manhattan, New York Supreme Court, New York State, Riverhead, New York HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Tax Review Board, San Joaquin County, Stockton, California Tax Review Board, Bangor, Maine Tax Review Board, Schenectady, New York Tax Review Board, Yorktown, New York Tax Review Board, North Carolina Tax Review Board, Philadelphia, Pennsylvania (2) U.S. District Court, Wilmington, Delaware U.S. District Court, Madison, Wisconsin ============================================================================== Partial List of Hotels/Motels, Appraised or Reviewed Internationally North America Canada - Delta Hotel, Calgary - Econo Lodge, Hull - Hotel Lord Berri, Montreal - Hotel Vogue, Montreal - Hyatt Regency, Montreal - Le Ragence Hyatt, Montreal - Holiday Inn, Oshawa, Ontario - Hotel Le Chantecler, Quebec - Bond Place Hotel, Toronto - Carlton Hotel, Toronto - Chelsea Hotel, Toronto - Delta Chelsea Hotel, Toronto - Four Seasons on the Park, Toronto - Inn on the Park, Toronto - Novotel Missisauga, Toronto - Ramada Inn, Toronto - Sutton Hotel, Toronto - Toronto Marriott East, Toronto - Westbury Hotel, Toronto - Burnaby Villa Inn, Vancouver - Four Seasons Hotel, Vancouver - Sheraton Land Mark, Vancouver - Sheraton Plaza 500, Vancouver - Four Seasons Yorkville Hotel, Yorkville United States Alabama - MEI - Birmingham West, Bessemer - Comfort Inn, Birmingham - Courtyard by Marriott, Birmingham - Courtyard by Marriott-Hoover, Birmingham - Courtyard By Marriott/Homewood, Birmingham - Crown Sterling Suites, Birmingham - Fairfield Inn, Birmingham - Holiday Inn, Birmingham - Howard Johnson, Birmingham - Knights Inn, Birmingham - Ramada Inn, Birmingham - Residence Inn by Marriott, Birmingham - Still Waters Resort, Dadeville - Ramada Inn, Gadsden - Sheraton Hotel, Gulf Shores - Courtyard by Marriott, Huntsville - Knights Inn, Huntsville - Marriott Hotel-Proposed, Huntsville - La Quinta Inn, Huntsville University - Days Inn, Mobile - Hotel - Proposed, Mobile - Inn-Proposed, Mobile - Stouffer Riverview, Mobile - Courtyard by Marriott, Montgomery - Fairfield Inn, Montgomery - Holiday Inn-Downtown, Montgomery - Holiday Inn-East, Montgomery - Howard Johnson, Montgomery - La Quinta Inn, Montgomery - Residence Inn, Montgomery - Marriott's Grand Hotel, Point Clear - Holiday Inn, Sheffield - La Quinta, Tuscaloosa - Masters Economy Inn, Tuscaloosa - Proposed Extended Stay, West Mobile Alaska - Barratt Inn, Anchorage - Clarion Hotel, Anchorage - Holiday Inn, Anchorage - Hotel Captain Hook, Anchorage - International Airport Inn, Anchorage - Sheraton Anchorage Hotel, Anchorage Arizona - Holiday Inn, Bullhead City - Embassy Suites, Camelback - Compri Hotel-Proposed, Chandler - Quality Inn, Chandler - Ramada Inn, Chandler - AmeriSuite Hotel-Proposed, Flagstaff - Holiday Inn, Flagstaff - Motel 6, Flagstaff - Rodeway Inn, Flagstaff - Bright Angel Lodge, Grand Canyon - El Tovar Hotel, Grand Canyon - Grand Canyon National Park, Grand Canyon - Kachina Lodge, Grand Canyon - Maswik Lodge, Grand Canyon - Moqui Lodge, Grand Canyon - Phantom Ranch, Grand Canyon - Thunderbird Lodge, Grand Canyon - Yavapai Lodge, Grand Canyon - Hampton Inn-Proposed, Holbrook - Moqui Lodge, Kaibab National Forest - Rodeway Inn, Kingman - Nautical Inn Resort, Lake Havasu City - Lexington Hotel Suites, Mesa - Biosphere II Conference Center, Oracle - Best Western-Per Diem, Phoenix - Bobby McGee's, Phoenix - Caravan Inn, Phoenix - Compri Hotel-Proposed, Phoenix - Courtyard by Marriott-Black Canyon, Phoenix - Courtyard by Marriott-Mesa, Phoenix - Crescent Phoenix Hotel, Phoenix - Crown Sterling Suites, Phoenix - Days Inn, Phoenix - Doubletree Inn at Park Central, Phoenix - Embassy Suites, Phoenix - Embassy Suites-Biltmore, Phoenix - Executive Park Hotel, Phoenix - Fountain Suites Hotel, Phoenix - Granada Royale-Camelhead, Phoenix - Hilton Hotel, Phoenix - Holiday Inn, Phoenix - Hyatt Regency, Phoenix - La Quinta Hotel, Phoenix - Lexington Hotel Suites, Phoenix - Newton's Sands, Phoenix - Phoenician Golf & Tennis Resort, Phoenix - Pointe Hilton at Tapatio Cliffs, Phoenix - Quality Inn, Phoenix - Ramada Inn-Airport, Phoenix - Ramada Inn-East, Phoenix - Ritz Carlton, Phoenix - Sunburst Resort Hotel, Phoenix - Hassayampa Inn, Prescott - Clarion Inn at McCormick Ranch, Scottsdale - Conference Center, Scottsdale - Courtyard by Marriott-Mayo, Scottsdale - Doubletree Inn at Scottsdale Mall, Scottsdale - Fairfield Inn, Scottsdale - Fashion Square Hotel, Scottsdale - Loews Paradise Resort, Scottsdale - Marriott Camelback Inn, Scottsdale - Marriott Mountain Shadows, Scottsdale - Mountain Shadows Resort, Scottsdale - Orange Tree Resort, Scottsdale - Ramada-Valley Ho, Scottsdale - Red Lion's La Posada Resort, Scottsdale - Registry Resort, Scottsdale - Rodeway Inn, Scottsdale - Scottsdale Princess, Scottsdale - Sheraton Scottsdale Resort, Scottsdale - The Phoenician, Scottsdale - Valley Ho, Scottsdale - John Gardiner's Enchantment, Sedona - L'Auberege de Sedona, Sedona - Los Abrigados, Sedona - Orchards Inn, Sedona - Hotel-Proposed, Sierra Vista - Motel 6, Sierra Vista - Temple Bar Resort, Temple Bar - Coachman Inn - Proposed, Tolleson/Phoenix - Tubac Resort, Tubac - Canyon Ranch, Tucson - Coachman Inn-Proposed, Tucson - Courtyard by Marriott, Tucson - Doubletree Inn, Tucson - Embassy Suites, Tucson - Granada Royale Hometel-E. Broadway, Tucson - Hotel Park Tucson-Proposed, Tucson - Lexington Suites Hotel, Tucson - Loews Hotel, Tucson - Resort Hotel-Proposed, Tucson - Rodeway Inn, Tucson - Sunbelt Commerce Center Hotel, Tucson - La Quinta Inn, Tucson East - Bobby McGee's, Tuscon - Radisson Suite Hotel, Tuscon - Ventana Canyon Golf and Racquet, Tuscon - Ramada Inn, Union Hill Arkansas - Sheraton Inn, Fort Smith - Hilton, Hot Springs - Holiday Inn-Lake Hamilton, Hot Springs - Courtyard by Marriott, Little Rock - Holiday Inn, Little Rock - Legacy Hotel, Little Rock - Little Rock Hilton, Little Rock - Masters Economy Inn, Little Rock - Red Carpet Inn, Little Rock - Super 8, Little Rock - Masters Economy Inn, North Little Rock - Masters Economy Inn, Protho-Junction - Holiday Inn, Texarkana California - Hampton Inn, Agoura Hills - Ramada Inn, Agoura Hills - Residence Inn-Proposed, Agoura Hills - Island Motel, Almeda - Anaheim Hilton & Towers, Anaheim - Anaheim Park Motor Inn, Anaheim - Anaheim Plaza Hotel, Anaheim - Best Western Pavillions, Anaheim - Carousel Inn, Anaheim - Conestoga Hotel, Anaheim - Courtyard by Marriott, Anaheim - Crown Sterling Suites, Anaheim - Disneyland Hotel, Anaheim - Golden Forest Motel, Anaheim - Hampton Inn, Anaheim - Hilton, Anaheim - Holiday Inn Anaheim Center, Anaheim - Hotel-Proposed, Anaheim - Marriott Hotel, Anaheim - Pan Pacific Hotel, Anaheim - Pitcairn Motel, Anaheim - Raffles Inn, Anaheim - Ramada Maingate/Disneyland Hotel, Anaheim - Roger Morris Inn, Anaheim - Stovall's Inn, Anaheim - The Station Inn, Anaheim - Travelodge Inn at the Park, Anaheim - AmeriSuite, Anaheim Hills - Comfort Inn, Anahiem - Mansouri Hotel, Antioch - Red Lion, Apple Valley - Hampton Inn, Arcadia - Residence Inn, Arcadia - Hilton Lodge, Arrowhead Lake - Auburn Inn, Auburn - Sleep Inn, Auburn - Allstar Inn, Bakersfield - Clarion Hotel, Bakersfield - Courtyard by Marriott, Bakersfield - Economy Inn, Bakersfield - Ramada Inn, Bakersfield - Red Lion Hotel, Bakersfield - Residence Inn, Bakersfield - Rodeway Inn, Bakersfield - Hilton Hotel, Baldwin Park - San Gabriel Valley Hotel, Baldwin Park - The Hilton Hotel, Baldwin Park - Allstar Inn, Barstow - Economy Inn, Barstow - Marriott Berkeley Marina, Berkeley - Shattuck Hotel, Berkeley - Beverly Hills Hotel, Beverly Hills - Beverly Rodeo Hotel, Beverly Hills - Beverly Wilshire Hotel, Beverly Hills - Hilton Hotel-Cresthil, Beverly Hills - L'Ermitage, Beverly Hills - Peninsula Hotel, Beverly Hills - Best Western, Big Bear Lake - Big Bear Hotel, Big Bear Lake - Big Bear Lake Resort, Big Bear Lake - Big Bear Towering Pines, Big Bear Lake - Motel 6, Big Bear Lake - Post Ranch, Big Sur - Ventana Inn, Big Sur - Rodeway Inn, Blythe - Courtyard by Marriott, Brea - Holiday Inn, Brentwood - Courtyard by Marriott, Buena Park - Fairfield Inn, Buena Park - Hampton Inn, Buena Park - Holiday Inn, Buena Park - Crowne Sterling Suites, Burlingame - Hyatt Regency, Burlingame - Mariott Hotel - SFO, Burlingame - Marriott, Burlingame - Marriott-San Francisco Airport, Burlingame - Radisson Hotel-Proposed, Burlingame - Sheraton Hotel, Burlingame - Courtyard by Marriott, Camarillo - Best Western Fireside Inn, Cambria - Cambria Pines Lodge, Cambria - Residence Inn, Campbell - Hotel-Proposed, Capitola - Resort Hotel, Spa & Conference Ctr., Capitola - Allstar Inn, Carlsbad - Carlsbad Inn, Carlsbad - Inn of America, Carlsbad - La Costa Hotel and Spa, Carlsbad - Olympic Resort Hotel, Carlsbad - Tickle Pink Inn, Carmel - Allstar Inn, Carpinteria - Desert Princess Country Club, Cathedral City - Royce Suites Hotel, Cathedral City - Digger Bay, Central Valley - Marriott Hotel-Proposed, Century City - Westin Century Plaza Hotel, Century City - Neighborhood Inn-Proposed, Chatsworth - Red Lion Hotel, Chico - Otay Valley Inn, Chula Vista - Travelodge-Otay Valley, Chula Vista - Ramada Inn, City of Commerce - Sheraton Hotel, City of Industry - Allstar Inn, Coalinga - Harris Ranch Restaurant/Inn, Coalinga - Howard Johnson, Colton - Best Western Willow Tree Inn, Compton - Concord Hotel, Concord - Hilton Hotel, Concord - The Trees Inn, Concord - Motel 6, Corona - Hotel del Coronado, Coronado - Loews Coronado Bay Resort, Coronado - Madera Village Inn, Corte Madera - Ha' Penny Inn, Costa Mesa - La Quinta Hotel, Costa Mesa - Marriott Suites, Costa Mesa - Red Lion Hotel, Costa Mesa - Residence Inn, Costa Mesa - Pacifica Hotel, Culver City - Ramada Inn, Culver City - Courtyard by Marriott, Cupertino - Doubletree Hotel, Cupertino - Doubletree Hotel, Dana Point - Spa-Proposed, Danville - El Rancho, Davis - Furnace Creek Resort, Death Valley - Stovepipe Wells Village, Death Valley - Hilton, Del Mar - Days Inn, Diamond Bar - Compri Hotel, El Segundo - Proposed Summerfield, El Segundo - Days Inn, Emeryville - Holiday Inn-Bay Bridge, Emeryville - Lyons Restaurant, Emeryville - Budget Motel, Encinitis - Marriott Tenaya Lodge-Proposed, Fishcamp - Holiday Inn, Fort Myers Beach - All Suites Hotel/Athletic Club, Foster City - Clubtel-Proposed, Foster City - Courtyard by Marriott, Foster City - Holiday Inn, Foster City - Courtyard by Marriott, Fremont - Fremont Hotel, Fremont - Motel 6, Fremont - Residence Inn, Fremont - Allstar Inn, Fresno - AmeriSuite, Fresno - Chateau Inn, Fresno - Courtyard by Marriott, Fresno - Economy Inn, Fresno - Hacienda, Fresno - Holiday Inn, Fresno - Holiday Inn-Fresno Airport, Fresno - Howard Johnson Motel, Fresno - Piccadilly Inn, Fresno - Travelers Inn, Fresno - Travelers Lodge, Fresno - Griswold's Hotel, Fullerton - Holiday Inn, Fullerton - Marriott Hotel, Fullerton - Hotel-Proposed, Garden Grove - Hyatt Regency Alicante, Garden Grove - Princess Hotel, Garden Grove - Motel 6, Gilroy - Hyatt Regency-Proposed, Goleta - Allstar Inn, Hacienda Heights - Courtyard by Marriott, Hacienda Heights - Half Moon Bay Lodge, Half Moon Bay - Courtyard by Marriott, Harbor Boulevard - Grosvenor, Harborside-Pt. Loma - Inn at Foss Creek, Healdsburg - Chateau Marmont, Hollywood - Hollywood Palm Hotel, Hollywood - Sunset Towers Hotel, Hollywood - Waterfront Hilton Hotel, Huntington Beach - Compri Hotel, Hutton Centre - Grand Champions Resort, Indian Wells - Stouffer Esmerelda Resort, Indian Wells - Courtyard By Marriott, Irvine - Courtyard by Marriott - Proposed, Irvine - Embassy Suites, Irvine - Hilton Hotel, Irvine - Holiday Inn, Irvine - Hyatt Hotel, Irvine - La Quinta-Proposed, Irvine - Marriott Hotel, Irvine - Marriott-Proposed, Irvine - Registry Hotel, Irvine - Residence Inn-Proposed, Irvine - Amador Inn, Jackson - Embassy Suites, La Jolla - Hotel-Proposed, La Jolla - La Jolla Property, La Jolla - La Jolla Village Inn, La Jolla - Marriott Hotel, La Jolla - Residence Inn, La Jolla - Days Inn-Proposed, La Palma - PGA West Resort - Proposed, La Quinta - Lafayette Park Hotel, Lafayette - Laguna Shores, Laguna Beach - Holiday Inn, Laguna Hills - Ryokan Hotel-Proposed, Laguna Hills - Villa Valencia, Laguna Hills - Ritz Carlton, Laguna Niguel - Lake Mohave Resort, Lake Mohave - Resort at Squaw Creek, Lake Tahoe - Courtyard by Marriott, Larkspur Landing - Hilton, Las Cruces - Surf and Sand Hotel, Leguna Beach - Holiday Inn, Lido Beach - Motel-Proposed, Little Lake - Residence Inn, Livermore - Residence Inn-Proposed, Livermore - Breakers Hotel, Long Beach - Holiday Inn, Long Beach - Holiday Inn Airport, Long Beach - Marriott Hotel-Long Beach Airport, Long Beach - Marriott Hotel-Proposed, Long Beach - Ramada Renaissance Hotel, Long Beach - Residence Inn, Long Beach - Sheraton Long Beach & Office Tower, Long Beach - Airport Park Hotel, Los Angeles - Bel Age, Los Angeles - Biltmore Hotel, Los Angeles - Century Inn, Los Angeles - Checkers Hotel, Los Angeles - Courtyard by Marriott-Irvine Main, Los Angeles - Courtyard by Marriott-LAX Airport, Los Angeles - Crown Sterling Suites, Los Angeles - Days Inn, Los Angeles - Econo Lodge-Proposed, Los Angeles - Embassy Suites, Los Angeles - Embassy Suites-LAX-Proposed, Los Angeles - Four Seasons, Los Angeles - Hampton Inn-LAX, Los Angeles - Herrick and Campbell, Los Angeles - Hilton & Towers-LAX, Los Angeles - Hilton Hotel, Los Angeles - Holiday Inn Crowne Plaza-LAX, Los Angeles - Le Montrose Hotel, Los Angeles - Ma Maison Sofitel, Los Angeles - Macklowe Hotel, Los Angeles - Marriott Century City, Los Angeles - MCA Hotel-Proposed, Los Angeles - New Otani Hotel, Los Angeles - Playa Vista Development, Los Angeles - Stouffer Concourse Hotel, Los Angeles - Westin Bonaventure, Los Angeles - Westwood Marquis Hotel, Los Angeles - Los Gatos Lodge, Los Gatos - Macienda Inn, Los Gatos - Toll House Inn, Los Gatos - Residence Inn, Manhattan Beach - All Suite Hotel, Marina Del Rey - Marina Beach Hotel, Marina del Rey - Marina del Rey Hotel and Marina, Marina del Rey - Marina Suites Hotel, Marina Del Rey - Marriott Marina Del Rey, Marina Del Rey - Residence Inn, Meriden - Quality Suites Hotel - Proposed, Millbrae - Beverly Heritage Hotel, Milpitas - Crown Sterling Suites, Milpitas - Holiday Inn, Milpitas - Courtyard by Marriott, Mira Mesa - Grosvenor, Mission Bay - Motel Orleans, Modesto - Red Lion Hotel, Modesto - Red Lion-Proposed, Modesto - Carmel Mission Inn, Monterey - Doubletree Inn, Monterey - Former Monterey Hilton Hotel, Monterey - Monterey Plaza, Monterey - Plaza Hotel, Monterey - Sheraton Hotel, Monterey - Pebble Beach Company, Monterey County - Inn at Morro Bay, Morro Bay - Residence Inn, Mountain View - Inn at Napa Valley, Napa - Best Western Inn, Napa Valley - Clarion Hotel-Napa Valley, Napa Valley - Silverado, Napa Valley - Ha'Penny Motel, National City - Allstar Inn, Needles - Hilton-Newark/Fremont, Newark - Four Seasons Hotel, Newport Beach - Hotel Meridien, Newport Beach - Hyatt Newporter, Newport Beach - Newporter Resort, Newport Beach - Sheraton, Newport Beach - Days Inn-Proposed, North Hollywood - Northstar, North Lake Tahoe - Ramada Inn, Norwalk - Impact Study - Proposed Hotel, Oakdale - Hilton Inn, Oakland - Holiday Inn, Oakland - Holiday Inn-Oakland Airport, Oakland - Parc Oakland Hotel, Oakland - Resort - Proposed, Olympic Valley - Resort at Squaw Creek-Proposed, Olympic Valley - Clarion Hotel, Ontario - Compri Hotel, Ontario - Fairfield Inn, Ontario - Holiday Inn, Ontario - Lexington Hotel Suites, Ontario - Red Lion Hotel, Ontario - Doubletree Hotel, Orange - Woodfin Suites, Orange - Embassy Suites, Palm Desert - Marriott Desert Springs, Palm Desert - Canyon Resort, Palm Springs - Compri Hotel-Proposed, Palm Springs - Courtyard by Marriott, Palm Springs - Desert Princess, Palm Springs - Grand Champions Resort, Palm Springs - International Hotel and Resort, Palm Springs - Ocotillo Lodge, Palm Springs - Palm Canyon, Palm Springs - PGA West Resort-Proposed, Palm Springs - Spa Hotel at Mineral Springs, Palm Springs - Westin Hotel, Palm Springs - Grosvenor, Palmdale - Super 8, Palmdale - Cowper Square, Palo Alto - Garden Court, Palo Alto - Holiday Inn, Palo Alto - Stanford Park, Palo Alto - Marriott, Paradise Valley - All Suite Hotel-Proposed, Pasadena - Doubletree Hotel, Pasadena - Holiday Inn, Pasadena - Cascade Ranch Lodge, Pescadero - Elk Lodge, Petaluma - Hotel Petaluma, Petaluma - Hilton-Proposed, Pismo Beach - Hilton-Sea Point, Pismo Beach - Holiday Inn, Pismo Beach - Hotel-Proposed, Pismo Beach - Pismo II, Pismo Beach - Fairfield Inn, Placentia - Residence Inn, Placentia - Howard Hughes Center, Playa Vista - Pleasant Hill Inn, Pleasant Hill - Residence Inn, Pleasant Hill - Club Hilton Hotel-Proposed, Pleasanton - Compri Hotel, Pleasanton - Courtyard by Marriott, Pleasanton - Hilton, Pleasanton - Holiday Inn, Pleasanton - Pleasanton Creek, Pleasanton - Shilo Inn - Hilltop, Pomona - Compri Hotel, Rancho Bernardo - Radisson Suites, Rancho Bernardo - Comfort Inn Motel, Rancho Cordova - Courtyard by Marriott, Rancho Cordova - Economy Inn, Rancho Cordova - El Rancho, Rancho Cordova - Quality Suites-Proposed, Rancho Cordova - Sheraton Sunrise, Rancho Cordova - Marriott Rancho Las Palmas, Rancho Mirage - Mission Hills Hotel, Rancho Mirage - Resort Hotel-Proposed, Rancho Mirage - Westin Mission Hills Resort, Rancho Mirage - Bridge Bay Resort, Redding - Grand Manor Inn, Redding - La Quinta Inn, Redding - Motel 6, Redding - Motel Orleans, Redding - Red Lion Inn, Redding - Shasta Inn, Redding - Portofino Hotel & Yacht Club, Redondo Beach - Sheraton, Redondo Beach - Sofitel Redwood Shores, Redwood - Days Inn, Richmond - Best Western Carraige Inn, Ridgecrest - Days Inn, Riverside - Mission Inn-Proposed, Riverside - Omni Mission Inn, Riverside - Sheraton Hotel, Riverside - Red Lion Inn, Rohnert Park - Crown Sterling Suites, S.San Fransicso - Allstar Inn, Sacramento - Arco Arena II-Proposed, Sacramento - Arco Park, Sacramento - Catering Center - Proposed, Sacramento - Clarion Hotel, Sacramento - Compri Hotel-Proposed, Sacramento - Courtyard by Marriott, Sacramento - Courtyard by Marriott-S. Natomas, Sacramento - Hilton Hotel, Sacramento - Holiday Inn-Capital Plaza, Sacramento - Hotel-Proposed, Sacramento - Hyatt Arbitrat, Sacramento - Hyatt Regency, Sacramento - La Quinta Hotel, Sacramento - Motel Orleans, Sacramento - Radisson Hotel, Sacramento - Red Lion Inn, Sacramento - Residence Inn, Sacramento - Sacramento Inn, Sacramento - Sierra Inn, Sacramento - Sterling Hotel, Sacramento - Travelers Inn, Sacramento - Woodlake Inn, Sacramento - Harvest Inn, Saint Helena - Courtyard by Marriott, San Bruno - San Carlos Motel Development, San Carlos - Atlas Hotels/Mission Valley Inn, San Diego - Best Western Seven Seas Motor Lodge, San Diego - Budget Motel of America, San Diego - Catamaran Resort Hotel, San Diego - Center Pointe Development, San Diego - Comfort Inn, San Diego - Courtyard by Marriott-Mira Mesa, San Diego - Doubletree Hotel, San Diego - Embassy Suites, San Diego - Executive Lodge, San Diego - Hanalei Hotel, San Diego - Harbor Island Hotel-Proposed, San Diego - Harborside Inn-Point Loma, San Diego - Harbortown Marina Resort, San Diego - Holiday Inn Montgomery Airport, San Diego - Holiday Inn-Embarcadero, San Diego - Holiday Inn-Harbor View, San Diego - Horton Grand Saddlery, San Diego - Horton Park Plaza Hotel, San Diego - Howard Johnson Hotel, San Diego - Inter-Continental Hotel & Marina, San Diego - Kings Inn, San Diego - La Jolla Village Inn, San Diego - La Quinta Hotel, San Diego - Marriott Hotel-Mission Valley, San Diego - Marriott Twin Towers and Marina, San Diego - Mission Valley Inn, San Diego - Omni Hotel, San Diego - Radisson Hotel, San Diego - Ramada Inn, San Diego - Ramada Limited Suites, San Diego - Ramada Old Town, San Diego - Ramada Rancho Penasquitos, San Diego - Red Lion Inn, San Diego - Regency Plaza Hotel, San Diego - San Diego Marriott, San Diego - Seven Seas Lodge, San Diego - Sheraton Grand, San Diego - Sheraton Harbor Island East, San Diego - Super 8-Point Loma, San Diego - Symphony Towers, San Diego - Town and Country Hotel, San Diego - Travelodge Hotel Plaza, San Diego - U.S. Grant Hotel, San Diego - Westin-Proposed, San Diego - Abagail Inn, San Francisco - Bellevue Hotel, San Francisco - Cable Motor Inn, San Francisco - California Cafe, San Francisco - Campton Place, San Francisco - Cartwright Hotel, San Francisco - Chancellor Hotel, San Francisco - Clarion Inn-San Francisco Airport, San Francisco - Comfort Inn, San Francisco - Courtyard by Marriott-Airport, San Francisco - Embarcadero Inn, San Francisco - Fairmont Hotel, San Francisco - Grand Hyatt, San Francisco - Grosvenor Clift Hotel, San Francisco - Harbor Court Hotel, San Francisco - Hilton Hotel, San Francisco - Holiday Inn - Union Square, San Francisco - Holiday Inn Crowne Plaza, San Francisco - Holiday Inn-Civic Center, San Francisco - Holiday Inn-Fisherman's Wharf, San Francisco - Holiday Inn-Golden Gateway, San Francisco - Holiday Inn-South, San Francisco - Holiday Lodge, San Francisco - Hotel Diva, San Francisco - Hotel Meridien, San Francisco - Hotel Union Square, San Francisco - Hotel-Proposed, San Francisco - Hyatt Fisherman's Wharf, San Francisco - Hyatt Regency Embarcadero, San Francisco - Inn at Fisherman's Wharf, San Francisco - Inn at the Opera, San Francisco - Inn-Proposed, San Francisco - Juliana Hotel, San Francisco - King George Hotel, San Francisco - La Quinta Inn, San Francisco - La Quinta-Airport, San Francisco - Lambourne Hotel, San Francisco - Laurel Motor Inn, San Francisco - Majestic Hotel, San Francisco - Manx Hotel, San Francisco - Mark Twain, San Francisco - Marriott, San Francisco - Marriott San Francisco-Proposed, San Francisco - Marriott-Airport, San Francisco - Orchard Hotel, San Francisco - Pan Pacific Hotel, San Francisco - Parc 55 Hotel, San Francisco - Park Hyatt Hotel, San Francisco - Portman Hotel, San Francisco - Prescott Hotel, San Francisco - Queen Anne Hotel, San Francisco - Ramada Hotel, San Francisco - Regis Hotel, San Francisco - Ritz-Carlton Hotel, San Francisco - San Franciscan, San Francisco - San Francisco Hotel, San Francisco - Savoy Hotel, San Francisco - Sheraton Palace Hotel, San Francisco - Sheraton-Fisherman's Wharf, San Francisco - Sir Francis Drake Hotel, San Francisco - Stanford Court, San Francisco - Stouffer Stanford Court Hotel, San Francisco - Super 8-Fisherman's Wharf, San Francisco - Westin St. Francis, San Francisco - Crowne Sterling Suites, San Francisco - South - Olympic Club Golf Course, San Francisco/San Mateo - Budget Inn, San Jose - Courtyard by Marriott, San Jose - Cozy 8 Arena Hotel, San Jose - Fairmont Hotel, San Jose - Holiday Inn, San Jose - Ramada Renaissance, San Jose - Red Lion Inn, San Jose - Islander Motel, San Leandro - Apple Farm Inn, San Luis Obispo - Embassy Suites, San Luis Obispo - Holiday Inn, San Luis Obispo - Los Nomados Resort, San Luis Obispo - Twin Oaks Golf Course, San Marcos - Dunfey San Mateo Hotel, San Mateo - Compri Hotel-Proposed, San Pedro - Embassy Suites Hotel, San Rafael - Marriott Hotel-Proposed, San Ramon - Residence Inn, San Ramon - AAA Inn, Santa Ana - California Palms Hotel, Santa Ana - Comfort Inn, Santa Ana - Compri Hotel, Santa Ana - Embassy Suites Santa Ana, Santa Ana - Executive Lodge, Santa Ana - Howard Johnson, Santa Ana - Quality Inn, Santa Ana - Ramada Inn-Orange County, Santa Ana - El Encanto Hotel, Santa Barbara - Fess Parker's Red Lion Resort, Santa Barbara - Four Seasons Hotel, Santa Barbara - Montecito Inn, Santa Barbara - San Ysidro Ranch, Santa Barbara - Santa Barbara Inn, Santa Barbara - Biltmore Hotel & Suites, Santa Clara - Days Inn, Santa Clara - Doubletree Hotel, Santa Clara - Embassy Suites, Santa Clara - Inn At Saratoga, Santa Clara - Marriott Hotel, Santa Clara - Quality Suites Hotel, Santa Clara - Dream Inn, Santa Cruz - Hilton, Santa Maria - Motel 6, Santa Maria - Econo Lodge-Proposed, Santa Monica - Holiday Inn, Santa Monica - Holiday Inn at the Pier, Santa Monica - Park Hyatt Hotel, Santa Monica - Santa Monica Beach Hotel, Santa Monica - Santa Monica/Slatkin, Santa Monica - Allstar Inn, Santa Rosa - Doubletree Hotel, Santa Rosa - Fountaingrove Inn, Santa Rosa - Holiday Inn, Santa Rosa - Round Barn Inn-Proposed, Santa Rosa - Sheraton Round Barn, Santa Rosa - Days Inn, Seaside - Embassy Suites, Seaside - Seaside 8 Motel, Seaside - Valley Radisson, Sherman Oaks - Red Lion, Sonoma - Sonoma Mission Inn, Sonoma - Holiday Inn - Proposed, Sonora - Timberwolf Lodge, South Lake Tahoe - Holiday Inn, South San Francisco - Hotel-Proposed, South San Francisco - Meadowood Resort, St. Helena - Hilton Hotel, Stockton - Holiday Inn, Stockton - La Quinta Hotel, Stockton - Motel Orleans, Stockton - Paradise Point Manna, Stockton - Sheraton-Proposed, Stockton - Hilton, Sunnyvale - Holiday Inn, Sunnyvale - Neighborhood Suites, Sunnyvale - Ramada Inn, Sunnyvale - Sunnyvale Hilton, Sunnyvale - Temecula Creek Inn, Temecula Creek - Westlake Plaza Hotel, Thousand Oaks - Courtyard by Marriott, Torrance - Holiday Inn, Torrance - Marriott Hotel, Torrance - Residence Inn, Torrance - Holiday Inn, Union City - MCA Hotel-Proposed, Universal City - Comfort Inn, Vallejo - Holiday Inn, Van Nuys - La Quinta Hotel, Ventura - Ocean Resorts, Ventura - Sheraton, Ventura - Greentree Inn, Victorville - Doubletree Inn, Walnut Creek - Parkside Hotel, Walnut Creek - Ramada Renaissance Hotel, Walnut Creek - Royce Hotel-Proposed, Walnut Creek - Walnut Creek Project, Walnut Creek - Hampton Inn, West Covina - Le Bel Age, West Hollywood - Le Dufy, West Hollywood - Le Mondrian Hotel, West Hollywood - Hilton, Whittler - Hotel & Conference Center-Proposed, Woodland - Marriott Hotel-Woodland Hills, Woodland Hills - Skylonda Retreat, Woodside - Compri Hotel-Proposed, Yorba Linda - Marriott-Tenaya Lodge, Yosemite - Motel Orleans, Yuba City Colorado - Days Inn, Arapahoe - Continental Inn, Aspen - Ritz-Carlton Hotel-Proposed, Aspen - Hampton Inn, Aurora - Holiday Inn, Aurora - Radisson Hotel, Aurora - Radisson Southeast, Aurora - Raffles Hotel, Aurora - Comfort Inn, Avon - Boulder Hotel-Downtown, Boulder - Clarion Hotel, Boulder - Courtyard by Marriott, Boulder - Doubletree Hotel-Proposed, Boulder - Hilton Harvest House, Boulder - Holiday Inn, Boulder - Interlocken Conference Resort-Prop., Boulder - Proposed Golf Course, Boulder - Residence Inn, Boulder - Hilton, Breckenridge - Ski Lodge-Proposed, Breckenridge - Interlocken Conference Center, Broomfield - Interlocken Conference Center-Prop., Broomfield - Embassy Suites, Colorado Springs - Hilton, Colorado Springs - Howard Johnson, Colorado Springs - Le Baron Hotel, Colorado Springs - Marriott, Colorado Springs - Quality Inn, Colorado Springs - Red Lion Inn, Colorado Springs - Sheraton Inn, Colorado Springs - Grand Butte Hotel, Crested Butte - Best Western Regency, Denver - Brown Palace, Denver - Clarion Hotel-Denver Airport, Denver - Courtyard by Marriott-Airport, Denver - Courtyard by Marriott-Southeast, Denver - Days Inn, Denver - Denver Airport Hilton Inn, Denver - Doubletree Hotel, Denver - Embassy Suites, Denver - Embassy Suites-Airport, Denver - Hilton-Technical Center, Denver - Holiday Inn-Downtown, Denver - Holiday Inn-West, Denver - Jackson's Hole Sport, Denver - Marriott-Southeast, Denver - Marriott-West, Denver - Radisson Hotel, Denver - Red Lion Hotel, Denver - Regency Inn, Denver - La Quinta Inn, Denver - Airport - La Quinta, Denver - South - Red Lion Inn, Durango - Hilton-Denver, Englewood - Residence Inn, Englewood - Scanticon Conference Center, Englewood - Marriott Hotel-Proposed, Fort Collins - Holiday Inn, Golden - Marriott-Denver West, Golden - Ramada Inn, Grand Junction - Sheraton-Proposed, Keystone - Compri Hotel, Lakewood - Hampton Inn, Lakewood - Sheraton Inn, Steamboat Springs - Proposed Hotel, Telluride - Days Inn, Vail - Doubletree Hotel, Vail - Lodge at Vail, Vail - Marriott's Mark Resort, Vail - Westin Vail Resort, Vail - Ramada Hotel, Westminster - Winter Park Resort, Winter Park Connecticut - Chester Inn-Chester, Chester - Inn-Proposed, Chester - Super 8-Proposed, Cromwell - Danbury Hilton & Towers, Danbury - Residence Inn, Danbury - Holiday Inn, Darien - Howard Johnson Lodge, Darien - Ramada Inn, Darien - Holiday Inn, East Hartford - Howard Johnson Lodge, East Lyme - Days Inn-Proposed, Enfield - Greenwich Habor Inn, Greenwich - Howard Johnson Lodge, Greenwich - Showboat Inn, Greenwich - Hotel-Proposed, Groton - Hilton Hotel, Hartford - Holiday Inn-Proposed, Hartford - Motel 6, Hartford - Ramada Inn, Hartford - Sheraton Tobacco Valley Inn, Hartford - Summit Hotel, Hartford - Super 8 Motel, Hartford - Susse Chalet, Hartford - Residence Inn By Marriott, Meriden - Holiday Inn, Milford - Susse Chalet, Milford - Howard Johnson Lodge, Mystic - Mystic Ramada Inn, Mystic - Holiday Inn, New Britain - Ramada Inn, New Britain - Colony Inn, New Haven - Holiday Inn, New Haven - Howard Johnson, New Haven - Quality Inn, New Haven - Residence Inn, New Haven - Radisson Hotel, New London - Best Western-Proposed, New Milford - Courtyard by Marriott, Norwalk - Holiday Inn, Norwalk - Howard Johnson, Norwalk - Ramada Inn, Norwalk - Susse Chalet, Rocky Hill - Ramada Hotel-Proposed, Shelton - Residence Inn - Shelton, Shelton - Heritage Village, Southbury - Southbury Hotel, Southbury - Susse Chalet, Southington - Days Inn, Stamford - Executive Hotel, Stamford - Harley Hotel, Stamford - Holiday Inn-Crowne Plaza, Stamford - Inn at Mill River, Stamford - Le Pavillon Hotel, Stamford - Marriott, Stamford - Radisson Tara Hotel, Stamford - Sheraton, Stamford - Best Western-Proposed, Stratford - Stratford Motor Lodge, Stratford - Marriott Hotel, Trumbull - Courtyard by Marriott, Wallingford - Susse Chalet, Wallingford - Howard Johnson Plaza Hotel, Waterbury - Super 8-Proposed, Waterbury - Residence Inn-Proposed, Waterford - Holiday Inn, Westbury - The Island Inn, Westbury - Courtyard by Marriott, Windsor - Sheraton Tobacco Valley Inn, Windsor - Holiday Inn-Proposed, Windsor Locks Delaware - Wilmington Hilton, Claymont - Rusty Rudder, Dewey Beach - Residence Inn-Proposed, Newark - Hilton Hotel, Wilmington - Hotel-Proposed, Wilmington - Marriott Suites, Wilmington - Residence Inn-Proposed, Wilmington District of Columbia - All Suite Hotel - Proposed, Washington - Bellevue Hotel, Washington - Canterbury Hotel, Washington - Capital Hilton, Washington - Capitol Hill Hotel, Washington - Castleton Hotel, Washington - Comfort Inn, Washington - Convention Center Inn, Washington - Dupont Plaza, Washington - Embassy Row Hotel, Washington - Fairfax Hotel, Washington - Fairmont Hotel, Washington - Four Seasons Hotel, Washington - General Scott Inn, Washington - Georgetown Hotel, Washington - Grand Hotel, Washington - Grand Hyatt, Washington - Hampshire House, Washington - Harambee House, Washington - Hay Adams Hotel, Washington - Holiday Inn Crowne Plaza, Washington - Holiday Inn-Capitol, Washington - Holiday Inn-Georgetown, Washington - Holiday Inn-Governor House, Washington - Hotel Washington, Washington - Howard Johnson, Washington - Hyatt Regency-Capitol, Washington - Hyatt-Convention Center, Washington - International Inn, Washington - Intrigue Hotel, Washington - Jefferson Hotel, Washington - Lombardy Tower Apartment Hotel, Washington - Madison Hotel, Washington - Manger Annapolis Hotel, Washington - Manger Hamilton Hotel, Washington - Manger Hay Adams Hotel, Washington - Marriott-Key Bridge, Washington - Mayflower Hotel, Washington - Omni Georgetown Hotel, Washington - Omni Shoreham Hotel, Washington - Park Terrace Hotel, Washington - Phoenix Park Hotel, Washington - Plaza Hotel, Washington - Potomac Hotel Group, Washington - Quality Inn-Capitol Hill, Washington - Quality Inn-Downtown, Washington - Ramada Inn-Central, Washington - Ramada Renaissance Hotel, Washington - Ritz-Carlton, Washington - River Inn, Washington - Riverside Towers, Washington - Sheraton City Centre, Washington - Sheraton Grand Hotel, Washington - Shoreham Hotel, Washington - St. James, Washington - State Plaza, Washington - Statler Hilton Hotel, Washington - Washington Hilton, Washington - Washington Plaza, Washington - Watergate Hotel, Washington - Wyndham Bristol Hotel, Washington Florida - Holiday Inn, Altamonte Springs - La Quinta, Altamonte Springs - Turnberry Isle Resort, Aventura - Boca Raton Hotel and Club, Boca Raton - Boca West, Boca Raton - Deerfield Beach Hilton, Boca Raton - Embassy Suites, Boca Raton - Park Place Suite Hotel, Boca Raton - Petite Suites, Boca Raton - Residence Inn, Boca Raton - Days Inn, Brandenton - South Seas Resort, Captive Island - Days Inn, Clearwater - Days Inn-Proposed, Clearwater - Holiday Inn - Central/Clearwater, Clearwater - La Quinta Inn, Clearwater - Sheraton Sand Key Hotel, Clearwater - Holiday Inn - Gulfview South, Clearwater Beach - Holiday Inn - Surfside North, Clearwater Beach - Howard Johnson, Clermont - Econolodge, Cocoa Beach - Hilton Hotel, Cocoa Beach - Holiday Inn, Cocoa Beach - Howard Johnson, Cocoa Beach - Perkins Restaurant, Cocoa Beach - Coconut Grove Hotel, Coconut Grove - Mayfair House, Coconut Grove - Proposed Hampton Inn, Coconut Grove - Biltmore Hotel, Coral Gables - Holiday Inn, Coral Gables - Holiday Inn (Court), Coral Gables - Plantation Hotel, Crystal River - Sheraton Inn, Cypress Gardens - Budget Inn, Davenport - Daytona Beach Surfside Regency, Daytona Beach - Howard Johnson, Daytona Beach - La Quinta Inn, Daytona Beach - Pirates Cove, Daytona Beach - Sheraton Inn, Daytona Beach - Crown Sterling Suites, Deerfield Beach - Days Inn, Deerfield Beach - Hilton Hotel, Deerfield Beach - Horizon Club, Deerfield Beach - Sheraton Inn, Deland - Hilton Hotel, Disney World - Holiday Inn, Edgewater - Knights Inn, Florida City - AmeriSuites Hotel-Proposed, Fort Lauderdale - Bahia Mar Hotel, Fort Lauderdale - Comfort Suites, Fort Lauderdale - Compri Hotel-Proposed, Fort Lauderdale - Costa Del Sol, Fort Lauderdale - Crown Sterling Suites, Fort Lauderdale - Days Inn, Fort Lauderdale - Embassy Suites Hotel, Fort Lauderdale - Executive House, Fort Lauderdale - Hilton Hotel, Fort Lauderdale - Hilton Inverrary, Fort Lauderdale - Holiday Inn - Galleria, Fort Lauderdale - Holiday Inn - North Beach, Fort Lauderdale - Holiday Inn-Proposed, Fort Lauderdale - Marriott Harbor Beach Hotel, Fort Lauderdale - Marriott Hotel & Marina, Fort Lauderdale - Marriott Hotel-Cypress Road, Fort Lauderdale - Pier 66 Hotel and Marina, Fort Lauderdale - Port Everglades Hotel, Fort Lauderdale - Stouffer Hotel, Fort Lauderdale - Days Inn, Fort Meyers - Courtyard by Marriott, Fort Myers - Holiday Inn, Fort Myers - La Quinta Hotel, Fort Myers - Sheraton Harbor Place-Proposed, Fort Myers - Sheraton Motor Inn, Fort Myers - Proposed Hotel, Fort Myers Beach - American Way, Fort Pierce - Days Inn, Fort Walton Beach - Holiday Inn - Airport, Fort.Lauderdale - Days Inn-University Center, Gainesville - Fairfield Inn, Gainesville - Howard Johnson Lodge-I-75, Gainesville - La Quinta Hotel, Gainesville - University Centre Hotel, Gainesville - Holiday Inn, Hialeah - Motel, Hillsboro Beach - Days Inn, Hollywood - Diplomat Hotel, Hollywood - Holiday Inn, Hollywood - Quality Suites - Oceanside, Indiatlantic - Hilton Inn, Inverrary - Best Inn, Jacksonville - Bradbury Suites-Proposed, Jacksonville - Compri Hotel-Proposed, Jacksonville - Courtyard By Marriott, Jacksonville - Days Inn, Jacksonville - Doubletree Club Hotel, Jacksonville - Hampton Inn, Jacksonville - Hotel-Proposed, Jacksonville - Jacksonville Hotel, Jacksonville - Residence Inn, Jacksonville - Sheraton Hotel, Jacksonville - Wyndham Lakes Hotel, Jacksonville - Sheraton Beach Hotel, Jensen Beach - Howard Johnson, Juno Beach - Hilton Hotel, Jupiter - Key Biscayne, Key Biscayne - Howard Johnson Lodge, Key Largo - Casa Marina Marriott, Key West - Fairfield Inn, Key West - Hampton Inn-Roosevelt Rd., Key West - Holiday Inn, Key West - Hyatt Hotel, Key West - La Concha Holiday Inn, Key West - Pier House Inn and Beach Club, Key West - Reach Hotel, Key West - Santa Maria Hotel, Key West - Timeshare Resort, Key West - Best Western Vacation Lodge, Kissimmee - Days Inn, Kissimmee - Days Inn West, Kissimmee - Days Lodge, Kissimmee - Howard Johnson Plaza Hotel, Kissimmee - Howard Johnson's, Kissimmee - KOA Campground, Kissimmee - Old Town Retail Complex, Kissimmee - Quality Suites, Kissimmee - Quality Suites-Maingate, Kissimmee - Save Inn, Kissimmee - Sheraton Lakeside, Kissimmee - Suite Hotel-Proposed, Kissimmee - Wynfield Inn, Kissimmee - Days Inn, Lake Buena Vista - Embassy Suites-Proposed, Lake Buena Vista - Hilton Hotel-Disney World, Lake Buena Vista - Marriott Orlando World Center, Lake Buena Vista - Days Inn, Lake City - Flagship Inn, Lake County - Travelodge Motel, Lake County - Lake Park Inn, Lake Park - Holiday Inn, Lake Placid - Hampton Inn-Proposed, Lakeland - Hotel-Proposed, Lakeland - Howard Johnson, Lakeland - Resort Hotel-Proposed, Lakeland - Resort-Imperial Lake-Prpsd., Lakeland - Proposed Hotel, Lee County - Sonesta Sanibel Harbour, Lee County - Holiday Inn, Lido Beach - Holiday Inn, Longboat Kay - Holiday Inn - Madiera Beach, Madiera - Howard Johnson, Marathon - Radisson Suite Resort, Marco Island - Holiday Inn, Marianna - Oceanfront Hotel, Melbourne - Quality Suites, Melbourne - Bahia Mar Hotel & Yachting Club, Miami - Biscayne Bay Marriott, Miami - Courtyard by Marriott, Miami - Crown Sterling Suites, Miami - Doral Ocean Beach Resort, Miami - Fairfield Inn, Miami - Hilton Hotel-Proposed, Miami - Holiday Inn Civic Center, Miami - Holiday Inn-Airport (Le Juene Rd.), Miami - Holiday Inn-Calder, Miami - Howard Johnson Hotel-Broad Causeway, Miami - Howard Johnson Hotel-Port of Miami, Miami - Howard Johnson Lodge-Golden Glades, Miami - Howard Johnson Lodge-Int'l Airport, Miami - Hyatt Regency Hotel, Miami - Inter-Continental Hotel, Miami - Jockey Club, Miami - Marriott Hotel-Downtown, Miami - Miami Airport Ramada, Miami - Proposed AmeriSuites, Miami - Propsed Hampton Inn, Miami - Residence Inn-Proposed, Miami - Sheraton River House, Miami - Sofitel Miami, Miami - Alexander Hotel, Miami Beach - Art Deco Hotel, Miami Beach - Cresent Timeshare, Miami Beach - Delano Hotel, Miami Beach - Doral Beach Hotel, Miami Beach - Eden Roc Hotel, Miami Beach - Fontainebleu Hotel, Miami Beach - Holiday Inn, Miami Beach - Holiday Inn-Central, Miami Beach - Holiday Inn-North, Miami Beach - Holiday Inn-Oceanside, Miami Beach - Holiday Inn-South, Miami Beach - Hotel-Proposed, Miami Beach - Nautilus Club Hotel, Miami Beach - Palm Resort on the Ocean, Miami Beach - Pan American Radisson, Miami Beach - Proposed Hotel, Miami Beach - Shelborne Beach Hotel, Miami Beach - Sheraton Beach, Miami Beach - Solymar Hotel-Proposed, Miami Beach - Quality Inn, Naples - Quality Inn-Gulfcoast, Naples - Registry Hotel at Pelican Bay, Naples - Registry Resort-Proposed, Naples - Super 8 Motel-Proposed, Naples - World Tennis Resort, Naples - Hyatt Newporter Hotel, Newport Beach - Hilton Hotel, North Redington Beach - Masters Economy Inn, North Seffner - Amfac Hotel, Orlando - Army lodging-Proposed, Orlando - Comfort Suites Hotel, Orlando - Compri Hotel-Airport-Proposed, Orlando - Compri Hotel-Proposed, Orlando - Courtyard - Orlando Airport, Orlando - Days Inn, Orlando - Days Inn and Lodge-Florida Mall, Orlando - Days Inn Civic Center, Orlando - Days Inn East of Universal Studios, Orlando - Days Inn-E/O Magic Kingdom, Orlando - Days Inn-Proposed, Orlando - Days Inn-Sandlake Road, Orlando - Days Suites-E/O Magic Kingdom, Orlando - Dolphin Hotel-Proposed, Orlando - Dutch Inn, Orlando - Embassy Suites, Orlando - Fairfield Inn, Orlando - Fairfield Inn-Airport, Orlando - Grand Cypress Resort, Orlando - Hampton Inn - Proposed, Orlando - Heritage Inn, Orlando - Holiday Inn Central Park, Orlando - Holiday Inn Crowne Plaza, Orlando - Holiday Inn-Airport, Orlando - Holiday Inn-International Drive, Orlando - Holiday Inn-Lee Road, Orlando - Holiday Inn-Maingate West, Orlando - Holiday Inn-Orange Blossom Trail, Orlando - Howard Johnson - Walt Disney World, Orlando - Howard Johnson-Kirkman, Orlando - Howard Johnson-Lake Holden, Orlando - Howard Johnson-Maingate, Orlando - Hyatt Grand Cypress, Orlando - Hyatt Regency Grand Cypress, Orlando - Hyatt-W. Irlo Bronson Mem. Hwy., Orlando - International Inn, Orlando - Kon Tiki Village, Orlando - La Quinta Hotel-Airport, Orlando - La Quinta Inn, Orlando - Omni Orlando, Orlando - Orlando Airport Hotel-Proposed, Orlando - Orlando Hamiton, Orlando - Orlando Plaza Hotel, Orlando - Orlando Twin Towers Hotel, Orlando - Park Suite Hotel-Proposed, Orlando - Peabody Hotel, Orlando - Princess Hotel and Spa, Orlando - Proposed Wellesley Inn, Orlando - Quality Inn, Orlando - Radisson Hotel-Aquatic Center, Orlando - Regency Inn, Orlando - Residence Inn By Marriott, Orlando - Rodeway Inn, Orlando - Save Inn, Orlando - Sheraton Jetport Inn, Orlando - Sheraton Lakeside, Orlando - Sheraton Twin Towers, Orlando - Sonesta Village Resort, Orlando - Stouffer Orlando Resort, Orlando - Swan Hotel-Proposed, Orlando - Thriftway Motel, Orlando - Wynfield Inn, Orlando - American Way, Osceola - Sheraton Gateway Motel, Osceola - Brazilian Court Hotel, Palm Beach - Heart of Palm Beach Hotel, Palm Beach - Hilton Inn, Palm Beach - Palm Court, Palm Beach - Holiday Inn, Palm Beach Garden - Days Inn, Panama City - Marriott's Bay Point, Panama City - Super 8, Panama City - Days Inn, Pensacola - Hilton Hotel, Pensacola - La Quinta Hotel, Pensacola - Residence Inn, Pensacola - Super 8, Pensacola - Proposed Hampton Inn, Pensacola Beach - Comfort Inn, Perdido Key - La Quinta, Pinellas County - Courtyard by Marriott, Plantation - Holiday Inn Plantation, Plantation - Sheraton Suites, Plantation - Days Inn, Pompano Beach - Palm-Aire Spa Resort, Pompano Beach - Lodge & Bath Club, Ponte Verde - Howard Johnson, Punta Gorda - Days Inn, Riviera Beach - Safety Harbor Spa, Safety Harbor - Holiday Inn, Saint Augustine - Howard Johnson, Saint Augustine - Courtyard by Marriott, Saint Petersburg - Don Ceahsar Beach Resort, Saint Petersburg - Hilton Hotel, Saint Petersburg - Howard Johnson, Saint Petersburg - Ramada Inn, Saint Petersburg - Residence Inn, Saint Petersburg - Saint Petersburg Motel, Saint Petersburg - Sheraton Hotel and Marina, Saint Petersburg - Vinoy Park Hotel, Saint Petersburg - Countryside Inn, Sanford - Days Inn, Sanford - Holiday Inn, Sanford - Azure Tides Resort-Proposed, Sarasota - Days Inn, Sarasota - Holiday Inn-Lido Beach, Sarasota - Proposed Hotel, Sarasota - Holiday Inn, Sebring - Embassy Suites, Singer Island - Hilton, Singer Island - Econo Lodge, Starke - Radisson Pan American Hotel, Sunny Isles - Best Inn, Tallahassee - Courtyard by Marriott, Tallahassee - Days Inn-Tallahassee, Tallahassee - American Way, Tampa - Courtyard by Marriott, Tampa - Days Inn, Tampa - Embassy Suites-Airport, Tampa - Hampton Inn-Airport, Tampa - Hilton-Airport, Tampa - Holiday Inn, Tampa - Holiday Inn Sahal Park, Tampa - Holiday Inn-Airport, Tampa - Manger Motor Inn, Tampa - Marriott Hotel, Tampa - Omni Tampa Hotel at Westshore, Tampa - Ramada Inn, Tampa - Rodeway Inn, Tampa - Saddlebrook Resort, Tampa - Sheraton Grand West, Tampa - Master Economy Inn, Tampa-East(Selfner) - Master Economy Inn, Tampa-North(Zephyrhills) - Days Inn, Vero Beach - Holiday Inn-Countryside, Vero Beach - Holiday Inn-Oceanside, Vero Beach - Saddlebrook Resort, Wesley Chapel - Courtyard by Marriott, West Melbourne - Airport Centre, West Palm Beach - Courtyard by Marriott, West Palm Beach - Days Inn, West Palm Beach - Field Palm Hotel, West Palm Beach - Hilton-Airport, West Palm Beach - Howard Johnson Lodge, West Palm Beach - Hyatt Hotel of the Palm Beaches, West Palm Beach - Royce Hotel, West Palm Beach - Masters Economy Inn, Zephyrhills Georgia - Atlanta Radisson Hotel, Atlanta - Atlanta Terrace Motel, Atlanta - Comfort Inn, Atlanta - Compri Hotel, Atlanta - Courtyard By Marriott-Airport North, Atlanta - Courtyard by Marriott-Airport South, Atlanta - Courtyard by Marriott-Cumberland, Atlanta - Courtyard by Marriott-Executive Pk., Atlanta - Courtyard by Marriott-Gwinnett, Atlanta - Courtyard by Marriott-Jimmy Carter, Atlanta - Courtyard by Marriott-PeachtrDunwdy, Atlanta - Courtyard by Marriott-Perimeter, Atlanta - Courtyard by Marriott-Rosewell, Atlanta - Courtyard by Marriott-Windy Hill, Atlanta - Cresthil Inn-Proposed, Atlanta - Days Inn, Atlanta - Days Inn - Northlake, Atlanta - Doubletree Hotel, Atlanta - Embassy Suites-Atlanta Perimeter, Atlanta - Embassy Suites-Buckhead, Atlanta - Embassy Suites-Galleria, Atlanta - F.W.W. Hotel, Atlanta - Fairfield Inn-Airport, Atlanta - Fairfield Inn-Gwinnett, Atlanta - Fairfield Inn-North Lake, Atlanta - Fairfield Inn-Northwest, Atlanta - Fairfield Inn-Peachtree, Atlanta - Fairfield Inn-South Lake, Atlanta - Hampton Inn-Airport, Atlanta - Hilton Inn, Atlanta - Holiday Inn Crowne Plaza, Atlanta - Holiday Inn-I-20 East, Atlanta - Holiday Inn-I-85 Monroe Drive, Atlanta - Holiday Inn-Perimeter Dunwooody, Atlanta - Hotel-Downtown-Proposed, Atlanta - Hotel-Proposed, Atlanta - Howard Johnson Hotel-Hartsfield, Atlanta - Howard Johnson-Airport, Atlanta - Howard Johnson-Northeast, Atlanta - Howard Johnson-Northwest, Atlanta - Howard Johnson-South, Atlanta - Hyatt Atlanta-Airport, Atlanta - La Quinta - Stone Mountain, Atlanta - La Quinta Hotel, Atlanta - La Quinta Hotel-West, Atlanta - Marriott Atlanta Airport, Atlanta - Marriott Hotel, Atlanta - Marriott Hotel-Downtown, Atlanta - Marriott Marquis, Atlanta - Marriott Suites Hotel-Proposed, Atlanta - Marriott-Perimeter, Atlanta - Master Economy Inn, Atlanta - Motel 6, Atlanta - Neighborhood Inn, Atlanta - Omni International Hotel, Atlanta - Perimeter North Inn, Atlanta - Proposed AmeriSuites, Atlanta - Quality Inn-Central, Atlanta - Radisson Inn, Atlanta - Ramada Inn-Perimeter, Atlanta - Residence Inn by Marriott-Dunwoody, Atlanta - Residence Inn-Airport, Atlanta - Residence Inn-Buckhead, Atlanta - Residence Inn-Northwest, Atlanta - Sheraton Century Center, Atlanta - Sheraton-Airport, Atlanta - Sporting Club at the Concourse, Atlanta - Stouffer Hotel-Proposed, Atlanta - Swissotel, Atlanta - Terrace Motel, Atlanta - Waverly Hotel, Atlanta - Westin Lenox Hotel, Atlanta - Westin Peachtree Plaza, Atlanta - Wyndham Garden Hotel, Atlanta - Hyatt Hotel, Atlanta Airport - Hampton Inn, Atlanta-Buckhead - Courtyard by Marriott, Augusta - Landmark Hotel, Augusta - Masters Economy Inn - Gordon Hwy., Augusta - Masters Economy Inn - Warner Robins, Augusta - Masters Economy Inn - Washington Rd, Augusta - Holiday Inn, Brunswick - Super 8, Brunswick - Days Inn, Calhoun - Super 8, Cartersville - Days Inn, Chamblee - Comfort Inn-Proposed, College Park - Holiday Inn Crowne Plaza, College Park - Courtyard by Marriott, Columbus - La Quinta Inn, Columbus - Super 8, Columbus - Best Inn, Dalton - Days Inn, Dalton - Holiday Inn-Proposed, Decatur - Sheraton Hotel, Decatur - Best Western-Perimeter-North, Doraville - Days Inn - Gwinnett, Duluth - Howard Johnson, Forsyth - Holiday Inn-Proposed, Gwinnett County - Holiday Inn, Jekyll Island - Jekyll Island Inn-Proposed, Jekyll Island - Hilton Hotel, Macon - Master Economy Inn, Macon - Best Inn, Marietta - Courtyard by Marriott-Delk Road, Marietta - Lafayette Hotel, Marietta - Hampton Inn, Marrietta (Atlanta) - Master Economy Inn, McDonough - Courtyard by Marriott-Perimeter, Norcross - Motel 6, Norcross - Hilton Hotel, Peachtree Corners - Super 8, Rome - Best Western, Savannah - Courtyard by Marriott, Savannah - Days Inn, Savannah - Days Inn-Bay Street, Savannah - Days Inn-Mall Blvd., Savannah - Fairfield Inn, Savannah - Hotel-Proposed, Savannah - Mulberry Inn, Savannah - Radisson Hotel-Proposed, Savannah - Royal Savannah, Savannah - Sheraton Savannah Resort & C.C., Savannah - Town and Country Motel, Savannah - Days Inn, Savannah Beach - Howard Johnson, Smyrna - Master Economy Inn, Tilton - Courtyard by Marriott-Northlake, Tucker - Master Economy Inn, Warner Robins - Super 8, Warner Robins Hawaii - Hyatt Regency Waikoloa, Hawaii - Mauna Kea Hotel, Hawaii - Kahala Hilton, Honolulu - Plaza Hotel, Honolulu - Waikiki Beachcomber, Honolulu - Waikiki Hobron, Honolulu - Coco Palms Resort, Kauai - Kauai Surf Hotel, Kauai - Westin Kauai-Kauai Lagoons Resort, Kauai - Westin Kauai-Proposed, Kauai - Kona Village, Kona - Royal Sea Cliff Resort, Kona - Westin Kauai at Kauai Lagoon, Lihue - Hyatt Regency, Maui - Marriott Resort, Maui - Maui Lu Hotel, Maui - Maui Surf Hotel, Maui - Westin Maui, Maui - Hawaiian Regent Hotel-Waikiki Beach, Oahu - Hotel-Proposed-Schofield Barracks, Oahu - Hyatt Regency Waikiki, Oahu - Kiahuna Plantation, Poipu Beach, Kauai - Transient Lodging Facilities, Schofield Barracks - Hilton Hawaiian Village, Waikiki - Grand Hyatt Wailea, Wailea Idaho - Compri Hotel, Boise - Holiday Inn, Boise - Holiday Inn-Airport, Boise - Red Lion Inn, Boise - Super 8, Boise - Motel 6, Coeur d'Alene - Super 8, Coeur d'Alene - Proposed Motel, Coure d'Alene - Super 8, Lewiston - Cotton Tree Inn, Pocatello - Super 8, Sand Point - Busterback Ranch, Sawtooth Valley Illinois - Arlington Park Hilton, Arlington Heights - Church Creek, Arlington Heights - Courtyard by Marriott, Arlington Heights - La Quinta Hotel, Arlington Heights - Hampton Inn-Proposed, Bedford Park - Best Inn, Bloomington - Fairfield Inn-Normal, Bloomington - Holiday Inn, Bloomington - Indian Lakes Resort, Bloomington - Ramada Inn, Bloomington - Super 8, Bloomington - Cresthil-Proposed, Buffalo Grove - Holiday Inn, Champaign - La Quinta Inn, Champaign - Radisson Suites - Champaign, Champaign - Suite Hotel-Proposed, Champaign - Super 8, Champaign - Ambassador West Hotel, Chicago - Americana Congress, Chicago - Conrad Hilton Hotel, Chicago - Courtyard by Marriott-Glenview, Chicago - Courtyard by Marriott-Highland, Chicago - Courtyard by Marriott-Lincoln, Chicago - Courtyard by Marriott-O'Hare, Chicago - Courtyard by Marriott-Waukegan, Chicago - Courtyard by Marriott-Woodale, Chicago - Days Inn, Chicago - Executive House, Chicago - Fairfield Inn-Lansing, Chicago - Fairfield Inn-Willowbrook, Chicago - Fairmont Hotel, Chicago - Guest Quarters Hotel, Chicago - Hilton and Towers, Chicago - Hilton-O'Hare, Chicago - Holiday Inn-Merchandise Mart, Chicago - Howard Johnson-O'Hare Int'l Airport, Chicago - Hyatt Regency, Chicago - Hyatt Suites Hotel, Chicago - Inter-Continental Hotel-Proposed, Chicago - La Quinta Inn - Hoffman Est., Chicago - Le Meridien, Chicago - Lenox House, Chicago - Lincoln Hotel, Chicago - Mark Twain Hotel, Chicago - Marriott-O'Hare, Chicago - Mayfair Regent, Chicago - McClurg Holiday Inn, Chicago - McCormick Inn Hotel, Chicago - Morton Hotel, Chicago - Omni Ambassador East, Chicago - Omni Morton Hotel, Chicago - Palmer House Hotel, Chicago - Ramada Inn - Lakeshore, Chicago - Ramada O'Hare, Chicago - Residence Inn-Deerfield, Chicago - Residence Inn-Lombard, Chicago - Sheraton Hotel-Downtown, Chicago - Sheraton Hotel-Proposed, Chicago - Sheraton O'Hare, Chicago - Sheraton Plaza Hotel, Chicago - Summerfield Suites Hotel, Chicago - Swissotel, Chicago - Tremont Hotel, Chicago - Westin Hotel, Chicago - Whitehall Hotel, Chicago - Hilton Hotel, Collinsville - Holiday Inn, Collinsville - Super 8, Columbus - Super 8, Crystal Lake - Super 8, Decatur - Courtyard by Marriott, Deerfield - Embassy Suites, Deerfield - Marriott Suites Hotel, Deerfield - Holiday Inn-Chicago, Des Plaines - Hotel-Proposed, Des Plaines - Compri Hotel-Proposed, Downers Grove - Radisson Suite Hotel, Downers Grove - Best Inn, Effingham - Ramada Inn, Elgin - Hampton Inn, Elk Grove Village - Marriott Suites, Elk Grove Village - Holiday Inn, Elmhurst - Orrington Hotel, Evanston - Drury Inn, Fairview Heights - Conference Center & Resort-Proposed, Fox Lake - Holiday Inn, Freeport - Hotel-Proposed, Gurnee - La Quinta Hotel, Hoffman Estates - Carson Inn, Itasca - Hamilton Wyndham, Itasca - Nordic Hills, Itasca - Holiday Inn, Joliet - Proposed Harrah's Riverboat, Joliet - Days Inn, Kankakee - Holiday Inn, LaSalle - Marriott Hotel, Lincolnshire - Hilton Inn, Lisle - Holiday Inn Crowne Plaza, Lisle - Embassy Suites, Lombard - Holiday Inn, Macomb - Best Inn, Marion - Best Inn, Mount Vernon - Holiday Inn, Mount Vernon - Ramada Inn, Mount Vernon - Courtyard by Marriott, Naperville - Ramada Inn, Naperville - Sheraton Naperville, Naperville - O'Hareport Hotel, Northlake - Courtyard by Marriott, Oakbrook Terrace - Super 8, Okawville - Fairfield Inn, Peoria - Days Inn, Peru - Super 8, Peru - Courtyard by Marriott, Rockford - Fairfield Inn, Rockford - Hampton Inn, Rockford - Embassy Suites, Rosemont - Quality Inn/Clarion, Rosemont - Sheraton Int'l At O'Hare, Rosemont - Holiday Inn, Salem - Compri Hotel, Schaumburg - Embassy Suites, Schaumburg - Marriott Schaumburg, Schaumburg - Holiday Inn, South Beloit - Ramada Renaissance Hotel, Springfield - Sheraton Inn, Springfield - Super 8-East, Springfield - Super 8-South, Springfield - Jumer's Castle, Urbana - Best Inn, Waukegan - Super 8, Waukegan Indiana - Clarion Fourwinds Inn, Bloomington - Holiday Inn, Bloomington - Inn at the Four Winds, Bloomington - Ramada Inn, Bloomington - Harbor Point Resort, Brookville Lake - Super 8, Columbus - Best Inn, Fort Wayne - Hilton, Fort Wayne - Downtown Hotel, Gary - Sheraton, Gary - Holiday Inn, Goshen - Howard Johnson, Hammond - Quality Inn, Hammond - Courtyard by Marriott-Airport, Indianapolis - Courtyard by Marriott-Carmel, Indianapolis - Courtyard by Marriott-Castleton, Indianapolis - Embassy Suites-Claypool Center, Indianapolis - Fairfield Inn-Castleton, Indianapolis - Fairfield Inn-College Park, Indianapolis - Hampton Inn-Proposed, Indianapolis - Hilton Hotel-Airport, Indianapolis - Hilton Inn-Downtown, Indianapolis - Holiday Inn-South, Indianapolis - Holiday Inn-Southeast, Indianapolis - Knights Inn, Indianapolis - Midway Motor Lodge, Indianapolis - Mohawk Inn, Indianapolis - Motel 6, Indianapolis - Proposed Fairfield Inn, Indianapolis - Proposed Residence Inn, Indianapolis - Radisson, Indianapolis - Ramada-Airport, Indianapolis - Wyndham Garden Hotel, Indianapolis - La Quinta Inn, Indianapolis Airport - Hilton Inn, Jeffersonville - Holiday Inn, La Porte - Days Inn, Lafayette - Holiday Inn, Lafayette - Cotton Mill Inn-Proposed, Madison - Hampton Inn, Merrillville - Holiday Inn Express, Merrillville - La Quinta Inn, Merrillville - Hotel Roberts, Muncie - Radisson Hotel, Muncie - Brown County Inn, Nashville - Holiday Inn, Portage - Knights Inn, Richmond - Holiday Inn, South Bend - Howard Johnson, South Bend - Signature Inn, Terre Haute - Super 8, Terre Haute - Courtyard Conversion, Valparaiso - Holiday Inn, Vincennes Iowa - Holiday Inn-Gateway Center, Ames - Holiday Inn, Cedar Falls - Collins Plaza, Cedar Rapids - Holiday Inn, Cedar Rapids - Roosevelt Hotel, Cedar Rapids - Super 8, Davenport - Courtyard by Marriott, Des Moines - Fairfield Inn, Des Moines - Holiday Inn, Des Moines - Holiday Inn - West, Des Moines - Holiday Inn-Downtown, Des Moines - Holiday Inn-North, Des Moines - Ramada Inn, Des Moines - Super 8-North, Des Moines - Super 8-West, Des Moines - Holiday Inn, Iowa City Kansas - Embassy Suites, Kansas City - Fairfield Inn-Overland Park, Kansas City - Holiday Inn-Mission Overland Park, Kansas City - Fairfield Inn, Kansas City West - Holiday Inn, Lawrence - University Inn, Lawrence - Holiday Inn, Manhattan - Courtyard by Marriott, Overland Park - Hampton Inn-Proposed, Overland Park - Marriott Hotel, Overland Park - Park Inn International, Topeka - Super 8, Topeka - Canterbury Inn, Wichita - Former Sheraton Hotel, Wichita - Hilton-East, Wichita - Marriott Hotel, Wichita - Comfort Inn, Winfield Kentucky - Conference Center-Proposed, Boone County - Howard Johnson, Bowling Green - Brown County Inn, Brown County - Holiday Inn, Corbin - Hotel-Proposed, Covington - Thomas More Centre, Crestville Hill - Comfort Inn, Elizabethtown - Signature Inn, Elkhart - Holiday Inn, Florence - Signature Inn, Florence - Drawbridge Inn, Fort Mitchell - Days Inn, Georgetown - Days Inn, Henderson - Holiday Inn, Henderson - Bluegrass Motor Inn, Lexington - Courtyard by Marriott, Lexington - Holiday Inn, Lexington - Holiday Inn-East, Lexington - Holiday Inn-North, Lexington - Hyatt Hotel, Lexington - Knights Inn, Lexington - Super 8-Proposed, London - Brown Hotel, Louisville - Courtyard by Marriott-East, Louisville - Holiday Inn, Louisville - Holiday Inn South, Louisville - Holiday Inn-Central, Louisville - Holiday Inn-Northeast, Louisville - Ramada Inn, Louisville - Ramada Inn-East, Louisville - Signature Inn, Louisville - Days Inn, Madisonville - Executive Inn, Owensboro - Super 8-Proposed, Radcliff - Holiday Inn, Richmond Louisiana - Howard Johnson, Alexandria - Capital House, Baton Rouge - Convention Center Hotel-Proposed, Baton Rouge - Courtyard by Marriott, Baton Rouge - Crown Sterling Suites, Baton Rouge - Embassy Suites, Baton Rouge - Hilton Hotel, Baton Rouge - Holiday Inn-East, Baton Rouge - Holiday Inn-South, Baton Rouge - Holiday Inn-West, Baton Rouge - La Quinta Inn, Baton Rouge - Prince Murat Hotel, Baton Rouge - Proposed Homewood Suites, Baton Rouge - Quality Inn, Bossier City - Ramada Inn, Hammond - Ramada Inn, Houma - Holiday Inn - New Orleans, Kenner - Sheraton, Kenner - Hilton Hotel, Lafayette - La Quinta Hotel, Lafayette - Gateway Hotel, Metairie - Howard Johnson-Airport, Metairie - Canal Street Hotels L.P., New Orleans - Clarion Hotel, New Orleans - Days Inn, New Orleans - Fairmont Roosevelt Hotel, New Orleans - Hampton Inn-Proposed, New Orleans - Holiday Inn Crowne Plaza, New Orleans - Hostellerie de la Poste, New Orleans - Hotel Meridien, New Orleans - Hyatt Regency, New Orleans - Iberville Hotel, New Orleans - Inter-Continental Hotel, New Orleans - La Quinta Inn, New Orleans - Landmark Bourbon, New Orleans - Le Meridien New Orleans, New Orleans - Maison Dupuy, New Orleans - Marriott Hotel, New Orleans - Omni Royal Orleans, New Orleans - Ramada Inn, New Orleans - Saint Louis Hotel, New Orleans - St. Ann/Marie Antoinette, New Orleans - Warwick, New Orleans - Westin Hotel, New Orleans - Residence Inn, Shreveport - Super 8, Shreveport Maine - Hilton Inn, Bangor - Ramada Inn, Bangor - Residence Inn by Marriott-Proposed, Bangor - Inn By The Sea, Cape Elizabeth - Hotel-Proposed, Orchard Beach - Hotel-Proposed, Portland - Portland Regency, Portland - Ramada Inn, Portland - Sheraton Tara Portland, Portland - Susse Chalet, Portland - Susse Chalet, Portland (In-town) - Keddy's Motor Inn of Maine, Presque Isle - Hampton Inn, South Portland - Sheraton Inn, South Portland Maryland - Budget Hotel-Proposed, Aberdeen - Chesapeake House, Aberdeen - Holiday Inn, Aberdeen - Motel-Proposed, Aberdeen - Annapolis Hotel, Annapolis - Courtyard by Marriott-Riva Road, Annapolis - Governor Calvert House, Annapolis - Historic Inns of Annapolis, Annapolis - Hotel-Proposed, Annapolis - Howard Johnson, Annapolis - Marriott Hotel, Annapolis - Maryland Inn, Annapolis - Quality Royale Hotel, Annapolis - Ramada Hotel, Annapolis - Robert Johnson House, Annapolis - Brookshire Hotel, Baltimore - Courtyard by Marriott-BWI Airport, Baltimore - Days Inn, Baltimore - Harbor Court Hotel, Baltimore - Harrison's at Pier 5, Baltimore - Hilton Hotel, Baltimore - Holiday Inn-Belmont Blvd., Baltimore - Holiday Inn-Cromwell Bridge, Baltimore - Holiday Inn-Glen Burnie, Baltimore - Holiday Inn-Inner Harbor, Baltimore - Holiday Inn-Int'l Airport, Baltimore - Holiday Inn-Moravia Road, Baltimore - Holiday Inn-Pikesville, Baltimore - Holiday Inn-South Glen Burnie, Baltimore - Hotel-Proposed, Baltimore - Howard Johnson-Proposed, Baltimore - Johns Hopkins Hotel-Proposed, Baltimore - Lord Baltimore Hotel, Baltimore - Omni International Hotel, Baltimore - Ramada Inn-I-695 West, Baltimore - Susse Chalet, Baltimore - Susse Chalet Inn-BWI Airport, Baltimore - Susse Chalet Inn-Golden Ring, Baltimore - Bethesda Metro Center, Bethesda - Guest Quarters, Bethesda - Hyatt Regency Hotel, Bethesda - Linden Hill Hotel, Bethesda - Omni Linden Hotel, Bethesda - Residence Inn, Bethesda - Bethseda Metro Center, Bethseda - Guest Quarters, Bethseda - Residence Inn - Proposed, Bethseda - Comfort Suites-Proposed, Bowie - Days Inn, Capital Heights - Residence Inn, Cockneysville - Abbey, College Park - Best Western Maryland, College Park - Holiday Inn, College Park - Sheraton Inn, Dorsey - Days Inn, Easton - Mariner Inn, Easton - Holiday Inn, Frederick - Compri Hotel, Gaithersburg - Marriott Hotel, Gaithersburg - Century XXI Resort, Germantown - Comfort Inn, Germantown - Hampton Inn, Glen Burnie - Residence Inn-Proposed, Greenbelt - Courtyard by Marriott, Hunt Valley - Hunt Valley Embassy Suites, Hunt Valley - Hunt Valley Marriott, Hunt Valley - Susse Chalet Inn, Jessup - Courtyard by Marriott, Landover - Quality Inn-Proposed, Landover - Days Inn, Lanham - Best Western Maryland, Laurel - Days Inn, Laurel - Holiday Inn, Laurel - Susse Chalet, Linthicum - Howard Johnson Plaza Hotel, New Carrollton - Carousel Hotel, Ocean City - Days Inn, Ocean City - Susse Chalet, Oxon Hill - Hotel-Proposed, Prince Georges County - Budget Hotel-Proposed, Rockville - Comfort Inn, Rockville - Courtyard by Marriott, Rockville - Days Inn-Congressional Park, Rockville - Holiday Inn Crowne Plaza, Rockville - Quality Inn-Proposed, Rockville - Ramada Inn, Rockville - Salisbury Hotel, Salisbury - Sheraton Hotel, Salisbury - Courtyard by Marriott, Silver Spring - Quality Inn-Proposed, Silver Spring - Comfort Inn-Proposed, Solomons Island - Holiday Inn, Towson - Quality Inn-Proposed, Westminster Massachusetts - Susse Chalet, Amsbury - Courtyard by Marriott, Andover - Marriott Hotel, Andover - Stouffer Bedford Glen Hotel, Bedford - Anthony's Pier Four, Boston - Battery Wharf Hotel-Proposed, Boston - Boston Harbor Hotel, Boston - Boston World Trade Center, Boston - Bostonian Hotel, Boston - Colonnade Hotel, Boston - Commonwealth Center Hotel, Boston - Compri Hotel-Proposed, Boston - Copley Plaza Hotel, Boston - Courtyard by Marriott-Foxborough, Boston - Econo Lodge-Proposed, Boston - Harborside Conf. Center-Proposed, Boston - Hilton-Back Bay, Boston - Hilton-Logan, Boston - Holiday Inn-Government Center, Boston - Hotel - Proposed, Boston - Hyatt Fan Pier-Proposed, Boston - Hyatt Harborside-Proposed, Boston - Lafayette Hotel, Boston - Lenox Hotel, Boston - Marriott Copley Place, Boston - Meridien Hotel, Boston - Omni Parker House, Boston - Residence Inn, Boston - Ritz-Carlton, Boston - Statler Hilton Hotel, Boston - Tremont House Hotel, Boston - World Trade Center Hotel - Proposed, Boston - Marriott Hotel, Boston/Newton - Sheraton Tara Hotel, Braintree - Ocean Edge Inn & Conference Center, Brewster - Holiday Inn, Brookline - Days Inn, Burlington - Charles Hotel, Cambridge - Hyatt Hotel, Cambridge - Royal Sonesta Hotel, Cambridge - The Charles Hotel, Cambridge - Chatham Bars Inn, Chatham - Chelmsford Radisson Hotel, Chelmsford - Best Western Motor Lodge, Chicopee - Cummington Farm Resort-Proposed, Cummington - Appleton Inn, Danvers - Howard Johnson Hotel, Danvers - Radisson Ferncroft Hotel, Danvers - Residence Inn - Proposed, Danvers - Dedham Comfort Inn, Dedham - Holiday Inn, Dedham - Wequassett Inn, East Harwich - Harbor View Hotel, Edgartown - Kelley House, Edgartown - Airport Inn, Fall River - Sea Crest Hotel, Falmouth - Sheraton Inn, Falmouth - Radisson Hotel, Ferncroft - Sheraton Tara Hotel, Framingham - Hotel-Proposed, Franklin - Hotel-Proposed, Haverhill - Susse Chalet, Holyoke - Dunfey Hyannis Hotel, Hyannis - Heritage House Hotel, Hyannis - Holiday Inn, Hyannis - Sheraton Regal Inn, Hyannis - Tara Hyannis, Hyannis - Canyon Ranch-Berkshires, Lenox - Cranwell Hotel and Conference Ctr., Lenox - Spa/Resort-Proposed, Lenox - Holiday Inn, Leominster - Lexington Sheraton, Lexington - Residence Inn-Proposed, Littleton - Appleton Inn, Lowell - Hilton Hotel, Lowell - Town House Motor Inn, Lowell - Holiday Inn, Marlboro - Susse Chalet, Middleboro - Sheraton Milford Hotel, Milford - Holiday Inn, Natick - Skipper's Inn, New Bedford - Days Inn, Newton - Howard Johnson, Newton - Marriott Hotel, Newton - Sheraton - Wayfarer, Newton - Sheraton Tara, Newton - Susse Chalet, Newton - North Adams Inn, North Adams - Hilton Inn, Northampton - Hotel Northampton, Northampton - Factory Mutual Hotel, Norwood - University Inn, Oxford - Holiday Inn, Peabody - Berkshire Commons Hotel, Pittsfield - Hotel-Proposed, Plymouth - Hawthorne Hotel, Salem - Days Inn, Saugus - Susse Chalet, Seekonk - Howard Johnson, Somerset - Somerset Omni, Somerset - Federal House Inn, South Lee - Holiday Inn, Springfield - Howard Johnson, Springfield - Monarch Place, Springfield - Treadway Inn, Springfield - Publick House, Sturbridge - Sheraton, Sturbridge - Regency Inn of Taunton, Taunton - Holiday Inn, Tewksbury - Susse Chalet, Tewksbury - Susse Chalet, Waltham - Vista Waltham House, Waltham - Hampton Inn, West Springfield - Westford Regency Hotel, Westford - The Westminster Village Inn, Westminster - The Orchards, Williamstown - Treadway Inn, Williamstown - Days Inn, Woburn - Howard Johnson, Woburn - Radisson Hotel, Woburn - Ramada Inn, Woburn - Susse Chalet, Woburn - Marriott Hotel, Worcester - Alladin Motor Inn, Yarmouth - Flagship Motor Inn, Yarmouth - Gull Wing Suites Hotel, Yarmouth Michigan - Motel-Proposed, Adrian - Ramada Inn, Allen Park - Holiday Inn-Alpena, Alpena - Compri Hotel-Proposed, Ann Arbor - Hampton Inn-North, Ann Arbor - Hampton Inn-South, Ann Arbor - Hilton Hotel, Ann Arbor - Holiday Inn-East, Ann Arbor - Holiday Inn-West, Ann Arbor - Residence Inn, Ann Arbor - Sheraton Hotel, Ann Arbor - AmeriSuites Hotel-Proposed, Auburn Hills - Holiday Inn, Auburn Hills - Knights Inn, Battle Creek - Super 8, Battle Creek - Bay Valley Inn, Bay City - Howard Johnson, Belleville - Fairfield Inn-Airport, Charlotte - Courtyard by Marriott, Dearborn - Courtyard by Marriott-Airport, Detroit - Courtyard by Marriott-Auburn Hills, Detroit - Courtyard by Marriott-Livonia, Detroit - Days Inn, Detroit - Downtown Hotel-Proposed, Detroit - Fairfield Inn-Airport, Detroit - Fairfield Inn-Auburn Hills, Detroit - Fairfield Inn-Warren, Detroit - Fairfield Inn-West, Detroit - Golden Harp, Detroit - Hampton Inn, Detroit - Hilton-Airport, Detroit - Hilton-North Field, Detroit - Holiday Inn, Detroit - Holiday Inn-Metro Airport, Detroit - Hotel Pontchartrain, Detroit - Omni Detroit, Detroit - Westin Hotel Renaissance Center, Detroit - Holiday Inn, East Lansing - Holiday Inn-Proposed, East Lansing - Knights Inn, Flint - Amway Hotel, Grand Rapids - Holiday Inn, Grand Rapids - Grand Traverse Resort, Grand Traverse Village - Holiday Inn, Howell - Jackson Hotel, Jackson - Fairfield Inn, Kalamazoo - Hilton-Kalamazoo Center, Kalamazoo - Holiday Inn, Kalamazoo - Radison Plaza Hotel, Kalamazoo - Residence Inn, Kalamazoo - Super 8, Kalamazoo - Embassy Suites-Proposed, Lansing - Holiday Inn, Lansing - Motel 6, Lansing - Quality Suites Hotel, Lansing - Compri Hotel-Proposed, Livonia - Embassy Suites, Livonia - Embassy Suites-Proposed, Livonia - Holiday Inn, Livonia - Marriott Hotel, Livonia - Fairfield Inn, Madison Heights - Residence Inn, Madison Heights - Holiday Inn, Marquette - Knights Inn, Monroe - Comfort Inn-Proposed, Mount Clemens - Holiday Inn, Muskegan - Super 8, Muskegon - Hilton Hotel, Novi - Holiday Inn-Petoskey, Petoskey - Mayflower Hotel, Plymouth - Inn at the Bridge, Port Huron - Radisson Hotel, Romulus - Holiday Inn-East, Saginaw - Super 8, Saginaw - Courtyard by Marriott, Southfield - Embassy Suites, Southfield - Hilton Hotel, Southfield - Marriott Hotel, Southfield - Ramada Inn, Southfield - Residence Inn, Southfield - The Garden Inn, Southfield - Comfort Suites-Proposed, Sterling Heights - Holiday Inn, Sturgis - Grand Traverse Resort, Traverse City - Hampton Inn, Traverse City - Park Place Hotel, Traverse City - Courtyard by Marriott, Troy - Holiday Inn, Troy - Marriott, Troy - Residence Inn, Troy - Courtyard by Marriott, Warren - Days Inn, Warren - Holiday Inn, Warren - Motel 6, Warren - Residence Inn, Warren - Van Dyke Hotel & Conference Center, Warren - Bob Evans Restaurant, Wyoming - Super 8, Wyoming - Radisson Resort-Conference Center, Ypsilanti Minnesota - Embassy Suites, Bloomington - Hilton Airport Hotel, Bloomington - Hilton Hotel, Bloomington - Howard Johnson Lodge, Bloomington - Marriott Hotel, Bloomington - Ramada Inn, Bloomington - Days Inn - Minneapolis, Brooklyn Center - Residence Inn, Eagan - Compri Hotel-Proposed, Minneapolis - Courtyard by Marriott-Eden Prairie, Minneapolis - Courtyard by Marriott-Mendota, Minneapolis - Days Inn, Minneapolis - Dyckman Hotel, Minneapolis - Hilton Inn, Minneapolis - Holiday Inn-Downtown, Minneapolis - Hotel-Proposed, Minneapolis - Luxeford Hotel, Minneapolis - Marquette, Minneapolis - Marriott City Center Hotel, Minneapolis - Marriott-Minnetonka, Minneapolis - Motel 6, Minneapolis - Omni-Northstar, Minneapolis - Radisson Hotel, Minneapolis - Ramada Inn, Minneapolis - Sheraton Minneapolis, Minneapolis - Sofitel, Minneapolis - Motel-Proposed, Montevideo - Days Inn, Plymouth - Hotel-Proposed, Rochester - Howard Johnson, Rochester - Motel 6, Rochester - Radisson Hotel, Rochester - Days Inn, Roseville - Holiday Inn, Saint Paul - Holiday Inn-Town Square, Saint Paul - Hotel-Proposed, Saint Paul - Inn and Expo Center, Saint Paul - World Trade Hotel, Saint Paul - Wayzata Conference Center, Wayzata Mississippi - Howard Johnson, Biloxi - Holiday Inn, Greenwood - Motel 6, Hattlesburg - Hampton Inn, Jackson - Howard Johnson, Jackson - Ramada Inn-Proposed, Jackson - Residence Inn, Jackson - Cabot Lodge, Ridgeland - Holiday Inn, Vicksburg Missouri - Ramada Inn, Columbia - Howard Johnson-North St. Louis, Hazelwood - Super 8, Independence - La Quinta Inn, Jackson - North - Capital Plaza, Jefferson City - Ramada Inn, Jefferson City - Days Inn, Joplin - Super 8, Joplin - Allis Plaza, Kansas City - Americana Hotel, Kansas City - AmeriSuites Hotel-Proposed, Kansas City - Doubletree Hotel, Kansas City - Embassy Suites, Kansas City - Fairfield Inn-West, Kansas City - Hilton - Proposed, Kansas City - Hilton Inn, Kansas City - Historic Suites Hotel, Kansas City - Holiday Inn, Kansas City - Holiday Inn Crowne Plaza, Kansas City - Holiday Inn-Proposed, Kansas City - Proposed Sheraton Hotel, Kansas City - Radisson Suite Hotel, Kansas City - Resort Hotel - Proposed, Kansas City - Marriott-Tan-Tar-A, Lake of the Ozarks - Super 8, Liberty - Super 8, North Kansas City - Inn at Grand Glaize, Osage Beach - Super 8, Saint Joseph - Clarion, Saint Louis - Courtyard by Marriott-Creve Coeur, Saint Louis - Courtyard by Marriott-Downtown, Saint Louis - Courtyard by Marriott-Westport, Saint Louis - Days Inn, Saint Louis - Doubletree Hotel, Saint Louis - Drury Inn, Saint Louis - Embassy Suites, Saint Louis - Fairfield Inn-Hazel, Saint Louis - Henry VIII Hotel, Saint Louis - Hilton Hotel-Bel Air, Saint Louis - Holiday Inn Sports Complex, Saint Louis - Holiday Inn-Airport North, Saint Louis - Holiday Inn-Downtown, Saint Louis - Holiday Inn-Riverfont, Saint Louis - Howard Johnson-South, Saint Louis - Mayfair Hotel, Saint Louis - Omni-St. Louis Station, Saint Louis - Ramada Inn-Westport, Saint Louis - Residence Inn-Chesterfield, Saint Louis - Residence Inn-Richmond Heights, Saint Louis - Ritz-Carlton Hotel, Saint Louis - Sheraton-Airport, Saint Louis - St. Louis Airport Hilton, Saint Louis - St. Louis Airport Radisson Hotel, Saint Louis - St. Louisian Hotel, Saint Louis - Stouffer Concourse Hotel, Saint Louis - Super 8, Saint Louis - Marriott Hotel, Saint Louis County - Holiday Inn, Springfield - Sheraton Inn, Springfield - Super 8, Springfield - Executive Inn & Office Building, St. Louis - Holiday Inn, St. Louis - Howard Johnson Hotel, St. Louis - Hotel-Proposed, Unity Village - Holiday Inn, Wendtzville Montana - Sheraton Hotel, Billings - Super 8, Billings - Super 8, Great Falls - Super 8, Helena - Super 8, Kalispell - Holiday Inn, Missoula - Red Lion Inn, Missoula Nebraska - Holiday Inn, Kearney - Best Western Airport Inn, Lincoln - Holiday Inn-Airport, Lincoln - Holiday Inn-Northeast, Lincoln - Howard Johnson, North Platte - Marriott Hotel, Omaha - Ramada Inn, Omaha - Red Lion Inn, Omaha Nevada - Lake Mead Resort, Boulder City - Ormsby House Hotel and Casino, Carson City - Super 8, Carson City - Doubletree Hotel and Resort, Cathedral City - Best Western Motel - Proposed, Jackpot - Airport Inn, Las Vegas - Aladdin Hotel and Casino, Las Vegas - Alexis Park Resort Hotel, Las Vegas - Casino Hotel-Proposed, Las Vegas - Courtyard by Marriott, Las Vegas - El Rancho Hotel and Casino, Las Vegas - Hotel and Casino-Proposed, Las Vegas - Jockey Club Hotel and Casino, Las Vegas - La Quinta Hotel, Las Vegas - Paradise Resort, Las Vegas - Residence Inn, Las Vegas - Silverbird Casino, Las Vegas - Super 8-Proposed, Las Vegas - The Mirage, Las Vegas - Tropicana Travelodge, Las Vegas - Westward Ho Casino, Las Vegas - Echo Bay Resort, Overton - Holiday Inn, Reno - La Quinta Hotel, Reno - Quality Inn and Casino, Reno - Red Lion Hotel-Proposed, Reno New Hampshire - Sheraton Wayfarer, Bedford - Hampton Inn, Bow - Mount Washington Resort, Bretton Woods - Balsams Hotel, Dixville Notch - Sheraton Inn-Lamie's Tavern, Hampton - Woodbound Inn, Jaffrey - Brickyard Mountain Inn, Laconia - Loon Mountain Hotel, Lincoln - Appleton Inns, Manchester - Holiday Inn Center, Manchester - Sheraton Wayfarer, Manchester - Susse Chalet, Manchester - Clarion Somerset Hotel, Nashua - Hotel-Proposed, Nashua - Tara Sheraton Nashua, Nashua - Wentworth by the Sea, Newcastle - Susse Chalet, Portsmouth - Wentworth-by-the-Sea, Portsmouth - Salem Inn, Salem - Susse Chalet, Salem - Landmarc Lodge-East, Waterville Valley - Landmarc Lodge-West, Waterville Valley - Silver Squirrel Inn, Waterville Valley - Snowy Owl Inn, Waterville Valley - Chalet Susse International, Inc., Wilton New Jersey - Marriott Seaview Golf Resort, Abescon - Howard Johnson Hotel, Absecon - Seaview Country Club, Absecon - Berkeley Carteret Hotel, Asbury Park - Caesar's Hotel and Casino, Atlantic City - Casino Hotel-Proposed, Atlantic City - Deauville Hotel, Atlantic City - Diplomat Hotel, Atlantic City - Hampton Inn, Atlantic City - Harrah's Marina Hotel Casino, Atlantic City - Lafayette Hotel, Atlantic City - Resorts Int'l Hotel and Casino, Atlantic City - Royal Inn, Atlantic City - Sands Hotel and Casino, Atlantic City - Traymore Hotel Site, Atlantic City - Tropicana Hotel and Casino, Atlantic City - World International Hotel, Atlantic City - Bernards Inn, Bernardsville - Hotel-Proposed, Bridgewater - Proposed Hotel, Camden - Cherry Hill Hyatt, Cherry Hill - Cherry Hill Inn, Cherry Hill - Ramada Inn, Clifton - Comfort Suites, E. Rutherford - Ramada Renaissance, East Brunswick - Sheraton Inn, East Brunswick - Sheraton - Per Diem, East Rutherford - Holiday Inn-Raritan Center, Edison - Hotel-Proposed, Edison - Ramada Inn, Edison - Best Western Hotel, Egg Harbor Township - Newark Airport Vista Hotel, Elizabeth - Ramada Inn-Proposed, Elizabeth - Sheraton Inn, Elizabeth - Marriott Suite Hotel-Proposed, Elmwood Park - Howard Johnson, Englewood - Conference Center, Farleigh Dickinson - Motel-Proposed, Flemington - Hamilton Park Conference Center, Florham Park - Courtesy Motel, Fort Lee - Ramada Inn-Proposed, Franklin Township - Playboy Resort, Great Gorge - Marriott Hotel, Hanover - Sheraton Hotel, Hasbrouck Heights - Holiday Inn, Jamesburg - Restaurant at Port Liberte, Jersey City - Harrogate Senior Living Facility, Lakewood - Courtyard by Marriott, Lincroft - Hotel-Proposed, Long Branch - Comfort Inn, Mahwah - Courtyard by Marriott, Mahwah - Residence Inn-Proposed, Mahwah - Economy Lodge - Proposed, Meadowlands - Holiday Inn, Meadowlands - Hotel-Proposed, Meadowlands - Meadowlands Hilton, Meadowlands - Sheraton Hotel, Meadowlands - Forsgate Conference Center, Monroe Township - Conference Center, Morristown - Governor Morris Inn, Morristown - Headquarters Plaza Hotel, Morristown - Pleasantville Farms Conference Cent, Morristown - Howard Johnson Lodge, Mount Holly - Courtyard by Marriott, Mount Laurel - Hilton, Mount Laurel - Days Hotel, New Brunswick - Hyatt Hotel, New Brunswick - Rennaisance Hotel, New Brunswick - Residence Inn - Princeton, New Jersey - Airport Hotel-Proposed, Newark - Courtyard by Marriott-Airport, Newark - Holiday Inn, Newark - Holiday Inn-Airport North, Newark - Hotel-Proposed, Newark - Howard Johnson Hotel, Newark - Days Inn, North Bergen - Holiday Inn, North Brunswick - Port-O-Call, Ocean City - Sting Ray Motel, Ocean City - Hotel-Proposed, Ocean Grove - Spray View Hotel, Ocean Grove - Macy Hotel-Proposed, Paramus - Red Carpet Inn, Paramus - Residence Inn-Proposed, Paramus - Marriott Hotel-Proposed, Park Ridge - Embassy Suites, Parsippany - Hilton, Parsippany - Residence Inn-Proposed, Parsippany - Howard Johnson, Phillipsburg - Hotel-Proposed, Piscataway - Residence Inn-Proposed, Piscataway - Compri Hotel-Proposed, Princeton - Hyatt Regency, Princeton - Marriott Hotel, Princeton - Omni Nassau Inn, Princeton - Treadway Inn, Princeton - Howard Johnson, Ridgefield Park - Hotel-Proposed, Rockleigh - Hotel-Proposed, Roxbury Township - Ramada Inn, Runnemede - Howard Johnson, Saddle Brook - Marriott Hotel, Saddle Brook - Days Inn, Secaucus - Howard Johnson, Secaucus - Ramada Inn, Secaucus - Hilton At Short Hills, Short Hills - Pier 4 Motel, Somers Point - Garden State Convention Center, Somerset - Holiday Inn, Somerset - Marriott Hotel, Somerset - Neighborhood Suites-Proposed, Somerset - Sommerset Plaza Hotel, Somerset - Summerfield Suites Hotel, Sommerset - Hewitt Wellington Hotel, Spring Lake - Hotel-Proposed, Spring Lake - Loews Glenpointe Hotel, Teaneck - Appleton Inn, Tinton Falls - Envoy Inn, Tinton Falls - Hilton Inn, Tinton Falls - Residence Inn, Tinton Falls - Sunrise Suite Hotel, Tinton Falls - Hotel-Proposed, Toms River - Hotel-Proposed, Turnersville - Hotel-Proposed, Wayne - Howard Johnson-Proposed, Wayne - Holiday Inn, Wildwood Crest - Motel, Wrightstown New Mexico - Compri Hotel-Proposed, Albuquerque - Courtyard by Marriott-Airport, Albuquerque - Fairfield Inn-Proposed, Albuquerque - Hampton Inn, Albuquerque - Hilton Hotel, Albuquerque - Holiday Inn, Albuquerque - Marriott Hotel, Albuquerque - Radisson Suite Hotel-Proposed, Albuquerque - Residence Inn, Albuquerque - Rodeway Inn, Albuquerque - Winrock Motor Inn, Albuquerque - La Quinta Inn, Albuquerque - Airport - Corkin's Lodge, Chama - La Quinta Inn, Farmington - Hilton, Las Cruces - Las Cruces Hilton, Las Cruces - Super 8, Las Cruces - Ski Rio Ski Resort, Miracle Mountain - Super 8, Raton - Young's Ranch, Red River - Eldorado Hotel, Santa Fe - Homewood Suites Hotel, Santa Fe - Hotel-Proposed, Santa Fe - Inn at Loretto, Santa Fe - Inn on the Alameda, Santa Fe - La Fonda Hotel, Santa Fe - La Quinta Hotel, Santa Fe - Residence Inn, Santa Fe - Santa Fe Motel, Santa Fe - Sheraton de Santa Fe, Santa Fe New York - Americana Inn, Albany - Desmond Hotel, Albany - Hilton Hotel, Albany - Marriott Hotel, Albany - Sheraton Inn, Albany - Susse Chalet, Albany - VIP Motor Lodge (Howard Johnson), Albany - Embassy Suites-Proposed, Amherst - Holiday Inn, Amherst - Annandale Inn-Proposed, Annandale - Wampus Inn-Proposed, Armonk - Treadway Inn, Batavia - Hampton Inn, Binghamton - Holiday Inn-Arena, Binghamton - Holiday Inn-SUNY, Binghamton - Hotel-Proposed, Binghamton - Howard Johnson, Binghamton - Residence Inn, Binghamton - Sheraton Inn, Binghamton - Eden Motel, Bronx - Days Inn-Proposed, Brookhaven - Residence Inn, Brookhaven - Brooklyn Hotel-Proposed, Brooklyn - Hilton Hotel, Brooklyn - Airport Hotel-Proposed, Buffalo - Buffalo Hotel, Buffalo - Days Hotel-Proposed, Buffalo - Hilton Hotel, Buffalo - Holiday Inn - Midtown, Buffalo - Hyatt Hotel, Buffalo - Hyatt Regency Hotel & Retail Area, Buffalo - Radisson Hotel, Buffalo - Ramada Inn-Airport, Buffalo - Ramada Renaissance Hotel, Buffalo - Residence Inn-Proposed, Buffalo - Sheraton Hotel, Buffalo - Sheraton Inn Buffalo East, Buffalo - Sheraton Inn-Airport, Buffalo - Sheraton Inn, Canadaiqua - Airway Motel, Cheektowaga - Holiday Inn - Airport, Cheektowaga - Holiday Inn - Gateway, Cheektowaga - Quality Inn, Cheektowaga - Sheraton Buffalo, Cheektowga - Steeplechase Park-Proposed, Coney Island - Hilton Inn, Corning - Resort/Conference Center-Proposed, Cornwall - Holiday Inn, Cortland - Roycroft Inn, East Aurora - Hotel-Proposed, East Elmhurst - Susse Chalet, East Greenbush - Nevele Hotel, Ellenville - Int'l Conf./Learning Center-Propose, Ellis Island - Days Inn, Elmsford - Howard Johnson, Elmsford - Neighborhood Suites Hotel-Proposed, Fishkill - Residence Inn, Fishkill - Metropole Hotel, Flushing - Midway Hotel, Flushing - Sheraton - Proposed, Flushing Center - Hotel-Proposed, Garden City - Wyndham Condominium, Garden City - Harrison Conference Center, Glen Clove - Great Neck Hotel, Great Neck - Comfort Inn, Greece - Holiday Inn-Proposed, Greece - Tamarack Lodge, Greenfield Park - Claudio's Restaurant, Greenport - Colonie Hill, Hauppauge - Holiday Inn, Hauppauge - Marriott Wind Watch Hotel & Golf, Hauppauge - Marriott Windwatch, Hauppauge - Ramada Inn, Hauppauge - Residence Inn, Hauppauge - Homewood Suites-Proposed, Henrietta - Howard Johnson, Huntington - Huntington Townhouse, Huntington - Hampton Inn, Islandia - Marriott Wind Watch, Islandia - Hotel-Proposed, Islip - Howard Johnson Hotel, Ithaca - Ramada Inn, Ithaca - Sheraton Inn, Ithaca - JFK Hilton, Jamaica - Howard Johnson, Kingston - Ramada Inn, Kingston - Omni Sagamore, Lake George - Ramada Inn, Lake George - Former Lake Placid Club Hotel, Lake Placid - Hilton Hotel, Lake Placid - Mirror Lake Inn, Lake Placid - Holiday Inn, Latham - Howard Johnson, Latham - Howard Johnson, Liberty - The New Brown's Resort, Loch Sheldrake - Convention Center - Proposed, Long Island - Eastern Nassau/W. Suffolk Hotel, Long Island - Hyatt Hotel-Proposed, Long Island - Motel-Proposed, Lynbrook - Crowne Plaza Hotel, Manhattan - Hotel Mark, Manhattan - Proposed Economy Hotel, Manhattan - Sugar Maples Resort, Maplecrest - Hotel-Proposed, Middletown - Howard Johnson, Middletown - Montauk Yacht Club and Inn, Montauk - Kutsher's Resort, Monticello - Motel-Proposed, Nanuet - Wallkill Valley Inn Project, New Paltz - Hotel-Proposed, New Rochelle - Le Richmond Hotel, New Rochelle - Ramada Plaza Inn and Offices, New Rochelle - Sheraton Inn, New Rochelle - Aberdeen Hotel, New York - American Youth Hostel, New York - Americana Hotel, New York - Ashley Hotel, New York - Astor House-Proposed, New York - Barbizon Plaza Hotel, New York - Barclay Hotel, New York - Battery Park City Hotel-Proposed, New York - Berkshire Place, New York - Best Western Woodward Hotel, New York - Biltmore Hotel, New York - Broadway Crowne Plaza, New York - Carlton House Hotel, New York - Century Paramount Hotel, New York - Chatwal Inn, New York - Chatwal Inn on 45th Street, New York - Chatwal Inn on Park Avenue, New York - Chinatown Hotel-Proposed, New York - Courtyard by Marriott-Proposed, New York - Custom's House, New York - Days Inn, New York - Days Inn-West 57th Street, New York - Doral Inn, New York - Dover Hotel, New York - Downtown Athletic Club, New York - Downtown Conference Center, New York - Drake Hotel, New York - Econo Lodge-Proposed, New York - El Rio Grande, New York - Embassy Suites-Times Square-Propose, New York - Empire Hotel, New York - Essex House, New York - Executive Hotel, New York - Giordano Hotel, New York - Gorham Hotel, New York - Grand Bay at Equitable Center, New York - Grand Hyatt Hotel, New York - Greenwich Street Hotel, New York - Halloran House, New York - Hampton House, New York - Harley Hotel, New York - Helmsley Hotel, New York - Hilton Hotel, New York - Hilton Hotel-Statler, New York - Holiday Inn, New York - Holiday Inn Crowne Plaza-Broadway, New York - Holiday Inn Crowne Plaza-Manhattan, New York - Holland Hotel, New York - Hotel Intercontinental, New York - Hotel Pierre, New York - Hotel-1926 Broadway-Proposed, New York - Hotel-East 57th Street-Proposed, New York - Hotel-Proposed, New York - Hotel-Tenth Avenue-Proposed, New York - Howard Hotel, New York - Howard Johnson, New York - Journey's Court Hotel-Proposed, New York - Journey's End, New York - Kalikow Hotel-Proposed, New York - Kennedy Inn, New York - Lancaster Hotel, New York - Le Meridien Liberty New York, New York - Lowell Hotel, New York - Luxury Hotel-Proposed, New York - Macklowe Hotel, New York - Madison Towers Hotel, New York - Manger Windsor Hotel, New York - Mark Hotel, New York - Marriott East Side, New York - Marriott Financial Center, New York - Marriott Hotel-Proposed, New York - Marriott Marquis, New York - Martinique Hotel, New York - Mayfair Regent, New York - Milford Plaza Hotel, New York - Millennium Hotel, New York - Navarro Hotel, New York - Nova Park-Gotham, New York - Novotel, New York - Omni Berkshire Place, New York - Omni Park Central, New York - Parc Fifty One Hotel, New York - Parker Meridien Hotel, New York - Peninsula Hotel, New York - Penta Hotel, New York - Piccadilly Hotel, New York - Plaza Hotel, New York - President Hotel, New York - Prince George Hotel, New York - Prince Street Hotel-Proposed, New York - Proposed Hotel and Apartments, New York - Proposed Luxury Hotel-Proposed, New York - Quality Inn, New York - Quality Suites, New York - Ramada Inn, New York - Regent Hotel-Proposed, New York - Regent of New York-Proposed, New York - Ritz-Carlton, New York - Roger Smith Winthrop Hotel, New York - Roosevelt Hotel, New York - Russian Tea Room, New York - Sheraton Hotel, New York - Sheraton Motor Inn, New York - Sheraton Park Avenue, New York - Soho Hotel-Proposed, New York - St. Moritz Hotel, New York - St. Regis, New York - Stanhope, New York - Sutton Place Hotel, New York - Taft Hotel, New York - Tenth Avenue Hotels-Proposed, New York - The Pierre Hotel, New York - The Plaza Athenee, New York - Times Square Hotel-Proposed, New York - Timeshare-Proposed, New York - Travel Inn, New York - Tudor Hotel, New York - UN Plaza Suite Hotel-Proposed, New York - Vista International, New York - Waldorf=Astoria Hotel, New York - Warwick Hotel, New York - Westbury Hotel, New York - Westin Plaza Hotel, New York - Woodward Hotel-Proposed, New York - York Club, New York - Howard Johnson Motel & Restaurant, Newburgh - Ramada Inn, Newburgh - Hilton Hotel, Niagara Falls - Howard Johnson, Norwich - Hotel-Proposed, Orangetown - Hudson Valley Conference Center, Ossining - Sheraton Inn, Ossining - Hotel-Proposed, Oswego - Best Western, Painted Post - Lodge on the Green, Painted Post - Residence Inn - Proposed, Parsippany - Senior Living - Proposed, Pearl River - Drum Hill Hotel, Peekskill - Holiday Inn, Plainview - Howard Johnson, Plainview - Pickwick Motor Inn, Plainview - Residence Inn, Plainview - Holiday Inn, Plattsburgh - Motel-Proposed, Port Jefferson - Comfort Inn-Proposed, Poughkeepsie - Courtyard by Marriott, Poughkeepsie - Radison Hotel, Poughkeepsie - Wyndham Hotel, Poughkeepsie - Best Western-LaGuardia Airport, Queens - Crown Motel, Queens - Crowne Plaza-LaGuardia Airport, Queens - Days Inn-LaGuardia Airport, Queens - Executive Inn, Queens - Hilton Inn-LaGuardia Airport, Queens - Hilton-JFK Airport, Queens - Holiday Inn-JFK Airport, Queens - Holiday Inn-LaGuardia Airport, Queens - Howard Johnson, Queens - Jade East Motel, Queens - JFK Plaza Hotel, Queens - Marriott Hotel-JFK Airport, Queens - Marriott-LaGuardia Airport, Queens - Metropole Hotel, Queens - Midway Hotel, Queens - Riviera Hotel, Queens - Royce Hotel-LaGuardia Airport, Queens - Sheraton-LaGuardia East-Proposed, Queens - Adria Hotel, Queens (Bayside) - Holiday Inn, Riverhead - Riverhead Motor Hotel, Riverhead - Americana Hotel, Rochester - Courtyard by Marriott-Wrighton, Rochester - Days Hotel (former Holiday Inn), Rochester - Hilton-Campus, Rochester - Holiday Inn, Rochester - Hotel-Proposed (former St. Bernard), Rochester - Hyatt Hotel, Rochester - Lodge at Woodcliff, Rochester - Omni Suites Hotel, Rochester - Residence Inn, Rochester - Sheraton Inn, Rochester - Stouffer Hotel, Rochester - Town House Inn, Rochester - Limited Service Hotel-Proposed, Rome - Hotel - Proposed, Roslyn - Roslyn Country Club, Roslyn - Courtyard by Marriott, Rye - Le Richemonde Hotel, Ryebrook - Baron's Cove Inn, Sag Harbor - Holiday Inn, Saratoga - Hotel-Proposed, Saratoga Springs - Howard Johnson, Saugerties - Holiday Inn, Schenectady - Ramada Inn, Schenectady - Dering Harbor Inn, Shelter Island - Crowne Plaza-Proposed, Smithtown - Howard Johnson, Smithtown - Sheraton, Smithtown - Raleigh Hotel, South Fallsburg - Hotel-Proposed, Southhold - Susse Chalet, Spring Valley - Executive Motor Inn, Springfield Gardens - Staten Island Hotel, Staten Island - Imperial Htl/Stevensville Golf Crs., Stevensville - Holiday Inn, Suffern - Motel on the Mountain, Suffern - Browns Hotel, Sullivan County - Imperial Hotel, Sullivan County - The New Brown's Resort, Sullivan County - Courtyard by Marriott, Syracuse - Embassy Suites, Syracuse - Hampton Inn, Syracuse - Hilton Inn, Syracuse - Holiday Inn-Downtown, Syracuse - Holiday Inn-Exit 35, Syracuse - Holiday Inn-Exit 36, Syracuse - Holiday Inn-Exit 39, Syracuse - Holiday Inn-I-90, Syracuse - Homewood Suites Hotel-Proposed, Syracuse - Hotel Syracuse, Syracuse - Hotel-Proposed, Syracuse - Marriott Hotel, Syracuse - Residence Inn-Proposed, Syracuse - Sheraton University Inn & Conf.Ctr., Syracuse - Treadway Inn, Syracuse - Courtyard by Marriott, Tarrytown - Tarrytown House Conference Center, Tarrytown - Westchester Marriott, Tarrytown - Embassy Suites - Proposed, Times Square, New York - Marriott Hotel, Uniondale - Sheraton Nassau Hotel, Uniondale - Howard Johnson Hotel, Utica - Howard Johnson, Vestal - Hotel-Proposed, Watertown - Convention Hotel-Proposed, Westbury - Dalts Restaurant, Westbury - Howard Johnson, Westbury - Marriott Hotel, Westchester - Inn-Proposed, Westhampton - Crowne Plaza, White Plains - Hotel-Proposed, White Plains - Howard Johnson, White Plains - Roger Smith Hotel, White Plains - Stouffer Westchester Hotel, White Plains - White Plains Hotel, White Plains - Anton Meadows, Yaphank - Quality Suites, Yorktown - Yorktown Motor Lodge, Yorktown Heights North Carolina - Days Inn - Central, Asheville - Holiday Inn - Airport, Asheville - Holiday Inn - Tunnel, Asheville - Inn on the Plaza, Asheville - Sheraton Inn, Asheville - Days Inn, Ashville - Masters Economy Inn - Rocky Mount, Battlebro - Days Inn, Blowing Rock - All-Suite Hotel-Proposed, Boone - Residence Inn-Proposed, Cary - Carolina Inn, Chapel Hill - Hilton-Proposed, Chapel Hill - Charlotte Registry Hotel-Per Diem, Charlotte - Compri Hotel-Proposed, Charlotte - Courtyard by Marriott, Charlotte - Days Inn, Charlotte - Days Inn-Uptown, Charlotte - Fairfield Inn, Charlotte - Howard Johnson, Charlotte - Howard Johnson Lodge, Charlotte - Knights Inn, Charlotte - Manger Motor Inn, Charlotte - Marriott City Center, Charlotte - Marriott Hotel-Independence Center, Charlotte - Masters Economy Inn - Charlotte No, Charlotte - Masters Economy Inn - Merchandise, Charlotte - Queen City Motel, Charlotte - Residence Inn, Charlotte - Residence Inn-North, Charlotte - Resistry Hotel, Charlotte - Royce Suite Hotel, Charlotte - Sheraton Inn, Charlotte - Conference Center, Clemmons - Sheraton Motel, Dunn - Best Western, Durham - Cricket Inn, Durham - Days Inn, Durham - Dutch Village Inn, Durham - Fairfield Inn, Durham - Holiday Inn-West, Durham - Motel 6, Durham - Sheraton-University Center, Durham - The Duke Inn, Durham - Days Inn, Fayetteville - Fairfield Inn, Fayetteville - Holiday Inn, Fayetteville - Hotel-Proposed, Fayetteville - Knights Inn, Fayetteville - Goldsboro Motel, Goldsboro - Courtyard by Marriott, Greensboro - Days Inn, Greensboro - Embassy Suites, Greensboro - Fairfield Inn, Greensboro - Hilton, Greensboro - Marriott Hotel, Greensboro - Residence Inn, Greensboro - Sheraton Greensboro, Greensboro - Hotel-Proposed, Greenville - Radisson Hotel, High Point - Days Inn, Lumberton - Maggie Valley Country Club, Maggie Valley - Courtyard by Marriott, Raleigh - Fairfield Inn, Raleigh - Hampton Inn, Raleigh - Hilton, Raleigh - Holiday Inn-Downtown, Raleigh - Marriott Hotel-RTP, Raleigh - Raleigh Radisson, Raleigh - Residence Inn, Raleigh - Holiday Inn - Airport, Research Triangle Park - Howard Johnson, Roanoke Rapids - Sheraton Inn, Rocky Mount - Days Inn, Rocky Mountain - Fairfield Inn, Rocky Mountain - Motel 6, Rocky Mountain - Days Inn, Rowland - Sheraton Motel, Selma - Masters Economy Inn, Smithfield - Holiday Inn, Southern Pines - Fairfield Inn, Wilmington - Hilton, Winston/Salem - Holiday Inn, Winston/Salem - Winston Plaza Hotel, Winston/Salem North Dakota - Holiday Inn, Bismark - Radisson Inn, Bismark - Super 8, Bismark - Ramada Hotel, Fargo - Ramada Inn-Proposed, Fargo - Super 8, Grand Forks - Super 8, Minot Ohio - Holiday Inn-Cascade, Akron - Ramada Inn, Akron - Residence Inn, Akron - Aurora Inn and Pine Lake Trout Club, Aurora - Sheraton Inn, Aurora - Woodlands Inn, Aurora - Courtyard by Marriott, Blue Ash - Embassy Suites, Blue Ash - Residence Inn-Proposed, Blue Ash - Best Western, Cambridge - Days Inn, Cambridge - Hilton Hotel, Canton - Super 8, Canton - Best Western Northeast, Cincinnati - Carousel Inn, Cincinnati - Cincinnati Hotel, Cincinnati - Clarion Hotel, Cincinnati - Days Inn, Cincinnati - Embassy Suites-Proposed, Cincinnati - Holiday Inn-Downtown, Cincinnati - Holiday Inn-Eastgate, Cincinnati - Holiday Inn-Northeast, Cincinnati - Holiday Inn-Riverfront, Cincinnati - Holiday Inn-South, Cincinnati - Hotel-Airport-Proposed, Cincinnati - Howard Johnson, Cincinnati - Hyatt, Cincinnati - Knights Inn, Cincinnati - KOA Campground, Cincinnati - Marriott Inn, Cincinnati - Netherland Hilton, Cincinnati - Omni Netherland Plaza, Cincinnati - Proposed Hotel, Cincinnati - Radisson Inn, Cincinnati - Ramada Inn, Cincinnati - Residence Inn, Cincinnati - Residence Inn-North, Cincinnati - Sheraton Inn-Proposed, Cincinnati - Treadway Inn, Cincinnati - Vernon Manor, Cincinnati - AmeriSuite Hotel-Proposed, Cleveland - Downtown Hotel-Proposed, Cleveland - Fairfield Inn-Brook Park, Cleveland - Fairfield Inn-West, Cleveland - Holiday Inn-Airport, Cleveland - Holiday Inn-Lakeside, Cleveland - Hyatt Hotel-Proposed, Cleveland - Marriott Hotel, Cleveland - Sheraton City Center, Cleveland - Sheraton Hopkins, Cleveland - AmeriSuite - Proposed, Columbus - Embassy Suites, Columbus - Fairfield Inn-North, Columbus - Fairfield Inn-West, Columbus - Hilton Inn, Columbus - Holiday Inn-Airport, Columbus - Holiday Inn-City Center, Columbus - Holiday Inn-Worthington, Columbus - Hotel-Proposed, Columbus - Howard Johnson Hotel, Columbus - Howard Johnson-East, Columbus - Howard Johnson-West, Columbus - Knights Inn-West, Columbus - Marriott Hotel, Columbus - Nationwide Hotel, Columbus - Residence Inn-North, Columbus - Sheraton Plaza Hotel, Columbus - Sheraton-North, Columbus - Union Plaza Hotel-Steeplechase, Columbus - University Inn, Columbus - Woodfin Hotel, Columbus - Courtyard by Marriott, Crosswoods - Courtyard by Marriott, Dayton - Daytonian Hilton, Dayton - Fairfield Inn, Dayton - Hope Hotel & Conference Center, Dayton - Knights Inn-North, Dayton - Marriott Hotel, Dayton - Motel 6, Dayton - Ramada Inn, Dayton - Residence Inn-North, Dayton - Residence Inn By Marriott, Dayton South - Courtyard by Marriott, Dublin - Woodfin Suites, Dublin - East Liverpool Motor Lodge, East Liverpool - Howard Johnson, Euclid - Ramada Inn, Fairlawn - Hampton Inn, Independence - Howard Johnson, Lima - Ramada Inn, Lima - Best Western, Mansfield - Holiday Inn, Marietta - Lafayette Hotel, Marietta - Holiday Inn, Middletown - Howard Johnson, Middletown - Regal 8 Inn, Middletown - Sheraton-Proposed, Milford - Super 8, Montrose - Ramada Inn, Sandusky - Days Inn, Sharonville - Holiday Inn-Cincinnati North, Sharonville - Super 8, St. Clairsville - Holiday Inn, Strongsville - Balhalla Hotel, Toledo - Courtyard by Marriott, Toledo - Fairfield Inn-Airport, Toledo - Hilton at the Medical College, Toledo - Hilton Hotel, Toledo - Holiday Inn, Toledo - Knights Inn-West, Toledo - Marriott Portside Hotel, Toledo - Radisson Hotel, Toledo - Sofitel, Toledo - Hampton Inn-Proposed, Wickliffe - Holiday Inn, Youngstown - Hotel-Proposed, Youngstown - Sheraton-Proposed, Youngstown Oklahoma - Fountainhead Resort, Mcintosh County - Residence at the Trails Inn, Norman - Suit Hotel, Norman - Courtyard by Marriott, Oklahoma City - Embassy Suites, Oklahoma City - Holiday Inn, Oklahoma City - Lexington Hotel Suites, Oklahoma City - Lincoln Plaza Hotel, Oklahoma City - Marriott Hotel, Oklahoma City - Meridien Plaza, Oklahoma City - Sheraton Hotel, Oklahoma City - Arrowhead Resort, Pittsburgh County - Camelot Hotel, Tulsa - Doubletree Hotel, Tulsa - Former Holiday Inn, Tulsa - Former Holiday Inn-Downtown, Tulsa - Holiday Inn, Tulsa - Holiday Inn-Convention Center, Tulsa - La Quinta Inn, Tulsa - Marriott Hotel, Tulsa - Mayo Hotel, Tulsa - Residence Inn, Tulsa - Westin Hotel, Tulsa Oregon - Inn At Face Rock, Bandon - Courtyard by Marriott, Beaverton - Red Lion Motel, Bend - Sunriver Lodge and Resort, Bend - Econolodge Motel, Eugene - Valley River Inn, Eugene - Residence Inn Portland-South, Lake Oswego - Big Creek Resort-US Highway 101, Lane County - Embassy Suites, Portland - Holiday Inn Crowne Plaza - Proposed, Portland - Holiday Inn-Airport, Portland - Holiday Inn-South, Portland - Proposed Sheraton Suites, Portland - Red Lion - Jantzen Beach, Portland - Red Lion Inn-Lloyd Center, Portland - Red Lion Inn-Portland Center, Portland - Residence Inn - Proposed, Portland - Vintage Plaza Hotel, Portland - Wells Building, Portland - Execulodge Motel, Salem - Oregon Capital Inn, Salem - Springfield Red Lion Inn, Springfield - Sunriver Resort, Sunriver Pennsylvania - Allentown Hilton Hotel, Allentown - Holiday Inn, Allentown - Proposed Microtel, Allentown - Quality Inn, Allentown - Bedford Springs Hotel, Bedford - Compri Hotel-Proposed, Bensalem - Days Inn-Proposed, Bensalem - Holiday Inn, Bensalem - Residence Inn By Marriott, Berwyn - Econolodge, Bristol - Days Inn, Brookville - Buck Hill Falls Inn, Buck Hill Falls - Howard Johnson, Butler - Holiday Inn, Chambersburg - Days Inn, Clarion - Embassy Suites, Coraopolis - Hydeholde Country House-Proposed, Coraopolis - Days Inn, Danville - Holiday Inn, Dubois - Lafayette Inn-Proposed, Easton - Howard Johnson Hotel, Erie - Ramada Inn, Erie - Holiday Inn, Essington - Quality Suites-Proposed, Essington - Super 8-Proposed, Essington - Howard Johnson, Gibsonia - Compri Hotel-Proposed, Harrisburg - Holiday Inn, Harrisburg - Marriott Hotel, Harrisburg - Penn Harris Inn, Harrisburg - Sheraton Inn, Harrisburg - Super 8-Proposed, Harrisburg - Holiday Inn, Hazleton - Super 8-Proposed, Hazleton - Plaza Valley Forge Hotel, King of Prussia - Radisson Hotel, King of Prussia - Sheraton Hotel, King of Prussia - Valley Forge Complex, King of Prussia - Valley Forge Hilton, King of Prussia - Motel-Proposed, Lake Ariel - Days Inn, Lancaster - Holiday Inn-Route 30E, Lancaster - Holiday Inn-Route 501, Lancaster - Sheraton Lancaster Golf Resort, Lancaster - Super 8-Proposed, Lancaster - Holiday Inn, Lionville - Hilton-Great Valley, Malvern - Summerfield Suite-Proposed, Malvern - Days Inn, Meadville - Hilton Inn, Monroeville - Holiday Inn-West, Monroeville - Economy Hotel, Montgomery Township - Holiday Inn, New Hope - Treadway Inn, Newport - Residence Inn-Proposed, Paoli - Conference Center-Proposed, Penn State - Barclay Hotel, Philadelphia - Bellevue, Philadelphia - Courtyard by Marriott-Devon, Philadelphia - Courtyard-Willow Grove, Philadelphia - Days Inn-Airport, Philadelphia - Econo Lodge-Franklin Towne, Philadelphia - Essex Hotel, Philadelphia - Franklin Motor Inn, Philadelphia - Franklin Plaza Hotel, Philadelphia - Guest Quarters Hotel, Philadelphia - Hampton Inn-Proposed, Philadelphia - Health Club-Proposed, Philadelphia - Hilton Inn, Philadelphia - Hilton Inn-Northeast, Philadelphia - Holiday Inn-City Center, Philadelphia - Holiday Inn-City Line, Philadelphia - Hub Motor Inn, Philadelphia - Hyatt-Proposed, Philadelphia - Marriott Hotel, Philadelphia - Marriott Hotel-Airport, Philadelphia - Omni Philadelphia, Philadelphia - Penn Center Inn, Philadelphia - Quality Inn-Center City, Philadelphia - Residence Inn-Proposed, Philadelphia - Rittenhouse Hotel, Philadelphia - Treadway Mohawk, Philadelphia - Treadway Roosevelt, Philadelphia - Residence Inn, Philadelphia/Berwyn - Clubhouse Inn, Pittsburgh - Courtyard by Marriott, Pittsburgh - Hampton Inn at Playhouse Square, Pittsburgh - Hilton Hotel, Pittsburgh - Holiday Inn-Greentree, Pittsburgh - Holiday Inn-North, Pittsburgh - Holiday Inn-Parkway-East, Pittsburgh - Holiday Inn-Parkway-West, Pittsburgh - Hotel-Proposed, Pittsburgh - Howard Johnson Hotel, Pittsburgh - Marriott Hotel, Pittsburgh - Marriott-Airport, Pittsburgh - Motel 6, Pittsburgh - Quality Inn, Pittsburgh - Royce Hotel-Airport, Pittsburgh - U.S.S. Hotel-Proposed, Pittsburgh - Westin William Penn, Pittsburgh - Courtyard By Marriott, Pittsburgh Airport - Holiday Inn, Reading - Sheraton Hotel, Reading - Hilton at Lackawanna Station, Scranton - Hilton Hotel, Scranton - Sheraton Inn, Stroudsburg - HoJo Inn, Tannersville - Hilton-Northeast, Trevose - Compri Hotel-Proposed, Valley Forge - Courtyard by Marriott, Valley Forge - Holiday Inn-Meadowlands, Washington - Holiday Inn, Wilkes-Barre - Days Inn-Proposed, Williamsport - Hotel-Proposed, Williamsport - Hampton Inn - Proposed, Willow Grove - Holiday Inn-Market Street, York - Holiday Inn-Route 30 and I-83, York - Ramada Inn, York - Super 8-Proposed, York Rhode Island - Cresthil-Proposed, Lincoln - Courtyard by Marriott, Newport - Vanderbilt Hotel-Convention Center, Newport - Quality Inn, North Kingston - Biltmore Plaza, Providence - Convention Center Hotel-Proposed, Providence - Holiday Inn Providence - Downtown, Providence - Hotel-Proposed, Providence - Marriott Hotel, Providence - Sheraton-Airport, Providence - Susse Chalet, Smithfield - Howard Johnson, Warwick - Residence Inn-Proposed, Warwick - Susse Chalet, Warwick South Carolina - Quality Inn Motel, Anderson - Super 8, Anderson - Budget Hotel - Proposed, Charleston - Charleston Center Hotel-Proposed, Charleston - Cooper River Inn, Charleston - Days Inn, Charleston - Francis Marion Hotel, Charleston - Hampton Inn-Proposed, Charleston - Hawthorne Suites Hotel, Charleston - Holiday Inn, Charleston - Holiday Inn-Airport, Charleston - Holiday Inn-Riverview, Charleston - Masters Economy Inn - Mt. Pleasant, Charleston - Masters Economy Inn - Rivers Ave, Charleston - Middleton Inn, Charleston - Omni Charleston, Charleston - Quality Inn, Charleston - Trusthouse Forte, Charleston - Courtyard by Marriott, Columbia - Courtyard by Marriott-Northeast, Columbia - Courtyard by Marriott-Northwest, Columbia - Embassy Suites, Columbia - Marriott Hotel, Columbia - Masters Economy Inn - I-26, Columbia - Masters Economy Inn - Knox Abbot, Columbia - Motel 6, Columbia - Residence Inn, Columbia - Coral Beach Hotel, Coral Beach - Days Inn, Dillon - Save Inn, Fairplay - Fairfield Inn, Florence - Holiday Inn, Florence - Days Inn, Gaffney - Courtyard by Marriott, Greenville - Fairfield Inn, Greenville - Greenville Hilton Hotel, Greenville - Ramada Inn, Greenville - Super 8, Greenwood - Days Inn, Hardeeville - Fairfield Inn, Hilton Head - Hilton Head Inn, Hilton Head - Holiday Inn, Hilton Head - Inter-Continental Hotel, Hilton Head - Islander Inn, Hilton Head - Quality Suites-Proposed, Hilton Head - Residence Inn-Proposed, Hilton Head - Sheraton Inn, Hilton Head - PGA East Resort-Proposed, Kiawah Island - Save Inn, Lake Hartwell - Days Inn, Mt. Pleasant - Coral Beach Hotel, Myrtle Beach - Radisson Hotel, Myrtle Beach - Best Western Inn, North Charleston - Budget Hotel-Proposed, North Charleston - Days Inn, North Charleston - Northwoods Atrium Inn, North Charleston - Days Inn, Santee - Holiday Inn-West, Spartanburg - Howard Johnson, Spartanburg - Residence Inn, Spartanburg South Dakota - Holiday Inn, Aberdeen - Holiday Inn, Rapid City - Holiday Inn, Sioux Falls - Super 8, Sioux Falls - Holiday Inn, Spearfish Tennessee - Ameri Suite Hotel-Proposed, Brentwood - Courtyard by Marriott, Brentwood - Holiday Inn, Bristol - Holiday Inn-Southeast, Chattanooga - Howard Johnson, Chattanooga - Marriott Hotel, Chattanooga - Motel 6, Chattanooga - Sheraton Inn, Chattanooga - Super 8, Chattanooga - Holiday Inn, Cove Lake - Masters Economy Inn, Dickson - Comfort Inn-Proposed, Elizabethton - Park Vista Hotel, Gatlinburg - Holiday Inn-I-40, Jackson - Holiday Inn, Johnson City - Super 8, Johnson City - Fairfield Inn, Johnson Park - Holiday Inn, Kingsport - Courtsouth Healthclub-North, Knoxville - Courtsouth Healthclub-South, Knoxville - Courtsouth Healthclub-West, Knoxville - Days Inn, Knoxville - Hilton Hotel, Knoxville - Howard Johnson-Westhills, Knoxville - Motel 6, Knoxville - Quality Inn, Knoxville - Ramada Inn-West, Knoxville - Rodeway Inn, Knoxville - Courtyard by Marriott, Memphis - Courtyard by Marriott-Airport, Memphis - Holiday Inn - Crowne Plaza, Memphis - Holiday Inn-East, Memphis - Holiday Inn-East Poplar, Memphis - Holiday Inn-I-40-Sycamore View, Memphis - Holiday Inn-Memphis Int'l Airport, Memphis - Hyatt Regency, Memphis - Lexington Hotel Suites, Memphis - Motel 6, Memphis - Omni Hotel, Memphis - Proposed Fairfield Inn, Memphis - Residence Inn, Memphis - La Quinta Inn, Memphis - Airport - Brown County Inn, Nashville - Capital Mall Conv. Center-Proposed, Nashville - Clarion Maxwell House, Nashville - Courtyard by Marriott-Airport, Nashville - Days Inn, Nashville - Doubletree Hotel, Nashville - Grosvenor, Nashville - Hampton Inn, Nashville - Holiday Inn Crowne Plaza, Nashville - Holiday Inn Express, Nashville - Holiday Inn-Briley Parkway, Nashville - Marriott Hotel, Nashville - Nashville Union Station, Nashville - Ramada Inn, Nashville - Sheraton Hotel, Nashville - Sheraton Music City, Nashville - Stouffer Hotel, Nashville - Super 8, Nashville - Union Station Hotel, Nashville - AmeriSuite, Oakridge - Holiday Inn, Oakridge - Super 8-Proposed, Union City Texas - Harvey Hotel, Addison - Days Inn, Amarillo - Motel 6, Amarillo - Radisson Hotel-Proposed, Amarillo - Super 8 Motel, Amarillo - La Quinta Inn, Amarillo - Airport - Courtyard by Marriott, Arlington - Hilton Hotel, Arlington - Holiday Inn, Arlington - Lexington Suites Hotel, Arlington - Compri Hotel-Proposed, Austin - Driskill Hotel, Austin - Embassy Suites-Austin Town Lake, Austin - Embassy Suites-North, Austin - Fairfield North, Austin - Four Seasons Hotel, Austin - Holiday Inn, Austin - Holiday Inn-Austin Town Lake, Austin - La Quinta Inn, Austin - Marriott Hotel, Austin - Proposed Fairfield Inn, Austin - Quality Inn, Austin - Residence South, Austin - La Quinta Inn, Austin - Ben White - Holiday Inn Airport, Austins Cities - Holiday Inn, Bay Town - Hilton Hotel, Beaumont - Holiday Inn, Beaumont - Courtyard by Marriott, Bedford - Holiday Inn, Brownsville - La Quinta Inn, Brownsville - Hilton Hotel, College Station - Ramada Inn, College Station - Holiday Inn, Conroe - Corpus Christi Hotel-Airport, Corpus Christi - Days Inn, Corpus Christi - Hilton - Proposed, Corpus Christi - Holiday Inn, Corpus Christi - Holiday Inn-Airport, Corpus Christi - La Quinta Inn, Corpus Christi - North - La Quinta Inn, Corpus Christi - South - Allstar Inn, Dallas - Ambassador Plaza Hotel, Dallas - Arlington Hilton, Dallas - Bradford Plaza Hotel, Dallas - Bristol Suites, Dallas - Convention Center Hotel-Proposed, Dallas - Courtyard by Marriott, Dallas - Courtyard by Marriott-Northeast, Dallas - Courtyard by Marriott-Plano, Dallas - Courtyard by Marriott-Stemmons, Dallas - Dallas Grand Hotel, Dallas - Doubletree Inn, Dallas - Embassy Suites, Dallas - Fairmont Hotel, Dallas - Harvey Hotel, Dallas - Hilltop, Dallas - Hilton Inn-LBJ, Dallas - Hilton-Arlington, Dallas - Holiday Inn - North, Dallas - Holiday Inn Crowne Plaza, Dallas - Holiday Inn-Brook Hollow, Dallas - Holiday Inn-South, Dallas - Houstonian Hotel, Dallas - Howard Johnson-East, Dallas - Lexington Hotel Suites, Dallas - Loews Anatole Hotel, Dallas - Marriott Hotel-Airport, Dallas - Marriott-Park Central, Dallas - Marriott-Quorum, Dallas - Melrose Hotel, Dallas - Motel 6, Dallas - Omni Melrose Hotel, Dallas - Park Plaza, Dallas - Propsed Hotel - DFW, Dallas - Ramada Inn Convention Center, Dallas - Ramada-Market Center, Dallas - Registry Hotel, Dallas - Residence Inn-Market Center, Dallas - Sheraton Grand, Dallas - Southland Center Hotel, Dallas - Statler Hilton Hotel, Dallas - Summit Hotel, Dallas - Westin Galleria Hotel, Dallas - La Quinta Inn, Dallas - DFW - La Quinta Inn, Dallas - North Park - La Quinta Inn, Dallas - Plano - La Quinta Inn, Dallas - Richardson - Allstar Inn, El Paso - Hilton Inn-Airport, El Paso - La Quinta Hotel-Airport, El Paso - Rodeway Inn, El Paso - Travelers Inn, El Paso - Westin Paso del Norte, El Paso - La Quinta Inn, El Paso - Lomaland - Allstar Inn, Euless - La Quinta Inn, Euless - Allstar Inn, Fort Worth - Courtyard by Marriott, Fort Worth - Days Inn Downtown, Fort Worth - Hilton Hotel, Fort Worth - Holiday Inn-North, Fort Worth - Holiday Inn-South, Fort Worth - Lexington Suites Hotel, Fort Worth - Metro Center Hotel, Fort Worth - Radisson Plaza Hotel, Fort Worth - Residence Inn, Fort Worth - La Quinta Inn, Fort Worth - East - Holiday Inn, Harlingen - La Quinta Inn, HI-LA Marque - Crowne Plaza-Houston Park, Houston - Days Inn, Houston - Days Inn-Hobby, Houston - Doubletree Hotel, Houston - Embassy Suites, Houston - Galleria Gardens, Houston - Harvest House Hotel, Houston - Harvey Hotel Medical Center, Houston - Hilton Inn-West, Houston - Holiday Inn I-10 East, Houston - Holiday Inn-Downtown, Houston - Holiday Inn-East, Houston - Holiday Inn-Greenway Plaza, Houston - Holiday Inn-Hobby, Houston - Holiday Inn-Medical Center, Houston - Holiday Inn-NASA, Houston - Holiday Inn-North, Houston - Holiday Inn-Northwest, Houston - Holiday Inn-Southwest, Houston - Host Hotel International, Houston - Hotel Meridien, Houston - Hotel-Proposed, Houston - Houston House, Houston - Houston Medical Center, Houston - Houston Park 10 Crowne Plaza, Houston - La Quinta Hotel-Astrodome, Houston - La Quinta Hotel-Baytown, Houston - La Quinta Hotel-CY Fair, Houston - La Quinta Hotel-Hobby, Houston - La Quinta Inn-Stafford, Houston - Lexington Hotel Suites, Houston - Marriott Astrodome, Houston - Marriott Hotel, Houston - Marriott Hotel-Medical Center, Houston - Marriott-Airport, Houston - Motel 6, Houston - Remington, Houston - Residence Inn, Houston - Rodeway Inn, Houston - Rodeway Inn-Hobby, Houston - Shamrock Hilton Hotel, Houston - Sheraton Hotel, Houston - Sheraton Houston House, Houston - Sheraton Houston Place Hotel, Houston - Sheraton Town and Country, Houston - Sofitel, Houston - Stouffer Greenway Plaza, Houston - Suite Hotel-Proposed, Houston - Whitehall, Houston - Whitehall Hotel Conversion to HI, Houston - La Quinta Inn, Houston - Sharpstown - La Quinta Inn, Houston - East - La Quinta Inn, Houston - Loop 1960 - La Quinta Inn, Houston - Northwest - La Quinta Inn, Houston- SW Freeway - Holiday Inn, Huntsville - Harvey Hotel DFW, Irvine - Allstar Inn, Irving - Hampton Inn, Irving - Hampton Inn-Proposed, Irving - Harvey Hotel-D/FW Airport, Irving - Holiday Inn-Texas Stadium, Irving - Marriott Hotel, Irving - Holiday Inn, Kingsville - Del Lago Hotel, Lake Conroe - Hilton Inn, Laredo - La Posada, Laredo - Courtyard by Marriott, Las Colinas - La Quinta Inn, Longview - Hilton Inn, Lubbock - Holiday Inn, Lubbock - Residence Inn, Lubbock - La Quinta Inn, Midland - Holiday Inn, New Braunfels - All Star Inn, North Richland Hills - La Quinta Inn, Odessa - Holiday Inn, Orange - Holiday Inn, Paris - Plano Harvey Hotel, Plano - La Quinta Inn, Round Rock - Sheraton Inn, San Angelo - Coachman Inn-Proposed, San Antonio - Courtyard by Marriott-Downtown, San Antonio - Courtyard by Marriott-Medical Ctr., San Antonio - Crockett Hotel, San Antonio - Days Inn, San Antonio - Fairfield - North, San Antonio - Gunter Hotel, San Antonio - Holiday Inn-Airport, San Antonio - Holiday Inn-Market Square, San Antonio - Holiday Inn-North, San Antonio - Holiday Inn-Northwest, San Antonio - Holiday Inn-Riverwalk, San Antonio - La Quinta Hotel-Ingram, San Antonio - La Quinta Hotel-Lackland, San Antonio - La Quinta Hotel-Toepperwein, San Antonio - Lexington Hotel Suites, San Antonio - Marriott Hotel-Proposed, San Antonio - Marriott Inn-North, San Antonio - Proposed Fairfield Inn, San Antonio - La Quinta Inn, San Antonio - Windsor - La Quinta Inn, San Antonio - Wurzbach - Holiday Inn, San Marcos - La Quinta Inn, SAT-Toepperwein - Sheraton Hotel, South Padre Island - La Quinta Inn, Tyler - Sheraton, Tyler - Sheraton Inn, Tyler - Traveler's Choice Inn, Tyler - Hilton Hotel, Waco - Gateway Inn, Wichita Falls - Hilton Hotel, Wichita Falls Utah - Mount Holly Ski Resort, Beaver - Hotel-Proposed, Brigham City - Motel-Proposed, Cedar City - Proposed Mayflower Hotel, Deer Valley - Stein Eriksen Lodge, Deer Valley - Deer Valley Resort, Park City - Omni Yarrow, Park City - Prospector Square Resort, Park City - Yarrow Resort, Park City - Seven Peaks Resort and Hotel, Provo - Comfort Inn, Salt Lake City - Doubletree, Salt Lake City - Hilton Hotel-Airport, Salt Lake City - Holiday Inn, Salt Lake City - Holiday Inn-Salt Palace, Salt Lake City - Hotel Utah, Salt Lake City - Hotel-Proposed, Salt Lake City - La Quinta Inn, Salt Lake City - Nendels Inn, Salt Lake City - New Grande Hotel, Salt Lake City - Red Lion Hotel, Salt Lake City - Sheraton Hotel, Salt Lake City - Super 8, Salt Lake City - University Park Hotel (Desktop Rev), Salt Lake City - Ramada Inn-Proposed, Sandy Vermont - Ramada Inn, Bennington - Bolton Valley Corporation, Bolton Valley - Quality Inn, Brattleboro - Radisson Hotel, Burlington - Smugglers Notch, Cambridge - Inn-Proposed, Essex - Cascade Lodge, Killington - Inn of the Six Mountains, Killington - Mountain Inn, Killington - Equinox Hotel, Manchester - Howard Johnson Inn, Rutland - Quality Inn, Stowe - Conference Center-Proposed, Stratton Mountain - Sugarbush Inn, Sugarbush - Susse Chalet, Williston Virginia - Comfort Inn, Abingdon - Best Western, Alexandria - Comfort Inn, Alexandria - Compri Hotel-Proposed, Alexandria - Embassy Suites, Alexandria - Howard Johnson, Alexandria - Marriott Suites, Alexandria - Ramada Inn, Alexandria - Best Western, Arlington - Gateway Marriott, Arlington - Hyatt Arlington Hotel, Arlington - Hyatt Regency, Arlington - Key Bridge Marriott, Arlington - Marriott Hotel, Arlington - Sheraton Crystal City Hotel, Arlington - Sheraton National Hotel, Arlington - Stouffer Concourse Hotel, Arlington - Mountain Lake Hotel, Blacksburg - Holiday Inn, Bristol - Howard Johnson, Bristol - Days Inn, Carmel Church - Westfields International, Chantilly - Boar's Head Inn, Charlottesville - Cavalier Inn, Charlottesville - Courtyard by Marriott, Charlottesville - Hilton-University, Charlottesville - Holiday Inn-North, Charlottesville - Omni Charlottesville, Charlottesville - Radisson-Proposed, Charlottesville - Super 8, Charlottesville - Days Inn, Chester - Howard Johnson, Chester - Days Inn, Colonial Heights - Holiday Inn, Covington - Embassy Suites, Crystal City - Holiday Inn Crowne Plaza, Crystal City - Hyatt Hotel, Crystal City - Marriott Crystal Gateway Hotel, Crystal City - Comfort Inn-Proposed, Dahlgren - Days Inn, Emporia - Courtyard by Marriott, Fairfax - Embassy Suites, Fairfax - Neighborhood Suites-Proposed, Fairfax - Hampton Inn-Proposed, Fairfax City - Westfields International, Fairfax County - Marriott Hotel, Fairview - Econo Lodge, Farmingville - Comfort Inn-Proposed, Farmville - Comfort Inn, Frederick County - Motel 6, Fredericksburg - Courtyard by Marriott, Hampton - Days Inn, Hampton - Fairfield Inn, Hampton - Courtyard by Marriott, Herndon - Embassy Suites Hotel, Herndon - Ramada Renaissance and Health Club, Herndon - Residence Inn-Proposed, Herndon - Worldgate Marriott Hotel, Herndon - Hotel-Proposed, Hopewell - Keswick Inn, Keswick - Holiday Inn, Lexington - Radisson Hotel, Lynchburg - Courtyard by Marriott, Manassas - Holiday Inn, Marion - Hilton, McLean - Days Inn, Norfolk - Marriott Waterside Hotel, Norfolk - Omni Hotel, Norfolk - Waterfront Hotel - Proposed, Norfolk - 135-Suite Hotel-Proposed, Portsmouth - Waterfront Suite Hotel-Proposed, Portsmouth - Comfort Inn, Princeton - Comfort Inn, Pulaski County - Embassy Suites Hotel, Reston - Hyatt Hotel, Reston - Best Western Kings Quarters, Richmond - Courtyard by Marriott, Richmond - Embassy Suites Hotel, Richmond - Hampton Inn, Richmond - Holiday Inn, Richmond - Howard Johnson Lodge, Richmond - Hyatt House Hotel, Richmond - La Quinta Hotel, Richmond - Marriott Hotel, Richmond - Omni Richmond, Richmond - Radisson Hotel, Richmond - Ramada Renaissance Hotel, Richmond - Residence Inn, Richmond - Days Inn, Richmond (Broad) - Days Inn, Richmond (Byrd) - Holiday Inn, Roanoke - Holiday Inn - Airport, Roanoke - Holiday Inn - Civic Center, Roanoke - Holiday Inn - South, Roanoke - Hotel Roanoke, Roanoke - Howard Johnson, Roanoke - Marriott - Roanoke Airport, Roanoke - Marriott Hotel, Roanoke - Holiday Inn, Salem - Super 8, South Hill - Days Inn, Springfield - Hilton, Springfield - Holiday Inn, Staunton - Stonewall Jackson Hotel, Staunton - Hampton Inn - Proposed, Tyson's Corner - Embassy Suites, Tysons Corner - Marriott Hotel, Tysons Corner - Residence Inn, Tysons Corner - Ritz Carlton-Proposed, Tysons Corner - Courtyard by Marriott, Virginia Beach - Courtyard by Marriott-Lynnhaven, Virginia Beach - Fairfield Inn, Virginia Beach - Hotel-Proposed, Virginia Beach - Pavilion Tower Hotel, Virginia Beach - Ramada Inn - Oceanside, Virginia Beach - International Conference Center, Westfields - Howard Johnson, Wheeling - Fort Magruder Inn, Williamsburg - Governor's Inn, Williamsburg - Holiday Inn-East, Williamsburg - Holiday Inn-West, Williamsburg - Royce Hotel, Williamsburg - Williamsburg Hilton, Williamsburg - Best Western-Proposed, Wytheville Washington - Bellevue Thunderbird Motor Inn, Bellevue - Embassy Suites, Bellevue - Hampton Inn, Bellevue - La Quinta, Bellevue - Residence Inn Seattle-East, Bellevue - Ramada Inn, Bothell - Rattling Spring Hotel, Harpers Ferry - Motel 6, Issaquah - AmeriSuite, Kent - Homecourt Suite Hotel, Kent - Embassy Suite, Lynnwood - Residence Inn-Seattle North, Lynnwood - Red Lion Inn at Pasco, Pasco - Redmond Motel, Redmond - Hampton Inn, Sea Tac - Holiday Inn Airport, Sea Tac - Thunderbird Inn, Sea Tac - Alexis Hotel, Seattle - Courtyard by Marriott-South Center, Seattle - Doubletree Inn at South Center, Seattle - Doubletree Plaza, Seattle - Hampton Inn-Airport, Seattle - Holiday Inn Crowne Plaza, Seattle - Holiday Inn-Sea Tac, Seattle - La Quinta, Seattle - Lake Union Residence Inn, Seattle - Marriott Hotel-Airport, Seattle - Marriott Sea-Tac Hotel, Seattle - Plaza Park Suites, Seattle - Ramada Inn-Airport, Seattle - Red Lion, Seattle - Stouffer Madison Hotel, Seattle - Travelodge-Proposed, Seattle - Westin Hotel, Seattle - Courtyard by Marriott, Spokane - Gateway Hotel, Spokane - Holiday Inn-West, Spokane - Red Lion Inn, Spokane - Super 8, Spokane - Hilton-Village Green, Tacoma - Hotel-Proposed, Tacoma - Park Shore Inn, Tacoma - Tacoma Sheraton Hotel, Tacoma - Embassy Suites Hotel, Tukwila - Hampton Inn, Tukwila - Residence Inn-Seattle South, Tukwila - Red Lion Quay, Vancouver - Residence Inn-Portland North, Vancouver - Super 8, Wenatchee - Thunderbird Motor Inn, Yakima West Virginia - Comfort Inn-Proposed, Charleston - Holiday Inn, Clarksburg - Holiday Inn, Fairmont - Hotel-Proposed, Harpers Ferry - Holiday Inn, Huntington - Comfort Inn-Proposed, Morgantown - Holiday Inn, Morgantown - Motel-Proposed, Morgantown - Comfort Inn, Princeton - Motel-Proposed, Princeton - Hotel-Proposed, Wheeling - Howard Johnson, Wheeling Wisconsin - Super 8, Ashland - Holiday Inn, Beloit - Embassy Suites Hotel-Proposed, Brookfield - Marriott-Milwaukee, Brookfield - Holiday Inn, Eau Claire - Residence Inn, Glendale - Granada Royale-Proposed, Green Bay - Holiday Inn-Downtown, Green Bay - Residence Inn-Proposed, Green Bay - Super 8, Janesville - Super 8, Kenosha - Playboy Resort, Lake Geneva - Concourse Hotel, Madison - Fairfield Inn, Madison - Hampton Inn - East, Madison - Hampton Inn - West, Madison - Compri Hotel-Proposed, Milwaukee - Embassy Suite, Milwaukee - Fairfield Inn, Milwaukee - Holiday Inn-Airport, Milwaukee - Holiday Inn-West, Milwaukee - Hotel and Conv. Ctr. East-Proposed, Milwaukee - Hyatt Regency, Milwaukee - Marc Plaza, Milwaukee - Marriott Inn, Milwaukee - Omni Suite Hotel-Proposed, Milwaukee - Super 8-Airport, Milwaukee - Olympia Village Resort, Oconomowoc - Scotsland Resort, Oconomowoc - Sheraton, Racine - Claridge Motor Inn, Rhinelander - Super 8, Waukesha - Holiday Inn, Wausau - Mead Inn, Wisconsin Rapids Wyoming - Days Inn, Casper - Flying L. Skytel, Cody - Super 8, Cody - Snow King Resort, Jackson - Super 8, Jackson - Wort Hotel, Jackson - Development-Proposed, Jackson Hole - Colter Bay Village, Moran - Jackson Lake Lodge, Moran - Jenny Lake Lodge, Moran - Best Western-Bel Air, Rawlins - Bridger Inn, Rawlins - La Quinta Inn, Rock Springs Western Europe Belgium - Oostkamp Hotel, Bruges - Proposed Residence Inn, Brussels - SAS Royal Hotel, Brussels Denmark - Proposed Hotel, Copenhagen France - The Miramar, Biarritz - Chateau D'arc en Barroi, Haute-Marne - Le Grand, Paris - Royal Monceau, Paris Germany - Cumberland House, Berlin - Munchen Penta Hotel, Munchen Holland - Carlton - Cannes & Amstel, Amsterdam - The Pulitzer Hotel, Amsterdam Spain - Le Meridien, Barcelona - Princess Sophia, Barcelona - Hotel Los Monteros, Marbella - Incosol Spa & Hotel, Marbella - Proposed Hyatt Resort, Marbella United Kingdom - Copthorne Hotel, Aberdeen - Copthorne Hotel, Birmingham - Hyatt Regency, Birmingham - Holiday Inn, Cambridge - Copthorne Hotel, Cardiff - Great Eastern Hotel, England - Copthorne Hotel, Glasgow - Hanbury Manor Hotel, Hertfordshire - 47 Park Street, London - Bailey's Hotel, London - Basil Street Hotel, London - Basil Street Hotel, Knightsbridge, London - Britannic Tower, London - Chelsea Hotel, London - Chesterfield Hotel, London - Chesterfield Hotel, Mayfair, London - Copthorne Hotels, London - Copthorne Tara Hotel, London - Dorchester Mayfair, London - Executive Hotel, London - Marriott Hotel, London - May Fair, London - Plaza Hotel, London - Proposed Hotel Conversion, London - Proposed Hotel-The City, London - Regent Hotel, London - Regent London Hotel, London - Sheraton Belgravia, London - Sheraton Park Tower, London - St. James Court Hotel, London - The Executive Hotel, London - Windsor Hotel, London - Copthorne Hotel, Manchester - Copthorne Hotel, Newcastle - Copthorne Hotel, Slough/Windsor - Swallow Hotel, Stockton - Copthorne Hotel-Effingham Park, Sussex - Copthorne Hotel-Gatwick, Sussex Middle East and North Africa Egypt - Sheraton Anni Cruise Ship, - Sheraton Aton Cruise Ship, - Sheraton Hotp Cruise Ship, - Sheraton Tut Cruise ship, - Aswan Oberol Hotel, Aswan - Cairo Sheraton Hotel, Cairo - Hotel - Proposed, Cairo - Lido Hotel, Cairo - Meridien Hotel, Cairo - Novotel Cairo Airport, Heliopolis, Cairo - Proposed Resort Complex, Hurghada - Luxor Sheraton Hotel, Luxor - Proposed Hotel, Luxor - Fayrouz Village Hotel, Sharm El Sheikh, Sinai - Coral Village Hotel, Nuweiba, Sinai - Hotel - Proposed, Dahab, Sinai - Hotel - Proposed, St. Catherine, Sinai Greece - Athens Hilton & Proposed Hotel, Athens - Caravel Hotel, Athens - Proposed Sargani Hotel & Bungalows, Halkidiki - Rhodes Hotel -Proposed, Rhodes Israel - Proposed Inter-Continental Hotel, Tel Aviv Lebanon - Hotel Market Review, Beruit Morocco - El Minzah Hotel, Tangier Nigeria - Proposed Sheraton Hotel, Port Harcourt Saudi Arabia - Proposed Jeddah Corniche Project, Jeddah Tunisia - Proposed Hotel, Hammamet Turkey - Hotel Conrad, Istanbul Latin America and the Caribbean Bahamas - Eleuthera Joint Venture, Eleuthera - Cape Eleuthera Island Hotel, Eleuthera Island - Eleuthera Joint Venture, Eleuthra - The Montague, Nassau - Paradise Island Hotel, Paradise Island - Resorts Int'l Hotel and Casino, Paradise Island Belize - Journey's End Caribbean Club, Abergris Caye Bermuda - Sonesta Hotel, Bermuda Brazil - Quatro Rodas Hotel, Recife Colombia - Charleston Hotel - Proposed, Barranquilla - Bella Suiza Hotel, Bogota - Hotel & Convention Center -Proposed, Cali - Cartagena Hilton, Cartagena - El Faro de Cartagena Resort Propose, Cartagena - Proposed Indian Sea and Sun Resort, Cartagena - Hotel De Isleno, San Andres Isla - Santamar Hotel, Santa Marta Curacao - Ramada Renaissance Hotel and Casino, Honduras - Inn Of The Sun, Guanaja Jamaica - Holiday Inn-Rose Hall, Montego Bay - Americana Eden II, Ocho Rios Mexico - Posadas de Mexico Hotels, - Americana Condesa Del Mar, Acapulco - Americana El Presidente Hotel, Acapulco - Resort-Proposed, Cabo San Lucas - Palacio Del Margus, Chiconcuac - Omni Hotel, Ixtapa - Fiesta Inn-Proposed, Leon - Karmina Place, Manzanillo - Hotel - Proposed, Mexico City - La Jolla de Mismaloya, Puerta Vallarta Netherland Antilles - Divi Divi Beach Resort, Aruba - Divi Tamarijn Beach Resort, Aruba - Golden Anchor, Bonaire - Resort Hotel-Proposed, Bonaire - Ramada Renaissance Hotel and Casino, Curacao - Cupecoy Beach Club Hotel, St. Maarten - Dawn Beach Hotel, St. Maarten - Dawn Beach Resort, St. Maarten - Mullet Bay Resort, St. Maarten - Oyster Pond Hotel, St. Maarten Puerto Rico - Hyatt Dorado Beach Hotel, Dorado - Hyatt Regency Cerromar Hotel, Dorado - Hotel - Proposed, Fajardo - Hotel Puerto Rico, Fajardo - Westin Resort-Proposed, Palmer - Marriott Resort & Casino-Proposed, Puerto Rico - Carib Inn, San Juan - Dupont Plaza, San Juan - El San Juan Hotel and Casino, San Juan - Howard Johnson Hotel, San Juan - Marriott - Proposed, San Juan - Marriott Update - Proposed, San Juan - Sands Hotel and Casino, San Juan Virgin Islands - Caneel Bay, St. Croix - Carambola Beach Resort, St. Croix - Hotel - Proposed, St. Croix - St. Croix Development, St. Croix - Caneel Bay, St. John - Pineapple Beach Hotel, St. Thomas - Sugar Bay Plantation, St. Thomas - Virgin Grand Hotel, St. Thomas - Virgin Isle Hotel, St. Thomas - Little Dix Bay, Virgin Borda Eastern Europe Croatia - Two Hotels, Dubrovnik Czech Republic - Voronesh Hotel Complex, Brno - Proposed Four Seasons Hotel, Prague Hungary - Proposed Resort Hotel, Babolna - Duna Inter-Continental, Budapest Latvia - Daugava Hotel-Proposed, Riga - Proposed Hotel, Riga Poland - Holiday Inn, Krakow - Marriott Hotel - Proposed, Poznan - Proposed Hotel, Poznan - Radisson Hotel, Szczecin - Bristol Hotel, Warsaw - Holiday Inn, Warsaw - Orbis Joint Venture, Warsaw - Proposed Hotel, Warsaw - Sheraton Hotel - Proposed, Warsaw - Zakopane Resort Complex, Zakopane Russia - Kamiennyi Most Hotel & Business, Moscow - Savoy Hotel, Moscow Asia Korea - Ultrapolis 3000, Seoul Malaysia - UP 3000 Hotel-Proposed, Selangor Singapore - Resort Hotels - Proposed, - Ultrapolis 3000, Singapore West Indies - Proposed Blue Lagoon Resort, St. Martin Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Hospitality Valuation Services Industry Leader Hospitality Valuation Services (HVS) was created in 1980 to satisfy the ever-increasing demand for reliable and well-documented hotel/motel valuations, market studies, and feasibility reports. As the nation's leading real estate appraisal organization devoted exclusively to lodging properties, HVS offers owners, investors, and lenders in-depth valuation and market research expertise. Our professional staff, operating on a worldwide basis with offices in New York, San Francisco, Miami, Boulder, Vancouver, and London, has appraised more than 4,000 hotels and motels in every state and over 32 foreign countries. Each member of Hospitality Valuation Services is well versed in lodging operations. Most have college degrees in hotel administration as well as actual on-the-job hotel experience. Coupled with intense training in real estate appraisal theory and techniques, we are highly qualified to handle the unique characteristics of hostelry valuations. Excellence Through Specialization An important feature of our valuation and feasibility services is specialization. Daily exposure on a global basis to a wide variety of hotel transactions and operating statistics, along with actual buyers and sellers, provides the data to thoroughly document our reports. HVS maintains the industry's largest database of hotel valuation information: o Data on over 4,000 hotel transactions; o Over 3,500 actual financial statements; o Thousands of management contracts, franchise agreements, mortgages, leases, and other similar documents; o Personal contacts at every major hotel company; o Names and addresses of over 10,000 hotel owners, investors, lenders, and operators. Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Innovative research in hotel valuation techniques is set forth in the textbooks we authored for the Appraisal Institute, entitled The Computerized Income Approach to Hotel/Motel Market Studies and Valuations and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations. These publications, along with more than 300 articles, are recognized as the authoritative standard for valuing lodging facilities and performing market feasibility studies. In addition, we have developed Hospitality Valuation Software, a computerized package that assists appraisers and consultants in evaluating market trends and preparing financial forecasts. Full-Service Hotel Consulting With a reputation established by providing highly detailed hotel valuations that are accepted and relied upon by virtually every major hotel owner, lender, and operator, HVS has branched out to offer a full range of consulting services. o HVS Consulting Services: Valuations, market feasibility studies, economic studies, management contract and franchise negotiations, development assistance, and expert testimony. o HVS Executive Search: Recruitment and placement of top-level hotel management personnel. o HVS Eco Services: Environmental audits and assistance in implementing programs including water and energy management, recycling, and green product selection. Provides ECOTEL certifications to environmentally sensitive hotels. o HVS Gaming Services: Specialized market, valuation, and consulting services for casinos and other types of gaming activities. o HEI Hotels: Hotel ownership and management. Long-Term Relationship Hospitality Valuation Services is in business for the long-term. We are dedicated to providing our clients with the highest quality consulting services. Should you require assistance in any areas covered by our expertise, please contact any member of our team at (516) 248-8828. This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. ============= HVS - ------------- International ============= ===================================================== ---------------------------- Economic Study and Appraisal ---------------------------- Howard Johnson Plaza ---------------------------- Saddle Brook, New Jersey ---------------------------- Prepared by: Hospitality Valuation Services A Division of Hotel Consulting Services, Inc. 372 Willis Avenue Mineola, NY 11501 516-248-8828 Submitted to: Mr. Shirish Godbole Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 [Letterhead of HVS International] December 2, 1996 Mr. Shirish Godbole, Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 Re: Howard Johnson Plaza Saddle Brook, New Jersey Ref. 9610273 Dear Mr. Godbole: Pursuant to your request, we herewith submit our economic study and appraisal pertaining to the above-captioned property. We have inspected the site and facilities, and have analyzed the hostelry market conditions in the Bergen County area. Our report was prepared in accordance with, and is subject to, the requirements of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and the Uniform Standards of Professional Practice (USPAP), as provided by the Appraisal Institute. Based on the available data, our analysis, and our experience in the hotel industry, it is our opinion that the market of the leasehold interest in the subject property described in this report, as of January 1, 1997, is: $3,500,000 THREE MILLION FIVE HUNDRED THOUSAND DOLLARS We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings and valuation. The economic study and appraisal is made part hereof, and must remain attached in order for the value opinion set forth to be considered valid. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. Very truly yours, HOSPITALITY VALUATION SERVICES A Division of Hotel Consulting Services, Inc. /s/ Rodney G. Clough Rodney G. Clough Consulting and Valuation Analyst /s/ Anne R. Lloyd-Jones Anne R. Lloyd-Jones, CRE Senior Vice President /s/ Stephen Rushmore Stephen Rushmore, CRE, MAI, CHA President HVS International, Mineola, New York Table of Contents 1 Howard Johnson Plaza, Saddle Brook, New Jersey - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table of Contents 1. Executive Summary ........................................... 1 2. Nature of the Assignment .................................... 3 3. Description of the Land, Improvements, Zoning, Taxes and Neighborhood ........................... 7 4. Market Area Analysis ........................................ 26 5. Overview of External Forces Affecting the U.S. Lodging Industry ......................................... 47 6. Lodging Market Supply and Demand Analysis ................... 63 7. Projection of Occupancy and Average Rate .................... 82 8. Highest and Best Use ........................................ 97 9. Approaches to Value ......................................... 99 10. Income Capitalization Approach .............................. 102 11. Sales Comparison Approach ................................... 139 12. Cost Approach ............................................... 148 13. Reconciliation of Value Indications ......................... 155 14. Statement of Assumptions and Limiting Conditions ............ 159 15. Certification ............................................... 163 Addenda Legal Description Photographs of the Subject Property Photographs of the Competitive Properties Synopsis of Howard Johnson License Agreement Synopsis of Ground Lease Synopsis of Hotel Management Agreement Synopsis of Restaurant Lease Explanation of the Simultaneous Valuation Formula HVS International, Mineola, New York Table of Contents 2 Howard Johnson Plaza, Saddle Brook, New Jersey - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table of Contents (continued) Qualifications Rodney G. Glough Anne Lloyd-Jones, CRE Stephen Rushmore, CRE, MAI, CHA HVS International, Mineola, New York Executive Summary 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 1. Executive Summary Property: Howard Johnson Plaza Location: 129 Pehle Avenue East Saddle Brook, New Jersey 07663 Date of Inspection: October 23, 1997 Interest Appraised: Leasehold Date of Value: January 1, 1997 Land Description - ---------------- Area: 3.9 acres, or 169,884 square feet Zoning: CH-1 - Limited Commercial - 1 Assessor's Parcel Number: 1311-36 Improvements Description - ------------------------ Age: Constructed in 1969 Property Type: Full-service Guestrooms: 141 Number of Stories: Eight stories Food and Beverage Facilities: Leased Restaurant, Mr. G's Cafe and Restaurant Meeting Space: Four rooms, +/-6,193 square feet Parking: 179 spaces (around perimeter of building) Summary of Value Parameters - --------------------------- Highest and Best Use (as if vacant): Transient lodging facility Highest and Best Use (as improved): Transient lodging facility Marketing Period: Six to nine months Number of Years to Stabilize: Three Stabilized Year: 1999 HVS International, Mineola, New York Executive Summary 2 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Valuation Assumptions - --------------------- Mortgage Interest Rate: 9.5% Amortization Period: 20 years Debt Service Constant: 0.111856 Loan-to-Value Ratio: 70% Stabilized Inflation Rate: 3.5% Equity Yield Rate: 22% Terminal Capitalization Rate: 12% Brokerage and Legal Fees: 3.0% Holding Period: 10 years Calculated Discount Rate: 14.29% Estimates of Value - ------------------ Income Capitalization Approach: $3,375,000 Sales Comparison Approach (based on fee simple): $2,900,000 - $3,800,000 Cost Approach (Replacement Cost): $9,600,000 Market Value Conclusion: $3,500,000 Market Value Conclusion per Room: +/-$25,000 HVS International, Mineola, New York Nature of the Assignment 3 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 2. Nature of the Assignment Subject of the Economic Study and Appraisal The subject of the economic study and appraisal is the leasehold interest in a +/-169,884-square-foot (+/-3.9-acre) parcel improved with a 141-room, full-service lodging facility known as the Howard Johnson Plaza, which opened in 1969. In addition to guestrooms, the subject property contains 13 meeting rooms totaling +/-6,193 square feet of meeting space, a restaurant that is currently leased, an exercise room, an indoor pool, a whirlpool, and appropriate back-of-the-house facilities for a lodging facility of this type. The hotel is situated proximate to and east of the intersection of the Garden State Parkway and Interstate 80 in New Jersey. Direct access to the hotel lies east of this intersection, and is provided by Pehle Avenue. Municipal jurisdictions governing the property include the City of Saddle Brook, the County of Bergen, and the State of New Jersey. The hotel's civic address is 129 Pehle Avenue East, Saddle Brook, New Jersey, 07663. Objective of the Economic Study and Appraisal The objective of the economic study and appraisal is to evaluate the supply and demand factors affecting the market for transient accommodations in the Saddle Brook area for the purpose of estimating the market value of the leasehold interest in the subject property. Market value is defined by the Office of the Comptroller of the Currency (OCC), 12 CFR, Part 34, 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 and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby 1. buyer and seller are typically motivated; HVS International, Mineola, New York Nature of the Assignment 4 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 2. both parties are well informed or well advised, and acting in what they consider their own best interests; 3. a reasonable time is allowed for exposure in the open market; 4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) Use of the Appraisal This appraisal is being prepared for use by Morgan Stanley Mortgage Capital, Inc. in connection with their proposed financing of a package of 17 hotels, including the subject property, which are owned by Ashford Financial Corporation or related entities. The information presented in this report should not be disseminated to the public or third parties without the express written consent of Hospitality Valuation Services. Scope of the Appraisal All information was collected and analyzed by the staff of Hospitality Valuation Services. Data such as historical operating statements, site plans, floor plans, and so forth were supplied by Ashford Financial Corporation and Remington Hotel Company. Unless noted otherwise, we have inspected the competitive lodging facilities and analyzed the sales summarized in this report, and our value conclusion is based on this investigation and analysis. Property Rights Appraised The property rights appraised are the leasehold ownership of the improvements, including the furniture, fixtures, and equipment. The leasehold interest is defined as, "the right to use and occupy real estate for a stated term and under certain conditions; conveyed by a lease."(2) An abstract of this ground lease is provided in the Addenda to this report. The subject property is appraised as a going concern (i.e., an open and operating facility). (1) Federal Register, Vol. 55, No. 165, August 24, 1990; p. 34696. (2) The Dictionary of Real Estate Appraisal - Second Edition, American Institute of Real Estate Appraisers, Chicago, IL, 1989, p. 177. HVS International, Mineola, New York Nature of the Assignment 5 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Method of Study The methodology used to develop this economic study and appraisal is based on the market research and valuation techniques set forth in the textbooks authored by HVS International for the American Institute of Real Estate Appraisers and the Appraisal Institute, entitled, The Valuation of Hotels and Motels,(1) Hotels, Motels and Restaurants: Valuations and Market Studies,(2) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations,(3) and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations.(4) The appraisal will consider the three standard approaches to value: income capitalization, sales comparison, and cost. Because lodging facilities are income-producing properties that are normally bought and sold on the basis of capitalization of their anticipated stabilized earning power, the greatest weight is given to the value indicated by the income capitalization approach. We find that most hotel investors employ a similar procedure in formulating their purchase decisions, and thus the income capitalization approach most closely reflects the rationale of typical buyers. When appropriate, the sales comparison and cost approaches are used to test the reasonableness of the results indicated by the income capitalization approach. Ownership, Franchise, and Management History and Assumptions A photocopy of the subject property's legal description, which was provided by Ashford Financial Corporation is presented in the Addenda to this report; the appraisers assume no responsibility regarding the accuracy of this legal description. Current title is held by Saddle Brook New Jersey Hotel Limited Partnership - an entity controlled by Ashford Financial Corporation. The subject property was purchased from the Nippon Credit Bank in a transaction that (1) The Valuation of Hotels and Motels, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1978. (2) Hotels, Motels and Restaurants : Valuations and Market Studies, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1983. (3) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1990. (4) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992. HVS International, Mineola, New York Nature of the Assignment 6 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= included 14 additional Howard Johnson properties. The bank sold these properties to the limited partnership after the mortgagor had defaulted on the mortgage loan. The assignment of the ground lease for the subject property occurred on August 25, 1994. The subject property is operated under a franchise agreement with Howard Johnson; this agreement expires August 24, 2009. The hotel is also subject to a management agreement with Remington Employers Corporation; an abstract of this contract is presented in the Addenda to this report. Marketing Period In light of the renewed interest in hotel investments and the increasing availability of debt and equity capital, we believe that it will take six to nine months to sell the subject property, assuming that it is placed on the market at the concluded value. Effective Date of the Appraisal The effective date of the appraisal is January 1, 1997. All projections are expressed in inflated dollars, and the value estimate represents 1997 dollars. Date of Inspection The subject property was inspected by Rodney G. Clough on October 23, 1997. HVS International, Mineola, New York Description of the Land, Improvements, 7 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 3. Description of the Land, Improvements, Zoning, Taxes, and Neighborhood LAND The suitability of the land for the operation of a lodging facility is an important consideration affecting the economic viability of a property and its overall value. Factors such as size, topography, access, visibility, and the availability of utilities have a direct impact on the desirability of a particular site. Size and Topography The subject site is located in northern New Jersey, north of Newark, in the Township of Saddle Brook. The center township is located at the intersection of Interstate 80 (I-80) and the Garden State Parkway; the township spans roughly two miles north of this intersection, and two miles south of this intersection. The subject site is situated proximate to and east of this intersection, and is bounded by the Garden State Parkway to the north, the northbound on-ramp for the parkway to the west, a parcel improved with several residences to the east, and Pehle Avenue to the south. Municipal jurisdictions governing the property include the Township of Saddle Brook, Bergen County, and the State of New Jersey. According to the Saddle Book Tax Assessor's Office, the subject parcel measures approximately +/-169,884 square feet, or +/-3.9 acres. The site is an irregularly shaped rectangle, with +/-515 feet of frontage on Pehle Avenue, +/-362 feet of frontage adjacent to the on-ramp to the Garden State Parkway, +/-535 feet of frontage along the Garden State Parkway, and +/-259 feet of frontage along the eastern edge of the site. Primary vehicular access to the property is provided by Pehle Avenue. The topography of the parcel generally flat. In conclusion, the size and topography of the subject parcel appear to be appropriate for hotel use. The site is fully developed, with no excess land available for expansion. HVS International, Mineola, New York Description of the Land, Improvements, 8 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Easements The appraisers were not provided with any information concerning easements affecting the subject property. For the purposes of this appraisal, we have assumed that the property is not encumbered by any unusual or onerous easements which would affect its use or marketability. Regional Access It is important to analyze a lodging facility's ease of access with respect to regional and local transportation routes and demand generators. The subject site is readily accessible to a variety of local, county, state, and interstate highways. Bergen County is extremely well served by a mixture of interstate, state, county and local roadways. These roadways include Interstates 80 and 95, the Garden State Parkway, U.S. Route 46 (U.S. 46), and State Route (S.R. 17). Of these, the most important insofar as the subject property is concerned are I-80 and the Garden State Parkway. Interstate 80 is one of the nation's major east-west arteries, commencing at its intersection with I-95 in Ridgefield Park, New Jersey - immediately west of the George Washington Bridge, to the east of the subject property, traversing the entire width of Bergen Country, and finally terminating at its intersection with the beltway surrounding the San Francisco metropolitan area, in California. In the vicinity of the subject property, I-80 is a heavily traveled superhighway which is divided into separate express and local access lanes; this roadway permits both commercial and passenger vehicles to access points throughout northern New Jersey and Pennsylvania, as well as New York City. Interstate Route 80 intersects with the Garden State Parkway just west of the subject property. The subject property enjoys frontage along the Garden State Parkway. The Garden State Parkway is a toll road that extends on a north-south axis, roughly paralleling the New Jersey coastline from I-87, the New York State Thruway, in New York State (to the north) to Cape May, at New Jersey's southern tip. The Garden State Parkway provides access along New Jersey's eastern shoreline, and intersects with other major highways, such as I-78, I-95, U.S. Highways 9 and 202, and the Atlantic City Expressway. Running in a north-south direction is State Route 17. The subject property is located two miles northwest of the intersection of S.R. 17 with I-80. This four-lane, median-divided roadway commences in the south at its juncture with State Route 3, in Rutherford, New Jersey. This southern extension HVS International, Mineola, New York Description of the Land, Improvements, 9 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= facilitates access to the Meadowlands Sports Complex, which is situated roughly seven miles southeast of the subject property. To the north, S.R. 17 basically parallels the Garden State Parkway, extending to New Jersey's northern border with New York to its juncture with the New York Thruway, near Suffern, New York. Located approximately five miles to the southeast of the subject property is Interstate 95, which provides a major link between northern New Jersey and New York City. At its intersection with I-80, I-95 leads northbound motorists directly to the George Washington Bridge, from which Manhattan's West Side can be accessed. Interstate 95 then continues northward through the Bronx, intersecting I-87 (known as the Major Deegan Expressway) and I-295 (which channels traffic to access Long Island), and continues northward through the New York County of Westchester, and on into Connecticut and the New England States. To the south of its intersection with I-80, I-95 is known as the New Jersey Turnpike, and provides access throughout the State of New Jersey; this highway then continues southward, roughly paralleling the Eastern Seaboard, to its terminus in Miami, Florida. U.S. Highway 46, which passes approximately one mile south of the subject property, is accessed via the Garden State Parkway, and is a major east-west link providing egress and ingress to the subject property's market area. U.S. Highway 46 commences at the George Washington Bridge, in the east, and extends to its termination at New Jersey's western border with Pennsylvania. This important route parallels I-80, and provides access to many local towns. Given the subject property's location at the intersection of I-80 and the Garden State Parkway, regional access to the Howard Johnson Plaza is considered to be excellent. Local Access and Visibility Local access to the subject property's area is readily provided by the local Saddle Brook exits of the Garden State Parkway and I-80. Direct access is provided by Pehle Avenue. To reach Pehle Avenue, motorists traveling south on the Garden State Parkway utilize the Saddle Brook Exit (Exit 80); at the end of this exit, motorists utilize the traffic circle and continue south on Midland Street. Motorists then turn left at the next intersection, or east onto Pehle Avenue, and continue to the subject property which is located on the left. Motorists traveling north on the Garden State Parkway utilize HVS International, Mineola, New York Description of the Land, Improvements, 10 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= the similar exit (the Saddle Brook Exit, 80), and turn right on to Pehle Avenue and continue to the subject property. Motorists traveling west on Interstate 80 utilize the Saddle Brook/Garden State Parkway North Exit (Exit 62). While driving on the exit ramp, motorists utilize the local, Saddle Brook Exit instead of continuing on to the Garden State Parkway. This local access ramp ends at Pehle Avenue, and the subject property is accessed by turning right, or to the east. Motorists traveling east on I-80 utilize the similarly numbered exit (Exit 62) to reach the subject property. From the access ramp, guests turn left onto Pehle Avenue, and continue east to the subject property. The site is visible to motorists traveling in either direction on the Garden State Parkway. However, the site is not visible to motorists traveling on Interstate 80. Airport Access Interstate 95 provides access to the subject property from Newark International Airport, located roughly 20 miles to the south of the I-95/I-80 intersection. Access is also possible from John F. Kennedy (JFK) and LaGuardia International Airports, although these facilities are further from the subject property, on Long Island, in the New York City Borough of Queens. Utilities The subject site is served by all necessary utilities, which are provided as follows. ================================================================================ Table 3-1 Available Utilities - -------------------------------------------------------------------------------- Utility Provider ------- -------- Water Saddle Brook Township Electricity and Gas Public Service Electricity and Gas Local Telephone Bell Atlantic Long Distance Telephone MCI Sewer and Storm Drainage Saddle Brook Township Garbage and Trash Classic Sanitation Cable Television World Cinema (via on-site satellite) - -------------------------------------------------------------------------------- HVS International, Mineola, New York Description of the Land, Improvements, 11 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Soil and Subsoil Conditions Geological and soil reports were not provided to the appraisers or made available for review during the preparation of this report. The appraisers are not qualified to evaluate soil conditions other than by a visual inspection of the surface. Nuisances and Hazards The appraisers have not been informed of any site-specific nuisances or hazards, and no signs of toxic ground contaminants were visible at the time of our inspection. Because the appraisers are not experts in this field, we do not warrant the absence of hazardous waste, and we urge the reader to obtain an independent analysis of these factors. Legal Description As noted earlier, a copy of the subject property's legal description, as provided by Ashford Financial Corporation, is presented in the Addenda to this report. Land Conclusion The subject parcel appears appropriate as the site of a lodging facility. We have analyzed the issues of size, topography, access, visibility, and the availability of utilities, and we note the following advantages and disadvantages. Advantages o The site size is large enough to allow for sufficient parking and other related hotel uses. o The site enjoys a favorable location near the intersection of Interstate 80 and the Garden State Parkway, and is easily accessible from Newark International Airport. o The site is visible to motorists traveling both directions on the Garden State Parkway. o The site is served by all necessary utilities. Disadvantage o The site is not visible to motorists traveling on Interstate 80. The advantages noted above are important locational characteristics. In conclusion, the site appears to be favorable for the location of a transient lodging facility. HVS International, Mineola, New York Description of the Land, Improvements, 12 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= IMPROVEMENTS The quality of a lodging facility's physical improvements has a direct influence on its marketability and attainable occupancy and average rate. The design and functionality of the structure can also affect operating efficiency and overall profitability. This section investigates the subject property's physical improvements and personal property in an effort to determine how they contribute to total value. The following description of the improvements is based on our inspection of the hotel and information provided by Ashford Financial Corporation. The Howard Johnson Plaza is a full-service lodging facility containing 141 rentable units, 13 meeting rooms containing a total of +/-6,193 square feet of meeting space, a restaurant that is currently leased, an exercise room, an indoor pool, a whirlpool, and appropriate back-of-the-house facilities for a lodging facility of this type. The eight-story property opened in 1969, and is 27 years old, as of the date of this appraisal. The hotel was acquired by Saddle Brook New Jersey Hotel Limited Partnership - an entity controlled by Ashford Financial Corporation, on August 25, 1994. At the time of this acquisition, the hotel was in extremely poor condition. Subsequent to the acquisition, the subject property was extensively renovated, at an estimated cost of $833,000. In scope, this renovation included the exterior of the building, public areas, and the guestrooms. The hotel is now judged to be in good condition, and management representatives report that all building systems are in working order. The hotel is operated under a license agreement with Howard Johnson and reportedly meets the standards for lodging facilities of that brand. Based on our inspection and information provided by Ashford Financial Corporation, the following table summarizes the facilities available at the subject property. HVS International, Mineola, New York Description of the Land, Improvements, 13 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 3-2 Facilities Summary - -------------------------------------------------------------------------------- Guestrooms King Beds 80 Units Double/Doubles 42 Suites 19 ----- Total 141 Units Food and Beverage Outlet (Leased) Mr. G's Cafe and Restaurant 125 Restaurant Seating 35 Bar Seating Meeting and Banquet Rooms Plaza Room 2,040 Square Feet Plaza I 680 Plaza II 680 Plaza III 680 Boardroom 88 New Jersey - New York 1,400 New York 560 New Jersey 840 Liberty Room 500 Additional Break-out Rooms (6) 2,165 ----- Total 6,193 Square Feet Recreational & Other Amenities Indoor Swimming Pool 46 Lounge Chairs Indoor Whirlpool Outdoor Putting Green Exercise Room Parking Spaces 179 Outdoor Spaces Elevators Guest 2 Service 1 Life Safety Systems Hard-wired smoke detectors in all guestrooms and public spaces Building sprinklered in all guestrooms and public spaces Pull stations and fire extinguishers throughout Laundry Washers 3 Dryers 2 Construction Details Wood construction Concrete foundation - -------------------------------------------------------------------------------- HVS International, Mineola, New York Description of the Land, Improvements, 14 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Property Exterior The hotel structure is situated on the northern portion of the site. Paved parking areas accommodating 179 vehicles are located around the perimeter of the building, with the majority of the spaces situated northeast and southwest of the hotel structure. The pavement is in fair condition. The property's exterior appears to be in good condition, and was repainted subsequent to the hotel's purchase by its current owners. On-site signage has also been repaired, and appears to be in good condition. According to management, guest complaints have reportedly been received regarding noise from the parkway, given the subject property's close proximity the Garden State Parkway. Although these complaints are considered to be disadvantageous for the subject property, they constitute an issue of physical obsolescence, and would be very difficult to address. However, according to management, this disadvantage does not negatively affect hotel occupancy or attainable average rate. Vehicular access to the subject site is provided via Pehle Avenue, along the southern border of the site; along this border, there are entrances near the southeastern and southwestern corners of the site. The majority of the hotel's guests are arriving from the parkway or the interstate; thus, guests usually approach the hotel from the west. After entering the site, guests proceed to the hotel's main entrance, which is located along the northern side of the property. Service traffic can gain access to the loading dock, which is located along the eastern side of the building. Construction and Design The subject property design includes an eight-story tower, with three main one-story wings extending from this tower, containing the restaurant, the meeting space, and the pool. The restaurant extension is along the west side of the building, and enjoys a highly visible location to approaching guests. The pool extension is situated along the southern side of the building. The meeting space extension is on the second floor of the hotel, and extends along the northern side of the building. The first level under this second-floor extension remains clear, and consists of the hotel's porte cochere main entrance. The building is of wood construction on concrete slab. Management reports no structural, electrical, or plumbing problems with the subject property. The guestrooms are double loaded off interior corridors. Rooms along the southern side of the tower are much larger than the those on the northern side; hence, these rooms feature larger bath areas (an extra sink area is provided) and larger bedroom areas. The guestrooms along the southern HVS International, Mineola, New York Description of the Land, Improvements, 15 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= side of the building are more popular because of their larger size, as well as a lower level of traffic noise along this side of the building. Lobby As stated previously, the porte cochere is situated along the northern side of the building. The lobby is located directly south of this porte cochere. Guests reach the lobby through one set of double manual doors which first leads to a breezeway, and then a second set of double manual doors, which leads to the lobby. Guests then must traverse a set of five stairs to reach the lobby level. The lobby has two main areas - one to the north, with seating and windows which overlook the hotel's entrance (to the immediate left as the guest enters the building), and one to the south, which contains further seating and the front desk, which is situated in front of the arriving guest. In total, the lobby contains 22 seats, plants, various tables, and framed artwork, and is in excellent condition following its renovation in 1995. The subject property's property management system utilized at the front desk is Multisystems Incorporated. Food and Beverage Outlets West of the southern lobby section is the interior entrance to the hotel's leased restaurant, Mr. G's. Mr. G's Cafe and Restaurant is the subject property's multi-purpose restaurant, serving breakfast, lunch, and dinner seven days a week. This area has not been recently renovated, and appears dated. However, advantages of this space include a marble dancing area an overhead skylight. This restaurant also features exterior signage and an exterior entrance. Because this leased operation provides banquet service for the hotel's meeting rooms, it is important to note that the restaurant is reportedly operating at a level which is below the standard set by the competition. This fact hinders the competitiveness of the subject property - particularly, for business in the meeting and group market, which requires banquets. For the purposes of this appraisal, we have assumed that the operation will continue as is, and we have considered the subject property's current food and beverage capacity in the formulation of its meeting and group segment competitive position. Meeting and Banquet Space The subject property features approximately 6,193 square feet of function space. The majority of function space is located on the second level of the property; this level contains the ballroom and the boardroom. The Liberty, New Jersey, and New York meeting rooms are located on the first level of HVS International, Mineola, New York Description of the Land, Improvements, 16 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= the hotel, east of the lobby. The New Jersey and New York Rooms can be used as one meeting space; the wall dividing these two rooms is portable. The meeting space remains in superior condition after the renovation of the hotel. The ballroom features new carpeting, wall covering, and lighting features. A dance floor is available for social functions, and all standard audio/visual equipment is available in the room. The ballroom is divisible into three sections, and appears to be highly functional and in superior condition. The ballroom offers a small break-out area, which also appears to be in excellent condition. This area also features a variety of attractive framed artwork, and plants are expected to be added to the break-out area in 1997. The hotel's meeting space is not directly accessible from the back-of-the-house areas, nor does the hotel feature a banquet kitchen. Hence, the meeting space is not considered favorable for banquets; this lack is typically considered an issue of functional obsolescence, and hinders the hotel's competitive level in this market. However, because the space is in superior condition, the hotel is able to utilize the space regularly and without issue for groups not requiring extensive food and beverage service. Guestrooms The subject property features 141 guestrooms, 40 of which feature connecting doors. The hotel originally featured 147 guestrooms; however, 6 first floor guestrooms were converted to meeting space. The guestrooms feature furniture which is reportedly about 12 years old (except for the mattresses). In 1995, all rooms received a complete soft-goods renovation and new mattresses. The following is a list of the furniture featured in a standard king guestroom: o King-sized bed with headboard o Two nightstands with lamps o Sofabed o Desk with chair and hanging lamp o Television set o Refrigerator (8th floor only) o Armoire with lamp o Framed artwork o Clothes hanging rack HVS International, Mineola, New York Description of the Land, Improvements, 17 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The guestrooms having two double beds feature similar furnishings, except that these rooms do not feature a sofa bed or a desk and chair, and have only one nightstand. The guestrooms with a queen bed also feature similar furniture, with the exception of a sofa bed. Guest bathrooms are standard, except that the units on the southern side of the building (rooms with the king beds) feature an extra sink. The bathrooms are in fair condition; while the renovation addressed new floor tiles, each bathroom's vanity, sink, toilet, bathtub, and bath tile is reportedly from the original construction, and appear to be worn and dated. Upgrades for the bathrooms are planned by management in the near future. Extra features in the subject property's guestrooms include balconies, clock radios, phones with dataports, luggage racks, and the rooms on the eighth floor of the property feature coffee machines, complimentary coffee, and refrigerators. While guestrooms do not offer an on-request movie system, standard television channels are supplemented by the Movie Channel and Showtime. Renovations in 1997 may include new bathroom wallcovering (as well as other cosmetic bathroom improvements), 20 new television sets, 20 new cooling units, balcony resurfacing, and a new phone system; these renovations are subject to budget approval. Therefore, although the furniture is dated, the rooms appear to be in reasonably good condition. Guestroom Corridors Guestroom corridors are wide enough to permit the easy passage of housekeeping and room service carts. The corridors are finished with relatively new carpeting, which was replaced in the previous renovation, and similarly, new wall finishes. Corridor lighting is sufficient, and appears to be in good condition; the lighting style appears appropriate to the hallway's recently updated finishes. Vending and ice machines are provided on each guestroom floor of the hotel. Management has created no-smoking rooms; approximately 50% of the hotel's guestrooms (70 units) are non-smoking. This type of amenity costs very little and requires no structural changes. We expect that the number of rooms allocated for this purpose will be increased or reduced, depending on demand and guest response. HVS International, Mineola, New York Description of the Land, Improvements, 18 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Recreational Amenities The subject property features the following recreational amenities: an indoor pool and whirlpool, an outdoor putting green, and an exercise facility. As discussed previously, the pool is housed in an enclosed, glass-on-metal-frame structure, in an extension that lies along the southern edge of the main hotel tower. Access to the pool area is provided from the first floor of the hotel by means of a hallway extending southward from the center of the main tower. From the hotel, guests must walk down several carpeted stairs to reach the pool area. The pool deck and the pool surface were recently refinished; the pool is in good condition, and the pool deck is in excellent condition. The pool deck features 46 lounge chairs, and the area is unsupervised. The lighting fixtures appear dated. The roof needs to be painted; this painting project is scheduled for completion in 1997. The pool area also features an open shower; the tiles in this shower appear dated, and may require upgrading. The exercise room, located on the first level, features two Stairmasters, a Lifecycle, and a Universal weight station. The Stairmasters are new, and all of the equipment is reportedly in good working order. This room was created from two original guestrooms before their conversion to its present use. The putting green is in poor condition, and is not currently advertised to guests as an amenity of the hotel. Back-of-the-House Space The back-of-the-house space appears to be adequate for the operation of this property. A considerable portion of the basement of this property was once used for the operation of a beauty salon and spa. However, this operation has ceased, and current ownership has closed off this portion of the building to the public, although this area was used for storage during the renovation, and also features a maintenance shop. Therefore, storage capacity at the subject property is considerable, and, from a back-of-the-house standpoint, is a advantageous feature of the current building layout. The leased kitchen appears to be in good working order. A new Bally walk-in refrigerator/freezer was installed as part of the 1995 renovation. The kitchen also features a dish machine and a receiving entrance. The subject property features an in-house laundry facility, which is equipped with three washers and two dryers. Two of the washers are Speed Queen machines; one of these was recently purchased, while the other is quite old, and its age was not readily known. The exact ages of the dryers were also unavailable to us; the older machine is of Fowler HVS International, Mineola, New York Description of the Land, Improvements, 19 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= manufacture, while the newer (reportedly five to ten years old) is of Speed Queen manufacture. Heating, Ventilation, and Air Conditioning (HVAC) The subject property's guestrooms are cooled by in-room, through-the-wall cooling units that are in working order. Public areas are cooled by individual roof-top cooling units; hence, the subject property does not require chillers. The subject property features five boilers, four of which are in working order, and are located in a storage room on the structure's roof. The four boilers reportedly handle the needed water heating capacity of the subject property. Two of these boilers were recently replaced. The boilers are of Smith Commercial manufacture. Based on information provided by Ashford Financial Corporation, all of the subject property's operating systems are in sufficient working order to maintain the operation of the hotel. Vertical Transportation Vertical transportation is provided by three Armor elevators and two stairwells. Of the three elevators, two are guest elevators, while one is reserved for service use. The elevator cabs were renovated last year, and appear to be in good condition. A planned upgrade to the cabs includes the installation of telephones, and is scheduled for 1997. Stairways are well located at each end of the hotel tower. Fire Protection The subject property is reportedly fully compliant with all fire standards. The building is fully sprinklered in all guestrooms and public areas, and guestrooms feature hard-wired smoke alarms. Guestroom hallways and all public areas feature pull stations and fire extinguishers. Security The subject property employs a security guard, who is on site during the evening hours. Doors feature a Tessla electronic locking system, which also contributes to the security of the hotel. Because of the subject property's location proximate to the parkway, the property is at times a target of crime, given the relatively easy escape route. However, crime is not a significant issue at the subject property, according to management, and the on-staff guard is reportedly sufficient to deter enough crime so that this issue does not affect the competitive level of the subject property of the safety of the guests. HVS International, Mineola, New York Description of the Land, Improvements, 20 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Asbestos According to information provided by management representatives, no asbestos is present in the subject property's improvements; however, we have not been provided with an asbestos report to confirm this assertion. The reader should be advised that any costs associated with asbestos removal or containment may have an unfavorable impact on the hotel's market value, and the estimate set forth in this appraisal reflects our value conclusions prior to the deduction of any such costs. We suggest that interested parties initiate an independent analysis regarding current asbestos levels and the capital expenditures necessary to remove any asbestos that is present. ADA Conformance Following the January 26, 1992 passage of the Americans with Disabilities Act (ADA), hotels are subject to new physical standards. The appraisers are not experts on ADA compliance, and we render no opinion regarding the subject property's conformance to ADA standards. Capital expenditures that may be necessary to bring the property into accordance with the ADA will reduce our estimate of market value. Any on-going costs related to ADA regulations are expected to be funded by normal replacement reserves. The subject property reportedly needs to address several issues regarding ADA non-conformance. We have assumed that the first year's reserve for replacement will be sufficient to address these areas of non-conformance. Improvements Conclusion Overall, the subject property's improvements appear to be appropriate for hotel use. The hotel's lobby, meeting space, guest bedroom areas, and guestroom corridors are in excellent condition, and have been maintained well since the 1995 renovation. The hotel's restaurant was unrenovated, and hence, may require upgrading; similarly, the hotel pool area and guestroom bathrooms may require further upgrading, as well. Issues of physical obsolescence include the noise emanating from the Garden State Parkway and its disadvantageous effect on the guestrooms along the northern side of the building, as well as several non-conforming ADA issues - all of which should be addressed within the short-term future. For the purposes of this appraisal, we have assumed that the subject property will be maintained in its present condition throughout the assumed ten-year holding period. Specifically, it is assumed that hotel management will employ standard preventive maintenance measures, and that a reserve for replacement fund will be established which will fund the cost of any future necessary capital expenditures. HVS International, Mineola, New York Description of the Land, Improvements, 21 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ZONING According to the Township of Saddle Brook zoning regulations and map, the subject property is zoned as follows. CH-1 - Limited Commercial - 1 This zoning provision allows: hotels; business and professional offices; scientific, engineering, and research offices; banks and other financial institutions; and public buildings. Based on this information, the subject property appears to conform to local zoning regulations. We assume that all necessary permits and approvals have been secured (including an appropriate liquor license), and that the subject property was constructed in accordance with local zoning ordinances, building codes, and all other applicable regulations. Our zoning analysis should be verified before any physical changes are made to the hotel. ASSESSED VALUE AND TAXES Property - or ad valorem - tax is one of the primary revenue sources of municipalities. Based on the concept that the tax burden should be distributed in proportion to the value of all properties within a taxing jurisdiction, a system of assessments is established. Theoretically, the assessed value placed on each parcel bears a definite relationship to market value, so properties with equal market values will have similar assessments and properties with higher and lower values will have proportionately larger and smaller assessments. Depending on the taxing policy of the municipality, property taxes can be based on the value of the real property or the value of the personal property and the real property. Because the objective of assessed value is to maintain a specific value relationship among all properties in a taxing jurisdiction, comparable hotel assessments should be evaluated to determine whether the subject property's assessed value is equitable. The taxing jurisdiction governing the subject property assesses real property only. The 1996 assessed value ratio is reported to be approximately 94.29%. One other hotel property comparable to the subject property is located in this jurisdiction - the Holiday Inn. The total assessment of the 144-room Holiday Inn in 1996 was $12,582,600 (roundly $87,400 per room), with $1,272,000 allocated to the land, and $11,310,600 allocated to the improvements. The following table illustrates the historical assessed value of the subject property from 1991 through 1996. HVS International, Mineola, New York Description of the Land, Improvements, 22 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 3-3 Historical and Current Assessed Value of the Subject Property - -------------------------------------------------------------------------------- Total Assessment Assessment per Room * ------------------------------ ------------------------ Year Land Improvements Land Improvements - ---------------------------------------------------------------------------- 1991 $1,950,000 $12,632,200 $13,830 $89,590 1992 1,950,000 12,632,200 13,830 89,590 1993 1,950,000 10,444,900 13,830 74,077 1994 1,061,000 6,521,400 7,525 46,251 1995 1,950,000 5,478,000 13,830 38,851 1996 1,950,000 5,478,000 13,830 38,851 * Assumes 141 rooms each year Source: Saddle Brook Tax Assessor's Office - -------------------------------------------------------------------------------- Based on the above information, the assessment of the subject property has declined in recent years, but appears to have stabilized in the most recent year. A comparison of the assessed value of the comparable hotel (the 144-room Holiday Inn) shows that the subject property is assessed at a much lower value per room of $52,681, when compared to the Holiday Inn's assessment of $87,400. According to the Saddle Brook Tax Assessor's Office, this discrepancy can be attributed to the size and scope of facilities and physical plant of the Holiday Inn. For the purposes of our projections, we have assumed that the assessment of the subject property is appropriate at its current level. The tax rates and assessment ratios applicable to the subject property are presented in the following table. HVS International, Mineola, New York Description of the Land, Improvements, 23 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 3-4 Historical Tax Rates and Assessment Ratios Applicable to the Subject Property - -------------------------------------------------------------------------------- Tax Rate Per $100 Percent Percent Assessment Percent Percent Year of Assessed Value Change(1) Change(2) Ratio Change(1) Change(2) - -------------------------------------------------------------------------------- 1991 $ 1.31 -- -- 109.61% -- -- 1992 1.68 28.2% 28.2% 97.00 (11.5)% (11.5)% 1993 1.82 8.3 4.1 98.88 1.9 1.0 1994 1.84 1.1 0.4 98.88 0.0 0.0 1995 1.94 5.4 1.3 100.06 1.2 0.3 1996 2.01 3.6 0.7 94.26 (5.8) (1.2) (1) Annual average compounded percentage change from the previous year (2) Annual average compounded percentage change from 1991 Source: Saddle Brook Tax Assessor's Office - -------------------------------------------------------------------------------- The above table illustrates that the tax rate has increased in recent years, by 5.4% in 1995, and 3.6% in 1996. For the purposes of this appraisal, we have assumed that the tax rate will continue to rise in tandem with inflation (assumed to 3.5%). The above table also illustrates that the assessment ratio in this jurisdiction has fluctuated in recent years; however, this ratio is proximate to 100%. For the purposes of this appraisal, we have assumed that the assessment ratio will remain at 100%; any ratio set below this level is assumed to offset any tax rate change which is above the level of inflation. The tax rate of 2.01 for 1996 comprises various components; these components are summarized in the following table. ================================================================================ Table 3-5 Property Tax Components - -------------------------------------------------------------------------------- Tax Rate per $100 Jurisdiction of Assessment -------------------------------------------- Bergen County 0.280 School District 1.079 Local Municipal 0.651 ----- Total 2.010 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Description of the Land, Improvements, 24 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Applying the projected inflationary increases to the 1995 tax burden yields the following forecast of property taxes for the subject property. ================================================================================ Table 3-6 Forecast of Property Tax Expense (+000) - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Forecast of Property Taxes $155 $160 $166 - -------------------------------------------------------------------------------- NEIGHBORHOOD The neighborhood surrounding a lodging facility often has an impact on a hotel's status, image, class, style of operation, and sometimes its ability to attract and properly serve a particular market segment. This section investigates the subject property's neighborhood and evaluates any pertinent locational factors that could affect its occupancy, average rate, food and beverage revenues, and overall profitability. As previously stated, the subject property is situated east of the intersection of I-80 and the Garden State Parkway. Given this superior accessibility, this intersection area is developed with various commercial and industrial uses. Directly south from the subject property is Park 80 East, an office building. Further south of this building, as well as east of the subject property, is a largely residential area, with a few various retail outlets fronting Pehle Avenue. Pehle Avenue continues eastward to its terminus at its intersection with Saddle River Road. Saddle River Road provides local, mainly residential access in a north-south direction. This road roughly follows the western bank of the Saddle River, from which this township takes its name. Directly west of the subject property are several roads that provide access between the two interstate routes. Pehle Avenue intersects these roads, and is the main local access thoroughfare in the subject property's immediate area. Continuing westward on Pehle Avenue, just past these interstate access roads, are two major developments: the Saddle Brook Marriott (a secondary competitor of the subject property), and the Park 80 West office complex. These two developments occupy the sites which are adjacent to and directly east of the intersection of the Garden State Parkway and I-80. Pehle Avenue continues eastward to its termination point at its intersection with Midland Avenue, a major local thoroughfare providing access in a north-south direction. Just south of its intersection with Pehle Avenue, HVS International, Mineola, New York Description of the Land, Improvements, 25 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Midland Avenue passes under I-80. The Holiday Inn Saddle Brook - a primary competitor of the subject property - is accessed immediately after this overpass, to the east of Midland Avenue. The Holiday Inn Saddle Brook therefore enjoys a visible location along the border of Interstate 80. Other improvements along Midland Avenue are mainly light industrial in nature. Neighborhood Conclusion The neighborhood surrounding the Howard Johnson Plaza appears to be favorable for the operation of a transient lodging facility. HVS International, Mineola, New York Market Area Analysis 26 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 4. Market Area Analysis The economic vitality of the market surrounding the subject property is an important consideration in forecasting lodging demand and income potential. Economic and demographic trends that reflect the amount of visitation provide a basis from which to project hostelry demand. The purpose of the area analysis is to review available economic and demographic data to determine whether the local market will undergo economic growth, stability, or decline. In addition to predicting the direction of the economy, the rate of change must be quantified. These trends are then correlated based on their propensity to reflect variations in lodging demand with the objective of forecasting the growth or decline in visitation by individual market segment. Market Area Definition The Howard Johnson Plaza is situated in the Township of Saddle Brook, in the southern portion of Bergen County, New Jersey. The area's major economic influences are provided by the Bergen - Passaic Metropolitan Statistical Area (MSA). Traditionally, New Jersey has been economically driven by the industrial, manufacturing, and transportation industries which are fueled by the readily accessible deep-water ports, airports and major highways linking the area to its sources of raw materials. New Jersey's economy, marked by modest but steady growth for the past two years, is experiencing a recovery that economists and labor analysts expect to continue into next year. The fallout of mergers and acquisitions in the telecommunication, pharmaceutical and banking industries has been compensated by the creation of new jobs in financial and business services, health care, and technology-related businesses. The subject property's extended neighborhood is highly developed with commercial, retail, industrial, transportation-related and residential uses. [GRAPHIC OMITTED] AREA MAP HVS International, Mineola, New York Market Area Analysis 27 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= New York - Northeastern New Jersey Region Economic Overview The following summary is excerpted from Regional Economy - Review and Outlook for the New York - New Jersey Metropolitan Region -April, 1996, published by the Port Authority of New York and New Jersey. The regional recovery has proved to be resilient despite the negative effects of higher interest rates, slower growth in the United States and leading international economies, and continued restructuring in key regional industries, such as banking, bio-medical and defense. Although growth slowed noticeably though most of 1995, the Northeastern NY-NJ region's gradual economic recovery continued for a third year. Total jobs rose 62,100 in 1995 - up 0.9%, following a 1.1% increase in 1994. However, trends in total jobs mask the sweeping changes underway in public and private sector employment throughout the region. During 1995, while government jobs declined by 2.0%, private employment rose 1.7% in the New York Suburbs, 1.6% in Northern New Jersey, and 1.2% in New York City. Importantly, the similar performance of the geographic sub-sectors of the region reinforces strong regional economic integration that has become well established since the onset of the 1989 to 1992 recession. A slowing regional economy in 1995 occurred in conjunction with sluggish growth in the United States throughout this year and persistent weakness in key international markets, such as Japan and Mexico, which are significant partners for trade and investment in the region. Regional gains were also dampened by the cumulative effect of rising interest rates last year, which negatively affected profits and bonuses on Wall Street, as well as new construction activity. Regional consumers turned increasingly cautious through the year, leading to a disappointing performance in retail sales during the critical holiday season. With many signals pointing to slower growth throughout the nation, long-term interest rates began to ease significantly in the second half of 1995, setting the stage for a resurgence in growth later in 1996 and into 1997. Despite lingering weakness in Japan and Mexico, the international sector has been an important foundation for continued regional growth, as witnessed by the record levels of international travel, tourism, and merchandise trade in 1995. Furthermore, regional wages began to pick up to a 5% growth rate from 2.5% at the close of 1994, according to the most recent data, and are expected to gain with the improved profitability of the securities sector. HVS International, Mineola, New York Market Area Analysis 28 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The outlook is decidedly mixed over the short term, as the significant restructuring of leading banking, telecommunications, bio-medical, and manufacturing corporations in the regional partially offsets expected jobs growth. In spite of the headlines generated by these losses, overall gains will continue in areas such as services, financial market activity, international trade, tourism, and the multimedia and entertainment sectors. Importantly, these sectors, which have been the source for many of the 250,000 private jobs generated in the region since the depths of the recession in late 1992, are well positioned to take advantage of the improved growth expected in the United States and in the leading international economies in the next few years. In addition to the Regional Economy - Review and Outlook for the New York - New Jersey Metropolitan Region - April, 1996, published by the Port Authority of New York and New Jersey, additional information has been provided by the Bureau of Labor Statistics, New York Department of Labor, Smith Travel Research, The New Jersey Star Ledger, and Con Edison's Forecasting Newsletter (Third and Fourth Quarters) for this analysis. REGIONAL EMPLOYMENT Within the New York-New Jersey region, employment continued to rise, as regional jobs gained 62,100, (public and private jobs) or 0.9%, during 1995. This performance represented a small decrease from the 1.1% gain in 1994. On a month-to-month basis, modest increases in growth rates associated with mild winter conditions in January and February of 1995 were realized. Employment growth in the region was noticeably slower during the spring of 1995. The following table illustrates the change in employment for the major sectors in the Northern New Jersey region, illustrating 1985 to 1995 data. The following information has been provided by the State of New Jersey Department of Labor. HVS International, Mineola, New York Market Area Analysis 29 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-1 Northern New Jersey Region Wage and Salary Employment by Major Industry (+000) - --------------------------------------------------------------------------------
Percent Percent Percent Percent Wholesale & Percent Year Total Change Construction Change Manufacturing Change TCPU Change Retail Trade Change - ----------------------------------------------------------------------------------------------------------------------------------- 1985 2,225.0 --- 82.9 --- 520.2 --- 172.2 --- 527.4 --- 1986 7,880.8 254.2 % 89.9 8.4 % 501.9 (3.5)% 176.8 2.7 % 540.4 2.5 % 1987 8,033.2 1.9 94.3 4.9 491.7 (2.0) 180.7 2.2 554.4 2.6 1988 8,473.8 5.5 99.8 5.8 479.6 (2.5) 178.2 (1.4) 564.0 1.7 1989 8,511.5 0.4 96.6 (3.2) 461.2 (3.8) 179.9 1.0 565.3 0.2 1990 8,384.1 (1.5) 87.2 (9.7) 427.7 (7.3) 176.9 (1.7) 546.6 (3.3) 1991 8,001.1 (4.6) 73.2 (16.1) 401.0 (6.2) 172.5 (2.5) 519.5 (5.0) 1992 7,829.0 (2.2) 64.2 (12.3) 379.7 (5.3) 171.8 (0.4) 507.2 (2.4) 1993 7,862.6 0.4 66.6 3.7 368.8 (2.9) 175.9 2.4 505.8 (0.3) 1994 7,941.6 1.0 69.4 4.2 363.0 (1.6) 182.2 3.6 514.1 1.6 1995 8,016.9 0.9 70.3 1.3 355.6 (2.0) 183.6 0.8 523.3 1.8 Annual Average Change: 1985 to 1995 13.7 % (1.6)% 10.9 % (3.7)% 0.6 % (0.1)% 1990 to 1995 (0.9) (4.2) 21.3 (3.6) 0.7 (0.9) 1994 to 1995 0.9 1.3 26.7 (2.0) 0.8 1.8
Percent Services Percent Percent Year FIRE Change & Misc. Change Government Change - -------------------------------------------------------------------------------- 1985 136.9 --- 484.2 --- 301.2 --- 1986 148.2 8.3 % 505.4 4.4 % 296.9 (1.4)% 1987 158.9 7.2 525.2 3.9 298.5 0.5 1988 165.1 3.9 544.5 3.7 302.0 1.2 1989 171.5 3.9 572.3 5.1 307.2 1.7 1990 166.8 (2.7) 580.4 1.4 309.9 0.9 1991 159.0 (4.7) 566.7 (2.4) 306.8 (1.0) 1992 158.8 (0.1) 574.3 1.3 307.7 0.3 1993 161.4 1.6 592.4 3.2 309.0 0.4 1994 162.9 0.9 609.9 3.0 310.1 0.4 1995 162.1 (0.5) 637.0 4.4 311.5 0.5 Annual Average Change: 1985 to 1995 1.7 % 2.8 % 0.3 % 1990 to 1995 (0.6) 1.9 0.1 1994 to 1995 (0.5) 4.4 0.5 Source: NYS & NJS Departments of Labor - -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 30 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Since the regional economic recovery began inclusive of the greater New Jersey - New York region, the eight counties of Northern New Jersey (including the subject property's county) have paced well above the aggregate average; this particular trend has identified the area as a "break out" economy. Northern New Jersey added 31,800 jobs to its employment base, which equated to a 1.4% growth rate. The new jobs represented over one-half of the 1995 job growth in the NY-NJ region. However, even with that impressive accomplishment, the Northern New Jersey economy slowed with each successive quarter in 1995. Private sector employment expanded faster than total employment. The Northern New Jersey private sector gained 30,200 jobs, for a growth rate of 1.6%. This performance represented almost one-third of the private sector jobs added regionwide. The gains spread across four sectors: services; wholesale and retail trade; transportation, communication, and public utilities (TCPU); and construction. The job losses were concentrated in the manufacturing and the finance, insurance and real estate (FIRE) sectors. Growth continued to slow in the TCPU sector, as continued layoffs at phone companies and energy utilities offset gains in transportation employment. Manufacturing employment continued to decline, losing 7,400 jobs - or 2.0% - in 1995. The region's wholesale and retail trade sector continued to rebound strongly in 1995, gaining 9,200 jobs, or 1.8%. According to the Departments of Labor for New York and New Jersey, construction employment totals, which were severely affected by the recession, continued to rise, with a gain of 9,000 - or 1.3% - in 1995. The slight increase in public sector employment continued in 1995, with an increasing by 0.5%. Employment in the Northeastern New Jersey Region In addition to reviewing employment trends for the New York-New Jersey region as a whole, we have also reviewed data for the Northern New Jersey area. Employment data for this review is based on information provided by the Port Authority of New York and New Jersey and the New Jersey Star Ledger. These most recent available employment statistics were through July of 1996. Job gains in the eight-county Northeastern New Jersey area, consisting of Bergen, Essex, Hudson, Middlesex, Morris, Passaic, Somerset, and Union Counties, drove the regional recovery. Following employment growth of 29,700, or 1.4%, in 1994, the increase in employment increased 2.0% in Northeastern New Jersey in the first half of 1995. By mid-year, 1996, New HVS International, Mineola, New York Market Area Analysis 31 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Jersey achieved a net gain of 18,600 jobs, and was on pace to match last year's gain of 36,600 jobs, statewide. The Counties of Hudson and Bergen led the overall employment gains in Northeastern New Jersey. Services sector job growth was strong, at 3.5%, and construction job growth, which benefited from the mild winter conditions, was 6.8%. Job growth for the first half of 1995 increased 2.0%, outperforming 1994. The rise in overall job growth is attributable to the wholesale and retail trade and the FIRE sectors, which had significant gains throughout 1994. Job reductions in the telecommunications and energy components of the TCPU sector detracted from the pace of total job growth. Manufacturing jobs fell 1.5%, with the largest losses occurring in the Counties of Bergen, Passaic, Middlesex, and Somerset. Similar to 1994, some divergence in the rates of job growth took place among the several labor markets that make up the eight-county Northeastern New Jersey sector. Growth was strongest in the more recently developed areas of Somerset and Middlesex Counties, along the more rapidly growing highway corridors in the periphery of the region, and at the Hudson County waterfront. Labor Force According to figures provided by the New Jersey Star Ledger, unemployment rates in the State of New Jersey declined during the first six months of 1996, averaging 6.1%, compared to 6.7% for the first six months in 1995. The state has regained 200,000 jobs, or about 75% of the 262,000 jobs lost during the last recession. According to information provided by the Port Authority of New York and New Jersey, unemployment rates also fell in the urbanized counties of Northern New Jersey. In Hudson County, the rate of unemployment fell to 9.4% in the first half of 1995, from 10.0% last year. Passaic County's unemployment rate stood at 8.9% - down from 10.1% at mid-1994. Essex County's rate was 7.9% in the first six months of 1995, compared to 8.9% in 1994. Regional unemployment rates in the suburban areas were at or below the national average the first half of 1995. In the New York Suburbs, joblessness eased consistently throughout the first six months of the year, averaging 4.9%. The suburban counties of Northern New Jersey averaged 5.3% - HVS International, Mineola, New York Market Area Analysis 32 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= also all at or below the nation's average rate of unemployment. Somerset County boasted the region's lowest jobless rate, at 4.0%. Construction Contracts and Starts The value of new construction contracts awarded during the year, reported by F. W. Dodge, is an indicator of the planned construction activity and employment demand over time, as work is completed on these projects. During the first six months of 1995, total planned spending on new construction awards in the New York-New Jersey region rose by 3.8%, compared to a 2.0% increase in 1994. In inflation-adjusted dollars, actual regional construction activities remained quite low, totaling $5.3 billion. This amount represented the lowest level of construction spending since the $4.8 billion recorded in 1977. In the Northern New Jersey area, total construction spending decreased by 2.6% during the first half of 1995. Nationally, F. W. Dodge reported a 2.0% decrease in total construction spending, compared to 1994. In Northern New Jersey, a 1.0% increase in the first six months of 1995 was recorded in commercial/industrial construction spending over 1994 levels. Residential construction spending in Northeastern New Jersey also experienced considerable gains, increasing by 17.8% in the first half of 1995. Infrastructure construction spending in the region decreased by 6.0%, compared to a 12% increase in 1994. Gains were recorded in all parts of the region except infrastructure construction. Nationally, infrastructure spending increased by 1%, compared with 1994 levels. Office Market The New Jersey Star Ledger reports that gradual recovery in office market conditions continued in much of the Northern and Central New Jersey region during the first half of 1996, with overall vacancy rates falling to their lowest level since 1987. After three consecutive quarters of increased occupancy, the overall vacancy rate for the two regions stands at 17.9%, down two percentage points from a year ago. However, Class A vacancy hit its lowest point in a decade, at 13.4%, with several sub-markets reporting Class A vacancy below 10%. Approximately 81% of the 1.5 million square feet of office space absorbed throughout the entire region was in Class A space. Overall, space came off the market at a rate 14% higher than during the first six months of 1995. Residential Market Rising interest rates in 1994 meant higher mortgages rates which, in turn, depressed regional housing markets in the first six months of 1995. The HVS International, Mineola, New York Market Area Analysis 33 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= largest drop in sales was registered in the fourth quarter of 1994, with the peak of 30-year mortgage rates at 9.1%, according to the National Association of Realtors. For the first six months of 1995, total sales in select residential locations of the region - including Northern New Jersey, Westchester and Nassau Counties in New York, and the western portion of Suffolk County - were still more than 10% lower than the comparable period a year ago. However, the rate of decline has been easing. Residential mortgage rates had moved downward to just over 7.5% by June, 1995. International Activity According to the New Jersey Star Ledger, international trade continued to become a more important part of New Jersey's economy in 1995, with exports of $18.3 billion, up $1.5 billion from 1994 and $3.9 billion from 1993. Exports grew to 7.1% of the state's gross domestic product, and increase of 0.9% from 1994. Total jobs related to international trade in New Jersey now number approximately 850,000, according to the Bureau of Labor Statistics. According to the New York and New Jersey Port Authority, international investment activity in the region has quickened. Leading foreign economies with ties to the region have begun to recover. In addition, the low value of the dollar has made investment in U.S. assets a bargain. According to information from the Port Authority of New York and New Jersey, office leasing activity by foreign tenants totaled 1.2 million square feet in the first half of 1995, compared to 1.9 million square feet leased in all of 1994. Firms from Switzerland and the U.K. represented more than half of the leasing activity in 1995. German, Japanese, and Canadian firms have also signed leases for significant amounts of office space in the region. International investors also purchased office buildings in the region. Purchases amounted to 1.3 million square feet of space, led by investors from Russia and Israel. Office buildings are not the only real estate asset that foreign investors purchased. Investors from 17 nations own 42 hotels, which comprise 29% of the total transient rooms inventory. Investors from Japan, Hong Kong, and the U.K. made up more than half of this total investment. Major Business and Industry The relatively low land cost (when compared to Manhattan), quality of living, and favorable accessibility of the greater Newark area make the Newark and Northern New Jersey region a popular location for major corporations to establish operations and corporate headquarters. These HVS International, Mineola, New York Market Area Analysis 34 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= types of offices, as well as other regional installations are the major source for lodging demand in the market of the subject property. This discussion includes a sample of some of these corporate headquarters in the general vicinity of the subject property. Companies with corporate headquarters in New Jersey and north of Newark (in the Paramus and Woodcliff Lake area) include the Federal Paper Board, A & P, Toys R Us, TW Services, Hertz, Ingersoll-Rand, and Becton Dickinson. The Interstate 287 southern corridor, which includes the Cities of Parsippany through Basking Ridge, features many companies having a headquarters location there, including BASF, Armco, Warner-Lambert, Allied Signal, AT&T, and Schering-Plough. Companies with headquarters in the Wayne/Fairfield area, approximately halfway between the I-287 corridor to the southwest and the Paramus area to the northeast, include American Cynamid, GAF, Union Camp, Grand Union, Noritsu, and Ricoh. Finally, company headquarters south of Newark in the general area encompassing Edison to the south through Clark to the north include Merck, Hanson Industries, Engelhard, Johnson and Johnson, and Supermarkets General. Economic and Demographic Data We have evaluated various economic and demographic statistics to determine trends in lodging demand. Much of this evaluation has been discussed thus far in this section of the report. However, we have also included a discussion of the area's population, retail sales, and personal income below. The source of data used in this section of analysis is the Complete Economic and Demographic Data Source published by Woods & Poole Economics, Inc. - a well-regarded forecasting service based in Washington, DC. Using a data base containing more than 300 variables for each county in the nation, Woods & Poole employs a sophisticated regional model to forecast economic and demographic trends. Historical statistics are based on census data and information published by the Bureau of Economic Analysis. Projections are formulated by Woods & Poole. All dollar amounts have been adjusted for inflation, and thus, growth or decline represents real change in constant dollars. Population According to Woods & Poole Economics, Inc., the statewide population increased at an average annual compounded rate of 0.5% between 1980 and 1995; an identical growth rate was registered from 1990 to 1995. These figures fall below the national gains of 1.0% and 1.1% for these respective periods. While population remained stable for Bergen County and the Bergen-Passaic, NJ MSA on an annual compounded basis between 1980 and HVS International, Mineola, New York Market Area Analysis 35 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 1995 (no growth was registered), population has increased on an annual compounded basis for these two areas by 0.4% between 1990 and 1995 for each classification. Projections indicate that population increases from 1995 through the Year 2000 will closely mirror recent trends, and will fall below national gains. Bergen County and the MSA are projected to experience a decline in population with an average annual compounded decline of 0.1% during this period. Forecasts for the state are more positive than those for the MSA and County, and indicate an average annual compounded population increase of 0.4% between 1995 and 2000. The United States population is anticipated to expand by 0.9% annually through the end of the decade. We find that the rate of population growth generally establishes a minimum rate of increase for commercial hotel demand; this observation also holds true for the meeting and convention segment if a majority of the meetings are business-oriented. Retail Sales Retail sales levels reflect both population trends and the propensity to spend money on retail goods. There is no direct correlation between retail sales and hotel demand; however, retail sales trends tend to gauge the economic health and vitality of the market. Retail sales growth should cause local businesses to prosper and make it more likely for new firms to enter the market. Information from Woods & Poole Economics, Inc. reveals that between 1980 and 1995, retail sales in Bergen County rose at an inflation-adjusted average annual compounded rate of 1.4%; the Bergen-Passaic, NJ MSA registered a moderately higher growth rate of 1.5% during this period. Retail sales levels for the state slightly surpassed this mark, with an increase of 1.6% annually, and the national growth rate of 1.9% annually was one-half percentage point higher than that registered by the MSA. For the short-term historical period of 1990 from 1995, retail sales growth maintained growth levels similar to the long-term period previously discussed except for the nation. Average annual compounded growth rates remained identical for the County and the MSA, and retail sales declined to a growth rate of 1.5% annually in New Jersey. The national retail sales expanded by 2.5% annually between 1990 and 1995. HVS International, Mineola, New York Market Area Analysis 36 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Countywide and the MSA retail sales are projected to slow to average annual compounded declines of 0.2% and 0.1%, respectively, between 1995 and 2000, which illustrates the expected stabilization of the regional economy. The state is expected to maintain a higher growth rate of 0.4% annually, which falls below the anticipated national gain of 0.9% per year. Personal Income According to the procedures outlined in the National Income and Product Accounts, personal income is calculated by totaling earned income (wages, salaries, other labor income, and proprietor's income), non-earned income, and residence adjustments and subtracting personal contributions to social insurance. Trends in personal income reflect the spending ability of local residents. Woods & Poole Economics, Inc. reports that personal income rose at average annual compounded rates of 2.2% in Bergen County and 1.9% in the Bergen-Passaic, NJ MSA between 1980 and 1995. New Jersey maintained a comparably high increase of 2.4% annually, and the 2.3% average annual compounded increase in the United States was largely similar to those achieved in the subject property's market area. Once again, the recession and related events caused slower personal income growth in all areas between 1990 and 1995. During this period, the average annual compounded growth rate was 0.3% in Bergen County and the Bergen-Passaic, NJ MSA, while the state achieved a growth rate of 1.0%, compounded annually. Between 1990 and 1995, the nation maintained personal income growth of 1.9% annually. Personal income growth in Bergen County is projected at an average annual compounded rate of 1.7% between 1995 and 2000; this anticipated growth suggests a stabilized economic climate through the remainder of the decade. Projected increases of 1.6% for the MSA and 2.0% for the state illustrate the anticipated strength for the greater Newark metropolitan area. Personal income growth in the United States is anticipated to occur at a slightly higher average annual compounded rate of 2.3% from 1995 through the Year 2000. Highway Traffic The subject property occupies a prominent location adjacent to the Garden State Parkway, and is located just north of the Interstate 80. The volume of highway traffic passing through a market area is a relevant factor that has a HVS International, Mineola, New York Market Area Analysis 37 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= direct impact on transient commercial and leisure demand and an indirect effect on meeting demand. ================================================================================ Table 4-2 Traffic Counts - -------------------------------------------------------------------------------- Garden State Percent Percent Year Parkway(1) Change Interstate 80(2) Change - -------------------------------------------------------------------------------- 1992 114,000 -- 122,700 -- 1993 113,800 (0.2)% 127,200 3.7% 1994 123,400 8.4 109,500 (13.9) 1995 119,700 (3.0) 117,100 6.9 Avg. Annual Comp. Percent Change, 1992 - 1995 1.6 % (1.5)% (1) At the Interstate 80 Toll Plaza (2) Near Passaic, New Jersey (approximately 5 miles west of subject property) Source: Data Development, New Jersey Department of Transportation - -------------------------------------------------------------------------------- Traffic counts for the Garden State Parkway illustrate strong growth of 8.4% in 1994, and a moderate decline of 3.0% in 1995. Between 1992 and 1995, traffic increased at the average annual compounded rate of 1.6%. On Interstate 80, traffic trends were opposite to those of the parkway, with growth in 1993 and 1995, and a considerable decline in 1994. Traffic on I-80 declined at the average annually compounded rate of 1.5% between 1992 and 1995. Airport Traffic Airport passenger counts are important indicators of transient lodging demand. Depending on the type and location of a particular airfield, a sizable percentage of arriving passengers may have need for hotel and motel accommodations. Trends showing changes in passenger counts also reflect local business activity and the overall economic health of an area. New York is one of the most important transportation centers in the United States, and the subject property's proximity to New York City positions it as a viable lodging alternative for visitors to New York City. There are three major commercial airports servicing the New York Metropolitan area including: John F. Kennedy (JFK) International Airport, LaGuardia Airport and Newark International Airport. Combined, these three airports serviced HVS International, Mineola, New York Market Area Analysis 38 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= over 78 million passengers in 1995. Over the past five years, the region has exhibited positive growth in airport passenger traffic, reflecting an average annual increase of 3.7%. New York City is a major destination for international business and tourism travel. International passenger traffic accounted for nearly 30% of total passenger volume into the city in 1995. International traffic has reflected strong growth over the last several years. Development activities at both JFK and Newark Airports are expected to boost airport traffic at both facilities. These plans are targeted to make both airports more accessible to the public and/or expand existing facilities. The JFK Redevelopment Plan consists of expansion to the existing facilities at Kennedy Airport. A new terminal is being constructed at the site of the former Eastern Air Lines facility, in addition to an expansion of the existing terminals. Another major planned development is the construction of a people mover, which would allow for connection of the airport to mass transit systems such as the Long Island Railroad and New York City mass transit. Development plans at Newark International Airport include the construction of a monorail. The monorail is intended to provide easier transportation between points throughout the airport. The following tables illustrate the historical passenger volume handled by the three New York area International Airports. HVS International, Mineola, New York Market Area Analysis 39 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-3 Growth at the Three New York Area Airports (Total Arrivals and Departures) - -------------------------------------------------------------------------------- Percent Percent Percent Year JFK Change LaGuardia Change Newark Change - -------------------------------------------------------------------------------- 1968 19,573,628 --- 10,481,999 --- 6,716,584 --- 1969 19,507,694 (0.3)% 11,736,383 12.0 % 7,130,537 6.2 % 1970 19,096,705 (2.1) 11,845,141 0.9 6,460,489 (9.4) 1971 19,310,714 1.1 12,796,002 8.0 6,105,054 (5.5) 1972 20,725,700 7.3 14,234,735 11.2 6,752,395 10.6 1973 31,389,159 51.5 14,027,360 (1.5) 6,835,203 1.2 1974 20,216,436 (35.6) 13,703,028 (2.3) 6,451,857 (5.6) 1975 19,475,761 (3.7) 13,185,753 (3.8) 6,265,797 (2.9) 1976 21,032,973 8.0 14,088,797 6.8 6,752,726 7.8 1977 22,545,497 7.2 15,087,530 7.1 7,303,604 8.2 1978 24,860,753 10.3 17,094,972 13.3 8,469,465 16.0 1979 26,976,675 8.5 18,391,035 7.6 9,296,942 9.8 1980 26,796,066 (0.7) 17,467,962 (5.0) 9,223,260 (0.8) 1981 25,752,719 (3.9) 18,146,191 3.9 10,181,865 10.4 1982 26,452,508 2.7 18,516,891 2.0 11,731,062 15.2 1983 27,904,474 5.5 18,813,397 1.6 17,411,253 48.4 1984 29,934,779 7.3 20,302,511 7.9 23,654,163 35.9 1985 28,945,000 (3.3) 20,542,000 1.2 28,577,000 20.8 1986 27,224,000 (5.9) 22,189,000 8.0 29,433,000 3.0 1987 30,192,000 10.9 24,226,000 9.2 23,475,000 (20.2) 1988 31,166,000 3.2 24,159,000 (0.3) 22,496,000 (4.2) 1989 30,323,000 (2.7) 23,158,000 (4.1) 20,928,000 (7.0) 1990 29,794,000 (1.7) 22,795,000 (1.6) 22,255,000 6.3 1991 26,229,068 (12.0) 19,654,344 (13.8) 22,276,396 0.1 1992 27,767,073 5.9 19,656,145 0.0 24,285,164 9.0 1993 26,796,843 (3.5) 19,804,566 0.8 25,809,413 6.3 1994 28,809,322 7.5 20,730,467 4.7 28,020,482 8.6 1995 30,829,781 7.0 20,599,394 (0.6) 26,626,231 (5.0) Average Annual Compounded Growth 1968 - 1995 1.7 % 2.5 % 5.2 % 1980 - 1995 0.9 1.1 7.3 1990 - 1995 0.7 (2.0) 3.7 Source: Port Authority of New York and New Jersey - Aviation Department - -------------------------------------------------------------------------------- Tourist Attractions Although commercial activity is an important component of the area economy, the greater New York area is also a major tourism destination. The subject property will often benefit from tourism related directly to New York City; tour groups will often utilize greater-Newark area guestroom HVS International, Mineola, New York Market Area Analysis 40 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= supply due to the cheaper room rates - when compared to New York City - that are available. Leisure travel in the subject property's market area is also affected by events occurring at the Meadowlands Sports Complex. The complex was constructed in 1976 on a 750-acre site for approximately $450 million. The project was entirely financed by the sale of bonds issued by the New Jersey Sports and Exposition Authority, at no expense to the taxpayers. Surplus operating revenues from the complex are turned over to the State of New Jersey General Fund, to which the complex has contributed more than $60 million. The three major facilities of the complex are Giants Stadium, Brendan Byrne Arena, and Meadowlands Racetrack. The following table illustrates the total attendance within the Meadowlands Sports Complex. The significant increase in attendees at Giants Stadium in 1994 represents the World Cup Soccer tournament that was held there that year. Because this is not an annual event, the large average annual compounded growth in 1994 at Giants Stadium is not indicative of future trends. ================================================================================ Table 4-4 Meadowlands Sports Complex Annual Attendance - -------------------------------------------------------------------------------- Brendan Meadowlands Total Year Giants Stadium Byrne Arena Racetrack Attendance - -------------------------------------------------------------------------------- 1985 2,200,000 2,100,000 2,800,000 7,100,000 1986 1,750,000 2,000,000 2,400,000 6,150,000 1987 1,700,000 2,200,000 2,600,000 6,500,000 1988 2,700,000 2,400,000 2,400,000 7,500,000 1989 2,100,000 2,300,000 2,200,000 6,600,000 1990 2,200,000 2,400,000 2,000,000 6,600,000 1991 2,300,000 2,000,000 2,000,000 6,300,000 1992 2,200,000 1,900,000 2,500,000 6,600,000 1993 2,000,000 1,900,000 2,000,000 5,900,000 1994 3,200,000 2,500,000 1,850,000 7,550,000 1995 1,600,000 2,300,000 1,600,000 5,500,000 Average Annual Compounded Growth - -------------------------------- 1985 - 1995 -3.1 % 0.9 % -5.4 % -2.5 % 1990 - 1995 -6.2 -0.8 -4.4 -3.6 Source: New Jersey Sports & Exposition Authority - -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 41 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Woods & Poole Data The following table summarizes the economic and demographic trends discussed throughout this section. All figures that reflect dollar amounts have been adjusted for inflation, and thus, reflect real change. It should be noted that the percentage changes indicated in the following tables are based on unrounded figures, and thus, may not calculate exactly. HVS International, Mineola, New York Market Area Analysis 42 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-5 Economic and Demographic Data for the Subject Property's Market Area - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------ Long-Term Historical Population (+,000) Bergen County 1980-1995 846.1 841.3 (0.0)% Bergen-Passaic, NJ MSA 1980-1995 1,294.6 1,303.2 0.0 State of New Jersey 1980-1995 7,377.0 7,938.8 0.5 United States 1980-1995 227,225.6 262,791.0 1.0 Short-Term Historical Population (+,000) Bergen County 1990-1995 825.6 841.3 0.4 Bergen-Passaic, NJ MSA 1990-1995 1,279.0 1,303.2 0.4 State of New Jersey 1990-1995 7,740.1 7,938.8 0.5 United States 1990-1995 249,401.4 262,791.0 1.1 Projected Population (+,000) Bergen County 1995-2000 841.3 835.3 (0.1) Bergen-Passaic, NJ MSA 1995-2000 1,303.2 1,297.3 (0.1) State of New Jersey 1995-2000 7,938.8 8,107.5 0.4 United States 1995-2000 262,791.0 274,758.4 0.9 Long-Term Historical Retail Sales (+,000,000) Bergen County 1980-1995 6,498.9 7,971.3 1.4 Bergen-Passaic, NJ MSA 1980-1995 9,201.4 11,501.7 1.5 State of New Jersey 1980-1995 45,469.7 57,963.4 1.6 United States 1980-1995 1,340,768.9 1,765,826.1 1.9 Short-Term Historical Retail Sales (+,000,000) Bergen County 1990-1995 7,445.8 7,971.3 1.4 Bergen-Passaic, NJ MSA 1990-1995 10,665.4 11,501.7 1.5 State of New Jersey 1990-1995 53,923.1 57,963.4 1.5 United States 1990-1995 1,557,380.2 1,765,826.1 2.5 Projected Retail Sales (+,000,000) Bergen County 1995-2000 7,971.3 7,905.8 (0.2) Bergen-Passaic, NJ MSA 1995-2000 11,501.7 11,433.7 (0.1) State of New Jersey 1995-2000 57,963.4 59,157.0 0.4 United States 1995-2000 1,765,826.1 1,846,830.4 0.9 Long-Term Historical Retail Sales Per Capita Bergen County 1980-1995 7,680.8 9,474.9 1.4 Bergen-Passaic, NJ MSA 1980-1995 7,107.5 8,825.7 1.5 State of New Jersey 1980-1995 6,163.7 7,301.3 1.1 United States 1980-1995 5,900.6 6,719.5 0.9 Short-Term Historical Retail Sales Per Capita Bergen County 1990-1995 9,018.8 9,474.9 1.0 Bergen-Passaic, NJ MSA 1990-1995 8,338.8 8,825.7 1.1 State of New Jersey 1990-1995 6,966.8 7,301.3 0.9 United States 1990-1995 6,244.5 6,719.5 1.5
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 43 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-5 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------ Projected Personal Retail Sales Per Capita Bergen County 1995-2000 9,474.9 9,464.7 (0.0)% Bergen-Passaic, NJ MSA 1995-2000 8,825.7 8,813.2 (0.0) State of New Jersey 1995-2000 7,301.3 7,296.6 (0.0) United States 1995-2000 6,719.5 6,721.7 0.0 Long-Term Historical Eating and Drinking Place Sales (+,000,000) Bergen County 1980-1995 541.4 650.2 1.2 Bergen-Passaic, NJ MSA 1980-1995 773.6 889.0 0.9 State of New Jersey 1980-1995 3,991.7 5,226.8 1.8 United States 1980-1995 126,131.6 185,035.4 2.6 Short-Term Historical Eating and Drinking Place Sales (+,000,000) Bergen County 1990-1995 609.1 650.2 1.3 Bergen-Passaic, NJ MSA 1990-1995 844.0 889.0 1.0 State of New Jersey 1990-1995 4,781.7 5,226.8 1.8 United States 1990-1995 161,197.4 185,035.4 2.8 Projected Eating and Drinking Place Sales (+,000,000) Bergen County 1995-2000 650.2 661.1 0.3 Bergen-Passaic, NJ MSA 1995-2000 889.0 903.3 0.3 State of New Jersey 1995-2000 5,226.8 5,482.5 1.0 United States 1995-2000 185,035.4 199,127.3 1.5 Long-Term Historical Eating and Drinking Place Sales Per Capita Bergen County 1980-1995 639.9 772.8 1.3 Bergen-Passaic, NJ MSA 1980-1995 597.6 682.2 0.9 State of New Jersey 1980-1995 541.1 658.4 1.3 United States 1980-1995 555.1 704.1 1.6 Short-Term Historical Eating and Drinking Place Sales Per Capita Bergen County 1990-1995 737.8 772.8 0.9 Bergen-Passaic, NJ MSA 1990-1995 659.9 682.2 0.7 State of New Jersey 1990-1995 617.8 658.4 1.3 United States 1990-1995 646.3 704.1 1.7 Projected Eating and Drinking Place Sales Per Capita Bergen County 1995-2000 772.8 791.4 0.5 Bergen-Passaic, NJ MSA 1995-2000 682.2 696.3 0.4 State of New Jersey 1995-2000 658.4 676.2 0.5 United States 1995-2000 704.1 724.7 0.6 Long-Term Historical Personal Income (+,000,000) Bergen County 1980-1995 17,077.9 23,510.1 2.2 Bergen-Passaic, NJ MSA 1980-1995 23,811.7 31,794.3 1.9 State of New Jersey 1980-1995 120,336.5 171,425.6 2.4 United States 1980-1995 3,163,874.0 4,443,243.2 2.3
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 44 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-5 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------ Short-Term Historical Personal Income (+,000,000) Bergen County 1990-1995 23,187.9 23,510.1 0.3 % Bergen-Passaic, NJ MSA 1990-1995 31,361.9 31,794.3 0.3 State of New Jersey 1990-1995 162,895.3 171,425.6 1.0 United States 1990-1995 4,051,714.6 4,443,243.2 1.9 Projected Personal Income (+,000,000) Bergen County 1995-2000 23,510.1 25,571.6 1.7 Bergen-Passaic, NJ MSA 1995-2000 31,794.3 34,353.0 1.6 State of New Jersey 1995-2000 171,425.6 188,925.7 2.0 United States 1995-2000 4,443,243.2 4,972,219.5 2.3 Long-Term Personal Income per Capita Bergen County 1980-1995 20,184.0 27,945.0 2.2 Bergen-Passaic, NJ MSA 1980-1995 18,393.0 24,397.0 1.9 State of New Jersey 1980-1995 16,312.0 21,593.0 1.9 United States 1980-1995 13,924.0 16,908.0 1.3 Short-Term Historical Personal Income per Capita Bergen County 1990-1995 28,086.0 27,945.0 (0.1) Bergen-Passaic, NJ MSA 1990-1995 24,520.0 24,397.0 (0.1) State of New Jersey 1990-1995 21,046.0 21,593.0 0.5 United States 1990-1995 16,246.0 16,908.0 0.8 Projected Personal Income per Capita Bergen County 1995-2000 27,945.0 30,614.0 1.8 Bergen-Passaic, NJ MSA 1995-2000 24,397.0 26,480.0 1.7 State of New Jersey 1995-2000 21,593.0 23,303.0 1.5 United States 1995-2000 16,908.0 18,097.0 1.4 Long-Term Historical Employment - Bergen County (+,000) Farm 1980-1995 0.4 0.4 (0.6) Agriculture Services, Other 1980-1995 2.6 3.3 1.5 Mining 1980-1995 0.4 0.3 (2.7) Construction 1980-1995 18.2 20.5 0.8 Manufacturing 1980-1995 113.6 73.3 (2.9) Trans., Comm. & Public Utils. 1980-1995 23.2 25.4 0.6 Total Trade 1980-1995 131.6 141.1 0.5 Wholesale Trade 1980-1995 52.8 60.6 0.9 Retail Trade 1980-1995 78.8 80.5 0.1 Finance, Insurance, & Real Estate 1980-1995 30.6 48.8 3.2 Services 1980-1995 105.0 171.9 3.3 Total Government 1980-1995 44.6 44.8 0.0 Federal Civilian Govt. 1980-1995 3.5 3.4 (0.2) Federal Military Govt. 1980-1995 2.8 2.3 (1.4) State & Local Govt. 1980-1995 38.3 39.2 0.2 TOTAL 1980-1995 470.2 529.7 0.8
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 45 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-5 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------ Short-Term Historical Employment - Bergen County (+,000) Farm 1990-1995 0.4 0.4 (0.1)% Agriculture Services, Other 1990-1995 3.0 3.3 1.7 Mining 1990-1995 0.3 0.3 0.7 Construction 1990-1995 24.7 20.5 (3.6) Manufacturing 1990-1995 86.2 73.3 (3.2) Trans., Comm. & Public Utils. 1990-1995 26.5 25.4 (0.8) Total Trade 1990-1995 147.8 141.1 (0.9) Wholesale Trade 1990-1995 64.8 60.6 (1.3) Retail Trade 1990-1995 83.0 80.5 (0.6) Finance, Insurance, & Real Estate 1990-1995 53.7 48.8 (1.9) Services 1990-1995 160.0 171.9 1.4 Total Government 1990-1995 45.4 44.8 (0.2) Federal Civilian Govt. 1990-1995 3.9 3.4 (3.1) Federal Military Govt. 1990-1995 2.5 2.3 (1.9) State & Local Govt. 1990-1995 39.0 39.2 0.1 TOTAL 1990-1995 547.9 529.7 (0.7) Projected Employment - Bergen County (+,000) Farm 1995-2000 0.4 0.4 (0.7) Agriculture Services, Other 1995-2000 3.3 3.1 (0.9) Mining 1995-2000 0.3 0.3 0.4 Construction 1995-2000 20.5 20.7 0.3 Manufacturing 1995-2000 73.3 69.5 (1.1) Trans., Comm. & Public Utils. 1995-2000 25.4 26.1 0.5 Total Trade 1995-2000 141.1 142.8 0.2 Wholesale Trade 1995-2000 60.6 63.3 0.9 Retail Trade 1995-2000 80.5 79.4 (0.3) Finance, Insurance, & Real Estate 1995-2000 48.8 53.7 1.9 Services 1995-2000 171.9 179.9 0.9 Total Government 1995-2000 44.8 45.2 0.1 Federal Civilian Govt. 1995-2000 3.4 3.2 (0.8) Federal Military Govt. 1995-2000 2.3 2.3 0.2 State & Local Govt. 1995-2000 39.2 39.6 0.2 TOTAL 1995-2000 529.7 541.6 0.4
Source: Woods and Poole Economics, Inc. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 46 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The Lodging Market Supply and Demand Analysis section of this economic study and appraisal will relate these historical and projected growth trends to specific market segments based on their propensity to reflect visitation. This analysis will provide a basis for forecasting changes in room night demand in the subject property's area. HVS International, Mineola, New York Overview of External Forces 47 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 5. Overview of External Forces Affecting the U.S. Lodging Industry Introduction Hotel ownership is ultimately the business of creating and enhancing value. To understand the investment potential of lodging facilities, investors must be thoroughly aware of the many forces that can cause changes in the value of their properties. Although some of these forces are internal (such as the layout and design of the facilities, the quality of management, and the condition of the property), others are external (such as the local economic environment and the competitive nature of the market). The risk associated with hotel investment lies largely with the external forces that are beyond the control of ownership and contribute to the variability of future income flows. Investors and appraisers can project financial results by evaluating the historical impact of external forces on hotel values. Successful hotel investors seek opportunities where the risk of external forces can be minimized, thus reducing the uncertainty associated with income expectations. When investors engage in due diligence prior to acquiring a lodging facility, they are primarily interested in trends affecting a limited geographic market area, such as a town, city, or county. A broader overview takes into account national and international travel patterns and trends. An understanding of the general characteristics of the United States hotel market is important because these trends often foreshadow economic and demographic changes in smaller areas. This section of the appraisal will present an overview of the U.S. lodging industry by tracing many of the forces that influence hotel values. Historical economic and demographic data, and industry statistics will be analyzed to provide a basis for projections. Forecasts will be evaluated to determine their reasonableness. The conclusions represent another set of criteria that hotel investors consider in making their acquisition decisions. HVS International, Mineola, New York Overview of External Forces 48 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The Supply and Demand Relationship Most business ventures are influenced by the relationship between supply and demand. In the hotel industry, supply refers to the number of units. A unit consists of one or more rooms and represents the smallest accommodation that can be rented to a guest. Each unit must have a full bath and its own entrance to a public hallway or the building exterior. Demand refers to a room night, which is one unit that is occupied for one night. The supply and demand relationship has a significant influence on a hotel's occupancy and/or average room rate. Occupancy is calculated by dividing the number of rooms that are occupied for a specific period by the total number of rooms that are available during the same period. Average room rate is determined by dividing the total rooms revenue achieved during a specific period by the number of rooms occupied during that period; it also represents the weighted average of all the room rates charged during that period. In a market where demand is increasing faster than supply, occupancies rise and average rate growth generally exceeds inflation. When supply is increasing faster than demand, occupancies fall and average rates typically remain level or decline. Hotels generate revenue based on occupancy and average rate, and thus the supply and demand relationship is an important factor in analyzing profits and value. Hotel occupancy levels have shown definite cycles that reflect the balance between supply and demand. The early 1970s marked the beginning of a hotel building boom reminiscent of the 1920s. Many factors contributed to this expansion, but the two main elements were readily available financing and aggressive chains that were eager to sell franchises. The new construction during the 1970s was made possible by the enormous amount of financing generated by all lenders, particularly real estate investment trusts (REITs). These high-leverage finance companies were created to allow small investors to participate in real estate mortgages and equities. The concept was quickly accepted by Wall Street, and soon billions of dollars were available to finance real estate projects. Many lenders became so overwhelmed with new money that their underwriting procedures broke down and some marginal developments were approved. During the late 1960s and early 1970s, hotel companies actively expanded their chains through franchising. Franchising was a source of new capital, allowing hotel companies to grow and achieve national recognition using the franchisee's financial investment in individual properties. Some franchisors, eager to demonstrate sustained growth and establish a national HVS International, Mineola, New York Overview of External Forces 49 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= presence, employed questionable marketing tactics to sell new franchises. Salespeople were often compensated based on the number of franchises sold, so there was little incentive to discourage developers from investing in poor locations and overbuilt markets. Many lenders and hostelry developers were led to believe that a national franchise would guarantee a successful operation. The combination of readily available financing and aggressive hotel chains eager to sell franchises resulted in overbuilding and development of many poorly located, undercapitalized hostelries managed by inexperienced owners. The bubble burst on the lodging industry when inflation caused construction costs and interest rates to escalate. The 1974 energy crisis drastically reduced travel, and the accompanying recession curtailed business trips, conferences, and conventions. Operators of marginal properties quickly fell behind in their mortgage payments, and lenders were forced to foreclose. As lenders became hostelry owners, they either organized work-out departments headed by experienced hoteliers or engaged professional hotel management companies to assume operational responsibilities. Sales data indicate that lenders who were looking for quick sales to remove non-performing hotel assets from their books had to lower their prices substantially to attract all-cash buyers. Lenders who were willing to hold on to foreclosed hotels and employ professional management to reposition and improve the properties' operation were generally able to recoup their original investments in three to five years, once the industry began to recover. However, even lenders who repositioned their hotels had to take back favorable purchase-money financing to sell the properties because money from other sources was not available. History has shown that during economic downturns, hotel values generally do not fall in proportion to the properties' declining incomes. Sellers, and particularly lenders who take back hotels through foreclosure, are often unwilling to sell at substantially reduced prices. They are more likely to wait out the downward cycle and dispose of their assets when the market begins to rebound. Thus, appraisers can best reflect market behavior by projecting a facility's net income to a point of recovery and applying the proper discounted cash flow procedure over that time period. The late 1970s was a period of relative calm for the lodging industry. Because most lenders were recovering from the financial wounds inflicted by HVS International, Mineola, New York Overview of External Forces 50 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= the 1975 recession, they had little interest in making hotel mortgages. New construction was restrained, and primarily consisted of additions to existing properties and the development of some large, downtown hotels oriented toward the commercial and convention markets. The rebirth of center-city hostelries was a direct result of fuel shortages and the availability of government financing for inner-city redevelopment projects. Highway-oriented properties, on the other hand, were adversely affected by escalating gasoline prices and decreased automobile travel, and these lodging facilities lost some of their appeal among investors and hotel companies. Decreased building activity, the normal retirement of older hostelries from the market, and an improving economy created a favorable supply and demand relationship and record-high occupancy levels from 1979 to 1980. Average room rates increased rapidly as operators took advantage of the excess demand to recoup earlier losses and keep up with inflation. After the decline in hotel development during the late 1970s, the environment appeared suitable for a period of renewed expansion. However, the Federal Reserve tightened the money supply in the early 1980s, sending the prime interest rate up to double-digit levels. Most of the projects that were in the preliminary planning stages but lacked sensible financing were put on hold. Fiscal policy and declining energy prices eventually reduced the national inflation rate. This caused a decline in hotel interest rates beginning in 1983, and suddenly massive amounts of capital were available for real estate investments. Hotel developers who had been out of the market since the mid-1970s rushed to initiate new projects. They were aided by several major real estate development incentives: high occupancies and escalating room rates, readily available debt and equity financing, and unique income tax benefits designed to stimulate the national economy out of a recession. During the early 1980s, trends were generally favorable for new hotel development. Although the recession caused a decline in lodging demand, many markets showed relatively high occupancy levels. Room rates were usually able to keep up with inflation, and the travel industry was expected to boom as a result of a recovering economy. Franchise sellers signed up new prospects aggressively, using product segmentation to justify the saturation of a market with a common brand. HVS International, Mineola, New York Overview of External Forces 51 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Financing was readily available from the savings and loan industry. Following deregulation, these banks were permitted to lend on commercial real estate, such as hotels. Although savings and loans had experience in making loans on single-family homes, few had expertise with commercial properties, and fewer still with hotels. The result was almost identical to the real estate investment trust fiasco the decade before: loan underwriting and administration were inept and sometimes nonexistent, the number of loans made seemed more important than the quality of the real estate and the integrity of the borrower, and short-term funds were often used to finance long-term mortgages. In the early 1990s, the industry suffered the consequences of this lending spree: most major hotel markets became severely overbuilt and many savings and loans went out of business. Another factor contributing to hotel development in the 1980s was the very favorable treatment provided by income tax regulations. By carefully structuring hotel syndications to take advantage of all available tax benefits, investors could virtually recoup their total cash outlay in the first year and reap additional benefits in the future regardless of the economic success of the underlying asset. Because there was little incentive to justify a transaction's economics (i.e., cash flow and reversionary benefits), a number of syndicators overpaid for hotel properties, took out usurious fees, and overloaded their hotels with debt. A change in the tax law in the mid-1980s eliminated many of the benefits associated with hotels, but the overbuilding in most markets was either in progress or had already taken place. By the end of the 1980s, the abuses of the savings and loans had become apparent, but it was too late to reverse the overbuilding. Between 1985 and 1990, approximately 556,000 rooms were added to the U.S. hotel supply. The national economy entered another recession in 1990, and this factor (coupled with overbuilding and the Persian Gulf War in 1991) caused the national hotel occupancy rate to bottom out at 60.9%. In some markets, hotel occupancies were as low as 35%. This supply and demand imbalance was almost identical to the situation in the 1970s that led to numerous hotel failures. As in the REIT days, the number of non-performing loans reached record levels, and lenders moved to a work-out mode of operation in order to foreclose and restructure their hotel investments. Many of the savings and loans were taken over by the government and their hotel assets were sold at auction. HVS International, Mineola, New York Overview of External Forces 52 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= According to the American Council of Life Insurance, which represents major life insurance companies, the number of delinquent hotel loans and the number of hotel loans in foreclosure peaked in 1991. This trend is undergoing a reversal as the U.S. lodging industry begins to recover. Loan restructuring was an attractive alternative to foreclosure during this period, and the number of loans in good standing with restructured terms almost doubled. By 1993, new hotel construction had declined significantly. Lenders, trying to get out from under problematic hotel portfolios, curtailed all real estate lending and would not even consider hotels. The tax benefits associated with lodging facilities had been reduced significantly, and passive investors left the hospitality market entirely. The slowdown in the growth of supply had a beneficial impact on occupancy levels, which started to recover in 1992. Improved occupancies are expected to continue through the late 1990s as increases in lodging demand outpace growth in supply. Beginning in 1991, many lenders and the Resolution Trust Corporation (RTC) sold their oldest and least desirable hotels at liquidation prices. Because virtually no third-party financing was available, most lenders were forced to take back purchase-money mortgages at favorable terms in order to sell these properties without suffering massive write-downs. The newer and more desirable hotels were not put on the market, because their lenders/owners were waiting for values to recover. This course of action significantly reduced the number of transactions involving good-quality lodging facilities. The following table shows the volume of hotel transactions exceeding $10,000,000 between 1990 and 1995. ================================================================================ Table 5-1 Summary of Major Hotel Transactions - --------------------------------------------------------------------------------
Year 1990 1991 1992 1993 1994 1995 - ---------------------------------------------------------------------------------------------- Number of Transactions 130 54 67 52 92 104 Number of Rooms 40,543 16,427 25,187 19,935 33,503 36,951 Average Price Per Room $136,000 $ 91,000 $ 85,000 $ 79,000 $ 80,000 $ 83,000
Source: HVS International - -------------------------------------------------------------------------------- HVS International, Mineola, New York Overview of External Forces 53 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= In 1991, there were only 54 major hotel sales recorded. This number increased to 67 in 1992 and declined to 52 in 1993, then rose dramatically in 1994 and 1995. During the low-volume years, many sellers remained on the sidelines waiting for values to increase before placing their properties on the market. The jump in 1994 is attributable to a number of factors, including the greater availability of mortgage funds, a return of institutional investors to the market, and a resurgence of investor interest in lodging facilities. The profile of typical hotel buyers has changed somewhat. During the mid-1980s, when tax-driven syndication's were popular, many hotels were purchased by passive investors who hired management companies to operate their properties. These owners had little involvement in day-to-day management decisions, which occasionally led to poor management and financial losses. Today, most buyers of major hotels are owner-operators who bring with them both the acquisition funds (usually from a joint venture partner) and management expertise. We also note that real estate investment trusts (REITs) and public hotel companies (C-Corps) are actively acquiring hotels using funds from public equity stock offerings. The supply of new hotel rooms is expected to increase slowly during the next several years. Lenders are beginning to return to the market, and are making some hotel loans based on conservative criteria. Initially, mortgage funds were available mainly to the budget and economy lodging sectors, for the purpose of refinancing existing properties or assisting buyers in acquisitions. Now, a number of lenders are willing to finance new construction for these small, low-end properties. Although financing is also becoming available for the acquisition of large, full-service hotels, very little has been allocated for new construction. At present, active hotel lenders are not necessarily traditional banks and insurance companies, but may include credit companies and Wall Street securities firms. A number of hotel owners and developers are now constructing budget and economy hotels; a few are planning more upscale, full-service properties. Most lenders are taking a conservative approach to new hotel loans, which should limit new development to those projects that demonstrate true economic feasibility. As a result, severe short-term overbuilding is unlikely. HVS International, Mineola, New York Overview of External Forces 54 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Room Rates The supply and demand relationship has a direct impact on hotel occupancies and an indirect influence on room rate growth. Between 1978 and 1995, hotel room rates increased at an average annual compounded rate of almost 6%. Significant rate growth was recorded during the late 1970s and early 1980s as a result of strong occupancies (70%'s) coupled with a high monetary inflation rate (14%). In recent years, room rate growth slowed as a result of low occupancies and a drop in inflation. Hotel room rates generally increase faster than the Consumer Price Index (CPI) when occupancies are strong or moving upward. When occupancies are low or declining, room rate growth tends to lag behind the CPI; in some cases, rates may remain flat or actually drop. The following table compares the historical and projected annual increase in hotel room rates in the United States to the change in the national CPI. HVS International, Mineola, New York Overview of External Forces 55 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 5-2 Percent Change in Average Room Rates Versus CPI - U.S. Hotels - -------------------------------------------------------------------------------- Consumer Price Hotel Room Rate Index Hotel Year Percent Change Percent Change Occupancy - -------------------------------------------------------------------------------- 1973 4.2% 6.2% 70.2% 1974 7.6 11.0 64.0 1975 7.3 9.1 63.7 1976 8.2 5.7 65.8 1977 8.1 6.5 67.3 1978 14.0 7.7 69.2 1979 17.0 11.3 71.9 1980 15.2 13.5 70.6 1981 10.0 10.3 67.9 1982 6.5 6.2 66.7 1983 5.1 3.2 64.4 1984 6.9 4.3 64.0 1985 4.6 3.6 63.1 1986 3.2 1.9 62.5 1987 3.6 3.6 61.9 1988 3.6 4.1 62.3 1989 3.5 4.8 63.2 1990 3.0 5.4 62.4 1991 0.6 4.2 60.9 1992 1.4 3.0 62.1 1993 2.8 3.0 63.1 1994 5.2 2.6 64.7 1995 4.8 2.8 65.5 1996* 5.0 3.0 66.0 1997* 5.5 3.5 67.0 1998* 6.0 4.0 68.0 1999* 5.5 4.0 68.0 Sources: Smith Travel Research & HVS International * Projected - -------------------------------------------------------------------------------- This table shows two periods when hotel room rate growth failed to keep pace with the CPI. From 1973 to 1975, the hotel industry was suffering from overbuilding related to real estate investment trusts, a recession, and a downturn in travel caused by the oil embargo. The second period of slow room rate growth occurred between 1988 and 1993, when the industry was again affected by overbuilding and a weak economy. The table illustrates HVS International, Mineola, New York Overview of External Forces 56 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= that during periods of prosperity, room rates are a good hedge against inflation; this was true even when the CPI increased at double-digit levels. The projections indicate a strong recovery of room rates as the relationship between supply and demand becomes more favorable. Growth is expected to peak in 1998 at 6%, which is significantly higher than the projected gain in the CPI. This may appear high, but a similar trend occurred in 1978, when room rates rose 14.0% and the CPI increased by only 7.7%. Hotels are unique because their room rates can be adjusted at any time. Unlike office space, where rents are typically negotiated for a five-year period, hotel operators are free to base rates on occupancy trends. Using sophisticated yield management programs, modern lodging facilities can ride the demand curve and maximize room rates whenever the market permits. As a result, hotels generally offer significant upside potential during periods of economic prosperity. If lodging facilities can increase room rates faster than the CPI and still maintain occupancies, bottom-line profits usually escalate. If they can raise room rates and occupancy at the same time, profits will grow significantly. The opposite occurs when room rates fail to keep pace with inflation. Because market value is basically a multiple of bottom-line profits, changes caused by fluctuations in occupancy and average rate have a direct impact on value. Rooms Revenue per Available Room (RevPAR) The ability of a hotel to maximize its occupancy and room rate is measured in terms of rooms revenue per available room (RevPAR), which is the product of occupancy and average rate. Between 1978 and 1995, RevPAR in the U.S. lodging industry increased at an average annual compounded rate of approximately 5%. As in the case of average rate, most of the increase occurred during the late 1970s, when occupancies escalated rapidly. The only decline in RevPAR occurred in 1991. Trends in Hotel Sales HVS International constantly monitors hotel markets in order to collect information on sales of lodging facilities. This comprehensive database is known as the Hospitality Market Data Exchange (HMDE). The HMDE includes more than 90% of all hotel sales that took place during this period. The HMDE data shows that the number of transactions peaked at 726 in 1986. This strong activity is largely attributable to pending changes in the tax laws, which made it less favorable to own hotels. It is also possible that HVS International, Mineola, New York Overview of External Forces 57 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= forward-thinking investors noted the substantial overbuilding and declining economy and decided to bail out at that time. In 1987 and 1990, the average sales price per room peaked at $75,000. This was more than twice the 1981 average of $36,000. Following the 1990 peak, hotel prices fell rapidly as occupancies and profits were eroded by the massive number of hotel rooms entering the market. By 1991, the year of the Persian Gulf War, sales prices had fallen to $38,000 per room. Even the highest price per room declined from the record $1,195,652 (for the sale of the Bel Aire Hotel) to $251,816 in 1992. The market hit bottom in 1993 when the average sales price dropped to $36,000 per room. Prices recovered rapidly in 1994 and 1995 as investors became interested in hotels again and more full-service properties were put on the market. In 1995, the average sales price was $61,000 per room. The figures presented in the HMDE represent actual sales prices; no attempt was made to adjust for factors such as favorable or unfavorable financing, forced or liquidation sales, bankruptcy sales, foreclosures, and so forth. As a result, the average price per room does not necessarily reflect market value, which assumes a willing buyer and a willing seller. Many of the transactions that took place during the early 1990s involved unwilling sellers - usually lenders who were forced to liquidate hotel portfolios quickly at prices that were below market levels. Most hotel experts agree that a recovery is underway, and they recommend that owners hold their properties until more favorable conditions prevail. Trends in Hotel Values A more meaningful indicator of trends in hotel value is the Hotel Valuation Index (HVI), developed by HVS International. This index tracks changes in hotel values in 23 major markets and the nation as a whole. It is developed through an income approach, using market area data provided by Smith Travel Research and operational and capitalization rate information from HVS International, and is indexed to the 1986 U.S.A. value (1.0000). The following table sets forth the HVI from 1986 to 1995. HVS International, Mineola, New York Overview of External Forces 58 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 5-3 Hotel Valuation Index per Room - --------------------------------------------------------------------------------
Valuation Index Per Room ------------------------ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 ------------------------------------------------------------------------------------------------------ Honolulu 3.3571 4.0357 4.6964 5.2857 5.3214 4.7857 4.9286 4.2857 4.3929 5.6071 New Orleans 1.5357 1.7500 2.2857 2.3929 2.5000 2.6071 3.2857 3.2500 3.8929 4.4286 New York 3.5714 4.1071 4.6429 4.5357 3.9286 3.0357 2.5714 2.5714 3.1429 4.1071 San Francisco 2.5000 3.0893 3.2500 3.0714 2.9286 2.5714 2.5714 2.9643 3.2143 4.0000 Phoenix 1.2143 1.0714 1.1786 1.5357 1.4286 1.2500 1.5000 1.9643 2.3571 3.2143 San Diego 2.8571 2.3571 2.5714 2.6786 2.3929 2.5357 2.5357 2.2143 2.3571 3.0357 Miami 1.4286 1.6071 1.7321 2.1429 2.1786 2.2500 2.5714 2.7857 2.3214 2.9286 Washington, DC 2.1786 2.1786 2.4464 2.6071 2.2500 1.8571 2.0357 2.5000 2.3929 2.8929 Atlanta 1.0714 1.0179 1.0536 1.0357 1.1429 1.1250 1.2857 1.7857 2.1429 2.6786 Minneapolis 0.7321 0.6964 0.7143 0.7143 0.7857 1.0000 1.2857 1.5714 1.8214 2.1786 Chicago 1.4643 1.5000 1.5714 1.5000 1.4286 1.2143 1.2500 1.5000 1.8571 2.1786 Boston 2.3571 2.7143 2.6071 2.1429 1.8214 1.2500 1.3036 1.3214 1.6071 2.1071 Fort Lauderdale 1.4643 1.2679 1.3214 1.4286 1.4821 1.3571 1.7143 1.8929 1.6071 1.9286 Orlando 1.5000 1.6429 1.9286 2.5000 2.5357 1.8929 2.0714 1.7857 1.6071 1.8929 Denver 0.5357 0.4464 0.4643 0.4821 0.7857 0.9268 1.0357 1.3214 1.5000 1.8571 Dallas 0.5536 0.6250 0.6607 0.7321 0.7857 0.7143 0.9643 1.0357 1.3214 1.7143 USA 1.0000 0.9464 1.0536 1.1250 1.0714 0.9214 0.9929 1.1429 1.3214 1.6071 Los Angeles 2.1071 2.2857 2.3929 2.4643 2.1786 1.5714 1.0714 0.9643 1.1964 1.5000 Tampa 0.8393 0.7679 0.8571 1.1429 1.2857 1.0357 1.0714 1.0357 1.1071 1.3214 Anaheim 1.7679 1.7321 1.7500 1.8571 1.6071 1.2857 0.9642 0.9464 0.8393 1.2500 Houston 0.3571 0.4286 0.6964 0.7857 1.1071 1.1607 1.1429 1.0357 1.0000 1.1786 Philadelphia 1.4643 1.5357 1.4286 1.3214 1.0714 0.6786 0.5714 0.6071 0.7500 1.0714 Norfolk 1.1786 1.0536 0.9286 0.7857 0.6429 0.5357 0.6071 0.6429 0.7500 0.9643 Riverside 0.9643 1.2143 1.5714 1.7143 1.4643 1.2500 0.7857 0.5357 0.4286 0.5357
Source: HVS International - -------------------------------------------------------------------------------- The HVI can be used to show the value change in a particular market over time or to show the relative difference in hotel values in various cities. The following table shows the annual change in hotel values in 23 major markets and the United States as a whole. HVS International, Mineola, New York Overview of External Forces 59 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 5-4 Percent Change in the Hotel Valuation Index - --------------------------------------------------------------------------------
Annual Percent Change --------------------- '86-'87 '87-'88 '88-'89 '89-'90 '90-'91 '91-'92 '92-'93 '93-'94 '94-'95 '86-'95 --------------------------------------------------------------------------------------------------------------- Honolulu 20 % 16 % 13 % 1 % -10 % 3 % -13 % 3 % 28 % 67 % New Orleans 14 31 5 4 4 26 -1 20 14 188 New York 15 13 -2 -13 -23 -15 0 22 31 15 San Francisco 24 5 -5 -5 -12 0 15 8 24 60 Phoenix -12 10 30 -7 -13 20 31 20 36 165 San Diego -18 9 4 -11 6 0 -13 6 29 6 Miami 12 8 24 2 3 14 8 -17 26 105 Washington, DC 0 12 7 -14 -17 10 23 -4 21 33 Atlanta -5 4 -2 10 -2 14 39 20 25 150 Minneapolis -5 3 0 10 27 29 22 16 20 198 Chicago 2 5 -5 -5 -15 3 20 24 17 49 Boston 15 -4 -18 -15 -31 4 1 22 31 -11 Fort Lauderdale -13 4 8 4 -8 26 10 -15 20 32 Orlando 10 17 30 1 -25 9 -14 -10 18 26 Denver -17 4 4 63 18 12 28 14 24 247 Dallas 13 6 11 7 -9 35 7 28 30 210 USA -5 11 7 -5 -14 8 15 16 22 61 Los Angeles 8 5 3 -12 -28 -32 -10 24 25 -29 Tampa -9 12 33 12 -19 3 -3 7 19 57 Anaheim -2 1 6 -13 -20 -25 -2 -11 49 -29 Houston 20 62 13 41 5 -2 -9 -3 18 230 Philadelphia 5 -7 -8 -19 -37 -16 6 24 43 -27 Norfolk -11 -12 -15 -18 -17 13 6 17 29 -18 Riverside 26 29 9 -15 -15 -37 -32 -20 25 -44
Source: HVS International - -------------------------------------------------------------------------------- On a national basis, hotel values rose in 1988 and 1989, then declined in 1990 and dropped by 14% in 1991. A turnaround commenced in 1992, when values increased by 8%; still greater increases of 15% in 1993, 16% in 1994, and 22% in 1995 signaled that a recovery was well underway. In the case of the individual cities, it is obvious that the movement in national hotel values has been offset somewhat by trends in local markets. Between 1986 and 1995, Riverside hotels lost more than 40% of their value, while San Francisco showed a 60% increase. Anaheim, Los Angeles, and Philadelphia also suffered significant drops. Future Trends Most hotel owners, operators and lenders agree that the U.S. lodging industry has emerged from one of the worst periods since the Depression of 1929. Today, there are many indications that signal a strong recovery is underway, and most hotels have experienced a dramatic rise in profitability. Conversely, the hotel industry remains cyclical, and there are long-term trends and risk factors that could have an unfavorable impact on the HVS International, Mineola, New York Overview of External Forces 60 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= operating results and investment potential of lodging facilities. The following list summarizes the positive and negative factors that are likely to influence the U.S. lodging industry in coming years. o No significant amount of new hotel development is likely to occur during the next three to five years. Lenders stopped financing new hotels in the early 1990s because of the high rate of loan defaults, and they are only now starting to make construction loans. Although mortgage funds are available to refinance existing properties and construction loans are being made for economy hotels, mortgages for new hotels in the mid-rate, first-class, and luxury categories are still difficult to secure. This lack of financing is major barrier to entry, and will prevent a number of proposed projects from moving forward. With only a slow increase in supply, hotel occupancies should rebound as fast as the growth in demand permits. o An additional barrier to entry is the current discrepancy between market values and replacement costs for first-class and luxury hotels. In today's market, many upscale hotels are still selling for prices that are below what it would cost to develop a comparable hotel. As a result, there is little justification for building a new hotel when a similar, existing facility is available for sale at some fraction of the cost. Until the gap between market value and replacement cost narrows, there will be minimal new hotel construction in the upper-tier segments. The market values and replacement costs of budget and economy hotels have been in equilibrium for several years which is another reason why new development is proceeding in these segments. o The U.S. economy continues to improve, which suggests that more people are traveling. Many people curtailed their travel plans during the recent recession, and there is likely to be pent-up demand that will be released as consumer confidence escalates. o Minimal additions to the hotel supply coupled with growth in demand should result in further improvement in occupancies during the next several years. HVS International, Mineola, New York Overview of External Forces 61 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= o As shown by the historical data, hotel room rates rise rapidly as occupancies escalate. The most frequent complaint that owners and operators had during the recent recession was their inability to achieve average rate gains. Starting in 1994, gains in hotel room rates returned to levels in excess of inflation, foreshadowing enhanced profitability. In real dollars, hotel room rates are expected to return to 1988 levels by 1998. This is a good indication that hotel values will return to record levels in the next two to four years. o The low cost of capital is another factor that tends to enhance value. Because capitalization rates are tied directly to the price of capital, the lower the cost, the lower the cap rate and the higher the value. The cost of hotel debt capital averaged 10.5% in 1990. Today, similar financing is available at 8.5% to 9.5%. Recent hotel sales support the downward trend in capitalization rates. o Government regulations are becoming increasingly expensive for the U.S. hotel industry. A national health care policy could force small operators to provide better benefits for many more employees, particularly the part-time workers who are used extensively by hotels and restaurants. Environmental laws are becoming stricter and will require hotels to implement recycling, reuse, and conservation procedures. Congress has limited deductions for meals and entertainment expenses, which increases the cost of doing business in hotels and restaurants. Local municipalities use hotel rooms taxes as a source of revenue for general use, and the hotel rooms tax is so high in some areas that it has driven away demand. This is particularly true with respect to meetings and conventions, which can be held in cities that tax accommodations at a lower rate. o Improved technology is rapidly changing the way business is conducted. During the next decade, advances such as video communication, enhanced data transfer, and faster transportation are expected to limit the need for face-to-face meetings and shorten the time that executives are away from their offices. Commercial hotels are bound to be influenced by this trend. Conclusion Interest in hotel acquisition has increased significantly during the past several years. Buyers have concluded that future earnings trends are likely to be favorable, and the risks posed by overbuilding or an economic downturn are small. Some sellers are holding their properties until prices reach a higher level. Consequently, we believe there is pent-up desire to sell, once HVS International, Mineola, New York Overview of External Forces 62 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= prices begin to approach levels that allow the existing (or restructured) debt to be paid off. The fact that numerous buyers are chasing very few acquisition opportunities has had a favorable impact on recent sales prices. For buyers to be successful in this highly competitive market, their projected operating results must take into account at least a portion of any upside created from improved performance, particularly if the improvement can be readily achieved through management efficiencies. Capitalization rates based on historical operating income have fallen during the past several years. Hotel buyers in today's market must be aggressive in all of their acquisition assumptions. As a result, hotel values in some parts of the country are approaching the levels registered during the mid-1980s, and a full recovery is expected to occur in the next two to four years. HVS International, Mineola, New York Lodging Market Supply and Demand 63 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 6. Lodging Market Supply and Demand Analysis MARKET FOR TRANSIENT ACCOMMODATIONS The market for transient accommodations is an all-encompassing term referring to the many types of travelers who use lodging facilities in a given area. These travelers represent the market's accommodated room night demand. This section will begin with an analysis of historical demand trends to determine what changes have occurred; the historical number of competitive hotel rooms will then be estimated to evaluate local supply trends. Areawide occupancy levels can be calculated based on the number of hotel rooms available in the market and the demand for lodging accommodations. The total hotel room night demand will be divided into individual market segments to allow us to forecast growth rates based on the economic and demographic data set forth earlier in this report. Historical Supply and Demand Data Smith Travel Research (STR) has compiled historical supply and demand data for the subject property and its competitors. This information is presented in the following table, along with the marketwide occupancy, average rate, and rooms revenue per available room (RevPAR). RevPAR is calculated by multiplying occupancy by average rate, and provides an indication of how well rooms revenue is being maximized. HVS International, Mineola, New York Lodging Market Supply and Demand 64 Analysis - -------------------------------------------------------------------------------- ================================================================================ Table 6-1 Historical Room Supply and Demand Trends (STR) - --------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 - ---------------------------------------------------------------------------------------------------------------------------------- Number of Rooms 1,009 1,009 1,009 1,009 1,009 1,009 1,009 Annual Guestroom Supply 368,285 368,285 368,285 368,285 368,285 368,285 368,285 Percent Change --- 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Room Night Demand 254,117 250,802 230,546 228,337 235,702 255,958 258,536 Percent Change --- (1.3)% (8.1)% (1.0)% 3.2% 8.6% 1.0 % Occupancy 69.0% 68.1% 62.6% 62.0% 64.0% 69.5% 70.2% Percent Change --- (1.3)% (8.1)% (1.0)% 3.2% 8.6% 1.0 % Average Rate $64.32 $63.87 $58.84 $58.91 $58.42 $61.20 $63.40 Percent Change --- (0.7)% (7.9)% 0.1% (0.8)% 4.8% 3.6 % RevPAR $44.38 $43.50 $36.83 $36.52 $37.39 $42.53 $44.51 Percent Change --- (2.0)% (15.3)% (0.8)% 2.4% 13.8% 4.6 %
Year-to-Date Through August --------------------------- Average Annual Compounded Growth 1995 1996 1989 - 1995 - ------------------------------------------------------------------------- Number of Rooms 1,009 1,009 Annual Guestroom Supply 245,187 246,196 Percent Change --- 0.4% 0.0% Room Night Demand 171,141 177,507 Percent Change --- 3.7% 0.3% Occupancy 69.8% 72.1% Percent Change --- 3.3% 0.3% Average Rate $62.33 $67.20 Percent Change --- 7.8% (0.2)% RevPAR $43.51 $48.45 Percent Change --- 11.4% 0.0% Source: Smith Travel Research - -------------------------------------------------------------------------------- HVS International, Mineola, New York Lodging Market Supply and Demand 65 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= It is important to note some limitations of the STR data. Hotels are occasionally added to or removed from the sample, and not every property reports data in a consistent and timely manner; these factors can influence the overall quality of the information by skewing the results. These inconsistencies may also cause the STR data to differ from the results of our competitive survey. Nonetheless, we find that hotel buyers often rely on STR statistics, and thus, they are considered relevant to this study. The preceding table indicates that the number of primarily competitive guestrooms included in the Saddle Brook, New Jersey area survey remained constant, at 1,009, from 1989 through 1995. Demand declined by 1.3% in 1990, by 8.1% in 1991, and by 1.0% in 1992. These declines were the result of the recession that affected the nation during this period, which was exacerbated, in 1991, by the Persian Gulf War, which caused a downturn in travel throughout the U.S. The impact of the recession on the subject market area was compounded by the dynamics of the regional hotel market, and particularly, the market in New York City. During the recession of the early 1990s, New York City's hotels suffered from a lack of demand, and decreased their rates in order to attract a wider array of business and thus, sustain reasonable occupancy levels. As a result, tour groups and other area leisure demand which had previously opted for the lower rates outside the CBD were able to attain low enough rates within the city, and used New York City hotels. With the recent upswing in the economy, both occupancy levels and average room rates in New York City have rebounded considerably, and many of these guests have again been forced out of the city. Further, demand in Manhattan is now strong enough to generate overflow to all of the suburban area markets. The subject property's lodging market is benefiting from this situation, as the hotels in northern New Jersey offer a reasonable alternative to the hotels in the city. That the hotels in Northern New Jersey are a reasonable alternative is evident in the 1993 historical figures, when room night demand experienced a 3.2% increase. In 1994, the increase in room night demand was even more considerable, at a level of 8.6%; in 1994, roundly 27,600 more room nights were accommodated in the market than in 1992. Additionally, it is important to note that 1994 represented an exceptional year for the Northern New Jersey area market; in addition to the strengthening economy, a number of "citywide" events were held in the region, including the World Cup Soccer matches at Giants Stadium and the Gay Games. These events generated a significant volume of overflow demand for the subject property's market. On the heels of this strong year, demand increased in 1995 by only HVS International, Mineola, New York Lodging Market Supply and Demand 66 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 1.0%, reflecting a more typical room night demand growth level. As the economy in New Jersey continues to improve and the enhanced room product at the subject property has allowed the accommodation of more demand in the competitive set, year-to-date trends through August, 1996 illustrate a growth rate of 3.7% in room demand. Overall, demand grew at an average annual compounded rate of 0.3% between 1989 and 1995. Because supply remained stable, changes in occupancy mirrored the shifts in demand. The weak demand experienced in 1990 through 1992 limited the market area's ability to increase average rates, which decreased in 1990 and again in 1991. A slight (0.1%) increase was achieved in 1992, followed by a 0.8% decline in 1993. As areawide occupancy continued to recover and demand reached the 70% level in 1994, average rate began to rebound. In 1994, rates grew by 4.8%, followed by 3.6% in 1995. The continued increase in occupancy achieved in 1996 year-to-date has supported further increases in average rate, at 7.8%, as area hotels pursue higher rates through both price increases and the limitation of discounted rates. RevPAR remained stable on an average annually compounded basis. The weakest RevPAR level was in 1991, at -15.3%, while the strongest increases occurred in 1994, 1995, and 1996 year-to-date, with 13.8%, 4.6%, and 11.4%, respectively. This most recent 11.4% increase registered for year-to-date, 1996 reflects the widespread improvement in overall conditions for the subject property's market area. Demand Analysis Using Market Segmentation For the purpose of demand analysis, the overall market is divided into individual segments based on the nature of travel. Although a market may have various segments, the three primary classifications occurring in most areas are commercial, meeting and group, and leisure. Market segmentation is a useful procedure because individual classifications often exhibit unique characteristics in terms of growth potential, seasonality of demand, average length of stay, double occupancy, facility requirements, price sensitivity, and so forth. By quantifying the room night demand by market segment and analyzing the characteristics of each segment, the overall demand for transient accommodations can be projected. Lodging demand in the Saddle Brook market area is generated primarily by the following four market segments. HVS International, Mineola, New York Lodging Market Supply and Demand 67 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Segment 1 Commercial Segment 2 Leisure Segment 3 Meeting and Group Segment 4 Contract Based on our fieldwork, area analysis, and knowledge of the local lodging market, we estimate the 1996 estimated year-end distribution of accommodated hotel room night demand as follows. ================================================================================ Table 6-2 1996 Estimated Year-end Accommodated Room Night Demand - -------------------------------------------------------------------------------- 1996 Annual Room Night Demand (Rounded) ------------------------------------------------------- Percentage Percentage Market Segment Marketwide of Total Subject Property of Total - -------------------------------------------------------------------------------- Commercial 152,000 62.0% 21,000 65.6% Meeting and Group 46,000 19.0 3,000 9.4 Leisure 39,000 16.0 8,000 25.0 Contract 10,000 4.0 0 0.0 ------- ----- ------ ----- Total 248,000 100.0% 32,000 100.0% - -------------------------------------------------------------------------------- Commercial demand predominates in the local market, accounting for approximately 62% of the estimated 1996 room night demand. Meeting and group demand followed, with a 19% share. Leisure rooms contributed a relatively strong 16%, and contract demand accounted for the remaining 4% of room night demand. The subject property's segmentation differed from that of the competitive market to some degree. Approximately 66% of the Howard Johnson's 1996 estimated year-end occupancy is attributable to the commercial segment; leisure rooms accounted for 25%, and the meeting and group segment contributed the remaining 9%. The subject property does not currently participate in the contract segment of the market. Using the distribution of accommodated hotel demand as a starting point, we will analyze the characteristics of each market segment in an effort to determine future trends in room night demand. Commercial Segment The commercial segment consists of individual business people who are visiting various firms in the subject property's market. Commercial demand is strongest Tuesday and Wednesday nights in this market, with HVS International, Mineola, New York Lodging Market Supply and Demand 68 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Sunday and Friday nights as shoulder nights (hotels typically sell out during Tuesday and Wednesday nights). The typical length of stay ranges from one to three days, and the rate of double occupancy is a low 1.2 to 1.3 people per room. Commercial demand is relatively constant throughout the year, although some declines are noticeable in late December and during other holiday periods. In general, commercial travelers are not overly rate-sensitive, and will make use of a hotel's food and beverage outlets and recreational facilities. The commercial segment represents a highly desirable and lucrative market that provides a consistent level of demand at relatively high room rates. Because of the improved room product and improving image of the subject property, the Howard Johnson Plaza is favorably positioned to benefit from the improving New Jersey economic outlook. Demand in this segment is generated from companies located as far north as Paramus, and as far east as New York City. As New York City hotel demand continues to improve, the area will also benefit from increased demand overflow. Area corporate demand is generated by a variety of corporations with offices and corporate headquarters generally situated within a ten-mile radius of the subject property. Some of these installations include the following: the Federal Paper Board, A & P, Toys R Us, TW Services, Hertz, Ingersoll-Rand, Becton Dickinson, American Cynamid, GAF, Union Camp, Grand Union, Noritsu, and Ricoh. A number of small industrial plants, office complexes, and warehouses which generate commercial demand are also located in the subject property's immediate area. Many of these local companies have negotiated corporate accounts with the subject property; two of the largest accounts include Sealed Air and National Chemical Research. Finally, the Marriott, a secondary competitor of the subject property, eliminated approximately 60 exterior-corridor rooms from its room count during its last renovation, which had the effect of providing more overflow business for the subject property and its primarily competitive set. Based on our analysis of the Bergen County economy, together with a review of national economic trends, we estimate that commercial demand will increase by 3% for the first projection year, and at a conservative level of 2% per annum throughout the remainder of our projection period. Meeting and Group Segment The meeting and group market includes meetings, seminars, conventions, trade association shows, and similar gatherings of ten or more people. Peak convention demand typically occurs in the spring and fall. Because of HVS International, Mineola, New York Lodging Market Supply and Demand 69 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= vacations, the summer months represent the slowest period for this market segment; winter demand varies. The average length of stay for typical meetings and groups ranges from three to five days. Most commercial groups meet during the weekday period of Monday through Thursday, but associations and social groups will sometimes gather on weekends. Commercial groups tend to have a low double occupancy of 1.3 to 1.5 people per room, while social groups are likely to have double occupancy rates ranging from 1.5 to 1.9. Meeting and group patronage is quite profitable for hotels. Although room rates are discounted for large groups, the property benefits from the use of meeting space and the revenues generated by in-house banquets and cocktail receptions. Facilities that are necessary to attract meetings and groups include function areas with adequate space for breakout, meals, and receptions; recreational amenities; and a sufficient number of guestrooms to house the attendees. Area meeting demand is largely generated by local corporations; these meetings typically involve training or company planning. Most corporate meeting business accounts are derived from companies located in the greater Paramus, New Jersey area (Paramus is just west of Saddle Brook). Significant meeting accounts at the subject property include AT&T, National Chemical Research, and Sealed Air. Because of its improved overall product, inclusive of the meeting space, the subject property should be able to continue to capture smaller corporate training meetings as well as educational meetings. The only constraining factor may be the limited banquet kitchen facilities of the hotel as well as the reputation for questionable service and food quality of the current restaurant operator. The subject property also houses meetings for the educational test preparation firm the Princeton Review. This company produces approximately $70,000 annually for the subject property in room night rental; this contract is renewed annually. Similar review classes for the CPA test are held by Fox Garity; this installation generates approximately $50,000 annually for the subject property in room rental; this contract is renewed monthly. No room nights or food and beverage revenues are associated with these groups; however, the room rental revenue generated is considerable, and this revenue source requires little labor, which results in a high profit margin. HVS International, Mineola, New York Lodging Market Supply and Demand 70 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Future meeting and group demand is closely related to growth in the commercial segment. Because most meetings have either a direct or an indirect business purpose, the economic considerations that have an impact on commercial travel also affect meeting and group demand. The exception is non-commercial meetings, which are tied to the economic factors that influence leisure travel. It should be noted that meetings and similar events are booked in advance, and thus, growth in this segment tends to lag slightly behind increases in commercial demand. We believe that growth in the meeting and group segment will occur at the rate of 2.0% in 1997, at 1.5% in 1998, and at 1.0% per annum throughout the remaining projection period. Leisure Segment The leisure market segment consists of individuals and families who are spending time in the area or passing through en route to other destinations. Their travel purposes may include sightseeing, recreation, visiting friends and relatives, or numerous other non-business activities. Leisure demand is strongest Friday and Saturday nights and all week during holiday periods and the summer months. These peak periods are negatively correlated with commercial visitation, underscoring the stabilizing effect of capturing weekend and summer tourist travel. The typical length of stay ranges from one to four days, depending on the destination and travel purpose, and the rate of double occupancy generally ranges from 1.8 to 2.5 people per room. Leisure travelers tend to be the most price-sensitive segment in the lodging market. They often prefer low-rise accommodations where parking is convenient to the rooms, and they typically demand extensive recreational facilities and amenities. Ease of highway access and proximity to tourist attractions are important locational considerations. The Northern New Jersey area offers a variety of local attractions, including the Meadowlands Sports Complex, which has been discussed previously in this report. Although the subject property houses leisure demand related to these local attractions, the majority of leisure demand is generated by tourists visiting New York City. As mentioned previously, with the economy strengthening, New York City hotels are charging increasingly higher room rates, which are compounded by higher lodging taxes. This pricing trend gives hotels situated outside of Manhattan a competitive sales tool with respect to this rate-sensitive segment of the market. These suburban hotels, including the subject property and its competitors, offer reasonable room rates when compared to room rates offered in Manhattan. The resulting room prices are very attractive to tour groups and other area leisure HVS International, Mineola, New York Lodging Market Supply and Demand 71 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= demand. Leisure demand is therefore expected to remain strong in the short term, given the current upswing in the economic cycle. Future leisure demand is related to the overall economic health of the nation. Trends showing changes in state and regional unemployment and disposable personal income often have a strong impact on non-commercial visitation. Traffic counts on nearby highways and attendance at local attractions can also form a basis for projections. Based upon our review of the local area and national trends, we estimate that leisure demand should increase at a rate of 2% in 1997 and 1998, and by 1% throughout the remaining projection period. Contract Segment A small portion of the area demand is associated with airline contract business. Airline demand is generated by flight crews and delayed passengers. The airlines typically contract rooms in nearby lodging facilities for extended periods to ensure the availability of accommodations. Because they are able to guarantee a specific level of usage on a daily basis, airlines can usually negotiate deeply discounted room rates. This type of demand is advantageous because it provides a base level of occupancy over a long period that normally includes weekends and slow seasons. The occupancy benefit is offset by low contract room rates, which have an adverse impact on average rate. Skilled hotel operators use airline patronage to fill in during periods of low occupancy, and quickly displace this demand when higher-rated market segments offer better potential. Currently, only the Holiday Inn Hasbrouck Heights hotel participates in this segment; thus, only 4% of the total market demand accommodates any contract demand. We have assumed a zero growth trend in this segment, as participation in this segment is largely based on any particular hotel's management marketing strategy at any given time. Conclusion The purpose of segmenting the lodging market is to define each major type of demand, identify customer characteristics, and estimate future growth trends. Starting with an analysis of the local area, four segments were defined as representing the subject property's lodging market. Various types of economic and demographic data were then evaluated to determine their propensity to reflect changes in hotel demand. Based on this procedure, we forecast the following average annual compounded market segment growth rates. HVS International, Mineola, New York Lodging Market Supply and Demand 72 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 6-3 Average Annual Compounded Market Segment Growth Rates - -------------------------------------------------------------------------------- Annual Compounded Growth Rate ----------------------------------------- 1997 1998 1999 2000 2001 2002 - ------------------------------------------------------------------------------- Commercial 3.0% 2.0% 2.0% 2.0% 2.0% 2.0% Meeting and Group 2.0 1.5 1.0 1.0 1.0 1.0 Leisure 2.0 1.0 1.0 1.0 1.0 1.0 Contract 0.0 0.0 0.0 0.0 0.0 0.0 Annual Average Growth 2.5% 1.7% 3.5% 1.6% 1.6% 1.6% - -------------------------------------------------------------------------------- These growth rates will be used in subsequent sections of this study to forecast changes in lodging demand. COMPETITION An integral component of the supply and demand relationship that has a direct impact on the availability of lodging demand is the current and anticipated supply of competitive lodging facilities. The Northern New Jersey suburban area is served by a wide array of hotels and motels. The subject property is situated in the Saddle Brook market area; additional concentrations are of lodging facilities are located in the Secaucus/Meadowlands area, in the vicinity of Newark Airport, as well as near the major concentrations of office space in the area and along the highways which serve as major arteries through the region. We have identified three properties that are considered primarily competitive with the Howard Johnson Plaza. Including those of the subject property, these primary competitors contain a total of 710 rooms. Three additional lodging facilities are judged to be only secondarily competitive; although the facilities, rate structures, or market orientations of these hotels prevent their inclusion among the primarily competitive supply, they do compete with the subject property to some extent. The room count of each secondary competitor has been weighted to reflect the degree to which it competes with the Howard Johnson Plaza; the aggregate weighted room count of the secondary competitors is 260. Primary Competitors The following table summarizes the important operating characteristics of the primary competitors and the aggregate secondary competitors. This information was compiled from personal interviews, inspections, lodging directories, and our in-house library of operating data. The table also sets HVS International, Mineola, New York Lodging Market Supply and Demand 73 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= forth each property's penetration factors; penetration is the ratio between a specific hotel's operating results and the corresponding data for the market. If the penetration factor is greater than 100%, the property is performing better than the market as a whole; conversely, if the penetration is less than 100%, the hotel is performing at a level below the marketwide average. HVS International, Mineola, New York Lodging Market Supply and Demand 74 Analysis - -------------------------------------------------------------------------------- ================================================================================ Table 6-4 Primary Competitors and Aggregate Secondary Competitors - --------------------------------------------------------------------------------
Estimated 1996 Market Segmentation Estimated 1995 Meeting Meeting --------------------------------- -------------------------- Year Number Space Space/Room Meeting Average Property/Location Opened of Rooms (Sq. Ft.) (Sq. Ft.) Comm. & Group Leisure Contract Occupancy Rate RevPAR - ------------------------------------------------------------------------------------------------------------------------------------ Subject Property 129 Pehle Avenue East 1969 141 6,193 44 65% 10% 25% 0% 55.7% $60.93 $33.94 Holiday Inn Hasbrouck Heights 283 Route 17 South 1967 250 5,900 24 55 20 10 15 77.0 61.00 46.97 Holiday Inn Saddle Brook 50 Kenney Place 1965 144 6,100 42 60 30 10 0 68.0 71.00 48.28 Ramada Rochelle Park 372 West Passaic Street 1974 175 8,000 46 70 15 15 0 68.0 64.00 43.52 - ------------------------------------------------------------------------------------------------------------------------------------ Sub-Totals and Averages 710 6,548 39 62% 19% 14% 6% 68.7% $63.73 $43.80 Secondary Competition 260 61% 18% 21% 0% 71.0% $73.48 $52.17 Totals and Averages 970 62% 19% 16% 4% 69.5% $66.63 $46.28 Estimated 1996 ------------------------------------------------------- Average Occupancy Yield Property/Location Occupancy Rate RevPAR Penetration Penetration - -------------------------------------------------------------------------------------- Subject Property 129 Pehle Avenue East 63.0% $63.00 $39.69 90.1% 81.3% Holiday Inn Hasbrouck Heights 283 Route 17 South 76.0 66.00 50.16 108.6 102.8 Holiday Inn Saddle Brook 50 Kenney Place 68.0 73.00 49.64 97.2 101.7 Ramada Rochelle Park 372 West Passaic Street 75.0 66.00 49.50 107.2 101.4 - -------------------------------------------------------------------------------------- Sub-Totals and Averages 71.5% $66.82 $47.81 102.3% 98.0% Secondary Competition 66.0% $78.50 $51.81 94.3% 106.2% Totals and Averages 70.0% $69.76 $48.80 100.0% 100.0%
- -------------------------------------------------------------------------------- [GRAPHIC OMITTED] COMPETITION MAP HVS International, Mineola, New York Lodging Market Supply and Demand 75 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Our survey of the primarily competitive market shows a representation of nationally-recognized, franchised lodging chains. The hotels range in size from 141 to 250 rooms, and in age from 22 to 31 years. The market demand has a strong corporate orientation, which results in commercial representing the majority of the demand in the market. In addition, several properties enjoy considerable meeting and group business. As a result of its proximity to the New York City area, this market is able to capture some leisure business as well. For estimated year-end 1996, the primary competitors achieved an overall occupancy of 71.5% at an average rate of $66.82, yielding a RevPAR of $47.81. The Holiday Inn Hasbrouck Heights is forecasted to maintain the highest occupancy in 1996, at 76.0%, which equates to an occupancy penetration of 108.6%. This strong performance is due to this hotel's airline contract, which bolsters occupancy during the slower periods of the week and year. The Ramada Rochelle Park follows closely, with an occupancy of 75.0% and an occupancy penetration rate of 107.2%. The Holiday Inn Saddle Brook commands the highest average rate, at $73.00, for estimated year-end 1996. In both 1995 and 1996, the subject property has achieved the lowest occupancy and average rate in the market area. This poor performance, which is effectively measured by the occupancy and yield penetration rates of 90.1% and 81.3%, respectively, is a result of the hotel's poor image in the local market. In large part, this image is attributable to the inferior condition of the physical facilities prior to the completion of the recent renovation. Additionally, the Howard Johnson brand is somewhat dated in market image, and generally constrains the hotel's ability to appeal to the commercial segment of the market. The completion of the recent renovation, together with an effective marketing effort, should enable the subject property to achieve an improved competitive position within the market area. Each primary competitor was inspected and evaluated. Descriptions of our findings are presented below. Holiday Inn Hasbrouck Heights The Holiday Inn Hasbrouck Heights is full-service, first-class lodging facility which opened on June 30, 1967. The property is owner operated under a Holiday Inn franchise; the owners are reportedly a group of local business people. The Holiday Inn features 250 guestrooms, a restaurant and lounge, and roundly 5,900 square feet of meeting space. The meeting and banquet space can accommodate groups of up to 250 persons. Additional facilities HVS International, Mineola, New York Lodging Market Supply and Demand 76 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= include an outdoor swimming pool, a health club with an exercise room, and a hot tub. Guestroom amenities offered include hair dryers and premium cable channels. According to management, this hotel continuously renovates, and no major renovations are currently planned. However, the hotel is somewhat dated in appearance. The high average rate achieved at the Holiday Inn is evidence of its superior room product and its location within the busy Hasbrouck Heights area. The property benefits from strong commercial generated from the Teaneck/ Tenafly/Paramus area, and is closer to New York City and the Meadowlands Complex than the rest of the competitive set. These factors allow the property to attract considerable patronage primarily from the commercial and the meeting and group segments. This property also enjoys a higher occupancy, reflecting its accommodation of an airline contract. This Holiday Inn currently derives approximately 55% of its occupancy from the commercial segment, 20% from the meeting and group segment, 10% from the leisure segment, and 15% from the contract segment. The hotel enjoys the highest occupancy and yield penetration in the market, at 108.6% and 102.8%, respectively, for estimated year-end 1996. Holiday Inn Saddle Brook Highly visible along I-80, the Holiday Inn Saddle Brook is a full-service, first-class lodging facility which opened in 1965, and is therefore the oldest of the primarily competitive properties. The hotel is owned by GP Inns, and is managed by Coventry Hotels under a Holiday Inn franchise. This property features 144 guestrooms configured in a circular guestroom tower. Additional facilities include a nightclub, a restaurant and lounge, and roundly 6,100 square feet of meeting space, which can accommodate groups of up to 500 persons. Additional facilities include an indoor swimming pool and an exercise room. According to management, this property renovated two guestroom floors in 1995, and an additional two floors are planned for renovation in 1997. The meeting space on the second floor of the hotel was renovated in 1994. At this time, the hotel has no plans for expansion. The limited size of the Holiday Inn precludes the property from fully utilizing its meeting space; as a result, the hotel contracts with local companies for training of employees who primarily reside in the New Jersey region. The hotel also hosts many area reunions on weekends, and accommodates demand associated with the local catering facilities. The Holiday Inn currently derives approximately 60% of its occupancy from the commercial segment, 30% from the meeting and group segment, and 10% from the HVS International, Mineola, New York Lodging Market Supply and Demand 77 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= leisure segment. The hotel enjoys the highest average rate in the market, at $73 for estimated year-end 1996. However, its limited size - similar to the subject property's 141 rooms - precludes its from handling larger meetings and groups. Hence, its 1996 year-end occupancy is estimated to be 68%, which equates to a 97.2% occupancy penetration. Yield penetration for this property is estimated at 101.7% for 1996 year-end. Ramada Rochelle Park The Ramada Rochelle Park is first-class, full-service lodging facility which opened in 1974, and is the newest property in the competitive set. The Ramada features 175 guestrooms, a restaurant, a lounge named the Sports Authority, and roundly 4,100 square feet of meeting space. The meeting and banquet space can accommodate groups of up to 250 persons. Additional facilities include an indoor swimming pool and an exercise room. The property is currently undergoing a soft goods renovation, at a reported cost of $1.2 million; however, the rooms remain in fair condition. The Ramada currently derives approximately 70% of its occupancy from the commercial segment, and equal portions of 15% from the meeting and group and the leisure segments. The Ramada operates four courtesy vans to accommodate corporate clients, and the hotel provides transportation between the property and various local companies. This complimentary transportation is a component of their negotiated corporate accounts which contributes to the hotel's primarily commercial market orientation. Although the meeting space of the Ramada is somewhat limited, this property markets heavily to the local wedding market; the hotel demand associated with these weddings comprises the majority of the Ramada's leisure segment. The hotel is forecast to achieve a year-end average rate in 1996 similar to the Holiday Inn Hasbrouck Heights, at $66. Its 1996 estimated year-end occupancy is 75%, which equates to a 107.2% occupancy penetration. Yield penetration for this property is estimated at 101.4% for year-end 1996. Secondary Competitors Secondary competitors of the subject property comprise three full-service hotels: the Marriott Saddle Brook, the Howard Johnson Clifton, and the Ramada Clifton. The Clifton area is located south of the subject property, along Route 21, just east of the Garden State Parkway. The Marriott Saddle Brook is situated directly south of the subject property, at the intersection of Interstate 80 and the Garden State Parkway. HVS International, Mineola, New York Lodging Market Supply and Demand 78 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The Ramada Clifton and Howard Johnson Clifton are considered competitive based on these properties' brand affiliations and their locations in the general Saddle Brook/Paterson vicinity. However, because of their distance from the subject property and their location on a secondary highway, these properties are considered to be only 50% competitive with the primary competitors. The Marriott Saddle Brook is a full-service, upper-tier property located directly south of the subject property. This property originally featured 281 rooms, which included a low-rise wing with 80 exterior-corridor guest- rooms; however, in April of this year, the property converted the 20 guestrooms closest to the main tower to an interior-corridor configuration, and demolished the remaining 60 rooms. The room count of the Marriott is now 221 rooms. Because of this property's rate positioning, quality of product, and its placement in the upper-tier market, this property is considered to be only 50% competitive. In aggregate, the secondary competitors will achieve an estimated year-end 1996 occupancy of 66%, and an average rate of $78.50. The occupancy level represents a five-point decline from 1995, due to both the re-positioning of the Marriott and the construction at that property during the past year, and a roundly $5 increase in average rate. The following table illustrates the operating statistics of the three secondary competitors. HVS International, Mineola, New York Lodging Market Supply and Demand 79 Analysis - -------------------------------------------------------------------------------- ================================================================================ Table 6-5 Secondary Competitors - --------------------------------------------------------------------------------
Estimated 1996 Market Segmentation Estimated 1995 --------------------------------- --------------------------------- Number Percentage Weighted Mtg. & Average Property of Rooms Competitive Room Count Comm. Conv. Leisure Contract Occupancy Rate RevPAR - ---------------------------------------------------------------------------------------------- --------------------------------- Saddle Brook Marriott 221 50% 110.5 60% 25% 15% 0% 76% $84.00 $63.84 Howard Johnson Clifton 116 50 58.0 65 5 30 0 76 60.00 45.60 Ramada Clifton 183 50 91.5 60 20 20 0 61 64.00 39.04 - ---------------------------------------------------------------------------------------------- --------------------------------- Totals and Averages 520 260.0 61% 18% 21% 0% 71% $73.48 $52.17
Estimated 1996 ------------------------------- Average Property Occupancy Rate RevPAR - ----------------------------------------------------------- Saddle Brook Marriott 64% $90.00 $57.60 Howard Johnson Clifton 76 67.00 50.92 Ramada Clifton 61 73.00 44.53 - ----------------------------------------------------------- Totals and Averages 66% $78.50 $51.81 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Lodging Market Supply and Demand 80 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Proposed Competitors Based on our field work in the market and our discussions with local hotel operators, developers, and government officials, no properties appear to be proposed or under construction that are likely to compete with the Howard Johnson Plaza. However, it should be noted that the competitive market registers a healthy occupancy of roundly 70% for estimated year-end 1996. Our experience indicates that once markets surpass occupancies of 70%, there is often some demand that cannot be accommodated by the existing hotels. Moreover, investors and developers rapidly become interested in such strong markets, particularly when the area is characterized by a degree of economic growth, thereby increasing the likelihood of new construction. Finally, the hotel industry is currently in a strong development cycle, particularly with respect to the limited-service segment of the industry; the inventory of these products is currently undergoing rapid expansion. In light of these factors and in order to recognize the cyclical nature of the lodging industry, our analysis will incorporate a hypothetical new competitor. This hotel is assumed to be a 120-room, limited-service hotel that is anticipated to enter the local lodging supply in January of 1999. It is also important to note that many limited-service hotels are outperforming their full-service counterparts, and as a result of the lower cost of operations, they often achieve higher yields. The selection of the January, 1999 opening date takes into account the relatively short time frame required to construct a limited-service hotel. As the national economy improves and hotel financing becomes more readily available, the development process can be further hastened. Conclusion A review of historical demand trends in the subject property's area indicates that the market has shown signs of recovery from 1992 onward, corresponding to the economic recovery nationwide. According to Smith Travel Research, these growth patterns have continued through August of 1996. While supply has remained constant over recent years, growth in demand has driven occupancy upwards, allowing the hotels in the market to follow with average rate increases. Based on our review of the local area, four market segments were defined within the subject property's lodging market. Growth rates for each market segment were forecasted based upon an analysis of the economic and demographic trends that appeared to significantly impact lodging demand. In general, demand is anticipated to increase at moderate rates throughout the projection period. HVS International, Mineola, New York Lodging Market Supply and Demand 81 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= We have identified three properties that are considered competitive with the subject hotel. The subject property is under-performing in the market, and is not attaining its fair share in terms of occupancy, average rate, and RevPAR. The completion of the recent renovations is expected to enable the property to achieve an improved competitive position, although the continued affiliation with the subject Howard Johnson will likely limit the hotel's success, particularly in the commercial segment of the market. HVS International, Mineola, New York Projection of Occupancy and 82 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 7. Projection of Occupancy and Average Rate Historical Operating Performance The following table sets forth the subject property's historical occupancy, average rate, and rooms revenue per available room (RevPAR). For the purpose of comparison, we have also presented corresponding data (as provided by Smith Travel Research) for the competitive hotels described in the previous section. In addition to the annual percent change calculations, we have determined the subject property's occupancy, average rate, and RevPAR penetration factors. HVS International, Mineola, New York Projection of Occupancy and 83 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-1 Historical Trends - -------------------------------------------------------------------------------- Year-to-Date Through August --------------------------- 1994 1995 1995 1996 - -------------------------------------------------------------------------------- Subject Property * Occupancy 55.4% 55.7% 48.0% 58.3% Percent Change --- 0.5% --- 21.5% Occupancy Penetration 79.7% 79.3% 68.8% 80.9% Average Rate $52.65 $60.93 $60.10 $63.10 Percent Change --- 15.7% --- 5.0% Average Rate Penetration 86.0% 96.1% 96.4% 93.9% RevPAR $29.17 $33.94 $28.85 $36.79 Percent Change --- 16.4% --- 27.5% RevPAR Penetration 68.6% 76.3% 66.3% 75.9% Areawide (STR) Occupancy 69.5% 70.2% 69.8% 72.1% Percent Change 8.6% 1.0% --- 3.3% Average Rate $61.20 $63.40 $62.33 $67.20 Percent Change 4.8% 3.6% --- 7.8% RevPAR $42.53 $44.51 $43.51 $48.45 Percent Change 13.8% 4.6% --- 11.4% * Subject property data for 1994 represents a partial year, beginning in April - -------------------------------------------------------------------------------- The above data illustrates that the subject property has historically under-performed the market. Occupancy penetration was roundly 80% in both 1994 and 1995; furthermore, while the market gained 1.0% in occupancy in 1995, the subject property gained only 0.5%. However, the subject property has achieved considerable occupancy growth in 1996, through August, when compared to its performance during the similar period in 1995, which should allow the subject property to improve its competitive position by year-end, 1996, due to an improved market image and the recent renovation. While historical changes in occupancy were limited, the subject property has been able to improve its average rate - and its resulting average rate HVS International, Mineola, New York Projection of Occupancy and 84 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= penetration considerably. The subject property attained a substantial 15.7% average rate increase in 1995, while the market average rate increased by only 3.6%. Year-to-date trends illustrate a continued, strong rate growth of 5.0% for the subject property; the market has been able to surpass this mark to date in 1996, with a growth rate of 7.8%. This strong growth trend in average rate will likely remain in this market during the short-term while the economy and resulting hostelry demand remains strong and supply remains constant. Resulting RevPAR increases for the subject property have been significant: 16.4% in 1995 and 27.5% for year-to-date 1996. These increases have been well above the market RevPAR increases of 4.6% in 1995 and 11.4% for year-to-date 1996. This trend bodes well for the subject property, and illustrates well both the subject property's improving position in the market and the success of management's market repositioning and product improve- ments. Premise of the Projections To a certain degree, occupancy and rate attainment can be manipulated by management. For example, hotel operators may choose to lower rates in an effort to maximize occupancy. Our forecasts reflect an operating strategy that we believe would be implemented by competent hotel management to achieve an optimal mix of occupancy and average rate. Projected Room Night Demand Lodging demand and occupancy can be projected through a process known as room night analysis. A room night is a unit of hotel demand that equals one room that is occupied for one night. After estimating the number of room nights a hotel can be expected to attract during a 12-month period, we can determine occupancy by dividing the number of room nights of demand captured by the number of room nights available (calculated as the room count x 365). The total annual number of room nights occupied in the competitive hotels equates to the market's accommodated room night demand, as shown in the following table. HVS International, Mineola, New York Projection of Occupancy and 85 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-2 1996 Estimated Year-end Accommodated Room Night Demand - -------------------------------------------------------------------------------- 1996 Annual Room Night Demand (Rounded) ------------------------------------------------------- Percentage Percentage Market Segment Marketwide of Total Subject Property of Total - -------------------------------------------------------------------------------- Commercial 152,000 62.0 % 21,000 65.6 % Meeting and Group 46,000 19.0 3,000 9.4 Leisure 39,000 16.0 8,000 25.0 Contract 10,000 4.0 0 0.0 ------- ----- ------ ----- Totals 248,000 100.0 % 32,000 100.0 % - -------------------------------------------------------------------------------- Latent Demand The previous table illustrates the accommodated room night demand in the subject property's competitive market. Because this estimate is based on occupancies, it includes only those hotel rooms that were actually used by guests. Latent demand considers guests who could not be accommodated by the existing competitive supply, and can be divided into unaccommodated demand and induced demand. Unaccommodated Demand Unaccommodated demand refers to individuals who are unable to secure accommodations in the market because all of the local hotels are filled. These travelers must defer their trips, settle for less desirable accommodations, or stay in properties located outside the market area. Because this demand did not yield occupied room nights, it is not included in the estimate of historical accommodated room night demand. Currently, the subject property and its competitors generally fill on Tuesday and Wednesday nights of any typical business week, excluding holiday weeks. This trend suggests that unaccommodated demand exists during these days of the week. Furthermore, it should be noted that the competitive market is expected to register a healthy occupancy of roundly 70% by year-end 1996. Our experience indicates that once markets surpass occupancies of 70%, there is often some demand that cannot be accommodated by the existing hotels. In this analysis, we estimate that approximately 3% of commercial demand is unaccommodated in this market. HVS International, Mineola, New York Projection of Occupancy and 86 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-3 1996 Accommodated and Unaccommodated Demand - -------------------------------------------------------------------------------- Accommodated Room Night Unaccommodated Unaccommodated Market Segment Demand Demand Percentage Room Night Demand - -------------------------------------------------------------------------------- Commercial 152,000 3.0% 4,571 Meeting and Group 46,000 0.0 0 Leisure 39,000 0.0 0 Contract 10,000 0.0 0 ------- ----- Totals 248,000 4,571 - -------------------------------------------------------------------------------- Total Usable Room Night Demand Total usable room night demand is estimated by combining accommodated demand and usable latent demand. Usable latent demand is that portion of latent demand that can be absorbed based on the number of existing and proposed hotel rooms in the market. The following table shows the projected annual change in accommodated and usable room night demand in the subject property's competitive market. The unaccommodated demand becomes accommodatable when the hypothetical proposed property enters the market in 1999. HVS International, Mineola, New York Projection of Occupancy and 87 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-4 Total Usable Room Night Demand - --------------------------------------------------------------------------------
Historical 1997 1998 1999 2000 2001 2002 2003 - -------------------------------------------------------------------------------------------------------- Commercial Growth Rate -- 3.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Accommodated Demand 152,378 156,949 160,088 163,290 166,556 169,887 173,285 176,751 Usable Latent -- 0 0 4,898 4,996 5,096 5,198 5,302 Meeting and Group Growth Rate -- 2.0% 1.5% 1.0% 1.0% 1.0% 1.0% 1.0% Accommodated Demand 46,355 47,282 47,991 48,471 48,956 49,446 49,940 50,439 Usable Latent -- 0 0 0 0 0 0 0 Leisure Growth Rate -- 2.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% Accommodated Demand 38,576 39,348 39,741 40,138 40,539 40,944 41,353 41,767 Usable Latent -- 0 0 0 0 0 0 0 Contract Growth Rate -- 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Accommodated Demand 10,403 10,403 10,403 10,403 10,403 10,403 10,403 10,403 Usable Latent -- 0 0 0 0 0 0 0 Totals Commercial 152,378 156,949 160,088 168,188 171,552 174,983 178,483 182,053 Meeting and Growth 46,355 47,282 47,991 48,471 48,956 49,446 49,940 50,439 Leisure 38,576 39,348 39,741 40,138 40,539 40,944 41,353 41,767 Contract 10,403 10,403 10,403 10,403 10,403 10,403 10,403 10,403 ------- ------- ------- ------- ------- ------- ------- ------- TOTAL DEMAND 247,712 253,982 258,223 267,200 271,450 275,776 280,179 284,662 Annual Forecasted Growth -- 2.5% 1.7% 3.5% 1.6% 1.6% 1.6% 1.6%
- -------------------------------------------------------------------------------- Guestroom Supply In 1996, the competitive properties provided a weighted total of 970 guestrooms. Based on our research and discussions with local planning officials, no new hotels are proposed or under construction in the area. However, as a result of the market's relatively high occupancy, we assume that a 120-room, limited-service hotel will open on January 1, 1999. This new property is projected to add 43,800 rooms to the guestroom supply in 1999. The following table shows the projected competitive supply of available rooms and available room nights. To calculate the annual number of available room nights, the number of available rooms is multiplied by 365. HVS International, Mineola, New York Projection of Occupancy and 88 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-5 Available Rooms and Room Nights - -------------------------------------------------------------------------------- Total Room Overall Night Room Nights Competitive Year Demand Available Occupancy - -------------------------------------------------------------------------------- Historical 247,712 354,050 70 % 1997 253,982 354,050 72 1998 258,223 354,050 73 1999 267,200 397,850 67 2000 271,450 397,850 68 2001 275,776 397,850 69 2002 280,179 397,850 70 - -------------------------------------------------------------------------------- Overall Competitive Occupancy In developing our forecasts, we have attempted to mirror long-term cyclical patterns in the lodging industry. The previous table illustrates that the overall competitive occupancy is expected to reach 73% by 1998. Following the assumed opening of the 120-room, limited-service hotel in January of 1999, this level is expected to decline to 67% in 1999, and to grow to 68% by 2000. The overall competitive occupancy is then projected to recover after 2000, reaching a level of 70% in 2002. Competitive Index Analysis Competitive indexes are used to analyze the relative market position of each property on the basis of a particular demand segment. The index represents the number of times each year that one room is occupied by one type of traveler (e.g., commercial, meeting and group, leisure, or contract), or the number of room nights actually accommodated per year, per room, per market segment. For example, if a hotel has a commercial competitive index of 190, each room in the property is occupied 190 times a year by a commercial traveler. The competitive index is calculated by dividing a hotel's annual accommodated room night demand in a particular market segment by that property's room count. Competitive indexes will be used to illustrate each property's position in the market based on its ability to compete with other local lodging facilities. Commercial Segment The historical commercial segment competitive indexes in the subject property's market range from 147 to 192. The Ramada Rochelle Park is the most competitive property in the commercial market in 1996, with an index of 192, followed by the Holiday Inn Hasbrouck Heights, at 153. The subject HVS International, Mineola, New York Projection of Occupancy and 89 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= property's commercial segment index of 149 is higher than the aggregate index of the secondary competitors. As a result of the recent renovation and the continued repositioning of the subject property, we expect the Howard Johnson Plaza to penetrate the commercial market more effectively. To reflect the more focused management strategy and improved facilities, the subject property's commercial segment competitive index is projected to increase to 160 in 1997, and to remain at this level in subsequent years. This stabilized level is lower than that of the Ramada Rochelle Park; the Ramada is expected to remain the leader in this market, due to the hotel's corporate strength in this particular segment. The new limited-service hotel is expected to attain a stabilized commercial segment index of 175 in 2001, which is above the level of subject property, but below that of the Ramada. The following table shows the projected commercial segment competitive indexes of the area's hotels. ================================================================================ Table 7-6 Commercial Segment Competitive Indexes - --------------------------------------------------------------------------------
Property Historical 1997 1998 1999 2000 2001 2002 - --------------------------------------------------------------------------------------- Subject Property 149 160 160 160 160 160 160 Holiday Inn Hasbrouck Heights 153 153 153 153 153 153 153 Holiday Inn Saddle Brook 149 149 149 149 149 149 149 Ramada Rochelle Park 192 192 192 192 192 192 192 Secondary 147 147 147 147 147 147 147 Proposed Hotel --- --- --- 155 165 175 175
- -------------------------------------------------------------------------------- Meeting and Group Segment As a result of their relatively large inventory of function space (coupled with a relatively small number of guestrooms), the Holiday Inn Saddle Brook is the most competitive property in this segment, at 74. Again, as a result of the renovation that took place in 1995, the Howard Johnson's meeting and group competitive index is expected to increase to 30 in 1997. The proposed hotel is expected to achieve a stabilized index of 35 in this segment, which is just above that of the subject property; because the proposed property is limited-service in nature, it is not expected to be very competitive in this segment. No other changes are anticipated for meeting and group segment demand. The following table illustrates the competitive indexes in the meeting and group segment. HVS International, Mineola, New York Projection of Occupancy and 90 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-7 Meeting and Group Segment Competitive Indexes - --------------------------------------------------------------------------------
Property Historical 1997 1998 1999 2000 2001 2002 - --------------------------------------------------------------------------------------- Subject Property 23 30 30 30 30 30 30 Holiday Inn Hasbrouck Heights 55 55 55 55 55 55 55 Holiday Inn Saddle Brook 74 74 74 74 74 74 74 Ramada Rochelle Park 41 41 41 41 41 41 41 Secondary 44 44 44 44 44 44 44 Proposed Hotel -- -- -- 25 30 35 35
- -------------------------------------------------------------------------------- Leisure Segment We anticipate the subject property's leisure segment competitive index to decline to 50 in 1997, as leisure demand is displaced due to a greater amount of accommodated commercial and meeting and group demand at the subject property. The proposed hotel is expected to enter the market with a competitive index of 55, which would position this hotel as the market leader for leisure demand from its opening, and to reach a stabilized index of 70 in this segment. This leisure segment index is considered appropriate, given the limited-service nature of the proposed hotel; the lack of meeting space inherent in most limited-service hotel designs typically leads to more marketing effort towards the leisure traveler and less effort toward meeting and group travelers. No other changes are expected in this segment. The following table illustrates the competitive indexes in the leisure segment. ================================================================================ Table 7-8 Leisure Segment Competitive Indexes - --------------------------------------------------------------------------------
Property Historical 1997 1998 1999 2000 2001 2002 - --------------------------------------------------------------------------------------- Subject Property 57 50 50 50 50 50 50 Holiday Inn Hasbrouck Heights 28 28 28 28 28 28 28 Holiday Inn Saddle Brook 25 25 25 25 25 25 25 Ramada Rochelle Park 41 41 41 41 41 41 41 Secondary 49 49 49 49 49 49 49 Proposed Hotel -- -- -- 55 60 70 70
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Projection of Occupancy and 91 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Contract Segment As a hotel's occupancy improves, its reliance on contract demand generally diminishes. Because this segment commands deeply discounted rates, operators prefer to accommodate more lucrative types of demand whenever possible. Historically, only the Holiday Inn Hasbrouck Heights has accommodated this demand. For the purposes of this appraisal, we have assumed that this will remain the case, and that no additional properties will accommodate contract demand. ================================================================================ Table 7-9 Contract Segment Competitive Indexes - --------------------------------------------------------------------------------
Property Historical 1997 1998 1999 2000 2001 2002 - --------------------------------------------------------------------------------------- Subject Property 0 0 0 0 0 0 0 Holiday Inn Hasbrouck Heights 42 42 42 42 42 42 42 Holiday Inn Saddle Brook 0 0 0 0 0 0 0 Ramada Rochelle Park 0 0 0 0 0 0 0 Secondary 0 0 0 0 0 0 0 Proposed Hotel -- -- -- -- -- -- --
- -------------------------------------------------------------------------------- Subject Property's Room Night Capture and Occupancy After the competitive index is calculated, it is adjusted to reflect the property's room count, yielding a figure referred to as the market share adjuster. The market share adjuster of each property is then divided by the total market share adjuster for all of the competitors, resulting in each hotel's market share. By multiplying the projected market share by the area's usable room night demand, we can determine the total number of room nights captured by a specific hotel. Occupancy is then calculated by dividing the projected number of room nights captured by the property's total number of available room nights. Multiplying the subject property's projected market share by the estimated room night demand in each segment results in the following estimate of room nights captured by the hotel. HVS International, Mineola, New York Projection of Occupancy and 92 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-10 Room Nights Captured by the Subject Property - --------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002 -------------------------------------------------------------------- Commercial Demand 156,949 160,088 168,188 171,552 174,983 178,483 Market Share 0.1464 0.1464 0.1306 0.1297 0.1289 0.1289 Capture 22,979 23,439 21,972 22,257 22,547 22,998 Meeting and Group Demand 47,282 47,991 48,471 48,956 49,446 49,940 Market Share 0.0895 0.0895 0.0842 0.0832 0.0822 0.0822 Capture 4,233 4,296 4,080 4,072 4,065 4,106 Leisure Demand 39,348 39,741 40,138 40,539 40,944 41,353 Market Share 0.1877 0.1877 0.1596 0.1575 0.1534 0.1534 Capture 7,385 7,458 6,407 6,384 6,280 6,343 Contract Demand 10,403 10,403 10,403 10,403 10,403 10,403 Market Share 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 Capture 0 0 0 0 0 0 ------ ------ ------ ------ ------ ------ Total Capture 34,597 35,193 32,460 32,714 32,892 33,446
- -------------------------------------------------------------------------------- Dividing the total number of room nights captured by the subject property's number of available room nights per year (calculated as 141 x 365) produces the projected occupancy percentage. ================================================================================ Table 7-11 Calculation of the Subject Property's Projected Occupancy - --------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002 -------------------------------------------------------------------- Total Room Nights Captured/Year 34,597 35,193 32,459 32,713 32,892 33,447 Available Room Nights 51,465 51,465 51,465 51,465 51,465 51,465 Occupancy 67.22% 68.38% 63.07% 63.56% 63.91% 64.99% Rounded 67% 68% 63% 64% 64% 65%
- -------------------------------------------------------------------------------- For the purpose of forecasting income and expense, we will use the following occupancy levels. HVS International, Mineola, New York Projection of Occupancy and 93 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-12 Occupancy Forecast for the Subject Property - -------------------------------------------------------------------------------- Year Occupancy ------------------------------------ 1997 67% 1998 68 Stabilized 64 - -------------------------------------------------------------------------------- Although the preceding room night analysis shows the subject property achieving occupancies ranging from 63% in 1999 to 65% in 2002, we have chosen to use a stabilized occupancy level of 64%. The stabilized occupancy is intended to reflect the anticipated results of the property over its remaining economic life, given any and all changes in the life cycle of the hotel. Thus, the stabilized occupancy excludes from consideration any abnormal relationship between supply and demand, as well as any non-recurring conditions that may result in unusually high or low occupancies. Although the subject property may operate at occupancies above this stabilized level, we believe that it is equally possible for new competition and temporary economic downturns to force the occupancy below this selected point of stability. AVERAGE RATE ANALYSIS One of the most important considerations in estimating the value of a lodging facility is a supportable forecast of its attainable average rate, which is more formally defined as the average rate per occupied room. Average rate can be calculated by dividing the total rooms revenue achieved during a specified period by the number of rooms sold during the same period. The projected average rate and the anticipated occupancy percentage are used to forecast rooms revenue, which in turn provides the basis for estimating most other income and expense categories. Competitive Positioning The Howard Johnson Plaza's average rate will be projected using a competitive positioning method. This technique begins with an analysis of the average rates achieved by the subject property and its competitors. These rates establish a range that reflects certain characteristics of the specific market, such as price sensitivity, demand orientation, and occupancy. The subject property's average rate is then compared to those of the hotels to which it is most similar in terms of size, quality, facilities, amenities, market orientation, location, management, image, and affiliation. Adjustments are made to reflect any relevant differences. HVS International, Mineola, New York Projection of Occupancy and 94 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Although the average rate analysis presented here follows the occupancy projections, these two statistics are highly correlated; in reality, one cannot project occupancy without making specific assumptions regarding average rate. This relationship is best illustrated by RevPAR, which reflects a property's ability to maximize rooms revenue. The following table summarizes the 1996 average rate and RevPAR of the subject property and its competitors. ================================================================================ Table 7-13 1996 Average Rate and RevPAR of the Primary Competitors - -------------------------------------------------------------------------------- 1996 1996 Average Rooms Revenue Property Room Rate Per Available Room - -------------------------------------------------------------------------------- Subject Property $63.00 $39.69 Holiday Inn Hasbrouck Heights 66.00 50.16 Holiday Inn Saddle Brook 73.00 49.64 Ramada Rochelle Park 66.00 49.50 ------ ------ Averages $66.82 $47.81 - -------------------------------------------------------------------------------- The Holiday Inn Saddle Brook maintains the highest average rate in 1996, projected at $73 for year-end 1996, followed by the Holiday Inn Hasbrouck Heights and the Ramada Rochelle Park, at $66. It is also important to note that the average rate at the Holiday Inn Hasbrouck Heights is discounted due to its accommodation of contract business, which accounts for approximately 15% of their accommodated demand. The subject property trails, with a projected 1996 year-end rate of $63. This discounted rate is largely due to the historically poor positioning of the hotel. The hotel reportedly used to accommodate trucking contracts and local demand which produced low average rates. Additionally, the historically poor condition of the property necessitated a discounting rate strategy. HVS International, Mineola, New York Projection of Occupancy and 95 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Average Rate Increases It is important to note that hotel room rate increases do not necessarily conform to the underlying monetary inflation rate, because lodging facilities are influenced by market conditions such as the relationship between supply and demand. A hotel's ability to raise room rates is affected by a number of factors, including the following. o Supply and Demand Relationships - The relationship between supply and demand is one of the factors that determine hotel occupancies and average rates. Strong markets where lodging demand is increasing faster than supply are often characterized by rate growth that exceeds inflation. Markets that are overbuilt or suffering from declining demand are unlikely to exhibit any significant increases in average rates. o Inflationary Pressures - Price increases caused by inflation affect hotel room rates by eroding profit margins and encouraging operators to raise prices. This strategy is effective only in markets that are characterized by a healthy supply and demand relationship. o Improving the Competitive Standard - When a new lodging facility enters a mature market, its rates may be set higher than the marketwide average in an effort to justify the development costs. This temporary condition may allow other competitors to achieve corresponding gains by effectively raising the amount the market will bear. However, if the addition to supply has a severe impact on the occupancy levels of other hotels, price competition may ensue. o Property-Specific Improvements - Changes that make a hotel more or less attractive to guests can have an impact on average rate. An expansion, renovation, upgrading, or the introduction of additional facilities and amenities may enable greater-than-inflationary room rate increases. Likewise, deferred maintenance may make a property less competitive, engendering a decline in room rates. In determining average rate projections, changes that occur prior to occupancy stabilization are generally attributable to factors that are specific to the property and the market. After a hotel achieves a stabilized occupancy, room rates are generally expected to continue to increase at the underlying inflation rate throughout the remainder of the projection period. Our forecast of the subject property's average rate recognizes the recent renovation, which has enhanced the hotel's ability to compete with other local lodging facilities. We have also taken into account the re-positioning HVS International, Mineola, New York Projection of Occupancy and 96 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= of the hotel's marketing efforts. Marketwide average rates rose by 4.8% in 1994, by 3.6% in 1995, and by 7.8% for year-to-date 1996 (according to Smith Travel Research). In consideration of these trends, as well as the improving market image of the property and market re-positioning, we believe that it is reasonable to expect the Howard Johnson's average rate to increase by 4.0% in 1997. In the second projection year, while demand remains strong and supply remains constant, we expect an increase of 5.0% in average rate. From the third projection year onward, average rate gains are expected to stabilize at the underlying inflation rate of 3.5% annually. Based on these considerations, the following table shows our projection of average rate increases. ================================================================================ Table 7-14 Average Rate Forecast - -------------------------------------------------------------------------------- Areawide Subject Property's Subject Property's Areawide Rate Rate Projected Year Occupancy Increase Increase Average Rate - ------------------------------------------------------------------------------- Positioned Base --- --- --- $63.00 1997 72 % 3% to 5% 4.0 % 65.53 1998 73 4 to 6 5.0 68.80 Stabilized 67 3 to 4 3.5 71.21 - -------------------------------------------------------------------------------- The following average rates will be used to project the subject property's rooms revenue. ================================================================================ Table 7-15 Forecast of Occupancy and Average Rate - -------------------------------------------------------------------------------- Year Occupancy Average Rate ------------------------------------------------------------------- 1997 67% $65.53 1998 68 68.80 Stabilized 64 71.21 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Highest and Best Use 97 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 8. Highest and Best Use The concept of highest and best use recognized by the Appraisal Institute distinguishes between the highest and best use of the land (as though vacant) and that of the property (as improved). Highest and best use is defined as: The reasonably probable and legal use of vacant land or improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.(1) The concept of highest and best use is the premise upon which value is based, and is a product of competitive forces in the marketplace. The principle of balance holds that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium. This principle applies to relationships among various property components as well as the relationship between the costs of production and the property's productivity. The point of economic balance is achieved when the combination of land and building is optimal (i.e., when no marginal benefit or utility is achieved by adding another unit of capital). The law of increasing returns holds that larger amounts of the agents of production produce greater net income up to a certain point, after which the law of diminishing returns is applied.(2) It is important to recognize that the highest and best use of the land (as though vacant) may differ from the highest and best use of the property (as improved). This differential may occur when a site has existing improvements and the highest and best use of the land differs from the current use. Nonetheless, the current property use will continue until the value of the land under its highest and best use exceeds the value of the property in its current use, plus the cost to remove the existing improvements. (1) The Appraisal of Real Estate - Tenth Edition, Appraisal Institute, Chicago, IL, 1992, p. 45. (2) Ibid., p. 40. HVS International, Mineola, New York Highest and Best Use 98 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= In consideration of the factors influencing development in the immediate area, it is the appraisers' opinion that the highest and best use of the subject site, as vacant, would be a transient lodging facility. Based on the fact that the value of the land does not exceed the value of the hotel plus the cost of demolition, it is our opinion that the subject property's highest and best use, as improved, is its current use as a lodging facility. HVS International, Mineola, New York Approaches to Value 99 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 9. Approaches to Value In appraising real estate for market value, the appraiser has three approaches from which to select: the income capitalization, sales comparison, and cost approaches. Although all three valuation procedures are given consideration, the inherent strengths of each approach and the nature of the subject property must be evaluated to determine which will provide supportable estimates of market value. The appraiser is then free to select one or more of the appropriate approaches in arriving at a final value estimate. The Income Capitalization Approach The income capitalization approach takes a property's projected net income before debt service and allocates this future benefit to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component is calculated. The total of the mortgage component and the equity component equals the value of the property. This approach is often selected as the preferred valuation method for income- producing properties, because it most closely reflects the investment rationale of knowledgeable buyers. The Sales Comparison Approach The sales comparison approach estimates the value of a property by comparing it to similar properties that have been sold on the open market. To obtain a supportable estimate of value, the sales price of a comparable property must be adjusted to reflect any dissimilarities between it and the property being appraised. The sales comparison approach may provide a useful value estimate in the case of simple forms of real estate, such as vacant land and single-family homes, where the properties are homogeneous and the adjustments are few and relatively simple to compute. In the case of complex investments such as shopping centers, office buildings, restaurants, and lodging facilities, where the adjustments are numerous and more difficult to quantify, the sales comparison approach loses much of its reliability. HVS International, Mineola, New York Approaches to Value 100 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Hotel investors typically do not employ the sales comparison approach in reaching their final purchase decisions. Factors such as the lack of recent sales data, the numerous insupportable adjustments that are necessary, and the general inability to determine the true financial terms and human motivations of comparable transactions often make the results of this technique questionable. Although the sales comparison approach may provide a range of values that supports the final estimate, reliance on this method beyond the establishment of broad parameters is rarely justified by the quality of the sales data. The market-derived capitalization rates sometimes used by appraisers are susceptible to the same shortcomings inherent in the sales comparison approach. To substantially reduce the reliability of the income capitalization approach by employing capitalization rates obtained from unsupported market data weakens the final value estimate and ignores the typical investment analysis procedures employed by hotel purchasers. Because appraisers are obligated to mirror the actions of the marketplace, we generally give the sales comparison approach minimal weight in the hotel appraisal process beyond bracketing the final estimate.(1) The Cost Approach The cost approach estimates market value by computing the current cost to replace the property and subtracting any depreciation resulting from physical deterioration, functional obsolescence, and external (or economic) obsolescence. The value of the land, as if vacant and available, is then added to the depreciated value of the improvements to produce a total value estimate. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements grow older and begin to deteriorate, the resultant loss in value becomes increasingly difficult to quantify accurately. We find that knowledgeable hotel buyers base their purchase decisions on economic factors such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, this approach is given minimal weight in the (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 209. HVS International, Mineola, New York Approaches to Value 101 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= hotel valuation process. As noted in Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, "the cost approach is seldom used to value existing hotels and motels."(1) Reconciliation The final step in the valuation process is the reconciliation and correlation of the value indications. Factors that are considered in assessing the reliability of each approach include the purpose of the appraisal, the nature of the subject property, and the reliability of the data used. In reconciliation, the applicability and supportability of each approach is considered and the range of value indications is examined. The most significant weight is given to the approach that produces the most reliable solution and most closely reflects the criteria used by typical investors. Our nationwide experience with numerous hostelry buyers and sellers indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the investors who constitute the marketplace. For this reason, the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in the hotel valuation process. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 208. HVS International, Mineola, New York Income Capitalization Approach 102 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 10. Income Capitalization Approach The income capitalization approach is based on the principle that the value of a property is indicated by its net return, or what is known as the present worth of future benefits. The future benefits of income-producing properties, such as hotels, are net income before debt service and depreciation (as estimated by a forecast of income and expense) and any anticipated reversionary proceeds from a sale. These future benefits can be converted into an indication of market value through a capitalization process and discounted cash flow analysis. Using the income capitalization approach, the subject property has been valued by analyzing the local market for transient accommodations, examining existing and proposed competition, and developing a forecast of income and expense that reflects current and anticipated income trends and cost components through a stabilized year of operation. The forecast of income and expense is expressed in current dollars for each year. The stabilized year is intended to reflect the anticipated operating results of the property over its remaining economic life, given any or all applicable stages of build-up, plateau, and decline in the life cycle of the hotel. Thus, income and expense estimates from the stabilized year forward exclude from consideration any abnormal relationship between supply and demand, as well as any non-recurring conditions that may result in unusual revenues or expenses. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, published by the Appraisal Institute, "of the three valuation approaches available to the appraiser, the income capitalization approach generally provides the most persuasive and supportable conclusions when valuing a lodging facility."(1) This text recommends that using a ten-year forecast and an equity yield rate "most accurately reflects the actions of typical hotel buyers, who purchase properties based (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. HVS International, Mineola, New York Income Capitalization Approach 103 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= on their leveraged discounted cash flow."(1) The simpler procedure of using a ten-year forecast and a discount rate is "less reliable because the derivation of the discount rate has little support. Moreover, it is difficult to adjust the discount rate for changes in the cost of capital."(2) We have used both methods to discount the subject property's projected net income into an estimate of value. Method One is a ten-year discounted cash flow analysis in which the cash flow to equity and the equity reversion are discounted to the present value at the equity yield rate, and the income to the mortgagee is discounted at a mortgage interest rate. The sum of the equity and mortgage values is the total property value. Method Two is a simple ten-year discounted cash flow analysis in which the annual net income before debt service and the reversionary proceeds following a sale at the end of the tenth year are discounted back to the date of the appraisal at an overall discount rate, and then totaled to produce an indication of the present worth of future benefits. To convert the projected income stream into an estimate of value through Method One, the anticipated net income (before debt service and depreciation) is allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. The total of the mortgage component and the equity component equals the value of the property. The process is described as follows. 1. The terms of typical hotel financing are set forth, including interest rate, amortization term, and loan-to-value ratio. 2. An equity yield rate of return is established. Numerous hotel buyers base their equity investments on a ten-year equity yield rate projection that takes into account ownership benefits such as periodic cash flow distributions, residual sale or refinancing distributions that return any property appreciation and mortgage amortization, income tax benefits, and various non-financial considerations such as status and prestige. The equity yield rate is also known as the internal rate of return on equity. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. (2) Ibid. HVS International, Mineola, New York Income Capitalization Approach 104 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 3. The value of the equity component is calculated by first deducting the annual debt service from the projected net income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value. After deducting the mortgage balance at the end of the tenth year and the typical brokerage and legal costs, the equity residual is discounted back to the date of value at the equity yield rate. The net income to equity for each of the ten projection years is also discounted to the present value. The sum of these discounted values equates to the value of the equity component. Adding the equity component to the initial mortgage balance yields the overall property value. Because the mortgage and the debt service amounts are unknown but the loan-to-value ratio was determined in Step #1, the preceding calculation can be solved through an iterative process or by use of a linear algebraic equation that computes the total property value. The algebraic equation that solves for the total property value using a ten-year mortgage and equity technique was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique." 14 4. The value is proven by allocating the total property value between the mortgage and equity components and verifying that the rates of return set forth in Steps #1 and #2 can be met from the projected net income. The process of converting the projected income stream into an estimate of value through Method Two is described as follows. 1. A discount rate is established by evaluating the total property yield derived by Method One. Occasionally, the discount rate may be adjusted slightly based on the total property yields indicated by recent transactions involving hotels similar to the subject property. 2. The reversionary value is calculated by capitalizing the 11th-year net income by the terminal capitalization rate and deducting typical brokerage and legal fees. (1) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Income Capitalization Approach 105 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 3. The ten-year forecast of net income (before debt service and depreciation) and the reversionary value are discounted to the date of value at the rate derived above. Review of Operating History Because the Howard Johnson Plaza is an existing hotel with an established operating performance, its historical income and expense experience can serve as a basis for projections. The subject property opened in 1969, and achieved occupancy levels of 55.4% in 1994 (partial year April through December), 55.7% in 1995, and 60.4% for year-to-date August 1996. The following income and expense statements were provided by Ashford Hotel Corporation, and are unaudited. Where applicable, we have reorganized the statements in accordance with the Uniform System of Accounts for Hotels. HVS International, Mineola, New York Income Capitalization Approach 106 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-1 Historical Operating Performance ($+,000) - --------------------------------------------------------------------------------
Partial Year Ending August: 1996 1995 --------------------------------------------- --------------------------------------------- Total Rooms: 141 141 Occupied Rooms: 20,069 16,451 Complimentary Rooms: 711 1,766 Days Open: 244 Amount per Amount per 243 Amount per Amount per Occupancy: 60.4% Percentage Available Occupied 53.2% Percentage Available Occupied Average Rate: $63.10 of Revenue Room Room $60.10 of Revenue Room Room - ------------------------------------------------------------------------------------------------------------------------------ REVENUE Rooms $1,266 89.6 % $8,981 $63.10 $989 88.6 % $7,012 $60.10 Telephone 59 4.2 419 2.94 42 3.8 299 2.56 Net Other Income 88 6.2 626 4.40 85 7.6 603 5.17 Total 1,414 100.0 10,026 70.44 1,116 100.0 7,913 67.82 - ------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL EXPENSES Rooms 240 18.9 1,700 11.94 224 22.6 1,586 13.60 Telephone 31 52.9 222 1.56 26 60.7 181 1.55 Total 271 19.2 1,922 13.50 249 22.3 1,767 15.15 - ------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL INCOME 1,143 80.8 8,104 56.94 867 77.7 6,146 52.68 - ------------------------------------------------------------------------------------------------------------------------------ OPERATING EXPENSES Administrative & General 190 13.4 1,347 9.46 164 14.7 1,166 9.99 Management Fee 43 3.1 307 2.16 35 3.1 245 2.10 Marketing 77 5.5 548 3.85 134 12.0 952 8.16 Franchise Fees 67 4.7 473 3.32 53 4.7 373 3.20 Property Oper. & Maint. 127 9.0 902 6.34 91 8.2 648 5.56 Energy 126 8.9 893 6.27 157 14.1 1,113 9.54 Total 630 44.6 4,469 31.40 634 56.8 4,497 38.54 - ------------------------------------------------------------------------------------------------------------------------------ HOUSE PROFIT 513 36.2 3,635 25.54 232 20.9 1,649 14.14 - ------------------------------------------------------------------------------------------------------------------------------ FIXED EXPENSES Property Taxes 100 7.1 709 4.98 85 7.6 600 5.14 Insurance 24 1.7 174 1.22 23 2.0 162 1.39 Reserve for Replacement 53 3.8 376 2.64 46 4.1 326 2.80 Ground Lease 130 9.2 923 6.48 130 11.7 923 7.91 Total 308 21.8 2,182 15.33 284 25.4 2,011 17.24 - ------------------------------------------------------------------------------------------------------------------------------ NET INCOME $205 14.4 % $1,453 $10.21 ($51) -4.5 % ($362) ($3.10) - ------------------------------------------------------------------------------------------------------------------------------
* Departmental expense ratios are expressed as a percentage of departmental revenues. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 107 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-2 Historical Operating Performance ($+,000) - --------------------------------------------------------------------------------
Calendar Year 1995 1994 (Partial Year, Starting April) ------------------------------------------- ------------------------------------------- Total Rooms: 141 141 Occupied Rooms: 26,038 17,517 Complimentary Rooms: 2,637 1,236 Days Open: 365 Amount per Amount per 240 Amount per Amount per Occupancy: 55.7% Percentage Available Occupied 55.4% Percentage Available Occupied Average Rate: $60.93 of Revenue Room Room $52.65 of Revenue Room Room - -------------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $1,586 88.3 % $11,251 $60.93 $922 88.4 % $6,540 $52.65 Telephone 71 4.0 505 2.74 30 2.9 215 1.73 Net Other Income 138 7.7 981 14.02 91 8.7 645 5.19 Total 1,796 100.0 12,738 68.98 1,043 100.0 7,400 59.57 - -------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES Rooms 365 23.0 2,589 14.02 199 21.6 1,415 11.39 Telephone 48 66.8 337 1.83 22 72.0 154 1.24 Total 413 23.0 2,926 15.84 221 21.2 1,569 12.63 - -------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 1,383 77.0 9,812 53.13 822 78.8 5,831 46.94 - -------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 260 14.5 1,842 9.97 164 15.7 1,165 9.38 Management Fee 55 3.1 393 2.13 32 3.1 226 1.82 Marketing 211 11.7 1,496 8.10 51 4.9 364 2.93 Franchise Fees 84 4.6 592 3.21 49 4.7 347 2.79 Property Oper. & Maint. 144 8.0 1,020 5.53 103 9.8 728 5.86 Energy 221 12.3 1,569 8.50 93 8.9 661 5.32 Total 975 54.2 6,913 37.43 492 47.1 3,491 28.10 - -------------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 409 22.8 2,899 15.70 330 31.7 2,340 18.84 - -------------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 127 7.1 902 4.88 66 6.4 471 3.80 Insurance 34 1.9 239 1.29 31 2.9 218 1.76 Reserve for Replacement 74 4.1 524 2.84 0 0.0 0 0.00 Ground Lease 195 10.9 1,384 7.50 114 10.9 807 6.50 Total 430 24.0 3,049 16.51 211 20.2 1,497 12.05 - -------------------------------------------------------------------------------------------------------------------------------- NET INCOME ($21) -1.2 % ($150) ($0.81) $119 11.5 % $843 $6.79 - --------------------------------------------------------------------------------------------------------------------------------
* Departmental expense ratios are expressed as a percentage of departmental revenues. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 108 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= These historical income and expense statements show that operating efficiencies have been achieved in the rooms department year-to-date, showing a decline from 22.6% to 18.9%. Efficiencies have also been achieved in the telephone department; expenses in this department were 72.0% of telephone revenue in 1994, and 66.8% in 1995; year-to-date efficiencies have also been achieved, illustrating a decline from 60.7% to 52.9%. Operating expenses have remained relatively stable; a fluctuation in marketing expense is attributed to a regional marketing director's salary that was temporarily allocated in its entirety to the subject property. Declines achieved in energy for year-to-date, 1996 are attributed to the assignment of energy expenses allocated with the restaurant to the restaurant lessee. Forecast of Income and Expense The forecast of income and expense is intended to reflect the appraiser's subjective estimate of how a typical buyer would project the subject property's future operating results. Depending on the dynamics of the local market, a typical buyer's projection may be adjusted upward or downward. We have attempted to consider these factors in formulating this forecast. HVS International uses a fixed-and-variable component model to project a lodging facility's revenue and expense levels. This model is based on the premise that hotel revenues and expenses have one component that is fixed, and another that varies directly with occupancy and facility usage. A projection can be made by taking a known level of revenue or expense and calculating its fixed and variable components. The fixed component is then held constant, while the variable component is adjusted for the percent change between the projected occupancy and facility usage and that which produced the known level of revenue or expense. Base-Year Statement of Income and Expense Based on our review of the operating histories of the subject property and comparable hotels, we have derived a base-year statement of income and expense expressed in 1996 dollars. The units of comparison include a percentage of departmental and total revenue, amounts per available room, and amounts per occupied room. The income and expense ratios reflect an occupancy level of 55.7%. The base-year profit and loss statement will be used to determine the relationship between the fixed and variable components. HVS International, Mineola, New York Income Capitalization Approach 109 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-3 Base-Year Statement of Income and Expense ($+,000) - -------------------------------------------------------------------------------- Calendar Year: 1995 -------------------------------------------- Number of Rooms: 141 Occupancy: 55.7% Percent of Amount per Amount per Average Rate: $60.93 Total Available Occupied Occupied Rooms: 26,038 Revenue Room Room - -------------------------------------------------------------------------------- Revenue: Rooms $1,586 88.3 % $11,251 $60.93 Telephone 71 4.0 505 2.74 Net Other Income 138 7.7 981 5.31 Total Revenue 1,796 100.0 12,738 68.98 - -------------------------------------------------------------------------------- Expenses: Rooms * 397 25.0 2,813 15.23 Telephone * 40 56.8 287 1.55 Administrative & General 278 15.5 1,969 10.66 Management Fee 54 3.0 382 2.07 Marketing 163 9.1 1,156 6.26 Franchise Fees 63 3.5 450 2.44 Property Oper. & Maint. 158 8.8 1,122 6.08 Energy 183 10.2 1,295 7.01 Property Taxes 144 8.0 1,023 5.54 Insurance 42 2.4 300 1.62 Reserve for Replacement 72 4.0 510 2.76 Ground Lease 195 10.9 1,383 7.49 Total Expenses 1,789 99.6 12,689 68.72 - -------------------------------------------------------------------------------- Net Income $7 0.4 % $49 $0.26 ================================================================================ * Departmental expense ratios are expressed as a percentage of departmental revenues. - -------------------------------------------------------------------------------- Inflation Assumptions The base revenue and expense amounts are inflated to reflect current dollars for each projection year. Line items can be affected by different factors. We must establish a general rate of inflation that will be applied to most revenue and expense categories. The following table shows inflation estimates made by economists at some noted institutions and corporations. HVS International, Mineola, New York Income Capitalization Approach 110 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-4 Inflation Estimates - -------------------------------------------------------------------------------- Projected Increase in Consumer Price Index (Annualized Rate Versus 12 Months Earlier) ------------------------------------------ November May Source of 1996 of 1997 - -------------------------------------------------------------------------------- Maureen Allyn, Scudder Stevens Clark 3.1% 2.3% Wayne Angell, Bear Stearns 3.0 3.2 Richard Berner, Mellon Bank 2.9 2.8 David Berson, Fannie Mae 2.9 2.8 David Blitzer, S&P 3.0 2.7 Paul Boltz, T. Rowe Price 3.2 3.5 David Bostian, Herzog, Heine, Geduld 2.9 2.5 Philip Braverman, DKB Securities 3.0 2.8 William Brown, J.P. Morgan 3.3 3.2 Rosanne Cahn, CS First Boston 3.1 2.6 James Coons, Huntington National Bank 3.2 3.0 Michael Cosgrove, The Econoclast 3.2 3.3 Dewey Daane, Vanderbilt University 3.4 3.6 Robert Dederick, Northern Trust 3.1 3.4 W.Dudley, Goldman Sachs 3.4 3.2 Michael Englund, MMS Intl. 3.2 3.3 Michael Evans, Evans Group 3.0 3.0 Gail Fosler, Conference Board 3.5 3.6 Maury Harris, Paine Weber, Inc. 2.8 2.8 Tracy Herrick, Jefferies & Co. 3.2 3.6 Stuart Hoffman, PNC Bank 3.1 2.8 William Hummer, Wayne Hummer 2.9 3.0 Edward Hyman, ISI Group 2.8 2.1 Saul Hymans, University of Michigan 2.7 1.7 Mieczyslaw Karczmar, Deutsche Bank 2.8 3.2 Kurt Karl, WEFA Group 2.6 2.3 Irwin Kellner, Chase Manhattan Bank 2.6 2.3 D. Laufenberg, American Express Financial Advisors 3.2 3.4 Michelle Laughlin, Sanwa Securities 3.0 3.2 Carol Leisenring, CoreStates Financial 2.7 2.5 Richard Lemmon, General Motors 3.0 3.0 Mickey Levy, NationsBank Capital Markets 2.6 2.4 David Littmann, Comerica 3.1 3.0 John Lonski, Moody's Investors Service 3.3 3.2 Paul McCulley, UBS Securities 3.0 2.8 John McDevitt, 3M 2.6 2.5 Arnold Moskowitz, Moskowitz Capital 3.1 3.5 John Mueller, LBMC, Inc. 3.2 2.5 David Munro, High Frequency Econ. 3.0 2.5 Carl Palash, MCM MoneyWatch 3.0 3.0 Nicholas Perna, Fleet Financial Group 3.3 3.3 Elliott Platt, Donaldson Lufkin 2.8 2.0 Maria F. Ramirez, MF Ramirez 3.0 3.0 Donald Ratajczak, Georgia State University 3.0 3.3 David Resler, Nomura Securities International 2.9 2.6 Allan Reynolds, Hudson Institute 3.3 3.6 Richard Rippe, Prudential Securities 3.1 3.3 A. Gary Schilling, Schilling & Co. 3.0 3.0 Allen Sinai, Lehman Brothers 3.2 3.4 James Smith, University of North Carolina 2.1 1.9 Susan Sterne, Economic Analysis 2.5 2.5 Donald Straszheim, Merrill Lynch 2.7 2.3 Thomas Synott III, U.S. Trust Company 3.3 3.4 John Williams, Bankers Trust 3.0 3.1 Raymond Worseck, A.G. Edwards 3.6 3.3 David Wyss, DRI/McGraw-Hill 3.0 2.5 Edward Yardeni, Deutsche Morgan Grenfell 2.2 2.0 Mark Zandi, Regional Financial Associates 3.0 3.2 ----- ----- Averages 3.0% 2.9% Source: Wall Street Journal, July 1, 1996 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 111 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The preceding table shows inflation forecasts averaging 3.0% through November of 1996 and 2.9% through May of 1997. Most of the economists in the sample estimate inflation rates ranging from 2.5% to 3.4% for the 12-month period, although several anticipate levels of slightly greater than 3.4%. As a further check on these inflation projections, we have reviewed historical increases in the Consumer Price Index. Because the value of real estate is predicated on cash flows over a relatively long period, inflation should be considered from a long-term perspective. Between 1986 and 1994, the national CPI increased at an average annual compounded rate of 3.8%. In consideration of these historical trends, the projections set forth above, and our assessment of probable property appreciation levels, we have selected an annual stabilized inflation rate of 3.5%. One of the exceptions to this general inflation assumption is the projected growth in average rate. As noted earlier, increases in the subject property's room rate are projected as follows. ================================================================================ Table 10-5 Projected Growth in Average Rate - -------------------------------------------------------------------------------- Increase From Year Previous Year ---------------------------------------------------------- 1997 2.4% 1998 5.0 Thereafter 3.5 - -------------------------------------------------------------------------------- Using these inflation assumptions, the base-year income and expense statement (which is expressed in 1996 dollars) is inflated to arrive at projections. Each revenue and expense category will be projected using the inflated base statement to determine the fixed-and-variable component relationships. Rooms Revenue Rooms revenue is determined by two variables: occupancy and average rate. Earlier in this report, we estimated the subject property's occupancy and average rate as follows. HVS International, Mineola, New York Income Capitalization Approach 112 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-6 Projected Occupancy and Average Rate - -------------------------------------------------------------------------------- 1997 1998 Stabilized --------------------------------------------------------------------------- Forecast of Occupancy Percentage 67.0 % 68.0 % 64.0 % Forecast of Average Rate $65.53 $68.80 $71.21 - -------------------------------------------------------------------------------- Rooms revenue is calculated as follows. ================================================================================ Table 10-7 Forecast of Rooms Revenue - -------------------------------------------------------------------------------- Number Forecast of Calendar Projected Average Number of Days Rooms Revenue Years Occupancy Room Rate of Units in Year (+,000) - -------------------------------------------------------------------------------- 1997 67.0 X $65.53 X 141 X 365 = $2,260 1998 68.0 X 68.80 X 141 X 365 = 2,408 Stabilized 64.0 X 71.21 X 141 X 365 = 2,346 - -------------------------------------------------------------------------------- Telephone Revenue Telephone revenue is generated by hotel guests who charge local and long-distance calls to their rooms, and by individuals who use the property's public telephones. Prior to the de-regulation of the telephone industry in the early 1980s, hotels were limited to a 15% commission on long-distance calls, a mark-up that allowed few profits. De-regulation and the development of sophisticated call-accounting equipment have resulted in profitable telephone departments. State-of-the-art equipment is capable of least-cost routing, automatic price billing, and posting telephone charges to guest folios. Hotels can select among various long-distance services, and can also work with any one of a number of Alternative Operator Services (AOS). These systems route and price calls, and may provide additional services. In recent years, the hospitality industry has experienced diverging trends with respect to telephone revenue. Prices per call have increased - in some cases, dramatically, yielding departmental profits as high as 50% to 55%. However, the number of long-distance calls billed per occupied room has declined as a result of the extensive use of long-distance carrier services that can be accessed locally or through a toll-free number. When guests charge long-distance calls to their personal or business accounts in this manner, the HVS International, Mineola, New York Income Capitalization Approach 113 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= hotel loses the revenue associated with long-distance tariffs and mark-ups, and only receives an access fee. Most telephone revenue varies directly with changes in occupancy. However, there is a small fixed component consisting of public telephone revenue, which is primarily generated by individuals using the hotel's food, beverage, and meeting facilities. Using this fixed-and-variable relationship, the subject property's telephone revenue is projected as follows. ================================================================================ Table 10-8 Forecast of Telephone Revenue - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total Telephone Revenue (+,000) $ 90 $ 95 $ 93 Percent of Total Revenue 3.6% 3.6% 3.6% Amount Per Available Room $ 638 $ 674 $ 660 Amount Per Occupied Room $ 2.61 $ 2.71 $ 2.82 - -------------------------------------------------------------------------------- Net Other Income Other income is derived from sources other than guestrooms, food and beverages, and telephone services. Depending on the type of hotel and the facilities and amenities offered, other income may include the following items. o Rentals - stores, office space, concession space, showcases, clubs, and storage. o Commissions from auto rentals, photography, telegrams, and vending services. o Concessions - revenue derived from charges for the privilege of operating departments that could be operated by the hotel. Gift shops, barber shops, and beauty salons are often operated as concessions. o Laundry, dry cleaning, and fax services. o Cash discounts earned - discounts from creditors' accounts for payment within the discount period. This item does not include trade discounts, which are a deduction from the cost of goods sold. o Electronic games and pinball machines. o Forfeited advance deposits and guaranteed no-shows. HVS International, Mineola, New York Income Capitalization Approach 114 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= o Service charges - service charges that are added to a customer's account but are not paid to service personnel. o Interest income - interest from house accounts. o Salvage - revenue from the sale of old or obsolete items. Other income is highly sensitive to changes in occupancy and slightly correlated to food and beverage volume. Using this fixed-and-variable relationship, the subject property's other income is projected as follows. ================================================================================ Table 10-9 Forecast of Other Income - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total Net Other Income (+,000) $ 157 $ 164 $ 166 Percent of Total Revenue 6.3% 6.1% 6.4% Amount Per Available Room $ 1,113 $ 1,163 $ 1,177 Amount Per Occupied Room $ 4.55 $ 4.69 $ 5.04 - -------------------------------------------------------------------------------- Rooms Expense Rooms expense consists of items related to the sale and upkeep of guestrooms and public space. Salaries, wages, and employee benefits account for a substantial portion of this category. Although payroll varies somewhat with occupancy (because managers can schedule maids, bell personnel, and house cleaners to work when demand requires), much of a hotel's payroll is fixed. Front desk personnel, public area cleaners, the housekeeper, and other supervisors must be maintained at all times. As a result, salaries, wages, and employee benefits are only moderately sensitive to changes in occupancy. Commissions represent remuneration to travel agents for booking rooms. Because these fees are based on a percentage of rooms revenue, they are highly dependent on occupancy and rate. Reservations is a similar expense that reflects the cost of a franchise reservation system that typically bills as a percentage of rooms revenue. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are only slightly affected by changes in volume. In light of these considerations, we project the subject property's rooms expense as follows. HVS International, Mineola, New York Income Capitalization Approach 115 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-10 Forecast of Rooms Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total Rooms Expense (+,000) $ 480 $ 500 $ 503 Percent of Rooms Revenue 21.2% 20.8% 21.4% Amount per Available Room $ 3,404 $ 3,546 $ 3,567 Amount per Occupied Room $ 13.92 $ 14.29 $ 15.27 - -------------------------------------------------------------------------------- Telephone Expense Telephone expense consists of all costs associated with this department. In the case of small hotels with automated systems, the operation of telephones may be an additional responsibility of front desk personnel; however, most large properties employ full-time operators. The bulk of the telephone expense consists of the cost of local and long-distance calls billed by the telephone companies that provide these services. Because most calls are made by in-house guests, these costs are moderately correlated to occupancy. Unless a particular hotel department incurs high expenses, use of telephone services by hotel employees is charged to this account. The remaining costs, which include salaries, wages, printing, and other expenses, are moderately fixed. The following table illustrates our forecast of telephone expense. ================================================================================ Table 10-11 Forecast of Telephone Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total Telephone Expense (+,000) $ 46 $ 48 $ 49 Percent of Telephone Revenue 51.1% 50.5% 52.7% Amount per Available Room $ 326 $ 340 $ 348 Amount per Occupied Room $ 1.33 $ 1.37 $ 1.49 - -------------------------------------------------------------------------------- Administrative and General Expense Administrative and general expense includes the salaries and wages of all administrative personnel who are not directly associated with a particular department. Expense items related to the management and operation of the property are also allocated to this category. Most administrative and general expenses are relatively fixed. The exceptions are cash overages and shortages; commissions on credit card charges; HVS International, Mineola, New York Income Capitalization Approach 116 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= provision for doubtful accounts, which are moderately affected by the number of transactions or total revenue; and salaries, wages, and benefits, which are very slightly influenced by volume. In recent years, several new items have been added to the administrative and general expense category. Human resources includes the cost of recruiting, relocating, and training personnel. Security consists of the cost of contract security for the property and related expenses. The general insurance category includes premiums for liability, fidelity, life, theft coverage, and business interruption insurance. Fire and extended-coverage insurance on the building and contents is a separate insurance expense category. Liability insurance covers third-party actions involving bodily injury and personal property, and is typically based on rooms receipts, meeting and banquet income, and food and beverage revenue. Factors that may have an impact on a hotel's liability expense include the size of the meeting, banquet, and restaurant facilities; the ratio between the amount of alcohol served and total food and beverage sales; the presence of a dance floor; a high-rise structure; a swimming pool; life safety support systems; and the guest transportation services provided by the hotel. The following table illustrates our forecast of administrative and general expense. ================================================================================ Table 10-12 Forecast of Administrative and General Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total Administrative & General Expense (+,000) $ 325 $ 339 $ 344 Percentage of Total Revenue 13.0% 12.7% 13.2% Amount per Available Room $ 2,305 $ 2,404 $ 2,440 Amount per Occupied Room $ 9.43 $ 9.69 $ 10.44 - -------------------------------------------------------------------------------- Management Fee Management expense consists of the basic fee paid to the type of company that is anticipated to operate the subject property. Some companies provide management services alone, while others also provide a brand name affiliation. When a management company has no brand identification, the property owner often acquires a franchise that provides the necessary image and recognition. Although most hotel management companies employ a fee schedule that includes a basic fee (usually a percentage of total revenue) and an incentive fee (usually a percentage of defined profit), the incentive HVS International, Mineola, New York Income Capitalization Approach 117 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= portion is often subordinated to debt service and does not appear in a forecast of net income before debt service. Basic hotel management fees are almost always based on a percentage of total revenue, which means they have no fixed component. Although the incentive fee does not decrease the cash flow available for debt service, it does reduce the potential cash flow to equity, and must be accounted for in the valuation process. Generally, the most appropriate procedure for handling the impact of the incentive fee on the equity component is to use the projected net income before debt service and incentive fee, but adjust the equity dividend or yield rate upward to reflect this added management cost. The adjusted equity dividend and yield rates will be described later in this section. The subject property is operated by Remington Employers Corporation; the management contract allows for a sum equal to 3% of gross revenues to be paid as a management fee. Based on our review of the current market for management contracts, we are of the opinion that this fee is consistent with prevailing market terms. Applying this management fee structure to the projection of total revenue yields the following forecast of the subject property's management fee. ================================================================================ Table 10-13 Forecast of Management Fee (+,000) - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Management Fee Expense (+,000) $ 75 $ 80 $ 78 - -------------------------------------------------------------------------------- Marketing Expense Marketing expense consists of all costs associated with advertising, sales, and promotion; these activities are intended to attract and retain customers. Marketing can be used to create an image, develop customer awareness, and stimulate patronage of a property's various facilities. The marketing category is unique, in that all expense items, with the exception of fees and commissions, are totally controlled by management. Most hotel operators establish an annual marketing budget that sets forth all planned expenditures. If the budget is followed, total marketing expenses can be projected accurately. HVS International, Mineola, New York Income Capitalization Approach 118 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Marketing expenditures are unusual because although there is a lag period before results are realized, the benefits are often extended over a long period. Depending on the type and scope of the advertising and promotion program implemented, the lag time can be as short as a few weeks or as long as several years. However, the favorable results of an effective marketing campaign tend to linger, and a property often enjoys the benefits of concentrated sales efforts for many months. Marketing expense can be divided into five categories: sales, reservations, advertising and merchandising, other marketing activities, and fees and commissions. Together, these categories include all marketing efforts made by hotel personnel and outside parties. Marketing expenses are fixed, with the exception of reservations, fees, and commissions, which are calculated as a percentage of rooms revenue. Based on the location of the subject property, the local market for transient accommodations, the competitive environment, and the hotel's anticipated market segmentation, we have developed the following marketing forecast using a fixed-and-variable component model. ================================================================================ Table 10-14 Forecast of Marketing Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total Marketing Expense (+,000) $ 190 $ 199 $ 202 Percentage of Total Revenue 7.6% 7.5% 7.8% Amount per Available Room $ 1,348 $ 1,411 $ 1,433 Amount per Occupied Room $ 5.51 $ 5.69 $ 6.13 - -------------------------------------------------------------------------------- Franchise Fee Franchise expense represents the fees paid to Howard Johnson for the use of the company's name, trade marks, and service marks. The following table illustrates the projection of the subject property's franchise fee. ================================================================================ Table 10-15 Forecast of Franchise Fee (+,000) - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Franchise Fees Expense $ 89 $ 94 $ 92 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 119 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Property Operations and Maintenance Property operations and maintenance expense is another expense category that is largely controlled by management. Except for repairs that are necessary to keep the facility open and prevent damage (e.g., plumbing, heating, and electrical items), most maintenance can be deferred for varying lengths of time. Maintenance is an accumulating expense. If management elects to postpone performing a required repair, they have not eliminated or saved the expenditure; they have only deferred payment until a later date. A lodging facility that operates with a lower-than-normal maintenance budget is likely to accumulate a considerable amount of deferred maintenance. The age of a lodging facility has a strong influence on the required level of maintenance. A new or thoroughly renovated property is protected for several years by modern equipment and manufacturers' warranties. However, as a hostelry grows older, maintenance expenses escalate. A well-organized preventive maintenance system often helps delay deterioration, but most facilities face higher property operations and maintenance costs each year, regardless of the occupancy trend. The quality of initial construction can also have a direct impact on future maintenance requirements. The use of high-quality building materials and construction methods generally reduces the need for maintenance expenditures over the long term. Property operations and maintenance is considered an operating expense; as such, it includes only those components that can be expensed, rather than capitalized, under Internal Revenue Service regulations. For example, if a table leg is broken, the repair of that leg is considered an expense and is chargeable to property operations and maintenance. If the table is replaced, it becomes a capital expenditure, and does not appear under the property operations and maintenance category. Appraisers account for capital replacement of items such as furniture and equipment in the reserve for replacement account, which is discussed later in this section. Property operations and maintenance costs are relatively fixed, and are projected as follows. HVS International, Mineola, New York Income Capitalization Approach 120 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-16 Forecast of Property Operations and Maintenance Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total Property Oper & Maint. Expense (+,000) $ 175 $ 181 $ 186 Percentage of Total Revenue 7.0% 6.8% 7.1% Amount per Available Room $ 1,241 $ 1,284 $ 1,319 Amount per Occupied Room $ 5.08 $ 5.17 $ 5.65 - -------------------------------------------------------------------------------- Energy Expense The energy consumption of a lodging facility takes several forms, including water and space heating, air conditioning, lighting, cooking fuel, and other miscellaneous power requirements. The most common sources of hotel energy are electricity, natural gas, fuel oil, and steam. This category also includes the cost of water service. Total energy cost depends on the source and quantity of fuel used. Electricity tends to be the most expensive source, followed by oil and gas. Although all hotels consume a sizable amount of electricity, many properties supplement their energy requirements with less expensive sources, such as gas and oil, for heating and cooking. A large portion of a hostelry's energy consumption is relatively fixed. Restaurants, kitchens, public areas, and corridors must be continually lighted and climate-controlled, regardless of occupancy. The energy cost of an additional occupied room (i.e., a few hours of light, television, heat, or air conditioning) is minimal. The following table presents our forecast of the subject property's energy expense. ================================================================================ Table 10-17 Forecast of Energy Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total Energy Expense (+,000) $ 201 $ 209 $ 215 Percentage of Total Revenue 8.0% 7.8% 8.3% Amount per Available Room $ 1,426 $ 1,482 $ 1,525 Amount per Occupied Room $ 5.83 $ 5.97 $ 6.53 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 121 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Property Taxes The estimate of property taxes was detailed in a previous section of this report. The following table summarizes these projections. ================================================================================ Table 10-18 Forecast of Property Taxes (+,000) - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Forecast of Property Taxes $ 155 $ 160 $ 166 - -------------------------------------------------------------------------------- Insurance Expense The insurance expense category consists of the cost of insuring the hotel and its contents against damage or destruction by fire, weather, sprinkler leakage, boiler explosion, plate glass breakage, and so forth. It does not include liability coverage, which is a component of administrative and general expense. Insurance rates are based on many factors, including building design and construction, fire detection and extinguishing equipment, fire district, distance from the firehouse, and the area's fire experience. Insurance expenses do not vary with occupancy. Based on historical levels, we project the subject property's insurance expense at approximately $45,000 in 1997 - the first projection period. In subsequent years, this amount is assumed to increase in tandem with inflation. The following table outlines our projection of insurance expense. ================================================================================ Table 10-19 Forecast of Insurance Expense (+,000) - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Forecast of Insurance Expense $ 45 $ 47 $ 49 - -------------------------------------------------------------------------------- Reserve for Replacement Furniture, fixtures, and equipment are essential to the operation of a lodging facility, and their quality often influences a property's class. This category includes all non-real estate items that are capitalized, rather than expensed. The furniture, fixtures, and equipment of a hotel are exposed to heavy use and must be replaced at regular intervals. The useful life of these items is determined by their quality, durability, and the amount of guest traffic and use. HVS International, Mineola, New York Income Capitalization Approach 122 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Periodic replacement of furniture, fixtures, and equipment is essential to maintain the quality, image, and income-producing potential of a lodging facility. Because capitalized expenditures are not included in the operating statement but nevertheless affect an owner's cash flow, an appraisal should reflect these expenses in the form of an appropriate reserve for replacement. Our industry experience indicates that a reserve for replacement of 3% to 5% of total revenue is generally sufficient to provide for the timely replacement of furniture, fixtures, and equipment. Because the reserve for replacement is based on a percentage of total revenue, it has no fixed component. Based on an analysis of comparable lodging facilities, we believe that a reserve for replacement of 4% of total revenue is sufficient to provide for the periodic replacement of the subject property's furniture, fixtures, and equipment. This amount is consistent with the reserve account contributions currently made by the hotel. The following table summarizes the projected reserve for replacement. ================================================================================ Table 10-20 Forecast of Reserve for Replacement (+,000) - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Reserve for Replacement Expense $ 100 $ 107 $ 104 - -------------------------------------------------------------------------------- Ground Lease The subject property is subject to a ground lease. The terms of this lease are included in the Addenda to this report. The following table summarizes the projected ground lease payments. ================================================================================ Table 10-21 Ground Lease Payment Projections (+,000) - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Ground Lease $ 209 $ 216 $ 224 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 123 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Summary of Projections Based on the preceding analysis, we have formulated a forecast of income and expense. The table on the following page presents a detailed forecast through the stabilized year, including amounts per available room (PAR) and per occupied room (POR). For the purpose of comparison, this table also presents the subject property's most recent full year of operating history. The second table illustrates our ten-year forecast of income and expense in less detail. The forecasts pertain to calendar operating years beginning January 1, 1997, and are expressed in inflated dollars for each year. HVS International, Mineola, New York Income Capitalization Approach 124 - -------------------------------------------------------------------------------- ================================================================================ Table 10-22 Detailed Forecast of Income and Expense through the Stabilized Year and Most Recent Operating History: Howard Johnson Plaza, Saddle Brook, New Jersey - --------------------------------------------------------------------------------
Historical Operating Results --------------------------------- Calendar Years: 1995 1997 Number of Rooms: 141 141 Occupancy: 55.7% 67.0% Average Rate: $60.93 $65.53 Days Open: 365 365 Occupied Rooms: 26,038 %Gross PAR POR 34,482 %Gross PAR POR - --------------------------------------------------------------------------------------------------------- REVENUE Rooms $1,586 88.3 % $11,251 $60.93 $2,260 90.1 % $16,028 $65.54 Telephone 71 4.0 505 2.74 90 3.6 638 2.61 Net Other Income 138 7.7 981 5.31 157 6.3 1,113 4.55 Total Revenues 1,796 100.0 12,738 68.98 2,507 100.0 17,780 72.71 - --------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES * Rooms 365 23.0 2,589 14.02 480 21.2 3,404 13.92 Telephone 48 66.8 337 1.83 46 51.1 326 1.33 Total Dept. Expenses 413 23.0 2,926 15.84 526 21.0 3,730 15.25 - --------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 1,383 77.0 9,812 53.13 1,981 79.0 14,050 57.45 - --------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 260 14.5 1,842 9.97 325 13.0 2,305 9.43 Management Fee 55 3.1 393 2.13 75 3.0 532 2.18 Marketing 211 11.7 1,496 8.10 190 7.6 1,348 5.51 Franchise Fees 84 4.6 592 3.21 89 3.6 631 2.58 Property Oper. & Maint. 144 8.0 1,020 5.53 175 7.0 1,241 5.08 Energy 221 12.3 1,569 8.50 201 8.0 1,426 5.83 Total Operating Expenses 975 54.2 6,913 37.43 1,055 42.2 7,482 30.60 - --------------------------------------------------------------------------------------------------------- HOUSE PROFIT 409 22.8 2,899 15.70 926 36.8 6,567 26.85 - --------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 127 7.1 902 4.88 155 6.2 1,099 4.50 Insurance 34 1.9 239 1.29 45 1.8 319 1.31 Reserve for Replacement 74 4.1 524 2.84 100 4.0 709 2.90 Ground Lease 195 10.9 1,384 7.50 209 8.3 1,482 6.06 Total 430 24.0 3,049 16.51 509 20.3 3,610 14.76 - --------------------------------------------------------------------------------------------------------- NET INCOME ($21) (1.2) (149) ($0.81) $417 16.5 $2,957 $12.09 ========================================================================================================= Telephone/Rooms 4.5% 4.0% Other Income/Rooms 8.7% 6.9% Calendar Years: 1998 Stabilized Number of Rooms: 141 141 Occupancy: 68.0% 64.0% Average Rate: $68.80 $71.21 Days Open: 365 365 Occupied Rooms: 34,996 %Gross PAR POR 32,938 %Gross PAR POR - -------------------------------------------------------------------------------------------------------- REVENUE Rooms $2,408 90.3 % $17,078 $68.81 $2,346 90.0 % $16,638 $71.23 Telephone 95 3.6 674 2.71 93 3.6 660 2.82 Net Other Income 164 6.1 1,163 4.69 166 6.4 1,177 5.04 Total Revenues 2,667 100.0 18,915 76.21 2,605 100.0 18,475 79.09 - -------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES * Rooms 500 20.8 3,546 14.29 503 21.4 3,567 15.27 Telephone 48 50.5 340 1.37 49 52.7 348 1.49 Total Dept. Expenses 548 20.5 3,887 15.66 552 21.2 3,915 16.76 - -------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 2,119 79.5 15,028 60.55 2,053 78.8 14,560 62.33 - -------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 339 12.7 2,404 9.69 344 13.2 2,440 10.44 Management Fee 80 3.0 567 2.29 78 3.0 553 2.37 Marketing 199 7.5 1,411 5.69 202 7.8 1,433 6.13 Franchise Fees 94 3.5 667 2.69 92 3.5 652 2.79 Property Oper. & Maint. 181 6.8 1,284 5.17 186 7.1 1,319 5.65 Energy 209 7.8 1,482 5.97 215 8.3 1,525 6.53 Total Operating Expenses 1,102 41.3 7,816 31.49 1,117 42.9 7,922 33.91 - -------------------------------------------------------------------------------------------------------- HOUSE PROFIT 1,017 38.2 7,213 29.06 936 35.9 6,638 28.42 - -------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 160 6.0 1,135 4.57 166 6.4 1,177 5.04 Insurance 47 1.8 333 1.34 49 1.9 348 1.49 Reserve for Replacement 107 4.0 759 3.06 104 4.0 738 3.16 Ground Lease 216 8.1 1,532 6.17 224 8.6 1,589 6.80 Total 530 19.9 3,759 15.14 543 20.9 3,851 16.49 - -------------------------------------------------------------------------------------------------------- NET INCOME $487 18.3 $3,454 $13.92 $393 15.0 $2,787 $11.93 ======================================================================================================== Telephone/Rooms 3.9% 4.0% Other Income/Rooms 6.8% 7.1%
* Departmental expense ratios are expressed as a percentage of departmental revenues. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 125 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-23 Ten-Year Forecast of Income and Expense, Howard Johnson Plaza, Saddle Brook, New Jersey - --------------------------------------------------------------------------------
Calendar Years: 1997 1998 1999 2000 2001 2002 -------------- -------------- -------------- -------------- -------------- ------------- Number of Rooms: 141 141 141 141 141 141 Occupied Rooms: 34,482 34,996 32,938 32,938 32,938 32,938 Occupancy: 67.0% % of 68.0% % of 64.0% % of 64.0% % of 64.0% % of 64.0% % of Average Rate: $65.53 Gross $68.80 Gross $71.21 Gross $73.70 Gross $76.28 Gross $78.95 Gross - ---------------------------- -------------- -------------- -------------- -------------- -------------- ------------- REVENUE Rooms $2,260 90.1% $2,408 90.3% $2,346 90.0% $2,428 90.0% $2,513 90.1% $2,601 90.0% Telephone 90 3.6 95 3.6 93 3.6 96 3.6 99 3.5 103 3.6 Net Other Income 157 6.3 164 6.1 166 6.4 172 6.4 178 6.4 184 6.4 Total 2,507 100.0 2,667 100.0 2,605 100.0 2,696 100.0 2,790 100.0 2,888 100.0 - ---------------------------- -------------- -------------- -------------- -------------- -------------- ------------- DEPARTMENTAL EXPENSES * Rooms 480 21.2 500 20.8 503 21.4 521 21.5 539 21.4 558 21.5 Telephone 46 51.1 48 50.5 49 52.7 51 53.1 52 52.5 54 52.4 Total 526 21.0 548 20.5 552 21.2 572 21.2 591 21.2 612 21.2 - ---------------------------- -------------- -------------- -------------- -------------- -------------- ------------- DEPARTMENTAL INCOME 1,981 79.0 2,119 79.5 2,053 78.8 2,124 78.8 2,199 78.8 2,276 78.8 - ---------------------------- -------------- -------------- -------------- -------------- -------------- ------------- OPERATING EXPENSES Administrative & General 325 13.0 339 12.7 344 13.2 356 13.2 368 13.2 381 13.2 Management Fee 75 3.0 80 3.0 78 3.0 81 3.0 84 3.0 87 3.0 Marketing 190 7.6 199 7.5 202 7.8 209 7.8 216 7.7 224 7.8 Franchise Fees 89 3.6 94 3.5 92 3.5 95 3.5 99 3.5 102 3.5 Property Oper. & Maint. 175 7.0 181 6.8 186 7.1 193 7.2 200 7.2 207 7.2 Energy 201 8.0 209 7.8 215 8.3 223 8.3 230 8.2 238 8.2 Total 1,055 42.2 1,102 41.3 1,117 42.9 1,157 43.0 1,197 42.8 1,239 42.9 - ---------------------------- -------------- -------------- -------------- -------------- -------------- ------------- HOUSE PROFIT 926 36.8 1,017 38.2 936 35.9 967 35.8 1,002 36.0 1,037 35.9 - ---------------------------- -------------- -------------- -------------- -------------- -------------- ------------- FIXED EXPENSES Property Taxes 155 6.2 160 6.0 166 6.4 171 6.3 177 6.3 184 6.4 Insurance 45 1.8 47 1.8 49 1.9 50 1.9 52 1.9 54 1.9 Reserve for Replacement 100 4.0 107 4.0 104 4.0 108 4.0 112 4.0 116 4.0 Ground Lease 209 8.3 216 8.1 224 8.6 232 8.6 240 8.6 248 8.6 Total 509 20.3 530 19.9 543 20.9 561 20.8 581 20.8 602 20.9 - ---------------------------- -------------- -------------- -------------- -------------- -------------- ------------- NET INCOME $417 16.5% $487 18.3% $393 15.0% $406 15.0% $421 15.2% $435 15.0% ============================ ============== ============== ============== ============== ============== ============= Calendar Years: 2003 2004 2005 2006 ------------- -------------- -------------- ------------- Number of Rooms: 141 141 141 141 Occupied Rooms: 32,938 32,938 32,938 32,938 Occupancy: 64.0% % of 64.0% % of 64.0% % of 64.0% % of Average Rate: $81.72 Gross $84.58 Gross $87.54 Gross $90.60 Gross - ---------------------------- ------------- -------------- -------------- ------------- REVENUE Rooms $2,692 90.1% $2,786 90.0% $2,883 90.0% $2,984 90.0% Telephone 106 3.5 110 3.6 114 3.6 118 3.6 Net Other Income 190 6.4 197 6.4 204 6.4 211 6.4 Total 2,988 100.0 3,093 100.0 3,201 100.0 3,313 100.0 - ---------------------------- ------------- -------------- -------------- ------------- DEPARTMENTAL EXPENSES * Rooms 578 21.5 598 21.5 619 21.5 640 21.4 Telephone 56 52.8 58 52.7 60 52.6 62 52.5 Total 634 21.2 656 21.2 679 21.2 702 21.2 - ---------------------------- ------------- -------------- -------------- ------------- DEPARTMENTAL INCOME 2,354 78.8 2,437 78.8 2,522 78.8 2,611 78.8 - ---------------------------- ------------- -------------- -------------- ------------- OPERATING EXPENSES Administrative & General 395 13.2 408 13.2 423 13.2 437 13.2 Management Fee 90 3.0 93 3.0 96 3.0 99 3.0 Marketing 232 7.8 240 7.8 248 7.7 257 7.8 Franchise Fees 106 3.5 109 3.5 113 3.5 117 3.5 Property Oper. & Maint. 214 7.2 221 7.1 229 7.2 237 7.2 Energy 247 8.3 255 8.2 264 8.2 274 8.3 Total 1,284 43.0 1,326 42.8 1,373 42.8 1,421 43.0 - ---------------------------- ------------- -------------- -------------- ------------- HOUSE PROFIT 1,070 35.8 1,111 36.0 1,149 36.0 1,190 35.8 - ---------------------------- ------------- -------------- -------------- ------------- FIXED EXPENSES Property Taxes 190 6.4 197 6.4 204 6.4 211 6.4 Insurance 56 1.9 58 1.9 60 1.9 62 1.9 Reserve for Replacement 120 4.0 124 4.0 128 4.0 133 4.0 Ground Lease 257 8.6 266 8.6 275 8.6 285 8.6 Total 623 20.9 645 20.9 667 20.9 691 20.9 - ---------------------------- ------------- -------------- -------------- ------------- NET INCOME $447 14.9% $466 15.1% $482 15.1% $499 14.9% ============================ ============= ============== ============== =============
* Departmental expense ratios are expressed as a percentage of departmental revenues. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 126 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The conversion of a property's projected net income into an estimate of value is based on the premise that investors typically purchase real estate with a small amount of equity cash (25% to 40%) and a large amount of mortgage financing (60% to 75%). The amounts and terms of available mortgage financing and the rates of return that are required to attract sufficient equity capital form the basis for allocating the net income between the mortgage and equity components and deriving a value estimate. Mortgage Component Data for the mortgage component may be developed from statistics of actual hotel mortgages made by long-term lenders. The American Council of Life Insurance, which represents 20 large life insurance companies, publishes quarterly information pertaining to the hotel mortgages issued by its member companies. The following table summarizes the average mortgage interest rates of the hotel loans made by these lenders. In addition, the A corporate bond yield (as reported by Moody's Bond Record) is shown for the purpose of comparison. HVS International, Mineola, New York Income Capitalization Approach 127 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-24 Average Mortgage Interest Rates and Average A Corporate Bond Yields - -------------------------------------------------------------------------------- Average A Average Corporate Period Interest Rate Bond Yield ---------------------------------------------------------------------- 1st Quarter 1996 7.79% 7.37% 4th Quarter 1995 8.44 7.28 3rd Quarter 1995 8.61 7.67 2nd Quarter 1995 9.25 7.87 1st Quarter 1995 9.14 8.50 3rd Quarter 1994 9.64 8.48 2nd Quarter 1994 9.38 8.28 4th Quarter 1993 9.38 7.80 3rd Quarter 1993 8.41 7.28 2nd Quarter 1993 10.53 9.65 4th Quarter 1992 9.43 8.48 3rd Quarter 1992 9.99 8.38 2nd Quarter 1992 9.47 8.79 1st Quarter 1992 10.02 8.81 4th Quarter 1991 10.49 8.97 3rd Quarter 1991 10.03 9.29 2nd Quarter 1991 10.75 9.45 3rd Quarter 1990 10.47 9.89 2nd Quarter 1990 10.58 9.83 4th Quarter 1989 9.96 9.42 3rd Quarter 1989 9.55 9.46 2nd Quarter 1989 10.54 9.93 1st Quarter 1989 10.39 10.16 4th Quarter 1988 10.07 10.03 3rd Quarter 1988 10.66 10.51 2nd Quarter 1988 10.09 10.33 4th Quarter 1987 10.41 10.45 3rd Quarter 1987 10.00 9.95 2nd Quarter 1987 9.81 9.46 1st Quarter 1987 9.43 9.19 4th Quarter 1986 9.44 9.55 3rd Quarter 1986 9.56 9.71 2nd Quarter 1986 9.80 9.91 1st Quarter 1986 10.99 10.62 Sources: American Council of Life Insurance; Moody's Bond Record - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 128 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Because of the six- to nine-month lag time in reporting and publishing hotel mortgage statistics, it is necessary to update this information to reflect current lending practices. Research by HVS International indicates that there is a close mathematical relationship between the average interest rate of a hotel mortgage and the concurrent yield on an average A corporate bond. Through a regression analysis, this relationship is expressed as follows. Y = 2.76078 + 0.782280 X Where: Y = Estimated Hotel/Motel Mortgage Interest Rate X = Current Average A Corporate Bond Yield (Coefficient of correlation is 96.4%) The yield on A corporate bonds for the third quarter of 1996, as reported by Moody's Bond Record, was 7.91%. Using a factor of 7.91% in the equation presented above produces an estimated hotel/motel interest rate of 8.95%. In addition to the mortgage interest rate estimate derived from this regression analysis, HVS International constantly monitors the terms of hotel mortgage loans made by our institutional lending clients. In the past year, we have noted an increase in the availability of debt financing, and many lenders have returned to the market. The current level of lending activity represents a significant increase from the restricted environment of the early 1990s. Nonetheless, the market for hotel mortgage loans remains somewhat tight, particularly when compared to the conditions that prevailed in the mid-to late 1980s. In the current lending climate, strong hotel projects that are structured on an economic basis can secure mortgage financing at interest rates ranging from 8% to 11%, depending on the property, location, affiliation, and operator. In the 1980s, when hotel mortgages were widely available, loan-to-value ratios typically ranged from 75% to 80%. Amortization schedules were generally based on 30 years, although the term of the loan was more likely to be seven to ten years. The few loans that were underwritten in the early 1990s were based on far more stringent parameters: loan-to-value ratios declined to a range of 50% to 65%, and amortization periods of 20 to 25 years were most common. With the recent reemergence of hotel financing, loan-to-value requirements and amortization schedules have loosened somewhat. At present, we find HVS International, Mineola, New York Income Capitalization Approach 129 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= that lenders who are active in the market are using loan-to-value ratios of 65% to 75%, and amortization periods of 25 to 30 years. The exact terms offered depend on specific factors such as the property's location, the age and quality of the physical facility, local hostelry market conditions, and (perhaps more significantly) the profile of the borrower. The strongest projects typically command the highest loan-to-value ratios. Based on the preceding analysis of the current lodging industry mortgage market and adjustments for specific factors such as the property's location and conditions in the local hotel market, it is our opinion that a 9.5% interest, 20-year amortization mortgage with a 0.111856 constant is appropriate for the subject property. We believe that a mortgage lender will lend up to 70% of the hotel's market value as determined by this appraisal. Equity Component The remaining capital required for a hotel investment generally comes from the equity investor. The rate of return that an equity investor expects over a ten-year holding period is known as the equity yield. Unlike the equity dividend, which is a short-term rate of return, the equity yield specifically considers a long-term holding period (generally ten years), annual inflation- adjusted cash flows, property appreciation, mortgage amortization, and proceeds from a sale at the end of the holding period. It is difficult to quantify the rate of return required by equity investors who are seeking to purchase hotel properties. To establish an appropriate equity yield rate, HVS International uses two sources of data: past appraisals and investor interviews. Past Appraisals - During the past 12 months, HVS International has appraised more than 400 hotels, including properties located in most major national markets. Each appraisal used a similar mortgage-equity approach in which income is projected and then discounted to a current value at rates reflecting the cost of debt and equity capital. In the case of hotels that were sold subsequent to our valuations, we are able to determine an appropriate equity yield rate by excluding incentive management fees from the projection of income and expense, inserting the projection into a valuation model, and adjusting the appraised value to reflect the actual sales price by modifying the return assumptions. The following table shows a representative sample of hotels that were sold shortly after we appraised them, along with the imputed equity return based on our valuation approach. HVS International, Mineola, New York Income Capitalization Approach 130 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-25 Sample of Hotels Sold - --------------------------------------------------------------------------------
No. of Date of Overall Total Property Equity Hotel City and State Rooms Sale Sales Price Rate Yield Yield - ------------------------------------------------------------------------------------------------------------------------------------ Ritz-Carlton Phoenix, AZ 281 2/94 $ 23,000,000 11.0% 14.6% 21.7% Marriott Marina Fort Lauderdale, FL 580 2/94 40,000,000 12.2 16.4 26.7 Holiday Inn Edison, NJ 274 3/94 11,803,000 7.8 17.0 26.3 Crescent Hotel Phoenix, AZ 342 3/94 26,000,000 6.5 7.2 2.2 Checkers Hotel Kempinski Los Angeles, CA 173 4/94 12,750,000 3.0 18.3 27.0 Best Western Fireside Inn Cambria, CA 46 4/94 3,377,000 11.7 15.8 24.3 Phoenician Resort Phoenix, AZ 580 4/94 224,000,000 6.6 9.3 8.9 Newark-Fremont Hilton Newark, CA 300 5/94 8,950,000 8.8 14.9 20.7 Radisson Inn Orlando, FL 299 5/94 11,150,000 12.9 18.0 28.2 Westin Kauai Lihue, Kauai, HI 840 6/94 97,400,000 (1.9) 8.1 7.2 Residence Inn Binghamton, NY 72 6/94 6,325,000 10.8 13.9 21.9 Hotel Millenium New York, NY 561 6/94 75,000,000 9.5 14.1 23.0 Best Western Otay Valley Chula Vista, CA 120 7/94 2,350,000 13.2 21.1 31.8 Hampton Inn Islandia, NY 121 7/94 6,572,000 12.6 16.6 28.2 Hampton Inn Willow Grove, PA 150 7/94 10,220,000 11.0 14.3 23.0 Hampton Inn West Palm Beach, FL 136 7/94 4,220,000 10.8 10.8 14.3 Hampton Inn Naples, FL 107 7/94 5,700,000 11.4 11.5 24.9 Hampton Inn Albany, NY 126 7/94 9,204,000 9.3 11.5 15.8 Marriott Hotel South Bend, IN 299 7/94 11,500,000 10.5 13.2 18.9 Marriott SFO Burlingame, CA 684 8/94 61,700,000 10.2 13.2 19.0 Westfields Conference Center Chantilly, VA 340 8/94 46,000,000 12.3 15.9 25.3 Radisson Mark Resort Vail, CO 349 9/94 25,200,000 8.9 15.8 24.1 Marriott East Side New York, NY 664 10/94 55,000,000 8.5 9.7 11.1 Marriott Resort Vail, CO 349 10/94 25,200,000 14.2 18.9 30.5 Marriott Quorum Addison, TX 547 10/94 29,815,000 13.5 18.2 31.8 Sheraton Hotel Hasbrouck Heights, NJ 338 11/94 10,450,000 18.3 21.1 30.7 Sheraton Inn Napa, CA 191 12/94 9,968,000 8.9 13.7 19.8 Marriott Fisherman's Wharf San Francisco, CA 255 12/94 27,755,000 10.8 13.4 19.4 Marriott Hotel Portland, OR 503 12/94 45,000,000 12.9 17.4 30.0 Radisson Inn Springfield, MO 199 12/94 5,800,000 8.2 10.1 11.3 Williamsburg Hilton Williamsburg, VA 291 12/94 15,000,000 15.4 19.0 32.0 Marriott Tech Center Denver, CO 625 12/94 36,000,000 13.7 16.4 27.1 Holiday Inn Sunspree Singer Island, FL 222 12/94 11,900,000 8.6 10.6 12.4 The Plaza New York, NY 805 6/95 325,000,000 7.0 11.0 14.0 Fullerton Suites Fullerton, CA 96 5/95 5,000,000 12.9 18.7 28.5 Residence Inn Baton Rouge, LA 80 6/95 6,518,000 12.7 14.8 21.2 Residence Inn Overland Park, KS 112 6/95 8,500,000 8.9 14.7 20.8 Residence Inn Des Moines, IA 112 6/95 7,660,000 9.8 14.1 19.6 Residence Inn Hunt Valley, MD 96 6/95 6,580,000 12.3 13.6 18.3 Residence Inn Kansas City, MO 112 6/95 6,560,000 10.4 13.2 19.8 Residence Inn Lincoln, NE 120 6/95 7,100,000 10.0 13.7 18.5 Embassy Suites Schaurmburg, IL 209 12/95 17,800,000 10.0 13.5 18.9 Marriott Hotel Andover, MA 293 12/95 24,000,000 9.7 13.5 19.2 Doubletree Suites Valley Forge, PA 229 12/95 28,500,000 10.7 14.2 15.5 Marriott Hotel Tysons Corner, VA 390 12/95 41,100,000 10.7 13.1 18.0 Marriott Hotel Warner Center, CA 461 12/95 57,900,000 6.2 11.6 14.2 Hilton at the Club Pleasanton, CA 294 12/95 22,000,000 10.5 13.4 17.0
Source: HVS International - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 131 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Investor Interviews - HVS International is in constant contact with numerous institutional and individual hotel investors. This source of equity funds has definite return requirements that can be expressed as an equity yield rate based on a ten-year projection of net income before incentive management fees but after debt service. Based on our surveys and investor interviews, the following table illustrates the range of equity yields generally required by individual and institutional investors. ================================================================================ Table 10-26 Equity Yield Requirements - -------------------------------------------------------------------------------- Source Equity Yield Requirement ------ ------------------------ Individual 20% - 24% Institution 18% - 22% - -------------------------------------------------------------------------------- Based on the assumed 70% loan-to-value ratio, the risk inherent in achieving the projected income stream, and the age, condition, and anticipated market position of the subject property, it is our opinion that an equity investor is likely to require an equity yield rate of 22% before payment of incentive management fees. This estimate is well supported by the equity yield requirements presented previously. Terminal Capitalization Rate Inherent in this valuation process is the assumption of a sale at the end of the ten-year holding period. The estimated reversionary sales price as of that date is calculated by capitalizing the projected 11th-year net income by an overall terminal capitalization rate. A percentage for the seller's brokerage and legal fees is deducted from this sales price, and the net proceeds to the equity interest (also known as the equity residual) are calculated by deducting the outstanding mortgage balance from the reversion. To estimate a property's reversionary value, the appraiser must select a terminal capitalization rate and an allocation for brokerage and legal fees. The terminal capitalization rate is an overall rate that is applied to one stabilized year, and thus, it inherently incorporates the cost of debt and equity capital. The terminal capitalization rate can be derived through a mortgage and equity band of investment technique which calculates the weighted average cost of the capital used in a hotel investment. Combining the mortgage financing terms derived previously - namely, a 70% loan-to-value ratio and a HVS International, Mineola, New York Income Capitalization Approach 132 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 0.111856 debt service constant, with a cash-on-cash equity dividend rate of 12% produces the following overall capitalization rate. Percent of Rate of Weighted Value Return Average ---------- ------- -------- Mortgage 70 x 0.11186 = 7.82990 Equity 30 x 0.12000 = 3.60000 -------- Overall Capitalization Rate 11.42990 Because this overall rate will be used to capitalize net income ten years from the date of value, an upward adjustment is appropriate to reflect the uncertainty inherent in this extended period. For the purpose of this valuation, we will use a terminal capitalization rate of 12%. As a point of reference, the terminal capitalization rate can be compared to the going-in rate implied by the subject property's estimated value. The going-in rate reflects the capitalization rate that would be applicable if the hotel were operating at a stabilized level as of the date of value. This rate is calculated by dividing the stabilized net income (expressed in current dollars as of the date of value) by the value indicated by the income capitalization approach. Generally, the terminal capitalization rate is approximately 100 to 200 basis points above the going-in rate. Summary of Valuation Variables The following table summarizes the valuation variables that have been used to estimate the subject property's value via the income capitalization approach. ================================================================================ Table 10-27 Summary of Valuation Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Ten-Year Forecast Loan-to-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.111856 Equity Yield Ye 22.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 12.0% - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 133 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Valuation of the Mortgage and Equity Components The valuation of the mortgage and equity components is accomplished through use of an algebraic equation that calculates the exact amount of debt and equity that the hotel will be able to support based on the anticipated cash flow (derived from the forecast of income and expense) and the specific return requirements demanded by the mortgage lender (interest) and the equity investor (equity yield). The equation and the calculations associated with this simultaneous valuation formula are set forth in the Addenda to this report. Using the variables summarized above, we estimate the value of the subject property via the income capitalization approach at $3,375,000. Proof of Value The value is proven by calculating the yields to the mortgage and equity components during the projection period. If the mortgagee achieves a 9.5% yield and the equity yield is 22%, then $3,375,000 is the correct value by the income capitalization approach. Using the assumed financial structure set forth in the previous calculations, market value can be allocated between the debt and equity as follows. Mortgage Component (70%) $ 2,363,000 Equity Component (30%) 1,013,000 ----------- Total $11,099,000 The annual debt service is calculated by multiplying the mortgage component by the mortgage constant. Mortgage Component $ 2,363,000 Mortgage Constant 0.111856 ----------- Annual Debt Service $ 264,315 The cash flow to equity is calculated by deducting the debt service from the projected net income before debt service. HVS International, Mineola, New York Income Capitalization Approach 134 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-28 Forecast of Net Income to Equity - -------------------------------------------------------------------------------- Net Income Available for Total Annual Net Income Year Debt Service Debt Service to Equity - -------------------------------------------------------------------------------- 1997 $ 398,000 - $ 266,000 = $ 132,000 1998 467,000 - 266,000 = 201,000 1999 401,000 - 266,000 = 135,000 2000 416,000 - 266,000 = 150,000 2001 432,000 - 266,000 = 166,000 2002 447,000 - 266,000 = 181,000 2003 461,000 - 266,000 = 195,000 2004 477,000 - 266,000 = 211,000 2005 493,000 - 266,000 = 227,000 2006 511,000 - 266,000 = 245,000 - -------------------------------------------------------------------------------- The equity residual at the end of the tenth year is calculated as follows. Reversionary Value ( $516,000 / 0.120 ) $ 4,300,000 Less: Brokerage and Legal Fees 129,000 Mortgage Balance 1,702,000 ----------- Net Sale Proceeds to Equity $ 2,469,000 The overall property yield (before debt service), the yield to the lender, and the yield to the equity position have been calculated by computer with the following results. HVS International, Mineola, New York Income Capitalization Approach 135 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-29 Overall Property Yields - -------------------------------------------------------------------------------- Projected Yield (Internal Rate of Return) Position Value Over 10-Year Holding Period - -------------------------------------------------------------------------------- Total Property $ 3,375,000 14.2% Mortgage 2,363,000 9.4 Equity 1,013,000 22.0 Note: Whereas the mortgage constant and value are calculated on the basis of monthly mortgage payments, the mortgage yield in this proof assumes single annual payments. As a result, the proof's derived yield may be slightly less than that actually input. - -------------------------------------------------------------------------------- The following tables demonstrate that the property receives its anticipated yields, proving that the $3,375,000 value is correct, based on the assumptions used in this approach. ================================================================================ Table 10-30 Total Property Yield - -------------------------------------------------------------------------------- Net Income Before Present Worth of $1 Discounted Year Debt Service Factor @ 14.2% Cash Flow - -------------------------------------------------------------------------------- 1997 $ 417,000 x 0.875650 = $ 365,000 1998 487,000 x 0.766763 = 373,000 1999 393,000 x 0.671416 = 264,000 2000 406,000 x 0.587926 = 239,000 2001 421,000 x 0.514817 = 217,000 2002 435,000 x 0.450800 = 196,000 2003 447,000 x 0.394743 = 176,000 2004 466,000 x 0.345657 = 161,000 2005 482,000 x 0.302674 = 146,000 2006 4,670,000 * x 0.265037 = 1,238,000 ----------- Total Property Value $ 3,375,000 * 10th year net income of $499,000 plus sales proceeds of $ 4,171,000 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 136 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-31 Mortgage Component Yield - -------------------------------------------------------------------------------- Total Annual Present Worth of $1 Discounted Year Debt Service Factor @ 9.4% Cash Flow - -------------------------------------------------------------------------------- 1997 $ 264,000 x 0.914362 = $ 241,000 1998 264,000 x 0.836058 = 221,000 1999 264,000 x 0.764460 = 202,000 2000 264,000 x 0.698993 = 185,000 2001 264,000 x 0.639133 = 169,000 2002 264,000 x 0.584399 = 154,000 2003 264,000 x 0.534352 = 141,000 2004 264,000 x 0.488592 = 129,000 2005 264,000 x 0.446750 = 118,000 2006 1,966,000 * x 0.408491 = 803,000 ---------- Value of Mortgage Component $2,363,000 * 10th year debt service of $264,000 plus outstanding mortgage balance of $1,702,000 - -------------------------------------------------------------------------------- ================================================================================ Table 10-32 Equity Component Yield - -------------------------------------------------------------------------------- Net Income Present Worth of $1 Discounted Year to Equity Factor @ 22.0% Cash Flow - -------------------------------------------------------------------------------- 1997 $ 153,000 x 0.819535 = $ 125,000 1998 223,000 x 0.671637 = 150,000 1999 129,000 x 0.550430 = 71,000 2000 142,000 x 0.451097 = 64,000 2001 157,000 x 0.369689 = 58,000 2002 171,000 x 0.302973 = 52,000 2003 183,000 x 0.248297 = 45,000 2004 202,000 x 0.203488 = 41,000 2005 218,000 x 0.166766 = 36,000 2006 2,704,000 * x 0.136670 = 370,000 ---------- Value of Equity Component $1,012,000 * 10th year net income to equity of $235,000 plus sales proceeds of $2,469,000 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 134 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Valuation Method Two: Discounted Cash Flow The total property yield derived from the previous valuation method was 14.29%. After reviewing the total property yields indicated by recent hotel sales, which ranged from 13% to 15%, it is our opinion that a 14% discount factor would be appropriate for the Howard Johnson Plaza. The following table illustrates the discounted cash flow analysis using a 14% discount factor. ================================================================================ Table 10-33 Discounted Cash Flow Analysis - -------------------------------------------------------------------------------- Discount Calendar Net Factor Discounted Year Income @ 14.0% Cash Flow -------------------------------------------------------------- 1997 $ 417,000 0.87719 $ 365,789 1998 487,000 0.76947 374,731 1999 393,000 0.67497 265,264 2000 406,000 0.59208 240,385 2001 421,000 0.51937 218,654 2002 435,000 0.45559 198,180 2003 447,000 0.39964 178,638 2004 466,000 0.35056 163,361 2005 482,000 0.30751 148,219 2006 4,670,000 * 0.26974 1,259,704 Estimated Market Value: $3,412,924 (Say): $3,400,000 Reversion Analysis ------------------ 11th Year's Net Income $516,000 Capitalization Rate 12.0% Total Sales Proceeds $4,300,000 Less: Broker & Legal @ 3.0% 129,000 ---------- Net Sales Proceeds $4,171,000 * 10th year net income of $499,000 plus sales proceeds of $4,171,000 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 138 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Conclusion Based on our extensive experience in the hotel industry and comprehensive support provided by literature published by the Appraisal Institute, it is our opinion that the valuation procedure embodied by Method One most closely reflects the investment rationale of typical hotel buyers. As stated in the textbook entitled, Hotels and Motels: A Guide to Market Analysis, Investment Analysis and Valuations,(1) Method Two (which discounts the projected net income and reversion using an overall discount rate, or total property yield) "does not consider the impact of mortgage debt, leverage and the specific equity demands of typical hotel investors. . . . This technique is simple, but less reliable because the derivation of the discount rate has little support." In light of this consideration, we have relied on the $3,375,000 value conclusion indicated by Method One. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. HVS International, Mineola, New York Sales Comparison Approach 139 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 11. Sales Comparison Approach The sales comparison approach is based on the assumption that an informed purchaser will pay no more for a property than the cost to acquire an existing property with equal utility. This approach estimates market value by considering the sales prices indicated by recent transactions involving properties that are similar to the property being appraised. Dissimilarities are resolved with appropriate adjustments; these differences may pertain to the date of sale, the age of the property, location, construction, condition, layout, equipment, size, or external economic factors. The reliability of the sales comparison approach depends on three factors: 1. the availability of timely, comparable sales data; 2. an understanding of the true terms of the sales and the motivation of the buyer and seller; 3. the degree of comparability, or the extent of the adjustments needed to reflect differences between the subject property and the comparable property. In appraising lodging facilities, it is often difficult to find an adequate number of recent sales involving hotels that are truly comparable to the subject property. Consequently, it may be necessary to consider transactions involving properties in different market areas, and the required adjustments greatly diminish the reliability of the conclusions. Moreover, it is virtually impossible for an observer to determine the true motivations of the buyers and sellers involved in transactions. Hotel acquisition often represents a highly ego-driven process in which a number of external, non-market factors influence the purchase price. Unless the appraiser can quantify these influences, there is no way of knowing whether the purchase price paid actually reflects market value. A final consideration is the degree of similarity between the subject property and the comparable; in most cases, the differences are significant enough to require numerous subjective and HVS International, Mineola, New York Sales Comparison Approach 140 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= unsubstantiated adjustments. Each adjustment represents a potential for error, and thus diminishes the reliability of this approach. As a result of these shortcomings, the use of the sales comparison approach in valuing hotels is primarily as a check against the value indicated by the income capitalization approach. Hotel values declined in many areas of the country during the late 1980s and early 1990s, although a rebound began in 1994 and 1995. The downturn, which began in most markets in 1988, was largely attributable to lower operating incomes caused by an oversupply of new hotel rooms constructed during the mid-1980s. Overbuilding resulted in flat or declining average rates and occupancies, which caused revenues to fall. A number of other factors exacerbated the situation. The national recession caused a drop in demand in many markets during the early 1990s, and the Persian Gulf War created a virtual freeze on travel in the beginning of 1991, further limiting hotel demand. Operating costs continued to rise despite poor market conditions, resulting in a decline in the net operating income of hotels throughout the nation. Because operating costs have a large fixed component, many lodging facilities experienced precipitous drops in net income. As bottom-line profits eroded, many hotels were unable to meet debt service, and hundreds of properties entered foreclosure or bankruptcy. Lenders and government agencies soon became hotel owners. Because most financial institutions were preoccupied with their distressed real estate, very little mortgage capital was available and the nation suffered from a well-publicized credit crunch. Most hotel transactions that occurred during the early 1990s were financed by the property owners, who, in most cases, were lenders. In the early 1990s, the primary market participants were owner-operators with the expertise to turn around under-performing properties. Hotels were out of favor with passive investors as a result of the industry's poor operating performance and the uncertainty of future appreciation. The wide disparity in buyer and seller expectations also limited the number of transactions. Many sellers were unwilling to accept the fact that the market value of their hotel investments had declined below the cost of the project or the original investment. Moreover, many owners were faced with a significant tax burden upon sale, further reducing their willingness to settle for a price that was below the original acquisition cost. HVS International, Mineola, New York Sales Comparison Approach 141 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= As a result of these market forces, there was very little sales activity involving large, high-quality hotels. The primary difficulty was the lack of properties available for sale; owners who were not forced to sell opted to wait for prices to recover. The few hotels that did enter the market generally attracted 15 to 20 interested bidders, mostly consisting of owner-operators. As a result of the competition for these few assets, the prices of better-quality hotels began to escalate rapidly. In response, more sellers have been encouraged to place their products on the market. An indicator of this market trend is the number of hotel sales that have occurred during the past few years. HVS International tracks major hotel transactions of more than $10,000,000 on an annual basis. In 1992, the number of major transactions was 67; a slightly lower level of 52 was registered in 1993. This total increased significantly - to 92 - in 1994, and the 1995 total is estimated to have been 104. In tandem with escalating prices, hotels are again being considered by traditional financing sources, which had virtually abandoned the hospitality industry by the early 1990s. Although many lenders are still approaching the market with a high degree of caution, it is now possible to obtain third-party financing for hotel transactions. The mortgage loans that are now being made are subject to fairly stringent requirements: loan-to-value ratios remain in the 65% to 75% range. The qualification of the borrower is also a crucial consideration for most lenders. We believe that the upward trend in both pricing and sales activity will continue as financing becomes more available and additional buyers (particularly passive investors) enter the market. Consequently, it is important to consider the date of the transactions used in the sales comparison approach. When the comparable sales are not recent enough to provide an accurate picture of the current market, it may be necessary to make upward adjustments to the values indicated by the sales comparison and income capitalization approaches in recognition of the recent escalation. Comparable Sales Based on information provided by the Hospitality Market Data Exchange and compiled by the six offices of HVS International, the following transactions involved hotels that appear to have some degree of comparability to the subject property. All of the following sales reflect the transfer of a fee simple interest. As the subject of this appraisal is the leasehold interest in the subject property, the HVS International, Mineola, New York Sales Comparison Approach 142 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= comparable sales must be adjusted accordingly. In each of the projection years, the amount paid by the subject property as ground rent represents roundly 36% of the net income before payment of ground rent (i.e., the net income to the fee simple position). Thus, the leasehold interest retains only 64% of the fee simple net income, while the leased fee interest collects 36% of the net income. This data forms the basis for the adjustment for the difference in property rights transferred, whereby the price per room of each transaction is adjusted downward by 36%. Sale #1: - -------- Property: Ramada Hotel Location: Montvale, NJ Date of Sale: May, 1996 Sales Price: $6,700,000 Grantor: Lennar Corporation Grantee: Gami Lovale Year Opened: 1970 Number of Rooms: 187 Price per Room: $35,829 Price per Room, after Leasehold Adjustment: $22,931 Confirmed By: Grantee Sale #2: - -------- Property: Days Inn Location: Bensalem, PA Year of Sale: July, 1995 Sales Price: $4,950,000 Grantor: South Charles Realty Grantee: Growth Property Investment Managers Number of Rooms: 136 Price per Room: $36,397 Price per Room, after Leasehold Adjustment: $23,294 Confirmed By: Landauer Hotel Group HVS International, Mineola, New York Sales Comparison Approach 143 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Sale #3: - -------- Property: Comfort Inn Location: Abingdon, Virginia Date of Sale February, 1995 Sales Price: $2,600,000 Grantor: B&R Enterprises Grantee: MRS Number of Rooms: 80 Price per Room: $32,500 Price per Room, after Leasehold Adjustment: $20,800 Confirmed by: Broker Sale #4: - -------- Property: Comfort Inn Location: Hershey, PA Date of Sale: March, 1995 Sale Price: $5,200,000 Grantor: N/A Grantee: Manor Care Number of Rooms: 125 Price per Room: $41,600 Price per Room, after Leasehold Adjustment: $26,624 HVS International, Mineola, New York Sales Comparison Approach 144 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Sale #5: - -------- Property: Quality Inn Location: Woodbury, NY Date of Sale: August, 1995 Sales Price: $2,900,000 Grantor: Estate of Frederick Phillips, et. al. Grantee: Woodbury Realty Associates Number of Rooms: 85 Price per Room: $34,118 Price per Room, after Leasehold Adjustment: $21,836 Confirmed by: Goodman, Marks Associates HVS International, Mineola, New York Sales Comparison Approach 145 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= In addition to considering the above recent transactions, we have also reviewed the sale of the subject property, which occurred in 1995. The details of this transaction are summarized as follows Subject Property: - ----------------- Property: Howard Johnson Inn (now the Howard Johnson Plaza) Location: 129 Pehle Avenue East Saddle Brook, NJ Date of Sale: August 25, 1994 Allocated Sales Price: $2,378,000 Grantor: Nippon Credit Bank, Ltd. Grantee: Saddle Brook New Jersey Hotel Limited Partnership - an entity controlled by Ashford Financial Corporation Year Opened: 1969 Number of Rooms: 147 (6 have subsequently been converted to meeting rooms) Price per Room: +/-$16,177 Confirmed By: Ashford Financial Corporation In analyzing the sale of the subject property, it is important to consider the terms and conditions pertaining to the transaction. The subject property was acquired by Ashford Financial Corporation from Nippon Credit Bank, Ltd. in March of 1994 as part of a purchase of a mortgage loan secured by 15 hotel properties. The outstanding principal balance of the non-performing mortgage loan at the time of acquisition was $72,840,000, and the purchase price was $18,730,000. At the time of the closing, the mortgage loan was the subject of a settlement agreement between Nippon Credit Bank, Ltd. and Northeast Hotel Association, Inc., which was the owner of the subject property. The settlement agreement called for the conveyance of property deeds in lieu of foreclosure, as well as a cash payment of $2,000,000 for the settlement of guaranty obligations. The above-listed price represents an allocation of the total package price rather than a negotiated value for this single asset. Based on our understanding of the terms of this transaction, we do not believe that this sale was reflective of either the market value of the individual hotel or of market value. HVS International, Mineola, New York Sales Comparison Approach 146 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The relevance of the previous transaction involving the subject property is also undermined by the material change in market conditions which occurred between the date of this sale and the present date of value. Areawide occupancy and average rate have improved dramatically in the intervening months, and are forecasted to continue this positive trend. As previously discussed, the market for hotel investments has also improved significantly, due to changes in lender and investor attitudes. Finally, the property itself has undergone a significant renovation, with a total of $833,000 spent on upgrading the facilities and amenities. For these reasons, we are of the opinion that the August, 1995 sale involving the subject property is not a reliable indicator of the current value of the hotel. Conclusion Although the sales comparison approach may be useful in providing a value range and reflecting certain market characteristics, its applicability is limited by the numerous possible points of difference between the subject property and other hotels that have sold in recent years. These factors may include location, access, size, services and facilities offered, market conditions, chain affiliation, market orientation, management, rate structure, age, physical condition, date of sale, the highest and best use of the land, and the anticipated profitability of the operation. Circumstances surrounding a sale, such as financing terms, tax considerations, income guarantees, sales of partial interests, duress on the part of the buyer or seller, or a particular deal structure can also cause a disparity between the sales price and pure market value. Moreover, it is often difficult to determine the marketing periods that were necessary to consummate the transactions. It is extremely difficult to quantify the appropriate adjustment factors accurately because of their number and complexity, as well as the difficulty in obtaining specific, detailed information. Any attempt to manipulate the necessary adjustments is insupportable and purely speculative. Because appraisers are expected to reflect the analytical processes and actions of typical buyers and sellers rather than to create a highly subjective valuation approach, the investment rationale of hotel owners is an essential consideration. As specialists in the valuation of hotels, we find that typical buyers purchase properties based on a thorough analysis of the anticipated economic benefits of property ownership, rather than on historical sales data. In light of these factors, it is our opinion that the sales comparison approach is unsuitable for indicating a specific estimate of the subject property's HVS International, Mineola, New York Sales Comparison Approach 147 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= market value; however, this approach may indicate a range of values that can be used to test the reasonableness of the value indicated by the income capitalization approach. Excluding the prior sale of the subject property, the adjusted sales prices range from approximately $20,800 to $26,624 per room, or $2,900,000 - $3,800,000 for the 141-unit subject property. The income capitalization approach indicates a value of roundly $25,000 per room, or roundly $3,400,000, which falls within this range. HVS International, Mineola, New York Cost Approach 148 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 12. Cost Approach The cost approach is founded on the principle of substitution, which implies that no prudent person will pay more for a property than the amount to acquire a site and construct a building of equal desirability and utility without undue delay. This approach estimates market value by first calculating the current cost of replacing the improvements. Appropriate deductions are made for depreciation resulting from physical deterioration, functional obsolescence, and external (economic) obsolescence, and the land value is added to the depreciated replacement cost to provide an estimate of market value. The cost approach employs the following steps. 1. The current replacement or reproduction cost is estimated. 2. Land value is estimated using techniques such as allocation, extraction, or ground rent capitalization. 3. Accrued depreciation, which can be divided into physical deterioration, functional obsolescence, and external obsolescence, is estimated. 4. Total depreciation is deducted from the subject property's replacement cost, and the land value is added to arrive at an estimate of value via the cost approach. When forming their purchase decisions regarding existing properties, market participants tend to consider the cost of developing a new hotel with optimal physical and functional utility. External conditions, such as the depressed market for real estate (and hotels in particular), can cause a property to be worth less than its replacement cost as new. The task of estimating the loss in value resulting from incurable functional and external obsolescence is highly subjective. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements age and begin to deteriorate, the loss in value resulting from physical obsolescence HVS International, Mineola, New York Cost Approach 149 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= becomes increasingly difficult to quantify accurately. Loss in value attributable to functional obsolescence can be even more difficult to determine. The subject property was constructed in 1969, and will be approximately 28 years old, as of the date of this appraisal. There are several issues of obsolescence with the subject property. As mentioned previously, the structure of the subject property was not constructed of materials which adequately muffle the noise created by the adjacent parkway. Furthermore, the subject features a considerable amount of unused space on the basement level of the property, which had been previously used for a beauty salon and spa. The transformation of this space for an alternate use (i.e., meeting space) would require a considerable capital investment. Following the 1994 acquisition by Ashford Financial Corporation and the subsequent recent renovation, the physical plant is in good condition, and planned improvements should address needed renovations in the pool area in 1997. The depressed hotel market conditions that prevailed in the late 1980s and the early 1990s has also led to a degree of external obsolescence. In our opinion, it is impossible to identify and quantify the impact of these factors on the property's value with any accuracy, so we will estimate only the replacement cost of the subject property. Replacement Cost Replacement cost is the current construction cost of a building with the same utility as the subject property, but built with modern materials and according to current construction and design standards. For the purpose of estimating the replacement cost of the subject property, we have used a hotel development cost survey conducted by HVS International. This survey is published annually in a newsletter entitled, The Hotel Valuation Journal, and appeared in the May, 1995, issue of Lodging Hospitality. The survey presents the range of per-room costs associated with various components of hotel development, including the improvements, the furniture, fixtures, and equipment, pre-opening expenses, and operating capital. Statistics are compiled for three broad categories of hotels: luxury, standard, and economy; the standard category has been used for the subject property. The results of this survey are presented in the following table. HVS International, Mineola, New York Cost Approach 150 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 12-1 Hotel Development Cost Survey (Amounts per Room) - --------------------------------------------------------------------------------
Improvements Furniture & Equipment Pre-Opening Operating Capital Total Percent Change - ------------------------------------------------------------------------------------------------------------------------------------ 1976 Luxury $32,000 - $55,000 $5,000 - $10,000 $1,000 - $2,000 $1,000 - $1,500 $39,000 - $68,500 --- - --- Standard 20,000 - 32,000 3,000 - 6,000 750 - 1,000 750 - 1,000 24,500 - 40,000 --- - --- Economy 8,000 - 15,000 2,000 - 4,000 500 - 1,000 500 - 750 11,000 - 20,750 --- - --- 1979 Luxury 36,000 - 65,000 8,000 - 15,000 1,500 - 3,000 1,500 - 2,000 47,000 - 85,000 6.8 - 8.0 Standard 25,000 - 36,000 5,000 - 10,000 1,000 - 2,000 1,000 - 1,500 32,000 - 49,500 10.2 - 7.9 Economy 10,000 - 20,000 3,000 - 5,000 750 - 1,000 750 - 1,000 14,500 - 27,000 10.6 - 10.0 1981 Luxury 45,000 - 80,000 10,000 - 20,000 2,000 - 3,500 2,000 - 2,500 59,000 - 106,000 12.8 - 12.4 Standard 25,000 - 40,000 7,000 - 13,000 1,200 - 2,500 1,200 - 2,000 34,400 - 57,500 3.8 - 8.1 Economy 13,000 - 25,000 4,000 - 7,000 700 - 1,200 900 - 1,200 18,600 - 34,400 14.1 - 13.7 1983 Luxury 55,000 - 100,000 12,500 - 20,000 2,300 - 4,000 2,000 - 2,800 71,800 - 126,800 10.8 - 9.8 Standard 35,000 - 50,000 9,000 - 15,000 1,400 - 3,000 1,300 - 2,200 46,700 - 70,200 17.9 - 11.0 Economy 18,000 - 32,000 5,000 - 8,000 800 - 1,500 900 - 1,300 24,700 - 42,800 16.4 - 12.2 1985 Luxury 60,000 - 115,000 13,400 - 30,000 3,000 - 5,000 2,100 - 3,100 78,500 - 153,100 4.7 - 10.4 Standard 38,000 - 57,000 9,500 - 16,500 1,900 - 3,600 1,500 - 2,500 50,900 - 79,600 4.5 - 6.7 Economy 20,000 - 36,000 5,000 - 8,800 1,000 - 1,700 1,000 - 1,500 27,000 - 48,000 4.7 - 6.1 1986 Luxury 62,000 - 120,000 13,700 - 30,600 3,100 - 5,200 2,300 - 3,100 81,100 - 158,900 3.3 - 3.8 Standard 39,000 - 60,000 9,700 - 16,800 2,000 - 3,800 1,500 - 2,600 52,200 - 83,200 2.6 - 4.5 Economy 21,000 - 37,000 5,100 - 9,000 1,000 - 1,800 1,100 - 1,500 28,200 - 49,300 4.4 - 2.7 1987 Luxury 63,000 - 122,000 13,800 - 30,900 3,300 - 5,500 2,300 - 3,200 82,400 - 161,600 1.6 - 1.7 Standard 40,000 - 61,000 9,800 - 16,800 2,100 - 3,900 1,500 - 2,600 53,400 - 84,300 2.3 - 1.3 Economy 21,000 - 39,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 28,400 - 51,400 0.7 - 4.3 1988 Luxury 65,000 - 125,000 14,000 - 31,000 3,300 - 5,500 2,300 - 3,200 84,600 - 164,700 2.7 - 1.9 Standard 41,000 - 63,000 10,000 - 17,100 2,100 - 3,900 1,500 - 2,600 54,600 - 86,600 2.2 - 2.7 Economy 22,000 - 40,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 29,400 - 52,400 3.5 - 1.9 1989 Luxury 66,000 - 126,000 15,000 - 32,000 3,300 - 5,500 2,300 - 3,200 86,600 - 166,700 2.4 - 1.2 Standard 41,000 - 64,000 10,500 - 18,000 2,100 - 3,900 1,500 - 2,600 55,100 - 88,500 0.9 - 2.2 Economy 22,000 - 40,000 5,500 - 9,700 1,100 - 1,800 1,100 - 1,500 29,700 - 53,000 1.0 - 1.1 1990 Luxury 67,000 - 128,000 15,400 - 33,000 3,500 - 5,700 2,500 - 3,500 88,400 - 170,200 2.1 - 2.1 Standard 42,000 - 65,000 10,800 - 18,500 2,200 - 4,000 1,600 - 2,800 56,600 - 90,300 2.7 - 2.0 Economy 22,500 - 41,000 5,600 - 10,000 1,200 - 1,800 1,200 - 1,600 30,500 - 54,400 2.7 - 2.6 1991 Luxury 65,000 - 122,000 14,500 - 31,500 3,700 - 5,900 2,600 - 3,600 85,800 - 163,000 (2.9) - (4.2) Standard 40,000 - 63,000 10,000 - 17,800 2,300 - 4,200 1,700 - 2,900 54,000 - 87,900 (4.6) - (2.7) Economy 21,000 - 39,000 5,000 - 9,500 1,300 - 2,000 1,300 - 1,700 28,600 - 52,200 (6.2) - (4.0) 1992 Luxury 64,000 - 120,000 14,200 - 30,900 3,800 - 6,100 2,700 - 3,700 84,700 - 160,700 (1.3) - (1.4) Standard 39,000 - 62,000 9,800 - 17,400 2,300 - 4,400 1,800 - 3,000 52,900 - 86,800 (2.0) - (1.3) Economy 21,000 - 38,000 4,900 - 9,300 1,400 - 2,100 1,300 - 1,800 28,600 - 51,200 0.0 - (1.9) 1993 Luxury 63,000 - 119,000 14,000 - 30,500 3,900 - 6,200 2,800 - 3,800 83,700 - 159,500 (1.2) - (0.7) Standard 39,000 - 61,000 9,700 - 17,200 2,300 - 4,500 1,800 - 3,000 52,800 - 85,700 (0.2) - (1.3) Economy 21,000 - 38,000 4,900 - 9,200 1,400 - 2,100 1,300 - 1,800 28,600 - 51,100 0.0 - (0.2) 1994 Luxury 64,000 - 121,000 14,300 - 31,100 3,900 - 6,200 2,800 - 3,800 85,000 - 162,100 1.6 - 1.6 Standard 40,000 - 63,000 10,000 - 17,600 2,400 - 4,600 1,800 - 3,000 54,200 - 88,200 2.7 - 2.9 Economy 22,000 - 40,000 5,100 - 9,500 1,500 - 2,200 1,300 - 1,800 29,900 - 53,500 4.5 - 4.7 1995 Luxury 65,000 - 124,000 14,800 - 32,300 4,100 - 6,400 2,900 - 4,000 86,800 - 166,700 2.1 - 2.8 Standard 41,000 - 65,000 10,400 - 18,300 2,500 - 4,800 1,900 - 3,100 55,800 - 91,200 3.0 - 3.4 Economy 23,000 - 42,000 5,400 - 9,900 1,600 - 2,300 1,300 - 1,800 31,300 - 56,000 4.7 - 4.7
Average Annual Compounded Percent Change: 1976 - 1995: Luxury 4.3% - 4.8% 1986 - 1995: Luxury 0.8% - 0.5% Standard 4.4% - 4.4% Standard 0.7% - 1.0% Economy 5.7% - 5.4% Economy 1.2% - 1.4% - -------------------------------------------------------------------------------- HVS International, Mineola, New York Cost Approach 151 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= As illustrated by the previous table, hotel development costs rose significantly during the late 1970s and the early 1980s; however, the rate of increase slowed substantially in 1987. In 1991, hotel development costs declined for the first time since 1976. Further drops of as much as 2.0% were registered in 1992. Between 1986 and 1990, average annual compounded increases ranged from 1.7% to 2.5%. Costs rose slowly (at average annual compounded rates ranging from 0.5% to 1.4%) between 1986 and 1995, largely as a result of the declines in 1991, 1992, and 1993. In 1995, hotel development costs started to escalate more rapidly, reaching 4.7% in the economy segment. As more hotels are developed, we expect costs to continue to rise. Because the replacement cost tends to set the upper limit of a particular hotel's value, this figure is relevant to our analysis. We estimate the replacement cost of the subject property as follows, based on the development cost survey discussed earlier. ================================================================================ Table 12-2 Subject Property's Replacement Cost - -------------------------------------------------------------------------------- Cost No. of Hotel Cost per Room Rooms Total Cost -------------------------------------------------------------------------- Building $45,000 141 $ 6,345,000 FF&E 12,000 141 1,692,000 Pre-Opening 3,000 141 423,000 Operating Capital 2,200 141 310,200 -------------------------------------------------------------------------- Totals $62,200 $ 8,770,200 - -------------------------------------------------------------------------------- Ground Lease Approach to Land Valuation Land value may be estimated either by the sales comparison approach, using comparable land sales, or by the ground lease approach, which is based on the economic value generated by an improvement that represents the property's highest and best use. Because it is unusual to find recent sales of comparable vacant land that is slated for imminent hotel development, we have used the ground lease approach to determine the subject property's land value. Hotels are often constructed on leased land, and although lease terms differ somewhat, the basis for the rental calculation is frequently tied to a percentage of revenue. By applying a typical ground lease rental formula to the HVS International, Mineola, New York Cost Approach 152 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= subject property's stabilized revenues, the appraiser can determine the hotel's economic rent, or what is also known as the income attributable to the land. Land value is then calculated by dividing the economic rent by an appropriate capitalization rate. The self-adjusting aspect of this approach is key to its reliability. Because the rental formula is tied to a percentage of revenue that inherently reflects both the locational attributes of the site (occupancy and rate) and the allowable density of development, the resulting economic ground rent justly represents the greatest net return to the land over a given period. Because the Howard Johnson Plaza appears to represent the highest and best use of the property, the ground lease approach is an appropriate method of determining land value. We have researched long-term hotel ground leases in search of rental formulas that are based on a percentage of rooms revenue or on a combination of rooms, food, and beverage revenue. This analysis indicates that economic ground rents for hotels similar to the subject property typically range from 2.7% to 7.8% of rooms revenue. Although this range is quite broad, most of the formulas yield rental percentages of between 4.0% and 5.0% of rooms revenue. After considering these comparable ground leases and the locational attributes of the subject property, we believe the appropriate economic ground rental percentage is 4.5% of stabilized rooms revenue. The subject property's stabilized rooms revenue has been deflated to reflect 1997 dollars. The following calculation shows the derivation of the subject property's economic ground rent. Stabilized Rooms Revenue (1997 dollars) $ 2,224,556 Rental Percentage 0.045 ----------- Economic Ground Rent $ 100,105 Rent generated by a ground lease represents a fairly low-risk income flow. Because the tenant improvements typically amount to more than eight times the value of the land, the risk of default is low. When the ground lease terms are tied to rooms revenue, the landlord is also protected from the adverse effects of inflation. Based on these risk factors and the current cost of long-term capital, we estimate the appropriate ground rental overall capitalization rate at 12%. Applying this indicated capitalization rate to the HVS International, Mineola, New York Cost Approach 153 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= subject property's economic ground rent yields the following estimate of land value. Economic Ground Rent $100,105 $ 834,208 ------------------------ = ------------ = Capitalization Rate 0.12 Estimated Land Value (Say) $ 830,000 A new hotel's land value typically ranges from 10% to 20% of the overall value. The estimate of land value presented above is approximately 16% of the subject property's total value as indicated by the income capitalization approach (on a fee simple basis). Replacement Cost Combining the replacement cost of the property with the land value yields the subject property's total replacement cost. ================================================================================ Table 12-3 Total Replacement Cost - -------------------------------------------------------------------------------- Cost of the Improvements and FF&E $ 8,770,200 Land Value 830,000 ----------- Total Replacement Cost $ 9,600,200 Total Replacement Cost (Say) $ 9,600,000 - -------------------------------------------------------------------------------- If a property's replacement cost is significantly higher than the values indicated by the income capitalization and sales comparison approaches, it may indicate that an upward adjustment of these values is appropriate. This would also reduce the probability of new hotel development, which is not likely to be feasible under those conditions, and creates an effective barrier to entry for new competition, thereby reducing the risk associated with the subject property's income-generating potential. An upward adjustment of the value indicated by the income capitalization approach is also justified by this barrier to entry. We find that knowledgeable hotel buyers generally base their purchase decisions on economic factors, such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation HVS International, Mineola, New York Cost Approach 154 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= estimates, it is our opinion that the cost approach is inapplicable in estimating the market value of the Howard Johnson Plaza. However, we have estimated the subject property's replacement cost as new, which may set the upper limit of the hotel's value. HVS International, Mineola, New York Reconciliation of Value Indications 155 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 13. Reconciliation of Value Indications The reconciliation, which is the last step in the appraisal process, involves summarizing and correlating the data and procedures employed throughout the analysis. The final conclusion of value is arrived at after reviewing the estimates indicated by the income capitalization, sales comparison, and cost approaches. The relative significance, applicability, and defensibility of each indicated value is considered, and the greatest weight is given to that approach deemed most appropriate for the property being appraised. The purpose of this report is to estimate the market value of the fee simple interest in the subject property. Our appraisal involves a careful analysis of the property itself and the economic, demographic, political, physical, and environmental factors that influence real estate values. Based on the data set forth in this report, the following value indications were developed. Approach Value Indication -------- ---------------- Income Capitalization $3,375,000 Sales Comparison(1) $2,900,000 - $3,800,000 Cost (Replacement Cost) $9,600,000 Income Capitalization Approach To estimate the subject property's value via the income capitalization approach, we analyzed the local market for transient accommodations, examined the competitive environment, projected occupancy and average rate levels, and developed a forecast of income and expense that reflects anticipated income trends and cost components through a stabilized year of operation. The subject property's projected net income before debt service was then allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component was calculated; the total of the mortgage and equity components equates to the value of the property. (1) This value indication is based on the assumption that fee-simple property rights are conveyed. HVS International, Mineola, New York Reconciliation of Value Indications 156 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Our nationwide experience indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the hotel investors who constitute the marketplace. For this reason, we believe that the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in our final estimate of the subject property's market value. Sales Comparison Approach The sales comparison approach uses actual sales of similar properties to provide an indication of the subject property's value. The strength of this approach is that it measures value based on the investment decisions made by actual buyers and sellers. Although we have investigated a number of sales in an attempt to develop a range of value indications, several adjustments are necessary to render the sales prices applicable to the subject property. These adjustments, which are numerous and highly subjective, diminish the reliability of the sales comparison approach. Furthermore, we find that typical hotel investors employ a sales comparison procedure only to establish broad value parameters. The hotel sales outlined earlier in this report indicate an adjusted value range of $32,500 to $41,600 per available room. The income capitalization approach, on a fee-simple basis, indicates a per-room value of approximately $37,000. This sales range does not necessarily warrant any adjustment of the value indicated by the income capitalization approach. Cost Approach To estimate the subject property's value via the cost approach, we estimated the current replacement cost of the property and added the land value. We give the cost approach limited weight in arriving at a final value estimate, because knowledgeable buyers of lodging facilities generally base their purchase decisions on economic factors (such as projected net income and return on investment) rather than on a property's depreciated replacement cost. The replacement cost estimate developed via the cost approach can help to corroborate the results of the income capitalization and sales comparison approaches to value. If the replacement cost is substantially higher or lower than the value indicated by the income capitalization approach, an upward or downward adjustment of the income capitalization approach value may be necessary. In the case of the subject property, the replacement cost is considerably higher than the value indicated by the income capitalization approach or the sales comparison approach. This suggests that a slight HVS International, Mineola, New York Reconciliation of Value Indications 157 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= upwards adjustment to the value indicated by the income capitalization approach may be warranted. Value Conclusion Careful consideration has been given to the strengths and weaknesses of the three approaches to value discussed above. In recognition of the purpose of this appraisal, we have given primary weight to the value indicated by the income capitalization approach and made some subjective adjustments based on the replacement cost estimate, the sales comparison approach, and our extensive experience in the hospitality industry. It is our opinion that the market of the leasehold interest in the Howard Johnson Plaza - Saddle Brook, as of January 1, 1997, is: $3,500,000 THREE MILLION FIVE HUNDRED THOUSAND DOLLARS The estimate of market value includes the land, the improvements, and the furniture, fixtures, and equipment. The appraisal assumes that the hotel is open and operational. This value estimate equates to roundly +/-$25,000 per room, which is well supported by market sales and approximately 3.2% higher than the value indicated by the income capitalization approach. The estimate of value assumes either the availability of third-party financing or the willingness and capability of the seller to take back purchase-money financing so that a buyer can obtain the level of debt set forth in the Income Capitalization Approach section of this appraisal. Marketing Period Our estimate of market value assumes a marketing period of six to nine months. Under normal economic conditions, hotels are transferred within this time frame. Personal Property In accordance with the appraisal standards set forth by the Office of the Comptroller of the Currency, it is necessary for bank appraisals to identify and value any personal property, fixtures, or intangible items that are included in the appraisal and discuss their impact on the overall estimate of market value. A hotel's income-generating ability depends on a suitable inventory of furniture, fixtures, and equipment. Removal of these items can HVS International, Mineola, New York Reconciliation of Value Indications 158 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= decrease the property value by as much as the cost to replace the inventory plus the loss of income incurred while the hotel cannot function. A hotel's personal property consists of a wide variety of components, including bedroom furnishings, bathroom fixtures, restaurant and kitchen equipment, front office and accounting computers, exterior signs, and similar items. Our inspection of the Howard Johnson Plaza indicates that the personal property and fixtures are fair condition. Based on an annual construction cost survey conducted by HVS International, we estimate the total replacement cost of the subject property's furniture, fixtures, and equipment at $12,000 per available room. Assuming an average useful life of ten years and an effective age of seven years, the value of the furniture, fixtures, and equipment currently in place is approximately $3,600 per room, or a total of $507,600. The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) stipulates that ". . . any business interest or other intangible item should be valued separately within the appraisal."(2) Hotels have both business and real estate components; without the business expertise necessary to operate the facility, a hostelry would have little real estate value. Because furniture, fixtures, and equipment are essential to a hotel's income-generating ability and are seldom removed from the property or sold separately, the separation of the personal property component from the real property is not particularly meaningful. (2) Federal Register, Vol. 55, No. 143, July 25, 1990, p. 30205. HVS International, Mineola, New York Statement of Assumptions and 159 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 14. Statement of Assumptions and Limiting Conditions 1. This report is to be used in whole and not in part. 2. No responsibility is assumed for matters of a legal nature, nor do we render any opinion as to title, which is assumed to be marketable and free of any deed restrictions and easements. The property is valued as though free and clear unless otherwise stated. 3. We assume that there are no hidden or unapparent conditions of the sub-soil or structures, such as underground storage tanks, that would render the property more or less valuable. No responsibility is assumed for these conditions or for any engineering that may be required to discover them. 4. We have not considered the presence of potentially hazardous materials such as asbestos, urea formaldehyde foam insulation, PCBs, any form of toxic waste, polychlorinated biphengyls, pesticides, or lead-based paints. The appraisers are not qualified to detect hazardous substances, and we urge the client to retain an expert in this field if desired. 5. The Americans with Disabilities Act (ADA) became effective on January 26, 1992. We have conducted no specific compliance survey to determine whether the subject property is operating in accordance with the various detailed requirements of the ADA. It is possible that the property does not conform to the requirements of the act, and this could have an unfavorable effect on value. Because we have no direct evidence regarding this issue, our estimate of value does not consider possible non-compliance with the ADA. HVS International, Mineola, New York Statement of Assumptions and 160 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 6. We have made no survey of the property, and we assume no responsibility in connection with such matters. Sketches, photographs, maps, and other exhibits are included to assist the reader in visualizing the property. It is assumed that the use of the land and improvements is within the boundaries of the property described, and that there is no encroachment or trespass unless noted. 7. All information, financial operating statements, estimates, and opinions obtained from parties not employed by HVS International are assumed to be true and correct. We can assume no liability resulting from misinformation. 8. Unless noted, we assume that there are no encroachments, zoning violations, or building violations encumbering the subject property. 9. The property is assumed to be in full compliance with all applicable federal, state, local, and private codes, laws, consents, licenses, and regulations (including a liquor license where appropriate), and that all licenses, permits, certificates, franchises, and so forth can be freely renewed or transferred to a purchaser. 10. All mortgages, liens, encumbrances, leases, and servitudes have been disregarded unless specified otherwise. 11. None of this material may be reproduced in any form without our written permission, and the report cannot be disseminated to the public through advertising, public relations, news, sales, or other media. 12. We are not required to testify or appear in court by reason of this analysis without previous arrangements, and only when our standard per diem fees and travel costs are paid prior to the appearance. 13. If the reader is making a fiduciary or individual investment decision and has any questions concerning the material presented in this report, it is recommended that the reader contact us. 14. We take no responsibility for any events or circumstances that take place subsequent to either the date of value or the date of our field inspection, whichever occurs first. HVS International, Mineola, New York Statement of Assumptions and 161 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 15. The quality of a lodging facility's on-site management has a direct effect on a property's economic viability and value. The financial forecasts presented in this analysis assume responsible ownership and competent management. Any departure from this assumption may have a significant impact on the projected operating results and the value estimate. 16. The estimated operating results presented in this report are based on an evaluation of the overall economy, and neither take into account nor make provision for the effect of any sharp rise or decline in local or national economic conditions. To the extent that wages and other operating expenses may advance during the economic life of the property, we expect that the prices of rooms, food, beverages, and services will be adjusted to at least offset those advances. We do not warrant that the estimates will be attained, but they have been prepared on the basis of information obtained during the course of this study and are intended to reflect the expectations of a typical hotel buyer. 17. This analysis assumes continuation of all Internal Revenue Service tax code provisions as stated or interpreted on either the date of value or the date of our field inspection, whichever occurs first. 18. Many of the figures presented in this report were generated using sophisticated computer models that make calculations based on numbers carried out to three or more decimal places. In the interest of simplicity, most numbers have been rounded to the nearest tenth of a percent. Thus, these figures may be subject to small rounding errors. 19. It is agreed that our liability to the client is limited to the amount of the fee paid as liquidated damages. Our responsibility is limited to the client, and use of this report by third parties shall be solely at the risk of the client and/or third parties. The use of this report is also subject to the terms and conditions set forth in our engagement letter with the client. 20. Appraising hotels is both a science and an art. Although this analysis employs various mathematical calculations to provide value indications, the final estimate is subjective and may be influenced by our experience and other factors not specifically set forth in this report. HVS International, Mineola, New York Statement of Assumptions and 162 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 21. Any distribution of the total value between the land and improvements or between partial ownership interests applies only under the stated use. Moreover, separate allocations between components are not valid if this report is used in conjunction with any other analysis. 22. This study was prepared by Hospitality Valuation Services, a division of Hotel Consulting Services, Inc. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of Hotel Consulting Services, Inc. as employees, rather than as individuals. HVS International, Mineola, New York Certification 163 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 15. Certification We, the undersigned appraisers, hereby certify: 1. that the statements and opinions presented in this report, subject to the limiting conditions set forth, are correct to the best of our knowledge and belief; 2. that Rodney G. Clough personally inspected the property described in this report; that Anne R. Lloyd-Jones and Stephen Rushmore participated in the analysis and reviewed the findings but did not personally inspect the property; 3. that we have no current or contemplated interests in the real estate that is the subject of this report; 4. that we have no personal interest or bias with respect to the subject matter of this report or the parties involved; 5. that this report sets forth all of the limiting conditions (imposed by the terms of this assignment) affecting the analyses, opinions, and conclusions presented herein; 6. that the fee paid for the preparation of this report is not contingent upon our conclusions; 7. that this report has been prepared in accordance with, and is subject to, the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute; 8. that the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives; 9. that this report has been prepared in accordance with the Uniform Standards of Professional Appraisal Practice (as adopted by the Appraisal Foundation); HVS International, Mineola, New York Certification 164 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 10. that as of the date of this report, Stephen Rushmore has completed the requirements of the continuing education program of the Appraisal Institute; 11. that no one other than the undersigned prepared the analyses, conclusions, and opinions concerning real estate that are set forth in this appraisal report; 12. that this appraisal is not based on a requested minimum value, a specific value, or the approval of a loan. /s/ Rodney G. Clough ----------------------------------- Rodney G. Clough Consulting and Valuation Analyst Hotel Consulting Services, Inc. /s/ Anne R. Lloyd-Jones ----------------------------------- Anne R. Lloyd-Jones Senior Vice President Hotel Consulting Services, Inc. /s/ Stephen Rushmore, CRE, MAI, CHA ----------------------------------- Stephen Rushmore, CRE, MAI, CHA President Hotel Consulting Services, Inc. SADDLE BROOK SCHEDULE A ALL that certain tract, lot and parcel of land lying and being in the Township of Saddle Brook, County of Bergen, and State of New Jersey, being more particularly described as follows: BEGINNING at the intersection of the northerly line of Pehle Avenue with the dividing line between lands formerly of Rosario Ciuppa and wife on the south and lands now or formerly of William Smidt and wife on the north, said point having N.J. Plane Coordinates of N. 755, 908. 142 and E. 2157491.645 and running thence; Westerly along the northerly line of Pehle Avenue on a bearing based on N.J. Plane Coordinate System, South 70 degrees 28 minutes 14 seconds West distant 515.00 feet to a point; thence Northwesterly along coordinate bearing North 67 degrees 32 minutes 00 seconds West distant 79.00 feet to a point; thence Northerly North 20 degrees 32 minutes 00 seconds West distant 196.00 feet to a point; thence, Northeasterly, North 33 degrees 43 minutes 00 seconds East distant 87.00 feet to a point; thence Northeasterly, North 63 degrees 43 minutes 00 seconds East distant 327.00 feet to a point; thence; Southeasterly, South 77 degrees 47 minutes 00 seconds East distant 162.95 feet to a point; thence Northeasterly North 63 degrees 01 minutes 30 seconds East distant 44.51 feet to a point in the dividing line between lands formerly of Rosario Ciuppa and wife and lands now or formerly of William Smidt and wife as mentioned in describing the point or place of beginning; thence Southerly along the said dividing line, South 19 degrees 31 minutes 46 seconds East distant 259.37 feet to the northerly line of Pehle Avenue, the point or place of BEGINNING. HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] View of the exterior of the Subject Property [GRAPHIC OMITTED] View of the Subject Property's lobby HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] View of a standard guestroom at the Subject Property [GRAPHIC OMITTED] View of the Subject Property's ballroom HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] View of the Subject Property's indoor swimming pool HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] View of a standard bathroom at the Subject Property HVS International, Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Holiday Inn Saddlebrook [GRAPHIC OMITTED] Ramada Rochelle Park HVS International, Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Holiday Inn Hasbrouck Heights HVS International, Mineola, New York Addenda: Synopsis of Howard 1 Johnson License Agreement - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Synopsis of Howard Johnson License Agreement Date: August 25, 1994 Licensor: Howard Johnson Franchise Systems, Inc. Licensee: Saddle Brook New Jersey Hotel Limited Partnership - an entity controlled by Ashford Financial Corporation Premises: 129 Pehle Avenue East, Saddle Brook, New Jersey Term: 15 years Renewal: No renewal rights conveyed Fees: Royalty: 4% of gross room revenues Marketing Fees: 2% of gross room revenues Room Sales Charge: 2.5% of gross room revenues Licensor Services: Reservation system, marketing, training Licensee Obligations: Insurance, minor renovations, courtesy lodging Termination: Upon default HVS International, Mineola, New York Addenda: Synopsis of Restaurant Lease 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Synopsis of Restaurant Lease Date: March 30, 1967 Current Licensor: Saddle Brook New Jersey Hotel Limited Partnership - an entity controlled by Ashford Financial Corporation Licensee: Allan V. Rose Term: Original lease: 25 years, with 3 five-year extensions Amendment: 3 additional five-year extensions Fixed Annual Rent: Year 1: $12,000 Years 2 - 6: $40,000 Years 7 - 21: $45,000 Years 22 - 26: $50,000 Additional: 5% of gross annual sales over $1,000,000 Comments: Lessor makes structural repairs Lessee pays all utilities Lessee pays real estate and personal property taxes HVS International, Mineola, New York Addenda: Synopsis of Hotel 1 Management Agreement - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Synopsis of Hotel Management Agreement Date: May 16, 1994 Owner: Saddle Brook New Jersey Hotel Limited Partnership - an entity controlled by Ashford Financial Corporation Manager: Remington Employers Corporation Premises: Howard Johnson Plaza Term: 15 years Renewal: 2 five-year extensions Management Fee: 3% of gross revenues Reserve for Replacement: 3% of gross revenues Termination: Under various conditions of default HVS International, Mineola, New York Addenda: Synopsis of Ground Lease 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Synopsis of Ground Lease Date: March 30, 1967 Current Landlord: Paul Ferber (T/A PLF Company) Current Lessee: Saddle Brook New Jersey Hotel Limited Partnership - an entity controlled by Ashford Financial Corporation Premises: Howard Johnson Plaza, Saddle Brook, New Jersey Term: 26 years, commencing 90 days from the execution of the Lease (expiration date is June 28, 1993) Renewal: Three extension options, two for periods of 21 years, and one for a period of 33-1/3 years, provided Tenant notifies landlord of its election to extent at least 180 days prior to the expiration of the term (or any extended term) Rent: Years 2-3: $40,000/per year Years 7-21: $45,000/per year Years 22-26: $50,000/per year Provisions are provided for CPI escalations. HVS International, Mineola, New York Explanation of the Simultaneous 1 Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Explanation of the Simultaneous Valuation Formula The algebraic equation known as the simultaneous valuation formula, which solves for the total property value using a ten-year mortgage and equity technique, was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(17) The process of solving for the value of the mortgage and equity components begins by deducting the annual debt service from the projected income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value using the terminal capitalization rate. The equity residual, which is the total reversionary value less the mortgage balance at that point in time and less any brokerage and legal costs associated with the sale, is discounted to the date of value at the equity yield rate. The net income to equity for each projection year is also discounted back to the date of value. The sum of these discounted values equals the value of the equity component. Because the equity component comprises a specific percentage of the total value, the value of the mortgage and the total property can be computed easily. (17) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Explanation of the Simultaneous 2 Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= This process can be expressed in two algebraic equations that set forth the mathematical relationships between the known and unknown variables using the following symbols. NI = Net income available for debt service V = Value M = Loan-to-value ratio f = Annual debt service constant n = Number of years in the projection period de = Annual cash available to equity dr = Residual equity value b = Brokerage and legal cost percentage P = Fraction of the loan paid off during the projection period fp = Annual constant required to amortize the entire loan during the projection period Rr = Overall terminal capitalization rate that is applied to net income to calculate the total property reversion (sales price at the end of the projection period) 1/Sn = Present worth of $1 factor (discount factor) at the equity yield rate Using these symbols, the following formulas can be used to express some of the components of this mortgage and equity valuation process. Debt Service - A property's debt service is calculated by first determining the mortgage amount that equals the total value (V) multiplied by the loan-to-value ratio (M). Debt service is derived by multiplying the mortgage amount by the annual debt service constant (f). The following formula represents debt service. f x M x V = Debt Service Net Income to Equity (Equity Dividend) - The net income to equity (de) is the property's net income before debt service (NI) less debt service. The following formula represents the net income to equity. HVS International, Mineola, New York Explanation of the Simultaneous 3 Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= NI - (f x M x V) = de Reversionary Value - The value of the hotel at the end of the tenth year is calculated by dividing the 11th-year net income before debt service (NI^11) by the terminal capitalization rate (Rr). The following formula represents the property's tenth-year reversionary value. (NI^11/Rr) = Reversionary Value Brokerage and Legal Costs - When a hotel is sold, certain costs are associated with the transaction. Normally, the broker is paid a commission and the attorney collects legal fees. In the case of hotel transactions, brokerage and legal costs typically range from 1% to 4% of the sales price. Because these expenses reduce the proceeds to the seller, they are usually deducted from the reversionary value in the mortgage and equity valuation process. Brokerage and legal costs (b), expressed as a percentage of reversionary value (NI^11/Rr), are calculated by application of the following formula. b(NI^11/Rr) = Brokerage and Legal Costs Ending Mortgage Balance - The mortgage balance at the end of the tenth year must be deducted from the total reversionary value (debt and equity) in order to determine the equity residual. The formula used to determine the fraction of the loan remaining (expressed as a percentage of the original loan balance) at any point in time (P) takes the annual debt service constant of the loan over the entire amortization period (f) less the mortgage interest rate (i), and divides it by the annual constant required to amortize the entire loan during the ten-year projection period (fp) less the mortgage interest rate. The following formula represents the fraction of the loan paid off (P). (f - i)/(fp - i) = P HVS International, Mineola, New York Explanation of the Simultaneous 4 Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= If the fraction of the loan paid off (expressed as a percentage of the initial loan balance) is P, then the remaining loan percentage is expressed as 1 - P. The ending mortgage balance is the fraction of the remaining loan (1 - P) multiplied by the initial loan amount (M x V). The following formula represents the ending mortgage balance. (1 - P) x M x V Equity Residual Value - The value of the equity upon the sale at the end of the projection period (dr) is the reversionary value less the brokerage and legal costs and the ending mortgage balance. The following formula represents the equity residual value. (NI^11/Rr) - (b(NI^11/Rr) - ((1 - P) x M x V) = dr Annual Cash Flow to Equity - The annual cash flow to equity consists of the equity dividend for each projection year plus the equity residual at the end of the tenth year. The following formula represents the annual cash flow to equity. NI^1 - (f x M x V) = de^1 NI^2 - (f x M x V) = de^2 NI^10 - (f x M x V) = de^10 (NI^11/Rr) - (b(NI^11/Rr) - ((1 - P) x M x V) = dr Value of the Equity - If the initial mortgage amount is calculated by multiplying the loan-to-value ratio (M) by the property value (V), then the equity value is one minus the loan-to-value ratio multiplied by the property value. The following formula represents the value of the equity. (1 - M) V HVS International, Mineola, New York Explanation of the Simultaneous 5 Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Discounting the Cash Flow to Equity to the Present Value - The cash flow to equity in each projection year is discounted to the present value at the equity yield rate (1/S^n). The sum of these cash flows is the value of the equity (1 - M) V. The following formula represents the calculation of equity as the sum of the discounted cash flows. (de^1 x 1/S^1) + (de^2 x 1/S^2) + . . . + (de^10 x 1/S^10) + (dr x 1/S^10) = (1 - M) V Combining the Equations: Annual Cash Flow to Equity and Discounting the Cash Flow to Equity to the Present Value - The last step is to arrive at one overall equation that shows that the annual cash flow to equity plus the yearly discounting to the present value equals the value of the equity. ((NI^1 - (f x M x V)) 1/S^1) + ((NI^2 - (f x M x V)) 1/S^2) + . . . ((NI^10 - (f x M x V)) 1/S^10) + (((NI^11/Rr) - (b(NI^11/Rr)) - ((1 - P) x M x V)) 1/S^10) = (1 -M) V Because the property's value (V) is the only unknown, this equation can be solved readily. Ten-Year Projection of Income and Expense - Because the fixed and variable forecast of income and expense is carried out only to the stabilized year, it is necessary to continue the projection to the 11th year. In most cases, net income before debt service beyond the stabilized year is projected at an assumed inflation rate. By increasing a property's revenue and expenses at the same rate of inflation, net income remains constant as a percentage of total revenue, and the dollar amount escalates at the annual inflation rate. Hotel investors are currently using inflation rates of approximately 3.5% annually. The ten-year forecast of income and expense illustrates the subject property's net income, which is assumed to increase by 3.5% annually subsequent to the hotel's stabilized year of operation. Solving for Value Using the Simultaneous Valuation Formula - In the case of the subject property, the following known variables have been determined. HVS International, Mineola, New York Explanation of the Simultaneous 6 Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 1: Summary of Known Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Ten-Year Forecast Loan-to-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.111856 Equity Yield Ye 22.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 12.0% - -------------------------------------------------------------------------------- The following table illustrates the present worth of a $1 factor at the 22% equity yield rate. ================================================================================ Table 2: Present Worth of $1 Factor at the Equity Yield Rate - -------------------------------------------------------------------------------- Present Worth of $1 Calendar Year Factor @22.0% ------------------------------------------------------------- 1997 0.819535 1998 0.671637 1999 0.550430 2000 0.451097 2001 0.369689 2002 0.302973 2003 0.248297 2004 0.203488 2005 0.166766 2006 0.136670 - -------------------------------------------------------------------------------- Using these known variables, the following intermediary calculations must be made before applying the simultaneous valuation formula. The fraction of the loan paid off during the projection period is calculated as follows. P = ( 0.111856 - 0.095 ) / ( 0.155277 - 0.095 ) = 0.279638 The annual debt service is calculated as f x M x V. (f x M x V) = 0.111856 x 0.70 x V = 0.078299 V HVS International, Mineola, New York Explanation of the Simultaneous 7 Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Inserting the known variables into the hotel valuation formula produces the following. ( 417,000 - 0.078299 V ) x 0.819672 + ( 487,000 - 0.078299 V ) x 0.671862 + ( 393,000 - 0.078299 V ) x 0.550707 + ( 406,000 - 0.078299 V ) x 0.451399 + ( 421,000 - 0.078299 V ) x 0.369999 + ( 435,000 - 0.078299 V ) x 0.303278 + ( 447,000 - 0.078299 V ) x 0.248589 + ( 466,000 - 0.078299 V ) x 0.203761 + ( 482,000 - 0.078299 V ) x 0.167017 + ( 499,000 - 0.078299 V ) x 0.136899 + ((( 516,000 / 0.120 ) - ( 0.03 x ( 516,000 / 0.120 )) - (( 1 - 0.279638 ) x 0.70 x V )) x 0.136899 ) = ( 1 - 0.70 ) V Like terms are combined as follows. $2,282,286 - 0.376214 V = (1 - 0.70) V $2,282,286 = 0.67621 V V = $ 2,282,286 / 0.67621 V = $ 3,375,097 Total Property Value as Indicated by the Income Capitalization Approach (Say) = $ 3,400,000 HVS International, Mineola, New York Qualifications of Rodney G. Clough - -------------------------------------------------------------------------------- ============= HVS INTERNATIONAL ============= ================================================================================ Rodney G. Clough Employment 1995 to present HVS INTERNATIONAL Mineola, New York (Hotel Valuations, Market Studies, Feasibility Reports and Investment Counseling) 1994 THE MIRAGE HOTEL AND CASINO Las Vegas, Nevada Summer, 1993 HYATT REGENCY DENVER DOWNTOWN Denver, Colorado 1991 THE STATLER HOTEL AND JW MARRIOTT EXECUTIVE EDUCATION CENTER Ithaca, New York 1988 UNIVERSITY OF COLORADO CATERING Boulder, Colorado Education BS - School of Hotel Administration, Cornell University (Managing Director, HEC 69) Professional Cornell Society of Hotelmen Affiliations Examples of Bay County Conference Center Keenan & Hewitt Corporate and Planning Authority Mountain Spa Development Institutional Capitol Hotel Group OCWEN Financial Corporation Clients Served City of Portsmouth ITT Sheraton Fairmont Hotel Management Co. Samoth, Inc. Grand Heritage Hotels Sumitomo Bank Ltd. HVS International, Mineola, New York Qualifications of Rodney G. Clough - -------------------------------------------------------------------------------- ============= HVS INTERNATIONAL ============= ================================================================================ Examples of Hotels Florida Appraised or Evaluated - Floridan Hotel, Tampa - Proposed Sheraton, Tampa - Grenelefe Golf and Tennis Resort, Haines City Illinois - The Fairmont, Chicago - Days Inn, Chicago Kansas - Broadview Hotel, Wichita Massachusetts - Copley Plaza Hotel, Boston Michigan - Proposed Conference Center, Bay City Nevada - Proposed Mountain Spa Resort, Las Vegas New York - Hotel Gregory, Brooklyn - LaGuardia Ramada, East Elmhurst - Staten Island Hotel, Staten Island South Carolina - Proposed Inn, Charleston Texas - Proposed Sheraton, San Antonio - Holiday Inn Riverwalk North, San Antonio - Crossroads Inn, San Antonio Virginia - Doubletree Hotel, Crystal City - Proposed Downtown Hotel, Portsmouth HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Anne R. Lloyd-Jones, CRE Employment 1982 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1981 FAIRMONT HOTEL Dallas, Texas 1979 - 1980 SAGA FOOD SERVICE SWARTHMORE COLLEGE Swarthmore, Pennsylvania 1977 - 1980 DARANNE CATERERS Swarthmore, Pennsylvania Professional Affiliations American Society of Real Estate Counselors - Member (CRE) Appraisal Institute - Candidate for Membership Cornell Society of Hotelmen Education MPS - School of Hotel Administration, Cornell University BA - Swarthmore College Appraisal Institute Course 1A1 - Real Estate Appraisal Principles Course 1A2 - Basic Valuation Procedures Course 1BA - Capitalization Theory and Techniques, Part A Course 1BB - Capitalization Theory and Techniques, Part B Course 2-1 - Case Studies in Real Estate Valuation Course 2-3 - Standards of Professional Practice Course 3-1 - Report Writing HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Corporate and Institutional Clients Served Ashford Financial Corporation Chase Manhattan Bank, N. A. Citibank / Citicorp NA Credit Lyonnais Doubletree Hotels Grand Heritage Hotels Great Western Bank Goldman Sachs Holiday Inns, Inc. Interstate Hotels MassMutual Marriott International / Host Marriott Morgan Stanley OCWEN Financial Services Remington Hotels Sheraton Hotels Starwood Capital Group Starwood Lodging Trust Winegardner & Hammons Wyndham Hotel Company Hotel Chains and Management Companies Appraised or Evaluated Doubletree Hotels Compri Hotels Interstate Hotels Fairmont Hotels Guest Quarters Hilton Hotels Corporation Omni International Hotels Ramada Hotel Corp. Servico Hotel Corp. Winegardner & Hammons Appearance as an Expert Witness Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Jefferson City, Missouri Federal Bankruptcy Court, Columbia, South Carolina Federal Bankruptcy Court, Houston, Texas Federal Bankruptcy Court, New York, New York Federal Bankruptcy Court, San Bernardino, California Federal Bankruptcy Court, Los Angeles, California Federal Bankruptcy Court, Charlotte, North Carolina Federal Bankruptcy Court, Miami, Florida Federal District Court, Central Division, Salt Lake City, Utah Iowa District Court, Story County, Iowa Texas District Court, Harris County, Texas Federal Bankruptcy Court, Tampa, Florida Utah District Court, Salt Lake County, Utah Federal Bankruptcy Court, Newark, New Jersey HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated Arizona - - Wyndham Garden Hotel, Chandler - - Wyndham Garden Hotel - Airport, Phoenix - - Wyndham Garden Hotel - Union Hills, Phoenix - - Canyon Ranch Spa & Fitness Resort, Tucson Alabama - - Holiday Inn, Birmingham - - Proposed Sheraton, Gulf Shores - - Proposed Inn, Mobile - - Holiday Inn, Sheffield California - - Industry Hills Sheraton Hotel, City of Industry - - Piccadilly Inn, Fresno - - Proposed Inn at Foss Creek, Healdsburg - - Sunset Towers Hotel, Hollywood - - Proposed La Quinta, Irvine - - Wyndham Garden Hotel, La Jolla - - Days Inn, La Palma - - Proposed Marriott Courtyard, Palm Springs - - Proposed Club Hilton Hotel, Pleasanton - - Center Pointe Development, San Diego - - Holiday Inn-Embarcadero, San Diego - - Holiday Inn-Harbor View, San Diego - - Seven Seas Lodge, San Diego - - Proposed Fountaingrove Inn, Santa Rosa - - Sheraton Round Barn Inn, Santa Rosa - - Wyndham Garden Hotel, Sunnyvale - - Westlake Plaza Hotel, Thousand Oaks - - Proposed Marriott Courtyard, Torrance Colorado - - Proposed Hotel, Keystone Connecticut - - Holiday Inn, Milford - - Holiday Inn, New Britain District of Columbia - - Grand Hotel, Washington - - Wyndham Bristol Hotel, Washington Florida - - Kon Tiki Village, Kissimmee - - Sheraton Lakeside, Kissimmee - - Holiday Inn, 22nd Street, Miami Beach - - Holiday Inn, 87th Street, Miami Beach - - Holiday Inn, 180th Street, Miami Beach - - Sheraton Resort & Marina, St. Petersburg - - Hilton Hotel, Singer Island - - Royce Hotel, West Palm Beach Georgia - - Marriott Hotel, Atlanta - - Wyndham Garden Hotel, Atlanta - - Holiday Inn, Brunswick - - Holiday Inn, Jekyll Island - - Mullberry Inn, Savannah - - Royal Savannah Inn, Savannah Hawaii - - Hobron in Waikiki, Honolulu Idaho - - Holiday Inn, Boise - - Red Lion Inn, Boise - - Super 8, Boise Illinois - - Ramada Inn, Bloomington - - Proposed Marriott Courtyard, Glenview - - Wyndham Garden Hotel, Naperville Indiana - - Holiday Inn, Bloomington - - Inn at the Four Winds, Bloomington - - Ramada Inn, Bloomington - - Hilton Hotel, Fort Wayne - - Airport Hilton Inn, Indianapolis - - Hilton at the Circle, Indianapolis Iowa - - Holiday Inn, Ames - - Proposed Fairfield Inn, Des Moines HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Kentucky - - Proposed Super 8, London - - Proposed Super 8, Radcliff Louisiana - - Sheraton Inn, Kenner - - Hotel Meridien, New Orleans Maine - - Proposed Hotel, Old Orchard Beach Maryland - - Brookshire Hotel, Baltimore - - Lord Baltimore Hotel, Baltimore - - Hyatt Regency, Bethesda Massachusetts - - Proposed Marriott Courtyard, Andover - - Hyatt Regency, Cambridge - - Proposed Hotel, Franklin - - Sheraton Inn, Hyannis - - Marriott Hotel, Worcester Michigan - - Bay Valley Inn, Bay City - - Hilton Airport, Detroit - - Westin Renaissance Center, Detroit - - Hotel Pontchartrain, Detroit - - Proposed Embassy Suites, Lansing - - Hilton Inn, Northfield - - Holiday Inn, Saginaw Minnesota - - Wyndham Garden Hotel, Bloomington - - Marriott Hotel, Minnetonka Missouri - - Inn at Grand Glaize, Osage Beach - - Bel Air Hilton, St. Louis - - Holiday Inn Riverfront, St. Louis Nebraska - - Holiday Inn Airport, Lincoln - - Holiday Inn Northeast, Lincoln Nebraska (continued) - - Marriott Hotel, Omaha - - Ramada Inn, Omaha - - Red Lion Inn, Omaha Nevada - - Proposed Super 8, Las Vegas New Jersey - - Ramada Inn, Edison - - Marriott Hotel, Hanover - - Headquarters Plaza, Morristown - - Hyatt Regency, New Brunswick - - Holiday Inn, North Brunswick New York - - Hilton Hotel, Albany - - Proposed Embassy Suites, Amherst - - Holiday Inn Arena, Binghamton - - Holiday Inn SUNY, Binghamton - - Proposed Hotel, Binghamton - - Proposed Hilton, Brooklyn - - Marriott Hotel, Dewitt - - Metropole Hotel, Flushing - - Midway Hotel, Flushing - - Ramada Inn, Kingston - - Royce Hotel, La Guardia - - Holiday Inn, Latham - - Proposed Crowne Plaza, Manhattan - - Proposed Prince Street Hotel, Manhattan - - Proposed Roslyn Inn, Roslyn - - Proposed Le Richmonde, Rye Brook - - Hilton Hotel, Syracuse - - Hotel Syracuse, Syracuse - - Proposed Hotel, Watertown North Carolina - - Proposed Inn, Chapel Hill - - Proposed Indep. Center Marriott Hotel, Charlotte - - Royce Hotel, Charlotte - - Howard Johnson's North, Charlotte HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) North Carolina (continued) - - Holiday Inn West, Durham - - Sheraton University Inn, Durham - - Holiday Inn, Fayetteville - - Holiday Inn Downtown, Raleigh Ohio - - Proposed Hyatt Hotel, Cleveland - - Proposed Marriott Hotel, Cleveland Oregon - - Holiday Inn Airport, Portland - - Holiday Inn South, Portland Pennsylvania - - Quality Inn, Allentown - - Holiday Inn, Bensalem - - Proposed Marriott Courtyard, Devon - - Proposed Lafayette Inn, Easton - - Ramada Inn, Erie - - Holiday Inn, Harrisburg - - Marriott Hotel, Harrisburg - - Proposed Super 8, Harrisburg - - Proposed Super 8, Lancaster - - Holiday Inn West, Monroeville - - Days Inn Philadelphia - - Franklin Plaza Hotel, Philadelphia - - Franklin Towne EconoLodge, Philadelphia - - Guest Quarters Hotel, Philadelphia - - Hilton Inn, Northeast, Philadelphia - - Marriott Airport Hotel, Philadelphia - - Holiday Inn Greentree, Pittsburgh - - Holiday Inn Parkway East, Pittsburgh - - Holiday Inn North, Pittsburgh - - Holiday Inn Parkway West, Pittsburgh - - Proposed Hotel, Pittsburgh - - Royce Hotel, Pittsburgh - - Westin William Penn Hotel, Pittsburgh - - Hilton Hotel, Scranton - - Proposed Marriott Courtyard, Valley Forge - - Holiday Inn Meadowlands, Washington - - Ramada Inn, York - - Proposed Super 8, York Rhode Island - - Proposed Hotel, Providence - - Omni Biltmore Hotel, Providence South Carolina - - Proposed Charleston Center Hotel, Charleston - - Proposed Cooper River Inn, Charleston - - Howard Johnson's, Spartanburg - - Proposed Middleton Inn and Conference Center, Charleston - - Best Western, North Charleston - - Proposed Marriott Courtyard, Columbia - - Fairfield Inn, Florence - - Holiday Inn, Florence - - Fairfield Inn, Greenville - - Proposed Marriott Courtyard, Greenville - - Fairfield Inn, Hilton Head - - Holiday Inn, Hilton Head Tennessee - - Hampton Inn, Brentwood - - Proposed Marriott Courtyard, Brentwood - - Howard Johnson's, Chattanooga - - Sheraton Hotel, Chattanooga - - Howard Johnson's, Knoxville - - Proposed Capital Mall Convention Center Hotel, Nashville - - Clarion Maxwell House, Nashville - - Holiday Inn Briley Parkway, Nashville - - Proposed Marriott Courtyard, Nashville - - Sheraton Music City, Nashville - - Stouffer's Nashville Hotel, Nashville - - Proposed Super 8, Nashville - - Union Station Hotel, Nashville - - Wyndham Garden Hotel, Nashville - - Proposed Super 8, Union City HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Texas - - Proposed Marriott Courtyard, Addison - - Proposed Marriott Courtyard, Arlington - - La Mansion, Austin - - Proposed Marriott Courtyard, Bedford - - Airport Hilton, El Paso - - Hotel Meridien, Houston - - Sheraton Hotel, Houston - - Proposed Marriott Courtyard, Las Colinas - - Proposed Marriott Courtyard, North Dallas - - La Mansion Del Norte, San Antonio - - La Mansion Del Rio, San Antonio - - Proposed Marriott Courtyard, San Antonio - - Proposed Marriott Courtyard - Medical Center, San Antonio Utah - - Deer Valley Resort, Park City - - Hilton Inn, Salt Lake City - - Holiday Inn, Salt Lake City - - Sheraton Hotel, Salt Lake City Virginia - - Mountain Lake Hotel, Blacksburg - - Howard Johnson's, Bristol - - Boars Head Inn, Charlottesville - - Proposed Fairfield Inn, Hampton - - Proposed Embassy Suites, Herndon - - Ramada Renaissance, Herndon - - Proposed Marriott Courtyard, Manassas - - Omni Hotel, Norfolk Virginia (continued) - - Proposed Marriott, Norfolk - - Howard Johnson's, Richmond - - Howard Johnson's, Roanoke - - Howard Johnson's, Roanoke Rapids - - Wyndham Hotel, Williamsburg Washington - - Wyndham Garden Hotel, Bothell - - Redmond Hotel, Redmond - - Wyndham Garden Hotel, SeaTac West Virginia Proposed Budget Motel, Princeton Wisconsin - - Proposed Granada Royale, Green Bay - - Holiday Inn-Downtown, Green Bay Canada - - Inn on the Park, Toronto Puerto Rico - - Carib Inn, San Juan Virgin Islands - - Virgin Grand Beach Hotel, St. Thomas Jamaica - - Holiday Inn, Montego Bay HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Stephen Rushmore, CRE, MAI, CHA Employment 1980 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1977 - 1980 1971 - 1974 HELMSLEY-SPEAR HOSPITALITY SERVICES, INC. New York, New York (Real Estate) 1974 - 1977 JAMES E. GIBBONS ASSOCIATES Garden City, New York (Mortgage Banking, Appraisals, Hotel Operations) Affiliated Ownership Interests HVS INTERNATIONAL (SAN FRANCISCO, CALIFORNIA) West coast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (MIAMI, FLORIDA) Southeast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (BOULDER, COLORADO) Midwest office for hotel/motel appraisals and counseling HVS INTERNATIONAL (VANCOUVER, CANADA) Canadian office for hotel/motel appraisals and counseling HVS INTERNATIONAL (LONDON, ENGLAND) European office for hotel/motel appraisals and counseling HVS - EXECUTIVE SEARCH Hotel/motel executive search and human resource consulting HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) HVS - ECO SERVICES Environmental consulting for hotels and motels; administrator of the ECOTEL designation HOSPITALITY EQUITY INVESTORS, INC. Hotel and motel investment and management company TRUMBULL MARRIOTT HOTEL General partner of a 324-room hotel and conference center PRINCETON HOTEL ASSOCIATES General partner of a 128-unit Residence Inn in Princeton, New Jersey SEAVIEW GOLF RESORT ASSOCIATES General partner of a 298-unit, 424-acre Marriott resort in Absecon, New Jersey SHELTON HOTEL ASSOCIATES General partner of a 96-unit Residence Inn in Shelton, Connecticut DANBURY HOTEL ASSOCIATES General partner of a 243-unit Hilton Hotel in Danbury, Connecticut PRUDENTIAL - HEI JOINT VENTURE Joint venture partner with Prudential Insurance Company of America on a 234-unit Embassy Suites in Atlanta, Georgia WESTPORT NORFOLK ASSOCIATES General partner of a 425-unit Omni Hotel in Norfolk, Virginia WESTPORT BWI, LLC General partner of a 310-unit Marriott Hotel in Baltimore, Maryland HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) WESTPORT RARITAN, LLC General partner of a 274-unit Crowne Plaza Hotel in Raritan, New Jersey WESTPORT NOVI, LLC General partner of a 193-unit Hilton Hotel in Novi, Michigan WESTPORT LONG BEACH, LLC General Partner of a 460-unit Sheraton Hotel in Long Beach, California WESTPORT PARK RIDGE, LLC General Partner of a 265-unit hotel and conference center in Valley Forge, Pennsylvania WESTPORT CHARLESTON, LLC General Partner of a 295-unit Hilton Hotel in Charleston, South Carolina HOSPITALITY VALUATION SOFTWARE, INC. Founder of software company that develops and distributes hotel financial analysis software Hotels Managed Sheraton Hotel, Smithtown, New York Marriott Hotel, Baltimore Airport, Maryland Hilton Hotel, Danbury, Connecticut Residence Inn, Princeton, New Jersey Embassy Suites, Atlanta Airport, Georgia Omni Hotel, Norfolk, Virginia Crowne Plaza, Raritan, New Jersey Hilton Hotel, Novi, Michigan Sheraton Hotel, Long Beach, California Hilton Hotel, Charleston, South Carolina Park Ridge Hotel and Conference Center, Valley Forge, Pennsylvania Hilton Hotel, Wilmington, Delaware HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Professional Affiliations American Society of Real Estate Counselors - Member (CRE) - Board of Governors Appraisal Institute - Member (MAI) (SREA) - Developer and Instructor, Hotel Investment and Valuation Seminar - Developer and Instructor, Hotel Computer Valuation Seminar American Hotel and Motel Association - Certified Hotel Administrator (CHA) - Industry Real Estate Financing Advisory Council (IREFAC) International Society of Hospitality Consultants - Member (ISHC) New York University - Adjunct Assistant Professor of Nutrition, Food and Hotel Management Michigan State University - Honorary Faculty, Honorary Alumnus Certified General Appraiser - Arizona, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Illinois, Massachusetts, Michigan, Minnesota, Nebraska, New Jersey, New York, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Virginia Licensed Real Estate Broker - New York, Pennsylvania Board of Advisers - Real Estate Finance Journal - Real Estate Workouts & Asset Management American Arbitration Association - National Real Estate Valuation Council Cornell Society of Hotelmen New York University Masters in Hospitality Management - Advisory Board New York University Hospitality Investment Conference - Board of Advisors Beta Gamma Sigma - National Honor Society in Business and Management HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Endowment Hospitality Valuation Services Professor of Hotel Finance and Real Estate - School of Hotel Administration, Cornell University (currently held by Professor James J. Eyster) Education BS - School of Hotel Administration, Cornell University MBA - Graduate School of Business Administration (Finance), University of Buffalo Candidate for PhD - School of Education, Department of Food Service Management, New York University Partial List of Teaching and Lecture Assignments Cornell University - Computer Valuation Techniques Michigan State University - Hotel Management Contracts University of North Carolina - Hotel Market Studies University of Virginia - Assessing Hotels American Arbitration Association - Real Estate Arbitration American Hotel and Motel Association - Hotel Obsolescence Appraisal Institute - Hotel Valuation (over 50 seminars) International Association of Assessing Officers - Hotel Valuation Montreal Appraisal Society - Total Project Analysis Society of Real Estate Appraisers - Lease Seminar Lodging Hospitality - Lodging Summit Published Books and Seminars Textbooks The Valuation of Hotels and Motels, Appraisal Institute, Chicago, Illinois, 1978 Hotels, Motels and Restaurants: Valuations and Market Studies, Appraisal Institute, Chicago, Illinois, 1983 How to Perform an Economic Feasibility Study of a Proposed Hotel/Motel, American Society of Real Estate Counselors, Chicago, Illinois, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Books and Seminars (continued) Textbooks (continued) Hotel Investments: A Guide for Owners and Lenders, Warren, Gorham and Lamont, Inc., New York, New York, 1990 The Computerized Income Approach to Hotel Market Studies and Valuations, Appraisal Institute, Chicago, Illinois, 1990 Hotel Investments: A Guide for Owners and Lenders, 1992 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotel Investments: A Guide for Owners and Lenders, 1993 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Appraisal Institute, Chicago, Illinois, 1992 Student Manuals The Valuation of Lease Interests, Society of Real Estate Appraisers, Chicago, Illinois, 1976 Hotel-Motel Valuation Seminar, Appraisal Institute, Chicago, Illinois, 1981, 1988, 1990 The Computerized Approach to Hotel Market Studies and Valuations Seminar, Appraisal Institute, Chicago, Illinois, 1991 Demonstration Appraisal Demonstration Appraisal of a Proposed Hotel, Spring Valley, New York, Hospitality Valuation Services, Mineola, New York, 1983, 1990 Chapters The Real Estate Handbook-Second Edition, Dow Jones-Irwin, 1989, "Hotels and Motels" Arbitration of Real Estate Valuation Principles, American Arbitration Association, 1987, "Arbitration in the Hospitality Industry" Ethics in Hospitality Management: A Book of Readings, Educational Institute of the American Hotel and Motel Association, 1992, "Ethics in Hotel Appraising" The Lodging and Food Service Industry, Educational Institute of the American Hotel and Motel Association, 1993, "Insider's Insights" HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles The Appraisal Journal "Using Total Project Analysis to Compete for Investment Capital," October, 1975 "The Appraisal of Food Service Facilities," July, 1980 "Publish and Prosper," October, 1980 "Valuation of Hotels and Motels for Assessment Purposes," April, 1984 "Adjusting Comparable Sales for Hotel Assessment Appeals," July, 1986 "Hotel Business Value and Working Capital: A Clarification," January, 1987 "Ethics in Hotel Appraising," July, 1993 The Appraiser "Hotel-Motel Appraisal Misconceptions Set Straight," January, 1979 "No Conventional Financing Available for Hotels: Rushmore," December, 1979 "Estimating Hotel Land Values Using Comparable Ground Leases," April, 1980 Bulletin of the Cornell Society of Hotelmen "Employment Philosophy for a Consulting Practice," July, 1984 Business Travel News "A Snapshot of a Classic Recovery," July, 1995 The Canadian Appraiser "Hotel/Motel Market Sales Update," Summer, 1987 Capital Sources for Real Estate "Stephen Rushmore Discusses the Future of the Lodging Industry," December, 1994 Cayuga Advisor "Secrets to Success in Consulting," October, 1992 Chapter News and Notes "Quantifying a Hotel's Business Value," November, 1979 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Cornell Hotel & Restaurant Administration Quarterly "A Preliminary Market Study," November, 1974 "How Much is Your Place Worth Today? A Case Study in Hotel - Motel Valuation," May, 1975 "What Can Be Done About Your Hotel's Real Estate Taxes?" May, 1977 "The Appraisal of Lodging Facilities," August, 1978 "The Appraisal of Food Service Facilities," February, 1979 "The Appraisal of Lodging Facilities - Update," November, 1984 "Hotel Sales Prices Down More Than 12%," May, 1991 "Seven Current Hotel Valuation Techniques," August, 1992 "The Valuation of Distressed Hotels," October, 1992 "Hotel Lending in the 1990's: Amateurs Beware," December, 1994 "Investment Values of Lodging Property: Modeling the Effects of Income Taxes and Alternative Lender Criteria," December, 1995 FCI Spec Sheet "Employment Philosophy for a Consulting Practice," September, 1984 Florida Hotel & Motel Journal "Rushmore Reports Rising Hotel Prices," February, 1995 Hotel and Motel Management "Average Rate vs. Project Cost," May 1, 1974 "How to Increase the Marketability of Your Motel," April, 1981 "Tougher Lending, Lower Room Rate Hikes On Way?" June, 1981 "What is That Mortgage Loan Going to Cost You?" August, 1981 "How to Perform a Study of Your Property's Market," October, 1981 "How do High Interest Rates Affect Your Motel's Value?" December, 1981 "How to Buy a Feasibility Study That Works for You," February, 1982 "Settling Lease Conflicts Quickly Through Arbitration," April, 1982 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Hotel and Motel Management (continued) "Are Casino Hotels Really Worth $500,000 Per Room?" June, 1982 "Discount Rates and Internal Rate of Return," August, 1982 "Determining a Property's Extended Life Cycle," November, 1982 "Using Microcomputers for Forecasting," December, 1982 "Update on Hotel Development Costs," January, 1983 "Estimating a Site's Worth by Finding Its Profit Value," June, 1983 "Hotel Construction May Be Slowing Down a Little Bit," April, 1983 "The Investor's Risk Sways to Prevailing Economic Winds," August, 1983 "Is Your Property Tax at as Low a Level as it Should Be?" October, 1983 "The Ultimate Guest Room: Could it Ever Exist Anywhere?" December, 1983 Hotel-Motor Inn Journal A Preventive Maintenance System for Motels," March, 1975 Hotel Valuation Journal "Hotel Valuation Index Peaks During 1989," Fall, 1990 "Hotel Development Costs," Winter, 1991 "Hotel Valuation Index for 1990," Spring, 1991 "Bad Year for Hotel Sales Prices Confirmed," Spring, 1992 "Hotel Sales Prices on the Rise," Fall, 1994 "United States Hotel Values Climb," Spring/Summer, 1995 "It's Time for Franchise Reform," Fall, 1995 Institutions/ Volume Feeding "Greater Risk/Greater Profit Potential: Hotel Management Contract," May, 1973 Lodging Hospitality "How to Finance Renovation Projects," January, 1974 "Controlling Your Real Estate Taxes," July, 1978 "Putting Together a Sound Financial Package," December, 1978 "Favorable Outlook for Lodging Values," December, 1983 "Are Your Property Taxes Too High? (Part I and II)," May and June, 1984 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Development Costs," July, 1984 "The Right Management Contract for You," September, 1984 "Selecting the Firm to Prepare Your Feasibility Study," October, 1984 "A Quick How-To In Hotel Valuation," November, 1984 "Updating Lodging Interest Rates," December, 1984 "Is Your Guest Experience Up to Par?" January, 1985 "How to Perform a Breakeven Analysis," May, 1985 "Evaluating Operating Performance," June, 1985 "Hotel Lenders Toughen Underwriting Requirements," July, 1985 "Don't Forget the Pre-Opening Agreement," August, 1985 "Management Companies Should Participate in Financing," October, 1985 "Current Techniques for Valuing Hotel Land," November, 1985 "Hotel Development Costs," December, 1985 "Sourcing Debt Into the 1990's," January, 1986 "Hotel Valuation Thumb Rule," February, 1986 "Value in Use Versus Value in Exchange," March, 1986 "Stretching Feasibility," April, 1986 "The Management Question," May, 1986 "How to Commission a Feasibility Study," June, 1986 "Macro Trends Affecting Property Values," July, 1986 "Hotel-Motel Market Sales Update," August, 1986 "Financing Alternatives: Zero Coupon Mortgages," September, 1986 "Forecasting Lodging Energy Costs," October, 1986 "Portfolio Financing a Better Way," November, 1986 "Profit by Looking at History," December, 1986 "Why New York Isn't Overbuilt," February, 1987 "How to Discourage Hotel Overbuilding: A Case Study," April, 1987 "Structuring an Incentive Management Fee," June, 1987 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Franchising Questions and Answers," July, 1987 "Comparing Hotel Development Costs," August, 1987 "Understanding Economic Life," September, 1987 "Prices Rise for Lodging Properties," October, 1987 "Management Companies Are Key to Success," November, 1987 "Evaluating a Management Contract Fee Structure," December, 1987 "Check Profits Before Selecting Hotel Operator," January, 1988 "It's a Good Time to Review Your Taxes," February, 1988 "How to Use a Management Company Rating System," March, 1988 "Make Sure Management Contracts Contain These Terms," April, 1988 "Hotel Access and Visibility," May, 1988 "Chain Sale Strategies," July, 1988 "Evaluating a Hotel Franchise," August, 1988 "Evaluating Franchise Fees," September, 1988 "Opportunities in Economy Lodging," October, 1988 "How to Obtain a Hotel Mortgage," November, 1988 "Arbitration in the Hospitality Industry," December, 1988 "Lodging Development Cost Update," January, 1989 "Amenities as Profit Builders," February, 1989 "Hotel Values Mirror the Times," March, 1989 "Forecasting Revenue and Expenses," April, 1989 "Real Estate Jargon Made Simple," May, 1989 "Pricing a Management Contract," June, 1989 "Trends in Valuation," July, 1989 "Rescuing the Distressed Hotel," August, 1989 "Shielding Against Incompetence," September, 1989 "Hotel Valuation Revisited," October, 1989 "New Breed of Hard Budgets," November, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Figuring Cap Rates," December, 1989 "A Glance Backward," January, 1990 "Costs Creeping Up," February, 1990 "Valuing Distressed Properties," March, 1990 "Cap and Discount Rates," April, 1990 "An Open Letter," May, 1990 "Misconceptions About Appraisals," June, 1990 "Hotel Values Still Growing," July, 1990 "Hotel Renovation is Key to `90s," August, 1990 "Time Right for Hotel Leases," September, 1990 "Getting a Fix on Rates," October, 1990 "The Wrinkles of Class," November, 1990 "A Glance Backward," December, 1990 "The Price Dropoff," January, 1991 "The Cost Washout," February, 1991 "Survival of the Fittest," March, 1991 "Looking Out and Up," April, 1991 "The Bottom is in Sight," May, 1991 "The Pitfalls of Liquidation," June, 1991 "Extra! Extra! Hospitality News," July, 1991 "The Art of Hotel Renovation," August, 1991 "No Better Time for a Tax Review," September, 1991 "No Time for Passivity," October, 1991 "What a Franchise Really Costs," November, 1991 "In Case You Hadn't Heard," January, 1992 "Negotiation - The Name of the Game," February, 1992 "Now Could be the Time to Build," March, 1992 "The Well May Stay Dry," April, 1992 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Life Expectancy," May, 1992 "Hotel Values - What a Downer," June, 1992 "How to Make Money Now," July, 1992 "Hotel Chain Class Survey," August, 1992 "Budget Dining with Rushmore," September, 1992 "Bookings Up, Rates Will Follow," October, 1992 "Hospitality Master's Good Preparation," November, 1992 "What's New on the Job Front?" January, 1993 "Where Have All the Hotels Gone?" February, 1993 "Hotel Building Costs Continue to Fall," March, 1993 "Hotel Values Head Upward," April, 1993 "The Rise and Fall of Trophy Hotels," May, 1993 "Hotel Sales and Prices Rebound," June, 1993 "Third Parties Loosening Purse Strings," July, 1993 "Beyond Recycling: The Ecotel," August, 1993 "Time to Reduce Property Taxes," September, 1993 "Lodging: The Way I See It," October, 1993 "Choosing an Appraiser," November, 1993 "Who Needs an Asset Manager?" January, 1994 "Investing by the Numbers," February, 1994 "Fire Your Staff and Lease Them Back," March, 1994 "Published Rates Hint at Recovery," April, 1994 "Now is the Time to Start Building," May, 1994 "Hotel Values Heading Up," June, 1994 "Farewell, Friend," July, 1994 "Sales Prices Creeping Up," August, 1994 "Selecting Green Hotel Supplies," September, 1994 "Don't Write Off Full-Service Hotels," October, 1994 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Lodging REIT's Are on the Rise," November, 1994 "Going Back to the Future," January, 1995 "How much do Managers Make?" March, 1995 "Lodging Transactions Soared in '94," April, 1995 "Hotel Development Costs on the Rise," May, 1995 "Hotel Values up Significantly," June, 1995 "What a Franchise Costs over the Long Term," July, 1995 "Road Food Part II," August, 1995 "It's Time for Franchise Reform," September, 1995 "Extended Stay May Not Extend Your Profits," October, 1995 "The Year as I See It," November, 1995 "Cap Rate 101," January, 1996 Michigan Lodging "Hotel Development Costs," January, 1988 The Mortgage and Real Estate Executives Report "Atlantic City Building Game Involves High Stakes," August, 1979 "How Interest Rates Affect Real Estate Values," June, 1982 "Update on Hotel Development Costs," May 1, 1983 Motel-Hotel Insider "The $100,000 Plus Hotel Room Has Become a Reality," November 19, 1979 "Update on Hotel Development Costs," April 4, 1983 NAIFA - The Appraisal Review "Hotel Valuation Techniques," Vol. 44, 1991 Real Estate Digest "Why Should the Management Team be Important to Hotel Lenders," Fall, 1988 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Finance Journal "What is a Typical Fee for a Hotel Management Contract?" Fall, 1988 "Hotel Franchise Fees," Winter 1989 "Why the Management Team Should be Important to Hotel Lenders," Spring, 1989 "Hotel Values and Costs," Summer, 1989 "Structuring a Hotel Investment," Fall, 1989 "A Guide for Lenders Holding Distressed Hotel Loans," Winter, 1990 "Estimating Current Interest Rates for Hotel Financing," Spring, 1990 "Hotel Valuation Techniques," Summer, 1990 "Now is the Time to Review Your Hotel's Property Taxes," Fall, 1990 "Property Tax Assessments for Hotels and Motels," Winter, 1991 "Putting Together Hotel Management Agreements - Part I," Spring 1991 "Putting Together Hotel Management Agreements - Part II," Summer, 1991 "The 1980s - The Decade of Change," Fall, 1991 "An Overview of the Hotel Industry: Past, Present, and Future," Spring, 1994 Real Estate Forum "Casino Hotels Raise Valuation Questions," November, 1981 Real Estate Investment Ideas "How Fuel and Energy Shortages Should Affect Investment Decisions in the Hospitality Industry," March, 1974 "Upward Trend Continues for Sales Price of Hotel-Motel Properties," May, 1988 "High Prices Paid for Hotel-Motel Properties," February, 1990 Real Estate Issues "Employee Compensation for a Consulting Practice," Fall/Winter, 1985 "Hotel/Motel Market Sales Update," Spring/Summer, 1987 Real Estate Newsletter "Computers in Hotel Appraising," May 15, 1989 Real Estate Investment Ideas "Hotel-Sales Update," Winter, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Review "Valuing Motels and Hotel in the Current Market," Fall, 1972 "Dealing With Distressed Hostelry Loans," Fall, 1975 "The Mortgage Underwriting Consultant Comes of Age," Fall, 1977 "Real Estate Compensation," Winter, 1987 Real Estate Workouts and Asset Management "Stephen Rushmore on Directions in the Hospitality Industry," September, 1992 Real Values "Hotel Construction Cost Update," April, 1986 Restaurant and Hotel Design "How Much Should the Renovation Be?" March, 1986 "14 Notable Hotel Development Firms," December, 1987 Rushmore on Hotel Valuation "Mortgage - Equity," Winter, 1979 "Atlantic City - From Bust to Boom," Winter, 1979 "Mortgage - Equity," Spring, 1979 "Developing Mortgage Data," Spring 1979 "Gasoline and Market Values, " Spring, 1979 "Mortgage - Equity," Fall, 1979 "Quantifying a Hotel's Business Value," Fall, 1979 "What Has Happened to Typical Hotel-Motel Development Costs?," Fall, 1979 "Mortgage-Equity," Winter, 1980 "Extending Hotel Economic Life Through Renovation," Winter, 1980 "Estimating Hotel Land Values Using Comparable Ground Leases," Winter, 1980 "Quantifying the Value of Personal Property to a Going Hotel," Spring, 1980 "Recent Changes in New York City's Hotel Market," Spring, 1980 "Hotel-Motel Economic Lives," Fall, 1980 "Mortgage - Equity," Fall, 1980 "Mortgage - Equity," Winter, 1981 "Developing Mortgage Data," Winter, 1981 "Statistical Support for Food and Beverage Projections," Winter, 1981 "Mortgage - Equity," Spring/Summer, 1981 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Rushmore on Hotel Valuation (continued) "Quantifying a Hotel's Demand," Spring/Summer, 1981 "A Five-Year Overview of Typical Hotel-Motel Development Costs," Spring/Summer, 1981 "Mortgage - Equity," Winter/Spring, 1982 "Update on Hotel Capitalization Rates," Winter/Spring, 1982 "Mortgage - Equity," Summer/Fall, 1982 "Are Casino Hotels Really Worth $500,000 Per Room?" Summer/Fall, 1982 "The Hotel-Motel Life Cycle, Summer/Fall, 1982 "Mortgage - Equity," Winter/Spring, 1983 "Update on Hotel Development Costs," Winter/Spring, 1983 "The Valuation of Hotels and Motels for Assessment Purposes," Winter, 1984 "Hotel Capitalization Rates," Summer, 1984 "Hotel Development Cost Survey," Summer, 1984 "Selecting a Hotel Management Company," Fall, 1984 "Hotel Capitalization Rates," Spring, 1985 "How to Perform a Breakeven Analysis," Spring, 1985 "Hotel Capitalization Rates," Winter, 1986 "Hotel Development Costs," Winter, 1986 "Hotel Valuation Survey," Winter, 1987 "Impact of New Tax Laws on Hotel Values," Winter, 1987 "Hotel-Motel Market Sales Update," Winter, 1987 "Structuring an Incentive Management Fee," Fall, 1987 "Understanding Your Hotel's Economic Life," Fall, 1987 "Hotel Development Costs," Fall, 1987 "Hotel, Motel Market Sales Update," Winter, 1988 "Amenity Creep," Winter, 1989 "Hotel Franchise Fees," Winter, 1989 "Hotel Valuation Index," Fall, 1989 "Latest Trends in Hotel Values," Fall, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Tri-State Real Estate Journal "Across the Nation: Hotel Sale Prices Escalate on Average," December 23, 1994 U.S. Real Estate Week "All-Suites Market Entering Second Phase," May 4, 1987 Valuation "Hotel-Motel Market Sales Update," February, 1987 Quarterly Newsletter Hotel Valuation Journal Professional newsletter with a circulation of 10,000 Real Estate Column Lodging Hospitality Real estate editor for a major monthly hospitality periodical Hospitality Column Real Estate Finance Journal Contributing hospitality editor Computer Software Hospitality Valuation Software Hotel financial software for room night analyses, income and expense forecasts, and valuation calculations - developed and distributed for the Appraisal Institute Hotel-Motel Data Hospitality Market Data Exchange National clearinghouse for information pertaining to hotel and motel transactions Hotel Valuation Index National index of hotel value trends for 24 individual market areas Hospitality Seminar Series Intensive short courses for hotel and restaurant professionals Hotel Franchise Fees Analysis Guide Analysis of hotel franchise fees and costs Hospitality Bibliography Comprehensive literature index of hotel and restaurant books and articles HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Awards Robert H. Armstrong Award For the most significant contribution to The Appraisal Journal in 1975 Activities Commercial pilot, instrument, multi-engine; sailing; skiing Corporate and Institutional Clients Served Aetna Life Insurance AIG Real Estate Investment Aldrich Eastman and Waltch Allstate American Airlines America's Best Inns Arthur Anderson & Company Bankers Trust Company Bank of America Bank of Boston Bank of Montreal Bank of New York Bank of Nova Scotia Bank of Tokyo Bank One-Columbus Banque Indosuez Barclay's Bank Baybank Boston The Beacon Companies Bear, Stearns & Company, Inc. Best Inns Best Western International Boykin Management Co. Bradbury Suites C. Itoh Caesar's World California Dept. of Transportation Chase Lincoln First Bank, N.A. Chase Manhattan Bank Chemical Bank Chrysler Capital Corporation CIGNA Citibank Citicorp Real Estate City of Boston City of Detroit City of Grand Rapids City of Kalamazoo City of Orlando City of Philadelphia City of Santa Monica City of Toronto Columbia Sussex Corporation Continental Illinois National Bank Copley Real Estate Advisors Corporex Development CRI, Inc. Cushman and Wakefield Days Inns Edward J. DeBartolo Corp. HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Deer Valley Ski Corporation Doubletree Hotels Drury Inns Econo Lodge Economic Development Admin. EIE Regent International Embassy Suites Equitable Life Assurance Equitable Real Estate Investment European American Bank Fairmont Hotels Federal Deposit Insurance Corp. First Boston First California Savings First Interstate Bank First National Bank of Chicago Four Seasons Hotels Goldman, Sachs Greater Orlando Aviation Authority Great Western Bank Great Western Savings Guest Quarters Hampton Inns Hilton Hotels, Corp. Hilton International Holiday Corporation Holiday Inns Home Savings of America Howard Johnson's Hudson Hotels Corporation Hyatt Hotels Industrial Bank of Japan Interstate Hotels The Irvine Company ITT Commercial Finance Corp. Japan Airlines JDC (America) Corporation John Q. Hammons John Hancock Life Insurance Johnson & Wales College Kenneth Leventhal & Assoc. Kidder Peabody & Company, Inc. La Quinta Larken, Inc. Lexington Companies Loews Hotels Harry Macklowe Real Estate Marine Midland Bank, N.A. Marriott Corporation MA Bay Transit Authority Massachusetts Mutual Life Mellon Bank Meridien Hotels Merrill Lynch Merrill Lynch Capital Markets Metropolitan Life Insurance Microtel Midlantic Bank HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Mitsubishi Morgan Guaranty Bank & Trust Co. J.P. Morgan Investment Management Morgan Stanley Motel 6, Inc. Mutual Benefit Co. National Westminster Bank New York Life Insurance Nippon Credit Bank Nomura Securities Int'l North American Taisei Corporation Northwestern Mutual Life Omni Hotels Parabas Bank Prime Motor Inns Property Capital Trust Prudential Life Insurance Radisson Hotels Ramada Inns Red Lion Inns Regent International Registry Hotels Residence Inns Resolution Trust Corporation Rhode Island Hospital Trust Ritz-Carlton Hotels Rodeway Inns Rose Associates Salomon Brothers San Antonio Hotel/Motel Assoc. Sanwa Bank Security Pacific Bank Servico Management Corp. Sheraton Hotels Sonesta Hotels Sonnenblick-Goldman Steamboat Ski Corporation Stouffer Hotels Stratton Corporation Sumitomo Bank Summerfield Hotel Corporation Super 8 Hotels Swiss Bank Corporation Taisei Texas Commerce Bancshares, Inc. Tishman Realty Corporation Trans World Airlines Travelers Insurance TraveLodge Trusthouse Forte UBS Securities Union Labor Life United Bank of Switzerland United Inns, Inc. United States Steel Universal Hotels U.S. Air Force U.S. Department of Justice HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) U.S. Department of the Army U.S. Department of the Interior U.S. Economic Development Authority U.S. Trust Company Walt Disney Productions Westin Hotels Williams Hospitality Corporation Winegardner & Hammons Winthrop Financial Associates Wyndham Hotels Zeckendorf Company Appearance as an Expert Witness Administrative Law Court - SEC, Washington, DC Appellate Tax Board, Boston, Massachusetts Arbitration, Wayne, New Jersey Assessment Appeals Board, Los Angeles County, Los Angeles, California Board of Equalization and Review, Washington, District of Columbia (2) Board of Taxation, Atlantic City, New Jersey Bureau de Revision Evaluation Fonciere du Quebec, Montreal, Canada Circuit Court, Orange County, Orlando, Florida Condemnation Review Board, Minneapolis, Minnesota Corporation Committee, Rhode Island State Senate Court of Common Pleas, Allegheny County, Pennsylvania Court of Common Pleas, Franklin County, Ohio Court of Common Pleas, Montgomery, Pennsylvania Court of Common Pleas, Pittsburgh, Pennsylvania Court of Common Pleas, Philadelphia, Pennsylvania Court of Queen's Bench of Alberta, Canada District Court, Arapahoe County, Colorado District Court, Dallas County, Texas District Court, Harris County, Texas District Court, Tarrant County, Texas District Court, Hennepin County, Minneapolis, Minnesota District Court, Knoxville, Tennessee Federal Bankruptcy Court, Oakland, California Federal Bankruptcy Court, Los Angeles, California HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Denver, Colorado Federal Bankruptcy Court, District of Columbia Federal Bankruptcy Court, Miami, Florida (2) Federal Bankruptcy Court, Chicago, Illinois Federal Bankruptcy Court, New Orleans, Louisiana Federal Bankruptcy Court, Greenbelt, Maryland Federal Bankruptcy Court, Baltimore, Maryland Federal Bankruptcy Court, Rockville, Maryland Federal Bankruptcy Court, Boston, Massachusetts Federal Bankruptcy Court, Grand Rapids, Michigan Federal Bankruptcy Court, Las Vegas, Nevada Federal Bankruptcy Court, Newark, New Jersey (2) Federal Bankruptcy Court, Manhattan, New York (2) Federal Bankruptcy Court, Westbury, New York Federal Bankruptcy Court, Philadelphia, Pennsylvania Federal Bankruptcy Court, Reading, Pennsylvania Federal Bankruptcy Court, Salt Lake City, Utah Federal Bankruptcy Court, Madison, Wisconsin (2) Federal District Court, Rochester, New York Federal District Court, Philadelphia, Pennsylvania (2) Judicial Arbitration and Mediation Services, Dallas, Texas Michigan Tax Tribunal, Detroit, Michigan New Jersey Tax Court, Newark, New Jersey (2) Superior Court, District of Columbia Superior Court, Clayton County, Georgia (2) Superior Court of North Carolina Superior Court, Nashua, New Hampshire Supreme Court, New York State, Buffalo, New York Supreme Court, New York State, Manhattan, New York Supreme Court, New York State, Riverhead, New York HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Tax Review Board, San Joaquin County, Stockton, California Tax Review Board, Bangor, Maine Tax Review Board, Schenectady, New York Tax Review Board, Yorktown, New York Tax Review Board, North Carolina Tax Review Board, Philadelphia, Pennsylvania (2) U.S. District Court, Wilmington, Delaware U.S. District Court, Madison, Wisconsin ============================================================================== Partial List of Hotels/Motels, Appraised or Reviewed Internationally North America Canada - Delta Hotel, Calgary - Econo Lodge, Hull - Hotel Lord Berri, Montreal - Hotel Vogue, Montreal - Hyatt Regency, Montreal - Le Ragence Hyatt, Montreal - Holiday Inn, Oshawa, Ontario - Hotel Le Chantecler, Quebec - Bond Place Hotel, Toronto - Carlton Hotel, Toronto - Chelsea Hotel, Toronto - Delta Chelsea Hotel, Toronto - Four Seasons on the Park, Toronto - Inn on the Park, Toronto - Novotel Missisauga, Toronto - Ramada Inn, Toronto - Sutton Hotel, Toronto - Toronto Marriott East, Toronto - Westbury Hotel, Toronto - Burnaby Villa Inn, Vancouver - Four Seasons Hotel, Vancouver - Sheraton Land Mark, Vancouver - Sheraton Plaza 500, Vancouver - Four Seasons Yorkville Hotel, Yorkville United States Alabama - MEI - Birmingham West, Bessemer - Comfort Inn, Birmingham - Courtyard by Marriott, Birmingham - Courtyard by Marriott-Hoover, Birmingham - Courtyard By Marriott/Homewood, Birmingham - Crown Sterling Suites, Birmingham - Fairfield Inn, Birmingham - Holiday Inn, Birmingham - Howard Johnson, Birmingham - Knights Inn, Birmingham - Ramada Inn, Birmingham - Residence Inn by Marriott, Birmingham - Still Waters Resort, Dadeville - Ramada Inn, Gadsden - Sheraton Hotel, Gulf Shores - Courtyard by Marriott, Huntsville - Knights Inn, Huntsville - Marriott Hotel-Proposed, Huntsville - La Quinta Inn, Huntsville University - Days Inn, Mobile - Hotel - Proposed, Mobile - Inn-Proposed, Mobile - Stouffer Riverview, Mobile - Courtyard by Marriott, Montgomery - Fairfield Inn, Montgomery - Holiday Inn-Downtown, Montgomery - Holiday Inn-East, Montgomery - Howard Johnson, Montgomery - La Quinta Inn, Montgomery - Residence Inn, Montgomery - Marriott's Grand Hotel, Point Clear - Holiday Inn, Sheffield - La Quinta, Tuscaloosa - Masters Economy Inn, Tuscaloosa - Proposed Extended Stay, West Mobile Alaska - Barratt Inn, Anchorage - Clarion Hotel, Anchorage - Holiday Inn, Anchorage - Hotel Captain Hook, Anchorage - International Airport Inn, Anchorage - Sheraton Anchorage Hotel, Anchorage Arizona - Holiday Inn, Bullhead City - Embassy Suites, Camelback - Compri Hotel-Proposed, Chandler - Quality Inn, Chandler - Ramada Inn, Chandler - AmeriSuite Hotel-Proposed, Flagstaff - Holiday Inn, Flagstaff - Motel 6, Flagstaff - Rodeway Inn, Flagstaff - Bright Angel Lodge, Grand Canyon - El Tovar Hotel, Grand Canyon - Grand Canyon National Park, Grand Canyon - Kachina Lodge, Grand Canyon - Maswik Lodge, Grand Canyon - Moqui Lodge, Grand Canyon - Phantom Ranch, Grand Canyon - Thunderbird Lodge, Grand Canyon - Yavapai Lodge, Grand Canyon - Hampton Inn-Proposed, Holbrook - Moqui Lodge, Kaibab National Forest - Rodeway Inn, Kingman - Nautical Inn Resort, Lake Havasu City - Lexington Hotel Suites, Mesa - Biosphere II Conference Center, Oracle - Best Western-Per Diem, Phoenix - Bobby McGee's, Phoenix - Caravan Inn, Phoenix - Compri Hotel-Proposed, Phoenix - Courtyard by Marriott-Black Canyon, Phoenix - Courtyard by Marriott-Mesa, Phoenix - Crescent Phoenix Hotel, Phoenix - Crown Sterling Suites, Phoenix - Days Inn, Phoenix - Doubletree Inn at Park Central, Phoenix - Embassy Suites, Phoenix - Embassy Suites-Biltmore, Phoenix - Executive Park Hotel, Phoenix - Fountain Suites Hotel, Phoenix - Granada Royale-Camelhead, Phoenix - Hilton Hotel, Phoenix - Holiday Inn, Phoenix - Hyatt Regency, Phoenix - La Quinta Hotel, Phoenix - Lexington Hotel Suites, Phoenix - Newton's Sands, Phoenix - Phoenician Golf & Tennis Resort, Phoenix - Pointe Hilton at Tapatio Cliffs, Phoenix - Quality Inn, Phoenix - Ramada Inn-Airport, Phoenix - Ramada Inn-East, Phoenix - Ritz Carlton, Phoenix - Sunburst Resort Hotel, Phoenix - Hassayampa Inn, Prescott - Clarion Inn at McCormick Ranch, Scottsdale - Conference Center, Scottsdale - Courtyard by Marriott-Mayo, Scottsdale - Doubletree Inn at Scottsdale Mall, Scottsdale - Fairfield Inn, Scottsdale - Fashion Square Hotel, Scottsdale - Loews Paradise Resort, Scottsdale - Marriott Camelback Inn, Scottsdale - Marriott Mountain Shadows, Scottsdale - Mountain Shadows Resort, Scottsdale - Orange Tree Resort, Scottsdale - Ramada-Valley Ho, Scottsdale - Red Lion's La Posada Resort, Scottsdale - Registry Resort, Scottsdale - Rodeway Inn, Scottsdale - Scottsdale Princess, Scottsdale - Sheraton Scottsdale Resort, Scottsdale - The Phoenician, Scottsdale - Valley Ho, Scottsdale - John Gardiner's Enchantment, Sedona - L'Auberege de Sedona, Sedona - Los Abrigados, Sedona - Orchards Inn, Sedona - Hotel-Proposed, Sierra Vista - Motel 6, Sierra Vista - Temple Bar Resort, Temple Bar - Coachman Inn - Proposed, Tolleson/Phoenix - Tubac Resort, Tubac - Canyon Ranch, Tucson - Coachman Inn-Proposed, Tucson - Courtyard by Marriott, Tucson - Doubletree Inn, Tucson - Embassy Suites, Tucson - Granada Royale Hometel-E. Broadway, Tucson - Hotel Park Tucson-Proposed, Tucson - Lexington Suites Hotel, Tucson - Loews Hotel, Tucson - Resort Hotel-Proposed, Tucson - Rodeway Inn, Tucson - Sunbelt Commerce Center Hotel, Tucson - La Quinta Inn, Tucson East - Bobby McGee's, Tuscon - Radisson Suite Hotel, Tuscon - Ventana Canyon Golf and Racquet, Tuscon - Ramada Inn, Union Hill Arkansas - Sheraton Inn, Fort Smith - Hilton, Hot Springs - Holiday Inn-Lake Hamilton, Hot Springs - Courtyard by Marriott, Little Rock - Holiday Inn, Little Rock - Legacy Hotel, Little Rock - Little Rock Hilton, Little Rock - Masters Economy Inn, Little Rock - Red Carpet Inn, Little Rock - Super 8, Little Rock - Masters Economy Inn, North Little Rock - Masters Economy Inn, Protho-Junction - Holiday Inn, Texarkana California - Hampton Inn, Agoura Hills - Ramada Inn, Agoura Hills - Residence Inn-Proposed, Agoura Hills - Island Motel, Almeda - Anaheim Hilton & Towers, Anaheim - Anaheim Park Motor Inn, Anaheim - Anaheim Plaza Hotel, Anaheim - Best Western Pavillions, Anaheim - Carousel Inn, Anaheim - Conestoga Hotel, Anaheim - Courtyard by Marriott, Anaheim - Crown Sterling Suites, Anaheim - Disneyland Hotel, Anaheim - Golden Forest Motel, Anaheim - Hampton Inn, Anaheim - Hilton, Anaheim - Holiday Inn Anaheim Center, Anaheim - Hotel-Proposed, Anaheim - Marriott Hotel, Anaheim - Pan Pacific Hotel, Anaheim - Pitcairn Motel, Anaheim - Raffles Inn, Anaheim - Ramada Maingate/Disneyland Hotel, Anaheim - Roger Morris Inn, Anaheim - Stovall's Inn, Anaheim - The Station Inn, Anaheim - Travelodge Inn at the Park, Anaheim - AmeriSuite, Anaheim Hills - Comfort Inn, Anahiem - Mansouri Hotel, Antioch - Red Lion, Apple Valley - Hampton Inn, Arcadia - Residence Inn, Arcadia - Hilton Lodge, Arrowhead Lake - Auburn Inn, Auburn - Sleep Inn, Auburn - Allstar Inn, Bakersfield - Clarion Hotel, Bakersfield - Courtyard by Marriott, Bakersfield - Economy Inn, Bakersfield - Ramada Inn, Bakersfield - Red Lion Hotel, Bakersfield - Residence Inn, Bakersfield - Rodeway Inn, Bakersfield - Hilton Hotel, Baldwin Park - San Gabriel Valley Hotel, Baldwin Park - The Hilton Hotel, Baldwin Park - Allstar Inn, Barstow - Economy Inn, Barstow - Marriott Berkeley Marina, Berkeley - Shattuck Hotel, Berkeley - Beverly Hills Hotel, Beverly Hills - Beverly Rodeo Hotel, Beverly Hills - Beverly Wilshire Hotel, Beverly Hills - Hilton Hotel-Cresthil, Beverly Hills - L'Ermitage, Beverly Hills - Peninsula Hotel, Beverly Hills - Best Western, Big Bear Lake - Big Bear Hotel, Big Bear Lake - Big Bear Lake Resort, Big Bear Lake - Big Bear Towering Pines, Big Bear Lake - Motel 6, Big Bear Lake - Post Ranch, Big Sur - Ventana Inn, Big Sur - Rodeway Inn, Blythe - Courtyard by Marriott, Brea - Holiday Inn, Brentwood - Courtyard by Marriott, Buena Park - Fairfield Inn, Buena Park - Hampton Inn, Buena Park - Holiday Inn, Buena Park - Crowne Sterling Suites, Burlingame - Hyatt Regency, Burlingame - Mariott Hotel - SFO, Burlingame - Marriott, Burlingame - Marriott-San Francisco Airport, Burlingame - Radisson Hotel-Proposed, Burlingame - Sheraton Hotel, Burlingame - Courtyard by Marriott, Camarillo - Best Western Fireside Inn, Cambria - Cambria Pines Lodge, Cambria - Residence Inn, Campbell - Hotel-Proposed, Capitola - Resort Hotel, Spa & Conference Ctr., Capitola - Allstar Inn, Carlsbad - Carlsbad Inn, Carlsbad - Inn of America, Carlsbad - La Costa Hotel and Spa, Carlsbad - Olympic Resort Hotel, Carlsbad - Tickle Pink Inn, Carmel - Allstar Inn, Carpinteria - Desert Princess Country Club, Cathedral City - Royce Suites Hotel, Cathedral City - Digger Bay, Central Valley - Marriott Hotel-Proposed, Century City - Westin Century Plaza Hotel, Century City - Neighborhood Inn-Proposed, Chatsworth - Red Lion Hotel, Chico - Otay Valley Inn, Chula Vista - Travelodge-Otay Valley, Chula Vista - Ramada Inn, City of Commerce - Sheraton Hotel, City of Industry - Allstar Inn, Coalinga - Harris Ranch Restaurant/Inn, Coalinga - Howard Johnson, Colton - Best Western Willow Tree Inn, Compton - Concord Hotel, Concord - Hilton Hotel, Concord - The Trees Inn, Concord - Motel 6, Corona - Hotel del Coronado, Coronado - Loews Coronado Bay Resort, Coronado - Madera Village Inn, Corte Madera - Ha' Penny Inn, Costa Mesa - La Quinta Hotel, Costa Mesa - Marriott Suites, Costa Mesa - Red Lion Hotel, Costa Mesa - Residence Inn, Costa Mesa - Pacifica Hotel, Culver City - Ramada Inn, Culver City - Courtyard by Marriott, Cupertino - Doubletree Hotel, Cupertino - Doubletree Hotel, Dana Point - Spa-Proposed, Danville - El Rancho, Davis - Furnace Creek Resort, Death Valley - Stovepipe Wells Village, Death Valley - Hilton, Del Mar - Days Inn, Diamond Bar - Compri Hotel, El Segundo - Proposed Summerfield, El Segundo - Days Inn, Emeryville - Holiday Inn-Bay Bridge, Emeryville - Lyons Restaurant, Emeryville - Budget Motel, Encinitis - Marriott Tenaya Lodge-Proposed, Fishcamp - Holiday Inn, Fort Myers Beach - All Suites Hotel/Athletic Club, Foster City - Clubtel-Proposed, Foster City - Courtyard by Marriott, Foster City - Holiday Inn, Foster City - Courtyard by Marriott, Fremont - Fremont Hotel, Fremont - Motel 6, Fremont - Residence Inn, Fremont - Allstar Inn, Fresno - AmeriSuite, Fresno - Chateau Inn, Fresno - Courtyard by Marriott, Fresno - Economy Inn, Fresno - Hacienda, Fresno - Holiday Inn, Fresno - Holiday Inn-Fresno Airport, Fresno - Howard Johnson Motel, Fresno - Piccadilly Inn, Fresno - Travelers Inn, Fresno - Travelers Lodge, Fresno - Griswold's Hotel, Fullerton - Holiday Inn, Fullerton - Marriott Hotel, Fullerton - Hotel-Proposed, Garden Grove - Hyatt Regency Alicante, Garden Grove - Princess Hotel, Garden Grove - Motel 6, Gilroy - Hyatt Regency-Proposed, Goleta - Allstar Inn, Hacienda Heights - Courtyard by Marriott, Hacienda Heights - Half Moon Bay Lodge, Half Moon Bay - Courtyard by Marriott, Harbor Boulevard - Grosvenor, Harborside-Pt. Loma - Inn at Foss Creek, Healdsburg - Chateau Marmont, Hollywood - Hollywood Palm Hotel, Hollywood - Sunset Towers Hotel, Hollywood - Waterfront Hilton Hotel, Huntington Beach - Compri Hotel, Hutton Centre - Grand Champions Resort, Indian Wells - Stouffer Esmerelda Resort, Indian Wells - Courtyard By Marriott, Irvine - Courtyard by Marriott - Proposed, Irvine - Embassy Suites, Irvine - Hilton Hotel, Irvine - Holiday Inn, Irvine - Hyatt Hotel, Irvine - La Quinta-Proposed, Irvine - Marriott Hotel, Irvine - Marriott-Proposed, Irvine - Registry Hotel, Irvine - Residence Inn-Proposed, Irvine - Amador Inn, Jackson - Embassy Suites, La Jolla - Hotel-Proposed, La Jolla - La Jolla Property, La Jolla - La Jolla Village Inn, La Jolla - Marriott Hotel, La Jolla - Residence Inn, La Jolla - Days Inn-Proposed, La Palma - PGA West Resort - Proposed, La Quinta - Lafayette Park Hotel, Lafayette - Laguna Shores, Laguna Beach - Holiday Inn, Laguna Hills - Ryokan Hotel-Proposed, Laguna Hills - Villa Valencia, Laguna Hills - Ritz Carlton, Laguna Niguel - Lake Mohave Resort, Lake Mohave - Resort at Squaw Creek, Lake Tahoe - Courtyard by Marriott, Larkspur Landing - Hilton, Las Cruces - Surf and Sand Hotel, Leguna Beach - Holiday Inn, Lido Beach - Motel-Proposed, Little Lake - Residence Inn, Livermore - Residence Inn-Proposed, Livermore - Breakers Hotel, Long Beach - Holiday Inn, Long Beach - Holiday Inn Airport, Long Beach - Marriott Hotel-Long Beach Airport, Long Beach - Marriott Hotel-Proposed, Long Beach - Ramada Renaissance Hotel, Long Beach - Residence Inn, Long Beach - Sheraton Long Beach & Office Tower, Long Beach - Airport Park Hotel, Los Angeles - Bel Age, Los Angeles - Biltmore Hotel, Los Angeles - Century Inn, Los Angeles - Checkers Hotel, Los Angeles - Courtyard by Marriott-Irvine Main, Los Angeles - Courtyard by Marriott-LAX Airport, Los Angeles - Crown Sterling Suites, Los Angeles - Days Inn, Los Angeles - Econo Lodge-Proposed, Los Angeles - Embassy Suites, Los Angeles - Embassy Suites-LAX-Proposed, Los Angeles - Four Seasons, Los Angeles - Hampton Inn-LAX, Los Angeles - Herrick and Campbell, Los Angeles - Hilton & Towers-LAX, Los Angeles - Hilton Hotel, Los Angeles - Holiday Inn Crowne Plaza-LAX, Los Angeles - Le Montrose Hotel, Los Angeles - Ma Maison Sofitel, Los Angeles - Macklowe Hotel, Los Angeles - Marriott Century City, Los Angeles - MCA Hotel-Proposed, Los Angeles - New Otani Hotel, Los Angeles - Playa Vista Development, Los Angeles - Stouffer Concourse Hotel, Los Angeles - Westin Bonaventure, Los Angeles - Westwood Marquis Hotel, Los Angeles - Los Gatos Lodge, Los Gatos - Macienda Inn, Los Gatos - Toll House Inn, Los Gatos - Residence Inn, Manhattan Beach - All Suite Hotel, Marina Del Rey - Marina Beach Hotel, Marina del Rey - Marina del Rey Hotel and Marina, Marina del Rey - Marina Suites Hotel, Marina Del Rey - Marriott Marina Del Rey, Marina Del Rey - Residence Inn, Meriden - Quality Suites Hotel - Proposed, Millbrae - Beverly Heritage Hotel, Milpitas - Crown Sterling Suites, Milpitas - Holiday Inn, Milpitas - Courtyard by Marriott, Mira Mesa - Grosvenor, Mission Bay - Motel Orleans, Modesto - Red Lion Hotel, Modesto - Red Lion-Proposed, Modesto - Carmel Mission Inn, Monterey - Doubletree Inn, Monterey - Former Monterey Hilton Hotel, Monterey - Monterey Plaza, Monterey - Plaza Hotel, Monterey - Sheraton Hotel, Monterey - Pebble Beach Company, Monterey County - Inn at Morro Bay, Morro Bay - Residence Inn, Mountain View - Inn at Napa Valley, Napa - Best Western Inn, Napa Valley - Clarion Hotel-Napa Valley, Napa Valley - Silverado, Napa Valley - Ha'Penny Motel, National City - Allstar Inn, Needles - Hilton-Newark/Fremont, Newark - Four Seasons Hotel, Newport Beach - Hotel Meridien, Newport Beach - Hyatt Newporter, Newport Beach - Newporter Resort, Newport Beach - Sheraton, Newport Beach - Days Inn-Proposed, North Hollywood - Northstar, North Lake Tahoe - Ramada Inn, Norwalk - Impact Study - Proposed Hotel, Oakdale - Hilton Inn, Oakland - Holiday Inn, Oakland - Holiday Inn-Oakland Airport, Oakland - Parc Oakland Hotel, Oakland - Resort - Proposed, Olympic Valley - Resort at Squaw Creek-Proposed, Olympic Valley - Clarion Hotel, Ontario - Compri Hotel, Ontario - Fairfield Inn, Ontario - Holiday Inn, Ontario - Lexington Hotel Suites, Ontario - Red Lion Hotel, Ontario - Doubletree Hotel, Orange - Woodfin Suites, Orange - Embassy Suites, Palm Desert - Marriott Desert Springs, Palm Desert - Canyon Resort, Palm Springs - Compri Hotel-Proposed, Palm Springs - Courtyard by Marriott, Palm Springs - Desert Princess, Palm Springs - Grand Champions Resort, Palm Springs - International Hotel and Resort, Palm Springs - Ocotillo Lodge, Palm Springs - Palm Canyon, Palm Springs - PGA West Resort-Proposed, Palm Springs - Spa Hotel at Mineral Springs, Palm Springs - Westin Hotel, Palm Springs - Grosvenor, Palmdale - Super 8, Palmdale - Cowper Square, Palo Alto - Garden Court, Palo Alto - Holiday Inn, Palo Alto - Stanford Park, Palo Alto - Marriott, Paradise Valley - All Suite Hotel-Proposed, Pasadena - Doubletree Hotel, Pasadena - Holiday Inn, Pasadena - Cascade Ranch Lodge, Pescadero - Elk Lodge, Petaluma - Hotel Petaluma, Petaluma - Hilton-Proposed, Pismo Beach - Hilton-Sea Point, Pismo Beach - Holiday Inn, Pismo Beach - Hotel-Proposed, Pismo Beach - Pismo II, Pismo Beach - Fairfield Inn, Placentia - Residence Inn, Placentia - Howard Hughes Center, Playa Vista - Pleasant Hill Inn, Pleasant Hill - Residence Inn, Pleasant Hill - Club Hilton Hotel-Proposed, Pleasanton - Compri Hotel, Pleasanton - Courtyard by Marriott, Pleasanton - Hilton, Pleasanton - Holiday Inn, Pleasanton - Pleasanton Creek, Pleasanton - Shilo Inn - Hilltop, Pomona - Compri Hotel, Rancho Bernardo - Radisson Suites, Rancho Bernardo - Comfort Inn Motel, Rancho Cordova - Courtyard by Marriott, Rancho Cordova - Economy Inn, Rancho Cordova - El Rancho, Rancho Cordova - Quality Suites-Proposed, Rancho Cordova - Sheraton Sunrise, Rancho Cordova - Marriott Rancho Las Palmas, Rancho Mirage - Mission Hills Hotel, Rancho Mirage - Resort Hotel-Proposed, Rancho Mirage - Westin Mission Hills Resort, Rancho Mirage - Bridge Bay Resort, Redding - Grand Manor Inn, Redding - La Quinta Inn, Redding - Motel 6, Redding - Motel Orleans, Redding - Red Lion Inn, Redding - Shasta Inn, Redding - Portofino Hotel & Yacht Club, Redondo Beach - Sheraton, Redondo Beach - Sofitel Redwood Shores, Redwood - Days Inn, Richmond - Best Western Carraige Inn, Ridgecrest - Days Inn, Riverside - Mission Inn-Proposed, Riverside - Omni Mission Inn, Riverside - Sheraton Hotel, Riverside - Red Lion Inn, Rohnert Park - Crown Sterling Suites, S.San Fransicso - Allstar Inn, Sacramento - Arco Arena II-Proposed, Sacramento - Arco Park, Sacramento - Catering Center - Proposed, Sacramento - Clarion Hotel, Sacramento - Compri Hotel-Proposed, Sacramento - Courtyard by Marriott, Sacramento - Courtyard by Marriott-S. Natomas, Sacramento - Hilton Hotel, Sacramento - Holiday Inn-Capital Plaza, Sacramento - Hotel-Proposed, Sacramento - Hyatt Arbitrat, Sacramento - Hyatt Regency, Sacramento - La Quinta Hotel, Sacramento - Motel Orleans, Sacramento - Radisson Hotel, Sacramento - Red Lion Inn, Sacramento - Residence Inn, Sacramento - Sacramento Inn, Sacramento - Sierra Inn, Sacramento - Sterling Hotel, Sacramento - Travelers Inn, Sacramento - Woodlake Inn, Sacramento - Harvest Inn, Saint Helena - Courtyard by Marriott, San Bruno - San Carlos Motel Development, San Carlos - Atlas Hotels/Mission Valley Inn, San Diego - Best Western Seven Seas Motor Lodge, San Diego - Budget Motel of America, San Diego - Catamaran Resort Hotel, San Diego - Center Pointe Development, San Diego - Comfort Inn, San Diego - Courtyard by Marriott-Mira Mesa, San Diego - Doubletree Hotel, San Diego - Embassy Suites, San Diego - Executive Lodge, San Diego - Hanalei Hotel, San Diego - Harbor Island Hotel-Proposed, San Diego - Harborside Inn-Point Loma, San Diego - Harbortown Marina Resort, San Diego - Holiday Inn Montgomery Airport, San Diego - Holiday Inn-Embarcadero, San Diego - Holiday Inn-Harbor View, San Diego - Horton Grand Saddlery, San Diego - Horton Park Plaza Hotel, San Diego - Howard Johnson Hotel, San Diego - Inter-Continental Hotel & Marina, San Diego - Kings Inn, San Diego - La Jolla Village Inn, San Diego - La Quinta Hotel, San Diego - Marriott Hotel-Mission Valley, San Diego - Marriott Twin Towers and Marina, San Diego - Mission Valley Inn, San Diego - Omni Hotel, San Diego - Radisson Hotel, San Diego - Ramada Inn, San Diego - Ramada Limited Suites, San Diego - Ramada Old Town, San Diego - Ramada Rancho Penasquitos, San Diego - Red Lion Inn, San Diego - Regency Plaza Hotel, San Diego - San Diego Marriott, San Diego - Seven Seas Lodge, San Diego - Sheraton Grand, San Diego - Sheraton Harbor Island East, San Diego - Super 8-Point Loma, San Diego - Symphony Towers, San Diego - Town and Country Hotel, San Diego - Travelodge Hotel Plaza, San Diego - U.S. Grant Hotel, San Diego - Westin-Proposed, San Diego - Abagail Inn, San Francisco - Bellevue Hotel, San Francisco - Cable Motor Inn, San Francisco - California Cafe, San Francisco - Campton Place, San Francisco - Cartwright Hotel, San Francisco - Chancellor Hotel, San Francisco - Clarion Inn-San Francisco Airport, San Francisco - Comfort Inn, San Francisco - Courtyard by Marriott-Airport, San Francisco - Embarcadero Inn, San Francisco - Fairmont Hotel, San Francisco - Grand Hyatt, San Francisco - Grosvenor Clift Hotel, San Francisco - Harbor Court Hotel, San Francisco - Hilton Hotel, San Francisco - Holiday Inn - Union Square, San Francisco - Holiday Inn Crowne Plaza, San Francisco - Holiday Inn-Civic Center, San Francisco - Holiday Inn-Fisherman's Wharf, San Francisco - Holiday Inn-Golden Gateway, San Francisco - Holiday Inn-South, San Francisco - Holiday Lodge, San Francisco - Hotel Diva, San Francisco - Hotel Meridien, San Francisco - Hotel Union Square, San Francisco - Hotel-Proposed, San Francisco - Hyatt Fisherman's Wharf, San Francisco - Hyatt Regency Embarcadero, San Francisco - Inn at Fisherman's Wharf, San Francisco - Inn at the Opera, San Francisco - Inn-Proposed, San Francisco - Juliana Hotel, San Francisco - King George Hotel, San Francisco - La Quinta Inn, San Francisco - La Quinta-Airport, San Francisco - Lambourne Hotel, San Francisco - Laurel Motor Inn, San Francisco - Majestic Hotel, San Francisco - Manx Hotel, San Francisco - Mark Twain, San Francisco - Marriott, San Francisco - Marriott San Francisco-Proposed, San Francisco - Marriott-Airport, San Francisco - Orchard Hotel, San Francisco - Pan Pacific Hotel, San Francisco - Parc 55 Hotel, San Francisco - Park Hyatt Hotel, San Francisco - Portman Hotel, San Francisco - Prescott Hotel, San Francisco - Queen Anne Hotel, San Francisco - Ramada Hotel, San Francisco - Regis Hotel, San Francisco - Ritz-Carlton Hotel, San Francisco - San Franciscan, San Francisco - San Francisco Hotel, San Francisco - Savoy Hotel, San Francisco - Sheraton Palace Hotel, San Francisco - Sheraton-Fisherman's Wharf, San Francisco - Sir Francis Drake Hotel, San Francisco - Stanford Court, San Francisco - Stouffer Stanford Court Hotel, San Francisco - Super 8-Fisherman's Wharf, San Francisco - Westin St. Francis, San Francisco - Crowne Sterling Suites, San Francisco - South - Olympic Club Golf Course, San Francisco/San Mateo - Budget Inn, San Jose - Courtyard by Marriott, San Jose - Cozy 8 Arena Hotel, San Jose - Fairmont Hotel, San Jose - Holiday Inn, San Jose - Ramada Renaissance, San Jose - Red Lion Inn, San Jose - Islander Motel, San Leandro - Apple Farm Inn, San Luis Obispo - Embassy Suites, San Luis Obispo - Holiday Inn, San Luis Obispo - Los Nomados Resort, San Luis Obispo - Twin Oaks Golf Course, San Marcos - Dunfey San Mateo Hotel, San Mateo - Compri Hotel-Proposed, San Pedro - Embassy Suites Hotel, San Rafael - Marriott Hotel-Proposed, San Ramon - Residence Inn, San Ramon - AAA Inn, Santa Ana - California Palms Hotel, Santa Ana - Comfort Inn, Santa Ana - Compri Hotel, Santa Ana - Embassy Suites Santa Ana, Santa Ana - Executive Lodge, Santa Ana - Howard Johnson, Santa Ana - Quality Inn, Santa Ana - Ramada Inn-Orange County, Santa Ana - El Encanto Hotel, Santa Barbara - Fess Parker's Red Lion Resort, Santa Barbara - Four Seasons Hotel, Santa Barbara - Montecito Inn, Santa Barbara - San Ysidro Ranch, Santa Barbara - Santa Barbara Inn, Santa Barbara - Biltmore Hotel & Suites, Santa Clara - Days Inn, Santa Clara - Doubletree Hotel, Santa Clara - Embassy Suites, Santa Clara - Inn At Saratoga, Santa Clara - Marriott Hotel, Santa Clara - Quality Suites Hotel, Santa Clara - Dream Inn, Santa Cruz - Hilton, Santa Maria - Motel 6, Santa Maria - Econo Lodge-Proposed, Santa Monica - Holiday Inn, Santa Monica - Holiday Inn at the Pier, Santa Monica - Park Hyatt Hotel, Santa Monica - Santa Monica Beach Hotel, Santa Monica - Santa Monica/Slatkin, Santa Monica - Allstar Inn, Santa Rosa - Doubletree Hotel, Santa Rosa - Fountaingrove Inn, Santa Rosa - Holiday Inn, Santa Rosa - Round Barn Inn-Proposed, Santa Rosa - Sheraton Round Barn, Santa Rosa - Days Inn, Seaside - Embassy Suites, Seaside - Seaside 8 Motel, Seaside - Valley Radisson, Sherman Oaks - Red Lion, Sonoma - Sonoma Mission Inn, Sonoma - Holiday Inn - Proposed, Sonora - Timberwolf Lodge, South Lake Tahoe - Holiday Inn, South San Francisco - Hotel-Proposed, South San Francisco - Meadowood Resort, St. Helena - Hilton Hotel, Stockton - Holiday Inn, Stockton - La Quinta Hotel, Stockton - Motel Orleans, Stockton - Paradise Point Manna, Stockton - Sheraton-Proposed, Stockton - Hilton, Sunnyvale - Holiday Inn, Sunnyvale - Neighborhood Suites, Sunnyvale - Ramada Inn, Sunnyvale - Sunnyvale Hilton, Sunnyvale - Temecula Creek Inn, Temecula Creek - Westlake Plaza Hotel, Thousand Oaks - Courtyard by Marriott, Torrance - Holiday Inn, Torrance - Marriott Hotel, Torrance - Residence Inn, Torrance - Holiday Inn, Union City - MCA Hotel-Proposed, Universal City - Comfort Inn, Vallejo - Holiday Inn, Van Nuys - La Quinta Hotel, Ventura - Ocean Resorts, Ventura - Sheraton, Ventura - Greentree Inn, Victorville - Doubletree Inn, Walnut Creek - Parkside Hotel, Walnut Creek - Ramada Renaissance Hotel, Walnut Creek - Royce Hotel-Proposed, Walnut Creek - Walnut Creek Project, Walnut Creek - Hampton Inn, West Covina - Le Bel Age, West Hollywood - Le Dufy, West Hollywood - Le Mondrian Hotel, West Hollywood - Hilton, Whittler - Hotel & Conference Center-Proposed, Woodland - Marriott Hotel-Woodland Hills, Woodland Hills - Skylonda Retreat, Woodside - Compri Hotel-Proposed, Yorba Linda - Marriott-Tenaya Lodge, Yosemite - Motel Orleans, Yuba City Colorado - Days Inn, Arapahoe - Continental Inn, Aspen - Ritz-Carlton Hotel-Proposed, Aspen - Hampton Inn, Aurora - Holiday Inn, Aurora - Radisson Hotel, Aurora - Radisson Southeast, Aurora - Raffles Hotel, Aurora - Comfort Inn, Avon - Boulder Hotel-Downtown, Boulder - Clarion Hotel, Boulder - Courtyard by Marriott, Boulder - Doubletree Hotel-Proposed, Boulder - Hilton Harvest House, Boulder - Holiday Inn, Boulder - Interlocken Conference Resort-Prop., Boulder - Proposed Golf Course, Boulder - Residence Inn, Boulder - Hilton, Breckenridge - Ski Lodge-Proposed, Breckenridge - Interlocken Conference Center, Broomfield - Interlocken Conference Center-Prop., Broomfield - Embassy Suites, Colorado Springs - Hilton, Colorado Springs - Howard Johnson, Colorado Springs - Le Baron Hotel, Colorado Springs - Marriott, Colorado Springs - Quality Inn, Colorado Springs - Red Lion Inn, Colorado Springs - Sheraton Inn, Colorado Springs - Grand Butte Hotel, Crested Butte - Best Western Regency, Denver - Brown Palace, Denver - Clarion Hotel-Denver Airport, Denver - Courtyard by Marriott-Airport, Denver - Courtyard by Marriott-Southeast, Denver - Days Inn, Denver - Denver Airport Hilton Inn, Denver - Doubletree Hotel, Denver - Embassy Suites, Denver - Embassy Suites-Airport, Denver - Hilton-Technical Center, Denver - Holiday Inn-Downtown, Denver - Holiday Inn-West, Denver - Jackson's Hole Sport, Denver - Marriott-Southeast, Denver - Marriott-West, Denver - Radisson Hotel, Denver - Red Lion Hotel, Denver - Regency Inn, Denver - La Quinta Inn, Denver - Airport - La Quinta, Denver - South - Red Lion Inn, Durango - Hilton-Denver, Englewood - Residence Inn, Englewood - Scanticon Conference Center, Englewood - Marriott Hotel-Proposed, Fort Collins - Holiday Inn, Golden - Marriott-Denver West, Golden - Ramada Inn, Grand Junction - Sheraton-Proposed, Keystone - Compri Hotel, Lakewood - Hampton Inn, Lakewood - Sheraton Inn, Steamboat Springs - Proposed Hotel, Telluride - Days Inn, Vail - Doubletree Hotel, Vail - Lodge at Vail, Vail - Marriott's Mark Resort, Vail - Westin Vail Resort, Vail - Ramada Hotel, Westminster - Winter Park Resort, Winter Park Connecticut - Chester Inn-Chester, Chester - Inn-Proposed, Chester - Super 8-Proposed, Cromwell - Danbury Hilton & Towers, Danbury - Residence Inn, Danbury - Holiday Inn, Darien - Howard Johnson Lodge, Darien - Ramada Inn, Darien - Holiday Inn, East Hartford - Howard Johnson Lodge, East Lyme - Days Inn-Proposed, Enfield - Greenwich Habor Inn, Greenwich - Howard Johnson Lodge, Greenwich - Showboat Inn, Greenwich - Hotel-Proposed, Groton - Hilton Hotel, Hartford - Holiday Inn-Proposed, Hartford - Motel 6, Hartford - Ramada Inn, Hartford - Sheraton Tobacco Valley Inn, Hartford - Summit Hotel, Hartford - Super 8 Motel, Hartford - Susse Chalet, Hartford - Residence Inn By Marriott, Meriden - Holiday Inn, Milford - Susse Chalet, Milford - Howard Johnson Lodge, Mystic - Mystic Ramada Inn, Mystic - Holiday Inn, New Britain - Ramada Inn, New Britain - Colony Inn, New Haven - Holiday Inn, New Haven - Howard Johnson, New Haven - Quality Inn, New Haven - Residence Inn, New Haven - Radisson Hotel, New London - Best Western-Proposed, New Milford - Courtyard by Marriott, Norwalk - Holiday Inn, Norwalk - Howard Johnson, Norwalk - Ramada Inn, Norwalk - Susse Chalet, Rocky Hill - Ramada Hotel-Proposed, Shelton - Residence Inn - Shelton, Shelton - Heritage Village, Southbury - Southbury Hotel, Southbury - Susse Chalet, Southington - Days Inn, Stamford - Executive Hotel, Stamford - Harley Hotel, Stamford - Holiday Inn-Crowne Plaza, Stamford - Inn at Mill River, Stamford - Le Pavillon Hotel, Stamford - Marriott, Stamford - Radisson Tara Hotel, Stamford - Sheraton, Stamford - Best Western-Proposed, Stratford - Stratford Motor Lodge, Stratford - Marriott Hotel, Trumbull - Courtyard by Marriott, Wallingford - Susse Chalet, Wallingford - Howard Johnson Plaza Hotel, Waterbury - Super 8-Proposed, Waterbury - Residence Inn-Proposed, Waterford - Holiday Inn, Westbury - The Island Inn, Westbury - Courtyard by Marriott, Windsor - Sheraton Tobacco Valley Inn, Windsor - Holiday Inn-Proposed, Windsor Locks Delaware - Wilmington Hilton, Claymont - Rusty Rudder, Dewey Beach - Residence Inn-Proposed, Newark - Hilton Hotel, Wilmington - Hotel-Proposed, Wilmington - Marriott Suites, Wilmington - Residence Inn-Proposed, Wilmington District of Columbia - All Suite Hotel - Proposed, Washington - Bellevue Hotel, Washington - Canterbury Hotel, Washington - Capital Hilton, Washington - Capitol Hill Hotel, Washington - Castleton Hotel, Washington - Comfort Inn, Washington - Convention Center Inn, Washington - Dupont Plaza, Washington - Embassy Row Hotel, Washington - Fairfax Hotel, Washington - Fairmont Hotel, Washington - Four Seasons Hotel, Washington - General Scott Inn, Washington - Georgetown Hotel, Washington - Grand Hotel, Washington - Grand Hyatt, Washington - Hampshire House, Washington - Harambee House, Washington - Hay Adams Hotel, Washington - Holiday Inn Crowne Plaza, Washington - Holiday Inn-Capitol, Washington - Holiday Inn-Georgetown, Washington - Holiday Inn-Governor House, Washington - Hotel Washington, Washington - Howard Johnson, Washington - Hyatt Regency-Capitol, Washington - Hyatt-Convention Center, Washington - International Inn, Washington - Intrigue Hotel, Washington - Jefferson Hotel, Washington - Lombardy Tower Apartment Hotel, Washington - Madison Hotel, Washington - Manger Annapolis Hotel, Washington - Manger Hamilton Hotel, Washington - Manger Hay Adams Hotel, Washington - Marriott-Key Bridge, Washington - Mayflower Hotel, Washington - Omni Georgetown Hotel, Washington - Omni Shoreham Hotel, Washington - Park Terrace Hotel, Washington - Phoenix Park Hotel, Washington - Plaza Hotel, Washington - Potomac Hotel Group, Washington - Quality Inn-Capitol Hill, Washington - Quality Inn-Downtown, Washington - Ramada Inn-Central, Washington - Ramada Renaissance Hotel, Washington - Ritz-Carlton, Washington - River Inn, Washington - Riverside Towers, Washington - Sheraton City Centre, Washington - Sheraton Grand Hotel, Washington - Shoreham Hotel, Washington - St. James, Washington - State Plaza, Washington - Statler Hilton Hotel, Washington - Washington Hilton, Washington - Washington Plaza, Washington - Watergate Hotel, Washington - Wyndham Bristol Hotel, Washington Florida - Holiday Inn, Altamonte Springs - La Quinta, Altamonte Springs - Turnberry Isle Resort, Aventura - Boca Raton Hotel and Club, Boca Raton - Boca West, Boca Raton - Deerfield Beach Hilton, Boca Raton - Embassy Suites, Boca Raton - Park Place Suite Hotel, Boca Raton - Petite Suites, Boca Raton - Residence Inn, Boca Raton - Days Inn, Brandenton - South Seas Resort, Captive Island - Days Inn, Clearwater - Days Inn-Proposed, Clearwater - Holiday Inn - Central/Clearwater, Clearwater - La Quinta Inn, Clearwater - Sheraton Sand Key Hotel, Clearwater - Holiday Inn - Gulfview South, Clearwater Beach - Holiday Inn - Surfside North, Clearwater Beach - Howard Johnson, Clermont - Econolodge, Cocoa Beach - Hilton Hotel, Cocoa Beach - Holiday Inn, Cocoa Beach - Howard Johnson, Cocoa Beach - Perkins Restaurant, Cocoa Beach - Coconut Grove Hotel, Coconut Grove - Mayfair House, Coconut Grove - Proposed Hampton Inn, Coconut Grove - Biltmore Hotel, Coral Gables - Holiday Inn, Coral Gables - Holiday Inn (Court), Coral Gables - Plantation Hotel, Crystal River - Sheraton Inn, Cypress Gardens - Budget Inn, Davenport - Daytona Beach Surfside Regency, Daytona Beach - Howard Johnson, Daytona Beach - La Quinta Inn, Daytona Beach - Pirates Cove, Daytona Beach - Sheraton Inn, Daytona Beach - Crown Sterling Suites, Deerfield Beach - Days Inn, Deerfield Beach - Hilton Hotel, Deerfield Beach - Horizon Club, Deerfield Beach - Sheraton Inn, Deland - Hilton Hotel, Disney World - Holiday Inn, Edgewater - Knights Inn, Florida City - AmeriSuites Hotel-Proposed, Fort Lauderdale - Bahia Mar Hotel, Fort Lauderdale - Comfort Suites, Fort Lauderdale - Compri Hotel-Proposed, Fort Lauderdale - Costa Del Sol, Fort Lauderdale - Crown Sterling Suites, Fort Lauderdale - Days Inn, Fort Lauderdale - Embassy Suites Hotel, Fort Lauderdale - Executive House, Fort Lauderdale - Hilton Hotel, Fort Lauderdale - Hilton Inverrary, Fort Lauderdale - Holiday Inn - Galleria, Fort Lauderdale - Holiday Inn - North Beach, Fort Lauderdale - Holiday Inn-Proposed, Fort Lauderdale - Marriott Harbor Beach Hotel, Fort Lauderdale - Marriott Hotel & Marina, Fort Lauderdale - Marriott Hotel-Cypress Road, Fort Lauderdale - Pier 66 Hotel and Marina, Fort Lauderdale - Port Everglades Hotel, Fort Lauderdale - Stouffer Hotel, Fort Lauderdale - Days Inn, Fort Meyers - Courtyard by Marriott, Fort Myers - Holiday Inn, Fort Myers - La Quinta Hotel, Fort Myers - Sheraton Harbor Place-Proposed, Fort Myers - Sheraton Motor Inn, Fort Myers - Proposed Hotel, Fort Myers Beach - American Way, Fort Pierce - Days Inn, Fort Walton Beach - Holiday Inn - Airport, Fort.Lauderdale - Days Inn-University Center, Gainesville - Fairfield Inn, Gainesville - Howard Johnson Lodge-I-75, Gainesville - La Quinta Hotel, Gainesville - University Centre Hotel, Gainesville - Holiday Inn, Hialeah - Motel, Hillsboro Beach - Days Inn, Hollywood - Diplomat Hotel, Hollywood - Holiday Inn, Hollywood - Quality Suites - Oceanside, Indiatlantic - Hilton Inn, Inverrary - Best Inn, Jacksonville - Bradbury Suites-Proposed, Jacksonville - Compri Hotel-Proposed, Jacksonville - Courtyard By Marriott, Jacksonville - Days Inn, Jacksonville - Doubletree Club Hotel, Jacksonville - Hampton Inn, Jacksonville - Hotel-Proposed, Jacksonville - Jacksonville Hotel, Jacksonville - Residence Inn, Jacksonville - Sheraton Hotel, Jacksonville - Wyndham Lakes Hotel, Jacksonville - Sheraton Beach Hotel, Jensen Beach - Howard Johnson, Juno Beach - Hilton Hotel, Jupiter - Key Biscayne, Key Biscayne - Howard Johnson Lodge, Key Largo - Casa Marina Marriott, Key West - Fairfield Inn, Key West - Hampton Inn-Roosevelt Rd., Key West - Holiday Inn, Key West - Hyatt Hotel, Key West - La Concha Holiday Inn, Key West - Pier House Inn and Beach Club, Key West - Reach Hotel, Key West - Santa Maria Hotel, Key West - Timeshare Resort, Key West - Best Western Vacation Lodge, Kissimmee - Days Inn, Kissimmee - Days Inn West, Kissimmee - Days Lodge, Kissimmee - Howard Johnson Plaza Hotel, Kissimmee - Howard Johnson's, Kissimmee - KOA Campground, Kissimmee - Old Town Retail Complex, Kissimmee - Quality Suites, Kissimmee - Quality Suites-Maingate, Kissimmee - Save Inn, Kissimmee - Sheraton Lakeside, Kissimmee - Suite Hotel-Proposed, Kissimmee - Wynfield Inn, Kissimmee - Days Inn, Lake Buena Vista - Embassy Suites-Proposed, Lake Buena Vista - Hilton Hotel-Disney World, Lake Buena Vista - Marriott Orlando World Center, Lake Buena Vista - Days Inn, Lake City - Flagship Inn, Lake County - Travelodge Motel, Lake County - Lake Park Inn, Lake Park - Holiday Inn, Lake Placid - Hampton Inn-Proposed, Lakeland - Hotel-Proposed, Lakeland - Howard Johnson, Lakeland - Resort Hotel-Proposed, Lakeland - Resort-Imperial Lake-Prpsd., Lakeland - Proposed Hotel, Lee County - Sonesta Sanibel Harbour, Lee County - Holiday Inn, Lido Beach - Holiday Inn, Longboat Kay - Holiday Inn - Madiera Beach, Madiera - Howard Johnson, Marathon - Radisson Suite Resort, Marco Island - Holiday Inn, Marianna - Oceanfront Hotel, Melbourne - Quality Suites, Melbourne - Bahia Mar Hotel & Yachting Club, Miami - Biscayne Bay Marriott, Miami - Courtyard by Marriott, Miami - Crown Sterling Suites, Miami - Doral Ocean Beach Resort, Miami - Fairfield Inn, Miami - Hilton Hotel-Proposed, Miami - Holiday Inn Civic Center, Miami - Holiday Inn-Airport (Le Juene Rd.), Miami - Holiday Inn-Calder, Miami - Howard Johnson Hotel-Broad Causeway, Miami - Howard Johnson Hotel-Port of Miami, Miami - Howard Johnson Lodge-Golden Glades, Miami - Howard Johnson Lodge-Int'l Airport, Miami - Hyatt Regency Hotel, Miami - Inter-Continental Hotel, Miami - Jockey Club, Miami - Marriott Hotel-Downtown, Miami - Miami Airport Ramada, Miami - Proposed AmeriSuites, Miami - Propsed Hampton Inn, Miami - Residence Inn-Proposed, Miami - Sheraton River House, Miami - Sofitel Miami, Miami - Alexander Hotel, Miami Beach - Art Deco Hotel, Miami Beach - Cresent Timeshare, Miami Beach - Delano Hotel, Miami Beach - Doral Beach Hotel, Miami Beach - Eden Roc Hotel, Miami Beach - Fontainebleu Hotel, Miami Beach - Holiday Inn, Miami Beach - Holiday Inn-Central, Miami Beach - Holiday Inn-North, Miami Beach - Holiday Inn-Oceanside, Miami Beach - Holiday Inn-South, Miami Beach - Hotel-Proposed, Miami Beach - Nautilus Club Hotel, Miami Beach - Palm Resort on the Ocean, Miami Beach - Pan American Radisson, Miami Beach - Proposed Hotel, Miami Beach - Shelborne Beach Hotel, Miami Beach - Sheraton Beach, Miami Beach - Solymar Hotel-Proposed, Miami Beach - Quality Inn, Naples - Quality Inn-Gulfcoast, Naples - Registry Hotel at Pelican Bay, Naples - Registry Resort-Proposed, Naples - Super 8 Motel-Proposed, Naples - World Tennis Resort, Naples - Hyatt Newporter Hotel, Newport Beach - Hilton Hotel, North Redington Beach - Masters Economy Inn, North Seffner - Amfac Hotel, Orlando - Army lodging-Proposed, Orlando - Comfort Suites Hotel, Orlando - Compri Hotel-Airport-Proposed, Orlando - Compri Hotel-Proposed, Orlando - Courtyard - Orlando Airport, Orlando - Days Inn, Orlando - Days Inn and Lodge-Florida Mall, Orlando - Days Inn Civic Center, Orlando - Days Inn East of Universal Studios, Orlando - Days Inn-E/O Magic Kingdom, Orlando - Days Inn-Proposed, Orlando - Days Inn-Sandlake Road, Orlando - Days Suites-E/O Magic Kingdom, Orlando - Dolphin Hotel-Proposed, Orlando - Dutch Inn, Orlando - Embassy Suites, Orlando - Fairfield Inn, Orlando - Fairfield Inn-Airport, Orlando - Grand Cypress Resort, Orlando - Hampton Inn - Proposed, Orlando - Heritage Inn, Orlando - Holiday Inn Central Park, Orlando - Holiday Inn Crowne Plaza, Orlando - Holiday Inn-Airport, Orlando - Holiday Inn-International Drive, Orlando - Holiday Inn-Lee Road, Orlando - Holiday Inn-Maingate West, Orlando - Holiday Inn-Orange Blossom Trail, Orlando - Howard Johnson - Walt Disney World, Orlando - Howard Johnson-Kirkman, Orlando - Howard Johnson-Lake Holden, Orlando - Howard Johnson-Maingate, Orlando - Hyatt Grand Cypress, Orlando - Hyatt Regency Grand Cypress, Orlando - Hyatt-W. Irlo Bronson Mem. Hwy., Orlando - International Inn, Orlando - Kon Tiki Village, Orlando - La Quinta Hotel-Airport, Orlando - La Quinta Inn, Orlando - Omni Orlando, Orlando - Orlando Airport Hotel-Proposed, Orlando - Orlando Hamiton, Orlando - Orlando Plaza Hotel, Orlando - Orlando Twin Towers Hotel, Orlando - Park Suite Hotel-Proposed, Orlando - Peabody Hotel, Orlando - Princess Hotel and Spa, Orlando - Proposed Wellesley Inn, Orlando - Quality Inn, Orlando - Radisson Hotel-Aquatic Center, Orlando - Regency Inn, Orlando - Residence Inn By Marriott, Orlando - Rodeway Inn, Orlando - Save Inn, Orlando - Sheraton Jetport Inn, Orlando - Sheraton Lakeside, Orlando - Sheraton Twin Towers, Orlando - Sonesta Village Resort, Orlando - Stouffer Orlando Resort, Orlando - Swan Hotel-Proposed, Orlando - Thriftway Motel, Orlando - Wynfield Inn, Orlando - American Way, Osceola - Sheraton Gateway Motel, Osceola - Brazilian Court Hotel, Palm Beach - Heart of Palm Beach Hotel, Palm Beach - Hilton Inn, Palm Beach - Palm Court, Palm Beach - Holiday Inn, Palm Beach Garden - Days Inn, Panama City - Marriott's Bay Point, Panama City - Super 8, Panama City - Days Inn, Pensacola - Hilton Hotel, Pensacola - La Quinta Hotel, Pensacola - Residence Inn, Pensacola - Super 8, Pensacola - Proposed Hampton Inn, Pensacola Beach - Comfort Inn, Perdido Key - La Quinta, Pinellas County - Courtyard by Marriott, Plantation - Holiday Inn Plantation, Plantation - Sheraton Suites, Plantation - Days Inn, Pompano Beach - Palm-Aire Spa Resort, Pompano Beach - Lodge & Bath Club, Ponte Verde - Howard Johnson, Punta Gorda - Days Inn, Riviera Beach - Safety Harbor Spa, Safety Harbor - Holiday Inn, Saint Augustine - Howard Johnson, Saint Augustine - Courtyard by Marriott, Saint Petersburg - Don Ceahsar Beach Resort, Saint Petersburg - Hilton Hotel, Saint Petersburg - Howard Johnson, Saint Petersburg - Ramada Inn, Saint Petersburg - Residence Inn, Saint Petersburg - Saint Petersburg Motel, Saint Petersburg - Sheraton Hotel and Marina, Saint Petersburg - Vinoy Park Hotel, Saint Petersburg - Countryside Inn, Sanford - Days Inn, Sanford - Holiday Inn, Sanford - Azure Tides Resort-Proposed, Sarasota - Days Inn, Sarasota - Holiday Inn-Lido Beach, Sarasota - Proposed Hotel, Sarasota - Holiday Inn, Sebring - Embassy Suites, Singer Island - Hilton, Singer Island - Econo Lodge, Starke - Radisson Pan American Hotel, Sunny Isles - Best Inn, Tallahassee - Courtyard by Marriott, Tallahassee - Days Inn-Tallahassee, Tallahassee - American Way, Tampa - Courtyard by Marriott, Tampa - Days Inn, Tampa - Embassy Suites-Airport, Tampa - Hampton Inn-Airport, Tampa - Hilton-Airport, Tampa - Holiday Inn, Tampa - Holiday Inn Sahal Park, Tampa - Holiday Inn-Airport, Tampa - Manger Motor Inn, Tampa - Marriott Hotel, Tampa - Omni Tampa Hotel at Westshore, Tampa - Ramada Inn, Tampa - Rodeway Inn, Tampa - Saddlebrook Resort, Tampa - Sheraton Grand West, Tampa - Master Economy Inn, Tampa-East(Selfner) - Master Economy Inn, Tampa-North(Zephyrhills) - Days Inn, Vero Beach - Holiday Inn-Countryside, Vero Beach - Holiday Inn-Oceanside, Vero Beach - Saddlebrook Resort, Wesley Chapel - Courtyard by Marriott, West Melbourne - Airport Centre, West Palm Beach - Courtyard by Marriott, West Palm Beach - Days Inn, West Palm Beach - Field Palm Hotel, West Palm Beach - Hilton-Airport, West Palm Beach - Howard Johnson Lodge, West Palm Beach - Hyatt Hotel of the Palm Beaches, West Palm Beach - Royce Hotel, West Palm Beach - Masters Economy Inn, Zephyrhills Georgia - Atlanta Radisson Hotel, Atlanta - Atlanta Terrace Motel, Atlanta - Comfort Inn, Atlanta - Compri Hotel, Atlanta - Courtyard By Marriott-Airport North, Atlanta - Courtyard by Marriott-Airport South, Atlanta - Courtyard by Marriott-Cumberland, Atlanta - Courtyard by Marriott-Executive Pk., Atlanta - Courtyard by Marriott-Gwinnett, Atlanta - Courtyard by Marriott-Jimmy Carter, Atlanta - Courtyard by Marriott-PeachtrDunwdy, Atlanta - Courtyard by Marriott-Perimeter, Atlanta - Courtyard by Marriott-Rosewell, Atlanta - Courtyard by Marriott-Windy Hill, Atlanta - Cresthil Inn-Proposed, Atlanta - Days Inn, Atlanta - Days Inn - Northlake, Atlanta - Doubletree Hotel, Atlanta - Embassy Suites-Atlanta Perimeter, Atlanta - Embassy Suites-Buckhead, Atlanta - Embassy Suites-Galleria, Atlanta - F.W.W. Hotel, Atlanta - Fairfield Inn-Airport, Atlanta - Fairfield Inn-Gwinnett, Atlanta - Fairfield Inn-North Lake, Atlanta - Fairfield Inn-Northwest, Atlanta - Fairfield Inn-Peachtree, Atlanta - Fairfield Inn-South Lake, Atlanta - Hampton Inn-Airport, Atlanta - Hilton Inn, Atlanta - Holiday Inn Crowne Plaza, Atlanta - Holiday Inn-I-20 East, Atlanta - Holiday Inn-I-85 Monroe Drive, Atlanta - Holiday Inn-Perimeter Dunwooody, Atlanta - Hotel-Downtown-Proposed, Atlanta - Hotel-Proposed, Atlanta - Howard Johnson Hotel-Hartsfield, Atlanta - Howard Johnson-Airport, Atlanta - Howard Johnson-Northeast, Atlanta - Howard Johnson-Northwest, Atlanta - Howard Johnson-South, Atlanta - Hyatt Atlanta-Airport, Atlanta - La Quinta - Stone Mountain, Atlanta - La Quinta Hotel, Atlanta - La Quinta Hotel-West, Atlanta - Marriott Atlanta Airport, Atlanta - Marriott Hotel, Atlanta - Marriott Hotel-Downtown, Atlanta - Marriott Marquis, Atlanta - Marriott Suites Hotel-Proposed, Atlanta - Marriott-Perimeter, Atlanta - Master Economy Inn, Atlanta - Motel 6, Atlanta - Neighborhood Inn, Atlanta - Omni International Hotel, Atlanta - Perimeter North Inn, Atlanta - Proposed AmeriSuites, Atlanta - Quality Inn-Central, Atlanta - Radisson Inn, Atlanta - Ramada Inn-Perimeter, Atlanta - Residence Inn by Marriott-Dunwoody, Atlanta - Residence Inn-Airport, Atlanta - Residence Inn-Buckhead, Atlanta - Residence Inn-Northwest, Atlanta - Sheraton Century Center, Atlanta - Sheraton-Airport, Atlanta - Sporting Club at the Concourse, Atlanta - Stouffer Hotel-Proposed, Atlanta - Swissotel, Atlanta - Terrace Motel, Atlanta - Waverly Hotel, Atlanta - Westin Lenox Hotel, Atlanta - Westin Peachtree Plaza, Atlanta - Wyndham Garden Hotel, Atlanta - Hyatt Hotel, Atlanta Airport - Hampton Inn, Atlanta-Buckhead - Courtyard by Marriott, Augusta - Landmark Hotel, Augusta - Masters Economy Inn - Gordon Hwy., Augusta - Masters Economy Inn - Warner Robins, Augusta - Masters Economy Inn - Washington Rd, Augusta - Holiday Inn, Brunswick - Super 8, Brunswick - Days Inn, Calhoun - Super 8, Cartersville - Days Inn, Chamblee - Comfort Inn-Proposed, College Park - Holiday Inn Crowne Plaza, College Park - Courtyard by Marriott, Columbus - La Quinta Inn, Columbus - Super 8, Columbus - Best Inn, Dalton - Days Inn, Dalton - Holiday Inn-Proposed, Decatur - Sheraton Hotel, Decatur - Best Western-Perimeter-North, Doraville - Days Inn - Gwinnett, Duluth - Howard Johnson, Forsyth - Holiday Inn-Proposed, Gwinnett County - Holiday Inn, Jekyll Island - Jekyll Island Inn-Proposed, Jekyll Island - Hilton Hotel, Macon - Master Economy Inn, Macon - Best Inn, Marietta - Courtyard by Marriott-Delk Road, Marietta - Lafayette Hotel, Marietta - Hampton Inn, Marrietta (Atlanta) - Master Economy Inn, McDonough - Courtyard by Marriott-Perimeter, Norcross - Motel 6, Norcross - Hilton Hotel, Peachtree Corners - Super 8, Rome - Best Western, Savannah - Courtyard by Marriott, Savannah - Days Inn, Savannah - Days Inn-Bay Street, Savannah - Days Inn-Mall Blvd., Savannah - Fairfield Inn, Savannah - Hotel-Proposed, Savannah - Mulberry Inn, Savannah - Radisson Hotel-Proposed, Savannah - Royal Savannah, Savannah - Sheraton Savannah Resort & C.C., Savannah - Town and Country Motel, Savannah - Days Inn, Savannah Beach - Howard Johnson, Smyrna - Master Economy Inn, Tilton - Courtyard by Marriott-Northlake, Tucker - Master Economy Inn, Warner Robins - Super 8, Warner Robins Hawaii - Hyatt Regency Waikoloa, Hawaii - Mauna Kea Hotel, Hawaii - Kahala Hilton, Honolulu - Plaza Hotel, Honolulu - Waikiki Beachcomber, Honolulu - Waikiki Hobron, Honolulu - Coco Palms Resort, Kauai - Kauai Surf Hotel, Kauai - Westin Kauai-Kauai Lagoons Resort, Kauai - Westin Kauai-Proposed, Kauai - Kona Village, Kona - Royal Sea Cliff Resort, Kona - Westin Kauai at Kauai Lagoon, Lihue - Hyatt Regency, Maui - Marriott Resort, Maui - Maui Lu Hotel, Maui - Maui Surf Hotel, Maui - Westin Maui, Maui - Hawaiian Regent Hotel-Waikiki Beach, Oahu - Hotel-Proposed-Schofield Barracks, Oahu - Hyatt Regency Waikiki, Oahu - Kiahuna Plantation, Poipu Beach, Kauai - Transient Lodging Facilities, Schofield Barracks - Hilton Hawaiian Village, Waikiki - Grand Hyatt Wailea, Wailea Idaho - Compri Hotel, Boise - Holiday Inn, Boise - Holiday Inn-Airport, Boise - Red Lion Inn, Boise - Super 8, Boise - Motel 6, Coeur d'Alene - Super 8, Coeur d'Alene - Proposed Motel, Coure d'Alene - Super 8, Lewiston - Cotton Tree Inn, Pocatello - Super 8, Sand Point - Busterback Ranch, Sawtooth Valley Illinois - Arlington Park Hilton, Arlington Heights - Church Creek, Arlington Heights - Courtyard by Marriott, Arlington Heights - La Quinta Hotel, Arlington Heights - Hampton Inn-Proposed, Bedford Park - Best Inn, Bloomington - Fairfield Inn-Normal, Bloomington - Holiday Inn, Bloomington - Indian Lakes Resort, Bloomington - Ramada Inn, Bloomington - Super 8, Bloomington - Cresthil-Proposed, Buffalo Grove - Holiday Inn, Champaign - La Quinta Inn, Champaign - Radisson Suites - Champaign, Champaign - Suite Hotel-Proposed, Champaign - Super 8, Champaign - Ambassador West Hotel, Chicago - Americana Congress, Chicago - Conrad Hilton Hotel, Chicago - Courtyard by Marriott-Glenview, Chicago - Courtyard by Marriott-Highland, Chicago - Courtyard by Marriott-Lincoln, Chicago - Courtyard by Marriott-O'Hare, Chicago - Courtyard by Marriott-Waukegan, Chicago - Courtyard by Marriott-Woodale, Chicago - Days Inn, Chicago - Executive House, Chicago - Fairfield Inn-Lansing, Chicago - Fairfield Inn-Willowbrook, Chicago - Fairmont Hotel, Chicago - Guest Quarters Hotel, Chicago - Hilton and Towers, Chicago - Hilton-O'Hare, Chicago - Holiday Inn-Merchandise Mart, Chicago - Howard Johnson-O'Hare Int'l Airport, Chicago - Hyatt Regency, Chicago - Hyatt Suites Hotel, Chicago - Inter-Continental Hotel-Proposed, Chicago - La Quinta Inn - Hoffman Est., Chicago - Le Meridien, Chicago - Lenox House, Chicago - Lincoln Hotel, Chicago - Mark Twain Hotel, Chicago - Marriott-O'Hare, Chicago - Mayfair Regent, Chicago - McClurg Holiday Inn, Chicago - McCormick Inn Hotel, Chicago - Morton Hotel, Chicago - Omni Ambassador East, Chicago - Omni Morton Hotel, Chicago - Palmer House Hotel, Chicago - Ramada Inn - Lakeshore, Chicago - Ramada O'Hare, Chicago - Residence Inn-Deerfield, Chicago - Residence Inn-Lombard, Chicago - Sheraton Hotel-Downtown, Chicago - Sheraton Hotel-Proposed, Chicago - Sheraton O'Hare, Chicago - Sheraton Plaza Hotel, Chicago - Summerfield Suites Hotel, Chicago - Swissotel, Chicago - Tremont Hotel, Chicago - Westin Hotel, Chicago - Whitehall Hotel, Chicago - Hilton Hotel, Collinsville - Holiday Inn, Collinsville - Super 8, Columbus - Super 8, Crystal Lake - Super 8, Decatur - Courtyard by Marriott, Deerfield - Embassy Suites, Deerfield - Marriott Suites Hotel, Deerfield - Holiday Inn-Chicago, Des Plaines - Hotel-Proposed, Des Plaines - Compri Hotel-Proposed, Downers Grove - Radisson Suite Hotel, Downers Grove - Best Inn, Effingham - Ramada Inn, Elgin - Hampton Inn, Elk Grove Village - Marriott Suites, Elk Grove Village - Holiday Inn, Elmhurst - Orrington Hotel, Evanston - Drury Inn, Fairview Heights - Conference Center & Resort-Proposed, Fox Lake - Holiday Inn, Freeport - Hotel-Proposed, Gurnee - La Quinta Hotel, Hoffman Estates - Carson Inn, Itasca - Hamilton Wyndham, Itasca - Nordic Hills, Itasca - Holiday Inn, Joliet - Proposed Harrah's Riverboat, Joliet - Days Inn, Kankakee - Holiday Inn, LaSalle - Marriott Hotel, Lincolnshire - Hilton Inn, Lisle - Holiday Inn Crowne Plaza, Lisle - Embassy Suites, Lombard - Holiday Inn, Macomb - Best Inn, Marion - Best Inn, Mount Vernon - Holiday Inn, Mount Vernon - Ramada Inn, Mount Vernon - Courtyard by Marriott, Naperville - Ramada Inn, Naperville - Sheraton Naperville, Naperville - O'Hareport Hotel, Northlake - Courtyard by Marriott, Oakbrook Terrace - Super 8, Okawville - Fairfield Inn, Peoria - Days Inn, Peru - Super 8, Peru - Courtyard by Marriott, Rockford - Fairfield Inn, Rockford - Hampton Inn, Rockford - Embassy Suites, Rosemont - Quality Inn/Clarion, Rosemont - Sheraton Int'l At O'Hare, Rosemont - Holiday Inn, Salem - Compri Hotel, Schaumburg - Embassy Suites, Schaumburg - Marriott Schaumburg, Schaumburg - Holiday Inn, South Beloit - Ramada Renaissance Hotel, Springfield - Sheraton Inn, Springfield - Super 8-East, Springfield - Super 8-South, Springfield - Jumer's Castle, Urbana - Best Inn, Waukegan - Super 8, Waukegan Indiana - Clarion Fourwinds Inn, Bloomington - Holiday Inn, Bloomington - Inn at the Four Winds, Bloomington - Ramada Inn, Bloomington - Harbor Point Resort, Brookville Lake - Super 8, Columbus - Best Inn, Fort Wayne - Hilton, Fort Wayne - Downtown Hotel, Gary - Sheraton, Gary - Holiday Inn, Goshen - Howard Johnson, Hammond - Quality Inn, Hammond - Courtyard by Marriott-Airport, Indianapolis - Courtyard by Marriott-Carmel, Indianapolis - Courtyard by Marriott-Castleton, Indianapolis - Embassy Suites-Claypool Center, Indianapolis - Fairfield Inn-Castleton, Indianapolis - Fairfield Inn-College Park, Indianapolis - Hampton Inn-Proposed, Indianapolis - Hilton Hotel-Airport, Indianapolis - Hilton Inn-Downtown, Indianapolis - Holiday Inn-South, Indianapolis - Holiday Inn-Southeast, Indianapolis - Knights Inn, Indianapolis - Midway Motor Lodge, Indianapolis - Mohawk Inn, Indianapolis - Motel 6, Indianapolis - Proposed Fairfield Inn, Indianapolis - Proposed Residence Inn, Indianapolis - Radisson, Indianapolis - Ramada-Airport, Indianapolis - Wyndham Garden Hotel, Indianapolis - La Quinta Inn, Indianapolis Airport - Hilton Inn, Jeffersonville - Holiday Inn, La Porte - Days Inn, Lafayette - Holiday Inn, Lafayette - Cotton Mill Inn-Proposed, Madison - Hampton Inn, Merrillville - Holiday Inn Express, Merrillville - La Quinta Inn, Merrillville - Hotel Roberts, Muncie - Radisson Hotel, Muncie - Brown County Inn, Nashville - Holiday Inn, Portage - Knights Inn, Richmond - Holiday Inn, South Bend - Howard Johnson, South Bend - Signature Inn, Terre Haute - Super 8, Terre Haute - Courtyard Conversion, Valparaiso - Holiday Inn, Vincennes Iowa - Holiday Inn-Gateway Center, Ames - Holiday Inn, Cedar Falls - Collins Plaza, Cedar Rapids - Holiday Inn, Cedar Rapids - Roosevelt Hotel, Cedar Rapids - Super 8, Davenport - Courtyard by Marriott, Des Moines - Fairfield Inn, Des Moines - Holiday Inn, Des Moines - Holiday Inn - West, Des Moines - Holiday Inn-Downtown, Des Moines - Holiday Inn-North, Des Moines - Ramada Inn, Des Moines - Super 8-North, Des Moines - Super 8-West, Des Moines - Holiday Inn, Iowa City Kansas - Embassy Suites, Kansas City - Fairfield Inn-Overland Park, Kansas City - Holiday Inn-Mission Overland Park, Kansas City - Fairfield Inn, Kansas City West - Holiday Inn, Lawrence - University Inn, Lawrence - Holiday Inn, Manhattan - Courtyard by Marriott, Overland Park - Hampton Inn-Proposed, Overland Park - Marriott Hotel, Overland Park - Park Inn International, Topeka - Super 8, Topeka - Canterbury Inn, Wichita - Former Sheraton Hotel, Wichita - Hilton-East, Wichita - Marriott Hotel, Wichita - Comfort Inn, Winfield Kentucky - Conference Center-Proposed, Boone County - Howard Johnson, Bowling Green - Brown County Inn, Brown County - Holiday Inn, Corbin - Hotel-Proposed, Covington - Thomas More Centre, Crestville Hill - Comfort Inn, Elizabethtown - Signature Inn, Elkhart - Holiday Inn, Florence - Signature Inn, Florence - Drawbridge Inn, Fort Mitchell - Days Inn, Georgetown - Days Inn, Henderson - Holiday Inn, Henderson - Bluegrass Motor Inn, Lexington - Courtyard by Marriott, Lexington - Holiday Inn, Lexington - Holiday Inn-East, Lexington - Holiday Inn-North, Lexington - Hyatt Hotel, Lexington - Knights Inn, Lexington - Super 8-Proposed, London - Brown Hotel, Louisville - Courtyard by Marriott-East, Louisville - Holiday Inn, Louisville - Holiday Inn South, Louisville - Holiday Inn-Central, Louisville - Holiday Inn-Northeast, Louisville - Ramada Inn, Louisville - Ramada Inn-East, Louisville - Signature Inn, Louisville - Days Inn, Madisonville - Executive Inn, Owensboro - Super 8-Proposed, Radcliff - Holiday Inn, Richmond Louisiana - Howard Johnson, Alexandria - Capital House, Baton Rouge - Convention Center Hotel-Proposed, Baton Rouge - Courtyard by Marriott, Baton Rouge - Crown Sterling Suites, Baton Rouge - Embassy Suites, Baton Rouge - Hilton Hotel, Baton Rouge - Holiday Inn-East, Baton Rouge - Holiday Inn-South, Baton Rouge - Holiday Inn-West, Baton Rouge - La Quinta Inn, Baton Rouge - Prince Murat Hotel, Baton Rouge - Proposed Homewood Suites, Baton Rouge - Quality Inn, Bossier City - Ramada Inn, Hammond - Ramada Inn, Houma - Holiday Inn - New Orleans, Kenner - Sheraton, Kenner - Hilton Hotel, Lafayette - La Quinta Hotel, Lafayette - Gateway Hotel, Metairie - Howard Johnson-Airport, Metairie - Canal Street Hotels L.P., New Orleans - Clarion Hotel, New Orleans - Days Inn, New Orleans - Fairmont Roosevelt Hotel, New Orleans - Hampton Inn-Proposed, New Orleans - Holiday Inn Crowne Plaza, New Orleans - Hostellerie de la Poste, New Orleans - Hotel Meridien, New Orleans - Hyatt Regency, New Orleans - Iberville Hotel, New Orleans - Inter-Continental Hotel, New Orleans - La Quinta Inn, New Orleans - Landmark Bourbon, New Orleans - Le Meridien New Orleans, New Orleans - Maison Dupuy, New Orleans - Marriott Hotel, New Orleans - Omni Royal Orleans, New Orleans - Ramada Inn, New Orleans - Saint Louis Hotel, New Orleans - St. Ann/Marie Antoinette, New Orleans - Warwick, New Orleans - Westin Hotel, New Orleans - Residence Inn, Shreveport - Super 8, Shreveport Maine - Hilton Inn, Bangor - Ramada Inn, Bangor - Residence Inn by Marriott-Proposed, Bangor - Inn By The Sea, Cape Elizabeth - Hotel-Proposed, Orchard Beach - Hotel-Proposed, Portland - Portland Regency, Portland - Ramada Inn, Portland - Sheraton Tara Portland, Portland - Susse Chalet, Portland - Susse Chalet, Portland (In-town) - Keddy's Motor Inn of Maine, Presque Isle - Hampton Inn, South Portland - Sheraton Inn, South Portland Maryland - Budget Hotel-Proposed, Aberdeen - Chesapeake House, Aberdeen - Holiday Inn, Aberdeen - Motel-Proposed, Aberdeen - Annapolis Hotel, Annapolis - Courtyard by Marriott-Riva Road, Annapolis - Governor Calvert House, Annapolis - Historic Inns of Annapolis, Annapolis - Hotel-Proposed, Annapolis - Howard Johnson, Annapolis - Marriott Hotel, Annapolis - Maryland Inn, Annapolis - Quality Royale Hotel, Annapolis - Ramada Hotel, Annapolis - Robert Johnson House, Annapolis - Brookshire Hotel, Baltimore - Courtyard by Marriott-BWI Airport, Baltimore - Days Inn, Baltimore - Harbor Court Hotel, Baltimore - Harrison's at Pier 5, Baltimore - Hilton Hotel, Baltimore - Holiday Inn-Belmont Blvd., Baltimore - Holiday Inn-Cromwell Bridge, Baltimore - Holiday Inn-Glen Burnie, Baltimore - Holiday Inn-Inner Harbor, Baltimore - Holiday Inn-Int'l Airport, Baltimore - Holiday Inn-Moravia Road, Baltimore - Holiday Inn-Pikesville, Baltimore - Holiday Inn-South Glen Burnie, Baltimore - Hotel-Proposed, Baltimore - Howard Johnson-Proposed, Baltimore - Johns Hopkins Hotel-Proposed, Baltimore - Lord Baltimore Hotel, Baltimore - Omni International Hotel, Baltimore - Ramada Inn-I-695 West, Baltimore - Susse Chalet, Baltimore - Susse Chalet Inn-BWI Airport, Baltimore - Susse Chalet Inn-Golden Ring, Baltimore - Bethesda Metro Center, Bethesda - Guest Quarters, Bethesda - Hyatt Regency Hotel, Bethesda - Linden Hill Hotel, Bethesda - Omni Linden Hotel, Bethesda - Residence Inn, Bethesda - Bethseda Metro Center, Bethseda - Guest Quarters, Bethseda - Residence Inn - Proposed, Bethseda - Comfort Suites-Proposed, Bowie - Days Inn, Capital Heights - Residence Inn, Cockneysville - Abbey, College Park - Best Western Maryland, College Park - Holiday Inn, College Park - Sheraton Inn, Dorsey - Days Inn, Easton - Mariner Inn, Easton - Holiday Inn, Frederick - Compri Hotel, Gaithersburg - Marriott Hotel, Gaithersburg - Century XXI Resort, Germantown - Comfort Inn, Germantown - Hampton Inn, Glen Burnie - Residence Inn-Proposed, Greenbelt - Courtyard by Marriott, Hunt Valley - Hunt Valley Embassy Suites, Hunt Valley - Hunt Valley Marriott, Hunt Valley - Susse Chalet Inn, Jessup - Courtyard by Marriott, Landover - Quality Inn-Proposed, Landover - Days Inn, Lanham - Best Western Maryland, Laurel - Days Inn, Laurel - Holiday Inn, Laurel - Susse Chalet, Linthicum - Howard Johnson Plaza Hotel, New Carrollton - Carousel Hotel, Ocean City - Days Inn, Ocean City - Susse Chalet, Oxon Hill - Hotel-Proposed, Prince Georges County - Budget Hotel-Proposed, Rockville - Comfort Inn, Rockville - Courtyard by Marriott, Rockville - Days Inn-Congressional Park, Rockville - Holiday Inn Crowne Plaza, Rockville - Quality Inn-Proposed, Rockville - Ramada Inn, Rockville - Salisbury Hotel, Salisbury - Sheraton Hotel, Salisbury - Courtyard by Marriott, Silver Spring - Quality Inn-Proposed, Silver Spring - Comfort Inn-Proposed, Solomons Island - Holiday Inn, Towson - Quality Inn-Proposed, Westminster Massachusetts - Susse Chalet, Amsbury - Courtyard by Marriott, Andover - Marriott Hotel, Andover - Stouffer Bedford Glen Hotel, Bedford - Anthony's Pier Four, Boston - Battery Wharf Hotel-Proposed, Boston - Boston Harbor Hotel, Boston - Boston World Trade Center, Boston - Bostonian Hotel, Boston - Colonnade Hotel, Boston - Commonwealth Center Hotel, Boston - Compri Hotel-Proposed, Boston - Copley Plaza Hotel, Boston - Courtyard by Marriott-Foxborough, Boston - Econo Lodge-Proposed, Boston - Harborside Conf. Center-Proposed, Boston - Hilton-Back Bay, Boston - Hilton-Logan, Boston - Holiday Inn-Government Center, Boston - Hotel - Proposed, Boston - Hyatt Fan Pier-Proposed, Boston - Hyatt Harborside-Proposed, Boston - Lafayette Hotel, Boston - Lenox Hotel, Boston - Marriott Copley Place, Boston - Meridien Hotel, Boston - Omni Parker House, Boston - Residence Inn, Boston - Ritz-Carlton, Boston - Statler Hilton Hotel, Boston - Tremont House Hotel, Boston - World Trade Center Hotel - Proposed, Boston - Marriott Hotel, Boston/Newton - Sheraton Tara Hotel, Braintree - Ocean Edge Inn & Conference Center, Brewster - Holiday Inn, Brookline - Days Inn, Burlington - Charles Hotel, Cambridge - Hyatt Hotel, Cambridge - Royal Sonesta Hotel, Cambridge - The Charles Hotel, Cambridge - Chatham Bars Inn, Chatham - Chelmsford Radisson Hotel, Chelmsford - Best Western Motor Lodge, Chicopee - Cummington Farm Resort-Proposed, Cummington - Appleton Inn, Danvers - Howard Johnson Hotel, Danvers - Radisson Ferncroft Hotel, Danvers - Residence Inn - Proposed, Danvers - Dedham Comfort Inn, Dedham - Holiday Inn, Dedham - Wequassett Inn, East Harwich - Harbor View Hotel, Edgartown - Kelley House, Edgartown - Airport Inn, Fall River - Sea Crest Hotel, Falmouth - Sheraton Inn, Falmouth - Radisson Hotel, Ferncroft - Sheraton Tara Hotel, Framingham - Hotel-Proposed, Franklin - Hotel-Proposed, Haverhill - Susse Chalet, Holyoke - Dunfey Hyannis Hotel, Hyannis - Heritage House Hotel, Hyannis - Holiday Inn, Hyannis - Sheraton Regal Inn, Hyannis - Tara Hyannis, Hyannis - Canyon Ranch-Berkshires, Lenox - Cranwell Hotel and Conference Ctr., Lenox - Spa/Resort-Proposed, Lenox - Holiday Inn, Leominster - Lexington Sheraton, Lexington - Residence Inn-Proposed, Littleton - Appleton Inn, Lowell - Hilton Hotel, Lowell - Town House Motor Inn, Lowell - Holiday Inn, Marlboro - Susse Chalet, Middleboro - Sheraton Milford Hotel, Milford - Holiday Inn, Natick - Skipper's Inn, New Bedford - Days Inn, Newton - Howard Johnson, Newton - Marriott Hotel, Newton - Sheraton - Wayfarer, Newton - Sheraton Tara, Newton - Susse Chalet, Newton - North Adams Inn, North Adams - Hilton Inn, Northampton - Hotel Northampton, Northampton - Factory Mutual Hotel, Norwood - University Inn, Oxford - Holiday Inn, Peabody - Berkshire Commons Hotel, Pittsfield - Hotel-Proposed, Plymouth - Hawthorne Hotel, Salem - Days Inn, Saugus - Susse Chalet, Seekonk - Howard Johnson, Somerset - Somerset Omni, Somerset - Federal House Inn, South Lee - Holiday Inn, Springfield - Howard Johnson, Springfield - Monarch Place, Springfield - Treadway Inn, Springfield - Publick House, Sturbridge - Sheraton, Sturbridge - Regency Inn of Taunton, Taunton - Holiday Inn, Tewksbury - Susse Chalet, Tewksbury - Susse Chalet, Waltham - Vista Waltham House, Waltham - Hampton Inn, West Springfield - Westford Regency Hotel, Westford - The Westminster Village Inn, Westminster - The Orchards, Williamstown - Treadway Inn, Williamstown - Days Inn, Woburn - Howard Johnson, Woburn - Radisson Hotel, Woburn - Ramada Inn, Woburn - Susse Chalet, Woburn - Marriott Hotel, Worcester - Alladin Motor Inn, Yarmouth - Flagship Motor Inn, Yarmouth - Gull Wing Suites Hotel, Yarmouth Michigan - Motel-Proposed, Adrian - Ramada Inn, Allen Park - Holiday Inn-Alpena, Alpena - Compri Hotel-Proposed, Ann Arbor - Hampton Inn-North, Ann Arbor - Hampton Inn-South, Ann Arbor - Hilton Hotel, Ann Arbor - Holiday Inn-East, Ann Arbor - Holiday Inn-West, Ann Arbor - Residence Inn, Ann Arbor - Sheraton Hotel, Ann Arbor - AmeriSuites Hotel-Proposed, Auburn Hills - Holiday Inn, Auburn Hills - Knights Inn, Battle Creek - Super 8, Battle Creek - Bay Valley Inn, Bay City - Howard Johnson, Belleville - Fairfield Inn-Airport, Charlotte - Courtyard by Marriott, Dearborn - Courtyard by Marriott-Airport, Detroit - Courtyard by Marriott-Auburn Hills, Detroit - Courtyard by Marriott-Livonia, Detroit - Days Inn, Detroit - Downtown Hotel-Proposed, Detroit - Fairfield Inn-Airport, Detroit - Fairfield Inn-Auburn Hills, Detroit - Fairfield Inn-Warren, Detroit - Fairfield Inn-West, Detroit - Golden Harp, Detroit - Hampton Inn, Detroit - Hilton-Airport, Detroit - Hilton-North Field, Detroit - Holiday Inn, Detroit - Holiday Inn-Metro Airport, Detroit - Hotel Pontchartrain, Detroit - Omni Detroit, Detroit - Westin Hotel Renaissance Center, Detroit - Holiday Inn, East Lansing - Holiday Inn-Proposed, East Lansing - Knights Inn, Flint - Amway Hotel, Grand Rapids - Holiday Inn, Grand Rapids - Grand Traverse Resort, Grand Traverse Village - Holiday Inn, Howell - Jackson Hotel, Jackson - Fairfield Inn, Kalamazoo - Hilton-Kalamazoo Center, Kalamazoo - Holiday Inn, Kalamazoo - Radison Plaza Hotel, Kalamazoo - Residence Inn, Kalamazoo - Super 8, Kalamazoo - Embassy Suites-Proposed, Lansing - Holiday Inn, Lansing - Motel 6, Lansing - Quality Suites Hotel, Lansing - Compri Hotel-Proposed, Livonia - Embassy Suites, Livonia - Embassy Suites-Proposed, Livonia - Holiday Inn, Livonia - Marriott Hotel, Livonia - Fairfield Inn, Madison Heights - Residence Inn, Madison Heights - Holiday Inn, Marquette - Knights Inn, Monroe - Comfort Inn-Proposed, Mount Clemens - Holiday Inn, Muskegan - Super 8, Muskegon - Hilton Hotel, Novi - Holiday Inn-Petoskey, Petoskey - Mayflower Hotel, Plymouth - Inn at the Bridge, Port Huron - Radisson Hotel, Romulus - Holiday Inn-East, Saginaw - Super 8, Saginaw - Courtyard by Marriott, Southfield - Embassy Suites, Southfield - Hilton Hotel, Southfield - Marriott Hotel, Southfield - Ramada Inn, Southfield - Residence Inn, Southfield - The Garden Inn, Southfield - Comfort Suites-Proposed, Sterling Heights - Holiday Inn, Sturgis - Grand Traverse Resort, Traverse City - Hampton Inn, Traverse City - Park Place Hotel, Traverse City - Courtyard by Marriott, Troy - Holiday Inn, Troy - Marriott, Troy - Residence Inn, Troy - Courtyard by Marriott, Warren - Days Inn, Warren - Holiday Inn, Warren - Motel 6, Warren - Residence Inn, Warren - Van Dyke Hotel & Conference Center, Warren - Bob Evans Restaurant, Wyoming - Super 8, Wyoming - Radisson Resort-Conference Center, Ypsilanti Minnesota - Embassy Suites, Bloomington - Hilton Airport Hotel, Bloomington - Hilton Hotel, Bloomington - Howard Johnson Lodge, Bloomington - Marriott Hotel, Bloomington - Ramada Inn, Bloomington - Days Inn - Minneapolis, Brooklyn Center - Residence Inn, Eagan - Compri Hotel-Proposed, Minneapolis - Courtyard by Marriott-Eden Prairie, Minneapolis - Courtyard by Marriott-Mendota, Minneapolis - Days Inn, Minneapolis - Dyckman Hotel, Minneapolis - Hilton Inn, Minneapolis - Holiday Inn-Downtown, Minneapolis - Hotel-Proposed, Minneapolis - Luxeford Hotel, Minneapolis - Marquette, Minneapolis - Marriott City Center Hotel, Minneapolis - Marriott-Minnetonka, Minneapolis - Motel 6, Minneapolis - Omni-Northstar, Minneapolis - Radisson Hotel, Minneapolis - Ramada Inn, Minneapolis - Sheraton Minneapolis, Minneapolis - Sofitel, Minneapolis - Motel-Proposed, Montevideo - Days Inn, Plymouth - Hotel-Proposed, Rochester - Howard Johnson, Rochester - Motel 6, Rochester - Radisson Hotel, Rochester - Days Inn, Roseville - Holiday Inn, Saint Paul - Holiday Inn-Town Square, Saint Paul - Hotel-Proposed, Saint Paul - Inn and Expo Center, Saint Paul - World Trade Hotel, Saint Paul - Wayzata Conference Center, Wayzata Mississippi - Howard Johnson, Biloxi - Holiday Inn, Greenwood - Motel 6, Hattlesburg - Hampton Inn, Jackson - Howard Johnson, Jackson - Ramada Inn-Proposed, Jackson - Residence Inn, Jackson - Cabot Lodge, Ridgeland - Holiday Inn, Vicksburg Missouri - Ramada Inn, Columbia - Howard Johnson-North St. Louis, Hazelwood - Super 8, Independence - La Quinta Inn, Jackson - North - Capital Plaza, Jefferson City - Ramada Inn, Jefferson City - Days Inn, Joplin - Super 8, Joplin - Allis Plaza, Kansas City - Americana Hotel, Kansas City - AmeriSuites Hotel-Proposed, Kansas City - Doubletree Hotel, Kansas City - Embassy Suites, Kansas City - Fairfield Inn-West, Kansas City - Hilton - Proposed, Kansas City - Hilton Inn, Kansas City - Historic Suites Hotel, Kansas City - Holiday Inn, Kansas City - Holiday Inn Crowne Plaza, Kansas City - Holiday Inn-Proposed, Kansas City - Proposed Sheraton Hotel, Kansas City - Radisson Suite Hotel, Kansas City - Resort Hotel - Proposed, Kansas City - Marriott-Tan-Tar-A, Lake of the Ozarks - Super 8, Liberty - Super 8, North Kansas City - Inn at Grand Glaize, Osage Beach - Super 8, Saint Joseph - Clarion, Saint Louis - Courtyard by Marriott-Creve Coeur, Saint Louis - Courtyard by Marriott-Downtown, Saint Louis - Courtyard by Marriott-Westport, Saint Louis - Days Inn, Saint Louis - Doubletree Hotel, Saint Louis - Drury Inn, Saint Louis - Embassy Suites, Saint Louis - Fairfield Inn-Hazel, Saint Louis - Henry VIII Hotel, Saint Louis - Hilton Hotel-Bel Air, Saint Louis - Holiday Inn Sports Complex, Saint Louis - Holiday Inn-Airport North, Saint Louis - Holiday Inn-Downtown, Saint Louis - Holiday Inn-Riverfont, Saint Louis - Howard Johnson-South, Saint Louis - Mayfair Hotel, Saint Louis - Omni-St. Louis Station, Saint Louis - Ramada Inn-Westport, Saint Louis - Residence Inn-Chesterfield, Saint Louis - Residence Inn-Richmond Heights, Saint Louis - Ritz-Carlton Hotel, Saint Louis - Sheraton-Airport, Saint Louis - St. Louis Airport Hilton, Saint Louis - St. Louis Airport Radisson Hotel, Saint Louis - St. Louisian Hotel, Saint Louis - Stouffer Concourse Hotel, Saint Louis - Super 8, Saint Louis - Marriott Hotel, Saint Louis County - Holiday Inn, Springfield - Sheraton Inn, Springfield - Super 8, Springfield - Executive Inn & Office Building, St. Louis - Holiday Inn, St. Louis - Howard Johnson Hotel, St. Louis - Hotel-Proposed, Unity Village - Holiday Inn, Wendtzville Montana - Sheraton Hotel, Billings - Super 8, Billings - Super 8, Great Falls - Super 8, Helena - Super 8, Kalispell - Holiday Inn, Missoula - Red Lion Inn, Missoula Nebraska - Holiday Inn, Kearney - Best Western Airport Inn, Lincoln - Holiday Inn-Airport, Lincoln - Holiday Inn-Northeast, Lincoln - Howard Johnson, North Platte - Marriott Hotel, Omaha - Ramada Inn, Omaha - Red Lion Inn, Omaha Nevada - Lake Mead Resort, Boulder City - Ormsby House Hotel and Casino, Carson City - Super 8, Carson City - Doubletree Hotel and Resort, Cathedral City - Best Western Motel - Proposed, Jackpot - Airport Inn, Las Vegas - Aladdin Hotel and Casino, Las Vegas - Alexis Park Resort Hotel, Las Vegas - Casino Hotel-Proposed, Las Vegas - Courtyard by Marriott, Las Vegas - El Rancho Hotel and Casino, Las Vegas - Hotel and Casino-Proposed, Las Vegas - Jockey Club Hotel and Casino, Las Vegas - La Quinta Hotel, Las Vegas - Paradise Resort, Las Vegas - Residence Inn, Las Vegas - Silverbird Casino, Las Vegas - Super 8-Proposed, Las Vegas - The Mirage, Las Vegas - Tropicana Travelodge, Las Vegas - Westward Ho Casino, Las Vegas - Echo Bay Resort, Overton - Holiday Inn, Reno - La Quinta Hotel, Reno - Quality Inn and Casino, Reno - Red Lion Hotel-Proposed, Reno New Hampshire - Sheraton Wayfarer, Bedford - Hampton Inn, Bow - Mount Washington Resort, Bretton Woods - Balsams Hotel, Dixville Notch - Sheraton Inn-Lamie's Tavern, Hampton - Woodbound Inn, Jaffrey - Brickyard Mountain Inn, Laconia - Loon Mountain Hotel, Lincoln - Appleton Inns, Manchester - Holiday Inn Center, Manchester - Sheraton Wayfarer, Manchester - Susse Chalet, Manchester - Clarion Somerset Hotel, Nashua - Hotel-Proposed, Nashua - Tara Sheraton Nashua, Nashua - Wentworth by the Sea, Newcastle - Susse Chalet, Portsmouth - Wentworth-by-the-Sea, Portsmouth - Salem Inn, Salem - Susse Chalet, Salem - Landmarc Lodge-East, Waterville Valley - Landmarc Lodge-West, Waterville Valley - Silver Squirrel Inn, Waterville Valley - Snowy Owl Inn, Waterville Valley - Chalet Susse International, Inc., Wilton New Jersey - Marriott Seaview Golf Resort, Abescon - Howard Johnson Hotel, Absecon - Seaview Country Club, Absecon - Berkeley Carteret Hotel, Asbury Park - Caesar's Hotel and Casino, Atlantic City - Casino Hotel-Proposed, Atlantic City - Deauville Hotel, Atlantic City - Diplomat Hotel, Atlantic City - Hampton Inn, Atlantic City - Harrah's Marina Hotel Casino, Atlantic City - Lafayette Hotel, Atlantic City - Resorts Int'l Hotel and Casino, Atlantic City - Royal Inn, Atlantic City - Sands Hotel and Casino, Atlantic City - Traymore Hotel Site, Atlantic City - Tropicana Hotel and Casino, Atlantic City - World International Hotel, Atlantic City - Bernards Inn, Bernardsville - Hotel-Proposed, Bridgewater - Proposed Hotel, Camden - Cherry Hill Hyatt, Cherry Hill - Cherry Hill Inn, Cherry Hill - Ramada Inn, Clifton - Comfort Suites, E. Rutherford - Ramada Renaissance, East Brunswick - Sheraton Inn, East Brunswick - Sheraton - Per Diem, East Rutherford - Holiday Inn-Raritan Center, Edison - Hotel-Proposed, Edison - Ramada Inn, Edison - Best Western Hotel, Egg Harbor Township - Newark Airport Vista Hotel, Elizabeth - Ramada Inn-Proposed, Elizabeth - Sheraton Inn, Elizabeth - Marriott Suite Hotel-Proposed, Elmwood Park - Howard Johnson, Englewood - Conference Center, Farleigh Dickinson - Motel-Proposed, Flemington - Hamilton Park Conference Center, Florham Park - Courtesy Motel, Fort Lee - Ramada Inn-Proposed, Franklin Township - Playboy Resort, Great Gorge - Marriott Hotel, Hanover - Sheraton Hotel, Hasbrouck Heights - Holiday Inn, Jamesburg - Restaurant at Port Liberte, Jersey City - Harrogate Senior Living Facility, Lakewood - Courtyard by Marriott, Lincroft - Hotel-Proposed, Long Branch - Comfort Inn, Mahwah - Courtyard by Marriott, Mahwah - Residence Inn-Proposed, Mahwah - Economy Lodge - Proposed, Meadowlands - Holiday Inn, Meadowlands - Hotel-Proposed, Meadowlands - Meadowlands Hilton, Meadowlands - Sheraton Hotel, Meadowlands - Forsgate Conference Center, Monroe Township - Conference Center, Morristown - Governor Morris Inn, Morristown - Headquarters Plaza Hotel, Morristown - Pleasantville Farms Conference Cent, Morristown - Howard Johnson Lodge, Mount Holly - Courtyard by Marriott, Mount Laurel - Hilton, Mount Laurel - Days Hotel, New Brunswick - Hyatt Hotel, New Brunswick - Rennaisance Hotel, New Brunswick - Residence Inn - Princeton, New Jersey - Airport Hotel-Proposed, Newark - Courtyard by Marriott-Airport, Newark - Holiday Inn, Newark - Holiday Inn-Airport North, Newark - Hotel-Proposed, Newark - Howard Johnson Hotel, Newark - Days Inn, North Bergen - Holiday Inn, North Brunswick - Port-O-Call, Ocean City - Sting Ray Motel, Ocean City - Hotel-Proposed, Ocean Grove - Spray View Hotel, Ocean Grove - Macy Hotel-Proposed, Paramus - Red Carpet Inn, Paramus - Residence Inn-Proposed, Paramus - Marriott Hotel-Proposed, Park Ridge - Embassy Suites, Parsippany - Hilton, Parsippany - Residence Inn-Proposed, Parsippany - Howard Johnson, Phillipsburg - Hotel-Proposed, Piscataway - Residence Inn-Proposed, Piscataway - Compri Hotel-Proposed, Princeton - Hyatt Regency, Princeton - Marriott Hotel, Princeton - Omni Nassau Inn, Princeton - Treadway Inn, Princeton - Howard Johnson, Ridgefield Park - Hotel-Proposed, Rockleigh - Hotel-Proposed, Roxbury Township - Ramada Inn, Runnemede - Howard Johnson, Saddle Brook - Marriott Hotel, Saddle Brook - Days Inn, Secaucus - Howard Johnson, Secaucus - Ramada Inn, Secaucus - Hilton At Short Hills, Short Hills - Pier 4 Motel, Somers Point - Garden State Convention Center, Somerset - Holiday Inn, Somerset - Marriott Hotel, Somerset - Neighborhood Suites-Proposed, Somerset - Sommerset Plaza Hotel, Somerset - Summerfield Suites Hotel, Sommerset - Hewitt Wellington Hotel, Spring Lake - Hotel-Proposed, Spring Lake - Loews Glenpointe Hotel, Teaneck - Appleton Inn, Tinton Falls - Envoy Inn, Tinton Falls - Hilton Inn, Tinton Falls - Residence Inn, Tinton Falls - Sunrise Suite Hotel, Tinton Falls - Hotel-Proposed, Toms River - Hotel-Proposed, Turnersville - Hotel-Proposed, Wayne - Howard Johnson-Proposed, Wayne - Holiday Inn, Wildwood Crest - Motel, Wrightstown New Mexico - Compri Hotel-Proposed, Albuquerque - Courtyard by Marriott-Airport, Albuquerque - Fairfield Inn-Proposed, Albuquerque - Hampton Inn, Albuquerque - Hilton Hotel, Albuquerque - Holiday Inn, Albuquerque - Marriott Hotel, Albuquerque - Radisson Suite Hotel-Proposed, Albuquerque - Residence Inn, Albuquerque - Rodeway Inn, Albuquerque - Winrock Motor Inn, Albuquerque - La Quinta Inn, Albuquerque - Airport - Corkin's Lodge, Chama - La Quinta Inn, Farmington - Hilton, Las Cruces - Las Cruces Hilton, Las Cruces - Super 8, Las Cruces - Ski Rio Ski Resort, Miracle Mountain - Super 8, Raton - Young's Ranch, Red River - Eldorado Hotel, Santa Fe - Homewood Suites Hotel, Santa Fe - Hotel-Proposed, Santa Fe - Inn at Loretto, Santa Fe - Inn on the Alameda, Santa Fe - La Fonda Hotel, Santa Fe - La Quinta Hotel, Santa Fe - Residence Inn, Santa Fe - Santa Fe Motel, Santa Fe - Sheraton de Santa Fe, Santa Fe New York - Americana Inn, Albany - Desmond Hotel, Albany - Hilton Hotel, Albany - Marriott Hotel, Albany - Sheraton Inn, Albany - Susse Chalet, Albany - VIP Motor Lodge (Howard Johnson), Albany - Embassy Suites-Proposed, Amherst - Holiday Inn, Amherst - Annandale Inn-Proposed, Annandale - Wampus Inn-Proposed, Armonk - Treadway Inn, Batavia - Hampton Inn, Binghamton - Holiday Inn-Arena, Binghamton - Holiday Inn-SUNY, Binghamton - Hotel-Proposed, Binghamton - Howard Johnson, Binghamton - Residence Inn, Binghamton - Sheraton Inn, Binghamton - Eden Motel, Bronx - Days Inn-Proposed, Brookhaven - Residence Inn, Brookhaven - Brooklyn Hotel-Proposed, Brooklyn - Hilton Hotel, Brooklyn - Airport Hotel-Proposed, Buffalo - Buffalo Hotel, Buffalo - Days Hotel-Proposed, Buffalo - Hilton Hotel, Buffalo - Holiday Inn - Midtown, Buffalo - Hyatt Hotel, Buffalo - Hyatt Regency Hotel & Retail Area, Buffalo - Radisson Hotel, Buffalo - Ramada Inn-Airport, Buffalo - Ramada Renaissance Hotel, Buffalo - Residence Inn-Proposed, Buffalo - Sheraton Hotel, Buffalo - Sheraton Inn Buffalo East, Buffalo - Sheraton Inn-Airport, Buffalo - Sheraton Inn, Canadaiqua - Airway Motel, Cheektowaga - Holiday Inn - Airport, Cheektowaga - Holiday Inn - Gateway, Cheektowaga - Quality Inn, Cheektowaga - Sheraton Buffalo, Cheektowga - Steeplechase Park-Proposed, Coney Island - Hilton Inn, Corning - Resort/Conference Center-Proposed, Cornwall - Holiday Inn, Cortland - Roycroft Inn, East Aurora - Hotel-Proposed, East Elmhurst - Susse Chalet, East Greenbush - Nevele Hotel, Ellenville - Int'l Conf./Learning Center-Propose, Ellis Island - Days Inn, Elmsford - Howard Johnson, Elmsford - Neighborhood Suites Hotel-Proposed, Fishkill - Residence Inn, Fishkill - Metropole Hotel, Flushing - Midway Hotel, Flushing - Sheraton - Proposed, Flushing Center - Hotel-Proposed, Garden City - Wyndham Condominium, Garden City - Harrison Conference Center, Glen Clove - Great Neck Hotel, Great Neck - Comfort Inn, Greece - Holiday Inn-Proposed, Greece - Tamarack Lodge, Greenfield Park - Claudio's Restaurant, Greenport - Colonie Hill, Hauppauge - Holiday Inn, Hauppauge - Marriott Wind Watch Hotel & Golf, Hauppauge - Marriott Windwatch, Hauppauge - Ramada Inn, Hauppauge - Residence Inn, Hauppauge - Homewood Suites-Proposed, Henrietta - Howard Johnson, Huntington - Huntington Townhouse, Huntington - Hampton Inn, Islandia - Marriott Wind Watch, Islandia - Hotel-Proposed, Islip - Howard Johnson Hotel, Ithaca - Ramada Inn, Ithaca - Sheraton Inn, Ithaca - JFK Hilton, Jamaica - Howard Johnson, Kingston - Ramada Inn, Kingston - Omni Sagamore, Lake George - Ramada Inn, Lake George - Former Lake Placid Club Hotel, Lake Placid - Hilton Hotel, Lake Placid - Mirror Lake Inn, Lake Placid - Holiday Inn, Latham - Howard Johnson, Latham - Howard Johnson, Liberty - The New Brown's Resort, Loch Sheldrake - Convention Center - Proposed, Long Island - Eastern Nassau/W. Suffolk Hotel, Long Island - Hyatt Hotel-Proposed, Long Island - Motel-Proposed, Lynbrook - Crowne Plaza Hotel, Manhattan - Hotel Mark, Manhattan - Proposed Economy Hotel, Manhattan - Sugar Maples Resort, Maplecrest - Hotel-Proposed, Middletown - Howard Johnson, Middletown - Montauk Yacht Club and Inn, Montauk - Kutsher's Resort, Monticello - Motel-Proposed, Nanuet - Wallkill Valley Inn Project, New Paltz - Hotel-Proposed, New Rochelle - Le Richmond Hotel, New Rochelle - Ramada Plaza Inn and Offices, New Rochelle - Sheraton Inn, New Rochelle - Aberdeen Hotel, New York - American Youth Hostel, New York - Americana Hotel, New York - Ashley Hotel, New York - Astor House-Proposed, New York - Barbizon Plaza Hotel, New York - Barclay Hotel, New York - Battery Park City Hotel-Proposed, New York - Berkshire Place, New York - Best Western Woodward Hotel, New York - Biltmore Hotel, New York - Broadway Crowne Plaza, New York - Carlton House Hotel, New York - Century Paramount Hotel, New York - Chatwal Inn, New York - Chatwal Inn on 45th Street, New York - Chatwal Inn on Park Avenue, New York - Chinatown Hotel-Proposed, New York - Courtyard by Marriott-Proposed, New York - Custom's House, New York - Days Inn, New York - Days Inn-West 57th Street, New York - Doral Inn, New York - Dover Hotel, New York - Downtown Athletic Club, New York - Downtown Conference Center, New York - Drake Hotel, New York - Econo Lodge-Proposed, New York - El Rio Grande, New York - Embassy Suites-Times Square-Propose, New York - Empire Hotel, New York - Essex House, New York - Executive Hotel, New York - Giordano Hotel, New York - Gorham Hotel, New York - Grand Bay at Equitable Center, New York - Grand Hyatt Hotel, New York - Greenwich Street Hotel, New York - Halloran House, New York - Hampton House, New York - Harley Hotel, New York - Helmsley Hotel, New York - Hilton Hotel, New York - Hilton Hotel-Statler, New York - Holiday Inn, New York - Holiday Inn Crowne Plaza-Broadway, New York - Holiday Inn Crowne Plaza-Manhattan, New York - Holland Hotel, New York - Hotel Intercontinental, New York - Hotel Pierre, New York - Hotel-1926 Broadway-Proposed, New York - Hotel-East 57th Street-Proposed, New York - Hotel-Proposed, New York - Hotel-Tenth Avenue-Proposed, New York - Howard Hotel, New York - Howard Johnson, New York - Journey's Court Hotel-Proposed, New York - Journey's End, New York - Kalikow Hotel-Proposed, New York - Kennedy Inn, New York - Lancaster Hotel, New York - Le Meridien Liberty New York, New York - Lowell Hotel, New York - Luxury Hotel-Proposed, New York - Macklowe Hotel, New York - Madison Towers Hotel, New York - Manger Windsor Hotel, New York - Mark Hotel, New York - Marriott East Side, New York - Marriott Financial Center, New York - Marriott Hotel-Proposed, New York - Marriott Marquis, New York - Martinique Hotel, New York - Mayfair Regent, New York - Milford Plaza Hotel, New York - Millennium Hotel, New York - Navarro Hotel, New York - Nova Park-Gotham, New York - Novotel, New York - Omni Berkshire Place, New York - Omni Park Central, New York - Parc Fifty One Hotel, New York - Parker Meridien Hotel, New York - Peninsula Hotel, New York - Penta Hotel, New York - Piccadilly Hotel, New York - Plaza Hotel, New York - President Hotel, New York - Prince George Hotel, New York - Prince Street Hotel-Proposed, New York - Proposed Hotel and Apartments, New York - Proposed Luxury Hotel-Proposed, New York - Quality Inn, New York - Quality Suites, New York - Ramada Inn, New York - Regent Hotel-Proposed, New York - Regent of New York-Proposed, New York - Ritz-Carlton, New York - Roger Smith Winthrop Hotel, New York - Roosevelt Hotel, New York - Russian Tea Room, New York - Sheraton Hotel, New York - Sheraton Motor Inn, New York - Sheraton Park Avenue, New York - Soho Hotel-Proposed, New York - St. Moritz Hotel, New York - St. Regis, New York - Stanhope, New York - Sutton Place Hotel, New York - Taft Hotel, New York - Tenth Avenue Hotels-Proposed, New York - The Pierre Hotel, New York - The Plaza Athenee, New York - Times Square Hotel-Proposed, New York - Timeshare-Proposed, New York - Travel Inn, New York - Tudor Hotel, New York - UN Plaza Suite Hotel-Proposed, New York - Vista International, New York - Waldorf=Astoria Hotel, New York - Warwick Hotel, New York - Westbury Hotel, New York - Westin Plaza Hotel, New York - Woodward Hotel-Proposed, New York - York Club, New York - Howard Johnson Motel & Restaurant, Newburgh - Ramada Inn, Newburgh - Hilton Hotel, Niagara Falls - Howard Johnson, Norwich - Hotel-Proposed, Orangetown - Hudson Valley Conference Center, Ossining - Sheraton Inn, Ossining - Hotel-Proposed, Oswego - Best Western, Painted Post - Lodge on the Green, Painted Post - Residence Inn - Proposed, Parsippany - Senior Living - Proposed, Pearl River - Drum Hill Hotel, Peekskill - Holiday Inn, Plainview - Howard Johnson, Plainview - Pickwick Motor Inn, Plainview - Residence Inn, Plainview - Holiday Inn, Plattsburgh - Motel-Proposed, Port Jefferson - Comfort Inn-Proposed, Poughkeepsie - Courtyard by Marriott, Poughkeepsie - Radison Hotel, Poughkeepsie - Wyndham Hotel, Poughkeepsie - Best Western-LaGuardia Airport, Queens - Crown Motel, Queens - Crowne Plaza-LaGuardia Airport, Queens - Days Inn-LaGuardia Airport, Queens - Executive Inn, Queens - Hilton Inn-LaGuardia Airport, Queens - Hilton-JFK Airport, Queens - Holiday Inn-JFK Airport, Queens - Holiday Inn-LaGuardia Airport, Queens - Howard Johnson, Queens - Jade East Motel, Queens - JFK Plaza Hotel, Queens - Marriott Hotel-JFK Airport, Queens - Marriott-LaGuardia Airport, Queens - Metropole Hotel, Queens - Midway Hotel, Queens - Riviera Hotel, Queens - Royce Hotel-LaGuardia Airport, Queens - Sheraton-LaGuardia East-Proposed, Queens - Adria Hotel, Queens (Bayside) - Holiday Inn, Riverhead - Riverhead Motor Hotel, Riverhead - Americana Hotel, Rochester - Courtyard by Marriott-Wrighton, Rochester - Days Hotel (former Holiday Inn), Rochester - Hilton-Campus, Rochester - Holiday Inn, Rochester - Hotel-Proposed (former St. Bernard), Rochester - Hyatt Hotel, Rochester - Lodge at Woodcliff, Rochester - Omni Suites Hotel, Rochester - Residence Inn, Rochester - Sheraton Inn, Rochester - Stouffer Hotel, Rochester - Town House Inn, Rochester - Limited Service Hotel-Proposed, Rome - Hotel - Proposed, Roslyn - Roslyn Country Club, Roslyn - Courtyard by Marriott, Rye - Le Richemonde Hotel, Ryebrook - Baron's Cove Inn, Sag Harbor - Holiday Inn, Saratoga - Hotel-Proposed, Saratoga Springs - Howard Johnson, Saugerties - Holiday Inn, Schenectady - Ramada Inn, Schenectady - Dering Harbor Inn, Shelter Island - Crowne Plaza-Proposed, Smithtown - Howard Johnson, Smithtown - Sheraton, Smithtown - Raleigh Hotel, South Fallsburg - Hotel-Proposed, Southhold - Susse Chalet, Spring Valley - Executive Motor Inn, Springfield Gardens - Staten Island Hotel, Staten Island - Imperial Htl/Stevensville Golf Crs., Stevensville - Holiday Inn, Suffern - Motel on the Mountain, Suffern - Browns Hotel, Sullivan County - Imperial Hotel, Sullivan County - The New Brown's Resort, Sullivan County - Courtyard by Marriott, Syracuse - Embassy Suites, Syracuse - Hampton Inn, Syracuse - Hilton Inn, Syracuse - Holiday Inn-Downtown, Syracuse - Holiday Inn-Exit 35, Syracuse - Holiday Inn-Exit 36, Syracuse - Holiday Inn-Exit 39, Syracuse - Holiday Inn-I-90, Syracuse - Homewood Suites Hotel-Proposed, Syracuse - Hotel Syracuse, Syracuse - Hotel-Proposed, Syracuse - Marriott Hotel, Syracuse - Residence Inn-Proposed, Syracuse - Sheraton University Inn & Conf.Ctr., Syracuse - Treadway Inn, Syracuse - Courtyard by Marriott, Tarrytown - Tarrytown House Conference Center, Tarrytown - Westchester Marriott, Tarrytown - Embassy Suites - Proposed, Times Square, New York - Marriott Hotel, Uniondale - Sheraton Nassau Hotel, Uniondale - Howard Johnson Hotel, Utica - Howard Johnson, Vestal - Hotel-Proposed, Watertown - Convention Hotel-Proposed, Westbury - Dalts Restaurant, Westbury - Howard Johnson, Westbury - Marriott Hotel, Westchester - Inn-Proposed, Westhampton - Crowne Plaza, White Plains - Hotel-Proposed, White Plains - Howard Johnson, White Plains - Roger Smith Hotel, White Plains - Stouffer Westchester Hotel, White Plains - White Plains Hotel, White Plains - Anton Meadows, Yaphank - Quality Suites, Yorktown - Yorktown Motor Lodge, Yorktown Heights North Carolina - Days Inn - Central, Asheville - Holiday Inn - Airport, Asheville - Holiday Inn - Tunnel, Asheville - Inn on the Plaza, Asheville - Sheraton Inn, Asheville - Days Inn, Ashville - Masters Economy Inn - Rocky Mount, Battlebro - Days Inn, Blowing Rock - All-Suite Hotel-Proposed, Boone - Residence Inn-Proposed, Cary - Carolina Inn, Chapel Hill - Hilton-Proposed, Chapel Hill - Charlotte Registry Hotel-Per Diem, Charlotte - Compri Hotel-Proposed, Charlotte - Courtyard by Marriott, Charlotte - Days Inn, Charlotte - Days Inn-Uptown, Charlotte - Fairfield Inn, Charlotte - Howard Johnson, Charlotte - Howard Johnson Lodge, Charlotte - Knights Inn, Charlotte - Manger Motor Inn, Charlotte - Marriott City Center, Charlotte - Marriott Hotel-Independence Center, Charlotte - Masters Economy Inn - Charlotte No, Charlotte - Masters Economy Inn - Merchandise, Charlotte - Queen City Motel, Charlotte - Residence Inn, Charlotte - Residence Inn-North, Charlotte - Resistry Hotel, Charlotte - Royce Suite Hotel, Charlotte - Sheraton Inn, Charlotte - Conference Center, Clemmons - Sheraton Motel, Dunn - Best Western, Durham - Cricket Inn, Durham - Days Inn, Durham - Dutch Village Inn, Durham - Fairfield Inn, Durham - Holiday Inn-West, Durham - Motel 6, Durham - Sheraton-University Center, Durham - The Duke Inn, Durham - Days Inn, Fayetteville - Fairfield Inn, Fayetteville - Holiday Inn, Fayetteville - Hotel-Proposed, Fayetteville - Knights Inn, Fayetteville - Goldsboro Motel, Goldsboro - Courtyard by Marriott, Greensboro - Days Inn, Greensboro - Embassy Suites, Greensboro - Fairfield Inn, Greensboro - Hilton, Greensboro - Marriott Hotel, Greensboro - Residence Inn, Greensboro - Sheraton Greensboro, Greensboro - Hotel-Proposed, Greenville - Radisson Hotel, High Point - Days Inn, Lumberton - Maggie Valley Country Club, Maggie Valley - Courtyard by Marriott, Raleigh - Fairfield Inn, Raleigh - Hampton Inn, Raleigh - Hilton, Raleigh - Holiday Inn-Downtown, Raleigh - Marriott Hotel-RTP, Raleigh - Raleigh Radisson, Raleigh - Residence Inn, Raleigh - Holiday Inn - Airport, Research Triangle Park - Howard Johnson, Roanoke Rapids - Sheraton Inn, Rocky Mount - Days Inn, Rocky Mountain - Fairfield Inn, Rocky Mountain - Motel 6, Rocky Mountain - Days Inn, Rowland - Sheraton Motel, Selma - Masters Economy Inn, Smithfield - Holiday Inn, Southern Pines - Fairfield Inn, Wilmington - Hilton, Winston/Salem - Holiday Inn, Winston/Salem - Winston Plaza Hotel, Winston/Salem North Dakota - Holiday Inn, Bismark - Radisson Inn, Bismark - Super 8, Bismark - Ramada Hotel, Fargo - Ramada Inn-Proposed, Fargo - Super 8, Grand Forks - Super 8, Minot Ohio - Holiday Inn-Cascade, Akron - Ramada Inn, Akron - Residence Inn, Akron - Aurora Inn and Pine Lake Trout Club, Aurora - Sheraton Inn, Aurora - Woodlands Inn, Aurora - Courtyard by Marriott, Blue Ash - Embassy Suites, Blue Ash - Residence Inn-Proposed, Blue Ash - Best Western, Cambridge - Days Inn, Cambridge - Hilton Hotel, Canton - Super 8, Canton - Best Western Northeast, Cincinnati - Carousel Inn, Cincinnati - Cincinnati Hotel, Cincinnati - Clarion Hotel, Cincinnati - Days Inn, Cincinnati - Embassy Suites-Proposed, Cincinnati - Holiday Inn-Downtown, Cincinnati - Holiday Inn-Eastgate, Cincinnati - Holiday Inn-Northeast, Cincinnati - Holiday Inn-Riverfront, Cincinnati - Holiday Inn-South, Cincinnati - Hotel-Airport-Proposed, Cincinnati - Howard Johnson, Cincinnati - Hyatt, Cincinnati - Knights Inn, Cincinnati - KOA Campground, Cincinnati - Marriott Inn, Cincinnati - Netherland Hilton, Cincinnati - Omni Netherland Plaza, Cincinnati - Proposed Hotel, Cincinnati - Radisson Inn, Cincinnati - Ramada Inn, Cincinnati - Residence Inn, Cincinnati - Residence Inn-North, Cincinnati - Sheraton Inn-Proposed, Cincinnati - Treadway Inn, Cincinnati - Vernon Manor, Cincinnati - AmeriSuite Hotel-Proposed, Cleveland - Downtown Hotel-Proposed, Cleveland - Fairfield Inn-Brook Park, Cleveland - Fairfield Inn-West, Cleveland - Holiday Inn-Airport, Cleveland - Holiday Inn-Lakeside, Cleveland - Hyatt Hotel-Proposed, Cleveland - Marriott Hotel, Cleveland - Sheraton City Center, Cleveland - Sheraton Hopkins, Cleveland - AmeriSuite - Proposed, Columbus - Embassy Suites, Columbus - Fairfield Inn-North, Columbus - Fairfield Inn-West, Columbus - Hilton Inn, Columbus - Holiday Inn-Airport, Columbus - Holiday Inn-City Center, Columbus - Holiday Inn-Worthington, Columbus - Hotel-Proposed, Columbus - Howard Johnson Hotel, Columbus - Howard Johnson-East, Columbus - Howard Johnson-West, Columbus - Knights Inn-West, Columbus - Marriott Hotel, Columbus - Nationwide Hotel, Columbus - Residence Inn-North, Columbus - Sheraton Plaza Hotel, Columbus - Sheraton-North, Columbus - Union Plaza Hotel-Steeplechase, Columbus - University Inn, Columbus - Woodfin Hotel, Columbus - Courtyard by Marriott, Crosswoods - Courtyard by Marriott, Dayton - Daytonian Hilton, Dayton - Fairfield Inn, Dayton - Hope Hotel & Conference Center, Dayton - Knights Inn-North, Dayton - Marriott Hotel, Dayton - Motel 6, Dayton - Ramada Inn, Dayton - Residence Inn-North, Dayton - Residence Inn By Marriott, Dayton South - Courtyard by Marriott, Dublin - Woodfin Suites, Dublin - East Liverpool Motor Lodge, East Liverpool - Howard Johnson, Euclid - Ramada Inn, Fairlawn - Hampton Inn, Independence - Howard Johnson, Lima - Ramada Inn, Lima - Best Western, Mansfield - Holiday Inn, Marietta - Lafayette Hotel, Marietta - Holiday Inn, Middletown - Howard Johnson, Middletown - Regal 8 Inn, Middletown - Sheraton-Proposed, Milford - Super 8, Montrose - Ramada Inn, Sandusky - Days Inn, Sharonville - Holiday Inn-Cincinnati North, Sharonville - Super 8, St. Clairsville - Holiday Inn, Strongsville - Balhalla Hotel, Toledo - Courtyard by Marriott, Toledo - Fairfield Inn-Airport, Toledo - Hilton at the Medical College, Toledo - Hilton Hotel, Toledo - Holiday Inn, Toledo - Knights Inn-West, Toledo - Marriott Portside Hotel, Toledo - Radisson Hotel, Toledo - Sofitel, Toledo - Hampton Inn-Proposed, Wickliffe - Holiday Inn, Youngstown - Hotel-Proposed, Youngstown - Sheraton-Proposed, Youngstown Oklahoma - Fountainhead Resort, Mcintosh County - Residence at the Trails Inn, Norman - Suit Hotel, Norman - Courtyard by Marriott, Oklahoma City - Embassy Suites, Oklahoma City - Holiday Inn, Oklahoma City - Lexington Hotel Suites, Oklahoma City - Lincoln Plaza Hotel, Oklahoma City - Marriott Hotel, Oklahoma City - Meridien Plaza, Oklahoma City - Sheraton Hotel, Oklahoma City - Arrowhead Resort, Pittsburgh County - Camelot Hotel, Tulsa - Doubletree Hotel, Tulsa - Former Holiday Inn, Tulsa - Former Holiday Inn-Downtown, Tulsa - Holiday Inn, Tulsa - Holiday Inn-Convention Center, Tulsa - La Quinta Inn, Tulsa - Marriott Hotel, Tulsa - Mayo Hotel, Tulsa - Residence Inn, Tulsa - Westin Hotel, Tulsa Oregon - Inn At Face Rock, Bandon - Courtyard by Marriott, Beaverton - Red Lion Motel, Bend - Sunriver Lodge and Resort, Bend - Econolodge Motel, Eugene - Valley River Inn, Eugene - Residence Inn Portland-South, Lake Oswego - Big Creek Resort-US Highway 101, Lane County - Embassy Suites, Portland - Holiday Inn Crowne Plaza - Proposed, Portland - Holiday Inn-Airport, Portland - Holiday Inn-South, Portland - Proposed Sheraton Suites, Portland - Red Lion - Jantzen Beach, Portland - Red Lion Inn-Lloyd Center, Portland - Red Lion Inn-Portland Center, Portland - Residence Inn - Proposed, Portland - Vintage Plaza Hotel, Portland - Wells Building, Portland - Execulodge Motel, Salem - Oregon Capital Inn, Salem - Springfield Red Lion Inn, Springfield - Sunriver Resort, Sunriver Pennsylvania - Allentown Hilton Hotel, Allentown - Holiday Inn, Allentown - Proposed Microtel, Allentown - Quality Inn, Allentown - Bedford Springs Hotel, Bedford - Compri Hotel-Proposed, Bensalem - Days Inn-Proposed, Bensalem - Holiday Inn, Bensalem - Residence Inn By Marriott, Berwyn - Econolodge, Bristol - Days Inn, Brookville - Buck Hill Falls Inn, Buck Hill Falls - Howard Johnson, Butler - Holiday Inn, Chambersburg - Days Inn, Clarion - Embassy Suites, Coraopolis - Hydeholde Country House-Proposed, Coraopolis - Days Inn, Danville - Holiday Inn, Dubois - Lafayette Inn-Proposed, Easton - Howard Johnson Hotel, Erie - Ramada Inn, Erie - Holiday Inn, Essington - Quality Suites-Proposed, Essington - Super 8-Proposed, Essington - Howard Johnson, Gibsonia - Compri Hotel-Proposed, Harrisburg - Holiday Inn, Harrisburg - Marriott Hotel, Harrisburg - Penn Harris Inn, Harrisburg - Sheraton Inn, Harrisburg - Super 8-Proposed, Harrisburg - Holiday Inn, Hazleton - Super 8-Proposed, Hazleton - Plaza Valley Forge Hotel, King of Prussia - Radisson Hotel, King of Prussia - Sheraton Hotel, King of Prussia - Valley Forge Complex, King of Prussia - Valley Forge Hilton, King of Prussia - Motel-Proposed, Lake Ariel - Days Inn, Lancaster - Holiday Inn-Route 30E, Lancaster - Holiday Inn-Route 501, Lancaster - Sheraton Lancaster Golf Resort, Lancaster - Super 8-Proposed, Lancaster - Holiday Inn, Lionville - Hilton-Great Valley, Malvern - Summerfield Suite-Proposed, Malvern - Days Inn, Meadville - Hilton Inn, Monroeville - Holiday Inn-West, Monroeville - Economy Hotel, Montgomery Township - Holiday Inn, New Hope - Treadway Inn, Newport - Residence Inn-Proposed, Paoli - Conference Center-Proposed, Penn State - Barclay Hotel, Philadelphia - Bellevue, Philadelphia - Courtyard by Marriott-Devon, Philadelphia - Courtyard-Willow Grove, Philadelphia - Days Inn-Airport, Philadelphia - Econo Lodge-Franklin Towne, Philadelphia - Essex Hotel, Philadelphia - Franklin Motor Inn, Philadelphia - Franklin Plaza Hotel, Philadelphia - Guest Quarters Hotel, Philadelphia - Hampton Inn-Proposed, Philadelphia - Health Club-Proposed, Philadelphia - Hilton Inn, Philadelphia - Hilton Inn-Northeast, Philadelphia - Holiday Inn-City Center, Philadelphia - Holiday Inn-City Line, Philadelphia - Hub Motor Inn, Philadelphia - Hyatt-Proposed, Philadelphia - Marriott Hotel, Philadelphia - Marriott Hotel-Airport, Philadelphia - Omni Philadelphia, Philadelphia - Penn Center Inn, Philadelphia - Quality Inn-Center City, Philadelphia - Residence Inn-Proposed, Philadelphia - Rittenhouse Hotel, Philadelphia - Treadway Mohawk, Philadelphia - Treadway Roosevelt, Philadelphia - Residence Inn, Philadelphia/Berwyn - Clubhouse Inn, Pittsburgh - Courtyard by Marriott, Pittsburgh - Hampton Inn at Playhouse Square, Pittsburgh - Hilton Hotel, Pittsburgh - Holiday Inn-Greentree, Pittsburgh - Holiday Inn-North, Pittsburgh - Holiday Inn-Parkway-East, Pittsburgh - Holiday Inn-Parkway-West, Pittsburgh - Hotel-Proposed, Pittsburgh - Howard Johnson Hotel, Pittsburgh - Marriott Hotel, Pittsburgh - Marriott-Airport, Pittsburgh - Motel 6, Pittsburgh - Quality Inn, Pittsburgh - Royce Hotel-Airport, Pittsburgh - U.S.S. Hotel-Proposed, Pittsburgh - Westin William Penn, Pittsburgh - Courtyard By Marriott, Pittsburgh Airport - Holiday Inn, Reading - Sheraton Hotel, Reading - Hilton at Lackawanna Station, Scranton - Hilton Hotel, Scranton - Sheraton Inn, Stroudsburg - HoJo Inn, Tannersville - Hilton-Northeast, Trevose - Compri Hotel-Proposed, Valley Forge - Courtyard by Marriott, Valley Forge - Holiday Inn-Meadowlands, Washington - Holiday Inn, Wilkes-Barre - Days Inn-Proposed, Williamsport - Hotel-Proposed, Williamsport - Hampton Inn - Proposed, Willow Grove - Holiday Inn-Market Street, York - Holiday Inn-Route 30 and I-83, York - Ramada Inn, York - Super 8-Proposed, York Rhode Island - Cresthil-Proposed, Lincoln - Courtyard by Marriott, Newport - Vanderbilt Hotel-Convention Center, Newport - Quality Inn, North Kingston - Biltmore Plaza, Providence - Convention Center Hotel-Proposed, Providence - Holiday Inn Providence - Downtown, Providence - Hotel-Proposed, Providence - Marriott Hotel, Providence - Sheraton-Airport, Providence - Susse Chalet, Smithfield - Howard Johnson, Warwick - Residence Inn-Proposed, Warwick - Susse Chalet, Warwick South Carolina - Quality Inn Motel, Anderson - Super 8, Anderson - Budget Hotel - Proposed, Charleston - Charleston Center Hotel-Proposed, Charleston - Cooper River Inn, Charleston - Days Inn, Charleston - Francis Marion Hotel, Charleston - Hampton Inn-Proposed, Charleston - Hawthorne Suites Hotel, Charleston - Holiday Inn, Charleston - Holiday Inn-Airport, Charleston - Holiday Inn-Riverview, Charleston - Masters Economy Inn - Mt. Pleasant, Charleston - Masters Economy Inn - Rivers Ave, Charleston - Middleton Inn, Charleston - Omni Charleston, Charleston - Quality Inn, Charleston - Trusthouse Forte, Charleston - Courtyard by Marriott, Columbia - Courtyard by Marriott-Northeast, Columbia - Courtyard by Marriott-Northwest, Columbia - Embassy Suites, Columbia - Marriott Hotel, Columbia - Masters Economy Inn - I-26, Columbia - Masters Economy Inn - Knox Abbot, Columbia - Motel 6, Columbia - Residence Inn, Columbia - Coral Beach Hotel, Coral Beach - Days Inn, Dillon - Save Inn, Fairplay - Fairfield Inn, Florence - Holiday Inn, Florence - Days Inn, Gaffney - Courtyard by Marriott, Greenville - Fairfield Inn, Greenville - Greenville Hilton Hotel, Greenville - Ramada Inn, Greenville - Super 8, Greenwood - Days Inn, Hardeeville - Fairfield Inn, Hilton Head - Hilton Head Inn, Hilton Head - Holiday Inn, Hilton Head - Inter-Continental Hotel, Hilton Head - Islander Inn, Hilton Head - Quality Suites-Proposed, Hilton Head - Residence Inn-Proposed, Hilton Head - Sheraton Inn, Hilton Head - PGA East Resort-Proposed, Kiawah Island - Save Inn, Lake Hartwell - Days Inn, Mt. Pleasant - Coral Beach Hotel, Myrtle Beach - Radisson Hotel, Myrtle Beach - Best Western Inn, North Charleston - Budget Hotel-Proposed, North Charleston - Days Inn, North Charleston - Northwoods Atrium Inn, North Charleston - Days Inn, Santee - Holiday Inn-West, Spartanburg - Howard Johnson, Spartanburg - Residence Inn, Spartanburg South Dakota - Holiday Inn, Aberdeen - Holiday Inn, Rapid City - Holiday Inn, Sioux Falls - Super 8, Sioux Falls - Holiday Inn, Spearfish Tennessee - Ameri Suite Hotel-Proposed, Brentwood - Courtyard by Marriott, Brentwood - Holiday Inn, Bristol - Holiday Inn-Southeast, Chattanooga - Howard Johnson, Chattanooga - Marriott Hotel, Chattanooga - Motel 6, Chattanooga - Sheraton Inn, Chattanooga - Super 8, Chattanooga - Holiday Inn, Cove Lake - Masters Economy Inn, Dickson - Comfort Inn-Proposed, Elizabethton - Park Vista Hotel, Gatlinburg - Holiday Inn-I-40, Jackson - Holiday Inn, Johnson City - Super 8, Johnson City - Fairfield Inn, Johnson Park - Holiday Inn, Kingsport - Courtsouth Healthclub-North, Knoxville - Courtsouth Healthclub-South, Knoxville - Courtsouth Healthclub-West, Knoxville - Days Inn, Knoxville - Hilton Hotel, Knoxville - Howard Johnson-Westhills, Knoxville - Motel 6, Knoxville - Quality Inn, Knoxville - Ramada Inn-West, Knoxville - Rodeway Inn, Knoxville - Courtyard by Marriott, Memphis - Courtyard by Marriott-Airport, Memphis - Holiday Inn - Crowne Plaza, Memphis - Holiday Inn-East, Memphis - Holiday Inn-East Poplar, Memphis - Holiday Inn-I-40-Sycamore View, Memphis - Holiday Inn-Memphis Int'l Airport, Memphis - Hyatt Regency, Memphis - Lexington Hotel Suites, Memphis - Motel 6, Memphis - Omni Hotel, Memphis - Proposed Fairfield Inn, Memphis - Residence Inn, Memphis - La Quinta Inn, Memphis - Airport - Brown County Inn, Nashville - Capital Mall Conv. Center-Proposed, Nashville - Clarion Maxwell House, Nashville - Courtyard by Marriott-Airport, Nashville - Days Inn, Nashville - Doubletree Hotel, Nashville - Grosvenor, Nashville - Hampton Inn, Nashville - Holiday Inn Crowne Plaza, Nashville - Holiday Inn Express, Nashville - Holiday Inn-Briley Parkway, Nashville - Marriott Hotel, Nashville - Nashville Union Station, Nashville - Ramada Inn, Nashville - Sheraton Hotel, Nashville - Sheraton Music City, Nashville - Stouffer Hotel, Nashville - Super 8, Nashville - Union Station Hotel, Nashville - AmeriSuite, Oakridge - Holiday Inn, Oakridge - Super 8-Proposed, Union City Texas - Harvey Hotel, Addison - Days Inn, Amarillo - Motel 6, Amarillo - Radisson Hotel-Proposed, Amarillo - Super 8 Motel, Amarillo - La Quinta Inn, Amarillo - Airport - Courtyard by Marriott, Arlington - Hilton Hotel, Arlington - Holiday Inn, Arlington - Lexington Suites Hotel, Arlington - Compri Hotel-Proposed, Austin - Driskill Hotel, Austin - Embassy Suites-Austin Town Lake, Austin - Embassy Suites-North, Austin - Fairfield North, Austin - Four Seasons Hotel, Austin - Holiday Inn, Austin - Holiday Inn-Austin Town Lake, Austin - La Quinta Inn, Austin - Marriott Hotel, Austin - Proposed Fairfield Inn, Austin - Quality Inn, Austin - Residence South, Austin - La Quinta Inn, Austin - Ben White - Holiday Inn Airport, Austins Cities - Holiday Inn, Bay Town - Hilton Hotel, Beaumont - Holiday Inn, Beaumont - Courtyard by Marriott, Bedford - Holiday Inn, Brownsville - La Quinta Inn, Brownsville - Hilton Hotel, College Station - Ramada Inn, College Station - Holiday Inn, Conroe - Corpus Christi Hotel-Airport, Corpus Christi - Days Inn, Corpus Christi - Hilton - Proposed, Corpus Christi - Holiday Inn, Corpus Christi - Holiday Inn-Airport, Corpus Christi - La Quinta Inn, Corpus Christi - North - La Quinta Inn, Corpus Christi - South - Allstar Inn, Dallas - Ambassador Plaza Hotel, Dallas - Arlington Hilton, Dallas - Bradford Plaza Hotel, Dallas - Bristol Suites, Dallas - Convention Center Hotel-Proposed, Dallas - Courtyard by Marriott, Dallas - Courtyard by Marriott-Northeast, Dallas - Courtyard by Marriott-Plano, Dallas - Courtyard by Marriott-Stemmons, Dallas - Dallas Grand Hotel, Dallas - Doubletree Inn, Dallas - Embassy Suites, Dallas - Fairmont Hotel, Dallas - Harvey Hotel, Dallas - Hilltop, Dallas - Hilton Inn-LBJ, Dallas - Hilton-Arlington, Dallas - Holiday Inn - North, Dallas - Holiday Inn Crowne Plaza, Dallas - Holiday Inn-Brook Hollow, Dallas - Holiday Inn-South, Dallas - Houstonian Hotel, Dallas - Howard Johnson-East, Dallas - Lexington Hotel Suites, Dallas - Loews Anatole Hotel, Dallas - Marriott Hotel-Airport, Dallas - Marriott-Park Central, Dallas - Marriott-Quorum, Dallas - Melrose Hotel, Dallas - Motel 6, Dallas - Omni Melrose Hotel, Dallas - Park Plaza, Dallas - Propsed Hotel - DFW, Dallas - Ramada Inn Convention Center, Dallas - Ramada-Market Center, Dallas - Registry Hotel, Dallas - Residence Inn-Market Center, Dallas - Sheraton Grand, Dallas - Southland Center Hotel, Dallas - Statler Hilton Hotel, Dallas - Summit Hotel, Dallas - Westin Galleria Hotel, Dallas - La Quinta Inn, Dallas - DFW - La Quinta Inn, Dallas - North Park - La Quinta Inn, Dallas - Plano - La Quinta Inn, Dallas - Richardson - Allstar Inn, El Paso - Hilton Inn-Airport, El Paso - La Quinta Hotel-Airport, El Paso - Rodeway Inn, El Paso - Travelers Inn, El Paso - Westin Paso del Norte, El Paso - La Quinta Inn, El Paso - Lomaland - Allstar Inn, Euless - La Quinta Inn, Euless - Allstar Inn, Fort Worth - Courtyard by Marriott, Fort Worth - Days Inn Downtown, Fort Worth - Hilton Hotel, Fort Worth - Holiday Inn-North, Fort Worth - Holiday Inn-South, Fort Worth - Lexington Suites Hotel, Fort Worth - Metro Center Hotel, Fort Worth - Radisson Plaza Hotel, Fort Worth - Residence Inn, Fort Worth - La Quinta Inn, Fort Worth - East - Holiday Inn, Harlingen - La Quinta Inn, HI-LA Marque - Crowne Plaza-Houston Park, Houston - Days Inn, Houston - Days Inn-Hobby, Houston - Doubletree Hotel, Houston - Embassy Suites, Houston - Galleria Gardens, Houston - Harvest House Hotel, Houston - Harvey Hotel Medical Center, Houston - Hilton Inn-West, Houston - Holiday Inn I-10 East, Houston - Holiday Inn-Downtown, Houston - Holiday Inn-East, Houston - Holiday Inn-Greenway Plaza, Houston - Holiday Inn-Hobby, Houston - Holiday Inn-Medical Center, Houston - Holiday Inn-NASA, Houston - Holiday Inn-North, Houston - Holiday Inn-Northwest, Houston - Holiday Inn-Southwest, Houston - Host Hotel International, Houston - Hotel Meridien, Houston - Hotel-Proposed, Houston - Houston House, Houston - Houston Medical Center, Houston - Houston Park 10 Crowne Plaza, Houston - La Quinta Hotel-Astrodome, Houston - La Quinta Hotel-Baytown, Houston - La Quinta Hotel-CY Fair, Houston - La Quinta Hotel-Hobby, Houston - La Quinta Inn-Stafford, Houston - Lexington Hotel Suites, Houston - Marriott Astrodome, Houston - Marriott Hotel, Houston - Marriott Hotel-Medical Center, Houston - Marriott-Airport, Houston - Motel 6, Houston - Remington, Houston - Residence Inn, Houston - Rodeway Inn, Houston - Rodeway Inn-Hobby, Houston - Shamrock Hilton Hotel, Houston - Sheraton Hotel, Houston - Sheraton Houston House, Houston - Sheraton Houston Place Hotel, Houston - Sheraton Town and Country, Houston - Sofitel, Houston - Stouffer Greenway Plaza, Houston - Suite Hotel-Proposed, Houston - Whitehall, Houston - Whitehall Hotel Conversion to HI, Houston - La Quinta Inn, Houston - Sharpstown - La Quinta Inn, Houston - East - La Quinta Inn, Houston - Loop 1960 - La Quinta Inn, Houston - Northwest - La Quinta Inn, Houston- SW Freeway - Holiday Inn, Huntsville - Harvey Hotel DFW, Irvine - Allstar Inn, Irving - Hampton Inn, Irving - Hampton Inn-Proposed, Irving - Harvey Hotel-D/FW Airport, Irving - Holiday Inn-Texas Stadium, Irving - Marriott Hotel, Irving - Holiday Inn, Kingsville - Del Lago Hotel, Lake Conroe - Hilton Inn, Laredo - La Posada, Laredo - Courtyard by Marriott, Las Colinas - La Quinta Inn, Longview - Hilton Inn, Lubbock - Holiday Inn, Lubbock - Residence Inn, Lubbock - La Quinta Inn, Midland - Holiday Inn, New Braunfels - All Star Inn, North Richland Hills - La Quinta Inn, Odessa - Holiday Inn, Orange - Holiday Inn, Paris - Plano Harvey Hotel, Plano - La Quinta Inn, Round Rock - Sheraton Inn, San Angelo - Coachman Inn-Proposed, San Antonio - Courtyard by Marriott-Downtown, San Antonio - Courtyard by Marriott-Medical Ctr., San Antonio - Crockett Hotel, San Antonio - Days Inn, San Antonio - Fairfield - North, San Antonio - Gunter Hotel, San Antonio - Holiday Inn-Airport, San Antonio - Holiday Inn-Market Square, San Antonio - Holiday Inn-North, San Antonio - Holiday Inn-Northwest, San Antonio - Holiday Inn-Riverwalk, San Antonio - La Quinta Hotel-Ingram, San Antonio - La Quinta Hotel-Lackland, San Antonio - La Quinta Hotel-Toepperwein, San Antonio - Lexington Hotel Suites, San Antonio - Marriott Hotel-Proposed, San Antonio - Marriott Inn-North, San Antonio - Proposed Fairfield Inn, San Antonio - La Quinta Inn, San Antonio - Windsor - La Quinta Inn, San Antonio - Wurzbach - Holiday Inn, San Marcos - La Quinta Inn, SAT-Toepperwein - Sheraton Hotel, South Padre Island - La Quinta Inn, Tyler - Sheraton, Tyler - Sheraton Inn, Tyler - Traveler's Choice Inn, Tyler - Hilton Hotel, Waco - Gateway Inn, Wichita Falls - Hilton Hotel, Wichita Falls Utah - Mount Holly Ski Resort, Beaver - Hotel-Proposed, Brigham City - Motel-Proposed, Cedar City - Proposed Mayflower Hotel, Deer Valley - Stein Eriksen Lodge, Deer Valley - Deer Valley Resort, Park City - Omni Yarrow, Park City - Prospector Square Resort, Park City - Yarrow Resort, Park City - Seven Peaks Resort and Hotel, Provo - Comfort Inn, Salt Lake City - Doubletree, Salt Lake City - Hilton Hotel-Airport, Salt Lake City - Holiday Inn, Salt Lake City - Holiday Inn-Salt Palace, Salt Lake City - Hotel Utah, Salt Lake City - Hotel-Proposed, Salt Lake City - La Quinta Inn, Salt Lake City - Nendels Inn, Salt Lake City - New Grande Hotel, Salt Lake City - Red Lion Hotel, Salt Lake City - Sheraton Hotel, Salt Lake City - Super 8, Salt Lake City - University Park Hotel (Desktop Rev), Salt Lake City - Ramada Inn-Proposed, Sandy Vermont - Ramada Inn, Bennington - Bolton Valley Corporation, Bolton Valley - Quality Inn, Brattleboro - Radisson Hotel, Burlington - Smugglers Notch, Cambridge - Inn-Proposed, Essex - Cascade Lodge, Killington - Inn of the Six Mountains, Killington - Mountain Inn, Killington - Equinox Hotel, Manchester - Howard Johnson Inn, Rutland - Quality Inn, Stowe - Conference Center-Proposed, Stratton Mountain - Sugarbush Inn, Sugarbush - Susse Chalet, Williston Virginia - Comfort Inn, Abingdon - Best Western, Alexandria - Comfort Inn, Alexandria - Compri Hotel-Proposed, Alexandria - Embassy Suites, Alexandria - Howard Johnson, Alexandria - Marriott Suites, Alexandria - Ramada Inn, Alexandria - Best Western, Arlington - Gateway Marriott, Arlington - Hyatt Arlington Hotel, Arlington - Hyatt Regency, Arlington - Key Bridge Marriott, Arlington - Marriott Hotel, Arlington - Sheraton Crystal City Hotel, Arlington - Sheraton National Hotel, Arlington - Stouffer Concourse Hotel, Arlington - Mountain Lake Hotel, Blacksburg - Holiday Inn, Bristol - Howard Johnson, Bristol - Days Inn, Carmel Church - Westfields International, Chantilly - Boar's Head Inn, Charlottesville - Cavalier Inn, Charlottesville - Courtyard by Marriott, Charlottesville - Hilton-University, Charlottesville - Holiday Inn-North, Charlottesville - Omni Charlottesville, Charlottesville - Radisson-Proposed, Charlottesville - Super 8, Charlottesville - Days Inn, Chester - Howard Johnson, Chester - Days Inn, Colonial Heights - Holiday Inn, Covington - Embassy Suites, Crystal City - Holiday Inn Crowne Plaza, Crystal City - Hyatt Hotel, Crystal City - Marriott Crystal Gateway Hotel, Crystal City - Comfort Inn-Proposed, Dahlgren - Days Inn, Emporia - Courtyard by Marriott, Fairfax - Embassy Suites, Fairfax - Neighborhood Suites-Proposed, Fairfax - Hampton Inn-Proposed, Fairfax City - Westfields International, Fairfax County - Marriott Hotel, Fairview - Econo Lodge, Farmingville - Comfort Inn-Proposed, Farmville - Comfort Inn, Frederick County - Motel 6, Fredericksburg - Courtyard by Marriott, Hampton - Days Inn, Hampton - Fairfield Inn, Hampton - Courtyard by Marriott, Herndon - Embassy Suites Hotel, Herndon - Ramada Renaissance and Health Club, Herndon - Residence Inn-Proposed, Herndon - Worldgate Marriott Hotel, Herndon - Hotel-Proposed, Hopewell - Keswick Inn, Keswick - Holiday Inn, Lexington - Radisson Hotel, Lynchburg - Courtyard by Marriott, Manassas - Holiday Inn, Marion - Hilton, McLean - Days Inn, Norfolk - Marriott Waterside Hotel, Norfolk - Omni Hotel, Norfolk - Waterfront Hotel - Proposed, Norfolk - 135-Suite Hotel-Proposed, Portsmouth - Waterfront Suite Hotel-Proposed, Portsmouth - Comfort Inn, Princeton - Comfort Inn, Pulaski County - Embassy Suites Hotel, Reston - Hyatt Hotel, Reston - Best Western Kings Quarters, Richmond - Courtyard by Marriott, Richmond - Embassy Suites Hotel, Richmond - Hampton Inn, Richmond - Holiday Inn, Richmond - Howard Johnson Lodge, Richmond - Hyatt House Hotel, Richmond - La Quinta Hotel, Richmond - Marriott Hotel, Richmond - Omni Richmond, Richmond - Radisson Hotel, Richmond - Ramada Renaissance Hotel, Richmond - Residence Inn, Richmond - Days Inn, Richmond (Broad) - Days Inn, Richmond (Byrd) - Holiday Inn, Roanoke - Holiday Inn - Airport, Roanoke - Holiday Inn - Civic Center, Roanoke - Holiday Inn - South, Roanoke - Hotel Roanoke, Roanoke - Howard Johnson, Roanoke - Marriott - Roanoke Airport, Roanoke - Marriott Hotel, Roanoke - Holiday Inn, Salem - Super 8, South Hill - Days Inn, Springfield - Hilton, Springfield - Holiday Inn, Staunton - Stonewall Jackson Hotel, Staunton - Hampton Inn - Proposed, Tyson's Corner - Embassy Suites, Tysons Corner - Marriott Hotel, Tysons Corner - Residence Inn, Tysons Corner - Ritz Carlton-Proposed, Tysons Corner - Courtyard by Marriott, Virginia Beach - Courtyard by Marriott-Lynnhaven, Virginia Beach - Fairfield Inn, Virginia Beach - Hotel-Proposed, Virginia Beach - Pavilion Tower Hotel, Virginia Beach - Ramada Inn - Oceanside, Virginia Beach - International Conference Center, Westfields - Howard Johnson, Wheeling - Fort Magruder Inn, Williamsburg - Governor's Inn, Williamsburg - Holiday Inn-East, Williamsburg - Holiday Inn-West, Williamsburg - Royce Hotel, Williamsburg - Williamsburg Hilton, Williamsburg - Best Western-Proposed, Wytheville Washington - Bellevue Thunderbird Motor Inn, Bellevue - Embassy Suites, Bellevue - Hampton Inn, Bellevue - La Quinta, Bellevue - Residence Inn Seattle-East, Bellevue - Ramada Inn, Bothell - Rattling Spring Hotel, Harpers Ferry - Motel 6, Issaquah - AmeriSuite, Kent - Homecourt Suite Hotel, Kent - Embassy Suite, Lynnwood - Residence Inn-Seattle North, Lynnwood - Red Lion Inn at Pasco, Pasco - Redmond Motel, Redmond - Hampton Inn, Sea Tac - Holiday Inn Airport, Sea Tac - Thunderbird Inn, Sea Tac - Alexis Hotel, Seattle - Courtyard by Marriott-South Center, Seattle - Doubletree Inn at South Center, Seattle - Doubletree Plaza, Seattle - Hampton Inn-Airport, Seattle - Holiday Inn Crowne Plaza, Seattle - Holiday Inn-Sea Tac, Seattle - La Quinta, Seattle - Lake Union Residence Inn, Seattle - Marriott Hotel-Airport, Seattle - Marriott Sea-Tac Hotel, Seattle - Plaza Park Suites, Seattle - Ramada Inn-Airport, Seattle - Red Lion, Seattle - Stouffer Madison Hotel, Seattle - Travelodge-Proposed, Seattle - Westin Hotel, Seattle - Courtyard by Marriott, Spokane - Gateway Hotel, Spokane - Holiday Inn-West, Spokane - Red Lion Inn, Spokane - Super 8, Spokane - Hilton-Village Green, Tacoma - Hotel-Proposed, Tacoma - Park Shore Inn, Tacoma - Tacoma Sheraton Hotel, Tacoma - Embassy Suites Hotel, Tukwila - Hampton Inn, Tukwila - Residence Inn-Seattle South, Tukwila - Red Lion Quay, Vancouver - Residence Inn-Portland North, Vancouver - Super 8, Wenatchee - Thunderbird Motor Inn, Yakima West Virginia - Comfort Inn-Proposed, Charleston - Holiday Inn, Clarksburg - Holiday Inn, Fairmont - Hotel-Proposed, Harpers Ferry - Holiday Inn, Huntington - Comfort Inn-Proposed, Morgantown - Holiday Inn, Morgantown - Motel-Proposed, Morgantown - Comfort Inn, Princeton - Motel-Proposed, Princeton - Hotel-Proposed, Wheeling - Howard Johnson, Wheeling Wisconsin - Super 8, Ashland - Holiday Inn, Beloit - Embassy Suites Hotel-Proposed, Brookfield - Marriott-Milwaukee, Brookfield - Holiday Inn, Eau Claire - Residence Inn, Glendale - Granada Royale-Proposed, Green Bay - Holiday Inn-Downtown, Green Bay - Residence Inn-Proposed, Green Bay - Super 8, Janesville - Super 8, Kenosha - Playboy Resort, Lake Geneva - Concourse Hotel, Madison - Fairfield Inn, Madison - Hampton Inn - East, Madison - Hampton Inn - West, Madison - Compri Hotel-Proposed, Milwaukee - Embassy Suite, Milwaukee - Fairfield Inn, Milwaukee - Holiday Inn-Airport, Milwaukee - Holiday Inn-West, Milwaukee - Hotel and Conv. Ctr. East-Proposed, Milwaukee - Hyatt Regency, Milwaukee - Marc Plaza, Milwaukee - Marriott Inn, Milwaukee - Omni Suite Hotel-Proposed, Milwaukee - Super 8-Airport, Milwaukee - Olympia Village Resort, Oconomowoc - Scotsland Resort, Oconomowoc - Sheraton, Racine - Claridge Motor Inn, Rhinelander - Super 8, Waukesha - Holiday Inn, Wausau - Mead Inn, Wisconsin Rapids Wyoming - Days Inn, Casper - Flying L. Skytel, Cody - Super 8, Cody - Snow King Resort, Jackson - Super 8, Jackson - Wort Hotel, Jackson - Development-Proposed, Jackson Hole - Colter Bay Village, Moran - Jackson Lake Lodge, Moran - Jenny Lake Lodge, Moran - Best Western-Bel Air, Rawlins - Bridger Inn, Rawlins - La Quinta Inn, Rock Springs Western Europe Belgium - Oostkamp Hotel, Bruges - Proposed Residence Inn, Brussels - SAS Royal Hotel, Brussels Denmark - Proposed Hotel, Copenhagen France - The Miramar, Biarritz - Chateau D'arc en Barroi, Haute-Marne - Le Grand, Paris - Royal Monceau, Paris Germany - Cumberland House, Berlin - Munchen Penta Hotel, Munchen Holland - Carlton - Cannes & Amstel, Amsterdam - The Pulitzer Hotel, Amsterdam Spain - Le Meridien, Barcelona - Princess Sophia, Barcelona - Hotel Los Monteros, Marbella - Incosol Spa & Hotel, Marbella - Proposed Hyatt Resort, Marbella United Kingdom - Copthorne Hotel, Aberdeen - Copthorne Hotel, Birmingham - Hyatt Regency, Birmingham - Holiday Inn, Cambridge - Copthorne Hotel, Cardiff - Great Eastern Hotel, England - Copthorne Hotel, Glasgow - Hanbury Manor Hotel, Hertfordshire - 47 Park Street, London - Bailey's Hotel, London - Basil Street Hotel, London - Basil Street Hotel, Knightsbridge, London - Britannic Tower, London - Chelsea Hotel, London - Chesterfield Hotel, London - Chesterfield Hotel, Mayfair, London - Copthorne Hotels, London - Copthorne Tara Hotel, London - Dorchester Mayfair, London - Executive Hotel, London - Marriott Hotel, London - May Fair, London - Plaza Hotel, London - Proposed Hotel Conversion, London - Proposed Hotel-The City, London - Regent Hotel, London - Regent London Hotel, London - Sheraton Belgravia, London - Sheraton Park Tower, London - St. James Court Hotel, London - The Executive Hotel, London - Windsor Hotel, London - Copthorne Hotel, Manchester - Copthorne Hotel, Newcastle - Copthorne Hotel, Slough/Windsor - Swallow Hotel, Stockton - Copthorne Hotel-Effingham Park, Sussex - Copthorne Hotel-Gatwick, Sussex Middle East and North Africa Egypt - Sheraton Anni Cruise Ship, - Sheraton Aton Cruise Ship, - Sheraton Hotp Cruise Ship, - Sheraton Tut Cruise ship, - Aswan Oberol Hotel, Aswan - Cairo Sheraton Hotel, Cairo - Hotel - Proposed, Cairo - Lido Hotel, Cairo - Meridien Hotel, Cairo - Novotel Cairo Airport, Heliopolis, Cairo - Proposed Resort Complex, Hurghada - Luxor Sheraton Hotel, Luxor - Proposed Hotel, Luxor - Fayrouz Village Hotel, Sharm El Sheikh, Sinai - Coral Village Hotel, Nuweiba, Sinai - Hotel - Proposed, Dahab, Sinai - Hotel - Proposed, St. Catherine, Sinai Greece - Athens Hilton & Proposed Hotel, Athens - Caravel Hotel, Athens - Proposed Sargani Hotel & Bungalows, Halkidiki - Rhodes Hotel -Proposed, Rhodes Israel - Proposed Inter-Continental Hotel, Tel Aviv Lebanon - Hotel Market Review, Beruit Morocco - El Minzah Hotel, Tangier Nigeria - Proposed Sheraton Hotel, Port Harcourt Saudi Arabia - Proposed Jeddah Corniche Project, Jeddah Tunisia - Proposed Hotel, Hammamet Turkey - Hotel Conrad, Istanbul Latin America and the Caribbean Bahamas - Eleuthera Joint Venture, Eleuthera - Cape Eleuthera Island Hotel, Eleuthera Island - Eleuthera Joint Venture, Eleuthra - The Montague, Nassau - Paradise Island Hotel, Paradise Island - Resorts Int'l Hotel and Casino, Paradise Island Belize - Journey's End Caribbean Club, Abergris Caye Bermuda - Sonesta Hotel, Bermuda Brazil - Quatro Rodas Hotel, Recife Colombia - Charleston Hotel - Proposed, Barranquilla - Bella Suiza Hotel, Bogota - Hotel & Convention Center -Proposed, Cali - Cartagena Hilton, Cartagena - El Faro de Cartagena Resort Propose, Cartagena - Proposed Indian Sea and Sun Resort, Cartagena - Hotel De Isleno, San Andres Isla - Santamar Hotel, Santa Marta Curacao - Ramada Renaissance Hotel and Casino, Honduras - Inn Of The Sun, Guanaja Jamaica - Holiday Inn-Rose Hall, Montego Bay - Americana Eden II, Ocho Rios Mexico - Posadas de Mexico Hotels, - Americana Condesa Del Mar, Acapulco - Americana El Presidente Hotel, Acapulco - Resort-Proposed, Cabo San Lucas - Palacio Del Margus, Chiconcuac - Omni Hotel, Ixtapa - Fiesta Inn-Proposed, Leon - Karmina Place, Manzanillo - Hotel - Proposed, Mexico City - La Jolla de Mismaloya, Puerta Vallarta Netherland Antilles - Divi Divi Beach Resort, Aruba - Divi Tamarijn Beach Resort, Aruba - Golden Anchor, Bonaire - Resort Hotel-Proposed, Bonaire - Ramada Renaissance Hotel and Casino, Curacao - Cupecoy Beach Club Hotel, St. Maarten - Dawn Beach Hotel, St. Maarten - Dawn Beach Resort, St. Maarten - Mullet Bay Resort, St. Maarten - Oyster Pond Hotel, St. Maarten Puerto Rico - Hyatt Dorado Beach Hotel, Dorado - Hyatt Regency Cerromar Hotel, Dorado - Hotel - Proposed, Fajardo - Hotel Puerto Rico, Fajardo - Westin Resort-Proposed, Palmer - Marriott Resort & Casino-Proposed, Puerto Rico - Carib Inn, San Juan - Dupont Plaza, San Juan - El San Juan Hotel and Casino, San Juan - Howard Johnson Hotel, San Juan - Marriott - Proposed, San Juan - Marriott Update - Proposed, San Juan - Sands Hotel and Casino, San Juan Virgin Islands - Caneel Bay, St. Croix - Carambola Beach Resort, St. Croix - Hotel - Proposed, St. Croix - St. Croix Development, St. Croix - Caneel Bay, St. John - Pineapple Beach Hotel, St. Thomas - Sugar Bay Plantation, St. Thomas - Virgin Grand Hotel, St. Thomas - Virgin Isle Hotel, St. Thomas - Little Dix Bay, Virgin Borda Eastern Europe Croatia - Two Hotels, Dubrovnik Czech Republic - Voronesh Hotel Complex, Brno - Proposed Four Seasons Hotel, Prague Hungary - Proposed Resort Hotel, Babolna - Duna Inter-Continental, Budapest Latvia - Daugava Hotel-Proposed, Riga - Proposed Hotel, Riga Poland - Holiday Inn, Krakow - Marriott Hotel - Proposed, Poznan - Proposed Hotel, Poznan - Radisson Hotel, Szczecin - Bristol Hotel, Warsaw - Holiday Inn, Warsaw - Orbis Joint Venture, Warsaw - Proposed Hotel, Warsaw - Sheraton Hotel - Proposed, Warsaw - Zakopane Resort Complex, Zakopane Russia - Kamiennyi Most Hotel & Business, Moscow - Savoy Hotel, Moscow Asia Korea - Ultrapolis 3000, Seoul Malaysia - UP 3000 Hotel-Proposed, Selangor Singapore - Resort Hotels - Proposed, - Ultrapolis 3000, Singapore West Indies - Proposed Blue Lagoon Resort, St. Martin Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Hospitality Valuation Services Industry Leader Hospitality Valuation Services (HVS) was created in 1980 to satisfy the ever-increasing demand for reliable and well-documented hotel/motel valuations, market studies, and feasibility reports. As the nation's leading real estate appraisal organization devoted exclusively to lodging properties, HVS offers owners, investors, and lenders in-depth valuation and market research expertise. Our professional staff, operating on a worldwide basis with offices in New York, San Francisco, Miami, Boulder, Vancouver, and London, has appraised more than 4,000 hotels and motels in every state and over 32 foreign countries. Each member of Hospitality Valuation Services is well versed in lodging operations. Most have college degrees in hotel administration as well as actual on-the-job hotel experience. Coupled with intense training in real estate appraisal theory and techniques, we are highly qualified to handle the unique characteristics of hostelry valuations. Excellence Through Specialization An important feature of our valuation and feasibility services is specialization. Daily exposure on a global basis to a wide variety of hotel transactions and operating statistics, along with actual buyers and sellers, provides the data to thoroughly document our reports. HVS maintains the industry's largest database of hotel valuation information: o Data on over 4,000 hotel transactions; o Over 3,500 actual financial statements; o Thousands of management contracts, franchise agreements, mortgages, leases, and other similar documents; o Personal contacts at every major hotel company; o Names and addresses of over 10,000 hotel owners, investors, lenders, and operators. Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Innovative research in hotel valuation techniques is set forth in the textbooks we authored for the Appraisal Institute, entitled The Computerized Income Approach to Hotel/Motel Market Studies and Valuations and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations. These publications, along with more than 300 articles, are recognized as the authoritative standard for valuing lodging facilities and performing market feasibility studies. In addition, we have developed Hospitality Valuation Software, a computerized package that assists appraisers and consultants in evaluating market trends and preparing financial forecasts. Full-Service Hotel Consulting With a reputation established by providing highly detailed hotel valuations that are accepted and relied upon by virtually every major hotel owner, lender, and operator, HVS has branched out to offer a full range of consulting services. o HVS Consulting Services: Valuations, market feasibility studies, economic studies, management contract and franchise negotiations, development assistance, and expert testimony. o HVS Executive Search: Recruitment and placement of top-level hotel management personnel. o HVS Eco Services: Environmental audits and assistance in implementing programs including water and energy management, recycling, and green product selection. Provides ECOTEL certifications to environmentally sensitive hotels. o HVS Gaming Services: Specialized market, valuation, and consulting services for casinos and other types of gaming activities. o HEI Hotels: Hotel ownership and management. Long-Term Relationship Hospitality Valuation Services is in business for the long-term. We are dedicated to providing our clients with the highest quality consulting services. Should you require assistance in any areas covered by our expertise, please contact any member of our team at (516) 248-8828. This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. APPRAISAL OF WESTSHORE MALL HOLLAND, MICHIGAN LANDAUER REAL ESTATE COUNSELORS APPRAISAL OF WESTSHORE MALL HOLLAND, MICHIGAN AS OF DECEMBER 31, 1996 PREPARED FOR MORGAN STANLEY MORTGAGE CAPITAL, INC. 1585 BROADWAY, 37TH FLOOR NEW YORK, NY 10036 PREPARED BY LANDAUER ASSOCIATES, INC. 666 FIFTH AVENUE NEW YORK, NEW YORK 10103 [LETTERHEAD OF LANDAUER REAL ESTATE COUNSELORS] January 24, 1997 Mr. James E. Flaum Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway, 37th Floor New York, NY 10036 Re: Westshore Mall Holland, Michigan Dear Mr. Flaum: As directed, we have made an appraisal of the above-captioned property. The subject property is a regional shopping center which contains 393,949 square feet of gross leasable area situated on 51.4 acres. The improvements were completed in 1988. Owned square footage includes the mall anchors: Sears (52,515 square feet), Younkers (69,148 square feet), Steketee's (40,755 square feet) and JC Penney (51,399 square feet). Two outlot ground leases with a restaurant and bank are part of the ownership. In addition, a strip center containing 26,087 square feet, located adjoining a Target department store, is part of the ownership. The ownership also contains about 22.8 acres of vacant land and pad site; however, the vacant land has not been valued at the instruction of the client. The purpose of this self-contained appraisal report is to estimate the Market Value of the Leased Fee Interest in the real property described herein, subject to the existing leases and encumbrances, and the general and specific assumptions and limiting conditions as discussed in the attached report. The estimate of Market Value is made as of December 31, 1996. It is assumed that physical and economic conditions affecting the property at the valuation date are the same as those existing at the date of our inspection. Kevin D. Gray inspected the property in August 1996. John P. Baker personally inspected the subject property on January 9, 1997 and John I. Wrzesinski inspected the property on January 21, 1997. Based upon our analysis, we estimate the Market Value of the Leased Fee Interest in Westshore Mall, subject to the existing leases and the assumptions and limiting conditions contained in this report, as of December 31, 1996, to be: THIRTY-THREE MILLION DOLLARS $33,000,000 LANDAUER REAL ESTATE COUNSELORS Morgan Stanley Mortgage Capital, Inc. January 24, 1997 Page Two A summary of our analyses, opinions, and conclusions is contained in the following report, of which this letter is a part. Thank you for the opportunity to be of service. Respectfully submitted, LANDAUER ASSOCIATES, INC. /s/ JCK /s/ John I. Wrzesinski James C. Kafes, MAI, CRE John I. Wrzesinski, MAI, CRE Executive Managing Director Senior Managing Director Certified Michigan Appraiser License #1201002445 /s/ Kevin D. Gray /s/ John P. Baker Kevin D. Gray, CRE John P. Baker, MAI Managing Director Director JCK/JIW/KDG/JPB:mjk LAI File No. C-302-961/6302 LANDAUER REAL ESTATE COUNSELORS TABLE OF CONTENTS Page Assumptions and Limiting Conditions..........................................1 Certification................................................................6 Summary of Salient Facts and Conclusions.....................................7 Nature of the Appraisal......................................................8 Identification of the Property and Interest Appraised....................8 Purpose, Function and Date of Appraisal..................................8 Scope of the Appraisal...................................................9 History of Property.....................................................10 Neighborhood Analysis.......................................................11 Property Description........................................................12 Site Analysis...........................................................12 Zoning..................................................................13 Real Estate Taxes.......................................................13 Improvements............................................................14 Highest and Best Use........................................................18 As If Vacant............................................................18 As Improved.............................................................18 Demographic/Area Review.....................................................20 Population Trends.......................................................20 Income Levels...........................................................21 Employment..............................................................21 Conclusion..............................................................23 Retail Market Overview......................................................24 Overview................................................................24 Trade Area Delineation..................................................25 Trade Area Population...................................................26 Income Estimates and Comparisons........................................28 Trade Area Expenditure Potential........................................28 Competitive Retail Analysis.............................................30 LANDAUER REAL ESTATE COUNSELORS TABLE OF CONTENTS Page Valuation Methodology.......................................................33 Cost Approach...............................................................34 Sales Comparison Approach...................................................35 Elements of Comparison..................................................35 Applicability of Adjustments............................................37 Analysis and Interpretation of Data.....................................38 Income Approach.............................................................40 Discounted Cash Flow ("DCF") Analysis Assumptions.......................40 Revenue.................................................................44 Expenses................................................................49 Occupancy Costs.........................................................53 Capital Items...........................................................54 Cash Flow...............................................................55 Discounted Cash Flow Analysis...........................................56 Rate Selection..........................................................57 Valuation by Discounted Cash Flow Analysis..............................60 Market Value Analysis as of December 31, 1996...........................60 Correlation and Conclusion .................................................62 ADDENDA Legal Description Photographs of Subject Property Recent Leases Rent Roll Lease Abstract Reports Professional Qualifications [GRAPHIC OMITTED] Photo [GRAPHIC OMITTED] Photo LANDAUER 1 REAL ESTATE COUNSELORS ASSUMPTIONS AND LIMITING CONDITIONS This appraisal report has been made with the following general assumptions: o Title to the property is assumed to be good and marketable unless otherwise stated. No responsibility is assumed for the legal description or any legal matter. The property is considered to be under responsible ownership, management, subject to responsible leasing efforts, and free of all liens and encumbrances except as specifically discussed herein. o The definition of value, together with other definitions and assumptions on which our analyses are based are set forth in appropriate sections of this report and are to be part of these General Assumptions as if included here in their entirety. o The information furnished to the appraisers by the client and others, as contained in this report, is considered to be from reliable sources and, where feasible, has been verified; however, no responsibility is assumed for the accuracy of the information. The appraisers reserve the right to modify the value conclusion should the accuracy of that information change subsequent to delivery of this report. o All engineering is assumed to be correct. o It is assumed that there are no hidden or unapparent conditions in the property, soil, subsoil, or structures which would render the property more or less valuable. No responsibility is assumed for such conditions or for arranging for engineering which would be required to discover them. All materials used in the structures on the appraised property are assumed to be free of asbestos, toxic materials, or any other potential health risks unless otherwise so stated and identified herein. No opinion is expressed on structural or mechanical conditions. o Landauer has reviewed and relied upon the tenant leases or abstracts provided by the client. LANDAUER 2 REAL ESTATE COUNSELORS o It is assumed that there is full compliance with all applicable federal, state and local environmental regulations and laws, that all applicable zoning and use regulations and restrictions have been complied with, unless a non-conformity has been stated, defined and considered in the appraisal report. o It is assumed that all required licenses, certificates of occupancy, legislative or administrative consents from any local or national governmental or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based. o It is assumed that the utilization of the land and/or improvements is within the boundaries or property lines of the property described herein and that there is no encroachment or trespass unless noted within the report. The appraisal report has been made with, and is subject to, the following general limiting conditions: o The appraisers herein, by reason of this appraisal report, are not required to give further consultation, testimony or to be in attendance in court or at any governmental or other hearing with reference to the property without prior arrangements having been made relative to such additional employment. o The distribution, if any, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and buildings must not be used in conjunction with any other appraisal and are invalid if so used. o Use and disclosure of the contents of this report is governed by the bylaws and regulations of the Appraisal Institute. LANDAUER 3 REAL ESTATE COUNSELORS o The client may show the reports in their entirety to interested parties outside its organization. Furthermore, the client may reference Landauer as its appraiser of record and the limited reports in their entirety only in any registration statement, prospectus, proxy materials, other offering materials or other communication (whether oral or written) distributed to third parties, subject to Landauer's prior written consent to any such reference. It is the understanding of Landauer that among the uses of the reports will be the disclosure of their contents in offering materials for the sale of securities and in various filings pursuant to state and federal securities laws. o This appraisal report is based upon and supported by available factual economic and market data and our interpretation of market conditions as of the date of the appraisal. Though we believe that our assumptions and forecasts are well supported, we cannot be held responsible for events which may alter market and property conditions between the date of inspection and the effective date of the opinion of value. o The information furnished to the appraisers by the client and others, as contained in this report, is considered to be from reliable sources; however, no responsibility is assumed for its accuracy. The appraisers reserve the right to modify the value conclusion should the accuracy of that information change subsequent to delivery of this appraisal report. o The Americans with Disabilities Act ("ADA") became effective January 26, 1992. Landauer has not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the property. Since we have no direct evidence relating to this issue, we did not consider possible non-compliance with the requirements of ADA in estimating the value of the property. LANDAUER 4 REAL ESTATE COUNSELORS The appraisal report has been made with, and is subject to, the following specific limiting conditions. o We have relied upon information supplied by the property manager and the owner. Additional details including landlord's tenant finish contribution, environmental reports, and some lease amendments were not provided. o A legal description was provided for the appraisal; however, we have relied upon areas cited by the Assessor of Holland Township, Ottawa County, Michigan. The legal descriptions are included in the Addenda. o We have used a rent roll, leases and verbal confirmation of occupancy and tenant retention as the basis for our estimate of potential gross income. o We have relied upon 1993, 1994 and 1995 operating expense data of the previous owner. A 1997 budget was not provided. o From the information provided, there appears to be about 24 different expense recovery methods used to calculate tenant recoveries. In the appraisal, three basic recovery methods are applied for the enclosed mall tenants and plaza tenants. Special recovery methods as stated in the leases were applied to the anchor and outlot tenants and some specific mall tenants. o It is assumed that the anchor tenants whose initial leases expire during the analysis period, will exercise the renewal options specified within their leases. o Although the ownership includes vacant land parcels, these parcels are not valued according to the instructions of the client. LANDAUER 5 REAL ESTATE COUNSELORS o Special Limiting Conditions are also stated in various portions of the Self-Contained Appraisal Report and are to be carefully noted in accepting the limited restricted appraisal report. LANDAUER 6 REAL ESTATE COUNSELORS CERTIFICATION The undersigned certify to the best of their knowledge and belief that: The statements of fact contained in this appraisal report and upon which the analyses, opinions and conclusions expressed herein are based are true and correct. This report is made subject to the Assumptions and Limiting Conditions set forth on the following pages which set forth all of the limiting conditions (imposed by the terms of the assignment or by the appraisers) affecting the analyses, opinions and conclusions contained in this report. Employment and compensation for making this appraisal are not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the attainment of a stipulated result, or the occurrence of a subsequent event. We have no direct or indirect current or prospective personal interest or bias in the subject matter of this appraisal report or to the parties involved. The appraisal assignment was not based on a requested minimum valuation, a specific valuation, or the approval of a loan. This report has been performed in accordance with the Uniform Standards of Professional Appraisal Practice as promulgated by the Appraisal Standards Board of the Appraisal Foundation adopted by the Appraisal Institute, and the Code of Professional Ethics of the Appraisal Institute. The use of this report is subject to the requirements of the Appraisal Institute relating to review by their duly authorized representatives. As of the date of this report, James C. Kafes, John I. Wrzesinski and John P. Baker have completed the requirements of the continuing education program of the Appraisal Institute. No one other than the undersigned prepared the analyses, opinion and conclusions concerning real estate that are set forth in this report. Kevin D. Gray inspected the property in August 1996. John P. Baker inspected the property on January 9, 1997, and John I. Wrzesinski inspected the property on January 21, 1997. /s/ JCK /s/ John I. Wrzesinski James C. Kafes, MAI, CRE John I. Wrzesinski, MAI, CRE Executive Managing Director Senior Managing Director Certified Michigan Appraiser License #1201002445 /s/ Kevin D. Gray /s/ John P. Baker Kevin D. Gray, CRE John P. Baker, MAI Managing Director Director LANDAUER 7 REAL ESTATE COUNSELORS SUMMARY OF SALIENT FACTS AND CONCLUSIONS Property Identification: Westshore Mall Holland, Michigan Location: Northeast corner of US-31 and James Street, Holland, Michigan. Improvements/Site: The improvements consist of a 393,949 square foot regional shopping center situated on a site of approximately 51.4-acres. Located on the site is the regional mall including four anchors, a strip center adjacent to a Target department store, a restaurant and bank. The ownership also includes four vacant parcels of land totaling about 22.8 acres which are not valued as part of this appraisal, according to the instructions of the client. Zoning: C-2, General Commercial District Occupancy: 96.4 percent leased and occupied with permanent enclosed mall tenants, excludes the anchor stores and outlots. Including anchor stores and outlot tenants the mall is 98.3 percent leased and occupied. Highest and Best Use: Present Use; Regional Mall Interest Appraised: Leased Fee Interest, subject to the existing and pending tenant leases and assumptions and limiting conditions stated herein. Date of Valuation: December 31, 1996 Date of Inspection: January 9, 1997 and January 21, 1997 Market Value Indications Cost Approach: Not Applicable Sales Comparison Approach: $30,000,000 to $35,000,000 Income Approach: $33,000,000 Final Value Conclusion: $33,000,000 =========== LANDAUER 8 REAL ESTATE COUNSELORS NATURE OF THE APPRAISAL IDENTIFICATION OF THE PROPERTY AND INTEREST APPRAISED Westshore Mall consists of 393,949 square feet of retail space situated on approximately 51.4 acres of land at the northeast corner of US-31 and James Street in Holland Township, Ottawa County, Michigan. The attached anchors, Sears, JC Penney, Younkers and Steketee's are part of the ownership. Two outlot pads and buildings are also part of the ownership, as is a strip retail center. The property is in excellent condition with no deferred maintenance noted. On-site asphalt surface parking is available with 2,292 spaces. A copy of the legal description is included in the Addenda. The property rights appraised in this report consist of the Leased Fee Estate. Leased Fee Estate, as defined by the Appraisal Institute Dictionary of Real Estate Appraisal, Third Edition, page 204, is: an ownership interest held by a landlord with the rights of use and occupancy conveyed by lease to others. The rights of lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease. PURPOSE, FUNCTION AND DATE OF APPRAISAL The purpose of the appraisal is to estimate the Market Value of the Leased Fee Estate as of December 31, 1996. The function of the appraisal is to assist Morgan Stanley Mortgage Capital, Inc. with loan underwriting. LANDAUER 9 REAL ESTATE COUNSELORS The Uniform Standards of Professional Appraisal Practice defines Market Value as: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: - Buyer and seller are typically motivated. - Both parties are well informed or well advised, and acting in what they consider their own best interests. - A reasonable time is allowed for exposure in the open market. - Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto. - 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. SCOPE OF THE APPRAISAL The scope of this complete appraisal involved the systematic research and analysis necessary to reach a market value conclusion for the subject. The initial step was to inspect the property, the general market area and the neighborhood. After investigating the area regarding economic, political, social and physical factors, research was conducted relevant to the valuation process, including gathering land sales, financial information, data concerning competitive shopping center properties and comparable improved sales, and other information pertinent to the valuation. This information was reviewed, confirmed and analyzed through the use of the Sales Comparison and Income Approaches to value. These approaches are detailed in the appropriate sections of the report. The Cost Approach is not considered to provide a meaningful value indication and is excluded from the analysis as agreed upon by the client. LANDAUER 10 REAL ESTATE COUNSELORS Lastly, a final value estimate was concluded based on the above analyses, which, in turn, were influenced by the most reliable and appropriate data. This narrative report is the result of our findings and analyses. HISTORY OF PROPERTY The subject property was purchased by Ivanhoe-Wilmorite Midwest, LLC. from Westshore Mall Limited Partnership on December 31, 1996 for a reported $30,159,000, net of closing costs. A 10.5 percent capitalization rate applied to the first year's income was used in developing this value. Prior to its most recent sale, the subject has been in the continuous ownership of the seller, Westshore Mall Limited Partnership, since its construction in 1988. [GRAPHIC OMITTED] Area Map OTTAWA COUNTY, MI REGIONAL ECONOMIC & DEMOGRAPHIC FACT SHEET (1990-2001)
Compound Annual 1996 2001 Percent Growth 1990 (est.) (proj.) 1980-1990 1990-1996 1996-2001 ---- ------ ------- --------- --------- --------- Population Ottawa County, MI 187,768 214,965 235,865 1.8% 2.3% 1.9% Grand Rapids-Muskegon-Holland, MI, MSA 937,891 1,010,591 1,063,089 1.1% 1.3% 1.0% State of Michigan 9,295,297 9,610,928 9,802,134 0.1% 0.6% 0.4% United States 248,708,990 265,253,151 276,918,306 1.0% 1.1% 0.9% Households Ottawa County, MI 62,664 75,501 80,894 2.2% 2.7% 1.9% Grand Rapids-Muskegon-Holland, MI, MSA 333,911 368,804 389,309 1.5% 1.7% 1.1% State of Michigan 3,419,331 3,626,743 3,713,927 0.7% 1.0% 0.5% United States 91,947,195 100,066,882 104,497,652 1.4% 1.4% 0.9% Avg. Household Income Ottawa County, MI $41,938 $48,503 $58,196 6.6% 2.5% 3.7% Grand Rapids-Muskegon-Holland, MI, MSA $37,744 $43,293 $51,744 6.2% 2.3% 3.8% State of Michigan $38,065 $43,407 $51,764 5.6% 2.2% 3.6% United States $38,464 $44,580 $53,841 6.6% 2.5% 3.8% Per Capita Income Ottawa County, MI $13,996 $16,870 $20,339 6.9% 3.2% 3.6% Grand Rapids-Muskegon-Holland, MI, MSA $13,438 $16,001 $19,202 6.5% 3.0% 3.7% State of Michigan $14,002 $16,494 $19,746 6.2% 2.8% 3.7% United States $14,220 $17,043 $20,545 6.8% 3.1% 3.8% Aggregate Income (000) Ottawa County, MI $2,628 $3,627 $4,797 8.8% 5.5% 5.8% Grand Rapids-Muskegon-Holland, MI, MSA $12,603 $16,171 $20,414 7.6% 4.2% 4.8% State of Michigan $130,156 $158,527 $193,553 6.2% 3.3% 4.1% United States $3,536,695 $4,520,610 $5,689,345 7.9% 4.2% 4.7% Non-Agricultural Employment Ottawa County, MI 79,868 103,264 116,084 4.0% 4.4% 2.4% Grand Rapids-Muskegon-Holland, MI, MSA 446,717 510,980 555,175 2.9% 2.3% 1.7% State of Michigan 3,970,179 4,284,925 4,557,404 1.4% 1.3% 1.2% United States 109,685,073 118,346,895 129,163,244 2.0% 1.3% 1.8% Retail Sales (000) Ottawa County, MI $1,781,018 $2,370,129 5.9% Grand Rapids-Muskegon-Holland, MI, MSA $9,435,839 $12,247,136 5.4% State of Michigan $91,523,947 $110,915,868 3.9% United States $2,355,241,609 $2,871,024,805 4.0%
Source: Urban Decision Systems; Market Statistics; Data Resources, Inc. Retail Sales data is for 1995 and 2000 Growth Rates - 1996 to 2001 [GRAPHIC OMITTED] LANDAUER 12 REAL ESTATE COUNSELORS DEMOGRAPHIC/AREA REVIEW POPULATION TRENDS The Grand Rapids-Muskegon-Holland Metropolitan Statistical Area (MSA) encompasses four counties in western Michigan: Ottawa, Allegan, Kent and Muskegon Counties. Henceforth in this report, whenever the MSA is referenced, it is called either the "Grand Rapids MSA" or "GR- MSA". The GR- MSA includes the cities of Muskegon, Holland and Grand Rapids, which is Michigan's second largest city. As summarized in the table on the facing, the projected 1996 population for the Grand Rapids MSA is 1,010,591, representing an increase of 73,060 persons from 1990 levels or a 1.3 percent compound annual increase. The estimated population in 2001 is 1,063,089 persons or total increase of 52,490 persons. From 1996, the population is estimated in increase at an annual rate of 1.0 percent. In general, the compound annual growth rate for the GR- MSA is twice that of the State of Michigan and comparable to the U.S. as a whole. INCOME LEVELS Per capita income in the Grand Rapids MSA is projected to be $16,0001, approximately 6.1 percent lower than the national average but about the same as the State of Michigan. However, Ottawa County's per capita income is about 5.4 percent higher than the GR- MSA. A similar trend is indicated when Average Household Income is analyzed. The GR- MSA Average Household Income for 1996 is about 3.1 percent lower than the national average but about the same as the State. However, Average Household Income in Ottawa County is about 12.0 percent higher than the GR- MSA Since 1990, per capita income in the Grand Rapids MSA has grown at a compound annual rate of 3.0 percent, consistent with Ottawa County, State of Michigan and nation. This growth rate is expected to increase to 3.7 percent through 2001, an increase consistent with state and national projections. LANDAUER 13 REAL ESTATE COUNSELORS EMPLOYMENT The Grand Rapids MSA has historically served as a manufacturing center where nearly 30 percent of its workers are employed in the industrial sector. The GR-MSA has the highest concentration of manufacturing employees in the nation. Furthermore, the trade and services employment sectors have a substantial presence in the area. DRI/McGraw-Hill reports that manufacturing employment grew by about 3.9 percent per year over the last two years, but they are predicting total manufacturing growth will slow by 0.3 percent in the near future. Major employers in the GR-MSA are listed below: Major Employers Grand Rapids MSA Major Employers Services --------------- -------- Steelcase Furniture Manufacturing Meijer Grocery Retail Trade Amway Health-Care Services General Motors Automotive Manufacturing Butterworth Hospital Health-Care Services D&W Food Centers Grocery Retail Trade Miko Care Health-Care Services Blodgett Memorial Medical Center Health-Care Services St. Mary's Health Services Health-Care Services Old Kent Bank and Trust Financial Services An historical perspective of the area's unemployment rate suggests that there is some economic stability. It is important to note that the unemployment rates for the GR-MSA are lower than the state and nation. Unemployment Rates Proj. Area 1994 1995 1996 1997 ---- ---- ---- ---- ---- GR-MSA 4.5% 4.1% 4.1% 4.5% Michigan 5.9% 5.3% 4.7% 5.0% United States 6.1% 5.5% 5.8% 5.7% [GRAPHIC OMITTED] Holland Vicinity Map LANDAUER 14 REAL ESTATE COUNSELORS The table on the facing page displays the employment characteristics of Ottawa County and the Grand Rapids MSA, in comparison to the state and nation. In the GR- MSA, the largest percentage of jobs (1996 estimate) is in the manufacturing sector with 29.2 percent. The services sector has 24.8 percent of the market share of employment with the trade sector having 23.9 percent. In 1990, the manufacturing share was 30.0 percent while the services and trade sectors had a 22.0 percent and 25.2 percent share, respectively. The trade sector lost a substantial market share of total employment since 1990 while the services sector posted a significant gain. The location quotient for the manufacturing and trade sectors exceed 100 percent which shows the dominance of these sectors in the overall economy. The total employment growth in the GR-MSA was 14.4 percent (1990 to 1996) and represents a 2.3 percent annual increase. As projected, total employment will increase by 8.6 percent (1996 to 2001), an 1.7 percent annual change. By employment sector the greatest projected between 1996 and 2001, the greatest changes will be realized in the trade and services sectors HOLLAND, OTTAWA COUNTY, MICHIGAN Holland was settled in 1947 and officially incorporated in 1867. The area's settlers were primarily Dutch immigrants, and this Dutch influence remains today. The city of Holland is located with in Ottawa and Allegan Counties, with only about 18 percent of its population residing in Allegan County. Holland is located about 27 miles west of Grand Rapids, Michigan's second largest city, and Muskegon lies 35 mile to the north. Chicago is located 146 miles away to the west and Detroit is located 173 miles to the east. A vicinity map is found on the following facing page. Primary highway access to the area is by way of I-96, Business Route 196 and US-31. Public transportation is provided by Dial-A-Ride. Kent County International Airport is located in Grand Rapids and is served by ten airlines, and the Muskegon County Airport is served by three airlines. Railroad passenger service is provided for by Amtrak which offers service between Holland and OTTAWA COUNTY, MI REGIONAL EMPLOYMENT FACT SHEET (1980-2001)
Compound Annual % Growth 1996 2001 1980 to 1990 to 1996 to Industry Location 1990 (est.) (proj.) 1990 1996 2001 Weight (1) Quotient (2) ---- ------ ------- ---- ---- ---- ---------- ------------ Ottawa County, MI Mining 221 133 124 9.5% -8.1% -1.4% 0.1% 26.3% Construction 3,926 4,588 4,873 4.3% 2.6% 1.2% 4.4% 99.9% Manufacturing 30,370 38,011 39,639 3.2% 3.8% 0.8% 36.8% 238.2% Transportation & Utilities 2,718 2,855 3,102 3.8% 0.8% 1.7% 2.8% 53.5% Trade 15,099 19,336 22,377 3.9% 4.2% 3.0% 18.7% 79.5% Finance, Insurance & Real Estate 2,346 3,276 3,658 5.0% 5.7% 2.2% 3.2% 54.6% Services 15,577 23,026 28,411 7.5% 6.7% 4.3% 22.3% 78.4% Government 9,611 12,039 13,900 2.1% 3.8% 2.9% 11.7% 70.2% ----- ------ ------ --- --- --- ---- ---- Total Non-Agricultural Employment 79,868 103,264 116,084 4.0% 4.4% 2.4% 100.0% 100.0% - -------------------------------------------------------------------------------------------------------------------------------- Grand Rapids-Muskegon-Holland, MI, MSA Mining 977 888 833 5.0% -1.6% -1.3% 0.2% 35.4% Construction 19,623 21,346 22,152 3.2% 1.4% 0.7% 4.2% 93.9% Manufacturing 133,998 149,028 149,086 1.5% 1.8% 0.0% 29.2% 188.7% Transportation & Utilities 16,488 17,569 18,280 1.1% 1.1% 0.8% 3.4% 66.5% Trade 112,650 122,160 135,372 4.2% 1.4% 2.1% 23.9% 101.5% Finance, Insurance & Real Estate 17,766 21,218 22,697 3.5% 3.0% 1.4% 4.2% 71.4% Services 98,081 126,711 149,689 5.1% 4.4% 3.4% 24.8% 87.2% Government 47,133 52,060 57,066 0.8% 1.7% 1.9% 10.2% 61.3% ------ ------ ------ --- --- --- ---- ---- Total Non-Agricultural Employment 446,717 510,980 555,175 2.9% 2.3% 1.7% 100.0% 100.0% - -------------------------------------------------------------------------------------------------------------------------------- State of Michigan Mining 9,397 7,644 7,156 -2.8% -3.4% -1.3% 0.2% 36.4% Construction 142,525 161,758 163,754 1.9% 2.1% 0.2% 3.8% 84.9% Manufacturing 943,721 945,989 923,264 -0.6% 0.0% -0.5% 22.1% 142.8% Transportation & Utilities 158,390 165,994 167,790 0.4% 0.8% 0.2% 3.9% 74.9% Trade 949,446 1,020,203 1,102,603 2.6% 1.2% 1.6% 23.8% 101.0% Finance, Insurance & Real Estate 190,950 197,776 206,599 2.0% 0.6% 0.9% 4.6% 79.4% Services 941,656 1,143,427 1,302,597 3.9% 3.3% 2.6% 26.7% 93.8% Government 634,092 642,145 683,638 0.1% 0.2% 1.3% 15.0% 90.2% ------- ------- ------- --- --- --- ---- ---- Total Non-Agricultural Employment 3,970,179 4,284,925 4,557,404 1.4% 1.3% 1.2% 100.0% 100.0% - -------------------------------------------------------------------------------------------------------------------------------- United States Mining 706,935 580,297 555,131 -3.6% -3.2% -0.9% 0.5% 100.0% Construction 4,999,505 5,265,186 5,550,150 1.5% 0.9% 1.1% 4.4% 100.0% Manufacturing 19,114,481 18,291,693 18,206,940 -0.6% -0.7% -0.1% 15.5% 100.0% Transportation & Utilities 5,788,409 6,121,598 6,348,340 1.2% 0.9% 0.7% 5.2% 100.0% Trade 25,866,231 27,888,031 31,009,236 2.4% 1.3% 2.1% 23.6% 100.0% Finance, Insurance & Real Estate 6,692,006 6,881,294 7,374,991 2.6% 0.5% 1.4% 5.8% 100.0% Services 27,876,068 33,655,628 38,961,776 4.5% 3.2% 3.0% 28.4% 100.0% Government 18,641,411 19,663,109 21,156,568 1.2% 0.9% 1.5% 16.6% 100.0% ---------- ---------- ---------- --- --- --- ---- ----- Total Non-Agricultural Employment 109,685,073 118,346,895 129,163,244 2.0% 1.3% 1.8% 100.0% 100.0% - --------------------------------------------------------------------------------------------------------------------------------
Change in Employment [GRAPHIC OMITTED] Source: Data Resources, Inc. 1) Number of jobs in this industry as a percentage of the total jobs in all industries. 2) The industry weight for the area referenced here (either county, MSA or state) divided by the industry weight for the nation. LANDAUER 15 REAL ESTATE COUNSELORS Chicago. Rail freight service is provided by CSX. Holland also has access to commercial Great Lakes shipping through the major Lake Michigan ports at Muskegon and Grand Haven. The projected 1996 population of the Holland area (Ottawa County) is 214,965 which is an annual increase of 2.3 percent over the 1990 population of 187,768. The population estimate for 2001 is 235,865, an annual increase of 1.9 percent. There are about 73,501 households which would mean there are 2.9 persons per household in 1996. Households are estimated to increase to 80,894 in 2001, and the average household size would be the same at 2.9 persons. Holland has a diverse housing market with homes as large as 10,000 square feet found on Lake Macatawa. Holland's older residential areas a located south of downtown between Michigan Avenue and State Street. There are a number of apartment and condominium developments in the Holland area. According the Holland Chamber of Commerce and 1990 census data, average home prices in the Holland area are about $74,600 slightly higher than Michigan's average home value of $60,600. New home construction averages about $134,500. Apartment rents are about $402 per month in Ottawa County and $305 per month in Allegan County. The employment base of the Holland area is also diverse and includes three primary industries which account for about 60 percent of the employment opportunity. Office furniture manufacturing, food processing and automotive component manufacturing are the three largest employment groups. The Haworth Company manufactures office furniture and is Holland's largest employer with 6,000 employees worldwide and 3,500 employees located in Holland. Herman-Miller, Inc. in Zeeland, has 6,000 worldwide employees with 2,800 in the west Michigan area. The Prince Corporation and Donnelly Corporation both manufacture automotive components and employ 4,500 and 1,600 persons, respectively. Food processing companies are represented by Bil Mar Foods (1,500 employees), Planters Lifesavers Company and Heinz, USA. Retail development is located throughout the area with the area along US-31 near Business Route 196 at James Street becoming the primary retail area. Found at this location are the Westshore Mall, LANDAUER 16 REAL ESTATE COUNSELORS Horizon Outlet Center, Target, Kohl's, Sam's Club and WalMart. Downtown Holland is a unique shopping district with about 70 specialty stores and restaurants. Downtown Holland has a snow melt system in four blocks of the shopping district. Retail sales in the Ottawa County are projected to be $2,370,129,000 in 1996 up from $1,1781,018,000 in 1990; this is an increase of 5.9 percent per year. Employees With Over 500 Employees Holland, Michigan Name Product ---- ------- Herman Miller, Inc. Modular Office Systems Haworth Co. Office Furniture Donnelly Corp. Automotive Mirrors Bil Mar Foods Turkey Products Prince Corp. Auto Interior Components Perrigo Co. Health & Beauty Products Planters Lifesavers Confections Hart & Cooley, Inc. Heating/Cooling Registers S2 Yachts Boat Manufacture Thermotron Industries Environmental Test Equipment According to data published by the Holland Chamber of Commerce, the 1995 civilian labor force of Ottawa County totaled 113,175 persons, with 108,225 persons employed. This results in an unemployment rate of 4.4 percent. In the 12 years between 1983 and 1994, the unemployment rate of Ottawa County has declined from 10.2 percent (1983) to 3.8 percent (1994) and averaged 6.2 percent. Although the 1995 unemployment data indicates a slight rise in the rate from the previous year, the rate is well below the 12-year average. Between 1993 and 1995, the unemployment rate has averaged 4.3 percent. For the time being, employment in the area could be considered stabilized. CONCLUSION The Grand Rapids MSA and Ottawa County demographic and economic characteristics suggest stability. Population and income are estimated to increase at rates that are similar to the State of Michigan and the nation. The MSA area unemployment level is stabilized at about 4.4 percent. The MSA has a diverse manufacturing economy which office furniture, food processing and automobile LANDAUER 17 REAL ESTATE COUNSELORS component manufacturing companies representing the foundation of the employment base. Recreation and tourism are also major components of the local economy. Retail sales have increased at a brisk annual rate of 5.9 percent in Ottawa County and 5.4 percent in the MSA. The economic characteristic and trends of the MSA and Ottawa County provide a favorable influence on the subject, Westshore Mall, as a retail center and regional mall serving the Holland area. [GRAPHIC OMITTED] Neighborhood Map LANDAUER 19 REAL ESTATE COUNSELORS NEIGHBORHOOD ANALYSIS The subject property is located in the north of the city of Holland in Ottawa County, Michigan at James Street and US-31. Ottawa County as well as Allegan, Kent and Muskegon Counties comprise the Grand Rapids-Muskegon-Holland, Michigan Metropolitan Statistical Area (MSA). The immediate neighborhood is considered a commercial strip on both sides of US-31, centering on James Street. The neighborhood boundaries are Riley Street on the north, Business Route 196 on the south, 128th Avenue on the west and 120th Avenue on the east. Extending beyond US-31, the area is considered suburban to the west and rural to the east. A neighborhood map on the previous page shows the general neighborhood boundaries; also, the photographs in the front of the report show the land uses around the subject. US-31 is a multi-lane highway that links Muskegon, Grand Haven and Holland with I-96. Riley, James and Lakewood Streets are east-west local streets. Eighth Street, located south of Business Route 196, provides access to Downtown Holland. The interchange of US-31 and Business Route 196 is located about one mile south of the subject, and Business Route 196 connects with I-96 about 5-miles east of US-31. Also, US-31 has an interchange with I-96 south of Holland about 6-miles from the subject. The area is primarily developed with retail uses including the Westshore Mall, Horizon Outlet Center, Sam's Club, WalMart, Lowes, Circuit City, Target and Kohl's. Other retailers include Ark Van, New York Carpet World, General Food Service, and Pier One Imports. There are numerous hotels located in the neighborhood including Hampden Inn, Fairfield Inn, Queen's Inn and Country Inn. Restaurants include Arby's, McDonalds, Red Lobster, Mesquite Willies, Branns and Steak N' Shake. There is an abundance of vacant land zoned for commercial development in the neighborhood. Recent commercial land sales range from $46,000 to $75,000 per acre for development sites and $275,000 to $405,000 for pad sites located along US-31. At present, only a small amount of commercial development is being contemplated in the area, as reported by the Holland Township Zoning official. It LANDAUER 20 REAL ESTATE COUNSELORS is reported that an assemblage of sites is being undertaken at the southeast corner of Riley Street and US-31 and that a service station development might be located on the assembled parcel. Most vacant land is located north of the subject; however, it is noted that the mall ownership has about 21.5 acres of commercial land and pad sites available for commercial development. The neighborhood is a developing area, and the potential for more residential development enhances the continued use of the subject as a regional mall. It is unlikely that another regional mall will be developed in the neighborhood; however, the abundance of vacant commercially zoned land suggests that other commercial development could potentially provide competition for the Westshore Mall tenants. The additional development of off-price retailers and discounters such as Target, WalMart and Sam's Club and the potential for other departments stores such as Kohl's could pose a risk to the future retail sales at the subject. LANDAUER 21 REAL ESTATE COUNSELORS RETAIL MARKET OVERVIEW OVERVIEW Westshore Mall is the Holland area's first regional mall. Other regional malls are located in the Grand Rapids MSA including Westwood and Eastbrook in Grand Rapids, Muskegon Mall in Muskegon and The Orchards Mall in Benton Harbor. A new regional mall is planned for Grandville, Michigan about 20-miles east of the subject on I-96. Also competing for customers are a number of free-standing department and discount stores. Department stores serving the area include Kohl's, Sears, JC Penny, Steketee's and Younkers. Sears, JC Penney, Steketee's and Younkers are represented at the subject and most of the other regional shopping centers. Wholesale clubs and big-box retailers such as Target, Sam's Club and WalMart are active in the area. TRADE AREA DELINEATION The ability of a retail store or group of stores to attract customers from within a specific market is limited by physical (geographic) are retail merchandising constraints. Consideration must be given to such factors as distance, driving times, the access convenience provided by existing and future highway systems, distribution of the resident population within the related region and the natural as well as man-made barriers which direct or channel the movement of residents within the area, (such as rivers, large bodies of water, marshlands, large public open spaces, political boundaries, and expressways or railroads). Other factors such as merchandising profile and strength exhibited by on-site retailers relative to competing shopping facilities may also have a profound impact on the trade area's definition. Typically, the majority of a mall's recurring sales are generated by residents located within a "Primary Trade Area", while additional sales are generated by persons residing outside of this area, either in a "Secondary Trade Area" or outside of the region altogether. The subject property is a suburban mall, LANDAUER 22 REAL ESTATE COUNSELORS located in an area having a relatively low population density. In a "shopper exit interview study" performed by the previous owner and manager, about 48.6 percent of all shoppers reside in an area with Holland, Michigan zip codes. The remaining 51.4 percent of shoppers are located in Zeeland, Grand Haven, and other surrounding communities. Grand Rapids and Muskegon were not mentioned in the exit survey. However, it was reported to the appraisers by the mall management, that Holland area shoppers would travel to Woodland Mall in Grand Rapids as an alternative to the subject primarily because of the larger size of Woodland Mall and its large anchors. According to the exit survey, the Westshore Mall trade area consists of the townships of Spring Lake, Grand Haven, Allendale, West Olive, Zeeland, Husdonville, Holland, Saugatuck, Hamilton and Fennville. In general the trade area is linear, radiating along US-31 and Business Route 196. The distance of the trade area boundaries vary from the subject, but most of the shoppers appear to come from an area within 15-miles. For the analysis, we have chosen an area contained within a 15-mile radius from the subject property. TRADE AREA POPULATION The table below shows the population of the subject's trade area, comparing the 1990 census data with 1996 estimates and 2001 projections. Urban Decision Systems, Inc. (UDS) estimates the 1996 trade area population was 170,301 persons, and this is a 16.6 percent increase from 1990 census levels. Based on the 2001 population projections, the total population is expected to increase an additional 11.1 percent. The upward trend is a characteristic of a growing community having and abundance of vacant land for expansion and growth. Westshore Mall Trade Area Population Estimates 1990 Census 1996 Est. 2001 Proj. ----------- --------- ---------- Trade Area 146,041 170,301 189,227 Grand Rapids MSA 937,891 1,010,591 1,063,089 - ---------- Source: Urban Decision Systems, Inc. LANDAUER 23 REAL ESTATE COUNSELORS The preceding table shows population in the trade area increasing from 1996 to 2001 at a compound annual rate of 2.13 percent. This is above the 1.0 percent compound annual growth expected for the GR- MSA. The following table displays the number of households included in the trade area as estimated by UDS. As with population, the total number of households in the trade area has increased 19.3 percent from 1990 census figures, a trend expected to continue at a slower rate (11.1 percent ) through the year 2001. Compared to the MSA, the trade area households have increased and are projected to increase at a faster rate. Westshore Mall Trade Area Household Estimates 1990 Census 1996 Est. 2001 Proj. ----------- --------- ---------- Trade Area 48,211 57,514 64,091 Grand Rapids-Holland 333,911 368,804 389,309 - ---------- Source: Urban Decision Systems, Inc. INCOME ESTIMATES AND COMPARISONS The income characteristics of the population of the subject property's trade area has a direct bearing on the property's economic viability. The following table presents a comparison of the income characteristics of the subject property's trade area to the Grand Rapids MSA and the nation. Westshore Mall Average Household Income Comparison 1990 Census 1996 Est. 2001 Proj. ----------- --------- ---------- Trade Area $42,268 $48,650 $58,148 Grand Rapids MSA $37,744 $43,293 $51,744 United States $38,464 $44,680 $53,841 - ---------- Source: Urban Decision Systems, Inc. LANDAUER 24 REAL ESTATE COUNSELORS The preceding table indicates that the average household income level for the trade area is slightly above that of the GR- MSA and the nation. Since the 1990 census, the trade area has seen average household income increase at a compound annual rate of 2.4 percent, in comparison to 2.3 percent for the GR- MSA and a 2.5 percent for the nation. The average household income for the trade area is projected to be faster over the next five years, with a compound annual growth rate of 3.6 percent projected through 2001. This is about the same for the GR- MSA and slightly slower than the nation. TRADE AREA EXPENDITURE POTENTIAL The retail expenditure potential of the subject property's trade area is key to the mall's success. Landauer estimates the retail expenditure potential of a mall's trade area using a three step process: First, the total gross income of the trade area is calculated by multiplying the average 1990, 1996 and 2001 household income by the number of households; Second, the total gross income is multiplied by a disposable income factor (income remaining after taxes); and Third, disposable income is multiplied by a GAFO factor (the percentage of expenditures for general merchandise, apparel, furnishings and other retail purchases--the expenditure categories most directly related to a typical regional mall tenant mix) to estimate the amount of trade area income available for retail purchases. The disposable income factor in Michigan was estimated to be approximately 86.8 percent in 1990 and 86.9 percent for 1996 and 2001. GAFO expenditures (expenditures for general merchandise, apparel, furnishings and other retail purchases) are estimated to be 20.0 percent of disposable income. For purposes of comparison, the expenditure calculations for the subject trade area are illustrated below for the years 1990, 1996 and 2001. LANDAUER 25 REAL ESTATE COUNSELORS Westshore Mall Trade Area GAFO Expenditures 1990 1996 2001 -------- -------- -------- Total Households 48,211 57,514 64,091 Average Household Income $42,268 $48,650 $58,148 Total Income (000) $2,037,783 $2,798,056 $3,726,763 Disposability Factor 0.868 0.869 0.869 Disposable Income (000) $1,768,796 $2,431,511 $3,238,557 GAFO Factor 0.20 0.20 0.20 GAFO Expenditures (000) $353,759 $486,302 $647,711 - ---------- Source: Urban Decision Systems, Inc., Landauer Associates, Inc. GAFO expenditures are projected to increase by 5.9 percent per year between 1996 and 2001 which is faster than the 5.5 percent annual rate from 1990 to 1996. In our analysis, we are projecting 1997 mall sales to be $70,273,000, inclusive of all anchors which is expected to increase to $80,269,000 by 2001, a 4.0 percent annual growth rate. Our sales projections indicate that the Westshore Mall is expected to capture 13.7 percent of potential trade area GAFO expenditures in 1997, declining to a 12.4 percent capture rate by 2001. Typical capture rates for regional malls range between 7.0 and 15.0 percent of GAFO and the subject's capture rate is within the range. Also, affecting total sales would be the amount of sales at Steketee's which are well below the sales reported for Sears, JC Penney and Younkers. The new owner of Westshore Mall has indicated the low sales for this anchor represents a potential for future growth by replacing it with a stronger anchor, should the opportunity present itself.. Growth rates for retail sales and market rents used later in this appraisal are developed based on projected growth in trade area retail expenditures. Utilizing the above analysis, historic and projected compound annual sales growth figures are extracted and analyzed. Between 1990 and 1996, estimated GAFO sales grew at a compound annual rate of 5.4 percent. Between 1996 and 2001, GAFO sales are expected to grow at a slightly faster rate of 5.9 percent. However, as there is potential for future competition with the development of Gandville Mall and future commercial development in the LANDAUER 26 REAL ESTATE COUNSELORS neighborhood, we have tempered the growth rate and have applied a general inflation rate of 3.5 percent. COMPETITIVE RETAIL ANALYSIS Westshore Mall is a strong performer within its market. The center's location, size and tenant mix all act to enhance its competitive position and is considered superior to its competing malls. The merchandise mix of the center appears to cater well to the population within its market. However, the subject is a small retail mall and significant retail dollars apparently go to the power center developments located nearby, with fashion expenditures going outside the market area to Woodland Mall in Grand Rapids. Retail development in the MSA has been driven by national and regional big-box retailers. Also, discount department stores (Target, WalMart, Sam's Club and Kohl's) are continuing to expand in the market area. In the last few years a number of category killers have built facilities in the Grand Rapids area to gain market share and distribution and advertising efficiencies. These stores include Meijer's, Target, Barnes & Noble and others. Kohl's, Elder-Beerman and Toys R Us are also entrants into the market. There are no commercial market reports which detail market statistics for the Holland area; however, the Holland Chamber of Commerce estimates a total retail GLA of 2,010,000 square feet with about 520,000 square feet in the Westshore Mall development, including the mall, Target and Kohl's. There is a factory outlet development adjacent to the subject, south of James Street. Several retail mall developments, including Muskegon Mall (Muskegon), Woodland and Eastbrook Malls (Grand Rapids) and Orchard Mall (Benton Harbor) provide some competition for the subject. Woodland Mall is considered the strongest competitor for the subject. Future developments include a shopping center proposed by Horizon in Fruitport which may not occur and Grandville Mall in LANDAUER 27 REAL ESTATE COUNSELORS Grandville which is proposed to be opened in 1998 or 1999 by General Growth Properties. Numerous department stores and the retail shops in Downtown Holland also provide competition for the subject. o Woodland Mall is anchored by JC Penney, Sears and Hudson's and contains approximately 1,100,000 square feet of retail space including the anchors. The enclosed mall area contains about 425,000 square feet, and there are about 135 stores of which nine were vacant when the mall was inspected. The mall does not have a dedicated food court area. First opened in 1968, this center is owned and managed by The Taubmann Company. The mall's appearance is dated, but sales are reported to be high because of the lack of competition in the metropolitan area. Economic data on the mall are not available from the owner/manager but other area brokers report mall sales upwards from $350 per square foot and rents upwards from $35 per square foot. o Eastbrook Mall is located near Woodland Mall and is managed by Visser Development, Inc. This is a single-level mall anchored by Steketee's and non-typical regional mall anchors including Kingman's Furniture Store, Minard's and Burlington Coat Factory. The mall first opened in 1969, and its appearance is dated. The mall contains about 950,000 square feet with the anchors and 375,000 square feet without the anchors. On the day of inspection the mall had about five vacant units. This mall is not considered to be a strong competitor for the subject as its in-line tenant sales are reported to be about $173 per square foot with rents in the range of $10 to $18 per square foot. o Muskegon Mall is located in downtown Muskegon; anchored by Steketee's and Sears, it first opened in 1976. The mall contains about 600,000 square feet, including anchors and 460,000 square feet, excluding the anchors. Of the 48 in-line stores at the mall, only one appeared vacant when the mall was inspected. This mall is reported to be a poor performer with in-line tenant sales of about $190 per square foot and rents between $8 and $16 per square foot. The mall is reported to be marketed for sale LANDAUER 28 REAL ESTATE COUNSELORS between $12 and $14 million dollars with no potential purchasers. This mall is not considered to be a strong competitor for the subject. o Orchard Mall is located in Benton Harbor, and its distance from the subject makes it a weak competitor for the subject. This mall first opened 1979 and was last renovated in 1993. The mall is anchored by Elder-Beerman, JC Penney and Sears. With anchors, the mall contains about 530,000 square feet with in-line tenant space of about 230,000 square feet. At the time of inspection there were 33 vacancies out of about 87 in-line tenant stores. No other data is available for the mall. In addition to the above described mall, local retail competition is provided by a number of department stores in the vicinity of the subject and the specialty shops located in downtown Holland. North Park Plaza is located at the southwest corner of US-31 and James Street. This 326,000 square foot shopping center was built in 1994 and is anchored by Sam's Club and WalMart. Kohl's and Target also have a presence in the market place with stores located near the subject. The specialty shops in Downtown Holland total about 300,000 square feet and presents a unique shopping experience for customers. Lakeshore Marketplace is located in Norton Shores, just south of Muskegon. This 503,000 square foot center was developed by Horizon in 1995 and is anchored by Elder-Beerman, Toys R Us, Ben Franklin and Witmark. Two new retail projects are planned for future development in the GR- MSA. These projects, when built, could provide additional competition for the subject. o Lakeshore Mall, located in Fruitport, south of Muskegon, is 710,000 square foot retail center proposed by Horizon. No anchors have been identified, and this development may not occur. o Grandville Mall is located south of I-96 approximately 25 minutes drive from the subject in Grandville, Michigan. This regional mall is planned to contain about LANDAUER 29 REAL ESTATE COUNSELORS 1,100,000 square feet with a planned opening no earlier than 1998. Anchors competitive with the subject and Woodland Mall are anticipated. Holland area customers that patronize Woodland Mall will likely be diverted to Grandville Mall. Although the Westshore Mall would be somewhat negatively affected by Grandville Mall, primarily because of its larger size and greater number of potential stores, the development of the mall would impact Woodland Mall to a greater degree because of its ease of access to customers living on the west side of Grand Rapids. With the exception of Grandville Mall and Lakeshore Marketplace, we have no knowledge of any new retail center additions which are currently planned for this market area. However, the abundance of zoned commercial land in the neighborhood of the subject presents an opportunity for a large amount of commercial development if market economics warrant. [GRAPHIC OMITTED] Westshore Mall Site Plan LANDAUER 30 REAL ESTATE COUNSELORS PROPERTY DESCRIPTION SITE ANALYSIS The subject site is located at the northeast corner of US-31 and James Street in Holland Township, Ottawa County, Michigan. The site is bounded by James Street on the south, US-31 on the west and Felch Street on the north. On the east, the subject adjoins an Ottawa County office building. All the usual public utilities are available to the site. A site plan with the Westshore Mall, anchors, outlots and plaza strip center are outlined. No soils tests were available for our review, and we assume that no adverse soil conditions exist. The area contained in the ownership is summarized below with the data in bold representing the developed sites. Shopping Center Site Parcel Size (Acres) ------ ------------ Developed Sites Mall and Anchors 40.87 Plaza 5.92 Outlots 4.63 ---- Total Developed 51.42 Undeveloped Sites Outlot 1.31 Outlot 5.24 Retention Pond 9.98 East of Kohl's 6.00 ---- Total Vacant 22.53 ----- Total Center 73.95 ===== The site is irregular in shape but generally at grade with its fronting streets, US-31 and James Street. According to the Holland Township Engineering Department, the subject property is identified on Flood Insurance Rate Map (FIRM) 260492-0003D (Panel 3 of 7) dated September 28, 1990. The subject is included in Zone X (Unshaded) which is the area outside of the 500-year flood plain. LANDAUER 31 REAL ESTATE COUNSELORS ACCESS AND VISIBILITY Visibility to the site is good from both US-31 and James Street. Access is available directly from James Street but indirectly from US-31 at Felch Street. Signal lights permitting full turning movements area located at the subject on James Street and at US-31 and Felch Street. US-31 is a major thoroughfare connecting Holland with Muskegon. ZONING The subject property is zoned C-2, General Commercial Business, by Holland Township. This zoning classification allows a variety of commercial and office uses, including retail. It appears that the subject improvements are in conformance with the zoning ordinance. A copy of the zoning ordinance is retained in our files. REAL ESTATE TAXES The subject falls within the tax jurisdiction of the Holland Township, Ottawa County, Michigan. Real estate taxes in the State of Michigan are assessed at 50.0 percent of the property's estimated True Cash Value.. Real estate taxes are paid on a calendar year system and are due and payable in July and December of each year. The 1997 Assessments and Tax Rates were not yet available as of the effective date of this analysis. Effective May 1, 1994, Michigan voters passed Proposition A, which shifted part of the burden of funding education from local property taxes to the state sales tax. The subject property's real estate taxes for year end 1995 reportedly take into account any changes in the tax structure created by this legislation. It is imperative to note that with the passage of Proposition A came a mandatory cap on tax increases, the equivalent of which may not exceed the lower of 5.0 percent or the previous year's rate of inflation for the state of Michigan. According to Township officials, the 1996 rate of inflation for the state of Michigan was 2.6 percent. Therefore, unless a municipality's overall Tax Rate is changed, WESTSHORE MALL ASSESSMENTS AND TAXES
Preliminary Year 1994 1995 1996 1997 Tax Parcel Number Millage Rate 42.9602 43.1602 42.918 42.918 =============================================================================================== Plaza (Strip Center) True Cash Value $ 1,564,600 $ 1,676,600 $ 1,863,000 $ 1,866,400 70- 16- 16- 400- 048 Assessed Value $ 782,300 $ 838,300 $ 931,500 $ 933,200 Taxable Value $ 782,300 $ 838,300 $ 861,772 $ 885,901 Real Estate Tax $ 33,608 $ 36,181 $ 36,986 $ 38,021 First Am. Bank True Cash Value $ 719,600 $ 746,400 $ 870,000 $ 863,000 70- 16- 16- 400- 053 Assessed Value $ 359,800 $ 373,200 $ 435,000 $ 431,500 Taxable Value $ 359,800 $ 369,154 $ 379,490 $ 390,115 Real Estate Tax $ 15,457 $ 15,933 $ 16,287 $ 16,743 Jose Babushka True Cash Value $ 1,249,600 $ 1,276,200 $ 1,552,200 $ 1,558,000 70- 16- 16- 400- 060 Assessed Value $ 624,800 $ 638,100 $ 776,100 $ 779,000 Taxable Value $ 624,800 $ 638,100 $ 655,966 $ 674,333 Real Estate Tax $ 26,842 $ 27,541 $ 28,153 $ 28,941 Westshore Mall True Cash Value $22,539,800 $23,318,200 $26,611,600 $26,717,200 70- 16- 16- 400- 065 Assessed Value $11,269,900 $11,659,100 $13,305,800 $13,358,600 Taxable Value $11,269,900 $11,562,917 $11,886,670 $12,219,500 Real Estate Tax $ 484,157 $ 499,058 $ 510,152 $ 524,437 Mall Totals True Cash Value $26,073,600 $27,017,400 $30,896,800 $31,004,600 All parcel numbers Assessed Value $13,036,800 $13,508,700 $15,448,400 $15,502,300 Taxable Value $13,036,800 $13,408,471 $13,783,898 $14,169,849 Real Estate Tax $ 560,064 $ 578,712 $ 591,577 $ 608,142
LANDAUER 32 REAL ESTATE COUNSELORS 1997 real estate taxes for a specific property can not exceed a 2.6 percent increase over 1996 levels. Capped tax increases do not apply however, if a property transfers ownership, or if additional site or building improvements are incorporated. As the subject sold in December 1996, it is likely the tax cap will be removed. The subject property is currently divided into five separate tax parcels as identified in the chart on the facing page. We note that the Assessor's true cash value is about $31,000,000 compared to the sale price of $30,159,000 which is net of sales costs and the value indication of $33,000,000. As the true cash value is near the reported sale price, it is likely that the taxable value for the subject property will be reestablished with the property reassessed in 1998. Because of the sale and removal of the tax cap, the taxes for the subject could increase by about 10.0 percent provided that the millage rate remains the same as in 1996. As it is unknown what the assessor will do when the sale is reported, we have elected to not increase the taxes because of the sale of the subject property, and have applied the 1997 preliminary tax amount of $608,142. As applied in the analysis, the real estate taxes are projected to increase at an annual rate of 3.5 percent per year. IMPROVEMENTS Westshore Mall is a single-level, masonry and steel, regional shopping center containing a total of 393,949 square feet including enclosed mall, four anchor stores, two outlots and a strip center (Plaza). The subject property consists of 143,034 square feet of in-line stores in the enclosed mall. The center's square footage is distributed as follows: [GRAPHIC OMITTED] Westshore Mall Single Level LANDAUER 33 REAL ESTATE COUNSELORS Westshore Mall Area Delineations (square feet) Enclosed Mall Stores 143,034 Sears 52,515 Younkers 69,148 Steketee's 40,755 JC Penney 51,399 ------ Anchor Total 213,817 First of America 2.236 Jose Babushka 8,775 ----- Total Outlots 11,011 Plaza Center 26,087 ------ Mall Total 393,949 ======= Westshore Mall was available for occupancy in late 1988, and most leases reflect a 1988 or 1989 start date. The total mall occupancy (all tenants) is currently 98.3 percent. All of the vacancy is located in the enclosed mall which has three vacant units and one leased to a temporary tenant. The vacant units are highlighted in the plan on the facing page. For calculating the occupancy, we have included the temporarily occupied unit as a vacant unit. The enclosed mall area is presently about 96.4 percent occupied. The following is a brief description of the physical components of the subject property. Foundations: Spread reinforced concrete footings. Exterior Walls: Brown brick over concrete block. Roof: Single ply membrane over R-13 rigid insulation. The membrane is covered with a rock ballast. Ceilings: Sheet rock and dropped ceilings with skylights the mall. Floor: Ceramic floor tile on the mall corridor. LANDAUER 34 REAL ESTATE COUNSELORS Lighting: Metal halide down lights with skylights in the mall corridor. Because of the large number of skylights, natural light is abundant in the mall. HVAC System: All mall tenants are heated by individual packaged units located on the roof. The mall has packaged units located on the roof. Anchor tenants have separate HVAC systems. Fire Protection: The shopping center is fully sprinklered with a wet system. Condition: Based on our inspection, the property is considered to be in excellent condition with no deferred maintenance noted. The center is of average-quality construction with an appealing single-level design. Circulation and parking are adequate and appropriate for a multi-tenant shopping center. Sears contains an automotive center, and it is reported that Sears disposes used oil in an above ground container before recycling. It is reported that their are no detrimental environmental issues associated with Westshore Mall. LANDAUER 35 REAL ESTATE COUNSELORS HIGHEST AND BEST USE Highest and best use is defined in The Appraisal of Real Estate, 10th Edition, as: The reasonably, probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible and that results in the highest value. Inherent in this definition is the separation of land and improvements. That is, the highest and best use for the land, as if vacant and available, could be different from the highest and best use of the improved property. All criteria must be met separately for both land and improvements. AS IF VACANT The subject property is located on a well-traveled highway. The best potential use would be one that benefits from the site's exposure and accessibility. The existing terrain is suitable for almost any type of commercial development. The property is zoned for commercial development and has been approved as a regional shopping center site by Holland Township. Surrounding land uses include residential, commercial and office developments with commercial use as the dominant use. Considering these factors, the highest and best use of the site, if vacant, would be for a regional shopping center. AS IMPROVED The appraised property is improved with a regional shopping center. The design and layout of the center are suitable for typical tenant needs. Having analyzed competing retail centers, as well as the property's location, design, and condition, we conclude that the present use represents the highest and best use of the site, as improved. LANDAUER 36 REAL ESTATE COUNSELORS VALUATION METHODOLOGY All three approaches to value--the Cost Approach, Sales Comparison Approach, and Income Approach--were considered in the valuation of the Leased Fee Estate in the subject property. The Cost Approach is based upon the theory of substitution, which implies that a prudent investor will not pay more to purchase a property than it would cost to create a comparable substitute property. The value of the underlying land as if vacant and available for development is first estimated. To this is added the estimated cost of reproducing or replacing the subject property, minus the estimated amount of any depreciation (physical and functional) and obsolescence (economic). The Cost Approach is not used in this appraisal are agreed to by the client. The Sales Comparison Approach involves a direct comparison of the subject property with similar properties that have sold, in order to derive an estimate of market value. It is also based on the theory of substitution, and implies that a prudent investor would not pay more to buy the subject property than he would to buy an equally desirable substitute property. Because of wide differences in age, condition, tenancy, location, and (most importantly) anticipated net income, this analysis often provides only broad indications of general valuation parameters, such as price per square foot of gross building or rentable area, and overall capitalization rates. The Income Approach is usually relied upon as the primary indicator of value when analyzing income-producing properties. Either through the direct capitalization of net income or the discounting of projected cash flows into a present worth indication, the analyst has reliable tools with which to formulate an estimate of market value. Essential to this approach is an awareness of market rents, operating costs, current investor yield requirements, and the relative risks associated with varying types of investment instruments. Based on the methodologies of the three approaches to value, we have conducted our analysis of the subject property. Our assumptions and conclusions for each approach are presented in the following sections of the report. LANDAUER 37 REAL ESTATE COUNSELORS COST APPROACH The Cost Approach to value has not been used in this report for two specific reasons: Lack of truly comparable construction cost data; and the inappropriateness of the valuation technique. Current land value and construction cost estimates may be higher or lower than those estimated in the last nine years since the mall was built; as a result, the lack of recent construction data prevents us from quantifying the changes in replacement costs. The lack of comparable regional mall development activity also precludes us from making a reliable estimate of developer's profit. What was once achievable in the market may not be achievable today, and without an active market, the estimation of an appropriate profit margin becomes even more subjective. Income producing properties like the subject property do not lend themselves to reliable estimates of value by the Cost Approach. The purpose of this appraisal is to estimate the market value of the leased fee interest in the subject property. Because of the potential impact of above or below market leases, specific anchor tenant operating agreements, ground leases, and other unique lease requirements oftentimes found in shopping centers, the Cost Approach cannot accurately measure the effect of such factors. In addition, the Cost Approach does not reflect the motivations inherent in purchasing income-producing properties. Shopping centers in many instances require intensive leasing, management and operational skills in order to maximize their performance. The above relationships are economic in nature, and in our opinion are best measured by proper application of the Income Approach to value. As a result of this, we have not undertaken an analysis of the property by the Cost Approach as previously agreed to by the client and Landauer. LANDAUER 38 REAL ESTATE COUNSELORS SALES COMPARISON APPROACH The Sales Comparison Approach to value is a technique by which market value is estimated by direct comparison of the subject property with current offerings and/or actual sales transactions of like or similar properties that occurred recently. The process is one of analyzing the listing or sale and correlating the characteristics of the property involved and the known details of the transaction so that such data can then be adjusted relative to the subject property. Consideration is given to a variety of valuation factors, including: 1) The degree of comparability of each property with the subject property; 2) The date of the sale in relation to the date of the current appraisal, taking into account market changes during the interim; 3) Reliability of the sales data; and 4) Appropriate adjustments for unusual conditions, if any, affecting price or terms of the sale. To apply the Sales Comparison Approach, an appraiser considers data on sales, contracts, offers, refusals, and listings of properties considered comparable to the subject property. First, the appraiser thoroughly researches the prices, real property rights conveyed, financing terms, motivations of buyers and sellers, and transaction dates of the sale properties. Then details on each property's location, physical and functional condition, and income producing characteristics must be examined. ELEMENTS OF COMPARISON These are the characteristics of properties and transactions that cause the prices paid for real estate to vary. The appraiser considers and compares all differences between the comparable properties and the subject property that could affect value. Adjustments for dissimilarities are made to the price of each comparable property to make the comparable equal to the subject on the date of the appraisal. LANDAUER 39 REAL ESTATE COUNSELORS There are several common elements of comparison that should always be considered in a sales comparison analysis. Each is described as follows: Real Property Rights Conveyed: A transaction price is always predicated upon the real property interest conveyed. Many types of real estate, particularly income producing property, are sold subject to existing leases. The revenue generating potential of a property is often fixed or limited by the terms of existing leases. In the valuation process, adjustments must be made to any limitations which may inhibit the property's ability to generate a level of net operating income constrained only by market events. Financing Terms: The transaction price of one property may differ from that of an identical property due to different financing arrangements. Estimates of market value are generally based upon an all cash basis or subject to financing terms typically available in the market. Calculations for atypical financing vary depending upon the type of financing arrangement and the market perceptions of the added value. These adjustments are commonly referred to as "cash equivalency". Conditions of Sale: These adjustments usually reflect the motivations of the buyer and the seller. When non-market conditions of sales are detected in a transaction, e.g. distressed sale, related parties or foreclosure, the sale can be used as a comparable only after extensive investigation. The motivations of the sale must be thoroughly researched before an adjustment is made. Date of Sale: Market conditions generally change over time, but the date of an appraisal is a specific time. Therefore, past sales must be examined in light of the direction of change between the sale date of the comparable and the valuation date of the subject property. This adjustment reflects change in value and is often called a "time adjustment". Location An adjustment may be required when the locational characteristics of a comparable property are different from those of the subject property. Adjustments for location are usually LANDAUER 40 REAL ESTATE COUNSELORS expressed as percentages that reflect the increase or decrease in value attributable to the property's location or neighborhood. Physical Characteristics: If the physical characteristics of a comparable property and the subject property differ in any way, each of these dissimilarities may require comparison and adjustment to equal the attributes of the subject. Physical divergences may include magnitude of improvement, quality of construction, age/condition, functional utility, site size and amenities. Income Characteristics: Factors that affect the income a property can generate include the quality of management and resulting efficiencies of operations, as well as demand, property condition, average rental rates and growth rates. APPLICABILITY OF ADJUSTMENTS In practice, when considering the purchase of a regional mall, buyers tend to relate one mall to another in income-oriented terminology, i.e., discount rates, capitalization rates. The rating process would include judgments of a center's location, market potential, development or expansion potential, and competitive advantage. This information would form the conclusions relating to capitalizing net income or discounting cash flows. Very little emphasis is given to the usual comparison factors utilized in the Sales Comparison Approach such as price per square foot or gross income multiplier. The presence or absence of owned anchor stores, ground leases or other factors tend to result in a desperate price per square foot comparison, while gross income characteristics can vary widely depending on escalation practices, real estate tax levels, etc. The foregoing factors make it very difficult to adjust the traditional comparison factors from one mall to another. REGIONAL MALL SALES
Sale Price/ Owned Sale Property Year Date SF Mortgage Interest GLA Occ' No. Location Built of Sale Sold Amount Purchased $/SF of At Sale - -------------------------------------------------------------------------------------------------------------------------------- 1 Westshore Mall 1988 Dec-96 393,949 $30,159,000 100.0% $77 98.00% Holland, MI N/A Leased Fee $30,800,000 $78.18 Adjusted for Cost of Sales 2 Three Michigan Malls Dec-96 N/A $134,000,000 100.0% N/A N/A Lansing Mall, Lansing, MI N/A Leased Fee Westwood Mall, Jackson, MI Lakeview Mall, Battle Creek, MI 3 Confidential 1974 Nov-96 400,800 $43,686,000 100.0% $274 94.00% Illinois 1992 $32,100,000 Fee Simple 4 Confidential 1971 Nov-96 550,000 $44,000,000 100.0% $80 90.00% Tennessee 1992 N/A Fee Simple 5 Valley View Center 1975 Oct-96 467,200 $85,500,000 100.0% $183 85.00% Dallas, TX 1993 N/A Leased Fee 1996 6 Paseo Nuevo 1990 Jun-96 158,120 $37,000,000 100.0% $234 88.00% Santa Barbara, CA N/A Leasehold 7 Charlestowne Mall 1991 Apr-96 744,901 $85,000,000 87.7% $114 79.00% St. Charles, IL 1993 N/A Partnership 1995 Interest 1st Year Final Sale/ Sale Property OAR Year Mall Sales Price No. Location COC OAR IRR Per SF Ratio - -------------------------------------------------------------------------------------------- 1 Westshore Mall 10.50% - - - - - - $178 0.43 Holland, MI - - - 10.28% $178 0.44 2 Three Michigan Malls 10.00% - - - - - - - - - - - - Lansing Mall, Lansing, MI - - - Westwood Mall, Jackson, MI Lakeview Mall, Battle Creek, MI 3 Confidential 8.90% 8.90% - - - $330 0.83 Illinois - - - 1996 Projected 4 Confidential 9.90% 9.90% - - - $245 0.33 Tennessee - - - 5 Valley View Center 9.00% 9.00% - - - $228 0.80 Dallas, TX - - - 6 Paseo Nuevo 10.30% - - - - - - $340 0.69 Santa Barbara, CA - - - 7 Charlestowne Mall 9.56% - - - 12.00% $202 0.56 St. Charles, IL - - - Sale Property No. Location Remarks - ----------------------------------------------------------------------------------------------------------- 1 Westshore Mall The buyer purchased a second mall from the seller, but Holland, MI both malls were priced separately. No details are avialable on the other mall. The sale included four anchors: Sears, JC Penney, Younkers and Steketee's. Steketee's sales are lagging and the buyer anticipated a significant upside potential with an anchor replacement if the opportunity presents itself. The mall includes about 22.0 acres of additional development land and pad, but no value was allocated to the this land in the sale price cited. The retail sales cited are the 1997 estimate for the entire mall. Enclosed mall sales are estimated to be $210/sf in 1997. 2 Three Michigan Malls Three malls were purchased as a package. The buyer Lansing Mall, Lansing, MI indicated the first year income was capitalized at the cited Westwood Mall, Jackson, MI rate. Anchors were included at the Lansing Mall (2) and Lakeview Mall, Battle Creek, MI Westwood Mall (1). Only retail shops were purchased with the Lakeview Mall. The price shown is the aggregate amount which includes $40 million in operating partnership units in General Growth, $4 million in cash and assumed debt of $90 million carryiing an interest rate of 9.7% with 3-23 years remaining on the notes. 3 Confidential Solid performer with strong anchors and virtually no Illinois competition. Tertiary market location. Purchase included mall area. Mall sales in 1995 were $317/sf. Seller's analysis. 4 Confidential Average center in a tertiary location with two strong Tennessee performing anchors. Seller's analysis. 5 Valley View Center NOI is projected for 1996 as shown. The 1995 NOI was Dallas, TX $7.7 million which would result in a 9.0 percent OAR. The mall shops were 85 percent occupied and the buyer anticipated a significant upside potential in increasing the occupancy. J.C. Penney is a new lease in the mall in a space that was vacant for an extended period. Buyer's analysis. 6 Paseo Nuevo Unenclosed center of quality. Sale did not include the Santa Barbara, CA department stores. High first year return is reflective of the leasehold interest being purchased (with stipulated ground rent payments reportedly limiting the buyer's upside potential) and a few small environment and engineering issues. Buyer's Analysis. 7 Charlestowne Mall Sale included the mall area and four anchors (Carson Pirie St. Charles, IL Scott, JC Penney, Sears and Regal Cinema). A pending lease with Regal Cinema is not reflected in the NOI.
LANDAUER 41 REAL ESTATE COUNSELORS ANALYSIS AND INTERPRETATION OF DATA A summary of the comparable sales can be found on the facing page. Sales 1 and 2 represent current sales in Michigan. All of the sales occurred between April 1996 and December 1996, and the sale prices range from $78 to $274 per square foot, with first year capitalization rates of 8.9 to 10.5 percent. Details on the transactions are included in the remarks column of the table. Typically, the unit value of a sale is significantly affected by the inclusion of anchor tenants; thus, a comparison among properties is most meaningful when there is a match among the property components included in the transfer. Other important price variables include differences in age, condition, quality, the interest transferred, and the extent to which the properties are leased at market rentals, as well as the impact of income from other sources not being accounted for within the expression of a mall gross leasable area measure. The sale of the subject is identified as Sale No. 1. The most comparable property in terms of age is Sale No. 6, which indicates a price of $234 per square foot; however, the sale did not include the department stores. The property most similar to the subject in terms of sales per square foot of GLA and sales-to-price ratio is Sale No. 4, which had retail sales of $80 per square foot, indicating a ratio of retail sales to price of 0.33. Confounding this traditional analysis is the fact that the subject property includes four anchor stores which serves to reduce the sales per square foot comparison. Only Sale Nos. 1 (the subject) and 7 included four anchors in the sale. Sale No. 1 is the sale of the subject property which occurred in December 1996. The seller transferred ownership of the subject and another mall, but they were both separately priced. No information on the other mall could be obtained from the buyer. The sale of the subject included all of the enclosed mall GLA, four anchors (Sears, JC Penney, Younkers and Steketee's), two outlots, and a strip center adjacent to a Target department store. The total GLA purchased was 393,949 square feet. The transaction also included about 22.8 acres of development land and pad site which did not contribute any value to the final transaction. The mall was never on the open market for sale and was negotiated LANDAUER 42 REAL ESTATE COUNSELORS directly between the buyer and seller. The contract sale price was reported by the purchaser to be $30,159,000 which is net of costs related to the sale such as sales commissions, appraisal fees, environmental studies and other "due diligence" costs. The buyer reported that the capitalization rate based on the contract sales price was 10.5 percent. Sales commissions of 2.0 percent would adjust the price to $30,800,000 or $78.18 per square foot and would, therefore, lower the capitalization rate to about 10.28 percent. Using estimated 1997 retail sales, the retail sales to sale price ratio would be 0.43 based on the contract price and would be 0.44 based on the adjusted price. Anchor sales per square foot were reported to be healthy for Sears ($246), Younkers ($143), and JC Penney ($175); however, the sales at Steketee's have been declining for the last few years and were reported to be $82 per square foot in 1996. The purchaser viewed an upside to the poor performance of this anchor, and believes that it could place a stronger tenant in the Steketee's space if the opportunity presented itself. At the time of sale, the mall was 98.3 percent occupied. It is our opinion that the buyer received a good deal on the purchase of Westshore Mall, and may have placed a greater risk to Steketee's vacating the building. Also, the buyer indicated that capitalizing the in-place income was the primary investment application when determining a fair price. It is our opinion that if the mall was placed on the open market with typical sales costs paid and was not part of a packaged sale, the sale price would have been higher. Therefore, it is our opinion that the sale price is understated. In general, the subject is a good-quality center in an area which is relatively insulated from new competition in the near term. In our opinion, the price per square foot applicable to the subject is in the upper end of the range, between $80 and $90 per square foot. Similarly, the ratio of sale price to sales applicable to the property is between 0.4 and 0.5 because of the inclusion of the four anchors in the ownership. These result in the following value ranges. 393,949 square feet x $80 = $31,500,000 393,949 square feet x $90 = $35,500,000 and 1997 sales of $178 psf x 0.4 x 393,949 = $28,000,000 1997 sales of $178 psf x 0.5 x 393,949 = $35,100,000 In conclusion, the value indications at the upper end of the range are most applicable to the subject. The value range indicated by the Sales Comparison Approach is: $30,000,000 to $35,000,000. LANDAUER 43 REAL ESTATE COUNSELORS INCOME APPROACH Income property exists for the production of income. It is only natural that the value of an income producing property should be a function of earning power. This is the essence of the Income Approach to Value and all related theory and techniques. This is not to say that the production of income is necessarily the sole reason for such a property's existence, nor is it meant to suggest that factors not related to earning power cannot influence value. There is no question, however, that the expectation of monetary gain is the major consideration in the valuation of income properties. Indeed, the anticipation of future benefits, either amenities or dollars, is the very basis of the value of any kind of property. The theory of the Income Approach is based on the present worth of the net income, cash flow, and reversionary value in the property it will produce during the remainder of its productive life over a reasonable holding (ownership) period. The Income Approach, therefore, is a process of measuring or estimating the extent of future benefits which might reasonably be expected and translating these benefits into a present value at a particular point in time. DISCOUNTED CASH FLOW ANALYSIS ("DCF") ASSUMPTIONS We have utilized a computer-generated (Pro-Ject) discounted cash flow analysis program to estimate the future financial performance of the subject property. The assumptions employed to structure the pro forma cash flow and determine future income and expense estimates in addition to capital items are summarized below. The model also allows for the entry of basic assumptions concerning future lease revenues and expenses. LEASING SUMMARY The subject property has 59 enclosed mall retail tenants, 4 kiosk tenants, 4 anchors and 7 tenants located in the strip center (Plaza) adjacent to the Target department store. Additionally, two outlot tenants (First of America Bank and Jose Babushka) have ground leases. Four of the enclosed mall LANDAUER 44 REAL ESTATE COUNSELORS enclosed mall, Kiosk, anchors, Plaza and outlot tenants. As the vacant units are in the enclosed mall portion of the subject, the occupancy of the enclosed mall tenants is 96.4 percent. Over the ten year holding period, the average occupancy of the enclosed mall tenants is 97.8 percent. Below follows a brief summary of the more pertinent details of the anchor leases, outlot leases and a general description of the enclosed mall and plaza leases. ANCHOR LEASES Sears: Sears contains 52,515 square feet and has a 15 year lease that commenced in August 1988 and will terminate in August 2003. The rental rate for the initial term was $156,744 per year or about $3.00 per square foot. In each year of the lease, Sears is to pay percentage rent of 1.5 percent of sales between $5,000,000 and $9,000,000 and 1.0 percent of sales exceeding $9,000,000. Sears pays its pro rata share of real estate tax and insurance expenses over a base year 1988 amount which was estimated by the appraisers as $1.42 per square foot. However, 50 percent of the tenants expenses are recaptured in the percentage rent payment. As projected for 1997, retail sales total about $13,070,000 which results in overage rent of about $100,700, and expense recoveries are projected to be $3,710. The total amount of Sears base rent, percentage rent and recoveries is projected to be $261,955 or about $4.99 per square foot in 1997. The tenant's occupancy costs is about 2.0 percent. Sears has five, 5-year renewal options at the same terms and conditions as the initial lease. As retail sales are about $249 per square foot in 1997 and the tenant is paying percentage rent which is nearly equal to its base rent, there is a strong probability that the tenant will renew its lease in September 2003. In this analysis, we have projected that Sears will renew its lease; however, we have given a $5.00 per square foot tenant finish contribution from the landlord as an additional incentive for the tenant to renew. It is recalled that the Grandville Mall will likely be opened just prior to the lease expiring, and this potential competition for the anchor might require additional incentives from the landlord. LANDAUER 45 REAL ESTATE COUNSELORS Younker's: Younker's contains 69,148 square feet and has a 15 year lease that commenced in August 1988 and will terminate in August 2003. The rental rate for the initial term was $224,808 per year or about $3.25 per square foot. In each year of the lease, Younker's is to pay percentage rent of 2.5 percent of sales between $7,500,000 and $9,499,000; 2.0 percent between $9,500,000 and $11,499,000; 1.5 percent between $11,500,000 and $13,499,000. Younker's pays its pro rata share of real estate tax and insurance expenses. Enclosed mall and CAM expenses are fixed at $0.30 per square foot for the first 5-years which increases by $0.05 per square foot every five years, including the option periods. As projected for 1997, retail sales total about $10,773,000 which results in overage rent of about $75,465, and expense recoveries are projected to be $115,660. The total amount of Younker's base rent, percentage rent and recoveries is projected to be $415,932 or about $6.02 per square foot in 1997. The tenant's occupancy cost is about 3.9 percent. Younker's has four, 5-year renewal options at the same terms and conditions as the initial lease. As retail sales are about $155 per square foot in 1997 and the tenant is paying percentage rent equal about one-third of its base rent, there is a strong probability that the tenant will renew its lease in September 2003. In this analysis, we have projected that Younker's will renew its lease; however, we have given a $5.00 per square foot tenant finish contribution from the landlord as an additional incentive for the tenant to renew. Steketee's: Steketee's contains 40,755 square feet and has a 15 year lease that commenced in December 1988 but was amended in December 1993. The lease will terminate in July 2003. The rental rate for the initial term was $171,018 per year or about $4.20 per square foot as cited in a supplemental agreement to the LANDAUER 46 REAL ESTATE COUNSELORS lease. In each year of the lease, Steketee's is to pay percentage rent of 3.0 percent of sales over $6,273,000. Steketee's pays a fixed amount ($1.00 per square foot) CAM expenses and its pro-rata share of real estate taxes. As projected for 1997, retail sales total about $3,273,361 ($80.32 per square foot) which is below the sales breakpoint and no overage rent is paid. Expense recoveries are projected to be $101,506. The total amount of Steketee's base rent and recoveries is projected to be $272,677 or about $6.69 per square foot. The tenant's occupancy cost is about 8.3 percent. Steketee's has a renewal option for one or more terms at the same terms and conditions as the initial lease, but not to exceed a total of 25 years. Although the tenant's retail sales are low, about $80.32 per square foot in 1997, the base rental at $4.20 per square foot is comparable to the other anchor tenants sum of base and overage rent. Overall, the tenant's cost of occupancy is high compared to the other anchors, which presents a risk that the tenant will not renew its lease when it expires. Nevertheless, as the tenant continues to pay its rent and expense recoveries, we have continued the tenant at Westshore Mall. The new owner of the mall perceives an opportunity by replacing Steketee's with a stronger tenant if the opportunity presents itself. In this analysis, we have projected that Steketee's will renew its lease; however, we have given a $5.00 per square foot tenant finish contribution from the landlord as an additional incentive for the tenant to renew. JC Penney: JC Penney contains 51,399 square feet and has a 15 year lease that commenced in August 1988 and will terminate in August 2003. The rental rate for the initial term was $188,370 per year or about $3.70 per square foot. In each year of the lease, JC Penney is to pay percentage rent of 1.5 percent of sales over a breakpoint of $9,418,500. Sears pays its pro rata share of real estate tax and insurance expenses over a base year 1988 amount which was estimated by the appraisers as $1.42 per square foot. Enclosed mall and CAM expenses are fixed at $0.40 per square foot for the first 10-years which increases by $0.05 per square foot for the last five years, including the option periods. As projected for 1997, retail sales total about $8,911,000 which results in no overage rent. Expense recoveries are LANDAUER 47 REAL ESTATE COUNSELORS projected to be $18,434. The total amount of JC Penney base rent and recoveries is projected to be $208,574 or about $4.06 per square foot, and its occupancy cost is about 2.3 percent. JC Penney has six, 5-year renewal options at the same terms and conditions as the initial lease. As retail sales are about $173 per square foot in 1997, the tenant is not paying percentage; however, its total rental (base rent and recoveries) is low at $4.06 per square foot, and its cost of occupancy is low at 2.3 percent compared to the other anchor tenants. There is a strong probability that the tenant will renew its lease in September 2003 because of the low cost of occupancy. In this analysis, we have projected that JC Penney will renew its lease; however, we have given a $5.00 per square foot tenant finish contribution from the landlord as an additional incentive for the tenant to renew. OUTLOT LEASES First of America Bank began in November 1988 and extends for 20-years to November 2008. The rental rate began at $15.65 per square foot and steps to $17.89 per square foot in November 1998 and $20.13 per square foot in November 2003. There is no percentage rent with this tenant. This tenant pays a proportionate share of common area expenses and its own real estate taxes. The bank has four 5-year renewal options, which we have projected will be exercised. The per square foot rental for the each of the 5-year renewal options are: $22.36, $24.60, $26.83 and $29.07. Jose Babuska has a ten year lease beginning in July 1990 and terminating in June 2000. The rental is fixed at $14.81 per square foot. The tenant does not pay any common area expenses to the landlord and pays its own real estate taxes. The tenant has three, 5-year renewal options at the same terms and conditions as the initial lease, including the rental rate. In this analysis, we have projected that the tenant will renew its lease. LANDAUER 48 REAL ESTATE COUNSELORS ENCLOSED MALL TENANT LEASES The mall tenant leases vary in length, but average about 8-years in duration. In most leases, enclosed mall expenses have a 15-percent administrative surcharge added for calculating recoveries. Leases signed between 1988 and 1994 or 1995 require that the tenant pay enclosed mall expenses based on the total GLA of the enclosed mall. However, more recent leases specify that the recovery calculation be based on the occupied area of the mall. Tax recoveries include the anchor taxes not paid by Sears and JC Penney because of their 1988 base year stop. This tax recovery is not typical for regional malls and would increase the enclosed mall tenants' occupancy costs. The enclosed mall is at a stabilized level with an occupancy of about 96.4 percent and the new method for calculating enclosed mall expense recoveries should result in a slightly higher amount of revenue to the landlord. Common area and other common area (administration) expenses are recovered based on the tenant's pro rata share of GLA for the enclosed mall and Plaza. In most leases, the common area expenses have a 15-percent administrative surcharge added for calculating recoveries. Most leases specify renewal options; however, the renewal option rent is to be negotiated to a market level. For this reason, renewal options are not modeled for the enclosed mall tenants. Plaza tenant leases have a duration of about five years. These tenants do not pay enclosed mall expenses but pay common area and other common area (administration) expenses. In most leases, the common area expenses have a 15-percent administrative surcharge added for calculating recoveries. Most leases specify renewal options; however, the renewal option rent is to be negotiated to a market level. For this reason, renewal options are not modeled for the enclosed mall tenants. MARKET RENT In estimating market rents for Westshore Mall, recent leases were analyzed, actual spaces were examined and leasing plans were reviewed at the subject center and at competitive centers. As summarized in the Addenda, since January 1993, 39 leases have commenced. For the Jewelry and outlot tenants, we have included older leases because of the lack of new leases. LANDAUER 49 REAL ESTATE COUNSELORS The weighted average by space category of the initial rents for these leases are summarized as follows: Recent Lease Summary Size of Space No. of Average (Sq. Ft.) Leases Rent/SF --------- ------ ------- 0-999 5 $27.81 1,000-1,999 8 $19.80 2,000 + 10 $15.82 Food 4 $35.40 Restaurant 2 $9.78 Kiosk 4 $122.67 Jewelry 4 $24.83 Plaza 7 $9.04 Total 44 $22.37 without Kiosk, Outlot & Plaza At present, there are three vacant enclosed mall retail tenant units and one enclosed mall food tenant unit. In this analysis, the market rent conclusion for these spaces will be applied. There is one ATM space at Westshore Mall, and we have applied a rental rate of $185 per square foot for this space. The four jewelry store tenants have an average rental of $24.83 per square foot. The most recent jewelry store lease was $20.36 per square foot in 1995. The older leases signed in 1998 suggest the rental rate for this tenant category has not changed. Market rents for Westshore Mall have been estimated on a tenant-by-tenant basis. These estimates are influenced by recent leasing trends, the quality of the location and the size of the space. Although rents vary by space, they generally fall within a range dictated by the size of the space. Market rental rates for 1997 are summarized as follows: LANDAUER 50 REAL ESTATE COUNSELORS Estimated Market Rent Size of Space Market Rent (Sq. Ft.) Per Sq. Ft. --------- ----------- 0-999 $30.00 1,000-1,999 $20.00 2,000 + $15.00 Food$35.00 Restaurant $10.00 Kiosk $125.00 Jewelry $25.00 Plaza $8.00 The forecasted basic lease structure and assumptions have been derived from the market, as determined by the rent survey and activity at the subject. The assumptions used in the DCF Analysis are: Projection Period: The projection period begins January 1, 1997, and extends for a term of 10 years through December, 2006. Calendar year 1997 (the first full year) is used as the initial base year. The 11th year's (2007) net operating income is capitalized to establish the reversionary value and is added to the 10th year cash flow. Gross Leasable Area: 393,949 square feet Lease Term: Typical enclosed mall retail leases at the subject are for a 8-year term. Kiosk and Plaza tenants have 5-year lease terms. Growth Rates: Market rental rates have annual escalations of 3.5 percent from Year-1. Expense categories are escalated annually at a rate of 3.5 percent through the projection period, except for management fees which are based upon a percentage of effective gross income. ANCHOR CONTRIBUTIONS TO COMMON AREA MAINTENANCE EXPENSES
Younkers Steketee's JC Penney Total Anchor Sears 69,148 sq. ft. 40,755 sq. ft. 51,399 sq. ft. Contributions Year Amount Per sq. ft. Amount Per sq. ft. Amount Per sq. ft. Amount Amount ================================================================================ =============== 1997 $ - $0.35 $ 24,202 $1.00 $40,755 $0.40 $20,560 $85,516 1998 $ - $0.35 $ 24,202 $1.00 $40,755 $0.40 $20,560 $85,516 1999 $ - $0.40 $ 27,659 $1.00 $40,755 $0.45 $23,130 $91,544 2000 $ - $0.40 $ 27,659 $1.00 $40,755 $0.45 $23,130 $91,544 2001 $ - $0.40 $ 27,659 $1.00 $40,755 $0.45 $23,130 $91,544 2002 $ - $0.40 $ 27,659 $1.00 $40,755 $0.45 $23,130 $91,544 2003 $ - $0.40 $ 27,659 $1.00 $40,755 $0.45 $23,130 $91,544 2004 $ - $0.45 $ 31,117 $1.00 $40,755 $0.50 $25,700 $97,571 2005 $ - $0.45 $ 31,117 $1.00 $40,755 $0.50 $25,700 $97,571 2006 $ - $0.45 $ 31,117 $1.00 $40,755 $0.50 $25,700 $97,571 2007 $ - $0.45 $ 31,117 $1.00 $40,755 $0.50 $25,700 $97,571 2008 $ - $0.45 $ 31,117 $1.00 $40,755 $0.50 $25,700 $97,571 2009 $ - $0.50 $ 34,574 $1.00 $40,755 $0.55 $28,269 $103,598 2010 $ - $0.50 $ 34,574 $1.00 $40,755 $0.55 $28,269 $103,596 2011 $ - $0.50 $ 34,574 $1.00 $40,755 $0.55 $28,269 $103,598 2012 $ - $0.50 $ 34,574 $1.00 $40,755 $0.55 $28,269 $103,598 2013 $ - $0.50 $ 34,574 $1.00 $40,755 $0.55 $28,269 $103,598 2014 $ - $0.55 $ 38,031 $1.00 $40,755 $0.60 $30,839 $109,626 2015 $ - $0.55 $ 38,031 $1.00 $40,755 $0.60 $30,839 $109,626 2016 $ - $0.55 $ 38,031 $1.00 $40,755 $0.60 $30,839 $109,626 2017 $ - $0.55 $ 38,031 $1.00 $40,755 $0.60 $30,839 $109,626 2018 $ - $0.55 $ 38,031 $1.00 $40,755 $0.60 $30,839 $109,626 2019 $ - $0.60 $ 41,489 $1.00 $40,755 $0.65 $33,409 $115,653 Allocation to Target's Enclosed Common Common Total Mall Area Area Enclosed Common Year 72% 28% Contribution Mall Area ============================================================ 1997 $61,572 $23,945 $42,000 $61,572 $ 65,945 1998 $61,572 $23,945 $42,000 $61,572 $ 65,945 1999 $65,912 $25,632 $44,991 $65,912 $ 70,623 2000 $65,912 $25,632 $44,991 $65,912 $ 70,623 2001 $65,912 $25,632 $44,991 $65,912 $ 70,623 2002 $65,912 $25,632 $44,991 $65,912 $ 70,623 2003 $65,912 $25,632 $44,991 $65,912 $ 70,623 2004 $70,251 $27,320 $53,436 $70,251 $ 80,756 2005 $70,251 $27,320 $53,436 $70,251 $ 80,756 2006 $70,251 $27,320 $53,436 $70,251 $ 80,756 2007 $70,251 $27,320 $53,436 $70,251 $ 80,756 2008 $70,251 $27,320 $53,436 $70,251 $ 80,756 2009 $74,591 $29,008 $63,465 $74,591 $ 92,473 2010 $74,591 $29,008 $63,465 $74,591 $ 92,473 2011 $74,591 $29,008 $63,465 $74,591 $ 92,473 2012 $74,591 $29,008 $63,465 $74,591 $ 92,473 2013 $74,591 $29,008 $63,465 $74,591 $ 92,473 2014 $78,931 $30,695 $75,376 $78,931 $106,071 2015 $78,931 $30,695 $75,376 $78,931 $106,071 2016 $78,931 $30,695 $75,376 $78,931 $106,071 2017 $78,931 $30,695 $75,376 $78,931 $106,071 2018 $78,931 $30,695 $75,376 $78,931 $106,071 2019 $83,270 $32,383 $89,523 $83,270 $121,906
LANDAUER 51 REAL ESTATE COUNSELORS REVENUE Minimum Rent: Rental rates for current tenants are dependent on specific lease terms which have been modeled in our analysis. For currently vacant spaces and for lease rollovers, tenant spaces have been assigned the market rent for the appropriate category. Most of the leases at the center are structured on a net basis with the tenant responsible for their defined pro rata share of operating expenses and real estate taxes. According to a rent roll provided for the appraisal more than 24 different expense recovery schedules are identified. We have simplified the recovery methods for most of the tenants, and the general expense recovery structure applied in the analysis is described below. Enclosed Mall Expenses: Enclosed mall tenants pay a pro-rata share of enclosed mall expenses based on a proportion of unit size to either the enclosed mall GLA or the occupied area of the enclosed mall, excluding anchor tenants. The CAM recovery includes such expenses as insurance, electricity, heat oil/gas, water and sewer, cleaning, repair and maintenance and security. An administrative fee of 15.0 percent is applied to this total, and anchor tenant contributions are deducted depending on terms specified in the individual anchor leases. Anchor tenant contributions, as applied and allocated, are shown on the facing page. It is reported that Target pays a small amount toward costs associated with maintaining the roads. Common Area Expenses: This expense is related to the maintenance and repair of the common area of the center (site, parking area, etc.). Items included within this category include landscaping, snow removal, insurance, lighting and parking lot repairs. Most tenants pay a direct pro-rata LANDAUER 52 REAL ESTATE COUNSELORS share of these expenses based on the GLA at the mall. This expense includes a 15.0 percent administrative charge, and the expense total is offset by anchor tenant contributions. Other CAM Expenses: This expense category includes expense items such as dues/subscriptions, office equipment, outside services postage staff salaries and benefits, and telephone. This expense category could also be referred to as Administration. For recovery purposes, no administrative surcharge is applied and the expense is not offset by anchor tenant contributions. Real Estate Taxes: Real estate taxes are recovered based on the tenants prorated share of the GLA. As the anchor tenants are not separately assessed for real estate taxes, they also pay a prorated share of the expense. The two outlots are separately assessed and pay their real estate taxes, directly. In our analysis, we have included the outlot taxes paid by the tenant, because if these tenants ever vacate their buildings, the landlord would be required to pay the taxes during the time required to release the buildings. Two of the anchors (Sears and JC Penney) pay real estate tax increases over a 1988 base year amount, which we have estimated to be $1.42 per square foot. This means that anchor taxes totalling $146,848 would not be recovered by the anchors. Leases for the enclosed mall tenants are interpreted by the landlord; to include a provision whereby these uncollected anchor taxes are recovered by the enclosed mall tenants. We have included this recovery method in the cash flow model, but recognize it is not a typical tax recovery method found in regional malls. Percentage Rent: Also known as overage rent, percentage rent cited in the existing leases vary from 2.0 to 15.0 percent of sales above a natural or LANDAUER 53 REAL ESTATE COUNSELORS predetermined breakpoint. The most typical percentage rent rates found at the subject are 5.0 to 6.0 percent. Future sales volume forecasts for each tenant are based upon the information from 1993, 1994, 1995, and year-to-date 1996 sales volume. Also, the previous owner's 1997 sales projection was considered. Vacancy/Credit Loss: A 2.5 percent deduction is taken against effective gross income to account for anticipated future vacancies and credit losses. All mall tenants are subject to the vacancy credit; however, the four anchor stores are not subject to the credit loss factor. Miscellaneous Income: This category includes income from cart rental, common area licenses and temporary tenants. Miscellaneous income is estimated at $125,000 for 1997, and is increased at the general growth rate of 3.5 percent per year. Tenant Retention Ratio: Upon the expiration of the existing leases, it is estimated that 75 percent of the expiring enclosed mall tenants will renew and 25 percent will vacate when the leases expire. For the Plaza tenants, we have assumed a 60 percent probability that they will renew with a 40 probability that they will vacate when their leases expire. Vacancy Between Leases: A weighted average of two months vacancy between leases is assumed at rollover. The weighted averages assume an actual downtime of six to nine months for non-anchor tenants. Rent Concessions: Rent concessions are not common in the regional mall market. However, some malls will give free rent inleu of contributing toward the tenant's alterations. No rent concessions are assumed in this analysis. LANDAUER 54 REAL ESTATE COUNSELORS Lease-up Assumptions: As of January 1, 1997, the subject is projected to have 6,768 square feet of vacant space, including a 2,239 square foot unit (B-16) that has never been leased. Our assumptions for leasing the four vacant units include leasing Unit B-1-008 in July 1997. This unit contains 3,025 square feet and is located on the main mall corridor near the center of the mall. It has been vacant since October 1996, and there are no prospects for leasing the unit. Unit B-1-015 contains a temporary tenant, and we have projected this 1,165 square foot unit to lease on a permanent basis in October 1997. Unit B-1-016 contains 2,239 square feet and has never been leased. We have projected this unit to lease in January 1998. The one vacant food tenant unit (D-1-008) is projected to lease in April 1998. Rental rates and tenant finish allowances are taken into consideration based on the characteristics of individual spaces. Options: Many of the tenants have renewal options included in their original leases. Most of the renewal terms cited in the leases indicate that the renewal rental rate will be at the prevailing market level. For this reason, we have not exercised any renewal options, except for the anchor and outlot tenants. Renewals: Upon expiration of current leases, tenants are renewed at the higher of the last effective rent or the market rent (base plus percentage rent) in the renewal year. The sales volume continues from the base lease. Each tenant is charged with a weighted average tenant improvement allowance. WESTSHORE MALL HISTORICAL OPERATING EXPENSES
Annualized Budget 1996 amount Concluded Item 1993 1994 1995 0ct-96 1996 1996 plus 3.5% 1997 ======================================================================================================================== Income Minimum Rent $3,128,302 $3,104,402 $3,115,520 $2,833,823 $3,400,588 $2,657,861 $3,519,608 $3,456,135 Overage Rent $ 292,190 $ 292,417 $ 171,927 $ 107,163 $ 128,596 $ 137,521 $ 133,096 $ 286,390 CAM Recovery $ 485,375 $ 837,181 $ 457,095 $ 592,924 $ 711,509 $ 480,594 $ 736,412 $ 726,059 Tax Recovery $ 611,488 $ 756,792 $ 549,867 $ 441,829 $ 530,195 $ 510,483 $ 548,752 $ 566,302 Anchor CAM $ 161,680 $ 139,604 $ 135,226 $ - $ 104,397 Misc. Income $ 172,698 $ 170,668 $ 194,552 $ 99,713 $ 119,656 $ 63,750 $ 123,844 $ 125,000 ---------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- Total Income $4,851,733 $5,301,064 $4,624,187 $4,075,452 $4,890,542 $3,850,209 $5,061,711 $5,264,283 Less: Vacancy & Credit $ - $ - $ - $ - $ - $ - $ - $ 98,710 ---------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- Effective Gross Income $4,851,733 $5,301,064 $4,624,187 $4,075,452 $4,890,542 $3,850,209 $5,061,711 $5,165,573 Expenses Enclosed Mall 40xx $ 365,612 $ 411,827 $ 390,296 $ 318,886 $ 382,663 $ 339,463 $ 396,056 $ 400,000 CAM 41xx $ 102,296 $ 216,717 $ 288,860 $ 234,134 $ 280,961 $ 220,607 $ 290,794 $ 250,000 CAM Special 44xx $ 56,355 $ - $ 1,042 $ - $ - $ - $ - $ - CAM, Other 45xx $ 152,977 $ 200,824 $ 129,942 $ 118,679 $ 142,415 $ 124,341 $ 147,399 $ 147,000 Utility $ 28,266 $ - $ 21,284 $ 19,204 $ 23,045 $ 12,100 $ 23,851 $ 24,000 Management Fee $ 252,281 $ 214,423 $ 147,206 $ 122,794 $ 147,353 $ 112,342 $ 152,510 $ 206,623 Owner's $ 62,132 $ 62,771 $ 86,373 $ 58,891 $ 70,669 $ 78,080 $ 73,143 $ 73,000 Miscellaneous $ 76,651 $ 75,348 $ 67,815 $ 56,082 $ 67,298 $ 83,894 $ 69,654 $ 70,000 Property Tax $ 653,886 $ 687,746 $ 592,697 $ 493,413 $ 592,096 $ 528,500 $ 612,819 $ 608,141 Insurance $ - $ - $ 7,000 $ - $ - $ - $ - $ 7,500 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total Expenses $1,750,456 $1,869,656 $1,732,515 $1,422,083 $1,706,500 $1,499,327 $1,766,227 $1,786,264 Net Income $3,101,277 $3,431,408 $2,891,672 $2,653,369 $3,184,043 $2,350,882 $3,295,484 $3,379,309 Management Fee $ 252,281 $ 214,423 $ 147,206 $ 122,794 $ 147,353 $ 112,342 $ 152,510 $ 206,623 Percent of Income 5.20% 4.04% 3.18% 3.01% 3.01% 2.92% 3.01% 4.00%
LANDAUER 55 REAL ESTATE COUNSELORS EXPENSES Operating Expenses: Operating expense estimates for Westshore Mall were based primarily upon historical data from 1993, 1994, and 1995 and year-to-date (October 1996) figures. The 1997 budget estimate of expenses was not provided. We have also taken into consideration expense data from other similar shopping centers as well as from trade publications such as Dollars and Cents of Shopping Centers: 1995, published by the Urban Land Institute. However, our expense conclusion is based primarily upon the historical levels found at the subject. When analyzing the operating statements, we have reconciled the anchor tenant contributions which shows as a deduction in the statement. A summary of the historical operating levels are found in the table on the facing page. Enclosed Mall (40xx): Enclosed mall expenses include items such as air conditioning, cleaning, repairs, insurance, lighting, music, pest control security, seasonal decorations, supplies, water and sewer. This expense has averaged about $389,000 between 1993 and 1995. The annualized 1996 amount is $382,663. We have increased the 1996 annualized amount by 3.5 percent and have concluded $400,000 for 1997. Common Area (41xx): The common area expenses are for maintaining the exterior common area including landscaping, parking lot and ring road. The expense items include pest control, security, sweeping, snow removal, trash removal, water and sewer. The expense has averaged about $202,000 between 1993 and 1995. The annualized 1996 expense level is $280,961 with the 1996 budget citing $220,607. We have concluded the 1997 common area expense within the range of the data, at $250,000. LANDAUER 56 REAL ESTATE COUNSELORS Other CAM (45xx): This expense category includes office and administrative expenses including: dues, subscriptions, office equipment, office supplies, promotion and entertainment, postage, telephone, training and seminars and staff salaries and benefits. The expense has averaged about $161,000 between 1993 and 1995. The 1996 annualized amount is $142,415. The 1996 budget cites $124,341. We have concluded $147,000 or 3.5 percent greater than the 1996 annualized amount. Utility Expenses: Utility expenses are combined with CAM expenses for recovery purposes but are reported separately. The since 1993, the expense has relatively stable, and we have concluded $24,000 for 1997. Management Fee: Management fees in the regional mall market range from 3.0 percent to 5.0 percent, depending the revenues to which it is applied and whether leasing commissions are paid separately. For most malls, the management fee is typically in the range of 4.5 percent of minimum and percentage rent and utility sales, charged between related entities. A higher management fee of 5.0 percent would be applied to a lower level of minimum and percentage rent. When applied to all revenue, management fees range between 3.0 and 3.5 percent. For the Westshore Mall, we conclude 4.0 percent which is applied to all revenue and which includes commissions for leasing of the spaces. Owner's Expenses: This expense includes the owner's contribution to the Merchant's Association which is cited in many leases as $25,000. Other owner's expenses include auditing and professional services fees, legal fees and miscellaneous promotion expenses. The expense has LANDAUER 57 REAL ESTATE COUNSELORS averaged about $50,000 between 1993 and 1995. The 1996 annualized amount is $70,669. We have concluded the total 1997 expense as $73,000 but have separately shown the Merchant's Association Contribution. Miscellaneous: Miscellaneous expenses include expenses for customer service, carts, temporary tenant expenses and information center. The expense has averaged about $73,000 between 1993 and 1995. The 1996 annualized amount is $67,298 with a 1996 budget citing $83,894. We have increased the 1996 annualized amount by 3.5 percent and have concluded $70,000 for 1997. Insurance: Insurance expenses have been concluded to be $7,500 for 1997. In 1995 they were, $7,000 but are not identified in the October 1996 operating statement. Real Estate Taxes: Real estate taxes are concluded at an estimated level as discussed in the previous Real Estate Tax section of the report. Taxes for the mall and anchors, plaza and outlots are included in the analysis. We have not included the real estate taxes for the owned vacant land parcels. As displayed in the Real Estate Tax Section of this report, the subject's taxes are based on historical levels levied against the subject; however, "fully assessed" taxes based on our value indication by the Income Approach ($33,000,000) are approximately $708,147, or about $100,000 greater than the current tax level. As reported by the seller, the sale price of $30,159,000, if used by the assessor to calculate the taxes, would result in a tax increase of about $39,000. The result of increased taxes on tenant retention is unknown as occupancy costs would increase. Since estimating real estate tax increases is speculative and conjectural, LANDAUER 58 REAL ESTATE COUNSELORS the possible impact that a sale would have on real estate taxes is not applied in this analysis as the taxes are recovered by the tenants. TOTAL EXPENSES The total expenses as concluded for 1997 are projected to be $1,790,138. The 1993 actual expenses were $1,750,456 and 1994 expenses were $1,869,656. In 1995 expenses totaled $1,732,515 and were budgeted to be $1,499,327 in 1996. The 1996 annualized amount is estimated to be $1,766,227. Our 1997 conclusion of $1,790,138 is not out of line based on historical expenses. Overall, the expenses are lower than typical for regional malls because of the lower real estate taxes paid in a suburban setting. OCCUPANCY COSTS FOR WESTSHORE MALL
All Tenants Minimum Overage Sub Total Expense Total Total Occupancy Cost Year Rent Rent Expense Recoveries Tenant Cost Retail Sales Sub/Sales Total/Sales ========================================================================================================= 1997 $3,456,135 $286,390 $3,742,525 $1,396,758 $5,139,283 $70,273,000 5.33% 7.31% 1998 $3,545,062 $310,748 $3,855,810 $1,489,157 $5,344,967 $71,413,000 5.40% 7.48% 1999 $3,728,801 $288,911 $4,017,712 $1,582,970 $5,600,682 $74,343,000 5.40% 7.53% 2000 $3,829,544 $322,855 $4,152,399 $1,655,328 $5,807,727 $77,214,000 5.38% 7.52% 2001 $3,915,380 $357,042 $4,272,422 $1,735,229 $6,007,651 $80,269,000 5.32% 7.48% 2002 $3,965,953 $392,593 $4,358,546 $1,806,577 $6,165,123 $83,176,000 5.24% 7.41% 2003 $3,990,158 $459,740 $4,449,898 $1,873,125 $6,323,023 $85,697,000 5.19% 7.38% 2004 $4,076,378 $500,465 $4,576,843 $1,952,271 $6,529,114 $88,536,000 5.17% 7.37% 2005 $4,141,730 $546,975 $4,688,705 $2,032,231 $6,720,936 $92,085,000 5.09% 7.30% 2006 $4,147,328 $585,291 $4,732,619 $2,095,560 $6,828,179 $94,161,000 5.03% 7.25% ================================================================================================= Totals $3,879,647 $405,101 $4,284,748 $1,761,921 $6,046,669 $81,716,700 5.24% 7.40% Enclosed Mall Tenants Minimum Overage Sub Total Expense Total Total Occupancy Cost Year Rent Rent Expense Recoveries Expenses Retail Sales Sub/Sales Total/Sales ========================================================================================================= 1997 $2,301,253 $106,434 $2,407,687 $ 990,066 $3,397,753 $29,982,000 8.03% 11.33% 1998 $2,381,055 $117,514 $2,498,569 $1,033,540 $3,532,109 $29,847,000 8.37% 11.83% 1999 $2,534,067 $ 82,323 $2,616,390 $1,097,151 $3,713,541 $31,325,000 8.35% 11.85% 2000 $2,613,649 $ 97,921 $2,711,570 $1,150,927 $3,862,497 $32,570,000 8.33% 11.86% 2001 $2,683,757 $120,580 $2,804,337 $1,205,217 $4,009,554 $34,014,000 8.24% 11.79% 2002 $2,738,228 $137,863 $2,876,091 $1,255,928 $4,132,019 $35,335,000 8.14% 11.69% 2003 $2,765,990 $183,490 $2,949,480 $1,305,067 $4,254,547 $36,293,000 8.13% 11.72% 2004 $2,833,079 $202,368 $3,035,447 $1,358,175 $4,393,622 $37,506,000 8.09% 11.71% 2005 $2,883,598 $220,589 $3,104,187 $1,420,714 $4,524,901 $39,172,000 7.92% 11.55% 2006 $2,862,116 $240,253 $3,102,369 $1,449,665 $4,552,034 $39,233,000 7.91% 11.60% ================================================================================================= Totals $2,659,679 $150,934 $2,810,613 $1,226,645 $4,037,258 $34,527,700 8.14% 11.69%
LANDAUER 59 REAL ESTATE COUNSELORS OCCUPANCY COSTS Occupancy costs for the mall and tenants were reviewed. It is found that the occupancy costs generally decline over the holding period and, for the mall including anchors. The average is about 7.40 percent over the ten-year holding period for all tenants, as shown in the table on the facing page. As a bench mark, the enclosed mall retail tenants, including the food and kiosk tenants, have an average occupancy cost of about 11.69 percent over the ten-year holding period. We note for both of these calculations, that the tenant's Merchant Association Fees are not included in the calculation. If the tenant's Merchant Association Fees were included the occupancy costs would likely increase a small amount. Within the regional mall market, enclosed mall (in-line) retail tenant's occupancy costs would be in the 12.0 percent range, and the subject's occupancy costs are near the average. On a tenant by tenant basis for enclosed mall tenants, the occupancy cost ranges from 7.0 to 28.0 percent. Those tenants with low occupancy costs would likely have a high probability of renewing their leases upon expiration of their lease. Conversely, the tenants with high occupancy costs would have a low probability of renewing their leases upon lease expiration. Nevertheless, the total mall occupancy cost is within reason, and we have confidence in the cash flow and assumptions used in the analysis. The occupancy costs from this analysis appear reasonable, and point to a stable mall operation. CAPITAL ITEMS This non-operating expense category includes tenant alteration and improvement costs, leasing commissions, and a capital reserve (or reserve for capital replacements). Tenant Alterations: We note that about the time that many of the current enclosed mall tenant leases expire in 1998 and 1999, the tenant spaces will be 10-years old and would require some refurbishing. Furthermore, the enclosed mall tenants renewal options specify that the renewal rental rate will be renegotiated to a market level, and there is no rental rate incentive for the tenant renew. The landlord LANDAUER 60 REAL ESTATE COUNSELORS and tenant will renegotiate the rental rate with the tenant most likely demanding that the landlord contribute to refurbishing its space as if it was a new lease. Furthermore, as the neighborhood continues to develop its commercial character, additional discount retailers would enter the market and compete with tenant sales at the mall. Examples of this retail penetration include, Target, WalMart, Sam's Club and Kohl's. To remain competitive in the future, new tenants will likely demand and receive from the landlord a larger amount of tenant finish. Historical detail on landlord's new tenant improvement allowance is limited. In 1988 and 1989 when the mall was in its initial lease-up period, the tenant finish contribution was about $10.00 per square foot for new tenants. Increasing the 1988 costs by a compound rate of 3.5 percent results in a current tenant improvement allowance of about $13.60 per square foot. For those tenants where the landlord's contribution was cited in the leases, the contribution has ranged from $8.00 to $45.00 per square foot. A "Recent Lease Analysis" provided by the landlord indicates tenant finish contributions range from $1.94 to $45.00 per square foot, averaging $14.45 per square foot for eight new leases. Local tenants would typically receive a lesser amount of tenant finish as will tenants with short term leases. National and retail tenants with longer lease terms or good credit would receive a greater amount of tenant finish from the landlord. At Westshore Mall, we anticipate some allowance above the recent average will usually be necessary, and we project an allowance of $16.00 per square foot for new enclosed mall retail tenants, with no allowance for tenant renewal. The allowance equates to about $2.00 per square foot per year of lease term. The $16.00 per square foot allowance is also applied to the outlot tenants. Plaza tenants have received a tenant finish allowance ranging from $2.50 to $6.25 per square foot. As the Plaza does not have frontage on US-31 or James Street, we have increased the allowance to $5.00 per square foot to keep the Plaza shops competitive with the strip centers in the neighborhood. As the anchor leases all expire during the analysis period (2003) and as we have assumed that the anchors will exercise their options, we have given a nominal amount of tenant finish to freshen each of the anchor units. It is recalled that the new mall in Grandville, Michigan is projected to be opened in LANDAUER 61 REAL ESTATE COUNSELORS 1998 or 1999 and will provide some competition for the subject's anchors. As an incentive to renew their leases, we have given each anchor $5.00 per square foot in 2003. Leasing Commissions: Leasing commissions at the subject property are not applied and are included in the management fee. Capital Reserves: This category accounts for the fact that capital items such as the roof, building mechanical systems, and parking lot eventually will need major repairs or replacement. We are projecting a $0.15 per square foot expense, growing at a 3.5 percent rate. Cash Flow Analysis: Based upon the foregoing assumptions and projections, the cash flow forecast for Westshore Mall is presented on the following page. WESTSHORE MALL ANNUAL CASH FLOW REPORT BEGINNING 1/1/97 FOR 11 YEARS
CY1997 CY1998 CY1999 CY2OOO CY2OO1 CY2OO2 CY2003 CY2004 INCOME - ------ MINIMUM RENT: ALL TENANTS 3,456,135 3,545,062 3,728,801 3,829,544 3,915,380 3,965,953 3,990,158 4,076,378 --------- --------- --------- --------- --------- --------- --------- --------- TOTAL MINIMUM RENT 3,456,135 3,545,062 3,728,801 3,829,544 3,915,380 3,965,953 3,990,158 4,076,378 RECOVERIES: ENCLOSED MALL 387,237 404,992 421,565 441,260 460,800 479,651 498,803 514,715 COMMON AREA & UTL. 215,873 228,355 240,278 251,997 267,589 280,310 288,542 296,127 ADMINISTRATIVE 122,949 128,990 140,524 147,444 155,226 161,281 164,723 173,104 TAX & INS. 566,302 590,572 640,337 672,656 707,878 739,772 771,834 813,607 ANCHOR CAM 104,397 136,248 140,266 141,971 143,736 145,563 149,223 154,718 --------- --------- --------- --------- --------- --------- --------- --------- TOTAL RECOVERIES 1,396,758 1,489,157 1,582,970 1,655,328 1,735,229 1,806,577 1,873,125 1,952,271 OVERAGE RENT 286,390 310,748 288,911 322,855 357,042 392,593 459,740 500,465 GROSS RENTAL INCOME 5,139,283 5,344,967 5,600,682 5,807,727 6,007,651 6,165,123 6,323,023 6,529,114 CREDIT LOSS ( 98,710) ( 102,477) ( 108,129) ( 112,569) ( 116,805) ( 119,953) ( 123,033) ( 127,258) MISC. INCOME 125,000 129,375 133,903 138,590 143,440 148,461 153,657 159,035 --------- --------- --------- --------- --------- --------- --------- --------- TOTAL INCOME 5,165,573 5,371,865 5,626,456 5,833,748 6,034,286 6,193,631 6,353,647 6,560,891 EXPENSES - -------- ENCLOSED MALL 400,000 414,000 428,490 443,487 459,009 475,074 491,702 508,912 COMMON AREA 250,000 258,750 267,806 277,179 286,881 296,922 307,314 318,070 ADMINISTRATIVE CAM 147,000 152,145 157,470 162,982 168,686 174,590 180,701 187,025 UTILITIES 24,000 24,840 25,709 26,609 27,541 28,504 29,502 30,535 MERCHANTS EXPENSE 25,000 25,875 26,781 27,718 28,688 29,692 30,731 31,807 OTHER OWNER 48,000 49,680 51,419 53,218 55,081 57,009 59,004 61,069 MISCELANEOUS 70,000 72,450 74,986 77,610 80,327 83,138 86,048 89,060 INSURANCE 7,500 7,762 8,034 8,315 8,606 8,908 9,219 9,542 TOTAL MALL TAX 608,141 629,426 651,456 674,257 697,856 722,281 747,560 773,725 MANAGEMENT FEE 206,623 214,875 225,058 233,350 241,371 247,745 254,146 262,436 --------- --------- --------- --------- --------- --------- --------- --------- TOTAL EXPENSES 1,786,264 1,849,803 1,917,209 1,984,725 2,054,046 2,123,863 2,195,927 2,272,181 --------- --------- --------- --------- --------- --------- --------- --------- NET OPERATING INCOME 3,379,309 3,522,062 3,709,247 3,849,023 3,980,240 4,069,768 4,157,720 4,288,710 ALTERATIONS 67,040 162,429 141,012 101,074 62,328 36,719 1,147,534 77,854 CAPTIAL RESERVE 59,092 61,161 63,301 65,517 67,810 70,183 72,640 75,182 --------- --------- --------- --------- --------- --------- --------- --------- CASH FLOW 3,253,177 3,298,472 3,504,934 3,682,432 3,850,102 3,962,866 2,937,546 4,135,674 CY2005 CY2006 CY2007 INCOME - ------ MINIMUM RENT: ALL TENANTS 4,141,730 4,147,328 4,390,466 --------- --------- --------- TOTAL MINIMUM RENT 4,141,730 4,147,328 4,390,466 RECOVERIES: ENCLOSED MALL 535,345 556,534 578,469 COMMON AREA & UTL. 311,439 321,558 333,692 ADMINISTRATIVE 180,506 184,862 190,324 TAX & INS. 848,197 873,766 906,354 ANCHOR CAM 156,744 158,840 161,010 --------- --------- --------- TOTAL RECOVERIES 2,032,231 2,095,560 2,169,849 OVERAGE RENT 546,975 585,291 557,573 GROSS RENTAL INCOME 6,720,936 6,828,179 7,117,888 CREDIT LOSS ( 131,179) ( 132,955) ( 139,261) MISC. INCOME 164,601 170,362 176,325 --------- --------- --------- TOTAL INCOME 6,754,358 6,865,586 7,154,952 EXPENSES - -------- ENCLOSED MALL 526,724 545,159 564,239 COMMON AREA 329,202 340,724 352,650 ADMINISTRATIVE CAM 193,571 200,346 207,358 UTILITIES 31,603 32,710 33,854 MERCHANTS EXPENSE 32,920 34,072 35,265 OTHER OWNER 63,207 65,419 67,709 MISCELANEOUS 92,177 95,403 98,742 INSURANCE 9,876 10,222 10,579 TOTAL MALL TAX 800,805 828,834 857,843 MANAGEMENT FEE 270,173 274,624 286,198 --------- --------- --------- TOTAL EXPENSES 2,350,258 2,427,513 2,514,437 --------- --------- --------- NET OPERATING INCOME 4,404,100 4,438,073 4,640,515 ALTERATIONS 79,440 167,091 202,222 CAPTIAL RESERVE 77,813 80,537 83,356 --------- --------- --------- CASH FLOW 4,246,847 4,190,445 4,354,937
LANDAUER 63 REAL ESTATE COUNSELORS DISCOUNTED CASH FLOW ANALYSIS As previously discussed, once the projected income stream over the projection period is determined, the next step is to discount the periodic cash flow and the reversion at the end of the holding period to an indicated value as of the valuation date. The following definitions and assumptions were employed in our analysis. Net Operating Income: Net income remaining after all expenses but before capital items, i.e., tenant improvement cost, leasing commissions, and capital expenditures. Cash Flow: Income available after all capital items, including reserves, leasing commissions and tenant improvements. Overall Rate: A rate which reflects the relationship of the first year's net income to total value, derived by dividing the net income by the indicated value. Discount Rate: A rate of return used to estimate the present value of future cash flows including the reversion (sales proceeds) of the property at the end of the holding period. The discount rate is alternately called an Internal Rate of Return. Terminal Capitalization Rate: An overall rate applied to the projected net operating income at the end of the holding period to determine the amount of the reversion. A disposition fee is usually deducted from the reversion. Holding Period: A holding period is the term of ownership of an investment, also referred to as the projection period for the purposes of analysis and valuation. LANDAUER 64 REAL ESTATE COUNSELORS RATE SELECTION The selection of appropriate Discount Rates and Terminal Capitalization Rates for use in arriving at an estimate of value is a judgmental process. Community centers similar to the subject have a market appeal to both national and local investors. Therefore, competition with many other investment vehicles has an influence on rates of return required by investors. One method used to estimate an appropriate discount rate to apply in the discounted cash flow model is to analyze the investment parameters of institutional-type investors, both for real estate and non-real estate types of investments. The following yields were noted for non-real estate investments for the year ending January 10, 1997. Non-Real Estate Investment Yields Investment Instrument Yield Rate --------------------- ---------- Government Bonds (10 Years) 6.57% U.S. Treasury (30 Years) 6.80% Aaa-rated Corporate Bonds 7.42% Baa-rated Corporate Bonds 8.11% A-rated Utility Bonds (30 Years) 7.95% Government issues, considered near risk-free, tend to offer the lowest yield, while Baa-rated issues are generally among the highest. Yield rates have increased since one year ago in response to a slowing economy. Ten-year government bonds have increased over 83 basis points since last year, with 30-year treasury bills increasing 68 basis points. For real estate investments, rates may be influenced by risk, degree of liquidity, burden of management, tax benefits, and future appreciation or depreciation. Adjustments must be made to the safe rate to compensate for these factors. Consequently, required real estate yields are generally higher than those for non-real estate investments. Survey of Investment Criterea Fourth Quarter, 1996 Regional Mall Market Current Last Year Quarter Quarter Ago ------- ------- --- Free & Clear Equity IRR - ----------------------- Range 10.00%-14.00% 10.00%-14.00% 10.00%-14.00% Average 11.69% 11.56% 11.55% Change (Basis Points) - 13 14 Free & Clear Equity Cap Rate - ---------------------------- Range 7.00%-11.00% 6.25%-11.00% 6.25%-11.00% Average 8.57% 8.33% 7.86% Change (Basis Points) - 24 71 Market Rent Change Rate - ----------------------- Range 0.00%-4.00% 0.00%-4.00% 0.00%-4.50% Average 2.64% 2.64% 3.16% Change (Basis Points) - 0 -52 Expense Change Rate - ------------------- Range 3.00%-4.00% 3.00%-4.00% 3.00%-5.00% Average 3.83% 3.83% 3.98% Change (Basis Points) - 0 -15 Residual Cap Rate - ----------------- Range 7.00%-11.00% 7.00%-11.00% 7.00%-11.00% Average 8.76% 8.71% 8.45% Change (Basis Points) - 5 31 Source: Peter F. Korpacz & Associates, Inc. - Quarterly Survey of Investment Criterea National Investor Survey Third Quarter 1996 Regional Malls, Class "A" Third Quarter Third Quarter First Quarter 1996 1995 1996 ---- ---- ---- Free & Clear Equity IRR - ----------------------- Range 10.00%-11.80% 10.00%-13.00% 10.00%-11.50% Average 11.10% 11.10% 11.00% Change (Basis Points) - 0 10 Free & Clear Equity Cap Rate - ---------------------------- Range 7.00%-9.00% 7.00%-11.00% 6.00%-10.00% Average 8.2% 7.80% 8.0% Change (Basis Points) - 40 20 Market Rent Change Rate - ----------------------- Range 2.00%-5.00% 2.00%-4.00% 0.00%-6.00% Average 3.20% 3.30% 3.50% Change (Basis Points) - -10 -30 Expense Change Rate - ------------------- Range 3.00%-4.00% 3.00%-5.00% 3.00%-4.00% Average 3.70% 3.90% 3.80% Change (Basis Points) - -20 -10 Residual Cap Rate - ----------------- Range 7.00%-9.50% 7.00%-11.00% 8.00%-10.00% Average 8.70% 8.30% 8.70% Change (Basis Points) - 40 0 Source: CB Commercial National Investor Survey LANDAUER 65 REAL ESTATE COUNSELORS The discount rates and terminal capitalization rates applicable to first-tier regional malls have remained relatively stable over the last year. As summarized on the facing page, according to the Korpacz Real Estate Investor Survey, Fourth Quarter 1996, discount rates range from 10.0 to 14.0 percent, with an average of 11.69 percent. This represents a 14 basis point increase from average rates of one year ago. Residual capitalization rates range from 7.0 to 11.0 percent, with an average of 8.76 percent, a 31 basis point increase from third quarter 1995 levels. First year overall rates are reported at 7.00 to 11.0 percent with an average of 8.57 percent, representing a 71 basis point increase from last year's rates. CB Commercial's National Investor Survey, Third Quarter 1996, also indicates lower ranges for Class A regional malls, but similar averages in discount rates (10.0-11.8 percent, average 11.1 percent), terminal capitalization rates (7.0-9.5 percent, average 8.7 percent), and going-in capitalization rates (7.0-9.0 percent, average 8.2 percent). These rates show changes from the first quarter of 1996, with the exception of the terminal capitalization rate which did not change. In addition to the investor survey, we have reviewed the market for recent sales of regional malls in order to extract rates from the market. The table on the following facing page shows the rates for the regional mall sales that have sold since 1991. The sales indicate a range of discount rates (IRR) from 10.50 to 14.70 percent with an average of 11.91 percent. Initial capitalization rates range from 6.80 to 12.60 percent with an average of 8.44 percent. Overall rates varied based on the number of anchors included in the sale as well as on expansion opportunities of a center. This usually results in a lower rate because investors can expect to reap a development profit from a potential increase in cash flow. Yield requirements for investment properties throughout the United States have been relatively stable over the past year and competition for the better properties appears to be steady due to a variety of factors, including the scarcity of good quality investment real estate, the desire for an adequate hedge against inflation, and the quest for a safe haven for investment capital. Arising out of concerns over troubled real estate markets due to a receding economy and overbuilding, investor cash flow ASSUMPTIONS AND RATES FROM SALES REGIONAL MALLS Price/ Sale # of Sale Location Date OAR IRR Anchors Ratio ======================================================================= Michigan Dec-96 10.50% -- 4 0.43 Illinois Dec-96 7.90% -- 0 -- California Nov-96 9.10% 15.20% 2 0.47 Montana Nov-96 9.90% 15.80% 2 0.47 Illinois Nov-96 8.90% -- 0 0.83 Tennessee Nov-96 9.90% -- 0 0.33 Texas Oct-96 9.00% -- 1 0.80 Arizona Oct-96 10.00% -- 1 0.50 California Jun-96 10.30% -- 0 0.69 Illinois Apr-96 9.56% 12.00% 4 0.56 Connecticut Mar-96 6.80% -- 0 -- California Mar-96 7.60% -- 1 1.18 Pennsylvania Mar-96 13.00% 10.50% 0 0.50 Florida Feb-96 7.70% -- 0 0.80 New Jersey Aug-95 8.70% -- 0 1.09 California Jun-95 8.90% 12.30% 0 0.95 Massachusetts Apr-95 8.50% 10.70% 1 0.81 California Jan-95 12.60% 13.50% 0 0.50 California Jan-95 7.80% 10.50% 0 1.14 Virginia Jan-95 7.80% -- -- 0.55 Texas Dec-94 6.70% 11.60% 0 1.03 Texas Dec-94 8.70% 11.50% 2 0.39 Florida Dec-94 8.20% 11.50% 1 1.00 Florida Dec-94 8.60% 12.00% 0 0.80 Arizona Dec-94 7.80% -- -- 1.02 Missouri Dec-94 8.00% 12.10% 0 -- Louisiana Dec-94 10.70% -- 0 0.50 No. Carolina Sep-94 10.60% 14.70% 0 0.50 Virginia Jul-94 9.00% -- 3 1.11 Louisiana Jul-94 8.90% -- 2 1.10 Florida Jun-94 7.50% 11.00% All 1.22 Alabama Feb-94 7.40% 11.50% 0 1.10 California Dec-93 7.00% -- 0 1.12 Arizona Dec-93 8.00% 11.00% 0 1.17 Florida Dec-93 7.50% 11.50% 0 0.91 Ohio Dec-93 7.50% 11.30% 0 1.16 New Mexico Dec-93 7.25% 11.00% 1 0.76 New Jersey Jul-93 7.50% 12.40% 1 0.68 9.00% Oregon Jul-93 8.00% 11.50% 0 0.88 No. Carolina Jul-93 7.00% 12.10% 2 0.77 Florida May-93 7.50% 12.00% 1 0.64 Texas May-93 8.50% 12.20% 1 0.85 Florida Jan-93 7.50% 11.00% 0 1.00 Florida Dec-92 7.25% 11.50% 0 1.50 11.70% 11.70% Illinois Dec-92 8.00% 12.00% 1 0.96 Texas Sep-92 8.00% 12.00% 1 0.73 Connecticut Aug-92 7.00% 11.50% 0 -- Florida Jul-92 7.10% 11.50% 1 0.81 Florida Apr-92 7.00% 11.10% 0 1.24 Nebraska Apr-92 7.50% 12.50% 1 0.79 Florida Mar-92 7.90% 11.50% 1 0.79 Pennsylvania Dec-91 6.80% 11.20% 1 0.55 Maine Dec-91 7.30% 11.80% 3 -- ===== ===== ==== Average 8.44% 11.91% 0.85 LANDAUER 66 REAL ESTATE COUNSELORS projections today tend to be more "realistic", incorporating assumptions and probabilities in keeping with actual market experience and predicated upon moderate future expectations. Good quality regional malls remain the top property preference for investors. Demand for these relatively scarce properties is strong and the market is characterized as a "seller's" market whereby the best properties are bid up in price. The market for average or "B" quality malls is less active than "A" malls like the subject in similar locations, and these properties must be competitively priced in order to attract buyers. The subject property is considered among the top malls in its metropolitan area, and because of its suburban setting, some possibility exists for new competition being constructed. Competition primarily comes from existing retail in the neighborhood, Woodland Mall in Grand Rapids, and the proposed mall in Grandville. Suburban malls generally do not have the density of population available to urban malls are not convenient to most employees during or after work hours in the suburban environment. However, the typical real estate tax recovery method would include additional risk in the cash flow if the enclosed mall tenants insisted upon tax recoveries as found in other regional malls. Taking these factors into consideration, it is our opinion that a discount rate of 12.5 percent is applicable to the cash flows forecast during the ten year holding period. Further, a terminal capitalization rate of 10.0 percent applied to the 11th year net operating income is appropriate to calculate the reversion value estimate. VALUATION BY DISCOUNTED CASH FLOW ANALYSIS The initial step when discounting with this methodology is to estimate the appraised property's reversionary value. Our reversion calculation assumes that the property would be sold at the end of the previously stated holding period. The reversion value of the property at that time is estimated by dividing the forecast net operating income (NOI) from the year following the projected holding period by the terminal capitalization rate. In addition, disposition costs of 2.0 percent are applied against the LANDAUER 67 REAL ESTATE COUNSELORS reversionary value in order to arrive at an estimate of the net reversion. The net reversion value is added to the last year of the projection period's net cash flow, which then represents the total future net cash flow to be received in that last year. MARKET VALUE ANALYSIS AS OF DECEMBER 31, 1996 This analysis begins January 1, 1997, and continues for ten years, ending December 31, 2006. The 11th year net operating income (Calendar Year 2007) is capitalized to produce an estimated reversionary value at the end of the holding period. Considering the foregoing, the results of our analysis for Westshore Mall is as follows: Calculation of the Reversion 11th Year NOI (CY 2007) $4,640,515 Terminal Cap Rate 10.0% Gross Reversion $46,405,150 Disposition Costs (2.0%) (928,103) -------- Net Reversion $45,477,047 This net reversion is then added to the 10th year's net cash flow, which then represents the total future net cash flow to be received in the 10th year. The following matrix shows the values indicated by discounting the cash flows at rates of 12.5, 13.0 and 13.5 percent. Valuation Matrix Discount Rate Property Value Price/SF -------- -------------- -------- 12.5% $34,015,808 $86.35 13.0% $32,992,309 $83.75 13.5% $32,011,047 $81.26 LANDAUER 68 REAL ESTATE COUNSELORS Utilizing a 13.0 percent discount rate, the estimated value is $33,000,000 (rounded). The overall rate in the first year is 10.2 percent and 10.7 percent in year 2. The discounted reversionary value of $13,397,008 represents 40.6 percent of the final value, below 50/50 ratio preferred by many investors for a stabilized property. However, the reversion contribution to value also suggests that more reliance is placed in the cash flow, which is an investment assumption confirmed by numerous investors who have purchased malls in secondary markets. INDICATED VALUE BY THE DISCOUNTED CASH FLOW ANALYSIS......................................$33,000,000 =========== LANDAUER 69 REAL ESTATE COUNSELORS CORRELATION AND CONCLUSION In this report, we have utilized the Sales Comparison and Income Approaches in estimating the Market Value of the Leased Fee Interest of the subject property. A summary of our value estimates by each approach is as follows: Cost Approach Not Applicable Sales Comparison Approach $30,000,000 to $35,000,000 Income Approach $33,000,000 The reliability of the Cost Approach for the appraised property is weakened because an investor--the most probable potential purchaser of the property--typically is more concerned with the property's location, amenities, and ability to generate a required cash flow than with its replacement cost. In addition, the Cost Approach does not directly reflect the specific terms of actual leases signed or in negotiation at the property. Therefore, we have not used a Cost Approach in this analysis. The Sales Comparison Approach is an appraisal technique whereby the data of recent transactions involving similar or like properties is analyzed in order to derive an indication of the most probable sale price of the property being appraised. The reliability of this technique is dependent upon (a) the availability of comparable sales data, (b) the verification of the sales data, (c) the degree of comparability or extent of adjustment necessary for various factors, and (d) the absence of non-typical conditions affecting the sale price. In this instance, the significant amount of income received from the garage operation serves to skew traditional multipliers and indications of value. This approach is most meaningful when income properties exhibit similar income and expense characteristics. The sales utilized in the analysis are national in nature, but are not truly comparable because of varying economic structures of the transactions, including lease structures, occupancy, etc. However, the adjusted value range and the rates exhibited by the dates is useful as a check of the reasonableness of the Income Approach. LANDAUER 70 REAL ESTATE COUNSELORS Most significant is the Income Approach, which focuses on investors' primary concerns about the property's potential for generating income and value appreciation. This approach is particularly relevant when well-supported market rent and income data are available, and when major cash flow assumptions are supported by market-derived analysis. Because this approach closely parallels the thinking of well-informed buyers and sellers of income-producing properties, the present value estimate by this approach is given the most weight. Greatest reliance is placed on the Discounted Cash Flow Analysis value estimate. After consideration of the factors presented in this report and with greatest consideration given to the Discounted Cash Flow Analysis of the Income Approach in arriving at a final value, the Market Value of Westshore Mall, as of December 31, 1996, subject to existing tenant leases and the Assumptions and Limiting Conditions stated herein, is estimated to be: THIRTY-THREE MILLION DOLLARS $33,000,000 ADDENDA Legal Description Photographs of Subject Property Recent Leases Rent Roll Lease Abstract Reports Professional Qualifications LEGAL DESCRIPTION OF LAND - -------------------------------------------------------------------------------- LAND LOCATED IN HOLLAND TOWNSHIP, OTTAWA COUNTY, STATE OF MICHIGAN PARCEL 1: THAT PART OF THE SOUTHEAST 1/4 AND THAT PART OF THE SOUTHWEST 1/4, OF SECTION 16, TOWN 5 NORTH, RANGE 15 WEST, DESCRIBED AS COMMENCING AT THE SOUTH 1/4 CORNER OF SAID SECTION 16; THENCE SOUTH 89 DEGREES 40 MINUTES 45 SECONDS EAST 72.46 FEET ALONG THE SOUTH LINE OF SAID SOUTHWEST 1/4; THENCE NORTH 45 DEGREES 22 MINUTES 52 SECONDS WEST 247.59 FEET ALONG THE EASTERLY U.S. 31 HIGHWAY RIGHT-OF-WAY LINE; THENCE NORTH 17 DEGREES 39 MINUTES WEST 220.86 FEET ALONG SAID RIGHT-OF-WAY LINE TO THE PLACE OF BEGINNING; THENCE NORTH 17 DEGREES 39 MINUTES 00 SECONDS WEST 452.63 FEET; THENCE NORTHERLY 1712.67 FEET ALONG SAID RIGHT-OF-WAY LINE ON A 22,843.3 FOOT RADIUS CURVE TO THE RIGHT, THE LONG CHORD BEARING NORTH 15 DEGREES 30 MINUTES 06 SECONDS WEST 1712.27 FEET; THENCE NORTH 24 DEGREES 13 MINUTES 15 SECONDS EAST 196.24 FEET ALONG SAID RIGHT-OF-WAY LINE; THENCE SOUTH 89 DEGREES 41 MINUTES 20 SECONDS EAST 425.37 FEET ALONG THE NORTH LINE OF SAID SOUTHWEST 1/4; THENCE SOUTH 0 DEGREES 19 MINUTES 16 SECONDS WEST 551.43 FEET; THENCE SOUTHERLY 44.33 FEET ALONG A 151.0 FOOT RADIUS CURVE TO THE LEFT, THE LONG CHORD BEARING SOUTH 8 DEGREES 05 MINUTES 22 SECONDS EAST 44.17 FEET; THENCE SOUTH 16 DEGREES 30 MINUTES EAST 23.15 FEET; THENCE SOUTHEASTERLY 50.09 FEET ALONG A 35.0 FOOT RADIUS CURVE TO THE LEFT, THE LONG CHORD BEARING SOUTH 57 DEGREES 30 MINUTES EAST 45.92 FEET; THENCE NORTH 81 DEGREES 30 MINUTES EAST 39.06 FEET; THENCE EASTERLY 12.50 FEET ALONG A 313.82 FOOT RADIUS CURVE TO THE RIGHT, THE LONG CHORD BEARNING SOUTH 87 DEGREES 30 MINUTES EAST 119.76 FEET; THENCE SOUTH 76 DEGREES 30 MINUTES EAST 842.91 FEET; THENCE NORTH 0 DEGREES 19 MINUTES 16 SECONDS EAST 66.19 FEET; THENCE SOUTH 89 DEGREES 41 MINUTES 37 SECONDS EAST 573.96 FEET; THENCE SOUTH 0 DEGREES 19 MINUTES 16 SECONDS WEST 1441.28 FEET ALONG THE EAST LINE OF THE WEST 1/2, OF SAID SOUTHEAST 1/4; THENCE NORTH 89 DEGREES 40 MINUTES 45 SECONDS WEST 264.0 FEET; THENCE NORTH 0 DEGREES 19 MINUTES 16 SECONDS EAST 551.43 FEET; THENCE NORTH 89 DEGREES 40 MINUTES 45 SECONDS WEST MINUTES 16 SECONDS EAST 551.43 FEET; THENCE NORTH 89 DEGREES 40 MINUTES 45 SECONDS WEST 427.0 FEET; THENCE SOUTH 45 DEGREES 19 MINUTES 15 SECONDS WEST 141.42 FEET; THENCE SOUTH 19 MINUTES 16 SECONDS WEST 884.43 FEET; THENCE NORTH 89 DEGREES 40 MINUTES 45 SECONDS WEST 326.0 FEET ALONG THE SOUTH LINE OF SAID SOUTHEAST 1/4; THENCE NORTH 0 DEGREES 19 MINUTES 16 SECONDS EAST 383.00 FEET; THENCE NORTH 89 DEGREES 40 MINUTES 45 SECONDS WEST 386.30 FEET TO THE POINT OF BEGINNING. EXCEPT THAT PART OF THE SOUTHWEST 1/4 OF SECTION 16, TOWN 5 NORTH, RANGE 15 WEST, DESCRIBED AS COMMENCING AT THE NORTHEAST CORNER OF SAID SOUTHWEST 1/4; THENCE NORTH 89 DEGREES 41 MINUTES 20 SECONDS WEST 365.11 FEET ALONG THE NORTH LINE OF SAID SOUTHWEST 1/4; THENCE SOUTH 00 DEGREES 19 MINUTES 16 SECONDS WEST 397.96 FEET; THENCE NORTH 89 DEGREES 41 MINUTES 20 SECONDS WEST 50.00 FEET TO THE POINT OF BEGINNING; THENCE NORTH 89 DEGREES 41 MINUTES 20 SECONDS WEST 310.56 FEET; THENCE NORTHERLY 225.20 FEET ALONG THE EASTERLY RIGHT-OF-WAY TO U.S. 31 ON A 22,843.3 FOOT RADIUS CURVE TO THE RIGHT, WITH THE CHORD BEARING NORTH 13 DEGREES 38 MINUTES 11 SECONDS WEST 225.02 FEET; THENCE NORTH 24 DEGREES 13 MINUTES 15 SECONDS EAST 13.61 FEET; THENCE SOUTH 89 DEGREES 41 MINUTES 20 SECONDS EAST 369.37 FEET; THENCE SOUTH 00 DEGREES 19 MINUTES 16 SECONDS WEST 171.00 FEET; THENCE NORTH 89 DEGREES 41 MINUTES 20 SECONDS WEST 10.00 FEET; THENCE SOUTH 00 DEGREES 19 MINUTES 16 SECONDS WEST 60.00 FEET TO THE POINT OF BEGINNING. LEGAL CONTINUED FROM PREVIOUS PAGE PARCEL 2: NONEXCLUSIVE ACCESS AND PARKING EASEMENTS AS CREATED, LIMITED AND DEFINED IN DECLARATION OF CONVENANTS AND RESTRICTIONS DATED AUGUST 23, 1987 BY WESTSHORE MALL LIMITED PARTNERSHIP, A TEXAS LIMITED PARTNERSHIP, RECORDED OCTOBER 20, 1987 IN LIBER 1228 ON PAGE 646. ALSO A NON-EXCLUSIVE PERPETUAL STORM WATER DRAINAGE EASEMENT AS CREATED, LIMITED AND DEFINED IN ACCESS AND DRAINAGE EASEMENT AGREEMENT DATED APRIL 12, 1988 AND RECORDED JUNE 26, 1988 IN LIBER 1416 ON PAGE 548. ALSO A NON-EXCLUSIVE EASEMENT FOR PEDESTRIAN AND VEHICULAR ACCESS, INGRESS, EGRESS AND REGRESS AS CREATED, LIMITED AND DEFINED IN DECLARATION AND GRANT OF EASEMENT DATED MAY 20, 1988 AND RECORDED MAY 23, 1988 IN LIBER 1266 ON PAGE 144. ALSO RIGHTS IN THE OPERATION AND EASEMENT AGREEMENT DATED JANUARY 25, 1989 AND RECORDED FEBRUARY 8, 1989 IN LIBER 1318 ON PAGE 1 AND FIRST AMENDMENT TO OPERATION AND EASEMENT AGREEMENT DATED APRIL 30, 1989 AND RECORDED AUGUST 21, 1989 IN LIBER 1354 ON PAGE 863. ALSO RIGHTS IN THE DRAINAGE EASEMENT AGREEMENT DATED MARCH 3, 1994 AND RECORDED MARCH 17, 1994 IN LIBER 1843, PAGE 35. PARCEL 3: THAT PART OF THE WEST 1/2 OF THE SOUTHEAST 1/4 OF SECTION 16, TOWN 5 NORTH, RANGE 15 WEST, DESCRIBED AS: COMMENCING AT THE EAST 1/4 CORNER OF SAID SECTION; THENCE NORTH 89 DEGREES 41 MINUTES 37 MINUTES 37 SECONDS WEST ALONG THE EAST AND WEST 1/4 LINE OF SAID SECTION 2145.04 FEET; THENCE SOUTH 00 DEGREES 19 MINUTES 16 SECONDS WEST 732.06 FEET; THENCE SOUTH 13 DEGREES 30 MINUTES 00 SECONDS WEST 35.04 FEET TO THE POINT OF BEGINNING OF THIS DESCRIPTION; THENCE SOUTH 89 DEGREES 41 MINUTES 37 SECONDS EAST 249.06 FEET; THENCE SOUTH 00 DEGREES 19 MINUTES 16 SECONDS WEST 66.19 FEET; THENCE NORTH 76 DEGREES 30 MINUTES 00 SECONDS WEST 257.58 FEET; THENCE NORTH 13 DEGREES 30 MINUTES 00 SECONDS EAST 7.60 FEET TO THE POINT OF BEGINNING. PARCEL 4: PART OF THE NORTHWEST 1/4 OF THE SOUTHEAST 1/4 COMMENCING SOUTH 89 DEGREES 41 MINUTES 37 SECONDS EAST 183.9 FEET FROM THE CENTER 1/4 CORNER, THENCE CONTINUING SOUTH 89 DEGREES 41 MINUTES 37 SECONDS EAST 331 FEET ALONG THE EAST AND WEST 1/4 LINE, THENCE SOUTH 0 DEGREES 19 MINUTES 16 SECONDS WEST 732.06 FEET, THENCE SOUTH 13 DEGREES 30 MINUTES WEST 43 FEET, THENCE NORTH 76 DEGREES 30 MINUTES WEST 363.6 FEET, THENCE NORTH 13 DEGREES 30 MINUTES EAST 65 FEET, THENCE NORTH 0 DEGREES 19 MINUTES 16 SECONDS EAST 258.81 FEET, THENCE NORTH 89 DEGREES 41 MINUTES 20 SECONDS WEST 55.9 FEET, THENCE NORTH 0 DEGREES 18 MINUTES 40 SECONDS EAST 48.2 FEET, THENCE NORTH 89 DEGREES 41 MINUTES 20 SECONDS WEST 6 FEET, THENCE NORTH 0 DEGREES 18 MINUTES 40 SECONDS EAST 80.8 FEET, THENCE SOUTH 89 DEGREES 41 MINUTES 20 SECONDS EAST 6 FEET, THENCE NORTH 0 DEGREES 18 MINUTES 40 SECONDS EAST 113 FEET, THENCE SOUTH 89 DEGREES 41 MINUTES 20 SECONDS EAST 73.96 FEET, THENCE NORTH 0 DEGREES 18 MINUTES 40 SECONDS EAST 126.85 FEET TO BEGINNING IN SECTION 16, TOWN 5 NORTH, RANGE 15 WEST PARCEL 5: PART OF THE WEST 1/2 OF THE SOUTHEAST 1/4 COMMENCING SOUTH 89 DEGREES 41 MINUTES 37 SECONDS EAST 1329.85 FEET FROM THE CENTER 1/4 CORNER, THENCE NORTH 89 DEGREES 41 MINUTES 37 SECONDS WEST 342.33 FEET, THENCE SOUTH 0 DEGREES 19 MINUTES 16 SECONDS WEST 416.38 FEET, THENCE NORTH 89 DEGREES 41 MINUTES 37 SECONDS WEST 23.84 FEET, THENCE SOUTH 0 DEGREES 19 MINUTES 15 SECONDS WEST 350.15 FEET, THENCE SOUTH 89 DEGREES 41 MINUTES 37 SECONDS EAST TO THE EAST LINE OF THE WEST 1/2 OF THE SOUTHEAST 1/4, THENCE NORTH ALONG SAID LINE TO BEGINNING IN SECTION 16, TOWN 5 NORTH, RANGE 15 WEST [GRAPHIC OMITTED] Mall Site Map WESTSHORE MALL HOLLAND, MICHIGAN [GRAPHIC OMITTED] TYPICAL CORRIDOR VIEW [GRAPHIC OMITTED] TYPICAL CORRIDOR VIEW RECENT LEASES AT WESTSHORE MALL
Start Term Rental Rates/SF Average Tenant Name Area/SF Year Years Initial Step Step Rate/SF ============================================================================================ Less than 1,000 SF Shoe Fixers 338 1996 2 $27.81 $27.81 Afterthoughts 816 1996 3 $32.59 $32.59 CPI Photo 920 1996 2 $14.50 $14.50 Cost Cutters 921 1996 5 $33.41 $33.41 Claire's 932 1994 10 $31.33 $37.55 $35.94 ------ ------ Total 3,927 Average $28.85 1,000 SF to 1,999 SF Lange's Sports 1,038 1996 5 $30.00 $33.00 $31.80 Coffee Beanery 1,039 1996 5 $26.82 $29.00 $28.13 LPC Nail/Tanning 1,236 1995 3 $14.50 $14.50 Sweets-N-Treats 1,354 1996 7 $15.04 $16.04 $17.04 $11.89 Carlson Wagonlite 1,544 1995 2 $14.50 $14.50 Splash 1,666 1995 7 $15.00 $16.00 $15.57 Bath & Body Works 1,800 1996 10 $18.00 $20.00 $19.00 Northern Reflections 1,857 1995 10 $21.00 $23.00 $25.00 $23.00 ------ ------ Total 11,534 Average $19.80 2,000 SF to 5,999 SF Bally's Aladdins Castle 2,518 1995 4 $17.87 $17.87 Amy's Hallmark 2,592 1994 10 $23.00 $22.00 $24.00 $21.40 Kinney Shoes, extend 2,716 1993 10 $14.00 $14.00 Laser Storm 2,837 1995 8 $13.08 $17.27 $15.47 NU Vision 2,869 1995 10 $14.00 $16.00 $15.00 Finish Line 3,600 1994 10 $12.00 $14.00 $13.00 Paul Harris 4,500 1994 10 $12.00 $14.00 $13.00 Musicland 4,910 1994 10 $14.00 $15.00 $14.50 Buckle 5,058 1995 10 $11.00 $13.00 $12.40 DEB 5,9ll 1994 10 $13.00 $14.00 $13.40 ------ ------ Total 68,433 Average $15.82 Food Tenants County Fair Fries 280 1996 4 $39.00 $40.00 $42.00 $39.80 Janie's Cookie Co. 883 1995 3 $31.50 $31.50 Mom's Cinnamon Rolls 661 1996 3 $45.39 $46.90 $48.51 $46.90 Wok House 900 1995 5 $23.00 $24.00 $23.40 ------ ------ Total 2,724 Average $35.40 Restaurant Elias Brothers 4,682 1993 10 $ 4.49 $ 6.00 $ 8.00 $ 6.55 J.J. Finnegan's 5,995 1989 15 $13.00 $13.00 ------ ------ Total 10,677 Average $ 9.78
RECENT LEASES AT WESTSHORE MALL
Start Term Rental Rates/SF Average Tenant Name Area/SF Year Years Initial Step Step Rate/SF ============================================================================================= Kiosk Tenants Things Remembered 180 1995 10 $136.11 $136.11 Sunglass Hut 150 1994 5 $ 93.33 $ 93.33 Royal Jewelers 64 1996 3 $156.25 $168.75 $164.58 Golden Chain 150 1996 2 $ 96.67 $ 96.67 ------ ------- Total 364 Average $122.67 Jewelry Tenants Fox's Jewelry 1,582 1988 10 $ 25.28 $ 25.28 Kay Jewelers 1,713 1988 10 $ 22.18 $ 22.18 Page's Jewelers 1,053 1988 10 $ 31.50 $ 31.50 W. Sherman Jewelers 1,800 1995 10 $ 20.36 $ 20.36 ------ ------- Total 6,148 Average $ 24.83 Plaza Tenants Marianne Plus 8,000 1994 5 $ 8.00 $ 8.00 Children's Orchard 2,000 1994 5 $ 8.00 $ 8.00 Andrew's Home Furnishings 5,983 1996 2 $ 6.00 $ 6.00 Apple Valley 1,999 1993 5 $ 9.00 $ 9.00 Imperial Garden 3,987 1995 10 $ 8.00 $ 10.00 $ 9.00 Bo Ric's Haircare 2,577 1993 5 $ 6.25 $ 6.26 Sally Beauty 1,541 1994 5 $ 10.00 $ 10.00 ------ ------- Total 26,087 Average $ 8.04
Westshore Mall Rent Roll
Lease Term Minimum Rent Overage Rent Tenant Sales/SF ---------- ------------ ------------ --------------- Suite Tenant GLA Begin End Annual $/SF % BP 1995 8/95 - 7/96 - ----- ------ --- ----- --- ------ ---- - -- ---- ----------- A1 Dollar Tree 2,235 05/04/89 12/31/99 $33,526 $15.00 6.0% N $240.60 $253.70 A2 Payless Shoesource 2,651 08/03/88 07/31/98 47,718 18.00 6.0% N 196.46 204.20 A3 Radio Shack 2,263 11/01/88 10/31/98 29,419 13.00 3.0% N 300.49 312.61 A4 Janie's Cookie Co. (R) 833 08/01/95 07/31/98 27,816 31.50 10.0% N 163.87 164.17 A5 Cost Cutters (O) 921 08/01/96 07/31/01 30,771 33.41 5.0% N 174.95 169.57 A6 Deb (O) 5,911 09/01/94 01/31/99 76,845 13.00 5.0% N 95.35 95.16 02/01/97 82,757 14.00 A7 Wok House (R) 900 01/01/95 12/31/99 20,700 23.00 7.0% N 118.80 116.28 01/01/98 21,600 24.00 A8 Trade Secret 907 08/03/88 07/31/98 25,396 28.00 6.0% N 275.26 291.16 A9 Elias Brothers Big Boy 4,682 07/21/93 07/31/03 21,000 4.49 15.0% 7,680,000 154.52 151.85 12/01/96 28,092 6.00 06/01/98 37,456 8.00 B1 J.J. Finnegan's 5,995 03/01/89 02/23/03 77,945 13.00 6.0% 1,800,000 274.56 290.85 B3 Sbarro Italian Eatery 1,770 11/01/88 10/31/00 38,000 21.47 7.0% N 300.94 310.28 B4 Lane Bryant 4,825 08/03/88 01/31/99 67,561 14.00 5.0% N 204.10 197.40 B6 Limited 4,413 08/03/88 01/31/99 63,989 14.50 5.0% N 140.04 146.64 B7 Imperial Sports 3,320 08/03/88 07/31/98 63,080 19.00 5.0% N 189.00 189.60 B8 ** VACANT ** 3,025 08/03/88 07/31/00 42,654 14.10 5.0% N 146.59 138.33 B9 Depot 3,241 08/03/88 07/31/98 51,862 16.00 5.0% N 273.09 266.74 B10 County Seat 3,535 08/03/88 01/31/99 78,300 22.15 5.0% 1,064,100 274.53 251.06 B11 Kinney Shoes (O) 2,716 08/01/93 07/31/98 38,034 14.00 5.5% N 160.42 139.52 B12 Footlocker (R) 2,607 08/01/91 07/31/01 46,623 17.88 5.5% N 323.43 331.71 B13 Afterthoughts (R) 816 08/01/96 07/31/99 26,593 32.59 8.0% N 287.34 288.00 B14 CPI Photo Finish (R) 920 08/01/96 07/31/98 13,340 14.50 6.0% N 203.02 239.42 B15 **VACANT** 1,165 B16 Minn. Sweatshirt (OFS) 2,239 09/01/97 08/31/03 26,868 12.00 7.0% N - - 09/01/00 31,346 14.00 B17 Nu Vision Optical (R) 2,869 10/01/95 09/30/05 40,166 14.00 6.0% N - - 10/01/00 45,904 16.00 C1 Laserstorm 2,837 04/01/95 04/30/02 37,113 13.08 15.0% 415,566 - 59.78 04/01/98 48,989 17.27 15.0% 489,885 C2 Babbages 1,382 06/25/92 08/31/02 35,000 25.33 5.0% N 373.89 361.27 C3 Sweets-N-Treats (R) 1,354 05/01/96 04/30/03 20,364 15.04 6.0% N 142.50 - 05/01/99 21,718 16.04 05/01/01 23,072 17.04 CAM Recovery RET Recovery ------------ ------------ Suite Tenant Exp. Denom. Floor Exp. Denom. Notes - ----- ------ ---- ------ ----- ---- ------ ----- Al Dollar Tree CAM1 GLA1 - RET GLA1 A2 Payless Shoesource CAM1 GLA1 - RET GLA1 A3 Radio Shack CAM1 GLA - RET GLA A4 Janie's Cookie Co. (R) CAM1 GLA - RET GLA A5 Cost Cutters (O) CAM1 GLA - RET GLA A6 Deb (O) CAM3 GLA - RET GLA 1 A7 Wok House (R) CAM1 0 - RET GLA A8 Trade Secret CAM1 GLA - RET GLA A9 Elias Brothers Big Boy CAM1 GLA - RET GLA 2 B1 J.J. Finnegan's CAM1 GLA - RET GLA B3 Sbarro Italian Eatery CAM1 GLA1 - RET GLA1 B4 Lane Bryant CAM2 GLA2 - RET GLA2 B6 Limited CAM2 GLA2 - RET GLA2 B7 Imperial Sports CAM1 GLA3 - RET GLA3 B8 ** VACANT ** CAM4 GLA1 - RET GLA1 3 B9 Depot CAM1 GLA1 - RET GLA1 B10 County Seat CAM4 GLA - RET GLA B11 Kinney Shoes (O) CAM1 GLA1 - RET GLA1 B12 Footlocker (R) CAM1 GLA1 - RET GLA1 B13 Afterthoughts(R) CAM1 GLA - RET GLA B14 CPI Photo Finish (R) CAM1 0 - RET GLA B15 **VACANT** B16 Minn. Sweatshirt (OFS) CAM1 0 - RET GLA 29 B17 Nu Vision Optical (R) CAM1 0 80% RET GLA C1 Laserstorm CAM1 0 - RET GLA 4 C2 Babbages CAM1 GLA - RET GLA 23 C3 Sweets-N-Treats (R) CAM1 0 - RET GLA
Westshore Mall Rent Roll
Lease Term Minimum Rent Overage Rent Tenant Sales/SF ---------- ------------ ------------ --------------- Suite Tenant GLA Begin End Annual $/SF % BP 1995 8/95 - 7/96 - ----- ------ --- ----- --- ------ ---- - -- ---- ----------- C4 Amy's Hallmark Shop 2,592 07/01/94 01/31/05 49,248 19.00 6.0% N 167.49 183.27 07/01/98 57,024 22.00 7.0% N 07/01/01 62,208 24.00 C6 Claire's Boutiques 932 04/26/93 04/30/03 32,000 34.33 7.0% N 306.45 344.87 05/01/98 35,000 37.55 C7 Paul Harris 4,500 06/09/94 06/30/04 54,000 12.00 5.0% N 141.22 161.41 07/01/99 63,000 14.00 C8 Finish Line 3,600 06/01/94 05/31/04 43,200 12.00 6.0% N 241.09 250.04 06/01/99 50,400 14.00 C9 General Nutrition Center 1,706 03/01/90 02/28/00 33,272 19.50 6.0% N 211.75 209.41 03/01/97 34,979 20.50 C1O Carlson Wagonlit Travel 1,544 10/14/95 11/30/97 22,388 14.50 - - - - D1 LPC Nail/Tanning Salon 1,236 02/15/95 02/28/98 17,922 14.50 8.0% 179,220 - 90.93 D2 Splash 1,666 03/01/95 03/31/02 24,990 15.00 5.0% N - 282.31 03/01/98 26,656 16.00 D3 W Sherman Jewelers (O) 1,800 08/01/95 07/31/98 36,655 20.36 6.0% N 351.99 149.85 D4 Northern Reflections 1,857 06/15/95 06/30/O5 38,997 21.00 5.0% N - 259.88 07/01/98 42,711 23.00 07/01/02 46,425 25.00 D5 Lady Footlocker 1,844 02/28/92 02/28/02 36,880 20.00 5.5% N 235.60 236.33 03/01/97 42,412 23.00 D6 Mom's Cinnamon Rolls (R) 661 08/01/96 07/31/01 30,000 45.39 8.0% N 217.35 215.77 08/01/98 31,000 46.90 08/01/99 32,000 48.41 D8 **VACANT** 339 D9 Buckle 5,058 03/03/95 01/31/06 55,638 11.00 5.0% N - 181.67 02/01/98 65,754 13.00 D7A County Fair Fries (R) 280 08/01/96 07/31/01 10,920 39.00 6.0% 210,000 342.44 405.51 01/01/99 11,200 40.00 01/01/00 11,760 42.00 D7B Ottawa Savings Bank (R) 36 08/01/96 07/31/01 6,660 185.00 - - - - E1 Maurice's 5,428 05/26/90 05/31/00 86,034 15.85 5.5% N 167.81 159.15 E4 Fox's Jewelers 1,582 08/03/88 07/31/98 40,000 25.28 5.0% N 649.28 621.39 E5 Kay-Bee Toys 2,703 08/03/88 08/31/00 45,961 17.00 5.0% N 195.62 203.66 E6 Braun's 3,370 08/03/88 01/31/01 50,562 15.00 5.0% N 182.62 172.84 01/01/98 53,933 16.00 E7 Express 5,819 08/09/89 01/31/00 93,115 16.00 5.0% N 204.82 204.24 E9 Kay Jewelers 1,713 08/03/88 03/31/99 38,000 22.18 6.0% N 652.54 669.88 E1O Lerner 5,321 11/23/88 01/31/99 63,853 12.00 5.0% N 126.56 124.16 CAM Recovery RET Recovery ------------ ------------ Suite Tenant Exp. Denom. Floor Exp. Denom. Notes - ----- ------ ---- ------ ----- ---- ------ ----- C4 Amy's Hallmark Shop CAM1 0 80% RET GLA C6 Claire's Boutiques CAM1 GLA1 - RET GLA1 C7 Paul Harris CAM1 030 85% RET GLA2 5 C8 Finish Line CAM5 050 80% RET GLA 6 C9 General Nutrition Center CAM1 GLA - RET GLA C1O Carlson Wagonlit Travel CAM1 0 - RET GLA 7 D1 LPC Nail/Tanning Salon CAM1 0 - RET GLA 8 D2 Splash CAM1 0 - RET GLA 9 D3 W Sherman Jewelers (O) CAM1 GLA - RET GLA 25 D4 Northern Reflections CAM1 0 80% RET GLA 27 D5 Lady Footlocker CAM1 GLA3 - RET GLA3 D6 Mom's Cinnamon Rolls (R) CAM1 0 - RET GLA D8 **VACANT** D9 Buckle CAM1 039 - RET GLA 28 D7A County Fair Fries (R) CAM1 GLA - RET GLA D7B Ottawa Savings Bank (R) - - - - - E1 Maurice's CAM1 GLA3 - RET GLA3 E4 Fox's Jewelers CAM1 GLA1 - RET GLA1 E5 Kay-Bee Toys CAM6 GLA4 - RET GLA4 E6 Braun's CAM1 GLA - RET GLA 24 E7 Express CAM2 GLA - RET GLA E9 Kay Jewelers CAM1 GLA1 - RET GLA1 E1O Lerner CAM2 GLA2 - RET GLA2
Westshore Mall Rent Roll
Lease Term Minimum Rent Overage Rent Tenant Sales/SF ---------- ------------ ------------ --------------- Suite Tenant GLA Begin End Annual $/SF % BP 1995 8/95 - 7/96 - ----- ------ --- ----- --- ------ ---- - -- ---- ----------- E12 Bath & Bodyworks 1,800 04/10/96 01/31/07 32,400 18.00 5.0% N - 350.83 05/01/01 36,000 20.00 E13 Shoe Fixers (OFS) 338 08/01/96 07/31/98 9,399 27.81 10.0% N 266.76 268.27 E14 Page's Jewelers 1,053 08/03/88 12/31/98 33,170 31.50 6.0% N 325.34 336.01 F1 Coffee Beanery (R) 1,039 09/01/96 08/31/01 27,866 26.82 6.0% 300,000 183.93 201.82 09/01/98 30,131 29.00 F2 Regis Hairstylists 1,094 08/03/88 07/31/98 26,256 24.00 6.0% N 291.21 324.14 F3 Walden Books 2,699 08/03/88 07/31/98 43,195 16.00 6.0% N 356.89 369.30 F4 Musicland (R) 4,910 03/01/94 02/28/04 68,740 14.00 5.0% N 320.78 321.44 03/01/99 73,650 15.00 5.0% N 03/01/01 73,650 15.00 6.0% N F6 Bally's Alladin's Castle (R) 2,518 01/01/96 12/31/00 45,000 17.87 20.0% N 82.12 77.04 F7 Lange's Sport (R) 1,038 02/01/96 01/31/01 31,140 30.00 6.0% 400,000 197.93 174.24 02/01/98 34,254 33.00 K1 Things Remembered (R) 180 08/01/95 07/31/97 24,500 136.11 8.0% N 689.37 748.13 K2 Royal Jewelry 96 05/01/96 04/30/99 15,000 156.25 7.0% 150,000 - 311.63 05/01/97 16,200 168.75 7.0% 162,000 K3 Sunglass Hut Intern'l 150 07/28/94 07/31/99 14,000 93.33 8.0% N 1229.33 1,171.37 K4 Golden Chain Gang (R) 150 01/01/96 12/31/97 14,500 96.67 7.0% N 590.07 548.89 --------------------------------------------- In-Line GLA ============================================= Leased 136,266 97.4% Unleased 6,768 2.6% --------------------------------------------- Total 143,034 100.0% ============================================= G1 Sears 52,515 08/03/88 08/31/03 157,545 3.00 1.5% 5,000,000 244.41 249.24 1.0% 9,000,000 H1 Younkers 69,148 08/03/88 08/31/03 224,808 3.25 2.5% 7,500,000 141.85 148.21 2.0% 9,500,000 1.5% 11,500,000 0.0% 13,500,000 I1 Steketee's 40,755 08/03/88 07/31/03 171,018 4.20 3.0% 6,235,492 84.71 82.99 J1 JC Penney 51,399 08/03/88 08/31/13 188,370 3.66 1.5% 9,418,500 - 174.74 --------------------------------------------- Total Mall GLA ============================================= Leased 350,083 99.0% Unleased 6,768 1.0% --------------------------------------------- Total 356,851 100.0% ============================================= CAM Recovery RET Recovery ------------ ------------ Suite Tenant Exp. Denom. Floor Exp. Denom. Notes - ----- ------ ---- ------ ----- ---- ------ ----- E12 Bath & Bodyworks CAM2 0 80% RET GLA 10 E13 Shoe Fixers (OFS) CAM1 0 - RET GLA 26 E14 Page's Jewelers CAM1 GLA - RET GLA F1 Coffee Beanery (R) CAM1 GLA - RET GLA F2 Regis Hairstylists CAM1 GLA1 - RET GLA1 F3 Walden Books CAM1 GLA1 - RET GLA1 F4 Musicland (R) CAM1 0 80% RET GLA F6 Bally's Alladin's Castle (R) CAM1 GLA1 - RET GLA1 F7 Lange's Sport (R) CAM1 0 - RET GLA 11 K1 Things Remembered (R) CAM1 GLA - RET GLA 12 K2 Royal Jewelry CAM1 0 - RET GLA K3 Sunglass Hut Intern'l CAM1 0 - RET GLA K4 Golden Chain Gang (R) CAM1 GLA4 - RET GLA G1 Sears - See Lease Abstracts - 13 H1 Younkers - See Lease Abstracts - I1 Steketee's - See Lease Abstracts - 14 J1 JC Penney - See Lease Abstracts - 15
Westshore Mall Rent Roll
Lease Term Minimum Rent Overage Rent Tenant Sales/SF ---------- ------------ ------------ --------------- Suite Tenant GLA Begin End Annual $/SF % BP 1995 8/95 - 7/96 - ----- ------ --- ----- --- ------ ---- - -- ---- ----------- O1 Jose Babushka 8,775 07/01/90 06/30/00 130,000 14.81 6.0% 2,000,000 - - 02 First of America Bank 2,236 11/18/88 11/17/08 35,000 15.65 - - - - 11/18/98 40,000 17.89 11/18/03 45,000 20.13 M1 Bo Rics Haircare 2,577 11/26/93 11/30/98 16,106 6.25 5.0% N 71.74 72.10 M2 Sally Beauty Supply (O) 1,541 10/01/94 09/30/99 15,410 10.00 4.0% 700,000 276.94 294.44 M3 Andrews Home Furn. (R) 5,983 07/01/96 06/30/98 35,898 6.00 2.0% 700,000 93.74 104.32 M5 Children's Orchard 2,000 09/01/94 08/31/99 16,000 8.00 6.0% 300,000 73.81 78.25 M7 Marianne/Marianna Plus 8,000 11/01/94 01/31/00 64,000 8.00 4.0% N 58.60 49.06 M11 Apple Valley (R) 1,999 09/01/93 08/31/98 17,991 9.00 - - - - M12 Imperial Garden 3,987 05/01/95 04/30/05 31,896 8.00 6.0% 800,000 - 60.92 05/01/00 39,870 10.00 --------------------------------------------- Total Owned GLA ============================================= Leased 387,181 99.2% Unleased 6,768 0.8% --------------------------------------------- Total 393,949 100.0% ============================================= CAM Recovery RET Recovery ------------ ------------ Suite Tenant Exp. Denom. Floor Exp. Denom. Notes - ----- ------ ---- ------ ----- ---- ------ ----- O1 Jose Babushka - - - - - 16 02 First of America Bank CAM9 GLA4 - - - 17 M1 Bo Rics Haircare CAM7 0 - RET GLA 18 M2 Sally Beauty Supply (O) CAM8 0 - RET GLA 19 M3 Andrews Home Furn. (R) - - - - - 20 M5 Children's Orchard CAM7 0 - RET GLA M7 Marianne/Marianna Plus CAM7 0 80% RET GLA 21 M11 Apple Valley (R) CAM7 0 - RET GLA M12 Imperial Garden CAM7 0 - RET GLA 22
Notes: (R) = Renewal; (O) = Option; (OFS) = Out For Signature; N = Natural Breakpoint Westshore Mall Rent Roll
Lease Term Minimum Rent Overage Rent Tenant Sales/SF ---------- ------------ ------------ --------------- Suite Tenant GLA Begin End Annual $/SF % BP 1995 8/95 - 7/96 - ----- ------ --- ----- --- ------ ---- - -- ---- ----------- O1 Jose Babushka 8,775 07/01/90 06/30/00 130,000 14.81 6.0% 2,000,000 - - 02 First of America Bank 2,236 11/18/88 11/17/08 35,000 15.65 - - - - 11/18/98 40,000 17.89 11/18/03 45,000 20.13 M1 Bo Rics Haircare 2,577 11/26/93 11/30/98 16,106 6.25 5.0% N 71.74 72.10 M2 Sally Beauty Supply (O) 1,541 10/01/94 09/30/99 15,410 10.00 4.0% 700,000 276.94 294.44 M3 Andrews Home Furn. (R) 5,983 07/01/96 06/30/98 35,898 6.00 2.0% 700,000 93.74 104.32 M5 Children's Orchard 2,000 09/01/94 08/31/99 16,000 8.00 6.0% 300,000 73.81 78.25 M7 Marianne/Marianna Plus 8,000 11/01/94 01/31/00 64,000 8.00 4.0% N 58.60 49.06 M11 Apple Valley (R) 1,999 09/01/93 08/31/98 17,991 9.00 - - - - M12 Imperial Garden 3,987 05/01/95 04/30/05 31,896 8.00 6.0% 800,000 - 60.92 05/01/00 39,870 10.00 --------------------------------------------- Total Owned GLA ============================================= Leased 390,206 99.2% Unleased 3,743 0.8% --------------------------------------------- Total 393,949 100.0% ============================================= CAM Recovery RET Recovery ------------ ------------ Suite Tenant Exp. Denom. Floor Exp. Denom. Notes - ----- ------ ---- ------ ----- ---- ------ ----- O1 Jose Babushka - - - - - 16 02 First of America Bank CAM9 GLA4 - - - 17 M1 Bo Rics Haircare CAM7 0 - RET GLA 18 M2 Sally Beauty Supply (O) CAM5 0 - RET GLA 19 M3 Andrews Home Furn. (R) - - - - - 20 M5 Children's Orchard CAM7 0 - RET GLA M7 Marianne/Marianna Plus CAM7 0 80% RET GLA 21 M11 Apple Valley (R) CAM7 0 - RET GLA M12 Imperial Garden CAM7 0 - RET GLA 22
Notes: (R) = Renewal; (O) = Option; (OFS) = Out For Signature; N = Natural Breakpoint CAM1 Standard CAM2 No administrative fee on insurance and water & sewer charges CAM3 10% administrative fee instead of 15% CAM4 No administrative fee on insurance CAM5 No Administrative and On-site charges CAM6 No anchor exclusions CAM7 Excludes enclosed mall costs CAM8 Excludes enclosed mall costs and Administrative and On-site charges. CAM9 Excludes enclosed mall costs and 12% administrative fee instead of 15% RET Standard O (Standard Hahn) Occupied area mall and plaza (mall only for enclosed mall costs), excluding anchors and Mall Tenants (tenants over 20,000 SF) O30 Major tenants are defined as tenants over 30,000 SF O39 Major tenants are defined as tenants over 39,000 SF O40 Major tenants are defined as tenants over 40,000 SF O50 Major tenants are defined as tenants over 50,000 SF GLA (Standard Bramalea) Total gross leasable area of mall, excluding tenants paying less than full pro-rata share (interpreted as excluding anchors only). GLA1 Excludes all tenants greater than 15,000 SF GLA2 Excludes all tenants greater than 40,000 SF GLA3 Exc1udes all tenants greater than 30,000 SF GLA4 Anchors are not excluded WESTSHORE MALL LEASE ABSTRACT REPORT FOR ALL TENANTS
PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- ---------- -------- # 1-SUITE A 1 001 1 2,235 5/89 12/99 - 15.00 33,525 DOLLAR TREE 6500 # 2-SUITE A 1 002 1 2,651 8/88 7/98 - 18.00 47,718 PAYLESS 3530 # 3-SUITE A 1 003 1 2,263 8/88 10/98 - 13.00 29,419 RADIO SHACK 5500 # 4-SUITE A 1 004 1 883 8/95 7/98 - 31.50 27,815 JANIES COOKIES 7500 # 5-SUITE A 1 005 1 921 8/96 7/01 - 33.41 30,771 COST CUTTERS 6000 # 6-SUITE A 1 006 1 5,911 8/88 1/99 - 13.00 76,843 DEB 510 2/97 14.00 82,754 # 7-SUITE A 1 007 1 900 1/95 12/99 - 23.00 20,700 WOK HOUSE 7500 1/98 24.00 21,600 # 8-SUITE A 1 008 1 907 8/88 7/98 - 28.02 25,414 TRADE SECRET 6000 OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ------------------- ------- -------- ---------- ------------------- ----------- ----------- # 1-SUITE A 1 001 6.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO DOLLAR TREE RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 2-SUITE A 1 002 6.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO PAYLESS RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 3-SUITE A 1 003 3.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO RADIO SHACK RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 4-SUITE A 1 004 10.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO JANIES COOKIES RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 5-SUITE A 1 005 5.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO COST CUTTERS RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 6-SUITE A 1 006 5.00 UNLIMITED NATURAL MALL TAX & INS. ZERO DEB DEB ENCLOSED +10 ZERO DEB EXTER CAM +10% ZERO DEB OTHER CAM +10 ZERO # 7-SUITE A 1 007 7.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO WOK HOUSE RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 8-SUITE A 1 008 6.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO TRADE SECRET RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- ---------- -------- # 9-SUITE A 1 009 1 4,682 8/96 7/03 - 11.88 55,622 ELIAS BROTHERS BI 8000 # 10-SUITE B 1 001 1 5,995 3/89 2/03 - 13.00 77,935 JJ FINEGANS 8000 # 11-SUITE B 1 003 1 1,770 11/88 10/00 - 21.47 38,002 SBARRO ITALIAN EAT 7500 # 12-SUITE B 1 004 1 4,825 8/88 1/99 - 14.00 67,550 LANE BRYANT 520 # 13-SUITE B 1 006 1 4,413 8/88 1/99 - 14.50 63,989 LIMITED 510 # 14-SUITE B 1 007 1 3,320 8/88 7/98 - 19.00 63,080 IMPERIAL SPORTS 3020 # 15-SUITE B 1 008 1 3,025 7/97 6/07 - 15.00 45,375 VACANT UNIT 9900 # 16-SUITE B 1 009 1 3,241 8/88 7/98 - 16.00 51,856 DEPOT 2500 # 17-SUITE B 1 010 1 3,535 8/88 1/99 - 22.15 78,300 COUNTY SEAT 2500 OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ------------------- ------- -------- ---------- ------------------- ----------- ----------- # 9-SUITE A 1 009 15.00 UNLIMITED 768 RECOVERY POOL 4000 ZERO ELIAS BROTHERS BI RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO # 10-SUITE B 1 001 6.00 UNLIMITED 1,800 RECOVERY POOL 4000 ZERO JJ FINEGANS RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 11-SUITE B 1 003 7.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO SBARRO ITALIAN EAT RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 12-SUITE B 1 004 5.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO LANE BRYANT LANEB&LIMITED CAM ZERO RECOVERY POOL 4500 ZERO # 13-SUITE B 1 006 5.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO LIMITED LANEB&LIMITED CAM ZERO # 14-SUITE B 1 007 5.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO IMPERIAL SPORTS RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 15-SUITE B 1 008 5.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO VACANT UNIT RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 16-SUITE B 1 009 5.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO DEPOT RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 17-SUITE B 1 010 5.00 UNLIMITED 1,064 RECOVERY POOL 4000 ZERO COUNTY SEAT RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- ---------- -------- # 18-SUITE B 1 011 1 2,716 8/88 7/98 - 14.00 38,024 KINNEY SHOES 3530 # 19-SUITE B 1 012 1 2,607 8/88 7/01 - 17.88 46,613 FOOTLOCKER 3550 # 20-SUITE B 1 013 1 816 8/96 7/99 - 32.59 26,593 AFTERTHOUGHTS 3010 # 21-SUITE B 1 014 1 920 8/96 7/98 - 14.50 13,340 CPI PHOTO 6500 # 22-SUITE B 1 015 1 1,165 10/97 9/07 - 20.00 23,300 VACANT UNIT 9900 # 23-SUITE B 1 016 1 2,239 1/98 12/07 - 20.70 46,347 VACANT UNIT 9900 # 24-SUITE B 1 017 1 2,869 7/95 6/05 - 14.00 40,166 NU VISION OPTICAL 6000 7/00 16.00 45,904 # 25-SUITE C 1 001 1 2,837 1/95 12/01 - 10.00 28,370 LASER STORM 9000 8/97 12.5O 35,463 OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ------------------- ------- -------- ---------- ------------------- ----------- ----------- # 18-SUITE B 1 011 5.50 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO KINNEY SHOES RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 19-SUITE B 1 012 5.50 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO FOOTLOCKER RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 20-SUITE B 1 013 8.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO AFTERTHOUGHTS RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 21-SUITE B 1 014 6.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO CPI PHOTO RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 22-SUITE B 1 015 5.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO VACANT UNIT RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 23-SUITE B 1 016 5.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO VACANT UNIT RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 24-SUITE B 1 017 6.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO NU VISION OPTICAL RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 25-SUITE C 1 001 15.00 UNLIMITED NATURAL MALL TAX & INS. ZERO LASER STORM RECOVERY POOL 4000 ZERO RECOVERY POOL 4100 ZERO RECOVERY POOL 4S00 ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- ---------- -------- # 26-SUITE C 1 002 1 1,382 7/92 8/02 - 25.33 35,006 BANDAGES 5500 # 27-SUITE C 1 003 1 1,354 8/96 4/03 - 15.04 20,364 SWEET N TREATS 8500 5/99 16.04 21,718 5/01 17.04 23,072 # 28-SUITE C 1 004 1 2,592 7/94 1/05 - 19.00 49,248 AMY'S HALLMARK SH 4500 7/98 22.00 57,024 7/01 24.00 62,208 # 29-SUITE C 1 006 1 932 5/93 4/03 - 34.33 31,996 CLAIRE'S BOUTIQUE 3010 5/98 37.55 34,997 # 30-SUITE C 1 007 1 4,500 7/93 6/04 - 12.00 54,000 PAUL HARRIS 510 7/99 14.00 63,000 # 31-SUITE C 1 008 1 3,600 6/94 5/04 - 12.00 43,200 FINISH LINE 3550 6/99 14.00 50,400 # 32-SUITE C 1 009 1 1,706 8/88 2/00 - 19.50 33,267 GNC 8500 3/97 20.50 34,973 # 33-SUITE C 1 010 1 1,544 10/95 11/97 - 14.50 22,388 CARLSON WAGONLIT 9900 # 34-SUITE D 1 001 1 1,236 2/95 2/98 - 14.50 17,922 LPC NAIL/TAN SALON 6000 OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ------------------- ------- -------- ---------- ------------------- ----------- ----------- # 26-SUITE C 1 002 5.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO BANDAGES RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 27-SUITE C 1 003 6.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO SWEET N TREATS RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 28-SUITE C 1 004 6.50 UNLIMITED 821 RECOVERY POOL 4000 ZERO AMY'S HALLMARK SH 7/98 815 RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 29-SUITE C 1 006 7.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO CLAIRE'S BOUTIQUE RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 30-SUITE C 1 007 5.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO PAUL HARRIS RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 31-SUITE C 1 008 6.00 UNLIMITED NATURAL MALL TAX & INS. ZERO FINISH LINE ENCLOSED MALL ZERO # 32-SUITE C 1 009 6.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO GNC RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 33-SUITE C 1 010 NATURAL RECOVERY POOL 4000 ZERO CARLSON WAGONLIT RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 34-SUITE D 1 001 8.00 UNLIMITED NATURAL MALL TAX & INS. ZERO LPC NAIL/TAN SALON RECOVERY POOL 4000 ZERO RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- ---------- -------- # 35-SUITE D 1 002 1 1,666 3/95 3/02 - 15.00 24,990 SPLASH 510 4/98 16.00 26,656 # 36-SUITE D 1 003 1 1,800 8/88 7/98 - 20.36 36,648 SHERMAN JEWELERS 4000 # 37-SUITE D 1 004 1 1,857 5/95 4/05 - 21.00 38,997 NORTHERN REFLECTIO 2500 7/98 23.00 42,711 7/02 25.00 46,425 # 38-SUITE D 1 005 1 1,844 3/92 2/02 - 20.00 36,880 LADY FOOTLOCKER 3550 3/97 23.00 42,412 # 39-SUITE D 1 006 1 661 8/96 7/06 - 39.00 25,779 MOMS CINNAMON 7500 1/99 40.00 26,440 1/00 42.00 27,762 # 40-SUITE D 1 007B 1 36 8/96 7/01 - 185.00 6,660 OTTAWA SAVINGS 9200 # 41-SUITE D 1 007A 1 280 8/96 7/01 - 39.00 10,920 COUNTY FAIR FRIES 7500 1/99 40.00 11,200 1/00 42.00 11,760 # 42-SUITE D 1 008 1 339 4/98 3/08 - 36.22 12,280 VACANT UNIT 9900 # 43-SUITE D 1 010 1 5,058 3/95 1/06 - 11.00 55,638 BUCKLE 2500 2/98 13.00 65,754 OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ------------------- ------- -------- ---------- ------------------- ----------- ----------- # 35-SUITE D 1 002 5.00 UNLIMITED NATURAL MALL TAX & INS. ZERO SPLASH RECOVERY POOL 4000 ZERO RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO # 36-SUITE D 1 003 6.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO SHERMAN JEWELERS RECOVERY POOL 4100 ZERO RECOVERY POOL 4600 ZERO MALL TAX & INS. ZERO # 37-SUITE D 1 004 5.00 UNLIMITED NATURAL MALL TAX & INS. ZERO NORTHERN REFLECTIO RECOVERY POOL 4000 ZERO RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO # 38-SUITE D 1 005 5.50 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO LADY FOOTLOCKER RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 39-SUITE D 1 006 6.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO MOMS CINNAMON RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 40-SUITE D 1 007B - - - NONE OTTAWA SAVINGS # 41-SUITE D 1 007A 6.00 UNLIMITED 210 RECOVERY POOL 4000 ZERO COUNTY FAIR FRIES RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 42-SUITE D 1 008 5.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO VACANT UNIT RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 43-SUITE D 1 010 5.00 UNLIMITED NATURAL MALL TAX & INS. ZERO BUCKLE RECOVERY POOL 4000 ZERO RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- ---------- -------- # 44-SUITE E 1 001 1 5,428 6/90 5/00 - 15.85 86,034 MAURICES 2500 # 45-SUITE E 1 004 1 1,582 8/88 7/98 - 25.28 39,993 FOXS 4000 # 46-SUITE E 1 005 1 2,703 8/88 8/00 - 17.00 45,951 KAY BEE 6500 # 47-SUITE E 1 006 1 3,370 8/88 1/01 - 15.00 50,550 BRAUNS 510 1/98 16.00 53,920 # 48-SUITE E 1 007 1 5,819 8/88 1/00 - 16.00 93,104 EXPRESS 510 # 49-SUITE E 1 009 1 1,713 8/88 3/99 - 22.18 37,994 KAY'S 4000 # 50-SUITE E 1 010 1 5,321 8/88 1/99 - 12.00 63,852 LERNER 530 # 51-SUITE E 1 012 1 1,800 4/96 1/07 - 18.00 32,400 BATH & BOOY WORKS 6000 5/01 20.00 36,000 OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ------------------- ------- -------- ---------- ------------------- ----------- ----------- # 44-SUITE E 1 001 5.50 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO MAURICES RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 45-SUITE E 1 004 5.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO FOXS RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 46-SUITE E 1 005 5.00 UNLIMITED NATURAL ENLOSED MALL ZERO KAY BEE COMMON AREA ZERO ADMINISTRATIVE ZERO MALL TAX & INS. ZERO # 47-SUITE E 1 006 4.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO BRAUNS RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 48-SUITE E 1 007 5.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO EXPRESS RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 49-SUITE E 1 009 6.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO KAY'S RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 50-SUITE E 1 010 5.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO LERNER RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 51-SUITE E 1 012 8.00 UNLIMITED NATURAL MALL TAX & INS. ZERO BATH & BOOY WORKS RECOVERY POOL 4000 ZERO LANEB&LIMITED CAM ZERO RECOVERY POOL 4500 ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- ---------- -------- # 52-SUITE E 1 013 1 338 8/96 7/98 - 27.81 9,400 SHOE FIXERS 9200 # 53-SUITE E 1 014 1 1,053 8/88 12/98 - 31.50 33,170 PAGES 4000 # 54-SUITE F 1 001 1 1,039 9/96 8/01 - 26.82 27,866 COFFEE BEANERY 8500 9/98 29.00 30,131 # 55-SUITE F 1 002 1 1,094 8/88 7/98 - 24.02 26,278 REGIS HAIR STYLIST 6000 # 56-SUITE F 1 003 1 2,699 8/88 7/98 - 16.00 43,184 WALDENBOOKS 6500 # 57-SUITE F 1 004 1 4,910 3/94 2/04 - 14.00 68,740 MUSICLAND 5500 3/99 15.00 73,650 # 58-SUITE F 1 006 1 2,518 1/96 12/00 - 17.87 44,997 BALLY'S ALADDIN'S 9000 # 59-SUITE F 1 007 1 1,038 4/96 1/01 - 30.00 31,140 LANGE'S SPORTS 6500 4/98 33.00 34,254 # 60-SUITE G 1 001 2 52,515 8/88 8/03 - 3.00 157,545 SEARS 9400 OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ------------------- ------- -------- ---------- ------------------- ----------- ----------- # 52-SUITE E 1 013 10.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO SHOE FIXERS RECOVERY FOOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 53-SUITE E 1 014 6.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO PAGES RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 54-SUITE F 1 001 6.00 UNLIMITED 300 RECOVERY POOL 4000 ZERO COFFEE BEANERY RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 55-SUITE F 1 002 6.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO REGIS HAIR STYLIST RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 56-SUITE F 1 003 6.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO WALDENBOOKS RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 57-SUITE F 1 004 5.00 UNLIMITED 1,375 RECOVERY POOL 4000 ZERO MUSICLAND 3/99 1,473 RECOVERY POOL 4100 ZERO 3/00 1,228 RECOVERY FOOL 4500 ZERO MALL TAX & INS. ZERO # 58-SUITE F 1 006 10.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO BALLY'S ALADDIN'S RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 59-SUITE F 1 007 6.00 UNLIMITED 400 RECOVERY POOL 4000 ZERO LANGE'S SPORTS RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 60-SUITE G 1 001 1.50 9,000 5,000 MALL & ANCHOR TAX 506,728 SEARS 1.00 UNLIMITED
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- ---------- -------- 1-180 3.00 157,545 # 61-SUITE H 1 001 2 69,148 8/88 8/03 - 3.25 224,807 YOUNKERS 9400 1-120 3.25 224,807 # 62-SUITE I 1 001 2 40,755 12/93 7/03 - 4.20 171,171 STEKETEES 9400 1-120 4.20 171,171 # 63-SUITE J 1 001 2 51,399 8/88 8/03 - 3.70 190,140 JCPENNEY 9400 1-120 3.70 190,140 # 64-SUITE K 1 001 3 180 8/88 7/97 - 136.11 24,500 THINGS REMEMBERED 4500 # 65-SUITE K 1 004 3 150 1/96 12/97 - 96.67 14,501 GOLDEN CHAIN GANG 4000 # 66-SUITE K 1 003 3 150 8/94 7/99 - 93.33 14,000 SUNGLASS CO 6000 OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ------------------- ------- -------- ---------- ------------------- ----------- ----------- 1.50 9,000 5,000 MALL & ANCHOR TAX 506,728 1.00 UNLIMITED # 61-SUITE H 1 001 2.50 9,500 7,500 MALL & ANCHOR TAX ZERO YOUNKERS 2.00 11,500 ENCLOSED MALL 1.50 UNLIMITED COMMON AREA 2.50 9,500 7,500 ENCLOSED MALL 2.00 11,500 COMMON AREA 1.50 UNLIMITED MALL & ANCHOR TAX ZERO # 62-SUITE I 1 001 3.00 UNLIMITED 6,273 ENCLOSED MALL STEKETEES COMMON AREA MALL & ANCHOR TAX ZERO 3.00 UNLIMITED 6,235 ENCLOSED MALL COMMON AREA MALL & ANCHOR TAX ZERO # 63-SUITE J 1 001 1.50 UNLIMITED 9,419 ENCLOSED MALL JCPENNEY COMMON AREA MALL & ANCHOR TAX 506,728 1.50 UNLIMITED 9,419 ENCLOSED MALL COMMON AREA MALL & ANCHOR TAX 506,728 # 64-SUITE K 1 001 8.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO THINGS REMEMBERED RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 65-SUITE K 1 004 7.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO GOLDEN CHAIN GANG RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO # 66-SUITE K 1 003 8.00 UNLIMITED NATURAL RECOVERY POOL 4000 ZERO SUNGLASS CO RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- ---------- -------- # 67-SUITE M 1 001 4 2,577 12/93 11/98 - 6.25 16,106 BO RICS HAIRCARE 6000 # 68-SUITE M 1 002 4 1,541 10/94 9/99 - 10.00 15,410 SALLY BEAUTY SUPPL 6000 # 69-SUITE M 1 003 4 5,983 7/96 6/98 - 3.35 20,043 ANDREWS HOME FURNI 5000 # 70-SUITE M 1 005 4 2,000 9/94 8/99 - 8.00 16,000 CHILDREN'S ORCHAR 3020 # 71-SUITE M 1 007 4 8,000 11/94 1/00 - 8.00 64,000 MARIANNE/MARIANNE 510 # 72-SUITE M 1 011 4 1,999 9/93 8/98 - 9.00 17,991 APPLE VALLEY 8500 # 73-SUITE M 1 012 4 3,987 6/95 4/05 - 8.00 31,896 IMPERIAL GARDEN 8000 6/00 10.00 39,870 # 74-SUITE L 1 605C 6 8,775 7/90 6/00 - 14.82 130,046 JOSE BABUSHKA 8000 1-60 14.82 130,046 2-60 14.82 130,046 # 75-SUITE L 1 605F 5 2,236 11/88 10/08 - 15.65 34,993 FIRST OF AMERICA 9200 11/98 17.89 40,002 11/03 20.13 45,000 1-60 22.36 49,997 OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ------------------- ------- -------- ---------- ------------------- ----------- ----------- # 67-SUITE M 1 001 5.00 UNLIMITED NATURAL RECOVERY POOL 4100 ZERO BO RICS HAIRCARE RECOVERY POOL 4500 ZERO PLAZA SHOPS TAX ZERO # 68-SUITE M 1 002 4.00 UNLIMITED NATURAL PLAZA SHOPS TAX ZERO SALLY BEAUTY SUPPL COMMON AREA ZERO # 69-SUITE M 1 003 2.00 UNLIMITED 700 PLAZA SHOPS TAX ZERO ANDREWS HOME FURNI # 70-SUITE M 1 005 6.00 UNLIMITED 300 PLAZA SHOPS TAX ZERO CHILDREN'S ORCHAR RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO # 71-SUITE M 1 007 4.00 UNLIMITED NATURAL PLAZA SHOPS TAX ZERO MARIANNE/MARIANNE RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO # 72-SUITE M 1 011 - - - RECOVERY POOL 4100 ZERO APPLE VALLEY RECOVERY POOL 4500 ZERO PLAZA SHOPS TAX ZERO # 73-SUITE M 1 012 6.00 UNLIMITED 800 PLAZA SHOPS TAX ZERO IMPERIAL GARDEN RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO # 74-SUITE L 1 605C 6.00 UNLIMITED 2,000 JOSE BABUSHKA TAX ZERO JOSE BABUSHKA 6.00 UNLIMITED 2,000 JOSE BABUSHKA TAX ZERO 6.00 UNLIMITED 2,000 JOSE BABUSHKA TAX ZERO # 75-SUITE L 1 605F - - - FIRST AM BANK TAX ZERO FIRST OF AMERICA FIRST AM BANK CAM ZERO RECOVERY POOL 4500 ZERO - - - FIRST AM BANK TAX ZERO FIRST AM BANK CAM ZERO RECOVERY POOL 4S00 ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- ---------- -------- 2-60 24.60 55,006 # 76-SUITE N 1 7 79,670 6/89 8/67 - 0.00 0 TARGET # 77-SUITE K 1 002 3 96 5/96 4/99 - 156.75 15,048 ROYAL JEWELRY 4000 5/97 168.75 16,200 ------- 473,619 ======= OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ------------------- ------- -------- ---------- ------------------- ----------- ----------- - - - FIRST AM BANK TAX ZERO FIRST AM BANK CAM ZERO RECOVERY POOL 4500 ZERO # 76-SUITE N 1 NATURAL ANCHOR CAM TARGET # 77-SUITE K 1 002 7.00 UNLIMITED 150 RECOVERY POOL 4000 ZERO ROYAL JEWELRY 5/97 162 RECOVERY POOL 4100 ZERO RECOVERY POOL 4500 ZERO MALL TAX & INS. ZERO
LANDAUER REAL ESTATE COUNSELORS - -------------------------------------------------------------------------------- Professional Qualifications JAMES C. KAFES, MAI, CRE EXPERIENCE: Landauer Associates, Inc., New York, NY (since 1986) Division Manager/Executive Managing Director in Charge of National Valuation and Technical Services, Member of the Management Committee, and General Manager of the New York Valuation and Technical Services Division. Valuation and real estate counseling on major urban properties and portfolios, including financial and feasibility analyses, appraisal reviews and independent fiduciary services. Miller & Kafes Associates, Inc. (1972-1986) Principal. Valuations, market studies, investment analyses and counseling services on major commercial developments nationwide and in the Caribbean. James E. Gibbons Associates (1970-1972) Assistant Director. Real estate valuations and counseling services. National Bank of North America (1969-1970) Chief Appraiser. Market valuations and analysis of investment opportunities. General Services Administration (1962-1968) Economic analyses, highest and best use studies, market valuations. PROFESSIONAL ACTIVITIES: MAI: Appraisal Institute CRE: American Society of Real Estate Counselors Has served on national committees of the Appraisal Institute and ASREC since 1971, including current service as a board member and past service as Editor-in-Chief and Chairman of the Editorial Board of the Appraisal Journal, published quarterly by the Appraisal Institute. Member: Board of Directors, Cedar Income Fund Board of Directors, Realty Credit Corp. Roundtable of Advisors, Murray H. Goodman Center for Real Estate Studies, Lehigh University The Real Estate Board of New York, Inc. CERTIFICATION: Currently certified in the Appraisal Institute's voluntary program of continuing education for its designated members. EDUCATION: BS, MBA, Lehigh University LANDAUER REAL ESTATE COUNSELORS - -------------------------------------------------------------------------------- Professional Qualifications JOHN I. WRZESINSKI, MAI, CRE EXPERIENCE: Landauer Associates, Inc., Chicago, Illinois (since 1982) Senior Managing Director, Member of the Management Committee and General Manager of the Chicago Regional Office. Active in general real estate consulting since 1972 with an emphasis in the valuation and financial analysis of income properties. Specialized experience in the preparation of feasibility, market and land use studies and litigation support. Assignments involved the evaluation and valuation of all types of real property throughout the United States for Insurance Companies, Pension Funds, financial institutions, developers, and industrial corporations. Lake Michigan Appraisal Co., Chicago, Illinois (1977-1982) Assistant Vice President and Secretary, (Subsidiary of Arthur Rubloff & Co.). Co-manager of the appraisal group; performing various market, feasibility studies and valuations of all types throughout the United States. Marshall & Stevens, Chicago, Illinois (1976-1977) Senior Appraiser. Appraisal and counseling assignments involving real property of all types in the Midwest principally but also in the Northeast and West. PROFESSIONAL DESIGNATIONS: MAI: Appraisal Institute CRE: American Society of Real Estate Counselors Member: - Appraisal Journal Board-Appraisal Institute - Chicago Real Estate Board - Illinois Association of Realtors - National Association of Realtors - Illinois Association of Certified Real Estate Appraisers - International Council of Shopping Centers - Lambda Alpha, Ely Chapter CERTIFICATION: Currently certified in the voluntary program of continuing education for designated members conducted by the Appraisal Institute. Currently State certified as a General Real Estate Appraiser Licensed Real Estate Broker EDUCATION: Bachelor of Science, School of Business Southern Illinois University, Carbondale, Illinois (1969) Numerous professional practice and real estate related courses offered by the Appraisal Institute. Also, various seminars, workshops and continuing education courses sponsored by the Appraisal Institute and the Chicago Real Estate Board. LANDAUER REAL ESTATE COUNSELORS - -------------------------------------------------------------------------------- Professional Qualifications JOHN P. BAKER, MAI EXPERIENCE: Landauer Associates, Inc., Chicago, Illinois (Since 1994) Director, Valuation and Technical Services Division. Research and valuation of income-producing properties throughout the United States. Experience includes general real estate consulting, valuation, market assessments, and litigation support. Chase and Company, Denver, Colorado (1985-1993) Appraiser. Research and appraise land and income-producing properties. Jefferson County, Golden, Colorado (1974-1985) Acquisition Administrator. Negotiated the acquisition of real estate and water rights for Jefferson County's Open Space Program. PROFESSIONAL ACTIVITIES: Member, Appraisal Institute (MAI) CERTIFICATION: Currently certified as State General Appraiser in Illinois (License Number 153-000915) and Colorado Certified General Appraiser (License Number CG01313629) Licensed Real Estate Salesman, State of Colorado Currently certified in the voluntary program of continuing education for designated members conducted by the Appraisal Institute. EDUCATION: MA Social Science/Public Administration University of Northern Colorado, Greeley, Colorado BS Degree - Geography/Urban Planning Northern Michigan University, Marquette, Michigan University of Denver, School of Law, Continuing Education Real Estate Practice - 1980 Water Law - 1984 University of Colorado, Boulder, Colorado Legal Aspects of Planning (Zoning Law) - 1976 Numerous professional practice and real estate related courses offered by the Appraisal Institute. Also, various seminars, workshops, and continuing education courses sponsored by the Appraisal Institute. LANDAUER REAL ESTATE COUNSELORS - -------------------------------------------------------------------------------- Professional Qualifications KEVIN D. GRAY, CRE EXPERIENCE: Landauer Associates, Inc., New York, NY (since 1985) Managing Director, Transaction Counseling Group Investment sales of shopping centers and other retail properties, as well as dispositions and acquisitions of real estate operating entities. Transaction-related services such as due diligence, offering memoranda, pricing analyses and fairness opinions. Senior Vice President, Valuation and Technical Services Group Real estate consulting emphasizing strategic planning, portfolio research, appraisals, feasibility studies, construction financing and securities offerings. All property types throughout North America. Price Waterhouse (Boston and New York) (1985) Senior Associate. General management and real estate consulting, incorporation of real estate investment into overall corporate strategic goals. PROFESSIONAL ACTIVITIES: Member: - American Society of Real Estate Counselors (CRE) - International Council of Shopping Centers (ICSC) - National Association of Real Estate Investment Trusts (NAREIT) - Pension Real Estate Association (PREA) Commissioner of Planning and Zoning (Elected Office), Town of Darien, Connecticut, 1988-1992; 1994-1998. Co-editor, Shopping Centers and Other Retail Properties, John Wiley and Sons in association with the Urban Land Institute, 512 pp., 1996. STATE CERTIFICATION: Licensed Salesperson, State of New York State Certified General Appraiser in California, Connecticut, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Tennessee and Texas. Registered Architect, State of Connecticut EDUCATION: MPPM (MBA), Finance and Accounting, Yale University M, Architecture with honors, University of Pennsylvania (Cret Medal Recipient) BA, Architecture with honors, University of Pennsylvania Languages: French, Italian, Spanish This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. ============= HVS - ------------- International ============= ===================================================== ---------------------------- Economic Study and Appraisal ---------------------------- Howard Johnson Commack ---------------------------- Commack, New York ---------------------------- Prepared by: Hospitality Valuation Services A Division of Hotel Consulting Services, Inc. 372 Willis Avenue Mineola, NY 11501 516-248-8828 Submitted to: Mr. Shirish Godbole Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 [Letterhead of HVS International] November 15, 1996 Mr. Shirish Godbole Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 Re: Howard Johnson Commack Commack, New York Ref. #9610282 Dear Mr. Godbole: Pursuant to your request, we herewith submit our economic study and appraisal pertaining to the above-captioned property. We have inspected the site and facilities and analyzed the hostelry market conditions in the Suffolk County area. Our report was prepared in accordance with, and is subject to, the requirements of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and the Uniform Standards of Professional Practice (USPAP), as provided by the Appraisal Institute. Based on the available data, our analysis, and our experience in the hotel industry, it is our opinion that the market of the fee simple interest in the subject property described in this report, as of January 1, 1997, is: $3,200,000 THREE MILLION TWO HUNDRED THOUSAND DOLLARS We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings and valuation. The economic study and appraisal is made part hereof, and must remain attached in order for the value opinion set forth to be considered valid. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. Very truly yours, HOSPITALITY VALUATION SERVICES A Division of Hotel Consulting Services, Inc. /s/ Sean A. Hehir Sean A. Hehir Consultant and Valuation Analyst /s/ Anne R. Lloyd-Jones Anne R. Lloyd-Jones, CRE Senior Vice President /s/ Stephen Rushmore Stephen Rushmore, CRE, MAI, CHA President HVS International, Mineola, New York Table of Contents - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table of Contents 1. Executive Summary ........................................... 1 2. Nature of the Assignment .................................... 3 3. Description of the Land, Improvements, Zoning, Taxes and Neighborhood ........................... 7 4. Market Area Analysis ........................................ 20 5. Overview of External Forces Affecting the U.S. Lodging Industry ......................................... 34 6. Lodging Market Supply and Demand Analysis ................... 50 7. Projection of Occupancy and Average Rate .................... 65 8. Highest and Best Use ........................................ 79 9. Approaches to Value ......................................... 81 10. Income Capitalization Approach .............................. 84 11. Sales Comparison Approach ................................... 118 12. Cost Approach ............................................... 126 13. Reconciliation of Value Indications ......................... 132 14. Statement of Assumptions and Limiting Conditions ............ 136 15. Certification ............................................... 139 Addenda Photographs of the Subject Property Photographs of the Competitors Legal Description Synopsis of Hotel Management Agreement Synopsis of Restaurant Lease Explanation of the Simultaneous Valuation Formula Qualifications Sean A. Hehir Anne R. Lloyd-Jones, CRE Stephen Rushmore, CRE, MAI, CHA HVS International, Mineola, New York Executive Summary 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 1. Executive Summary Property: Howard Johnson Commack Location: 450 Moreland Road Commack, New York 11725 Date of Inspection: October 21, 1996 Interest Appraised: Fee simple Date of Value: January 1, 1997 Land Description - ---------------- Area: +/-4.13 acres, or +/-179,903 square feet Zoning: WSI - Wholesale and Service Industrial District Assessor's Parcel Number: Section 180, Block 1, Lot 44 Improvements Description - ------------------------ Age: Constructed in 1971 Property Type: Limited-service Guestrooms: 109 Number of Stories: Two stories Food and Beverage Service: Complimentary continental breakfast Meeting Space: Two rooms totaling 800 square feet Parking: Approximately 110 spaces Summary of Value Parameters - --------------------------- Highest and Best Use (as if vacant): Lodging facility Highest and Best Use (as improved): Lodging facility Marketing Period: Six to nine months Number of Years to Stabilize: Two Stabilized Year: 1998 HVS International, Mineola, New York Executive Summary 2 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Valuation Assumptions - --------------------- Mortgage Interest Rate: 9.5% Amortization Period: 20 years Debt Service Constant: 0.111856 Loan-to-Value Ratio: 70% Stabilized Inflation Rate: 3.5% Equity Yield Rate: 22.0% Terminal Capitalization Rate: 12.0% Brokerage and Legal Fees: 3% Holding Period: Ten years Calculated Discount Rate: 14.42% Estimates of Value - ------------------ Income Capitalization Approach: $3,140,000 Sales Comparison Approach: $2,630,000 - $3,700,000 Cost Approach (Replacement Cost): $5,800,000 Market Value Conclusion: $3,200,000 Market Value Conclusion per Room: $29,358 HVS International, Mineola, New York Nature of the Assignment 3 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 2. Nature of the Assignment Subject of the Economic Study and Appraisal The subject of the economic study and appraisal is the fee simple interest in a +/-179,903-square-foot ( +/-4.13 -acre) parcel improved with a 109-room, limited-service lodging facility known as the Howard Johnson Commack, which opened in 1971. In addition to guestrooms, the subject property features a gatehouse where the registration area is located, +/-800 square feet of meeting space, an outdoor swimming pool, an area where complimentary continental breakfast is served, and all other facilities and amenities typical of a limited-service hotel. The hotel is located on the west side of Moreland Road, approximately 100 feet north of its intersection with Vanderbilt Motor Parkway. Municipal jurisdictions governing the property include the Hamlet of Commack, the Town of Smithtown, Suffolk County, and the State of New York. The hotel's civic address is 450 Moreland Road, Commack, New York, 11725. Objective of the Economic Study and Appraisal The objective of the economic study and appraisal is to evaluate the supply and demand factors affecting the market for transient accommodations in the Commack area for the purpose of estimating the market value of the subject property. Market value is defined by the Office of the Comptroller of the Currency (OCC), 12 CFR, Part 34, 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 and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. buyer and seller are typically motivated; 2. both parties are well informed or well advised, and acting in what they consider their own best interests; HVS International, Mineola, New York Nature of the Assignment 4 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 3. a reasonable time is allowed for exposure in the open market; 4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) Use of the Appraisal This appraisal is being prepared for the use of Morgan Stanley Mortgage Capital, Inc. in connection with their proposed financing of a package of 17 hotels (including the subject property) which are owned by Ashford Financial Corporation or related entities. The information presented in this report should not be disseminated to the public or third parties without the express written consent of Hospitality Valuation Services. Scope of the Appraisal All information was collected and analyzed by the staff of Hospitality Valuation Services. Data such as historical operating statements, site plans, floor plans, and so forth were supplied by Ashford Financial Corporation. Unless noted otherwise, we have inspected the competitive lodging facilities and analyzed the sales summarized in this report, and our value conclusion is based on this investigation and analysis. Property Rights Appraised The property rights appraised are the fee simple ownership of the land and improvements, including the furniture, fixtures, and equipment. The fee simple interest is defined as "absolute ownership unencumbered by any other interest or estate subject only to the four powers of government."(2) The subject property is appraised as a going concern (i.e., an open and operating facility). (1) Federal Register, Vol. 55, No. 165, August 24, 1990; p. 34696. (2) The Dictionary of Real Estate Appraisal - Second Edition, American Institute of Real Estate Appraisers, Chicago, IL, 1989, p. 120. HVS International, Mineola, New York Nature of the Assignment 5 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Method of Study The methodology used to develop this economic study and appraisal is based on the market research and valuation techniques set forth in the textbooks authored by HVS International for the American Institute of Real Estate Appraisers and the Appraisal Institute, entitled The Valuation of Hotels and Motels,(1) Hotels, Motels and Restaurants: Valuations and Market Studies,(2) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations,(3) and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations.(4) The appraisal will consider the three standard approaches to value: income capitalization, sales comparison, and cost. Because lodging facilities are income-producing properties that are normally bought and sold on the basis of capitalization of their anticipated stabilized earning power, the greatest weight is given to the value indicated by the income capitalization approach. We find that most hotel investors employ a similar procedure in formulating their purchase decisions, and thus the income capitalization approach most closely reflects the rationale of typical buyers. When appropriate, the sales comparison and cost approaches are used to test the reasonableness of the results indicated by the income capitalization approach. Ownership, Franchise, and Management A photocopy of the subject property's legal description, which was provided by Ashford Financial Corporation, is presented in the Addenda to this report; the appraisers assume no responsibility regarding the accuracy of this document. According to records maintained by the Smithtown Tax Assessor's Office, the subject property was formerly owned by Knight & Associates, Inc. On February 28, 1994, the Chartwell/G.S.R. Hotels III Limited Partnership entered into a purchase agreement with the Nippon Credit Bank, Ltd., which provided the mortgage loan to the subject property and 14 other hotels. The closing of the sale of the mortgage loan took place on March 25, 1994, and the purchase price allocated to the subject property was $2,218,895. (1) The Valuation of Hotels and Motels, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1978. (2) Hotels, Motels and Restaurants: Valuations and Market Studies, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1983. (3) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1990. (4) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992. HVS International, Mineola, New York Nature of the Assignment 6 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Conveyance of the fee simple title to the hotel occurred on or about August 25, 1994. The subject property operates under a franchise agreement with Howard Johnson Franchise Systems, Inc.; this agreement expires on August 25, 2009. The hotel is also subject to a management agreement with Remington Hotel Company, an abstract of which is presented in the Addenda to this report. For the purpose of this appraisal, we assume continued ownership of the subject property by Ashford Financial Corporation and operation of the property by Remington Hotel Company as a Howard Johnson. Marketing Period In light of the renewed interest in hotel investments and the increasing availability of debt and equity capital, we believe that it will take six to nine months to sell the subject property assuming it is placed on the market at the concluded value. Effective Date of the Appraisal The effective date of the appraisal is January 1, 1997. All projections are expressed in inflated dollars, and the value estimate represents 1997 dollars. Date of Inspection The subject property was inspected by Sean A. Hehir and Anne R. Lloyd-Jones on October 21, 1996. HVS International, Mineola, New York Description of the Land, Improvements, 7 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 3. Description of the Land, Improvements, Zoning, Taxes, and Neighborhood LAND The suitability of the land for the operation of a lodging facility is an important consideration affecting the economic viability of a property and its overall value. Factors such as size, topography, access, visibility, and the availability of utilities have a direct impact on the desirability of a particular site. Size and Topography The subject site is located on the west side of Moreland Road, approximately 100 feet north of its intersection with the Vanderbilt Motor Parkway. Municipal jurisdictions governing the property include the Hamlet of Commack, the Town of Smithtown, Suffolk County, and the State of New York. According to the subject property's 1995/96 real estate tax bill and representatives of the Smithtown Tax Assessor's Office, the parcel measures approximately 4.13 acres, or +/-179,903 square feet. For tax purposes, the property is identified as District 800, Section 180, Block 1, Lot 44. The hotel is located on Moreland Road, north of the Long Island Expressway and the Vanderbilt Motor Parkway (which roughly parallels the expressway). A Mobil gas station and the Happy Family Chinese Buffet restaurant are located along the south side of the Howard Johnson. The Vanderbilt Motor Parkway extends on an east/west axis just south of the gas station and the restaurant. Moreland Road, which is also known as Wicks Road, is located at the property's east end, and carries traffic north and south. A vacant parcel and the Suffolk County Girl Scout Council are located along the hotel's northern periphery. Commercial developments and a mini-storage warehouse known as SYMS are situated on the west side of the parcel. Primary vehicular access to the Howard Johnson is provided by Moreland Road. The parcel is generally flat, and its size and topography appear well suited for the current use. HVS International, Mineola, New York Description of the Land, Improvements, 8 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Easements The appraisers were not provided with any information concerning easements affecting the subject property. For the purposes of this appraisal, we assume that the property is not encumbered by any unusual or onerous easements which would affect its use or marketability. Regional Access It is important to analyze a lodging facility's ease of access with respect to regional and local transportation routes and demand generators. The subject site is conveniently accessible to a variety of local, county, state, and interstate highways. The Howard Johnson Commack is located near the center of Long Island. The island stretches east for roughly 188 miles from Manhattan to Montauk Point, but is only 25 miles wide at its widest point. Development has followed a west-to-east pattern. Long Island is served by three major east-west highways: the Long Island Expressway, Northern State Parkway, and Southern State Parkway. The Long Island Expressway (LIE) is the only east-west commercial highway serving almost the entire length of the island, and is a key component of the transportation system in Nassau and Suffolk Counties. Both the Northern and Southern State Parkways are characterized by low overpasses that render them impassable to large commercial vehicles. The Long Island Expressway is paralleled by two-lane service roads on its northern and southern sides throughout most of Queens and Nassau County; the service roads are only partially constructed throughout Suffolk County. The availability of a service road in the vicinity of the Howard Johnson affords the site improved access, and thus represents a locational advantage. Although the area's highway system is well developed, it is overtaxed as a result of the large population base and the extent of the area's commercial activity. Most travel on Long Island takes place on an east-west axis, and as a result, the LIE and the Northern and Southern State Parkways are often congested during peak periods. Although this traffic congestion is inconvenient, it is also pervasive, and thus does not represent a competitive disadvantage for any one area hotel. Sagtikos State Parkway, Sunken Meadow State Parkway, and Northern State Parkway all pass within a one- to two-mile radius of the subject property, and provide convenient access to local demand generators and other points of interest. Sagtikos State Parkway originates in Commack, HVS International, Mineola, New York Description of the Land, Improvements, 9 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= approximately 800 feet west of the subject property, and extends south to the coast. North of Commack, this route becomes the Sunken Meadow State Parkway, and extends to the north shore. Northern State Parkway is a four-lane, limited-access route. This highway originates at Veterans Memorial Highway (State Route 454) approximately one and one-half miles northeast of the Howard Johnson, and continues west through western Suffolk and Nassau Counties. Northern State Parkway becomes the Grand Central Parkway at the Nassau/Queens border, and terminates at the Triborough Bridge (which provides access to Manhattan and Interstate 95). Overall, regional access to the Howard Johnson Commack is excellent. Local Access and Visibility Local access to the subject property is provided by Moreland Road, a two-lane, undivided thoroughfare that intersects the Vanderbilt Motor Parkway and the Long Island Expressway. South of the Vanderbilt Parkway, Moreland Road becomes Wicks Road. Access to the hotel from the Long Island Expressway is convenient. Westbound motorists use Exit 53 and make a left turn onto the Vanderbilt Motor Parkway, then continue west for roughly one-eighth of a mile before turning right at the subject property. Eastbound motorists also use Exit 53 and turn left on Wicks Road (which becomes Moreland Road), continue under the LIE and the Vanderbilt Motor Parkway, and turn left into the Howard Johnson. Although visibility of the subject property from the LIE is limited, this is not considered a serious detriment. Like most of the area's hotels, the Howard Johnson does not attract a substantial amount of demand from passing motorists. All destinations on Long Island can be reached within one or two hours, and thus highway traffic does not produce a significant number of hotel guests. As noted earlier, the Howard Johnson is located near the intersection of the Vanderbilt Motor Parkway and Moreland Road. The hotel is set back behind a Mobil station and the Happy Family Chinese Buffet restaurant, and these structures obscure the view of the property. This factor is mitigated somewhat by the Howard Johnson's distinctive orange roof and a tall sign installed in front of the property. HVS International, Mineola, New York Description of the Land, Improvements, 10 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Overall, the subject site is considered appropriate for hotel use in terms of capacity, configuration, and access. The property is well situated with regard to various demand generators, although visibility is limited. Airport Access Long Island is served by three major airports: John F. Kennedy, La Guardia, and MacArthur. Guests of the subject property can reach John F. Kennedy Airport by taking the LIE west to the southbound Belt Parkway. Motorists gain access to La Guardia by traveling west on the LIE and then north on the Brooklyn-Queens Expressway. The subject property is located within an approximate 20-minute drive of Long Island MacArthur Airport in Ronkonkoma. This regional air facility is served by American, USAir, and several commuter carriers. MacArthur's popularity has increased in recent years as more businesses have moved to Suffolk County and congestion at the New York City airports has intensified. Most of the passengers who use MacArthur Airport are local residents or commercial travelers visiting firms in Suffolk County. Utilities The subject site is served by all necessary utilities, which are provided as follows. ================================================================================ Table 3-1 Available Utilities - -------------------------------------------------------------------------------- Utility Provider ------- -------- Water Suffolk Water Authority Electricity LILCO Telephone NYNEX Sewer Suffolk Water Authority Garbage and Trash Hickeys - -------------------------------------------------------------------------------- Soil and Subsoil Conditions According to the November 24, 1993 Preliminary Environmental Site Assessment and Limited Asbestos Survey prepared by Certified Engineering & Testing Company, Inc., the subject site is located approximately 2,000 feet southeast of a State Hazardous Waste Site (SHWS): Gibson Oil and Chemical at 74 Mall Drive. Moreover, Kay Pneumatics, a fuel oil Leaking Underground Storage site (LUST) with a "clean-up in progress/required" status, is located approximately 2,000 feet west of the subject property and is hydraulically upgradient from the site. Gibson Oil and Chemical and Fairchild Industrial Production Division (at 76 Mall Drive) are classified as Comprehensive Environmental Resource Compensation and Liability HVS International, Mineola, New York Description of the Land, Improvements, 11 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Information System (CERCLIS) sites, and are both hydraulically upgradient from the subject parcel. Because the subject property's proximity to these sites may raise environmental concerns, the Certified Engineering & Testing Company report recommends a Phase II environmental study. The appraisers are not qualified to evaluate soil conditions, and we urge concerned parties to engage qualified personnel to pursue the issue. This appraisal does not consider the potential impact of environmental problems, and it should be noted that the cost of remediation and the loss in value caused by the site's decreased desirability are extremely difficult to quantify. Nuisances and Hazards The same Certified Engineering & Testing Company report cited above indicates that friable asbestos has been identified in corrugated air-cell pipe insulation in the first-floor corridor and electrical room of the subject property's east wing (with an estimated total length of 250 feet) and in sprayed acoustical ceiling material in all guestrooms (an estimated area of 25,120 square feet). The reader should be advised that any costs associated with asbestos removal or containment could have an unfavorable impact on the hotel's market value, and the estimate set forth in this appraisal reflects our value conclusions prior to the deduction of any such costs. We suggest that interested parties initiate an independent analysis regarding current asbestos levels and the capital expenditures necessary to remove any asbestos that is present. Excess Land The 4.13-acre parcel includes a vacant tract that is situated on the northern side of the hotel improvements. The property's manager indicates that the cesspool is buried in this area, and unless alternate sewage treatment arrangements can be made, this portion of the site will remain vacant and dedicated to this use. Moreover, as a result of the significant expenditures that would be necessary to remove the cesspool, its seems unlikely that this land would be used for an expansion of the hotel facilities. Flood Zone As indicated by the Federal Emergency Management Agency (FEMA) Community Panel Number 3608-1000-15B, dated June 2, 1992, the subject property is located in Flood Zone C, an area of minimal flooding. Seismicity At the time of our analysis, information on the seismicity of the subject property was not available. For the purpose of this appraisal, we assume that the hotel is not located in an area of seismic danger. HVS International, Mineola, New York Description of the Land, Improvements, 12 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Land Conclusion The subject parcel appears well suited as the site of a lodging facility. We have analyzed the issues of size, topography, access, visibility, and the availability of utilities, and noted the following advantages and disadvantages. Advantages o There is a well-developed network of local and regional highways in close proximity to the subject property, and access is favorable. o In terms of shape and topography, the parcel appears suitable for its current use. o All necessary utilities are available. Disadvantages o The site is not visible from the Long Island Expressway. o The subject property is situated behind a Mobil gas station and the Happy Family Chinese Buffet restaurant, limiting visibility from Vanderbilt Motor Parkway. The disadvantages noted above are surmountable through marketing and improved signage, and the advantages represent desirable locational attributes. As a result, we believe that the subject property is well suited for hotel use. IMPROVEMENTS The quality of a lodging facility's physical improvements has a direct influence on its marketability and attainable occupancy and average rate. The design and functionality of the structure can also affect operating efficiency and overall profitability. This section investigates the subject property's physical improvements and personal property in an effort to determine how they contribute to total value. The following description of the improvements is based on our inspection of the hotel and information provided by management representatives. The Howard Johnson Commack is a limited-service lodging facility containing 109 rentable units, +/-800 square feet of meeting space, an outdoor swimming pool, and typical back-of-the-house areas. The two-story property opened in 1971, and operates under a management contract with Remington Hotel Company and a franchise affiliation with Howard Johnson Franchise System, Inc. Overall, the hotel appears to be in good condition, and management representatives report that all building systems are in working HVS International, Mineola, New York Description of the Land, Improvements, 13 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= order. The following table summarizes the facilities available at the Howard Johnson. ================================================================================ Table 3-2 Facilities Summary - -------------------------------------------------------------------------------- Guestrooms (No. of Units) Standard Queen 43 King Jacuzzi 16 Double Jacuzzi 33 Queen Jacuzzi 10 King Island Oval 5 Manager's Room 2 ----- Total 109 Meeting Space Two rooms totaling approximately 800 square feet Parking Approximately 110 surface spaces Life Safety Systems Hard-wired smoke detectors Laundry Equipment Two washers Four dryers Construction Details Five buildings Exterior facade of beige stucco with teal railing Concrete masonry blocks Rubber membrane roof Interior guestroom corridors Carpeting in the guestrooms and corridors and tile floor covering in the baths Vinyl covering on the interior walls Note: two meeting rooms contain pull-down parlor beds and can be converted to guestrooms - -------------------------------------------------------------------------------- Property Exterior The hotel consists of five buildings configured in a "U"-shape around a central courtyard; these structures occupy the northern, eastern, and western portions of the site. Paved parking areas accommodating approximately 110 vehicles are located around the perimeter of the improvements. The north and west guestroom buildings were constructed in 1971 and the east wing HVS International, Mineola, New York Description of the Land, Improvements, 14 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= was added in 1976. An additional structure located in the northwestern corner of the parcel houses a laundry room and a mechanic's room. As noted earlier, the subject property benefits from convenient vehicular access from the LIE. Westbound motorists use Exit 53 and make a left turn onto the Vanderbilt Motor Parkway, then continue west for roughly one-eighth of a mile before turning right at the hotel. Eastbound motorists also use Exit 53 and turn left on Wicks Road (which becomes Moreland Road), continue under the LIE and Vanderbilt Motor Parkway overpasses, and turn left into the Howard Johnson. After entering the site, guests proceed to the hotel's main entrance, which is housed in a traditional Howard Johnson gatehouse constructed of brick and glass gatehouse; this facility is situated in the southeastern portion of the parcel. We note that the property exterior and the paved areas appear to be in good condition, with no apparent signs of disrepair. Lobby The front desk, the lobby, and a manager's office are in the gatehouse structure. The lobby is attractively furnished with plants, a coffee table, chairs, and some lamps. A public telephone and a public restroom are located to the right of the reception desk. Management representatives indicate that the ceiling and the wall vinyl in the lobby will be replaced in the near future. Meeting and Banquet Space Complimentary continental breakfast is served in a solarium that connects the north and east guestroom wings. Two small meeting rooms totaling approximately 800 square feet are available; both of these facilities are equipped with pull-down beds, and thus they can be used as guestrooms. We were informed by management that there are plans to convert a room that is now used for storage into a meeting room in the near future. This should enhance the ability to market the hotel to small groups. Guestrooms Guestrooms are of standard configuration and size. In addition to one or two beds, each unit is equipped with bedside tables, lamps, two chairs, a writing desk, a dresser, draperies with black-out lining and sheers, and a color television. Bathrooms, which are finished with tile floors, contain a commode, a tub/shower combination, and a freestanding sink. Thermasol Jacuzzi Steambaths are installed in 65 guestrooms. Recent guestroom renovations included the replacement of beds, bedspreads, and carpets in 19 units and the installation of new vanities in all guest bathrooms. Floor tiles were also replaced in 53 of the bathrooms, and HVS International, Mineola, New York Description of the Land, Improvements, 15 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= the remainder will be addressed in the near future. Walls in 15 guestrooms were resurfaced with stucco-style wall covering recently. Another 50 units will receive the same treatment in 1997, and the remainder are scheduled for completion in 1998. Guestroom Corridors Guestroom corridors are wide enough to permit the easy passage of housekeeping and room service carts. The corridors are finished with relatively new carpets, which were replaced as part of a previous renovation. Corridor lighting is sufficient and the fixtures appear to be good condition; we note that the lighting style complements the updated finishes in the hallways. Management has set aside 60 units for non-smoking guests; this type of amenity costs very little and requires no structural changes. We expect that the number of rooms allocated for this purpose will be increased or reduced depending on demand and guest response. Recreational Amenities An outdoor swimming pool is situated in the "U" formed by the hotel buildings. Access to the pool is provided by a door leading off the breakfast solarium, southwest of the reception area. The swimming pool is fenced in, as required by local ordinances. A new pool filter was installed recently, and management representatives indicate that the paving around the perimeter of the pool will be repainted in the near future. Back-of-the-House Space Back-of-the-house facilities include a laundry room, a mechanical equipment room, and various offices and storage areas. The laundry and the mechanical equipment room are located in the northwestern corner of the building. The laundry room is equipped with two washers and four dryers. These machines appear dated, and may need to be replaced sometime in the near future. Vertical Transportation Vertical transportation is provided by four stairwells, located at each end of the east and west guestroom wings. All of the stairwells appear to be well maintained. Heating, Ventilation, and Air Conditioning The subject property guestrooms are cooled by in-room through-the-wall air conditioners that are reported to be in good working order. Public areas are cooled by ten package air conditioning units; hence, the property does not require chillers. Heat is provided by two boilers. According to information provided by Ashford Financial Corporation, all of the Howard Johnson's operating systems are in a condition appropriate to ensure the hotel's continued operation. HVS International, Mineola, New York Description of the Land, Improvements, 16 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Fire Protection It is our understanding that the subject property is in full compliance with all applicable fire safety standards. All guestrooms are equipped with heat detectors and hard-wired smoke alarms, and pull stations and fire extinguishers are located at various points throughout the buildings. The hotel's fire alarm is wired to the front desk and to the fire department. ADA Conformance Following the January 26, 1992 passage of the Americans with Disabilities Act (ADA), hotels are subject to new physical standards. The appraisers are not experts on ADA compliance, and we render no opinion regarding the subject property's conformance to ADA standards. Capital expenditures that may be necessary to bring the property into accordance with the ADA will reduce our estimate of market value. Any ongoing costs related to ADA regulations are expected to be funded by normal replacement reserves. Improvements Conclusion Except as noted above, the subject property's improvements are considered appropriate for hotel use in terms of capacity and configuration. The facilities appear to be in good condition, and the guestrooms are appropriately furnished. For the purpose of this appraisal, we assume that the subject property's management will continue to perform necessary renovations, and that these will be funded from the reserve for replacement account. ZONING According to the Smithtown Planning Department's zoning map (dated September 30, 1989), the subject property is zoned as follows. WSI - Wholesale and Service Industrial District Based on our discussions with representatives of the Smithtown Planning Department and our review of the zoning ordinances pertaining to this classification, hotel and motels are a "special exception" use and are subject to approval by the Town Board. We assume that all necessary permits and approvals have been secured (including an appropriate liquor license), and that the subject property was constructed in accordance with local zoning ordinances, building codes, and all other applicable regulations. ASSESSED VALUE AND TAXES Property (or ad valorem) tax is one of the primary revenue sources of municipalities. Based on the concept that the tax burden should be distributed in proportion to the value of all properties within a taxing jurisdiction, a system of assessments is established. Theoretically, the assessed value placed on each parcel bears a definite relationship to market value, so properties of equal market value will have similar assessments and properties with higher and lower values will have proportionately larger and smaller assessments. Depending on the taxing policy of the municipality, property HVS International, Mineola, New York Description of the Land, Improvements, 17 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= taxes can be based on the value of the real property or the value of the personal property and the real property. According to the Town of Smithtown Tax Assessor's Office, the subject parcel is designated as District 800, Section 180, Block 1, Lot 44. The hotel is subject to taxation by the Town of Smithtown and Suffolk County, and also incurs school taxes and miscellaneous other taxes. Personal property is not assessed in these jurisdictions. The tax year extends from December 1 to November 30, and taxes are payable on January 10 of the prior year and May 15 of the current year. The subject property is currently assessed at $97,705, which includes a land assessment of $12,500. According to representatives of the Smithtown Tax Assessor's Office, the hotel's total 1992/93 assessment was $108,705. As a result of the property's recent change in ownership, its tax file is currently in circulation and details of the assessment change are not available to us. Commercial real estate in the subject property's area is not reassessed unless there is a substantial upgrading or expansion, or unless court proceedings require a reassessment. As a result, property assessments generally remain constant, and the equalization ratio fluctuates from year to year. In 1996, the equalization ratio applicable to the subject property is reported to be approximately 3.2% of market value. According to data supplied by the Smithtown Tax Assessor's Office, equalization rates ranged from 2.70% to 3.39% between 1990 and 1996. The 1995/96 tax rate applicable to the subject property is $924.787 per $1,000 of assessed value. The overall tax rate (including all applicable taxing jurisdictions) has increased at an average annual compounded rate of approximately 4.35% since 1990/91. To forecast the subject property's tax burden, we have increased the historical tax rate by 4.5% to yield a tax rate of $966.402 per $1,000 of assessed value in the first projection year, and then increased that rate by 4.5% annually in subsequent years. Applying the projected increases to the 1996 tax burden yields the following forecast of property taxes for the Howard Johnson. ================================================================================ Table 3-3 Forecast of Property Tax Expense (+000) - -------------------------------------------------------------------------------- 1997 Stabilized -------------------------------------------------------------------------- Projected Property Taxes (+000) $94 $99 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Description of the Land, Improvements, 18 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= NEIGHBORHOOD The neighborhood surrounding a lodging facility often has an impact on a hotel's status, image, class, style of operation, and sometimes its ability to attract and properly serve a particular market segment. This section investigates the subject property's neighborhood and evaluates any pertinent locational factors that could affect its occupancy, average rate, and overall profitability. The neighborhood surrounding the Howard Johnson is characterized by a mixture of light industrial, office, and residential uses. A majority of the hotel's demand is generated by firms operating in the John V.N. Klein Hauppauge Industrial Park, which is located northeast of the subject site. Land uses along the Vanderbilt Motor Parkway include a variety of Class A office buildings. A number of freestanding restaurants are located in the immediate vicinity of the Howard Johnson (including the Happy Family Chinese Buffet, McDonald's, Bennigan's, Lotus East, and Villa Parma), and provide guests with dining alternatives to suit different tastes and budgets. Residential developments are located off the Vanderbilt Motor Parkway, east and west of the subject property. The 211-room Sheraton Long Island is situated on the north side of Vanderbilt Motor Parkway, approximately one mile west of the subject property. The Suffolk County Girl Scout Council is located on the north side of the adjoining vacant parcel. Adjoining the subject parcel to the west are SYMS, Liberty Aero Inc., and the Picture Frame Factory. As noted earlier, a Mobil gas station is situated directly south of the hotel, and the Happy Family Chinese Buffet restaurant is located southwest of the hotel and west of the Mobil station. Other land uses in the immediate vicinity include a manufacturing firm known as FESTO, which is situated northeast of the hotel. A vacant, wooded parcel is located to the east of the Howard Johnson, and various manufacturing and industrial companies are situated in the areas to the north and east. Some residential developments are located west of the SYMS facility. Overall, the neighborhood surrounding the Howard Johnson Commack appears well suited for the operation of a lodging facility. The Hauppauge Industrial Park and other nearby commercial developments provide a base level of hotel demand. As a limited-service property, the Howard Johnson does not offer a restaurant; however, the Happy Family Chinese Buffet and numerous freestanding food and beverage outlets that line the Vanderbilt HVS International, Mineola, New York Description of the Land, Improvements, 19 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Motor Parkway provide guests with appropriate dining alternatives. The subject property's proximity to the Long Island Expressway and the Vanderbilt Motor Parkway also allows convenient access to nearby demand generators. HVS International, Mineola, New York Market Area Analysis 20 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 4. Market Area Analysis The economic vitality of the market surrounding the subject property is an important consideration in forecasting lodging demand and income potential. Economic and demographic trends that reflect the amount of visitation provide a basis from which to project hostelry demand. The purpose of the area analysis is to review available economic and demographic data to determine whether the local market will undergo economic growth, stability, or decline. In addition to predicting the direction of the economy, the rate of change must be quantified. These trends are then correlated based on their propensity to reflect variations in lodging demand with the objective of forecasting the growth or decline in visitation by individual market segment. Market Area Definition The subject property is located on Long Island, in the southeastern portion of New York State. The hotel is situated in the Hamlet of Commack and the Town of Smithtown, and its primary market consists of Suffolk County and the Nassau-Suffolk Metropolitan Statistical Area (MSA). The Howard Johnson is located in central Suffolk County, which includes the municipalities of Hauppauge, Smithtown, and Central Islip, as well as the area surrounding MacArthur Airport. Long Island is approximately 188 miles long and 25 miles across at its widest point; at roughly 1,396 square miles in area, it is the largest island adjoining the continental United States. The island is bounded by the Atlantic Ocean to the south and east, the Long Island Sound to the north, and the East River and the Upper New York Bay to the west. The area developed from a sparsely populated agricultural region in the 18th Century to a major suburban metropolitan center. The character of Long Island changes markedly from urban to suburban to rural over its length. The Queens and Brooklyn boroughs of New York City occupy the western end of the island; Nassau and Suffolk Counties comprise the middle and eastern portions. In the popular sense, Long [GRAPHIC OMITTED] AREA MAP HVS International, Mineola, New York Market Area Analysis 21 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Island refers only to Nassau and Suffolk Counties, which cover roughly 929 square miles and contain 67% of the island's total land mass. Nassau and Suffolk Counties' proximity to New York City has been the primary factor in the development of Long Island. New York City, which consists of five boroughs, is the most densely populated city in the United States and serves as a global center for trade, commerce, and industry. New York and its surrounding suburbs are the central hub of a megalopolis that extends along the eastern seaboard from Boston to Philadelphia, Baltimore, and Washington, DC. Economic and Demographic Data Based on fieldwork conducted in the area and our in-house sources, we have evaluated various economic and demographic statistics to determine trends in lodging demand. A primary source of economic and demographic statistics used in this analysis is the Complete Economic and Demographic Data Source published by Woods & Poole Economics, Inc., a well-regarded forecasting service based in Washington, DC. Using a data base containing more than 300 variables for each county in the nation, Woods & Poole employs a sophisticated regional model to forecast economic and demographic trends. Historical statistics are based on census data and information published by the Bureau of Economic Analysis. Projections are formulated by Woods and Poole. All dollar amounts have been adjusted for inflation, and thus growth or decline represents real change in constant dollars. Population Between 1980 and 1995, the population of Suffolk County increased at an average annual compounded rate of 0.3%, which was lower than the national gain of 1.0% annually but higher than the levels registered by the MSA and the state (at 0.1% and 0.2%, respectively). Population growth accelerated between 1990 and 1995; during this period, Suffolk County's population increased at a rate of 0.5%, while the MSA, the state, and the nation recorded annual gains of 0.3%, 0.2%, and 1.1%, respectively. Forecasts indicate slower gains between 1995 and 2000. Suffolk County is expected to achieve an average annual compounded population increase of 0.3% during this period; no change is anticipated in the MSA, and growth rates in the state and the nation are projected at 0.1% and 0.9%, respectively. The higher growth rate anticipated for Suffolk County reflects its relatively low population density, particularly when compared to Nassau County. Although there is no direct relationship between population and hotel demand, we find that the rate of population growth generally establishes a HVS International, Mineola, New York Market Area Analysis 22 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= minimum rate of increase for an area's commercial segment lodging demand. This observation also holds true for the meeting and group segment if a majority of the meetings are business-oriented. Retail Sales Retail sales in Suffolk County increased at a real average annual compounded rate of 2.1% between 1980 and 1995, a level that was higher than those registered by the Nassau-Suffolk MSA (at 1.6%), New York State (at 1.1%), and the nation as a whole (at 1.9%). In response to the regional and national recession, retail sales levels declined in the county and the MSA between 1990 and 1995. Forecasts suggest retail sales growth of 0.3% annually in Suffolk County between 1995 and the year 2000. This level exceeds the 0.1% gain anticipated in New York State, but is lower than the increase projected for the nation; no change is anticipated in the MSA. Again, the greater opportunity for development in Suffolk County is a contributing factor. Overall, retail sales statistics for the subject property's market area suggest a favorable economic profile. With greater retail growth, local businesses should prosper and new firms are more likely to enter the market. This trend should result in greater visitation and an increased demand for lodging facilities. Personal Income Between 1980 and 1995, personal income growth in Suffolk County outpaced the levels recorded in the Nassau-Suffolk MSA and the state and was comparable to the national average. As a result of the economic downturn, growth slowed between 1990 and 1995. Suffolk County and the nation fared somewhat better than the MSA and the state during this period, and achieved increases of 0.8% and 1.9%, respectively. Projections indicate continued economic recovery between 1995 and the year 2000, and gains in personal income are anticipated at average annual compounded rates of 2.3% in Suffolk County, 1.7% in the Nassau-Suffolk MSA, 1.3% in New York State, and 2.3% in the nation. On a per-capita basis, personal income levels in Suffolk County and the Nassau-Suffolk MSA are higher than those in the state and the nation. This suggests that Long Island residents are more affluent than typical Americans, and have more money available to spend on retail goods and services. This increased spending ability contributes to a favorable environment for local commercial establishments, and restaurants in particular. It should be noted, however, that personal income figures do not consider cost-of-living factors, which are particularly high on Long Island. HVS International, Mineola, New York Market Area Analysis 23 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Employment Between 1980 and 1995, the most rapid employment growth in the county occurred in the services and construction sectors, reflecting the considerable development that occurred in the area during that period. Most employment sectors underwent declines from 1990 to 1995; the exceptions were agricultural services, TCPU (transportation, communications, and public utilities), services, and wholesale trade. The greatest drops were apparent in the farming, construction, manufacturing, and federal government sectors; more limited defense spending on a nation level and the region's historical reliance on defense contracts are largely responsible for the downturn in manufacturing and federal government employment on Long Island. During this recessionary period, overall employment increased at an average annual compounded rate of 0.1% in Suffolk County. Employment is expected to rebound between 1995 and the end of the decade. Forecasts indicate an average annual compounded growth rate of 1.1% in Suffolk County, and relatively healthy gains are expected to occur in all areas (with the exception of farming and agricultural services). The moderate employment gains anticipated in the area reflect a stabilization of the local economy following the dramatic expansion that occurred in the 1980s and the recession that characterized the early 1990s. The major employers on Long Island represent a cross section of hotel demand potential. Some are national in scope, while others operate on a more local basis; some are engaged in manufacturing, and others are active in research and development. Although this diversification may not maximize the area's lodging demand, it does tend to stabilize the local economy during its various cycles. The following table outlines some of the major employers on Long Island. HVS International, Mineola, New York Market Area Analysis 24 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-1 Major Employers - -------------------------------------------------------------------------------- Number of Firm Product Employees - -------------------------------------------------------------------------------- Diocese of Rockville Center Religious Institution 12,500 North Shore Health System Medical Care 11,002 Waldbaum's Supermarket 6,500 Long Island Rail Road Transportation 6,068 Long Island Lighting Company Electricity/Gas 5,947 Long Island Jewish Medical Center Medical Care 5,880 Northrop Grumman Aerospace Manufacturers 5,000 Chemical Banking Financial Institution 4,500 King Kullen Supermarket 4,500 NYNEX Communications 4,500 Pathmark Supermarket 4,500 Chase Manhattan Financial Institution 4,000 Macy's East Merchandising 4,000 Newsday Daily Newspaper 4,000 Winthrop University Hospital Medical Care 3,350 Brookhaven National Lab Research and Development 3,200 United Parcel Service Delivery Service 3,200 Source: Long Island Almanac 1996 - -------------------------------------------------------------------------------- As illustrated in the preceding table, Northrop Grumman, a major defense contractor, is currently the area's seventh-largest employer. In the late 1980s and early 1990s, Grumman was the largest firm on Long Island, employing more than 19,000 people. Cutbacks have occurred since that time as a result of the end of the Cold War and pressures to reduce the federal deficit. It is difficult to quantify the number of jobs lost at the small supply and distribution companies that relied on Grumman for a majority of their business. In early March, 1994, the Martin Marietta Corporation of Bethesda, Maryland, announced that it would purchase Grumman for approximately $55 per share of stock. Within the week, Northrop, which is based in Los Angeles, indicated that it would better Martin Marietta's offer and would pay approximately $60 per share. Grumman did not solicit a takeover bid from Northrop, preferring instead to be bought by Martin Marietta. However, Martin Marietta would not raise its offer of $55 a share. Northrop eventually raised its final offer to $62, and officially acquired Grumman on April 15, 1994. Reports indicate that the existing Grumman facilities will remain on Long Island, and current employment levels are believed to be stable. However, future changes in defense spending could affect this employment sector. HVS International, Mineola, New York Market Area Analysis 25 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Office Space Office space in Suffolk County is concentrated primarily along the Route 110 corridor in Melville and along Veterans Memorial Highway and Motor Parkway in Hauppauge. Other areas of Suffolk County with a relatively high concentration of office space include Commack and Smithtown. Most of the companies that occupy office space in Suffolk County are local firms or branch offices of regional and national organizations. There was more office development on Long Island in the 1980s than in all other decades combined. Cushman and Wakefield divides the Suffolk County office market into the western and central districts; the subject property is located in central Suffolk, which recorded a year-end 1995 inventory of 3,034,503 square feet. The countywide office supply was estimated at 7,936,890 square feet at the end of 1994, and the Long Island total was 26,039,938 square feet. The office space vacancy rate for Long Island stood at 15.9% at the end of 1995, and Suffolk County registered a vacancy rate of 16.3%. Office space totaling approximately 36,000 square feet is under construction in Suffolk County, which is the first new development of this type in either Suffolk or Nassau County since 1992. Industrial Space The Hauppauge area contains Long Island's greatest concentration of industrial space. The following table outlines the ten largest industrial parks in Nassau and Suffolk Counties. ================================================================================ Table 4-2 Major Long Island Industrial Parks - -------------------------------------------------------------------------------- Square Park Name Town County Footage Acreage - -------------------------------------------------------------------------------- Heartland Executive Park Hauppauge Suffolk 4,000,000 242 Crossways/Gateways Woodbury Nassau 3,025,000 217 Marcus Blvd. Hauppauge Nassau 1,800,000 150 Heartland Business Center Edgewood Suffolk 1,640,000 301 Racanelli Industrial Park Hauppauge Suffolk 1,600,000 140 Vanderbilt Industril Park Hauppauge Suffolk 1,470,000 100 Freeport Industrial Park Freeport Nassau 1,454,000 44 Airport International Plaza Bohemia Suffolk 1,400,000 200 Price Parkway Farmingdale Nassau 1,360,000 70 MacArthur Centers I & II Ronkonkoma Suffolk 1,250,000 91 Source: 1996 Long Island Almanac - -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 26 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Highway Traffic The amount of traffic passing through a market area can have a direct impact on commercial and leisure demand and an indirect effect on meeting and group demand. The subject property occupies a prominent location adjacent to the Long Island Expressway and Vanderbilt Motor Parkway. Representatives of the New York State Department of Transportation indicate that traffic counts on exits of the Long Island Expressway are not maintained every year, but are taken only when requested. The most recent traffic count at Exit 53, near the subject property, was taken in 1989. At that time, eastbound traffic between Vanderbilt Motor Parkway and Wicks Road totaled 78,218, and westbound traffic count was recorded at 77,802 vehicles. On the stretch between the Sagtikos State Parkway and Wicks Road, at Exit 53, eastbound traffic was 72,290 and westbound traffic was 68,700. Because these statistics are somewhat dated, they have been given minimal weight in our analysis. Airport Traffic Airport passenger counts are important indicators of lodging demand. Depending on the type and location of a particular airfield, a sizable percentage of arriving passengers may have need for hotel accommodations. Trends showing changes in passenger counts also reflect local business activity and the overall economic health of the area. The subject property is located within an approximate 20-minute drive of Long Island MacArthur Airport in Ronkonkoma. This regional air facility is served by American, USAir, and several commuter carriers. MacArthur's popularity has increased in recent years as more businesses have moved to Suffolk County and congestion at the New York City airports has intensified. Most of the passengers who use MacArthur Airport are local residents or commercial travelers visiting firms in Suffolk County. The following table illustrates historical passenger activity trends at this facility. HVS International, Mineola, New York Market Area Analysis 27 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-3 Total Passenger Activity - Long Island MacArthur Airport - -------------------------------------------------------------------------------- Commuter Percent Major Percent Total Percent Year Airlines Change Air Carriers Change Activity Change - -------------------------------------------------------------------------------- 1985 137,122 --- 696,029 --- 833,151 --- 1986 102,594 (25.2)% 849,073 22.0 % 951,667 14.2% 1987 186,949 82.2 1,009,329 18.9 1,196,278 25.7 1988 179,521 (4.0) 1,040,858 3.1 1,220,379 2.0 1989 205,072 14.2 883,338 (15.1) 1,088,410 (10.8) 1990 330,074 61.0 838,821 (5.0) 1,168,895 7.4 1991 331,479 0.4 859,426 2.5 1,190,905 1.9 1992 411,478 24.1 790,755 (8.0) 1,202,233 1.0 1993 374,550 (9.0) 797,130 0.8 1,171,680 (2.5) 1994 350,576 (6.4) 886,750 11.2 1,237,326 5.6 Avg. Annual Comp. Change, 1985-1994 11.0 % 2.7 % 4.5 1990-1994 1.5 1.4 1.4 Source: Long Island MacArthur Airport - -------------------------------------------------------------------------------- Leisure Travel Although beaches and other attractions are available in the subject property's area, leisure travel does not contribute a large percentage of local hotel demand. Most leisure travel to Long Island consists of day trips rather than overnight stays, and the areas that do attract a significant amount of leisure-oriented lodging demand are located on the eastern tip of the island. Tourist attractions on Long Island include the Animal Farm, which offers a petting farm and pony rides; the Brookhaven National Laboratory, which features an exhibit center and science museum; the Cold Spring Harbor Fish Hatchery; the Fire Island Lighthouse; the Hamptons, a seaside resort community; local wineries such as Hargrave Vineyards, where tours and wine tastings are available; the children's zoo at the Long Island Game Farm; Sagamore Hill, the former home of Theodore Roosevelt; and the Shrine of Our Lady of the Island, a religious sanctuary. Numerous state and county parks are located across the island, and many offer swimming and ice skating. Golf is available at 113 private and public courses, there are bicycle trails in numerous locations, and camping, boating, and fishing are popular recreational activities. Small game hunting is permitted in season. HVS International, Mineola, New York Market Area Analysis 28 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Conclusion Our review of various economic and demographic data indicates that the local economy experienced strong growth during the early to mid-1980s, which became more moderate later in the decade. Projections indicate that an economic recovery is underway, but the market is approaching a point of stabilization. Although these trends suggest that local lodging demand will not increase as dramatically as it did during the 1980s, slight gains are anticipated. The following table summarizes the economic and demographic trends discussed throughout this section. All figures that reflect dollar amounts have been adjusted for inflation, and thus reflect real change. HVS International, Mineola, New York Market Area Analysis 29 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-4 Economic and Demographic Data for the Subject Property's Market Area - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------------------------------ Long-Term Historical Population (+000) Suffolk County 1980-1995 1,285.7 1,352.8 0.3 % Nassau-Suffolk MSA 1980-1995 2,606.8 2,652.7 0.1 New York-North New Jersey-Long Island CMSA 1980-1995 18,844.2 19,725.4 0.3 State of New York 1980-1995 17,566.4 18,195.7 0.2 United States 1980-1995 227,225.6 262,791.0 1.0 Short-Term Historical Population (+000) Suffolk County 1990-1995 1,322.6 1,352.8 0.5 Nassau-Suffolk MSA 1990-1995 2,608.7 2,652.7 0.3 New York-North New Jersey-Long Island CMSA 1990-1995 19,470.4 19,725.4 0.3 State of New York 1990-1995 18,002.3 18,195.7 0.2 United States 1990-1995 249,401.4 262,791.0 1.1 Projected Population (+000) Suffolk County 1995-2000 1,352.8 1,370.1 0.3 Nassau-Suffolk MSA 1995-2000 2,652.7 2,657.2 0.0 New York-North New Jersey-Long Island CMSA 1995-2000 19,725.4 19,827.7 0.1 State of New York 1995-2000 18,195.7 18,314.7 0.1 United States 1995-2000 262,791.0 274,758.4 0.9 Long-Term Historical Retail Sales (+000,000) Suffolk County 1980-1995 7,258.8 9,878.1 2.1 Nassau-Suffolk MSA 1980-1995 17,537.0 22,328.1 1.6 New York-North New Jersey-Long Island CMSA 1980-1995 105,476.9 127,771.9 1.3 State of New York 1980-1995 91,865.8 108,055.2 1.1 United States 1980-1995 1,340,768.9 1,765,826.1 1.9 Short-Term Historical Retail Sales (+000,000) Suffolk County 1990-1995 9,277.6 9,878.1 1.3 Nassau-Suffolk MSA 1990-1995 20,977.4 22,328.1 1.3 New York-North New Jersey-Long Island CMSA 1990-1995 120,093.1 127,771.9 1.2 State of New York 1990-1995 101,720.0 108,055.2 1.2 United States 1990-1995 1,557,380.2 1,765,826.1 2.5 Projected Retail Sales (+000,000) Suffolk County 1995-2000 9,878.1 10,005.7 0.3 Nassau-Suffolk MSA 1995-2000 22,328.1 22,334.3 0.0 New York-North New Jersey-Long Island CMSA 1995-2000 127,771.9 128,377.0 0.1 State of New York 1995-2000 108,055.2 108,691.5 0.1 United States 1995-2000 1,765,826.1 1,846,830.4 0.9 Long-Term Historical Retail Sales per Capita Suffolk County 1980-1995 5,645.7 7,301.9 1.7 Nassau-Suffolk MSA 1980-1995 6,727.4 8,417.1 1.5 New York-North New Jersey-Long Island CMSA 1980-1995 5,597.3 6,477.5 1.0 State of New York 1980-1995 5,229.6 5,938.5 0.9 United States 1980-1995 5,900.6 6,719.5 0.9
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 30 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-4 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------------------------------ Short-Term Historical Retail Sales per Capita Suffolk County 1990-1995 7,014.7 7,301.9 0.8 % Nassau-Suffolk MSA 1990-1995 8,041.4 8,417.1 0.9 New York-North New Jersey-Long Island CMSA 1990-1995 6,168.0 6,477.5 1.0 State of New York 1990-1995 5,650.4 5,938.5 1.0 United States 1990-1995 6,244.5 6,719.5 1.5 Projected Retail Sales per Capita Suffolk County 1995-2000 7,301.9 7,302.7 0.0 Nassau-Suffolk MSA 1995-2000 8,417.1 8,405.2 (0.0) New York-North New Jersey-Long Island CMSA 1995-2000 6,477.5 6,474.6 (0.0) State of New York 1995-2000 5,938.5 5,934.6 (0.0) United States 1995-2000 6,719.5 6,721.7 0.0 Long-Term Historical Eating and Drinking Place Sales (+000,000) Suffolk County 1980-1995 549.1 828.2 2.8 Nassau-Suffolk MSA 1980-1995 1,362.0 1,821.9 2.0 New York-North New Jersey-Long Island CMSA 1980-1995 10,199.7 13,183.6 1.7 State of New York 1980-1995 9,199.4 11,882.1 1.7 United States 1980-1995 126,131.6 185,035.4 2.6 Short-Term Historical Eating and Drinking Place Sales (+000,000) Suffolk County 1990-1995 725.6 828.2 2.7 Nassau-Suffolk MSA 1990-1995 1,676.7 1,821.9 1.7 New York-North New Jersey-Long Island CMSA 1990-1995 12,105.4 13,183.6 1.7 State of New York 1990-1995 10,874.1 11,882.1 1.8 United States 1990-1995 161,197.4 185,035.4 2.8 Projected Eating and Drinking Place Sales (+000,000) Suffolk County 1995-2000 828.2 868.6 1.0 Nassau-Suffolk MSA 1995-2000 1,821.9 1,866.8 0.5 New York-North New Jersey-Long Island CMSA 1995-2000 13,183.6 13,497.4 0.5 State of New York 1995-2000 11,882.1 12,228.3 0.6 United States 1995-2000 185,035.4 199,127.3 1.5 Long-Term Historical Eating and Drinking Place Sales per Capita Suffolk County 1980-1995 427.1 612.2 2.4 Nassau-Suffolk MSA 1980-1995 522.5 686.8 1.8 New York-North New Jersey-Long Island CMSA 1980-1995 541.3 668.4 1.4 State of New York 1980-1995 523.7 653.0 1.5 United States 1980-1995 555.1 704.1 1.6 Short-Term Historical Eating and Drinking Place Sales per Capita Suffolk County 1990-1995 548.6 612.2 2.2 Nassau-Suffolk MSA 1990-1995 642.7 686.8 1.3 New York-North New Jersey-Long Island CMSA 1990-1995 621.7 668.4 1.5 State of New York 1990-1995 604.0 653.0 1.6 United States 1990-1995 646.3 704.1 1.7
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 31 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-4 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------------------------------ Projected Eating and Drinking Place Sales per Capita Suffolk County 1995-2000 612.2 633.9 0.7 % Nassau-Suffolk MSA 1995-2000 686.8 702.6 0.5 New York-North New Jersey-Long Island CMSA 1995-2000 668.4 680.7 0.4 State of New York 1995-2000 653.0 667.7 0.4 United States 1995-2000 704.1 724.7 0.6 Long-Term Historical Personal Income (+000,000) Suffolk County 1980-1995 19,196.0 26,820.4 2.3 Nassau-Suffolk MSA 1980-1995 46,050.4 61,056.6 1.9 New York-North New Jersey-Long Island CMSA 1980-1995 316,226.9 439,766.7 2.2 State of New York 1980-1995 268,310.1 358,297.4 1.9 United States 1980-1995 3,163,874.0 4,443,243.2 2.3 Short-Term Historical Personal Income (+000,000) Suffolk County 1990-1995 25,737.0 26,820.4 0.8 Nassau-Suffolk MSA 1990-1995 60,694.9 61,056.6 0.1 New York-North New Jersey-Long Island CMSA 1990-1995 427,531.9 439,766.7 0.6 State of New York 1990-1995 349,724.3 358,297.4 0.5 United States 1990-1995 4,051,714.6 4,443,243.2 1.9 Projected Personal Income (+000,000) Suffolk County 1995-2000 26,820.4 30,003.8 2.3 Nassau-Suffolk MSA 1995-2000 61,056.6 66,527.7 1.7 New York-North New Jersey-Long Island CMSA 1995-2000 439,766.7 472,116.9 1.4 State of New York 1995-2000 358,297.4 382,633.9 1.3 United States 1995-2000 4,443,243.2 4,972,219.5 2.3 Long-Term Personal Income per Capita Suffolk County 1980-1995 14,930.0 19,826.0 1.9 Nassau-Suffolk MSA 1980-1995 17,666.0 23,017.0 1.8 New York-North New Jersey-Long Island CMSA 1980-1995 16,781.0 22,294.0 1.9 State of New York 1980-1995 15,274.0 19,691.0 1.7 United States 1980-1995 13,924.0 16,908.0 1.3 Short-Term Historical Personal Income per Capita Suffolk County 1990-1995 19,459.0 19,826.0 0.4 Nassau-Suffolk MSA 1990-1995 23,267.0 23,017.0 (0.2) New York-North New Jersey-Long Island CMSA 1990-1995 21,958.0 22,294.0 0.3 State of New York 1990-1995 19,427.0 19,691.0 0.3 United States 1990-1995 16,246.0 16,908.0 0.8 Projected Personal Income per Capita Suffolk County 1995-2000 19,826.0 21,898.0 2.0 Nassau-Suffolk MSA 1995-2000 23,017.0 25,037.0 1.7 New York-North New Jersey-Long Island CMSA 1995-2000 22,294.0 23,811.0 1.3 State of New York 1995-2000 19,691.0 20,892.0 1.2 United States 1995-2000 16,908.0 18,097.0 1.4
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 32 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-4 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------------------------------ Long-Term Historical Employment - Suffolk County (+000) Farming 1980-1995 3.4 2.3 (2.6)% Agricultural Services 1980-1995 6.2 7.3 1.0 Mining 1980-1995 0.6 0.3 (4.9) Construction 1980-1995 21.8 36.2 3.4 Manufacturing 1980-1995 84.3 74.6 (0.8) Transportation, Communications, & Public Utilities 1980-1995 20.4 26.6 1.8 Total Trade 1980-1995 104.8 143.2 2.1 Wholesale 1980-1995 24.5 39.1 3.2 Retail 1980-1995 80.2 104.1 1.7 Finance, Insurance, & Real Estate 1980-1995 37.4 47.3 1.6 Services 1980-1995 104.1 199.3 4.4 Total Government 1980-1995 98.3 99.1 0.1 Federal Civilian 1980-1995 11.2 10.9 (0.2) Federal Military 1980-1995 4.0 3.9 (0.2) State & Local 1980-1995 83.1 84.3 0.1 Total 1980-1995 481.2 636.2 1.9 Short-Term Historical Employment - Suffolk County (+000) Farming 1990-1995 2.3 2.3 (0.1) Agricultural Services 1990-1995 6.9 7.3 1.0 Mining 1990-1995 0.3 0.3 (4.0) Construction 1990-1995 39.4 36.2 (1.6) Manufacturing 1990-1995 87.2 74.6 (3.1) Transportation, Communications, & Public Utilities 1990-1995 25.5 26.6 0.9 Total Trade 1990-1995 142.8 143.2 0.1 Wholesale 1990-1995 36.4 39.1 1.5 Retail 1990-1995 106.4 104.1 (0.4) Finance, Insurance, & Real Estate 1990-1995 47.9 47.3 (0.2) Services 1990-1995 176.3 199.3 2.5 Total Government 1990-1995 103.9 99.1 (0.9) Federal Civilian 1990-1995 11.9 10.9 (1.8) Federal Military 1990-1995 4.4 3.9 (2.5) State & Local 1990-1995 87.6 84.3 (0.8) Total 1990-1995 632.5 636.2 0.1
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 33 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-4 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------------------------------ Projected Employment - Suffolk County (+000) Farming 1995-2000 2.3 2.1 (1.1)% Agricultural Services 1995-2000 7.3 6.9 (1.0) Mining 1995-2000 0.3 0.3 0.4 Construction 1995-2000 36.2 37.3 0.6 Manufacturing 1995-2000 74.6 77.0 0.6 Transportation, Communications, & Public Utilities 1995-2000 26.6 28.0 1.0 Total Trade 1995-2000 143.2 150.3 1.0 Wholesale 1995-2000 39.1 45.0 2.8 Retail 1995-2000 104.1 105.4 0.2 Finance, Insurance, & Real Estate 1995-2000 47.3 50.8 1.4 Services 1995-2000 199.3 215.5 1.6 Total Government 1995-2000 99.1 102.1 0.6 Federal Civilian 1995-2000 10.9 11.2 0.6 Federal Military 1995-2000 3.9 3.9 0.2 State & Local 1995-2000 84.3 87.0 0.6 Total 1995-2000 636.2 670.4 1.1
- -------------------------------------------------------------------------------- In later sections of this economic study and appraisal, we will relate these historical and projected growth trends to specific market segments based on their propensity to reflect changes in room night demand in the subject property's area. HVS International, Mineola, New York Overview of External Forces 34 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 5. Overview of External Forces Affecting the U.S. Lodging Industry Introduction Hotel ownership is ultimately the business of creating and enhancing value. To understand the investment potential of lodging facilities, investors must be thoroughly aware of the many forces that can cause changes in the value of their properties. Although some of these forces are internal (such as the layout and design of the facilities, the quality of management, and the condition of the property), others are external (such as the local economic environment and the competitive nature of the market). The risk associated with hotel investment lies largely with the external forces that are beyond the control of ownership and contribute to the variability of future income flows. Investors and appraisers can project financial results by evaluating the historical impact of external forces on hotel values. Successful hotel investors seek opportunities where the risk of external forces can be minimized, thus reducing the uncertainty associated with income expectations. When investors engage in due diligence prior to acquiring a lodging facility, they are primarily interested in trends affecting a limited geographic market area, such as a town, city, or county. A broader overview takes into account national and international travel patterns and trends. An understanding of the general characteristics of the United States hotel market is important because these trends often foreshadow economic and demographic changes in smaller areas. This section of the appraisal will present an overview of the U.S. lodging industry by tracing many of the forces that influence hotel values. Historical economic and demographic data, and industry statistics will be analyzed to provide a basis for projections. Forecasts will be evaluated to determine their reasonableness. The conclusions represent another set of criteria that hotel investors consider in making their acquisition decisions. HVS International, Mineola, New York Overview of External Forces 35 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The Supply and Demand Relationship Most business ventures are influenced by the relationship between supply and demand. In the hotel industry, supply refers to the number of units. A unit consists of one or more rooms and represents the smallest accommodation that can be rented to a guest. Each unit must have a full bath and its own entrance to a public hallway or the building exterior. Demand refers to a room night, which is one unit that is occupied for one night. The supply and demand relationship has a significant influence on a hotel's occupancy and/or average room rate. Occupancy is calculated by dividing the number of rooms that are occupied for a specific period by the total number of rooms that are available during the same period. Average room rate is determined by dividing the total rooms revenue achieved during a specific period by the number of rooms occupied during that period; it also represents the weighted average of all the room rates charged during that period. In a market where demand is increasing faster than supply, occupancies rise and average rate growth generally exceeds inflation. When supply is increasing faster than demand, occupancies fall and average rates typically remain level or decline. Hotels generate revenue based on occupancy and average rate, and thus the supply and demand relationship is an important factor in analyzing profits and value. Hotel occupancy levels have shown definite cycles that reflect the balance between supply and demand. The early 1970s marked the beginning of a hotel building boom reminiscent of the 1920s. Many factors contributed to this expansion, but the two main elements were readily available financing and aggressive chains that were eager to sell franchises. The new construction during the 1970s was made possible by the enormous amount of financing generated by all lenders, particularly real estate investment trusts (REITs). These high-leverage finance companies were created to allow small investors to participate in real estate mortgages and equities. The concept was quickly accepted by Wall Street, and soon billions of dollars were available to finance real estate projects. Many lenders became so overwhelmed with new money that their underwriting procedures broke down and some marginal developments were approved. During the late 1960s and early 1970s, hotel companies actively expanded their chains through franchising. Franchising was a source of new capital, allowing hotel companies to grow and achieve national recognition using the franchisee's financial investment in individual properties. Some franchisors, eager to demonstrate sustained growth and establish a national HVS International, Mineola, New York Overview of External Forces 36 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= presence, employed questionable marketing tactics to sell new franchises. Salespeople were often compensated based on the number of franchises sold, so there was little incentive to discourage developers from investing in poor locations and overbuilt markets. Many lenders and hostelry developers were led to believe that a national franchise would guarantee a successful operation. The combination of readily available financing and aggressive hotel chains eager to sell franchises resulted in overbuilding and development of many poorly located, undercapitalized hostelries managed by inexperienced owners. The bubble burst on the lodging industry when inflation caused construction costs and interest rates to escalate. The 1974 energy crisis drastically reduced travel, and the accompanying recession curtailed business trips, conferences, and conventions. Operators of marginal properties quickly fell behind in their mortgage payments, and lenders were forced to foreclose. As lenders became hostelry owners, they either organized work-out departments headed by experienced hoteliers or engaged professional hotel management companies to assume operational responsibilities. Sales data indicate that lenders who were looking for quick sales to remove nonperforming hotel assets from their books had to lower their prices substantially to attract all-cash buyers. Lenders who were willing to hold on to foreclosed hotels and employ professional management to reposition and improve the properties' operation were generally able to recoup their original investments in three to five years, once the industry began to recover. However, even lenders who repositioned their hotels had to take back favorable purchase-money financing to sell the properties because money from other sources was not available. History has shown that during economic downturns, hotel values generally do not fall in proportion to the properties' declining incomes. Sellers, and particularly lenders who take back hotels through foreclosure, are often unwilling to sell at substantially reduced prices. They are more likely to wait out the downward cycle and dispose of their assets when the market begins to rebound. Thus, appraisers can best reflect market behavior by projecting a facility's net income to a point of recovery and applying the proper discounted cash flow procedure over that time period. The late 1970s was a period of relative calm for the lodging industry. Because most lenders were recovering from the financial wounds inflicted by HVS International, Mineola, New York Overview of External Forces 37 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= the 1975 recession, they had little interest in making hotel mortgages. New construction was restrained, and primarily consisted of additions to existing properties and the development of some large, downtown hotels oriented toward the commercial and convention markets. The rebirth of center-city hostelries was a direct result of fuel shortages and the availability of government financing for inner-city redevelopment projects. Highway-oriented properties, on the other hand, were adversely affected by escalating gasoline prices and decreased automobile travel, and these lodging facilities lost some of their appeal among investors and hotel companies. Decreased building activity, the normal retirement of older hostelries from the market, and an improving economy created a favorable supply and demand relationship and record-high occupancy levels from 1979 to 1980. Average room rates increased rapidly as operators took advantage of the excess demand to recoup earlier losses and keep up with inflation. After the decline in hotel development during the late 1970s, the environment appeared suitable for a period of renewed expansion. However, the Federal Reserve tightened the money supply in the early 1980s, sending the prime interest rate up to double-digit levels. Most of the projects that were in the preliminary planning stages but lacked sensible financing were put on hold. Fiscal policy and declining energy prices eventually reduced the national inflation rate. This caused a decline in hotel interest rates beginning in 1983, and suddenly massive amounts of capital were available for real estate investments. Hotel developers who had been out of the market since the mid-1970s rushed to initiate new projects. They were aided by several major real estate development incentives: high occupancies and escalating room rates, readily available debt and equity financing, and unique income tax benefits designed to stimulate the national economy out of a recession. During the early 1980s, trends were generally favorable for new hotel development. Although the recession caused a decline in lodging demand, many markets showed relatively high occupancy levels. Room rates were usually able to keep up with inflation, and the travel industry was expected to boom as a result of a recovering economy. Franchise sellers signed up new prospects aggressively, using product segmentation to justify the saturation of a market with a common brand. HVS International, Mineola, New York Overview of External Forces 38 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Financing was readily available from the savings and loan industry. Following deregulation, these banks were permitted to lend on commercial real estate, such as hotels. Although savings and loans had experience in making loans on single-family homes, few had expertise with commercial properties, and fewer still with hotels. The result was almost identical to the real estate investment trust fiasco the decade before: loan underwriting and administration were inept and sometimes nonexistent, the number of loans made seemed more important than the quality of the real estate and the integrity of the borrower, and short-term funds were often used to finance long-term mortgages. In the early 1990s, the industry suffered the consequences of this lending spree: most major hotel markets became severely overbuilt and many savings and loans went out of business. Another factor contributing to hotel development in the 1980s was the very favorable treatment provided by income tax regulations. By carefully structuring hotel syndications to take advantage of all available tax benefits, investors could virtually recoup their total cash outlay in the first year and reap additional benefits in the future regardless of the economic success of the underlying asset. Because there was little incentive to justify a transaction's economics (i.e., cash flow and reversionary benefits), a number of syndicators overpaid for hotel properties, took out usurious fees, and overloaded their hotels with debt. A change in the tax law in the mid-1980s eliminated many of the benefits associated with hotels, but the overbuilding in most markets was either in progress or had already taken place. By the end of the 1980s, the abuses of the savings and loans had become apparent, but it was too late to reverse the overbuilding. Between 1985 and 1990, approximately 556,000 rooms were added to the U.S. hotel supply. The national economy entered another recession in 1990, and this factor (coupled with overbuilding and the Persian Gulf War in 1991) caused the national hotel occupancy rate to bottom out at 60.9%. In some markets, hotel occupancies were as low as 35%. This supply and demand imbalance was almost identical to the situation in the 1970s that led to numerous hotel failures. As in the REIT days, the number of non-performing loans reached record levels, and lenders moved to a work-out mode of operation in order to foreclose and restructure their hotel investments. Many of the savings and loans were taken over by the government and their hotel assets were sold at auction. HVS International, Mineola, New York Overview of External Forces 39 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= According to the American Council of Life Insurance, which represents major life insurance companies, the number of delinquent hotel loans and the number of hotel loans in foreclosure peaked in 1991. This trend is undergoing a reversal as the U.S. lodging industry begins to recover. Loan restructuring was an attractive alternative to foreclosure during this period, and the number of loans in good standing with restructured terms almost doubled. By 1993, new hotel construction had declined significantly. Lenders, trying to get out from under problematic hotel portfolios, curtailed all real estate lending and would not even consider hotels. The tax benefits associated with lodging facilities had been reduced significantly, and passive investors left the hospitality market entirely. The slowdown in the growth of supply had a beneficial impact on occupancy levels, which started to recover in 1992. Improved occupancies are expected to continue through the late 1990s as increases in lodging demand outpace growth in supply. Beginning in 1991, many lenders and the Resolution Trust Corporation (RTC) sold their oldest and least desirable hotels at liquidation prices. Because virtually no third-party financing was available, most lenders were forced to take back purchase-money mortgages at favorable terms in order to sell these properties without suffering massive write-downs. The newer and more desirable hotels were not put on the market, because their lenders/owners were waiting for values to recover. This course of action significantly reduced the number of transactions involving good-quality lodging facilities. The following table shows the volume of hotel transactions exceeding $10,000,000 between 1990 and 1995. ================================================================================ Table 5-1 Summary of Major Hotel Transactions - --------------------------------------------------------------------------------
Year 1991 1992 1993 1994 - ----------------------------------------------------------------------------------------- Number of Transactions 52 41 40 83 Number of Rooms 15,806 17,219 15,825 30,452 Total Price $1,375,122,000 $1,084,797,000 $1,171,050,000 $2,314,352,000 Average Price Per Room $ 87,000 $ 63,000 $ 74,000 $ 76,000
Source: Hospitality Valuation Services - -------------------------------------------------------------------------------- HVS International, Mineola, New York Overview of External Forces 40 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= In 1991, there were only 54 major hotel sales recorded. This number increased to 67 in 1992 and declined to 52 in 1993, then rose dramatically in 1994 and 1995. During the low-volume years, many sellers remained on the sidelines waiting for values to increase before placing their properties on the market. The jump in 1994 is attributable to a number of factors, including the greater availability of mortgage funds, a return of institutional investors to the market, and a resurgence of investor interest in lodging facilities. The profile of typical hotel buyers has changed somewhat. During the mid-1980s, when tax-driven syndication's were popular, many hotels were purchased by passive investors who hired management companies to operate their properties. These owners had little involvement in day-to-day management decisions, which occasionally led to poor management and financial losses. Today, most buyers of major hotels are owner-operators who bring with them both the acquisition funds (usually from a joint venture partner) and management expertise. We also note that real estate investment trusts (REITs) and public hotel companies (C-Corps) are actively acquiring hotels using funds from public equity stock offerings. The supply of new hotel rooms is expected to increase slowly during the next several years. Lenders are beginning to return to the market, and are making some hotel loans based on conservative criteria. Initially, mortgage funds were available mainly to the budget and economy lodging sectors, for the purpose of refinancing existing properties or assisting buyers in acquisitions. Now, a number of lenders are willing to finance new construction for these small, low-end properties. Although financing is also becoming available for the acquisition of large, full-service hotels, very little has been allocated for new construction. At present, active hotel lenders are not necessarily traditional banks and insurance companies, but may include credit companies and Wall Street securities firms. A number of hotel owners and developers are now constructing budget and economy hotels; a few are planning more upscale, full-service properties. Most lenders are taking a conservative approach to new hotel loans, which should limit new development to those projects that demonstrate true economic feasibility. As a result, severe short-term overbuilding is unlikely. HVS International, Mineola, New York Overview of External Forces 41 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Room Rates The supply and demand relationship has a direct impact on hotel occupancies and an indirect influence on room rate growth. Between 1978 and 1995, hotel room rates increased at an average annual compounded rate of almost 6%. Significant rate growth was recorded during the late 1970s and early 1980s as a result of strong occupancies (70%'s) coupled with a high monetary inflation rate (14%). In recent years, room rate growth slowed as a result of low occupancies and a drop in inflation. Hotel room rates generally increase faster than the Consumer Price Index (CPI) when occupancies are strong or moving upward. When occupancies are low or declining, room rate growth tends to lag behind the CPI; in some cases, rates may remain flat or actually drop. The following table compares the historical and projected annual increase in hotel room rates in the United States to the change in the national CPI. HVS International, Mineola, New York Overview of External Forces 42 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 5-2 Percent Change in Average Room Rates Versus CPI - U.S. Hotels - -------------------------------------------------------------------------------- Consumer Price Hotel Room Rate Index Hotel Year Percent Change Percent Change Occupancy - -------------------------------------------------------------------------------- 1973 4.2 % 6.2 % 70.2 % 1974 7.6 11.0 64.0 1975 7.3 9.1 63.7 1976 8.2 5.7 65.8 1977 8.1 6.5 67.3 1978 14.0 7.7 69.2 1979 17.0 11.3 71.9 1980 15.2 13.5 70.6 1981 10.0 10.3 67.9 1982 6.5 6.2 66.7 1983 5.1 3.2 64.4 1984 6.9 4.3 64.0 1985 4.6 3.6 63.1 1986 3.2 1.9 62.5 1987 3.6 3.6 61.9 1988 3.6 4.1 62.3 1989 3.5 4.8 63.2 1990 3.0 5.4 62.4 1991 0.6 4.2 60.9 1992 1.4 3.0 62.1 1993 2.8 3.0 63.1 1994 4.8 2.6 64.7 1995 4.8 2.8 65.5 1996 5.0 3.0 66.0 1997 5.5 3.5 67.0 1998 6.0 4.0 68.0 1999 5.5 4.0 68.0 Source: Smith Travel Research & Hospitality Valuation Services - -------------------------------------------------------------------------------- This table shows two periods when hotel room rate growth failed to keep pace with the CPI. From 1973 to 1975, the hotel industry was suffering from overbuilding related to real estate investment trusts, a recession, and a downturn in travel caused by the oil embargo. The second period of slow room rate growth occurred between 1988 and 1993, when the industry was again affected by overbuilding and a weak economy. The table illustrates that during periods of prosperity, room rates are a good hedge against inflation; this was true even when the CPI increased at double-digit levels. HVS International, Mineola, New York Overview of External Forces 43 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The projections indicate a strong recovery of room rates as the relationship between supply and demand becomes more favorable. Growth is expected to peak in 1998 at 6%, which is significantly higher than the projected gain in the CPI. This may appear high, but a similar trend occurred in 1978, when room rates rose 14.0% and the CPI increased by only 7.7%. Hotels are unique because their room rates can be adjusted at any time. Unlike office space, where rents are typically negotiated for a five-year period, hotel operators are free to base rates on occupancy trends. Using sophisticated yield management programs, modern lodging facilities can ride the demand curve and maximize room rates whenever the market permits. As a result, hotels generally offer significant upside potential during periods of economic prosperity. If lodging facilities can increase room rates faster than the CPI and still maintain occupancies, bottom-line profits usually escalate. If they can raise room rates and occupancy at the same time, profits will grow significantly. The opposite occurs when room rates fail to keep pace with inflation. Because market value is basically a multiple of bottom-line profits, changes caused by fluctuations in occupancy and average rate have a direct impact on value. Rooms Revenue per Available Room (RevPAR) The ability of a hotel to maximize its occupancy and room rate is measured in terms of rooms revenue per available room (RevPAR), which is the product of occupancy and average rate. Between 1978 and 1995, RevPAR in the U.S. lodging industry increased at an average annual compounded rate of approximately 5%. As in the case of average rate, most of the increase occurred during the late 1970s, when occupancies escalated rapidly. The only decline in RevPAR occurred in 1991. Trends in Hotel Sales HVS International constantly monitors hotel markets in order to collect information on sales of lodging facilities. This comprehensive database is known as the Hospitality Market Data Exchange (HMDE). The HMDE includes more than 90% of all hotel sales that took place during this period. The HMDE data shows that the number of transactions peaked at 726 in 1986. This strong activity is largely attributable to pending changes in the tax laws, which made it less favorable to own hotels. It is also possible that forward-thinking investors noted the substantial overbuilding and declining economy and decided to bail out at that time. In 1987 and 1990, the HVS International, Mineola, New York Overview of External Forces 44 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= average sales price per room peaked at $75,000. This was more than twice the 1981 average of $36,000. Following the 1990 peak, hotel prices fell rapidly as occupancies and profits were eroded by the massive number of hotel rooms entering the market. By 1991, the year of the Persian Gulf War, sales prices had fallen to $38,000 per room. Even the highest price per room declined from the record $1,195,652 (for the sale of the Bel Aire Hotel) to $251,816 in 1992. The market hit bottom in 1993 when the average sales price dropped to $36,000 per room. Prices recovered rapidly in 1994 and 1995 as investors became interested in hotels again and more full-service properties were put on the market. In 1995, the average sales price was $61,000 per room. The figures presented in the HMDE represent actual sales prices; no attempt was made to adjust for factors such as favorable or unfavorable financing, forced or liquidation sales, bankruptcy sales, foreclosures, and so forth. As a result, the average price per room does not necessarily reflect market value, which assumes a willing buyer and a willing seller. Many of the transactions that took place during the early 1990s involved unwilling sellers - usually lenders who were forced to liquidate hotel portfolios quickly at prices that were below market levels. Most hotel experts agree that a recovery is underway, and they recommend that owners hold their properties until more favorable conditions prevail. Trends in Hotel Values A more meaningful indicator of trends in hotel value is the Hotel Valuation Index (HVI), developed by HVS International. This index tracks changes in hotel values in 23 major markets and the nation as a whole. It is developed through an income approach, using market area data provided by Smith Travel Research and operational and capitalization rate information from HVS International, and is indexed to the 1986 U.S.A. value (1.0000). The following table sets forth the HVI from 1986 to 1995. HVS International, Mineola, New York Overview of External Forces 45 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 5-3 Hotel Valuation Index per Room - --------------------------------------------------------------------------------
Valuation Index Per Room ------------------------ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 ------------------------------------------------------------------------------------------------------ Honolulu 3.3571 4.0357 4.6964 5.2857 5.3214 4.7857 4.9286 4.2857 4.3929 5.6071 New Orleans 1.5357 1.7500 2.2857 2.3929 2.5000 2.6071 3.2857 3.2500 3.8929 4.4286 New York 3.5714 4.1071 4.6429 4.5357 3.9286 3.0357 2.5714 2.5714 3.1429 4.1071 San Francisco 2.5000 3.0893 3.2500 3.0714 2.9286 2.5714 2.5714 2.9643 3.2143 4.0000 Phoenix 1.2143 1.0714 1.1786 1.5357 1.4286 1.2500 1.5000 1.9643 2.3571 3.2143 San Diego 2.8571 2.3571 2.5714 2.6786 2.3929 2.5357 2.5357 2.2143 2.3571 3.0357 Miami 1.4286 1.6071 1.7321 2.1429 2.1786 2.2500 2.5714 2.7857 2.3214 2.9286 Washington, DC 2.1786 2.1786 2.4464 2.6071 2.2500 1.8571 2.0357 2.5000 2.3929 2.8929 Atlanta 1.0714 1.0179 1.0536 1.0357 1.1429 1.1250 1.2857 1.7857 2.1429 2.6786 Minneapolis 0.7321 0.6964 0.7143 0.7143 0.7857 1.0000 1.2857 1.5714 1.8214 2.1786 Chicago 1.4643 1.5000 1.5714 1.5000 1.4286 1.2143 1.2500 1.5000 1.8571 2.1786 Boston 2.3571 2.7143 2.6071 2.1429 1.8214 1.2500 1.3036 1.3214 1.6071 2.1071 Fort Lauderdale 1.4643 1.2679 1.3214 1.4286 1.4821 1.3571 1.7143 1.8929 1.6071 1.9286 Orlando 1.5000 1.6429 1.9286 2.5000 2.5357 1.8929 2.0714 1.7857 1.6071 1.8929 Denver 0.5357 0.4464 0.4643 0.4821 0.7857 0.9268 1.0357 1.3214 1.5000 1.8571 Dallas 0.5536 0.6250 0.6607 0.7321 0.7857 0.7143 0.9643 1.0357 1.3214 1.7143 USA 1.0000 0.9464 1.0536 1.1250 1.0714 0.9214 0.9929 1.1429 1.3214 1.6071 Los Angeles 2.1071 2.2857 2.3929 2.4643 2.1786 1.5714 1.0714 0.9643 1.1964 1.5000 Tampa 0.8393 0.7679 0.8571 1.1429 1.2857 1.0357 1.0714 1.0357 1.1071 1.3214 Anaheim 1.7679 1.7321 1.7500 1.8571 1.6071 1.2857 0.9642 0.9464 0.8393 1.2500 Houston 0.3571 0.4286 0.6964 0.7857 1.1071 1.1607 1.1429 1.0357 1.0000 1.1786 Philadelphia 1.4643 1.5357 1.4286 1.3214 1.0714 0.6786 0.5714 0.6071 0.7500 1.0714 Norfolk 1.1786 1.0536 0.9286 0.7857 0.6429 0.5357 0.6071 0.6429 0.7500 0.9643 Riverside 0.9643 1.2143 1.5714 1.7143 1.4643 1.2500 0.7857 0.5357 0.4286 0.5357
Source: HVS International - -------------------------------------------------------------------------------- The HVI can be used to show the value change in a particular market over time or to show the relative difference in hotel values in various cities. The following table shows the annual change in hotel values in 23 major markets and the United States as a whole. HVS International, Mineola, New York Overview of External Forces 46 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 5-4 Percent Change in the Hotel Valuation Index - --------------------------------------------------------------------------------
Annual Percent Change --------------------- '86-'87 '87-'88 '88-'89 '89-'90 '90-'91 '91-'92 '92-'93 '93-'94 '94-'95 '86-'95 --------------------------------------------------------------------------------------------------------------- Honolulu 20 % 16 % 13 % 1 % -10 % 3 % -13 % 3 % 28 % 67 % New Orleans 14 31 5 4 4 26 -1 20 14 188 New York 15 13 -2 -13 -23 -15 0 22 31 15 San Francisco 24 5 -5 -5 -12 0 15 8 24 60 Phoenix -12 10 30 -7 -13 20 31 20 36 165 San Diego -18 9 4 -11 6 0 -13 6 29 6 Miami 12 8 24 2 3 14 8 -17 26 105 Washington, DC 0 12 7 -14 -17 10 23 -4 21 33 Atlanta -5 4 -2 10 -2 14 39 20 25 150 Minneapolis -5 3 0 10 27 29 22 16 20 198 Chicago 2 5 -5 -5 -15 3 20 24 17 49 Boston 15 -4 -18 -15 -31 4 1 22 31 -11 Fort Lauderdale -13 4 8 4 -8 26 10 -15 20 32 Orlando 10 17 30 1 -25 9 -14 -10 18 26 Denver -17 4 4 63 18 12 28 14 24 247 Dallas 13 6 11 7 -9 35 7 28 30 210 USA -5 11 7 -5 -14 8 15 16 22 61 Los Angeles 8 5 3 -12 -28 -32 -10 24 25 -29 Tampa -9 12 33 12 -19 3 -3 7 19 57 Anaheim -2 1 6 -13 -20 -25 -2 -11 49 -29 Houston 20 62 13 41 5 -2 -9 -3 18 230 Philadelphia 5 -7 -8 -19 -37 -16 6 24 43 -27 Norfolk -11 -12 -15 -18 -17 13 6 17 29 -18 Riverside 26 29 9 -15 -15 -37 -32 -20 25 -44
Source: HVS International - -------------------------------------------------------------------------------- On a national basis, hotel values rose in 1988 and 1989, then declined in 1990 and dropped by 14% in 1991. A turnaround commenced in 1992, when values increased by 8%; still greater increases of 15% in 1993, 16% in 1994, and 22% in 1995 signaled that a recovery was well underway. In the case of the individual cities, it is obvious that the movement in national hotel values has been offset somewhat by trends in local markets. Between 1986 and 1995, Riverside hotels lost more than 40% of their value, while San Francisco showed a 60% increase. Anaheim, Los Angeles, and Philadelphia also suffered significant drops. Future Trends Most hotel owners, operators and lenders agree that the U.S. lodging industry has emerged from one of the worst periods since the Depression of 1929. Today, there are many indications that signal a strong recovery is underway, and most hotels have experienced a dramatic rise in profitability. Conversely, the hotel industry remains cyclical, and there are long-term trends and risk factors that could have an unfavorable impact on the operating results and investment potential of lodging facilities. The following HVS International, Mineola, New York Overview of External Forces 47 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= list summarizes the positive and negative factors that are likely to influence the U.S. lodging industry in coming years. o No significant amount of new hotel development is likely to occur during the next three to five years. Lenders stopped financing new hotels in the early 1990s because of the high rate of loan defaults, and they are only now starting to make construction loans. Although mortgage funds are available to refinance existing properties and construction loans are being made for economy hotels, mortgages for new hotels in the mid-rate, first-class, and luxury categories are still difficult to secure. This lack of financing is major barrier to entry, and will prevent a number of proposed projects from moving forward. With only a slow increase in supply, hotel occupancies should rebound as fast as the growth in demand permits. o An additional barrier to entry is the current discrepancy between market values and replacement costs for first-class and luxury hotels. In today's market, many upscale hotels are still selling for prices that are below what it would cost to develop a comparable hotel. As a result, there is little justification for building a new hotel when a similar, existing facility is available for sale at some fraction of the cost. Until the gap between market value and replacement cost narrows, there will be minimal new hotel construction in the upper-tier segments. The market values and replacement costs of budget and economy hotels have been in equilibrium for several years which is another reason why new development is proceeding in these segments. o The U.S. economy continues to improve, which suggests that more people are traveling. Many people curtailed their travel plans during the recent recession, and there is likely to be pent-up demand that will be released as consumer confidence escalates. o Minimal additions to the hotel supply coupled with growth in demand should result in further improvement in occupancies during the next several years. o As shown by the historical data, hotel room rates rise rapidly as occupancies escalate. The most frequent complaint that owners and operators had during the recent recession was their inability to achieve average rate gains. Starting in 1994, gains in hotel room rates returned to levels in excess of inflation, foreshadowing enhanced profitability. In real dollars, hotel room rates are expected to return to 1988 levels by 1998. This HVS International, Mineola, New York Overview of External Forces 48 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= is a good indication that hotel values will return to record levels in the next two to four years. o The low cost of capital is another factor that tends to enhance value. Because capitalization rates are tied directly to the price of capital, the lower the cost, the lower the cap rate and the higher the value. The cost of hotel debt capital averaged 10.5% in 1990. Today, similar financing is available at 8.5% to 9.5%. Recent hotel sales support the downward trend in capitalization rates. o Government regulations are becoming increasingly expensive for the U.S. hotel industry. A national health care policy could force small operators to provide better benefits for many more employees, particularly the part-time workers who are used extensively by hotels and restaurants. Environmental laws are becoming stricter and will require hotels to implement recycling, reuse, and conservation procedures. Congress has limited deductions for meals and entertainment expenses, which increases the cost of doing business in hotels and restaurants. Local municipalities use hotel rooms taxes as a source of revenue for general use, and the hotel rooms tax is so high in some areas that it has driven away demand. This is particularly true with respect to meetings and conventions, which can be held in cities that tax accommodations at a lower rate. o Improved technology is rapidly changing the way business is conducted. During the next decade, advances such as video communication, enhanced data transfer, and faster transportation are expected to limit the need for face-to-face meetings and shorten the time that executives are away from their offices. Commercial hotels are bound to be influenced by this trend. Conclusion Interest in hotel acquisition has increased significantly during the past several years. Buyers have concluded that future earnings trends are likely to be favorable, and the risks posed by overbuilding or an economic downturn are small. Some sellers are holding their properties until prices reach a higher level. Consequently, we believe there is pent-up desire to sell once prices begin to approach levels that allow the existing (or restructured) debt to be paid off. The fact that numerous buyers are chasing very few acquisition opportunities has had a favorable impact on recent sales prices. For buyers to be successful in this highly competitive market, their projected operating results HVS International, Mineola, New York Overview of External Forces 49 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= must take into account at least a portion of any upside created from improved performance, particularly if the improvement can be readily achieved through management efficiencies. Capitalization rates based on historical operating income have fallen during the past several years. Hotel buyers in today's market must be aggressive in all of their acquisition assumptions. As a result, hotel values in some parts of the country are approaching the levels registered during the mid-1980s, and a full recovery is expected to occur in the next two to four years. HVS International, Mineola, New York Lodging Market Supply and Demand 50 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 6. Lodging Market Supply and Demand Analysis MARKET FOR TRANSIENT ACCOMMODATIONS The market for transient accommodations is an all-encompassing term referring to the many types of travelers who use lodging facilities in a given area. These travelers represent the market's accommodated room night demand. This section will begin with an analysis of historical demand trends to determine what changes have occurred; the historical number of competitive hotel rooms will then be estimated to evaluate local supply trends. Areawide occupancy levels can be calculated based on the number of hotel rooms available in the market and the demand for lodging accommodations. The total hotel room night demand will be divided into individual market segments to allow us to forecast growth rates based on the economic and demographic data set forth earlier in this report. Historical Supply and Demand Data Smith Travel Research (STR) has compiled historical supply and demand data for the subject property and its competitors. This information is presented in the following table, along with the marketwide occupancy, average rate, and rooms revenue per available room (RevPAR). RevPAR is calculated by multiplying occupancy by average rate, and provides an indication of how well rooms revenue is being maximized. HVS International, Mineola, New York Lodging Market Supply and Demand 51 Analysis - -------------------------------------------------------------------------------- ================================================================================ Table 6-1 Historical Supply and Demand Trends (STR) - --------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 - -------------------------------------------------------------------------------------------------------------- Number of Rooms 870 870 870 870 870 870 870 Annual Guestroom Supply 317,550 317,550 317,550 317,550 317,550 317,550 317,550 Percent Change -- 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % Room Night Demand 215,616 204,502 200,057 216,887 207,043 223,873 226,096 Percent Change -- (5.2)% (2.2)% 8.4 % (4.5)% 8.1 % 1.0 % Occupancy 67.9 % 64.4 % 63.0 % 68.3 % 65.2 % 70.5 % 71.2 % Percent Change -- (5.2)% (2.2)% 8.4 % (4.5)% 8.1 % 1.0 % Average Rate $83.34 $76.57 $68.19 $67.53 $68.11 $72.46 $76.46 Percent Change -- (8.1)% (10.9)% (1.0)% 0.9 % 6.4 % 5.5 % RevPAR $56.59 $49.31 $42.96 $46.12 $44.41 $51.08 $54.44 Percent Change -- (12.9)% (12.9)% 7.4 % (3.7)% 15.0 % 6.6 %
Year-to-Date August Average Annual ----------------------- Comp. Change, 1995 1996 1989 - 1995 - -------------------------------------------------------------------- Number of Rooms 870 866 Annual Guestroom Supply 211,410 211,410 Percent Change --- 0.0 % 0.0 % Room Night Demand 149,890 153,061 Percent Change --- 2.1 % 0.8 % Occupancy 70.9 % 72.4 % Percent Change --- 2.1 % 0.8 % Average Rate $76.20 $80.20 Percent Change --- 5.2 % -1.4 % RevPAR $54.03 $58.06 Percent Change --- 7.5 % -0.6 % - -------------------------------------------------------------------------------- HVS International, Mineola, New York Lodging Market Supply and Demand 52 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= It is important to note some limitations of the STR data. Hotels are occasionally added to or removed from the sample, and not every property reports data in a consistent and timely manner; these factors can influence the overall quality of the information by skewing the results. These inconsistencies may also cause the STR data to differ from the results of our competitive survey. Nonetheless, we find that hotel buyers often rely on STR statistics, and thus they are considered relevant to this study. As the preceding table indicates, the competitive supply has remained stable since 1989. Demand fluctuated during this period, declining by 5.2% in 1990 and 2.2% in 1991; these downturns can be attributed to the regional impact of the national recession and, in 1991, the Persian Gulf War. A substantial increase of 8.4% occurred in 1992, as the economic outlook began to brighten and the area recovered from the impact of the war. This was followed by a 4.5% decrease in 1993 and an 8.1% gain in 1994. These latter trends are largely attributable to an extensive renovation of one of the secondary competitors (the Holiday Inn - MacArthur Airport), which took some rooms out of service during 1993. Year-to-date August figures indicate a 2.1% demand increase from 1995 to 1996. This is partially the result of the TWA airplane crash that occurred off the coast of Long Island in July of 1996. All of the hotels in the subject property's market experienced an increase in demand resulting from the influx of government officials and media representatives involved in the investigation of the crash. The Sheraton Long Island, which is located in the subject property's immediate vicinity, was the base of operations for the National Transportation Safety Board and the FBI, and the site of numerous press conferences. Overall, room night demand increased at an average annual compounded rate of 0.8% between 1989 and 1995, indicating a relatively stable market. As a result of the overall economic downturn and cutbacks and layoffs at many Long Island firms, the average rate of the competitive properties declined by a substantial 8.1% in 1990, and by another 10.9% in 1991. The most significant employment reductions took place at Grumman, and this company's decline had ripple effects on a vast number of other firms that had relied on its economic contribution. In 1992, the drop in average rate slowed to 1.0%. A slight increase of 0.9% was registered in 1993, followed by a more significant gain of 6.4% in 1994. The 1994 jump accompanied a strong rise in occupancy, and reflects the more aggressive rate strategy pursued by area hotel operators as demand increased. This trend continued in HVS International, Mineola, New York Lodging Market Supply and Demand 53 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 1995, when the market achieved a 5.5% increase in average rate while maintaining an overall occupancy of 71.2%. Year-to-date August figures show a further 5.2% rise in average rate from 1995 to 1996; as in the case of the occupancy increase, a substantial portion of this gain can be attributed to the TWA crash, which allowed area hotels to charge above-average room rates to government officials and members of the media. Despite the strong increases achieved in the recent years, we note that by 1995, the marketwide e average rate had recovered only to 1990 levels, and remained substantially below the 1989 average of $83.34. Overall, rate declined at an average annual compounded rate of 1.4% between 1989 and 1995. Demand Analysis Using Market Segmentation For the purpose of demand analysis, the overall market is divided into individual segments based on the nature of travel. Although a market may have various segments, the three primary classifications occurring in most areas are commercial, meeting and group, and leisure. Market segmentation is a useful procedure because individual classifications often exhibit unique characteristics in terms of growth potential, seasonality of demand, average length of stay, double occupancy, facility requirements, price sensitivity, and so forth. By quantifying the room night demand by market segment and analyzing the characteristics of each segment, the overall demand for transient accommodations can be projected. Lodging demand in Suffolk County is generated primarily by the following three market segments. Segment 1 Commercial Segment 2 Meeting and Group Segment 3 Leisure Based on our fieldwork, area analysis, and knowledge of the local lodging market, we estimate the year-end 1996 distribution of accommodated hotel room night demand as follows. HVS International, Mineola, New York Lodging Market Supply and Demand 54 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 6-2 Estimated Year-End 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- Marketwide Subject Property --------------------------- -------------------------- Accommodated Percent Accommodated Percent Market Segment Demand of Total Demand of Total - -------------------------------------------------------------------------------- Commercial 97,000 66 % 14,000 61 % Meeting and Group 20,000 14 2,000 9 Leisure 29,000 20 7,000 30 - -------------------------------------------------------------------------------- Total 146,000 100 % 23,000 100 % - -------------------------------------------------------------------------------- Commercial demand predominates in the local market, accounting for approximately 66% of the 1996 room night demand. Leisure travelers show a relatively strong presence, at approximately 20% of the market, and meeting and group demand contributes the remaining 14%. The subject property's market segmentation differs from that of the area as a whole, largely as a result of its limited function space. Moreover, the Howard Johnson accommodates a larger percentage of leisure travelers than the market as a whole, and maintains a somewhat weaker presence in the commercial segment. The property's appeal to leisure travelers is at least partly the result of its Howard Johnson affiliation. Using the distribution of accommodated hotel demand as a starting point, we will analyze the characteristics of each market segment in an effort to determine future trends in room night demand. Commercial Segment The commercial segment consists of individual businesspeople who are visiting various firms in the subject property's market, including local manufacturers, service-related firms, and light industrial facilities. Because the Howard Johnson is located at the southwestern corner of the Hauppauge Industrial Park and near the Vanderbilt Industrial Park, the Heartland Executive Park, and the Racanelli Industrial Park, a solid base of commercial demand is available. However, management reports limited success in securing this business, partly as a result of its somewhat poor reputation in the area and its Howard Johnson affiliation, which is not particularly popular among commercial travelers. Commercial demand is strongest Monday through Thursday nights, declines significantly on Friday and Saturday, and increases somewhat on Sunday. The typical length of stay ranges from one to three days, and the HVS International, Mineola, New York Lodging Market Supply and Demand 55 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= rate of double occupancy is a low 1.2 to 1.3 people per room. Commercial demand is relatively constant throughout the year, although some declines are noticeable in late December and during other holiday periods. In general, commercial travelers are not overly rate-sensitive, and will make use of a hotel's food and beverage outlets and recreational facilities. The commercial segment represents a highly desirable and lucrative market that provides a consistent level of demand at relatively high room rates. Demand potential in this segment is tied to the business and economic health of the surrounding area; although the Long Island economy exhibited a moderately favorable growth trend during the past decade, forecasts indicate a considerable slowing in the 1990s. We generally find a multiplier effect between employment growth in certain sectors and the increase in commercial lodging demand (i.e., one new FIRE employee will correspond to more than one new visitor). In conjunction with the recent trend of slower growth in the local economy, commercial demand increases have become more moderate. As the national and international economy improves and prominent local businesses increase their production and employment levels, commercial hotel demand is expected to rebound quickly. Smith Travel Research estimates that total hotel demand in the competitive market rose by 1.0% in 1995. We project that commercial demand (which comprises more than 66% of the total market) will increase by 2% in 1997 and 1998 and 1% annually in subsequent years. Meeting and Group Segment The meeting and group market includes meetings, seminars, conventions, trade association shows, and similar gatherings of ten or more people. Peak convention demand typically occurs in the spring and fall. Because of vacations, the summer months represent the slowest period for this market segment; winter demand varies. The average length of stay for typical meetings and groups ranges from three to five days. Most commercial groups meet during the weekday period of Monday through Thursday, but associations and social groups will sometimes gather on weekends. Commercial groups tend to have a low double occupancy of 1.3 to 1.5 people per room, while social groups are likely to have double occupancy rates ranging from 1.5 to 1.9. Meeting and group demand in western Suffolk County is generated primarily by local businesses, and includes small functions such as training sessions, product announcements, meetings, and seminars with between 15 and 20 attendees. Non-commercial groups such as civic associations and professional societies, which often range from 75 to 250 people, are a HVS International, Mineola, New York Lodging Market Supply and Demand 56 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= secondary demand source. Most of the meeting and group functions in western Suffolk County are held at local hotels. Because the subject property is a limited-service facility that offers only 800 square feet of meeting space, its participation in this segment is limited. Future meeting and group demand is closely related to growth in the commercial segment. Because most meetings have either a direct or an indirect business purpose, the economic considerations that have an impact on commercial travel also affect meeting and group demand. The exception is non-commercial meetings, which are tied to the economic factors that influence leisure travel. It should be noted that meetings and similar events are booked in advance, and thus growth in this segment tends to lag slightly behind increases in commercial demand. Historically, meeting and group demand in the Suffolk County market is estimated to have increased at a rate lower than the overall demand increase in the market. Given this factor and the relevant economic and demographic trends summarized earlier in this report, we forecast meeting and group demand in the subject property's market to increase by 1% in 1997 and 1998 and at 0.5% annually throughout the remainder of the projection period. Leisure Segment The leisure market segment consists of individuals and families who are spending time in the area or passing through en route to other destinations. Their travel purposes may include sightseeing, recreation, visiting friends and relatives, or numerous other non-business activities. Leisure demand is strongest Friday and Saturday nights and all week during holiday periods and the summer months. These peak periods are negatively correlated with commercial visitation, underscoring the stabilizing effect of capturing weekend and summer tourist travel. The typical length of stay ranges from one to four days, depending on the destination and travel purpose, and the rate of double occupancy generally ranges from 1.8 to 2.5 people per room. Leisure travelers tend to be the most price-sensitive segment in the lodging market. They often prefer low-rise accommodations where parking is convenient to the rooms, and they typically demand extensive recreational facilities and amenities. Ease of highway access and proximity to tourist attractions are important locational considerations. Leisure demand in the subject property's market is generated by people traveling on the Long Island Expressway to locations farther east on Long Island and individuals HVS International, Mineola, New York Lodging Market Supply and Demand 57 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= visiting Suffolk County's various attractions, including the area's beaches and wineries. Future leisure demand is related to the overall economic health of the nation. Trends showing changes in state and regional unemployment and disposable personal income often have a strong impact on non-commercial visitation. Traffic counts on nearby highways and attendance at local attractions can also form a basis for projections. Although traffic counts in the vicinity of the subject property are dated and thus do not form a solid base from which to formulate projections, Suffolk County residents enjoy relatively high disposable income levels. It should be noted, however, that the Howard Johnson is located in a commercial-oriented neighborhood that offers few leisure attractions. Based on our analysis of economic and demographic trends in the area, we project leisure demand to increase at an average annual compounded rate of 1%. Conclusion The purpose of segmenting the lodging market is to define each major type of demand, identify customer characteristics, and estimate future growth trends. Starting with an analysis of the local area, three segments were defined as representing the subject property's lodging market. Various types of economic and demographic data were then evaluated to determine their propensity to reflect changes in hotel demand. Based on this procedure, we forecast the following average annual compounded market segment growth rates. ================================================================================ Table 6-3 Average Annual Compounded Market Segment Growth Rates - -------------------------------------------------------------------------------- 1997 1998 Thereafter - -------------------------------------------------------------------------------- Commercial 2.0% 2.0% 1.0% Meeting and Group 1.0 1.0 0.5 Leisure 1.0 1.0 1.0 Annual Average 1.7% 1.7% 0.9% - -------------------------------------------------------------------------------- These growth rates will be used in subsequent sections of this study to forecast changes in lodging demand. COMPETITION An integral component of the supply and demand relationship that has a direct impact on the availability of lodging demand is the current and anticipated supply of competitive lodging facilities. The Long Island area is HVS International, Mineola, New York Lodging Market Supply and Demand 58 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= served by numerous hotels and motels, which are located throughout the region. Unlike many other suburban market areas, these properties are not concentrated in clusters, but are spread throughout the area, generally near the major highways serving Long Island. We have identified two hotels that are considered primarily competitive with the Howard Johnson. Including the subject property, these primary competitors total 374 rooms. Two additional lodging facilities are judged to be only secondarily competitive; although the facilities, rate structures, or market orientations of these hotels prevent their inclusion among the primarily competitive supply, they do compete with the subject property to some extent. The room count of each secondary competitor has been weighted to reflect the degree to which it competes with the Howard Johnson; the aggregate weighted room count of the secondary competitors is 178. Primary Competitors The following table summarizes the important operating characteristics of the primary competitors and the aggregate secondary competitors. This information was compiled from personal interviews, inspections, lodging directories, and our in-house library of operating data. The table also sets forth each property's estimated year-end 1996 penetration factors; penetration is the ratio between a specific hotel's operating results and the corresponding data for the market. If the penetration factor is greater than 100%, the property is performing better than the market as a whole; conversely, if the penetration is less than 100%, the hotel is performing at a level below the marketwide average. HVS International, Mineola, New York Lodging Market Supply and Demand 59 Analysis - -------------------------------------------------------------------------------- ================================================================================ Table 6-4 Primary Competitors and Aggregate Secondary Competitors - --------------------------------------------------------------------------------
Square Footage Estimated 1996 --------------------- Market Segmentation Estimated 1995 Meeting ----------------------- --------------------------- Year Number Meeting Space Mtg. & Average Property/Location Opened of Rooms Space per Room Comm. Group Leisure Occ. Rate RevPAR - ---------------------------------------------------------------------------------------------------------------------------------- Subject Properrty 450 Moreland Rd., Commack 1971 109 800 7 60% 10% 30% 58.1% $61.34 $35.64 Hampton Inn - Commack 680 Commack Rd., Commack 1989 144 400 3 70 10 20 83.0 75.00 62.25 Hampton Inn - Islandia 1600 Vets. Highway, Islandia 1988 121 384 3 70 10 20 75.0 75.00 56.25 - ---------------------------------------------------------------------------------------------------------------------------------- Sub-Totals and Averages 374 528 4 68% 10% 22% 73.2% $71.84 $52.55 Secondary Competitors 178 63 22 15 70.0 81.44 57.00 - ---------------------------------------------------------------------------------------------------------------------------------- Totals and Averages 552 66% 14% 20% 72.3% $74.85 $54.09 Estimated 1996 ---------------------------------------------------------- Average Occupancy Yield Property/Location Occ. Rate RevPAR Penetration Penetration - ---------------------------------------------------------------------------------------------- Subject Properrty 450 Moreland Rd., Commack 57.9% $65.00 $37.65 79.8% 64.2% Hampton Inn - Commack 680 Commack Rd., Commack 82.0 88.00 72.16 113.0 122.9 Hampton Inn - Islandia 1600 Vets. Highway, Islandia 75.0 77.00 57.75 103.3 98.4 - ---------------------------------------------------------------------------------------------- Sub-Totals and Averages 72.7% $78.99 $57.44 100.2% 97.9% Secondary Competitors 72.0 84.85 61.09 99.2 104.1 - ---------------------------------------------------------------------------------------------- Totals and Averages 72.6% $80.87 $58.70 100.0% 100.0%
- -------------------------------------------------------------------------------- [GRAPHIC OMITTED] COMPETITION MAP HVS International, Mineola, New York Lodging Market Supply and Demand 60 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Our survey shows nationally recognized chains controlling all of the rooms in the competitive market. With 109 units, the subject property is the smallest hotel in the market; the 144-room Hampton Inn - Commack is the largest. The Howard Johnson opened in 1971, and thus is also the oldest facility among the primary competitors. The Hampton Inns were constructed in 1988 and 1989; when compared to the Howard Johnson, they are more modern in appearance and feature more attractive appointments. Local lodging demand has a strong commercial orientation; we estimate that the 1996 market segmentation of the primary competitors was 68% commercial, 22% leisure, and 10% meeting and group. The three hotels are expected to achieve an overall 1996 occupancy of 72.7% at an average rate of $78.99, which yields RevPAR of $57.44. Both primary competitors were inspected and evaluated, and descriptions of our findings are presented below. Hampton Inn - Commack The 144-room Hampton Inn - Commack is located on Commack Road, off Exit 52 of the Long Island Expressway and approximately two miles west of the subject property. The hotel is highly visible from the highway, and is superior to the Howard Johnson in that respect. A freestanding Ground Round Restaurant is located immediately west of the property, and the Commack Cinema is situated to the east. Consequently, the neighborhood is also judged to be superior to that of the Howard Johnson. A vacant parcel lies immediately north of the Hampton Inn, and a service road providing access to Commack Road from the Long Island Expressway is located to the south. This service road does not provide direct access to the property, and thus guests must enter from Commack Road. The Hampton Inn is not equipped with food and beverage outlets (although guests are provided with a complimentary continental breakfast buffet). Meeting facilities consist of one small room which can accommodate approximately 35 people. Guestrooms are attractively appointed, and offer all of the amenities typically required by commercial travelers. The hotel opened in 1989 and is owned by V.I.A. Properties Associates Limited Partnership. The property benefits from its Hampton Inn affiliation, which has enabled it to sustain strong occupancy and average rate levels. As of year-end 1996, we estimate the Hampton Inn's market mix at 70% commercial, 10% meeting and groups, and 20% leisure. HVS International, Mineola, New York Lodging Market Supply and Demand 61 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Hampton Inn- Islandia The Hampton Inn - Islandia is located approximately four and one-half miles east of the subject property, at the intersection formed by Veterans Memorial Highway and the south service road of the Long Island Expressway. This location provides convenient access to local demand generators, and is comparable to that of the subject property. Like the Howard Johnson, the Hampton Inn cannot be seen from the Long Island Expressway. This 121-room hotel opened in July of 1988, and was originally owned by Concord Hotels and operated by Lane Hotels. In July of 1994, the property was purchased by Innkeepers USA Limited Partnership; JF Hotel Management is the current operator. Like the Hampton Inn - Commack, this hotel benefits its strong chain affiliation. Like the other primary competitors, the Hampton Inn is not equipped with food and beverage outlets (although guests are provided with a complimentary continental breakfast buffet). Meeting facilities consist of one small room that is the size of a typical guest unit. Guestrooms are attractively appointed, and offer all of the amenities typically required by commercial travelers. We estimate that approximately 70% of this hotel's demand is generated by the commercial segment, 10% by meetings and groups, and 20% by leisure travelers. Secondary Competitors As noted earlier, two hotels are considered secondarily competitive with the subject property; both are first-class, full-service facilities. Although the secondary competitors have a strong commercial orientation, differences in their locations, facilities, amenities, and rate structures prevent them from posing direct competition to the Howard Johnson. The following table outlines the pertinent operating statistics of these hotels. HVS International, Mineola, New York Lodging Market Supply and Demand 62 Analysis - -------------------------------------------------------------------------------- ================================================================================ Table 6-5 Secondary Competitors - --------------------------------------------------------------------------------
Estimated 1996 Market Segmentation Estimated 1994 ---------------------------- ------------------------ Weighted Year No. of Percent No. of Mtg. & Average Property Opened Rooms Competitive Rooms Comm. Group Leisure Occ. Rate RevPAR - ------------------------------------------------------------------------------------------------------------------------------------ Sheraton Long Island 1981 212 50% 106 62% 23% 15% 68% $82.00 $55.76 Holiday Inn Ronkonkoma 1974 287 25 72 65 20 15 71 68.33 48.79 - ------------------------------------------------------------------------------------------------------------------------------------ Totals and Averages 178 63% 22% 15% 69% $76.32 $52.66
Estimated 1995 Estimated 1996 ----------------------- ------------------------- Average Average Property Occ. Rate RevPAR Occ. Rate RevPAR - -------------------------------------------------------------------------------- Sheraton Long Island 70% $87.00 $60.90 71% $91.00 $64.61 Holiday Inn Ronkonkoma 71 73.33 52.06 74 76.15 56.50 - -------------------------------------------------------------------------------- Totals and Averages 70% $81.44 $57.00 72% $84.85 $61.09 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- HVS International, Mineola, New York Lodging Market Supply and Demand 63 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= We estimate the year-end 1996 weighted occupancy of the secondary competitors at approximately 72%, which is slightly lower than the overall marketwide average of 72.6%. The estimated 1996 average rate of these two properties is $84.85, which is higher than the marketwide average of $80.87. The 211-room Sheraton Smithtown is located roughly one mile east of the Howard Johnson on Vanderbilt Motor Parkway. This full-service hotel offers amenities far more extensive than those available at the subject property, which is reflected in its higher rate structure. The Sheraton opened in 1981, and was originally owned by Folklane Hotel Associates of Ronkonkoma and operated by Inn America Corporation. As a result of financial difficulties and a sizable debt burden, the Mutual Insurance Company of New York (which holds a mortgage on the property) foreclosed in December of 1990. The court later appointed Stephen W. Brener Associates, Inc., a Manhattan-based hotel consulting firm, as the receiver during the foreclosure proceedings. Mutual Insurance subsequently obtained ownership of the property, which is now operated by HEI Hotels, Inc. A significant amount of airline crew business is accommodated by the Holiday Inn - - MacArthur Airport, which is located approximately five and one-half miles southeast of the subject property. This 287-room hotel was sold in September of 1993, and an extensive renovation was completed shortly thereafter. Current management representatives indicate that they are trying to limit airline business, which places downward pressure on the hotel's average rate. Because demand has increased during the past two years, there are indications that this low-rated patronage is no longer necessary, and recent marketing efforts have been concentrated on commercial travelers. The Holiday Inn is currently owned by Jack Parker, a New York developer, and operates under a franchise agreement with Holiday Inns. The Holiday Inn is scheduled to undergo renovations in 1997, including the addition of an indoor swimming pool. Proposed Competitors It is important to consider any new hotels that may have an impact on the subject property's operating performance. Based on our fieldwork in the market and our discussions with local hotel operators, developers, and government officials, we have not identified any properties that are proposed or under development in the Commack area. The market only recently surpassed the 70% occupancy mark, and (absent singular events such as the TWA crash) has not demonstrated a strong growth trend in the past several years. Moreover, although the local economy is recovering from the recent recession, forecasts anticipate only moderate growth in the near term. HVS International, Mineola, New York Lodging Market Supply and Demand 64 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Accordingly, we believe it is unlikely that a new hotel will be developed in this market in the near future. Conclusion We estimate that the overall occupancy of the primary and secondary competitors rose from 72.3% in 1995 to 72.6% in 1996, and this gain was accompanied by an average rate increase from $74.85 to $80.87 in 1996. A majority of the area's lodging demand is generated by commercial travelers, who constitute roughly 66% of the total occupancy. All of the competitive hotels derive at least 60% of their demand from commercial guests. Leisure travelers contribute roughly 20% of the total, and the meeting and group segment generates the remaining 14%. Overall, the market has exhibited minimal growth during the next several years, and no new development is anticipated in the near future. HVS International, Mineola, New York Projection of Occupancy and 65 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 7. Projection of Occupancy and Average Rate Historical Operating Performance The following table sets forth the subject property's historical occupancy, average rate, and RevPAR. For the purpose of comparison, we have also presented corresponding data (as provided by Smith Travel Research) for the competitive hotels described in the previous section. In addition to the annual percent change calculations, we have determined the subject property's occupancy, average rate, and RevPAR penetration factors. We note that we were unable to obtain data for the subject property prior to calendar year 1994. HVS International, Mineola, New York Projection of Occupancy and 66 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-1 Historical Trends - -------------------------------------------------------------------------------- Year-to-Date August --------------------- 1994 1995 1995 1996 - -------------------------------------------------------------------------------- Subject Property Occupancy 55.1 % 58.1 % 56.9 % 59.1 % Percent Change --- 5.4 % --- 3.9 % Occupancy Penetration 78.2 % 81.6 % 80.2 % 81.6 % Average Rate $56.38 $61.34 $60.92 $64.93 Percent Change --- 8.8 % --- 6.6 % Average Rate Penetration 77.8 % 80.2 % 79.9 % 81.0 % RevPAR $31.08 $35.64 $34.64 $38.35 Percent Change --- 14.7 % --- 10.7 % RevPAR Penetration 60.8 % 65.5 % 64.1 % 66.0 % Areawide (STR) Occupancy 70.5 % 71.2 % 70.9 % 72.4 % Percent Change 8.1 % 1.0 % --- 2.1 % Average Rate $72.46 $76.46 $76.20 $80.20 Percent Change 6.4 % 5.5 % --- 5.2 % RevPAR $51.08 $54.44 $54.03 $58.06 Percent Change 15.0 % 6.6 % --- 7.5 % - -------------------------------------------------------------------------------- The preceding table shows that the subject property achieving occupancy and average rate levels lower than the marketwide averages since 1994. Consequently, its historical RevPAR was also far below that of the market as a whole. The hotel's penetration factors are equally poor. As noted earlier in this report, we believe that the hotel's weak performance is largely the result of its Howard Johnson affiliation, which tends to be more accepted among leisure travelers than commercial guests. Both of the property's primary competitors maintain a Hampton Inn affiliation, and this franchise benefits from a loyal following in the commercial segment of the market. Because most of the lodging demand in the Commack area is commercial in nature, this is considered a significant drawback. HVS International, Mineola, New York Projection of Occupancy and 67 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= A hotel's occupancy should also be evaluated on a monthly basis to identify seasonality trends. The following table sets forth the subject property's monthly occupancy from 1994 through August of 1996. ================================================================================ Table 7-2 Subject Property's Monthly Occupancy History - -------------------------------------------------------------------------------- 1994 1995 1996 --------- --------------------- --------------------- Percent Percent Occupancy Occupancy Change Occupancy Change - -------------------------------------------------------------------------------- January 47.8 % 35.5 % (25.7) % 38.6 % 8.6 % February 45.8 39.4 (14.0) 47.0 19.2 March 48.6 41.8 (14.0) 50.9 21.8 April 51.4 48.5 (5.6) 58.3 20.2 May 69.7 56.6 (18.8) 51.7 (8.6) June 69.5 83.7 20.4 66.1 (21.0) July 65.6 70.5 7.5 76.4 8.3 August 70.8 77.8 9.9 82.6 6.1 September 57.7 61.1 5.9 --- --- October 44.6 72.1 61.7 --- --- November 43.2 55.4 28.2 --- --- December 45.8 53.5 16.8 --- --- - -------------------------------------------------------------------------------- Annual 55.1 % 58.1 % 5.4 % --- --- - -------------------------------------------------------------------------------- As illustrated above, the subject property's peak season is in the spring and summer, from May through the end of September, when occupancies reach the upper 60% and lower 70% range. The higher occupancy levels recorded in July and August of 1996 were a result of the demand generated by government officials and the media in the wake of the TWA plane crash. As noted earlier in this report, occupancy levels have increased slightly as a result of a more favorable economic climate throughout the region. Occupancy falls off considerably during the winter, when there is a reduction in commercial and leisure business. Premise of the Projections To a certain degree, occupancy and rate attainment can be manipulated by management. For example, hotel operators may choose to lower rates in an effort to maximize occupancy. Our forecasts reflect an operating strategy that we believe would be implemented by competent hotel management to achieve an optimal mix of occupancy and average rate. HVS International, Mineola, New York Projection of Occupancy and 68 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Projected Room Night Demand Lodging demand and occupancy can be projected through a process known as room night analysis. A room night is a unit of hotel demand that equals one room that is occupied for one night. After estimating the number of room nights a hotel can be expected to attract during a 12-month period, we can determine occupancy by dividing the number of room nights of demand captured by the number of room nights available (calculated as the room count x 365). The total annual number of room nights occupied in the competitive hotels equates to the market's accommodated room night demand, as shown in the following table. ================================================================================ Table 7-3 Estimated Year-End 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- Marketwide Subject Property --------------------------- -------------------------- Accommodated Percent Accommodated Percent Market Segment Demand of Total Demand of Total - -------------------------------------------------------------------------------- Commercial 97,000 66 % 14,000 61 % Meeting and Group 20,000 14 2,000 9 Leisure 29,000 20 7,000 30 - -------------------------------------------------------------------------------- Total 146,000 100 % 23,000 100 % - -------------------------------------------------------------------------------- Latent Demand The previous table illustrates the accommodated room night demand in the subject property's competitive market. Because this estimate is based on occupancies, it includes only those hotel rooms that were used by guests. Latent demand considers guests who could not be accommodated by the existing competitive supply, and can be divided into unaccommodated demand and induced demand. Based on our market analysis, interviews with local hotel operators, and the area's overall occupancy levels, we consider it unlikely that there is any significant amount of latent demand in the subject property's market. Total Usable Room Night Demand Total usable room night demand is estimated by combining accommodated demand and usable latent demand. Usable latent demand is that portion of latent demand that can be absorbed based on the number of existing and proposed hotel rooms in the market. As noted above, our analysis does not consider any latent demand. The following table outlines the projected annual change in accommodated room night demand in the subject property's competitive market. HVS International, Mineola, New York Projection of Occupancy and 69 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-4 Total Usable Room Night Demand - -------------------------------------------------------------------------------- Historical 1997 1998 1999 2000 - -------------------------------------------------------------------------------- Commercial Growth Rate --- 2.0 % 2.0 % 1.0 % 1.0 % Accommodated Demand 96,852 98,789 100,765 101,773 102,791 Meeting and Group Growth Rate --- 1.0 % 1.0 % 0.5 % 0.5 % Accommodated Demand 20,132 20,333 20,536 20,639 20,742 Leisure Growth Rate --- 1.0 % 1.0 % 1.0 % 1.0 % Accommodated Demand 29,195 29,487 29,782 30,080 30,381 Totals Commercial 96,852 98,789 100,765 101,773 102,791 Meeting and Group 20,132 20,333 20,536 20,639 20,742 Leisure 29,195 29,487 29,782 30,080 30,381 - -------------------------------------------------------------------------------- TOTAL DEMAND 146,179 148,609 151,083 152,492 153,914 Overall Annual Growth --- 1.7 % 1.7 % 0.9 % 0.9 % - -------------------------------------------------------------------------------- Guestroom Supply In 1996, the competitive properties provided a weighted total of 552 guestrooms. Based on our market analysis and interviews with area general managers and government officials, we did not identify any proposed lodging properties that are likely to enter the market in the near future. The following table shows the projected competitive supply of available rooms and available room nights. To calculate the annual number of available room nights, the number of available rooms is multiplied by 365. HVS International, Mineola, New York Projection of Occupancy and 70 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-5 Available Rooms and Room Nights - -------------------------------------------------------------------------------- Total Overall Room Night Room Nights Competitive Year Demand Available Occupancy - -------------------------------------------------------------------------------- Historical 146,179 201,389 73 % 1997 148,609 201,389 74 1998 151,083 201,389 75 1999 152,492 201,389 76 2000 153,914 201,389 76 - -------------------------------------------------------------------------------- Overall Competitive Occupancy As a result of the projected growth in demand, the overall competitive occupancy is expected to increase moderately, from 73% in 1996 to 76% in the year 2000. Competitive Index Analysis Competitive indexes are used to analyze the relative market position of each property on the basis of a particular demand segment. The index represents the number of times each year that one room is occupied by one type of traveler (e.g., commercial, meeting and group, or leisure), or the number of room nights actually accommodated per year, per room, per market segment. For example, if a hotel has a commercial competitive index of 190, each room in the property is occupied 190 times a year by a commercial traveler. The competitive index is calculated by dividing a hotel's annual accommodated room night demand in a particular market segment by that property's room count. Competitive indexes will be used to illustrate each property's position in the market based on its ability to compete with other local lodging facilities. Commercial Segment We estimate that the year-end 1996 commercial segment competitive indexes in the subject property's market range from 210 to 127. The Hampton Inn - Commack is the most competitive property in this segment, followed by the Hampton Inn - Islandia (with an estimated index of 192). In the aggregate, the secondary competitors maintain an index of 167. The subject property is the least competitive hotel in the commercial segment, with an estimated year-end 1996 index of 127. Because none of the competitive hotels are scheduled to undergo extensive renovation or expansion, we anticipate no changes in the historical competitive indexes in the commercial market segment. The following table summarizes the projected commercial segment competitive indexes of the area's hotels. HVS International, Mineola, New York Projection of Occupancy and 71 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-6 Commercial Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 - -------------------------------------------------------------------------------- Subject Properrty 127 127 127 127 127 Hampton Inn - Commack 210 210 210 210 210 Hampton Inn - Islandia 192 192 192 192 192 Secondary Competitors 167 167 167 167 167 - -------------------------------------------------------------------------------- Meeting and Group Segment As a result of their full-service orientation and relatively large inventory of function space, the secondary competitors maintain the highest index in the meeting and group segment. Because the subject property offers only 800 square feet of function space, its participation in this segment is inherently limited, and our conversations with management representatives indicate that the hotel does, in fact, derive little occupancy from this type of demand. We assume that the Howard Johnson's estimated year-end 1996 meeting and group competitive index of 21 represents a stabilized level. Again, because no significant changes are anticipated at the other competitors, their indexes are also assumed to remain at historical levels. The following table illustrates the competitive indexes in the meeting and group segment. ================================================================================ Table 7-7 Meeting and Group Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 - -------------------------------------------------------------------------------- Subject Properrty 21 21 21 21 21 Hampton Inn - Commack 30 30 30 30 30 Hampton Inn - Islandia 27 27 27 27 27 Secondary Competitors 57 57 57 57 57 - -------------------------------------------------------------------------------- Leisure Segment The subject property is the most competitive hotel in the leisure market, with an estimated year-end 1996 index of 63. The Hampton Inn - Commack follows (at 60), and the Hampton Inn - Islandia maintains an index of 55. In large part, the Howard Johnson's strong presence in the leisure segment reflects its limited participation in the commercial and meeting and group segment. As noted earlier, the Howard Johnson name has more appeal among leisure travelers than among commercial guests. We assume no changes in the competitive indexes of the local hotels during the HVS International, Mineola, New York Projection of Occupancy and 72 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= projection period. The following table illustrates the competitive indexes in the leisure segment. ================================================================================ Table 7-8 Leisure Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 - -------------------------------------------------------------------------------- Subject Properrty 63 63 63 63 63 Hampton Inn - Commack 60 60 60 60 60 Hampton Inn - Islandia 55 55 55 55 55 Secondary Competitors 40 40 40 40 40 - -------------------------------------------------------------------------------- Subject Property's Room Night Capture and Occupancy After the competitive index is calculated, it is adjusted to reflect the property's room count, yielding a figure referred to as the market share adjuster. The market share adjuster of each property is then divided by the total market share adjuster for all of the competitors, resulting in each hotel's market share. By multiplying the projected market share by the area's usable room night demand, we can determine the total number of room nights captured by a specific hotel. Occupancy is then calculated by dividing the projected number of room nights captured by the property's total number of available room nights. Multiplying the subject property's projected market share by the estimated room night demand in each segment results in the following estimate of room nights captured by the hotel. HVS International, Mineola, New York Projection of Occupancy and 73 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-9 Room Nights Captured by the Subject Property - -------------------------------------------------------------------------------- 1997 1998 1999 2000 - -------------------------------------------------------------------------------- Commercial Demand 98,789 100,765 101,773 102,791 Market Share 0.1427 0.1427 0.1427 0.1427 - -------------------------------------------------------------------------------- Capture 14,098 14,380 14,524 14,670 Meeting and Group Demand 20,333 20,536 20,639 20,742 Market Share 0.1144 0.1144 0.1144 0.1144 - -------------------------------------------------------------------------------- Capture 2,326 2,349 2,361 2,373 Leisure Demand 29,487 29,782 30,080 30,381 Market Share 0.2346 0.2346 0.2346 0.2346 - -------------------------------------------------------------------------------- Capture 6,917 6,987 7,057 7,127 Total Capture 23,341 23,716 23,942 24,170 - -------------------------------------------------------------------------------- Dividing the total number of room nights captured by the subject property's number of available room nights per year (calculated as 109 x 365) produces the projected occupancy percentage. ================================================================================ Table 7-10 Calculation of the Subject Property's Projected Occupancy - -------------------------------------------------------------------------------- 1997 1998 1999 2000 ------------------------------------------- Room Nights Captured 23,341 23,716 23,942 24,170 Available Room Nights 39,785 39,785 39,785 39,785 Occupancy 58.67 % 59.61 % 60.18 % 60.75 % Rounded 59 % 60 % 60 % 61 % - -------------------------------------------------------------------------------- For the purpose of forecasting income and expense, we will use the following occupancy levels. HVS International, Mineola, New York Projection of Occupancy and 74 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-11 Occupancy Forecast - -------------------------------------------------------------------------------- Year Occupancy ------------------------------------ 1997 59% Stabilized 60 - -------------------------------------------------------------------------------- Although the preceding room night analysis shows the subject property achieving a 61% occupancy in the year 2000, we have chosen to use a stabilized level of 60%. The stabilized occupancy is intended to reflect the anticipated results of the property over its remaining economic life, given any and all changes in the life cycle of the hotel. Thus, the stabilized occupancy excludes from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusually high or low occupancies. Although the subject property may operate at occupancies above this stabilized level, we believe it equally possible for new competition and temporary economic downturns to force the occupancy below this selected point of stability. AVERAGE RATE ANALYSIS One of the most important considerations in estimating the value of a lodging facility is a supportable forecast of its attainable average rate, which is more formally defined as the average rate per occupied room. Average rate can be calculated by dividing the total rooms revenue achieved during a specified period by the number of rooms sold during the same period. The projected average rate and the anticipated occupancy percentage are used to forecast rooms revenue, which in turn provides the basis for estimating most other income and expense categories. Average Rate by Month The following table shows the subject property's monthly occupancy and average rate from 1994 through August of 1996. HVS International, Mineola, New York Projection of Occupancy and 75 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-12 Subject Property's Occupancy and Average Rate by Month - --------------------------------------------------------------------------------
1994 1995 1996 ------------------ --------------------------------------- --------------------------------------- Average Percent Average Percent Percent Average Percent Occupancy Rate Occupancy Change Rate Change Occupancy Change Rate Change - ----------------------------------------------------------------------------------------------------------------------- January 47.8% $56.43 35.5% (25.7)% $56.74 0.5% 38.6% 8.6% $58.86 3.7% February 45.8 56.54 39.4 (14.0) 57.40 1.5 47.0 19.2 59.76 4.1 March 48.6 56.24 41.8 (14.0) 61.04 8.5 50.9 21.8 59.28 (2.9) April 51.4 55.65 48.5 (5.6) 61.14 9.9 58.3 20.2 62.41 2.1 May 69.7 53.81 56.6 (18.8) 61.86 15.0 51.7 (8.6) 68.32 10.4 June 69.5 53.83 83.7 20.4 62.30 15.7 66.1 (21.0) 67.25 7.9 July 65.6 55.50 70.5 7.5 61.36 10.6 76.4 8.3 70.44 14.8 August 70.8 57.69 77.8 9.9 61.73 7.0 82.6 6.1 66.61 7.9 September 57.7 57.82 61.1 5.9 66.12 14.4 -- -- -- -- October 44.6 59.10 72.1 61.7 63.92 8.2 -- -- -- -- November 43.2 58.55 55.4 28.2 58.37 (0.3) -- -- -- -- December 45.8 57.70 53.5 16.8 59.07 2.4 -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------- Weighted Average 55.1% $56.38 58.1% 5.4% $61.34 8.8% -- -- -- --
- -------------------------------------------------------------------------------- The previous table underscores the correlation between a hotel's occupancy and its average rate: as occupancy increases, rates tend to follow. On a monthly basis, the subject property's average rate fluctuates. In general, the Howard Johnson registered the highest average rates in May, June, July, August, September, and October, when commercial travel is augmented by leisure demand. In July of 1996, the hotel's monthly average rate topped $70 for the first time since 1994. With the exception of declines in November of 1995 and March of 1996, the Howard Johnson has maintained consistent rate growth; occupancy gains have been less favorable. Competitive Positioning The Howard Johnson's average rate will be projected using a competitive positioning method. This technique begins with an analysis of the average rates achieved by the subject property and its competitors. These rates establish a range that reflects certain characteristics of the specific market, such as price sensitivity, demand orientation, and occupancy. The subject property's average rate is then compared to those of the hotels to which it is most similar in terms of size, quality, facilities, amenities, market orientation, location, management, image, and affiliation. Adjustments are made to reflect any relevant differences. Although the average rate analysis presented here follows the occupancy projections, these two statistics are highly correlated; in reality, one can not HVS International, Mineola, New York Projection of Occupancy and 76 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= project occupancy without making specific assumptions regarding average rate. This relationship is best illustrated by rooms revenue per available room (RevPAR), which reflects a property's ability to maximize rooms revenue. The following table summarizes the estimated year-end 1996 average rate and RevPAR of the subject property and its primary competitors. ================================================================================ Table 7-13 Estimated Year-End Average Rate and RevPAR - -------------------------------------------------------------------------------- Property Average Rate RevPAR ----------------------------------------------------------------------- Subject Properrty $65.00 $37.65 Hampton Inn - Commack 88.00 72.16 Hampton Inn - Islandia 77.00 57.75 ----------------------------------------------------------------------- Average $78.99 $57.44 - -------------------------------------------------------------------------------- As the preceding table indicates, the estimated year-end 1996 average rate of the Hampton Inn - Commack is the highest in the market, at $88. The Hampton Inn - - Islandia follows at $77. The subject property's estimated year-end 1996 average rate of $65 is the lowest in the market. This competitive positioning is reasonable given that the two Hampton Inns are relatively new properties that are oriented toward commercial travelers; the Commack property maintains the highest rate because it benefits from a number of negotiated contracts with local businesses. Because the Howard Johnson is the primary competitor situated closest to the Hauppauge Industrial Park, we believe that it should capture more high-rated commercial business than it does at present. As noted earlier, the Howard Johnson affiliation is considered a major disadvantage in attracting this type of demand. Average Rate Increases It is important to note that hotel room rate increases do not necessarily conform to the underlying monetary inflation rate, because lodging facilities are influenced by market conditions such as the relationship between supply and demand. A hotel's ability to raise room rates is affected by a number of factors, including the following. o Supply and Demand Relationships - The relationship between supply and demand is one of the factors that determine hotel occupancies and average rates. Strong markets where lodging demand is increasing faster than supply are often characterized by rate growth that exceeds HVS International, Mineola, New York Projection of Occupancy and 77 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= inflation. Markets that are overbuilt or suffering from declining demand are unlikely to exhibit any significant increases in average rates. o Inflationary Pressures - Price increases caused by inflation affect hotel room rates by eroding profit margins and encouraging operators to raise prices. This strategy is effective only in markets that are characterized by a healthy supply and demand relationship. o Improving the Competitive Standard - When a new lodging facility enters a mature market, its rates may be set higher than the marketwide average in an effort to justify the development costs. This may allow other competitors to achieve corresponding gains by effectively raising the amount the market will bear. However, if the addition to supply has a severe impact on the occupancy levels of other hotels, price competition may ensue. o Property-Specific Improvements - Changes that make a hotel more or less attractive to guests can have an impact on average rate. An expansion, renovation, upgrading, or the introduction of additional facilities and amenities may enable greater-than-inflationary room rate increases. Likewise, deferred maintenance may make a property less competitive, engendering a decline in room rates. In determining average rate projections, changes that occur prior to occupancy stabilization are generally attributable to factors that are specific to the property and the market. After a hotel achieves a stabilized occupancy, room rates are generally expected to continue to increase at the underlying inflation rate throughout the remainder of the projection period. Statistics provided by Smith Travel Research indicate that the market maintained strong average rate gains of 6.4% in 1994 and 5.5% in 1995. Estimates indicate a further marketwide increase of 5.2% from 1995 to 1996, and the subject property is estimated to have achieved a 6.6% rate increase in 1996. Based on these considerations, the following table shows our projection of average rate increases. HVS International, Mineola, New York Projection of Occupancy and 78 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-14 Average Rate Forecast - -------------------------------------------------------------------------------- Marketwide Subject Property ---------------------- --------------------------- Rate Rate Year Occupancy Increase Increase Average Rate - -------------------------------------------------------------------------------- Positioned Base --- --- --- $65.00 1997 74 % 5% to 6% 4.0 % 67.61 Stabilized 75 4 to 5 3.5 69.97 - -------------------------------------------------------------------------------- To derive a forecast of average rate for the subject property, we have recognized the strong level of growth in the market. We forecast the Howard Johnson's average rate to increase by 4.0% in 1997, followed by increases of 3.5% annually (in tandem with the assumed underlying inflation rate). The following table outlines our project of occupancy and average rate for the Howard Johnson through the stabilized year. ================================================================================ Table 7-15 Forecast of Occupancy and Average Rate - -------------------------------------------------------------------------------- Year Occupancy Average Rate ----------------------------------------------------------- 1997 59% $67.61 Stabilized 60 69.97 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Highest and Best Use 79 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 8. Highest and Best Use The concept of highest and best use recognized by the Appraisal Institute distinguishes between the highest and best use of the land (as though vacant) and that of the property (as improved). Highest and best use is defined as: The reasonably probable and legal use of vacant land or improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.(1) The concept of highest and best use is the premise upon which value is based, and is a product of competitive forces in the marketplace. The principle of balance holds that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium. This principle applies to relationships among various property components as well as the relationship between the costs of production and the property's productivity. The point of economic balance is achieved when the combination of land and building is optimal (i.e., when no marginal benefit or utility is achieved by adding another unit of capital). The law of increasing returns holds that larger amounts of the agents of production produce greater net income up to a certain point, after which the law of diminishing returns is applied.(2) It is important to recognize that the highest and best use of the land (as though vacant) may differ from the highest and best use of the property (as improved). This may occur when a site has existing improvements and the highest and best use of the land differs from the current use. Nonetheless, the current property use will continue until the value of the land under its highest and best use exceeds the value of the property in its current use, plus the cost to remove the existing improvements. (1) The Appraisal of Real Estate - Tenth Edition, Appraisal Institute, Chicago, IL, 1992, p. 45. (2) Ibid., p. 40. HVS International, Mineola, New York Highest and Best Use 80 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= In consideration of the factors influencing development in the immediate area, it is the appraisers' opinion that the highest and best use of the subject site, as vacant, would be for the development of a lodging facility. Based on the fact that the value of the land does not exceed the value of the hotel plus the cost of demolition, it is our further opinion that the subject property's highest and best use, as improved, is its current use as a lodging facility. HVS International, Mineola, New York Approaches to Value 81 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 9. Approaches to Value In appraising real estate for market value, the appraiser has three approaches from which to select: the income capitalization, sales comparison, and cost approaches. Although all three valuation procedures are given consideration, the inherent strengths of each approach and the nature of the subject property must be evaluated to determine which will provide supportable estimates of market value. The appraiser is then free to select one or more of the appropriate approaches in arriving at a final value estimate. The Income Capitalization Approach The income capitalization approach takes a property's projected net income before debt service and allocates this future benefit to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component is calculated. The total of the mortgage component and the equity component equals the value of the property. This approach is often selected as the preferred valuation method for income- producing properties, because it most closely reflects the investment rationale of knowledgeable buyers. The Sales Comparison Approach The sales comparison approach estimates the value of a property by comparing it to similar properties that have been sold on the open market. To obtain a supportable estimate of value, the sales price of a comparable property must be adjusted to reflect any dissimilarities between it and the property being appraised. The sales comparison approach may provide a useful value estimate in the case of simple forms of real estate, such as vacant land and single-family homes, where the properties are homogeneous and the adjustments are few and relatively simple to compute. In the case of complex investments such as shopping centers, office buildings, restaurants, and lodging facilities, where the adjustments are numerous and more difficult to quantify, the sales comparison approach loses much of its reliability. HVS International, Mineola, New York Approaches to Value 82 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Hotel investors typically do not employ the sales comparison approach in reaching their final purchase decisions. Factors such as the lack of recent sales data, the numerous insupportable adjustments that are necessary, and the general inability to determine the true financial terms and human motivations of comparable transactions often make the results of this technique questionable. Although the sales comparison approach may provide a range of values that supports the final estimate, reliance on this method beyond the establishment of broad parameters is rarely justified by the quality of the sales data. The market-derived capitalization rates sometimes used by appraisers are susceptible to the same shortcomings inherent in the sales comparison approach. To substantially reduce the reliability of the income capitalization approach by employing capitalization rates obtained from unsupported market data weakens the final value estimate and ignores the typical investment analysis procedures employed by hotel purchasers. Because appraisers are obligated to mirror the actions of the marketplace, we generally give the sales comparison approach minimal weight in the hotel appraisal process beyond bracketing the final estimate.(1) The Cost Approach The cost approach estimates market value by computing the current cost to replace the property and subtracting any depreciation resulting from physical deterioration, functional obsolescence, and external (or economic) obsolescence. The value of the land, as if vacant and available, is then added to the depreciated value of the improvements to produce a total value estimate. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements grow older and begin to deteriorate, the resultant loss in value becomes increasingly difficult to quantify accurately. We find that knowledgeable hotel buyers base their purchase decisions on economic factors such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, this approach is given minimal weight in the hotel valuation process. As noted in Hotels and Motels: A Guide to Market (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 209. HVS International, Mineola, New York Approaches to Value 83 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Analysis, Investment Analysis, and Valuations, "the cost approach is seldom used to value existing hotels and motels."(1) Reconciliation The final step in the valuation process is the reconciliation and correlation of the value indications. Factors that are considered in assessing the reliability of each approach include the purpose of the appraisal, the nature of the subject property, and the reliability of the data used. In reconciliation, the applicability and supportability of each approach is considered and the range of value indications is examined. The most significant weight is given to the approach that produces the most reliable solution and most closely reflects the criteria used by typical investors. Our nationwide experience with numerous hostelry buyers and sellers indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the investors who constitute the marketplace. For this reason, the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in the hotel valuation process. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 208. HVS International, Mineola, New York Income Capitalization Approach 84 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 10. Income Capitalization Approach The income capitalization approach is based on the principle that the value of a property is indicated by its net return, or what is known as the present worth of future benefits. The future benefits of income-producing properties, such as hotels, are net income before debt service and depreciation (as estimated by a forecast of income and expense) and any anticipated reversionary proceeds from a sale. These future benefits can be converted into an indication of market value through a capitalization process and discounted cash flow analysis. Using the income capitalization approach, the subject property has been valued by analyzing the local market for transient accommodations, examining existing and proposed competition, and developing a forecast of income and expense that reflects current and anticipated income trends and cost components through a stabilized year of operation. The forecast of income and expense is expressed in current dollars for each year. The stabilized year is intended to reflect the anticipated operating results of the property over its remaining economic life, given any or all applicable stages of build-up, plateau, and decline in the life cycle of the hotel. Thus, income and expense estimates from the stabilized year forward exclude from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusual revenues or expenses. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, published by the Appraisal Institute, "of the three valuation approaches available to the appraiser, the income capitalization approach generally provides the most persuasive and supportable conclusions when valuing a lodging facility."(1) This text recommends that using a ten-year forecast and an equity yield rate "most accurately reflects the actions of typical hotel buyers, who purchase properties based (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. HVS International, Mineola, New York Income Capitalization Approach 85 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= on their leveraged discounted cash flow."(1) The simpler procedure of using a ten-year forecast and a discount rate is "less reliable because the derivation of the discount rate has little support. Moreover, it is difficult to adjust the discount rate for changes in the cost of capital."(2) We have used both methods to discount the subject property's projected net income into an estimate of value. Method One is a ten-year discounted cash flow analysis in which the cash flow to equity and the equity reversion are discounted to the present value at the equity yield rate, and the income to the mortgagee is discounted at a mortgage interest rate. The sum of the equity and mortgage values is the total property value. Method Two is a simple ten-year discounted cash flow analysis in which the annual net income before debt service and the reversionary proceeds following a sale at the end of the tenth year are discounted back to the date of the appraisal at an overall discount rate, and then totaled to produce an indication of the present worth of future benefits. To convert the projected income stream into an estimate of value through Method One, the anticipated net income (before debt service and depreciation) is allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. The total of the mortgage component and the equity component equals the value of the property. The process is described as follows. 1. The terms of typical hotel financing are set forth, including interest rate, amortization term, and loan-to-value ratio. 2. An equity yield rate of return is established. Numerous hotel buyers base their equity investments on a ten-year equity yield rate projection that takes into account ownership benefits such as periodic cash flow distributions, residual sale or refinancing distributions that return any property appreciation and mortgage amortization, income tax benefits, and various non-financial considerations such as status and prestige. The equity yield rate is also known as the internal rate of return on equity. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236 (2) Ibid. HVS International, Mineola, New York Income Capitalization Approach 86 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 3. The value of the equity component is calculated by first deducting the annual debt service from the projected net income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value. After deducting the mortgage balance at the end of the tenth year and the typical brokerage and legal costs, the equity residual is discounted back to the date of value at the equity yield rate. The net income to equity for each of the ten projection years is also discounted to the present value. The sum of these discounted values equates to the value of the equity component. Adding the equity component to the initial mortgage balance yields the overall property value. 4. Because the mortgage and the debt service amounts are unknown but the loan-to-value ratio was determined in Step #1, the preceding calculation can be solved through an iterative process or by use of a linear algebraic equation that computes the total property value. The algebraic equation that solves for the total property value using a ten-year mortgage and equity technique was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(1) 5. The value is proven by allocating the total property value between the mortgage and equity components and verifying that the rates of return set forth in Steps #1 and #2 can be met from the projected net income. The process of converting the projected income stream into an estimate of value through Method Two is described as follows. 1. A discount rate is established by evaluating the total property yield derived by Method One. Occasionally, the discount rate may be adjusted slightly based on the total property yields indicated by recent transactions involving hotels similar to the subject property. 2. The reversionary value is calculated by capitalizing the 11th-year net income by the terminal capitalization rate and deducting typical brokerage and legal fees. (1) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Income Capitalization Approach 87 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 3. The ten-year forecast of net income (before debt service and depreciation) and the reversionary value are discounted to the date of value at the rate derived above. Review of Operating History Because the Howard Johnson Commack is an existing hotel with an established operating performance, its historical income and expense experience can serve as a basis for projections. The subject property opened in 1971, and achieved occupancy levels of 55.3% in 1994 and 56.9% in 1995. The following income and expense statements were provided by the Ashford Financial Corporation, and are unaudited. Where applicable, we have reorganized the statements in accordance with the Uniform System of Accounts for Hotels. HVS International, Mineola, New York Income Capitalization Approach 88 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-1 Historical Operating Performance - --------------------------------------------------------------------------------
1995 1994 ----------------------------------------------- -------------------------------------------------- No of Rooms: 109 109 No of Occupied Rooms 22,630 14,411 No of Complimentary Rooms: 479 346 No of Days Open: 365 245 Occupancy: 56.9% Amount per Amount per 55.3% Amount per Amount per Average Rate: $61.34 Percent Available Occupied $56.67 Percent Available Occupied (+000) of Gross Room Room (+000) of Gross Room Room - ------------------------------------------------------------------------------------------------------------------------------------ REVENUE Rooms $1,388 96.2% $12,736 $61.34 $817 94.7% $7,492 $56.67 Telephone 34 2.3 310 1.49 29 3.4 270 2.04 Other Income 21 1.5 193 12.80 17 1.9 152 1.15 Total 1,443 100.0 13,238 63.76 863 100.0 7,915 59.86 - ------------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL EXPENSES* Rooms 290 20.9 2,658 12.80 204 24.9 1,868 14.13 Telephone 19 54.9 170 0.82 15 52.4 142 1.07 Other Income 0.0 0.00 0.6 1 0.01 Total 308 21.4 2,828 13.62 219 25.4 2,011 15.21 - ------------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL INCOME 1,135 78.6 10,411 50.14 644 74.6 5,904 44.65 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING EXPENSES Administrative & General 159 11.0 1,459 7.03 88 10.2 810 6.13 Management Fee 43 3.0 397 1.91 26 3.0 239 1.81 Marketing 138 9.5 1,263 6.08 26 3.0 241 1.82 Franchise Fees 44 3.0 400 1.93 41 4.8 378 2.86 Property Oper. & Maint. 101 7.0 929 4.47 64 7.4 584 4.42 Energy 151 10.4 1,382 6.66 102 11.9 940 7.11 Total 636 43.9 5,830 28.08 348 40.3 3,192 24.14 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSE PROFIT 499 34.7 4,581 22.06 296 34.3 2,712 20.51 - ------------------------------------------------------------------------------------------------------------------------------------ FIXED EXPENSES Property Taxes 104 7.2 957 4.61 58 6.7 528 3.99 Insurance 37 2.5 335 1.61 24 2.8 221 1.67 Reserve for Replacement 58 4.0 530 2.55 26 3.0 239 1.81 Equipment Rental 5 0.4 50 0.24 7 0.9 68 0.51 Total 204 14.1 1,872 9.01 115 13.4 1,055 7.98 - ------------------------------------------------------------------------------------------------------------------------------------ NET INCOME $295 20.6% $2,709 $13.05 $181 20.9% $1,657 $12.53 ====================================================================================================================================
* Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 89 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-2 Historical Operating Performance - --------------------------------------------------------------------------------
Year-to-Date August, 1995 Year-to-Date August, 1996 --------------------------------------------- ----------------------------------------------- No of Rooms: 109 109 No of Occupied Rooms: 14,705 15,260 No of Complimentary Rooms: 0 0 No of Days Open: 242 243 Occupancy: 55.7% Amount per Amount per 57.6% Amount per Amount per Average Rate: $61.05 Percent Available Occupied $65.09 Percent Available Occupied (+000) of Gross Room Room (+000) of Gross Room Room - ------------------------------------------------------------------------------------------------------------------------------------ REVENUE Rooms $898 96.5% $8,237 $61.05 $993 95.4% $9,113 $65.09 Telephone 22 2.3 198 1.47 32 3.1 298 2.13 Other Income 11 1.2 103 0.76 15 1.5 139 0.99 Total 931 100.0 8,538 63.29 1,041 100.0 9,549 68.21 - ------------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL EXPENSES* Rooms 182 20.3 1,670 12.38 199 20.0 1,826 13.04 Telephone 12 54.1 107 0.79 16 50.6 151 1.08 Other Income 0.0 0.00 0.0 0.00 Total 194 20.8 1,777 13.17 215 20.7 1,977 14.12 - ------------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL INCOME 737 79.2 6,761 50.11 825 79.3 7,573 54.09 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING EXPENSES Administrative & General 100 10.8 920 6.82 117 11.2 1,071 7.65 Management Fee 28 3.0 256 1.90 31 3.0 286 2.05 Marketing 87 9.3 797 5.91 91 8.8 839 5.99 Franchise Fees 28 3.0 259 1.92 32 3.1 294 2.10 Property Oper. & Maint. 67 7.2 612 4.54 74 7.2 683 4.88 Energy 110 11.8 1,006 7.45 121 11.6 1,111 7.94 Total 420 45.1 3,850 28.53 467 44.9 4,285 30.61 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSE PROFIT 317 34.1 2,911 21.58 358 34.4 3,288 23.48 - ------------------------------------------------------------------------------------------------------------------------------------ FIXED EXPENSES Property Taxes 64 6.9 585 4.34 60 5.8 550 3.93 Insurance 27 2.9 250 1.85 19 1.8 172 1.23 Reserve for Replacement 37 4.0 342 2.53 41 4.0 380 2.72 Equipment Rental 4 0.4 33 0.25 4 0.4 37 0.26 Total 132 14.2 1,210 8.97 124 12.0 1,140 8.14 - ------------------------------------------------------------------------------------------------------------------------------------ NET INCOME $185 19.9% $1,701 $12.61 $234 22.4% $2,148 $15.34 ====================================================================================================================================
* Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 90 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The year-to-date August statements presented on the previous page show an increase in telephone revenues from 1995 to 1996; this is largely attributable to the presence of numerous government officials and media representatives following the crash of TWA Flight 800 off the coast of Long Island; by the nature of their business, these guests made more long-distance calls than would be expected of the hotel's typical clientele. Departmental expenses and operating expenses remained relatively stable. The only fixed expense that showed any significant fluctuation was insurance, which declined from 1995 to 1996 on a year-to-date basis. Forecast of Income and Expense The forecast of income and expense is intended to reflect the appraiser's subjective estimate of how a typical buyer would project the subject property's operating results. Depending on the dynamics of the local market, a typical buyer's projection may be adjusted upward or downward. We have attempted to consider these factors in formulating this forecast. HVS International uses a fixed and variable component model to project a lodging facility's revenue and expense levels. This model is based on the premise that hotel revenues and expenses have one component that is fixed and another that varies directly with occupancy and facility usage. A projection can be made by taking a known level of revenue or expense and calculating its fixed and variable components. The fixed component is then held constant, while the variable component is adjusted for the percent change between the projected occupancy and facility usage and that which produced the known level of revenue or expense. Base-Year Statement of Income and Expense Based on our review of the operating histories of the subject property and comparable hotels, we have derived a base-year statement of income and expense expressed in 1995 dollars. The units of comparison include a percentage of departmental and total revenue, amounts per available room, and amounts per occupied room. The income and expense ratios reflect an occupancy level of 56.9%. The base-year profit and loss statement will be used to determine the relationship between the fixed and variable components. HVS International, Mineola, New York Income Capitalization Approach 91 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-4 Base-Year Statement of Income and Expense - -------------------------------------------------------------------------------- 1995 -------------------------------------------------- No of Rooms: 109 Occupancy: 56.9% Average Rate: $61.34 Amount per Amount per No of Occupied Rooms: 22,630 Percent Available Occupied (+000) of Gross Room Room - -------------------------------------------------------------------------------- REVENUE Rooms $1,388 95.8 % $12,736 $61.34 Telephone 40 2.8 371 1.79 Other Income 21 1.5 193 0.93 Total 1,450 100.0 13,300 64.06 - -------------------------------------------------------------------------------- EXPENSES Rooms* 329 23.7 3,018 14.54 Telephone* 21 53.0 197 0.95 Administrative & General 180 12.4 1,649 7.94 Management Fee 43 3.0 399 1.92 Marketing 124 8.5 1,136 5.47 Franchise Fees 53 3.6 484 2.33 Property Oper. & Maint. 111 7.7 1,022 4.92 Energy 151 10.4 1,382 6.66 Property Taxes 86 6.0 793 3.82 Insurance 33 2.3 300 1.44 Reserve for Replacement 58 4.0 532 2.56 Equipment Rental 5 0.4 50 0.24 Total 1,195 82.4 10,963 52.80 - -------------------------------------------------------------------------------- NET INCOME $255 17.6 % $2,337 $11.26 ================================================================================ * Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- Inflation Assumptions The base revenue and expense amounts are inflated to reflect current dollars for each projection year. Although line items can be affected by different factors, we must establish a general rate of inflation that will be applied to most revenue and expense categories. The following table shows inflation estimates made by economists at some noted institutions and corporations. HVS International, Mineola, New York Income Capitalization Approach 92 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-5 Inflation Estimates - -------------------------------------------------------------------------------- Projected Increase in Consumer Price Index (Annualized Rate Versus 12 Months Earlier) ------------------------------------------ November May Source of 1996 of 1997 - -------------------------------------------------------------------------------- Maureen Allyn, Scudder Stevens Clark 3.1 % 2.3 % Wayne Angell, Bear Stearns 3.0 3.2 Richard Berner, Mellon Bank 2.9 2.8 David Berson, Fannie Mae 2.9 2.8 David Blitzer, S&P 3.0 2.7 Paul Boltz, T. Rowe Price 3.2 3.5 David Bostian, Herzog, Heine, Geduld 2.9 2.5 Philip Braverman, DKB Securities 3.0 2.8 William Brown, J.P. Morgan 3.3 3.2 Rosanne Cahn, CS First Boston 3.1 2.6 James Coons, Huntington National Bank 3.2 3.0 Michael Cosgrove, The Econoclast 3.2 3.3 Dewey Daane, Vanderbilt University 3.4 3.6 Robert Dederick, Northern Trust 3.1 3.4 W.Dudley, Goldman Sachs 3.4 3.2 Michael Englund, MMS Intl. 3.2 3.3 Michael Evans, Evans Group 3.0 3.0 Gail Fosler, Conference Board 3.5 3.6 Maury Harris, Paine Weber, Inc. 2.8 2.8 Tracy Herrick, Jefferies & Co. 3.2 3.6 Stuart Hoffman, PNC Bank 3.1 2.8 William Hummer, Wayne Hummer 2.9 3.0 Edward Hyman, ISI Group 2.8 2.1 Saul Hymans, University of Michigan 2.7 1.7 Mieczyslaw Karczmar, Deutsche Bank 2.8 3.2 Kurt Karl, WEFA Group 2.6 2.3 Irwin Kellner, Chase Manhattan Bank 2.6 2.3 D. Laufenberg, Amer. Exp. Finl. Adv. 3.2 3.4 Michelle Laughlin, Sanwa Securities 3.0 3.2 Carol Leisenring, CoreStates Financial 2.7 2.5 Richard Lemmon, General Motors 3.0 3.0 Mickey Levy, NationsBank Capital Markets 2.6 2.4 David Littmann, Comerica 3.1 3.0 John Lonski, Moody's Investors Service 3.3 3.2 Paul McCulley, UBS Securities 3.0 2.8 John McDevitt, 3M 2.6 2.5 Arnold Moskowitz, Moskowitz Capital 3.1 3.5 John Mueller, LBMC, Inc. 3.2 2.5 David Munro, High Frequency Econ. 3.0 2.5 Carl Palash, MCM MoneyWatch 3.0 3.0 Nicholas Perna, Fleet Financial Group 3.3 3.3 Elliott Platt, Donaldson Lufkin 2.8 2.0 Maria F. Ramirez, MF Ramirez 3.0 3.0 Donald Ratajczak, Georgia State University 3.0 3.3 David Resler, Nomura Securities International 2.9 2.6 Allan Reynolds, Hudson Institute 3.3 3.6 Richard Rippe, Prudential Securities 3.1 3.3 A. Gary Schilling, Schilling & Co. 3.0 3.0 Allen Sinai, Lehman Brothers 3.2 3.4 James Smith, University of North Carolina 2.1 1.9 Susan Sterne, Economic Analysis 2.5 2.5 Donald Straszheim, Merrill Lynch 2.7 2.3 Thomas Synott III, U.S. Trust Company 3.3 3.4 John Williams, Bankers Trust 3.0 3.1 Raymond Worseck, A.G. Edwards 3.6 3.3 David Wyss, DRI/McGraw-Hill 3.0 2.5 Edward Yardeni, Deutsche Morgan Grenfell 2.2 2.0 Mark Zandi, Regional Financial Associates 3.0 3.2 ----- ----- Average 3.0 % 2.9 % Source: Wall Street Journal, July 1, 1996 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 93 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The preceding table shows inflation forecasts averaging 3.0% and 2.9%. Although most of the economists in the sample estimate inflation rates ranging from 2.5% to 3.4%, several anticipate slightly higher levels. As a further check on these inflation projections, we have reviewed historical increases in the Consumer Price Index. Because the value of real estate is predicated on cash flows over a relatively long period, inflation should be considered from a long-term perspective. Between 1986 and 1995, the national CPI increased at an average annual compounded rate of 3.7%. In consideration of these historical trends, the projections set forth above, and our assessment of probable property appreciation levels, we have selected an annual stabilized inflation rate of 3.5% annually. One of the exceptions to this general inflation assumption is the projected growth in average rate. As noted earlier, the subject property's room rate is expected to increase by 4.0% in 1997 before stabilizing at 3.5% annually throughout the remainder of the projection period. Using these inflation assumptions, the base-year income and expense statement (which is expressed in 1995 dollars) is inflated to arrive at projections. Each revenue and expense category will be projected using the inflated base statement to determine the fixed and variable component relationships. Rooms Revenue Rooms revenue is determined by two variables: occupancy and average rate. Earlier in this report, we estimated the subject property's occupancy and average rate as follows. ================================================================================ Table 10-6 Projected Occupancy and Average Rate - -------------------------------------------------------------------------------- 1997 Stabilized ----------------------------------------------------------------------- Projected Occupancy Percentage 59.0 % 60.0 % Projected Average Rate $67.61 $69.97 - -------------------------------------------------------------------------------- Rooms revenue is calculated as follows. HVS International, Mineola, New York Income Capitalization Approach 94 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-7 Forecast of Rooms Revenue - -------------------------------------------------------------------------------- Rooms Number Days Revenue Year Occupancy Average Rate of Units in Year (+000) - -------------------------------------------------------------------------------- 1997 59 % x $67.61 x 109 x 365 = $1,587 Stabilized 60 x 69.97 x 109 x 365 = 1,670 - -------------------------------------------------------------------------------- Telephone Revenue Telephone revenue is generated by hotel guests who charge local and long-distance calls to their rooms, and by individuals who use the property's public telephones. Prior to the early 1980s, hotels were limited to a 15% commission on long-distance calls, which allowed few profits. Deregulation and the development of sophisticated call-accounting equipment have resulted in profitable telephone departments. State-of-the-art equipment is capable of least-cost routing, automatic price billing, and posting telephone charges to guest folios. Hotels can select among various long-distance services, and can also work with any one of a number of Alternative Operator Services (AOS). These systems route and price calls, and may provide additional services. In recent years, the hospitality industry has experienced diverging trends with respect to telephone revenue. Prices per call have increased, in some cases dramatically, yielding departmental profits as high as 50% to 55%. However, the number of long-distance calls billed per occupied room has declined as a result of the extensive use of long-distance carrier services that can be accessed locally or through a toll-free number. When guests charge long-distance calls to their personal or business accounts in this manner, the hotel loses the revenue associated with long-distance tariffs and mark-ups, and only receives an access fee. Most telephone revenue varies directly with changes in occupancy. However, there is a small fixed component consisting of public telephone revenue, which is primarily generated by individuals using the hotel's food, beverage, and meeting facilities. Using this fixed and variable relationship, the subject property's telephone revenue is projected as follows. HVS International, Mineola, New York Income Capitalization Approach 95 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-8 Forecast of Telephone Revenue - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Telephone Revenue (+000) $45 $47 Percent of Total Revenue 2.7% 2.7% Amount per Available Room $411 $432 Amount per Occupied Room $1.92 $1.97 - -------------------------------------------------------------------------------- Other Income Other income is derived from sources other than guestrooms and telephone services. Depending on the type of hotel and the facilities and amenities offered, other income may include the following items. o Rentals - stores, office space, concession space, showcases, clubs, and storage. o Commissions from auto rentals, photography, telegrams, and vending services. o Concessions - revenue derived from charges for the privilege of operating departments that could be operated by the hotel. Gift shops, barber shops, and beauty salons are often operated as concessions. o Laundry, dry cleaning, and fax services. o Cash discounts earned - discounts from creditors' accounts for payment within the discount period. This item does not include trade discounts, which are a deduction from the cost of goods sold. o Electronic games and pinball machines. o Forfeited advance deposits and guaranteed no-shows. o Service charges - service charges that are added to a customer's account but are not paid to service personnel. o Interest income - interest from house accounts. o Salvage - revenue from the sale of old or obsolete items. Other income is highly sensitive to changes in occupancy and slightly correlated to food and beverage volume. Using this fixed and variable relationship, the subject property's other income is projected as follows. HVS International, Mineola, New York Income Capitalization Approach 96 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-9 Forecast of Other Income - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Other Income (+000) $23 $24 Percent of Total Revenue 1.4% 1.4% Amount per Available Room $209 $218 Amount per Occupied Room $0.98 $1.01 - -------------------------------------------------------------------------------- Rooms Expense Rooms expense consists of items related to the sale and upkeep of guestrooms and public space. Salaries, wages, and employee benefits account for a substantial portion of this category. Although payroll varies somewhat with occupancy (because managers can schedule maids, bell personnel, and house cleaners to work when demand requires), much of a hotel's payroll is fixed. Front desk personnel, public area cleaners, the housekeeper, and other supervisors must be maintained at all times. As a result, salaries, wages, and employee benefits are only moderately sensitive to changes in occupancy. Commissions represent remuneration to travel agents for booking rooms. Because these fees are based on a percentage of rooms revenue, they are highly dependent on occupancy and rate. Reservations is a similar expense that reflects the cost of a franchise reservation system that typically bills as a percentage of rooms revenue. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are only slightly affected by changes in volume. In light of these considerations, we project the subject property's rooms expense as follows. ================================================================================ Table 10-10 Forecast of Rooms Expense - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Rooms Expense (+000) $358 $373 Percent of Rooms Revenue 22.5% 22.3% Amount per Available Room $3,282 $3,420 Amount per Occupied Room $15.25 $15.63 - -------------------------------------------------------------------------------- Telephone Expense Telephone expense consists of all costs associated with this department. In the case of small hotels with automated systems, the operation of telephones may be an additional responsibility of front desk personnel; however, most large properties employ full-time operators. HVS International, Mineola, New York Income Capitalization Approach 97 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The bulk of the telephone expense consists of the cost of local and long-distance calls billed by the telephone companies that provide these services. Because most calls are made by in-house guests, these costs are moderately correlated to occupancy. Unless a particular hotel department incurs high expenses, use of telephone services by hotel employees is charged to this account. The remaining costs, which include salaries, wages, printing, and other expenses, are moderately fixed. The following table illustrates our forecast of telephone expense. ================================================================================ Table 10-11 Forecast of Telephone Expense - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Telephone Expense (+000) $23 $24 Percent of Telephone Revenue 51.8% 51.6% Amount per Available Room $214 $222 Amount per Occupied Room $0.98 $1.01 - -------------------------------------------------------------------------------- Administrative and General Expense Administrative and general expense includes the salaries and wages of all administrative personnel who are not directly associated with a particular department. Expense items related to the management and operation of the property are also allocated to this category. Most administrative and general expenses are relatively fixed. The exceptions are cash overages and shortages; commissions on credit card charges; provision for doubtful accounts, which are moderately affected by the number of transactions or total revenue; and salaries, wages, and benefits, which are very slightly influenced by volume. In recent years, several new items have been added to the administrative and general expense category. Human resources includes the cost of recruiting, relocating, and training personnel. Security consists of the cost of contract security for the property and related expenses. The general insurance category includes premiums for liability, fidelity, life, theft coverage, and business interruption insurance. Fire and extended-coverage insurance on the building and contents is a separate insurance expense category. Liability insurance covers third-party actions involving bodily injury and personal property, and is typically based on rooms receipts, meeting and banquet income, and food and beverage revenue. Factors that may have an impact on a hotel's liability expense include the size of the meeting, banquet, and restaurant facilities; the ratio between the amount of HVS International, Mineola, New York Income Capitalization Approach 98 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= alcohol served and total food and beverage sales; the presence of a dance floor; a high-rise structure; a swimming pool; life safety support systems; and the guest transportation services provided by the hotel. The following table illustrates our forecast of administrative and general expense. ================================================================================ Table 10-12 Forecast of Administrative and General Expense - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Admin. & General Expense (+000) $196 $204 Ratio to Total Revenue 11.9% 11.7% Amount per Available Room $1,798 $1,872 Amount per Occupied Room $8.37 $8.56 - -------------------------------------------------------------------------------- Management Fee Management expense consists of the basic fee paid to the type of company that is anticipated to operate the subject property. Some companies provide management services alone, while others also provide a brand name affiliation. When a management company has no brand identification, the property owner often acquires a franchise that provides the necessary image and recognition. Although most hotel management companies employ a fee schedule that includes a basic fee (usually a percentage of total revenue) and an incentive fee (usually a percentage of defined profit), the incentive portion is often subordinated to debt service and does not appear in a forecast of net income before debt service. Basic hotel management fees are almost always based on a percentage of total revenue, which means they have no fixed component. Although the incentive fee does not decrease the cash flow available for debt service, it does reduce the potential cash flow to equity, and must be accounted for in the valuation process. Generally, the most appropriate procedure for handling the impact of the incentive fee on the equity component is to use the projected net income before debt service and incentive fee, but adjust the equity dividend or yield rate upward to reflect this added management cost. The adjusted equity dividend and yield rates will be described later in this section. The subject property is operated by Remington Hotel Company for a fee of 3.0% of total revenue. Based on our review of the current market for management contracts, we are of the opinion that this fee is consistent with prevailing market terms. Applying this management fee structure to the HVS International, Mineola, New York Income Capitalization Approach 99 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= projection of total revenue yields the following forecast of the subject property's management fee. ================================================================================ Table 10-13 Forecast of Management Fee - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Management Fee (+000) $50 $52 - -------------------------------------------------------------------------------- Marketing Expense Marketing expense consists of all costs associated with advertising, sales, and promotion; these activities are intended to attract and retain customers. Marketing can be used to create an image, develop customer awareness, and stimulate patronage of a property's various facilities. The marketing category is unique in that all expense items, with the exception of fees and commissions, are totally controlled by management. Most hotel operators establish an annual marketing budget that sets forth all planned expenditures. If the budget is followed, total marketing expenses can be projected accurately. Marketing expenditures are unusual because although there is a lag period before results are realized, the benefits are often extended over a long period. Depending on the type and scope of the advertising and promotion program implemented, the lag time can be as short as a few weeks or as long as several years. However, the favorable results of an effective marketing campaign tend to linger, and a property often enjoys the benefits of concentrated sales efforts for many months. Marketing expense can be divided into five categories: sales, reservations, advertising and merchandising, other marketing activities, and fees and commissions. Together, these categories include all marketing efforts made by hotel personnel and outside parties. Marketing expenses are fixed with the exception of reservations, fees, and commissions, which are calculated as a percentage of rooms revenue. Based on the location of the subject property, the local market for transient accommodations, the competitive environment, and the hotel's anticipated market segmentation, we have developed the following marketing forecast using a fixed and variable component model. HVS International, Mineola, New York Income Capitalization Approach 100 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-14 Forecast of Marketing Expense - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Marketing Expense (+000) $135 $141 Ratio to Total Revenue 8.2% 8.1% Amount per Available Room $1,241 $1,291 Amount per Occupied Room $5.76 $5.90 - -------------------------------------------------------------------------------- Franchise Fee Franchise expense represents the fees paid to Howard Johnson for the use of the company's name, trademarks, and service marks. The following table illustrates the projection of the subject property's franchise fee. ================================================================================ Table 10-15 Forecast of Franchise Fee - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Franchise Fees (+000) $60 $63 - -------------------------------------------------------------------------------- Property Operations and Maintenance Property operations and maintenance expense is another expense category that is largely controlled by management. Except for repairs that are necessary to keep the facility open and prevent damage (e.g., plumbing, heating, and electrical items), most maintenance can be deferred for varying lengths of time. Maintenance is an accumulating expense. If management elects to postpone performing a required repair, they have not eliminated or saved the expenditure; they have only deferred payment until a later date. A lodging facility that operates with a lower-than-normal maintenance budget is likely to accumulate a considerable amount of deferred maintenance. The age of a lodging facility has a strong influence on the required level of maintenance. A new or thoroughly renovated property is protected for several years by modern equipment and manufacturers' warranties. However, as a hostelry grows older, maintenance expenses escalate. A well-organized preventive maintenance system often helps delay deterioration, but most facilities face higher property operations and maintenance costs each year, regardless of the occupancy trend. The quality of initial construction can also have a direct impact on future maintenance requirements. The use of high-quality building materials and construction methods generally reduces the need for maintenance expenditures over the long term. HVS International, Mineola, New York Income Capitalization Approach 101 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Property operations and maintenance is considered an operating expense; as such, it includes only those components that can be expensed, rather than capitalized, under Internal Revenue Service regulations. For example, if a table leg is broken, the repair of that leg is considered an expense and is chargeable to property operations and maintenance. If the table is replaced, it becomes a capital expenditure and does not appear under the property operations and maintenance category. Appraisers account for capital replacement of items such as furniture and equipment in the reserve for replacement account, which is discussed later in this section. Property operations and maintenance costs are relatively fixed, and are projected as follows. ================================================================================ Table 10-16 Forecast of Property Operations and Maintenance Expense - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Prop. Oper. & Maint. Expense (+000) $122 $127 Ratio to Total Revenue 7.4% 7.3% Amount per Available Room $1,116 $1,161 Amount per Occupied Room $5.18 $5.30 - -------------------------------------------------------------------------------- Energy Expense The energy consumption of a lodging facility takes several forms, including water and space heating, air conditioning, lighting, cooking fuel, and other miscellaneous power requirements. The most common sources of hotel energy are electricity, natural gas, fuel oil, and steam. This category also includes the cost of water service. Total energy cost depends on the source and quantity of fuel used. Electricity tends to be the most expensive source, followed by oil and gas. Although all hotels consume a sizable amount of electricity, many properties supplement their energy requirements with less expensive sources, such as gas and oil, for heating and cooking. A large portion of a hostelry's energy consumption is relatively fixed. Restaurants, kitchens, public areas, and corridors must be continually lighted and climate-controlled, regardless of occupancy. The energy cost of an additional occupied room (i.e., a few hours of light, television, heat, or air conditioning) is minimal. The following table presents our forecast of the subject property's energy expense. HVS International, Mineola, New York Income Capitalization Approach 102 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-17 Forecast of Energy Expense - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Energy Expense (+000) $162 $168 Ratio to Total Revenue 9.8% 9.7% Amount per Available Room $1,491 $1,546 Amount per Occupied Room $6.92 $7.06 - -------------------------------------------------------------------------------- Property Taxes The estimate of property taxes was detailed in a previous section of this report. The following table summarizes these projections. ================================================================================ Table 10-18 Forecast of Property Taxes - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Property Taxes (+000) $94 $99 - -------------------------------------------------------------------------------- Insurance Expense The insurance expense category consists of the cost of insuring the hotel and its contents against damage or destruction by fire, weather, sprinkler leakage, boiler explosion, plate glass breakage, and so forth. It does not include liability coverage, which is a component of administrative and general expense. Insurance rates are based on many factors, including building design and construction, fire detection and extinguishing equipment, fire district, distance from the firehouse, and the area's fire experience. Insurance expenses do not vary with occupancy. Based on historical levels, we project the subject property's insurance expense at approximately $35,000 in 1997 (the first projection period). In subsequent years, this amount is assumed to increase in tandem with inflation. The following table outlines our projection of insurance expense. ================================================================================ Table 10-19 Forecast of Insurance Expense - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Insurance Expense (+000) $35 $36 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 103 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Reserve for Replacement Furniture, fixtures, and equipment are essential to the operation of a lodging facility, and their quality influences a property's class. This category includes all non-real estate items that are capitalized, rather than expensed. The furniture, fixtures, and equipment of a hotel are exposed to heavy use and must be replaced at regular intervals. The useful life of these items is determined by their quality, durability, and the amount of guest traffic and use. Periodic replacement of furniture, fixtures, and equipment is essential to maintain the quality, image, and income-producing potential of a lodging facility. Because capitalized expenditures are not included in the operating statement but nevertheless affect an owner's cash flow, an appraisal should reflect these expenses in the form of an appropriate reserve for replacement. Our industry experience indicates that a reserve for replacement of 3% to 5% of total revenue is generally sufficient to provide for the timely replacement of furniture, fixtures, and equipment. Because the reserve for replacement is based on a percentage of total revenue, it has no fixed component. Based on an analysis of comparable lodging facilities, we believe that a reserve for replacement of 4% of total revenue is sufficient to provide for the periodic replacement of the subject property's furniture, fixtures, and equipment. This amount is consistent with the reserve account contributions currently made by the hotel. The following table summarizes the projected reserve for replacement. ================================================================================ Table 10-20 Forecast of Reserve for Replacement - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Replacement Reserve (+000) $66 $70 - -------------------------------------------------------------------------------- Summary of Projections Based on the preceding analysis, we have formulated a forecast of income and expense. The table on the following page presents a detailed forecast through the stabilized year, including amounts per available room (PAR) and per occupied room (POR). For the purpose of comparison, this table also presents the subject property's most recent full year of operating history. The second table illustrates our ten-year forecast of income and expense in less detail. The forecasts pertain to calendar operating years, and are expressed in inflated dollars for each year. HVS International, Mineola, New York Income Capitalization Approach 104 - -------------------------------------------------------------------------------- ================================================================================ Table 10-21 Detailed Forecast of Income and Expense through the Stabilized Year and Most Recent Operating History, Howard Johnson Commack, Commack, New York - --------------------------------------------------------------------------------
Historical 1995 Results 1997 --------------------------------------- ---------------------------------------- No of Rooms: 109 109 Occupancy: 56.9% 59.0% Average Rate: $61.34 $67.61 No of Days Open: 365 Percent 365 Percent No of Occupied Rooms: 22,630 of 23,473 of (+000) Gross PAR POR (+000) Gross PAR POR - -------------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $1,388 96.2 % $12,736 $61.34 $1,587 95.9 % $14,560 $67.61 Telephone 34 2.3 310 1.49 45 2.7 413 1.92 Other Income 21 1.5 193 0.93 23 1.4 211 0.98 Total 1,443 100.0 13,238 63.76 1,655 100.0 15,183 70.51 - -------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES * Rooms 290 20.9 2,658 12.80 358 22.6 3,284 15.25 Telephone 19 54.9 170 0.82 23 51.1 211 0.98 Total 308 21.4 2,828 13.62 381 23.0 3,495 16.23 - -------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 1,135 78.6 10,411 50.14 1,274 77.0 11,688 54.27 - -------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 159 11.0 1,459 7.03 196 11.8 1,798 8.35 Management Fee 43 3.0 397 1.91 50 3.0 459 2.13 Marketing 138 9.5 1,263 6.08 135 8.2 1,239 5.75 Franchise Fees 44 3.0 400 1.93 60 3.6 550 2.56 Property Oper. & Maint. 101 7.0 929 4.47 122 7.4 1,119 5.20 Energy 151 10.4 1,382 6.66 162 9.8 1,486 6.90 Total 636 43.9 5,830 28.08 725 43.8 6,651 30.89 - -------------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 499 34.7 4,580 22.06 549 33.2 5,037 23.39 - -------------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 104 7.2 957 4.61 94 5.7 862 4.00 Insurance 37 2.5 335 1.61 35 2.1 321 1.49 Reserve for Replacement 58 4.0 530 2.55 66 4.0 606 2.81 Equipment Rental 5 0.4 50 0.24 6 0.4 55 0.26 Total 204 14.1 1,872 9.01 201 12.2 1,844 8.56 - -------------------------------------------------------------------------------------------------------------------------------- NET INCOME $295 20.6 % $2,709 $13.05 $348 21.0 % $3,193 $14.83 ================================================================================================================================ Telephone/Rooms 2.4% 2.8% Other Income/Rooms 1.5% 1.4%
Stabilized ---------------------------------------- No of Rooms: 109 Occupancy: 60.0% Average Rate: $69.97 No of Days Open: 365 Percent No of Occupied Rooms: 23,871 of (+000) Gross PAR POR - ------------------------------------------------------------------------------ REVENUE Rooms $1,670 95.9 % $15,321 $69.96 Telephone 47 2.7 431 1.97 Other Income 24 1.4 220 1.01 Total 1,741 100.0 15,972 72.93 - ------------------------------------------------------------------------------ DEPARTMENTAL EXPENSES * Rooms 373 22.3 3,422 15.63 Telephone 24 51.1 220 1.01 Total 397 22.8 3,642 16.63 - ------------------------------------------------------------------------------ DEPARTMENTAL INCOME 1,344 77.2 12,330 56.30 - ------------------------------------------------------------------------------ OPERATING EXPENSES Administrative & General 204 11.7 1,872 8.55 Management Fee 52 3.0 477 2.18 Marketing 141 8.1 1,294 5.91 Franchise Fees 63 3.6 578 2.64 Property Oper. & Maint. 127 7.3 1,165 5.32 Energy 168 9.6 1,541 7.04 Total 755 43.3 6,927 31.63 - ------------------------------------------------------------------------------ HOUSE PROFIT 589 33.9 5,404 24.67 - ------------------------------------------------------------------------------ FIXED EXPENSES Property Taxes 99 5.7 908 4.15 Insurance 36 2.1 330 1.51 Reserve for Replacement 70 4.0 642 2.93 Equipment Rental 6 0.3 55 0.25 Total 211 12.1 1,936 8.84 - ------------------------------------------------------------------------------ NET INCOME $378 21.8 % $3,468 $15.84 ============================================================================== Telephone/Rooms 2.8% Other Income/Rooms 1.4% * Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 105 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-22 Ten-Year Forecast of Income and Expense, Howard Johnson Commack, Commack, New York (+000) - --------------------------------------------------------------------------------
1997 1998 1999 2000 2001 --------------- --------------- ----------------- ---------------- --------------- No of Rooms: 109 109 109 109 109 No of Occupied Rooms: 23,473 23,871 23,871 23,871 23,871 Occupancy: 59.0% % of 60.0% % of 60.0% % of 60.0% % of 60.0% % of Average Rate: $67.61 Gross $69.97 Gross $72.42 Gross $74.95 Gross $77.58 Gross - ------------------------------------------------------------------------------------------------------------------------ REVENUE Rooms $1,587 95.9% $1,670 95.9% $1,729 95.9% $1,789 96.0% $1,852 96.0% Telephone 45 2.7 47 2.7 49 2.7 50 2.7 52 2.7 Other Income 23 1.4 24 1.4 25 1.4 25 1.3 26 1.3 Total 1,655 100.0 1,741 100.0 1,803 100.0 1,864 100.0 1,930 100.0 - ------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL EXPENSES* Rooms 358 22.6 373 22.3 386 22.3 399 22.3 413 22.3 Telephone 23 51.1 24 51.1 25 51.0 26 52.0 27 51.9 Total 381 23.0 397 22.8 411 22.8 425 22.8 440 22.8 - ------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL INCOME 1,274 77.0 1,344 77.2 1,392 77.2 1,439 77.2 1,490 77.2 - ------------------------------------------------------------------------------------------------------------------------ OPERATING EXPENSES Administrative & General 196 11.8 204 11.7 211 11.7 219 11.7 226 11.7 Management Fee 50 3.0 52 3.0 54 3.0 56 3.0 58 3.0 Marketing 135 8.2 141 8.1 146 8.1 151 8.1 156 8.1 Franchise Fees 60 3.6 63 3.6 66 3.7 68 3.6 70 3.6 Property Oper. & Maint. 122 7.4 127 7.3 131 7.3 136 7.3 140 7.3 Energy 162 9.8 168 9.6 174 9.7 180 9.7 187 9.7 Total 725 43.8 755 43.3 782 43.5 810 43.4 837 43.4 - ------------------------------------------------------------------------------------------------------------------------ HOUSE PROFIT 549 33.2 589 33.9 610 33.7 629 33.8 653 33.8 - ------------------------------------------------------------------------------------------------------------------------ FIXED EXPENSES Property Taxes 94 5.7 99 5.7 103 5.7 108 5.8 113 5.9 Insurance 35 2.1 36 2.1 38 2.1 39 2.1 40 2.1 Reserve for Replacement 66 4.0 70 4.0 72 4.0 75 4.0 77 4.0 Equipment Rental 6 0.4 6 0.3 6 0.3 6 0.3 7 0.4 Total 201 12.2 211 12.1 219 12.1 228 12.2 237 12.4 - ------------------------------------------------------------------------------------------------------------------------ NET INCOME $348 21.0% $378 21.8% $391 21.6% $401 21.6% $416 21.4% ======================================================================================================================== 2002 2003 2004 2005 2006 --------------- ---------------- --------------- --------------- --------------- No of Rooms: 109 109 109 109 109 No of Occupied Rooms: 23,871 23,871 23,871 23,871 23,871 Occupancy: 60.0% % of 60.0% % of 60.0% % of 60.0% % of 60.0% % of Average Rate: $80.29 Gross $83.10 Gross $86.01 Gross $89.02 Gross $92.14 Gross - ---------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $1,917 95.9% $1,984 95.9% $2,053 95.9% $2,125 95.9% $2,199 95.9% Telephone 54 2.7 56 2.7 58 2.7 60 2.7 62 2.7 Other Income 27 1.4 28 1.4 29 1.4 30 1.4 31 1.4 Total 1,998 100.0 2,068 100.0 2,140 100.0 2,215 100.0 2,292 100.0 - ---------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES* Rooms 428 22.3 443 22.3 458 22.3 474 22.3 491 22.3 Telephone 28 51.9 29 51.8 30 51.7 31 51.7 32 51.6 Total 456 22.8 472 22.8 488 22.8 505 22.8 523 22.8 - ---------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 1,542 77.2 1,596 77.2 1,652 77.2 1,710 77.2 1,769 77.2 - ---------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 234 11.7 243 11.8 251 11.7 260 11.7 269 11.7 Management Fee 60 3.0 62 3.0 64 3.0 66 3.0 69 3.0 Marketing 162 8.1 167 8.1 173 8.1 179 8.1 185 8.1 Franchise Fees 73 3.7 75 3.6 78 3.6 81 3.7 84 3.7 Property Oper. & Maint. 145 7.3 150 7.3 156 7.3 161 7.3 167 7.3 Energy 193 9.7 200 9.7 207 9.7 214 9.7 222 9.7 Total 867 43.5 897 43.5 929 43.4 961 43.5 996 43.5 - ---------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 675 33.7 699 33.7 723 33.8 749 33.7 773 33.7 - ---------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 118 5.9 123 5.9 129 6.0 134 6.0 140 6.1 Insurance 42 2.1 43 2.1 45 2.1 46 2.1 48 2.1 Reserve for Replacement 80 4.0 83 4.0 86 4.0 89 4.0 92 4.0 Equipment Rental 7 0.4 7 0.3 7 0.3 8 0.4 8 0.3 Total 247 12.4 256 12.3 267 12.4 277 12.5 288 12.5 - ---------------------------------------------------------------------------------------------------------------------- NET INCOME $428 21.3% $443 21.4% $456 21.4% $472 21.2% $485 21.2% ======================================================================================================================
* Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 106 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The conversion of a property's projected net income into an estimate of value is based on the premise that investors typically purchase real estate with a small amount of equity cash (25% to 40%) and a large amount of mortgage financing (60% to 75%). The amounts and terms of available mortgage financing and the rates of return that are required to attract sufficient equity capital form the basis for allocating the net income between the mortgage and equity components and deriving a value estimate. Mortgage Component Data for the mortgage component may be developed from statistics of actual hotel mortgages made by long-term lenders. The American Council of Life Insurance, which represents 20 large life insurance companies, publishes quarterly information pertaining to the hotel mortgages issued by its member companies. The following table summarizes the average mortgage interest rates of the hotel loans made by these lenders. In addition, the average A corporate bond yield (as reported by Moody's Bond Record) is shown for the purpose of comparison. HVS International, Mineola, New York Income Capitalization Approach 107 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-23 Average Mortgage Interest Rates and Average A Corporate Bond Yields - -------------------------------------------------------------------------------- Average Average A Corporate Year Interest Rate Bond Yield ---------------------------------------------------------------------- 1st Quarter 1996 7.79 % 7.37 % 4th Quarter 1995 8.44 7.28 3rd Quarter 1995 8.61 7.67 2nd Quarter 1995 9.25 7.87 1st Quarter 1995 9.14 8.50 3rd Quarter 1994 9.64 8.48 2nd Quarter 1994 9.38 8.28 4th Quarter 1993 9.38 7.80 3rd Quarter 1993 8.41 7.28 2nd Quarter 1993 10.53 9.65 4th Quarter 1992 9.43 8.48 3rd Quarter 1992 9.99 8.38 2nd Quarter 1992 9.47 8.79 1st Quarter 1992 10.02 8.81 4th Quarter 1991 10.49 8.97 3rd Quarter 1991 10.03 9.29 2nd Quarter 1991 10.75 9.45 3rd Quarter 1990 10.47 9.89 2nd Quarter 1990 10.58 9.83 4th Quarter 1989 9.96 9.42 3rd Quarter 1989 9.55 9.46 2nd Quarter 1989 10.54 9.93 1st Quarter 1989 10.39 10.16 4th Quarter 1988 10.07 10.03 3rd Quarter 1988 10.66 10.51 2nd Quarter 1988 10.09 10.33 4th Quarter 1987 10.41 10.45 3rd Quarter 1987 10.00 9.95 2nd Quarter 1987 9.81 9.46 1st Quarter 1987 9.43 9.19 4th Quarter 1986 9.44 9.55 3rd Quarter 1986 9.56 9.71 2nd Quarter 1986 9.80 9.91 1st Quarter 1986 10.99 10.62 Sources: American Council of Life Insurance; Moody's Bond Record - -------------------------------------------------------------------------------- Because of the six- to nine-month lag time in reporting and publishing hotel mortgage statistics, it is necessary to update this information to reflect current lending practices. Research by HVS International indicates that there is a close mathematical relationship between the average interest rate of a HVS International, Mineola, New York Income Capitalization Approach 108 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= hotel mortgage and the concurrent yield on an average A corporate bond. Through a regression analysis, this relationship is expressed as follows. Y = 2.76078 + 0.782280 X Where: Y = Estimated Hotel/Motel Mortgage Interest Rate X = Current Average A Corporate Bond Yield (Coefficient of correlation is 96.4%) The average yield on A corporate bonds for the third quarter of 1996, as reported by Moody's Bond Record, was 7.91%. Using a factor of 7.91% in the equation presented above produces an estimated hotel/motel interest rate of 8.95%. In addition to the mortgage interest rate estimate derived from this regression analysis, HVS International constantly monitors the terms of hotel mortgage loans made by our institutional lending clients. In the past year, we have noted an increase in the availability of debt financing, and many lenders have returned to the market. The current level of lending activity represents a significant increase from the restricted environment of the early 1990s. Nonetheless, the market for hotel mortgage loans remains somewhat tight, particularly when compared to the conditions that prevailed in the mid-to late 1980s. In the current lending climate, strong hotel projects that are structured on an economic basis can secure mortgage financing at interest rates ranging from 8% to 11%, depending on the property, location, affiliation, and operator. In the 1980s, when hotel mortgages were widely available, loan-to-value ratios typically ranged from 75% to 80%. Amortization schedules were generally based on 30 years, although the term of the loan was more likely to be seven to ten years. The few loans that were underwritten in the early 1990s were based on far more stringent parameters: loan-to-value ratios declined to a range of 50% to 65%, and amortization periods of 20 to 25 years were most common. With the recent reemergence of hotel financing, loan-to-value requirements and amortization schedules have loosened somewhat. At present, we find that lenders who are active in the market are using loan-to-value ratios of 65% to 75%, and amortization periods of 25 to 30 years. The exact terms offered depend on specific factors such as the property's location, the age and quality of the physical facility, local hostelry market conditions, and HVS International, Mineola, New York Income Capitalization Approach 109 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= (perhaps more significantly) the profile of the borrower. The strongest projects typically command the highest loan-to-value ratios. Based on the preceding analysis of the current lodging industry mortgage market and adjustments for specific factors such as the property's location and conditions in the local hotel market, it is our opinion that a 20-year amortization mortgage with a 9.5% interest rate and a 0.111856 constant is appropriate for the subject property. We believe that a mortgage lender will lend up to 70% of the hotel's market value as determined by this appraisal. Equity Component The remaining capital required for a hotel investment generally comes from the equity investor. The rate of return that an equity investor expects over a ten-year holding period is known as the equity yield. Unlike the equity dividend, which is a short-term rate of return, the equity yield specifically considers a long-term holding period (generally ten years), annual inflation- adjusted cash flows, property appreciation, mortgage amortization, and proceeds from a sale at the end of the holding period. It is difficult to quantify the rate of return required by equity investors who are seeking to purchase hotel properties. To establish an appropriate equity yield rate, HVS International uses two sources of data: past appraisals and investor interviews. Past Appraisals - During the past 12 months, HVS International has appraised more than 400 hotels, including properties located in most major national markets. Each appraisal used a similar mortgage-equity approach in which income is projected and then discounted to a current value at rates reflecting the cost of debt and equity capital. In the case of hotels that were sold subsequent to our valuations, we are able to determine an appropriate equity yield rate by excluding incentive management fees from the projection of income and expense, inserting the projection into a valuation model, and adjusting the appraised value to reflect the actual sales price by modifying the return assumptions. The following table shows a representative sample of hotels that were sold shortly after we appraised them, along with the imputed equity return based on our valuation approach. HVS International, Mineola, New York Income Capitalization Approach 110 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-24 Sample of Hotels Sold - --------------------------------------------------------------------------------
No. of Date of Overall Total Property Equity Hotel City and State Rooms Sale Sales Price Rate Yield Yield - ------------------------------------------------------------------------------------------------------------------------------------ Ritz-Carlton Phoenix, AZ 281 2/94 $ 23,000,000 11.0% 14.6% 21.7% Marriott Marina Fort Lauderdale, FL 580 2/94 40,000,000 12.2 16.4 26.7 Holiday Inn Edison, NJ 274 3/94 11,803,000 7.8 17.0 26.3 Crescent Hotel Phoenix, AZ 342 3/94 26,000,000 6.5 7.2 2.2 Checkers Hotel Kempinski Los Angeles, CA 173 4/94 12,750,000 3.0 18.3 27.0 Best Western Fireside Inn Cambria, CA 46 4/94 3,377,000 11.7 15.8 24.3 Phoenician Resort Phoenix, AZ 580 4/94 224,000,000 6.6 9.3 8.9 Newark-Fremont Hilton Newark, CA 300 5/94 8,950,000 8.8 14.9 20.7 Radisson Inn Orlando, FL 299 5/94 11,150,000 12.9 18.0 28.2 Westin Kauai Lihue, Kauai, HI 840 6/94 97,400,000 (1.9) 8.1 7.2 Residence Inn Binghamton, NY 72 6/94 6,325,000 10.8 13.9 21.9 Hotel Millenium New York, NY 561 6/94 75,000,000 9.5 14.1 23.0 Best Western Otay Valley Chula Vista, CA 120 7/94 2,350,000 13.2 21.1 31.8 Hampton Inn Islandia, NY 121 7/94 6,572,000 12.6 16.6 28.2 Hampton Inn Willow Grove, PA 150 7/94 10,220,000 11.0 14.3 23.0 Hampton Inn West Palm Beach, FL 136 7/94 4,220,000 10.8 10.8 14.3 Hampton Inn Naples, FL 107 7/94 5,700,000 11.4 11.5 24.9 Hampton Inn Albany, NY 126 7/94 9,204,000 9.3 11.5 15.8 Marriott Hotel South Bend, IN 299 7/94 11,500,000 10.5 13.2 18.9 Marriott SFO Burlingame, CA 684 8/94 61,700,000 10.2 13.2 19.0 Westfields Conference Center Chantilly, VA 340 8/94 46,000,000 12.3 15.9 25.3 Radisson Mark Resort Vail, CO 349 9/94 25,200,000 8.9 15.8 24.1 Marriott East Side New York, NY 664 10/94 55,000,000 8.5 9.7 11.1 Marriott Resort Vail, CO 349 10/94 25,200,000 14.2 18.9 30.5 Marriott Quorum Addison, TX 547 10/94 29,815,000 13.5 18.2 31.8 Sheraton Hotel Hasbrouck Heights, NJ 338 11/94 10,450,000 18.3 21.1 30.7 Sheraton Inn Napa, CA 191 12/94 9,968,000 8.9 13.7 19.8 Marriott Fisherman's Wharf San Francisco, CA 255 12/94 27,755,000 10.8 13.4 19.4 Marriott Hotel Portland, OR 503 12/94 45,000,000 12.9 17.4 30.0 Radisson Inn Springfield, MO 199 12/94 5,800,000 8.2 10.1 11.3 Williamsburg Hilton Williamsburg, VA 291 12/94 15,000,000 15.4 19.0 32.0 Marriott Tech Center Denver, CO 625 12/94 36,000,000 13.7 16.4 27.1 Holiday Inn Sunspree Singer Island, FL 222 12/94 11,900,000 8.6 10.6 12.4 The Plaza New York, NY 805 6/95 325,000,000 7.0 11.0 14.0 Fullerton Suites Fullerton, CA 96 5/95 5,000,000 12.9 18.7 28.5 Residence Inn Baton Rouge, LA 80 6/95 6,518,000 12.7 14.8 21.2 Residence Inn Overland Park, KS 112 6/95 8,500,000 8.9 14.7 20.8 Residence Inn Des Moines, IA 112 6/95 7,660,000 9.8 14.1 19.6 Residence Inn Hunt Valley, MD 96 6/95 6,580,000 12.3 13.6 18.3 Residence Inn Kansas City, MO 112 6/95 6,560,000 10.4 13.2 19.8 Residence Inn Lincoln, NE 120 6/95 7,100,000 10.0 13.7 18.5 Embassy Suites Schaurmburg, IL 209 12/95 17,800,000 10.0 13.5 18.9 Marriott Hotel Andover, MA 293 12/95 24,000,000 9.7 13.5 19.2 Doubletree Suites Valley Forge, PA 229 12/95 28,500,000 10.7 14.2 15.5 Marriott Hotel Tysons Corner, VA 390 12/95 41,100,000 10.7 13.1 18.0 Marriott Hotel Warner Center, CA 461 12/95 57,900,000 6.2 11.6 14.2 Hilton at the Club Pleasanton, CA 294 12/95 22,000,000 10.5 13.4 17.0
Source: HVS International - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 111 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Investor Interviews - HVS International is in constant contact with numerous institutional and individual hotel investors. This source of equity funds has definite return requirements that can be expressed as an equity yield rate based on a ten-year projection of net income before incentive management fees but after debt service. Based on our surveys and investor interviews, the following table illustrates the range of equity yields generally required by individual and institutional investors. ================================================================================ Table 10-25 Equity Yield Requirements - -------------------------------------------------------------------------------- Source Equity Yield Requirement ------ ------------------------ Individual 20% - 24% Institution 18% - 22% - -------------------------------------------------------------------------------- Based on the assumed 70% loan-to-value ratio, the risk inherent in achieving the projected income stream, and the age, condition, and anticipated market position of the subject property, it is our opinion that an equity investor is likely to require an equity yield rate of 22.0% before payment of incentive management fees. This estimate is well supported by the equity yield requirements presented previously. Terminal Capitalization Rate Inherent in this valuation process is the assumption of a sale at the end of the ten-year holding period. The estimated reversionary sales price as of that date is calculated by capitalizing the projected 11th-year net income by an overall terminal capitalization rate. A percentage for the seller's brokerage and legal fees is deducted from this sales price, and the net proceeds to the equity interest (also known as the equity residual) are calculated by deducting the outstanding mortgage balance from the reversion. To estimate a property's reversionary value, the appraiser must select a terminal capitalization rate and an allocation for brokerage and legal fees. The terminal capitalization rate is an overall rate that is applied to one stabilized year, and thus it inherently incorporates the cost of debt and equity capital. The terminal capitalization rate can be derived through a mortgage and equity band of investment technique which calculates the weighted average cost of the capital used in a hotel investment. Combining the mortgage financing terms derived previously (namely, a 70% loan-to-value ratio and a 0.111856 debt service constant) with a cash-on-cash equity dividend rate of 12% produces the following overall capitalization rate. HVS International, Mineola, New York Income Capitalization Approach 112 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-26 Equity Yield Requirements - -------------------------------------------------------------------------------- Percent of Rate of Weighted Value Return Average ---------- ------- -------- Mortgage 70 % x 0.11186 = 0.07830 Equity 30 % x 0.13000 = 0.03900 ------- Overall Capitalization Rate 0.11730 - -------------------------------------------------------------------------------- Because this overall rate will be used to capitalize net income ten years from the date of value, an upward adjustment is appropriate to reflect the uncertainty inherent in this extended period. For the purpose of this valuation, we will use a terminal capitalization rate of 12.0%. As a point of reference, the terminal capitalization rate can be compared to the going-in rate implied by the subject property's estimated value. The going-in rate reflects the capitalization rate that would be applicable if the hotel were operating at a stabilized level as of the date of value. This rate is calculated by dividing the stabilized net income (expressed in current dollars as of the date of value) by the value indicated by the income capitalization approach. Generally, the terminal capitalization rate is approximately 100 to 200 basis points above the going-in rate. Summary of Valuation Variables The following table summarizes the valuation variables that have been used to estimate the subject property's value via the income capitalization approach. ================================================================================ Table 10-27 Summary of Valuation Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Ten-Year Forecast Loan-to-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.111856 Equity Yield Ye 22.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 12.0% - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 113 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Valuation of the Mortgage and Equity Components The valuation of the mortgage and equity components is accomplished through use of an algebraic equation that calculates the exact amount of debt and equity that the hotel will be able to support based on the anticipated cash flow (as derived from the forecast of income and expense) and the specific return requirements demanded by the mortgage lender (interest) and the equity investor (equity yield). The equation and the calculations associated with this simultaneous valuation formula are set forth in the Addenda to this report. Using the variables summarized above, we estimate the value of the subject property via the income capitalization approach at $3,140,000. Proof of Value The value is proven by calculating the yields to the mortgage and equity components during the projection period. If the mortgagee achieves a 9.5% yield and the equity yield is 22.0%, then $3,140,000 is the correct value by the income capitalization approach. Using the assumed financial structure set forth in the previous calculations, market value can be allocated between the debt and equity as follows. Mortgage Component (70%) $ 2,198,000 Equity Component (30%) 942,000 ----------- Total $ 3,140,000 The annual debt service is calculated by multiplying the mortgage component by the mortgage constant. Mortgage Component $ 2,198,000 Mortgage Constant 0.111856 ----------- Annual Debt Service $ 245,859 The cash flow to equity is calculated by deducting the debt service from the projected net income before debt service. HVS International, Mineola, New York Income Capitalization Approach 114 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-28 Forecast of Net Income to Equity - -------------------------------------------------------------------------------- Net Income Available for Net Income Year Debt Service Debt Service to Equity - -------------------------------------------------------------------------------- 1997 $348,000 - $246,000 = $102,000 1998 378,000 - 246,000 = 132,000 1999 391,000 - 246,000 = 145,000 2000 401,000 - 246,000 = 155,000 2001 416,000 - 246,000 = 170,000 2002 428,000 - 246,000 = 182,000 2003 443,000 - 246,000 = 197,000 2004 456,000 - 246,000 = 210,000 2005 472,000 - 246,000 = 226,000 2006 485,000 - 246,000 = 239,000 - -------------------------------------------------------------------------------- The equity residual at the end of the tenth year is calculated as follows. Reversionary Value ($502,000 / 0.120 ) $ 4,183,000 Less: Brokerage and Legal Fees 126,000 Less: Mortgage Balance 1,583,000 ----------- Net Sale Proceeds to Equity $ 2,474,000 The overall property yield (before debt service), the yield to the lender, and the yield to the equity position have been calculated by computer with the following results. ================================================================================ Table 10-29 Overall Property Yields - -------------------------------------------------------------------------------- Projected Yield (Internal Rate of Return) Position Value Over 10-Year Holding Period - -------------------------------------------------------------------------------- Total Property $3,140,000 14.4% Mortgage 2,198,000 9.4 Equity 942,000 22.0 - -------------------------------------------------------------------------------- The following tables demonstrate that the property receives its anticipated yields, proving that the $3,140,000 value is correct based on the assumptions used in this approach. HVS International, Mineola, New York Income Capitalization Approach 115 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-30 Total Property Yield - -------------------------------------------------------------------------------- Net Income Before Present Worth of $1 Year Debt Service Factor at 14.4% Cash Flow - -------------------------------------------------------------------------------- 1997 $348,000 x 0.873955 = $304,000 1998 378,000 x 0.763798 = 289,000 1999 391,000 x 0.667525 = 261,000 2000 401,000 x 0.583387 = 234,000 2001 416,000 x 0.509854 = 212,000 2002 428,000 x 0.445589 = 191,000 2003 443,000 x 0.389425 = 173,000 2004 456,000 x 0.340340 = 155,000 2005 472,000 x 0.297442 = 140,000 2006 4,543,000 * x 0.259951 = 1,181,000 ---------- Total Property Value $3,140,000 * Tenth-year net income of $485,000 plus sales proceeds of $4,058,000 - -------------------------------------------------------------------------------- ================================================================================ Table 10-31 Mortgage Component Yield - -------------------------------------------------------------------------------- Present Worth of $1 Discounted Year Debt Service Factor at 9.5% Cash Flow - -------------------------------------------------------------------------------- 1997 $246,000 x 0.914195 = $225,000 1998 246,000 x 0.835752 = 206,000 1999 246,000 x 0.764040 = 188,000 2000 246,000 x 0.698481 = 172,000 2001 246,000 x 0.638547 = 157,000 2002 246,000 x 0.583757 = 144,000 2003 246,000 x 0.533667 = 131,000 2004 246,000 x 0.487876 = 120,000 2005 246,000 x 0.446013 = 110,000 2006 1,829,000 * x 0.407743 = 746,000 ---------- Value of the Mortgage Component $2,199,000 * Tenth-year debt service of $246,000 plus outstanding mortgage balance of $1,583,000 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 116 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-32 Equity Component Yield - -------------------------------------------------------------------------------- Net Income Present Worth of $1 Year to Equity Factor at 22.0% Cash Flow - -------------------------------------------------------------------------------- 1997 $102,000 x 0.819758 = $84,000 1998 132,000 x 0.672004 = 89,000 1999 145,000 x 0.550880 = 80,000 2000 155,000 x 0.451589 = 70,000 2001 170,000 x 0.370194 = 63,000 2002 182,000 x 0.303469 = 55,000 2003 197,000 x 0.248771 = 49,000 2004 210,000 x 0.203932 = 43,000 2005 226,000 x 0.167175 = 38,000 2006 2,714,000 * x 0.137043 = 372,000 -------- Value of the Equity Component $943,000 * Tenth-year net income to equity of $239,000 plus sales proceeds of $2,475,000 - -------------------------------------------------------------------------------- Valuation Method Two: Discounted Cash Flow The total property yield derived from the previous valuation method was 14.42%. After reviewing the total property yields indicated by recent hotel sales, which ranged from 6% to 18%, it is our opinion that a 14% discount factor is appropriate for the Howard Johnson Commack. The following table illustrates the discounted cash flow analysis using this 14% factor. HVS International, Mineola, New York Income Capitalization Approach 117 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-33 Discounted Cash Flow Analysis - -------------------------------------------------------------------------------- Discount Net Factor Discounted Year Income at 14.0% Cash Flow - -------------------------------------------------------------------------------- 1997 $348,000 x 0.87719 = $305,263 1998 378,000 x 0.76947 = 290,859 1999 391,000 x 0.67497 = 263,914 2000 401,000 x 0.59208 = 237,424 2001 416,000 x 0.51937 = 216,057 2002 428,000 x 0.45559 = 194,991 2003 443,000 x 0.39964 = 177,039 2004 456,000 x 0.35056 = 159,855 2005 472,000 x 0.30751 = 145,144 2006 4,542,833 * x 0.26974 = 1,225,401 Estimated Market Value: $3,215,948 (Say): $3,200,000 Reversion Analysis 11th Year Net Income $ 502,000 Capitalization Rate 12.0% Total Sales Proceeds $4,183,333 Less: Broker & Legal Fees at 3.0% 125,500 ----------- Net Sales Proceeds $4,057,833 * Tenth-year net income of $485,000 plus sales proceeds of $4,057,833 - -------------------------------------------------------------------------------- Conclusion Based on our extensive experience in the hotel industry and comprehensive support provided by literature published by the Appraisal Institute, it is our opinion that the valuation procedure embodied by Method One most closely reflects the investment rationale of typical hotel buyers. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis and Valuations,(1) Method Two (which discounts the projected net income and reversion using an overall discount rate, or total property yield) "does not consider the impact of mortgage debt, leverage and the specific equity demands of typical hotel investors. This technique is simple but less reliable because the derivation of the discount rate has little support." In light of this consideration, we have relied on the $3,140,000 value conclusion indicated by Method One. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236 HVS International, Mineola, New York Sales Comparison Approach 118 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 11. Sales Comparison Approach The sales comparison approach is based on the assumption that an informed purchaser will pay no more for a property than the cost to acquire an existing property with equal utility. This approach estimates market value by considering the sales prices indicated by recent transactions involving properties that are similar to the property being appraised. Dissimilarities are resolved with appropriate adjustments; these differences may pertain to the date of sale, the age of the property, location, construction, condition, layout, equipment, size, or external economic factors. The reliability of the sales comparison approach depends on three factors: 1. the availability of timely, comparable sales data; 2. an understanding of the true terms of the sales and the motivation of the buyer and seller; 3. the degree of comparability, or the extent of the adjustments needed to reflect differences between the subject property and the comparable property. In appraising lodging facilities, it is often difficult to find an adequate number of recent sales involving hotels that are truly comparable to the subject property. Consequently, it may be necessary to consider transactions involving properties in different market areas, and the required adjustments greatly diminish the reliability of the conclusions. Moreover, it is virtually impossible for an observer to determine the true motivations of the buyers and sellers involved in transactions. Hotel acquisition often represents a highly ego-driven process in which a number of external, non-market factors influence the purchase price. Unless the appraiser can quantify these influences, there is no way of knowing whether the purchase price paid actually reflects market value. A final consideration is the degree of similarity between the subject property and the comparable; in most cases, the differences are significant enough to require numerous subjective and unsubstantiated adjustments. Each adjustment represents a potential for error, HVS International, Mineola, New York Sales Comparison Approach 119 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= and thus diminishes the reliability of this approach. As a result of these shortcomings, the use of the sales comparison approach in valuing hotels is primarily as a check against the value indicated by the income capitalization approach. Hotel values declined in many areas of the country during the late 1980s and early 1990s, although a rebound began in 1994 and 1995. The downturn, which began in most markets in 1988, was largely attributable to lower operating incomes caused by an oversupply of new hotel rooms constructed during the mid-1980s. Overbuilding resulted in flat or declining average rates and occupancies, which caused revenues to fall. A number of other factors exacerbated the situation. The national recession caused a drop in demand in many markets during the early 1990s, and the Persian Gulf War created a virtual freeze on travel in the beginning of 1991, further limiting hotel demand. Operating costs continued to rise despite poor market conditions, resulting in a decline in the net operating income of hotels throughout the nation. Because operating costs have a large fixed component, many lodging facilities experienced precipitous drops in net income. As bottom-line profits eroded, many hotels were unable to meet debt service, and hundreds of properties entered foreclosure or bankruptcy. Lenders and government agencies soon became hotel owners. Because most financial institutions were preoccupied with their distressed real estate, very little mortgage capital was available and the nation suffered from a well-publicized credit crunch. Most hotel transactions that occurred during the early 1990s were financed by the property owners, who, in most cases, were lenders. In the early 1990s, the primary market participants were owner-operators with the expertise to turn around under-performing properties. Hotels were out of favor with passive investors as a result of the industry's poor operating performance and the uncertainty of future appreciation. The wide disparity in buyer and seller expectations also limited the number of transactions. Many sellers were unwilling to accept the fact that the market value of their hotel investments had declined below the cost of the project or the original investment. Moreover, many owners were faced with a significant tax burden upon sale, further reducing their willingness to settle for a price that was below the original acquisition cost. As a result of these market forces, there was very little sales activity involving large, high-quality hotels. The primary difficulty was the lack of HVS International, Mineola, New York Sales Comparison Approach 120 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= properties available for sale; owners who were not forced to sell opted to wait for prices to recover. The few hotels that did enter the market generally attracted 15 to 20 interested bidders, mostly consisting of owner-operators. As a result of the competition for these few assets, the prices of better-quality hotels began to escalate rapidly. In response, more sellers have been encouraged to place their products on the market. An indicator of this market trend is the number of hotel sales that have occurred during the past few years. HVS International tracks major hotel transactions of more than $10,000,000 on an annual basis. In 1992, the number of major transactions was 67; a slightly lower level of 52 was registered in 1993. This total increased significantly (to 92) in 1994, and the 1995 total is estimated to have been 104. In tandem with escalating prices, hotels are again being considered by traditional financing sources, which had virtually abandoned the hospitality industry by the early 1990s. Although many lenders are still approaching the market with a high degree of caution, it is now possible to obtain third-party financing for hotel transactions. The mortgage loans that are now being made are subject to fairly stringent requirements: loan-to-value ratios remain in the 65% to 75% range. The qualification of the borrower is also a crucial consideration for most lenders. We believe that the upward trend in both pricing and sales activity will continue as financing becomes more available and additional buyers (particularly passive investors) enter the market. Consequently, it is important to consider the date of the transactions used in the sales comparison approach. When the comparable sales are not recent enough to provide an accurate picture of the current market, it may be necessary to make upward adjustments to the values indicated by the sales comparison and income capitalization approaches in recognition of the recent escalation. Comparable Sales Based on information provided by the Hospitality Market Data Exchange and compiled by the six offices of HVS International, the following transactions involved hotels that appear to have some degree of comparability to the subject property. HVS International, Mineola, New York Sales Comparison Approach 121 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Sale #1: -------- Property: Quality Inn Location: Woodbury, New York Date of Sale: August, 1995 Sales Price: $2,900,000 Grantor: The Estate of Frederick Phillips, et. al. Grantee: Woodbury Realty Associates Year Opened: 1961 Number of Rooms: 85 Price per Room: $34,118 Confirmed By: Goodman Marks Associates Comments: This property is located on Jericho Turnpike in Woodbury. The purchase price includes the furniture, fixtures and equipment, and is subject to a long-term lease for a restaurant on the premises. Sale #2: -------- Property: Comfort Inn Location: Abingdon, Virginia Date of Sale February, 1995 Sales Price: $2,600,000 Grantor: B&R Enterprises Grantee: MRS Number of Rooms: 80 Price per Room: $32,500 Confirmed by: Broker Sale #3: -------- Property: La Plata Super 8 Motel Location: 9400 Chesapeake Street, La Plata, Maryland Date of Sale: May, 1996 Sales Price: $1,350,000 Grantors: Faisal J. and Bahjat Jodeh and Nidal Suleiman Grantees: JAD, Inc.; Rahit K. and Rohet C. Patel Year Opened: 1988 Number of Rooms: 45 Price per Room: $30,000 Confirmed By: Rahit K. Patel; Charles County Clerk; Charles County Assessment Office HVS International, Mineola, New York Sales Comparison Approach 122 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Comments: This property house a typical three-story Super 8 motel, which is reported to be in good condition Sale #4: -------- Property: Quality Inn Location: 6111 Arlington Blvd., Falls Church, Virginia Date of Sale: September, 1995 Sales Price: $3,000,000 Grantor: Third Hotel Associates Grantee: Virginia Hospitality Inc. Year Opened: 1966 Number of Rooms: 108 Price per Room: $27,778 Confirmed By: Broker Sale #5: -------- Property: Ramada Inn Location: Germantown, Maryland Date of Sale: May, 1995 Sales Price: $5,350,000 Grantor: Goldenrod Limited Partnership Grantee: Inn Keepers USA Limited Partnership Year Opened: Not available Number of Rooms: 180 Price per Room: $29,722 Confirmed By: Eastdil Corp. Comments: This property was subsequently renovated and converted to a Hampton Inn Sale #6: -------- Property: Days Inn Location: 30 Wheeler Road, Burlington, Massachusetts Date of Sale: June, 1995 Sales Price: $4,200,000 Grantor: The First National Bank of Boston Grantee: Burlington Garden Level I, LP Year Opened: 1969 Number of Rooms: 173 Price per Room: $24,277 Confirmed By: CB Commercial HVS International, Mineola, New York Sales Comparison Approach 123 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Comments: The buyers have spent approximately $4,000,000 to convert the property to a Wyndham Garden. In addition to considering the transactions outlined above, we have also reviewed the March, 1994 sale of the subject property. The details of this transaction are summarized as follows. Subject Property: ----------------- Property: Howard Johnson - Commack Location: Commack, New York Date of Sale: March, 1994 Sales Price: $2,610,602 Grantor: Nippon Credit Bank, Ltd. Grantee: Chartwell/G.S.R. Hotels III Limited Partnership, an entity controlled by Ashford Financial Corp. Year Opened: 1971 Number of Rooms: 109 Price per Room: $23,950 Est. 1994 Occupancy: 55.1% Est. 1994 Average Rate: $56.40 Est. 1994 Rev. PAR: $31.08 It is important to consider the terms and conditions pertaining to the subject property's sale. The Howard Johnson was acquired by Ashford Financial Corporation from Nippon Credit Bank, Ltd. in March of 1994 as part of a purchase of a mortgage loan secured by 15 hotel properties. The outstanding principal balance of the nonperforming mortgage loan at the time of acquisition was $72,840,000, and the purchase price was $18,730,000. At the time of the closing, the mortgage loan was the subject of a settlement agreement between Nippon Credit Bank, Ltd. and Northeast Hotel Association, Inc., which owned the subject property. The settlement agreement called for the conveyance of property deeds in lieu of foreclosure as well as a cash payment of $2,000,000 for the settlement of guaranty obligations. The price set forth above represents an allocation of the total package price rather than a negotiated value for this single asset. Based on our understanding of the terms of this transaction, we do not believe that this sale was reflective of the market value of the individual hotel. The relevance of the transaction involving the subject property is also undermined by the significant change in market conditions that occurred HVS International, Mineola, New York Sales Comparison Approach 124 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= between the date of this sale and the date of value of this appraisal. Areawide occupancy and average rate have improved in the intervening months, and this favorable trend is expected to continue. As previously discussed, the market for hotel investments has also improved significantly as a result of changes in lender and investor attitudes. Finally, the property itself has undergone a significant renovation, in which approximately $400,000 was spent to upgrade the facilities and amenities. For these reasons, it is our opinion that the March, 1994 sale of the subject property is not a reliable indicator of the hotel's current value. Conclusion Although the sales comparison approach may be useful in providing a value range and reflecting certain market characteristics, its applicability is limited by the numerous possible points of difference between the subject property and other hotels that have sold in recent years. These factors may include location, access, size, services and facilities offered, market conditions, chain affiliation, market orientation, management, rate structure, age, physical condition, date of sale, the highest and best use of the land, and the anticipated profitability of the operation. Circumstances surrounding a sale, such as financing terms, tax considerations, income guarantees, sales of partial interests, duress on the part of the buyer or seller, or a particular deal structure can also cause a disparity between the sales price and pure market value. Moreover, it is often difficult to determine the marketing periods that were necessary to consummate the transactions. It is extremely difficult to quantify the appropriate adjustment factors accurately because of their number and complexity, as well as the difficulty in obtaining specific, detailed information. Any attempt to manipulate the necessary adjustments is insupportable and purely speculative. Because appraisers are expected to reflect the analytical processes and actions of typical buyers and sellers rather than to create a highly subjective valuation approach, the investment rationale of hotel owners is an essential consideration. As specialists in the valuation of hotels, we find that typical buyers purchase properties based on a thorough analysis of the anticipated economic benefits of property ownership, rather than on historical sales data. In light of these factors, it is our opinion that the sales comparison approach is unsuitable for indicating a specific estimate of the subject property's market value; however, this approach may indicate a range of values that can be used to test the reasonableness of the value indicated by the income capitalization approach. Excluding the prior sale of the subject property, HVS International, Mineola, New York Sales Comparison Approach 125 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= the sales prices range from approximately $24,100 to $34,100 per room, or $2,630,000 to $3,700,000 for the 109-unit subject property. The income capitalization approach indicates a value of $3,140,000, which falls within this range. HVS International, Mineola, New York Cost Approach 126 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 12. Cost Approach The cost approach is founded on the principle of substitution, which implies that no prudent person will pay more for a property than the amount needed to acquire a site and construct a building of equal desirability and utility without undue delay. This approach estimates market value by first calculating the current cost of replacing the improvements. Appropriate deductions are made for depreciation resulting from physical deterioration, functional obsolescence, and external (economic) obsolescence, and the land value is added to the depreciated replacement cost to provide an estimate of market value. The cost approach employs the following steps. 1. The current replacement or reproduction cost is estimated. 2. Land value is estimated using techniques such as allocation, extraction, or ground rent capitalization. 3. Accrued depreciation, which can be divided into physical deterioration, functional obsolescence, and external obsolescence, is estimated. 4. Total depreciation is deducted from the subject property's replacement cost, and the land value is added to arrive at an estimate of value via the cost approach. When forming their purchase decisions regarding existing properties, market participants tend to consider the cost of developing a new hotel with optimal physical and functional utility. External conditions, such as a depressed market for real estate, can cause a property to be worth less than its replacement cost as new. The task of estimating the loss in value resulting from incurable functional and external obsolescence is highly subjective. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements age and begin to deteriorate, the loss in value resulting from physical obsolescence becomes increasingly difficult to quantify accurately. Loss in value HVS International, Mineola, New York Cost Approach 127 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= attributable to functional obsolescence can be even more difficult to determine. The subject property was constructed in 1971, and thus is approximately 25 years old as of the date of this appraisal. At the time of our inspection, the hotel was in fair condition, and we note that its design includes interior corridors. In addition to guestrooms, the Howard Johnson is equipped with a breakfast lounge (where continental breakfast is served) and an outdoor swimming pool. The depressed hotel market conditions that prevailed in the late 1980s and the early 1990s have also led to a degree of external obsolescence. In our opinion, it is impossible to identify and quantify the impact of the various types of depreciation and obsolescence on the property's value with any accuracy, so we will only estimate the hotel's replacement cost. Replacement Cost Replacement cost is the current construction cost of a building with the same utility as the subject property, but built with modern materials and according to current construction and design standards. For the purpose of estimating the replacement cost of the subject property, we have used a hotel development cost survey conducted by HVS International. This survey is published annually in a newsletter entitled The Hotel Valuation Journal, and appeared in the May issue of Lodging Hospitality. The survey presents the range of per-room costs associated with various components of hotel development, including the improvements, the furniture, fixtures, and equipment, pre-opening expenses, and operating capital. Statistics are compiled for three broad categories of hotels: luxury, standard, and economy. The results of this survey are presented in the following table. HVS International, Mineola, New York Cost Approach 128 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 12-1 Hotel Development Cost Survey (Amounts per Room) - --------------------------------------------------------------------------------
Improvements Furniture & Equipment Pre-Opening Operating Capital Total Percent Change - ------------------------------------------------------------------------------------------------------------------------------------ 1976 Luxury $32,000 - $55,000 $5,000 - $10,000 $1,000 - $2,000 $1,000 - $1,500 $39,000 - $68,500 --- - --- Standard 20,000 - 32,000 3,000 - 6,000 750 - 1,000 750 - 1,000 24,500 - 40,000 --- - --- Economy 8,000 - 15,000 2,000 - 4,000 500 - 1,000 500 - 750 11,000 - 20,750 --- - --- 1979 Luxury 36,000 - 65,000 8,000 - 15,000 1,500 - 3,000 1,500 - 2,000 47,000 - 85,000 6.8 - 8.0 Standard 25,000 - 36,000 5,000 - 10,000 1,000 - 2,000 1,000 - 1,500 32,000 - 49,500 10.2 - 7.9 Economy 10,000 - 20,000 3,000 - 5,000 750 - 1,000 750 - 1,000 14,500 - 27,000 10.6 - 10.0 1981 Luxury 45,000 - 80,000 10,000 - 20,000 2,000 - 3,500 2,000 - 2,500 59,000 - 106,000 12.8 - 12.4 Standard 25,000 - 40,000 7,000 - 13,000 1,200 - 2,500 1,200 - 2,000 34,400 - 57,500 3.8 - 8.1 Economy 13,000 - 25,000 4,000 - 7,000 700 - 1,200 900 - 1,200 18,600 - 34,400 14.1 - 13.7 1983 Luxury 55,000 - 100,000 12,500 - 20,000 2,300 - 4,000 2,000 - 2,800 71,800 - 126,800 10.8 - 9.8 Standard 35,000 - 50,000 9,000 - 15,000 1,400 - 3,000 1,300 - 2,200 46,700 - 70,200 17.9 - 11.0 Economy 18,000 - 32,000 5,000 - 8,000 800 - 1,500 900 - 1,300 24,700 - 42,800 16.4 - 12.2 1985 Luxury 60,000 - 115,000 13,400 - 30,000 3,000 - 5,000 2,100 - 3,100 78,500 - 153,100 4.7 - 10.4 Standard 38,000 - 57,000 9,500 - 16,500 1,900 - 3,600 1,500 - 2,500 50,900 - 79,600 4.5 - 6.7 Economy 20,000 - 36,000 5,000 - 8,800 1,000 - 1,700 1,000 - 1,500 27,000 - 48,000 4.7 - 6.1 1986 Luxury 62,000 - 120,000 13,700 - 30,600 3,100 - 5,200 2,300 - 3,100 81,100 - 158,900 3.3 - 3.8 Standard 39,000 - 60,000 9,700 - 16,800 2,000 - 3,800 1,500 - 2,600 52,200 - 83,200 2.6 - 4.5 Economy 21,000 - 37,000 5,100 - 9,000 1,000 - 1,800 1,100 - 1,500 28,200 - 49,300 4.4 - 2.7 1987 Luxury 63,000 - 122,000 13,800 - 30,900 3,300 - 5,500 2,300 - 3,200 82,400 - 161,600 1.6 - 1.7 Standard 40,000 - 61,000 9,800 - 16,800 2,100 - 3,900 1,500 - 2,600 53,400 - 84,300 2.3 - 1.3 Economy 21,000 - 39,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 28,400 - 51,400 0.7 - 4.3 1988 Luxury 65,000 - 125,000 14,000 - 31,000 3,300 - 5,500 2,300 - 3,200 84,600 - 164,700 2.7 - 1.9 Standard 41,000 - 63,000 10,000 - 17,100 2,100 - 3,900 1,500 - 2,600 54,600 - 86,600 2.2 - 2.7 Economy 22,000 - 40,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 29,400 - 52,400 3.5 - 1.9 1989 Luxury 66,000 - 126,000 15,000 - 32,000 3,300 - 5,500 2,300 - 3,200 86,600 - 166,700 2.4 - 1.2 Standard 41,000 - 64,000 10,500 - 18,000 2,100 - 3,900 1,500 - 2,600 55,100 - 88,500 0.9 - 2.2 Economy 22,000 - 40,000 5,500 - 9,700 1,100 - 1,800 1,100 - 1,500 29,700 - 53,000 1.0 - 1.1 1990 Luxury 67,000 - 128,000 15,400 - 33,000 3,500 - 5,700 2,500 - 3,500 88,400 - 170,200 2.1 - 2.1 Standard 42,000 - 65,000 10,800 - 18,500 2,200 - 4,000 1,600 - 2,800 56,600 - 90,300 2.7 - 2.0 Economy 22,500 - 41,000 5,600 - 10,000 1,200 - 1,800 1,200 - 1,600 30,500 - 54,400 2.7 - 2.6 1991 Luxury 65,000 - 122,000 14,500 - 31,500 3,700 - 5,900 2,600 - 3,600 85,800 - 163,000 (2.9) - (4.2) Standard 40,000 - 63,000 10,000 - 17,800 2,300 - 4,200 1,700 - 2,900 54,000 - 87,900 (4.6) - (2.7) Economy 21,000 - 39,000 5,000 - 9,500 1,300 - 2,000 1,300 - 1,700 28,600 - 52,200 (6.2) - (4.0) 1992 Luxury 64,000 - 120,000 14,200 - 30,900 3,800 - 6,100 2,700 - 3,700 84,700 - 160,700 (1.3) - (1.4) Standard 39,000 - 62,000 9,800 - 17,400 2,300 - 4,400 1,800 - 3,000 52,900 - 86,800 (2.0) - (1.3) Economy 21,000 - 38,000 4,900 - 9,300 1,400 - 2,100 1,300 - 1,800 28,600 - 51,200 0.0 - (1.9) 1993 Luxury 63,000 - 119,000 14,000 - 30,500 3,900 - 6,200 2,800 - 3,800 83,700 - 159,500 (1.2) - (0.7) Standard 39,000 - 61,000 9,700 - 17,200 2,300 - 4,500 1,800 - 3,000 52,800 - 85,700 (0.2) - (1.3) Economy 21,000 - 38,000 4,900 - 9,200 1,400 - 2,100 1,300 - 1,800 28,600 - 51,100 0.0 - (0.2) 1994 Luxury 64,000 - 121,000 14,300 - 31,100 3,900 - 6,200 2,800 - 3,800 85,000 - 162,100 1.6 - 1.6 Standard 40,000 - 63,000 10,000 - 17,600 2,400 - 4,600 1,800 - 3,000 54,200 - 88,200 2.7 - 2.9 Economy 22,000 - 40,000 5,100 - 9,500 1,500 - 2,200 1,300 - 1,800 29,900 - 53,500 4.5 - 4.7 1995 Luxury 65,000 - 124,000 14,800 - 32,300 4,100 - 6,400 2,900 - 4,000 86,800 - 166,700 2.1 - 2.8 Standard 41,000 - 65,000 10,400 - 18,300 2,500 - 4,800 1,900 - 3,100 55,800 - 91,200 3.0 - 3.4 Economy 23,000 - 42,000 5,400 - 9,900 1,600 - 2,300 1,300 - 1,800 31,300 - 56,000 4.7 - 4.7
Average Annual Compounded Percent Change: 1976 - 1995: Luxury 4.3% - 4.8% 1986 - 1995: Luxury 0.8% - 0.5% Standard 4.4% - 4.4% Standard 0.7% - 1.0% Economy 5.7% - 5.4% Economy 1.2% - 1.4% - -------------------------------------------------------------------------------- HVS International, Mineola, New York Cost Approach 129 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= As illustrated by the previous table, hotel development costs rose significantly during the late 1970s and the early 1980s; however, the rate of increase slowed substantially in 1987. In 1991, hotel development costs declined for the first time since 1976. Further drops of as much as 2.0% were registered in 1992. Between 1986 and 1990, average annual compounded increases ranged from 1.7% to 2.5%. Costs rose slowly (at average annual compounded rates ranging from 0.5% to 1.4%) between 1986 and 1995, largely as a result of the declines in 1991, 1992, and 1993. In 1995, hotel development costs started to escalate more rapidly, reaching 4.7% in the economy segment. As more hotels are developed, we expect costs to continue to rise. Because the replacement cost tends to set the upper limit of a particular hotel's value, this figure is relevant to our analysis. We estimate the replacement cost of the subject property as follows, based on the development cost survey discussed earlier. ================================================================================ Table 12-2 Subject Property's Replacement Cost - -------------------------------------------------------------------------------- Cost No. of Hotel Cost per Room Rooms Total Cost -------------------------------------------------------------------------- Building $35,000 109 $3,815,000 FF&E 8,000 109 872,000 Pre-Opening 2,000 109 218,000 Operating Capital 1,800 109 196,200 -------------------------------------------------------------------------- Totals $46,800 $5,101,200 - -------------------------------------------------------------------------------- Ground Lease Approach to Land Valuation Land value may be estimated either by the sales comparison approach, using comparable land sales, or by the ground lease approach, which is based on the economic value generated by an improvement that represents the property's highest and best use. Because it is unusual to find recent sales of comparable vacant land that is slated for imminent hotel development, we have used the ground lease approach to determine the subject property's land value. Hotels are often constructed on leased land, and although lease terms differ somewhat, the basis for the rental calculation is frequently tied to a percentage of revenue. By applying a typical ground lease rental formula to the subject property's stabilized revenues, the appraiser can determine the hotel's economic rent, or what is also known as the income attributable to the HVS International, Mineola, New York Cost Approach 130 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= land. Land value is then calculated by dividing the economic rent by an appropriate capitalization rate. The self-adjusting aspect of this approach is key to its reliability. Because the rental formula is tied to a percentage of revenue that inherently reflects both the locational attributes of the site (occupancy and rate) and the allowable density of development, the resulting economic ground rent justly represents the greatest net return to the land over a given period. Because the Howard Johnson Commack appears to represent the highest and best use of the property, the ground lease approach is an appropriate method of determining land value. We have researched long-term hotel ground leases in search of rental formulas that are based on a percentage of rooms revenue or on a combination of rooms, food, and beverage revenue. This analysis indicates that economic ground rents for hotels similar to the subject property typically range from 2.7% to 7.8% of rooms revenue. Although this range is quite broad, most of the formulas yield rental percentages of between 4.0% and 5.0% of rooms revenue. After considering these comparable ground leases and the locational attributes of the subject property, we believe the appropriate economic ground rental percentage is 4.5% of stabilized rooms revenue. The subject property's stabilized rooms revenue has been deflated to reflect 1997 dollars. The following calculation shows the derivation of the subject property's economic ground rent. Stabilized Rooms Revenue (1997 dollars) $ 1,614,040 Rental Percentage 0.045 ----------- Economic Ground Rent $ 72,632 Rent generated by a ground lease represents a fairly low-risk income flow. Because the tenant improvements typically amount to more than eight times the value of the land, the risk of default is low. When the ground lease terms are tied to rooms revenue, the landlord is also protected from the adverse effects of inflation. Based on these risk factors and the current cost of long-term capital, we estimate the appropriate ground rental overall capitalization rate at 10%. Applying this indicated capitalization rate to the subject property's economic ground rent yields the following estimate of land value. HVS International, Mineola, New York Cost Approach 131 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Economic Ground Rent $72,632 $ 726,318 ------------------------ = ------------ = Capitalization Rate 0.10 Estimated Land Value (Say) $ 730,000 A new hotel's land value typically ranges from 10% to 20% of the overall value. The estimate of land value presented above is approximately 23% of the subject property's total value as indicated by the income capitalization approach. Replacement Cost Combining the replacement cost of the property with the land value yields the subject property's total replacement cost. ================================================================================ Table 12-3 Total Replacement Cost - -------------------------------------------------------------------------------- Cost of the Improvements and FF&E $ 5,101,200 Land Value 730,000 ----------- Total Replacement Cost $ 5,831,200 (Say) $ 5,800,000 - -------------------------------------------------------------------------------- If a property's replacement cost is significantly higher than the values indicated by the income capitalization and sales comparison approaches, it may indicate that an upward adjustment of these values is appropriate. This would also reduce the probability of new hotel development, which is not likely to be feasible under those conditions. This creates an effective barrier to entry for new competition, thus reducing the risk associated with the subject property's income-generating potential. An upward adjustment of the value indicated by the income capitalization approach is also justified by this barrier to entry. We find that knowledgeable hotel buyers generally base their purchase decisions on economic factors, such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, it is our opinion that the cost approach is inapplicable in estimating the market value of the Howard Johnson Commack. However, we have estimated the subject property's replacement cost as new, which may set the upper limit of the hotel's value. HVS International, Mineola, New York Reconciliation of Value Indications 132 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 13. Reconciliation of Value Indications The reconciliation, which is the last step in the appraisal process, involves summarizing and correlating the data and procedures employed throughout the analysis. The final conclusion of value is arrived at after reviewing the estimates indicated by the income capitalization, sales comparison, and cost approaches. The relative significance, applicability, and defensibility of each indicated value is considered, and the greatest weight is given to that approach deemed most appropriate for the property being appraised. The purpose of this report is to estimate the market value of the fee simple interest in the subject property. Our appraisal involves a careful analysis of the property itself and the economic, demographic, political, physical, and environmental factors that influence real estate values. Based on the data set forth in this report, the following value indications were developed. Approach Value Indication -------- ---------------- Income Capitalization $3,140,000 Sales Comparison $2,630,000 - $3,700,000 Cost (Replacement Cost) $5,800,000 Income Capitalization Approach To estimate the subject property's value via the income capitalization approach, we analyzed the local market for transient accommodations, examined the competitive environment, projected occupancy and average rate levels, and developed a forecast of income and expense that reflects anticipated income trends and cost components through a stabilized year of operation. The subject property's projected net income before debt service was then allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component was calculated; the total of the mortgage and equity components equates to the value of the property. HVS International, Mineola, New York Reconciliation of Value Indications 133 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Our nationwide experience indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the hotel investors who constitute the marketplace. For this reason, we believe that the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in our final estimate of the subject property's market value. Sales Comparison Approach The sales comparison approach uses actual sales of similar properties to provide an indication of the subject property's value. The strength of this approach is that it measures value based on the investment decisions made by actual buyers and sellers. Although we have investigated a number of sales in an attempt to develop a range of value indications, several adjustments are necessary to render the sales prices applicable to the subject property. These adjustments, which are numerous and highly subjective, diminish the reliability of the sales comparison approach. Furthermore, we find that typical hotel investors employ a sales comparison procedure only to establish broad value parameters. The hotel sales outlined earlier in this report indicate a value range of $24,100 to $34,100 per available room. The income capitalization approach indicates a per-room value of approximately $28,800. This information suggests that a slight upward adjustment of the value indicated by the income capitalization approach may be warranted. Cost Approach To estimate the subject property's value via the cost approach, we estimated the current replacement cost of the property and added the land value. We give the cost approach limited weight in arriving at a final value estimate, because knowledgeable buyers of lodging facilities generally base their purchase decisions on economic factors (such as projected net income and return on investment) rather than on a property's depreciated replacement cost. The replacement cost estimate developed via the cost approach can help to corroborate the results of the income capitalization and sales comparison approaches to value. If the replacement cost is substantially higher or lower than the value indicated by the income capitalization approach, an upward or downward adjustment of the income capitalization approach value may be necessary. In the case of the subject property, the replacement cost is higher than the value indicated by the income capitalization approach or the sales comparison approach. This suggests that a slight HVS International, Mineola, New York Reconciliation of Value Indications 134 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= upwards adjustment to the value indicated by the income capitalization approach may be warranted. Value Conclusion Careful consideration has been given to the strengths and weaknesses of the three approaches to value discussed above. In recognition of the purpose of this appraisal, we have given primary weight to the value indicated by the income capitalization approach and made some subjective adjustments based on the sales comparison approach, the replacement cost estimate, and our extensive experience in the hospitality industry. It is our opinion that the market of the fee simple interest in the Howard Johnson Commack, as of January 1, 1997, is: $3,200,000 THREE MILLION TWO HUNDRED THOUSAND DOLLARS The estimate of market value includes the land, the improvements, and the furniture, fixtures, and equipment. The appraisal assumes that the hotel is open and operational. This value estimate equates to roundly $29,358 per room, which is well supported by market sales and approximately 1.8% higher than the value indicated by the income capitalization approach. The estimate of value assumes either the availability of third-party financing or the willingness and capability of the seller to take back purchase-money financing so that a buyer can obtain the level of debt set forth in the Income Capitalization Approach section of this appraisal. Marketing Period Our estimate of market value assumes a marketing period of six to nine months. Under normal economic conditions, hotels are transferred within this time frame. Personal Property In accordance with the appraisal standards set forth by the Office of the Comptroller of the Currency, it is necessary for bank appraisals to identify and value any personal property, fixtures, or intangible items that are included in the appraisal and discuss their impact on the overall estimate of market value. A hotel's income-generating ability depends on a suitable inventory of furniture, fixtures, and equipment. Removal of these items can decrease the property value by as much as the cost to replace the inventory plus the loss of income incurred while the hotel cannot function. HVS International, Mineola, New York Reconciliation of Value Indications 135 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= A hotel's personal property consists of a wide variety of components, including bedroom furnishings, bathroom fixtures, restaurant and kitchen equipment, front office and accounting computers, exterior signs, and similar items. Our inspection of the Howard Johnson Commack indicates that the personal property and fixtures are in fair condition. Based on an annual construction cost survey conducted by HVS International, we estimate the total replacement cost of the subject property's furniture, fixtures, and equipment at $8,000 per available room. Assuming an average useful life of ten years and an effective age of seven years, the value of the furniture, fixtures, and equipment currently in place is approximately $2,400 per room, or a total of $261,600. Hotels have both business and real estate components; without the business expertise necessary to operate the facility, a hostelry would have little real estate value. Because furniture, fixtures, and equipment are essential to a hotel's income-generating ability and are seldom removed from the property or sold separately, the separation of the personal property component from the real property is not particularly meaningful. The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) stipulates that "...any business interest or other intangible item should be valued separately within the appraisal."(1) (1) Federal Register, Vol. 55, No. 143, July 25, 1990, p. 30205. HVS International, Mineola, New York Statement of Assumptions and 136 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 14. Statement of Assumptions and Limiting Conditions 1. This report is to be used in whole and not in part. 2. No responsibility is assumed for matters of a legal nature, nor do we render any opinion as to title, which is assumed to be marketable and free of any deed restrictions and easements. The property is valued as though free and clear unless otherwise stated. 3. We assume that there are no hidden or unapparent conditions of the sub-soil or structures, such as underground storage tanks, that would render the property more or less valuable. No responsibility is assumed for these conditions or for any engineering that may be required to discover them. 4. We have not considered the presence of potentially hazardous materials such as asbestos, urea formaldehyde foam insulation, PCBs, any form of toxic waste, polychlorinated biphengyls, pesticides, or lead-based paints. The appraisers are not qualified to detect hazardous substances, and we urge the client to retain an expert in this field if desired. 5. The Americans with Disabilities Act (ADA) became effective on January 26, 1992. We have conducted no specific compliance survey to determine whether the subject property is operating in accordance with the various detailed requirements of the ADA. It is possible that the property does not conform to the requirements of the act, and this could have an unfavorable effect on value. Because we have no direct evidence regarding this issue, our estimate of value does not consider possible non-compliance with the ADA. 6. We have made no survey of the property, and we assume no responsibility in connection with such matters. Sketches, photographs, maps, and other exhibits are included to assist the reader in visualizing the property. It is assumed that the use of the land and improvements is HVS International, Mineola, New York Statement of Assumptions and 137 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= within the boundaries of the property described, and that there is no encroachment or trespass unless noted. 7. All information, financial operating statements, estimates, and opinions obtained from parties not employed by HVS International are assumed to be true and correct. We can assume no liability resulting from misinformation. 8. Unless noted, we assume that there are no encroachments, zoning violations, or building violations encumbering the subject property. 9. The property is assumed to be in full compliance with all applicable federal, state, local, and private codes, laws, consents, licenses, and regulations (including a liquor license where appropriate), and that all licenses, permits, certificates, franchises, and so forth can be freely renewed or transferred to a purchaser. 10. All mortgages, liens, encumbrances, leases, and servitudes have been disregarded unless specified otherwise. 11. None of this material may be reproduced in any form without our written permission, and the report cannot be disseminated to the public through advertising, public relations, news, sales, or other media. 12. We are not required to testify or appear in court by reason of this analysis without previous arrangements, and only when our standard per diem fees and travel costs are paid prior to the appearance. 13. If the reader is making a fiduciary or individual investment decision and has any questions concerning the material presented in this report, it is recommended that the reader contact us. 14. We take no responsibility for any events or circumstances that take place subsequent to either the date of value or the date of our field inspection, whichever occurs first. 15. The quality of a lodging facility's on-site management has a direct effect on a property's economic viability and value. The financial forecasts presented in this analysis assume responsible ownership and competent management. Any departure from this assumption may have a significant impact on the projected operating results and the value estimate. 16. The estimated operating results presented in this report are based on an evaluation of the overall economy, and neither take into account nor HVS International, Mineola, New York Statement of Assumptions and 138 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= make provision for the effect of any sharp rise or decline in local or national economic conditions. To the extent that wages and other operating expenses may advance during the economic life of the property, we expect that the prices of rooms, food, beverages, and services will be adjusted to at least offset those advances. We do not warrant that the estimates will be attained, but they have been prepared on the basis of information obtained during the course of this study and are intended to reflect the expectations of a typical hotel buyer. 17. This analysis assumes continuation of all Internal Revenue Service tax code provisions as stated or interpreted on either the date of value or the date of our field inspection, whichever occurs first. 18. Many of the figures presented in this report were generated using sophisticated computer models that make calculations based on numbers carried out to three or more decimal places. In the interest of simplicity, most numbers have been rounded to the nearest tenth of a percent. Thus, these figures may be subject to small rounding errors. 19. It is agreed that our liability to the client is limited to the amount of the fee paid as liquidated damages. Our responsibility is limited to the client, and use of this report by third parties shall be solely at the risk of the client and/or third parties. The use of this report is also subject to the terms and conditions set forth in our engagement letter with the client. 20. Appraising hotels is both a science and an art. Although this analysis employs various mathematical calculations to provide value indications, the final estimate is subjective and may be influenced by our experience and other factors not specifically set forth in this report. 21. Any distribution of the total value between the land and improvements or between partial ownership interests applies only under the stated use. Moreover, separate allocations between components are not valid if this report is used in conjunction with any other analysis. 22. This study was prepared by Hospitality Valuation Services, a division of Hotel Consulting Services, Inc. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of Hotel Consulting Services, Inc. as employees, rather than as individuals. HVS International, Mineola, New York Certification 139 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 15. Certification We, the undersigned appraisers, hereby certify: 1. that the statements and opinions presented in this report, subject to the limiting conditions set forth, are correct to the best of our knowledge and belief; 2. that Sean A. Hehir and Anne R. Lloyd-Jones personally inspected the property described in this report; that Stephen Rushmore participated in the analysis and reviewed the findings but did not personally inspect the property; 3. that we have no current or contemplated interests in the real estate that is the subject of this report; 4. that we have no personal interest or bias with respect to the subject matter of this report or the parties involved; 5. that this report sets forth all of the limiting conditions (imposed by the terms of this assignment) affecting the analyses, opinions, and conclusions presented herein; 6. that the fee paid for the preparation of this report is not contingent upon our conclusions; 7. that this report has been prepared in accordance with, and is subject to, the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute; 8. that the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives; 9. that this report has been prepared in accordance with the Uniform Standards of Professional Appraisal Practice (as adopted by the Appraisal Foundation); HVS International, Mineola, New York Certification 140 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 10. that no one other than the undersigned prepared the analyses, conclusions, and opinions concerning real estate that are set forth in this appraisal report; 11. that as of the date of this report, Stephen Rushmore has completed the requirements of the continuing education program of the Appraisal Institute; 12. that this appraisal is not based on a requested minimum value, a specific value, or the approval of a loan. Sean A. Hehir ------------------------------- Sean A. Hehir Consulting and Valuation Analyst Hotel Consulting Services, Inc. Anne R. Lloyd-Jones ------------------------------- Anne R. Lloyd-Jones, CRE Senior Vice President Hotel Consulting Services, Inc. Stephen Rushmore ------------------------------- Stephen Rushmore, CRE, MAI, CHA President Hotel Consulting Services, Inc. HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] View of the Subject Property [GRAPHIC OMITTED] View of the Subject Property's lobby HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] View of a guestroom with jacuzzi at the Subject Property [GRAPHIC OMITTED] View of a guestroom with two double beds at the Subject Property HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] View of the guestroom corridor at the Subject Property HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] View of the breakfast lounge at the Subject Property HVS International, Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Hampton Inn - Commack [GRAPHIC OMITTED] Hampton Inn - Islandia Howard Johnson B&B - Commack, NY SMITHTOWN SCHEDULE A ALL THAT CERTAIN PLOT, PIECE, OR PARCEL OF LAND, SITUATE, LYING, AND BEING AT COMMACK, TOWN OF SMITHTOWN, COUNTY OF SUFFOLK AND STATE OF NEW YORK BEING MORE PARTICULARLY BOUNDED AND DESCRIBED AS FOLLOWS:: BEGINNING AT A POINT ON THE WESTERLY SIDE OF WICKS ROAD DISTANT 137.14 FEET NORTHERLY FROM THE NORTHEASTERLY END OF A STRAIGHT LINE CONNECTING THE WESTERLY SIDE OF WICKS ROAD WITH THE NORTHERLY SIDE OF LONG ISLAND EXPRESSWAY (VANDERBILT MOTOR PARKWAY); RUNNING THENCE SOUTH 83 DEGREES, 36 MINUTES, 00 SECONDS WEST 401.94 FEET TO A POINT AND LAND NOW OR FORMERLY OF PAY-LESS MINI WAREHOUSE; THENCE NORTH 4 DEGREES, 21 MINUTES, 00 SECONDS EAST ALONG LAST MENTIONED LAND AND LAND OF RWS REALTY CORP. 548.36 FEET TO A POINT; THENCE NORTH 83 DEGREES, 36 MINUTES, 00 SECONDS EAST ALONG LAST MENTIONED LAND AND LAND NOW OR FORMERLY OF SUFFOLK COUNTY GIRL SCOUT COUNCIL, 264.47 FEET TO THE WESTERLY SIDE OF MORELAND ROAD (WICKS ROAD); THENCE ALONG THE WESTERLY SIDE OF MORELAND ROAD (WICKS ROAD) THE FOLLOWING TWO COURSES AND DISTANCES: 1) SOUTH 10 DEGREES, 20 MINUTES, 10 SECONDS EAST 520.39 FEET TO A POINT; 2) SOUTH 4 DEGREES, 50 MINUTES, 30 SECONDS EAST 19.58 FEET TO THE POINT OR PLACE OF BEGINNING. TOGETHER WITH AN EASEMENT IN COMMON WITH OTHERS OVER THE FOLLOWING DESCRIBED PREMISES FOR ACCESS TO AND FROM VANDERBILT MOTOR PARKWAY: BEGINNING AT A POINT ON THE NORTHERLY SIDE OF LONG ISLAND EXPRESSWAY (VANDERBILT MOTOR PARKWAY) DISTANT 123.57 FEET WESTERLY FROM THE SOUTHWESTERLY END OF A STRAIGHT LINE CONNECTING THE NORTHERLY SIDE OF LONG ISLAND EXPRESSWAY WITH THE WESTERLY SIDE OF WICKS ROAD; RUNNING THENCE SOUTH 83 DEGREES, 36 MINUTES, 00 SECONDS WEST ALONG THE NORTHERLY SIDE OF LONG ISLAND EXPRESSWAY 50 FEET; THENCE NORTH 6 DEGREES, 24 MINUTES, 00 SECONDS WEST 170 FEET; THENCE NORTH 83 DEGREES, 36 MINUTES, 00 SECONDS EAST 50 FEET; THENCE SOUTH 6 DEGREES, 24 MINUTES, 00 SECONDS EAST 170 FEET TO THE NORTHERLY SIDE OF LONG ISLAND EXPRESSWAY AND THE POINT OR PLACE OF BEGINNING. EXCEPTING THEREFROM SO MUCH OF THE ABOVE DESCRIBED PREMISES THAT WAS CONVEYED TO THE TOWN OF SMITHTOWN FOR THE WIDENING OF WICKS ROAD BY DEED DATED 8/23/72, RECORDED 11/30/72 IN LIBER 7293 CP 187. HVS International, Mineola, New York Synopsis of Hotel Management Agreement - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Synopsis of Hotel Management Agreement Date: May, 1994 Owner: Chartwell/G.S.R. Hotels III Limited Partnership (Ashford Financial Corp.) Manager: Remington Hotel Company Premises: Howard Johnson Motor Lodge, Commack, New York Term: 15 years Renewal: Operator option for two successive periods of five years Management Fee: 3% of gross revenues Reserve for Replacement: 3% of gross revenues Termination: 1) Upon default by owner or manager 2) Upon death or incapacitation of Archie Bennett, Jr., president of Remington Hotel Company 3) Upon a sale of the property (at the owner's option) HVS International, Mineola, New York Simultaneous Valuation Formula 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ The Simultaneous Valuation Formula as Used in the Valuation of the Subject Property The algebraic equation known as the simultaneous valuation formula, which solves for the total property value using a ten-year mortgage and equity technique, was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of Hospitality Valuation Services. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(1) The process of solving for the value of the mortgage and equity components begins by deducting the annual debt service from the projected income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value using the terminal capitalization rate. The equity residual, which is the total reversionary value less the mortgage balance at that point in time and less any brokerage and legal costs associated with the sale, is discounted to the date of value at the equity yield rate. The net income to equity for each projection year is also discounted back to the date of value. The sum of these discounted values equals the value of the equity component. Because the equity component comprises a specific percentage of the total value, the value of the mortgage and the total property can be computed easily. This process can be expressed in two algebraic equations that set forth the mathematic relationships between the known and unknown variables using the following symbols. (1) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Simultaneous Valuation Formula 2 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= NI = Net income available for debt service V = Value M = Loan-to-value ratio f = Annual debt service constant n = Number of years in the projection period d(e) = Annual cash available to equity d(r) = Residual equity value b = Brokerage and legal cost percentage P = Fraction of the loan paid off during the projection period f(p) = Annual constant required to amortize the entire loan during the projection period R(r) = Overall terminal capitalization rate applied to net income to calculate the total property reversion (sales price at the end of the projection period) 1/S^n = Present worth of a $1 factor (discount factor) at the equity yield rate Using these symbols, the following formulas can be used to express some of the components of this mortgage and equity valuation process. Debt Service - A property's debt service is calculated by first determining the mortgage amount that equals the total value (V) multiplied by the loan-to-value ratio (M). Debt service is derived by multiplying the mortgage amount by the annual debt service constant (f). The following formula represents debt service. f x M x V = Debt Service Net Income to Equity (Equity Dividend) - The net income to equity (de) is the property's net income before debt service (NI) less debt service. The following formula represents the net income to equity. NI - (f x M x V) = d(e) Reversionary Value - The value of the hotel at the end of the tenth year is calculated by dividing the 11th-year net income before debt service (NI^11) by HVS International, Mineola, New York Simultaneous Valuation Formula 3 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= the terminal capitalization rate (R(r)). The following formula represents the property's tenth-year reversionary value. (NI^11/R(r)) = Reversionary Value Brokerage and Legal Costs - When a hotel is sold, certain costs are associated with the transaction. Normally, the broker is paid a commission and the attorney collects legal fees. In the case of hotel transactions, brokerage and legal costs typically range from 1% to 4% of the sales price. Because these expenses reduce the proceeds to the seller, they are usually deducted from the reversionary value in the mortgage and equity valuation process. Brokerage and legal costs (b) expressed as a percentage of reversionary value (NI^11/R(r)) is calculated by application of the following formula. b(NI^11/R(r)) = Brokerage and Legal Costs Ending Mortgage Balance - The mortgage balance at the end of the tenth year must be deducted from the total reversionary value (debt and equity) in order to determine the equity residual. The formula used to determine the fraction of the loan remaining (expressed as a percentage of the original loan balance) at any point in time (P) takes the annual debt service constant of the loan over the entire amortization period (f) less the mortgage interest rate (i) and divides it by the annual constant required to amortize the entire loan during the ten-year projection period (f(p)) less the mortgage interest rate. The following formula represents the fraction of the loan paid off (P). (f - i)/(f(p) - i) = P If the fraction of the loan paid off (expressed as a percentage of the initial loan balance) is P, then the remaining loan percentage is expressed as 1 - P. The ending mortgage balance is the fraction of the remaining loan (1 - P) multiplied by the initial loan amount (M x V). The following formula represents the ending mortgage balance. (1 - P) x M x V Equity Residual Value - The value of the equity upon the sale at the end of the projection period (d(r)) is the reversionary value less the brokerage and legal costs and the ending mortgage balance. The following formula represents the equity residual value. (NI^11/R(r)) - (b(NI^11/R(r)) - ((1 - P) x M x V) = d(r) HVS International, Mineola, New York Simultaneous Valuation Formula 4 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Annual Cash Flow to Equity - The annual cash flow to equity consists of the equity dividend for each projection year plus the equity residual at the end of the tenth year. The following formula represents the annual cash flow to equity. NI^1 - (f x M x V) = de^1 NI^2 - (f x M x V) = de^2 NI^10 - (f x M x V) = de^10 (NI^11/R(r)) - (b(NI^11/R(r)) - ((1 - P) x M x V) = d(r) Value of the Equity - If the initial mortgage amount is calculated by multiplying the loan-to-value ratio (M) by the property value (V), then the equity value is one minus the loan-to-value ratio multiplied by the property value. The following formula represents the value of the equity. (1 - M)V Discounting the Cash Flow to Equity to the Present Value - The cash flow to equity in each projection year is discounted to the present value at the equity yield rate (1/S^n). The sum of these cash flows is the value of the equity (1 - M)V. The following formula represents the calculation of equity as the sum of the discounted cash flows. (d(e)^1 x 1/S^1) + (d(e)^2 x 1/S^2) + . . . + (d(e)^10 x 1/S^10) + (d(r) x 1/S^10) = (1 - M)V Combining the Equations: Annual Cash Flow to Equity and Discounting the Cash Flow to Equity to the Present Value - The last step is to arrive at one overall equation that shows that the annual cash flow to equity plus the yearly discounting to the present value equals the value of the equity. ((NI^1 - (f x M x V))1/S^1) + ((NI^2 - (f x M x V))1/S^2) + . . . ((NI^10 - (f x M x V))1/S^10) + (((NI^11/R(r)) - (b(NI^11/R(r))) - ((1 - P) x M x V)) 1/S^10) = (1 -M)V Because the only unknown in this equation is the property's value (V), it can be solved readily. HVS International, Mineola, New York Simultaneous Valuation Formula 5 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Ten-Year Projection of Income and Expense - Because the fixed and variable forecast of income and expense is carried out only to the stabilized year, it is necessary to continue the projection to the 11th year. In most instances, net income before debt service beyond the stabilized year is projected at an assumed inflation rate. By increasing a property's revenue and expenses at the same rate of inflation, net income remains constant as a percentage of total revenue and the dollar amount escalates at the annual inflation rate. Hotel investors are currently using inflation rates of approximately 3.5% annually. The ten-year forecast of income and expense illustrates the subject property's net income, which is assumed to increase by 3.5% annually subsequent to the hotel's stabilized year of operation. Solving for Value Using the Simultaneous Valuation Formula - In the case of the subject property, the following known variables have been determined. ================================================================================ Table 1: Summary of Known Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Ten-Year Forecast Loan-to-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.111856 Equity Yield Ye 22.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 12.0% - -------------------------------------------------------------------------------- The following table illustrates the present worth of a $1 factor at the 22.0% equity yield rate. HVS International, Mineola, New York Simultaneous Valuation Formula 6 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 2: Present Worth of $1 Factor at Equity Yield Rate - -------------------------------------------------------------------------------- Present Worth of $1 Year Factor at 22.0% --------------------------------------------------------------- 1997 0.819758 1998 0.672004 1999 0.550880 2000 0.451589 2001 0.370194 2002 0.303469 2003 0.248771 2004 0.203932 2005 0.167175 2006 0.137043 - -------------------------------------------------------------------------------- Using these known variables, the following intermediary calculations must be made before applying the simultaneous valuation formula. The fraction of the loan paid off during the projection period is calculated as follows. P = ( 0.111856 - 0.095 ) / ( 0.155277 - 0.095 ) = 0.279638 The annual debt service is calculated as f x M x V. (f x M x V) = 0.111856 x 0.70 x V = 0.078299 V Inserting the known variables into the hotel valuation formula produces the following. ( 348,000 - 0.078299 V ) x 0.819672 + ( 378,000 - 0.078299 V ) x 0.671862 + ( 391,000 - 0.078299 V ) x 0.550707 + ( 401,000 - 0.078299 V ) x 0.451399 + ( 416,000 - 0.078299 V ) x 0.369999 + ( 428,000 - 0.078299 V ) x 0.303278 + ( 443,000 - 0.078299 V ) x 0.248589 + ( 456,000 - 0.078299 V ) x 0.203761 + ( 472,000 - 0.078299 V ) x 0.167017 + ( 485,000 - 0.078299 V ) x 0.136899 + ((( 502,000 / 0.120 ) - ( 0.03 x ( 502,000 / 0.120 )) - (( 1 - 0.279638 ) x 0.70 x V )) x 0.136899 ) = ( 1 - 0.70 ) V HVS International, Mineola, New York Simultaneous Valuation Formula 7 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Like terms are combined as follows. $2,123,053 - 0.376214 V = (1 - 0.70) V $2,123,053 = 0.67621 V V = $2,123,053 / 0.67621 V = $3,139,620 Value Indicated by the Income Capitalization Approach (Say) $3,140,000 HVS International, Mineola, New York Qualifications of Sean A. Hehir - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Sean A. Hehir Employment 1996 to present HVS INTERNATIONAL Mineola, New York (Hotel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) Summer, 1996 THE HILTON AT SHORT HILLS Short Hills, New Jersey 1995 to 1996 THE STATLER HOTEL AND JW MARRIOTT EXECUTIVE EDUCATION CENTER Ithaca, New York 1993 HOTEL DE CHAILLY Montreux, Switzerland 1992 HOTEL BAUR AU LAC Zurich, Switzerland Education BS - School of Hotel Administration, Cornell University University of Nevada at Las Vegas Hotel Institute Montreux, Montreux, Switzerland Professional Cornell Society of Hotelmen Affiliations HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Anne R. Lloyd-Jones, CRE Employment 1982 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1981 FAIRMONT HOTEL Dallas, Texas 1979 - 1980 SAGA FOOD SERVICE SWARTHMORE COLLEGE Swarthmore, Pennsylvania 1977 - 1980 DARANNE CATERERS Swarthmore, Pennsylvania Professional Affiliations American Society of Real Estate Counselors - Member (CRE) Appraisal Institute - Candidate for Membership Cornell Society of Hotelmen Education MPS - School of Hotel Administration, Cornell University BA - Swarthmore College Appraisal Institute Course 1A1 - Real Estate Appraisal Principles Course 1A2 - Basic Valuation Procedures Course 1BA - Capitalization Theory and Techniques, Part A Course 1BB - Capitalization Theory and Techniques, Part B Course 2-1 - Case Studies in Real Estate Valuation Course 2-3 - Standards of Professional Practice Course 3-1 - Report Writing HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Corporate and Institutional Clients Served Ashford Financial Corporation Chase Manhattan Bank, N. A. Citibank / Citicorp NA Credit Lyonnais Doubletree Hotels Grand Heritage Hotels Great Western Bank Goldman Sachs Holiday Inns, Inc. Interstate Hotels MassMutual Marriott International / Host Marriott Morgan Stanley OCWEN Financial Services Remington Hotels Sheraton Hotels Starwood Capital Group Starwood Lodging Trust Winegardner & Hammons Wyndham Hotel Company Hotel Chains and Management Companies Appraised or Evaluated Doubletree Hotels Compri Hotels Interstate Hotels Fairmont Hotels Guest Quarters Hilton Hotels Corporation Omni International Hotels Ramada Hotel Corp. Servico Hotel Corp. Winegardner & Hammons Appearance as an Expert Witness Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Jefferson City, Missouri Federal Bankruptcy Court, Columbia, South Carolina Federal Bankruptcy Court, Houston, Texas Federal Bankruptcy Court, New York, New York Federal Bankruptcy Court, San Bernardino, California Federal Bankruptcy Court, Los Angeles, California Federal Bankruptcy Court, Charlotte, North Carolina Federal Bankruptcy Court, Miami, Florida Federal District Court, Central Division, Salt Lake City, Utah Iowa District Court, Story County, Iowa Texas District Court, Harris County, Texas Federal Bankruptcy Court, Tampa, Florida Utah District Court, Salt Lake County, Utah Federal Bankruptcy Court, Newark, New Jersey HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated Arizona - - Wyndham Garden Hotel, Chandler - - Wyndham Garden Hotel - Airport, Phoenix - - Wyndham Garden Hotel - Union Hills, Phoenix - - Canyon Ranch Spa & Fitness Resort, Tucson Alabama - - Holiday Inn, Birmingham - - Proposed Sheraton, Gulf Shores - - Proposed Inn, Mobile - - Holiday Inn, Sheffield California - - Industry Hills Sheraton Hotel, City of Industry - - Piccadilly Inn, Fresno - - Proposed Inn at Foss Creek, Healdsburg - - Sunset Towers Hotel, Hollywood - - Proposed La Quinta, Irvine - - Wyndham Garden Hotel, La Jolla - - Days Inn, La Palma - - Proposed Marriott Courtyard, Palm Springs - - Proposed Club Hilton Hotel, Pleasanton - - Center Pointe Development, San Diego - - Holiday Inn-Embarcadero, San Diego - - Holiday Inn-Harbor View, San Diego - - Seven Seas Lodge, San Diego - - Proposed Fountaingrove Inn, Santa Rosa - - Sheraton Round Barn Inn, Santa Rosa - - Wyndham Garden Hotel, Sunnyvale - - Westlake Plaza Hotel, Thousand Oaks - - Proposed Marriott Courtyard, Torrance Colorado - - Proposed Hotel, Keystone Connecticut - - Holiday Inn, Milford - - Holiday Inn, New Britain District of Columbia - - Grand Hotel, Washington - - Wyndham Bristol Hotel, Washington Florida - - Kon Tiki Village, Kissimmee - - Sheraton Lakeside, Kissimmee - - Holiday Inn, 22nd Street, Miami Beach - - Holiday Inn, 87th Street, Miami Beach - - Holiday Inn, 180th Street, Miami Beach - - Sheraton Resort & Marina, St. Petersburg - - Hilton Hotel, Singer Island - - Royce Hotel, West Palm Beach Georgia - - Marriott Hotel, Atlanta - - Wyndham Garden Hotel, Atlanta - - Holiday Inn, Brunswick - - Holiday Inn, Jekyll Island - - Mullberry Inn, Savannah - - Royal Savannah Inn, Savannah Hawaii - - Hobron in Waikiki, Honolulu Idaho - - Holiday Inn, Boise - - Red Lion Inn, Boise - - Super 8, Boise Illinois - - Ramada Inn, Bloomington - - Proposed Marriott Courtyard, Glenview - - Wyndham Garden Hotel, Naperville Indiana - - Holiday Inn, Bloomington - - Inn at the Four Winds, Bloomington - - Ramada Inn, Bloomington - - Hilton Hotel, Fort Wayne - - Airport Hilton Inn, Indianapolis - - Hilton at the Circle, Indianapolis Iowa - - Holiday Inn, Ames - - Proposed Fairfield Inn, Des Moines HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Kentucky - - Proposed Super 8, London - - Proposed Super 8, Radcliff Louisiana - - Sheraton Inn, Kenner - - Hotel Meridien, New Orleans Maine - - Proposed Hotel, Old Orchard Beach Maryland - - Brookshire Hotel, Baltimore - - Lord Baltimore Hotel, Baltimore - - Hyatt Regency, Bethesda Massachusetts - - Proposed Marriott Courtyard, Andover - - Hyatt Regency, Cambridge - - Proposed Hotel, Franklin - - Sheraton Inn, Hyannis - - Marriott Hotel, Worcester Michigan - - Bay Valley Inn, Bay City - - Hilton Airport, Detroit - - Westin Renaissance Center, Detroit - - Hotel Pontchartrain, Detroit - - Proposed Embassy Suites, Lansing - - Hilton Inn, Northfield - - Holiday Inn, Saginaw Minnesota - - Wyndham Garden Hotel, Bloomington - - Marriott Hotel, Minnetonka Missouri - - Inn at Grand Glaize, Osage Beach - - Bel Air Hilton, St. Louis - - Holiday Inn Riverfront, St. Louis Nebraska - - Holiday Inn Airport, Lincoln - - Holiday Inn Northeast, Lincoln Nebraska (continued) - - Marriott Hotel, Omaha - - Ramada Inn, Omaha - - Red Lion Inn, Omaha Nevada - - Proposed Super 8, Las Vegas New Jersey - - Ramada Inn, Edison - - Marriott Hotel, Hanover - - Headquarters Plaza, Morristown - - Hyatt Regency, New Brunswick - - Holiday Inn, North Brunswick New York - - Hilton Hotel, Albany - - Proposed Embassy Suites, Amherst - - Holiday Inn Arena, Binghamton - - Holiday Inn SUNY, Binghamton - - Proposed Hotel, Binghamton - - Proposed Hilton, Brooklyn - - Marriott Hotel, Dewitt - - Metropole Hotel, Flushing - - Midway Hotel, Flushing - - Ramada Inn, Kingston - - Royce Hotel, La Guardia - - Holiday Inn, Latham - - Proposed Crowne Plaza, Manhattan - - Proposed Prince Street Hotel, Manhattan - - Proposed Roslyn Inn, Roslyn - - Proposed Le Richmonde, Rye Brook - - Hilton Hotel, Syracuse - - Hotel Syracuse, Syracuse - - Proposed Hotel, Watertown North Carolina - - Proposed Inn, Chapel Hill - - Proposed Indep. Center Marriott Hotel, Charlotte - - Royce Hotel, Charlotte - - Howard Johnson's North, Charlotte HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) North Carolina (continued) - - Holiday Inn West, Durham - - Sheraton University Inn, Durham - - Holiday Inn, Fayetteville - - Holiday Inn Downtown, Raleigh Ohio - - Proposed Hyatt Hotel, Cleveland - - Proposed Marriott Hotel, Cleveland Oregon - - Holiday Inn Airport, Portland - - Holiday Inn South, Portland Pennsylvania - - Quality Inn, Allentown - - Holiday Inn, Bensalem - - Proposed Marriott Courtyard, Devon - - Proposed Lafayette Inn, Easton - - Ramada Inn, Erie - - Holiday Inn, Harrisburg - - Marriott Hotel, Harrisburg - - Proposed Super 8, Harrisburg - - Proposed Super 8, Lancaster - - Holiday Inn West, Monroeville - - Days Inn Philadelphia - - Franklin Plaza Hotel, Philadelphia - - Franklin Towne EconoLodge, Philadelphia - - Guest Quarters Hotel, Philadelphia - - Hilton Inn, Northeast, Philadelphia - - Marriott Airport Hotel, Philadelphia - - Holiday Inn Greentree, Pittsburgh - - Holiday Inn Parkway East, Pittsburgh - - Holiday Inn North, Pittsburgh - - Holiday Inn Parkway West, Pittsburgh - - Proposed Hotel, Pittsburgh - - Royce Hotel, Pittsburgh - - Westin William Penn Hotel, Pittsburgh - - Hilton Hotel, Scranton - - Proposed Marriott Courtyard, Valley Forge - - Holiday Inn Meadowlands, Washington - - Ramada Inn, York - - Proposed Super 8, York Rhode Island - - Proposed Hotel, Providence - - Omni Biltmore Hotel, Providence South Carolina - - Proposed Charleston Center Hotel, Charleston - - Proposed Cooper River Inn, Charleston - - Howard Johnson's, Spartanburg - - Proposed Middleton Inn and Conference Center, Charleston - - Best Western, North Charleston - - Proposed Marriott Courtyard, Columbia - - Fairfield Inn, Florence - - Holiday Inn, Florence - - Fairfield Inn, Greenville - - Proposed Marriott Courtyard, Greenville - - Fairfield Inn, Hilton Head - - Holiday Inn, Hilton Head Tennessee - - Hampton Inn, Brentwood - - Proposed Marriott Courtyard, Brentwood - - Howard Johnson's, Chattanooga - - Sheraton Hotel, Chattanooga - - Howard Johnson's, Knoxville - - Proposed Capital Mall Convention Center Hotel, Nashville - - Clarion Maxwell House, Nashville - - Holiday Inn Briley Parkway, Nashville - - Proposed Marriott Courtyard, Nashville - - Sheraton Music City, Nashville - - Stouffer's Nashville Hotel, Nashville - - Proposed Super 8, Nashville - - Union Station Hotel, Nashville - - Wyndham Garden Hotel, Nashville - - Proposed Super 8, Union City HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Texas - - Proposed Marriott Courtyard, Addison - - Proposed Marriott Courtyard, Arlington - - La Mansion, Austin - - Proposed Marriott Courtyard, Bedford - - Airport Hilton, El Paso - - Hotel Meridien, Houston - - Sheraton Hotel, Houston - - Proposed Marriott Courtyard, Las Colinas - - Proposed Marriott Courtyard, North Dallas - - La Mansion Del Norte, San Antonio - - La Mansion Del Rio, San Antonio - - Proposed Marriott Courtyard, San Antonio - - Proposed Marriott Courtyard - Medical Center, San Antonio Utah - - Deer Valley Resort, Park City - - Hilton Inn, Salt Lake City - - Holiday Inn, Salt Lake City - - Sheraton Hotel, Salt Lake City Virginia - - Mountain Lake Hotel, Blacksburg - - Howard Johnson's, Bristol - - Boars Head Inn, Charlottesville - - Proposed Fairfield Inn, Hampton - - Proposed Embassy Suites, Herndon - - Ramada Renaissance, Herndon - - Proposed Marriott Courtyard, Manassas - - Omni Hotel, Norfolk Virginia (continued) - - Proposed Marriott, Norfolk - - Howard Johnson's, Richmond - - Howard Johnson's, Roanoke - - Howard Johnson's, Roanoke Rapids - - Wyndham Hotel, Williamsburg Washington - - Wyndham Garden Hotel, Bothell - - Redmond Hotel, Redmond - - Wyndham Garden Hotel, SeaTac West Virginia Proposed Budget Motel, Princeton Wisconsin - - Proposed Granada Royale, Green Bay - - Holiday Inn-Downtown, Green Bay Canada - - Inn on the Park, Toronto Puerto Rico - - Carib Inn, San Juan Virgin Islands - - Virgin Grand Beach Hotel, St. Thomas Jamaica - - Holiday Inn, Montego Bay HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Stephen Rushmore, CRE, MAI, CHA Employment 1980 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1977 - 1980 1971 - 1974 HELMSLEY-SPEAR HOSPITALITY SERVICES, INC. New York, New York (Real Estate) 1974 - 1977 JAMES E. GIBBONS ASSOCIATES Garden City, New York (Mortgage Banking, Appraisals, Hotel Operations) Affiliated Ownership Interests HVS INTERNATIONAL (SAN FRANCISCO, CALIFORNIA) West coast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (MIAMI, FLORIDA) Southeast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (BOULDER, COLORADO) Midwest office for hotel/motel appraisals and counseling HVS INTERNATIONAL (VANCOUVER, CANADA) Canadian office for hotel/motel appraisals and counseling HVS INTERNATIONAL (LONDON, ENGLAND) European office for hotel/motel appraisals and counseling HVS - EXECUTIVE SEARCH Hotel/motel executive search and human resource consulting HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) HVS - ECO SERVICES Environmental consulting for hotels and motels; administrator of the ECOTEL designation HOSPITALITY EQUITY INVESTORS, INC. Hotel and motel investment and management company TRUMBULL MARRIOTT HOTEL General partner of a 324-room hotel and conference center PRINCETON HOTEL ASSOCIATES General partner of a 128-unit Residence Inn in Princeton, New Jersey SEAVIEW GOLF RESORT ASSOCIATES General partner of a 298-unit, 424-acre Marriott resort in Absecon, New Jersey SHELTON HOTEL ASSOCIATES General partner of a 96-unit Residence Inn in Shelton, Connecticut DANBURY HOTEL ASSOCIATES General partner of a 243-unit Hilton Hotel in Danbury, Connecticut PRUDENTIAL - HEI JOINT VENTURE Joint venture partner with Prudential Insurance Company of America on a 234-unit Embassy Suites in Atlanta, Georgia WESTPORT NORFOLK ASSOCIATES General partner of a 425-unit Omni Hotel in Norfolk, Virginia WESTPORT BWI, LLC General partner of a 310-unit Marriott Hotel in Baltimore, Maryland HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) WESTPORT RARITAN, LLC General partner of a 274-unit Crowne Plaza Hotel in Raritan, New Jersey WESTPORT NOVI, LLC General partner of a 193-unit Hilton Hotel in Novi, Michigan WESTPORT LONG BEACH, LLC General Partner of a 460-unit Sheraton Hotel in Long Beach, California WESTPORT PARK RIDGE, LLC General Partner of a 265-unit hotel and conference center in Valley Forge, Pennsylvania WESTPORT CHARLESTON, LLC General Partner of a 295-unit Hilton Hotel in Charleston, South Carolina HOSPITALITY VALUATION SOFTWARE, INC. Founder of software company that develops and distributes hotel financial analysis software Hotels Managed Sheraton Hotel, Smithtown, New York Marriott Hotel, Baltimore Airport, Maryland Hilton Hotel, Danbury, Connecticut Residence Inn, Princeton, New Jersey Embassy Suites, Atlanta Airport, Georgia Omni Hotel, Norfolk, Virginia Crowne Plaza, Raritan, New Jersey Hilton Hotel, Novi, Michigan Sheraton Hotel, Long Beach, California Hilton Hotel, Charleston, South Carolina Park Ridge Hotel and Conference Center, Valley Forge, Pennsylvania Hilton Hotel, Wilmington, Delaware HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Professional Affiliations American Society of Real Estate Counselors - Member (CRE) - Board of Governors Appraisal Institute - Member (MAI) (SREA) - Developer and Instructor, Hotel Investment and Valuation Seminar - Developer and Instructor, Hotel Computer Valuation Seminar American Hotel and Motel Association - Certified Hotel Administrator (CHA) - Industry Real Estate Financing Advisory Council (IREFAC) International Society of Hospitality Consultants - Member (ISHC) New York University - Adjunct Assistant Professor of Nutrition, Food and Hotel Management Michigan State University - Honorary Faculty, Honorary Alumnus Certified General Appraiser - Arizona, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Illinois, Massachusetts, Michigan, Minnesota, Nebraska, New Jersey, New York, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Virginia Licensed Real Estate Broker - New York, Pennsylvania Board of Advisers - Real Estate Finance Journal - Real Estate Workouts & Asset Management American Arbitration Association - National Real Estate Valuation Council Cornell Society of Hotelmen New York University Masters in Hospitality Management - Advisory Board New York University Hospitality Investment Conference - Board of Advisors Beta Gamma Sigma - National Honor Society in Business and Management HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Endowment Hospitality Valuation Services Professor of Hotel Finance and Real Estate - School of Hotel Administration, Cornell University (currently held by Professor James J. Eyster) Education BS - School of Hotel Administration, Cornell University MBA - Graduate School of Business Administration (Finance), University of Buffalo Candidate for PhD - School of Education, Department of Food Service Management, New York University Partial List of Teaching and Lecture Assignments Cornell University - Computer Valuation Techniques Michigan State University - Hotel Management Contracts University of North Carolina - Hotel Market Studies University of Virginia - Assessing Hotels American Arbitration Association - Real Estate Arbitration American Hotel and Motel Association - Hotel Obsolescence Appraisal Institute - Hotel Valuation (over 50 seminars) International Association of Assessing Officers - Hotel Valuation Montreal Appraisal Society - Total Project Analysis Society of Real Estate Appraisers - Lease Seminar Lodging Hospitality - Lodging Summit Published Books and Seminars Textbooks The Valuation of Hotels and Motels, Appraisal Institute, Chicago, Illinois, 1978 Hotels, Motels and Restaurants: Valuations and Market Studies, Appraisal Institute, Chicago, Illinois, 1983 How to Perform an Economic Feasibility Study of a Proposed Hotel/Motel, American Society of Real Estate Counselors, Chicago, Illinois, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Books and Seminars (continued) Textbooks (continued) Hotel Investments: A Guide for Owners and Lenders, Warren, Gorham and Lamont, Inc., New York, New York, 1990 The Computerized Income Approach to Hotel Market Studies and Valuations, Appraisal Institute, Chicago, Illinois, 1990 Hotel Investments: A Guide for Owners and Lenders, 1992 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotel Investments: A Guide for Owners and Lenders, 1993 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Appraisal Institute, Chicago, Illinois, 1992 Student Manuals The Valuation of Lease Interests, Society of Real Estate Appraisers, Chicago, Illinois, 1976 Hotel-Motel Valuation Seminar, Appraisal Institute, Chicago, Illinois, 1981, 1988, 1990 The Computerized Approach to Hotel Market Studies and Valuations Seminar, Appraisal Institute, Chicago, Illinois, 1991 Demonstration Appraisal Demonstration Appraisal of a Proposed Hotel, Spring Valley, New York, Hospitality Valuation Services, Mineola, New York, 1983, 1990 Chapters The Real Estate Handbook-Second Edition, Dow Jones-Irwin, 1989, "Hotels and Motels" Arbitration of Real Estate Valuation Principles, American Arbitration Association, 1987, "Arbitration in the Hospitality Industry" Ethics in Hospitality Management: A Book of Readings, Educational Institute of the American Hotel and Motel Association, 1992, "Ethics in Hotel Appraising" The Lodging and Food Service Industry, Educational Institute of the American Hotel and Motel Association, 1993, "Insider's Insights" HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles The Appraisal Journal "Using Total Project Analysis to Compete for Investment Capital," October, 1975 "The Appraisal of Food Service Facilities," July, 1980 "Publish and Prosper," October, 1980 "Valuation of Hotels and Motels for Assessment Purposes," April, 1984 "Adjusting Comparable Sales for Hotel Assessment Appeals," July, 1986 "Hotel Business Value and Working Capital: A Clarification," January, 1987 "Ethics in Hotel Appraising," July, 1993 The Appraiser "Hotel-Motel Appraisal Misconceptions Set Straight," January, 1979 "No Conventional Financing Available for Hotels: Rushmore," December, 1979 "Estimating Hotel Land Values Using Comparable Ground Leases," April, 1980 Bulletin of the Cornell Society of Hotelmen "Employment Philosophy for a Consulting Practice," July, 1984 Business Travel News "A Snapshot of a Classic Recovery," July, 1995 The Canadian Appraiser "Hotel/Motel Market Sales Update," Summer, 1987 Capital Sources for Real Estate "Stephen Rushmore Discusses the Future of the Lodging Industry," December, 1994 Cayuga Advisor "Secrets to Success in Consulting," October, 1992 Chapter News and Notes "Quantifying a Hotel's Business Value," November, 1979 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Cornell Hotel & Restaurant Administration Quarterly "A Preliminary Market Study," November, 1974 "How Much is Your Place Worth Today? A Case Study in Hotel - Motel Valuation," May, 1975 "What Can Be Done About Your Hotel's Real Estate Taxes?" May, 1977 "The Appraisal of Lodging Facilities," August, 1978 "The Appraisal of Food Service Facilities," February, 1979 "The Appraisal of Lodging Facilities - Update," November, 1984 "Hotel Sales Prices Down More Than 12%," May, 1991 "Seven Current Hotel Valuation Techniques," August, 1992 "The Valuation of Distressed Hotels," October, 1992 "Hotel Lending in the 1990's: Amateurs Beware," December, 1994 "Investment Values of Lodging Property: Modeling the Effects of Income Taxes and Alternative Lender Criteria," December, 1995 FCI Spec Sheet "Employment Philosophy for a Consulting Practice," September, 1984 Florida Hotel & Motel Journal "Rushmore Reports Rising Hotel Prices," February, 1995 Hotel and Motel Management "Average Rate vs. Project Cost," May 1, 1974 "How to Increase the Marketability of Your Motel," April, 1981 "Tougher Lending, Lower Room Rate Hikes On Way?" June, 1981 "What is That Mortgage Loan Going to Cost You?" August, 1981 "How to Perform a Study of Your Property's Market," October, 1981 "How do High Interest Rates Affect Your Motel's Value?" December, 1981 "How to Buy a Feasibility Study That Works for You," February, 1982 "Settling Lease Conflicts Quickly Through Arbitration," April, 1982 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Hotel and Motel Management (continued) "Are Casino Hotels Really Worth $500,000 Per Room?" June, 1982 "Discount Rates and Internal Rate of Return," August, 1982 "Determining a Property's Extended Life Cycle," November, 1982 "Using Microcomputers for Forecasting," December, 1982 "Update on Hotel Development Costs," January, 1983 "Estimating a Site's Worth by Finding Its Profit Value," June, 1983 "Hotel Construction May Be Slowing Down a Little Bit," April, 1983 "The Investor's Risk Sways to Prevailing Economic Winds," August, 1983 "Is Your Property Tax at as Low a Level as it Should Be?" October, 1983 "The Ultimate Guest Room: Could it Ever Exist Anywhere?" December, 1983 Hotel-Motor Inn Journal A Preventive Maintenance System for Motels," March, 1975 Hotel Valuation Journal "Hotel Valuation Index Peaks During 1989," Fall, 1990 "Hotel Development Costs," Winter, 1991 "Hotel Valuation Index for 1990," Spring, 1991 "Bad Year for Hotel Sales Prices Confirmed," Spring, 1992 "Hotel Sales Prices on the Rise," Fall, 1994 "United States Hotel Values Climb," Spring/Summer, 1995 "It's Time for Franchise Reform," Fall, 1995 Institutions/ Volume Feeding "Greater Risk/Greater Profit Potential: Hotel Management Contract," May, 1973 Lodging Hospitality "How to Finance Renovation Projects," January, 1974 "Controlling Your Real Estate Taxes," July, 1978 "Putting Together a Sound Financial Package," December, 1978 "Favorable Outlook for Lodging Values," December, 1983 "Are Your Property Taxes Too High? (Part I and II)," May and June, 1984 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Development Costs," July, 1984 "The Right Management Contract for You," September, 1984 "Selecting the Firm to Prepare Your Feasibility Study," October, 1984 "A Quick How-To In Hotel Valuation," November, 1984 "Updating Lodging Interest Rates," December, 1984 "Is Your Guest Experience Up to Par?" January, 1985 "How to Perform a Breakeven Analysis," May, 1985 "Evaluating Operating Performance," June, 1985 "Hotel Lenders Toughen Underwriting Requirements," July, 1985 "Don't Forget the Pre-Opening Agreement," August, 1985 "Management Companies Should Participate in Financing," October, 1985 "Current Techniques for Valuing Hotel Land," November, 1985 "Hotel Development Costs," December, 1985 "Sourcing Debt Into the 1990's," January, 1986 "Hotel Valuation Thumb Rule," February, 1986 "Value in Use Versus Value in Exchange," March, 1986 "Stretching Feasibility," April, 1986 "The Management Question," May, 1986 "How to Commission a Feasibility Study," June, 1986 "Macro Trends Affecting Property Values," July, 1986 "Hotel-Motel Market Sales Update," August, 1986 "Financing Alternatives: Zero Coupon Mortgages," September, 1986 "Forecasting Lodging Energy Costs," October, 1986 "Portfolio Financing a Better Way," November, 1986 "Profit by Looking at History," December, 1986 "Why New York Isn't Overbuilt," February, 1987 "How to Discourage Hotel Overbuilding: A Case Study," April, 1987 "Structuring an Incentive Management Fee," June, 1987 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Franchising Questions and Answers," July, 1987 "Comparing Hotel Development Costs," August, 1987 "Understanding Economic Life," September, 1987 "Prices Rise for Lodging Properties," October, 1987 "Management Companies Are Key to Success," November, 1987 "Evaluating a Management Contract Fee Structure," December, 1987 "Check Profits Before Selecting Hotel Operator," January, 1988 "It's a Good Time to Review Your Taxes," February, 1988 "How to Use a Management Company Rating System," March, 1988 "Make Sure Management Contracts Contain These Terms," April, 1988 "Hotel Access and Visibility," May, 1988 "Chain Sale Strategies," July, 1988 "Evaluating a Hotel Franchise," August, 1988 "Evaluating Franchise Fees," September, 1988 "Opportunities in Economy Lodging," October, 1988 "How to Obtain a Hotel Mortgage," November, 1988 "Arbitration in the Hospitality Industry," December, 1988 "Lodging Development Cost Update," January, 1989 "Amenities as Profit Builders," February, 1989 "Hotel Values Mirror the Times," March, 1989 "Forecasting Revenue and Expenses," April, 1989 "Real Estate Jargon Made Simple," May, 1989 "Pricing a Management Contract," June, 1989 "Trends in Valuation," July, 1989 "Rescuing the Distressed Hotel," August, 1989 "Shielding Against Incompetence," September, 1989 "Hotel Valuation Revisited," October, 1989 "New Breed of Hard Budgets," November, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Figuring Cap Rates," December, 1989 "A Glance Backward," January, 1990 "Costs Creeping Up," February, 1990 "Valuing Distressed Properties," March, 1990 "Cap and Discount Rates," April, 1990 "An Open Letter," May, 1990 "Misconceptions About Appraisals," June, 1990 "Hotel Values Still Growing," July, 1990 "Hotel Renovation is Key to `90s," August, 1990 "Time Right for Hotel Leases," September, 1990 "Getting a Fix on Rates," October, 1990 "The Wrinkles of Class," November, 1990 "A Glance Backward," December, 1990 "The Price Dropoff," January, 1991 "The Cost Washout," February, 1991 "Survival of the Fittest," March, 1991 "Looking Out and Up," April, 1991 "The Bottom is in Sight," May, 1991 "The Pitfalls of Liquidation," June, 1991 "Extra! Extra! Hospitality News," July, 1991 "The Art of Hotel Renovation," August, 1991 "No Better Time for a Tax Review," September, 1991 "No Time for Passivity," October, 1991 "What a Franchise Really Costs," November, 1991 "In Case You Hadn't Heard," January, 1992 "Negotiation - The Name of the Game," February, 1992 "Now Could be the Time to Build," March, 1992 "The Well May Stay Dry," April, 1992 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Life Expectancy," May, 1992 "Hotel Values - What a Downer," June, 1992 "How to Make Money Now," July, 1992 "Hotel Chain Class Survey," August, 1992 "Budget Dining with Rushmore," September, 1992 "Bookings Up, Rates Will Follow," October, 1992 "Hospitality Master's Good Preparation," November, 1992 "What's New on the Job Front?" January, 1993 "Where Have All the Hotels Gone?" February, 1993 "Hotel Building Costs Continue to Fall," March, 1993 "Hotel Values Head Upward," April, 1993 "The Rise and Fall of Trophy Hotels," May, 1993 "Hotel Sales and Prices Rebound," June, 1993 "Third Parties Loosening Purse Strings," July, 1993 "Beyond Recycling: The Ecotel," August, 1993 "Time to Reduce Property Taxes," September, 1993 "Lodging: The Way I See It," October, 1993 "Choosing an Appraiser," November, 1993 "Who Needs an Asset Manager?" January, 1994 "Investing by the Numbers," February, 1994 "Fire Your Staff and Lease Them Back," March, 1994 "Published Rates Hint at Recovery," April, 1994 "Now is the Time to Start Building," May, 1994 "Hotel Values Heading Up," June, 1994 "Farewell, Friend," July, 1994 "Sales Prices Creeping Up," August, 1994 "Selecting Green Hotel Supplies," September, 1994 "Don't Write Off Full-Service Hotels," October, 1994 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Lodging REIT's Are on the Rise," November, 1994 "Going Back to the Future," January, 1995 "How much do Managers Make?" March, 1995 "Lodging Transactions Soared in '94," April, 1995 "Hotel Development Costs on the Rise," May, 1995 "Hotel Values up Significantly," June, 1995 "What a Franchise Costs over the Long Term," July, 1995 "Road Food Part II," August, 1995 "It's Time for Franchise Reform," September, 1995 "Extended Stay May Not Extend Your Profits," October, 1995 "The Year as I See It," November, 1995 "Cap Rate 101," January, 1996 Michigan Lodging "Hotel Development Costs," January, 1988 The Mortgage and Real Estate Executives Report "Atlantic City Building Game Involves High Stakes," August, 1979 "How Interest Rates Affect Real Estate Values," June, 1982 "Update on Hotel Development Costs," May 1, 1983 Motel-Hotel Insider "The $100,000 Plus Hotel Room Has Become a Reality," November 19, 1979 "Update on Hotel Development Costs," April 4, 1983 NAIFA - The Appraisal Review "Hotel Valuation Techniques," Vol. 44, 1991 Real Estate Digest "Why Should the Management Team be Important to Hotel Lenders," Fall, 1988 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Finance Journal "What is a Typical Fee for a Hotel Management Contract?" Fall, 1988 "Hotel Franchise Fees," Winter 1989 "Why the Management Team Should be Important to Hotel Lenders," Spring, 1989 "Hotel Values and Costs," Summer, 1989 "Structuring a Hotel Investment," Fall, 1989 "A Guide for Lenders Holding Distressed Hotel Loans," Winter, 1990 "Estimating Current Interest Rates for Hotel Financing," Spring, 1990 "Hotel Valuation Techniques," Summer, 1990 "Now is the Time to Review Your Hotel's Property Taxes," Fall, 1990 "Property Tax Assessments for Hotels and Motels," Winter, 1991 "Putting Together Hotel Management Agreements - Part I," Spring 1991 "Putting Together Hotel Management Agreements - Part II," Summer, 1991 "The 1980s - The Decade of Change," Fall, 1991 "An Overview of the Hotel Industry: Past, Present, and Future," Spring, 1994 Real Estate Forum "Casino Hotels Raise Valuation Questions," November, 1981 Real Estate Investment Ideas "How Fuel and Energy Shortages Should Affect Investment Decisions in the Hospitality Industry," March, 1974 "Upward Trend Continues for Sales Price of Hotel-Motel Properties," May, 1988 "High Prices Paid for Hotel-Motel Properties," February, 1990 Real Estate Issues "Employee Compensation for a Consulting Practice," Fall/Winter, 1985 "Hotel/Motel Market Sales Update," Spring/Summer, 1987 Real Estate Newsletter "Computers in Hotel Appraising," May 15, 1989 Real Estate Investment Ideas "Hotel-Sales Update," Winter, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Review "Valuing Motels and Hotel in the Current Market," Fall, 1972 "Dealing With Distressed Hostelry Loans," Fall, 1975 "The Mortgage Underwriting Consultant Comes of Age," Fall, 1977 "Real Estate Compensation," Winter, 1987 Real Estate Workouts and Asset Management "Stephen Rushmore on Directions in the Hospitality Industry," September, 1992 Real Values "Hotel Construction Cost Update," April, 1986 Restaurant and Hotel Design "How Much Should the Renovation Be?" March, 1986 "14 Notable Hotel Development Firms," December, 1987 Rushmore on Hotel Valuation "Mortgage - Equity," Winter, 1979 "Atlantic City - From Bust to Boom," Winter, 1979 "Mortgage - Equity," Spring, 1979 "Developing Mortgage Data," Spring 1979 "Gasoline and Market Values, " Spring, 1979 "Mortgage - Equity," Fall, 1979 "Quantifying a Hotel's Business Value," Fall, 1979 "What Has Happened to Typical Hotel-Motel Development Costs?," Fall, 1979 "Mortgage-Equity," Winter, 1980 "Extending Hotel Economic Life Through Renovation," Winter, 1980 "Estimating Hotel Land Values Using Comparable Ground Leases," Winter, 1980 "Quantifying the Value of Personal Property to a Going Hotel," Spring, 1980 "Recent Changes in New York City's Hotel Market," Spring, 1980 "Hotel-Motel Economic Lives," Fall, 1980 "Mortgage - Equity," Fall, 1980 "Mortgage - Equity," Winter, 1981 "Developing Mortgage Data," Winter, 1981 "Statistical Support for Food and Beverage Projections," Winter, 1981 "Mortgage - Equity," Spring/Summer, 1981 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Rushmore on Hotel Valuation (continued) "Quantifying a Hotel's Demand," Spring/Summer, 1981 "A Five-Year Overview of Typical Hotel-Motel Development Costs," Spring/Summer, 1981 "Mortgage - Equity," Winter/Spring, 1982 "Update on Hotel Capitalization Rates," Winter/Spring, 1982 "Mortgage - Equity," Summer/Fall, 1982 "Are Casino Hotels Really Worth $500,000 Per Room?" Summer/Fall, 1982 "The Hotel-Motel Life Cycle, Summer/Fall, 1982 "Mortgage - Equity," Winter/Spring, 1983 "Update on Hotel Development Costs," Winter/Spring, 1983 "The Valuation of Hotels and Motels for Assessment Purposes," Winter, 1984 "Hotel Capitalization Rates," Summer, 1984 "Hotel Development Cost Survey," Summer, 1984 "Selecting a Hotel Management Company," Fall, 1984 "Hotel Capitalization Rates," Spring, 1985 "How to Perform a Breakeven Analysis," Spring, 1985 "Hotel Capitalization Rates," Winter, 1986 "Hotel Development Costs," Winter, 1986 "Hotel Valuation Survey," Winter, 1987 "Impact of New Tax Laws on Hotel Values," Winter, 1987 "Hotel-Motel Market Sales Update," Winter, 1987 "Structuring an Incentive Management Fee," Fall, 1987 "Understanding Your Hotel's Economic Life," Fall, 1987 "Hotel Development Costs," Fall, 1987 "Hotel, Motel Market Sales Update," Winter, 1988 "Amenity Creep," Winter, 1989 "Hotel Franchise Fees," Winter, 1989 "Hotel Valuation Index," Fall, 1989 "Latest Trends in Hotel Values," Fall, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Tri-State Real Estate Journal "Across the Nation: Hotel Sale Prices Escalate on Average," December 23, 1994 U.S. Real Estate Week "All-Suites Market Entering Second Phase," May 4, 1987 Valuation "Hotel-Motel Market Sales Update," February, 1987 Quarterly Newsletter Hotel Valuation Journal Professional newsletter with a circulation of 10,000 Real Estate Column Lodging Hospitality Real estate editor for a major monthly hospitality periodical Hospitality Column Real Estate Finance Journal Contributing hospitality editor Computer Software Hospitality Valuation Software Hotel financial software for room night analyses, income and expense forecasts, and valuation calculations - developed and distributed for the Appraisal Institute Hotel-Motel Data Hospitality Market Data Exchange National clearinghouse for information pertaining to hotel and motel transactions Hotel Valuation Index National index of hotel value trends for 24 individual market areas Hospitality Seminar Series Intensive short courses for hotel and restaurant professionals Hotel Franchise Fees Analysis Guide Analysis of hotel franchise fees and costs Hospitality Bibliography Comprehensive literature index of hotel and restaurant books and articles HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Awards Robert H. Armstrong Award For the most significant contribution to The Appraisal Journal in 1975 Activities Commercial pilot, instrument, multi-engine; sailing; skiing Corporate and Institutional Clients Served Aetna Life Insurance AIG Real Estate Investment Aldrich Eastman and Waltch Allstate American Airlines America's Best Inns Arthur Anderson & Company Bankers Trust Company Bank of America Bank of Boston Bank of Montreal Bank of New York Bank of Nova Scotia Bank of Tokyo Bank One-Columbus Banque Indosuez Barclay's Bank Baybank Boston The Beacon Companies Bear, Stearns & Company, Inc. Best Inns Best Western International Boykin Management Co. Bradbury Suites C. Itoh Caesar's World California Dept. of Transportation Chase Lincoln First Bank, N.A. Chase Manhattan Bank Chemical Bank Chrysler Capital Corporation CIGNA Citibank Citicorp Real Estate City of Boston City of Detroit City of Grand Rapids City of Kalamazoo City of Orlando City of Philadelphia City of Santa Monica City of Toronto Columbia Sussex Corporation Continental Illinois National Bank Copley Real Estate Advisors Corporex Development CRI, Inc. Cushman and Wakefield Days Inns Edward J. DeBartolo Corp. HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Deer Valley Ski Corporation Doubletree Hotels Drury Inns Econo Lodge Economic Development Admin. EIE Regent International Embassy Suites Equitable Life Assurance Equitable Real Estate Investment European American Bank Fairmont Hotels Federal Deposit Insurance Corp. First Boston First California Savings First Interstate Bank First National Bank of Chicago Four Seasons Hotels Goldman, Sachs Greater Orlando Aviation Authority Great Western Bank Great Western Savings Guest Quarters Hampton Inns Hilton Hotels, Corp. Hilton International Holiday Corporation Holiday Inns Home Savings of America Howard Johnson's Hudson Hotels Corporation Hyatt Hotels Industrial Bank of Japan Interstate Hotels The Irvine Company ITT Commercial Finance Corp. Japan Airlines JDC (America) Corporation John Q. Hammons John Hancock Life Insurance Johnson & Wales College Kenneth Leventhal & Assoc. Kidder Peabody & Company, Inc. La Quinta Larken, Inc. Lexington Companies Loews Hotels Harry Macklowe Real Estate Marine Midland Bank, N.A. Marriott Corporation MA Bay Transit Authority Massachusetts Mutual Life Mellon Bank Meridien Hotels Merrill Lynch Merrill Lynch Capital Markets Metropolitan Life Insurance Microtel Midlantic Bank HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Mitsubishi Morgan Guaranty Bank & Trust Co. J.P. Morgan Investment Management Morgan Stanley Motel 6, Inc. Mutual Benefit Co. National Westminster Bank New York Life Insurance Nippon Credit Bank Nomura Securities Int'l North American Taisei Corporation Northwestern Mutual Life Omni Hotels Parabas Bank Prime Motor Inns Property Capital Trust Prudential Life Insurance Radisson Hotels Ramada Inns Red Lion Inns Regent International Registry Hotels Residence Inns Resolution Trust Corporation Rhode Island Hospital Trust Ritz-Carlton Hotels Rodeway Inns Rose Associates Salomon Brothers San Antonio Hotel/Motel Assoc. Sanwa Bank Security Pacific Bank Servico Management Corp. Sheraton Hotels Sonesta Hotels Sonnenblick-Goldman Steamboat Ski Corporation Stouffer Hotels Stratton Corporation Sumitomo Bank Summerfield Hotel Corporation Super 8 Hotels Swiss Bank Corporation Taisei Texas Commerce Bancshares, Inc. Tishman Realty Corporation Trans World Airlines Travelers Insurance TraveLodge Trusthouse Forte UBS Securities Union Labor Life United Bank of Switzerland United Inns, Inc. United States Steel Universal Hotels U.S. Air Force U.S. Department of Justice HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) U.S. Department of the Army U.S. Department of the Interior U.S. Economic Development Authority U.S. Trust Company Walt Disney Productions Westin Hotels Williams Hospitality Corporation Winegardner & Hammons Winthrop Financial Associates Wyndham Hotels Zeckendorf Company Appearance as an Expert Witness Administrative Law Court - SEC, Washington, DC Appellate Tax Board, Boston, Massachusetts Arbitration, Wayne, New Jersey Assessment Appeals Board, Los Angeles County, Los Angeles, California Board of Equalization and Review, Washington, District of Columbia (2) Board of Taxation, Atlantic City, New Jersey Bureau de Revision Evaluation Fonciere du Quebec, Montreal, Canada Circuit Court, Orange County, Orlando, Florida Condemnation Review Board, Minneapolis, Minnesota Corporation Committee, Rhode Island State Senate Court of Common Pleas, Allegheny County, Pennsylvania Court of Common Pleas, Franklin County, Ohio Court of Common Pleas, Montgomery, Pennsylvania Court of Common Pleas, Pittsburgh, Pennsylvania Court of Common Pleas, Philadelphia, Pennsylvania Court of Queen's Bench of Alberta, Canada District Court, Arapahoe County, Colorado District Court, Dallas County, Texas District Court, Harris County, Texas District Court, Tarrant County, Texas District Court, Hennepin County, Minneapolis, Minnesota District Court, Knoxville, Tennessee Federal Bankruptcy Court, Oakland, California Federal Bankruptcy Court, Los Angeles, California HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Denver, Colorado Federal Bankruptcy Court, District of Columbia Federal Bankruptcy Court, Miami, Florida (2) Federal Bankruptcy Court, Chicago, Illinois Federal Bankruptcy Court, New Orleans, Louisiana Federal Bankruptcy Court, Greenbelt, Maryland Federal Bankruptcy Court, Baltimore, Maryland Federal Bankruptcy Court, Rockville, Maryland Federal Bankruptcy Court, Boston, Massachusetts Federal Bankruptcy Court, Grand Rapids, Michigan Federal Bankruptcy Court, Las Vegas, Nevada Federal Bankruptcy Court, Newark, New Jersey (2) Federal Bankruptcy Court, Manhattan, New York (2) Federal Bankruptcy Court, Westbury, New York Federal Bankruptcy Court, Philadelphia, Pennsylvania Federal Bankruptcy Court, Reading, Pennsylvania Federal Bankruptcy Court, Salt Lake City, Utah Federal Bankruptcy Court, Madison, Wisconsin (2) Federal District Court, Rochester, New York Federal District Court, Philadelphia, Pennsylvania (2) Judicial Arbitration and Mediation Services, Dallas, Texas Michigan Tax Tribunal, Detroit, Michigan New Jersey Tax Court, Newark, New Jersey (2) Superior Court, District of Columbia Superior Court, Clayton County, Georgia (2) Superior Court of North Carolina Superior Court, Nashua, New Hampshire Supreme Court, New York State, Buffalo, New York Supreme Court, New York State, Manhattan, New York Supreme Court, New York State, Riverhead, New York HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Tax Review Board, San Joaquin County, Stockton, California Tax Review Board, Bangor, Maine Tax Review Board, Schenectady, New York Tax Review Board, Yorktown, New York Tax Review Board, North Carolina Tax Review Board, Philadelphia, Pennsylvania (2) U.S. District Court, Wilmington, Delaware U.S. District Court, Madison, Wisconsin ============================================================================== Partial List of Hotels/Motels, Appraised or Reviewed Internationally North America Canada - Delta Hotel, Calgary - Econo Lodge, Hull - Hotel Lord Berri, Montreal - Hotel Vogue, Montreal - Hyatt Regency, Montreal - Le Ragence Hyatt, Montreal - Holiday Inn, Oshawa, Ontario - Hotel Le Chantecler, Quebec - Bond Place Hotel, Toronto - Carlton Hotel, Toronto - Chelsea Hotel, Toronto - Delta Chelsea Hotel, Toronto - Four Seasons on the Park, Toronto - Inn on the Park, Toronto - Novotel Missisauga, Toronto - Ramada Inn, Toronto - Sutton Hotel, Toronto - Toronto Marriott East, Toronto - Westbury Hotel, Toronto - Burnaby Villa Inn, Vancouver - Four Seasons Hotel, Vancouver - Sheraton Land Mark, Vancouver - Sheraton Plaza 500, Vancouver - Four Seasons Yorkville Hotel, Yorkville United States Alabama - MEI - Birmingham West, Bessemer - Comfort Inn, Birmingham - Courtyard by Marriott, Birmingham - Courtyard by Marriott-Hoover, Birmingham - Courtyard By Marriott/Homewood, Birmingham - Crown Sterling Suites, Birmingham - Fairfield Inn, Birmingham - Holiday Inn, Birmingham - Howard Johnson, Birmingham - Knights Inn, Birmingham - Ramada Inn, Birmingham - Residence Inn by Marriott, Birmingham - Still Waters Resort, Dadeville - Ramada Inn, Gadsden - Sheraton Hotel, Gulf Shores - Courtyard by Marriott, Huntsville - Knights Inn, Huntsville - Marriott Hotel-Proposed, Huntsville - La Quinta Inn, Huntsville University - Days Inn, Mobile - Hotel - Proposed, Mobile - Inn-Proposed, Mobile - Stouffer Riverview, Mobile - Courtyard by Marriott, Montgomery - Fairfield Inn, Montgomery - Holiday Inn-Downtown, Montgomery - Holiday Inn-East, Montgomery - Howard Johnson, Montgomery - La Quinta Inn, Montgomery - Residence Inn, Montgomery - Marriott's Grand Hotel, Point Clear - Holiday Inn, Sheffield - La Quinta, Tuscaloosa - Masters Economy Inn, Tuscaloosa - Proposed Extended Stay, West Mobile Alaska - Barratt Inn, Anchorage - Clarion Hotel, Anchorage - Holiday Inn, Anchorage - Hotel Captain Hook, Anchorage - International Airport Inn, Anchorage - Sheraton Anchorage Hotel, Anchorage Arizona - Holiday Inn, Bullhead City - Embassy Suites, Camelback - Compri Hotel-Proposed, Chandler - Quality Inn, Chandler - Ramada Inn, Chandler - AmeriSuite Hotel-Proposed, Flagstaff - Holiday Inn, Flagstaff - Motel 6, Flagstaff - Rodeway Inn, Flagstaff - Bright Angel Lodge, Grand Canyon - El Tovar Hotel, Grand Canyon - Grand Canyon National Park, Grand Canyon - Kachina Lodge, Grand Canyon - Maswik Lodge, Grand Canyon - Moqui Lodge, Grand Canyon - Phantom Ranch, Grand Canyon - Thunderbird Lodge, Grand Canyon - Yavapai Lodge, Grand Canyon - Hampton Inn-Proposed, Holbrook - Moqui Lodge, Kaibab National Forest - Rodeway Inn, Kingman - Nautical Inn Resort, Lake Havasu City - Lexington Hotel Suites, Mesa - Biosphere II Conference Center, Oracle - Best Western-Per Diem, Phoenix - Bobby McGee's, Phoenix - Caravan Inn, Phoenix - Compri Hotel-Proposed, Phoenix - Courtyard by Marriott-Black Canyon, Phoenix - Courtyard by Marriott-Mesa, Phoenix - Crescent Phoenix Hotel, Phoenix - Crown Sterling Suites, Phoenix - Days Inn, Phoenix - Doubletree Inn at Park Central, Phoenix - Embassy Suites, Phoenix - Embassy Suites-Biltmore, Phoenix - Executive Park Hotel, Phoenix - Fountain Suites Hotel, Phoenix - Granada Royale-Camelhead, Phoenix - Hilton Hotel, Phoenix - Holiday Inn, Phoenix - Hyatt Regency, Phoenix - La Quinta Hotel, Phoenix - Lexington Hotel Suites, Phoenix - Newton's Sands, Phoenix - Phoenician Golf & Tennis Resort, Phoenix - Pointe Hilton at Tapatio Cliffs, Phoenix - Quality Inn, Phoenix - Ramada Inn-Airport, Phoenix - Ramada Inn-East, Phoenix - Ritz Carlton, Phoenix - Sunburst Resort Hotel, Phoenix - Hassayampa Inn, Prescott - Clarion Inn at McCormick Ranch, Scottsdale - Conference Center, Scottsdale - Courtyard by Marriott-Mayo, Scottsdale - Doubletree Inn at Scottsdale Mall, Scottsdale - Fairfield Inn, Scottsdale - Fashion Square Hotel, Scottsdale - Loews Paradise Resort, Scottsdale - Marriott Camelback Inn, Scottsdale - Marriott Mountain Shadows, Scottsdale - Mountain Shadows Resort, Scottsdale - Orange Tree Resort, Scottsdale - Ramada-Valley Ho, Scottsdale - Red Lion's La Posada Resort, Scottsdale - Registry Resort, Scottsdale - Rodeway Inn, Scottsdale - Scottsdale Princess, Scottsdale - Sheraton Scottsdale Resort, Scottsdale - The Phoenician, Scottsdale - Valley Ho, Scottsdale - John Gardiner's Enchantment, Sedona - L'Auberege de Sedona, Sedona - Los Abrigados, Sedona - Orchards Inn, Sedona - Hotel-Proposed, Sierra Vista - Motel 6, Sierra Vista - Temple Bar Resort, Temple Bar - Coachman Inn - Proposed, Tolleson/Phoenix - Tubac Resort, Tubac - Canyon Ranch, Tucson - Coachman Inn-Proposed, Tucson - Courtyard by Marriott, Tucson - Doubletree Inn, Tucson - Embassy Suites, Tucson - Granada Royale Hometel-E. Broadway, Tucson - Hotel Park Tucson-Proposed, Tucson - Lexington Suites Hotel, Tucson - Loews Hotel, Tucson - Resort Hotel-Proposed, Tucson - Rodeway Inn, Tucson - Sunbelt Commerce Center Hotel, Tucson - La Quinta Inn, Tucson East - Bobby McGee's, Tuscon - Radisson Suite Hotel, Tuscon - Ventana Canyon Golf and Racquet, Tuscon - Ramada Inn, Union Hill Arkansas - Sheraton Inn, Fort Smith - Hilton, Hot Springs - Holiday Inn-Lake Hamilton, Hot Springs - Courtyard by Marriott, Little Rock - Holiday Inn, Little Rock - Legacy Hotel, Little Rock - Little Rock Hilton, Little Rock - Masters Economy Inn, Little Rock - Red Carpet Inn, Little Rock - Super 8, Little Rock - Masters Economy Inn, North Little Rock - Masters Economy Inn, Protho-Junction - Holiday Inn, Texarkana California - Hampton Inn, Agoura Hills - Ramada Inn, Agoura Hills - Residence Inn-Proposed, Agoura Hills - Island Motel, Almeda - Anaheim Hilton & Towers, Anaheim - Anaheim Park Motor Inn, Anaheim - Anaheim Plaza Hotel, Anaheim - Best Western Pavillions, Anaheim - Carousel Inn, Anaheim - Conestoga Hotel, Anaheim - Courtyard by Marriott, Anaheim - Crown Sterling Suites, Anaheim - Disneyland Hotel, Anaheim - Golden Forest Motel, Anaheim - Hampton Inn, Anaheim - Hilton, Anaheim - Holiday Inn Anaheim Center, Anaheim - Hotel-Proposed, Anaheim - Marriott Hotel, Anaheim - Pan Pacific Hotel, Anaheim - Pitcairn Motel, Anaheim - Raffles Inn, Anaheim - Ramada Maingate/Disneyland Hotel, Anaheim - Roger Morris Inn, Anaheim - Stovall's Inn, Anaheim - The Station Inn, Anaheim - Travelodge Inn at the Park, Anaheim - AmeriSuite, Anaheim Hills - Comfort Inn, Anahiem - Mansouri Hotel, Antioch - Red Lion, Apple Valley - Hampton Inn, Arcadia - Residence Inn, Arcadia - Hilton Lodge, Arrowhead Lake - Auburn Inn, Auburn - Sleep Inn, Auburn - Allstar Inn, Bakersfield - Clarion Hotel, Bakersfield - Courtyard by Marriott, Bakersfield - Economy Inn, Bakersfield - Ramada Inn, Bakersfield - Red Lion Hotel, Bakersfield - Residence Inn, Bakersfield - Rodeway Inn, Bakersfield - Hilton Hotel, Baldwin Park - San Gabriel Valley Hotel, Baldwin Park - The Hilton Hotel, Baldwin Park - Allstar Inn, Barstow - Economy Inn, Barstow - Marriott Berkeley Marina, Berkeley - Shattuck Hotel, Berkeley - Beverly Hills Hotel, Beverly Hills - Beverly Rodeo Hotel, Beverly Hills - Beverly Wilshire Hotel, Beverly Hills - Hilton Hotel-Cresthil, Beverly Hills - L'Ermitage, Beverly Hills - Peninsula Hotel, Beverly Hills - Best Western, Big Bear Lake - Big Bear Hotel, Big Bear Lake - Big Bear Lake Resort, Big Bear Lake - Big Bear Towering Pines, Big Bear Lake - Motel 6, Big Bear Lake - Post Ranch, Big Sur - Ventana Inn, Big Sur - Rodeway Inn, Blythe - Courtyard by Marriott, Brea - Holiday Inn, Brentwood - Courtyard by Marriott, Buena Park - Fairfield Inn, Buena Park - Hampton Inn, Buena Park - Holiday Inn, Buena Park - Crowne Sterling Suites, Burlingame - Hyatt Regency, Burlingame - Mariott Hotel - SFO, Burlingame - Marriott, Burlingame - Marriott-San Francisco Airport, Burlingame - Radisson Hotel-Proposed, Burlingame - Sheraton Hotel, Burlingame - Courtyard by Marriott, Camarillo - Best Western Fireside Inn, Cambria - Cambria Pines Lodge, Cambria - Residence Inn, Campbell - Hotel-Proposed, Capitola - Resort Hotel, Spa & Conference Ctr., Capitola - Allstar Inn, Carlsbad - Carlsbad Inn, Carlsbad - Inn of America, Carlsbad - La Costa Hotel and Spa, Carlsbad - Olympic Resort Hotel, Carlsbad - Tickle Pink Inn, Carmel - Allstar Inn, Carpinteria - Desert Princess Country Club, Cathedral City - Royce Suites Hotel, Cathedral City - Digger Bay, Central Valley - Marriott Hotel-Proposed, Century City - Westin Century Plaza Hotel, Century City - Neighborhood Inn-Proposed, Chatsworth - Red Lion Hotel, Chico - Otay Valley Inn, Chula Vista - Travelodge-Otay Valley, Chula Vista - Ramada Inn, City of Commerce - Sheraton Hotel, City of Industry - Allstar Inn, Coalinga - Harris Ranch Restaurant/Inn, Coalinga - Howard Johnson, Colton - Best Western Willow Tree Inn, Compton - Concord Hotel, Concord - Hilton Hotel, Concord - The Trees Inn, Concord - Motel 6, Corona - Hotel del Coronado, Coronado - Loews Coronado Bay Resort, Coronado - Madera Village Inn, Corte Madera - Ha' Penny Inn, Costa Mesa - La Quinta Hotel, Costa Mesa - Marriott Suites, Costa Mesa - Red Lion Hotel, Costa Mesa - Residence Inn, Costa Mesa - Pacifica Hotel, Culver City - Ramada Inn, Culver City - Courtyard by Marriott, Cupertino - Doubletree Hotel, Cupertino - Doubletree Hotel, Dana Point - Spa-Proposed, Danville - El Rancho, Davis - Furnace Creek Resort, Death Valley - Stovepipe Wells Village, Death Valley - Hilton, Del Mar - Days Inn, Diamond Bar - Compri Hotel, El Segundo - Proposed Summerfield, El Segundo - Days Inn, Emeryville - Holiday Inn-Bay Bridge, Emeryville - Lyons Restaurant, Emeryville - Budget Motel, Encinitis - Marriott Tenaya Lodge-Proposed, Fishcamp - Holiday Inn, Fort Myers Beach - All Suites Hotel/Athletic Club, Foster City - Clubtel-Proposed, Foster City - Courtyard by Marriott, Foster City - Holiday Inn, Foster City - Courtyard by Marriott, Fremont - Fremont Hotel, Fremont - Motel 6, Fremont - Residence Inn, Fremont - Allstar Inn, Fresno - AmeriSuite, Fresno - Chateau Inn, Fresno - Courtyard by Marriott, Fresno - Economy Inn, Fresno - Hacienda, Fresno - Holiday Inn, Fresno - Holiday Inn-Fresno Airport, Fresno - Howard Johnson Motel, Fresno - Piccadilly Inn, Fresno - Travelers Inn, Fresno - Travelers Lodge, Fresno - Griswold's Hotel, Fullerton - Holiday Inn, Fullerton - Marriott Hotel, Fullerton - Hotel-Proposed, Garden Grove - Hyatt Regency Alicante, Garden Grove - Princess Hotel, Garden Grove - Motel 6, Gilroy - Hyatt Regency-Proposed, Goleta - Allstar Inn, Hacienda Heights - Courtyard by Marriott, Hacienda Heights - Half Moon Bay Lodge, Half Moon Bay - Courtyard by Marriott, Harbor Boulevard - Grosvenor, Harborside-Pt. Loma - Inn at Foss Creek, Healdsburg - Chateau Marmont, Hollywood - Hollywood Palm Hotel, Hollywood - Sunset Towers Hotel, Hollywood - Waterfront Hilton Hotel, Huntington Beach - Compri Hotel, Hutton Centre - Grand Champions Resort, Indian Wells - Stouffer Esmerelda Resort, Indian Wells - Courtyard By Marriott, Irvine - Courtyard by Marriott - Proposed, Irvine - Embassy Suites, Irvine - Hilton Hotel, Irvine - Holiday Inn, Irvine - Hyatt Hotel, Irvine - La Quinta-Proposed, Irvine - Marriott Hotel, Irvine - Marriott-Proposed, Irvine - Registry Hotel, Irvine - Residence Inn-Proposed, Irvine - Amador Inn, Jackson - Embassy Suites, La Jolla - Hotel-Proposed, La Jolla - La Jolla Property, La Jolla - La Jolla Village Inn, La Jolla - Marriott Hotel, La Jolla - Residence Inn, La Jolla - Days Inn-Proposed, La Palma - PGA West Resort - Proposed, La Quinta - Lafayette Park Hotel, Lafayette - Laguna Shores, Laguna Beach - Holiday Inn, Laguna Hills - Ryokan Hotel-Proposed, Laguna Hills - Villa Valencia, Laguna Hills - Ritz Carlton, Laguna Niguel - Lake Mohave Resort, Lake Mohave - Resort at Squaw Creek, Lake Tahoe - Courtyard by Marriott, Larkspur Landing - Hilton, Las Cruces - Surf and Sand Hotel, Leguna Beach - Holiday Inn, Lido Beach - Motel-Proposed, Little Lake - Residence Inn, Livermore - Residence Inn-Proposed, Livermore - Breakers Hotel, Long Beach - Holiday Inn, Long Beach - Holiday Inn Airport, Long Beach - Marriott Hotel-Long Beach Airport, Long Beach - Marriott Hotel-Proposed, Long Beach - Ramada Renaissance Hotel, Long Beach - Residence Inn, Long Beach - Sheraton Long Beach & Office Tower, Long Beach - Airport Park Hotel, Los Angeles - Bel Age, Los Angeles - Biltmore Hotel, Los Angeles - Century Inn, Los Angeles - Checkers Hotel, Los Angeles - Courtyard by Marriott-Irvine Main, Los Angeles - Courtyard by Marriott-LAX Airport, Los Angeles - Crown Sterling Suites, Los Angeles - Days Inn, Los Angeles - Econo Lodge-Proposed, Los Angeles - Embassy Suites, Los Angeles - Embassy Suites-LAX-Proposed, Los Angeles - Four Seasons, Los Angeles - Hampton Inn-LAX, Los Angeles - Herrick and Campbell, Los Angeles - Hilton & Towers-LAX, Los Angeles - Hilton Hotel, Los Angeles - Holiday Inn Crowne Plaza-LAX, Los Angeles - Le Montrose Hotel, Los Angeles - Ma Maison Sofitel, Los Angeles - Macklowe Hotel, Los Angeles - Marriott Century City, Los Angeles - MCA Hotel-Proposed, Los Angeles - New Otani Hotel, Los Angeles - Playa Vista Development, Los Angeles - Stouffer Concourse Hotel, Los Angeles - Westin Bonaventure, Los Angeles - Westwood Marquis Hotel, Los Angeles - Los Gatos Lodge, Los Gatos - Macienda Inn, Los Gatos - Toll House Inn, Los Gatos - Residence Inn, Manhattan Beach - All Suite Hotel, Marina Del Rey - Marina Beach Hotel, Marina del Rey - Marina del Rey Hotel and Marina, Marina del Rey - Marina Suites Hotel, Marina Del Rey - Marriott Marina Del Rey, Marina Del Rey - Residence Inn, Meriden - Quality Suites Hotel - Proposed, Millbrae - Beverly Heritage Hotel, Milpitas - Crown Sterling Suites, Milpitas - Holiday Inn, Milpitas - Courtyard by Marriott, Mira Mesa - Grosvenor, Mission Bay - Motel Orleans, Modesto - Red Lion Hotel, Modesto - Red Lion-Proposed, Modesto - Carmel Mission Inn, Monterey - Doubletree Inn, Monterey - Former Monterey Hilton Hotel, Monterey - Monterey Plaza, Monterey - Plaza Hotel, Monterey - Sheraton Hotel, Monterey - Pebble Beach Company, Monterey County - Inn at Morro Bay, Morro Bay - Residence Inn, Mountain View - Inn at Napa Valley, Napa - Best Western Inn, Napa Valley - Clarion Hotel-Napa Valley, Napa Valley - Silverado, Napa Valley - Ha'Penny Motel, National City - Allstar Inn, Needles - Hilton-Newark/Fremont, Newark - Four Seasons Hotel, Newport Beach - Hotel Meridien, Newport Beach - Hyatt Newporter, Newport Beach - Newporter Resort, Newport Beach - Sheraton, Newport Beach - Days Inn-Proposed, North Hollywood - Northstar, North Lake Tahoe - Ramada Inn, Norwalk - Impact Study - Proposed Hotel, Oakdale - Hilton Inn, Oakland - Holiday Inn, Oakland - Holiday Inn-Oakland Airport, Oakland - Parc Oakland Hotel, Oakland - Resort - Proposed, Olympic Valley - Resort at Squaw Creek-Proposed, Olympic Valley - Clarion Hotel, Ontario - Compri Hotel, Ontario - Fairfield Inn, Ontario - Holiday Inn, Ontario - Lexington Hotel Suites, Ontario - Red Lion Hotel, Ontario - Doubletree Hotel, Orange - Woodfin Suites, Orange - Embassy Suites, Palm Desert - Marriott Desert Springs, Palm Desert - Canyon Resort, Palm Springs - Compri Hotel-Proposed, Palm Springs - Courtyard by Marriott, Palm Springs - Desert Princess, Palm Springs - Grand Champions Resort, Palm Springs - International Hotel and Resort, Palm Springs - Ocotillo Lodge, Palm Springs - Palm Canyon, Palm Springs - PGA West Resort-Proposed, Palm Springs - Spa Hotel at Mineral Springs, Palm Springs - Westin Hotel, Palm Springs - Grosvenor, Palmdale - Super 8, Palmdale - Cowper Square, Palo Alto - Garden Court, Palo Alto - Holiday Inn, Palo Alto - Stanford Park, Palo Alto - Marriott, Paradise Valley - All Suite Hotel-Proposed, Pasadena - Doubletree Hotel, Pasadena - Holiday Inn, Pasadena - Cascade Ranch Lodge, Pescadero - Elk Lodge, Petaluma - Hotel Petaluma, Petaluma - Hilton-Proposed, Pismo Beach - Hilton-Sea Point, Pismo Beach - Holiday Inn, Pismo Beach - Hotel-Proposed, Pismo Beach - Pismo II, Pismo Beach - Fairfield Inn, Placentia - Residence Inn, Placentia - Howard Hughes Center, Playa Vista - Pleasant Hill Inn, Pleasant Hill - Residence Inn, Pleasant Hill - Club Hilton Hotel-Proposed, Pleasanton - Compri Hotel, Pleasanton - Courtyard by Marriott, Pleasanton - Hilton, Pleasanton - Holiday Inn, Pleasanton - Pleasanton Creek, Pleasanton - Shilo Inn - Hilltop, Pomona - Compri Hotel, Rancho Bernardo - Radisson Suites, Rancho Bernardo - Comfort Inn Motel, Rancho Cordova - Courtyard by Marriott, Rancho Cordova - Economy Inn, Rancho Cordova - El Rancho, Rancho Cordova - Quality Suites-Proposed, Rancho Cordova - Sheraton Sunrise, Rancho Cordova - Marriott Rancho Las Palmas, Rancho Mirage - Mission Hills Hotel, Rancho Mirage - Resort Hotel-Proposed, Rancho Mirage - Westin Mission Hills Resort, Rancho Mirage - Bridge Bay Resort, Redding - Grand Manor Inn, Redding - La Quinta Inn, Redding - Motel 6, Redding - Motel Orleans, Redding - Red Lion Inn, Redding - Shasta Inn, Redding - Portofino Hotel & Yacht Club, Redondo Beach - Sheraton, Redondo Beach - Sofitel Redwood Shores, Redwood - Days Inn, Richmond - Best Western Carraige Inn, Ridgecrest - Days Inn, Riverside - Mission Inn-Proposed, Riverside - Omni Mission Inn, Riverside - Sheraton Hotel, Riverside - Red Lion Inn, Rohnert Park - Crown Sterling Suites, S.San Fransicso - Allstar Inn, Sacramento - Arco Arena II-Proposed, Sacramento - Arco Park, Sacramento - Catering Center - Proposed, Sacramento - Clarion Hotel, Sacramento - Compri Hotel-Proposed, Sacramento - Courtyard by Marriott, Sacramento - Courtyard by Marriott-S. Natomas, Sacramento - Hilton Hotel, Sacramento - Holiday Inn-Capital Plaza, Sacramento - Hotel-Proposed, Sacramento - Hyatt Arbitrat, Sacramento - Hyatt Regency, Sacramento - La Quinta Hotel, Sacramento - Motel Orleans, Sacramento - Radisson Hotel, Sacramento - Red Lion Inn, Sacramento - Residence Inn, Sacramento - Sacramento Inn, Sacramento - Sierra Inn, Sacramento - Sterling Hotel, Sacramento - Travelers Inn, Sacramento - Woodlake Inn, Sacramento - Harvest Inn, Saint Helena - Courtyard by Marriott, San Bruno - San Carlos Motel Development, San Carlos - Atlas Hotels/Mission Valley Inn, San Diego - Best Western Seven Seas Motor Lodge, San Diego - Budget Motel of America, San Diego - Catamaran Resort Hotel, San Diego - Center Pointe Development, San Diego - Comfort Inn, San Diego - Courtyard by Marriott-Mira Mesa, San Diego - Doubletree Hotel, San Diego - Embassy Suites, San Diego - Executive Lodge, San Diego - Hanalei Hotel, San Diego - Harbor Island Hotel-Proposed, San Diego - Harborside Inn-Point Loma, San Diego - Harbortown Marina Resort, San Diego - Holiday Inn Montgomery Airport, San Diego - Holiday Inn-Embarcadero, San Diego - Holiday Inn-Harbor View, San Diego - Horton Grand Saddlery, San Diego - Horton Park Plaza Hotel, San Diego - Howard Johnson Hotel, San Diego - Inter-Continental Hotel & Marina, San Diego - Kings Inn, San Diego - La Jolla Village Inn, San Diego - La Quinta Hotel, San Diego - Marriott Hotel-Mission Valley, San Diego - Marriott Twin Towers and Marina, San Diego - Mission Valley Inn, San Diego - Omni Hotel, San Diego - Radisson Hotel, San Diego - Ramada Inn, San Diego - Ramada Limited Suites, San Diego - Ramada Old Town, San Diego - Ramada Rancho Penasquitos, San Diego - Red Lion Inn, San Diego - Regency Plaza Hotel, San Diego - San Diego Marriott, San Diego - Seven Seas Lodge, San Diego - Sheraton Grand, San Diego - Sheraton Harbor Island East, San Diego - Super 8-Point Loma, San Diego - Symphony Towers, San Diego - Town and Country Hotel, San Diego - Travelodge Hotel Plaza, San Diego - U.S. Grant Hotel, San Diego - Westin-Proposed, San Diego - Abagail Inn, San Francisco - Bellevue Hotel, San Francisco - Cable Motor Inn, San Francisco - California Cafe, San Francisco - Campton Place, San Francisco - Cartwright Hotel, San Francisco - Chancellor Hotel, San Francisco - Clarion Inn-San Francisco Airport, San Francisco - Comfort Inn, San Francisco - Courtyard by Marriott-Airport, San Francisco - Embarcadero Inn, San Francisco - Fairmont Hotel, San Francisco - Grand Hyatt, San Francisco - Grosvenor Clift Hotel, San Francisco - Harbor Court Hotel, San Francisco - Hilton Hotel, San Francisco - Holiday Inn - Union Square, San Francisco - Holiday Inn Crowne Plaza, San Francisco - Holiday Inn-Civic Center, San Francisco - Holiday Inn-Fisherman's Wharf, San Francisco - Holiday Inn-Golden Gateway, San Francisco - Holiday Inn-South, San Francisco - Holiday Lodge, San Francisco - Hotel Diva, San Francisco - Hotel Meridien, San Francisco - Hotel Union Square, San Francisco - Hotel-Proposed, San Francisco - Hyatt Fisherman's Wharf, San Francisco - Hyatt Regency Embarcadero, San Francisco - Inn at Fisherman's Wharf, San Francisco - Inn at the Opera, San Francisco - Inn-Proposed, San Francisco - Juliana Hotel, San Francisco - King George Hotel, San Francisco - La Quinta Inn, San Francisco - La Quinta-Airport, San Francisco - Lambourne Hotel, San Francisco - Laurel Motor Inn, San Francisco - Majestic Hotel, San Francisco - Manx Hotel, San Francisco - Mark Twain, San Francisco - Marriott, San Francisco - Marriott San Francisco-Proposed, San Francisco - Marriott-Airport, San Francisco - Orchard Hotel, San Francisco - Pan Pacific Hotel, San Francisco - Parc 55 Hotel, San Francisco - Park Hyatt Hotel, San Francisco - Portman Hotel, San Francisco - Prescott Hotel, San Francisco - Queen Anne Hotel, San Francisco - Ramada Hotel, San Francisco - Regis Hotel, San Francisco - Ritz-Carlton Hotel, San Francisco - San Franciscan, San Francisco - San Francisco Hotel, San Francisco - Savoy Hotel, San Francisco - Sheraton Palace Hotel, San Francisco - Sheraton-Fisherman's Wharf, San Francisco - Sir Francis Drake Hotel, San Francisco - Stanford Court, San Francisco - Stouffer Stanford Court Hotel, San Francisco - Super 8-Fisherman's Wharf, San Francisco - Westin St. Francis, San Francisco - Crowne Sterling Suites, San Francisco - South - Olympic Club Golf Course, San Francisco/San Mateo - Budget Inn, San Jose - Courtyard by Marriott, San Jose - Cozy 8 Arena Hotel, San Jose - Fairmont Hotel, San Jose - Holiday Inn, San Jose - Ramada Renaissance, San Jose - Red Lion Inn, San Jose - Islander Motel, San Leandro - Apple Farm Inn, San Luis Obispo - Embassy Suites, San Luis Obispo - Holiday Inn, San Luis Obispo - Los Nomados Resort, San Luis Obispo - Twin Oaks Golf Course, San Marcos - Dunfey San Mateo Hotel, San Mateo - Compri Hotel-Proposed, San Pedro - Embassy Suites Hotel, San Rafael - Marriott Hotel-Proposed, San Ramon - Residence Inn, San Ramon - AAA Inn, Santa Ana - California Palms Hotel, Santa Ana - Comfort Inn, Santa Ana - Compri Hotel, Santa Ana - Embassy Suites Santa Ana, Santa Ana - Executive Lodge, Santa Ana - Howard Johnson, Santa Ana - Quality Inn, Santa Ana - Ramada Inn-Orange County, Santa Ana - El Encanto Hotel, Santa Barbara - Fess Parker's Red Lion Resort, Santa Barbara - Four Seasons Hotel, Santa Barbara - Montecito Inn, Santa Barbara - San Ysidro Ranch, Santa Barbara - Santa Barbara Inn, Santa Barbara - Biltmore Hotel & Suites, Santa Clara - Days Inn, Santa Clara - Doubletree Hotel, Santa Clara - Embassy Suites, Santa Clara - Inn At Saratoga, Santa Clara - Marriott Hotel, Santa Clara - Quality Suites Hotel, Santa Clara - Dream Inn, Santa Cruz - Hilton, Santa Maria - Motel 6, Santa Maria - Econo Lodge-Proposed, Santa Monica - Holiday Inn, Santa Monica - Holiday Inn at the Pier, Santa Monica - Park Hyatt Hotel, Santa Monica - Santa Monica Beach Hotel, Santa Monica - Santa Monica/Slatkin, Santa Monica - Allstar Inn, Santa Rosa - Doubletree Hotel, Santa Rosa - Fountaingrove Inn, Santa Rosa - Holiday Inn, Santa Rosa - Round Barn Inn-Proposed, Santa Rosa - Sheraton Round Barn, Santa Rosa - Days Inn, Seaside - Embassy Suites, Seaside - Seaside 8 Motel, Seaside - Valley Radisson, Sherman Oaks - Red Lion, Sonoma - Sonoma Mission Inn, Sonoma - Holiday Inn - Proposed, Sonora - Timberwolf Lodge, South Lake Tahoe - Holiday Inn, South San Francisco - Hotel-Proposed, South San Francisco - Meadowood Resort, St. Helena - Hilton Hotel, Stockton - Holiday Inn, Stockton - La Quinta Hotel, Stockton - Motel Orleans, Stockton - Paradise Point Manna, Stockton - Sheraton-Proposed, Stockton - Hilton, Sunnyvale - Holiday Inn, Sunnyvale - Neighborhood Suites, Sunnyvale - Ramada Inn, Sunnyvale - Sunnyvale Hilton, Sunnyvale - Temecula Creek Inn, Temecula Creek - Westlake Plaza Hotel, Thousand Oaks - Courtyard by Marriott, Torrance - Holiday Inn, Torrance - Marriott Hotel, Torrance - Residence Inn, Torrance - Holiday Inn, Union City - MCA Hotel-Proposed, Universal City - Comfort Inn, Vallejo - Holiday Inn, Van Nuys - La Quinta Hotel, Ventura - Ocean Resorts, Ventura - Sheraton, Ventura - Greentree Inn, Victorville - Doubletree Inn, Walnut Creek - Parkside Hotel, Walnut Creek - Ramada Renaissance Hotel, Walnut Creek - Royce Hotel-Proposed, Walnut Creek - Walnut Creek Project, Walnut Creek - Hampton Inn, West Covina - Le Bel Age, West Hollywood - Le Dufy, West Hollywood - Le Mondrian Hotel, West Hollywood - Hilton, Whittler - Hotel & Conference Center-Proposed, Woodland - Marriott Hotel-Woodland Hills, Woodland Hills - Skylonda Retreat, Woodside - Compri Hotel-Proposed, Yorba Linda - Marriott-Tenaya Lodge, Yosemite - Motel Orleans, Yuba City Colorado - Days Inn, Arapahoe - Continental Inn, Aspen - Ritz-Carlton Hotel-Proposed, Aspen - Hampton Inn, Aurora - Holiday Inn, Aurora - Radisson Hotel, Aurora - Radisson Southeast, Aurora - Raffles Hotel, Aurora - Comfort Inn, Avon - Boulder Hotel-Downtown, Boulder - Clarion Hotel, Boulder - Courtyard by Marriott, Boulder - Doubletree Hotel-Proposed, Boulder - Hilton Harvest House, Boulder - Holiday Inn, Boulder - Interlocken Conference Resort-Prop., Boulder - Proposed Golf Course, Boulder - Residence Inn, Boulder - Hilton, Breckenridge - Ski Lodge-Proposed, Breckenridge - Interlocken Conference Center, Broomfield - Interlocken Conference Center-Prop., Broomfield - Embassy Suites, Colorado Springs - Hilton, Colorado Springs - Howard Johnson, Colorado Springs - Le Baron Hotel, Colorado Springs - Marriott, Colorado Springs - Quality Inn, Colorado Springs - Red Lion Inn, Colorado Springs - Sheraton Inn, Colorado Springs - Grand Butte Hotel, Crested Butte - Best Western Regency, Denver - Brown Palace, Denver - Clarion Hotel-Denver Airport, Denver - Courtyard by Marriott-Airport, Denver - Courtyard by Marriott-Southeast, Denver - Days Inn, Denver - Denver Airport Hilton Inn, Denver - Doubletree Hotel, Denver - Embassy Suites, Denver - Embassy Suites-Airport, Denver - Hilton-Technical Center, Denver - Holiday Inn-Downtown, Denver - Holiday Inn-West, Denver - Jackson's Hole Sport, Denver - Marriott-Southeast, Denver - Marriott-West, Denver - Radisson Hotel, Denver - Red Lion Hotel, Denver - Regency Inn, Denver - La Quinta Inn, Denver - Airport - La Quinta, Denver - South - Red Lion Inn, Durango - Hilton-Denver, Englewood - Residence Inn, Englewood - Scanticon Conference Center, Englewood - Marriott Hotel-Proposed, Fort Collins - Holiday Inn, Golden - Marriott-Denver West, Golden - Ramada Inn, Grand Junction - Sheraton-Proposed, Keystone - Compri Hotel, Lakewood - Hampton Inn, Lakewood - Sheraton Inn, Steamboat Springs - Proposed Hotel, Telluride - Days Inn, Vail - Doubletree Hotel, Vail - Lodge at Vail, Vail - Marriott's Mark Resort, Vail - Westin Vail Resort, Vail - Ramada Hotel, Westminster - Winter Park Resort, Winter Park Connecticut - Chester Inn-Chester, Chester - Inn-Proposed, Chester - Super 8-Proposed, Cromwell - Danbury Hilton & Towers, Danbury - Residence Inn, Danbury - Holiday Inn, Darien - Howard Johnson Lodge, Darien - Ramada Inn, Darien - Holiday Inn, East Hartford - Howard Johnson Lodge, East Lyme - Days Inn-Proposed, Enfield - Greenwich Habor Inn, Greenwich - Howard Johnson Lodge, Greenwich - Showboat Inn, Greenwich - Hotel-Proposed, Groton - Hilton Hotel, Hartford - Holiday Inn-Proposed, Hartford - Motel 6, Hartford - Ramada Inn, Hartford - Sheraton Tobacco Valley Inn, Hartford - Summit Hotel, Hartford - Super 8 Motel, Hartford - Susse Chalet, Hartford - Residence Inn By Marriott, Meriden - Holiday Inn, Milford - Susse Chalet, Milford - Howard Johnson Lodge, Mystic - Mystic Ramada Inn, Mystic - Holiday Inn, New Britain - Ramada Inn, New Britain - Colony Inn, New Haven - Holiday Inn, New Haven - Howard Johnson, New Haven - Quality Inn, New Haven - Residence Inn, New Haven - Radisson Hotel, New London - Best Western-Proposed, New Milford - Courtyard by Marriott, Norwalk - Holiday Inn, Norwalk - Howard Johnson, Norwalk - Ramada Inn, Norwalk - Susse Chalet, Rocky Hill - Ramada Hotel-Proposed, Shelton - Residence Inn - Shelton, Shelton - Heritage Village, Southbury - Southbury Hotel, Southbury - Susse Chalet, Southington - Days Inn, Stamford - Executive Hotel, Stamford - Harley Hotel, Stamford - Holiday Inn-Crowne Plaza, Stamford - Inn at Mill River, Stamford - Le Pavillon Hotel, Stamford - Marriott, Stamford - Radisson Tara Hotel, Stamford - Sheraton, Stamford - Best Western-Proposed, Stratford - Stratford Motor Lodge, Stratford - Marriott Hotel, Trumbull - Courtyard by Marriott, Wallingford - Susse Chalet, Wallingford - Howard Johnson Plaza Hotel, Waterbury - Super 8-Proposed, Waterbury - Residence Inn-Proposed, Waterford - Holiday Inn, Westbury - The Island Inn, Westbury - Courtyard by Marriott, Windsor - Sheraton Tobacco Valley Inn, Windsor - Holiday Inn-Proposed, Windsor Locks Delaware - Wilmington Hilton, Claymont - Rusty Rudder, Dewey Beach - Residence Inn-Proposed, Newark - Hilton Hotel, Wilmington - Hotel-Proposed, Wilmington - Marriott Suites, Wilmington - Residence Inn-Proposed, Wilmington District of Columbia - All Suite Hotel - Proposed, Washington - Bellevue Hotel, Washington - Canterbury Hotel, Washington - Capital Hilton, Washington - Capitol Hill Hotel, Washington - Castleton Hotel, Washington - Comfort Inn, Washington - Convention Center Inn, Washington - Dupont Plaza, Washington - Embassy Row Hotel, Washington - Fairfax Hotel, Washington - Fairmont Hotel, Washington - Four Seasons Hotel, Washington - General Scott Inn, Washington - Georgetown Hotel, Washington - Grand Hotel, Washington - Grand Hyatt, Washington - Hampshire House, Washington - Harambee House, Washington - Hay Adams Hotel, Washington - Holiday Inn Crowne Plaza, Washington - Holiday Inn-Capitol, Washington - Holiday Inn-Georgetown, Washington - Holiday Inn-Governor House, Washington - Hotel Washington, Washington - Howard Johnson, Washington - Hyatt Regency-Capitol, Washington - Hyatt-Convention Center, Washington - International Inn, Washington - Intrigue Hotel, Washington - Jefferson Hotel, Washington - Lombardy Tower Apartment Hotel, Washington - Madison Hotel, Washington - Manger Annapolis Hotel, Washington - Manger Hamilton Hotel, Washington - Manger Hay Adams Hotel, Washington - Marriott-Key Bridge, Washington - Mayflower Hotel, Washington - Omni Georgetown Hotel, Washington - Omni Shoreham Hotel, Washington - Park Terrace Hotel, Washington - Phoenix Park Hotel, Washington - Plaza Hotel, Washington - Potomac Hotel Group, Washington - Quality Inn-Capitol Hill, Washington - Quality Inn-Downtown, Washington - Ramada Inn-Central, Washington - Ramada Renaissance Hotel, Washington - Ritz-Carlton, Washington - River Inn, Washington - Riverside Towers, Washington - Sheraton City Centre, Washington - Sheraton Grand Hotel, Washington - Shoreham Hotel, Washington - St. James, Washington - State Plaza, Washington - Statler Hilton Hotel, Washington - Washington Hilton, Washington - Washington Plaza, Washington - Watergate Hotel, Washington - Wyndham Bristol Hotel, Washington Florida - Holiday Inn, Altamonte Springs - La Quinta, Altamonte Springs - Turnberry Isle Resort, Aventura - Boca Raton Hotel and Club, Boca Raton - Boca West, Boca Raton - Deerfield Beach Hilton, Boca Raton - Embassy Suites, Boca Raton - Park Place Suite Hotel, Boca Raton - Petite Suites, Boca Raton - Residence Inn, Boca Raton - Days Inn, Brandenton - South Seas Resort, Captive Island - Days Inn, Clearwater - Days Inn-Proposed, Clearwater - Holiday Inn - Central/Clearwater, Clearwater - La Quinta Inn, Clearwater - Sheraton Sand Key Hotel, Clearwater - Holiday Inn - Gulfview South, Clearwater Beach - Holiday Inn - Surfside North, Clearwater Beach - Howard Johnson, Clermont - Econolodge, Cocoa Beach - Hilton Hotel, Cocoa Beach - Holiday Inn, Cocoa Beach - Howard Johnson, Cocoa Beach - Perkins Restaurant, Cocoa Beach - Coconut Grove Hotel, Coconut Grove - Mayfair House, Coconut Grove - Proposed Hampton Inn, Coconut Grove - Biltmore Hotel, Coral Gables - Holiday Inn, Coral Gables - Holiday Inn (Court), Coral Gables - Plantation Hotel, Crystal River - Sheraton Inn, Cypress Gardens - Budget Inn, Davenport - Daytona Beach Surfside Regency, Daytona Beach - Howard Johnson, Daytona Beach - La Quinta Inn, Daytona Beach - Pirates Cove, Daytona Beach - Sheraton Inn, Daytona Beach - Crown Sterling Suites, Deerfield Beach - Days Inn, Deerfield Beach - Hilton Hotel, Deerfield Beach - Horizon Club, Deerfield Beach - Sheraton Inn, Deland - Hilton Hotel, Disney World - Holiday Inn, Edgewater - Knights Inn, Florida City - AmeriSuites Hotel-Proposed, Fort Lauderdale - Bahia Mar Hotel, Fort Lauderdale - Comfort Suites, Fort Lauderdale - Compri Hotel-Proposed, Fort Lauderdale - Costa Del Sol, Fort Lauderdale - Crown Sterling Suites, Fort Lauderdale - Days Inn, Fort Lauderdale - Embassy Suites Hotel, Fort Lauderdale - Executive House, Fort Lauderdale - Hilton Hotel, Fort Lauderdale - Hilton Inverrary, Fort Lauderdale - Holiday Inn - Galleria, Fort Lauderdale - Holiday Inn - North Beach, Fort Lauderdale - Holiday Inn-Proposed, Fort Lauderdale - Marriott Harbor Beach Hotel, Fort Lauderdale - Marriott Hotel & Marina, Fort Lauderdale - Marriott Hotel-Cypress Road, Fort Lauderdale - Pier 66 Hotel and Marina, Fort Lauderdale - Port Everglades Hotel, Fort Lauderdale - Stouffer Hotel, Fort Lauderdale - Days Inn, Fort Meyers - Courtyard by Marriott, Fort Myers - Holiday Inn, Fort Myers - La Quinta Hotel, Fort Myers - Sheraton Harbor Place-Proposed, Fort Myers - Sheraton Motor Inn, Fort Myers - Proposed Hotel, Fort Myers Beach - American Way, Fort Pierce - Days Inn, Fort Walton Beach - Holiday Inn - Airport, Fort.Lauderdale - Days Inn-University Center, Gainesville - Fairfield Inn, Gainesville - Howard Johnson Lodge-I-75, Gainesville - La Quinta Hotel, Gainesville - University Centre Hotel, Gainesville - Holiday Inn, Hialeah - Motel, Hillsboro Beach - Days Inn, Hollywood - Diplomat Hotel, Hollywood - Holiday Inn, Hollywood - Quality Suites - Oceanside, Indiatlantic - Hilton Inn, Inverrary - Best Inn, Jacksonville - Bradbury Suites-Proposed, Jacksonville - Compri Hotel-Proposed, Jacksonville - Courtyard By Marriott, Jacksonville - Days Inn, Jacksonville - Doubletree Club Hotel, Jacksonville - Hampton Inn, Jacksonville - Hotel-Proposed, Jacksonville - Jacksonville Hotel, Jacksonville - Residence Inn, Jacksonville - Sheraton Hotel, Jacksonville - Wyndham Lakes Hotel, Jacksonville - Sheraton Beach Hotel, Jensen Beach - Howard Johnson, Juno Beach - Hilton Hotel, Jupiter - Key Biscayne, Key Biscayne - Howard Johnson Lodge, Key Largo - Casa Marina Marriott, Key West - Fairfield Inn, Key West - Hampton Inn-Roosevelt Rd., Key West - Holiday Inn, Key West - Hyatt Hotel, Key West - La Concha Holiday Inn, Key West - Pier House Inn and Beach Club, Key West - Reach Hotel, Key West - Santa Maria Hotel, Key West - Timeshare Resort, Key West - Best Western Vacation Lodge, Kissimmee - Days Inn, Kissimmee - Days Inn West, Kissimmee - Days Lodge, Kissimmee - Howard Johnson Plaza Hotel, Kissimmee - Howard Johnson's, Kissimmee - KOA Campground, Kissimmee - Old Town Retail Complex, Kissimmee - Quality Suites, Kissimmee - Quality Suites-Maingate, Kissimmee - Save Inn, Kissimmee - Sheraton Lakeside, Kissimmee - Suite Hotel-Proposed, Kissimmee - Wynfield Inn, Kissimmee - Days Inn, Lake Buena Vista - Embassy Suites-Proposed, Lake Buena Vista - Hilton Hotel-Disney World, Lake Buena Vista - Marriott Orlando World Center, Lake Buena Vista - Days Inn, Lake City - Flagship Inn, Lake County - Travelodge Motel, Lake County - Lake Park Inn, Lake Park - Holiday Inn, Lake Placid - Hampton Inn-Proposed, Lakeland - Hotel-Proposed, Lakeland - Howard Johnson, Lakeland - Resort Hotel-Proposed, Lakeland - Resort-Imperial Lake-Prpsd., Lakeland - Proposed Hotel, Lee County - Sonesta Sanibel Harbour, Lee County - Holiday Inn, Lido Beach - Holiday Inn, Longboat Kay - Holiday Inn - Madiera Beach, Madiera - Howard Johnson, Marathon - Radisson Suite Resort, Marco Island - Holiday Inn, Marianna - Oceanfront Hotel, Melbourne - Quality Suites, Melbourne - Bahia Mar Hotel & Yachting Club, Miami - Biscayne Bay Marriott, Miami - Courtyard by Marriott, Miami - Crown Sterling Suites, Miami - Doral Ocean Beach Resort, Miami - Fairfield Inn, Miami - Hilton Hotel-Proposed, Miami - Holiday Inn Civic Center, Miami - Holiday Inn-Airport (Le Juene Rd.), Miami - Holiday Inn-Calder, Miami - Howard Johnson Hotel-Broad Causeway, Miami - Howard Johnson Hotel-Port of Miami, Miami - Howard Johnson Lodge-Golden Glades, Miami - Howard Johnson Lodge-Int'l Airport, Miami - Hyatt Regency Hotel, Miami - Inter-Continental Hotel, Miami - Jockey Club, Miami - Marriott Hotel-Downtown, Miami - Miami Airport Ramada, Miami - Proposed AmeriSuites, Miami - Propsed Hampton Inn, Miami - Residence Inn-Proposed, Miami - Sheraton River House, Miami - Sofitel Miami, Miami - Alexander Hotel, Miami Beach - Art Deco Hotel, Miami Beach - Cresent Timeshare, Miami Beach - Delano Hotel, Miami Beach - Doral Beach Hotel, Miami Beach - Eden Roc Hotel, Miami Beach - Fontainebleu Hotel, Miami Beach - Holiday Inn, Miami Beach - Holiday Inn-Central, Miami Beach - Holiday Inn-North, Miami Beach - Holiday Inn-Oceanside, Miami Beach - Holiday Inn-South, Miami Beach - Hotel-Proposed, Miami Beach - Nautilus Club Hotel, Miami Beach - Palm Resort on the Ocean, Miami Beach - Pan American Radisson, Miami Beach - Proposed Hotel, Miami Beach - Shelborne Beach Hotel, Miami Beach - Sheraton Beach, Miami Beach - Solymar Hotel-Proposed, Miami Beach - Quality Inn, Naples - Quality Inn-Gulfcoast, Naples - Registry Hotel at Pelican Bay, Naples - Registry Resort-Proposed, Naples - Super 8 Motel-Proposed, Naples - World Tennis Resort, Naples - Hyatt Newporter Hotel, Newport Beach - Hilton Hotel, North Redington Beach - Masters Economy Inn, North Seffner - Amfac Hotel, Orlando - Army lodging-Proposed, Orlando - Comfort Suites Hotel, Orlando - Compri Hotel-Airport-Proposed, Orlando - Compri Hotel-Proposed, Orlando - Courtyard - Orlando Airport, Orlando - Days Inn, Orlando - Days Inn and Lodge-Florida Mall, Orlando - Days Inn Civic Center, Orlando - Days Inn East of Universal Studios, Orlando - Days Inn-E/O Magic Kingdom, Orlando - Days Inn-Proposed, Orlando - Days Inn-Sandlake Road, Orlando - Days Suites-E/O Magic Kingdom, Orlando - Dolphin Hotel-Proposed, Orlando - Dutch Inn, Orlando - Embassy Suites, Orlando - Fairfield Inn, Orlando - Fairfield Inn-Airport, Orlando - Grand Cypress Resort, Orlando - Hampton Inn - Proposed, Orlando - Heritage Inn, Orlando - Holiday Inn Central Park, Orlando - Holiday Inn Crowne Plaza, Orlando - Holiday Inn-Airport, Orlando - Holiday Inn-International Drive, Orlando - Holiday Inn-Lee Road, Orlando - Holiday Inn-Maingate West, Orlando - Holiday Inn-Orange Blossom Trail, Orlando - Howard Johnson - Walt Disney World, Orlando - Howard Johnson-Kirkman, Orlando - Howard Johnson-Lake Holden, Orlando - Howard Johnson-Maingate, Orlando - Hyatt Grand Cypress, Orlando - Hyatt Regency Grand Cypress, Orlando - Hyatt-W. Irlo Bronson Mem. Hwy., Orlando - International Inn, Orlando - Kon Tiki Village, Orlando - La Quinta Hotel-Airport, Orlando - La Quinta Inn, Orlando - Omni Orlando, Orlando - Orlando Airport Hotel-Proposed, Orlando - Orlando Hamiton, Orlando - Orlando Plaza Hotel, Orlando - Orlando Twin Towers Hotel, Orlando - Park Suite Hotel-Proposed, Orlando - Peabody Hotel, Orlando - Princess Hotel and Spa, Orlando - Proposed Wellesley Inn, Orlando - Quality Inn, Orlando - Radisson Hotel-Aquatic Center, Orlando - Regency Inn, Orlando - Residence Inn By Marriott, Orlando - Rodeway Inn, Orlando - Save Inn, Orlando - Sheraton Jetport Inn, Orlando - Sheraton Lakeside, Orlando - Sheraton Twin Towers, Orlando - Sonesta Village Resort, Orlando - Stouffer Orlando Resort, Orlando - Swan Hotel-Proposed, Orlando - Thriftway Motel, Orlando - Wynfield Inn, Orlando - American Way, Osceola - Sheraton Gateway Motel, Osceola - Brazilian Court Hotel, Palm Beach - Heart of Palm Beach Hotel, Palm Beach - Hilton Inn, Palm Beach - Palm Court, Palm Beach - Holiday Inn, Palm Beach Garden - Days Inn, Panama City - Marriott's Bay Point, Panama City - Super 8, Panama City - Days Inn, Pensacola - Hilton Hotel, Pensacola - La Quinta Hotel, Pensacola - Residence Inn, Pensacola - Super 8, Pensacola - Proposed Hampton Inn, Pensacola Beach - Comfort Inn, Perdido Key - La Quinta, Pinellas County - Courtyard by Marriott, Plantation - Holiday Inn Plantation, Plantation - Sheraton Suites, Plantation - Days Inn, Pompano Beach - Palm-Aire Spa Resort, Pompano Beach - Lodge & Bath Club, Ponte Verde - Howard Johnson, Punta Gorda - Days Inn, Riviera Beach - Safety Harbor Spa, Safety Harbor - Holiday Inn, Saint Augustine - Howard Johnson, Saint Augustine - Courtyard by Marriott, Saint Petersburg - Don Ceahsar Beach Resort, Saint Petersburg - Hilton Hotel, Saint Petersburg - Howard Johnson, Saint Petersburg - Ramada Inn, Saint Petersburg - Residence Inn, Saint Petersburg - Saint Petersburg Motel, Saint Petersburg - Sheraton Hotel and Marina, Saint Petersburg - Vinoy Park Hotel, Saint Petersburg - Countryside Inn, Sanford - Days Inn, Sanford - Holiday Inn, Sanford - Azure Tides Resort-Proposed, Sarasota - Days Inn, Sarasota - Holiday Inn-Lido Beach, Sarasota - Proposed Hotel, Sarasota - Holiday Inn, Sebring - Embassy Suites, Singer Island - Hilton, Singer Island - Econo Lodge, Starke - Radisson Pan American Hotel, Sunny Isles - Best Inn, Tallahassee - Courtyard by Marriott, Tallahassee - Days Inn-Tallahassee, Tallahassee - American Way, Tampa - Courtyard by Marriott, Tampa - Days Inn, Tampa - Embassy Suites-Airport, Tampa - Hampton Inn-Airport, Tampa - Hilton-Airport, Tampa - Holiday Inn, Tampa - Holiday Inn Sahal Park, Tampa - Holiday Inn-Airport, Tampa - Manger Motor Inn, Tampa - Marriott Hotel, Tampa - Omni Tampa Hotel at Westshore, Tampa - Ramada Inn, Tampa - Rodeway Inn, Tampa - Saddlebrook Resort, Tampa - Sheraton Grand West, Tampa - Master Economy Inn, Tampa-East(Selfner) - Master Economy Inn, Tampa-North(Zephyrhills) - Days Inn, Vero Beach - Holiday Inn-Countryside, Vero Beach - Holiday Inn-Oceanside, Vero Beach - Saddlebrook Resort, Wesley Chapel - Courtyard by Marriott, West Melbourne - Airport Centre, West Palm Beach - Courtyard by Marriott, West Palm Beach - Days Inn, West Palm Beach - Field Palm Hotel, West Palm Beach - Hilton-Airport, West Palm Beach - Howard Johnson Lodge, West Palm Beach - Hyatt Hotel of the Palm Beaches, West Palm Beach - Royce Hotel, West Palm Beach - Masters Economy Inn, Zephyrhills Georgia - Atlanta Radisson Hotel, Atlanta - Atlanta Terrace Motel, Atlanta - Comfort Inn, Atlanta - Compri Hotel, Atlanta - Courtyard By Marriott-Airport North, Atlanta - Courtyard by Marriott-Airport South, Atlanta - Courtyard by Marriott-Cumberland, Atlanta - Courtyard by Marriott-Executive Pk., Atlanta - Courtyard by Marriott-Gwinnett, Atlanta - Courtyard by Marriott-Jimmy Carter, Atlanta - Courtyard by Marriott-PeachtrDunwdy, Atlanta - Courtyard by Marriott-Perimeter, Atlanta - Courtyard by Marriott-Rosewell, Atlanta - Courtyard by Marriott-Windy Hill, Atlanta - Cresthil Inn-Proposed, Atlanta - Days Inn, Atlanta - Days Inn - Northlake, Atlanta - Doubletree Hotel, Atlanta - Embassy Suites-Atlanta Perimeter, Atlanta - Embassy Suites-Buckhead, Atlanta - Embassy Suites-Galleria, Atlanta - F.W.W. Hotel, Atlanta - Fairfield Inn-Airport, Atlanta - Fairfield Inn-Gwinnett, Atlanta - Fairfield Inn-North Lake, Atlanta - Fairfield Inn-Northwest, Atlanta - Fairfield Inn-Peachtree, Atlanta - Fairfield Inn-South Lake, Atlanta - Hampton Inn-Airport, Atlanta - Hilton Inn, Atlanta - Holiday Inn Crowne Plaza, Atlanta - Holiday Inn-I-20 East, Atlanta - Holiday Inn-I-85 Monroe Drive, Atlanta - Holiday Inn-Perimeter Dunwooody, Atlanta - Hotel-Downtown-Proposed, Atlanta - Hotel-Proposed, Atlanta - Howard Johnson Hotel-Hartsfield, Atlanta - Howard Johnson-Airport, Atlanta - Howard Johnson-Northeast, Atlanta - Howard Johnson-Northwest, Atlanta - Howard Johnson-South, Atlanta - Hyatt Atlanta-Airport, Atlanta - La Quinta - Stone Mountain, Atlanta - La Quinta Hotel, Atlanta - La Quinta Hotel-West, Atlanta - Marriott Atlanta Airport, Atlanta - Marriott Hotel, Atlanta - Marriott Hotel-Downtown, Atlanta - Marriott Marquis, Atlanta - Marriott Suites Hotel-Proposed, Atlanta - Marriott-Perimeter, Atlanta - Master Economy Inn, Atlanta - Motel 6, Atlanta - Neighborhood Inn, Atlanta - Omni International Hotel, Atlanta - Perimeter North Inn, Atlanta - Proposed AmeriSuites, Atlanta - Quality Inn-Central, Atlanta - Radisson Inn, Atlanta - Ramada Inn-Perimeter, Atlanta - Residence Inn by Marriott-Dunwoody, Atlanta - Residence Inn-Airport, Atlanta - Residence Inn-Buckhead, Atlanta - Residence Inn-Northwest, Atlanta - Sheraton Century Center, Atlanta - Sheraton-Airport, Atlanta - Sporting Club at the Concourse, Atlanta - Stouffer Hotel-Proposed, Atlanta - Swissotel, Atlanta - Terrace Motel, Atlanta - Waverly Hotel, Atlanta - Westin Lenox Hotel, Atlanta - Westin Peachtree Plaza, Atlanta - Wyndham Garden Hotel, Atlanta - Hyatt Hotel, Atlanta Airport - Hampton Inn, Atlanta-Buckhead - Courtyard by Marriott, Augusta - Landmark Hotel, Augusta - Masters Economy Inn - Gordon Hwy., Augusta - Masters Economy Inn - Warner Robins, Augusta - Masters Economy Inn - Washington Rd, Augusta - Holiday Inn, Brunswick - Super 8, Brunswick - Days Inn, Calhoun - Super 8, Cartersville - Days Inn, Chamblee - Comfort Inn-Proposed, College Park - Holiday Inn Crowne Plaza, College Park - Courtyard by Marriott, Columbus - La Quinta Inn, Columbus - Super 8, Columbus - Best Inn, Dalton - Days Inn, Dalton - Holiday Inn-Proposed, Decatur - Sheraton Hotel, Decatur - Best Western-Perimeter-North, Doraville - Days Inn - Gwinnett, Duluth - Howard Johnson, Forsyth - Holiday Inn-Proposed, Gwinnett County - Holiday Inn, Jekyll Island - Jekyll Island Inn-Proposed, Jekyll Island - Hilton Hotel, Macon - Master Economy Inn, Macon - Best Inn, Marietta - Courtyard by Marriott-Delk Road, Marietta - Lafayette Hotel, Marietta - Hampton Inn, Marrietta (Atlanta) - Master Economy Inn, McDonough - Courtyard by Marriott-Perimeter, Norcross - Motel 6, Norcross - Hilton Hotel, Peachtree Corners - Super 8, Rome - Best Western, Savannah - Courtyard by Marriott, Savannah - Days Inn, Savannah - Days Inn-Bay Street, Savannah - Days Inn-Mall Blvd., Savannah - Fairfield Inn, Savannah - Hotel-Proposed, Savannah - Mulberry Inn, Savannah - Radisson Hotel-Proposed, Savannah - Royal Savannah, Savannah - Sheraton Savannah Resort & C.C., Savannah - Town and Country Motel, Savannah - Days Inn, Savannah Beach - Howard Johnson, Smyrna - Master Economy Inn, Tilton - Courtyard by Marriott-Northlake, Tucker - Master Economy Inn, Warner Robins - Super 8, Warner Robins Hawaii - Hyatt Regency Waikoloa, Hawaii - Mauna Kea Hotel, Hawaii - Kahala Hilton, Honolulu - Plaza Hotel, Honolulu - Waikiki Beachcomber, Honolulu - Waikiki Hobron, Honolulu - Coco Palms Resort, Kauai - Kauai Surf Hotel, Kauai - Westin Kauai-Kauai Lagoons Resort, Kauai - Westin Kauai-Proposed, Kauai - Kona Village, Kona - Royal Sea Cliff Resort, Kona - Westin Kauai at Kauai Lagoon, Lihue - Hyatt Regency, Maui - Marriott Resort, Maui - Maui Lu Hotel, Maui - Maui Surf Hotel, Maui - Westin Maui, Maui - Hawaiian Regent Hotel-Waikiki Beach, Oahu - Hotel-Proposed-Schofield Barracks, Oahu - Hyatt Regency Waikiki, Oahu - Kiahuna Plantation, Poipu Beach, Kauai - Transient Lodging Facilities, Schofield Barracks - Hilton Hawaiian Village, Waikiki - Grand Hyatt Wailea, Wailea Idaho - Compri Hotel, Boise - Holiday Inn, Boise - Holiday Inn-Airport, Boise - Red Lion Inn, Boise - Super 8, Boise - Motel 6, Coeur d'Alene - Super 8, Coeur d'Alene - Proposed Motel, Coure d'Alene - Super 8, Lewiston - Cotton Tree Inn, Pocatello - Super 8, Sand Point - Busterback Ranch, Sawtooth Valley Illinois - Arlington Park Hilton, Arlington Heights - Church Creek, Arlington Heights - Courtyard by Marriott, Arlington Heights - La Quinta Hotel, Arlington Heights - Hampton Inn-Proposed, Bedford Park - Best Inn, Bloomington - Fairfield Inn-Normal, Bloomington - Holiday Inn, Bloomington - Indian Lakes Resort, Bloomington - Ramada Inn, Bloomington - Super 8, Bloomington - Cresthil-Proposed, Buffalo Grove - Holiday Inn, Champaign - La Quinta Inn, Champaign - Radisson Suites - Champaign, Champaign - Suite Hotel-Proposed, Champaign - Super 8, Champaign - Ambassador West Hotel, Chicago - Americana Congress, Chicago - Conrad Hilton Hotel, Chicago - Courtyard by Marriott-Glenview, Chicago - Courtyard by Marriott-Highland, Chicago - Courtyard by Marriott-Lincoln, Chicago - Courtyard by Marriott-O'Hare, Chicago - Courtyard by Marriott-Waukegan, Chicago - Courtyard by Marriott-Woodale, Chicago - Days Inn, Chicago - Executive House, Chicago - Fairfield Inn-Lansing, Chicago - Fairfield Inn-Willowbrook, Chicago - Fairmont Hotel, Chicago - Guest Quarters Hotel, Chicago - Hilton and Towers, Chicago - Hilton-O'Hare, Chicago - Holiday Inn-Merchandise Mart, Chicago - Howard Johnson-O'Hare Int'l Airport, Chicago - Hyatt Regency, Chicago - Hyatt Suites Hotel, Chicago - Inter-Continental Hotel-Proposed, Chicago - La Quinta Inn - Hoffman Est., Chicago - Le Meridien, Chicago - Lenox House, Chicago - Lincoln Hotel, Chicago - Mark Twain Hotel, Chicago - Marriott-O'Hare, Chicago - Mayfair Regent, Chicago - McClurg Holiday Inn, Chicago - McCormick Inn Hotel, Chicago - Morton Hotel, Chicago - Omni Ambassador East, Chicago - Omni Morton Hotel, Chicago - Palmer House Hotel, Chicago - Ramada Inn - Lakeshore, Chicago - Ramada O'Hare, Chicago - Residence Inn-Deerfield, Chicago - Residence Inn-Lombard, Chicago - Sheraton Hotel-Downtown, Chicago - Sheraton Hotel-Proposed, Chicago - Sheraton O'Hare, Chicago - Sheraton Plaza Hotel, Chicago - Summerfield Suites Hotel, Chicago - Swissotel, Chicago - Tremont Hotel, Chicago - Westin Hotel, Chicago - Whitehall Hotel, Chicago - Hilton Hotel, Collinsville - Holiday Inn, Collinsville - Super 8, Columbus - Super 8, Crystal Lake - Super 8, Decatur - Courtyard by Marriott, Deerfield - Embassy Suites, Deerfield - Marriott Suites Hotel, Deerfield - Holiday Inn-Chicago, Des Plaines - Hotel-Proposed, Des Plaines - Compri Hotel-Proposed, Downers Grove - Radisson Suite Hotel, Downers Grove - Best Inn, Effingham - Ramada Inn, Elgin - Hampton Inn, Elk Grove Village - Marriott Suites, Elk Grove Village - Holiday Inn, Elmhurst - Orrington Hotel, Evanston - Drury Inn, Fairview Heights - Conference Center & Resort-Proposed, Fox Lake - Holiday Inn, Freeport - Hotel-Proposed, Gurnee - La Quinta Hotel, Hoffman Estates - Carson Inn, Itasca - Hamilton Wyndham, Itasca - Nordic Hills, Itasca - Holiday Inn, Joliet - Proposed Harrah's Riverboat, Joliet - Days Inn, Kankakee - Holiday Inn, LaSalle - Marriott Hotel, Lincolnshire - Hilton Inn, Lisle - Holiday Inn Crowne Plaza, Lisle - Embassy Suites, Lombard - Holiday Inn, Macomb - Best Inn, Marion - Best Inn, Mount Vernon - Holiday Inn, Mount Vernon - Ramada Inn, Mount Vernon - Courtyard by Marriott, Naperville - Ramada Inn, Naperville - Sheraton Naperville, Naperville - O'Hareport Hotel, Northlake - Courtyard by Marriott, Oakbrook Terrace - Super 8, Okawville - Fairfield Inn, Peoria - Days Inn, Peru - Super 8, Peru - Courtyard by Marriott, Rockford - Fairfield Inn, Rockford - Hampton Inn, Rockford - Embassy Suites, Rosemont - Quality Inn/Clarion, Rosemont - Sheraton Int'l At O'Hare, Rosemont - Holiday Inn, Salem - Compri Hotel, Schaumburg - Embassy Suites, Schaumburg - Marriott Schaumburg, Schaumburg - Holiday Inn, South Beloit - Ramada Renaissance Hotel, Springfield - Sheraton Inn, Springfield - Super 8-East, Springfield - Super 8-South, Springfield - Jumer's Castle, Urbana - Best Inn, Waukegan - Super 8, Waukegan Indiana - Clarion Fourwinds Inn, Bloomington - Holiday Inn, Bloomington - Inn at the Four Winds, Bloomington - Ramada Inn, Bloomington - Harbor Point Resort, Brookville Lake - Super 8, Columbus - Best Inn, Fort Wayne - Hilton, Fort Wayne - Downtown Hotel, Gary - Sheraton, Gary - Holiday Inn, Goshen - Howard Johnson, Hammond - Quality Inn, Hammond - Courtyard by Marriott-Airport, Indianapolis - Courtyard by Marriott-Carmel, Indianapolis - Courtyard by Marriott-Castleton, Indianapolis - Embassy Suites-Claypool Center, Indianapolis - Fairfield Inn-Castleton, Indianapolis - Fairfield Inn-College Park, Indianapolis - Hampton Inn-Proposed, Indianapolis - Hilton Hotel-Airport, Indianapolis - Hilton Inn-Downtown, Indianapolis - Holiday Inn-South, Indianapolis - Holiday Inn-Southeast, Indianapolis - Knights Inn, Indianapolis - Midway Motor Lodge, Indianapolis - Mohawk Inn, Indianapolis - Motel 6, Indianapolis - Proposed Fairfield Inn, Indianapolis - Proposed Residence Inn, Indianapolis - Radisson, Indianapolis - Ramada-Airport, Indianapolis - Wyndham Garden Hotel, Indianapolis - La Quinta Inn, Indianapolis Airport - Hilton Inn, Jeffersonville - Holiday Inn, La Porte - Days Inn, Lafayette - Holiday Inn, Lafayette - Cotton Mill Inn-Proposed, Madison - Hampton Inn, Merrillville - Holiday Inn Express, Merrillville - La Quinta Inn, Merrillville - Hotel Roberts, Muncie - Radisson Hotel, Muncie - Brown County Inn, Nashville - Holiday Inn, Portage - Knights Inn, Richmond - Holiday Inn, South Bend - Howard Johnson, South Bend - Signature Inn, Terre Haute - Super 8, Terre Haute - Courtyard Conversion, Valparaiso - Holiday Inn, Vincennes Iowa - Holiday Inn-Gateway Center, Ames - Holiday Inn, Cedar Falls - Collins Plaza, Cedar Rapids - Holiday Inn, Cedar Rapids - Roosevelt Hotel, Cedar Rapids - Super 8, Davenport - Courtyard by Marriott, Des Moines - Fairfield Inn, Des Moines - Holiday Inn, Des Moines - Holiday Inn - West, Des Moines - Holiday Inn-Downtown, Des Moines - Holiday Inn-North, Des Moines - Ramada Inn, Des Moines - Super 8-North, Des Moines - Super 8-West, Des Moines - Holiday Inn, Iowa City Kansas - Embassy Suites, Kansas City - Fairfield Inn-Overland Park, Kansas City - Holiday Inn-Mission Overland Park, Kansas City - Fairfield Inn, Kansas City West - Holiday Inn, Lawrence - University Inn, Lawrence - Holiday Inn, Manhattan - Courtyard by Marriott, Overland Park - Hampton Inn-Proposed, Overland Park - Marriott Hotel, Overland Park - Park Inn International, Topeka - Super 8, Topeka - Canterbury Inn, Wichita - Former Sheraton Hotel, Wichita - Hilton-East, Wichita - Marriott Hotel, Wichita - Comfort Inn, Winfield Kentucky - Conference Center-Proposed, Boone County - Howard Johnson, Bowling Green - Brown County Inn, Brown County - Holiday Inn, Corbin - Hotel-Proposed, Covington - Thomas More Centre, Crestville Hill - Comfort Inn, Elizabethtown - Signature Inn, Elkhart - Holiday Inn, Florence - Signature Inn, Florence - Drawbridge Inn, Fort Mitchell - Days Inn, Georgetown - Days Inn, Henderson - Holiday Inn, Henderson - Bluegrass Motor Inn, Lexington - Courtyard by Marriott, Lexington - Holiday Inn, Lexington - Holiday Inn-East, Lexington - Holiday Inn-North, Lexington - Hyatt Hotel, Lexington - Knights Inn, Lexington - Super 8-Proposed, London - Brown Hotel, Louisville - Courtyard by Marriott-East, Louisville - Holiday Inn, Louisville - Holiday Inn South, Louisville - Holiday Inn-Central, Louisville - Holiday Inn-Northeast, Louisville - Ramada Inn, Louisville - Ramada Inn-East, Louisville - Signature Inn, Louisville - Days Inn, Madisonville - Executive Inn, Owensboro - Super 8-Proposed, Radcliff - Holiday Inn, Richmond Louisiana - Howard Johnson, Alexandria - Capital House, Baton Rouge - Convention Center Hotel-Proposed, Baton Rouge - Courtyard by Marriott, Baton Rouge - Crown Sterling Suites, Baton Rouge - Embassy Suites, Baton Rouge - Hilton Hotel, Baton Rouge - Holiday Inn-East, Baton Rouge - Holiday Inn-South, Baton Rouge - Holiday Inn-West, Baton Rouge - La Quinta Inn, Baton Rouge - Prince Murat Hotel, Baton Rouge - Proposed Homewood Suites, Baton Rouge - Quality Inn, Bossier City - Ramada Inn, Hammond - Ramada Inn, Houma - Holiday Inn - New Orleans, Kenner - Sheraton, Kenner - Hilton Hotel, Lafayette - La Quinta Hotel, Lafayette - Gateway Hotel, Metairie - Howard Johnson-Airport, Metairie - Canal Street Hotels L.P., New Orleans - Clarion Hotel, New Orleans - Days Inn, New Orleans - Fairmont Roosevelt Hotel, New Orleans - Hampton Inn-Proposed, New Orleans - Holiday Inn Crowne Plaza, New Orleans - Hostellerie de la Poste, New Orleans - Hotel Meridien, New Orleans - Hyatt Regency, New Orleans - Iberville Hotel, New Orleans - Inter-Continental Hotel, New Orleans - La Quinta Inn, New Orleans - Landmark Bourbon, New Orleans - Le Meridien New Orleans, New Orleans - Maison Dupuy, New Orleans - Marriott Hotel, New Orleans - Omni Royal Orleans, New Orleans - Ramada Inn, New Orleans - Saint Louis Hotel, New Orleans - St. Ann/Marie Antoinette, New Orleans - Warwick, New Orleans - Westin Hotel, New Orleans - Residence Inn, Shreveport - Super 8, Shreveport Maine - Hilton Inn, Bangor - Ramada Inn, Bangor - Residence Inn by Marriott-Proposed, Bangor - Inn By The Sea, Cape Elizabeth - Hotel-Proposed, Orchard Beach - Hotel-Proposed, Portland - Portland Regency, Portland - Ramada Inn, Portland - Sheraton Tara Portland, Portland - Susse Chalet, Portland - Susse Chalet, Portland (In-town) - Keddy's Motor Inn of Maine, Presque Isle - Hampton Inn, South Portland - Sheraton Inn, South Portland Maryland - Budget Hotel-Proposed, Aberdeen - Chesapeake House, Aberdeen - Holiday Inn, Aberdeen - Motel-Proposed, Aberdeen - Annapolis Hotel, Annapolis - Courtyard by Marriott-Riva Road, Annapolis - Governor Calvert House, Annapolis - Historic Inns of Annapolis, Annapolis - Hotel-Proposed, Annapolis - Howard Johnson, Annapolis - Marriott Hotel, Annapolis - Maryland Inn, Annapolis - Quality Royale Hotel, Annapolis - Ramada Hotel, Annapolis - Robert Johnson House, Annapolis - Brookshire Hotel, Baltimore - Courtyard by Marriott-BWI Airport, Baltimore - Days Inn, Baltimore - Harbor Court Hotel, Baltimore - Harrison's at Pier 5, Baltimore - Hilton Hotel, Baltimore - Holiday Inn-Belmont Blvd., Baltimore - Holiday Inn-Cromwell Bridge, Baltimore - Holiday Inn-Glen Burnie, Baltimore - Holiday Inn-Inner Harbor, Baltimore - Holiday Inn-Int'l Airport, Baltimore - Holiday Inn-Moravia Road, Baltimore - Holiday Inn-Pikesville, Baltimore - Holiday Inn-South Glen Burnie, Baltimore - Hotel-Proposed, Baltimore - Howard Johnson-Proposed, Baltimore - Johns Hopkins Hotel-Proposed, Baltimore - Lord Baltimore Hotel, Baltimore - Omni International Hotel, Baltimore - Ramada Inn-I-695 West, Baltimore - Susse Chalet, Baltimore - Susse Chalet Inn-BWI Airport, Baltimore - Susse Chalet Inn-Golden Ring, Baltimore - Bethesda Metro Center, Bethesda - Guest Quarters, Bethesda - Hyatt Regency Hotel, Bethesda - Linden Hill Hotel, Bethesda - Omni Linden Hotel, Bethesda - Residence Inn, Bethesda - Bethseda Metro Center, Bethseda - Guest Quarters, Bethseda - Residence Inn - Proposed, Bethseda - Comfort Suites-Proposed, Bowie - Days Inn, Capital Heights - Residence Inn, Cockneysville - Abbey, College Park - Best Western Maryland, College Park - Holiday Inn, College Park - Sheraton Inn, Dorsey - Days Inn, Easton - Mariner Inn, Easton - Holiday Inn, Frederick - Compri Hotel, Gaithersburg - Marriott Hotel, Gaithersburg - Century XXI Resort, Germantown - Comfort Inn, Germantown - Hampton Inn, Glen Burnie - Residence Inn-Proposed, Greenbelt - Courtyard by Marriott, Hunt Valley - Hunt Valley Embassy Suites, Hunt Valley - Hunt Valley Marriott, Hunt Valley - Susse Chalet Inn, Jessup - Courtyard by Marriott, Landover - Quality Inn-Proposed, Landover - Days Inn, Lanham - Best Western Maryland, Laurel - Days Inn, Laurel - Holiday Inn, Laurel - Susse Chalet, Linthicum - Howard Johnson Plaza Hotel, New Carrollton - Carousel Hotel, Ocean City - Days Inn, Ocean City - Susse Chalet, Oxon Hill - Hotel-Proposed, Prince Georges County - Budget Hotel-Proposed, Rockville - Comfort Inn, Rockville - Courtyard by Marriott, Rockville - Days Inn-Congressional Park, Rockville - Holiday Inn Crowne Plaza, Rockville - Quality Inn-Proposed, Rockville - Ramada Inn, Rockville - Salisbury Hotel, Salisbury - Sheraton Hotel, Salisbury - Courtyard by Marriott, Silver Spring - Quality Inn-Proposed, Silver Spring - Comfort Inn-Proposed, Solomons Island - Holiday Inn, Towson - Quality Inn-Proposed, Westminster Massachusetts - Susse Chalet, Amsbury - Courtyard by Marriott, Andover - Marriott Hotel, Andover - Stouffer Bedford Glen Hotel, Bedford - Anthony's Pier Four, Boston - Battery Wharf Hotel-Proposed, Boston - Boston Harbor Hotel, Boston - Boston World Trade Center, Boston - Bostonian Hotel, Boston - Colonnade Hotel, Boston - Commonwealth Center Hotel, Boston - Compri Hotel-Proposed, Boston - Copley Plaza Hotel, Boston - Courtyard by Marriott-Foxborough, Boston - Econo Lodge-Proposed, Boston - Harborside Conf. Center-Proposed, Boston - Hilton-Back Bay, Boston - Hilton-Logan, Boston - Holiday Inn-Government Center, Boston - Hotel - Proposed, Boston - Hyatt Fan Pier-Proposed, Boston - Hyatt Harborside-Proposed, Boston - Lafayette Hotel, Boston - Lenox Hotel, Boston - Marriott Copley Place, Boston - Meridien Hotel, Boston - Omni Parker House, Boston - Residence Inn, Boston - Ritz-Carlton, Boston - Statler Hilton Hotel, Boston - Tremont House Hotel, Boston - World Trade Center Hotel - Proposed, Boston - Marriott Hotel, Boston/Newton - Sheraton Tara Hotel, Braintree - Ocean Edge Inn & Conference Center, Brewster - Holiday Inn, Brookline - Days Inn, Burlington - Charles Hotel, Cambridge - Hyatt Hotel, Cambridge - Royal Sonesta Hotel, Cambridge - The Charles Hotel, Cambridge - Chatham Bars Inn, Chatham - Chelmsford Radisson Hotel, Chelmsford - Best Western Motor Lodge, Chicopee - Cummington Farm Resort-Proposed, Cummington - Appleton Inn, Danvers - Howard Johnson Hotel, Danvers - Radisson Ferncroft Hotel, Danvers - Residence Inn - Proposed, Danvers - Dedham Comfort Inn, Dedham - Holiday Inn, Dedham - Wequassett Inn, East Harwich - Harbor View Hotel, Edgartown - Kelley House, Edgartown - Airport Inn, Fall River - Sea Crest Hotel, Falmouth - Sheraton Inn, Falmouth - Radisson Hotel, Ferncroft - Sheraton Tara Hotel, Framingham - Hotel-Proposed, Franklin - Hotel-Proposed, Haverhill - Susse Chalet, Holyoke - Dunfey Hyannis Hotel, Hyannis - Heritage House Hotel, Hyannis - Holiday Inn, Hyannis - Sheraton Regal Inn, Hyannis - Tara Hyannis, Hyannis - Canyon Ranch-Berkshires, Lenox - Cranwell Hotel and Conference Ctr., Lenox - Spa/Resort-Proposed, Lenox - Holiday Inn, Leominster - Lexington Sheraton, Lexington - Residence Inn-Proposed, Littleton - Appleton Inn, Lowell - Hilton Hotel, Lowell - Town House Motor Inn, Lowell - Holiday Inn, Marlboro - Susse Chalet, Middleboro - Sheraton Milford Hotel, Milford - Holiday Inn, Natick - Skipper's Inn, New Bedford - Days Inn, Newton - Howard Johnson, Newton - Marriott Hotel, Newton - Sheraton - Wayfarer, Newton - Sheraton Tara, Newton - Susse Chalet, Newton - North Adams Inn, North Adams - Hilton Inn, Northampton - Hotel Northampton, Northampton - Factory Mutual Hotel, Norwood - University Inn, Oxford - Holiday Inn, Peabody - Berkshire Commons Hotel, Pittsfield - Hotel-Proposed, Plymouth - Hawthorne Hotel, Salem - Days Inn, Saugus - Susse Chalet, Seekonk - Howard Johnson, Somerset - Somerset Omni, Somerset - Federal House Inn, South Lee - Holiday Inn, Springfield - Howard Johnson, Springfield - Monarch Place, Springfield - Treadway Inn, Springfield - Publick House, Sturbridge - Sheraton, Sturbridge - Regency Inn of Taunton, Taunton - Holiday Inn, Tewksbury - Susse Chalet, Tewksbury - Susse Chalet, Waltham - Vista Waltham House, Waltham - Hampton Inn, West Springfield - Westford Regency Hotel, Westford - The Westminster Village Inn, Westminster - The Orchards, Williamstown - Treadway Inn, Williamstown - Days Inn, Woburn - Howard Johnson, Woburn - Radisson Hotel, Woburn - Ramada Inn, Woburn - Susse Chalet, Woburn - Marriott Hotel, Worcester - Alladin Motor Inn, Yarmouth - Flagship Motor Inn, Yarmouth - Gull Wing Suites Hotel, Yarmouth Michigan - Motel-Proposed, Adrian - Ramada Inn, Allen Park - Holiday Inn-Alpena, Alpena - Compri Hotel-Proposed, Ann Arbor - Hampton Inn-North, Ann Arbor - Hampton Inn-South, Ann Arbor - Hilton Hotel, Ann Arbor - Holiday Inn-East, Ann Arbor - Holiday Inn-West, Ann Arbor - Residence Inn, Ann Arbor - Sheraton Hotel, Ann Arbor - AmeriSuites Hotel-Proposed, Auburn Hills - Holiday Inn, Auburn Hills - Knights Inn, Battle Creek - Super 8, Battle Creek - Bay Valley Inn, Bay City - Howard Johnson, Belleville - Fairfield Inn-Airport, Charlotte - Courtyard by Marriott, Dearborn - Courtyard by Marriott-Airport, Detroit - Courtyard by Marriott-Auburn Hills, Detroit - Courtyard by Marriott-Livonia, Detroit - Days Inn, Detroit - Downtown Hotel-Proposed, Detroit - Fairfield Inn-Airport, Detroit - Fairfield Inn-Auburn Hills, Detroit - Fairfield Inn-Warren, Detroit - Fairfield Inn-West, Detroit - Golden Harp, Detroit - Hampton Inn, Detroit - Hilton-Airport, Detroit - Hilton-North Field, Detroit - Holiday Inn, Detroit - Holiday Inn-Metro Airport, Detroit - Hotel Pontchartrain, Detroit - Omni Detroit, Detroit - Westin Hotel Renaissance Center, Detroit - Holiday Inn, East Lansing - Holiday Inn-Proposed, East Lansing - Knights Inn, Flint - Amway Hotel, Grand Rapids - Holiday Inn, Grand Rapids - Grand Traverse Resort, Grand Traverse Village - Holiday Inn, Howell - Jackson Hotel, Jackson - Fairfield Inn, Kalamazoo - Hilton-Kalamazoo Center, Kalamazoo - Holiday Inn, Kalamazoo - Radison Plaza Hotel, Kalamazoo - Residence Inn, Kalamazoo - Super 8, Kalamazoo - Embassy Suites-Proposed, Lansing - Holiday Inn, Lansing - Motel 6, Lansing - Quality Suites Hotel, Lansing - Compri Hotel-Proposed, Livonia - Embassy Suites, Livonia - Embassy Suites-Proposed, Livonia - Holiday Inn, Livonia - Marriott Hotel, Livonia - Fairfield Inn, Madison Heights - Residence Inn, Madison Heights - Holiday Inn, Marquette - Knights Inn, Monroe - Comfort Inn-Proposed, Mount Clemens - Holiday Inn, Muskegan - Super 8, Muskegon - Hilton Hotel, Novi - Holiday Inn-Petoskey, Petoskey - Mayflower Hotel, Plymouth - Inn at the Bridge, Port Huron - Radisson Hotel, Romulus - Holiday Inn-East, Saginaw - Super 8, Saginaw - Courtyard by Marriott, Southfield - Embassy Suites, Southfield - Hilton Hotel, Southfield - Marriott Hotel, Southfield - Ramada Inn, Southfield - Residence Inn, Southfield - The Garden Inn, Southfield - Comfort Suites-Proposed, Sterling Heights - Holiday Inn, Sturgis - Grand Traverse Resort, Traverse City - Hampton Inn, Traverse City - Park Place Hotel, Traverse City - Courtyard by Marriott, Troy - Holiday Inn, Troy - Marriott, Troy - Residence Inn, Troy - Courtyard by Marriott, Warren - Days Inn, Warren - Holiday Inn, Warren - Motel 6, Warren - Residence Inn, Warren - Van Dyke Hotel & Conference Center, Warren - Bob Evans Restaurant, Wyoming - Super 8, Wyoming - Radisson Resort-Conference Center, Ypsilanti Minnesota - Embassy Suites, Bloomington - Hilton Airport Hotel, Bloomington - Hilton Hotel, Bloomington - Howard Johnson Lodge, Bloomington - Marriott Hotel, Bloomington - Ramada Inn, Bloomington - Days Inn - Minneapolis, Brooklyn Center - Residence Inn, Eagan - Compri Hotel-Proposed, Minneapolis - Courtyard by Marriott-Eden Prairie, Minneapolis - Courtyard by Marriott-Mendota, Minneapolis - Days Inn, Minneapolis - Dyckman Hotel, Minneapolis - Hilton Inn, Minneapolis - Holiday Inn-Downtown, Minneapolis - Hotel-Proposed, Minneapolis - Luxeford Hotel, Minneapolis - Marquette, Minneapolis - Marriott City Center Hotel, Minneapolis - Marriott-Minnetonka, Minneapolis - Motel 6, Minneapolis - Omni-Northstar, Minneapolis - Radisson Hotel, Minneapolis - Ramada Inn, Minneapolis - Sheraton Minneapolis, Minneapolis - Sofitel, Minneapolis - Motel-Proposed, Montevideo - Days Inn, Plymouth - Hotel-Proposed, Rochester - Howard Johnson, Rochester - Motel 6, Rochester - Radisson Hotel, Rochester - Days Inn, Roseville - Holiday Inn, Saint Paul - Holiday Inn-Town Square, Saint Paul - Hotel-Proposed, Saint Paul - Inn and Expo Center, Saint Paul - World Trade Hotel, Saint Paul - Wayzata Conference Center, Wayzata Mississippi - Howard Johnson, Biloxi - Holiday Inn, Greenwood - Motel 6, Hattlesburg - Hampton Inn, Jackson - Howard Johnson, Jackson - Ramada Inn-Proposed, Jackson - Residence Inn, Jackson - Cabot Lodge, Ridgeland - Holiday Inn, Vicksburg Missouri - Ramada Inn, Columbia - Howard Johnson-North St. Louis, Hazelwood - Super 8, Independence - La Quinta Inn, Jackson - North - Capital Plaza, Jefferson City - Ramada Inn, Jefferson City - Days Inn, Joplin - Super 8, Joplin - Allis Plaza, Kansas City - Americana Hotel, Kansas City - AmeriSuites Hotel-Proposed, Kansas City - Doubletree Hotel, Kansas City - Embassy Suites, Kansas City - Fairfield Inn-West, Kansas City - Hilton - Proposed, Kansas City - Hilton Inn, Kansas City - Historic Suites Hotel, Kansas City - Holiday Inn, Kansas City - Holiday Inn Crowne Plaza, Kansas City - Holiday Inn-Proposed, Kansas City - Proposed Sheraton Hotel, Kansas City - Radisson Suite Hotel, Kansas City - Resort Hotel - Proposed, Kansas City - Marriott-Tan-Tar-A, Lake of the Ozarks - Super 8, Liberty - Super 8, North Kansas City - Inn at Grand Glaize, Osage Beach - Super 8, Saint Joseph - Clarion, Saint Louis - Courtyard by Marriott-Creve Coeur, Saint Louis - Courtyard by Marriott-Downtown, Saint Louis - Courtyard by Marriott-Westport, Saint Louis - Days Inn, Saint Louis - Doubletree Hotel, Saint Louis - Drury Inn, Saint Louis - Embassy Suites, Saint Louis - Fairfield Inn-Hazel, Saint Louis - Henry VIII Hotel, Saint Louis - Hilton Hotel-Bel Air, Saint Louis - Holiday Inn Sports Complex, Saint Louis - Holiday Inn-Airport North, Saint Louis - Holiday Inn-Downtown, Saint Louis - Holiday Inn-Riverfont, Saint Louis - Howard Johnson-South, Saint Louis - Mayfair Hotel, Saint Louis - Omni-St. Louis Station, Saint Louis - Ramada Inn-Westport, Saint Louis - Residence Inn-Chesterfield, Saint Louis - Residence Inn-Richmond Heights, Saint Louis - Ritz-Carlton Hotel, Saint Louis - Sheraton-Airport, Saint Louis - St. Louis Airport Hilton, Saint Louis - St. Louis Airport Radisson Hotel, Saint Louis - St. Louisian Hotel, Saint Louis - Stouffer Concourse Hotel, Saint Louis - Super 8, Saint Louis - Marriott Hotel, Saint Louis County - Holiday Inn, Springfield - Sheraton Inn, Springfield - Super 8, Springfield - Executive Inn & Office Building, St. Louis - Holiday Inn, St. Louis - Howard Johnson Hotel, St. Louis - Hotel-Proposed, Unity Village - Holiday Inn, Wendtzville Montana - Sheraton Hotel, Billings - Super 8, Billings - Super 8, Great Falls - Super 8, Helena - Super 8, Kalispell - Holiday Inn, Missoula - Red Lion Inn, Missoula Nebraska - Holiday Inn, Kearney - Best Western Airport Inn, Lincoln - Holiday Inn-Airport, Lincoln - Holiday Inn-Northeast, Lincoln - Howard Johnson, North Platte - Marriott Hotel, Omaha - Ramada Inn, Omaha - Red Lion Inn, Omaha Nevada - Lake Mead Resort, Boulder City - Ormsby House Hotel and Casino, Carson City - Super 8, Carson City - Doubletree Hotel and Resort, Cathedral City - Best Western Motel - Proposed, Jackpot - Airport Inn, Las Vegas - Aladdin Hotel and Casino, Las Vegas - Alexis Park Resort Hotel, Las Vegas - Casino Hotel-Proposed, Las Vegas - Courtyard by Marriott, Las Vegas - El Rancho Hotel and Casino, Las Vegas - Hotel and Casino-Proposed, Las Vegas - Jockey Club Hotel and Casino, Las Vegas - La Quinta Hotel, Las Vegas - Paradise Resort, Las Vegas - Residence Inn, Las Vegas - Silverbird Casino, Las Vegas - Super 8-Proposed, Las Vegas - The Mirage, Las Vegas - Tropicana Travelodge, Las Vegas - Westward Ho Casino, Las Vegas - Echo Bay Resort, Overton - Holiday Inn, Reno - La Quinta Hotel, Reno - Quality Inn and Casino, Reno - Red Lion Hotel-Proposed, Reno New Hampshire - Sheraton Wayfarer, Bedford - Hampton Inn, Bow - Mount Washington Resort, Bretton Woods - Balsams Hotel, Dixville Notch - Sheraton Inn-Lamie's Tavern, Hampton - Woodbound Inn, Jaffrey - Brickyard Mountain Inn, Laconia - Loon Mountain Hotel, Lincoln - Appleton Inns, Manchester - Holiday Inn Center, Manchester - Sheraton Wayfarer, Manchester - Susse Chalet, Manchester - Clarion Somerset Hotel, Nashua - Hotel-Proposed, Nashua - Tara Sheraton Nashua, Nashua - Wentworth by the Sea, Newcastle - Susse Chalet, Portsmouth - Wentworth-by-the-Sea, Portsmouth - Salem Inn, Salem - Susse Chalet, Salem - Landmarc Lodge-East, Waterville Valley - Landmarc Lodge-West, Waterville Valley - Silver Squirrel Inn, Waterville Valley - Snowy Owl Inn, Waterville Valley - Chalet Susse International, Inc., Wilton New Jersey - Marriott Seaview Golf Resort, Abescon - Howard Johnson Hotel, Absecon - Seaview Country Club, Absecon - Berkeley Carteret Hotel, Asbury Park - Caesar's Hotel and Casino, Atlantic City - Casino Hotel-Proposed, Atlantic City - Deauville Hotel, Atlantic City - Diplomat Hotel, Atlantic City - Hampton Inn, Atlantic City - Harrah's Marina Hotel Casino, Atlantic City - Lafayette Hotel, Atlantic City - Resorts Int'l Hotel and Casino, Atlantic City - Royal Inn, Atlantic City - Sands Hotel and Casino, Atlantic City - Traymore Hotel Site, Atlantic City - Tropicana Hotel and Casino, Atlantic City - World International Hotel, Atlantic City - Bernards Inn, Bernardsville - Hotel-Proposed, Bridgewater - Proposed Hotel, Camden - Cherry Hill Hyatt, Cherry Hill - Cherry Hill Inn, Cherry Hill - Ramada Inn, Clifton - Comfort Suites, E. Rutherford - Ramada Renaissance, East Brunswick - Sheraton Inn, East Brunswick - Sheraton - Per Diem, East Rutherford - Holiday Inn-Raritan Center, Edison - Hotel-Proposed, Edison - Ramada Inn, Edison - Best Western Hotel, Egg Harbor Township - Newark Airport Vista Hotel, Elizabeth - Ramada Inn-Proposed, Elizabeth - Sheraton Inn, Elizabeth - Marriott Suite Hotel-Proposed, Elmwood Park - Howard Johnson, Englewood - Conference Center, Farleigh Dickinson - Motel-Proposed, Flemington - Hamilton Park Conference Center, Florham Park - Courtesy Motel, Fort Lee - Ramada Inn-Proposed, Franklin Township - Playboy Resort, Great Gorge - Marriott Hotel, Hanover - Sheraton Hotel, Hasbrouck Heights - Holiday Inn, Jamesburg - Restaurant at Port Liberte, Jersey City - Harrogate Senior Living Facility, Lakewood - Courtyard by Marriott, Lincroft - Hotel-Proposed, Long Branch - Comfort Inn, Mahwah - Courtyard by Marriott, Mahwah - Residence Inn-Proposed, Mahwah - Economy Lodge - Proposed, Meadowlands - Holiday Inn, Meadowlands - Hotel-Proposed, Meadowlands - Meadowlands Hilton, Meadowlands - Sheraton Hotel, Meadowlands - Forsgate Conference Center, Monroe Township - Conference Center, Morristown - Governor Morris Inn, Morristown - Headquarters Plaza Hotel, Morristown - Pleasantville Farms Conference Cent, Morristown - Howard Johnson Lodge, Mount Holly - Courtyard by Marriott, Mount Laurel - Hilton, Mount Laurel - Days Hotel, New Brunswick - Hyatt Hotel, New Brunswick - Rennaisance Hotel, New Brunswick - Residence Inn - Princeton, New Jersey - Airport Hotel-Proposed, Newark - Courtyard by Marriott-Airport, Newark - Holiday Inn, Newark - Holiday Inn-Airport North, Newark - Hotel-Proposed, Newark - Howard Johnson Hotel, Newark - Days Inn, North Bergen - Holiday Inn, North Brunswick - Port-O-Call, Ocean City - Sting Ray Motel, Ocean City - Hotel-Proposed, Ocean Grove - Spray View Hotel, Ocean Grove - Macy Hotel-Proposed, Paramus - Red Carpet Inn, Paramus - Residence Inn-Proposed, Paramus - Marriott Hotel-Proposed, Park Ridge - Embassy Suites, Parsippany - Hilton, Parsippany - Residence Inn-Proposed, Parsippany - Howard Johnson, Phillipsburg - Hotel-Proposed, Piscataway - Residence Inn-Proposed, Piscataway - Compri Hotel-Proposed, Princeton - Hyatt Regency, Princeton - Marriott Hotel, Princeton - Omni Nassau Inn, Princeton - Treadway Inn, Princeton - Howard Johnson, Ridgefield Park - Hotel-Proposed, Rockleigh - Hotel-Proposed, Roxbury Township - Ramada Inn, Runnemede - Howard Johnson, Saddle Brook - Marriott Hotel, Saddle Brook - Days Inn, Secaucus - Howard Johnson, Secaucus - Ramada Inn, Secaucus - Hilton At Short Hills, Short Hills - Pier 4 Motel, Somers Point - Garden State Convention Center, Somerset - Holiday Inn, Somerset - Marriott Hotel, Somerset - Neighborhood Suites-Proposed, Somerset - Sommerset Plaza Hotel, Somerset - Summerfield Suites Hotel, Sommerset - Hewitt Wellington Hotel, Spring Lake - Hotel-Proposed, Spring Lake - Loews Glenpointe Hotel, Teaneck - Appleton Inn, Tinton Falls - Envoy Inn, Tinton Falls - Hilton Inn, Tinton Falls - Residence Inn, Tinton Falls - Sunrise Suite Hotel, Tinton Falls - Hotel-Proposed, Toms River - Hotel-Proposed, Turnersville - Hotel-Proposed, Wayne - Howard Johnson-Proposed, Wayne - Holiday Inn, Wildwood Crest - Motel, Wrightstown New Mexico - Compri Hotel-Proposed, Albuquerque - Courtyard by Marriott-Airport, Albuquerque - Fairfield Inn-Proposed, Albuquerque - Hampton Inn, Albuquerque - Hilton Hotel, Albuquerque - Holiday Inn, Albuquerque - Marriott Hotel, Albuquerque - Radisson Suite Hotel-Proposed, Albuquerque - Residence Inn, Albuquerque - Rodeway Inn, Albuquerque - Winrock Motor Inn, Albuquerque - La Quinta Inn, Albuquerque - Airport - Corkin's Lodge, Chama - La Quinta Inn, Farmington - Hilton, Las Cruces - Las Cruces Hilton, Las Cruces - Super 8, Las Cruces - Ski Rio Ski Resort, Miracle Mountain - Super 8, Raton - Young's Ranch, Red River - Eldorado Hotel, Santa Fe - Homewood Suites Hotel, Santa Fe - Hotel-Proposed, Santa Fe - Inn at Loretto, Santa Fe - Inn on the Alameda, Santa Fe - La Fonda Hotel, Santa Fe - La Quinta Hotel, Santa Fe - Residence Inn, Santa Fe - Santa Fe Motel, Santa Fe - Sheraton de Santa Fe, Santa Fe New York - Americana Inn, Albany - Desmond Hotel, Albany - Hilton Hotel, Albany - Marriott Hotel, Albany - Sheraton Inn, Albany - Susse Chalet, Albany - VIP Motor Lodge (Howard Johnson), Albany - Embassy Suites-Proposed, Amherst - Holiday Inn, Amherst - Annandale Inn-Proposed, Annandale - Wampus Inn-Proposed, Armonk - Treadway Inn, Batavia - Hampton Inn, Binghamton - Holiday Inn-Arena, Binghamton - Holiday Inn-SUNY, Binghamton - Hotel-Proposed, Binghamton - Howard Johnson, Binghamton - Residence Inn, Binghamton - Sheraton Inn, Binghamton - Eden Motel, Bronx - Days Inn-Proposed, Brookhaven - Residence Inn, Brookhaven - Brooklyn Hotel-Proposed, Brooklyn - Hilton Hotel, Brooklyn - Airport Hotel-Proposed, Buffalo - Buffalo Hotel, Buffalo - Days Hotel-Proposed, Buffalo - Hilton Hotel, Buffalo - Holiday Inn - Midtown, Buffalo - Hyatt Hotel, Buffalo - Hyatt Regency Hotel & Retail Area, Buffalo - Radisson Hotel, Buffalo - Ramada Inn-Airport, Buffalo - Ramada Renaissance Hotel, Buffalo - Residence Inn-Proposed, Buffalo - Sheraton Hotel, Buffalo - Sheraton Inn Buffalo East, Buffalo - Sheraton Inn-Airport, Buffalo - Sheraton Inn, Canadaiqua - Airway Motel, Cheektowaga - Holiday Inn - Airport, Cheektowaga - Holiday Inn - Gateway, Cheektowaga - Quality Inn, Cheektowaga - Sheraton Buffalo, Cheektowga - Steeplechase Park-Proposed, Coney Island - Hilton Inn, Corning - Resort/Conference Center-Proposed, Cornwall - Holiday Inn, Cortland - Roycroft Inn, East Aurora - Hotel-Proposed, East Elmhurst - Susse Chalet, East Greenbush - Nevele Hotel, Ellenville - Int'l Conf./Learning Center-Propose, Ellis Island - Days Inn, Elmsford - Howard Johnson, Elmsford - Neighborhood Suites Hotel-Proposed, Fishkill - Residence Inn, Fishkill - Metropole Hotel, Flushing - Midway Hotel, Flushing - Sheraton - Proposed, Flushing Center - Hotel-Proposed, Garden City - Wyndham Condominium, Garden City - Harrison Conference Center, Glen Clove - Great Neck Hotel, Great Neck - Comfort Inn, Greece - Holiday Inn-Proposed, Greece - Tamarack Lodge, Greenfield Park - Claudio's Restaurant, Greenport - Colonie Hill, Hauppauge - Holiday Inn, Hauppauge - Marriott Wind Watch Hotel & Golf, Hauppauge - Marriott Windwatch, Hauppauge - Ramada Inn, Hauppauge - Residence Inn, Hauppauge - Homewood Suites-Proposed, Henrietta - Howard Johnson, Huntington - Huntington Townhouse, Huntington - Hampton Inn, Islandia - Marriott Wind Watch, Islandia - Hotel-Proposed, Islip - Howard Johnson Hotel, Ithaca - Ramada Inn, Ithaca - Sheraton Inn, Ithaca - JFK Hilton, Jamaica - Howard Johnson, Kingston - Ramada Inn, Kingston - Omni Sagamore, Lake George - Ramada Inn, Lake George - Former Lake Placid Club Hotel, Lake Placid - Hilton Hotel, Lake Placid - Mirror Lake Inn, Lake Placid - Holiday Inn, Latham - Howard Johnson, Latham - Howard Johnson, Liberty - The New Brown's Resort, Loch Sheldrake - Convention Center - Proposed, Long Island - Eastern Nassau/W. Suffolk Hotel, Long Island - Hyatt Hotel-Proposed, Long Island - Motel-Proposed, Lynbrook - Crowne Plaza Hotel, Manhattan - Hotel Mark, Manhattan - Proposed Economy Hotel, Manhattan - Sugar Maples Resort, Maplecrest - Hotel-Proposed, Middletown - Howard Johnson, Middletown - Montauk Yacht Club and Inn, Montauk - Kutsher's Resort, Monticello - Motel-Proposed, Nanuet - Wallkill Valley Inn Project, New Paltz - Hotel-Proposed, New Rochelle - Le Richmond Hotel, New Rochelle - Ramada Plaza Inn and Offices, New Rochelle - Sheraton Inn, New Rochelle - Aberdeen Hotel, New York - American Youth Hostel, New York - Americana Hotel, New York - Ashley Hotel, New York - Astor House-Proposed, New York - Barbizon Plaza Hotel, New York - Barclay Hotel, New York - Battery Park City Hotel-Proposed, New York - Berkshire Place, New York - Best Western Woodward Hotel, New York - Biltmore Hotel, New York - Broadway Crowne Plaza, New York - Carlton House Hotel, New York - Century Paramount Hotel, New York - Chatwal Inn, New York - Chatwal Inn on 45th Street, New York - Chatwal Inn on Park Avenue, New York - Chinatown Hotel-Proposed, New York - Courtyard by Marriott-Proposed, New York - Custom's House, New York - Days Inn, New York - Days Inn-West 57th Street, New York - Doral Inn, New York - Dover Hotel, New York - Downtown Athletic Club, New York - Downtown Conference Center, New York - Drake Hotel, New York - Econo Lodge-Proposed, New York - El Rio Grande, New York - Embassy Suites-Times Square-Propose, New York - Empire Hotel, New York - Essex House, New York - Executive Hotel, New York - Giordano Hotel, New York - Gorham Hotel, New York - Grand Bay at Equitable Center, New York - Grand Hyatt Hotel, New York - Greenwich Street Hotel, New York - Halloran House, New York - Hampton House, New York - Harley Hotel, New York - Helmsley Hotel, New York - Hilton Hotel, New York - Hilton Hotel-Statler, New York - Holiday Inn, New York - Holiday Inn Crowne Plaza-Broadway, New York - Holiday Inn Crowne Plaza-Manhattan, New York - Holland Hotel, New York - Hotel Intercontinental, New York - Hotel Pierre, New York - Hotel-1926 Broadway-Proposed, New York - Hotel-East 57th Street-Proposed, New York - Hotel-Proposed, New York - Hotel-Tenth Avenue-Proposed, New York - Howard Hotel, New York - Howard Johnson, New York - Journey's Court Hotel-Proposed, New York - Journey's End, New York - Kalikow Hotel-Proposed, New York - Kennedy Inn, New York - Lancaster Hotel, New York - Le Meridien Liberty New York, New York - Lowell Hotel, New York - Luxury Hotel-Proposed, New York - Macklowe Hotel, New York - Madison Towers Hotel, New York - Manger Windsor Hotel, New York - Mark Hotel, New York - Marriott East Side, New York - Marriott Financial Center, New York - Marriott Hotel-Proposed, New York - Marriott Marquis, New York - Martinique Hotel, New York - Mayfair Regent, New York - Milford Plaza Hotel, New York - Millennium Hotel, New York - Navarro Hotel, New York - Nova Park-Gotham, New York - Novotel, New York - Omni Berkshire Place, New York - Omni Park Central, New York - Parc Fifty One Hotel, New York - Parker Meridien Hotel, New York - Peninsula Hotel, New York - Penta Hotel, New York - Piccadilly Hotel, New York - Plaza Hotel, New York - President Hotel, New York - Prince George Hotel, New York - Prince Street Hotel-Proposed, New York - Proposed Hotel and Apartments, New York - Proposed Luxury Hotel-Proposed, New York - Quality Inn, New York - Quality Suites, New York - Ramada Inn, New York - Regent Hotel-Proposed, New York - Regent of New York-Proposed, New York - Ritz-Carlton, New York - Roger Smith Winthrop Hotel, New York - Roosevelt Hotel, New York - Russian Tea Room, New York - Sheraton Hotel, New York - Sheraton Motor Inn, New York - Sheraton Park Avenue, New York - Soho Hotel-Proposed, New York - St. Moritz Hotel, New York - St. Regis, New York - Stanhope, New York - Sutton Place Hotel, New York - Taft Hotel, New York - Tenth Avenue Hotels-Proposed, New York - The Pierre Hotel, New York - The Plaza Athenee, New York - Times Square Hotel-Proposed, New York - Timeshare-Proposed, New York - Travel Inn, New York - Tudor Hotel, New York - UN Plaza Suite Hotel-Proposed, New York - Vista International, New York - Waldorf=Astoria Hotel, New York - Warwick Hotel, New York - Westbury Hotel, New York - Westin Plaza Hotel, New York - Woodward Hotel-Proposed, New York - York Club, New York - Howard Johnson Motel & Restaurant, Newburgh - Ramada Inn, Newburgh - Hilton Hotel, Niagara Falls - Howard Johnson, Norwich - Hotel-Proposed, Orangetown - Hudson Valley Conference Center, Ossining - Sheraton Inn, Ossining - Hotel-Proposed, Oswego - Best Western, Painted Post - Lodge on the Green, Painted Post - Residence Inn - Proposed, Parsippany - Senior Living - Proposed, Pearl River - Drum Hill Hotel, Peekskill - Holiday Inn, Plainview - Howard Johnson, Plainview - Pickwick Motor Inn, Plainview - Residence Inn, Plainview - Holiday Inn, Plattsburgh - Motel-Proposed, Port Jefferson - Comfort Inn-Proposed, Poughkeepsie - Courtyard by Marriott, Poughkeepsie - Radison Hotel, Poughkeepsie - Wyndham Hotel, Poughkeepsie - Best Western-LaGuardia Airport, Queens - Crown Motel, Queens - Crowne Plaza-LaGuardia Airport, Queens - Days Inn-LaGuardia Airport, Queens - Executive Inn, Queens - Hilton Inn-LaGuardia Airport, Queens - Hilton-JFK Airport, Queens - Holiday Inn-JFK Airport, Queens - Holiday Inn-LaGuardia Airport, Queens - Howard Johnson, Queens - Jade East Motel, Queens - JFK Plaza Hotel, Queens - Marriott Hotel-JFK Airport, Queens - Marriott-LaGuardia Airport, Queens - Metropole Hotel, Queens - Midway Hotel, Queens - Riviera Hotel, Queens - Royce Hotel-LaGuardia Airport, Queens - Sheraton-LaGuardia East-Proposed, Queens - Adria Hotel, Queens (Bayside) - Holiday Inn, Riverhead - Riverhead Motor Hotel, Riverhead - Americana Hotel, Rochester - Courtyard by Marriott-Wrighton, Rochester - Days Hotel (former Holiday Inn), Rochester - Hilton-Campus, Rochester - Holiday Inn, Rochester - Hotel-Proposed (former St. Bernard), Rochester - Hyatt Hotel, Rochester - Lodge at Woodcliff, Rochester - Omni Suites Hotel, Rochester - Residence Inn, Rochester - Sheraton Inn, Rochester - Stouffer Hotel, Rochester - Town House Inn, Rochester - Limited Service Hotel-Proposed, Rome - Hotel - Proposed, Roslyn - Roslyn Country Club, Roslyn - Courtyard by Marriott, Rye - Le Richemonde Hotel, Ryebrook - Baron's Cove Inn, Sag Harbor - Holiday Inn, Saratoga - Hotel-Proposed, Saratoga Springs - Howard Johnson, Saugerties - Holiday Inn, Schenectady - Ramada Inn, Schenectady - Dering Harbor Inn, Shelter Island - Crowne Plaza-Proposed, Smithtown - Howard Johnson, Smithtown - Sheraton, Smithtown - Raleigh Hotel, South Fallsburg - Hotel-Proposed, Southhold - Susse Chalet, Spring Valley - Executive Motor Inn, Springfield Gardens - Staten Island Hotel, Staten Island - Imperial Htl/Stevensville Golf Crs., Stevensville - Holiday Inn, Suffern - Motel on the Mountain, Suffern - Browns Hotel, Sullivan County - Imperial Hotel, Sullivan County - The New Brown's Resort, Sullivan County - Courtyard by Marriott, Syracuse - Embassy Suites, Syracuse - Hampton Inn, Syracuse - Hilton Inn, Syracuse - Holiday Inn-Downtown, Syracuse - Holiday Inn-Exit 35, Syracuse - Holiday Inn-Exit 36, Syracuse - Holiday Inn-Exit 39, Syracuse - Holiday Inn-I-90, Syracuse - Homewood Suites Hotel-Proposed, Syracuse - Hotel Syracuse, Syracuse - Hotel-Proposed, Syracuse - Marriott Hotel, Syracuse - Residence Inn-Proposed, Syracuse - Sheraton University Inn & Conf.Ctr., Syracuse - Treadway Inn, Syracuse - Courtyard by Marriott, Tarrytown - Tarrytown House Conference Center, Tarrytown - Westchester Marriott, Tarrytown - Embassy Suites - Proposed, Times Square, New York - Marriott Hotel, Uniondale - Sheraton Nassau Hotel, Uniondale - Howard Johnson Hotel, Utica - Howard Johnson, Vestal - Hotel-Proposed, Watertown - Convention Hotel-Proposed, Westbury - Dalts Restaurant, Westbury - Howard Johnson, Westbury - Marriott Hotel, Westchester - Inn-Proposed, Westhampton - Crowne Plaza, White Plains - Hotel-Proposed, White Plains - Howard Johnson, White Plains - Roger Smith Hotel, White Plains - Stouffer Westchester Hotel, White Plains - White Plains Hotel, White Plains - Anton Meadows, Yaphank - Quality Suites, Yorktown - Yorktown Motor Lodge, Yorktown Heights North Carolina - Days Inn - Central, Asheville - Holiday Inn - Airport, Asheville - Holiday Inn - Tunnel, Asheville - Inn on the Plaza, Asheville - Sheraton Inn, Asheville - Days Inn, Ashville - Masters Economy Inn - Rocky Mount, Battlebro - Days Inn, Blowing Rock - All-Suite Hotel-Proposed, Boone - Residence Inn-Proposed, Cary - Carolina Inn, Chapel Hill - Hilton-Proposed, Chapel Hill - Charlotte Registry Hotel-Per Diem, Charlotte - Compri Hotel-Proposed, Charlotte - Courtyard by Marriott, Charlotte - Days Inn, Charlotte - Days Inn-Uptown, Charlotte - Fairfield Inn, Charlotte - Howard Johnson, Charlotte - Howard Johnson Lodge, Charlotte - Knights Inn, Charlotte - Manger Motor Inn, Charlotte - Marriott City Center, Charlotte - Marriott Hotel-Independence Center, Charlotte - Masters Economy Inn - Charlotte No, Charlotte - Masters Economy Inn - Merchandise, Charlotte - Queen City Motel, Charlotte - Residence Inn, Charlotte - Residence Inn-North, Charlotte - Resistry Hotel, Charlotte - Royce Suite Hotel, Charlotte - Sheraton Inn, Charlotte - Conference Center, Clemmons - Sheraton Motel, Dunn - Best Western, Durham - Cricket Inn, Durham - Days Inn, Durham - Dutch Village Inn, Durham - Fairfield Inn, Durham - Holiday Inn-West, Durham - Motel 6, Durham - Sheraton-University Center, Durham - The Duke Inn, Durham - Days Inn, Fayetteville - Fairfield Inn, Fayetteville - Holiday Inn, Fayetteville - Hotel-Proposed, Fayetteville - Knights Inn, Fayetteville - Goldsboro Motel, Goldsboro - Courtyard by Marriott, Greensboro - Days Inn, Greensboro - Embassy Suites, Greensboro - Fairfield Inn, Greensboro - Hilton, Greensboro - Marriott Hotel, Greensboro - Residence Inn, Greensboro - Sheraton Greensboro, Greensboro - Hotel-Proposed, Greenville - Radisson Hotel, High Point - Days Inn, Lumberton - Maggie Valley Country Club, Maggie Valley - Courtyard by Marriott, Raleigh - Fairfield Inn, Raleigh - Hampton Inn, Raleigh - Hilton, Raleigh - Holiday Inn-Downtown, Raleigh - Marriott Hotel-RTP, Raleigh - Raleigh Radisson, Raleigh - Residence Inn, Raleigh - Holiday Inn - Airport, Research Triangle Park - Howard Johnson, Roanoke Rapids - Sheraton Inn, Rocky Mount - Days Inn, Rocky Mountain - Fairfield Inn, Rocky Mountain - Motel 6, Rocky Mountain - Days Inn, Rowland - Sheraton Motel, Selma - Masters Economy Inn, Smithfield - Holiday Inn, Southern Pines - Fairfield Inn, Wilmington - Hilton, Winston/Salem - Holiday Inn, Winston/Salem - Winston Plaza Hotel, Winston/Salem North Dakota - Holiday Inn, Bismark - Radisson Inn, Bismark - Super 8, Bismark - Ramada Hotel, Fargo - Ramada Inn-Proposed, Fargo - Super 8, Grand Forks - Super 8, Minot Ohio - Holiday Inn-Cascade, Akron - Ramada Inn, Akron - Residence Inn, Akron - Aurora Inn and Pine Lake Trout Club, Aurora - Sheraton Inn, Aurora - Woodlands Inn, Aurora - Courtyard by Marriott, Blue Ash - Embassy Suites, Blue Ash - Residence Inn-Proposed, Blue Ash - Best Western, Cambridge - Days Inn, Cambridge - Hilton Hotel, Canton - Super 8, Canton - Best Western Northeast, Cincinnati - Carousel Inn, Cincinnati - Cincinnati Hotel, Cincinnati - Clarion Hotel, Cincinnati - Days Inn, Cincinnati - Embassy Suites-Proposed, Cincinnati - Holiday Inn-Downtown, Cincinnati - Holiday Inn-Eastgate, Cincinnati - Holiday Inn-Northeast, Cincinnati - Holiday Inn-Riverfront, Cincinnati - Holiday Inn-South, Cincinnati - Hotel-Airport-Proposed, Cincinnati - Howard Johnson, Cincinnati - Hyatt, Cincinnati - Knights Inn, Cincinnati - KOA Campground, Cincinnati - Marriott Inn, Cincinnati - Netherland Hilton, Cincinnati - Omni Netherland Plaza, Cincinnati - Proposed Hotel, Cincinnati - Radisson Inn, Cincinnati - Ramada Inn, Cincinnati - Residence Inn, Cincinnati - Residence Inn-North, Cincinnati - Sheraton Inn-Proposed, Cincinnati - Treadway Inn, Cincinnati - Vernon Manor, Cincinnati - AmeriSuite Hotel-Proposed, Cleveland - Downtown Hotel-Proposed, Cleveland - Fairfield Inn-Brook Park, Cleveland - Fairfield Inn-West, Cleveland - Holiday Inn-Airport, Cleveland - Holiday Inn-Lakeside, Cleveland - Hyatt Hotel-Proposed, Cleveland - Marriott Hotel, Cleveland - Sheraton City Center, Cleveland - Sheraton Hopkins, Cleveland - AmeriSuite - Proposed, Columbus - Embassy Suites, Columbus - Fairfield Inn-North, Columbus - Fairfield Inn-West, Columbus - Hilton Inn, Columbus - Holiday Inn-Airport, Columbus - Holiday Inn-City Center, Columbus - Holiday Inn-Worthington, Columbus - Hotel-Proposed, Columbus - Howard Johnson Hotel, Columbus - Howard Johnson-East, Columbus - Howard Johnson-West, Columbus - Knights Inn-West, Columbus - Marriott Hotel, Columbus - Nationwide Hotel, Columbus - Residence Inn-North, Columbus - Sheraton Plaza Hotel, Columbus - Sheraton-North, Columbus - Union Plaza Hotel-Steeplechase, Columbus - University Inn, Columbus - Woodfin Hotel, Columbus - Courtyard by Marriott, Crosswoods - Courtyard by Marriott, Dayton - Daytonian Hilton, Dayton - Fairfield Inn, Dayton - Hope Hotel & Conference Center, Dayton - Knights Inn-North, Dayton - Marriott Hotel, Dayton - Motel 6, Dayton - Ramada Inn, Dayton - Residence Inn-North, Dayton - Residence Inn By Marriott, Dayton South - Courtyard by Marriott, Dublin - Woodfin Suites, Dublin - East Liverpool Motor Lodge, East Liverpool - Howard Johnson, Euclid - Ramada Inn, Fairlawn - Hampton Inn, Independence - Howard Johnson, Lima - Ramada Inn, Lima - Best Western, Mansfield - Holiday Inn, Marietta - Lafayette Hotel, Marietta - Holiday Inn, Middletown - Howard Johnson, Middletown - Regal 8 Inn, Middletown - Sheraton-Proposed, Milford - Super 8, Montrose - Ramada Inn, Sandusky - Days Inn, Sharonville - Holiday Inn-Cincinnati North, Sharonville - Super 8, St. Clairsville - Holiday Inn, Strongsville - Balhalla Hotel, Toledo - Courtyard by Marriott, Toledo - Fairfield Inn-Airport, Toledo - Hilton at the Medical College, Toledo - Hilton Hotel, Toledo - Holiday Inn, Toledo - Knights Inn-West, Toledo - Marriott Portside Hotel, Toledo - Radisson Hotel, Toledo - Sofitel, Toledo - Hampton Inn-Proposed, Wickliffe - Holiday Inn, Youngstown - Hotel-Proposed, Youngstown - Sheraton-Proposed, Youngstown Oklahoma - Fountainhead Resort, Mcintosh County - Residence at the Trails Inn, Norman - Suit Hotel, Norman - Courtyard by Marriott, Oklahoma City - Embassy Suites, Oklahoma City - Holiday Inn, Oklahoma City - Lexington Hotel Suites, Oklahoma City - Lincoln Plaza Hotel, Oklahoma City - Marriott Hotel, Oklahoma City - Meridien Plaza, Oklahoma City - Sheraton Hotel, Oklahoma City - Arrowhead Resort, Pittsburgh County - Camelot Hotel, Tulsa - Doubletree Hotel, Tulsa - Former Holiday Inn, Tulsa - Former Holiday Inn-Downtown, Tulsa - Holiday Inn, Tulsa - Holiday Inn-Convention Center, Tulsa - La Quinta Inn, Tulsa - Marriott Hotel, Tulsa - Mayo Hotel, Tulsa - Residence Inn, Tulsa - Westin Hotel, Tulsa Oregon - Inn At Face Rock, Bandon - Courtyard by Marriott, Beaverton - Red Lion Motel, Bend - Sunriver Lodge and Resort, Bend - Econolodge Motel, Eugene - Valley River Inn, Eugene - Residence Inn Portland-South, Lake Oswego - Big Creek Resort-US Highway 101, Lane County - Embassy Suites, Portland - Holiday Inn Crowne Plaza - Proposed, Portland - Holiday Inn-Airport, Portland - Holiday Inn-South, Portland - Proposed Sheraton Suites, Portland - Red Lion - Jantzen Beach, Portland - Red Lion Inn-Lloyd Center, Portland - Red Lion Inn-Portland Center, Portland - Residence Inn - Proposed, Portland - Vintage Plaza Hotel, Portland - Wells Building, Portland - Execulodge Motel, Salem - Oregon Capital Inn, Salem - Springfield Red Lion Inn, Springfield - Sunriver Resort, Sunriver Pennsylvania - Allentown Hilton Hotel, Allentown - Holiday Inn, Allentown - Proposed Microtel, Allentown - Quality Inn, Allentown - Bedford Springs Hotel, Bedford - Compri Hotel-Proposed, Bensalem - Days Inn-Proposed, Bensalem - Holiday Inn, Bensalem - Residence Inn By Marriott, Berwyn - Econolodge, Bristol - Days Inn, Brookville - Buck Hill Falls Inn, Buck Hill Falls - Howard Johnson, Butler - Holiday Inn, Chambersburg - Days Inn, Clarion - Embassy Suites, Coraopolis - Hydeholde Country House-Proposed, Coraopolis - Days Inn, Danville - Holiday Inn, Dubois - Lafayette Inn-Proposed, Easton - Howard Johnson Hotel, Erie - Ramada Inn, Erie - Holiday Inn, Essington - Quality Suites-Proposed, Essington - Super 8-Proposed, Essington - Howard Johnson, Gibsonia - Compri Hotel-Proposed, Harrisburg - Holiday Inn, Harrisburg - Marriott Hotel, Harrisburg - Penn Harris Inn, Harrisburg - Sheraton Inn, Harrisburg - Super 8-Proposed, Harrisburg - Holiday Inn, Hazleton - Super 8-Proposed, Hazleton - Plaza Valley Forge Hotel, King of Prussia - Radisson Hotel, King of Prussia - Sheraton Hotel, King of Prussia - Valley Forge Complex, King of Prussia - Valley Forge Hilton, King of Prussia - Motel-Proposed, Lake Ariel - Days Inn, Lancaster - Holiday Inn-Route 30E, Lancaster - Holiday Inn-Route 501, Lancaster - Sheraton Lancaster Golf Resort, Lancaster - Super 8-Proposed, Lancaster - Holiday Inn, Lionville - Hilton-Great Valley, Malvern - Summerfield Suite-Proposed, Malvern - Days Inn, Meadville - Hilton Inn, Monroeville - Holiday Inn-West, Monroeville - Economy Hotel, Montgomery Township - Holiday Inn, New Hope - Treadway Inn, Newport - Residence Inn-Proposed, Paoli - Conference Center-Proposed, Penn State - Barclay Hotel, Philadelphia - Bellevue, Philadelphia - Courtyard by Marriott-Devon, Philadelphia - Courtyard-Willow Grove, Philadelphia - Days Inn-Airport, Philadelphia - Econo Lodge-Franklin Towne, Philadelphia - Essex Hotel, Philadelphia - Franklin Motor Inn, Philadelphia - Franklin Plaza Hotel, Philadelphia - Guest Quarters Hotel, Philadelphia - Hampton Inn-Proposed, Philadelphia - Health Club-Proposed, Philadelphia - Hilton Inn, Philadelphia - Hilton Inn-Northeast, Philadelphia - Holiday Inn-City Center, Philadelphia - Holiday Inn-City Line, Philadelphia - Hub Motor Inn, Philadelphia - Hyatt-Proposed, Philadelphia - Marriott Hotel, Philadelphia - Marriott Hotel-Airport, Philadelphia - Omni Philadelphia, Philadelphia - Penn Center Inn, Philadelphia - Quality Inn-Center City, Philadelphia - Residence Inn-Proposed, Philadelphia - Rittenhouse Hotel, Philadelphia - Treadway Mohawk, Philadelphia - Treadway Roosevelt, Philadelphia - Residence Inn, Philadelphia/Berwyn - Clubhouse Inn, Pittsburgh - Courtyard by Marriott, Pittsburgh - Hampton Inn at Playhouse Square, Pittsburgh - Hilton Hotel, Pittsburgh - Holiday Inn-Greentree, Pittsburgh - Holiday Inn-North, Pittsburgh - Holiday Inn-Parkway-East, Pittsburgh - Holiday Inn-Parkway-West, Pittsburgh - Hotel-Proposed, Pittsburgh - Howard Johnson Hotel, Pittsburgh - Marriott Hotel, Pittsburgh - Marriott-Airport, Pittsburgh - Motel 6, Pittsburgh - Quality Inn, Pittsburgh - Royce Hotel-Airport, Pittsburgh - U.S.S. Hotel-Proposed, Pittsburgh - Westin William Penn, Pittsburgh - Courtyard By Marriott, Pittsburgh Airport - Holiday Inn, Reading - Sheraton Hotel, Reading - Hilton at Lackawanna Station, Scranton - Hilton Hotel, Scranton - Sheraton Inn, Stroudsburg - HoJo Inn, Tannersville - Hilton-Northeast, Trevose - Compri Hotel-Proposed, Valley Forge - Courtyard by Marriott, Valley Forge - Holiday Inn-Meadowlands, Washington - Holiday Inn, Wilkes-Barre - Days Inn-Proposed, Williamsport - Hotel-Proposed, Williamsport - Hampton Inn - Proposed, Willow Grove - Holiday Inn-Market Street, York - Holiday Inn-Route 30 and I-83, York - Ramada Inn, York - Super 8-Proposed, York Rhode Island - Cresthil-Proposed, Lincoln - Courtyard by Marriott, Newport - Vanderbilt Hotel-Convention Center, Newport - Quality Inn, North Kingston - Biltmore Plaza, Providence - Convention Center Hotel-Proposed, Providence - Holiday Inn Providence - Downtown, Providence - Hotel-Proposed, Providence - Marriott Hotel, Providence - Sheraton-Airport, Providence - Susse Chalet, Smithfield - Howard Johnson, Warwick - Residence Inn-Proposed, Warwick - Susse Chalet, Warwick South Carolina - Quality Inn Motel, Anderson - Super 8, Anderson - Budget Hotel - Proposed, Charleston - Charleston Center Hotel-Proposed, Charleston - Cooper River Inn, Charleston - Days Inn, Charleston - Francis Marion Hotel, Charleston - Hampton Inn-Proposed, Charleston - Hawthorne Suites Hotel, Charleston - Holiday Inn, Charleston - Holiday Inn-Airport, Charleston - Holiday Inn-Riverview, Charleston - Masters Economy Inn - Mt. Pleasant, Charleston - Masters Economy Inn - Rivers Ave, Charleston - Middleton Inn, Charleston - Omni Charleston, Charleston - Quality Inn, Charleston - Trusthouse Forte, Charleston - Courtyard by Marriott, Columbia - Courtyard by Marriott-Northeast, Columbia - Courtyard by Marriott-Northwest, Columbia - Embassy Suites, Columbia - Marriott Hotel, Columbia - Masters Economy Inn - I-26, Columbia - Masters Economy Inn - Knox Abbot, Columbia - Motel 6, Columbia - Residence Inn, Columbia - Coral Beach Hotel, Coral Beach - Days Inn, Dillon - Save Inn, Fairplay - Fairfield Inn, Florence - Holiday Inn, Florence - Days Inn, Gaffney - Courtyard by Marriott, Greenville - Fairfield Inn, Greenville - Greenville Hilton Hotel, Greenville - Ramada Inn, Greenville - Super 8, Greenwood - Days Inn, Hardeeville - Fairfield Inn, Hilton Head - Hilton Head Inn, Hilton Head - Holiday Inn, Hilton Head - Inter-Continental Hotel, Hilton Head - Islander Inn, Hilton Head - Quality Suites-Proposed, Hilton Head - Residence Inn-Proposed, Hilton Head - Sheraton Inn, Hilton Head - PGA East Resort-Proposed, Kiawah Island - Save Inn, Lake Hartwell - Days Inn, Mt. Pleasant - Coral Beach Hotel, Myrtle Beach - Radisson Hotel, Myrtle Beach - Best Western Inn, North Charleston - Budget Hotel-Proposed, North Charleston - Days Inn, North Charleston - Northwoods Atrium Inn, North Charleston - Days Inn, Santee - Holiday Inn-West, Spartanburg - Howard Johnson, Spartanburg - Residence Inn, Spartanburg South Dakota - Holiday Inn, Aberdeen - Holiday Inn, Rapid City - Holiday Inn, Sioux Falls - Super 8, Sioux Falls - Holiday Inn, Spearfish Tennessee - Ameri Suite Hotel-Proposed, Brentwood - Courtyard by Marriott, Brentwood - Holiday Inn, Bristol - Holiday Inn-Southeast, Chattanooga - Howard Johnson, Chattanooga - Marriott Hotel, Chattanooga - Motel 6, Chattanooga - Sheraton Inn, Chattanooga - Super 8, Chattanooga - Holiday Inn, Cove Lake - Masters Economy Inn, Dickson - Comfort Inn-Proposed, Elizabethton - Park Vista Hotel, Gatlinburg - Holiday Inn-I-40, Jackson - Holiday Inn, Johnson City - Super 8, Johnson City - Fairfield Inn, Johnson Park - Holiday Inn, Kingsport - Courtsouth Healthclub-North, Knoxville - Courtsouth Healthclub-South, Knoxville - Courtsouth Healthclub-West, Knoxville - Days Inn, Knoxville - Hilton Hotel, Knoxville - Howard Johnson-Westhills, Knoxville - Motel 6, Knoxville - Quality Inn, Knoxville - Ramada Inn-West, Knoxville - Rodeway Inn, Knoxville - Courtyard by Marriott, Memphis - Courtyard by Marriott-Airport, Memphis - Holiday Inn - Crowne Plaza, Memphis - Holiday Inn-East, Memphis - Holiday Inn-East Poplar, Memphis - Holiday Inn-I-40-Sycamore View, Memphis - Holiday Inn-Memphis Int'l Airport, Memphis - Hyatt Regency, Memphis - Lexington Hotel Suites, Memphis - Motel 6, Memphis - Omni Hotel, Memphis - Proposed Fairfield Inn, Memphis - Residence Inn, Memphis - La Quinta Inn, Memphis - Airport - Brown County Inn, Nashville - Capital Mall Conv. Center-Proposed, Nashville - Clarion Maxwell House, Nashville - Courtyard by Marriott-Airport, Nashville - Days Inn, Nashville - Doubletree Hotel, Nashville - Grosvenor, Nashville - Hampton Inn, Nashville - Holiday Inn Crowne Plaza, Nashville - Holiday Inn Express, Nashville - Holiday Inn-Briley Parkway, Nashville - Marriott Hotel, Nashville - Nashville Union Station, Nashville - Ramada Inn, Nashville - Sheraton Hotel, Nashville - Sheraton Music City, Nashville - Stouffer Hotel, Nashville - Super 8, Nashville - Union Station Hotel, Nashville - AmeriSuite, Oakridge - Holiday Inn, Oakridge - Super 8-Proposed, Union City Texas - Harvey Hotel, Addison - Days Inn, Amarillo - Motel 6, Amarillo - Radisson Hotel-Proposed, Amarillo - Super 8 Motel, Amarillo - La Quinta Inn, Amarillo - Airport - Courtyard by Marriott, Arlington - Hilton Hotel, Arlington - Holiday Inn, Arlington - Lexington Suites Hotel, Arlington - Compri Hotel-Proposed, Austin - Driskill Hotel, Austin - Embassy Suites-Austin Town Lake, Austin - Embassy Suites-North, Austin - Fairfield North, Austin - Four Seasons Hotel, Austin - Holiday Inn, Austin - Holiday Inn-Austin Town Lake, Austin - La Quinta Inn, Austin - Marriott Hotel, Austin - Proposed Fairfield Inn, Austin - Quality Inn, Austin - Residence South, Austin - La Quinta Inn, Austin - Ben White - Holiday Inn Airport, Austins Cities - Holiday Inn, Bay Town - Hilton Hotel, Beaumont - Holiday Inn, Beaumont - Courtyard by Marriott, Bedford - Holiday Inn, Brownsville - La Quinta Inn, Brownsville - Hilton Hotel, College Station - Ramada Inn, College Station - Holiday Inn, Conroe - Corpus Christi Hotel-Airport, Corpus Christi - Days Inn, Corpus Christi - Hilton - Proposed, Corpus Christi - Holiday Inn, Corpus Christi - Holiday Inn-Airport, Corpus Christi - La Quinta Inn, Corpus Christi - North - La Quinta Inn, Corpus Christi - South - Allstar Inn, Dallas - Ambassador Plaza Hotel, Dallas - Arlington Hilton, Dallas - Bradford Plaza Hotel, Dallas - Bristol Suites, Dallas - Convention Center Hotel-Proposed, Dallas - Courtyard by Marriott, Dallas - Courtyard by Marriott-Northeast, Dallas - Courtyard by Marriott-Plano, Dallas - Courtyard by Marriott-Stemmons, Dallas - Dallas Grand Hotel, Dallas - Doubletree Inn, Dallas - Embassy Suites, Dallas - Fairmont Hotel, Dallas - Harvey Hotel, Dallas - Hilltop, Dallas - Hilton Inn-LBJ, Dallas - Hilton-Arlington, Dallas - Holiday Inn - North, Dallas - Holiday Inn Crowne Plaza, Dallas - Holiday Inn-Brook Hollow, Dallas - Holiday Inn-South, Dallas - Houstonian Hotel, Dallas - Howard Johnson-East, Dallas - Lexington Hotel Suites, Dallas - Loews Anatole Hotel, Dallas - Marriott Hotel-Airport, Dallas - Marriott-Park Central, Dallas - Marriott-Quorum, Dallas - Melrose Hotel, Dallas - Motel 6, Dallas - Omni Melrose Hotel, Dallas - Park Plaza, Dallas - Propsed Hotel - DFW, Dallas - Ramada Inn Convention Center, Dallas - Ramada-Market Center, Dallas - Registry Hotel, Dallas - Residence Inn-Market Center, Dallas - Sheraton Grand, Dallas - Southland Center Hotel, Dallas - Statler Hilton Hotel, Dallas - Summit Hotel, Dallas - Westin Galleria Hotel, Dallas - La Quinta Inn, Dallas - DFW - La Quinta Inn, Dallas - North Park - La Quinta Inn, Dallas - Plano - La Quinta Inn, Dallas - Richardson - Allstar Inn, El Paso - Hilton Inn-Airport, El Paso - La Quinta Hotel-Airport, El Paso - Rodeway Inn, El Paso - Travelers Inn, El Paso - Westin Paso del Norte, El Paso - La Quinta Inn, El Paso - Lomaland - Allstar Inn, Euless - La Quinta Inn, Euless - Allstar Inn, Fort Worth - Courtyard by Marriott, Fort Worth - Days Inn Downtown, Fort Worth - Hilton Hotel, Fort Worth - Holiday Inn-North, Fort Worth - Holiday Inn-South, Fort Worth - Lexington Suites Hotel, Fort Worth - Metro Center Hotel, Fort Worth - Radisson Plaza Hotel, Fort Worth - Residence Inn, Fort Worth - La Quinta Inn, Fort Worth - East - Holiday Inn, Harlingen - La Quinta Inn, HI-LA Marque - Crowne Plaza-Houston Park, Houston - Days Inn, Houston - Days Inn-Hobby, Houston - Doubletree Hotel, Houston - Embassy Suites, Houston - Galleria Gardens, Houston - Harvest House Hotel, Houston - Harvey Hotel Medical Center, Houston - Hilton Inn-West, Houston - Holiday Inn I-10 East, Houston - Holiday Inn-Downtown, Houston - Holiday Inn-East, Houston - Holiday Inn-Greenway Plaza, Houston - Holiday Inn-Hobby, Houston - Holiday Inn-Medical Center, Houston - Holiday Inn-NASA, Houston - Holiday Inn-North, Houston - Holiday Inn-Northwest, Houston - Holiday Inn-Southwest, Houston - Host Hotel International, Houston - Hotel Meridien, Houston - Hotel-Proposed, Houston - Houston House, Houston - Houston Medical Center, Houston - Houston Park 10 Crowne Plaza, Houston - La Quinta Hotel-Astrodome, Houston - La Quinta Hotel-Baytown, Houston - La Quinta Hotel-CY Fair, Houston - La Quinta Hotel-Hobby, Houston - La Quinta Inn-Stafford, Houston - Lexington Hotel Suites, Houston - Marriott Astrodome, Houston - Marriott Hotel, Houston - Marriott Hotel-Medical Center, Houston - Marriott-Airport, Houston - Motel 6, Houston - Remington, Houston - Residence Inn, Houston - Rodeway Inn, Houston - Rodeway Inn-Hobby, Houston - Shamrock Hilton Hotel, Houston - Sheraton Hotel, Houston - Sheraton Houston House, Houston - Sheraton Houston Place Hotel, Houston - Sheraton Town and Country, Houston - Sofitel, Houston - Stouffer Greenway Plaza, Houston - Suite Hotel-Proposed, Houston - Whitehall, Houston - Whitehall Hotel Conversion to HI, Houston - La Quinta Inn, Houston - Sharpstown - La Quinta Inn, Houston - East - La Quinta Inn, Houston - Loop 1960 - La Quinta Inn, Houston - Northwest - La Quinta Inn, Houston- SW Freeway - Holiday Inn, Huntsville - Harvey Hotel DFW, Irvine - Allstar Inn, Irving - Hampton Inn, Irving - Hampton Inn-Proposed, Irving - Harvey Hotel-D/FW Airport, Irving - Holiday Inn-Texas Stadium, Irving - Marriott Hotel, Irving - Holiday Inn, Kingsville - Del Lago Hotel, Lake Conroe - Hilton Inn, Laredo - La Posada, Laredo - Courtyard by Marriott, Las Colinas - La Quinta Inn, Longview - Hilton Inn, Lubbock - Holiday Inn, Lubbock - Residence Inn, Lubbock - La Quinta Inn, Midland - Holiday Inn, New Braunfels - All Star Inn, North Richland Hills - La Quinta Inn, Odessa - Holiday Inn, Orange - Holiday Inn, Paris - Plano Harvey Hotel, Plano - La Quinta Inn, Round Rock - Sheraton Inn, San Angelo - Coachman Inn-Proposed, San Antonio - Courtyard by Marriott-Downtown, San Antonio - Courtyard by Marriott-Medical Ctr., San Antonio - Crockett Hotel, San Antonio - Days Inn, San Antonio - Fairfield - North, San Antonio - Gunter Hotel, San Antonio - Holiday Inn-Airport, San Antonio - Holiday Inn-Market Square, San Antonio - Holiday Inn-North, San Antonio - Holiday Inn-Northwest, San Antonio - Holiday Inn-Riverwalk, San Antonio - La Quinta Hotel-Ingram, San Antonio - La Quinta Hotel-Lackland, San Antonio - La Quinta Hotel-Toepperwein, San Antonio - Lexington Hotel Suites, San Antonio - Marriott Hotel-Proposed, San Antonio - Marriott Inn-North, San Antonio - Proposed Fairfield Inn, San Antonio - La Quinta Inn, San Antonio - Windsor - La Quinta Inn, San Antonio - Wurzbach - Holiday Inn, San Marcos - La Quinta Inn, SAT-Toepperwein - Sheraton Hotel, South Padre Island - La Quinta Inn, Tyler - Sheraton, Tyler - Sheraton Inn, Tyler - Traveler's Choice Inn, Tyler - Hilton Hotel, Waco - Gateway Inn, Wichita Falls - Hilton Hotel, Wichita Falls Utah - Mount Holly Ski Resort, Beaver - Hotel-Proposed, Brigham City - Motel-Proposed, Cedar City - Proposed Mayflower Hotel, Deer Valley - Stein Eriksen Lodge, Deer Valley - Deer Valley Resort, Park City - Omni Yarrow, Park City - Prospector Square Resort, Park City - Yarrow Resort, Park City - Seven Peaks Resort and Hotel, Provo - Comfort Inn, Salt Lake City - Doubletree, Salt Lake City - Hilton Hotel-Airport, Salt Lake City - Holiday Inn, Salt Lake City - Holiday Inn-Salt Palace, Salt Lake City - Hotel Utah, Salt Lake City - Hotel-Proposed, Salt Lake City - La Quinta Inn, Salt Lake City - Nendels Inn, Salt Lake City - New Grande Hotel, Salt Lake City - Red Lion Hotel, Salt Lake City - Sheraton Hotel, Salt Lake City - Super 8, Salt Lake City - University Park Hotel (Desktop Rev), Salt Lake City - Ramada Inn-Proposed, Sandy Vermont - Ramada Inn, Bennington - Bolton Valley Corporation, Bolton Valley - Quality Inn, Brattleboro - Radisson Hotel, Burlington - Smugglers Notch, Cambridge - Inn-Proposed, Essex - Cascade Lodge, Killington - Inn of the Six Mountains, Killington - Mountain Inn, Killington - Equinox Hotel, Manchester - Howard Johnson Inn, Rutland - Quality Inn, Stowe - Conference Center-Proposed, Stratton Mountain - Sugarbush Inn, Sugarbush - Susse Chalet, Williston Virginia - Comfort Inn, Abingdon - Best Western, Alexandria - Comfort Inn, Alexandria - Compri Hotel-Proposed, Alexandria - Embassy Suites, Alexandria - Howard Johnson, Alexandria - Marriott Suites, Alexandria - Ramada Inn, Alexandria - Best Western, Arlington - Gateway Marriott, Arlington - Hyatt Arlington Hotel, Arlington - Hyatt Regency, Arlington - Key Bridge Marriott, Arlington - Marriott Hotel, Arlington - Sheraton Crystal City Hotel, Arlington - Sheraton National Hotel, Arlington - Stouffer Concourse Hotel, Arlington - Mountain Lake Hotel, Blacksburg - Holiday Inn, Bristol - Howard Johnson, Bristol - Days Inn, Carmel Church - Westfields International, Chantilly - Boar's Head Inn, Charlottesville - Cavalier Inn, Charlottesville - Courtyard by Marriott, Charlottesville - Hilton-University, Charlottesville - Holiday Inn-North, Charlottesville - Omni Charlottesville, Charlottesville - Radisson-Proposed, Charlottesville - Super 8, Charlottesville - Days Inn, Chester - Howard Johnson, Chester - Days Inn, Colonial Heights - Holiday Inn, Covington - Embassy Suites, Crystal City - Holiday Inn Crowne Plaza, Crystal City - Hyatt Hotel, Crystal City - Marriott Crystal Gateway Hotel, Crystal City - Comfort Inn-Proposed, Dahlgren - Days Inn, Emporia - Courtyard by Marriott, Fairfax - Embassy Suites, Fairfax - Neighborhood Suites-Proposed, Fairfax - Hampton Inn-Proposed, Fairfax City - Westfields International, Fairfax County - Marriott Hotel, Fairview - Econo Lodge, Farmingville - Comfort Inn-Proposed, Farmville - Comfort Inn, Frederick County - Motel 6, Fredericksburg - Courtyard by Marriott, Hampton - Days Inn, Hampton - Fairfield Inn, Hampton - Courtyard by Marriott, Herndon - Embassy Suites Hotel, Herndon - Ramada Renaissance and Health Club, Herndon - Residence Inn-Proposed, Herndon - Worldgate Marriott Hotel, Herndon - Hotel-Proposed, Hopewell - Keswick Inn, Keswick - Holiday Inn, Lexington - Radisson Hotel, Lynchburg - Courtyard by Marriott, Manassas - Holiday Inn, Marion - Hilton, McLean - Days Inn, Norfolk - Marriott Waterside Hotel, Norfolk - Omni Hotel, Norfolk - Waterfront Hotel - Proposed, Norfolk - 135-Suite Hotel-Proposed, Portsmouth - Waterfront Suite Hotel-Proposed, Portsmouth - Comfort Inn, Princeton - Comfort Inn, Pulaski County - Embassy Suites Hotel, Reston - Hyatt Hotel, Reston - Best Western Kings Quarters, Richmond - Courtyard by Marriott, Richmond - Embassy Suites Hotel, Richmond - Hampton Inn, Richmond - Holiday Inn, Richmond - Howard Johnson Lodge, Richmond - Hyatt House Hotel, Richmond - La Quinta Hotel, Richmond - Marriott Hotel, Richmond - Omni Richmond, Richmond - Radisson Hotel, Richmond - Ramada Renaissance Hotel, Richmond - Residence Inn, Richmond - Days Inn, Richmond (Broad) - Days Inn, Richmond (Byrd) - Holiday Inn, Roanoke - Holiday Inn - Airport, Roanoke - Holiday Inn - Civic Center, Roanoke - Holiday Inn - South, Roanoke - Hotel Roanoke, Roanoke - Howard Johnson, Roanoke - Marriott - Roanoke Airport, Roanoke - Marriott Hotel, Roanoke - Holiday Inn, Salem - Super 8, South Hill - Days Inn, Springfield - Hilton, Springfield - Holiday Inn, Staunton - Stonewall Jackson Hotel, Staunton - Hampton Inn - Proposed, Tyson's Corner - Embassy Suites, Tysons Corner - Marriott Hotel, Tysons Corner - Residence Inn, Tysons Corner - Ritz Carlton-Proposed, Tysons Corner - Courtyard by Marriott, Virginia Beach - Courtyard by Marriott-Lynnhaven, Virginia Beach - Fairfield Inn, Virginia Beach - Hotel-Proposed, Virginia Beach - Pavilion Tower Hotel, Virginia Beach - Ramada Inn - Oceanside, Virginia Beach - International Conference Center, Westfields - Howard Johnson, Wheeling - Fort Magruder Inn, Williamsburg - Governor's Inn, Williamsburg - Holiday Inn-East, Williamsburg - Holiday Inn-West, Williamsburg - Royce Hotel, Williamsburg - Williamsburg Hilton, Williamsburg - Best Western-Proposed, Wytheville Washington - Bellevue Thunderbird Motor Inn, Bellevue - Embassy Suites, Bellevue - Hampton Inn, Bellevue - La Quinta, Bellevue - Residence Inn Seattle-East, Bellevue - Ramada Inn, Bothell - Rattling Spring Hotel, Harpers Ferry - Motel 6, Issaquah - AmeriSuite, Kent - Homecourt Suite Hotel, Kent - Embassy Suite, Lynnwood - Residence Inn-Seattle North, Lynnwood - Red Lion Inn at Pasco, Pasco - Redmond Motel, Redmond - Hampton Inn, Sea Tac - Holiday Inn Airport, Sea Tac - Thunderbird Inn, Sea Tac - Alexis Hotel, Seattle - Courtyard by Marriott-South Center, Seattle - Doubletree Inn at South Center, Seattle - Doubletree Plaza, Seattle - Hampton Inn-Airport, Seattle - Holiday Inn Crowne Plaza, Seattle - Holiday Inn-Sea Tac, Seattle - La Quinta, Seattle - Lake Union Residence Inn, Seattle - Marriott Hotel-Airport, Seattle - Marriott Sea-Tac Hotel, Seattle - Plaza Park Suites, Seattle - Ramada Inn-Airport, Seattle - Red Lion, Seattle - Stouffer Madison Hotel, Seattle - Travelodge-Proposed, Seattle - Westin Hotel, Seattle - Courtyard by Marriott, Spokane - Gateway Hotel, Spokane - Holiday Inn-West, Spokane - Red Lion Inn, Spokane - Super 8, Spokane - Hilton-Village Green, Tacoma - Hotel-Proposed, Tacoma - Park Shore Inn, Tacoma - Tacoma Sheraton Hotel, Tacoma - Embassy Suites Hotel, Tukwila - Hampton Inn, Tukwila - Residence Inn-Seattle South, Tukwila - Red Lion Quay, Vancouver - Residence Inn-Portland North, Vancouver - Super 8, Wenatchee - Thunderbird Motor Inn, Yakima West Virginia - Comfort Inn-Proposed, Charleston - Holiday Inn, Clarksburg - Holiday Inn, Fairmont - Hotel-Proposed, Harpers Ferry - Holiday Inn, Huntington - Comfort Inn-Proposed, Morgantown - Holiday Inn, Morgantown - Motel-Proposed, Morgantown - Comfort Inn, Princeton - Motel-Proposed, Princeton - Hotel-Proposed, Wheeling - Howard Johnson, Wheeling Wisconsin - Super 8, Ashland - Holiday Inn, Beloit - Embassy Suites Hotel-Proposed, Brookfield - Marriott-Milwaukee, Brookfield - Holiday Inn, Eau Claire - Residence Inn, Glendale - Granada Royale-Proposed, Green Bay - Holiday Inn-Downtown, Green Bay - Residence Inn-Proposed, Green Bay - Super 8, Janesville - Super 8, Kenosha - Playboy Resort, Lake Geneva - Concourse Hotel, Madison - Fairfield Inn, Madison - Hampton Inn - East, Madison - Hampton Inn - West, Madison - Compri Hotel-Proposed, Milwaukee - Embassy Suite, Milwaukee - Fairfield Inn, Milwaukee - Holiday Inn-Airport, Milwaukee - Holiday Inn-West, Milwaukee - Hotel and Conv. Ctr. East-Proposed, Milwaukee - Hyatt Regency, Milwaukee - Marc Plaza, Milwaukee - Marriott Inn, Milwaukee - Omni Suite Hotel-Proposed, Milwaukee - Super 8-Airport, Milwaukee - Olympia Village Resort, Oconomowoc - Scotsland Resort, Oconomowoc - Sheraton, Racine - Claridge Motor Inn, Rhinelander - Super 8, Waukesha - Holiday Inn, Wausau - Mead Inn, Wisconsin Rapids Wyoming - Days Inn, Casper - Flying L. Skytel, Cody - Super 8, Cody - Snow King Resort, Jackson - Super 8, Jackson - Wort Hotel, Jackson - Development-Proposed, Jackson Hole - Colter Bay Village, Moran - Jackson Lake Lodge, Moran - Jenny Lake Lodge, Moran - Best Western-Bel Air, Rawlins - Bridger Inn, Rawlins - La Quinta Inn, Rock Springs Western Europe Belgium - Oostkamp Hotel, Bruges - Proposed Residence Inn, Brussels - SAS Royal Hotel, Brussels Denmark - Proposed Hotel, Copenhagen France - The Miramar, Biarritz - Chateau D'arc en Barroi, Haute-Marne - Le Grand, Paris - Royal Monceau, Paris Germany - Cumberland House, Berlin - Munchen Penta Hotel, Munchen Holland - Carlton - Cannes & Amstel, Amsterdam - The Pulitzer Hotel, Amsterdam Spain - Le Meridien, Barcelona - Princess Sophia, Barcelona - Hotel Los Monteros, Marbella - Incosol Spa & Hotel, Marbella - Proposed Hyatt Resort, Marbella United Kingdom - Copthorne Hotel, Aberdeen - Copthorne Hotel, Birmingham - Hyatt Regency, Birmingham - Holiday Inn, Cambridge - Copthorne Hotel, Cardiff - Great Eastern Hotel, England - Copthorne Hotel, Glasgow - Hanbury Manor Hotel, Hertfordshire - 47 Park Street, London - Bailey's Hotel, London - Basil Street Hotel, London - Basil Street Hotel, Knightsbridge, London - Britannic Tower, London - Chelsea Hotel, London - Chesterfield Hotel, London - Chesterfield Hotel, Mayfair, London - Copthorne Hotels, London - Copthorne Tara Hotel, London - Dorchester Mayfair, London - Executive Hotel, London - Marriott Hotel, London - May Fair, London - Plaza Hotel, London - Proposed Hotel Conversion, London - Proposed Hotel-The City, London - Regent Hotel, London - Regent London Hotel, London - Sheraton Belgravia, London - Sheraton Park Tower, London - St. James Court Hotel, London - The Executive Hotel, London - Windsor Hotel, London - Copthorne Hotel, Manchester - Copthorne Hotel, Newcastle - Copthorne Hotel, Slough/Windsor - Swallow Hotel, Stockton - Copthorne Hotel-Effingham Park, Sussex - Copthorne Hotel-Gatwick, Sussex Middle East and North Africa Egypt - Sheraton Anni Cruise Ship, - Sheraton Aton Cruise Ship, - Sheraton Hotp Cruise Ship, - Sheraton Tut Cruise ship, - Aswan Oberol Hotel, Aswan - Cairo Sheraton Hotel, Cairo - Hotel - Proposed, Cairo - Lido Hotel, Cairo - Meridien Hotel, Cairo - Novotel Cairo Airport, Heliopolis, Cairo - Proposed Resort Complex, Hurghada - Luxor Sheraton Hotel, Luxor - Proposed Hotel, Luxor - Fayrouz Village Hotel, Sharm El Sheikh, Sinai - Coral Village Hotel, Nuweiba, Sinai - Hotel - Proposed, Dahab, Sinai - Hotel - Proposed, St. Catherine, Sinai Greece - Athens Hilton & Proposed Hotel, Athens - Caravel Hotel, Athens - Proposed Sargani Hotel & Bungalows, Halkidiki - Rhodes Hotel -Proposed, Rhodes Israel - Proposed Inter-Continental Hotel, Tel Aviv Lebanon - Hotel Market Review, Beruit Morocco - El Minzah Hotel, Tangier Nigeria - Proposed Sheraton Hotel, Port Harcourt Saudi Arabia - Proposed Jeddah Corniche Project, Jeddah Tunisia - Proposed Hotel, Hammamet Turkey - Hotel Conrad, Istanbul Latin America and the Caribbean Bahamas - Eleuthera Joint Venture, Eleuthera - Cape Eleuthera Island Hotel, Eleuthera Island - Eleuthera Joint Venture, Eleuthra - The Montague, Nassau - Paradise Island Hotel, Paradise Island - Resorts Int'l Hotel and Casino, Paradise Island Belize - Journey's End Caribbean Club, Abergris Caye Bermuda - Sonesta Hotel, Bermuda Brazil - Quatro Rodas Hotel, Recife Colombia - Charleston Hotel - Proposed, Barranquilla - Bella Suiza Hotel, Bogota - Hotel & Convention Center -Proposed, Cali - Cartagena Hilton, Cartagena - El Faro de Cartagena Resort Propose, Cartagena - Proposed Indian Sea and Sun Resort, Cartagena - Hotel De Isleno, San Andres Isla - Santamar Hotel, Santa Marta Curacao - Ramada Renaissance Hotel and Casino, Honduras - Inn Of The Sun, Guanaja Jamaica - Holiday Inn-Rose Hall, Montego Bay - Americana Eden II, Ocho Rios Mexico - Posadas de Mexico Hotels, - Americana Condesa Del Mar, Acapulco - Americana El Presidente Hotel, Acapulco - Resort-Proposed, Cabo San Lucas - Palacio Del Margus, Chiconcuac - Omni Hotel, Ixtapa - Fiesta Inn-Proposed, Leon - Karmina Place, Manzanillo - Hotel - Proposed, Mexico City - La Jolla de Mismaloya, Puerta Vallarta Netherland Antilles - Divi Divi Beach Resort, Aruba - Divi Tamarijn Beach Resort, Aruba - Golden Anchor, Bonaire - Resort Hotel-Proposed, Bonaire - Ramada Renaissance Hotel and Casino, Curacao - Cupecoy Beach Club Hotel, St. Maarten - Dawn Beach Hotel, St. Maarten - Dawn Beach Resort, St. Maarten - Mullet Bay Resort, St. Maarten - Oyster Pond Hotel, St. Maarten Puerto Rico - Hyatt Dorado Beach Hotel, Dorado - Hyatt Regency Cerromar Hotel, Dorado - Hotel - Proposed, Fajardo - Hotel Puerto Rico, Fajardo - Westin Resort-Proposed, Palmer - Marriott Resort & Casino-Proposed, Puerto Rico - Carib Inn, San Juan - Dupont Plaza, San Juan - El San Juan Hotel and Casino, San Juan - Howard Johnson Hotel, San Juan - Marriott - Proposed, San Juan - Marriott Update - Proposed, San Juan - Sands Hotel and Casino, San Juan Virgin Islands - Caneel Bay, St. Croix - Carambola Beach Resort, St. Croix - Hotel - Proposed, St. Croix - St. Croix Development, St. Croix - Caneel Bay, St. John - Pineapple Beach Hotel, St. Thomas - Sugar Bay Plantation, St. Thomas - Virgin Grand Hotel, St. Thomas - Virgin Isle Hotel, St. Thomas - Little Dix Bay, Virgin Borda Eastern Europe Croatia - Two Hotels, Dubrovnik Czech Republic - Voronesh Hotel Complex, Brno - Proposed Four Seasons Hotel, Prague Hungary - Proposed Resort Hotel, Babolna - Duna Inter-Continental, Budapest Latvia - Daugava Hotel-Proposed, Riga - Proposed Hotel, Riga Poland - Holiday Inn, Krakow - Marriott Hotel - Proposed, Poznan - Proposed Hotel, Poznan - Radisson Hotel, Szczecin - Bristol Hotel, Warsaw - Holiday Inn, Warsaw - Orbis Joint Venture, Warsaw - Proposed Hotel, Warsaw - Sheraton Hotel - Proposed, Warsaw - Zakopane Resort Complex, Zakopane Russia - Kamiennyi Most Hotel & Business, Moscow - Savoy Hotel, Moscow Asia Korea - Ultrapolis 3000, Seoul Malaysia - UP 3000 Hotel-Proposed, Selangor Singapore - Resort Hotels - Proposed, - Ultrapolis 3000, Singapore West Indies - Proposed Blue Lagoon Resort, St. Martin Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Hospitality Valuation Services Industry Leader Hospitality Valuation Services (HVS) was created in 1980 to satisfy the ever-increasing demand for reliable and well-documented hotel/motel valuations, market studies, and feasibility reports. As the nation's leading real estate appraisal organization devoted exclusively to lodging properties, HVS offers owners, investors, and lenders in-depth valuation and market research expertise. Our professional staff, operating on a worldwide basis with offices in New York, San Francisco, Miami, Boulder, Vancouver, and London, has appraised more than 4,000 hotels and motels in every state and over 32 foreign countries. Each member of Hospitality Valuation Services is well versed in lodging operations. Most have college degrees in hotel administration as well as actual on-the-job hotel experience. Coupled with intense training in real estate appraisal theory and techniques, we are highly qualified to handle the unique characteristics of hostelry valuations. Excellence Through Specialization An important feature of our valuation and feasibility services is specialization. Daily exposure on a global basis to a wide variety of hotel transactions and operating statistics, along with actual buyers and sellers, provides the data to thoroughly document our reports. HVS maintains the industry's largest database of hotel valuation information: o Data on over 4,000 hotel transactions; o Over 3,500 actual financial statements; o Thousands of management contracts, franchise agreements, mortgages, leases, and other similar documents; o Personal contacts at every major hotel company; o Names and addresses of over 10,000 hotel owners, investors, lenders, and operators. Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Innovative research in hotel valuation techniques is set forth in the textbooks we authored for the Appraisal Institute, entitled The Computerized Income Approach to Hotel/Motel Market Studies and Valuations and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations. These publications, along with more than 300 articles, are recognized as the authoritative standard for valuing lodging facilities and performing market feasibility studies. In addition, we have developed Hospitality Valuation Software, a computerized package that assists appraisers and consultants in evaluating market trends and preparing financial forecasts. Full-Service Hotel Consulting With a reputation established by providing highly detailed hotel valuations that are accepted and relied upon by virtually every major hotel owner, lender, and operator, HVS has branched out to offer a full range of consulting services. o HVS Consulting Services: Valuations, market feasibility studies, economic studies, management contract and franchise negotiations, development assistance, and expert testimony. o HVS Executive Search: Recruitment and placement of top-level hotel management personnel. o HVS Eco Services: Environmental audits and assistance in implementing programs including water and energy management, recycling, and green product selection. Provides ECOTEL certifications to environmentally sensitive hotels. o HVS Gaming Services: Specialized market, valuation, and consulting services for casinos and other types of gaming activities. o HEI Hotels: Hotel ownership and management. Long-Term Relationship Hospitality Valuation Services is in business for the long-term. We are dedicated to providing our clients with the highest quality consulting services. Should you require assistance in any areas covered by our expertise, please contact any member of our team at (516) 248-8828. This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. ============= HVS - ------------- International ============= ===================================================== ---------------------------- Economic Study and Appraisal ---------------------------- Howard Johnson ---------------------------- Woburn, Massachusetts ---------------------------- Prepared by: Hospitality Valuation Services A Division of Hotel Consulting Services, Inc. 372 Willis Avenue Mineola, NY 11501 516-248-8828 Submitted to: Mr. Shirish Godbole Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 [Letterhead of HVS International] December 31, 1996 Mr. Shirish Godbole Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 Re: Howard Johnson Woburn, Massachusetts Ref. #9610283 Dear Mr. Godbole: Pursuant to your request, we herewith submit our economic study and appraisal pertaining to the above-captioned property. We have inspected the site and facilities and analyzed the hostelry market conditions in the Middlesex area. Our report was prepared in accordance with, and is subject to, the requirements of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and the Uniform Standards of Professional Practice (USPAP), as provided by the Appraisal Institute. Based on the available data, our analysis, and our experience in the hotel industry, it is our opinion that the market of the fee simple interest in the subject property described in this report, as of January 1, 1997, is: $5,200,000 FIVE MILLION TWO HUNDRED THOUSAND DOLLARS We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings and valuation. The economic study and appraisal is made part hereof, and must remain attached in order for the value opinion set forth to be considered valid. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. Very truly yours, HOSPITALITY VALUATION SERVICES A Division of Hotel Consulting Services, Inc. /s/ Robert Wong --------------------------------------------- Robert Wong Consulting and Valuation Analyst /s/ Anne R. Lloyd-Jones --------------------------------------------- Anne R. Lloyd-Jones, CRE Senior Vice President /s/ Stephen Rushmore --------------------------------------------- Stephen Rushmore, CRE, MAI, CHA President RW: ARL-J: SR: dce HVS International, Mineola, New York Table of Contents - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table of Contents 1. Executive Summary .......................................... 1 2. Nature of the Assignment ................................... 3 3. Description of the Land, Improvements, Zoning, Taxes and Neighborhood ............................. 7 4. Market Area Analysis ....................................... 22 5. Overview of External Forces Affecting the U.S. Lodging Industry ................................................... 35 6. Lodging Market Supply and Demand Analysis .................. 51 7. Projection of Occupancy and Average Rate ................... 68 8. Highest and Best Use ....................................... 83 9. Approaches to Value ........................................ 85 10. Income Capitalization Approach ............................. 88 11. Sales Comparison Approach .................................. 125 12. Cost Approach .............................................. 132 13. Reconciliation of Value Indications ........................ 138 14. Statement of Assumptions and Limiting Conditions ........... 142 15. Certification .............................................. 145 Addenda Photographs of the Subject Property Photographs of the Competition Legal Description HVS International, Mineola, New York Table of Contents - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Addenda (continued) Synopsis of Franchise and License Agreements Synopsis of Hotel Management Agreement Synopsis of Restaurant Lease Explanation of the Simultaneous Valuation Formula Qualifications Robert Wong Anne R. Lloyd-Jones, CRE Stephen Rushmore, CRE, MAI, CHA HVS International, Mineola, New York Executive Summary 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 1. Executive Summary Property: Howard Johnson Location: 1 Mack Road Woburn, Massachusetts 01801 Date of Inspection: October 17, 1996 Interest Appraised: Fee simple Date of Value: January 1, 1997 Land Description - ---------------- Area: +/-5.2 acres, or +/-226,512 square feet Zoning: OP- Office Park Assessor's Parcel Number: 28-70270-53982-0 Improvements Description - ------------------------ Age: Constructed in 1972 Property Type: Full-service Guestrooms: 100 Number of Stories: One and five stories Food and Beverage Spud's Restaurant, currently leased to an independent operator Meeting Space: Four rooms, +/-4,431 square feet Parking: +/-150 surface parking spaces Summary of Value Parameters - --------------------------- Highest and Best Use (as if vacant): Transient lodging facility Highest and Best Use (as improved): Transient lodging facility Marketing Period: Six months to one year Number of Years to Stabilize: Three Stabilized Year: 1999 HVS International, Mineola, New York Executive Summary 2 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Valuation Assumptions - --------------------- Mortgage Interest Rate: 9.5% Amortization Period: 20 years Debt Service Constant: 0.111856 Loan-to-Value Ratio: 70% Stabilized Inflation Rate: 3.5% Equity Yield Rate: 22% Terminal Capitalization Rate: 12% Brokerage and Legal Fees: 3% Holding Period: 10 years Calculated Discount Rate: 14.4% Estimates of Value - ------------------ Income Capitalization Approach: $5,309,000 Sales Comparison Approach: $4,700,000 - $5,500,000 Cost Approach (Replacement Cost): $6,400,000 Market Value Conclusion: $5,200,000 Market Value Conclusion per Room: $52,000 HVS International, Mineola, New York Nature of the Assignment 3 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 2. Nature of the Assignment Subject of the Economic Study and Appraisal The subject of the economic study and appraisal is the fee simple interest in a +/-226,512-square-foot (+/-5.2-acre) parcel improved with a 100-room, full-service lodging facility known as the Howard Johnson, which opened in 1972. In addition to guestrooms, the subject property contains a restaurant, which is leased and operated by Home Fries, Inc., 4,431 square feet of meeting and banquet space, an indoor swimming pool, and other facilities typically found in a full-service transient lodging facility. The hotel is located in the northwestern quadrant of the intersection formed by Montvale Avenue and Interstate 93, in the southeastern section of the City of Woburn. Municipal jurisdictions governing the property include the City of Woburn, the County of Middlesex, and the State of Massachusetts. The hotel's civic address is 1 Mack Road, Woburn, Massachusetts, 01801. Objective of the Economic Study and Appraisal The objective of the economic study and appraisal is to evaluate the supply and demand factors affecting the market for transient accommodations in the Woburn area for the purpose of estimating the market value of the subject property. Market value is defined by the Office of the Comptroller of the Currency (OCC), 12 CFR, Part 34, 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 and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. buyer and seller are typically motivated; 2. both parties are well informed or well advised, and acting in what they consider their own best interests; HVS International, Mineola, New York Nature of the Assignment 4 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 3. a reasonable time is allowed for exposure in the open market; 4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) Use of the Appraisal This appraisal is being prepared for use by Morgan Stanley Mortgage Capital, Inc. in connection with their proposed financing of a package of 17 hotels, including the subject property, which are owned by Ashford Financial Corporation or related entities. The information presented in this report should not be disseminated to the public or third parties without the express written consent of Hospitality Valuation Services. Scope of the Appraisal All information was collected and analyzed by the staff of Hospitality Valuation Services. Data such as historical operating statements, site plans, floor plans, and so forth were supplied by Ashford Financial Corporation and Remington Hotel Company. Unless noted otherwise, we have inspected the competitive lodging facilities and analyzed the sales summarized in this report, and our value conclusion is based on this investigation and analysis. Property Rights Appraised The property rights appraised are the fee simple ownership of the land and improvements, including the furniture, fixtures, and equipment. The fee simple interest is defined as "absolute ownership unencumbered by any other interest or estate subject only to the four powers of government."(2) The subject property is appraised as a going concern (i.e., an open and operating facility). Method of Study The methodology used to develop this economic study and appraisal is based on the market research and valuation techniques set forth in the textbooks authored by HVS International for the American Institute of Real Estate Appraisers and the Appraisal Institute, entitled The Valuation of Hotels and Motels,(3) Hotels, Motels and Restaurants: Valuations and Market Studies,(4) The (1) Federal Register, Vol. 55, No. 165, August 24, 1990; p. 34696. (2) The Dictionary of Real Estate Appraisal - Second Edition, American Institute of Real Estate Appraisers, Chicago, IL, 1989, p. 120. (3) The Valuation of Hotels and Motels, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1978. HVS International, Mineola, New York Nature of the Assignment 5 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Computerized Income Approach to Hotel/Motel Market Studies and Valuations,(2) and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations.(3) The appraisal will consider the three standard approaches to value: income capitalization, sales comparison, and cost. Because lodging facilities are income-producing properties that are normally bought and sold on the basis of capitalization of their anticipated stabilized earning power, the greatest weight is given to the value indicated by the income capitalization approach. We find that most hotel investors employ a similar procedure in formulating their purchase decisions, and thus the income capitalization approach most closely reflects the rationale of typical buyers. When appropriate, the sales comparison and cost approaches are used to test the reasonableness of the results indicated by the income capitalization approach. Ownership, Franchise, and Management History and Assumptions A photocopy of the subject property's legal description, which was provided by Ashford Financial Corporation, is presented in the Addenda to this report; the appraisers assume no responsibility regarding the accuracy of this legal description. According to records maintained at the City of Woburn Tax Assessor's Office, the subject property was previously owned by Northeast Hotel Associates. On February 28, 1994, the Chartwell/G.S.R. Hotels III, Limited Partnership (formed by Woburn Massachusetts Hotel Limited Partnership) entered into a purchase agreement with Nippon Credit Bank, Ltd., which held the mortgage loan on the subject property and 14 other hotel properties. The closing of the sale of the mortgage loan took place on March 25, 1994. The purchase price allocated to the subject property was $2,698,482. Conveyance of the fee simple title to the subject property occurred on or about August 25, 1994. The current ownership entity is Woburn Massachusetts Hotel Limited Partnership, which is a wholly owned subsidiary of Ashford Financial Corporation. The subject property entered into a franchise agreement with Howard Johnson on May 12, 1994; this agreement expires on May 11, 2009. The (1) Hotels, Motels and Restaurants: Valuations and Market Studies, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1983. (2) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1990. (3) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992. HVS International, Mineola, New York Nature of the Assignment 6 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= franchise affiliation of the subject property did not change upon the hotel's acquisition by Woburn Massachusetts Hotel Limited Partnership. The hotel is also subject to a management agreement with Remington Employers Corporation; an abstract of this contract is presented as an Addendum to this report. For the purposes of this appraisal, we have assumed the continued ownership of the subject property by Ashford Financial Corporation and the operation of the property by Remington Employers Corporation as a Howard Johnson hotel. Marketing Period In light of the renewed interest in hotel investments and the increasing availability of debt and equity capital, we believe that it will take six months to one year to sell the subject property assuming it is placed on the market at the concluded value. Effective Date of the Appraisal The effective date of the appraisal is January 1, 1997. All projections are expressed in inflated dollars, and the value estimate represents 1997 dollars. Date of Inspection The subject property was inspected by Robert Wong and Anne Lloyd-Jones on October 17, 1996. HVS International, Mineola, New York Description of the Land, Improvements, 7 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 3. Description of the Land, Improvements, Zoning, Taxes, and Neighborhood LAND The suitability of the land for the operation of a lodging facility is an important consideration affecting the economic viability of a property and its overall value. Factors such as size, topography, access, visibility, and the availability of utilities have a direct impact on the desirability of a particular site. Size and Topography The subject site is located in the northwestern quadrant of the intersection formed by Montvale Avenue and Interstate 93, in the southeastern section of the City of Woburn. Municipal jurisdictions governing the property include the City of Woburn, the County of Middlesex, and the Commonwealth of Massachusetts. According to the tax map provided by the City of Woburn Tax Assessor's Office, the subject parcel measures approximately +/-226,512 square feet, or +/-5.2 acres. The site is roughly triangular in shape. The Aberjona River flows along the site's eastern border; beyond the river is Interstate 93, a north/south highway. Montvale Avenue extends along the southern boundary of the property. To the west, the subject property is bounded by Mack Road. Adjacent to the north is a parcel currently improved with an instrument manufacturing company; a chain-link fence borders the northern property line. Primary vehicular access to the property is provided by Mack Road. The topography of the parcel is generally level, with no significant grading. According to the Environmental Report prepared by Certified Engineering and Testing Company and dated December 29, 1993, the subject site has been graded so that the site's topography slopes gently upward to the northeast at an approximate 2% grade. Overall, the size and topography of the subject parcel appear well-suited for hotel use. The site appears to be fully developed, with no excess land for expansion. HVS International, Mineola, New York Description of the Land, Improvements, 8 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Easements The appraisers were not provided with any information concerning easements affecting the subject property. For the purpose of this appraisal, we have assumed that the property is not encumbered by any unusual or onerous easements which would affect its use or marketability. Regional Access It is important to analyze a lodging facility's ease of access with respect to regional and local transportation routes and demand generators. The subject site is readily accessible to a variety of local, county, state, and interstate highways. The Howard Johnson is strategically located in proximity to the intersection of two of Massachusetts' major roadways: Interstate 93 and Interstate 95 (known locally as Route 128). Interstate 93, which abuts the subject property, is a six-lane, limited-access, divided highway that originates south of Boston and stretches north, eventually connecting with Interstate 91 in northern Vermont, along the New Hampshire-Vermont border. Interstate 93 is the primary north/south route connecting Boston to points north; during the summertime this roadway is popular with leisure travelers journeying between the Boston metropolitan area and New Hampshire. Interstate 95 (I-95) - a transnational highway connecting the City of Miami, Florida in the south to the Maine-Canadian border to the north - also serves as an important north/south artery serving the area. The subject property is located approximately three-quarters of a mile southeast of the intersection of Interstates 93 and 95. In the vicinity of the City of Woburn, I-95 extends in an east/west direction. This highway has become a major commercial corridor, with high-technology businesses proliferating along this route over the last decade. State Route 128, which runs conjointly with I-95 in the greater Boston area, serves a significant amount of interstate, inter-regional, and commutational motorists. From the City of Woburn, State Route 128 extends in a northeasterly direction to Gloucester at the far northeastern portion of the commonwealth. Southward from the City of Woburn, State Route 128 (I-95) serves as an inner beltway, partially encircling the western side of the City of Boston before terminating near Dedham, where I-95 continues southward through Providence, Rhode Island and along the eastern coast of the United States to Florida. HVS International, Mineola, New York Description of the Land, Improvements, 9 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Overall, by virtue of its location along Interstate 93 and its close proximity to Interstate 95, regional access to the Howard Johnson is considered to be highly favorable. Local Access and Visibility Visibility of the Howard Johnson from northbound Interstate 93 is only fair, due to both the higher elevation of the interstate overpass as it crosses Montvale Avenue and the mid-rise nature of the subject property's improvements. Visibility from southbound Interstate 93, however, is good. The subject property is not visible from Interstate 95, and motorists must exit this roadway and follow I-93 south to reach the property. The subject property is visible from Montvale Avenue. This roadway extends in an east/west direction, originating in Stoneham to the east and terminating in downtown Woburn to the west. To access to the subject property, motorists use the Interstate 93-Montvale Avenue exit and travel westbound on Montvale Avenue before making a right turn onto Mack Road, from which the subject property is accessible. Airport Access Logan International Airport is located approximately 15 miles southeast of the subject site. Access to the subject property is provided by Interstate 93. Motorists travel on northbound I-93 and follow the same instructions as set forth previously. Access to Local Demand Generators The Howard Johnson is situated proximate to the area's primary generators of lodging demand, which range from retail distributors to high-technology firms. The following table outlines some of these major demand generators and their distance from the subject site. ================================================================================ Table 3-1 Local Demand Generators - -------------------------------------------------------------------------------- Approximate Distance Approximate Driving Demand Generator from Subject Site (in Miles) Time (in Minutes) ---------------- ---------------------------- ----------------- Marshalls 8 15 W.R. Grace 5 10 General Foods 8 15 Cummings Properties 5 10 Lechmere 8 15 Alpha Industries 5 10 - -------------------------------------------------------------------------------- The subject parcel is proximate to the area's demand generators and is well-suited for its use as a transient lodging facility. HVS International, Mineola, New York Description of the Land, Improvements, 10 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Utilities The subject site is served by all necessary utilities, which are provided as follows. ================================================================================ Table 3-2 Available Utilities - -------------------------------------------------------------------------------- Utility Provider ------- -------- Water City of Woburn Electricity Boston Edison Co. Telephone NYNEX Sewer City of Woburn Gas Boston Gas Co. - -------------------------------------------------------------------------------- Soil and Subsoil Conditions Geological and soil reports were not provided to the appraisers or made available for review during the preparation of this report. The appraisers are not qualified to evaluate soil conditions other than by a visual inspection of the surface. Nuisances and Hazards The appraisers have not been informed of any site-specific nuisances or hazards, and there were no visible signs of toxic ground contaminants at the time of our inspection. Because the appraisers are not experts in this field, we do not warrant the absence of hazardous waste, and we urge the reader to obtain an independent analysis of these factors. Flood Zone Possible locational hazards include flood potential. As indicated by the Federal Emergency Management Agency (FEMA) panel number 250229 005 B, dated July 2, 1980, the subject property is located within Flood Zone B, an area between the limits of 100-year and 500-year flood. Seismicity Information pertaining to the seismicity of the subject site was not provided to the appraisers. We have assumed that the subject site is not situated in an area of seismic danger. Legal Description As noted earlier, a copy of the subject property's legal description, as provided by Ashford Financial Corporation, is presented in the Addenda to this report. Conclusion The subject parcel appears well suited as the site of a transient lodging facility. We have analyzed the issues of size, topography, access, visibility, and the availability of utilities, and noted the following advantages and disadvantages. HVS International, Mineola, New York Description of the Land, Improvements, 11 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Advantages o The subject site consists of a smooth topography. o A well-developed network of area and interstate highways exists in close proximity to the subject property. o All necessary utilities are available to the subject property. o The subject site has good visibility from Montvale Avenue and southbound Interstate 93. Disadvantages o Visibility from northbound Interstate 93 is fair. o The subject property is not visible from Interstate 95. o Logan International Airport is located 15 miles away from the subject property, making airport access only fair. The advantages exhibited by the subject site are all important characteristics of a hotel location. Even though the subject parcel is not visible from Interstate 95 and northbound Interstate 93, the advantages outweigh the disadvantages, and we believe that the site is well-suited for hotel use. IMPROVEMENTS The quality of a lodging facility's physical improvements has a direct influence on its marketability and attainable occupancy and average rate. The design and functionality of the structure can also affect operating efficiency and overall profitability. This section investigates the subject property's physical improvements and personal property in an effort to determine how they contribute to total value. The following description of the improvements is based on our inspection of the hotel and information provided by Ashford Financial Corporation. Howard Johnson is a full-service lodging facility containing 100 rentable units, 4,431 square feet of meeting and banquet space, a restaurant (which is currently leased to an independent operator), an indoor swimming pool, and appropriate back-of-the-house facilities. The one- and five-story property opened in 1972, and is approximately 25 years old as of the date of this appraisal. The hotel was acquired by Ashford Financial Corporation in March, 1994. At the time of this acquisition, the hotel was in extremely poor condition. Subsequent to the acquisition, the subject property was extensively renovated at an estimated cost of $448,726. In scope, this renovation HVS International, Mineola, New York Description of the Land, Improvements, 12 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= included the exterior of the building, public areas and the guestrooms. The hotel is now judged to be in relatively good condition; management representatives report that all building systems are in good working order. The hotel is operated under a license agreement with Howard Johnson and reportedly meets the standards for lodging facilities of that brand. Based on our inspection and information provided by Ashford Financial Corporation, the following table summarizes the facilities available at the subject property. ================================================================================ Table 3-3 Facilities Summary - -------------------------------------------------------------------------------- Opening Date 1972 Number of Buildings One Exterior Facade Beige stucco finish Entrance Walkway with Canopy Guestroom Configuration: King Beds 62 Units Double/Doubles 36 Standard Single 2 ----- Total 100 Units Corridors Double-loaded, interior Food and Beverage Outlets Spud's Restaurant Meeting and Banquet Rooms: Waterford Ballroom 2,160 Square Feet Tiffany Ballroom 1,560 Board Room A 480 Board Room B 231 ----- Total 4,431 Square feet Parking Facilities Approximately 150 parking spaces Recreational and Other Amenities Indoor swimming pool Laundry: Washers One Milnor, one Wascomat Dryers Two Speed Queen Self-Service One washer, one dryer Elevators Two Life Safety Systems Hardwired smoke detectors Construction Details Foundation Continuous Wall; Poured Concrete Slab on Grade Framing Steel; Concrete Block Poured-in-Place Concrete Exterior Walls Concrete Block; Reinforced Concrete Roof Steel Deck; Asphalt Covering - -------------------------------------------------------------------------------- HVS International, Mineola, New York Description of the Land, Improvements, 13 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Property Exterior The hotel structure is situated near the center of the subject parcel. Paved parking areas accommodating approximately 150 vehicles are predominantly located in the northern and southern sides of the hotel. A small parking area is also situated along the eastern side of the subject parcel. Vehicular access to the subject site is provided by three driveways located along the western boundary of the subject parcel. After entering the site, guests proceed to the hotel's main entrance, which is located on the eastern side of the hotel structure. The subject property does not feature a porte cochere; however, a canopy extending from the main entrance to the driveway shields guests from inclement weather such as rain and snow. Service traffic can gain access to the loading dock by entering the southernmost driveway and circling around the southern portion of the subject parcel to the western side of the hotel. Construction and Design The Howard Johnson features two wings. The one-story commercial wing houses the hotel's main lobby, meeting and banquet space, restaurant, swimming pool, and most of the back-of-the-house space. To the north of the commercial wing is the five-story guestroom tower, which contains the hotel's guestrooms and laundry facility. An enclosed corridor connects the commercial wing to the guestroom tower. Combining the two wings, the hotel structure's footprint measures approximately 31,243 square feet. The subject property features a continuous wall foundation, concrete slab floor structure, and steel frame. The exterior walls are constructed of concrete block and reinforced concrete and are finished in stucco. The roofs feature steel decks and are covered with asphalt. Ownership capital expenditure reports indicate that the roof over the meeting and banquet space was replaced in 1995, and the roof over the restaurant was replaced in 1996. Overall, Management representatives report that the building structure is in good condition, and our inspection revealed no visible signs of damage. Lobby Situated in the northeastern corner of the commercial wing and immediately north of the main entrance, the hotel's main lobby acts as the focal point of the hotel and provides access to other areas of the property. Guests enter the main entrance of the hotel and turn left to access the lobby. The front desk, which consists of a three-sided, obtuse-angled counter, is located along the western wall of the lobby. A seating area is situated in the eastern portion of the lobby. On the northern side of the lobby is the corridor that connects the commercial wing to the guestroom tower. Extending from the southern side of the lobby are two, perpendicular corridors - one of which runs easterly and leads to the hotel's swimming HVS International, Mineola, New York Description of the Land, Improvements, 14 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= pool and two ballrooms, and the other which extends southerly towards the hotel's restaurant and two small meeting rooms. Renovated in 1996, the lobby features newly replaced carpeting, refinished vinyl wallcovering, white ceiling tiles, and refurbished lighting and drapery. As a result of the recent upgrades, the lobby is currently in good condition. Food and Beverage Outlets The subject property's food and beverage facility is currently leased to Hash Browns, Inc., an operator of five restaurants in the northeast United States known as Spud's Restaurant and Pub. Located in the southern portion of the commercial wing, the restaurant serves lunch and dinner seven days a week and handles the food and beverage component of the hotel's meeting and banquet events as well as room service. A synopsis of the restaurant lease is included as an Addendum to this report. Meeting and Banquet Space The subject property offers approximately 4,431 square feet of meeting and banquet space, which is located in the commercial wing southeast of the lobby area. The 2160-square-foot Waterford Ballroom is located near the center of the commercial wing and can be partitioned into three separate rooms; the 1560-square-foot Tiffany Ballroom is situated east of the Waterford Ballroom and can be divided into two smaller meeting rooms. Board Room A, which is situated south of the Waterford Ballroom, offers 480 square feet of function space; the 231-square-foot Board Room B is located immediately south of the main entrance. Although the hotel oversees and controls the booking of all meetings and events, the food and beverage function is serviced by the restaurant. All of the hotel's meeting and banquet space was renovated in 1994, including the installation of new lighting, refinishing of walls, and the replacement of carpeting. At the time of inspection, the subject property's meeting and banquet space was in good condition, although some signs of wear and tear were apparent. Guestrooms The subject property features 100 guestrooms: 62 with king beds, 36 with two double beds, and 2 with one double bed. Management reports that two rooms are currently being converted to handicapped-accessible rooms, which will allow the hotel to meet ADA requirements through the year 2000. Guestrooms in the subject property's tower are double loaded. The hotel's guestrooms are standard in configuration and feature one room that contains sleeping and working areas with a bathroom situated to the left or HVS International, Mineola, New York Description of the Land, Improvements, 15 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= right of the entrance to the room. Guestrooms are typically furnished with the following items. o One king, one double bed, or two double beds o Dresser o Desk with chair o Color television with remote control o Nightstand with alarm clock/radio o Floor lamp and wall-mounted lamps o Upholstered chair o Standard touchtone telephone o Closet with luggage rack o Assorted artwork o Full-length glass balcony doors leading to nonfunctional balconies o Wall-to-wall carpeting o Vinyl wallcovering o Popcorn ceilings The guest bathrooms feature a vanity with sink, a wall-mounted mirror, a commode, and a combination shower-and-tub unit. Finishes include vinyl wallcovering, tiled floors, and ceiling tiles. Twelve guestrooms feature in-room, full Jacuzzis; an additional twelve rooms offer mini-whirlpool tubs in the bathrooms. Although the guestrooms were renovated in 1994, additional upgrades were completed in 1996. The guestrooms received new carpeting, drapes, chair upholstery, lamp shades, and artwork in 1996; additionally, case goods were refinished. Plans for the remainder of 1996 include the installation of 21-inch televisions, the replacement of bathroom floor tiles, the refinishing of the walls in 27 bathrooms, and the replacement of ceiling tiles in half the bathrooms. In 1997, the hotel plans to refinish guestroom walls with textured paint, seal the balcony doors, re-tile the remainder of the bathrooms, repair moisture damage in the wall areas near the HVAC units, and refinish the bathroom walls. HVS International, Mineola, New York Description of the Land, Improvements, 16 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= At the time of our inspection, the subject property's guestrooms appeared to be in relatively good condition. However, despite the refinishing of case goods, the guestrooms furniture appears outdated. Guestroom Corridors Guestroom corridors are wide enough to permit the easy passage of housekeeping and room service carts. The corridors are finished with carpet, vinyl wallcovering, and a popcorn ceiling. The corridors were refinished in 1994 and are currently in good condition. While each floor contains a housekeeping closet, floors 2 and 4 offer ice machines and floors 1 and 5 feature soda vending machines. Recreational Amenities The Howard Johnson features an indoor, heated swimming pool, which is located in the northeastern portion of the commercial wing. The swimming pool area was redecked in 1995, and the heat pumps were replaced in 1996. The greenhouse-like structure that encloses the pool is in fairly good condition, with no leaks reported in the roof. However, the swimming pool lining is slightly stained as a result of the hard, local water supply. Back-of-the-House Space The subject property's back-of-the-house space is housed entirely on the first floor. The hotel's administrative and sales offices are located near the northwest corner of the commercial wing behind the front desk. The laundry and housekeeping facility is located in the western wing of the guestroom tower. By virtue of its location near the elevator core, the laundry facility's location enhances efficient flow of housekeeping staff. The main kitchen is situated in the southeast corner of the commercial wing, where it provides direct service flow to the restaurant and the meeting and banquet space. Based on information provided by management representatives, all of the subject property's operating systems are in good working order. Vertical Transportation Vertical transportation in the five-story guestroom tower is provided by two elevators and two stairwells. The two elevators are situated adjacent to each other in the western end of the guestroom tower; one stairwell is located at each end of the guestroom wing. Heating, Ventilation, and Air Conditioning The subject property's heating, ventilation, and air conditioning (HVAC) are provided by individual, through-the-wall, electrical units for the guestrooms and centralized, gas- and electrical-powered HVAC units for the public areas. The guestroom HVAC units were newly installed in 1994. The property's management indicate that all HVAC equipment is in good working condition. HVS International, Mineola, New York Description of the Land, Improvements, 17 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Fire Protection The Howard Johnson's guestrooms and public areas feature hardwired smoke detectors. However, the hotel's guestrooms are not serviced by a sprinkler system. Given that the guestroom tower is five-stories tall, the lack of a sprinkler system is highly disadvantageous and poses a life safety risk to the hotel's guests. Security The subject property utilizes electronic door locks. Security is further enhanced by restricted access through peripheral entrances to the hotel. Only guests and service staff with electronically-coded key cards can gain access to the hotel through exterior entrances located away from the lobby area. The hotel's front desk is fully staffed 24 hours per day. Asbestos According to information provided by management representatives, there is no asbestos present in the subject property's improvements; however, we have not been provided with an asbestos report to confirm this assertion. The reader should be advised that any costs associated with asbestos removal or containment may have an unfavorable impact on the hotel's market value, and the estimate set forth in this appraisal reflects our value conclusions prior to the deduction of any such costs. We suggest that interested parties initiate an independent analysis regarding current asbestos levels and the capital expenditures necessary to remove any asbestos that is present. ADA Conformance Following the January 26, 1992 passage of the Americans with Disabilities Act (ADA), hotels are subject to new physical standards. The appraisers are not experts on ADA compliance, and we render no opinion regarding the subject property's conformance to ADA standards. Capital expenditures that may be necessary to bring the property into accordance with the ADA will reduce our estimate of market value. Any ongoing costs related to ADA regulations are expected to be funded by normal replacement reserves. Conclusion Overall, the subject property's improvements appear appropriate for hotel use. For the purposes of this appraisal, we have assumed that the subject property will be maintained in its present condition throughout the assumed ten year holding period. Specifically, it is assumed that hotel management will employ standard preventive maintenance measures, and that a reserve for replacement fund will be established which will fund the cost of any future necessary capital expenditures. HVS International, Mineola, New York Description of the Land, Improvements, 18 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ZONING According to the City of Woburn zoning regulations and map (dated April 19, 1985), the subject property is zoned as follows. OP - Office Park Conforming uses under this zoning designation include medical and professional offices, restaurants, and retail and service uses in connection with a hotel or motel. Hotels and motels require a special use permit under the OP zoning classification. In the case of the subject property, a special use permit was obtained; hence, the subject property appears to conform to local zoning regulations. We assume that all necessary permits and approvals have been secured (including an appropriate liquor license), and that the subject property was constructed in accordance with local zoning ordinances, building codes, and all other applicable regulations. Our zoning analysis should be verified before any physical changes are made to the hotel. ASSESSED VALUE AND TAXES Property (or ad valorem) tax is one of the primary revenue sources of municipalities. Based on the concept that the tax burden should be distributed in proportion to the value of all properties within a taxing jurisdiction, a system of assessments is established. Theoretically, the assessed value placed on each parcel bears a definite relationship to market value, so properties with equal market values will have similar assessments and properties with higher and lower values will have proportionately larger and smaller assessments. Depending on the taxing policy of the municipality, property taxes can be based on the value of the real property or the value of the personal property and the real property. Because the objective of assessed value is to maintain a specific value relationship among all properties in a taxing jurisdiction, comparable hotel assessments should be evaluated to determine whether the subject property's assessed value is equitable. The taxing jurisdiction governing the subject property assesses both real and personal property. The assessed value ratio is reported to be approximately 100% of market value. A review of the assessed values of six comparable hotels located in the Woburn taxing jurisdiction reveals the following information. HVS International, Mineola, New York Description of the Land, Improvements, 19 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 3-4 Assessed Value of Comparable Hotels - -------------------------------------------------------------------------------- Number Total Assessment Assessment per Room -------------------------- --------------------- Hotel of Rooms Land Improvements Land Improvements - -------------------------------------------------------------------------------- Subject Property 100 $1,703,000 $1,747,000 $17,030 $17,470 Ramada Plaza Hotel 196 $1,816,000 $5,959,000 $9,265 $30,403 Crowne Plaza Hotel 345 $1,797,000 $15,192,000 $5,209 $44,035 Courtyard by Marriott 120 1,072,000 5,589,000 8,933 46,575 Red Roof Inn 159 2,845,000 2,836,000 17,893 17,836 Comfort Inn 100 852,000 2,562,000 8,520 25,620 Suisse Chalet 129 887,000 2,156,000 6,876 16,713 Source: City of Woburn Assessor's Office - -------------------------------------------------------------------------------- As indicated in the preceding table, the subject property's land value per room ranked second behind that of the Red Roof Inn. The Red Roof Inn's and the subject property's high land value can be attributed to their excellent locations; each site is located near interstate exits and adjacent to desirable commercial development. The subject property's improvements value per room appears reasonable and is comparable to those of limited-service properties, including the Red Roof Inn, Comfort Inn, and Suisse Chalet. The Howard Johnson's personal property assessment totals $417,700. Based on a total real and personal property assessment of $3,867,700 and a tax rate of $23.09 per $1000 of assessment, the subject property's 1995/96 tax burden is calculated as follows. $3,867,700 X $0.02309 = $89,305 The following table illustrates the historical changes in the real and personal property tax rates for the subject property's governing jurisdiction. HVS International, Mineola, New York Description of the Land, Improvements, 20 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 3-5 Tax Rates Applicable to the Subject Property - -------------------------------------------------------------------------------- Tax Rate per $1,000 Percent Change from Year of Assessment Previous Year - ----------------------------------------------------------- 1991/92 $17.74 1992/93 19.39 9.3% 1993/94 20.16 4.0 1994/95 21.38 6.1 1995/96 23.09 8.0 Annual Compounded Rate 6.8% Source: City of Woburn Assessor's Office - -------------------------------------------------------------------------------- Historically, the applicable tax rates have increased at an annual compounded rate of 6.8%. For the purpose of this appraisal, and in recognition of the potential for increases in the subject property's assessed value, we have forecasted the subjected property's tax burden to increase at an annual rate of 6.0% for the first three projection years. From 2000 and beyond, property taxes are projected to increase at the underlying rate of inflation of 3.5%. Applying the projected increases to the1995/96 tax burden yields the following forecast of property taxes for the subject property. ================================================================================ Table 3-6 Forecast of Property Tax Expense (+000) - -------------------------------------------------------------------------------- 1997 Stablized 1999 2000 2001 - -------------------------------------------------------------------------------- Forecast Property Taxes $93 $99 $102 $106 $110 - -------------------------------------------------------------------------------- NEIGHBORHOOD The neighborhood surrounding a lodging facility often has an impact on a hotel's status, image, class, style of operation, and sometimes its ability to attract and properly serve a particular market segment. This section of the report investigates the subject property's neighborhood and evaluates any pertinent locational factors that could affect its occupancy, average rate, food and beverage revenues, and overall profitability. The neighborhood surrounding the subject property is characterized by commercial development, consisting primarily of office buildings, high-technology industrial companies, and retail outlets. The majority of these HVS International, Mineola, New York Description of the Land, Improvements, 21 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= developments are located in the vicinity of the I-93/I-95 interchange, and are directly accessible from the subject property. Some of the companies located at this intersection are EDS, Alpha Industries, Inc., and Environmental Products and Services, Inc. Several business are situated proximate to the subject property. Unicorn Park is located east of the property and is tenanted by small companies, many of which are financial, insurance, and real estate firms. Cummings Park, a large business park situated approximately two miles northwest of the subject property, features companies such as Elliott Corporation, Theta Systems, the Access Group, and the Professional Development Group. Additionally, restaurants and day care centers are housed within Cummings Park and a 347-room, full-service hotel - the Crowne Plaza - is situated in close proximity. The Aberjona River traverses the eastern margin of the subject site, past a narrow zone of woods and weeds which comprise the eastern border. Beyond the Aberjona River to the east are Interstate 93 and Unicorn Park. To the immediate west of the subject property is a service station and an architectural firm, Will-Bern Associates, Inc. The neighborhood further west of the subject property is characterized by service stations and single- and two-family housing units. To the immediate north of the subject property is the office for Rainin Instrument Company, Inc., an instrument manufacturing company. Situated further north of the property are single- and two-family housing units. The area immediately south of the subject property is characterized by restaurants, retail stores, service stations, and offices. The restaurants in the neighborhood include McDonald's, Friendly's, Primo's Steak Restaurant, and a pancake outlet; these eateries are located in proximity to stores selling woodcraft items and groceries. Conclusion The neighborhood surrounding the Howard Johnson appears well-suited for the operation of a transient lodging facility. Major companies in the various business developments, such as Cummings and Unicorn Parks, are located within the subject property's vicinity. In addition, a number of restaurants and retail stores are situated in the immediate vicinity of the subject property and support the operation of a transient lodging facility. HVS International, Mineola, New York Market Area Analysis 22 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 4. Market Area Analysis The economic vitality of the market surrounding the subject property is an important consideration in forecasting lodging demand and income potential. Economic and demographic trends that reflect the amount of visitation provide a basis from which to project hostelry demand. The purpose of the area analysis is to review available economic and demographic data to determine whether the local market will undergo economic growth, stability, or decline. In addition to predicting the direction of the economy, the rate of change must be quantified. These trends are then correlated based on their propensity to reflect variations in lodging demand with the objective of forecasting the growth or decline in visitation by individual market segment. Market Area Definition The market area encompassing the subject property can broadly be defined as the Boston-Worcester-Lawrence-Lowell-Brockton Metropolitan Statistical Area (MSA). The Boston MSA, the largest in the commonwealth, with roughly 64% of the total population, is comprised of Suffolk, Essex, Middlesex, Norfolk, Plymouth, and Worcester Counties. More specifically, the subject property's market area can be described as northern suburban Boston and the State Route 128 (I-95) corridor. For the purpose of generally defining the geographical/economic boundaries within the area, three major market areas exist within the greater Boston metropolitan area: the Route 128 corridor, the Route 495 corridor, and the inner urban market. The subject property is located in close proximity to the intersection of Route 128 and Interstate 93. Woburn's economy is closely tied to the trends occurring both in the central Boston area and along Route 128's high-technology area. For this reason, the market area analysis will include relevant data for both the City of Boston and suburban Boston. In most cases, the Boston metropolitan area is the market for which pertinent information on the economic and demographic trends that will affect the subject property is available. [GRAPHIC OMITTED] AREA MAP HVS International, Mineola, New York Market Area Analysis 23 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= In the early to middle 1980s, the Massachusetts area underwent a period of strong economic growth, often referred to as the "Massachusetts Miracle." This period of economic success can be attributed to a boom in industrial and high-technology manufacturing as well as to an increase in tourism and a sharing in the rapid expansion of the national financial service industry. In the early 1990s, however, downturns in the computer and high-technology fields had a negative impact on the area's economy. The area's economic problems were further exacerbated by the difficulties on Wall Street and in the region's depository institutions. As a result of the recent revival of the nation's economy as a whole, however, Woburn's economy - as demonstrated by Smith Travel Research statistics and the commercial developments planned for the City of Woburn - is pulling out of its economic difficulties. According to the Planning Department of the City of Woburn, an extensive development project is scheduled to begin construction in 1998 or 1999, with completion projected for the year 2001. The project is planned on a site roughly five miles northwest of the subject property, on Commerce Way. According to city officials, $10 million in state funds have been allocated for the project, and 170 acres of land have been zoned for business parks on the site. Moreover, restaurants, a commuter rail stop, and a commuter parking garage are planned for the site. The Logan Airport Bus Terminal and the train station providing access to Boston will be relocated there as well. Plans are also being reviewed to build an exit ramp from Interstate 93 that would lead directly into the proposed development. Presently, the proposed site is a superfund site which is scheduled for clean-up in 1997. Economic and Demographic Data Based on fieldwork conducted in the area and our in-house sources, we have evaluated various economic and demographic statistics to determine trends in lodging demand. A primary source of economic and demographic statistics used in this analysis is the Complete Economic and Demographic Data Source published by Woods & Poole Economics, Inc., a well-regarded forecasting service based in Washington, DC. Using a data base containing more than 300 variables for each county in the nation, Woods & Poole employs a sophisticated regional model to forecast economic and demographic trends. Historical statistics are based on census data and information published by the Bureau of Economic Analysis. Projections are formulated by Woods and Poole. All dollar amounts have been adjusted for inflation, and thus growth or decline represents real change in constant dollars. HVS International, Mineola, New York Market Area Analysis 24 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Population Between 1980 and 1995, Middlesex County registered an average annual compounded population growth of 0.2%, which was lower than the rates registered by the MSA, the commonwealth, and the nation, which achieved rates of 0.5%, 0.4%, and 1.0%, respectively. Between 1990 and 1995, population growth in the county, the MSA, and the commonwealth slowed to 0.1%, 0.2%, and 0.1%, respectively, despite increased population growth in the nation (1.1%). The slowed population growth in Massachusetts can be attributed to the economic recession that gripped the commonwealth in the early 1990s. Projections for the period 1995 to 2000 call for a relatively slow rate of population growth for Middlesex County and increased rates of growth for the MSA, the commonwealth, and the nation. Population in Middlesex County is expected to increase by an average annual compounded rate of 0.1%, while the MSA, commonwealth, and nation are anticipated to increase by 0.4%, 0.3%, and 0.9%, respectively. We find that the rate of population growth generally establishes a minimum rate of increase for commercial hotel demand; this observation also holds true for the meeting and convention segment if a majority of the meetings are business-oriented. Retail Sales Retail sales in Middlesex County increased at a real average annual compounded rate of 1.1% between 1980 and 1995, a level that was lower than the gains registered by the MSA, at 1.6%, the commonwealth, at 1.4%, and the nation, at 1.9%. Between 1990 and 1995, the county, MSA and commonwealth experienced slower retail sales growth as a result of the regional recession. During this period, Middlesex County registered retail sales growth of 0.3%, while the Boston MSA and Massachusetts experienced growth of 0.6% and 0.5%, respectively. Although retail sales growth declined in these three areas, the nation achieved a higher rate of growth of 2.5%. Retail sales in all four areas of evaluation are projected to increase at lower rates between 1995 and 2000. Retail sales in Middlesex County are projected to increase at an average annual compounded rate of 0.1%, and the MSA, commonwealth, and nation are expected to show average annual growth in retail sales of 0.4%, 0.2%, and 0.9%. Overall, retail sales trends indicate slowing economic growth in the subject property's market area as well as in the nation as a whole. HVS International, Mineola, New York Market Area Analysis 25 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Personal Income Between 1980 and 1995, total personal income in Middlesex County increased at an average annual compounded rate of 2.7%, after adjustment for inflation. Growth in personal income in Middlesex outpaced those of the MSA, commonwealth, and nation, which experienced growth of 2.5%, 2.3%, and 2.3%, respectively. Although slower growth was achieved between 1990 and 1995, projections call for improved personal income growth in the next five years. Middlesex County is anticipated to achieve real gains of 1.6% annually between 1995 and 2000. During the same period, personal income in the MSA, the commonwealth, and the nation is projected to increase at rates of 1.8%, 1.6%, and 2.3%, respectively. Overall, the projected growth in total personal income is a favorable economic indicator for businesses in Middlesex County. In terms of per capita personal income, projections for Middlesex County indicate a higher level than those anticipated for the Boston MSA, Massachusetts and the United States. This relationship suggests that Middlesex County residents will have more money available to spend on retail goods and services than do typical Americans. This increased spending ability contributes to a favorable environment for local commercial establishments, and restaurants in particular. It should be noted, however, that personal income does not take into account cost-of-living factors; as a result, it is possible for local residents to have higher income levels without enjoying greater affluence if the cost of necessities is greater than it is in other parts of the nation. Work Force Characteristics The greatest long-term historical employment growth in Middlesex County occurred in the services and agricultural services sectors, which achieved growth rates of 3.6% and 3.4%, respectively between 1980 and 1995. Between 1990 and 1995, most of the sectors in the county experienced declines, with the exception of services, agricultural services, and transportation, communications and utilities sectors. The greatest drops occurred in the federal military, manufacturing, and mining sectors. Overall employment decreased between 1990 and 1995 at an average annual compounded rate of 0.4% in Middlesex County. Employment is expected to rebound slightly between 1995 and 2000, with total employment forecasted to increase annually at 0.3%. The strongest gains in employment are projected to occur in the mining and services sectors, which are forecasted to increase at rates of 3.0% and 0.9%, respectively. These moderate employment gains reflect stabilization of the local economy HVS International, Mineola, New York Market Area Analysis 26 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= following the dramatic expansion in the 1980s and the recession that characterized the early 1990s. A favorable characteristic is the diversification of the MSA economy, with services, trade, manufacturing, and government as the largest employment sectors in 1995. Because the local economy is not tied to the prosperity of any single sector, the impact of business cycles is somewhat cushioned. Furthermore, the downturn in high-technology industries that occurred in the early 1990s resulted in a diminished dependence on this industrial sector; nevertheless, the high-technology firms in the region remain a dominant influence on the area's economy. The major employers in Woburn represent a cross-section of hotel demand potential. Some are national in scope, while others operate on a more local basis; some are engaged in manufacturing, and others are active in retail distribution. The following table outlines some of the major employers in Woburn. ================================================================================ Table 4-1 Major Employers - -------------------------------------------------------------------------------- Number of Firm Product Employees -------------------------------------------------------- Marshalls Retail 600 W.R. Grace Retail 500 General Foods Food 200 Cummings Properties Commercial Real Estate Source: Executive Office of Communications & Development - -------------------------------------------------------------------------------- Office Space The City of Woburn is an industrial town containing a number of industrial parks that are owned by both the public and private sectors. According to the Planning Department of the City of Woburn, the 1995 vacancy rate for business parks in the city is estimated at below 7%, an improvement over vacancy levels in recent years that is attributable to the economic revival and the lack of new construction. With the planned development on Commerce Way, city officials anticipate significant growth in the future. Highway Traffic The subject property occupies a prominent location, proximate to the intersection of Interstates 93 and 95. Access to the property is provided by Interstate 93, via the Montvale Avenue exit. The amount of traffic passing HVS International, Mineola, New York Market Area Analysis 27 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= through a market area can have a direct impact on commercial and leisure demand and an indirect effect on meeting demand. At the time of preparing this appraisal, no information on the volume of traffic entering or exiting the Montvale Avenue exit ramps was available. According to representatives of the Massachusetts Department of Transportation, the only information available is the daily traffic counts on Interstate 93 in the vicinity of the intersection of Interstates 93 and 95. For northbound Interstate 93, the latest statistics available (for 1994) show 135,000 vehicles utilizing Interstate 93 daily; for southbound Interstate 93, the latest count (in 1990) reveals 137,120 vehicles per day. As mentioned previously, given the proximity of Woburn to the City of Boston, the latest developments in Boston do have some effect on the subject property's market area. Major road construction is currently underway in the City of Boston. The $7.7-billion Central Artery/Third Harbor Tunnel project -the largest highway initiative in the history of the commonwealth - will replace the six-lane, elevated section of the Central Artery (I-93) in downtown Boston with a largely underground, eight- to ten-lane section extending from the Southeast Expressway (I-93) to Charlestown. This project also involves extending I-90 (the Massachusetts Turnpike) to Logan Airport via a new seaport access road that will pass through commercial land in south Boston, and constructing a four-lane tunnel across Boston Harbor. Completion of this project should improve access between Logan Airport and downtown Boston dramatically. The project is expected to double traffic capacity both through the city and across the harbor, thus alleviating one of the most congested urban traffic areas in the nation and providing the city with a safer and wider traffic configuration. The Central Artery depression will create over 27 acres of new green space, including the area abutting Atlantic Avenue. Work began in early 1994 on the relocation of utility infrastructures and on wall construction near Quincy Market to clear a path for the proposed project. Currently, work is occurring below ground near South Station and Quincy Market to construct the tunnel itself; the estimated completion date of the artery depression is late 1999. The construction of the 1.3-mile third harbor tunnel began in 1992. According to the Massachusetts Department of Transportation, the tunnel is currently open to commercial traffic only, and should relieve some traffic congestion. The tunnel is four lanes wide, doubling the present cross-harbor capacity to eight lanes. Although it is unclear as to when the tunnel HVS International, Mineola, New York Market Area Analysis 28 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= will permit passenger vehicles, it is hoped that the tunnel will enable airport-bound drivers from the west and south, who comprise 70% of airport traffic, to bypass downtown Boston and the existing Sumner and Callahan tunnels, thereby alleviating traffic congestion to and from the city. Airport Traffic The main airport serving the City of Woburn is Logan International Airport, located roughly 15 miles southeast of the subject property. The airport is utilized by more than 40 major domestic airlines and international carriers that offer non-stop service to the business centers of Europe and Asia. In 1995, the airport served more than 24 million arriving and departing passengers, making it the 10th busiest airport in the country for passenger service. The airport also handled more than 800 million pounds of cargo and mail during the same year, making it the 12th busiest airport in the country in terms of cargo service. Currently, Logan International Airport is undergoing an expansion and upgrading, which may continue until 2010. This $1.5-billion modernization program - known as Logan 2000 - consists of roughly 30 projects, and is intended to ensure the facility's economic contribution to the greater Boston area and the New England region well into the 21st Century. According to the Massachusetts Port Authority, the projects include improvements to the passenger terminals, roadways, parking facilities, public transportation and passenger amenities. Specifically, Terminal A will be replaced with a modern concourse to accommodate wide-bodied jets, ultimately expanding the number of gates that can handle these larger aircraft from 45 to 70. Terminal E will receive an expanded customs hall to be located on what is now the Terminal E parking lot. While the old customs facility could handle only 600 international passengers per hour, the new one will be able to handle 3,000. In addition, a new central terminal will connect to both the new Terminal A and the customs hall in Terminal E. The aforementioned Boston Tunnel project will, upon completion, surface at the airport, thereby significantly improving access to Logan. The following table shows historical passenger counts at Logan International Airport. HVS International, Mineola, New York Market Area Analysis 29 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-2 Logan International Airport Passenger Statistics - -------------------------------------------------------------------------------- Domestic Domestic Jet Commuter International Total Percent Year Passengers Passengers Passengers Passengers Change - -------------------------------------------------------------------------------- 1986 18,640,863 1,233,531 2,058,686 21,933,080 -- 1987 19,316,103 1,365,371 2,687,528 23,369,002 6.5% 1988 19,237,619 1,400,674 3,093,630 23,731,923 1.6% 1989 17,689,413 1,348,616 3,235,831 22,273,860 -6.1% 1990 17,968,410 1,550,837 3,358,944 22,878,191 2.7% 1991 16,585,359 1,771,873 3,092,911 21,450,143 -6.2% 1992 17,083,755 2,067,965 3,571,418 22,723,138 5.9% 1993 17,722,509 2,277,059 3,580,158 23,579,726 3.8% 1994 18,774,177 2,035,166 3,658,835 24,468,178 3.8% 1995 18,596,080 2,120,262 3,475,753 24,192,095 -1.1% Average Annual Compounded Change 1986-1995 1.1% Source: Massachusetts Port Authority, Aviation Department - -------------------------------------------------------------------------------- With 1.1% in average annual compounded growth, Logan International Airport has not witnessed any strong growth in passenger count over the past ten years. The number of domestic jet passengers has remained steady, while increases have been achieved in the number of domestic commuter and international passengers. This lack of strong growth is a consequence of the airport operating at capacity; growth should occur in the future as the expansion projects at Logan International Airport are completed. Convention Center The nearest convention center, the John B. Hynes Veterans Memorial Convention Center, is located in the City of Boston. Because of the large number of hotels located in the city, and Woburn's distance from downtown Boston, hotels in the subject property's area do not enjoy significant overflow generated by the convention center. Tourist Attractions Woburn is a historic site and contains a number of historic attractions, including the Baldwin Mansion and the Count Rumford House. The majority of leisure travelers who stay in Woburn, however, commute to Boston to visit the city's numerous tourist attractions. The subject property's strategic location along Interstate 93, which provides direct access to Boston, enhances its ability to attract leisure travelers. Boston is a popular destination because it offers a wide variety of visitor attractions. The area's educational, medical, and scientific institutions are a HVS International, Mineola, New York Market Area Analysis 30 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= magnet for scholars, researchers, and scientists. Visitors are attracted by local sports teams and recreational activities. Numerous golf courses are available in the outlying suburban area, and miles of Atlantic beaches are located within a few miles of the city. For cultural entertainment, Boston offers many museums, a planetarium, an aquarium, and a variety of historic attractions. Visitors also enjoy symphony concerts, opera, and the theater. The city offers ample restaurants. Some of the most popular historic attractions include the Old South Church, the Boston Tea Party Ship and Museum, Faneuil Hall, Quincy Market, the Boston Massacre Site, the Old South Meeting House, the Bunker Hill Pavilion, Trinity Church, the Paul Revere House, Boston Common, the U.S.S. Constitution, and the Old North Church. Cultural attractions include the Museum of Fine Arts, the Isabella Stewart Gardner Museum, and the world-famous Boston Pops. Other attractions include Newbury Street, the John Hancock Observatory, and the New England Aquarium. There are 68 colleges and universities in the Boston metropolitan area with an enrollment of approximately 275,000 students. Two out of three of the undergraduates enrolled in Boston's most prestigious colleges and universities (Boston College, Boston University, Harvard University, Massachusetts Institute of Technology, Northeastern, and Tufts) come from areas outside Massachusetts. These institutions generate strong leisure visitation during the weekends when school is in session, and particularly during commencement and parents' weekends. During the week, the schools and the medical hospitals host guest lecturers, continuing educational seminars, and meetings and banquets, much of which attract attendees who require overnight accommodations. Conclusion Our review of various economic and demographic data indicates that the subject property's market area has recovered from the recession of the early 1990s, with economic growth stabilizing. With the planned development on Commerce Way, the economy of the City of Woburn is anticipated to grow at a moderate pace. The following table summarizes the economic and demographic trends discussed throughout this section. All figures that reflect dollar amounts have been adjusted for inflation, and thus reflect real change. It should be noted that the percent changes indicated in the following tables are based on unrounded figures, and thus may not calculate exactly. HVS International, Mineola, New York Market Area Analysis 31 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-3 Economic and Demographic Data for the Subject Property's Market Area - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------ Long-Term Historical Population (+000) Middlesex County 1980-1995 1,369.4 1,404.6 0.2% Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1980-1995 5,348.9 5,754.9 0.5 State of Massachusetts 1980-1995 5,748.4 6,057.9 0.4 United States 1980-1995 227,225.6 262,791.0 1.0 Short-Term Historical Population (+000) Middlesex County 1990-1995 1,398.3 1,404.6 0.1 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1990-1995 5,688.4 5,754.9 0.2 State of Massachusetts 1990-1995 6,018.4 6,057.9 0.1 United States 1990-1995 249,401.4 262,791.0 1.1 Projected Population (+000) Middlesex County 1995-2000 1,404.6 1,410.3 0.1 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1995-2000 5,754.9 5,874.5 0.4 State of Massachusetts 1995-2000 6,057.9 6,137.0 0.3 United States 1995-2000 262,791.0 274,758.4 0.9 Long-Term Historical Retail Sales (+000,000) Middlesex County 1980-1995 8,547.6 10,122.4 1.1 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1980-1995 33,570.2 42,615.7 1.6 State of Massachusetts 1980-1995 35,625.3 43,503.2 1.3 United States 1980-1995 1,340,768.9 1,765,826.1 1.9 Short-Term Historical Retail Sales (+000,000) Middlesex County 1990-1995 9,987.3 10,122.4 0.3 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1990-1995 41,364.4 42,615.7 0.6 State of Massachusetts 1990-1995 42,531.0 43,503.2 0.5 United States 1990-1995 1,557,380.2 1,765,826.1 2.5 Projected Retail Sales (+000,000) Middlesex County 1995-2000 10,122.4 10,148.1 0.1 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1995-2000 42,615.7 43,528.2 0.4 State of Massachusetts 1995-2000 43,503.2 44,042.8 0.2 United States 1995-2000 1,765,826.1 1,846,830.4 0.9 Long-Term Historical Retail Sales Per Capita Middlesex County 1980-1995 6,241.8 7,206.4 1.0 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1980-1995 6,276.1 7,405.2 1.1 State of Massachusetts 1980-1995 6,197.4 7,181.2 1.0 United States 1980-1995 5,900.6 6,719.5 0.9 Short-Term Historical Retail Sales Per Capita Middlesex County 1990-1995 7,142.4 7,206.4 0.2 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1990-1995 7,271.7 7,405.2 0.4 State of Massachusetts 1990-1995 7,066.8 7,181.2 0.3 United States 1990-1995 6,244.5 6,719.5 1.5
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 32 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-3 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------ Projected Personal Retail Sales Per Capita Middlesex County 1995-2000 7,206.4 7,195.9 (0.0) Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1995-2000 7,405.2 7,409.7 0.0 State of Massachusetts 1995-2000 7,181.2 7,176.6 (0.0) United States 1995-2000 6,719.5 6,721.7 0.0 Long-Term Historical Eating and Drinking Place Sales (+000,000) Middlesex County 1980-1995 795.9 1,061.3 1.9 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1980-1995 3,389.3 4,693.3 2.2 State of Massachusetts 1980-1995 3,709.2 5,043.2 2.1 United States 1980-1995 126,131.6 185,035.4 2.6 Short-Term Historical Eating and Drinking Place Sales (+000,000) Middlesex County 1990-1995 989.1 1,061.3 1.4 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1990-1995 4,407.3 4,693.3 1.3 State of Massachusetts 1990-1995 4,750.3 5,043.2 1.2 United States 1990-1995 161,197.4 185,035.4 2.8 Projected Eating and Drinking Place Sales (+000,000) Middlesex County 1995-2000 1,061.3 1,092.5 0.6 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1995-2000 4,693.3 4,883.0 0.8 State of Massachusetts 1995-2000 5,043.2 5,221.0 0.7 United States 1995-2000 185,035.4 199,127.3 1.5 Long-Term Historical Eating and Drinking Place Sales Per Capita Middlesex County 1980-1995 581.2 755.5 1.8 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1980-1995 633.6 815.5 1.7 State of Massachusetts 1980-1995 645.2 832.5 1.7 United States 1980-1995 555.1 704.1 1.6 Short-Term Historical Eating and Drinking Place Sales Per Capita Middlesex County 1990-1995 707.4 755.5 1.3 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1990-1995 774.8 815.5 1.0 State of Massachusetts 1990-1995 789.3 832.5 1.1 United States 1990-1995 646.3 704.1 1.7 Projected Eating and Drinking Place Sales Per Capita Middlesex County 1995-2000 755.5 774.7 0.5 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1995-2000 815.5 831.2 0.4 State of Massachusetts 1995-2000 832.5 850.7 0.4 United States 1995-2000 704.1 724.7 0.6 Long-Term Historical Personal Income (+000,000) Middlesex County 1980-1995 22,135.6 32,881.8 2.7 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1980-1995 80,572.5 116,135.5 2.5 State of Massachusetts 1980-1995 85,728.2 120,350.9 2.3 United States 1980-1995 3,163,874.0 4,443,243.2 2.3
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 33 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-3 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------ Short-Term Historical Personal Income (+000,000) Middlesex County 1990-1995 31,480.0 32,881.8 0.9 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1990-1995 111,831.4 116,135.5 0.8 State of Massachusetts 1990-1995 116,527.4 120,350.9 0.6 United States 1990-1995 4,051,714.6 4,443,243.2 1.9 Projected Personal Income (+000,000) Middlesex County 1995-2000 32,881.8 35,681.4 1.6 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1995-2000 116,135.5 126,766.0 1.8 State of Massachusetts 1995-2000 120,350.9 130,482.7 1.6 United States 1995-2000 4,443,243.2 4,972,219.5 2.3 Long-Term Personal Income per Capita Middlesex County 1980-1995 16,164.0 23,409.0 2.5 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1980-1995 15,064.0 20,180.0 2.0 State of Massachusetts 1980-1995 14,913.0 19,867.0 1.9 United States 1980-1995 13,924.0 16,908.0 1.3 Short-Term Historical Personal Income per Capita Middlesex County 1990-1995 22,513.0 23,409.0 0.8 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1990-1995 19,660.0 20,180.0 0.5 State of Massachusetts 1990-1995 19,362.0 19,867.0 0.5 United States 1990-1995 16,246.0 16,908.0 0.8 Projected Personal Income per Capita Middlesex County 1995-2000 23,409.0 25,301.0 1.6 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH MSA 1995-2000 20,180.0 21,579.0 1.3 State of Massachusetts 1995-2000 19,867.0 21,262.0 1.4 United States 1995-2000 16,908.0 18,097.0 1.4 Long-Term Historical Employment - Middlesex County (+000) Farm 1980-1995 2.8 1.6 (3.5) Agriculture Services, Other 1980-1995 3.2 5.3 3.4 Mining 1980-1995 0.5 0.6 1.6 Construction 1980-1995 29.2 35.9 1.4 Manufacturing 1980-1995 202.4 139.3 (2.5) Trans., Comm. & Public Utils. 1980-1995 27.7 30.3 0.6 Total Trade 1980-1995 161.5 182.7 0.8 Wholesale Trade 1980-1995 43.7 51.9 1.2 Retail Trade 1980-1995 117.8 130.8 0.7 Finance, Insurance, & Real Estate 1980-1995 41.1 51.5 1.5 Services 1980-1995 229.8 392.2 3.6 Total Government 1980-1995 95.8 87.3 (0.6) Federal Civilian Govt. 1980-1995 15.0 15.3 0.1 Federal Military Govt. 1980-1995 14.4 11.6 (1.5) State & Local Govt. 1980-1995 66.4 60.4 (0.6) TOTAL 1980-1995 794.0 926.7 1.0
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 34 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-3 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------ Short-Term Historical Employment - Middlesex County (+000) Farm 1990-1995 1.8 1.6 (1.3) Agriculture Services, Other 1990-1995 5.1 5.3 0.5 Mining 1990-1995 0.7 0.6 (3.4) Construction 1990-1995 38.3 35.9 (1.3) Manufacturing 1990-1995 168.9 139.3 (3.8) Trans., Comm. & Public Utils. 1990-1995 30.0 30.3 0.2 Total Trade 1990-1995 194.3 182.7 (1.2) Wholesale Trade 1990-1995 58.8 51.9 (2.5) Retail Trade 1990-1995 135.5 130.8 (0.7) Finance, Insurance, & Real Estate 1990-1995 55.5 51.5 (1.5) Services 1990-1995 358.1 392.2 1.8 Total Government 1990-1995 94.2 87.3 (1.5) Federal Civilian Govt. 1990-1995 15.5 15.3 (0.2) Federal Military Govt. 1990-1995 14.4 11.6 (4.2) State & Local Govt. 1990-1995 64.4 60.4 (1.3) TOTAL 1990-1995 946.9 926.7 (0.4) Projected Employment - Middlesex County (+000) Farm 1995-2000 1.6 1.5 (1.3) Agriculture Services, Other 1995-2000 5.3 5.1 (0.4) Mining 1995-2000 0.6 0.7 3.0 Construction 1995-2000 35.9 35.8 (0.0) Manufacturing 1995-2000 139.3 134.7 (0.7) Trans., Comm. & Public Utils. 1995-2000 30.3 30.2 (0.0) Total Trade 1995-2000 182.7 181.5 (0.1) Wholesale Trade 1995-2000 51.9 51.4 (0.2) Retail Trade 1995-2000 130.8 130.2 (0.1) Finance, Insurance, & Real Estate 1995-2000 51.5 52.8 0.5 Services 1995-2000 392.2 410.4 0.9 Total Government 1995-2000 87.3 88.3 0.2 Federal Civilian Govt. 1995-2000 15.3 15.4 0.1 Federal Military Govt. 1995-2000 11.6 11.7 0.2 State & Local Govt. 1995-2000 60.4 61.2 0.3 TOTAL 1995-2000 926.7 941.2 0.3
- -------------------------------------------------------------------------------- Subsequent sections of this economic study and appraisal will relate these historical and projected growth trends to specific market segments based on their propensity to reflect visitation. This analysis will provide a basis for forecasting changes in room night demand in the subject property's area. HVS International, Mineola, New York Overview of External Forces 35 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 5. Overview of External Forces Affecting the U.S. Lodging Industry Introduction Hotel ownership is ultimately the business of creating and enhancing value. To understand the investment potential of lodging facilities, investors must be thoroughly aware of the many forces that can cause changes in the value of their properties. Although some of these forces are internal (such as the layout and design of the facilities, the quality of management, and the condition of the property), others are external (such as the local economic environment and the competitive nature of the market). The risk associated with hotel investment lies largely with the external forces that are beyond the control of ownership and contribute to the variability of future income flows. Investors and appraisers can project financial results by evaluating the historical impact of external forces on hotel values. Successful hotel investors seek opportunities where the risk of external forces can be minimized, thus reducing the uncertainty associated with income expectations. When investors engage in due diligence prior to acquiring a lodging facility, they are primarily interested in trends affecting a limited geographic market area, such as a town, city, or county. A broader overview takes into account national and international travel patterns and trends. An understanding of the general characteristics of the United States hotel market is important because these trends often foreshadow economic and demographic changes in smaller areas. This section of the appraisal will present an overview of the U.S. lodging industry by tracing many of the forces that influence hotel values. Historical economic and demographic data, and industry statistics will be analyzed to provide a basis for projections. Forecasts will be evaluated to determine their reasonableness. The conclusions represent another set of criteria that hotel investors consider in making their acquisition decisions. HVS International, Mineola, New York Overview of External Forces 36 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The Supply and Demand Relationship Most business ventures are influenced by the relationship between supply and demand. In the hotel industry, supply refers to the number of units. A unit consists of one or more rooms and represents the smallest accommodation that can be rented to a guest. Each unit must have a full bath and its own entrance to a public hallway or the building exterior. Demand refers to a room night, which is one unit that is occupied for one night. The supply and demand relationship has a significant influence on a hotel's occupancy and/or average room rate. Occupancy is calculated by dividing the number of rooms that are occupied for a specific period by the total number of rooms that are available during the same period. Average room rate is determined by dividing the total rooms revenue achieved during a specific period by the number of rooms occupied during that period; it also represents the weighted average of all the room rates charged during that period. In a market where demand is increasing faster than supply, occupancies rise and average rate growth generally exceeds inflation. When supply is increasing faster than demand, occupancies fall and average rates typically remain level or decline. Hotels generate revenue based on occupancy and average rate, and thus the supply and demand relationship is an important factor in analyzing profits and value. Hotel occupancy levels have shown definite cycles that reflect the balance between supply and demand. The early 1970s marked the beginning of a hotel building boom reminiscent of the 1920s. Many factors contributed to this expansion, but the two main elements were readily available financing and aggressive chains that were eager to sell franchises. The new construction during the 1970s was made possible by the enormous amount of financing generated by all lenders, particularly real estate investment trusts (REITs). These high-leverage finance companies were created to allow small investors to participate in real estate mortgages and equities. The concept was quickly accepted by Wall Street, and soon billions of dollars were available to finance real estate projects. Many lenders became so overwhelmed with new money that their underwriting procedures broke down and some marginal developments were approved. During the late 1960s and early 1970s, hotel companies actively expanded their chains through franchising. Franchising was a source of new capital, allowing hotel companies to grow and achieve national recognition using the franchisee's financial investment in individual properties. Some franchisors, eager to demonstrate sustained growth and establish a national HVS International, Mineola, New York Overview of External Forces 37 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= presence, employed questionable marketing tactics to sell new franchises. Salespeople were often compensated based on the number of franchises sold, so there was little incentive to discourage developers from investing in poor locations and overbuilt markets. Many lenders and hostelry developers were led to believe that a national franchise would guarantee a successful operation. The combination of readily available financing and aggressive hotel chains eager to sell franchises resulted in overbuilding and development of many poorly located, undercapitalized hostelries managed by inexperienced owners. The bubble burst on the lodging industry when inflation caused construction costs and interest rates to escalate. The 1974 energy crisis drastically reduced travel, and the accompanying recession curtailed business trips, conferences, and conventions. Operators of marginal properties quickly fell behind in their mortgage payments, and lenders were forced to foreclose. As lenders became hostelry owners, they either organized work-out departments headed by experienced hoteliers or engaged professional hotel management companies to assume operational responsibilities. Sales data indicate that lenders who were looking for quick sales to remove nonperforming hotel assets from their books had to lower their prices substantially to attract all-cash buyers. Lenders who were willing to hold on to foreclosed hotels and employ professional management to reposition and improve the properties' operation were generally able to recoup their original investments in three to five years, once the industry began to recover. However, even lenders who repositioned their hotels had to take back favorable purchase-money financing to sell the properties because money from other sources was not available. History has shown that during economic downturns, hotel values generally do not fall in proportion to the properties' declining incomes. Sellers, and particularly lenders who take back hotels through foreclosure, are often unwilling to sell at substantially reduced prices. They are more likely to wait out the downward cycle and dispose of their assets when the market begins to rebound. Thus, appraisers can best reflect market behavior by projecting a facility's net income to a point of recovery and applying the proper discounted cash flow procedure over that time period. The late 1970s was a period of relative calm for the lodging industry. Because most lenders were recovering from the financial wounds inflicted by HVS International, Mineola, New York Overview of External Forces 38 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= the 1975 recession, they had little interest in making hotel mortgages. New construction was restrained, and primarily consisted of additions to existing properties and the development of some large, downtown hotels oriented toward the commercial and convention markets. The rebirth of center-city hostelries was a direct result of fuel shortages and the availability of government financing for inner-city redevelopment projects. Highway-oriented properties, on the other hand, were adversely affected by escalating gasoline prices and decreased automobile travel, and these lodging facilities lost some of their appeal among investors and hotel companies. Decreased building activity, the normal retirement of older hostelries from the market, and an improving economy created a favorable supply and demand relationship and record-high occupancy levels from 1979 to 1980. Average room rates increased rapidly as operators took advantage of the excess demand to recoup earlier losses and keep up with inflation. After the decline in hotel development during the late 1970s, the environment appeared suitable for a period of renewed expansion. However, the Federal Reserve tightened the money supply in the early 1980s, sending the prime interest rate up to double-digit levels. Most of the projects that were in the preliminary planning stages but lacked sensible financing were put on hold. Fiscal policy and declining energy prices eventually reduced the national inflation rate. This caused a decline in hotel interest rates beginning in 1983, and suddenly massive amounts of capital were available for real estate investments. Hotel developers who had been out of the market since the mid-1970s rushed to initiate new projects. They were aided by several major real estate development incentives: high occupancies and escalating room rates, readily available debt and equity financing, and unique income tax benefits designed to stimulate the national economy out of a recession. During the early 1980s, trends were generally favorable for new hotel development. Although the recession caused a decline in lodging demand, many markets showed relatively high occupancy levels. Room rates were usually able to keep up with inflation, and the travel industry was expected to boom as a result of a recovering economy. Franchise sellers signed up new prospects aggressively, using product segmentation to justify the saturation of a market with a common brand. HVS International, Mineola, New York Overview of External Forces 39 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Financing was readily available from the savings and loan industry. Following deregulation, these banks were permitted to lend on commercial real estate, such as hotels. Although savings and loans had experience in making loans on single-family homes, few had expertise with commercial properties, and fewer still with hotels. The result was almost identical to the real estate investment trust fiasco the decade before: loan underwriting and administration were inept and sometimes nonexistent, the number of loans made seemed more important than the quality of the real estate and the integrity of the borrower, and short-term funds were often used to finance long-term mortgages. In the early 1990s, the industry suffered the consequences of this lending spree: most major hotel markets became severely overbuilt and many savings and loans went out of business. Another factor contributing to hotel development in the 1980s was the very favorable treatment provided by income tax regulations. By carefully structuring hotel syndications to take advantage of all available tax benefits, investors could virtually recoup their total cash outlay in the first year and reap additional benefits in the future regardless of the economic success of the underlying asset. Because there was little incentive to justify a transaction's economics (i.e., cash flow and reversionary benefits), a number of syndicators overpaid for hotel properties, took out usurious fees, and overloaded their hotels with debt. A change in the tax law in the mid-1980s eliminated many of the benefits associated with hotels, but the overbuilding in most markets was either in progress or had already taken place. By the end of the 1980s, the abuses of the savings and loans had become apparent, but it was too late to reverse the overbuilding. Between 1985 and 1990, approximately 556,000 rooms were added to the U.S. hotel supply. The national economy entered another recession in 1990, and this factor (coupled with overbuilding and the Persian Gulf War in 1991) caused the national hotel occupancy rate to bottom out at 60.9%. In some markets, hotel occupancies were as low as 35%. This supply and demand imbalance was almost identical to the situation in the 1970s that led to numerous hotel failures. As in the REIT days, the number of non-performing loans reached record levels, and lenders moved to a work-out mode of operation in order to foreclose and restructure their hotel investments. Many of the savings and loans were taken over by the government and their hotel assets were sold at auction. HVS International, Mineola, New York Overview of External Forces 40 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= According to the American Council of Life Insurance, which represents major life insurance companies, the number of delinquent hotel loans and the number of hotel loans in foreclosure peaked in 1991. This trend is undergoing a reversal as the U.S. lodging industry begins to recover. Loan restructuring was an attractive alternative to foreclosure during this period, and the number of loans in good standing with restructured terms almost doubled. By 1993, new hotel construction had declined significantly. Lenders, trying to get out from under problematic hotel portfolios, curtailed all real estate lending and would not even consider hotels. The tax benefits associated with lodging facilities had been reduced significantly, and passive investors left the hospitality market entirely. The slowdown in the growth of supply had a beneficial impact on occupancy levels, which started to recover in 1992. Improved occupancies are expected to continue through the late 1990s as increases in lodging demand outpace growth in supply. Beginning in 1991, many lenders and the Resolution Trust Corporation (RTC) sold their oldest and least desirable hotels at liquidation prices. Because virtually no third-party financing was available, most lenders were forced to take back purchase-money mortgages at favorable terms in order to sell these properties without suffering massive write-downs. The newer and more desirable hotels were not put on the market, because their lenders/owners were waiting for values to recover. This course of action significantly reduced the number of transactions involving good-quality lodging facilities. The following table shows the volume of hotel transactions exceeding $10,000,000 between 1990 and 1995. ================================================================================ Table 5-1 Summary of Major Hotel Transactions - -------------------------------------------------------------------------------- Year 1990 1991 1992 1993 1994 1995 - -------------------------------------------------------------------------------- Number of Transactions 130 54 67 52 92 104 Number of Rooms 40,543 16,427 25,187 19,935 33,503 36,951 Average Price Per Room $136,000 $91,000 $85,000 $79,000 $80,000 $83,000 Source: HVS International - -------------------------------------------------------------------------------- In 1991, there were only 54 major hotel sales recorded. This number increased to 67 in 1992 and declined to 52 in 1993, then rose dramatically in HVS International, Mineola, New York Overview of External Forces 41 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 1994 and 1995. During the low-volume years, many sellers remained on the sidelines waiting for values to increase before placing their properties on the market. The jump in 1994 is attributable to a number of factors, including the greater availability of mortgage funds, a return of institutional investors to the market, and a resurgence of investor interest in lodging facilities. The profile of typical hotel buyers has changed somewhat. During the mid-1980s, when tax-driven syndication's were popular, many hotels were purchased by passive investors who hired management companies to operate their properties. These owners had little involvement in day-to-day management decisions, which occasionally led to poor management and financial losses. Today, most buyers of major hotels are owner-operators who bring with them both the acquisition funds (usually from a joint venture partner) and management expertise. We also note that real estate investment trusts (REITs) and public hotel companies (C-Corps) are actively acquiring hotels using funds from public equity stock offerings. The supply of new hotel rooms is expected to increase slowly during the next several years. Lenders are beginning to return to the market, and are making some hotel loans based on conservative criteria. Initially, mortgage funds were available mainly to the budget and economy lodging sectors, for the purpose of refinancing existing properties or assisting buyers in acquisitions. Now, a number of lenders are willing to finance new construction for these small, low-end properties. Although financing is also becoming available for the acquisition of large, full-service hotels, very little has been allocated for new construction. At present, active hotel lenders are not necessarily traditional banks and insurance companies, but may include credit companies and Wall Street securities firms. A number of hotel owners and developers are now constructing budget and economy hotels; a few are planning more upscale, full-service properties. Most lenders are taking a conservative approach to new hotel loans, which should limit new development to those projects that demonstrate true economic feasibility. As a result, severe short-term overbuilding is unlikely. HVS International, Mineola, New York Overview of External Forces 42 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Room Rates The supply and demand relationship has a direct impact on hotel occupancies and an indirect influence on room rate growth. Between 1978 and 1995, hotel room rates increased at an average annual compounded rate of almost 6%. Significant rate growth was recorded during the late 1970s and early 1980s as a result of strong occupancies (70%'s) coupled with a high monetary inflation rate (14%). In recent years, room rate growth slowed as a result of low occupancies and a drop in inflation. Hotel room rates generally increase faster than the Consumer Price Index (CPI) when occupancies are strong or moving upward. When occupancies are low or declining, room rate growth tends to lag behind the CPI; in some cases, rates may remain flat or actually drop. The following table compares the historical and projected annual increase in hotel room rates in the United States to the change in the national CPI. HVS International, Mineola, New York Overview of External Forces 43 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 5-2 Percent Change in Average Room Rates Versus CPI - U.S. Hotels - -------------------------------------------------------------------------------- Consumer Price Hotel Room Rate Index Hotel Year Percent Change Percent Change Occupancy - ------------------------------------------------------------------ 1973 4.2% 6.2% 70.2% 1974 7.6 11.0 64.0 1975 7.3 9.1 63.7 1976 8.2 5.7 65.8 1977 8.1 6.5 67.3 1978 14.0 7.7 69.2 1979 17.0 11.3 71.9 1980 15.2 13.5 70.6 1981 10.0 10.3 67.9 1982 6.5 6.2 66.7 1983 5.1 3.2 64.4 1984 6.9 4.3 64.0 1985 4.6 3.6 63.1 1986 3.2 1.9 62.5 1987 3.6 3.6 61.9 1988 3.6 4.1 62.3 1989 3.5 4.8 63.2 1990 3.0 5.4 62.4 1991 0.6 4.2 60.9 1992 1.4 3.0 62.1 1993 2.8 3.0 63.1 1994 5.2 2.6 64.7 1995 4.8 2.8 65.5 1996* 5.0 3.0 66.0 1997* 5.5 3.5 67.0 1998* 6.0 4.0 68.0 1999* 5.5 4.0 68.0 Sources: Smith Travel Research & HVS International * Projected - -------------------------------------------------------------------------------- This table shows two periods when hotel room rate growth failed to keep pace with the CPI. From 1973 to 1975, the hotel industry was suffering from overbuilding related to real estate investment trusts, a recession, and a downturn in travel caused by the oil embargo. The second period of slow room rate growth occurred between 1988 and 1993, when the industry was again affected by overbuilding and a weak economy. The table illustrates that during periods of prosperity, room rates are a good hedge against inflation; this was true even when the CPI increased at double-digit levels. HVS International, Mineola, New York Overview of External Forces 44 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The projections indicate a strong recovery of room rates as the relationship between supply and demand becomes more favorable. Growth is expected to peak in 1998 at 6%, which is significantly higher than the projected gain in the CPI. This may appear high, but a similar trend occurred in 1978, when room rates rose 14.0% and the CPI increased by only 7.7%. Hotels are unique because their room rates can be adjusted at any time. Unlike office space, where rents are typically negotiated for a five-year period, hotel operators are free to base rates on occupancy trends. Using sophisticated yield management programs, modern lodging facilities can ride the demand curve and maximize room rates whenever the market permits. As a result, hotels generally offer significant upside potential during periods of economic prosperity. If lodging facilities can increase room rates faster than the CPI and still maintain occupancies, bottom-line profits usually escalate. If they can raise room rates and occupancy at the same time, profits will grow significantly. The opposite occurs when room rates fail to keep pace with inflation. Because market value is basically a multiple of bottom-line profits, changes caused by fluctuations in occupancy and average rate have a direct impact on value. Rooms Revenue per Available Room (RevPAR) The ability of a hotel to maximize its occupancy and room rate is measured in terms of rooms revenue per available room (RevPAR), which is the product of occupancy and average rate. Between 1978 and 1995, RevPAR in the U.S. lodging industry increased at an average annual compounded rate of approximately 5%. As in the case of average rate, most of the increase occurred during the late 1970s, when occupancies escalated rapidly. The only decline in RevPAR occurred in 1991. Trends in Hotel Sales HVS International constantly monitors hotel markets in order to collect information on sales of lodging facilities. This comprehensive database is known as the Hospitality Market Data Exchange (HMDE). The HMDE includes more than 90% of all hotel sales that took place during this period. The HMDE data shows that the number of transactions peaked at 726 in 1986. This strong activity is largely attributable to pending changes in the tax laws, which made it less favorable to own hotels. It is also possible that forward-thinking investors noted the substantial overbuilding and declining economy and decided to bail out at that time. In 1987 and 1990, the HVS International, Mineola, New York Overview of External Forces 45 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= average sales price per room peaked at $75,000. This was more than twice the 1981 average of $36,000. Following the 1990 peak, hotel prices fell rapidly as occupancies and profits were eroded by the massive number of hotel rooms entering the market. By 1991, the year of the Persian Gulf War, sales prices had fallen to $38,000 per room. Even the highest price per room declined from the record $1,195,652 (for the sale of the Bel Aire Hotel) to $251,816 in 1992. The market hit bottom in 1993 when the average sales price dropped to $36,000 per room. Prices recovered rapidly in 1994 and 1995 as investors became interested in hotels again and more full-service properties were put on the market. In 1995, the average sales price was $61,000 per room. The figures presented in the HMDE represent actual sales prices; no attempt was made to adjust for factors such as favorable or unfavorable financing, forced or liquidation sales, bankruptcy sales, foreclosures, and so forth. As a result, the average price per room does not necessarily reflect market value, which assumes a willing buyer and a willing seller. Many of the transactions that took place during the early 1990s involved unwilling sellers - usually lenders who were forced to liquidate hotel portfolios quickly at prices that were below market levels. Most hotel experts agree that a recovery is underway, and they recommend that owners hold their properties until more favorable conditions prevail. Trends in Hotel Values A more meaningful indicator of trends in hotel value is the Hotel Valuation Index (HVI), developed by HVS International. This index tracks changes in hotel values in 23 major markets and the nation as a whole. It is developed through an income approach, using market area data provided by Smith Travel Research and operational and capitalization rate information from HVS International, and is indexed to the 1986 U.S.A. value (1.0000). The following table sets forth the HVI from 1986 to 1995. HVS International, Mineola, New York Overview of External Forces 46 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 5-3 Hotel Valuation Index per Room - --------------------------------------------------------------------------------
Valuation Index Per Room 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 ------------------------------------------------------------------------------------------------------- Honolulu 3.3571 4.0357 4.6964 5.2857 5.3214 4.7857 4.9286 4.2857 4.3929 5.6071 New Orleans 1.5357 1.7500 2.2857 2.3929 2.5000 2.6071 3.2857 3.2500 3.8929 4.4286 New York 3.5714 4.1071 4.6429 4.5357 3.9286 3.0357 2.5714 2.5714 3.1429 4.1071 San Francisco 2.5000 3.0893 3.2500 3.0714 2.9286 2.5714 2.5714 2.9643 3.2143 4.0000 Phoenix 1.2143 1.0714 1.1786 1.5357 1.4286 1.2500 1.5000 1.9643 2.3571 3.2143 San Diego 2.8571 2.3571 2.5714 2.6786 2.3929 2.5357 2.5357 2.2143 2.3571 3.0357 Miami 1.4286 1.6071 1.7321 2.1429 2.1786 2.2500 2.5714 2.7857 2.3214 2.9286 Washington, DC 2.1786 2.1786 2.4464 2.6071 2.2500 1.8571 2.0357 2.5000 2.3929 2.8929 Atlanta 1.0714 1.0179 1.0536 1.0357 1.1429 1.1250 1.2857 1.7857 2.1429 2.6786 Minneapolis 0.7321 0.6964 0.7143 0.7143 0.7857 1.0000 1.2857 1.5714 1.8214 2.1786 Chicago 1.4643 1.5000 1.5714 1.5000 1.4286 1.2143 1.2500 1.5000 1.8571 2.1786 Boston 2.3571 2.7143 2.6071 2.1429 1.8214 1.2500 1.3036 1.3214 1.6071 2.1071 Fort Lauderdale 1.4643 1.2679 1.3214 1.4286 1.4821 1.3571 1.7143 1.8929 1.6071 1.9286 Orlando 1.5000 1.6429 1.9286 2.5000 2.5357 1.8929 2.0714 1.7857 1.6071 1.8929 Denver 0.5357 0.4464 0.4643 0.4821 0.7857 0.9268 1.0357 1.3214 1.5000 1.8571 Dallas 0.5536 0.6250 0.6607 0.7321 0.7857 0.7143 0.9643 1.0357 1.3214 1.7143 USA 1.0000 0.9464 1.0536 1.1250 1.0714 0.9214 0.9929 1.1429 1.3214 1.6071 Los Angeles 2.1071 2.2857 2.3929 2.4643 2.1786 1.5714 1.0714 0.9643 1.1964 1.5000 Tampa 0.8393 0.7679 0.8571 1.1429 1.2857 1.0357 1.0714 1.0357 1.1071 1.3214 Anaheim 1.7679 1.7321 1.7500 1.8571 1.6071 1.2857 0.9642 0.9464 0.8393 1.2500 Houston 0.3571 0.4286 0.6964 0.7857 1.1071 1.1607 1.1429 1.0357 1.0000 1.1786 Philadelphia 1.4643 1.5357 1.4286 1.3214 1.0714 0.6786 0.5714 0.6071 0.7500 1.0714 Norfolk 1.1786 1.0536 0.9286 0.7857 0.6429 0.5357 0.6071 0.6429 0.7500 0.9643 Riverside 0.9643 1.2143 1.5714 1.7143 1.4643 1.2500 0.7857 0.5357 0.4286 0.5357
Source: HVS International - -------------------------------------------------------------------------------- The HVI can be used to show the value change in a particular market over time or to show the relative difference in hotel values in various cities. The following table shows the annual change in hotel values in 23 major markets and the United States as a whole. HVS International, Mineola, New York Overview of External Forces 47 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 5-4 Percent Change in the Hotel Valuation Index - -------------------------------------------------------------------------------- Annual Percent Change
'86-87 '87-88 '88-'89 '89-'90 '90-'91 '91-'92 '92-'93 93-'94 '94-'95 '86-'95 - ----------------------------------------------------------------------------------------------------------- Honolulu 20 % 16 % 13 % 1 % -10 % 3 % -13 % 3 % 28 % 67 % New Orleans 14 31 5 4 4 26 -1 20 14 188 New York 15 13 -2 -13 -23 -15 0 22 31 15 San Francisco 24 5 -5 -5 -12 0 15 8 24 60 Phoenix -12 10 30 -7 -13 20 31 20 36 165 San Diego -18 9 4 -11 6 0 -13 6 29 6 Miami 12 8 24 2 3 14 8 -17 26 105 Washington, DC 0 12 7 -14 -17 10 23 -4 21 33 Atlanta -5 4 -2 10 -2 14 39 20 25 150 Minneapolis -5 3 0 10 27 29 22 16 20 198 Chicago 2 5 -5 -5 -15 3 20 24 17 49 Boston 15 -4 -18 -15 -31 4 1 22 31 -11 Fort Lauderdale -13 4 8 4 -8 26 10 -15 20 32 Orlando 10 17 30 1 -25 9 -14 -10 18 26 Denver -17 4 4 63 18 12 28 14 24 247 Dallas 13 6 11 7 -9 35 7 28 30 210 USA -5 11 7 -5 -14 8 15 16 22 61 Los Angeles 8 5 3 -12 -28 -32 -10 24 25 -29 Tampa -9 12 33 12 -19 3 -3 7 19 57 Anaheim -2 1 6 -13 -20 -25 -2 -11 49 -29 Houston 20 62 13 41 5 -2 -9 -3 18 230 Philadelphia 5 -7 -8 -19 -37 -16 6 24 43 -27 Norfolk -11 -12 -15 -18 -17 13 6 17 29 -18 Riverside 26 29 9 -15 -15 -37 -32 -20 25 -44
Source: HVS International - -------------------------------------------------------------------------------- On a national basis, hotel values rose in 1988 and 1989, then declined in 1990 and dropped by 14% in 1991. A turnaround commenced in 1992, when values increased by 8%; still greater increases of 15% in 1993, 16% in 1994, and 22% in 1995 signaled that a recovery was well underway. In the case of the individual cities, it is obvious that the movement in national hotel values has been offset somewhat by trends in local markets. Between 1986 and 1995, Riverside hotels lost more than 40% of their value, while San Francisco showed a 60% increase. Anaheim, Los Angeles, and Philadelphia also suffered significant drops. Future Trends Most hotel owners, operators and lenders agree that the U.S. lodging industry has emerged from one of the worst periods since the Depression of 1929. Today, there are many indications that signal a strong recovery is underway, and most hotels have experienced a dramatic rise in profitability. Conversely, the hotel industry remains cyclical, and there are long-term trends and risk factors that could have an unfavorable impact on the operating results and investment potential of lodging facilities. The following HVS International, Mineola, New York Overview of External Forces 48 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= list summarizes the positive and negative factors that are likely to influence the U.S. lodging industry in coming years. o No significant amount of new hotel development is likely to occur during the next three to five years. Lenders stopped financing new hotels in the early 1990s because of the high rate of loan defaults, and they are only now starting to make construction loans. Although mortgage funds are available to refinance existing properties and construction loans are being made for economy hotels, mortgages for new hotels in the mid-rate, first-class, and luxury categories are still difficult to secure. This lack of financing is major barrier to entry, and will prevent a number of proposed projects from moving forward. With only a slow increase in supply, hotel occupancies should rebound as fast as the growth in demand permits. o An additional barrier to entry is the current discrepancy between market values and replacement costs for first-class and luxury hotels. In today's market, many upscale hotels are still selling for prices that are below what it would cost to develop a comparable hotel. As a result, there is little justification for building a new hotel when a similar, existing facility is available for sale at some fraction of the cost. Until the gap between market value and replacement cost narrows, there will be minimal new hotel construction in the upper-tier segments. The market values and replacement costs of budget and economy hotels have been in equilibrium for several years which is another reason why new development is proceeding in these segments. o The U.S. economy continues to improve, which suggests that more people are traveling. Many people curtailed their travel plans during the recent recession, and there is likely to be pent-up demand that will be released as consumer confidence escalates. o Minimal additions to the hotel supply coupled with growth in demand should result in further improvement in occupancies during the next several years. o As shown by the historical data, hotel room rates rise rapidly as occupancies escalate. The most frequent complaint that owners and operators had during the recent recession was their inability to achieve average rate gains. Starting in 1994, gains in hotel room rates returned to levels in excess of inflation, foreshadowing enhanced profitability. In real dollars, hotel room rates are expected to return to 1988 levels by 1998. This HVS International, Mineola, New York Overview of External Forces 49 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= is a good indication that hotel values will return to record levels in the next two to four years. o The low cost of capital is another factor that tends to enhance value. Because capitalization rates are tied directly to the price of capital, the lower the cost, the lower the cap rate and the higher the value. The cost of hotel debt capital averaged 10.5% in 1990. Today, similar financing is available at 8.5% to 9.5%. Recent hotel sales support the downward trend in capitalization rates. o Government regulations are becoming increasingly expensive for the U.S. hotel industry. A national health care policy could force small operators to provide better benefits for many more employees, particularly the part-time workers who are used extensively by hotels and restaurants. Environmental laws are becoming stricter and will require hotels to implement recycling, reuse, and conservation procedures. Congress has limited deductions for meals and entertainment expenses, which increases the cost of doing business in hotels and restaurants. Local municipalities use hotel rooms taxes as a source of revenue for general use, and the hotel rooms tax is so high in some areas that it has driven away demand. This is particularly true with respect to meetings and conventions, which can be held in cities that tax accommodations at a lower rate. o Improved technology is rapidly changing the way business is conducted. During the next decade, advances such as video communication, enhanced data transfer, and faster transportation are expected to limit the need for face-to-face meetings and shorten the time that executives are away from their offices. Commercial hotels are bound to be influenced by this trend. Conclusion Interest in hotel acquisition has increased significantly during the past several years. Buyers have concluded that future earnings trends are likely to be favorable, and the risks posed by overbuilding or an economic downturn are small. Some sellers are holding their properties until prices reach a higher level. Consequently, we believe there is pent-up desire to sell once prices begin to approach levels that allow the existing (or restructured) debt to be paid off. The fact that numerous buyers are chasing very few acquisition opportunities has had a favorable impact on recent sales prices. For buyers to be successful in this highly competitive market, their projected operating results HVS International, Mineola, New York Overview of External Forces 50 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= must take into account at least a portion of any upside created from improved performance, particularly if the improvement can be readily achieved through management efficiencies. Capitalization rates based on historical operating income have fallen during the past several years. Hotel buyers in today's market must be aggressive in all of their acquisition assumptions. As a result, hotel values in some parts of the country are approaching the levels registered during the mid-1980s, and a full recovery is expected to occur in the next two to four years. HVS International, Mineola, New York Lodging Market Supply and Demand 51 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 6. Lodging Market Supply and Demand Analysis MARKET FOR TRANSIENT ACCOMMODATIONS The market for transient accommodations is an all-encompassing term referring to the many types of travelers who use lodging facilities in a given area. These travelers represent the market's accommodated room night demand. This section will begin with an analysis of historical demand trends to determine what changes have occurred; the historical number of competitive hotel rooms will then be estimated to evaluate local supply trends. Areawide occupancy levels can be calculated based on the number of hotel rooms available in the market and the demand for lodging accommodations. The total hotel room night demand will be divided into individual market segments to allow us to forecast growth rates based on the economic and demographic data set forth earlier in this report. Historical Supply and Demand Data Smith Travel Research (STR) has compiled historical supply and demand data for the subject property and its competitors. This information is presented in the following table, along with the marketwide occupancy, average rate, and rooms revenue per available room (RevPAR). RevPAR is calculated by multiplying occupancy by average rate, and provides an indication of how well rooms revenue is being maximized. HVS International, Mineola, New York Lodging Market Supply and Demand 52 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 6-1 Historical Room Supply and Demand Trends (STR) - --------------------------------------------------------------------------------
Year to Date ----------------- 1989 1990 1991 1992 1993 1994 1995 1995 1996 - ---------------------------------------------------------------------------------------------------------------------------- Number of Rooms 1,537 1,855 1,884 1,884 1,884 1,884 1,884 1,884 1,884 Annual Guestroom Supply 561,005 676,903 687,660 687,660 687,660 687,660 687,660 457,812 457,812 Percent Change -- 20.7% 1.6% 0.0% 0.0% 0.0% 0.0% -- 0.0% Room Night Demand 399,997 411,557 409,158 429,100 446,979 475,173 479,299 315,432 325,047 Percent Change -- 2.9% (0.6)% 4.9% 4.2% 6.3% 0.9% -- 3.0% Occupancy 71.3% 60.8% 59.5% 62.4% 65.0% 69.1% 69.7% 68.9% 71.0% Percent Change -- (14.7)% (2.1)% 4.9% 4.2% 6.3% 0.9% -- 3.0% Average Rate $ 81.07 $ 78.57 $ 71.27 $ 68.47 $ 67.25 $ 69.67 $ 74.60 $72.47 $ 80.73 Percent Change -- (3.1)% (9.3)% (3.9)% (1.8)% 3.6% 7.1% -- 11.4% RevPAR $ 57.80 $ 47.77 $ 42.41 $ 42.73 $ 43.71 $ 48.14 $ 52.00 $49.93 $ 57.32 Percent Change -- (17.4)% (11.2)% 0.8% 2.3% 10.1% 8.0% -- 14.8%
Average Annual Average Annual Compounded Growth Compounded Growth 1989 - 1995 1992 - 1995 - ------------------------------------------------------------- Number of Rooms Annual Guestroom Supply Percent Change 3.5% 0.0% Room Night Demand Percent Change 3.1% 3.8% Occupancy Percent Change -0.4% 3.8% Average Rate Percent Change -1.4% 2.9% RevPAR Percent Change -1.7% 6.8% The 347-room Crowne Plaza Hotel opened in February of 1990 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Lodging Market Supply and Demand 53 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= It is important to note some limitations of the STR data. Hotels are occasionally added to or removed from the sample, and not every property reports data in a consistent and timely manner; these factors can influence the overall quality of the information by skewing the results. These inconsistencies may also cause the STR data to differ from the results of our competitive survey. Nonetheless, we find that hotel buyers often rely on STR statistics, and thus they are considered relevant to this study. As indicated in the preceding table, room supply in the market area has remained relatively stable in recent years. The only change to the room supply occurred in 1990, when the 347-room Crowne Plaza opened. Because the Crowne Plaza opened in February of 1990, an addition to the room supply of 318 rooms was reflected in 1990, while the total 347 rooms was reflected in 1991. These additions equated to increases in room supply of 20.7% and 1.6% in 1990 and 1991, respectively. With the exception of 1991, room night demand has shown increases in each year since 1989. The 0.6% decrease in room demand in 1991 can be attributed to the nationwide recession that occurred in that year as well as the Persian Gulf War, both of which adversely affected travel. The market recovered in 1992, when demand climbed by 4.9%, and continued to show growth in 1993 and 1994, when demand increased by 4.2% and 6.3%, respectively. Although growth in demand slowed to 0.9% in 1995, year-to-date data through August, 1996 indicates an increase in demand of 3.0%. Between 1989 and 1995, room night demand increased by an average annual compounded rate of 3.1%. Although growth in demand has resulted in corresponding growth in occupancy since 1992 (as a result of stable room supply), demand and supply dynamics adversely impacted occupancy in 1990 and 1991. When the Crowne Plaza Hotel opened in 1990, demand did not grow sufficiently to absorb the expansion in room supply. As supply increased by 20.7%, demand only grew by 2.9%, resulting in a severe decline in market occupancy of 14.7%. In 1991, occupancy decreased by 2.1% due to an 1.6% increase in room supply and a 0.6% decrease in room night demand. Despite growth in demand in 1990 and in each year since 1992, the market has not yet fully absorbed the addition of the Crowne Plaza Hotel, as indicated by the 1995 market occupancy of 69.7%, which lags behind the 1989 occupancy level of 71.3%. The overall drop in occupancy from 71.3% in 1989 to 69.7% in 1995 represents an average annual compounded decline of 0.4%. With year-to- HVS International, Mineola, New York Lodging Market Supply and Demand 54 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= date 1996 data indicating a 3.0% increase in demand, occupancy appears to be climbing near the 1989 occupancy level. In response to the opening of the Crowne Plaza and the resulting decline in occupancy, as well as the recession that occurred in 1991, hotels in the market lowered rates in an effort to gain a competitive advantage and thus boost occupancy. Average rate in the market declined in each year between 1990 and 1993, with the greatest decrease occurring in 1991, when average rate decreased by 9.3%. As occupancy neared the 70% level in 1994 and 1995, average rate increased by 3.6% and 7.1%, respectively. Year-to-date data indicates an 11.4% average rate increase over the same period in 1995. Overall, average rate in the market declined at an average annual compounded rate of 1.4% from 1989 to 1995. Our analysis of STR indicates that while the market suffered a severe downturn in the early 1990s - as a result of a dilution of demand from increased supply, the national recession, and the Gulf Crisis - the area lodging market has nearly recovered to 1989 levels. Room demand and occupancy demonstrated fairly strong growth between 1992 and 1995, with both increasing at an average annual compounded rate of 3.8%. Growth in average rate has followed demand and occupancy growth. While average rate increased at an average annual compounded rate of 2.9% from 1992 to 1995, the strongest growth has occurred since 1995, with average rate increasing 7.1% in 1995 and 11.4% for year-to-date August, 1996. Demand Analysis Using Market Segmentation For the purpose of demand analysis, the overall market is divided into individual segments based on the nature of travel. Although a market may have various segments, the three primary classifications occurring in most areas are commercial, meeting and group, and leisure. Market segmentation is a useful procedure because individual classifications often exhibit unique characteristics in terms of growth potential, seasonality of demand, average length of stay, double occupancy, facility requirements, price sensitivity, and so forth. By quantifying the room night demand by market segment and analyzing the characteristics of each segment, the overall demand for transient accommodations can be projected. Lodging demand in the Woburn area is generated primarily by the following three market segments. HVS International, Mineola, New York Lodging Market Supply and Demand 55 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Segment 1: Commercial Segment 2: Meeting and Group Segment 3: Leisure Based on our fieldwork, area analysis, and knowledge of the local lodging market, we estimate the 1996 distribution of accommodated hotel room night demand as follows. ================================================================================ Table 6-2 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- 1996 Annual Room Night Demand (Rounded) ------------------------------------------------------------- Percentage Percentage Market Segment Market Wide of Total Subject Property of Total - -------------------------------------------------------------------------------- Commercial 194,000 68% 16,000 58% Meeting and Group 38,000 13 3,000 10 Leisure 54,000 19 9,000 32 ------- ---- ------ --- Total 285,000 100% 28,000 100% - -------------------------------------------------------------------------------- Commercial demand predominates in the local lodging market, accounting for approximately 68% of the 1996 room night demand. Leisure demand follows the commercial segment with a 19% share of room night demand, while meeting and group demand contributes a relatively strong 13% of the estimated 1996 total. The subject property's demand segmentation differs from that of the market to some degree. Approximately 58% of the Howard Johnson's occupancy is derived from the commercial segment. The leisure segment comprises 32% of the subject property's demand, a share that is substantially higher than the market leisure demand segment, and roughly 10% of the subject property's demand is generated from the meeting and group segment. The subject property's relatively high percentage of leisure demand is partially attributable to several factors: its location next to a major interstate highway, its proximity to Boston, and the existence of whirlpool baths in 24 of its guestrooms. Using the distribution of accommodated hotel demand as a starting point, we will analyze the characteristics of each market segment in an effort to determine future trends in room night demand. HVS International, Mineola, New York Lodging Market Supply and Demand 56 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Commercial Segment The commercial segment consists of individual businesspeople who are visiting various firms in the subject property's market. Commercial demand is strongest Monday through Thursday nights, declines significantly on Friday and Saturday, and increases somewhat on Sunday. The typical length of stay ranges from one to three days, and the rate of double occupancy is a low 1.2 to 1.3 people per room. Commercial demand is relatively constant throughout the year, although some declines are noticeable in late December and during other holiday periods. In general, commercial travelers are not overly rate-sensitive, and will make use of a hotel's food and beverage outlets and recreational facilities. The commercial segment represents a highly desirable and lucrative market that provides a consistent level of demand at relatively high room rates. Commercial demand in the subject property's market is generated by a wide variety of corporations, with the computer industry and other high-technology employers exhibiting some dominance. Many of the companies are located in the business parks situated along the Interstate 95 corridor and in the vicinity of the I-93/I-95 interchange. Firms that generate lodging demand in the area include Sybase, IBM, USA Today, AW Chesterton, Hewlett Packard, Lahey Hitchcock Clinic, McDonnell Douglas, and Motorola. The subject property is located in close proximity to Cummings and Unicorn business parks, which provide a strong commercial demand base. Also providing demand is Hanscom Air Force Base, which has increased its work force by roughly 300 people in recent years as a result of personnel transfers from closed federal bases. As previously noted, the area has suffered from the effects of defense cutbacks and the nationwide recession, which curtailed commercial activity in the area in the early 1990s. However, indications of a full economic recovery are evident with the proposed IndustryPlex business park development on Commerce Way and the low commercial vacancy rates in Woburn as indicated by city planning officials. Based on the economic and demographic data presented earlier in the Market Area Analysis section, we estimate that commercial hotel demand in the Woburn market rose at rates ranging from 5% to 6% annually during the early 1980s, followed by a period of decline as a result of the dramatic downturns which affected the high-tech industries in the region. In conjunction with the recovery from the national recession of the early 1990s and slower growth in the local economy, commercial demand in the recent past has increased more moderately. As the national and international economy continue to improve and prominent local businesses increase HVS International, Mineola, New York Lodging Market Supply and Demand 57 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= their production and employment levels, commercial hotel demand is expected to grow steadily. Smith Travel Research estimates that total hotel demand in the competitive market rose by an average annual compounded rate of 3.8% between 1992 and 1995. We project that commercial demand (which comprises approximately 68% of the total market) will increase by 3% in 1997. Thereafter, we project continued commercial demand growth of 3% during 1998 and 1999 before stabilizing at 2% annually in subsequent years. Meeting and Group Segment The meeting and group market includes meetings, seminars, conventions, trade association shows, and similar gatherings of ten or more people. Peak convention demand typically occurs in the spring and fall. Because of vacations, the summer months represent the slowest period for this market segment; winter demand varies. The average length of stay for typical meetings and groups ranges from three to five days. Most commercial groups meet during the weekday period of Monday through Thursday, but associations and social groups will sometimes gather on weekends. Commercial groups tend to have a low double occupancy of 1.3 to 1.5 people per room, while social groups are likely to have double occupancy rates ranging from 1.5 to 1.9. Meeting and group demand in Woburn is generated primarily by local businesses and includes functions such as training sessions, product announcements, meetings, and seminars. Most of these meetings are small, and range from 15 to 20 persons. Non-commercial groups such as civic associations and professional societies are a secondary source of meeting and group demand. Such meetings often range from 75 to 250 persons. Most of the meetings and group functions in Woburn are held at local hotels. Because the subject property offers only +/-4,400 square feet of meeting space, participation in this segment is inherently limited. Meeting and group patronage is quite profitable for hotels. Although room rates are discounted for large groups, the property benefits from the use of meeting space and the revenues generated by in-house banquets and cocktail receptions. Facilities that are necessary to attract meetings and groups include function areas with adequate space for breakout, meals, and receptions; recreational amenities; and a sufficient number of guestrooms to house the attendees. Future meeting and group demand is closely related to growth in the commercial segment. Because most meetings have either a direct or an indirect HVS International, Mineola, New York Lodging Market Supply and Demand 58 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= business purpose, the economic considerations that have an impact on commercial travel also affect meeting and group demand. The exception is non-commercial meetings, which are tied to the economic factors that influence leisure travel. It should be noted that meetings and similar events are booked in advance, and thus growth in this segment tends to lag slightly behind increases in commercial demand. Historically, meeting and group demand in the Woburn area is estimated to have increased at a rate slower than the overall average annual compounded rate of 3.8% achieved by the market. In light of this information and the relevant economic and demographic trends, we estimate that meeting and group demand in the subject property's market area will increase by a stable rate of 2% annually. Leisure Segment The leisure market segment consists of individuals and families who are spending time in the area or passing through en route to other destinations. Their travel purposes may include sightseeing, recreation, visiting friends and relatives, or numerous other non-business activities. Leisure demand is strongest Friday and Saturday nights and all week during holiday periods and the summer months. These peak periods are negatively correlated with commercial visitation, underscoring the stabilizing effect of capturing weekend and summer tourist travel. The typical length of stay ranges from one to four days, depending on the destination and travel purpose, and the rate of double occupancy generally ranges from 1.8 to 2.5 people per room. Leisure travelers tend to be the most price-sensitive segment in the lodging market. They often prefer low-rise accommodations where parking is convenient to the rooms, and they typically demand extensive recreational facilities and amenities. Ease of highway access and proximity to tourist attractions are important locational considerations. Leisure demand in the subject property's market is generated by travelers who stay in Woburn to visit local attractions or by travelers who are visiting Boston but select lodging accommodations in Woburn. These travelers are generally drawn to the Woburn market area by its proximity and ease of access to the many tourist attractions in the Boston area, together with the availability of significantly lower rates than those charged by hotels in the city itself. Future leisure demand is related to the overall economic health of the nation. Trends showing changes in state and regional unemployment and disposable personal income often have a strong impact on non-commercial HVS International, Mineola, New York Lodging Market Supply and Demand 59 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= visitation. Traffic counts on nearby highways and attendance at local attractions can also form a basis for projections. Although Middlesex County residents enjoy considerable disposable income, there are few leisure attractions in the subject property's immediate neighborhood. In addition, the ongoing construction at Logan Airport and on Boston's highways is anticipated to create traffic congestion and cause travel inconveniences; therefore, we do not anticipate significant growth in this segment. In light of these factors and the overall commercial orientation of the area, we estimate that future leisure demand will increase at a rate of 1% throughout the projection period. Conclusion The purpose of segmenting the lodging market is to define each major type of demand, identify customer characteristics, and estimate future growth trends. Starting with an analysis of the local area, three segments were defined as representing the subject property's lodging market. Various types of economic and demographic data were then evaluated to determine their propensity to reflect changes in hotel demand. Based on this procedure, we forecast the following average annual compounded market segment growth rates. ================================================================================ Table 6-3 Average Annual Compounded Market Segment Growth Rates - -------------------------------------------------------------------------------- Annual Compounded Growth Rate ------------------------------------------------------ 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Commercial 3.0% 3.0% 3.0% 2.0% 2.0% 2.0% Meeting and Group 2.0 2.0 2.0 2.0 2.0 2.0 Leisure 1.0 1.0 1.0 1.0 1.0 1.0 Annual Average Growth 2.5% 2.5% 2.5% 1.8% 1.8% 1.8% - -------------------------------------------------------------------------------- These growth rates will be used in subsequent sections of this study to forecast changes in lodging demand. COMPETITION An integral component of the supply and demand relationship that has a direct impact on the availability of lodging demand is the current and anticipated supply of competitive lodging facilities. The suburban region of the greater Boston metropolitan area is served by a wide array of lodging facilities. In general, these hotel are situated near or within the larger concentration of office space and/or along the major highways which serve the HVS International, Mineola, New York Lodging Market Supply and Demand 60 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= region. The subject property is located along Interstate 93, approximately 1.5 miles south of Interstate 95. In this location, the subject Howard Johnson competes with other hotels situated along Interstates 95 and 93 for demand generated by the businesses located along these corridors. We have identified five properties that are considered primarily competitive with the Howard Johnson. Including the subject property, these primary competitors total 816 rooms. Four additional lodging facilities are judged to be only secondarily competitive; although the facilities, rate structures, or market orientations of these hotels prevent their inclusion among the primarily competitive supply, they do compete with the subject property to some extent. The room count of each secondary competitor has been weighted to reflect the degree to which it competes with the Howard Johnson; the aggregate weighted room count of the secondary competitors is 296 rooms. Primary Competitors The following table summarizes the important operating characteristics of the primary competitors and the aggregate secondary competitors. This information was compiled from personal interviews, inspections, lodging directories, and our in-house library of operating data. The table also sets forth each property's penetration factors; penetration is the ratio between a specific hotel's operating results and the corresponding data for the market. If the penetration factor is greater than 100%, the property is performing better than the market as a whole; conversely, if the penetration is less than 100%, the hotel is performing at a level below the marketwide average. HVS International, Mineola, New York Lodging Market Supply and Demand 61 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 6-4 Primary Competitors and Aggregate Secondary Competitors - --------------------------------------------------------------------------------
Estimated 1996 Market Segmentation Estimated 1995 ------------------------ --------------------------- Number Year Meeting Meeting Meeting Average Property/Location of Rooms Opened Space Space/Room Comm. & Group Leisure Occupancy Rate Rev PAR - ----------------------------------------------------------------------------------------------------------------------------- Subject Property 1 Mack Road 100 1972 4,431 44 58 % 10 % 32 % 68.6 % $58.69 $40.26 Ramada Plaza Hotel 15 Middlesex Canal Park 196 1974 5,328 27 50 35 15 60.0 51.00 30.60 Red Roof Inn 19 Commerce Way 159 1974 Minimal N/A 75 5 20 73.0 55.00 40.15 Suisse Chalet 285 Mishawum Road 129 1984 Minimal N/A 70 10 20 60.0 50.00 30.00 Comfort Inn 315 Mishawum Road 100 1975 Minimal N/A 70 5 25 68.0 56.00 38.08 Howard Johnson Burlington 98 Middlesex Turnpike 132 1968 Minimal N/A 75 5 20 69.0 69.00 47.61 - ----------------------------------------------------------------------------------------------------------------------------- Sub-Totals and Averages 816 66 % 13 % 21 % 66.0 % $56.37 $37.22 Secondary Competition 296 73 % 14 % 13 % 73.0 % $91.13 $66.52 Totals/Averages 1112 68 % 13 % 19 % 67.9 % $66.31 $45.00 Estimated 1996 --------------------------------------------------------- Average Occupancy Yield Property/Location Occupancy Rate Rev PAR Penetration Penetration - ------------------------------------------------------------------------------------- Subject Property 1 Mack Road 74.0 % $65.00 $48.10 105.5 % 96.0 % Ramada Plaza Hotel 15 Middlesex Canal Park 61.0 62.00 37.82 86.9 75.5 Red Roof Inn 19 Commerce Way 75.0 52.00 39.00 106.9 77.8 Suisse Chalet 285 Mishawum Road 63.0 51.00 32.13 89.8 64.1 Comfort Inn 315 Mishawum Road 67.0 57.00 38.19 95.5 76.2 Howard Johnson Burlington 98 Middlesex Turnpike 69.0 75.00 51.75 98.3 103.2 - ------------------------------------------------------------------------------------- Sub-Totals and Averages 67.7 % $60.16 $40.71 96.4 % 81.2 % Secondary Competition 77.0 % $98.74 $76.03 109.7 % 151.7 % Totals/Averages 70.2 % $71.44 $50.12 100.0 % 100.0 %
- -------------------------------------------------------------------------------- [GRAPHIC OMITTED] COMPETITION MAP HVS International, Mineola, New York Lodging Market Supply and Demand 62 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Our survey of the primarily competitive hotels in the Woburn market shows a representation of nationally recognized, franchised lodging chains. These properties range in size from 100 to 196 rooms, and their ages range from 12 to 28 years old. The market demand has a commercial orientation; in 1996, this segment is estimated to contribute 66% of the overall occupancy. The leisure segment comprised 21% of the total, followed by the meeting and group segment (at 13%). In 1996, the primary competitors achieved an overall occupancy of 67.7% at an average rate of $60.16, yielding RevPAR of $40.71. The subject property outperforms the market in terms of occupancy, average rate, and RevPAR, placing second among the primary competitive set in each category. The Red Roof Inn generates the greatest occupancy, with an estimated 1996 occupancy of 75% and an occupancy penetration of 106.9%, followed by the subject property at 74% and 105.5%, respectively. The Howard Johnson Burlington leads the primary competitive set in terms of average rate (1996 average rate of $75), due to its highly favorable location on Interstate 95, which allows the property to capture more commercial demand. The subject property places second with a 1996 average rate of $65. As a result of its strong average rate, the Howard Johnson Burlington outperforms the competitive set in terms of RevPAR, as indicated by its yield penetration of 103.2. The Suisse Chalet is the poorest performer in the market; this property's low occupancy and average rate can be attributed to its less-recognized brand name and its greater distance from an I-95 exit in comparison to its competitors. Each primary competitor was inspected and evaluated. Descriptions of our findings are presented below. Ramada Plaza Hotel The Ramada Plaza Hotel, a full-service hotel located off Interstate 95, was purchased by Ashford Financial Corporation in October of 1994 as a Ramada Inn. Reportedly, at the time of the sale, the hotel was in poor condition. The property underwent renovations in 1995, including upgrades to the guestrooms, lobby, and public space, and was recently upgraded to a Ramada Plaza Hotel. Currently managed by Remington Employers Corporation, the property's facilities include 196 rooms, a restaurant, a lounge, over 5,300 square feet of meeting space, an indoor heated swimming pool, and health facilities. It should be noted that the Ramada Plaza Hotel is presently owned and managed by the same entities as the subject property. HVS International, Mineola, New York Lodging Market Supply and Demand 63 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Located approximately two miles northwest of the subject property, the Ramada Plaza Hotel features fair visibility from northbound Interstate 95 due to the low-rise nature of the property; the property is not visible from southbound I-95. In terms of occupancy and average rate, the property has improved since the renovations, but is still underperforming in comparison to its competitors. The 1996 occupancy and average rate is estimated to be 61% and $62. The Ramada Inn derives approximately 50% of its room night demand from commercial business, 35% from the meeting and group segment, and 15% from leisure travelers. Red Roof Inn Woburn The Red Roof Inn is strategically located near the intersection of Interstates 93 and 95, less than two miles north of the subject property. Formerly a Days Inn, the property was acquired by Red Roof, Inc. in November of 1995. The new owner subsequently renovated the property, including the removal of the restaurant and meeting and banquet space, the refurbishing of the guestrooms, and the upgrading of the exterior. The property features 159 guestrooms, one meeting room with a maximum capacity of 25 people, and an indoor, heated swimming pool. The adjacent land where the former restaurant and function space were situated is being leased to a national restaurant company which is currently constructing On the Border, a restaurant that will feature Mexican cuisine. Although management representatives report a loss of some corporate contract business as a result of the conversion from a Days Inn to a Red Roof Inn, the property is expected to maintain its leading occupancy position in the primary competitive set of hotels. Although visibility of the property from Interstate 95 is poor, access to the property is favorable due to its close proximity to the interstate exit. We estimate the property's occupancy to be 75% and its average rate to be $52 for 1996. In addition, we estimate that the property derives 75% of its demand from the commercial segment, followed by 20% from the leisure segment, and 5% from the meeting and group segment. Suisse Chalet Woburn The Suisse Chalet is owned by Telahc Properties L.P. and managed by Suisse Chalet International, Inc. Like the Red Roof Inn, this property is located near the I-93/I-95 interchange. In addition, this property is situated in close proximity to the Logan Airport Bus Terminal and the Boston commuter train station. According to management representatives, the hotel underwent a $400,000 renovation of the guestrooms and hallways in 1994 and a $30,000 upgrading of its lobby in 1995. As a result, the facilities are HVS International, Mineola, New York Lodging Market Supply and Demand 64 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= comparable to those found in the competitive hotels. The facilities at the Suisse Chalet include 129 guestrooms and an outdoor swimming pool. Visibility of the Suisse Chalet from Interstate 95 is excellent, however, access to the property is less favorable than the Red Roof Inn and the Comfort Inn, both of which are situated closer to the interstate exit. The 1996 occupancy and average rate is estimated to be 63% and $51, respectively. We estimate that 70% of the property's demand is generated from the commercial segment, 10% from the meeting and group segment, and 20% from leisure travelers. Comfort Inn Woburn The Comfort Inn is located across from the Red Roof Inn, in close proximity to the Suisse Chalet. The leasehold interest of the property was sold to Innkeepers, Inc. in August of 1996 from 128 Motel Corp. The property is scheduled to be converted to a Hampton Inn and will close in November, 1996 for approximately eight months for renovations. Facilities at the Comfort Inn include 100 rooms, a restaurant, and a lounge. Visibility of the property is excellent from I-95 and access is highly favorable. With the planned renovations and the reflagging of the property to a Hampton Inn (a strong, highly recognized brand), the property should be able to improve its position in the market. The property's 1996 occupancy and average rate are estimated to be 67% and $57, respectively. We estimate that the property derives 70% of its room night demand from commercial travelers, 25% from leisure demand, and 5% from group and meeting attendees. Howard Johnson Burlington The Howard Johnson Burlington is located on Middlesex Turnpike, opposite the Burlington Mall in the City of Burlington, approximately six miles west of the subject property. The property is owned and managed by the Crystal Group and features 132 guestrooms, a restaurant, a lounge, a swimming pool, and a fitness room. Although the property is the oldest of the primary competitive set, continual maintenance and upgrading of the guestrooms has allowed the property to remain highly competitive. The current franchise agreement expires within two years and management representatives report that it has not been decided whether the Howard Johnson brand will be retained. Although this property ranks as one of the top performing Howard Johnsons in the country, ownership and management are concerned about the brand's reputation and appeal, especially with young corporate professionals. Reportedly, HFS has offered the HVS International, Mineola, New York Lodging Market Supply and Demand 65 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= property interest-free financing for funds to completely renovate the property's interior and exterior. Visibility of the Howard Johnson from Middlesex Turnpike is excellent because the property is situated on a slope above the grade of the road. We estimate the property's occupancy and average rate to be 69% and $75, respectively, in 1996. The property's demand segmentation consists of 75% commercial demand, 20% leisure, and 5% meeting and group demand. Secondary Competitors The subject property's secondary competitors consist of four hotel properties, all of which feature higher room rate structures and more extensive amenities. One of the properties is the 120-room Courtyard by Marriott, which is situated just west of the Suisse Chalet and targets higher end corporate travelers. Three of the secondarily competitive properties are full-service hotels, consisting of the 345-room Crowne Plaza Hotel located approximately one mile north of the subject property along Interstate 93, the 419-room Marriott Burlington situated near I-95 less than one mile east of the Howard Johnson Burlington, and the 180-room Wyndham Garden Hotel located just southeast of the I-95 Middlesex Turnpike intersection. The three full-service properties are considered to be 25% competitive, while the Courtyard is considered to be 50% competitive with the subject property. The secondary competitors are estimated to capture 73% of their demand from the business travelers, 14% from meeting and group attendees, and 13% from leisure travelers. HVS International, Mineola, New York Lodging Market Supply and Demand 66 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 6-5 Secondary Competitors - --------------------------------------------------------------------------------
Estimated 1996 Market Segmentation Estimated 1995 Estimated 1996 Weighted ----------------------- -------------------------- -------------------------- Number Percentage Number Meeting Average Average Property of Rooms Competitive of Rooms Comm. & Group Leisure Occupancy Rate Rev PAR Occupancy Rate Rev PAR - ------------------------------------------------------------------------------------------------------------------------------------ Crowne Plaza Hotel 345 25 % 86 70 % 15 % 15 % 63 % $ 84.00 $52.92 73 % $ 90.00 $65.70 Courtyard by Marriott 120 50 60 80 5 15 83 85.00 70.55 81 92.00 74.52 Marriott Burlington 419 25 105 70 20 10 77 104.00 80.08 82 111.00 91.02 Wyndham Garden Hotel 180 25 45 75 10 15 69 80.00 55.20 68 93.00 63.24 - ------------------------------------------------------------------------------------------------------------------------------------ Totals/Averages 1064 296 73 % 14 % 13 % 73 % $ 91.13 $66.52 77 % $ 98.74 $76.03
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Lodging Market Supply and Demand 67 Analysis - ------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Proposed Competitors It is important to consider any new hotels that may have an impact on the subject property's operating performance. Based on our fieldwork in the market and our discussions with local hotel operators, developers, and government officials, we have identified one property that is proposed or under development in the Woburn area. It is reported that a 101-room Sierra Suites will be developed on 827 Main Street, just north of Interstate 95. The Woburn Planning Department reports that approval of the project appears favorable and that construction should start in Spring of 1997, with the opening of the hotel slated for the Summer of 1998. Based on the extended stay nature of the Sierra Suites product, the proposed property's distance from the subject property, and the higher rate structure of the proposed property, it is our opinion that the Sierra Suites will be 40% competitive with the subject property. Conclusion A review of historical demand trends in the subject property's area indicates that the market has shown signs of recovery from 1992 onwards, corresponding to the economic recovery nationwide. According to Smith Travel Research, these growth patterns have continued through August of 1996. While supply has remained constant over recent years, growth in demand has driven occupancy upwards, allowing the hotels in the market to follow with average rate increases. Based on our review of the local area, three market segments were defined within the subject property's lodging market. Growth rates for each market segment were forecasted based upon an analysis of the economic and demographic trends that appeared to significantly impact lodging demand. In general, demand is anticipated to increase at moderate rates throughout the projection period. We have identified five properties that are considered competitive with the subject hotel. The subject property has outperformed the overall market in the past in terms of occupancy, average rate, and RevPAR. Despite the completed and planned renovations scheduled at the majority of the competitive hotels, with an improved product and a strong marketing focus, we anticipate that the subject property will remain highly competitive in the market. We have also identified one proposed property in the area; however, due to the nature of the proposed product, we have deemed it to be only moderately competitive with the subject property. HVS International, Mineola, New York Projection of Occupancy and 68 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 7. Projection of Occupancy and Average Rate Historical Operating Performance The following table sets forth the subject property's historical occupancy, average rate, and RevPAR. For the purpose of comparison, we have also presented corresponding data (as provided by Smith Travel Research) for the competitive hotels described in the previous section. In addition to the annual percent change calculations, we have determined the subject property's occupancy, average rate, and RevPAR penetration factors. HVS International, Mineola, New York Projection of Occupancy and 69 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-1 Historical Trends - -------------------------------------------------------------------------------- Year to Date ------------------------ 1994 1995 1995 1996 - -------------------------------------------------------------------------------- Subject Property Occupancy 72.0 % 68.6 % 64.2 % 72.7 % Percent Change -- (4.7) % -- 13.3 % Occupancy Penetration 104.2 % 98.4 % 93.2 % 102.4 % Average Rate $ 51.85 $ 58.69 $ 56.76 $ 64.19 Percent Change -- 13.2 % -- 13.1 % Average Rate Penetration 74.4 % 78.7 % 78.3 % 79.5 % RevPAR $ 37.33 $ 40.26 $ 36.45 $ 46.69 Percent Change -- 7.8 % -- 28.1 % RevPAR Penetration 77.5 % 77.4 % 73.0 % 81.4 % Areawide (STR) Occupancy 69.1 % 69.7 % 68.9 % 71.0 % Percent Change -- 0.9 % -- 3.0 % Average Rate $ 69.67 $ 74.60 $ 72.47 $ 80.73 Percent Change -- 7.1 % -- 11.4 % RevPAR $ 48.14 $ 52.00 $ 49.93 $ 57.32 Percent Change -- 8.0 % -- 14.8 % - -------------------------------------------------------------------------------- Since 1994, the subject property has focused on increasing RevPAR. In 1995, in an effort to increase its RevPAR, the Howard Johnson sacrificed occupancy in return for higher average rate. As indicated in the above table, occupancy for the subject property declined by 4.7% in 1995, while occupancy for the area increased slightly by 0.9%; this resulted in a drop in the subject property's occupancy penetration from 104.2% in 1994 to 98.4% in 1995. However, the subject property substantially boosted average rate by 13.2% in 1995, which contributed to an increase in RevPAR of 7.8%. Because the competitive hotels as a whole experienced increases in both occupancy and average rate, areawide RevPAR climbed by 8.0%, or 0.2% above that of the subject property. Therefore, the subject property's RevPAR penetration declined slightly by 0.1%. HVS International, Mineola, New York Projection of Occupancy and 70 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Based on year-to-date data through August, 1996, the Howard Johnson has shown significant improvement in its ability to capture demand and increase room rates. Occupancy, average rate, and RevPAR have increased at higher rates than those experienced by the competitive set of hotels. While the area has shown a 3.0% occupancy increase in 1996 over 1995, the subject property has increased occupancy by 13.3%, which has boosted occupancy penetration from 93.2% in 1995 to 102.4% in 1996. At the same time, the Howard Johnson has continued its upward pressure on room rates, as indicated by its 13.3% increase in average rate in 1996. In comparison, the area has shown a 11.4% increase in average rate in 1996. The combined effects of occupancy and average rate changes for the subject property have resulted in its RevPAR climbing from 73.0% in 1995 to 81.4% in 1996. This equates to a 28.1% increase in RevPAR, which is significantly higher than the 11.4% increase experienced by the competitive set. Premise of the Projections To a certain degree, occupancy and rate attainment can be manipulated by management. For example, hotel operators may choose to lower rates in an effort to maximize occupancy. Our forecasts reflect an operating strategy that we believe would be implemented by competent hotel management to achieve an optimal mix of occupancy and average rate. Projected Room Night Demand Lodging demand and occupancy can be projected through a process known as room night analysis. A room night is a unit of hotel demand that equals one room that is occupied for one night. After estimating the number of room nights a hotel can be expected to attract during a 12-month period, we can determine occupancy by dividing the number of room nights of demand captured by the number of room nights available (calculated as the room count x 365). HVS International, Mineola, New York Projection of Occupancy and 71 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The total annual number of room nights occupied in the competitive hotels equates to the market's accommodated room night demand, as shown in the following table. ================================================================================ Table 7-2 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- 1996 Annual Room Night Demand (Rounded) ------------------------------------------------------------- Percentage Percentage Market Segment Market Wide of Total Subject Property of Total - -------------------------------------------------------------------------------- Commercial 194,000 68% 16,000 58% Meeting and Group 38,000 13 3,000 10 Leisure 54,000 19 9,000 32 ------- ---- ------ --- Total 285,000 100% 28,000 100% - -------------------------------------------------------------------------------- Latent Demand The previous table illustrates the accommodated room night demand in the subject property's competitive market. Because this estimate is based on occupancies, it includes only those hotel rooms that were used by guests. Latent demand considers guests who could not be accommodated by the existing competitive supply, and can be divided into unaccommodated demand and induced demand. Based on our fieldwork and our discussions with the area's general managers, we believe an insignificant amount of latent demand exists in the Woburn market. Demand Adjustment As discussed in the section entitled Lodging Market Supply and Demand Analysis, the Comfort Inn will be closing from November, 1996 until the Summer of 1997 for renovation and conversion into a Hampton Inn. The market room night demand must be adjusted downward to account for the demand lost from the Comfort Inn's guestroom closing. Although the competitive set of hotels will be able to capture some of the Comfort Inn's lost demand, a significant portion of the demand will inevitably escape the market since the area's hotels will only have limited amounts of available rooms to accommodate the additional demand. For example, on Tuesday and Wednesday nights, when demand from the commercial segment is strongest, the area's hotels will likely operate at or near capacity, with few rooms available to accommodate guests who would have stayed at the Comfort Inn. Furthermore, guests will also be lost as the central reservation system serving the Comfort Inn refers guests to Comfort Inns, or other Choice Hotel brands, located in other nearby areas. HVS International, Mineola, New York Projection of Occupancy and 72 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= As indicated in the following table, room night demand in the commercial segment is adjusted downward by 10,000 room nights in 1997 as a result of the temporary closing of the Comfort Inn. ================================================================================ Table 7-3 Demand Adjustment - -------------------------------------------------------------------------------- 1997 1998 1999 - ------------------------------------------------------------------ Phase-in: 100% 0% 0% Commercial (10,000) 0 0 Meeting and Group 0 0 0 Leisure 0 0 0 ------- ---- ---- Total (10,000) 0 0 - -------------------------------------------------------------------------------- Total Usable Room Night Demand Total usable room night demand is estimated by combining accommodated demand and usable latent demand. Usable latent demand is that portion of latent demand that can be absorbed based on the number of existing and proposed hotel rooms in the market. Based on the established demand growth rates set forth in the previous section of this report, as well as the projected drop in demand resulting from the temporary closing of the Comfort Inn, total usable room night demand is expected to decline by 1.0% in 1997. With the projected growth in marketwide demand and the reopening of the Comfort Inn property, total usable demand is forecasted to climb by 6.1% in 1998. Although the increase in demand for 1998 appears high, it is important to note that a substantial portion of the demand increase results from the room nights returning to the Comfort Inn property. In 1999 and thereafter, demand is projected to grow at the rates set forth earlier in this report. The following table shows the projected annual change in accommodated and usable room night demand in the subject property's competitive market. HVS International, Mineola, New York Projection of Occupancy and 73 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International =============
==================================================================================================== Table 7-4 Total Usable Room Night Demand - ---------------------------------------------------------------------------------------------------- Historical 1997 1998 1999 2000 2001 2002 2003 - ---------------------------------------------------------------------------------------------------- Commercial Growth Rate -- 3.0% 3.0% 3.0% 2.0% 2.0% 2.0% 2.0% Accommodated Demand 193,563 199,370 205,351 211,512 215,742 220,057 224,458 228,947 Usable Latent -- (10,000) 0 0 0 0 0 0 Meeting and Group Growth Rate -- 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Accommodated Demand 37,726 38,481 39,251 40,036 40,837 41,654 42,487 43,337 Usable Latent -- 0 0 0 0 0 0 0 Leisure Growth Rate -- 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% Accommodated Demand 53,510 54,045 54,585 55,131 55,682 56,239 56,801 57,369 Usable Latent -- 0 0 0 0 0 0 0 Totals Commercial 193,563 189,370 205,351 211,512 215,742 220,057 224,458 228,947 Meeting and Group 37,726 38,481 39,251 40,036 40,837 41,654 42,487 43,337 Leisure 53,510 54,045 54,585 55,131 55,682 56,239 56,801 57,369 -------- -------- -------- -------- -------- -------- -------- -------- TOTAL DEMAND 284,799 281,896 299,187 306,679 312,261 317,950 323,746 329,653 Annual Forecasted Growth -1.0% 6.1% 2.5% 1.8% 1.8% 1.8% 1.8%
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Projection of Occupancy and 74 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Guestroom Supply In 1996, the competitive properties provided a weighted total of 1,112 guestrooms. Due to the temporary closing of the Comfort Inn in 1997, room supply is expected to decline to 1,062 rooms. However, with the reopening of the Comfort Inn and the opening of the proposed 101-room Sierra Suites, which will contribute 40 guestrooms to the supply based on its estimated competitiveness, total room supply is projected to increase to 1,132 rooms in 1997, and a stabilized room supply of 1,152 rooms in 1999. The following table shows the projected competitive supply of available rooms and available room nights. To calculate the annual number of available room nights, the number of available rooms is multiplied by 365. ================================================================================ Table 7-5 Available Rooms and Room Nights - -------------------------------------------------------------------------------- Total Room Overall Night Room Nights Competitive Year Demand Available Occupancy - ------------------------------------------------------------------ Historical 284,799 405,880 70% 1997 281,896 387,630 73 1998 299,187 413,180 72 1999 306,679 420,480 73 2000 312,261 420,480 74 2001 317,950 420,480 76 2002 323,746 420,480 77 2003 329,653 420,480 78 - -------------------------------------------------------------------------------- Overall Competitive Occupancy As indicated in the above table, the competitive set of hotels experienced an overall occupancy of 70% in 1996. Despite a forecasted decline in demand in 1997, overall occupancy is expected to climb by 3.0% due to a deeper drop in room supply. In 1998, when the proposed Sierra Suites opens, occupancy in the area is expected to decrease from 73% in 1997 to 72% as a result of the additional room supply. As demand continues to increase, the additional rooms will be absorbed into the market, and overall occupancy should climb. In 1999, overall competitive occupancy is forecasted to increase to 73%. Subsequent to 1999, overall occupancy is projected to grow in conjunction with growth in demand since room supply expected to remain constant. Competitive Index Analysis Competitive indexes are used to analyze the relative market position of each property on the basis of a particular demand segment. The index represents the number of times each year that one room is occupied by one type of traveler (e.g., commercial, meeting and group, leisure, or airline), or the number of room nights actually accommodated per year, per room, per HVS International, Mineola, New York Projection of Occupancy and 75 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= market segment. For example, if a hotel has a commercial competitive index of 190, each room in the property is occupied 190 times a year by a commercial traveler. The competitive index is calculated by dividing a hotel's annual accommodated room night demand in a particular market segment by that property's room count. Competitive indexes will be used to illustrate each property's position in the market based on its ability to compete with other local lodging facilities. Commercial Segment The historical commercial segment competitive indexes in the subject property's market ranged from 111 to 205. The Red Roof Inn and the set of secondary hotels were the most competitive properties in the commercial market in 1996, with each registering an index of 205. The Howard Johnson Burlington ranked second with an index of 189, while the Comfort Inn placed third with an index of 171. The subject property's competitive index of 157 placed it fifth among the six primary competitive hotels Based on our field work, all of the hotels are expected to retain their current competitive indexes, except for the Comfort Inn. The Comfort Inn's renovation of its facilities and conversion to a Hampton Inn will allow it to significantly improve its competitive position in the commercial segment. With a fresh product and a strong franchise affiliation, the Comfort Inn should become the market leader in the commercial segment. For the proposed Sierra Suites, we have forecasted a stabilized competitive index of 190, which is higher than the index of the Howard Johnson Burlington, but lower than that of the Red Roof Inn and converted Comfort Inn. Although suite-type hotels are typically very competitive in the commercial segment, the Sierra Suites brand, which has only limited national exposure and presence, prohibits the proposed property from achieving a stronger competitive position in the area. The following table shows the projected commercial segment competitive indexes of the area's hotels. HVS International, Mineola, New York Projection of Occupancy and 76 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-6 Commercial Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Subject Property 157 157 157 157 157 157 Ramada Plaza Hotel 111 111 111 111 111 111 Red Roof Inn 205 205 205 205 205 205 Suisse Chalet 161 161 161 161 161 161 Comfort Inn 171 171 200 210 210 210 Howard Johnson Burlington 189 189 189 189 189 189 Secondary 205 205 205 205 205 205 Sierra Suites 0 0 170 180 190 190 - -------------------------------------------------------------------------------- Meeting and Group Segment The Ramada Plaza Hotel is the market leader in the meeting and group segment, with an index of 78. The competitive indexes of all the hotels are expected to remain constant in the meeting and group segment. With limited meeting space and a commercial segment orientation, the proposed Sierra Suites is expected to have a stabilized competitive index of 15. The following table illustrates the competitive indexes in the meeting and group segment. ================================================================================ Table 7-7 Meeting and Group Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Subject Property 27 27 27 27 27 27 Ramada Plaza Hotel 78 78 78 78 78 78 Red Roof Inn 14 14 14 14 14 14 Suisse Chalet 23 23 23 23 23 23 Comfort Inn 12 12 12 12 12 12 Howard Johnson Burlington 13 13 13 13 13 13 Secondary 40 40 40 40 40 40 Sierra Suites 0 0 10 13 15 15 - -------------------------------------------------------------------------------- Leisure Segment The subject property ranked first in the leisure segment, with a competitive index of 86; this can be attributed to its closer proximity to Boston in comparison to its competitors, as well as the property's offering of Jacuzzis in some of its guestrooms. The Comfort Inn's competitive position in the leisure segment is expected to increase as a result of its planned renovations, which will enable to the property to provide more appealing facilities to its guests. The proposed Sierra Suites is projected to achieve a competitive index of 45. HVS International, Mineola, New York Projection of Occupancy and 77 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The following table illustrates the competitive indexes in the leisure segment. ================================================================================ Table 7-8 Leisure Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Subject Property 86 86 86 86 86 86 Ramada Plaza Hotel 33 33 33 33 33 33 Red Roof Inn 55 55 55 55 55 55 Suisse Chalet 46 46 46 46 46 46 Comfort Inn 61 61 75 80 80 80 Howard Johnson Burlington 50 50 50 50 50 50 Secondary 37 37 37 37 37 37 Sierra Suites 0 0 35 40 45 45 - -------------------------------------------------------------------------------- Subject Property's Room Night Capture and Occupancy After the competitive index is calculated, it is adjusted to reflect the property's room count, yielding a figure referred to as the market share adjuster. The market share adjuster of each property is then divided by the total market share adjuster for all of the competitors, resulting in each hotel's market share. By multiplying the projected market share by the area's usable room night demand, we can determine the total number of room nights captured by a specific hotel. Occupancy is then calculated by dividing the projected number of room nights captured by the property's total number of available room nights. Multiplying the subject property's projected market share by the estimated room night demand in each segment results in the following estimate of room nights captured by the hotel. HVS International, Mineola, New York Projection of Occupancy and 78 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-9 Room Nights Captured by the Subject Property - -------------------------------------------------------------------------------- 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Commercial Demand 189,370 205,351 211,512 215,742 220,057 224,458 Market Share 0.0849 0.0786 0.0767 0.0766 0.0766 0.0766 Capture 16,071 16,132 16,227 16,519 16,849 17,186 Meeting and Group Demand 38,481 39,251 40,036 40,837 41,654 42,487 Market Share 0.0723 0.0708 0.0702 0.0701 0.0701 0.0701 Capture 2,783 2,779 2,811 2,861 2,918 2,977 Leisure Demand 54,045 54,585 55,131 55,682 56,239 56,801 Market Share 0.1708 0.1550 0.1511 0.1506 0.1506 0.1506 Capture 9,231 8,458 8,333 8,387 8,470 8,555 ------- ------- ------- ------- ------- ------- Total Capture 28,085 27,370 27,370 27,767 28,238 28,718 - -------------------------------------------------------------------------------- Dividing the total number of room nights captured by the subject property's number of available room nights per year (calculated as 100 x 365) produces the projected occupancy percentage. ================================================================================ Table 7-10 Calculation of the Subject Property's Projected Occupancy - -------------------------------------------------------------------------------- 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Total Room Nights Captured/Year 28,085 27,369 27,371 27,767 28,237 28,718 Available Room Nights 36,500 36,500 36,500 36,500 36,500 36,500 Occupancy 76.95% 74.98% 74.99% 76.07% 77.36% 78.68% Rounded 77% 75% 75% 76% 77% 79% - -------------------------------------------------------------------------------- For the purpose of forecasting income and expense, we will use the following occupancy levels. HVS International, Mineola, New York Projection of Occupancy and 79 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-11 Occupancy Forecast - -------------------------------------------------------------------------------- Year Occupancy -------------------------- 1997 77% 1998 75 Stabilized 75 2,000 76 - -------------------------------------------------------------------------------- Although the preceding room night analysis shows the subject property achieving a 76% occupancy in 2000, we have chosen to use a stabilized level of 75%. The stabilized occupancy is intended to reflect the anticipated results of the property over its remaining economic life, given any and all changes in the life cycle of the hotel. Thus, the stabilized occupancy excludes from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusually high or low occupancies. Although the subject property may operate at occupancies above this stabilized level, we believe it equally possible for new competition and temporary economic downturns to force the occupancy below this selected point of stability. AVERAGE RATE ANALYSIS One of the most important considerations in estimating the value of a lodging facility is a supportable forecast of its attainable average rate, which is more formally defined as the average rate per occupied room. Average rate can be calculated by dividing the total rooms revenue achieved during a specified period by the number of rooms sold during the same period. The projected average rate and the anticipated occupancy percentage are used to forecast rooms revenue, which in turn provides the basis for estimating most other income and expense categories. Competitive Positioning The Howard Johnson's average rate will be projected using a competitive positioning method. This technique begins with an analysis of the average rates achieved by the subject property and its competitors. These rates establish a range that reflects certain characteristics of the specific market, such as price sensitivity, demand orientation, and occupancy. The subject property's average rate is then compared to those of the hotels to which it is most similar in terms of size, quality, facilities, amenities, market orientation, location, management, image, and affiliation. Adjustments are made to reflect any relevant differences. Although the average rate analysis presented here follows the occupancy projections, these two statistics are highly correlated; in reality, one can not HVS International, Mineola, New York Projection of Occupancy and 80 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= project occupancy without making specific assumptions regarding average rate. This relationship is best illustrated by rooms revenue per available room (RevPAR), which reflects a property's ability to maximize rooms revenue. The following table summarizes the 1996 average rate and RevPAR of the subject property and its competitors. ================================================================================ Table 7-12 1996 Average Rate and RevPAR of the Primary Competitors - -------------------------------------------------------------------------------- 1996 1996 Average Rooms Revenue Property Room Rate Per Available Room - -------------------------------------------------------------------------------- Subject Property $65.00 $48.10 Ramada Plaza Hotel 62.00 37.82 Red Roof Inn 52.00 39.00 Suisse Chalet 51.00 32.13 Comfort Inn 57.00 38.19 Howard Johnson Burlington 75.00 51.75 ------ ------ Average $60.16 $40.71 - -------------------------------------------------------------------------------- The subject property's average rate and RevPAR are positioned below only those of the Howard Johnson Burlington, which enjoys a more favorable location than the subject property. The subject property's management reports that it has been able to achieve a higher average rate than most of its competitors by offering full-service facilities and changing its demand mix in favor of the commercial segment, which is less rate-sensitive than the group and leisure segments. As the subject Howard Johnson continues its efforts to gain more commercial travelers, the property should be able to maintain its current average rate and RevPAR position in the market area. Average Rate Increases It is important to note that hotel room rate increases do not necessarily conform to the underlying monetary inflation rate, because lodging facilities are influenced by market conditions such as the relationship between supply and demand. A hotel's ability to raise room rates is affected by a number of factors, including the following. o Supply and Demand Relationships - The relationship between supply and demand is one of the factors that determine hotel occupancies and average rates. Strong markets where lodging demand is increasing faster than supply are often characterized by rate growth that exceeds inflation. Markets that are overbuilt or suffering from declining demand are unlikely to exhibit any significant increases in average rates. HVS International, Mineola, New York Projection of Occupancy and 81 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= o Inflationary Pressures - Price increases caused by inflation affect hotel room rates by eroding profit margins and encouraging operators to raise prices. This strategy is effective only in markets that are characterized by a healthy supply and demand relationship. o Improving the Competitive Standard - When a new lodging facility enters a mature market, its rates may be set higher than the marketwide average in an effort to justify the development costs. This may allow other competitors to achieve corresponding gains by effectively raising the amount the market will bear. However, if the addition to supply has a severe impact on the occupancy levels of other hotels, price competition may ensue. o Property-Specific Improvements - Changes that make a hotel more or less attractive to guests can have an impact on average rate. An expansion, renovation, upgrading, or the introduction of additional facilities and amenities may enable greater-than-inflationary room rate increases. Likewise, deferred maintenance may make a property less competitive, engendering a decline in room rates. In determining average rate projections, changes that occur prior to occupancy stabilization are generally attributable to factors that are specific to the property and the market. After a hotel achieves a stabilized occupancy, room rates are generally expected to continue to increase at the underlying inflation rate throughout the remainder of the projection period. As discussed earlier, the market has experienced strong growth in average rate in recent years. According to STR data, average rate in the area increased by 3.6% in 1994 and 7.1% in 1995. Furthermore, year-to-date 1996 data indicates a 11.4% growth in average rate over 1995. The subject property experienced a 13.2% increase in average rate in 1995, and it is expected to achieve a 10.8% climb in average rate in 1996. Although the subject property and the competitive set have shown strong growth in average rate in recent years, as the market achieves a full recovery from the early 1990's, growth in average rate should become more moderate. Based on these considerations, the following table shows our projection of average rate increases. HVS International, Mineola, New York Projection of Occupancy and 82 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-13 Average Rate Forecast - -------------------------------------------------------------------------------- Areawide Subject Property's Subject Property's Areawide Rate Rate Projected Year Occupancy Increase Increase Average Rate - -------------------------------------------------------------------------------- Positioned Base -- -- -- $65.00 1997 73 % 5% to 7% 5.0% 68.26 1998 72 3 to 4 4.0 70.99 1999 73 3 to 4 3.5 73.47 2000 74 3 to 4 3.5 76.05 2001 76 3 to 4 3.5 78.71 2002 77 3 to 4 3.5 81.46 - -------------------------------------------------------------------------------- As the above table illustrates, the area's average rate is expected to grow by 5% to 7%. Because the subject property has increased rates substantially in the past few years, there exists limited opportunity for it to achieve similar rates of growth. Consequently, we have projected the subject property's average rate to climb by 5.0% in 1997 and 4.0% in 1998, before stabilizing at an annual rate of growth of 3.5%. The following average rates will be used to project the subject property's rooms revenue. ================================================================================ Table 7-14 Forecast of Occupancy and Average Rate - -------------------------------------------------------------------------------- Year Occupancy Average Rate -------------------------------------------------- 1997 77% $68.26 1998 75 $70.99 Stabilized 75 $73.47 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Highest and Best Use 83 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 8. Highest and Best Use The concept of highest and best use recognized by the Appraisal Institute distinguishes between the highest and best use of the land (as though vacant) and that of the property (as improved). Highest and best use is defined as: The reasonably probable and legal use of vacant land or improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.(1) The concept of highest and best use is the premise upon which value is based, and is a product of competitive forces in the marketplace. The principle of balance holds that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium. This principle applies to relationships among various property components as well as the relationship between the costs of production and the property's productivity. The point of economic balance is achieved when the combination of land and building is optimal (i.e., when no marginal benefit or utility is achieved by adding another unit of capital). The law of increasing returns holds that larger amounts of the agents of production produce greater net income up to a certain point, after which the law of diminishing returns is applied.(2) It is important to recognize that the highest and best use of the land (as though vacant) may differ from the highest and best use of the property (as improved). This may occur when a site has existing improvements and the highest and best use of the land differs from the current use. Nonetheless, the current property use will continue until the value of the land under its highest and best use exceeds the value of the property in its current use, plus the cost to remove the existing improvements. (1) The Appraisal of Real Estate - Tenth Edition, Appraisal Institute, Chicago, IL, 1992, p. 45. (2) Ibid., p. 40. HVS International, Mineola, New York Highest and Best Use 84 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= In consideration of the factors influencing development in the immediate area, it is the appraisers' opinion that the highest and best use of the subject site, as vacant, would be as a full-service transient lodging facility. Based on the fact that the value of the land does not exceed the value of the hotel plus the cost of demolition, it is our opinion that the subject property's highest and best use, as improved, is its current use as a lodging facility. HVS International, Mineola, New York Approaches to Value 85 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 9. Approaches to Value In appraising real estate for market value, the appraiser has three approaches from which to select: the income capitalization, sales comparison, and cost approaches. Although all three valuation procedures are given consideration, the inherent strengths of each approach and the nature of the subject property must be evaluated to determine which will provide supportable estimates of market value. The appraiser is then free to select one or more of the appropriate approaches in arriving at a final value estimate. The Income Capitalization Approach The income capitalization approach takes a property's projected net income before debt service and allocates this future benefit to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component is calculated. The total of the mortgage component and the equity component equals the value of the property. This approach is often selected as the preferred valuation method for income-producing properties, because it most closely reflects the investment rationale of knowledgeable buyers. The Sales Comparison Approach The sales comparison approach estimates the value of a property by comparing it to similar properties that have been sold on the open market. To obtain a supportable estimate of value, the sales price of a comparable property must be adjusted to reflect any dissimilarities between it and the property being appraised. The sales comparison approach may provide a useful value estimate in the case of simple forms of real estate, such as vacant land and single-family homes, where the properties are homogeneous and the adjustments are few and relatively simple to compute. In the case of complex investments such as shopping centers, office buildings, restaurants, and lodging facilities, where the adjustments are numerous and more difficult to quantify, the sales comparison approach loses much of its reliability. HVS International, Mineola, New York Approaches to Value 86 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Hotel investors typically do not employ the sales comparison approach in reaching their final purchase decisions. Factors such as the lack of recent sales data, the numerous insupportable adjustments that are necessary, and the general inability to determine the true financial terms and human motivations of comparable transactions often make the results of this technique questionable. Although the sales comparison approach may provide a range of values that supports the final estimate, reliance on this method beyond the establishment of broad parameters is rarely justified by the quality of the sales data. The market-derived capitalization rates sometimes used by appraisers are susceptible to the same shortcomings inherent in the sales comparison approach. To substantially reduce the reliability of the income capitalization approach by employing capitalization rates obtained from unsupported market data weakens the final value estimate and ignores the typical investment analysis procedures employed by hotel purchasers. Because appraisers are obligated to mirror the actions of the marketplace, we generally give the sales comparison approach minimal weight in the hotel appraisal process beyond bracketing the final estimate.(1) The Cost Approach The cost approach estimates market value by computing the current cost to replace the property and subtracting any depreciation resulting from physical deterioration, functional obsolescence, and external (or economic) obsolescence. The value of the land, as if vacant and available, is then added to the depreciated value of the improvements to produce a total value estimate. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements grow older and begin to deteriorate, the resultant loss in value becomes increasingly difficult to quantify accurately. We find that knowledgeable hotel buyers base their purchase decisions on economic factors such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, this approach is given minimal weight in the hotel valuation process. As noted in Hotels and Motels: A Guide to Market (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 209. HVS International, Mineola, New York Approaches to Value 87 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Analysis, Investment Analysis, and Valuations, "the cost approach is seldom used to value existing hotels and motels."(1) Reconciliation The final step in the valuation process is the reconciliation and correlation of the value indications. Factors that are considered in assessing the reliability of each approach include the purpose of the appraisal, the nature of the subject property, and the reliability of the data used. In reconciliation, the applicability and supportability of each approach is considered and the range of value indications is examined. The most significant weight is given to the approach that produces the most reliable solution and most closely reflects the criteria used by typical investors. Our nationwide experience with numerous hostelry buyers and sellers indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the investors who constitute the marketplace. For this reason, the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in the hotel valuation process. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 208. HVS International, Mineola, New York Income Capitalization Approach 88 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 10. Income Capitalization Approach The income capitalization approach is based on the principle that the value of a property is indicated by its net return, or what is known as the present worth of future benefits. The future benefits of income-producing properties, such as hotels, are net income before debt service and depreciation (as estimated by a forecast of income and expense) and any anticipated reversionary proceeds from a sale. These future benefits can be converted into an indication of market value through a capitalization process and discounted cash flow analysis. Using the income capitalization approach, the subject property has been valued by analyzing the local market for transient accommodations, examining existing and proposed competition, and developing a forecast of income and expense that reflects current and anticipated income trends and cost components through a stabilized year of operation. The forecast of income and expense is expressed in current dollars for each year. The stabilized year is intended to reflect the anticipated operating results of the property over its remaining economic life, given any or all applicable stages of build-up, plateau, and decline in the life cycle of the hotel. Thus, income and expense estimates from the stabilized year forward exclude from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusual revenues or expenses. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, published by the Appraisal Institute, "of the three valuation approaches available to the appraiser, the income capitalization approach generally provides the most persuasive and supportable conclusions when valuing a lodging facility."(1) This text recommends that using a ten-year forecast and an equity yield rate "most accurately reflects the actions of typical hotel buyers, who purchase properties based (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. HVS International, Mineola, New York Income Capitalization Approach 89 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= on their leveraged discounted cash flow."(1) The simpler procedure of using a ten-year forecast and a discount rate is "less reliable because the derivation of the discount rate has little support. Moreover, it is difficult to adjust the discount rate for changes in the cost of capital."(2) We have used both methods to discount the subject property's projected net income into an estimate of value. Method One is a ten-year discounted cash flow analysis in which the cash flow to equity and the equity reversion are discounted to the present value at the equity yield rate, and the income to the mortgagee is discounted at a mortgage interest rate. The sum of the equity and mortgage values is the total property value. Method Two is a simple ten-year discounted cash flow analysis in which the annual net income before debt service and the reversionary proceeds following a sale at the end of the tenth year are discounted back to the date of the appraisal at an overall discount rate, and then totaled to produce an indication of the present worth of future benefits. To convert the projected income stream into an estimate of value through Method One, the anticipated net income (before debt service and depreciation) is allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. The total of the mortgage component and the equity component equals the value of the property. The process is described as follows. 1. The terms of typical hotel financing are set forth, including interest rate, amortization term, and loan-to-value ratio. 2. An equity yield rate of return is established. Numerous hotel buyers base their equity investments on a ten-year equity yield rate projection that takes into account ownership benefits such as periodic cash flow distributions, residual sale or refinancing distributions that return any property appreciation and mortgage amortization, income tax benefits, and various non-financial considerations such as status and prestige. The equity yield rate is also known as the internal rate of return on equity. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236 (2) Ibid. HVS International, Mineola, New York Income Capitalization Approach 90 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 3. The value of the equity component is calculated by first deducting the annual debt service from the projected net income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value. After deducting the mortgage balance at the end of the tenth year and the typical brokerage and legal costs, the equity residual is discounted back to the date of value at the equity yield rate. The net income to equity for each of the ten projection years is also discounted to the present value. The sum of these discounted values equates to the value of the equity component. Adding the equity component to the initial mortgage balance yields the overall property value. Because the mortgage and the debt service amounts are unknown but the loan-to-value ratio was determined in Step #1, the preceding calculation can be solved through an iterative process or by use of a linear algebraic equation that computes the total property value. The algebraic equation that solves for the total property value using a ten-year mortgage and equity technique was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(1) 4. The value is proven by allocating the total property value between the mortgage and equity components and verifying that the rates of return set forth in Steps #1 and #2 can be met from the projected net income. The process of converting the projected income stream into an estimate of value through Method Two is described as follows. 1. A discount rate is established by evaluating the total property yield derived by Method One. Occasionally, the discount rate may be adjusted slightly based on the total property yields indicated by recent transactions involving hotels similar to the subject property. 2. The reversionary value is calculated by capitalizing the 11th-year net income by the terminal capitalization rate and deducting typical brokerage and legal fees. (1) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Income Capitalization Approach 91 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 3. The ten-year forecast of net income (before debt service and depreciation) and the reversionary value are discounted to the date of value at the rate derived above. Review of Operating History Because the Howard Johnson is an existing hotel with an established operating performance, its historical income and expense experience can serve as a basis for projections. The subject property opened in 1972, and achieved occupancy levels of 77.4% in 1994 and 68.7% in 1995. The following income and expense statements were provided by Ashford Financial Corporation, and are unaudited. Where applicable, we have reorganized the statements in accordance with the Uniform System of Accounts for Hotels. Complete income and expense statements were not available due to the change in ownership in 1994; consequently, the 1994 statement is for the period beginning May 1, 1994 and ending December 31, 1994. HVS International, Mineola, New York Income Capitalization Approach 92 - -------------------------------------------------------------------------------- ============= HVS - ------------- International =============
====================================================================================================================== Table 10-1 Historical Operating Performance - ---------------------------------------------------------------------------------------------------------------------- Calendar Year Ending: 1995 1994 Total Rooms: 100 100 Occupied Rooms: 24,813 18,706 Complimentary Rooms: 247 269 Days Open: 365 245 Occupancy: 68.7% Amount per Amount Per 77.4% Amount per Amount Per Average Rate: $58.66 Percentage Available Occupied $53.94 Percentage Available Occupied (+000) of Revenues Room Room (+000) of Revenues Room Room - ---------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $1,456 90.5% $14,556 $58.66 $1,009 89.3% $10,089 $53.94 Telephone 35 2.2 351 1.42 28 2.5 278 1.48 Minor Operated Depts. 49 3.0 485 1.96 1 0.1 8 0.04 Other Income 70 4.3 695 13.57 92 8.1 918 4.91 Total 1,609 100.0 16,088 64.84 1,129 100.0 11,293 60.37 - ---------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES Rooms 337 23.1 3,367 13.57 240 23.8 2,402 12.84 Telephone 21 60.5 213 0.86 13 48.2 134 0.72 Minor Operated Depts. 14 29.2 142 0.57 0 40.2 3 0.02 Total 372 23.1 3,721 15.00 254 22.5 2,538 13.57 - ---------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 1,237 76.9 12,367 49.84 875 77.5 8,754 46.80 - ---------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 174 10.8 1,736 7.00 108 9.6 1,083 5.79 Management Fee 48 3.0 483 1.95 34 3.0 336 1.80 Marketing 88 5.4 875 3.53 48 4.2 477 2.55 Franchise Fees 47 2.9 466 1.88 31 2.7 308 1.65 Property Oper. & Maint. 115 7.1 1,149 4.63 85 7.6 853 4.56 Energy 172 10.7 1,716 6.92 81 7.2 809 4.32 Total 643 39.9 6,426 25.90 387 34.3 3,866 20.67 - ---------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 594 37.0 5,941 23.94 489 43.2 4,888 26.13 - ---------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 97 6.0 966 3.89 51 4.5 513 2.74 Insurance 27 1.7 274 1.10 28 2.4 276 1.48 Reserve for Replacement 64 4.0 644 2.59 0 0.0 0 0.00 Equipment Rent 12 0.8 124 0.50 6 0.6 64 0.34 Total 201 12.5 2,007 8.09 85 7.5 853 4.56 - ---------------------------------------------------------------------------------------------------------------------- NET INCOME $393 24.5 3,934 $15.85 $404 35.7 4,035 21.57 ======================================================================================================================
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 93 - -------------------------------------------------------------------------------- ============= HVS - ------------- International =============
====================================================================================================================== Table 10-2 Historical Operating Performance - ---------------------------------------------------------------------------------------------------------------------- Calendar Year Ending: Year-to-Date through August, 1996 Year-to-Date through August, 1995 Total Rooms: 100 100 Occupied Rooms: 17,570 15,448 Complimentary Rooms: 176 157 Days Open: 244 244 Occupancy: 72.7% Amount per Amount Per 64.0% Amount per Amount Per Average Rate: $64.19 Percentage Available Occupied $56.76 Percentage Available Occupied (+000) of Revenues Room Room (+000) of Revenues Room Room - ---------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $1,128 90.0% $11,277 $64.19 $877 89.8% $8,768 $56.76 Telephone 32 2.6 322 1.83 22 2.2 218 1.41 Minor Operated Depts. 34 2.7 335 1.91 32 3.3 319 2.07 Other Income 60 4.8 597 3.40 45 4.7 454 2.94 Total 1,253 100.1 12,532 71.33 976 100.0 9,760 63.18 - ---------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES Rooms 245 21.7 2,450 13.95 207 23.7 2,074 13.42 Telephone 12 38.2 123 0.70 13 59.7 130 0.84 Minor Operated Depts. 12 34.9 117 0.66 8 24.5 78 0.51 Total 269 21.5 2,690 15.31 228 23.4 2,282 14.77 - ---------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 984 78.6 9,842 56.01 748 76.6 7,478 48.40 - ---------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 138 11.0 1,384 7.88 114 11.7 1,140 7.38 Management Fee 38 3.0 376 2.14 29 3.0 293 1.90 Marketing 74 5.9 741 4.22 51 5.2 509 3.30 Franchise Fees 36 2.9 364 2.07 28 2.9 283 1.83 Property Oper. & Maint. 88 7.0 883 5.02 75 7.7 755 4.89 Energy 88 7.0 881 5.02 115 11.8 1,154 7.47 Total 463 36.8 4,629 26.35 413 42.3 4,133 26.76 - ---------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 521 41.8 5,213 29.66 334 34.3 3,345 21.64 - ---------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 63 5.0 630 3.59 67 6.8 667 4.32 Insurance 31 2.4 305 1.74 19 2.0 190 1.23 Reserve for Replacement 50 4.0 501 2.85 39 4.0 391 2.53 Equipment Rent 14 1.1 141 0.80 12 1.2 115 0.75 Total 158 12.5 1,578 8.98 136 14.0 1,364 8.83 - ---------------------------------------------------------------------------------------------------------------------- NET INCOME $363 29.3 3,635 $20.68 $198 20.3 $1,981 12.81 ======================================================================================================================
HVS International, Mineola, New York Income Capitalization Approach 94 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Because the 1994 statement of income and expense is for a partial year only, they will not be used for comparison; instead, emphasis will be placed upon the 1995 statement and the year-to-date statements for 1995 and 1996. These historical income and expense statements show that the subject property has significantly improved its operating performance since 1995. By increasing revenues and controlling expenses, the subject property has attained net income of $363,000 through August of 1996, which is approximately an 83% increase over the 1995 level of $198,000. As a percentage of gross revenues, net income has risen from 20.3% in 1995 to 29.3% in 1996. Contributing to the Howard Johnson's increase in net income is its growth in revenue. Due to increases in both occupancy and average rate, the subject property's year-to-date rooms revenue for 1996 has increased by 28.6% over the same period in 1995. Increased occupancy has also boosted revenue from the telephone and minor operated departments as well as other income. Overall, total revenue has increased from $976,000 in 1995 to $1,253,000 in 1996. As revenue has increased, departmental expenses as a percentage of total revenue has decreased from 23.4% in 1995 to 21.5% in 1996. Rooms department expense as a percentage of rooms revenue has decreased from 23.7% to 21.7%, and telephone expense has substantially declined from 59.7% to 38.2% as a result of increased long distance calls and lower costs associated with these calls. Due to higher lifeguard wages and greater costs associated with guest laundry services, minor operated department expense has increased from 24.5% of total revenues to 34.9%. Like departmental expenses, operating expenses as a percentage of total revenue has declined. Year-to-date operating expenses has decreased from 42.3% to 36.8%. Because all of the operating expenses, with the exception of energy expense, has increased on a per available room basis, the decline in the total operating expense ratio has resulted from increased revenue, and indicates that management has been able to generate revenue without incurring corresponding increases in expenses. While management and franchise fees have remained constant, administrative and general, property operations and maintenance, and energy expense ratios have declined. Marketing expense as a percentage of total revenue has increased from 5.2% in 1995 to 5.9% in 1996. HVS International, Mineola, New York Income Capitalization Approach 95 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Forecast of Income and Expense The forecast of income and expense is intended to reflect the appraiser's subjective estimate of how a typical buyer would project the subject property's future operating results. Depending on the dynamics of the local market, a typical buyer's projection may be adjusted upward or downward. We have attempted to consider these factors in formulating this forecast. HVS International uses a fixed and variable component model to project a lodging facility's revenue and expense levels. This model is based on the premise that hotel revenues and expenses have one component that is fixed and another that varies directly with occupancy and facility usage. A projection can be made by taking a known level of revenue or expense and calculating its fixed and variable components. The fixed component is then held constant, while the variable component is adjusted for the percent change between the projected occupancy and facility usage and that which produced the known level of revenue or expense. Base-Year Statement of Income and Expense Based on our review of the operating histories of the subject property and comparable hotels, we have derived a base-year statement of income and expense expressed in 1995 dollars. The units of comparison include a percentage of departmental and total revenue, amounts per available room, and amounts per occupied room. The income and expense ratios reflect an occupancy level of 68.7%. The base-year profit and loss statement will be used to determine the relationship between the fixed and variable components. HVS International, Mineola, New York Income Capitalization Approach 96 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-4 Base-Year Statement of Income and Expense - -------------------------------------------------------------------------------- Calendar Year Ending: 1995 Number of Rooms: 100 Occupancy: 68.7% Average Rate: $58.66 Percent of Amount per Amount per Occupied Rooms: 24,813 Total Available Occupied (+000) Revenue Room Room - -------------------------------------------------------------------------------- Revenue: Rooms $ 1,456 90.0% $14,556 $ 58.66 Telephone 44 2.7 443 1.78 Minor Operated Depts 49 3.0 485 1.96 Other Income 70 4.3 695 2.80 Total Revenue $ 1,618 100.0 $16,179 $ 65.21 - -------------------------------------------------------------------------------- Expenses: Rooms* $ 378 26.0% $ 3,785 $ 15.25 Telephone* 24 54.0 239 0.96 Minor Operated Depts.* 18 36.8 179 0.72 Other Income* 0 0.0 0 0.00 Administrative & General 200 12.3 1,997 8.05 Management Fee 49 3.0 485 1.96 Marketing 109 6.8 1,094 4.41 Franchise Fees 58 3.6 582 2.35 Property Oper. & Maint 123 7.6 1,229 4.95 Energy 129 8.0 1,287 5.19 Property Taxes 83 5.1 830 3.35 Insurance 30 1.9 300 1.21 Reserve for Replacement 65 4.0 647 2.61 Equipment Rent 12 0.8 124 0.50 Total Expenses $ 1,278 79.0% $12,779 $ 51.50 - -------------------------------------------------------------------------------- Net Income $ 340 21.0% $ 3,401 $ 13.70 ================================================================================ * Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- Inflation Assumptions The base revenue and expense amounts are inflated to reflect current dollars for each projection year. Line items can be affected by different factors. We must establish a general rate of inflation that will be applied to most revenue and expense categories. The following table shows inflation estimates made by economists at some noted institutions and corporations. HVS International, Mineola, New York Income Capitalization Approach 97 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-5 Inflation Estimates - -------------------------------------------------------------------------------- Projected Increase in Consumer Price Index (Annualized Rate Versus 12 Months Earlier) ------------------------------------------ November May Source of 1996 of 1997 - -------------------------------------------------------------------------------- Maureen Allyn, Scudder Stevens Clark 3.1% 2.3% Wayne Angell, Bear Stearns 3.0 3.2 Richard Berner, Mellon Bank 2.9 2.8 David Berson, Fannie Mae 2.9 2.8 David Blitzer, S&P 3.0 2.7 Paul Boltz, T. Rowe Price 3.2 3.5 David Bostian, Herzog, Heine, Geduld 2.9 2.5 Philip Braverman, DKB Securities 3.0 2.8 William Brown, J.P. Morgan 3.3 3.2 Rosanne Cahn, CS First Boston 3.1 2.6 James Coons, Huntington National Bank 3.2 3.0 Michael Cosgrove, The Econoclast 3.2 3.3 Dewey Daane, Vanderbilt University 3.4 3.6 Robert Dederick, Northern Trust 3.1 3.4 W. Dudley, Goldman Sachs 3.4 3.2 Michael Englund, MMS Intl. 3.2 3.3 Michael Evans, Evans Group 3.0 3.0 Gail Fosler, Conference Board 3.5 3.6 Maury Harris, Paine Webber, Inc. 2.8 2.8 Tracy Herrick, Jefferies & Co. 3.2 3.6 Stuart Hoffman, PNC Bank 3.1 2.8 William Hummer, Wayne Hummer 2.9 3.0 Edward Hyman, ISI Group 2.8 2.1 Saul Hymans, University of Michigan 2.7 1.7 Mieczyslaw Karczmar, Deutsche Bank 2.8 3.2 Kurt Karl, WEFA Group 2.6 2.3 Irwin Kellner, Chase Manhattan Bank 2.6 2.3 D. Laufenberg, American Express Financial Advisors 3.2 3.4 Michelle Laughlin, Sanwa Securities 3.0 3.2 Carol Leisenring, CoreStates Financial 2.7 2.5 Richard Lemmon, General Motors 3.0 3.0 Mickey Levy, NationsBank Capital Markets 2.6 2.4 David Littmann, Comerica 3.1 3.0 John Lonski, Moody's Investors Service 3.3 3.2 Paul McCulley, UBS Securities 3.0 2.8 John McDevitt, 3M 2.6 2.5 Arnold Moskowitz, Moskowitz Capital 3.1 3.5 John Mueller, LBMC, Inc. 3.2 2.5 David Munro, High Frequency Econ. 3.0 2.5 Carl Palash, MCM MoneyWatch 3.0 3.0 Nicholas Perna, Fleet Financial Group 3.3 3.3 Elliott Platt, Donaldson Lufkin 2.8 2.0 Maria F. Ramirez, MF Ramirez 3.0 3.0 Donald Ratajczak, Georgia State University 3.0 3.3 David Resler, Nomura Securities International 2.9 2.6 Allan Reynolds, Hudson Institute 3.3 3.6 Richard Rippe, Prudential Securities 3.1 3.3 A. Gary Schilling, Schilling & Co. 3.0 3.0 Allen Sinai, Lehman Brothers 3.2 3.4 James Smith, University of North Carolina 2.1 1.9 Susan Sterne, Economic Analysis 2.5 2.5 Donald Straszheim, Merrill Lynch 2.7 2.3 Thomas Synott III, U.S. Trust Company 3.3 3.4 John Williams, Bankers Trust 3.0 3.1 Raymond Worseck, A.G. Edwards 3.6 3.3 David Wyss, DRI/McGraw-Hill 3.0 2.5 Edward Yardeni, Deutsche Morgan Grenfell 2.2 2.0 Mark Zandi, Regional Financial Associates 3.0 3.2 ---- ---- Average 3.0% 2.9% Source: Wall Street Journal, July 1, 1996 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 98 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The preceding table shows inflation forecasts averaging 3.0% through November of 1996 and 2.9% through May of 1997. Most of the economists in the sample estimate inflation rates ranging from 2.5% to 3.4% for the 12-month period, although several anticipate levels of slightly greater than 3.4%. As a further check on these inflation projections, we have reviewed historical increases in the Consumer Price Index. Because the value of real estate is predicated on cash flows over a relatively long period, inflation should be considered from a long-term perspective. Between 1986 and 1994, the national CPI increased at an average annual compounded rate of 3.8%. In consideration of these historical trends, the projections set forth above, and our assessment of probable property appreciation levels, we have selected an annual stabilized inflation rate of 3.5% throughout the projection period. One of the exceptions to this general inflation assumption is the projected growth in average rate. As noted earlier, increases in the subject property's room rate are projected as follows. ================================================================================ Table 10-6 Projected Growth in Average Rate - -------------------------------------------------------------------------------- Increase From Year Previous Year ---------------------------- 1997 5.0% 1998 4.0 1999 3.5 2000 3.5 Thereafter 3.5 - -------------------------------------------------------------------------------- Another exception is the project rate of growth for the Howard Johnson's property taxes. As discussed earlier in this report, property taxes are forecasted to increase by 6.0% in the first three projection years. For 2000 and beyond, property taxes are expected to increase in tandem with the underlying rate of inflation of 3.5%. Using these inflation assumptions, the base-year income and expense statement (which is expressed in 1996 dollars) is inflated to arrive at projections. Each revenue and expense category will be projected using the inflated base statement to determine the fixed and variable component relationships. HVS International, Mineola, New York Income Capitalization Approach 99 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Rooms Revenue Rooms revenue is determined by two variables: occupancy and average rate. Earlier in this report, we estimated the subject property's occupancy and average rate as follows. ================================================================================ Table 10-7 Projected Occupancy and Average Rate - -------------------------------------------------------------------------------- 1997 1998 Stablized 2000 2001 - -------------------------------------------------------------------------------- Forecast Occupancy Percentage 77.0% 75.0% 75.0% 75.0% 75.0% Forecast Average Rate $68.26 $70.99 $73.47 $76.05 $78.71 - -------------------------------------------------------------------------------- Rooms revenue is calculated as follows. ================================================================================ Table 10-8 Forecast of Rooms Revenue (+000) - -------------------------------------------------------------------------------- Number of Forecast Calendar Years Projected Average Number Days in Rooms Ending: Occupancy Room Rate of Units in Year Revenue - -------------------------------------------------------------------------------- 1997 77.0 X $ 68.26 X 100 X 365 = $ 1,918 1998 75.0 X 70.99 X 100 X 365 = 1,943 Stabilized 75.0 X 73.47 X 100 X 365 = 2,011 2000 75.0 X 76.05 X 100 X 365 = 2,082 2001 75.0 X 78.71 X 100 X 365 = 2,155 - -------------------------------------------------------------------------------- Telephone Revenue Telephone revenue is generated by hotel guests who charge local and long-distance calls to their rooms, and by individuals who use the property's public telephones. Prior to the deregulation of the telephone industry in the early 1980s, hotels were limited to a 15% commission on long-distance calls, a mark-up that allowed few profits. Deregulation and the development of sophisticated call-accounting equipment have resulted in profitable telephone departments. State-of-the-art equipment is capable of least-cost routing, automatic price billing, and posting telephone charges to guest folios. Hotels can select among various long-distance services, and can also work with any one of a number of Alternative Operator Services (AOS). These systems route and price calls, and may provide additional services. In recent years, the hospitality industry has experienced diverging trends with respect to telephone revenue. Prices per call have increased, in some cases dramatically, yielding departmental profits as high as 50% to 55%. However, the number of long-distance calls billed per occupied room has declined as a result of the extensive use of long-distance carrier services that HVS International, Mineola, New York Income Capitalization Approach 100 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= can be accessed locally or through a toll-free number. When guests charge long-distance calls to their personal or business accounts in this manner, the hotel loses the revenue associated with long-distance tariffs and mark-ups, and only receives an access fee. Most telephone revenue varies directly with changes in occupancy. However, there is a small fixed component consisting of public telephone revenue, which is primarily generated by individuals using the hotel's food, beverage, and meeting facilities. Using this fixed and variable relationship, the subject property's telephone revenue is projected as follows. ================================================================================ Table 10-9 Forecast of Telephone Revenue - -------------------------------------------------------------------------------- 1997 1998 Stabilized 2000 2001 - -------------------------------------------------------------------------------- Total Telephone Revenue (+000) $ 53 $ 53 $ 55 $ 57 $ 59 Percent of Total Revenue 2.5% 2.5% 2.5% 2.5% 2.5% Amount Per Available Room $ 526 $ 532 $ 550 $ 570 $ 590 Amount Per Occupied Room $ 1.89 $ 1.94 $ 2.01 $ 2.08 $ 2.16 - -------------------------------------------------------------------------------- Minor Operated Departments Revenue The subject property contains several minor operated departments. Revenues are generated from guest laundry services, swimming pool passes, and banquet space rentals. These revenues typically vary directly with changes in occupancy. The subject property's minor operated departments revenue is project as follows. ================================================================================ Table 10-10 Forecast Minor Operated Departments Revenue - -------------------------------------------------------------------------------- 1997 1998 Stabilized 2000 2001 - -------------------------------------------------------------------------------- Total Minor Operated Depts. Rev. (+000) $ 54 $ 55 $ 57 $ 59 $ 61 Percent of Total Revenue 2.6% 2.6% 2.6% 2.6% 2.6% Amount Per Available Room $ 539 $ 553 $ 572 $ 592 $ 613 Amount Per Occupied Room $1.92 $2.01 $2.08 $2.16 $2.23 - -------------------------------------------------------------------------------- Other Income Other income is derived from sources other than guestrooms, food and beverages, telephone services, and other minor operated departments. Depending on the type of hotel and the facilities and amenities offered, other income may include the following items. o Rentals - stores, office space, concession space, showcases, clubs, and storage. HVS International, Mineola, New York Income Capitalization Approach 101 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= o Commissions from auto rentals, photography, telegrams, and vending services. o Concessions - revenue derived from charges for the privilege of operating departments that could be operated by the hotel. Gift shops, barber shops, and beauty salons are often operated as concessions. o Laundry, dry cleaning, and fax services. o Cash discounts earned - discounts from creditors' accounts for payment within the discount period. This item does not include trade discounts, which are a deduction from the cost of goods sold. o Electronic games and pinball machines. o Forfeited advance deposits and guaranteed no-shows. o Service charges - service charges that are added to a customer's account but are not paid to service personnel. o Interest income - interest from house accounts. o Salvage - revenue from the sale of old or obsolete items. Other income is highly sensitive to changes in occupancy and slightly correlated to food and beverage volume. Using this fixed and variable relationship, the subject property's other income is projected as follows. ================================================================================ Table 10-11 Forecast of Other Income - -------------------------------------------------------------------------------- 1997 1998 Stabilized 2000 2001 - -------------------------------------------------------------------------------- Total Other Income (+000) $ 77 $ 79 $ 82 $ 85 $ 88 Percent of Rooms Revenue 3.7% 3.7% 3.7% 3.7% 3.7% Amount per Available Room $ 772 $ 792 $ 820 $ 848 $ 878 Amount per Occupied Room $ 2.74 $ 2.89 $ 3.00 $ 3.11 $ 3.21 - -------------------------------------------------------------------------------- Rooms Expense Rooms expense consists of items related to the sale and upkeep of guestrooms and public space. Salaries, wages, and employee benefits account for a substantial portion of this category. Although payroll varies somewhat with occupancy (because managers can schedule maids, bell personnel, and house cleaners to work when demand requires), much of a hotel's payroll is fixed. Front desk personnel, public area cleaners, the housekeeper, and other supervisors must be maintained at all times. As a HVS International, Mineola, New York Income Capitalization Approach 102 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= result, salaries, wages, and employee benefits are only moderately sensitive to changes in occupancy. Commissions represent remuneration to travel agents for booking rooms. Because these fees are based on a percentage of rooms revenue, they are highly dependent on occupancy and rate. Reservations is a similar expense that reflects the cost of a franchise reservation system that typically bills as a percentage of rooms revenue. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are only slightly affected by changes in volume. In light of these considerations, we project the subject property's rooms expense as follows. ================================================================================ Table 10-12 Forecast of Rooms Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized 2000 2001 - -------------------------------------------------------------------------------- Total Rooms Expense (+000) $ 425 $ 435 $ 450 $ 466 $ 482 Percent of Rooms Revenue 22.2% 22.4% 22.4% 22.4% 22.4% Amount per Available Room $4,252 $4,352 $4,504 $4,661 $4,825 Amount per Occupied Room $15.19 $15.96 $16.51 $17.10 $17.68 - -------------------------------------------------------------------------------- Telephone Expense Telephone expense consists of all costs associated with this department. In the case of small hotels with automated systems, the operation of telephones may be an additional responsibility of front desk personnel; however, most large properties employ full-time operators. The bulk of the telephone expense consists of the cost of local and long-distance calls billed by the telephone companies that provide these services. Because most calls are made by in-house guests, these costs are moderately correlated to occupancy. Unless a particular hotel department incurs high expenses, use of telephone services by hotel employees is charged to this account. The remaining costs, which include salaries, wages, printing, and other expenses, are moderately fixed. The following table illustrates our forecast of telephone expense. HVS International, Mineola, New York Income Capitalization Approach 103 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-13 Forecast of Telephone Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized 2000 2001 - -------------------------------------------------------------------------------- Total Telephone Expense (+000) $ 27 $ 27 $ 28 $ 29 $ 30 Percent of Telephone Revenue 50.6% 51.6% 51.5% 51.5% 51.5% Amount per Available Room $ 268 $ 274 $ 283 $ 294 $ 304 Amount per Occupied Room $0.96 $ 0.99 $1.02 $1.06 $1.10 Minor Operated Department Expense Expenses related to the subject property's minor operated departments consist of guest laundry cost of sales and payroll expenses for the swimming pool's lifeguards. The following table illustrates our projection of minor operated departments expense. ================================================================================ Table 10-14 Forecast of Minor Operated Departments Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized 2000 2001 - -------------------------------------------------------------------------------- Total Minor Operated Depts. Exp. (+000) $ 20 $ 20 $ 21 $ 21 $ 22 Percent of Minor Operated Depts. Revenue 36.1% 36.4% 36.4% 36.4% 36.4% Amount per Available Room $ 195 $ 200 $ 208 $ 215 $ 222 Amount per Occupied Room $0.71 $0.73 $0.77 $0.77 $0.80 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Administrative and General Expense Administrative and general expense includes the salaries and wages of all administrative personnel who are not directly associated with a particular department. Expense items related to the management and operation of the property are also allocated to this category. Most administrative and general expenses are relatively fixed. The exceptions are cash overages and shortages; commissions on credit card charges; provision for doubtful accounts, which are moderately affected by the number of transactions or total revenue; and salaries, wages, and benefits, which are very slightly influenced by volume. In recent years, several new items have been added to the administrative and general expense category. Human resources includes the cost of recruiting, relocating, and training personnel. Security consists of the cost of contract security for the property and related expenses. The general insurance category includes premiums for liability, fidelity, life, theft coverage, and business interruption insurance. Fire and extended-coverage insurance on the building and contents is a separate insurance HVS International, Mineola, New York Income Capitalization Approach 104 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= expense category. Liability insurance covers third-party actions involving bodily injury and personal property, and is typically based on rooms receipts, meeting and banquet income, and food and beverage revenue. Factors that may have an impact on a hotel's liability expense include the size of the meeting, banquet, and restaurant facilities; the ratio between the amount of alcohol served and total food and beverage sales; the presence of a dance floor; a high-rise structure; a swimming pool; life safety support systems; and the guest transportation services provided by the hotel. The following table illustrates our forecast of administrative and general expense. ================================================================================ Table 10-15 Forecast of Administrative and General Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized 2000 2001 - -------------------------------------------------------------------------------- Total Administrative & General Exp. (+000) $ 228 $ 234 $ 242 $ 251 $ 259 Percentage of Total Revenue 10.8% 11.0% 11.0% 11.0% 11.0% Amount per Available Room $2,280 $2,340 $2,420 $2,510 $2,590 Amount per Occupied Room $ 8.10 $ 8.54 $ 8.84 $ 9.15 $ 9.47 - -------------------------------------------------------------------------------- Management Fee Management expense consists of the basic fee paid to the type of company that is anticipated to operate the subject property. Some companies provide management services alone, while others also provide a brand name affiliation. When a management company has no brand identification, the property owner often acquires a franchise that provides the necessary image and recognition. Although most hotel management companies employ a fee schedule that includes a basic fee (usually a percentage of total revenue) and an incentive fee (usually a percentage of defined profit), the incentive portion is often subordinated to debt service and does not appear in a forecast of net income before debt service. Basic hotel management fees are almost always based on a percentage of total revenue, which means they have no fixed component. Although the incentive fee does not decrease the cash flow available for debt service, it does reduce the potential cash flow to equity, and must be accounted for in the valuation process. Generally, the most appropriate procedure for handling the impact of the incentive fee on the equity component is to use the projected net income before debt service and incentive fee, but adjust the equity dividend or yield rate upward to reflect this added management cost. The adjusted equity dividend and yield rates will be described later in this section. HVS International, Mineola, New York Income Capitalization Approach 105 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The subject property is operated by Remington Employers Corporation. According to the management agreement between Woburn Massachusetts Hotel Limited Partnership and Remington Employers Corporation, a fee of 3% of gross revenues is due to the management company. Based on our review of the current market for management contracts, we are of the opinion that this fee is consistent with prevailing market terms. Applying this management fee structure to the projection of total revenue yields the following forecast of the subject property's management fee. ================================================================================ Table 10-16 Forecast of Management Fee - -------------------------------------------------------------------------------- 1997 1998 Stablized 2000 2001 - -------------------------------------------------------------------------------- Management Fee Expense (+000) $ 63 $ 64 $ 66 $ 68 $ 71 - -------------------------------------------------------------------------------- Marketing Expense Marketing expense consists of all costs associated with advertising, sales, and promotion; these activities are intended to attract and retain customers. Marketing can be used to create an image, develop customer awareness, and stimulate patronage of a property's various facilities. The marketing category is unique in that all expense items, with the exception of fees and commissions, are totally controlled by management. Most hotel operators establish an annual marketing budget that sets forth all planned expenditures. If the budget is followed, total marketing expenses can be projected accurately. Marketing expenditures are unusual because although there is a lag period before results are realized, the benefits are often extended over a long period. Depending on the type and scope of the advertising and promotion program implemented, the lag time can be as short as a few weeks or as long as several years. However, the favorable results of an effective marketing campaign tend to linger, and a property often enjoys the benefits of concentrated sales efforts for many months. Marketing expense can be divided into five categories: sales, reservations, advertising and merchandising, other marketing activities, and fees and commissions. Together, these categories include all marketing efforts made by hotel personnel and outside parties. Marketing expenses are fixed with the exception of reservations, fees, and commissions, which are calculated as a percentage of rooms revenue. HVS International, Mineola, New York Income Capitalization Approach 106 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Based on the location of the subject property, the local market for transient accommodations, the competitive environment, and the hotel's anticipated market segmentation, we have developed the following marketing forecast using a fixed and variable component model. ================================================================================ Table 10-17 Forecast of Marketing Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized 2000 2001 - -------------------------------------------------------------------------------- Total Marketing Expense (+000) $ 125 $ 128 $ 133 $ 137 $ 142 Percentage of Total Revenue 5.9% 6.0% 6.0% 6.0% 6.0% Amount per Available Room $1,247 $1,282 $1,327 $1,373 $1,421 Amount per Occupied Room $ 4.44 $ 4.68 $ 4.85 $ 5.02 $ 5.19 - -------------------------------------------------------------------------------- Franchise Fee Franchise expense represents the fees paid to Howard Johnson Franchise Systems, Inc. for the use of the company's name, trade marks, and service marks. The following table illustrates the projection of the subject property's franchise fee. ================================================================================ Table 10-18 Forecast of Franchise Fee - -------------------------------------------------------------------------------- 1997 1998 Stabilized 2000 2001 - -------------------------------------------------------------------------------- Franchise Fees Expense (+000) $ 77 $ 78 $ 80 $ 83 $ 86 - -------------------------------------------------------------------------------- Property Operations and Maintenance Property operations and maintenance expense is another expense category that is largely controlled by management. Except for repairs that are necessary to keep the facility open and prevent damage (e.g., plumbing, heating, and electrical items), most maintenance can be deferred for varying lengths of time. Maintenance is an accumulating expense. If management elects to postpone performing a required repair, they have not eliminated or saved the expenditure; they have only deferred payment until a later date. A lodging facility that operates with a lower-than-normal maintenance budget is likely to accumulate a considerable amount of deferred maintenance. The age of a lodging facility has a strong influence on the required level of maintenance. A new or thoroughly renovated property is protected for several years by modern equipment and manufacturers' warranties. However, HVS International, Mineola, New York Income Capitalization Approach 107 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= as a hostelry grows older, maintenance expenses escalate. A well-organized preventive maintenance system often helps delay deterioration, but most facilities face higher property operations and maintenance costs each year, regardless of the occupancy trend. The quality of initial construction can also have a direct impact on future maintenance requirements. The use of high-quality building materials and construction methods generally reduces the need for maintenance expenditures over the long term. Property operations and maintenance is considered an operating expense; as such, it includes only those components that can be expensed, rather than capitalized, under Internal Revenue Service regulations. For example, if a table leg is broken, the repair of that leg is considered an expense and is chargeable to property operations and maintenance. If the table is replaced, it becomes a capital expenditure and does not appear under the property operations and maintenance category. Appraisers account for capital replacement of items such as furniture and equipment in the reserve for replacement account, which is discussed later in this section. Property operations and maintenance costs are relatively fixed, and are projected as follows. ================================================================================ Table 10-19 Forecast of Property Operations and Maintenance Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized 2000 2001 - -------------------------------------------------------------------------------- Total Property Oper.& Maint. Exp. (+000) $ 140 $ 144 $ 149 $ 154 $ 160 Percentage of Total Revenue 6.7% 6.8% 6.8% 6.8% 6.8% Amount per Available Room $1,401 $1,440 $1,490 $1,542 $1,596 Amount per Occupied Room $ 4.98 $ 5.26 $ 5.44 $ 5.63 $ 5.83 - -------------------------------------------------------------------------------- Energy Expense The energy consumption of a lodging facility takes several forms, including water and space heating, air conditioning, lighting, cooking fuel, and other miscellaneous power requirements. The most common sources of hotel energy are electricity, natural gas, fuel oil, and steam. This category also includes the cost of water service. Total energy cost depends on the source and quantity of fuel used. Electricity tends to be the most expensive source, followed by oil and gas. Although all hotels consume a sizable amount of electricity, many properties supplement their energy requirements with less expensive sources, such as gas and oil, for heating and cooking. HVS International, Mineola, New York Income Capitalization Approach 108 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= A large portion of a hostelry's energy consumption is relatively fixed. Restaurants, kitchens, public areas, and corridors must be continually lighted and climate-controlled, regardless of occupancy. The energy cost of an additional occupied room (i.e., a few hours of light, television, heat, or air conditioning) is minimal. The following table presents our forecast of the subject property's energy expense. ================================================================================ Table 10-20 Forecast of Energy Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized 2000 2001 - -------------------------------------------------------------------------------- Total Energy Ezpense (+000) $ 141 $ 145 $ 150 $ 156 $ 161 Percentage of Total Revenue 6.7% 6.8% 6.8% 6.8% 6.8% Amount per Available Room $1,408 $1,454 $1,505 $1,558 $1,612 Amount per Occupied Room $ 5.01 $ 5.31 $ 5.50 $ 5.69 $ 5.89 - -------------------------------------------------------------------------------- Property Taxes The estimate of property taxes was detailed in a previous section of this report. The following table summarizes these projections. ================================================================================ Table 10-21 Forecast of Property Taxes - -------------------------------------------------------------------------------- 1997 1998 Stabilized 2000 2001 - -------------------------------------------------------------------------------- Forecast Property Taxes (+000) $ 93 $ 99 $ 102 $ 106 $ 110 - ------------------------------------------------------------------------------- Insurance Expense The insurance expense category consists of the cost of insuring the hotel and its contents against damage or destruction by fire, weather, sprinkler leakage, boiler explosion, plate glass breakage, and so forth. It does not include liability coverage, which is a component of administrative and general expense. Insurance rates are based on many factors, including building design and construction, fire detection and extinguishing equipment, fire district, distance from the firehouse, and the area's fire experience. Insurance expenses do not vary with occupancy. Based on historical levels, we project the subject property's insurance expense at approximately $93,000 in 1997. In subsequent years, this amount is assumed to increase in tandem with inflation. The following table outlines our projection of insurance expense. HVS International, Mineola, New York Income Capitalization Approach 109 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-22 Forecast of Insurance Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized 2000 2001 - -------------------------------------------------------------------------------- Forecast Insurance Expense (+000) $ 32 $ 33 $ 34 $ 36 $ 37 - -------------------------------------------------------------------------------- Reserve for Replacement Furniture, fixtures, and equipment are essential to the operation of a lodging facility, and their quality often influences a property's class. This category includes all non-real estate items that are capitalized, rather than expensed. The furniture, fixtures, and equipment of a hotel are exposed to heavy use and must be replaced at regular intervals. The useful life of these items is determined by their quality, durability, and the amount of guest traffic and use. Periodic replacement of furniture, fixtures, and equipment is essential to maintain the quality, image, and income-producing potential of a lodging facility. Because capitalized expenditures are not included in the operating statement but nevertheless affect an owner's cash flow, an appraisal should reflect these expenses in the form of an appropriate reserve for replacement. Our industry experience indicates that a reserve for replacement of 3% to 5% of total revenue is generally sufficient to provide for the timely replacement of furniture, fixtures, and equipment. Because the reserve for replacement is based on a percentage of total revenue, it has no fixed component. Based on an analysis of comparable lodging facilities, we believe that a reserve for replacement of 4% of total revenue is sufficient to provide for the periodic replacement of the subject property's furniture, fixtures, and equipment. This amount is consistent with the reserve account contributions currently made by the hotel. The following table summarizes the projected reserve for replacement. ================================================================================ Table 10-23 Forecast of Reserve for Replacement - -------------------------------------------------------------------------------- 1997 1998 Stabilized 2000 2001 - -------------------------------------------------------------------------------- Reserve for Replacement Expense (+000) $ 84 $ 85 $ 88 $ 91 $ 95 - -------------------------------------------------------------------------------- Equipment Rental The equipment rental category is comprised of lease payments for the rental of the shuttle van and other miscellaneous equipment. For the purposes of this appraisal, we have assumed that upon expiration of the subject property's equipment leases, it will enter into other lease agreements under the HVS International, Mineola, New York Income Capitalization Approach 110 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= prevailing lease terms. Based on the 1995 equipment rental of $12,000, we have forecasted equipment rent to increase in tandem with the underlying inflation rate of 3.5%. The following table illustrates our projection of equipment rent. ================================================================================ Table 10-24 Forecast of Equipment Rental - -------------------------------------------------------------------------------- 1997 1998 Stabilized 2000 2001 - -------------------------------------------------------------------------------- Equipment Rental $ 13 $ 14 $ 14 $ 15 $ 15 - -------------------------------------------------------------------------------- Summary of Projections Based on the preceding analysis, we have formulated a forecast of income and expense. The table on the following page presents a detailed forecast through the stabilized year, including amounts per available room (PAR) and per occupied room (POR). For the purpose of comparison, this table also presents the subject property's most recent full year of operating history. The second table illustrates our ten-year forecast of income and expense in less detail. The forecasts pertain to calendar operating years beginning January 1, 1997, and are expressed in inflated dollars for each year. HVS International, Mineola, New York Income Capitalization Approach 111 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-25 Detailed Forecast of Income and Expense through the Stabilized Year and Most Recent Operating History, Howard Johnson, Woburn, Massachusetts (+000) - --------------------------------------------------------------------------------
Historical Operating Results --------------------------------------- Calendar Years Ending: 1995 1997 Number of Rooms: 100 100 Occupancy: 68.7% 77.0% Average Rate: $58.66 $68.26 Days Open: 365 365 Occupied Rooms: 24,813 % Gross PAR POR 28,105 % Gross PAR POR - ---------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $ 1,456 90.5 % $ 14,556 $ 58.66 $ 1,918 91.2 % $ 19,180 $ 68.24 Telephone 35 2.2 351 1.42 53 2.5 530 1.89 Minor Operated Depts 49 3.0 485 1.96 54 2.6 540 1.92 Other Income 70 4.3 695 2.80 77 3.7 770 2.74 Total Revenues 1,609 100.0 16,088 64.84 2,102 100.0 21,020 74.79 - ---------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES * Rooms 337 23.1 3,367 13.57 427 22.3 4,270 15.19 Telephone 21 60.5 213 0.86 27 50.9 270 0.96 Minor Operated Depts 14 29.2 142 0.57 20 37.0 200 0.71 Total Dept. Expenses 372 23.1 3,721 15.00 474 22.5 4,740 16.87 - ---------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 1,237 76.9 12,367 49.84 1,628 77.5 16,280 57.93 - ---------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 174 10.8 1,736 7.00 228 10.8 2,280 8.11 Management Fee 48 3.0 483 1.95 63 3.0 630 2.24 Marketing 88 5.4 875 3.53 125 5.9 1,250 4.45 Franchise Fees 47 2.9 466 1.88 77 3.7 770 2.74 Property Oper. & Maint. 115 7.1 1,149 4.63 140 6.7 1,400 4.98 Energy 172 10.7 1,716 6.92 141 6.7 1,410 5.02 Total Operating Expenses 643 39.9 6,426 25.90 774 36.8 7,740 27.54 - ---------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 594 37.0 5,941 23.94 854 40.7 8,540 30.39 - ---------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 97 6.0 966 3.89 93 4.4 930 3.31 Insurance 27 1.7 274 1.10 32 1.5 320 1.14 Reserve for Replacement 64 4.0 644 2.59 84 4.0 840 2.99 Equipment Rent 12 0.8 124 0.50 13 0.6 130 0.46 Total 201 12.5 2,007 8.09 222 10.5 2,220 7.90 - ---------------------------------------------------------------------------------------------------------------------- NET INCOME $ 393 24.5 3,933 $ 15.85 $ 632 30.2 $ 6,320 $ 22.49 ====================================================================================================================== Calendar Years Ending: 1998 Stabilized Number of Rooms: 100 100 Occupancy: 75.0% 75.0% Average Rate: $70.99 $73.47 Days Open: 365 365 Occupied Rooms: 27,375 % Gross PAR POR 27,375 % Gross PAR POR - ---------------------------------------------------------------------------------------------------------------- REVENUE Rooms $ 1,943 91.2 % $ 19,430 $ 70.98 $ 2,011 91.2 % $ 20,110 $ 73.46 Telephone 53 2.5 530 1.94 55 2.5 550 2.01 Minor Operated Depts 55 2.6 550 2.01 57 2.6 570 2.08 Other Income 79 3.7 790 2.89 82 3.7 820 3.00 Total Revenues 2,130 100.0 21,300 77.81 2,205 100.0 22,050 80.55 - ---------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES * Rooms 437 22.5 4,370 15.96 452 22.5 4,520 16.51 Telephone 27 50.9 270 0.99 28 50.9 280 1.02 Minor Operated Depts 20 36.4 200 0.73 21 36.8 210 0.77 Total Dept. Expenses 484 22.7 4,840 17.68 501 22.7 5,010 18.30 - ---------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 1,646 77.3 16,460 60.13 1,704 77.3 17,040 62.25 - ---------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 234 11.0 2,340 8.55 242 11.0 2,420 8.84 Management Fee 64 3.0 640 2.34 66 3.0 660 2.41 Marketing 128 6.0 1,280 4.68 133 6.0 1,330 4.86 Franchise Fees 78 3.7 780 2.85 80 3.6 800 2.92 Property Oper. & Maint. 144 6.8 1,440 5.26 149 6.8 1,490 5.44 Energy 145 6.8 1,450 5.30 150 6.8 1,500 5.48 Total Operating Expenses 793 37.3 7,930 28.97 820 37.2 8,200 29.95 - ---------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 853 40.0 8,530 31.16 884 40.1 8,840 32.29 - ---------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 99 4.6 990 3.62 102 4.6 1,020 3.73 Insurance 33 1.5 330 1.21 34 1.5 340 1.24 Reserve for Replacement 85 4.0 850 3.11 88 4.0 880 3.21 Equipment Rent 14 0.7 140 0.51 14 0.6 140 0.51 Total 231 10.8 2,310 8.44 238 10.7 2,380 8.69 - ---------------------------------------------------------------------------------------------------------------- NET INCOME $ 622 29.2 $ 6,220 $ 22.72 $ 646 29.4 $ 6,460 $ 23.60 ================================================================================================================
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 112 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-26 Ten-Year Forecast of Income and Expense, Howard Johnson, Woburn, Massachusetts(+000) - --------------------------------------------------------------------------------
Calendar Years Ending: 1997 1998 1999 2000 2001 ----------------- ----------------- ----------------- ----------------- ---------------- Number of Rooms: 100 100 100 100 100 Occupied Rooms: 28,105 27,375 27,375 27,375 27,375 Occupancy: 77.0% % of 75.0% % of 75.0% % of 75.0% % of 75.0% % of Average Rate: $68.26 Gross $70.99 Gross $73.47 Gross $76.05 Gross $78.71 Gross - ---------------------------- ----------------- ----------------- ----------------- ----------------- ---------------- REVENUE Rooms $1,918 91.2% $1,943 91.2% $2,011 91.2% $2,082 91.2% $2,155 91.2% Telephone 53 2.5 53 2.5 55 2.5 57 2.5 59 2.5 Minor Operated Depts 54 2.6 55 2.6 57 2.6 59 2.6 61 2.6 Other Income 77 3.7 79 3.7 82 3.7 85 3.7 88 3.7 Total 2,102 100.0 2,130 100.0 2,205 100.0 2,283 100.0 2,363 100.0 - ---------------------------- ----------------- ----------------- ----------------- ----------------- ---------------- DEPARTMENTAL EXPENSES Rooms 427 22.3 437 22.5 452 22.5 468 22.5 484 22.5 Telephone 27 50.9 27 50.9 28 50.9 29 50.9 30 50.8 Minor Operated Depts 20 37.0 20 36.4 21 36.8 21 35.6 22 36.1 Total 474 22.5 484 22.7 501 22.7 518 22.7 536 22.7 - ---------------------------- ----------------- ----------------- ----------------- ----------------- ---------------- DEPARTMENTAL INCOME 1,628 77.5 1,646 77.3 1,704 77.3 1,765 77.3 1,827 77.3 - ---------------------------- ----------------- ----------------- ----------------- ----------------- ---------------- OPERATING EXPENSES Administrative & General 228 10.8 234 11.0 242 11.0 251 11.0 259 11.0 Management Fee 63 3.0 64 3.0 66 3.0 68 3.0 71 3.0 Marketing 125 5.9 128 6.0 133 6.0 137 6.0 142 6.0 Franchise Fees 77 3.7 78 3.7 80 3.6 83 3.6 86 3.6 Property Oper. & Maint 140 6.7 144 6.8 149 6.8 154 6.7 160 6.8 Energy 141 6.7 145 6.8 150 6.8 156 6.8 161 6.8 Total 774 36.8 793 37.3 820 37.2 849 37.1 879 37.2 - ---------------------------- ----------------- ----------------- ----------------- ----------------- ---------------- HOUSE PROFIT 854 40.7 853 40.0 884 40.1 916 40.2 948 40.1 - ---------------------------- ----------------- ----------------- ----------------- ----------------- ---------------- FIXED EXPENSES Property Taxes 93 4.4 99 4.6 102 4.6 106 4.6 110 4.7 Insurance 32 1.5 33 1.5 34 1.5 36 1.6 37 1.6 Reserve for Replacement 84 4.0 85 4.0 88 4.0 91 4.0 95 4.0 Equipment Rent 13 0.6 14 0.7 14 0.6 15 0.7 15 0.6 Total 222 10.5 231 10.8 238 10.7 248 10.9 257 10.9 - ---------------------------- ----------------- ----------------- ----------------- ---------------- ---------------- NET INCOME $ 632 30.2% $ 622 29.2% $ 646 29.4% $ 668 29.3% $ 691 29.2% ============================ ================= ================= ================= ================ ================ Calendar Years Ending: 2002 2003 2004 2005 2006 ---------------- ---------------- --------------- ---------------- ---------------- Number of Rooms: 100 100 100 100 100 Occupied Rooms: 27,375 27,375 27,375 27,375 27,375 Occupancy: 75.0% % of 75.0% % of 75.0% % of 75.0% % of 75.0% % of Average Rate: $81.46 Gross $84.31 Gross $87.26 Gross $90.32 Gross $93.48 Gross - ---------------------------- ----------------- ---------------- --------------- ---------------- ---------------- REVENUE Rooms $2,230 91.2% $2,308 91.2% $2,389 91.2% $2,472 91.2% $2,559 91.2% Telephone 61 2.5 63 2.5 65 2.5 68 2.5 70 2.5 Minor Operated Depts 63 2.6 66 2.6 68 2.6 70 2.6 73 2.6 Other Income 91 3.7 94 3.7 97 3.7 101 3.7 104 3.7 Total 2,445 100.0 2,531 100.0 2,619 100.0 2,711 100.0 2,806 100.0 - ---------------------------- ----------------- ---------------- --------------- ---------------- ---------------- DEPARTMENTAL EXPENSES Rooms 501 22.5 519 22.5 537 22.5 556 22.5 575 22.5 Telephone 31 50.8 33 52.4 34 52.3 35 51.5 36 51.4 Minor Operated Depts 23 36.5 24 36.4 25 36.8 26 37.1 26 35.6 Total 555 22.7 576 22.8 596 22.8 617 22.8 637 22.7 - ---------------------------- ----------------- ---------------- --------------- ---------------- ---------------- DEPARTMENTAL INCOME 1,890 77.3 1,955 77.2 2,023 77.2 2,094 77.2 2,169 77.3 - ---------------------------- ----------------- ---------------- --------------- ---------------- ---------------- OPERATING EXPENSES Administrative & General 268 11.0 278 11.0 287 11.0 298 11.0 308 11.0 Management Fee 73 3.0 76 3.0 79 3.0 81 3.0 84 3.0 Marketing 147 6.0 152 6.0 158 6.0 163 6.0 169 6.0 Franchise Fees 89 3.6 92 3.6 96 3.7 99 3.7 102 3.6 Property Oper. & Maint. 165 6.7 171 6.8 177 6.8 183 6.8 190 6.8 Energy 167 6.8 173 6.8 179 6.8 185 6.8 191 6.8 Total 909 37.1 942 37.2 976 37.3 1,009 37.3 1,044 37.2 - ---------------------------- ----------------- ---------------- --------------- ---------------- ---------------- HOUSE PROFIT 981 40.2 1,013 40.0 1,047 39.9 1,085 39.9 1,125 40.1 - ---------------------------- ----------------- ---------------- --------------- ---------------- ---------------- FIXED EXPENSES Property Taxes 113 4.6 117 4.6 122 4.7 126 4.6 130 4.6 Insurance 38 1.6 40 1.6 41 1.6 42 1.5 44 1.6 Reserve for Replacement 98 4.0 101 4.0 105 4.0 108 4.0 112 4.0 Equipment Rent 16 0.7 16 0.6 17 0.6 17 0.6 18 0.6 Total 265 10.9 274 10.8 285 10.9 293 10.7 304 10.8 - ---------------------------- ----------------- ---------------- --------------- ---------------- ---------------- NET INCOME $ 716 29.3% $ 739 29.2% $ 762 29.0% $ 792 29.2% $ 821 29.3% ============================ ================= ================ ================ ================ ================
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 113 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The conversion of a property's projected net income into an estimate of value is based on the premise that investors typically purchase real estate with a small amount of equity cash (25% to 40%) and a large amount of mortgage financing (60% to 75%). The amounts and terms of available mortgage financing and the rates of return that are required to attract sufficient equity capital form the basis for allocating the net income between the mortgage and equity components and deriving a value estimate. Mortgage Component Data for the mortgage component may be developed from statistics of actual hotel mortgages made by long-term lenders. The American Council of Life Insurance, which represents 20 large life insurance companies, publishes quarterly information pertaining to the hotel mortgages issued by its member companies. The following table summarizes the average mortgage interest rates of the hotel loans made by these lenders. In addition, the A corporate bond yield (as reported by Moody's Bond Record) is shown for the purpose of comparison. HVS International, Mineola, New York Income Capitalization Approach 114 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-27 Average Mortgage Interest Rates and Average A Corporate Bond Yields - -------------------------------------------------------------------------------- Average A Average Corporate Period Interest Rate Bond Yield - -------------------------------------------------------------------------------- 1st Quarter 1996 7.79 % 7.37 % 4th Quarter 1995 8.44 7.28 3rd Quarter 1995 8.61 7.67 2nd Quarter 1995 9.25 7.87 1st Quarter 1995 9.14 8.50 3rd Quarter 1994 9.64 8.48 2nd Quarter 1994 9.38 8.28 4th Quarter 1993 9.38 7.80 3rd Quarter 1993 8.41 7.28 2nd Quarter 1993 10.53 9.65 4th Quarter 1992 9.43 8.48 3rd Quarter 1992 9.99 8.38 2nd Quarter 1992 9.47 8.79 1st Quarter 1992 10.02 8.81 4th Quarter 1991 10.49 8.97 3rd Quarter 1991 10.03 9.29 2nd Quarter 1991 10.75 9.45 3rd Quarter 1990 10.47 9.89 2nd Quarter 1990 10.58 9.83 4th Quarter 1989 9.96 9.42 3rd Quarter 1989 9.55 9.46 2nd Quarter 1989 10.54 9.93 1st Quarter 1989 10.39 10.16 4th Quarter 1988 10.07 10.03 3rd Quarter 1988 10.66 10.51 2nd Quarter 1988 10.09 10.33 4th Quarter 1987 10.41 10.45 3rd Quarter 1987 10.00 9.95 2nd Quarter 1987 9.81 9.46 1st Quarter 1987 9.43 9.19 4th Quarter 1986 9.44 9.55 3rd Quarter 1986 9.56 9.71 2nd Quarter 1986 9.80 9.91 1st Quarter 1986 10.99 10.62 Sources: American Council of Life Insurance; Moody's Bond Record - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 115 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Because of the six- to nine-month lag time in reporting and publishing hotel mortgage statistics, it is necessary to update this information to reflect current lending practices. Research by HVS International indicates that there is a close mathematical relationship between the average interest rate of a hotel mortgage and the concurrent yield on an average A corporate bond. Through a regression analysis, this relationship is expressed as follows. Y = 2.76078 + 0.782280 X Where: Y = Estimated Hotel/Motel Mortgage Interest Rate X = Current Average A Corporate Bond Yield (Coefficient of correlation is 96.4%) The yield on A corporate bonds for the third quarter of 1996, as reported by Moody's Bond Record, was 7.91%. Using a factor of 7.91% in the equation presented above produces an estimated hotel/motel interest rate of 8.95%. In addition to the mortgage interest rate estimate derived from this regression analysis, HVS International constantly monitors the terms of hotel mortgage loans made by our institutional lending clients. In the past year, we have noted an increase in the availability of debt financing, and many lenders have returned to the market. The current level of lending activity represents a significant increase from the restricted environment of the early 1990s. Nonetheless, the market for hotel mortgage loans remains somewhat tight, particularly when compared to the conditions that prevailed in the mid-to late 1980s. In the current lending climate, strong hotel projects that are structured on an economic basis can secure mortgage financing at interest rates ranging from 8% to 11%, depending on the property, location, affiliation, and operator. In the 1980s, when hotel mortgages were widely available, loan-to-value ratios typically ranged from 75% to 80%. Amortization schedules were generally based on 30 years, although the term of the loan was more likely to be seven to ten years. The few loans that were underwritten in the early 1990s were based on far more stringent parameters: loan-to-value ratios declined to a range of 50% to 65%, and amortization periods of 20 to 25 years were most common. With the recent reemergence of hotel financing, loan-to-value requirements and amortization schedules have loosened somewhat. At present, we find that lenders who are active in the market are using loan-to-value ratios of HVS International, Mineola, New York Income Capitalization Approach 116 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 65% to 75%, and amortization periods of 25 to 30 years. The exact terms offered depend on specific factors such as the property's location, the age and quality of the physical facility, local hostelry market conditions, and (perhaps more significantly) the profile of the borrower. The strongest projects typically command the highest loan-to-value ratios. Based on the preceding analysis of the current lodging industry mortgage market and adjustments for specific factors such as the property's location and conditions in the local hotel market, it is our opinion that a 9.5% interest, 20-year amortization mortgage with a 0.111856 constant is appropriate for the subject property. We believe that a mortgage lender will lend up to 70% of the hotel's market value as determined by this appraisal. Equity Component The remaining capital required for a hotel investment generally comes from the equity investor. The rate of return that an equity investor expects over a ten-year holding period is known as the equity yield. Unlike the equity dividend, which is a short-term rate of return, the equity yield specifically considers a long-term holding period (generally ten years), annual inflation- adjusted cash flows, property appreciation, mortgage amortization, and proceeds from a sale at the end of the holding period. It is difficult to quantify the rate of return required by equity investors who are seeking to purchase hotel properties. To establish an appropriate equity yield rate, HVS International uses two sources of data: past appraisals and investor interviews. Past Appraisals - During the past 12 months, HVS International has appraised more than 400 hotels, including properties located in most major national markets. Each appraisal used a similar mortgage-equity approach in which income is projected and then discounted to a current value at rates reflecting the cost of debt and equity capital. In the case of hotels that were sold subsequent to our valuations, we are able to determine an appropriate equity yield rate by excluding incentive management fees from the projection of income and expense, inserting the projection into a valuation model, and adjusting the appraised value to reflect the actual sales price by modifying the return assumptions. The following table shows a representative sample of hotels that were sold shortly after we appraised them, along with the imputed equity return based on our valuation approach. HVS International, Mineola, New York Income Capitalization Approach 117 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-28 Sample of Hotels Sold - --------------------------------------------------------------------------------
No. of Date of Overall Total Property Equity Hotel City and State Rooms Sale Selling Price Rate Yield Yield - ---------------------------------------------------------------------------------------------------------------------------------- Ritz-Carlton Phoenix, AZ 281 2/94 $23,000,000 11.0% 14.6% 21.7% Marriott Marina Fort Lauderdale, FL 580 2/94 40,000,000 12.2 16.4 26.7 Holiday Inn Edison, NJ 274 3/94 11,803,000 7.8 17.0 26.3 Crescent Hotel Phoenix, AZ 342 3/94 26,000,000 6.5 7.2 2.2 Checkers Hotel Kempinski Los Angeles, CA 173 4/94 12,750,000 3.0 18.3 27.0 Best Western Fireside Inn Cambria, CA 46 4/94 3,377,000 11.7 15.8 24.3 Phoenician Resort Phoenix, AZ 580 4/94 224,000,000 6.6 9.3 8.9 Newark-Fremont Hilton Newark, CA 300 5/94 8,950,000 8.8 14.9 20.7 Radisson Inn Orlando, FL 299 5/94 11,150,000 12.9 18.0 28.2 Westin Kauai Lihue, Kauai, HI 840 6/94 97,400,000 (1.9) 8.1 7.2 Residence Inn Binghamton, NY 72 6/94 6,325,000 10.8 13.9 21.9 Hotel Millenium New York, NY 561 6/94 75,000,000 9.5 14.1 23.0 Best Western Otay Valley Chula Vista, CA 120 7/94 2,350,000 13.2 21.1 31.8 Hampton Inn Islandia, NY 121 7/94 6,572,000 12.6 16.6 28.2 Hampton Inn Willow Grove, PA 150 7/94 10,220,000 11.0 14.3 23.0 Hampton Inn West Palm Beach, FL 136 7/94 4,220,000 10.8 10.8 14.3 Hampton Inn Naples, FL 107 7/94 5,700,000 11.4 11.5 24.9 Hampton Inn Albany, NY 126 7/94 9,204,000 9.3 11.5 15.8 Marriott Hotel South Bend, IN 299 7/94 11,500,000 10.5 13.2 18.9 Marriott SFO Burlingame, CA 684 8/94 61,700,000 10.2 13.2 19.0 Westfields Conference Center Chantilly, VA 340 8/94 46,000,000 12.3 15.9 25.3 Radisson Mark Resort Vail, CO 349 9/94 25,200,000 8.9 15.8 24.1 Marriott East Side New York, NY 664 10/94 55,000,000 8.5 9.7 11.1 Marriott Resort Vail, CO 349 10/94 25,200,000 14.2 18.9 30.5 Marriott Quorum Addison, TX 547 10/94 29,815,000 13.5 18.2 31.8 Sheraton Hotel Hasbrouck Heights, NJ 338 11/94 10,450,000 18.3 21.1 30.7 Sheraton Inn Napa, CA 191 12/94 9,968,000 8.9 13.7 19.8 Marriott Fisherman's Wharf San Francisco, CA 255 12/94 27,755,000 10.8 13.4 19.4 Marriott Hotel Portland, OR 503 12/94 45,000,000 12.9 17.4 30.0 Radisson Inn Springfield, MO 199 12/94 5,800,000 8.2 10.1 11.3 Williamsburg Hilton Williamsburg, VA 291 12/94 15,000,000 15.4 19.0 32.0 Marriott Tech Center Denver, CO 625 12/94 36,000,000 13.7 16.4 27.1 Holiday Inn Sunspree Singer Island, FL 222 12/94 11,900,000 8.6 10.6 12.4 The Plaza New York, NY 805 6/95 325,000,000 7.0 11.0 14.0 Fullerton Suites Fullerton, CA 96 5/95 5,000,000 12.9 18.7 28.5 Residence Inn Baton Rouge, LA 80 6/95 6,518,000 12.7 14.8 21.2 Residence Inn Overland Park, KS 112 6/95 8,500,000 8.9 14.7 20.8 Residence Inn Des Moines, IA 112 6/95 7,660,000 9.8 14.1 19.6 Residence Inn Hunt Valley, MD 96 6/95 6,580,000 12.3 13.6 18.3 Residence Inn Kansas City, MO 112 6/95 6,560,000 10.4 13.2 19.8 Residence Inn Lincoln, NE 120 6/95 7,100,000 10.0 13.7 18.5 Embassy Suites Schaurmburg, IL 209 12/95 17,800,000 10.0 13.5 18.9 Marriott Hotel Andover, MA 293 12/95 24,000,000 9.7 13.5 19.2 Doubletree Suites Valley Forge, PA 229 12/95 28,500,000 10.7 14.2 15.5 Marriott Hotel Tysons Corner, VA 390 12/95 41,100,000 10.7 13.1 18.0 Marriott Hotel Warner Center, CA 461 12/95 57,900,000 6.2 11.6 14.2 Hilton at the Club Pleasanton, CA 294 12/95 22,000,000 10.5 13.4 17.0
Source: HVS International - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 118 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Investor Interviews - HVS International is in constant contact with numerous institutional and individual hotel investors. This source of equity funds has definite return requirements that can be expressed as an equity yield rate based on a ten-year projection of net income before incentive management fees but after debt service. Based on our surveys and investor interviews, the following table illustrates the range of equity yields generally required by individual and institutional investors. ================================================================================ Table 10-29 Equity Yield Requirements - -------------------------------------------------------------------------------- Source Equity Yield Requirement Individual 20% - 24% Institution 18% - 22% - -------------------------------------------------------------------------------- Based on the assumed 70% loan-to-value ratio, the risk inherent in achieving the projected income stream, and the age, condition, and anticipated market position of the subject property, it is our opinion that an equity investor is likely to require an equity yield rate of 22% before payment of incentive management fees. This estimate is well supported by the equity yield requirements presented previously. Terminal Capitalization Rate Inherent in this valuation process is the assumption of a sale at the end of the ten-year holding period. The estimated reversionary sales price as of that date is calculated by capitalizing the projected 11th-year net income by an overall terminal capitalization rate. A percentage for the seller's brokerage and legal fees is deducted from this sales price, and the net proceeds to the equity interest (also known as the equity residual) are calculated by deducting the outstanding mortgage balance from the reversion. To estimate a property's reversionary value, the appraiser must select a terminal capitalization rate and an allocation for brokerage and legal fees. The terminal capitalization rate is an overall rate that is applied to one stabilized year, and thus it inherently incorporates the cost of debt and equity capital. The terminal capitalization rate can be derived through a mortgage and equity band of investment technique which calculates the weighted average cost of the capital used in a hotel investment. Combining the mortgage financing terms derived previously (namely, a 70% loan-to-value ratio and a 0.111856 debt service constant) with a cash-on-cash equity dividend rate of 12% produces the following overall capitalization rate. HVS International, Mineola, New York Income Capitalization Approach 119 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Percent of Rate of Weighted Value Return Average ---------- ------- -------- Mortgage 70% X 0.11186 = 0.07830 Equity 30% X 0.12000 = 0.03600 ------- Overall Capitalization Rate 0.11430 Because this overall rate will be used to capitalize net income ten years from the date of value, an upward adjustment is appropriate to reflect the uncertainty inherent in this extended period. For the purpose of this valuation, we will use a terminal capitalization rate of 12%. As a point of reference, the terminal capitalization rate can be compared to the going-in rate implied by the subject property's estimated value. The going-in rate reflects the capitalization rate that would be applicable if the hotel were operating at a stabilized level as of the date of value. This rate is calculated by dividing the stabilized net income (expressed in current dollars as of the date of value) by the value indicated by the income capitalization approach. Generally, the terminal capitalization rate is approximately 100 to 200 basis points above the going-in rate. Summary of Valuation Variables The following table summarizes the valuation variables that have been used to estimate the subject property's value via the income capitalization approach. ================================================================================ Table 10-30 Summary of Valuation Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Ten-Year Forecast Loan-To-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.111856 Equity Yield Ye 22.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 12.0% - -------------------------------------------------------------------------------- Valuation of the Mortgage and Equity Components The valuation of the mortgage and equity components is accomplished through use of an algebraic equation that calculates the exact amount of debt and equity that the hotel will be able to support based on the anticipated cash flow (derived from the forecast of income and expense) and the specific return requirements demanded by the mortgage lender (interest) HVS International, Mineola, New York Income Capitalization Approach 120 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= and the equity investor (equity yield). The equation and the calculations associated with this simultaneous valuation formula are set forth in the Addenda to this report. Using the variables summarized above, we estimate the value of the subject property via the income capitalization approach at $5,309,000. Proof of Value The value is proven by calculating the yields to the mortgage and equity components during the projection period. If the mortgagee achieves a 9.5%yield and the equity yield is 22%, then $5,309,000 is the correct value by the income capitalization approach. Using the assumed financial structure set forth in the previous calculations, market value can be allocated between the debt and equity as follows. Mortgage Component (70%) $ 3,717,000 Equity Component (30%) 1,593,000 ----------- Total $ 5,309,000 The annual debt service is calculated by multiplying the mortgage component by the mortgage constant. Mortgage Component $ 3,717,000 Equity Component 0.111856 ----------- Annual Debt Service $ 415,768 The cash flow to equity is calculated by deducting the debt service from the projected net income before debt service. HVS International, Mineola, New York Income Capitalization Approach 121 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-31 Forecast of Net Income to Equity - -------------------------------------------------------------------------------- Net Income Available for Total Annual Net Income Year Debt Service Debt Service to Equity - -------------------------------------------------------------------------- 1997 $ 632,000 - $ 416,000 = $ 216,000 1998 622,000 - 416,000 = 206,000 1999 646,000 - 416,000 = 230,000 2000 668,000 - 416,000 = 252,000 2001 691,000 - 416,000 = 275,000 2002 716,000 - 416,000 = 300,000 2003 739,000 - 416,000 = 323,000 2004 762,000 - 416,000 = 346,000 2005 792,000 - 416,000 = 376,000 2006 821,000 - 416,000 = 405,000 - -------------------------------------------------------------------------------- The equity residual at the end of the tenth year is calculated as follows. Reversionary Value ( $850,000 /0.120) $7,083,000 Less: Brokerage and Legal Fees 213,000 Mortgage Balance 2,677,000 ---------- Net Sale Proceeds to Equity $4,193,000 The overall property yield (before debt service), the yield to the lender, and the yield to the equity position have been calculated by computer with the following results. ================================================================================ Table 10-32 Overall Property Yields - -------------------------------------------------------------------------------- Projected Yield (Internal Rate of Return) Position Value Over 10-Year Holding Period ----------------------------------------------------------------- Total Property $5,309,000 14.4 % Mortgage 3,717,000 9.4 Equiy 1,593,000 22.0 Note: Whereas the mortgage constant and value are calculated on the basis of monthly mortgage payments, the mortghage yield in this proof assumes single annual payments. As a result, the proof's derived yield may be slightly less than that actually input. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 122 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The following tables demonstrate that the property receives its anticipated yields, proving that the $5,309,000 value is correct based on the assumptions used in this approach. ================================================================================ Table 10-33 Total Property Yield - -------------------------------------------------------------------------------- Net Income before Present Worth of $1 Discounted Year Debt Service Factor @ 14.4% Cash Flow - ------------------------------------------------------------------------- 1997 $ 632,000 x 0.874147 = $ 552,000 1998 622,000 x 0.764133 = 475,000 1999 646,000 x 0.667964 = 432,000 2000 668,000 x 0.583899 = 390,000 2001 691,000 x 0.510414 = 353,000 2002 716,000 x 0.446177 = 319,000 2003 739,000 x 0.390024 = 288,000 2004 762,000 x 0.340938 = 260,000 2005 792,000 x 0.298030 = 236,000 2006 7,692,000 * x 0.260522 = 2,004,000 ----------- Total Property Value $ 5,309,000 *10th year net income of $821,000 plus sales proceeds of $ 6,871,000 - -------------------------------------------------------------------------------- ================================================================================ Table 10-34 Mortgage Component Yield - -------------------------------------------------------------------------------- Total Annual Present Worth of $1 Discounted Year Debt Service Factor @ 9.4% Cash Flow - ------------------------------------------------------------------------- 1997 $ 416,000 x 0.914197 = $ 380,000 1998 416,000 x 0.835757 = 348,000 1999 416,000 x 0.764047 = 318,000 2000 416,000 x 0.698490 = 291,000 2001 416,000 x 0.638557 = 266,000 2002 416,000 x 0.583768 = 243,000 2003 416,000 x 0.533679 = 222,000 2004 416,000 x 0.487888 = 203,000 2005 416,000 x 0.446026 = 186,000 2006 3,093,000 * x 0.407756 = 1,261,000 ----------- Value Of Mortgage Component $ 3,718,000 *10th year debt service of $416,000 plus outstanding mortgage balance of $2,677,000 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 123 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-35 Equity Component Yield - -------------------------------------------------------------------------------- Net Income Present Worth of $1 Discounted Year to Equity Factor @ 22.2% Cash Flow - ------------------------------------------------------------------------- 1997 $ 216,000 x 0.819756 = $ 177,000 1998 206,000 x 0.671999 = 138,000 1999 230,000 x 0.550875 = 127,000 2000 252,000 x 0.451583 = 114,000 2001 275,000 x 0.370187 = 102,000 2002 300,000 x 0.303463 = 91,000 2003 323,000 x 0.248766 = 80,000 2004 346,000 x 0.203927 = 71,000 2005 376,000 x 0.167170 = 63,000 2006 4,599,000 * x 0.137039 = 630,000 ---------- Value of Equity Component $1,593,000 *10th year net income to equity of $405,000 plus sales proceeds of $4,194,000 - -------------------------------------------------------------------------------- Valuation Method Two: Discounted Cash Flow The total property yield derived from the previous valuation method was 14.4%. After reviewing the total property yields indicated by recent hotel sales, which ranged from 7.2% to 21.1%, it is our opinion that a 14% discount factor would be appropriate for the Howard Johnson. The following table illustrates the discounted cash flow analysis using a 14% discount factor. HVS International, Mineola, New York Income Capitalization Approach 124 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-36 Discounted Cash Flow Analysis - -------------------------------------------------------------------------------- Discount Net Factor Discounted Calendar Year Income @ 14.0% Cash Flow --------------------------------------------------------------- 1997 $ 632,000 0.87719 $ 554,386 1998 622,000 0.76947 478,609 1999 646,000 0.67497 436,032 2000 668,000 0.59208 395,510 2001 691,000 0.51937 358,884 2002 716,000 0.45559 326,200 2003 739,000 0.39964 295,332 2004 762,000 0.35056 267,126 2005 792,000 0.30751 243,546 2006 7,691,833 * 0.26974 2,074,824 Estimated Market Value: $5,430,448 (Say:) $5,400,000 Reversion Analysis ------------------ 11th Year's Net Income $ 850,000 Capitalization Rate 12.0% Total Sales Proceeds $7,083,333 Less: Broker & Legal @ 3.0% 212,500 ---------- * 10th year net income of $821,000 plus sales proceeds of $6,870,833 - -------------------------------------------------------------------------------- Conclusion Based on our extensive experience in the hotel industry and comprehensive support provided by literature published by the Appraisal Institute, it is our opinion that the valuation procedure embodied by Method One most closely reflects the investment rationale of typical hotel buyers. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis and Valuations,(1) Method Two (which discounts the projected net income and reversion using an overall discount rate, or total property yield) "does not consider the impact of mortgage debt, leverage and the specific equity demands of typical hotel investors...This technique is simple but less reliable because the derivation of the discount rate has little support." In light of this consideration, we have relied on the $5,309,000 value conclusion indicated by Method One. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236 HVS International, Mineola, New York Sales Comparison Approach 125 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 11. Sales Comparison Approach The sales comparison approach is based on the assumption that an informed purchaser will pay no more for a property than the cost to acquire an existing property with equal utility. This approach estimates market value by considering the sales prices indicated by recent transactions involving properties that are similar to the property being appraised. Dissimilarities are resolved with appropriate adjustments; these differences may pertain to the date of sale, the age of the property, location, construction, condition, layout, equipment, size, or external economic factors. The reliability of the sales comparison approach depends on three factors: 1. the availability of timely, comparable sales data; 2. an understanding of the true terms of the sales and the motivation of the buyer and seller; 3. the degree of comparability, or the extent of the adjustments needed to reflect differences between the subject property and the comparable property. In appraising lodging facilities, it is often difficult to find an adequate number of recent sales involving hotels that are truly comparable to the subject property. Consequently, it may be necessary to consider transactions involving properties in different market areas, and the required adjustments greatly diminish the reliability of the conclusions. Moreover, it is virtually impossible for an observer to determine the true motivations of the buyers and sellers involved in transactions. Hotel acquisition often represents a highly ego-driven process in which a number of external, non-market factors influence the purchase price. Unless the appraiser can quantify these influences, there is no way of knowing whether the purchase price paid actually reflects market value. A final consideration is the degree of similarity between the subject property and the comparable; in most cases, the differences are significant enough to require numerous subjective and unsubstantiated adjustments. Each adjustment represents a potential for error, and thus diminishes the reliability of this approach. As a result of these HVS International, Mineola, New York Sales Comparison Approach 126 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= shortcomings, the use of the sales comparison approach in valuing hotels is primarily as a check against the value indicated by the income capitalization approach. Hotel values declined in many areas of the country during the late 1980s and early 1990s, although a rebound began in 1994 and 1995. The downturn, which began in most markets in 1988, was largely attributable to lower operating incomes caused by an oversupply of new hotel rooms constructed during the mid-1980s. Overbuilding resulted in flat or declining average rates and occupancies, which caused revenues to fall. A number of other factors exacerbated the situation. The national recession caused a drop in demand in many markets during the early 1990s, and the Persian Gulf War created a virtual freeze on travel in the beginning of 1991, further limiting hotel demand. Operating costs continued to rise despite poor market conditions, resulting in a decline in the net operating income of hotels throughout the nation. Because operating costs have a large fixed component, many lodging facilities experienced precipitous drops in net income. As bottom-line profits eroded, many hotels were unable to meet debt service, and hundreds of properties entered foreclosure or bankruptcy. Lenders and government agencies soon became hotel owners. Because most financial institutions were preoccupied with their distressed real estate, very little mortgage capital was available and the nation suffered from a well-publicized credit crunch. Most hotel transactions that occurred during the early 1990s were financed by the property owners, who, in most cases, were lenders. In the early 1990s, the primary market participants were owner-operators with the expertise to turn around under-performing properties. Hotels were out of favor with passive investors as a result of the industry's poor operating performance and the uncertainty of future appreciation. The wide disparity in buyer and seller expectations also limited the number of transactions. Many sellers were unwilling to accept the fact that the market value of their hotel investments had declined below the cost of the project or the original investment. Moreover, many owners were faced with a significant tax burden upon sale, further reducing their willingness to settle for a price that was below the original acquisition cost. As a result of these market forces, there was very little sales activity involving large, high-quality hotels. The primary difficulty was the lack of properties available for sale; owners who were not forced to sell opted to wait for prices to recover. The few hotels that did enter the market generally HVS International, Mineola, New York Sales Comparison Approach 127 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= attracted 15 to 20 interested bidders, mostly consisting of owner-operators. As a result of the competition for these few assets, the prices of better-quality hotels began to escalate rapidly. In response, more sellers have been encouraged to place their products on the market. An indicator of this market trend is the number of hotel sales that have occurred during the past few years. HVS International tracks major hotel transactions of more than $10,000,000 on an annual basis. In 1992, the number of major transactions was 67; a slightly lower level of 52 was registered in 1993. This total increased significantly (to 92) in 1994, and the 1995 total is estimated to have been 104. In tandem with escalating prices, hotels are again being considered by traditional financing sources, which had virtually abandoned the hospitality industry by the early 1990s. Although many lenders are still approaching the market with a high degree of caution, it is now possible to obtain third-party financing for hotel transactions. The mortgage loans that are now being made are subject to fairly stringent requirements: loan-to-value ratios remain in the 65% to 75% range. The qualification of the borrower is also a crucial consideration for most lenders. We believe that the upward trend in both pricing and sales activity will continue as financing becomes more available and additional buyers (particularly passive investors) enter the market. Consequently, it is important to consider the date of the transactions used in the sales comparison approach. When the comparable sales are not recent enough to provide an accurate picture of the current market, it may be necessary to make upward adjustments to the values indicated by the sales comparison and income capitalization approaches in recognition of the recent escalation. Comparable Sales Based on information provided by the Hospitality Market Data Exchange and compiled by the six offices of HVS International, the following transactions involved hotels that appear to have some degree of comparability to the subject property. HVS International, Mineola, New York Sales Comparison Approach 128 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Sale #1: - -------- Property: Hampton Inn Location: 6109 Glenwood Avenue Raleigh, North Carolina Date of Sale: May, 1995 Sales Price: $6,700,000 Grantor: IMIC (International Management and Investment Corporation). Grantee: Winston Hotels, Inc. Year Opened: 1986 Number of Rooms: 141 Price per Room: $47,518 Confirmed By: Schultz, Carr, Bissette & Associates Comments: The property features an outdoor swimming pool. Sale #2: - -------- Property: Comfort Inn Location: 629 Frontage Road Augusta, Georgia Date of Sale: May, 1995 Sales Price: $6,000,000 Grantor: IMIC (International Management & Investment Corporation) Grantee: Winston Hotels Year Opened: 1989 Number of Rooms: 123 Price per Room: $48,780 Confirmed By: Schultz, Carr, Bissette & Associates Comments: The purchaser reportedly paid a premium for this property, in order to obtain the remaining properties in the portfolio. HVS International, Mineola, New York Sales Comparison Approach 129 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Sale #3: - -------- Property: Comfort Inn Location: 7625 Imperial Way Fogelsville, Pennsylvania Date of Sale: March, 1995 Sales Price: $7,000,000 Grantor: Solow Hotel Corporation Grantee: Innkeepers USA, L.P. Year Opened: 1990 Number of Rooms: 127 Price per Room: $55,118 Confirmed By: Pratt, White, and Whitney - Real Estate Appraisers and Consultants Sale #4: - -------- Property: Independent Motel Location: Wells Beach, Maine Date of Sale: January, 1996 Sales Price: $6,000,000 Grantor: Vander W. Forbes and Mary E. Forbes Grantee: Lafayette Wells, Inc. Year Opened: 1917 Number of Rooms: 122 Price per Room: $47,244 Confirmed By: Amidon Appraisal Company Comments: This property consists of at least six buildings constructed between 1917 and 1983. HVS International, Mineola, New York Sales Comparison Approach 130 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= In addition to considering the above recent transactions, we have also reviewed the sale of the subject property, which occurred in March, 1994. The details of this transaction are summarized as follows: Subject Property: - ----------------- Property: Howard Johnson Location: Woburn, MA Date of Sale: March, 1994 Sales Price: $2,698,482 Grantor: Nippon Credit Bank, Ltd. Grantee: Chartwell/G.S.R. Hotels III Limited Partnership (an entity controlled by Ashford Financial Corporation) Year Opened: 1972 Number of Rooms: 100 Price per Room: $32,083 Confirmed By: Grantee In analyzing the sale of the subject property, it is important to consider the terms and conditions pertaining to the transaction. The subject property was acquired by Ashford Financial Corporation from Nippon Credit Bank, Ltd. in March of 1994 as part of a purchase of a mortgage loan secured by 15 hotel properties. The outstanding principal balance of the non-performing mortgage loan at the time of acquisition was $72,840,000, and the purchase price was $18,730,000. At the time of the closing, the mortgage loan was the subject of a settlement agreement between Nippon Credit Bank, Ltd. and Northeast Hotel Association, Inc., which was the owner of the subject property. The settlement agreement called for the conveyance of property deeds in lieu of foreclosure as well as a cash payment of $2,000,000 for the settlement of guaranty obligations. The above listed price represents an allocation of the total package price rather than a negotiated value for this single asset. Based on our understanding of the terms of this transaction, we do not believe that this sale was reflective of the market value of the individual hotel. The relevance of the previous transaction involving the subject property is also undermined by the material change in market conditions which occurred between the date of this sale and the present date of value. Areawide occupancy and average rate have improved dramatically in the intervening months, and are forecasted to continue this positive trend. As previously discussed, the market for hotel investments has also improved HVS International, Mineola, New York Sales Comparison Approach 131 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= significantly, due to changes in lender and investor attitudes. Finally, the property itself has undergone a significant renovation, with a total of $548,212 spent on upgrading the facilities and amenities in 1994 and 1995. An estimated $103,771 is expected to be spent in 1996. For these reasons, we are of the opinion that the 1994 sale involving the subject property is not a reliable indicator of the current value of the hotel. Conclusion Although the sales comparison approach may be useful in providing a value range and reflecting certain market characteristics, its applicability is limited by the numerous possible points of difference between the subject property and other hotels that have sold in recent years. These factors may include location, access, size, services and facilities offered, market conditions, chain affiliation, market orientation, management, rate structure, age, physical condition, date of sale, the highest and best use of the land, and the anticipated profitability of the operation. Circumstances surrounding a sale, such as financing terms, tax considerations, income guarantees, sales of partial interests, duress on the part of the buyer or seller, or a particular deal structure can also cause a disparity between the sales price and pure market value. Moreover, it is often difficult to determine the marketing periods that were necessary to consummate the transactions. It is extremely difficult to quantify the appropriate adjustment factors accurately because of their number and complexity, as well as the difficulty in obtaining specific, detailed information. Any attempt to manipulate the necessary adjustments is insupportable and purely speculative. Because appraisers are expected to reflect the analytical processes and actions of typical buyers and sellers rather than to create a highly subjective valuation approach, the investment rationale of hotel owners is an essential consideration. As specialists in the valuation of hotels, we find that typical buyers purchase properties based on a thorough analysis of the anticipated economic benefits of property ownership, rather than on historical sales data. In light of these factors, it is our opinion that the sales comparison approach is unsuitable for indicating a specific estimate of the subject property's market value; however, this approach may indicate a range of values that can be used to test the reasonableness of the value indicated by the income capitalization approach. Excluding the prior sale of the subject property, the sales prices range from approximately $47,000 to $55,000 per room, or $4,700,000 to $5,500,000 for the 100-unit subject property. The income capitalization approach indicates a value of $5,309,000, which falls within this range. HVS International, Mineola, New York Cost Approach 132 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 12. Cost Approach The cost approach is founded on the principle of substitution, which implies that no prudent person will pay more for a property than the amount to acquire a site and construct a building of equal desirability and utility without undue delay. This approach estimates market value by first calculating the current cost of replacing the improvements. Appropriate deductions are made for depreciation resulting from physical deterioration, functional obsolescence, and external (economic) obsolescence, and the land value is added to the depreciated replacement cost to provide an estimate of market value. The cost approach employs the following steps. 1. The current replacement or reproduction cost is estimated. 2. Land value is estimated using techniques such as allocation, extraction, or ground rent capitalization. 3. Accrued depreciation, which can be divided into physical deterioration, functional obsolescence, and external obsolescence, is estimated. 4. Total depreciation is deducted from the subject property's replacement cost, and the land value is added to arrive at an estimate of value via the cost approach. When forming their purchase decisions regarding existing properties, market participants tend to consider the cost of developing a new hotel with optimal physical and functional utility. External conditions, such as the depressed market for real estate (and hotels in particular), can cause a property to be worth less than its replacement cost as new. The task of estimating the loss in value resulting from incurable functional and external obsolescence is highly subjective. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements age and begin to deteriorate, the loss in value resulting from physical obsolescence HVS International, Mineola, New York Cost Approach 133 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= becomes increasingly difficult to quantify accurately. Loss in value attributable to functional obsolescence can be even more difficult to determine. The subject property was constructed in 1972, and will be approximately 24 years old as of the date of this appraisal. The subject property appeared to be in good condition at the time of our inspection. The depressed hotel market conditions that prevailed in the late 1980s and the early 1990s have also led to a degree of external obsolescence. In our opinion, it is impossible to identify and quantify the impact of these factors on the property's value with any accuracy, so we will only estimate the replacement cost of the subject property. Replacement Cost Replacement cost is the current construction cost of a building with the same utility as the subject property, but built with modern materials and according to current construction and design standards. For the purpose of estimating the replacement cost of the subject property, we have used a hotel development cost survey conducted by HVS International. This survey is published annually in a newsletter entitled The Hotel Valuation Journal, and appeared in the May, 1995, issue of Lodging Hospitality. The survey presents the range of per-room costs associated with various components of hotel development, including the improvements, the furniture, fixtures, and equipment, pre-opening expenses, and operating capital. Statistics are compiled for three broad categories of hotels: luxury, standard, and economy. The results of this survey are presented in the following table. HVS International, Mineola, New York Cost Approach 134 - -------------------------------------------------------------------------------- ============= HVS - ------------- International =============
==================================================================================================================================== Table 12-1 Hotel Development Cost Survey (Amounts per Room) - ------------------------------------------------------------------------------------------------------------------------------------ Improvements Furniture & Equipment Pre-Opening Operating Capital Total Percent Change - ----------------------------------------------------------------------------------------------------------------------------------- 1976 Luxury $32,000 - $55,000 $5,000 - $10,000 $1,000 - $2,000 $1,000 - $1,500 $39,000 - $68,500 -- - -- Standard 20,000 - 32,000 3,000 - 6,000 750 - 1,000 750 - 1,000 24,500 - 40,000 -- - -- Economy 8,000 - 15,000 2,000 - 4,000 500 - 1,000 500 - 750 11,000 - 20,750 -- - -- 1979 Luxury 36,000 - 65,000 8,000 - 15,000 1,500 - 3,000 1,500 - 2,000 47,000 - 85,000 6.8 - 8.0 Standard 25,000 - 36,000 5,000 - 10,000 1,000 - 2,000 1,000 - 1,500 32,000 - 49,500 10.2 - 7.9 Economy 10,000 - 20,000 3,000 - 5,000 750 - 1,000 750 - 1,000 14,500 - 27,000 10.6 - 10.0 1981 Luxury 45,000 - 80,000 10,000 - 20,000 2,000 - 3,500 2,000 - 2,500 59,000 - 106,000 12.8 - 12.4 Standard 25,000 - 40,000 7,000 - 13,000 1,200 - 2,500 1,200 - 2,000 34,400 - 57,500 3.8 - 8.1 Economy 13,000 - 25,000 4,000 - 7,000 700 - 1,200 900 - 1,200 18,600 - 34,400 14.1 - 13.7 1983 Luxury 55,000 - 100,000 12,500 - 20,000 2,300 - 4,000 2,000 - 2,800 71,800 - 126,800 10.8 - 9.8 Standard 35,000 - 50,000 9,000 - 15,000 1,400 - 3,000 1,300 - 2,200 46,700 - 70,200 17.9 - 11.0 Economy 18,000 - 32,000 5,000 - 8,000 800 - 1,500 900 - 1,300 24,700 - 42,800 16.4 - 12.2 1985 Luxury 60,000 - 115,000 13,400 - 30,000 3,000 - 5,000 2,100 - 3,100 78,500 - 153,100 4.7 - 10.4 Standard 38,000 - 57,000 9,500 - 16,500 1,900 - 3,600 1,500 - 2,500 50,900 - 79,600 4.5 - 6.7 Economy 20,000 - 36,000 5,000 - 8,800 1,000 - 1,700 1,000 - 1,500 27,000 - 48,000 4.7 - 6.1 1986 Luxury 62,000 - 120,000 13,700 - 30,600 3,100 - 5,200 2,300 - 3,100 81,100 - 158,900 3.3 - 3.8 Standard 39,000 - 60,000 9,700 - 16,800 2,000 - 3,800 1,500 - 2,600 52,200 - 83,200 2.6 - 4.5 Economy 21,000 - 37,000 5,100 - 9,000 1,000 - 1,800 1,100 - 1,500 28,200 - 49,300 4.4 - 2.7 1987 Luxury 63,000 - 122,000 13,800 - 30,900 3,300 - 5,500 2,300 - 3,200 82,400 - 161,600 1.6 - 1.7 Standard 40,000 - 61,000 9,800 - 16,800 2,100 - 3,900 1,500 - 2,600 53,400 - 84,300 2.3 - 1.3 Economy 21,000 - 39,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 28,400 - 51,400 0.7 - 4.3 1988 Luxury 65,000 - 125,000 14,000 - 31,000 3,300 - 5,500 2,300 - 3,200 84,600 - 164,700 2.7 - 1.9 Standard 41,000 - 63,000 10,000 - 17,100 2,100 - 3,900 1,500 - 2,600 54,600 - 86,600 2.2 - 2.7 Economy 22,000 - 40,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 29,400 - 52,400 3.5 - 1.9 1989 Luxury 66,000 - 126,000 15,000 - 32,000 3,300 - 5,500 2,300 - 3,200 86,600 - 166,700 2.4 - 1.2 Standard 41,000 - 64,000 10,500 - 18,000 2,100 - 3,900 1,500 - 2,600 55,100 - 88,500 0.9 - 2.2 Economy 22,000 - 40,000 5,500 - 9,700 1,100 - 1,800 1,100 - 1,500 29,700 - 53,000 1.0 - 1.1 1990 Luxury 67,000 - 128,000 15,400 - 33,000 3,500 - 5,700 2,500 - 3,500 88,400 - 170,200 2.1 - 2.1 Standard 42,000 - 65,000 10,800 - 18,500 2,200 - 4,000 1,600 - 2,800 56,600 - 90,300 2.7 - 2.0 Economy 22,500 - 41,000 5,600 - 10,000 1,200 - 1,800 1,200 - 1,600 30,500 - 54,400 2.7 - 2.6 1991 Luxury 65,000 - 122,000 14,500 - 31,500 3,700 - 5,900 2,600 - 3,600 85,800 - 163,000 (2.9) - (4.2) Standard 40,000 - 63,000 10,000 - 17,800 2,300 - 4,200 1,700 - 2,900 54,000 - 87,900 (4.6) - (2.7) Economy 21,000 - 39,000 5,000 - 9,500 1,300 - 2,000 1,300 - 1,700 28,600 - 52,200 (6.2) - (4.0) 1992 Luxury 64,000 - 120,000 14,200 - 30,900 3,800 - 6,100 2,700 - 3,700 84,700 - 160,700 (1.3) - (1.4) Standard 39,000 - 62,000 9,800 - 17,400 2,300 - 4,400 1,800 - 3,000 52,900 - 86,800 (2.0) - (1.3) Economy 21,000 - 38,000 4,900 - 9,300 1,400 - 2,100 1,300 - 1,800 28,600 - 51,200 0.0 - (1.9) 1993 Luxury 63,000 - 119,000 14,000 - 30,500 3,900 - 6,200 2,800 - 3,800 83,700 - 159,500 (1.2) - (0.7) Standard 39,000 - 61,000 9,700 - 17,200 2,300 - 4,500 1,800 - 3,000 52,800 - 85,700 (0.2) - (1.3) Economy 21,000 - 38,000 4,900 - 9,200 1,400 - 2,100 1,300 - 1,800 28,600 - 51,100 0.0 - (0.2) 1994 Luxury 64,000 - 121,000 14,300 - 31,100 3,900 - 6,200 2,800 - 3,800 85,000 - 162,100 1.6 - 1.6 Standard 40,000 - 63,000 10,000 - 17,600 2,400 - 4,600 1,800 - 3,000 54,200 - 88,200 2.7 - 2.9 Economy 22,000 - 40,000 5,100 - 9,500 1,500 - 2,200 1,300 - 1,800 29,900 - 53,500 4.5 - 4.7 1995 Luxury 65,000 - 124,000 14,800 - 32,300 4,100 - 6,400 2,900 - 4,000 86,800 - 166,700 2.1 - 2.8 Standard 41,000 - 65,000 10,400 - 18,300 2,500 - 4,800 1,900 - 3,100 55,800 - 91,200 3.0 - 3.4 Economy 23,000 - 42,000 5,400 - 9,900 1,600 - 2,300 1,300 - 1,800 31,300 - 56,000 4.7 - 4.7 Average Annual Compounded Percent Change: 1976 - 1995: Luxury 4.3% - 4.8% 1986 - 1995: Luxury 0.8% - 0.5% Standard 4.4% - 4.4% Standard 0.7% - 1.0% Economy 5.7% - 5.4% Economy 1.2% - 1.4%
- -------------------------------------------------------------------------------- HVS International Cost Approach 135 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= As illustrated by the previous table, hotel development costs rose significantly during the late 1970s and the early 1980s; however, the rate of increase slowed substantially in 1987. In 1991, hotel development costs declined for the first time since 1976. Further drops of as much as 2.0% were registered in 1992. Between 1986 and 1990, average annual compounded increases ranged from 1.7% to 2.5%. Costs rose slowly (at average annual compounded rates ranging from 0.5% to 1.4%) between 1986 and 1995, largely as a result of the declines in 1991, 1992, and 1993. In 1995, hotel development costs started to escalate more rapidly, reaching 4.7% in the economy segment. As more hotels are developed, we expect costs to continue to rise. Because the replacement cost tends to set the upper limit of a particular hotel's value, this figure is relevant to our analysis. We estimate the replacement cost of the subject property as follows, based on the development cost survey discussed earlier. ================================================================================ Table 12-2 Subject Property's Replacement Cost - -------------------------------------------------------------------------------- Cost No. of Hotel Cost per Room Rooms Total Cost - ------------------------------------------------------------- Building $ 42,000 100 $4,200,000 FF&E 10,500 100 1,050,000 Pre-Opening 2,500 100 250,000 Operating Capital 1,900 100 190,000 - ------------------------------------------------------------- Total $ 56,900 $5,690,000 - -------------------------------------------------------------------------------- Ground Lease Approach to Land Valuation Land value may be estimated either by the sales comparison approach, using comparable land sales, or by the ground lease approach, which is based on the economic value generated by an improvement that represents the property's highest and best use. Because it is unusual to find recent sales of comparable vacant land that is slated for imminent hotel development, we have used the ground lease approach to determine the subject property's land value. Hotels are often constructed on leased land, and although lease terms differ somewhat, the basis for the rental calculation is frequently tied to a percentage of revenue. By applying a typical ground lease rental formula to the subject property's stabilized revenues, the appraiser can determine the hotel's economic rent, or what is also known as the income attributable to the HVS International, Mineola, New York Cost Approach 136 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= land. Land value is then calculated by dividing the economic rent by an appropriate capitalization rate. The self-adjusting aspect of this approach is key to its reliability. Because the rental formula is tied to a percentage of revenue that inherently reflects both the locational attributes of the site (occupancy and rate) and the allowable density of development, the resulting economic ground rent justly represents the greatest net return to the land over a given period. Because the Howard Johnson appears to represent the highest and best use of the property, the ground lease approach is an appropriate method of determining land value. We have researched long-term hotel ground leases in search of rental formulas that are based on a percentage of rooms revenue or on a combination of rooms, food, and beverage revenue. This analysis indicates that economic ground rents for hotels similar to the subject property typically range from 2.7% to 7.8% of rooms revenue. Although this range is quite broad, most of the formulas yield rental percentages of between 3.0% and 4.5% of rooms revenue. After considering these comparable ground leases and the locational attributes of the subject property, we believe the appropriate economic ground rental percentage is 4.0% of stabilized rooms revenue. The subject property's stabilized rooms revenue has been deflated to reflect 1997 dollars. The following calculation shows the derivation of the subject property's economic ground rent. Stabilized Rooms Revenue (1997 dollars) $ 1,877,290 Rental Percentage 0.04 ----------- Economic Ground Rent $ 75,092 Rent generated by a ground lease represents a fairly low-risk income flow. Because the tenant improvements typically amount to more than eight times the value of the land, the risk of default is low. When the ground lease terms are tied to rooms revenue, the landlord is also protected from the adverse effects of inflation. Based on these risk factors and the current cost of long-term capital, we estimate the appropriate ground rental overall capitalization rate at 10%. Applying this indicated capitalization rate to the subject property's economic ground rent yields the following estimate of land value. HVS International, Mineola, New York Cost Approach 137 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Economic Ground Rent $ 75,092 $750,916 -------------------------- = -------- = Capitalization Rate 0.10 Estimated Land Value (Say) $750,000 A new hotel's land value typically ranges from 10% to 20% of the overall value. The estimate of land value presented above is approximately 14.1% of the subject property's total value as indicated by the income capitalization approach. Replacement Cost Combining the replacement cost of the property with the land value yields the subject property's total replacement cost. ================================================================================ Table 12-3 Total Replacement Cost - -------------------------------------------------------------------------------- Cost of the Improvements and FF&E $ 5,690,000 Land Value 750,000 ----------- Total Replacement Cost $ 6,440,000 Total Replacement Cost (Say) 6,440,000 - -------------------------------------------------------------------------------- If a property's replacement cost is significantly higher than the values indicated by the income capitalization and sales comparison approaches, it may indicate that an upward adjustment of these values is appropriate. This would also reduce the probability of new hotel development, which is not likely to be feasible under those conditions. This creates an effective barrier to entry for new competition, thus reducing the risk associated with the subject property's income-generating potential. An upward adjustment of the value indicated by the income capitalization approach is also justified by this barrier to entry. We find that knowledgeable hotel buyers generally base their purchase decisions on economic factors, such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, it is our opinion that the cost approach is inapplicable in estimating the market value of the Howard Johnson. However, we have estimated the subject property's replacement cost as new, which may set the upper limit of the hotel's value. HVS International, Mineola, New York Reconciliation of Value Indications 138 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 13. Reconciliation of Value Indications The reconciliation, which is the last step in the appraisal process, involves summarizing and correlating the data and procedures employed throughout the analysis. The final conclusion of value is arrived at after reviewing the estimates indicated by the income capitalization, sales comparison, and cost approaches. The relative significance, applicability, and defensibility of each indicated value is considered, and the greatest weight is given to that approach deemed most appropriate for the property being appraised. The purpose of this report is to estimate the market value of the fee simple interest in the subject property. Our appraisal involves a careful analysis of the property itself and the economic, demographic, political, physical, and environmental factors that influence real estate values. Based on the data set forth in this report, the following value indications were developed. Approach Value Indication -------- ---------------- Income Capitalization $5,309,000 Sales Comparison $4,700,000 - $5,500,000 Cost (Replacement Cost) $6,400,000 Income Capitalization Approach To estimate the subject property's value via the income capitalization approach, we analyzed the local market for transient accommodations, examined the competitive environment, projected occupancy and average rate levels, and developed a forecast of income and expense that reflects anticipated income trends and cost components through a stabilized year of operation. The subject property's projected net income before debt service was then allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component was calculated; the total of the mortgage and equity components equates to the value of the property. HVS International, Mineola, New York Reconciliation of Value Indications 139 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Our nationwide experience indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the hotel investors who constitute the marketplace. For this reason, we believe that the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in our final estimate of the subject property's market value. Sales Comparison Approach The sales comparison approach uses actual sales of similar properties to provide an indication of the subject property's value. The strength of this approach is that it measures value based on the investment decisions made by actual buyers and sellers. Although we have investigated a number of sales in an attempt to develop a range of value indications, several adjustments are necessary to render the sales prices applicable to the subject property. These adjustments, which are numerous and highly subjective, diminish the reliability of the sales comparison approach. Furthermore, we find that typical hotel investors employ a sales comparison procedure only to establish broad value parameters. The hotel sales outlined earlier in this report indicate an adjusted value range of $47,000 to $55,000 per available room. The income capitalization approach indicates a per-room value of approximately $53,000. This information suggests that a slight downward adjustment of the value indicated by the income capitalization approach may be warranted. Cost Approach To estimate the subject property's value via the cost approach, we estimated the current replacement cost of the property and added the land value. We give the cost approach limited weight in arriving at a final value estimate, because knowledgeable buyers of lodging facilities generally base their purchase decisions on economic factors (such as projected net income and return on investment) rather than on a property's depreciated replacement cost. The replacement cost estimate developed via the cost approach can help to corroborate the results of the income capitalization and sales comparison approaches to value. If the replacement cost is substantially higher or lower than the value indicated by the income capitalization approach, an upward or downward adjustment of the income capitalization approach value may be necessary. The estimated replacement cost for the subject property is substantially higher than the value indicated by the income capitalization approach, and represents a barrier to entry for prospective hotel developers. HVS International, Mineola, New York Reconciliation of Value Indications 140 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Value Conclusion Careful consideration has been given to the strengths and weaknesses of the three approaches to value discussed above. In recognition of the purpose of this appraisal, we have given primary weight to the value indicated by the income capitalization approach and made some subjective adjustments based on the replacement cost estimate, the sales comparison approach, and our extensive experience in the hospitality industry. It is our opinion that the market of the fee simple interest in the Howard Johnson - Woburn, as of January 1, 1997, is: $5,200,000 FIVE MILLION TWO HUNDRED THOUSAND DOLLARS The estimate of market value includes the land, the improvements, and the furniture, fixtures, and equipment. The appraisal assumes that the hotel is open and operational. This value estimate equates to roundly $52,000 per room, which is well supported by market sales, and is approximately 2% lower than the value indicated by the income capitalization approach. The estimate of value assumes either the availability of third-party financing or the willingness and capability of the seller to take back purchase-money financing so that a buyer can obtain the level of debt set forth in the Income Capitalization Approach section of this appraisal. Marketing Period Our estimate of market value assumes a marketing period of six months to one year. Under normal economic conditions, hotels are transferred within this time frame. Personal Property In accordance with the appraisal standards set forth by the Office of the Comptroller of the Currency, it is necessary for bank appraisals to identify and value any personal property, fixtures, or intangible items that are included in the appraisal and discuss their impact on the overall estimate of market value. A hotel's income-generating ability depends on a suitable inventory of furniture, fixtures, and equipment. Removal of these items can decrease the property value by as much as the cost to replace the inventory plus the loss of income incurred while the hotel cannot function. A hotel's personal property consists of a wide variety of components, including bedroom furnishings, bathroom fixtures, restaurant and kitchen equipment, front office and accounting computers, exterior signs, and HVS International, Mineola, New York Reconciliation of Value Indications 141 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= similar items. Our inspection of the Howard Johnson indicates that the personal property and fixtures are in good condition. Based on an annual construction cost survey conducted by HVS International, we estimate the total replacement cost of the subject property's furniture, fixtures, and equipment at $10,500 per available room. Assuming an average useful life of ten years and an effective age of four years, the value of the furniture, fixtures, and equipment currently in place is approximately $6,300 per room, or a total of $630,000. The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) stipulates that "...any business interest or other intangible item should be valued separately within the appraisal."(1) Hotels have both business and real estate components; without the business expertise necessary to operate the facility, a hostelry would have little real estate value. Because furniture, fixtures, and equipment are essential to a hotel's income-generating ability and are seldom removed from the property or sold separately, the separation of the personal property component from the real property is not particularly meaningful. (1) Federal Register, Vol. 55, No. 143, July 25, 1990, p. 30205. HVS International, Mineola, New York Statement of Assumptions and 142 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 14. Statement of Assumptions and Limiting Conditions 1. This report is to be used in whole and not in part. 2. No responsibility is assumed for matters of a legal nature, nor do we render any opinion as to title, which is assumed to be marketable and free of any deed restrictions and easements. The property is valued as though free and clear unless otherwise stated. 3. We assume that there are no hidden or unapparent conditions of the sub-soil or structures, such as underground storage tanks, that would render the property more or less valuable. No responsibility is assumed for these conditions or for any engineering that may be required to discover them. 4. We have not considered the presence of potentially hazardous materials such as asbestos, urea formaldehyde foam insulation, PCBs, any form of toxic waste, polychlorinated biphengyls, pesticides, or lead-based paints. The appraisers are not qualified to detect hazardous substances, and we urge the client to retain an expert in this field if desired. 5. The Americans with Disabilities Act (ADA) became effective on January 26, 1992. We have conducted no specific compliance survey to determine whether the subject property is operating in accordance with the various detailed requirements of the ADA. It is possible that the property does not conform to the requirements of the act, and this could have an unfavorable effect on value. Because we have no direct evidence regarding this issue, our estimate of value does not consider possible non-compliance with the ADA. 6. We have made no survey of the property, and we assume no responsibility in connection with such matters. Sketches, photographs, maps, and other exhibits are included to assist the reader in visualizing the property. It is assumed that the use of the land and improvements is HVS International, Mineola, New York Statement of Assumptions and 143 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= within the boundaries of the property described, and that there is no encroachment or trespass unless noted. 7. All information, financial operating statements, estimates, and opinions obtained from parties not employed by HVS International are assumed to be true and correct. We can assume no liability resulting from misinformation. 8. Unless noted, we assume that there are no encroachments, zoning violations, or building violations encumbering the subject property. 9. The property is assumed to be in full compliance with all applicable federal, state, local, and private codes, laws, consents, licenses, and regulations (including a liquor license where appropriate), and that all licenses, permits, certificates, franchises, and so forth can be freely renewed or transferred to a purchaser. 10. All mortgages, liens, encumbrances, leases, and servitudes have been disregarded unless specified otherwise. 11. None of this material may be reproduced in any form without our written permission, and the report cannot be disseminated to the public through advertising, public relations, news, sales, or other media. 12. We are not required to testify or appear in court by reason of this analysis without previous arrangements, and only when our standard per diem fees and travel costs are paid prior to the appearance. 13. If the reader is making a fiduciary or individual investment decision and has any questions concerning the material presented in this report, it is recommended that the reader contact us. 14. We take no responsibility for any events or circumstances that take place subsequent to either the date of value or the date of our field inspection, whichever occurs first. 15. The quality of a lodging facility's on-site management has a direct effect on a property's economic viability and value. The financial forecasts presented in this analysis assume responsible ownership and competent management. Any departure from this assumption may have a significant impact on the projected operating results and the value estimate. 16. The estimated operating results presented in this report are based on an evaluation of the overall economy, and neither take into account nor HVS International, Mineola, New York Statement of Assumptions and 144 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= make provision for the effect of any sharp rise or decline in local or national economic conditions. To the extent that wages and other operating expenses may advance during the economic life of the property, we expect that the prices of rooms, food, beverages, and services will be adjusted to at least offset those advances. We do not warrant that the estimates will be attained, but they have been prepared on the basis of information obtained during the course of this study and are intended to reflect the expectations of a typical hotel buyer. 17. This analysis assumes continuation of all Internal Revenue Service tax code provisions as stated or interpreted on either the date of value or the date of our field inspection, whichever occurs first. 18. Many of the figures presented in this report were generated using sophisticated computer models that make calculations based on numbers carried out to three or more decimal places. In the interest of simplicity, most numbers have been rounded to the nearest tenth of a percent. Thus, these figures may be subject to small rounding errors. 19. It is agreed that our liability to the client is limited to the amount of the fee paid as liquidated damages. Our responsibility is limited to the client, and use of this report by third parties shall be solely at the risk of the client and/or third parties. The use of this report is also subject to the terms and conditions set forth in our engagement letter with the client. 20. Appraising hotels is both a science and an art. Although this analysis employs various mathematical calculations to provide value indications, the final estimate is subjective and may be influenced by our experience and other factors not specifically set forth in this report. 21. Any distribution of the total value between the land and improvements or between partial ownership interests applies only under the stated use. Moreover, separate allocations between components are not valid if this report is used in conjunction with any other analysis. 22. This study was prepared by Hospitality Valuation Services, a division of Hotel Consulting Services, Inc. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of Hotel Consulting Services, Inc. as employees, rather than as individuals. HVS International, Mineola, New York Certification 145 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 15. Certification We, the undersigned appraisers, hereby certify: 1. that the statements and opinions presented in this report, subject to the limiting conditions set forth, are correct to the best of our knowledge and belief; 2. that Stephen Rushmore personally inspected the property described in this report; 3. that we have no current or contemplated interests in the real estate that is the subject of this report; 4. that we have no personal interest or bias with respect to the subject matter of this report or the parties involved; 5. that this report sets forth all of the limiting conditions (imposed by the terms of this assignment) affecting the analyses, opinions, and conclusions presented herein; 6. that the fee paid for the preparation of this report is not contingent upon our conclusions; 7. that this report has been prepared in accordance with, and is subject to, the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute; 8. that the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives; 9. that this report has been prepared in accordance with the Uniform Standards of Professional Appraisal Practice (as adopted by the Appraisal Foundation); HVS International, Mineola, New York Certification 146 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 10. that no one other than the undersigned prepared the analyses, conclusions, and opinions concerning real estate that are set forth in this appraisal report; 11. that as of the date of this report, Stephen Rushmore has completed the requirements of the continuing education program of the Appraisal Institute; 12. that this appraisal is not based on a requested minimum value, a specific value, or the approval of a loan. /s/ Robert Wong ----------------------------------- Robert Wong Consulting and Valuation Analyst /s/ Anne R. Lloyd-Jones ----------------------------------- Anne R. Lloyd-Jones Senior Vice President /s/ Stephen Rushmore ----------------------------------- Stephen Rushmore, CRE, MAI, CHA President Hotel Consulting Services, Inc. RW: ARL-J: SR: dce HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= [GRAPHIC OMITTED] Northerly view of Subject Property [GRAPHIC OMITTED] Southern side of Guestroom wing HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= [GRAPHIC OMITTED] Lobby [GRAPHIC OMITTED] Standard Double/Double Guestroom HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= [GRAPHIC OMITTED] Standard King Guestroom HVS International, Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= [GRAPHIC OMITTED] Comfort Inn [GRAPHIC OMITTED] Susse Chalet HVS International, Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= [GRAPHIC OMITTED] Ramada Plaza Hotel [GRAPHIC OMITTED] Red Roof Inn HVS International, Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= [GRAPHIC OMITTED] Howard Johnson Burlington WOBURN SCHEDULE A That certain parcel of land situate in Woburn in the County of Middlesex and said Commonwealth described as follows: Easterly by the Westerly line of Interstate Highway (Route 93) No Access, sixty-three feet; Southerly by the northerly line of said Interstate Highway, (Route 93) - (55 feet of which is No Access) and Montvale Avenue, two hundred thirteen and 78/100 feet; Southwesterly by the Northeasterly curving line forming the junction of said Montvale Avenue and Mack Road, as shown on plan hereinafter mentioned, thirty-nine and 27/100 feet; Southwesterly again and Westerly by said Mack Road, six hundred ninety and 67/100 feet; Northerly by Lot 2 on said plan, four hundred twenty and 80/100 feet; Easterly, five hundred thirty-nine and 03/100 feet and Northerly, eighty-eight and 79/100 feet by land now or formerly of James F. McDonough. Said parcel is shown as lot 1 on said plan, (Plan No. 33379B). Being the same premises conveyed by Howard Johnson company to H.J. Acquisition Corp. by deed dated 11/29/85 and recorded on 12/4/85 as instrument #69555-7. HVS International, Mineola, New York Addendum - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Synopsis of Franchise and License Agreements Date: May 12, 1994 Licensor: Howard Johnson Franchise Systems, Inc. Licensee: Woburn Massachusetts Hotel Limited Partnership Premises: Hotel located on 1 Mack Road, Woburn, Massachusetts Term: 15 years; expiration on May 11, 2009 Renewal: None Fees: Royalty fee equal to 4% of gross rooms revenue Marketing contribution equal to 2% of gross rooms revenue Reservations fee equal to 2.5% of gross rooms revenue Licensor Services: Reservation system; marketing; manager training program Licensee Obligations: Proper bookkeeping; carrying of insurance; proper upkeep of facilities Termination: Upon default of either party; licensee termination with liquidated damages in the amount of the accrued royalties during the preceding 12 full calendar months. HVS International, Mineola, New York Synopsis of Hotel Management Agreement - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Synopsis of Hotel Management Agreement Date: April, 1994 Owner: Woburn Massachusetts Hotel Limited Partnership (Ashford Financial Corporation) Manager: Remington Employers Corporation Premises: Howard Johnson Woburn Woburn, Massachusetts Term: 15 years Renewal: Operator option for two successive periods of five years Management Fee: 3% of gross revenues Reserve for Replacement: 3% of gross revenues Termination: 1) Upon default by owner or manager 2) Upon death or incapacitation of Archie Bennett, Jr., President of Remington Employers Corporation. 3) Upon sale of property (owner's option) HVS International, Mineola, New York Synopsis of Unexecuted Restaurant Lease - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Synopsis of Restaurant Lease Date: July 1, 1994 Owner: Woburn Massachusetts Hotel Limited Partnership (Ashford Financial Corporation) Manager: Home Fries, Inc. Premises: Howard Johnson Woburn Woburn, Massachusetts Term: 20 months Renewal: Operator option for three successive periods of five years Lease Payments: Basic Fee Initial Term: $5,000 per month First Year of Renewal: $6,250 per month, increasing by 5% annually thereafter Incentive Fee 10% of gross meeting and banquet revenues HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Explanation of the Simultaneous Valuation Formula The algebraic equation known as the simultaneous valuation formula, which solves for the total property value using a ten-year mortgage and equity technique, was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(17) The process of solving for the value of the mortgage and equity components begins by deducting the annual debt service from the projected income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value using the terminal capitalization rate. The equity residual, which is the total reversionary value less the mortgage balance at that point in time and less any brokerage and legal costs associated with the sale, is discounted to the date of value at the equity yield rate. The net income to equity for each projection year is also discounted back to the date of value. The sum of these discounted values equals the value of the equity component. Because the equity component comprises a specific percentage of the total value, the value of the mortgage and the total property can be computed easily. This process can be expressed in two algebraic equations that set forth the mathematical relationships between the known and unknown variables using the following symbols. (17) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= NI = Net income available for debt service V = Value M = Loan-to-value ratio f = Annual debt service constant n = Number of years in the projection period de = Annual cash available to equity dr = Residual equity value b = Brokerage and legal cost percentage P = Fraction of the loan paid off during the projection period fp = Annual constant required to amortize the entire loan during the projection period Rr = Overall terminal capitalization rate that is applied to net income to calculate the total property reversion (sales price at the end of the projection period) 1/Sn = Present worth of $1 factor (discount factor) at the equity yield rate Using these symbols, the following formulas can be used to express some of the components of this mortgage and equity valuation process. Debt Service - A property's debt service is calculated by first determining the mortgage amount that equals the total value (V) multiplied by the loan-to-value ratio (M). Debt service is derived by multiplying the mortgage amount by the annual debt service constant (f). The following formula represents debt service. f x M x V = Debt Service Net Income to Equity (Equity Dividend) - The net income to equity (d(e)) is the property's net income before debt service (NI) less debt service. The following formula represents the net income to equity. NI - (f x M x V) = d(e) Reversionary Value - The value of the hotel at the end of the tenth year is calculated by dividing the 11th-year net income before debt service (NI^11) by HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= the terminal capitalization rate (R(r)). The following formula represents the property's tenth-year reversionary value. (NI^11/R(r)) = Reversionary Value Brokerage and Legal Costs - When a hotel is sold, certain costs are associated with the transaction. Normally, the broker is paid a commission and the attorney collects legal fees. In the case of hotel transactions, brokerage and legal costs typically range from 1% to 4% of the sales price. Because these expenses reduce the proceeds to the seller, they are usually deducted from the reversionary value in the mortgage and equity valuation process. Brokerage and legal costs (b), expressed as a percentage of reversionary value (NI^11/R(r)), are calculated by application of the following formula. b (NI^11/R(r)) = Brokerage and Legal Costs Ending Mortgage Balance - The mortgage balance at the end of the tenth year must be deducted from the total reversionary value (debt and equity) in order to determine the equity residual. The formula used to determine the fraction of the loan remaining (expressed as a percentage of the original loan balance) at any point in time (P) takes the annual debt service constant of the loan over the entire amortization period (f) less the mortgage interest rate (i), and divides it by the annual constant required to amortize the entire loan during the ten-year projection period (f(p)) less the mortgage interest rate. The following formula represents the fraction of the loan paid off (P). (f - i)/(f(p) - i) = P If the fraction of the loan paid off (expressed as a percentage of the initial loan balance) is P, then the remaining loan percentage is expressed as 1 - P. The ending mortgage balance is the fraction of the remaining loan (1 - P) multiplied by the initial loan amount (M x V). The following formula represents the ending mortgage balance. (1 - P) x M x V Equity Residual Value - The value of the equity upon the sale at the end of the projection period (d(r)) is the reversionary value less the brokerage and legal costs and the ending mortgage balance. The following formula represents the equity residual value. (NI^11/R(r)) - (b (NI^11/R(r)) - ((1 - P) x M x V) = d(r) HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Annual Cash Flow to Equity - The annual cash flow to equity consists of the equity dividend for each projection year plus the equity residual at the end of the tenth year. The following formula represents the annual cash flow to equity. NI^1 - (f x M x V) = d(e)^1 NI^2 - (f x M x V) = d(e)^2 NI^10 - (f x M x V) = d(e)^10 (NI^11/R(r)) - (b (NI^11/R(r)) - ((1 - P) x M x V) = d(r) Value of the Equity - If the initial mortgage amount is calculated by multiplying the loan-to-value ratio (M) by the property value (V), then the equity value is one minus the loan-to-value ratio multiplied by the property value. The following formula represents the value of the equity. (1 - M) V Discounting the Cash Flow to Equity to the Present Value - The cash flow to equity in each projection year is discounted to the present value at the equity yield rate (1/S^n). The sum of these cash flows is the value of the equity (1 - M) V. The following formula represents the calculation of equity as the sum of the discounted cash flows. (d(e)^1 x 1/S^1) + (d(e)^2 x 1/S^2) + ... + (d(e)^10 x 1/S^10) + (d(r) x 1/S^10) = (1 - M) V Combining the Equations: Annual Cash Flow to Equity and Discounting the Cash Flow to Equity to the Present Value - The last step is to arrive at one overall equation that shows that the annual cash flow to equity plus the yearly discounting to the present value equals the value of the equity. ((NI^1 - (f x M x V)) 1/S^1) + ((NI^2 - (f x M x V)) 1/S^2) + ... ((NI^10 - (f x M x V)) 1/S^10) + (((NI^11/R(r)) - (b (NI^11/R(r))) - ((1 - P) x M x V)) 1/S^10) = (1 -M) V Because the only unknown in this equation is the property's value (V), it can be solved readily. HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Ten-Year Projection of Income and Expense - Because the fixed and variable forecast of income and expense is carried out only to the stabilized year, it is necessary to continue the projection to the 11th year. In most cases, net income before debt service beyond the stabilized year is projected at an assumed inflation rate. By increasing a property's revenue and expenses at the same rate of inflation, net income remains constant as a percentage of total revenue, and the dollar amount escalates at the annual inflation rate. Hotel investors are currently using inflation rates of approximately 3.5% annually. The ten-year forecast of income and expense illustrates the subject property's net income, which is assumed to increase by 3.5% annually subsequent to the hotel's stabilized year of operation. Solving for Value Using the Simultaneous Valuation Formula - In the case of the subject property, the following known variables have been determined. ================================================================================ Table 1: Summary of Known Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Ten-Year Forecast Loan-To-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.111856 Equity Yield Ye 22.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 12.0% - -------------------------------------------------------------------------------- The following table illustrates the present worth of a $1 factor at the 22% equity yield rate. HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 2: Present Worth of $1 Factor at the Equity Yield Rate - -------------------------------------------------------------------------------- Calendar Year Ending: Present Worth of $1 Factor @22.0% --------------------------------------------------------- 1997 0.819756 1998 0.671999 1999 0.550875 2000 0.451583 2001 0.370187 2002 0.303463 2003 0.248766 2004 0.203927 2005 0.167170 2006 0.137039 - -------------------------------------------------------------------------------- Using these known variables, the following intermediary calculations must be made before applying the simultaneous valuation formula. The fraction of the loan paid off during the projection period is calculated as follows. P = ( 0.111856 - 0.095 ) / ( 0.155277 - 0.095 ) = 0.279638 The annual debt service is calculated as f x M x V. (f x M x V) = 0.111856 x 0.70 x V = 0.078299 V Inserting the known variables into the hotel valuation formula produces the following. ( 632,000 - 0.078299 V) x 0.819672 + ( 622,000 - 0.078299 V) x 0.671862 + ( 646,000 - 0.078299 V) x 0.550707 + ( 668,000 - 0.078299 V) x 0.451399 + ( 691,000 - 0.078299 V) x 0.369999 + ( 716,000 - 0.078299 V) x 0.303278 + ( 739,000 - 0.078299 V) x 0.248589 + ( 762,000 - 0.078299 V) x 0.203761 + ( 792,000 - 0.078299 V) x 0.167017 + ( 821,000 - 0.078299 V) x 0.136899 + ((( 850,000 / 0.120 ) - ( 0.03 x ( 850,000 / 0.120)) - (( 1 - 0.279638 ) x 0.70 x V)) x 0.136899 ) = ( 1 - 0.70 )V HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Like terms are combined as follows. $3,590,297 - 0.376214 V = (1 - 0.70)V $3,590,297 = 0.67621 V V = $3,590,297 / 0.67621 V = $5,309,414 Total Property Value as Indicated by the Income Capitalization Approach (Say) = $5,300,000 HVS International, Mineola, New York Qualifications of Robert Wong - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Robert Wong Employment 1996 to present HVS INTERNATIONAL Mineola, New York (Hotel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1992 to 1996 CORNELL UNIVERSITY, SCHOOL OF HOTEL ADMINISTRATION Ithaca, New York 1987 to 1992 DRAGON WYCK RESTAURANTS Sheboygan, Wisconsin Summer, 1992 HOLIDAY INN Madison, Wisconsin Education BS - School of Hotel Administration, Cornell University Professional Affiliations Cornell Society of Hotelmen HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Anne R. Lloyd-Jones, CRE Employment 1982 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1981 FAIRMONT HOTEL Dallas, Texas 1979 - 1980 SAGA FOOD SERVICE SWARTHMORE COLLEGE Swarthmore, Pennsylvania 1977 - 1980 DARANNE CATERERS Swarthmore, Pennsylvania Professional Affiliations American Society of Real Estate Counselors - Member (CRE) Appraisal Institute - Candidate for Membership Cornell Society of Hotelmen Education MPS - School of Hotel Administration, Cornell University BA - Swarthmore College Appraisal Institute Course 1A1 - Real Estate Appraisal Principles Course 1A2 - Basic Valuation Procedures Course 1BA - Capitalization Theory and Techniques, Part A Course 1BB - Capitalization Theory and Techniques, Part B Course 2-1 - Case Studies in Real Estate Valuation Course 2-3 - Standards of Professional Practice Course 3-1 - Report Writing HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Corporate and Institutional Clients Served Ashford Financial Corporation Chase Manhattan Bank, N. A. Citibank / Citicorp NA Credit Lyonnais Doubletree Hotels Grand Heritage Hotels Great Western Bank Goldman Sachs Holiday Inns, Inc. Interstate Hotels MassMutual Marriott International / Host Marriott Morgan Stanley OCWEN Financial Services Remington Hotels Sheraton Hotels Starwood Capital Group Starwood Lodging Trust Winegardner & Hammons Wyndham Hotel Company Hotel Chains and Management Companies Appraised or Evaluated Doubletree Hotels Compri Hotels Interstate Hotels Fairmont Hotels Guest Quarters Hilton Hotels Corporation Omni International Hotels Ramada Hotel Corp. Servico Hotel Corp. Winegardner & Hammons Appearance as an Expert Witness Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Jefferson City, Missouri Federal Bankruptcy Court, Columbia, South Carolina Federal Bankruptcy Court, Houston, Texas Federal Bankruptcy Court, New York, New York Federal Bankruptcy Court, San Bernardino, California Federal Bankruptcy Court, Los Angeles, California Federal Bankruptcy Court, Charlotte, North Carolina Federal Bankruptcy Court, Miami, Florida Federal District Court, Central Division, Salt Lake City, Utah Iowa District Court, Story County, Iowa Texas District Court, Harris County, Texas Federal Bankruptcy Court, Tampa, Florida Utah District Court, Salt Lake County, Utah Federal Bankruptcy Court, Newark, New Jersey HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated Arizona - - Wyndham Garden Hotel, Chandler - - Wyndham Garden Hotel - Airport, Phoenix - - Wyndham Garden Hotel - Union Hills, Phoenix - - Canyon Ranch Spa & Fitness Resort, Tucson Alabama - - Holiday Inn, Birmingham - - Proposed Sheraton, Gulf Shores - - Proposed Inn, Mobile - - Holiday Inn, Sheffield California - - Industry Hills Sheraton Hotel, City of Industry - - Piccadilly Inn, Fresno - - Proposed Inn at Foss Creek, Healdsburg - - Sunset Towers Hotel, Hollywood - - Proposed La Quinta, Irvine - - Wyndham Garden Hotel, La Jolla - - Days Inn, La Palma - - Proposed Marriott Courtyard, Palm Springs - - Proposed Club Hilton Hotel, Pleasanton - - Center Pointe Development, San Diego - - Holiday Inn-Embarcadero, San Diego - - Holiday Inn-Harbor View, San Diego - - Seven Seas Lodge, San Diego - - Proposed Fountaingrove Inn, Santa Rosa - - Sheraton Round Barn Inn, Santa Rosa - - Wyndham Garden Hotel, Sunnyvale - - Westlake Plaza Hotel, Thousand Oaks - - Proposed Marriott Courtyard, Torrance Colorado - - Proposed Hotel, Keystone Connecticut - - Holiday Inn, Milford - - Holiday Inn, New Britain District of Columbia - - Grand Hotel, Washington - - Wyndham Bristol Hotel, Washington Florida - - Kon Tiki Village, Kissimmee - - Sheraton Lakeside, Kissimmee - - Holiday Inn, 22nd Street, Miami Beach - - Holiday Inn, 87th Street, Miami Beach - - Holiday Inn, 180th Street, Miami Beach - - Sheraton Resort & Marina, St. Petersburg - - Hilton Hotel, Singer Island - - Royce Hotel, West Palm Beach Georgia - - Marriott Hotel, Atlanta - - Wyndham Garden Hotel, Atlanta - - Holiday Inn, Brunswick - - Holiday Inn, Jekyll Island - - Mullberry Inn, Savannah - - Royal Savannah Inn, Savannah Hawaii - - Hobron in Waikiki, Honolulu Idaho - - Holiday Inn, Boise - - Red Lion Inn, Boise - - Super 8, Boise Illinois - - Ramada Inn, Bloomington - - Proposed Marriott Courtyard, Glenview - - Wyndham Garden Hotel, Naperville Indiana - - Holiday Inn, Bloomington - - Inn at the Four Winds, Bloomington - - Ramada Inn, Bloomington - - Hilton Hotel, Fort Wayne - - Airport Hilton Inn, Indianapolis - - Hilton at the Circle, Indianapolis Iowa - - Holiday Inn, Ames - - Proposed Fairfield Inn, Des Moines HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Kentucky - - Proposed Super 8, London - - Proposed Super 8, Radcliff Louisiana - - Sheraton Inn, Kenner - - Hotel Meridien, New Orleans Maine - - Proposed Hotel, Old Orchard Beach Maryland - - Brookshire Hotel, Baltimore - - Lord Baltimore Hotel, Baltimore - - Hyatt Regency, Bethesda Massachusetts - - Proposed Marriott Courtyard, Andover - - Hyatt Regency, Cambridge - - Proposed Hotel, Franklin - - Sheraton Inn, Hyannis - - Marriott Hotel, Worcester Michigan - - Bay Valley Inn, Bay City - - Hilton Airport, Detroit - - Westin Renaissance Center, Detroit - - Hotel Pontchartrain, Detroit - - Proposed Embassy Suites, Lansing - - Hilton Inn, Northfield - - Holiday Inn, Saginaw Minnesota - - Wyndham Garden Hotel, Bloomington - - Marriott Hotel, Minnetonka Missouri - - Inn at Grand Glaize, Osage Beach - - Bel Air Hilton, St. Louis - - Holiday Inn Riverfront, St. Louis Nebraska - - Holiday Inn Airport, Lincoln - - Holiday Inn Northeast, Lincoln Nebraska (continued) - - Marriott Hotel, Omaha - - Ramada Inn, Omaha - - Red Lion Inn, Omaha Nevada - - Proposed Super 8, Las Vegas New Jersey - - Ramada Inn, Edison - - Marriott Hotel, Hanover - - Headquarters Plaza, Morristown - - Hyatt Regency, New Brunswick - - Holiday Inn, North Brunswick New York - - Hilton Hotel, Albany - - Proposed Embassy Suites, Amherst - - Holiday Inn Arena, Binghamton - - Holiday Inn SUNY, Binghamton - - Proposed Hotel, Binghamton - - Proposed Hilton, Brooklyn - - Marriott Hotel, Dewitt - - Metropole Hotel, Flushing - - Midway Hotel, Flushing - - Ramada Inn, Kingston - - Royce Hotel, La Guardia - - Holiday Inn, Latham - - Proposed Crowne Plaza, Manhattan - - Proposed Prince Street Hotel, Manhattan - - Proposed Roslyn Inn, Roslyn - - Proposed Le Richmonde, Rye Brook - - Hilton Hotel, Syracuse - - Hotel Syracuse, Syracuse - - Proposed Hotel, Watertown North Carolina - - Proposed Inn, Chapel Hill - - Proposed Indep. Center Marriott Hotel, Charlotte - - Royce Hotel, Charlotte - - Howard Johnson's North, Charlotte HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) North Carolina (continued) - - Holiday Inn West, Durham - - Sheraton University Inn, Durham - - Holiday Inn, Fayetteville - - Holiday Inn Downtown, Raleigh Ohio - - Proposed Hyatt Hotel, Cleveland - - Proposed Marriott Hotel, Cleveland Oregon - - Holiday Inn Airport, Portland - - Holiday Inn South, Portland Pennsylvania - - Quality Inn, Allentown - - Holiday Inn, Bensalem - - Proposed Marriott Courtyard, Devon - - Proposed Lafayette Inn, Easton - - Ramada Inn, Erie - - Holiday Inn, Harrisburg - - Marriott Hotel, Harrisburg - - Proposed Super 8, Harrisburg - - Proposed Super 8, Lancaster - - Holiday Inn West, Monroeville - - Days Inn Philadelphia - - Franklin Plaza Hotel, Philadelphia - - Franklin Towne EconoLodge, Philadelphia - - Guest Quarters Hotel, Philadelphia - - Hilton Inn, Northeast, Philadelphia - - Marriott Airport Hotel, Philadelphia - - Holiday Inn Greentree, Pittsburgh - - Holiday Inn Parkway East, Pittsburgh - - Holiday Inn North, Pittsburgh - - Holiday Inn Parkway West, Pittsburgh - - Proposed Hotel, Pittsburgh - - Royce Hotel, Pittsburgh - - Westin William Penn Hotel, Pittsburgh - - Hilton Hotel, Scranton - - Proposed Marriott Courtyard, Valley Forge - - Holiday Inn Meadowlands, Washington - - Ramada Inn, York - - Proposed Super 8, York Rhode Island - - Proposed Hotel, Providence - - Omni Biltmore Hotel, Providence South Carolina - - Proposed Charleston Center Hotel, Charleston - - Proposed Cooper River Inn, Charleston - - Howard Johnson's, Spartanburg - - Proposed Middleton Inn and Conference Center, Charleston - - Best Western, North Charleston - - Proposed Marriott Courtyard, Columbia - - Fairfield Inn, Florence - - Holiday Inn, Florence - - Fairfield Inn, Greenville - - Proposed Marriott Courtyard, Greenville - - Fairfield Inn, Hilton Head - - Holiday Inn, Hilton Head Tennessee - - Hampton Inn, Brentwood - - Proposed Marriott Courtyard, Brentwood - - Howard Johnson's, Chattanooga - - Sheraton Hotel, Chattanooga - - Howard Johnson's, Knoxville - - Proposed Capital Mall Convention Center Hotel, Nashville - - Clarion Maxwell House, Nashville - - Holiday Inn Briley Parkway, Nashville - - Proposed Marriott Courtyard, Nashville - - Sheraton Music City, Nashville - - Stouffer's Nashville Hotel, Nashville - - Proposed Super 8, Nashville - - Union Station Hotel, Nashville - - Wyndham Garden Hotel, Nashville - - Proposed Super 8, Union City HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Texas - - Proposed Marriott Courtyard, Addison - - Proposed Marriott Courtyard, Arlington - - La Mansion, Austin - - Proposed Marriott Courtyard, Bedford - - Airport Hilton, El Paso - - Hotel Meridien, Houston - - Sheraton Hotel, Houston - - Proposed Marriott Courtyard, Las Colinas - - Proposed Marriott Courtyard, North Dallas - - La Mansion Del Norte, San Antonio - - La Mansion Del Rio, San Antonio - - Proposed Marriott Courtyard, San Antonio - - Proposed Marriott Courtyard - Medical Center, San Antonio Utah - - Deer Valley Resort, Park City - - Hilton Inn, Salt Lake City - - Holiday Inn, Salt Lake City - - Sheraton Hotel, Salt Lake City Virginia - - Mountain Lake Hotel, Blacksburg - - Howard Johnson's, Bristol - - Boars Head Inn, Charlottesville - - Proposed Fairfield Inn, Hampton - - Proposed Embassy Suites, Herndon - - Ramada Renaissance, Herndon - - Proposed Marriott Courtyard, Manassas - - Omni Hotel, Norfolk Virginia (continued) - - Proposed Marriott, Norfolk - - Howard Johnson's, Richmond - - Howard Johnson's, Roanoke - - Howard Johnson's, Roanoke Rapids - - Wyndham Hotel, Williamsburg Washington - - Wyndham Garden Hotel, Bothell - - Redmond Hotel, Redmond - - Wyndham Garden Hotel, SeaTac West Virginia Proposed Budget Motel, Princeton Wisconsin - - Proposed Granada Royale, Green Bay - - Holiday Inn-Downtown, Green Bay Canada - - Inn on the Park, Toronto Puerto Rico - - Carib Inn, San Juan Virgin Islands - - Virgin Grand Beach Hotel, St. Thomas Jamaica - - Holiday Inn, Montego Bay HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Stephen Rushmore, CRE, MAI, CHA Employment 1980 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1977 - 1980 1971 - 1974 HELMSLEY-SPEAR HOSPITALITY SERVICES, INC. New York, New York (Real Estate) 1974 - 1977 JAMES E. GIBBONS ASSOCIATES Garden City, New York (Mortgage Banking, Appraisals, Hotel Operations) Affiliated Ownership Interests HVS INTERNATIONAL (SAN FRANCISCO, CALIFORNIA) West coast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (MIAMI, FLORIDA) Southeast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (BOULDER, COLORADO) Midwest office for hotel/motel appraisals and counseling HVS INTERNATIONAL (VANCOUVER, CANADA) Canadian office for hotel/motel appraisals and counseling HVS INTERNATIONAL (LONDON, ENGLAND) European office for hotel/motel appraisals and counseling HVS - EXECUTIVE SEARCH Hotel/motel executive search and human resource consulting HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) HVS - ECO SERVICES Environmental consulting for hotels and motels; administrator of the ECOTEL designation HOSPITALITY EQUITY INVESTORS, INC. Hotel and motel investment and management company TRUMBULL MARRIOTT HOTEL General partner of a 324-room hotel and conference center PRINCETON HOTEL ASSOCIATES General partner of a 128-unit Residence Inn in Princeton, New Jersey SEAVIEW GOLF RESORT ASSOCIATES General partner of a 298-unit, 424-acre Marriott resort in Absecon, New Jersey SHELTON HOTEL ASSOCIATES General partner of a 96-unit Residence Inn in Shelton, Connecticut DANBURY HOTEL ASSOCIATES General partner of a 243-unit Hilton Hotel in Danbury, Connecticut PRUDENTIAL - HEI JOINT VENTURE Joint venture partner with Prudential Insurance Company of America on a 234-unit Embassy Suites in Atlanta, Georgia WESTPORT NORFOLK ASSOCIATES General partner of a 425-unit Omni Hotel in Norfolk, Virginia WESTPORT BWI, LLC General partner of a 310-unit Marriott Hotel in Baltimore, Maryland HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) WESTPORT RARITAN, LLC General partner of a 274-unit Crowne Plaza Hotel in Raritan, New Jersey WESTPORT NOVI, LLC General partner of a 193-unit Hilton Hotel in Novi, Michigan WESTPORT LONG BEACH, LLC General Partner of a 460-unit Sheraton Hotel in Long Beach, California WESTPORT PARK RIDGE, LLC General Partner of a 265-unit hotel and conference center in Valley Forge, Pennsylvania WESTPORT CHARLESTON, LLC General Partner of a 295-unit Hilton Hotel in Charleston, South Carolina HOSPITALITY VALUATION SOFTWARE, INC. Founder of software company that develops and distributes hotel financial analysis software Hotels Managed Sheraton Hotel, Smithtown, New York Marriott Hotel, Baltimore Airport, Maryland Hilton Hotel, Danbury, Connecticut Residence Inn, Princeton, New Jersey Embassy Suites, Atlanta Airport, Georgia Omni Hotel, Norfolk, Virginia Crowne Plaza, Raritan, New Jersey Hilton Hotel, Novi, Michigan Sheraton Hotel, Long Beach, California Hilton Hotel, Charleston, South Carolina Park Ridge Hotel and Conference Center, Valley Forge, Pennsylvania Hilton Hotel, Wilmington, Delaware HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Professional Affiliations American Society of Real Estate Counselors - Member (CRE) - Board of Governors Appraisal Institute - Member (MAI) (SREA) - Developer and Instructor, Hotel Investment and Valuation Seminar - Developer and Instructor, Hotel Computer Valuation Seminar American Hotel and Motel Association - Certified Hotel Administrator (CHA) - Industry Real Estate Financing Advisory Council (IREFAC) International Society of Hospitality Consultants - Member (ISHC) New York University - Adjunct Assistant Professor of Nutrition, Food and Hotel Management Michigan State University - Honorary Faculty, Honorary Alumnus Certified General Appraiser - Arizona, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Illinois, Massachusetts, Michigan, Minnesota, Nebraska, New Jersey, New York, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Virginia Licensed Real Estate Broker - New York, Pennsylvania Board of Advisers - Real Estate Finance Journal - Real Estate Workouts & Asset Management American Arbitration Association - National Real Estate Valuation Council Cornell Society of Hotelmen New York University Masters in Hospitality Management - Advisory Board New York University Hospitality Investment Conference - Board of Advisors Beta Gamma Sigma - National Honor Society in Business and Management HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Endowment Hospitality Valuation Services Professor of Hotel Finance and Real Estate - School of Hotel Administration, Cornell University (currently held by Professor James J. Eyster) Education BS - School of Hotel Administration, Cornell University MBA - Graduate School of Business Administration (Finance), University of Buffalo Candidate for PhD - School of Education, Department of Food Service Management, New York University Partial List of Teaching and Lecture Assignments Cornell University - Computer Valuation Techniques Michigan State University - Hotel Management Contracts University of North Carolina - Hotel Market Studies University of Virginia - Assessing Hotels American Arbitration Association - Real Estate Arbitration American Hotel and Motel Association - Hotel Obsolescence Appraisal Institute - Hotel Valuation (over 50 seminars) International Association of Assessing Officers - Hotel Valuation Montreal Appraisal Society - Total Project Analysis Society of Real Estate Appraisers - Lease Seminar Lodging Hospitality - Lodging Summit Published Books and Seminars Textbooks The Valuation of Hotels and Motels, Appraisal Institute, Chicago, Illinois, 1978 Hotels, Motels and Restaurants: Valuations and Market Studies, Appraisal Institute, Chicago, Illinois, 1983 How to Perform an Economic Feasibility Study of a Proposed Hotel/Motel, American Society of Real Estate Counselors, Chicago, Illinois, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Books and Seminars (continued) Textbooks (continued) Hotel Investments: A Guide for Owners and Lenders, Warren, Gorham and Lamont, Inc., New York, New York, 1990 The Computerized Income Approach to Hotel Market Studies and Valuations, Appraisal Institute, Chicago, Illinois, 1990 Hotel Investments: A Guide for Owners and Lenders, 1992 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotel Investments: A Guide for Owners and Lenders, 1993 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Appraisal Institute, Chicago, Illinois, 1992 Student Manuals The Valuation of Lease Interests, Society of Real Estate Appraisers, Chicago, Illinois, 1976 Hotel-Motel Valuation Seminar, Appraisal Institute, Chicago, Illinois, 1981, 1988, 1990 The Computerized Approach to Hotel Market Studies and Valuations Seminar, Appraisal Institute, Chicago, Illinois, 1991 Demonstration Appraisal Demonstration Appraisal of a Proposed Hotel, Spring Valley, New York, Hospitality Valuation Services, Mineola, New York, 1983, 1990 Chapters The Real Estate Handbook-Second Edition, Dow Jones-Irwin, 1989, "Hotels and Motels" Arbitration of Real Estate Valuation Principles, American Arbitration Association, 1987, "Arbitration in the Hospitality Industry" Ethics in Hospitality Management: A Book of Readings, Educational Institute of the American Hotel and Motel Association, 1992, "Ethics in Hotel Appraising" The Lodging and Food Service Industry, Educational Institute of the American Hotel and Motel Association, 1993, "Insider's Insights" HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles The Appraisal Journal "Using Total Project Analysis to Compete for Investment Capital," October, 1975 "The Appraisal of Food Service Facilities," July, 1980 "Publish and Prosper," October, 1980 "Valuation of Hotels and Motels for Assessment Purposes," April, 1984 "Adjusting Comparable Sales for Hotel Assessment Appeals," July, 1986 "Hotel Business Value and Working Capital: A Clarification," January, 1987 "Ethics in Hotel Appraising," July, 1993 The Appraiser "Hotel-Motel Appraisal Misconceptions Set Straight," January, 1979 "No Conventional Financing Available for Hotels: Rushmore," December, 1979 "Estimating Hotel Land Values Using Comparable Ground Leases," April, 1980 Bulletin of the Cornell Society of Hotelmen "Employment Philosophy for a Consulting Practice," July, 1984 Business Travel News "A Snapshot of a Classic Recovery," July, 1995 The Canadian Appraiser "Hotel/Motel Market Sales Update," Summer, 1987 Capital Sources for Real Estate "Stephen Rushmore Discusses the Future of the Lodging Industry," December, 1994 Cayuga Advisor "Secrets to Success in Consulting," October, 1992 Chapter News and Notes "Quantifying a Hotel's Business Value," November, 1979 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Cornell Hotel & Restaurant Administration Quarterly "A Preliminary Market Study," November, 1974 "How Much is Your Place Worth Today? A Case Study in Hotel - Motel Valuation," May, 1975 "What Can Be Done About Your Hotel's Real Estate Taxes?" May, 1977 "The Appraisal of Lodging Facilities," August, 1978 "The Appraisal of Food Service Facilities," February, 1979 "The Appraisal of Lodging Facilities - Update," November, 1984 "Hotel Sales Prices Down More Than 12%," May, 1991 "Seven Current Hotel Valuation Techniques," August, 1992 "The Valuation of Distressed Hotels," October, 1992 "Hotel Lending in the 1990's: Amateurs Beware," December, 1994 "Investment Values of Lodging Property: Modeling the Effects of Income Taxes and Alternative Lender Criteria," December, 1995 FCI Spec Sheet "Employment Philosophy for a Consulting Practice," September, 1984 Florida Hotel & Motel Journal "Rushmore Reports Rising Hotel Prices," February, 1995 Hotel and Motel Management "Average Rate vs. Project Cost," May 1, 1974 "How to Increase the Marketability of Your Motel," April, 1981 "Tougher Lending, Lower Room Rate Hikes On Way?" June, 1981 "What is That Mortgage Loan Going to Cost You?" August, 1981 "How to Perform a Study of Your Property's Market," October, 1981 "How do High Interest Rates Affect Your Motel's Value?" December, 1981 "How to Buy a Feasibility Study That Works for You," February, 1982 "Settling Lease Conflicts Quickly Through Arbitration," April, 1982 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Hotel and Motel Management (continued) "Are Casino Hotels Really Worth $500,000 Per Room?" June, 1982 "Discount Rates and Internal Rate of Return," August, 1982 "Determining a Property's Extended Life Cycle," November, 1982 "Using Microcomputers for Forecasting," December, 1982 "Update on Hotel Development Costs," January, 1983 "Estimating a Site's Worth by Finding Its Profit Value," June, 1983 "Hotel Construction May Be Slowing Down a Little Bit," April, 1983 "The Investor's Risk Sways to Prevailing Economic Winds," August, 1983 "Is Your Property Tax at as Low a Level as it Should Be?" October, 1983 "The Ultimate Guest Room: Could it Ever Exist Anywhere?" December, 1983 Hotel-Motor Inn Journal A Preventive Maintenance System for Motels," March, 1975 Hotel Valuation Journal "Hotel Valuation Index Peaks During 1989," Fall, 1990 "Hotel Development Costs," Winter, 1991 "Hotel Valuation Index for 1990," Spring, 1991 "Bad Year for Hotel Sales Prices Confirmed," Spring, 1992 "Hotel Sales Prices on the Rise," Fall, 1994 "United States Hotel Values Climb," Spring/Summer, 1995 "It's Time for Franchise Reform," Fall, 1995 Institutions/ Volume Feeding "Greater Risk/Greater Profit Potential: Hotel Management Contract," May, 1973 Lodging Hospitality "How to Finance Renovation Projects," January, 1974 "Controlling Your Real Estate Taxes," July, 1978 "Putting Together a Sound Financial Package," December, 1978 "Favorable Outlook for Lodging Values," December, 1983 "Are Your Property Taxes Too High? (Part I and II)," May and June, 1984 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Development Costs," July, 1984 "The Right Management Contract for You," September, 1984 "Selecting the Firm to Prepare Your Feasibility Study," October, 1984 "A Quick How-To In Hotel Valuation," November, 1984 "Updating Lodging Interest Rates," December, 1984 "Is Your Guest Experience Up to Par?" January, 1985 "How to Perform a Breakeven Analysis," May, 1985 "Evaluating Operating Performance," June, 1985 "Hotel Lenders Toughen Underwriting Requirements," July, 1985 "Don't Forget the Pre-Opening Agreement," August, 1985 "Management Companies Should Participate in Financing," October, 1985 "Current Techniques for Valuing Hotel Land," November, 1985 "Hotel Development Costs," December, 1985 "Sourcing Debt Into the 1990's," January, 1986 "Hotel Valuation Thumb Rule," February, 1986 "Value in Use Versus Value in Exchange," March, 1986 "Stretching Feasibility," April, 1986 "The Management Question," May, 1986 "How to Commission a Feasibility Study," June, 1986 "Macro Trends Affecting Property Values," July, 1986 "Hotel-Motel Market Sales Update," August, 1986 "Financing Alternatives: Zero Coupon Mortgages," September, 1986 "Forecasting Lodging Energy Costs," October, 1986 "Portfolio Financing a Better Way," November, 1986 "Profit by Looking at History," December, 1986 "Why New York Isn't Overbuilt," February, 1987 "How to Discourage Hotel Overbuilding: A Case Study," April, 1987 "Structuring an Incentive Management Fee," June, 1987 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Franchising Questions and Answers," July, 1987 "Comparing Hotel Development Costs," August, 1987 "Understanding Economic Life," September, 1987 "Prices Rise for Lodging Properties," October, 1987 "Management Companies Are Key to Success," November, 1987 "Evaluating a Management Contract Fee Structure," December, 1987 "Check Profits Before Selecting Hotel Operator," January, 1988 "It's a Good Time to Review Your Taxes," February, 1988 "How to Use a Management Company Rating System," March, 1988 "Make Sure Management Contracts Contain These Terms," April, 1988 "Hotel Access and Visibility," May, 1988 "Chain Sale Strategies," July, 1988 "Evaluating a Hotel Franchise," August, 1988 "Evaluating Franchise Fees," September, 1988 "Opportunities in Economy Lodging," October, 1988 "How to Obtain a Hotel Mortgage," November, 1988 "Arbitration in the Hospitality Industry," December, 1988 "Lodging Development Cost Update," January, 1989 "Amenities as Profit Builders," February, 1989 "Hotel Values Mirror the Times," March, 1989 "Forecasting Revenue and Expenses," April, 1989 "Real Estate Jargon Made Simple," May, 1989 "Pricing a Management Contract," June, 1989 "Trends in Valuation," July, 1989 "Rescuing the Distressed Hotel," August, 1989 "Shielding Against Incompetence," September, 1989 "Hotel Valuation Revisited," October, 1989 "New Breed of Hard Budgets," November, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Figuring Cap Rates," December, 1989 "A Glance Backward," January, 1990 "Costs Creeping Up," February, 1990 "Valuing Distressed Properties," March, 1990 "Cap and Discount Rates," April, 1990 "An Open Letter," May, 1990 "Misconceptions About Appraisals," June, 1990 "Hotel Values Still Growing," July, 1990 "Hotel Renovation is Key to `90s," August, 1990 "Time Right for Hotel Leases," September, 1990 "Getting a Fix on Rates," October, 1990 "The Wrinkles of Class," November, 1990 "A Glance Backward," December, 1990 "The Price Dropoff," January, 1991 "The Cost Washout," February, 1991 "Survival of the Fittest," March, 1991 "Looking Out and Up," April, 1991 "The Bottom is in Sight," May, 1991 "The Pitfalls of Liquidation," June, 1991 "Extra! Extra! Hospitality News," July, 1991 "The Art of Hotel Renovation," August, 1991 "No Better Time for a Tax Review," September, 1991 "No Time for Passivity," October, 1991 "What a Franchise Really Costs," November, 1991 "In Case You Hadn't Heard," January, 1992 "Negotiation - The Name of the Game," February, 1992 "Now Could be the Time to Build," March, 1992 "The Well May Stay Dry," April, 1992 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Life Expectancy," May, 1992 "Hotel Values - What a Downer," June, 1992 "How to Make Money Now," July, 1992 "Hotel Chain Class Survey," August, 1992 "Budget Dining with Rushmore," September, 1992 "Bookings Up, Rates Will Follow," October, 1992 "Hospitality Master's Good Preparation," November, 1992 "What's New on the Job Front?" January, 1993 "Where Have All the Hotels Gone?" February, 1993 "Hotel Building Costs Continue to Fall," March, 1993 "Hotel Values Head Upward," April, 1993 "The Rise and Fall of Trophy Hotels," May, 1993 "Hotel Sales and Prices Rebound," June, 1993 "Third Parties Loosening Purse Strings," July, 1993 "Beyond Recycling: The Ecotel," August, 1993 "Time to Reduce Property Taxes," September, 1993 "Lodging: The Way I See It," October, 1993 "Choosing an Appraiser," November, 1993 "Who Needs an Asset Manager?" January, 1994 "Investing by the Numbers," February, 1994 "Fire Your Staff and Lease Them Back," March, 1994 "Published Rates Hint at Recovery," April, 1994 "Now is the Time to Start Building," May, 1994 "Hotel Values Heading Up," June, 1994 "Farewell, Friend," July, 1994 "Sales Prices Creeping Up," August, 1994 "Selecting Green Hotel Supplies," September, 1994 "Don't Write Off Full-Service Hotels," October, 1994 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Lodging REIT's Are on the Rise," November, 1994 "Going Back to the Future," January, 1995 "How much do Managers Make?" March, 1995 "Lodging Transactions Soared in '94," April, 1995 "Hotel Development Costs on the Rise," May, 1995 "Hotel Values up Significantly," June, 1995 "What a Franchise Costs over the Long Term," July, 1995 "Road Food Part II," August, 1995 "It's Time for Franchise Reform," September, 1995 "Extended Stay May Not Extend Your Profits," October, 1995 "The Year as I See It," November, 1995 "Cap Rate 101," January, 1996 Michigan Lodging "Hotel Development Costs," January, 1988 The Mortgage and Real Estate Executives Report "Atlantic City Building Game Involves High Stakes," August, 1979 "How Interest Rates Affect Real Estate Values," June, 1982 "Update on Hotel Development Costs," May 1, 1983 Motel-Hotel Insider "The $100,000 Plus Hotel Room Has Become a Reality," November 19, 1979 "Update on Hotel Development Costs," April 4, 1983 NAIFA - The Appraisal Review "Hotel Valuation Techniques," Vol. 44, 1991 Real Estate Digest "Why Should the Management Team be Important to Hotel Lenders," Fall, 1988 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Finance Journal "What is a Typical Fee for a Hotel Management Contract?" Fall, 1988 "Hotel Franchise Fees," Winter 1989 "Why the Management Team Should be Important to Hotel Lenders," Spring, 1989 "Hotel Values and Costs," Summer, 1989 "Structuring a Hotel Investment," Fall, 1989 "A Guide for Lenders Holding Distressed Hotel Loans," Winter, 1990 "Estimating Current Interest Rates for Hotel Financing," Spring, 1990 "Hotel Valuation Techniques," Summer, 1990 "Now is the Time to Review Your Hotel's Property Taxes," Fall, 1990 "Property Tax Assessments for Hotels and Motels," Winter, 1991 "Putting Together Hotel Management Agreements - Part I," Spring 1991 "Putting Together Hotel Management Agreements - Part II," Summer, 1991 "The 1980s - The Decade of Change," Fall, 1991 "An Overview of the Hotel Industry: Past, Present, and Future," Spring, 1994 Real Estate Forum "Casino Hotels Raise Valuation Questions," November, 1981 Real Estate Investment Ideas "How Fuel and Energy Shortages Should Affect Investment Decisions in the Hospitality Industry," March, 1974 "Upward Trend Continues for Sales Price of Hotel-Motel Properties," May, 1988 "High Prices Paid for Hotel-Motel Properties," February, 1990 Real Estate Issues "Employee Compensation for a Consulting Practice," Fall/Winter, 1985 "Hotel/Motel Market Sales Update," Spring/Summer, 1987 Real Estate Newsletter "Computers in Hotel Appraising," May 15, 1989 Real Estate Investment Ideas "Hotel-Sales Update," Winter, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Review "Valuing Motels and Hotel in the Current Market," Fall, 1972 "Dealing With Distressed Hostelry Loans," Fall, 1975 "The Mortgage Underwriting Consultant Comes of Age," Fall, 1977 "Real Estate Compensation," Winter, 1987 Real Estate Workouts and Asset Management "Stephen Rushmore on Directions in the Hospitality Industry," September, 1992 Real Values "Hotel Construction Cost Update," April, 1986 Restaurant and Hotel Design "How Much Should the Renovation Be?" March, 1986 "14 Notable Hotel Development Firms," December, 1987 Rushmore on Hotel Valuation "Mortgage - Equity," Winter, 1979 "Atlantic City - From Bust to Boom," Winter, 1979 "Mortgage - Equity," Spring, 1979 "Developing Mortgage Data," Spring 1979 "Gasoline and Market Values, " Spring, 1979 "Mortgage - Equity," Fall, 1979 "Quantifying a Hotel's Business Value," Fall, 1979 "What Has Happened to Typical Hotel-Motel Development Costs?," Fall, 1979 "Mortgage-Equity," Winter, 1980 "Extending Hotel Economic Life Through Renovation," Winter, 1980 "Estimating Hotel Land Values Using Comparable Ground Leases," Winter, 1980 "Quantifying the Value of Personal Property to a Going Hotel," Spring, 1980 "Recent Changes in New York City's Hotel Market," Spring, 1980 "Hotel-Motel Economic Lives," Fall, 1980 "Mortgage - Equity," Fall, 1980 "Mortgage - Equity," Winter, 1981 "Developing Mortgage Data," Winter, 1981 "Statistical Support for Food and Beverage Projections," Winter, 1981 "Mortgage - Equity," Spring/Summer, 1981 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Rushmore on Hotel Valuation (continued) "Quantifying a Hotel's Demand," Spring/Summer, 1981 "A Five-Year Overview of Typical Hotel-Motel Development Costs," Spring/Summer, 1981 "Mortgage - Equity," Winter/Spring, 1982 "Update on Hotel Capitalization Rates," Winter/Spring, 1982 "Mortgage - Equity," Summer/Fall, 1982 "Are Casino Hotels Really Worth $500,000 Per Room?" Summer/Fall, 1982 "The Hotel-Motel Life Cycle, Summer/Fall, 1982 "Mortgage - Equity," Winter/Spring, 1983 "Update on Hotel Development Costs," Winter/Spring, 1983 "The Valuation of Hotels and Motels for Assessment Purposes," Winter, 1984 "Hotel Capitalization Rates," Summer, 1984 "Hotel Development Cost Survey," Summer, 1984 "Selecting a Hotel Management Company," Fall, 1984 "Hotel Capitalization Rates," Spring, 1985 "How to Perform a Breakeven Analysis," Spring, 1985 "Hotel Capitalization Rates," Winter, 1986 "Hotel Development Costs," Winter, 1986 "Hotel Valuation Survey," Winter, 1987 "Impact of New Tax Laws on Hotel Values," Winter, 1987 "Hotel-Motel Market Sales Update," Winter, 1987 "Structuring an Incentive Management Fee," Fall, 1987 "Understanding Your Hotel's Economic Life," Fall, 1987 "Hotel Development Costs," Fall, 1987 "Hotel, Motel Market Sales Update," Winter, 1988 "Amenity Creep," Winter, 1989 "Hotel Franchise Fees," Winter, 1989 "Hotel Valuation Index," Fall, 1989 "Latest Trends in Hotel Values," Fall, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Tri-State Real Estate Journal "Across the Nation: Hotel Sale Prices Escalate on Average," December 23, 1994 U.S. Real Estate Week "All-Suites Market Entering Second Phase," May 4, 1987 Valuation "Hotel-Motel Market Sales Update," February, 1987 Quarterly Newsletter Hotel Valuation Journal Professional newsletter with a circulation of 10,000 Real Estate Column Lodging Hospitality Real estate editor for a major monthly hospitality periodical Hospitality Column Real Estate Finance Journal Contributing hospitality editor Computer Software Hospitality Valuation Software Hotel financial software for room night analyses, income and expense forecasts, and valuation calculations - developed and distributed for the Appraisal Institute Hotel-Motel Data Hospitality Market Data Exchange National clearinghouse for information pertaining to hotel and motel transactions Hotel Valuation Index National index of hotel value trends for 24 individual market areas Hospitality Seminar Series Intensive short courses for hotel and restaurant professionals Hotel Franchise Fees Analysis Guide Analysis of hotel franchise fees and costs Hospitality Bibliography Comprehensive literature index of hotel and restaurant books and articles HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Awards Robert H. Armstrong Award For the most significant contribution to The Appraisal Journal in 1975 Activities Commercial pilot, instrument, multi-engine; sailing; skiing Corporate and Institutional Clients Served Aetna Life Insurance AIG Real Estate Investment Aldrich Eastman and Waltch Allstate American Airlines America's Best Inns Arthur Anderson & Company Bankers Trust Company Bank of America Bank of Boston Bank of Montreal Bank of New York Bank of Nova Scotia Bank of Tokyo Bank One-Columbus Banque Indosuez Barclay's Bank Baybank Boston The Beacon Companies Bear, Stearns & Company, Inc. Best Inns Best Western International Boykin Management Co. Bradbury Suites C. Itoh Caesar's World California Dept. of Transportation Chase Lincoln First Bank, N.A. Chase Manhattan Bank Chemical Bank Chrysler Capital Corporation CIGNA Citibank Citicorp Real Estate City of Boston City of Detroit City of Grand Rapids City of Kalamazoo City of Orlando City of Philadelphia City of Santa Monica City of Toronto Columbia Sussex Corporation Continental Illinois National Bank Copley Real Estate Advisors Corporex Development CRI, Inc. Cushman and Wakefield Days Inns Edward J. DeBartolo Corp. HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Deer Valley Ski Corporation Doubletree Hotels Drury Inns Econo Lodge Economic Development Admin. EIE Regent International Embassy Suites Equitable Life Assurance Equitable Real Estate Investment European American Bank Fairmont Hotels Federal Deposit Insurance Corp. First Boston First California Savings First Interstate Bank First National Bank of Chicago Four Seasons Hotels Goldman, Sachs Greater Orlando Aviation Authority Great Western Bank Great Western Savings Guest Quarters Hampton Inns Hilton Hotels, Corp. Hilton International Holiday Corporation Holiday Inns Home Savings of America Howard Johnson's Hudson Hotels Corporation Hyatt Hotels Industrial Bank of Japan Interstate Hotels The Irvine Company ITT Commercial Finance Corp. Japan Airlines JDC (America) Corporation John Q. Hammons John Hancock Life Insurance Johnson & Wales College Kenneth Leventhal & Assoc. Kidder Peabody & Company, Inc. La Quinta Larken, Inc. Lexington Companies Loews Hotels Harry Macklowe Real Estate Marine Midland Bank, N.A. Marriott Corporation MA Bay Transit Authority Massachusetts Mutual Life Mellon Bank Meridien Hotels Merrill Lynch Merrill Lynch Capital Markets Metropolitan Life Insurance Microtel Midlantic Bank HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Mitsubishi Morgan Guaranty Bank & Trust Co. J.P. Morgan Investment Management Morgan Stanley Motel 6, Inc. Mutual Benefit Co. National Westminster Bank New York Life Insurance Nippon Credit Bank Nomura Securities Int'l North American Taisei Corporation Northwestern Mutual Life Omni Hotels Parabas Bank Prime Motor Inns Property Capital Trust Prudential Life Insurance Radisson Hotels Ramada Inns Red Lion Inns Regent International Registry Hotels Residence Inns Resolution Trust Corporation Rhode Island Hospital Trust Ritz-Carlton Hotels Rodeway Inns Rose Associates Salomon Brothers San Antonio Hotel/Motel Assoc. Sanwa Bank Security Pacific Bank Servico Management Corp. Sheraton Hotels Sonesta Hotels Sonnenblick-Goldman Steamboat Ski Corporation Stouffer Hotels Stratton Corporation Sumitomo Bank Summerfield Hotel Corporation Super 8 Hotels Swiss Bank Corporation Taisei Texas Commerce Bancshares, Inc. Tishman Realty Corporation Trans World Airlines Travelers Insurance TraveLodge Trusthouse Forte UBS Securities Union Labor Life United Bank of Switzerland United Inns, Inc. United States Steel Universal Hotels U.S. Air Force U.S. Department of Justice HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) U.S. Department of the Army U.S. Department of the Interior U.S. Economic Development Authority U.S. Trust Company Walt Disney Productions Westin Hotels Williams Hospitality Corporation Winegardner & Hammons Winthrop Financial Associates Wyndham Hotels Zeckendorf Company Appearance as an Expert Witness Administrative Law Court - SEC, Washington, DC Appellate Tax Board, Boston, Massachusetts Arbitration, Wayne, New Jersey Assessment Appeals Board, Los Angeles County, Los Angeles, California Board of Equalization and Review, Washington, District of Columbia (2) Board of Taxation, Atlantic City, New Jersey Bureau de Revision Evaluation Fonciere du Quebec, Montreal, Canada Circuit Court, Orange County, Orlando, Florida Condemnation Review Board, Minneapolis, Minnesota Corporation Committee, Rhode Island State Senate Court of Common Pleas, Allegheny County, Pennsylvania Court of Common Pleas, Franklin County, Ohio Court of Common Pleas, Montgomery, Pennsylvania Court of Common Pleas, Pittsburgh, Pennsylvania Court of Common Pleas, Philadelphia, Pennsylvania Court of Queen's Bench of Alberta, Canada District Court, Arapahoe County, Colorado District Court, Dallas County, Texas District Court, Harris County, Texas District Court, Tarrant County, Texas District Court, Hennepin County, Minneapolis, Minnesota District Court, Knoxville, Tennessee Federal Bankruptcy Court, Oakland, California Federal Bankruptcy Court, Los Angeles, California HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Denver, Colorado Federal Bankruptcy Court, District of Columbia Federal Bankruptcy Court, Miami, Florida (2) Federal Bankruptcy Court, Chicago, Illinois Federal Bankruptcy Court, New Orleans, Louisiana Federal Bankruptcy Court, Greenbelt, Maryland Federal Bankruptcy Court, Baltimore, Maryland Federal Bankruptcy Court, Rockville, Maryland Federal Bankruptcy Court, Boston, Massachusetts Federal Bankruptcy Court, Grand Rapids, Michigan Federal Bankruptcy Court, Las Vegas, Nevada Federal Bankruptcy Court, Newark, New Jersey (2) Federal Bankruptcy Court, Manhattan, New York (2) Federal Bankruptcy Court, Westbury, New York Federal Bankruptcy Court, Philadelphia, Pennsylvania Federal Bankruptcy Court, Reading, Pennsylvania Federal Bankruptcy Court, Salt Lake City, Utah Federal Bankruptcy Court, Madison, Wisconsin (2) Federal District Court, Rochester, New York Federal District Court, Philadelphia, Pennsylvania (2) Judicial Arbitration and Mediation Services, Dallas, Texas Michigan Tax Tribunal, Detroit, Michigan New Jersey Tax Court, Newark, New Jersey (2) Superior Court, District of Columbia Superior Court, Clayton County, Georgia (2) Superior Court of North Carolina Superior Court, Nashua, New Hampshire Supreme Court, New York State, Buffalo, New York Supreme Court, New York State, Manhattan, New York Supreme Court, New York State, Riverhead, New York HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Tax Review Board, San Joaquin County, Stockton, California Tax Review Board, Bangor, Maine Tax Review Board, Schenectady, New York Tax Review Board, Yorktown, New York Tax Review Board, North Carolina Tax Review Board, Philadelphia, Pennsylvania (2) U.S. District Court, Wilmington, Delaware U.S. District Court, Madison, Wisconsin ============================================================================== Partial List of Hotels/Motels, Appraised or Reviewed Internationally North America Canada - Delta Hotel, Calgary - Econo Lodge, Hull - Hotel Lord Berri, Montreal - Hotel Vogue, Montreal - Hyatt Regency, Montreal - Le Ragence Hyatt, Montreal - Holiday Inn, Oshawa, Ontario - Hotel Le Chantecler, Quebec - Bond Place Hotel, Toronto - Carlton Hotel, Toronto - Chelsea Hotel, Toronto - Delta Chelsea Hotel, Toronto - Four Seasons on the Park, Toronto - Inn on the Park, Toronto - Novotel Missisauga, Toronto - Ramada Inn, Toronto - Sutton Hotel, Toronto - Toronto Marriott East, Toronto - Westbury Hotel, Toronto - Burnaby Villa Inn, Vancouver - Four Seasons Hotel, Vancouver - Sheraton Land Mark, Vancouver - Sheraton Plaza 500, Vancouver - Four Seasons Yorkville Hotel, Yorkville United States Alabama - MEI - Birmingham West, Bessemer - Comfort Inn, Birmingham - Courtyard by Marriott, Birmingham - Courtyard by Marriott-Hoover, Birmingham - Courtyard By Marriott/Homewood, Birmingham - Crown Sterling Suites, Birmingham - Fairfield Inn, Birmingham - Holiday Inn, Birmingham - Howard Johnson, Birmingham - Knights Inn, Birmingham - Ramada Inn, Birmingham - Residence Inn by Marriott, Birmingham - Still Waters Resort, Dadeville - Ramada Inn, Gadsden - Sheraton Hotel, Gulf Shores - Courtyard by Marriott, Huntsville - Knights Inn, Huntsville - Marriott Hotel-Proposed, Huntsville - La Quinta Inn, Huntsville University - Days Inn, Mobile - Hotel - Proposed, Mobile - Inn-Proposed, Mobile - Stouffer Riverview, Mobile - Courtyard by Marriott, Montgomery - Fairfield Inn, Montgomery - Holiday Inn-Downtown, Montgomery - Holiday Inn-East, Montgomery - Howard Johnson, Montgomery - La Quinta Inn, Montgomery - Residence Inn, Montgomery - Marriott's Grand Hotel, Point Clear - Holiday Inn, Sheffield - La Quinta, Tuscaloosa - Masters Economy Inn, Tuscaloosa - Proposed Extended Stay, West Mobile Alaska - Barratt Inn, Anchorage - Clarion Hotel, Anchorage - Holiday Inn, Anchorage - Hotel Captain Hook, Anchorage - International Airport Inn, Anchorage - Sheraton Anchorage Hotel, Anchorage Arizona - Holiday Inn, Bullhead City - Embassy Suites, Camelback - Compri Hotel-Proposed, Chandler - Quality Inn, Chandler - Ramada Inn, Chandler - AmeriSuite Hotel-Proposed, Flagstaff - Holiday Inn, Flagstaff - Motel 6, Flagstaff - Rodeway Inn, Flagstaff - Bright Angel Lodge, Grand Canyon - El Tovar Hotel, Grand Canyon - Grand Canyon National Park, Grand Canyon - Kachina Lodge, Grand Canyon - Maswik Lodge, Grand Canyon - Moqui Lodge, Grand Canyon - Phantom Ranch, Grand Canyon - Thunderbird Lodge, Grand Canyon - Yavapai Lodge, Grand Canyon - Hampton Inn-Proposed, Holbrook - Moqui Lodge, Kaibab National Forest - Rodeway Inn, Kingman - Nautical Inn Resort, Lake Havasu City - Lexington Hotel Suites, Mesa - Biosphere II Conference Center, Oracle - Best Western-Per Diem, Phoenix - Bobby McGee's, Phoenix - Caravan Inn, Phoenix - Compri Hotel-Proposed, Phoenix - Courtyard by Marriott-Black Canyon, Phoenix - Courtyard by Marriott-Mesa, Phoenix - Crescent Phoenix Hotel, Phoenix - Crown Sterling Suites, Phoenix - Days Inn, Phoenix - Doubletree Inn at Park Central, Phoenix - Embassy Suites, Phoenix - Embassy Suites-Biltmore, Phoenix - Executive Park Hotel, Phoenix - Fountain Suites Hotel, Phoenix - Granada Royale-Camelhead, Phoenix - Hilton Hotel, Phoenix - Holiday Inn, Phoenix - Hyatt Regency, Phoenix - La Quinta Hotel, Phoenix - Lexington Hotel Suites, Phoenix - Newton's Sands, Phoenix - Phoenician Golf & Tennis Resort, Phoenix - Pointe Hilton at Tapatio Cliffs, Phoenix - Quality Inn, Phoenix - Ramada Inn-Airport, Phoenix - Ramada Inn-East, Phoenix - Ritz Carlton, Phoenix - Sunburst Resort Hotel, Phoenix - Hassayampa Inn, Prescott - Clarion Inn at McCormick Ranch, Scottsdale - Conference Center, Scottsdale - Courtyard by Marriott-Mayo, Scottsdale - Doubletree Inn at Scottsdale Mall, Scottsdale - Fairfield Inn, Scottsdale - Fashion Square Hotel, Scottsdale - Loews Paradise Resort, Scottsdale - Marriott Camelback Inn, Scottsdale - Marriott Mountain Shadows, Scottsdale - Mountain Shadows Resort, Scottsdale - Orange Tree Resort, Scottsdale - Ramada-Valley Ho, Scottsdale - Red Lion's La Posada Resort, Scottsdale - Registry Resort, Scottsdale - Rodeway Inn, Scottsdale - Scottsdale Princess, Scottsdale - Sheraton Scottsdale Resort, Scottsdale - The Phoenician, Scottsdale - Valley Ho, Scottsdale - John Gardiner's Enchantment, Sedona - L'Auberege de Sedona, Sedona - Los Abrigados, Sedona - Orchards Inn, Sedona - Hotel-Proposed, Sierra Vista - Motel 6, Sierra Vista - Temple Bar Resort, Temple Bar - Coachman Inn - Proposed, Tolleson/Phoenix - Tubac Resort, Tubac - Canyon Ranch, Tucson - Coachman Inn-Proposed, Tucson - Courtyard by Marriott, Tucson - Doubletree Inn, Tucson - Embassy Suites, Tucson - Granada Royale Hometel-E. Broadway, Tucson - Hotel Park Tucson-Proposed, Tucson - Lexington Suites Hotel, Tucson - Loews Hotel, Tucson - Resort Hotel-Proposed, Tucson - Rodeway Inn, Tucson - Sunbelt Commerce Center Hotel, Tucson - La Quinta Inn, Tucson East - Bobby McGee's, Tuscon - Radisson Suite Hotel, Tuscon - Ventana Canyon Golf and Racquet, Tuscon - Ramada Inn, Union Hill Arkansas - Sheraton Inn, Fort Smith - Hilton, Hot Springs - Holiday Inn-Lake Hamilton, Hot Springs - Courtyard by Marriott, Little Rock - Holiday Inn, Little Rock - Legacy Hotel, Little Rock - Little Rock Hilton, Little Rock - Masters Economy Inn, Little Rock - Red Carpet Inn, Little Rock - Super 8, Little Rock - Masters Economy Inn, North Little Rock - Masters Economy Inn, Protho-Junction - Holiday Inn, Texarkana California - Hampton Inn, Agoura Hills - Ramada Inn, Agoura Hills - Residence Inn-Proposed, Agoura Hills - Island Motel, Almeda - Anaheim Hilton & Towers, Anaheim - Anaheim Park Motor Inn, Anaheim - Anaheim Plaza Hotel, Anaheim - Best Western Pavillions, Anaheim - Carousel Inn, Anaheim - Conestoga Hotel, Anaheim - Courtyard by Marriott, Anaheim - Crown Sterling Suites, Anaheim - Disneyland Hotel, Anaheim - Golden Forest Motel, Anaheim - Hampton Inn, Anaheim - Hilton, Anaheim - Holiday Inn Anaheim Center, Anaheim - Hotel-Proposed, Anaheim - Marriott Hotel, Anaheim - Pan Pacific Hotel, Anaheim - Pitcairn Motel, Anaheim - Raffles Inn, Anaheim - Ramada Maingate/Disneyland Hotel, Anaheim - Roger Morris Inn, Anaheim - Stovall's Inn, Anaheim - The Station Inn, Anaheim - Travelodge Inn at the Park, Anaheim - AmeriSuite, Anaheim Hills - Comfort Inn, Anahiem - Mansouri Hotel, Antioch - Red Lion, Apple Valley - Hampton Inn, Arcadia - Residence Inn, Arcadia - Hilton Lodge, Arrowhead Lake - Auburn Inn, Auburn - Sleep Inn, Auburn - Allstar Inn, Bakersfield - Clarion Hotel, Bakersfield - Courtyard by Marriott, Bakersfield - Economy Inn, Bakersfield - Ramada Inn, Bakersfield - Red Lion Hotel, Bakersfield - Residence Inn, Bakersfield - Rodeway Inn, Bakersfield - Hilton Hotel, Baldwin Park - San Gabriel Valley Hotel, Baldwin Park - The Hilton Hotel, Baldwin Park - Allstar Inn, Barstow - Economy Inn, Barstow - Marriott Berkeley Marina, Berkeley - Shattuck Hotel, Berkeley - Beverly Hills Hotel, Beverly Hills - Beverly Rodeo Hotel, Beverly Hills - Beverly Wilshire Hotel, Beverly Hills - Hilton Hotel-Cresthil, Beverly Hills - L'Ermitage, Beverly Hills - Peninsula Hotel, Beverly Hills - Best Western, Big Bear Lake - Big Bear Hotel, Big Bear Lake - Big Bear Lake Resort, Big Bear Lake - Big Bear Towering Pines, Big Bear Lake - Motel 6, Big Bear Lake - Post Ranch, Big Sur - Ventana Inn, Big Sur - Rodeway Inn, Blythe - Courtyard by Marriott, Brea - Holiday Inn, Brentwood - Courtyard by Marriott, Buena Park - Fairfield Inn, Buena Park - Hampton Inn, Buena Park - Holiday Inn, Buena Park - Crowne Sterling Suites, Burlingame - Hyatt Regency, Burlingame - Mariott Hotel - SFO, Burlingame - Marriott, Burlingame - Marriott-San Francisco Airport, Burlingame - Radisson Hotel-Proposed, Burlingame - Sheraton Hotel, Burlingame - Courtyard by Marriott, Camarillo - Best Western Fireside Inn, Cambria - Cambria Pines Lodge, Cambria - Residence Inn, Campbell - Hotel-Proposed, Capitola - Resort Hotel, Spa & Conference Ctr., Capitola - Allstar Inn, Carlsbad - Carlsbad Inn, Carlsbad - Inn of America, Carlsbad - La Costa Hotel and Spa, Carlsbad - Olympic Resort Hotel, Carlsbad - Tickle Pink Inn, Carmel - Allstar Inn, Carpinteria - Desert Princess Country Club, Cathedral City - Royce Suites Hotel, Cathedral City - Digger Bay, Central Valley - Marriott Hotel-Proposed, Century City - Westin Century Plaza Hotel, Century City - Neighborhood Inn-Proposed, Chatsworth - Red Lion Hotel, Chico - Otay Valley Inn, Chula Vista - Travelodge-Otay Valley, Chula Vista - Ramada Inn, City of Commerce - Sheraton Hotel, City of Industry - Allstar Inn, Coalinga - Harris Ranch Restaurant/Inn, Coalinga - Howard Johnson, Colton - Best Western Willow Tree Inn, Compton - Concord Hotel, Concord - Hilton Hotel, Concord - The Trees Inn, Concord - Motel 6, Corona - Hotel del Coronado, Coronado - Loews Coronado Bay Resort, Coronado - Madera Village Inn, Corte Madera - Ha' Penny Inn, Costa Mesa - La Quinta Hotel, Costa Mesa - Marriott Suites, Costa Mesa - Red Lion Hotel, Costa Mesa - Residence Inn, Costa Mesa - Pacifica Hotel, Culver City - Ramada Inn, Culver City - Courtyard by Marriott, Cupertino - Doubletree Hotel, Cupertino - Doubletree Hotel, Dana Point - Spa-Proposed, Danville - El Rancho, Davis - Furnace Creek Resort, Death Valley - Stovepipe Wells Village, Death Valley - Hilton, Del Mar - Days Inn, Diamond Bar - Compri Hotel, El Segundo - Proposed Summerfield, El Segundo - Days Inn, Emeryville - Holiday Inn-Bay Bridge, Emeryville - Lyons Restaurant, Emeryville - Budget Motel, Encinitis - Marriott Tenaya Lodge-Proposed, Fishcamp - Holiday Inn, Fort Myers Beach - All Suites Hotel/Athletic Club, Foster City - Clubtel-Proposed, Foster City - Courtyard by Marriott, Foster City - Holiday Inn, Foster City - Courtyard by Marriott, Fremont - Fremont Hotel, Fremont - Motel 6, Fremont - Residence Inn, Fremont - Allstar Inn, Fresno - AmeriSuite, Fresno - Chateau Inn, Fresno - Courtyard by Marriott, Fresno - Economy Inn, Fresno - Hacienda, Fresno - Holiday Inn, Fresno - Holiday Inn-Fresno Airport, Fresno - Howard Johnson Motel, Fresno - Piccadilly Inn, Fresno - Travelers Inn, Fresno - Travelers Lodge, Fresno - Griswold's Hotel, Fullerton - Holiday Inn, Fullerton - Marriott Hotel, Fullerton - Hotel-Proposed, Garden Grove - Hyatt Regency Alicante, Garden Grove - Princess Hotel, Garden Grove - Motel 6, Gilroy - Hyatt Regency-Proposed, Goleta - Allstar Inn, Hacienda Heights - Courtyard by Marriott, Hacienda Heights - Half Moon Bay Lodge, Half Moon Bay - Courtyard by Marriott, Harbor Boulevard - Grosvenor, Harborside-Pt. Loma - Inn at Foss Creek, Healdsburg - Chateau Marmont, Hollywood - Hollywood Palm Hotel, Hollywood - Sunset Towers Hotel, Hollywood - Waterfront Hilton Hotel, Huntington Beach - Compri Hotel, Hutton Centre - Grand Champions Resort, Indian Wells - Stouffer Esmerelda Resort, Indian Wells - Courtyard By Marriott, Irvine - Courtyard by Marriott - Proposed, Irvine - Embassy Suites, Irvine - Hilton Hotel, Irvine - Holiday Inn, Irvine - Hyatt Hotel, Irvine - La Quinta-Proposed, Irvine - Marriott Hotel, Irvine - Marriott-Proposed, Irvine - Registry Hotel, Irvine - Residence Inn-Proposed, Irvine - Amador Inn, Jackson - Embassy Suites, La Jolla - Hotel-Proposed, La Jolla - La Jolla Property, La Jolla - La Jolla Village Inn, La Jolla - Marriott Hotel, La Jolla - Residence Inn, La Jolla - Days Inn-Proposed, La Palma - PGA West Resort - Proposed, La Quinta - Lafayette Park Hotel, Lafayette - Laguna Shores, Laguna Beach - Holiday Inn, Laguna Hills - Ryokan Hotel-Proposed, Laguna Hills - Villa Valencia, Laguna Hills - Ritz Carlton, Laguna Niguel - Lake Mohave Resort, Lake Mohave - Resort at Squaw Creek, Lake Tahoe - Courtyard by Marriott, Larkspur Landing - Hilton, Las Cruces - Surf and Sand Hotel, Leguna Beach - Holiday Inn, Lido Beach - Motel-Proposed, Little Lake - Residence Inn, Livermore - Residence Inn-Proposed, Livermore - Breakers Hotel, Long Beach - Holiday Inn, Long Beach - Holiday Inn Airport, Long Beach - Marriott Hotel-Long Beach Airport, Long Beach - Marriott Hotel-Proposed, Long Beach - Ramada Renaissance Hotel, Long Beach - Residence Inn, Long Beach - Sheraton Long Beach & Office Tower, Long Beach - Airport Park Hotel, Los Angeles - Bel Age, Los Angeles - Biltmore Hotel, Los Angeles - Century Inn, Los Angeles - Checkers Hotel, Los Angeles - Courtyard by Marriott-Irvine Main, Los Angeles - Courtyard by Marriott-LAX Airport, Los Angeles - Crown Sterling Suites, Los Angeles - Days Inn, Los Angeles - Econo Lodge-Proposed, Los Angeles - Embassy Suites, Los Angeles - Embassy Suites-LAX-Proposed, Los Angeles - Four Seasons, Los Angeles - Hampton Inn-LAX, Los Angeles - Herrick and Campbell, Los Angeles - Hilton & Towers-LAX, Los Angeles - Hilton Hotel, Los Angeles - Holiday Inn Crowne Plaza-LAX, Los Angeles - Le Montrose Hotel, Los Angeles - Ma Maison Sofitel, Los Angeles - Macklowe Hotel, Los Angeles - Marriott Century City, Los Angeles - MCA Hotel-Proposed, Los Angeles - New Otani Hotel, Los Angeles - Playa Vista Development, Los Angeles - Stouffer Concourse Hotel, Los Angeles - Westin Bonaventure, Los Angeles - Westwood Marquis Hotel, Los Angeles - Los Gatos Lodge, Los Gatos - Macienda Inn, Los Gatos - Toll House Inn, Los Gatos - Residence Inn, Manhattan Beach - All Suite Hotel, Marina Del Rey - Marina Beach Hotel, Marina del Rey - Marina del Rey Hotel and Marina, Marina del Rey - Marina Suites Hotel, Marina Del Rey - Marriott Marina Del Rey, Marina Del Rey - Residence Inn, Meriden - Quality Suites Hotel - Proposed, Millbrae - Beverly Heritage Hotel, Milpitas - Crown Sterling Suites, Milpitas - Holiday Inn, Milpitas - Courtyard by Marriott, Mira Mesa - Grosvenor, Mission Bay - Motel Orleans, Modesto - Red Lion Hotel, Modesto - Red Lion-Proposed, Modesto - Carmel Mission Inn, Monterey - Doubletree Inn, Monterey - Former Monterey Hilton Hotel, Monterey - Monterey Plaza, Monterey - Plaza Hotel, Monterey - Sheraton Hotel, Monterey - Pebble Beach Company, Monterey County - Inn at Morro Bay, Morro Bay - Residence Inn, Mountain View - Inn at Napa Valley, Napa - Best Western Inn, Napa Valley - Clarion Hotel-Napa Valley, Napa Valley - Silverado, Napa Valley - Ha'Penny Motel, National City - Allstar Inn, Needles - Hilton-Newark/Fremont, Newark - Four Seasons Hotel, Newport Beach - Hotel Meridien, Newport Beach - Hyatt Newporter, Newport Beach - Newporter Resort, Newport Beach - Sheraton, Newport Beach - Days Inn-Proposed, North Hollywood - Northstar, North Lake Tahoe - Ramada Inn, Norwalk - Impact Study - Proposed Hotel, Oakdale - Hilton Inn, Oakland - Holiday Inn, Oakland - Holiday Inn-Oakland Airport, Oakland - Parc Oakland Hotel, Oakland - Resort - Proposed, Olympic Valley - Resort at Squaw Creek-Proposed, Olympic Valley - Clarion Hotel, Ontario - Compri Hotel, Ontario - Fairfield Inn, Ontario - Holiday Inn, Ontario - Lexington Hotel Suites, Ontario - Red Lion Hotel, Ontario - Doubletree Hotel, Orange - Woodfin Suites, Orange - Embassy Suites, Palm Desert - Marriott Desert Springs, Palm Desert - Canyon Resort, Palm Springs - Compri Hotel-Proposed, Palm Springs - Courtyard by Marriott, Palm Springs - Desert Princess, Palm Springs - Grand Champions Resort, Palm Springs - International Hotel and Resort, Palm Springs - Ocotillo Lodge, Palm Springs - Palm Canyon, Palm Springs - PGA West Resort-Proposed, Palm Springs - Spa Hotel at Mineral Springs, Palm Springs - Westin Hotel, Palm Springs - Grosvenor, Palmdale - Super 8, Palmdale - Cowper Square, Palo Alto - Garden Court, Palo Alto - Holiday Inn, Palo Alto - Stanford Park, Palo Alto - Marriott, Paradise Valley - All Suite Hotel-Proposed, Pasadena - Doubletree Hotel, Pasadena - Holiday Inn, Pasadena - Cascade Ranch Lodge, Pescadero - Elk Lodge, Petaluma - Hotel Petaluma, Petaluma - Hilton-Proposed, Pismo Beach - Hilton-Sea Point, Pismo Beach - Holiday Inn, Pismo Beach - Hotel-Proposed, Pismo Beach - Pismo II, Pismo Beach - Fairfield Inn, Placentia - Residence Inn, Placentia - Howard Hughes Center, Playa Vista - Pleasant Hill Inn, Pleasant Hill - Residence Inn, Pleasant Hill - Club Hilton Hotel-Proposed, Pleasanton - Compri Hotel, Pleasanton - Courtyard by Marriott, Pleasanton - Hilton, Pleasanton - Holiday Inn, Pleasanton - Pleasanton Creek, Pleasanton - Shilo Inn - Hilltop, Pomona - Compri Hotel, Rancho Bernardo - Radisson Suites, Rancho Bernardo - Comfort Inn Motel, Rancho Cordova - Courtyard by Marriott, Rancho Cordova - Economy Inn, Rancho Cordova - El Rancho, Rancho Cordova - Quality Suites-Proposed, Rancho Cordova - Sheraton Sunrise, Rancho Cordova - Marriott Rancho Las Palmas, Rancho Mirage - Mission Hills Hotel, Rancho Mirage - Resort Hotel-Proposed, Rancho Mirage - Westin Mission Hills Resort, Rancho Mirage - Bridge Bay Resort, Redding - Grand Manor Inn, Redding - La Quinta Inn, Redding - Motel 6, Redding - Motel Orleans, Redding - Red Lion Inn, Redding - Shasta Inn, Redding - Portofino Hotel & Yacht Club, Redondo Beach - Sheraton, Redondo Beach - Sofitel Redwood Shores, Redwood - Days Inn, Richmond - Best Western Carraige Inn, Ridgecrest - Days Inn, Riverside - Mission Inn-Proposed, Riverside - Omni Mission Inn, Riverside - Sheraton Hotel, Riverside - Red Lion Inn, Rohnert Park - Crown Sterling Suites, S.San Fransicso - Allstar Inn, Sacramento - Arco Arena II-Proposed, Sacramento - Arco Park, Sacramento - Catering Center - Proposed, Sacramento - Clarion Hotel, Sacramento - Compri Hotel-Proposed, Sacramento - Courtyard by Marriott, Sacramento - Courtyard by Marriott-S. Natomas, Sacramento - Hilton Hotel, Sacramento - Holiday Inn-Capital Plaza, Sacramento - Hotel-Proposed, Sacramento - Hyatt Arbitrat, Sacramento - Hyatt Regency, Sacramento - La Quinta Hotel, Sacramento - Motel Orleans, Sacramento - Radisson Hotel, Sacramento - Red Lion Inn, Sacramento - Residence Inn, Sacramento - Sacramento Inn, Sacramento - Sierra Inn, Sacramento - Sterling Hotel, Sacramento - Travelers Inn, Sacramento - Woodlake Inn, Sacramento - Harvest Inn, Saint Helena - Courtyard by Marriott, San Bruno - San Carlos Motel Development, San Carlos - Atlas Hotels/Mission Valley Inn, San Diego - Best Western Seven Seas Motor Lodge, San Diego - Budget Motel of America, San Diego - Catamaran Resort Hotel, San Diego - Center Pointe Development, San Diego - Comfort Inn, San Diego - Courtyard by Marriott-Mira Mesa, San Diego - Doubletree Hotel, San Diego - Embassy Suites, San Diego - Executive Lodge, San Diego - Hanalei Hotel, San Diego - Harbor Island Hotel-Proposed, San Diego - Harborside Inn-Point Loma, San Diego - Harbortown Marina Resort, San Diego - Holiday Inn Montgomery Airport, San Diego - Holiday Inn-Embarcadero, San Diego - Holiday Inn-Harbor View, San Diego - Horton Grand Saddlery, San Diego - Horton Park Plaza Hotel, San Diego - Howard Johnson Hotel, San Diego - Inter-Continental Hotel & Marina, San Diego - Kings Inn, San Diego - La Jolla Village Inn, San Diego - La Quinta Hotel, San Diego - Marriott Hotel-Mission Valley, San Diego - Marriott Twin Towers and Marina, San Diego - Mission Valley Inn, San Diego - Omni Hotel, San Diego - Radisson Hotel, San Diego - Ramada Inn, San Diego - Ramada Limited Suites, San Diego - Ramada Old Town, San Diego - Ramada Rancho Penasquitos, San Diego - Red Lion Inn, San Diego - Regency Plaza Hotel, San Diego - San Diego Marriott, San Diego - Seven Seas Lodge, San Diego - Sheraton Grand, San Diego - Sheraton Harbor Island East, San Diego - Super 8-Point Loma, San Diego - Symphony Towers, San Diego - Town and Country Hotel, San Diego - Travelodge Hotel Plaza, San Diego - U.S. Grant Hotel, San Diego - Westin-Proposed, San Diego - Abagail Inn, San Francisco - Bellevue Hotel, San Francisco - Cable Motor Inn, San Francisco - California Cafe, San Francisco - Campton Place, San Francisco - Cartwright Hotel, San Francisco - Chancellor Hotel, San Francisco - Clarion Inn-San Francisco Airport, San Francisco - Comfort Inn, San Francisco - Courtyard by Marriott-Airport, San Francisco - Embarcadero Inn, San Francisco - Fairmont Hotel, San Francisco - Grand Hyatt, San Francisco - Grosvenor Clift Hotel, San Francisco - Harbor Court Hotel, San Francisco - Hilton Hotel, San Francisco - Holiday Inn - Union Square, San Francisco - Holiday Inn Crowne Plaza, San Francisco - Holiday Inn-Civic Center, San Francisco - Holiday Inn-Fisherman's Wharf, San Francisco - Holiday Inn-Golden Gateway, San Francisco - Holiday Inn-South, San Francisco - Holiday Lodge, San Francisco - Hotel Diva, San Francisco - Hotel Meridien, San Francisco - Hotel Union Square, San Francisco - Hotel-Proposed, San Francisco - Hyatt Fisherman's Wharf, San Francisco - Hyatt Regency Embarcadero, San Francisco - Inn at Fisherman's Wharf, San Francisco - Inn at the Opera, San Francisco - Inn-Proposed, San Francisco - Juliana Hotel, San Francisco - King George Hotel, San Francisco - La Quinta Inn, San Francisco - La Quinta-Airport, San Francisco - Lambourne Hotel, San Francisco - Laurel Motor Inn, San Francisco - Majestic Hotel, San Francisco - Manx Hotel, San Francisco - Mark Twain, San Francisco - Marriott, San Francisco - Marriott San Francisco-Proposed, San Francisco - Marriott-Airport, San Francisco - Orchard Hotel, San Francisco - Pan Pacific Hotel, San Francisco - Parc 55 Hotel, San Francisco - Park Hyatt Hotel, San Francisco - Portman Hotel, San Francisco - Prescott Hotel, San Francisco - Queen Anne Hotel, San Francisco - Ramada Hotel, San Francisco - Regis Hotel, San Francisco - Ritz-Carlton Hotel, San Francisco - San Franciscan, San Francisco - San Francisco Hotel, San Francisco - Savoy Hotel, San Francisco - Sheraton Palace Hotel, San Francisco - Sheraton-Fisherman's Wharf, San Francisco - Sir Francis Drake Hotel, San Francisco - Stanford Court, San Francisco - Stouffer Stanford Court Hotel, San Francisco - Super 8-Fisherman's Wharf, San Francisco - Westin St. Francis, San Francisco - Crowne Sterling Suites, San Francisco - South - Olympic Club Golf Course, San Francisco/San Mateo - Budget Inn, San Jose - Courtyard by Marriott, San Jose - Cozy 8 Arena Hotel, San Jose - Fairmont Hotel, San Jose - Holiday Inn, San Jose - Ramada Renaissance, San Jose - Red Lion Inn, San Jose - Islander Motel, San Leandro - Apple Farm Inn, San Luis Obispo - Embassy Suites, San Luis Obispo - Holiday Inn, San Luis Obispo - Los Nomados Resort, San Luis Obispo - Twin Oaks Golf Course, San Marcos - Dunfey San Mateo Hotel, San Mateo - Compri Hotel-Proposed, San Pedro - Embassy Suites Hotel, San Rafael - Marriott Hotel-Proposed, San Ramon - Residence Inn, San Ramon - AAA Inn, Santa Ana - California Palms Hotel, Santa Ana - Comfort Inn, Santa Ana - Compri Hotel, Santa Ana - Embassy Suites Santa Ana, Santa Ana - Executive Lodge, Santa Ana - Howard Johnson, Santa Ana - Quality Inn, Santa Ana - Ramada Inn-Orange County, Santa Ana - El Encanto Hotel, Santa Barbara - Fess Parker's Red Lion Resort, Santa Barbara - Four Seasons Hotel, Santa Barbara - Montecito Inn, Santa Barbara - San Ysidro Ranch, Santa Barbara - Santa Barbara Inn, Santa Barbara - Biltmore Hotel & Suites, Santa Clara - Days Inn, Santa Clara - Doubletree Hotel, Santa Clara - Embassy Suites, Santa Clara - Inn At Saratoga, Santa Clara - Marriott Hotel, Santa Clara - Quality Suites Hotel, Santa Clara - Dream Inn, Santa Cruz - Hilton, Santa Maria - Motel 6, Santa Maria - Econo Lodge-Proposed, Santa Monica - Holiday Inn, Santa Monica - Holiday Inn at the Pier, Santa Monica - Park Hyatt Hotel, Santa Monica - Santa Monica Beach Hotel, Santa Monica - Santa Monica/Slatkin, Santa Monica - Allstar Inn, Santa Rosa - Doubletree Hotel, Santa Rosa - Fountaingrove Inn, Santa Rosa - Holiday Inn, Santa Rosa - Round Barn Inn-Proposed, Santa Rosa - Sheraton Round Barn, Santa Rosa - Days Inn, Seaside - Embassy Suites, Seaside - Seaside 8 Motel, Seaside - Valley Radisson, Sherman Oaks - Red Lion, Sonoma - Sonoma Mission Inn, Sonoma - Holiday Inn - Proposed, Sonora - Timberwolf Lodge, South Lake Tahoe - Holiday Inn, South San Francisco - Hotel-Proposed, South San Francisco - Meadowood Resort, St. Helena - Hilton Hotel, Stockton - Holiday Inn, Stockton - La Quinta Hotel, Stockton - Motel Orleans, Stockton - Paradise Point Manna, Stockton - Sheraton-Proposed, Stockton - Hilton, Sunnyvale - Holiday Inn, Sunnyvale - Neighborhood Suites, Sunnyvale - Ramada Inn, Sunnyvale - Sunnyvale Hilton, Sunnyvale - Temecula Creek Inn, Temecula Creek - Westlake Plaza Hotel, Thousand Oaks - Courtyard by Marriott, Torrance - Holiday Inn, Torrance - Marriott Hotel, Torrance - Residence Inn, Torrance - Holiday Inn, Union City - MCA Hotel-Proposed, Universal City - Comfort Inn, Vallejo - Holiday Inn, Van Nuys - La Quinta Hotel, Ventura - Ocean Resorts, Ventura - Sheraton, Ventura - Greentree Inn, Victorville - Doubletree Inn, Walnut Creek - Parkside Hotel, Walnut Creek - Ramada Renaissance Hotel, Walnut Creek - Royce Hotel-Proposed, Walnut Creek - Walnut Creek Project, Walnut Creek - Hampton Inn, West Covina - Le Bel Age, West Hollywood - Le Dufy, West Hollywood - Le Mondrian Hotel, West Hollywood - Hilton, Whittler - Hotel & Conference Center-Proposed, Woodland - Marriott Hotel-Woodland Hills, Woodland Hills - Skylonda Retreat, Woodside - Compri Hotel-Proposed, Yorba Linda - Marriott-Tenaya Lodge, Yosemite - Motel Orleans, Yuba City Colorado - Days Inn, Arapahoe - Continental Inn, Aspen - Ritz-Carlton Hotel-Proposed, Aspen - Hampton Inn, Aurora - Holiday Inn, Aurora - Radisson Hotel, Aurora - Radisson Southeast, Aurora - Raffles Hotel, Aurora - Comfort Inn, Avon - Boulder Hotel-Downtown, Boulder - Clarion Hotel, Boulder - Courtyard by Marriott, Boulder - Doubletree Hotel-Proposed, Boulder - Hilton Harvest House, Boulder - Holiday Inn, Boulder - Interlocken Conference Resort-Prop., Boulder - Proposed Golf Course, Boulder - Residence Inn, Boulder - Hilton, Breckenridge - Ski Lodge-Proposed, Breckenridge - Interlocken Conference Center, Broomfield - Interlocken Conference Center-Prop., Broomfield - Embassy Suites, Colorado Springs - Hilton, Colorado Springs - Howard Johnson, Colorado Springs - Le Baron Hotel, Colorado Springs - Marriott, Colorado Springs - Quality Inn, Colorado Springs - Red Lion Inn, Colorado Springs - Sheraton Inn, Colorado Springs - Grand Butte Hotel, Crested Butte - Best Western Regency, Denver - Brown Palace, Denver - Clarion Hotel-Denver Airport, Denver - Courtyard by Marriott-Airport, Denver - Courtyard by Marriott-Southeast, Denver - Days Inn, Denver - Denver Airport Hilton Inn, Denver - Doubletree Hotel, Denver - Embassy Suites, Denver - Embassy Suites-Airport, Denver - Hilton-Technical Center, Denver - Holiday Inn-Downtown, Denver - Holiday Inn-West, Denver - Jackson's Hole Sport, Denver - Marriott-Southeast, Denver - Marriott-West, Denver - Radisson Hotel, Denver - Red Lion Hotel, Denver - Regency Inn, Denver - La Quinta Inn, Denver - Airport - La Quinta, Denver - South - Red Lion Inn, Durango - Hilton-Denver, Englewood - Residence Inn, Englewood - Scanticon Conference Center, Englewood - Marriott Hotel-Proposed, Fort Collins - Holiday Inn, Golden - Marriott-Denver West, Golden - Ramada Inn, Grand Junction - Sheraton-Proposed, Keystone - Compri Hotel, Lakewood - Hampton Inn, Lakewood - Sheraton Inn, Steamboat Springs - Proposed Hotel, Telluride - Days Inn, Vail - Doubletree Hotel, Vail - Lodge at Vail, Vail - Marriott's Mark Resort, Vail - Westin Vail Resort, Vail - Ramada Hotel, Westminster - Winter Park Resort, Winter Park Connecticut - Chester Inn-Chester, Chester - Inn-Proposed, Chester - Super 8-Proposed, Cromwell - Danbury Hilton & Towers, Danbury - Residence Inn, Danbury - Holiday Inn, Darien - Howard Johnson Lodge, Darien - Ramada Inn, Darien - Holiday Inn, East Hartford - Howard Johnson Lodge, East Lyme - Days Inn-Proposed, Enfield - Greenwich Habor Inn, Greenwich - Howard Johnson Lodge, Greenwich - Showboat Inn, Greenwich - Hotel-Proposed, Groton - Hilton Hotel, Hartford - Holiday Inn-Proposed, Hartford - Motel 6, Hartford - Ramada Inn, Hartford - Sheraton Tobacco Valley Inn, Hartford - Summit Hotel, Hartford - Super 8 Motel, Hartford - Susse Chalet, Hartford - Residence Inn By Marriott, Meriden - Holiday Inn, Milford - Susse Chalet, Milford - Howard Johnson Lodge, Mystic - Mystic Ramada Inn, Mystic - Holiday Inn, New Britain - Ramada Inn, New Britain - Colony Inn, New Haven - Holiday Inn, New Haven - Howard Johnson, New Haven - Quality Inn, New Haven - Residence Inn, New Haven - Radisson Hotel, New London - Best Western-Proposed, New Milford - Courtyard by Marriott, Norwalk - Holiday Inn, Norwalk - Howard Johnson, Norwalk - Ramada Inn, Norwalk - Susse Chalet, Rocky Hill - Ramada Hotel-Proposed, Shelton - Residence Inn - Shelton, Shelton - Heritage Village, Southbury - Southbury Hotel, Southbury - Susse Chalet, Southington - Days Inn, Stamford - Executive Hotel, Stamford - Harley Hotel, Stamford - Holiday Inn-Crowne Plaza, Stamford - Inn at Mill River, Stamford - Le Pavillon Hotel, Stamford - Marriott, Stamford - Radisson Tara Hotel, Stamford - Sheraton, Stamford - Best Western-Proposed, Stratford - Stratford Motor Lodge, Stratford - Marriott Hotel, Trumbull - Courtyard by Marriott, Wallingford - Susse Chalet, Wallingford - Howard Johnson Plaza Hotel, Waterbury - Super 8-Proposed, Waterbury - Residence Inn-Proposed, Waterford - Holiday Inn, Westbury - The Island Inn, Westbury - Courtyard by Marriott, Windsor - Sheraton Tobacco Valley Inn, Windsor - Holiday Inn-Proposed, Windsor Locks Delaware - Wilmington Hilton, Claymont - Rusty Rudder, Dewey Beach - Residence Inn-Proposed, Newark - Hilton Hotel, Wilmington - Hotel-Proposed, Wilmington - Marriott Suites, Wilmington - Residence Inn-Proposed, Wilmington District of Columbia - All Suite Hotel - Proposed, Washington - Bellevue Hotel, Washington - Canterbury Hotel, Washington - Capital Hilton, Washington - Capitol Hill Hotel, Washington - Castleton Hotel, Washington - Comfort Inn, Washington - Convention Center Inn, Washington - Dupont Plaza, Washington - Embassy Row Hotel, Washington - Fairfax Hotel, Washington - Fairmont Hotel, Washington - Four Seasons Hotel, Washington - General Scott Inn, Washington - Georgetown Hotel, Washington - Grand Hotel, Washington - Grand Hyatt, Washington - Hampshire House, Washington - Harambee House, Washington - Hay Adams Hotel, Washington - Holiday Inn Crowne Plaza, Washington - Holiday Inn-Capitol, Washington - Holiday Inn-Georgetown, Washington - Holiday Inn-Governor House, Washington - Hotel Washington, Washington - Howard Johnson, Washington - Hyatt Regency-Capitol, Washington - Hyatt-Convention Center, Washington - International Inn, Washington - Intrigue Hotel, Washington - Jefferson Hotel, Washington - Lombardy Tower Apartment Hotel, Washington - Madison Hotel, Washington - Manger Annapolis Hotel, Washington - Manger Hamilton Hotel, Washington - Manger Hay Adams Hotel, Washington - Marriott-Key Bridge, Washington - Mayflower Hotel, Washington - Omni Georgetown Hotel, Washington - Omni Shoreham Hotel, Washington - Park Terrace Hotel, Washington - Phoenix Park Hotel, Washington - Plaza Hotel, Washington - Potomac Hotel Group, Washington - Quality Inn-Capitol Hill, Washington - Quality Inn-Downtown, Washington - Ramada Inn-Central, Washington - Ramada Renaissance Hotel, Washington - Ritz-Carlton, Washington - River Inn, Washington - Riverside Towers, Washington - Sheraton City Centre, Washington - Sheraton Grand Hotel, Washington - Shoreham Hotel, Washington - St. James, Washington - State Plaza, Washington - Statler Hilton Hotel, Washington - Washington Hilton, Washington - Washington Plaza, Washington - Watergate Hotel, Washington - Wyndham Bristol Hotel, Washington Florida - Holiday Inn, Altamonte Springs - La Quinta, Altamonte Springs - Turnberry Isle Resort, Aventura - Boca Raton Hotel and Club, Boca Raton - Boca West, Boca Raton - Deerfield Beach Hilton, Boca Raton - Embassy Suites, Boca Raton - Park Place Suite Hotel, Boca Raton - Petite Suites, Boca Raton - Residence Inn, Boca Raton - Days Inn, Brandenton - South Seas Resort, Captive Island - Days Inn, Clearwater - Days Inn-Proposed, Clearwater - Holiday Inn - Central/Clearwater, Clearwater - La Quinta Inn, Clearwater - Sheraton Sand Key Hotel, Clearwater - Holiday Inn - Gulfview South, Clearwater Beach - Holiday Inn - Surfside North, Clearwater Beach - Howard Johnson, Clermont - Econolodge, Cocoa Beach - Hilton Hotel, Cocoa Beach - Holiday Inn, Cocoa Beach - Howard Johnson, Cocoa Beach - Perkins Restaurant, Cocoa Beach - Coconut Grove Hotel, Coconut Grove - Mayfair House, Coconut Grove - Proposed Hampton Inn, Coconut Grove - Biltmore Hotel, Coral Gables - Holiday Inn, Coral Gables - Holiday Inn (Court), Coral Gables - Plantation Hotel, Crystal River - Sheraton Inn, Cypress Gardens - Budget Inn, Davenport - Daytona Beach Surfside Regency, Daytona Beach - Howard Johnson, Daytona Beach - La Quinta Inn, Daytona Beach - Pirates Cove, Daytona Beach - Sheraton Inn, Daytona Beach - Crown Sterling Suites, Deerfield Beach - Days Inn, Deerfield Beach - Hilton Hotel, Deerfield Beach - Horizon Club, Deerfield Beach - Sheraton Inn, Deland - Hilton Hotel, Disney World - Holiday Inn, Edgewater - Knights Inn, Florida City - AmeriSuites Hotel-Proposed, Fort Lauderdale - Bahia Mar Hotel, Fort Lauderdale - Comfort Suites, Fort Lauderdale - Compri Hotel-Proposed, Fort Lauderdale - Costa Del Sol, Fort Lauderdale - Crown Sterling Suites, Fort Lauderdale - Days Inn, Fort Lauderdale - Embassy Suites Hotel, Fort Lauderdale - Executive House, Fort Lauderdale - Hilton Hotel, Fort Lauderdale - Hilton Inverrary, Fort Lauderdale - Holiday Inn - Galleria, Fort Lauderdale - Holiday Inn - North Beach, Fort Lauderdale - Holiday Inn-Proposed, Fort Lauderdale - Marriott Harbor Beach Hotel, Fort Lauderdale - Marriott Hotel & Marina, Fort Lauderdale - Marriott Hotel-Cypress Road, Fort Lauderdale - Pier 66 Hotel and Marina, Fort Lauderdale - Port Everglades Hotel, Fort Lauderdale - Stouffer Hotel, Fort Lauderdale - Days Inn, Fort Meyers - Courtyard by Marriott, Fort Myers - Holiday Inn, Fort Myers - La Quinta Hotel, Fort Myers - Sheraton Harbor Place-Proposed, Fort Myers - Sheraton Motor Inn, Fort Myers - Proposed Hotel, Fort Myers Beach - American Way, Fort Pierce - Days Inn, Fort Walton Beach - Holiday Inn - Airport, Fort.Lauderdale - Days Inn-University Center, Gainesville - Fairfield Inn, Gainesville - Howard Johnson Lodge-I-75, Gainesville - La Quinta Hotel, Gainesville - University Centre Hotel, Gainesville - Holiday Inn, Hialeah - Motel, Hillsboro Beach - Days Inn, Hollywood - Diplomat Hotel, Hollywood - Holiday Inn, Hollywood - Quality Suites - Oceanside, Indiatlantic - Hilton Inn, Inverrary - Best Inn, Jacksonville - Bradbury Suites-Proposed, Jacksonville - Compri Hotel-Proposed, Jacksonville - Courtyard By Marriott, Jacksonville - Days Inn, Jacksonville - Doubletree Club Hotel, Jacksonville - Hampton Inn, Jacksonville - Hotel-Proposed, Jacksonville - Jacksonville Hotel, Jacksonville - Residence Inn, Jacksonville - Sheraton Hotel, Jacksonville - Wyndham Lakes Hotel, Jacksonville - Sheraton Beach Hotel, Jensen Beach - Howard Johnson, Juno Beach - Hilton Hotel, Jupiter - Key Biscayne, Key Biscayne - Howard Johnson Lodge, Key Largo - Casa Marina Marriott, Key West - Fairfield Inn, Key West - Hampton Inn-Roosevelt Rd., Key West - Holiday Inn, Key West - Hyatt Hotel, Key West - La Concha Holiday Inn, Key West - Pier House Inn and Beach Club, Key West - Reach Hotel, Key West - Santa Maria Hotel, Key West - Timeshare Resort, Key West - Best Western Vacation Lodge, Kissimmee - Days Inn, Kissimmee - Days Inn West, Kissimmee - Days Lodge, Kissimmee - Howard Johnson Plaza Hotel, Kissimmee - Howard Johnson's, Kissimmee - KOA Campground, Kissimmee - Old Town Retail Complex, Kissimmee - Quality Suites, Kissimmee - Quality Suites-Maingate, Kissimmee - Save Inn, Kissimmee - Sheraton Lakeside, Kissimmee - Suite Hotel-Proposed, Kissimmee - Wynfield Inn, Kissimmee - Days Inn, Lake Buena Vista - Embassy Suites-Proposed, Lake Buena Vista - Hilton Hotel-Disney World, Lake Buena Vista - Marriott Orlando World Center, Lake Buena Vista - Days Inn, Lake City - Flagship Inn, Lake County - Travelodge Motel, Lake County - Lake Park Inn, Lake Park - Holiday Inn, Lake Placid - Hampton Inn-Proposed, Lakeland - Hotel-Proposed, Lakeland - Howard Johnson, Lakeland - Resort Hotel-Proposed, Lakeland - Resort-Imperial Lake-Prpsd., Lakeland - Proposed Hotel, Lee County - Sonesta Sanibel Harbour, Lee County - Holiday Inn, Lido Beach - Holiday Inn, Longboat Kay - Holiday Inn - Madiera Beach, Madiera - Howard Johnson, Marathon - Radisson Suite Resort, Marco Island - Holiday Inn, Marianna - Oceanfront Hotel, Melbourne - Quality Suites, Melbourne - Bahia Mar Hotel & Yachting Club, Miami - Biscayne Bay Marriott, Miami - Courtyard by Marriott, Miami - Crown Sterling Suites, Miami - Doral Ocean Beach Resort, Miami - Fairfield Inn, Miami - Hilton Hotel-Proposed, Miami - Holiday Inn Civic Center, Miami - Holiday Inn-Airport (Le Juene Rd.), Miami - Holiday Inn-Calder, Miami - Howard Johnson Hotel-Broad Causeway, Miami - Howard Johnson Hotel-Port of Miami, Miami - Howard Johnson Lodge-Golden Glades, Miami - Howard Johnson Lodge-Int'l Airport, Miami - Hyatt Regency Hotel, Miami - Inter-Continental Hotel, Miami - Jockey Club, Miami - Marriott Hotel-Downtown, Miami - Miami Airport Ramada, Miami - Proposed AmeriSuites, Miami - Propsed Hampton Inn, Miami - Residence Inn-Proposed, Miami - Sheraton River House, Miami - Sofitel Miami, Miami - Alexander Hotel, Miami Beach - Art Deco Hotel, Miami Beach - Cresent Timeshare, Miami Beach - Delano Hotel, Miami Beach - Doral Beach Hotel, Miami Beach - Eden Roc Hotel, Miami Beach - Fontainebleu Hotel, Miami Beach - Holiday Inn, Miami Beach - Holiday Inn-Central, Miami Beach - Holiday Inn-North, Miami Beach - Holiday Inn-Oceanside, Miami Beach - Holiday Inn-South, Miami Beach - Hotel-Proposed, Miami Beach - Nautilus Club Hotel, Miami Beach - Palm Resort on the Ocean, Miami Beach - Pan American Radisson, Miami Beach - Proposed Hotel, Miami Beach - Shelborne Beach Hotel, Miami Beach - Sheraton Beach, Miami Beach - Solymar Hotel-Proposed, Miami Beach - Quality Inn, Naples - Quality Inn-Gulfcoast, Naples - Registry Hotel at Pelican Bay, Naples - Registry Resort-Proposed, Naples - Super 8 Motel-Proposed, Naples - World Tennis Resort, Naples - Hyatt Newporter Hotel, Newport Beach - Hilton Hotel, North Redington Beach - Masters Economy Inn, North Seffner - Amfac Hotel, Orlando - Army lodging-Proposed, Orlando - Comfort Suites Hotel, Orlando - Compri Hotel-Airport-Proposed, Orlando - Compri Hotel-Proposed, Orlando - Courtyard - Orlando Airport, Orlando - Days Inn, Orlando - Days Inn and Lodge-Florida Mall, Orlando - Days Inn Civic Center, Orlando - Days Inn East of Universal Studios, Orlando - Days Inn-E/O Magic Kingdom, Orlando - Days Inn-Proposed, Orlando - Days Inn-Sandlake Road, Orlando - Days Suites-E/O Magic Kingdom, Orlando - Dolphin Hotel-Proposed, Orlando - Dutch Inn, Orlando - Embassy Suites, Orlando - Fairfield Inn, Orlando - Fairfield Inn-Airport, Orlando - Grand Cypress Resort, Orlando - Hampton Inn - Proposed, Orlando - Heritage Inn, Orlando - Holiday Inn Central Park, Orlando - Holiday Inn Crowne Plaza, Orlando - Holiday Inn-Airport, Orlando - Holiday Inn-International Drive, Orlando - Holiday Inn-Lee Road, Orlando - Holiday Inn-Maingate West, Orlando - Holiday Inn-Orange Blossom Trail, Orlando - Howard Johnson - Walt Disney World, Orlando - Howard Johnson-Kirkman, Orlando - Howard Johnson-Lake Holden, Orlando - Howard Johnson-Maingate, Orlando - Hyatt Grand Cypress, Orlando - Hyatt Regency Grand Cypress, Orlando - Hyatt-W. Irlo Bronson Mem. Hwy., Orlando - International Inn, Orlando - Kon Tiki Village, Orlando - La Quinta Hotel-Airport, Orlando - La Quinta Inn, Orlando - Omni Orlando, Orlando - Orlando Airport Hotel-Proposed, Orlando - Orlando Hamiton, Orlando - Orlando Plaza Hotel, Orlando - Orlando Twin Towers Hotel, Orlando - Park Suite Hotel-Proposed, Orlando - Peabody Hotel, Orlando - Princess Hotel and Spa, Orlando - Proposed Wellesley Inn, Orlando - Quality Inn, Orlando - Radisson Hotel-Aquatic Center, Orlando - Regency Inn, Orlando - Residence Inn By Marriott, Orlando - Rodeway Inn, Orlando - Save Inn, Orlando - Sheraton Jetport Inn, Orlando - Sheraton Lakeside, Orlando - Sheraton Twin Towers, Orlando - Sonesta Village Resort, Orlando - Stouffer Orlando Resort, Orlando - Swan Hotel-Proposed, Orlando - Thriftway Motel, Orlando - Wynfield Inn, Orlando - American Way, Osceola - Sheraton Gateway Motel, Osceola - Brazilian Court Hotel, Palm Beach - Heart of Palm Beach Hotel, Palm Beach - Hilton Inn, Palm Beach - Palm Court, Palm Beach - Holiday Inn, Palm Beach Garden - Days Inn, Panama City - Marriott's Bay Point, Panama City - Super 8, Panama City - Days Inn, Pensacola - Hilton Hotel, Pensacola - La Quinta Hotel, Pensacola - Residence Inn, Pensacola - Super 8, Pensacola - Proposed Hampton Inn, Pensacola Beach - Comfort Inn, Perdido Key - La Quinta, Pinellas County - Courtyard by Marriott, Plantation - Holiday Inn Plantation, Plantation - Sheraton Suites, Plantation - Days Inn, Pompano Beach - Palm-Aire Spa Resort, Pompano Beach - Lodge & Bath Club, Ponte Verde - Howard Johnson, Punta Gorda - Days Inn, Riviera Beach - Safety Harbor Spa, Safety Harbor - Holiday Inn, Saint Augustine - Howard Johnson, Saint Augustine - Courtyard by Marriott, Saint Petersburg - Don Ceahsar Beach Resort, Saint Petersburg - Hilton Hotel, Saint Petersburg - Howard Johnson, Saint Petersburg - Ramada Inn, Saint Petersburg - Residence Inn, Saint Petersburg - Saint Petersburg Motel, Saint Petersburg - Sheraton Hotel and Marina, Saint Petersburg - Vinoy Park Hotel, Saint Petersburg - Countryside Inn, Sanford - Days Inn, Sanford - Holiday Inn, Sanford - Azure Tides Resort-Proposed, Sarasota - Days Inn, Sarasota - Holiday Inn-Lido Beach, Sarasota - Proposed Hotel, Sarasota - Holiday Inn, Sebring - Embassy Suites, Singer Island - Hilton, Singer Island - Econo Lodge, Starke - Radisson Pan American Hotel, Sunny Isles - Best Inn, Tallahassee - Courtyard by Marriott, Tallahassee - Days Inn-Tallahassee, Tallahassee - American Way, Tampa - Courtyard by Marriott, Tampa - Days Inn, Tampa - Embassy Suites-Airport, Tampa - Hampton Inn-Airport, Tampa - Hilton-Airport, Tampa - Holiday Inn, Tampa - Holiday Inn Sahal Park, Tampa - Holiday Inn-Airport, Tampa - Manger Motor Inn, Tampa - Marriott Hotel, Tampa - Omni Tampa Hotel at Westshore, Tampa - Ramada Inn, Tampa - Rodeway Inn, Tampa - Saddlebrook Resort, Tampa - Sheraton Grand West, Tampa - Master Economy Inn, Tampa-East(Selfner) - Master Economy Inn, Tampa-North(Zephyrhills) - Days Inn, Vero Beach - Holiday Inn-Countryside, Vero Beach - Holiday Inn-Oceanside, Vero Beach - Saddlebrook Resort, Wesley Chapel - Courtyard by Marriott, West Melbourne - Airport Centre, West Palm Beach - Courtyard by Marriott, West Palm Beach - Days Inn, West Palm Beach - Field Palm Hotel, West Palm Beach - Hilton-Airport, West Palm Beach - Howard Johnson Lodge, West Palm Beach - Hyatt Hotel of the Palm Beaches, West Palm Beach - Royce Hotel, West Palm Beach - Masters Economy Inn, Zephyrhills Georgia - Atlanta Radisson Hotel, Atlanta - Atlanta Terrace Motel, Atlanta - Comfort Inn, Atlanta - Compri Hotel, Atlanta - Courtyard By Marriott-Airport North, Atlanta - Courtyard by Marriott-Airport South, Atlanta - Courtyard by Marriott-Cumberland, Atlanta - Courtyard by Marriott-Executive Pk., Atlanta - Courtyard by Marriott-Gwinnett, Atlanta - Courtyard by Marriott-Jimmy Carter, Atlanta - Courtyard by Marriott-PeachtrDunwdy, Atlanta - Courtyard by Marriott-Perimeter, Atlanta - Courtyard by Marriott-Rosewell, Atlanta - Courtyard by Marriott-Windy Hill, Atlanta - Cresthil Inn-Proposed, Atlanta - Days Inn, Atlanta - Days Inn - Northlake, Atlanta - Doubletree Hotel, Atlanta - Embassy Suites-Atlanta Perimeter, Atlanta - Embassy Suites-Buckhead, Atlanta - Embassy Suites-Galleria, Atlanta - F.W.W. Hotel, Atlanta - Fairfield Inn-Airport, Atlanta - Fairfield Inn-Gwinnett, Atlanta - Fairfield Inn-North Lake, Atlanta - Fairfield Inn-Northwest, Atlanta - Fairfield Inn-Peachtree, Atlanta - Fairfield Inn-South Lake, Atlanta - Hampton Inn-Airport, Atlanta - Hilton Inn, Atlanta - Holiday Inn Crowne Plaza, Atlanta - Holiday Inn-I-20 East, Atlanta - Holiday Inn-I-85 Monroe Drive, Atlanta - Holiday Inn-Perimeter Dunwooody, Atlanta - Hotel-Downtown-Proposed, Atlanta - Hotel-Proposed, Atlanta - Howard Johnson Hotel-Hartsfield, Atlanta - Howard Johnson-Airport, Atlanta - Howard Johnson-Northeast, Atlanta - Howard Johnson-Northwest, Atlanta - Howard Johnson-South, Atlanta - Hyatt Atlanta-Airport, Atlanta - La Quinta - Stone Mountain, Atlanta - La Quinta Hotel, Atlanta - La Quinta Hotel-West, Atlanta - Marriott Atlanta Airport, Atlanta - Marriott Hotel, Atlanta - Marriott Hotel-Downtown, Atlanta - Marriott Marquis, Atlanta - Marriott Suites Hotel-Proposed, Atlanta - Marriott-Perimeter, Atlanta - Master Economy Inn, Atlanta - Motel 6, Atlanta - Neighborhood Inn, Atlanta - Omni International Hotel, Atlanta - Perimeter North Inn, Atlanta - Proposed AmeriSuites, Atlanta - Quality Inn-Central, Atlanta - Radisson Inn, Atlanta - Ramada Inn-Perimeter, Atlanta - Residence Inn by Marriott-Dunwoody, Atlanta - Residence Inn-Airport, Atlanta - Residence Inn-Buckhead, Atlanta - Residence Inn-Northwest, Atlanta - Sheraton Century Center, Atlanta - Sheraton-Airport, Atlanta - Sporting Club at the Concourse, Atlanta - Stouffer Hotel-Proposed, Atlanta - Swissotel, Atlanta - Terrace Motel, Atlanta - Waverly Hotel, Atlanta - Westin Lenox Hotel, Atlanta - Westin Peachtree Plaza, Atlanta - Wyndham Garden Hotel, Atlanta - Hyatt Hotel, Atlanta Airport - Hampton Inn, Atlanta-Buckhead - Courtyard by Marriott, Augusta - Landmark Hotel, Augusta - Masters Economy Inn - Gordon Hwy., Augusta - Masters Economy Inn - Warner Robins, Augusta - Masters Economy Inn - Washington Rd, Augusta - Holiday Inn, Brunswick - Super 8, Brunswick - Days Inn, Calhoun - Super 8, Cartersville - Days Inn, Chamblee - Comfort Inn-Proposed, College Park - Holiday Inn Crowne Plaza, College Park - Courtyard by Marriott, Columbus - La Quinta Inn, Columbus - Super 8, Columbus - Best Inn, Dalton - Days Inn, Dalton - Holiday Inn-Proposed, Decatur - Sheraton Hotel, Decatur - Best Western-Perimeter-North, Doraville - Days Inn - Gwinnett, Duluth - Howard Johnson, Forsyth - Holiday Inn-Proposed, Gwinnett County - Holiday Inn, Jekyll Island - Jekyll Island Inn-Proposed, Jekyll Island - Hilton Hotel, Macon - Master Economy Inn, Macon - Best Inn, Marietta - Courtyard by Marriott-Delk Road, Marietta - Lafayette Hotel, Marietta - Hampton Inn, Marrietta (Atlanta) - Master Economy Inn, McDonough - Courtyard by Marriott-Perimeter, Norcross - Motel 6, Norcross - Hilton Hotel, Peachtree Corners - Super 8, Rome - Best Western, Savannah - Courtyard by Marriott, Savannah - Days Inn, Savannah - Days Inn-Bay Street, Savannah - Days Inn-Mall Blvd., Savannah - Fairfield Inn, Savannah - Hotel-Proposed, Savannah - Mulberry Inn, Savannah - Radisson Hotel-Proposed, Savannah - Royal Savannah, Savannah - Sheraton Savannah Resort & C.C., Savannah - Town and Country Motel, Savannah - Days Inn, Savannah Beach - Howard Johnson, Smyrna - Master Economy Inn, Tilton - Courtyard by Marriott-Northlake, Tucker - Master Economy Inn, Warner Robins - Super 8, Warner Robins Hawaii - Hyatt Regency Waikoloa, Hawaii - Mauna Kea Hotel, Hawaii - Kahala Hilton, Honolulu - Plaza Hotel, Honolulu - Waikiki Beachcomber, Honolulu - Waikiki Hobron, Honolulu - Coco Palms Resort, Kauai - Kauai Surf Hotel, Kauai - Westin Kauai-Kauai Lagoons Resort, Kauai - Westin Kauai-Proposed, Kauai - Kona Village, Kona - Royal Sea Cliff Resort, Kona - Westin Kauai at Kauai Lagoon, Lihue - Hyatt Regency, Maui - Marriott Resort, Maui - Maui Lu Hotel, Maui - Maui Surf Hotel, Maui - Westin Maui, Maui - Hawaiian Regent Hotel-Waikiki Beach, Oahu - Hotel-Proposed-Schofield Barracks, Oahu - Hyatt Regency Waikiki, Oahu - Kiahuna Plantation, Poipu Beach, Kauai - Transient Lodging Facilities, Schofield Barracks - Hilton Hawaiian Village, Waikiki - Grand Hyatt Wailea, Wailea Idaho - Compri Hotel, Boise - Holiday Inn, Boise - Holiday Inn-Airport, Boise - Red Lion Inn, Boise - Super 8, Boise - Motel 6, Coeur d'Alene - Super 8, Coeur d'Alene - Proposed Motel, Coure d'Alene - Super 8, Lewiston - Cotton Tree Inn, Pocatello - Super 8, Sand Point - Busterback Ranch, Sawtooth Valley Illinois - Arlington Park Hilton, Arlington Heights - Church Creek, Arlington Heights - Courtyard by Marriott, Arlington Heights - La Quinta Hotel, Arlington Heights - Hampton Inn-Proposed, Bedford Park - Best Inn, Bloomington - Fairfield Inn-Normal, Bloomington - Holiday Inn, Bloomington - Indian Lakes Resort, Bloomington - Ramada Inn, Bloomington - Super 8, Bloomington - Cresthil-Proposed, Buffalo Grove - Holiday Inn, Champaign - La Quinta Inn, Champaign - Radisson Suites - Champaign, Champaign - Suite Hotel-Proposed, Champaign - Super 8, Champaign - Ambassador West Hotel, Chicago - Americana Congress, Chicago - Conrad Hilton Hotel, Chicago - Courtyard by Marriott-Glenview, Chicago - Courtyard by Marriott-Highland, Chicago - Courtyard by Marriott-Lincoln, Chicago - Courtyard by Marriott-O'Hare, Chicago - Courtyard by Marriott-Waukegan, Chicago - Courtyard by Marriott-Woodale, Chicago - Days Inn, Chicago - Executive House, Chicago - Fairfield Inn-Lansing, Chicago - Fairfield Inn-Willowbrook, Chicago - Fairmont Hotel, Chicago - Guest Quarters Hotel, Chicago - Hilton and Towers, Chicago - Hilton-O'Hare, Chicago - Holiday Inn-Merchandise Mart, Chicago - Howard Johnson-O'Hare Int'l Airport, Chicago - Hyatt Regency, Chicago - Hyatt Suites Hotel, Chicago - Inter-Continental Hotel-Proposed, Chicago - La Quinta Inn - Hoffman Est., Chicago - Le Meridien, Chicago - Lenox House, Chicago - Lincoln Hotel, Chicago - Mark Twain Hotel, Chicago - Marriott-O'Hare, Chicago - Mayfair Regent, Chicago - McClurg Holiday Inn, Chicago - McCormick Inn Hotel, Chicago - Morton Hotel, Chicago - Omni Ambassador East, Chicago - Omni Morton Hotel, Chicago - Palmer House Hotel, Chicago - Ramada Inn - Lakeshore, Chicago - Ramada O'Hare, Chicago - Residence Inn-Deerfield, Chicago - Residence Inn-Lombard, Chicago - Sheraton Hotel-Downtown, Chicago - Sheraton Hotel-Proposed, Chicago - Sheraton O'Hare, Chicago - Sheraton Plaza Hotel, Chicago - Summerfield Suites Hotel, Chicago - Swissotel, Chicago - Tremont Hotel, Chicago - Westin Hotel, Chicago - Whitehall Hotel, Chicago - Hilton Hotel, Collinsville - Holiday Inn, Collinsville - Super 8, Columbus - Super 8, Crystal Lake - Super 8, Decatur - Courtyard by Marriott, Deerfield - Embassy Suites, Deerfield - Marriott Suites Hotel, Deerfield - Holiday Inn-Chicago, Des Plaines - Hotel-Proposed, Des Plaines - Compri Hotel-Proposed, Downers Grove - Radisson Suite Hotel, Downers Grove - Best Inn, Effingham - Ramada Inn, Elgin - Hampton Inn, Elk Grove Village - Marriott Suites, Elk Grove Village - Holiday Inn, Elmhurst - Orrington Hotel, Evanston - Drury Inn, Fairview Heights - Conference Center & Resort-Proposed, Fox Lake - Holiday Inn, Freeport - Hotel-Proposed, Gurnee - La Quinta Hotel, Hoffman Estates - Carson Inn, Itasca - Hamilton Wyndham, Itasca - Nordic Hills, Itasca - Holiday Inn, Joliet - Proposed Harrah's Riverboat, Joliet - Days Inn, Kankakee - Holiday Inn, LaSalle - Marriott Hotel, Lincolnshire - Hilton Inn, Lisle - Holiday Inn Crowne Plaza, Lisle - Embassy Suites, Lombard - Holiday Inn, Macomb - Best Inn, Marion - Best Inn, Mount Vernon - Holiday Inn, Mount Vernon - Ramada Inn, Mount Vernon - Courtyard by Marriott, Naperville - Ramada Inn, Naperville - Sheraton Naperville, Naperville - O'Hareport Hotel, Northlake - Courtyard by Marriott, Oakbrook Terrace - Super 8, Okawville - Fairfield Inn, Peoria - Days Inn, Peru - Super 8, Peru - Courtyard by Marriott, Rockford - Fairfield Inn, Rockford - Hampton Inn, Rockford - Embassy Suites, Rosemont - Quality Inn/Clarion, Rosemont - Sheraton Int'l At O'Hare, Rosemont - Holiday Inn, Salem - Compri Hotel, Schaumburg - Embassy Suites, Schaumburg - Marriott Schaumburg, Schaumburg - Holiday Inn, South Beloit - Ramada Renaissance Hotel, Springfield - Sheraton Inn, Springfield - Super 8-East, Springfield - Super 8-South, Springfield - Jumer's Castle, Urbana - Best Inn, Waukegan - Super 8, Waukegan Indiana - Clarion Fourwinds Inn, Bloomington - Holiday Inn, Bloomington - Inn at the Four Winds, Bloomington - Ramada Inn, Bloomington - Harbor Point Resort, Brookville Lake - Super 8, Columbus - Best Inn, Fort Wayne - Hilton, Fort Wayne - Downtown Hotel, Gary - Sheraton, Gary - Holiday Inn, Goshen - Howard Johnson, Hammond - Quality Inn, Hammond - Courtyard by Marriott-Airport, Indianapolis - Courtyard by Marriott-Carmel, Indianapolis - Courtyard by Marriott-Castleton, Indianapolis - Embassy Suites-Claypool Center, Indianapolis - Fairfield Inn-Castleton, Indianapolis - Fairfield Inn-College Park, Indianapolis - Hampton Inn-Proposed, Indianapolis - Hilton Hotel-Airport, Indianapolis - Hilton Inn-Downtown, Indianapolis - Holiday Inn-South, Indianapolis - Holiday Inn-Southeast, Indianapolis - Knights Inn, Indianapolis - Midway Motor Lodge, Indianapolis - Mohawk Inn, Indianapolis - Motel 6, Indianapolis - Proposed Fairfield Inn, Indianapolis - Proposed Residence Inn, Indianapolis - Radisson, Indianapolis - Ramada-Airport, Indianapolis - Wyndham Garden Hotel, Indianapolis - La Quinta Inn, Indianapolis Airport - Hilton Inn, Jeffersonville - Holiday Inn, La Porte - Days Inn, Lafayette - Holiday Inn, Lafayette - Cotton Mill Inn-Proposed, Madison - Hampton Inn, Merrillville - Holiday Inn Express, Merrillville - La Quinta Inn, Merrillville - Hotel Roberts, Muncie - Radisson Hotel, Muncie - Brown County Inn, Nashville - Holiday Inn, Portage - Knights Inn, Richmond - Holiday Inn, South Bend - Howard Johnson, South Bend - Signature Inn, Terre Haute - Super 8, Terre Haute - Courtyard Conversion, Valparaiso - Holiday Inn, Vincennes Iowa - Holiday Inn-Gateway Center, Ames - Holiday Inn, Cedar Falls - Collins Plaza, Cedar Rapids - Holiday Inn, Cedar Rapids - Roosevelt Hotel, Cedar Rapids - Super 8, Davenport - Courtyard by Marriott, Des Moines - Fairfield Inn, Des Moines - Holiday Inn, Des Moines - Holiday Inn - West, Des Moines - Holiday Inn-Downtown, Des Moines - Holiday Inn-North, Des Moines - Ramada Inn, Des Moines - Super 8-North, Des Moines - Super 8-West, Des Moines - Holiday Inn, Iowa City Kansas - Embassy Suites, Kansas City - Fairfield Inn-Overland Park, Kansas City - Holiday Inn-Mission Overland Park, Kansas City - Fairfield Inn, Kansas City West - Holiday Inn, Lawrence - University Inn, Lawrence - Holiday Inn, Manhattan - Courtyard by Marriott, Overland Park - Hampton Inn-Proposed, Overland Park - Marriott Hotel, Overland Park - Park Inn International, Topeka - Super 8, Topeka - Canterbury Inn, Wichita - Former Sheraton Hotel, Wichita - Hilton-East, Wichita - Marriott Hotel, Wichita - Comfort Inn, Winfield Kentucky - Conference Center-Proposed, Boone County - Howard Johnson, Bowling Green - Brown County Inn, Brown County - Holiday Inn, Corbin - Hotel-Proposed, Covington - Thomas More Centre, Crestville Hill - Comfort Inn, Elizabethtown - Signature Inn, Elkhart - Holiday Inn, Florence - Signature Inn, Florence - Drawbridge Inn, Fort Mitchell - Days Inn, Georgetown - Days Inn, Henderson - Holiday Inn, Henderson - Bluegrass Motor Inn, Lexington - Courtyard by Marriott, Lexington - Holiday Inn, Lexington - Holiday Inn-East, Lexington - Holiday Inn-North, Lexington - Hyatt Hotel, Lexington - Knights Inn, Lexington - Super 8-Proposed, London - Brown Hotel, Louisville - Courtyard by Marriott-East, Louisville - Holiday Inn, Louisville - Holiday Inn South, Louisville - Holiday Inn-Central, Louisville - Holiday Inn-Northeast, Louisville - Ramada Inn, Louisville - Ramada Inn-East, Louisville - Signature Inn, Louisville - Days Inn, Madisonville - Executive Inn, Owensboro - Super 8-Proposed, Radcliff - Holiday Inn, Richmond Louisiana - Howard Johnson, Alexandria - Capital House, Baton Rouge - Convention Center Hotel-Proposed, Baton Rouge - Courtyard by Marriott, Baton Rouge - Crown Sterling Suites, Baton Rouge - Embassy Suites, Baton Rouge - Hilton Hotel, Baton Rouge - Holiday Inn-East, Baton Rouge - Holiday Inn-South, Baton Rouge - Holiday Inn-West, Baton Rouge - La Quinta Inn, Baton Rouge - Prince Murat Hotel, Baton Rouge - Proposed Homewood Suites, Baton Rouge - Quality Inn, Bossier City - Ramada Inn, Hammond - Ramada Inn, Houma - Holiday Inn - New Orleans, Kenner - Sheraton, Kenner - Hilton Hotel, Lafayette - La Quinta Hotel, Lafayette - Gateway Hotel, Metairie - Howard Johnson-Airport, Metairie - Canal Street Hotels L.P., New Orleans - Clarion Hotel, New Orleans - Days Inn, New Orleans - Fairmont Roosevelt Hotel, New Orleans - Hampton Inn-Proposed, New Orleans - Holiday Inn Crowne Plaza, New Orleans - Hostellerie de la Poste, New Orleans - Hotel Meridien, New Orleans - Hyatt Regency, New Orleans - Iberville Hotel, New Orleans - Inter-Continental Hotel, New Orleans - La Quinta Inn, New Orleans - Landmark Bourbon, New Orleans - Le Meridien New Orleans, New Orleans - Maison Dupuy, New Orleans - Marriott Hotel, New Orleans - Omni Royal Orleans, New Orleans - Ramada Inn, New Orleans - Saint Louis Hotel, New Orleans - St. Ann/Marie Antoinette, New Orleans - Warwick, New Orleans - Westin Hotel, New Orleans - Residence Inn, Shreveport - Super 8, Shreveport Maine - Hilton Inn, Bangor - Ramada Inn, Bangor - Residence Inn by Marriott-Proposed, Bangor - Inn By The Sea, Cape Elizabeth - Hotel-Proposed, Orchard Beach - Hotel-Proposed, Portland - Portland Regency, Portland - Ramada Inn, Portland - Sheraton Tara Portland, Portland - Susse Chalet, Portland - Susse Chalet, Portland (In-town) - Keddy's Motor Inn of Maine, Presque Isle - Hampton Inn, South Portland - Sheraton Inn, South Portland Maryland - Budget Hotel-Proposed, Aberdeen - Chesapeake House, Aberdeen - Holiday Inn, Aberdeen - Motel-Proposed, Aberdeen - Annapolis Hotel, Annapolis - Courtyard by Marriott-Riva Road, Annapolis - Governor Calvert House, Annapolis - Historic Inns of Annapolis, Annapolis - Hotel-Proposed, Annapolis - Howard Johnson, Annapolis - Marriott Hotel, Annapolis - Maryland Inn, Annapolis - Quality Royale Hotel, Annapolis - Ramada Hotel, Annapolis - Robert Johnson House, Annapolis - Brookshire Hotel, Baltimore - Courtyard by Marriott-BWI Airport, Baltimore - Days Inn, Baltimore - Harbor Court Hotel, Baltimore - Harrison's at Pier 5, Baltimore - Hilton Hotel, Baltimore - Holiday Inn-Belmont Blvd., Baltimore - Holiday Inn-Cromwell Bridge, Baltimore - Holiday Inn-Glen Burnie, Baltimore - Holiday Inn-Inner Harbor, Baltimore - Holiday Inn-Int'l Airport, Baltimore - Holiday Inn-Moravia Road, Baltimore - Holiday Inn-Pikesville, Baltimore - Holiday Inn-South Glen Burnie, Baltimore - Hotel-Proposed, Baltimore - Howard Johnson-Proposed, Baltimore - Johns Hopkins Hotel-Proposed, Baltimore - Lord Baltimore Hotel, Baltimore - Omni International Hotel, Baltimore - Ramada Inn-I-695 West, Baltimore - Susse Chalet, Baltimore - Susse Chalet Inn-BWI Airport, Baltimore - Susse Chalet Inn-Golden Ring, Baltimore - Bethesda Metro Center, Bethesda - Guest Quarters, Bethesda - Hyatt Regency Hotel, Bethesda - Linden Hill Hotel, Bethesda - Omni Linden Hotel, Bethesda - Residence Inn, Bethesda - Bethseda Metro Center, Bethseda - Guest Quarters, Bethseda - Residence Inn - Proposed, Bethseda - Comfort Suites-Proposed, Bowie - Days Inn, Capital Heights - Residence Inn, Cockneysville - Abbey, College Park - Best Western Maryland, College Park - Holiday Inn, College Park - Sheraton Inn, Dorsey - Days Inn, Easton - Mariner Inn, Easton - Holiday Inn, Frederick - Compri Hotel, Gaithersburg - Marriott Hotel, Gaithersburg - Century XXI Resort, Germantown - Comfort Inn, Germantown - Hampton Inn, Glen Burnie - Residence Inn-Proposed, Greenbelt - Courtyard by Marriott, Hunt Valley - Hunt Valley Embassy Suites, Hunt Valley - Hunt Valley Marriott, Hunt Valley - Susse Chalet Inn, Jessup - Courtyard by Marriott, Landover - Quality Inn-Proposed, Landover - Days Inn, Lanham - Best Western Maryland, Laurel - Days Inn, Laurel - Holiday Inn, Laurel - Susse Chalet, Linthicum - Howard Johnson Plaza Hotel, New Carrollton - Carousel Hotel, Ocean City - Days Inn, Ocean City - Susse Chalet, Oxon Hill - Hotel-Proposed, Prince Georges County - Budget Hotel-Proposed, Rockville - Comfort Inn, Rockville - Courtyard by Marriott, Rockville - Days Inn-Congressional Park, Rockville - Holiday Inn Crowne Plaza, Rockville - Quality Inn-Proposed, Rockville - Ramada Inn, Rockville - Salisbury Hotel, Salisbury - Sheraton Hotel, Salisbury - Courtyard by Marriott, Silver Spring - Quality Inn-Proposed, Silver Spring - Comfort Inn-Proposed, Solomons Island - Holiday Inn, Towson - Quality Inn-Proposed, Westminster Massachusetts - Susse Chalet, Amsbury - Courtyard by Marriott, Andover - Marriott Hotel, Andover - Stouffer Bedford Glen Hotel, Bedford - Anthony's Pier Four, Boston - Battery Wharf Hotel-Proposed, Boston - Boston Harbor Hotel, Boston - Boston World Trade Center, Boston - Bostonian Hotel, Boston - Colonnade Hotel, Boston - Commonwealth Center Hotel, Boston - Compri Hotel-Proposed, Boston - Copley Plaza Hotel, Boston - Courtyard by Marriott-Foxborough, Boston - Econo Lodge-Proposed, Boston - Harborside Conf. Center-Proposed, Boston - Hilton-Back Bay, Boston - Hilton-Logan, Boston - Holiday Inn-Government Center, Boston - Hotel - Proposed, Boston - Hyatt Fan Pier-Proposed, Boston - Hyatt Harborside-Proposed, Boston - Lafayette Hotel, Boston - Lenox Hotel, Boston - Marriott Copley Place, Boston - Meridien Hotel, Boston - Omni Parker House, Boston - Residence Inn, Boston - Ritz-Carlton, Boston - Statler Hilton Hotel, Boston - Tremont House Hotel, Boston - World Trade Center Hotel - Proposed, Boston - Marriott Hotel, Boston/Newton - Sheraton Tara Hotel, Braintree - Ocean Edge Inn & Conference Center, Brewster - Holiday Inn, Brookline - Days Inn, Burlington - Charles Hotel, Cambridge - Hyatt Hotel, Cambridge - Royal Sonesta Hotel, Cambridge - The Charles Hotel, Cambridge - Chatham Bars Inn, Chatham - Chelmsford Radisson Hotel, Chelmsford - Best Western Motor Lodge, Chicopee - Cummington Farm Resort-Proposed, Cummington - Appleton Inn, Danvers - Howard Johnson Hotel, Danvers - Radisson Ferncroft Hotel, Danvers - Residence Inn - Proposed, Danvers - Dedham Comfort Inn, Dedham - Holiday Inn, Dedham - Wequassett Inn, East Harwich - Harbor View Hotel, Edgartown - Kelley House, Edgartown - Airport Inn, Fall River - Sea Crest Hotel, Falmouth - Sheraton Inn, Falmouth - Radisson Hotel, Ferncroft - Sheraton Tara Hotel, Framingham - Hotel-Proposed, Franklin - Hotel-Proposed, Haverhill - Susse Chalet, Holyoke - Dunfey Hyannis Hotel, Hyannis - Heritage House Hotel, Hyannis - Holiday Inn, Hyannis - Sheraton Regal Inn, Hyannis - Tara Hyannis, Hyannis - Canyon Ranch-Berkshires, Lenox - Cranwell Hotel and Conference Ctr., Lenox - Spa/Resort-Proposed, Lenox - Holiday Inn, Leominster - Lexington Sheraton, Lexington - Residence Inn-Proposed, Littleton - Appleton Inn, Lowell - Hilton Hotel, Lowell - Town House Motor Inn, Lowell - Holiday Inn, Marlboro - Susse Chalet, Middleboro - Sheraton Milford Hotel, Milford - Holiday Inn, Natick - Skipper's Inn, New Bedford - Days Inn, Newton - Howard Johnson, Newton - Marriott Hotel, Newton - Sheraton - Wayfarer, Newton - Sheraton Tara, Newton - Susse Chalet, Newton - North Adams Inn, North Adams - Hilton Inn, Northampton - Hotel Northampton, Northampton - Factory Mutual Hotel, Norwood - University Inn, Oxford - Holiday Inn, Peabody - Berkshire Commons Hotel, Pittsfield - Hotel-Proposed, Plymouth - Hawthorne Hotel, Salem - Days Inn, Saugus - Susse Chalet, Seekonk - Howard Johnson, Somerset - Somerset Omni, Somerset - Federal House Inn, South Lee - Holiday Inn, Springfield - Howard Johnson, Springfield - Monarch Place, Springfield - Treadway Inn, Springfield - Publick House, Sturbridge - Sheraton, Sturbridge - Regency Inn of Taunton, Taunton - Holiday Inn, Tewksbury - Susse Chalet, Tewksbury - Susse Chalet, Waltham - Vista Waltham House, Waltham - Hampton Inn, West Springfield - Westford Regency Hotel, Westford - The Westminster Village Inn, Westminster - The Orchards, Williamstown - Treadway Inn, Williamstown - Days Inn, Woburn - Howard Johnson, Woburn - Radisson Hotel, Woburn - Ramada Inn, Woburn - Susse Chalet, Woburn - Marriott Hotel, Worcester - Alladin Motor Inn, Yarmouth - Flagship Motor Inn, Yarmouth - Gull Wing Suites Hotel, Yarmouth Michigan - Motel-Proposed, Adrian - Ramada Inn, Allen Park - Holiday Inn-Alpena, Alpena - Compri Hotel-Proposed, Ann Arbor - Hampton Inn-North, Ann Arbor - Hampton Inn-South, Ann Arbor - Hilton Hotel, Ann Arbor - Holiday Inn-East, Ann Arbor - Holiday Inn-West, Ann Arbor - Residence Inn, Ann Arbor - Sheraton Hotel, Ann Arbor - AmeriSuites Hotel-Proposed, Auburn Hills - Holiday Inn, Auburn Hills - Knights Inn, Battle Creek - Super 8, Battle Creek - Bay Valley Inn, Bay City - Howard Johnson, Belleville - Fairfield Inn-Airport, Charlotte - Courtyard by Marriott, Dearborn - Courtyard by Marriott-Airport, Detroit - Courtyard by Marriott-Auburn Hills, Detroit - Courtyard by Marriott-Livonia, Detroit - Days Inn, Detroit - Downtown Hotel-Proposed, Detroit - Fairfield Inn-Airport, Detroit - Fairfield Inn-Auburn Hills, Detroit - Fairfield Inn-Warren, Detroit - Fairfield Inn-West, Detroit - Golden Harp, Detroit - Hampton Inn, Detroit - Hilton-Airport, Detroit - Hilton-North Field, Detroit - Holiday Inn, Detroit - Holiday Inn-Metro Airport, Detroit - Hotel Pontchartrain, Detroit - Omni Detroit, Detroit - Westin Hotel Renaissance Center, Detroit - Holiday Inn, East Lansing - Holiday Inn-Proposed, East Lansing - Knights Inn, Flint - Amway Hotel, Grand Rapids - Holiday Inn, Grand Rapids - Grand Traverse Resort, Grand Traverse Village - Holiday Inn, Howell - Jackson Hotel, Jackson - Fairfield Inn, Kalamazoo - Hilton-Kalamazoo Center, Kalamazoo - Holiday Inn, Kalamazoo - Radison Plaza Hotel, Kalamazoo - Residence Inn, Kalamazoo - Super 8, Kalamazoo - Embassy Suites-Proposed, Lansing - Holiday Inn, Lansing - Motel 6, Lansing - Quality Suites Hotel, Lansing - Compri Hotel-Proposed, Livonia - Embassy Suites, Livonia - Embassy Suites-Proposed, Livonia - Holiday Inn, Livonia - Marriott Hotel, Livonia - Fairfield Inn, Madison Heights - Residence Inn, Madison Heights - Holiday Inn, Marquette - Knights Inn, Monroe - Comfort Inn-Proposed, Mount Clemens - Holiday Inn, Muskegan - Super 8, Muskegon - Hilton Hotel, Novi - Holiday Inn-Petoskey, Petoskey - Mayflower Hotel, Plymouth - Inn at the Bridge, Port Huron - Radisson Hotel, Romulus - Holiday Inn-East, Saginaw - Super 8, Saginaw - Courtyard by Marriott, Southfield - Embassy Suites, Southfield - Hilton Hotel, Southfield - Marriott Hotel, Southfield - Ramada Inn, Southfield - Residence Inn, Southfield - The Garden Inn, Southfield - Comfort Suites-Proposed, Sterling Heights - Holiday Inn, Sturgis - Grand Traverse Resort, Traverse City - Hampton Inn, Traverse City - Park Place Hotel, Traverse City - Courtyard by Marriott, Troy - Holiday Inn, Troy - Marriott, Troy - Residence Inn, Troy - Courtyard by Marriott, Warren - Days Inn, Warren - Holiday Inn, Warren - Motel 6, Warren - Residence Inn, Warren - Van Dyke Hotel & Conference Center, Warren - Bob Evans Restaurant, Wyoming - Super 8, Wyoming - Radisson Resort-Conference Center, Ypsilanti Minnesota - Embassy Suites, Bloomington - Hilton Airport Hotel, Bloomington - Hilton Hotel, Bloomington - Howard Johnson Lodge, Bloomington - Marriott Hotel, Bloomington - Ramada Inn, Bloomington - Days Inn - Minneapolis, Brooklyn Center - Residence Inn, Eagan - Compri Hotel-Proposed, Minneapolis - Courtyard by Marriott-Eden Prairie, Minneapolis - Courtyard by Marriott-Mendota, Minneapolis - Days Inn, Minneapolis - Dyckman Hotel, Minneapolis - Hilton Inn, Minneapolis - Holiday Inn-Downtown, Minneapolis - Hotel-Proposed, Minneapolis - Luxeford Hotel, Minneapolis - Marquette, Minneapolis - Marriott City Center Hotel, Minneapolis - Marriott-Minnetonka, Minneapolis - Motel 6, Minneapolis - Omni-Northstar, Minneapolis - Radisson Hotel, Minneapolis - Ramada Inn, Minneapolis - Sheraton Minneapolis, Minneapolis - Sofitel, Minneapolis - Motel-Proposed, Montevideo - Days Inn, Plymouth - Hotel-Proposed, Rochester - Howard Johnson, Rochester - Motel 6, Rochester - Radisson Hotel, Rochester - Days Inn, Roseville - Holiday Inn, Saint Paul - Holiday Inn-Town Square, Saint Paul - Hotel-Proposed, Saint Paul - Inn and Expo Center, Saint Paul - World Trade Hotel, Saint Paul - Wayzata Conference Center, Wayzata Mississippi - Howard Johnson, Biloxi - Holiday Inn, Greenwood - Motel 6, Hattlesburg - Hampton Inn, Jackson - Howard Johnson, Jackson - Ramada Inn-Proposed, Jackson - Residence Inn, Jackson - Cabot Lodge, Ridgeland - Holiday Inn, Vicksburg Missouri - Ramada Inn, Columbia - Howard Johnson-North St. Louis, Hazelwood - Super 8, Independence - La Quinta Inn, Jackson - North - Capital Plaza, Jefferson City - Ramada Inn, Jefferson City - Days Inn, Joplin - Super 8, Joplin - Allis Plaza, Kansas City - Americana Hotel, Kansas City - AmeriSuites Hotel-Proposed, Kansas City - Doubletree Hotel, Kansas City - Embassy Suites, Kansas City - Fairfield Inn-West, Kansas City - Hilton - Proposed, Kansas City - Hilton Inn, Kansas City - Historic Suites Hotel, Kansas City - Holiday Inn, Kansas City - Holiday Inn Crowne Plaza, Kansas City - Holiday Inn-Proposed, Kansas City - Proposed Sheraton Hotel, Kansas City - Radisson Suite Hotel, Kansas City - Resort Hotel - Proposed, Kansas City - Marriott-Tan-Tar-A, Lake of the Ozarks - Super 8, Liberty - Super 8, North Kansas City - Inn at Grand Glaize, Osage Beach - Super 8, Saint Joseph - Clarion, Saint Louis - Courtyard by Marriott-Creve Coeur, Saint Louis - Courtyard by Marriott-Downtown, Saint Louis - Courtyard by Marriott-Westport, Saint Louis - Days Inn, Saint Louis - Doubletree Hotel, Saint Louis - Drury Inn, Saint Louis - Embassy Suites, Saint Louis - Fairfield Inn-Hazel, Saint Louis - Henry VIII Hotel, Saint Louis - Hilton Hotel-Bel Air, Saint Louis - Holiday Inn Sports Complex, Saint Louis - Holiday Inn-Airport North, Saint Louis - Holiday Inn-Downtown, Saint Louis - Holiday Inn-Riverfont, Saint Louis - Howard Johnson-South, Saint Louis - Mayfair Hotel, Saint Louis - Omni-St. Louis Station, Saint Louis - Ramada Inn-Westport, Saint Louis - Residence Inn-Chesterfield, Saint Louis - Residence Inn-Richmond Heights, Saint Louis - Ritz-Carlton Hotel, Saint Louis - Sheraton-Airport, Saint Louis - St. Louis Airport Hilton, Saint Louis - St. Louis Airport Radisson Hotel, Saint Louis - St. Louisian Hotel, Saint Louis - Stouffer Concourse Hotel, Saint Louis - Super 8, Saint Louis - Marriott Hotel, Saint Louis County - Holiday Inn, Springfield - Sheraton Inn, Springfield - Super 8, Springfield - Executive Inn & Office Building, St. Louis - Holiday Inn, St. Louis - Howard Johnson Hotel, St. Louis - Hotel-Proposed, Unity Village - Holiday Inn, Wendtzville Montana - Sheraton Hotel, Billings - Super 8, Billings - Super 8, Great Falls - Super 8, Helena - Super 8, Kalispell - Holiday Inn, Missoula - Red Lion Inn, Missoula Nebraska - Holiday Inn, Kearney - Best Western Airport Inn, Lincoln - Holiday Inn-Airport, Lincoln - Holiday Inn-Northeast, Lincoln - Howard Johnson, North Platte - Marriott Hotel, Omaha - Ramada Inn, Omaha - Red Lion Inn, Omaha Nevada - Lake Mead Resort, Boulder City - Ormsby House Hotel and Casino, Carson City - Super 8, Carson City - Doubletree Hotel and Resort, Cathedral City - Best Western Motel - Proposed, Jackpot - Airport Inn, Las Vegas - Aladdin Hotel and Casino, Las Vegas - Alexis Park Resort Hotel, Las Vegas - Casino Hotel-Proposed, Las Vegas - Courtyard by Marriott, Las Vegas - El Rancho Hotel and Casino, Las Vegas - Hotel and Casino-Proposed, Las Vegas - Jockey Club Hotel and Casino, Las Vegas - La Quinta Hotel, Las Vegas - Paradise Resort, Las Vegas - Residence Inn, Las Vegas - Silverbird Casino, Las Vegas - Super 8-Proposed, Las Vegas - The Mirage, Las Vegas - Tropicana Travelodge, Las Vegas - Westward Ho Casino, Las Vegas - Echo Bay Resort, Overton - Holiday Inn, Reno - La Quinta Hotel, Reno - Quality Inn and Casino, Reno - Red Lion Hotel-Proposed, Reno New Hampshire - Sheraton Wayfarer, Bedford - Hampton Inn, Bow - Mount Washington Resort, Bretton Woods - Balsams Hotel, Dixville Notch - Sheraton Inn-Lamie's Tavern, Hampton - Woodbound Inn, Jaffrey - Brickyard Mountain Inn, Laconia - Loon Mountain Hotel, Lincoln - Appleton Inns, Manchester - Holiday Inn Center, Manchester - Sheraton Wayfarer, Manchester - Susse Chalet, Manchester - Clarion Somerset Hotel, Nashua - Hotel-Proposed, Nashua - Tara Sheraton Nashua, Nashua - Wentworth by the Sea, Newcastle - Susse Chalet, Portsmouth - Wentworth-by-the-Sea, Portsmouth - Salem Inn, Salem - Susse Chalet, Salem - Landmarc Lodge-East, Waterville Valley - Landmarc Lodge-West, Waterville Valley - Silver Squirrel Inn, Waterville Valley - Snowy Owl Inn, Waterville Valley - Chalet Susse International, Inc., Wilton New Jersey - Marriott Seaview Golf Resort, Abescon - Howard Johnson Hotel, Absecon - Seaview Country Club, Absecon - Berkeley Carteret Hotel, Asbury Park - Caesar's Hotel and Casino, Atlantic City - Casino Hotel-Proposed, Atlantic City - Deauville Hotel, Atlantic City - Diplomat Hotel, Atlantic City - Hampton Inn, Atlantic City - Harrah's Marina Hotel Casino, Atlantic City - Lafayette Hotel, Atlantic City - Resorts Int'l Hotel and Casino, Atlantic City - Royal Inn, Atlantic City - Sands Hotel and Casino, Atlantic City - Traymore Hotel Site, Atlantic City - Tropicana Hotel and Casino, Atlantic City - World International Hotel, Atlantic City - Bernards Inn, Bernardsville - Hotel-Proposed, Bridgewater - Proposed Hotel, Camden - Cherry Hill Hyatt, Cherry Hill - Cherry Hill Inn, Cherry Hill - Ramada Inn, Clifton - Comfort Suites, E. Rutherford - Ramada Renaissance, East Brunswick - Sheraton Inn, East Brunswick - Sheraton - Per Diem, East Rutherford - Holiday Inn-Raritan Center, Edison - Hotel-Proposed, Edison - Ramada Inn, Edison - Best Western Hotel, Egg Harbor Township - Newark Airport Vista Hotel, Elizabeth - Ramada Inn-Proposed, Elizabeth - Sheraton Inn, Elizabeth - Marriott Suite Hotel-Proposed, Elmwood Park - Howard Johnson, Englewood - Conference Center, Farleigh Dickinson - Motel-Proposed, Flemington - Hamilton Park Conference Center, Florham Park - Courtesy Motel, Fort Lee - Ramada Inn-Proposed, Franklin Township - Playboy Resort, Great Gorge - Marriott Hotel, Hanover - Sheraton Hotel, Hasbrouck Heights - Holiday Inn, Jamesburg - Restaurant at Port Liberte, Jersey City - Harrogate Senior Living Facility, Lakewood - Courtyard by Marriott, Lincroft - Hotel-Proposed, Long Branch - Comfort Inn, Mahwah - Courtyard by Marriott, Mahwah - Residence Inn-Proposed, Mahwah - Economy Lodge - Proposed, Meadowlands - Holiday Inn, Meadowlands - Hotel-Proposed, Meadowlands - Meadowlands Hilton, Meadowlands - Sheraton Hotel, Meadowlands - Forsgate Conference Center, Monroe Township - Conference Center, Morristown - Governor Morris Inn, Morristown - Headquarters Plaza Hotel, Morristown - Pleasantville Farms Conference Cent, Morristown - Howard Johnson Lodge, Mount Holly - Courtyard by Marriott, Mount Laurel - Hilton, Mount Laurel - Days Hotel, New Brunswick - Hyatt Hotel, New Brunswick - Rennaisance Hotel, New Brunswick - Residence Inn - Princeton, New Jersey - Airport Hotel-Proposed, Newark - Courtyard by Marriott-Airport, Newark - Holiday Inn, Newark - Holiday Inn-Airport North, Newark - Hotel-Proposed, Newark - Howard Johnson Hotel, Newark - Days Inn, North Bergen - Holiday Inn, North Brunswick - Port-O-Call, Ocean City - Sting Ray Motel, Ocean City - Hotel-Proposed, Ocean Grove - Spray View Hotel, Ocean Grove - Macy Hotel-Proposed, Paramus - Red Carpet Inn, Paramus - Residence Inn-Proposed, Paramus - Marriott Hotel-Proposed, Park Ridge - Embassy Suites, Parsippany - Hilton, Parsippany - Residence Inn-Proposed, Parsippany - Howard Johnson, Phillipsburg - Hotel-Proposed, Piscataway - Residence Inn-Proposed, Piscataway - Compri Hotel-Proposed, Princeton - Hyatt Regency, Princeton - Marriott Hotel, Princeton - Omni Nassau Inn, Princeton - Treadway Inn, Princeton - Howard Johnson, Ridgefield Park - Hotel-Proposed, Rockleigh - Hotel-Proposed, Roxbury Township - Ramada Inn, Runnemede - Howard Johnson, Saddle Brook - Marriott Hotel, Saddle Brook - Days Inn, Secaucus - Howard Johnson, Secaucus - Ramada Inn, Secaucus - Hilton At Short Hills, Short Hills - Pier 4 Motel, Somers Point - Garden State Convention Center, Somerset - Holiday Inn, Somerset - Marriott Hotel, Somerset - Neighborhood Suites-Proposed, Somerset - Sommerset Plaza Hotel, Somerset - Summerfield Suites Hotel, Sommerset - Hewitt Wellington Hotel, Spring Lake - Hotel-Proposed, Spring Lake - Loews Glenpointe Hotel, Teaneck - Appleton Inn, Tinton Falls - Envoy Inn, Tinton Falls - Hilton Inn, Tinton Falls - Residence Inn, Tinton Falls - Sunrise Suite Hotel, Tinton Falls - Hotel-Proposed, Toms River - Hotel-Proposed, Turnersville - Hotel-Proposed, Wayne - Howard Johnson-Proposed, Wayne - Holiday Inn, Wildwood Crest - Motel, Wrightstown New Mexico - Compri Hotel-Proposed, Albuquerque - Courtyard by Marriott-Airport, Albuquerque - Fairfield Inn-Proposed, Albuquerque - Hampton Inn, Albuquerque - Hilton Hotel, Albuquerque - Holiday Inn, Albuquerque - Marriott Hotel, Albuquerque - Radisson Suite Hotel-Proposed, Albuquerque - Residence Inn, Albuquerque - Rodeway Inn, Albuquerque - Winrock Motor Inn, Albuquerque - La Quinta Inn, Albuquerque - Airport - Corkin's Lodge, Chama - La Quinta Inn, Farmington - Hilton, Las Cruces - Las Cruces Hilton, Las Cruces - Super 8, Las Cruces - Ski Rio Ski Resort, Miracle Mountain - Super 8, Raton - Young's Ranch, Red River - Eldorado Hotel, Santa Fe - Homewood Suites Hotel, Santa Fe - Hotel-Proposed, Santa Fe - Inn at Loretto, Santa Fe - Inn on the Alameda, Santa Fe - La Fonda Hotel, Santa Fe - La Quinta Hotel, Santa Fe - Residence Inn, Santa Fe - Santa Fe Motel, Santa Fe - Sheraton de Santa Fe, Santa Fe New York - Americana Inn, Albany - Desmond Hotel, Albany - Hilton Hotel, Albany - Marriott Hotel, Albany - Sheraton Inn, Albany - Susse Chalet, Albany - VIP Motor Lodge (Howard Johnson), Albany - Embassy Suites-Proposed, Amherst - Holiday Inn, Amherst - Annandale Inn-Proposed, Annandale - Wampus Inn-Proposed, Armonk - Treadway Inn, Batavia - Hampton Inn, Binghamton - Holiday Inn-Arena, Binghamton - Holiday Inn-SUNY, Binghamton - Hotel-Proposed, Binghamton - Howard Johnson, Binghamton - Residence Inn, Binghamton - Sheraton Inn, Binghamton - Eden Motel, Bronx - Days Inn-Proposed, Brookhaven - Residence Inn, Brookhaven - Brooklyn Hotel-Proposed, Brooklyn - Hilton Hotel, Brooklyn - Airport Hotel-Proposed, Buffalo - Buffalo Hotel, Buffalo - Days Hotel-Proposed, Buffalo - Hilton Hotel, Buffalo - Holiday Inn - Midtown, Buffalo - Hyatt Hotel, Buffalo - Hyatt Regency Hotel & Retail Area, Buffalo - Radisson Hotel, Buffalo - Ramada Inn-Airport, Buffalo - Ramada Renaissance Hotel, Buffalo - Residence Inn-Proposed, Buffalo - Sheraton Hotel, Buffalo - Sheraton Inn Buffalo East, Buffalo - Sheraton Inn-Airport, Buffalo - Sheraton Inn, Canadaiqua - Airway Motel, Cheektowaga - Holiday Inn - Airport, Cheektowaga - Holiday Inn - Gateway, Cheektowaga - Quality Inn, Cheektowaga - Sheraton Buffalo, Cheektowga - Steeplechase Park-Proposed, Coney Island - Hilton Inn, Corning - Resort/Conference Center-Proposed, Cornwall - Holiday Inn, Cortland - Roycroft Inn, East Aurora - Hotel-Proposed, East Elmhurst - Susse Chalet, East Greenbush - Nevele Hotel, Ellenville - Int'l Conf./Learning Center-Propose, Ellis Island - Days Inn, Elmsford - Howard Johnson, Elmsford - Neighborhood Suites Hotel-Proposed, Fishkill - Residence Inn, Fishkill - Metropole Hotel, Flushing - Midway Hotel, Flushing - Sheraton - Proposed, Flushing Center - Hotel-Proposed, Garden City - Wyndham Condominium, Garden City - Harrison Conference Center, Glen Clove - Great Neck Hotel, Great Neck - Comfort Inn, Greece - Holiday Inn-Proposed, Greece - Tamarack Lodge, Greenfield Park - Claudio's Restaurant, Greenport - Colonie Hill, Hauppauge - Holiday Inn, Hauppauge - Marriott Wind Watch Hotel & Golf, Hauppauge - Marriott Windwatch, Hauppauge - Ramada Inn, Hauppauge - Residence Inn, Hauppauge - Homewood Suites-Proposed, Henrietta - Howard Johnson, Huntington - Huntington Townhouse, Huntington - Hampton Inn, Islandia - Marriott Wind Watch, Islandia - Hotel-Proposed, Islip - Howard Johnson Hotel, Ithaca - Ramada Inn, Ithaca - Sheraton Inn, Ithaca - JFK Hilton, Jamaica - Howard Johnson, Kingston - Ramada Inn, Kingston - Omni Sagamore, Lake George - Ramada Inn, Lake George - Former Lake Placid Club Hotel, Lake Placid - Hilton Hotel, Lake Placid - Mirror Lake Inn, Lake Placid - Holiday Inn, Latham - Howard Johnson, Latham - Howard Johnson, Liberty - The New Brown's Resort, Loch Sheldrake - Convention Center - Proposed, Long Island - Eastern Nassau/W. Suffolk Hotel, Long Island - Hyatt Hotel-Proposed, Long Island - Motel-Proposed, Lynbrook - Crowne Plaza Hotel, Manhattan - Hotel Mark, Manhattan - Proposed Economy Hotel, Manhattan - Sugar Maples Resort, Maplecrest - Hotel-Proposed, Middletown - Howard Johnson, Middletown - Montauk Yacht Club and Inn, Montauk - Kutsher's Resort, Monticello - Motel-Proposed, Nanuet - Wallkill Valley Inn Project, New Paltz - Hotel-Proposed, New Rochelle - Le Richmond Hotel, New Rochelle - Ramada Plaza Inn and Offices, New Rochelle - Sheraton Inn, New Rochelle - Aberdeen Hotel, New York - American Youth Hostel, New York - Americana Hotel, New York - Ashley Hotel, New York - Astor House-Proposed, New York - Barbizon Plaza Hotel, New York - Barclay Hotel, New York - Battery Park City Hotel-Proposed, New York - Berkshire Place, New York - Best Western Woodward Hotel, New York - Biltmore Hotel, New York - Broadway Crowne Plaza, New York - Carlton House Hotel, New York - Century Paramount Hotel, New York - Chatwal Inn, New York - Chatwal Inn on 45th Street, New York - Chatwal Inn on Park Avenue, New York - Chinatown Hotel-Proposed, New York - Courtyard by Marriott-Proposed, New York - Custom's House, New York - Days Inn, New York - Days Inn-West 57th Street, New York - Doral Inn, New York - Dover Hotel, New York - Downtown Athletic Club, New York - Downtown Conference Center, New York - Drake Hotel, New York - Econo Lodge-Proposed, New York - El Rio Grande, New York - Embassy Suites-Times Square-Propose, New York - Empire Hotel, New York - Essex House, New York - Executive Hotel, New York - Giordano Hotel, New York - Gorham Hotel, New York - Grand Bay at Equitable Center, New York - Grand Hyatt Hotel, New York - Greenwich Street Hotel, New York - Halloran House, New York - Hampton House, New York - Harley Hotel, New York - Helmsley Hotel, New York - Hilton Hotel, New York - Hilton Hotel-Statler, New York - Holiday Inn, New York - Holiday Inn Crowne Plaza-Broadway, New York - Holiday Inn Crowne Plaza-Manhattan, New York - Holland Hotel, New York - Hotel Intercontinental, New York - Hotel Pierre, New York - Hotel-1926 Broadway-Proposed, New York - Hotel-East 57th Street-Proposed, New York - Hotel-Proposed, New York - Hotel-Tenth Avenue-Proposed, New York - Howard Hotel, New York - Howard Johnson, New York - Journey's Court Hotel-Proposed, New York - Journey's End, New York - Kalikow Hotel-Proposed, New York - Kennedy Inn, New York - Lancaster Hotel, New York - Le Meridien Liberty New York, New York - Lowell Hotel, New York - Luxury Hotel-Proposed, New York - Macklowe Hotel, New York - Madison Towers Hotel, New York - Manger Windsor Hotel, New York - Mark Hotel, New York - Marriott East Side, New York - Marriott Financial Center, New York - Marriott Hotel-Proposed, New York - Marriott Marquis, New York - Martinique Hotel, New York - Mayfair Regent, New York - Milford Plaza Hotel, New York - Millennium Hotel, New York - Navarro Hotel, New York - Nova Park-Gotham, New York - Novotel, New York - Omni Berkshire Place, New York - Omni Park Central, New York - Parc Fifty One Hotel, New York - Parker Meridien Hotel, New York - Peninsula Hotel, New York - Penta Hotel, New York - Piccadilly Hotel, New York - Plaza Hotel, New York - President Hotel, New York - Prince George Hotel, New York - Prince Street Hotel-Proposed, New York - Proposed Hotel and Apartments, New York - Proposed Luxury Hotel-Proposed, New York - Quality Inn, New York - Quality Suites, New York - Ramada Inn, New York - Regent Hotel-Proposed, New York - Regent of New York-Proposed, New York - Ritz-Carlton, New York - Roger Smith Winthrop Hotel, New York - Roosevelt Hotel, New York - Russian Tea Room, New York - Sheraton Hotel, New York - Sheraton Motor Inn, New York - Sheraton Park Avenue, New York - Soho Hotel-Proposed, New York - St. Moritz Hotel, New York - St. Regis, New York - Stanhope, New York - Sutton Place Hotel, New York - Taft Hotel, New York - Tenth Avenue Hotels-Proposed, New York - The Pierre Hotel, New York - The Plaza Athenee, New York - Times Square Hotel-Proposed, New York - Timeshare-Proposed, New York - Travel Inn, New York - Tudor Hotel, New York - UN Plaza Suite Hotel-Proposed, New York - Vista International, New York - Waldorf=Astoria Hotel, New York - Warwick Hotel, New York - Westbury Hotel, New York - Westin Plaza Hotel, New York - Woodward Hotel-Proposed, New York - York Club, New York - Howard Johnson Motel & Restaurant, Newburgh - Ramada Inn, Newburgh - Hilton Hotel, Niagara Falls - Howard Johnson, Norwich - Hotel-Proposed, Orangetown - Hudson Valley Conference Center, Ossining - Sheraton Inn, Ossining - Hotel-Proposed, Oswego - Best Western, Painted Post - Lodge on the Green, Painted Post - Residence Inn - Proposed, Parsippany - Senior Living - Proposed, Pearl River - Drum Hill Hotel, Peekskill - Holiday Inn, Plainview - Howard Johnson, Plainview - Pickwick Motor Inn, Plainview - Residence Inn, Plainview - Holiday Inn, Plattsburgh - Motel-Proposed, Port Jefferson - Comfort Inn-Proposed, Poughkeepsie - Courtyard by Marriott, Poughkeepsie - Radison Hotel, Poughkeepsie - Wyndham Hotel, Poughkeepsie - Best Western-LaGuardia Airport, Queens - Crown Motel, Queens - Crowne Plaza-LaGuardia Airport, Queens - Days Inn-LaGuardia Airport, Queens - Executive Inn, Queens - Hilton Inn-LaGuardia Airport, Queens - Hilton-JFK Airport, Queens - Holiday Inn-JFK Airport, Queens - Holiday Inn-LaGuardia Airport, Queens - Howard Johnson, Queens - Jade East Motel, Queens - JFK Plaza Hotel, Queens - Marriott Hotel-JFK Airport, Queens - Marriott-LaGuardia Airport, Queens - Metropole Hotel, Queens - Midway Hotel, Queens - Riviera Hotel, Queens - Royce Hotel-LaGuardia Airport, Queens - Sheraton-LaGuardia East-Proposed, Queens - Adria Hotel, Queens (Bayside) - Holiday Inn, Riverhead - Riverhead Motor Hotel, Riverhead - Americana Hotel, Rochester - Courtyard by Marriott-Wrighton, Rochester - Days Hotel (former Holiday Inn), Rochester - Hilton-Campus, Rochester - Holiday Inn, Rochester - Hotel-Proposed (former St. Bernard), Rochester - Hyatt Hotel, Rochester - Lodge at Woodcliff, Rochester - Omni Suites Hotel, Rochester - Residence Inn, Rochester - Sheraton Inn, Rochester - Stouffer Hotel, Rochester - Town House Inn, Rochester - Limited Service Hotel-Proposed, Rome - Hotel - Proposed, Roslyn - Roslyn Country Club, Roslyn - Courtyard by Marriott, Rye - Le Richemonde Hotel, Ryebrook - Baron's Cove Inn, Sag Harbor - Holiday Inn, Saratoga - Hotel-Proposed, Saratoga Springs - Howard Johnson, Saugerties - Holiday Inn, Schenectady - Ramada Inn, Schenectady - Dering Harbor Inn, Shelter Island - Crowne Plaza-Proposed, Smithtown - Howard Johnson, Smithtown - Sheraton, Smithtown - Raleigh Hotel, South Fallsburg - Hotel-Proposed, Southhold - Susse Chalet, Spring Valley - Executive Motor Inn, Springfield Gardens - Staten Island Hotel, Staten Island - Imperial Htl/Stevensville Golf Crs., Stevensville - Holiday Inn, Suffern - Motel on the Mountain, Suffern - Browns Hotel, Sullivan County - Imperial Hotel, Sullivan County - The New Brown's Resort, Sullivan County - Courtyard by Marriott, Syracuse - Embassy Suites, Syracuse - Hampton Inn, Syracuse - Hilton Inn, Syracuse - Holiday Inn-Downtown, Syracuse - Holiday Inn-Exit 35, Syracuse - Holiday Inn-Exit 36, Syracuse - Holiday Inn-Exit 39, Syracuse - Holiday Inn-I-90, Syracuse - Homewood Suites Hotel-Proposed, Syracuse - Hotel Syracuse, Syracuse - Hotel-Proposed, Syracuse - Marriott Hotel, Syracuse - Residence Inn-Proposed, Syracuse - Sheraton University Inn & Conf.Ctr., Syracuse - Treadway Inn, Syracuse - Courtyard by Marriott, Tarrytown - Tarrytown House Conference Center, Tarrytown - Westchester Marriott, Tarrytown - Embassy Suites - Proposed, Times Square, New York - Marriott Hotel, Uniondale - Sheraton Nassau Hotel, Uniondale - Howard Johnson Hotel, Utica - Howard Johnson, Vestal - Hotel-Proposed, Watertown - Convention Hotel-Proposed, Westbury - Dalts Restaurant, Westbury - Howard Johnson, Westbury - Marriott Hotel, Westchester - Inn-Proposed, Westhampton - Crowne Plaza, White Plains - Hotel-Proposed, White Plains - Howard Johnson, White Plains - Roger Smith Hotel, White Plains - Stouffer Westchester Hotel, White Plains - White Plains Hotel, White Plains - Anton Meadows, Yaphank - Quality Suites, Yorktown - Yorktown Motor Lodge, Yorktown Heights North Carolina - Days Inn - Central, Asheville - Holiday Inn - Airport, Asheville - Holiday Inn - Tunnel, Asheville - Inn on the Plaza, Asheville - Sheraton Inn, Asheville - Days Inn, Ashville - Masters Economy Inn - Rocky Mount, Battlebro - Days Inn, Blowing Rock - All-Suite Hotel-Proposed, Boone - Residence Inn-Proposed, Cary - Carolina Inn, Chapel Hill - Hilton-Proposed, Chapel Hill - Charlotte Registry Hotel-Per Diem, Charlotte - Compri Hotel-Proposed, Charlotte - Courtyard by Marriott, Charlotte - Days Inn, Charlotte - Days Inn-Uptown, Charlotte - Fairfield Inn, Charlotte - Howard Johnson, Charlotte - Howard Johnson Lodge, Charlotte - Knights Inn, Charlotte - Manger Motor Inn, Charlotte - Marriott City Center, Charlotte - Marriott Hotel-Independence Center, Charlotte - Masters Economy Inn - Charlotte No, Charlotte - Masters Economy Inn - Merchandise, Charlotte - Queen City Motel, Charlotte - Residence Inn, Charlotte - Residence Inn-North, Charlotte - Resistry Hotel, Charlotte - Royce Suite Hotel, Charlotte - Sheraton Inn, Charlotte - Conference Center, Clemmons - Sheraton Motel, Dunn - Best Western, Durham - Cricket Inn, Durham - Days Inn, Durham - Dutch Village Inn, Durham - Fairfield Inn, Durham - Holiday Inn-West, Durham - Motel 6, Durham - Sheraton-University Center, Durham - The Duke Inn, Durham - Days Inn, Fayetteville - Fairfield Inn, Fayetteville - Holiday Inn, Fayetteville - Hotel-Proposed, Fayetteville - Knights Inn, Fayetteville - Goldsboro Motel, Goldsboro - Courtyard by Marriott, Greensboro - Days Inn, Greensboro - Embassy Suites, Greensboro - Fairfield Inn, Greensboro - Hilton, Greensboro - Marriott Hotel, Greensboro - Residence Inn, Greensboro - Sheraton Greensboro, Greensboro - Hotel-Proposed, Greenville - Radisson Hotel, High Point - Days Inn, Lumberton - Maggie Valley Country Club, Maggie Valley - Courtyard by Marriott, Raleigh - Fairfield Inn, Raleigh - Hampton Inn, Raleigh - Hilton, Raleigh - Holiday Inn-Downtown, Raleigh - Marriott Hotel-RTP, Raleigh - Raleigh Radisson, Raleigh - Residence Inn, Raleigh - Holiday Inn - Airport, Research Triangle Park - Howard Johnson, Roanoke Rapids - Sheraton Inn, Rocky Mount - Days Inn, Rocky Mountain - Fairfield Inn, Rocky Mountain - Motel 6, Rocky Mountain - Days Inn, Rowland - Sheraton Motel, Selma - Masters Economy Inn, Smithfield - Holiday Inn, Southern Pines - Fairfield Inn, Wilmington - Hilton, Winston/Salem - Holiday Inn, Winston/Salem - Winston Plaza Hotel, Winston/Salem North Dakota - Holiday Inn, Bismark - Radisson Inn, Bismark - Super 8, Bismark - Ramada Hotel, Fargo - Ramada Inn-Proposed, Fargo - Super 8, Grand Forks - Super 8, Minot Ohio - Holiday Inn-Cascade, Akron - Ramada Inn, Akron - Residence Inn, Akron - Aurora Inn and Pine Lake Trout Club, Aurora - Sheraton Inn, Aurora - Woodlands Inn, Aurora - Courtyard by Marriott, Blue Ash - Embassy Suites, Blue Ash - Residence Inn-Proposed, Blue Ash - Best Western, Cambridge - Days Inn, Cambridge - Hilton Hotel, Canton - Super 8, Canton - Best Western Northeast, Cincinnati - Carousel Inn, Cincinnati - Cincinnati Hotel, Cincinnati - Clarion Hotel, Cincinnati - Days Inn, Cincinnati - Embassy Suites-Proposed, Cincinnati - Holiday Inn-Downtown, Cincinnati - Holiday Inn-Eastgate, Cincinnati - Holiday Inn-Northeast, Cincinnati - Holiday Inn-Riverfront, Cincinnati - Holiday Inn-South, Cincinnati - Hotel-Airport-Proposed, Cincinnati - Howard Johnson, Cincinnati - Hyatt, Cincinnati - Knights Inn, Cincinnati - KOA Campground, Cincinnati - Marriott Inn, Cincinnati - Netherland Hilton, Cincinnati - Omni Netherland Plaza, Cincinnati - Proposed Hotel, Cincinnati - Radisson Inn, Cincinnati - Ramada Inn, Cincinnati - Residence Inn, Cincinnati - Residence Inn-North, Cincinnati - Sheraton Inn-Proposed, Cincinnati - Treadway Inn, Cincinnati - Vernon Manor, Cincinnati - AmeriSuite Hotel-Proposed, Cleveland - Downtown Hotel-Proposed, Cleveland - Fairfield Inn-Brook Park, Cleveland - Fairfield Inn-West, Cleveland - Holiday Inn-Airport, Cleveland - Holiday Inn-Lakeside, Cleveland - Hyatt Hotel-Proposed, Cleveland - Marriott Hotel, Cleveland - Sheraton City Center, Cleveland - Sheraton Hopkins, Cleveland - AmeriSuite - Proposed, Columbus - Embassy Suites, Columbus - Fairfield Inn-North, Columbus - Fairfield Inn-West, Columbus - Hilton Inn, Columbus - Holiday Inn-Airport, Columbus - Holiday Inn-City Center, Columbus - Holiday Inn-Worthington, Columbus - Hotel-Proposed, Columbus - Howard Johnson Hotel, Columbus - Howard Johnson-East, Columbus - Howard Johnson-West, Columbus - Knights Inn-West, Columbus - Marriott Hotel, Columbus - Nationwide Hotel, Columbus - Residence Inn-North, Columbus - Sheraton Plaza Hotel, Columbus - Sheraton-North, Columbus - Union Plaza Hotel-Steeplechase, Columbus - University Inn, Columbus - Woodfin Hotel, Columbus - Courtyard by Marriott, Crosswoods - Courtyard by Marriott, Dayton - Daytonian Hilton, Dayton - Fairfield Inn, Dayton - Hope Hotel & Conference Center, Dayton - Knights Inn-North, Dayton - Marriott Hotel, Dayton - Motel 6, Dayton - Ramada Inn, Dayton - Residence Inn-North, Dayton - Residence Inn By Marriott, Dayton South - Courtyard by Marriott, Dublin - Woodfin Suites, Dublin - East Liverpool Motor Lodge, East Liverpool - Howard Johnson, Euclid - Ramada Inn, Fairlawn - Hampton Inn, Independence - Howard Johnson, Lima - Ramada Inn, Lima - Best Western, Mansfield - Holiday Inn, Marietta - Lafayette Hotel, Marietta - Holiday Inn, Middletown - Howard Johnson, Middletown - Regal 8 Inn, Middletown - Sheraton-Proposed, Milford - Super 8, Montrose - Ramada Inn, Sandusky - Days Inn, Sharonville - Holiday Inn-Cincinnati North, Sharonville - Super 8, St. Clairsville - Holiday Inn, Strongsville - Balhalla Hotel, Toledo - Courtyard by Marriott, Toledo - Fairfield Inn-Airport, Toledo - Hilton at the Medical College, Toledo - Hilton Hotel, Toledo - Holiday Inn, Toledo - Knights Inn-West, Toledo - Marriott Portside Hotel, Toledo - Radisson Hotel, Toledo - Sofitel, Toledo - Hampton Inn-Proposed, Wickliffe - Holiday Inn, Youngstown - Hotel-Proposed, Youngstown - Sheraton-Proposed, Youngstown Oklahoma - Fountainhead Resort, Mcintosh County - Residence at the Trails Inn, Norman - Suit Hotel, Norman - Courtyard by Marriott, Oklahoma City - Embassy Suites, Oklahoma City - Holiday Inn, Oklahoma City - Lexington Hotel Suites, Oklahoma City - Lincoln Plaza Hotel, Oklahoma City - Marriott Hotel, Oklahoma City - Meridien Plaza, Oklahoma City - Sheraton Hotel, Oklahoma City - Arrowhead Resort, Pittsburgh County - Camelot Hotel, Tulsa - Doubletree Hotel, Tulsa - Former Holiday Inn, Tulsa - Former Holiday Inn-Downtown, Tulsa - Holiday Inn, Tulsa - Holiday Inn-Convention Center, Tulsa - La Quinta Inn, Tulsa - Marriott Hotel, Tulsa - Mayo Hotel, Tulsa - Residence Inn, Tulsa - Westin Hotel, Tulsa Oregon - Inn At Face Rock, Bandon - Courtyard by Marriott, Beaverton - Red Lion Motel, Bend - Sunriver Lodge and Resort, Bend - Econolodge Motel, Eugene - Valley River Inn, Eugene - Residence Inn Portland-South, Lake Oswego - Big Creek Resort-US Highway 101, Lane County - Embassy Suites, Portland - Holiday Inn Crowne Plaza - Proposed, Portland - Holiday Inn-Airport, Portland - Holiday Inn-South, Portland - Proposed Sheraton Suites, Portland - Red Lion - Jantzen Beach, Portland - Red Lion Inn-Lloyd Center, Portland - Red Lion Inn-Portland Center, Portland - Residence Inn - Proposed, Portland - Vintage Plaza Hotel, Portland - Wells Building, Portland - Execulodge Motel, Salem - Oregon Capital Inn, Salem - Springfield Red Lion Inn, Springfield - Sunriver Resort, Sunriver Pennsylvania - Allentown Hilton Hotel, Allentown - Holiday Inn, Allentown - Proposed Microtel, Allentown - Quality Inn, Allentown - Bedford Springs Hotel, Bedford - Compri Hotel-Proposed, Bensalem - Days Inn-Proposed, Bensalem - Holiday Inn, Bensalem - Residence Inn By Marriott, Berwyn - Econolodge, Bristol - Days Inn, Brookville - Buck Hill Falls Inn, Buck Hill Falls - Howard Johnson, Butler - Holiday Inn, Chambersburg - Days Inn, Clarion - Embassy Suites, Coraopolis - Hydeholde Country House-Proposed, Coraopolis - Days Inn, Danville - Holiday Inn, Dubois - Lafayette Inn-Proposed, Easton - Howard Johnson Hotel, Erie - Ramada Inn, Erie - Holiday Inn, Essington - Quality Suites-Proposed, Essington - Super 8-Proposed, Essington - Howard Johnson, Gibsonia - Compri Hotel-Proposed, Harrisburg - Holiday Inn, Harrisburg - Marriott Hotel, Harrisburg - Penn Harris Inn, Harrisburg - Sheraton Inn, Harrisburg - Super 8-Proposed, Harrisburg - Holiday Inn, Hazleton - Super 8-Proposed, Hazleton - Plaza Valley Forge Hotel, King of Prussia - Radisson Hotel, King of Prussia - Sheraton Hotel, King of Prussia - Valley Forge Complex, King of Prussia - Valley Forge Hilton, King of Prussia - Motel-Proposed, Lake Ariel - Days Inn, Lancaster - Holiday Inn-Route 30E, Lancaster - Holiday Inn-Route 501, Lancaster - Sheraton Lancaster Golf Resort, Lancaster - Super 8-Proposed, Lancaster - Holiday Inn, Lionville - Hilton-Great Valley, Malvern - Summerfield Suite-Proposed, Malvern - Days Inn, Meadville - Hilton Inn, Monroeville - Holiday Inn-West, Monroeville - Economy Hotel, Montgomery Township - Holiday Inn, New Hope - Treadway Inn, Newport - Residence Inn-Proposed, Paoli - Conference Center-Proposed, Penn State - Barclay Hotel, Philadelphia - Bellevue, Philadelphia - Courtyard by Marriott-Devon, Philadelphia - Courtyard-Willow Grove, Philadelphia - Days Inn-Airport, Philadelphia - Econo Lodge-Franklin Towne, Philadelphia - Essex Hotel, Philadelphia - Franklin Motor Inn, Philadelphia - Franklin Plaza Hotel, Philadelphia - Guest Quarters Hotel, Philadelphia - Hampton Inn-Proposed, Philadelphia - Health Club-Proposed, Philadelphia - Hilton Inn, Philadelphia - Hilton Inn-Northeast, Philadelphia - Holiday Inn-City Center, Philadelphia - Holiday Inn-City Line, Philadelphia - Hub Motor Inn, Philadelphia - Hyatt-Proposed, Philadelphia - Marriott Hotel, Philadelphia - Marriott Hotel-Airport, Philadelphia - Omni Philadelphia, Philadelphia - Penn Center Inn, Philadelphia - Quality Inn-Center City, Philadelphia - Residence Inn-Proposed, Philadelphia - Rittenhouse Hotel, Philadelphia - Treadway Mohawk, Philadelphia - Treadway Roosevelt, Philadelphia - Residence Inn, Philadelphia/Berwyn - Clubhouse Inn, Pittsburgh - Courtyard by Marriott, Pittsburgh - Hampton Inn at Playhouse Square, Pittsburgh - Hilton Hotel, Pittsburgh - Holiday Inn-Greentree, Pittsburgh - Holiday Inn-North, Pittsburgh - Holiday Inn-Parkway-East, Pittsburgh - Holiday Inn-Parkway-West, Pittsburgh - Hotel-Proposed, Pittsburgh - Howard Johnson Hotel, Pittsburgh - Marriott Hotel, Pittsburgh - Marriott-Airport, Pittsburgh - Motel 6, Pittsburgh - Quality Inn, Pittsburgh - Royce Hotel-Airport, Pittsburgh - U.S.S. Hotel-Proposed, Pittsburgh - Westin William Penn, Pittsburgh - Courtyard By Marriott, Pittsburgh Airport - Holiday Inn, Reading - Sheraton Hotel, Reading - Hilton at Lackawanna Station, Scranton - Hilton Hotel, Scranton - Sheraton Inn, Stroudsburg - HoJo Inn, Tannersville - Hilton-Northeast, Trevose - Compri Hotel-Proposed, Valley Forge - Courtyard by Marriott, Valley Forge - Holiday Inn-Meadowlands, Washington - Holiday Inn, Wilkes-Barre - Days Inn-Proposed, Williamsport - Hotel-Proposed, Williamsport - Hampton Inn - Proposed, Willow Grove - Holiday Inn-Market Street, York - Holiday Inn-Route 30 and I-83, York - Ramada Inn, York - Super 8-Proposed, York Rhode Island - Cresthil-Proposed, Lincoln - Courtyard by Marriott, Newport - Vanderbilt Hotel-Convention Center, Newport - Quality Inn, North Kingston - Biltmore Plaza, Providence - Convention Center Hotel-Proposed, Providence - Holiday Inn Providence - Downtown, Providence - Hotel-Proposed, Providence - Marriott Hotel, Providence - Sheraton-Airport, Providence - Susse Chalet, Smithfield - Howard Johnson, Warwick - Residence Inn-Proposed, Warwick - Susse Chalet, Warwick South Carolina - Quality Inn Motel, Anderson - Super 8, Anderson - Budget Hotel - Proposed, Charleston - Charleston Center Hotel-Proposed, Charleston - Cooper River Inn, Charleston - Days Inn, Charleston - Francis Marion Hotel, Charleston - Hampton Inn-Proposed, Charleston - Hawthorne Suites Hotel, Charleston - Holiday Inn, Charleston - Holiday Inn-Airport, Charleston - Holiday Inn-Riverview, Charleston - Masters Economy Inn - Mt. Pleasant, Charleston - Masters Economy Inn - Rivers Ave, Charleston - Middleton Inn, Charleston - Omni Charleston, Charleston - Quality Inn, Charleston - Trusthouse Forte, Charleston - Courtyard by Marriott, Columbia - Courtyard by Marriott-Northeast, Columbia - Courtyard by Marriott-Northwest, Columbia - Embassy Suites, Columbia - Marriott Hotel, Columbia - Masters Economy Inn - I-26, Columbia - Masters Economy Inn - Knox Abbot, Columbia - Motel 6, Columbia - Residence Inn, Columbia - Coral Beach Hotel, Coral Beach - Days Inn, Dillon - Save Inn, Fairplay - Fairfield Inn, Florence - Holiday Inn, Florence - Days Inn, Gaffney - Courtyard by Marriott, Greenville - Fairfield Inn, Greenville - Greenville Hilton Hotel, Greenville - Ramada Inn, Greenville - Super 8, Greenwood - Days Inn, Hardeeville - Fairfield Inn, Hilton Head - Hilton Head Inn, Hilton Head - Holiday Inn, Hilton Head - Inter-Continental Hotel, Hilton Head - Islander Inn, Hilton Head - Quality Suites-Proposed, Hilton Head - Residence Inn-Proposed, Hilton Head - Sheraton Inn, Hilton Head - PGA East Resort-Proposed, Kiawah Island - Save Inn, Lake Hartwell - Days Inn, Mt. Pleasant - Coral Beach Hotel, Myrtle Beach - Radisson Hotel, Myrtle Beach - Best Western Inn, North Charleston - Budget Hotel-Proposed, North Charleston - Days Inn, North Charleston - Northwoods Atrium Inn, North Charleston - Days Inn, Santee - Holiday Inn-West, Spartanburg - Howard Johnson, Spartanburg - Residence Inn, Spartanburg South Dakota - Holiday Inn, Aberdeen - Holiday Inn, Rapid City - Holiday Inn, Sioux Falls - Super 8, Sioux Falls - Holiday Inn, Spearfish Tennessee - Ameri Suite Hotel-Proposed, Brentwood - Courtyard by Marriott, Brentwood - Holiday Inn, Bristol - Holiday Inn-Southeast, Chattanooga - Howard Johnson, Chattanooga - Marriott Hotel, Chattanooga - Motel 6, Chattanooga - Sheraton Inn, Chattanooga - Super 8, Chattanooga - Holiday Inn, Cove Lake - Masters Economy Inn, Dickson - Comfort Inn-Proposed, Elizabethton - Park Vista Hotel, Gatlinburg - Holiday Inn-I-40, Jackson - Holiday Inn, Johnson City - Super 8, Johnson City - Fairfield Inn, Johnson Park - Holiday Inn, Kingsport - Courtsouth Healthclub-North, Knoxville - Courtsouth Healthclub-South, Knoxville - Courtsouth Healthclub-West, Knoxville - Days Inn, Knoxville - Hilton Hotel, Knoxville - Howard Johnson-Westhills, Knoxville - Motel 6, Knoxville - Quality Inn, Knoxville - Ramada Inn-West, Knoxville - Rodeway Inn, Knoxville - Courtyard by Marriott, Memphis - Courtyard by Marriott-Airport, Memphis - Holiday Inn - Crowne Plaza, Memphis - Holiday Inn-East, Memphis - Holiday Inn-East Poplar, Memphis - Holiday Inn-I-40-Sycamore View, Memphis - Holiday Inn-Memphis Int'l Airport, Memphis - Hyatt Regency, Memphis - Lexington Hotel Suites, Memphis - Motel 6, Memphis - Omni Hotel, Memphis - Proposed Fairfield Inn, Memphis - Residence Inn, Memphis - La Quinta Inn, Memphis - Airport - Brown County Inn, Nashville - Capital Mall Conv. Center-Proposed, Nashville - Clarion Maxwell House, Nashville - Courtyard by Marriott-Airport, Nashville - Days Inn, Nashville - Doubletree Hotel, Nashville - Grosvenor, Nashville - Hampton Inn, Nashville - Holiday Inn Crowne Plaza, Nashville - Holiday Inn Express, Nashville - Holiday Inn-Briley Parkway, Nashville - Marriott Hotel, Nashville - Nashville Union Station, Nashville - Ramada Inn, Nashville - Sheraton Hotel, Nashville - Sheraton Music City, Nashville - Stouffer Hotel, Nashville - Super 8, Nashville - Union Station Hotel, Nashville - AmeriSuite, Oakridge - Holiday Inn, Oakridge - Super 8-Proposed, Union City Texas - Harvey Hotel, Addison - Days Inn, Amarillo - Motel 6, Amarillo - Radisson Hotel-Proposed, Amarillo - Super 8 Motel, Amarillo - La Quinta Inn, Amarillo - Airport - Courtyard by Marriott, Arlington - Hilton Hotel, Arlington - Holiday Inn, Arlington - Lexington Suites Hotel, Arlington - Compri Hotel-Proposed, Austin - Driskill Hotel, Austin - Embassy Suites-Austin Town Lake, Austin - Embassy Suites-North, Austin - Fairfield North, Austin - Four Seasons Hotel, Austin - Holiday Inn, Austin - Holiday Inn-Austin Town Lake, Austin - La Quinta Inn, Austin - Marriott Hotel, Austin - Proposed Fairfield Inn, Austin - Quality Inn, Austin - Residence South, Austin - La Quinta Inn, Austin - Ben White - Holiday Inn Airport, Austins Cities - Holiday Inn, Bay Town - Hilton Hotel, Beaumont - Holiday Inn, Beaumont - Courtyard by Marriott, Bedford - Holiday Inn, Brownsville - La Quinta Inn, Brownsville - Hilton Hotel, College Station - Ramada Inn, College Station - Holiday Inn, Conroe - Corpus Christi Hotel-Airport, Corpus Christi - Days Inn, Corpus Christi - Hilton - Proposed, Corpus Christi - Holiday Inn, Corpus Christi - Holiday Inn-Airport, Corpus Christi - La Quinta Inn, Corpus Christi - North - La Quinta Inn, Corpus Christi - South - Allstar Inn, Dallas - Ambassador Plaza Hotel, Dallas - Arlington Hilton, Dallas - Bradford Plaza Hotel, Dallas - Bristol Suites, Dallas - Convention Center Hotel-Proposed, Dallas - Courtyard by Marriott, Dallas - Courtyard by Marriott-Northeast, Dallas - Courtyard by Marriott-Plano, Dallas - Courtyard by Marriott-Stemmons, Dallas - Dallas Grand Hotel, Dallas - Doubletree Inn, Dallas - Embassy Suites, Dallas - Fairmont Hotel, Dallas - Harvey Hotel, Dallas - Hilltop, Dallas - Hilton Inn-LBJ, Dallas - Hilton-Arlington, Dallas - Holiday Inn - North, Dallas - Holiday Inn Crowne Plaza, Dallas - Holiday Inn-Brook Hollow, Dallas - Holiday Inn-South, Dallas - Houstonian Hotel, Dallas - Howard Johnson-East, Dallas - Lexington Hotel Suites, Dallas - Loews Anatole Hotel, Dallas - Marriott Hotel-Airport, Dallas - Marriott-Park Central, Dallas - Marriott-Quorum, Dallas - Melrose Hotel, Dallas - Motel 6, Dallas - Omni Melrose Hotel, Dallas - Park Plaza, Dallas - Propsed Hotel - DFW, Dallas - Ramada Inn Convention Center, Dallas - Ramada-Market Center, Dallas - Registry Hotel, Dallas - Residence Inn-Market Center, Dallas - Sheraton Grand, Dallas - Southland Center Hotel, Dallas - Statler Hilton Hotel, Dallas - Summit Hotel, Dallas - Westin Galleria Hotel, Dallas - La Quinta Inn, Dallas - DFW - La Quinta Inn, Dallas - North Park - La Quinta Inn, Dallas - Plano - La Quinta Inn, Dallas - Richardson - Allstar Inn, El Paso - Hilton Inn-Airport, El Paso - La Quinta Hotel-Airport, El Paso - Rodeway Inn, El Paso - Travelers Inn, El Paso - Westin Paso del Norte, El Paso - La Quinta Inn, El Paso - Lomaland - Allstar Inn, Euless - La Quinta Inn, Euless - Allstar Inn, Fort Worth - Courtyard by Marriott, Fort Worth - Days Inn Downtown, Fort Worth - Hilton Hotel, Fort Worth - Holiday Inn-North, Fort Worth - Holiday Inn-South, Fort Worth - Lexington Suites Hotel, Fort Worth - Metro Center Hotel, Fort Worth - Radisson Plaza Hotel, Fort Worth - Residence Inn, Fort Worth - La Quinta Inn, Fort Worth - East - Holiday Inn, Harlingen - La Quinta Inn, HI-LA Marque - Crowne Plaza-Houston Park, Houston - Days Inn, Houston - Days Inn-Hobby, Houston - Doubletree Hotel, Houston - Embassy Suites, Houston - Galleria Gardens, Houston - Harvest House Hotel, Houston - Harvey Hotel Medical Center, Houston - Hilton Inn-West, Houston - Holiday Inn I-10 East, Houston - Holiday Inn-Downtown, Houston - Holiday Inn-East, Houston - Holiday Inn-Greenway Plaza, Houston - Holiday Inn-Hobby, Houston - Holiday Inn-Medical Center, Houston - Holiday Inn-NASA, Houston - Holiday Inn-North, Houston - Holiday Inn-Northwest, Houston - Holiday Inn-Southwest, Houston - Host Hotel International, Houston - Hotel Meridien, Houston - Hotel-Proposed, Houston - Houston House, Houston - Houston Medical Center, Houston - Houston Park 10 Crowne Plaza, Houston - La Quinta Hotel-Astrodome, Houston - La Quinta Hotel-Baytown, Houston - La Quinta Hotel-CY Fair, Houston - La Quinta Hotel-Hobby, Houston - La Quinta Inn-Stafford, Houston - Lexington Hotel Suites, Houston - Marriott Astrodome, Houston - Marriott Hotel, Houston - Marriott Hotel-Medical Center, Houston - Marriott-Airport, Houston - Motel 6, Houston - Remington, Houston - Residence Inn, Houston - Rodeway Inn, Houston - Rodeway Inn-Hobby, Houston - Shamrock Hilton Hotel, Houston - Sheraton Hotel, Houston - Sheraton Houston House, Houston - Sheraton Houston Place Hotel, Houston - Sheraton Town and Country, Houston - Sofitel, Houston - Stouffer Greenway Plaza, Houston - Suite Hotel-Proposed, Houston - Whitehall, Houston - Whitehall Hotel Conversion to HI, Houston - La Quinta Inn, Houston - Sharpstown - La Quinta Inn, Houston - East - La Quinta Inn, Houston - Loop 1960 - La Quinta Inn, Houston - Northwest - La Quinta Inn, Houston- SW Freeway - Holiday Inn, Huntsville - Harvey Hotel DFW, Irvine - Allstar Inn, Irving - Hampton Inn, Irving - Hampton Inn-Proposed, Irving - Harvey Hotel-D/FW Airport, Irving - Holiday Inn-Texas Stadium, Irving - Marriott Hotel, Irving - Holiday Inn, Kingsville - Del Lago Hotel, Lake Conroe - Hilton Inn, Laredo - La Posada, Laredo - Courtyard by Marriott, Las Colinas - La Quinta Inn, Longview - Hilton Inn, Lubbock - Holiday Inn, Lubbock - Residence Inn, Lubbock - La Quinta Inn, Midland - Holiday Inn, New Braunfels - All Star Inn, North Richland Hills - La Quinta Inn, Odessa - Holiday Inn, Orange - Holiday Inn, Paris - Plano Harvey Hotel, Plano - La Quinta Inn, Round Rock - Sheraton Inn, San Angelo - Coachman Inn-Proposed, San Antonio - Courtyard by Marriott-Downtown, San Antonio - Courtyard by Marriott-Medical Ctr., San Antonio - Crockett Hotel, San Antonio - Days Inn, San Antonio - Fairfield - North, San Antonio - Gunter Hotel, San Antonio - Holiday Inn-Airport, San Antonio - Holiday Inn-Market Square, San Antonio - Holiday Inn-North, San Antonio - Holiday Inn-Northwest, San Antonio - Holiday Inn-Riverwalk, San Antonio - La Quinta Hotel-Ingram, San Antonio - La Quinta Hotel-Lackland, San Antonio - La Quinta Hotel-Toepperwein, San Antonio - Lexington Hotel Suites, San Antonio - Marriott Hotel-Proposed, San Antonio - Marriott Inn-North, San Antonio - Proposed Fairfield Inn, San Antonio - La Quinta Inn, San Antonio - Windsor - La Quinta Inn, San Antonio - Wurzbach - Holiday Inn, San Marcos - La Quinta Inn, SAT-Toepperwein - Sheraton Hotel, South Padre Island - La Quinta Inn, Tyler - Sheraton, Tyler - Sheraton Inn, Tyler - Traveler's Choice Inn, Tyler - Hilton Hotel, Waco - Gateway Inn, Wichita Falls - Hilton Hotel, Wichita Falls Utah - Mount Holly Ski Resort, Beaver - Hotel-Proposed, Brigham City - Motel-Proposed, Cedar City - Proposed Mayflower Hotel, Deer Valley - Stein Eriksen Lodge, Deer Valley - Deer Valley Resort, Park City - Omni Yarrow, Park City - Prospector Square Resort, Park City - Yarrow Resort, Park City - Seven Peaks Resort and Hotel, Provo - Comfort Inn, Salt Lake City - Doubletree, Salt Lake City - Hilton Hotel-Airport, Salt Lake City - Holiday Inn, Salt Lake City - Holiday Inn-Salt Palace, Salt Lake City - Hotel Utah, Salt Lake City - Hotel-Proposed, Salt Lake City - La Quinta Inn, Salt Lake City - Nendels Inn, Salt Lake City - New Grande Hotel, Salt Lake City - Red Lion Hotel, Salt Lake City - Sheraton Hotel, Salt Lake City - Super 8, Salt Lake City - University Park Hotel (Desktop Rev), Salt Lake City - Ramada Inn-Proposed, Sandy Vermont - Ramada Inn, Bennington - Bolton Valley Corporation, Bolton Valley - Quality Inn, Brattleboro - Radisson Hotel, Burlington - Smugglers Notch, Cambridge - Inn-Proposed, Essex - Cascade Lodge, Killington - Inn of the Six Mountains, Killington - Mountain Inn, Killington - Equinox Hotel, Manchester - Howard Johnson Inn, Rutland - Quality Inn, Stowe - Conference Center-Proposed, Stratton Mountain - Sugarbush Inn, Sugarbush - Susse Chalet, Williston Virginia - Comfort Inn, Abingdon - Best Western, Alexandria - Comfort Inn, Alexandria - Compri Hotel-Proposed, Alexandria - Embassy Suites, Alexandria - Howard Johnson, Alexandria - Marriott Suites, Alexandria - Ramada Inn, Alexandria - Best Western, Arlington - Gateway Marriott, Arlington - Hyatt Arlington Hotel, Arlington - Hyatt Regency, Arlington - Key Bridge Marriott, Arlington - Marriott Hotel, Arlington - Sheraton Crystal City Hotel, Arlington - Sheraton National Hotel, Arlington - Stouffer Concourse Hotel, Arlington - Mountain Lake Hotel, Blacksburg - Holiday Inn, Bristol - Howard Johnson, Bristol - Days Inn, Carmel Church - Westfields International, Chantilly - Boar's Head Inn, Charlottesville - Cavalier Inn, Charlottesville - Courtyard by Marriott, Charlottesville - Hilton-University, Charlottesville - Holiday Inn-North, Charlottesville - Omni Charlottesville, Charlottesville - Radisson-Proposed, Charlottesville - Super 8, Charlottesville - Days Inn, Chester - Howard Johnson, Chester - Days Inn, Colonial Heights - Holiday Inn, Covington - Embassy Suites, Crystal City - Holiday Inn Crowne Plaza, Crystal City - Hyatt Hotel, Crystal City - Marriott Crystal Gateway Hotel, Crystal City - Comfort Inn-Proposed, Dahlgren - Days Inn, Emporia - Courtyard by Marriott, Fairfax - Embassy Suites, Fairfax - Neighborhood Suites-Proposed, Fairfax - Hampton Inn-Proposed, Fairfax City - Westfields International, Fairfax County - Marriott Hotel, Fairview - Econo Lodge, Farmingville - Comfort Inn-Proposed, Farmville - Comfort Inn, Frederick County - Motel 6, Fredericksburg - Courtyard by Marriott, Hampton - Days Inn, Hampton - Fairfield Inn, Hampton - Courtyard by Marriott, Herndon - Embassy Suites Hotel, Herndon - Ramada Renaissance and Health Club, Herndon - Residence Inn-Proposed, Herndon - Worldgate Marriott Hotel, Herndon - Hotel-Proposed, Hopewell - Keswick Inn, Keswick - Holiday Inn, Lexington - Radisson Hotel, Lynchburg - Courtyard by Marriott, Manassas - Holiday Inn, Marion - Hilton, McLean - Days Inn, Norfolk - Marriott Waterside Hotel, Norfolk - Omni Hotel, Norfolk - Waterfront Hotel - Proposed, Norfolk - 135-Suite Hotel-Proposed, Portsmouth - Waterfront Suite Hotel-Proposed, Portsmouth - Comfort Inn, Princeton - Comfort Inn, Pulaski County - Embassy Suites Hotel, Reston - Hyatt Hotel, Reston - Best Western Kings Quarters, Richmond - Courtyard by Marriott, Richmond - Embassy Suites Hotel, Richmond - Hampton Inn, Richmond - Holiday Inn, Richmond - Howard Johnson Lodge, Richmond - Hyatt House Hotel, Richmond - La Quinta Hotel, Richmond - Marriott Hotel, Richmond - Omni Richmond, Richmond - Radisson Hotel, Richmond - Ramada Renaissance Hotel, Richmond - Residence Inn, Richmond - Days Inn, Richmond (Broad) - Days Inn, Richmond (Byrd) - Holiday Inn, Roanoke - Holiday Inn - Airport, Roanoke - Holiday Inn - Civic Center, Roanoke - Holiday Inn - South, Roanoke - Hotel Roanoke, Roanoke - Howard Johnson, Roanoke - Marriott - Roanoke Airport, Roanoke - Marriott Hotel, Roanoke - Holiday Inn, Salem - Super 8, South Hill - Days Inn, Springfield - Hilton, Springfield - Holiday Inn, Staunton - Stonewall Jackson Hotel, Staunton - Hampton Inn - Proposed, Tyson's Corner - Embassy Suites, Tysons Corner - Marriott Hotel, Tysons Corner - Residence Inn, Tysons Corner - Ritz Carlton-Proposed, Tysons Corner - Courtyard by Marriott, Virginia Beach - Courtyard by Marriott-Lynnhaven, Virginia Beach - Fairfield Inn, Virginia Beach - Hotel-Proposed, Virginia Beach - Pavilion Tower Hotel, Virginia Beach - Ramada Inn - Oceanside, Virginia Beach - International Conference Center, Westfields - Howard Johnson, Wheeling - Fort Magruder Inn, Williamsburg - Governor's Inn, Williamsburg - Holiday Inn-East, Williamsburg - Holiday Inn-West, Williamsburg - Royce Hotel, Williamsburg - Williamsburg Hilton, Williamsburg - Best Western-Proposed, Wytheville Washington - Bellevue Thunderbird Motor Inn, Bellevue - Embassy Suites, Bellevue - Hampton Inn, Bellevue - La Quinta, Bellevue - Residence Inn Seattle-East, Bellevue - Ramada Inn, Bothell - Rattling Spring Hotel, Harpers Ferry - Motel 6, Issaquah - AmeriSuite, Kent - Homecourt Suite Hotel, Kent - Embassy Suite, Lynnwood - Residence Inn-Seattle North, Lynnwood - Red Lion Inn at Pasco, Pasco - Redmond Motel, Redmond - Hampton Inn, Sea Tac - Holiday Inn Airport, Sea Tac - Thunderbird Inn, Sea Tac - Alexis Hotel, Seattle - Courtyard by Marriott-South Center, Seattle - Doubletree Inn at South Center, Seattle - Doubletree Plaza, Seattle - Hampton Inn-Airport, Seattle - Holiday Inn Crowne Plaza, Seattle - Holiday Inn-Sea Tac, Seattle - La Quinta, Seattle - Lake Union Residence Inn, Seattle - Marriott Hotel-Airport, Seattle - Marriott Sea-Tac Hotel, Seattle - Plaza Park Suites, Seattle - Ramada Inn-Airport, Seattle - Red Lion, Seattle - Stouffer Madison Hotel, Seattle - Travelodge-Proposed, Seattle - Westin Hotel, Seattle - Courtyard by Marriott, Spokane - Gateway Hotel, Spokane - Holiday Inn-West, Spokane - Red Lion Inn, Spokane - Super 8, Spokane - Hilton-Village Green, Tacoma - Hotel-Proposed, Tacoma - Park Shore Inn, Tacoma - Tacoma Sheraton Hotel, Tacoma - Embassy Suites Hotel, Tukwila - Hampton Inn, Tukwila - Residence Inn-Seattle South, Tukwila - Red Lion Quay, Vancouver - Residence Inn-Portland North, Vancouver - Super 8, Wenatchee - Thunderbird Motor Inn, Yakima West Virginia - Comfort Inn-Proposed, Charleston - Holiday Inn, Clarksburg - Holiday Inn, Fairmont - Hotel-Proposed, Harpers Ferry - Holiday Inn, Huntington - Comfort Inn-Proposed, Morgantown - Holiday Inn, Morgantown - Motel-Proposed, Morgantown - Comfort Inn, Princeton - Motel-Proposed, Princeton - Hotel-Proposed, Wheeling - Howard Johnson, Wheeling Wisconsin - Super 8, Ashland - Holiday Inn, Beloit - Embassy Suites Hotel-Proposed, Brookfield - Marriott-Milwaukee, Brookfield - Holiday Inn, Eau Claire - Residence Inn, Glendale - Granada Royale-Proposed, Green Bay - Holiday Inn-Downtown, Green Bay - Residence Inn-Proposed, Green Bay - Super 8, Janesville - Super 8, Kenosha - Playboy Resort, Lake Geneva - Concourse Hotel, Madison - Fairfield Inn, Madison - Hampton Inn - East, Madison - Hampton Inn - West, Madison - Compri Hotel-Proposed, Milwaukee - Embassy Suite, Milwaukee - Fairfield Inn, Milwaukee - Holiday Inn-Airport, Milwaukee - Holiday Inn-West, Milwaukee - Hotel and Conv. Ctr. East-Proposed, Milwaukee - Hyatt Regency, Milwaukee - Marc Plaza, Milwaukee - Marriott Inn, Milwaukee - Omni Suite Hotel-Proposed, Milwaukee - Super 8-Airport, Milwaukee - Olympia Village Resort, Oconomowoc - Scotsland Resort, Oconomowoc - Sheraton, Racine - Claridge Motor Inn, Rhinelander - Super 8, Waukesha - Holiday Inn, Wausau - Mead Inn, Wisconsin Rapids Wyoming - Days Inn, Casper - Flying L. Skytel, Cody - Super 8, Cody - Snow King Resort, Jackson - Super 8, Jackson - Wort Hotel, Jackson - Development-Proposed, Jackson Hole - Colter Bay Village, Moran - Jackson Lake Lodge, Moran - Jenny Lake Lodge, Moran - Best Western-Bel Air, Rawlins - Bridger Inn, Rawlins - La Quinta Inn, Rock Springs Western Europe Belgium - Oostkamp Hotel, Bruges - Proposed Residence Inn, Brussels - SAS Royal Hotel, Brussels Denmark - Proposed Hotel, Copenhagen France - The Miramar, Biarritz - Chateau D'arc en Barroi, Haute-Marne - Le Grand, Paris - Royal Monceau, Paris Germany - Cumberland House, Berlin - Munchen Penta Hotel, Munchen Holland - Carlton - Cannes & Amstel, Amsterdam - The Pulitzer Hotel, Amsterdam Spain - Le Meridien, Barcelona - Princess Sophia, Barcelona - Hotel Los Monteros, Marbella - Incosol Spa & Hotel, Marbella - Proposed Hyatt Resort, Marbella United Kingdom - Copthorne Hotel, Aberdeen - Copthorne Hotel, Birmingham - Hyatt Regency, Birmingham - Holiday Inn, Cambridge - Copthorne Hotel, Cardiff - Great Eastern Hotel, England - Copthorne Hotel, Glasgow - Hanbury Manor Hotel, Hertfordshire - 47 Park Street, London - Bailey's Hotel, London - Basil Street Hotel, London - Basil Street Hotel, Knightsbridge, London - Britannic Tower, London - Chelsea Hotel, London - Chesterfield Hotel, London - Chesterfield Hotel, Mayfair, London - Copthorne Hotels, London - Copthorne Tara Hotel, London - Dorchester Mayfair, London - Executive Hotel, London - Marriott Hotel, London - May Fair, London - Plaza Hotel, London - Proposed Hotel Conversion, London - Proposed Hotel-The City, London - Regent Hotel, London - Regent London Hotel, London - Sheraton Belgravia, London - Sheraton Park Tower, London - St. James Court Hotel, London - The Executive Hotel, London - Windsor Hotel, London - Copthorne Hotel, Manchester - Copthorne Hotel, Newcastle - Copthorne Hotel, Slough/Windsor - Swallow Hotel, Stockton - Copthorne Hotel-Effingham Park, Sussex - Copthorne Hotel-Gatwick, Sussex Middle East and North Africa Egypt - Sheraton Anni Cruise Ship, - Sheraton Aton Cruise Ship, - Sheraton Hotp Cruise Ship, - Sheraton Tut Cruise ship, - Aswan Oberol Hotel, Aswan - Cairo Sheraton Hotel, Cairo - Hotel - Proposed, Cairo - Lido Hotel, Cairo - Meridien Hotel, Cairo - Novotel Cairo Airport, Heliopolis, Cairo - Proposed Resort Complex, Hurghada - Luxor Sheraton Hotel, Luxor - Proposed Hotel, Luxor - Fayrouz Village Hotel, Sharm El Sheikh, Sinai - Coral Village Hotel, Nuweiba, Sinai - Hotel - Proposed, Dahab, Sinai - Hotel - Proposed, St. Catherine, Sinai Greece - Athens Hilton & Proposed Hotel, Athens - Caravel Hotel, Athens - Proposed Sargani Hotel & Bungalows, Halkidiki - Rhodes Hotel -Proposed, Rhodes Israel - Proposed Inter-Continental Hotel, Tel Aviv Lebanon - Hotel Market Review, Beruit Morocco - El Minzah Hotel, Tangier Nigeria - Proposed Sheraton Hotel, Port Harcourt Saudi Arabia - Proposed Jeddah Corniche Project, Jeddah Tunisia - Proposed Hotel, Hammamet Turkey - Hotel Conrad, Istanbul Latin America and the Caribbean Bahamas - Eleuthera Joint Venture, Eleuthera - Cape Eleuthera Island Hotel, Eleuthera Island - Eleuthera Joint Venture, Eleuthra - The Montague, Nassau - Paradise Island Hotel, Paradise Island - Resorts Int'l Hotel and Casino, Paradise Island Belize - Journey's End Caribbean Club, Abergris Caye Bermuda - Sonesta Hotel, Bermuda Brazil - Quatro Rodas Hotel, Recife Colombia - Charleston Hotel - Proposed, Barranquilla - Bella Suiza Hotel, Bogota - Hotel & Convention Center -Proposed, Cali - Cartagena Hilton, Cartagena - El Faro de Cartagena Resort Propose, Cartagena - Proposed Indian Sea and Sun Resort, Cartagena - Hotel De Isleno, San Andres Isla - Santamar Hotel, Santa Marta Curacao - Ramada Renaissance Hotel and Casino, Honduras - Inn Of The Sun, Guanaja Jamaica - Holiday Inn-Rose Hall, Montego Bay - Americana Eden II, Ocho Rios Mexico - Posadas de Mexico Hotels, - Americana Condesa Del Mar, Acapulco - Americana El Presidente Hotel, Acapulco - Resort-Proposed, Cabo San Lucas - Palacio Del Margus, Chiconcuac - Omni Hotel, Ixtapa - Fiesta Inn-Proposed, Leon - Karmina Place, Manzanillo - Hotel - Proposed, Mexico City - La Jolla de Mismaloya, Puerta Vallarta Netherland Antilles - Divi Divi Beach Resort, Aruba - Divi Tamarijn Beach Resort, Aruba - Golden Anchor, Bonaire - Resort Hotel-Proposed, Bonaire - Ramada Renaissance Hotel and Casino, Curacao - Cupecoy Beach Club Hotel, St. Maarten - Dawn Beach Hotel, St. Maarten - Dawn Beach Resort, St. Maarten - Mullet Bay Resort, St. Maarten - Oyster Pond Hotel, St. Maarten Puerto Rico - Hyatt Dorado Beach Hotel, Dorado - Hyatt Regency Cerromar Hotel, Dorado - Hotel - Proposed, Fajardo - Hotel Puerto Rico, Fajardo - Westin Resort-Proposed, Palmer - Marriott Resort & Casino-Proposed, Puerto Rico - Carib Inn, San Juan - Dupont Plaza, San Juan - El San Juan Hotel and Casino, San Juan - Howard Johnson Hotel, San Juan - Marriott - Proposed, San Juan - Marriott Update - Proposed, San Juan - Sands Hotel and Casino, San Juan Virgin Islands - Caneel Bay, St. Croix - Carambola Beach Resort, St. Croix - Hotel - Proposed, St. Croix - St. Croix Development, St. Croix - Caneel Bay, St. John - Pineapple Beach Hotel, St. Thomas - Sugar Bay Plantation, St. Thomas - Virgin Grand Hotel, St. Thomas - Virgin Isle Hotel, St. Thomas - Little Dix Bay, Virgin Borda Eastern Europe Croatia - Two Hotels, Dubrovnik Czech Republic - Voronesh Hotel Complex, Brno - Proposed Four Seasons Hotel, Prague Hungary - Proposed Resort Hotel, Babolna - Duna Inter-Continental, Budapest Latvia - Daugava Hotel-Proposed, Riga - Proposed Hotel, Riga Poland - Holiday Inn, Krakow - Marriott Hotel - Proposed, Poznan - Proposed Hotel, Poznan - Radisson Hotel, Szczecin - Bristol Hotel, Warsaw - Holiday Inn, Warsaw - Orbis Joint Venture, Warsaw - Proposed Hotel, Warsaw - Sheraton Hotel - Proposed, Warsaw - Zakopane Resort Complex, Zakopane Russia - Kamiennyi Most Hotel & Business, Moscow - Savoy Hotel, Moscow Asia Korea - Ultrapolis 3000, Seoul Malaysia - UP 3000 Hotel-Proposed, Selangor Singapore - Resort Hotels - Proposed, - Ultrapolis 3000, Singapore West Indies - Proposed Blue Lagoon Resort, St. Martin Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Hospitality Valuation Services Industry Leader Hospitality Valuation Services (HVS) was created in 1980 to satisfy the ever-increasing demand for reliable and well-documented hotel/motel valuations, market studies, and feasibility reports. As the nation's leading real estate appraisal organization devoted exclusively to lodging properties, HVS offers owners, investors, and lenders in-depth valuation and market research expertise. Our professional staff, operating on a worldwide basis with offices in New York, San Francisco, Miami, Boulder, Vancouver, and London, has appraised more than 4,000 hotels and motels in every state and over 32 foreign countries. Each member of Hospitality Valuation Services is well versed in lodging operations. Most have college degrees in hotel administration as well as actual on-the-job hotel experience. Coupled with intense training in real estate appraisal theory and techniques, we are highly qualified to handle the unique characteristics of hostelry valuations. Excellence Through Specialization An important feature of our valuation and feasibility services is specialization. Daily exposure on a global basis to a wide variety of hotel transactions and operating statistics, along with actual buyers and sellers, provides the data to thoroughly document our reports. HVS maintains the industry's largest database of hotel valuation information: o Data on over 4,000 hotel transactions; o Over 3,500 actual financial statements; o Thousands of management contracts, franchise agreements, mortgages, leases, and other similar documents; o Personal contacts at every major hotel company; o Names and addresses of over 10,000 hotel owners, investors, lenders, and operators. Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Innovative research in hotel valuation techniques is set forth in the textbooks we authored for the Appraisal Institute, entitled The Computerized Income Approach to Hotel/Motel Market Studies and Valuations and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations. These publications, along with more than 300 articles, are recognized as the authoritative standard for valuing lodging facilities and performing market feasibility studies. In addition, we have developed Hospitality Valuation Software, a computerized package that assists appraisers and consultants in evaluating market trends and preparing financial forecasts. Full-Service Hotel Consulting With a reputation established by providing highly detailed hotel valuations that are accepted and relied upon by virtually every major hotel owner, lender, and operator, HVS has branched out to offer a full range of consulting services. o HVS Consulting Services: Valuations, market feasibility studies, economic studies, management contract and franchise negotiations, development assistance, and expert testimony. o HVS Executive Search: Recruitment and placement of top-level hotel management personnel. o HVS Eco Services: Environmental audits and assistance in implementing programs including water and energy management, recycling, and green product selection. Provides ECOTEL certifications to environmentally sensitive hotels. o HVS Gaming Services: Specialized market, valuation, and consulting services for casinos and other types of gaming activities. o HEI Hotels: Hotel ownership and management. Long-Term Relationship Hospitality Valuation Services is in business for the long-term. We are dedicated to providing our clients with the highest quality consulting services. Should you require assistance in any areas covered by our expertise, please contact any member of our team at (516) 248-8828. This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. ============= HVS - ------------- International ============= ===================================================== ---------------------------- Economic Study and Appraisal ---------------------------- Grand Kempinski Dallas ---------------------------- Addison, Texas ---------------------------- Prepared by: Hospitality Valuation Services A Division of Hotel Consulting Services, Inc. 372 Willis Avenue Mineola, NY 11501 516-248-8828 Submitted to: Mr. Shirish Godbole Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 [Letterhead of HVS International] April 30, 1997 Mr. Shirish Godbole Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 Re: Grand Kempinski Dallas Addison, Texas Ref. #9710145 Dear Mr. Godbole: Pursuant to your request, we herewith submit our economic study and appraisal pertaining to the above-captioned property. We have inspected the site and facilities, and have analyzed the hostelry market conditions in the Dallas area. Our report was prepared in accordance with, and is subject to, the requirements of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and the Uniform Standards of Professional Appraisal Practice (USPAP), as provided by the Appraisal Institute. Based on the available data, our analysis, and our experience in the hotel industry, it is our opinion that the market value of the fee simple interest in the subject property described in this report, as of April 1, 1997, is: $90,000,000 NINETY MILLION DOLLARS We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings and valuation. The economic study and appraisal is made part hereof, and must remain attached in order for the value opinion set forth to be considered valid. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. Very truly yours, HOSPITALITY VALUATION SERVICES A Division of Hotel Consulting Services, Inc. /s/ Samantha A. Sudre Samantha A. Sudre Consulting and Valuation Analyst /s/ Anne R. Lloyd-Jones Anne R. Lloyd-Jones, CRE Senior Vice President /s/ Stephen Rushmore Stephen Rushmore, CRE, MAI, CHA President HVS International, Mineola, New York Grand Kempinski Dallas, Addison, Texas Table of Contents - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table of Contents 1. Executive Summary ......................................... 1 2. Nature of the Assignment .................................. 3 3. Description of the Land, Improvements, Zoning, Taxes, and Neighborhood ...................... 7 4. Market Area Analysis ...................................... 29 5. Overview of External Forces Affecting the U.S. Lodging Industry ................................ 43 6. Lodging Market Supply and Demand Analysis ................. 59 7. Projection of Occupancy and Average Rate .................. 78 8. Highest and Best Use ...................................... 96 9. Approaches to Value ....................................... 98 10. Income Capitalization Approach ............................ 101 11. Sales Comparison Approach ................................. 142 12. Cost Approach ............................................. 155 13. Reconciliation of Value Indications ....................... 163 14. Statement of Assumptions and Limiting Conditions .......... 167 15. Certification ............................................. 171 Addenda Quality Assurance Photographs of the Subject Property Photographs of the Competitive Properties Legal Description Flood Map Synopsis of Management Agreement Synopsis of Retail Leases Explanation of the Simultaneous Valuation Formula Qualifications Samantha A. Sudre Anne R. Lloyd-Jones, CRE Stephen Rushmore, CRE, MAI, CHA HVS International, Mineola, New York Executive Summary 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 1. Executive Summary Property: Grand Kempinski Dallas Location: 15201 Dallas Parkway Addison, Texas 75248 Date of Inspection: April 1, 1997 Interest Appraised: Fee simple, including land, improvements, and furniture, fixtures, and equipment Date of Value: April 1, 1997 Land Description - ---------------- Area: 11 acres, or +/-480,000 square feet Zoning: PD - Planned Development Assessor's Parcel Number: Quorum North PT Site 4, Block 2 Improvements Description - ------------------------ Age: Constructed in 1983 Property Type: Four-star luxury convention Guestrooms: 528 Number of Stories: 15 stories Food and Beverage Facilities: Le Cafe (Coffee Shop) 250 seats Monte Carlo (Gourmet French/Italian) 230 seats Le Gala (Sophisticated Reception Hall) 150 seats Malachite (Showroom) 750 seats Bristol Lounge (Lobby Lounge/Bar) 120 seats Kempis (Nightclub) 750 seats Meeting Space: 21 rooms, totaling +/-76,000 square feet Parking: 860 total spaces Surface Lot: 330 spaces Parking Garage: 530 spaces HVS International, Mineola, New York Executive Summary 2 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Summary of Value Parameters - --------------------------- Highest and Best Use (as if vacant): Transient lodging facility Highest and Best Use (as improved): Transient lodging facility Marketing Period: Six to twelve months Number of Years to Stabilize: Three Stabilized Year: 1999/00 Valuation Assumptions - --------------------- Mortgage Interest Rate: 9.5% Amortization Period: 25 years Debt Service Constant: 0.104844 Loan-to-Value Ratio: 70.0% Stabilized Inflation Rate: 3.5% Equity Yield Rate: 20.0% Terminal Capitalization Rate: 11.0% Brokerage and Legal Fees: 3.0% Holding Period: 10 years Calculated Discount Rate: 13.5% Estimates of Value - ------------------ Income Capitalization Approach: $89,950,000 Sales Comparison Approach: $85,000,000 - $99,000,000 Cost Approach (Replacement Cost): $100,800,000 Market Value Conclusion: $90,000,000 Market Value Conclusion per Room: $170,455 HVS International, Mineola, New York Nature of the Assignment 3 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 2. Nature of the Assignment Subject of the Economic Study and Appraisal The subject of the economic study and appraisal is the fee simple interest in a +/-480,000-square-foot (11-acre) parcel improved with a 528-room, four-star luxury convention lodging facility known as the Grand Kempinski Dallas, which opened in 1983. In addition to guestrooms, the subject property contains 40 suites (included in the above room count), 22 meeting rooms with +/-76,000 square feet, a showroom, a garden court, two restaurants, a lobby lounge, a nightclub, heated indoor and outdoor swimming pools and whirlpools, four lighted roof-top tennis courts, two racquetball courts, a health club, parking for 860 cars, and appropriate back-of-the-house facilities. The hotel is located in Addison, a small business town north of Dallas, at the intersection of Dallas North Tollway and Beltline Road. Municipal jurisdictions governing the property include the City of Addison, Dallas County, and the State of Texas. The hotel's civic address is 15201 Dallas Parkway, Addison, Texas, 75248. Objective of the Economic Study and Appraisal The objective of the economic study and appraisal is to evaluate the supply and demand factors affecting the market for transient accommodations in the Addison area for the purpose of estimating the market value of the subject property. Market value is defined by the Office of the Comptroller of the Currency (OCC), 12 CFR, Part 34, 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 and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. buyer and seller are typically motivated; HVS International, Mineola, New York Nature of the Assignment 4 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 2. both parties are well informed or well advised, and acting in what they consider their own best interests; 3. a reasonable time is allowed for exposure in the open market; 4. payment is made in terms of cash in U. S. dollars or in terms of financial arrangements comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) Use of the Appraisal This appraisal is being prepared for use by Morgan Stanley Mortgage Capital, Inc. in connection with the possible refinancing of the subject property. The information presented in this report should not be disseminated to the public or third parties without the express written consent of Hospitality Valuation Services. Scope of the Appraisal All information was collected and analyzed by the staff of Hospitality Valuation Services. Data such as historical operating statements, site plans, floor plans, and so forth were supplied by Morgan Stanley Mortgage Capital, Inc. and the hotel management. Unless noted otherwise, we have inspected the competitive lodging facilities, and have analyzed the sales summarized in this report, and our value conclusion is based on this investigation and analysis. Property Rights Appraised The property rights appraised are the fee simple ownership of the land and improvements, including the furniture, fixtures, and equipment. The fee simple interest is defined as, "absolute ownership unencumbered by any other interest or estate subject only to the four powers of government." The subject property is appraised as a going concern (i.e., an open and operating facility). (1) Federal Register, Vol. 55, No. 165, August 24, 1990; p. 34696. HVS International, Mineola, New York Nature of the Assignment 5 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Method of Study The methodology used to develop this economic study and appraisal is based on the market research and valuation techniques set forth in the textbooks authored by HVS International for the American Institute of Real Estate Appraisers and the Appraisal Institute, entitled, The Valuation of Hotels and Motels,(2) Hotels, Motels and Restaurants: Valuations and Market Studies,(3) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations,(4) and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations.(5) The appraisal will consider the three standard approaches to value: income capitalization, sales comparison, and cost. Because lodging facilities are income-producing properties that are normally bought and sold on the basis of capitalization of their anticipated stabilized earning power, the greatest weight is given to the value indicated by the income capitalization approach. We find that most hotel investors employ a similar procedure in formulating their purchase decisions, and thus, the income capitalization approach most closely reflects the rationale of typical buyers. When appropriate, the sales comparison and cost approaches are used to test the reasonableness of the results indicated by the income capitalization approach. Ownership, Franchise, and Management History and Assumptions A photocopy of the subject property's legal description, which was provided by the City of Adisson, is presented in the Addenda to this report; the appraisers assume no responsibility regarding the accuracy of this legal description. The subject property was built in 1983 and opened as a Registry hotel. In mid 1987, the hotel's appellation was changed to the Grand Kempinski. The legal ownership entity is the Registry Dallas Associates, a Delaware limited partnership which consists of Dallas Hotel Associates, the general (2) The Valuation of Hotels and Motels, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1978. (3) Hotels, Motels and Restaurants: Valuations and Market Studies, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1983. (4) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1990. (5) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992. HVS International, Mineola, New York Nature of the Assignment 6 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= partner, and Grand Hotel Associates, the limited partner. These entities have owned the hotel since it opened. Kempinski International, Inc. operates the subject property under a management agreement which expires December 31, 2002; an abstract of this contract is presented in the Addenda to this report. Marketing Period In light of the renewed interest in hotel investments and the increasing availability of debt and equity capital, we believe that it will take six to twelve months to sell the subject property, assuming that it is placed on the market at the concluded value. Effective Date of the Appraisal The effective date of the appraisal is April 1, 1997. All projections are expressed in inflated dollars, and the value estimate represents 1997 dollars. Date of Inspection The subject property was inspected by Anne R. Lloyd-Jones and Samantha Sudre on April 1, 1997. HVS International, Mineola, New York Description of the Land, Improvements, 7 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 3. Description of the Land, Improvements, Zoning, Taxes, and Neighborhood LAND The suitability of the land for the operation of a lodging facility is an important consideration affecting the economic viability of a property and its overall value. Factors such as size, topography, access, visibility, and the availability of utilities have a direct impact on the desirability of a particular site. Size and Topography The subject site is located North of Dallas, within the block bounded by Dallas Parkway to the east, Arapaho Road to the north, and the Quorum Loop North to the west and south. Street frontage is available along the Dallas Parkway to the east and the Quorum Loop to the south. The site's northern boundary is formed by an alley between the hotel and the Colonnade, an adjacent office building. To the west, the hotel adjoins a vacant parcel which is also owned by Registry Dallas Associates, but which is not included in this appraisal. Primary vehicular access to the property is provided by the Dallas Parkway. The site is an irregular rectangle in shape, and its topography is flat. According to a July, 1980 survey from the City of Addison, the subject parcel measures approximately 480,000 square feet, or +/-11 acres. Municipal jurisdictions governing the property include the City of Addison, the County of Dallas, and the State of Texas. The size and topography of the subject parcel appear to be well suited for hotel use. The site is fully developed, with no excess land available for expansion. Indeed, although the subject site is proportionately large for a 528-room hotel, the City of Addison's requirements for parking accommodation justify the total use of the land. Regional Access It is important to analyze a lodging facility's ease of access with respect to regional and local transportation routes and demand generators. The subject site is readily accessible to a variety of local, county, state, and interstate highways. [GRAPHIC OMITTED] SITE PLAN HVS International, Mineola, New York Description of the Land, Improvements, 8 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Primary regional access to the Dallas area is provided by Interstates 35, 30, and 20. Interstate 35 (Stemmons Freeway), a major north-south thoroughfare for Texas, connecting the Dallas/Fort area with Waco, Austin, San Antonio, and Laredo, carries motorists south from Oklahoma and branches into two highways (I-35E and I-35W) as it passes through Dallas and Fort Worth, before merging again in Hillsboro, Texas. Interstate 30 is a northeast-southwest thruway connecting the eastern boundary of downtown Dallas to Little Rock, Arkansas. Interstate 20, a major east-west thoroughfare, originates in Meridian, Mississippi, and extends westward through Jackson, Mississippi, Shreveport, Louisiana, and Dallas before terminating approximately ten miles of Odessa, Texas. Other important regional roadways in the subject property's vicinity include Interstates 75 and 635, and the Dallas North Tollway. Interstate 75 is a north-south thruway connecting Caddo, Oklahoma (where it changes into U. S. Highway 65) to the northern boundary of downtown Dallas. Interstate 635, which is also known locally as the LBJ Freeway, constitutes a major east-west loop known as the 635 Loop, which circumnavigates the Dallas Metropolitan area and provides ready access from North Dallas to the Dallas/Fort Worth Airport. Interstate 635 also meets Interstates 30, 20, and 35E at different points around the city. The Dallas North Tollway is a six-lane, bi-directional toll road which extends in a north-south direction through North Dallas. This road is a primary commutational route, and links the commercial and residential developments in North Dallas with the communities to the south, including the Dallas Central Business District. In turn, the Dallas North Tollway provides access to I-635 approximately two miles south of the subject property. Local Access and Visibility Local thoroughfares providing general access to the subject site consist of Belt Line Road, Preston Road and Arapaho Road. Belt Line Road and Arapaho Road are both east-west thoroughfares which are characterized by commercial and residential developments along their borders. Belt Line Road passes south of the subject property, and Arapaho Road intersects the Quorum Loop North to the west, which, in turn, circumvents the property and ends to the south, at Dallas Parkway. Preston Road runs in a north-south direction approximately one mile east of the subject property, and connects the Highland Park area of Dallas, to the south, with the City of Plano to the north. HVS International, Mineola, New York Description of the Land, Improvements, 9 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Local access to the Grand Kempinski is primarily provided by the Dallas North Tollway and Belt Line Road. The hotel is situated on the western access road for the Tollway, which is known as the Dallas Parkway; traffic on this service road travels one way, in a southbound direction. Motorists traveling north on the Tollway must exit at Belt Line/Arapaho and continuing north, make a left U-turn onto Dallas Parkway before reaching the hotel, which is located to their right. The subject property has two entrances; the first one encountered provides direct access to the main entrance (or east entrance) and to Monte Carlo, the hotel's evening restaurant. The next entranceway (south entrance) offers direct access to the ballroom and other function areas. Motorists traveling southbound on the Dallas North Tollway must exit at the Keller Springs Road Exit, and continue southward on Dallas Parkway; the hotel is encountered on their right, shortly after crossing Arapaho Road. The subject site, located immediately west of the Dallas North Tollway, enjoys good visibility for passing north- and southbound motorists. However, the high-rise office buildings located to the north and south somewhat obscure the visibility of the hotel from points on the Tollway prior to the appropriate exits, making the overall visibility of the subject hotel only fair. Visibility of the Grand Kempinski from Belt Line Road is considered to be very good. Overall, regional access to the Grand Kempinski Dallas is considered good, but the visibility is considered average. Airport Access Primary air transportation to the Addison area is provided by Dallas/Fort Worth International Airport, located approximately 19 miles west of the subject property. The Dallas/Fort Worth International Airport serves as a hub for both American Airlines and Delta Airlines, in addition to being utilized by an additional five international and 16 domestic airlines. According to the new Airport Development Plan, Dallas and Fort Worth will invest a total of $3.5 billion for major airfield expansion and associated facilities. To reach the Grand Kempinski Dallas, motorists exit Dallas/Fort Worth International Airport via the north exit onto Highway 121, and continuing north, exit onto I-635, and travel eastward to the Dallas North Tollway, turning north. Love Field Airport is a secondary airport servicing the Dallas area. It is located approximately 12 miles south of the subject property, and offers the services of Southwest Airlines. Under "the Wright Amendment," Love Field and Southwest Airlines are allowed to provide interstate service, but HVS International, Mineola, New York Description of the Land, Improvements, 10 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= only to the four states contiguous to Texas - New Mexico, Oklahoma, Arkansas, and Louisiana. To reach the Grand Kempinski from Love Field Airport, motorists follow Mockingbird Lane east, then take the Dallas North Tollway going north, and use the Belt Line Road/Arapaho Road Exit. Access to Local Demand Generators The Grand Kempinski Dallas is situated in the heart of the area's primary generators of lodging demand. Primary lodging demand generators in the subject property's area are major businesses and corporations. The following table outlines some of these major demand generators and their distance from the subject site. ================================================================================ Table 3-1 Local Demand Generators - -------------------------------------------------------------------------------- Approximate Distance Demand Generator from Subject Site (in Miles) - ---------------- ---------------------------- CompUSA 0.10 MBNA Information Services 0.25 Pizza Hut International 0.25 Mary Kay Cosmetics, Inc. 0.75 Countrywide Funding 8.0 The Galleria Mall 2.0 Digital Switch Corporation 7.0 - -------------------------------------------------------------------------------- Utilities The subject site is served by all necessary utilities, which are provided as follows. ================================================================================ Table 3-2 Available Utilities - -------------------------------------------------------------------------------- Utility Provider ------- -------- Water Addison Water Department Electricity TU Electric Telephone Southwestern Bell Long-distance Telephone MCI Sewer Addison Water Department Natural Gas Lone Star Gas Company Garbage and Trash Texas Waste Management - -------------------------------------------------------------------------------- HVS International, Mineola, New York Description of the Land, Improvements, 11 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Soil and Subsoil Conditions Geological and soil reports were not provided to the appraisers or made available for review during the preparation of this report. The appraisers are not qualified to evaluate soil conditions, other than by a visual inspection of the surface. Nuisances and Hazards The appraisers have not been informed of any site-specific nuisances or hazards, and no signs of toxic ground contaminants were visible s at the time of our inspection. Because the appraisers are not experts in this field, we do not warrant the absence of hazardous waste, and we urge the reader to obtain an independent analysis of these factors. Easements The appraisers were not provided with any information concerning easements affecting the subject property. For the purpose of this appraisal, we have assumed that the property is not encumbered by any unusual or onerous easements that would affect its use or potential marketability. Flood Zone Possible locational hazards include flood potential. The subject property is located within Zone C, per the Federal Insurance Administration Agency's Community Panel Number 48108 0005 A, effective July 16, 1980. Zone C is designates "areas of minimal flooding." However, we cannot guarantee the accuracy of our data; therefore, we recommend that a flood certification be obtained. Legal Description As noted earlier, a copy of the subject property's legal description, as provided by the City of Addison, is presented in the Addenda to this report. Land Conclusion The subject parcel appears to be well suited as the site of a lodging facility. We have analyzed the issues of size, topography, access, visibility, and the availability of utilities, and we note the following advantages and disadvantages. Advantages o The entire Dallas area enjoys superior national accessibility via Dallas/Fort Worth International Airport. o Local access is facilitated via easily navigated highways; Dallas North Tollway provides convenient direct access to downtown Dallas. o The size and topography of the site are appropriate for its current use, and ample parking is available. HVS International, Mineola, New York Description of the Land, Improvements, 12 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= o The area surrounding the site is developed with extensive commercial, retail, and office uses, all of which generate lodging demand. Disadvantages o Visibility of the subject site for north- and southbound Tollway motorists is somewhat impaired by the presence of high-rise office buildings in the area. o Access to the subject site from the Tollway via Dallas Parkway is somewhat complicated for northbound travelers. The advantages noted above are important locational characteristics. We believe that these advantages outweigh the disadvantages, and we conclude that the subject site is appropriate for its current use. IMPROVEMENTS The quality of a lodging facility's physical improvements has a direct influence on its marketability and attainable occupancy and average rate. The design and functionality of the structure can also affect operating efficiency and overall profitability. This section investigates the subject property's physical improvements and personal property in an effort to determine how they contribute to total value. The following description of the improvements is based on our inspection of the hotel and information provided by management representatives. The Grand Kempinski Dallas is a four-star luxury convention lodging facility containing 528 rentable units with 40 suites (included in the above room count); +/-76,000 square feet of meeting and banquet space, including a showroom and the Garden Court; two restaurants; a lobby lounge; a nightclub; heated indoor and outdoor swimming pools and whirlpools; four lighted tennis courts; two racquet ball courts; a health club; parking for 860 cars; and appropriate back-of-the-house facilities. The 15-story property opened in 1983, and is operated under a management agreement with Kempinski International, Inc. Overall, the hotel appears to be in relatively good condition; management representatives report that all of the building systems are in working order. Based on our inspection and information provided by management representatives, the following table summarizes the facilities available at the subject property. HVS International, Mineola, New York Description of the Land, Improvements, 13 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 3-3 Facilities Summary - -------------------------------------------------------------------------------- Guestrooms King Beds 293 Units Double/Doubles 204 Suites 31 ------- Total 528 Units Non-Smoking Rooms 355 Food and Beverage Outlets Le Cafe 200 Seats Monte Carlo 150 Bristol Lounge 150 Kempi's 700 Meeting and Banquet Rooms Crystal Ballroom (8 sections) 25,400 Square Feet Crystal Ballroom Foyer 20,000 Lalique Ballroom (2 sections) 4,560 Lalique Foyer 2,000 Malachite Showroom 9,280 Le Gala Reception Hall 3,180 3 Conference Rooms (2 sections each) 3,300 2 Board Rooms 1,100 2 Meeting Rooms Cosmopolitan 650 Metroplex 650 Addison Hospitality Suite 1,030 Garden Court 5,168 ------- Total 76,318 Square Feet Parking Surface Lot 330 Spaces Parking Garage 530 ------- Total 860 Spaces Recreational & Other Amenities Lighted Roof-Top Tennis Courts 4 Racquetball Courts 2 Indoor Heated Swimming Pool with Whirlpool Outdoor Heated Swimming Pool with Whirlpool Health Club Men's & Women's Saunas Ice Machine on each floor - -------------------------------------------------------------------------------- HVS International, Mineola, New York Description of the Land, Improvements, 14 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 3-3 Facilities Summary (continued) - -------------------------------------------------------------------------------- Retail Space 8 Shops Elevators/Escalators Montgomery Passenger Electric (3,000 lbs.) 6 Units Service Electric (3,500 lbs.) 3 Cargo Hydraulic (10,000 lbs.) 1 Freight Hydraulic (3,500 lbs.) 1 Montgomery Escalators 2 Laundry Washers 10 Units Dryers 15 Folder 1 Ironer 1 Chutes Life Safety Systems Full Sprinkler System Single Station Smoke Alarms Voice Alarm System Smoke and Fire Dampeners Fire Extinguishers, Pull Stations Mechanical Systems Centralized Four-Pipe HVAC Trane Centravac Air Chillers 2 Cleaver Brooks Boilers 2 Fulton Boiler for Laundry Area 1 Construction Details Foundation Drill Concrete Piers Framing Poured/Cast-in-Place Concrete Fire-Proof Exterior Walls Pre-cast Concrete Concrete Panels Windows Single-pane Glazed Roof Metal and Concrete Multi-ply Asphalt Covering Roofing Felt and Ballast - -------------------------------------------------------------------------------- HVS International, Mineola, New York Description of the Land, Improvements, 15 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Property Exterior and Construction Vehicular access to the subject site is via a driveway between the Colonnade building and the hotel, or via the Quorum Loop North. After entering the site, guests proceed to the hotel's main entrance, which is located on the east side of the building. Service traffic can gain access to the loading dock, which is located on the north side of the building. The hotel structure is situated in the northeast portion of the site. Paved parking areas located to the south of the property contain 330 spaces, and a parking garage to the west accommodates 530 vehicles, for a total of approximately 860 available parking spaces. The hotel features two basic components: the 15-story hotel tower and the three-story public building. The hotel is constructed of a fireproof poured/cast-in-place concrete frame with concrete panels exterior walls. The roof is constructed of metal and concrete with an asphalt multi-ply cover. Windows are single-paned, glazed, and fixed throughout the property. Design and Layout The design of the hotel tower features a rectangular-shape; however, the adjoining public building structure to the north, creates a L-shape with the tower. Adjoining the subject hotel on its western side is the parking garage, which is connected to the hotel tower on the ground level. The subject property features 14 levels above one basement level. This below-grade level houses the hair salon, the health club, some administrative offices, the discotheque, and back-of-the-house spaces such as the hotel's laundry, housekeeping and engineering rooms, and the employees' lockers and cafeteria. Facilities accommodated on the first (ground) level include the swimming pools, leased retail spaces, the two restaurants and the lobby lounge, the showroom and additional function space, the main kitchen, the loading deck, the two entrances, the lobby, some administrative offices, and parking. The second level accommodates the ballrooms and pre-function space, five breakout meeting rooms, the banquet kitchen, coat check rooms, and the business center. The third-level accommodates sales and executive offices, four meeting rooms, and guestrooms. The remaining 11 levels of the hotel structure are guestroom floors. Levels 14 and 15 are concierge levels, and as such, benefit from added services and amenities. Lobby The subject property's main entrance is located on the south side of the hotel building, and is equipped with a porte cochere that covers the passenger HVS International, Mineola, New York Description of the Land, Improvements, 16 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= arrival area. The main entrance opens into the lobby - a long rectangular space that houses the front desk, and provides access to other areas of the hotel. Upon entering through the main entrance doors, guests proceed to the front desk, which is situated straight ahead and to the right, on the northern wall of the lobby. The concierge desk is perpendicular to the front desk, on the western wall. A seating area is conveniently located immediately to the left of the entrance, on the southern wall, for the comfort of guests waiting for transportation services. Across from the seating area, are the lobby lounge and a corridor leading to Monte Carlo Restaurant, Le Gala Banquet Room, public restrooms, and the stairways to Kempi's Discotheque below. Another corridor, situated across from the front desk, extends westward, providing access to the six guest elevators, six shops, including the hotel's gift shop, two escalators leading to the function space on the second floor, the Garden Court, Le Cafe Restaurant, the Malachite Showroom, public restrooms, a travel agency and the covered parking. The lobby floor is finished with marble and carpets. The walls are covered with bright-colored fabrics and framed artworks, and two large glass chandeliers hang from the ceiling. The lobby design is functional, and the front desk visible from the main entry. However, the elevators are not visible from the front desk, and are directly accessible from the ballroom (or southern) entrance, which may cause security problems. Food and Beverage Outlets Food and beverage service is available in a casual restaurant known as Le Cafe, a more upscale, gourmet French/Italian restaurant known as Monte Carlo, the Malachite Showroom, Kempi's discotheque, and the Bristol Lounge. Except for Kempi's, which is located on the basement level, all of these facilities are located on the ground floor. Le Cafe seats 250 people in a dining room divided into three sections, with the middle section serving for the display of the buffets and the pastry shop. This restaurant serves breakfast and lunch; its hours of operation are from 6:00 a.m. to 5:00 p.m. every day of the week. Decorative elements include bright wallcovering and assorted carpets, art works, chandeliers and wall fixtures, flower arrangements, and a rose on each table. Le Cafe offers a breakfast and a lunch buffet that attract a substantial outside clientele from the neighboring offices. The 230-seat Monte Carlo Restaurant is also divided into three areas. The western section offers a more lively atmosphere, and features a bar and an open kitchen. The other two sections are separated by an arch; the middle HVS International, Mineola, New York Description of the Land, Improvements, 17 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= section is bright, and features a central table with a flower arrangement and a display of wines. The eastern section has a more intimate atmosphere, with dimmed lights and tables arranged along tinted-glass windows. In addition, the restaurant offers two private rooms which can accommodate medium to large parties in separate back rooms. The decoration of this restaurant is influenced by Mediterranean styles. Recently acquired art works cover the walls, and numerous plants enhance the atmosphere of the dining room. Monte Carlo is open for dinner seven days a week from 6:00 p.m. until 10:30 p.m. Like Le Cafe, this restaurant is serviced by a direct, efficient connection to the main kitchen, and it appears to be in very good condition. Monte Carlo was renovated in 1989, at which time, the walls were painted and soft goods were replaced. The Malachite Showroom seats 750 people, with a choice of booth or regular tables. This outlet originally operated as a showroom, featuring cabaret-style entertainment several nights a week. This facility is now primarily used for private functions. The stage, dance floor, and flexible setting permit many different uses. On Sunday, the Malachite houses an elegant, locally popular brunch from 11:00 a.m. until 2:30 p.m. The atmosphere of this room is very luxurious, and the decor is in complete harmony with the malachite colonnades, which gave it its name. The Malachite Showroom appears to be in very good condition, and has direct access to the main kitchen. Kempi's Discotheque has a capacity of 750 people. Furnishings include a round bar, a dance floor with a disc jockey booth, and round black tables, and black chairs. This facility is open Tuesday through Friday from 5:30 p.m. until 2:00 a.m., and Saturday from 8:00 p.m. until 2:00 a.m. A Happy Hour offering complimentary hors d'oeuvres from 5:00 p.m. until 8:00 p.m. is available Tuesday through Friday. Kempi's has had two recent minor renovations, and appears to be in good condition. The 120-seat Bristol Lounge is located in the lobby, and is furnished with tables, chairs, and sofas. The bar is a half-circle in shape, and is situated in the northeast corner of the lounge. In the middle of the eastern wall, a stage accommodates a piano for live entertainment. The lounge is open from 11:00 a.m. until 2:00 a.m., and complimentary hors d'oeuvres are offered between 5:30 p.m. and 7:30 p.m. Soft goods and chairs were recently replaced, and the Bristol Lounge appears to be in good condition. HVS International, Mineola, New York Description of the Land, Improvements, 18 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Meeting and Banquet Space A majority of the hotel's function space is located on the second level, with additional areas situated on the first and third levels. Access to the upper-level meeting areas is provided by the escalators, which connect the lobby to the second level, and by the guest elevators. The Grand Kempinski Dallas offers roughly 76,000 square feet of flexible meeting and banquet space, including the +/-25,400-square-foot Crystal Ballroom, which divides into eight sections; the +/-4,560-square-foot Lalique Ballroom, which divides into two sections; +/-22,000 square feet of pre-function space; and a number of smaller meeting rooms, breakout rooms, boardrooms, a magnificent showroom, and banquet rooms. The following table illustrates the various sizes and capacities of this meeting space. ================================================================================ Table 3-4 Meeting Space Capacities - -------------------------------------------------------------------------------- Capacity by Configuration ------------------------ Meeting Room Square Feet Theatre Banquet - ------------------------------------------------------------------------------- Crystal Ballroom 25,400 3,000 2,500 Lalique Ballroom 4,560 500 440 The Waterford 1,100 120 80 The Colonnade 1,100 120 80 The Spectrum 1,100 120 80 The Baccarat Room 560 60 40 The Steuben Room 560 --- 20 Garden Court 5,168 --- 600 Malachite Showroom 9,280 950 650 Le Gala 3,180 250 260 The Cosmopolitan 650 50 50 The Metroplex 650 50 50 Addison Hospitality Suite 1,030 75 80 --------- Total 54,338 - -------------------------------------------------------------------------------- The subject property's meeting space is in good condition and is finished with the same high-quality carpets, wallpapers, lighting fixtures, and decorated with framed prints. The space offers high audiovisual capabilities, and audio-visual services are provided by J&S Audio Visual, Inc., an outside company which contracts with the hotel for these services. HVS International, Mineola, New York Description of the Land, Improvements, 19 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Guestrooms The subject property contains 528 guestrooms, including 40 suites. The typical guestroom measures approximately 334 square feet. Typical guest-rooms are furnished with the following items. o One king bed or two double beds with headboard(s) o One or two nightstands with wall mounted lamps o Small desk with chair and wall mirror o Oval coffee table with love seat, chair and floor lamp o One armoire with color television set and drawers o One bench o One closet o One telephone with dataports o One fax machine o One radio alarm clock o Iron and ironing board o Fabric draperies o Assorted artwork Guest bathrooms feature the following items. o Tub/shower combination o Sink with counter o One wall-mounted telephone o Hair dryer o Make-up mirror The hotel features three types of guestroom decor, which are differentiated by the patterns and colors of the soft goods, and the nature and design of the wooden case goods. The Oriental rooms feature black wooden furniture, soft goods with an Oriental motif, and mustard-colored carpeting. These rooms' soft goods were replaced in the last quarter of 1996. The English rooms feature medium brown wooden furniture and green carpeting. These rooms' soft goods were replaced in the first quarter of 1997. The French rooms feature light-hued wooden furniture and red carpeting; they HVS International, Mineola, New York Description of the Land, Improvements, 20 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= remain unchanged since 1983, except for the carpeting, which was recently replaced. At the time of our inspection, the subject property's guestrooms appeared to be in good condition, although the French rooms will require soft goods renovation in the near future. Additionally, some of the bathroom wall vinyl still needed to be replaced, which, according to management representatives, will be accomplished in the next few months. Guestroom Corridors Guestroom corridors are wide enough to permit the easy passage of housekeeping and room service carts. The corridors are finished with new carpeting and wall vinyl. Management has created non-smoking levels, which contain approximately 355 smoke-free guestrooms; this type of amenity costs very little and requires no structural changes. We expect that the number of rooms allocated for this purpose will be increased or reduced depending on demand and guest response. Recreational Amenities Recreational amenities at the subject property include a full-service health club, which is located on the basement level. This facility is equipped with treadmills, stationary bicycles, stair steppers, weight machines, and free weights, and features two wall-mounted television sets. In addition, the hotel has four lighted roof-top tennis courts, two indoor racquetball courts with viewers gallery, men's and women's saunas, indoor and outdoor and heated swimming pools - each with a whirlpool. Leased Retail Spaces The subject property currently leases retail space in eight ground-level outlets, to seven tenants. This space is in excellent condition, and for the most part, enjoys superior visibility. Tenants currently occupying this space are Nova Limo (with one outlet adjacent to the parking garage and another in the lobby), Voyage Travel, Fashion With Pizzazz, Enterprise Rent-a-Car, Menagerie Salon, Mallasadi International, and Studio Kippenbrock. Summaries of these leases are included in the Addenda to this report. According to management representatives, there are reportedly no problems with the current tenants, who are expected to remain in place at the hotel over the foreseeable future. If any tenant were not to renew one of the leases, management estimates that it would take two to three months to find a new tenant. HVS International, Mineola, New York Description of the Land, Improvements, 21 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Back-of-the-House Space The majority of the back-of-the-house space is located on the basement and first floors; the banquet kitchen is located on the second floor. The laundry room, housekeeping, uniform issue, engineering, employee locker room an cafeteria, storage rooms, switchboard, and general systems are all situated off a large corridor in the back-of-the-house space of the basement. In addition, some administrative offices are located just behind the health club. The main kitchen, purchasing and receiving, human resources, security, employee entrance, loading deck, storage rooms, and administrative offices are located in the north, northwest, and center portions of the ground level. The layout and design of the back-of-the-house space allows for very efficient operations. The main kitchen is situated centrally to the two restaurants, the showroom, and the banquet room. The only food and beverage areas that are not directly serviced by the main kitchen are the Garden Court, and Kempi's and the Bristol Lounge; however, the latter two outlets provide only limited food service. The kitchen also features a butcher shop; pastries are baked on the premises, and are also sold in the pastry shop. Administrative Offices The executive offices are located on the third floor of the subject property. The front offices, including reservations, are located on the first floor, behind the front desk; and the accounting offices are located in the basement. Vertical Transportation Six guest tower elevators, three service tower elevators, two freight elevators, two escalators, and a variety of stairways facilitate vertical transportation throughout the property. The nine tower elevators are electric units that span the basement level through the 15th floor of the hotel. These elevators accommodate both guests and service personnel, and are in good condition, although their finishes are somewhat tired. The two freight elevators are hydraulic units that allow access between the ground level and the second floor; one of these elevators has a cargo car with a capacity of 10,000 pounds that allows for the transportation of cars and boats. Vertical transportation in the tower is also provided by two staircases. A staircase also facilitates access between the lobby and basement level of the hotel, and two escalators provide access between the lobby and the ballroom level. HVS International, Mineola, New York Description of the Land, Improvements, 22 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Heating, Ventilation, and Air Conditioning (HVAC) Guestroom heating at the subject property is provided by a central plant with a four-pipe system, and the public areas employ 20 air handling units. Heating is provided by two oil and gas dual-fired boilers. According to property management, all of the HVAC equipment is in working condition. Fire Protection The subject property reportedly meets all fire code regulations and safety requirements. It is fully sprinklered, with the appropriate standpipes and hose cabinets, which utilize a separate water supply. Hard-wired smoke detectors and pull stations are located throughout the property, and are connected to the local fire department. Additional fire protection features include the following items. o Voice alarm system o Smoke and fire dampeners o Fire extinguishers throughout the property Management representatives of the subject property report that there have not been any extraordinary concerns regarding security. The subject property offers an electronic key system for its guestrooms. A video monitoring system has been installed at various points in the building, and the security staff is located at the service entrance, thereby contributing to the security of the building. Asbestos According to information provided by management representatives, no asbestos is present in the subject property's improvements; however, we have not been provided with an asbestos report to confirm this assertion. The reader should be advised that any costs associated with asbestos removal or containment may have an unfavorable impact on the hotel's market value, and the estimate set forth in this appraisal reflects our value conclusions prior to the deduction of any such costs. We suggest that interested parties initiate an independent analysis regarding current asbestos levels and the capital expenditures necessary to remove any asbestos that might be present. ADA Conformance Following the January 26, 1992 passage of the Americans with Disabilities Act (ADA), hotels are subject to new physical standards. The appraisers are not experts on ADA compliance, and we render no opinion regarding the subject property's conformance to ADA standards. Capital expenditures that may be necessary to bring the property into accordance with the ADA HVS International, Mineola, New York Description of the Land, Improvements, 23 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= will reduce our estimate of market value. Any ongoing costs related to ADA regulations are expected to be funded by normal replacement reserves. Improvements Conclusion Overall, the subject property's improvements appear to be appropriate for hotel use. However, one problem has surfaced within the last six months: the ceiling of the indoor swimming pool is suffering leaks. It is not clear at this time what is causing this problem, but further investigation is planned. It is assumed in this appraisal that the necessary steps to remedy the problem will be taken, once the nature of the problem has been determined. ZONING According to the City Council of the City of Addison, Texas, zoning regulations and map (dated July 15, 1980), the subject property is zoned as follows. PD - Planned Development Hotels (including related restaurants, alcoholic beverage sales, and retail sales facilities) are a permitted use under this designation. Based on this information, the subject property appears to conform to local zoning regulations. We assume that all necessary permits and approvals have been secured (including an appropriate liquor license), and that the subject property was constructed in accordance with local zoning ordinances, building codes, and all other applicable regulations. Our zoning analysis should be verified before any physical changes are made to the hotel. ASSESSED VALUE AND TAXES Property - or ad valorem - tax is one of the primary revenue sources of municipalities. Based on the concept that the tax burden should be distributed in proportion to the value of all properties within a taxing jurisdiction, a system of assessments is established. Theoretically, the assessed value placed on each parcel bears a definite relationship to market value, so properties with equal market values will have similar assessments and properties with higher and lower values will have proportionately larger and smaller assessments. Depending on the taxing policy of the municipality, property taxes can be based on the value of the real property or the value of the personal property and the real property. Because the objective of assessed value is to maintain a specific value relationship among all properties in a taxing jurisdiction, comparable hotel assessments should be evaluated to determine whether the subject property's assessed value is equitable. HVS International, Mineola, New York Description of the Land, Improvements, 24 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The taxing jurisdiction governing the subject property assesses real and personal property. The assessed value ratio is reported to be 100% of market value. A review of the assessed values of the subject property and three comparable hotels located in the Dallas County taxing jurisdiction reveals the following information. ================================================================================ Table 3-5 Assessed Value of Comparable Hotels - --------------------------------------------------------------------------------
Total Assessment Assessment per Room ----------------------- --------------------- No. of Hotel Rooms Land Improvements Land Improvements - -------------------------------------------------------------------------------- Grand Kempinski 528 $6,528,940 $35,843,810 $12,365 $67,886 Westin Galleria 431 10 35,999,990 0 83,527 Marriott Quorum 547 3,878,590 26,716,800 7,091 48,842 Doubletree Lincoln Center 502 9,973,600 18,444,260 19,868 36,742
Source: Dallas Central Appraisal District - -------------------------------------------------------------------------------- Based on the information presented in the preceding table, the per-room assessed value of the subject property's land falls within the range indicated by the comparable properties. Although the per-room assessed value of the subject property's improvements is the second highest in the comparable set, it should be noted that the subject property maintains the greatest amount of meeting space, which will increase a property's per-room assessed value of improvements. The 1996 assessment of personal property at the subject property is $5,752,420, including the gift shop's assessed personal property value of $96,350. The 1996 tax rates applicable to the subject property are presented in the following table. HVS International, Mineola, New York Description of the Land, Improvements, 25 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 3-6 Tax Rates Applicable to the Subject Property - -------------------------------------------------------------------------------- Tax Rate per $100 Jurisdiction of Assessment -------------------------------------------------- Dallas County $0.46255 City of Addison 0.45500 Dallas School District 1.46053 -------- Total $2.37808 - -------------------------------------------------------------------------------- The subject property's 1996 tax burden is calculated as follows. Real Property ($42,372,750 / 100) x 2.37808 = $1,007,658 Personal Property ($5,752,420 / 100) x 2.37808 = $136,797 Total 1996 Tax Burden $1,144,455 ================================================================================ Table 3-7 Historical Tax Rates Applicable to the Subject Property - -------------------------------------------------------------------------------- Tax Rate per $100 Percent Change from Year of Assessment Previous Year ------------------------------------------------------------- 1993 2.41308 --- % 1994 2.40311 (0.4) 1995 2.40998 0.3 1996 2.37808 (1.3) Average Annual Compounded Percent Change, 1993 - 1996: (0.5) % -------------------------------------------------------------- The above table shows that the tax rate applicable to the subject property has remained fairly stable for the past four years, with an average annual HVS International, Mineola, New York Description of the Land, Improvements, 26 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= compounded change of -0.5% between 1993 and 1996. Based on this trend, we have projected a minimal 1.0% annual increase in tax rates for the period between 1997/98 and 1999/00. Throughout the remainder of the forecast period, we have projected the subject property's tax burden to increase by 3.5% per year, reflecting annual inflationary trends. Applying the projected increases to the 1996 tax burden yields the following forecast of property taxes for the subject property. ================================================================================ Table 3-8 Forecast of Property Tax Expense (+000) - -------------------------------------------------------------------------------- 1997/98 1998/99 Stabilized ------------------------------------------------------------------- Projected Property Taxes (+000) $1,173 $1,185 $1,197 - -------------------------------------------------------------------------------- NEIGHBORHOOD The neighborhood surrounding a lodging facility often has an impact on a hotel's status, image, class, style of operation, and sometimes its ability to attract and properly serve a particular market segment. This section investigates the subject property's neighborhood and evaluates any pertinent locational factors that could affect its occupancy, average rate, food and beverage revenues, and overall profitability. The neighborhood of the subject property can be broadly defined by the borders of Keller Springs to the north, Preston Road to the east, Interstate 635 to the south, and Midway Road to the west. The general neighborhood surrounding the subject site, as defined by the above parameters, is characterized by residential, commercial, retail, and office uses. The Dallas Galleria Mall, located south of the subject property, at the northeast corner of the I-635/Tollway interchange, is one of the pre- eminent malls in the Dallas Metropolitan area, containing over 200 specialty stores, with anchors such as Saks Fifth Avenue, Macy's, Nordstrom, and Marshall Field's. Retail use is also prevalent in the area around the subject property; Prestonwood Town Center, located just across the Dallas North Tollway contains a mall with anchors that include Neiman Marcus, Lord & Taylor, J. C. Penney, Dillard's, and Mervyn's, and retail outlets such as Discovery Zone, Computer City, Starpower, and Larry's Shoes. Additional strip developments in this area contain small retail outlets, as well as larger ones, such as a Bed Bath & Beyond, Office Depot, and Office Max. HVS International, Mineola, New York Description of the Land, Improvements, 27 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Restaurants, which serve as essential support facilities to both limited- and full-service hotels, are prevalent along Belt Line Road. In addition to various strip malls, office space and other lodging facilities, Belt Line Road is characterized by various food and beverage outlets, such as the Macaroni Grill, Tony Roma's, Hooter's, Grady's Restaurant, Houston's, and Landry's Seafood House. North of the subject property, between Arapaho Road and Airport Parkway, a special planned neighborhood, the Addison Circle, is in the process of being developed by Columbus Realty Trust with the joint planning efforts of the Town of Addison, and Gaylord Properties, Inc.. According to representatives of the Town of Addison, phase one of the project is well underway, and includes residential housing, parks, retail, restaurants, and some office space and corporate suites. Phase two of the Addison Circle project could eventually include the addition of a hotel, but no definite plans have been made for the present time. Commercial office space in the subject site's neighborhood is also prevalent, and is characterized by a mixture of both low-rise, single tenant facilities and high-rise, multi-tenant complexes. The Dallas North Tollway has experienced a proliferation of high-rise office development in the last 15 years, and major tenants in the area currently include Pizza Hut International, Verifone, PepsiCo, IBM, EDS, J. C. Penney, American Express, Kodak, CompUSA, Mobil Oil, Mary Kay, and AT&T. In addition, the subject property is situated in an area of increasing development, labeled as "the Platinum Corridor" by a real estate firm in Dallas. We will discuss this region in the next section of the report. The immediate neighborhood surrounding the subject property is principally commercial in nature. Directly across Dallas North Tollway from the subject property is a Bank of America, at the northwest corner of Dallas Parkway and Belt Line Road; further to the north, a series of retail outlets are situated in front of the Prestonwood Town Center mall (both the mall and the outlets were discussed previously). A Mobil gas station is at the southeast corner of Arapaho Road and Dallas Parkway, and directly across Arapaho Road are an Office Max and Oshman's. The Colonnade office complex is situated at the southwest corner of Arapaho Road and Dallas Parkway, followed to the west on Arapaho Road by an antique store, a parking garage, a Nation's Bank, and the Digital Matrix Systems building. West of the subject property a vacant +/-3.76-acre site, which is currently used for parking, is open for development, and behind it are an Office HVS International, Mineola, New York Description of the Land, Improvements, 28 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Depot and a restaurant. South of the subject property, at the northwest corner of Dallas Parkway and Belt Line Road, the Spectrum Center is an office complex housing Frito Lay and Novell, among others, and directly to the west of it is a Hooter's restaurant. A Mobil Mart is situated at the southwest corner of the intersection of Belt Line Road and Dallas Parkway, and directly to the west is a strip shopping center - the Plaza at Quorum - containing outlets such as Starbuck's and Federal Express, restaurants, and a Bally Total Fitness Club. To the south of the Mobil Mart is the CompUSA building, followed by the Marriott Quorum, and the Pizza Hut Corporation building. Further south along the Dallas Parkway are additional office buildings, +/-13.55 acres of land for sale, and a +/-325,000-square-foot office building which is scheduled for completion in December of 1998. Neighborhood Conclusion The neighborhood surrounding the Grand Kempinski Dallas appears to be well suited for the operation of a four-star luxury convention hotel. The diversified mix of residential, office, restaurant and retail uses in the area are necessary for the success of the hotel. A significant amount of retail and restaurant services are available in the neighborhood, identified primarily as the Galleria Mall, the Prestonwood Town Center Mall, and the facilities along Belt Line Road. The extensive commercial office space existing along the Dallas North Tollway provides a strong corporate base of demand, and major tenants in the area, such as Pizza Hut, allow for strong commercial demand growth. Overall, the subject property's immediate neighborhood appears to be continuing on a strong growth path. Such growth should allow the subject property to continue to strengthen its position, as well as help to cushion the impact of any new hotel supply into the area. HVS International, Mineola, New York Market Area Analysis 29 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 4. Market Area Analysis The economic vitality of the market surrounding the subject property is an important consideration in forecasting lodging demand and income potential. Economic and demographic trends that reflect the amount of visitation provide a basis from which to project hostelry demand. The purpose of the area analysis is to review available economic and demographic data to determine whether the local market will undergo economic growth, stability, or decline. In addition to predicting the direction of the economy, the rate of change must be quantified. These trends are then correlated based on their propensity to reflect variations in lodging demand with the objective of forecasting the growth or decline in visitation by individual market segment. Market Area Definition The Grand Kempinski Dallas is situated in the City of Addison, Dallas County, and the State of Texas. Economic trends in this area are influenced by events occurring in the Dallas Metropolitan Statistical Area (MSA). This MSA consists of Collin, Dallas, Denton, Ellis, Henderson, Hunt, Kaufman, and Rockwall Counties. Addison is adjacent to the Cities of Carrollton and Farmers Branch. These Cities are situated immediately north and west of the City of Dallas, and are generally included in the area known as North Dallas. This area has become a center for business, retail, and fine restaurants. Addison lies almost entirely to the west of North Dallas Tollway and to the north of Spring Valley Road. The economic success of this city is linked to more than 2,000 businesses, 100 restaurants, nine hotels, and the Addison Airport, a general aviation facility. Economic and Demographic Data Based on fieldwork conducted in the area and our in-house sources, we have evaluated various economic and demographic statistics to determine trends in lodging demand. A primary source of economic and demographic statistics used in this analysis is the Complete Economic and Demographic Data Source, published by Woods & Poole Economics, Inc. - a well-regarded forecasting service based in Washington, DC. Using a data [GRAPHIC OMITTED] AREA MAP HVS International, Mineola, New York Market Area Analysis 30 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= base containing more than 300 variables for each county in the nation, Woods & Poole employs a sophisticated regional model to forecast economic and demographic trends. Historical statistics are based on census data and information published by the Bureau of Economic Analysis. Projections are formulated by Woods & Poole. All dollar amounts have been adjusted for inflation, and thus, growth or decline represents real change in constant dollars. Population Between 1980 and 1995, Dallas County and the State of Texas, registered population growths of 1.5% and 1.8%, respectively; these levels were considerably lower than the 2.4% annual gain registered by the Dallas MSA, and higher than the United States annual gain of 1.0% during the same period. The MSA's strong population gains are partially attributable to the lower cost of living and doing business in the Southwestern United States in recent years, which have supported both residential and business relocations. Forecasts indicate that the population of Dallas County will continue to increase faster than that of the United States, at 0.9%, although the 1.0% average annual compounded growth rate anticipated for the county between 1995 and 2000 remains at a lower level than that projected for the MSA, at 1.6%, and the state, at 1.5%. The slight population gains anticipated for Dallas County suggest that this central county is relatively mature, with future growth anticipated to occur in the outlying counties and neighborhoods, where housing costs are more affordable. We find that the rate of population growth generally establishes a minimum rate of increase for commercial segment hotel demand; this observation also holds true for meeting and group business if a majority of the meetings are business- oriented. Retail Sales Retail sales levels reflect both population trends and the propensity to spend money on retail goods. There is no direct correlation between retail sales and hotel demand; however, retail sales trends tend to gauge the economic health and vitality of the market. Retail sales growth should cause local businesses to prosper and make it more likely for new firms to enter the market, thereby causing an increase in the demand for lodging facilities. In areas where tourism is a significant economic factor, retail sales also reflect the amount of visitation. Between 1980 and 1995, retail sales in Dallas County increased at an average annual compounded rate of 1.8%. The Dallas MSA achieved a higher HVS International, Mineola, New York Market Area Analysis 31 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= growth rate of 2.5%, while the state registered the lowest level of 1.6%, and the nation experienced a modest annual rate of 1.9%. Projections indicate a recovery in retail sales between 1995 and 2000; Dallas County is expected to achieve an average annual compounded growth rate of 1.0% during this period, which is close to the 0.9% level anticipated for the nation. The MSA and the state are both projected to achieve annual growth rates of 1.5% between 1995 and 2000. These trends are consistent with the population trends discussed previously. Based on these trends, it is reasonable to conclude that economic growth in the proposed subject property's market area will remain somewhat moderate during the next few years. Personal Income According to the procedures outlined in the National Income and Product Accounts, personal income is calculated by totaling earned income (wages, salaries, other labor income, and proprietor's income), non-earned income, and residence adjustments and subtracting personal contributions to social insurance. Trends in personal income reflect the spending ability of local residents. Like population trends, personal income has no direct correlation with hotel room night demand, but rather, tends to gauge the economic health and vitality of a market area. Between 1990 and 1995, Dallas County's per-capita personal income level was higher than the state and national average. This relationship suggests that Dallas County residents were more affluent than typical Americans and able to spend more money on retail goods, travel, dining, and services. Projections indicate a 1.0% average annual compounded increase in Dallas County per-capita personal income from 1995 to 2000; this rate is slightly lower than the 1.4% annual gain anticipated for the United States. Between 1980 and 1995, the total personal income in Dallas County increased at an average annual compounded rate of 2.7%, after adjustment for inflation, which compares favorably to the annual increase of 3.5% for the Dallas MSA, the 2.5% increase for the State of Texas and the 2.3% increase for the United States. Although projections are for slower growth in total personal income, Dallas County is anticipated to achieve real gains of 2.0% annually between 1995 and 2000. During the same period, personal income in the Dallas MSA, the State of Texas and the United States is projected to increase at rates of 2.7%, 2.8% and 2.3%, respectively. Overall, the projected growth in total personal income is a favorable economic indicator for businesses in Dallas County. HVS International, Mineola, New York Market Area Analysis 32 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Trends showing the number, type, economic strength, and growth potential of local businesses are key indicators of commercial lodging demand. Moreover, the characteristics of the work force provide an indication of the type and amount of hotel demand that is likely to be accommodated by area hotels. Sectors such as finance, insurance, and real estate (FIRE); wholesale trade; and services produce a considerable number of visitors who are not particularly rate sensitive. The government sector often generates room nights, but per-diem reimbursement allowances often limit the accommodations selection to budget and mid-priced lodging facilities. Manufacturing, construction, and the transportation, communications, and public utilities (TCPU) sector are least likely to generate a significant number of hotel guests. The major growth in employment between 1980 and 1995 occurred in the agriculture, and services sectors (at 7.4% and 5.3% respectively), followed by more moderate growths in the FIRE, total trade, TCPU, and total federal government sectors. Declines were registered in the farming, manufacturing, and federal military government categories. Total employment in the Dallas MSA increased at an average annual compounded rate of 2.5% between 1980 and 1995. This strong growth reflects the economic expansion which occurred in the Dallas/Fort Worth area in the early to mid-1980s. Data for the more recent period of 1990 to 1995 reflects a moderation of these trends, with total employment increasing 1.7%. The agriculture and services sectors continued to exhibit strong growth, at 5.0% and 3.0%, respectively. Additionally, the construction sector increased by 3.0%, reflecting the return of development activity in recent years. Projections anticipate more moderate growth between 1995 and 2000, with total employment expected to increase by 0.8%. Although total employment growth is anticipated to be sluggish, the services and FIRE sectors are projected to show moderate gains, which is a positive indicator of future transient lodging demand. The major employers in the North Dallas area represent a cross-section of hotel demand potential. Some are national in scope, while others operate on a more local basis; some are engaged in manufacturing, and others are active in information technology, telecommunications, retail, food production and distribution. The following table outlines some of the major employers in the North Dallas area. HVS International, Mineola, New York Market Area Analysis 33 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-1 Major Employers - -------------------------------------------------------------------------------- Number of Firm Type of Business Employees - -------------------------------------------------------------------------------- Texas Instruments, Inc. Manufacturing 19,000 EDS Corporation Information Technology 10,000 Tom Thumb Food & Pharmacy, Inc. Supermarket Chain 8,400 J.C. Penney Co., Inc. Retailing 7,000 MCI Communications Telecommunications 6,000 Northern Telecom (Nortel) Telecommunications Manufacturer 5,500 Plano ISD Public Schools 4,279 Frito Lay Co. Snack Food Production 3,900 Carrolton-Farmers Branch ISD Public School System 2,500 Source: Dallas Business Journal - Book of Lists 1997 - -------------------------------------------------------------------------------- Office Space Trends in occupied office space are among the most reliable indicators of lodging demand; firms that occupy office space often exhibit a strong propensity to attract commercial visitors. Although it is difficult to quantify hotel demand based on the amount of occupied office space, trends that cause changes in the amount of occupied office space or office space vacancy rates may have a proportional impact on commercial lodging demand, and a less direct effect on meeting demand. The following table summarizes recent office statistics for the Dallas area, by submarket. HVS International, Mineola, New York Market Area Analysis 34 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-2 Dallas Existing Multi-Tenant Office Space - -------------------------------------------------------------------------------- No. of Total Percent Dallas Market Buildings Square Feet Occupied ------------------------------------------------------------- Central Business District 60 29,346,738 63 % Central Expressway 64 10,736,212 88 North Dallas/Preston Center 25 2,822,092 94 Oak Lawn/Turtle Creek 56 7,492,584 87 Stemmons Freeway 77 9,653,855 76 South Dallas 15 829,794 86 LBJ Freeway 126 20,392,087 94 East Dallas 36 2,261,007 89 Las Colinas 73 11,344,220 95 Quorum/Bent Tree 110 12,853,479 94 Richardson/Plano 99 7,742,797 94 LBJ Extension/Freeport 19 2,112,736 89 ------------------------------------------------------------- Total 760 117,587,601 84 Source: The 1996 Year-End Annual Market Report Fults Companies/ONCOR International - -------------------------------------------------------------------------------- Year-end figures estimate the Dallas multi-tenant office market to contain a total of 117.6 million square feet in 760 office buildings with a minimum of 20,000 square feet. FULTSRESEARCH identified a continued demand of over three million square feet of office space per year through the Year 2000. The subject property is proximate to both the LBJ Freeway and Quorum/Bent Tree submarkets. Both of these markets enjoyed a 6% vacancy rate in 1996, compared to a 16% market average. According to a recent profile on Dallas in the October, 1996 issue of National Real Estate Investor, overall commercial construction in the Dallas area was approximately 60% ahead of 1995's building rate through October, with recently relocated companies such as Pizza Hut, Capital One, Quaker State Oil and Transamerica Corp. responsible for much of this growth. In the subject site's neighborhood, commercial office space expansions and developments are prevalent. According to Mr. Randy Garrett, Vice President of FultsOncor a real estate firm in Dallas, there is a real estate development "frenzy" along a 13.7-mile stretch of the Dallas North Tollway, which he calls "the Platinum Corridor." This designation is a reference to a two-mile stretch of the Tollway, just north of LBJ Freeway, which was known as "the Golden Corridor" in the 1980s. "The Platinum Corridor" is HVS International, Mineola, New York Market Area Analysis 35 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= approximately bounded by Midway Road to the west, Preston Road to the east, the LBJ Freeway to the south, and State Highway 121 to the north. The subject property is situated in the heart of this corridor. It currently encompasses 122 existing buildings, which have reached an overall occupancy of 94%, and counts 22 office buildings planned or under construction, in addition to numerous planned retail and residential developments on both sides of the Tollway. It is expected that six of these buildings will be completed in 1997, for a total of +/-729,604 square feet; eight are anticipated for completion in 1998, for a total of +/-1,128,617 square feet; and eight more will open in 1999 and beyond, for a grand total of +/-3,440,578 square feet. Examples of projects around the subject property are offered below. o MEPC American Properties is adding a building containing +/-381,000 square feet to its Colonnade complex, located just north of the subject property, which is due to be completed in September of 1998; o The Tollway Plaza, located east of the Tollway and south of Keller Springs Road, encompasses +/-180,000 square feet of office space, and is due to be completed in June of 1998; o The Village Parkway - located south of the shopping center which carries the same name, and west of Bed Bath & Beyond - encompasses +/-320,000 square feet of office space and a potential hotel; o Galleria IV, located at the northwest corner of Alpha Road and Dallas North Tollway, encompasses roundly 200,000 square feet of office space and a potential hotel; o In the Preston Center on Dallas North Tollway, Trammell Crow Co. has announced plans to develop a nine-story, +/-181,000-square-foot office building at a reported cost of $30 million. Another area of interest is Legacy, in the City of Plano, along Legacy Drive - a shoulder road between Interstate 121 and U. S. Highway 75. The western portion of Legacy Drive, between I-121 and Preston Road, houses the Legacy Office Park, and is a fast-growing development area, as well as home to several major national companies, such as J. C. Penney. Examples of company expansions and relocations to the Legacy area are itemized as follows. HVS International, Mineola, New York Market Area Analysis 36 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= o In 1993, Countrywide Funding Corporation, the nation's largest mortgage lender, purchased a +/-250,000-square-foot building to use as its Central Office. During the subsequent three years, Countrywide continued to grow, and to operate with over 1,000 employees. o PageNet, Inc., based in Plano, purchased a +/-60.9-acre site in Legacy for a new corporate headquarters. o In the second quarter of 1996, Frito-Lay, Inc. announced the expansion of its Legacy headquarters, to include their international snack foods division. o In the fourth quarter of 1996, Dr. Pepper/7-Up, Inc. broke ground on a +/-270,000-square-foot corporate office complex at 5301 Legacy Drive. The firm expects to move to Plano in mid-1998, with 500 to 700 employees. o Fina Oil and Chemical Corporation is moving its corporate headquarters into a four-story and five-story office building on approximately 25 acres on the southwest corner of the Dallas North Tollway and Legacy Drive. Airport Traffic Airport passenger counts are important indicators of lodging demand. Depending on the type of service provided by a particular airfield, a sizable percentage of arriving passengers may require hotel accommodations. Trends showing changes in passenger counts also reflect local business activity and the overall economic health of the area. The primary airport serving the proposed subject property's market area is the Dallas/Fort Worth International Airport (DFW). With more than 2,500 daily flights, DFW is reportedly the second-busiest airport in the world. The airport, which is served by five international and eighteen domestic carriers, services approximately 29 million passengers a year. The following table details total passenger activity for DFW from 1992 to 1996. HVS International, Mineola, New York Market Area Analysis 37 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-3 Dallas/Fort Worth International Airport Statistics - -------------------------------------------------------------------------------- Passenger Percent Percent Year Enplanements Change(1) Change(2) ----------------------------------------- 1992 25,981,866 -- -- 1993 25,166,901 (3.1) % (3.1) % 1994 26,222,449 4.2 0.5 1995 27,049,215 3.2 1.4 1996 29,066,411 2.4 1.9 (1)Annual average compounded percentage change from the previous year (2)Annual average compounded percentage change from 1992 Source: Dallas/Fort Worth International Airport Authority - -------------------------------------------------------------------------------- As the preceding table indicates, total passenger enplanements at Dallas/Fort Worth International Airport increased at healthy average annual compounded rates from 1993 to 1996. This information is a favorable indicator of increased visitation and a healthy environment for local lodging facilities. Tourist Attractions Addison offers a number of cultural attractions and events such as the Addison Theatre Center or the historic Cavanaugh Flight Museum, Taste Addison, Kaboom Town, and Oktoberfest. Addison is located in the heart of the southwest's shopping mecca; from the Galleria to Prestonwood Mall, thousands of specialty and department stores are available to shoppers. In addition, outside of Addison's city limits, Dallas offers an array of attractions such as the Dallas Zoo, Six Flags Over Texas, Wet'N Wild, West End Market Place, and Dallas Cowboys' football, as well as numerous museums and theatres. Conclusion Our review of various economic and demographic data indicates that the subject property's market area has historically achieved greater than average growth. Continuing office building development, relocating employers, and the lowest office vacancy rates in the submarket proximate to the proposed subject property relative to Dallas overall suggest continuing demand growth in the commercial market segment. HVS International, Mineola, New York Market Area Analysis 38 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The following table summarizes the economic and demographic trends discussed throughout this section. All figures that reflect dollar amounts have been adjusted for inflation, and thus, reflect real change. It should be noted that the percent changes indicated in the following tables are based on unrounded figures, and thus, may not calculate exactly. HVS International, Mineola, New York Market Area Analysis 39 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-4 Economic and Demographic Data for the Subject Property's Market Area - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------- Long-Term Historical Population (+,000) Dallas County 1980-1995 1,565.1 1,962.2 1.5% Dallas, TX MSA 1980-1995 2,069.8 2,947.6 2.4 State of Texas 1980-1995 14,337.8 18,664.4 1.8 United States 1980-1995 227,225.6 262,791.0 1.0 Short-Term Historical Population (+,000) Dallas County 1990-1995 1,860.3 1,962.2 1.1 Dallas, TX MSA 1990-1995 2,689.6 2,947.6 1.8 State of Texas 1990-1995 17,045.4 18,664.4 1.8 United States 1990-1995 249,401.4 262,791.0 1.1 Projected Population (+,000) Dallas County 1995-2000 1,962.2 2,061.0 1.0 Dallas, TX MSA 1995-2000 2,947.6 3,192.0 1.6 State of Texas 1995-2000 18,664.4 20,073.0 1.5 United States 1995-2000 262,791.0 274,758.4 0.9 Long-Term Historical Retail Sales (+,000,000) Dallas County 1980-1995 13,135.6 17,190.3 1.8 Dallas, TX MSA 1980-1995 15,833.5 22,854.9 2.5 State of Texas 1980-1995 97,713.3 124,784.7 1.6 United States 1980-1995 1,340,768.9 1,765,826.1 1.9 Short-Term Historical Retail Sales (+,000,000) Dallas County 1990-1995 15,215.3 17,190.3 2.5 Dallas, TX MSA 1990-1995 19,686.2 22,854.9 3.0 State of Texas 1990-1995 103,868.0 124,784.7 3.7 United States 1990-1995 1,557,380.2 1,765,826.1 2.5 Projected Retail Sales (+,000,000) Dallas County 1995-2000 17,190.3 18,029.6 1.0 Dallas, TX MSA 1995-2000 22,854.9 24,570.2 1.5 State of Texas 1995-2000 124,784.7 134,120.1 1.5 United States 1995-2000 1,765,826.1 1,846,830.4 0.9 Long-Term Historical Retail Sales Per Capita Dallas County 1980-1995 8,392.8 8,760.5 0.3 Dallas, TX MSA 1980-1995 7,649.9 7,753.7 0.1 State of Texas 1980-1995 6,815.1 6,685.7 (0.1) United States 1980-1995 5,900.6 6,719.5 0.9 Short-Term Historical Retail Sales Per Capita Dallas County 1990-1995 8,179.1 8,760.5 1.4 Dallas, TX MSA 1990-1995 7,319.4 7,753.7 1.2 State of Texas 1990-1995 6,093.6 6,685.7 1.9 United States 1990-1995 6,244.5 6,719.5 1.5
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 40 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-4 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------- Projected Personal Retail Sales Per Capita Dallas County 1995-2000 8,760.5 8,748.1 (0.0) % Dallas, TX MSA 1995-2000 7,753.7 7,697.5 (0.1) State of Texas 1995-2000 6,685.7 6,681.6 (0.0) United States 1995-2000 6,719.5 6,721.7 0.0 Long-Term Historical Eating and Drinking Place Sales (+,000,000) Dallas County 1980-1995 1,351.7 1,994.2 2.6 Dallas, TX MSA 1980-1995 1,543.6 2,516.8 3.3 State of Texas 1980-1995 8,606.1 13,050.1 2.8 United States 1980-1995 126,131.6 185,035.4 2.6 Short-Term Historical Eating and Drinking Place Sales (+,000,000) Dallas County 1990-1995 1,779.1 1,994.2 2.3 Dallas, TX MSA 1990-1995 2,174.7 2,516.8 3.0 State of Texas 1990-1995 10,794.4 13,050.1 3.9 United States 1990-1995 161,197.4 185,035.4 2.8 Projected Eating and Drinking Place Sales (+,000,000) Dallas County 1995-2000 1,994.2 2,144.5 1.5 Dallas, TX MSA 1995-2000 2,516.8 2,769.1 1.9 State of Texas 1995-2000 13,050.1 14,471.7 2.1 United States 1995-2000 185,035.4 199,127.3 1.5 Long-Term Historical Eating and Drinking Place Sales Per Capita Dallas County 1980-1995 863.6 1,016.3 1.1 Dallas, TX MSA 1980-1995 745.8 853.8 0.9 State of Texas 1980-1995 600.2 699.2 1.0 United States 1980-1995 555.1 704.1 1.6 Short-Term Historical Eating and Drinking Place Sales Per Capita Dallas County 1990-1995 956.4 1,016.3 1.2 Dallas, TX MSA 1990-1995 808.6 853.8 1.1 State of Texas 1990-1995 633.3 699.2 2.0 United States 1990-1995 646.3 704.1 1.7 Projected Eating and Drinking Place Sales Per Capita Dallas County 1995-2000 1,016.3 1,040.5 0.5 Dallas, TX MSA 1995-2000 853.8 867.5 0.3 State of Texas 1995-2000 699.2 721.0 0.6 United States 1995-2000 704.1 724.7 0.6 Long-Term Historical Personal Income (+,000,000) Dallas County 1980-1995 26,466.0 39,298.6 2.7 Dallas, TX MSA 1980-1995 33,594.0 56,083.7 3.5 State of Texas 1980-1995 197,605.0 285,315.1 2.5 United States 1980-1995 3,163,874.0 4,443,243.2 2.3
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 41 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-4 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------- Short-Term Historical Personal Income (+,000,000) Dallas County 1990-1995 34,282.0 39,298.6 2.8% Dallas, TX MSA 1990-1995 47,947.2 56,083.7 3.2 State of Texas 1990-1995 248,474.8 285,315.1 2.8 United States 1990-1995 4,051,714.6 4,443,243.2 1.9 Projected Personal Income (+,000,000) Dallas County 1995-2000 39,298.6 43,476.2 2.0 Dallas, TX MSA 1995-2000 56,083.7 64,010.8 2.7 State of Texas 1995-2000 285,315.1 327,233.2 2.8 United States 1995-2000 4,443,243.2 4,972,219.5 2.3 Long-Term Personal Income per Capita Dallas County 1980-1995 16,910.0 20,027.0 1.1 Dallas, TX MSA 1980-1995 16,231.0 19,027.0 1.1 State of Texas 1980-1995 13,782.0 15,287.0 0.7 United States 1980-1995 13,924.0 16,908.0 1.3 Short-Term Historical Personal Income per Capita Dallas County 1990-1995 18,429.0 20,027.0 1.7 Dallas, TX MSA 1990-1995 17,827.0 19,027.0 1.3 State of Texas 1990-1995 14,577.0 15,287.0 1.0 United States 1990-1995 16,246.0 16,908.0 0.8 Projected Personal Income per Capita Dallas County 1995-2000 20,027.0 21,095.0 1.0 Dallas, TX MSA 1995-2000 19,027.0 20,054.0 1.1 State of Texas 1995-2000 15,287.0 16,302.0 1.3 United States 1995-2000 16,908.0 18,097.0 1.4 Long-Term Historical Employment - Dallas County (+,000) Farm 1980-1995 1.4 1.1 (1.6) Agriculture Services, Other 1980-1995 3.6 10.7 7.4 Mining 1980-1995 28.5 29.8 0.3 Construction 1980-1995 66.2 68.9 0.3 Manufacturing 1980-1995 193.0 190.0 (0.1) Trans., Comm. & Public Utils. 1980-1995 67.5 93.8 2.2 Total Trade 1980-1995 278.6 373.1 2.0 Wholesale Trade 1980-1995 103.1 129.0 1.5 Retail Trade 1980-1995 175.5 244.1 2.2 Finance, Insurance, & Real Estate 1980-1995 123.6 184.2 2.7 Services 1980-1995 233.4 503.0 5.3 Total Government 1980-1995 106.5 142.3 1.9 Federal Civilian Govt. 1980-1995 22.0 31.1 2.3 Federal Military Govt. 1980-1995 6.2 4.6 (2.0) State & Local Govt. 1980-1995 78.3 106.6 2.1 TOTAL 1980-1995 1,102.2 1,597.0 2.5
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 42 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-4 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------- Short-Term Historical Employment - Dallas County (+,000) Farm 1990-1995 1.1 1.1 0.3 % Agriculture Services, Other 1990-1995 8.3 10.7 5.0 Mining 1990-1995 32.6 29.8 (1.8) Construction 1990-1995 56.4 68.9 4.1 Manufacturing 1990-1995 191.7 190.0 (0.2) Trans., Comm., & Public Utils. 1990-1995 84.6 93.8 2.1 Total Trade 1990-1995 344.7 373.1 1.6 Wholesale Trade 1990-1995 118.5 129.0 1.7 Retail Trade 1990-1995 226.2 244.1 1.5 Finance, Insurance, & Real Estate 1990-1995 182.1 184.2 0.2 Services 1990-1995 434.6 503.0 3.0 Total Government 1990-1995 133.4 142.3 1.3 Federal Civilian Govt. 1990-1995 30.7 31.1 0.3 Federal Military Govt. 1990-1995 9.0 4.6 (12.5) State & Local Govt. 1990-1995 93.7 106.6 2.6 TOTAL 1990-1995 1,469.4 1,597.0 1.7 Projected Employment - Dallas County (+,000) Farm 1995-2000 1.1 1.1 (0.8) Agriculture Services, Other 1995-2000 10.7 11.8 2.0 Mining 1995-2000 29.8 33.7 2.5 Construction 1995-2000 68.9 68.5 (0.1) Manufacturing 1995-2000 190.0 196.0 0.6 Trans., Comm., & Public Utils. 1995-2000 93.8 97.7 0.8 Total Trade 1995-2000 373.1 386.2 0.7 Wholesale Trade 1995-2000 129.0 133.7 0.7 Retail Trade 1995-2000 244.1 252.5 0.7 Finance, Insurance, & Real Estate 1995-2000 184.2 197.4 1.4 Services 1995-2000 503.0 531.6 1.1 Total Government 1995-2000 142.3 141.1 (0.2) Federal Civilian Govt. 1995-2000 31.1 33.1 1.2 Federal Military Govt. 1995-2000 4.6 0.3 (41.6) State & Local Govt. 1995-2000 106.6 107.8 0.2 TOTAL 1995-2000 1,597.0 1,665.1 0.8
Source: Woods & Poole Economics, Inc. - -------------------------------------------------------------------------------- The Lodging Market Supply and Demand Analysis section of this economic study and appraisal will relate these historical and projected growth trends to specific market segments based on their propensity to reflect visitation. This analysis will provide a basis for forecasting changes in room night demand in the subject property's area. HVS International, Mineola, New York Overview of External Forces 43 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 5. Overview of External Forces Affecting the U. S. Lodging Industry Introduction Hotel ownership is ultimately the business of creating and enhancing value. To understand the investment potential of lodging facilities, investors must be thoroughly aware of the many forces that can cause changes in the value of their properties. Although some of these forces are internal (such as the layout and design of the facilities, the quality of management, and the condition of the property), others are external (such as the local economic environment and the competitive nature of the market). The risk associated with hotel investment lies largely with the external forces that are beyond the control of ownership and contribute to the variability of future income flows. Investors and appraisers can project financial results by evaluating the historical impact of external forces on hotel values. Successful hotel investors seek opportunities where the risk of external forces can be minimized, thus reducing the uncertainty associated with income expectations. When investors engage in due diligence prior to acquiring a lodging facility, they are primarily interested in trends affecting a limited geographic market area, such as a town, city, or county. A broader overview takes into account national and international travel patterns and trends. An understanding of the general characteristics of the United States hotel market is important because these trends often foreshadow economic and demographic changes in smaller areas. This section of the appraisal will present an overview of the U. S. lodging industry by tracing many of the forces that influence hotel values. Historical economic and demographic data, and industry statistics will be analyzed to provide a basis for projections. Forecasts will be evaluated to determine their reasonableness. The conclusions represent another set of criteria that hotel investors consider in making their acquisition decisions. HVS International, Mineola, New York Overview of External Forces 44 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The Supply and Demand Relationship Most business ventures are influenced by the relationship between supply and demand. In the hotel industry, supply refers to the number of units. A unit consists of one or more rooms and represents the smallest accommodation that can be rented to a guest. Each unit must have a full bath and its own entrance to a public hallway or the building exterior. Demand refers to a room night, which is one unit that is occupied for one night. The supply and demand relationship has a significant influence on a hotel's occupancy and/or average room rate. Occupancy is calculated by dividing the number of rooms that are occupied for a specific period by the total number of rooms that are available during the same period. Average room rate is determined by dividing the total rooms revenue achieved during a specific period by the number of rooms occupied during that period; it also represents the weighted average of all the room rates charged during that period. In a market where demand is increasing faster than supply, occupancies rise and average rate growth generally exceeds inflation. When supply is increasing faster than demand, occupancies fall and average rates typically remain level or decline. Hotels generate revenue based on occupancy and average rate, and thus the supply and demand relationship is an important factor in analyzing profits and value. Hotel occupancy levels have shown definite cycles that reflect the balance between supply and demand. The early 1970s marked the beginning of a hotel building boom reminiscent of the 1920s. Many factors contributed to this expansion, but the two main elements were readily available financing and aggressive chains that were eager to sell franchises. The new construction during the 1970s was made possible by the enormous amount of financing generated by all lenders, particularly real estate investment trusts (REITs). These high-leverage finance companies were created to allow small investors to participate in real estate mortgages and equities. The concept was quickly accepted by Wall Street, and soon billions of dollars were available to finance real estate projects. Many lenders became so overwhelmed with new money that their underwriting procedures broke down and some marginal developments were approved. During the late 1960s and early 1970s, hotel companies actively expanded their chains through franchising. Franchising was a source of new capital, allowing hotel companies to grow and achieve national recognition using the franchisee's financial investment in individual properties. Some franchisors, eager to demonstrate sustained growth and establish a national HVS International, Mineola, New York Overview of External Forces 45 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= presence, employed questionable marketing tactics to sell new franchises. Salespeople were often compensated based on the number of franchises sold, so there was little incentive to discourage developers from investing in poor locations and overbuilt markets. Many lenders and hostelry developers were led to believe that a national franchise would guarantee a successful operation. The combination of readily available financing and aggressive hotel chains eager to sell franchises resulted in overbuilding and development of many poorly located, undercapitalized hostelries managed by inexperienced owners. The bubble burst on the lodging industry when inflation caused construction costs and interest rates to escalate. The 1974 energy crisis drastically reduced travel, and the accompanying recession curtailed business trips, conferences, and conventions. Operators of marginal properties quickly fell behind in their mortgage payments, and lenders were forced to foreclose. As lenders became hostelry owners, they either organized work-out departments headed by experienced hoteliers or engaged professional hotel management companies to assume operational responsibilities. Sales data indicate that lenders who were looking for quick sales to remove nonperforming hotel assets from their books had to lower their prices substantially to attract all-cash buyers. Lenders who were willing to hold on to foreclosed hotels and employ professional management to reposition and improve the properties' operation were generally able to recoup their original investments in three to five years, once the industry began to recover. However, even lenders who repositioned their hotels had to take back favorable purchase-money financing to sell the properties because money from other sources was not available. History has shown that during economic downturns, hotel values generally do not fall in proportion to the properties' declining incomes. Sellers, and particularly lenders who take back hotels through foreclosure, are often unwilling to sell at substantially reduced prices. They are more likely to wait out the downward cycle and dispose of their assets when the market begins to rebound. Thus, appraisers can best reflect market behavior by projecting a facility's net income to a point of recovery and applying the proper discounted cash flow procedure over that time period. The late 1970s was a period of relative calm for the lodging industry. Because most lenders were recovering from the financial wounds inflicted by HVS International, Mineola, New York Overview of External Forces 46 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= the 1975 recession, they had little interest in making hotel mortgages. New construction was restrained, and primarily consisted of additions to existing properties and the development of some large, downtown hotels oriented toward the commercial and convention markets. The rebirth of center-city hostelries was a direct result of fuel shortages and the availability of government financing for inner-city redevelopment projects. Highway-oriented properties, on the other hand, were adversely affected by escalating gasoline prices and decreased automobile travel, and these lodging facilities lost some of their appeal among investors and hotel companies. Decreased building activity, the normal retirement of older hostelries from the market, and an improving economy created a favorable supply and demand relationship and record-high occupancy levels from 1979 to 1980. Average room rates increased rapidly as operators took advantage of the excess demand to recoup earlier losses and keep up with inflation. After the decline in hotel development during the late 1970s, the environment appeared suitable for a period of renewed expansion. However, the Federal Reserve tightened the money supply in the early 1980s, sending the prime interest rate up to double-digit levels. Most of the projects that were in the preliminary planning stages but lacked sensible financing were put on hold. Fiscal policy and declining energy prices eventually reduced the national inflation rate. This decrease caused a decline in hotel interest rates beginning in 1983, and suddenly massive amounts of capital were available for real estate investments. Hotel developers who had been out of the market since the mid-1970s rushed to initiate new projects. They were aided by several major real estate development incentives: high occupancies and escalating room rates, readily available debt and equity financing, and unique income tax benefits designed to stimulate the national economy out of a recession. During the early 1980s, trends were generally favorable for new hotel development. Although the recession caused a decline in lodging demand, many markets showed relatively high occupancy levels. Room rates were usually able to keep up with inflation, and the travel industry was expected to boom as a result of a recovering economy. Franchise sellers signed up new prospects aggressively, using product segmentation to justify the saturation of a market with a common brand. HVS International, Mineola, New York Overview of External Forces 47 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Financing was readily available from the savings and loan industry. Following deregulation, these banks were permitted to lend on commercial real estate, such as hotels. Although savings and loans had experience in making loans on single-family homes, few had expertise with commercial properties, and fewer still with hotels. The result was almost identical to the real estate investment trust fiasco the decade before: loan underwriting and administration were inept and sometimes nonexistent, the number of loans made seemed more important than the quality of the real estate and the integrity of the borrower, and short-term funds were often used to finance long-term mortgages. In the early 1990s, the industry suffered the consequences of this lending spree: most major hotel markets became severely overbuilt and many savings and loans went out of business. Another factor contributing to hotel development in the 1980s was the very favorable treatment provided by income tax regulations. By carefully structuring hotel syndications to take advantage of all available tax benefits, investors could virtually recoup their total cash outlay in the first year and reap additional benefits in the future regardless of the economic success of the underlying asset. Because there was little incentive to justify a transaction's economics (i.e., cash flow and reversionary benefits), a number of syndicators overpaid for hotel properties, took out usurious fees, and overloaded their hotels with debt. A change in the tax law in the mid-1980s eliminated many of the benefits associated with hotels, but the overbuilding in most markets was either in progress or had already taken place. By the end of the 1980s, the abuses of the savings and loans had become apparent, but it was too late to reverse the overbuilding. Between 1985 and 1990, approximately 556,000 rooms were added to the U. S. hotel supply. The national economy entered another recession in 1990, and this factor (coupled with overbuilding and the Persian Gulf War in 1991) caused the national hotel occupancy rate to bottom out at 60.9%. In some markets, hotel occupancies were as low as 35%. This supply and demand imbalance was almost identical to the situation in the 1970s that led to numerous hotel failures. As in the REIT days, the number of non-performing loans reached record levels, and lenders moved to a work-out mode of operation in order to foreclose and restructure their hotel investments. Many of the savings and loans were taken over by the government and their hotel assets were sold at auction. HVS International, Mineola, New York Overview of External Forces 48 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= According to the American Council of Life Insurance, which represents major life insurance companies, the number of delinquent hotel loans and the number of hotel loans in foreclosure peaked in 1991. This trend is undergoing a reversal as the U. S. lodging industry begins to recover. Loan restructuring was an attractive alternative to foreclosure during this period, and the number of loans in good standing with restructured terms almost doubled. By 1993, new hotel construction had declined significantly. Lenders, trying to get out from under problematic hotel portfolios, curtailed all real estate lending and would not even consider hotels. The tax benefits associated with lodging facilities had been reduced significantly, and passive investors left the hospitality market entirely. The slowdown in the growth of supply had a beneficial impact on occupancy levels, which started to recover in 1992. Improved occupancies are expected to continue through the late 1990s as increases in lodging demand outpace growth in supply. Beginning in 1991, many lenders and the Resolution Trust Corporation (RTC) sold their oldest and least desirable hotels at liquidation prices. Because virtually no third-party financing was available, most lenders were forced to take back purchase-money mortgages at favorable terms in order to sell these properties without suffering massive write-downs. The newer and more desirable hotels were not put on the market, because their lenders/owners were waiting for values to recover. This course of action significantly reduced the number of transactions involving good-quality lodging facilities. The following table shows the volume of hotel transactions exceeding $10,000,000 between 1990 and 1995. ================================================================================ Table 5-1 Summary of Major Hotel Transactions - -------------------------------------------------------------------------------- Year 1990 1991 1992 1993 1994 1995 - ------------------------------------------------------------------------------ Number of Transactions 130 54 67 52 92 104 Number of Rooms 40,543 16,427 25,187 19,935 33,503 36,951 Average Price Per Room $136,000 $91,000 $85,000 $79,000 $80,000 $83,000 Source: HVS International - -------------------------------------------------------------------------------- HVS International, Mineola, New York Overview of External Forces 49 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= In 1991, there were only 54 major hotel sales recorded. This number increased to 67 in 1992 and declined to 52 in 1993, then rose dramatically in 1994 and 1995. During the low-volume years, many sellers remained on the sidelines waiting for values to increase before placing their properties on the market. The jump in 1994 is attributable to a number of factors, including the greater availability of mortgage funds, a return of institutional investors to the market, and a resurgence of investor interest in lodging facilities. The profile of typical hotel buyers has changed somewhat. During the mid-1980s, when tax-driven syndication's were popular, many hotels were purchased by passive investors who hired management companies to operate their properties. These owners had little involvement in day-to-day management decisions, which occasionally led to poor management and financial losses. Today, most buyers of major hotels are owner-operators who bring with them both the acquisition funds (usually from a joint venture partner) and management expertise. We also note that real estate investment trusts (REITs) and public hotel companies (C-Corps) are actively acquiring hotels using funds from public equity stock offerings. The supply of new hotel rooms is expected to increase slowly during the next several years. Lenders are beginning to return to the market, and are making some hotel loans based on conservative criteria. Initially, mortgage funds were available mainly to the budget and economy lodging sectors, for the purpose of refinancing existing properties or assisting buyers in acquisitions. Now, a number of lenders are willing to finance new construction for these small, low-end properties. Although financing is also becoming available for the acquisition of large, full-service hotels, very little has been allocated for new construction. At present, active hotel lenders are not necessarily traditional banks and insurance companies, but may include credit companies and Wall Street securities firms. A number of hotel owners and developers are now constructing budget and economy hotels; a few are planning more upscale, full-service properties. Most lenders are taking a conservative approach to new hotel loans, which should limit new development to those projects that demonstrate true economic feasibility. As a result, severe short-term overbuilding is unlikely. HVS International, Mineola, New York Overview of External Forces 50 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Room Rates The supply and demand relationship has a direct impact on hotel occupancies and an indirect influence on room rate growth. Between 1978 and 1995, hotel room rates increased at an average annual compounded rate of almost 6%. Significant rate growth was recorded during the late 1970s and early 1980s as a result of strong occupancies (70%'s) coupled with a high monetary inflation rate (14%). In recent years, room rate growth slowed as a result of low occupancies and a drop in inflation. Hotel room rates generally increase faster than the Consumer Price Index (CPI) when occupancies are strong or moving upward. When occupancies are low or declining, room rate growth tends to lag behind the CPI; in some cases, rates may remain flat or actually drop. The following table compares the historical and projected annual increase in hotel room rates in the United States to the change in the national CPI. HVS International, Mineola, New York Overview of External Forces 51 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 5-2 Percent Change in Average Room Rates Versus CPI - U.S. Hotels - -------------------------------------------------------------------------------- Consumer Price Hotel Room Rate Index Hotel Year Percent Change Percent Change Occupancy --------------------------------------------------------------- 1973 4.2% 6.2% 70.2% 1974 7.6 11.0 64.0 1975 7.3 9.1 63.7 1976 8.2 5.7 65.8 1977 8.1 6.5 67.3 1978 14.0 7.7 69.2 1979 17.0 11.3 71.9 1980 15.2 13.5 70.6 1981 10.0 10.3 67.9 1982 6.5 6.2 66.7 1983 5.1 3.2 64.4 1984 6.9 4.3 64.0 1985 4.6 3.6 63.1 1986 3.2 1.9 62.5 1987 3.6 3.6 61.9 1988 3.6 4.1 62.3 1989 3.5 4.8 63.2 1990 3.0 5.4 62.4 1991 0.6 4.2 60.9 1992 1.4 3.0 62.1 1993 2.8 3.0 63.1 1994 5.2 2.6 64.7 1995 4.8 2.8 65.5 1996* 5.0 3.0 66.0 1997* 5.5 3.5 67.0 1998* 6.0 4.0 68.0 1999* 5.5 4.0 68.0 Sources: Smith Travel Research & HVS International * Projected - -------------------------------------------------------------------------------- This table shows two periods when hotel room rate growth failed to keep pace with the CPI. From 1973 to 1975, the hotel industry was suffering from overbuilding related to real estate investment trusts, a recession, and a downturn in travel caused by the oil embargo. The second period of slow room rate growth occurred between 1988 and 1993, when the industry was again affected by overbuilding and a weak economy. The table illustrates that during periods of prosperity, room rates are a good hedge against HVS International, Mineola, New York Overview of External Forces 52 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= inflation, which was true even when the CPI increased at double-digit levels. The projections indicate a strong recovery of room rates as the relationship between supply and demand becomes more favorable. Growth is expected to peak in 1998 at 6%, which is significantly higher than the projected gain in the CPI. This percentage may appear to be high, but a similar trend occurred in 1978, when room rates rose 14.0% and the CPI increased by only 7.7%. Hotels are unique because their room rates can be adjusted at any time. Unlike office space, where rents are typically negotiated for a five-year period, hotel operators are free to base rates on occupancy trends. Using sophisticated yield management programs, modern lodging facilities can ride the demand curve and maximize room rates whenever the market permits. As a result, hotels generally offer significant upside potential during periods of economic prosperity. If lodging facilities can increase room rates faster than the CPI and still maintain occupancies, bottom-line profits usually escalate. If they can raise room rates and occupancy at the same time, profits will grow significantly. The opposite occurs when room rates fail to keep pace with inflation. Because market value is basically a multiple of bottom-line profits, changes caused by fluctuations in occupancy and average rate have a direct impact on value. Rooms Revenue per Available Room (RevPAR) The ability of a hotel to maximize its occupancy and room rate is measured in terms of rooms revenue per available room (RevPAR), which is the product of occupancy and average rate. Between 1978 and 1995, RevPAR in the U. S. lodging industry increased at an average annual compounded rate of approximately 5%. As in the case of average rate, most of the increase occurred during the late 1970s, when occupancies escalated rapidly. The only decline in RevPAR occurred in 1991. Trends in Hotel Sales HVS International constantly monitors hotel markets in order to collect information on sales of lodging facilities. This comprehensive database is known as the Hospitality Market Data Exchange (HMDE). The HMDE includes more than 90% of all hotel sales that took place during this period. The HMDE data shows that the number of transactions peaked at 726 in 1986. This strong activity is largely attributable to pending changes in the tax laws, which made it less favorable to own hotels. It is also possible that HVS International, Mineola, New York Overview of External Forces 53 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= forward-thinking investors noted the substantial overbuilding and declining economy and decided to bail out at that time. In 1987 and 1990, the average sales price per room peaked at $75,000, which was more than twice the 1981 average of $36,000. Following the 1990 peak, hotel prices fell rapidly as occupancies and profits were eroded by the massive number of hotel rooms entering the market. By 1991, the year of the Persian Gulf War, sales prices had fallen to $38,000 per room. Even the highest price per room declined from the record $1,195,652 (for the sale of the Bel Air Hotel) to $251,816 in 1992. The market hit bottom in 1993, when the average sales price dropped to $36,000 per room. Prices recovered rapidly in 1994 and 1995 as investors became interested in hotels again and more full-service properties were put on the market. In 1995, the average sales price was $61,000 per room. The figures presented in the HMDE represent actual sales prices; no attempt was made to adjust for factors such as favorable or unfavorable financing, forced or liquidation sales, bankruptcy sales, foreclosures, and so forth. As a result, the average price per room does not necessarily reflect market value, which assumes a willing buyer and a willing seller. Many of the transactions that took place during the early 1990s involved unwilling sellers - usually lenders who were forced to liquidate hotel portfolios quickly at prices that were below market levels. Most hotel experts agree that a recovery is underway, and they recommend that owners hold their properties until more favorable conditions prevail. Trends in Hotel Values A more meaningful indicator of trends in hotel value is the Hotel Valuation Index (HVI), developed by HVS International. This index tracks changes in hotel values in 23 major markets and the nation as a whole. It is developed through an income approach, using market area data provided by Smith Travel Research and operational and capitalization rate information from HVS International, and is indexed to the 1986 U.S.A. value (1.0000). The following table sets forth the HVI from 1986 to 1995. HVS International, Mineola, New York Overview of External Forces 54 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 5-3 Hotel Valuation Index per Room - -------------------------------------------------------------------------------- Valuation Index Per Room ------------------------
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 ------------------------------------------------------------------------------------------------------- Honolulu 3.3571 4.0357 4.6964 5.2857 5.3214 4.7857 4.9286 4.2857 4.3929 5.6071 New Orleans 1.5357 1.7500 2.2857 2.3929 2.5000 2.6071 3.2857 3.2500 3.8929 4.4286 New York 3.5714 4.1071 4.6429 4.5357 3.9286 3.0357 2.5714 2.5714 3.1429 4.1071 San Francisco 2.5000 3.0893 3.2500 3.0714 2.9286 2.5714 2.5714 2.9643 3.2143 4.0000 Phoenix 1.2143 1.0714 1.1786 1.5357 1.4286 1.2500 1.5000 1.9643 2.3571 3.2143 San Diego 2.8571 2.3571 2.5714 2.6786 2.3929 2.5357 2.5357 2.2143 2.3571 3.0357 Miami 1.4286 1.6071 1.7321 2.1429 2.1786 2.2500 2.5714 2.7857 2.3214 2.9286 Washington, DC 2.1786 2.1786 2.4464 2.6071 2.2500 1.8571 2.0357 2.5000 2.3929 2.8929 Atlanta 1.0714 1.0179 1.0536 1.0357 1.1429 1.1250 1.2857 1.7857 2.1429 2.6786 Minneapolis 0.7321 0.6964 0.7143 0.7143 0.7857 1.0000 1.2857 1.5714 1.8214 2.1786 Chicago 1.4643 1.5000 1.5714 1.5000 1.4286 1.2143 1.2500 1.5000 1.8571 2.1786 Boston 2.3571 2.7143 2.6071 2.1429 1.8214 1.2500 1.3036 1.3214 1.6071 2.1071 Fort Lauderdale 1.4643 1.2679 1.3214 1.4286 1.4821 1.3571 1.7143 1.8929 1.6071 1.9286 Orlando 1.5000 1.6429 1.9286 2.5000 2.5357 1.8929 2.0714 1.7857 1.6071 1.8929 Denver 0.5357 0.4464 0.4643 0.4821 0.7857 0.9268 1.0357 1.3214 1.5000 1.8571 Dallas 0.5536 0.6250 0.6607 0.7321 0.7857 0.7143 0.9643 1.0357 1.3214 1.7143 USA 1.0000 0.9464 1.0536 1.1250 1.0714 0.9214 0.9929 1.1429 1.3214 1.6071 Los Angeles 2.1071 2.2857 2.3929 2.4643 2.1786 1.5714 1.0714 0.9643 1.1964 1.5000 Tampa 0.8393 0.7679 0.8571 1.1429 1.2857 1.0357 1.0714 1.0357 1.1071 1.3214 Anaheim 1.7679 1.7321 1.7500 1.8571 1.6071 1.2857 0.9642 0.9464 0.8393 1.2500 Houston 0.3571 0.4286 0.6964 0.7857 1.1071 1.1607 1.1429 1.0357 1.0000 1.1786 Philadelphia 1.4643 1.5357 1.4286 1.3214 1.0714 0.6786 0.5714 0.6071 0.7500 1.0714 Norfolk 1.1786 1.0536 0.9286 0.7857 0.6429 0.5357 0.6071 0.6429 0.7500 0.9643 Riverside 0.9643 1.2143 1.5714 1.7143 1.4643 1.2500 0.7857 0.5357 0.4286 0.5357
Source: HVS International - -------------------------------------------------------------------------------- The HVI can be used to show the value change in a particular market over time or to show the relative difference in hotel values in various cities. The following table shows the annual change in hotel values in 23 major markets and the United States as a whole. HVS International, Mineola, New York Overview of External Forces 55 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 5-4 Percent Change in the Hotel Valuation Index - -------------------------------------------------------------------------------- Annual Percent Change ---------------------
'86-87 '87-88 '88-'89 '89-'90 '90-'91 '91-'92 '92-'93 93-'94 '94-'95 '86-'95 - ----------------------------------------------------------------------------------------------------------- Honolulu 20 % 16 % 13 % 1 % -10 % 3 % -13 % 3 % 28 % 67 % New Orleans 14 31 5 4 4 26 -1 20 14 188 New York 15 13 -2 -13 -23 -15 0 22 31 15 San Francisco 24 5 -5 -5 -12 0 15 8 24 60 Phoenix -12 10 30 -7 -13 20 31 20 36 165 San Diego -18 9 4 -11 6 0 -13 6 29 6 Miami 12 8 24 2 3 14 8 -17 26 105 Washington, DC 0 12 7 -14 -17 10 23 -4 21 33 Atlanta -5 4 -2 10 -2 14 39 20 25 150 Minneapolis -5 3 0 10 27 29 22 16 20 198 Chicago 2 5 -5 -5 -15 3 20 24 17 49 Boston 15 -4 -18 -15 -31 4 1 22 31 -11 Fort Lauderdale -13 4 8 4 -8 26 10 -15 20 32 Orlando 10 17 30 1 -25 9 -14 -10 18 26 Denver -17 4 4 63 18 12 28 14 24 247 Dallas 13 6 11 7 -9 35 7 28 30 210 USA -5 11 7 -5 -14 8 15 16 22 61 Los Angeles 8 5 3 -12 -28 -32 -10 24 25 -29 Tampa -9 12 33 12 -19 3 -3 7 19 57 Anaheim -2 1 6 -13 -20 -25 -2 -11 49 -29 Houston 20 62 13 41 5 -2 -9 -3 18 230 Philadelphia 5 -7 -8 -19 -37 -16 6 24 43 -27 Norfolk -11 -12 -15 -18 -17 13 6 17 29 -18 Riverside 26 29 9 -15 -15 -37 -32 -20 25 -44
Source: HVS International - -------------------------------------------------------------------------------- On a national basis, hotel values rose in 1988 and 1989, then declined in 1990 and dropped by 14% in 1991. A turnaround commenced in 1992, when values increased by 8%; still greater increases of 15% in 1993, 16% in 1994, and 22% in 1995 signaled that a recovery was well underway. In the case of the individual cities, it is obvious that the movement in national hotel values has been offset somewhat by trends in local markets. Between 1986 and 1995, Riverside hotels lost more than 40% of their value, while San Francisco showed a 60% increase. Anaheim, Los Angeles, and Philadelphia also suffered significant drops. Future Trends Most hotel owners, operators and lenders agree that the U. S. lodging industry has emerged from one of the worst periods since the Depression of 1929. Today, there are many indications that signal a strong recovery is underway, and most hotels have experienced a dramatic rise in profitability. Conversely, the hotel industry remains cyclical, and there are long-term trends and risk factors that could have an unfavorable impact on the operating results and investment potential of lodging facilities. The following HVS International, Mineola, New York Overview of External Forces 56 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= list summarizes the positive and negative factors that are likely to influence the U. S. lodging industry in coming years. o No significant amount of new hotel development is likely to occur during the next three to five years. Lenders stopped financing new hotels in the early 1990s because of the high rate of loan defaults, and they are only now starting to make construction loans. Although mortgage funds are available to refinance existing properties and construction loans are being made for economy hotels, mortgages for new hotels in the mid-rate, first-class, and luxury categories are still difficult to secure. This lack of financing is major barrier to entry, and will prevent a number of proposed projects from moving forward. With only a slow increase in supply, hotel occupancies should rebound as fast as the growth in demand permits. o An additional barrier to entry is the current discrepancy between market values and replacement costs for first-class and luxury hotels. In today's market, many upscale hotels are still selling for prices that are below what it would cost to develop a comparable hotel. As a result, there is little justification for building a new hotel when a similar, existing facility is available for sale at some fraction of the cost. Until the gap between market value and replacement cost narrows, there will be minimal new hotel construction in the upper-tier segments. The market values and replacement costs of budget and economy hotels have been in equilibrium for several years which is another reason why new development is proceeding in these segments. o The U. S. economy continues to improve, which suggests that more people are traveling. Many people curtailed their travel plans during the recent recession, and there is likely to be pent-up demand that will be released as consumer confidence escalates. o Minimal additions to the hotel supply coupled with growth in demand should result in further improvement in occupancies during the next several years. HVS International, Mineola, New York Overview of External Forces 57 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= o As shown by the historical data, hotel room rates rise rapidly as occupancies escalate. The most frequent complaint that owners and operators had during the recent recession was their inability to achieve average rate gains. Starting in 1994, gains in hotel room rates returned to levels in excess of inflation, foreshadowing enhanced profitability. In real dollars, hotel room rates are expected to return to 1988 levels by 1998, which is a good indication that hotel values will return to record levels in the next two to four years. o The low cost of capital is another factor that tends to enhance value. Because capitalization rates are tied directly to the price of capital, the lower the cost, the lower the cap rate and the higher the value. The cost of hotel debt capital averaged 10.5% in 1990. Today, similar financing is available at 8.5% to 9.5%. Recent hotel sales support the downward trend in capitalization rates. o Government regulations are becoming increasingly expensive for the U. S. hotel industry. A national health care policy could force small operators to provide better benefits for many more employees, particularly the part-time workers who are used extensively by hotels and restaurants. Environmental laws are becoming stricter and will require hotels to implement recycling, reuse, and conservation procedures. Congress has limited deductions for meals and entertainment expenses, which increases the cost of doing business in hotels and restaurants. Local municipalities use hotel rooms taxes as a source of revenue for general use, and the hotel rooms tax is so high in some areas that it has driven away demand. This case is particularly true with respect to meetings and conventions, which can be held in cities that tax accommodations at a lower rate. o Improved technology is rapidly changing the way business is conducted. During the next decade, advances such as video communication, enhanced data transfer, and faster transportation are expected to limit the need for face-to-face meetings and shorten the time that executives are away from their offices. Commercial hotels are bound to be influenced by this trend. Conclusion Interest in hotel acquisition has increased significantly during the past several years. Buyers have concluded that future earnings trends are likely to be favorable, and the risks posed by overbuilding or an economic downturn are small. Some sellers are holding their properties until prices reach a HVS International, Mineola, New York Overview of External Forces 58 Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= higher level. Consequently, we believe that there is pent-up desire to sell, once prices begin to approach levels that allow the existing (or restructured) debt to be paid off. The fact that numerous buyers are chasing very few acquisition opportunities has had a favorable impact on recent sales prices. For buyers to be successful in this highly competitive market, their projected operating results must take into account at least a portion of any upside created from improved performance, particularly if the improvement can be readily achieved through management efficiencies. Capitalization rates based on historical operating income have fallen during the past several years. Hotel buyers in today's market must be aggressive in all of their acquisition assumptions. As a result, hotel values in some parts of the country are approaching the levels registered during the mid-1980s, and a full recovery is expected to occur in the next two to four years. HVS International, Mineola, New York Lodging Market Supply and Demand 59 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 6. Lodging Market Supply and Demand Analysis MARKET FOR TRANSIENT ACCOMMODATIONS The market for transient accommodations is an all-encompassing term referring to the many types of travelers who use lodging facilities in a given area. These travelers represent the market's accommodated room night demand. This section will begin with an analysis of historical demand trends to determine what changes have occurred; the historical number of competitive hotel rooms will then be estimated to evaluate local supply trends. Areawide occupancy levels can be calculated based on the number of hotel rooms available in the market and the demand for lodging accommodations. The total hotel room night demand will be divided into individual market segments to allow us to forecast growth rates based on the economic and demographic data set forth earlier in this report. Historical Supply and Demand Data Smith Travel Research (STR) has compiled historical supply and demand data for the subject property's competitors. Included in the STR report are the Marriott Quorum, the Westin Galleria, the Doubletree Lincoln Center, and the Sheraton Park Central. The former three hotels are the properties which compete on a primary basis with the Grand Kempinski. The Sheraton Park Central is not a direct competitor, primarily due to its somewhat remote location. However, we have included it in this survey in order to comply with STR's reporting requirements, which mandate a sample of a minimum of four hotels. The subject property only began reporting to STR in 1994; thus, the inclusion of the Sheraton in place of the Grand Kempinski enables us to study area trends since 1991. The STR data is presented in the following table, and includes the marketwide occupancy, average rate, and rooms revenue per available room (RevPAR). RevPAR is calculated by multiplying occupancy by average rate, and provides an indication of how well rooms revenue is being maximized. HVS International, Mineola, New York Lodging Market Supply and Demand 60 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 6-1 Historical Room Supply and Demand Trends (STR) - --------------------------------------------------------------------------------
Year-to-Date Through Average Annual -------------------- February Compounded Growth -------- 1991 1992 1993 1994 1995 1996 1996 1997 1991-1996 ------------------------------------------------------------------------------------------------------------- Number of Rooms 2,024 2,024 2,024 2,024 2,024 2,024 1,990 2,024 Room Supply 738,760 738,760 738,760 738,760 738,760 738,760 119,416 119,416 Percent Change --- 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % --- 0.0 % 0.0 % Room Demand 472,482 502,194 529,070 574,672 568,372 578,907 96,853 91,112 Percent Change --- 6.3 % 5.4 % 8.6 % -1.1 % 1.9 % --- -5.9 % 4.1 % Occupancy 64.0 % 68.0 % 71.6 % 77.8 % 76.9 % 78.4 % 81.1 % 76.3 % Percent Change --- 6.3 % 5.4 % 8.6 % -1.1 % 1.9 % --- -5.9 % 4.1 % Average Rate $82.95 $85.21 $84.14 $90.94 $101.48 $111.07 $110.75 $121.18 Percent Change --- 2.7 % -1.3 % 8.1 % 11.6 % 9.4 % --- 9.4 % 6.0 % RevPAR $53.05 $57.93 $60.26 $70.74 $78.08 $87.04 $89.83 $92.45 Percent Change --- 9.2 % 4.0 % 17.4 % 10.4 % 11.5 % --- 2.9 % 10.4 %
Please note that we did not include the subject property in this competitive set, but rather, the Sheraton Park Central, for the subject property failed to report to STR prior to 1994. Source: Smith Travel Research, Inc. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Lodging Market Supply and Demand 61 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= It is important to note some limitations of the STR data. Hotels are occasionally added to or removed from the sample, and not every property reports data in a consistent and timely manner; these factors can influence the overall quality of the information by skewing the results. These inconsistencies may also cause the STR data to differ from the results of our competitive survey. Nonetheless, we find that hotel buyers often rely on STR statistics, and thus, they are considered relevant to this study. Moreover, as previously noted, the present sample includes four hotels which have reportedly been contributing data consistently since 1991. This information is therefore believed to be a reasonable gauge of market trends. As illustrated by the preceding table, supply has remained constant among this competitive set since 1991. Our research indicates that, during this five-year period, some limited-service hotels (consisting primarily of economy and extended stay properties) opened in the north Dallas area. None of these is considered to be primarily competitive with the subject property. As a result of the constancy of the room supply, the reported changes in occupancy mirror the movements in room night demand shown in the table. Marketwide demand increased at an average annual compounded rate of 4.1% between 1991 and 1996, with a high of 8.6% in 1994, followed by a decline of 1.1% in 1995. The dramatic growth evident since 1991 is somewhat misleading, as 1991 was a uniformly poor year for the hotel industry throughout the U. S., due to the effects of the Gulf War and the deepening of the national recession. The strong recovery achieved since 1991 indicates that the market achieved an early recovery from the recession; this interpretation is consistent with the economic trends discussed previously in this report. Marketwide occupancy levels have reached the high 70% range in each of the last three years. Year-to-date through February data indicates a significant downturn, which is almost wholly attributable to soft performance in the month of January. Although market sources were unable to provide a specific reason for this poor performance, all of the managers with whom we spoke indicated that they expect to achieve occupancy levels on par with 1996 results this year. As a large share of the market demand is derived from the meeting and group segment, such a recovery is considered to be achievable. Moreover, it is difficult to base the market's future demand trends on these first two months alone. Growth in average rate was minimal during the period 1991 through 1993, with a 2.7% increase followed by a 1.3% decline. This pattern of rate growth is consistent with the concurrent increases in occupancy; area hotels HVS International, Mineola, New York Lodging Market Supply and Demand 62 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= offered a wider array of discounts, while deferring rate increases, in an effort to regain profitable occupancy levels. In the past three years, as occupancy levels have reached the high 70% range, the market strategy has been to pursue average rate increase. While this strategy led to a minor 1.1% decrease in occupancy in 1995, the overall success is evident in the double-digit increases in RevPAR which have been achieved in the past three years. Also sustaining the strong rate increase is the fact that the market has effectively reached maximum occupancy levels, given the prevailing pattern of demand. Since 1994, areawide occupancy levels have exceeded 75.0%. The strong commercial orientation of the market results in peak occupancies on Monday through Thursday nights, while the softer weekend demand curtails the occupancy levels attainable during this period. As a result, the current occupancy levels are close to the maximum attainable. The concentration of demand on these peak nights has enabled area operators to achieve strong rate increases in the commercial segment, which has been a significant factor in the overall rate increases achieved. Data for the year-to-date through February suggests that the upward trend in average rate can be expected to continue over the near future. Despite a soft January, occupancy levels are expected to remain in the mid- to high- 70% range. With limited supply growth anticipated for the high end, full-service segment of the market, these market dynamics should prevail over the next several years. Overall, the market sustained an average annual compounded gain of 6.0% in average rate between 1991 and 1996. Demand Analysis Using Market Segmentation For the purpose of demand analysis, the overall market is divided into individual segments based on the nature of travel. Although a market may have various segments, the three primary classifications occurring in most areas are commercial, meeting and group, and leisure. Market segmentation is a useful procedure because individual classifications often exhibit unique characteristics in terms of growth potential, seasonality of demand, average length of stay, double occupancy, facility requirements, price sensitivity, and so forth. By quantifying the room night demand by market segment and analyzing the characteristics of each segment, the overall demand for transient accommodations can be projected. Lodging demand in North Dallas is generated primarily by the following four market segments. HVS International, Mineola, New York Lodging Market Supply and Demand 63 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Segment 1 Commercial Segment 2 Meeting and Group Segment 3 Leisure Segment 4 Airline Based on our field work, area analysis, and knowledge of the local lodging market, we estimate the 1996 distribution of accommodated hotel room night demand as follows. ================================================================================ Table 6-2 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- Marketwide Subject Property ----------------------- ----------------------- Accommodated Percent Accommodated Percent Market Segment Demand of Total Demand of Total - ------------------------------------------------------------------------ Commercial 269,000 47 % 55,000 40 % Meeting and Group 206,000 36 64,000 46 Leisure 88,000 15 10,000 7 Airline 10,000 2 10,000 7 - ------------------------------------------------------------------------ Totals 572,000 100 % 139,000 100 % - -------------------------------------------------------------------------------- As shown above, the market area is primarily commercial in nature, with this segment accounting for an estimated 47% of the total 1996 accommodated demand. The meeting and group segment accounted for an estimated 36% of the 1996 demand, while the leisure segment comprised an estimated 15%, and the airline segment only 2% of total demand. The subject property's distribution of demand differs rather significantly from that of the market as a whole. A majority of the Grand Kempinski's 1996 occupancy (46%) was derived from the meeting and group segment; this characteristic is consistent with the hotel's extensive inventory (+/-76,000 square feet) of meeting space, by far the largest in the competitive set. The limited exposure of the Grand Kempinski name has contributed to the hotels poorer participation in the commercial and leisure segments of the market. These segments are more heavily influenced by brand name and reservation system than is the meeting and group segment, and thus, the other, more well-known chains outperform the Grand Kempinski in these areas. Finally, the Grand Kempinski is currently the only hotel in the market which is participating in the airline segment of the market. HVS International, Mineola, New York Lodging Market Supply and Demand 64 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Using the distribution of accommodated hotel demand as a starting point, we will analyze the characteristics of each market segment in an effort to determine future trends in room night demand. Commercial Segment The commercial segment consists of individual business people who are visiting various firms in the subject property's market. Commercial demand is strongest Monday through Thursday nights, declines significantly on Friday and Saturday, and increases somewhat on Sunday. In markets where the weekday occupancy typically exceeds 90%, it is likely that some unaccommodated demand exists. The typical length of stay ranges from one to three days, and the rate of double occupancy is a low 1.2 to 1.3 people per room. Commercial demand is relatively constant throughout the year, although some declines are noticeable in late December and during other holiday periods. Although there are numerous sub-segments which comprise the commercial segment, the primary categories included herein are individual business travelers and volume corporate accounts. Individual business travelers are typically visiting firms in the immediate area or passing through en route to other destinations. The lodging choices made by these persons are influenced by brand loyalty, and in particular frequent traveler programs, as well as by location and convenience to businesses and amenities. The volume corporate accounts category consists of demand generated by local companies which produce a high volume of room night demand; this demand can include employees of the firm or of affiliated companies, and often includes training groups. These companies typically designate one or several hotels as their "preferred" lodging facility; in return, the selected hotels offer a rate which can represent a significant discount from published levels. These rates are typically negotiated on an annual basis, and the amount of the discount offered is tied to the number of room nights produced. Commercial demand in the North Dallas market is primarily generated by firms related to the following industries: finance and banking, wholesale and retail, telecommunications, and computing. Examples of such companies are Pizza Hut International, Pepsico, EDS, IBM, J. C. Penney, Digital Switch Corporation, American Express, CompUSA, Kodak, Mobil Oil, Mary Kay, and AT&T. In addition, various small businesses are located in the office complexes along Dallas North Tollway. HVS International, Mineola, New York Lodging Market Supply and Demand 65 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= All of the economic and demographic data presented previously correlates to some extent with the commercial demand trends, though changes in the FIRE, services, and wholesale trade employment sectors, total employment, occupied office space, and air passenger counts are most directly correlated. Recent average annual growth rates for these indicators have ranged from 0.2% to 3.0%. Smith Travel Research has estimated that demand in the local market has increased by 4.1% over the period 1991 to 1996. Our research indicates that the growth of commercial demand has been similar to these levels. However, in more recent years, this demand growth has tapered off, due primarily to the attainment of maximum occupancies on the peak weeknights. With the opening of some new supply, we anticipate that commercial demand (which comprises almost 50% of the total market) will increase by 3.0% annually throughout our projection period. It should be noted that the volume of new office space proposed for the North Dallas corridor suggests that higher growth rates are likely in the near future. However, the attainment of strong growth will continue to be constrained by the amount of available supply. This circumstance should cushion the competitive market in the event of any future additions to supply. Meeting and Group Segment The meeting and group market includes meetings, seminars, conventions, trade association shows, and similar gatherings of ten or more people. Peak convention demand typically occurs in the spring and fall. Because of vacations, the summer months represent the slowest period for this market segment; winter demand varies. The average length of stay for typical meetings and groups ranges from three to five days. Most commercial groups meet during the weekday period of Monday through Thursday, but associations and social groups will sometimes gather on weekends. Commercial groups tend to have a low double occupancy of 1.3 to 1.5 people per room, while social groups are likely to have double occupancy rates ranging from 1.5 to 1.9. Meeting and group patronage is quite profitable for hotels. Although room rates are discounted for large groups, the property benefits from the use of meeting space and the revenues generated by in-house banquets and cocktail receptions. Facilities that are necessary to attract meetings and groups include function areas with adequate space for breakout, meals, and receptions; recreational amenities; and a sufficient number of guestrooms to house the attendees. HVS International, Mineola, New York Lodging Market Supply and Demand 66 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= In the North Dallas market, this segment encompasses corporate group demand generators which are predominantly based in the local area, although due to the area's central location and mild weather, some national firms elect to have their annual gatherings in Dallas. Demand from these groups peaks on weekdays and during the spring and fall months. By contrast, the social gatherings which comprise the balance of the market usually take place on weekends and in the summer. National and Texas associations form the last category of this segment. Associations typically make their hotel arrangements two to four years in advance, which enables them to benefit from discounted rates and allows the hotel more advance planning and flexibility. Future meeting and group demand is closely related to growth in the commercial segment. Because most meetings have either a direct or an indirect business purpose, the economic considerations that have an impact on commercial travel also affect meeting and group demand. The exception is non-commercial meetings, which are tied to the economic factors that influence leisure travel. It should be noted that meetings and similar events are booked in advance, and thus, growth in this segment tends to lag slightly behind increases in commercial demand Based on the relevant economic and demographic trends, we estimate that meeting and group demand in the subject property's market area will increase by 2.0 % annually throughout the projection period. Leisure Segment The leisure market segment consists of individuals and families who are spending time in the area or passing through en route to other destinations. Their travel purposes may include sightseeing, recreation, visiting friends and relatives, or numerous other non-business activities. Leisure demand is strongest Friday and Saturday nights and all week during holiday periods and the summer months. These peak periods are negatively correlated with commercial visitation, underscoring the stabilizing effect of capturing weekend and summer tourist travel. The typical length of stay ranges from one to four days, depending on the destination and travel purpose, and the rate of double occupancy generally ranges from 1.8 to 2.5 people per room. Leisure travelers tend to be the most price-sensitive segment in the lodging market. They may prefer low-rise accommodations where parking is convenient to the rooms and often select accommodations which offer complimentary amenities such as continental breakfast. Ease of highway access HVS International, Mineola, New York Lodging Market Supply and Demand 67 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= and proximity to tourist attractions and retail centers are important locational considerations. Leisure demand in the subject property's market is predominantly generated by local individuals who are looking to get away from home, and are drawn to the North Dallas market by the array of restaurants and shopping alternatives available in the vicinity. Most of these visitors are drawn from within a 150 mile radius of the city. A smaller percentage is related to the local population, visiting friends or relatives who live in the area. The majority of this demand is generated on the weekend. Future leisure demand is related to the overall economic health of the nation. Trends showing changes in state and regional unemployment and disposable personal income often have a strong impact on non-commercial visitation. Traffic counts on nearby highways and attendance at local attractions can also form a basis for projections. Using the data compiled earlier in this report, we project that leisure demand will grow at a rate of 1.5% annually throughout the projection period. Airline Segment Airline demand is generated by flight crews and delayed passengers. The airlines typically contract rooms in nearby lodging facilities for extended periods to ensure the availability of accommodations. Because they are able to guarantee a specific level of usage on a daily basis, airlines can usually negotiate deeply discounted room rates. This type of demand is advantageous because it provides a base level of occupancy over a long period that normally includes weekends and slow seasons. The occupancy benefit is offset by low contract room rates, which have an adverse impact on average rate. Skilled hotel operators use airline patronage to fill in during periods of low occupancy, and quickly displace this demand when higher-rated market segments offer better potential. The subject property is the only hotel in the competitive market which currently accommodates an airline crew. The current contract is with Lufthansa, and consists of a total of 25 rooms per night. Management representatives reported that the hotel's contract with Lufthansa terminates March 31, 1998, but they anticipate that the contract will be renewed at least through the first quarter of 1999. Given the Kempinski's chain's affiliation with Lufthansa, it is reasonable to expect that the subject property will continue to accommodate this contract demand for the foreseeable future. However, we do not anticipate any growth in the volume of contract demand accommodated by the subject property, nor do we expect any of the HVS International, Mineola, New York Lodging Market Supply and Demand 68 Analysis - -------------------------------------------------------------------------------- other hotels in the market to pursue this segment. We have therefore forecasted that the airline segment will remain stable throughout the projection period. Conclusion The purpose of segmenting the lodging market is to define each major type of demand, identify customer characteristics, and estimate future growth trends. Starting with an analysis of the local area, four segments were defined as representing the subject property's lodging market. Various types of economic and demographic data were then evaluated to determine their propensity to reflect changes in hotel demand. Based on this procedure, we forecast the following average annual compounded market segment growth rates. ================================================================================ Table 6-3 Average Annual Compounded Market Segment Growth Rates - -------------------------------------------------------------------------------- Annual Compounded Growth Rates ---------------------------------------------------- 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 - ---------------------------------------------------------------------------- Commercial 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % Meeting and Group 2.0 2.0 2.0 2.0 2.0 2.0 Leisure 1.5 1.5 1.5 1.5 1.5 1.5 Airline 0.0 0.0 0.0 0.0 0.0 0.0 Annual Average Growth 2.4 % 4.8 % 2.4 % 2.4 % 2.4 % 2.4 % - -------------------------------------------------------------------------------- These growth rates will be used in subsequent sections of this study to forecast changes in lodging demand. COMPETITION An integral component of the supply and demand relationship that has a direct impact on the availability of lodging demand is the current and anticipated supply of competitive lodging facilities. We have identified three properties that are considered primarily competitive with Grand Kempinski Dallas. Including the subject property, these primary competitors total 2,009 rooms. Although there are numerous other first-class, full-service hotels in the Dallas area, none are judged to be sufficiently similar and proximate to the subject property to be considered secondarily competitive with the subject property. HVS International, Mineola, New York Lodging Market Supply and Demand 69 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Primary Competitors The following table summarizes the important operating characteristics of the primary competitors. This information was compiled from personal interviews, inspections, lodging directories, and our in-house library of operating data. The table also sets forth each property's penetration factors; penetration is the ratio between a specific hotel's operating results and the corresponding data for the market. If the penetration factor is greater than 100%, the property is performing better than the market as a whole; conversely, if the penetration is less than 100%, the hotel is performing at a level below the marketwide average. HVS International, Mineola, New York Lodging Market Supply and Demand 70 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 6-4 Primary Competitors and Aggregate Secondary Competitors - --------------------------------------------------------------------------------
Square Footage ----------------- Estimated 1996 Market Segmentation Estimated 1995 Meeting ------------------------------- 1994 ----------------------- Year No. of Meeting Space Mtg. & Published Average Property/Location Opened Rooms Space per Room Comm. Group Leisure Airline Rates Occ. Rate RevPAR - ---------------------------------------------------------------------------------------------------------------------------------- Grand Kempinski Dallas 15201 Dallas Parkway 1983 528 76,000 144 40 % 46 % 7 % 7 % $175-$195 73.5 % $97.41 $71.60 Dallas Marriott Quorum 14901 Dallas Parkway 1982 547 16,000 29 60 25 15 0 $129-$149 82.0 94.00 77.08 Westin Galleria 13340 Dallas Parkway 1983 431 35,978 83 45 35 20 0 $167-$177 81.0 131.00 106.11 Doubletree Lincoln Center 5410 LBJ Freeway 1982 502 25,000 50 40 40 20 0 $160-$180 72.0 90.00 64.80 - ---------------------------------------------------------------------------------------------------------------------------------- Totals and Averages 2,008 38,245 77 47 % 36 % 15 % 2 % 77.1 % $102.27 $78.80
Estimated 1996 ------------------------------------------------- Average Occupancy Yield Property/Location Occ. Rate RevPAR Penetration Penetration - ---------------------------------------------------------------------------- Grand Kempinski Dallas 71.9 % $104.61 $75.21 92.1 % 86.2 % 15201 Dallas Parkway Dallas Marriott Quorum 84.0 102.00 85.68 107.5 98.2 14901 Dallas Parkway Westin Galleria 83.0 144.00 119.52 106.3 137.0 13340 Dallas Parkway Doubletree Lincoln Center 74.0 100.00 74.00 94.7 84.8 5410 LBJ Freeway - ---------------------------------------------------------------------------- Totals and Averages 78.1 % $111.74 $87.27 100.0 % 100.0 % - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] COMPETITION MAP HVS International, Mineola, New York Lodging Market Supply and Demand 71 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Our survey of the primarily competitive hotels in the North Dallas market shows a well-defined market with a representation of nationally and internationally recognized, full-service hotels. These properties range in size from 431 to 547 guestrooms, and are very similar in age as they all opened in the early 1980's. The market demand has a commercial orientation; in 1996, this segment contributed 47% of the overall occupancy. The meeting and group segment comprised 36% of the total, followed by the leisure segment (at 15%), and the airline segment (at 2%). In 1996, the primary competitors achieved an overall occupancy of 78.1% at an average rate of $111.73, yielding RevPAR of $87.27, which represents an approximate 10% increase over 1995 levels. Although this increase was due primarily to average rate growth, it is significant to note that despite that increase the occupancy of the primary competitors increased by one point over 1995 results. The Marriott Quorum maintained the highest occupancy in 1996, at 84.0%, which equated to an occupancy penetration of 107.6%. This hotel's strong performance is attributed to its well-recognized and respected brand. Ranked second, closely behind the Marriott Quorum, was the Westin Galleria with an occupancy of 83.0% and an occupancy penetration of 106.3%. The Westin's superior location adjacent to the Galleria has helped to sustain this strong level, and has also enabled this hotel to maintain the strongest average rate in the market. The lowest occupancy penetration was registered by the subject property, at 92.1%, which is attributed to its meeting and group orientation and its unfamiliar brand to the U. S. traveling public. The highest RevPAR in 1996 was achieved by the Westin Galleria, due to the average rate levels attained by this property, which contributed to a 137.0% yield penetration - the highest in the market. At 84.8%, the Doubletree Lincoln Center realized the lowest yield penetration, and the subject property surpassed the Doubletree, with a yield penetration of 86.2%. Each primary competitor was inspected and evaluated. Descriptions of our findings are presented below. HVS International, Mineola, New York Lodging Market Supply and Demand 72 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Dallas Marriott Quorum Location: 14901 Dallas Parkway Number of Rooms: 547 1996 Estimated Occupancy: 84.0% 1996 Estimated Average Rate: $102.00 1996 Estimated RevPAR: $85.68 The 547-room Marriott Quorum was built in 1982. This property is located approximately one quarter of a mile south of the Grand Kempinski, west of the Dallas North Tollway and north of I-635 LBJ Freeway. In addition to standard guestrooms, the hotel features 15 suites (included in the above room count), 16,000 square feet of meeting and banquet space (which includes a +/-9,500-square-foot ballroom, and two junior ballrooms which accommodate up to 200 people each), two restaurants, a lobby bar, an indoor/outdoor swimming pool, a whirlpool, a sauna, lighted tennis and basketball courts, and an exercise room. The Marriott Quorum underwent an estimated $3 million soft and case goods renovation throughout 1994 and 1995, and the property appeared to be in good condition at the time of our inspection. Guests staying on the Concierge Level can enjoy complimentary breakfasts, afternoon cocktails, and access to the Concierge Lounge. The hotel is owned by Host Marriott, and has no current plans for expansion. Approximately 60% of the Marriott Quorum's demand is generated from the commercial segment. The remaining 40% of accommodated demand at the Marriott Quorum in 1996 was made up of 25% meeting and group and 15% leisure. The Marriott competes with the Grand Kempinski by virtue of location, facilities and market orientation. This hotel has an advantage over the subject property due to its preeminent brand name, but offers significantly less meeting space than does the Grand Kempinski. The Marriott Quorum achieved an 82.0% occupancy in 1995 at a $94.00 average rate. Occupancy increased to 84% in 1996, and average rate rose to $102.00, which equated to a roughly 11% gain in RevPAR. For estimated year-end 1996, the Marriott Quorum's yield penetration was 98.2%. HVS International, Mineola, New York Lodging Market Supply and Demand 73 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Westin Galleria Location: 13340 Dallas Parkway Number of Rooms: 431 1996 Estimated Occupancy: 83.0% 1996 Estimated Average Rate: $144.00 1996 Estimated RevPAR: $119.52 Opened in January of 1983, the 431-room Westin Hotel is attached to the Galleria retail and office tower complex. This property is located approximately two miles south of the subject property, in the northeast quadrant of the intersection of I-635 LBJ Freeway and Dallas Parkway. In addition to standard guestrooms, the hotel features 12 suites (included in the above room count) and approximately 36,000 square feet of meeting space, including an +/-11,850-square-foot ballroom and a +/-5,510-square-foot junior ballroom. The property benefits from a wide array of food and beverage outlets; the hotel itself features three restaurants, including the Four Star-rated Huntington's restaurant, and a lobby bar. Additional food and beverage options are available in the Galleria mall. Recreational amenities at this property include a heated outdoor swimming pool, a sundeck, and a one-half-mile lighted outdoor jogging track; a state-of-the-art fitness center is located in the Galleria mall, and is available to hotel guests. The facilities of the Westin Hotel are currently in excellent condition, and may be considered superior to those offered by the subject property. During the past three months, 415 guestrooms were renovated, including case and soft goods. The meeting rooms were renovated in 1996 and the ballroom in 1995. According to management representatives, the hotel has plans to add 17 guestrooms on the 21st floor, replacing the existing suites which will then be relocated in the space currently occupied by banquet rooms. The property is owned by North Dallas Galleria Venture (a joint-venture between Hines and Westin Inc.), and it is managed by Westin. This property has a Three-Star 1996 Mobil Travel Guide rating. Roughly 45% of the Westin's demand is derived from the commercial segment, and 35% is generated by the meeting and group segment. Due to its premiere location, the Westin can be very selective in its accommodation of corporate accounts, and tend to serve only the highest rated segments of this market. Meeting and group demand consists primarily of smaller in-house corporate meetings and conferences, and again the strength of the demand experienced by this hotel enables management to achieve aggressive prices in meeting and group segment. The remaining 20% of the HVS International, Mineola, New York Lodging Market Supply and Demand 74 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Westin's demand is derived from the leisure segment; the hotel's connection to the Galleria Shopping Mall allows the Westin to enjoy a favorable leisure location. The Westin achieved an 81.0% occupancy in 1995 at a $131.00 average rate. Occupancy increased to 83.0% in 1996, while average rate improved to $144.00, which resulted in a 12.6% improvement in RevPAR in 1996. The Westin's yield penetration in 1996 was 137.0%; this market strength should continue given the hotel's location, its superior rooms product, and its high service standard. Doubletree Lincoln Center Location: 5410 LBJ Freeway Number of Rooms: 502 1996 Estimated Occupancy: 74.0% 1996 Estimated Average Rate: $100.00 1996 Estimated RevPAR: $74.00 The 502-room Doubletree Lincoln Center was built in 1982, and was originally operated as a Lincoln Hotel. This property is located approximately two miles of the subject property, in the southeast quadrant of the intersection of I-635 LBJ Freeway and Dallas Parkway, immediately to the south of the Westin Galleria. In addition to standard guestrooms, the hotel features 16 suites (included in the above room count), and roundly 25,000 square feet of meeting space, including a +/-9,300-square-foot ballroom. Food and beverage outlets include two restaurants, two lounges, and a deli. Recreational amenities consist of an outside pool, an exercise room, a jogging track around the hotel's landscaped lake, and access to the Lincoln City Club (a fully equipped health facility adjacent to the hotel) for an $11.00 fee per day. This property also features four executive levels; guests staying on these levels can enjoy free fax service and local calls, complementary continental breakfast and hors d'oeuvres, and free access to the Lincoln City Club. The guestrooms' case and soft goods were renovated in 1996, and in 1997 renovations included the lobby and the suites' soft goods. Overall, the improvements appeared to be in very good condition. The property is owned by Metropolitan Life and it is managed by Doubletree Hotel Corporation. HVS International, Mineola, New York Lodging Market Supply and Demand 75 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Approximately 40% of the guests accommodated by the Doubletree Lincoln Center in 1996 were considered commercial travelers. Another 40% was generated by the meeting and group segment, and roundly 20% was derived from leisure travelers. The Doubletree Lincoln Center achieved a 72.0% occupancy in 1995, at a $90.00 average rate. Occupancy increased to 74.0% in 1996 while average rate increased to $100.00, equating to a roughly 9% gain in RevPAR. For the calendar year 1996, the operating statistics for the Doubletree Lincoln Center equated to an 84.8% yield penetration. Proposed Competitors It is important to consider any new hotels that may have an impact on the subject property's operating performance. Based on our fieldwork in the market and our discussions with local hotel operators, developers, and government officials, we have identified two proposed hotel in the North Dallas market area which are expected to be competitive with the subject property. A 150-room Embassy Suites is being developed at the intersection of Spring Valley Road and Noel Road, approximately one mile southeast of the subject property. This new, all-suite property is expected to open in January of 1998, and will feature +/-2,800 square feet of meeting space and one food and beverage outlet. The project is being developed by Remington Hotel Corporation with financing provided by Nomura Asset Capital. The hotel will reportedly be operated by Remington Hotel Corporation under a franchise agreement with Promus Hotel Corporation. Given the proximity of the Embassy Suites and its expected service and quality level, we believe that it will be primarily competitive with the subject property. A 176-room, full-service Courtyard by Marriott is proposed for a site on Quorum Drive, just behind Trulecks Steaks and Stone Crab Restaurant on Beltline Road, and within walking distance south of the subject property. This property is expected to be under construction by the summer of 1997 and to open in the middle of 1998. The project is being developed by Gene Carter, and has received all necessary Marriott approvals. The final loan documents for the financing of this project are reportedly being prepared. The project has not yet received the necessary approval from the Town of Addison, and is scheduled for review by the Council on May 13, 1997. For the purposes of this appraisal, we have assumed that this project will be completed as scheduled. Given the proximity of the Courtyard and its HVS International, Mineola, New York Lodging Market Supply and Demand 76 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= product type, we believe that it will be 50% competitive with the subject property. According to a F. W. Dodge Report pertaining to proposed hotel projects in Dallas County, a 315-room luxury hotel project is currently in the preliminary discussion stage in the subject site's market area. The property is reportedly proposed for the corner of Beltline Road and Dallas North Tollway, in the immediate vicinity of the subject property. Development costs associated with this project have been estimated at between $30,000,000 and $40,000,000. The developer of the project is reportedly Southwest Properties Group of Dallas, but no finalized development plans or possible franchise affiliations have been announced. Moreover, officials of the city of Addison are currently unaware of any such proposed development. Because this project is only in the discussion stage, we have not explicitly considered it as new room supply in our analysis. However, we will take the possibility of any such future development into consideration in our selection of a stabilized occupancy for the subject property. In addition, it must be noted that several limited-service properties are either proposed or under development in the region. These include a Townplace Suites by Marriott and a Fairfield Suites. These developments are not likely to hurt the hotels in the competitive set, although such properties can dilute areawide occupancies during the softer periods of the week and year, particularly with respect to the more rate-sensitive component of the leisure segment. Finally, the question of hotels proposed for development in the Legacy market area must be considered. As previously described, the Legacy office park is situated approximately 15 miles north of the subject market area, in the City of Plano. This development currently consists of several major office headquarters, including J. C. Penney and Frito Lay, with little supporting commercial development in the area. However, a mall is to be constructed in the Legacy region, and other commercial development is expected to follow thereafter. Given the nature of the business in the Legacy area, it is inevitable that at least one first-class hotel will be developed in that area. In fact, representatives of Westin report that they have a letter of intent with a local developer for a 300-room hotel in this vicinity; however, no other details have been established and neither debt nor equity is yet in place for this project. HVS International, Mineola, New York Lodging Market Supply and Demand 77 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The development of first-class lodging facilities in Legacy can be expected to have some impact on the hotels in the competitive set, as the businesses in this area are among the leading generators of demand in the North Dallas market. However, the current resurgence of office space development in the subject neighborhood can reasonably be expected to generate sufficient demand to substantially offset the negative impact of developments at Legacy. This contention is particularly true, as the hotel development in that area is in the extreme preliminary stages, and not expected to reach fruition before the Year 2000, while the office space development in the North Dallas is much farther along. In order to reflect the probable impact of future hotel development in the Legacy area on the subject property and competitive market, we have included a 300-room hotel in our analysis. This hotel is assumed to open on or about January 1, 2000. Due to its distance from the subject property, this hotel would only be 50% competitive with the Grand Kempinski. Conclusion A review of historical demand trends in the subject property's area indicates that the market is very strong and has completely recovered from both the national and regional recession. While supply has remained constant over recent years, growth in demand has been increasing and area wide occupancy is reaching peak levels. This strong performance has enabled the hotel's in the market to sustain relatively strong rate increases in the past three years. Based on our review of the local area, four primary market segments were defined within the subject property's lodging market. Growth rates for each segment were forecasted based upon an analysis of the economic and demographic trends that appeared to significantly impact lodging demand. In general, demand is anticipated to increase at moderate rates throughout the projection period, with the limited amount of new supply expected to constrain growth. We have identified a total of three lodging facilities that are considered competitive with the subject hotel. We have reviewed the hotel projects proposed for the area. Given the favorable commercial location of the subject property and the improving nature of the North Dallas market, we expect that the Grand Kempinski will continue to perform well. HVS International, Mineola, New York Projection of Occupancy and 78 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 7. Projection of Occupancy and Average Rate Historical Operating Performance The following table sets forth the subject property's historical occupancy, average rate, and rooms revenue per available room (RevPAR). For the purpose of comparison, we have also presented corresponding data (as provided by Smith Travel Research) for the competitive hotels described in the previous section. In addition to the annual percent change calculations, we have determined the subject property's occupancy, average rate, and RevPAR penetration factors. HVS International, Mineola, New York Projection of Occupancy and 79 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-1 Historical Trends - --------------------------------------------------------------------------------
Average Annnual Compounded Growth 1991 1992 1993 1994 1995 1996 1991-1996 --------------------------------------------------------------------------------- Subject Property Occupancy 62.7 % 60.9 % 63.9 % 72.7 % 73.5 % 71.9 % Percent Change --- (2.9)% 4.9 % 13.8 % 1.1 % (2.2)% 2.8 % Occupancy Penetration 98.0 % 89.6 % 89.2 % 93.5 % 95.5 % 91.8 % Average Rate $79.45 $85.40 $88.54 $91.32 $97.41 $104.61 % Percent Change --- 7.5 % 3.7 % 3.1 % 6.7 % 7.4 % 5.7 % Average Rate Penetration 95.8 % 100.2 % 105.2 % 100.4 % 96.0 % 94.2 % RevPAR $49.82 $52.01 $56.58 $66.39 $71.60 $75.21 % Percent Change --- 4.4 % 8.8 % 17.3 % 7.8 % 5.1 % 8.6 % RevPAR Penetration 93.9 % 89.8 % 93.9 % 93.8 % 91.7 % 86.4 % Areawide (STR) Occupancy 64.0 % 68.0 % 71.6 % 77.8 % 76.9 % 78.4 % Percent Change --- 6.3 % 5.4 % 8.6 % (1.1)% 1.9 % 4.1 % Room Rate $82.95 $85.21 $84.14 $90.94 $101.48 $111.07 Percent Change --- 2.7 % (1.3)% 8.1 % 11.6 % 9.4 % 6.0 % RevPAR $53.05 $57.93 $60.26 $70.74 $78.08 $87.04 Percent Change --- 9.2 % 4.0 % 17.4 % 10.4 % 11.5 % 10.4 %
- -------------------------------------------------------------------------------- Since 1991, the Grand Kempinski DallasGrand Kempinski Dallas has experienced lower-than-average occupancies, with occupancy penetration rates lower than 100%. It appears that while the market showed a healthy 6.3% increase in occupancy in 1992, the subject property's occupancy was hurt by the nationwide recession, and dropped by 2.9%. Three major reasons behind this observation are the lack of a nationally recognized brand name, the meeting and group orientation of the hotel, and the above market increase in average rate adopted at that time, which either hurt or at least did not help the hotel go through the recession. In 1993 and 1994, the hotel appeared to have recovered, and exhibited strong results, with occupancy annual average growths of 4.9% and 13.8%, respectively, compared to 5.4% and 8.6%, respectively, for the market. In 1995 and 1996, the growth in occupancy slowed, and the hotel achieved occupancies in the low 70s, while those of the market were in the high 70s. Average rate, on the other hand, has sustained a healthy growth from 1991 to 1996, and the subject property HVS International, Mineola, New York Projection of Occupancy and 80 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= exhibited average rate penetration levels higher than 100% from 1992 to 1994. In 1995 and 1996, the growth in average rate at the subject property, although stronger than in the previous years, was outperformed by the market as a whole, with increases of 11.6% and 9.4%, respectively. Because of the subject property's low occupancy, its RevPAR has been consistently lower than the market average RevPAR from 1991 to 1996, and its RevPAR penetration did not once reach 100% during that time. Premise of the Projections To a certain degree, occupancy and rate attainment can be manipulated by management. For example, hotel operators may choose to lower rates in an effort to maximize occupancy. Our forecasts reflect an operating strategy that we believe would be implemented by competent hotel management to achieve an optimal mix of occupancy and average rate. Projected Room Night Demand Lodging demand and occupancy can be projected through a process known as room night analysis. A room night is a unit of hotel demand that equals one room that is occupied for one night. After estimating the number of room nights a hotel can be expected to attract during a 12-month period, we can determine occupancy by dividing the number of room nights of demand captured by the number of room nights available (calculated as the room count x 365). The total annual number of room nights occupied in the competitive hotels equates to the market's accommodated room night demand, as shown in the following table. ================================================================================ Table 7-2 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- Marketwide Subject Property ---------------------- ---------------------- Accommodated Percent Accommodated Percent Market Segment Demand of Total Demand of Total ------------------------------------------------------------------ Commercial 269,000 47 % 55,000 40 % Meeting and Group 206,000 36 64,000 46 Leisure 88,000 15 10,000 7 Airline 10,000 2 10,000 7 ------------------------------------------------------------------ Totals 572,000 100 % 139,000 100 % - -------------------------------------------------------------------------------- HVS International, Mineola, New York Projection of Occupancy and 81 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Latent Demand The previous table illustrates the accommodated room night demand in the subject property's competitive market. Because this estimate is based on occupancies, it includes only those hotel rooms that were used by guests. Latent demand considers guests who could not be accommodated by the existing competitive supply; latent demand can be divided into unaccommodated demand and induced demand. Unaccommodated Demand Unaccommodated demand refers to individuals who are unable to secure accommodations in the market because all of the local hotels are filled. These travelers must defer their trips, settle for less desirable accommodations, or stay in properties located outside the market area. Because this demand did not yield occupied room nights, it is not included in the estimate of historical accommodated room night demand. In the subject market area, areawide occupancy on weekdays and particularly Tuesday and Wednesday nights exceeds 90% for most weeks of the year. Most hotels report high levels of turnaway demand during these periods. As a result, we have estimated unaccommodated demand in the commercial segment to be equal to 5% of the accommodated commercial demand, which equates to 13,452 room nights per year, or an average of roundly 65 rooms on a typical Monday through Thursday night. As the Embassy Suites and the Courtyard will be increasing the room supply by a total of 228 competitive rooms, this level of unaccommodated demand is deemed reasonable. ================================================================================ Table 7-3 1996 Accommodated and Unaccommodated Demand - -------------------------------------------------------------------------------- Accommodated Room Night Unaccomodated Unaccomodated Market Segment Demand Demand Percentag Room Night Demand -------------------------------------------------------------------- Commercial 269,000 5.0 % 13,452 Meeting and Group 206,000 0.0 0 Leisure 88,000 0.0 0 Airline 10,000 0.0 0 ------- ------ Totals 572,000 13,452 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Projection of Occupancy and 82 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Induced Demand Induced demand represents the additional room nights that are expected to be attracted to the market following the introduction of a new demand generator. Situations that can induce demand include the opening of a new manufacturing plant, the expansion of a convention center, or the addition of a new hotel with a distinct chain affiliation or unique facilities. Although three new hotels are forecast to open during the projection period, none of these facilities are expected to induce demand, as the properties offer standard amenities and are affiliated with brands that are represented in adjacent market areas. Total Usable Room Night Demand Total usable room night demand is estimated by combining accommodated demand and usable latent demand. Usable latent demand is that portion of latent demand that can be absorbed based on the number of existing and proposed hotel rooms in the market. The following table shows the projected annual change in accommodated and usable room night demand in the subject property's competitive market. HVS International, Mineola, New York Projection of Occupancy and 83 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-4 Total Usable Room Night Demand - --------------------------------------------------------------------------------
Historical 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 - ----------------------------------------------------------------------------------------------------- Commercial Growth Rate --- 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % Accommodated Demand 269,046 277,117 285,431 293,994 302,814 311,898 321,255 Usable Latent --- 0 14,272 14,700 15,141 15,595 16,063 Meeting and Group Growth Rate --- 2.0 % 2.0 % 2.0 % 2.0 % 2.0 % 2.0 % Accommodated Demand 205,604 209,716 213,910 218,188 222,552 227,003 231,543 Usable Latent --- 0 0 0 0 0 0 Leisure Growth Rate --- 1.5 % 1.5 % 1.5 % 1.5 % 1.5 % 1.5 % Accommodated Demand 88,088 89,409 90,750 92,111 93,493 94,895 96,318 Usable Latent --- 0 0 0 0 0 0 Airline Growth Rate --- 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % Accommodated Demand 9,700 9,700 9,700 9,700 9,700 9,700 9,700 Usable Latent --- 0 0 0 0 0 0 Totals Commercial 269,046 277,117 299,703 308,694 317,955 327,493 337,318 Meeting and Group 205,604 209,716 213,910 218,188 222,552 227,003 231,543 Leisure 88,088 89,409 90,750 92,111 93,493 94,895 96,318 Airline 9,700 9,700 9,700 9,700 9,700 9,700 9,700 TOTAL DEMAND 572,438 585,942 614,063 628,693 643,700 659,091 674,879 Annual Forecasted Growth --- 2.4 % 4.8 % 2.4 % 2.4 % 2.4 % 2.4 %
- -------------------------------------------------------------------------------- Guestroom Supply In 1996, the competitive properties provided a total of 2,009 guestrooms. In January, 1998, a 150-room Embassy Suites will enter the market, and in July of 1998, a Courtyard by Marriott will do the same. As mentioned previously, in January, 2000, we project that a 300-room property will come on line. The following table shows the projected competitive supply of available rooms and available room nights. To calculate the annual number of available room nights, the number of available rooms is multiplied by 365. HVS International, Mineola, New York Projection of Occupancy and 84 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-5 Available Rooms and Room Nights - -------------------------------------------------------------------------------- Total Room Overall Night Room Nights Competitive Year Demand Available Occupancy Historical 572,438 732,920 78 % 1997/98 585,942 746,425 78 1998/99 614,063 811,760 76 1999/00 628,693 833,295 75 2000/01 643,700 874,540 74 2001/02 659,091 874,540 75 2002/03 674,879 874,540 77 2003/04 691,075 874,540 79 - -------------------------------------------------------------------------------- Overall Competitive Occupancy In 1998/99, the projected overall competitive occupancy drops two percentage points, following the opening of the Embassy Suites and the Courtyard. In 1999/00, the full-year availability of the Courtyard causes the occupancy to drop again to 75%. The opening of the 300-room hotel in 2000/01 leads to a further decline (from 75% to 74%) in the competitive occupancy, but due to strong growth, occupancy is estimated to start to increase again in 2001/02. Competitive Index Analysis Competitive indexes are used to analyze the relative market position of each property on the basis of a particular demand segment. The index represents the number of times each year that one room is occupied by one type of traveler (e.g., commercial, meeting and group, leisure, or airline), or the number of room nights actually accommodated per year, per room, per market segment. For example, if a hotel has a commercial competitive index of 190, each room in the property is occupied 190 times a year by a commercial traveler. The competitive index is calculated by dividing a hotel's annual accommodated room night demand in a particular market segment by that property's room count. Competitive indexes will be used to illustrate each property's position in the market based on its ability to compete with other local lodging facilities. Commercial Segment The historical commercial segment competitive indexes in the subject property's market ranged from 105 to 184. The Dallas Marriott Quorum was the most competitive property in the commercial market in 1996, with an index of 184, due to its highly recognized name among commercial travelers. The Westin Galleria was the second most competitive in the commercial HVS International, Mineola, New York Projection of Occupancy and 85 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= segment, with an index of 136, followed by the Doubletree Lincoln Center, at 108, and the subject property closely behind, at 105. We estimate that the Embassy Suites will be very competitive in the commercial segment, entering in second position behind the Marriott, at 165 in 1997/98, and stabilizing at a competitive index of 180. The Courtyard will be slightly more competitive than the Embassy Suites in its first year of operation, but it will take the lead thereafter, with a stabilized competitive index of 190, which makes it the market leader in this segment of the market. The 300-room Legacy hotel will be less competitive, but it will still enter the market in fourth position behind the Marriott, the two-year old Embassy Suites, and the one-and-one-half year old Courtyard, with a competitive index of 140 in 1999/00, and stabilizing at 160 - still in fourth position. The following table shows the projected commercial segment competitive indexes of the area's hotels. ================================================================================ Table 7-6 Commercial Segment Competitive Indexes - --------------------------------------------------------------------------------
Property Historical 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 - ----------------------------------------------------------------------------------------------------- Grand Kempinski Dallas 105 105 105 105 105 105 105 Dallas Marriott Quorum 184 184 184 184 184 184 184 Westin Galleria 136 136 136 136 136 136 136 Doubletree Lincoln Center 108 108 108 108 108 108 108 Proposed Embassy Suites 0 165 175 180 180 180 180 Proposed Hotel 0 0 0 140 150 160 160 Courtyard 0 0 175 185 190 190 190
- -------------------------------------------------------------------------------- Meeting and Group Segment The historical meeting and group segment competitive indexes in the subject property's market ranged from 77 to 121. The subject property was the most competitive property in the meeting and group market in 1996, with an index of 121, due to the nature of its product. The Doubletree Lincoln Center was the second most competitive hotel in the meeting and group segment with an index of 108. We do not project neither the Embassy Suites nor the Courtyard to be very competitive in the meeting and group segment, stabilizing with a competitive index of 40 and 30 respectively, due to the small amount of planned meeting space in these properties. Although we anticipate the 300-room Legacy hotel to feature more meeting space than the Embassy Suites or the HVS International, Mineola, New York Projection of Occupancy and 86 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Courtyard, we do not expect it to be equally competitive to the existing hotels in our competitive set, therefore it will enter the market in fourth position, and to stabilize at an index of 100. The following table illustrates the competitive indexes in the meeting and group segment. ================================================================================ Table 7-7 Meeting and Group Segment Competitive Indexes - --------------------------------------------------------------------------------
Property Historical 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 - ----------------------------------------------------------------------------------------------------- Grand Kempinski Dallas 121 121 121 121 121 121 121 Dallas Marriott Quorum 77 77 77 77 77 77 77 Westin Galleria 106 106 106 106 106 106 106 Doubletree Lincoln Center 108 108 108 108 108 108 108 Proposed Embassy Suites 0 25 35 40 40 40 40 Proposed Hotel 0 0 0 80 90 100 100 Courtyard 0 0 20 25 30 30 30
- -------------------------------------------------------------------------------- Leisure Segment Historically, the Westin Galleria was the most competitive in the leisure segment, with an index of 61, due to its location adjacent to the Galleria Mall. The second most competitive property in this segment was the Doubletree Lincoln Center, with an index of 54, while the subject property has been the least competitive, with an index of 18. We estimate that the Embassy Suites will become the most competitive property in the leisure segment, since its suite product is popular with families. This property will enter as the second most competitive hotel in 1997/98, with an index of 60, and will increase to and stabilize at an index of 75. The Courtyard will also be very competitive in the leisure segment, which tends to be more rate sensitive. It will enter in third place with an index of 50 and will stabilize just behind the Embassy Suites at 70. The 300-room Legacy hotel is expected to enter the market in fifth position, just ahead of the subject property, with a competitive index of 20, and will stabilize at an index of 30, since this property is located in an area which is predominantly commercial in nature and still needs to be developed with supporting facilities such as shopping centers, and restaurants. The following table illustrates the competitive indexes in the leisure segment. HVS International, Mineola, New York Projection of Occupancy and 87 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-8 Leisure Segment Competitive Indexes - --------------------------------------------------------------------------------
Property Historical 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 - ----------------------------------------------------------------------------------------------------- Grand Kempinski Dallas 18 18 18 18 18 18 18 Dallas Marriott Quorum 46 46 46 46 46 46 46 Westin Galleria 61 61 61 61 61 61 61 Doubletree Lincoln Center 54 54 54 54 54 54 54 Proposed Embassy Suites 0 60 70 75 75 75 75 Proposed Hotel 0 0 0 20 25 30 30 Courtyard 0 0 55 65 70 70 70
- -------------------------------------------------------------------------------- Airline Segment As a hotel's occupancy improves, its reliance on airline demand generally diminishes. Because this segment commands deeply discounted rates, operators prefer to accommodate more lucrative types of demand whenever possible. The subject property is the only hotel to accommodate an airline crew, and we anticipate this segment to remain stable throughout the projection period. ================================================================================ Table 7-9 Airline Segment Competitive Indexes - --------------------------------------------------------------------------------
Property Historical 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 - ----------------------------------------------------------------------------------------------------- Grand Kempinski Dallas 18 18 18 18 18 18 18 Dallas Marriott Quorum 0 0 0 0 0 0 0 Westin Galleria 0 0 0 0 0 0 0 Lincoln Center 0 0 0 0 0 0 0 Proposed Embassy Suites 0 0 0 0 0 0 0 Proposed Hotel 0 0 0 0 0 0 0 Courtyard 0 0 0 0 0 0 0
- -------------------------------------------------------------------------------- Subject Property's Room Night Capture and Occupancy After the competitive index is calculated, it is adjusted to reflect the property's room count, yielding a figure referred to as the market share adjuster. The market share adjuster of each property is then divided by the total market share adjuster for all of the competitors, resulting in each hotel's market share. By multiplying the projected market share by the area's usable room night demand, we can determine the total number of room nights captured by a specific hotel. Occupancy is then calculated by dividing the projected HVS International, Mineola, New York Projection of Occupancy and 88 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= number of room nights captured by the property's total number of available room nights. Multiplying the subject property's projected market share by the estimated room night demand in each segment results in the following estimate of room nights captured by the hotel. ================================================================================ Table 7-10 Room Nights Captured by the Subject Property - -------------------------------------------------------------------------------- 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 ------------------------------------------------------- Commercial Demand 277,117 299,703 308,694 317,955 327,493 337,318 Market Share 0.2016 0.1808 0.1747 0.1654 0.1647 0.1647 Capture 55,862 54,172 53,923 52,597 53,934 55,552 Meeting and Group Demand 209,716 213,910 218,188 222,552 227,003 231,543 Market Share 0.3089 0.3007 0.2943 0.2802 0.2783 0.2783 Capture 64,778 64,318 64,217 62,348 63,179 64,443 Leisure Demand 89,409 90,750 92,111 93,493 94,895 96,318 Market Share 0.1053 0.0930 0.0899 0.0870 0.0864 0.0864 Capture 9,412 8,440 8,276 8,135 8,201 8,324 Airline Demand 9,700 9,700 9,700 9,700 9,700 9,700 Market Share 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 Capture 9,700 9,700 9,700 9,700 9,700 9,700 ------- ------- ------- ------- ------- ------- Total Capture 139,752 136,630 136,116 132,780 135,014 138,018 - -------------------------------------------------------------------------------- Dividing the total number of room nights captured by the subject property's number of available room nights per year (calculated as 528 x 365) produces the projected occupancy percentage. HVS International, Mineola, New York Projection of Occupancy and 89 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-11 Calculation of the Subject Property's Projected Occupancy - --------------------------------------------------------------------------------
1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 ----------------------------------------------------------- Total Room Nights Captured/Year 139,752 136,630 136,116 132,780 135,014 138,019 Available Room Nights 192,720 192,720 192,720 192,720 192,720 192,720 Occupancy 72.52% 70.90% 70.63% 68.90% 70.06% 71.62% Rounded 73% 71% 71% 69% 70% 72%
- -------------------------------------------------------------------------------- For the purpose of forecasting income and expense, we will use the following occupancy levels. ================================================================================ Table 7-12 Occupancy Forecast - -------------------------------------------------------------------------------- Year Occupancy ----------------------- 1997/98 73 % 1998/99 71 Stabilized 71 - -------------------------------------------------------------------------------- Although the preceding room night analysis shows the subject property achieving a 72% occupancy in 2002/03, we have chosen a stabilized level of 71%. The stabilized occupancy is intended to reflect the anticipated results of the property over its remaining economic life, given any and all changes in the life cycle of the hotel. Thus, the stabilized occupancy excludes from consideration any abnormal relationship between supply and demand, as well as any non-recurring conditions that may result in unusually high or low occupancies. Although the subject property may operate at occupancies above this stabilized level, we believe that it is equally possible for new competition and temporary economic downturns to force the occupancy below this selected point of stability. HVS International, Mineola, New York Projection of Occupancy and 90 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= AVERAGE RATE ANALYSIS One of the most important considerations in estimating the value of a lodging facility is a supportable forecast of its attainable average rate, which is more formally defined as the average rate per occupied room. Average rate can be calculated by dividing the total rooms revenue achieved during a specified period by the number of rooms sold during the same period. The projected average rate and the anticipated occupancy percentage are used to forecast rooms revenue, which, in turn, provides the basis for estimating most other income and expense categories. The Concept of Average Rate A hotel's average room rate is the weighted average of the various amounts charged to different market segments, such as rack rates, published rates, commercial rates, and contract rates. The average rate also takes into account differentials during peak and off-peak periods, including various seasons of the year, holidays, and weekends. Different types of rooms may also command varying rates, and thus have an impact on the overall average rate. The following is a description of several typical rate categories. o Rack Rate - An undiscounted room rate generally given to anyone who does not qualify for or request a discounted rate. The term is derived from the room rack (now a computer terminal) at the front desk, which contains information about each room's rate, including the highest amount that can be charged for that type of unit. When a hotel is expected to be full during a certain period or when a guest arrives without a reservation, the rack rate is usually the only rate available. The average rate is almost always lower than the rack rate. o Published Rate - The rate listed in directories and other publications. This rate is usually quoted as a range (i.e., single: $70-$100), and represents the various rack rates for specific types of accommodations. Published rates usually set the upper limit of average rate, and average rates tend to be closest to published rates in the case of single (rather than double) rooms. o Commercial Rate - A discounted rate available to certain commercial travelers. Some hotels charge all commercial travelers a commercial rate upon request, while others offer it only to established accounts based on their projected use of the hotel. Commercial rates vary because they can be negotiated between the business and the hotel. These rates are always below the rack and published rates and, depending on the market mix, may approximate the property's average rate. HVS International, Mineola, New York Projection of Occupancy and 91 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= o Contract Rate - A discounted rate available to specific high-volume users, such as airlines, convention groups, and bus tours. Contract rates are negotiated and often apply to a block of rooms that are reserved on an ongoing basis and paid for regardless of use. Depending on the amount of use and the time it occurs, a contract rate may be heavily discounted and thus significantly lower than both the average rate and the commercial rate. o Complimentary Rooms - It is customary for hotels to provide rooms to very important guests on a complimentary basis. When performing a room night analysis, complimentary rooms should be included in the occupancy projection, because these occupied rooms represent actual demand (although they generate no revenue). However, the inclusion of complimentary rooms in the occupancy lowers the calculated average rate, and thus the treatment of complimentary rooms in the average rates obtained from competitive properties must be consistent in order to draw an accurate rate comparison. In the case of existing lodging facilities, we can use the operating history as a starting point and project average rate based on market conditions and the property's relative degree of competitiveness. This process is outlined as follows. 1. The subject property's historical monthly average rate is analyzed to determine trends that may continue to influence operating performance. Any relationship between changes in average rate and occupancy should be taken into account. 2. The average rates of competitive properties are considered to determine whether the subject property's rates reflect market conditions, competent management, and buyer's expectations. 3. Factors that may have an impact on future average rate increases are analyzed, and annual growth rates are projected. 4. The subject property's average rate is projected using either a competitive positioning or market segmentation method. These two techniques are described as follows. HVS International, Mineola, New York Projection of Occupancy and 92 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Competitive Positioning Method: Competitive positioning begins with an analysis of the average rates achieved by the subject property and its competitors. These rates establish a range that reflects various market characteristics, such as rate sensitivity and demand orientation. The subject property's average rate is then compared to those of the hotels to which it is most similar in terms of quality, size, facilities, amenities, market orientation, location, management, image, and affiliation. Adjustments are made to reflect any relevant differences or anticipated changes resulting from a new owner, a change of affiliation, or market repositioning. This method works well if the subject property is an existing hotel and comparable properties can be found in the market. Market Segmentation Method: The advantage of the market segmentation method is its ability to reflect anticipated changes in the subject property's market mix and their impact on average rate. This technique begins with an analysis of the room rates commanded by local hotels in each market segment. Using this information, we can forecast the subject property's rate on a segment-by-segment basis. The projected rate in each segment is then multiplied by the number of room nights the hotel is expected to capture in that segment (as determined earlier in this analysis). These amounts are totaled, yielding the overall rooms revenue. Average rate is then calculated by dividing the property's total rooms revenue by the estimated number of occupied rooms. The subject property's average rate will be projected utilizing the market segmentation method. Although the average rate analysis presented here follows the occupancy projections, these two statistics are highly correlated; in reality, one can not project occupancy without making specific assumptions regarding average rate. This relationship is best illustrated by RevPAR, which reflects a property's ability to maximize rooms revenue. The following table summarizes the 1996 average rate and RevPAR of the subject property and its competitors. HVS International, Mineola, New York Projection of Occupancy and 93 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-13 1996 Average Rate and RevPAR of the Primary Competitors - -------------------------------------------------------------------------------- 1996 1996 Average Rooms Revenue Property Room Rate Per Available Room -------------------------------------------------------- Grand Kempinski Dallas $104.61 $ 75.21 Dallas Marriott Quorum 102.00 85.68 Westin Galleria 144.00 119.52 Doubletree Lincoln Center 100.00 74.00 ------ ----- Averages $111.74 $ 87.27 - -------------------------------------------------------------------------------- The subject property achieves an average rate that is higher than most of its competitors, for the exception of the Westin Galleria, which benefits from a privileged location. However, because of its lower occupancy, the subject property only ranks third in RevPAR, compared to its competitors. Average Rate Increases It is important to note that hotel room rate increases do not necessarily conform to the underlying monetary inflation rate, because lodging facilities are influenced by market conditions such as the relationship between supply and demand. A hotel's ability to raise room rates is affected by a number of factors, including the following. o Supply and Demand Relationships - The relationship between supply and demand is one of the factors that determine hotel occupancies and average rates. Strong markets where lodging demand is increasing faster than supply are often characterized by rate growth that exceeds inflation. Markets that are overbuilt or suffering from declining demand are unlikely to exhibit any significant increases in average rates. o Inflationary Pressures - Price increases caused by inflation affect hotel room rates by eroding profit margins and encouraging operators to raise prices. This strategy is effective only in markets that are characterized by a healthy supply and demand relationship. o Improving the Competitive Standard - When a new lodging facility enters a mature market, its rates may be set higher than the marketwide average in an effort to justify the development costs. This temporary condition may allow other competitors to achieve corresponding gains by effectively raising the amount the market will bear. However, if the addition to supply has a severe impact on the occupancy levels of other hotels, price competition may ensue. HVS International, Mineola, New York Projection of Occupancy and 94 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= o Property-Specific Improvements - Changes that make a hotel more or less attractive to guests can have an impact on average rate. An expansion, renovation, upgrading, or the introduction of additional facilities and amenities may enable greater-than-inflationary room rate increases. Likewise, deferred maintenance may make a property less competitive, engendering a decline in room rates. In determining average rate projections, changes that occur prior to occupancy stabilization are generally attributable to factors that are specific to the property and the market. After a hotel achieves a stabilized occupancy, room rates are generally expected to continue to increase at the underlying inflation rate throughout the remainder of the projection period. Average Rates by Market Segment The Grand Kempinski Dallas's historical average rates are set forth in the following table. To project average rate, we have applied growth factors to the hotel's 1996 rates in each market segment. The following table also outlines these growth factors. ================================================================================ Table 7-14 1996 Average Rate by Market Segment and Assumed Growth Factors - -------------------------------------------------------------------------------- Projected Growth Rates ------------------------------------------- 1996 Market Segment Average Rate 1997/98 1998/99 1999/00 2000/01 2001/02 - ----------------------------------------------------------------------------- Commercial $110.00 6.0 % 3.0 % 3.5 % 3.5 % 3.5 % Meeting and Group 106.00 3.0 % 3.0 % 3.5 % 3.5 % 3.5 % Leisure 116.00 3.5 % 2.0 % 3.0 % 3.5 % 3.5 % Airline 51.00 14.0 % 8.0 % 5.0 % 3.5 % 3.5 % - -------------------------------------------------------------------------------- To arrive at projections, the growth factors are applied to the subject property's historical average rate in each market segment. These calculations are summarized in the following table. HVS International, Mineola, New York Projection of Occupancy and 95 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 7-15 Forecast of Average Rate by Market Segment - --------------------------------------------------------------------------------
Group/ Weighted Percent Commercial Meeting Leisure Contract Total Average Rate Change - ----------------------------------------------------------------------------------------------- Historical Demand 55,426 63,740 9,700 9,700 138,566 Segment Rate $110.00 $106.00 $116.00 $51.00 Revenue $6,096,890 $6,756,463 $1,125,153 $494,679 $14,473,185 $104.45 --- 1997/98 Demand 55,862 64,778 9,412 9,700 139,752 Segment Rate $118.25 $109.97 $121.07 $59.92 Revenue $6,605,429 $7,123,819 $1,139,532 $581,225 $15,450,005 $110.55 5.8 % 1998/99 Demand 54,172 64,318 8,440 9,700 136,630 Segment Rate $121.79 $113.27 $123.49 $64.71 Revenue $6,597,762 $7,285,429 $1,042,287 $627,723 $15,553,200 $113.83 3.0 % 1999/00 Demand 53,923 64,217 8,276 9,700 136,116 Segment Rate $126.06 $117.24 $127.20 $67.95 Revenue $6,797,296 $7,528,578 $1,052,695 $659,109 $16,037,678 $117.82 3.5 %
- -------------------------------------------------------------------------------- The following average rates will be used to project the subject property's rooms revenue. ================================================================================ Table 7-16 Forecast of Average Rate - -------------------------------------------------------------------------------- Year Average Rate ------------------------------ 1997/98 $110.55 1998/99 113.83 Stabilized 117.82 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Highest and Best Use 96 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 8. Highest and Best Use The concept of highest and best use recognized by the Appraisal Institute distinguishes between the highest and best use of the land (as though vacant) and that of the property (as improved). Highest and best use is defined as: The reasonably probable and legal use of vacant land or improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.(1) The concept of highest and best use is the premise upon which value is based, and is a product of competitive forces in the marketplace. The principle of balance holds that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium. This principle applies to relationships among various property components as well as the relationship between the costs of production and the property's productivity. The point of economic balance is achieved when the combination of land and building is optimal (i.e., when no marginal benefit or utility is achieved by adding another unit of capital). The law of increasing returns holds that larger amounts of the agents of production produce greater net income up to a certain point, after which the law of diminishing returns is applied.(2) It is important to recognize that the highest and best use of the land (as though vacant) may differ from the highest and best use of the property (as improved). This differential may occur when a site has existing improvements and the highest and best use of the land differs from the current use. Nonetheless, the current property use will continue until the value of the land under its highest and best use exceeds the value of the property in its current use, plus the cost to remove the existing improvements. (1) The Appraisal of Real Estate - Eleventh Edition, Appraisal Institute, Chicago, IL, 1996, p. 50. (2) Ibid., p. 44. HVS International, Mineola, New York Highest and Best Use 97 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= In consideration of the factors influencing development in the immediate area, it is the appraisers' opinion that the highest and best use of the subject site, as vacant, would be as a lodging facility. However, given the current market trends and the value of land in the subject market area, we are of the opinion that the highest and best use would be for a more moderately sized lodging facility, with more compact parking areas, together with more limited meeting space, food and beverage outlets and public areas than are present at the subject property. Based on the fact that the value of the land does not exceed the value of the hotel plus the cost of demolition, it is our opinion that the subject property's highest and best use, as improved, is its current use as a lodging facility. HVS International, Mineola, New York Approaches to Value 98 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 9. Approaches to Value In appraising real estate for market value, the appraiser has three approaches from which to select: the income capitalization, sales comparison, and cost approaches. Although all three valuation procedures are given consideration, the inherent strengths of each approach and the nature of the subject property must be evaluated to determine which will provide supportable estimates of market value. The appraiser is then free to select one or more of the appropriate approaches in arriving at a final value estimate. The Income Capitalization Approach The income capitalization approach takes a property's projected net income before debt service and allocates this future benefit to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component is calculated. The total of the mortgage component and the equity component equals the value of the property. This approach is often selected as the preferred valuation method for income- producing properties, because it most closely reflects the investment rationale of knowledgeable buyers. The Sales Comparison Approach The sales comparison approach estimates the value of a property by comparing it to similar properties that have been sold on the open market. To obtain a supportable estimate of value, the sales price of a comparable property must be adjusted to reflect any dissimilarities between it and the property being appraised. The sales comparison approach may provide a useful value estimate in the case of simple forms of real estate, such as vacant land and single-family homes, where the properties are homogeneous and the adjustments are few and relatively simple to compute. In the case of complex investments such as shopping centers, office buildings, restaurants, and lodging facilities, where the adjustments are numerous and more difficult to quantify, the sales comparison approach loses much of its reliability. HVS International, Mineola, New York Approaches to Value 99 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Hotel investors typically do not employ the sales comparison approach in reaching their final purchase decisions. Factors such as the lack of recent sales data, the numerous insupportable adjustments that are necessary, and the general inability to determine the true financial terms and human motivations of comparable transactions often make the results of this technique questionable. Although the sales comparison approach may provide a range of values that supports the final estimate, reliance on this method beyond the establishment of broad parameters is rarely justified by the quality of the sales data. The market-derived capitalization rates sometimes used by appraisers are susceptible to the same shortcomings inherent in the sales comparison approach. To substantially reduce the reliability of the income capitalization approach by employing capitalization rates obtained from unsupported market data weakens the final value estimate and ignores the typical investment analysis procedures employed by hotel purchasers. Because appraisers are obligated to mirror the actions of the marketplace, we generally give the sales comparison approach minimal weight in the hotel appraisal process beyond bracketing the final estimate.(1) The Cost Approach The cost approach estimates market value by computing the current cost to replace the property and subtracting any depreciation resulting from physical deterioration, functional obsolescence, and external (or economic) obsolescence. The value of the land, as if vacant and available, is then added to the depreciated value of the improvements to produce a total value estimate. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements grow older and begin to deteriorate, the resultant loss in value becomes increasingly difficult to quantify accurately. We find that knowledgeable hotel buyers base their purchase decisions on economic factors such as projected net income and return on investment. Because the cost approach does not reflect (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 209. HVS International, Mineola, New York Approaches to Value 100 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= these income-related considerations and requires a number of highly subjective depreciation estimates, this approach is given minimal weight in the hotel valuation process. As noted in Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, "the cost approach is seldom used to value existing hotels and motels."(1) Reconciliation The final step in the valuation process is the reconciliation and correlation of the value indications. Factors that are considered in assessing the reliability of each approach include the purpose of the appraisal, the nature of the subject property, and the reliability of the data used. In reconciliation, we consider the applicability and supportability of each approach and examine the range of value indications. The most significant weight is given to the approach that produces the most reliable solution and most closely reflects the criteria used by typical investors. Our nationwide experience with numerous hostelry buyers and sellers indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the investors who constitute the marketplace. For this reason, the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in the hotel valuation process. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 208. HVS International, Mineola, New York Income Capitalization Approach 101 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 10. Income Capitalization Approach The income capitalization approach is based on the principle that the value of a property is indicated by its net return, or what is known as the present worth of future benefits. The future benefits of income-producing properties, such as hotels, are net income before debt service and depreciation (as estimated by a forecast of income and expense) and any anticipated reversionary proceeds from a sale. These future benefits can be converted into an indication of market value through a capitalization process and discounted cash flow analysis. Using the income capitalization approach, the subject property has been valued by analyzing the local market for transient accommodations, examining existing and proposed competition, and developing a forecast of income and expense that reflects current and anticipated income trends and cost components through a stabilized year of operation. The forecast of income and expense is expressed in current dollars for each year. The stabilized year is intended to reflect the anticipated operating results of the property over its remaining economic life, given any or all applicable stages of build-up, plateau, and decline in the life cycle of the hotel. Thus, income and expense estimates from the stabilized year forward exclude from consideration any abnormal relationship between supply and demand, as well as any non-recurring conditions that may result in unusual revenues or expenses. As stated in the textbook entitled, Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, published by the Appraisal Institute, "of the three valuation approaches available to the appraiser, the income capitalization approach generally provides the most persuasive and supportable conclusions when valuing a lodging facility."(10) This text recommends that using a ten-year forecast and an equity yield rate "most accurately reflects the actions of typical hotel buyers, who purchase properties based (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. HVS International, Mineola, New York Income Capitalization Approach 102 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= on their leveraged discounted cash flow."(1) The simpler procedure of using a ten-year forecast and a discount rate is "less reliable because the derivation of the discount rate has little support. Moreover, it is difficult to adjust the discount rate for changes in the cost of capital."(2) We have used both methods to discount the subject property's projected net income into an estimate of value. Method One is a ten-year discounted cash flow analysis in which the cash flow to equity and the equity reversion are discounted to the present value at the equity yield rate, and the income to the mortgagee is discounted at a mortgage interest rate. The sum of the equity and mortgage values is the total property value. Method Two is a simple ten-year discounted cash flow analysis in which the annual net income before debt service and the reversionary proceeds following a sale at the end of the tenth year are discounted back to the date of the appraisal at an overall discount rate, and then totaled to produce an indication of the present worth of future benefits. To convert the projected income stream into an estimate of value through Method One, the anticipated net income (before debt service and depreciation) is allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. The total of the mortgage component and the equity component equals the value of the property. The process is described as follows. 1. The terms of typical hotel financing are set forth, including interest rate, amortization term, and loan-to-value ratio. 2. An equity yield rate of return is established. Numerous hotel buyers base their equity investments on a ten-year equity yield rate projection that takes into account ownership benefits such as periodic cash flow distributions, residual sale or refinancing distributions that return any property appreciation and mortgage amortization, income tax benefits, and various non-financial considerations such as status and prestige. The equity yield rate is also known as the internal rate of return on equity. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. (2) Ibid. HVS International, Mineola, New York Income Capitalization Approach 103 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 3. The value of the equity component is calculated by first deducting the annual debt service from the projected net income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value. After deducting the mortgage balance at the end of the tenth year and the typical brokerage and legal costs, the equity residual is discounted back to the date of value at the equity yield rate. The net income to equity for each of the ten projection years is also discounted to the present value. The sum of these discounted values equates to the value of the equity component. Adding the equity component to the initial mortgage balance yields the overall property value. Because the mortgage and the debt service amounts are unknown but the loan-to-value ratio was determined in Step #1, the preceding calculation can be solved through an iterative process or by use of a linear algebraic equation that computes the total property value. The algebraic equation that solves for the total property value using a ten-year mortgage and equity technique was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(1) 4. The value is proven by allocating the total property value between the mortgage and equity components and verifying that the rates of return set forth in Steps #1 and #2 can be met from the projected net income. The process of converting the projected income stream into an estimate of value through Method Two is described as follows. 1. A discount rate is established by evaluating the total property yield derived by Method One. Occasionally, the discount rate may be adjusted slightly based on the total property yields indicated by recent transactions involving hotels similar to the subject property. 2. The reversionary value is calculated by capitalizing the 11th-year net income by the terminal capitalization rate and deducting typical brokerage and legal fees. (1) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Income Capitalization Approach 104 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 3. The ten-year forecast of net income (before debt service and depreciation) and the reversionary value are discounted to the date of value at the rate derived above. Review of Operating History Because the Grand Kempinski Dallas is an existing hotel with an established operating performance, its historical income and expense experience can serve as a basis for projections. The subject property opened in 1983, and achieved occupancy levels of 73.5% in 1995 and 71.9% in 1996. The following income and expense statements were provided by Morgan Stanley Mortgage Capital, Inc., and are unaudited. Where applicable, we have reorganized the statements in accordance with the Uniform System of Accounts for Hotels. HVS International, Mineola, New York Income Capitalization Approach 105 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-1 Historical Operating Performance - --------------------------------------------------------------------------------
Calendar Year: 1996 1995 ----------------------------------------- ------------------------------------------- No. of Rooms: 528 528 No. of Occupied Rooms: 138,915 141,743 Complimentary Rooms: 3,847 3,829 No. of Days Open: 366 365 Occupancy: 71.9% Amount per Amount per 73.5% Amount per Amount per Average Rate: $104.61 Percent Available Occupied $97.41 Percent Available Occupied (+000) of Gross Room Room (+000) of Gross Room Room - ---------------------------------------------------------------------------------------------------------------- REVENUE Rooms $14,533 46.2 % $27,524 $104.61 $13,807 48.2 % $26,150 $97.41 Food 10,600 33.7 20,075 76.30 9,561 33.4 18,108 67.45 Beverage 3,698 11.8 7,004 26.62 3,018 10.5 5,716 21.29 Telephone 894 2.8 1,694 6.44 841 2.9 1,594 5.94 Minor Operated Depts 724 2.3 1,372 5.21 669 2.3 1,267 4.72 Other Income 984 3.1 1,863 7.08 721 2.5 1,365 5.09 ------------------------------------------------------------------------------------- Total 31,433 99.9 59,531 226.27 28,618 99.8 54,201 201.90 - ---------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES* Rooms 3,068 21.1 5,810 22.08 2,920 21.2 5,531 20.60 Food & Beverage 7,941 55.5 15,040 57.16 7,469 59.4 14,147 52.70 Telephone 323 36.1 612 2.32 310 36.9 588 2.19 Minor Operated Depts 499 68.9 946 3.59 473 70.6 895 3.33 Total 11,831 37.6 22,407 85.17 11,173 39.0 21,161 78.82 - ---------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 19,602 62.3 37,125 141.11 17,445 60.8 33,040 123.08 - ---------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 1,892 6.0 3,582 13.62 1,913 6.7 3,624 13.50 Management Fee 300 1.0 568 2.16 300 1.0 3,795 14.13 Marketing 1,939 6.2 3,673 13.96 2,004 7.0 3,795 14.13 Property Oper. & Maint. 1,519 4.8 2,876 10.93 1,256 4.4 2,379 8.86 Energy 1,068 3.4 2,023 7.69 1,117 3.9 2,116 7.88 Total 6,717 21.4 12,722 48.36 6,590 23.0 15,708 58.51 - ---------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 12,884 40.9 24,403 92.75 10,855 37.8 17,332 64.57 - ---------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 1,158 3.7 2,194 8.34 985 3.4 1,865 6.95 Insurance 153 0.5 290 1.10 143 0.5 271 1.01 Reserve for Replacement 1,723 5.5 3,263 12.40 968 3.4 1,833 6.83 Total 3,034 9.7 5,747 21.84 2,096 7.3 3,969 14.78 - ---------------------------------------------------------------------------------------------------------------- NET INCOME $9,850 31.2 % $18,656 $70.91 $8,759 30.5 % $13,363 $49.79 ================================================================================================================
* Departmental expense ratios are expressed as a percentage of departmental revenues. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 106 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-2 Historical Operating Performance - --------------------------------------------------------------------------------
Calendar Year: 1994 1993 ----------------------------------------- ------------------------------------------- No. of Rooms: 528 528 No. of Occupied Rooms: 140,046 123,148 Complimentary Rooms: 4,250 0 No. of Days Open: 365 365 Occupancy: 72.7% Amount per Amount per 63.9% Amount per Amount per Average Rate: $91.32 Percent Available Occupied $88.48 Percent Available Occupied (+000) of Gross Room Room (+000) of Gross Room Room - ---------------------------------------------------------------------------------------------------------------- REVENUE Rooms $12,789 48.8 % $24,221 $91.32 $10,897 47.6 % $20,638 $88.48 Food 8,586 32.8 16,261 61.31 7,751 33.9 14,680 62.94 Beverage 2,725 10.4 5,161 19.46 2,649 11.6 5,018 21.51 Telephone 880 3.4 1,667 6.28 673 2.9 1,275 5.47 Minor Operated Depts 1,230 4.7 2,329 8.78 906 4.0 1,716 7.36 Other Income 0 0.0 0 0.00 0 0.0 0 0.00 -------------------------------------------------------------------------------------- Total 26,210 100.1 49,639 187.15 22,876 100.0 43,326 185.76 - ---------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES* Rooms 2,901 22.7 5,494 20.71 2,625 24.1 4,971 21.31 Food & Beverage 7,047 62.3 13,347 50.32 6,687 64.3 12,665 54.30 Telephone 323 36.7 612 2.31 356 52.8 674 2.89 Minor Operated Depts 434 35.3 823 3.10 220 24.3 418 1.79 Total 10,706 40.8 20,276 76.44 9,888 43.2 18,727 80.29 - ---------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 15,504 59.3 29,364 110.71 12,988 56.8 24,599 105.47 - ---------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 1,675 6.4 3,172 11.96 1,666 7.3 3,155 13.53 Management Fee 300 1.1 568 2.14 300 1.3 568 2.44 Marketing 1,765 6.7 3,343 12.60 1,763 7.7 3,339 14.32 Property Oper. & Maint. 1,396 5.3 2,644 9.97 1,173 5.1 2,221 9.52 Energy 1,099 4.2 2,082 7.85 1,077 4.7 2,040 8.75 Total 6,235 23.7 11,810 44.52 5,979 26.1 11,324 48.55 - ---------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 9,268 35.6 17,554 66.19 7,009 30.7 13,275 56.92 - ---------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 767 2.9 1,453 5.48 767 3.4 1,452 6.22 Insurance 158 0.6 299 1.13 135 0.6 256 1.10 Reserve for Replacement 1,013 3.9 1,918 7.23 1,322 5.8 2,504 10.74 Total 1,937 7.4 3,669 13.83 2,224 9.8 4,212 18.06 - ---------------------------------------------------------------------------------------------------------------- NET INCOME $7,331 28.2 % $13,885 $52.36 $4,786 20.9 % $9,063 $38.86 ================================================================================================================
* Departmental expense ratios are expressed as a percentage of departmental revenues. - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 107 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Comparable Operating Statements These historical income and expense statements show an efficient operation, that has been able to increase revenues, while also increasing the net income, both as a dollar amount and as a percentage of total revenue. Between 1995 and 1996 revenues increased by approximately $3 million from $28,618,000 to $31,433,000 as a result of increasing revenues in all departments. The food and beverage expense declined from 59.4% of food and beverage revenue in 1995 to 55.5% in 1996 - a level that is extremely efficient in a full-service property which operates its own butcher shop and pastry shop. In our base year estimates, we have increased the food and beverage expense to 60.0% of food and beverage revenue to bring it more in line with industry standards, which more commonly range from 68% to 80%. Total departmental expense as a percentage of revenue decreased from 39.0% in 1995 to 37.6% in 1996. Operating expenses also show a very efficient operation. In 1996, the management fee expense was only 1.0% of gross revenues; we increased this expense to 3.0% of gross revenues in our base year estimate to reflect industry standards. The reserve for replacement included in the historical statements reflects the actual capital expenditures during those years. This expense increased from 3.4% of total revenue in 1995 to 5.5% in 1996, reflecting the expenses of the guestroom and corridor renovation as well as some of the public areas renovations undertaken at the subject property in 1996 and beginning of 1997. We have utilized a reserve for replacement equal to 4.0% of gross revenues in our base year estimate in accordance with industry standards. Net income increased over $1 million between 1995 and 1996. Forecast of Income and Expense The forecast of income and expense is intended to reflect the appraiser's subjective estimate of how a typical buyer would project the subject property's future operating results. Depending on the dynamics of the local market, a typical buyer's projection may be adjusted upward or downward. We have attempted to consider these factors in formulating this forecast. HVS International uses a fixed-and-variable component model to project a lodging facility's revenue and expense levels. This model is based on the premise that hotel revenues and expenses have one component that is fixed, and another that varies directly with occupancy and facility usage. A HVS International, Mineola, New York Income Capitalization Approach 108 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= projection can be made by taking a known level of revenue or expense and calculating its fixed and variable components. The fixed component is then held constant, while the variable component is adjusted for the percent change between the projected occupancy and facility usage and that which produced the known level of revenue or expense. Base-Year Statement of Income and Expense Based on our review of the operating histories of the subject property and comparable hotels, we have derived a base-year statement of income and expense expressed in 1996 dollars. The units of comparison include a percentage of departmental and total revenue, amounts per available room, and amounts per occupied room. The income and expense ratios reflect an occupancy level of 71.9%. The base-year profit and loss statement will be used to determine the relationship between the fixed and variable components. HVS International, Mineola, New York Income Capitalization Approach 109 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-3 Base-Year Statement of Income and Expense - -------------------------------------------------------------------------------- Calendar Year: 1996 No of Rooms: 528 Occupancy: 71.9% Amount per Amount per Average Rate: $104.61 Percent Available Occupied No of Occupied Rooms: 138,915 of Gross Room Room - --------------------------------------------------------------------- REVENUES Rooms $14,533 46.4 % $27,524 $104.61 Food 10,600 33.9 $20,075 76.30 Beverage 3,698 11.8 7,004 26.62 Telephone 894 2.9 1,694 6.44 Minor Operated Depts 579 1.8 1,096 4.17 Other Income 1,008 3.2 1,909 7.25 Total 31,311 100.0 59,301 225.40 - --------------------------------------------------------------------- EXPENSES Rooms* 3,068 21.1 5,810 22.08 Food & Beverage* 8,579 60.0 16,248 61.75 Telephone* 323 36.1 612 2.32 Minor Operated Depts* 371 64.1 703 2.67 Administrative & General 1,892 6.0 3,582 13.62 Management Fee 939 3.0 1,779 6.76 Marketing 1,939 6.2 3,673 13.96 Property Oper. & Maint. 1,519 4.8 2,876 10.93 Energy 1,068 3.4 2,023 7.69 Property Taxes 1,158 3.7 2,194 8.34 Insurance 153 0.5 290 1.10 Reserve for Replacement 1,252 4.0 2,372 9.02 Total 22,261 71.1 42,161 160.25 - --------------------------------------------------------------------- NET INCOME $ 9,050 28.9 % $17,141 $65.15 ===================================================================== * Departmental expense ratios are expressed as a percentage of departmental revenues. - -------------------------------------------------------------------------------- Inflation Assumptions The base revenue and expense amounts are inflated to reflect current dollars for each projection year. Line items can be affected by different factors. We must establish a general rate of inflation that will be applied to most revenue and expense categories. The following table shows inflation estimates made by economists at some noted institutions and corporations. HVS International, Mineola, New York Income Capitalization Approach 110 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-4 Inflation Estimates - --------------------------------------------------------------------------------
Projected Increase in Consumer Price Index (Annualized Rate Versus 12 Months Earlier) -------------------------------------------- May November Source of 1997 of 1997 - -------------------------------------------------------------------------------------------- Maureen Allyn, Scudder Stevens Clark 2.6 % 2.8 % Wayne Angell, Bear Stearns 3.3 3.2 Richard Berner, Mellon Bank 2.7 3.0 David Berson, Fannie Mae 2.6 2.9 David Blitzer, S&P 3.1 2.8 Paul Boltz, T. Rowe Price 3.3 3.5 David Bostian, Herzog, Heine, Geduld 2.4 1.6 Philip Braverman, DKB Securities 3.0 3.0 William Brown, J.P. Morgan 2.8 2.9 Rosanne Cahn, CS First Boston 2.8 2.7 James Coons, Huntington National Bank 3.0 2.9 Michael Cosgrove, The Econoclast 3.3 3.0 Robert Crow, Bechtel Group 2.8 2.7 Dewey Daane, Vanderbilt University 3.1 3.3 WDudley, Goldman Sachs 3.0 3.4 Michael Englund, MMS Intl. 3.3 3.4 Gail Fosler, Conference Board 3.3 3.9 Maury Harris, Paine Webber, Inc. 2.9 2.9 Michael J. Held, Smith Barney 2.9 2.8 Tracy Herrick, Jefferies & Co. 3.4 3.9 Stuart Hoffman, PNC Bank 3.1 2.8 William Hummer, Wayne Hummer 3.1 3.0 Edward Hyman, ISI Group 2.5 2.5 Saul Hymans, University of Michigan 2.1 1.9 Mieczyslaw Karczmar, Deutsche Bank 3.3 3.5 Kurt Karl, WEFA Group 2.5 2.5 Irwin Kellner, Chase Regional Bank 2.2 2.1 D Laufenberg, American Express Financial Advisors 3.1 3.4 Carol Leisenring, CoreStates Financial 2.7 2.5 Mickey Levy, NationsBank Capital Markets 2.8 2.5 David Littmann, Comerica 3.0 3.0 John Lonski, Moody's Investors Service 3.5 3.2 Paul McCulley, UBS Securities 2.7 2.7 John McDevitt, 3M 2.7 2.8 Arnold Moskowitz, Moskowitz Capital 3.0 3.1 John Mueller, LBMC, Inc. 3.0 2.8 David Munro, High Frequency Econ. 2.8 2.6 Carl Palash, MCM MoneyWatch 3.5 3.5 Nicholas Perna, Fleet Financial Group 3.1 3.3 Elliott Platt, Donaldson Lufkin Jenrette 2.8 2.3 Maria F. Ramirez, MF Ramirez 2.9 2.5 Donald Ratajczak, Georgia State University 3.2 3.3 David Resler, Nomura Securities International 2.7 2.7 Allan Reynolds, Hudson Institute 3.1 3.6 Richard Rippe, Prudential Securities 3.0 3.2 A Gary Schilling, Schilling & Co. 2.5 2.5 Allen Sinai, Lehman Brothers 3.3 3.1 James Smith, University of North Carolina 2.4 2.2 Susan Sterne, Economic Analysis 2.8 3.0 Donald Straszheim, Merrill Lynch 2.7 2.9 Thomas Synott III, U.S. Trust Company 3.3 3.0 John Walter, Dow Corning 2.8 2.4 John Williams, Bankers Trust 3.2 3.3 Raymond Worseck, A.G. Edwards 3.3 3.5 David Wyss, DRI/McGraw-Hill 2.8 2.9 Edward Yardeni, Deutsche Morgan Grenfell 3.0 2.2 Mark Zandi, Regional Financial Associates 3.0 3.2 ------- ------- Averages 2.9 % 2.9 %
Source: Wall Street Journal, Jan 2, 1997 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 111 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The preceding table shows inflation forecasts averaging 2.9% for both the first and second half of 1997. Most of the economists in the sample estimate inflation rates ranging from 2.5% to 3.3% for the 12-month period, although several anticipate levels of slightly greater than 3.4% during the second half of the year. As a further check on these inflation projections, we have reviewed historical increases in the Consumer Price Index. Because the value of real estate is predicated on cash flows over a relatively long period, inflation should be considered from a long-term perspective. Between 1986 and 1995, the national CPI increased at an average annual compounded rate of 3.7%. In consideration of these historical trends, the projections set forth above, and our assessment of probable property appreciation levels, we have selected an annual stabilized inflation rate of 3.5% throughout the projection period. One of the exceptions to this general inflation assumption is the projected growth in average rate. As noted earlier, increases in the subject property's room rate are projected as follows. ================================================================================ Table 10-5 Projected Growth in Average Rate - -------------------------------------------------------------------------------- Increase From Year Previous Year ---------------------------------------- 1997/98 5.7 % 1998/99 3.0 1999/00 3.5 2000/01 3.5 Thereafter 3.5 - -------------------------------------------------------------------------------- Using these inflation assumptions, the base-year income and expense statement (which is expressed in 1996 dollars) is inflated to arrive at projections. Each revenue and expense category will be projected using the inflated base statement to determine the fixed-and-variable component relationships. HVS International, Mineola, New York Income Capitalization Approach 112 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Rooms Revenue Rooms revenue is determined by two variables: occupancy and average rate. Earlier in this report, we estimated the subject property's occupancy and average rate as follows. ================================================================================ Table 10-6 Projected Occupancy and Average Rate - -------------------------------------------------------------------------------- 1997/98 1998/99 Stabilized - --------------------------------------------------------------------------- Projected Occupancy Percentage 73.0 % 71.0 % 71.0 % Projected Average Rate $110.55 $113.83 $117.82 - -------------------------------------------------------------------------------- Rooms revenue is calculated as follows. ================================================================================ Table 10-7 Forecast of Rooms Revenue - -------------------------------------------------------------------------------- Rooms No. of Days Revenue Year Occupancy Average Rate Units in Year (+000) - --------------------------------------------------------------------------- 1997/98 73 % x $110.55 x 528 x 365 = $15,553 1998/99 71 x 113.83 x 528 x 365 = 15,576 Stabilized 71 x 117.82 x 528 x 365 = 16,122 - -------------------------------------------------------------------------------- Food and Beverage Revenue Food and beverage revenue is generated by a hotel's restaurants, lounges, coffee shops, snack bars, banquet rooms, and room service. In addition to providing a source of revenue, these outlets serve as an amenity that assists in the sale of guestrooms. With the exception of properties with active lounges or banquet facilities that draw local residents, in-house guests generally represent a substantial percentage of a hotel's food and beverage patrons. The Uniform System of Accounts for Hotels/Eighth Revised Edition defines food revenue as, "revenue derived from the sale of food, including coffee, milk, tea and soft drinks. Food sales do not include meals charged on employees' (staff) checks." Beverage revenues are "derived from the sale of beverages." In addition to the revenue generated by the sale of food and beverages, hotels often produce other income that is related to this department, such as meeting room rentals, cover charges, service charges, and miscellaneous banquet revenue. HVS International, Mineola, New York Income Capitalization Approach 113 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Although food revenue varies directly with changes in occupancy, the small portion generated by banquet sales and outside capture is relatively fixed. Food revenue was projected based on this relationship between the fixed and variable components. The following table shows the projected food revenue and several units of comparison that can be used to check the reasonableness of the forecast. ================================================================================ Table 10-8 Forecast of Food Revenue - -------------------------------------------------------------------------------- 1997/98 1998/99 Stabilized - ----------------------------------------------------------------------------- Projected Food Revenue (+000) $11,142 $11,389 $11,788 Percent of Total Revenue 33.6 % 33.9 % 33.9 % Amount per Available Room $21,103 $21,570 $22,325 Amount per Occupied Room $79.20 $83.23 $86.15 - -------------------------------------------------------------------------------- Based on these units of comparison, the projected food revenue appears reasonable when compared with industry standards. Beverage revenue is generated by the sale of alcoholic beverages in a hotel's restaurants and banquet rooms and the sale of alcoholic and non-alcoholic beverages in the bars and lounges. The following table illustrates the forecast of beverage revenue. ================================================================================ Table 10-9 Forecast of Beverage Revenue - -------------------------------------------------------------------------------- 1997/98 1998/99 Stabilized - ------------------------------------------------------------------------ Projected Beverage Revenue (+000) $3,887 $3,974 $4,113 - -------------------------------------------------------------------------------- Telephone Revenue Telephone revenue is generated by hotel guests who charge local and long-distance calls to their rooms, and by individuals who use the property's public telephones. Prior to the deregulation of the telephone industry in the early 1980s, hotels were limited to a 15% commission on long-distance calls, a mark-up that allowed few profits. Deregulation and the development of sophisticated call-accounting equipment have resulted in profitable telephone departments. State-of-the-art equipment is capable of least-cost HVS International, Mineola, New York Income Capitalization Approach 114 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= routing, automatic price billing, and posting telephone charges to guest folios. Hotels can select among various long-distance services, and can also work with any one of a number of Alternative Operator Services (AOS). These systems route and price calls, and may provide additional services. In recent years, the hospitality industry has experienced diverging trends with respect to telephone revenue. Prices per call have increased, in some cases dramatically, yielding departmental profits as high as 50% to 55%. However, the number of long-distance calls billed per occupied room has declined as a result of the extensive use of long-distance carrier services that can be accessed locally or through a toll-free number. When guests charge long-distance calls to their personal or business accounts in this manner, the hotel loses the revenue associated with long-distance tariffs and mark-ups, and only receives an access fee. Most telephone revenue varies directly with changes in occupancy. However, there is a small fixed component consisting of public telephone revenue, which is primarily generated by individuals using the hotel's food, beverage, and meeting facilities. Using this fixed-and-variable relationship, the subject property's telephone revenue is projected as follows. ================================================================================ Table 10-10 Forecast of Telephone Revenue - -------------------------------------------------------------------------------- 1997/98 1998/99 Stabilized - -------------------------------------------------------------------------- Projected Telephone Revenue (+000) $947 $956 $989 Percent of Total Revenue 2.9 % 2.8 % 2.8 % Amount per Available Room $1,793 $1,810 $1,873 Amount per Occupied Room $6.73 $6.99 $7.23 - -------------------------------------------------------------------------------- Minor Operated Departments This line item refers to all revenue generated by the hotel's gift shop and flower shop before the latter was leased to a third party in March 15, 1997. Additional revenues are generated by the valet parking and parking garage, the guest valet service, and the health club. Minor operated department income is highly sensitive to changes in occupancy and slightly correlated to food and beverage volume. Using this fixed-and-variable relationship, the subject property's minor operated departments revenue is projected as follows. HVS International, Mineola, New York Income Capitalization Approach 115 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-11 Forecast of Minor Operated Departments - --------------------------------------------------------------------------------
1997/98 1998/99 Stabilized - ------------------------------------------------------------------------------------- Projected Minor Operated Department Income (+000) $607 $623 $645 Percent of Total Revenue 1.8 % 1.9 % 1.9 Amount Per Available Room $1,150 $1,180 $1,221 Amount Per Occupied Room $4.31 $4.55 $4.71
- -------------------------------------------------------------------------------- Other Income Other income is derived from sources other than guestrooms, food and beverages, and telephone services. The subject property's other income refers principally to rent income generated from the lease of its retail space. Depending on the type of hotel and the facilities and amenities offered, other income may include the following items. o Rentals - stores, office space, concession space, showcases, clubs, and storage. o Commissions from auto rentals, photography, telegrams, and vending services. o Concessions - revenue derived from charges for the privilege of operating departments that could be operated by the hotel. Gift shops, barber shops, and beauty salons are often operated as concessions. o Cash discounts earned - discounts from creditors' accounts for payment within the discount period. This item does not include trade discounts, which are a deduction from the cost of goods sold. o Forfeited advance deposits and guaranteed no-shows. o Service charges - service charges that are added to a customer's account but are not paid to service personnel. o Interest income - interest from house accounts. o Salvage - revenue from the sale of old or obsolete items. Other income is highly sensitive to changes in occupancy and slightly correlated to food and beverage volume. Using this fixed-and-variable relationship, the subject property's other income is projected as follows. The items are net of any related expenses. HVS International, Mineola, New York Income Capitalization Approach 116 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-12 Forecast of Other Income - -------------------------------------------------------------------------------- 1997/98 1998/99 Stabilized - --------------------------------------------------------------------------- Projected Other Income (+000) $1,057 $1,085 $1,123 Percent of Total Revenue 3.2 % 3.2 % 3.2 % Amount per Available Room $2,002 $2,054 $2,126 Amount per Occupied Room $7.51 $7.93 $8.21 - -------------------------------------------------------------------------------- Rooms Expense Rooms expense consists of items related to the sale and upkeep of guestrooms and public space. Salaries, wages, and employee benefits account for a substantial portion of this category. Although payroll varies somewhat with occupancy (because managers can schedule maids, bell personnel, and house cleaners to work when demand requires), much of a hotel's payroll is fixed. Front desk personnel, public area cleaners, the housekeeper, and other supervisors must be maintained at all times. As a result, salaries, wages, and employee benefits are only moderately sensitive to changes in occupancy. Commissions represent remuneration to travel agents for booking rooms. Because these fees are based on a percentage of rooms revenue, they are highly dependent on occupancy and rate. Reservations is a similar expense that reflects the cost of a franchise reservation system that typically bills as a percentage of rooms revenue. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are only slightly affected by changes in volume. In light of these considerations, we project the subject property's rooms expense as follows. ================================================================================ Table 10-13 Forecast of Rooms Expense - -------------------------------------------------------------------------------- 1997/98 1998/99 Stabilized - ----------------------------------------------------------------------- Projected Rooms Expense (+000) $3,222 $3,298 $3,413 Percent of Rooms Revenue 20.7 % 21.2 % 21.2 % Amount per Available Room $6,102 $6,246 $6,465 Amount per Occupied Room $22.88 $24.07 $24.92 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 117 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Food and Beverage Expense Food and beverage expenses consist of items necessary for the operation of a hotel's food, beverage, and banquet facilities. Although food and beverage revenues are projected separately and occupy separate categories on a hotel's income and expense statement, the corresponding expenses are combined into a single category. The costs associated with food and beverage sales and payroll are moderately to highly correlated to food and beverage revenues, and comprise a substantial portion of this category. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are very slightly dependent on volume. Although the other expense items are basically fixed, they represent a relatively insignificant factor. After considering the fixed and variable components, we forecast the subject property's food and beverage expense as follows. ================================================================================ Table 10-14 Forecast of Food and Beverage Expense - -------------------------------------------------------------------------------- 1997/98 1998/99 Stabilized - ---------------------------------------------------------------------------- Projected Food & Beverage Expense (+000) $8,983 $9,246 $9,570 Percent of Food and Beverage Revenue 59.8 % 60.2 % 60.2 % Amount per Available Room $17,014 $17,511 $18,124 Amount per Occupied Room $63.85 $67.57 $69.94 - -------------------------------------------------------------------------------- Telephone Expense Telephone expense consists of all costs associated with this department. In the case of small hotels with automated systems, the operation of telephones may be an additional responsibility of front desk personnel; however, most large properties employ full-time operators. The bulk of the telephone expense consists of the cost of local and long-distance calls billed by the telephone companies that provide these services. Because most calls are made by in-house guests, these costs are moderately correlated to occupancy. Unless a particular hotel department incurs high expenses, use of telephone services by hotel employees is charged to this account. The remaining costs, which include salaries, wages, printing, and other expenses, are moderately fixed. The following table illustrates our forecast of telephone expense. HVS International, Mineola, New York Income Capitalization Approach 118 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-15 Forecast of Telephone Expense - -------------------------------------------------------------------------------- 1997/98 1998/99 Stabilized - ---------------------------------------------------------------------------- Projected Telephone Expense (+000) $339 $347 $360 Percent of Telephone Revenue 35.8 % 36.3 % 36.4 % Amount per Available Room $642 $658 $681 Amount per Occupied Room $2.41 $2.54 $2.63 - -------------------------------------------------------------------------------- Minor Operated Departments Expense Minor operated departments expense consists of costs associated with minor operated departments, and is dependent on the nature of the revenue. For example, if the property operates its own gift shop, both revenues and expenses will be higher, and the hotel is responsible for the cost of goods sold, payroll, and so forth. Using a fixed-and-variable forecasting model, we project the subject property's minor operated expense as follows. ================================================================================ Table 10-16 Forecast of Other Income Expense - -------------------------------------------------------------------------------- 1997/98 1998/99 Stabilized - ----------------------------------------------------------------------------- Projected Minor Operated Depts Expense (+000) $388 $400 $414 Percent of Minor Operated Depts Revenue 63.9 % 64.2 % 64.2 % Amount per Available Room $735 $758 $784 Amount per Occupied Room $2.76 $2.92 $3.03 - -------------------------------------------------------------------------------- Administrative and General Expense Administrative and general expense includes the salaries and wages of all administrative personnel who are not directly associated with a particular department. Expense items related to the management and operation of the property are also allocated to this category. Most administrative and general expenses are relatively fixed. The exceptions are cash overages and shortages; commissions on credit card charges; provision for doubtful accounts, which are moderately affected by the number of transactions or total revenue; and salaries, wages, and benefits, which are very slightly influenced by volume. In recent years, several new items have been added to the administrative and general expense category. Human resources includes the cost of HVS International, Mineola, New York Income Capitalization Approach 119 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= recruiting, relocating, and training personnel. Security consists of the cost of contract security for the property and related expenses. The general insurance category includes premiums for liability, fidelity, life, theft coverage, and business interruption insurance. Fire and extended-coverage insurance on the building and contents is a separate insurance expense category. Liability insurance covers third-party actions involving bodily injury and personal property, and is typically based on rooms receipts, meeting and banquet income, and food and beverage revenue. Factors that may have an impact on a hotel's liability expense include the size of the meeting, banquet, and restaurant facilities; the ratio between the amount of alcohol served and total food and beverage sales; the presence of a dance floor; a high-rise structure; a swimming pool; life safety support systems; and the guest transportation services provided by the hotel. The following table illustrates our forecast of administrative and general expense. ================================================================================ Table 10-17 Forecast of Administrative and General Expense - -------------------------------------------------------------------------------- 1997/98 1998/99 Stabilized - -------------------------------------------------------------------------------- Projected Admin. & General Expense (+000) $1,984 $2,040 $2,111 Percentage of Total Revenue 6.0 % 6.1 % 6.1 % Amount per Available Room $3,758 $3,864 $3,998 Amount per Occupied Room $14.10 $14.91 $15.43 - -------------------------------------------------------------------------------- Management Fee Management expense consists of the basic fee paid to the type of company that is anticipated to operate the subject property. Some companies provide management services alone, while others also provide a brand name affiliation. When a management company has no brand identification, the property owner often acquires a franchise that provides the necessary image and recognition. Although most hotel management companies employ a fee schedule that includes a basic fee (usually a percentage of total revenue) and an incentive fee (usually a percentage of defined profit), the incentive portion is often subordinated to debt service and does not appear in a forecast of net income before debt service. Basic hotel management fees are almost always based on a percentage of total revenue, which means they have no fixed component. HVS International, Mineola, New York Income Capitalization Approach 120 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Although the incentive fee does not decrease the cash flow available for debt service, it does reduce the potential cash flow to equity, and must be accounted for in the valuation process. Generally, the most appropriate procedure for handling the impact of the incentive fee on the equity component is to use the projected net income before debt service and incentive fee, but adjust the equity dividend or yield rate upward to reflect this added management cost. The adjusted equity dividend and yield rates will be described later in this section. The subject property is currently operated by Kempinski International, Inc.. The terms of this agreement provide for an annual management fee of $300,000. This equates to roundly 1% of gross revenues in each of the projection years. For the purposes of this appraisal, we have assumed that the cost of management will be in line with prevailing market terms for management contracts, in recognition of the fact that a typical investor would anticipate incurring such costs. As a result, we have forecast the base management fee to be 3% of gross revenues throughout the projection period. Applying this management fee structure to the projection of total revenue yields the following forecast of the subject property's management fee. ================================================================================ Table 10-18 Forecast of Management Fee - -------------------------------------------------------------------------------- 1997/98 1998/99 Stabilized - ------------------------------------------------------------------- Projected Management Fee (+000) $996 $1,008 $1,043 - -------------------------------------------------------------------------------- Marketing Expense Marketing expense consists of all costs associated with advertising, sales, and promotion; these activities are intended to attract and retain customers. Marketing can be used to create an image, develop customer awareness, and stimulate patronage of a property's various facilities. The marketing category is unique in that all expense items, with the exception of fees and commissions, are totally controlled by management. Most hotel operators establish an annual marketing budget that sets forth all planned expenditures. If the budget is followed, total marketing expenses can be projected accurately. Marketing expenditures are unusual because although there is a lag period before results are realized, the benefits are often extended over a long HVS International, Mineola, New York Income Capitalization Approach 121 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= period. Depending on the type and scope of the advertising and promotion program implemented, the lag time can be as short as a few weeks or as long as several years. However, the favorable results of an effective marketing campaign tend to linger, and a property often enjoys the benefits of concentrated sales efforts for many months. Marketing expense can be divided into five categories: sales, reservations, advertising and merchandising, other marketing activities, and fees and commissions. Together, these categories include all marketing efforts made by hotel personnel and outside parties. Marketing expenses are fixed, with the exception of reservations, fees, and commissions, which are calculated as a percentage of rooms revenue. Based on the location of the subject property, the local market for transient accommodations, the competitive environment, and the hotel's anticipated market segmentation, we have developed the following marketing forecast using a fixed-and-variable component model. ================================================================================ Table 10-19 Forecast of Marketing Expense - -------------------------------------------------------------------------------- 1997/98 1998/99 Stabilized - ----------------------------------------------------------------------- Projected Marketing Expense (+000) $2,034 $2,091 $2,164 Percentage of Total Revenue 6.1 % 6.2 % 6.2 % Amount per Available Room $3,852 $3,960 $4,099 Amount per Occupied Room $14.46 $15.28 $15.82 - -------------------------------------------------------------------------------- Property Operations and Maintenance Property operations and maintenance expense is another expense category that is largely controlled by management. Except for repairs that are necessary to keep the facility open and prevent damage (e.g., plumbing, heating, and electrical items), most maintenance can be deferred for varying lengths of time. Maintenance is an accumulating expense. If management elects to postpone performing a required repair, they have not eliminated or saved the expenditure; they have only deferred payment until a later date. A lodging facility that operates with a lower-than-normal maintenance budget is likely to accumulate a considerable amount of deferred maintenance. HVS International, Mineola, New York Income Capitalization Approach 122 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The age of a lodging facility has a strong influence on the required level of maintenance. A new or thoroughly renovated property is protected for several years by modern equipment and manufacturers' warranties. However, as a hostelry grows older, maintenance expenses escalate. A well-organized preventive maintenance system often helps delay deterioration, but most facilities face higher property operations and maintenance costs each year, regardless of the occupancy trend. The quality of initial construction can also have a direct impact on future maintenance requirements. The use of high-quality building materials and construction methods generally reduces the need for maintenance expenditures over the long term. Property operations and maintenance is considered an operating expense; as such, it includes only those components that can be expensed, rather than capitalized, under Internal Revenue Service regulations. For example, if a table leg is broken, the repair of that leg is considered an expense and is chargeable to property operations and maintenance. If the table is replaced, it becomes a capital expenditure and does not appear under the property operations and maintenance category. Appraisers account for capital replacement of items such as furniture and equipment in the reserve for replacement account, which is discussed later in this section. Property operations and maintenance costs are relatively fixed, and are projected as follows. ================================================================================ Table 10-20 Forecast of Property Operations and Maintenance Expense - -------------------------------------------------------------------------------- 1997/98 1998/99 Stabilized - -------------------------------------------------------------------------------- Projected Prop. Oper. & Maint. Expense (+000) $1,593 $1,637 $1,695 Percentage of Total Revenue 4.8 % 4.9 % 4.9 % Amount per Available Room $3,016 $3,101 $3,210 Amount per Occupied Room $11.32 $11.97 $12.39 - -------------------------------------------------------------------------------- Energy Expense The energy consumption of a lodging facility takes several forms, including water and space heating, air conditioning, lighting, cooking fuel, and other miscellaneous power requirements. The most common sources of hotel energy are electricity, natural gas, fuel oil, and steam. This category also includes the cost of water service. Total energy cost depends on the source and quantity of fuel used. Electricity tends to be the most expensive source, followed by oil and gas. Although HVS International, Mineola, New York Income Capitalization Approach 123 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= all hotels consume a sizable amount of electricity, many properties supplement their energy requirements with less expensive sources, such as gas and oil, for heating and cooking. A large portion of a hostelry's energy consumption is relatively fixed. Restaurants, kitchens, public areas, and corridors must be continually lighted and climate-controlled, regardless of occupancy. The energy cost of an additional occupied room (i.e., a few hours of light, television, heat, or air conditioning) is minimal. The following table presents our forecast of the subject property's energy expense. ================================================================================ Table 10-21 Forecast of Energy Expense - -------------------------------------------------------------------------------- 1997/98 1998/99 Stabilized - ------------------------------------------------------------------------- Projected Energy Expense (+000) $1,117 $1,153 $1,194 Percentage of Total Revenue 3.4 % 3.4 % 3.4 % Amount per Available Room $2,115 $2,185 $2,261 Amount per Occupied Room $7.94 $8.43 $8.73 - -------------------------------------------------------------------------------- Property Taxes The estimate of property taxes was detailed in a previous section of this report. The following table summarizes these projections. ================================================================================ Table 10-22 Forecast of Property Taxes - -------------------------------------------------------------------------------- 1997/98 1998/99 Stabilized - ---------------------------------------------------------------------- Projected Property Taxes (+000) $1,173 $1,185 $1,197 - -------------------------------------------------------------------------------- Insurance Expense The insurance expense category consists of the cost of insuring the hotel and its contents against damage or destruction by fire, weather, sprinkler leakage, boiler explosion, plate glass breakage, and so forth. It does not include liability coverage, which is a component of administrative and general expense. Insurance rates are based on many factors, including building design and construction, fire detection and extinguishing equipment, fire district, HVS International, Mineola, New York Income Capitalization Approach 124 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= distance from the firehouse, and the area's fire experience. Insurance expenses do not vary with occupancy. Based on historical levels, we project the subject property's insurance expense at approximately $160,000 in 1997/98 (the first projection period). In subsequent years, this amount is assumed to increase in tandem with inflation. The following table outlines our projection of insurance expense. ================================================================================ Table 10-23 Forecast of Insurance Expense - -------------------------------------------------------------------------------- 1997/98 1998/99 Stabilized - ------------------------------------------------------------------------ Projected Insurance Expense (+000) $160 $165 $171 - -------------------------------------------------------------------------------- Reserve for Replacement Furniture, fixtures, and equipment are essential to the operation of a lodging facility, and their quality often influences a property's class. This category includes all non-real estate items that are capitalized, rather than expensed. The furniture, fixtures, and equipment of a hotel are exposed to heavy use and must be replaced at regular intervals. The useful life of these items is determined by their quality, durability, and the amount of guest traffic and use. Periodic replacement of furniture, fixtures, and equipment is essential to maintain the quality, image, and income-producing potential of a lodging facility. Because capitalized expenditures are not included in the operating statement but nevertheless affect an owner's cash flow, an appraisal should reflect these expenses in the form of an appropriate reserve for replacement. Our industry experience indicates that a reserve for replacement of 3% to 5% of total revenue is generally sufficient to provide for the timely replacement of furniture, fixtures, and equipment. Because the reserve for replacement is based on a percentage of total revenue, it has no fixed component. Based on an analysis of comparable lodging facilities, we believe that a reserve for replacement of 4.0% of total revenue is sufficient to provide for the periodic replacement of the subject property's furniture, fixtures, and equipment. The following table summarizes the projected reserve for replacement. HVS International, Mineola, New York Income Capitalization Approach 118 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-24 Forecast of Reserve for Replacement - -------------------------------------------------------------------------------- 1997/98 1998/99 Stabilized - --------------------------------------------------------------------------- Projected Replacement Reserves (+000) $1,328 $1,344 $1,391 - -------------------------------------------------------------------------------- Summary of Projections Based on the preceding analysis, we have formulated a forecast of income and expense. The table on the following page presents a detailed forecast through the stabilized year, including amounts per available room (PAR) and per occupied room (POR). For the purpose of comparison, this table also presents the subject property's most recent full year of operating history. The second table illustrates our ten-year forecast of income and expense in less detail. The forecasts pertain to fiscal operating years beginning in 1997/98, and are expressed in inflated dollars for each year. HVS International, Mineola, New York Income Capitalization Approach 126 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-25 Detailed Forecast of Income and Expense through the Stabilized Year and Most Recent Operating History: Grand Kempinski Dallas, Addison, Texas - --------------------------------------------------------------------------------
Historical Operating Results ------------------------------------- Fiscal Year: 1966 1997/98 1998/99 No. of Rooms: 528 528 528 Occupancy: 71.9% 73.0% 71.0% Average Rate: $104.61 $110.55 $113.83 No. of Days Open: 366 Percent 365 Percent 365 Percent No.of 0ccupied Rooms: 138,915 of 140,686 of 136,831 of (+000) Gross PAR POR (+000) Gross PAR POR (+000) Gross PAR - ------------------------------------------------------------------------------------------------------------------------------------ REVENUE Rooms $14,533 46.2 % $27,524 $104.61 $15,553 46.8 % $29,456 $110.55 $15,576 46.4 % $29,500 Food 10,600 33.7 20,075 76.30 11,142 33.6 21,102 79.20 11,389 33.9 21,570 Beverage 3,698 11.8 7,004 26.62 3,887 11.7 7,362 27.63 3,974 11.8 7,527 Telephone 894 2.8 1,694 6.44 947 2.9 1,794 6.73 956 2.8 1,811 Minor Operated Depts 724 2.3 1,372 5.21 607 1.8 1,150 4.31 623 1.9 1,180 Other Income 984 3.1 1,863 7.08 1,057 3.2 2,002 7.51 1,085 3.2 2,055 Total 31,433 99.9 59,531 226.27 33,193 100.0 62,866 235.94 33,603 100.0 63,642 - ------------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL EXPENSES* Rooms 3,068 21.1 5,810 22.08 3,219 20.7 6,097 22.88 3,294 21.1 6,239 Food & Beverage 7,941 55.5 15,040 57.16 8,983 59.8 17,013 63.85 9,246 60.2 17,511 Telephone 323 36.1 612 2.32 339 35.8 642 2.41 347 36.3 657 Minor Operated Depts 499 68.9 946 3.59 388 63.9 735 2.76 400 64.2 758 Total 11,831 37.6 22,407 85.17 12,929 39.0 24,487 91.90 13,287 39.5 25,165 - ------------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL INCOME 19,602 62.3 37,125 141.11 20,264 61.0 38,379 144.04 20,316 60.5 38,477 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING EXPENSES Administrative & General 1,892 6.0 3,582 13.62 1,984 6.0 3,758 14.10 2,040 6.1 3,864 Management Fee 300 1.0 568 2.16 996 3.0 1,886 7.08 1,008 3.0 1,909 Marketing 1,939 6.2 3,673 13.96 2,034 6.1 3,852 14.46 2,091 6.2 3,960 Property Oper. & Maint. 1,519 4.8 2,876 10.93 1,593 4.8 3,017 11.32 1,637 4.9 3,100 Energy 1,068 3.4 2,023 7.69 1,117 3.4 2,116 7.94 1,153 3.4 2,184 Total 6,717 21.4 12,722 48.36 7,724 23.3 14,629 54.90 7,929 23.6 15,017 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSE PROFIT 12,884 40.9 24,402 92.75 12,540 37.7 23,750 89.13 12,387 36.9 23,460 - ------------------------------------------------------------------------------------------------------------------------------------ FIXED EXPENSES Property Taxes 1,158 3.7 2,194 8.34 1,173 3.5 2,222 8.34 1,185 3.5 2,244 Insurance 153 0.5 290 1.10 160 0.5 303 1.14 165 0.5 313 Reserve for Replacement 1,723 5.5 3,263 12.40 1,328 4.0 2,515 9.44 1,344 4.0 2,545 Total 3,034 9.7 5,747 21.84 2,661 8.0 5,040 18.91 2,694 8.0 5,102 - ------------------------------------------------------------------------------------------------------------------------------------ NET INCOME $9,850 31.2 % $18,655 $70.91 $9,879 29.8 % $18,710 $70.22 $9,693 28.8 % $18,358 ==================================================================================================================================== Food/Rooms 72.9% 71.6% 73.1% Beverage/Food 34.9% 34.9% 34.9% Telephone/Rooms 6.2% 6.1% 6.1% Other Income/Rooms 6.8% 6.8% 7.0% Fiscal Year: Stabilized 2000/01 2001/02 No. of Rooms: 528 528 528 Occupancy: 71.0% 71.0% 71.0% Average Rate: $117.82 $121.90 $126.17 No. of Days Open: 365 Percent 365 Percent 365 Percent No.of 0ccupied Rooms: 136,831 of 136,831 of 136,831 of POR (+000) Gross PAR POR (+000) Gross PAR POR (+000) Gross - ------------------------------------------------------------------------------------------------------------------------------------ REVENUE Rooms $113.83 $16,122 46.4 % $30,534 $117.82 $16,680 46.4 % $31,591 $121.90 17,264 46.4 % Food 83.23 11,788 33.9 22,326 86.15 12,200 33.9 23,106 89.16 12,627 33.9 Beverage 29.04 4,113 11.8 7,790 30.06 4,257 11.8 8,063 31.11 4,406 11.8 Telephone 6.99 989 2.8 1,873 7.23 1,024 2.8 1,939 7.48 1,059 2.8 Minor Operated Depts 4.55 645 1.9 1,222 4.71 667 1.9 1,263 4.87 691 1.9 Other Income 7.93 1,123 3.2 2,127 8.21 1,162 3.2 2,201 8.49 1,203 3.2 Total 245.58 34,780 100.0 65,871 254.18 35,990 100.0 68,163 263.02 37,250 100.0 - ------------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL EXPENSES* Rooms 24.07 3,410 21.2 6,458 24.92 3,529 21.2 6,684 25.79 3,653 21.2 Food & Beverage 67.57 9,570 60.2 18,125 69.94 9,904 60.2 18,758 72.38 10,251 60.2 Telephone 2.54 360 36.4 682 2.63 372 36.3 705 2.72 385 36.4 Minor Operated Depts 2.92 414 64.2 784 3.03 428 64.2 811 3.13 444 64.3 Total 97.11 13,754 39.5 26,049 100.52 14,233 39.5 26,956 104.02 14,733 39.6 - ------------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL INCOME 148.47 21,026 60.5 39,822 153.66 21,757 60.5 41,206 159.01 22,517 60.4 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING EXPENSES Administrative & General 14.91 2,111 6.1 3,998 15.43 2,185 6.1 4,138 15.97 2,261 6.1 Management Fee 7.37 1,043 3.0 1,975 7.62 1,080 3.0 2,045 7.89 1,118 3.0 Marketing 15.28 2,164 6.2 4,098 15.82 2,240 6.2 4,242 16.37 2,318 6.2 Property Oper. & Maint. 11.96 1,695 4.9 3,210 12.39 1,754 4.9 3,322 12.82 1,815 4.9 Energy 8.43 1,194 3.4 2,261 8.73 1,236 3.4 2,341 9.03 1,279 3.4 Total 57.95 8,207 23.6 15,544 59.98 8,495 23.6 16,089 62.08 8,791 23.6 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSE PROFIT 90.53 12,819 36.9 24,278 93.68 13,262 36.9 25,117 96.92 13,726 36.8 - ------------------------------------------------------------------------------------------------------------------------------------ FIXED EXPENSES Property Taxes 8.66 1,197 3.4 2,267 8.75 1,238 3.4 2,345 9.05 1,282 3.4 Insurance 1.21 171 0.5 324 1.25 177 0.5 335 1.29 183 0.5 Reserve for Replacement 9.82 1,391 4.0 2,634 10.17 1,440 4.0 2,727 10.52 1,490 4.0 Total 19.69 2,759 7.9 5,225 20.16 2,855 7.9 5,407 20.87 2,955 7.9 - ------------------------------------------------------------------------------------------------------------------------------------ NET INCOME $70.84 $10,060 28.9 % $19,053 $73.52 $10,407 28.9 % $19,710 $76.06 $10,771 28.9 % ==================================================================================================================================== Food/Rooms 73.1% 73.1% 73.1% Beverage/Food 34.9% 34.9% 34.9% Telephone/Rooms 6.1% 6.1% 6.1% Other Income/Rooms 7.0% 7.0% 7.0%
Fiscal Year: No. of Rooms: Occupancy: Average Rate: No. of Days Open: No.of 0ccupied Rooms: PAR POR - ---------------------------------------------- REVENUE Rooms $32,697 $126.17 Food 23,915 92.28 Beverage 8,345 32.20 Telephone 2,006 7.74 Minor Operated Depts 1,309 5.05 Other Income 2,278 8.79 Total 70,549 272.23 - ---------------------------------------------- DEPARTMENTAL EXPENSES* Rooms 6,919 26.70 Food & Beverage 19,415 74.92 Telephone 729 2.81 Minor Operated Depts 841 3.24 Total 27,903 107.67 - ---------------------------------------------- DEPARTMENTAL INCOME 42,646 164.56 - ---------------------------------------------- OPERATING EXPENSES Administrative & General 4,282 16.52 Management Fee 2,117 8.17 Marketing 4,390 16.94 Property Oper. & Maint. 3,438 13.26 Energy 2,422 9.35 Total 16,650 64.25 - ---------------------------------------------- HOUSE PROFIT 25,996 100.31 - ---------------------------------------------- FIXED EXPENSES Property Taxes 2,428 9.37 Insurance 347 1.34 Reserve for Replacement 2,822 10.89 Total 5,597 21.60 - ---------------------------------------------- NET INCOME $20,400 $78.72 ============================================== Food/Rooms Beverage/Food Telephone/Rooms Other Income/Rooms * Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 127 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-26 Ten-Year Forecast of Income and Expense, Grand Kempinski Dallas, Addison, Texas ($+,000) - --------------------------------------------------------------------------------
Fiscal Year: 1997/98 1998/99 1999/00 2000/01 2001/02 ---------------- ---------------- ---------------- ---------------- ---------------- No. of Rooms: 528 528 528 528 528 No. of Occupied Rooms: 140,686 136,831 136,831 136,831 136,831 Occupancy: 73.0% % of 71.0% % of 71.0% % of 71.0% % of 71.0% % of Average Rate: $110.55 Gross $113.83 Gross $117.82 Gross $121.90 Gross $126.17 Gross - --------------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $15,553 46.8 % $15,576 46.4 % $16,122 46.4 % $16,680 46.4 % $17,264 46.4 % Food 11,142 33.6 11,389 33.9 11,788 33.9 12,200 33.9 12,627 33.9 Beverage 3,887 11.7 3,974 11.8 4,113 11.8 4,257 11.8 4,406 11.8 Telephone 947 2.9 956 2.8 989 2.8 1,024 2.8 1,059 2.8 Minor Operated Depts 607 1.8 623 1.9 645 1.9 667 1.9 691 1.9 Other Income 1,057 3.2 1,085 3.2 1,123 3.2 1,162 3.2 1,203 3.2 Total 33,193 100.0 33,603 100.0 34,780 100.0 35,990 100.0 37,250 100.0 - --------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES* Rooms 3,219 20.7 3,294 21.1 3,410 21.2 3,529 21.2 3,653 21.2 Food & Beverage 8,983 59.8 9,246 60.2 9,570 60.2 9,904 60.2 10,251 60.2 Telephone 339 35.8 347 36.3 360 36.4 372 36.3 385 36.4 Minor Operated Depts 388 63.9 400 64.2 414 64.2 428 64.2 444 64.3 Total 12,929 39.0 13,287 39.5 13,754 39.5 14,233 39.5 14,733 39.6 - --------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 20,264 61.0 20,316 60.5 21,026 60.5 21,757 60.5 22,517 60.4 - --------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 1,984 6.0 2,040 6.1 2,111 6.1 2,185 6.1 2,261 6.1 Management Fee 996 3.0 1,008 3.0 1,043 3.0 1,080 3.0 1,118 3.0 Marketing 2,034 6.1 2,091 6.2 2,164 6.2 2,240 6.2 2,318 6.2 Property Oper. & Maint. 1,593 4.8 1,637 4.9 1,695 4.9 1,754 4.9 1,815 4.9 Energy 1,117 3.4 1,153 3.4 1,194 3.4 1,236 3.4 1,279 3.4 Total 7,724 23.3 7,929 23.6 8,207 23.6 8,495 23.6 8,791 23.6 - --------------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 12,540 37.7 12,387 36.9 12,819 36.9 13,262 36.9 13,726 36.8 - --------------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 1,173 3.5 1,185 3.5 1,197 3.4 1,238 3.4 1,282 3.4 Insurance 160 0.5 165 0.5 171 0.5 177 0.5 183 0.5 Reserve for Replacement 1,328 4.0 1,344 4.0 1,391 4.0 1,440 4.0 1,490 4.0 Total 2,661 8.0 2,694 8.0 2,759 7.9 2,855 7.9 2,955 7.9 - --------------------------------------------------------------------------------------------------------------------------------- NET INCOME $9,879 29.8 % $9,693 28.8 % $10,060 28.9 % $10,407 28.9 % $10,771 28.9 % ================================================================================================================================= Fiscal Year: 2002/03 2003/04 2004/05 2005/06 2006/07 ---------------- ---------------- ---------------- ---------------- ---------------- No. of Rooms: 528 528 528 528 528 No. of Occupied Rooms: 136,831 136,831 136,831 136,831 136,831 Occupancy: 71.0% % of 71.0% % of 71.0% % of 71.0% % of 71.0% % of Average Rate: $130.58 Gross $135.15 Gross $139.88 Gross $144.78 Gross $149.85 Gross - --------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $17,868 46.4 % $18,493 46.4 % $19,140 46.4 % $19,810 46.4 % $20,504 46.4 % Food 13,069 33.9 13,526 33.9 14,000 33.9 14,490 33.9 14,997 33.9 Beverage 4,560 11.8 4,719 11.8 4,885 11.8 5,056 11.8 5,232 11.8 Telephone 1,097 2.8 1,135 2.8 1,175 2.8 1,216 2.8 1,258 2.8 Minor Operated Depts 715 1.9 740 1.9 766 1.9 793 1.9 820 1.9 Other Income 1,245 3.2 1,288 3.2 1,333 3.2 1,380 3.2 1,428 3.2 Total 38,554 100.0 39,901 100.0 41,299 100.0 42,745 100.0 44,239 100.0 - --------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES* Rooms 3,780 21.2 3,913 21.2 4,050 21.2 4,191 21.2 4,338 21.2 Food & Beverage 10,610 60.2 10,981 60.2 11,366 60.2 11,763 60.2 12,175 60.2 Telephone 399 36.4 413 36.4 427 36.3 442 36.3 457 36.3 Minor Operated Depts 459 64.2 475 64.2 492 64.2 509 64.2 527 64.3 Total 15,248 39.5 15,782 39.6 16,335 39.6 16,905 39.5 17,497 39.6 - --------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 23,306 60.5 24,119 60.4 24,964 60.4 25,840 60.5 26,742 60.4 - --------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 2,340 6.1 2,422 6.1 2,507 6.1 2,595 6.1 2,686 6.1 Management Fee 1,157 3.0 1,197 3.0 1,239 3.0 1,282 3.0 1,327 3.0 Marketing 2,399 6.2 2,483 6.2 2,570 6.2 2,660 6.2 2,753 6.2 Property Oper. & Maint. 1,879 4.9 1,945 4.9 2,013 4.9 2,083 4.9 2,156 4.9 Energy 1,324 3.4 1,370 3.4 1,418 3.4 1,468 3.4 1,519 3.4 Total 9,099 23.6 9,417 23.6 9,747 23.6 10,088 23.6 10,441 23.6 - --------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 14,207 36.9 14,702 36.8 15,217 36.8 15,752 36.9 16,301 36.8 - --------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 1,327 3.4 1,373 3.4 1,421 3.4 1,471 3.4 1,522 3.4 Insurance 190 0.5 196 0.5 203 0.5 210 0.5 218 0.5 Reserve for Replacement 1,542 4.0 1,596 4.0 1,652 4.0 1,710 4.0 1,770 4.0 Total 3,059 7.9 3,165 7.9 3,276 7.9 3,391 7.9 3,510 7.9 - --------------------------------------------------------------------------------------------------------------------- NET INCOME $11,148 28.9 % $11,537 28.9 % $11,941 28.9 % $12,361 28.9 % $12,791 28.9 % =====================================================================================================================
* Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 128 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The conversion of a property's projected net income into an estimate of value is based on the premise that investors typically purchase real estate with a small amount of equity cash (25% to 40%) and a large amount of mortgage financing (60% to 75%). The amounts and terms of available mortgage financing and the rates of return that are required to attract sufficient equity capital form the basis for allocating the net income between the mortgage and equity components and deriving a value estimate. Mortgage Component Data for the mortgage component may be developed from statistics of actual hotel mortgages made by long-term lenders. The American Council of Life Insurance, which represents 20 large life insurance companies, publishes quarterly information pertaining to the hotel mortgages issued by its member companies. The following table summarizes the average mortgage interest rates of the hotel loans made by these lenders. In addition, the average A corporate bond yield (as reported by Moody's Bond Record) is shown for the purpose of comparison. HVS International, Mineola, New York Income Capitalization Approach 129 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-27 Average Mortgage Interest Rates and Average A Corporate Bond Yields - -------------------------------------------------------------------------------- Average A Average Corporate Period Interest Rate Bond Yield ------------------------------------------------------------------------- 4th Quarter 1996 9.49 % 7.54 % 3rd Quarter 1996 8.96 7.90 2nd Quarter 1996 8.82 7.93 1st Quarter 1996 7.79 7.37 4th Quarter 1995 8.44 7.28 3rd Quarter 1995 8.61 7.67 2nd Quarter 1995 9.25 7.87 1st Quarter 1995 9.14 8.50 3rd Quarter 1994 9.64 8.48 2nd Quarter 1994 9.38 8.28 4th Quarter 1993 9.38 7.80 3rd Quarter 1993 8.41 7.28 2nd Quarter 1993 10.53 9.65 4th Quarter 1992 9.43 8.48 3rd Quarter 1992 9.99 8.38 2nd Quarter 1992 9.47 8.79 1st Quarter 1992 10.02 8.81 4th Quarter 1991 10.49 8.97 3rd Quarter 1991 10.03 9.29 2nd Quarter 1991 10.75 9.45 3rd Quarter 1990 10.47 9.89 2nd Quarter 1990 10.58 9.83 4th Quarter 1989 9.96 9.42 3rd Quarter 1989 9.55 9.46 2nd Quarter 1989 10.54 9.93 1st Quarter 1989 10.39 10.16 4th Quarter 1988 10.07 10.03 3rd Quarter 1988 10.66 10.51 2nd Quarter 1988 10.09 10.33 4th Quarter 1987 10.41 10.45 3rd Quarter 1987 10.00 9.95 2nd Quarter 1987 9.81 9.46 1st Quarter 1987 9.43 9.19 4th Quarter 1986 9.44 9.55 3rd Quarter 1986 9.56 9.71 2nd Quarter 1986 9.80 9.91 1st Quarter 1986 10.99 10.62 Sources: American Council of Life Insurance; Moody's Bond Record - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 130 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Because of the six- to nine-month lag time in reporting and publishing hotel mortgage statistics, it is necessary to update this information to reflect current lending practices. Research by HVS International indicates that there is a close mathematical relationship between the average interest rate of a hotel mortgage and the concurrent yield on an average A corporate bond. Through a regression analysis, this relationship is expressed as follows. Y = 2.811891 + 0.778037 Where: Y = Estimated Hotel/Motel Mortgage Interest Rate X = Current Average A Corporate Bond Yield (Coefficient of correlation is 96.0%) The yield on Average A corporate bonds, as reported by Moody's Bond Record, was 7.97% for the month of March, 1997. Using a factor of 7.97% in the equation presented above produces an estimated hotel/motel interest rate of 9.01%. In addition to the mortgage interest rate estimate derived from this regression analysis, HVS International constantly monitors the terms of hotel mortgage loans made by our institutional lending clients. In the past year, we have noted an increase in the availability of debt financing, and many lenders have returned to the market. The current level of lending activity represents a significant increase from the restricted environment of the early 1990s. Nonetheless, the market for hotel mortgage loans remains somewhat tight, particularly when compared to the conditions that prevailed in the mid-to late 1980s. In the current lending climate, strong hotel projects that are structured on an economic basis can secure mortgage financing at interest rates ranging from 8% to 11%, depending on the property, location, affiliation, and operator. In the 1980s, when hotel mortgages were widely available, loan-to-value ratios typically ranged from 75% to 80%. Amortization schedules were generally based on 30 years, although the term of the loan was more likely to be seven to ten years. The few loans that were underwritten in the early 1990s were based on far more stringent parameters: loan-to-value ratios declined to a range of 50% to 65%, and amortization periods of 20 to 25 years were most common. With the recent reemergence of hotel financing, loan-to-value requirements and amortization schedules have loosened somewhat. At present, we find HVS International, Mineola, New York Income Capitalization Approach 131 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= that lenders who are active in the market are using loan-to-value ratios of 65% to 75%, and amortization periods of 25 to 30 years. The exact terms offered depend on specific factors such as the property's location, the age and quality of the physical facility, local hostelry market conditions, and (perhaps more significantly) the profile of the borrower. The strongest projects typically command the highest loan-to-value ratios. Information pertaining to transactions that involved the Hotel & Motel Brokers of America, an association of active hotel sales agents, is summarized in a publication entitled, TransActions. The following table presents HMBA data regarding first-mortgage hotel financing. 1991 1992 1993 1994 1995 ---- ---- ---- ---- ---- Average First-Year Interest 9.8% 9.1% 8.4% 9.0% 9.7% Loan-to-Value Ratio 74 73 76 73 73 Based on the preceding analysis of the current lodging industry mortgage market and adjustments for specific factors such as the property's location and conditions in the local hotel market, it is our opinion that a 9.5% interest, 25-year amortization mortgage with a 0.104844 constant is appropriate for the subject property. We believe that a mortgage lender will lend up to 70.0% of the hotel's market value as determined by this appraisal. Equity Component The remaining capital required for a hotel investment generally comes from the equity investor. The rate of return that an equity investor expects over a ten-year holding period is known as the equity yield. Unlike the equity dividend, which is a short-term rate of return, the equity yield specifically considers a long-term holding period (generally ten years), annual inflation- adjusted cash flows, property appreciation, mortgage amortization, and proceeds from a sale at the end of the holding period. It is difficult to quantify the rate of return required by equity investors who are seeking to purchase hotel properties. To establish an appropriate equity yield rate, HVS International uses two sources of data: past appraisals and investor interviews. HVS International, Mineola, New York Income Capitalization Approach 132 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Past Appraisals - During the past 12 months, HVS International has appraised more than 400 hotels, including properties located in most major national markets. Each appraisal used a similar mortgage-equity approach in which income is projected and then discounted to a current value at rates reflecting the cost of debt and equity capital. In the case of hotels that were sold subsequent to our valuations, we are able to determine an appropriate equity yield rate by excluding incentive management fees from the projection of income and expense, inserting the projection into a valuation model, and adjusting the appraised value to reflect the actual sales price by modifying the return assumptions. The following table shows a representative sample of hotels that were sold shortly after we appraised them, along with the imputed equity return based on our valuation approach. HVS International, Mineola, New York Income Capitalization Approach 133 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-28 Sample of Hotels Sold - --------------------------------------------------------------------------------
Total No. of Date Property Equity Hotel City and State Rooms of Sale Sales Price Yield Yield - ------------------------------------------------------------------------------------------------------- Residence Inn Lincoln, NE 120 6/95 $ 7,100,000 13.7 % 18.5 % DFW Marriott Irving, TX 491 7/95 44,000,000 15.3 24.6 High Mesa Inn Sante Fe, NM 211 9/95 11,200,000 17.7 30.4 Radisson Hotel Agoura Hills Agoura Hills, CA 281 9/95 12,100,000 8.1 6.2 Residence Inn - Perimeter West Atlanta, GA 120 10/95 11,650,000 10.0 10.2 Terrace Garden Inn Atlanta, GA 368 10/95 27,900,000 16.0 26.1 Doubletree, Marina del Ray Marina del Ray, CA 368 11/95 16,500,000 21.3 33.6 Hyatt Regency Beaver Creek Avon, CO 295 5/95 40,000,000 --- --- Embassy Suites Schaumburg, IL 209 12/95 17,800,000 13.5 18.9 Marriott Hotel Andover, MA 293 12/95 24,000,000 13.5 19.2 Doubletree Suites Valley Forge, PA 229 12/95 28,500,000 15.5 10.7 Marriott Hotel Tysons Comer, VA 390 12/95 41,100,000 13.1 18.0 Marriott Hotel Warner Center, CA 461 12/95 57,900,000 11.6 14.2 Hilton at the Club Pleasanton, CA 294 12/95 22,000,000 10.5 17.0 Ft. Lauderdale Airport Hilton Dania, FL 388 12/95 14,792,000 22.2 36.8 DeSoto Hilton Savannah, GA 250 6/96 6,500,000 --- --- The Copley Plaza Boston, MA 373 6/96 65,000,000 9.9 11.7 Arlington Park Hilton Arlington Heights, I 421 8/96 13,000,000 15.2 28.9 Radisson Marque Winston-Salem, N 293 8/96 7,500,000 13.5 20.4 Ritz Carlton Kansas City, MO 373 8/96 42,500,000 10.9 14.9 Ritz-Carlton Philadelphia, PA 290 8/96 34,000,000 13.8 22.8 Hotel Park Tucson Tucson, AZ 216 8/96 11,000,000 12.3 18.3 Embassy Suites Hotel Palm Desert, CA 198 8/96 14,000,000 13.8 22.8 Sheraton Ft Lauderdale Airport Dania, FL 250 8/96 22,000,000 9.0 9.1 Doubletree Hotel Atlanta, GA 370 8/96 52,000,000 10.6 14.2 The Marque of Atlanta Atlanta, GA 274 8/96 23,000,000 14.8 25.7 Doubletree Grand Hotel Bloomington, MN 321 8/96 37,000,000 13.3 22.0 Sheraton Minneapolis Metrodome Minneapolis, MN 252 8/96 18,000,000 13.1 21.5 Sheraton Needham Needham, MA 247 8/96 20,000,000 15.0 26.8 Westin Hotel Waltham, MA 346 8/96 41,000,000 13.5 20.8 Embassy Suites St. Louis, MO 297 8/96 20,000,000 14.7 25.3 Allentown Hilton Allentown, PA 224 10/96 7,500,000 12.2 18.9 Marriott's Casa Marina Resort Key West, FL 311 1/97 62,800,000 12.6 18.3 Hotel Nikko Atlanta, GA 439 2/97 89,000,000 13.6 20.1
Overall Rate Based on Net Operating Income --------------------------------- Stabilized Historical Projected Hotel Year Year Year One - ------------------------------ --------------------------------- Residence Inn 10.0 % --- --- DFW Marriott 11.3 12.1 % 12.6 % High Mesa Inn 13.1 --- 13.6 Radisson Hotel Agoura Hills 8.0 4.0 9.6 Residence Inn - Perimeter West 8.6 --- 9.6 Terrace Garden Inn 12.2 8.5 11.2 Doubletree, Marina del Ray 17.0 --- 15.0 Hyatt Regency Beaver Creek --- --- --- Embassy Suites 10.0 --- --- Marriott Hotel 9.7 7.4 10.2 Doubletree Suites 14.2 7.7 10.4 Marriott Hotel 10.7 8.2 8.9 Marriott Hotel 6.2 --- --- Hilton at the Club 10.5 --- --- Ft. Lauderdale Airport Hilton 16.7 --- 14.5 DeSoto Hilton --- --- --- The Copley Plaza 8.5 6.6 8.3 Arlington Park Hilton 10.8 0.0 15.0 Radisson Marque 11.9 5.3 5.5 Ritz Carlton 8.7 7.1 8.2 Ritz-Carlton 10.0 5.1 9.7 Hotel Park Tucson 10.2 5.4 7.0 Embassy Suites Hotel 10.7 7.2 10.1 Sheraton Ft Lauderdale Airport 7.8 4.7 7.3 Doubletree Hotel 9.1 7.0 8.8 The Marque of Atlanta 11.5 9.6 10.9 Doubletree Grand Hotel 10.3 9.9 11.3 Sheraton Minneapolis Metrodome 10.2 8.9 11.2 Sheraton Needham 11.4 8.4 12.5 Westin Hotel 10.2 6.4 10.8 Embassy Suites 11.4 7.7 10.2 Allentown Hilton 9.7 8.5 10.0 Marriott's Casa Marina Resort 9.7 9.8 9.2 Hotel Nikko 13.6 8.1 10.4 Source: HVS International - -------------------------------------------------------------------------------- Investor Interviews - HVS International is in constant contact with numerous institutional and individual hotel investors. This source of equity funds has definite return requirements that can be expressed as an equity yield rate based on a ten-year projection of net income before incentive management fees but after debt service. Based on our surveys and investor interviews, the following table illustrates the range of equity yields generally required by individual and institutional investors. HVS International, Mineola, New York Income Capitalization Approach 134 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-29 Equity Yield Requirements - -------------------------------------------------------------------------------- Source Equity Yield Requirement ------ ------------------------ Individual 20% - 24% Institution 18% - 22% - -------------------------------------------------------------------------------- Based on the assumed 70.0% loan-to-value ratio, the risk inherent in achieving the projected income stream, and the age, condition, and anticipated market position of the subject property, it is our opinion that an equity investor is likely to require an equity yield rate of 20.0% before payment of incentive management fees. This estimate is well supported by the equity yield requirements presented previously. Terminal Capitalization Rate Inherent in this valuation process is the assumption of a sale at the end of the ten-year holding period. The estimated reversionary sales price as of that date is calculated by capitalizing the projected 11th-year net income by an overall terminal capitalization rate. A percentage for the seller's brokerage and legal fees is deducted from this sales price, and the net proceeds to the equity interest (also known as the equity residual) are calculated by deducting the outstanding mortgage balance from the reversion. To estimate a property's reversionary value, the appraiser must select a terminal capitalization rate and an allocation for brokerage and legal fees. The terminal capitalization rate is an overall rate that is applied to one stabilized year, and thus, it inherently incorporates the cost of debt and equity capital. The terminal capitalization rate can be derived through a mortgage and equity band of investment technique which calculates the weighted average cost of the capital used in a hotel investment. Combining the mortgage financing terms derived previously (namely, a 70.0% loan-to-value ratio and a 0.104844 debt service constant) with a cash-on-cash equity dividend rate of 20.0% produces the following overall capitalization rate. HVS International, Mineola, New York Income Capitalization Approach 135 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Percent Rate of Weighted of Value Return Average Mortgage 70% x 0.104844 = 0.073391 Equity 30% x 0.120000 = 0.036000 -------- Overall Capitalization Rate 0.109391 Because this overall rate will be used to capitalize net income ten years from the date of value, an upward adjustment is appropriate to reflect the uncertainty inherent in this extended period. For the purpose of this valuation, we will use a terminal capitalization rate of 11.0%. As a point of reference, the terminal capitalization rate can be compared to the going-in rate implied by the subject property's estimated value. The going-in rate reflects the capitalization rate that would be applicable if the hotel were operating at a stabilized level as of the date of value. This rate is calculated by dividing the stabilized net income (expressed in current dollars as of the date of value) by the value indicated by the income capitalization approach. Generally, the terminal capitalization rate is approximately 100 to 200 basis points above the going-in rate. Summary of Valuation Variables The following table summarizes the valuation variables that have been used to estimate the subject property's value via the income capitalization approach. ================================================================================ Table 10-30 Summary of Valuation Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Forecast Loan-to-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.104844 Equity Yield Ye 20.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 11.0% - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 136 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Valuation of the Mortgage and Equity Components The valuation of the mortgage and equity components is accomplished through use of an algebraic equation that calculates the exact amount of debt and equity that the hotel will be able to support based on the anticipated cash flow (derived from the forecast of income and expense) and the specific return requirements demanded by the mortgage lender (interest) and the equity investor (equity yield). The equation and the calculations associated with this simultaneous valuation formula are set forth in the Addenda to this report. Using the variables summarized above, we estimate the value of the subject property via the income capitalization approach at $89,963,000. Proof of Value The value is proven by calculating the yields to the mortgage and equity components during the projection period. If the mortgagee achieves a 9.5% yield and the equity yield is 20.0%, then $89,963,000 is the correct value by the income capitalization approach. Using the assumed financial structure set forth in the previous calculations, market value can be allocated between the debt and equity as follows. Mortgage Component (70%) $62,974,000 Equity Component (30%) 26,989,000 ----------- Total $89,963,000 The annual debt service is calculated by multiplying the mortgage component by the mortgage constant. Mortgage Component $62,974,000 Mortgage Constant 0.104844 ----------- Annual Debt Service $ 6,602,421 The cash flow to equity is calculated by deducting the debt service from the projected net income before debt service. HVS International, Mineola, New York Income Capitalization Approach 137 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-31 Forecast of Net Income to Equity - -------------------------------------------------------------------------------- Net Income Available for Net Income Year Debt Service Debt Service to Equity -------------------------------------------------------------- 1997/98 $ 9,879,000 - $6,602,000 = $3,277,000 1998/99 9,693,000 - 6,602,000 = 3,091,000 1999/00 10,060,000 - 6,602,000 = 3,458,000 2000/01 10,407,000 - 6,602,000 = 3,805,000 2001/02 10,771,000 - 6,602,000 = 4,169,000 2002/03 11,148,000 - 6,602,000 = 4,546,000 2003/04 11,537,000 - 6,602,000 = 4,935,000 2004/05 11,941,000 - 6,602,000 = 5,339,000 2005/06 12,361,000 - 6,602,000 = 5,759,000 2006/07 12,791,000 - 6,602,000 = 6,189,000 - -------------------------------------------------------------------------------- The equity residual at the end of the tenth year is calculated as follows. Reversionary Value ($13,239,000 / 0.110 ) $ 120,355,000 Less: Brokerage and Legal Fees 3,611,000 Less: Mortgage Balance 52,690,000 ------------- Net Sale Proceeds to Equity $ 64,054,000 The overall property yield (before debt service), the yield to the lender, and the yield to the equity position have been calculated by computer with the following results. HVS International, Mineola, New York Income Capitalization Approach 138 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-32 Overall Property Yields - -------------------------------------------------------------------------------- Projected Yield (Internal Rate of Return) Position Value Over Ten-Year Holding Period - -------------------------------------------------------------------------------- Total Property $89,963,000 13.5 % Mortgage 62,974,000 9.5 Equity 26,989,000 20.0 Note: Whereas the mortgage constant and value are calculated on the basis of monthly mortgage payments, the mortgage yield in this proof assumes single annual payments. As a result, the proof's derived yield may be slightly less than that actually input. - -------------------------------------------------------------------------------- The following tables demonstrate that the property receives its anticipated yields, proving that the $89,963,000 value is correct, based on the assumptions used in this approach. ================================================================================ Table 10-33 Total Property Yield - -------------------------------------------------------------------------------- Net Income Before Present Worth of $1 Year Debt Service Factor at 13.5% Cash Flow --------------------------------------------------------------------- 1997/98 $ 9,879,000 x 0.881196 = $ 8,705,000 1998/99 9,693,000 x 0.776507 = 7,527,000 1999/00 10,060,000 x 0.684255 = 6,884,000 2000/01 10,407,000 x 0.602963 = 6,275,000 2001/02 10,771,000 x 0.531328 = 5,723,000 2002/03 11,148,000 x 0.468205 = 5,220,000 2003/04 11,537,000 x 0.412580 = 4,760,000 2004/05 11,941,000 x 0.363564 = 4,341,000 2005/06 12,361,000 x 0.320371 = 3,960,000 2006/07 129,535,000 * x 0.282310 = 36,569,000 ------------ Total Property Value $ 89,964,000 * 10th year net income of $12,791,000 plus sales proceeds of $116,744,000 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 139 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 10-34 Mortgage Component Yield - --------------------------------------------------------------------------------
Present Worth of $1 Discounted Year Debt Service Factor at 9.4% Cash Flow - --------------------------------------------------------------------------------------- 1997/98 $ 6,602,000 x 0.913820 = $ 6,033,000 1998/99 6,602,000 x 0.835068 = 5,513,000 1999/00 6,602,000 x 0.763102 = 5,038,000 2000/01 6,602,000 x 0.697338 = 4,604,000 2001/02 6,602,000 x 0.637242 = 4,207,000 2002/03 6,602,000 x 0.582325 = 3,845,000 2003/04 6,602,000 x 0.532140 = 3,513,000 2004/05 6,602,000 x 0.486280 = 3,210,000 2005/06 6,602,000 x 0.444373 = 2,934,000 2006/07 59,293,000 * x 0.406077 = 24,078,000 ----------- Value of the Mortgage Component $62,975,000 *10th year debt service of $6,602,000 plus outstanding mortgage balance of $52,690,000
- -------------------------------------------------------------------------------- ================================================================================ Table 10-35 Equity Component Yield - --------------------------------------------------------------------------------
Net Income Present Worth of $1 Discounted Year to Equity Factor at 20.0% Cash Flow - --------------------------------------------------------------------------------------- 1997/98 $ 3,277,000 x 0.833325 = $ 2,731,000 1998/99 3,091,000 x 0.694430 = 2,146,000 1999/00 3,458,000 x 0.578686 = 2,001,000 2000/01 3,805,000 x 0.482233 = 1,835,000 2001/02 4,169,000 x 0.401857 = 1,675,000 2002/03 4,546,000 x 0.334877 = 1,522,000 2003/04 4,935,000 x 0.279062 = 1,377,000 2004/05 5,339,000 x 0.232549 = 1,242,000 2005/06 5,759,000 x 0.193789 = 1,116,000 2006/07 70,243,000 * x 0.161489 = 11,343,000 ----------- Value of the Equity Component $26,988,000 *10th year net income to equity of $6,189,000 plus sales proceeds of $64,054,000
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 140 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Valuation Method Two: Discounted Cash Flow The total property yield derived from the previous valuation method was 13.48%. After reviewing the total property yields indicated by recent hotel sales, which ranged from 7.2% to 36.0%, it is our opinion that a 13.5% discount factor would be appropriate for the Grand Kempinski Dallas. The following table illustrates the discounted cash flow analysis using a 13.5% discount factor. ================================================================================ Table 10-36 Discounted Cash Flow Analysis - -------------------------------------------------------------------------------- Discount Factor Discounted Year Net Income at 13.5% Cash Flow - ------------------------------------------------------------------------- 1997/98 $ 9,879,000 0.88106 $ 8,703,965 1998/99 9,693,000 0.77626 7,524,307 1999/00 10,060,000 0.68393 6,880,348 2000/01 10,407,000 0.60258 6,271,077 2001/02 10,771,000 0.53091 5,718,429 2002/03 11,148,000 0.46776 5,214,609 2003/04 11,537,000 0.41213 4,754,686 2004/05 11,941,000 0.36311 4,335,846 2005/06 12,361,000 0.31992 3,954,493 2006/07 129,534,909 * 0.28187 36,511,377 ------------ Estimated Market Value $ 89,869,136 (Say) $ 89,900,000 Reversion Analysis 11th-Year Net Income $ 13,239,000 Capitalization Rate 11.0% ------------ Total Sales Proceeds $120,354,545 Less: Brokerage & Legal Fees at 3.0% 3,610,636 ------------ Net Sales Proceeds $116,743,909 * Tenth-year net income of $12,791,000 plus sales proceeds of $116,743,909 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 141 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Conclusion Based on our extensive experience in the hotel industry and comprehensive support provided by literature published by the Appraisal Institute, it is our opinion that the valuation procedure embodied by Method One most closely reflects the investment rationale of typical hotel buyers. As stated in the textbook entitled, Hotels and Motels: A Guide to Market Analysis, Investment Analysis and Valuations,(1) Method Two (which discounts the projected net income and reversion using an overall discount rate, or total property yield) "does not consider the impact of mortgage debt, leverage and the specific equity demands of typical hotel investors. . . . This technique is simple but less reliable because the derivation of the discount rate has little support." In light of this consideration, we have relied on the $89,950,000 value conclusion indicated by Method One. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. HVS International, Mineola, New York Sales Comparison Approach 142 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 11. Sales Comparison Approach The sales comparison approach is based on the assumption that an informed purchaser will pay no more for a property than the cost to acquire an existing property with equal utility. This approach estimates market value by considering the sales prices indicated by recent transactions involving properties that are similar to the property being appraised. Dissimilarities are resolved with appropriate adjustments; these differences may pertain to the date of sale, the age of the property, location, construction, condition, layout, equipment, size, or external economic factors. The reliability of the sales comparison approach depends on three factors: 1. the availability of timely, comparable sales data; 2. an understanding of the true terms of the sales and the motivation of the buyer and seller; 3. the degree of comparability, or the extent of the adjustments needed to reflect differences between the subject property and the comparable property. In appraising lodging facilities, it is often difficult to find an adequate number of recent sales involving hotels that are truly comparable to the subject property. Consequently, it may be necessary to consider transactions involving properties in different market areas, and the required adjustments greatly diminish the reliability of the conclusions. Moreover, it is virtually impossible for an observer to determine the true motivations of the buyers and sellers involved in transactions. Hotel acquisition often represents a highly ego-driven process in which a number of external, non-market factors influence the purchase price. Unless the appraiser can quantify these influences, there is no way of knowing whether the purchase price paid actually reflects market value. A final consideration is the degree of similarity between the subject property and the comparable; in most cases, the differences are significant enough to require numerous subjective and unsubstantiated adjustments. Each adjustment represents a potential for error, HVS International, Mineola, New York Sales Comparison Approach 143 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= and thus diminishes the reliability of this approach. As a result of these shortcomings, the use of the sales comparison approach in valuing hotels is primarily as a check against the value indicated by the income capitalization approach. Market Overview Throughout the past decade, hotel values in the U. S. have fluctuated fairly dramatically. During the late 1980s and early 1990s, values declined in most parts of the country. The downturn, which began in most markets in 1988, was largely attributable to lower operating incomes caused by an oversupply of new hotel rooms that were constructed during the mid-1980s. Overbuilding resulted in flat or declining average rates and occupancies, which caused revenues to fall. A number of other factors exacerbated the situation. The national recession caused a drop in demand in many markets during the early 1990s, and the Persian Gulf War created a virtual freeze on travel in the beginning of 1991, further limiting hotel demand. Operating costs continued to rise despite poor market conditions, resulting in a decline in the net operating income of many hotels throughout the nation. Because operating costs have a large fixed component, some lodging facilities experienced precipitous drops in net income. As bottom-line profits eroded, many hotels were unable to meet debt service, and hundreds of properties entered foreclosure or bankruptcy. Lenders and government agencies soon became hotel owners. Because most financial institutions were preoccupied with their distressed real estate, very little mortgage capital was available and the nation suffered from a well-publicized credit crunch. A majority of the hotel transactions that occurred during the early 1990s were financed by the property owners, who, in most cases, were lenders. In the early 1990s, the primary market participants were owner-operators with the expertise to turn around underperforming properties. Hotels were out of favor with passive investors as a result of the industry's poor operating performance and the uncertainty of future appreciation. The wide disparity in buyer and seller expectations also limited the number of transactions. Many sellers were unwilling to accept the fact that the market value of their hotel investments had declined below the cost of the project or the original investment. Moreover, many owners were faced with a significant tax burden upon sale, further reducing their willingness to settle for a price that was below the original acquisition cost. HVS International, Mineola, New York Sales Comparison Approach 144 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= As a result of these market forces, there was very little sales activity involving large, high-quality hotels in the early 1990s. The primary difficulty was the lack of properties available for sale; owners who were not forced to sell opted to wait for prices to recover. The few hotels that did enter the market during this period generally attracted 15 to 20 interested bidders, mostly consisting of owner-operators. As a result of the competition for these few assets, the prices of better-quality hotels began to escalate rapidly. In response, more sellers were encouraged to place their products on the market, and the number of hotels available for sale (and the number actually sold) began to rise in 1994. This trend has continued to accelerate. An indicator of this market trend is the number of hotel sales that have occurred during the past few years. HVS International tracks major hotel transactions of more than $10,000,000 on an annual basis. In 1992, the number of major transactions was 67; a slightly lower level of 52 was registered in 1993. This total increased significantly - to 92 in 1994 and to 134 in 1995. In 1996, the total number of major transactions soared to an estimated 207. The wider availability of mortgage capital has been a material factor influencing the increase in both market activity and prices. With the industry-wide slump in the early 1990s, traditional financing sources virtually abandoned the hospitality industry. Initially, the number of lenders returning to the market was extremely limited, and the underwriting criteria was fairly stringent: loan-to-value ratios were in the 60% to 70% range, and amortization periods were shortened to 20 or 25 years. The qualification of the borrower was also a crucial consideration for most lenders. Since 1995, an increasing number of lenders have entered the hotel mortgage market. Although these institutions continue to adopt a cautious posture, the greater availability of funds has fostered competition, particularly for high-quality assets and well-qualified buyers. As a result, loan-to-value ratios are returning to historical levels of 70% to 75%, and interest rates remain in the 8.5% to 10.0% range for most deals. Amortization periods remain in the 20- to 25-year range. The lingering influence of the recent downturn is evident in the widespread practice of underwriting based on net income after the deduction of management fees and a reserve for replacement; these line items typically total 7% to 8% of gross revenues. The current strength of the hotel industry is also supporting the increase in prices and the availability of mortgage capital. Moderate supply growth in the economy and mid-priced segments, limited development of new first HVS International, Mineola, New York Sales Comparison Approach 145 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= class and luxury hotels, and the favorable national economy have yielded healthy occupancy levels and average rate increases that are well above inflation. This resulted in high revenue levels which, paired with modest expense increases and improved operating efficiency, led to record net income levels in 1996. Still greater gains are anticipated in 1997. Real Estate Investment Trusts (REITs) are also influencing pricing trends and sales volume. Given their structure, organizational purpose, and low cost of capital, REITs are driven by the need to acquire assets. With several large REITs actively pursuing high-quality hotels, the competition for these properties is accelerating; this trend is exemplified by the rise in sales prices. In the short term, as long as REITs continue to make purchases and maintain a strong position and reputation in the capital markets, sales prices are likely to increase. The continued availability of mortgage financing is also expected to support this trend. However, sales activity is expected to slow as the number of high-quality, available assets diminishes. Given the dramatic changes in investor activity and attitudes that have occurred recently, if is our opinion that hotel sales that took place prior to 1995 cannot be relied on in preparing a sales comparison approach. Even sales data from 1995 may be subject to significant upward adjustments, depending on the location and condition of the property at the date of sale. These circumstances will be considered in our selection of comparable sales for the subject property. Comparable Sales Based on information provided by the Hospitality Market Data Exchange and compiled by the six offices of HVS International, the following transactions involved hotels that appear to have some degree of comparability to the subject property. HVS International, Mineola, New York Sales Comparison Approach 146 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Sale #1: - -------- Property: Occidental Grand Hotel Location: Atlanta, Georgia Date of Sale: March, 1997 Sales Price: $49,000,000 Grantor: N/A Grantee: Blackstone Partnership Year Opened: 1993 Number of Rooms: 245 Price per Room: $200,000 1996 Operating Data: Occupancy: 69% Average Rate: $150.00 RevPAR: $103.50 Food & Beverage Revenue: N/A Food & Beverage Profit: N/A Overall Capitalization Rate: 1996 NOI: N/A 1997 Projected NOI: N/A Confirmed By: Jon Gray, Blackstone This sale represents the transfer of a mixed-use complex that includes the Occidental Grand Hotel and adjacent office space. The indicated sale price reflects an allocation made by the purchaser. The facility is constructed of superior-quality materials and features high-grade finishes. In addition to guestrooms, the hotel features meeting space accommodating up to 600 people, business services, two restaurants, one lounge, and two bars, an indoor swimming pool, a health club, saunas, steam rooms, a whirlpool, and a sun terrace. The buyer plans to renovate the guestrooms (soft goods and some case pieces), and to reconfigure and renovate some of the food and beverage facilities and meeting space. Subsequent to the transaction, the hotel was converted to a Four Seasons. The buyer indicated that the hotel has suffered from a lack of market identity and direction, as it was previously operated by Doubletree on the Intercontinental reservation system. The buyer believes that significant increases in revenues and net income can be readily attained with the new management and affiliation. HVS International, Mineola, New York Sales Comparison Approach 147 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Sale #2: - -------- Property: Hotel Nikko Location: Atlanta, Georgia Date of Sale: February 1997 Sales Price: $89,000,000 Grantor: JDC Group - Prudential Joint Venture Grantee: Blackstone Group & Hyatt Hotels Year Opened: 1990 Number of Rooms: 439 Price per Room: $202,733 1996 Operating Data: Occupancy: 79% Average Rate: $148.00 RevPAR: $116.92 Food & Beverage Revenue: $11,478,000 Food & Beverage Profit: $3,115,000 (27.1%) Overall Capitalization Rate: 1996 NOI: 7.8% 1997 Projected NOI: 10.4% Confirmed By: Jon Gray, Blackstone The Hotel Nikko is a superior facility, featuring high-grade finishes, which was in very good condition at the time of sale. No significant renovations were planned by the buyer. In addition to guestrooms, the subject property contains two restaurants, a lobby bar, approximately 20,000 square feet of indoor meeting space, an additional +/-6,300 square feet of outdoor meeting space, a business center, a health club, a gift shop, an outdoor swimming pool, and a Japanese Garden. The hotel is situated in Buckhead, the premiere office and retail market in Atlanta. Subsequent to the transaction, the hotel was converted to a Hyatt, and managed by Hyatt Hotels. Hyatt believed some increase in revenues to be attainable with the conversion to a more widely known brand name. However, the real upside was perceived to be the opportunity to initiate more effective cost controls and improve overall profitability and net income levels. HVS International, Mineola, New York Sales Comparison Approach 148 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Sale #3: - -------- Property: Hyatt Regency Reston Town Center Location: Reston, Virginia Date of Sale: November, 1996 Sales Price: $66,400,000 Grantor: Property Investors, Inc., a subsidiary of Mobil Grantee: BRE/Reston, L.L.C., a Blackstone affiliate Year Opened: 1990 Number of Rooms: 625 Price per Room: $136,187 1996 Operating Data: Occupancy: 77% Average Rate: $106.00 RevPAR: $81.62 Food & Beverage Revenue: $11,134,000 Food & Beverage Profit: $2,685,000 (24.1%) Overall Capitalization Rate: 1996 NOI: 9.9% 1997 Projected NOI: 10.6% Confirmed By: Jon Gray, Blackstone The Hyatt is a full-service, first-class hotel which is situated within a larger, upscale office and retail complex known as Reston Town Center. In addition to guestrooms, the subject property contains four food and beverage facilities, approximately 24,000 square feet of meeting and banquet space, a health club, a gift shop, a parking garage, and appropriate back-of-the-house facilities. The hotel was reportedly in very good condition at the time of sale, with minimum renovations planned by the buyer. The above-indicated price includes the acquisition amount of $66,400,000, plus related transaction costs, including financing and closing fees. One of the seller's primary motivations was reported to be certainty of execution rather than price maximization; a previous sale had reportedly fallen through, and the seller was anxious to complete the disposition of the property. Consequently, the contracted price may be slightly below market value. HVS International, Mineola, New York Sales Comparison Approach 149 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Sale #4 - ------- Property: Hyatt Regency Westshore Location: Tampa, Florida Date of Sale: July, 1996 Sales Price: $73,000,000 Grantor: N/A Grantee: Hyatt Hotels Corporation Year Opened: 1986 Number of Rooms: 445 Price per Room: $164,045 1995 Operating Data: Occupancy: 67% Average Rate: $124.00 RevPAR: $83.08 Food & Beverage Revenue: $13,892,000 Food & Beverage Profit: $3,921,000 (28.2%) Overall Capitalization Rate: 1995 NOI: 7.7% 1996 Projected NOI: 9.2% The Hyatt is a full-service, first-class hotel which is situated in the Westshore area of Tampa, the region's premiere office market. In addition to guestrooms, the hotel features meeting space accommodating up to 1,000 people, a business center, three restaurants, a lobby bar, two swimming pools, two lighted tennis courts, one racquetball court, a health club with exercise equipment, a whirlpool, and sauna, a private beach, and shops. The property was in excellent condition at the time of the sale. The existing Hyatt management contract could be terminated only if Hyatt had the right of first refusal. Hyatt reportedly opted to purchase the property when it was placed on the market, and paid the seller's asking price. HVS International, Mineola, New York Sales Comparison Approach 150 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Adjustment Grid In order to compare these sales to the subject property, several adjustments - such as property rights conveyed, conditions of sale, market conditions (time), location, and physical condition of the facilities - are necessary. All of the comparable sales reflect transactions which have occurred within the past 12 months; therefore, we have made no specific adjustment for market conditions (time). Additionally, each transaction involved the transfer of the fee simple interest, as is the case of the subject property. Consequently, no adjustments are required for interest sold. With respect to the conditions of sale, our review of each transaction indicates that each occurred in "market" conditions - that is, between willing buyers and sellers acting knowledgeably and in their own best interest. The influence of management and brand affiliation on all of the transactions is notable. In the case of Sales #2, #3 and #4, the purchaser was a direct affiliate of the management company which was either currently managing the hotel (#3 and #4) or who assumed management of the hotel (#2). In the case of both Sales #1 and #2, the existing management and chain affiliation of the hotel were terminated in conjunction with the purchase, and a new management and chain affiliation were put in place. Reportedly, no significant cost was associated with the termination of the existing contract in either of these sales. These circumstances suggest that the most likely purchaser of the Grand Kempinski hotel would be an investment group in conjunction with a management company. This opinion is particularly valid, given the fact that the Kempinski name is not well recognized in North America, and some upside in revenues could reasonably be anticipated to result from a change in chain affiliation. A review of the terms of the current management contract indicates that the contract provides for the termination of Kempinski International, Inc. with 12 months' notice, which equates to a termination "fee" of $300,000, the contractual management fee. Such an amount is relatively insignificant, given the hotel's total value, and thus, would not lessen the hotel's marketability. As a result, no adjustment is necessary for these conditions of sale. Some adjustments must be made to reflect location, facilities, and the specific market in which each property operates. The subject property has its own individual characteristics in terms of these items. The sales prices of the comparable hotels that do not fit this profile need to be adjusted. It is HVS International, Mineola, New York Sales Comparison Approach 151 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= our experience that each of the factors listed above will influence a hotel's ability to attract and serve potential lodging guests. The success of a property in so doing is measured by the occupancy and average rate that the hotel achieves. Multiplying the occupancy by the average rate yields the revenue per available room, or RevPAR, which is a measure of the revenue-generating ability of the hotel at the time of sale. Thus, a comparison of the RevPAR of each comparable property, as of the date of sale, with the RevPAR of the subject property, as of the date of value, will result in an adjustment factor that recognizes these differences. In the case of the subject property, a further adjustment must be made in recognition of the excellent performance of the food and beverage operations at the Kempinski. In terms of revenues, the extensive meeting and banquet space available at the Kempinski, together with the several retail food and beverage outlets, enables the hotel to generate a relatively high level of food and beverage revenue. Further, the extraordinarily efficient operations of the department enable the hotel to achieve dramatically higher levels of food and beverage profit. These profits directly influence the net income of the hotel, and thus, also enhance the value of the property. Of the comparables, only the Hyatt Regency Westshore generates a comparable volume of food and beverage revenues. The profit ratios achieved by each of the comparables range from roundly 24% to 28%. By contrast, the Kempinski's profit ratio is roundly 45%. In recognition of the impact of these revenue and profit differentials, we have applied a further adjustment to the indicated sales prices of each of the comparables. The differential in the volume of food and beverage revenue is reflected in a 10% upward adjustment to all sales except the Hyatt Regency Westshore (#4). The difference in profitability is reflected in an additional upward adjustment of 10% in all instances except the Hyatt Regency Reston, where a 15% upward adjustment has been utilized in recognition of this hotel's historically low level of profitability. The following table summarizes the adjustments that have been applied to the comparable sales. HVS International, Mineola, New York Sales Comparison Approach 152 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 11-1 Comparable Sales Adjustment Grid - --------------------------------------------------------------------------------
Sale #1 Sale #2 Sale #3 Sale #4 Hyatt Regency Subject Occidental Grand Hotel Nikko Hyatt Regency Westshore Elements of Comparison Property Atlanta, GA Atlanta, GA Reston, VA Tampa, FL - --------------------------------------------------------------------------------------------------------------------- Sale Price $49,000,000 $89,000,000 $70,000,000 $73,000,000 Number of Rooms 528 245 439 514 445 Price per Room $200,000 $202,733 $136,187 $164,045 Date of Sale April, 1997 March, 1997 Feb., 1997 Dec., 1996 July, 1996 - --------------------------------------------------------------------------------------------------------------------- Adjustments for Transaction Characteristics - --------------------------------------------------------------------------------------------------------------------- Property Rights Conveyed Adjustment 0.0% 0.0% 0.0% 0.0% Adjusted Unit Price $200,000 $202,733 $136,187 $164,045 ------------------------------------------------------------------------ Financing Terms Adjustment 0.0% 0.0% 0.0% 0.0% Adjusted Unit Price $200,000 $202,733 $136,187 $164,045 ---------------------------------------------------------- Conditions of Sale Adjustment 0.0% 0.0% 0.0% 0.0% Adjusted Unit Price $200,000 $202,733 $136,187 $164,045 ------------------------------------------------------------------------ Market Conditions (Time & Market Area) HVI 1.0000 1.0000 1.0000 1.0000 1.0000 Adjusted Unit Price $200,000 $202,733 $136,187 $164,045 - --------------------------------------------------------------------------------------------------------------------- Adjustments for Property Characteristics - --------------------------------------------------------------------------------------------------------------------- Location/Market Adjustment 0.0% 0.0% 0.0% 0.0% Physical Condition/Facilities Adjustment 20.0% 20.0% 25.0% 10.0% Market Orientation (RevPAR) $75.82 $103.50 $116.92 $81.62 $83.08 Adjustment -26.7% -35.1% -7.1% -8.7% Net Percentage Adjustment -6.7% -15.1% 17.9% 1.3% - --------------------------------------------------------------------------------------------------------------------- Final Adjusted Unit Price $186,518 $172,020 $160,561 $166,121 - ---------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Sales Comparison Approach 153 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Conclusion Although the sales comparison approach may be useful in providing a value range and reflecting certain market characteristics, its applicability is limited by the numerous possible points of difference between the subject property and other hotels that have sold in recent years. These factors may include location, access, size, services and facilities offered, market conditions, chain affiliation, market orientation, management, rate structure, age, physical condition, date of sale, the highest and best use of the land, and the anticipated profitability of the operation. Circumstances surrounding a sale, such as financing terms, tax considerations, income guarantees, sales of partial interests, duress on the part of the buyer or seller, or a particular deal structure can also cause a disparity between the sales price and pure market value. Moreover, it is often difficult to determine the marketing periods that were necessary to consummate the transactions. It is extremely difficult to quantify the appropriate adjustment factors accurately because of their number and complexity, as well as the difficulty in obtaining specific, detailed information. Any attempt to manipulate the necessary adjustments is insupportable and purely speculative. Because appraisers are expected to reflect the analytical processes and actions of typical buyers and sellers rather than to create a highly subjective valuation approach, the investment rationale of hotel owners is an essential consideration. As specialists in the valuation of hotels, we find that typical buyers purchase properties based on a thorough analysis of the anticipated economic benefits of property ownership, rather than on historical sales data. In light of these factors, it is our opinion that the sales comparison approach is unsuitable for indicating a specific estimate of the subject property's market value; however, this approach may indicate a range of values that can be used to test the reasonableness of the value indicated by the income capitalization approach. The sales prices range from approximately $161,000 to $187,000 per room, or $85,000,000 to $99,000,000 for the 528-unit subject property. The income capitalization approach indicates a value of $89,950,000, which is above this range. The comparable sales data can also be utilized as a test of the reasonableness of the capitalization rates indicated by the income capitalization approach. For the purposes of this comparison, we will consider the overall capitalization rates based on the historical net income and the net income projected for the first year. The capitalization rate for the historical year is calculated by dividing the net income for the 12 months preceding the sale HVS International, Mineola, New York Sales Comparison Approach 154 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= by the indicated sales price. The first-year capitalization rate is calculated by dividing the net income for the first projection year following the sale by the sales price. The comparable sales data reflected historical cap rates ranging from 7.7% to 9.9%, and projected cap rates ranging from 9.2% to 10.6%. The differential between the two ranges is reflective of each purchaser's belief that, through renovations and changes in management and/or brand affiliation, these hotels will be able to generate an increased level of net income. The capitalization rate indicated by dividing the subject property's 1996 net income by the estimated value of $90,000,000 is 10.75%; the projected capitalization rate is 11.0%. These rates are well above the range of historical rates indicated by the comparable sales, and slightly higher than the projected capitalization rate. The capitalization rate is a measure of the return requirement of a typical investor, and as such must reflect market perceptions as to the desirability of a particular asset. However, it is also a reflection of the perceived risk in attaining the level of cash flows upon which the capitalization rate is based. As previously discussed, the Kempinski's current management team has achieved extraordinarily strong level of operating efficiency and expense control. Although there is probably some upside to be achieved by changing the property's affiliation to a more widely recognized brand, we are of the opinion that the probable decline in efficiency - and particularly, in food and beverage profitability - will more than offset the upside gained by a new affiliation. Thus, the risks associated with achieving net income levels commensurate with the hotel's historical performance are substantial. These circumstances clearly warrant a higher than average capitalization rate. As a result, we are of the opinion that the capitalization rates indicated by the income capitalization approach are reasonable. HVS International, Mineola, New York Cost Approach 155 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 12. Cost Approach The cost approach is founded on the principle of substitution, which implies that no prudent person will pay more for a property than the amount to acquire a site and construct a building of equal desirability and utility without undue delay. This approach estimates market value by first calculating the current cost of replacing the improvements. Appropriate deductions are made for depreciation resulting from physical deterioration, functional obsolescence, and external (economic) obsolescence, and the land value is added to the depreciated replacement cost to provide an estimate of market value. The cost approach employs the following steps. 1. The current replacement or reproduction cost is estimated. 2. Land value is estimated using techniques such as allocation, extraction, or ground rent capitalization. 3. Accrued depreciation, which can be divided into physical deterioration, functional obsolescence, and external obsolescence, is estimated. 4. Total depreciation is deducted from the subject property's replacement cost, and the land value is added to arrive at an estimate of value via the cost approach. When forming their purchase decisions regarding existing properties, market participants tend to consider the cost of developing a new hotel with optimal physical and functional utility. External conditions, such as the depressed market for real estate (and hotels in particular), can cause a property to be worth less than its replacement cost as new. The task of estimating the loss in value resulting from incurable functional and external obsolescence is highly subjective. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements age and begin to deteriorate, the loss in value resulting from physical obsolescence HVS International, Mineola, New York Cost Approach 156 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= becomes increasingly difficult to quantify accurately. Loss in value attributable to functional obsolescence can be even more difficult to determine. The subject property was constructed in 1983, and will be approximately 14 years old as of the date of this appraisal. The depressed hotel market conditions that prevailed in the late 1980s and the early 1990s have also led to a degree of external obsolescence. In our opinion, it is impossible to identify and quantify the impact of these factors on the property's value with any accuracy, so we will estimate only the replacement cost of the subject property. Replacement Cost Replacement cost is the current construction cost of a building with the same utility as the subject property, but built with modern materials and according to current construction and design standards. For the purpose of estimating the replacement cost of the subject property, we have used a hotel development cost survey conducted by HVS International. This survey is published annually in a newsletter entitled, The Hotel Valuation Journal, and appeared in the May, 1995, issue of Lodging Hospitality. The survey presents the range of per-room costs associated with various components of hotel development, including the improvements, the furniture, fixtures, and equipment, pre-opening expenses, and operating capital. Statistics are compiled for three broad categories of hotels: luxury, standard, and economy. The results of this survey are presented in the following table. HVS International, Mineola, New York Cost Approach 157 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 12-1 Hotel Development Cost Survey (Amounts per Room) - --------------------------------------------------------------------------------
Improvements Furniture & Equipment Pre-Opening Operating Capital Total Percent Change - ------------------------------------------------------------------------------------------------------------------------------------ 1976 Luxury $32,000 - $55,000 $5,000 - $10,000 $1,000 - $2,000 $1,000 - $1,500 $39,000 - $68,500 --- - --- Standard 20,000 - 32,000 3,000 - 6,000 750 - 1,000 750 - 1,000 24,500 - 40,000 --- - --- Economy 8,000 - 15,000 2,000 - 4,000 500 - 1,000 500 - 750 11,000 - 20,750 --- - --- 1979 Luxury 36,000 - 65,000 8,000 - 15,000 1,500 - 3,000 1,500 - 2,000 47,000 - 85,000 6.8 - 8.0 Standard 25,000 - 36,000 5,000 - 10,000 1,000 - 2,000 1,000 - 1,500 32,000 - 49,500 10.2 - 7.9 Economy 10,000 - 20,000 3,000 - 5,000 750 - 1,000 750 - 1,000 14,500 - 27,000 10.6 - 10.0 1981 Luxury 45,000 - 80,000 10,000 - 20,000 2,000 - 3,500 2,000 - 2,500 59,000 - 106,000 12.8 - 12.4 Standard 25,000 - 40,000 7,000 - 13,000 1,200 - 2,500 1,200 - 2,000 34,400 - 57,500 3.8 - 8.1 Economy 13,000 - 25,000 4,000 - 7,000 700 - 1,200 900 - 1,200 18,600 - 34,400 14.1 - 13.7 1983 Luxury 55,000 - 100,000 12,500 - 20,000 2,300 - 4,000 2,000 - 2,800 71,800 - 126,800 10.8 - 9.8 Standard 35,000 - 50,000 9,000 - 15,000 1,400 - 3,000 1,300 - 2,200 46,700 - 70,200 17.9 - 11.0 Economy 18,000 - 32,000 5,000 - 8,000 800 - 1,500 900 - 1,300 24,700 - 42,800 16.4 - 12.2 1985 Luxury 60,000 - 115,000 13,400 - 30,000 3,000 - 5,000 2,100 - 3,100 78,500 - 153,100 4.7 - 10.4 Standard 38,000 - 57,000 9,500 - 16,500 1,900 - 3,600 1,500 - 2,500 50,900 - 79,600 4.5 - 6.7 Economy 20,000 - 36,000 5,000 - 8,800 1,000 - 1,700 1,000 - 1,500 27,000 - 48,000 4.7 - 6.1 1986 Luxury 62,000 - 120,000 13,700 - 30,600 3,100 - 5,200 2,300 - 3,100 81,100 - 158,900 3.3 - 3.8 Standard 39,000 - 60,000 9,700 - 16,800 2,000 - 3,800 1,500 - 2,600 52,200 - 83,200 2.6 - 4.5 Economy 21,000 - 37,000 5,100 - 9,000 1,000 - 1,800 1,100 - 1,500 28,200 - 49,300 4.4 - 2.7 1987 Luxury 63,000 - 122,000 13,800 - 30,900 3,300 - 5,500 2,300 - 3,200 82,400 - 161,600 1.6 - 1.7 Standard 40,000 - 61,000 9,800 - 16,800 2,100 - 3,900 1,500 - 2,600 53,400 - 84,300 2.3 - 1.3 Economy 21,000 - 39,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 28,400 - 51,400 0.7 - 4.3 1988 Luxury 65,000 - 125,000 14,000 - 31,000 3,300 - 5,500 2,300 - 3,200 84,600 - 164,700 2.7 - 1.9 Standard 41,000 - 63,000 10,000 - 17,100 2,100 - 3,900 1,500 - 2,600 54,600 - 86,600 2.2 - 2.7 Economy 22,000 - 40,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 29,400 - 52,400 3.5 - 1.9 1989 Luxury 66,000 - 126,000 15,000 - 32,000 3,300 - 5,500 2,300 - 3,200 86,600 - 166,700 2.4 - 1.2 Standard 41,000 - 64,000 10,500 - 18,000 2,100 - 3,900 1,500 - 2,600 55,100 - 88,500 0.9 - 2.2 Economy 22,000 - 40,000 5,500 - 9,700 1,100 - 1,800 1,100 - 1,500 29,700 - 53,000 1.0 - 1.1 1990 Luxury 67,000 - 128,000 15,400 - 33,000 3,500 - 5,700 2,500 - 3,500 88,400 - 170,200 2.1 - 2.1 Standard 42,000 - 65,000 10,800 - 18,500 2,200 - 4,000 1,600 - 2,800 56,600 - 90,300 2.7 - 2.0 Economy 22,500 - 41,000 5,600 - 10,000 1,200 - 1,800 1,200 - 1,600 30,500 - 54,400 2.7 - 2.6 1991 Luxury 65,000 - 122,000 14,500 - 31,500 3,700 - 5,900 2,600 - 3,600 85,800 - 163,000 (2.9) - (4.2) Standard 40,000 - 63,000 10,000 - 17,800 2,300 - 4,200 1,700 - 2,900 54,000 - 87,900 (4.6) - (2.7) Economy 21,000 - 39,000 5,000 - 9,500 1,300 - 2,000 1,300 - 1,700 28,600 - 52,200 (6.2) - (4.0) 1992 Luxury 64,000 - 120,000 14,200 - 30,900 3,800 - 6,100 2,700 - 3,700 84,700 - 160,700 (1.3) - (1.4) Standard 39,000 - 62,000 9,800 - 17,400 2,300 - 4,400 1,800 - 3,000 52,900 - 86,800 (2.0) - (1.3) Economy 21,000 - 38,000 4,900 - 9,300 1,400 - 2,100 1,300 - 1,800 28,600 - 51,200 0.0 - (1.9) 1993 Luxury 63,000 - 119,000 14,000 - 30,500 3,900 - 6,200 2,800 - 3,800 83,700 - 159,500 (1.2) - (0.7) Standard 39,000 - 61,000 9,700 - 17,200 2,300 - 4,500 1,800 - 3,000 52,800 - 85,700 (0.2) - (1.3) Economy 21,000 - 38,000 4,900 - 9,200 1,400 - 2,100 1,300 - 1,800 28,600 - 51,100 0.0 - (0.2) 1994 Luxury 64,000 - 121,000 14,300 - 31,100 3,900 - 6,200 2,800 - 3,800 85,000 - 162,100 1.6 - 1.6 Standard 40,000 - 63,000 10,000 - 17,600 2,400 - 4,600 1,800 - 3,000 54,200 - 88,200 2.7 - 2.9 Economy 22,000 - 40,000 5,100 - 9,500 1,500 - 2,200 1,300 - 1,800 29,900 - 53,500 4.5 - 4.7 1995 Luxury 65,000 - 124,000 14,800 - 32,300 4,100 - 6,400 2,900 - 4,000 86,800 - 166,700 2.1 - 2.8 Standard 41,000 - 65,000 10,400 - 18,300 2,500 - 4,800 1,900 - 3,100 55,800 - 91,200 3.0 - 3.4 Economy 23,000 - 42,000 5,400 - 9,900 1,600 - 2,300 1,300 - 1,800 31,300 - 56,000 4.7 - 4.7
Average Annual Compounded Percent Change: 1976 - 1995: Luxury 4.3% - 4.8% 1986 - 1995: Luxury 0.8% - 0.5% Standard 4.4% - 4.4% Standard 0.7% - 1.0% Economy 5.7% - 5.4% Economy 1.2% - 1.4% - -------------------------------------------------------------------------------- HVS International, Mineola, New York Cost Approach 158 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= As illustrated by the previous table, hotel development costs rose significantly during the late 1970s and the early 1980s; however, the rate of increase slowed substantially in 1987. In 1991, hotel development costs declined for the first time since 1976. Further drops of as much as 2.0% were registered in 1992. Between 1986 and 1990, average annual compounded increases ranged from 1.7% to 2.5%. Costs rose slowly (at average annual compounded rates ranging from 0.5% to 1.4%) between 1986 and 1995, largely as a result of the declines in 1991, 1992, and 1993. In 1995, hotel development costs started to escalate more rapidly, reaching 4.7% in the economy segment. As more hotels are developed, we expect costs to continue to rise. Because the replacement cost tends to set the upper limit of a particular hotel's value, this figure is relevant to our analysis. We estimate the replacement cost of the subject property as follows, based on the development cost survey discussed earlier. ================================================================================ Table 12-2 Subject Property's Replacement Cost - -------------------------------------------------------------------------------- Cost No. of Hotel Cost per Room Rooms Total Cost ------------------------------------------------ Building $132,000 528 $69,696,000 FF&E 35,000 528 18,480,000 Pre-Opening 6,800 528 3,590,400 Operating Capital 4,300 528 2,270,400 ------------------------------------------------ Totals $178,100 $94,036,800 - -------------------------------------------------------------------------------- Ground Lease Approach to Land Valuation Land value may be estimated either by the sales comparison approach, using comparable land sales, or by the ground lease approach, which is based on the economic value generated by an improvement that represents the property's highest and best use. Because it is unusual to find recent sales of comparable vacant land that is slated for imminent hotel development, we have used the ground lease approach to determine the subject property's land value. Hotels are often constructed on leased land, and although lease terms differ somewhat, the basis for the rental calculation is frequently tied to a percentage of revenue. By applying a typical ground lease rental formula to the subject property's stabilized revenues, the appraiser can determine the HVS International, Mineola, New York Cost Approach 159 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= hotel's economic rent, or what is also known as the income attributable to the land. Land value is then calculated by dividing the economic rent by an appropriate capitalization rate. The self-adjusting aspect of this approach is key to its reliability. Because the rental formula is tied to a percentage of revenue that inherently reflects both the locational attributes of the site (occupancy and rate) and the allowable density of development, the resulting economic ground rent justly represents the greatest net return to the land over a given period. Because the Grand Kempinski Dallas appears to represent the highest and best use of the property, the ground lease approach is an appropriate method of determining land value. We have researched long-term hotel ground leases in search of rental formulas that are based on a percentage of rooms revenue or on a combination of rooms, food, and beverage revenue. This analysis indicates that economic ground rents for hotels similar to the subject property typically range from 2.7% to 7.8% of rooms revenue. Although this range is quite broad, most of the formulas yield rental percentages of between 2.5% and 5.0% of rooms revenue. After considering these comparable ground leases and the locational attributes of the subject property, we believe the appropriate economic ground rental percentage is 4.0% of stabilized rooms revenue. The subject property's stabilized rooms revenue has been deflated to reflect 1997 dollars. The following calculation shows the derivation of the subject property's economic ground rent. Stabilized Rooms Revenue (1997 dollars) $15,256,361 Rental Percentage 0.04 ----------- Economic Ground Rent $ 610,254 Rent generated by a ground lease represents a fairly low-risk income flow. Because the tenant improvements typically amount to more than eight times the value of the land, the risk of default is low. When the ground lease terms are tied to rooms revenue, the landlord is also protected from the adverse effects of inflation. Based on these risk factors and the current cost of long-term capital, we estimate the appropriate ground rental overall capitalization rate at 9.0%. Applying this indicated capitalization rate to the subject property's economic ground rent yields the following estimate of land value. HVS International, Mineola, New York Cost Approach 160 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Economic Ground Rent $610,254 $6,780,605 ----------------------- = -------- = Capitalization Rate 0.09 Estimated Land Value (Say) $6,800,000 The above value equates to $14.12 per square foot for the 480,000-square- foot subject site. Sales Comparison Approach to Land Value The sales comparison approach to estimate land value involves analyzing the amounts paid for comparable sites. The following is a summary of vacant land sales that have taken place in the subject property's neighborhood during recent years and one current listing. ================================================================================ Table 12-3 Comparable Land Sales - --------------------------------------------------------------------------------
Price per Sale Location Date of Sale Size (sq. ft.) Consideration Square Foot Land Use - -------------------------------------------------------------------------------------------------------------------- 1 Spring Valley Rd. & Noel Rd. 11/96 118,779 $1,873,219 $15.77 Hotel (Embassy Suites) 2 Tollway & Spring Valley Rd. 07/95 304,920 4,878,720 16.00 Retail (Home Depot) 3 Tollway & Alpha Rd. 02/96 175,000 4,200,000 24.00 Retail 4 Southern Rd. & Montfort Rd. 12/96 500,940 6,100,000 12.18 Residential 5 Spring Valley Rd. & Noel Rd. 01/96 87,120 1,045,440 12.00 Hotel (Sumner Suites) 6 Noel Rd. & Alpha Rd. Current 283,140 8,494,200 30.00 Commercial/Retail
- -------------------------------------------------------------------------------- Sale #1, shown in the above table, details the sale of the Embassy Suites' site in November, 1996. Shown at $15.77 per square foot, the sale price for this site after being adjusted for easements approximates $16.00 per square foot. Sale #2 details the sale of land for the recently-constructed Home Depot Expo Design Center, located immediately southwest of the subject site. Sale #3 represents a vacant parcel sold for the development of a small retail center, which is currently under construction immediately south of the Home Depot. Sale #4, represents land being used for the development of residential units and, therefore, has limited comparability to the subject site. Sale #5 represents the acquirement of land for the development of the Sumner Suites, located directly across Spring Valley Road from the Embassy Suites. While the land use is comparable, this transaction was not a fee simple sale; instead, it reflects an estimation of sale price based on a 90-year ground lease which was negotiated for the parcel. Finally, Sale #6 is actually a HVS International, Mineola, New York Cost Approach 161 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= current listing for land available for commercial development in the immediate vicinity of the Galleria Mall; its future sales price is likely to be lower than that which is currently listed. Overall, we believe that Land Sales #1, #2 and #3 are most comparable to the subject property. Each is a fee simple sales of parcels located in the area of the subject property, and has been developed for commercial purposes. Based on the comparable sales and the ground lease approach set forth, we believe that the value of the subject property's land, as determined by the ground lease approach, is well supported by recent sales in the area. This value, determined to be roundly $6,800,000, yields a value of approximately $14.19 per square foot, which is at the lower end of the indicated range of value. Given the large size of the subject property, the lower per square foot value is considered to be appropriate particularly, given the current use of the property, which is less dense than is ideal. A hotel's land value typically ranges from 10% to 20% of the overall value. The estimate of land value presented above is roughly 7.5% of the total property value indicated by the income capitalization approach. Again, the size of the site together with the low density of the current development, is affecting the value of the land. Replacement Cost Combining the replacement cost of the property with the land value yields the subject property's total replacement cost. ================================================================================ Table 12-3 Total Replacement Cost - -------------------------------------------------------------------------------- Cost of the Improvements and FF&E $ 94,036,800 Land Value 6,800,000 ------------ Total Replacement Cost $100,836,800 Total Replacement Cost (Say) $100,800,000 - -------------------------------------------------------------------------------- If a property's replacement cost is significantly higher than the values indicated by the income capitalization and sales comparison approaches, it may indicate that an upward adjustment of these values is appropriate, which would also reduce the probability of new hotel development, which is not likely to be feasible under those conditions. This condition creates an effective barrier to entry for new competition, thereby reducing the risk HVS International, Mineola, New York Cost Approach 162 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= associated with the subject property's income-generating potential. An upward adjustment of the value indicated by the income capitalization approach is also justified by this barrier to entry. We find that knowledgeable hotel buyers generally base their purchase decisions on economic factors, such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, it is our opinion that the cost approach is inapplicable in estimating the market value of the Grand Kempinski Dallas. However, we have estimated the subject property's replacement cost as new, which may set the upper limit of the hotel's value. HVS International, Mineola, New York Reconciliation of Value Indications 163 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 13. Reconciliation of Value Indications The reconciliation, which is the last step in the appraisal process, involves summarizing and correlating the data and procedures employed throughout the analysis. The final conclusion of value is arrived at after reviewing the estimates indicated by the income capitalization, sales comparison, and cost approaches. The relative significance, applicability, and defensibility of each indicated value is considered, and the greatest weight is given to that approach deemed most appropriate for the property being appraised. The purpose of this report is to estimate the market value of the fee simple interest in the subject property. Our appraisal involves a careful analysis of the property itself and the economic, demographic, political, physical, and environmental factors that influence real estate values. Based on the data set forth in this report, the following value indications were developed. Approach Value Indication Income Capitalization $89,950,000 Sales Comparison $85,000,000 - $99,000,000 Cost (Replacement Cost) $100,800,000 Income Capitalization Approach To estimate the subject property's value via the income capitalization approach, we analyzed the local market for transient accommodations, examined the competitive environment, projected occupancy and average rate levels, and developed a forecast of income and expense that reflects anticipated income trends and cost components through a stabilized year of operation. The subject property's projected net income before debt service was then allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component was calculated; the total of the mortgage and equity components equates to the value of the property. HVS International, Mineola, New York Reconciliation of Value Indications 164 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Our nationwide experience indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the hotel investors who constitute the marketplace. For this reason, we believe that the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in our final estimate of the subject property's market value. Sales Comparison Approach The sales comparison approach uses actual sales of similar properties to provide an indication of the subject property's value. The strength of this approach is that it measures value based on the investment decisions made by actual buyers and sellers. Although we have investigated a number of sales in an attempt to develop a range of value indications, several adjustments are necessary to render the sales prices applicable to the subject property. These adjustments, which are numerous and highly subjective, diminish the reliability of the sales comparison approach. Furthermore, we find that typical hotel investors employ a sales comparison procedure only to establish broad value parameters. The hotel sales outlined earlier in this report indicate an adjusted value range of $161,000 to $187,000 per available room. The income capitalization approach indicates a per-room value of approximately $170,385. This information suggests that a minimal adjustment of the value indicated by the income capitalization approach may be warranted. Cost Approach To estimate the subject property's value via the cost approach, we estimated the current replacement cost of the property and added the land value. We give the cost approach limited weight in arriving at a final value estimate, because knowledgeable buyers of lodging facilities generally base their purchase decisions on economic factors (such as projected net income and return on investment) rather than on a property's depreciated replacement cost. The replacement cost estimate developed via the cost approach can help to corroborate the results of the income capitalization and sales comparison approaches to value. If the replacement cost is substantially higher or lower than the value indicated by the income capitalization approach, an upward or downward adjustment of the income capitalization approach value may be necessary. HVS International, Mineola, New York Reconciliation of Value Indications 165 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Value Conclusion Careful consideration has been given to the strengths and weaknesses of the three approaches to value discussed above. In recognition of the purpose of this appraisal, we have given primary weight to the value indicated by the income capitalization approach and made some subjective adjustments based on the replacement cost estimate, the sales comparison approach, and our extensive experience in the hospitality industry. It is our opinion that the market value of the fee simple interest in the Grand Kempinski Dallas - Addison, as of April 1, 1997, is: $90,000,000 NINETY MILLION DOLLARS The estimate of market value includes the land, the improvements, and the furniture, fixtures, and equipment. The appraisal assumes that the hotel is open and operational. This value estimate equates to roundly $170,455 per room, which is well supported by market sales, and approximately 0.1% higher than the value indicated by the income capitalization approach. The estimate of value assumes either the availability of third-party financing or the willingness and capability of the seller to take back purchase-money financing so that a buyer can obtain the level of debt set forth in the Income Capitalization Approach section of this appraisal. Marketing Period Our estimate of market value assumes a marketing period of six to twelve months. Under normal economic conditions, hotels are transferred within this time frame. Personal Property In accordance with the appraisal standards set forth by the Office of the Comptroller of the Currency, it is necessary for bank appraisals to identify and value any personal property, fixtures, or intangible items that are included in the appraisal and discuss their impact on the overall estimate of market value. A hotel's income-generating ability depends on a suitable inventory of furniture, fixtures, and equipment. Removal of these items can decrease the property value by as much as the cost to replace the inventory plus the loss of income incurred while the hotel cannot function. A hotel's personal property consists of a wide variety of components, including bedroom furnishings, bathroom fixtures, restaurant and kitchen HVS International, Mineola, New York Reconciliation of Value Indications 166 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= equipment, front office and accounting computers, exterior signs, and similar items. Our inspection of the Grand Kempinski Dallas indicates that the personal property and fixtures are in relatively good condition, and have been well maintained. Based on an annual construction cost survey conducted by HVS International, we estimate the total replacement cost of the subject property's furniture, fixtures, and equipment at $35,000 per available room. Assuming an average useful life of ten years and an effective age of five years, the value of the furniture, fixtures, and equipment currently in place is approximately $17,500 per room, or a total of $9,240,000. The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) stipulates that ". . . any business interest or other intangible item should be valued separately within the appraisal."(1) Hotels have both business and real estate components; without the business expertise necessary to operate the facility, a hostelry would have little real estate value. Because furniture, fixtures, and equipment are essential to a hotel's income-generating ability and are seldom removed from the property or sold separately, the separation of the personal property component from the real property is not particularly meaningful. (1) Federal Register, Vol. 55, No. 143, July 25, 1990, p. 30205. HVS International, Mineola, New York Statement of Assumptions and 167 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 14. Statement of Assumptions and Limiting Conditions 1. This report is to be used in whole and not in part. 2. No responsibility is assumed for matters of a legal nature, nor do we render any opinion as to title, which is assumed to be marketable and free of any deed restrictions and easements. The property is valued as though free and clear, unless otherwise stated. 3. We assume that there are no hidden or unapparent conditions of the sub-soil or structures, such as underground storage tanks, that would render the property more or less valuable. No responsibility is assumed for these conditions or for any engineering that may be required to discover them. 4. We have not considered the presence of potentially hazardous materials such as asbestos, urea formaldehyde foam insulation, PCBs, any form of toxic waste, polychlorinated biphengyls, pesticides, or lead-based paints. The appraisers are not qualified to detect hazardous substances, and we urge the client to retain an expert in this field if desired. 5. The Americans with Disabilities Act (ADA) became effective on January 26, 1992. We have conducted no specific compliance survey to determine whether the subject property is operating in accordance with the various detailed requirements of the ADA. It is possible that the property does not conform to the requirements of the act, and this could have an unfavorable effect on value. Because we have no direct evidence regarding this issue, our estimate of value does not consider possible non-compliance with the ADA. HVS International, Mineola, New York Statement of Assumptions and 168 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 6. We have made no survey of the property, and we assume no responsibility in connection with such matters. Sketches, photographs, maps, and other exhibits are included to assist the reader in visualizing the property. It is assumed that the use of the land and improvements is within the boundaries of the property described, and that there is no encroachment or trespass, unless noted. 7. All information, financial operating statements, estimates, and opinions obtained from parties not employed by HVS International are assumed to be true and correct. We can assume no liability resulting from misinformation. 8. Unless noted, we assume that there are no encroachments, zoning violations, or building violations encumbering the subject property. 9. The property is assumed to be in full compliance with all applicable federal, state, local, and private codes, laws, consents, licenses, and regulations (including a liquor license where appropriate), and that all licenses, permits, certificates, franchises, and so forth can be freely renewed or transferred to a purchaser. 10. All mortgages, liens, encumbrances, leases, and servitudes have been disregarded, unless specified otherwise. 11. None of this material may be reproduced in any form without our written permission, and the report cannot be disseminated to the public through advertising, public relations, news, sales, or other media. 12. We are not required to testify or appear in court by reason of this analysis without previous arrangements, and only when our standard per diem fees and travel costs are paid prior to the appearance. 13. If the reader is making a fiduciary or individual investment decision and has any questions concerning the material presented in this report, it is recommended that the reader contact us. 14. We take no responsibility for any events or circumstances that take place subsequent to either the date of value or the date of our field inspection, whichever occurs first. HVS International, Mineola, New York Statement of Assumptions and 169 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 15. The quality of a lodging facility's on-site management has a direct effect on a property's economic viability and value. The financial forecasts presented in this analysis assume responsible ownership and competent management. Any departure from this assumption may have a significant impact on the projected operating results and the value estimate. 16. The estimated operating results presented in this report are based on an evaluation of the overall economy, and neither take into account nor make provision for the effect of any sharp rise or decline in local or national economic conditions. To the extent that wages and other operating expenses may advance during the economic life of the property, we expect that the prices of rooms, food, beverages, and services will be adjusted to at least offset those advances. We do not warrant that the estimates will be attained, but they have been prepared on the basis of information obtained during the course of this study and are intended to reflect the expectations of a typical hotel buyer. 17. This analysis assumes continuation of all Internal Revenue Service tax code provisions as stated or interpreted on either the date of value or the date of our field inspection, whichever occurs first. 18. Many of the figures presented in this report were generated using sophisticated computer models that make calculations based on numbers carried out to three or more decimal places. In the interest of simplicity, most numbers have been rounded to the nearest tenth of a percent. Thus, these figures may be subject to small rounding errors. 19. It is agreed that our liability to the client is limited to the amount of the fee paid as liquidated damages. Our responsibility is limited to the client, and use of this report by third parties shall be solely at the risk of the client and/or third parties. The use of this report is also subject to the terms and conditions set forth in our engagement letter with the client. 20. Appraising hotels is both a science and an art. Although this analysis employs various mathematical calculations to provide value indications, the final estimate is subjective and may be influenced by our experience and other factors not specifically set forth in this report. HVS International, Mineola, New York Statement of Assumptions and 170 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 21. Any distribution of the total value between the land and improvements or between partial ownership interests applies only under the stated use. Moreover, separate allocations between components are not valid if this report is used in conjunction with any other analysis. 22. This study was prepared by Hospitality Valuation Services, a division of Hotel Consulting Services, Inc. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of Hotel Consulting Services, Inc. as employees, rather than as individuals. HVS International, Mineola, New York Certification 171 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 15. Certification We, the undersigned appraisers, hereby certify: 1. that the statements and opinions presented in this report, subject to the limiting conditions set forth, are correct to the best of our knowledge and belief; 2. that Samantha A. Sudre and Anne R. Lloyd-Jones personally inspected the property described in this report; Stephen Rushmore participated in the analysis and reviewed the findings, but did not personally inspect the property; 3. that we have no current or contemplated interests in the real estate that is the subject of this report; 4. that we have no personal interest or bias with respect to the subject matter of this report or the parties involved; 5. that this report sets forth all of the limiting conditions (imposed by the terms of this assignment) affecting the analyses, opinions, and conclusions presented herein; 6. that the fee paid for the preparation of this report is not contingent upon our conclusions; 7. that this report has been prepared in accordance with, and is subject to, the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute; 8. that the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives; 9. that this report has been prepared in accordance with the Uniform Standards of Professional Appraisal Practice (as adopted by the Appraisal Foundation); HVS International, Mineola, New York Certification 172 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= 10. that as of the date of this report, Stephen Rushmore has completed the requirements of the continuing education program of the Appraisal Institute; 11. that no one other than the undersigned prepared the analyses, conclusions, and opinions concerning real estate that are set forth in this appraisal report; 12. that this appraisal is not based on a requested minimum value, a specific value, or the approval of a loan. /s/ Samantha A. Sudre Samantha A. Sudre Consulting and Valuation Analyst Hotel Consulting Services, Inc. /s/ Anne R. Lloyd-Jones Anne R. Lloyd-Jones, CRE Senior Vice President Hotel Consulting Services, Inc. /s/ Stephen Rushmore Stephen Rushmore, CRE, MAI, CHA President Hotel Consulting Services, Inc. HVS International, Mineola, New York Addenda: Quality Assurance 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Quality Assurance The Hospitality Valuation Services division of Hotel Consulting Services, Inc. strives to achieve the highest quality standards of quality during all phases of the assignment. It is our goal to provide clients with the finest product available. The following staff members acknowledge their contribution to this report. /s/ Marissa D. Cannuscio Marissa D. Cannuscio Office Manager (Extension 201) Report Production and Graphics /s/ Anne Millward Anne Millward Editor (Extension 215) Editing HVS International, Mineola, New York Addenda: Quality Assurance 2 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= /s/ Samantha A. Sudre Samantha A. Sudre Consulting and Valuation Analyst (Extension 222) Analysis, Write-up and Review /s/ Anne R. Lloyd-Jones Anne R. Lloyd-Jones, CRE Senior Vice President (Extension 208) Analysis, Write-up and Review /s/ Stephen Rushmore Stephen Rushmore, CRE, MAI, CHA President (Extension 204) Analysis, Write-up and Review We are available to answer any questions, and are pleased to have provided you with the finest quality product available. Wendy Millward (extension 233) is available to answer any billing questions. We look forward to serving you again in the future. HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= [GRAPHIC OMITTED] Northeast view of Subject Property [GRAPHIC OMITTED] Southwest view of Subject Property HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= [GRAPHIC OMITTED] Monte Carlo entrance and Main entrance to Subject Property [GRAPHIC OMITTED] Oriental guestroom HVS International, Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= [GRAPHIC OMITTED] Standard bathroom [GRAPHIC OMITTED] Outside swimming pool and whirlpool HVS International, Mineola, New York Photographs of the Competitors - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= [GRAPHIC OMITTED] Mariott Quorum [GRAPHIC OMITTED] Westin Galleria [GRAPHIC OMITTED] Doubletree Lincoln Center ORDINANCE NO. 601 AN ORDINANCE OF THE CITY OF ADDISON, TEXAS, AMENDING THE COMPREHENSIVE ZONING ORDINANCE NO. 66 OF THE CITY OF ADDISON, TEXAS AS HERETOFORE AMENDED, SO AS TO CHANGE THE HEREINAFTER DESCRIBED PROPERTY LOCATED NORTH OF BELT LINE AND WEST OF DALLAS PARKWAY AND CONTAINING 11.020 ACRES OF LAND PRESENTLY ZONED "C" COMMERCIAL TO "PD" PLANNED DEVELOPMENT NO.13 SHALL BE GRANTED WITH REFERENCE TO THE HEREIN DESCRIBED PROPERTY SUBJECT, HOWEVER, TO THE SPECIAL CONDITIONS HEREINAFTER MORE FULLY EXPRESSED; PROVIDING FOR A PENALTY NOT TO EXCEED THE SUM OF TWO HUNDRED DOLLARS ($200.00) FOR EACH OFFENSE; PROVIDING FOR A SEVERABILITY CLAUSE; AND DECLARING AN EMERGENCY. WHEREAS, the City Zoning Commission of the City of Addison, Texas, and the City Council of the City of Addison, Texas, in compliance with the laws of the State of Texas with reference to the granting of zoning changes under the zoning ordinance and zoning map, have given requisite notices by publication and otherwise, and after holding due hearings and affording a full and fair hearing to all property owners generally and to all persons interested and situated in the area, the City of Addison, Texas, is of the opinion that said change of zoning on application of Registry Hotel, Case #511, should be granted and the Comprehensive Zoning Ordinance should be amended in the exercise of its legislative direction: BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF ADDISON, TEXAS: SECTION 1. That the Comprehensive Zoning Ordinance No.66 of the City of Addison, Texas, be, and the same is hereby amended, so as to give the hereinafter described property the following zoning district classification, to-wit: Planned Development District No. l3. Said property being in the City of Addison, Dallas County, Texas, and being described as follows: A 11.020 acre tract of land out of the G. W. Fisher Survey, Abstract No. 482 and being part of a 104.05 acre tract described as the First Tract in deed, recorded in Volume 2465, Page 413 of the deed records of Dallas County, Texas on March 24, 1944, said part being more particularly described as follows: BEGINNING at a point, said point being the intersection point of the north right-of-way line of Quorum Loop North (80' R.O.W.) and the west right-of-way line of Dallas Parkway (200' R.O.W.); THENCE N 80(degrees) 40' 39' W, along the north right-of-way line of said Quorum Loop North, for a distance of 470.93 feet to the point of a curvature of a curve to the right whose delta is 80(degrees) 15' 39" and whose radius is 335.20 feet; THENCE, along said curve to the right, for a distance of 469.55 feet to the point of tangency of said curve; THENCE N 0(degrees) 25' 00" W for a distance of 232.50 feet to a point for corner; THENCE N 85(degrees) 50' 54" E for a distance of 884.52 feet to a point for corner, said point being located in the west right-of-way of said Dallas Parkway; THENCE S 10(degrees) 56' 00" W, along the west right-of-way of Dallas Parkway, for a distance of 663.79 feet to a point, said point being the point of curvature of a curve to the left whose delta is 01(degrees) 12' 11" and whose radius is 2391.86 feet; THENCE Southerly, along said curve, for a distance of 50.22 feet to the POINT OF BEGINNING; CONTAINING 480,009.96 square feet of 11.020 acres of land. SECTION 2. In the hereinabove described land or building, no land shall be used, erected or converted to any use other than: 1. Office 2. Hotel (including related restaurants, alcoholic beverage sales, and retail sales facilities); 3. General Retail; 4. Restaurant (including related alcoholic beverage sales for on-premises consumption); 5. Surface parking to meet off-street parking requirements; 6. Parking structure to meet off-street parking requirements 7. Access, utility, and drainage easements; 8. Accessory buildings, equipment, and uses customarily incident to the above uses; SECTION 3. The following special conditions are placed upon the above described property: 1. No structure of any kind, and no part thereof shall be placed within the following set back lines: a. 125 feet from the center line of Dallas Parkway (a 120 foot right-of-way); b. 25 feet from major access drive; c. Minimum 10 feet side yard set-back; d. Minimum 10 feet rear yard set-back; 2. The following improvements are expressly excluded from the set-back restrictions: a. Structures below and covered by ground; b. Steps, walks, driveways, parking areas, and curbing; c. Planters, walls, fences or hedges not to exceed 4 feet in height; d. Landscaping and landscape features; e. Guardhouses; f. Exterior lighting sources; 3. No structure shall exceed 117 feet in total height (or as approved by FAA) including mechanical penthouses, antennas, etc. 4. Maximum land coverage for any use shall be 50% (first floor of building). 5. All office facilities shall provide off-street parking at a ratio of one (1) space for each 300 square feet of net floor area. The net floor area shall be defined as the gross floor area less vertical air shafts, elevator shafts, stairwells, mechanical rooms, electrical and telephone rooms, and storage rooms. 6. All hotel or motel facilities shall provide off-street parking at the following ratios: a. One space per each guest room; b. One space per each 100 square feet of net floor area in meeting areas; c. One space per each 100 square feet of net floor area in dining rooms and cocktail lounges; d. No spaces required for sundries shop; e. One space per each employee for the first 20%; f. No spaces required for malls, atriums, patios, lobbies, or circulation areas; 7. All general retail facilities (exclusive of facilities within a hotel or motel) shall provide off-street parking at a ratio of one space per each 200 square feet of floor area. 8. All restaurants shall provide off-street parking at a ratio of one space per each 100 square feet of floor area (exclusive of facilities within a hotel or motel). 9. All driveways, parking area, access easements, and walkways shall be illuminated. 10. All exterior lighting sources shall be placed and reflected in such a manner so as not to create annoyances, nuisances, or hazards. 11. All building sides must be faced with face brick, stone, concrete, aluminum, glass, or with similar quality face materials. 12. Wood frame construction of exterior walls shall be prohibited. 13. All utilities (public and private) shall be underground. 14. Mechanical equipment shall be constructed, located, and screened so as not to interfere with the peace, comfort, and repose of the occupants of any adjoining building. 15. All refuse and refuse containers shall be screened from the view of all public streets adjacent to the property to be a solid fence or wall of at least six (6) feet in height. 16. Landscaping shall be required on all sites contemporaneously with completion of other improvements, but in no extent later than 180 days after first occupancy or completion of buildings, which ever shall first occur. 17. Provide automatic underground sprinkling systems for all landscaped areas. 18. Shall not obstruct sight lines at street or driveway intersections. 19. Owners and occupants (including lessees) of any part of the properties shall jointly and severally have the duty and responsibility, at their sole cost and expense, to keep that part of the properties so owned or occupied, including buildings, improvements and grounds in connection therewith, in a well-maintained, safe, clean and attractive condition at all times. Such maintenance includes, but is not limited to the following: a. Prompt removal of all litter, trash, refuse and wastes; b. Lawn mowing; c. Tree and shrub pruning; d. Watering; e. Keeping exterior lighting and mechanical facilities in working order; f. Keeping lawn and garden areas alive, free of weeds, and attractive; g. Keeping parking areas, driveways, and roads in good repair; h. Striping of parking areas and repainting of improvements; i. Repair of exterior damages to improvements; j. Provide and maintain driveway marking and striping as required for fire lanes by the Addison Fire Department; SECTION 4. All paved areas, permanent drives, streets and drainage structure shall be constructed in accordance with standard City of Addison specifications adopted for such purpose, and the same shall be done to the satisfaction of the Director of Public Works. SECTION 5. This Planned Development District is established pursuant to the Comprehensive Zoning Ordinance of the City of Addison as amended, and the provisions thereof unless directly conflict herewith, shall be applicable to the Planned Development District No. 12. SECTION 6. That all ordinances of the City in conflict with the provisions of this Ordinance be, and the same are hereby repealed, and all other ordinances of the City not in conflict with the provisions of this ordinance shall remain in full force and effect. SECTION 7. That should any paragraph, sentence, subdivision, clause, phrase or section of this ordinance be adjudged or held to be unconstitutional, illegal or invalid, the same shall not affect the validity of this ordinance as a whole or any part or provision thereof other than the part so decided to be invalid, illegal, or unconstitutional, and shall not affect the validity of the Comprehensive Zoning Ordinance as a whole. SECTION 8. That any person, firm, or corporation violating any of the provisions or terms of this ordinance shall be subject to the same penalty as provided for in the Comprehensive Zoning Ordinance of the City as heretofore amended, and upon conviction shall be punished by a fine not to exceed the sum of Two Hundred Dollars ($200.00) for each offense and that each day such violation shall continue to exist shall constitute a separate offense. SECTION 9. Whereas, the above described property requires that it be given the above zoning classification in order to permit its proper development and in order to protect the public interest, comfort and general welfare of the City and creates an urgency and an emergency for the preservation of the public health, safety, and welfare and requires that this ordinance shall take effect immediately from and after its passage and publication of the caption as the law in such cases provides. DULY PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF ADDISON, TEXAS, this the 15 day of July, 1980. /s/ [ILLEGIBLE] -------------------------- MAYOR ATTEST: /s/ Jacque Sharp - -------------------------- CITY SECRETARY [GRAPHIC OMITTED] Flood Map Refer to the FLOOD INSURANCE RATE MAP EFFECTIVE date shown on this map to determine when actuarial rates apply to structures in the zones where elevations or depths have been established. To determine if flood insurance is available in this community, contact your insurance agent, or call the National Flood Insurance Program, at (800) 638-6620, or (800) 424-8872. [GRAPHIC OMITTED] [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- NATIONAL FLOOD INSURANCE PROGRAM ================================================================================ FIRM FLOOD INSURANCE RATE MAP CITY OF ADDISON, TEXAS DALLAS COUNTY ONLY PANEL PRINTED C0MMUNITY-PANEL NUMBER 48108 0005 A EFFECTIVE DATE: JULY 16,1980 ======================================================= [SEAL] U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT FEDERAL INSURANCE ADMINISTRATION ------------------------------------------------------- KEY TO MAP [GRAPHIC OMITTED] 500-Year Flood Boundary ----------------------- 100-Year Flood Boundary ----------------------- Zone Designations* With Date of Identification e.g., 12/2/74 100-Year Flood Boundary ----------------------- 500-Year Flood Boundary ----------------------- Base Flood Elevation Line -513- With Elevation In Feet** Base Flood Elevation in Feet (EL 987) Where Uniform Within Zone** Elevation Reference Mark RM7(x) River Mile o M1.5 **Referenced to the National Geodetic Vertical Datum of 1929 ---------- *EXPLANATION OF ZONE DESIGNATIONS ZONE EXPLANATION A Areas of 100-year flood; base flood elevations and flood hazard factors not determined. AO Areas of 100-year shallow flooding where depths are between one (1) and three (3) feet; average depths of inundation are shown, but no flood hazard factors are determined. AH Areas of 100-year shallow flooding where depths are between one (1) and three (3) feet; base flood elevations are shown, but no flood hazard factors are determined. A1-A30 Areas of 100-year flood; base flood elevations and flood hazard factors determined. A99 Areas of 100-year flood to be protected by flood protection system under construction; base flood elevations and flood hazard factors not determined. B Areas between limits of the 100-year flood and 500-year flood; or certain areas subject to 100-year flooding with average depths less than one (1) foot or where the contributing drainage area is less than one square mile; or areas protected by levees from the base flood. (Medium shading) C Areas of minimal flooding. (No shading) D Areas of undetermined, but possible, flood hazards. V Areas of 100-year coastal flood with velocity (wave action); base flood elevations and flood hazard factors not determined. V1-V30 Areas of 100-year coastal flood with velocity (wave action); base flood elevations and flood hazard factors determined. ---------- NOTES TO USER Certain areas not in the special flood hazard areas (zones A and V) may be protected by flood control structures. This map is for flood insurance purposes only; it does not necessarily show all areas subject to flooding in the community or all planimetric features outside special flood hazard areas. ---------- INITIAL IDENTIFICATION: OCTOBER 29, 1976 HVS International, Mineola, New York Addenda: Synopsis of Hotel 1 Management Agreement - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Synopsis of Hotel Management Agreement Date: January 1, 1993 Owner: The Registry Dallas Association Manager: Kempinski International, Inc. Premises: Grand Kempinski Dallas Term: December 31, 2002 Management Fee: $300,000 per annum, in monthly installments of $25,000 Termination: With twelve months' notice HVS International, Mineola, New York Addenda: Synopsis of Retail 1 Leases - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Synopsis of Retail Leases Lessee: Nova Limo Square Footage: 572 square feet (plus additional garage office) Monthly Rent: $1,500.00 (plus $300.00 for the additional garage office) Termination Date: September 1, 1998 Lessee: Voyage Travel Square Footage: 532 square feet Monthly Rent: $900.00 Termination Date: May 31, 1999 Lessee: Fashion With Pizzazz Square Footage: 930 square feet Monthly Rent: $2,250.00 Termination Date: June 31, 1999 Lessee: Enterprise Square Footage: 280 square feet Monthly Rent: $875.00 Termination Date: September 1, 1997 HVS International, Mineola, New York Addenda: Synopsis of Retail 2 Leases - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Lessee: Menagerie Salon Square Footage: 983 square feet Monthly Rent: $1,500 Termination Date: April 30, 1998 Lessee: Mallasadi International Square Footage: 930 square feet Monthly Rent: $1,500 Termination Date: October 1, 1999 Lessee: Studio Kippenbrock Square Footage: 1,134 square feet Monthly Rent: $2,000 Termination Date: March 17, 1998 HVS International, Mineola, New York Addenda: Simultaneous 1 Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Explanation of the Simultaneous Valuation Formula The algebraic equation, known as the Simultaneous Valuation Formula, that solves for the total property value using a ten-year mortgage equity technique was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of Hospitality Valuation Services. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(1) The process of solving for the value of the mortgage and equity components begins by deducting the annual debt service from the forecasted income before debt service, leaving the net income to equity for each projection year. The net income as of the 11th Year is capitalized into a reversionary value using the terminal capitalization rate. The equity residual, which is the total reversionary value less the mortgage balance at that point in time and less any broker and legal costs associated with the sale, is discounted to the date of value at the equity yield rate. The net income to equity for each of the projection years is also discounted back to the date of value. The sum of these discounted values equals the value of the equity component. Because the equity component comprises a specific percentage of the total value, the value of the mortgage and the total property can be computed easily. (1) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Addenda: Simultaneous 2 Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= This process can be expressed in two algebraic equations that set forth the mathematical relationships between the known and unknown variables using the following symbols. NI = Net income available for debt service V = Value M = Loan-to-value ratio f = Annual debt service constant n = Number of years in the projection period d(e) = Annual cash available to equity d(r) = Residual equity value b = Brokerage and legal cost percentage P = Fraction of loan paid off during the projection period f(p) = Annual constant required to amortize the entire loan during the projection period R(r) = Overall terminal capitalization rate applied to net income to calculate total property reversion (sales price at the end of the projection period) 1/S^n = Current worth of $1 factor (discount factor) at the equity yield rate Using these symbols, the following formulas can be derived to express some of the components comprising this mortgage and equity valuation process. Debt Service - A property's debt service is calculated by first determining the mortgage amount which equals the total value (V) multiplied by the loan-to-value ratio (M). Debt service is derived by multiplying the amount of the mortgage by the annual debt service constant (f). The following formula represents debt service. f x M x V = Debt Service HVS International, Mineola, New York Addenda: Simultaneous 3 Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Net Income to Equity (Equity Dividend) - The net income to equity (d(e)) is the property's net income before debt service (NI) less debt service. The following formula represents net income to equity. NI - (f x M x V) = d(e) Reversionary Value - The value of the hotel at the end of the Tenth Year is calculated by dividing the 11th Year's net income before debt service (NI(11)) by the terminal capitalization rate (R(r)). The following formula represents the property's Tenth-Year reversionary value. (NI^11/R(r)) = Reversionary Value Brokerage and Legal Costs - When a hotel is sold, certain costs are associated with the transaction. Normally, the broker is paid a commission and the attorney collects legal fees. In the case of hotel transactions, brokerage and legal costs typically range from 1% to 4% of the sales price. Because these expenses reduce the proceeds to the seller, they are usually deducted from the reversionary value in the mortgage equity valuation process. Brokerage and legal costs (b) expressed as a percentage of reversionary value (NI^11/R(r)) is calculated by application of the following formula. b (NI^11/R(r)) = Brokerage and Legal Costs Ending Mortgage Balance - The mortgage balance at the end of the Tenth Year must be deducted from the total reversionary value (debt and equity) in order to determine the equity residual. The formula used to determine the fraction of a loan remaining (expressed as a percentage of the original loan balance) at any point in time (P) takes the annual debt service constant of the loan over the entire amortization period (f) less the mortgage interest rate (i) and divides it by the annual constant required to amortize the entire loan during the ten-year projection period (f(p)) less the mortgage interest rate. The following formula represents the fraction of a loan paid off (P). (f - i)/(f(p) - i) = P If the fraction of a loan paid off (expressed as a percentage of the initial loan balance) is P, then the remaining loan percentage is expressed as 1 - P. HVS International, Mineola, New York Addenda: Simultaneous 4 Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The ending mortgage balance is the fraction of the remaining loan (1 - P) multiplied by the initial loan amount (M x V). The following formula represents the ending mortgage balance. (1 - P) x M x V Equity Residual Value - The value of the equity upon the sale at the end of the projection period (d(r)) is the reversionary value less the brokerage and legal costs and the ending mortgage balance. The following formula represents the equity reversionary value. (NI^11/R(r)) - (b (NI^11/R(r)) - ((1 - P) x M x V) = d(r) Annual Cash Flow to Equity - The annual cash flow to equity consists of the equity dividend for each projection year plus the equity residual at the end of the Tenth Year. The following formula represents the annual cash flow to equity. NI^1 - (f x M x V) = d(e)^1 NI^2 - (f x M x V) = d(e)^2 NI^10 - (f x M x V) = d(e)^10 (NI^11/R(r)) - (b (NI^11/R(r)) - ((1 - P) x M x V) = d(r) Value of the Equity - If the initial amount of the mortgage is calculated by multiplying the loan-to-value ratio (M) by the property value (V), then the equity value is one minus the loan-to-value ratio multiplied by the property value. The following formula represents the value of the equity. (1 - M) V HVS International, Mineola, New York Addenda: Simultaneous 5 Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Discounting the Cash Flow to Equity to the Present Value - The cash flow to equity in each of the projection years is discounted to the present value at the equity yield rate (1/S^n). The sum of all these cash flows is the value of the equity (1 - M) V. The following formula represents the calculation of equity as the sum of the discounted cash flows. (d(e)^1 x 1/S^1) + (d(e)^2 x 1/S^2) + . . . + (d(e)^10 x 1/S^10) + (d(r) x 1/S^10) = (1 - M)V Combine Equations: Annual Cash Flow to Equity and Discounting the Cash Flow to Equity to the Present Value - The last step is to arrive at one overall equation that shows that the annual cash flow to equity plus the yearly discounting to the present value equals the value of the equity. ((NI^1 - (f x M x V)) 1/S^1) + ((NI^2 - (f x M x V)) 1/S^2) + . . . ((NI^10 - (f x M x V)) 1/S^10) + (((NI^11/R(r)) - (b(NI^11/R(r))) - ((1 - P) x M x V)) 1/S^10) = (1-M)V Because the property's value (V) is the only unknown, this equation can be readily solved. Ten-Year Projection of Income and Expense - Because the fixed and variable forecast of income and expense is carried out only to the Stabilized Year, it is necessary to continue the projection to the 11th Year. In most instances, net income before debt service beyond the Stabilized Year is projected at an assumed inflation rate. By increasing a property's revenue and expenses at the same rate of inflation, net income expressed as a percentage of total revenue will remain constant and the dollar amount will escalate at the annual inflation rate. Hotel investors are currently using inflation rates of approximately 3.5% annually. The previously presented ten-year forecast of income and expense illustrates the subject property's net income, which is assumed to increase by 3.5% annually subsequent to the hotel's Stabilized Year of operation. Solving for Value Using the Simultaneous Valuation Formula - In the case of the subject property, the following known variables have been determined. HVS International, Mineola, New York Addenda: Simultaneous 6 Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 1: Summary of Known Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Forecast Loan-to-Loan Value M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.104844 Equity Yield Ye 20.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten years fp 0.155277 Terminal Capitalization Rate Rr 11.0% - -------------------------------------------------------------------------------- The following table illustrates the present worth of a $1 factor at the 20.0% equity yield rate. ================================================================================ Table 2: Present Worth of $1 Factor at Equity Yield Rate - -------------------------------------------------------------------------------- Present Worth of $1 Year Factor at 20.0% -------------------------------------------------- 1997/98 0.833335 1998/99 0.694446 1999/00 0.578706 2000/01 0.482256 2001/02 0.401880 2002/03 0.334901 2003/04 0.279084 2004/05 0.232571 2005/06 0.193809 2006/07 0.161508 - -------------------------------------------------------------------------------- Using these known variables, the following intermediary calculations must be made before applying the simultaneous valuation formula. The fraction of the loan paid off during the projection period is calculated as follows. P = ( 0.104844 - 0.095 ) / ( 0.155277 - 0.095 ) = 0.163306 The annual debt service is calculated as f x M x V. ( f x M x V ) = 0.104844 x 0.70 x V = 0.073391 V HVS International, Mineola, New York Addenda: Simultaneous 7 Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Inserting the known variables into the hotel valuation formula produces the following: ( 9,827,000 - 0.073391 V) x 0.833333 + ( 9,609,000 - 0.073391 V) x 0.694444 + ( 9,944,000 - 0.073391 V) x 0.578704 + (10,286,000 - 0.073391 V) x 0.482253 + (10,646,000 - 0.073391 V) x 0.401878 + (11,020,000 - 0.073391 V) x 0.334898 + (11,403,000 - 0.073391 V) x 0.279082 + (11,803,000 - 0.073391 V) x 0.232568 + (12,219,000 - 0.073391 V) x 0.193807 + (12,645,000 - 0.073391 V) x 0.161506 + (((13,088,000 / 0.110 ) - ( 0.03 x (13,088,000 / 0.110 )) (( 1 - 0.163306 ) x 0.70 x V )) x 0.161506 )=(1- 0.70 )V Combine Like Terms $62,523,604 - 0.402279V = (1 - 0.70)V $62,523,604 = 0.70228V V = $62,523,604 / 0.70228 V = $89,029,549 Value Indicated by the Income Capitalization Approach (Say) $89,000,000 HVS International, Mineola, New York Qualifications of Samantha A. Sudre - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Samantha A. Sudre ================================================================================ Employment 1997 to present HVS INTERNATIONAL Mineola, New York (Hotel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) Summer, 1996 BURGER KING CORPORATION Miami, Florida Summer, 1995 RIVIERA BISTRO Fort Lauderdale, Florida Summer, 1994 GLADSTONE'S 4 FISH Los Angeles, California Fall, 1992 HOTEL NEW OTANI Osaka, Japan Education BS - School of Hotel Administration, Cornell University Professional Cornell Society of Hotelmen Affiliations HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Anne R. Lloyd-Jones, CRE Employment 1982 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1981 FAIRMONT HOTEL Dallas, Texas 1979 - 1980 SAGA FOOD SERVICE SWARTHMORE COLLEGE Swarthmore, Pennsylvania 1977 - 1980 DARANNE CATERERS Swarthmore, Pennsylvania Professional Affiliations American Society of Real Estate Counselors - Member (CRE) Appraisal Institute - Candidate for Membership Cornell Society of Hotelmen Education MPS - School of Hotel Administration, Cornell University BA - Swarthmore College Appraisal Institute Course 1A1 - Real Estate Appraisal Principles Course 1A2 - Basic Valuation Procedures Course 1BA - Capitalization Theory and Techniques, Part A Course 1BB - Capitalization Theory and Techniques, Part B Course 2-1 - Case Studies in Real Estate Valuation Course 2-3 - Standards of Professional Practice Course 3-1 - Report Writing HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Corporate and Institutional Clients Served Ashford Financial Corporation Chase Manhattan Bank, N. A. Citibank / Citicorp NA Credit Lyonnais Doubletree Hotels Grand Heritage Hotels Great Western Bank Goldman Sachs Holiday Inns, Inc. Interstate Hotels MassMutual Marriott International / Host Marriott Morgan Stanley OCWEN Financial Services Remington Hotels Sheraton Hotels Starwood Capital Group Starwood Lodging Trust Winegardner & Hammons Wyndham Hotel Company Hotel Chains and Management Companies Appraised or Evaluated Doubletree Hotels Compri Hotels Interstate Hotels Fairmont Hotels Guest Quarters Hilton Hotels Corporation Omni International Hotels Ramada Hotel Corp. Servico Hotel Corp. Winegardner & Hammons Appearance as an Expert Witness Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Jefferson City, Missouri Federal Bankruptcy Court, Columbia, South Carolina Federal Bankruptcy Court, Houston, Texas Federal Bankruptcy Court, New York, New York Federal Bankruptcy Court, San Bernardino, California Federal Bankruptcy Court, Los Angeles, California Federal Bankruptcy Court, Charlotte, North Carolina Federal Bankruptcy Court, Miami, Florida Federal District Court, Central Division, Salt Lake City, Utah Iowa District Court, Story County, Iowa Texas District Court, Harris County, Texas Federal Bankruptcy Court, Tampa, Florida Utah District Court, Salt Lake County, Utah Federal Bankruptcy Court, Newark, New Jersey HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated Arizona - - Wyndham Garden Hotel, Chandler - - Wyndham Garden Hotel - Airport, Phoenix - - Wyndham Garden Hotel - Union Hills, Phoenix - - Canyon Ranch Spa & Fitness Resort, Tucson Alabama - - Holiday Inn, Birmingham - - Proposed Sheraton, Gulf Shores - - Proposed Inn, Mobile - - Holiday Inn, Sheffield California - - Industry Hills Sheraton Hotel, City of Industry - - Piccadilly Inn, Fresno - - Proposed Inn at Foss Creek, Healdsburg - - Sunset Towers Hotel, Hollywood - - Proposed La Quinta, Irvine - - Wyndham Garden Hotel, La Jolla - - Days Inn, La Palma - - Proposed Marriott Courtyard, Palm Springs - - Proposed Club Hilton Hotel, Pleasanton - - Center Pointe Development, San Diego - - Holiday Inn-Embarcadero, San Diego - - Holiday Inn-Harbor View, San Diego - - Seven Seas Lodge, San Diego - - Proposed Fountaingrove Inn, Santa Rosa - - Sheraton Round Barn Inn, Santa Rosa - - Wyndham Garden Hotel, Sunnyvale - - Westlake Plaza Hotel, Thousand Oaks - - Proposed Marriott Courtyard, Torrance Colorado - - Proposed Hotel, Keystone Connecticut - - Holiday Inn, Milford - - Holiday Inn, New Britain District of Columbia - - Grand Hotel, Washington - - Wyndham Bristol Hotel, Washington Florida - - Kon Tiki Village, Kissimmee - - Sheraton Lakeside, Kissimmee - - Holiday Inn, 22nd Street, Miami Beach - - Holiday Inn, 87th Street, Miami Beach - - Holiday Inn, 180th Street, Miami Beach - - Sheraton Resort & Marina, St. Petersburg - - Hilton Hotel, Singer Island - - Royce Hotel, West Palm Beach Georgia - - Marriott Hotel, Atlanta - - Wyndham Garden Hotel, Atlanta - - Holiday Inn, Brunswick - - Holiday Inn, Jekyll Island - - Mullberry Inn, Savannah - - Royal Savannah Inn, Savannah Hawaii - - Hobron in Waikiki, Honolulu Idaho - - Holiday Inn, Boise - - Red Lion Inn, Boise - - Super 8, Boise Illinois - - Ramada Inn, Bloomington - - Proposed Marriott Courtyard, Glenview - - Wyndham Garden Hotel, Naperville Indiana - - Holiday Inn, Bloomington - - Inn at the Four Winds, Bloomington - - Ramada Inn, Bloomington - - Hilton Hotel, Fort Wayne - - Airport Hilton Inn, Indianapolis - - Hilton at the Circle, Indianapolis Iowa - - Holiday Inn, Ames - - Proposed Fairfield Inn, Des Moines HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Kentucky - - Proposed Super 8, London - - Proposed Super 8, Radcliff Louisiana - - Sheraton Inn, Kenner - - Hotel Meridien, New Orleans Maine - - Proposed Hotel, Old Orchard Beach Maryland - - Brookshire Hotel, Baltimore - - Lord Baltimore Hotel, Baltimore - - Hyatt Regency, Bethesda Massachusetts - - Proposed Marriott Courtyard, Andover - - Hyatt Regency, Cambridge - - Proposed Hotel, Franklin - - Sheraton Inn, Hyannis - - Marriott Hotel, Worcester Michigan - - Bay Valley Inn, Bay City - - Hilton Airport, Detroit - - Westin Renaissance Center, Detroit - - Hotel Pontchartrain, Detroit - - Proposed Embassy Suites, Lansing - - Hilton Inn, Northfield - - Holiday Inn, Saginaw Minnesota - - Wyndham Garden Hotel, Bloomington - - Marriott Hotel, Minnetonka Missouri - - Inn at Grand Glaize, Osage Beach - - Bel Air Hilton, St. Louis - - Holiday Inn Riverfront, St. Louis Nebraska - - Holiday Inn Airport, Lincoln - - Holiday Inn Northeast, Lincoln Nebraska (continued) - - Marriott Hotel, Omaha - - Ramada Inn, Omaha - - Red Lion Inn, Omaha Nevada - - Proposed Super 8, Las Vegas New Jersey - - Ramada Inn, Edison - - Marriott Hotel, Hanover - - Headquarters Plaza, Morristown - - Hyatt Regency, New Brunswick - - Holiday Inn, North Brunswick New York - - Hilton Hotel, Albany - - Proposed Embassy Suites, Amherst - - Holiday Inn Arena, Binghamton - - Holiday Inn SUNY, Binghamton - - Proposed Hotel, Binghamton - - Proposed Hilton, Brooklyn - - Marriott Hotel, Dewitt - - Metropole Hotel, Flushing - - Midway Hotel, Flushing - - Ramada Inn, Kingston - - Royce Hotel, La Guardia - - Holiday Inn, Latham - - Proposed Crowne Plaza, Manhattan - - Proposed Prince Street Hotel, Manhattan - - Proposed Roslyn Inn, Roslyn - - Proposed Le Richmonde, Rye Brook - - Hilton Hotel, Syracuse - - Hotel Syracuse, Syracuse - - Proposed Hotel, Watertown North Carolina - - Proposed Inn, Chapel Hill - - Proposed Indep. Center Marriott Hotel, Charlotte - - Royce Hotel, Charlotte - - Howard Johnson's North, Charlotte HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) North Carolina (continued) - - Holiday Inn West, Durham - - Sheraton University Inn, Durham - - Holiday Inn, Fayetteville - - Holiday Inn Downtown, Raleigh Ohio - - Proposed Hyatt Hotel, Cleveland - - Proposed Marriott Hotel, Cleveland Oregon - - Holiday Inn Airport, Portland - - Holiday Inn South, Portland Pennsylvania - - Quality Inn, Allentown - - Holiday Inn, Bensalem - - Proposed Marriott Courtyard, Devon - - Proposed Lafayette Inn, Easton - - Ramada Inn, Erie - - Holiday Inn, Harrisburg - - Marriott Hotel, Harrisburg - - Proposed Super 8, Harrisburg - - Proposed Super 8, Lancaster - - Holiday Inn West, Monroeville - - Days Inn Philadelphia - - Franklin Plaza Hotel, Philadelphia - - Franklin Towne EconoLodge, Philadelphia - - Guest Quarters Hotel, Philadelphia - - Hilton Inn, Northeast, Philadelphia - - Marriott Airport Hotel, Philadelphia - - Holiday Inn Greentree, Pittsburgh - - Holiday Inn Parkway East, Pittsburgh - - Holiday Inn North, Pittsburgh - - Holiday Inn Parkway West, Pittsburgh - - Proposed Hotel, Pittsburgh - - Royce Hotel, Pittsburgh - - Westin William Penn Hotel, Pittsburgh - - Hilton Hotel, Scranton - - Proposed Marriott Courtyard, Valley Forge - - Holiday Inn Meadowlands, Washington - - Ramada Inn, York - - Proposed Super 8, York Rhode Island - - Proposed Hotel, Providence - - Omni Biltmore Hotel, Providence South Carolina - - Proposed Charleston Center Hotel, Charleston - - Proposed Cooper River Inn, Charleston - - Howard Johnson's, Spartanburg - - Proposed Middleton Inn and Conference Center, Charleston - - Best Western, North Charleston - - Proposed Marriott Courtyard, Columbia - - Fairfield Inn, Florence - - Holiday Inn, Florence - - Fairfield Inn, Greenville - - Proposed Marriott Courtyard, Greenville - - Fairfield Inn, Hilton Head - - Holiday Inn, Hilton Head Tennessee - - Hampton Inn, Brentwood - - Proposed Marriott Courtyard, Brentwood - - Howard Johnson's, Chattanooga - - Sheraton Hotel, Chattanooga - - Howard Johnson's, Knoxville - - Proposed Capital Mall Convention Center Hotel, Nashville - - Clarion Maxwell House, Nashville - - Holiday Inn Briley Parkway, Nashville - - Proposed Marriott Courtyard, Nashville - - Sheraton Music City, Nashville - - Stouffer's Nashville Hotel, Nashville - - Proposed Super 8, Nashville - - Union Station Hotel, Nashville - - Wyndham Garden Hotel, Nashville - - Proposed Super 8, Union City HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Texas - - Proposed Marriott Courtyard, Addison - - Proposed Marriott Courtyard, Arlington - - La Mansion, Austin - - Proposed Marriott Courtyard, Bedford - - Airport Hilton, El Paso - - Hotel Meridien, Houston - - Sheraton Hotel, Houston - - Proposed Marriott Courtyard, Las Colinas - - Proposed Marriott Courtyard, North Dallas - - La Mansion Del Norte, San Antonio - - La Mansion Del Rio, San Antonio - - Proposed Marriott Courtyard, San Antonio - - Proposed Marriott Courtyard - Medical Center, San Antonio Utah - - Deer Valley Resort, Park City - - Hilton Inn, Salt Lake City - - Holiday Inn, Salt Lake City - - Sheraton Hotel, Salt Lake City Virginia - - Mountain Lake Hotel, Blacksburg - - Howard Johnson's, Bristol - - Boars Head Inn, Charlottesville - - Proposed Fairfield Inn, Hampton - - Proposed Embassy Suites, Herndon - - Ramada Renaissance, Herndon - - Proposed Marriott Courtyard, Manassas - - Omni Hotel, Norfolk Virginia (continued) - - Proposed Marriott, Norfolk - - Howard Johnson's, Richmond - - Howard Johnson's, Roanoke - - Howard Johnson's, Roanoke Rapids - - Wyndham Hotel, Williamsburg Washington - - Wyndham Garden Hotel, Bothell - - Redmond Hotel, Redmond - - Wyndham Garden Hotel, SeaTac West Virginia Proposed Budget Motel, Princeton Wisconsin - - Proposed Granada Royale, Green Bay - - Holiday Inn-Downtown, Green Bay Canada - - Inn on the Park, Toronto Puerto Rico - - Carib Inn, San Juan Virgin Islands - - Virgin Grand Beach Hotel, St. Thomas Jamaica - - Holiday Inn, Montego Bay HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Stephen Rushmore, CRE, MAI, CHA Employment 1980 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1977 - 1980 1971 - 1974 HELMSLEY-SPEAR HOSPITALITY SERVICES, INC. New York, New York (Real Estate) 1974 - 1977 JAMES E. GIBBONS ASSOCIATES Garden City, New York (Mortgage Banking, Appraisals, Hotel Operations) Affiliated Ownership Interests HVS INTERNATIONAL (SAN FRANCISCO, CALIFORNIA) West coast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (MIAMI, FLORIDA) Southeast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (BOULDER, COLORADO) Midwest office for hotel/motel appraisals and counseling HVS INTERNATIONAL (VANCOUVER, CANADA) Canadian office for hotel/motel appraisals and counseling HVS INTERNATIONAL (LONDON, ENGLAND) European office for hotel/motel appraisals and counseling HVS - EXECUTIVE SEARCH Hotel/motel executive search and human resource consulting HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) HVS - ECO SERVICES Environmental consulting for hotels and motels; administrator of the ECOTEL designation HOSPITALITY EQUITY INVESTORS, INC. Hotel and motel investment and management company TRUMBULL MARRIOTT HOTEL General partner of a 324-room hotel and conference center PRINCETON HOTEL ASSOCIATES General partner of a 128-unit Residence Inn in Princeton, New Jersey SEAVIEW GOLF RESORT ASSOCIATES General partner of a 298-unit, 424-acre Marriott resort in Absecon, New Jersey SHELTON HOTEL ASSOCIATES General partner of a 96-unit Residence Inn in Shelton, Connecticut DANBURY HOTEL ASSOCIATES General partner of a 243-unit Hilton Hotel in Danbury, Connecticut PRUDENTIAL - HEI JOINT VENTURE Joint venture partner with Prudential Insurance Company of America on a 234-unit Embassy Suites in Atlanta, Georgia WESTPORT NORFOLK ASSOCIATES General partner of a 425-unit Omni Hotel in Norfolk, Virginia WESTPORT BWI, LLC General partner of a 310-unit Marriott Hotel in Baltimore, Maryland HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) WESTPORT RARITAN, LLC General partner of a 274-unit Crowne Plaza Hotel in Raritan, New Jersey WESTPORT NOVI, LLC General partner of a 193-unit Hilton Hotel in Novi, Michigan WESTPORT LONG BEACH, LLC General Partner of a 460-unit Sheraton Hotel in Long Beach, California WESTPORT PARK RIDGE, LLC General Partner of a 265-unit hotel and conference center in Valley Forge, Pennsylvania WESTPORT CHARLESTON, LLC General Partner of a 295-unit Hilton Hotel in Charleston, South Carolina HOSPITALITY VALUATION SOFTWARE, INC. Founder of software company that develops and distributes hotel financial analysis software Hotels Managed Sheraton Hotel, Smithtown, New York Marriott Hotel, Baltimore Airport, Maryland Hilton Hotel, Danbury, Connecticut Residence Inn, Princeton, New Jersey Embassy Suites, Atlanta Airport, Georgia Omni Hotel, Norfolk, Virginia Crowne Plaza, Raritan, New Jersey Hilton Hotel, Novi, Michigan Sheraton Hotel, Long Beach, California Hilton Hotel, Charleston, South Carolina Park Ridge Hotel and Conference Center, Valley Forge, Pennsylvania Hilton Hotel, Wilmington, Delaware HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Professional Affiliations American Society of Real Estate Counselors - Member (CRE) - Board of Governors Appraisal Institute - Member (MAI) (SREA) - Developer and Instructor, Hotel Investment and Valuation Seminar - Developer and Instructor, Hotel Computer Valuation Seminar American Hotel and Motel Association - Certified Hotel Administrator (CHA) - Industry Real Estate Financing Advisory Council (IREFAC) International Society of Hospitality Consultants - Member (ISHC) New York University - Adjunct Assistant Professor of Nutrition, Food and Hotel Management Michigan State University - Honorary Faculty, Honorary Alumnus Certified General Appraiser - Arizona, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Illinois, Massachusetts, Michigan, Minnesota, Nebraska, New Jersey, New York, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Virginia Licensed Real Estate Broker - New York, Pennsylvania Board of Advisers - Real Estate Finance Journal - Real Estate Workouts & Asset Management American Arbitration Association - National Real Estate Valuation Council Cornell Society of Hotelmen New York University Masters in Hospitality Management - Advisory Board New York University Hospitality Investment Conference - Board of Advisors Beta Gamma Sigma - National Honor Society in Business and Management HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Endowment Hospitality Valuation Services Professor of Hotel Finance and Real Estate - School of Hotel Administration, Cornell University (currently held by Professor James J. Eyster) Education BS - School of Hotel Administration, Cornell University MBA - Graduate School of Business Administration (Finance), University of Buffalo Candidate for PhD - School of Education, Department of Food Service Management, New York University Partial List of Teaching and Lecture Assignments Cornell University - Computer Valuation Techniques Michigan State University - Hotel Management Contracts University of North Carolina - Hotel Market Studies University of Virginia - Assessing Hotels American Arbitration Association - Real Estate Arbitration American Hotel and Motel Association - Hotel Obsolescence Appraisal Institute - Hotel Valuation (over 50 seminars) International Association of Assessing Officers - Hotel Valuation Montreal Appraisal Society - Total Project Analysis Society of Real Estate Appraisers - Lease Seminar Lodging Hospitality - Lodging Summit Published Books and Seminars Textbooks The Valuation of Hotels and Motels, Appraisal Institute, Chicago, Illinois, 1978 Hotels, Motels and Restaurants: Valuations and Market Studies, Appraisal Institute, Chicago, Illinois, 1983 How to Perform an Economic Feasibility Study of a Proposed Hotel/Motel, American Society of Real Estate Counselors, Chicago, Illinois, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Books and Seminars (continued) Textbooks (continued) Hotel Investments: A Guide for Owners and Lenders, Warren, Gorham and Lamont, Inc., New York, New York, 1990 The Computerized Income Approach to Hotel Market Studies and Valuations, Appraisal Institute, Chicago, Illinois, 1990 Hotel Investments: A Guide for Owners and Lenders, 1992 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotel Investments: A Guide for Owners and Lenders, 1993 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Appraisal Institute, Chicago, Illinois, 1992 Student Manuals The Valuation of Lease Interests, Society of Real Estate Appraisers, Chicago, Illinois, 1976 Hotel-Motel Valuation Seminar, Appraisal Institute, Chicago, Illinois, 1981, 1988, 1990 The Computerized Approach to Hotel Market Studies and Valuations Seminar, Appraisal Institute, Chicago, Illinois, 1991 Demonstration Appraisal Demonstration Appraisal of a Proposed Hotel, Spring Valley, New York, Hospitality Valuation Services, Mineola, New York, 1983, 1990 Chapters The Real Estate Handbook-Second Edition, Dow Jones-Irwin, 1989, "Hotels and Motels" Arbitration of Real Estate Valuation Principles, American Arbitration Association, 1987, "Arbitration in the Hospitality Industry" Ethics in Hospitality Management: A Book of Readings, Educational Institute of the American Hotel and Motel Association, 1992, "Ethics in Hotel Appraising" The Lodging and Food Service Industry, Educational Institute of the American Hotel and Motel Association, 1993, "Insider's Insights" HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles The Appraisal Journal "Using Total Project Analysis to Compete for Investment Capital," October, 1975 "The Appraisal of Food Service Facilities," July, 1980 "Publish and Prosper," October, 1980 "Valuation of Hotels and Motels for Assessment Purposes," April, 1984 "Adjusting Comparable Sales for Hotel Assessment Appeals," July, 1986 "Hotel Business Value and Working Capital: A Clarification," January, 1987 "Ethics in Hotel Appraising," July, 1993 The Appraiser "Hotel-Motel Appraisal Misconceptions Set Straight," January, 1979 "No Conventional Financing Available for Hotels: Rushmore," December, 1979 "Estimating Hotel Land Values Using Comparable Ground Leases," April, 1980 Bulletin of the Cornell Society of Hotelmen "Employment Philosophy for a Consulting Practice," July, 1984 Business Travel News "A Snapshot of a Classic Recovery," July, 1995 The Canadian Appraiser "Hotel/Motel Market Sales Update," Summer, 1987 Capital Sources for Real Estate "Stephen Rushmore Discusses the Future of the Lodging Industry," December, 1994 Cayuga Advisor "Secrets to Success in Consulting," October, 1992 Chapter News and Notes "Quantifying a Hotel's Business Value," November, 1979 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Cornell Hotel & Restaurant Administration Quarterly "A Preliminary Market Study," November, 1974 "How Much is Your Place Worth Today? A Case Study in Hotel - Motel Valuation," May, 1975 "What Can Be Done About Your Hotel's Real Estate Taxes?" May, 1977 "The Appraisal of Lodging Facilities," August, 1978 "The Appraisal of Food Service Facilities," February, 1979 "The Appraisal of Lodging Facilities - Update," November, 1984 "Hotel Sales Prices Down More Than 12%," May, 1991 "Seven Current Hotel Valuation Techniques," August, 1992 "The Valuation of Distressed Hotels," October, 1992 "Hotel Lending in the 1990's: Amateurs Beware," December, 1994 "Investment Values of Lodging Property: Modeling the Effects of Income Taxes and Alternative Lender Criteria," December, 1995 FCI Spec Sheet "Employment Philosophy for a Consulting Practice," September, 1984 Florida Hotel & Motel Journal "Rushmore Reports Rising Hotel Prices," February, 1995 Hotel and Motel Management "Average Rate vs. Project Cost," May 1, 1974 "How to Increase the Marketability of Your Motel," April, 1981 "Tougher Lending, Lower Room Rate Hikes On Way?" June, 1981 "What is That Mortgage Loan Going to Cost You?" August, 1981 "How to Perform a Study of Your Property's Market," October, 1981 "How do High Interest Rates Affect Your Motel's Value?" December, 1981 "How to Buy a Feasibility Study That Works for You," February, 1982 "Settling Lease Conflicts Quickly Through Arbitration," April, 1982 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Hotel and Motel Management (continued) "Are Casino Hotels Really Worth $500,000 Per Room?" June, 1982 "Discount Rates and Internal Rate of Return," August, 1982 "Determining a Property's Extended Life Cycle," November, 1982 "Using Microcomputers for Forecasting," December, 1982 "Update on Hotel Development Costs," January, 1983 "Estimating a Site's Worth by Finding Its Profit Value," June, 1983 "Hotel Construction May Be Slowing Down a Little Bit," April, 1983 "The Investor's Risk Sways to Prevailing Economic Winds," August, 1983 "Is Your Property Tax at as Low a Level as it Should Be?" October, 1983 "The Ultimate Guest Room: Could it Ever Exist Anywhere?" December, 1983 Hotel-Motor Inn Journal A Preventive Maintenance System for Motels," March, 1975 Hotel Valuation Journal "Hotel Valuation Index Peaks During 1989," Fall, 1990 "Hotel Development Costs," Winter, 1991 "Hotel Valuation Index for 1990," Spring, 1991 "Bad Year for Hotel Sales Prices Confirmed," Spring, 1992 "Hotel Sales Prices on the Rise," Fall, 1994 "United States Hotel Values Climb," Spring/Summer, 1995 "It's Time for Franchise Reform," Fall, 1995 Institutions/ Volume Feeding "Greater Risk/Greater Profit Potential: Hotel Management Contract," May, 1973 Lodging Hospitality "How to Finance Renovation Projects," January, 1974 "Controlling Your Real Estate Taxes," July, 1978 "Putting Together a Sound Financial Package," December, 1978 "Favorable Outlook for Lodging Values," December, 1983 "Are Your Property Taxes Too High? (Part I and II)," May and June, 1984 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Development Costs," July, 1984 "The Right Management Contract for You," September, 1984 "Selecting the Firm to Prepare Your Feasibility Study," October, 1984 "A Quick How-To In Hotel Valuation," November, 1984 "Updating Lodging Interest Rates," December, 1984 "Is Your Guest Experience Up to Par?" January, 1985 "How to Perform a Breakeven Analysis," May, 1985 "Evaluating Operating Performance," June, 1985 "Hotel Lenders Toughen Underwriting Requirements," July, 1985 "Don't Forget the Pre-Opening Agreement," August, 1985 "Management Companies Should Participate in Financing," October, 1985 "Current Techniques for Valuing Hotel Land," November, 1985 "Hotel Development Costs," December, 1985 "Sourcing Debt Into the 1990's," January, 1986 "Hotel Valuation Thumb Rule," February, 1986 "Value in Use Versus Value in Exchange," March, 1986 "Stretching Feasibility," April, 1986 "The Management Question," May, 1986 "How to Commission a Feasibility Study," June, 1986 "Macro Trends Affecting Property Values," July, 1986 "Hotel-Motel Market Sales Update," August, 1986 "Financing Alternatives: Zero Coupon Mortgages," September, 1986 "Forecasting Lodging Energy Costs," October, 1986 "Portfolio Financing a Better Way," November, 1986 "Profit by Looking at History," December, 1986 "Why New York Isn't Overbuilt," February, 1987 "How to Discourage Hotel Overbuilding: A Case Study," April, 1987 "Structuring an Incentive Management Fee," June, 1987 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Franchising Questions and Answers," July, 1987 "Comparing Hotel Development Costs," August, 1987 "Understanding Economic Life," September, 1987 "Prices Rise for Lodging Properties," October, 1987 "Management Companies Are Key to Success," November, 1987 "Evaluating a Management Contract Fee Structure," December, 1987 "Check Profits Before Selecting Hotel Operator," January, 1988 "It's a Good Time to Review Your Taxes," February, 1988 "How to Use a Management Company Rating System," March, 1988 "Make Sure Management Contracts Contain These Terms," April, 1988 "Hotel Access and Visibility," May, 1988 "Chain Sale Strategies," July, 1988 "Evaluating a Hotel Franchise," August, 1988 "Evaluating Franchise Fees," September, 1988 "Opportunities in Economy Lodging," October, 1988 "How to Obtain a Hotel Mortgage," November, 1988 "Arbitration in the Hospitality Industry," December, 1988 "Lodging Development Cost Update," January, 1989 "Amenities as Profit Builders," February, 1989 "Hotel Values Mirror the Times," March, 1989 "Forecasting Revenue and Expenses," April, 1989 "Real Estate Jargon Made Simple," May, 1989 "Pricing a Management Contract," June, 1989 "Trends in Valuation," July, 1989 "Rescuing the Distressed Hotel," August, 1989 "Shielding Against Incompetence," September, 1989 "Hotel Valuation Revisited," October, 1989 "New Breed of Hard Budgets," November, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Figuring Cap Rates," December, 1989 "A Glance Backward," January, 1990 "Costs Creeping Up," February, 1990 "Valuing Distressed Properties," March, 1990 "Cap and Discount Rates," April, 1990 "An Open Letter," May, 1990 "Misconceptions About Appraisals," June, 1990 "Hotel Values Still Growing," July, 1990 "Hotel Renovation is Key to `90s," August, 1990 "Time Right for Hotel Leases," September, 1990 "Getting a Fix on Rates," October, 1990 "The Wrinkles of Class," November, 1990 "A Glance Backward," December, 1990 "The Price Dropoff," January, 1991 "The Cost Washout," February, 1991 "Survival of the Fittest," March, 1991 "Looking Out and Up," April, 1991 "The Bottom is in Sight," May, 1991 "The Pitfalls of Liquidation," June, 1991 "Extra! Extra! Hospitality News," July, 1991 "The Art of Hotel Renovation," August, 1991 "No Better Time for a Tax Review," September, 1991 "No Time for Passivity," October, 1991 "What a Franchise Really Costs," November, 1991 "In Case You Hadn't Heard," January, 1992 "Negotiation - The Name of the Game," February, 1992 "Now Could be the Time to Build," March, 1992 "The Well May Stay Dry," April, 1992 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Life Expectancy," May, 1992 "Hotel Values - What a Downer," June, 1992 "How to Make Money Now," July, 1992 "Hotel Chain Class Survey," August, 1992 "Budget Dining with Rushmore," September, 1992 "Bookings Up, Rates Will Follow," October, 1992 "Hospitality Master's Good Preparation," November, 1992 "What's New on the Job Front?" January, 1993 "Where Have All the Hotels Gone?" February, 1993 "Hotel Building Costs Continue to Fall," March, 1993 "Hotel Values Head Upward," April, 1993 "The Rise and Fall of Trophy Hotels," May, 1993 "Hotel Sales and Prices Rebound," June, 1993 "Third Parties Loosening Purse Strings," July, 1993 "Beyond Recycling: The Ecotel," August, 1993 "Time to Reduce Property Taxes," September, 1993 "Lodging: The Way I See It," October, 1993 "Choosing an Appraiser," November, 1993 "Who Needs an Asset Manager?" January, 1994 "Investing by the Numbers," February, 1994 "Fire Your Staff and Lease Them Back," March, 1994 "Published Rates Hint at Recovery," April, 1994 "Now is the Time to Start Building," May, 1994 "Hotel Values Heading Up," June, 1994 "Farewell, Friend," July, 1994 "Sales Prices Creeping Up," August, 1994 "Selecting Green Hotel Supplies," September, 1994 "Don't Write Off Full-Service Hotels," October, 1994 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Lodging REIT's Are on the Rise," November, 1994 "Going Back to the Future," January, 1995 "How much do Managers Make?" March, 1995 "Lodging Transactions Soared in '94," April, 1995 "Hotel Development Costs on the Rise," May, 1995 "Hotel Values up Significantly," June, 1995 "What a Franchise Costs over the Long Term," July, 1995 "Road Food Part II," August, 1995 "It's Time for Franchise Reform," September, 1995 "Extended Stay May Not Extend Your Profits," October, 1995 "The Year as I See It," November, 1995 "Cap Rate 101," January, 1996 Michigan Lodging "Hotel Development Costs," January, 1988 The Mortgage and Real Estate Executives Report "Atlantic City Building Game Involves High Stakes," August, 1979 "How Interest Rates Affect Real Estate Values," June, 1982 "Update on Hotel Development Costs," May 1, 1983 Motel-Hotel Insider "The $100,000 Plus Hotel Room Has Become a Reality," November 19, 1979 "Update on Hotel Development Costs," April 4, 1983 NAIFA - The Appraisal Review "Hotel Valuation Techniques," Vol. 44, 1991 Real Estate Digest "Why Should the Management Team be Important to Hotel Lenders," Fall, 1988 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Finance Journal "What is a Typical Fee for a Hotel Management Contract?" Fall, 1988 "Hotel Franchise Fees," Winter 1989 "Why the Management Team Should be Important to Hotel Lenders," Spring, 1989 "Hotel Values and Costs," Summer, 1989 "Structuring a Hotel Investment," Fall, 1989 "A Guide for Lenders Holding Distressed Hotel Loans," Winter, 1990 "Estimating Current Interest Rates for Hotel Financing," Spring, 1990 "Hotel Valuation Techniques," Summer, 1990 "Now is the Time to Review Your Hotel's Property Taxes," Fall, 1990 "Property Tax Assessments for Hotels and Motels," Winter, 1991 "Putting Together Hotel Management Agreements - Part I," Spring 1991 "Putting Together Hotel Management Agreements - Part II," Summer, 1991 "The 1980s - The Decade of Change," Fall, 1991 "An Overview of the Hotel Industry: Past, Present, and Future," Spring, 1994 Real Estate Forum "Casino Hotels Raise Valuation Questions," November, 1981 Real Estate Investment Ideas "How Fuel and Energy Shortages Should Affect Investment Decisions in the Hospitality Industry," March, 1974 "Upward Trend Continues for Sales Price of Hotel-Motel Properties," May, 1988 "High Prices Paid for Hotel-Motel Properties," February, 1990 Real Estate Issues "Employee Compensation for a Consulting Practice," Fall/Winter, 1985 "Hotel/Motel Market Sales Update," Spring/Summer, 1987 Real Estate Newsletter "Computers in Hotel Appraising," May 15, 1989 Real Estate Investment Ideas "Hotel-Sales Update," Winter, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Review "Valuing Motels and Hotel in the Current Market," Fall, 1972 "Dealing With Distressed Hostelry Loans," Fall, 1975 "The Mortgage Underwriting Consultant Comes of Age," Fall, 1977 "Real Estate Compensation," Winter, 1987 Real Estate Workouts and Asset Management "Stephen Rushmore on Directions in the Hospitality Industry," September, 1992 Real Values "Hotel Construction Cost Update," April, 1986 Restaurant and Hotel Design "How Much Should the Renovation Be?" March, 1986 "14 Notable Hotel Development Firms," December, 1987 Rushmore on Hotel Valuation "Mortgage - Equity," Winter, 1979 "Atlantic City - From Bust to Boom," Winter, 1979 "Mortgage - Equity," Spring, 1979 "Developing Mortgage Data," Spring 1979 "Gasoline and Market Values, " Spring, 1979 "Mortgage - Equity," Fall, 1979 "Quantifying a Hotel's Business Value," Fall, 1979 "What Has Happened to Typical Hotel-Motel Development Costs?," Fall, 1979 "Mortgage-Equity," Winter, 1980 "Extending Hotel Economic Life Through Renovation," Winter, 1980 "Estimating Hotel Land Values Using Comparable Ground Leases," Winter, 1980 "Quantifying the Value of Personal Property to a Going Hotel," Spring, 1980 "Recent Changes in New York City's Hotel Market," Spring, 1980 "Hotel-Motel Economic Lives," Fall, 1980 "Mortgage - Equity," Fall, 1980 "Mortgage - Equity," Winter, 1981 "Developing Mortgage Data," Winter, 1981 "Statistical Support for Food and Beverage Projections," Winter, 1981 "Mortgage - Equity," Spring/Summer, 1981 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Rushmore on Hotel Valuation (continued) "Quantifying a Hotel's Demand," Spring/Summer, 1981 "A Five-Year Overview of Typical Hotel-Motel Development Costs," Spring/Summer, 1981 "Mortgage - Equity," Winter/Spring, 1982 "Update on Hotel Capitalization Rates," Winter/Spring, 1982 "Mortgage - Equity," Summer/Fall, 1982 "Are Casino Hotels Really Worth $500,000 Per Room?" Summer/Fall, 1982 "The Hotel-Motel Life Cycle, Summer/Fall, 1982 "Mortgage - Equity," Winter/Spring, 1983 "Update on Hotel Development Costs," Winter/Spring, 1983 "The Valuation of Hotels and Motels for Assessment Purposes," Winter, 1984 "Hotel Capitalization Rates," Summer, 1984 "Hotel Development Cost Survey," Summer, 1984 "Selecting a Hotel Management Company," Fall, 1984 "Hotel Capitalization Rates," Spring, 1985 "How to Perform a Breakeven Analysis," Spring, 1985 "Hotel Capitalization Rates," Winter, 1986 "Hotel Development Costs," Winter, 1986 "Hotel Valuation Survey," Winter, 1987 "Impact of New Tax Laws on Hotel Values," Winter, 1987 "Hotel-Motel Market Sales Update," Winter, 1987 "Structuring an Incentive Management Fee," Fall, 1987 "Understanding Your Hotel's Economic Life," Fall, 1987 "Hotel Development Costs," Fall, 1987 "Hotel, Motel Market Sales Update," Winter, 1988 "Amenity Creep," Winter, 1989 "Hotel Franchise Fees," Winter, 1989 "Hotel Valuation Index," Fall, 1989 "Latest Trends in Hotel Values," Fall, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Tri-State Real Estate Journal "Across the Nation: Hotel Sale Prices Escalate on Average," December 23, 1994 U.S. Real Estate Week "All-Suites Market Entering Second Phase," May 4, 1987 Valuation "Hotel-Motel Market Sales Update," February, 1987 Quarterly Newsletter Hotel Valuation Journal Professional newsletter with a circulation of 10,000 Real Estate Column Lodging Hospitality Real estate editor for a major monthly hospitality periodical Hospitality Column Real Estate Finance Journal Contributing hospitality editor Computer Software Hospitality Valuation Software Hotel financial software for room night analyses, income and expense forecasts, and valuation calculations - developed and distributed for the Appraisal Institute Hotel-Motel Data Hospitality Market Data Exchange National clearinghouse for information pertaining to hotel and motel transactions Hotel Valuation Index National index of hotel value trends for 24 individual market areas Hospitality Seminar Series Intensive short courses for hotel and restaurant professionals Hotel Franchise Fees Analysis Guide Analysis of hotel franchise fees and costs Hospitality Bibliography Comprehensive literature index of hotel and restaurant books and articles HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Awards Robert H. Armstrong Award For the most significant contribution to The Appraisal Journal in 1975 Activities Commercial pilot, instrument, multi-engine; sailing; skiing Corporate and Institutional Clients Served Aetna Life Insurance AIG Real Estate Investment Aldrich Eastman and Waltch Allstate American Airlines America's Best Inns Arthur Anderson & Company Bankers Trust Company Bank of America Bank of Boston Bank of Montreal Bank of New York Bank of Nova Scotia Bank of Tokyo Bank One-Columbus Banque Indosuez Barclay's Bank Baybank Boston The Beacon Companies Bear, Stearns & Company, Inc. Best Inns Best Western International Boykin Management Co. Bradbury Suites C. Itoh Caesar's World California Dept. of Transportation Chase Lincoln First Bank, N.A. Chase Manhattan Bank Chemical Bank Chrysler Capital Corporation CIGNA Citibank Citicorp Real Estate City of Boston City of Detroit City of Grand Rapids City of Kalamazoo City of Orlando City of Philadelphia City of Santa Monica City of Toronto Columbia Sussex Corporation Continental Illinois National Bank Copley Real Estate Advisors Corporex Development CRI, Inc. Cushman and Wakefield Days Inns Edward J. DeBartolo Corp. HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Deer Valley Ski Corporation Doubletree Hotels Drury Inns Econo Lodge Economic Development Admin. EIE Regent International Embassy Suites Equitable Life Assurance Equitable Real Estate Investment European American Bank Fairmont Hotels Federal Deposit Insurance Corp. First Boston First California Savings First Interstate Bank First National Bank of Chicago Four Seasons Hotels Goldman, Sachs Greater Orlando Aviation Authority Great Western Bank Great Western Savings Guest Quarters Hampton Inns Hilton Hotels, Corp. Hilton International Holiday Corporation Holiday Inns Home Savings of America Howard Johnson's Hudson Hotels Corporation Hyatt Hotels Industrial Bank of Japan Interstate Hotels The Irvine Company ITT Commercial Finance Corp. Japan Airlines JDC (America) Corporation John Q. Hammons John Hancock Life Insurance Johnson & Wales College Kenneth Leventhal & Assoc. Kidder Peabody & Company, Inc. La Quinta Larken, Inc. Lexington Companies Loews Hotels Harry Macklowe Real Estate Marine Midland Bank, N.A. Marriott Corporation MA Bay Transit Authority Massachusetts Mutual Life Mellon Bank Meridien Hotels Merrill Lynch Merrill Lynch Capital Markets Metropolitan Life Insurance Microtel Midlantic Bank HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Mitsubishi Morgan Guaranty Bank & Trust Co. J.P. Morgan Investment Management Morgan Stanley Motel 6, Inc. Mutual Benefit Co. National Westminster Bank New York Life Insurance Nippon Credit Bank Nomura Securities Int'l North American Taisei Corporation Northwestern Mutual Life Omni Hotels Parabas Bank Prime Motor Inns Property Capital Trust Prudential Life Insurance Radisson Hotels Ramada Inns Red Lion Inns Regent International Registry Hotels Residence Inns Resolution Trust Corporation Rhode Island Hospital Trust Ritz-Carlton Hotels Rodeway Inns Rose Associates Salomon Brothers San Antonio Hotel/Motel Assoc. Sanwa Bank Security Pacific Bank Servico Management Corp. Sheraton Hotels Sonesta Hotels Sonnenblick-Goldman Steamboat Ski Corporation Stouffer Hotels Stratton Corporation Sumitomo Bank Summerfield Hotel Corporation Super 8 Hotels Swiss Bank Corporation Taisei Texas Commerce Bancshares, Inc. Tishman Realty Corporation Trans World Airlines Travelers Insurance TraveLodge Trusthouse Forte UBS Securities Union Labor Life United Bank of Switzerland United Inns, Inc. United States Steel Universal Hotels U.S. Air Force U.S. Department of Justice HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) U.S. Department of the Army U.S. Department of the Interior U.S. Economic Development Authority U.S. Trust Company Walt Disney Productions Westin Hotels Williams Hospitality Corporation Winegardner & Hammons Winthrop Financial Associates Wyndham Hotels Zeckendorf Company Appearance as an Expert Witness Administrative Law Court - SEC, Washington, DC Appellate Tax Board, Boston, Massachusetts Arbitration, Wayne, New Jersey Assessment Appeals Board, Los Angeles County, Los Angeles, California Board of Equalization and Review, Washington, District of Columbia (2) Board of Taxation, Atlantic City, New Jersey Bureau de Revision Evaluation Fonciere du Quebec, Montreal, Canada Circuit Court, Orange County, Orlando, Florida Condemnation Review Board, Minneapolis, Minnesota Corporation Committee, Rhode Island State Senate Court of Common Pleas, Allegheny County, Pennsylvania Court of Common Pleas, Franklin County, Ohio Court of Common Pleas, Montgomery, Pennsylvania Court of Common Pleas, Pittsburgh, Pennsylvania Court of Common Pleas, Philadelphia, Pennsylvania Court of Queen's Bench of Alberta, Canada District Court, Arapahoe County, Colorado District Court, Dallas County, Texas District Court, Harris County, Texas District Court, Tarrant County, Texas District Court, Hennepin County, Minneapolis, Minnesota District Court, Knoxville, Tennessee Federal Bankruptcy Court, Oakland, California Federal Bankruptcy Court, Los Angeles, California HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Denver, Colorado Federal Bankruptcy Court, District of Columbia Federal Bankruptcy Court, Miami, Florida (2) Federal Bankruptcy Court, Chicago, Illinois Federal Bankruptcy Court, New Orleans, Louisiana Federal Bankruptcy Court, Greenbelt, Maryland Federal Bankruptcy Court, Baltimore, Maryland Federal Bankruptcy Court, Rockville, Maryland Federal Bankruptcy Court, Boston, Massachusetts Federal Bankruptcy Court, Grand Rapids, Michigan Federal Bankruptcy Court, Las Vegas, Nevada Federal Bankruptcy Court, Newark, New Jersey (2) Federal Bankruptcy Court, Manhattan, New York (2) Federal Bankruptcy Court, Westbury, New York Federal Bankruptcy Court, Philadelphia, Pennsylvania Federal Bankruptcy Court, Reading, Pennsylvania Federal Bankruptcy Court, Salt Lake City, Utah Federal Bankruptcy Court, Madison, Wisconsin (2) Federal District Court, Rochester, New York Federal District Court, Philadelphia, Pennsylvania (2) Judicial Arbitration and Mediation Services, Dallas, Texas Michigan Tax Tribunal, Detroit, Michigan New Jersey Tax Court, Newark, New Jersey (2) Superior Court, District of Columbia Superior Court, Clayton County, Georgia (2) Superior Court of North Carolina Superior Court, Nashua, New Hampshire Supreme Court, New York State, Buffalo, New York Supreme Court, New York State, Manhattan, New York Supreme Court, New York State, Riverhead, New York HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Tax Review Board, San Joaquin County, Stockton, California Tax Review Board, Bangor, Maine Tax Review Board, Schenectady, New York Tax Review Board, Yorktown, New York Tax Review Board, North Carolina Tax Review Board, Philadelphia, Pennsylvania (2) U.S. District Court, Wilmington, Delaware U.S. District Court, Madison, Wisconsin ============================================================================== Partial List of Hotels/Motels, Appraised or Reviewed Internationally North America Canada - Delta Hotel, Calgary - Econo Lodge, Hull - Hotel Lord Berri, Montreal - Hotel Vogue, Montreal - Hyatt Regency, Montreal - Le Ragence Hyatt, Montreal - Holiday Inn, Oshawa, Ontario - Hotel Le Chantecler, Quebec - Bond Place Hotel, Toronto - Carlton Hotel, Toronto - Chelsea Hotel, Toronto - Delta Chelsea Hotel, Toronto - Four Seasons on the Park, Toronto - Inn on the Park, Toronto - Novotel Missisauga, Toronto - Ramada Inn, Toronto - Sutton Hotel, Toronto - Toronto Marriott East, Toronto - Westbury Hotel, Toronto - Burnaby Villa Inn, Vancouver - Four Seasons Hotel, Vancouver - Sheraton Land Mark, Vancouver - Sheraton Plaza 500, Vancouver - Four Seasons Yorkville Hotel, Yorkville United States Alabama - MEI - Birmingham West, Bessemer - Comfort Inn, Birmingham - Courtyard by Marriott, Birmingham - Courtyard by Marriott-Hoover, Birmingham - Courtyard By Marriott/Homewood, Birmingham - Crown Sterling Suites, Birmingham - Fairfield Inn, Birmingham - Holiday Inn, Birmingham - Howard Johnson, Birmingham - Knights Inn, Birmingham - Ramada Inn, Birmingham - Residence Inn by Marriott, Birmingham - Still Waters Resort, Dadeville - Ramada Inn, Gadsden - Sheraton Hotel, Gulf Shores - Courtyard by Marriott, Huntsville - Knights Inn, Huntsville - Marriott Hotel-Proposed, Huntsville - La Quinta Inn, Huntsville University - Days Inn, Mobile - Hotel - Proposed, Mobile - Inn-Proposed, Mobile - Stouffer Riverview, Mobile - Courtyard by Marriott, Montgomery - Fairfield Inn, Montgomery - Holiday Inn-Downtown, Montgomery - Holiday Inn-East, Montgomery - Howard Johnson, Montgomery - La Quinta Inn, Montgomery - Residence Inn, Montgomery - Marriott's Grand Hotel, Point Clear - Holiday Inn, Sheffield - La Quinta, Tuscaloosa - Masters Economy Inn, Tuscaloosa - Proposed Extended Stay, West Mobile Alaska - Barratt Inn, Anchorage - Clarion Hotel, Anchorage - Holiday Inn, Anchorage - Hotel Captain Hook, Anchorage - International Airport Inn, Anchorage - Sheraton Anchorage Hotel, Anchorage Arizona - Holiday Inn, Bullhead City - Embassy Suites, Camelback - Compri Hotel-Proposed, Chandler - Quality Inn, Chandler - Ramada Inn, Chandler - AmeriSuite Hotel-Proposed, Flagstaff - Holiday Inn, Flagstaff - Motel 6, Flagstaff - Rodeway Inn, Flagstaff - Bright Angel Lodge, Grand Canyon - El Tovar Hotel, Grand Canyon - Grand Canyon National Park, Grand Canyon - Kachina Lodge, Grand Canyon - Maswik Lodge, Grand Canyon - Moqui Lodge, Grand Canyon - Phantom Ranch, Grand Canyon - Thunderbird Lodge, Grand Canyon - Yavapai Lodge, Grand Canyon - Hampton Inn-Proposed, Holbrook - Moqui Lodge, Kaibab National Forest - Rodeway Inn, Kingman - Nautical Inn Resort, Lake Havasu City - Lexington Hotel Suites, Mesa - Biosphere II Conference Center, Oracle - Best Western-Per Diem, Phoenix - Bobby McGee's, Phoenix - Caravan Inn, Phoenix - Compri Hotel-Proposed, Phoenix - Courtyard by Marriott-Black Canyon, Phoenix - Courtyard by Marriott-Mesa, Phoenix - Crescent Phoenix Hotel, Phoenix - Crown Sterling Suites, Phoenix - Days Inn, Phoenix - Doubletree Inn at Park Central, Phoenix - Embassy Suites, Phoenix - Embassy Suites-Biltmore, Phoenix - Executive Park Hotel, Phoenix - Fountain Suites Hotel, Phoenix - Granada Royale-Camelhead, Phoenix - Hilton Hotel, Phoenix - Holiday Inn, Phoenix - Hyatt Regency, Phoenix - La Quinta Hotel, Phoenix - Lexington Hotel Suites, Phoenix - Newton's Sands, Phoenix - Phoenician Golf & Tennis Resort, Phoenix - Pointe Hilton at Tapatio Cliffs, Phoenix - Quality Inn, Phoenix - Ramada Inn-Airport, Phoenix - Ramada Inn-East, Phoenix - Ritz Carlton, Phoenix - Sunburst Resort Hotel, Phoenix - Hassayampa Inn, Prescott - Clarion Inn at McCormick Ranch, Scottsdale - Conference Center, Scottsdale - Courtyard by Marriott-Mayo, Scottsdale - Doubletree Inn at Scottsdale Mall, Scottsdale - Fairfield Inn, Scottsdale - Fashion Square Hotel, Scottsdale - Loews Paradise Resort, Scottsdale - Marriott Camelback Inn, Scottsdale - Marriott Mountain Shadows, Scottsdale - Mountain Shadows Resort, Scottsdale - Orange Tree Resort, Scottsdale - Ramada-Valley Ho, Scottsdale - Red Lion's La Posada Resort, Scottsdale - Registry Resort, Scottsdale - Rodeway Inn, Scottsdale - Scottsdale Princess, Scottsdale - Sheraton Scottsdale Resort, Scottsdale - The Phoenician, Scottsdale - Valley Ho, Scottsdale - John Gardiner's Enchantment, Sedona - L'Auberege de Sedona, Sedona - Los Abrigados, Sedona - Orchards Inn, Sedona - Hotel-Proposed, Sierra Vista - Motel 6, Sierra Vista - Temple Bar Resort, Temple Bar - Coachman Inn - Proposed, Tolleson/Phoenix - Tubac Resort, Tubac - Canyon Ranch, Tucson - Coachman Inn-Proposed, Tucson - Courtyard by Marriott, Tucson - Doubletree Inn, Tucson - Embassy Suites, Tucson - Granada Royale Hometel-E. Broadway, Tucson - Hotel Park Tucson-Proposed, Tucson - Lexington Suites Hotel, Tucson - Loews Hotel, Tucson - Resort Hotel-Proposed, Tucson - Rodeway Inn, Tucson - Sunbelt Commerce Center Hotel, Tucson - La Quinta Inn, Tucson East - Bobby McGee's, Tuscon - Radisson Suite Hotel, Tuscon - Ventana Canyon Golf and Racquet, Tuscon - Ramada Inn, Union Hill Arkansas - Sheraton Inn, Fort Smith - Hilton, Hot Springs - Holiday Inn-Lake Hamilton, Hot Springs - Courtyard by Marriott, Little Rock - Holiday Inn, Little Rock - Legacy Hotel, Little Rock - Little Rock Hilton, Little Rock - Masters Economy Inn, Little Rock - Red Carpet Inn, Little Rock - Super 8, Little Rock - Masters Economy Inn, North Little Rock - Masters Economy Inn, Protho-Junction - Holiday Inn, Texarkana California - Hampton Inn, Agoura Hills - Ramada Inn, Agoura Hills - Residence Inn-Proposed, Agoura Hills - Island Motel, Almeda - Anaheim Hilton & Towers, Anaheim - Anaheim Park Motor Inn, Anaheim - Anaheim Plaza Hotel, Anaheim - Best Western Pavillions, Anaheim - Carousel Inn, Anaheim - Conestoga Hotel, Anaheim - Courtyard by Marriott, Anaheim - Crown Sterling Suites, Anaheim - Disneyland Hotel, Anaheim - Golden Forest Motel, Anaheim - Hampton Inn, Anaheim - Hilton, Anaheim - Holiday Inn Anaheim Center, Anaheim - Hotel-Proposed, Anaheim - Marriott Hotel, Anaheim - Pan Pacific Hotel, Anaheim - Pitcairn Motel, Anaheim - Raffles Inn, Anaheim - Ramada Maingate/Disneyland Hotel, Anaheim - Roger Morris Inn, Anaheim - Stovall's Inn, Anaheim - The Station Inn, Anaheim - Travelodge Inn at the Park, Anaheim - AmeriSuite, Anaheim Hills - Comfort Inn, Anahiem - Mansouri Hotel, Antioch - Red Lion, Apple Valley - Hampton Inn, Arcadia - Residence Inn, Arcadia - Hilton Lodge, Arrowhead Lake - Auburn Inn, Auburn - Sleep Inn, Auburn - Allstar Inn, Bakersfield - Clarion Hotel, Bakersfield - Courtyard by Marriott, Bakersfield - Economy Inn, Bakersfield - Ramada Inn, Bakersfield - Red Lion Hotel, Bakersfield - Residence Inn, Bakersfield - Rodeway Inn, Bakersfield - Hilton Hotel, Baldwin Park - San Gabriel Valley Hotel, Baldwin Park - The Hilton Hotel, Baldwin Park - Allstar Inn, Barstow - Economy Inn, Barstow - Marriott Berkeley Marina, Berkeley - Shattuck Hotel, Berkeley - Beverly Hills Hotel, Beverly Hills - Beverly Rodeo Hotel, Beverly Hills - Beverly Wilshire Hotel, Beverly Hills - Hilton Hotel-Cresthil, Beverly Hills - L'Ermitage, Beverly Hills - Peninsula Hotel, Beverly Hills - Best Western, Big Bear Lake - Big Bear Hotel, Big Bear Lake - Big Bear Lake Resort, Big Bear Lake - Big Bear Towering Pines, Big Bear Lake - Motel 6, Big Bear Lake - Post Ranch, Big Sur - Ventana Inn, Big Sur - Rodeway Inn, Blythe - Courtyard by Marriott, Brea - Holiday Inn, Brentwood - Courtyard by Marriott, Buena Park - Fairfield Inn, Buena Park - Hampton Inn, Buena Park - Holiday Inn, Buena Park - Crowne Sterling Suites, Burlingame - Hyatt Regency, Burlingame - Mariott Hotel - SFO, Burlingame - Marriott, Burlingame - Marriott-San Francisco Airport, Burlingame - Radisson Hotel-Proposed, Burlingame - Sheraton Hotel, Burlingame - Courtyard by Marriott, Camarillo - Best Western Fireside Inn, Cambria - Cambria Pines Lodge, Cambria - Residence Inn, Campbell - Hotel-Proposed, Capitola - Resort Hotel, Spa & Conference Ctr., Capitola - Allstar Inn, Carlsbad - Carlsbad Inn, Carlsbad - Inn of America, Carlsbad - La Costa Hotel and Spa, Carlsbad - Olympic Resort Hotel, Carlsbad - Tickle Pink Inn, Carmel - Allstar Inn, Carpinteria - Desert Princess Country Club, Cathedral City - Royce Suites Hotel, Cathedral City - Digger Bay, Central Valley - Marriott Hotel-Proposed, Century City - Westin Century Plaza Hotel, Century City - Neighborhood Inn-Proposed, Chatsworth - Red Lion Hotel, Chico - Otay Valley Inn, Chula Vista - Travelodge-Otay Valley, Chula Vista - Ramada Inn, City of Commerce - Sheraton Hotel, City of Industry - Allstar Inn, Coalinga - Harris Ranch Restaurant/Inn, Coalinga - Howard Johnson, Colton - Best Western Willow Tree Inn, Compton - Concord Hotel, Concord - Hilton Hotel, Concord - The Trees Inn, Concord - Motel 6, Corona - Hotel del Coronado, Coronado - Loews Coronado Bay Resort, Coronado - Madera Village Inn, Corte Madera - Ha' Penny Inn, Costa Mesa - La Quinta Hotel, Costa Mesa - Marriott Suites, Costa Mesa - Red Lion Hotel, Costa Mesa - Residence Inn, Costa Mesa - Pacifica Hotel, Culver City - Ramada Inn, Culver City - Courtyard by Marriott, Cupertino - Doubletree Hotel, Cupertino - Doubletree Hotel, Dana Point - Spa-Proposed, Danville - El Rancho, Davis - Furnace Creek Resort, Death Valley - Stovepipe Wells Village, Death Valley - Hilton, Del Mar - Days Inn, Diamond Bar - Compri Hotel, El Segundo - Proposed Summerfield, El Segundo - Days Inn, Emeryville - Holiday Inn-Bay Bridge, Emeryville - Lyons Restaurant, Emeryville - Budget Motel, Encinitis - Marriott Tenaya Lodge-Proposed, Fishcamp - Holiday Inn, Fort Myers Beach - All Suites Hotel/Athletic Club, Foster City - Clubtel-Proposed, Foster City - Courtyard by Marriott, Foster City - Holiday Inn, Foster City - Courtyard by Marriott, Fremont - Fremont Hotel, Fremont - Motel 6, Fremont - Residence Inn, Fremont - Allstar Inn, Fresno - AmeriSuite, Fresno - Chateau Inn, Fresno - Courtyard by Marriott, Fresno - Economy Inn, Fresno - Hacienda, Fresno - Holiday Inn, Fresno - Holiday Inn-Fresno Airport, Fresno - Howard Johnson Motel, Fresno - Piccadilly Inn, Fresno - Travelers Inn, Fresno - Travelers Lodge, Fresno - Griswold's Hotel, Fullerton - Holiday Inn, Fullerton - Marriott Hotel, Fullerton - Hotel-Proposed, Garden Grove - Hyatt Regency Alicante, Garden Grove - Princess Hotel, Garden Grove - Motel 6, Gilroy - Hyatt Regency-Proposed, Goleta - Allstar Inn, Hacienda Heights - Courtyard by Marriott, Hacienda Heights - Half Moon Bay Lodge, Half Moon Bay - Courtyard by Marriott, Harbor Boulevard - Grosvenor, Harborside-Pt. Loma - Inn at Foss Creek, Healdsburg - Chateau Marmont, Hollywood - Hollywood Palm Hotel, Hollywood - Sunset Towers Hotel, Hollywood - Waterfront Hilton Hotel, Huntington Beach - Compri Hotel, Hutton Centre - Grand Champions Resort, Indian Wells - Stouffer Esmerelda Resort, Indian Wells - Courtyard By Marriott, Irvine - Courtyard by Marriott - Proposed, Irvine - Embassy Suites, Irvine - Hilton Hotel, Irvine - Holiday Inn, Irvine - Hyatt Hotel, Irvine - La Quinta-Proposed, Irvine - Marriott Hotel, Irvine - Marriott-Proposed, Irvine - Registry Hotel, Irvine - Residence Inn-Proposed, Irvine - Amador Inn, Jackson - Embassy Suites, La Jolla - Hotel-Proposed, La Jolla - La Jolla Property, La Jolla - La Jolla Village Inn, La Jolla - Marriott Hotel, La Jolla - Residence Inn, La Jolla - Days Inn-Proposed, La Palma - PGA West Resort - Proposed, La Quinta - Lafayette Park Hotel, Lafayette - Laguna Shores, Laguna Beach - Holiday Inn, Laguna Hills - Ryokan Hotel-Proposed, Laguna Hills - Villa Valencia, Laguna Hills - Ritz Carlton, Laguna Niguel - Lake Mohave Resort, Lake Mohave - Resort at Squaw Creek, Lake Tahoe - Courtyard by Marriott, Larkspur Landing - Hilton, Las Cruces - Surf and Sand Hotel, Leguna Beach - Holiday Inn, Lido Beach - Motel-Proposed, Little Lake - Residence Inn, Livermore - Residence Inn-Proposed, Livermore - Breakers Hotel, Long Beach - Holiday Inn, Long Beach - Holiday Inn Airport, Long Beach - Marriott Hotel-Long Beach Airport, Long Beach - Marriott Hotel-Proposed, Long Beach - Ramada Renaissance Hotel, Long Beach - Residence Inn, Long Beach - Sheraton Long Beach & Office Tower, Long Beach - Airport Park Hotel, Los Angeles - Bel Age, Los Angeles - Biltmore Hotel, Los Angeles - Century Inn, Los Angeles - Checkers Hotel, Los Angeles - Courtyard by Marriott-Irvine Main, Los Angeles - Courtyard by Marriott-LAX Airport, Los Angeles - Crown Sterling Suites, Los Angeles - Days Inn, Los Angeles - Econo Lodge-Proposed, Los Angeles - Embassy Suites, Los Angeles - Embassy Suites-LAX-Proposed, Los Angeles - Four Seasons, Los Angeles - Hampton Inn-LAX, Los Angeles - Herrick and Campbell, Los Angeles - Hilton & Towers-LAX, Los Angeles - Hilton Hotel, Los Angeles - Holiday Inn Crowne Plaza-LAX, Los Angeles - Le Montrose Hotel, Los Angeles - Ma Maison Sofitel, Los Angeles - Macklowe Hotel, Los Angeles - Marriott Century City, Los Angeles - MCA Hotel-Proposed, Los Angeles - New Otani Hotel, Los Angeles - Playa Vista Development, Los Angeles - Stouffer Concourse Hotel, Los Angeles - Westin Bonaventure, Los Angeles - Westwood Marquis Hotel, Los Angeles - Los Gatos Lodge, Los Gatos - Macienda Inn, Los Gatos - Toll House Inn, Los Gatos - Residence Inn, Manhattan Beach - All Suite Hotel, Marina Del Rey - Marina Beach Hotel, Marina del Rey - Marina del Rey Hotel and Marina, Marina del Rey - Marina Suites Hotel, Marina Del Rey - Marriott Marina Del Rey, Marina Del Rey - Residence Inn, Meriden - Quality Suites Hotel - Proposed, Millbrae - Beverly Heritage Hotel, Milpitas - Crown Sterling Suites, Milpitas - Holiday Inn, Milpitas - Courtyard by Marriott, Mira Mesa - Grosvenor, Mission Bay - Motel Orleans, Modesto - Red Lion Hotel, Modesto - Red Lion-Proposed, Modesto - Carmel Mission Inn, Monterey - Doubletree Inn, Monterey - Former Monterey Hilton Hotel, Monterey - Monterey Plaza, Monterey - Plaza Hotel, Monterey - Sheraton Hotel, Monterey - Pebble Beach Company, Monterey County - Inn at Morro Bay, Morro Bay - Residence Inn, Mountain View - Inn at Napa Valley, Napa - Best Western Inn, Napa Valley - Clarion Hotel-Napa Valley, Napa Valley - Silverado, Napa Valley - Ha'Penny Motel, National City - Allstar Inn, Needles - Hilton-Newark/Fremont, Newark - Four Seasons Hotel, Newport Beach - Hotel Meridien, Newport Beach - Hyatt Newporter, Newport Beach - Newporter Resort, Newport Beach - Sheraton, Newport Beach - Days Inn-Proposed, North Hollywood - Northstar, North Lake Tahoe - Ramada Inn, Norwalk - Impact Study - Proposed Hotel, Oakdale - Hilton Inn, Oakland - Holiday Inn, Oakland - Holiday Inn-Oakland Airport, Oakland - Parc Oakland Hotel, Oakland - Resort - Proposed, Olympic Valley - Resort at Squaw Creek-Proposed, Olympic Valley - Clarion Hotel, Ontario - Compri Hotel, Ontario - Fairfield Inn, Ontario - Holiday Inn, Ontario - Lexington Hotel Suites, Ontario - Red Lion Hotel, Ontario - Doubletree Hotel, Orange - Woodfin Suites, Orange - Embassy Suites, Palm Desert - Marriott Desert Springs, Palm Desert - Canyon Resort, Palm Springs - Compri Hotel-Proposed, Palm Springs - Courtyard by Marriott, Palm Springs - Desert Princess, Palm Springs - Grand Champions Resort, Palm Springs - International Hotel and Resort, Palm Springs - Ocotillo Lodge, Palm Springs - Palm Canyon, Palm Springs - PGA West Resort-Proposed, Palm Springs - Spa Hotel at Mineral Springs, Palm Springs - Westin Hotel, Palm Springs - Grosvenor, Palmdale - Super 8, Palmdale - Cowper Square, Palo Alto - Garden Court, Palo Alto - Holiday Inn, Palo Alto - Stanford Park, Palo Alto - Marriott, Paradise Valley - All Suite Hotel-Proposed, Pasadena - Doubletree Hotel, Pasadena - Holiday Inn, Pasadena - Cascade Ranch Lodge, Pescadero - Elk Lodge, Petaluma - Hotel Petaluma, Petaluma - Hilton-Proposed, Pismo Beach - Hilton-Sea Point, Pismo Beach - Holiday Inn, Pismo Beach - Hotel-Proposed, Pismo Beach - Pismo II, Pismo Beach - Fairfield Inn, Placentia - Residence Inn, Placentia - Howard Hughes Center, Playa Vista - Pleasant Hill Inn, Pleasant Hill - Residence Inn, Pleasant Hill - Club Hilton Hotel-Proposed, Pleasanton - Compri Hotel, Pleasanton - Courtyard by Marriott, Pleasanton - Hilton, Pleasanton - Holiday Inn, Pleasanton - Pleasanton Creek, Pleasanton - Shilo Inn - Hilltop, Pomona - Compri Hotel, Rancho Bernardo - Radisson Suites, Rancho Bernardo - Comfort Inn Motel, Rancho Cordova - Courtyard by Marriott, Rancho Cordova - Economy Inn, Rancho Cordova - El Rancho, Rancho Cordova - Quality Suites-Proposed, Rancho Cordova - Sheraton Sunrise, Rancho Cordova - Marriott Rancho Las Palmas, Rancho Mirage - Mission Hills Hotel, Rancho Mirage - Resort Hotel-Proposed, Rancho Mirage - Westin Mission Hills Resort, Rancho Mirage - Bridge Bay Resort, Redding - Grand Manor Inn, Redding - La Quinta Inn, Redding - Motel 6, Redding - Motel Orleans, Redding - Red Lion Inn, Redding - Shasta Inn, Redding - Portofino Hotel & Yacht Club, Redondo Beach - Sheraton, Redondo Beach - Sofitel Redwood Shores, Redwood - Days Inn, Richmond - Best Western Carraige Inn, Ridgecrest - Days Inn, Riverside - Mission Inn-Proposed, Riverside - Omni Mission Inn, Riverside - Sheraton Hotel, Riverside - Red Lion Inn, Rohnert Park - Crown Sterling Suites, S.San Fransicso - Allstar Inn, Sacramento - Arco Arena II-Proposed, Sacramento - Arco Park, Sacramento - Catering Center - Proposed, Sacramento - Clarion Hotel, Sacramento - Compri Hotel-Proposed, Sacramento - Courtyard by Marriott, Sacramento - Courtyard by Marriott-S. Natomas, Sacramento - Hilton Hotel, Sacramento - Holiday Inn-Capital Plaza, Sacramento - Hotel-Proposed, Sacramento - Hyatt Arbitrat, Sacramento - Hyatt Regency, Sacramento - La Quinta Hotel, Sacramento - Motel Orleans, Sacramento - Radisson Hotel, Sacramento - Red Lion Inn, Sacramento - Residence Inn, Sacramento - Sacramento Inn, Sacramento - Sierra Inn, Sacramento - Sterling Hotel, Sacramento - Travelers Inn, Sacramento - Woodlake Inn, Sacramento - Harvest Inn, Saint Helena - Courtyard by Marriott, San Bruno - San Carlos Motel Development, San Carlos - Atlas Hotels/Mission Valley Inn, San Diego - Best Western Seven Seas Motor Lodge, San Diego - Budget Motel of America, San Diego - Catamaran Resort Hotel, San Diego - Center Pointe Development, San Diego - Comfort Inn, San Diego - Courtyard by Marriott-Mira Mesa, San Diego - Doubletree Hotel, San Diego - Embassy Suites, San Diego - Executive Lodge, San Diego - Hanalei Hotel, San Diego - Harbor Island Hotel-Proposed, San Diego - Harborside Inn-Point Loma, San Diego - Harbortown Marina Resort, San Diego - Holiday Inn Montgomery Airport, San Diego - Holiday Inn-Embarcadero, San Diego - Holiday Inn-Harbor View, San Diego - Horton Grand Saddlery, San Diego - Horton Park Plaza Hotel, San Diego - Howard Johnson Hotel, San Diego - Inter-Continental Hotel & Marina, San Diego - Kings Inn, San Diego - La Jolla Village Inn, San Diego - La Quinta Hotel, San Diego - Marriott Hotel-Mission Valley, San Diego - Marriott Twin Towers and Marina, San Diego - Mission Valley Inn, San Diego - Omni Hotel, San Diego - Radisson Hotel, San Diego - Ramada Inn, San Diego - Ramada Limited Suites, San Diego - Ramada Old Town, San Diego - Ramada Rancho Penasquitos, San Diego - Red Lion Inn, San Diego - Regency Plaza Hotel, San Diego - San Diego Marriott, San Diego - Seven Seas Lodge, San Diego - Sheraton Grand, San Diego - Sheraton Harbor Island East, San Diego - Super 8-Point Loma, San Diego - Symphony Towers, San Diego - Town and Country Hotel, San Diego - Travelodge Hotel Plaza, San Diego - U.S. Grant Hotel, San Diego - Westin-Proposed, San Diego - Abagail Inn, San Francisco - Bellevue Hotel, San Francisco - Cable Motor Inn, San Francisco - California Cafe, San Francisco - Campton Place, San Francisco - Cartwright Hotel, San Francisco - Chancellor Hotel, San Francisco - Clarion Inn-San Francisco Airport, San Francisco - Comfort Inn, San Francisco - Courtyard by Marriott-Airport, San Francisco - Embarcadero Inn, San Francisco - Fairmont Hotel, San Francisco - Grand Hyatt, San Francisco - Grosvenor Clift Hotel, San Francisco - Harbor Court Hotel, San Francisco - Hilton Hotel, San Francisco - Holiday Inn - Union Square, San Francisco - Holiday Inn Crowne Plaza, San Francisco - Holiday Inn-Civic Center, San Francisco - Holiday Inn-Fisherman's Wharf, San Francisco - Holiday Inn-Golden Gateway, San Francisco - Holiday Inn-South, San Francisco - Holiday Lodge, San Francisco - Hotel Diva, San Francisco - Hotel Meridien, San Francisco - Hotel Union Square, San Francisco - Hotel-Proposed, San Francisco - Hyatt Fisherman's Wharf, San Francisco - Hyatt Regency Embarcadero, San Francisco - Inn at Fisherman's Wharf, San Francisco - Inn at the Opera, San Francisco - Inn-Proposed, San Francisco - Juliana Hotel, San Francisco - King George Hotel, San Francisco - La Quinta Inn, San Francisco - La Quinta-Airport, San Francisco - Lambourne Hotel, San Francisco - Laurel Motor Inn, San Francisco - Majestic Hotel, San Francisco - Manx Hotel, San Francisco - Mark Twain, San Francisco - Marriott, San Francisco - Marriott San Francisco-Proposed, San Francisco - Marriott-Airport, San Francisco - Orchard Hotel, San Francisco - Pan Pacific Hotel, San Francisco - Parc 55 Hotel, San Francisco - Park Hyatt Hotel, San Francisco - Portman Hotel, San Francisco - Prescott Hotel, San Francisco - Queen Anne Hotel, San Francisco - Ramada Hotel, San Francisco - Regis Hotel, San Francisco - Ritz-Carlton Hotel, San Francisco - San Franciscan, San Francisco - San Francisco Hotel, San Francisco - Savoy Hotel, San Francisco - Sheraton Palace Hotel, San Francisco - Sheraton-Fisherman's Wharf, San Francisco - Sir Francis Drake Hotel, San Francisco - Stanford Court, San Francisco - Stouffer Stanford Court Hotel, San Francisco - Super 8-Fisherman's Wharf, San Francisco - Westin St. Francis, San Francisco - Crowne Sterling Suites, San Francisco - South - Olympic Club Golf Course, San Francisco/San Mateo - Budget Inn, San Jose - Courtyard by Marriott, San Jose - Cozy 8 Arena Hotel, San Jose - Fairmont Hotel, San Jose - Holiday Inn, San Jose - Ramada Renaissance, San Jose - Red Lion Inn, San Jose - Islander Motel, San Leandro - Apple Farm Inn, San Luis Obispo - Embassy Suites, San Luis Obispo - Holiday Inn, San Luis Obispo - Los Nomados Resort, San Luis Obispo - Twin Oaks Golf Course, San Marcos - Dunfey San Mateo Hotel, San Mateo - Compri Hotel-Proposed, San Pedro - Embassy Suites Hotel, San Rafael - Marriott Hotel-Proposed, San Ramon - Residence Inn, San Ramon - AAA Inn, Santa Ana - California Palms Hotel, Santa Ana - Comfort Inn, Santa Ana - Compri Hotel, Santa Ana - Embassy Suites Santa Ana, Santa Ana - Executive Lodge, Santa Ana - Howard Johnson, Santa Ana - Quality Inn, Santa Ana - Ramada Inn-Orange County, Santa Ana - El Encanto Hotel, Santa Barbara - Fess Parker's Red Lion Resort, Santa Barbara - Four Seasons Hotel, Santa Barbara - Montecito Inn, Santa Barbara - San Ysidro Ranch, Santa Barbara - Santa Barbara Inn, Santa Barbara - Biltmore Hotel & Suites, Santa Clara - Days Inn, Santa Clara - Doubletree Hotel, Santa Clara - Embassy Suites, Santa Clara - Inn At Saratoga, Santa Clara - Marriott Hotel, Santa Clara - Quality Suites Hotel, Santa Clara - Dream Inn, Santa Cruz - Hilton, Santa Maria - Motel 6, Santa Maria - Econo Lodge-Proposed, Santa Monica - Holiday Inn, Santa Monica - Holiday Inn at the Pier, Santa Monica - Park Hyatt Hotel, Santa Monica - Santa Monica Beach Hotel, Santa Monica - Santa Monica/Slatkin, Santa Monica - Allstar Inn, Santa Rosa - Doubletree Hotel, Santa Rosa - Fountaingrove Inn, Santa Rosa - Holiday Inn, Santa Rosa - Round Barn Inn-Proposed, Santa Rosa - Sheraton Round Barn, Santa Rosa - Days Inn, Seaside - Embassy Suites, Seaside - Seaside 8 Motel, Seaside - Valley Radisson, Sherman Oaks - Red Lion, Sonoma - Sonoma Mission Inn, Sonoma - Holiday Inn - Proposed, Sonora - Timberwolf Lodge, South Lake Tahoe - Holiday Inn, South San Francisco - Hotel-Proposed, South San Francisco - Meadowood Resort, St. Helena - Hilton Hotel, Stockton - Holiday Inn, Stockton - La Quinta Hotel, Stockton - Motel Orleans, Stockton - Paradise Point Manna, Stockton - Sheraton-Proposed, Stockton - Hilton, Sunnyvale - Holiday Inn, Sunnyvale - Neighborhood Suites, Sunnyvale - Ramada Inn, Sunnyvale - Sunnyvale Hilton, Sunnyvale - Temecula Creek Inn, Temecula Creek - Westlake Plaza Hotel, Thousand Oaks - Courtyard by Marriott, Torrance - Holiday Inn, Torrance - Marriott Hotel, Torrance - Residence Inn, Torrance - Holiday Inn, Union City - MCA Hotel-Proposed, Universal City - Comfort Inn, Vallejo - Holiday Inn, Van Nuys - La Quinta Hotel, Ventura - Ocean Resorts, Ventura - Sheraton, Ventura - Greentree Inn, Victorville - Doubletree Inn, Walnut Creek - Parkside Hotel, Walnut Creek - Ramada Renaissance Hotel, Walnut Creek - Royce Hotel-Proposed, Walnut Creek - Walnut Creek Project, Walnut Creek - Hampton Inn, West Covina - Le Bel Age, West Hollywood - Le Dufy, West Hollywood - Le Mondrian Hotel, West Hollywood - Hilton, Whittler - Hotel & Conference Center-Proposed, Woodland - Marriott Hotel-Woodland Hills, Woodland Hills - Skylonda Retreat, Woodside - Compri Hotel-Proposed, Yorba Linda - Marriott-Tenaya Lodge, Yosemite - Motel Orleans, Yuba City Colorado - Days Inn, Arapahoe - Continental Inn, Aspen - Ritz-Carlton Hotel-Proposed, Aspen - Hampton Inn, Aurora - Holiday Inn, Aurora - Radisson Hotel, Aurora - Radisson Southeast, Aurora - Raffles Hotel, Aurora - Comfort Inn, Avon - Boulder Hotel-Downtown, Boulder - Clarion Hotel, Boulder - Courtyard by Marriott, Boulder - Doubletree Hotel-Proposed, Boulder - Hilton Harvest House, Boulder - Holiday Inn, Boulder - Interlocken Conference Resort-Prop., Boulder - Proposed Golf Course, Boulder - Residence Inn, Boulder - Hilton, Breckenridge - Ski Lodge-Proposed, Breckenridge - Interlocken Conference Center, Broomfield - Interlocken Conference Center-Prop., Broomfield - Embassy Suites, Colorado Springs - Hilton, Colorado Springs - Howard Johnson, Colorado Springs - Le Baron Hotel, Colorado Springs - Marriott, Colorado Springs - Quality Inn, Colorado Springs - Red Lion Inn, Colorado Springs - Sheraton Inn, Colorado Springs - Grand Butte Hotel, Crested Butte - Best Western Regency, Denver - Brown Palace, Denver - Clarion Hotel-Denver Airport, Denver - Courtyard by Marriott-Airport, Denver - Courtyard by Marriott-Southeast, Denver - Days Inn, Denver - Denver Airport Hilton Inn, Denver - Doubletree Hotel, Denver - Embassy Suites, Denver - Embassy Suites-Airport, Denver - Hilton-Technical Center, Denver - Holiday Inn-Downtown, Denver - Holiday Inn-West, Denver - Jackson's Hole Sport, Denver - Marriott-Southeast, Denver - Marriott-West, Denver - Radisson Hotel, Denver - Red Lion Hotel, Denver - Regency Inn, Denver - La Quinta Inn, Denver - Airport - La Quinta, Denver - South - Red Lion Inn, Durango - Hilton-Denver, Englewood - Residence Inn, Englewood - Scanticon Conference Center, Englewood - Marriott Hotel-Proposed, Fort Collins - Holiday Inn, Golden - Marriott-Denver West, Golden - Ramada Inn, Grand Junction - Sheraton-Proposed, Keystone - Compri Hotel, Lakewood - Hampton Inn, Lakewood - Sheraton Inn, Steamboat Springs - Proposed Hotel, Telluride - Days Inn, Vail - Doubletree Hotel, Vail - Lodge at Vail, Vail - Marriott's Mark Resort, Vail - Westin Vail Resort, Vail - Ramada Hotel, Westminster - Winter Park Resort, Winter Park Connecticut - Chester Inn-Chester, Chester - Inn-Proposed, Chester - Super 8-Proposed, Cromwell - Danbury Hilton & Towers, Danbury - Residence Inn, Danbury - Holiday Inn, Darien - Howard Johnson Lodge, Darien - Ramada Inn, Darien - Holiday Inn, East Hartford - Howard Johnson Lodge, East Lyme - Days Inn-Proposed, Enfield - Greenwich Habor Inn, Greenwich - Howard Johnson Lodge, Greenwich - Showboat Inn, Greenwich - Hotel-Proposed, Groton - Hilton Hotel, Hartford - Holiday Inn-Proposed, Hartford - Motel 6, Hartford - Ramada Inn, Hartford - Sheraton Tobacco Valley Inn, Hartford - Summit Hotel, Hartford - Super 8 Motel, Hartford - Susse Chalet, Hartford - Residence Inn By Marriott, Meriden - Holiday Inn, Milford - Susse Chalet, Milford - Howard Johnson Lodge, Mystic - Mystic Ramada Inn, Mystic - Holiday Inn, New Britain - Ramada Inn, New Britain - Colony Inn, New Haven - Holiday Inn, New Haven - Howard Johnson, New Haven - Quality Inn, New Haven - Residence Inn, New Haven - Radisson Hotel, New London - Best Western-Proposed, New Milford - Courtyard by Marriott, Norwalk - Holiday Inn, Norwalk - Howard Johnson, Norwalk - Ramada Inn, Norwalk - Susse Chalet, Rocky Hill - Ramada Hotel-Proposed, Shelton - Residence Inn - Shelton, Shelton - Heritage Village, Southbury - Southbury Hotel, Southbury - Susse Chalet, Southington - Days Inn, Stamford - Executive Hotel, Stamford - Harley Hotel, Stamford - Holiday Inn-Crowne Plaza, Stamford - Inn at Mill River, Stamford - Le Pavillon Hotel, Stamford - Marriott, Stamford - Radisson Tara Hotel, Stamford - Sheraton, Stamford - Best Western-Proposed, Stratford - Stratford Motor Lodge, Stratford - Marriott Hotel, Trumbull - Courtyard by Marriott, Wallingford - Susse Chalet, Wallingford - Howard Johnson Plaza Hotel, Waterbury - Super 8-Proposed, Waterbury - Residence Inn-Proposed, Waterford - Holiday Inn, Westbury - The Island Inn, Westbury - Courtyard by Marriott, Windsor - Sheraton Tobacco Valley Inn, Windsor - Holiday Inn-Proposed, Windsor Locks Delaware - Wilmington Hilton, Claymont - Rusty Rudder, Dewey Beach - Residence Inn-Proposed, Newark - Hilton Hotel, Wilmington - Hotel-Proposed, Wilmington - Marriott Suites, Wilmington - Residence Inn-Proposed, Wilmington District of Columbia - All Suite Hotel - Proposed, Washington - Bellevue Hotel, Washington - Canterbury Hotel, Washington - Capital Hilton, Washington - Capitol Hill Hotel, Washington - Castleton Hotel, Washington - Comfort Inn, Washington - Convention Center Inn, Washington - Dupont Plaza, Washington - Embassy Row Hotel, Washington - Fairfax Hotel, Washington - Fairmont Hotel, Washington - Four Seasons Hotel, Washington - General Scott Inn, Washington - Georgetown Hotel, Washington - Grand Hotel, Washington - Grand Hyatt, Washington - Hampshire House, Washington - Harambee House, Washington - Hay Adams Hotel, Washington - Holiday Inn Crowne Plaza, Washington - Holiday Inn-Capitol, Washington - Holiday Inn-Georgetown, Washington - Holiday Inn-Governor House, Washington - Hotel Washington, Washington - Howard Johnson, Washington - Hyatt Regency-Capitol, Washington - Hyatt-Convention Center, Washington - International Inn, Washington - Intrigue Hotel, Washington - Jefferson Hotel, Washington - Lombardy Tower Apartment Hotel, Washington - Madison Hotel, Washington - Manger Annapolis Hotel, Washington - Manger Hamilton Hotel, Washington - Manger Hay Adams Hotel, Washington - Marriott-Key Bridge, Washington - Mayflower Hotel, Washington - Omni Georgetown Hotel, Washington - Omni Shoreham Hotel, Washington - Park Terrace Hotel, Washington - Phoenix Park Hotel, Washington - Plaza Hotel, Washington - Potomac Hotel Group, Washington - Quality Inn-Capitol Hill, Washington - Quality Inn-Downtown, Washington - Ramada Inn-Central, Washington - Ramada Renaissance Hotel, Washington - Ritz-Carlton, Washington - River Inn, Washington - Riverside Towers, Washington - Sheraton City Centre, Washington - Sheraton Grand Hotel, Washington - Shoreham Hotel, Washington - St. James, Washington - State Plaza, Washington - Statler Hilton Hotel, Washington - Washington Hilton, Washington - Washington Plaza, Washington - Watergate Hotel, Washington - Wyndham Bristol Hotel, Washington Florida - Holiday Inn, Altamonte Springs - La Quinta, Altamonte Springs - Turnberry Isle Resort, Aventura - Boca Raton Hotel and Club, Boca Raton - Boca West, Boca Raton - Deerfield Beach Hilton, Boca Raton - Embassy Suites, Boca Raton - Park Place Suite Hotel, Boca Raton - Petite Suites, Boca Raton - Residence Inn, Boca Raton - Days Inn, Brandenton - South Seas Resort, Captive Island - Days Inn, Clearwater - Days Inn-Proposed, Clearwater - Holiday Inn - Central/Clearwater, Clearwater - La Quinta Inn, Clearwater - Sheraton Sand Key Hotel, Clearwater - Holiday Inn - Gulfview South, Clearwater Beach - Holiday Inn - Surfside North, Clearwater Beach - Howard Johnson, Clermont - Econolodge, Cocoa Beach - Hilton Hotel, Cocoa Beach - Holiday Inn, Cocoa Beach - Howard Johnson, Cocoa Beach - Perkins Restaurant, Cocoa Beach - Coconut Grove Hotel, Coconut Grove - Mayfair House, Coconut Grove - Proposed Hampton Inn, Coconut Grove - Biltmore Hotel, Coral Gables - Holiday Inn, Coral Gables - Holiday Inn (Court), Coral Gables - Plantation Hotel, Crystal River - Sheraton Inn, Cypress Gardens - Budget Inn, Davenport - Daytona Beach Surfside Regency, Daytona Beach - Howard Johnson, Daytona Beach - La Quinta Inn, Daytona Beach - Pirates Cove, Daytona Beach - Sheraton Inn, Daytona Beach - Crown Sterling Suites, Deerfield Beach - Days Inn, Deerfield Beach - Hilton Hotel, Deerfield Beach - Horizon Club, Deerfield Beach - Sheraton Inn, Deland - Hilton Hotel, Disney World - Holiday Inn, Edgewater - Knights Inn, Florida City - AmeriSuites Hotel-Proposed, Fort Lauderdale - Bahia Mar Hotel, Fort Lauderdale - Comfort Suites, Fort Lauderdale - Compri Hotel-Proposed, Fort Lauderdale - Costa Del Sol, Fort Lauderdale - Crown Sterling Suites, Fort Lauderdale - Days Inn, Fort Lauderdale - Embassy Suites Hotel, Fort Lauderdale - Executive House, Fort Lauderdale - Hilton Hotel, Fort Lauderdale - Hilton Inverrary, Fort Lauderdale - Holiday Inn - Galleria, Fort Lauderdale - Holiday Inn - North Beach, Fort Lauderdale - Holiday Inn-Proposed, Fort Lauderdale - Marriott Harbor Beach Hotel, Fort Lauderdale - Marriott Hotel & Marina, Fort Lauderdale - Marriott Hotel-Cypress Road, Fort Lauderdale - Pier 66 Hotel and Marina, Fort Lauderdale - Port Everglades Hotel, Fort Lauderdale - Stouffer Hotel, Fort Lauderdale - Days Inn, Fort Meyers - Courtyard by Marriott, Fort Myers - Holiday Inn, Fort Myers - La Quinta Hotel, Fort Myers - Sheraton Harbor Place-Proposed, Fort Myers - Sheraton Motor Inn, Fort Myers - Proposed Hotel, Fort Myers Beach - American Way, Fort Pierce - Days Inn, Fort Walton Beach - Holiday Inn - Airport, Fort.Lauderdale - Days Inn-University Center, Gainesville - Fairfield Inn, Gainesville - Howard Johnson Lodge-I-75, Gainesville - La Quinta Hotel, Gainesville - University Centre Hotel, Gainesville - Holiday Inn, Hialeah - Motel, Hillsboro Beach - Days Inn, Hollywood - Diplomat Hotel, Hollywood - Holiday Inn, Hollywood - Quality Suites - Oceanside, Indiatlantic - Hilton Inn, Inverrary - Best Inn, Jacksonville - Bradbury Suites-Proposed, Jacksonville - Compri Hotel-Proposed, Jacksonville - Courtyard By Marriott, Jacksonville - Days Inn, Jacksonville - Doubletree Club Hotel, Jacksonville - Hampton Inn, Jacksonville - Hotel-Proposed, Jacksonville - Jacksonville Hotel, Jacksonville - Residence Inn, Jacksonville - Sheraton Hotel, Jacksonville - Wyndham Lakes Hotel, Jacksonville - Sheraton Beach Hotel, Jensen Beach - Howard Johnson, Juno Beach - Hilton Hotel, Jupiter - Key Biscayne, Key Biscayne - Howard Johnson Lodge, Key Largo - Casa Marina Marriott, Key West - Fairfield Inn, Key West - Hampton Inn-Roosevelt Rd., Key West - Holiday Inn, Key West - Hyatt Hotel, Key West - La Concha Holiday Inn, Key West - Pier House Inn and Beach Club, Key West - Reach Hotel, Key West - Santa Maria Hotel, Key West - Timeshare Resort, Key West - Best Western Vacation Lodge, Kissimmee - Days Inn, Kissimmee - Days Inn West, Kissimmee - Days Lodge, Kissimmee - Howard Johnson Plaza Hotel, Kissimmee - Howard Johnson's, Kissimmee - KOA Campground, Kissimmee - Old Town Retail Complex, Kissimmee - Quality Suites, Kissimmee - Quality Suites-Maingate, Kissimmee - Save Inn, Kissimmee - Sheraton Lakeside, Kissimmee - Suite Hotel-Proposed, Kissimmee - Wynfield Inn, Kissimmee - Days Inn, Lake Buena Vista - Embassy Suites-Proposed, Lake Buena Vista - Hilton Hotel-Disney World, Lake Buena Vista - Marriott Orlando World Center, Lake Buena Vista - Days Inn, Lake City - Flagship Inn, Lake County - Travelodge Motel, Lake County - Lake Park Inn, Lake Park - Holiday Inn, Lake Placid - Hampton Inn-Proposed, Lakeland - Hotel-Proposed, Lakeland - Howard Johnson, Lakeland - Resort Hotel-Proposed, Lakeland - Resort-Imperial Lake-Prpsd., Lakeland - Proposed Hotel, Lee County - Sonesta Sanibel Harbour, Lee County - Holiday Inn, Lido Beach - Holiday Inn, Longboat Kay - Holiday Inn - Madiera Beach, Madiera - Howard Johnson, Marathon - Radisson Suite Resort, Marco Island - Holiday Inn, Marianna - Oceanfront Hotel, Melbourne - Quality Suites, Melbourne - Bahia Mar Hotel & Yachting Club, Miami - Biscayne Bay Marriott, Miami - Courtyard by Marriott, Miami - Crown Sterling Suites, Miami - Doral Ocean Beach Resort, Miami - Fairfield Inn, Miami - Hilton Hotel-Proposed, Miami - Holiday Inn Civic Center, Miami - Holiday Inn-Airport (Le Juene Rd.), Miami - Holiday Inn-Calder, Miami - Howard Johnson Hotel-Broad Causeway, Miami - Howard Johnson Hotel-Port of Miami, Miami - Howard Johnson Lodge-Golden Glades, Miami - Howard Johnson Lodge-Int'l Airport, Miami - Hyatt Regency Hotel, Miami - Inter-Continental Hotel, Miami - Jockey Club, Miami - Marriott Hotel-Downtown, Miami - Miami Airport Ramada, Miami - Proposed AmeriSuites, Miami - Propsed Hampton Inn, Miami - Residence Inn-Proposed, Miami - Sheraton River House, Miami - Sofitel Miami, Miami - Alexander Hotel, Miami Beach - Art Deco Hotel, Miami Beach - Cresent Timeshare, Miami Beach - Delano Hotel, Miami Beach - Doral Beach Hotel, Miami Beach - Eden Roc Hotel, Miami Beach - Fontainebleu Hotel, Miami Beach - Holiday Inn, Miami Beach - Holiday Inn-Central, Miami Beach - Holiday Inn-North, Miami Beach - Holiday Inn-Oceanside, Miami Beach - Holiday Inn-South, Miami Beach - Hotel-Proposed, Miami Beach - Nautilus Club Hotel, Miami Beach - Palm Resort on the Ocean, Miami Beach - Pan American Radisson, Miami Beach - Proposed Hotel, Miami Beach - Shelborne Beach Hotel, Miami Beach - Sheraton Beach, Miami Beach - Solymar Hotel-Proposed, Miami Beach - Quality Inn, Naples - Quality Inn-Gulfcoast, Naples - Registry Hotel at Pelican Bay, Naples - Registry Resort-Proposed, Naples - Super 8 Motel-Proposed, Naples - World Tennis Resort, Naples - Hyatt Newporter Hotel, Newport Beach - Hilton Hotel, North Redington Beach - Masters Economy Inn, North Seffner - Amfac Hotel, Orlando - Army lodging-Proposed, Orlando - Comfort Suites Hotel, Orlando - Compri Hotel-Airport-Proposed, Orlando - Compri Hotel-Proposed, Orlando - Courtyard - Orlando Airport, Orlando - Days Inn, Orlando - Days Inn and Lodge-Florida Mall, Orlando - Days Inn Civic Center, Orlando - Days Inn East of Universal Studios, Orlando - Days Inn-E/O Magic Kingdom, Orlando - Days Inn-Proposed, Orlando - Days Inn-Sandlake Road, Orlando - Days Suites-E/O Magic Kingdom, Orlando - Dolphin Hotel-Proposed, Orlando - Dutch Inn, Orlando - Embassy Suites, Orlando - Fairfield Inn, Orlando - Fairfield Inn-Airport, Orlando - Grand Cypress Resort, Orlando - Hampton Inn - Proposed, Orlando - Heritage Inn, Orlando - Holiday Inn Central Park, Orlando - Holiday Inn Crowne Plaza, Orlando - Holiday Inn-Airport, Orlando - Holiday Inn-International Drive, Orlando - Holiday Inn-Lee Road, Orlando - Holiday Inn-Maingate West, Orlando - Holiday Inn-Orange Blossom Trail, Orlando - Howard Johnson - Walt Disney World, Orlando - Howard Johnson-Kirkman, Orlando - Howard Johnson-Lake Holden, Orlando - Howard Johnson-Maingate, Orlando - Hyatt Grand Cypress, Orlando - Hyatt Regency Grand Cypress, Orlando - Hyatt-W. Irlo Bronson Mem. Hwy., Orlando - International Inn, Orlando - Kon Tiki Village, Orlando - La Quinta Hotel-Airport, Orlando - La Quinta Inn, Orlando - Omni Orlando, Orlando - Orlando Airport Hotel-Proposed, Orlando - Orlando Hamiton, Orlando - Orlando Plaza Hotel, Orlando - Orlando Twin Towers Hotel, Orlando - Park Suite Hotel-Proposed, Orlando - Peabody Hotel, Orlando - Princess Hotel and Spa, Orlando - Proposed Wellesley Inn, Orlando - Quality Inn, Orlando - Radisson Hotel-Aquatic Center, Orlando - Regency Inn, Orlando - Residence Inn By Marriott, Orlando - Rodeway Inn, Orlando - Save Inn, Orlando - Sheraton Jetport Inn, Orlando - Sheraton Lakeside, Orlando - Sheraton Twin Towers, Orlando - Sonesta Village Resort, Orlando - Stouffer Orlando Resort, Orlando - Swan Hotel-Proposed, Orlando - Thriftway Motel, Orlando - Wynfield Inn, Orlando - American Way, Osceola - Sheraton Gateway Motel, Osceola - Brazilian Court Hotel, Palm Beach - Heart of Palm Beach Hotel, Palm Beach - Hilton Inn, Palm Beach - Palm Court, Palm Beach - Holiday Inn, Palm Beach Garden - Days Inn, Panama City - Marriott's Bay Point, Panama City - Super 8, Panama City - Days Inn, Pensacola - Hilton Hotel, Pensacola - La Quinta Hotel, Pensacola - Residence Inn, Pensacola - Super 8, Pensacola - Proposed Hampton Inn, Pensacola Beach - Comfort Inn, Perdido Key - La Quinta, Pinellas County - Courtyard by Marriott, Plantation - Holiday Inn Plantation, Plantation - Sheraton Suites, Plantation - Days Inn, Pompano Beach - Palm-Aire Spa Resort, Pompano Beach - Lodge & Bath Club, Ponte Verde - Howard Johnson, Punta Gorda - Days Inn, Riviera Beach - Safety Harbor Spa, Safety Harbor - Holiday Inn, Saint Augustine - Howard Johnson, Saint Augustine - Courtyard by Marriott, Saint Petersburg - Don Ceahsar Beach Resort, Saint Petersburg - Hilton Hotel, Saint Petersburg - Howard Johnson, Saint Petersburg - Ramada Inn, Saint Petersburg - Residence Inn, Saint Petersburg - Saint Petersburg Motel, Saint Petersburg - Sheraton Hotel and Marina, Saint Petersburg - Vinoy Park Hotel, Saint Petersburg - Countryside Inn, Sanford - Days Inn, Sanford - Holiday Inn, Sanford - Azure Tides Resort-Proposed, Sarasota - Days Inn, Sarasota - Holiday Inn-Lido Beach, Sarasota - Proposed Hotel, Sarasota - Holiday Inn, Sebring - Embassy Suites, Singer Island - Hilton, Singer Island - Econo Lodge, Starke - Radisson Pan American Hotel, Sunny Isles - Best Inn, Tallahassee - Courtyard by Marriott, Tallahassee - Days Inn-Tallahassee, Tallahassee - American Way, Tampa - Courtyard by Marriott, Tampa - Days Inn, Tampa - Embassy Suites-Airport, Tampa - Hampton Inn-Airport, Tampa - Hilton-Airport, Tampa - Holiday Inn, Tampa - Holiday Inn Sahal Park, Tampa - Holiday Inn-Airport, Tampa - Manger Motor Inn, Tampa - Marriott Hotel, Tampa - Omni Tampa Hotel at Westshore, Tampa - Ramada Inn, Tampa - Rodeway Inn, Tampa - Saddlebrook Resort, Tampa - Sheraton Grand West, Tampa - Master Economy Inn, Tampa-East(Selfner) - Master Economy Inn, Tampa-North(Zephyrhills) - Days Inn, Vero Beach - Holiday Inn-Countryside, Vero Beach - Holiday Inn-Oceanside, Vero Beach - Saddlebrook Resort, Wesley Chapel - Courtyard by Marriott, West Melbourne - Airport Centre, West Palm Beach - Courtyard by Marriott, West Palm Beach - Days Inn, West Palm Beach - Field Palm Hotel, West Palm Beach - Hilton-Airport, West Palm Beach - Howard Johnson Lodge, West Palm Beach - Hyatt Hotel of the Palm Beaches, West Palm Beach - Royce Hotel, West Palm Beach - Masters Economy Inn, Zephyrhills Georgia - Atlanta Radisson Hotel, Atlanta - Atlanta Terrace Motel, Atlanta - Comfort Inn, Atlanta - Compri Hotel, Atlanta - Courtyard By Marriott-Airport North, Atlanta - Courtyard by Marriott-Airport South, Atlanta - Courtyard by Marriott-Cumberland, Atlanta - Courtyard by Marriott-Executive Pk., Atlanta - Courtyard by Marriott-Gwinnett, Atlanta - Courtyard by Marriott-Jimmy Carter, Atlanta - Courtyard by Marriott-PeachtrDunwdy, Atlanta - Courtyard by Marriott-Perimeter, Atlanta - Courtyard by Marriott-Rosewell, Atlanta - Courtyard by Marriott-Windy Hill, Atlanta - Cresthil Inn-Proposed, Atlanta - Days Inn, Atlanta - Days Inn - Northlake, Atlanta - Doubletree Hotel, Atlanta - Embassy Suites-Atlanta Perimeter, Atlanta - Embassy Suites-Buckhead, Atlanta - Embassy Suites-Galleria, Atlanta - F.W.W. Hotel, Atlanta - Fairfield Inn-Airport, Atlanta - Fairfield Inn-Gwinnett, Atlanta - Fairfield Inn-North Lake, Atlanta - Fairfield Inn-Northwest, Atlanta - Fairfield Inn-Peachtree, Atlanta - Fairfield Inn-South Lake, Atlanta - Hampton Inn-Airport, Atlanta - Hilton Inn, Atlanta - Holiday Inn Crowne Plaza, Atlanta - Holiday Inn-I-20 East, Atlanta - Holiday Inn-I-85 Monroe Drive, Atlanta - Holiday Inn-Perimeter Dunwooody, Atlanta - Hotel-Downtown-Proposed, Atlanta - Hotel-Proposed, Atlanta - Howard Johnson Hotel-Hartsfield, Atlanta - Howard Johnson-Airport, Atlanta - Howard Johnson-Northeast, Atlanta - Howard Johnson-Northwest, Atlanta - Howard Johnson-South, Atlanta - Hyatt Atlanta-Airport, Atlanta - La Quinta - Stone Mountain, Atlanta - La Quinta Hotel, Atlanta - La Quinta Hotel-West, Atlanta - Marriott Atlanta Airport, Atlanta - Marriott Hotel, Atlanta - Marriott Hotel-Downtown, Atlanta - Marriott Marquis, Atlanta - Marriott Suites Hotel-Proposed, Atlanta - Marriott-Perimeter, Atlanta - Master Economy Inn, Atlanta - Motel 6, Atlanta - Neighborhood Inn, Atlanta - Omni International Hotel, Atlanta - Perimeter North Inn, Atlanta - Proposed AmeriSuites, Atlanta - Quality Inn-Central, Atlanta - Radisson Inn, Atlanta - Ramada Inn-Perimeter, Atlanta - Residence Inn by Marriott-Dunwoody, Atlanta - Residence Inn-Airport, Atlanta - Residence Inn-Buckhead, Atlanta - Residence Inn-Northwest, Atlanta - Sheraton Century Center, Atlanta - Sheraton-Airport, Atlanta - Sporting Club at the Concourse, Atlanta - Stouffer Hotel-Proposed, Atlanta - Swissotel, Atlanta - Terrace Motel, Atlanta - Waverly Hotel, Atlanta - Westin Lenox Hotel, Atlanta - Westin Peachtree Plaza, Atlanta - Wyndham Garden Hotel, Atlanta - Hyatt Hotel, Atlanta Airport - Hampton Inn, Atlanta-Buckhead - Courtyard by Marriott, Augusta - Landmark Hotel, Augusta - Masters Economy Inn - Gordon Hwy., Augusta - Masters Economy Inn - Warner Robins, Augusta - Masters Economy Inn - Washington Rd, Augusta - Holiday Inn, Brunswick - Super 8, Brunswick - Days Inn, Calhoun - Super 8, Cartersville - Days Inn, Chamblee - Comfort Inn-Proposed, College Park - Holiday Inn Crowne Plaza, College Park - Courtyard by Marriott, Columbus - La Quinta Inn, Columbus - Super 8, Columbus - Best Inn, Dalton - Days Inn, Dalton - Holiday Inn-Proposed, Decatur - Sheraton Hotel, Decatur - Best Western-Perimeter-North, Doraville - Days Inn - Gwinnett, Duluth - Howard Johnson, Forsyth - Holiday Inn-Proposed, Gwinnett County - Holiday Inn, Jekyll Island - Jekyll Island Inn-Proposed, Jekyll Island - Hilton Hotel, Macon - Master Economy Inn, Macon - Best Inn, Marietta - Courtyard by Marriott-Delk Road, Marietta - Lafayette Hotel, Marietta - Hampton Inn, Marrietta (Atlanta) - Master Economy Inn, McDonough - Courtyard by Marriott-Perimeter, Norcross - Motel 6, Norcross - Hilton Hotel, Peachtree Corners - Super 8, Rome - Best Western, Savannah - Courtyard by Marriott, Savannah - Days Inn, Savannah - Days Inn-Bay Street, Savannah - Days Inn-Mall Blvd., Savannah - Fairfield Inn, Savannah - Hotel-Proposed, Savannah - Mulberry Inn, Savannah - Radisson Hotel-Proposed, Savannah - Royal Savannah, Savannah - Sheraton Savannah Resort & C.C., Savannah - Town and Country Motel, Savannah - Days Inn, Savannah Beach - Howard Johnson, Smyrna - Master Economy Inn, Tilton - Courtyard by Marriott-Northlake, Tucker - Master Economy Inn, Warner Robins - Super 8, Warner Robins Hawaii - Hyatt Regency Waikoloa, Hawaii - Mauna Kea Hotel, Hawaii - Kahala Hilton, Honolulu - Plaza Hotel, Honolulu - Waikiki Beachcomber, Honolulu - Waikiki Hobron, Honolulu - Coco Palms Resort, Kauai - Kauai Surf Hotel, Kauai - Westin Kauai-Kauai Lagoons Resort, Kauai - Westin Kauai-Proposed, Kauai - Kona Village, Kona - Royal Sea Cliff Resort, Kona - Westin Kauai at Kauai Lagoon, Lihue - Hyatt Regency, Maui - Marriott Resort, Maui - Maui Lu Hotel, Maui - Maui Surf Hotel, Maui - Westin Maui, Maui - Hawaiian Regent Hotel-Waikiki Beach, Oahu - Hotel-Proposed-Schofield Barracks, Oahu - Hyatt Regency Waikiki, Oahu - Kiahuna Plantation, Poipu Beach, Kauai - Transient Lodging Facilities, Schofield Barracks - Hilton Hawaiian Village, Waikiki - Grand Hyatt Wailea, Wailea Idaho - Compri Hotel, Boise - Holiday Inn, Boise - Holiday Inn-Airport, Boise - Red Lion Inn, Boise - Super 8, Boise - Motel 6, Coeur d'Alene - Super 8, Coeur d'Alene - Proposed Motel, Coure d'Alene - Super 8, Lewiston - Cotton Tree Inn, Pocatello - Super 8, Sand Point - Busterback Ranch, Sawtooth Valley Illinois - Arlington Park Hilton, Arlington Heights - Church Creek, Arlington Heights - Courtyard by Marriott, Arlington Heights - La Quinta Hotel, Arlington Heights - Hampton Inn-Proposed, Bedford Park - Best Inn, Bloomington - Fairfield Inn-Normal, Bloomington - Holiday Inn, Bloomington - Indian Lakes Resort, Bloomington - Ramada Inn, Bloomington - Super 8, Bloomington - Cresthil-Proposed, Buffalo Grove - Holiday Inn, Champaign - La Quinta Inn, Champaign - Radisson Suites - Champaign, Champaign - Suite Hotel-Proposed, Champaign - Super 8, Champaign - Ambassador West Hotel, Chicago - Americana Congress, Chicago - Conrad Hilton Hotel, Chicago - Courtyard by Marriott-Glenview, Chicago - Courtyard by Marriott-Highland, Chicago - Courtyard by Marriott-Lincoln, Chicago - Courtyard by Marriott-O'Hare, Chicago - Courtyard by Marriott-Waukegan, Chicago - Courtyard by Marriott-Woodale, Chicago - Days Inn, Chicago - Executive House, Chicago - Fairfield Inn-Lansing, Chicago - Fairfield Inn-Willowbrook, Chicago - Fairmont Hotel, Chicago - Guest Quarters Hotel, Chicago - Hilton and Towers, Chicago - Hilton-O'Hare, Chicago - Holiday Inn-Merchandise Mart, Chicago - Howard Johnson-O'Hare Int'l Airport, Chicago - Hyatt Regency, Chicago - Hyatt Suites Hotel, Chicago - Inter-Continental Hotel-Proposed, Chicago - La Quinta Inn - Hoffman Est., Chicago - Le Meridien, Chicago - Lenox House, Chicago - Lincoln Hotel, Chicago - Mark Twain Hotel, Chicago - Marriott-O'Hare, Chicago - Mayfair Regent, Chicago - McClurg Holiday Inn, Chicago - McCormick Inn Hotel, Chicago - Morton Hotel, Chicago - Omni Ambassador East, Chicago - Omni Morton Hotel, Chicago - Palmer House Hotel, Chicago - Ramada Inn - Lakeshore, Chicago - Ramada O'Hare, Chicago - Residence Inn-Deerfield, Chicago - Residence Inn-Lombard, Chicago - Sheraton Hotel-Downtown, Chicago - Sheraton Hotel-Proposed, Chicago - Sheraton O'Hare, Chicago - Sheraton Plaza Hotel, Chicago - Summerfield Suites Hotel, Chicago - Swissotel, Chicago - Tremont Hotel, Chicago - Westin Hotel, Chicago - Whitehall Hotel, Chicago - Hilton Hotel, Collinsville - Holiday Inn, Collinsville - Super 8, Columbus - Super 8, Crystal Lake - Super 8, Decatur - Courtyard by Marriott, Deerfield - Embassy Suites, Deerfield - Marriott Suites Hotel, Deerfield - Holiday Inn-Chicago, Des Plaines - Hotel-Proposed, Des Plaines - Compri Hotel-Proposed, Downers Grove - Radisson Suite Hotel, Downers Grove - Best Inn, Effingham - Ramada Inn, Elgin - Hampton Inn, Elk Grove Village - Marriott Suites, Elk Grove Village - Holiday Inn, Elmhurst - Orrington Hotel, Evanston - Drury Inn, Fairview Heights - Conference Center & Resort-Proposed, Fox Lake - Holiday Inn, Freeport - Hotel-Proposed, Gurnee - La Quinta Hotel, Hoffman Estates - Carson Inn, Itasca - Hamilton Wyndham, Itasca - Nordic Hills, Itasca - Holiday Inn, Joliet - Proposed Harrah's Riverboat, Joliet - Days Inn, Kankakee - Holiday Inn, LaSalle - Marriott Hotel, Lincolnshire - Hilton Inn, Lisle - Holiday Inn Crowne Plaza, Lisle - Embassy Suites, Lombard - Holiday Inn, Macomb - Best Inn, Marion - Best Inn, Mount Vernon - Holiday Inn, Mount Vernon - Ramada Inn, Mount Vernon - Courtyard by Marriott, Naperville - Ramada Inn, Naperville - Sheraton Naperville, Naperville - O'Hareport Hotel, Northlake - Courtyard by Marriott, Oakbrook Terrace - Super 8, Okawville - Fairfield Inn, Peoria - Days Inn, Peru - Super 8, Peru - Courtyard by Marriott, Rockford - Fairfield Inn, Rockford - Hampton Inn, Rockford - Embassy Suites, Rosemont - Quality Inn/Clarion, Rosemont - Sheraton Int'l At O'Hare, Rosemont - Holiday Inn, Salem - Compri Hotel, Schaumburg - Embassy Suites, Schaumburg - Marriott Schaumburg, Schaumburg - Holiday Inn, South Beloit - Ramada Renaissance Hotel, Springfield - Sheraton Inn, Springfield - Super 8-East, Springfield - Super 8-South, Springfield - Jumer's Castle, Urbana - Best Inn, Waukegan - Super 8, Waukegan Indiana - Clarion Fourwinds Inn, Bloomington - Holiday Inn, Bloomington - Inn at the Four Winds, Bloomington - Ramada Inn, Bloomington - Harbor Point Resort, Brookville Lake - Super 8, Columbus - Best Inn, Fort Wayne - Hilton, Fort Wayne - Downtown Hotel, Gary - Sheraton, Gary - Holiday Inn, Goshen - Howard Johnson, Hammond - Quality Inn, Hammond - Courtyard by Marriott-Airport, Indianapolis - Courtyard by Marriott-Carmel, Indianapolis - Courtyard by Marriott-Castleton, Indianapolis - Embassy Suites-Claypool Center, Indianapolis - Fairfield Inn-Castleton, Indianapolis - Fairfield Inn-College Park, Indianapolis - Hampton Inn-Proposed, Indianapolis - Hilton Hotel-Airport, Indianapolis - Hilton Inn-Downtown, Indianapolis - Holiday Inn-South, Indianapolis - Holiday Inn-Southeast, Indianapolis - Knights Inn, Indianapolis - Midway Motor Lodge, Indianapolis - Mohawk Inn, Indianapolis - Motel 6, Indianapolis - Proposed Fairfield Inn, Indianapolis - Proposed Residence Inn, Indianapolis - Radisson, Indianapolis - Ramada-Airport, Indianapolis - Wyndham Garden Hotel, Indianapolis - La Quinta Inn, Indianapolis Airport - Hilton Inn, Jeffersonville - Holiday Inn, La Porte - Days Inn, Lafayette - Holiday Inn, Lafayette - Cotton Mill Inn-Proposed, Madison - Hampton Inn, Merrillville - Holiday Inn Express, Merrillville - La Quinta Inn, Merrillville - Hotel Roberts, Muncie - Radisson Hotel, Muncie - Brown County Inn, Nashville - Holiday Inn, Portage - Knights Inn, Richmond - Holiday Inn, South Bend - Howard Johnson, South Bend - Signature Inn, Terre Haute - Super 8, Terre Haute - Courtyard Conversion, Valparaiso - Holiday Inn, Vincennes Iowa - Holiday Inn-Gateway Center, Ames - Holiday Inn, Cedar Falls - Collins Plaza, Cedar Rapids - Holiday Inn, Cedar Rapids - Roosevelt Hotel, Cedar Rapids - Super 8, Davenport - Courtyard by Marriott, Des Moines - Fairfield Inn, Des Moines - Holiday Inn, Des Moines - Holiday Inn - West, Des Moines - Holiday Inn-Downtown, Des Moines - Holiday Inn-North, Des Moines - Ramada Inn, Des Moines - Super 8-North, Des Moines - Super 8-West, Des Moines - Holiday Inn, Iowa City Kansas - Embassy Suites, Kansas City - Fairfield Inn-Overland Park, Kansas City - Holiday Inn-Mission Overland Park, Kansas City - Fairfield Inn, Kansas City West - Holiday Inn, Lawrence - University Inn, Lawrence - Holiday Inn, Manhattan - Courtyard by Marriott, Overland Park - Hampton Inn-Proposed, Overland Park - Marriott Hotel, Overland Park - Park Inn International, Topeka - Super 8, Topeka - Canterbury Inn, Wichita - Former Sheraton Hotel, Wichita - Hilton-East, Wichita - Marriott Hotel, Wichita - Comfort Inn, Winfield Kentucky - Conference Center-Proposed, Boone County - Howard Johnson, Bowling Green - Brown County Inn, Brown County - Holiday Inn, Corbin - Hotel-Proposed, Covington - Thomas More Centre, Crestville Hill - Comfort Inn, Elizabethtown - Signature Inn, Elkhart - Holiday Inn, Florence - Signature Inn, Florence - Drawbridge Inn, Fort Mitchell - Days Inn, Georgetown - Days Inn, Henderson - Holiday Inn, Henderson - Bluegrass Motor Inn, Lexington - Courtyard by Marriott, Lexington - Holiday Inn, Lexington - Holiday Inn-East, Lexington - Holiday Inn-North, Lexington - Hyatt Hotel, Lexington - Knights Inn, Lexington - Super 8-Proposed, London - Brown Hotel, Louisville - Courtyard by Marriott-East, Louisville - Holiday Inn, Louisville - Holiday Inn South, Louisville - Holiday Inn-Central, Louisville - Holiday Inn-Northeast, Louisville - Ramada Inn, Louisville - Ramada Inn-East, Louisville - Signature Inn, Louisville - Days Inn, Madisonville - Executive Inn, Owensboro - Super 8-Proposed, Radcliff - Holiday Inn, Richmond Louisiana - Howard Johnson, Alexandria - Capital House, Baton Rouge - Convention Center Hotel-Proposed, Baton Rouge - Courtyard by Marriott, Baton Rouge - Crown Sterling Suites, Baton Rouge - Embassy Suites, Baton Rouge - Hilton Hotel, Baton Rouge - Holiday Inn-East, Baton Rouge - Holiday Inn-South, Baton Rouge - Holiday Inn-West, Baton Rouge - La Quinta Inn, Baton Rouge - Prince Murat Hotel, Baton Rouge - Proposed Homewood Suites, Baton Rouge - Quality Inn, Bossier City - Ramada Inn, Hammond - Ramada Inn, Houma - Holiday Inn - New Orleans, Kenner - Sheraton, Kenner - Hilton Hotel, Lafayette - La Quinta Hotel, Lafayette - Gateway Hotel, Metairie - Howard Johnson-Airport, Metairie - Canal Street Hotels L.P., New Orleans - Clarion Hotel, New Orleans - Days Inn, New Orleans - Fairmont Roosevelt Hotel, New Orleans - Hampton Inn-Proposed, New Orleans - Holiday Inn Crowne Plaza, New Orleans - Hostellerie de la Poste, New Orleans - Hotel Meridien, New Orleans - Hyatt Regency, New Orleans - Iberville Hotel, New Orleans - Inter-Continental Hotel, New Orleans - La Quinta Inn, New Orleans - Landmark Bourbon, New Orleans - Le Meridien New Orleans, New Orleans - Maison Dupuy, New Orleans - Marriott Hotel, New Orleans - Omni Royal Orleans, New Orleans - Ramada Inn, New Orleans - Saint Louis Hotel, New Orleans - St. Ann/Marie Antoinette, New Orleans - Warwick, New Orleans - Westin Hotel, New Orleans - Residence Inn, Shreveport - Super 8, Shreveport Maine - Hilton Inn, Bangor - Ramada Inn, Bangor - Residence Inn by Marriott-Proposed, Bangor - Inn By The Sea, Cape Elizabeth - Hotel-Proposed, Orchard Beach - Hotel-Proposed, Portland - Portland Regency, Portland - Ramada Inn, Portland - Sheraton Tara Portland, Portland - Susse Chalet, Portland - Susse Chalet, Portland (In-town) - Keddy's Motor Inn of Maine, Presque Isle - Hampton Inn, South Portland - Sheraton Inn, South Portland Maryland - Budget Hotel-Proposed, Aberdeen - Chesapeake House, Aberdeen - Holiday Inn, Aberdeen - Motel-Proposed, Aberdeen - Annapolis Hotel, Annapolis - Courtyard by Marriott-Riva Road, Annapolis - Governor Calvert House, Annapolis - Historic Inns of Annapolis, Annapolis - Hotel-Proposed, Annapolis - Howard Johnson, Annapolis - Marriott Hotel, Annapolis - Maryland Inn, Annapolis - Quality Royale Hotel, Annapolis - Ramada Hotel, Annapolis - Robert Johnson House, Annapolis - Brookshire Hotel, Baltimore - Courtyard by Marriott-BWI Airport, Baltimore - Days Inn, Baltimore - Harbor Court Hotel, Baltimore - Harrison's at Pier 5, Baltimore - Hilton Hotel, Baltimore - Holiday Inn-Belmont Blvd., Baltimore - Holiday Inn-Cromwell Bridge, Baltimore - Holiday Inn-Glen Burnie, Baltimore - Holiday Inn-Inner Harbor, Baltimore - Holiday Inn-Int'l Airport, Baltimore - Holiday Inn-Moravia Road, Baltimore - Holiday Inn-Pikesville, Baltimore - Holiday Inn-South Glen Burnie, Baltimore - Hotel-Proposed, Baltimore - Howard Johnson-Proposed, Baltimore - Johns Hopkins Hotel-Proposed, Baltimore - Lord Baltimore Hotel, Baltimore - Omni International Hotel, Baltimore - Ramada Inn-I-695 West, Baltimore - Susse Chalet, Baltimore - Susse Chalet Inn-BWI Airport, Baltimore - Susse Chalet Inn-Golden Ring, Baltimore - Bethesda Metro Center, Bethesda - Guest Quarters, Bethesda - Hyatt Regency Hotel, Bethesda - Linden Hill Hotel, Bethesda - Omni Linden Hotel, Bethesda - Residence Inn, Bethesda - Bethseda Metro Center, Bethseda - Guest Quarters, Bethseda - Residence Inn - Proposed, Bethseda - Comfort Suites-Proposed, Bowie - Days Inn, Capital Heights - Residence Inn, Cockneysville - Abbey, College Park - Best Western Maryland, College Park - Holiday Inn, College Park - Sheraton Inn, Dorsey - Days Inn, Easton - Mariner Inn, Easton - Holiday Inn, Frederick - Compri Hotel, Gaithersburg - Marriott Hotel, Gaithersburg - Century XXI Resort, Germantown - Comfort Inn, Germantown - Hampton Inn, Glen Burnie - Residence Inn-Proposed, Greenbelt - Courtyard by Marriott, Hunt Valley - Hunt Valley Embassy Suites, Hunt Valley - Hunt Valley Marriott, Hunt Valley - Susse Chalet Inn, Jessup - Courtyard by Marriott, Landover - Quality Inn-Proposed, Landover - Days Inn, Lanham - Best Western Maryland, Laurel - Days Inn, Laurel - Holiday Inn, Laurel - Susse Chalet, Linthicum - Howard Johnson Plaza Hotel, New Carrollton - Carousel Hotel, Ocean City - Days Inn, Ocean City - Susse Chalet, Oxon Hill - Hotel-Proposed, Prince Georges County - Budget Hotel-Proposed, Rockville - Comfort Inn, Rockville - Courtyard by Marriott, Rockville - Days Inn-Congressional Park, Rockville - Holiday Inn Crowne Plaza, Rockville - Quality Inn-Proposed, Rockville - Ramada Inn, Rockville - Salisbury Hotel, Salisbury - Sheraton Hotel, Salisbury - Courtyard by Marriott, Silver Spring - Quality Inn-Proposed, Silver Spring - Comfort Inn-Proposed, Solomons Island - Holiday Inn, Towson - Quality Inn-Proposed, Westminster Massachusetts - Susse Chalet, Amsbury - Courtyard by Marriott, Andover - Marriott Hotel, Andover - Stouffer Bedford Glen Hotel, Bedford - Anthony's Pier Four, Boston - Battery Wharf Hotel-Proposed, Boston - Boston Harbor Hotel, Boston - Boston World Trade Center, Boston - Bostonian Hotel, Boston - Colonnade Hotel, Boston - Commonwealth Center Hotel, Boston - Compri Hotel-Proposed, Boston - Copley Plaza Hotel, Boston - Courtyard by Marriott-Foxborough, Boston - Econo Lodge-Proposed, Boston - Harborside Conf. Center-Proposed, Boston - Hilton-Back Bay, Boston - Hilton-Logan, Boston - Holiday Inn-Government Center, Boston - Hotel - Proposed, Boston - Hyatt Fan Pier-Proposed, Boston - Hyatt Harborside-Proposed, Boston - Lafayette Hotel, Boston - Lenox Hotel, Boston - Marriott Copley Place, Boston - Meridien Hotel, Boston - Omni Parker House, Boston - Residence Inn, Boston - Ritz-Carlton, Boston - Statler Hilton Hotel, Boston - Tremont House Hotel, Boston - World Trade Center Hotel - Proposed, Boston - Marriott Hotel, Boston/Newton - Sheraton Tara Hotel, Braintree - Ocean Edge Inn & Conference Center, Brewster - Holiday Inn, Brookline - Days Inn, Burlington - Charles Hotel, Cambridge - Hyatt Hotel, Cambridge - Royal Sonesta Hotel, Cambridge - The Charles Hotel, Cambridge - Chatham Bars Inn, Chatham - Chelmsford Radisson Hotel, Chelmsford - Best Western Motor Lodge, Chicopee - Cummington Farm Resort-Proposed, Cummington - Appleton Inn, Danvers - Howard Johnson Hotel, Danvers - Radisson Ferncroft Hotel, Danvers - Residence Inn - Proposed, Danvers - Dedham Comfort Inn, Dedham - Holiday Inn, Dedham - Wequassett Inn, East Harwich - Harbor View Hotel, Edgartown - Kelley House, Edgartown - Airport Inn, Fall River - Sea Crest Hotel, Falmouth - Sheraton Inn, Falmouth - Radisson Hotel, Ferncroft - Sheraton Tara Hotel, Framingham - Hotel-Proposed, Franklin - Hotel-Proposed, Haverhill - Susse Chalet, Holyoke - Dunfey Hyannis Hotel, Hyannis - Heritage House Hotel, Hyannis - Holiday Inn, Hyannis - Sheraton Regal Inn, Hyannis - Tara Hyannis, Hyannis - Canyon Ranch-Berkshires, Lenox - Cranwell Hotel and Conference Ctr., Lenox - Spa/Resort-Proposed, Lenox - Holiday Inn, Leominster - Lexington Sheraton, Lexington - Residence Inn-Proposed, Littleton - Appleton Inn, Lowell - Hilton Hotel, Lowell - Town House Motor Inn, Lowell - Holiday Inn, Marlboro - Susse Chalet, Middleboro - Sheraton Milford Hotel, Milford - Holiday Inn, Natick - Skipper's Inn, New Bedford - Days Inn, Newton - Howard Johnson, Newton - Marriott Hotel, Newton - Sheraton - Wayfarer, Newton - Sheraton Tara, Newton - Susse Chalet, Newton - North Adams Inn, North Adams - Hilton Inn, Northampton - Hotel Northampton, Northampton - Factory Mutual Hotel, Norwood - University Inn, Oxford - Holiday Inn, Peabody - Berkshire Commons Hotel, Pittsfield - Hotel-Proposed, Plymouth - Hawthorne Hotel, Salem - Days Inn, Saugus - Susse Chalet, Seekonk - Howard Johnson, Somerset - Somerset Omni, Somerset - Federal House Inn, South Lee - Holiday Inn, Springfield - Howard Johnson, Springfield - Monarch Place, Springfield - Treadway Inn, Springfield - Publick House, Sturbridge - Sheraton, Sturbridge - Regency Inn of Taunton, Taunton - Holiday Inn, Tewksbury - Susse Chalet, Tewksbury - Susse Chalet, Waltham - Vista Waltham House, Waltham - Hampton Inn, West Springfield - Westford Regency Hotel, Westford - The Westminster Village Inn, Westminster - The Orchards, Williamstown - Treadway Inn, Williamstown - Days Inn, Woburn - Howard Johnson, Woburn - Radisson Hotel, Woburn - Ramada Inn, Woburn - Susse Chalet, Woburn - Marriott Hotel, Worcester - Alladin Motor Inn, Yarmouth - Flagship Motor Inn, Yarmouth - Gull Wing Suites Hotel, Yarmouth Michigan - Motel-Proposed, Adrian - Ramada Inn, Allen Park - Holiday Inn-Alpena, Alpena - Compri Hotel-Proposed, Ann Arbor - Hampton Inn-North, Ann Arbor - Hampton Inn-South, Ann Arbor - Hilton Hotel, Ann Arbor - Holiday Inn-East, Ann Arbor - Holiday Inn-West, Ann Arbor - Residence Inn, Ann Arbor - Sheraton Hotel, Ann Arbor - AmeriSuites Hotel-Proposed, Auburn Hills - Holiday Inn, Auburn Hills - Knights Inn, Battle Creek - Super 8, Battle Creek - Bay Valley Inn, Bay City - Howard Johnson, Belleville - Fairfield Inn-Airport, Charlotte - Courtyard by Marriott, Dearborn - Courtyard by Marriott-Airport, Detroit - Courtyard by Marriott-Auburn Hills, Detroit - Courtyard by Marriott-Livonia, Detroit - Days Inn, Detroit - Downtown Hotel-Proposed, Detroit - Fairfield Inn-Airport, Detroit - Fairfield Inn-Auburn Hills, Detroit - Fairfield Inn-Warren, Detroit - Fairfield Inn-West, Detroit - Golden Harp, Detroit - Hampton Inn, Detroit - Hilton-Airport, Detroit - Hilton-North Field, Detroit - Holiday Inn, Detroit - Holiday Inn-Metro Airport, Detroit - Hotel Pontchartrain, Detroit - Omni Detroit, Detroit - Westin Hotel Renaissance Center, Detroit - Holiday Inn, East Lansing - Holiday Inn-Proposed, East Lansing - Knights Inn, Flint - Amway Hotel, Grand Rapids - Holiday Inn, Grand Rapids - Grand Traverse Resort, Grand Traverse Village - Holiday Inn, Howell - Jackson Hotel, Jackson - Fairfield Inn, Kalamazoo - Hilton-Kalamazoo Center, Kalamazoo - Holiday Inn, Kalamazoo - Radison Plaza Hotel, Kalamazoo - Residence Inn, Kalamazoo - Super 8, Kalamazoo - Embassy Suites-Proposed, Lansing - Holiday Inn, Lansing - Motel 6, Lansing - Quality Suites Hotel, Lansing - Compri Hotel-Proposed, Livonia - Embassy Suites, Livonia - Embassy Suites-Proposed, Livonia - Holiday Inn, Livonia - Marriott Hotel, Livonia - Fairfield Inn, Madison Heights - Residence Inn, Madison Heights - Holiday Inn, Marquette - Knights Inn, Monroe - Comfort Inn-Proposed, Mount Clemens - Holiday Inn, Muskegan - Super 8, Muskegon - Hilton Hotel, Novi - Holiday Inn-Petoskey, Petoskey - Mayflower Hotel, Plymouth - Inn at the Bridge, Port Huron - Radisson Hotel, Romulus - Holiday Inn-East, Saginaw - Super 8, Saginaw - Courtyard by Marriott, Southfield - Embassy Suites, Southfield - Hilton Hotel, Southfield - Marriott Hotel, Southfield - Ramada Inn, Southfield - Residence Inn, Southfield - The Garden Inn, Southfield - Comfort Suites-Proposed, Sterling Heights - Holiday Inn, Sturgis - Grand Traverse Resort, Traverse City - Hampton Inn, Traverse City - Park Place Hotel, Traverse City - Courtyard by Marriott, Troy - Holiday Inn, Troy - Marriott, Troy - Residence Inn, Troy - Courtyard by Marriott, Warren - Days Inn, Warren - Holiday Inn, Warren - Motel 6, Warren - Residence Inn, Warren - Van Dyke Hotel & Conference Center, Warren - Bob Evans Restaurant, Wyoming - Super 8, Wyoming - Radisson Resort-Conference Center, Ypsilanti Minnesota - Embassy Suites, Bloomington - Hilton Airport Hotel, Bloomington - Hilton Hotel, Bloomington - Howard Johnson Lodge, Bloomington - Marriott Hotel, Bloomington - Ramada Inn, Bloomington - Days Inn - Minneapolis, Brooklyn Center - Residence Inn, Eagan - Compri Hotel-Proposed, Minneapolis - Courtyard by Marriott-Eden Prairie, Minneapolis - Courtyard by Marriott-Mendota, Minneapolis - Days Inn, Minneapolis - Dyckman Hotel, Minneapolis - Hilton Inn, Minneapolis - Holiday Inn-Downtown, Minneapolis - Hotel-Proposed, Minneapolis - Luxeford Hotel, Minneapolis - Marquette, Minneapolis - Marriott City Center Hotel, Minneapolis - Marriott-Minnetonka, Minneapolis - Motel 6, Minneapolis - Omni-Northstar, Minneapolis - Radisson Hotel, Minneapolis - Ramada Inn, Minneapolis - Sheraton Minneapolis, Minneapolis - Sofitel, Minneapolis - Motel-Proposed, Montevideo - Days Inn, Plymouth - Hotel-Proposed, Rochester - Howard Johnson, Rochester - Motel 6, Rochester - Radisson Hotel, Rochester - Days Inn, Roseville - Holiday Inn, Saint Paul - Holiday Inn-Town Square, Saint Paul - Hotel-Proposed, Saint Paul - Inn and Expo Center, Saint Paul - World Trade Hotel, Saint Paul - Wayzata Conference Center, Wayzata Mississippi - Howard Johnson, Biloxi - Holiday Inn, Greenwood - Motel 6, Hattlesburg - Hampton Inn, Jackson - Howard Johnson, Jackson - Ramada Inn-Proposed, Jackson - Residence Inn, Jackson - Cabot Lodge, Ridgeland - Holiday Inn, Vicksburg Missouri - Ramada Inn, Columbia - Howard Johnson-North St. Louis, Hazelwood - Super 8, Independence - La Quinta Inn, Jackson - North - Capital Plaza, Jefferson City - Ramada Inn, Jefferson City - Days Inn, Joplin - Super 8, Joplin - Allis Plaza, Kansas City - Americana Hotel, Kansas City - AmeriSuites Hotel-Proposed, Kansas City - Doubletree Hotel, Kansas City - Embassy Suites, Kansas City - Fairfield Inn-West, Kansas City - Hilton - Proposed, Kansas City - Hilton Inn, Kansas City - Historic Suites Hotel, Kansas City - Holiday Inn, Kansas City - Holiday Inn Crowne Plaza, Kansas City - Holiday Inn-Proposed, Kansas City - Proposed Sheraton Hotel, Kansas City - Radisson Suite Hotel, Kansas City - Resort Hotel - Proposed, Kansas City - Marriott-Tan-Tar-A, Lake of the Ozarks - Super 8, Liberty - Super 8, North Kansas City - Inn at Grand Glaize, Osage Beach - Super 8, Saint Joseph - Clarion, Saint Louis - Courtyard by Marriott-Creve Coeur, Saint Louis - Courtyard by Marriott-Downtown, Saint Louis - Courtyard by Marriott-Westport, Saint Louis - Days Inn, Saint Louis - Doubletree Hotel, Saint Louis - Drury Inn, Saint Louis - Embassy Suites, Saint Louis - Fairfield Inn-Hazel, Saint Louis - Henry VIII Hotel, Saint Louis - Hilton Hotel-Bel Air, Saint Louis - Holiday Inn Sports Complex, Saint Louis - Holiday Inn-Airport North, Saint Louis - Holiday Inn-Downtown, Saint Louis - Holiday Inn-Riverfont, Saint Louis - Howard Johnson-South, Saint Louis - Mayfair Hotel, Saint Louis - Omni-St. Louis Station, Saint Louis - Ramada Inn-Westport, Saint Louis - Residence Inn-Chesterfield, Saint Louis - Residence Inn-Richmond Heights, Saint Louis - Ritz-Carlton Hotel, Saint Louis - Sheraton-Airport, Saint Louis - St. Louis Airport Hilton, Saint Louis - St. Louis Airport Radisson Hotel, Saint Louis - St. Louisian Hotel, Saint Louis - Stouffer Concourse Hotel, Saint Louis - Super 8, Saint Louis - Marriott Hotel, Saint Louis County - Holiday Inn, Springfield - Sheraton Inn, Springfield - Super 8, Springfield - Executive Inn & Office Building, St. Louis - Holiday Inn, St. Louis - Howard Johnson Hotel, St. Louis - Hotel-Proposed, Unity Village - Holiday Inn, Wendtzville Montana - Sheraton Hotel, Billings - Super 8, Billings - Super 8, Great Falls - Super 8, Helena - Super 8, Kalispell - Holiday Inn, Missoula - Red Lion Inn, Missoula Nebraska - Holiday Inn, Kearney - Best Western Airport Inn, Lincoln - Holiday Inn-Airport, Lincoln - Holiday Inn-Northeast, Lincoln - Howard Johnson, North Platte - Marriott Hotel, Omaha - Ramada Inn, Omaha - Red Lion Inn, Omaha Nevada - Lake Mead Resort, Boulder City - Ormsby House Hotel and Casino, Carson City - Super 8, Carson City - Doubletree Hotel and Resort, Cathedral City - Best Western Motel - Proposed, Jackpot - Airport Inn, Las Vegas - Aladdin Hotel and Casino, Las Vegas - Alexis Park Resort Hotel, Las Vegas - Casino Hotel-Proposed, Las Vegas - Courtyard by Marriott, Las Vegas - El Rancho Hotel and Casino, Las Vegas - Hotel and Casino-Proposed, Las Vegas - Jockey Club Hotel and Casino, Las Vegas - La Quinta Hotel, Las Vegas - Paradise Resort, Las Vegas - Residence Inn, Las Vegas - Silverbird Casino, Las Vegas - Super 8-Proposed, Las Vegas - The Mirage, Las Vegas - Tropicana Travelodge, Las Vegas - Westward Ho Casino, Las Vegas - Echo Bay Resort, Overton - Holiday Inn, Reno - La Quinta Hotel, Reno - Quality Inn and Casino, Reno - Red Lion Hotel-Proposed, Reno New Hampshire - Sheraton Wayfarer, Bedford - Hampton Inn, Bow - Mount Washington Resort, Bretton Woods - Balsams Hotel, Dixville Notch - Sheraton Inn-Lamie's Tavern, Hampton - Woodbound Inn, Jaffrey - Brickyard Mountain Inn, Laconia - Loon Mountain Hotel, Lincoln - Appleton Inns, Manchester - Holiday Inn Center, Manchester - Sheraton Wayfarer, Manchester - Susse Chalet, Manchester - Clarion Somerset Hotel, Nashua - Hotel-Proposed, Nashua - Tara Sheraton Nashua, Nashua - Wentworth by the Sea, Newcastle - Susse Chalet, Portsmouth - Wentworth-by-the-Sea, Portsmouth - Salem Inn, Salem - Susse Chalet, Salem - Landmarc Lodge-East, Waterville Valley - Landmarc Lodge-West, Waterville Valley - Silver Squirrel Inn, Waterville Valley - Snowy Owl Inn, Waterville Valley - Chalet Susse International, Inc., Wilton New Jersey - Marriott Seaview Golf Resort, Abescon - Howard Johnson Hotel, Absecon - Seaview Country Club, Absecon - Berkeley Carteret Hotel, Asbury Park - Caesar's Hotel and Casino, Atlantic City - Casino Hotel-Proposed, Atlantic City - Deauville Hotel, Atlantic City - Diplomat Hotel, Atlantic City - Hampton Inn, Atlantic City - Harrah's Marina Hotel Casino, Atlantic City - Lafayette Hotel, Atlantic City - Resorts Int'l Hotel and Casino, Atlantic City - Royal Inn, Atlantic City - Sands Hotel and Casino, Atlantic City - Traymore Hotel Site, Atlantic City - Tropicana Hotel and Casino, Atlantic City - World International Hotel, Atlantic City - Bernards Inn, Bernardsville - Hotel-Proposed, Bridgewater - Proposed Hotel, Camden - Cherry Hill Hyatt, Cherry Hill - Cherry Hill Inn, Cherry Hill - Ramada Inn, Clifton - Comfort Suites, E. Rutherford - Ramada Renaissance, East Brunswick - Sheraton Inn, East Brunswick - Sheraton - Per Diem, East Rutherford - Holiday Inn-Raritan Center, Edison - Hotel-Proposed, Edison - Ramada Inn, Edison - Best Western Hotel, Egg Harbor Township - Newark Airport Vista Hotel, Elizabeth - Ramada Inn-Proposed, Elizabeth - Sheraton Inn, Elizabeth - Marriott Suite Hotel-Proposed, Elmwood Park - Howard Johnson, Englewood - Conference Center, Farleigh Dickinson - Motel-Proposed, Flemington - Hamilton Park Conference Center, Florham Park - Courtesy Motel, Fort Lee - Ramada Inn-Proposed, Franklin Township - Playboy Resort, Great Gorge - Marriott Hotel, Hanover - Sheraton Hotel, Hasbrouck Heights - Holiday Inn, Jamesburg - Restaurant at Port Liberte, Jersey City - Harrogate Senior Living Facility, Lakewood - Courtyard by Marriott, Lincroft - Hotel-Proposed, Long Branch - Comfort Inn, Mahwah - Courtyard by Marriott, Mahwah - Residence Inn-Proposed, Mahwah - Economy Lodge - Proposed, Meadowlands - Holiday Inn, Meadowlands - Hotel-Proposed, Meadowlands - Meadowlands Hilton, Meadowlands - Sheraton Hotel, Meadowlands - Forsgate Conference Center, Monroe Township - Conference Center, Morristown - Governor Morris Inn, Morristown - Headquarters Plaza Hotel, Morristown - Pleasantville Farms Conference Cent, Morristown - Howard Johnson Lodge, Mount Holly - Courtyard by Marriott, Mount Laurel - Hilton, Mount Laurel - Days Hotel, New Brunswick - Hyatt Hotel, New Brunswick - Rennaisance Hotel, New Brunswick - Residence Inn - Princeton, New Jersey - Airport Hotel-Proposed, Newark - Courtyard by Marriott-Airport, Newark - Holiday Inn, Newark - Holiday Inn-Airport North, Newark - Hotel-Proposed, Newark - Howard Johnson Hotel, Newark - Days Inn, North Bergen - Holiday Inn, North Brunswick - Port-O-Call, Ocean City - Sting Ray Motel, Ocean City - Hotel-Proposed, Ocean Grove - Spray View Hotel, Ocean Grove - Macy Hotel-Proposed, Paramus - Red Carpet Inn, Paramus - Residence Inn-Proposed, Paramus - Marriott Hotel-Proposed, Park Ridge - Embassy Suites, Parsippany - Hilton, Parsippany - Residence Inn-Proposed, Parsippany - Howard Johnson, Phillipsburg - Hotel-Proposed, Piscataway - Residence Inn-Proposed, Piscataway - Compri Hotel-Proposed, Princeton - Hyatt Regency, Princeton - Marriott Hotel, Princeton - Omni Nassau Inn, Princeton - Treadway Inn, Princeton - Howard Johnson, Ridgefield Park - Hotel-Proposed, Rockleigh - Hotel-Proposed, Roxbury Township - Ramada Inn, Runnemede - Howard Johnson, Saddle Brook - Marriott Hotel, Saddle Brook - Days Inn, Secaucus - Howard Johnson, Secaucus - Ramada Inn, Secaucus - Hilton At Short Hills, Short Hills - Pier 4 Motel, Somers Point - Garden State Convention Center, Somerset - Holiday Inn, Somerset - Marriott Hotel, Somerset - Neighborhood Suites-Proposed, Somerset - Sommerset Plaza Hotel, Somerset - Summerfield Suites Hotel, Sommerset - Hewitt Wellington Hotel, Spring Lake - Hotel-Proposed, Spring Lake - Loews Glenpointe Hotel, Teaneck - Appleton Inn, Tinton Falls - Envoy Inn, Tinton Falls - Hilton Inn, Tinton Falls - Residence Inn, Tinton Falls - Sunrise Suite Hotel, Tinton Falls - Hotel-Proposed, Toms River - Hotel-Proposed, Turnersville - Hotel-Proposed, Wayne - Howard Johnson-Proposed, Wayne - Holiday Inn, Wildwood Crest - Motel, Wrightstown New Mexico - Compri Hotel-Proposed, Albuquerque - Courtyard by Marriott-Airport, Albuquerque - Fairfield Inn-Proposed, Albuquerque - Hampton Inn, Albuquerque - Hilton Hotel, Albuquerque - Holiday Inn, Albuquerque - Marriott Hotel, Albuquerque - Radisson Suite Hotel-Proposed, Albuquerque - Residence Inn, Albuquerque - Rodeway Inn, Albuquerque - Winrock Motor Inn, Albuquerque - La Quinta Inn, Albuquerque - Airport - Corkin's Lodge, Chama - La Quinta Inn, Farmington - Hilton, Las Cruces - Las Cruces Hilton, Las Cruces - Super 8, Las Cruces - Ski Rio Ski Resort, Miracle Mountain - Super 8, Raton - Young's Ranch, Red River - Eldorado Hotel, Santa Fe - Homewood Suites Hotel, Santa Fe - Hotel-Proposed, Santa Fe - Inn at Loretto, Santa Fe - Inn on the Alameda, Santa Fe - La Fonda Hotel, Santa Fe - La Quinta Hotel, Santa Fe - Residence Inn, Santa Fe - Santa Fe Motel, Santa Fe - Sheraton de Santa Fe, Santa Fe New York - Americana Inn, Albany - Desmond Hotel, Albany - Hilton Hotel, Albany - Marriott Hotel, Albany - Sheraton Inn, Albany - Susse Chalet, Albany - VIP Motor Lodge (Howard Johnson), Albany - Embassy Suites-Proposed, Amherst - Holiday Inn, Amherst - Annandale Inn-Proposed, Annandale - Wampus Inn-Proposed, Armonk - Treadway Inn, Batavia - Hampton Inn, Binghamton - Holiday Inn-Arena, Binghamton - Holiday Inn-SUNY, Binghamton - Hotel-Proposed, Binghamton - Howard Johnson, Binghamton - Residence Inn, Binghamton - Sheraton Inn, Binghamton - Eden Motel, Bronx - Days Inn-Proposed, Brookhaven - Residence Inn, Brookhaven - Brooklyn Hotel-Proposed, Brooklyn - Hilton Hotel, Brooklyn - Airport Hotel-Proposed, Buffalo - Buffalo Hotel, Buffalo - Days Hotel-Proposed, Buffalo - Hilton Hotel, Buffalo - Holiday Inn - Midtown, Buffalo - Hyatt Hotel, Buffalo - Hyatt Regency Hotel & Retail Area, Buffalo - Radisson Hotel, Buffalo - Ramada Inn-Airport, Buffalo - Ramada Renaissance Hotel, Buffalo - Residence Inn-Proposed, Buffalo - Sheraton Hotel, Buffalo - Sheraton Inn Buffalo East, Buffalo - Sheraton Inn-Airport, Buffalo - Sheraton Inn, Canadaiqua - Airway Motel, Cheektowaga - Holiday Inn - Airport, Cheektowaga - Holiday Inn - Gateway, Cheektowaga - Quality Inn, Cheektowaga - Sheraton Buffalo, Cheektowga - Steeplechase Park-Proposed, Coney Island - Hilton Inn, Corning - Resort/Conference Center-Proposed, Cornwall - Holiday Inn, Cortland - Roycroft Inn, East Aurora - Hotel-Proposed, East Elmhurst - Susse Chalet, East Greenbush - Nevele Hotel, Ellenville - Int'l Conf./Learning Center-Propose, Ellis Island - Days Inn, Elmsford - Howard Johnson, Elmsford - Neighborhood Suites Hotel-Proposed, Fishkill - Residence Inn, Fishkill - Metropole Hotel, Flushing - Midway Hotel, Flushing - Sheraton - Proposed, Flushing Center - Hotel-Proposed, Garden City - Wyndham Condominium, Garden City - Harrison Conference Center, Glen Clove - Great Neck Hotel, Great Neck - Comfort Inn, Greece - Holiday Inn-Proposed, Greece - Tamarack Lodge, Greenfield Park - Claudio's Restaurant, Greenport - Colonie Hill, Hauppauge - Holiday Inn, Hauppauge - Marriott Wind Watch Hotel & Golf, Hauppauge - Marriott Windwatch, Hauppauge - Ramada Inn, Hauppauge - Residence Inn, Hauppauge - Homewood Suites-Proposed, Henrietta - Howard Johnson, Huntington - Huntington Townhouse, Huntington - Hampton Inn, Islandia - Marriott Wind Watch, Islandia - Hotel-Proposed, Islip - Howard Johnson Hotel, Ithaca - Ramada Inn, Ithaca - Sheraton Inn, Ithaca - JFK Hilton, Jamaica - Howard Johnson, Kingston - Ramada Inn, Kingston - Omni Sagamore, Lake George - Ramada Inn, Lake George - Former Lake Placid Club Hotel, Lake Placid - Hilton Hotel, Lake Placid - Mirror Lake Inn, Lake Placid - Holiday Inn, Latham - Howard Johnson, Latham - Howard Johnson, Liberty - The New Brown's Resort, Loch Sheldrake - Convention Center - Proposed, Long Island - Eastern Nassau/W. Suffolk Hotel, Long Island - Hyatt Hotel-Proposed, Long Island - Motel-Proposed, Lynbrook - Crowne Plaza Hotel, Manhattan - Hotel Mark, Manhattan - Proposed Economy Hotel, Manhattan - Sugar Maples Resort, Maplecrest - Hotel-Proposed, Middletown - Howard Johnson, Middletown - Montauk Yacht Club and Inn, Montauk - Kutsher's Resort, Monticello - Motel-Proposed, Nanuet - Wallkill Valley Inn Project, New Paltz - Hotel-Proposed, New Rochelle - Le Richmond Hotel, New Rochelle - Ramada Plaza Inn and Offices, New Rochelle - Sheraton Inn, New Rochelle - Aberdeen Hotel, New York - American Youth Hostel, New York - Americana Hotel, New York - Ashley Hotel, New York - Astor House-Proposed, New York - Barbizon Plaza Hotel, New York - Barclay Hotel, New York - Battery Park City Hotel-Proposed, New York - Berkshire Place, New York - Best Western Woodward Hotel, New York - Biltmore Hotel, New York - Broadway Crowne Plaza, New York - Carlton House Hotel, New York - Century Paramount Hotel, New York - Chatwal Inn, New York - Chatwal Inn on 45th Street, New York - Chatwal Inn on Park Avenue, New York - Chinatown Hotel-Proposed, New York - Courtyard by Marriott-Proposed, New York - Custom's House, New York - Days Inn, New York - Days Inn-West 57th Street, New York - Doral Inn, New York - Dover Hotel, New York - Downtown Athletic Club, New York - Downtown Conference Center, New York - Drake Hotel, New York - Econo Lodge-Proposed, New York - El Rio Grande, New York - Embassy Suites-Times Square-Propose, New York - Empire Hotel, New York - Essex House, New York - Executive Hotel, New York - Giordano Hotel, New York - Gorham Hotel, New York - Grand Bay at Equitable Center, New York - Grand Hyatt Hotel, New York - Greenwich Street Hotel, New York - Halloran House, New York - Hampton House, New York - Harley Hotel, New York - Helmsley Hotel, New York - Hilton Hotel, New York - Hilton Hotel-Statler, New York - Holiday Inn, New York - Holiday Inn Crowne Plaza-Broadway, New York - Holiday Inn Crowne Plaza-Manhattan, New York - Holland Hotel, New York - Hotel Intercontinental, New York - Hotel Pierre, New York - Hotel-1926 Broadway-Proposed, New York - Hotel-East 57th Street-Proposed, New York - Hotel-Proposed, New York - Hotel-Tenth Avenue-Proposed, New York - Howard Hotel, New York - Howard Johnson, New York - Journey's Court Hotel-Proposed, New York - Journey's End, New York - Kalikow Hotel-Proposed, New York - Kennedy Inn, New York - Lancaster Hotel, New York - Le Meridien Liberty New York, New York - Lowell Hotel, New York - Luxury Hotel-Proposed, New York - Macklowe Hotel, New York - Madison Towers Hotel, New York - Manger Windsor Hotel, New York - Mark Hotel, New York - Marriott East Side, New York - Marriott Financial Center, New York - Marriott Hotel-Proposed, New York - Marriott Marquis, New York - Martinique Hotel, New York - Mayfair Regent, New York - Milford Plaza Hotel, New York - Millennium Hotel, New York - Navarro Hotel, New York - Nova Park-Gotham, New York - Novotel, New York - Omni Berkshire Place, New York - Omni Park Central, New York - Parc Fifty One Hotel, New York - Parker Meridien Hotel, New York - Peninsula Hotel, New York - Penta Hotel, New York - Piccadilly Hotel, New York - Plaza Hotel, New York - President Hotel, New York - Prince George Hotel, New York - Prince Street Hotel-Proposed, New York - Proposed Hotel and Apartments, New York - Proposed Luxury Hotel-Proposed, New York - Quality Inn, New York - Quality Suites, New York - Ramada Inn, New York - Regent Hotel-Proposed, New York - Regent of New York-Proposed, New York - Ritz-Carlton, New York - Roger Smith Winthrop Hotel, New York - Roosevelt Hotel, New York - Russian Tea Room, New York - Sheraton Hotel, New York - Sheraton Motor Inn, New York - Sheraton Park Avenue, New York - Soho Hotel-Proposed, New York - St. Moritz Hotel, New York - St. Regis, New York - Stanhope, New York - Sutton Place Hotel, New York - Taft Hotel, New York - Tenth Avenue Hotels-Proposed, New York - The Pierre Hotel, New York - The Plaza Athenee, New York - Times Square Hotel-Proposed, New York - Timeshare-Proposed, New York - Travel Inn, New York - Tudor Hotel, New York - UN Plaza Suite Hotel-Proposed, New York - Vista International, New York - Waldorf=Astoria Hotel, New York - Warwick Hotel, New York - Westbury Hotel, New York - Westin Plaza Hotel, New York - Woodward Hotel-Proposed, New York - York Club, New York - Howard Johnson Motel & Restaurant, Newburgh - Ramada Inn, Newburgh - Hilton Hotel, Niagara Falls - Howard Johnson, Norwich - Hotel-Proposed, Orangetown - Hudson Valley Conference Center, Ossining - Sheraton Inn, Ossining - Hotel-Proposed, Oswego - Best Western, Painted Post - Lodge on the Green, Painted Post - Residence Inn - Proposed, Parsippany - Senior Living - Proposed, Pearl River - Drum Hill Hotel, Peekskill - Holiday Inn, Plainview - Howard Johnson, Plainview - Pickwick Motor Inn, Plainview - Residence Inn, Plainview - Holiday Inn, Plattsburgh - Motel-Proposed, Port Jefferson - Comfort Inn-Proposed, Poughkeepsie - Courtyard by Marriott, Poughkeepsie - Radison Hotel, Poughkeepsie - Wyndham Hotel, Poughkeepsie - Best Western-LaGuardia Airport, Queens - Crown Motel, Queens - Crowne Plaza-LaGuardia Airport, Queens - Days Inn-LaGuardia Airport, Queens - Executive Inn, Queens - Hilton Inn-LaGuardia Airport, Queens - Hilton-JFK Airport, Queens - Holiday Inn-JFK Airport, Queens - Holiday Inn-LaGuardia Airport, Queens - Howard Johnson, Queens - Jade East Motel, Queens - JFK Plaza Hotel, Queens - Marriott Hotel-JFK Airport, Queens - Marriott-LaGuardia Airport, Queens - Metropole Hotel, Queens - Midway Hotel, Queens - Riviera Hotel, Queens - Royce Hotel-LaGuardia Airport, Queens - Sheraton-LaGuardia East-Proposed, Queens - Adria Hotel, Queens (Bayside) - Holiday Inn, Riverhead - Riverhead Motor Hotel, Riverhead - Americana Hotel, Rochester - Courtyard by Marriott-Wrighton, Rochester - Days Hotel (former Holiday Inn), Rochester - Hilton-Campus, Rochester - Holiday Inn, Rochester - Hotel-Proposed (former St. Bernard), Rochester - Hyatt Hotel, Rochester - Lodge at Woodcliff, Rochester - Omni Suites Hotel, Rochester - Residence Inn, Rochester - Sheraton Inn, Rochester - Stouffer Hotel, Rochester - Town House Inn, Rochester - Limited Service Hotel-Proposed, Rome - Hotel - Proposed, Roslyn - Roslyn Country Club, Roslyn - Courtyard by Marriott, Rye - Le Richemonde Hotel, Ryebrook - Baron's Cove Inn, Sag Harbor - Holiday Inn, Saratoga - Hotel-Proposed, Saratoga Springs - Howard Johnson, Saugerties - Holiday Inn, Schenectady - Ramada Inn, Schenectady - Dering Harbor Inn, Shelter Island - Crowne Plaza-Proposed, Smithtown - Howard Johnson, Smithtown - Sheraton, Smithtown - Raleigh Hotel, South Fallsburg - Hotel-Proposed, Southhold - Susse Chalet, Spring Valley - Executive Motor Inn, Springfield Gardens - Staten Island Hotel, Staten Island - Imperial Htl/Stevensville Golf Crs., Stevensville - Holiday Inn, Suffern - Motel on the Mountain, Suffern - Browns Hotel, Sullivan County - Imperial Hotel, Sullivan County - The New Brown's Resort, Sullivan County - Courtyard by Marriott, Syracuse - Embassy Suites, Syracuse - Hampton Inn, Syracuse - Hilton Inn, Syracuse - Holiday Inn-Downtown, Syracuse - Holiday Inn-Exit 35, Syracuse - Holiday Inn-Exit 36, Syracuse - Holiday Inn-Exit 39, Syracuse - Holiday Inn-I-90, Syracuse - Homewood Suites Hotel-Proposed, Syracuse - Hotel Syracuse, Syracuse - Hotel-Proposed, Syracuse - Marriott Hotel, Syracuse - Residence Inn-Proposed, Syracuse - Sheraton University Inn & Conf.Ctr., Syracuse - Treadway Inn, Syracuse - Courtyard by Marriott, Tarrytown - Tarrytown House Conference Center, Tarrytown - Westchester Marriott, Tarrytown - Embassy Suites - Proposed, Times Square, New York - Marriott Hotel, Uniondale - Sheraton Nassau Hotel, Uniondale - Howard Johnson Hotel, Utica - Howard Johnson, Vestal - Hotel-Proposed, Watertown - Convention Hotel-Proposed, Westbury - Dalts Restaurant, Westbury - Howard Johnson, Westbury - Marriott Hotel, Westchester - Inn-Proposed, Westhampton - Crowne Plaza, White Plains - Hotel-Proposed, White Plains - Howard Johnson, White Plains - Roger Smith Hotel, White Plains - Stouffer Westchester Hotel, White Plains - White Plains Hotel, White Plains - Anton Meadows, Yaphank - Quality Suites, Yorktown - Yorktown Motor Lodge, Yorktown Heights North Carolina - Days Inn - Central, Asheville - Holiday Inn - Airport, Asheville - Holiday Inn - Tunnel, Asheville - Inn on the Plaza, Asheville - Sheraton Inn, Asheville - Days Inn, Ashville - Masters Economy Inn - Rocky Mount, Battlebro - Days Inn, Blowing Rock - All-Suite Hotel-Proposed, Boone - Residence Inn-Proposed, Cary - Carolina Inn, Chapel Hill - Hilton-Proposed, Chapel Hill - Charlotte Registry Hotel-Per Diem, Charlotte - Compri Hotel-Proposed, Charlotte - Courtyard by Marriott, Charlotte - Days Inn, Charlotte - Days Inn-Uptown, Charlotte - Fairfield Inn, Charlotte - Howard Johnson, Charlotte - Howard Johnson Lodge, Charlotte - Knights Inn, Charlotte - Manger Motor Inn, Charlotte - Marriott City Center, Charlotte - Marriott Hotel-Independence Center, Charlotte - Masters Economy Inn - Charlotte No, Charlotte - Masters Economy Inn - Merchandise, Charlotte - Queen City Motel, Charlotte - Residence Inn, Charlotte - Residence Inn-North, Charlotte - Resistry Hotel, Charlotte - Royce Suite Hotel, Charlotte - Sheraton Inn, Charlotte - Conference Center, Clemmons - Sheraton Motel, Dunn - Best Western, Durham - Cricket Inn, Durham - Days Inn, Durham - Dutch Village Inn, Durham - Fairfield Inn, Durham - Holiday Inn-West, Durham - Motel 6, Durham - Sheraton-University Center, Durham - The Duke Inn, Durham - Days Inn, Fayetteville - Fairfield Inn, Fayetteville - Holiday Inn, Fayetteville - Hotel-Proposed, Fayetteville - Knights Inn, Fayetteville - Goldsboro Motel, Goldsboro - Courtyard by Marriott, Greensboro - Days Inn, Greensboro - Embassy Suites, Greensboro - Fairfield Inn, Greensboro - Hilton, Greensboro - Marriott Hotel, Greensboro - Residence Inn, Greensboro - Sheraton Greensboro, Greensboro - Hotel-Proposed, Greenville - Radisson Hotel, High Point - Days Inn, Lumberton - Maggie Valley Country Club, Maggie Valley - Courtyard by Marriott, Raleigh - Fairfield Inn, Raleigh - Hampton Inn, Raleigh - Hilton, Raleigh - Holiday Inn-Downtown, Raleigh - Marriott Hotel-RTP, Raleigh - Raleigh Radisson, Raleigh - Residence Inn, Raleigh - Holiday Inn - Airport, Research Triangle Park - Howard Johnson, Roanoke Rapids - Sheraton Inn, Rocky Mount - Days Inn, Rocky Mountain - Fairfield Inn, Rocky Mountain - Motel 6, Rocky Mountain - Days Inn, Rowland - Sheraton Motel, Selma - Masters Economy Inn, Smithfield - Holiday Inn, Southern Pines - Fairfield Inn, Wilmington - Hilton, Winston/Salem - Holiday Inn, Winston/Salem - Winston Plaza Hotel, Winston/Salem North Dakota - Holiday Inn, Bismark - Radisson Inn, Bismark - Super 8, Bismark - Ramada Hotel, Fargo - Ramada Inn-Proposed, Fargo - Super 8, Grand Forks - Super 8, Minot Ohio - Holiday Inn-Cascade, Akron - Ramada Inn, Akron - Residence Inn, Akron - Aurora Inn and Pine Lake Trout Club, Aurora - Sheraton Inn, Aurora - Woodlands Inn, Aurora - Courtyard by Marriott, Blue Ash - Embassy Suites, Blue Ash - Residence Inn-Proposed, Blue Ash - Best Western, Cambridge - Days Inn, Cambridge - Hilton Hotel, Canton - Super 8, Canton - Best Western Northeast, Cincinnati - Carousel Inn, Cincinnati - Cincinnati Hotel, Cincinnati - Clarion Hotel, Cincinnati - Days Inn, Cincinnati - Embassy Suites-Proposed, Cincinnati - Holiday Inn-Downtown, Cincinnati - Holiday Inn-Eastgate, Cincinnati - Holiday Inn-Northeast, Cincinnati - Holiday Inn-Riverfront, Cincinnati - Holiday Inn-South, Cincinnati - Hotel-Airport-Proposed, Cincinnati - Howard Johnson, Cincinnati - Hyatt, Cincinnati - Knights Inn, Cincinnati - KOA Campground, Cincinnati - Marriott Inn, Cincinnati - Netherland Hilton, Cincinnati - Omni Netherland Plaza, Cincinnati - Proposed Hotel, Cincinnati - Radisson Inn, Cincinnati - Ramada Inn, Cincinnati - Residence Inn, Cincinnati - Residence Inn-North, Cincinnati - Sheraton Inn-Proposed, Cincinnati - Treadway Inn, Cincinnati - Vernon Manor, Cincinnati - AmeriSuite Hotel-Proposed, Cleveland - Downtown Hotel-Proposed, Cleveland - Fairfield Inn-Brook Park, Cleveland - Fairfield Inn-West, Cleveland - Holiday Inn-Airport, Cleveland - Holiday Inn-Lakeside, Cleveland - Hyatt Hotel-Proposed, Cleveland - Marriott Hotel, Cleveland - Sheraton City Center, Cleveland - Sheraton Hopkins, Cleveland - AmeriSuite - Proposed, Columbus - Embassy Suites, Columbus - Fairfield Inn-North, Columbus - Fairfield Inn-West, Columbus - Hilton Inn, Columbus - Holiday Inn-Airport, Columbus - Holiday Inn-City Center, Columbus - Holiday Inn-Worthington, Columbus - Hotel-Proposed, Columbus - Howard Johnson Hotel, Columbus - Howard Johnson-East, Columbus - Howard Johnson-West, Columbus - Knights Inn-West, Columbus - Marriott Hotel, Columbus - Nationwide Hotel, Columbus - Residence Inn-North, Columbus - Sheraton Plaza Hotel, Columbus - Sheraton-North, Columbus - Union Plaza Hotel-Steeplechase, Columbus - University Inn, Columbus - Woodfin Hotel, Columbus - Courtyard by Marriott, Crosswoods - Courtyard by Marriott, Dayton - Daytonian Hilton, Dayton - Fairfield Inn, Dayton - Hope Hotel & Conference Center, Dayton - Knights Inn-North, Dayton - Marriott Hotel, Dayton - Motel 6, Dayton - Ramada Inn, Dayton - Residence Inn-North, Dayton - Residence Inn By Marriott, Dayton South - Courtyard by Marriott, Dublin - Woodfin Suites, Dublin - East Liverpool Motor Lodge, East Liverpool - Howard Johnson, Euclid - Ramada Inn, Fairlawn - Hampton Inn, Independence - Howard Johnson, Lima - Ramada Inn, Lima - Best Western, Mansfield - Holiday Inn, Marietta - Lafayette Hotel, Marietta - Holiday Inn, Middletown - Howard Johnson, Middletown - Regal 8 Inn, Middletown - Sheraton-Proposed, Milford - Super 8, Montrose - Ramada Inn, Sandusky - Days Inn, Sharonville - Holiday Inn-Cincinnati North, Sharonville - Super 8, St. Clairsville - Holiday Inn, Strongsville - Balhalla Hotel, Toledo - Courtyard by Marriott, Toledo - Fairfield Inn-Airport, Toledo - Hilton at the Medical College, Toledo - Hilton Hotel, Toledo - Holiday Inn, Toledo - Knights Inn-West, Toledo - Marriott Portside Hotel, Toledo - Radisson Hotel, Toledo - Sofitel, Toledo - Hampton Inn-Proposed, Wickliffe - Holiday Inn, Youngstown - Hotel-Proposed, Youngstown - Sheraton-Proposed, Youngstown Oklahoma - Fountainhead Resort, Mcintosh County - Residence at the Trails Inn, Norman - Suit Hotel, Norman - Courtyard by Marriott, Oklahoma City - Embassy Suites, Oklahoma City - Holiday Inn, Oklahoma City - Lexington Hotel Suites, Oklahoma City - Lincoln Plaza Hotel, Oklahoma City - Marriott Hotel, Oklahoma City - Meridien Plaza, Oklahoma City - Sheraton Hotel, Oklahoma City - Arrowhead Resort, Pittsburgh County - Camelot Hotel, Tulsa - Doubletree Hotel, Tulsa - Former Holiday Inn, Tulsa - Former Holiday Inn-Downtown, Tulsa - Holiday Inn, Tulsa - Holiday Inn-Convention Center, Tulsa - La Quinta Inn, Tulsa - Marriott Hotel, Tulsa - Mayo Hotel, Tulsa - Residence Inn, Tulsa - Westin Hotel, Tulsa Oregon - Inn At Face Rock, Bandon - Courtyard by Marriott, Beaverton - Red Lion Motel, Bend - Sunriver Lodge and Resort, Bend - Econolodge Motel, Eugene - Valley River Inn, Eugene - Residence Inn Portland-South, Lake Oswego - Big Creek Resort-US Highway 101, Lane County - Embassy Suites, Portland - Holiday Inn Crowne Plaza - Proposed, Portland - Holiday Inn-Airport, Portland - Holiday Inn-South, Portland - Proposed Sheraton Suites, Portland - Red Lion - Jantzen Beach, Portland - Red Lion Inn-Lloyd Center, Portland - Red Lion Inn-Portland Center, Portland - Residence Inn - Proposed, Portland - Vintage Plaza Hotel, Portland - Wells Building, Portland - Execulodge Motel, Salem - Oregon Capital Inn, Salem - Springfield Red Lion Inn, Springfield - Sunriver Resort, Sunriver Pennsylvania - Allentown Hilton Hotel, Allentown - Holiday Inn, Allentown - Proposed Microtel, Allentown - Quality Inn, Allentown - Bedford Springs Hotel, Bedford - Compri Hotel-Proposed, Bensalem - Days Inn-Proposed, Bensalem - Holiday Inn, Bensalem - Residence Inn By Marriott, Berwyn - Econolodge, Bristol - Days Inn, Brookville - Buck Hill Falls Inn, Buck Hill Falls - Howard Johnson, Butler - Holiday Inn, Chambersburg - Days Inn, Clarion - Embassy Suites, Coraopolis - Hydeholde Country House-Proposed, Coraopolis - Days Inn, Danville - Holiday Inn, Dubois - Lafayette Inn-Proposed, Easton - Howard Johnson Hotel, Erie - Ramada Inn, Erie - Holiday Inn, Essington - Quality Suites-Proposed, Essington - Super 8-Proposed, Essington - Howard Johnson, Gibsonia - Compri Hotel-Proposed, Harrisburg - Holiday Inn, Harrisburg - Marriott Hotel, Harrisburg - Penn Harris Inn, Harrisburg - Sheraton Inn, Harrisburg - Super 8-Proposed, Harrisburg - Holiday Inn, Hazleton - Super 8-Proposed, Hazleton - Plaza Valley Forge Hotel, King of Prussia - Radisson Hotel, King of Prussia - Sheraton Hotel, King of Prussia - Valley Forge Complex, King of Prussia - Valley Forge Hilton, King of Prussia - Motel-Proposed, Lake Ariel - Days Inn, Lancaster - Holiday Inn-Route 30E, Lancaster - Holiday Inn-Route 501, Lancaster - Sheraton Lancaster Golf Resort, Lancaster - Super 8-Proposed, Lancaster - Holiday Inn, Lionville - Hilton-Great Valley, Malvern - Summerfield Suite-Proposed, Malvern - Days Inn, Meadville - Hilton Inn, Monroeville - Holiday Inn-West, Monroeville - Economy Hotel, Montgomery Township - Holiday Inn, New Hope - Treadway Inn, Newport - Residence Inn-Proposed, Paoli - Conference Center-Proposed, Penn State - Barclay Hotel, Philadelphia - Bellevue, Philadelphia - Courtyard by Marriott-Devon, Philadelphia - Courtyard-Willow Grove, Philadelphia - Days Inn-Airport, Philadelphia - Econo Lodge-Franklin Towne, Philadelphia - Essex Hotel, Philadelphia - Franklin Motor Inn, Philadelphia - Franklin Plaza Hotel, Philadelphia - Guest Quarters Hotel, Philadelphia - Hampton Inn-Proposed, Philadelphia - Health Club-Proposed, Philadelphia - Hilton Inn, Philadelphia - Hilton Inn-Northeast, Philadelphia - Holiday Inn-City Center, Philadelphia - Holiday Inn-City Line, Philadelphia - Hub Motor Inn, Philadelphia - Hyatt-Proposed, Philadelphia - Marriott Hotel, Philadelphia - Marriott Hotel-Airport, Philadelphia - Omni Philadelphia, Philadelphia - Penn Center Inn, Philadelphia - Quality Inn-Center City, Philadelphia - Residence Inn-Proposed, Philadelphia - Rittenhouse Hotel, Philadelphia - Treadway Mohawk, Philadelphia - Treadway Roosevelt, Philadelphia - Residence Inn, Philadelphia/Berwyn - Clubhouse Inn, Pittsburgh - Courtyard by Marriott, Pittsburgh - Hampton Inn at Playhouse Square, Pittsburgh - Hilton Hotel, Pittsburgh - Holiday Inn-Greentree, Pittsburgh - Holiday Inn-North, Pittsburgh - Holiday Inn-Parkway-East, Pittsburgh - Holiday Inn-Parkway-West, Pittsburgh - Hotel-Proposed, Pittsburgh - Howard Johnson Hotel, Pittsburgh - Marriott Hotel, Pittsburgh - Marriott-Airport, Pittsburgh - Motel 6, Pittsburgh - Quality Inn, Pittsburgh - Royce Hotel-Airport, Pittsburgh - U.S.S. Hotel-Proposed, Pittsburgh - Westin William Penn, Pittsburgh - Courtyard By Marriott, Pittsburgh Airport - Holiday Inn, Reading - Sheraton Hotel, Reading - Hilton at Lackawanna Station, Scranton - Hilton Hotel, Scranton - Sheraton Inn, Stroudsburg - HoJo Inn, Tannersville - Hilton-Northeast, Trevose - Compri Hotel-Proposed, Valley Forge - Courtyard by Marriott, Valley Forge - Holiday Inn-Meadowlands, Washington - Holiday Inn, Wilkes-Barre - Days Inn-Proposed, Williamsport - Hotel-Proposed, Williamsport - Hampton Inn - Proposed, Willow Grove - Holiday Inn-Market Street, York - Holiday Inn-Route 30 and I-83, York - Ramada Inn, York - Super 8-Proposed, York Rhode Island - Cresthil-Proposed, Lincoln - Courtyard by Marriott, Newport - Vanderbilt Hotel-Convention Center, Newport - Quality Inn, North Kingston - Biltmore Plaza, Providence - Convention Center Hotel-Proposed, Providence - Holiday Inn Providence - Downtown, Providence - Hotel-Proposed, Providence - Marriott Hotel, Providence - Sheraton-Airport, Providence - Susse Chalet, Smithfield - Howard Johnson, Warwick - Residence Inn-Proposed, Warwick - Susse Chalet, Warwick South Carolina - Quality Inn Motel, Anderson - Super 8, Anderson - Budget Hotel - Proposed, Charleston - Charleston Center Hotel-Proposed, Charleston - Cooper River Inn, Charleston - Days Inn, Charleston - Francis Marion Hotel, Charleston - Hampton Inn-Proposed, Charleston - Hawthorne Suites Hotel, Charleston - Holiday Inn, Charleston - Holiday Inn-Airport, Charleston - Holiday Inn-Riverview, Charleston - Masters Economy Inn - Mt. Pleasant, Charleston - Masters Economy Inn - Rivers Ave, Charleston - Middleton Inn, Charleston - Omni Charleston, Charleston - Quality Inn, Charleston - Trusthouse Forte, Charleston - Courtyard by Marriott, Columbia - Courtyard by Marriott-Northeast, Columbia - Courtyard by Marriott-Northwest, Columbia - Embassy Suites, Columbia - Marriott Hotel, Columbia - Masters Economy Inn - I-26, Columbia - Masters Economy Inn - Knox Abbot, Columbia - Motel 6, Columbia - Residence Inn, Columbia - Coral Beach Hotel, Coral Beach - Days Inn, Dillon - Save Inn, Fairplay - Fairfield Inn, Florence - Holiday Inn, Florence - Days Inn, Gaffney - Courtyard by Marriott, Greenville - Fairfield Inn, Greenville - Greenville Hilton Hotel, Greenville - Ramada Inn, Greenville - Super 8, Greenwood - Days Inn, Hardeeville - Fairfield Inn, Hilton Head - Hilton Head Inn, Hilton Head - Holiday Inn, Hilton Head - Inter-Continental Hotel, Hilton Head - Islander Inn, Hilton Head - Quality Suites-Proposed, Hilton Head - Residence Inn-Proposed, Hilton Head - Sheraton Inn, Hilton Head - PGA East Resort-Proposed, Kiawah Island - Save Inn, Lake Hartwell - Days Inn, Mt. Pleasant - Coral Beach Hotel, Myrtle Beach - Radisson Hotel, Myrtle Beach - Best Western Inn, North Charleston - Budget Hotel-Proposed, North Charleston - Days Inn, North Charleston - Northwoods Atrium Inn, North Charleston - Days Inn, Santee - Holiday Inn-West, Spartanburg - Howard Johnson, Spartanburg - Residence Inn, Spartanburg South Dakota - Holiday Inn, Aberdeen - Holiday Inn, Rapid City - Holiday Inn, Sioux Falls - Super 8, Sioux Falls - Holiday Inn, Spearfish Tennessee - Ameri Suite Hotel-Proposed, Brentwood - Courtyard by Marriott, Brentwood - Holiday Inn, Bristol - Holiday Inn-Southeast, Chattanooga - Howard Johnson, Chattanooga - Marriott Hotel, Chattanooga - Motel 6, Chattanooga - Sheraton Inn, Chattanooga - Super 8, Chattanooga - Holiday Inn, Cove Lake - Masters Economy Inn, Dickson - Comfort Inn-Proposed, Elizabethton - Park Vista Hotel, Gatlinburg - Holiday Inn-I-40, Jackson - Holiday Inn, Johnson City - Super 8, Johnson City - Fairfield Inn, Johnson Park - Holiday Inn, Kingsport - Courtsouth Healthclub-North, Knoxville - Courtsouth Healthclub-South, Knoxville - Courtsouth Healthclub-West, Knoxville - Days Inn, Knoxville - Hilton Hotel, Knoxville - Howard Johnson-Westhills, Knoxville - Motel 6, Knoxville - Quality Inn, Knoxville - Ramada Inn-West, Knoxville - Rodeway Inn, Knoxville - Courtyard by Marriott, Memphis - Courtyard by Marriott-Airport, Memphis - Holiday Inn - Crowne Plaza, Memphis - Holiday Inn-East, Memphis - Holiday Inn-East Poplar, Memphis - Holiday Inn-I-40-Sycamore View, Memphis - Holiday Inn-Memphis Int'l Airport, Memphis - Hyatt Regency, Memphis - Lexington Hotel Suites, Memphis - Motel 6, Memphis - Omni Hotel, Memphis - Proposed Fairfield Inn, Memphis - Residence Inn, Memphis - La Quinta Inn, Memphis - Airport - Brown County Inn, Nashville - Capital Mall Conv. Center-Proposed, Nashville - Clarion Maxwell House, Nashville - Courtyard by Marriott-Airport, Nashville - Days Inn, Nashville - Doubletree Hotel, Nashville - Grosvenor, Nashville - Hampton Inn, Nashville - Holiday Inn Crowne Plaza, Nashville - Holiday Inn Express, Nashville - Holiday Inn-Briley Parkway, Nashville - Marriott Hotel, Nashville - Nashville Union Station, Nashville - Ramada Inn, Nashville - Sheraton Hotel, Nashville - Sheraton Music City, Nashville - Stouffer Hotel, Nashville - Super 8, Nashville - Union Station Hotel, Nashville - AmeriSuite, Oakridge - Holiday Inn, Oakridge - Super 8-Proposed, Union City Texas - Harvey Hotel, Addison - Days Inn, Amarillo - Motel 6, Amarillo - Radisson Hotel-Proposed, Amarillo - Super 8 Motel, Amarillo - La Quinta Inn, Amarillo - Airport - Courtyard by Marriott, Arlington - Hilton Hotel, Arlington - Holiday Inn, Arlington - Lexington Suites Hotel, Arlington - Compri Hotel-Proposed, Austin - Driskill Hotel, Austin - Embassy Suites-Austin Town Lake, Austin - Embassy Suites-North, Austin - Fairfield North, Austin - Four Seasons Hotel, Austin - Holiday Inn, Austin - Holiday Inn-Austin Town Lake, Austin - La Quinta Inn, Austin - Marriott Hotel, Austin - Proposed Fairfield Inn, Austin - Quality Inn, Austin - Residence South, Austin - La Quinta Inn, Austin - Ben White - Holiday Inn Airport, Austins Cities - Holiday Inn, Bay Town - Hilton Hotel, Beaumont - Holiday Inn, Beaumont - Courtyard by Marriott, Bedford - Holiday Inn, Brownsville - La Quinta Inn, Brownsville - Hilton Hotel, College Station - Ramada Inn, College Station - Holiday Inn, Conroe - Corpus Christi Hotel-Airport, Corpus Christi - Days Inn, Corpus Christi - Hilton - Proposed, Corpus Christi - Holiday Inn, Corpus Christi - Holiday Inn-Airport, Corpus Christi - La Quinta Inn, Corpus Christi - North - La Quinta Inn, Corpus Christi - South - Allstar Inn, Dallas - Ambassador Plaza Hotel, Dallas - Arlington Hilton, Dallas - Bradford Plaza Hotel, Dallas - Bristol Suites, Dallas - Convention Center Hotel-Proposed, Dallas - Courtyard by Marriott, Dallas - Courtyard by Marriott-Northeast, Dallas - Courtyard by Marriott-Plano, Dallas - Courtyard by Marriott-Stemmons, Dallas - Dallas Grand Hotel, Dallas - Doubletree Inn, Dallas - Embassy Suites, Dallas - Fairmont Hotel, Dallas - Harvey Hotel, Dallas - Hilltop, Dallas - Hilton Inn-LBJ, Dallas - Hilton-Arlington, Dallas - Holiday Inn - North, Dallas - Holiday Inn Crowne Plaza, Dallas - Holiday Inn-Brook Hollow, Dallas - Holiday Inn-South, Dallas - Houstonian Hotel, Dallas - Howard Johnson-East, Dallas - Lexington Hotel Suites, Dallas - Loews Anatole Hotel, Dallas - Marriott Hotel-Airport, Dallas - Marriott-Park Central, Dallas - Marriott-Quorum, Dallas - Melrose Hotel, Dallas - Motel 6, Dallas - Omni Melrose Hotel, Dallas - Park Plaza, Dallas - Propsed Hotel - DFW, Dallas - Ramada Inn Convention Center, Dallas - Ramada-Market Center, Dallas - Registry Hotel, Dallas - Residence Inn-Market Center, Dallas - Sheraton Grand, Dallas - Southland Center Hotel, Dallas - Statler Hilton Hotel, Dallas - Summit Hotel, Dallas - Westin Galleria Hotel, Dallas - La Quinta Inn, Dallas - DFW - La Quinta Inn, Dallas - North Park - La Quinta Inn, Dallas - Plano - La Quinta Inn, Dallas - Richardson - Allstar Inn, El Paso - Hilton Inn-Airport, El Paso - La Quinta Hotel-Airport, El Paso - Rodeway Inn, El Paso - Travelers Inn, El Paso - Westin Paso del Norte, El Paso - La Quinta Inn, El Paso - Lomaland - Allstar Inn, Euless - La Quinta Inn, Euless - Allstar Inn, Fort Worth - Courtyard by Marriott, Fort Worth - Days Inn Downtown, Fort Worth - Hilton Hotel, Fort Worth - Holiday Inn-North, Fort Worth - Holiday Inn-South, Fort Worth - Lexington Suites Hotel, Fort Worth - Metro Center Hotel, Fort Worth - Radisson Plaza Hotel, Fort Worth - Residence Inn, Fort Worth - La Quinta Inn, Fort Worth - East - Holiday Inn, Harlingen - La Quinta Inn, HI-LA Marque - Crowne Plaza-Houston Park, Houston - Days Inn, Houston - Days Inn-Hobby, Houston - Doubletree Hotel, Houston - Embassy Suites, Houston - Galleria Gardens, Houston - Harvest House Hotel, Houston - Harvey Hotel Medical Center, Houston - Hilton Inn-West, Houston - Holiday Inn I-10 East, Houston - Holiday Inn-Downtown, Houston - Holiday Inn-East, Houston - Holiday Inn-Greenway Plaza, Houston - Holiday Inn-Hobby, Houston - Holiday Inn-Medical Center, Houston - Holiday Inn-NASA, Houston - Holiday Inn-North, Houston - Holiday Inn-Northwest, Houston - Holiday Inn-Southwest, Houston - Host Hotel International, Houston - Hotel Meridien, Houston - Hotel-Proposed, Houston - Houston House, Houston - Houston Medical Center, Houston - Houston Park 10 Crowne Plaza, Houston - La Quinta Hotel-Astrodome, Houston - La Quinta Hotel-Baytown, Houston - La Quinta Hotel-CY Fair, Houston - La Quinta Hotel-Hobby, Houston - La Quinta Inn-Stafford, Houston - Lexington Hotel Suites, Houston - Marriott Astrodome, Houston - Marriott Hotel, Houston - Marriott Hotel-Medical Center, Houston - Marriott-Airport, Houston - Motel 6, Houston - Remington, Houston - Residence Inn, Houston - Rodeway Inn, Houston - Rodeway Inn-Hobby, Houston - Shamrock Hilton Hotel, Houston - Sheraton Hotel, Houston - Sheraton Houston House, Houston - Sheraton Houston Place Hotel, Houston - Sheraton Town and Country, Houston - Sofitel, Houston - Stouffer Greenway Plaza, Houston - Suite Hotel-Proposed, Houston - Whitehall, Houston - Whitehall Hotel Conversion to HI, Houston - La Quinta Inn, Houston - Sharpstown - La Quinta Inn, Houston - East - La Quinta Inn, Houston - Loop 1960 - La Quinta Inn, Houston - Northwest - La Quinta Inn, Houston- SW Freeway - Holiday Inn, Huntsville - Harvey Hotel DFW, Irvine - Allstar Inn, Irving - Hampton Inn, Irving - Hampton Inn-Proposed, Irving - Harvey Hotel-D/FW Airport, Irving - Holiday Inn-Texas Stadium, Irving - Marriott Hotel, Irving - Holiday Inn, Kingsville - Del Lago Hotel, Lake Conroe - Hilton Inn, Laredo - La Posada, Laredo - Courtyard by Marriott, Las Colinas - La Quinta Inn, Longview - Hilton Inn, Lubbock - Holiday Inn, Lubbock - Residence Inn, Lubbock - La Quinta Inn, Midland - Holiday Inn, New Braunfels - All Star Inn, North Richland Hills - La Quinta Inn, Odessa - Holiday Inn, Orange - Holiday Inn, Paris - Plano Harvey Hotel, Plano - La Quinta Inn, Round Rock - Sheraton Inn, San Angelo - Coachman Inn-Proposed, San Antonio - Courtyard by Marriott-Downtown, San Antonio - Courtyard by Marriott-Medical Ctr., San Antonio - Crockett Hotel, San Antonio - Days Inn, San Antonio - Fairfield - North, San Antonio - Gunter Hotel, San Antonio - Holiday Inn-Airport, San Antonio - Holiday Inn-Market Square, San Antonio - Holiday Inn-North, San Antonio - Holiday Inn-Northwest, San Antonio - Holiday Inn-Riverwalk, San Antonio - La Quinta Hotel-Ingram, San Antonio - La Quinta Hotel-Lackland, San Antonio - La Quinta Hotel-Toepperwein, San Antonio - Lexington Hotel Suites, San Antonio - Marriott Hotel-Proposed, San Antonio - Marriott Inn-North, San Antonio - Proposed Fairfield Inn, San Antonio - La Quinta Inn, San Antonio - Windsor - La Quinta Inn, San Antonio - Wurzbach - Holiday Inn, San Marcos - La Quinta Inn, SAT-Toepperwein - Sheraton Hotel, South Padre Island - La Quinta Inn, Tyler - Sheraton, Tyler - Sheraton Inn, Tyler - Traveler's Choice Inn, Tyler - Hilton Hotel, Waco - Gateway Inn, Wichita Falls - Hilton Hotel, Wichita Falls Utah - Mount Holly Ski Resort, Beaver - Hotel-Proposed, Brigham City - Motel-Proposed, Cedar City - Proposed Mayflower Hotel, Deer Valley - Stein Eriksen Lodge, Deer Valley - Deer Valley Resort, Park City - Omni Yarrow, Park City - Prospector Square Resort, Park City - Yarrow Resort, Park City - Seven Peaks Resort and Hotel, Provo - Comfort Inn, Salt Lake City - Doubletree, Salt Lake City - Hilton Hotel-Airport, Salt Lake City - Holiday Inn, Salt Lake City - Holiday Inn-Salt Palace, Salt Lake City - Hotel Utah, Salt Lake City - Hotel-Proposed, Salt Lake City - La Quinta Inn, Salt Lake City - Nendels Inn, Salt Lake City - New Grande Hotel, Salt Lake City - Red Lion Hotel, Salt Lake City - Sheraton Hotel, Salt Lake City - Super 8, Salt Lake City - University Park Hotel (Desktop Rev), Salt Lake City - Ramada Inn-Proposed, Sandy Vermont - Ramada Inn, Bennington - Bolton Valley Corporation, Bolton Valley - Quality Inn, Brattleboro - Radisson Hotel, Burlington - Smugglers Notch, Cambridge - Inn-Proposed, Essex - Cascade Lodge, Killington - Inn of the Six Mountains, Killington - Mountain Inn, Killington - Equinox Hotel, Manchester - Howard Johnson Inn, Rutland - Quality Inn, Stowe - Conference Center-Proposed, Stratton Mountain - Sugarbush Inn, Sugarbush - Susse Chalet, Williston Virginia - Comfort Inn, Abingdon - Best Western, Alexandria - Comfort Inn, Alexandria - Compri Hotel-Proposed, Alexandria - Embassy Suites, Alexandria - Howard Johnson, Alexandria - Marriott Suites, Alexandria - Ramada Inn, Alexandria - Best Western, Arlington - Gateway Marriott, Arlington - Hyatt Arlington Hotel, Arlington - Hyatt Regency, Arlington - Key Bridge Marriott, Arlington - Marriott Hotel, Arlington - Sheraton Crystal City Hotel, Arlington - Sheraton National Hotel, Arlington - Stouffer Concourse Hotel, Arlington - Mountain Lake Hotel, Blacksburg - Holiday Inn, Bristol - Howard Johnson, Bristol - Days Inn, Carmel Church - Westfields International, Chantilly - Boar's Head Inn, Charlottesville - Cavalier Inn, Charlottesville - Courtyard by Marriott, Charlottesville - Hilton-University, Charlottesville - Holiday Inn-North, Charlottesville - Omni Charlottesville, Charlottesville - Radisson-Proposed, Charlottesville - Super 8, Charlottesville - Days Inn, Chester - Howard Johnson, Chester - Days Inn, Colonial Heights - Holiday Inn, Covington - Embassy Suites, Crystal City - Holiday Inn Crowne Plaza, Crystal City - Hyatt Hotel, Crystal City - Marriott Crystal Gateway Hotel, Crystal City - Comfort Inn-Proposed, Dahlgren - Days Inn, Emporia - Courtyard by Marriott, Fairfax - Embassy Suites, Fairfax - Neighborhood Suites-Proposed, Fairfax - Hampton Inn-Proposed, Fairfax City - Westfields International, Fairfax County - Marriott Hotel, Fairview - Econo Lodge, Farmingville - Comfort Inn-Proposed, Farmville - Comfort Inn, Frederick County - Motel 6, Fredericksburg - Courtyard by Marriott, Hampton - Days Inn, Hampton - Fairfield Inn, Hampton - Courtyard by Marriott, Herndon - Embassy Suites Hotel, Herndon - Ramada Renaissance and Health Club, Herndon - Residence Inn-Proposed, Herndon - Worldgate Marriott Hotel, Herndon - Hotel-Proposed, Hopewell - Keswick Inn, Keswick - Holiday Inn, Lexington - Radisson Hotel, Lynchburg - Courtyard by Marriott, Manassas - Holiday Inn, Marion - Hilton, McLean - Days Inn, Norfolk - Marriott Waterside Hotel, Norfolk - Omni Hotel, Norfolk - Waterfront Hotel - Proposed, Norfolk - 135-Suite Hotel-Proposed, Portsmouth - Waterfront Suite Hotel-Proposed, Portsmouth - Comfort Inn, Princeton - Comfort Inn, Pulaski County - Embassy Suites Hotel, Reston - Hyatt Hotel, Reston - Best Western Kings Quarters, Richmond - Courtyard by Marriott, Richmond - Embassy Suites Hotel, Richmond - Hampton Inn, Richmond - Holiday Inn, Richmond - Howard Johnson Lodge, Richmond - Hyatt House Hotel, Richmond - La Quinta Hotel, Richmond - Marriott Hotel, Richmond - Omni Richmond, Richmond - Radisson Hotel, Richmond - Ramada Renaissance Hotel, Richmond - Residence Inn, Richmond - Days Inn, Richmond (Broad) - Days Inn, Richmond (Byrd) - Holiday Inn, Roanoke - Holiday Inn - Airport, Roanoke - Holiday Inn - Civic Center, Roanoke - Holiday Inn - South, Roanoke - Hotel Roanoke, Roanoke - Howard Johnson, Roanoke - Marriott - Roanoke Airport, Roanoke - Marriott Hotel, Roanoke - Holiday Inn, Salem - Super 8, South Hill - Days Inn, Springfield - Hilton, Springfield - Holiday Inn, Staunton - Stonewall Jackson Hotel, Staunton - Hampton Inn - Proposed, Tyson's Corner - Embassy Suites, Tysons Corner - Marriott Hotel, Tysons Corner - Residence Inn, Tysons Corner - Ritz Carlton-Proposed, Tysons Corner - Courtyard by Marriott, Virginia Beach - Courtyard by Marriott-Lynnhaven, Virginia Beach - Fairfield Inn, Virginia Beach - Hotel-Proposed, Virginia Beach - Pavilion Tower Hotel, Virginia Beach - Ramada Inn - Oceanside, Virginia Beach - International Conference Center, Westfields - Howard Johnson, Wheeling - Fort Magruder Inn, Williamsburg - Governor's Inn, Williamsburg - Holiday Inn-East, Williamsburg - Holiday Inn-West, Williamsburg - Royce Hotel, Williamsburg - Williamsburg Hilton, Williamsburg - Best Western-Proposed, Wytheville Washington - Bellevue Thunderbird Motor Inn, Bellevue - Embassy Suites, Bellevue - Hampton Inn, Bellevue - La Quinta, Bellevue - Residence Inn Seattle-East, Bellevue - Ramada Inn, Bothell - Rattling Spring Hotel, Harpers Ferry - Motel 6, Issaquah - AmeriSuite, Kent - Homecourt Suite Hotel, Kent - Embassy Suite, Lynnwood - Residence Inn-Seattle North, Lynnwood - Red Lion Inn at Pasco, Pasco - Redmond Motel, Redmond - Hampton Inn, Sea Tac - Holiday Inn Airport, Sea Tac - Thunderbird Inn, Sea Tac - Alexis Hotel, Seattle - Courtyard by Marriott-South Center, Seattle - Doubletree Inn at South Center, Seattle - Doubletree Plaza, Seattle - Hampton Inn-Airport, Seattle - Holiday Inn Crowne Plaza, Seattle - Holiday Inn-Sea Tac, Seattle - La Quinta, Seattle - Lake Union Residence Inn, Seattle - Marriott Hotel-Airport, Seattle - Marriott Sea-Tac Hotel, Seattle - Plaza Park Suites, Seattle - Ramada Inn-Airport, Seattle - Red Lion, Seattle - Stouffer Madison Hotel, Seattle - Travelodge-Proposed, Seattle - Westin Hotel, Seattle - Courtyard by Marriott, Spokane - Gateway Hotel, Spokane - Holiday Inn-West, Spokane - Red Lion Inn, Spokane - Super 8, Spokane - Hilton-Village Green, Tacoma - Hotel-Proposed, Tacoma - Park Shore Inn, Tacoma - Tacoma Sheraton Hotel, Tacoma - Embassy Suites Hotel, Tukwila - Hampton Inn, Tukwila - Residence Inn-Seattle South, Tukwila - Red Lion Quay, Vancouver - Residence Inn-Portland North, Vancouver - Super 8, Wenatchee - Thunderbird Motor Inn, Yakima West Virginia - Comfort Inn-Proposed, Charleston - Holiday Inn, Clarksburg - Holiday Inn, Fairmont - Hotel-Proposed, Harpers Ferry - Holiday Inn, Huntington - Comfort Inn-Proposed, Morgantown - Holiday Inn, Morgantown - Motel-Proposed, Morgantown - Comfort Inn, Princeton - Motel-Proposed, Princeton - Hotel-Proposed, Wheeling - Howard Johnson, Wheeling Wisconsin - Super 8, Ashland - Holiday Inn, Beloit - Embassy Suites Hotel-Proposed, Brookfield - Marriott-Milwaukee, Brookfield - Holiday Inn, Eau Claire - Residence Inn, Glendale - Granada Royale-Proposed, Green Bay - Holiday Inn-Downtown, Green Bay - Residence Inn-Proposed, Green Bay - Super 8, Janesville - Super 8, Kenosha - Playboy Resort, Lake Geneva - Concourse Hotel, Madison - Fairfield Inn, Madison - Hampton Inn - East, Madison - Hampton Inn - West, Madison - Compri Hotel-Proposed, Milwaukee - Embassy Suite, Milwaukee - Fairfield Inn, Milwaukee - Holiday Inn-Airport, Milwaukee - Holiday Inn-West, Milwaukee - Hotel and Conv. Ctr. East-Proposed, Milwaukee - Hyatt Regency, Milwaukee - Marc Plaza, Milwaukee - Marriott Inn, Milwaukee - Omni Suite Hotel-Proposed, Milwaukee - Super 8-Airport, Milwaukee - Olympia Village Resort, Oconomowoc - Scotsland Resort, Oconomowoc - Sheraton, Racine - Claridge Motor Inn, Rhinelander - Super 8, Waukesha - Holiday Inn, Wausau - Mead Inn, Wisconsin Rapids Wyoming - Days Inn, Casper - Flying L. Skytel, Cody - Super 8, Cody - Snow King Resort, Jackson - Super 8, Jackson - Wort Hotel, Jackson - Development-Proposed, Jackson Hole - Colter Bay Village, Moran - Jackson Lake Lodge, Moran - Jenny Lake Lodge, Moran - Best Western-Bel Air, Rawlins - Bridger Inn, Rawlins - La Quinta Inn, Rock Springs Western Europe Belgium - Oostkamp Hotel, Bruges - Proposed Residence Inn, Brussels - SAS Royal Hotel, Brussels Denmark - Proposed Hotel, Copenhagen France - The Miramar, Biarritz - Chateau D'arc en Barroi, Haute-Marne - Le Grand, Paris - Royal Monceau, Paris Germany - Cumberland House, Berlin - Munchen Penta Hotel, Munchen Holland - Carlton - Cannes & Amstel, Amsterdam - The Pulitzer Hotel, Amsterdam Spain - Le Meridien, Barcelona - Princess Sophia, Barcelona - Hotel Los Monteros, Marbella - Incosol Spa & Hotel, Marbella - Proposed Hyatt Resort, Marbella United Kingdom - Copthorne Hotel, Aberdeen - Copthorne Hotel, Birmingham - Hyatt Regency, Birmingham - Holiday Inn, Cambridge - Copthorne Hotel, Cardiff - Great Eastern Hotel, England - Copthorne Hotel, Glasgow - Hanbury Manor Hotel, Hertfordshire - 47 Park Street, London - Bailey's Hotel, London - Basil Street Hotel, London - Basil Street Hotel, Knightsbridge, London - Britannic Tower, London - Chelsea Hotel, London - Chesterfield Hotel, London - Chesterfield Hotel, Mayfair, London - Copthorne Hotels, London - Copthorne Tara Hotel, London - Dorchester Mayfair, London - Executive Hotel, London - Marriott Hotel, London - May Fair, London - Plaza Hotel, London - Proposed Hotel Conversion, London - Proposed Hotel-The City, London - Regent Hotel, London - Regent London Hotel, London - Sheraton Belgravia, London - Sheraton Park Tower, London - St. James Court Hotel, London - The Executive Hotel, London - Windsor Hotel, London - Copthorne Hotel, Manchester - Copthorne Hotel, Newcastle - Copthorne Hotel, Slough/Windsor - Swallow Hotel, Stockton - Copthorne Hotel-Effingham Park, Sussex - Copthorne Hotel-Gatwick, Sussex Middle East and North Africa Egypt - Sheraton Anni Cruise Ship, - Sheraton Aton Cruise Ship, - Sheraton Hotp Cruise Ship, - Sheraton Tut Cruise ship, - Aswan Oberol Hotel, Aswan - Cairo Sheraton Hotel, Cairo - Hotel - Proposed, Cairo - Lido Hotel, Cairo - Meridien Hotel, Cairo - Novotel Cairo Airport, Heliopolis, Cairo - Proposed Resort Complex, Hurghada - Luxor Sheraton Hotel, Luxor - Proposed Hotel, Luxor - Fayrouz Village Hotel, Sharm El Sheikh, Sinai - Coral Village Hotel, Nuweiba, Sinai - Hotel - Proposed, Dahab, Sinai - Hotel - Proposed, St. Catherine, Sinai Greece - Athens Hilton & Proposed Hotel, Athens - Caravel Hotel, Athens - Proposed Sargani Hotel & Bungalows, Halkidiki - Rhodes Hotel -Proposed, Rhodes Israel - Proposed Inter-Continental Hotel, Tel Aviv Lebanon - Hotel Market Review, Beruit Morocco - El Minzah Hotel, Tangier Nigeria - Proposed Sheraton Hotel, Port Harcourt Saudi Arabia - Proposed Jeddah Corniche Project, Jeddah Tunisia - Proposed Hotel, Hammamet Turkey - Hotel Conrad, Istanbul Latin America and the Caribbean Bahamas - Eleuthera Joint Venture, Eleuthera - Cape Eleuthera Island Hotel, Eleuthera Island - Eleuthera Joint Venture, Eleuthra - The Montague, Nassau - Paradise Island Hotel, Paradise Island - Resorts Int'l Hotel and Casino, Paradise Island Belize - Journey's End Caribbean Club, Abergris Caye Bermuda - Sonesta Hotel, Bermuda Brazil - Quatro Rodas Hotel, Recife Colombia - Charleston Hotel - Proposed, Barranquilla - Bella Suiza Hotel, Bogota - Hotel & Convention Center -Proposed, Cali - Cartagena Hilton, Cartagena - El Faro de Cartagena Resort Propose, Cartagena - Proposed Indian Sea and Sun Resort, Cartagena - Hotel De Isleno, San Andres Isla - Santamar Hotel, Santa Marta Curacao - Ramada Renaissance Hotel and Casino, Honduras - Inn Of The Sun, Guanaja Jamaica - Holiday Inn-Rose Hall, Montego Bay - Americana Eden II, Ocho Rios Mexico - Posadas de Mexico Hotels, - Americana Condesa Del Mar, Acapulco - Americana El Presidente Hotel, Acapulco - Resort-Proposed, Cabo San Lucas - Palacio Del Margus, Chiconcuac - Omni Hotel, Ixtapa - Fiesta Inn-Proposed, Leon - Karmina Place, Manzanillo - Hotel - Proposed, Mexico City - La Jolla de Mismaloya, Puerta Vallarta Netherland Antilles - Divi Divi Beach Resort, Aruba - Divi Tamarijn Beach Resort, Aruba - Golden Anchor, Bonaire - Resort Hotel-Proposed, Bonaire - Ramada Renaissance Hotel and Casino, Curacao - Cupecoy Beach Club Hotel, St. Maarten - Dawn Beach Hotel, St. Maarten - Dawn Beach Resort, St. Maarten - Mullet Bay Resort, St. Maarten - Oyster Pond Hotel, St. Maarten Puerto Rico - Hyatt Dorado Beach Hotel, Dorado - Hyatt Regency Cerromar Hotel, Dorado - Hotel - Proposed, Fajardo - Hotel Puerto Rico, Fajardo - Westin Resort-Proposed, Palmer - Marriott Resort & Casino-Proposed, Puerto Rico - Carib Inn, San Juan - Dupont Plaza, San Juan - El San Juan Hotel and Casino, San Juan - Howard Johnson Hotel, San Juan - Marriott - Proposed, San Juan - Marriott Update - Proposed, San Juan - Sands Hotel and Casino, San Juan Virgin Islands - Caneel Bay, St. Croix - Carambola Beach Resort, St. Croix - Hotel - Proposed, St. Croix - St. Croix Development, St. Croix - Caneel Bay, St. John - Pineapple Beach Hotel, St. Thomas - Sugar Bay Plantation, St. Thomas - Virgin Grand Hotel, St. Thomas - Virgin Isle Hotel, St. Thomas - Little Dix Bay, Virgin Borda Eastern Europe Croatia - Two Hotels, Dubrovnik Czech Republic - Voronesh Hotel Complex, Brno - Proposed Four Seasons Hotel, Prague Hungary - Proposed Resort Hotel, Babolna - Duna Inter-Continental, Budapest Latvia - Daugava Hotel-Proposed, Riga - Proposed Hotel, Riga Poland - Holiday Inn, Krakow - Marriott Hotel - Proposed, Poznan - Proposed Hotel, Poznan - Radisson Hotel, Szczecin - Bristol Hotel, Warsaw - Holiday Inn, Warsaw - Orbis Joint Venture, Warsaw - Proposed Hotel, Warsaw - Sheraton Hotel - Proposed, Warsaw - Zakopane Resort Complex, Zakopane Russia - Kamiennyi Most Hotel & Business, Moscow - Savoy Hotel, Moscow Asia Korea - Ultrapolis 3000, Seoul Malaysia - UP 3000 Hotel-Proposed, Selangor Singapore - Resort Hotels - Proposed, - Ultrapolis 3000, Singapore West Indies - Proposed Blue Lagoon Resort, St. Martin Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Hospitality Valuation Services Industry Leader Hospitality Valuation Services (HVS) was created in 1980 to satisfy the ever-increasing demand for reliable and well-documented hotel/motel valuations, market studies, and feasibility reports. As the nation's leading real estate appraisal organization devoted exclusively to lodging properties, HVS offers owners, investors, and lenders in-depth valuation and market research expertise. Our professional staff, operating on a worldwide basis with offices in New York, San Francisco, Miami, Boulder, Vancouver, and London, has appraised more than 4,000 hotels and motels in every state and over 32 foreign countries. Each member of Hospitality Valuation Services is well versed in lodging operations. Most have college degrees in hotel administration as well as actual on-the-job hotel experience. Coupled with intense training in real estate appraisal theory and techniques, we are highly qualified to handle the unique characteristics of hostelry valuations. Excellence Through Specialization An important feature of our valuation and feasibility services is specialization. Daily exposure on a global basis to a wide variety of hotel transactions and operating statistics, along with actual buyers and sellers, provides the data to thoroughly document our reports. HVS maintains the industry's largest database of hotel valuation information: o Data on over 4,000 hotel transactions; o Over 3,500 actual financial statements; o Thousands of management contracts, franchise agreements, mortgages, leases, and other similar documents; o Personal contacts at every major hotel company; o Names and addresses of over 10,000 hotel owners, investors, lenders, and operators. Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Innovative research in hotel valuation techniques is set forth in the textbooks we authored for the Appraisal Institute, entitled The Computerized Income Approach to Hotel/Motel Market Studies and Valuations and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations. These publications, along with more than 300 articles, are recognized as the authoritative standard for valuing lodging facilities and performing market feasibility studies. In addition, we have developed Hospitality Valuation Software, a computerized package that assists appraisers and consultants in evaluating market trends and preparing financial forecasts. Full-Service Hotel Consulting With a reputation established by providing highly detailed hotel valuations that are accepted and relied upon by virtually every major hotel owner, lender, and operator, HVS has branched out to offer a full range of consulting services. o HVS Consulting Services: Valuations, market feasibility studies, economic studies, management contract and franchise negotiations, development assistance, and expert testimony. o HVS Executive Search: Recruitment and placement of top-level hotel management personnel. o HVS Eco Services: Environmental audits and assistance in implementing programs including water and energy management, recycling, and green product selection. Provides ECOTEL certifications to environmentally sensitive hotels. o HVS Gaming Services: Specialized market, valuation, and consulting services for casinos and other types of gaming activities. o HEI Hotels: Hotel ownership and management. Long-Term Relationship Hospitality Valuation Services is in business for the long-term. We are dedicated to providing our clients with the highest quality consulting services. Should you require assistance in any areas covered by our expertise, please contact any member of our team at (516) 248-8828. This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. ============= HVS - ------------- INTERNATIONAL ============= ===================================================== ---------------------------- Economic Study and Appraisal ---------------------------- Ramada Plaza Pentagon ---------------------------- Alexandria, Virginia ---------------------------- Prepared by: Hospitality Valuation Services A Division of Hotel Consulting Services, Inc. 372 Willis Avenue Mineola, NY 11501 516-248-8828 Submitted to: Mr. Shirish Godbole Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 [Letterhead of HVS International] November 20, 1996 Mr. Shirish Godbole Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 Re: Ramada Plaza Pentagon Alexandria, Virginia Ref. #9610267 Dear Mr. Godbole: Pursuant to your request, we herewith submit our economic study and appraisal pertaining to the above-captioned property. We have inspected the site and facilities and analyzed the hostelry market conditions in the subject property's area. Our report was prepared in accordance with, and is subject to, the requirements of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and the Uniform Standards of Professional Practice (USPAP), as provided by the Appraisal Institute. Based on the available data, our analysis, and our experience in the hotel industry, it is our opinion that the market value of the fee simple interest in the subject property described in this report, as of January 1, 1997, is: $6,600,000 SIX MILLION SIX HUNDRED THOUSAND DOLLARS We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings and valuation. The economic study and appraisal is made part hereof, and must remain attached in order for the value opinion set forth to be considered valid. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. Very truly yours, HOSPITALITY VALUATION SERVICES A Division of Hotel Consulting Services, Inc. /s/ Christopher J. Doherty Christopher J. Doherty Consulting and Valuation Analyst /s/ Anne R. Lloyd-Jones Anne R. Lloyd-Jones, CRE Senior Vice President /s/ Stephen Rushmore Stephen Rushmore, CRE, MAI, CHA President HVS International, Mineola, New York Table of Contents - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 1. Executive Summary .............................................. 1 2. Nature of the Assignment ....................................... 3 3. Description of the Land, Improvements, Zoning, Taxes, and Neighborhood ................................ 7 4. Market Area Analysis ........................................... 22 5. Overview of External Forces Affecting the U.S. Lodging Industry 36 6. Lodging Market Supply and Demand Analysis ...................... 52 7. Projection of Occupancy and Average Rate ....................... 72 8. Highest and Best Use ........................................... 87 9. Approaches to Value ............................................ 89 10. Income Capitalization Approach ................................. 92 11. Sales Comparison Approach ...................................... 130 12. Cost Approach .................................................. 138 13. Reconciliation of Value Indications ............................ 144 14. Statement of Assumptions and Limiting Conditions ............... 148 15. Certification .................................................. 151 Addenda Photographs of the Subject Property Photographs of the Competitors Legal Description Explanation of the Simultaneous Valuation Formula Qualifications Christopher J. Doherty Anne R. Lloyd-Jones, CRE Stephen Rushmore, CRE, MAI, CHA HVS International, Mineola, New York Executive Summary 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 1. Executive Summary Property: Ramada Plaza Pentagon Location: 4641 Kenmore Avenue Alexandria, Virginia 22304 Date of Inspection: October 29, 1996 Interest Appraised: Fee simple Date of Value: January 1, 1997 Land Description Area: +/-2.6251 acres, or +/-114,349 square feet Zoning: OCH - Office Commercial High Zone Assessor's Parcel Number: Map 20, Block 2, Lot 1 Improvements Description Age: Constructed in 1975 Property Type: Full-service Guestrooms: 193 Number of Stories: Eleven stories Food and Beverage Facilities: Nickels Bar and Grill (85 seats) Meeting Space: Nine rooms totaling 6,344 square feet Parking: 340 spaces (in adjacent parking structure) Summary of Value Parameters Highest and Best Use (as if vacant): Hold for speculative use Highest and Best Use (as improved): Lodging facility Marketing Period: Six to nine months Number of Years to Stabilize: Two Stabilized Year: 1998 HVS International, Mineola, New York Executive Summary 2 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Valuation Assumptions Mortgage Interest Rate: 9.5% Amortization Period: 25 years Debt Service Constant: 0.111856 Loan-to-Value Ratio: 70% Stabilized Inflation Rate: 3.5% Equity Yield Rate: 22.0% Terminal Capitalization Rate: 11.5% Brokerage and Legal Fees: 3.0% Holding Period: Ten years Calculated Discount Rate: 14.56% Estimates of Value Income Capitalization Approach: $6,700,000 Sales Comparison Approach: $5,700,000 - $8,000,000 Cost Approach (Replacement Cost): $11,400,000 Market Value Conclusion: $6,600,000 Market Value Conclusion per Room: $34,200 HVS International, Mineola, New York Nature of the Assignment 3 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 2. Nature of the Assignment Subject of the Economic Study and Appraisal The subject of the economic study and appraisal is the fee simple interest in a +/-114,349-square-foot (+/-2.6251-acre) parcel improved with a 193-room, full-service lodging facility known as the Ramada Plaza Pentagon, which opened in 1975. In addition to guestrooms, the subject property contains approximately 6,344 square feet of meeting space, a restaurant and bar, an indoor swimming pool, a small exercise room, a gift shop, a business center, and an adjacent parking garage. The hotel is located near the northeastern quadrant of the intersection of Van Dorn Street and Seminary Road, roughly six miles south of Washington, DC. Municipal jurisdictions governing the property include the City of Alexandria and the Commonwealth of Virginia. The hotel's civic address is 4641 Kenmore Avenue, Alexandria, Virginia, 22304. Objective of the Economic Study and Appraisal The objective of the economic study and appraisal is to evaluate the supply and demand factors affecting the market for transient accommodations in the Alexandria area for the purpose of estimating the market value of the subject property. Market value is defined by the Office of the Comptroller of the Currency (OCC), 12 CFR, Part 34, 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 and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. buyer and seller are typically motivated; 2. both parties are well informed or well advised, and acting in what they consider their own best interests; 3. a reasonable time is allowed for exposure in the open market; HVS International, Mineola, New York Nature of the Assignment 4 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) Use of the Appraisal This appraisal is being prepared for the use of Morgan Stanley Mortgage Capital, Inc. in connection with their proposed financing of a package of 17 hotels, including the subject property, which are owned by Ashford Financial Corporation or related entities. The information presented in this report should not be disseminated to the public or third parties without the express written consent of Hospitality Valuation Services. Scope of the Appraisal All information was collected and analyzed by the staff of Hospitality Valuation Services. Data such as historical operating statements, site plans, floor plans, and so forth were supplied by the Ashford Financial Corporation and Remington Hospitality, Inc. Unless noted otherwise, we have inspected the competitive lodging facilities and analyzed the sales summarized in this report, and our value conclusion is based on this investigation and analysis. Property Rights Appraised The property rights appraised are the fee simple ownership of the land and improvements, including the furniture, fixtures, and equipment. The fee simple interest is defined as "absolute ownership unencumbered by any other interest or estate subject only to the four powers of government."(2) The subject property is appraised as a going concern (i.e., an open and operating facility). (1) Federal Register, Vol. 55, No. 165, August 24, 1990; p. 34696. (2) The Dictionary of Real Estate Appraisal - Second Edition, American Institute of Real Estate Appraisers, Chicago, IL, 1989, p. 120. HVS International, Mineola, New York Nature of the Assignment 5 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Method of Study The methodology used to develop this economic study and appraisal is based on the market research and valuation techniques set forth in the textbooks authored by HVS International for the American Institute of Real Estate Appraisers and the Appraisal Institute, entitled The Valuation of Hotels and Motels,(1) Hotels, Motels and Restaurants: Valuations and Market Studies,(2) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations,(3) and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations.(4) The appraisal will consider the three standard approaches to value: income capitalization, sales comparison, and cost. Because lodging facilities are income-producing properties that are normally bought and sold on the basis of capitalization of their anticipated stabilized earning power, the greatest weight is given to the value indicated by the income capitalization approach. We find that most hotel investors employ a similar procedure in formulating their purchase decisions, and thus the income capitalization approach most closely reflects the rationale of typical buyers. When appropriate, the sales comparison and cost approaches are used to test the reasonableness of the results indicated by the income capitalization approach. Ownership, Franchise, and Management A photocopy of the subject property's legal description, which was provided by the Ashford Financial Corporation, is presented in the Addenda to this report; the appraisers assume no responsibility regarding the accuracy of this document. The subject property is owned by Alexandria Virginia Hotel Limited Partnership, an entity controlled by the Ashford Financial Corporation. Remington Hospitality, Inc., the current management company, took over the hotel from Prime Hospitality in October of 1994. An abstract of the management contract is presented in the Addenda to this report. (1) The Valuation of Hotels and Motels, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1978. (2) Hotels, Motels and Restaurants: Valuations and Market Studies, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1983. (3) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1990. (4) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992. HVS International, Mineola, New York Nature of the Assignment 6 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The property has been franchised as a Ramada Plaza since its opening in 1975, but the name of the property changed from the Ramada Plaza Seminary Road to the Ramada Plaza Pentagon in early 1996. The subject property's franchise agreement expires in 2009. Marketing Period In light of the renewed interest in hotel investments and the increasing availability of debt and equity capital, we believe that it will take six to nine months to sell the subject property assuming it is placed on the market at the concluded value. Effective Date of the Appraisal The effective date of the appraisal is January 1, 1997. All projections are expressed in inflated dollars, and the value estimate represents 1997 dollars. Date of Inspection The subject property was inspected by Anne R. Lloyd-Jones on October 26, 1996 and by Christopher J. Doherty on October 29, 1996. HVS International, Mineola, New York Description of the Land, Improvements 7 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 3. Description of the Land, Improvements, Zoning, Taxes, and Neighborhood LAND The suitability of the land for the operation of a lodging facility is an important consideration affecting the economic viability of a property and its overall value. Factors such as size, topography, access, visibility, and the availability of utilities have a direct impact on the desirability of a particular site. Size and Topography The subject site is located near the northeastern corner of the intersection of Van Dorn Street (which lies on a north/south axis) and Seminary Road (which extends from east to west). Its civic address places the property on Kenmore Avenue, which extends west from Van Dorn Street at a point just north of Seminary Road, then loops around to intersect Van Dorn Street again at a point just south of Seminary Road. Municipal jurisdictions governing the property include the City of Alexandria and the Commonwealth of Virginia; we note that the Alexandria is an independent city, and is not part of any county or other municipality. According to an August 25, 1994 survey prepared by Absolute Surveys Incorporated, the subject parcel measures approximately +/-114,349 square feet, or +/-2.6251 acres. The site is irregular in shape, with frontage along Seminary Road, Kenmore Avenue, and Van Dorn Street. The only vehicular access to the property is provided by Kenmore Avenue. The topography of the parcel is generally flat, with a gentle slope from east to west. Overall, the size and topography of the site appear well-suited for hotel use. The parcel is fully developed, and there is no excess land available for expansion. Easements There are two easements on the subject property's site. The first is was granted to the Chesapeake and Potomac Telephone Company to accommodate telephone lines. The second is an exclusive right or option to the City of Alexandria to acquire an easement for sewer use. It is our understanding HVS International, Mineola, New York Description of the Land, Improvements 8 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= that this easement was not exercised within a given time limitation, and thus it will not have any impact on the subject property. Regional Access It is important to analyze a lodging facility's ease of access with respect to regional and local transportation routes and demand generators. Major thoroughfares that serve the subject property's area include the Henry G. Shirley Memorial Highway (Interstate 395), the Curtis Memorial Parkway (Interstate 66), the Capital Beltway (Interstates 95 and 495), and Jefferson Davis Highway (U.S. Route 1). The Ramada's proximity to this integrated highway network allows convenient transportation between the hotel and the surrounding communities and commercial developments. Overall, regional access to the Ramada Plaza Pentagon is considered excellent. Interstate 395 is the main highway in downtown Washington, DC. This interstate originates at its intersection with the Capital Beltway, which encircles the entire Washington metropolitan area, in the vicinity of Springfield, Virginia. It then traverses the City of Alexandria and Arlington County before crossing the Potomac River into Washington, DC (via the George Mason Memorial Bridge). Interstate 395 separates Crystal City from the Pentagon. Interstate 66 begins at the Theodore Roosevelt Memorial Bridge, in the vicinity of the Arlington National Cemetery Historic Site, and extends west across the Commonwealth of Virginia to a point just beyond the City of Front Royal, where the it terminates at Interstate 81. This intersection with I-81 provides travelers on I-66 with access to most areas of western Virginia, and to many parts of Maryland and Pennsylvania to the north, as well as Tennessee and North Carolina to the south. Interstate 66 traverses Arlington County northwest of the subject property. The Capital Beltway consists of Intestates 95 and 495, which join to form a large circle that encompassing Washington and its surrounding suburbs. Generally, I-495 comprises the northern and western portions of the circle, while I-95 extends along the east and south sides of the city. This roadway allows motorists to bypass the traffic in the Washington metropolitan area if they are en route to other destinations. Route 1, which is known locally as the Jefferson Davis Highway, is the main thoroughfare in Crystal City (near National Airport). A number of the subject property's competitors are located along this roadway. Route 1 extends HVS International, Mineola, New York Description of the Land, Improvements 9 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the entire length of the eastern seaboard, from Maine to Florida, roughly paralleling the coastline. Local Access and Visibility Local access to the subject property is indirect, and may be confusing for travelers who are not familiar with the area. Most guests arrive via I-395, which passes immediately west of the hotel. To reach the hotel from the north- or southbound lanes of I-395, guests must exit at Seminary Road and proceed east. Because the hotel is located so close to the interstate, guests traveling on Seminary Road cannot see the property until they have already passed it; visibility is completely obscured by numerous exits ramps and raised bypasses from I-395. Motorists must pass the Ramada and turn left at the end of the next block, onto Library Lane; from this point, they can either double back, return to Seminary Road, and proceed one-half block to Kenmore Avenue, or turn left and negotiate their way through a supermarket parking lot to Kenmore Avenue and the subject property's entrance. A clear view of the hotel is available from I-395. Southbound motorists can see the 11-story tower from a distance of approximately one mile, and northbound travelers can see the property for roughly one-half of a mile. As noted above, visibility from Seminary Road is poor. Airport Access Washington's National Airport is located approximately four miles northeast of the Ramada Plaza Pentagon, and can be reached be taking Exit 10 east off I-395. This close proximity to a major municipal airport is considered a favorable locational attribute of the subject property. Access to Local Demand Generators The Ramada Plaza Pentagon is situated near many of the area's primary generators of lodging demand, as illustrated by the following table. ================================================================================ Table 3-1 Local Demand Generators - -------------------------------------------------------------------------------- Approximate Distance Approximate Driving Demand Generator from Subject Site (in Miles) Time (in Minutes) ---------------- ---------------------------- ----------------- Pentagon 3.0 5 Patents & Trademarks 1.0 5 Department of Agriculture 3.0 5 Department of Defense 3.0 5 Downtown Alexandria 4.0 10 Washington, DC 6.0 15 - -------------------------------------------------------------------------------- The subject site is located on the western edge of the City of Alexandria, but is still relatively close to many of the area's businesses. By virtue of the HVS International, Mineola, New York Description of the Land, Improvements 10 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= excellent local highway system, access to all nearby demand generators is convenient. Utilities The subject site is served by all necessary utilities, which are provided as follows. ================================================================================ Table 3-2 Available Utilities - -------------------------------------------------------------------------------- Utility Provider ------- -------- Water Virginia American Water Company Electricity Virginia Power Telephone Bell Atlantic, MCI Gas Washington Gas and Light Garbage and Trash BFI - -------------------------------------------------------------------------------- Soil and Subsoil Conditions Geological and soil reports were not provided to the appraisers or made available for review during the preparation of this report. The appraisers are not qualified to evaluate soil conditions other than by a visual inspection of the surface. Nuisances and Hazards The appraisers have not been informed of any site-specific nuisances or hazards, and there were no visible signs of toxic ground contaminants at the time of our inspection. Because the appraisers are not experts in this field, we do not warrant the absence of hazardous waste, and we urge the reader to obtain an independent analysis of this factor. Flood Zone Possible locational hazards include flood potential. The subject property is located within Flood Zone X. This designation applies to areas that have been determined to be outside of he 500-year flood plain, indicating that there is little or no potential for flooding. Seismicity Information regarding the seismicity of the area surrounding the subject property was not available, and we assume that the hotel is not situated in an area of seismic danger. Land Conclusion The subject parcel appears well-suited as the site of a lodging facility. We have analyzed the issues of size, topography, access, visibility, and the availability of utilities, and we note the following advantages and disadvantages. HVS International, Mineola, New York Description of the Land, Improvements 11 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Advantages o Proximity to the Pentagon and numerous other demand generators o Accessible from a variety of local roadways and interstate highways o Situated immediately off a major interstate o Served by all necessary utilities Disadvantages o Not located in the immediate vicinity of Pentagon and other government demand generators o Moderately confusing access from Seminary Road o Lack of visibility for eastbound motorists on Seminary Road The advantages exhibited by the subject site are all important locational characteristics for hotels in this market. Overall, the parcel appears to be well suited for its current use, and its relatively smooth topography and proximity to major highways and local routes are favorable attributes. IMPROVEMENTS The quality of a lodging facility's physical improvements has a direct influence on its marketability and attainable occupancy and average rate. The design and functionality of the structure can also affect operating efficiency and overall profitability. This section investigates the subject property's physical improvements and personal property in an effort to determine how they contribute to total value. The following description of the improvements is based on our inspection of the hotel and information provided by management representatives. The Ramada Plaza Pentagon is a full-service lodging facility containing 193 rentable units, 6,344 square feet of meeting space, a restaurant and bar, an indoor swimming pool, a small exercise room, a gift shop, and a business center, a five-story parking garage with a 340-car capacity, and appropriate back-of-the-house facilities. The 11-story hotel opened in early 1975, and is 21 years old as of the date of this appraisal. The property was acquired by the Ashford Financial Corporation in October of 1994, and was reported to have been in extremely poor condition at that time. Subsequent to the sale, the subject property received an extensive $2,400,000 renovation that addressed the building exterior, the public areas, and the guestrooms. The Ramada Plaza is now judged to be in average to good condition, and HVS International, Mineola, New York Description of the Land, Improvements 12 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= management representatives report that all building systems are in working order. The hotel operates under a license agreement with Ramada, and reportedly meets the standards for lodging facilities of that brand. Based on our inspection and information provided by management representatives, the following table summarizes the hotel's facilities. ================================================================================ Table 3-3 Facilities Summary - -------------------------------------------------------------------------------- Guestrooms (No. of Units) Kings 61 Double/doubles 124 Suites 8 ------- Total 193 Food and Beverage Outlets (No. of Seats) Nickels Bar and Grill 85 Meeting and Banquet Rooms (Square Footage) Winchester 496 Manchester 496 Cambridge 496 Carrington 496 Room 408 550 Room 409 550 Room 416 550 Room 419 550 Nuage Room 2,160 ------- Total 6,344 Recreational & Other Amenities Indoor swimming pool, exercise room Parking Spaces 340 Elevators Three passenger, one service Life Safety Systems Full sprinkler system, hard-wired fire alarms Laundry Two 75-lb.-capacity washers, one 50-lb.-capacity washer, five 110-lb.-capacity dryers Construction Details Poured concrete foundation, steel structure, concrete walls and roof - -------------------------------------------------------------------------------- HVS International, Mineola, New York Description of the Land, Improvements 13 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Construction and Design The subject property includes an 11-story guestroom tower with a height of 122 feet and a parking garage that is located off the southeast side of main building. The guestroom tower is rectangular and is situated between the one-story restaurant building and the one-story pool area. It should be noted that these three areas are all part of one structure. The footprint of the tower measures roughly 46,150 square feet, and the parking garage covers an area of approximately 23,040 square feet. The property features poured concrete slab and reinforced concrete footings in the foundation. The building was not constructed on pilings, but it is equipped with frost walls. The frame of the main building is constructed of steel and poured cast-in-place concrete, and is fireproof. Exterior walls are constructed of concrete panels and poured concrete, and are finished with paint and stucco. Windows throughout the facility are double paned, but none are glazed. The guestroom windows open, but those in the public and employee areas do not. The high roof deck of the 11-story tower is constructed of concrete, and covered with asphalt and roll roofing. The first level of the property features some public areas and a majority of the back-of-the-house space. Four small boardrooms are located on the fourth floor. Guestrooms are situated on the second through 11th floors. Management representatives report that the buildings are in good condition, and our inspection revealed no visible signs of damage. Lobby As noted earlier, the subject property underwent a $2,400,000 renovation after being acquired by the Ashford Financial Corporation, and this upgrading included the lobby. Guests enter the lobby from the hotel's main entrance, which is situated on the southeast side of the building. The gift shop is located immediately right of the entrance, as is a corridor leading to a majority of the property's meeting space. A corridor to the left leads to the sales offices, the guest elevators, the swimming pool, and the parking garage. After entering, guests pass through a small seating area and can either approach the front desk, which is situated to the left, or climb three stairs to another raised seating area before reaching the restaurant, the business center, and one of the property's meeting rooms. Food and Beverage Outlets Nickels Bar and Grill is situated on the hotel's first level, just past the lobby and the raised seating area. This facility offers breakfast, lunch, and dinner seven days a week, and is open from 6:30 a.m. to 10:00 p.m. Monday through Friday and 7:00 a.m. to 10:00 p.m. on weekends. The restaurant is HVS International, Mineola, New York Description of the Land, Improvements 14 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= attractive and features upholstered booths, various artwork, and plants. A small bar is centrally located in the tiered restaurant. This bar area was recently moved, and the area that formerly served as the hotel's lounge was converted to the Nuage meeting room. The restaurant was completely upgraded during the recent renovation, and appears to be in good condition. Meeting and Banquet Space The subject property's function space is located on the first and fourth floors. From the main entrance, guests can reach the 1,984-square-foot ballroom by following a corridor that extends to the right, just past gift shop. This ballroom can be divided into four smaller sections known as the Winchester, Manchester, Cambridge, and Carrington Rooms. As noted earlier, the former lounge area has been converted to the 2,160-square-foot Nuage Room. This facility adjoins the west side of the restaurant, and features a tiered layout that allows a variety of seating arrangements. Four guestrooms on the fourth floor (Rooms 408, 409, 416, and 419) are currently used as small boardrooms. Following the recent renovation, all of the Ramada's meeting space appears to be in good condition. Guestrooms The subject property has a total of 193 guestrooms; 61 offer king beds, 124 have two double beds (four of which are handicapped accessible), and eight are suites. Four of the double/double units have been modified for the use of disabled guests, and 97 units have been set aside for non-smokers. We note that this type of amenity costs very little and requires no structural changes, and we expect the number of rooms allocated for this purpose to be increased or reduced depending on demand and guest response. Guestrooms are double-loaded along interior corridors. The units feature a standard configuration consisting of one room and a bathroom that is situated left or right of the entrance. Typical guestrooms are furnished with the following items. o One king-size or two double beds o Remote-control color television situated on a wooden armoire with drawers o Two nightstands; one with a digital alarm clock, the other with a telephone o Wall-mounted lamps on both sides of the bed(s) o A desk with chair HVS International, Mineola, New York Description of the Land, Improvements 15 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= o A small seating area featuring an upholstered chair, an ottoman, a square table, and a floor lamp o Vanity outside the bathroom equipped with a coffeemaker, an ice bucket, and drinking glasses o Open alcove with rod to hang clothing o Assorted artwork The bathrooms feature a vanity sink, a tub/shower combination, and a toilet. Amenities include a heat lamp, a hair dryer, and typical bath items. All guestrooms feature splatter wallpaper, popcorn ceilings, and a combination of fluorescent and incandescent lighting. At the time of our inspection, the subject property's guestrooms appeared to be in average to good condition. The 1995 renovation included replacement of all guestroom soft goods, the installation of new light fixtures, televisions, and electronic locks, and replacement of the in-room HVAC units. In addition, bathroom vinyl, tile, and vanities were upgraded in half of the units. These renovations should help to maintain the subject property's competitive position, but are not expected to allow an improvement in the Ramada's overall market share. Guestroom Corridors Guestroom corridors are wide enough to permit the easy passage of housekeeping and room service carts. The corridors are finished with vinyl wallcovering, popcorn ceilings, and carpet that is in relatively good condition. Lighting is adequate. Each guestroom floor contains a vending area, a housekeeping closet, and an electrical closet. Recreational Amenities Recreational amenities consist of an indoor swimming pool and a small exercise room that are both located on the west side of the main building. We note that the Ramada also maintains an agreement with the Skyline Health Club, which is located on Leesburg Pike roughly two miles northeast of the hotel. This arrangement allows guests to use the club's extensive facilities free of charge. Although the agreement with the Skyline Health Club is beneficial, it does not eliminate the need for a larger, better-equipped facility than is currently available at the hotel. Back-of-the-House Space All of the hotel's back-of-the-house space is situated on the first floor. Based on information provided by management representatives, the hotel's operating systems are all in good working order. The main kitchen is located between the restaurant and ballroom, and its size and equipment appear to HVS International, Mineola, New York Description of the Land, Improvements 16 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= be adequate to meet the hotel's needs. Sales and other administrative offices are located behind the front desk, on the west side of the building. The general manager's office is situated opposite the ballroom entrance, on the east side of the structure. Laundry facilities consist of three washers and five dryers, which are located on the first floor of the main structure. Vertical Transportation The subject property features three electric guest elevators and one hydraulic service elevator. Each elevator serves all 11 floors. As noted earlier, the guest elevator core is located down a corridor to the left of the main entrance. Heating, Ventilation, and Air Conditioning (HVAC) Guestrooms are heated and cooled by individual through-the-wall HVAC units that were installed during the most recent renovation. The boiler operates on oil, and public areas are cooled by three centralized packaged air conditioning units. Management representatives indicate that all of the property's HVAC equipment is in good condition. Fire Protection Fire protection is provided by hard-wired, single-station smoke alarms in the guestrooms, public spaces, and employee areas. The fire alarms are wired to the front desk, but are not connected to the fire department. Fire sprinklers are installed throughout the hotel. Security Guestrooms are equipped with electronic door locks. Although this is a good security measure, management indicates that employee and guest entrances are not separated and access to the property is never restricted, which somewhat negates the advantage provided by the electronic door locks. Asbestos According to information provided by management representatives, there is no asbestos present in the subject property's improvements; however, we have not been provided with an asbestos report to confirm this assertion. The reader should be advised that any costs associated with asbestos removal or containment may have an unfavorable impact on the hotel's market value, and the estimate set forth in this appraisal reflects our value conclusions prior to the deduction of any such costs. We suggest that interested parties initiate an independent analysis regarding current asbestos levels and the capital expenditures necessary to remove any asbestos that is present. ADA Conformance Following the January 26, 1992 passage of the Americans with Disabilities Act (ADA), hotels are subject to new physical standards. The appraisers are not experts on ADA compliance, and we render no opinion regarding the HVS International, Mineola, New York Description of the Land, Improvements 17 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= subject property's conformance to ADA standards. Capital expenditures that may be necessary to bring the property into accordance with the ADA will reduce our estimate of market value. Any ongoing costs related to ADA regulations are expected to be funded by normal replacement reserves. Conclusion Overall, the subject property's improvements appear appropriate for hotel use. Following a $2,400,000 renovation in 1995, the facilities are now in sufficiently good condition to maintain the Ramada's competitive posture in the market; however, we believe that additional capital expenditures will be necessary if the hotel's market share is to increase. For the purpose of this appraisal, we assume that the subject property will be maintained in its current condition throughout the ten-year holding period. Specifically, we assume that management will employ standard preventive maintenance measures, and that a reserve for replacement fund will be established which will fund the cost of any future capital expenditures that may be necessary. ZONING According to the City of Alexandria zoning regulations and map, the subject property is zoned as follows. OCH - Office Commercial High Zone Permitted uses in this zoning designation include hotels, family dwellings, office space, churches, hospitals, funeral homes, and pet-grooming establishments. Based on this information, the subject property appears to conform to local zoning regulations. We assume that all necessary permits and approvals have been secured (including an appropriate liquor license), and that the subject property was constructed in accordance with local zoning ordinances, building codes, and all other applicable regulations. Our zoning analysis should be verified before any physical changes are made to the hotel. ASSESSED VALUE AND TAXES Property tax is one of the primary revenue sources of municipalities. Based on the concept that the tax burden should be distributed in proportion to the value of all properties within a taxing jurisdiction, a system of assessments is established. Theoretically, the assessed value placed on each parcel bears a definite relationship to market value, so properties of equal market value will have similar assessments, and properties with higher and lower values will have proportionately larger and smaller assessments. Depending on the taxing policy of the municipality, property taxes can be based on the value of the real property or the value of the personal HVS International, Mineola, New York Description of the Land, Improvements 18 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= property and the real property. The taxing jurisdiction governing the Ramada assesses both real and personal property; the assessed value ratio is reported to be approximately 100% of market value. Because the objective of assessed value is to maintain a specific value relationship among all properties in a taxing jurisdiction, comparable hotel assessments should be evaluated to determine whether the subject property's assessed value is equitable. A review of the assessed values of two comparable hotels located in the City of Alexandria reveals the following information. ================================================================================ Table 3-4 1996 Assessed Value of Comparable Hotels - --------------------------------------------------------------------------------
Total Assessment Assessment per Room ----------------------------- ------------------------ No. of Hotel Rooms Land Improvements Land Improvements - ---------------------------------------------------------------------------------------- Subject Property 193 $2,660,200 $5,788,300 $13,783 $29,991 Ramada Plaza Old Town 258 2,522,200 9,281,900 9,776 35,976 Holiday Inn - Eisenhower 201 2,445,900 7,404,100 12,169 36,836
Source: City of Alexandria Assessor's Office - -------------------------------------------------------------------------------- The table above illustrates the 1996 assessed values of the subject property and two of its primary competitors. The subject property's overall land assessment is the highest among these competitors, while its improvements assessment is the lowest. The same is true on a per-room basis. We believe that the high land assessment probably reflects the fact that the hotel occupies a prime commercial location near I-395; the low improvements assessment can be attributed to the fact that the hotel's facilities were slightly inferior to those of the other properties at the time of the assessment. The following table sets forth the historical real property tax rates applicable to the hotel. HVS International, Mineola, New York Description of the Land, Improvements 19 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 3-5 Historical Real Tax Rates Applicable to the Subject Property - -------------------------------------------------------------------------------- Tax Rate per $100 Percent Year of Assessment Change - ------------------------------------------------------ 1991 1.045 --- 1992 1.045 0.00% 1993 1.070 2.39 1994 1.070 0.00 1995 1.070 0.00 1996 1.070 0.00 Avg. Annual Comp. Change, 1991-96 0.47% - -------------------------------------------------------------------------------- The subject property's 1996 tax burden is calculated as follows. $8,448,500 Total Assessment x 1.07 Rate = $90,399 Real Tax Burden + $40,394 Personal and Special Tax = $130,793 (Say) $131,000 Total Tax Burden Tax rates in the City of Alexandria have remained relatively stable since 1991, but local officials indicate that the completion of the recent renovation is likely to cause an increase in the subject property's assessment. In light of this consideration, we assume that the hotel's overall tax burden will increase at the underlying inflation rate of 3.5% annually, yielding the following forecast. ================================================================================ Table 3-6 Forecast of Property Tax Expense (+000) - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Property Taxes (+000) $131 $136 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Description of the Land, Improvements 20 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= NEIGHBORHOOD The neighborhood surrounding a lodging facility often has an impact on a hotel's status, image, class, style of operation, and sometimes its ability to attract and properly serve a particular market segment. This section investigates the subject property's neighborhood and evaluates any pertinent locational factors that could affect its occupancy, average rate, food and beverage revenues, and overall profitability. The neighborhood surrounding the subject property is primarily residential in character, with some limited retail uses. The vast majority of the land situated to the east and southeast of the hotel is improved with middle- to upper-income housing. Alexandria Hospital is situated just east of the Ramada, followed by residential areas that extend roughly five miles east toward downtown Alexandria. This area, which is also known as "Old Town" Alexandria, features numerous retail outlets, restaurants, and city buildings, all built in an attractive historic style. Southwest of the subject property, beyond several apartment buildings and residential developments, is the Landmark Center Mall, which draws some visitors from the surrounding area. A large concentration of retail outlets and office space is located to the northwest, along King Street/Leesburg Pike. Nearby hotels include the Hampton Inn and adjacent Homewood Suites. Well-known retail establishments and restaurants are available in the Burlington Plaza, Leesburg Pike Plaza, and the Skyline Shopping Mall. There are numerous types of developments in the subject property's immediate vicinity. A mini-mall containing a Safeway supermarket, a CVS drugstore, a Blockbuster Video outlets, a 7-11 convenience store, a beauty salon, a pizza parlor, and a small bank is situated northeast of the hotel, across Kenmore Avenue. An Exxon service station is located just past this strip mall. Other developments surrounding the Ramada include a Steak and Ale restaurant to the southeast, the aforementioned Alexandria Hospital to the east, apartment buildings to the south, and I-395 and the Radisson at St. Mark's Place to the west. Past these initial commercial developments, residential usage dominates. Overall, the neighborhood surrounding the Ramada Plaza Pentagon appears well suited for the operation of a lodging facility. Numerous retail outlets and malls and a limited inventory of office space generate a base level of demand and provide important support services for the subject property's guests. The neighborhood's attractive surroundings should help the hotel to maintain its market position, and although it is somewhat HVS International, Mineola, New York Description of the Land, Improvements 21 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= removed from the government demand generators in the vicinity of the Pentagon, the neighborhood appears to have no detrimental impact on the hotel's attainable occupancy and average rate. HVS International, Mineola, New York Market Area Analysis 22 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 4. Market Area Analysis The economic vitality of the market surrounding the subject property is an important consideration in forecasting lodging demand and income potential. Economic and demographic trends that reflect the amount of visitation provide a basis from which to project hostelry demand. The purpose of the area analysis is to review available economic and demographic data to determine whether the local market will undergo economic growth, stability, or decline. In addition to predicting the direction of the economy, the rate of change must be quantified. These trends are then correlated based on their propensity to reflect variations in lodging demand with the objective of forecasting the growth or decline in visitation by individual market segment. Market Area Definition The subject property is located in the City of Alexandria. The city is not part of a county, but as a result of its geographical location (just south of Arlington County and west of Fairfax County), it is included in the Washington Metropolitan Statistical Area (MSA). Because most of the subject property's competitors are located in Arlington County and most of the demand captured by the hotel originates there as well, we have included the county in our discussion of the market area. Arlington County is an urban area encompassing approximately 26 square miles directly across the Potomac River from Washington, DC. Its proximity to Washington has made this area a highly desirable commercial and residential location. Most of the high-density commercial and residential development in the county is concentrated around Metro stations in the Rosslyn-Ballston and Jefferson Davis corridors; the latter includes both Crystal City and Pentagon City. The economy of Arlington County is greatly influenced by the area's proximity to Washington, DC. As the nation's capital, Washington is the hub of activities pertaining to domestic and international political affairs. The city houses the headquarters of the legislative, judicial, and executive branches of the government of the United States. The District of Columbia is also a [GRAPHIC OMITTED] AREA MAP HVS International, Mineola, New York Market Area Analysis 23 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ national focal point for associations, foreign embassies, students, tourists, and industrial groups dealing with military and government employees from all 50 states. In addition to being a political and economic hub, Washington is well-known for its institutions of higher learning and visitor and cultural attractions. Economic and Demographic Data Based on fieldwork conducted in the area and our in-house sources, we have evaluated various economic and demographic statistics to determine trends in lodging demand. A primary source of economic and demographic statistics used in this analysis is the Complete Economic and Demographic Data Source published by Woods & Poole Economics, Inc., a well-regarded forecasting service based in Washington, DC. Using a data base containing more than 300 variables for each county in the nation, Woods & Poole employs a sophisticated regional model to forecast economic and demographic trends. Historical statistics are based on census data and information published by the Bureau of Economic Analysis. Projections are formulated by Woods and Poole. All dollar amounts have been adjusted for inflation, and thus growth or decline represents real change in constant dollars. Population Although there is no direct correlation between the size of an area's population and its specific level of visitation, historical and projected population trends often reflect the economic climate of a locale. Moreover, we find that the rate of population growth generally establishes a minimum rate of increase for an area's commercial segment lodging demand. This observation also holds true for the meeting and convention segment if a majority of the functions are business-oriented. According to information provided by Woods and Poole Economics, the population of Alexandria increased at an average annual compounded rate of 0.6% between 1980 and 1995; a slightly lower growth rate of 0.4% was registered from 1990 to 1995. During both periods, there were substantially larger population gains in the Washington MSA, Virginia, and nation as a whole. Woods and Poole projects an average annual compounded growth rate of 1.2% in the Washington MSA between 1995 and the year 2000; this rate is higher than the 0.9% gain anticipated for the United States and the 0.1% increase that is expected to occur in the City of Alexandria. Retail Sales Trends in retail sales reflect changes in population as well as the propensity of residents and visitors to purchase retail goods. Like population trends, retail sales have no direct correlation with hotel room night demand, HVS International, Mineola, New York Market Area Analysis 24 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= although they do tend to gauge the economic health and vitality of the market. Woods and Poole Economics reports that retail sales in the City of Alexandria increased at an average annual compounded rate of 1.3% between 1980 and 1995. Stronger gains were registered in the Washington MSA (at 2.4%), the Commonwealth of Virginia (at 2.5%), and the United States (at 1.9%). Retail sales growth slowed to 1.0% annually in Alexandria from 1990 to 1995, and the MSA and the state also registered lower increases of 2.2% and 2.3%, respectively. On a national level, retail sales increased at an average annual compounded rate of 2.5% during that period. Projections indicate lower growth rates in all four statistical areas. No increase is anticipated in the City of Alexandria through the end of the decade, and the gains anticipated in the MSA, the state, and the nation are expected to slow to 1.2%, 1.0%, and 0.9%, respectively, from 1995 through the year 2000. Greater retail sales activity in the Washington MSA should allow local businesses to prosper, and greater spending means that new firms may enter the market. This trend could ultimately result in additional visitation and some increase in the demand for lodging facilities in the subject property's market area. Personal Income Between 1980 and 1995, personal income in the City of Alexandria increased at an average annual compounded rate of 2.3% after adjustment for inflation; this growth rate decreased slightly, to 1.7% annually, from 1990 to 1995. These figures are significantly lower than the 3.6% gain in the Washington MSA from 1980 to 1995 and the 2.4% annual increase registered from 1990 to 1995. Personal income in the United States rose by 2.3% annually between 1980 and 1995 and 1.9% annually from 1990 to 1995. Projections by Woods and Poole Economics indicate a slower gain of 1.2% in the city. The Washington MSA is expected to continue to register an increase of 2.4% annually from 1995 through the end of the decade, while Virginia and the United States are projected to achieve comparable growth rates of 2.5% and 2.3%, respectively, during the same period. These trends are favorable and reflect some expansion of the regional economy. Work Force Characteristics Overall employment in the City of Alexandria increased at an average annual compounded rate of 1.9% from 1980 to 1995. This level declined to a nominal 0.1% between 1990 and 1995, reflecting the business atmosphere engendered by the national recession in the early 1990s. Projections indicate that total employment will decline at an average annual compounded HVS International, Mineola, New York Market Area Analysis 25 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= rate of 0.2% between 1995 and the year 2000, reflecting some stagnation of the city's economy. The only gains are expected to occur in services (at 0.3%), state and local government (at 0.4%), agricultural services (at 1.1%), manufacturing (at 0.6%), and mining (at 0.3%). Employment in the finance, insurance, and real estate (FIRE) sector is expected to decrease by 0.6% annually. We note that the unemployment rate in the Washington MSA stood at 3.8% in February of 1996, down from 4.3% during February of the previous year. The major employers in the subject property's market represent a cross section of hotel demand potential. Some are national in scope, while others operate on a more local basis; some are engaged in manufacturing, and others are involved in public transportation and government. The following tables outline some of the major employers in the City of Alexandria and Arlington County. ================================================================================ Table 4-1 Major Employers - City of Alexandria - -------------------------------------------------------------------------------- No. of Firm Employees - --------------------------------------------------------------- Department of Defense 8,335 City of Alexandria 2,052 Alexandria Hospital 1,800 Alexandria City Public Schools 1,764 Washington Metropolitan Area Transit Authority 1,358 Institute for Defense Analyses 800 Pentagon Federal Credit Union 800 U.S. Department of Agriculture 761 North Virginia Community College 591 Giant Food 530 Source: Alexandria Chamber of Commerce - -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 26 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-2 Major Employers - Arlington County - -------------------------------------------------------------------------------- No. of Firm Employees - --------------------------------------------------------------- Bell Atlantic Network Services, Inc. 2,900 MCI Telecommunications Corporation 2,700 USAir, Inc. 2,696 The Arlington Hospital 1,600 Marriott Corporation 1,475 Gannett Company, Inc. 1,400 The Xerox Corporation 1,354 The Hecht Company 1,300 CACI International 948 Hyatt Hotels and Resorts 749 Source: Arlington County Planning Division - -------------------------------------------------------------------------------- The City of Alexandria benefits from a somewhat diversified employment base despite its reliance on the government and service sectors. Because the local economy is not tied to the prosperity of any single sector, the overall economic impact of typical business cycles is cushioned. Moreover, service firms are less influenced by economic fluctuations than many other employment sectors, and thus tend to stabilize the economy. Office Space One of the economic indicators that best reflect lodging demand is the trend in occupied office space in a given area. Firms and businesses that occupy office space generally exhibit a strong propensity to attract commercial visitation. Although it is difficult to directly quantify lodging demand based on the amount of occupied space, trends causing either an increase or a decrease in the amount of occupied space may have a proportional impact on commercial hotel demand, and a less direct effect on meeting and group demand. Arlington County consists of two major corridors: the Rosslyn-Ballston and Jefferson Davis. Crystal City and Pentagon City are the two sub-areas that constitute the Jefferson Davis corridor. Overall, it is estimated that 18,000,000 square feet, or about 35%, of the office and commercial development capacity in these corridors is undeveloped; the current office space inventory in these corridors is approximately 35,000,000 square feet. According to a Planning Information Report published by the Arlington County Department of Community Planning, Housing and Development, HVS International, Mineola, New York Market Area Analysis 27 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the amount of office space in Crystal City increased at an average annual compounded rate of 1.5% between 1992 and 1995. The available square footage for Crystal City declined at a rate of 4.5% annually during the same period. The market's high occupancy rate illustrates the strength of the office market in Crystal City. Data for Pentagon City reveals similar strength, and sources indicate that there is no square footage available to rent and no additional office space was added to the supply between 1992 and 1995. Highway Traffic The subject property's market is served by an extensive network of highways, subways, railways, and airports. The Metrorail is a convenient subway system that spans the entire Washington MSA, including southern Maryland and northern Virginia, offering 78 stations and 97 miles of track. The Metro is a popular mode of transportation for both residents and visitors, and provides access to virtually all parts of the District of Columbia and the surrounding areas. At present, no major roadways are scheduled for construction in the Washington MSA; however, there are plans to extend the Metrorail into other parts of Montgomery and Prince Georges Counties in Maryland and Fairfax County in Virginia. This construction is ongoing and expected to last until 2001. When completed, the Metrorail system will have 103 track miles and 83 stations in the greater Washington region. Airport Traffic Airport traffic passenger counts are important indicators of transient lodging demand. Depending on the type and location of a particular airfield, a sizable percentage of arriving passengers may have need for hotel and motel accommodations. Trends showing changes in passenger counts also reflect local business activity and the overall economic health of an area. The Washington MSA is served by three airports: Washington National, Dulles International, and Baltimore-Washington International (BWI). Together, these airports serve more than 27,000,000 passengers a year and have a significant economic impact on the region. All three airports are undergoing renovations that began in 1995. The focus of current facility improvements is the Capital Development Program (CDP), which will modernize the 51-year-old National Airport and expand Dulles International. The CDP encompasses roughly 200 different projects and is scheduled to be completed by the late 1990s. These improvements should increase the region's economic stability by providing convenient transportation for domestic and international travelers. HVS International, Mineola, New York Market Area Analysis 28 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Washington National Airport is the region's downtown airport and is the primary facility used by guests of the subject property. The number of daily aircraft operations at National is limited. The Metropolitan Washington Airports Authority is committed to operating National near its current passenger level, with only modest growth in the future. The airport sits on 860 acres surrounded by waterways and Crystal City, and thus there is no room for expansion. Washington National is undergoing a nearly $1 billion renovation project that is scheduled for completion in 1997. The scope of this renovation is outlined in the following table; this information was provided by the Metropolitan Washington Airports Authority. At present, Washington National provides flights to 91 cities in 38 states within a 1,250-mile radius of Washington, DC. The facility served approximately 16,000,000 passengers in 1994 (1995 statistics had not been finalized at the time of our fieldwork), and it is expected to remain the area's primary airport for business and government travelers. ================================================================================ Table 4-3 Washington National Airport Capital Developments - -------------------------------------------------------------------------------- Runway and taxiway improvements New 35-gate terminal Planned renovation of original terminal Two-level terminal roadway system New Metrorail farecard plaza Covered moving sidewalks connecting Metro and parking garages to the terminal New parking garages Rental car support facilities Improved roadway system Taxicab dispatch facility New heating and cooling plant Improved general aviation facilities Air cargo building Modern aviation fuel storage facility Airport administration and maintenance facilities at the south end of the airport - -------------------------------------------------------------------------------- Dulles International Airport, which is located roughly 20 miles northwest of the subject property, has a new international arrivals building, and ongoing renovations include doubling the size of the main terminal, constructing new midfield concourses, adding a peoplemover system, improving ground transportation centers, and expanding the runway capacity. The expansion of the main terminal is scheduled for completion in 1997. Upon completion of this project, the airport will feature enhanced baggage and HVS International, Mineola, New York Market Area Analysis 29 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ticketing facilities, varied retail and food outlets, and wider arrival and departure roadways. Dulles currently provides service to roughly 11,700,000 passengers, and this figure is expected to increase to 23,000,000 by the year 2000. The airport offers more than 300 domestic flights daily and non-stop and single-plane service to 26 cities in Europe, South America, and the Far East. Baltimore-Washington International (BWI) Airport is located roughly 35 miles north of the subject property. Recent renovations included the completion of Concourse F, which consists of six gates and an international arrivals area, and the development of a new observation area with 40-foot windows and a flight simulator. Projects that are scheduled for completion in 1997 include extending Runway 1028 to 10,500 feet and construction of a cargo building. Soft goods are being upgraded in the main terminal, and exterior signage is being improved. This facility is served by 17 airlines with 72 domestic destinations and offers international flights to 21 cities in Europe, South America, Israel, Canada, and the Caribbean. Leisure Travel In 1791, the land that comprises Arlington County was designated as a part of the nation's capital. Years later, the land was returned to the Commonwealth of Virginia, but the area remains rich in history. The most famous Arlington landmarks and tourist destinations are the Pentagon and Arlington National Cemetery. Covering 583 acres, the Pentagon is the home of the United States Department of Defense and contains 6,500,000 square feet of space, making it the world's largest office building. Arlington National Cemetery contains the Tomb of the Unknowns, the Challenger Space Shuttle Memorial, and the grave sites of John F. Kennedy, Robert F. Kennedy, and some 240,000 other American heroes on 612 acres. Washington, DC is a major destination, and the city's numerous visitor attractions help to draw that draw leisure travelers to the entire metropolitan area (including the subject property's market). The following table lists some of the attractions available in Washington; other sources of leisure demand include events at Robert F. Kennedy Stadium (home of the Washington Redskins) and the historic shops of Old Town Alexandria. HVS International, Mineola, New York Market Area Analysis 30 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-4 National Capital Area Attractions - -------------------------------------------------------------------------------- Anderson House Museum Library of Congress Ansel Adams Collection Lincoln Memorial National Aquarium Marine Corps Memorial U.S. National Arboretum Mount Vernon National Archives Naval Observatory U.S. Botanic Garden Navy Museum Capitol Building Supreme Court FBI Headquarters Vietnam Veterans Memorial Ford's Theater Washington Monument Holocaust Memorial Museum The Washington Post Jefferson Memorial White House - -------------------------------------------------------------------------------- A major new attraction, the Newseum, is scheduled to open in 1997. The construction of this 72,000-square-foot facility began in 1994 and will be completed at a reported cost of $32,000,000. The Newseum will be the world's only major museum dedicated exclusively to news. It will tell the story of the past, present, and future of news through state-of-the-art multimedia presentations and exhibits designed to appeal to a wide array of visitors. The Newseum will feature a News Wall as long as a city block, a theater, a television studio, a walk through the history of news gathering, and interactive archives. The center is funded by the Freedom Forum, the world's largest media-oriented private foundation. Conclusion Our review of various economic and demographic data indicates that the subject property's market has undergone moderate growth during the past several years, and projections indicate that slower expansion can be anticipated in the near future. These trends suggest moderate increases in lodging demand. The following table summarizes the economic and demographic trends discussed throughout this section. All figures that reflect dollar amounts have been adjusted for inflation, and thus reflect real change. It should be noted that the percent changes indicated in the following tables are based on unrounded figures, and thus may not calculate exactly. HVS International, Mineola, New York Market Area Analysis 31 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-5 Economic and Demographic Data for the Subject Property's Market Area - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - --------------------------------------------------------------------------------------------------------------------- Long-Term Historical Population (+000) City of Alexandria 1980-1995 103.6 113.6 0.6 % Washington MSA 1980-1995 3,492.4 4,530.2 1.7 Commonwealth of Virginia 1980-1995 5,367.7 6,621.7 1.4 United States 1980-1995 227,225.6 262,791.0 1.0 Short-Term Historical Population (+000) City of Alexandria 1990-1995 111.3 113.6 0.4 Washington MSA 1990-1995 4,237.4 4,530.2 1.3 Commonwealth of Virginia 1990-1995 6,213.7 6,621.7 1.3 United States 1990-1995 249,401.4 262,791.0 1.1 Projected Population (+000) City of Alexandria 1995-2000 113.6 114.0 0.1 Washington MSA 1995-2000 4,530.2 4,807.5 1.2 Commonwealth of Virginia 1995-2000 6,621.7 6,964.7 1.0 United States 1995-2000 262,791.0 274,758.4 0.9 Long-Term Historical Retail Sales (+000,000) City of Alexandria 1980-1995 1,010.8 1,234.3 1.3 Washington MSA 1980-1995 23,498.2 33,678.9 2.4 Commonwealth of Virginia 1980-1995 30,946.2 45,006.8 2.5 United States 1980-1995 1,340,768.9 1,765,826.1 1.9 Short-Term Historical Retail Sales (+000,000) City of Alexandria 1990-1995 1,174.6 1,234.3 1.0 Washington MSA 1990-1995 30,271.1 33,678.9 2.2 Commonwealth of Virginia 1990-1995 40,138.2 45,006.8 2.3 United States 1990-1995 1,557,380.2 1,765,826.1 2.5 Projected Retail Sales (+000,000) City of Alexandria 1995-2000 1,234.3 1,234.1 (0.0) Washington MSA 1995-2000 33,678.9 35,721.1 1.2 Commonwealth of Virginia 1995-2000 45,006.8 47,309.5 1.0 United States 1995-2000 1,765,826.1 1,846,830.4 0.9 Long-Term Historical Retail Sales per Capita City of Alexandria 1980-1995 9,761.3 10,867.2 0.7 Washington MSA 1980-1995 6,728.3 7,434.3 0.7 Commonwealth of Virginia 1980-1995 5,765.3 6,796.8 1.1 United States 1980-1995 5,900.6 6,719.5 0.9 Short-Term Historical Retail Sales per Capita City of Alexandria 1990-1995 10,556.1 10,867.2 0.6 Washington MSA 1990-1995 7,143.8 7,434.3 0.8 Commonwealth of Virginia 1990-1995 6,459.6 6,796.8 1.0 United States 1990-1995 6,244.5 6,719.5 1.5
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 32 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-5 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------------------------------ Projected Retail Sales per Capita City of Alexandria 1995-2000 10,867.2 10,830.1 (0.1) % Washington MSA 1995-2000 7,434.3 7,430.3 (0.0) Commonwealth of Virginia 1995-2000 6,796.8 6,792.8 (0.0) United States 1995-2000 6,719.5 6,721.7 0.0 Long-Term Historical Eating and Drinking Place Sales (+000,000) City of Alexandria 1980-1995 107.3 173.4 3.2 Washington MSA 1980-1995 2,370.5 3,992.8 3.5 Commonwealth of Virginia 1980-1995 2,566.6 4,488.6 3.8 United States 1980-1995 126,131.6 185,035.4 2.6 Short-Term Historical Eating and Drinking Place Sales (+000,000) City of Alexandria 1990-1995 159.1 173.4 1.7 Washington MSA 1990-1995 3,509.1 3,992.8 2.6 Commonwealth of Virginia 1990-1995 3,893.2 4,488.6 2.9 United States 1990-1995 161,197.4 185,035.4 2.8 Projected Eating and Drinking Place Sales (+000,000) City of Alexandria 1995-2000 173.4 178.8 0.6 Washington MSA 1995-2000 3,992.8 4,291.0 1.5 Commonwealth of Virginia 1995-2000 4,488.6 4,859.0 1.6 United States 1995-2000 185,035.4 199,127.3 1.5 Long-Term Historical Eating and Drinking Place Sales per Capita City of Alexandria 1980-1995 1,036.6 1,526.7 2.6 Washington MSA 1980-1995 678.7 881.4 1.8 Commonwealth of Virginia 1980-1995 478.2 677.9 2.4 United States 1980-1995 555.1 704.1 1.6 Short-Term Historical Eating and Drinking Place Sales per Capita City of Alexandria 1990-1995 1,429.7 1,526.7 1.3 Washington MSA 1990-1995 828.1 881.4 1.3 Commonwealth of Virginia 1990-1995 626.6 677.9 1.6 United States 1990-1995 646.3 704.1 1.7 Projected Eating and Drinking Place Sales per Capita City of Alexandria 1995-2000 1,526.7 1,569.0 0.5 Washington MSA 1995-2000 881.4 892.6 0.3 Commonwealth of Virginia 1995-2000 677.9 697.7 0.6 United States 1995-2000 704.1 724.7 0.6 Long-Term Historical Personal Income (+000,000) City of Alexandria 1980-1995 2,285.8 3,203.7 2.3 Washington MSA 1980-1995 61,076.0 104,252.9 3.6 Commonwealth of Virginia 1980-1995 74,109.0 116,969.7 3.1 United States 1980-1995 3,163,874.0 4,443,243.2 2.3
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 33 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-5 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------------------------------ Short-Term Historical Personal Income (+000,000) City of Alexandria 1990-1995 2,947.9 3,203.7 1.7 % Washington MSA 1990-1995 92,685.0 104,252.9 2.4 Commonwealth of Virginia 1990-1995 105,654.1 116,969.7 2.1 United States 1990-1995 4,051,714.6 4,443,243.2 1.9 Projected Personal Income (+000,000) City of Alexandria 1995-2000 3,203.7 3,395.6 1.2 Washington MSA 1995-2000 104,252.9 117,297.3 2.4 Commonwealth of Virginia 1995-2000 116,969.7 132,310.6 2.5 United States 1995-2000 4,443,243.2 4,972,219.5 2.3 Long-Term Personal Income per Capita City of Alexandria 1980-1995 22,073.0 28,206.0 1.6 Washington MSA 1980-1995 17,488.0 23,013.0 1.8 Commonwealth of Virginia 1980-1995 13,807.0 17,665.0 1.7 United States 1980-1995 13,924.0 16,908.0 1.3 Short-Term Historical Personal Income per Capita City of Alexandria 1990-1995 26,494.0 28,206.0 1.3 Washington MSA 1990-1995 21,873.0 23,013.0 1.0 Commonwealth of Virginia 1990-1995 17,003.0 17,665.0 0.8 United States 1990-1995 16,246.0 16,908.0 0.8 Projected Personal Income per Capita City of Alexandria 1995-2000 28,206.0 29,799.0 1.1 Washington MSA 1995-2000 23,013.0 24,399.0 1.2 Commonwealth of Virginia 1995-2000 17,665.0 18,997.0 1.5 United States 1995-2000 16,908.0 18,097.0 1.4 Long-Term Historical Employment - City of Alexandria (+000) Farming 1980-1995 0.0 0.0 0.0 Agricultural Services 1980-1995 0.3 0.5 3.7 Mining 1980-1995 0.0 0.1 8.5 Construction 1980-1995 5.5 3.4 (3.1) Manufacturing 1980-1995 2.5 2.9 1.0 Transportation, Communications, & Public Utilities 1980-1995 4.7 5.5 1.0 Total Trade 1980-1995 17.2 20.1 1.0 Wholesale 1980-1995 3.1 3.4 0.5 Retail 1980-1995 14.1 16.7 1.1 Finance, Insurance, & Real Estate 1980-1995 9.2 9.1 (0.0) Services 1980-1995 23.6 45.0 4.4 Total Government 1980-1995 20.2 23.4 1.0 Federal Civilian 1980-1995 9.7 10.7 0.6 Federal Military 1980-1995 5.0 4.9 (0.1) State & Local 1980-1995 5.5 7.8 2.3 Total 1980-1995 83.1 109.9 1.9
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 34 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-5 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------------------------------ Short-Term Historical Employment - City of Alexandria (+000) Farming 1990-1995 0.0 0.0 0.0 % Agricultural Services 1990-1995 0.4 0.5 4.0 Mining 1990-1995 0.2 0.1 (23.2) Construction 1990-1995 4.3 3.4 (4.7) Manufacturing 1990-1995 2.9 2.9 0.3 Transportation, Communications, & Public Utilities 1990-1995 5.0 5.5 1.7 Total Trade 1990-1995 21.4 20.1 (1.3) Wholesale 1990-1995 3.3 3.4 0.6 Retail 1990-1995 18.1 16.7 (1.6) Finance, Insurance, & Real Estate 1990-1995 10.0 9.1 (1.8) Services 1990-1995 41.4 45.0 1.7 Total Government 1990-1995 23.6 23.4 (0.2) Federal Civilian 1990-1995 11.6 10.7 (1.6) Federal Military 1990-1995 4.9 4.9 0.1 State & Local 1990-1995 7.2 7.8 1.6 Total 1990-1995 109.3 109.9 0.1 Projected Employment - City of Alexandria (+000) Farming 1995-2000 0.0 0.0 0.0 Agricultural Services 1995-2000 0.5 0.5 1.1 Mining 1995-2000 0.1 0.1 0.3 Construction 1995-2000 3.4 3.3 (0.3) Manufacturing 1995-2000 2.9 3.0 0.6 Transportation, Communications, & Public Utilities 1995-2000 5.5 5.3 (0.6) Total Trade 1995-2000 20.1 19.5 (0.6) Wholesale 1995-2000 3.4 3.1 (1.8) Retail 1995-2000 16.7 16.4 (0.4) Finance, Insurance, & Real Estate 1995-2000 9.1 8.9 (0.6) Services 1995-2000 45.0 45.7 0.3 Total Government 1995-2000 23.4 22.3 (0.9) Federal Civilian 1995-2000 10.7 9.6 (2.1) Federal Military 1995-2000 4.9 4.8 (0.5) State & Local 1995-2000 7.8 8.0 0.4 Total 1995-2000 109.9 108.6 (0.2) Office Space Available 1992-1995 2,073,000 2,000,000 (1.2) Total 1992-1995 26,867,000 27,800,000 1.1 Airport Statistics Washington National 1990-1994 15,805,496 15,700,825 (0.2) Dulles International 1990-1994 10,424,444 11,690,786 2.9 Baltimore-Washington International 1990-1994 10,245,049 12,700,000 5.5 Convention Activity Number of Conventions 1993-1995 29 18 (21.2) Convention Room Nights 1993-1995 525,743 186,181 (40.5)
Sources: Washington D.C. Convention and Visitors Association; Woods and Poole Economics, Inc.; Arlington County Department of Community Planning, Housing, and Development; Metropolitan Airports Authority - -------------------------------------------------------------------------------- HVS International, Mineola, New York Market Area Analysis 35 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= In later sections of this economic study and appraisal, we will relate these historical and projected growth trends to specific market segments based on their propensity to reflect changes in room night demand in the subject property's area. HVS International, Mineola, New York Overview of External Forces 36 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 5. Overview of External Forces Affecting the U.S. Lodging Industry Introduction Hotel ownership is ultimately the business of creating and enhancing value. To understand the investment potential of lodging facilities, investors must be thoroughly aware of the many forces that can cause changes in the value of their properties. Although some of these forces are internal (such as the layout and design of the facilities, the quality of management, and the condition of the property), others are external (such as the local economic environment and the competitive nature of the market). The risk associated with hotel investment lies largely with the external forces that are beyond the control of ownership and contribute to the variability of future income flows. Investors and appraisers can project financial results by evaluating the historical impact of external forces on hotel values. Successful hotel investors seek opportunities where the risk of external forces can be minimized, thus reducing the uncertainty associated with income expectations. When investors engage in due diligence prior to acquiring a lodging facility, they are primarily interested in trends affecting a limited geographic market area, such as a town, city, or county. A broader overview takes into account national and international travel patterns and trends. An understanding of the general characteristics of the United States hotel market is important because these trends often foreshadow economic and demographic changes in smaller areas. This section of the appraisal will present an overview of the U.S. lodging industry by tracing many of the forces that influence hotel values. Historical economic and demographic data, and industry statistics will be analyzed to provide a basis for projections. Forecasts will be evaluated to determine their reasonableness. The conclusions represent another set of criteria that hotel investors consider in making their acquisition decisions. HVS International, Mineola, New York Overview of External Forces 37 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The Supply and Demand Relationship Most business ventures are influenced by the relationship between supply and demand. In the hotel industry, supply refers to the number of units. A unit consists of one or more rooms and represents the smallest accommodation that can be rented to a guest. Each unit must have a full bath and its own entrance to a public hallway or the building exterior. Demand refers to a room night, which is one unit that is occupied for one night. The supply and demand relationship has a significant influence on a hotel's occupancy and/or average room rate. Occupancy is calculated by dividing the number of rooms that are occupied for a specific period by the total number of rooms that are available during the same period. Average room rate is determined by dividing the total rooms revenue achieved during a specific period by the number of rooms occupied during that period; it also represents the weighted average of all the room rates charged during that period. In a market where demand is increasing faster than supply, occupancies rise and average rate growth generally exceeds inflation. When supply is increasing faster than demand, occupancies fall and average rates typically remain level or decline. Hotels generate revenue based on occupancy and average rate, and thus the supply and demand relationship is an important factor in analyzing profits and value. Hotel occupancy levels have shown definite cycles that reflect the balance between supply and demand. The early 1970s marked the beginning of a hotel building boom reminiscent of the 1920s. Many factors contributed to this expansion, but the two main elements were readily available financing and aggressive chains that were eager to sell franchises. The new construction during the 1970s was made possible by the enormous amount of financing generated by all lenders, particularly real estate investment trusts (REITs). These high-leverage finance companies were created to allow small investors to participate in real estate mortgages and equities. The concept was quickly accepted by Wall Street, and soon billions of dollars were available to finance real estate projects. Many lenders became so overwhelmed with new money that their underwriting procedures broke down and some marginal developments were approved. During the late 1960s and early 1970s, hotel companies actively expanded their chains through franchising. Franchising was a source of new capital, allowing hotel companies to grow and achieve national recognition using the franchisee's financial investment in individual properties. Some franchisors, eager to demonstrate sustained growth and establish a national HVS International, Mineola, New York Overview of External Forces 38 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= presence, employed questionable marketing tactics to sell new franchises. Salespeople were often compensated based on the number of franchises sold, so there was little incentive to discourage developers from investing in poor locations and overbuilt markets. Many lenders and hostelry developers were led to believe that a national franchise would guarantee a successful operation. The combination of readily available financing and aggressive hotel chains eager to sell franchises resulted in overbuilding and development of many poorly located, undercapitalized hostelries managed by inexperienced owners. The bubble burst on the lodging industry when inflation caused construction costs and interest rates to escalate. The 1974 energy crisis drastically reduced travel, and the accompanying recession curtailed business trips, conferences, and conventions. Operators of marginal properties quickly fell behind in their mortgage payments, and lenders were forced to foreclose. As lenders became hostelry owners, they either organized work-out departments headed by experienced hoteliers or engaged professional hotel management companies to assume operational responsibilities. Sales data indicate that lenders who were looking for quick sales to remove nonperforming hotel assets from their books had to lower their prices substantially to attract all-cash buyers. Lenders who were willing to hold on to foreclosed hotels and employ professional management to reposition and improve the properties' operation were generally able to recoup their original investments in three to five years, once the industry began to recover. However, even lenders who repositioned their hotels had to take back favorable purchase-money financing to sell the properties because money from other sources was not available. History has shown that during economic downturns, hotel values generally do not fall in proportion to the properties' declining incomes. Sellers, and particularly lenders who take back hotels through foreclosure, are often unwilling to sell at substantially reduced prices. They are more likely to wait out the downward cycle and dispose of their assets when the market begins to rebound. Thus, appraisers can best reflect market behavior by projecting a facility's net income to a point of recovery and applying the proper discounted cash flow procedure over that time period. The late 1970s was a period of relative calm for the lodging industry. Because most lenders were recovering from the financial wounds inflicted by HVS International, Mineola, New York Overview of External Forces 39 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the 1975 recession, they had little interest in making hotel mortgages. New construction was restrained, and primarily consisted of additions to existing properties and the development of some large, downtown hotels oriented toward the commercial and convention markets. The rebirth of center-city hostelries was a direct result of fuel shortages and the availability of government financing for inner-city redevelopment projects. Highway-oriented properties, on the other hand, were adversely affected by escalating gasoline prices and decreased automobile travel, and these lodging facilities lost some of their appeal among investors and hotel companies. Decreased building activity, the normal retirement of older hostelries from the market, and an improving economy created a favorable supply and demand relationship and record-high occupancy levels from 1979 to 1980. Average room rates increased rapidly as operators took advantage of the excess demand to recoup earlier losses and keep up with inflation. After the decline in hotel development during the late 1970s, the environment appeared suitable for a period of renewed expansion. However, the Federal Reserve tightened the money supply in the early 1980s, sending the prime interest rate up to double-digit levels. Most of the projects that were in the preliminary planning stages but lacked sensible financing were put on hold. Fiscal policy and declining energy prices eventually reduced the national inflation rate. This caused a decline in hotel interest rates beginning in 1983, and suddenly massive amounts of capital were available for real estate investments. Hotel developers who had been out of the market since the mid-1970s rushed to initiate new projects. They were aided by several major real estate development incentives: high occupancies and escalating room rates, readily available debt and equity financing, and unique income tax benefits designed to stimulate the national economy out of a recession. During the early 1980s, trends were generally favorable for new hotel development. Although the recession caused a decline in lodging demand, many markets showed relatively high occupancy levels. Room rates were usually able to keep up with inflation, and the travel industry was expected to boom as a result of a recovering economy. Franchise sellers signed up new prospects aggressively, using product segmentation to justify the saturation of a market with a common brand. HVS International, Mineola, New York Overview of External Forces 40 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Financing was readily available from the savings and loan industry. Following deregulation, these banks were permitted to lend on commercial real estate, such as hotels. Although savings and loans had experience in making loans on single-family homes, few had expertise with commercial properties, and fewer still with hotels. The result was almost identical to the real estate investment trust fiasco the decade before: loan underwriting and administration were inept and sometimes nonexistent, the number of loans made seemed more important than the quality of the real estate and the integrity of the borrower, and short-term funds were often used to finance long-term mortgages. In the early 1990s, the industry suffered the consequences of this lending spree: most major hotel markets became severely overbuilt and many savings and loans went out of business. Another factor contributing to hotel development in the 1980s was the very favorable treatment provided by income tax regulations. By carefully structuring hotel syndications to take advantage of all available tax benefits, investors could virtually recoup their total cash outlay in the first year and reap additional benefits in the future regardless of the economic success of the underlying asset. Because there was little incentive to justify a transaction's economics (i.e., cash flow and reversionary benefits), a number of syndicators overpaid for hotel properties, took out usurious fees, and overloaded their hotels with debt. A change in the tax law in the mid-1980s eliminated many of the benefits associated with hotels, but the overbuilding in most markets was either in progress or had already taken place. By the end of the 1980s, the abuses of the savings and loans had become apparent, but it was too late to reverse the overbuilding. Between 1985 and 1990, approximately 556,000 rooms were added to the U.S. hotel supply. The national economy entered another recession in 1990, and this factor (coupled with overbuilding and the Persian Gulf War in 1991) caused the national hotel occupancy rate to bottom out at 60.9%. In some markets, hotel occupancies were as low as 35%. This supply and demand imbalance was almost identical to the situation in the 1970s that led to numerous hotel failures. As in the REIT days, the number of non-performing loans reached record levels, and lenders moved to a work-out mode of operation in order to foreclose and restructure their hotel investments. Many of the savings and loans were taken over by the government and their hotel assets were sold at auction. HVS International, Mineola, New York Overview of External Forces 41 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= According to the American Council of Life Insurance, which represents major life insurance companies, the number of delinquent hotel loans and the number of hotel loans in foreclosure peaked in 1991. This trend is undergoing a reversal as the U.S. lodging industry begins to recover. Loan restructuring was an attractive alternative to foreclosure during this period, and the number of loans in good standing with restructured terms almost doubled. By 1993, new hotel construction had declined significantly. Lenders, trying to get out from under problematic hotel portfolios, curtailed all real estate lending and would not even consider hotels. The tax benefits associated with lodging facilities had been reduced significantly, and passive investors left the hospitality market entirely. The slowdown in the growth of supply had a beneficial impact on occupancy levels, which started to recover in 1992. Improved occupancies are expected to continue through the late 1990s as increases in lodging demand outpace growth in supply. Beginning in 1991, many lenders and the Resolution Trust Corporation (RTC) sold their oldest and least desirable hotels at liquidation prices. Because virtually no third-party financing was available, most lenders were forced to take back purchase-money mortgages at favorable terms in order to sell these properties without suffering massive write-downs. The newer and more desirable hotels were not put on the market, because their lenders/owners were waiting for values to recover. This course of action significantly reduced the number of transactions involving good-quality lodging facilities. The following table shows the volume of hotel transactions exceeding $10,000,000 between 1990 and 1995. ================================================================================ Table 5-1 Summary of Major Hotel Transactions - -------------------------------------------------------------------------------- Year 1990 1991 1992 1993 1994 1995 - -------------------------------------------------------------------------------- Number of Transactions 130 54 67 52 92 104 Number of Rooms 40,543 16,427 25,187 19,935 33,503 36,951 Average Price Per Room $136,000 $91,000 $85,000 $79,000 $80,000 $83,000 Source: HVS International - -------------------------------------------------------------------------------- In 1991, there were only 54 major hotel sales recorded. This number increased to 67 in 1992 and declined to 52 in 1993, then rose dramatically in HVS International, Mineola, New York Overview of External Forces 42 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 1994 and 1995. During the low-volume years, many sellers remained on the sidelines waiting for values to increase before placing their properties on the market. The jump in 1994 is attributable to a number of factors, including the greater availability of mortgage funds, a return of institutional investors to the market, and a resurgence of investor interest in lodging facilities. The profile of typical hotel buyers has changed somewhat. During the mid-1980s, when tax-driven syndication's were popular, many hotels were purchased by passive investors who hired management companies to operate their properties. These owners had little involvement in day-to-day management decisions, which occasionally led to poor management and financial losses. Today, most buyers of major hotels are owner-operators who bring with them both the acquisition funds (usually from a joint venture partner) and management expertise. We also note that real estate investment trusts (REITs) and public hotel companies (C-Corps) are actively acquiring hotels using funds from public equity stock offerings. The supply of new hotel rooms is expected to increase slowly during the next several years. Lenders are beginning to return to the market, and are making some hotel loans based on conservative criteria. Initially, mortgage funds were available mainly to the budget and economy lodging sectors, for the purpose of refinancing existing properties or assisting buyers in acquisitions. Now, a number of lenders are willing to finance new construction for these small, low-end properties. Although financing is also becoming available for the acquisition of large, full-service hotels, very little has been allocated for new construction. At present, active hotel lenders are not necessarily traditional banks and insurance companies, but may include credit companies and Wall Street securities firms. A number of hotel owners and developers are now constructing budget and economy hotels; a few are planning more upscale, full-service properties. Most lenders are taking a conservative approach to new hotel loans, which should limit new development to those projects that demonstrate true economic feasibility. As a result, severe short-term overbuilding is unlikely. HVS International, Mineola, New York Overview of External Forces 43 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Room Rates The supply and demand relationship has a direct impact on hotel occupancies and an indirect influence on room rate growth. Between 1978 and 1995, hotel room rates increased at an average annual compounded rate of almost 6%. Significant rate growth was recorded during the late 1970s and early 1980s as a result of strong occupancies (70%'s) coupled with a high monetary inflation rate (14%). In recent years, room rate growth slowed as a result of low occupancies and a drop in inflation. Hotel room rates generally increase faster than the Consumer Price Index (CPI) when occupancies are strong or moving upward. When occupancies are low or declining, room rate growth tends to lag behind the CPI; in some cases, rates may remain flat or actually drop. The following table compares the historical and projected annual increase in hotel room rates in the United States to the change in the national CPI. HVS International, Mineola, New York Overview of External Forces 44 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-2 Percent Change in Average Room Rates Versus CPI - U.S. Hotels - -------------------------------------------------------------------------------- Consumer Price Hotel Room Rate Index Hotel Year Percent Change Percent Change Occupancy - ------------------------------------------------------------------ 1973 4.2% 6.2% 70.2% 1974 7.6 11.0 64.0 1975 7.3 9.1 63.7 1976 8.2 5.7 65.8 1977 8.1 6.5 67.3 1978 14.0 7.7 69.2 1979 17.0 11.3 71.9 1980 15.2 13.5 70.6 1981 10.0 10.3 67.9 1982 6.5 6.2 66.7 1983 5.1 3.2 64.4 1984 6.9 4.3 64.0 1985 4.6 3.6 63.1 1986 3.2 1.9 62.5 1987 3.6 3.6 61.9 1988 3.6 4.1 62.3 1989 3.5 4.8 63.2 1990 3.0 5.4 62.4 1991 0.6 4.2 60.9 1992 1.4 3.0 62.1 1993 2.8 3.0 63.1 1994 5.2 2.6 64.7 1995 4.8 2.8 65.5 1996* 5.0 3.0 66.0 1997* 5.5 3.5 67.0 1998* 6.0 4.0 68.0 1999* 5.5 4.0 68.0 Sources: Smith Travel Research & HVS International * Projected - -------------------------------------------------------------------------------- This table shows two periods when hotel room rate growth failed to keep pace with the CPI. From 1973 to 1975, the hotel industry was suffering from overbuilding related to real estate investment trusts, a recession, and a downturn in travel caused by the oil embargo. The second period of slow room rate growth occurred between 1988 and 1993, when the industry was again affected by overbuilding and a weak economy. The table illustrates that during periods of prosperity, room rates are a good hedge against inflation; this was true even when the CPI increased at double-digit levels. HVS International, Mineola, New York Overview of External Forces 45 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The projections indicate a strong recovery of room rates as the relationship between supply and demand becomes more favorable. Growth is expected to peak in 1998 at 6%, which is significantly higher than the projected gain in the CPI. This may appear high, but a similar trend occurred in 1978, when room rates rose 14.0% and the CPI increased by only 7.7%. Hotels are unique because their room rates can be adjusted at any time. Unlike office space, where rents are typically negotiated for a five-year period, hotel operators are free to base rates on occupancy trends. Using sophisticated yield management programs, modern lodging facilities can ride the demand curve and maximize room rates whenever the market permits. As a result, hotels generally offer significant upside potential during periods of economic prosperity. If lodging facilities can increase room rates faster than the CPI and still maintain occupancies, bottom-line profits usually escalate. If they can raise room rates and occupancy at the same time, profits will grow significantly. The opposite occurs when room rates fail to keep pace with inflation. Because market value is basically a multiple of bottom-line profits, changes caused by fluctuations in occupancy and average rate have a direct impact on value. Rooms Revenue per Available Room (RevPAR) The ability of a hotel to maximize its occupancy and room rate is measured in terms of rooms revenue per available room (RevPAR), which is the product of occupancy and average rate. Between 1978 and 1995, RevPAR in the U.S. lodging industry increased at an average annual compounded rate of approximately 5%. As in the case of average rate, most of the increase occurred during the late 1970s, when occupancies escalated rapidly. The only decline in RevPAR occurred in 1991. Trends in Hotel Sales HVS International constantly monitors hotel markets in order to collect information on sales of lodging facilities. This comprehensive database is known as the Hospitality Market Data Exchange (HMDE). The HMDE includes more than 90% of all hotel sales that took place during this period. The HMDE data shows that the number of transactions peaked at 726 in 1986. This strong activity is largely attributable to pending changes in the tax laws, which made it less favorable to own hotels. It is also possible that forward-thinking investors noted the substantial overbuilding and declining economy and decided to bail out at that time. In 1987 and 1990, the HVS International, Mineola, New York Overview of External Forces 46 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= average sales price per room peaked at $75,000. This was more than twice the 1981 average of $36,000. Following the 1990 peak, hotel prices fell rapidly as occupancies and profits were eroded by the massive number of hotel rooms entering the market. By 1991, the year of the Persian Gulf War, sales prices had fallen to $38,000 per room. Even the highest price per room declined from the record $1,195,652 (for the sale of the Bel Aire Hotel) to $251,816 in 1992. The market hit bottom in 1993 when the average sales price dropped to $36,000 per room. Prices recovered rapidly in 1994 and 1995 as investors became interested in hotels again and more full-service properties were put on the market. In 1995, the average sales price was $61,000 per room. The figures presented in the HMDE represent actual sales prices; no attempt was made to adjust for factors such as favorable or unfavorable financing, forced or liquidation sales, bankruptcy sales, foreclosures, and so forth. As a result, the average price per room does not necessarily reflect market value, which assumes a willing buyer and a willing seller. Many of the transactions that took place during the early 1990s involved unwilling sellers - usually lenders who were forced to liquidate hotel portfolios quickly at prices that were below market levels. Most hotel experts agree that a recovery is underway, and they recommend that owners hold their properties until more favorable conditions prevail. Trends in Hotel Values A more meaningful indicator of trends in hotel value is the Hotel Valuation Index (HVI), developed by HVS International. This index tracks changes in hotel values in 23 major markets and the nation as a whole. It is developed through an income approach, using market area data provided by Smith Travel Research and operational and capitalization rate information from HVS International, and is indexed to the 1986 U.S.A. value (1.0000). The following table sets forth the HVI from 1986 to 1995. HVS International, Mineola, New York Overview of External Forces 47 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-3 Hotel Valuation Index per Room - -------------------------------------------------------------------------------- Valuation Index Per Room
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 ------------------------------------------------------------------------------------------------------- Honolulu 3.3571 4.0357 4.6964 5.2857 5.3214 4.7857 4.9286 4.2857 4.3929 5.6071 New Orleans 1.5357 1.7500 2.2857 2.3929 2.5000 2.6071 3.2857 3.2500 3.8929 4.4286 New York 3.5714 4.1071 4.6429 4.5357 3.9286 3.0357 2.5714 2.5714 3.1429 4.1071 San Francisco 2.5000 3.0893 3.2500 3.0714 2.9286 2.5714 2.5714 2.9643 3.2143 4.0000 Phoenix 1.2143 1.0714 1.1786 1.5357 1.4286 1.2500 1.5000 1.9643 2.3571 3.2143 San Diego 2.8571 2.3571 2.5714 2.6786 2.3929 2.5357 2.5357 2.2143 2.3571 3.0357 Miami 1.4286 1.6071 1.7321 2.1429 2.1786 2.2500 2.5714 2.7857 2.3214 2.9286 Washington, DC 2.1786 2.1786 2.4464 2.6071 2.2500 1.8571 2.0357 2.5000 2.3929 2.8929 Atlanta 1.0714 1.0179 1.0536 1.0357 1.1429 1.1250 1.2857 1.7857 2.1429 2.6786 Minneapolis 0.7321 0.6964 0.7143 0.7143 0.7857 1.0000 1.2857 1.5714 1.8214 2.1786 Chicago 1.4643 1.5000 1.5714 1.5000 1.4286 1.2143 1.2500 1.5000 1.8571 2.1786 Boston 2.3571 2.7143 2.6071 2.1429 1.8214 1.2500 1.3036 1.3214 1.6071 2.1071 Fort Lauderdale 1.4643 1.2679 1.3214 1.4286 1.4821 1.3571 1.7143 1.8929 1.6071 1.9286 Orlando 1.5000 1.6429 1.9286 2.5000 2.5357 1.8929 2.0714 1.7857 1.6071 1.8929 Denver 0.5357 0.4464 0.4643 0.4821 0.7857 0.9268 1.0357 1.3214 1.5000 1.8571 Dallas 0.5536 0.6250 0.6607 0.7321 0.7857 0.7143 0.9643 1.0357 1.3214 1.7143 USA 1.0000 0.9464 1.0536 1.1250 1.0714 0.9214 0.9929 1.1429 1.3214 1.6071 Los Angeles 2.1071 2.2857 2.3929 2.4643 2.1786 1.5714 1.0714 0.9643 1.1964 1.5000 Tampa 0.8393 0.7679 0.8571 1.1429 1.2857 1.0357 1.0714 1.0357 1.1071 1.3214 Anaheim 1.7679 1.7321 1.7500 1.8571 1.6071 1.2857 0.9642 0.9464 0.8393 1.2500 Houston 0.3571 0.4286 0.6964 0.7857 1.1071 1.1607 1.1429 1.0357 1.0000 1.1786 Philadelphia 1.4643 1.5357 1.4286 1.3214 1.0714 0.6786 0.5714 0.6071 0.7500 1.0714 Norfolk 1.1786 1.0536 0.9286 0.7857 0.6429 0.5357 0.6071 0.6429 0.7500 0.9643 Riverside 0.9643 1.2143 1.5714 1.7143 1.4643 1.2500 0.7857 0.5357 0.4286 0.5357
Source: HVS International - -------------------------------------------------------------------------------- The HVI can be used to show the value change in a particular market over time or to show the relative difference in hotel values in various cities. The following table shows the annual change in hotel values in 23 major markets and the United States as a whole. HVS International, Mineola, New York Overview of External Forces 48 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-4 Percent Change in the Hotel Valuation Index - -------------------------------------------------------------------------------- Annual Percent Change
'86-87 '87-88 '88-'89 '89-'90 '90-'91 '91-'92 '92-'93 93-'94 '94-'95 '86-'95 - ----------------------------------------------------------------------------------------------------------- Honolulu 20 % 16 % 13 % 1 % -10 % 3 % -13 % 3 % 28 % 67 % New Orleans 14 31 5 4 4 26 -1 20 14 188 New York 15 13 -2 -13 -23 -15 0 22 31 15 San Francisco 24 5 -5 -5 -12 0 15 8 24 60 Phoenix -12 10 30 -7 -13 20 31 20 36 165 San Diego -18 9 4 -11 6 0 -13 6 29 6 Miami 12 8 24 2 3 14 8 -17 26 105 Washington, DC 0 12 7 -14 -17 10 23 -4 21 33 Atlanta -5 4 -2 10 -2 14 39 20 25 150 Minneapolis -5 3 0 10 27 29 22 16 20 198 Chicago 2 5 -5 -5 -15 3 20 24 17 49 Boston 15 -4 -18 -15 -31 4 1 22 31 -11 Fort Lauderdale -13 4 8 4 -8 26 10 -15 20 32 Orlando 10 17 30 1 -25 9 -14 -10 18 26 Denver -17 4 4 63 18 12 28 14 24 247 Dallas 13 6 11 7 -9 35 7 28 30 210 USA -5 11 7 -5 -14 8 15 16 22 61 Los Angeles 8 5 3 -12 -28 -32 -10 24 25 -29 Tampa -9 12 33 12 -19 3 -3 7 19 57 Anaheim -2 1 6 -13 -20 -25 -2 -11 49 -29 Houston 20 62 13 41 5 -2 -9 -3 18 230 Philadelphia 5 -7 -8 -19 -37 -16 6 24 43 -27 Norfolk -11 -12 -15 -18 -17 13 6 17 29 -18 Riverside 26 29 9 -15 -15 -37 -32 -20 25 -44
Source: HVS International - -------------------------------------------------------------------------------- On a national basis, hotel values rose in 1988 and 1989, then declined in 1990 and dropped by 14% in 1991. A turnaround commenced in 1992, when values increased by 8%; still greater increases of 15% in 1993, 16% in 1994, and 22% in 1995 signaled that a recovery was well underway. In the case of the individual cities, it is obvious that the movement in national hotel values has been offset somewhat by trends in local markets. Between 1986 and 1995, Riverside hotels lost more than 40% of their value, while San Francisco showed a 60% increase. Anaheim, Los Angeles, and Philadelphia also suffered significant drops. Future Trends Most hotel owners, operators and lenders agree that the U.S. lodging industry has emerged from one of the worst periods since the Depression of 1929. Today, there are many indications that signal a strong recovery is underway, and most hotels have experienced a dramatic rise in profitability. Conversely, the hotel industry remains cyclical, and there are long-term trends and risk factors that could have an unfavorable impact on the operating results and investment potential of lodging facilities. The following HVS International, Mineola, New York Overview of External Forces 49 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= list summarizes the positive and negative factors that are likely to influence the U.S. lodging industry in coming years. o No significant amount of new hotel development is likely to occur during the next three to five years. Lenders stopped financing new hotels in the early 1990s because of the high rate of loan defaults, and they are only now starting to make construction loans. Although mortgage funds are available to refinance existing properties and construction loans are being made for economy hotels, mortgages for new hotels in the mid-rate, first-class, and luxury categories are still difficult to secure. This lack of financing is major barrier to entry, and will prevent a number of proposed projects from moving forward. With only a slow increase in supply, hotel occupancies should rebound as fast as the growth in demand permits. o An additional barrier to entry is the current discrepancy between market values and replacement costs for first-class and luxury hotels. In today's market, many upscale hotels are still selling for prices that are below what it would cost to develop a comparable hotel. As a result, there is little justification for building a new hotel when a similar, existing facility is available for sale at some fraction of the cost. Until the gap between market value and replacement cost narrows, there will be minimal new hotel construction in the upper-tier segments. The market values and replacement costs of budget and economy hotels have been in equilibrium for several years which is another reason why new development is proceeding in these segments. o The U.S. economy continues to improve, which suggests that more people are traveling. Many people curtailed their travel plans during the recent recession, and there is likely to be pent-up demand that will be released as consumer confidence escalates. o Minimal additions to the hotel supply coupled with growth in demand should result in further improvement in occupancies during the next several years. o As shown by the historical data, hotel room rates rise rapidly as occupancies escalate. The most frequent complaint that owners and operators had during the recent recession was their inability to achieve average rate gains. Starting in 1994, gains in hotel room rates returned to levels in excess of inflation, foreshadowing enhanced profitability. In real dollars, hotel room rates are expected to return to 1988 levels by 1998. This HVS International, Mineola, New York Overview of External Forces 50 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= is a good indication that hotel values will return to record levels in the next two to four years. o The low cost of capital is another factor that tends to enhance value. Because capitalization rates are tied directly to the price of capital, the lower the cost, the lower the cap rate and the higher the value. The cost of hotel debt capital averaged 10.5% in 1990. Today, similar financing is available at 8.5% to 9.5%. Recent hotel sales support the downward trend in capitalization rates. o Government regulations are becoming increasingly expensive for the U.S. hotel industry. A national health care policy could force small operators to provide better benefits for many more employees, particularly the part-time workers who are used extensively by hotels and restaurants. Environmental laws are becoming stricter and will require hotels to implement recycling, reuse, and conservation procedures. Congress has limited deductions for meals and entertainment expenses, which increases the cost of doing business in hotels and restaurants. Local municipalities use hotel rooms taxes as a source of revenue for general use, and the hotel rooms tax is so high in some areas that it has driven away demand. This is particularly true with respect to meetings and conventions, which can be held in cities that tax accommodations at a lower rate. o Improved technology is rapidly changing the way business is conducted. During the next decade, advances such as video communication, enhanced data transfer, and faster transportation are expected to limit the need for face-to-face meetings and shorten the time that executives are away from their offices. Commercial hotels are bound to be influenced by this trend. Conclusion Interest in hotel acquisition has increased significantly during the past several years. Buyers have concluded that future earnings trends are likely to be favorable, and the risks posed by overbuilding or an economic downturn are small. Some sellers are holding their properties until prices reach a higher level. Consequently, we believe there is pent-up desire to sell once prices begin to approach levels that allow the existing (or restructured) debt to be paid off. The fact that numerous buyers are chasing very few acquisition opportunities has had a favorable impact on recent sales prices. For buyers to be successful in this highly competitive market, their projected operating results HVS International, Mineola, New York Overview of External Forces 51 Affectiong the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= must take into account at least a portion of any upside created from improved performance, particularly if the improvement can be readily achieved through management efficiencies. Capitalization rates based on historical operating income have fallen during the past several years. Hotel buyers in today's market must be aggressive in all of their acquisition assumptions. As a result, hotel values in some parts of the country are approaching the levels registered during the mid-1980s, and a full recovery is expected to occur in the next two to four years. HVS International, Mineola, New York Lodging Market Supply and Demand 52 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 6. Lodging Market Supply and Demand Analysis MARKET FOR TRANSIENT ACCOMMODATIONS The market for transient accommodations is an all-encompassing term referring to the many types of travelers who use lodging facilities in a given area. These travelers represent the market's accommodated room night demand. This section will begin with an analysis of historical demand trends to determine what changes have occurred; the historical number of competitive hotel rooms will then be estimated to evaluate local supply trends. Areawide occupancy levels can be calculated based on the number of hotel rooms available in the market and the demand for lodging accommodations. The total hotel room night demand will be divided into individual market segments to allow us to forecast growth rates based on the economic and demographic data set forth earlier in this report. Historical Supply and Demand Data Smith Travel Research (STR) has compiled historical supply and demand data for the subject property and its competitors. This information is presented in the following table, along with the marketwide occupancy, average rate, and rooms revenue per available room (RevPAR). RevPAR is calculated by multiplying occupancy by average rate, and provides an indication of how well rooms revenue is being maximized. HVS International, Mineola, New York Lodging Market Supply and Demand 53 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-1 Historical Supply and Demand Trends (STR) - --------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 - --------------------------------------------------------------------------------------------------------------------- Number of Rooms 3,161 3,389 3,433 3,433 3,433 3,433 3,433 Annual Guestroom Supply 1,153,765 1,236,997 1,253,045 1,253,045 1,253,045 1,253,045 1,253,045 Percent Change -- 7.2% 1.3% 0.0% 0.0% 0.0% 0.0% Room Night Demand 838,821 830,993 816,507 813,045 844,602 865,872 861,062 Percent Change -- (0.9)% (1.7)% (0.4)% 3.9% 2.5% (0.6)% Occupancy 72.7% 67.2% 65.2% 64.9% 67.4% 69.1% 68.7% Percent Change -- (7.6)% (3.0)% (0.4)% 3.9% 2.5% (0.6)% Average Rate $68.93 $70.98 $71.55 $72.99 $74.14 $77.13 $79.76 Percent Change -- 3.0% 0.8% 2.0% 1.6% 4.0% 3.4% RevPAR $50.11 $47.68 $46.62 $47.36 $49.97 $53.30 $54.81 Percent Change -- (4.9)% (2.2)% 1.6% 5.5% 6.7% 2.8%
Year-to-Date September Avg. Annual ------------------------ Comp. Change, 1995 1996 1989-95 - --------------------------------------------------------------------- Number of Rooms 3,433 3,433 Annual Guestroom Supply 937,209 937,209 Percent Change -- 0.0% 1.4% Room Night Demand 673,125 643,084 Percent Change -- (4.5)% 0.4% Occupancy 71.8% 68.6% Percent Change -- (4.5)% (0.9)% Average Rate $79.64 $82.14 Percent Change -- 3.1% 2.5% RevPAR $57.20 $56.36 Percent Change -- (1.5)% 1.5% Note: Additions to supply in 1990 and 1991 represent the opening of the 272-room Courtyard by Marriott in Crystal City - -------------------------------------------------------------------------------- HVS International, Mineola, New York Lodging Market Supply and Demand 54 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= It is important to note some limitations of the STR data. Hotels are occasionally added to or removed from the sample, and not every property reports data in a consistent and timely manner; these factors can influence the overall quality of the information by skewing the results. These inconsistencies may also cause the STR data to differ from the results of our competitive survey. Nonetheless, we find that hotel buyers often rely on STR statistics, and thus they are considered relevant to this study. Supply remained relatively stable from 1989 to 1996, with the exception of the opening of the 272-room Courtyard by Marriott in March of 1990. Because the hotel did not open at the beginning of a calendar year, the STR survey phases its room count into the supply in 1990 and 1991, resulting in supply increases of 7.2% and 1.3% in those years. Demand fluctuated somewhat during the historical period; there were slight declines (of 0.9% in 1990, 1.7% in 1991, and 0.4% in 1992, which were followed by moderate increases of 3.9% in 1993 and 2.5% in 1994. The decrease from 1990 through 1992 reflects the national recession and the Persian Gulf War, which both causes a downturn in travel throughout the country. As the economy improved in 1993 and 1994, demand growth resumed. However, demand declined again (by 0.6%) in 1995, and year-to-date September figures show a 4.5% drop from 1995 to 1996. These decreases are largely the result of two relatively unusual factors: the severe winter in 1995/96 and the government shut-down that occurred in early 1996. We also note that moderate government downsizing has had an impact on demand. Overall, room night demand rose at a minimal average annual compounded rate of 0.4% between 1989 and 1995, reflecting the long-term stabilization of the market. Occupancy fluctuations mirrored changes in demand except in 1990 and 1991, when there was slight supply-side dilution resulting from the opening of the Courtyard by Marriott. In those years, occupancy declined more significantly than demand, falling by 7.6% and 3.0%. These decreases resulted in overall marketwide occupancy levels of 67.2% in 1990 and 65.2% in 1991. The market has yet to regain the above-70% occupancy levels that were apparent in the late 1980s. Marketwide average rates increased at moderate rates ranging from 0.8% to 4.0% from 1989 to 1995, and outpaced occupancy and demand gains. Year-to-date September statistics indicate that rates continued to rise, with a 3.1% gain registered from 1995 to 1996. Overall, average rate increased at an average annual compounded rate of 2.5% between 1989 and 1995. By virtue of the consistent rate increases, the market's 1995 average rate and RevPAR HVS International, Mineola, New York Lodging Market Supply and Demand 55 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= levels of $79.76 and $54.81 are the highest achieved during the historical period. Like average rate, marketwide RevPAR increased at a moderately from 1989 to 1995, at an average annual compounded rate of 1.5%. The largest gains of 5.5% and 6.7% were achieved in 1993 and 1994, respectively. Year-to-date September data show a 1.5% decline, from $57.20 in 1995 to $56.36 in 1996. The overall stability of RevPAR levels again underscores the maturity of the local lodging market; however, we do note that both average rate and RevPAR growth were lower than the prevailing inflation rate on an average annual compounded basis. Demand Analysis Using Market Segmentation For the purpose of demand analysis, the overall market is divided into individual segments based on the nature of travel. Although a market may have various segments, the three primary classifications occurring in most areas are commercial, meeting and group, and leisure. Market segmentation is a useful procedure because individual classifications often exhibit unique characteristics in terms of growth potential, seasonality of demand, average length of stay, double occupancy, facility requirements, price sensitivity, and so forth. By quantifying the room night demand by market segment and analyzing the characteristics of each segment, the overall demand for transient accommodations can be projected. Lodging demand in the subject property's market is generated primarily by the following four market segments. Segment 1 Commercial Segment 2 Meeting and Group Segment 3 Leisure Segment 4 Government Based on our fieldwork, area analysis, and knowledge of the local lodging market, we estimate the year-end 1996 distribution of accommodated hotel room night demand as follows. HVS International, Mineola, New York Lodging Market Supply and Demand 56 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-2 Estimated Year-End 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- Marketwide Subject Property -------------------------- ---------------------- Accommodated Percent Accommodated Percent Market Segment Demand of Total Demand of Total - -------------------------------------------------------------------------------- Commercial 71,000 13% 12,000 28% Meeting and Group 161,000 29 23,000 53 Leisure 155,000 28 5,000 12 Government 163,000 30 3,000 7 - -------------------------------------------------------------------------------- Total 551,000 100% 43,000 100% - -------------------------------------------------------------------------------- As illustrated by the preceding table, government demand predominates in the market, contributing 30% of the estimated year-end 1996 room night demand. Meeting and group demand followed with a 29% share, leisure travelers accounted for 28%, and commercial guests constituted the smallest segment, at 13%. The subject property's demand segmentation differs from that of the competitive market to some degree. Approximately 53% of the Ramada's occupancy is derived from meetings and groups, reflecting the large volume of tour and travel business that the hotel accommodates. Lower-end commercial business contribute another 28%, and leisure travelers comprise 12% of the total. The government segment produces only 7% of the subject property's occupancy. Using the distribution of accommodated hotel demand as a starting point, we will analyze the characteristics of each market segment in an effort to determine future trends in room night demand. Commercial Segment The commercial segment consists of businesspeople who are visiting various firms in the subject property's market. For the most part, business travelers are not particularly rate-sensitive, and they often use a hotel's food and beverage outlets and recreational facilities. Washington, DC, which is situated only six miles northeast of the Ramada, is a major national and international center for financial, commercial, and political activity. Commercial demand is strongest Monday through Thursday nights, declines significantly on Friday and Saturday, and increases somewhat on Sunday. The typical length of stay ranges from one to three days, and the rate of double occupancy is a low 1.2 to 1.3 people per room. Commercial demand is relatively constant throughout the year, although some declines HVS International, Mineola, New York Lodging Market Supply and Demand 57 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= are noticeable in late December and during other holiday periods. In general, the commercial segment represents a highly desirable and lucrative market that provides a consistent level of demand at relatively high room rates. According to local hotel operators, the year following a presidential election year is usually strong, particularly if there is a change in administration; for this reason, we project a 1.0% increase in commercial demand in 1997, slowing to a growth rate of 0.5% annually in subsequent years. Meeting and Group Segment The meeting and group market includes meetings, seminars, trade association shows, and similar gatherings of ten or more people. Peak convention demand typically occurs in the spring and fall. Because of vacations, the summer months represent the slowest period for this market segment; winter demand varies. The average length of stay for typical meetings and groups ranges from three to five days. Most groups meet during the weekday period of Monday through Thursday, but associations and social groups will sometimes gather on weekends. Business groups tend to have a low double occupancy of 1.3 to 1.5 people per room, while social groups are likely to have double occupancy rates ranging from 1.5 to 1.9. Meeting and group patronage is generally quite profitable for hotels. Although room rates are discounted for large groups, the property benefits from the use of meeting space and revenues generated by in-house banquets and cocktail receptions. Facilities that are necessary to attract meetings and groups include function areas with adequate space for breakout, meals, and receptions; recreational amenities; and a sufficient number of guestrooms to house the attendees. Future meeting and group demand is closely related to growth in the commercial segment. Because most meetings have either a direct or an indirect business purpose, the economic considerations that have an impact on commercial travel also affect meeting and group demand. The exception is non-commercial meetings, which are tied to the economic factors that influence leisure travel. It should be noted that meetings and group demand is booked in advance, and thus growth in this segment tends to lag slightly behind increases in commercial demand. Most of the meeting and group demand in the subject property's area is generated by associations. Alexandria is the nation's fourth-largest center for trade and professional associations, outranked only by Washington, HVS International, Mineola, New York Lodging Market Supply and Demand 58 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= New York, and Chicago. The city is home to nearly 300 national trade and professional associations, more than the State of Maryland and more than all of the other communities in Virginia combined. Nearby Washington, DC houses the headquarters of more than 2,000 trade and professional associations. There are also numerous labor organizations, institutions, and non-profit foundations operating in the market area, and all of them hold meetings, seminars, and receptions on a regular basis. Many have employee or social clubs that often book repeat business at hotels that have hosted one of their meetings. The Washington, DC Convention Center plays a major role in attracting group business to the area; however, the center's relatively small size has discouraged a considerable amount of association and convention business. We also note that the significant number of hotels available in the District of Columbia limits the influence of the convention center on the subject property's market. Hotels in downtown Washington tend to fill first during citywide conventions, and outlying properties such as the Ramada receive only a limited amount of overflow. It should be noted that activities related to the elections and inaugurals in 1997 should result in a short-term increase in meeting and group business. Tour and travel business is an important component of the meeting and group demand accommodated by the subject property. Elementary and high school groups such as American Student Travel and Lakeland Tours consistently contribute a significant portion of the subject property's overall demand. Management representatives indicate that a major effort is underway to reposition the property toward the government segment at the expense of tour and travel demand (and, to a lesser extent, airline demand); traditionally, the Ramada has lagged the market in terms of the amount of high-rated government demand it captures and led the market in the low-rated tour and travel segment. This has placed downward pressure on the hotel's overall average rate. Based on the economic and demographic data summarized earlier in this report, we estimate that meeting and group demand in the subject property's market will increase by 1.0% in 1997 and by 0.5% annually thereafter. Leisure Segment The leisure market segment consists of individuals and families who are spending time in the area or passing through en route to other destinations. Their travel purposes may include sightseeing, recreation, visiting friends and relatives, or numerous other non-business activities. Leisure demand is strongest Friday and Saturday nights and all week during holiday periods HVS International, Mineola, New York Lodging Market Supply and Demand 59 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= and the summer months. These peak periods are negatively correlated with commercial visitation, underscoring the stabilizing effect of capturing weekend and summer tourist travel. The typical length of stay ranges from one to four days, depending on the destination and travel purpose, and the rate of double occupancy generally ranges from 1.8 to 2.5 people per room. Leisure travelers tend to be the most price-sensitive segment of the lodging market, because their trips are funded by discretionary income. They often prefer low-rise accommodations where parking is convenient to the rooms, and they typically demand extensive recreational facilities and amenities. Ease of highway access and proximity to tourist attractions are important locational considerations. In the subject property's area, leisure demand is generated by the multitude of museums, monuments, historical sites, government offices, cultural activities, and educational institutions greater Washington metropolitan area. This demand may consist of individuals, families, tour groups, or international travelers who stay overnight while on vacation, traveling through, or visiting friends and relatives. Because of the nature of this travel, leisure demand is strongest during the summer and on spring and fall weekends. We believe that the subject property's proximity to the nation's capital and historic Old Town Alexandria will continue to ensure a base level of leisure-oriented visitation. Future leisure demand is related to the overall economic health of the nation. Trends showing changes in state and regional unemployment and disposable personal income often have a strong impact on non-commercial visitation. Traffic counts on nearby highways and attendance at local attractions can also form a basis for projections. We forecast leisure demand to increase by 1.0% in 1997 and by 0.5% annually throughout the remainder of the projection period. Government By virtue of its proximity to the Pentagon and several government-occupied office buildings, there is a significant amount of government demand in the subject property's immediate market. Contractors visiting the Pentagon represent a significant portion of these travelers. The government market segment shows little seasonality (except during election years) and it is similar to the commercial segment in terms of average length of stay and double occupancy. Government demand provides a consistent level of demand even during economic downturns, and is most prevalent in state capitals or near firms and businesses that do a substantial amount of HVS International, Mineola, New York Lodging Market Supply and Demand 60 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= government contract work. As noted earlier, the subject property's management representatives are working to increase the amount of government demand accommodated by the Ramada, thus displacing tour and travel business and some airline patronage. Based on the economic and demographic data summarized earlier, we estimate that government-oriented hotel demand in the subject property's market rose at rates of 3% to 5% per year during the 1980s. With the recent slowdown in federal government growth, there has also been a reduction in government hotel demand. Because the year following a presidential election tends to be strong, we project government demand to increase by 1.0% in 1997 and 0.5% annually in subsequent years. Growth Rates The purpose of segmenting the lodging market is to define each major type of demand, identify customer characteristics, and estimate future growth trends. Starting with an analysis of the local area, four segments were defined as representing the subject property's lodging market. Various types of economic and demographic data were then evaluated to determine their propensity to reflect changes in hotel demand. Based on this procedure, we forecast the following average annual compounded market segment growth rates. ================================================================================ Table 6-3 Average Annual Compounded Market Segment Growth Rates - -------------------------------------------------------------------------------- 1997 Thereafter - ----------------------------------------------------------------- Commercial 1.0% 0.5% Meeting and Group 1.0 0.5 Leisure 1.0 0.5 Government 1.0 0.5 Overall Annual Growth 1.0% 0.5% - -------------------------------------------------------------------------------- These growth rates will be used in subsequent sections of this study to forecast changes in lodging demand. COMPETITION An integral component of the supply and demand relationship that has a direct impact on the availability of lodging demand is the current and anticipated supply of competitive lodging facilities. Numerous hotels and motels are situated throughout the greater Washington, DC metropolitan area. The subject property is located in the Alexandria/Arlington market (which includes the hotels surrounding National Airport), which is situated HVS International, Mineola, New York Lodging Market Supply and Demand 61 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= roughly three to six miles south of Washington, DC. Other concentrations of lodging facilities are located in downtown Washington, near Dulles International Airport, and in Tysons Corner, Virginia (northwest of the Ramada). We have identified six properties that are considered primarily competitive with the Ramada Plaza Pentagon. Including the subject property, these primary competitors total 1,634 rooms. Four additional lodging facilities are judged to be only secondarily competitive; although the facilities, rate structures, or market orientations of these hotels prevent their inclusion among the primarily competitive supply, they do compete with the subject property to some extent. The room count of each secondary competitor has been weighted to reflect the degree to which it competes with the Ramada Plaza Pentagon; the aggregate weighted room count of the secondary competitors is 642. Primary Competitors The following table summarizes the important operating characteristics of the primary competitors and the aggregate secondary competitors. This information was compiled from personal interviews, inspections, lodging directories, and our in-house library of operating data. The table also sets forth each property's penetration factors; penetration is the ratio between a specific hotel's operating results and the corresponding data for the market. If the penetration factor is greater than 100%, the property is performing better than the market as a whole; conversely, if the penetration is less than 100%, the hotel is performing at a level below the marketwide average. HVS International, Mineola, New York Lodging Market Supply and Demand 62 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-4 Primary Competitors and Aggregate Secondary Competitors - --------------------------------------------------------------------------------
Square Footage Estimated 1996 ---------------------- Market Segmentation Meeting ------------------------- Year No. of Meeting Space Mtg. & Property/Location Opened Rooms Space per Room Comm. Group Leisure Govt. - --------------------------------------------------------------------------------------------------------------------- Ramada Plaza Pentagon 4641 Kenmore Ave. 1975 193 6,344 33 28 % 55 % 11 % 6 % Holiday Inn - Eisenhower 2460 Eisenhower Ave. 1970 201 3,300 16 15 40 25 20 Best Western Arlington Inn & Tower 2480 S. Glebe Rd. 1967 326 5,200 16 5 35 35 25 Hampton Inn 4800 Leesburg Pike 1987 130 350 3 15 5 45 35 Ramada Plaza Old Town 901 N. Fairfax St. 1974 258 10,250 40 5 40 20 35 Days Inn - Crystal City 2000 Jefferson Davis Hwy. 1965 247 5,800 23 15 20 35 30 Howard Johnson - National Airport 2650 Jefferson Davis Hwy. 1973 279 5,700 20 10 20 35 35 - --------------------------------------------------------------------------------------------------------------------- Sub-Totals and Averages 1,634 5,278 22 12 % 31 % 30 % 27 % Secondary Competitors 14 25 25 36 - --------------------------------------------------------------------------------------------------------------------- Totals and Averages 13 % 29 % 28 % 30 % - --------------------------------------------------------------------------------------------------------------------- Estimated 1995 Estimated 1996 --------------------------- -------------------------------------------------------------- Average Average Occupancy Yield Property/Location Occ. Rate RevPAR Occ. Rate RevPAR Penetration Penetration - ----------------------------------------------------------------------------------------------------------------------------------- Ramada Plaza Pentagon 4641 Kenmore Ave. 59.3 % $61.29 $36.34 60.0 % $66.00 $39.60 90.5 % 76.5 % Holiday Inn - Eisenhower 2460 Eisenhower Ave. 78.0 72.00 56.16 76.0 69.00 52.44 114.6 101.2 Best Western Arlington Inn & Tower 2480 S. Glebe Rd. 58.0 58.00 33.64 58.0 57.00 33.06 87.5 63.8 Hampton Inn 4800 Leesburg Pike 81.0 79.00 63.99 79.0 80.00 63.20 119.2 122.0 Ramada Plaza Old Town 901 N. Fairfax St. 68.0 86.00 58.48 65.0 88.00 57.20 98.1 110.4 Days Inn - Crystal City 2000 Jefferson Davis Hwy. 67.0 80.00 53.60 69.0 83.00 57.27 104.1 110.6 Howard Johnson - National Airport 2650 Jefferson Davis Hwy. 70.0 65.00 45.50 65.0 72.00 46.80 98.1 90.4 - ----------------------------------------------------------------------------------------------------------------------------------- 67.4 % $71.34 $48.11 66.1 % $73.29 $48.43 99.7 % 93.5 % 69.0 86.71 59.83 67.0 90.35 60.53 101.1 116.9 - ----------------------------------------------------------------------------------------------------------------------------------- 68.0 % $75.77 $51.52 66.3 % $78.14 $51.80 100.0 % 100.0 % - -----------------------------------------------------------------------------------------------------------------------------------
[GRAPHIC OMITTED] COMPETITION MAP HVS International, Mineola, New York Lodging Market Supply and Demand 63 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Our survey of the primary competitive hotels shows a representation of nationally recognized, franchised lodging chains controlling 1,634 rooms in the area. The size of these properties ranges from 130 to 326 rooms, and their average age is roughly 23 years. We estimate the year-end 1996 market segmentation of the primary competitors at 31% meeting and group, 30% leisure, 27% government, and 12% commercial. We estimate the year-end 1996 occupancy and average rate of the primary competitors at 66.1% and $73.29, yielding RevPAR of $48.43. The Hampton Inn maintains the highest occupancy in the market (at 79.0%), followed by the Holiday Inn - Eisenhower (at 76.0%). The 1996 occupancies of the Ramada Plaza Old Town, the Days Inn - Crystal City, and the Howard Johnson - National Airport are estimated at 65%, 69%, and 65%, respectively, while the subject property and the Best Western maintain levels of 60% and below. The Ramada Plaza Old Town and the Days Inn achieve the highest rates (estimated at $88 and $83, respectively, as of year-end 1996), while the subject property's estimated rate of $66 is the second-lowest (surpassing only that of the Best Western). The Ramada Plaza Pentagon's estimated year-end 1996 RevPAR of $39.65 is well below the average of $48.43 set by the primary competitors. Each primary competitor was inspected and evaluated, and descriptions of our findings are presented below. Holiday Inn - Eisenhower The 201-room Holiday Inn - Eisenhower is located southeast of the subject property and just south of downtown Alexandria, adjacent to the Eisenhower Avenue Metro stop. This hotel, which opened in 1970, features the Eisenhower Station Restaurant, which offers American cuisine for breakfast, lunch, and dinner. The Eisenhower Station Lounge offers a lighter menu and nightly entertainment. The Holiday Inn is owned and operated by Hoffman Enterprises, which is based in Alexandria. Meeting space consists of one 3,300-square-foot room that can seat 250 people; this facility can be divided into smaller sections. An extensive renovation of the entire hotel was completed in 1992; according to management representatives, this upgrading was needed to allow the Holiday Inn to remain competitive in the market. At present, the hotel is undergoing a cosmetic refurbishment. Amenities available at this property include complimentary in-room coffee and non-smoking rooms; units are equipped with an iron, a hair dryer, and a remote-control color television with cable. Recreational facilities consist of HVS International, Mineola, New York Lodging Market Supply and Demand 64 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= an indoor swimming pool and an exercise room. Complimentary shuttle service is provided to and from Washington National Airport and Old Town Alexandria, and all parking is free. Given its relatively proximate location and similarity in terms of physical facilities, we believe that the Holiday Inn - Eisenhower will continue to compete with the Ramada Plaza. Best Western Arlington Inn & Tower The 326-room Best Western Arlington Inn & Tower is situated roughly one and three-quarter miles northeast of the subject property, at the intersection of I-395 and Glebe Road. This location is roughly two miles south of the Pentagon. Guestrooms are housed in a two-story structure (205 units) and in a seven-story tower that was added ten year ago (121 units). The Best Western, which opened in 1967, is operated by Bernstein Companies and is privately owned. Although the Best Western's public space and guestrooms are in need of renovation, there were only tentative refurbishment plans at the time of our fieldwork. The hotel's poor condition of the property explains its poor occupancy and average rate performance in comparison to that of its primary competitors. Food and beverage service is provided by a restaurant and lounge that serves a variety of American fare for breakfast, lunch, and dinner. Meeting space at the Best Western totals approximately 5,200 square feet, which is comparable to the inventory available at the subject property. The hotel offers nine conference rooms, the largest of which accommodates 200 guests. Amenities include climate-controlled guestrooms equipped with telephones, radios, and remote-control color television with cable. Additional facilities include an outdoor swimming pool, a gift shop, a game room, and an exercise room. Complimentary shuttle service is offered to and from Washington National Airport, the Metro station at the Pentagon, Crystal City, and the Pentagon City Mall. As a result of this property's poor condition, high sales staff turnover, and poor reputation, the Ramada Plaza is expected to continue to outperform the Best Western in the future, particularly given the subject property's recent renovation and ongoing efforts to reposition the hotel in the market. Hampton Inn The 103-unit Hampton Inn is located along Leesburg Pike, west of I-395 and approximately one mile north of the subject property. This limited-service hotel, which opened in April of 1987, does not offer the scope of facilities and amenities available at most of the primary competitors. In addition to HVS International, Mineola, New York Lodging Market Supply and Demand 65 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= guestrooms, facilities include one meeting room, a small lobby seating area, an exercise room, and an outdoor swimming pool; a complimentary continental breakfast is offered to all guests. At the time of our inspection, guestrooms appeared to be in good condition. The Hampton Inn is owned and operated by Brantley Enterprises, which is based in Fairfax County. A major renovation of the hotel is scheduled to commence in November of 1996, immediately following the presidential election. Guestrooms will receive new soft goods, bathrooms will be retiled, and new soft goods will be installed in the lobby seating area. There have also been discussions regarding the possibility of converting the hotel's single meeting room into a king suite with a Murphy bed. Management representatives hope that the upcoming refurbishment will help to solidify the Hampton Inn's role as the occupancy leader among the primary competitors. This property derives a majority of its occupancy from leisure travelers and the government segment, largely as a result of its favorable location near a plethora of retail outlets, restaurants, mini-malls, and the Skyline complex (which features a large health club, numerous office buildings, and one of the largest malls in the area). The Hampton Inn competes with the subject property on the basis of its location, brand name identification, and strong reservation system. We estimate the Hampton Inn's year-end 1996 occupancy and average rate at 79% and $80, yielding RevPAR of $63.20 (the highest level among the primary competitors). Ramada Plaza Old Town The Ramada Plaza Old Town is located approximately three and one-half miles east of the subject property, at the intersection of North Fairfax Street and Canal Center Plaza. The 12-story property was constructed in 1974 and is privately owned and operated. In addition to 258 guest units, the Ramada Plaza Old Town offers a restaurant, a lounge, a gift shop, a rooftop swimming pool, and roundly 10,250 square feet of meeting space, including an executive boardroom. Some guestrooms also provide attractive river views. Management representatives report that a significant renovation of virtually all areas of the hotel was completed in 1994; our inspection revealed that the public areas and guestrooms were in moderately good condition. Although the Ramada Plaza Old Town caters to those leisure travelers who are primarily interested in visiting the historic sites in Old Town Alexandria (whereas the subject property tends to appeal to those destined for Washington, DC) the two hotels compete as a result of their shared chain HVS International, Mineola, New York Lodging Market Supply and Demand 66 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= affiliation and resultant competition for demand generated by the central reservation system. This hotel derives a majority of its demand from the meeting and group segment, primarily as a result of its large inventory of function space. We estimate the year-end 1996 average rate of this hotel at $88, which is the highest among the primary competitors. Days Inn - Crystal City The 247-room Days Inn is located just west of National Airport in the immediate vicinity of the Howard Johnson and the Courtyard by Marriott, approximately three and one-half miles northeast of the subject property. In addition to guestrooms, the Days Inn offers a restaurant, a lounge, a rooftop swimming pool, a gift shop, and approximately 5,800 square feet of meeting space. Generally, the Days Inn has been well maintained, and the facilities appear to be in average condition. The last major renovation occurred in 1993, and included the replacement of guestroom soft goods and a complete upgrade of all public areas. This is the oldest of the primary competitors, having opened in 1965, but because most of the hotels are older properties, we do not believe that this is a significant disadvantage. Despite its relatively distant location, the Days Inn competes with the subject property as a result of its rate structure, services, amenities, and market orientation. The property derives a majority of its room night demand from the leisure segment. The Days Inn affiliation is comparable to those of the other HFS-affiliated properties in the competitive set (the two Ramadas and the Howard Johnson) in that it is highly recognizable but it is generally not associated with first-class hotels. Nonetheless, this property's estimated year-end 1996 average rate of $83 is the second-highest among the primary competitors. Howard Johnson - National Airport The 279-room Howard Johnson is the second-largest of the primary competitors, and is owned and operated by the B.F. Saul Company. As noted earlier, Howard Johnson is a member of the HFS family, and is well recognized in the industry by virtue of its longevity. This hotel is located on Jefferson Davis Highway, approximately three and one-half miles northeast of the subject property and in close proximity to the Days Inn and the Courtyard by Marriott. In addition to guestrooms, the Howard Johnson contains a leased restaurant and approximately 5,700 square feet of meeting space. Other amenities include an executive level, hospitality suites, in-room coffeemakers, an HVS International, Mineola, New York Lodging Market Supply and Demand 67 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= exercise room, a gift shop, in-room voice mail, and an outdoor swimming pool. It should be noted that this property reportedly charges guests a daily fee for parking, which is considered a slight disadvantage because free parking is available at the other primary competitors. Despite its somewhat distant location, the Howard Johnson competes with the Ramada Plaza as a result of its rate structure, services, amenities, and market orientation. The property was in average condition at the time of our fieldwork. The last renovation took place in 1995, and involved recarpeting the public areas, upgrading the bathrooms, and the addition of several amenities. The Howard Johnson derives a majority of its occupancy from the leisure segment and government travelers. Although its 1995 average rate was the third-lowest among the primary competitors, it is estimated to have achieved an impressive rate gain of $7 in 1996 (to reach $72), thus surpassing the Holiday Inn - Eisenhower. Secondary Competitors The 495-room Radisson Plaza Hotel at Mark Center is a large, well-maintained property that features an attractive glass guestroom tower. It is located just west of the intersection of I-395 and Seminary Road. This location is only a quarter of a mile west of the subject property, making the Radisson the competitor that is geographically closest to the subject property. By virtue of its extensive function space, this hotel derives a majority of its demand from the meeting and group segment, although it also accommodates a significant percentage of government travelers. We consider the Radisson Plaza to be 50% competitive with the subject property. The Doubletree - National Airport is located approximately six miles northeast of the subject property and just south of the Pentagon. This 632-room, full-service property, which opened in 1971, is the largest in the competitive market. We estimate that the Doubletree will continue to compete with the subject property for government and leisure demand, particularly as Ramada Plaza is repositioned to accommodate more government travelers. Facilities include 250 suites, two restaurants, a lobby bar, a revolving rooftop lounge, 17 meeting rooms capable of seating groups of up to 600 people, and a full health club with a weight room, a racquetball court, and a heated swimming pool. The 400-room Sheraton - National, which opened in 1975, is located northeast of the subject property, directly west of the Pentagon, adjacent to the Navy Annex, and south of the Marine Corps Headquarters. These nearby government installations are the Sheraton's primary demand generators. HVS International, Mineola, New York Lodging Market Supply and Demand 68 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Public space and guestrooms are in need of renovation, but no refurbishment was planned at the time of our fieldwork. Food and beverage service is provided by two restaurants and a lounge. The Cafe Brassiere is open for breakfast, lunch, and dinner. The Stars Restaurant and Lounge, which is located on the 16th floor, is the hotel's fine dining outlet, and is open for dinner only. The Quarter Deck Lounge and Sports Bar is situated in the atrium lobby. Meeting space at the Sheraton totals approximately 19,000 square feet, and is more extensive than that available at the subject property. The Commonwealth Ballroom and 22 additional meeting and conference rooms can accommodate groups ranging from ten to 2,000 people, and the Galaxy Room offers a rooftop view of Washington, DC. Amenities include video check-out and fresh-brewed coffee in the tower rooms. A business center provides guests with administrative services. Recreational facilities consist of an enclosed rooftop swimming pool and an exercise room. Complimentary shuttle service is provided to and from Washington National Airport, the Metro station at the Pentagon, and Pentagon City Fashion Centre every 30 minutes. The 272-room Courtyard by Marriott is situated northeast of the subject property, in the southern portion of the Crystal City area. This location is near the Days Inn and the Howard Johnson, and is convenient to National Airport. The Courtyard, which opened in 1990, appears to be in very good condition and is expected to continue to achieve strong average rate penetration. Facilities include a restaurant and lounge serving breakfast, lunch, and dinner, and roughly 5,000 square feet of meeting space (which is comparable to the amount available at the Ramada Plaza). The largest function room is the 1,260-square-foot Club Room; eight additional meeting and conference rooms accommodate groups ranging from ten to 100 people. There are also two executive boardrooms with a capacity ten people each. Guest amenities include copy and fax services and dry cleaning. Recreational facilities consist of a complete fitness center, an indoor lap pool, and a whirlpool. Complimentary shuttle service is provided to and from National Airport and the Crystal City Metro stop. A recent renovation of the Courtyard included an upgrade of the voice mail system and installation of new wall vinyl and draperies in the public areas. Given its market share, average rate, and well-maintained product, we believe that the Courtyard by Marriott will continue to compete with the subject property. It should be noted that this property was sold on November HVS International, Mineola, New York Lodging Market Supply and Demand 69 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 1, 1996; the terms of this sale will be discussed in the Sales Comparison Approach section of this report. The following table summarizes the important operating characteristics of the secondary competitors. HVS International, Mineola, New York Lodging Market Supply and Demand 70 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-5 Secondary Competitors - --------------------------------------------------------------------------------
Estimated 1996 Market Segmentation Weighted ---------------------------------- Year No. of Percent No. of. Mtg. & Property Opened Rooms Competitive Rooms Comm. Group Leisure Govt. - ------------------------------------------------------------------------------------------------------------------ Radisson Plaza Hotel at Mark Center 1985 495 50 % 248 10 % 40 % 20 % 30 % Doubletree - National Airport 1971 632 25 158 10 20 40 30 Sheraton National Hotel 1975 400 25 100 10 10 15 65 Courtyard by Marriott - Crystal City 1990 272 50 136 30 15 20 35 - ------------------------------------------------------------------------------------------------------------------ Totals and Averages 1,799 642 14 % 25 % 25 % 36 % Estimated 1995 Estimated 1996 ------------------------- ------------------------- Average Average Property Occ. Rate RevPAR Occ. Rate RevPAR - --------------------------------------------------------------------------------------------- Radisson Plaza Hotel at Mark Center 69 % $85.00 $58.65 66 % $89.00 $58.74 Doubletree - National Airport 76 79.00 60.04 72 83.00 59.76 Sheraton National Hotel 62 88.00 54.56 59 90.00 53.10 Courtyard by Marriott - Crystal City 68 99.00 67.32 68 102.00 69.36 - --------------------------------------------------------------------------------------------- 69 % $86.71 $59.83 67 % $90.35 $60.53 - ---------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- HVS International, Mineola, New York Lodging Market Supply and Demand 71 Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Proposed Competitors It is important to consider any new hotels that may have an impact on the subject property's operating performance. Based on our fieldwork in the area and our discussions with local hotel operators, developers, and government officials, we have identified no properties that are proposed or under development in market that are likely to compete with the Ramada Plaza Pentagon. Although we anticipate no further additions to the competitive supply, two properties opened recently and warrant some discussion. A 105-room Homewood Suites opened in April of 1996 adjacent to the Hampton Inn. Like the Hampton Inn, it is owned and operated by Brantley Enterprises. Because this property's facilities are materially different from those of the subject property, it is not considered competitive at this time. A 300-unit Residence Inn opened north of the Ramada Plaza in May of 1996; although this location is relatively close to the Pentagon, the Residence Inn is less convenient than many of the competitors with respect to a majority of the offices in Crystal City. We note that this hotel differs from typical Residence Inns as a result of its high-rise design and the availability of meeting space and a restaurant. Given its extended-stay market orientation, strong Marriott chain affiliation, and far higher rate structure, the Residence Inn does not pose a significant degree of competition to the subject property. CONCLUSION The competitive environment encompassing the subject property appears to be somewhat stagnant, but because there are fewer limited-service hotels proposed for construction here than in many similar parts of the country, some moderate growth in occupancy and average rate should be possible. We estimate the year-end 1996 occupancy of the primary competitors at 66.1%; the higher-quality hotels that comprise the secondary competitors achieve a higher occupancy (estimated at 67% in 1996) and far higher average rates. Based on the structure of the marketplace, we believe that the subject property should be able to maintain its competitive position by virtue of the recent renovation. The lack of additional supply entering the market will probably allow occupancy to remain stable in the short term, but we note that no significant new demand generators are planned for development that would serve to increase the marketwide occupancy during the next few years. HVS International, Mineola, New York Projection of Occupancy and 72 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 7. Projection of Occupancy and Average Rate Historical Operating Performance The following table sets forth the subject property's historical occupancy, average rate, and RevPAR. For the purpose of comparison, we have also presented corresponding data (as provided by Smith Travel Research) for the competitive hotels described in the previous section. In addition to the annual percent change calculations, we have determined the subject property's occupancy, average rate, and RevPAR penetration factors. HVS International, Mineola, New York Projection of Occupancy and 73 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-1 Historical Trends - -------------------------------------------------------------------------------- Year to Date* ------------------------- 1994 1995 1995 1996 - -------------------------------------------------------------------------------- Subject Property Occupancy 13.8% 59.3% 57.3% 58.9% Percent Change ---% 329.6% --- 2.8% Occupancy Penetration 20.0% 86.3% 79.8% 85.8% Average Rate $58.68 $61.29 $61.63 $64.90 Percent Change --- 4.5% --- 5.3% Average Rate Penetration 76.1% 76.8% 77.4% 79.0% RevPAR $8.10 $36.35 $35.31 $38.23 Percent Change ---% 348.8% --- 8.2% RevPAR Penetration 15.2% 66.3% 61.7% 67.8% Areawide (STR) Occupancy 69.1% 68.7% 71.8% 68.6% Percent Change 2.5% (0.6)% --- (4.5)% Average Rate $77.13 $79.76 $79.64 $82.14 Percent Change 4.0% 3.4% --- 3.1% RevPAR $53.30 $54.81 $57.20 $56.36 Percent Change 6.7% 2.8% --- (1.5)% Note: Year-to-date statistics are through August for the subject property and through September for the STR data - -------------------------------------------------------------------------------- It should be noted that the 1994 operating statistics for the subject property reflect only the last three months of the year, when Remington began to manage the hotel. Year-to-date August figures show that the Ramada's occupancy (and occupancy penetration) rose from 1995 to 1996, and although the hotel continues to underperform the market, the subject property's year-to-date occupancy gain of 2.8% compares favorably with the 4.5% decline registered by the market as a whole. Similar trends are apparent with regard to average rate; although the Ramada's year-to-date 1996 average rate is far below the overall competitive average, its 5.3% increase was also higher than the 3.1% registered by the market as a whole, leading to a higher penetration rate. As a result of the occupancy and rate gains, the HVS International, Mineola, New York Projection of Occupancy and 74 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ subject property's RevPAR rose by 8.2% on a year-to-date basis, while the market showed a 1.5% decline from 1995 to 1996. Although the Ramada's year-to-date 1996 RevPAR penetration of 67.8% is far below its fair share, it is still an improvement over the 61.7% level achieved in year-to-date 1995. A hotel's occupancy should also be evaluated on a monthly basis to identify seasonality trends. The following table sets forth the subject property's monthly occupancy from October, 1994 through 1996; we note that the figures for the last four months of 1996 represent estimates. ================================================================================ Table 7-2 Subject Property's Monthly Occupancy History - -------------------------------------------------------------------------------- 1994 1995 1996 -------------- ----------------------- -------------------------- Percent Percent Occupancy Occupancy Change Occupancy Change - -------------------------------------------------------------------------------- January --- 34.5 % --- 30.0 % (13.0) % February --- 20.8 --- 34.5 65.9 March --- 63.3 --- 66.0 4.3 April --- 72.6 --- 79.4 9.4 May --- 74.2 --- 71.8 (3.2) June --- 67.1 --- 71.5 6.6 July --- 56.6 --- 53.8 (4.9) August --- 66.5 --- 63.8 (4.1) September --- 74.5 --- 65.3 (12.3) October 77.5 % 66.1 (14.7) % 74.0 12.0 November 54.4 65.8 21.0 59.0 (10.3) December 32.4 47.4 46.3 48.0 1.3 - -------------------------------------------------------------------------------- Annual 13.8 % 59.3 % 329.6 % 59.9 % 0.9 % Note: The final four months of 1996 are estimated figures - -------------------------------------------------------------------------------- As illustrated above, the subject property's occupancy peaks in the spring and fall, which is the prime demand period for tour and travel groups. Lower occupancies are recorded during the less temperate summer and winter periods. Premise of the Projections To a certain degree, occupancy and rate attainment can be manipulated by management. For example, hotel operators may choose to lower rates in an effort to maximize occupancy. Our forecasts reflect an operating strategy HVS International, Mineola, New York Projection of Occupancy and 75 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= that we believe would be implemented by a competent hotel management team to achieve an optimal mix of occupancy and average rate. Projected Room Night Demand Lodging demand and occupancy can be projected through a process known as room night analysis. A room night is a unit of hotel demand that equals one room that is occupied for one night. After estimating the number of room nights a hotel can be expected to attract during a 12-month period, we can determine occupancy by dividing the number of room nights of demand captured by the number of room nights available (calculated as the room count x 365). The total annual number of room nights occupied in the competitive hotels equates to the market's accommodated room night demand, as shown in the following table. ================================================================================ Table 7-3 Estimated 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- Marketwide Subject Property ------------------------- ------------------------------ Accommodated Percent Accommodated Percent Market Segment Demand of Total Demand of Total - -------------------------------------------------------------------------------- Commercial 71,000 13 % 12,000 28 % Meeting and Group 161,000 29 23,000 53 Leisure 155,000 28 5,000 12 Government 163,000 30 3,000 7 - -------------------------------------------------------------------------------- Total 551,000 100 % 43,000 100 % - -------------------------------------------------------------------------------- Latent Demand The previous table illustrates the accommodated room night demand in the subject property's competitive market. Because this estimate is based on occupancies, it includes only those hotel rooms that were used by guests. Latent demand considers guests who could not be accommodated by the existing competitive supply, and can be divided into unaccommodated demand and induced demand. We have not identified any significant amount of latent demand in the subject property's market. Total Usable Room Night Demand Total usable room night demand is estimated by combining accommodated demand and usable latent demand; because there no latent demand in the subject property's market, the room night demand is projected by applying the growth rates determined earlier to the historical accommodated demand. Because 1997 is the first year following a presidential election, overall demand growth is anticipated at 1.0%; in subsequent projection periods, increases are expected to slow to a stabilized level of 0.5% annually. The HVS International, Mineola, New York Projection of Occupancy and 76 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= following table shows the projected annual change in accommodated room night demand in the subject property's competitive market. ================================================================================ Table 7-4 Total Room Night Demand - -------------------------------------------------------------------------------- Historical 1997 1998 1999 2000 - -------------------------------------------------------------------------------- Commercial Growth Rate --- 1.0% 0.5% 0.5% 0.5% Accommodated Demand 70,679 71,386 71,743 72,102 72,463 Meeting and Group Growth Rate --- 1.0% 0.5% 0.5% 0.5% Accommodated Demand 161,118 162,729 163,543 164,361 165,183 Leisure Growth Rate --- 1.0% 0.5% 0.5% 0.5% Accommodated Demand 155,313 156,866 157,650 158,438 159,230 Government Growth Rate --- 1.0% 0.5% 0.5% 0.5% Accommodated Demand 163,474 165,109 165,935 166,765 167,599 Totals Commercial 70,679 71,386 71,743 72,102 72,463 Meeting and Group 161,118 162,729 163,543 164,361 165,183 Leisure 155,313 156,866 157,650 158,438 159,230 Government 163,474 165,109 165,935 166,765 167,599 - -------------------------------------------------------------------------------- TOTAL DEMAND 550,584 556,090 558,871 561,666 564,475 Overall Annual Growth --- 1.0% 0.5% 0.5% 0.5% - -------------------------------------------------------------------------------- Guestroom Supply In 1996, the competitive properties provided a weighted total of 2,276 guestrooms. No changes to supply are anticipated, because marketwide occupancies are low enough and land prices are high enough to create a substantial barrier to entry. The following table shows the projected competitive supply of available rooms and available room nights. To calculate the annual number of available room nights, the number of available rooms is multiplied by 365. HVS International, Mineola, New York Projection of Occupancy and 77 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-5 Available Rooms and Room Nights - -------------------------------------------------------------------------------- Total Room Night Room Nights Competitive Year Demand Available Occupancy - -------------------------------------------------------------------------------- Historical 550,584 830,558 66 % 1997 556,090 830,558 67 1998 558,871 830,558 67 1999 561,666 830,558 68 2000 564,475 830,558 68 - -------------------------------------------------------------------------------- Occupancy in the subject property's market is expected to increase only slightly, from 66% to 67% in 1997 and 68% in 1999. Competitive Index Analysis Competitive indexes are used to analyze the relative market position of each property on the basis of a particular demand segment. The index represents the number of times each year that one room is occupied by one type of traveler (e.g., commercial, meeting and group, leisure, or government), or the number of room nights actually accommodated per year, per room, per market segment. For example, if a hotel has a commercial competitive index of 190, each room in the property is occupied 190 times a year by a commercial traveler. The competitive index is calculated by dividing a hotel's annual accommodated room night demand in a particular market segment by that property's room count. Competitive indexes will be used to illustrate each property's position in the market based on its ability to compete with other local lodging facilities. Commercial Segment In 1996, we estimate that the commercial segment competitive indexes in the subject property's market range from 11 to 61. The Ramada Plaza Pentagon achieves the highest level, followed by the Hampton Inn (with an index of 43) and the Holiday Inn - Eisenhower (at 42). By virtue of the recent renovation, the subject property's competitive index in the commercial segment is projected to increase to 65 in 1997; no other changes are anticipated in the market. The following table shows the projected commercial segment competitive indexes of the area's hotels. HVS International, Mineola, New York Projection of Occupancy and 78 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-6 Commercial Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 - -------------------------------------------------------------------------------- Ramada Plaza Pentagon 61 65 65 65 65 Holiday Inn - Eisenhower 42 42 42 42 42 Best Western Arlington Inn & Tower 11 11 11 11 11 Hampton Inn 43 43 43 43 43 Ramada Plaza Old Town 12 12 12 12 12 Days Inn - Crystal City 38 38 38 38 38 Howard Johnson - National Airport 24 24 24 24 24 Secondary Competitors 35 35 35 35 35 - -------------------------------------------------------------------------------- Meeting and Group Segment Meeting and group segment competitive indexes are estimated to range from 14 to 120 in 1996. Once again, the Ramada Plaza Pentagon is the most competitive hotel; this largely reflects the _high volume of tour and travel business that the hotel accommodates. The Holiday Inn - Eisenhower and the Ramada Plaza Old Town also maintain high indexes of 111 and 95, respectively. The lowest level is registered by the Hampton Inn. As discussed earlier, management representatives indicate that attempts are being made to displace some of the subject property's tour and travel business with more lucrative government demand; consequently, we project its competitive index in this segment to decline to 100 in 1997 before reaching a stabilized level of 80 in 1998. The following table illustrates the competitive indexes in the meeting and group segment. ================================================================================ Table 7-7 Meeting and Group Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 - -------------------------------------------------------------------------------- Ramada Plaza Pentagon 120 100 80 80 80 Holiday Inn - Eisenhower 111 111 111 111 111 Best Western Arlington Inn & Tower 74 74 74 74 74 Hampton Inn 14 14 14 14 14 Ramada Plaza Old Town 95 95 95 95 95 Days Inn - Crystal City 50 50 50 50 50 Howard Johnson - National Airport 47 47 47 47 47 Secondary Competitors 61 61 61 61 61 - -------------------------------------------------------------------------------- Leisure Segment We estimate that the Hampton Inn achieves the highest leisure segment competitive index in the market, at 130 in 1996, followed by the Days Inn - Crystal City (at 88) and the Howard Johnson - National Airport (at 83). The HVS International, Mineola, New York Projection of Occupancy and 79 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= subject property maintains the lowest index in this segment, estimated at 24 in 1996. As a result of the recent renovation, we expect the leisure segment competitive index of the Ramada Plaza Pentagon to increase to 30 in 1997 and a stabilized level of 35 in 1998. The following table outlines the historical and projected competitive indexes in the leisure segment. ================================================================================ Table 7-8 Leisure Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 - -------------------------------------------------------------------------------- Ramada Plaza Pentagon 24 30 35 35 35 Holiday Inn - Eisenhower 69 69 69 69 69 Best Western Arlington Inn & Tower 74 74 74 74 74 Hampton Inn 130 130 130 130 130 Ramada Plaza Old Town 47 47 47 47 47 Days Inn - Crystal City 88 88 88 88 88 Howard Johnson - National Airport 83 83 83 83 83 Secondary Competitors 60 60 60 60 60 - -------------------------------------------------------------------------------- Government Segment The estimated year-end 1996 government segment competitive indexes in the subject property's market range from 13 to 101. The Hampton Inn achieves the highest level, followed by the secondary competitors, the Howard Johnson National Airport, and the Ramada Plaza Old Town (with indexes of 88, 83, and 83, respectively). As the subject property begins to reposition itself as more of a government house (by displacing tour and travel business and, to a lesser extent, airline contract demand), its competitive index is projected to increase significantly, from 13 in 1996 to 30 in 1997 and 50 in subsequent years. ================================================================================ Table 7-9 Government Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 - -------------------------------------------------------------------------------- Ramada Plaza Pentagon 13 30 50 50 50 Holiday Inn - Eisenhower 55 55 55 55 55 Best Western Arlington Inn & Tower 53 53 53 53 53 Hampton Inn 101 101 101 101 101 Ramada Plaza Old Town 83 83 83 83 83 Days Inn - Crystal City 76 76 76 76 76 Howard Johnson - National Airport 83 83 83 83 83 Secondary Competitors 88 88 88 88 88 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Projection of Occupancy and 80 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Subject Property's Room Night Capture and Occupancy After the competitive index is calculated, it is adjusted to reflect the property's room count, yielding a figure referred to as the market share adjuster. The market share adjuster of each property is then divided by the total market share adjuster for all of the competitors, resulting in each hotel's market share. By multiplying the projected market share by the area's usable room night demand, we can determine the total number of room nights captured by a specific hotel. Occupancy is then calculated by dividing the projected number of room nights captured by the property's total number of available room nights. Multiplying the subject property's projected market share by the estimated room night demand in each segment results in the following estimate of room nights captured by the hotel. ================================================================================ Table 7-10 Room Nights Captured by the Subject Property - -------------------------------------------------------------------------------- 1997 1998 1999 2000 - ---------------------------------------------------------------------- Commercial Demand 71,386 71,743 72,102 72,463 Market Share 0.1747 0.1747 0.1747 0.1747 - ---------------------------------------------------------------------- Capture 12,474 12,536 12,599 12,662 Meeting and Group Demand 162,729 163,543 164,361 165,183 Market Share 0.1232 0.1010 0.1010 0.1010 - ---------------------------------------------------------------------- Capture 20,048 16,526 16,608 16,691 Leisure Demand 156,866 157,650 158,438 159,230 Market Share 0.0371 0.0430 0.0430 0.0430 - ---------------------------------------------------------------------- Capture 5,815 6,776 6,810 6,844 Government Demand 165,109 165,935 166,765 167,599 Market Share 0.0347 0.0565 0.0565 0.0565 - ---------------------------------------------------------------------- Capture 5,723 9,369 9,416 9,463 Total Capture 44,060 45,207 45,433 45,660 - -------------------------------------------------------------------------------- Dividing the total number of room nights captured by the subject property's number of available room nights per year (calculated as 193 x 365) produces the projected occupancy percentage. HVS International, Mineola, New York Projection of Occupancy and 81 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-11 Calculation of the Subject Property's Projected Occupancy - -------------------------------------------------------------------------------- 1997 1998 1999 2000 - ---------------------------------------------------------------------- Room Nights Captured 44,060 45,207 45,433 45,660 Available Room Nights 70,445 70,445 70,445 70,445 Occupancy 62.55 % 64.17 % 64.49 % 64.82 % Rounded 63 % 64 % 64 % 65 % - -------------------------------------------------------------------------------- For the purpose of forecasting income and expense, we will use the following occupancy levels. ================================================================================ Table 7-12 Occupancy Forecast - -------------------------------------------------------------------------------- Year Occupancy - --------------------------------------------- 1997 63 % Stabilized 64 - -------------------------------------------------------------------------------- Although the preceding room night analysis shows the subject property achieving a 65% occupancy in the year 2000, we have chosen to use a stabilized level of 64%. The stabilized occupancy is intended to reflect the anticipated results of the property over its remaining economic life, given any and all changes in the life cycle of the hotel. Thus, the stabilized occupancy excludes from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusually high or low occupancies. Although the subject property may operate at occupancies above this stabilized level, we believe it equally possible for new competition and temporary economic downturns to force the occupancy below this selected point of stability. AVERAGE RATE ANALYSIS One of the most important considerations in estimating the value of a lodging facility is a supportable forecast of its attainable average rate, which is more formally defined as the average rate per occupied room. Average rate can be calculated by dividing the total rooms revenue achieved during a specified period by the number of rooms sold during the same period. The projected average rate and the anticipated occupancy percentage are used to forecast rooms revenue, which in turn provides the basis for estimating most other income and expense categories. HVS International, Mineola, New York Projection of Occupancy and 82 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Average Rate by Month The following table shows the subject property's monthly occupancy and average rate from October 1994 through 1996. ================================================================================ Table 7-13 Subject Property's Occupancy and Average Rate by Month - --------------------------------------------------------------------------------
1994 1995 1996 --------------------- --------------------------------------- --------------------------------------- Average Percent Average Percent Percent Average Percent Occupancy Rate Occupancy Change Rate Change Occupancy Change Rate Change - ----------------------------------------------------------------------------------------------------------------------- January --- --- 34.5% --- $46.38 --- 30.0% (13.0)% $54.69 17.9% February --- --- 20.8 --- 57.41 --- 34.5 65.9 62.10 8.2 March --- --- 63.3 --- 61.08 --- 66.0 4.3 66.07 8.2 April --- --- 72.6 --- 64.42 --- 79.4 9.4 67.58 4.9 May --- --- 74.2 --- 70.38 --- 71.8 (3.2) 71.79 2.0 June --- --- 67.1 --- 64.22 --- 71.5 6.6 73.05 13.7 July --- --- 56.6 --- 62.88 --- 53.8 (4.9) 59.81 (4.9) August --- --- 66.5 --- 54.93 --- 63.8 (4.1) 54.39 (1.0) September --- --- 74.5 --- 61.41 --- 65.3 (12.3) 62.52 1.8 October 77.5% $62.03 66.1 (14.7)% 64.78 4.4% 74.0 12.0 74.00 14.2 November 54.4 57.27 65.8 21.0 59.68 4.2 59.0 (10.3) 69.00 15.6 December 32.4 52.95 47.4 46.3 55.25 4.3 48.0 1.3 68.00 23.1 - ---------------------------------------------------------------------------------------------------------------------- Weighted Average 13.8% $58.68 59.3% 329.6% $61.29 4.5% 59.9% 0.9% 66.19 8.0% - --------------------------------------------------------------------------------
The previous table underscores the correlation between a hotel's occupancy and its average rate: as occupancy increases, rates tend to follow. On a monthly basis, the Ramada Plaza Pentagon achieves its highest average rate during the spring and fall months. However, because of the recent renovation, average rates are expected to increase during the last few months of 1996. Higher average rates can also be expected in the near future, as the subject property is repositioned in the market and begins to accommodate more government demand and less tour and travel and airline business. Market Segmentation Method The subject property's average rate will be projected using a market segmentation method. The advantage of this technique is its ability to reflect anticipated changes in the subject property's market mix and their impact on average rate. This approach begins with an analysis of the room rates commanded by local hotels in each market segment. Using this information, we can forecast the subject property's rate on a segment-by-segment basis. The projected rate in each segment is then multiplied by the number of room nights the hotel is expected to capture in that segment (as determined earlier in this analysis). These amounts are totaled, yielding the HVS International, Mineola, New York Projection of Occupancy and 83 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= overall rooms revenue. Average rate is then calculated by dividing the property's total rooms revenue by the estimated number of occupied rooms. Although the average rate analysis presented here follows the occupancy projections, these two statistics are highly correlated; in reality, one can not project occupancy without making specific assumptions regarding average rate. This relationship is best illustrated by RevPAR, which reflects a property's ability to maximize rooms revenue. The following table summarizes the 1996 average rate and RevPAR of the subject property and its primary competitors. ================================================================================ Table 7-14 Estimated 1996 Average Rate and RevPAR of the Primary Competitors - -------------------------------------------------------------------------------- Property Average Rate RevPAR - ------------------------------------------------------------------- Ramada Plaza Pentagon $66.00 $39.60 Holiday Inn - Eisenhower 69.00 52.44 Best Western Arlington Inn & Tower 57.00 33.06 Hampton Inn 80.00 63.20 Ramada Plaza Old Town 88.00 57.20 Days Inn - Crystal City 83.00 57.27 Howard Johnson - National Airport 72.00 46.80 - ------------------------------------------------------------------- Average $73.29 $48.43 - -------------------------------------------------------------------------------- The subject property's average rate and RevPAR are among the lowest achieved by the primary competitors, largely as a result of the type of business currently accommodated by the hotel. The significant amount of tour and travel patronage (and, to a lesser extent, airline demand) at the Ramada Plaza has served to limit the property's rate potential. As management begins to reposition the hotel by replacing some tour and travel patronage with government business, average rate (and RevPAR) should increase. Average Rate Increases It is important to note that hotel room rate increases do not necessarily conform to the underlying monetary inflation rate, because lodging facilities are influenced by market conditions such as the relationship between supply and demand. A hotel's ability to raise room rates is affected by a number of factors, including the following. o Supply and Demand Relationships - The relationship between supply and demand is one of the factors that determine hotel occupancies and average rates. Strong markets where lodging demand is increasing HVS International, Mineola, New York Projection of Occupancy and 84 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= faster than supply are often characterized by rate growth that exceeds inflation. Markets that are overbuilt or suffering from declining demand are unlikely to exhibit any significant increases in average rates. o Inflationary Pressures - Price increases caused by inflation affect hotel room rates by eroding profit margins and encouraging operators to raise prices. This strategy is effective only in markets that are characterized by a healthy supply and demand relationship. o Improving the Competitive Standard - When a new lodging facility enters a mature market, its rates may be set higher than the marketwide average in an effort to justify the development costs. This may allow other competitors to achieve corresponding gains by effectively raising the amount the market will bear. However, if the addition to supply has a severe impact on the occupancy levels of other hotels, price competition may ensue. o Property-Specific Improvements - Changes that make a hotel more or less attractive to guests can have an impact on average rate. An expansion, renovation, upgrading, or the introduction of additional facilities and amenities may enable greater-than-inflationary room rate increases. Likewise, deferred maintenance may make a property less competitive, engendering a decline in room rates. In determining average rate projections, changes that occur prior to occupancy stabilization are generally attributable to factors that are specific to the property and the market. After a hotel achieves a stabilized occupancy, room rates are generally expected to continue to increase at the underlying inflation rate throughout the remainder of the projection period. Average Rates by Market Segment Average rate can be projected by considering anticipated changes in the subject property's demand mix and the rates that can be commanded in each market segment. To project average rate, we have applied growth factors to the hotel's 1996 rates in each market segment. The following table outlines these growth factors. HVS International, Mineola, New York Projection of Occupancy and 85 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-15 1996 Average Rate by Market Segment and Assumed Growth Factors - -------------------------------------------------------------------------------- Projected Growth Rate ------------------------------------------ 1996 Market Segment Average Rate 1997 1998 1999 2000 - -------------------------------------------------------------------------------- Commercial $76.50 0.0% 0.5% 3.5% 3.5% Meeting and Group 58.45 0.0 0.5 3.5 3.5 Leisure 63.30 0.0 0.5 3.5 3.5 Government 101.20 0.0 0.5 3.5 3.5 - -------------------------------------------------------------------------------- Based on interviews with the subject property's management representatives and an analysis of economic and demographic data pertaining to the market, we projected no rate gains in any segment in 1997, followed by increases of 0.5% in 1998 and 3.5% annually throughout the projection period. This stabilized growth mirrors the assumed underlying inflation rate. To arrive at projections, the growth factors are applied to the subject property's historical average rate in each market segment, as illustrated by the following table. HVS International, Mineola, New York Projection of Occupancy and 86 Average Rate - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-16 Forecast of Average Rate by Market Segment - --------------------------------------------------------------------------------
Meeting Weighted Percent Commercial & Group Leisure Government Total Average Rate Change - ----------------------------------------------------------------------------------------------------------- Historical Demand 11,835 23,247 4,649 2,536 42,267 Segment Rate $76.50 $58.45 $63.30 $101.20 Revenue $905,406 $1,358,782 $294,298 $256,645 $2,815,130 $66.60 --- 1997 Demand 12,474 20,048 5,815 5,723 44,060 Segment Rate $76.50 $58.45 $63.30 $101.20 Revenue $954,310 $1,171,808 $368,080 $579,168 $3,073,367 $69.75 4.7% 1998 Demand 12,536 16,526 6,776 9,369 45,207 Segment Rate $76.89 $58.74 $63.61 $101.71 Revenue $963,849 $970,777 $431,055 $952,884 $3,318,564 $73.41 5.2% 1999 Demand 12,599 16,608 6,810 9,416 45,433 Segment Rate $79.58 $60.80 $65.84 $105.27 Revenue $1,002,597 $1,009,739 $448,380 $991,182 $3,451,898 $75.98 3.5% 2000 Demand 12,662 16,691 6,844 9,463 45,660 Segment Rate $82.36 $62.93 $68.15 $108.95 Revenue $1,042,876 $1,050,303 $466,391 $1,030,994 $3,590,564 $78.64 3.5%
- -------------------------------------------------------------------------------- The following table summarizes our projection of occupancy and average rate through the stabilized year. ================================================================================ Table 7-17 Forecast of Occupancy and Average Rate - -------------------------------------------------------------------------------- Year Occupancy Average Rate - ------------------------------------------------------ 1997 63 % $69.75 Stabilized 64 73.41 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Highest and Best Use 87 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 8. Highest and Best Use The concept of highest and best use recognized by the Appraisal Institute distinguishes between the highest and best use of the land (as though vacant) and that of the property (as improved). Highest and best use is defined as: The reasonably probable and legal use of vacant land or improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.(1) The concept of highest and best use is the premise upon which value is based, and is a product of competitive forces in the marketplace. The principle of balance holds that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium. This principle applies to relationships among various property components as well as the relationship between the costs of production and the property's productivity. The point of economic balance is achieved when the combination of land and building is optimal (i.e., when no marginal benefit or utility is achieved by adding another unit of capital). The law of increasing returns holds that larger amounts of the agents of production produce greater net income up to a certain point, after which the law of diminishing returns is applied.(2) It is important to recognize that the highest and best use of the land (as though vacant) may differ from the highest and best use of the property (as improved). This may occur when a site has existing improvements and the highest and best use of the land differs from the current use. Nonetheless, the current property use will continue until the value of the land under its highest and best use exceeds the value of the property in its current use, plus the cost to remove the existing improvements. (1) The Appraisal of Real Estate - Tenth Edition, Appraisal Institute, Chicago, IL, 1992, p. 45. (2) Ibid., p. 40. HVS International, Mineola, New York Highest and Best Use 88 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= In consideration of the factors influencing development in the immediate area, it is the appraisers' opinion that the highest and best use of the subject site, as vacant, would be to hold for speculative use. Based on the fact that the value of the land does not exceed the value of the hotel plus the cost of demolition, it is our further opinion that the subject property's highest and best use, as improved, is its current use as a lodging facility. HVS International, Mineola, New York Approaches to Value 89 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 9. Approaches to Value In appraising real estate for market value, the appraiser has three approaches from which to select: the income capitalization, sales comparison, and cost approaches. Although all three valuation procedures are given consideration, the inherent strengths of each approach and the nature of the subject property must be evaluated to determine which will provide supportable estimates of market value. The appraiser is then free to select one or more of the appropriate approaches in arriving at a final value estimate. The Income Capitalization Approach The income capitalization approach takes a property's projected net income before debt service and allocates this future benefit to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component is calculated. The total of the mortgage component and the equity component equals the value of the property. This approach is often selected as the preferred valuation method for income-producing properties, because it most closely reflects the investment rationale of knowledgeable buyers. The Sales Comparison Approach The sales comparison approach estimates the value of a property by comparing it to similar properties that have been sold on the open market. To obtain a supportable estimate of value, the sales price of a comparable property must be adjusted to reflect any dissimilarities between it and the property being appraised. The sales comparison approach may provide a useful value estimate in the case of simple forms of real estate, such as vacant land and single-family homes, where the properties are homogeneous and the adjustments are few and relatively simple to compute. In the case of complex investments such as shopping centers, office buildings, restaurants, and lodging facilities, where the adjustments are numerous and more difficult to quantify, the sales comparison approach loses much of its reliability. HVS International, Mineola, New York Approaches to Value 90 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Hotel investors typically do not employ the sales comparison approach in reaching their final purchase decisions. Factors such as the lack of recent sales data, the numerous insupportable adjustments that are necessary, and the general inability to determine the true financial terms and human motivations of comparable transactions often make the results of this technique questionable. Although the sales comparison approach may provide a range of values that supports the final estimate, reliance on this method beyond the establishment of broad parameters is rarely justified by the quality of the sales data. The market-derived capitalization rates sometimes used by appraisers are susceptible to the same shortcomings inherent in the sales comparison approach. To substantially reduce the reliability of the income capitalization approach by employing capitalization rates obtained from unsupported market data weakens the final value estimate and ignores the typical investment analysis procedures employed by hotel purchasers. Because appraisers are obligated to mirror the actions of the marketplace, we generally give the sales comparison approach minimal weight in the hotel appraisal process beyond bracketing the final estimate.(1) The Cost Approach The cost approach estimates market value by computing the current cost to replace the property and subtracting any depreciation resulting from physical deterioration, functional obsolescence, and external (or economic) obsolescence. The value of the land, as if vacant and available, is then added to the depreciated value of the improvements to produce a total value estimate. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements grow older and begin to deteriorate, the resultant loss in value becomes increasingly difficult to quantify accurately. We find that knowledgeable hotel buyers base their purchase decisions on economic factors such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, this approach is given minimal weight in the hotel valuation process. As noted in Hotels and Motels: A Guide to Market (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 209. HVS International, Mineola, New York Approaches to Value 91 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Analysis, Investment Analysis, and Valuations, "the cost approach is seldom used to value existing hotels and motels."(1) Reconciliation The final step in the valuation process is the reconciliation and correlation of the value indications. Factors that are considered in assessing the reliability of each approach include the purpose of the appraisal, the nature of the subject property, and the reliability of the data used. In reconciliation, the applicability and supportability of each approach is considered and the range of value indications is examined. The most significant weight is given to the approach that produces the most reliable solution and most closely reflects the criteria used by typical investors. Our nationwide experience with numerous hostelry buyers and sellers indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the investors who constitute the marketplace. For this reason, the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in the hotel valuation process. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 208. HVS International, Mineola, New York Income Capitalization Approach 92 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 10. Income Capitalization Approach The income capitalization approach is based on the principle that the value of a property is indicated by its net return, or what is known as the present worth of future benefits. The future benefits of income-producing properties, such as hotels, are net income before debt service and depreciation (as estimated by a forecast of income and expense) and any anticipated reversionary proceeds from a sale. These future benefits can be converted into an indication of market value through a capitalization process and discounted cash flow analysis. Using the income capitalization approach, the subject property has been valued by analyzing the local market for transient accommodations, examining existing and proposed competition, and developing a forecast of income and expense that reflects current and anticipated income trends and cost components through a stabilized year of operation. The forecast of income and expense is expressed in current dollars for each year. The stabilized year is intended to reflect the anticipated operating results of the property over its remaining economic life, given any or all applicable stages of build-up, plateau, and decline in the life cycle of the hotel. Thus, income and expense estimates from the stabilized year forward exclude from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusual revenues or expenses. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, published by the Appraisal Institute, "of the three valuation approaches available to the appraiser, the income capitalization approach generally provides the most persuasive and supportable conclusions when valuing a lodging facility."(1) This text recommends that using a ten-year forecast and an equity yield rate "most accurately reflects the actions of typical hotel buyers, who purchase properties based (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. HVS International, Mineola, New York Income Capitalization Approach 93 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= on their leveraged discounted cash flow."(1) The simpler procedure of using a ten-year forecast and a discount rate is "less reliable because the derivation of the discount rate has little support. Moreover, it is difficult to adjust the discount rate for changes in the cost of capital."(2) We have used both methods to discount the subject property's projected net income into an estimate of value. Method One is a ten-year discounted cash flow analysis in which the cash flow to equity and the equity reversion are discounted to the present value at the equity yield rate, and the income to the mortgagee is discounted at a mortgage interest rate. The sum of the equity and mortgage values is the total property value. Method Two is a simple ten-year discounted cash flow analysis in which the annual net income before debt service and the reversionary proceeds following a sale at the end of the tenth year are discounted back to the date of the appraisal at an overall discount rate, and then totaled to produce an indication of the present worth of future benefits. To convert the projected income stream into an estimate of value through Method One, the anticipated net income (before debt service and depreciation) is allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. The total of the mortgage component and the equity component equals the value of the property. The process is described as follows. 1. The terms of typical hotel financing are set forth, including interest rate, amortization term, and loan-to-value ratio. 2. An equity yield rate of return is established. Numerous hotel buyers base their equity investments on a ten-year equity yield rate projection that takes into account ownership benefits such as periodic cash flow distributions, residual sale or refinancing distributions that return any property appreciation and mortgage amortization, income tax benefits, and various non-financial considerations such as status and prestige. The equity yield rate is also known as the internal rate of return on equity. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. (2) Ibid. HVS International, Mineola, New York Income Capitalization Approach 94 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 3. The value of the equity component is calculated by first deducting the annual debt service from the projected net income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value. After deducting the mortgage balance at the end of the tenth year and the typical brokerage and legal costs, the equity residual is discounted back to the date of value at the equity yield rate. The net income to equity for each of the ten projection years is also discounted to the present value. The sum of these discounted values equates to the value of the equity component. Adding the equity component to the initial mortgage balance yields the overall property value. Because the mortgage and the debt service amounts are unknown but the loan-to-value ratio was determined in Step #1, the preceding calculation can be solved through an iterative process or by use of a linear algebraic equation that computes the total property value. The algebraic equation that solves for the total property value using a ten-year mortgage and equity technique was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(1) 4. The value is proven by allocating the total property value between the mortgage and equity components and verifying that the rates of return set forth in Steps #1 and #2 can be met from the projected net income. The process of converting the projected income stream into an estimate of value through Method Two is described as follows. 1. A discount rate is established by evaluating the total property yield derived by Method One. Occasionally, the discount rate may be adjusted slightly based on the total property yields indicated by recent transactions involving hotels similar to the subject property. 2. The reversionary value is calculated by capitalizing the 11th-year net income by the terminal capitalization rate and deducting typical brokerage and legal fees. (1) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Income Capitalization Approach 95 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 3. The ten-year forecast of net income (before debt service and depreciation) and the reversionary value are discounted to the date of value at the rate derived above. Review of Operating History Because the Ramada Plaza Pentagon is an existing hotel with an established operating performance, its historical income and expense experience can serve as a basis for projections. The subject property opened in 1975, and achieved occupancy levels of 59.3% in 1995 and 58.9% as of August, 1996. The following income and expense statements were provided by the management representatives, and are unaudited. Where applicable, we have reorganized the statements in accordance with the Uniform System of Accounts for Hotels. As a result of the change in ownership in October of 1994, complete operating statements for prior years were not available. To facilitate comparisons, we have presented the year-to-date August, 1996 data in both of the following tables. HVS International, Mineola, New York Income Capitalization Approach 96 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-1 Historical Operating Performance - --------------------------------------------------------------------------------
1995 Year-to-Date August, 1996 -------------------------------------------------- ------------------------------------------------- No. of Rooms: 193 193 No. of Occupied Rooms: 41,787 27,741 No. of Days Open: 365 244 Occupancy: 59.3% Amount per Amount per 58.9% Amount per Amount per Average Rate: $61.29 Percent Available Occupied $64.90 Percent Available Occupied (+000) of Gross Room Room (+000) of Gross Room Room - ------------------------------------------------------------------------------------------------------------------------------ REVENUE Rooms $2,561 77.4 % $13,270 $61.29 $1,800 77.4 % $9,329 $64.90 Food 558 16.9 2,890 13.35 409 17.6 2,118 14.74 Beverage 90 2.7 467 2.16 46 2.0 238 1.66 Telephone 63 1.9 328 1.51 49 2.1 254 1.76 Other Income 35 1.0 180 15.94 23 1.0 119 0.83 Total 3,307 99.9 17,135 79.14 2,327 100.1 12,058 83.89 - ------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL EXPENSES* Rooms 666 26.0 3,451 15.94 468 26.0 2,424 16.86 Food & Beverage 512 79.1 2,654 12.26 322 70.7 1,667 11.60 Telephone 41 64.3 211 0.97 21 42.4 108 0.75 Total 1,219 36.9 6,317 29.17 810 34.8 4,198 29.21 - ------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL INCOME 2,088 63.0 10,819 49.97 1,517 65.3 7,860 54.68 - ------------------------------------------------------------------------------------------------------------------------------ OPERATING EXPENSES Administrative & General 454 13.7 2,353 10.87 330 14.2 1,708 11.88 Management Fee 99 3.0 514 2.38 70 3.0 362 2.52 Marketing 268 8.1 1,390 6.42 166 7.1 860 5.98 Franchise Fees 75 2.3 390 1.80 55 2.3 283 1.97 Property Oper. & Maint. 250 7.6 1,294 5.98 158 6.8 819 5.70 Energy 275 8.3 1,425 6.58 169 7.3 876 6.09 Total 1,422 43.0 7,367 34.03 947 40.7 4,907 34.14 - ------------------------------------------------------------------------------------------------------------------------------ HOUSE PROFIT 666 20.0 3,452 15.94 570 24.6 2,953 20.54 - ------------------------------------------------------------------------------------------------------------------------------ FIXED EXPENSES Property Taxes 107 3.2 554 2.56 96 4.1 500 3.48 Insurance 62 1.9 322 1.49 35 1.5 181 1.26 Total 169 5.1 876 4.05 131 5.6 681 4.74 - ------------------------------------------------------------------------------------------------------------------------------ NET INCOME $497 14.9 % $2,576 $11.89 $439 19.0 % $2,272 $15.80 ==============================================================================================================================
* Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 97 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-2 Historical Operating Performance - --------------------------------------------------------------------------------
Year-to-Date August, 1996 Year-to-Date August, 1995 ------------------------------------------------ ------------------------------------------------ No. of Rooms: 193 193 No. of Occupied Rooms: 27,741 26,833 No. of Days Open: 244 243 Occupancy: 58.9% Amount per Amount per 57.2% Amount per Amount per Average Rate: $64.90 Percent Available Occupied $61.71 Percent Available Occupied (+000) of Gross Room Room (+000) of Gross Room Room - ---------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $1,800 77.4 % $9,329 $64.90 $1,656 78.9 % $8,579 $61.71 Food 409 17.6 2,118 14.74 333 15.9 1,725 12.41 Beverage 46 2.0 238 1.66 54 2.6 281 2.02 Telephone 49 2.1 254 1.76 35 1.7 180 1.29 Other Income 23 1.0 119 0.83 22 1.1 116 0.83 Total 2,327 100.1 12,058 83.89 2,100 100.2 10,880 78.26 - ---------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES* Rooms 468 26.0 2,424 16.86 436 26.3 2,260 16.25 Food & Beverage 322 70.7 1,667 11.60 317 82.0 1,645 11.83 Telephone 21 42.4 108 0.75 27 76.8 138 0.99 Total 810 34.8 4,198 29.21 780 37.2 4,042 29.08 - ---------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 1,517 65.3 7,860 54.68 1,320 63.0 6,838 49.18 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 330 14.2 1,708 11.88 253 12.1 1,313 9.44 Management Fee 70 3.0 362 2.52 63 3.0 327 2.35 Marketing 166 7.1 860 5.98 175 8.3 905 6.51 Franchise Fees 55 2.3 283 1.97 49 2.3 252 1.81 Property Oper. & Maint. 158 6.8 819 5.70 169 8.0 876 6.30 Energy 169 7.3 876 6.09 190 9.1 986 7.09 Total 947 40.7 4,907 34.14 899 42.8 4,659 33.51 - ---------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 570 24.6 2,953 20.54 420 20.2 2,179 15.67 - ---------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 96 4.1 500 3.48 69 3.3 360 2.59 Insurance 35 1.5 181 1.26 42 2.0 219 1.57 Total 131 5.6 681 4.74 112 5.3 579 4.16 - ---------------------------------------------------------------------------------------------------------------------------- NET INCOME $439 19.0 % $2,272 $15.80 $309 14.9 % $1,600 $11.51 ============================================================================================================================
* Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 98 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Comparable Operating Statements The year-to-date August historical income and expense statements show that the subject property's overall net income rose from 14.9% of total revenue in 1995 to 19.0% in 1996. This shows an improvement in management, because the hotel is dropping a higher percentage of revenue to the bottom line, but the overall net profit level is still low when compared to industry standards for a property of this type. Year-to-date August, 1996 figures show total revenues of $2,327,000, including rooms revenue of $1,800,000 (or 77.4% of total revenue). During the same period of 1995, the Ramada registered rooms revenue of $1,656,000, which equated to 78.9% of total revenue. Food revenue increased moderately as a dollar amount, and rose from 15.9% of total revenue in year-to-date 1995 to 17.6% in year-to-date 1996. Telephone revenue also increased from $35,000 to $49,000 during this period. Other income, which includes the rent from the gift shop, other space rentals, vending, and miscellaneous items, rose slightly on a year-to-date basis. Departmental expenses, which equated to 37.2% of revenues in year-to-date 1995, decreased moderately (to 34.8%) in year-to-date 1996. Rooms expense also declined, from 26.3% of rooms revenue as of August, 1995 to 26.0% (or $468,000) as of August, 1996. These ratios are comparable to market averages for properties of this type. The year-to-date 1996 food and beverage expense ratio of 70.7% represented a significant improvement over the 82.0% level registered during the same period of 1995, and is considerably lower than industry standards of 80% to 85%, reflecting skilled management in this area. On a year-to-date basis, every departmental expense declined from 1995 to 1996, which shows evidence of efficient management. Operating expenses equated to 40.7% of total revenue in year-to-date 1996, down slightly from the 42.8% ratio achieved in year-to-date 1995. With the exception of administrative and general costs, every operating expense either remained constant or decreased as a percentage of revenue during this period, again indicating greater operational efficiency. House profit increased substantially on a year-to-date August basis, from 20.2% of total revenue in 1995 to 24.6% in 1996. We do note, however, that this ratio remains slightly lower than industry averages, indicating that the property's operating performance could still be improved somewhat. Overall, the Ramada registered net income of $439,000 in year-to-date 1996, and although this is higher than the $309,000 registered during the same HVS International, Mineola, New York Income Capitalization Approach 99 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= period of 1995, it remains somewhat lower than what is normally expected for a hotel of this type. Forecast of Income and Expense The forecast of income and expense is intended to reflect the appraiser's subjective estimate of how a typical buyer would project the subject property's operating results. Depending on the dynamics of the local market, a typical buyer's projection may be adjusted upward or downward. We have attempted to consider these factors in formulating this forecast. HVS International uses a fixed and variable component model to project a lodging facility's revenue and expense levels. This model is based on the premise that hotel revenues and expenses have one component that is fixed and another that varies directly with occupancy and facility usage. A projection can be made by taking a known level of revenue or expense and calculating its fixed and variable components. The fixed component is then held constant, while the variable component is adjusted for the percent change between the projected occupancy and facility usage and that which produced the known level of revenue or expense. Base-Year Statement of Income and Expense Based on our review of the operating histories of the subject property and comparable hotels, we have derived a base-year statement of income and expense expressed in 1995 dollars. The units of comparison include a percentage of departmental and total revenue, amounts per available room, and amounts per occupied room. The income and expense ratios reflect an occupancy level of 59.3%. This base-year profit and loss statement will be used to determine the relationship between the fixed and variable components. HVS International, Mineola, New York Income Capitalization Approach 100 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-4 Base-Year Statement of Income and Expense - --------------------------------------------------------------------------------
1995 -------------------------------------------------------------- No. of Rooms: 193 Occupancy: 59.3% Average Rate: $61.29 Amount per Amount per No. of Occupied Rooms: 41,787 Percent Available Occupied (+000) of Gross Room Room - --------------------------------------------------------------------------------------- REVENUE Rooms $2,561 75.8% $13,270 $61.29 Food 625 18.5 3,237 14.95 Beverage 78 2.3 402 1.86 Telephone 82 2.4 426 1.97 Other Income 35 1.0 180 0.83 Total 3,380 100.0 17,515 80.90 - --------------------------------------------------------------------------------------- EXPENSES Rooms* 699 27.3 3,624 16.74 Food & Beverage* 565 80.5 2,929 13.53 Telephone* 46 55.3 236 1.09 Administrative & General 406 12.0 2,102 9.71 Management Fee 101 3.0 525 2.43 Marketing 268 7.9 1,390 6.42 Franchise Fees 102 3.0 531 2.45 Property Oper. & Maint. 237 7.0 1,229 5.68 Energy 253 7.5 1,311 6.05 Property Taxes 107 3.2 554 2.56 Insurance 68 2.0 350 1.62 Reserve for Replacement 135 4.0 701 3.24 Total 2,988 88.4 15,482 71.51 - --------------------------------------------------------------------------------------- NET INCOME $392 11.6% $2,033 $9.39 =======================================================================================
* Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- Inflation Assumptions The base revenue and expense amounts are inflated to reflect current dollars for each projection year. Although line items can be affected by different factors, we must establish a general rate of inflation that will be applied to most revenue and expense categories. The following table shows inflation estimates made by economists at some noted institutions and corporations. HVS International, Mineola, New York Income Capitalization Approach 101 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-5 Inflation Estimates - -------------------------------------------------------------------------------- Projected Increase in Consumer Price Index (Annualized Rate Versus 12 Months Earlier) ------------------------------------------ November May Source of 1996 of 1997 - -------------------------------------------------------------------------------- Maureen Allyn, Scudder Stevens Clark 3.1% 2.3% Wayne Angell, Bear Stearns 3.0 3.2 Richard Berner, Mellon Bank 2.9 2.8 David Berson, Fannie Mae 2.9 2.8 David Blitzer, S&P 3.0 2.7 Paul Boltz, T. Rowe Price 3.2 3.5 David Bostian, Herzog, Heine, Geduld 2.9 2.5 Philip Braverman, DKB Securities 3.0 2.8 William Brown, J.P. Morgan 3.3 3.2 Rosanne Cahn, CS First Boston 3.1 2.6 James Coons, Huntington National Bank 3.2 3.0 Michael Cosgrove, The Econoclast 3.2 3.3 Dewey Daane, Vanderbilt University 3.4 3.6 Robert Dederick, Northern Trust 3.1 3.4 W.Dudley, Goldman Sachs 3.4 3.2 Michael Englund, MMS Intl. 3.2 3.3 Michael Evans, Evans Group 3.0 3.0 Gail Fosler, Conference Board 3.5 3.6 Maury Harris, Paine Weber, Inc. 2.8 2.8 Tracy Herrick, Jefferies & Co. 3.2 3.6 Stuart Hoffman, PNC Bank 3.1 2.8 William Hummer, Wayne Hummer 2.9 3.0 Edward Hyman, ISI Group 2.8 2.1 Saul Hymans, University of Michigan 2.7 1.7 Mieczyslaw Karczmar, Deutsche Bank 2.8 3.2 Kurt Karl, WEFA Group 2.6 2.3 Irwin Kellner, Chase Manhattan Bank 2.6 2.3 D. Laufenberg, American Express Financial Advisors 3.2 3.4 Michelle Laughlin, Sanwa Securities 3.0 3.2 Carol Leisenring, CoreStates Financial 2.7 2.5 Richard Lemmon, General Motors 3.0 3.0 Mickey Levy, NationsBank Capital Markets 2.6 2.4 David Littmann, Comerica 3.1 3.0 John Lonski, Moody's Investors Service 3.3 3.2 Paul McCulley, UBS Securities 3.0 2.8 John McDevitt, 3M 2.6 2.5 Arnold Moskowitz, Moskowitz Capital 3.1 3.5 John Mueller, LBMC, Inc. 3.2 2.5 David Munro, High Frequency Econ. 3.0 2.5 Carl Palash, MCM MoneyWatch 3.0 3.0 Nicholas Perna, Fleet Financial Group 3.3 3.3 Elliott Platt, Donaldson Lufkin 2.8 2.0 Maria F. Ramirez, MF Ramirez 3.0 3.0 Donald Ratajczak, Georgia State University 3.0 3.3 David Resler, Nomura Securities International 2.9 2.6 Allan Reynolds, Hudson Institute 3.3 3.6 Richard Rippe, Prudential Securities 3.1 3.3 A. Gary Schilling, Schilling & Co. 3.0 3.0 Allen Sinai, Lehman Brothers 3.2 3.4 James Smith, University of North Carolina 2.1 1.9 Susan Sterne, Economic Analysis 2.5 2.5 Donald Straszheim, Merrill Lynch 2.7 2.3 Thomas Synott III, U.S. Trust Company 3.3 3.4 John Williams, Bankers Trust 3.0 3.1 Raymond Worseck, A.G. Edwards 3.6 3.3 David Wyss, DRI/McGraw-Hill 3.0 2.5 Edward Yardeni, Deutsche Morgan Grenfell 2.2 2.0 Mark Zandi, Regional Financial Associates 3.0 3.2 ---- ---- Average 3.0% 2.9% Source: Wall Street Journal, July 1, 1996 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 102 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The preceding table shows inflation forecasts averaging 3.0% and 2.9%. Most of the economists in the sample estimate inflation rates ranging from 2.5% to 3.4%, although several anticipate slightly higher level. As a further check on these inflation projections, we have reviewed historical increases in the Consumer Price Index. Because the value of real estate is predicated on cash flows over a relatively long period, inflation should be considered from a long-term perspective. Between 1986 and 1995, the national CPI increased at an average annual compounded rate of 3.7%. In consideration of these historical trends, the projections set forth above, and our assessment of probable property appreciation levels, we have selected an annual stabilized inflation rate of 3.5% throughout the projection period. One of the exceptions to this general inflation assumption is the projected growth in average rate. As noted earlier, increases in the subject property's room rate are projected as follows. ================================================================================ Table 10-6 Projected Growth in Average Rate - -------------------------------------------------------------------------------- Increase From Year Previous Year - ----------------------------------------------- 1997 4.7% 1998 5.2 Thereafter 3.5 - -------------------------------------------------------------------------------- Using these inflation assumptions, the base-year income and expense statement (which is expressed in 1995 dollars) is inflated to arrive at projections. Each revenue and expense category will be projected using the inflated base statement to determine the fixed and variable component relationships. Rooms Revenue Rooms revenue is determined by two variables: occupancy and average rate. Earlier in this report, we estimated the subject property's occupancy and average rate as follows. ================================================================================ Table 10-7 Projected Occupancy and Average Rate - -------------------------------------------------------------------------------- 1997 Stabilized - ------------------------------------------------------------------- Projected Occupancy Percentage 63.0 % 64.0 % Projected Average Rate $69.75 $73.41 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 103 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Rooms revenue is calculated as follows. ================================================================================ Table 10-8 Forecast of Rooms Revenue - --------------------------------------------------------------------------------
Rooms No. of Days Revenue Year Occupancy Average Rate Rooms in Year (+000) - ------------------------------------------------------------------------------------------------------------------- 1997 63 % x $69.75 x 193 x 365 = $3,096 Stabilized 64 x 73.41 x 193 x 365 = 3,310
- -------------------------------------------------------------------------------- Food and Beverage Revenue Food and beverage revenue is generated by a hotel's restaurants, lounges, coffee shops, snack bars, banquet rooms, and room service. In addition to providing a source of revenue, these outlets serve as an amenity that assists in the sale of guestrooms. With the exception of properties with active lounges or banquet facilities that draw local residents, in-house guests generally represent a substantial percentage of a hotel's food and beverage patrons. The Uniform System of Accounts for Hotels/Eighth Revised Edition defines food revenue as "revenue derived from the sale of food, including coffee, milk, tea and soft drinks. Food sales do not include meals charged on employees' (staff) checks." Beverage revenues are "derived from the sale of beverages." In addition to the revenue generated by the sale of food and beverages, hotels often produce other income that is related to this department, such as meeting room rentals, cover charges, service charges, and miscellaneous banquet revenue. Although food revenue varies directly with changes in occupancy, the small portion generated by banquet sales and outside capture is relatively fixed. The following table shows the projected food revenue and several units of comparison that can be used to check the reasonableness of the forecast. ================================================================================ Table 10-9 Forecast of Food Revenue - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Food Revenue (+000) $700 $734 Percent of Total Revenue 17.4% 17.2% Amount per Available Room $3,629 $3,801 Amount per Occupied Room $15.77 $16.28 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 104 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Based on these units of comparison, the projected food revenue appears reasonable when compared with industry standards. Beverage revenue is generated by the sale of alcoholic beverages in a hotel's restaurants and banquet rooms and the sale of alcoholic and nonalcoholic beverages in the bars and lounges. Based on an analysis of comparable lodging facilities, beverage revenue is estimated to average approximately 12.4% of food revenue. Thus, beverage revenue is projected by multiplying the projected food revenue by 12.4%. The following table illustrates the forecast of beverage revenue. ================================================================================ Table 10-10 Forecast of Beverage Revenue - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Beverage Revenue (+000) $87 $91 - -------------------------------------------------------------------------------- Telephone Revenue Telephone revenue is generated by hotel guests who charge local and long-distance calls to their rooms, and by individuals who use the property's public telephones. Prior to the early 1980s, hotels were limited to a 15% commission on long-distance calls, which allowed few profits. Deregulation and the development of sophisticated call-accounting equipment have resulted in profitable telephone departments. State-of-the-art equipment is capable of least-cost routing, automatic price billing, and posting telephone charges to guest folios. Hotels can select among various long-distance services, and can also work with any one of a number of Alternative Operator Services (AOS). These systems route and price calls, and may provide additional services. In recent years, the hospitality industry has experienced diverging trends with respect to telephone revenue. Prices per call have increased, in some cases dramatically, yielding departmental profits as high as 50% to 55%. However, the number of long-distance calls billed per occupied room has declined as a result of the extensive use of long-distance carrier services that can be accessed locally or through a toll-free number. When guests charge long-distance calls to their personal or business accounts in this manner, the hotel loses the revenue associated with long-distance tariffs and mark-ups, and only receives an access fee. Most telephone revenue varies directly with changes in occupancy. However, there is a small fixed component consisting of public telephone revenue, which is primarily generated by individuals using the hotel's food, HVS International, Mineola, New York Income Capitalization Approach 105 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= beverage, and meeting facilities. Using this fixed and variable relationship, the subject property's telephone revenue is projected as follows. ================================================================================ Table 10-11 Forecast of Telephone Revenue - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Telephone Revenue (+000) $93 $98 Percent of Total Revenue 2.3 % 2.3 % Amount per Available Room $482 $506 Amount per Occupied Room $2.10 $2.17 - -------------------------------------------------------------------------------- Other Income Other income is derived from sources other than guestrooms, food and beverages, and telephone services. Depending on the type of hotel and the facilities and amenities offered, other income may include the following items. o Rentals - stores, office space, concession space, showcases, clubs, and storage. o Commissions from auto rentals, photography, telegrams, and vending services. o Concessions - revenue derived from charges for the privilege of operating departments that could be operated by the hotel. Gift shops, barber shops, and beauty salons are often operated as concessions. o Laundry, dry cleaning, and fax services. o Cash discounts earned - discounts from creditors' accounts for payment within the discount period. This item does not include trade discounts, which are a deduction from the cost of goods sold. o Electronic games and pinball machines. o Forfeited advance deposits and guaranteed no-shows. o Service charges - service charges that are added to a customer's account but are not paid to service personnel. o Interest income - interest from house accounts. o Salvage - revenue from the sale of old or obsolete items. Other income is highly sensitive to changes in occupancy and slightly correlated to food and beverage volume. Using this fixed and variable relationship, the subject property's other income is projected as follows. HVS International, Mineola, New York Income Capitalization Approach 106 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-12 Forecast of Other Income - -------------------------------------------------------------------------------- 1997 Stabilized - ------------------------------------------------------------------------- Projected Other Income (+000) $38 $39 Percent of Total Revenue 0.9% 0.9% Amount per Available Room $196 $204 Amount per Occupied Room $0.86 $0.87 - -------------------------------------------------------------------------------- Rooms Expense Rooms expense consists of items related to the sale and upkeep of guestrooms and public space. Salaries, wages, and employee benefits account for a substantial portion of this category. Although payroll varies somewhat with occupancy (because managers can schedule maids, bell personnel, and house cleaners to work when demand requires), much of a hotel's payroll is fixed. Front desk personnel, public area cleaners, the housekeeper, and other supervisors must be maintained at all times. As a result, salaries, wages, and employee benefits are only moderately sensitive to changes in occupancy. Commissions represent remuneration to travel agents for booking rooms. Because these fees are based on a percentage of rooms revenue, they are highly dependent on occupancy and rate. Reservations is a similar expense that reflects the cost of a franchise reservation system that typically bills as a percentage of rooms revenue. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are only slightly affected by changes in volume. In light of these considerations, we project the subject property's rooms expense as follows. ================================================================================ Table 10-13 Forecast of Rooms Expense - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Rooms Expense (+000) $768 $800 Ratio to Rooms Revenue 24.8% 24.2% Amount per Available Room $3,979 $4,145 Amount per Occupied Room $17.30 $17.74 - -------------------------------------------------------------------------------- Food and Beverage Expense Food and beverage expenses consist of items necessary for the operation of a hotel's food, beverage, and banquet facilities. Although food and beverage revenues are projected separately and occupy separate categories on a HVS International, Mineola, New York Income Capitalization Approach 107 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= hotel's income and expense statement, the corresponding expenses are combined into a single category. The costs associated with food and beverage sales and payroll are moderately to highly correlated to food and beverage revenues, and comprise a substantial portion of this category. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are very slightly dependent on volume. Although the other expense items are basically fixed, they represent a relatively insignificant factor. As noted earlier, the subject property's year-to-date August, 1996 food and beverage expense ratio was far below industry averages. In light of this factor, we have adjusted this line item upward to reflect what a typical operator of this property would achieve. Specifically, we project food and beverage expense to equate to 78.6% of food and beverage revenue in 1997, declining to a stabilized level of 78.0% in 1998. There are slight fluctuations in ratio in some subsequent years, merely as a result of rounding. We note that these rounding errors are apparent in several categories of the income and expense projection, but they do not influence the overall correct dollar amounts. After considering the fixed and variable components, we forecast the subject property's food and beverage expense as follows. ================================================================================ Table 10-14 Forecast of Food and Beverage Expense - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Food & Beverage Expense (+000) $618 $644 Ratio to Food & Beverage Revenue 78.6% 78.0% Amount per Available Room $3,203 $3,335 Amount per Occupied Room $13.93 $14.28 - -------------------------------------------------------------------------------- Telephone Expense Telephone expense consists of all costs associated with this department. In the case of small hotels with automated systems, the operation of telephones may be an additional responsibility of front desk personnel; however, most large properties employ full-time operators. The bulk of the telephone expense consists of the cost of local and long-distance calls billed by the telephone companies that provide these services. Because most calls are made by in-house guests, these costs are moderately correlated to occupancy. Unless a particular hotel department incurs high expenses, use of telephone services by hotel employees is charged to this account. The remaining costs, which include salaries, wages, printing, and HVS International, Mineola, New York Income Capitalization Approach 108 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= other expenses, are moderately fixed. On a year-to-date basis, the subject property's telephone expense equated to 42.4% of telephone revenue in 1996. This level has been adjusted upward somewhat to reflect industry averages. The following table illustrates our forecast of telephone expense. ================================================================================ Table 10-15 Forecast of Telephone Expense - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Telephone Expense (+000) $50 $52 Ratio to Telephone Revenue 53.6% 53.0% Amount per Available Room $258 $269 Amount per Occupied Room $1.13 $1.15 - -------------------------------------------------------------------------------- Administrative and General Expense Administrative and general expense includes the salaries and wages of all administrative personnel who are not directly associated with a particular department. Expense items related to the management and operation of the property are also allocated to this category. Most administrative and general expenses are relatively fixed. The exceptions are cash overages and shortages; commissions on credit card charges; provision for doubtful accounts, which are moderately affected by the number of transactions or total revenue; and salaries, wages, and benefits, which are very slightly influenced by volume. In recent years, several new items have been added to the administrative and general expense category. Human resources includes the cost of recruiting, relocating, and training personnel. Security consists of the cost of contract security for the property and related expenses. The general insurance category includes premiums for liability, fidelity, life, theft coverage, and business interruption insurance. Fire and extended-coverage insurance on the building and contents is a separate insurance expense category. Liability insurance covers third-party actions involving bodily injury and personal property, and is typically based on rooms receipts, meeting and banquet income, and food and beverage revenue. Factors that may have an impact on a hotel's liability expense include the size of the meeting, banquet, and restaurant facilities; the ratio between the amount of alcohol served and total food and beverage sales; the presence of a dance floor; a high-rise structure; a swimming pool; life safety support systems; and the guest transportation services provided by the hotel. The subject property's historical administrative and general expense was quite high in HVS International, Mineola, New York Income Capitalization Approach 109 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= comparison to industry standards, which generally dictate a range of approximately 8% to 11% of total revenue. Consequently, we adjusted the historical ratio down to 11.2% in 1997 and 11.0% in 1998, where it is assumed to stabilize. The following table illustrates our forecast of administrative and general expense. ================================================================================ Table 10-16 Forecast of Administrative and General Expense - -------------------------------------------------------------------------------- 1997 Stabilized - ---------------------------------------------------------------------------- Projected Admin. & General Expense (+000) $449 $469 Ratio to Total Revenue 11.2% 11.0% Amount per Available Room $2,326 $2,430 Amount per Occupied Room $10.11 $10.39 - -------------------------------------------------------------------------------- Management Fee Management expense consists of the basic fee paid to the type of company that is anticipated to operate the subject property. Some companies provide management services alone, while others also provide a brand name affiliation. When a management company has no brand identification, the property owner often acquires a franchise that provides the necessary image and recognition. Although most hotel management companies employ a fee schedule that includes a basic fee (usually a percentage of total revenue) and an incentive fee (usually a percentage of defined profit), the incentive portion is often subordinated to debt service and does not appear in a forecast of net income before debt service. Basic hotel management fees are almost always based on a percentage of total revenue, which means they have no fixed component. Although the incentive fee does not decrease the cash flow available for debt service, it does reduce the potential cash flow to equity, and must be accounted for in the valuation process. Generally, the most appropriate procedure for handling the impact of the incentive fee on the equity component is to use the projected net income before debt service and incentive fee, but adjust the equity dividend or yield rate upward to reflect this added management cost. The adjusted equity dividend and yield rates will be described later in this section. The subject property is operated by Remington Hospitality, Inc. According to Remington's management agreement with Alexandria Virginia Hotel Limited Partnership, 3% of gross revenues are payable to Remington on a monthly basis. Based on our review of the current market for management HVS International, Mineola, New York Income Capitalization Approach 110 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= contracts, we are of the opinion that this fee is consistent with prevailing terms. Applying this management fee structure to the projection of total revenue yields the following forecast of the subject property's management fee. ================================================================================ Table 10-17 Forecast of Management Fee - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Management Fee (+000) $120 $128 - -------------------------------------------------------------------------------- Marketing Expense Marketing expense consists of all costs associated with advertising, sales, and promotion; these activities are intended to attract and retain customers. Marketing can be used to create an image, develop customer awareness, and stimulate patronage of a property's various facilities. The marketing category is unique in that all expense items, with the exception of fees and commissions, are totally controlled by management. Most hotel operators establish an annual marketing budget that sets forth all planned expenditures. If the budget is followed, total marketing expenses can be projected accurately. Marketing expenditures are unusual because although there is a lag period before results are realized, the benefits are often extended over a long period. Depending on the type and scope of the advertising and promotion program implemented, the lag time can be as short as a few weeks or as long as several years. However, the favorable results of an effective marketing campaign tend to linger, and a property often enjoys the benefits of concentrated sales efforts for many months. Marketing expense can be divided into five categories: sales, reservations, advertising and merchandising, other marketing activities, and fees and commissions. Together, these categories include all marketing efforts made by hotel personnel and outside parties. Marketing expenses are fixed with the exception of reservations, fees, and commissions, which are calculated as a percentage of rooms revenue. Based on the location of the subject property, the local market for transient accommodations, the competitive environment, and the hotel's anticipated market segmentation, we have developed the following marketing forecast using a fixed and variable component model. HVS International, Mineola, New York Income Capitalization Approach 111 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-18 Forecast of Marketing Expense - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Marketing Expense (+000) $297 $310 Ratio to Total Revenue 7.4% 7.3% Amount per Available Room $1,538 $1,606 Amount per Occupied Room $6.69 $6.88 - -------------------------------------------------------------------------------- Franchise Fee Franchise fee expense represents the fees paid to Ramada Franchise Systems, Inc. for the use of the company's name, trademarks, and service marks. These fees equate to 4.0% of gross rooms revenue, yielding the following forecast. ================================================================================ Table 10-19 Forecast of Franchise Fee - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Franchise Fees (+000) $124 $132 - -------------------------------------------------------------------------------- Property Operations and Maintenance Property operations and maintenance expense is another expense category that is largely controlled by management. Except for repairs that are necessary to keep the facility open and prevent damage (e.g., plumbing, heating, and electrical items), most maintenance can be deferred for varying lengths of time. Maintenance is an accumulating expense. If management elects to postpone performing a required repair, they have not eliminated or saved the expenditure; they have only deferred payment until a later date. A lodging facility that operates with a lower-than-normal maintenance budget is likely to accumulate a considerable amount of deferred maintenance. The age of a lodging facility has a strong influence on the required level of maintenance. A new or thoroughly renovated property is protected for several years by modern equipment and manufacturers' warranties. However, as a hostelry grows older, maintenance expenses escalate. A well-organized preventive maintenance system often helps delay deterioration, but most facilities face higher property operations and maintenance costs each year, regardless of the occupancy trend. The quality of initial construction can also have a direct impact on future maintenance requirements. The use of high- HVS International, Mineola, New York Income Capitalization Approach 112 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= quality building materials and construction methods generally reduces the need for maintenance expenditures over the long term. Property operations and maintenance is considered an operating expense; as such, it includes only those components that can be expensed, rather than capitalized, under Internal Revenue Service regulations. For example, if a table leg is broken, the repair of that leg is considered an expense and is chargeable to property operations and maintenance. If the table is replaced, it becomes a capital expenditure and does not appear under the property operations and maintenance category. Appraisers account for capital replacement of items such as furniture and equipment in the reserve for replacement account, which is discussed later in this section. Property operations and maintenance costs are relatively fixed, and are projected as follows. ================================================================================ Table 10-20 Forecast of Property Operations and Maintenance Expense - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Prop. Oper. & Maint. Expense (+000) $262 $274 Ratio to Total Revenue 6.5% 6.4% Amount per Available Room $1,360 $1,420 Amount per Occupied Room $5.91 $6.08 - -------------------------------------------------------------------------------- Energy Expense The energy consumption of a lodging facility takes several forms, including water and space heating, air conditioning, lighting, cooking fuel, and other miscellaneous power requirements. The most common sources of hotel energy are electricity, natural gas, fuel oil, and steam. This category also includes the cost of water service. Total energy cost depends on the source and quantity of fuel used. Electricity tends to be the most expensive source, followed by oil and gas. Although all hotels consume a sizable amount of electricity, many properties supplement their energy requirements with less expensive sources, such as gas and oil, for heating and cooking. A large portion of a hostelry's energy consumption is relatively fixed. Restaurants, kitchens, public areas, and corridors must be continually lighted and climate-controlled, regardless of occupancy. The energy cost of an additional occupied room (i.e., a few hours of light, television, heat, or air HVS International, Mineola, New York Income Capitalization Approach 113 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= conditioning) is minimal. The following table presents our forecast of the subject property's energy expense. ================================================================================ Table 10-21 Forecast of Energy Expense - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Energy Expense (+000) $274 $284 Ratio to Total Revenue 6.8% 6.7% Amount per Available Room $1,419 $1,474 Amount per Occupied Room $6.17 $6.31 - -------------------------------------------------------------------------------- Property Taxes The estimate of property taxes was detailed in a previous section of this report. The following table summarizes these projections. ================================================================================ Table 10-22 Forecast of Property Taxes - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Property Taxes (+000) $131 $136 - -------------------------------------------------------------------------------- Insurance Expense The insurance expense category consists of the cost of insuring the hotel and its contents against damage or destruction by fire, weather, sprinkler leakage, boiler explosion, plate glass breakage, and so forth. It does not include liability coverage, which is a component of administrative and general expense. Insurance rates are based on many factors, including building design and construction, fire detection and extinguishing equipment, fire district, distance from the firehouse, and the area's fire experience. Insurance expenses do not vary with occupancy. Based on historical levels, we project the subject property's insurance expense to equate to approximately $72,000 or $373 per available room in 1997 (the first projection period). In subsequent years, this amount is assumed to increase in tandem with inflation. The following table outlines our projection of insurance expense. HVS International, Mineola, New York Income Capitalization Approach 114 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-23 Forecast of Insurance Expense - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Insurance Expense (+000) $72 $75 - -------------------------------------------------------------------------------- Reserve for Replacement Furniture, fixtures, and equipment are essential to the operation of a lodging facility, and their quality often influences a property's class. This category includes all non-real estate items that are capitalized, rather than expensed. The furniture, fixtures, and equipment of a hotel are exposed to heavy use and must be replaced at regular intervals. The useful life of these items is determined by their quality, durability, and the amount of guest traffic and use. Periodic replacement of furniture, fixtures, and equipment is essential to maintain the quality, image, and income-producing potential of a lodging facility. Because capitalized expenditures are not included in the operating statement but nevertheless affect an owner's cash flow, an appraisal should reflect these expenses in the form of an appropriate reserve for replacement. Our industry experience indicates that a reserve for replacement of 3% to 5% of total revenue is generally sufficient to provide for the timely replacement of furniture, fixtures, and equipment. Because the reserve for replacement is based on a percentage of total revenue, it has no fixed component. Based on an analysis of comparable lodging facilities, we believe that a reserve for replacement of 4.0% of total revenue is sufficient to provide for the periodic replacement of the subject property's furniture, fixtures, and equipment. This amount is consistent with the reserve account contributions that are being made currently. The following table summarizes the projected reserve for replacement. ================================================================================ Table 10-24 Forecast of Reserve for Replacement - -------------------------------------------------------------------------------- 1997 Stabilized - -------------------------------------------------------------------------------- Projected Replacement Reserve (+000) $161 $171 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 115 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Summary of Projections Based on the preceding analysis, we have formulated a forecast of income and expense. The table on the following page presents a detailed forecast through the stabilized year, including amounts per available room (PAR) and per occupied room (POR). For the purpose of comparison, this table also presents the subject property's most recent full year of operating history. The second table illustrates our ten-year forecast of income and expense in less detail. The forecasts pertain to calendar operating years beginning in 1997, and are expressed in inflated dollars for each year. HVS International, Mineola, New York Income Capitalization Approach 116 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-25 Detailed Forecast of Income and Expense through the Stabilized Year and Most Recent Operating History, Ramada Plaza Pentagon, Alexandria, Virginia - --------------------------------------------------------------------------------
Historical 1995 Results 1997 ---------------------------------------- ---------------------------------------- No. of Rooms: 193 193 Occupancy: 59.3% 63.0% Average Rate: $61.29 $69.75 No. of Days Open: 365 365 No. of Occupied Rooms: 41,787 Percent 44,380 Percent (+000) of Gross PAR POR (+000) of Gross PAR POR - -------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $2,561 77.4% $13,270 $61.29 $3,096 77.2% $16,041 $69.76 Food 558 16.9 2,890 13.35 700 17.4 3,627 15.77 Beverage 90 2.7 467 2.16 87 2.2 451 1.96 Telephone 63 1.9 328 1.51 93 2.3 482 2.10 Other Income 35 1.0 180 0.83 38 0.9 197 0.86 Total 3,307 99.9 17,135 79.14 4,014 100.0 20,798 90.45 - -------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES * Rooms 666 26.0 3,451 15.94 768 24.8 3,979 17.30 Food & Beverage 512 79.1 2,654 12.26 618 78.5 3,202 13.93 Telephone 41 64.3 211 0.97 50 53.8 259 1.13 Total 1,219 36.9 6,317 29.17 1,436 35.8 7,440 32.36 - -------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 2,088 63.0 10,819 49.97 2,578 64.2 13,358 58.09 - -------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 454 13.7 2,353 10.87 449 11.2 2,326 10.12 Management Fee 99 3.0 514 2.38 120 3.0 622 2.70 Marketing 268 8.1 1,390 6.42 297 7.4 1,539 6.69 Franchise Fees 75 2.3 390 1.80 124 3.1 642 2.79 Property Oper. & Maint. 250 7.6 1,294 5.98 262 6.5 1,358 5.90 Energy 275 8.3 1,425 6.58 274 6.8 1,420 6.17 Total 1,422 43.0 7,367 34.03 1,526 38.0 7,907 34.38 - -------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 666 20.0 3,452 15.94 1,052 26.2 5,451 23.70 - -------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 107 3.2 554 2.56 131 3.3 679 2.95 Insurance 62 1.9 322 1.49 72 1.8 373 1.62 Total 169 5.1 876 4.05 364 9.1 1,886 8.20 - -------------------------------------------------------------------------------------------------------------------------- NET INCOME $497 14.9% $2,576 $11.90 $688 17.1% $3,565 $15.50 ========================================================================================================================== Food/Rooms 21.8% 22.6% Beverage/Food 16.2% 12.4% Telephone/Rooms 2.5% 3.0% Other Income/Rooms 1.4% 1.2%
Stabilized ------------------------------------------ No. of Rooms: 193 Occupancy: 64.0% Average Rate: $73.41 No. of Days Open: 365 No. of Occupied Rooms: 45,085 Percent (+000) of Gross PAR POR - -------------------------------------------------------------------------- REVENUE Rooms $3,310 77.5% $17,150 $73.42 Food 734 17.2 3,803 16.28 Beverage 91 2.1 472 2.02 Telephone 98 2.3 508 2.17 Other Income 39 0.9 202 0.87 Total 4,272 100.0 22,135 94.75 - -------------------------------------------------------------------------- DEPARTMENTAL EXPENSES * Rooms 800 24.2 4,145 17.74 Food & Beverage 644 78.1 3,337 14.28 Telephone 52 53.1 269 1.15 Total 1,496 35.0 7,751 33.18 - -------------------------------------------------------------------------- DEPARTMENTAL INCOME 2,776 65.0 14,383 61.57 - -------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 469 11.0 2,430 10.40 Management Fee 128 3.0 663 2.84 Marketing 310 7.3 1,606 6.88 Franchise Fees 132 3.1 684 2.93 Property Oper. & Maint. 274 6.4 1,420 6.08 Energy 284 6.6 1,472 6.30 Total 1,597 37.4 8,275 35.42 - -------------------------------------------------------------------------- HOUSE PROFIT 1,179 27.6 6,109 26.15 - -------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 136 3.2 703 3.01 Insurance 75 1.8 389 1.66 Total 382 9.0 1,977 8.46 - -------------------------------------------------------------------------- NET INCOME $797 18.6% $4,132 $17.69 ========================================================================== Food/Rooms 22.2% Beverage/Food 12.4% Telephone/Rooms 3.0% Other Income/Rooms 1.2% * Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 117 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-26 Ten-Year Forecast of Income and Expense, Ramada Plaza Pentagon, Alexandria, Virginia (+000) - --------------------------------------------------------------------------------
1997 1998 1999 2000 ---------------------- ---------------------- ----------------------- ---------------------- Number of Rooms: 193 193 193 193 Occupied Rooms: 44,380 45,085 45,085 45,085 Occupancy: 63.0% % of 64.0% % of 64.0% % of 64.0% % of Average Rate: $69.75 Gross $73.41 Gross $75.98 Gross $78.64 Gross - ---------------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $3,096 77.2 % $3,310 77.5 % $3,426 77.5 % $3,545 77.5 % Food 700 17.4 734 17.2 759 17.2 786 17.2 Beverage 87 2.2 91 2.1 94 2.1 98 2.1 Telephone 93 2.3 98 2.3 101 2.3 105 2.3 Other Income 38 0.9 39 0.9 41 0.9 42 0.9 Total 4,014 100.0 4,272 100.0 4,421 100.0 4,576 100.0 - ---------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES* Rooms 768 24.8 800 24.2 828 24.2 857 24.2 Food & Beverage 618 78.5 644 78.1 666 78.1 690 78.1 Telephone 50 53.8 52 53.1 54 53.5 56 53.3 Total 1,436 35.8 1,496 35.0 1,548 35.0 1,603 35.0 - ---------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 2,578 64.2 2,776 65.0 2,873 65.0 2,973 65.0 - ---------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 449 11.2 469 11.0 485 11.0 502 11.0 Management Fee 120 3.0 128 3.0 133 3.0 137 3.0 Marketing 297 7.4 310 7.3 321 7.3 332 7.3 Franchise Fees 124 3.1 132 3.1 137 3.1 142 3.1 Property Oper. & Maint. 262 6.5 274 6.4 284 6.4 294 6.4 Energy 274 6.8 284 6.6 294 6.7 305 6.7 Total 1,526 38.0 1,597 37.4 1,654 37.5 1,712 37.5 - ---------------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 1,052 26.2 1,179 27.6 1,219 27.5 1,261 27.5 - ---------------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 131 3.3 136 3.2 140 3.2 145 3.2 Insurance 72 1.8 75 1.8 78 1.8 80 1.7 Reserve for Replacement 161 4.0 171 4.0 177 4.0 183 4.0 Total 364 9.1 382 9.0 395 9.0 408 8.9 - ---------------------------------------------------------------------------------------------------------------------------------- NET INCOME $688 17.1 % $797 18.6 % $824 18.5 % $853 18.6 ================================================================================================================================== 2001 2002 2003 2004 ----------------------- ---------------------- ---------------------- ---------------------- Number of Rooms: 193 193 193 193 Occupied Rooms: 45,085 45,085 45,085 45,085 Occupancy: 64.0% % of 64.0% % of 64.0% % of 64.0% % of Average Rate: $81.39 Gross $84.24 Gross $87.19 Gross $90.24 Gross - ----------------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $3,669 77.5 % $3,798 77.5 % $3,931 77.5 % $4,068 77.5 % Food 813 17.2 842 17.2 871 17.2 902 17.2 Beverage 101 2.1 105 2.1 108 2.1 112 2.1 Telephone 108 2.3 112 2.3 116 2.3 120 2.3 Other Income 44 0.9 45 0.9 47 0.9 48 0.9 Total 4,735 100.0 4,902 100.0 5,073 100.0 5,250 100.0 - ----------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES* Rooms 887 24.2 918 24.2 950 24.2 983 24.2 Food & Beverage 713 78.0 739 78.0 764 78.0 791 78.0 Telephone 57 52.8 60 53.6 62 53.4 64 53.3 Total 1,657 35.0 1,717 35.0 1,776 35.0 1,838 35.0 - ----------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 3,078 65.0 3,185 65.0 3,297 65.0 3,412 65.0 - ----------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 520 11.0 538 11.0 557 11.0 576 11.0 Management Fee 142 3.0 147 3.0 152 3.0 158 3.0 Marketing 344 7.3 356 7.3 368 7.3 381 7.3 Franchise Fees 147 3.1 152 3.1 157 3.1 163 3.1 Property Oper. & Maint. 304 6.4 315 6.4 326 6.4 337 6.4 Energy 315 6.7 326 6.7 338 6.7 350 6.7 Total 1,772 37.5 1,834 37.5 1,898 37.5 1,965 37.5 - ----------------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 1,306 27.5 1,351 27.5 1,399 27.5 1,447 27.5 - ----------------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 150 3.2 156 3.2 161 3.2 167 3.2 Insurance 83 1.8 86 1.8 89 1.8 92 1.8 Reserve for Replacement 189 4.0 196 4.0 203 4.0 210 4.0 Total 422 9.0 438 9.0 453 9.0 469 9.0 - ----------------------------------------------------------------------------------------------------------------------------------- NET INCOME $884 18.5 % $913 18.5 % $946 18.5 % $978 18.5 % ===================================================================================================================================
2005 2006 -------------------- ----------------------- Number of Rooms: 193 193 Occupied Rooms: 45,085 45,085 Occupancy: 64.0% % of 64.0% % of Average Rate: $93.40 Gross $96.67 Gross - ---------------------------------------------------------------------------- REVENUE Rooms $4,211 77.5 % $4,358 77.5 % Food 933 17.2 966 17.2 Beverage 116 2.1 120 2.1 Telephone 124 2.3 129 2.3 Other Income 50 0.9 52 0.9 Total 5,434 100.0 5,625 100.0 - ---------------------------------------------------------------------------- DEPARTMENTAL EXPENSES* Rooms 1,018 24.2 1,053 24.2 Food & Beverage 819 78.1 847 78.0 Telephone 66 53.2 68 52.7 Total 1,903 35.0 1,968 35.0 - ---------------------------------------------------------------------------- DEPARTMENTAL INCOME 3,531 65.0 3,657 65.0 - ---------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 596 11.0 617 11.0 Management Fee 163 3.0 169 3.0 Marketing 394 7.3 408 7.3 Franchise Fees 168 3.1 174 3.1 Property Oper. & Maint. 349 6.4 361 6.4 Energy 362 6.7 375 6.7 Total 2,032 37.5 2,104 37.5 - ---------------------------------------------------------------------------- HOUSE PROFIT 1,499 27.5 1,553 27.5 - ---------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 173 3.2 179 3.2 Insurance 95 1.7 99 1.8 Reserve for Replacement 217 4.0 225 4.0 Total 485 8.9 503 9.0 - ---------------------------------------------------------------------------- NET INCOME $1,014 18.6 % $1,050 18.5 % ============================================================================ * Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 118 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The conversion of a property's projected net income into an estimate of value is based on the premise that investors typically purchase real estate with a small amount of equity cash (25% to 40%) and a large amount of mortgage financing (60% to 75%). The amounts and terms of available mortgage financing and the rates of return that are required to attract sufficient equity capital form the basis for allocating the net income between the mortgage and equity components and deriving a value estimate. Mortgage Component Data for the mortgage component may be developed from statistics of actual hotel mortgages made by long-term lenders. The American Council of Life Insurance, which represents 20 large life insurance companies, publishes quarterly information pertaining to the hotel mortgages issued by its member companies. The following table summarizes the average mortgage interest rates of the hotel loans made by these lenders. In addition, the average A corporate bond yield (as reported by Moody's Bond Record) is shown for the purpose of comparison. HVS International, Mineola, New York Income Capitalization Approach 119 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-27 Average Mortgage Interest Rates and Average A Corporate Bond Yields - -------------------------------------------------------------------------------- Average A Average Corporate Period Interest Rate Bond Yield - -------------------------------------------------------------------------------- 1st Quarter 1996 7.79 % 7.37 % 4th Quarter 1995 8.44 7.28 3rd Quarter 1995 8.61 7.67 2nd Quarter 1995 9.25 7.87 1st Quarter 1995 9.14 8.50 3rd Quarter 1994 9.64 8.48 2nd Quarter 1994 9.38 8.28 4th Quarter 1993 9.38 7.80 3rd Quarter 1993 8.41 7.28 2nd Quarter 1993 10.53 9.65 4th Quarter 1992 9.43 8.48 3rd Quarter 1992 9.99 8.38 2nd Quarter 1992 9.47 8.79 1st Quarter 1992 10.02 8.81 4th Quarter 1991 10.49 8.97 3rd Quarter 1991 10.03 9.29 2nd Quarter 1991 10.75 9.45 3rd Quarter 1990 10.47 9.89 2nd Quarter 1990 10.58 9.83 4th Quarter 1989 9.96 9.42 3rd Quarter 1989 9.55 9.46 2nd Quarter 1989 10.54 9.93 1st Quarter 1989 10.39 10.16 4th Quarter 1988 10.07 10.03 3rd Quarter 1988 10.66 10.51 2nd Quarter 1988 10.09 10.33 4th Quarter 1987 10.41 10.45 3rd Quarter 1987 10.00 9.95 2nd Quarter 1987 9.81 9.46 1st Quarter 1987 9.43 9.19 4th Quarter 1986 9.44 9.55 3rd Quarter 1986 9.56 9.71 2nd Quarter 1986 9.80 9.91 1st Quarter 1986 10.99 10.62 Source: American Council of Life Insurance; Moody's Bond Record - -------------------------------------------------------------------------------- Because of the six- to nine-month lag time in reporting and publishing hotel mortgage statistics, it is necessary to update this information to reflect current lending practices. Research by HVS International indicates that there is a close mathematical relationship between the average interest rate of a HVS International, Mineola, New York Income Capitalization Approach 120 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= hotel mortgage and the concurrent yield on an average A corporate bond. Through a regression analysis, this relationship is expressed as follows. Y = 2.76078 + 0.782280 X Where: Y = Estimated Hotel/Motel Mortgage Interest Rate X = Current Average A Corporate Bond Yield (Coefficient of correlation is 96.4%) The average yield on A corporate bonds for the third quarter of 1996, as reported by Moody's Bond Record, was 7.91%. Using a factor of 7.91% in the equation presented above produces an estimated hotel/motel interest rate of 8.95%. In addition to the mortgage interest rate estimate derived from this regression analysis, HVS International constantly monitors the terms of hotel mortgage loans made by our institutional lending clients. In the past year, we have noted an increase in the availability of debt financing, and many lenders have returned to the market. The current level of lending activity represents a significant increase from the restricted environment of the early 1990s. Nonetheless, the market for hotel mortgage loans remains somewhat tight, particularly when compared to the conditions that prevailed in the mid-to late 1980s. In the current lending climate, strong hotel projects that are structured on an economic basis can secure mortgage financing at interest rates ranging from 8% to 11%, depending on the property, location, affiliation, and operator. In the 1980s, when hotel mortgages were widely available, loan-to-value ratios typically ranged from 75% to 80%. Amortization schedules were generally based on 30 years, although the term of the loan was more likely to be seven to ten years. The few loans that were underwritten in the early 1990s were based on far more stringent parameters: loan-to-value ratios declined to a range of 50% to 65%, and amortization periods of 20 to 25 years were most common. With the recent reemergence of hotel financing, loan-to-value requirements and amortization schedules have loosened somewhat. At present, we find that lenders who are active in the market are using loan-to-value ratios of 65% to 75%, and amortization periods of 25 to 30 years. The exact terms offered depend on specific factors such as the property's location, the age and quality of the physical facility, local hostelry market conditions, and HVS International, Mineola, New York Income Capitalization Approach 121 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= (perhaps more significantly) the profile of the borrower. The strongest projects typically command the highest loan-to-value ratios. Based on the preceding analysis of the current lodging industry mortgage market and adjustments for specific factors such as the property's location and conditions in the local hotel market, it is our opinion that a 25-year amortization mortgage with a 9.5% interest rate and a 0.111856 constant is appropriate for the subject property. We believe that a mortgage lender will lend up to 70% of the hotel's market value as determined by this appraisal. Equity Component The remaining capital required for a hotel investment generally comes from the equity investor. The rate of return that an equity investor expects over a ten-year holding period is known as the equity yield. Unlike the equity dividend, which is a short-term rate of return, the equity yield specifically considers a long-term holding period (generally ten years), annual inflation-adjusted cash flows, property appreciation, mortgage amortization, and proceeds from a sale at the end of the holding period. It is difficult to quantify the rate of return required by equity investors who are seeking to purchase hotel properties. To establish an appropriate equity yield rate, HVS International uses two sources of data: past appraisals and investor interviews. Past Appraisals - During the past 12 months, HVS International has appraised more than 400 hotels, including properties located in most major national markets. Each appraisal used a similar mortgage-equity approach in which income is projected and then discounted to a current value at rates reflecting the cost of debt and equity capital. In the case of hotels that were sold subsequent to our valuations, we are able to determine an appropriate equity yield rate by excluding incentive management fees from the projection of income and expense, inserting the projection into a valuation model, and adjusting the appraised value to reflect the actual sales price by modifying the return assumptions. The following table shows a representative sample of hotels that were sold shortly after we appraised them, along with the imputed equity return based on our valuation approach. HVS International, Mineola, New York Income Capitalization Approach 122 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-28 Sample of Hotels Sold - --------------------------------------------------------------------------------
No. of Date of Overall Total Property Equity Hotel City and State Rooms Sale Sales Price Rate Yield Yield - ---------------------------------------------------------------------------------------------------------------------------------- Ritz-Carlton Phoenix, AZ 281 2/94 $23,000,000 11.0% 14.6% 21.7% Marriott Marina Fort Lauderdale, FL 580 2/94 40,000,000 12.2 16.4 26.7 Holiday Inn Edison, NJ 274 3/94 11,803,000 7.8 17.0 26.3 Crescent Hotel Phoenix, AZ 342 3/94 26,000,000 6.5 7.2 2.2 Checkers Hotel Kempinski Los Angeles, CA 173 4/94 12,750,000 3.0 18.3 27.0 Best Western Fireside Inn Cambria, CA 46 4/94 3,377,000 11.7 15.8 24.3 Phoenician Resort Phoenix, AZ 580 4/94 224,000,000 6.6 9.3 8.9 Newark-Fremont Hilton Newark, CA 300 5/94 8,950,000 8.8 14.9 20.7 Radisson Inn Orlando, FL 299 5/94 11,150,000 12.9 18.0 28.2 Westin Kauai Lihue, Kauai, HI 840 6/94 97,400,000 (1.9) 8.1 7.2 Residence Inn Binghamton, NY 72 6/94 6,325,000 10.8 13.9 21.9 Hotel Millenium New York, NY 561 6/94 75,000,000 9.5 14.1 23.0 Best Western Otay Valley Chula Vista, CA 120 7/94 2,350,000 13.2 21.1 31.8 Hampton Inn Islandia, NY 121 7/94 6,572,000 12.6 16.6 28.2 Hampton Inn Willow Grove, PA 150 7/94 10,220,000 11.0 14.3 23.0 Hampton Inn West Palm Beach, FL 136 7/94 4,220,000 10.8 10.8 14.3 Hampton Inn Naples, FL 107 7/94 5,700,000 11.4 11.5 24.9 Hampton Inn Albany, NY 126 7/94 9,204,000 9.3 11.5 15.8 Marriott Hotel South Bend, IN 299 7/94 11,500,000 10.5 13.2 18.9 Marriott SFO Burlingame, CA 684 8/94 61,700,000 10.2 13.2 19.0 Westfields Conference Center Chantilly, VA 340 8/94 46,000,000 12.3 15.9 25.3 Radisson Mark Resort Vail, CO 349 9/94 25,200,000 8.9 15.8 24.1 Marriott East Side New York, NY 664 10/94 55,000,000 8.5 9.7 11.1 Marriott Resort Vail, CO 349 10/94 25,200,000 14.2 18.9 30.5 Marriott Quorum Addison, TX 547 10/94 29,815,000 13.5 18.2 31.8 Sheraton Hotel Hasbrouck Heights, NJ 338 11/94 10,450,000 18.3 21.1 30.7 Sheraton Inn Napa, CA 191 12/94 9,968,000 8.9 13.7 19.8 Marriott Fisherman's Wharf San Francisco, CA 255 12/94 27,755,000 10.8 13.4 19.4 Marriott Hotel Portland, OR 503 12/94 45,000,000 12.9 17.4 30.0 Radisson Inn Springfield, MO 199 12/94 5,800,000 8.2 10.1 11.3 Williamsburg Hilton Williamsburg, VA 291 12/94 15,000,000 15.4 19.0 32.0 Marriott Tech Center Denver, CO 625 12/94 36,000,000 13.7 16.4 27.1 Holiday Inn Sunspree Singer Island, FL 222 12/94 11,900,000 8.6 10.6 12.4 The Plaza New York, NY 805 6/95 325,000,000 7.0 11.0 14.0 Fullerton Suites Fullerton, CA 96 5/95 5,000,000 12.9 18.7 28.5 Residence Inn Baton Rouge, LA 80 6/95 6,518,000 12.7 14.8 21.2 Residence Inn Overland Park, KS 112 6/95 8,500,000 8.9 14.7 20.8 Residence Inn Des Moines, IA 112 6/95 7,660,000 9.8 14.1 19.6 Residence Inn Hunt Valley, MD 96 6/95 6,580,000 12.3 13.6 18.3 Residence Inn Kansas City, MO 112 6/95 6,560,000 10.4 13.2 19.8 Residence Inn Lincoln, NE 120 6/95 7,100,000 10.0 13.7 18.5 Embassy Suites Schaurmburg, IL 209 12/95 17,800,000 10.0 13.5 18.9 Marriott Hotel Andover, MA 293 12/95 24,000,000 9.7 13.5 19.2 Doubletree Suites Valley Forge, PA 229 12/95 28,500,000 10.7 14.2 15.5 Marriott Hotel Tysons Corner, VA 390 12/95 41,100,000 10.7 13.1 18.0 Marriott Hotel Warner Center, CA 461 12/95 57,900,000 6.2 11.6 14.2 Hilton at the Club Pleasanton, CA 294 12/95 22,000,000 10.5 13.4 17.0
Source: HVS International - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 123 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Investor Interviews - HVS International is in constant contact with numerous institutional and individual hotel investors. These sources of equity funds have definite return requirements that can be expressed as an equity yield rate based on a ten-year projection of net income before incentive management fees but after debt service. Based on our surveys and investor interviews, the following table illustrates the range of equity yields generally required by individual and institutional investors. ================================================================================ Table 10-29 Equity Yield Requirements - -------------------------------------------------------------------------------- Source Equity Yield Requirement ------ ------------------------ Individual 20% - 24% Institution 18% - 22% - -------------------------------------------------------------------------------- Based on the assumed 70% loan-to-value ratio, the risk inherent in achieving the projected income stream, and the age, condition, and anticipated market position of the subject property, it is our opinion that an equity investor is likely to require an equity yield rate of 22.0% before payment of incentive management fees. This estimate is well supported by the equity yield requirements presented previously. Terminal Capitalization Rate Inherent in this valuation process is the assumption of a sale at the end of the ten-year holding period. The estimated reversionary sales price as of that date is calculated by capitalizing the projected 11th-year net income by an overall terminal capitalization rate. A percentage for the seller's brokerage and legal fees is deducted from this sales price, and the net proceeds to the equity interest (also known as the equity residual) are calculated by deducting the outstanding mortgage balance from the reversion. To estimate a property's reversionary value, the appraiser must select a terminal capitalization rate and an allocation for brokerage and legal fees. The terminal capitalization rate is an overall rate that is applied to one stabilized year, and thus it inherently incorporates the cost of debt and equity capital. The terminal capitalization rate can be derived through a mortgage and equity band of investment technique which calculates the weighted average cost of the capital used in a hotel investment. Combining the mortgage financing terms derived previously (namely, a 70% loan-to-value ratio and a 0.111856 debt service constant) with a cash-on-cash equity dividend rate of 12% produces the following overall capitalization rate. Because this overall rate will be used to capitalize net income ten years from the date of value, an HVS International, Mineola, New York Income Capitalization Approach 124 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= upward adjustment is appropriate to reflect the uncertainty inherent in this extended period. For the purpose of this valuation, we will use a terminal capitalization rate of 11.5%. As a point of reference, the terminal capitalization rate can be compared to the going-in rate implied by the subject property's estimated value. The going-in rate reflects the capitalization rate that would be applicable if the hotel were operating at a stabilized level as of the date of value. This rate is calculated by dividing the stabilized net income (expressed in current dollars as of the date of value) by the value indicated by the income capitalization approach. Generally, the terminal capitalization rate is approximately 100 to 200 basis points above the going-in rate. Summary of Valuation Variables The following table summarizes the valuation variables that have been used to estimate the subject property's value via the income capitalization approach. ================================================================================ Table 10-30 Summary of Valuation Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Forecast Loan-to-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.111856 Equity Yield Ye 22.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 11.5% - -------------------------------------------------------------------------------- Valuation of the Mortgage and Equity Components The valuation of the mortgage and equity components is accomplished through use of an algebraic equation that calculates the exact amount of debt and equity that the hotel will be able to support based on the anticipated cash flow (as derived from the forecast of income and expense) and the specific return requirements demanded by the mortgage lender (interest) and the equity investor (equity yield). The equation and the calculations associated with this simultaneous valuation formula are set forth in the Addenda to this report. Using the variables summarized above, we estimate the value of the subject property via the income capitalization approach at $6,700,000. HVS International, Mineola, New York Income Capitalization Approach 125 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Proof of Value The value is proven by calculating the yields to the mortgage and equity components during the projection period. If the mortgagee achieves a 9.5% yield and the equity yield is 22.0%, then roundly $6,700,000 is the correct value by the income capitalization approach. Using the assumed financial structure set forth in the previous calculations, market value can be allocated between the debt and equity as follows. Mortgage Component (70%) $4,705,000 Equity Component (30%) 2,016,000 ------------- Total $6,721,000 The annual debt service is calculated by multiplying the mortgage component by the mortgage constant. Mortgage Component $4,705,000 Mortgage Constant 0.111856 ----------- Annual Debt Service $526,281 The cash flow to equity is calculated by deducting the debt service from the projected net income before debt service. ================================================================================ Table 10-31 Forecast of Net Income to Equity - -------------------------------------------------------------------------------- Net Income Available for Net Income Year Debt Service Debt Service to Equity - ------------------------------------------------------------------------------ 1997 $688,000 - $526,000 = $162,000 1998 797,000 - 526,000 = 271,000 1999 824,000 - 526,000 = 298,000 2000 853,000 - 526,000 = 327,000 2001 884,000 - 526,000 = 358,000 2002 913,000 - 526,000 = 387,000 2003 946,000 - 526,000 = 420,000 2004 978,000 - 526,000 = 452,000 2005 1,014,000 - 526,000 = 488,000 2006 1,050,000 - 526,000 = 524,000 - -------------------------------------------------------------------------------- The equity residual at the end of the tenth year is calculated as follows. HVS International, Mineola, New York Income Capitalization Approach 126 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Reversionary Value ( $1,087,000 / 0.115) $9,452,000 Less: Brokerage and Legal Fees 284,000 Less: Mortgage Balance 3,389,000 ------------- Net Sale Proceeds to Equity $5,779,000 The overall property yield (before debt service), the yield to the lender, and the yield to the equity position have been calculated by computer with the following results. ================================================================================ Table 10-32 Overall Property Yields - -------------------------------------------------------------------------------- Projected Yield (Internal Rate of Return) Position Value Over 10-Year Holding Period - --------------------------------------------------------------------- Total Property $6,721,000 14.6% Mortgage 4,705,000 9.5 Equity 2,016,000 22.0 The following tables demonstrate that the property receives its anticipated yields, proving that the value of roundly $6,700,000 is correct based on the assumptions used in this approach. ================================================================================ Table 10-33 Total Property Yield - -------------------------------------------------------------------------------- Net Income Before Present Worth of $1 Discounted Year Debt Service Factor at 14.6% Cash Flow - ------------------------------------------------------------------------------ 1997 $688,000 x 0.872908 = $601,000 1998 797,000 x 0.761969 = 607,000 1999 824,000 x 0.665129 = 548,000 2000 853,000 x 0.580596 = 495,000 2001 884,000 x 0.506807 = 448,000 2002 913,000 x 0.442396 = 404,000 2003 946,000 x 0.386171 = 365,000 2004 978,000 x 0.337092 = 330,000 2005 1,014,000 x 0.294251 = 298,000 2006 10,219,000* x 0.256854 = 2,625,000 ----------- Total Property Value $6,721,000 *Tenth-year net income of $1,050,000 plus sales proceeds of $9,169,000 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 127 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-34 Mortgage Component Yield - -------------------------------------------------------------------------------- Present Worth of $1 Discounted Year Debt Service Factor at 9.5% Cash Flow - ------------------------------------------------------------------------------ 1997 $526,000 x 0.914314 = $481,000 1998 526,000 x 0.835969 = 440,000 1999 526,000 x 0.764338 = 402,000 2000 526,000 x 0.698845 = 368,000 2001 526,000 x 0.638963 = 336,000 2002 526,000 x 0.584213 = 307,000 2003 526,000 x 0.534154 = 281,000 2004 526,000 x 0.488384 = 257,000 2005 526,000 x 0.446536 = 235,000 2006 3,915,000 * x 0.408274 = 1,598,000 ----------- Value of the Mortgage Component $4,705,000 * Tenth-year debt service fo $526,000 plus outstanding mortgage balance of $3,389,000 ================================================================================ Table 10-35 Equity Component Yield - -------------------------------------------------------------------------------- Net Income Present Worth of $1 Discounted Year to Equity Factor at 22.0% Cash Flow - ------------------------------------------------------------------------------ 1997 $162,000 x 0.819610 = $133,000 1998 271,000 x 0.671761 = 182,000 1999 298,000 x 0.550582 = 164,000 2000 327,000 x 0.451263 = 148,000 2001 358,000 x 0.369860 = 132,000 2002 387,000 x 0.303141 = 117,000 2003 420,000 x 0.248458 = 104,000 2004 452,000 x 0.203638 = 92,000 2005 488,000 x 0.166904 = 81,000 2006 6,303,000 * x 0.136796 = 862,000 ----------- Value of the Equity Component $2,015,000 * Tenth-year net income ot equity of $524,000 plus sales proceeds of $5,779,000 - -------------------------------------------------------------------------------- Valuation Method Two: Discounted Cash Flow The total property yield derived from the previous valuation method was 14.6%. After reviewing the total property yields indicated by recent hotel sales, it is our opinion that a 15.0% discount factor is appropriate for the HVS International, Mineola, New York Income Capitalization Approach 128 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Ramada Plaza Pentagon. The following table illustrates the discounted cash flow analysis using this 15.0% factor. ================================================================================ Table 10-36 Discounted Cash Flow Analysis - -------------------------------------------------------------------------------- Discount Net Factor Discounted Year Income at 15.0% Cash Flow - ----------------------------------------------------------------------------- 1997 $688,000 x 0.86957 = $598,261 1998 797,000 x 0.75614 = 602,647 1999 824,000 x 0.65752 = 541,793 2000 853,000 x 0.57175 = 487,706 2001 884,000 x 0.49718 = 439,504 2002 913,000 x 0.43233 = 394,715 2003 946,000 x 0.37594 = 355,636 2004 978,000 x 0.32690 = 319,710 2005 1,014,000 x 0.28426 = 288,242 2006 10,218,609 * x 0.24718 = 2,525,884 ----------- Estimated Market Value $6,554,098 (Say) $6,600,000 Reversion Analysis 11th-Year Net Income $1,087,000 Capitalization Rate 11.5% ----------- Total Sales Proceeds $9,452,174 Less: Brokerage & Legal Fees at 3.0% 283,565 ----------- Net Sales Proceeds $9,168,609 *Tenth-year net income of $1,050,000 plus sales proceeds of $9,168,609 - -------------------------------------------------------------------------------- Conclusion Based on our extensive experience in the hotel industry and comprehensive support provided by literature published by the Appraisal Institute, it is our opinion that the valuation procedure embodied by Method One most closely reflects the investment rationale of typical hotel buyers. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis and Valuations,(1) Method Two (which discounts the projected net income and reversion using an overall discount rate, or total property yield) "does not consider the impact of mortgage debt, leverage and the specific equity demands of typical hotel investors...This technique is simple but less reliable because the derivation of the discount rate has little support." In light (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236 HVS International, Mineola, New York Income Capitalization Approach 129 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= of this consideration, we have relied on the $6,700,000 value conclusion indicated by Method One. HVS International, Mineola, New York Sales Comparison Approach 130 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 11. Sales Comparison Approach The sales comparison approach is based on the assumption that an informed purchaser will pay no more for a property than the cost to acquire an existing property with equal utility. This approach estimates market value by considering the sales prices indicated by recent transactions involving properties that are similar to the property being appraised. Dissimilarities are resolved with appropriate adjustments; these differences may pertain to the date of sale, the age of the property, location, construction, condition, layout, equipment, size, or external economic factors. The reliability of the sales comparison approach depends on three factors: 1. the availability of timely, comparable sales data; 2. an understanding of the true terms of the sales and the motivation of the buyer and seller; 3. the degree of comparability, or the extent of the adjustments needed to reflect differences between the subject property and the comparable property. In appraising lodging facilities, it is often difficult to find an adequate number of recent sales involving hotels that are truly comparable to the subject property. Consequently, it may be necessary to consider transactions involving properties in different market areas, and the required adjustments greatly diminish the reliability of the conclusions. Moreover, it is virtually impossible for an observer to determine the true motivations of the buyers and sellers involved in transactions. Hotel acquisition often represents a highly ego-driven process in which a number of external, non-market factors influence the purchase price. Unless the appraiser can quantify these influences, there is no way of knowing whether the purchase price paid actually reflects market value. A final consideration is the degree of similarity between the subject property and the comparable; in most cases, the differences are significant enough to require numerous subjective and unsubstantiated adjustments. Each adjustment represents a potential for error, HVS International, Mineola, New York Sales Comparison Approach 131 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= and thus diminishes the reliability of this approach. As a result of these shortcomings, the use of the sales comparison approach in valuing hotels is primarily as a check against the value indicated by the income capitalization approach. Hotel values declined in many areas of the country during the late 1980s and early 1990s, although a rebound began in 1994 and 1995. The downturn, which began in most markets in 1988, was largely attributable to lower operating incomes caused by an oversupply of new hotel rooms constructed during the mid-1980s. Overbuilding resulted in flat or declining average rates and occupancies, which caused revenues to fall. A number of other factors exacerbated the situation. The national recession caused a drop in demand in many markets during the early 1990s, and the Persian Gulf War created a virtual freeze on travel in the beginning of 1991, further limiting hotel demand. Operating costs continued to rise despite poor market conditions, resulting in a decline in the net operating income of hotels throughout the nation. Because operating costs have a large fixed component, many lodging facilities experienced precipitous drops in net income. As bottom-line profits eroded, many hotels were unable to meet debt service, and hundreds of properties entered foreclosure or bankruptcy. Lenders and government agencies soon became hotel owners. Because most financial institutions were preoccupied with their distressed real estate, very little mortgage capital was available and the nation suffered from a well-publicized credit crunch. Most hotel transactions that occurred during the early 1990s were financed by the property owners, who, in most cases, were lenders. In the early 1990s, the primary market participants were owner-operators with the expertise to turn around under-performing properties. Hotels were out of favor with passive investors as a result of the industry's poor operating performance and the uncertainty of future appreciation. The wide disparity in buyer and seller expectations also limited the number of transactions. Many sellers were unwilling to accept the fact that the market value of their hotel investments had declined below the cost of the project or the original investment. Moreover, many owners were faced with a significant tax burden upon sale, further reducing their willingness to settle for a price that was below the original acquisition cost. As a result of these market forces, there was very little sales activity involving large, high-quality hotels. The primary difficulty was the lack of HVS International, Mineola, New York Sales Comparison Approach 132 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= properties available for sale; owners who were not forced to sell opted to wait for prices to recover. The few hotels that did enter the market generally attracted 15 to 20 interested bidders, mostly consisting of owner-operators. As a result of the competition for these few assets, the prices of better-quality hotels began to escalate rapidly. In response, more sellers have been encouraged to place their products on the market. An indicator of this market trend is the number of hotel sales that have occurred during the past few years. HVS International tracks major hotel transactions of more than $10,000,000 on an annual basis. In 1992, the number of major transactions was 67; a slightly lower level of 52 was registered in 1993. This total increased significantly (to 92) in 1994, and the 1995 total is estimated to have been 104. In tandem with escalating prices, hotels are again being considered by traditional financing sources, which had virtually abandoned the hospitality industry by the early 1990s. Although many lenders are still approaching the market with a high degree of caution, it is now possible to obtain third-party financing for hotel transactions. The mortgage loans that are now being made are subject to fairly stringent requirements: loan-to-value ratios remain in the 65% to 75% range. The qualification of the borrower is also a crucial consideration for most lenders. We believe that the upward trend in both pricing and sales activity will continue as financing becomes more available and additional buyers (particularly passive investors) enter the market. Consequently, it is important to consider the date of the transactions used in the sales comparison approach. When the comparable sales are not recent enough to provide an accurate picture of the current market, it may be necessary to make upward adjustments to the values indicated by the sales comparison and income capitalization approaches in recognition of the recent escalation. Comparable Sales Based on information provided by the Hospitality Market Data Exchange and compiled by the six offices of HVS International, the following transactions involved hotels that appear to have some degree of comparability to the subject property. HVS International, Mineola, New York Sales Comparison Approach 133 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #1: Property: Courtyard by Marriott Location: Crystal City, Virginia Date of Sale: November 1, 1996 Sales Price: $28,000,000 Grantor: Rahn Properties Grantee: HEI Year Opened: 1990 Number of Rooms: 272 Price per Room: $102,941 Confirmed By: HEI Comments: All cash transaction Sale #2: Property: Comfort Inn Location: Alexandria, Virginia Date of Sale: August 8, 1996 Sales Price: $3,417,500 Grantor: Not available Grantee: Not available Year Opened: 1985 Number of Rooms: 188 Price per Room: $18,178 Sale #3: Property: Ramada Hotel Location: Montvale, New Jersey Date of Sale: May 1996 Sales Price: $6,700,000 Grantor: Lennar Corporation Grantee: Gami Lovale Year Opened: 1970 Number of Rooms: 187 Price per Room: $35,829 Confirmed by: Grantee HVS International, Mineola, New York Sales Comparison Approach 134 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #4: Property: Days Inn Location: Bensalem, Pennsylvania Date of Sale: July, 1995 Sales Price: $4,950,000 Grantor: South Charles Realty Grantee: Growth Property Investment Managers Number of Rooms: 136 Price per Room: $36,397 Confirmed By: Landauer Hotel Group Sale #5: Property: Holiday Inn Location: Waterbury, Connecticut Date of Sale: June, 1995 Sales Price: $7,850,000 Grantor: Buckingham Development Corporation Grantee: Oakdale College Limited Partnership Year Opened: 1990 Number of Rooms: 205 Price per Room: $38,293 Confirmed By: Arthur Anderson Sale #6: Property: Ramada Inn Location: Germantown, Maryland Date of Sale: May, 1995 Sales Price: $5,350,000 Grantor: Goldenrod Limited Partnership Grantee: Inn Keepers USA Limited Partnership Year Opened: NA Number of Rooms: 180 Price per Room: $29,722 Confirmed By: Eastdil Corp. Comments: This property was subsequently renovated and converted to a Hampton Inn HVS International, Mineola, New York Sales Comparison Approach 135 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #7: Property: Ramada Hotel Location: Falls Church, Virginia Date of Sale: April, 1995 Sales Price: $16,625,000 Grantor: Renaissance Hotel Operating Company Grantee: Tysons Corner Pt. L.P. Year Opened: 1975 Number of Rooms: 404 Price per Room: $41,151 Confirmed By: Blake and Associates Sale #8: Property: Comfort Inn Location: Abingdon, Virginia Date of Sale: February, 1995 Sales Price: $2,600,000 Grantor: B&R Enterprises Grantee: MRS Year Opened: NA Number of Rooms: 80 Price per Room: $32,500 In addition to considering the transactions outlined above, we have also reviewed the October, 1994 sale of the subject property. The details of this transaction are summarized as follows. Subject Property: Property: Ramada Plaza Pentagon Location: Alexandria, Virginia Date of Sale: October 4, 1994 Sales Price: $2,900,000 Grantor: Ramada Assured Income Associates, L.P. Grantee: Alexandria Virginia Hotel Ltd. Partnership (an entity controlled by the Ashford Financial Corporation) Year Opened: 1975 Number of Rooms: 193 Price per Room: $15,029 HVS International, Mineola, New York Sales Comparison Approach 136 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= It is important to consider the terms and conditions pertaining to the subject property's sale. According to information provided by the Ashford Financial Corporation, the subject property was one of six Ramadas that were purchased as a package from an investment partnership sponsored by Lehman Brothers. The price set forth above represents an allocation of the total package price rather than a negotiated value for this single asset. The total package price was $20,250,000, and was paid in cash. At the time of the transaction, the hotels were generating virtually no operating income as a group, and all were in extremely poor condition. Reports indicate that the previous owners were strongly motivated to sell as a result of the hotels' poor performance. Based on our understanding of the terms of this transaction, we do not believe that this sale was reflective of the market value of the individual hotel. The relevance of the transaction involving the subject property is also undermined by the significant change in market conditions that occurred between the date of this sale and the date of value of this appraisal. Areawide occupancy and average rate have improved in the intervening months, and this favorable trend is expected to continue. As previously discussed, the market for hotel investments has also improved significantly as a result of changes in lender and investor attitudes. Finally, the property itself has undergone a significant renovation, in which approximately $2,400,000 was spent to upgrade the facilities and amenities. For these reasons, it is our opinion that the October, 1994 sale of the subject property is not a reliable indicator of the hotel's current value. Conclusion Although the sales comparison approach may be useful in providing a value range and reflecting certain market characteristics, its applicability is limited by the numerous possible points of difference between the subject property and other hotels that have sold in recent years. These factors may include location, access, size, services and facilities offered, market conditions, chain affiliation, market orientation, management, rate structure, age, physical condition, date of sale, the highest and best use of the land, and the anticipated profitability of the operation. Circumstances surrounding a sale, such as financing terms, tax considerations, income guarantees, sales of partial interests, duress on the part of the buyer or seller, or a particular deal structure can also cause a disparity between the sales price and pure market value. Moreover, it is often difficult to determine the marketing periods that were necessary to consummate the transactions. It is extremely difficult to quantify the appropriate adjustment factors accurately because of their number and complexity, as well as the difficulty in obtaining specific, HVS International, Mineola, New York Sales Comparison Approach 137 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= detailed information. Any attempt to manipulate the necessary adjustments is insupportable and purely speculative. Because appraisers are expected to reflect the analytical processes and actions of typical buyers and sellers rather than to create a highly subjective valuation approach, the investment rationale of hotel owners is an essential consideration. As specialists in the valuation of hotels, we find that typical buyers purchase properties based on a thorough analysis of the anticipated economic benefits of property ownership, rather than on historical sales data. In light of these factors, it is our opinion that the sales comparison approach is unsuitable for indicating a specific estimate of the subject property's market value; however, this approach may indicate a range of values that can be used to test the reasonableness of the value indicated by the income capitalization approach. The overall range of prices indicated by the eight comparable hotel sales is $18,178 to $102,941 per room; however, because a majority of the prices fall in a much narrower range, we have eliminated the two sales that form the high and low ends of the overall range (the sales of the Courtyard by Marriott in Alexandria and the Comfort Inn in Alexandria). Excluding these transactions and the prior sale of the subject property yields a range of roundly $29,700 to $41,200 per room, or approximately $5,700,000 to $8,000,000 for the 193-unit subject property. The income capitalization approach indicates a value of $6,700,000, which falls within this range. HVS International, Mineola, New York Cost Approach 138 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 12. Cost Approach The cost approach is founded on the principle of substitution, which implies that no prudent person will pay more for a property than the amount needed to acquire a site and construct a building of equal desirability and utility without undue delay. This approach estimates market value by first calculating the current cost of replacing the improvements. Appropriate deductions are made for depreciation resulting from physical deterioration, functional obsolescence, and external (economic) obsolescence, and the land value is added to the depreciated replacement cost to provide an estimate of market value. The cost approach employs the following steps. 1. The current replacement or reproduction cost is estimated. 2. Land value is estimated using techniques such as allocation, extraction, or ground rent capitalization. 3. Accrued depreciation, which can be divided into physical deterioration, functional obsolescence, and external obsolescence, is estimated. 4. Total depreciation is deducted from the subject property's replacement cost, and the land value is added to arrive at an estimate of value via the cost approach. When forming their purchase decisions regarding existing properties, market participants tend to consider the cost of developing a new hotel with optimal physical and functional utility. External conditions, such as a depressed market for real estate, can cause a property to be worth less than its replacement cost as new. The task of estimating the loss in value resulting from incurable functional and external obsolescence is highly subjective. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements age and begin to deteriorate, the loss in value resulting from physical obsolescence becomes increasingly difficult to quantify accurately. Loss in value HVS International, Mineola, New York Cost Approach 139 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= attributable to functional obsolescence can be even more difficult to determine. The subject property was constructed in 1975, and thus is approximately 21 years old as of the date of this appraisal. The property is in moderate to good physical condition following a renovation in 1995, but some signs of physical deterioration remain. The depressed hotel market conditions that prevailed in the late 1980s and the early 1990s have also led to a degree of external obsolescence. In our opinion, it is impossible to identify and quantify the impact of these factors on the property's value with any accuracy, so we will only estimate the hotel's replacement cost. Replacement Cost Replacement cost is the current construction cost of a building with the same utility as the subject property, but built with modern materials and according to current construction and design standards. For the purpose of estimating the replacement cost of the subject property, we have used a hotel development cost survey conducted by HVS International. This survey is published annually in a newsletter entitled The Hotel Valuation Journal, and appeared in the May issue of Lodging Hospitality. The survey presents the range of per-room costs associated with various components of hotel development, including the improvements, the furniture, fixtures, and equipment, pre-opening expenses, and operating capital. Statistics are compiled for three broad categories of hotels: luxury, standard, and economy. The results of this survey are presented in the following table. HVS International, Mineola, New York Cost Approach 140 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 12-1 Hotel Development Cost Survey (Amounts per Room) - --------------------------------------------------------------------------------
Improvements Furniture & Equipment Pre-Opening Operating Capital Total Percent Change - ------------------------------------------------------------------------------------------------------------------------------------ 1976 Luxury $32,000 - $55,000 $5,000 - $10,000 $1,000 - $2,000 $1,000 - $1,500 $39,000 - $68,500 --- - --- Standard 20,000 - 32,000 3,000 - 6,000 750 - 1,000 750 - 1,000 24,500 - 40,000 --- --- Economy 8,000 - 15,000 2,000 - 4,000 500 - 1,000 500 - 750 11,000 - 20,750 --- - --- 1979 Luxury 36,000 - 65,000 8,000 - 15,000 1,500 - 3,000 1,500 - 2,000 47,000 - 85,000 6.8 - 8.0 Standard 25,000 - 36,000 5,000 - 10,000 1,000 - 2,000 1,000 - 1,500 32,000 - 49,500 10.2 - 7.9 Economy 10,000 - 20,000 3,000 - 5,000 750 - 1,000 750 - 1,000 14,500 - 27,000 10.6 - 10.0 1981 Luxury 45,000 - 80,000 10,000 - 20,000 2,000 - 3,500 2,000 - 2,500 59,000 - 106,000 12.8 - 12.4 Standard 25,000 - 40,000 7,000 - 13,000 1,200 - 2,500 1,200 - 2,000 34,400 - 57,500 3.8 - 8.1 Economy 13,000 - 25,000 4,000 - 7,000 700 - 1,200 900 - 1,200 18,600 - 34,400 14.1 - 13.7 1983 Luxury 55,000 - 100,000 12,500 - 20,000 2,300 - 4,000 2,000 - 2,800 71,800 - 126,800 10.8 - 9.8 Standard 35,000 - 50,000 9,000 - 15,000 1,400 - 3,000 1,300 - 2,200 46,700 - 70,200 17.9 - 11.0 Economy 18,000 - 32,000 5,000 - 8,000 800 - 1,500 900 - 1,300 24,700 - 42,800 16.4 - 12.2 1985 Luxury 60,000 - 115,000 13,400 - 30,000 3,000 - 5,000 2,100 - 3,100 78,500 - 153,100 4.7 - 10.4 Standard 38,000 - 57,000 9,500 - 16,500 1,900 - 3,600 1,500 - 2,500 50,900 - 79,600 4.5 - 6.7 Economy 20,000 - 36,000 5,000 - 8,800 1,000 - 1,700 1,000 - 1,500 27,000 - 48,000 4.7 - 6.1 1986 Luxury 62,000 - 120,000 13,700 - 30,600 3,100 - 5,200 2,300 - 3,100 81,100 - 158,900 3.3 - 3.8 Standard 39,000 - 60,000 9,700 - 16,800 2,000 - 3,800 1,500 - 2,600 52,200 - 83,200 2.6 - 4.5 Economy 21,000 - 37,000 5,100 - 9,000 1,000 - 1,800 1,100 - 1,500 28,200 - 49,300 4.4 - 2.7 1987 Luxury 63,000 - 122,000 13,800 - 30,900 3,300 - 5,500 2,300 - 3,200 82,400 - 161,600 1.6 - 1.7 Standard 40,000 - 61,000 9,800 - 16,800 2,100 - 3,900 1,500 - 2,600 53,400 - 84,300 2.3 - 1.3 Economy 21,000 - 39,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 28,400 - 51,400 0.7 - 4.3 1988 Luxury 65,000 - 125,000 14,000 - 31,000 3,300 - 5,500 2,300 - 3,200 84,600 - 164,700 2.7 - 1.9 Standard 41,000 - 63,000 10,000 - 17,100 2,100 - 3,900 1,500 - 2,600 54,600 - 86,600 2.2 - 2.7 Economy 22,000 - 40,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 29,400 - 52,400 3.5 - 1.9 1989 Luxury 66,000 - 126,000 15,000 - 32,000 3,300 - 5,500 2,300 - 3,200 86,600 - 166,700 2.4 - 1.2 Standard 41,000 - 64,000 10,500 - 18,000 2,100 - 3,900 1,500 - 2,600 55,100 - 88,500 0.9 - 2.2 Economy 22,000 - 40,000 5,500 - 9,700 1,100 - 1,800 1,100 - 1,500 29,700 - 53,000 1.0 - 1.1 1990 Luxury 67,000 - 128,000 15,400 - 33,000 3,500 - 5,700 2,500 - 3,500 88,400 - 170,200 2.1 - 2.1 Standard 42,000 - 65,000 10,800 - 18,500 2,200 - 4,000 1,600 - 2,800 56,600 - 90,300 2.7 - 2.0 Economy 22,500 - 41,000 5,600 - 10,000 1,200 - 1,800 1,200 - 1,600 30,500 - 54,400 2.7 - 2.6 1991 Luxury 65,000 - 122,000 14,500 - 31,500 3,700 - 5,900 2,600 - 3,600 85,800 - 163,000 (2.9) - (4.2) Standard 40,000 - 63,000 10,000 - 17,800 2,300 - 4,200 1,700 - 2,900 54,000 - 87,900 (4.6) - (2.7) Economy 21,000 - 39,000 5,000 - 9,500 1,300 - 2,000 1,300 - 1,700 28,600 - 52,200 (6.2) - (4.0) 1992 Luxury 64,000 - 120,000 14,200 - 30,900 3,800 - 6,100 2,700 - 3,700 84,700 - 160,700 (1.3) - (1.4) Standard 39,000 - 62,000 9,800 - 17,400 2,300 - 4,400 1,800 - 3,000 52,900 - 86,800 (2.0) - (1.3) Economy 21,000 - 38,000 4,900 - 9,300 1,400 - 2,100 1,300 - 1,800 28,600 - 51,200 0.0 - (1.9) 1993 Luxury 63,000 - 119,000 14,000 - 30,500 3,900 - 6,200 2,800 - 3,800 83,700 - 159,500 (1.2) - (0.7) Standard 39,000 - 61,000 9,700 - 17,200 2,300 - 4,500 1,800 - 3,000 52,800 - 85,700 (0.2) - (1.3) Economy 21,000 - 38,000 4,900 - 9,200 1,400 - 2,100 1,300 - 1,800 28,600 - 51,100 0.0 - (0.2) 1994 Luxury 64,000 - 121,000 14,300 - 31,100 3,900 - 6,200 2,800 - 3,800 85,000 - 162,100 1.6 - 1.6 Standard 40,000 - 63,000 10,000 - 17,600 2,400 - 4,600 1,800 - 3,000 54,200 - 88,200 2.7 - 2.9 Economy 22,000 - 40,000 5,100 - 9,500 1,500 - 2,200 1,300 - 1,800 29,900 - 53,500 4.5 - 4.7 1995 Luxury 65,000 - 124,000 14,800 - 32,300 4,100 - 6,400 2,900 - 4,000 86,800 - 166,700 2.1 - 2.8 Standard 41,000 - 65,000 10,400 - 18,300 2,500 - 4,800 1,900 - 3,100 55,800 - 91,200 3.0 - 3.4 Economy 23,000 - 42,000 5,400 - 9,900 1,600 - 2,300 1,300 - 1,800 31,300 - 56,000 4.7 - 4.7
Average Annual Compounded Percent Change: 1976 - 1995: Luxury 4.3% - 4.8% 1986 - 1995: Luxury 0.8% - 0.5% Standard 4.4% - 4.4% Standard 0.7% - 1.0% Economy 5.7% - 5.4% Economy 1.2% - 1.4% - -------------------------------------------------------------------------------- HVS International, Mineola, New York Cost Approach 141 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= As illustrated by the previous table, hotel development costs rose significantly during the late 1970s and the early 1980s; however, the rate of increase slowed substantially in 1987. In 1991, hotel development costs declined for the first time since 1976. Further drops of as much as 2.0% were registered in 1992. Between 1986 and 1990, average annual compounded increases ranged from 1.7% to 2.5%. Costs rose slowly (at average annual compounded rates ranging from 0.5% to 1.4%) between 1986 and 1995, largely as a result of the declines in 1991, 1992, and 1993. In 1995, hotel development costs started to escalate more rapidly, reaching 4.7% in the economy segment. As more hotels are developed, we expect costs to continue to rise. Because the replacement cost tends to set the upper limit of a particular hotel's value, this figure is relevant to our analysis. We estimate the replacement cost of the subject property as follows, based on the development cost survey discussed earlier. ================================================================================ Table 12-2 Subject Property's Replacement Cost - -------------------------------------------------------------------------------- Cost No. of Hotel Cost per Room Rooms Total Cost - ------------------------------------------------------ Building $35,000 193 $6,755,000 FF&E 6,000 193 1,158,000 Pre-Opening 2,100 193 405,300 Operating Capital 1,500 193 289,500 - ----------------------------------------------------- Total $44,600 $8,607,800 - -------------------------------------------------------------------------------- Ground Lease Approach to Land Valuation Land value may be estimated either by the sales comparison approach, using comparable land sales, or by the ground lease approach, which is based on the economic value generated by an improvement that represents the property's highest and best use. Because it is unusual to find recent sales of comparable vacant land that is slated for imminent hotel development, we have used the ground lease approach to determine the subject property's land value. Hotels are often constructed on leased land, and although lease terms differ somewhat, the basis for the rental calculation is frequently tied to a percentage of revenue. By applying a typical ground lease rental formula to the subject property's stabilized revenues, the appraiser can determine the hotel's economic rent, or what is also known as the income attributable to the HVS International, Mineola, New York Cost Approach 142 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= land. Land value is then calculated by dividing the economic rent by an appropriate capitalization rate. The self-adjusting aspect of this approach is key to its reliability. Because the rental formula is tied to a percentage of revenue that inherently reflects both the locational attributes of the site (occupancy and rate) and the allowable density of development, the resulting economic ground rent justly represents the greatest net return to the land over a given period. Because the Ramada Plaza Pentagon appears to represent the highest and best use of the property, the ground lease approach is an appropriate method of determining land value. We have researched long-term hotel ground leases in search of rental formulas that are based on a percentage of rooms revenue or on a combination of rooms, food, and beverage revenue. This analysis indicates that economic ground rents for hotels similar to the subject property typically range from 2.7% to 7.8% of rooms revenue. Although this range is quite broad, most of the formulas yield rental percentages of between 3% and 5% of rooms revenue. After considering these comparable ground leases and the locational attributes of the subject property, we believe the appropriate economic ground rental percentage is 4.0% of stabilized rooms revenue. The subject property's stabilized rooms revenue has been deflated to reflect 1997 dollars. The following calculation shows the derivation of the subject property's economic ground rent. Stabilized Rooms Revenue (1997 dollars) $3,198,068 Rental Percentage 0.04 ---------- Economic Ground Rent $127,923 Rent generated by a ground lease represents a fairly low-risk income flow. Because the tenant improvements typically amount to more than eight times the value of the land, the risk of default is low. When the ground lease terms are tied to rooms revenue, the landlord is also protected from the adverse effects of inflation. Based on these risk factors and the current cost of long-term capital, we estimate the appropriate ground rental overall capitalization rate at 10%. Applying this indicated capitalization rate to the subject property's economic ground rent yields the following estimate of land value. HVS International, Mineola, New York Cost Approach 143 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Economic Ground Rent $127,923 $1,279,227 - ----------------------------- = ----------- = Capitalization Rate 0.10 Estimated Land Value (Say) $1,280,000 A new hotel's land value typically ranges from 10% to 20% of the overall value. The estimate of land value presented above is approximately 19% of the subject property's total value as indicated by the income capitalization approach. Replacement Cost Combining the replacement cost of the property with the land value and adding a developer's profit of 15% yields the subject property's total replacement cost. ================================================================================ Table 12-3 Total Replacement Cost - -------------------------------------------------------------------------------- Cost of the Improvements and FF&E $8,607,800 Land Value 1,280,000 Add: Developer's Profit 1,483,170 --------------- Total Replacement Cost $11,370,970 (Say) $11,400,000 - -------------------------------------------------------------------------------- If a property's replacement cost is significantly higher than the values indicated by the income capitalization and sales comparison approaches, it may indicate that an upward adjustment of these values is appropriate. This would also reduce the probability of new hotel development, which is not likely to be feasible under those conditions. This creates an effective barrier to entry for new competition, thus reducing the risk associated with the subject property's income-generating potential. An upward adjustment of the value indicated by the income capitalization approach is also justified by this barrier to entry. We find that knowledgeable hotel buyers generally base their purchase decisions on economic factors, such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, it is our opinion that this technique is inapplicable in estimating the market value of the Ramada Plaza Pentagon. However, we have estimated the subject property's replacement cost as new, which may set the upper limit of the hotel's value. HVS International, Mineola, New York Reconciliation of Value Indications 144 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 13. Reconciliation of Value Indications The reconciliation, which is the last step in the appraisal process, involves summarizing and correlating the data and procedures employed throughout the analysis. The final conclusion of value is arrived at after reviewing the estimates indicated by the income capitalization, sales comparison, and cost approaches. The relative significance, applicability, and defensibility of each indicated value is considered, and the greatest weight is given to that approach deemed most appropriate for the property being appraised. The purpose of this report is to estimate the market value of the fee simple interest in the subject property. Our appraisal involves a careful analysis of the property itself and the economic, demographic, political, physical, and environmental factors that influence real estate values. Based on the data set forth in this report, the following value indications were developed. Approach Value Indication -------- ---------------- Income Capitalization $6,700,000 Sales Comparison $5,700,000 - $8,000,000 Cost (Replacement Cost) $11,400,000 Income Capitalization Approach To estimate the subject property's value via the income capitalization approach, we analyzed the local market for transient accommodations, examined the competitive environment, projected occupancy and average rate levels, and developed a forecast of income and expense that reflects anticipated income trends and cost components through a stabilized year of operation. The subject property's projected net income before debt service was then allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component was calculated; the total of the mortgage and equity components equates to the value of the property. HVS International, Mineola, New York Reconciliation of Value Indications 145 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Our nationwide experience indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the hotel investors who constitute the marketplace. For this reason, we believe that the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in our final estimate of the subject property's market value. Sales Comparison Approach The sales comparison approach uses actual sales of similar properties to provide an indication of the subject property's value. The strength of this approach is that it measures value based on the investment decisions made by actual buyers and sellers. Although we have investigated a number of sales in an attempt to develop a range of value indications, several adjustments are necessary to render the sales prices applicable to the subject property. These adjustments, which are numerous and highly subjective, diminish the reliability of the sales comparison approach. Furthermore, we find that typical hotel investors employ a sales comparison procedure only to establish broad value parameters. The hotel sales outlined earlier in this report indicate an adjusted value range of $29,700 to $41,200 per available room. The income capitalization approach indicates a per-room value of approximately $34,800. This information suggests that a slight downward adjustment of the value indicated by the income capitalization approach may be warranted. Cost Approach To estimate the subject property's value via the cost approach, we estimated the current replacement cost of the property and added the land value. We give the cost approach limited weight in arriving at a final value estimate, because knowledgeable buyers of lodging facilities generally base their purchase decisions on economic factors (such as projected net income and return on investment) rather than on a property's depreciated replacement cost. The replacement cost estimate developed via the cost approach can help to corroborate the results of the income capitalization and sales comparison approaches to value. If the replacement cost is substantially higher or lower than the value indicated by the income capitalization approach, an upward or downward adjustment of the income capitalization approach value may be necessary. In the Alexandria/Arlington market, land costs are extremely high, which poses a strong barrier to market entry; this is a primary reason why the subject property's replacement cost is somewhat higher than HVS International, Mineola, New York Reconciliation of Value Indications 146 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the values indicated by the income capitalization and sales comparison approaches. Value Conclusion Careful consideration has been given to the strengths and weaknesses of the three approaches to value discussed above. In recognition of the purpose of this appraisal, we have given primary weight to the value indicated by the income capitalization approach and made some subjective adjustments based on the sales comparison approach, the replacement cost estimate, and our extensive experience in the hospitality industry. It is our opinion that the market value of the fee simple interest in the Ramada Plaza Pentagon in Alexandria, Virginia, as of January 1, 1997, is: $6,600,000 SIX MILLION SIX HUNDRED THOUSAND DOLLARS The estimate of market value includes the land, the improvements, and the furniture, fixtures, and equipment. The appraisal assumes that the hotel is open and operational. This value estimate equates to roundly $34,200 per room, which is well supported by market sales and approximately 2% lower than the value indicated by the income capitalization approach. The estimate of value assumes either the availability of third-party financing or the willingness and capability of the seller to take back purchase-money financing so that a buyer can obtain the level of debt set forth in the Income Capitalization Approach section of this appraisal. Marketing Period Our estimate of market value assumes a marketing period of six to nine months. Under normal economic conditions, hotels are transferred within this time frame. Personal Property In accordance with the appraisal standards set forth by the Office of the Comptroller of the Currency, it is necessary for bank appraisals to identify and value any personal property, fixtures, or intangible items that are included in the appraisal and discuss their impact on the overall estimate of market value. A hotel's income-generating ability depends on a suitable inventory of furniture, fixtures, and equipment. Removal of these items can decrease the property value by as much as the cost to replace the inventory plus the loss of income incurred while the hotel cannot function. HVS International, Mineola, New York Reconciliation of Value Indications 147 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= A hotel's personal property consists of a wide variety of components, including bedroom furnishings, bathroom fixtures, restaurant and kitchen equipment, front office and accounting computers, exterior signs, and similar items. Based on an annual construction cost survey conducted by HVS International, we estimate the total replacement cost of the subject property's furniture, fixtures, and equipment at $6,000 per available room. Assuming an average useful life of ten years and an effective age of four years, the value of the furniture, fixtures, and equipment currently in place is approximately $3,600 per room, or a total of $694,800. Because furniture, fixtures, and equipment are essential to a hotel's income-generating ability and are seldom removed from the property or sold separately, the separation of the personal property component from the real property is not particularly meaningful. HVS International, Mineola, New York Statement of Assumptions and 148 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 14. Statement of Assumptions and Limiting Conditions 1. This report is to be used in whole and not in part. 2. No responsibility is assumed for matters of a legal nature, nor do we render any opinion as to title, which is assumed to be marketable and free of any deed restrictions and easements. The property is valued as though free and clear unless otherwise stated. 3. We assume that there are no hidden or unapparent conditions of the sub-soil or structures, such as underground storage tanks, that would render the property more or less valuable. No responsibility is assumed for these conditions or for any engineering that may be required to discover them. 4. We have not considered the presence of potentially hazardous materials such as asbestos, urea formaldehyde foam insulation, PCBs, any form of toxic waste, polychlorinated biphengyls, pesticides, or lead-based paints. The appraisers are not qualified to detect hazardous substances, and we urge the client to retain an expert in this field if desired. 5. The Americans with Disabilities Act (ADA) became effective on January 26, 1992. We have conducted no specific compliance survey to determine whether the subject property is operating in accordance with the various detailed requirements of the ADA. It is possible that the property does not conform to the requirements of the act, and this could have an unfavorable effect on value. Because we have no direct evidence regarding this issue, our estimate of value does not consider possible non-compliance with the ADA. 6. We have made no survey of the property, and we assume no responsibility in connection with such matters. Sketches, photographs, maps, and other exhibits are included to assist the reader in visualizing the property. It is assumed that the use of the land and improvements is HVS International, Mineola, New York Statement of Assumptions and 149 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= within the boundaries of the property described, and that there is no encroachment or trespass unless noted. 7. All information, financial operating statements, estimates, and opinions obtained from parties not employed by HVS International are assumed to be true and correct. We can assume no liability resulting from misinformation. 8. Unless noted, we assume that there are no encroachments, zoning violations, or building violations encumbering the subject property. 9. The property is assumed to be in full compliance with all applicable federal, state, local, and private codes, laws, consents, licenses, and regulations (including a liquor license where appropriate), and that all licenses, permits, certificates, franchises, and so forth can be freely renewed or transferred to a purchaser. 10. All mortgages, liens, encumbrances, leases, and servitudes have been disregarded unless specified otherwise. 11. None of this material may be reproduced in any form without our written permission, and the report cannot be disseminated to the public through advertising, public relations, news, sales, or other media. 12. We are not required to testify or appear in court by reason of this analysis without previous arrangements, and only when our standard per diem fees and travel costs are paid prior to the appearance. 13. If the reader is making a fiduciary or individual investment decision and has any questions concerning the material presented in this report, it is recommended that the reader contact us. 14. We take no responsibility for any events or circumstances that take place subsequent to either the date of value or the date of our field inspection, whichever occurs first. 15. The quality of a lodging facility's on-site management has a direct effect on a property's economic viability and value. The financial forecasts presented in this analysis assume responsible ownership and competent management. Any departure from this assumption may have a significant impact on the projected operating results and the value estimate. 16. The estimated operating results presented in this report are based on an evaluation of the overall economy, and neither take into account nor HVS International, Mineola, New York Statement of Assumptions and 150 Limiting Conditions - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= make provision for the effect of any sharp rise or decline in local or national economic conditions. To the extent that wages and other operating expenses may advance during the economic life of the property, we expect that the prices of rooms, food, beverages, and services will be adjusted to at least offset those advances. We do not warrant that the estimates will be attained, but they have been prepared on the basis of information obtained during the course of this study and are intended to reflect the expectations of a typical hotel buyer. 17. This analysis assumes continuation of all Internal Revenue Service tax code provisions as stated or interpreted on either the date of value or the date of our field inspection, whichever occurs first. 18. Many of the figures presented in this report were generated using sophisticated computer models that make calculations based on numbers carried out to three or more decimal places. In the interest of simplicity, most numbers have been rounded to the nearest tenth of a percent. Thus, these figures may be subject to small rounding errors. 19. It is agreed that our liability to the client is limited to the amount of the fee paid as liquidated damages. Our responsibility is limited to the client, and use of this report by third parties shall be solely at the risk of the client and/or third parties. The use of this report is also subject to the terms and conditions set forth in our engagement letter with the client. 20. Appraising hotels is both a science and an art. Although this analysis employs various mathematical calculations to provide value indications, the final estimate is subjective and may be influenced by our experience and other factors not specifically set forth in this report. 21. Any distribution of the total value between the land and improvements or between partial ownership interests applies only under the stated use. Moreover, separate allocations between components are not valid if this report is used in conjunction with any other analysis. 22. This study was prepared by Hospitality Valuation Services, a division of Hotel Consulting Services, Inc. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of Hotel Consulting Services, Inc. as employees, rather than as individuals. HVS International, Mineola, New York Certification 151 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 15. Certification We, the undersigned appraisers, hereby certify: 1. that the statements and opinions presented in this report, subject to the limiting conditions set forth, are correct to the best of our knowledge and belief; 2. that Christopher J. Doherty and Anne R. Lloyd-Jones personally inspected the property described in this report; Stephen Rushmore participated in the analysis and reviewed the findings, but did not personally inspect the property; 3. that we have no current or contemplated interests in the real estate that is the subject of this report; 4. that we have no personal interest or bias with respect to the subject matter of this report or the parties involved; 5. that this report sets forth all of the limiting conditions (imposed by the terms of this assignment) affecting the analyses, opinions, and conclusions presented herein; 6. that the fee paid for the preparation of this report is not contingent upon our conclusions; 7. that this report has been prepared in accordance with, and is subject to, the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute; 8. that the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives; 9. that this report has been prepared in accordance with the Uniform Standards of Professional Appraisal Practice (as adopted by the Appraisal Foundation); HVS International, Mineola, New York Certification 152 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 10. that no one other than the undersigned prepared the analyses, conclusions, and opinions concerning real estate that are set forth in this appraisal report; 11. that as of the date of this report, Stephen Rushmore has completed the requirements of the continuing education program of the Appraisal Institute; 12. that this appraisal is not based on a requested minimum value, a specific value, or the approval of a loan. /s/ Christopher J. Doherty -------------------------------- Christopher J. Doherty Consulting and Valuation Analyst Hotel Consulting Services, Inc. /s/ Anne R. Lloyd-Jones -------------------------------- Anne R. Lloyd-Jones, CRE Senior Vice President Hotel Consulting Services, Inc. /s/ Stephen Rushmore -------------------------------- Stephen Rushmore, CRE, MAI, CHA President Hotel Consulting Services, Inc. HVS International Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] An exterior view of the Subject Property HVS International Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] View of the Subject Property's front desk and partial view of lobby [GRAPHIC OMITTED] View of a typical double\double guestroom at the Subject Property HVS International Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] View of one of the Subject Property's meeting rooms [GRAPHIC OMITTED] View of Subject Property's restaurant/bar HVS International Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] View of the Subject Property's Pool area [GRAPHIC OMITTED] View of the Subject Property's Parking Garage HVS International Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] View of a typical bathroom HVS International Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] View of Subject Property's business center HVS International Mineola, New York Photographs of the Subject Property - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] View of guestroom corridor HVS International Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Hampton Inn [GRAPHIC OMITTED] Best Western Arlington Inn & Tower HVS International Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Holiday Inn Eisenhower HVS International Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Ramada Plaza Old Town HVS International Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Courtyard by Marriott Crystal City HVS International Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Days Inn Crystal City HVS International Mineola, New York Photographs of the Competition - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Howard Johnson Hotel Ramada Inn Alexandria, VA Legal Description BEGINNING AT A POINT IN THE WESTERN LINE OF KENMORE AVENUE, SAID POINT BEING A COMMON CORNER OF PARCEL 3986-01-01 AND PARCEL 3986-01-02; THENCE IN THE LINE OF SAID PARCELS THE TWO FOLLOWING COURSES AND DISTANCES: 1.) N 69(degrees)45'00" W A DISTANCE OF 160.28 FEET; 2.) S 53(degrees)02'44" E A DISTANCE OF 134.37 FEET TO A POINT IN THE EASTERN LINE OF SEMINARY ROAD; THENCE IN THE SAID EASTERN LINE THE THREE FOLLOWING COURSES AND DISTANCES: 1.) N 36(degrees)57'15" W A DISTANCE OF 111.86 FEET; 2.) N 31(degrees)38'09" W A DISTANCE OF 147.08 FEET; 3.) N 38(degrees)20'22" F A DISTANCE OF 6.09 FEET TO A POINT OF CURVATURE IN THE SOUTHERN LINE OF N. VAN DORN STREET; THENCE IN THE SAID SOUTHERN LINE THE FIVE FOLLOWING COURSES AND DISTANCE: 1.) ALONG THE ARC OF A CURVE TO THE LEFT WITH A RADIUS OF 767.00 FEET WHOSE CHORD BEARING AND CHORD ARE N 70(degrees)46'36" E A DISTANCE OF 20.48 FEET TO A POINT OF TANGENCY; 2.) N 71(degrees)32'30" E A DISTANCE OF 82.63 FEET TO A POINT OF CURVATURE; 3.) 95.97 FEET ALONG THE ARC OF A CURVE TO THE LEFT WITH A RADIUS OF 633.00 FEET WHOSE CHORD BEARING AND CHORD ARE N 67(degrees)11'55" E A DISTANCE OF 95.87 FEET; 4.) N 62(degrees)51'19" E A DISTANCE OF 199.17 FEET; 5.) 219.68 FEET ALONG THE ARC OF A CURVE TO THE RIGHT WITH A RADIUS OF 90.00 FEET WHOSE CHORD BEARING AND CHORD ARE S 47(degrees)13'10" E A DISTANCE OF 169.06 FEET TO A POINT OF COMPOUND CURVATURE IN THE WESTERN LINE OF KENMORE AVENUE; THENCE IN THE SAID WESTERN LINE THE FOLLOWING TWO COURSES AND DISTANCES: 1.) 18.56 FEET ALONG THE ARC OF A CURVE TO THE LEFT WITH A RADIUS OF 433.00 FEET WHOSE CHORD BEARING AND CHORD ARE S 21(degrees)28'41" W A DISTANCE OF 18.56 FEET; 2.) S 20(degrees)15'00" W A DISTANCE OF 237.58 FEET TO THE POINT OF BEGINNING, CONTAINING 2.6251 ACRES, MORE OR LESS. HVS International, Mineola, New York Simultaneous Valuation Formula 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ The Simultaneous Valuation Formula as Used in the Valuation of the Subject Property The algebraic equation, known as the Simultaneous Valuation Formula, that solves for the total property value using a ten-year mortgage equity technique was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of Hospitality Valuation Services. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(1) The process of solving for the value of the mortgage and equity components begins by deducting the annual debt service from the forecasted income before debt service, leaving the net income to equity for each projection year. The net income as of the 11th year is capitalized into a reversionary value using the terminal capitalization rate. The equity residual, which is the total reversionary value less the mortgage balance at that point in time and less any broker and legal costs associated with the sale, is discounted to the date of value at the equity yield rate. The net income to equity for each of the projection years is also discounted back to the date of value. The sum of these discounted values equals the value of the equity component. Because the equity component comprises a specific percentage of the total value, the value of the mortgage and the total property can be computed easily. This process can be expressed in two algebraic equations that set forth the mathematic relationships between the known and unknown variables using the following symbols. (1) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Simultaneous Valuation Formula 2 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= NI = Net income available for debt service V = Value M = Loan-to-value ratio f = Annual debt service constant n = Number of years in the projection period d(e) = Annual cash available to equity d(r) = Residual equity value b = Brokerage and legal cost percentage P = Fraction of loan paid off during the projection period f(p) = Annual constant required to amortize the entire loan during the projection period R(r) = Overall terminal capitalization rate applied to net income to calculate total property reversion (sales price at the end of the projection period) 1/S^n = Current worth of $1 factor (discount factor) at the equity yield rate Using these symbols, the following formulas can be derived to express some of the components comprising this mortgage and equity valuation process. Debt Service - A property's debt service is calculated by first determining the mortgage amount which equals the total value (V) multiplied by the loan-to-value ratio (M). Debt service is derived by multiplying the amount of the mortgage by the annual debt service constant (f). The following formula represents debt service. f x M x V = Debt Service Net Income to Equity (Equity Dividend) - The net income to equity (d(e)) is the property's net income before debt service (NI) less debt service. The following formula represents net income to equity. NI - (f x M x V) = d(e) Reversionary Value - The value of the hotel at the end of the tenth year is calculated by dividing the 11th year's net income before debt service (NI^11) by HVS International, Mineola, New York Simultaneous Valuation Formula 3 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the terminal capitalization rate (R(r)). The following formula represents the property's tenth-year reversionary value. (NI^11/R(r)) = Reversionary Value Brokerage and Legal Costs - When a hotel is sold, certain costs are associated with the transaction. Normally, the broker is paid a commission and the attorney collects legal fees. In the case of hotel transactions, brokerage and legal costs typically range from 1% to 4% of the sales price. Because these expenses reduce the proceeds to the seller, they are usually deducted from the reversionary value in the mortgage equity valuation process. Brokerage and legal costs (b) expressed as a percentage of reversionary value (NI^11/R(r)) is calculated by application of the following formula. b (NI^11/R(r)) = Brokerage and Legal Costs Ending Mortgage Balance - The mortgage balance at the end of the tenth year must be deducted from the total reversionary value (debt and equity) in order to determine the equity residual. The formula used to determine the fraction of a loan remaining (expressed as a percentage of the original loan balance) at any point in time (P) takes the annual debt service constant of the loan over the entire amortization period (f) less the mortgage interest rate (i) and divides it by the annual constant required to amortize the entire loan during the ten-year projection period (fp) less the mortgage interest rate. The following formula represents the fraction of a loan paid off (P). (f - i)/(f(p) - i) = P If the fraction of a loan paid off (expressed as a percentage of the initial loan balance) is P, then the remaining loan percentage is expressed as 1 - P. The ending mortgage balance is the fraction of the remaining loan (1 - P) multiplied by the initial loan amount (M x V). The following formula represents the ending mortgage balance. (1 - P) x M x V Equity Residual Value - The value of the equity upon the sale at the end of the projection period (dr) is the reversionary value less the brokerage and legal costs and the ending mortgage balance. The following formula represents the equity reversionary value. (NI^11/R(r)) - (b (NI^11/R(r)) - ((1 - P) x M x V) = d(r) HVS International, Mineola, New York Simultaneous Valuation Formula 4 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Annual Cash Flow to Equity - The annual cash flow to equity consists of the equity dividend for each projection year plus the equity residual at the end of the tenth year. The following formula represents the annual cash flow to equity. NI^1 - (f x M x V) = d(e)^1 NI^2 - (f x M x V) = d(e)^2 NI^10 - (f x M x V) = d(e)^10 (NI^11/R(r)) - (b (NI^11/R(r)) - ((1 - P) x M x V) = d(r) Value of the Equity - If the initial amount of the mortgage is calculated by multiplying the loan-to-value ratio (M) by the property value (V), then the equity value is one minus the loan-to-value ratio multiplied by the property value. The following formula represents the value of the equity. (1 - M) V Discounting the Cash Flow to Equity to the Present Value - The cash flow to equity in each of the projection years is discounted to the present value at the equity yield rate (1/S^n). The sum of all these cash flows is the value of the equity (1 - M) V. The following formula represents the calculation of equity as the sum of the discounted cash flows. (d(e)^1 x 1/S^1) + (d(e)^2 x 1/S^2) + . . . + (d(e)^10 x 1/S^10) + (d(r) x 1/S^10) = (1 - M) V Combine Equations: Annual Cash Flow to Equity and Discounting the Cash Flow to Equity to the Present Value - The last step is to arrive at one overall equation that shows that the annual cash flow to equity plus the yearly discounting to the present value equals the value of the equity. ((NI^1 - (f x M x V)) 1/S^1) + ((NI^2 - (f x M x V)) 1/S^2) + . . . ((NI^10 - (f x M x V)) 1/S^10) + (((NI^11/R(r)) - (b (NI^11/R(r))) - ((1 - P) x M x V)) 1/S^10) = (1 -M) V Because the only unknown in this equation is the property's value (V), it can be readily solved. HVS International, Mineola, New York Simultaneous Valuation Formula 5 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Ten-Year Projection of Income and Expense - Because the fixed and variable forecast of income and expense is carried out only to the stabilized year, it is necessary to continue the projection to the 11th year. In most instances, net income before debt service beyond the stabilized year is projected at an assumed inflation rate. By increasing a property's revenue and expenses at the same rate of inflation, net income expressed as a percentage of total revenue will remain constant, and the dollar amount will escalate at the annual inflation rate. Hotel investors are currently using inflation rates of approximately 3.5% annually. The previously presented ten-year forecast of income and expense illustrates the subject property's net income, which is assumed to increase by 3.5% annually subsequent to the hotel's stabilized year of operation. Solving for Value Using the Simultaneous Valuation Formula - In the case of the subject property, the following known variables have been determined. ================================================================================ Table 1: Summary of Known Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Forecast Loan-to-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.111856 Equity Yield Ye 22.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 11.5% - -------------------------------------------------------------------------------- The following table illustrates the present worth of a $1 factor at the 22.0% equity yield rate. HVS International, Mineola, New York Simultaneous Valuation Formula 6 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 2: Present Worth of $1 Factor at Equity Yield Rate - -------------------------------------------------------------------------------- Year Present Worth of $1 Factor at 22.0% - -------------------------------------------------------------- 1997 0.819610 1998 0.671761 1999 0.550582 2000 0.451263 2001 0.369860 2002 0.303141 2003 0.248458 2004 0.203638 2005 0.166904 2006 0.136796 - -------------------------------------------------------------------------------- Using these known variables, the following intermediary calculations must be made before applying the simultaneous valuation formula. The fraction of the loan paid off during the projection period is calculated as follows. P = ( 0.11856 - 0.095 ) / ( 0.155277 - 0.095 ) = 0.279638 The annual debt service is calculated as f x M x V. ( f x M x V ) 0.111856 x 0.70 x V = 0.078299 V Inserting the known variables into the hotel valuation formula produces the following: ( 688,000 - 0.078299 V ) x 0.819672 + ( 797,000 - 0.078299 V ) x 0.671862 + ( 824,000 - 0.078299 V ) x 0.550707 + ( 853,000 - 0.078299 V ) x 0.451399 + ( 884,000 - 0.078299 V ) x 0.369999 + ( 913,000 - 0.078299 V ) x 0.303278 + ( 946,000 - 0.078299 V ) x 0.248589 + ( 978,000 - 0.078299 V ) x 0.203761 + ( 1,014,000 - 0.078299 V ) x 0.167017 + ( 1,050,000 - 0.078299 V ) x 0.136899 + ((( 1,087,000 / 0.115 ) - ( 0.03 x ( 1,087,000 / 0.115 )) - (( 1 - 0.279638 ) x 0.70 x V )) x 0.136899 ) = ( 1 - 0.70 ) V HVS International, Mineola, New York Simultaneous Valuation Formula 7 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Like terms are combined as follows. $4,544,928 - 0.376214 V = (1-0.70) V $4,544,928 = 0.67621 V V = $4,544,928 / 0.67621 V = $6,721,143 Value Indicated by the Income Capitalization Approach (Say) $6,700,000 HVS International, Mineola, New York Qualifications of Christopher J. Doherty - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Christopher J. Doherty Employment HVS INTERNATIONAL August, 1995 to present Mineola, New York (Hotel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1994 OAK BROOK HILLS HOTEL & RESORT Oak Brook, Illinois 1993 COURTYARD BY MARRIOTT Arlington Heights, Illinois Education BS - School of Hotel Administration, Cornell University (Financial Management Concentration) Examples of Ashford Financial Corp. Corporate and Bank of Tokyo - Mitsubishi Institutional Capitol Hotel Group Clients Served Capstar Chartwell Leisure Goldman Sachs Hotels of Distinction Lumbermen's Investment Corp. Mardec, Ltd. Mitsui Bank & Trust NextHealth Nomura Securities International Rubenstein, Rudolph, Meyerson, Blake & Strull, P.A. Shaner Hotel Group Sheraton Seattle Hotel & Towers Simpson, Thatcher, and Bartlett Societe Generale Springfield Institute for Savings Starwood Lodging Sumitomo Bank, Ltd. Winegardner and Hammons HVS International, Mineola, New York Qualifications of Christopher J. Doherty - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Arizona Appraised or Evaluated - Miraval, Tucson California - La Costa Resort & Spa, Carlsbad - Travelodge, San Diego Connecticut - Sheraton Stamford, Stamford Illinois - Arlington Park Hilton, Arlington Heights - Ambassador West, Chicago - Marriott Suites, Downers Grove - Radisson, Schaumburg Massachusetts - Howard Johnson, West Springfield Michigan - Radisson, Lansing Minnesota - Sheraton Metrodome, Minneapolis - Doubletree Grand at Mall of America, Bloomington - Sheraton Airport Inn, Bloomington Missouri - Embassy Suites, St. Louis New Jersey - Holiday Inn, Wayne New York - Long Island Marriott, Uniondale Ohio - Toledo Hilton, Toledo Pennsylvania - Hawthorn Suites, Greentree - Holiday Inn, Exton Texas - Radisson on Town Lake, Austin Utah - Salt Lake City Airport Hilton, Salt Lake City Virginia - Super 8 at Broad Street, Richmond - Super 8 at Chamberlayne, Richmond - Ramada Inn, Alexandria Washington - Sheraton Seattle Hotel & Towers, Seattle - Hilton Bellevue, Bellevue Puerto Rico - El Conquistador Resort and Country Club HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Anne R. Lloyd-Jones, CRE Employment 1982 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1981 FAIRMONT HOTEL Dallas, Texas 1979 - 1980 SAGA FOOD SERVICE SWARTHMORE COLLEGE Swarthmore, Pennsylvania 1977 - 1980 DARANNE CATERERS Swarthmore, Pennsylvania Professional Affiliations American Society of Real Estate Counselors - Member (CRE) Appraisal Institute - Candidate for Membership Cornell Society of Hotelmen Education MPS - School of Hotel Administration, Cornell University BA - Swarthmore College Appraisal Institute Course 1A1 - Real Estate Appraisal Principles Course 1A2 - Basic Valuation Procedures Course 1BA - Capitalization Theory and Techniques, Part A Course 1BB - Capitalization Theory and Techniques, Part B Course 2-1 - Case Studies in Real Estate Valuation Course 2-3 - Standards of Professional Practice Course 3-1 - Report Writing HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Corporate and Institutional Clients Served Ashford Financial Corporation Chase Manhattan Bank, N. A. Citibank / Citicorp NA Credit Lyonnais Doubletree Hotels Grand Heritage Hotels Great Western Bank Goldman Sachs Holiday Inns, Inc. Interstate Hotels MassMutual Marriott International / Host Marriott Morgan Stanley OCWEN Financial Services Remington Hotels Sheraton Hotels Starwood Capital Group Starwood Lodging Trust Winegardner & Hammons Wyndham Hotel Company Hotel Chains and Management Companies Appraised or Evaluated Doubletree Hotels Compri Hotels Interstate Hotels Fairmont Hotels Guest Quarters Hilton Hotels Corporation Omni International Hotels Ramada Hotel Corp. Servico Hotel Corp. Winegardner & Hammons Appearance as an Expert Witness Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Jefferson City, Missouri Federal Bankruptcy Court, Columbia, South Carolina Federal Bankruptcy Court, Houston, Texas Federal Bankruptcy Court, New York, New York Federal Bankruptcy Court, San Bernardino, California Federal Bankruptcy Court, Los Angeles, California Federal Bankruptcy Court, Charlotte, North Carolina Federal Bankruptcy Court, Miami, Florida Federal District Court, Central Division, Salt Lake City, Utah Iowa District Court, Story County, Iowa Texas District Court, Harris County, Texas Federal Bankruptcy Court, Tampa, Florida Utah District Court, Salt Lake County, Utah Federal Bankruptcy Court, Newark, New Jersey HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated Arizona - - Wyndham Garden Hotel, Chandler - - Wyndham Garden Hotel - Airport, Phoenix - - Wyndham Garden Hotel - Union Hills, Phoenix - - Canyon Ranch Spa & Fitness Resort, Tucson Alabama - - Holiday Inn, Birmingham - - Proposed Sheraton, Gulf Shores - - Proposed Inn, Mobile - - Holiday Inn, Sheffield California - - Industry Hills Sheraton Hotel, City of Industry - - Piccadilly Inn, Fresno - - Proposed Inn at Foss Creek, Healdsburg - - Sunset Towers Hotel, Hollywood - - Proposed La Quinta, Irvine - - Wyndham Garden Hotel, La Jolla - - Days Inn, La Palma - - Proposed Marriott Courtyard, Palm Springs - - Proposed Club Hilton Hotel, Pleasanton - - Center Pointe Development, San Diego - - Holiday Inn-Embarcadero, San Diego - - Holiday Inn-Harbor View, San Diego - - Seven Seas Lodge, San Diego - - Proposed Fountaingrove Inn, Santa Rosa - - Sheraton Round Barn Inn, Santa Rosa - - Wyndham Garden Hotel, Sunnyvale - - Westlake Plaza Hotel, Thousand Oaks - - Proposed Marriott Courtyard, Torrance Colorado - - Proposed Hotel, Keystone Connecticut - - Holiday Inn, Milford - - Holiday Inn, New Britain District of Columbia - - Grand Hotel, Washington - - Wyndham Bristol Hotel, Washington Florida - - Kon Tiki Village, Kissimmee - - Sheraton Lakeside, Kissimmee - - Holiday Inn, 22nd Street, Miami Beach - - Holiday Inn, 87th Street, Miami Beach - - Holiday Inn, 180th Street, Miami Beach - - Sheraton Resort & Marina, St. Petersburg - - Hilton Hotel, Singer Island - - Royce Hotel, West Palm Beach Georgia - - Marriott Hotel, Atlanta - - Wyndham Garden Hotel, Atlanta - - Holiday Inn, Brunswick - - Holiday Inn, Jekyll Island - - Mullberry Inn, Savannah - - Royal Savannah Inn, Savannah Hawaii - - Hobron in Waikiki, Honolulu Idaho - - Holiday Inn, Boise - - Red Lion Inn, Boise - - Super 8, Boise Illinois - - Ramada Inn, Bloomington - - Proposed Marriott Courtyard, Glenview - - Wyndham Garden Hotel, Naperville Indiana - - Holiday Inn, Bloomington - - Inn at the Four Winds, Bloomington - - Ramada Inn, Bloomington - - Hilton Hotel, Fort Wayne - - Airport Hilton Inn, Indianapolis - - Hilton at the Circle, Indianapolis Iowa - - Holiday Inn, Ames - - Proposed Fairfield Inn, Des Moines HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Kentucky - - Proposed Super 8, London - - Proposed Super 8, Radcliff Louisiana - - Sheraton Inn, Kenner - - Hotel Meridien, New Orleans Maine - - Proposed Hotel, Old Orchard Beach Maryland - - Brookshire Hotel, Baltimore - - Lord Baltimore Hotel, Baltimore - - Hyatt Regency, Bethesda Massachusetts - - Proposed Marriott Courtyard, Andover - - Hyatt Regency, Cambridge - - Proposed Hotel, Franklin - - Sheraton Inn, Hyannis - - Marriott Hotel, Worcester Michigan - - Bay Valley Inn, Bay City - - Hilton Airport, Detroit - - Westin Renaissance Center, Detroit - - Hotel Pontchartrain, Detroit - - Proposed Embassy Suites, Lansing - - Hilton Inn, Northfield - - Holiday Inn, Saginaw Minnesota - - Wyndham Garden Hotel, Bloomington - - Marriott Hotel, Minnetonka Missouri - - Inn at Grand Glaize, Osage Beach - - Bel Air Hilton, St. Louis - - Holiday Inn Riverfront, St. Louis Nebraska - - Holiday Inn Airport, Lincoln - - Holiday Inn Northeast, Lincoln Nebraska (continued) - - Marriott Hotel, Omaha - - Ramada Inn, Omaha - - Red Lion Inn, Omaha Nevada - - Proposed Super 8, Las Vegas New Jersey - - Ramada Inn, Edison - - Marriott Hotel, Hanover - - Headquarters Plaza, Morristown - - Hyatt Regency, New Brunswick - - Holiday Inn, North Brunswick New York - - Hilton Hotel, Albany - - Proposed Embassy Suites, Amherst - - Holiday Inn Arena, Binghamton - - Holiday Inn SUNY, Binghamton - - Proposed Hotel, Binghamton - - Proposed Hilton, Brooklyn - - Marriott Hotel, Dewitt - - Metropole Hotel, Flushing - - Midway Hotel, Flushing - - Ramada Inn, Kingston - - Royce Hotel, La Guardia - - Holiday Inn, Latham - - Proposed Crowne Plaza, Manhattan - - Proposed Prince Street Hotel, Manhattan - - Proposed Roslyn Inn, Roslyn - - Proposed Le Richmonde, Rye Brook - - Hilton Hotel, Syracuse - - Hotel Syracuse, Syracuse - - Proposed Hotel, Watertown North Carolina - - Proposed Inn, Chapel Hill - - Proposed Indep. Center Marriott Hotel, Charlotte - - Royce Hotel, Charlotte - - Howard Johnson's North, Charlotte HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) North Carolina (continued) - - Holiday Inn West, Durham - - Sheraton University Inn, Durham - - Holiday Inn, Fayetteville - - Holiday Inn Downtown, Raleigh Ohio - - Proposed Hyatt Hotel, Cleveland - - Proposed Marriott Hotel, Cleveland Oregon - - Holiday Inn Airport, Portland - - Holiday Inn South, Portland Pennsylvania - - Quality Inn, Allentown - - Holiday Inn, Bensalem - - Proposed Marriott Courtyard, Devon - - Proposed Lafayette Inn, Easton - - Ramada Inn, Erie - - Holiday Inn, Harrisburg - - Marriott Hotel, Harrisburg - - Proposed Super 8, Harrisburg - - Proposed Super 8, Lancaster - - Holiday Inn West, Monroeville - - Days Inn Philadelphia - - Franklin Plaza Hotel, Philadelphia - - Franklin Towne EconoLodge, Philadelphia - - Guest Quarters Hotel, Philadelphia - - Hilton Inn, Northeast, Philadelphia - - Marriott Airport Hotel, Philadelphia - - Holiday Inn Greentree, Pittsburgh - - Holiday Inn Parkway East, Pittsburgh - - Holiday Inn North, Pittsburgh - - Holiday Inn Parkway West, Pittsburgh - - Proposed Hotel, Pittsburgh - - Royce Hotel, Pittsburgh - - Westin William Penn Hotel, Pittsburgh - - Hilton Hotel, Scranton - - Proposed Marriott Courtyard, Valley Forge - - Holiday Inn Meadowlands, Washington - - Ramada Inn, York - - Proposed Super 8, York Rhode Island - - Proposed Hotel, Providence - - Omni Biltmore Hotel, Providence South Carolina - - Proposed Charleston Center Hotel, Charleston - - Proposed Cooper River Inn, Charleston - - Howard Johnson's, Spartanburg - - Proposed Middleton Inn and Conference Center, Charleston - - Best Western, North Charleston - - Proposed Marriott Courtyard, Columbia - - Fairfield Inn, Florence - - Holiday Inn, Florence - - Fairfield Inn, Greenville - - Proposed Marriott Courtyard, Greenville - - Fairfield Inn, Hilton Head - - Holiday Inn, Hilton Head Tennessee - - Hampton Inn, Brentwood - - Proposed Marriott Courtyard, Brentwood - - Howard Johnson's, Chattanooga - - Sheraton Hotel, Chattanooga - - Howard Johnson's, Knoxville - - Proposed Capital Mall Convention Center Hotel, Nashville - - Clarion Maxwell House, Nashville - - Holiday Inn Briley Parkway, Nashville - - Proposed Marriott Courtyard, Nashville - - Sheraton Music City, Nashville - - Stouffer's Nashville Hotel, Nashville - - Proposed Super 8, Nashville - - Union Station Hotel, Nashville - - Wyndham Garden Hotel, Nashville - - Proposed Super 8, Union City HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Texas - - Proposed Marriott Courtyard, Addison - - Proposed Marriott Courtyard, Arlington - - La Mansion, Austin - - Proposed Marriott Courtyard, Bedford - - Airport Hilton, El Paso - - Hotel Meridien, Houston - - Sheraton Hotel, Houston - - Proposed Marriott Courtyard, Las Colinas - - Proposed Marriott Courtyard, North Dallas - - La Mansion Del Norte, San Antonio - - La Mansion Del Rio, San Antonio - - Proposed Marriott Courtyard, San Antonio - - Proposed Marriott Courtyard - Medical Center, San Antonio Utah - - Deer Valley Resort, Park City - - Hilton Inn, Salt Lake City - - Holiday Inn, Salt Lake City - - Sheraton Hotel, Salt Lake City Virginia - - Mountain Lake Hotel, Blacksburg - - Howard Johnson's, Bristol - - Boars Head Inn, Charlottesville - - Proposed Fairfield Inn, Hampton - - Proposed Embassy Suites, Herndon - - Ramada Renaissance, Herndon - - Proposed Marriott Courtyard, Manassas - - Omni Hotel, Norfolk Virginia (continued) - - Proposed Marriott, Norfolk - - Howard Johnson's, Richmond - - Howard Johnson's, Roanoke - - Howard Johnson's, Roanoke Rapids - - Wyndham Hotel, Williamsburg Washington - - Wyndham Garden Hotel, Bothell - - Redmond Hotel, Redmond - - Wyndham Garden Hotel, SeaTac West Virginia Proposed Budget Motel, Princeton Wisconsin - - Proposed Granada Royale, Green Bay - - Holiday Inn-Downtown, Green Bay Canada - - Inn on the Park, Toronto Puerto Rico - - Carib Inn, San Juan Virgin Islands - - Virgin Grand Beach Hotel, St. Thomas Jamaica - - Holiday Inn, Montego Bay HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Stephen Rushmore, CRE, MAI, CHA Employment 1980 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1977 - 1980 1971 - 1974 HELMSLEY-SPEAR HOSPITALITY SERVICES, INC. New York, New York (Real Estate) 1974 - 1977 JAMES E. GIBBONS ASSOCIATES Garden City, New York (Mortgage Banking, Appraisals, Hotel Operations) Affiliated Ownership Interests HVS INTERNATIONAL (SAN FRANCISCO, CALIFORNIA) West coast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (MIAMI, FLORIDA) Southeast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (BOULDER, COLORADO) Midwest office for hotel/motel appraisals and counseling HVS INTERNATIONAL (VANCOUVER, CANADA) Canadian office for hotel/motel appraisals and counseling HVS INTERNATIONAL (LONDON, ENGLAND) European office for hotel/motel appraisals and counseling HVS - EXECUTIVE SEARCH Hotel/motel executive search and human resource consulting HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) HVS - ECO SERVICES Environmental consulting for hotels and motels; administrator of the ECOTEL designation HOSPITALITY EQUITY INVESTORS, INC. Hotel and motel investment and management company TRUMBULL MARRIOTT HOTEL General partner of a 324-room hotel and conference center PRINCETON HOTEL ASSOCIATES General partner of a 128-unit Residence Inn in Princeton, New Jersey SEAVIEW GOLF RESORT ASSOCIATES General partner of a 298-unit, 424-acre Marriott resort in Absecon, New Jersey SHELTON HOTEL ASSOCIATES General partner of a 96-unit Residence Inn in Shelton, Connecticut DANBURY HOTEL ASSOCIATES General partner of a 243-unit Hilton Hotel in Danbury, Connecticut PRUDENTIAL - HEI JOINT VENTURE Joint venture partner with Prudential Insurance Company of America on a 234-unit Embassy Suites in Atlanta, Georgia WESTPORT NORFOLK ASSOCIATES General partner of a 425-unit Omni Hotel in Norfolk, Virginia WESTPORT BWI, LLC General partner of a 310-unit Marriott Hotel in Baltimore, Maryland HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) WESTPORT RARITAN, LLC General partner of a 274-unit Crowne Plaza Hotel in Raritan, New Jersey WESTPORT NOVI, LLC General partner of a 193-unit Hilton Hotel in Novi, Michigan WESTPORT LONG BEACH, LLC General Partner of a 460-unit Sheraton Hotel in Long Beach, California WESTPORT PARK RIDGE, LLC General Partner of a 265-unit hotel and conference center in Valley Forge, Pennsylvania WESTPORT CHARLESTON, LLC General Partner of a 295-unit Hilton Hotel in Charleston, South Carolina HOSPITALITY VALUATION SOFTWARE, INC. Founder of software company that develops and distributes hotel financial analysis software Hotels Managed Sheraton Hotel, Smithtown, New York Marriott Hotel, Baltimore Airport, Maryland Hilton Hotel, Danbury, Connecticut Residence Inn, Princeton, New Jersey Embassy Suites, Atlanta Airport, Georgia Omni Hotel, Norfolk, Virginia Crowne Plaza, Raritan, New Jersey Hilton Hotel, Novi, Michigan Sheraton Hotel, Long Beach, California Hilton Hotel, Charleston, South Carolina Park Ridge Hotel and Conference Center, Valley Forge, Pennsylvania Hilton Hotel, Wilmington, Delaware HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Professional Affiliations American Society of Real Estate Counselors - Member (CRE) - Board of Governors Appraisal Institute - Member (MAI) (SREA) - Developer and Instructor, Hotel Investment and Valuation Seminar - Developer and Instructor, Hotel Computer Valuation Seminar American Hotel and Motel Association - Certified Hotel Administrator (CHA) - Industry Real Estate Financing Advisory Council (IREFAC) International Society of Hospitality Consultants - Member (ISHC) New York University - Adjunct Assistant Professor of Nutrition, Food and Hotel Management Michigan State University - Honorary Faculty, Honorary Alumnus Certified General Appraiser - Arizona, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Illinois, Massachusetts, Michigan, Minnesota, Nebraska, New Jersey, New York, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Virginia Licensed Real Estate Broker - New York, Pennsylvania Board of Advisers - Real Estate Finance Journal - Real Estate Workouts & Asset Management American Arbitration Association - National Real Estate Valuation Council Cornell Society of Hotelmen New York University Masters in Hospitality Management - Advisory Board New York University Hospitality Investment Conference - Board of Advisors Beta Gamma Sigma - National Honor Society in Business and Management HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Endowment Hospitality Valuation Services Professor of Hotel Finance and Real Estate - School of Hotel Administration, Cornell University (currently held by Professor James J. Eyster) Education BS - School of Hotel Administration, Cornell University MBA - Graduate School of Business Administration (Finance), University of Buffalo Candidate for PhD - School of Education, Department of Food Service Management, New York University Partial List of Teaching and Lecture Assignments Cornell University - Computer Valuation Techniques Michigan State University - Hotel Management Contracts University of North Carolina - Hotel Market Studies University of Virginia - Assessing Hotels American Arbitration Association - Real Estate Arbitration American Hotel and Motel Association - Hotel Obsolescence Appraisal Institute - Hotel Valuation (over 50 seminars) International Association of Assessing Officers - Hotel Valuation Montreal Appraisal Society - Total Project Analysis Society of Real Estate Appraisers - Lease Seminar Lodging Hospitality - Lodging Summit Published Books and Seminars Textbooks The Valuation of Hotels and Motels, Appraisal Institute, Chicago, Illinois, 1978 Hotels, Motels and Restaurants: Valuations and Market Studies, Appraisal Institute, Chicago, Illinois, 1983 How to Perform an Economic Feasibility Study of a Proposed Hotel/Motel, American Society of Real Estate Counselors, Chicago, Illinois, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Books and Seminars (continued) Textbooks (continued) Hotel Investments: A Guide for Owners and Lenders, Warren, Gorham and Lamont, Inc., New York, New York, 1990 The Computerized Income Approach to Hotel Market Studies and Valuations, Appraisal Institute, Chicago, Illinois, 1990 Hotel Investments: A Guide for Owners and Lenders, 1992 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotel Investments: A Guide for Owners and Lenders, 1993 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Appraisal Institute, Chicago, Illinois, 1992 Student Manuals The Valuation of Lease Interests, Society of Real Estate Appraisers, Chicago, Illinois, 1976 Hotel-Motel Valuation Seminar, Appraisal Institute, Chicago, Illinois, 1981, 1988, 1990 The Computerized Approach to Hotel Market Studies and Valuations Seminar, Appraisal Institute, Chicago, Illinois, 1991 Demonstration Appraisal Demonstration Appraisal of a Proposed Hotel, Spring Valley, New York, Hospitality Valuation Services, Mineola, New York, 1983, 1990 Chapters The Real Estate Handbook-Second Edition, Dow Jones-Irwin, 1989, "Hotels and Motels" Arbitration of Real Estate Valuation Principles, American Arbitration Association, 1987, "Arbitration in the Hospitality Industry" Ethics in Hospitality Management: A Book of Readings, Educational Institute of the American Hotel and Motel Association, 1992, "Ethics in Hotel Appraising" The Lodging and Food Service Industry, Educational Institute of the American Hotel and Motel Association, 1993, "Insider's Insights" HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles The Appraisal Journal "Using Total Project Analysis to Compete for Investment Capital," October, 1975 "The Appraisal of Food Service Facilities," July, 1980 "Publish and Prosper," October, 1980 "Valuation of Hotels and Motels for Assessment Purposes," April, 1984 "Adjusting Comparable Sales for Hotel Assessment Appeals," July, 1986 "Hotel Business Value and Working Capital: A Clarification," January, 1987 "Ethics in Hotel Appraising," July, 1993 The Appraiser "Hotel-Motel Appraisal Misconceptions Set Straight," January, 1979 "No Conventional Financing Available for Hotels: Rushmore," December, 1979 "Estimating Hotel Land Values Using Comparable Ground Leases," April, 1980 Bulletin of the Cornell Society of Hotelmen "Employment Philosophy for a Consulting Practice," July, 1984 Business Travel News "A Snapshot of a Classic Recovery," July, 1995 The Canadian Appraiser "Hotel/Motel Market Sales Update," Summer, 1987 Capital Sources for Real Estate "Stephen Rushmore Discusses the Future of the Lodging Industry," December, 1994 Cayuga Advisor "Secrets to Success in Consulting," October, 1992 Chapter News and Notes "Quantifying a Hotel's Business Value," November, 1979 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Cornell Hotel & Restaurant Administration Quarterly "A Preliminary Market Study," November, 1974 "How Much is Your Place Worth Today? A Case Study in Hotel - Motel Valuation," May, 1975 "What Can Be Done About Your Hotel's Real Estate Taxes?" May, 1977 "The Appraisal of Lodging Facilities," August, 1978 "The Appraisal of Food Service Facilities," February, 1979 "The Appraisal of Lodging Facilities - Update," November, 1984 "Hotel Sales Prices Down More Than 12%," May, 1991 "Seven Current Hotel Valuation Techniques," August, 1992 "The Valuation of Distressed Hotels," October, 1992 "Hotel Lending in the 1990's: Amateurs Beware," December, 1994 "Investment Values of Lodging Property: Modeling the Effects of Income Taxes and Alternative Lender Criteria," December, 1995 FCI Spec Sheet "Employment Philosophy for a Consulting Practice," September, 1984 Florida Hotel & Motel Journal "Rushmore Reports Rising Hotel Prices," February, 1995 Hotel and Motel Management "Average Rate vs. Project Cost," May 1, 1974 "How to Increase the Marketability of Your Motel," April, 1981 "Tougher Lending, Lower Room Rate Hikes On Way?" June, 1981 "What is That Mortgage Loan Going to Cost You?" August, 1981 "How to Perform a Study of Your Property's Market," October, 1981 "How do High Interest Rates Affect Your Motel's Value?" December, 1981 "How to Buy a Feasibility Study That Works for You," February, 1982 "Settling Lease Conflicts Quickly Through Arbitration," April, 1982 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Hotel and Motel Management (continued) "Are Casino Hotels Really Worth $500,000 Per Room?" June, 1982 "Discount Rates and Internal Rate of Return," August, 1982 "Determining a Property's Extended Life Cycle," November, 1982 "Using Microcomputers for Forecasting," December, 1982 "Update on Hotel Development Costs," January, 1983 "Estimating a Site's Worth by Finding Its Profit Value," June, 1983 "Hotel Construction May Be Slowing Down a Little Bit," April, 1983 "The Investor's Risk Sways to Prevailing Economic Winds," August, 1983 "Is Your Property Tax at as Low a Level as it Should Be?" October, 1983 "The Ultimate Guest Room: Could it Ever Exist Anywhere?" December, 1983 Hotel-Motor Inn Journal A Preventive Maintenance System for Motels," March, 1975 Hotel Valuation Journal "Hotel Valuation Index Peaks During 1989," Fall, 1990 "Hotel Development Costs," Winter, 1991 "Hotel Valuation Index for 1990," Spring, 1991 "Bad Year for Hotel Sales Prices Confirmed," Spring, 1992 "Hotel Sales Prices on the Rise," Fall, 1994 "United States Hotel Values Climb," Spring/Summer, 1995 "It's Time for Franchise Reform," Fall, 1995 Institutions/ Volume Feeding "Greater Risk/Greater Profit Potential: Hotel Management Contract," May, 1973 Lodging Hospitality "How to Finance Renovation Projects," January, 1974 "Controlling Your Real Estate Taxes," July, 1978 "Putting Together a Sound Financial Package," December, 1978 "Favorable Outlook for Lodging Values," December, 1983 "Are Your Property Taxes Too High? (Part I and II)," May and June, 1984 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Development Costs," July, 1984 "The Right Management Contract for You," September, 1984 "Selecting the Firm to Prepare Your Feasibility Study," October, 1984 "A Quick How-To In Hotel Valuation," November, 1984 "Updating Lodging Interest Rates," December, 1984 "Is Your Guest Experience Up to Par?" January, 1985 "How to Perform a Breakeven Analysis," May, 1985 "Evaluating Operating Performance," June, 1985 "Hotel Lenders Toughen Underwriting Requirements," July, 1985 "Don't Forget the Pre-Opening Agreement," August, 1985 "Management Companies Should Participate in Financing," October, 1985 "Current Techniques for Valuing Hotel Land," November, 1985 "Hotel Development Costs," December, 1985 "Sourcing Debt Into the 1990's," January, 1986 "Hotel Valuation Thumb Rule," February, 1986 "Value in Use Versus Value in Exchange," March, 1986 "Stretching Feasibility," April, 1986 "The Management Question," May, 1986 "How to Commission a Feasibility Study," June, 1986 "Macro Trends Affecting Property Values," July, 1986 "Hotel-Motel Market Sales Update," August, 1986 "Financing Alternatives: Zero Coupon Mortgages," September, 1986 "Forecasting Lodging Energy Costs," October, 1986 "Portfolio Financing a Better Way," November, 1986 "Profit by Looking at History," December, 1986 "Why New York Isn't Overbuilt," February, 1987 "How to Discourage Hotel Overbuilding: A Case Study," April, 1987 "Structuring an Incentive Management Fee," June, 1987 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Franchising Questions and Answers," July, 1987 "Comparing Hotel Development Costs," August, 1987 "Understanding Economic Life," September, 1987 "Prices Rise for Lodging Properties," October, 1987 "Management Companies Are Key to Success," November, 1987 "Evaluating a Management Contract Fee Structure," December, 1987 "Check Profits Before Selecting Hotel Operator," January, 1988 "It's a Good Time to Review Your Taxes," February, 1988 "How to Use a Management Company Rating System," March, 1988 "Make Sure Management Contracts Contain These Terms," April, 1988 "Hotel Access and Visibility," May, 1988 "Chain Sale Strategies," July, 1988 "Evaluating a Hotel Franchise," August, 1988 "Evaluating Franchise Fees," September, 1988 "Opportunities in Economy Lodging," October, 1988 "How to Obtain a Hotel Mortgage," November, 1988 "Arbitration in the Hospitality Industry," December, 1988 "Lodging Development Cost Update," January, 1989 "Amenities as Profit Builders," February, 1989 "Hotel Values Mirror the Times," March, 1989 "Forecasting Revenue and Expenses," April, 1989 "Real Estate Jargon Made Simple," May, 1989 "Pricing a Management Contract," June, 1989 "Trends in Valuation," July, 1989 "Rescuing the Distressed Hotel," August, 1989 "Shielding Against Incompetence," September, 1989 "Hotel Valuation Revisited," October, 1989 "New Breed of Hard Budgets," November, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Figuring Cap Rates," December, 1989 "A Glance Backward," January, 1990 "Costs Creeping Up," February, 1990 "Valuing Distressed Properties," March, 1990 "Cap and Discount Rates," April, 1990 "An Open Letter," May, 1990 "Misconceptions About Appraisals," June, 1990 "Hotel Values Still Growing," July, 1990 "Hotel Renovation is Key to `90s," August, 1990 "Time Right for Hotel Leases," September, 1990 "Getting a Fix on Rates," October, 1990 "The Wrinkles of Class," November, 1990 "A Glance Backward," December, 1990 "The Price Dropoff," January, 1991 "The Cost Washout," February, 1991 "Survival of the Fittest," March, 1991 "Looking Out and Up," April, 1991 "The Bottom is in Sight," May, 1991 "The Pitfalls of Liquidation," June, 1991 "Extra! Extra! Hospitality News," July, 1991 "The Art of Hotel Renovation," August, 1991 "No Better Time for a Tax Review," September, 1991 "No Time for Passivity," October, 1991 "What a Franchise Really Costs," November, 1991 "In Case You Hadn't Heard," January, 1992 "Negotiation - The Name of the Game," February, 1992 "Now Could be the Time to Build," March, 1992 "The Well May Stay Dry," April, 1992 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Hotel Life Expectancy," May, 1992 "Hotel Values - What a Downer," June, 1992 "How to Make Money Now," July, 1992 "Hotel Chain Class Survey," August, 1992 "Budget Dining with Rushmore," September, 1992 "Bookings Up, Rates Will Follow," October, 1992 "Hospitality Master's Good Preparation," November, 1992 "What's New on the Job Front?" January, 1993 "Where Have All the Hotels Gone?" February, 1993 "Hotel Building Costs Continue to Fall," March, 1993 "Hotel Values Head Upward," April, 1993 "The Rise and Fall of Trophy Hotels," May, 1993 "Hotel Sales and Prices Rebound," June, 1993 "Third Parties Loosening Purse Strings," July, 1993 "Beyond Recycling: The Ecotel," August, 1993 "Time to Reduce Property Taxes," September, 1993 "Lodging: The Way I See It," October, 1993 "Choosing an Appraiser," November, 1993 "Who Needs an Asset Manager?" January, 1994 "Investing by the Numbers," February, 1994 "Fire Your Staff and Lease Them Back," March, 1994 "Published Rates Hint at Recovery," April, 1994 "Now is the Time to Start Building," May, 1994 "Hotel Values Heading Up," June, 1994 "Farewell, Friend," July, 1994 "Sales Prices Creeping Up," August, 1994 "Selecting Green Hotel Supplies," September, 1994 "Don't Write Off Full-Service Hotels," October, 1994 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Lodging REIT's Are on the Rise," November, 1994 "Going Back to the Future," January, 1995 "How much do Managers Make?" March, 1995 "Lodging Transactions Soared in '94," April, 1995 "Hotel Development Costs on the Rise," May, 1995 "Hotel Values up Significantly," June, 1995 "What a Franchise Costs over the Long Term," July, 1995 "Road Food Part II," August, 1995 "It's Time for Franchise Reform," September, 1995 "Extended Stay May Not Extend Your Profits," October, 1995 "The Year as I See It," November, 1995 "Cap Rate 101," January, 1996 Michigan Lodging "Hotel Development Costs," January, 1988 The Mortgage and Real Estate Executives Report "Atlantic City Building Game Involves High Stakes," August, 1979 "How Interest Rates Affect Real Estate Values," June, 1982 "Update on Hotel Development Costs," May 1, 1983 Motel-Hotel Insider "The $100,000 Plus Hotel Room Has Become a Reality," November 19, 1979 "Update on Hotel Development Costs," April 4, 1983 NAIFA - The Appraisal Review "Hotel Valuation Techniques," Vol. 44, 1991 Real Estate Digest "Why Should the Management Team be Important to Hotel Lenders," Fall, 1988 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Finance Journal "What is a Typical Fee for a Hotel Management Contract?" Fall, 1988 "Hotel Franchise Fees," Winter 1989 "Why the Management Team Should be Important to Hotel Lenders," Spring, 1989 "Hotel Values and Costs," Summer, 1989 "Structuring a Hotel Investment," Fall, 1989 "A Guide for Lenders Holding Distressed Hotel Loans," Winter, 1990 "Estimating Current Interest Rates for Hotel Financing," Spring, 1990 "Hotel Valuation Techniques," Summer, 1990 "Now is the Time to Review Your Hotel's Property Taxes," Fall, 1990 "Property Tax Assessments for Hotels and Motels," Winter, 1991 "Putting Together Hotel Management Agreements - Part I," Spring 1991 "Putting Together Hotel Management Agreements - Part II," Summer, 1991 "The 1980s - The Decade of Change," Fall, 1991 "An Overview of the Hotel Industry: Past, Present, and Future," Spring, 1994 Real Estate Forum "Casino Hotels Raise Valuation Questions," November, 1981 Real Estate Investment Ideas "How Fuel and Energy Shortages Should Affect Investment Decisions in the Hospitality Industry," March, 1974 "Upward Trend Continues for Sales Price of Hotel-Motel Properties," May, 1988 "High Prices Paid for Hotel-Motel Properties," February, 1990 Real Estate Issues "Employee Compensation for a Consulting Practice," Fall/Winter, 1985 "Hotel/Motel Market Sales Update," Spring/Summer, 1987 Real Estate Newsletter "Computers in Hotel Appraising," May 15, 1989 Real Estate Investment Ideas "Hotel-Sales Update," Winter, 1986 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Review "Valuing Motels and Hotel in the Current Market," Fall, 1972 "Dealing With Distressed Hostelry Loans," Fall, 1975 "The Mortgage Underwriting Consultant Comes of Age," Fall, 1977 "Real Estate Compensation," Winter, 1987 Real Estate Workouts and Asset Management "Stephen Rushmore on Directions in the Hospitality Industry," September, 1992 Real Values "Hotel Construction Cost Update," April, 1986 Restaurant and Hotel Design "How Much Should the Renovation Be?" March, 1986 "14 Notable Hotel Development Firms," December, 1987 Rushmore on Hotel Valuation "Mortgage - Equity," Winter, 1979 "Atlantic City - From Bust to Boom," Winter, 1979 "Mortgage - Equity," Spring, 1979 "Developing Mortgage Data," Spring 1979 "Gasoline and Market Values, " Spring, 1979 "Mortgage - Equity," Fall, 1979 "Quantifying a Hotel's Business Value," Fall, 1979 "What Has Happened to Typical Hotel-Motel Development Costs?," Fall, 1979 "Mortgage-Equity," Winter, 1980 "Extending Hotel Economic Life Through Renovation," Winter, 1980 "Estimating Hotel Land Values Using Comparable Ground Leases," Winter, 1980 "Quantifying the Value of Personal Property to a Going Hotel," Spring, 1980 "Recent Changes in New York City's Hotel Market," Spring, 1980 "Hotel-Motel Economic Lives," Fall, 1980 "Mortgage - Equity," Fall, 1980 "Mortgage - Equity," Winter, 1981 "Developing Mortgage Data," Winter, 1981 "Statistical Support for Food and Beverage Projections," Winter, 1981 "Mortgage - Equity," Spring/Summer, 1981 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Rushmore on Hotel Valuation (continued) "Quantifying a Hotel's Demand," Spring/Summer, 1981 "A Five-Year Overview of Typical Hotel-Motel Development Costs," Spring/Summer, 1981 "Mortgage - Equity," Winter/Spring, 1982 "Update on Hotel Capitalization Rates," Winter/Spring, 1982 "Mortgage - Equity," Summer/Fall, 1982 "Are Casino Hotels Really Worth $500,000 Per Room?" Summer/Fall, 1982 "The Hotel-Motel Life Cycle, Summer/Fall, 1982 "Mortgage - Equity," Winter/Spring, 1983 "Update on Hotel Development Costs," Winter/Spring, 1983 "The Valuation of Hotels and Motels for Assessment Purposes," Winter, 1984 "Hotel Capitalization Rates," Summer, 1984 "Hotel Development Cost Survey," Summer, 1984 "Selecting a Hotel Management Company," Fall, 1984 "Hotel Capitalization Rates," Spring, 1985 "How to Perform a Breakeven Analysis," Spring, 1985 "Hotel Capitalization Rates," Winter, 1986 "Hotel Development Costs," Winter, 1986 "Hotel Valuation Survey," Winter, 1987 "Impact of New Tax Laws on Hotel Values," Winter, 1987 "Hotel-Motel Market Sales Update," Winter, 1987 "Structuring an Incentive Management Fee," Fall, 1987 "Understanding Your Hotel's Economic Life," Fall, 1987 "Hotel Development Costs," Fall, 1987 "Hotel, Motel Market Sales Update," Winter, 1988 "Amenity Creep," Winter, 1989 "Hotel Franchise Fees," Winter, 1989 "Hotel Valuation Index," Fall, 1989 "Latest Trends in Hotel Values," Fall, 1989 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Tri-State Real Estate Journal "Across the Nation: Hotel Sale Prices Escalate on Average," December 23, 1994 U.S. Real Estate Week "All-Suites Market Entering Second Phase," May 4, 1987 Valuation "Hotel-Motel Market Sales Update," February, 1987 Quarterly Newsletter Hotel Valuation Journal Professional newsletter with a circulation of 10,000 Real Estate Column Lodging Hospitality Real estate editor for a major monthly hospitality periodical Hospitality Column Real Estate Finance Journal Contributing hospitality editor Computer Software Hospitality Valuation Software Hotel financial software for room night analyses, income and expense forecasts, and valuation calculations - developed and distributed for the Appraisal Institute Hotel-Motel Data Hospitality Market Data Exchange National clearinghouse for information pertaining to hotel and motel transactions Hotel Valuation Index National index of hotel value trends for 24 individual market areas Hospitality Seminar Series Intensive short courses for hotel and restaurant professionals Hotel Franchise Fees Analysis Guide Analysis of hotel franchise fees and costs Hospitality Bibliography Comprehensive literature index of hotel and restaurant books and articles HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Awards Robert H. Armstrong Award For the most significant contribution to The Appraisal Journal in 1975 Activities Commercial pilot, instrument, multi-engine; sailing; skiing Corporate and Institutional Clients Served Aetna Life Insurance AIG Real Estate Investment Aldrich Eastman and Waltch Allstate American Airlines America's Best Inns Arthur Anderson & Company Bankers Trust Company Bank of America Bank of Boston Bank of Montreal Bank of New York Bank of Nova Scotia Bank of Tokyo Bank One-Columbus Banque Indosuez Barclay's Bank Baybank Boston The Beacon Companies Bear, Stearns & Company, Inc. Best Inns Best Western International Boykin Management Co. Bradbury Suites C. Itoh Caesar's World California Dept. of Transportation Chase Lincoln First Bank, N.A. Chase Manhattan Bank Chemical Bank Chrysler Capital Corporation CIGNA Citibank Citicorp Real Estate City of Boston City of Detroit City of Grand Rapids City of Kalamazoo City of Orlando City of Philadelphia City of Santa Monica City of Toronto Columbia Sussex Corporation Continental Illinois National Bank Copley Real Estate Advisors Corporex Development CRI, Inc. Cushman and Wakefield Days Inns Edward J. DeBartolo Corp. HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Deer Valley Ski Corporation Doubletree Hotels Drury Inns Econo Lodge Economic Development Admin. EIE Regent International Embassy Suites Equitable Life Assurance Equitable Real Estate Investment European American Bank Fairmont Hotels Federal Deposit Insurance Corp. First Boston First California Savings First Interstate Bank First National Bank of Chicago Four Seasons Hotels Goldman, Sachs Greater Orlando Aviation Authority Great Western Bank Great Western Savings Guest Quarters Hampton Inns Hilton Hotels, Corp. Hilton International Holiday Corporation Holiday Inns Home Savings of America Howard Johnson's Hudson Hotels Corporation Hyatt Hotels Industrial Bank of Japan Interstate Hotels The Irvine Company ITT Commercial Finance Corp. Japan Airlines JDC (America) Corporation John Q. Hammons John Hancock Life Insurance Johnson & Wales College Kenneth Leventhal & Assoc. Kidder Peabody & Company, Inc. La Quinta Larken, Inc. Lexington Companies Loews Hotels Harry Macklowe Real Estate Marine Midland Bank, N.A. Marriott Corporation MA Bay Transit Authority Massachusetts Mutual Life Mellon Bank Meridien Hotels Merrill Lynch Merrill Lynch Capital Markets Metropolitan Life Insurance Microtel Midlantic Bank HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) Mitsubishi Morgan Guaranty Bank & Trust Co. J.P. Morgan Investment Management Morgan Stanley Motel 6, Inc. Mutual Benefit Co. National Westminster Bank New York Life Insurance Nippon Credit Bank Nomura Securities Int'l North American Taisei Corporation Northwestern Mutual Life Omni Hotels Parabas Bank Prime Motor Inns Property Capital Trust Prudential Life Insurance Radisson Hotels Ramada Inns Red Lion Inns Regent International Registry Hotels Residence Inns Resolution Trust Corporation Rhode Island Hospital Trust Ritz-Carlton Hotels Rodeway Inns Rose Associates Salomon Brothers San Antonio Hotel/Motel Assoc. Sanwa Bank Security Pacific Bank Servico Management Corp. Sheraton Hotels Sonesta Hotels Sonnenblick-Goldman Steamboat Ski Corporation Stouffer Hotels Stratton Corporation Sumitomo Bank Summerfield Hotel Corporation Super 8 Hotels Swiss Bank Corporation Taisei Texas Commerce Bancshares, Inc. Tishman Realty Corporation Trans World Airlines Travelers Insurance TraveLodge Trusthouse Forte UBS Securities Union Labor Life United Bank of Switzerland United Inns, Inc. United States Steel Universal Hotels U.S. Air Force U.S. Department of Justice HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (continued) U.S. Department of the Army U.S. Department of the Interior U.S. Economic Development Authority U.S. Trust Company Walt Disney Productions Westin Hotels Williams Hospitality Corporation Winegardner & Hammons Winthrop Financial Associates Wyndham Hotels Zeckendorf Company Appearance as an Expert Witness Administrative Law Court - SEC, Washington, DC Appellate Tax Board, Boston, Massachusetts Arbitration, Wayne, New Jersey Assessment Appeals Board, Los Angeles County, Los Angeles, California Board of Equalization and Review, Washington, District of Columbia (2) Board of Taxation, Atlantic City, New Jersey Bureau de Revision Evaluation Fonciere du Quebec, Montreal, Canada Circuit Court, Orange County, Orlando, Florida Condemnation Review Board, Minneapolis, Minnesota Corporation Committee, Rhode Island State Senate Court of Common Pleas, Allegheny County, Pennsylvania Court of Common Pleas, Franklin County, Ohio Court of Common Pleas, Montgomery, Pennsylvania Court of Common Pleas, Pittsburgh, Pennsylvania Court of Common Pleas, Philadelphia, Pennsylvania Court of Queen's Bench of Alberta, Canada District Court, Arapahoe County, Colorado District Court, Dallas County, Texas District Court, Harris County, Texas District Court, Tarrant County, Texas District Court, Hennepin County, Minneapolis, Minnesota District Court, Knoxville, Tennessee Federal Bankruptcy Court, Oakland, California Federal Bankruptcy Court, Los Angeles, California HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Denver, Colorado Federal Bankruptcy Court, District of Columbia Federal Bankruptcy Court, Miami, Florida (2) Federal Bankruptcy Court, Chicago, Illinois Federal Bankruptcy Court, New Orleans, Louisiana Federal Bankruptcy Court, Greenbelt, Maryland Federal Bankruptcy Court, Baltimore, Maryland Federal Bankruptcy Court, Rockville, Maryland Federal Bankruptcy Court, Boston, Massachusetts Federal Bankruptcy Court, Grand Rapids, Michigan Federal Bankruptcy Court, Las Vegas, Nevada Federal Bankruptcy Court, Newark, New Jersey (2) Federal Bankruptcy Court, Manhattan, New York (2) Federal Bankruptcy Court, Westbury, New York Federal Bankruptcy Court, Philadelphia, Pennsylvania Federal Bankruptcy Court, Reading, Pennsylvania Federal Bankruptcy Court, Salt Lake City, Utah Federal Bankruptcy Court, Madison, Wisconsin (2) Federal District Court, Rochester, New York Federal District Court, Philadelphia, Pennsylvania (2) Judicial Arbitration and Mediation Services, Dallas, Texas Michigan Tax Tribunal, Detroit, Michigan New Jersey Tax Court, Newark, New Jersey (2) Superior Court, District of Columbia Superior Court, Clayton County, Georgia (2) Superior Court of North Carolina Superior Court, Nashua, New Hampshire Supreme Court, New York State, Buffalo, New York Supreme Court, New York State, Manhattan, New York Supreme Court, New York State, Riverhead, New York HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (continued) Tax Review Board, San Joaquin County, Stockton, California Tax Review Board, Bangor, Maine Tax Review Board, Schenectady, New York Tax Review Board, Yorktown, New York Tax Review Board, North Carolina Tax Review Board, Philadelphia, Pennsylvania (2) U.S. District Court, Wilmington, Delaware U.S. District Court, Madison, Wisconsin ============================================================================== Partial List of Hotels/Motels, Appraised or Reviewed Internationally North America Canada - Delta Hotel, Calgary - Econo Lodge, Hull - Hotel Lord Berri, Montreal - Hotel Vogue, Montreal - Hyatt Regency, Montreal - Le Ragence Hyatt, Montreal - Holiday Inn, Oshawa, Ontario - Hotel Le Chantecler, Quebec - Bond Place Hotel, Toronto - Carlton Hotel, Toronto - Chelsea Hotel, Toronto - Delta Chelsea Hotel, Toronto - Four Seasons on the Park, Toronto - Inn on the Park, Toronto - Novotel Missisauga, Toronto - Ramada Inn, Toronto - Sutton Hotel, Toronto - Toronto Marriott East, Toronto - Westbury Hotel, Toronto - Burnaby Villa Inn, Vancouver - Four Seasons Hotel, Vancouver - Sheraton Land Mark, Vancouver - Sheraton Plaza 500, Vancouver - Four Seasons Yorkville Hotel, Yorkville United States Alabama - MEI - Birmingham West, Bessemer - Comfort Inn, Birmingham - Courtyard by Marriott, Birmingham - Courtyard by Marriott-Hoover, Birmingham - Courtyard By Marriott/Homewood, Birmingham - Crown Sterling Suites, Birmingham - Fairfield Inn, Birmingham - Holiday Inn, Birmingham - Howard Johnson, Birmingham - Knights Inn, Birmingham - Ramada Inn, Birmingham - Residence Inn by Marriott, Birmingham - Still Waters Resort, Dadeville - Ramada Inn, Gadsden - Sheraton Hotel, Gulf Shores - Courtyard by Marriott, Huntsville - Knights Inn, Huntsville - Marriott Hotel-Proposed, Huntsville - La Quinta Inn, Huntsville University - Days Inn, Mobile - Hotel - Proposed, Mobile - Inn-Proposed, Mobile - Stouffer Riverview, Mobile - Courtyard by Marriott, Montgomery - Fairfield Inn, Montgomery - Holiday Inn-Downtown, Montgomery - Holiday Inn-East, Montgomery - Howard Johnson, Montgomery - La Quinta Inn, Montgomery - Residence Inn, Montgomery - Marriott's Grand Hotel, Point Clear - Holiday Inn, Sheffield - La Quinta, Tuscaloosa - Masters Economy Inn, Tuscaloosa - Proposed Extended Stay, West Mobile Alaska - Barratt Inn, Anchorage - Clarion Hotel, Anchorage - Holiday Inn, Anchorage - Hotel Captain Hook, Anchorage - International Airport Inn, Anchorage - Sheraton Anchorage Hotel, Anchorage Arizona - Holiday Inn, Bullhead City - Embassy Suites, Camelback - Compri Hotel-Proposed, Chandler - Quality Inn, Chandler - Ramada Inn, Chandler - AmeriSuite Hotel-Proposed, Flagstaff - Holiday Inn, Flagstaff - Motel 6, Flagstaff - Rodeway Inn, Flagstaff - Bright Angel Lodge, Grand Canyon - El Tovar Hotel, Grand Canyon - Grand Canyon National Park, Grand Canyon - Kachina Lodge, Grand Canyon - Maswik Lodge, Grand Canyon - Moqui Lodge, Grand Canyon - Phantom Ranch, Grand Canyon - Thunderbird Lodge, Grand Canyon - Yavapai Lodge, Grand Canyon - Hampton Inn-Proposed, Holbrook - Moqui Lodge, Kaibab National Forest - Rodeway Inn, Kingman - Nautical Inn Resort, Lake Havasu City - Lexington Hotel Suites, Mesa - Biosphere II Conference Center, Oracle - Best Western-Per Diem, Phoenix - Bobby McGee's, Phoenix - Caravan Inn, Phoenix - Compri Hotel-Proposed, Phoenix - Courtyard by Marriott-Black Canyon, Phoenix - Courtyard by Marriott-Mesa, Phoenix - Crescent Phoenix Hotel, Phoenix - Crown Sterling Suites, Phoenix - Days Inn, Phoenix - Doubletree Inn at Park Central, Phoenix - Embassy Suites, Phoenix - Embassy Suites-Biltmore, Phoenix - Executive Park Hotel, Phoenix - Fountain Suites Hotel, Phoenix - Granada Royale-Camelhead, Phoenix - Hilton Hotel, Phoenix - Holiday Inn, Phoenix - Hyatt Regency, Phoenix - La Quinta Hotel, Phoenix - Lexington Hotel Suites, Phoenix - Newton's Sands, Phoenix - Phoenician Golf & Tennis Resort, Phoenix - Pointe Hilton at Tapatio Cliffs, Phoenix - Quality Inn, Phoenix - Ramada Inn-Airport, Phoenix - Ramada Inn-East, Phoenix - Ritz Carlton, Phoenix - Sunburst Resort Hotel, Phoenix - Hassayampa Inn, Prescott - Clarion Inn at McCormick Ranch, Scottsdale - Conference Center, Scottsdale - Courtyard by Marriott-Mayo, Scottsdale - Doubletree Inn at Scottsdale Mall, Scottsdale - Fairfield Inn, Scottsdale - Fashion Square Hotel, Scottsdale - Loews Paradise Resort, Scottsdale - Marriott Camelback Inn, Scottsdale - Marriott Mountain Shadows, Scottsdale - Mountain Shadows Resort, Scottsdale - Orange Tree Resort, Scottsdale - Ramada-Valley Ho, Scottsdale - Red Lion's La Posada Resort, Scottsdale - Registry Resort, Scottsdale - Rodeway Inn, Scottsdale - Scottsdale Princess, Scottsdale - Sheraton Scottsdale Resort, Scottsdale - The Phoenician, Scottsdale - Valley Ho, Scottsdale - John Gardiner's Enchantment, Sedona - L'Auberege de Sedona, Sedona - Los Abrigados, Sedona - Orchards Inn, Sedona - Hotel-Proposed, Sierra Vista - Motel 6, Sierra Vista - Temple Bar Resort, Temple Bar - Coachman Inn - Proposed, Tolleson/Phoenix - Tubac Resort, Tubac - Canyon Ranch, Tucson - Coachman Inn-Proposed, Tucson - Courtyard by Marriott, Tucson - Doubletree Inn, Tucson - Embassy Suites, Tucson - Granada Royale Hometel-E. Broadway, Tucson - Hotel Park Tucson-Proposed, Tucson - Lexington Suites Hotel, Tucson - Loews Hotel, Tucson - Resort Hotel-Proposed, Tucson - Rodeway Inn, Tucson - Sunbelt Commerce Center Hotel, Tucson - La Quinta Inn, Tucson East - Bobby McGee's, Tuscon - Radisson Suite Hotel, Tuscon - Ventana Canyon Golf and Racquet, Tuscon - Ramada Inn, Union Hill Arkansas - Sheraton Inn, Fort Smith - Hilton, Hot Springs - Holiday Inn-Lake Hamilton, Hot Springs - Courtyard by Marriott, Little Rock - Holiday Inn, Little Rock - Legacy Hotel, Little Rock - Little Rock Hilton, Little Rock - Masters Economy Inn, Little Rock - Red Carpet Inn, Little Rock - Super 8, Little Rock - Masters Economy Inn, North Little Rock - Masters Economy Inn, Protho-Junction - Holiday Inn, Texarkana California - Hampton Inn, Agoura Hills - Ramada Inn, Agoura Hills - Residence Inn-Proposed, Agoura Hills - Island Motel, Almeda - Anaheim Hilton & Towers, Anaheim - Anaheim Park Motor Inn, Anaheim - Anaheim Plaza Hotel, Anaheim - Best Western Pavillions, Anaheim - Carousel Inn, Anaheim - Conestoga Hotel, Anaheim - Courtyard by Marriott, Anaheim - Crown Sterling Suites, Anaheim - Disneyland Hotel, Anaheim - Golden Forest Motel, Anaheim - Hampton Inn, Anaheim - Hilton, Anaheim - Holiday Inn Anaheim Center, Anaheim - Hotel-Proposed, Anaheim - Marriott Hotel, Anaheim - Pan Pacific Hotel, Anaheim - Pitcairn Motel, Anaheim - Raffles Inn, Anaheim - Ramada Maingate/Disneyland Hotel, Anaheim - Roger Morris Inn, Anaheim - Stovall's Inn, Anaheim - The Station Inn, Anaheim - Travelodge Inn at the Park, Anaheim - AmeriSuite, Anaheim Hills - Comfort Inn, Anahiem - Mansouri Hotel, Antioch - Red Lion, Apple Valley - Hampton Inn, Arcadia - Residence Inn, Arcadia - Hilton Lodge, Arrowhead Lake - Auburn Inn, Auburn - Sleep Inn, Auburn - Allstar Inn, Bakersfield - Clarion Hotel, Bakersfield - Courtyard by Marriott, Bakersfield - Economy Inn, Bakersfield - Ramada Inn, Bakersfield - Red Lion Hotel, Bakersfield - Residence Inn, Bakersfield - Rodeway Inn, Bakersfield - Hilton Hotel, Baldwin Park - San Gabriel Valley Hotel, Baldwin Park - The Hilton Hotel, Baldwin Park - Allstar Inn, Barstow - Economy Inn, Barstow - Marriott Berkeley Marina, Berkeley - Shattuck Hotel, Berkeley - Beverly Hills Hotel, Beverly Hills - Beverly Rodeo Hotel, Beverly Hills - Beverly Wilshire Hotel, Beverly Hills - Hilton Hotel-Cresthil, Beverly Hills - L'Ermitage, Beverly Hills - Peninsula Hotel, Beverly Hills - Best Western, Big Bear Lake - Big Bear Hotel, Big Bear Lake - Big Bear Lake Resort, Big Bear Lake - Big Bear Towering Pines, Big Bear Lake - Motel 6, Big Bear Lake - Post Ranch, Big Sur - Ventana Inn, Big Sur - Rodeway Inn, Blythe - Courtyard by Marriott, Brea - Holiday Inn, Brentwood - Courtyard by Marriott, Buena Park - Fairfield Inn, Buena Park - Hampton Inn, Buena Park - Holiday Inn, Buena Park - Crowne Sterling Suites, Burlingame - Hyatt Regency, Burlingame - Mariott Hotel - SFO, Burlingame - Marriott, Burlingame - Marriott-San Francisco Airport, Burlingame - Radisson Hotel-Proposed, Burlingame - Sheraton Hotel, Burlingame - Courtyard by Marriott, Camarillo - Best Western Fireside Inn, Cambria - Cambria Pines Lodge, Cambria - Residence Inn, Campbell - Hotel-Proposed, Capitola - Resort Hotel, Spa & Conference Ctr., Capitola - Allstar Inn, Carlsbad - Carlsbad Inn, Carlsbad - Inn of America, Carlsbad - La Costa Hotel and Spa, Carlsbad - Olympic Resort Hotel, Carlsbad - Tickle Pink Inn, Carmel - Allstar Inn, Carpinteria - Desert Princess Country Club, Cathedral City - Royce Suites Hotel, Cathedral City - Digger Bay, Central Valley - Marriott Hotel-Proposed, Century City - Westin Century Plaza Hotel, Century City - Neighborhood Inn-Proposed, Chatsworth - Red Lion Hotel, Chico - Otay Valley Inn, Chula Vista - Travelodge-Otay Valley, Chula Vista - Ramada Inn, City of Commerce - Sheraton Hotel, City of Industry - Allstar Inn, Coalinga - Harris Ranch Restaurant/Inn, Coalinga - Howard Johnson, Colton - Best Western Willow Tree Inn, Compton - Concord Hotel, Concord - Hilton Hotel, Concord - The Trees Inn, Concord - Motel 6, Corona - Hotel del Coronado, Coronado - Loews Coronado Bay Resort, Coronado - Madera Village Inn, Corte Madera - Ha' Penny Inn, Costa Mesa - La Quinta Hotel, Costa Mesa - Marriott Suites, Costa Mesa - Red Lion Hotel, Costa Mesa - Residence Inn, Costa Mesa - Pacifica Hotel, Culver City - Ramada Inn, Culver City - Courtyard by Marriott, Cupertino - Doubletree Hotel, Cupertino - Doubletree Hotel, Dana Point - Spa-Proposed, Danville - El Rancho, Davis - Furnace Creek Resort, Death Valley - Stovepipe Wells Village, Death Valley - Hilton, Del Mar - Days Inn, Diamond Bar - Compri Hotel, El Segundo - Proposed Summerfield, El Segundo - Days Inn, Emeryville - Holiday Inn-Bay Bridge, Emeryville - Lyons Restaurant, Emeryville - Budget Motel, Encinitis - Marriott Tenaya Lodge-Proposed, Fishcamp - Holiday Inn, Fort Myers Beach - All Suites Hotel/Athletic Club, Foster City - Clubtel-Proposed, Foster City - Courtyard by Marriott, Foster City - Holiday Inn, Foster City - Courtyard by Marriott, Fremont - Fremont Hotel, Fremont - Motel 6, Fremont - Residence Inn, Fremont - Allstar Inn, Fresno - AmeriSuite, Fresno - Chateau Inn, Fresno - Courtyard by Marriott, Fresno - Economy Inn, Fresno - Hacienda, Fresno - Holiday Inn, Fresno - Holiday Inn-Fresno Airport, Fresno - Howard Johnson Motel, Fresno - Piccadilly Inn, Fresno - Travelers Inn, Fresno - Travelers Lodge, Fresno - Griswold's Hotel, Fullerton - Holiday Inn, Fullerton - Marriott Hotel, Fullerton - Hotel-Proposed, Garden Grove - Hyatt Regency Alicante, Garden Grove - Princess Hotel, Garden Grove - Motel 6, Gilroy - Hyatt Regency-Proposed, Goleta - Allstar Inn, Hacienda Heights - Courtyard by Marriott, Hacienda Heights - Half Moon Bay Lodge, Half Moon Bay - Courtyard by Marriott, Harbor Boulevard - Grosvenor, Harborside-Pt. Loma - Inn at Foss Creek, Healdsburg - Chateau Marmont, Hollywood - Hollywood Palm Hotel, Hollywood - Sunset Towers Hotel, Hollywood - Waterfront Hilton Hotel, Huntington Beach - Compri Hotel, Hutton Centre - Grand Champions Resort, Indian Wells - Stouffer Esmerelda Resort, Indian Wells - Courtyard By Marriott, Irvine - Courtyard by Marriott - Proposed, Irvine - Embassy Suites, Irvine - Hilton Hotel, Irvine - Holiday Inn, Irvine - Hyatt Hotel, Irvine - La Quinta-Proposed, Irvine - Marriott Hotel, Irvine - Marriott-Proposed, Irvine - Registry Hotel, Irvine - Residence Inn-Proposed, Irvine - Amador Inn, Jackson - Embassy Suites, La Jolla - Hotel-Proposed, La Jolla - La Jolla Property, La Jolla - La Jolla Village Inn, La Jolla - Marriott Hotel, La Jolla - Residence Inn, La Jolla - Days Inn-Proposed, La Palma - PGA West Resort - Proposed, La Quinta - Lafayette Park Hotel, Lafayette - Laguna Shores, Laguna Beach - Holiday Inn, Laguna Hills - Ryokan Hotel-Proposed, Laguna Hills - Villa Valencia, Laguna Hills - Ritz Carlton, Laguna Niguel - Lake Mohave Resort, Lake Mohave - Resort at Squaw Creek, Lake Tahoe - Courtyard by Marriott, Larkspur Landing - Hilton, Las Cruces - Surf and Sand Hotel, Leguna Beach - Holiday Inn, Lido Beach - Motel-Proposed, Little Lake - Residence Inn, Livermore - Residence Inn-Proposed, Livermore - Breakers Hotel, Long Beach - Holiday Inn, Long Beach - Holiday Inn Airport, Long Beach - Marriott Hotel-Long Beach Airport, Long Beach - Marriott Hotel-Proposed, Long Beach - Ramada Renaissance Hotel, Long Beach - Residence Inn, Long Beach - Sheraton Long Beach & Office Tower, Long Beach - Airport Park Hotel, Los Angeles - Bel Age, Los Angeles - Biltmore Hotel, Los Angeles - Century Inn, Los Angeles - Checkers Hotel, Los Angeles - Courtyard by Marriott-Irvine Main, Los Angeles - Courtyard by Marriott-LAX Airport, Los Angeles - Crown Sterling Suites, Los Angeles - Days Inn, Los Angeles - Econo Lodge-Proposed, Los Angeles - Embassy Suites, Los Angeles - Embassy Suites-LAX-Proposed, Los Angeles - Four Seasons, Los Angeles - Hampton Inn-LAX, Los Angeles - Herrick and Campbell, Los Angeles - Hilton & Towers-LAX, Los Angeles - Hilton Hotel, Los Angeles - Holiday Inn Crowne Plaza-LAX, Los Angeles - Le Montrose Hotel, Los Angeles - Ma Maison Sofitel, Los Angeles - Macklowe Hotel, Los Angeles - Marriott Century City, Los Angeles - MCA Hotel-Proposed, Los Angeles - New Otani Hotel, Los Angeles - Playa Vista Development, Los Angeles - Stouffer Concourse Hotel, Los Angeles - Westin Bonaventure, Los Angeles - Westwood Marquis Hotel, Los Angeles - Los Gatos Lodge, Los Gatos - Macienda Inn, Los Gatos - Toll House Inn, Los Gatos - Residence Inn, Manhattan Beach - All Suite Hotel, Marina Del Rey - Marina Beach Hotel, Marina del Rey - Marina del Rey Hotel and Marina, Marina del Rey - Marina Suites Hotel, Marina Del Rey - Marriott Marina Del Rey, Marina Del Rey - Residence Inn, Meriden - Quality Suites Hotel - Proposed, Millbrae - Beverly Heritage Hotel, Milpitas - Crown Sterling Suites, Milpitas - Holiday Inn, Milpitas - Courtyard by Marriott, Mira Mesa - Grosvenor, Mission Bay - Motel Orleans, Modesto - Red Lion Hotel, Modesto - Red Lion-Proposed, Modesto - Carmel Mission Inn, Monterey - Doubletree Inn, Monterey - Former Monterey Hilton Hotel, Monterey - Monterey Plaza, Monterey - Plaza Hotel, Monterey - Sheraton Hotel, Monterey - Pebble Beach Company, Monterey County - Inn at Morro Bay, Morro Bay - Residence Inn, Mountain View - Inn at Napa Valley, Napa - Best Western Inn, Napa Valley - Clarion Hotel-Napa Valley, Napa Valley - Silverado, Napa Valley - Ha'Penny Motel, National City - Allstar Inn, Needles - Hilton-Newark/Fremont, Newark - Four Seasons Hotel, Newport Beach - Hotel Meridien, Newport Beach - Hyatt Newporter, Newport Beach - Newporter Resort, Newport Beach - Sheraton, Newport Beach - Days Inn-Proposed, North Hollywood - Northstar, North Lake Tahoe - Ramada Inn, Norwalk - Impact Study - Proposed Hotel, Oakdale - Hilton Inn, Oakland - Holiday Inn, Oakland - Holiday Inn-Oakland Airport, Oakland - Parc Oakland Hotel, Oakland - Resort - Proposed, Olympic Valley - Resort at Squaw Creek-Proposed, Olympic Valley - Clarion Hotel, Ontario - Compri Hotel, Ontario - Fairfield Inn, Ontario - Holiday Inn, Ontario - Lexington Hotel Suites, Ontario - Red Lion Hotel, Ontario - Doubletree Hotel, Orange - Woodfin Suites, Orange - Embassy Suites, Palm Desert - Marriott Desert Springs, Palm Desert - Canyon Resort, Palm Springs - Compri Hotel-Proposed, Palm Springs - Courtyard by Marriott, Palm Springs - Desert Princess, Palm Springs - Grand Champions Resort, Palm Springs - International Hotel and Resort, Palm Springs - Ocotillo Lodge, Palm Springs - Palm Canyon, Palm Springs - PGA West Resort-Proposed, Palm Springs - Spa Hotel at Mineral Springs, Palm Springs - Westin Hotel, Palm Springs - Grosvenor, Palmdale - Super 8, Palmdale - Cowper Square, Palo Alto - Garden Court, Palo Alto - Holiday Inn, Palo Alto - Stanford Park, Palo Alto - Marriott, Paradise Valley - All Suite Hotel-Proposed, Pasadena - Doubletree Hotel, Pasadena - Holiday Inn, Pasadena - Cascade Ranch Lodge, Pescadero - Elk Lodge, Petaluma - Hotel Petaluma, Petaluma - Hilton-Proposed, Pismo Beach - Hilton-Sea Point, Pismo Beach - Holiday Inn, Pismo Beach - Hotel-Proposed, Pismo Beach - Pismo II, Pismo Beach - Fairfield Inn, Placentia - Residence Inn, Placentia - Howard Hughes Center, Playa Vista - Pleasant Hill Inn, Pleasant Hill - Residence Inn, Pleasant Hill - Club Hilton Hotel-Proposed, Pleasanton - Compri Hotel, Pleasanton - Courtyard by Marriott, Pleasanton - Hilton, Pleasanton - Holiday Inn, Pleasanton - Pleasanton Creek, Pleasanton - Shilo Inn - Hilltop, Pomona - Compri Hotel, Rancho Bernardo - Radisson Suites, Rancho Bernardo - Comfort Inn Motel, Rancho Cordova - Courtyard by Marriott, Rancho Cordova - Economy Inn, Rancho Cordova - El Rancho, Rancho Cordova - Quality Suites-Proposed, Rancho Cordova - Sheraton Sunrise, Rancho Cordova - Marriott Rancho Las Palmas, Rancho Mirage - Mission Hills Hotel, Rancho Mirage - Resort Hotel-Proposed, Rancho Mirage - Westin Mission Hills Resort, Rancho Mirage - Bridge Bay Resort, Redding - Grand Manor Inn, Redding - La Quinta Inn, Redding - Motel 6, Redding - Motel Orleans, Redding - Red Lion Inn, Redding - Shasta Inn, Redding - Portofino Hotel & Yacht Club, Redondo Beach - Sheraton, Redondo Beach - Sofitel Redwood Shores, Redwood - Days Inn, Richmond - Best Western Carraige Inn, Ridgecrest - Days Inn, Riverside - Mission Inn-Proposed, Riverside - Omni Mission Inn, Riverside - Sheraton Hotel, Riverside - Red Lion Inn, Rohnert Park - Crown Sterling Suites, S.San Fransicso - Allstar Inn, Sacramento - Arco Arena II-Proposed, Sacramento - Arco Park, Sacramento - Catering Center - Proposed, Sacramento - Clarion Hotel, Sacramento - Compri Hotel-Proposed, Sacramento - Courtyard by Marriott, Sacramento - Courtyard by Marriott-S. Natomas, Sacramento - Hilton Hotel, Sacramento - Holiday Inn-Capital Plaza, Sacramento - Hotel-Proposed, Sacramento - Hyatt Arbitrat, Sacramento - Hyatt Regency, Sacramento - La Quinta Hotel, Sacramento - Motel Orleans, Sacramento - Radisson Hotel, Sacramento - Red Lion Inn, Sacramento - Residence Inn, Sacramento - Sacramento Inn, Sacramento - Sierra Inn, Sacramento - Sterling Hotel, Sacramento - Travelers Inn, Sacramento - Woodlake Inn, Sacramento - Harvest Inn, Saint Helena - Courtyard by Marriott, San Bruno - San Carlos Motel Development, San Carlos - Atlas Hotels/Mission Valley Inn, San Diego - Best Western Seven Seas Motor Lodge, San Diego - Budget Motel of America, San Diego - Catamaran Resort Hotel, San Diego - Center Pointe Development, San Diego - Comfort Inn, San Diego - Courtyard by Marriott-Mira Mesa, San Diego - Doubletree Hotel, San Diego - Embassy Suites, San Diego - Executive Lodge, San Diego - Hanalei Hotel, San Diego - Harbor Island Hotel-Proposed, San Diego - Harborside Inn-Point Loma, San Diego - Harbortown Marina Resort, San Diego - Holiday Inn Montgomery Airport, San Diego - Holiday Inn-Embarcadero, San Diego - Holiday Inn-Harbor View, San Diego - Horton Grand Saddlery, San Diego - Horton Park Plaza Hotel, San Diego - Howard Johnson Hotel, San Diego - Inter-Continental Hotel & Marina, San Diego - Kings Inn, San Diego - La Jolla Village Inn, San Diego - La Quinta Hotel, San Diego - Marriott Hotel-Mission Valley, San Diego - Marriott Twin Towers and Marina, San Diego - Mission Valley Inn, San Diego - Omni Hotel, San Diego - Radisson Hotel, San Diego - Ramada Inn, San Diego - Ramada Limited Suites, San Diego - Ramada Old Town, San Diego - Ramada Rancho Penasquitos, San Diego - Red Lion Inn, San Diego - Regency Plaza Hotel, San Diego - San Diego Marriott, San Diego - Seven Seas Lodge, San Diego - Sheraton Grand, San Diego - Sheraton Harbor Island East, San Diego - Super 8-Point Loma, San Diego - Symphony Towers, San Diego - Town and Country Hotel, San Diego - Travelodge Hotel Plaza, San Diego - U.S. Grant Hotel, San Diego - Westin-Proposed, San Diego - Abagail Inn, San Francisco - Bellevue Hotel, San Francisco - Cable Motor Inn, San Francisco - California Cafe, San Francisco - Campton Place, San Francisco - Cartwright Hotel, San Francisco - Chancellor Hotel, San Francisco - Clarion Inn-San Francisco Airport, San Francisco - Comfort Inn, San Francisco - Courtyard by Marriott-Airport, San Francisco - Embarcadero Inn, San Francisco - Fairmont Hotel, San Francisco - Grand Hyatt, San Francisco - Grosvenor Clift Hotel, San Francisco - Harbor Court Hotel, San Francisco - Hilton Hotel, San Francisco - Holiday Inn - Union Square, San Francisco - Holiday Inn Crowne Plaza, San Francisco - Holiday Inn-Civic Center, San Francisco - Holiday Inn-Fisherman's Wharf, San Francisco - Holiday Inn-Golden Gateway, San Francisco - Holiday Inn-South, San Francisco - Holiday Lodge, San Francisco - Hotel Diva, San Francisco - Hotel Meridien, San Francisco - Hotel Union Square, San Francisco - Hotel-Proposed, San Francisco - Hyatt Fisherman's Wharf, San Francisco - Hyatt Regency Embarcadero, San Francisco - Inn at Fisherman's Wharf, San Francisco - Inn at the Opera, San Francisco - Inn-Proposed, San Francisco - Juliana Hotel, San Francisco - King George Hotel, San Francisco - La Quinta Inn, San Francisco - La Quinta-Airport, San Francisco - Lambourne Hotel, San Francisco - Laurel Motor Inn, San Francisco - Majestic Hotel, San Francisco - Manx Hotel, San Francisco - Mark Twain, San Francisco - Marriott, San Francisco - Marriott San Francisco-Proposed, San Francisco - Marriott-Airport, San Francisco - Orchard Hotel, San Francisco - Pan Pacific Hotel, San Francisco - Parc 55 Hotel, San Francisco - Park Hyatt Hotel, San Francisco - Portman Hotel, San Francisco - Prescott Hotel, San Francisco - Queen Anne Hotel, San Francisco - Ramada Hotel, San Francisco - Regis Hotel, San Francisco - Ritz-Carlton Hotel, San Francisco - San Franciscan, San Francisco - San Francisco Hotel, San Francisco - Savoy Hotel, San Francisco - Sheraton Palace Hotel, San Francisco - Sheraton-Fisherman's Wharf, San Francisco - Sir Francis Drake Hotel, San Francisco - Stanford Court, San Francisco - Stouffer Stanford Court Hotel, San Francisco - Super 8-Fisherman's Wharf, San Francisco - Westin St. Francis, San Francisco - Crowne Sterling Suites, San Francisco - South - Olympic Club Golf Course, San Francisco/San Mateo - Budget Inn, San Jose - Courtyard by Marriott, San Jose - Cozy 8 Arena Hotel, San Jose - Fairmont Hotel, San Jose - Holiday Inn, San Jose - Ramada Renaissance, San Jose - Red Lion Inn, San Jose - Islander Motel, San Leandro - Apple Farm Inn, San Luis Obispo - Embassy Suites, San Luis Obispo - Holiday Inn, San Luis Obispo - Los Nomados Resort, San Luis Obispo - Twin Oaks Golf Course, San Marcos - Dunfey San Mateo Hotel, San Mateo - Compri Hotel-Proposed, San Pedro - Embassy Suites Hotel, San Rafael - Marriott Hotel-Proposed, San Ramon - Residence Inn, San Ramon - AAA Inn, Santa Ana - California Palms Hotel, Santa Ana - Comfort Inn, Santa Ana - Compri Hotel, Santa Ana - Embassy Suites Santa Ana, Santa Ana - Executive Lodge, Santa Ana - Howard Johnson, Santa Ana - Quality Inn, Santa Ana - Ramada Inn-Orange County, Santa Ana - El Encanto Hotel, Santa Barbara - Fess Parker's Red Lion Resort, Santa Barbara - Four Seasons Hotel, Santa Barbara - Montecito Inn, Santa Barbara - San Ysidro Ranch, Santa Barbara - Santa Barbara Inn, Santa Barbara - Biltmore Hotel & Suites, Santa Clara - Days Inn, Santa Clara - Doubletree Hotel, Santa Clara - Embassy Suites, Santa Clara - Inn At Saratoga, Santa Clara - Marriott Hotel, Santa Clara - Quality Suites Hotel, Santa Clara - Dream Inn, Santa Cruz - Hilton, Santa Maria - Motel 6, Santa Maria - Econo Lodge-Proposed, Santa Monica - Holiday Inn, Santa Monica - Holiday Inn at the Pier, Santa Monica - Park Hyatt Hotel, Santa Monica - Santa Monica Beach Hotel, Santa Monica - Santa Monica/Slatkin, Santa Monica - Allstar Inn, Santa Rosa - Doubletree Hotel, Santa Rosa - Fountaingrove Inn, Santa Rosa - Holiday Inn, Santa Rosa - Round Barn Inn-Proposed, Santa Rosa - Sheraton Round Barn, Santa Rosa - Days Inn, Seaside - Embassy Suites, Seaside - Seaside 8 Motel, Seaside - Valley Radisson, Sherman Oaks - Red Lion, Sonoma - Sonoma Mission Inn, Sonoma - Holiday Inn - Proposed, Sonora - Timberwolf Lodge, South Lake Tahoe - Holiday Inn, South San Francisco - Hotel-Proposed, South San Francisco - Meadowood Resort, St. Helena - Hilton Hotel, Stockton - Holiday Inn, Stockton - La Quinta Hotel, Stockton - Motel Orleans, Stockton - Paradise Point Manna, Stockton - Sheraton-Proposed, Stockton - Hilton, Sunnyvale - Holiday Inn, Sunnyvale - Neighborhood Suites, Sunnyvale - Ramada Inn, Sunnyvale - Sunnyvale Hilton, Sunnyvale - Temecula Creek Inn, Temecula Creek - Westlake Plaza Hotel, Thousand Oaks - Courtyard by Marriott, Torrance - Holiday Inn, Torrance - Marriott Hotel, Torrance - Residence Inn, Torrance - Holiday Inn, Union City - MCA Hotel-Proposed, Universal City - Comfort Inn, Vallejo - Holiday Inn, Van Nuys - La Quinta Hotel, Ventura - Ocean Resorts, Ventura - Sheraton, Ventura - Greentree Inn, Victorville - Doubletree Inn, Walnut Creek - Parkside Hotel, Walnut Creek - Ramada Renaissance Hotel, Walnut Creek - Royce Hotel-Proposed, Walnut Creek - Walnut Creek Project, Walnut Creek - Hampton Inn, West Covina - Le Bel Age, West Hollywood - Le Dufy, West Hollywood - Le Mondrian Hotel, West Hollywood - Hilton, Whittler - Hotel & Conference Center-Proposed, Woodland - Marriott Hotel-Woodland Hills, Woodland Hills - Skylonda Retreat, Woodside - Compri Hotel-Proposed, Yorba Linda - Marriott-Tenaya Lodge, Yosemite - Motel Orleans, Yuba City Colorado - Days Inn, Arapahoe - Continental Inn, Aspen - Ritz-Carlton Hotel-Proposed, Aspen - Hampton Inn, Aurora - Holiday Inn, Aurora - Radisson Hotel, Aurora - Radisson Southeast, Aurora - Raffles Hotel, Aurora - Comfort Inn, Avon - Boulder Hotel-Downtown, Boulder - Clarion Hotel, Boulder - Courtyard by Marriott, Boulder - Doubletree Hotel-Proposed, Boulder - Hilton Harvest House, Boulder - Holiday Inn, Boulder - Interlocken Conference Resort-Prop., Boulder - Proposed Golf Course, Boulder - Residence Inn, Boulder - Hilton, Breckenridge - Ski Lodge-Proposed, Breckenridge - Interlocken Conference Center, Broomfield - Interlocken Conference Center-Prop., Broomfield - Embassy Suites, Colorado Springs - Hilton, Colorado Springs - Howard Johnson, Colorado Springs - Le Baron Hotel, Colorado Springs - Marriott, Colorado Springs - Quality Inn, Colorado Springs - Red Lion Inn, Colorado Springs - Sheraton Inn, Colorado Springs - Grand Butte Hotel, Crested Butte - Best Western Regency, Denver - Brown Palace, Denver - Clarion Hotel-Denver Airport, Denver - Courtyard by Marriott-Airport, Denver - Courtyard by Marriott-Southeast, Denver - Days Inn, Denver - Denver Airport Hilton Inn, Denver - Doubletree Hotel, Denver - Embassy Suites, Denver - Embassy Suites-Airport, Denver - Hilton-Technical Center, Denver - Holiday Inn-Downtown, Denver - Holiday Inn-West, Denver - Jackson's Hole Sport, Denver - Marriott-Southeast, Denver - Marriott-West, Denver - Radisson Hotel, Denver - Red Lion Hotel, Denver - Regency Inn, Denver - La Quinta Inn, Denver - Airport - La Quinta, Denver - South - Red Lion Inn, Durango - Hilton-Denver, Englewood - Residence Inn, Englewood - Scanticon Conference Center, Englewood - Marriott Hotel-Proposed, Fort Collins - Holiday Inn, Golden - Marriott-Denver West, Golden - Ramada Inn, Grand Junction - Sheraton-Proposed, Keystone - Compri Hotel, Lakewood - Hampton Inn, Lakewood - Sheraton Inn, Steamboat Springs - Proposed Hotel, Telluride - Days Inn, Vail - Doubletree Hotel, Vail - Lodge at Vail, Vail - Marriott's Mark Resort, Vail - Westin Vail Resort, Vail - Ramada Hotel, Westminster - Winter Park Resort, Winter Park Connecticut - Chester Inn-Chester, Chester - Inn-Proposed, Chester - Super 8-Proposed, Cromwell - Danbury Hilton & Towers, Danbury - Residence Inn, Danbury - Holiday Inn, Darien - Howard Johnson Lodge, Darien - Ramada Inn, Darien - Holiday Inn, East Hartford - Howard Johnson Lodge, East Lyme - Days Inn-Proposed, Enfield - Greenwich Habor Inn, Greenwich - Howard Johnson Lodge, Greenwich - Showboat Inn, Greenwich - Hotel-Proposed, Groton - Hilton Hotel, Hartford - Holiday Inn-Proposed, Hartford - Motel 6, Hartford - Ramada Inn, Hartford - Sheraton Tobacco Valley Inn, Hartford - Summit Hotel, Hartford - Super 8 Motel, Hartford - Susse Chalet, Hartford - Residence Inn By Marriott, Meriden - Holiday Inn, Milford - Susse Chalet, Milford - Howard Johnson Lodge, Mystic - Mystic Ramada Inn, Mystic - Holiday Inn, New Britain - Ramada Inn, New Britain - Colony Inn, New Haven - Holiday Inn, New Haven - Howard Johnson, New Haven - Quality Inn, New Haven - Residence Inn, New Haven - Radisson Hotel, New London - Best Western-Proposed, New Milford - Courtyard by Marriott, Norwalk - Holiday Inn, Norwalk - Howard Johnson, Norwalk - Ramada Inn, Norwalk - Susse Chalet, Rocky Hill - Ramada Hotel-Proposed, Shelton - Residence Inn - Shelton, Shelton - Heritage Village, Southbury - Southbury Hotel, Southbury - Susse Chalet, Southington - Days Inn, Stamford - Executive Hotel, Stamford - Harley Hotel, Stamford - Holiday Inn-Crowne Plaza, Stamford - Inn at Mill River, Stamford - Le Pavillon Hotel, Stamford - Marriott, Stamford - Radisson Tara Hotel, Stamford - Sheraton, Stamford - Best Western-Proposed, Stratford - Stratford Motor Lodge, Stratford - Marriott Hotel, Trumbull - Courtyard by Marriott, Wallingford - Susse Chalet, Wallingford - Howard Johnson Plaza Hotel, Waterbury - Super 8-Proposed, Waterbury - Residence Inn-Proposed, Waterford - Holiday Inn, Westbury - The Island Inn, Westbury - Courtyard by Marriott, Windsor - Sheraton Tobacco Valley Inn, Windsor - Holiday Inn-Proposed, Windsor Locks Delaware - Wilmington Hilton, Claymont - Rusty Rudder, Dewey Beach - Residence Inn-Proposed, Newark - Hilton Hotel, Wilmington - Hotel-Proposed, Wilmington - Marriott Suites, Wilmington - Residence Inn-Proposed, Wilmington District of Columbia - All Suite Hotel - Proposed, Washington - Bellevue Hotel, Washington - Canterbury Hotel, Washington - Capital Hilton, Washington - Capitol Hill Hotel, Washington - Castleton Hotel, Washington - Comfort Inn, Washington - Convention Center Inn, Washington - Dupont Plaza, Washington - Embassy Row Hotel, Washington - Fairfax Hotel, Washington - Fairmont Hotel, Washington - Four Seasons Hotel, Washington - General Scott Inn, Washington - Georgetown Hotel, Washington - Grand Hotel, Washington - Grand Hyatt, Washington - Hampshire House, Washington - Harambee House, Washington - Hay Adams Hotel, Washington - Holiday Inn Crowne Plaza, Washington - Holiday Inn-Capitol, Washington - Holiday Inn-Georgetown, Washington - Holiday Inn-Governor House, Washington - Hotel Washington, Washington - Howard Johnson, Washington - Hyatt Regency-Capitol, Washington - Hyatt-Convention Center, Washington - International Inn, Washington - Intrigue Hotel, Washington - Jefferson Hotel, Washington - Lombardy Tower Apartment Hotel, Washington - Madison Hotel, Washington - Manger Annapolis Hotel, Washington - Manger Hamilton Hotel, Washington - Manger Hay Adams Hotel, Washington - Marriott-Key Bridge, Washington - Mayflower Hotel, Washington - Omni Georgetown Hotel, Washington - Omni Shoreham Hotel, Washington - Park Terrace Hotel, Washington - Phoenix Park Hotel, Washington - Plaza Hotel, Washington - Potomac Hotel Group, Washington - Quality Inn-Capitol Hill, Washington - Quality Inn-Downtown, Washington - Ramada Inn-Central, Washington - Ramada Renaissance Hotel, Washington - Ritz-Carlton, Washington - River Inn, Washington - Riverside Towers, Washington - Sheraton City Centre, Washington - Sheraton Grand Hotel, Washington - Shoreham Hotel, Washington - St. James, Washington - State Plaza, Washington - Statler Hilton Hotel, Washington - Washington Hilton, Washington - Washington Plaza, Washington - Watergate Hotel, Washington - Wyndham Bristol Hotel, Washington Florida - Holiday Inn, Altamonte Springs - La Quinta, Altamonte Springs - Turnberry Isle Resort, Aventura - Boca Raton Hotel and Club, Boca Raton - Boca West, Boca Raton - Deerfield Beach Hilton, Boca Raton - Embassy Suites, Boca Raton - Park Place Suite Hotel, Boca Raton - Petite Suites, Boca Raton - Residence Inn, Boca Raton - Days Inn, Brandenton - South Seas Resort, Captive Island - Days Inn, Clearwater - Days Inn-Proposed, Clearwater - Holiday Inn - Central/Clearwater, Clearwater - La Quinta Inn, Clearwater - Sheraton Sand Key Hotel, Clearwater - Holiday Inn - Gulfview South, Clearwater Beach - Holiday Inn - Surfside North, Clearwater Beach - Howard Johnson, Clermont - Econolodge, Cocoa Beach - Hilton Hotel, Cocoa Beach - Holiday Inn, Cocoa Beach - Howard Johnson, Cocoa Beach - Perkins Restaurant, Cocoa Beach - Coconut Grove Hotel, Coconut Grove - Mayfair House, Coconut Grove - Proposed Hampton Inn, Coconut Grove - Biltmore Hotel, Coral Gables - Holiday Inn, Coral Gables - Holiday Inn (Court), Coral Gables - Plantation Hotel, Crystal River - Sheraton Inn, Cypress Gardens - Budget Inn, Davenport - Daytona Beach Surfside Regency, Daytona Beach - Howard Johnson, Daytona Beach - La Quinta Inn, Daytona Beach - Pirates Cove, Daytona Beach - Sheraton Inn, Daytona Beach - Crown Sterling Suites, Deerfield Beach - Days Inn, Deerfield Beach - Hilton Hotel, Deerfield Beach - Horizon Club, Deerfield Beach - Sheraton Inn, Deland - Hilton Hotel, Disney World - Holiday Inn, Edgewater - Knights Inn, Florida City - AmeriSuites Hotel-Proposed, Fort Lauderdale - Bahia Mar Hotel, Fort Lauderdale - Comfort Suites, Fort Lauderdale - Compri Hotel-Proposed, Fort Lauderdale - Costa Del Sol, Fort Lauderdale - Crown Sterling Suites, Fort Lauderdale - Days Inn, Fort Lauderdale - Embassy Suites Hotel, Fort Lauderdale - Executive House, Fort Lauderdale - Hilton Hotel, Fort Lauderdale - Hilton Inverrary, Fort Lauderdale - Holiday Inn - Galleria, Fort Lauderdale - Holiday Inn - North Beach, Fort Lauderdale - Holiday Inn-Proposed, Fort Lauderdale - Marriott Harbor Beach Hotel, Fort Lauderdale - Marriott Hotel & Marina, Fort Lauderdale - Marriott Hotel-Cypress Road, Fort Lauderdale - Pier 66 Hotel and Marina, Fort Lauderdale - Port Everglades Hotel, Fort Lauderdale - Stouffer Hotel, Fort Lauderdale - Days Inn, Fort Meyers - Courtyard by Marriott, Fort Myers - Holiday Inn, Fort Myers - La Quinta Hotel, Fort Myers - Sheraton Harbor Place-Proposed, Fort Myers - Sheraton Motor Inn, Fort Myers - Proposed Hotel, Fort Myers Beach - American Way, Fort Pierce - Days Inn, Fort Walton Beach - Holiday Inn - Airport, Fort.Lauderdale - Days Inn-University Center, Gainesville - Fairfield Inn, Gainesville - Howard Johnson Lodge-I-75, Gainesville - La Quinta Hotel, Gainesville - University Centre Hotel, Gainesville - Holiday Inn, Hialeah - Motel, Hillsboro Beach - Days Inn, Hollywood - Diplomat Hotel, Hollywood - Holiday Inn, Hollywood - Quality Suites - Oceanside, Indiatlantic - Hilton Inn, Inverrary - Best Inn, Jacksonville - Bradbury Suites-Proposed, Jacksonville - Compri Hotel-Proposed, Jacksonville - Courtyard By Marriott, Jacksonville - Days Inn, Jacksonville - Doubletree Club Hotel, Jacksonville - Hampton Inn, Jacksonville - Hotel-Proposed, Jacksonville - Jacksonville Hotel, Jacksonville - Residence Inn, Jacksonville - Sheraton Hotel, Jacksonville - Wyndham Lakes Hotel, Jacksonville - Sheraton Beach Hotel, Jensen Beach - Howard Johnson, Juno Beach - Hilton Hotel, Jupiter - Key Biscayne, Key Biscayne - Howard Johnson Lodge, Key Largo - Casa Marina Marriott, Key West - Fairfield Inn, Key West - Hampton Inn-Roosevelt Rd., Key West - Holiday Inn, Key West - Hyatt Hotel, Key West - La Concha Holiday Inn, Key West - Pier House Inn and Beach Club, Key West - Reach Hotel, Key West - Santa Maria Hotel, Key West - Timeshare Resort, Key West - Best Western Vacation Lodge, Kissimmee - Days Inn, Kissimmee - Days Inn West, Kissimmee - Days Lodge, Kissimmee - Howard Johnson Plaza Hotel, Kissimmee - Howard Johnson's, Kissimmee - KOA Campground, Kissimmee - Old Town Retail Complex, Kissimmee - Quality Suites, Kissimmee - Quality Suites-Maingate, Kissimmee - Save Inn, Kissimmee - Sheraton Lakeside, Kissimmee - Suite Hotel-Proposed, Kissimmee - Wynfield Inn, Kissimmee - Days Inn, Lake Buena Vista - Embassy Suites-Proposed, Lake Buena Vista - Hilton Hotel-Disney World, Lake Buena Vista - Marriott Orlando World Center, Lake Buena Vista - Days Inn, Lake City - Flagship Inn, Lake County - Travelodge Motel, Lake County - Lake Park Inn, Lake Park - Holiday Inn, Lake Placid - Hampton Inn-Proposed, Lakeland - Hotel-Proposed, Lakeland - Howard Johnson, Lakeland - Resort Hotel-Proposed, Lakeland - Resort-Imperial Lake-Prpsd., Lakeland - Proposed Hotel, Lee County - Sonesta Sanibel Harbour, Lee County - Holiday Inn, Lido Beach - Holiday Inn, Longboat Kay - Holiday Inn - Madiera Beach, Madiera - Howard Johnson, Marathon - Radisson Suite Resort, Marco Island - Holiday Inn, Marianna - Oceanfront Hotel, Melbourne - Quality Suites, Melbourne - Bahia Mar Hotel & Yachting Club, Miami - Biscayne Bay Marriott, Miami - Courtyard by Marriott, Miami - Crown Sterling Suites, Miami - Doral Ocean Beach Resort, Miami - Fairfield Inn, Miami - Hilton Hotel-Proposed, Miami - Holiday Inn Civic Center, Miami - Holiday Inn-Airport (Le Juene Rd.), Miami - Holiday Inn-Calder, Miami - Howard Johnson Hotel-Broad Causeway, Miami - Howard Johnson Hotel-Port of Miami, Miami - Howard Johnson Lodge-Golden Glades, Miami - Howard Johnson Lodge-Int'l Airport, Miami - Hyatt Regency Hotel, Miami - Inter-Continental Hotel, Miami - Jockey Club, Miami - Marriott Hotel-Downtown, Miami - Miami Airport Ramada, Miami - Proposed AmeriSuites, Miami - Propsed Hampton Inn, Miami - Residence Inn-Proposed, Miami - Sheraton River House, Miami - Sofitel Miami, Miami - Alexander Hotel, Miami Beach - Art Deco Hotel, Miami Beach - Cresent Timeshare, Miami Beach - Delano Hotel, Miami Beach - Doral Beach Hotel, Miami Beach - Eden Roc Hotel, Miami Beach - Fontainebleu Hotel, Miami Beach - Holiday Inn, Miami Beach - Holiday Inn-Central, Miami Beach - Holiday Inn-North, Miami Beach - Holiday Inn-Oceanside, Miami Beach - Holiday Inn-South, Miami Beach - Hotel-Proposed, Miami Beach - Nautilus Club Hotel, Miami Beach - Palm Resort on the Ocean, Miami Beach - Pan American Radisson, Miami Beach - Proposed Hotel, Miami Beach - Shelborne Beach Hotel, Miami Beach - Sheraton Beach, Miami Beach - Solymar Hotel-Proposed, Miami Beach - Quality Inn, Naples - Quality Inn-Gulfcoast, Naples - Registry Hotel at Pelican Bay, Naples - Registry Resort-Proposed, Naples - Super 8 Motel-Proposed, Naples - World Tennis Resort, Naples - Hyatt Newporter Hotel, Newport Beach - Hilton Hotel, North Redington Beach - Masters Economy Inn, North Seffner - Amfac Hotel, Orlando - Army lodging-Proposed, Orlando - Comfort Suites Hotel, Orlando - Compri Hotel-Airport-Proposed, Orlando - Compri Hotel-Proposed, Orlando - Courtyard - Orlando Airport, Orlando - Days Inn, Orlando - Days Inn and Lodge-Florida Mall, Orlando - Days Inn Civic Center, Orlando - Days Inn East of Universal Studios, Orlando - Days Inn-E/O Magic Kingdom, Orlando - Days Inn-Proposed, Orlando - Days Inn-Sandlake Road, Orlando - Days Suites-E/O Magic Kingdom, Orlando - Dolphin Hotel-Proposed, Orlando - Dutch Inn, Orlando - Embassy Suites, Orlando - Fairfield Inn, Orlando - Fairfield Inn-Airport, Orlando - Grand Cypress Resort, Orlando - Hampton Inn - Proposed, Orlando - Heritage Inn, Orlando - Holiday Inn Central Park, Orlando - Holiday Inn Crowne Plaza, Orlando - Holiday Inn-Airport, Orlando - Holiday Inn-International Drive, Orlando - Holiday Inn-Lee Road, Orlando - Holiday Inn-Maingate West, Orlando - Holiday Inn-Orange Blossom Trail, Orlando - Howard Johnson - Walt Disney World, Orlando - Howard Johnson-Kirkman, Orlando - Howard Johnson-Lake Holden, Orlando - Howard Johnson-Maingate, Orlando - Hyatt Grand Cypress, Orlando - Hyatt Regency Grand Cypress, Orlando - Hyatt-W. Irlo Bronson Mem. Hwy., Orlando - International Inn, Orlando - Kon Tiki Village, Orlando - La Quinta Hotel-Airport, Orlando - La Quinta Inn, Orlando - Omni Orlando, Orlando - Orlando Airport Hotel-Proposed, Orlando - Orlando Hamiton, Orlando - Orlando Plaza Hotel, Orlando - Orlando Twin Towers Hotel, Orlando - Park Suite Hotel-Proposed, Orlando - Peabody Hotel, Orlando - Princess Hotel and Spa, Orlando - Proposed Wellesley Inn, Orlando - Quality Inn, Orlando - Radisson Hotel-Aquatic Center, Orlando - Regency Inn, Orlando - Residence Inn By Marriott, Orlando - Rodeway Inn, Orlando - Save Inn, Orlando - Sheraton Jetport Inn, Orlando - Sheraton Lakeside, Orlando - Sheraton Twin Towers, Orlando - Sonesta Village Resort, Orlando - Stouffer Orlando Resort, Orlando - Swan Hotel-Proposed, Orlando - Thriftway Motel, Orlando - Wynfield Inn, Orlando - American Way, Osceola - Sheraton Gateway Motel, Osceola - Brazilian Court Hotel, Palm Beach - Heart of Palm Beach Hotel, Palm Beach - Hilton Inn, Palm Beach - Palm Court, Palm Beach - Holiday Inn, Palm Beach Garden - Days Inn, Panama City - Marriott's Bay Point, Panama City - Super 8, Panama City - Days Inn, Pensacola - Hilton Hotel, Pensacola - La Quinta Hotel, Pensacola - Residence Inn, Pensacola - Super 8, Pensacola - Proposed Hampton Inn, Pensacola Beach - Comfort Inn, Perdido Key - La Quinta, Pinellas County - Courtyard by Marriott, Plantation - Holiday Inn Plantation, Plantation - Sheraton Suites, Plantation - Days Inn, Pompano Beach - Palm-Aire Spa Resort, Pompano Beach - Lodge & Bath Club, Ponte Verde - Howard Johnson, Punta Gorda - Days Inn, Riviera Beach - Safety Harbor Spa, Safety Harbor - Holiday Inn, Saint Augustine - Howard Johnson, Saint Augustine - Courtyard by Marriott, Saint Petersburg - Don Ceahsar Beach Resort, Saint Petersburg - Hilton Hotel, Saint Petersburg - Howard Johnson, Saint Petersburg - Ramada Inn, Saint Petersburg - Residence Inn, Saint Petersburg - Saint Petersburg Motel, Saint Petersburg - Sheraton Hotel and Marina, Saint Petersburg - Vinoy Park Hotel, Saint Petersburg - Countryside Inn, Sanford - Days Inn, Sanford - Holiday Inn, Sanford - Azure Tides Resort-Proposed, Sarasota - Days Inn, Sarasota - Holiday Inn-Lido Beach, Sarasota - Proposed Hotel, Sarasota - Holiday Inn, Sebring - Embassy Suites, Singer Island - Hilton, Singer Island - Econo Lodge, Starke - Radisson Pan American Hotel, Sunny Isles - Best Inn, Tallahassee - Courtyard by Marriott, Tallahassee - Days Inn-Tallahassee, Tallahassee - American Way, Tampa - Courtyard by Marriott, Tampa - Days Inn, Tampa - Embassy Suites-Airport, Tampa - Hampton Inn-Airport, Tampa - Hilton-Airport, Tampa - Holiday Inn, Tampa - Holiday Inn Sahal Park, Tampa - Holiday Inn-Airport, Tampa - Manger Motor Inn, Tampa - Marriott Hotel, Tampa - Omni Tampa Hotel at Westshore, Tampa - Ramada Inn, Tampa - Rodeway Inn, Tampa - Saddlebrook Resort, Tampa - Sheraton Grand West, Tampa - Master Economy Inn, Tampa-East(Selfner) - Master Economy Inn, Tampa-North(Zephyrhills) - Days Inn, Vero Beach - Holiday Inn-Countryside, Vero Beach - Holiday Inn-Oceanside, Vero Beach - Saddlebrook Resort, Wesley Chapel - Courtyard by Marriott, West Melbourne - Airport Centre, West Palm Beach - Courtyard by Marriott, West Palm Beach - Days Inn, West Palm Beach - Field Palm Hotel, West Palm Beach - Hilton-Airport, West Palm Beach - Howard Johnson Lodge, West Palm Beach - Hyatt Hotel of the Palm Beaches, West Palm Beach - Royce Hotel, West Palm Beach - Masters Economy Inn, Zephyrhills Georgia - Atlanta Radisson Hotel, Atlanta - Atlanta Terrace Motel, Atlanta - Comfort Inn, Atlanta - Compri Hotel, Atlanta - Courtyard By Marriott-Airport North, Atlanta - Courtyard by Marriott-Airport South, Atlanta - Courtyard by Marriott-Cumberland, Atlanta - Courtyard by Marriott-Executive Pk., Atlanta - Courtyard by Marriott-Gwinnett, Atlanta - Courtyard by Marriott-Jimmy Carter, Atlanta - Courtyard by Marriott-PeachtrDunwdy, Atlanta - Courtyard by Marriott-Perimeter, Atlanta - Courtyard by Marriott-Rosewell, Atlanta - Courtyard by Marriott-Windy Hill, Atlanta - Cresthil Inn-Proposed, Atlanta - Days Inn, Atlanta - Days Inn - Northlake, Atlanta - Doubletree Hotel, Atlanta - Embassy Suites-Atlanta Perimeter, Atlanta - Embassy Suites-Buckhead, Atlanta - Embassy Suites-Galleria, Atlanta - F.W.W. Hotel, Atlanta - Fairfield Inn-Airport, Atlanta - Fairfield Inn-Gwinnett, Atlanta - Fairfield Inn-North Lake, Atlanta - Fairfield Inn-Northwest, Atlanta - Fairfield Inn-Peachtree, Atlanta - Fairfield Inn-South Lake, Atlanta - Hampton Inn-Airport, Atlanta - Hilton Inn, Atlanta - Holiday Inn Crowne Plaza, Atlanta - Holiday Inn-I-20 East, Atlanta - Holiday Inn-I-85 Monroe Drive, Atlanta - Holiday Inn-Perimeter Dunwooody, Atlanta - Hotel-Downtown-Proposed, Atlanta - Hotel-Proposed, Atlanta - Howard Johnson Hotel-Hartsfield, Atlanta - Howard Johnson-Airport, Atlanta - Howard Johnson-Northeast, Atlanta - Howard Johnson-Northwest, Atlanta - Howard Johnson-South, Atlanta - Hyatt Atlanta-Airport, Atlanta - La Quinta - Stone Mountain, Atlanta - La Quinta Hotel, Atlanta - La Quinta Hotel-West, Atlanta - Marriott Atlanta Airport, Atlanta - Marriott Hotel, Atlanta - Marriott Hotel-Downtown, Atlanta - Marriott Marquis, Atlanta - Marriott Suites Hotel-Proposed, Atlanta - Marriott-Perimeter, Atlanta - Master Economy Inn, Atlanta - Motel 6, Atlanta - Neighborhood Inn, Atlanta - Omni International Hotel, Atlanta - Perimeter North Inn, Atlanta - Proposed AmeriSuites, Atlanta - Quality Inn-Central, Atlanta - Radisson Inn, Atlanta - Ramada Inn-Perimeter, Atlanta - Residence Inn by Marriott-Dunwoody, Atlanta - Residence Inn-Airport, Atlanta - Residence Inn-Buckhead, Atlanta - Residence Inn-Northwest, Atlanta - Sheraton Century Center, Atlanta - Sheraton-Airport, Atlanta - Sporting Club at the Concourse, Atlanta - Stouffer Hotel-Proposed, Atlanta - Swissotel, Atlanta - Terrace Motel, Atlanta - Waverly Hotel, Atlanta - Westin Lenox Hotel, Atlanta - Westin Peachtree Plaza, Atlanta - Wyndham Garden Hotel, Atlanta - Hyatt Hotel, Atlanta Airport - Hampton Inn, Atlanta-Buckhead - Courtyard by Marriott, Augusta - Landmark Hotel, Augusta - Masters Economy Inn - Gordon Hwy., Augusta - Masters Economy Inn - Warner Robins, Augusta - Masters Economy Inn - Washington Rd, Augusta - Holiday Inn, Brunswick - Super 8, Brunswick - Days Inn, Calhoun - Super 8, Cartersville - Days Inn, Chamblee - Comfort Inn-Proposed, College Park - Holiday Inn Crowne Plaza, College Park - Courtyard by Marriott, Columbus - La Quinta Inn, Columbus - Super 8, Columbus - Best Inn, Dalton - Days Inn, Dalton - Holiday Inn-Proposed, Decatur - Sheraton Hotel, Decatur - Best Western-Perimeter-North, Doraville - Days Inn - Gwinnett, Duluth - Howard Johnson, Forsyth - Holiday Inn-Proposed, Gwinnett County - Holiday Inn, Jekyll Island - Jekyll Island Inn-Proposed, Jekyll Island - Hilton Hotel, Macon - Master Economy Inn, Macon - Best Inn, Marietta - Courtyard by Marriott-Delk Road, Marietta - Lafayette Hotel, Marietta - Hampton Inn, Marrietta (Atlanta) - Master Economy Inn, McDonough - Courtyard by Marriott-Perimeter, Norcross - Motel 6, Norcross - Hilton Hotel, Peachtree Corners - Super 8, Rome - Best Western, Savannah - Courtyard by Marriott, Savannah - Days Inn, Savannah - Days Inn-Bay Street, Savannah - Days Inn-Mall Blvd., Savannah - Fairfield Inn, Savannah - Hotel-Proposed, Savannah - Mulberry Inn, Savannah - Radisson Hotel-Proposed, Savannah - Royal Savannah, Savannah - Sheraton Savannah Resort & C.C., Savannah - Town and Country Motel, Savannah - Days Inn, Savannah Beach - Howard Johnson, Smyrna - Master Economy Inn, Tilton - Courtyard by Marriott-Northlake, Tucker - Master Economy Inn, Warner Robins - Super 8, Warner Robins Hawaii - Hyatt Regency Waikoloa, Hawaii - Mauna Kea Hotel, Hawaii - Kahala Hilton, Honolulu - Plaza Hotel, Honolulu - Waikiki Beachcomber, Honolulu - Waikiki Hobron, Honolulu - Coco Palms Resort, Kauai - Kauai Surf Hotel, Kauai - Westin Kauai-Kauai Lagoons Resort, Kauai - Westin Kauai-Proposed, Kauai - Kona Village, Kona - Royal Sea Cliff Resort, Kona - Westin Kauai at Kauai Lagoon, Lihue - Hyatt Regency, Maui - Marriott Resort, Maui - Maui Lu Hotel, Maui - Maui Surf Hotel, Maui - Westin Maui, Maui - Hawaiian Regent Hotel-Waikiki Beach, Oahu - Hotel-Proposed-Schofield Barracks, Oahu - Hyatt Regency Waikiki, Oahu - Kiahuna Plantation, Poipu Beach, Kauai - Transient Lodging Facilities, Schofield Barracks - Hilton Hawaiian Village, Waikiki - Grand Hyatt Wailea, Wailea Idaho - Compri Hotel, Boise - Holiday Inn, Boise - Holiday Inn-Airport, Boise - Red Lion Inn, Boise - Super 8, Boise - Motel 6, Coeur d'Alene - Super 8, Coeur d'Alene - Proposed Motel, Coure d'Alene - Super 8, Lewiston - Cotton Tree Inn, Pocatello - Super 8, Sand Point - Busterback Ranch, Sawtooth Valley Illinois - Arlington Park Hilton, Arlington Heights - Church Creek, Arlington Heights - Courtyard by Marriott, Arlington Heights - La Quinta Hotel, Arlington Heights - Hampton Inn-Proposed, Bedford Park - Best Inn, Bloomington - Fairfield Inn-Normal, Bloomington - Holiday Inn, Bloomington - Indian Lakes Resort, Bloomington - Ramada Inn, Bloomington - Super 8, Bloomington - Cresthil-Proposed, Buffalo Grove - Holiday Inn, Champaign - La Quinta Inn, Champaign - Radisson Suites - Champaign, Champaign - Suite Hotel-Proposed, Champaign - Super 8, Champaign - Ambassador West Hotel, Chicago - Americana Congress, Chicago - Conrad Hilton Hotel, Chicago - Courtyard by Marriott-Glenview, Chicago - Courtyard by Marriott-Highland, Chicago - Courtyard by Marriott-Lincoln, Chicago - Courtyard by Marriott-O'Hare, Chicago - Courtyard by Marriott-Waukegan, Chicago - Courtyard by Marriott-Woodale, Chicago - Days Inn, Chicago - Executive House, Chicago - Fairfield Inn-Lansing, Chicago - Fairfield Inn-Willowbrook, Chicago - Fairmont Hotel, Chicago - Guest Quarters Hotel, Chicago - Hilton and Towers, Chicago - Hilton-O'Hare, Chicago - Holiday Inn-Merchandise Mart, Chicago - Howard Johnson-O'Hare Int'l Airport, Chicago - Hyatt Regency, Chicago - Hyatt Suites Hotel, Chicago - Inter-Continental Hotel-Proposed, Chicago - La Quinta Inn - Hoffman Est., Chicago - Le Meridien, Chicago - Lenox House, Chicago - Lincoln Hotel, Chicago - Mark Twain Hotel, Chicago - Marriott-O'Hare, Chicago - Mayfair Regent, Chicago - McClurg Holiday Inn, Chicago - McCormick Inn Hotel, Chicago - Morton Hotel, Chicago - Omni Ambassador East, Chicago - Omni Morton Hotel, Chicago - Palmer House Hotel, Chicago - Ramada Inn - Lakeshore, Chicago - Ramada O'Hare, Chicago - Residence Inn-Deerfield, Chicago - Residence Inn-Lombard, Chicago - Sheraton Hotel-Downtown, Chicago - Sheraton Hotel-Proposed, Chicago - Sheraton O'Hare, Chicago - Sheraton Plaza Hotel, Chicago - Summerfield Suites Hotel, Chicago - Swissotel, Chicago - Tremont Hotel, Chicago - Westin Hotel, Chicago - Whitehall Hotel, Chicago - Hilton Hotel, Collinsville - Holiday Inn, Collinsville - Super 8, Columbus - Super 8, Crystal Lake - Super 8, Decatur - Courtyard by Marriott, Deerfield - Embassy Suites, Deerfield - Marriott Suites Hotel, Deerfield - Holiday Inn-Chicago, Des Plaines - Hotel-Proposed, Des Plaines - Compri Hotel-Proposed, Downers Grove - Radisson Suite Hotel, Downers Grove - Best Inn, Effingham - Ramada Inn, Elgin - Hampton Inn, Elk Grove Village - Marriott Suites, Elk Grove Village - Holiday Inn, Elmhurst - Orrington Hotel, Evanston - Drury Inn, Fairview Heights - Conference Center & Resort-Proposed, Fox Lake - Holiday Inn, Freeport - Hotel-Proposed, Gurnee - La Quinta Hotel, Hoffman Estates - Carson Inn, Itasca - Hamilton Wyndham, Itasca - Nordic Hills, Itasca - Holiday Inn, Joliet - Proposed Harrah's Riverboat, Joliet - Days Inn, Kankakee - Holiday Inn, LaSalle - Marriott Hotel, Lincolnshire - Hilton Inn, Lisle - Holiday Inn Crowne Plaza, Lisle - Embassy Suites, Lombard - Holiday Inn, Macomb - Best Inn, Marion - Best Inn, Mount Vernon - Holiday Inn, Mount Vernon - Ramada Inn, Mount Vernon - Courtyard by Marriott, Naperville - Ramada Inn, Naperville - Sheraton Naperville, Naperville - O'Hareport Hotel, Northlake - Courtyard by Marriott, Oakbrook Terrace - Super 8, Okawville - Fairfield Inn, Peoria - Days Inn, Peru - Super 8, Peru - Courtyard by Marriott, Rockford - Fairfield Inn, Rockford - Hampton Inn, Rockford - Embassy Suites, Rosemont - Quality Inn/Clarion, Rosemont - Sheraton Int'l At O'Hare, Rosemont - Holiday Inn, Salem - Compri Hotel, Schaumburg - Embassy Suites, Schaumburg - Marriott Schaumburg, Schaumburg - Holiday Inn, South Beloit - Ramada Renaissance Hotel, Springfield - Sheraton Inn, Springfield - Super 8-East, Springfield - Super 8-South, Springfield - Jumer's Castle, Urbana - Best Inn, Waukegan - Super 8, Waukegan Indiana - Clarion Fourwinds Inn, Bloomington - Holiday Inn, Bloomington - Inn at the Four Winds, Bloomington - Ramada Inn, Bloomington - Harbor Point Resort, Brookville Lake - Super 8, Columbus - Best Inn, Fort Wayne - Hilton, Fort Wayne - Downtown Hotel, Gary - Sheraton, Gary - Holiday Inn, Goshen - Howard Johnson, Hammond - Quality Inn, Hammond - Courtyard by Marriott-Airport, Indianapolis - Courtyard by Marriott-Carmel, Indianapolis - Courtyard by Marriott-Castleton, Indianapolis - Embassy Suites-Claypool Center, Indianapolis - Fairfield Inn-Castleton, Indianapolis - Fairfield Inn-College Park, Indianapolis - Hampton Inn-Proposed, Indianapolis - Hilton Hotel-Airport, Indianapolis - Hilton Inn-Downtown, Indianapolis - Holiday Inn-South, Indianapolis - Holiday Inn-Southeast, Indianapolis - Knights Inn, Indianapolis - Midway Motor Lodge, Indianapolis - Mohawk Inn, Indianapolis - Motel 6, Indianapolis - Proposed Fairfield Inn, Indianapolis - Proposed Residence Inn, Indianapolis - Radisson, Indianapolis - Ramada-Airport, Indianapolis - Wyndham Garden Hotel, Indianapolis - La Quinta Inn, Indianapolis Airport - Hilton Inn, Jeffersonville - Holiday Inn, La Porte - Days Inn, Lafayette - Holiday Inn, Lafayette - Cotton Mill Inn-Proposed, Madison - Hampton Inn, Merrillville - Holiday Inn Express, Merrillville - La Quinta Inn, Merrillville - Hotel Roberts, Muncie - Radisson Hotel, Muncie - Brown County Inn, Nashville - Holiday Inn, Portage - Knights Inn, Richmond - Holiday Inn, South Bend - Howard Johnson, South Bend - Signature Inn, Terre Haute - Super 8, Terre Haute - Courtyard Conversion, Valparaiso - Holiday Inn, Vincennes Iowa - Holiday Inn-Gateway Center, Ames - Holiday Inn, Cedar Falls - Collins Plaza, Cedar Rapids - Holiday Inn, Cedar Rapids - Roosevelt Hotel, Cedar Rapids - Super 8, Davenport - Courtyard by Marriott, Des Moines - Fairfield Inn, Des Moines - Holiday Inn, Des Moines - Holiday Inn - West, Des Moines - Holiday Inn-Downtown, Des Moines - Holiday Inn-North, Des Moines - Ramada Inn, Des Moines - Super 8-North, Des Moines - Super 8-West, Des Moines - Holiday Inn, Iowa City Kansas - Embassy Suites, Kansas City - Fairfield Inn-Overland Park, Kansas City - Holiday Inn-Mission Overland Park, Kansas City - Fairfield Inn, Kansas City West - Holiday Inn, Lawrence - University Inn, Lawrence - Holiday Inn, Manhattan - Courtyard by Marriott, Overland Park - Hampton Inn-Proposed, Overland Park - Marriott Hotel, Overland Park - Park Inn International, Topeka - Super 8, Topeka - Canterbury Inn, Wichita - Former Sheraton Hotel, Wichita - Hilton-East, Wichita - Marriott Hotel, Wichita - Comfort Inn, Winfield Kentucky - Conference Center-Proposed, Boone County - Howard Johnson, Bowling Green - Brown County Inn, Brown County - Holiday Inn, Corbin - Hotel-Proposed, Covington - Thomas More Centre, Crestville Hill - Comfort Inn, Elizabethtown - Signature Inn, Elkhart - Holiday Inn, Florence - Signature Inn, Florence - Drawbridge Inn, Fort Mitchell - Days Inn, Georgetown - Days Inn, Henderson - Holiday Inn, Henderson - Bluegrass Motor Inn, Lexington - Courtyard by Marriott, Lexington - Holiday Inn, Lexington - Holiday Inn-East, Lexington - Holiday Inn-North, Lexington - Hyatt Hotel, Lexington - Knights Inn, Lexington - Super 8-Proposed, London - Brown Hotel, Louisville - Courtyard by Marriott-East, Louisville - Holiday Inn, Louisville - Holiday Inn South, Louisville - Holiday Inn-Central, Louisville - Holiday Inn-Northeast, Louisville - Ramada Inn, Louisville - Ramada Inn-East, Louisville - Signature Inn, Louisville - Days Inn, Madisonville - Executive Inn, Owensboro - Super 8-Proposed, Radcliff - Holiday Inn, Richmond Louisiana - Howard Johnson, Alexandria - Capital House, Baton Rouge - Convention Center Hotel-Proposed, Baton Rouge - Courtyard by Marriott, Baton Rouge - Crown Sterling Suites, Baton Rouge - Embassy Suites, Baton Rouge - Hilton Hotel, Baton Rouge - Holiday Inn-East, Baton Rouge - Holiday Inn-South, Baton Rouge - Holiday Inn-West, Baton Rouge - La Quinta Inn, Baton Rouge - Prince Murat Hotel, Baton Rouge - Proposed Homewood Suites, Baton Rouge - Quality Inn, Bossier City - Ramada Inn, Hammond - Ramada Inn, Houma - Holiday Inn - New Orleans, Kenner - Sheraton, Kenner - Hilton Hotel, Lafayette - La Quinta Hotel, Lafayette - Gateway Hotel, Metairie - Howard Johnson-Airport, Metairie - Canal Street Hotels L.P., New Orleans - Clarion Hotel, New Orleans - Days Inn, New Orleans - Fairmont Roosevelt Hotel, New Orleans - Hampton Inn-Proposed, New Orleans - Holiday Inn Crowne Plaza, New Orleans - Hostellerie de la Poste, New Orleans - Hotel Meridien, New Orleans - Hyatt Regency, New Orleans - Iberville Hotel, New Orleans - Inter-Continental Hotel, New Orleans - La Quinta Inn, New Orleans - Landmark Bourbon, New Orleans - Le Meridien New Orleans, New Orleans - Maison Dupuy, New Orleans - Marriott Hotel, New Orleans - Omni Royal Orleans, New Orleans - Ramada Inn, New Orleans - Saint Louis Hotel, New Orleans - St. Ann/Marie Antoinette, New Orleans - Warwick, New Orleans - Westin Hotel, New Orleans - Residence Inn, Shreveport - Super 8, Shreveport Maine - Hilton Inn, Bangor - Ramada Inn, Bangor - Residence Inn by Marriott-Proposed, Bangor - Inn By The Sea, Cape Elizabeth - Hotel-Proposed, Orchard Beach - Hotel-Proposed, Portland - Portland Regency, Portland - Ramada Inn, Portland - Sheraton Tara Portland, Portland - Susse Chalet, Portland - Susse Chalet, Portland (In-town) - Keddy's Motor Inn of Maine, Presque Isle - Hampton Inn, South Portland - Sheraton Inn, South Portland Maryland - Budget Hotel-Proposed, Aberdeen - Chesapeake House, Aberdeen - Holiday Inn, Aberdeen - Motel-Proposed, Aberdeen - Annapolis Hotel, Annapolis - Courtyard by Marriott-Riva Road, Annapolis - Governor Calvert House, Annapolis - Historic Inns of Annapolis, Annapolis - Hotel-Proposed, Annapolis - Howard Johnson, Annapolis - Marriott Hotel, Annapolis - Maryland Inn, Annapolis - Quality Royale Hotel, Annapolis - Ramada Hotel, Annapolis - Robert Johnson House, Annapolis - Brookshire Hotel, Baltimore - Courtyard by Marriott-BWI Airport, Baltimore - Days Inn, Baltimore - Harbor Court Hotel, Baltimore - Harrison's at Pier 5, Baltimore - Hilton Hotel, Baltimore - Holiday Inn-Belmont Blvd., Baltimore - Holiday Inn-Cromwell Bridge, Baltimore - Holiday Inn-Glen Burnie, Baltimore - Holiday Inn-Inner Harbor, Baltimore - Holiday Inn-Int'l Airport, Baltimore - Holiday Inn-Moravia Road, Baltimore - Holiday Inn-Pikesville, Baltimore - Holiday Inn-South Glen Burnie, Baltimore - Hotel-Proposed, Baltimore - Howard Johnson-Proposed, Baltimore - Johns Hopkins Hotel-Proposed, Baltimore - Lord Baltimore Hotel, Baltimore - Omni International Hotel, Baltimore - Ramada Inn-I-695 West, Baltimore - Susse Chalet, Baltimore - Susse Chalet Inn-BWI Airport, Baltimore - Susse Chalet Inn-Golden Ring, Baltimore - Bethesda Metro Center, Bethesda - Guest Quarters, Bethesda - Hyatt Regency Hotel, Bethesda - Linden Hill Hotel, Bethesda - Omni Linden Hotel, Bethesda - Residence Inn, Bethesda - Bethseda Metro Center, Bethseda - Guest Quarters, Bethseda - Residence Inn - Proposed, Bethseda - Comfort Suites-Proposed, Bowie - Days Inn, Capital Heights - Residence Inn, Cockneysville - Abbey, College Park - Best Western Maryland, College Park - Holiday Inn, College Park - Sheraton Inn, Dorsey - Days Inn, Easton - Mariner Inn, Easton - Holiday Inn, Frederick - Compri Hotel, Gaithersburg - Marriott Hotel, Gaithersburg - Century XXI Resort, Germantown - Comfort Inn, Germantown - Hampton Inn, Glen Burnie - Residence Inn-Proposed, Greenbelt - Courtyard by Marriott, Hunt Valley - Hunt Valley Embassy Suites, Hunt Valley - Hunt Valley Marriott, Hunt Valley - Susse Chalet Inn, Jessup - Courtyard by Marriott, Landover - Quality Inn-Proposed, Landover - Days Inn, Lanham - Best Western Maryland, Laurel - Days Inn, Laurel - Holiday Inn, Laurel - Susse Chalet, Linthicum - Howard Johnson Plaza Hotel, New Carrollton - Carousel Hotel, Ocean City - Days Inn, Ocean City - Susse Chalet, Oxon Hill - Hotel-Proposed, Prince Georges County - Budget Hotel-Proposed, Rockville - Comfort Inn, Rockville - Courtyard by Marriott, Rockville - Days Inn-Congressional Park, Rockville - Holiday Inn Crowne Plaza, Rockville - Quality Inn-Proposed, Rockville - Ramada Inn, Rockville - Salisbury Hotel, Salisbury - Sheraton Hotel, Salisbury - Courtyard by Marriott, Silver Spring - Quality Inn-Proposed, Silver Spring - Comfort Inn-Proposed, Solomons Island - Holiday Inn, Towson - Quality Inn-Proposed, Westminster Massachusetts - Susse Chalet, Amsbury - Courtyard by Marriott, Andover - Marriott Hotel, Andover - Stouffer Bedford Glen Hotel, Bedford - Anthony's Pier Four, Boston - Battery Wharf Hotel-Proposed, Boston - Boston Harbor Hotel, Boston - Boston World Trade Center, Boston - Bostonian Hotel, Boston - Colonnade Hotel, Boston - Commonwealth Center Hotel, Boston - Compri Hotel-Proposed, Boston - Copley Plaza Hotel, Boston - Courtyard by Marriott-Foxborough, Boston - Econo Lodge-Proposed, Boston - Harborside Conf. Center-Proposed, Boston - Hilton-Back Bay, Boston - Hilton-Logan, Boston - Holiday Inn-Government Center, Boston - Hotel - Proposed, Boston - Hyatt Fan Pier-Proposed, Boston - Hyatt Harborside-Proposed, Boston - Lafayette Hotel, Boston - Lenox Hotel, Boston - Marriott Copley Place, Boston - Meridien Hotel, Boston - Omni Parker House, Boston - Residence Inn, Boston - Ritz-Carlton, Boston - Statler Hilton Hotel, Boston - Tremont House Hotel, Boston - World Trade Center Hotel - Proposed, Boston - Marriott Hotel, Boston/Newton - Sheraton Tara Hotel, Braintree - Ocean Edge Inn & Conference Center, Brewster - Holiday Inn, Brookline - Days Inn, Burlington - Charles Hotel, Cambridge - Hyatt Hotel, Cambridge - Royal Sonesta Hotel, Cambridge - The Charles Hotel, Cambridge - Chatham Bars Inn, Chatham - Chelmsford Radisson Hotel, Chelmsford - Best Western Motor Lodge, Chicopee - Cummington Farm Resort-Proposed, Cummington - Appleton Inn, Danvers - Howard Johnson Hotel, Danvers - Radisson Ferncroft Hotel, Danvers - Residence Inn - Proposed, Danvers - Dedham Comfort Inn, Dedham - Holiday Inn, Dedham - Wequassett Inn, East Harwich - Harbor View Hotel, Edgartown - Kelley House, Edgartown - Airport Inn, Fall River - Sea Crest Hotel, Falmouth - Sheraton Inn, Falmouth - Radisson Hotel, Ferncroft - Sheraton Tara Hotel, Framingham - Hotel-Proposed, Franklin - Hotel-Proposed, Haverhill - Susse Chalet, Holyoke - Dunfey Hyannis Hotel, Hyannis - Heritage House Hotel, Hyannis - Holiday Inn, Hyannis - Sheraton Regal Inn, Hyannis - Tara Hyannis, Hyannis - Canyon Ranch-Berkshires, Lenox - Cranwell Hotel and Conference Ctr., Lenox - Spa/Resort-Proposed, Lenox - Holiday Inn, Leominster - Lexington Sheraton, Lexington - Residence Inn-Proposed, Littleton - Appleton Inn, Lowell - Hilton Hotel, Lowell - Town House Motor Inn, Lowell - Holiday Inn, Marlboro - Susse Chalet, Middleboro - Sheraton Milford Hotel, Milford - Holiday Inn, Natick - Skipper's Inn, New Bedford - Days Inn, Newton - Howard Johnson, Newton - Marriott Hotel, Newton - Sheraton - Wayfarer, Newton - Sheraton Tara, Newton - Susse Chalet, Newton - North Adams Inn, North Adams - Hilton Inn, Northampton - Hotel Northampton, Northampton - Factory Mutual Hotel, Norwood - University Inn, Oxford - Holiday Inn, Peabody - Berkshire Commons Hotel, Pittsfield - Hotel-Proposed, Plymouth - Hawthorne Hotel, Salem - Days Inn, Saugus - Susse Chalet, Seekonk - Howard Johnson, Somerset - Somerset Omni, Somerset - Federal House Inn, South Lee - Holiday Inn, Springfield - Howard Johnson, Springfield - Monarch Place, Springfield - Treadway Inn, Springfield - Publick House, Sturbridge - Sheraton, Sturbridge - Regency Inn of Taunton, Taunton - Holiday Inn, Tewksbury - Susse Chalet, Tewksbury - Susse Chalet, Waltham - Vista Waltham House, Waltham - Hampton Inn, West Springfield - Westford Regency Hotel, Westford - The Westminster Village Inn, Westminster - The Orchards, Williamstown - Treadway Inn, Williamstown - Days Inn, Woburn - Howard Johnson, Woburn - Radisson Hotel, Woburn - Ramada Inn, Woburn - Susse Chalet, Woburn - Marriott Hotel, Worcester - Alladin Motor Inn, Yarmouth - Flagship Motor Inn, Yarmouth - Gull Wing Suites Hotel, Yarmouth Michigan - Motel-Proposed, Adrian - Ramada Inn, Allen Park - Holiday Inn-Alpena, Alpena - Compri Hotel-Proposed, Ann Arbor - Hampton Inn-North, Ann Arbor - Hampton Inn-South, Ann Arbor - Hilton Hotel, Ann Arbor - Holiday Inn-East, Ann Arbor - Holiday Inn-West, Ann Arbor - Residence Inn, Ann Arbor - Sheraton Hotel, Ann Arbor - AmeriSuites Hotel-Proposed, Auburn Hills - Holiday Inn, Auburn Hills - Knights Inn, Battle Creek - Super 8, Battle Creek - Bay Valley Inn, Bay City - Howard Johnson, Belleville - Fairfield Inn-Airport, Charlotte - Courtyard by Marriott, Dearborn - Courtyard by Marriott-Airport, Detroit - Courtyard by Marriott-Auburn Hills, Detroit - Courtyard by Marriott-Livonia, Detroit - Days Inn, Detroit - Downtown Hotel-Proposed, Detroit - Fairfield Inn-Airport, Detroit - Fairfield Inn-Auburn Hills, Detroit - Fairfield Inn-Warren, Detroit - Fairfield Inn-West, Detroit - Golden Harp, Detroit - Hampton Inn, Detroit - Hilton-Airport, Detroit - Hilton-North Field, Detroit - Holiday Inn, Detroit - Holiday Inn-Metro Airport, Detroit - Hotel Pontchartrain, Detroit - Omni Detroit, Detroit - Westin Hotel Renaissance Center, Detroit - Holiday Inn, East Lansing - Holiday Inn-Proposed, East Lansing - Knights Inn, Flint - Amway Hotel, Grand Rapids - Holiday Inn, Grand Rapids - Grand Traverse Resort, Grand Traverse Village - Holiday Inn, Howell - Jackson Hotel, Jackson - Fairfield Inn, Kalamazoo - Hilton-Kalamazoo Center, Kalamazoo - Holiday Inn, Kalamazoo - Radison Plaza Hotel, Kalamazoo - Residence Inn, Kalamazoo - Super 8, Kalamazoo - Embassy Suites-Proposed, Lansing - Holiday Inn, Lansing - Motel 6, Lansing - Quality Suites Hotel, Lansing - Compri Hotel-Proposed, Livonia - Embassy Suites, Livonia - Embassy Suites-Proposed, Livonia - Holiday Inn, Livonia - Marriott Hotel, Livonia - Fairfield Inn, Madison Heights - Residence Inn, Madison Heights - Holiday Inn, Marquette - Knights Inn, Monroe - Comfort Inn-Proposed, Mount Clemens - Holiday Inn, Muskegan - Super 8, Muskegon - Hilton Hotel, Novi - Holiday Inn-Petoskey, Petoskey - Mayflower Hotel, Plymouth - Inn at the Bridge, Port Huron - Radisson Hotel, Romulus - Holiday Inn-East, Saginaw - Super 8, Saginaw - Courtyard by Marriott, Southfield - Embassy Suites, Southfield - Hilton Hotel, Southfield - Marriott Hotel, Southfield - Ramada Inn, Southfield - Residence Inn, Southfield - The Garden Inn, Southfield - Comfort Suites-Proposed, Sterling Heights - Holiday Inn, Sturgis - Grand Traverse Resort, Traverse City - Hampton Inn, Traverse City - Park Place Hotel, Traverse City - Courtyard by Marriott, Troy - Holiday Inn, Troy - Marriott, Troy - Residence Inn, Troy - Courtyard by Marriott, Warren - Days Inn, Warren - Holiday Inn, Warren - Motel 6, Warren - Residence Inn, Warren - Van Dyke Hotel & Conference Center, Warren - Bob Evans Restaurant, Wyoming - Super 8, Wyoming - Radisson Resort-Conference Center, Ypsilanti Minnesota - Embassy Suites, Bloomington - Hilton Airport Hotel, Bloomington - Hilton Hotel, Bloomington - Howard Johnson Lodge, Bloomington - Marriott Hotel, Bloomington - Ramada Inn, Bloomington - Days Inn - Minneapolis, Brooklyn Center - Residence Inn, Eagan - Compri Hotel-Proposed, Minneapolis - Courtyard by Marriott-Eden Prairie, Minneapolis - Courtyard by Marriott-Mendota, Minneapolis - Days Inn, Minneapolis - Dyckman Hotel, Minneapolis - Hilton Inn, Minneapolis - Holiday Inn-Downtown, Minneapolis - Hotel-Proposed, Minneapolis - Luxeford Hotel, Minneapolis - Marquette, Minneapolis - Marriott City Center Hotel, Minneapolis - Marriott-Minnetonka, Minneapolis - Motel 6, Minneapolis - Omni-Northstar, Minneapolis - Radisson Hotel, Minneapolis - Ramada Inn, Minneapolis - Sheraton Minneapolis, Minneapolis - Sofitel, Minneapolis - Motel-Proposed, Montevideo - Days Inn, Plymouth - Hotel-Proposed, Rochester - Howard Johnson, Rochester - Motel 6, Rochester - Radisson Hotel, Rochester - Days Inn, Roseville - Holiday Inn, Saint Paul - Holiday Inn-Town Square, Saint Paul - Hotel-Proposed, Saint Paul - Inn and Expo Center, Saint Paul - World Trade Hotel, Saint Paul - Wayzata Conference Center, Wayzata Mississippi - Howard Johnson, Biloxi - Holiday Inn, Greenwood - Motel 6, Hattlesburg - Hampton Inn, Jackson - Howard Johnson, Jackson - Ramada Inn-Proposed, Jackson - Residence Inn, Jackson - Cabot Lodge, Ridgeland - Holiday Inn, Vicksburg Missouri - Ramada Inn, Columbia - Howard Johnson-North St. Louis, Hazelwood - Super 8, Independence - La Quinta Inn, Jackson - North - Capital Plaza, Jefferson City - Ramada Inn, Jefferson City - Days Inn, Joplin - Super 8, Joplin - Allis Plaza, Kansas City - Americana Hotel, Kansas City - AmeriSuites Hotel-Proposed, Kansas City - Doubletree Hotel, Kansas City - Embassy Suites, Kansas City - Fairfield Inn-West, Kansas City - Hilton - Proposed, Kansas City - Hilton Inn, Kansas City - Historic Suites Hotel, Kansas City - Holiday Inn, Kansas City - Holiday Inn Crowne Plaza, Kansas City - Holiday Inn-Proposed, Kansas City - Proposed Sheraton Hotel, Kansas City - Radisson Suite Hotel, Kansas City - Resort Hotel - Proposed, Kansas City - Marriott-Tan-Tar-A, Lake of the Ozarks - Super 8, Liberty - Super 8, North Kansas City - Inn at Grand Glaize, Osage Beach - Super 8, Saint Joseph - Clarion, Saint Louis - Courtyard by Marriott-Creve Coeur, Saint Louis - Courtyard by Marriott-Downtown, Saint Louis - Courtyard by Marriott-Westport, Saint Louis - Days Inn, Saint Louis - Doubletree Hotel, Saint Louis - Drury Inn, Saint Louis - Embassy Suites, Saint Louis - Fairfield Inn-Hazel, Saint Louis - Henry VIII Hotel, Saint Louis - Hilton Hotel-Bel Air, Saint Louis - Holiday Inn Sports Complex, Saint Louis - Holiday Inn-Airport North, Saint Louis - Holiday Inn-Downtown, Saint Louis - Holiday Inn-Riverfont, Saint Louis - Howard Johnson-South, Saint Louis - Mayfair Hotel, Saint Louis - Omni-St. Louis Station, Saint Louis - Ramada Inn-Westport, Saint Louis - Residence Inn-Chesterfield, Saint Louis - Residence Inn-Richmond Heights, Saint Louis - Ritz-Carlton Hotel, Saint Louis - Sheraton-Airport, Saint Louis - St. Louis Airport Hilton, Saint Louis - St. Louis Airport Radisson Hotel, Saint Louis - St. Louisian Hotel, Saint Louis - Stouffer Concourse Hotel, Saint Louis - Super 8, Saint Louis - Marriott Hotel, Saint Louis County - Holiday Inn, Springfield - Sheraton Inn, Springfield - Super 8, Springfield - Executive Inn & Office Building, St. Louis - Holiday Inn, St. Louis - Howard Johnson Hotel, St. Louis - Hotel-Proposed, Unity Village - Holiday Inn, Wendtzville Montana - Sheraton Hotel, Billings - Super 8, Billings - Super 8, Great Falls - Super 8, Helena - Super 8, Kalispell - Holiday Inn, Missoula - Red Lion Inn, Missoula Nebraska - Holiday Inn, Kearney - Best Western Airport Inn, Lincoln - Holiday Inn-Airport, Lincoln - Holiday Inn-Northeast, Lincoln - Howard Johnson, North Platte - Marriott Hotel, Omaha - Ramada Inn, Omaha - Red Lion Inn, Omaha Nevada - Lake Mead Resort, Boulder City - Ormsby House Hotel and Casino, Carson City - Super 8, Carson City - Doubletree Hotel and Resort, Cathedral City - Best Western Motel - Proposed, Jackpot - Airport Inn, Las Vegas - Aladdin Hotel and Casino, Las Vegas - Alexis Park Resort Hotel, Las Vegas - Casino Hotel-Proposed, Las Vegas - Courtyard by Marriott, Las Vegas - El Rancho Hotel and Casino, Las Vegas - Hotel and Casino-Proposed, Las Vegas - Jockey Club Hotel and Casino, Las Vegas - La Quinta Hotel, Las Vegas - Paradise Resort, Las Vegas - Residence Inn, Las Vegas - Silverbird Casino, Las Vegas - Super 8-Proposed, Las Vegas - The Mirage, Las Vegas - Tropicana Travelodge, Las Vegas - Westward Ho Casino, Las Vegas - Echo Bay Resort, Overton - Holiday Inn, Reno - La Quinta Hotel, Reno - Quality Inn and Casino, Reno - Red Lion Hotel-Proposed, Reno New Hampshire - Sheraton Wayfarer, Bedford - Hampton Inn, Bow - Mount Washington Resort, Bretton Woods - Balsams Hotel, Dixville Notch - Sheraton Inn-Lamie's Tavern, Hampton - Woodbound Inn, Jaffrey - Brickyard Mountain Inn, Laconia - Loon Mountain Hotel, Lincoln - Appleton Inns, Manchester - Holiday Inn Center, Manchester - Sheraton Wayfarer, Manchester - Susse Chalet, Manchester - Clarion Somerset Hotel, Nashua - Hotel-Proposed, Nashua - Tara Sheraton Nashua, Nashua - Wentworth by the Sea, Newcastle - Susse Chalet, Portsmouth - Wentworth-by-the-Sea, Portsmouth - Salem Inn, Salem - Susse Chalet, Salem - Landmarc Lodge-East, Waterville Valley - Landmarc Lodge-West, Waterville Valley - Silver Squirrel Inn, Waterville Valley - Snowy Owl Inn, Waterville Valley - Chalet Susse International, Inc., Wilton New Jersey - Marriott Seaview Golf Resort, Abescon - Howard Johnson Hotel, Absecon - Seaview Country Club, Absecon - Berkeley Carteret Hotel, Asbury Park - Caesar's Hotel and Casino, Atlantic City - Casino Hotel-Proposed, Atlantic City - Deauville Hotel, Atlantic City - Diplomat Hotel, Atlantic City - Hampton Inn, Atlantic City - Harrah's Marina Hotel Casino, Atlantic City - Lafayette Hotel, Atlantic City - Resorts Int'l Hotel and Casino, Atlantic City - Royal Inn, Atlantic City - Sands Hotel and Casino, Atlantic City - Traymore Hotel Site, Atlantic City - Tropicana Hotel and Casino, Atlantic City - World International Hotel, Atlantic City - Bernards Inn, Bernardsville - Hotel-Proposed, Bridgewater - Proposed Hotel, Camden - Cherry Hill Hyatt, Cherry Hill - Cherry Hill Inn, Cherry Hill - Ramada Inn, Clifton - Comfort Suites, E. Rutherford - Ramada Renaissance, East Brunswick - Sheraton Inn, East Brunswick - Sheraton - Per Diem, East Rutherford - Holiday Inn-Raritan Center, Edison - Hotel-Proposed, Edison - Ramada Inn, Edison - Best Western Hotel, Egg Harbor Township - Newark Airport Vista Hotel, Elizabeth - Ramada Inn-Proposed, Elizabeth - Sheraton Inn, Elizabeth - Marriott Suite Hotel-Proposed, Elmwood Park - Howard Johnson, Englewood - Conference Center, Farleigh Dickinson - Motel-Proposed, Flemington - Hamilton Park Conference Center, Florham Park - Courtesy Motel, Fort Lee - Ramada Inn-Proposed, Franklin Township - Playboy Resort, Great Gorge - Marriott Hotel, Hanover - Sheraton Hotel, Hasbrouck Heights - Holiday Inn, Jamesburg - Restaurant at Port Liberte, Jersey City - Harrogate Senior Living Facility, Lakewood - Courtyard by Marriott, Lincroft - Hotel-Proposed, Long Branch - Comfort Inn, Mahwah - Courtyard by Marriott, Mahwah - Residence Inn-Proposed, Mahwah - Economy Lodge - Proposed, Meadowlands - Holiday Inn, Meadowlands - Hotel-Proposed, Meadowlands - Meadowlands Hilton, Meadowlands - Sheraton Hotel, Meadowlands - Forsgate Conference Center, Monroe Township - Conference Center, Morristown - Governor Morris Inn, Morristown - Headquarters Plaza Hotel, Morristown - Pleasantville Farms Conference Cent, Morristown - Howard Johnson Lodge, Mount Holly - Courtyard by Marriott, Mount Laurel - Hilton, Mount Laurel - Days Hotel, New Brunswick - Hyatt Hotel, New Brunswick - Rennaisance Hotel, New Brunswick - Residence Inn - Princeton, New Jersey - Airport Hotel-Proposed, Newark - Courtyard by Marriott-Airport, Newark - Holiday Inn, Newark - Holiday Inn-Airport North, Newark - Hotel-Proposed, Newark - Howard Johnson Hotel, Newark - Days Inn, North Bergen - Holiday Inn, North Brunswick - Port-O-Call, Ocean City - Sting Ray Motel, Ocean City - Hotel-Proposed, Ocean Grove - Spray View Hotel, Ocean Grove - Macy Hotel-Proposed, Paramus - Red Carpet Inn, Paramus - Residence Inn-Proposed, Paramus - Marriott Hotel-Proposed, Park Ridge - Embassy Suites, Parsippany - Hilton, Parsippany - Residence Inn-Proposed, Parsippany - Howard Johnson, Phillipsburg - Hotel-Proposed, Piscataway - Residence Inn-Proposed, Piscataway - Compri Hotel-Proposed, Princeton - Hyatt Regency, Princeton - Marriott Hotel, Princeton - Omni Nassau Inn, Princeton - Treadway Inn, Princeton - Howard Johnson, Ridgefield Park - Hotel-Proposed, Rockleigh - Hotel-Proposed, Roxbury Township - Ramada Inn, Runnemede - Howard Johnson, Saddle Brook - Marriott Hotel, Saddle Brook - Days Inn, Secaucus - Howard Johnson, Secaucus - Ramada Inn, Secaucus - Hilton At Short Hills, Short Hills - Pier 4 Motel, Somers Point - Garden State Convention Center, Somerset - Holiday Inn, Somerset - Marriott Hotel, Somerset - Neighborhood Suites-Proposed, Somerset - Sommerset Plaza Hotel, Somerset - Summerfield Suites Hotel, Sommerset - Hewitt Wellington Hotel, Spring Lake - Hotel-Proposed, Spring Lake - Loews Glenpointe Hotel, Teaneck - Appleton Inn, Tinton Falls - Envoy Inn, Tinton Falls - Hilton Inn, Tinton Falls - Residence Inn, Tinton Falls - Sunrise Suite Hotel, Tinton Falls - Hotel-Proposed, Toms River - Hotel-Proposed, Turnersville - Hotel-Proposed, Wayne - Howard Johnson-Proposed, Wayne - Holiday Inn, Wildwood Crest - Motel, Wrightstown New Mexico - Compri Hotel-Proposed, Albuquerque - Courtyard by Marriott-Airport, Albuquerque - Fairfield Inn-Proposed, Albuquerque - Hampton Inn, Albuquerque - Hilton Hotel, Albuquerque - Holiday Inn, Albuquerque - Marriott Hotel, Albuquerque - Radisson Suite Hotel-Proposed, Albuquerque - Residence Inn, Albuquerque - Rodeway Inn, Albuquerque - Winrock Motor Inn, Albuquerque - La Quinta Inn, Albuquerque - Airport - Corkin's Lodge, Chama - La Quinta Inn, Farmington - Hilton, Las Cruces - Las Cruces Hilton, Las Cruces - Super 8, Las Cruces - Ski Rio Ski Resort, Miracle Mountain - Super 8, Raton - Young's Ranch, Red River - Eldorado Hotel, Santa Fe - Homewood Suites Hotel, Santa Fe - Hotel-Proposed, Santa Fe - Inn at Loretto, Santa Fe - Inn on the Alameda, Santa Fe - La Fonda Hotel, Santa Fe - La Quinta Hotel, Santa Fe - Residence Inn, Santa Fe - Santa Fe Motel, Santa Fe - Sheraton de Santa Fe, Santa Fe New York - Americana Inn, Albany - Desmond Hotel, Albany - Hilton Hotel, Albany - Marriott Hotel, Albany - Sheraton Inn, Albany - Susse Chalet, Albany - VIP Motor Lodge (Howard Johnson), Albany - Embassy Suites-Proposed, Amherst - Holiday Inn, Amherst - Annandale Inn-Proposed, Annandale - Wampus Inn-Proposed, Armonk - Treadway Inn, Batavia - Hampton Inn, Binghamton - Holiday Inn-Arena, Binghamton - Holiday Inn-SUNY, Binghamton - Hotel-Proposed, Binghamton - Howard Johnson, Binghamton - Residence Inn, Binghamton - Sheraton Inn, Binghamton - Eden Motel, Bronx - Days Inn-Proposed, Brookhaven - Residence Inn, Brookhaven - Brooklyn Hotel-Proposed, Brooklyn - Hilton Hotel, Brooklyn - Airport Hotel-Proposed, Buffalo - Buffalo Hotel, Buffalo - Days Hotel-Proposed, Buffalo - Hilton Hotel, Buffalo - Holiday Inn - Midtown, Buffalo - Hyatt Hotel, Buffalo - Hyatt Regency Hotel & Retail Area, Buffalo - Radisson Hotel, Buffalo - Ramada Inn-Airport, Buffalo - Ramada Renaissance Hotel, Buffalo - Residence Inn-Proposed, Buffalo - Sheraton Hotel, Buffalo - Sheraton Inn Buffalo East, Buffalo - Sheraton Inn-Airport, Buffalo - Sheraton Inn, Canadaiqua - Airway Motel, Cheektowaga - Holiday Inn - Airport, Cheektowaga - Holiday Inn - Gateway, Cheektowaga - Quality Inn, Cheektowaga - Sheraton Buffalo, Cheektowga - Steeplechase Park-Proposed, Coney Island - Hilton Inn, Corning - Resort/Conference Center-Proposed, Cornwall - Holiday Inn, Cortland - Roycroft Inn, East Aurora - Hotel-Proposed, East Elmhurst - Susse Chalet, East Greenbush - Nevele Hotel, Ellenville - Int'l Conf./Learning Center-Propose, Ellis Island - Days Inn, Elmsford - Howard Johnson, Elmsford - Neighborhood Suites Hotel-Proposed, Fishkill - Residence Inn, Fishkill - Metropole Hotel, Flushing - Midway Hotel, Flushing - Sheraton - Proposed, Flushing Center - Hotel-Proposed, Garden City - Wyndham Condominium, Garden City - Harrison Conference Center, Glen Clove - Great Neck Hotel, Great Neck - Comfort Inn, Greece - Holiday Inn-Proposed, Greece - Tamarack Lodge, Greenfield Park - Claudio's Restaurant, Greenport - Colonie Hill, Hauppauge - Holiday Inn, Hauppauge - Marriott Wind Watch Hotel & Golf, Hauppauge - Marriott Windwatch, Hauppauge - Ramada Inn, Hauppauge - Residence Inn, Hauppauge - Homewood Suites-Proposed, Henrietta - Howard Johnson, Huntington - Huntington Townhouse, Huntington - Hampton Inn, Islandia - Marriott Wind Watch, Islandia - Hotel-Proposed, Islip - Howard Johnson Hotel, Ithaca - Ramada Inn, Ithaca - Sheraton Inn, Ithaca - JFK Hilton, Jamaica - Howard Johnson, Kingston - Ramada Inn, Kingston - Omni Sagamore, Lake George - Ramada Inn, Lake George - Former Lake Placid Club Hotel, Lake Placid - Hilton Hotel, Lake Placid - Mirror Lake Inn, Lake Placid - Holiday Inn, Latham - Howard Johnson, Latham - Howard Johnson, Liberty - The New Brown's Resort, Loch Sheldrake - Convention Center - Proposed, Long Island - Eastern Nassau/W. Suffolk Hotel, Long Island - Hyatt Hotel-Proposed, Long Island - Motel-Proposed, Lynbrook - Crowne Plaza Hotel, Manhattan - Hotel Mark, Manhattan - Proposed Economy Hotel, Manhattan - Sugar Maples Resort, Maplecrest - Hotel-Proposed, Middletown - Howard Johnson, Middletown - Montauk Yacht Club and Inn, Montauk - Kutsher's Resort, Monticello - Motel-Proposed, Nanuet - Wallkill Valley Inn Project, New Paltz - Hotel-Proposed, New Rochelle - Le Richmond Hotel, New Rochelle - Ramada Plaza Inn and Offices, New Rochelle - Sheraton Inn, New Rochelle - Aberdeen Hotel, New York - American Youth Hostel, New York - Americana Hotel, New York - Ashley Hotel, New York - Astor House-Proposed, New York - Barbizon Plaza Hotel, New York - Barclay Hotel, New York - Battery Park City Hotel-Proposed, New York - Berkshire Place, New York - Best Western Woodward Hotel, New York - Biltmore Hotel, New York - Broadway Crowne Plaza, New York - Carlton House Hotel, New York - Century Paramount Hotel, New York - Chatwal Inn, New York - Chatwal Inn on 45th Street, New York - Chatwal Inn on Park Avenue, New York - Chinatown Hotel-Proposed, New York - Courtyard by Marriott-Proposed, New York - Custom's House, New York - Days Inn, New York - Days Inn-West 57th Street, New York - Doral Inn, New York - Dover Hotel, New York - Downtown Athletic Club, New York - Downtown Conference Center, New York - Drake Hotel, New York - Econo Lodge-Proposed, New York - El Rio Grande, New York - Embassy Suites-Times Square-Propose, New York - Empire Hotel, New York - Essex House, New York - Executive Hotel, New York - Giordano Hotel, New York - Gorham Hotel, New York - Grand Bay at Equitable Center, New York - Grand Hyatt Hotel, New York - Greenwich Street Hotel, New York - Halloran House, New York - Hampton House, New York - Harley Hotel, New York - Helmsley Hotel, New York - Hilton Hotel, New York - Hilton Hotel-Statler, New York - Holiday Inn, New York - Holiday Inn Crowne Plaza-Broadway, New York - Holiday Inn Crowne Plaza-Manhattan, New York - Holland Hotel, New York - Hotel Intercontinental, New York - Hotel Pierre, New York - Hotel-1926 Broadway-Proposed, New York - Hotel-East 57th Street-Proposed, New York - Hotel-Proposed, New York - Hotel-Tenth Avenue-Proposed, New York - Howard Hotel, New York - Howard Johnson, New York - Journey's Court Hotel-Proposed, New York - Journey's End, New York - Kalikow Hotel-Proposed, New York - Kennedy Inn, New York - Lancaster Hotel, New York - Le Meridien Liberty New York, New York - Lowell Hotel, New York - Luxury Hotel-Proposed, New York - Macklowe Hotel, New York - Madison Towers Hotel, New York - Manger Windsor Hotel, New York - Mark Hotel, New York - Marriott East Side, New York - Marriott Financial Center, New York - Marriott Hotel-Proposed, New York - Marriott Marquis, New York - Martinique Hotel, New York - Mayfair Regent, New York - Milford Plaza Hotel, New York - Millennium Hotel, New York - Navarro Hotel, New York - Nova Park-Gotham, New York - Novotel, New York - Omni Berkshire Place, New York - Omni Park Central, New York - Parc Fifty One Hotel, New York - Parker Meridien Hotel, New York - Peninsula Hotel, New York - Penta Hotel, New York - Piccadilly Hotel, New York - Plaza Hotel, New York - President Hotel, New York - Prince George Hotel, New York - Prince Street Hotel-Proposed, New York - Proposed Hotel and Apartments, New York - Proposed Luxury Hotel-Proposed, New York - Quality Inn, New York - Quality Suites, New York - Ramada Inn, New York - Regent Hotel-Proposed, New York - Regent of New York-Proposed, New York - Ritz-Carlton, New York - Roger Smith Winthrop Hotel, New York - Roosevelt Hotel, New York - Russian Tea Room, New York - Sheraton Hotel, New York - Sheraton Motor Inn, New York - Sheraton Park Avenue, New York - Soho Hotel-Proposed, New York - St. Moritz Hotel, New York - St. Regis, New York - Stanhope, New York - Sutton Place Hotel, New York - Taft Hotel, New York - Tenth Avenue Hotels-Proposed, New York - The Pierre Hotel, New York - The Plaza Athenee, New York - Times Square Hotel-Proposed, New York - Timeshare-Proposed, New York - Travel Inn, New York - Tudor Hotel, New York - UN Plaza Suite Hotel-Proposed, New York - Vista International, New York - Waldorf=Astoria Hotel, New York - Warwick Hotel, New York - Westbury Hotel, New York - Westin Plaza Hotel, New York - Woodward Hotel-Proposed, New York - York Club, New York - Howard Johnson Motel & Restaurant, Newburgh - Ramada Inn, Newburgh - Hilton Hotel, Niagara Falls - Howard Johnson, Norwich - Hotel-Proposed, Orangetown - Hudson Valley Conference Center, Ossining - Sheraton Inn, Ossining - Hotel-Proposed, Oswego - Best Western, Painted Post - Lodge on the Green, Painted Post - Residence Inn - Proposed, Parsippany - Senior Living - Proposed, Pearl River - Drum Hill Hotel, Peekskill - Holiday Inn, Plainview - Howard Johnson, Plainview - Pickwick Motor Inn, Plainview - Residence Inn, Plainview - Holiday Inn, Plattsburgh - Motel-Proposed, Port Jefferson - Comfort Inn-Proposed, Poughkeepsie - Courtyard by Marriott, Poughkeepsie - Radison Hotel, Poughkeepsie - Wyndham Hotel, Poughkeepsie - Best Western-LaGuardia Airport, Queens - Crown Motel, Queens - Crowne Plaza-LaGuardia Airport, Queens - Days Inn-LaGuardia Airport, Queens - Executive Inn, Queens - Hilton Inn-LaGuardia Airport, Queens - Hilton-JFK Airport, Queens - Holiday Inn-JFK Airport, Queens - Holiday Inn-LaGuardia Airport, Queens - Howard Johnson, Queens - Jade East Motel, Queens - JFK Plaza Hotel, Queens - Marriott Hotel-JFK Airport, Queens - Marriott-LaGuardia Airport, Queens - Metropole Hotel, Queens - Midway Hotel, Queens - Riviera Hotel, Queens - Royce Hotel-LaGuardia Airport, Queens - Sheraton-LaGuardia East-Proposed, Queens - Adria Hotel, Queens (Bayside) - Holiday Inn, Riverhead - Riverhead Motor Hotel, Riverhead - Americana Hotel, Rochester - Courtyard by Marriott-Wrighton, Rochester - Days Hotel (former Holiday Inn), Rochester - Hilton-Campus, Rochester - Holiday Inn, Rochester - Hotel-Proposed (former St. Bernard), Rochester - Hyatt Hotel, Rochester - Lodge at Woodcliff, Rochester - Omni Suites Hotel, Rochester - Residence Inn, Rochester - Sheraton Inn, Rochester - Stouffer Hotel, Rochester - Town House Inn, Rochester - Limited Service Hotel-Proposed, Rome - Hotel - Proposed, Roslyn - Roslyn Country Club, Roslyn - Courtyard by Marriott, Rye - Le Richemonde Hotel, Ryebrook - Baron's Cove Inn, Sag Harbor - Holiday Inn, Saratoga - Hotel-Proposed, Saratoga Springs - Howard Johnson, Saugerties - Holiday Inn, Schenectady - Ramada Inn, Schenectady - Dering Harbor Inn, Shelter Island - Crowne Plaza-Proposed, Smithtown - Howard Johnson, Smithtown - Sheraton, Smithtown - Raleigh Hotel, South Fallsburg - Hotel-Proposed, Southhold - Susse Chalet, Spring Valley - Executive Motor Inn, Springfield Gardens - Staten Island Hotel, Staten Island - Imperial Htl/Stevensville Golf Crs., Stevensville - Holiday Inn, Suffern - Motel on the Mountain, Suffern - Browns Hotel, Sullivan County - Imperial Hotel, Sullivan County - The New Brown's Resort, Sullivan County - Courtyard by Marriott, Syracuse - Embassy Suites, Syracuse - Hampton Inn, Syracuse - Hilton Inn, Syracuse - Holiday Inn-Downtown, Syracuse - Holiday Inn-Exit 35, Syracuse - Holiday Inn-Exit 36, Syracuse - Holiday Inn-Exit 39, Syracuse - Holiday Inn-I-90, Syracuse - Homewood Suites Hotel-Proposed, Syracuse - Hotel Syracuse, Syracuse - Hotel-Proposed, Syracuse - Marriott Hotel, Syracuse - Residence Inn-Proposed, Syracuse - Sheraton University Inn & Conf.Ctr., Syracuse - Treadway Inn, Syracuse - Courtyard by Marriott, Tarrytown - Tarrytown House Conference Center, Tarrytown - Westchester Marriott, Tarrytown - Embassy Suites - Proposed, Times Square, New York - Marriott Hotel, Uniondale - Sheraton Nassau Hotel, Uniondale - Howard Johnson Hotel, Utica - Howard Johnson, Vestal - Hotel-Proposed, Watertown - Convention Hotel-Proposed, Westbury - Dalts Restaurant, Westbury - Howard Johnson, Westbury - Marriott Hotel, Westchester - Inn-Proposed, Westhampton - Crowne Plaza, White Plains - Hotel-Proposed, White Plains - Howard Johnson, White Plains - Roger Smith Hotel, White Plains - Stouffer Westchester Hotel, White Plains - White Plains Hotel, White Plains - Anton Meadows, Yaphank - Quality Suites, Yorktown - Yorktown Motor Lodge, Yorktown Heights North Carolina - Days Inn - Central, Asheville - Holiday Inn - Airport, Asheville - Holiday Inn - Tunnel, Asheville - Inn on the Plaza, Asheville - Sheraton Inn, Asheville - Days Inn, Ashville - Masters Economy Inn - Rocky Mount, Battlebro - Days Inn, Blowing Rock - All-Suite Hotel-Proposed, Boone - Residence Inn-Proposed, Cary - Carolina Inn, Chapel Hill - Hilton-Proposed, Chapel Hill - Charlotte Registry Hotel-Per Diem, Charlotte - Compri Hotel-Proposed, Charlotte - Courtyard by Marriott, Charlotte - Days Inn, Charlotte - Days Inn-Uptown, Charlotte - Fairfield Inn, Charlotte - Howard Johnson, Charlotte - Howard Johnson Lodge, Charlotte - Knights Inn, Charlotte - Manger Motor Inn, Charlotte - Marriott City Center, Charlotte - Marriott Hotel-Independence Center, Charlotte - Masters Economy Inn - Charlotte No, Charlotte - Masters Economy Inn - Merchandise, Charlotte - Queen City Motel, Charlotte - Residence Inn, Charlotte - Residence Inn-North, Charlotte - Resistry Hotel, Charlotte - Royce Suite Hotel, Charlotte - Sheraton Inn, Charlotte - Conference Center, Clemmons - Sheraton Motel, Dunn - Best Western, Durham - Cricket Inn, Durham - Days Inn, Durham - Dutch Village Inn, Durham - Fairfield Inn, Durham - Holiday Inn-West, Durham - Motel 6, Durham - Sheraton-University Center, Durham - The Duke Inn, Durham - Days Inn, Fayetteville - Fairfield Inn, Fayetteville - Holiday Inn, Fayetteville - Hotel-Proposed, Fayetteville - Knights Inn, Fayetteville - Goldsboro Motel, Goldsboro - Courtyard by Marriott, Greensboro - Days Inn, Greensboro - Embassy Suites, Greensboro - Fairfield Inn, Greensboro - Hilton, Greensboro - Marriott Hotel, Greensboro - Residence Inn, Greensboro - Sheraton Greensboro, Greensboro - Hotel-Proposed, Greenville - Radisson Hotel, High Point - Days Inn, Lumberton - Maggie Valley Country Club, Maggie Valley - Courtyard by Marriott, Raleigh - Fairfield Inn, Raleigh - Hampton Inn, Raleigh - Hilton, Raleigh - Holiday Inn-Downtown, Raleigh - Marriott Hotel-RTP, Raleigh - Raleigh Radisson, Raleigh - Residence Inn, Raleigh - Holiday Inn - Airport, Research Triangle Park - Howard Johnson, Roanoke Rapids - Sheraton Inn, Rocky Mount - Days Inn, Rocky Mountain - Fairfield Inn, Rocky Mountain - Motel 6, Rocky Mountain - Days Inn, Rowland - Sheraton Motel, Selma - Masters Economy Inn, Smithfield - Holiday Inn, Southern Pines - Fairfield Inn, Wilmington - Hilton, Winston/Salem - Holiday Inn, Winston/Salem - Winston Plaza Hotel, Winston/Salem North Dakota - Holiday Inn, Bismark - Radisson Inn, Bismark - Super 8, Bismark - Ramada Hotel, Fargo - Ramada Inn-Proposed, Fargo - Super 8, Grand Forks - Super 8, Minot Ohio - Holiday Inn-Cascade, Akron - Ramada Inn, Akron - Residence Inn, Akron - Aurora Inn and Pine Lake Trout Club, Aurora - Sheraton Inn, Aurora - Woodlands Inn, Aurora - Courtyard by Marriott, Blue Ash - Embassy Suites, Blue Ash - Residence Inn-Proposed, Blue Ash - Best Western, Cambridge - Days Inn, Cambridge - Hilton Hotel, Canton - Super 8, Canton - Best Western Northeast, Cincinnati - Carousel Inn, Cincinnati - Cincinnati Hotel, Cincinnati - Clarion Hotel, Cincinnati - Days Inn, Cincinnati - Embassy Suites-Proposed, Cincinnati - Holiday Inn-Downtown, Cincinnati - Holiday Inn-Eastgate, Cincinnati - Holiday Inn-Northeast, Cincinnati - Holiday Inn-Riverfront, Cincinnati - Holiday Inn-South, Cincinnati - Hotel-Airport-Proposed, Cincinnati - Howard Johnson, Cincinnati - Hyatt, Cincinnati - Knights Inn, Cincinnati - KOA Campground, Cincinnati - Marriott Inn, Cincinnati - Netherland Hilton, Cincinnati - Omni Netherland Plaza, Cincinnati - Proposed Hotel, Cincinnati - Radisson Inn, Cincinnati - Ramada Inn, Cincinnati - Residence Inn, Cincinnati - Residence Inn-North, Cincinnati - Sheraton Inn-Proposed, Cincinnati - Treadway Inn, Cincinnati - Vernon Manor, Cincinnati - AmeriSuite Hotel-Proposed, Cleveland - Downtown Hotel-Proposed, Cleveland - Fairfield Inn-Brook Park, Cleveland - Fairfield Inn-West, Cleveland - Holiday Inn-Airport, Cleveland - Holiday Inn-Lakeside, Cleveland - Hyatt Hotel-Proposed, Cleveland - Marriott Hotel, Cleveland - Sheraton City Center, Cleveland - Sheraton Hopkins, Cleveland - AmeriSuite - Proposed, Columbus - Embassy Suites, Columbus - Fairfield Inn-North, Columbus - Fairfield Inn-West, Columbus - Hilton Inn, Columbus - Holiday Inn-Airport, Columbus - Holiday Inn-City Center, Columbus - Holiday Inn-Worthington, Columbus - Hotel-Proposed, Columbus - Howard Johnson Hotel, Columbus - Howard Johnson-East, Columbus - Howard Johnson-West, Columbus - Knights Inn-West, Columbus - Marriott Hotel, Columbus - Nationwide Hotel, Columbus - Residence Inn-North, Columbus - Sheraton Plaza Hotel, Columbus - Sheraton-North, Columbus - Union Plaza Hotel-Steeplechase, Columbus - University Inn, Columbus - Woodfin Hotel, Columbus - Courtyard by Marriott, Crosswoods - Courtyard by Marriott, Dayton - Daytonian Hilton, Dayton - Fairfield Inn, Dayton - Hope Hotel & Conference Center, Dayton - Knights Inn-North, Dayton - Marriott Hotel, Dayton - Motel 6, Dayton - Ramada Inn, Dayton - Residence Inn-North, Dayton - Residence Inn By Marriott, Dayton South - Courtyard by Marriott, Dublin - Woodfin Suites, Dublin - East Liverpool Motor Lodge, East Liverpool - Howard Johnson, Euclid - Ramada Inn, Fairlawn - Hampton Inn, Independence - Howard Johnson, Lima - Ramada Inn, Lima - Best Western, Mansfield - Holiday Inn, Marietta - Lafayette Hotel, Marietta - Holiday Inn, Middletown - Howard Johnson, Middletown - Regal 8 Inn, Middletown - Sheraton-Proposed, Milford - Super 8, Montrose - Ramada Inn, Sandusky - Days Inn, Sharonville - Holiday Inn-Cincinnati North, Sharonville - Super 8, St. Clairsville - Holiday Inn, Strongsville - Balhalla Hotel, Toledo - Courtyard by Marriott, Toledo - Fairfield Inn-Airport, Toledo - Hilton at the Medical College, Toledo - Hilton Hotel, Toledo - Holiday Inn, Toledo - Knights Inn-West, Toledo - Marriott Portside Hotel, Toledo - Radisson Hotel, Toledo - Sofitel, Toledo - Hampton Inn-Proposed, Wickliffe - Holiday Inn, Youngstown - Hotel-Proposed, Youngstown - Sheraton-Proposed, Youngstown Oklahoma - Fountainhead Resort, Mcintosh County - Residence at the Trails Inn, Norman - Suit Hotel, Norman - Courtyard by Marriott, Oklahoma City - Embassy Suites, Oklahoma City - Holiday Inn, Oklahoma City - Lexington Hotel Suites, Oklahoma City - Lincoln Plaza Hotel, Oklahoma City - Marriott Hotel, Oklahoma City - Meridien Plaza, Oklahoma City - Sheraton Hotel, Oklahoma City - Arrowhead Resort, Pittsburgh County - Camelot Hotel, Tulsa - Doubletree Hotel, Tulsa - Former Holiday Inn, Tulsa - Former Holiday Inn-Downtown, Tulsa - Holiday Inn, Tulsa - Holiday Inn-Convention Center, Tulsa - La Quinta Inn, Tulsa - Marriott Hotel, Tulsa - Mayo Hotel, Tulsa - Residence Inn, Tulsa - Westin Hotel, Tulsa Oregon - Inn At Face Rock, Bandon - Courtyard by Marriott, Beaverton - Red Lion Motel, Bend - Sunriver Lodge and Resort, Bend - Econolodge Motel, Eugene - Valley River Inn, Eugene - Residence Inn Portland-South, Lake Oswego - Big Creek Resort-US Highway 101, Lane County - Embassy Suites, Portland - Holiday Inn Crowne Plaza - Proposed, Portland - Holiday Inn-Airport, Portland - Holiday Inn-South, Portland - Proposed Sheraton Suites, Portland - Red Lion - Jantzen Beach, Portland - Red Lion Inn-Lloyd Center, Portland - Red Lion Inn-Portland Center, Portland - Residence Inn - Proposed, Portland - Vintage Plaza Hotel, Portland - Wells Building, Portland - Execulodge Motel, Salem - Oregon Capital Inn, Salem - Springfield Red Lion Inn, Springfield - Sunriver Resort, Sunriver Pennsylvania - Allentown Hilton Hotel, Allentown - Holiday Inn, Allentown - Proposed Microtel, Allentown - Quality Inn, Allentown - Bedford Springs Hotel, Bedford - Compri Hotel-Proposed, Bensalem - Days Inn-Proposed, Bensalem - Holiday Inn, Bensalem - Residence Inn By Marriott, Berwyn - Econolodge, Bristol - Days Inn, Brookville - Buck Hill Falls Inn, Buck Hill Falls - Howard Johnson, Butler - Holiday Inn, Chambersburg - Days Inn, Clarion - Embassy Suites, Coraopolis - Hydeholde Country House-Proposed, Coraopolis - Days Inn, Danville - Holiday Inn, Dubois - Lafayette Inn-Proposed, Easton - Howard Johnson Hotel, Erie - Ramada Inn, Erie - Holiday Inn, Essington - Quality Suites-Proposed, Essington - Super 8-Proposed, Essington - Howard Johnson, Gibsonia - Compri Hotel-Proposed, Harrisburg - Holiday Inn, Harrisburg - Marriott Hotel, Harrisburg - Penn Harris Inn, Harrisburg - Sheraton Inn, Harrisburg - Super 8-Proposed, Harrisburg - Holiday Inn, Hazleton - Super 8-Proposed, Hazleton - Plaza Valley Forge Hotel, King of Prussia - Radisson Hotel, King of Prussia - Sheraton Hotel, King of Prussia - Valley Forge Complex, King of Prussia - Valley Forge Hilton, King of Prussia - Motel-Proposed, Lake Ariel - Days Inn, Lancaster - Holiday Inn-Route 30E, Lancaster - Holiday Inn-Route 501, Lancaster - Sheraton Lancaster Golf Resort, Lancaster - Super 8-Proposed, Lancaster - Holiday Inn, Lionville - Hilton-Great Valley, Malvern - Summerfield Suite-Proposed, Malvern - Days Inn, Meadville - Hilton Inn, Monroeville - Holiday Inn-West, Monroeville - Economy Hotel, Montgomery Township - Holiday Inn, New Hope - Treadway Inn, Newport - Residence Inn-Proposed, Paoli - Conference Center-Proposed, Penn State - Barclay Hotel, Philadelphia - Bellevue, Philadelphia - Courtyard by Marriott-Devon, Philadelphia - Courtyard-Willow Grove, Philadelphia - Days Inn-Airport, Philadelphia - Econo Lodge-Franklin Towne, Philadelphia - Essex Hotel, Philadelphia - Franklin Motor Inn, Philadelphia - Franklin Plaza Hotel, Philadelphia - Guest Quarters Hotel, Philadelphia - Hampton Inn-Proposed, Philadelphia - Health Club-Proposed, Philadelphia - Hilton Inn, Philadelphia - Hilton Inn-Northeast, Philadelphia - Holiday Inn-City Center, Philadelphia - Holiday Inn-City Line, Philadelphia - Hub Motor Inn, Philadelphia - Hyatt-Proposed, Philadelphia - Marriott Hotel, Philadelphia - Marriott Hotel-Airport, Philadelphia - Omni Philadelphia, Philadelphia - Penn Center Inn, Philadelphia - Quality Inn-Center City, Philadelphia - Residence Inn-Proposed, Philadelphia - Rittenhouse Hotel, Philadelphia - Treadway Mohawk, Philadelphia - Treadway Roosevelt, Philadelphia - Residence Inn, Philadelphia/Berwyn - Clubhouse Inn, Pittsburgh - Courtyard by Marriott, Pittsburgh - Hampton Inn at Playhouse Square, Pittsburgh - Hilton Hotel, Pittsburgh - Holiday Inn-Greentree, Pittsburgh - Holiday Inn-North, Pittsburgh - Holiday Inn-Parkway-East, Pittsburgh - Holiday Inn-Parkway-West, Pittsburgh - Hotel-Proposed, Pittsburgh - Howard Johnson Hotel, Pittsburgh - Marriott Hotel, Pittsburgh - Marriott-Airport, Pittsburgh - Motel 6, Pittsburgh - Quality Inn, Pittsburgh - Royce Hotel-Airport, Pittsburgh - U.S.S. Hotel-Proposed, Pittsburgh - Westin William Penn, Pittsburgh - Courtyard By Marriott, Pittsburgh Airport - Holiday Inn, Reading - Sheraton Hotel, Reading - Hilton at Lackawanna Station, Scranton - Hilton Hotel, Scranton - Sheraton Inn, Stroudsburg - HoJo Inn, Tannersville - Hilton-Northeast, Trevose - Compri Hotel-Proposed, Valley Forge - Courtyard by Marriott, Valley Forge - Holiday Inn-Meadowlands, Washington - Holiday Inn, Wilkes-Barre - Days Inn-Proposed, Williamsport - Hotel-Proposed, Williamsport - Hampton Inn - Proposed, Willow Grove - Holiday Inn-Market Street, York - Holiday Inn-Route 30 and I-83, York - Ramada Inn, York - Super 8-Proposed, York Rhode Island - Cresthil-Proposed, Lincoln - Courtyard by Marriott, Newport - Vanderbilt Hotel-Convention Center, Newport - Quality Inn, North Kingston - Biltmore Plaza, Providence - Convention Center Hotel-Proposed, Providence - Holiday Inn Providence - Downtown, Providence - Hotel-Proposed, Providence - Marriott Hotel, Providence - Sheraton-Airport, Providence - Susse Chalet, Smithfield - Howard Johnson, Warwick - Residence Inn-Proposed, Warwick - Susse Chalet, Warwick South Carolina - Quality Inn Motel, Anderson - Super 8, Anderson - Budget Hotel - Proposed, Charleston - Charleston Center Hotel-Proposed, Charleston - Cooper River Inn, Charleston - Days Inn, Charleston - Francis Marion Hotel, Charleston - Hampton Inn-Proposed, Charleston - Hawthorne Suites Hotel, Charleston - Holiday Inn, Charleston - Holiday Inn-Airport, Charleston - Holiday Inn-Riverview, Charleston - Masters Economy Inn - Mt. Pleasant, Charleston - Masters Economy Inn - Rivers Ave, Charleston - Middleton Inn, Charleston - Omni Charleston, Charleston - Quality Inn, Charleston - Trusthouse Forte, Charleston - Courtyard by Marriott, Columbia - Courtyard by Marriott-Northeast, Columbia - Courtyard by Marriott-Northwest, Columbia - Embassy Suites, Columbia - Marriott Hotel, Columbia - Masters Economy Inn - I-26, Columbia - Masters Economy Inn - Knox Abbot, Columbia - Motel 6, Columbia - Residence Inn, Columbia - Coral Beach Hotel, Coral Beach - Days Inn, Dillon - Save Inn, Fairplay - Fairfield Inn, Florence - Holiday Inn, Florence - Days Inn, Gaffney - Courtyard by Marriott, Greenville - Fairfield Inn, Greenville - Greenville Hilton Hotel, Greenville - Ramada Inn, Greenville - Super 8, Greenwood - Days Inn, Hardeeville - Fairfield Inn, Hilton Head - Hilton Head Inn, Hilton Head - Holiday Inn, Hilton Head - Inter-Continental Hotel, Hilton Head - Islander Inn, Hilton Head - Quality Suites-Proposed, Hilton Head - Residence Inn-Proposed, Hilton Head - Sheraton Inn, Hilton Head - PGA East Resort-Proposed, Kiawah Island - Save Inn, Lake Hartwell - Days Inn, Mt. Pleasant - Coral Beach Hotel, Myrtle Beach - Radisson Hotel, Myrtle Beach - Best Western Inn, North Charleston - Budget Hotel-Proposed, North Charleston - Days Inn, North Charleston - Northwoods Atrium Inn, North Charleston - Days Inn, Santee - Holiday Inn-West, Spartanburg - Howard Johnson, Spartanburg - Residence Inn, Spartanburg South Dakota - Holiday Inn, Aberdeen - Holiday Inn, Rapid City - Holiday Inn, Sioux Falls - Super 8, Sioux Falls - Holiday Inn, Spearfish Tennessee - Ameri Suite Hotel-Proposed, Brentwood - Courtyard by Marriott, Brentwood - Holiday Inn, Bristol - Holiday Inn-Southeast, Chattanooga - Howard Johnson, Chattanooga - Marriott Hotel, Chattanooga - Motel 6, Chattanooga - Sheraton Inn, Chattanooga - Super 8, Chattanooga - Holiday Inn, Cove Lake - Masters Economy Inn, Dickson - Comfort Inn-Proposed, Elizabethton - Park Vista Hotel, Gatlinburg - Holiday Inn-I-40, Jackson - Holiday Inn, Johnson City - Super 8, Johnson City - Fairfield Inn, Johnson Park - Holiday Inn, Kingsport - Courtsouth Healthclub-North, Knoxville - Courtsouth Healthclub-South, Knoxville - Courtsouth Healthclub-West, Knoxville - Days Inn, Knoxville - Hilton Hotel, Knoxville - Howard Johnson-Westhills, Knoxville - Motel 6, Knoxville - Quality Inn, Knoxville - Ramada Inn-West, Knoxville - Rodeway Inn, Knoxville - Courtyard by Marriott, Memphis - Courtyard by Marriott-Airport, Memphis - Holiday Inn - Crowne Plaza, Memphis - Holiday Inn-East, Memphis - Holiday Inn-East Poplar, Memphis - Holiday Inn-I-40-Sycamore View, Memphis - Holiday Inn-Memphis Int'l Airport, Memphis - Hyatt Regency, Memphis - Lexington Hotel Suites, Memphis - Motel 6, Memphis - Omni Hotel, Memphis - Proposed Fairfield Inn, Memphis - Residence Inn, Memphis - La Quinta Inn, Memphis - Airport - Brown County Inn, Nashville - Capital Mall Conv. Center-Proposed, Nashville - Clarion Maxwell House, Nashville - Courtyard by Marriott-Airport, Nashville - Days Inn, Nashville - Doubletree Hotel, Nashville - Grosvenor, Nashville - Hampton Inn, Nashville - Holiday Inn Crowne Plaza, Nashville - Holiday Inn Express, Nashville - Holiday Inn-Briley Parkway, Nashville - Marriott Hotel, Nashville - Nashville Union Station, Nashville - Ramada Inn, Nashville - Sheraton Hotel, Nashville - Sheraton Music City, Nashville - Stouffer Hotel, Nashville - Super 8, Nashville - Union Station Hotel, Nashville - AmeriSuite, Oakridge - Holiday Inn, Oakridge - Super 8-Proposed, Union City Texas - Harvey Hotel, Addison - Days Inn, Amarillo - Motel 6, Amarillo - Radisson Hotel-Proposed, Amarillo - Super 8 Motel, Amarillo - La Quinta Inn, Amarillo - Airport - Courtyard by Marriott, Arlington - Hilton Hotel, Arlington - Holiday Inn, Arlington - Lexington Suites Hotel, Arlington - Compri Hotel-Proposed, Austin - Driskill Hotel, Austin - Embassy Suites-Austin Town Lake, Austin - Embassy Suites-North, Austin - Fairfield North, Austin - Four Seasons Hotel, Austin - Holiday Inn, Austin - Holiday Inn-Austin Town Lake, Austin - La Quinta Inn, Austin - Marriott Hotel, Austin - Proposed Fairfield Inn, Austin - Quality Inn, Austin - Residence South, Austin - La Quinta Inn, Austin - Ben White - Holiday Inn Airport, Austins Cities - Holiday Inn, Bay Town - Hilton Hotel, Beaumont - Holiday Inn, Beaumont - Courtyard by Marriott, Bedford - Holiday Inn, Brownsville - La Quinta Inn, Brownsville - Hilton Hotel, College Station - Ramada Inn, College Station - Holiday Inn, Conroe - Corpus Christi Hotel-Airport, Corpus Christi - Days Inn, Corpus Christi - Hilton - Proposed, Corpus Christi - Holiday Inn, Corpus Christi - Holiday Inn-Airport, Corpus Christi - La Quinta Inn, Corpus Christi - North - La Quinta Inn, Corpus Christi - South - Allstar Inn, Dallas - Ambassador Plaza Hotel, Dallas - Arlington Hilton, Dallas - Bradford Plaza Hotel, Dallas - Bristol Suites, Dallas - Convention Center Hotel-Proposed, Dallas - Courtyard by Marriott, Dallas - Courtyard by Marriott-Northeast, Dallas - Courtyard by Marriott-Plano, Dallas - Courtyard by Marriott-Stemmons, Dallas - Dallas Grand Hotel, Dallas - Doubletree Inn, Dallas - Embassy Suites, Dallas - Fairmont Hotel, Dallas - Harvey Hotel, Dallas - Hilltop, Dallas - Hilton Inn-LBJ, Dallas - Hilton-Arlington, Dallas - Holiday Inn - North, Dallas - Holiday Inn Crowne Plaza, Dallas - Holiday Inn-Brook Hollow, Dallas - Holiday Inn-South, Dallas - Houstonian Hotel, Dallas - Howard Johnson-East, Dallas - Lexington Hotel Suites, Dallas - Loews Anatole Hotel, Dallas - Marriott Hotel-Airport, Dallas - Marriott-Park Central, Dallas - Marriott-Quorum, Dallas - Melrose Hotel, Dallas - Motel 6, Dallas - Omni Melrose Hotel, Dallas - Park Plaza, Dallas - Propsed Hotel - DFW, Dallas - Ramada Inn Convention Center, Dallas - Ramada-Market Center, Dallas - Registry Hotel, Dallas - Residence Inn-Market Center, Dallas - Sheraton Grand, Dallas - Southland Center Hotel, Dallas - Statler Hilton Hotel, Dallas - Summit Hotel, Dallas - Westin Galleria Hotel, Dallas - La Quinta Inn, Dallas - DFW - La Quinta Inn, Dallas - North Park - La Quinta Inn, Dallas - Plano - La Quinta Inn, Dallas - Richardson - Allstar Inn, El Paso - Hilton Inn-Airport, El Paso - La Quinta Hotel-Airport, El Paso - Rodeway Inn, El Paso - Travelers Inn, El Paso - Westin Paso del Norte, El Paso - La Quinta Inn, El Paso - Lomaland - Allstar Inn, Euless - La Quinta Inn, Euless - Allstar Inn, Fort Worth - Courtyard by Marriott, Fort Worth - Days Inn Downtown, Fort Worth - Hilton Hotel, Fort Worth - Holiday Inn-North, Fort Worth - Holiday Inn-South, Fort Worth - Lexington Suites Hotel, Fort Worth - Metro Center Hotel, Fort Worth - Radisson Plaza Hotel, Fort Worth - Residence Inn, Fort Worth - La Quinta Inn, Fort Worth - East - Holiday Inn, Harlingen - La Quinta Inn, HI-LA Marque - Crowne Plaza-Houston Park, Houston - Days Inn, Houston - Days Inn-Hobby, Houston - Doubletree Hotel, Houston - Embassy Suites, Houston - Galleria Gardens, Houston - Harvest House Hotel, Houston - Harvey Hotel Medical Center, Houston - Hilton Inn-West, Houston - Holiday Inn I-10 East, Houston - Holiday Inn-Downtown, Houston - Holiday Inn-East, Houston - Holiday Inn-Greenway Plaza, Houston - Holiday Inn-Hobby, Houston - Holiday Inn-Medical Center, Houston - Holiday Inn-NASA, Houston - Holiday Inn-North, Houston - Holiday Inn-Northwest, Houston - Holiday Inn-Southwest, Houston - Host Hotel International, Houston - Hotel Meridien, Houston - Hotel-Proposed, Houston - Houston House, Houston - Houston Medical Center, Houston - Houston Park 10 Crowne Plaza, Houston - La Quinta Hotel-Astrodome, Houston - La Quinta Hotel-Baytown, Houston - La Quinta Hotel-CY Fair, Houston - La Quinta Hotel-Hobby, Houston - La Quinta Inn-Stafford, Houston - Lexington Hotel Suites, Houston - Marriott Astrodome, Houston - Marriott Hotel, Houston - Marriott Hotel-Medical Center, Houston - Marriott-Airport, Houston - Motel 6, Houston - Remington, Houston - Residence Inn, Houston - Rodeway Inn, Houston - Rodeway Inn-Hobby, Houston - Shamrock Hilton Hotel, Houston - Sheraton Hotel, Houston - Sheraton Houston House, Houston - Sheraton Houston Place Hotel, Houston - Sheraton Town and Country, Houston - Sofitel, Houston - Stouffer Greenway Plaza, Houston - Suite Hotel-Proposed, Houston - Whitehall, Houston - Whitehall Hotel Conversion to HI, Houston - La Quinta Inn, Houston - Sharpstown - La Quinta Inn, Houston - East - La Quinta Inn, Houston - Loop 1960 - La Quinta Inn, Houston - Northwest - La Quinta Inn, Houston- SW Freeway - Holiday Inn, Huntsville - Harvey Hotel DFW, Irvine - Allstar Inn, Irving - Hampton Inn, Irving - Hampton Inn-Proposed, Irving - Harvey Hotel-D/FW Airport, Irving - Holiday Inn-Texas Stadium, Irving - Marriott Hotel, Irving - Holiday Inn, Kingsville - Del Lago Hotel, Lake Conroe - Hilton Inn, Laredo - La Posada, Laredo - Courtyard by Marriott, Las Colinas - La Quinta Inn, Longview - Hilton Inn, Lubbock - Holiday Inn, Lubbock - Residence Inn, Lubbock - La Quinta Inn, Midland - Holiday Inn, New Braunfels - All Star Inn, North Richland Hills - La Quinta Inn, Odessa - Holiday Inn, Orange - Holiday Inn, Paris - Plano Harvey Hotel, Plano - La Quinta Inn, Round Rock - Sheraton Inn, San Angelo - Coachman Inn-Proposed, San Antonio - Courtyard by Marriott-Downtown, San Antonio - Courtyard by Marriott-Medical Ctr., San Antonio - Crockett Hotel, San Antonio - Days Inn, San Antonio - Fairfield - North, San Antonio - Gunter Hotel, San Antonio - Holiday Inn-Airport, San Antonio - Holiday Inn-Market Square, San Antonio - Holiday Inn-North, San Antonio - Holiday Inn-Northwest, San Antonio - Holiday Inn-Riverwalk, San Antonio - La Quinta Hotel-Ingram, San Antonio - La Quinta Hotel-Lackland, San Antonio - La Quinta Hotel-Toepperwein, San Antonio - Lexington Hotel Suites, San Antonio - Marriott Hotel-Proposed, San Antonio - Marriott Inn-North, San Antonio - Proposed Fairfield Inn, San Antonio - La Quinta Inn, San Antonio - Windsor - La Quinta Inn, San Antonio - Wurzbach - Holiday Inn, San Marcos - La Quinta Inn, SAT-Toepperwein - Sheraton Hotel, South Padre Island - La Quinta Inn, Tyler - Sheraton, Tyler - Sheraton Inn, Tyler - Traveler's Choice Inn, Tyler - Hilton Hotel, Waco - Gateway Inn, Wichita Falls - Hilton Hotel, Wichita Falls Utah - Mount Holly Ski Resort, Beaver - Hotel-Proposed, Brigham City - Motel-Proposed, Cedar City - Proposed Mayflower Hotel, Deer Valley - Stein Eriksen Lodge, Deer Valley - Deer Valley Resort, Park City - Omni Yarrow, Park City - Prospector Square Resort, Park City - Yarrow Resort, Park City - Seven Peaks Resort and Hotel, Provo - Comfort Inn, Salt Lake City - Doubletree, Salt Lake City - Hilton Hotel-Airport, Salt Lake City - Holiday Inn, Salt Lake City - Holiday Inn-Salt Palace, Salt Lake City - Hotel Utah, Salt Lake City - Hotel-Proposed, Salt Lake City - La Quinta Inn, Salt Lake City - Nendels Inn, Salt Lake City - New Grande Hotel, Salt Lake City - Red Lion Hotel, Salt Lake City - Sheraton Hotel, Salt Lake City - Super 8, Salt Lake City - University Park Hotel (Desktop Rev), Salt Lake City - Ramada Inn-Proposed, Sandy Vermont - Ramada Inn, Bennington - Bolton Valley Corporation, Bolton Valley - Quality Inn, Brattleboro - Radisson Hotel, Burlington - Smugglers Notch, Cambridge - Inn-Proposed, Essex - Cascade Lodge, Killington - Inn of the Six Mountains, Killington - Mountain Inn, Killington - Equinox Hotel, Manchester - Howard Johnson Inn, Rutland - Quality Inn, Stowe - Conference Center-Proposed, Stratton Mountain - Sugarbush Inn, Sugarbush - Susse Chalet, Williston Virginia - Comfort Inn, Abingdon - Best Western, Alexandria - Comfort Inn, Alexandria - Compri Hotel-Proposed, Alexandria - Embassy Suites, Alexandria - Howard Johnson, Alexandria - Marriott Suites, Alexandria - Ramada Inn, Alexandria - Best Western, Arlington - Gateway Marriott, Arlington - Hyatt Arlington Hotel, Arlington - Hyatt Regency, Arlington - Key Bridge Marriott, Arlington - Marriott Hotel, Arlington - Sheraton Crystal City Hotel, Arlington - Sheraton National Hotel, Arlington - Stouffer Concourse Hotel, Arlington - Mountain Lake Hotel, Blacksburg - Holiday Inn, Bristol - Howard Johnson, Bristol - Days Inn, Carmel Church - Westfields International, Chantilly - Boar's Head Inn, Charlottesville - Cavalier Inn, Charlottesville - Courtyard by Marriott, Charlottesville - Hilton-University, Charlottesville - Holiday Inn-North, Charlottesville - Omni Charlottesville, Charlottesville - Radisson-Proposed, Charlottesville - Super 8, Charlottesville - Days Inn, Chester - Howard Johnson, Chester - Days Inn, Colonial Heights - Holiday Inn, Covington - Embassy Suites, Crystal City - Holiday Inn Crowne Plaza, Crystal City - Hyatt Hotel, Crystal City - Marriott Crystal Gateway Hotel, Crystal City - Comfort Inn-Proposed, Dahlgren - Days Inn, Emporia - Courtyard by Marriott, Fairfax - Embassy Suites, Fairfax - Neighborhood Suites-Proposed, Fairfax - Hampton Inn-Proposed, Fairfax City - Westfields International, Fairfax County - Marriott Hotel, Fairview - Econo Lodge, Farmingville - Comfort Inn-Proposed, Farmville - Comfort Inn, Frederick County - Motel 6, Fredericksburg - Courtyard by Marriott, Hampton - Days Inn, Hampton - Fairfield Inn, Hampton - Courtyard by Marriott, Herndon - Embassy Suites Hotel, Herndon - Ramada Renaissance and Health Club, Herndon - Residence Inn-Proposed, Herndon - Worldgate Marriott Hotel, Herndon - Hotel-Proposed, Hopewell - Keswick Inn, Keswick - Holiday Inn, Lexington - Radisson Hotel, Lynchburg - Courtyard by Marriott, Manassas - Holiday Inn, Marion - Hilton, McLean - Days Inn, Norfolk - Marriott Waterside Hotel, Norfolk - Omni Hotel, Norfolk - Waterfront Hotel - Proposed, Norfolk - 135-Suite Hotel-Proposed, Portsmouth - Waterfront Suite Hotel-Proposed, Portsmouth - Comfort Inn, Princeton - Comfort Inn, Pulaski County - Embassy Suites Hotel, Reston - Hyatt Hotel, Reston - Best Western Kings Quarters, Richmond - Courtyard by Marriott, Richmond - Embassy Suites Hotel, Richmond - Hampton Inn, Richmond - Holiday Inn, Richmond - Howard Johnson Lodge, Richmond - Hyatt House Hotel, Richmond - La Quinta Hotel, Richmond - Marriott Hotel, Richmond - Omni Richmond, Richmond - Radisson Hotel, Richmond - Ramada Renaissance Hotel, Richmond - Residence Inn, Richmond - Days Inn, Richmond (Broad) - Days Inn, Richmond (Byrd) - Holiday Inn, Roanoke - Holiday Inn - Airport, Roanoke - Holiday Inn - Civic Center, Roanoke - Holiday Inn - South, Roanoke - Hotel Roanoke, Roanoke - Howard Johnson, Roanoke - Marriott - Roanoke Airport, Roanoke - Marriott Hotel, Roanoke - Holiday Inn, Salem - Super 8, South Hill - Days Inn, Springfield - Hilton, Springfield - Holiday Inn, Staunton - Stonewall Jackson Hotel, Staunton - Hampton Inn - Proposed, Tyson's Corner - Embassy Suites, Tysons Corner - Marriott Hotel, Tysons Corner - Residence Inn, Tysons Corner - Ritz Carlton-Proposed, Tysons Corner - Courtyard by Marriott, Virginia Beach - Courtyard by Marriott-Lynnhaven, Virginia Beach - Fairfield Inn, Virginia Beach - Hotel-Proposed, Virginia Beach - Pavilion Tower Hotel, Virginia Beach - Ramada Inn - Oceanside, Virginia Beach - International Conference Center, Westfields - Howard Johnson, Wheeling - Fort Magruder Inn, Williamsburg - Governor's Inn, Williamsburg - Holiday Inn-East, Williamsburg - Holiday Inn-West, Williamsburg - Royce Hotel, Williamsburg - Williamsburg Hilton, Williamsburg - Best Western-Proposed, Wytheville Washington - Bellevue Thunderbird Motor Inn, Bellevue - Embassy Suites, Bellevue - Hampton Inn, Bellevue - La Quinta, Bellevue - Residence Inn Seattle-East, Bellevue - Ramada Inn, Bothell - Rattling Spring Hotel, Harpers Ferry - Motel 6, Issaquah - AmeriSuite, Kent - Homecourt Suite Hotel, Kent - Embassy Suite, Lynnwood - Residence Inn-Seattle North, Lynnwood - Red Lion Inn at Pasco, Pasco - Redmond Motel, Redmond - Hampton Inn, Sea Tac - Holiday Inn Airport, Sea Tac - Thunderbird Inn, Sea Tac - Alexis Hotel, Seattle - Courtyard by Marriott-South Center, Seattle - Doubletree Inn at South Center, Seattle - Doubletree Plaza, Seattle - Hampton Inn-Airport, Seattle - Holiday Inn Crowne Plaza, Seattle - Holiday Inn-Sea Tac, Seattle - La Quinta, Seattle - Lake Union Residence Inn, Seattle - Marriott Hotel-Airport, Seattle - Marriott Sea-Tac Hotel, Seattle - Plaza Park Suites, Seattle - Ramada Inn-Airport, Seattle - Red Lion, Seattle - Stouffer Madison Hotel, Seattle - Travelodge-Proposed, Seattle - Westin Hotel, Seattle - Courtyard by Marriott, Spokane - Gateway Hotel, Spokane - Holiday Inn-West, Spokane - Red Lion Inn, Spokane - Super 8, Spokane - Hilton-Village Green, Tacoma - Hotel-Proposed, Tacoma - Park Shore Inn, Tacoma - Tacoma Sheraton Hotel, Tacoma - Embassy Suites Hotel, Tukwila - Hampton Inn, Tukwila - Residence Inn-Seattle South, Tukwila - Red Lion Quay, Vancouver - Residence Inn-Portland North, Vancouver - Super 8, Wenatchee - Thunderbird Motor Inn, Yakima West Virginia - Comfort Inn-Proposed, Charleston - Holiday Inn, Clarksburg - Holiday Inn, Fairmont - Hotel-Proposed, Harpers Ferry - Holiday Inn, Huntington - Comfort Inn-Proposed, Morgantown - Holiday Inn, Morgantown - Motel-Proposed, Morgantown - Comfort Inn, Princeton - Motel-Proposed, Princeton - Hotel-Proposed, Wheeling - Howard Johnson, Wheeling Wisconsin - Super 8, Ashland - Holiday Inn, Beloit - Embassy Suites Hotel-Proposed, Brookfield - Marriott-Milwaukee, Brookfield - Holiday Inn, Eau Claire - Residence Inn, Glendale - Granada Royale-Proposed, Green Bay - Holiday Inn-Downtown, Green Bay - Residence Inn-Proposed, Green Bay - Super 8, Janesville - Super 8, Kenosha - Playboy Resort, Lake Geneva - Concourse Hotel, Madison - Fairfield Inn, Madison - Hampton Inn - East, Madison - Hampton Inn - West, Madison - Compri Hotel-Proposed, Milwaukee - Embassy Suite, Milwaukee - Fairfield Inn, Milwaukee - Holiday Inn-Airport, Milwaukee - Holiday Inn-West, Milwaukee - Hotel and Conv. Ctr. East-Proposed, Milwaukee - Hyatt Regency, Milwaukee - Marc Plaza, Milwaukee - Marriott Inn, Milwaukee - Omni Suite Hotel-Proposed, Milwaukee - Super 8-Airport, Milwaukee - Olympia Village Resort, Oconomowoc - Scotsland Resort, Oconomowoc - Sheraton, Racine - Claridge Motor Inn, Rhinelander - Super 8, Waukesha - Holiday Inn, Wausau - Mead Inn, Wisconsin Rapids Wyoming - Days Inn, Casper - Flying L. Skytel, Cody - Super 8, Cody - Snow King Resort, Jackson - Super 8, Jackson - Wort Hotel, Jackson - Development-Proposed, Jackson Hole - Colter Bay Village, Moran - Jackson Lake Lodge, Moran - Jenny Lake Lodge, Moran - Best Western-Bel Air, Rawlins - Bridger Inn, Rawlins - La Quinta Inn, Rock Springs Western Europe Belgium - Oostkamp Hotel, Bruges - Proposed Residence Inn, Brussels - SAS Royal Hotel, Brussels Denmark - Proposed Hotel, Copenhagen France - The Miramar, Biarritz - Chateau D'arc en Barroi, Haute-Marne - Le Grand, Paris - Royal Monceau, Paris Germany - Cumberland House, Berlin - Munchen Penta Hotel, Munchen Holland - Carlton - Cannes & Amstel, Amsterdam - The Pulitzer Hotel, Amsterdam Spain - Le Meridien, Barcelona - Princess Sophia, Barcelona - Hotel Los Monteros, Marbella - Incosol Spa & Hotel, Marbella - Proposed Hyatt Resort, Marbella United Kingdom - Copthorne Hotel, Aberdeen - Copthorne Hotel, Birmingham - Hyatt Regency, Birmingham - Holiday Inn, Cambridge - Copthorne Hotel, Cardiff - Great Eastern Hotel, England - Copthorne Hotel, Glasgow - Hanbury Manor Hotel, Hertfordshire - 47 Park Street, London - Bailey's Hotel, London - Basil Street Hotel, London - Basil Street Hotel, Knightsbridge, London - Britannic Tower, London - Chelsea Hotel, London - Chesterfield Hotel, London - Chesterfield Hotel, Mayfair, London - Copthorne Hotels, London - Copthorne Tara Hotel, London - Dorchester Mayfair, London - Executive Hotel, London - Marriott Hotel, London - May Fair, London - Plaza Hotel, London - Proposed Hotel Conversion, London - Proposed Hotel-The City, London - Regent Hotel, London - Regent London Hotel, London - Sheraton Belgravia, London - Sheraton Park Tower, London - St. James Court Hotel, London - The Executive Hotel, London - Windsor Hotel, London - Copthorne Hotel, Manchester - Copthorne Hotel, Newcastle - Copthorne Hotel, Slough/Windsor - Swallow Hotel, Stockton - Copthorne Hotel-Effingham Park, Sussex - Copthorne Hotel-Gatwick, Sussex Middle East and North Africa Egypt - Sheraton Anni Cruise Ship, - Sheraton Aton Cruise Ship, - Sheraton Hotp Cruise Ship, - Sheraton Tut Cruise ship, - Aswan Oberol Hotel, Aswan - Cairo Sheraton Hotel, Cairo - Hotel - Proposed, Cairo - Lido Hotel, Cairo - Meridien Hotel, Cairo - Novotel Cairo Airport, Heliopolis, Cairo - Proposed Resort Complex, Hurghada - Luxor Sheraton Hotel, Luxor - Proposed Hotel, Luxor - Fayrouz Village Hotel, Sharm El Sheikh, Sinai - Coral Village Hotel, Nuweiba, Sinai - Hotel - Proposed, Dahab, Sinai - Hotel - Proposed, St. Catherine, Sinai Greece - Athens Hilton & Proposed Hotel, Athens - Caravel Hotel, Athens - Proposed Sargani Hotel & Bungalows, Halkidiki - Rhodes Hotel -Proposed, Rhodes Israel - Proposed Inter-Continental Hotel, Tel Aviv Lebanon - Hotel Market Review, Beruit Morocco - El Minzah Hotel, Tangier Nigeria - Proposed Sheraton Hotel, Port Harcourt Saudi Arabia - Proposed Jeddah Corniche Project, Jeddah Tunisia - Proposed Hotel, Hammamet Turkey - Hotel Conrad, Istanbul Latin America and the Caribbean Bahamas - Eleuthera Joint Venture, Eleuthera - Cape Eleuthera Island Hotel, Eleuthera Island - Eleuthera Joint Venture, Eleuthra - The Montague, Nassau - Paradise Island Hotel, Paradise Island - Resorts Int'l Hotel and Casino, Paradise Island Belize - Journey's End Caribbean Club, Abergris Caye Bermuda - Sonesta Hotel, Bermuda Brazil - Quatro Rodas Hotel, Recife Colombia - Charleston Hotel - Proposed, Barranquilla - Bella Suiza Hotel, Bogota - Hotel & Convention Center -Proposed, Cali - Cartagena Hilton, Cartagena - El Faro de Cartagena Resort Propose, Cartagena - Proposed Indian Sea and Sun Resort, Cartagena - Hotel De Isleno, San Andres Isla - Santamar Hotel, Santa Marta Curacao - Ramada Renaissance Hotel and Casino, Honduras - Inn Of The Sun, Guanaja Jamaica - Holiday Inn-Rose Hall, Montego Bay - Americana Eden II, Ocho Rios Mexico - Posadas de Mexico Hotels, - Americana Condesa Del Mar, Acapulco - Americana El Presidente Hotel, Acapulco - Resort-Proposed, Cabo San Lucas - Palacio Del Margus, Chiconcuac - Omni Hotel, Ixtapa - Fiesta Inn-Proposed, Leon - Karmina Place, Manzanillo - Hotel - Proposed, Mexico City - La Jolla de Mismaloya, Puerta Vallarta Netherland Antilles - Divi Divi Beach Resort, Aruba - Divi Tamarijn Beach Resort, Aruba - Golden Anchor, Bonaire - Resort Hotel-Proposed, Bonaire - Ramada Renaissance Hotel and Casino, Curacao - Cupecoy Beach Club Hotel, St. Maarten - Dawn Beach Hotel, St. Maarten - Dawn Beach Resort, St. Maarten - Mullet Bay Resort, St. Maarten - Oyster Pond Hotel, St. Maarten Puerto Rico - Hyatt Dorado Beach Hotel, Dorado - Hyatt Regency Cerromar Hotel, Dorado - Hotel - Proposed, Fajardo - Hotel Puerto Rico, Fajardo - Westin Resort-Proposed, Palmer - Marriott Resort & Casino-Proposed, Puerto Rico - Carib Inn, San Juan - Dupont Plaza, San Juan - El San Juan Hotel and Casino, San Juan - Howard Johnson Hotel, San Juan - Marriott - Proposed, San Juan - Marriott Update - Proposed, San Juan - Sands Hotel and Casino, San Juan Virgin Islands - Caneel Bay, St. Croix - Carambola Beach Resort, St. Croix - Hotel - Proposed, St. Croix - St. Croix Development, St. Croix - Caneel Bay, St. John - Pineapple Beach Hotel, St. Thomas - Sugar Bay Plantation, St. Thomas - Virgin Grand Hotel, St. Thomas - Virgin Isle Hotel, St. Thomas - Little Dix Bay, Virgin Borda Eastern Europe Croatia - Two Hotels, Dubrovnik Czech Republic - Voronesh Hotel Complex, Brno - Proposed Four Seasons Hotel, Prague Hungary - Proposed Resort Hotel, Babolna - Duna Inter-Continental, Budapest Latvia - Daugava Hotel-Proposed, Riga - Proposed Hotel, Riga Poland - Holiday Inn, Krakow - Marriott Hotel - Proposed, Poznan - Proposed Hotel, Poznan - Radisson Hotel, Szczecin - Bristol Hotel, Warsaw - Holiday Inn, Warsaw - Orbis Joint Venture, Warsaw - Proposed Hotel, Warsaw - Sheraton Hotel - Proposed, Warsaw - Zakopane Resort Complex, Zakopane Russia - Kamiennyi Most Hotel & Business, Moscow - Savoy Hotel, Moscow Asia Korea - Ultrapolis 3000, Seoul Malaysia - UP 3000 Hotel-Proposed, Selangor Singapore - Resort Hotels - Proposed, - Ultrapolis 3000, Singapore West Indies - Proposed Blue Lagoon Resort, St. Martin Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Hospitality Valuation Services Industry Leader Hospitality Valuation Services (HVS) was created in 1980 to satisfy the ever-increasing demand for reliable and well-documented hotel/motel valuations, market studies, and feasibility reports. As the nation's leading real estate appraisal organization devoted exclusively to lodging properties, HVS offers owners, investors, and lenders in-depth valuation and market research expertise. Our professional staff, operating on a worldwide basis with offices in New York, San Francisco, Miami, Boulder, Vancouver, and London, has appraised more than 4,000 hotels and motels in every state and over 32 foreign countries. Each member of Hospitality Valuation Services is well versed in lodging operations. Most have college degrees in hotel administration as well as actual on-the-job hotel experience. Coupled with intense training in real estate appraisal theory and techniques, we are highly qualified to handle the unique characteristics of hostelry valuations. Excellence Through Specialization An important feature of our valuation and feasibility services is specialization. Daily exposure on a global basis to a wide variety of hotel transactions and operating statistics, along with actual buyers and sellers, provides the data to thoroughly document our reports. HVS maintains the industry's largest database of hotel valuation information: o Data on over 4,000 hotel transactions; o Over 3,500 actual financial statements; o Thousands of management contracts, franchise agreements, mortgages, leases, and other similar documents; o Personal contacts at every major hotel company; o Names and addresses of over 10,000 hotel owners, investors, lenders, and operators. Hospitality Valuation Services Mineola, New York - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Innovative research in hotel valuation techniques is set forth in the textbooks we authored for the Appraisal Institute, entitled The Computerized Income Approach to Hotel/Motel Market Studies and Valuations and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations. These publications, along with more than 300 articles, are recognized as the authoritative standard for valuing lodging facilities and performing market feasibility studies. In addition, we have developed Hospitality Valuation Software, a computerized package that assists appraisers and consultants in evaluating market trends and preparing financial forecasts. Full-Service Hotel Consulting With a reputation established by providing highly detailed hotel valuations that are accepted and relied upon by virtually every major hotel owner, lender, and operator, HVS has branched out to offer a full range of consulting services. o HVS Consulting Services: Valuations, market feasibility studies, economic studies, management contract and franchise negotiations, development assistance, and expert testimony. o HVS Executive Search: Recruitment and placement of top-level hotel management personnel. o HVS Eco Services: Environmental audits and assistance in implementing programs including water and energy management, recycling, and green product selection. Provides ECOTEL certifications to environmentally sensitive hotels. o HVS Gaming Services: Specialized market, valuation, and consulting services for casinos and other types of gaming activities. o HEI Hotels: Hotel ownership and management. Long-Term Relationship Hospitality Valuation Services is in business for the long-term. We are dedicated to providing our clients with the highest quality consulting services. Should you require assistance in any areas covered by our expertise, please contact any member of our team at (516) 248-8828. This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. ========================================================== APPRAISAL OF REAL PROPERTY 605 Third Avenue New York, New York ========================================================== IN A SELF-CONTAINED REPORT As of August 1, 1997 Prepared For: Morgan Stanley Realty, Inc. 1585 Broadway New York, New York Prepared By: Cushman & Wakefield, Inc. Valuation Advisory Services 51 West 52nd Street, 9th Floor New York, NY 10019 Cushman & Wakefield, Inc. CUSHMAN & 51 West 52nd Street WAKEFIELD(R) New York, NY 10019-6178 (212) 841-7500 Improving your place in the world July 30, 1997 Mr. Shirish B. Godbole Vice President Morgan Stanley Realty, Inc. 1585 Broadway New York, New York Re: Appraisal of Real Property 605 Third Avenue New York, New York Dear Mr. Godbole: In fulfillment of our agreement as outlined in the Letter of Engagement, Cushman & Wakefield, Inc. is pleased to transmit our self-contained appraisal report estimating the market value of the leased fee interest in the referenced real property on an "as is" basis. As specified in the Letter of Engagement, the value opinion reported below is qualified by certain assumptions, limiting conditions, certifications, and definitions, which are set forth in the report. This report was prepared for Morgan Stanley Realty, Inc. (client) and it is intended only for the specified use of the client. It may be not be distributed to or relied upon by other persons or entities without written permission of the appraiser. The appraisal report has been prepared in accordance with our interpretation of your institution's guidelines, Title 11 of the Financial Institution's Reform, Recovery, and Enforcement Act of 1989 (FIRREA) and the Uniform Standards of Professional Practice, including the Competency Provision. The property was inspected by and the report was prepared by Travis W. Walsh, MAI, CRE. Cushman & Wakefield, Inc. Mr. Shirish B. Godbole Morgan Stanley Realty, Inc. Page 2 July 30, 1997 As a result of our analysis, it is our opinion that the market value of the leased fee estate in the subject property, subject to the assumptions, limiting conditions, certifications, and definitions, as of August 1, 1997, is: ONE HUNDRED EIGHTY MILLION DOLLARS $180,000,000. Respectfully submitted, Cushman & Wakefield, Inc. /s/Travis W. Walsh Travis W. Walsh, MAI, CRE Director Valuation Advisory Services State Certified Appraiser No. 46000005074 TWW:mls SUMMARY OF SALIENT FACTS AND CONCLUSIONS ================================================================================ Location: 605 Third Avenue New York, New York Assessor's Parcel Number: Block 920, Lot 12 Interest Appraised: Leased Fee Estate Date of Value: August 1, 1997 Date of Inspection: July 30, 1997 Ownership Leased Fee Estate: Fisher 40th and 3rd Company and Hawaiian Realty, Inc. Land Area: 71,210+/- square feet Zoning: C5-3 and C1-9, General Central Commercial District Highest and Best Use If Vacant: Eventual development as an office building, consisting of large floor plates catering to Class A office users. As Improved: Existing use as a multi-tenanted office building containing office space on the upper floors with retail space on the ground level and a parking garage. Improvements Type: 43-story multi-tenanted Class A office building. Year Built: 1963 Type of Construction: Structural steel, concrete and glass Size Total Rentable Area: 984,447+/- square feet Condition: Excellent Operating Data and Forecasts Current Occupancy: 98.1+/-% Forecasted Stabilized Occupancy: 96+/-% Value Indicators Sales Comparison Approach: $180,000,000 Summary of Salient Facts and Conclusions ================================================================================ Income Approach Discounted Cash Flow Income Growth Rate: 4% per annum Tax Growth Rate: 2-1/2% per annum Expense Growth Rate: 4% per annum Tenant Improvements Vacant Space/New Leases: $40 per square foot increasing at 4% per year $40 per square foot increasing at 4% per year Renewal Tenants: 2000 and thereafter - $20 per square foot increasing at 4% per year commencing 1997. Vacancy Between Tenancies: 6 months weighted for renewal probability Renewal Probability: 50% Terminal Overall Rate: 8.5% to 9.0% Cost of Sale at Reversion: 4% Discount Rate: 11.0% to 11.5% Indicated Value Discounted Cash Flow Analysis: $180,000,000 Value Conclusion As Is: $180,000,000 Estimated Marketing Time: Less than 12 months Special Assumptions: Please refer to the complete list of Assumptions and Limiting Conditions included at the end of this report. PHOTOGRAPHS ================================================================================ [GRAPHIC OMITTED] 605 Third Avenue looking southeast on Third Avenue. Photographs of Subject Property ================================================================================ [GRAPHIC OMITTED] 605 Third Avenue looking northeast on Third Avenue. Photographs of Subject Property ================================================================================ [GRAPHIC OMITTED] Looking south on Third Avenue. [GRAPHIC OMITTED] Looking north on Third Avenue. Photographs of Subject Property ================================================================================ [GRAPHIC OMITTED] Looking east on East 39th Street. [GRAPHIC OMITTED] Looking west on East 39th Street. Photographs of Subject Property ================================================================================ [GRAPHIC OMITTED] Looking east on East 40th Street. [GRAPHIC OMITTED] Looking west on East 40th Street. Photographs of Subject Property ================================================================================ [GRAPHIC OMITTED] Parking garage from East 39th Street. [GRAPHIC OMITTED] Parking garage from East 40th Street. Photographs of Subject Property ================================================================================ [GRAPHIC OMITTED] Looking north on the Midtown Tunnel access road. [GRAPHIC OMITTED] Looking south on the Midtown Tunnel access road. Photographs ================================================================================ [GRAPHIC OMITTED] Lobby of 605 Third Avenue. Photographs ================================================================================ [GRAPHIC OMITTED] View looking northeast from the roof. [GRAPHIC OMITTED] View looking northwest from the roof. Photographs ================================================================================ [GRAPHIC OMITTED] View looking east from the roof. [GRAPHIC OMITTED] View looking south from the roof. TABLE OF CONTENTS ================================================================================ Page INTRODUCTION .............................................................. 1 Identification of Property .......................................... 1 Property Ownership and Recent History ............................... 1 Purpose and Intended Use of the Appraisal ........................... 1 Extent of the Appraisal Process ..................................... 1 Date of Value and Property Inspection ............................... 2 Property Rights Appraised ........................................... 2 Definitions of Value, Interest Appraised, and Other Pertinent Terms . 2 Legal Description ................................................... 3 NEW YORK REGIONAL ANALYSIS ................................................ 4 MIDTOWN MANHATTAN OFFICE MARKET ANALYSIS .................................. 12 NEIGHBORHOOD ANALYSIS ..................................................... 29 PROPERTY DESCRIPTION ...................................................... 49 Site Description .................................................... 49 Improvements Description ............................................ 50 REAL PROPERTY TAXES AND ASSESSMENTS ....................................... 54 ZONING .................................................................... 57 HIGHEST AND BEST USE ...................................................... 58 VALUATION PROCESS ......................................................... 60 SALES COMPARISON APPROACH ................................................. 61 INCOME CAPITALIZATION APPROACH ............................................ 64 RECONCILIATION AND FINAL VALUE ESTIMATE ................................... 85 ASSUMPTIONS AND LIMITING CONDITIONS ....................................... 87 CERTIFICATION OF APPRAISAL ................................................ 89 ADDENDA ................................................................... 90 Improved Property Sales Prime Tenant Rent Roll Appraisers' Qualifications INTRODUCTION ================================================================================ Identification of Property The subject property consists of a 43-story, Class A office structure with a detached garage, located on the easterly blockfront of Third Avenue between East 39th Street and East 40th Street in Midtown Manhattan. The property is known by the street address 605 Third Avenue, New York, New York. The property is identified on the Tax Map of the City of New York as Lot 12, Block 920. Property Ownership and Recent History The leased fee estate in the property is owned by Fisher 40th and 3rd Company and Hawaiian Realty, Inc. There have been no transfers of ownership involving this property within the last five years. Purpose and Intended Use of the Appraisal The purpose of the appraisal is to estimate the market value of the leased fee estate in the property, in its "as is" condition, based upon prevailing market conditions, as of August 1, 1997. The function of this appraisal is its use by Fisher Brothers in conjunction with a mortgage financing of the property. Extent of the Appraisal Process In the process of preparing this appraisal, we: o Inspected the exterior of the building, the site improvements and a representative sample of tenant spaces. o Interviewed a representative of the property management company. o Reviewed leasing policy, concessions, tenant build-out allowances and history of rental rates and occupancy with the building manager and leasing personnel. o Reviewed a detailed history of income and expenses and a budget forecast for 1997, including the budget for planned capital expenditures and repairs. o Conducted market research of occupancies, asking rents, concessions and operating expenses at competing buildings, including interviews with on-site managers and a review of our own data base from previous appraisal files. o Prepared an estimate of stabilized income and expense (for capitalization purposes). o Conducted market inquiries into recent sales of similar buildings to ascertain sales price per square foot, effective gross income multipliers and capitalization rates. This process involved telephone interviews with sellers, buyers and/or participating brokers. (See detailed sales write-ups in Addenda for more complete information on the verification process.) o Prepared Sales Comparison and Income Approaches to value. ================================================================================ -1- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Introduction ================================================================================ Date of Value and Property Inspection The date of value is August 1, 1997. Our most recent inspection of the property was July 20, 1997. Property Rights Appraised Leased fee estate. Definitions of Value, Interest Appraised, and Other Pertinent Terms The definition of market value taken from the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation, is 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 and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised, and acting in what they consider their own best interests; 3. A reasonable time is allowed for exposure in the open market; 4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. Exposure Time Under Paragraph 3 of the Definition of Market Value, the value estimate presumes that "A reasonable time is allowed for exposure in the open market". Exposure time is defined as the estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at the market value on the effective date of the appraisal. Exposure time is presumed to precede the effective date of the appraisal. The following definitions of pertinent terms are taken from the Dictionary of Real Estate Appraisal, Third Edition (1993), published by the Appraisal Institute. Leased Fee Estate An ownership interest held by a landlord with the rights of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease. ================================================================================ -2- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Introduction ================================================================================ The following definitions are taken from various sources: Market Value As Is on Appraisal Date Value of the property appraised in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications on the effective date of appraisal. Legal Description We have not been provided with a metes and bounds legal description for the property and therefore, have not included one within this report. The property is legally identified on the Tax Map of the City of New York as Block 920, Lot 12. ================================================================================ -3- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- [GRAPHIC OMITTED] Regional Map NEW YORK REGIONAL ANALYSIS ================================================================================ Area Overview The New York metropolitan area, centered in New York City, is the nation's center for finance, the arts, media, fashion, telecommunications and corporate headquarters. The region generally encompasses 20 counties in three states, extending for a radius of approximately 50 miles from New York City. Included in this area are: New York City's five boroughs of Manhattan, Brooklyn, Queens, Bronx and Staten Island; the New York State counties of Nassau, Suffolk, Westchester, Rockland, Orange and Putnam; the northern New Jersey counties of Bergen, Essex, Hudson, Union, Middlesex, Passaic, Somerset and Morris; and the southern Connecticut county of Fairfield. Population Trends The New York area is the largest metropolitan area in the country in terms of population. The following chart provides population growth for the metropolitan area between 1980 and 1990, estimated figures for 1996 and projected population statistics for the year 2001.
==================================================================================================================================== New York Metropolitan Area Population ==================================================================================================================================== % Increase % Increase 1980 1990 % Increase 1996 1990-1996 2001 1996-2001 County Census Census 1980-1990 Estimated (Est.) Projection (Projected) - ------------------------------------------------------------------------------------------------------------------------------------ New York City 7,071,641 7,322,564 3.5% 7,382,450 0.82% 7,466,689 1.14% - ------------------------------------------------------------------------------------------------------------------------------------ NYS (Nassau/ Suffolk/Westchester/ Rockland/Orange/ Putnam) 4,068,738 4,141,141 1.8% 4,255,711 2.77% 4,313,220 1.53% - ------------------------------------------------------------------------------------------------------------------------------------ New Jersey Counties 4,411,992 4,436,976 0.57% 4,497,693 1.37% 4,434,801 -1.40% - ------------------------------------------------------------------------------------------------------------------------------------ Connecticut Fairfield 807,143 827,645 2.5% 834,637 0.84% 845,931 1.35% - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL 16,359,512 16,728,326 2.3% 16,970,491 1.76% 17,060,641 0.53% ==================================================================================================================================== Source: Equifax National Decision Systems ====================================================================================================================================
Transportation Metropolitan New York is served by the most diverse transportation system in the United States. The region's transportation network links the area to regional, national and global commerce and trade. A brief synopsis of the region's transportation system follows below. Rail System o NYC Subway system: 710-mile subway line servicing 3.5 million passengers a day. o Metro North: Based in the landmark Grand Central Terminal in Midtown Manhattan, train lines span Westchester and Putnam counties in New York and Fairfield County, Connecticut to an 80-mile radius. Over 100,000 passengers use this system daily. o Long Island Railroad: Commuter line to Pennsylvania Station in Manhattan and to Atlantic Terminal in Brooklyn servicing over 270,000 commuters daily. Improvements are scheduled for the next few years, including the addition of 24 new "dual mode" locomotive engines that allow trains to switch between ================================================================================ -4- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- New York Regional Analysis ================================================================================ diesel and electric power while en route so that passengers will no longer have to switch trains when the tracks change. In addition, over 120 new rail cars will be added to the fleet and 13 additional stations are to be equipped with automatic ticket vending machines. o (PATH) - Port Authority Trans-Hudson subway system: Services nearly 200,000 commuters daily from Newark and Hoboken to Manhattan. o New Jersey Transit-rail: Train service for commuters in the northern part of the state to either Hoboken, New Jersey or Pennsylvania Station in Manhattan. Plans are currently underway for a 20.5-mile technologically advanced light rail system from Bayonne to Hoboken, ultimately extending to Ridgefield, which will make a great improvement in transportation in Hudson County. Construction of the first phase (between Bayonne and Hoboken) is scheduled to begin shortly, with completion expected by the year 2000. Bus System o New York City Transit: Regularly scheduled bus service in New York City's five boroughs handles over one million riders daily. o Port Authority Bus Terminal: Regional bus lines servicing an average of 175,000 passengers daily, with most service to and from New Jersey. Airports o The region contains three major commercial airports: Newark, LaGuardia and Kennedy International (JFK). Newark Airport, in New Jersey, recently opened a new international terminal, doubling the airport's ability to process international passengers. A $350 million monorail system, connecting the three passenger terminals to the airport's long-term parking lots, opened last spring. Plans are being made to extend the monorail to nearby Amtrak and New Jersey Transit rail stations. At JFK Airport in Queens, a $1.1 billion redevelopment project to expand and improve its international arrivals and customs facilities is expected to begin during 1997. Construction of a light rail system providing passengers with a link between terminals as well as connections from the airport to the New York City subway system and the Long Island Rail Road will be scheduled in phases to minimize disruptions at the airport. A $549 million roadway/utility renewal effort and a $63 million air traffic control tower will also greatly improve conditions for travelers. Major improvements at LaGuardia Airport include a new passenger terminal and improved roadways to expedite traffic flow into and out of the airport. Renovation work continues in the main terminal and a new retail and food court is being built. Ferries o Regularly scheduled service runs from Staten Island, Brooklyn and several New Jersey cities to Downtown and Midtown Manhattan. ================================================================================ -5- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- New York Regional Analysis ================================================================================ Regional Economic and Employment Trends The New York metropolitan region saw a net increase of nearly 48,000 new jobs in the last 12-month period ending October 1996, the highest increase so far this decade. Northern New Jersey's employment outlook also improved, though slightly, with a gain of 9,800 new jobs. Outlined below are the most current employment statistics available by industry. o The service industry experienced 94 percent of the area's overall job growth, the largest gain in employment during the last twelve months. The New York area netted 35,300 new jobs, Long Island expanded by approximately 10,000, and New Jersey increased its service sector jobs by 15,000. o The second-largest employment increase in the New York region occurred in the retail trade, with over 11,000 new jobs in New York City, boosted by the surge of retail and entertainment projects. In particular, the Midtown Manhattan area has been transformed by a plethora of retailers, such as Kmart, Tower Records, Barnes & Noble, The Gap, Pottery Barn, the Disney Store, Nike town and Reebok Sports Club. Madison Avenue, one of the most desirable and expensive retail locales in the world, recently opened its doors to highly sought-after designers such as Calvin Klein, Valentino and Giorgio Armani. On Long Island, 6,600 retailing jobs were created. Retail also accounted for the second-largest employment gain in New Jersey, adding 4,200 new jobs. o New York's construction industry added 2,000 new jobs, making it the third largest net gain employment category. On Long Island, construction jobs increased by 300. With a number of major renovations and new retail projects coming on-line on Long Island, construction activity should continue on the upswing. o During this period, wholesale trade added 1,900 jobs in the New York region and the transportation sector increased by 1,800 new jobs in the City and 900 on Long Island. New Jersey suffered in both areas, declining 1,200 jobs in transportation and losing 600 in the wholesale trade industry. o The FIRE (finance, insurance and real estate) sector accounts for the third largest group of the New York region's workforce -- 13 percent -- which greatly exceeds the national average of 5.8 percent. Considering this, FIRE's loss of 1,900 jobs, considered minor, is a significant improvement over the last few years, when the brunt of corporate downsizing, mergers and consolidations took its toll within the sector's workforce. o The two sectors that suffered the largest losses in employment in the metropolitan area were in the public sector. There was a reduction of approximately 12,000 government jobs. In manufacturing, there were losses of 5,900 workers in New York, 3,600 jobs on Long Island and 5,600 unemployed in Northern New Jersey. ================================================================================ -6- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- New York Regional Analysis ================================================================================ Lucrative incentive packages in the form of city and state tax breaks and attractive leasing packages have been successful in enticing many large corporations into staying in the region as well as attracting businesses seeking locations elsewhere. The New York Cotton Exchange, as well as the Coffee, Sugar & Cocoa Exchange will keep its 5,300 employees in New York City at a new facility, encouraged by a reported $99 million tax incentive package, among other municipal-backed financial incentives. Paine Webber, with its 2,650 employees, will maintain its world headquarters at 1285 Avenue of the Americas in Midtown Manhattan through the year 2015, attributed to an attractive lease deal and a series of tax incentives, sales tax exemptions and energy savings. In a deal that marks a first time return to New York after moving out of state, Nine West will relocate to White Plains, bringing with it 1,400 jobs, with an expected addition of 500 jobs during the course of its 25-year lease. They will occupy a 377,000+/- square foot building that was previously the home of NYNEX. The Nine West deal was assisted by a $7.8 million package of tax incentives, grants and electricity savings. In October 1996, New York City Mayor Rudolph Giuliani introduced a series of tax incentives and other benefits to attract tenants and developers to move to certain areas of Downtown Manhattan. American International Group (AIG) will take advantage of that, keeping its headquarters and over 5,100 employees at 175 Water Street, an office tower which the company recently purchased. AIG also expects to add almost 1,900 new jobs as a result of growth and consolidation of other leased properties outside the city. Other encouraging corporate news items include MasterCard, which moved into its new corporate headquarters in Purchase, New York. IBM is planning to consolidate to a new state-of-the-art headquarters facility adjacent to their existing building in Armonk, New York. Ciba-Geigy has relocated its corporate headquarters, along with 1,200 employees, to the Tarrytown Corporate Center, and is constructing a new $40 million laboratory, scheduled for occupancy in 1997. Symbol Technologies Inc., employing 2,500 on Long Island, recently relocated to its new corporate headquarters, encompassing 48+/- acres in Holtsville. Unemployment Unemployment rates have continued to decline nationally and regionally over the past few years. The latest year-end statistics available from the Department of Labor, published in December, include figures as of October 1996. The unemployment rate for the New York region (including New York City, Putnam, Rockland and Westchester) as of October 1996 was 7.6 percent, as opposed to 7.7 percent twelve months earlier. Similarly, Long Island's October 1996 figure fell to 3.7 percent from 4.8 percent the prior year. In New Jersey, the unemployment rates as of September 1996 show 6.0 percent, compared to 6.3 percent the year before. Economists explain that unemployment rates change at a slower rate than other economic indicators and, therefore, may not accurately reflect recent shifts in the job market. Employment figures provide a more accurate reflection of economic performance in the region. ================================================================================ -7- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- New York Regional Analysis ================================================================================ Real Estate Markets o Office Markets Strong leasing performance in the Midtown, Midtown South and Downtown Manhattan Class A office markets has resulted in a shrinking supply of premium space. The Long Island markets have shown improvement with lowered vacancy rates. In Northern New Jersey, leasing of Class A space has also been notable. Midtown Manhattan exhibits the lowest Class A vacancy rate in the region between 10 and 14 percent, and the Downtown, Long Island, and New Jersey markets all report Class A vacancy rates at their lowest points for the year, between 10 and 15 percent. However, Westchester vacancy rates increased, due to fact that more space was vacated than occupied in 1996, and the region is striving to recover from the wave of corporate consolidations and reorganizations that began in 1995. With vacancy rates of prime space falling, the focus has changed to construction to meet the demand for suitable space. Times Square will be the site of one of the first new office developments in the Midtown area. Located at the northeast corner of Broadway between West 42nd and 43rd streets, 4 Times Square, a 1.6+/- million square foot office and retail project, broke ground in August 1996. The Durst Organization acquired the western portion of the same city block which they have a majority ownership. A scheduled completion date of 1999 is expected. Another site that is generating a great deal of interest from prominent developers is the New York Coliseum site at Columbus Circle. Among the bids submitted are plans for a mixed used development with office space, a large retail component, residential apartments condominiums and hotel rooms. The governmental agencies requesting the bids received nine proposals and four finalists are to be announced in April 1997. There are several projects in the preliminary planning stages on Long Island, including developer Edward J. Minskoff's proposal for a 200,000 square foot office building at the site of the former Roosevelt Raceway, where he also plans a separate 350,000 square foot office building. Anchor tenants have been secured for both buildings. Also slated for development are Brookhaven Town Center and Parr Yaphank, with a potential of 3+/- million additional square feet of new office development. In Jersey City's Waterfront district, the Newport Office Center III will contribute 750,000 square feet of new office space, with developers planning to complete construction within 2 years after securing 25 percent of the space through pre-leasing. o Retail Markets Retailing activity has skyrocketed in both new and expansion projects due to the region's rebounding economy. The New York City area, traditionally served by large department stores and small boutiques, is presently experiencing a different kind of retail experience connected to the multi-media and entertainment fields. Revitalizing projects in the Times Square area, such as Disney's renovation of the New Amsterdam theater, David Copperfield's magic-theme restaurant, the Official All Star Cafe, Sony's State Theatre, and E Walk, an entertainment complex developed in part by Tishman Broadway Corp., has made the area attractive for continued development. Additionally, large retailers such as Kmart, Barnes & Noble, and a new Gap chain, Old Navy Clothing Co. have expanded into Manhattan with one or two signature stores so as to not overextend themselves or saturating the market. The Warner Brothers Studio Store, originally opened in October 1993 on the corner of Fifth Avenue and 57th Street, recently expanded to nine stories, adding 75,000 square feet retail space to include interactive ================================================================================ -8- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- New York Regional Analysis ================================================================================ games, a cafe and a 74-seat screening room to feature computer generated 3-D cartoons featuring the well-known Warner Brothers characters. Warner Brothers more recently leased the 1 Times Square building and is to open a second Manhattan studio store on West 42nd Street and Broadway. Luxury retailers also made news, with Chanel moving a few doors away to a completely renovated site with a 99-year lease. Other upscale designers, such as the aforementioned Calvin Klein, Valentino and Giorgio Armani, also opened new retail spaces. Next to Chanel on East 57th Street, Louis Vuitton, the French luxury leather goods designer, is building a 23-story tower, two floors for their retail business and the upper floors designated to the company's corporate offices. Elizabeth Arden and Red Door Salons Inc., slated for extensive renovations and expansion, will close this month and reopen in April of 1997. Long Island is renovating and expanding many of its retail centers, such as the Walt Whitman Mall in Huntington, the South Shore Mall in Islip, the Tanger Outlet center in Riverhead and the Bellport Outlet Center. Roosevelt Field mall will be adding a Nordstrom's to the second level expansion project and completion is expected by the fall of 1997. In Westbury, a two-level mall expansion project, The Source, will add 525,000 square feet to the existing site and is scheduled to be completed in the summer of 1997. The Source will feature a number of big-name, large-draw retailers such as Fortunoff (the project's joint venture partner), Nordstrom Rack, Old Navy, Saks Off Fifth, Loehmann's, The Disney Store, Bertolini's Restaurant and Virgin Megastore. In addition, a number of new retail developments over 100,000 square feet are being proposed, among them the Brookhaven Town Center in Yaphank, which ultimately may include a significant amount of office space as well. In Westchester, renovations are underway at the Westchester Mall, which will double in size to 766,000 square feet and be renamed the Cortland Town Center. It will feature commanding retailers such as Home Depot, Barnes & Noble, United Artists Theater, and an A&P Superstore. About 80 percent of the space has been pre-leased and completion is scheduled for 1999. Just over the Westchester border in West Nyack, Pyramid Companies has commenced construction of Palisades Center, a 1.85 million square foot power mall, due to open late 1997. It will be host to anchor stores such as JC Penney, Lord & Taylor, Filene's Basement and BJ's Wholesale Club. Other headlining retailers lined up so far include Home Depot, The Wiz, Target, Sony Multiplex Theatre and Burlington Coat Factory. o Residential Markets The New York City residential markets have exhibited a strong recovery from the past recession. Over the past few years in Manhattan, vacancy rates have been at the lowest point in years (from 3.4 percent to as low as 1+/- percent, according to some sources), despite rising supply and market rents. This factor has, in turn, stimulated the outer borough markets, as many renters seek relief from the tight Manhattan market and turn to Brooklyn and Queens as alternatives. Other potential renters have chosen to buy apartments, some more affordably priced than in the past, boosting the lagging sales of co-ops and condominiums. ================================================================================ -9- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- New York Regional Analysis ================================================================================ Overall vacancy figures for Northern New Jersey, currently between 4 percent and 5 percent, can vary between submarkets, due to the fact that the region contains some of the most impoverished areas along with some of the most affluent neighborhoods in the nation. The Long Island residential market has shown some improvement, but along with Northern New Jersey, restrictive zoning and rent control ordinances hinder multifamily development and allow for only modest improvements in the existing markets. Legislation proposed to eliminate rent control may alter the development scene dramatically. New residential construction in the New York region is showing great promise for the near future and is a reflection of increased momentum of the region's economy. In New York City, there are ten or more projects that are at or near completion, which should serve to ease the demand for rental and condominium units for tenants, including low and middle-income families. In Westchester County, Avalon Gardens, a 500-unit project, should be ready for occupancy by late 1998. On Long Island, Avalon is building 300 apartments in Smithtown, which should also be completed by the end of 1998. In Huntington, a complex is in the planning stages for a continuous care facility that would include 1,000 apartments, townhouses and detached homes for senior citizens, as well as another 250-unit senior housing project. o Hotel Markets The region's hotel market is currently in the midst of a dramatic recovery from a period of economic recession. The supply of hotel rooms in New York has changed over the past few years, as many older sites are being replaced by more modern facilities. In some cases, hotels such as the St. Regis Hotel, the Sheraton New York and the Sheraton Manhattan, along with the Omni Berkshire have been completely renovated, with more accommodating guestrooms and facilities designed to pamper the occupants with more upscale amenities. The demand for hotel space is on the rise and is expected to continue in the near future. This trend is supported by the number of new and proposed hotel developments currently in the planning stages, under construction or near completion. The Downtown area of SoHo is the site of two new hotels and another under proposal. The first hotel to open in this resurgent area, the 367-room SoHo Grand Hotel, was completed in the summer of 1996 and has already made a favorable impression among models, artists and actors. The 73-room Mercer Hotel is currently under construction and has signed a major retailer, J. Crew, to their attractive ground floor space. Developer Hank Sopher has proposed the 160-room SoHo Gateway, which will reportedly cost $25+/- million and is still in the planning stages. The first new hotel to be constructed in the successfully revitalized Downtown Brooklyn area is finally underway. Developer Josh Muss' Renaissance Plaza, a 31-story hotel/office complex will encompass a 7-story, 384-room Marriott Hotel. The project broke ground in late 1996 and is expected to be completed between 1998 and 1999. The latest new hotel proposal in the Times Square area is a plan by Milstein Properties to build a 500,000 square foot hotel and retail complex on the parking lot located at West 42nd Street and Eighth Avenue, across the street from the Tishman development. The Milsteins have owned the property for 15 years, and have been waiting for the right incentive package from the city and state to catalyze the project. ================================================================================ -10- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- New York Regional Analysis ================================================================================ At the New York Coliseum site on Columbus Circle, many accepted proposals from the nine prominent development teams include plans for a hotel component. Another project, targeted at budget-conscious business travelers, is a $50 million plan to build a 300-room Courtyard by Marriott hotel on the top floors of 866 Third Avenue. Construction is scheduled to commence Mid-year 1997 and should be completed in approximately one year. On Long Island, Edward J. Minskoff is proposing two hotel projects at the former Roosevelt Raceway property in Westbury. The first hotel would be a 170-room economy rate project, and the second a 130 suite room project to be built on the former racetrack's grandstand site. Construction is to begin Mid-year 1997 and should take about two years to complete. Another significant proposal is the plan for a 200-room hotel in Jersey City, along the Hudson River waterfront area. The hotel will be a part of the Hudson Exchange mixed-use project and will be located next to the Newport Mall and accessible to the planned light rail system in Hudson County. The hotel will be a vital link to the area's development as a viable business district and will certainly be a factor in its future growth. Conclusion The downward pattern within the New York region in the past few years has made a significant turnaround which, boosted by a stable economy and a strong performance by Wall Street, has prompted some economists to predict that conditions should remain favorable through at least the third quarter of 1997. According to Crain's New York Business, inflation in the region has been below the national average for the last six out of seven months. The latest employment figures are a powerful indication of the strength of the region's economy. ================================================================================ -11- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- MIDTOWN MANHATTAN OFFICE MARKET ANALYSIS ================================================================================ Manhattan Overview Manhattan contains over 350 million square feet of Class A, B and C office space and is, by a very wide margin, the largest market in the United States. The Manhattan office market is actually composed of three markets: Midtown, Midtown South and Downtown. The Midtown market, which is identified as that area north of 32nd Street, is widely diversified among legal services, financial institutions, insurance companies, media companies, advertising agencies and accounting firms, among others. The Midtown South market is identified as that area north of Canal Street and south of 32nd Street and is dominated by Class B and C buildings which are generally occupied by local service firms, back office divisions of large companies and front offices for local manufacturers. The Downtown market, identified as that area south of Canal Street to the Battery, is linked significantly to financial services, Wall Street firms and New York City government. During the 1980s the Midtown Manhattan office market experienced unprecedented growth in leasing activity, new construction and rental rates. The Midtown market softened in the early 1990s as new supply entered the market in response to the increased demand of the mid-1980s, rising rental rates and New York City office development incentives. The oversupply of Midtown office space, in conjunction with the past recession, created soft market conditions that persisted well after most of the country had begun its ascent from the past economic downturn. The future shows a more balanced outlook for the Midtown office market. New construction had virtually come to a standstill, which allowed demand to catch up with existing supply and vacancy rates to decline. The New York City region has emerged from the past recession and lenders have begun to provide new financing of well-occupied and stabilized office properties. Finally, new construction has begun on speculative office projects, with partial preleasing mandatory, which is deemed as a positive factor. The following chart summarizes the status of the Midtown Office Market (excluding Midtown South) as of the first quarter 1997.
- ------------------------------------------------------------------------------------------------------------------------------------ Midtown Manhattan Office Market Statistics - 1Q1997 ==================================================================================================================================== Class A Class B Class C Overall ==================================================================================================================================== Number of Built Buildings 342 328 108 778 Inventory - Square Feet 168,126,777 39,395,235 13,127,089 220,649,101 - ------------------------------------------------------------------------------------------------------------------------------------ Overall Availabilities - SF 15,952,711 6,160,384 1,693,200 23,806,295 YTD Under Construction 1 Qtr 1997 1,614,000 0 0 1,614,000 - ------------------------------------------------------------------------------------------------------------------------------------ Total Leasing Activity 1996 - SF 15,134,075 2,641,959 859,620 18,635,654 Total Leasing Activity 1st Qtr. 1997 - SF 3,753,633 871,470 261,072 4,886,175 - ------------------------------------------------------------------------------------------------------------------------------------ Total Absorption 1996 - SF 1,530,652 103,212 133,649 1,767,513 Total Absorption 1st Qtr. 1997 - SF (234,687) (67,663) (20,176) (322,526) - ------------------------------------------------------------------------------------------------------------------------------------ Total Vacancy Rate 9.50% 15.60% 12.9% 10.80% Total Avg. Asking Rental Rate $ 36.14 $ 22.63 $ 12.43 $ 30.95 - ------------------------------------------------------------------------------------------------------------------------------------
Source: Cushman & Wakefield Research Services Class A: Buildings which meet three or more of the following criteria: centrally located, professionally managed and maintained; attract high-quality tenants and command upper-tier rental rates. Structures are modern or have been modernized to successfully compete with newer buildings. Class B: Buildings with less than three of the criteria listed above. In addition, the current or prospective tenants must be office space users. Class C: Buildings competing for tenants requiring functional space at rents below average. ================================================================================ -12- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Midtown Manhattan Office Market Analysis ================================================================================ Supply The last wave of new construction activity in Midtown was initiated by the 1981 rezoning of the West Side of Manhattan centering around Times Square. The temporary zoning change increased the permissible density (FAR) of potential building sites. This prompted many developers to acquire sites and begin construction in order to meet the zoning deadline requirement that foundations be in place by May 13, 1988. East Side sites were conversely downzoned, although the scarcity of sites on the East Side minimized the effects of the downzoning. The 1981 rezoning of the West Side, which was successful in promoting development, was scaled back in 1987. Developers who took advantage of the rezoning have long since completed those buildings. New office construction over the past few years has been almost non-existent, with just nine (primarily owner occupied) buildings completed between 1992 and 1994. This slowdown in construction activity was attributed to the oversupply of office space created by the building boom of the 1980s, the decreased demand for space that is the result of corporate downsizing and relocation out of New York City, and general economic weakness stemming from the past recession. Proposals for construction over the next few years have been minimal, which has had a favorable impact on occupancy levels. The following chart lists the most recent office projects proposed and under construction.
- ------------------------------------------------------------------------------------------------------------------------------------ Midtown Office Building Projects - Proposed and Under Construction ==================================================================================================================================== Rentable No. Property Status Office SF Constructed For ==================================================================================================================================== 1 German Embassy Under Construction 114,000 Owner/User 871 United Nations Plaza - ------------------------------------------------------------------------------------------------------------------------------------ 2 4 Times Square - NE Tower Under Construction 1,500,000 Conde Nast and Skadden, Arps have 1480 Broadway committed to 80% of available space - ------------------------------------------------------------------------------------------------------------------------------------ 3 Park Avenue Place Proposed 800,000 Anchor tenants will likely be secured 383 Madison Avenue prior to construction - ------------------------------------------------------------------------------------------------------------------------------------ 4 One Rockefeller Plaza West Proposed 1,460,000 Anchor tenants will likely be secured 745 Seventh Avenue prior to construction - ------------------------------------------------------------------------------------------------------------------------------------ 5 Heron Tower II Foundation in place 125,000 Office/Hotel Speculative 60 East 55th Street - ------------------------------------------------------------------------------------------------------------------------------------ 6 Columbus Center Developer to be announced 1,340,000 Mixed Use -- Office, Retail and Columbus Circle & 59th Street Residential - ------------------------------------------------------------------------------------------------------------------------------------ Source: Cushman & Wakefield Research Services
There have been no new speculative office building completions since 1992, when Americas Tower, 450 Lexington Avenue and 565 Fifth Avenue were completed. The over-built market and corresponding decrease in market rents during the past recession made new construction infeasible. ================================================================================ -13- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Midtown Manhattan Office Market Analysis ================================================================================ More recently, a few new office projects have broken ground for construction. The new German Embassy was long identified as a speculative office site. The Albanese development firm sold the site and is constructing a build-to-suit project for the German government. The other new projects, excluding 4 Times Square, will most likely not be built without a commitment from major tenants. This is a standard requirement in many other office markets nationally and a primary condition to secure traditional construction financing. Following is a bar graph exhibiting both Midtown and Midtown South construction and vacancy. The vacancy rate indicated varies from some of the statistics included in this market overview due to the inclusion of Midtown South in this presentation. ================================================================================ -14- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- - -------------------------------------------------------------------------------- MIDTOWN & MIDTOWN SOUTH CONSTRUCTION & CLASS A DIRECT VACANCY RATES 1973 - 1ST QUARTER 1997 [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Source: Cushman & Wakefield Research Services CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Midtown Manhattan Office Market Analysis ================================================================================ Proposed New Construction Many of the proposed projects listed on the chart have been in the planning stage for a number of years. The developers of these projects have been marketing the proposed office space for quite some time. The first two projects listed transferred to new owners and broke ground. Two of the other sites were also sold and new development is coming closer to fruition. In 1996, 871 U.N. Plaza, located on a 50-by-100 square foot site between East 48th and East 49th streets, was purchased by the Federal Republic of Germany. Construction of the 114,000+/- square foot property recently commenced and will take approximately two years to complete. It will be entirely occupied by the German Government, which will consolidate three of its New York offices. The entire project will cost $30 million, which includes the purchase and construction of the existing site and adjacent land. Four Times Square, which is part of the Times Square redevelopment project, will be the first new office development to take place. The Durst Organization broke ground in August 1996, at the Northeast Tower site, a 1.5+/- million square foot proposed office and retail tower. The Durst Organization purchased the site for an estimated price of over $70 million from Prudential Insurance. Included with the site are a variety of zoning and real estate tax incentives which transferred to Durst in the sale. Construction on the site, located along Broadway between West 42nd and 43rd streets, is underway and a scheduled completion date of 1999 is expected. Conde Nast, its anchor tenant, committed to lease more than 550,000+/- square feet within the proposed building. In November 1996, the law firm of Skadden, Arps, Slate, Meagher & Flom completed a deal for 660,000+/- square feet. It is reported that Morgan Stanley is considering a 400,000+/- square foot commitment in the structure and Bertelsmann, Inc. is also contemplating leasing approximately 300,000+/- square feet in the building. In mid-February 1996, the al-Babtain family of Saudi Arabia, investment partners with CS First Boston in the 383 Madison Avenue-Park Avenue Place property, exercised a purchase option to take control of the site for $55,000,000. The proposed structure would contain approximately 800,000+/- square feet of office area with the floor plates ranging between 26,000+/- square feet and approximately 48,000+/- square feet. Several prospective users have expressed interest in this site including Bear Stearns, Dean Witter, Union Bank of Switzerland and Chase Bank. However, the current owner has not expressed a serious interest to undertake an immediate development of this site and may ultimately delay the development for the present time. The British developer Howard Ronson of HRO International had been marketing the site for over two years, but lost the development opportunity when CS First Boston's ex-partner exercised its purchase option. Another significant proposed office building project is One Rockefeller Plaza West. Rockefeller Center Properties is marketing the proposed 1.46+/- million square foot, 55-story tower site, controlled by Mitsubishi Estate through Cushman & Wakefield Brokerage Services. At the present time, there is moderate interest in this site. Potential tenants have analyzed the project with rents being determined based on the requested design and scope of the tenants' specific needs. The site, which may be connected to the Rockefeller Center retail concourse, is being used on an interim basis as an open parking facility. ================================================================================ -16- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Midtown Manhattan Office Market Analysis ================================================================================ A development site that was recently re-introduced to the market is the New York Coliseum site at Columbus Circle. The site is located along Central Park South - West 59th Street and Central Park West - Eighth Avenue with the potential to build over 1.2 million square feet of space on a 3.4 acre parcel. MTA officials which control the site sent out a Request for Proposal in July 1996, and are anticipating a sale price of over $150 million. Reportedly, all of the well-known developers in Manhattan submitted proposals/offers for the site. Most of the submitted proposals are for mixed-use projects combining office, retail and residential components. The bid process has been completed and the MTA should announce a short list of developers in February. The winning bidder is expected to be announced in April 1997. Across the street from the Coliseum site is 2 Columbus Circle, another site slated for sale or redevelopment by New York City. Proposals submitted for consideration may either make use of the existing ten-story white marble block building, or include construction of a new building in accordance with current zoning resolutions and compatibility with the surrounding community. A site located at 1530 Broadway was recently reported to be under consideration for development. This parcel contains a footprint of approximately 45,000 square feet and is currently occupied by the Roundabout Theater on Broadway under a lease which expires in March 1999. This parcel can accommodate an as-of-right zoning floor area of 600,000+/- square feet with uses which include retail, signage, hotel and office. The owner, Charles Moss, has not yet announced plans for the site. In other construction news, the site and foundation for the proposed Heron Tower II, located at 60 East 55th Street, was sold in March 1996 to the commercial real estate developers, Americas Tower Partners, the Bernstein Brothers, for $5.3 million. The new owners are considering an office development or possibly a hotel project. The most recent wave of speculative office construction was conceived and designed almost a decade ago. Since that time, given the technological advances in terms of building construction and the level of sophisticated build-outs now required by most tenants in the current market, it is reasonable to assume that this next wave of construction will prompt a demand for "smarter buildings" and a more favorable rent-to-expense ratio. There is very strong interest and desire on the part of tenants within the market to find consolidated commitments preferably in new buildings. There are a variety of requirements which influence the decisions of tenants, such as: o Space located on contiguous floors: At the present time, there are very few opportunities to secure large blocks of suitable space in Midtown. Given the number of large tenants in the market, there is likely to be increased competition for large blocks of available supply. ================================================================================ -17- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Midtown Manhattan Office Market Analysis ================================================================================ o Space in modern buildings designed for high technology users: Businesses today rely heavily on telecommunications, computers and sophisticated mechanical equipment which require an environment that can accommodate "state of the art" technology. Spaces under consideration would require both raised floors and suspended ceilings, making the existing supply of availabilities located in older buildings inadequate to meet the constantly changing needs. Space is limited in many post-1985 "smart buildings" to relatively small units. o Avoidance of functionally obsolescent buildings: Inability to accommodate upgraded electrical and telecommunications risers as well as HVAC coverage is a crucial factor. Additionally, pre-1975 structures often used asbestos-containing materials as a fire retardant. Complete renovation of such spaces may resolve many of these inadequacies, but certain structural factors such as slab to slab heights and column spacing cannot be changed economically. o Proximity to established transportation hubs: Tenants have expressed a strong desire to be near established transportation hubs such as Grand Central Terminal and Pennsylvania Station. At the present time, the existing supply of space within the Midtown Manhattan market cannot fully satisfy the demand for large blocks of contiguous space. When the age and location of space is also considered, realistic choices are limited. However, desire to locate out of the Midtown Manhattan area is not apparently a strong trend. Analysis of tenants currently in the market indicates that less than 13 percent contemplate locations outside of New York City. Leasing activity for office space in Midtown Manhattan continues to increase and is expected to remain steady into the near future. Demand The following chart provides a breakdown of leasing activity in the Midtown sub-districts and Midtown South from 1985 through the first quarter of 1997.
Midtown Leasing Activity by District (SF) ==================================================================================================================================== Year Plaza Grand Central Midtown West Midtown South Total ==================================================================================================================================== 1985 4,026,951 2,829,263 3,289,313 1,782,866 11,923,843 1986 6,913,195 3,730,673 4,411,042 2,459,768 17,542,184 1987 6,161,960 4,806,671 4,780,460 3,428,095 19,181,945 1988 6,040,805 4,027,576 5,982,913 1,847,195 17,898,489 1989 6,089,294 4,039,726 5,286,691 2,902,038 18,318,334 1990 5,660,136 3,406,050 4,998,241 1,828,555 15,892,982 1991 5,195,632 2,875,776 3,682,264 1,667,853 13,421,525 1992 6,059,470 3,792,338 4,714,699 2,184,259 16,750,766 1993 7,039,477 3,491,990 5,172,914 2,345,591 18,049,972 1994 8,403,760 3,587,694 5,228,707 2,979,190 20,199,351 1995 7,798,621 4,344,954 4,699,239 5,058,002 21,900,816 1996 8,165,048 4,960,750 5,509,856 4,351,440 22,987,094 1Q 1997 2,003,337 1,567,474 1,315,364 914,514 5,800,689 - ------------------------------------------------------------------------------------------------------------------------------------ Source: Cushman & Wakefield Research Services
================================================================================ -18- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Midtown Manhattan Office Market Analysis ================================================================================ Leasing activity in 1992 signaled a reversal of the downward trend caused by the past recession, with the total of square feet leased showing a 24.8 percent increase over 1991. Annual leasing activity in 1993 reached 18.0 million square feet, a 7.8 percent increase over 1992, and the highest level of leasing activity achieved in Midtown since 1989. Midtown leasing activity in 1994 was strong, and the year-end total of 20.2+/- million square feet was the highest total recorded for the Midtown market over the past decade. Leasing activity in 1995 reached nearly 22 million square feet (inclusive of Midtown South), exceeding the record 1994 leasing activity and continuing an upward trend. Total year-end 1996 Midtown leasing activity (excluding Midtown South) reached a healthy 18.6+ million square feet. With the addition of Midtown South, leasing activity shot up to 22.9+ million square feet, an all-time high. First quarter 1997 Midtown leasing activity was 4.8+/- million square feet, up from 4.0+/- million square feet in the first quarter of 1996. The following charts summarize the largest Midtown leases and the major space additions over the past 12 months.
- ------------------------------------------------------------------------------------------------------------------------------------ Significant Transactions Last 12 Months ==================================================================================================================================== Building Market Tenant Date SF ==================================================================================================================================== 4 Times Square West Side Skadden, Arps 4Q 1996 659,937 4 Times Square West Side Conde Nast Publications 3Q 1996 568,151 150 East 42nd Street Grand Central Pfizer Inc. 4Q 1996 293,841 55 East 52nd Street Park Avenue ING Capital Markets 1Q 1997 278,200 345 Park Avenue Park Avenue JP Morgan & Company 4Q 1996 242,802 150 East 42nd Street Grand Central Gruner & Jahr Publishing 3Q 1996 174,681 55 East 52nd Street East Side Swiss Re Holding N.A. 4Q 1996 151,327 150 East 42nd Street Grand Central Bayerische Vereins Bank 1Q 1997 136,684 555 West 57th Street West Side BMW of Manhattan 4Q 1996 130,059 1301 Avenue of the Americas 6th/Rock Center Deutsche Bank A.G. 4Q 1996 125,200 1211 Avenue of the Americas 6th/Rock Center The News Corporation 3Q 1996 113,102 888 Seventh Avenue West Side Golden Books Publishing, Inc. 1Q 1997 112,290 11 West 42nd Street Grand Central Anne Klein 2Q 1996 105,089 245 Park Avenue Park Avenue Bear Stearns & Co., Inc. 3Q 1996 98,495 1251 Avenue of the Americas 6th/Rock Center Deutsche Bank A.G. 2Q 1996 95,700 One Park Avenue Murray Hill Public Service Mutual Insurance 1Q 1997 89,700 1345 Avenue of the Americas 6th/Rock Center Arnhold & S. Bleichroeder 2Q 1996 81,687 1211 Avenue of the Americas 6th/Rock Center Nissho Iwai American Corp. 3Q 1996 79,150 - ------------------------------------------------------------------------------------------------------------------------------------ Source: Cushman & Wakefield Research Services
================================================================================ -19- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Midtown Manhattan Office Market Analysis ================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------ Major Space Additions Last 12 Months ==================================================================================================================================== Direct Date Building Market or Sublease Tenant Vacating Available SF ==================================================================================================================================== 825 Eighth Avenue West Side Sublease Ogilvy & Mather Jan-98 477,070 9 West 57th Street Mad/Fifth Direct Avon Products Jul-97 450,000 625 Madison Avenue Mad/Fifth Sublease Revlon 4Q 1997 387,395 520 Madison Avenue Mad/Fifth Direct Various 4/97-12/97 298,900 777 Third Avenue East Side Direct Gray Advertising Jan-00 261,600 866 Third Avenue East Side Direct Macmillan Comm. Immediate 225,000 One Penn Plaza West Side Sublease Stone & Webster Eng. Immediate 165,764 335 Madison Avenue Grand Central Direct Bank of America Jan-97 155,194 410 East 62nd Street East Side Direct Vacant Immediate 125,000 200 Park Avenue Park Avenue Direct Met Life mid-1997 122,916 1211 Ave. of Americas 6th/Rock Center Direct Nissho Iwai Jan-97 118,725 Tower 49 Mad/Fifth Direct Credit Suisse Apr-97 116,750 1230 Ave. of Americas 6th/Rock Center Direct USA Network Immediate 108,301 450 West 33rd Street Penn Station Sublease Chemical Bank Immediate 100,000 One Park Avenue Murray Hill Sublease Loews Corporation Immediate 100,000 Tower 49 Mad/Fifth Sublease CS First Boston Apr-97 98,780 280 Park Avenue East Park Avenue Direct Bankers Trust Immediate 92,118 - ------------------------------------------------------------------------------------------------------------------------------------ Source: Cushman & Wakefield Research Services
Vacancy and Asking Rents Over 22 percent of Midtown's Class A inventory has come on line since 1980, and office construction since 1985 has increased primary inventory by 13.9 percent. The following chart provides primary and secondary vacancy rates along with weighted average asking rental rates for Midtown and Midtown South from 1984 through the first quarter 1997.
- -------------------------------------------------------------------------------------------------------- Vacancy and Asking Rents ======================================================================================================== Year Vacancy Rates* Asking Rental Rates* Total Leasing Activity SF Class A Class B Class A Class B (including Midtown South) ======================================================================================================== 1984 6.60% 7.80% $37.77 $20.50 15,459,000 1985 9.10% 10.50% $38.15 $22.70 11,923,000 1986 9.70% 12.90% $38.55 $21.76 17,497,000 1987 10.20% 13.30% $38.46 $23.76 19,182,000 1988 13.00% 14.70% $39.45 $23.47 17,898,489 1989 14.70% 15.10% $40.28 $23.26 18,317,700 1990 17.20% 16.80% $40.26 $21.10 16,014,023 1991 16.80% 18.50% $37.47 $19.71 13,421,525 1992 16.30% 20.10% $34.38 $19.14 16,750,766 1993 15.50% 18.60% $33.17 $19.56 18,049,972 1994 13.40% 16.40% $33.60 $19.82 20,199,351 1995 12.10% 15.6%* $34.36 $22.36* 21,900,816 1996 9.90% 14.60% $34.75 $21.31 22,987,094 1Q 1997 9.40% 14.80% $35.78 $21.64 5,800,689 - -------------------------------------------------------------------------------------------------------- * As of 1995 Class C space is excluded from Class B calculations Source: Cushman & Wakefield Research Services
================================================================================ -20- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Midtown Manhattan Office Market Analysis ================================================================================ The Midtown primary vacancy rate climbed to a year-end high of 17.2 percent in 1990 and remained above 15 percent through 1993. This increase in the vacancy rate was touched off by the substantial amount of new construction completed in the Special Midtown Zoning District, which came on line just as the economy was heading into the past recession. New York City was particularly affected by the recession, with approximately 350,000 jobs eliminated due to corporate consolidations, relocations and downsizing. With the large increase in primary inventory due to the rezoning of the West Side, the loss of nearly one-tenth of the City's job base, and the general downturn in the economy, a rise in the vacancy rate was inevitable. The dearth of new construction coming on-line and moderate job growth predicted over the next couple of years should mean that the vacancy rate will continue to decline in the near term. However, it's expected that over 2.0+/- million square feet of newly constructed office space will be completed by the year 2000. As of the first quarter of 1997 the Midtown Class A vacancy rate was 9.5 percent, the lowest year-end rate since 1987. In the fourth quarter of 1996, both the Class A and Class B inventory showed continued declines, with vacancy rates of 10.0 percent and 15.5 percent, respectively. First quarter 1997 Class B vacancy rate was reported at 15.6 percent. This positive trend is expected to continue thru 1997 due to the strong demand for space in the Grand Central, West Side and Sixth Avenue/Rockefeller Center sub-markets. Absorption Midtown has enjoyed positive overall net absorption over the past few years, though figures from year to year often exhibit wide fluctuations. Net absorption also varies considerably by district, between primary and secondary space, and when space is reclassified or dropped from the survey conducted by Cushman & Wakefield Research Services. Net absorption in the Midtown (inclusive of Midtown South) office market from 1993 through the first quarter of 1997, is summarized on the bar graph on the following page. ================================================================================ -21- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- - -------------------------------------------------------------------------------- MIDTOWN & MIDTOWN SOUTH CLASS A ABSORPTION BY YEAR [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Source: Cushman & Wakefield Research Services CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Midtown Manhattan Office Market Analysis ================================================================================ Historical overall net absorption figures indicate that Midtown usually experiences positive absorption. In the past decade overall Midtown net absorption was negative in only one year, 1988, the year after the stock market crash. The market rebounded in 1989, when over 4 million square feet was absorbed, resulting in positive overall absorption of 1.7 million square feet. The largest positive change in overall net absorption occurred between 1993 and 1994. Overall net absorption increased by 5.8 million square feet, resulting in the absorption of over 7 million square feet in 1994, the highest level of overall absorption experienced by the Midtown market in the past decade. This tremendous amount of absorption is explained in large part by the high level of leasing activity that occurred in Midtown in 1994. With leasing activity totaling 20.2 million square feet, the overall vacancy rate dropped 2 percentage points from year-end 1993 to year-end 1994, the largest decrease in the overall vacancy rate on a year-over-year basis since the 1980s. Through the fourth quarter of 1996, absorption increased significantly to over 1.7 million square feet for the year. First quarter of 1997 overall absorption was negative 327,526 due mainly to new availabilities in the Midtown market. Midtown Manhattan Sub-districts Midtown Manhattan has traditionally been divided into four sub-districts delineated by geographic boundaries: Plaza, Grand Central, Midtown West and Midtown South. Cushman & Wakefield has changed the way in which Midtown is sub-districted to better reflect trends within the various office sub-markets. Both the traditional and the corresponding new office sub-markets are discussed below. Plaza District (East Side, Park Avenue, Madison/Fifth, Sixth/Rockefeller Center) This district had traditionally been defined as the area between 47th and 65th streets, from Fifth Avenue to the East River, and more recently had its western border expanded to Seventh Avenue. The expansion of this district was explained by the willingness of many major companies to locate west of Fifth Avenue to the corporate towers along Avenue of the Americas. The firmly established locations of offices on Park, Madison and Fifth avenues form the cornerstone of the Plaza District. Many familiar and noteworthy buildings, including Rockefeller Center, the Citicorp Building, Trump Tower, the Seagram Building, the Solow Building, the General Motors Building, and several buildings along the Avenue of the Americas office corridor lie within the boundaries of the Plaza District. The sub-districts that form what is otherwise known as the Plaza District reflect the strongest market rents in Midtown. This is the result of the long-standing reputation that these markets have enjoyed as the premier office locations in Manhattan for corporate domestic and international headquarters. These include the banking, legal and financial services industries as well as, but to a lesser degree, communications, publishing and advertising firms. ================================================================================ -23- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Midtown Manhattan Office Market Analysis ================================================================================ Grand Central District (Murray Hill, Grand Central, United Nations) The traditional Grand Central District continuously exhibited relatively stable vacancy rates, asking rents and leasing activity. The main reason for this situation is that this district contains some of the oldest and most famous Midtown office buildings and new construction has been limited. The area, which extended from 32nd Street to 47th Street and from Fifth Avenue to the East River, offered few sites for redevelopment. Due to the lack of available sites, developers have had to be innovative; 450 Lexington Avenue, constructed atop the Grand Central Post Office, is a prime example. Midtown West District (Westside, Penn Station, Textile/Garment, Lincoln Center) Midtown West was traditionally known as the area bounded by 30th Street and 47th Street west of Fifth Avenue to the Hudson River and by 47th Street to 70th Street west of Seventh Avenue, to the Hudson River. This market experienced a dramatic surge in development from 1985 through 1990, and was widely expected to become the center of new office development in Manhattan, meeting the expansion needs of major Midtown Manhattan space users. The primary reason for this increase in development was a 20 percent zoning bonus (floor area ratio increased from 15 to 18 times the lot area) enacted in 1981, which expired on May 13, 1988. In order to be eligible for this bonus, the full foundation work on new projects had to be completed by that date. Approximately 16 development sites had foundations in place or were under construction at that time. This construction produced a renaissance in the Midtown West District. The Midtown West market grew and dominated new construction in Midtown Manhattan through 1991, and from 1989 to the present, Midtown West construction accounts for 57 percent of all construction completions in Midtown. The area that formerly comprised the Midtown West office district is now divided into the four sub-markets mentioned above. Midtown South (SoHo, Greenwich/NoHo, Madison Square/Union Square, Hudson Square/West Village, Chelsea) The Midtown South office district comprises 21 percent of the total Midtown Manhattan inventory of office space. Just 727,000+/- square feet (4.4 percent of total Midtown's primary) is considered Class A space, which is generally considered competitive with some Midtown Class B and C buildings. Well-located buildings along Park Avenue South, Madison Avenue, Fifth Avenue and Broadway are some of the district's most desirable. Midtown South has undergone a tremendous renaissance over the past year, enjoying strong leasing activity. The 1996 year-end leasing activity of 4.4+/- million square feet was significant, including the largest fourth quarter transaction of Credit Suisse, which will occupy 428,000 square feet at 11 Madison Avenue. Dynamic leasing activity in this market has also driven the overall year-to-date absorption to positive 664,000+/- square feet. First quarter of 1997 leasing activity was 914,519 square feet, while the first quarter of 1997 absorption was 261,513 square feet. ================================================================================ -24- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES ---------------------------
Midtown, New York Office Market Office Market Report Overall Statistical Summary First Quarter 1997 Total Direct Total Direct Total YTD YTD Available Vacancy Vacancy Wtd.Av. Wtd.Av. Absorption Leasing Submarket Name Inventory Space Rate Rate Rental Rate Rental Rate Rate Activity ==================================================================================================================================== Murray Hill 13,281,401 1,857,039 12.6% 14.0% $ 26.34 $ 25.63 (53,207) 526,412 Grand Central 40,745,105 4,241,824 9.4% 10.4% $ 31.48 $ 31.13 130,566 1,041,062 United Nations 3,093,204 274,611 8.1% 8.9% $ 31.27 $ 30.79 (1,458) 0 East Side 19,038,255 1,973,964 8.9% 10.4% $ 33.37 $ 33.13 (105,366) 229,997 Park Avenue 21,043,271 1,551,309 6.2% 7.4% $ 44.62 $ 43.94 (84,820) 597,098 Madison/Fifth Avenue 24,114,289 3,002,035 11.0% 12.4% $ 44.43 $ 44.09 (470,966) 649,374 Sixth Avenue/Rock Ctr 37,027,060 2,340,093 4.8% 6.3% $ 38.37 $ 37.14 54,728 526,868 West Side 22,102,063 1,473,612 4.6% 6.7% $ 26.52 $ 25.87 403,867 592,477 Penn Station 13,943,971 3,153,860 19.8% 22.6% $ 24.00 $ 23.38 (146,411) 243,357 Textile/Garment 23,748,095 3,824,105 15.6% 16.1% $ 21.48 $ 21.35 (15,414) 475,675 Lincoln Center 2,512,387 113,843 4.5% 4.5% $ 21.87 $ 21.96 (34,045) 3,855 Midtown Total 220,649,101 23,806,295 9.4% 10.8% $ 31.22 $ 30.95 (322,526) 4,886,175 SoHo 3,294,860 65,461 1.8% 2.0% $ 19.81 $ 19.62 1,569 35,723 Greenwich/NoHo 4,610,441 835,920 16.3% 18.1% $ 18.95 $ 18.14 76,645 110,565 Madison/Union Square 29,187,132 2,790,060 8.2% 9.6% $ 21.32 $ 21.84 64,699 432,724 Hudson Sq./W. Village 9,994,272 1,206,764 10.8% 12.1% $ 14.49 $ 15.27 80,132 124,283 Chelsea 13,349,944 1,827,244 12.3% 13.7% $ 12.52 $ 13.11 38,468 211,219 Midtown South Total 60,436,649 6,725,449 9.8% 11.1% $ 17.32 $ 17.81 261,513 914,514 Source: Cushman & Wakefield Research Services
-25- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES ---------------------------
Midtown, New York Office Market Office Market Report Class A Statistical Summary First Quarter 1997 Total Direct Total Direct Total YTD YTD Available Vacancy Vacancy Wtd.Av. Wtd.Av. Absorption Leasing Submarket Name Inventory Space Rate Rate Rental Rate Rental Rate Rate Activity ==================================================================================================================================== Murray Hill 7,089,581 1,074,892 13.9% 15.2% $ 29.63 $ 28.62 (164,407) 272,665 Grand Central 33,781,805 3,584,062 9.5% 10.6% $ 32.83 $ 32.35 125,999 881,590 United Nations 2,580,606 244,039 8.7% 9.5% $ 31.42 $ 30.93 (1,458) 0 East Side 17,505,333 1,666,571 8.0% 9.5% $ 36.65 $ 36.00 (103,409) 219,397 Park Avenue 21,043,271 1,551,309 6.2% 7.4% $ 44.62 $ 43.94 (84,820) 597,098 Madison/Fifth Avenue 22,326,146 2,842,526 11.2% 12.7% $ 45.43 $ 44.96 (452,634) 619,684 Sixth Avenue/Rock Ctr 35,701,968 2,224,140 4.7% 6.2% $ 39.27 $ 37.83 88,432 516,305 West Side 16,441,593 1,083,322 3.8% 6.6% $ 31.95 $ 28.94 363,606 460,355 Penn Station 6,099,415 1,365,065 18.6% 22.4% $ 31.43 $ 30.43 (18,892) 102,782 Textile/Garment 4,102,922 316,785 7.7% 7.7% $ 29.03 $ 29.02 12,896 83,757 Lincoln Center 1,454,137 0 0.0% 0.0% N/A N/A 0 0 Midtown Total 168,126,777 15,952,711 8.0% 9.5% $ 37.03 $ 36.14 (234,687) 3,753,633 SoHo 0 0 0.0% 0.0% N/A N/A 0 0 Greenwich/NoHo 0 0 0.0% 0.0% N/A N/A 0 0 Madison/Union Square 8,404,239 554,704 4.6% 6.6% $ 28.47 $ 29.26 103,446 29,890 Hudson Sq./W. Village 1,270,948 123,868 0.0% 9.7% N/A $ 22.00 0 0 Chelsea 540,000 48,000 8.9% 8.9% $ 30.00 $ 30.00 (31,500) 16,500 Midtown South Total 10,215,187 726,572 4.2% 7.1% $ 28.64 $ 28.07 71,946 46,390 Source: Cushman & Wakefield Research Services
-26- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES ---------------------------
Midtown, New York Office Market Office Market Report Class B Statistical Summary First Quarter 1997 Total Direct Total Direct Total YTD YTD Available Vacancy Vacancy Wtd.Av. Wtd.Av. Absorption Leasing Submarket Name Inventory Space Rate Rate Rental Rate Rental Rate Rate Activity ==================================================================================================================================== Murray Hill 5,466,475 702,547 11.1% 12.9% $ 22.36 $ 22.22 107,650 234,697 Grand Central 6,882,300 646,637 8.9% 9.4% $ 24.74 $ 24.62 4,567 159,472 United Nations 512,598 30,572 5.2% 6.0% $ 30.00 $ 29.73 0 0 East Side 1,472,722 303,393 19.3% 20.6% $ 17.34 $ 17.53 (1,957) 10,600 Park Avenue 0 0 0.0% 0.0% N/A N/A 0 0 Madison/Fifth Avenue 1,762,090 159,509 8.8% 9.1% $ 28.34 $ 28.45 (18,332) 29,690 Sixth Avenue/Rock Ctr 1,304,092 114,453 8.2% 8.8% $ 24.53 $ 24.04 (33,704) 10,563 West Side 2,387,277 150,220 5.9% 6.3% $ 23.58 $ 23.38 46,874 100,495 Penn Station 5,583,434 1,466,189 26.1% 26.3% $ 19.44 $ 19.43 (127,224) 109,875 Textile/Garment 13,020,997 2,473,021 18.3% 19.0% $ 24.40 $ 24.20 (11,492) 212,223 Lincoln Center 1,003,250 113,843 11.2% 11.3% $ 21.87 $ 21.96 (34,045) 3,855 Midtown Total 39,395,235 6,160,384 15.0% 15.6% $ 22.72 $ 22.63 (67,663) 871,470 SoHo 1,039,880 7,500 0.7% 0.7% $ 26.33 $ 26.33 10,360 20,353 Greenwich/NoHo 2,888,613 613,950 20.0% 21.3% $ 20.42 $ 20.14 76,665 82,465 Madison/Union Square 15,860,433 1,772,851 10.0% 11.2% $ 21.58 $ 21.54 (14,662) 346,834 Hudson Sq./W. Village 1,998,316 407,968 20.3% 20.4% $ 18.42 $ 18.43 56,939 58,900 Chelsea 5,187,510 846,319 12.8% 16.3% $ 16.95 $ 17.28 (15,383) 32,678 Midtown South Total 26,974,752 3,648,588 12.0% 13.5% $ 20.04 $ 19.98 113,919 541,230 Source: Cushman & Wakefield Research Services
-27- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Midtown Manhattan Office Market Analysis ================================================================================ Summary The Midtown Manhattan office market has recovered from the effects of the recent recession. After displaying lackluster leasing in 1990 and 1991 during the national recession, Midtown leasing activity began to improve in 1992. Leasing activity in 1993 was brisk, and 1994 posted over 20 million square feet of leasing activity. Year-end 1996 had the highest level of leasing activity in the twelve years that Cushman & Wakefield has reported these statistics, including six Midtown South transactions in the fourth quarter, each in excess of 100,000 square feet, finishing the year at 22.9+ million square feet. First quarter of 1997 year-to-date leasing activity was reported as 4.9+/- million square feet. As total Midtown leasing for the year substantially outweighed new space availabilities, absorption was positive, totaling 1.8+/- million square feet. First quarter of 1997 absorption was negative 323,000 square feet due mainly to new availabilities in the Midtown market. Dynamic leasing activity in Midtown South was also instrumental in driving its overall year-to-date absorption to positive 664,000 square feet, exceeding previous projections. The overall vacancy rate in Midtown fell to 10.8 percent from 12.1 percent at the end of first quarter of 1997. The Class A vacancy rate, which was 12.1 percent one year ago, dropped to 9.5 percent in the first quarter of 1997, its lowest level in ten years. These statistics are a strong indication that the Midtown market has improved, evidencing continued absorption and growing demand for space that entered the market during the late 1980s. New construction was almost non-existent in 1993 through the first half of 1996, with just a few owner occupied buildings completed. New construction completions through the end of the century will be limited to a few significant projects of which most will be pre-leased, given the security most lenders require in the wake of the past recession. This limited construction activity bodes well for the Midtown market since it forces office tenants to take space in existing buildings, thereby lowering the vacancy rate and increasing the rental rate over the long term. Conclusion The Midtown Manhattan market appears to have stabilized and the outlook for the near future is encouraging. Both leasing and absorption activities improved significantly through the fourth quarter of 1996, and this positive trend is expected to continue through 1997, supported by a stable regional economy. The Midtown Manhattan vacancy rate continues to fall, and asking rents have increased albeit slightly. Real estate analysts expect a period of stability within the Midtown Manhattan market over the next year, with base rents remaining level or showing modest increases. It is anticipated, however, that concession packages should continue to decline, resulting in an effective rental rate increase. The overall assessment of the Midtown office market is more positive than in recent years. ================================================================================ -28- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- - -------------------------------------------------------------------------------- Neighborhood Map [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- NEIGHBORHOOD ANALYSIS ================================================================================ The subject office building is located at 605 Third Avenue, between 39th Street and 40th Street. As mentioned previously, the subject property's location is within the Grand Central Office Market District of Midtown Manhattan. Due to the subject's address, the building can be described as the southeast corner of the Grand Central Office Market District. Immediate Neighborhood The subject office building is located on the easterly side of Third Avenue, bounded by 39th Street to the south, and 40th Street to the north. As a blockfront structure, the subject property offers frontage on Third Avenue, 39th Street and 40th Street. To the west of the subject building, on the opposite side of Third Avenue, is 600 Third Avenue, a 42-story office complex. An office building containing 925,000+/- square feet of office space is located at 633 Third Avenue, bordering the subject to the north. Bordering the subject to the south and east is the residential neighborhood of Murray Hill, which features numerous low-rise residential structures. The subject's immediate neighborhood enjoys a variety of commercial and residential structures, due to the subject's unique location at the southeast corner of the Grand Central Office Market district. In general, the subject is bordered by corporate oriented buildings to the north and west and the predominantly residential neighborhood of Murray Hill to the south and east. The 43-story subject property was constructed in 1963 and features favorable access to both Grand Central Station and the Queens Midtown Tunnel. The close proximity of the train station, featuring several lines of the intricate NYC Subway system and serving Metro-North commuters as far north as New Haven, Connecticut; and the tunnel, offering motorists easy access from the Long Island Expressway, bodes very well for the subject facility. Additionally, the subject property enjoys excellent views to the south and east. As mentioned above, the subject property is bounded by lower-story residential buildings to the south and east, and therefore enjoys virtually unobstructed views in those directions. Lastly, although the subject building is approximately 32 years in age, its effective age is considerably lower due to on-going renovations. Over the history of the building, significant improvements to the structure's mechanical systems and public areas have occurred. These include upgrading the cooling towers and the air-cooling and ventilation system throughout the building, upgrading the elevator systems, and renovating the main entrance lobby and the elevator lobbies on each office floor. Competitive Building Overview In order to identify the office buildings considered most comparable with the subject property, we have conducted a survey of the Grand Central Office Market district. Based upon our survey, we have concluded that 17 office properties compete with the subject building within the Grand Central District. The competitive building write-ups, found on the following pages, describe and highlight pertinent office market statistics of the buildings deemed most comparable with the subject. ================================================================================ -29- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Neighborhood Analysis ================================================================================ Subject Property Location: 605 Third Avenue Year Built: 1963 No. of Floors: 43 Rentable Area Office: 948,103+/- SF Retail: 17,070+/- SF Basement: 19,274+/- SF Total: 984,447+/- SF Office Area Available (All Direct): 18,695+/- SF Office Vacancy Rate: 1.9% Typical Floor Size Minimum: 18,000 SF Maximum: 34,200 SF Asking (Face Rates) Office: $335.00 to $37.00 Retail: N/A Operating Expenses: Direct pass through Real Estate Taxes: Direct pass through Comments: The subject building, 605 Third Avenue, was built in 1963 and contains 984,447+/- total square feet of space. The total square footage is comprised of 948,103+/- square feet of office space, 17,070+/- square feet of retail space and 19,274+/- square feet of basement space. This 43-story office building currently has a 1.9% vacancy rate. The asking rents in the subject are approximately $33.00 to $37.00 per square foot plus an electric charge. ================================================================================ -30- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Neighborhood Analysis ================================================================================ Competitive Property #1 Location: 633 Third Avenue Year Built: 1960 No. of Floors: 41 Rentable Area Office: 948,000 SF Retail/Basement: 70,735 SF Total: 1,018,735 SF Office Area Available (All Direct): 163,423 Office Vacancy Rate: 17.24% Typical Floor Size Minimum: 17,800+/- SF Maximum: 45,400+/- SF Asking (Face Rates) Office: $29.00 - $36.75 Retail: N/A Operating Expenses: Direct pass through Real Estate Taxes: Direct pass through Comments: This property is a 41-story, 1,018,735+/- square foot. Approximately 163,423+/- square feet of the total rentable office area is available, yielding a vacancy rate of 17.24%. Asking average rent ranges from $29.00 to $36.75 per square foot. The electric is submetered. This property as been converted to condominium ownership. Overall, this property is considered inferior to 605 Third Avenue. ================================================================================ -31- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Neighborhood Analysis ================================================================================ Competitive Property #2 Location: 150 East 42nd Street Year Built: 1956 No. of Floors: 42 Rentable Area Office: 1,346,822 SF Retail: 33,100 SF Total: 1,379,922 SF Office Area Available (All Direct): 119,439 SF Office Vacancy Rate: 8.87% Typical Floor Size Minimum: 22,300 SF Maximum: 93,800 SF Asking (Face Rates) Office: $29.00 - $41.00 Retail: N/A Operating Expenses: Direct pass through Real Estate Taxes: Direct pass through Comments: 150 East 42nd Street is a 42-story office building featuring 1,346,822+/- square feet of office space. The property features limited retail space totaling 33,100+/- square feet. As of July 30, 1997, there was 119,439+/- square feet of total office availability in the building, indicating a vacancy rate of 8.87%. The asking rent in this building ranges from $29.00 to $41.00 per square foot, and the electric is directly metered. ================================================================================ -32- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Neighborhood Analysis ================================================================================ Competitive Property #3 Location: The Kent Building 666 Third Avenue Year Built: 1951 No. of Floors: 35 Rentable Area Office: 426,725 SF Total: 426,725 SF Office Area Available (All Direct): 206,715 SF Office Vacancy Rate: 48.44% Typical Floor Size Minimum: 9,300 SF Maximum: 32,000 SF Asking (Face Rates) Office: $30.00 - $34.00 Operating Expenses: Direct pass through Real Estate Taxes: Direct pass through Comments: The Kent Building is a 426,725 square foot, 35-story office building which, according to Cushman & Wakefield, was 48.44% vacant as of July 30, 1997. The estimated asking rates for this property range from $30.00 to $34.00 per square foot plus an electric charge of approximately $3.00 per square foot. ================================================================================ -33- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Neighborhood Analysis ================================================================================ Competitive Property #4 Location: 675 Third Avenue Year Built: 1964 No. of Floors: 37 Rentable Area Office: 265,411 SF Retail: 9,640 SF Total: 275,051 SF Office Area Available (All Direct): 64,469 SF Office Vacancy Rate: 24.3% Typical Floor Size Minimum: 7,300 SF Maximum: 16,300 SF Asking (Face Rates) Office: $32.00 - $34.00 N/A Operating Expenses: Direct pass through Real Estate Taxes: Direct pass through Comments: This 37-story building was constructed in 1964 and features 275,051+/- total square feet of space. Approximately 97% of the space is for office use, with retail space comprising only 9,640 square feet. 675 Third Avenue was 24.3% vacant as of July 30, 1997. Current asking rates range from $32.00 to $34.00 per square foot plus an electric charge of $2.90 per square foot. ================================================================================ -34- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Neighborhood Analysis ================================================================================ Competitive Property #5 Location: 711 Third Avenue Year Built: 1956 No. of Floors: 19 Rentable Area Office: 431,000 SF Retail: 25,000 SF Total: 456,000 SF Office Area Available (All Direct): 101,221 SF Office Vacancy Rate: 23.5% Typical Floor Size Minimum: 14,200 SF Maximum: 45,600 SF Asking (Face Rates) Office: $31.00 N/A Operating Expenses: Direct pass through Real Estate Taxes: Direct pass through Comments: The building at 711 Third Avenue was built in 1956 and features 19 stories. This 431,000+/- square foot office building also features 25,000+/- square feet of retail space. The office space is renting on average for $31.00 per square foot and the electric is directly metered. The office vacancy rate for the building was estimated to be 23.5% as of July 30, 1997. ================================================================================ -35- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Neighborhood Analysis ================================================================================ Competitive Property #6 Location: The Sun America Building 733 Third Avenue Year Built: 1961 No. of Floors: 24 Rentable Area Office: 366,002 SF Retail: 16,214 SF Total: 382,216 SF Office Area Available (All Direct): 6,877 SF Office Vacancy Rate: 1.88% Typical Floor Size Minimum: 6,400 SF Maximum: 26,900 SF Asking (Face Rates) Office: N/A N/A Operating Expenses: Direct pass through Real Estate Taxes: Direct pass through Comments: The Sun America Building features 366,022+/-square feet of office space and 16,214+/-square feet of retail space. As of July 30, 1997, the building was 98.2% occupied. The 24-story building was built in 1961 and features floor sizes ranging from 6,400 square feet to 26,900 square feet. ================================================================================ -36- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Neighborhood Analysis ================================================================================ Competitive Property #7 Location: Teachers Insurance Building 730 Third Avenue Year Built: 1958 No. of Floors: 28 Rentable Area Office: 407,000 SF Retail: 16,000 SF Total: 423,000 SF Office Area Available (All Direct): 0 SF Office Vacancy Rate: 0.0% Typical Floor Size Minimum: 7,200 SF Maximum: 13,000 SF Asking (Face Rates) Office: N/A N/A Operating Expenses: Direct pass through Real Estate Taxes: Direct pass through Comments: The Teachers Insurance Building was built in 1958 and contains 28 stories. The building contains 407,000+/-of office space and 16,000+/-square feet of retail space. ================================================================================ -37- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Neighborhood Analysis ================================================================================ Competitive Property #8 Location: 750 Third Avenue Year Built: 1958 No. of Floors: 34 Rentable Area Office: 686,356 SF Retail: 30,000 SF Total: 716,356 SF Office Area Available (All Direct): 0 SF Office Vacancy Rate: 0.0% Typical Floor Size Minimum: 9,700 SF Maximum: 38,900 SF Asking (Face Rates) Office: N/A N/A Operating Expenses: Direct pass through Real Estate Taxes: Direct pass through Comments: 750 Third Avenue is a 716,356+/- square foot, 34-story office building that features 30,000+/- square feet of retail space and 686,356+/- square feet of office space. The building was built in 1958 and as of July 30, 1997, the building was 100% occupied. ================================================================================ -38- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Neighborhood Analysis ================================================================================ Competitive Property #9 Location: 747 Third Avenue Year Built: 1972 No. of Floors: 38 Rentable Area Office: 344,965 SF Retail: 16,000 SF Total: 360,965 SF Office Area Available (All Direct): 36,835 SF Office Vacancy Rate: 10.6% Typical Floor Size Minimum: 1,200 SF Maximum: 16,400 SF Asking (Face Rates) Office: $33.00 - $36.00 Retail: N/A Operating Expenses: Direct pass through Real Estate Taxes: Direct pass through Comments: The building at 747 Third Avenue is a 360,965+/- square foot, 38-story office building built in 1972. It contains 344,965+/- square feet of office space, and 16,000 square feet of retail space. As of July 30, 1997, there was 36,835+/- available square feet of office space with asking rents ranging from $33.00 to $36.00 per square foot. The building's electric charges range from $2.75 to $3.00 per square foot. ================================================================================ -39- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Neighborhood Analysis ================================================================================ Competitive Property #10 Location: 845 Third Avenue Year Built: 1963 No. of Floors: 21 Rentable Area Office: 313,093 SF Total: 313,093 SF Office Area Available (All Direct): 0 SF Office Vacancy Rate: 0 Typical Floor Size Minimum: 4,500 SF Maximum: 22,500 SF Asking (Face Rates) Office: $29.00 Operating Expenses: Direct pass through Real Estate Taxes: Direct pass through Comments: 845 Third Avenue is a 313,093+/- square foot Midtown office building with 21 stories. The building contains no retail space. This building was fully occupied as of July 30, 1997. ================================================================================ -40- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Neighborhood Analysis ================================================================================ Competitive Property #11 Location: The MacMillan Building 866 Third Avenue Year Built: 1966 No. of Floors: 31 Rentable Area Office: 454,000 SF Retail: 20,000 SF Total: 474,000 SF Office Area Available (All Direct): 0 SF Office Vacancy Rate: 0 Typical Floor Size Minimum: 7,600 SF Maximum: 27,200 SF Asking (Face Rates) Office: $33.00 - $39.00 Retail: N/A Operating Expenses: Direct pass through Real Estate Taxes: Direct pass through Comments: This 31-story building contains 454,000+/- SF of office space and 20,000+/- SF of retail space. ================================================================================ -41- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Neighborhood Analysis ================================================================================ Competitive Property #12 Location: 875 Third Avenue Year Built: 1982 No. of Floors: 29 Rentable Area Office: 662,588 SF Retail: 5,000 SF Total: 667,588 SF Office Area Available (All Direct): 0 SF Office Vacancy Rate: 0 Typical Floor Size Minimum: 21,800 SF Maximum: 29,000 SF Asking (Face Rates) Office: N/A Retail: N/A Operating Expenses: Direct pass through Real Estate Taxes: Direct pass through Comments: 875 Third Avenue is a 662,588+/-square foot building with 29 stories. The building was built in 1982. As of July 30, 1997, according to the Cushman & Wakefield Combined Building and Space Survey, there is no space available. ================================================================================ -42- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Neighborhood Analysis ================================================================================ Competitive Property #13 Location: Fifty Third at Third 885 Third Avenue Year Built: 1986 No. of Floors: 34 Rentable Area Office: 581,339 SF Retail: 18,809 SF Total: 600,148 SF Office Area Available (All Direct): 0 SF Office Vacancy Rate: 0% Typical Floor Size Minimum: 12,500 SF Maximum: 29,000 SF Asking (Face Rates) Office: $43.00 - $44.00 Retail: N/A Operating Expenses: Direct pass through Real Estate Taxes: Direct pass through Comments: 885 Third Avenue was constructed in 1986. The building features 600,148 square feet of total space, 581,339 square feet of office space, with the remainder being retail space. ================================================================================ -43- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Neighborhood Analysis ================================================================================ Competitive Property #14 Location: 909 Third Avenue Year Built: 1968 No. of Floors: 33 Rentable Area Office: 1,125,000 SF Retail: 30,000 SF Total: 1,155,000 SF Office Area Available (All Direct): 50,120+/- SF Office Vacancy Rate: 4.46% Typical Floor Size Minimum: 29,300 SF Maximum: 30,200 SF Asking (Face Rates) Office: $28.00 - $40.00 Retail: N/A Operating Expenses: Direct pass through Real Estate Taxes: Direct pass through Comments: 909 Third Avenue was constructed in 1968. The building features 1,155,000+/- square feet of total space, 1,125,000 square feet of office space, with the remainder being retail space. As of July 30, 1997, there were 50,120+/- square feet available, according to Cushman & Wakefield's Market Research. ================================================================================ -44- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Neighborhood Analysis ================================================================================ Competitive Property #15 Location: 919 Third Avenue Year Built: 1970 No. of Floors: 47 Rentable Area Office: 1,152,000 SF Total: 1,152,000 SF Office Area Available (All Direct): 594,192 SF Office Vacancy Rate: 51.6% Typical Floor Size Minimum: 21,700 SF Maximum: 43,700 SF Asking (Face Rates) Office: $29.00 - $38.00 Operating Expenses: Direct pass through Real Estate Taxes: Direct pass through Comments: 919 Third Avenue was constructed in 1970. The building features 1,152,000+/- square feet of total space, all of which is office space. As of July 30, 1997, there was an availability of 594,192+/- square feet, according to Cushman & Wakefield's Market Research. A major block of office space has become available in this building since Skadden, Arps has signed a lease for space in 4 Times Square. ================================================================================ -45- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Neighborhood Analysis ================================================================================ Competitive Property #16 Location: 900 Third Avenue Year Built: 1983 No. of Floors: 36 Rentable Area Office: 515,200 SF Retail: 7,500 SF Total: 522,700 Sf Office Area Available (All Direct): 45,432 SF Office Vacancy Rate: 8.82% Typical Floor Size Minimum: 3,100 SF Maximum: 16,000 SF Asking (Face Rates) Office: $35.00 - $37.00` Retail: N/A Operating Expenses: Direct pass through Real Estate Taxes: Direct pass through Comments: 900 Third Avenue was constructed in 1983. The building features 522,700+/- square feet of total space, 515,200+/- square feet of office space, with the remainder being retail space. As of July 30, 1997, there were 45,432+/- square feet of office space available, according to Cushman & Wakefield's Market Research. ================================================================================ -46- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Neighborhood Analysis ================================================================================ Competitive Property #17 Location: 599 Lexington Avenue Year Built: 1986 No. of Floors: 47 Rentable Area Office: 955,274 SF Retail: 13,525 SF Total: Office Area Available (All Direct): 0 Office Vacancy Rate: 0 Typical Floor Size Minimum: 7,600 SF Maximum: 29,900 SF Asking (Face Rates) Office: $45.00 - $47.00 Retail: N/A Operating Expenses: Direct pass through Real Estate Taxes: Direct pass through Comments: 599 Lexington Avenue was constructed in 1986. The building features 968,799+/-square feet of total space, 620,000 square feet of office space, with the remainder being retail space. The Competitive Office Building Summary Chart summarizing the comparable building office market statistics can be found on the following facing page. It should be noted that any sublease space with less than a ten year lease and below grade commercial space asking rents were disregarded in terms of this survey. Additionally, the vacancy rates listed are based on the most current listings available as of July 30, 1997. Lastly, the vacancy rates detailed are strictly office vacancy space rates and do not include any retail space (available or in total inventory). ================================================================================ -47- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Neighborhood Analysis ================================================================================ The overall comparable office buildings featured in the survey range in age from 1951 to 1986. The various buildings range in stories from 19 to 77 floors. The comparable property with the smallest rentable office space is the building at 675 Third Avenue with an estimated 265,411+/- square feet of total office space. 150 East 42nd Street, offers the largest rentable office space with approximately 1,346,822+/- square feet. Average asking rents within the subject's overall competitive market range from $28.00 to $47.00 per square foot. Based on the competitive office market summary, the overall market featured an estimated 11,928,000+/- square feet of total office inventory. The overall market, as of July 30, 1997 featured approximately 1,444,000+/- square feet of available office space. This equates to an overall office vacancy rate of 12.1 percent. Several recent lease transactions have been signed in 150 East 42nd Street. This structure which is Mobil Oil's former headquarters, is reported to be in fair condition. The larger floor plates, ranging between 50,000 square feet and 93,000 square feet, are difficult to subdivide and appeal to large tenants. The MacMillan Building, 866 Third Avenue, currently has 435,000+/- square feet available for rent. Although the floor plates within this structure range in size between 12,000+/- square feet and 28,000+/- square feet, ownership is interested only in leasing to 150,000 square feet to 200,000 square feet tenants. This strategy coupled with the floor sizes and a fair reputation within this market have contributed to a slow lease-up of the space. The subject fares well against the properties with which it is most competitive. The subject has a very convenient location for both public transportation and private automobile. In addition, 605 Third Avenue remains in superior condition both structurally and mechanically and offers excellent southerly views. ================================================================================ -48- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- PROPERTY DESCRIPTION ================================================================================ Site Description Property: 605 Third Avenue New York, New York Location: The site is located on the easterly blockfront of Third Avenue between East 39th Street and East 40th Street. Shape: Irregular Site Area: 71,210+/- square feet Frontage: 197 feet 6 inches on Third Avenue 359 feet 7 inches on East 39th Street 361 feet on East 40th Street Topography/Terrain: The site is level at street grade. Street Improvements: Curbing, sidewalks and street lighting. Access: Pedestrian access to the building is available via entrances on Third Avenue, East 39th Street and East 40th Street. Vehicular access is available to the garage from East 39th Street and East 40th Street. Site Disclaimers Soil Conditions: We did not receive nor review a soil report. However, we assume that the soil's load-bearing capacity is sufficient to support the existing structure. We did not observe any evidence to the contrary during our physical inspection of the property. The tract's drainage appears to be adequate. Utilities Water: City of New York Sewer: City of New York Electricity: Consolidated Edison Steam Heat: Consolidated Edison Telephone: NYNEX ================================================================================ -49- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Property Description ================================================================================ Land Use Restrictions: We were not given a title report to review. We do not know of any easements, encroachments, or restrictions that would adversely affect the site's use. However, we recommend a title search to determine whether any adverse conditions exist. Flood Hazard: According to Community Panel No. 360497-0039B, National Flood Insurance Rate Map, effective November 16, 1983, the subject property is in Flood Hazard Zone C and, therefore, does not require flood hazard insurance. Wetlands: We were not given a Wetlands survey. However, it appears that the site is not encumbered by regulated wetlands. Site Improvements: The site is improved with an office tower and a parking garage. Comments: Overall, the site was found to be a functional parcel, well suited for its existing use and typical of this area. Hazardous Substances: Asbestos containing materials have been removed from mechanical rooms and VAT flooring on floors that have been rebuilt over the past ten years. VAT remains under carpet on some floors. There is ACM fireproofing in some elevator shafts and insulation on some pipes in steam shafts. Improvements Description The improvements consist of a 43-story and basement, Class A office tower containing a total rentable area of 984,447+/- square feet completed in 1963. The improvements provide for office space in the above-grade areas, retail space on the ground level and a parking garage. The following description of the improvements is based upon our physical inspection of the property along with our discussions of the property with the ownership and management. General Description Year Built: 1963 Building Area Rentable Area: 984,447+/- SF Building Height: 43 stories plus basement Building Efficiency: 23 percent loss factor ================================================================================ -50- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Property Description ================================================================================ Construction Detail: Foundations: Foundations rest on bedrock and appear to be constructed of poured concrete. Framing: Framing throughout the property is structural steel Column Spacing: Columns are spaced 23 feet on center Ceiling Heights: Ceiling heights throughout the property are 11 feet 4 inches from slab to slab. This accommodates a dropped acoustical ceiling of 8-1/2 feet. Floors: Poured concrete Exterior Walls: The exterior curtain wall is finished with aluminum and three-eighths inch spandrel glass with insulated aluminum black panels. The glass is shaded black, transparent only from the inside. Roof Cover: The roof is rubberoid membrane and built-up composition with pebble covering. The roof was replaced in 1989-1990. Windows: The windows throughout the property are fixed glass in aluminum frames. Pedestrian Doors: The pedestrian doors are a combination of revolving glass and swinging glass doors in aluminum frames. Loading Doors: There is a loading dock on East 40th Street utilized by the retail tenant. It is an exterior dock with a steel structural overhead door. There is an exterior loading dock on East 39th Street with a swinging door and two overhead doors for the building. Mechanical Detail Heating and Cooling: Heating to the property is provided by Consolidated Edison steam. Steam is distributed through the property via an interior/perimeter heating system. All mechanical equipment is located in the basement area and on mechanical floors which are located on part of the 7th and part of the 28th floors. Cooling to the property is provided by chillers operated by steam from Con Edison steam. The cooling towers which service the property are located on the roof. ================================================================================ -51- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Property Description ================================================================================ Plumbing: Plumbing throughout the property appears to be in adequate condition and is appropriate for the existing and expected future use of the property. Electrical: All wiring in the switchboard rooms is assumed to be to building code standards. Elevator Service: There are five elevator banks. These banks service the building as follows: 1) Floors 2-7; 2) Floors 7-12; 3) Floors 14-24; 4) Floors 24-33; 5) Floors 34-44. In addition, there are two freight elevators which service all floors. The elevator systems appear to be adequate in number for a structure of this size and appear to be in excellent condition. In 1989, the passenger cars were upgraded with new SCR controllers. Security/Fire Protection: The property is in full compliance with Local Law No. 5/73. The property is partially sprinklered, compartmentalized and contains elevator recall, computer alarm and speaker control systems. Interior Detail Floors: The finished floors vary from level to level and from tenant to tenant. Generally, the elevator lobbies are finished with wood floors, stone tiled floors or are carpeted. Tenants which occupy full floors have installed very high quality grade finishes. Ceiling: Ceilings throughout the property are suspended acoustical tile. Generally, the acoustical tile is suspended 12 inches below the concrete slab. This area is generally filled with duct work and wiring. Walls: Walls throughout the floors are sheetrock over metal studs. Generally, the sheetrock walls are painted or are treated with various wall coverings. Lighting: A combination of fluorescent and incandescent fixtures. Restrooms: Each floor is equipped with a men's and a women's restrooms in a central location. The restrooms are fully equipped. Many of the restroom areas throughout the building have been renovated. Americans With Compliance with these regulations is being met as Disabilities Act floors are being rebuilt. Compliance: ================================================================================ -52- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Property Description ================================================================================ Site Improvements On-Site Parking: The parking garage structure has a capacity of 750 cars. Condition: Excellent Comments: The quality of the subject improvements is rated to be very good, the layout and functional plan are considered to be excellent. The building was completed in 1963 and has undergone periodic renovations and mechanical overhauls including a full lobby renovation in 1985. The normal life expectancy of this type of building is 45 years. Its effective age is estimated to be 20 years, therefore, its estimated remaining economic life is 25 years. ================================================================================ -53- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- REAL PROPERTY TAXES AND ASSESSMENTS ================================================================================ The 1997/98 assessment for the property is as follows: Actual Transitional Land $27,000,000 $19,800,000 Improvements $55,350,000 $56,430,000 Total $82,350,000 $76,230,000 Tax Rate $10.072/$100 of Assessed Value Taxes $ 7,677,885.60 $7.80/SF Plus: Business Improvement District Tax $ 164,429 Total $ 7,842,314.60 $7.97 Real estate taxes in New York City are normally the product of the transitional assessed value times the tax rate, for the fiscal year July 1 through June 30 (payable July 1 and January 1). The transitional assessed value is based on a five year phase-in of actual assessed value. If the actual assessed value is lower than the transitional assessed value for that year, the actual assessed value is multiplied by the tax rate to determine the tax. In the case of the subject property, the 1997/98 actual assessed value is greater than the transitional assessed value. This has been the case for the previous four tax assessment years, as illustrated below.
============================================================================================ Historical Tax Assessments and Payments (Excluding Bid Tax) ============================================================================================ Total Transitional Total Taxable Assessment Tax Rate Per $ Amount Per Tax Year Assessment (000) (000) $100 Taxes Owed Sq. Ft. ============================================================================================ 1994/95 $71,100 $64,710 $10.608 $6,864,437 $6.97 - -------------------------------------------------------------------------------------------- 1995/96 $81,000 $68,580 $10.402 $7,133,692 $7.25 - -------------------------------------------------------------------------------------------- 1996/97 $81,450 $74,160 $10.252 $7,602,883 $7.72 - -------------------------------------------------------------------------------------------- 1997/98 $82,350 $76,230 $10.072 $7,677,855 $7.80 ============================================================================================
Our tax projection (including Bid Tax) for the 1997 calendar year, therefore, is based upon the 1996/97 and 1997/98 actual assessments for calendar year 1997 as follows: 1996/97 Fiscal Taxes $7,772,732 @ 50% = $3,886,366 1997/98 Fiscal Taxes $7,842,315 @ 50% = $3,921,158 ---------- 1997 Calendar Year Taxes $7,807,524 In an effort to evaluate the fairness of the subject's current assessed value and future prospects for a change in the assessment, we have 1) compared the most recent assessments (land and building) to that of other similar properties, 2) compared the assessment to the market value estimate concluded in this report, and 3) considered the potential for future changes in the assessed value of the subject property. ================================================================================ -54- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Real Property Taxes And Assessments ================================================================================ Listed below is a summary chart of the 1997/98 assessments for the subject and three properties considered to have varying degrees of comparability to the subject property.
==================================================================================================================================== Year Total Rentable Total Assessed Assessment Per No. Property Built Area Value Sq. Ft. ==================================================================================================================================== Subject 605 Third Avenue 1963 984,447 $82,350,000 $83.65 - ------------------------------------------------------------------------------------------------------------------------------------ 1. 90 Park Avenue 1963 895,325 $62,316,000 $69.60 - ------------------------------------------------------------------------------------------------------------------------------------ 2. 730 Third Avenue 1959 596,500 $38,250,000 $64.12 - ------------------------------------------------------------------------------------------------------------------------------------ 3. 100 Park Avenue 1950 778,183 $55,428,000 $71.23 - ------------------------------------------------------------------------------------------------------------------------------------ 4. 335 Madison Avenue 1982 874,734 $75,150,000 $85.91 - ------------------------------------------------------------------------------------------------------------------------------------ 5. 750 Third Avenue 1957 761,057 $53,590,000 $70.41 ====================================================================================================================================
Our survey of the subject and comparable office buildings, which contain primarily office space, indicates assessments ranging from $64.12 to $85.91 per square foot. The average assessments of the five comparables, excluding the subject, is $72.25 per square foot. This compares with the subject assessment of $83.65 per square foot which is toward the upper end of this range of assessments per square foot. As will be discussed later within this report, we have concluded at a market value of $180,000,000 for the subject property. The 1997/98 actual assessed value of $82,350,000 is equivalent to 45.75 percent of market value. This assessment/sale price ratio is within the range of the ratios found for standard office buildings in the marketplace. In addition, in light of the property's income and expenses, as well as our analysis of the tax comparables, leads us to believe that the subject property's current taxable assessment is reasonable. It is important to note that the ownership is actively pursuing a reduction in the current assessment with the City Tax Commission and the Assessor. Projected cash flow has stabilized and there are no large increases in Net Operating Income and Cash Flow over the projection period (refer to Annual Cash Flow Report). Therefore, we have adopted an average growth rate of 2 1/2% per year as applied to real estate taxes. Conclusion of Future Real Estate Taxes As previously noted, based upon a declining tax base and increased government spending, we expect overall tax rates to increase over the next several years. Historically, the commercial tax rate in New York City has increased an average of 1.51 percent per annum compounded from the 1989/90 tax year to the 1997/98 tax year as exhibited on the following chart. During the 1996/97 and 1997/98 tax years, the tax rate has decreased approximately 1.5 percent per annum. ================================================================================ 1989/90 $ 9.539 - -------------------------------------------------------------------------------- 1990/91 $ 9.924 - -------------------------------------------------------------------------------- 1991/92 $10.631 - -------------------------------------------------------------------------------- 1992/93 $10.698 - -------------------------------------------------------------------------------- 1993/94 $10.724 - -------------------------------------------------------------------------------- 1994/95 $10.608 - -------------------------------------------------------------------------------- 1995/96 $10.402 - -------------------------------------------------------------------------------- 1996/97 $10.252 - -------------------------------------------------------------------------------- 1997/98 $10.072 ================================================================================ ================================================================================ -55- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Real Property Taxes And Assessments ================================================================================ Based upon the current taxable assessment and the 1997/1998 tax rate, the current calendar year taxes are $7,807,524. Therefore, we have assumed that total tax increases will be limited to 2 1/2% per annum. ================================================================================ -56- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- ZONING ================================================================================ According to Map 8d, published by the New York City Planning Commissions, there are two zoning districts which cover the subject property. The portion of the property situated on Third Avenue, extending to a depth of 200 feet is located in a C5-3 district, while the remainder of the site is located in a C1-9 zoning district. This district is identified as a General Central Commercial District. These districts are designed to provide for office buildings and a great variety of large retail stores and related activities which occupy the prime retail frontage in the Central Business District, and which serve the entire metropolitan region. The district regulations also permit a few high/value custom manufacturing establishments which are generally associated with the predominant retail activities, and which depend on personal contacts with persons living all over the region. The district regulations are also designed to provide for continuous retail frontage. The C5-3 zoning district allows for a floor area ratio of 15 times the site area. Therefore, the subject property has a zoning floor area of 592,500+/- square feet without the consideration of any bonusable areas that might be available. The rear portion of the site is restricted to a zoning floor area of 63,420 for retail/commercial use and 317,100+/- square feet for residential use. The subject property contains a rentable area of 984,447+/- square feet and accordingly, is non-conforming with regard to building bulk. However, the subject property was constructed in 1963 and predates the current zoning statues. Therefore, the subject property is a legal, non-conforming use which appears to satisfy the zoning regulations in all other matters. Permitted uses in the C5 designation include light manufacturing buildings, commercial office buildings and residential buildings. Retail uses are permitted on the site. We know of no deed restrictions, private or public, that further limit the subject property's use. The research required to determine whether or not such restrictions exist, however, is beyond the scope of this appraisal assignment. Deed restrictions are a legal matter and only a title examination by an attorney or title company can usually uncover such restrictive covenants. Thus, we recommend a title search to determine if any such restrictions do exist. ================================================================================ -57- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- HIGHEST AND BEST USE ================================================================================ According to the Dictionary of Real Estate Appraisal, Third Edition (1993), a publication of the Appraisal Institute, the highest and best use is defined as: The reasonable probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum profitability. As Vacant Our initial consideration of the subject site as vacant concerns the land uses which are physically possible on the subject parcel. The subject site contains an area of 71,210+/- square feet of land with excellent frontage on the Third Avenue, East 39th Street and East 40th Street. The size and the configuration of the site are felt to provide a suitable land use or development potential for a wide variety of possible as well as typical Midtown land uses. Access and exposure are felt to be excellent for office use. Municipal utilities would adequately provide for all conceivable uses. Street improvements are also adequate. Therefore, the physical characteristics of the site provide for a wide range of potential land uses. Secondly, we must consider the land uses which were legally permissible based upon the prevailing zoning and land use ordinances. The subject's zoning classification permits development of office, retail and service related uses. Office uses are consistent with the overall development of the area. Finally, we have considered the possible land uses which would be financially feasible and which would produce the highest net return to the land. As noted in our discussion, office uses felt to be the most appropriate land use for the subject. Vacancy rates in Midtown Manhattan are such that it is likely that a developer would look for improvement in the market prior to undertaking a major development of this kind. However, the Midtown market has been a very strong and active one, and the Grand Central District has been the focus of a great deal of leasing activity in the last 24 months. Therefore, it is likely that at some point, a major office user would show significant interest in improving the site with Class A office space. Based upon the above, we conclude that the highest and best use of the site, as vacant is for a Class A office building, once market conditions would support a development of this size. As Improved Unlike the previous analysis of the site as vacant, this analysis considers the subject property as currently improved with an evaluation of the physical, legal and financial appropriateness of the existing land use. Relative to physical considerations, the subject site is improved with an existing office structure, and based upon our observations, there are no apparent physical factors, such as soil, drainage, or other site characteristics which would adversely affect the continued utility or existence of the subject improvements. ================================================================================ -58- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Highest and Best Use ================================================================================ In relation to the legal considerations, the subject site, as presently improved, represents a legal non-conforming use. Finally, in consideration of an appropriately supported and financially feasible land use, the use of the subject improvement is considered to contribute in an economic manner to the subject site. Occupancy at the subject has been strong and continues to exceed 95 percent. In the foreseeable future, this will produce a level of return which is consistent with investment grade real estate. Therefore, based upon the subject's historical high performance and overall character, and the likelihood of continued high occupancy, it is our opinion that the highest and best use of the property, as improved is a commercial office building. ================================================================================ -59- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- VALUATION PROCESS ================================================================================ Appraisers typically use three approaches in valuing real property: the Cost Approach, the Income Approach, and the Sales Comparison Approach. The type and age of the property and the quantity and quality of data affect the applicability of each approach in a specific appraisal situation. Sales of existing properties similar to the subject are available for our analysis, and we can use information from these sales along with other market information to value the subject using the Sales Comparison and Income Approaches. We believe a discounted cash flow analysis is more appropriate because it is most widely used by investors in the current marketplace. The Cost Approach is not considered in the valuation of the subject property. The investment marketplace does not typically trade leased office buildings on a cost/value basis, particularly in markets where it is generally perceived that costs significantly exceeds value. In addition, the subjectivity of accurately estimating accrued depreciation involving existing improvements significantly limits the reliability of this approach. We concluded the appraisal process by reviewing each of the approaches to value. We considered the type and reliability of data and the applicability of each approach. Finally, we reconciled the approaches and estimated the final value. ================================================================================ -60- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- SALES COMPARISON APPROACH ================================================================================ Methodology In the Sales Comparison Approach, we estimated value by comparing this property with similar, recently sold properties in the surrounding or competing area. Inherent in this approach is the principle of substitution, which holds that 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 that no costly delay is encountered in making the substitution. By analyzing sales that qualify as arms-length transactions between willing and knowledgeable buyers and sellers, we can identify value and price trends. The basic steps of this approach are: 1. research recent, relevant property sales and current offerings throughout the competitive area; 2. select and analyze properties that are similar to the property appraised, considering changes in economic conditions that may have occurred between the sale date and the date of value, and other physical, functional, or locational factors; 3. identify sales that include favorable financing and calculate the cash equivalent price; 4. reduce the sale prices to a common unit of comparison such as price per square foot of net rentable area, effective gross income multiplier, and overall capitalization rate; 5. make appropriate comparative adjustments to the prices of the comparable properties to relate them to the property being appraised; and 6. interpret the adjusted sales data and draw a logical value conclusion. The most widely-used and market-oriented unit of comparison for properties such as the subject is the sale price per square foot. All comparable sales were analyzed on this basis. On the following page is a summary of the improved, sold properties that we compared with the subject property. Also exhibited within this section is a chart which summarizes important statistics of the comparables. Over the past 12 months, the Midtown Manhattan office market has shown signs of significant improvement. Rents and concession packages have stabilized as positive net absorption has taken place in the market. In terms of the investment market, upward pressure on rent levels and decreased availability of good quality office space has stimulated demand for space from large users and others who have decided to purchase rather than lease. There have been seven recent sales of Manhattan office buildings which are pertinent to the valuation of the subject property. All are primary Class A structures located in the Midtown Manhattan. Two of the seven represent sales to owner users, while the balance have been purchased by American investors and real estate investment trusts. We have included a summary chart on these sales which is shown on the facing page. ================================================================================ -61- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- - -------------------------------------------------------------------------------- Improved Property Sales Map [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Sales Comparison Approach ================================================================================ Analysis of Sales Comparable Sale No. 1 is the American Home Products building located at 685 Third Avenue between East 43rd Street and East 44th Street. The property was conveyed in June 1997 under the terms of a contract signed on that date. The seller was Professional Data Management, Inc. (Leucadia National) and the buyer was Amroc/Black Acre Group (Jeff Sitron). The purchase price was $100,000,000. It is reported that the property was 34 percent occupied as of the date of sale. 685 Third Avenue is comprised of two interconnected buildings which contain 240,000 square feet in the southern tower built in 1961 and 355,000 square feet in the northern tower built in 1976. It is reported that the property requires significant alteration. Furthermore, the purchaser intends to begin a leasing program for the balance of the building. The sale price indicates a unit value of $171.13 per square foot. Comparable Sale No. 2 is located at 31 West 52nd Street between Fifth Avenue and Sixth Avenue. The property was conveyed in March 1997. The purchase price was reported to be $278,000,000. The seller was 40 West 53 Partnership (G. Heinz/Kuwaiti Investors). The buyer was Deutsche Bank, AG. Deutche Bank is the primary building occupant under a long term lease which, reportedly reflects significantly above market lease terms. The property is a 30-story Class A office building constructed in 1986 containing a rentable area of 659,724+/- square feet. The property has a 120 space parking garage located in the basement. The condition of the property is considered to be excellent. The site area of this property is 45,868+/- square feet. The sale indicates a unit value of $421.39 per square foot. Comparable Sale No. 3 is located at 90 Park Avenue. This property is situated between East 39th Street and East 40th Street. The sale occurred in April 1997. The seller was Sumitomo, the buyer was Vornado Realty (Steven Roth). The purchase price was $185,000,000. The property is comprised of a 41-story Class A office building constructed in 1964 with a rentable area of 877,869+/- square feet and a parking garage in the basement containing 156 spaces. According to a realtor familiar with the transaction, the property was 82.7 percent occupied at the time of sale and reflected a net operating income of $22.33 per square foot. The buyers purchased mortgages which encumbered the property following a threat of foreclosure by Sumitomo. The price indicates a unit value of $210.74 per square foot. The net operating income indicates an overall capitalization rate of 10.6 percent. Comparable Sale No. 4 is located at 1370 Avenue of the Americas, located between West 55th Street and West 56th Street. The transaction occurred in March 1997. The seller was St. Andrews Associates (Peter Sharp) and the buyer was S.L. Green Real Estate (Steven Green). The purchase price was $55,000,000. The property is comprised of a 35-story office building constructed in 1971. The property is situated on a site which contains 15,276+/- square feet and a rentable area of 381,345+/- square feet. The sale price indicates a unit value of $144.23 per square foot of building area. ================================================================================ -62- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Sales Comparison Approach ================================================================================ Comparable Sale No. 5 is located at 527 Madison Avenue on the southeast corner of East 45th Street. The sale occurred in February 1997. The seller was 527 Madison Holding (Louis Dreyfuss Property Group) and the buyer was Cornerstone Properties (Scott Darymple). The purchase price was $67,000,000. The property is comprised of a 26-story Class A office building built in 1986 and containing a rentable area of 201,148+/- square feet. The site area is 12,675 square feet. At the time of sale, the property was 88 percent occupied and reflected a net operating income of $36.44 per square foot. According to our information, the anchor tenant within the building is a Japanese bank which occupy space under a lease which will expire in 2001. The lease terms are reported to be above market and, therefore, the indicated net operating income is likely to decrease in the future. The purchase price indicates a unit value of $333.09 per square foot and an overall capitalization rate of 10.94 percent. Comparable Sale No. 6 is known as the Continental Can building located at 125 Park Avenue between East 41st Street and East 42nd Street. The sale occurred in January 1997, the seller was Sutom N.V. and the buyer was General Electric Capital Corp. The sale price was reported to be $92,652,000. The property is comprised of a 26-story office building constructed in 1922 and containing a rentable area of 445,437+/- square feet. This sale occurred following a foreclosure of the property. The purchaser is one of the property's major tenants. The purchase price indicates a unit value of $208.00 per square foot. Comparable Sale No. 7 is known as the NBC Condominium located at 30 Rockefeller Plaza. This property is part of Rockefeller Center. The transaction date was July 1996. The seller was RCP Associates (Tishman Speyer Properties, LP), the buyer was NBC Trust 1996A (National Broadcasting Corp.). The transaction price was $440,000,000. The property is comprised of a 70-story structure built in 1932 and containing a rentable area of 2,700,000 square feet. The NBC Condominium is comprised of a condominium unit which consists of 1,561,277+/- square feet. The purchase price indicates a unit value of $281.82 per square foot of rentable area. The seven comparable sales indicate a range in unit value of from $144.23 per square foot to $421.39 per square foot. The median sale price is $210.74 per square foot and the average sale price is $252.91 per square foot. The most applicable sales in terms of location and character, are Sale No. 1 - 685 Third Avenue, Sale No. 3 - 90 Park Avenue and Sale No. 6-125 Park Avenue. These sales ranged between $144.23 per square foot and $210.00 per square foot. 31 West 52nd Street reflects the sale of a new Class A building in the Plaza District which is subject to an above market lease. In addition, this property was purchased by the buildings' primary occupant. Sale No. 5, 527 Madison Avenue reflects the economics of a property leased somewhat above market, reflecting an overall rate which contemplates a decline in net operating income upon the expiration of existing leases within the property. Based upon our analysis, we conclude that an appropriate range in market value for the subject property is $175.00 to $185.00 per square foot of rentable area. This indicates a range in value for the subject property of $172,000,000 to $182,000,000. We have concluded with a value toward the upper end of the range in order to reflect a good location, the excellent condition and stabilized occupancy of the subject. Therefore, the conclusion of value as indicated by the Sales Comparison Approach is $180,000,000. ================================================================================ -63- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- INCOME CAPITALIZATION APPROACH ================================================================================ The Income Approach is a method of converting the anticipated economic benefits of owning property into a value estimate through capitalization. The principle of "anticipation" underlies this approach in that investors recognize the relationship between an asset's income and its value. In order to value the anticipated economic benefits of a particular property, potential income and expenses must be estimated, and the most appropriate capitalization method must be selected. The two most common methods of converting net income into value are direct capitalization and discounted cash flow analysis. In direct capitalization, net operating income is divided by an overall rate extracted from market sales to indicate a value. In the discounted cash flow method, anticipated future net income streams and a reversionary value are discounted to an estimate of net present value at a chosen yield rate (internal rate of return). In our opinion, the discounted cash flow method is appropriate. The discounted cash flow analysis is generally thought to be the best method for evaluating income producing properties purchased for investment. Forecasted future patterns of income and expenses are modeled to reflect the perceived investor expectations. Appraisers make forecasts (not predictions) of future events based on their understanding of market forces and familiarity with the expectations of typical investors in the property type being appraised. Potential Gross Income Generally, Manhattan office tenants pay fixed rents on a rentable area basis which is consistent with the space measurement standards for buildings of similar vintage, plus any increases in operating expenses and real estate taxes above stipulated base year amounts. Tenant electric costs are either directly metered, submetered or billed on a rent inclusion basis, that is charged as additional rent. Existing Rent Roll There are approximately 24 office tenants in occupancy within 605 Third Avenue. We have included a rent roll in the Addenda of this report, but each lease will be summarized on the following pages. In addition, a tenant stacking plan appears on the following page. ================================================================================ -64- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- 605 THIRD AVENUE LEASE EXPIRATIONS - -------------------------------------------------------------------------------- 44 STINNES MECH. - -------------------------------------------------------------------------------- 43 STINNES MECH. 1997 - -------------------------------------------------------------------------------- 42 NEUBERGER & BERMAN - -------------------------------------------------------------------------------- 41 NEUBERGER & BERMAN 1999 - -------------------------------------------------------------------------------- 40 NEUBERGER & BERMAN - -------------------------------------------------------------------------------- 39 NEUBERGER & BERMAN 2000 - -------------------------------------------------------------------------------- 38 NEUBERGER & BERMAN - -------------------------------------------------------------------------------- 37 NEUBERGER & BERMAN 2001 - -------------------------------------------------------------------------------- 36 NEUBERGER & BERMAN - -------------------------------------------------------------------------------- 35 NIMS HOWES COLLISON 2003 - -------------------------------------------------------------------------------- 34 DAVIDOFF & MALITO - -------------------------------------------------------------------------------- 33 STEINHARDT PARTNERS, L.P. 2004 - -------------------------------------------------------------------------------- 32 GRANT THORNTON - -------------------------------------------------------------------------------- 31 GRANT THORNTON 2005 - -------------------------------------------------------------------------------- 30 GRANT THORNTON - -------------------------------------------------------------------------------- 29 SMITH BARNEY 2006 - -------------------------------------------------------------------------------- 28 SNOW BECKER KROLL MECH. - -------------------------------------------------------------------------------- 27 HUBER LAWRENCE 2007 - -------------------------------------------------------------------------------- 26 NEW YORK JOB DEVELOPMENT - -------------------------------------------------------------------------------- 25 SNOW BECKER KROLL 2008 - -------------------------------------------------------------------------------- 24 BAND ROSENZWEIG AIM RESOURCES - -------------------------------------------------------------------------------- 23 CHARTWELL LEISURE 2009 - -------------------------------------------------------------------------------- 22 NEUBERGER & BERMAN (2) - -------------------------------------------------------------------------------- 21 NEUBERGER & BERMAN (2) 2010 - -------------------------------------------------------------------------------- 20 NEUBERGER & BERMAN (2) - -------------------------------------------------------------------------------- 19 [ILLEGIBLE] MECH. - -------------------------------------------------------------------------------- 18 PODELL, ROTHMAN - -------------------------------------------------------------------------------- 17 VACANT - -------------------------------------------------------------------------------- 16 ESANU, KATSKY - -------------------------------------------------------------------------------- 15 ESANU, KATSKY [BLDG OFF] MA ASSOCIATES - -------------------------------------------------------------------------------- 14 ARMY CORP OF ENGINEERS UNIVISION - -------------------------------------------------------------------------------- 12 UNIVISION - -------------------------------------------------------------------------------- 11 JOHN WILEY ESPN - -------------------------------------------------------------------------------- 10 JOHN WILEY & SONS - -------------------------------------------------------------------------------- 9 JOHN WILEY & SONS - -------------------------------------------------------------------------------- 8 ESPN - -------------------------------------------------------------------------------- 7 JOHN WILEY & SONS MECH. - -------------------------------------------------------------------------------- 6 JOHN WILEY & SONS - -------------------------------------------------------------------------------- 5 JOHN WILEY & SONS - -------------------------------------------------------------------------------- 4 JOHN WILEY & SONS - -------------------------------------------------------------------------------- 3 NEUBERGER & BERMAN (1) - -------------------------------------------------------------------------------- 2 NEUBERGER & BERMAN (1) - -------------------------------------------------------------------------------- METRO - -------------------------------------------------------------------------------- L UNISYS SOUTH PASQUA PUBLIC NATIONAL BANK - -------------------------------------------------------------------------------- WORTH - -------------------------------------------------------------------------------- 6/27/97 (1) Unisys is prime tenant until 1999. (2) Rollins, Burdick is prime tenant until 2000. Neuberger & Berman may terminate either the 20th or 22nd floor lease as of 8/31/2003 upon 12 months notice. Income Capitaization Approach ================================================================================ Insert ================================================================================ -65- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Income Capitaization Approach ================================================================================ Floors 1, 2 and 3 are encumbered by a lease to UNISYS Corporation. This lease encompasses 77,144 square feet and expires in April, 1999. The total rent including recoveries amounts to $53.15 per square foot. On floor 2, this space is occupied, by Sublease, by Neuberger & Berman who will become a direct tenant when the lease expires. On floor 3, there is a lease with Neuberger & Berman to occupy the space when the current lease expires. The new lease will provide for a rental based upon 95% of fair market rent. John Wiley occupies floors 4 to 7, 9-10 and part of 11 under a lease which expires in April, 2003. The total rent including escalations currently amounts to approximately $50.12 per square foot. The lease area contains 228,827 square feet. ESPN, Inc. occupies floors 8 and part 11 under a lease which expires October, 2004. The lease for floor 8 encumbers 34,246 square feet and the total rent, including escalations is currently $47.04 per square foot. The lease for Part 11 encumbers 19,428 square feet and the total rent, including escalations is currently $31.94 per square foot. Univision occupies the 12th floor and a portion of 14th floor under a lease which expires in June 2010. The leased area contains 35,814 square feet and the total rent, including escalations is currently $36.55 per square foot. The 16th floor and part of the 15th floor (19,867 square feet) are leased to Esanu, Katsky, Koring and Siger. This lease expires in June, 2008 and the total rent, including escalations is currently $33.10 per square foot. The balance of the 15th floor (6,084 square feet) is occupied by Sylvor, Gold & Morelli. This lease expires in June, 2000. Podell Rothman occupies the 18th floor (17,800 square feet) under a lease which expires in March, 2009. The total current rent amounts to $32.55 per square foot. Floors 19-22 are encumbered by a lease to Rollins Burdick through April, 2000. The total rent including escalations is currently $52.74 per square foot. However, floors 20-22 are occupied, by sublease, by Neuberger & Berman who will become a direct tenant when the current lease expires. The new lease will provide for a rental based upon 90% of fair market rent expiring in February, 2007. Neuberger & Berman may terminate either the 20th or 22nd floor lease as of August 31, 2003. The 24th floor has been leased to AIM Resources (7,575 square feet) and Rand Rosensweig (11,063 square feet). Both leases expire in October, 2005. Snow Becker occupies the 25th floor and a portion of 28. The space contains 25,270 square feet and the lease expires in August, 2005. New York Job Development occupies 17,770 square feet on the 26th floor. This lease expires in April, 2000 and the current total rental amounts to $60.90 per square foot, including escalations. ================================================================================ -66- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Income Capitaization Approach ================================================================================ On the 27th floor, Huber Lawrence occupies 18,768 square feet under a lease which expires in March, 2006. The total rent, including escalations currently amounts to $47.95 per square foot. Smith Barney is located on the 29th floor which is comprised of 17,890 square feet. This lease runs through April, 1999 and provides for a total current rental payment of $44.24 per square foot, including escalations. Grant Thornton occupies floors 30, 31 and 32 under a lease which expires in August, 1999. This lease encompasses 53,688 square feet and provides for a current rent of approximately $42.91 per square foot, including escalations. Steinhardt Partners, L.P. occupies 17,896 square feet on the 33rd floor. This lease expires in September, 1997. Davidoff & Malito occupies space on the 34th floor under a lease which expires in August, 2004. The space is comprised of 17,947 square feet and the rent is $37.66 per square foot, including escalations. Nims Howe is on the 35th floor. The lease encompasses 17,984 square feet and runs through July, 2007. The base rent plus escalations amounts to $41.97 per square foot at the present time. Floors 36-42 are occupied by Neuberger & Berman under a lease which expires in February, 2007. The space encompasses 136,793 square feet and produces a rental of $39.17 per square foot, including escalations. The 43rd and 44th floors are occupied by Stinnes Corp. encompassing 25,560 square feet. This lease expires in February, 2005 and provides for a total current rental of $46.02 per square foot, including escalations. There were six recent lease transactions completed within 605 Third Avenue during 1996. ================================================================================ -67- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Income Capitaization Approach ================================================================================
Summary of Recent Leases Space Tenant SF Area Rent/SF Free Rent Alteration Work/SF 23 Chartwell Leisure 18,695 1-5 - $29.00 9 months $15.00 6-10 - $32.00 Pt. 14 Univision 8,832 $35.07 6 months $30.00 12 Univision 26,982 $35.07 None $10.00 Pt. 28 Snow Becker 7,500 $29.75 4 months $15.00 Pt. 11 ESPN 6,795 $29.75 12 months None Pt. 14 Army Corp. of 7,500 $31.75 None None Engineers
As noted above, the most recent leasing activity within the property involves relatively small spaces where little free rent and minimal or no alteration allowances were given. The rent levels reflect a range of from $29.00 per square foot to $35.07 per square foot with the tenant further being responsible for increases in operating expense, real estate taxes and labor costs. Office Market Rental Rate The market rent for office space within the property has been estimated by analyzing 13 comparable leases exhibited on the summary chart which appears on the facing page. In our analysis, we have considered several lease attributes: rent concession, time (market conditions), location, quality, size and the condition. Percentage adjustments between the subject property and the comparable leases were made for each of these factors. We have adjusted each comparable rental for rent concessions which are significantly different from those offered in the subject property. In this case, the building standard is estimated to be 12 months of free rent, including construction build-out time and $40.00 per square foot of tenant alteration work provided by the landlord. Comparable leases which provide more generous rent concessions when viewed in the aggregate over the length of the lease terms were adjusted downward to account for these concession packages. Conversely, those rentals with less generous rental concession packages were adjusted upward. The comparable rentals indicate a range in starting rent of from $21.00 per square foot to $44.00 per square foot. The leases range in terms from approximately 5 years to 15 years. The base rents tend to begin at a range of between $21.00 and $41.00 per square foot and subsequently increase approximately $2.00 to $4.00 per square foot after five years with an additional $2.00 to $4.00 per square foot increase after 10 years in the case of leases which have a greater term than that period of time. A more specific discussion of the rental comparables follows. ================================================================================ -68- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- - -------------------------------------------------------------------------------- Office Rental Map [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Income Capitaization Approach ================================================================================ Office Lease Comparable No. 1 is located at 850 Third Avenue. The lease was signed in May 1996 and involves a leased premises of 15,000 square feet. The lease runs for 10 years and involves a rental of $27.50 per square foot for 5 years and $30.50 per square foot for 5 years. The tenant is responsible for increases in real estate taxes and operating expenses, as well as electric on a direct meter basis. The tenant was given $25.00 per square foot of alteration work and 6 months of free rent. Office Lease Comparable No. 2 is located at 757 Third Avenue which is at the northeast corner of 47th Street. The lease was signed in May 1996 involving an area of 22,598 square feet. The lease term was 10 years with rentals of $32.00 per square foot for 5 years and $34.00 per square foot for 5 years. The tenant is responsible for increases in real estate taxes and operating expenses as well as electric on a direct meter basis. The tenant was given 7 months of free rent. Office Lease Comparable No. 3 is located in the GrayBar Building at 420 Lexington Avenue. This lease was signed in May 1996 and involves 21,086 square feet. The term of the lease is 5 years. The rental is $21.00 per square foot for 3 years and $22.00 per square foot for the final 2 years. The tenant pays increases in real estate taxes and operating expenses, as well as electricity on a direct meter basis. This was a sublease transaction and involved no work and no free rent. Office Lease Comparable No. 4 is located at 150 East 42nd Street. The transaction date is May 1996. The premises is comprised of 56,390 square feet. The leased term is 11 years. The tenant pays base rent of $27.50 per square foot for 6 years and $30.50 per square foot for 5 years. The tenant is further responsible for increases in real estate taxes and operating expenses as well as electricity on a direct meter basis. The tenant was provided with a $35.00 per square foot alterational allowance. Office Lease Comparable No. 5 is located at 2 Grand Central Tower. The lease involves 7,600 square feet which was taken for a 10 year term in January 1996. The rent was $33.00 per square foot for 3 years and $38.00 per square foot for seven years. The tenant received $35.00 per square foot of alteration work. Office Lease Comparable No. 6 is located at 575 Lexington Avenue. The leased date is June 1996. The premises is comprised of 12,467 square feet. The leased term is 10 years. The base rent is $26.00 per square foot for years 1 through 5 and $30.00 per square foot for years 6 through 10. The tenant is responsible for increases in operating expenses and real estate taxes as well as electricity on a submetered basis. The tenant was provided with no free rent and no alterational allowance. ================================================================================ -69- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Income Capitaization Approach ================================================================================ Office Lease Comparable No. 7 is located at 575 Lexington Avenue. The premises is comprised of 21,370 square feet on the second floor and 300 square feet on the first floor. The tenant is TSI Sports Club. The leased term is 15 years with base rents of $22.00 per square foot for 4 years, $26.00 per square foot for 5 years and $32.00 per square foot for 5 years for the second floor space and $75.00 per square foot for the first floor space. The tenant is responsible for increases in operating expenses and real estate taxes as well as electricity on a submetered basis. The landlord agreed to provide $22.00 of alteration work and a 10-1/2 month free rent period. Office Lease Comparable No. 8 is located at 675 Third Avenue. The transaction date is December 1996. The leased premises are comprised of 8,792 square feet of office space. The leased term is 10 years and the base rent is $27.70 per square foot for years 1 through 5 and $30.50 for years 6 through 10. The tenant is responsible for increases in real estate taxes and operating expenses as well as electrical consumption on a submetered basis. The tenant had no free rent allowance but was given $50.00 of alterational work. Office Lease Comparable No. 9 is located in 666 Third Avenue. The lease was signed in November 1996 and involved 4,700 square feet of office space. The lease has a 10 year term. The base rents are $29.00 per square foot for years 1 through 5 and $31.00 per square foot for years 6 through 10. The tenant is responsible for increases in real estate taxes and operating expenses as well as electrical costs on a submetered basis. There was no free rent period and the tenant was given a $40.00 per square foot alterational allowance. Office Lease Comparable No. 10 is located in 150 East 42nd Street. The lease was signed in October 1996 and involves 82,000 square feet of office space. The lease term is 10 years and the base rents are $28.00 per square foot for years 1 through 5 and $32.00 per square foot for years 6 through 10. The tenant is responsible for increases in real estate taxes and operating expenses as well as electrical costs on a submetered basis. There was a 12 month free rent allowance and the tenant was given $45.00 of alterational work. This space is located on floors 6 and 7, and tends to reflect a rent for lower floor space. Office Lease Comparable No. 11 is located at 150 East 42nd Street. This lease was signed in January 1997 involving several upper floors. The leased premises is comprised of 287,000 square feet. The lease term is 13 years. The initial base rent is $41.00 per square foot increasing to $45.00 per square foot after 6-1/2 years. The tenant is responsible for increases in real estate taxes and operating expenses as well as electrical consumption on a submetered basis. There was a free rent allowance of 13 months and an alterational allowance of $45.00 per square foot. Office Lease Comparable No. 12 is located at 150 East 42nd Street. This lease was signed in January 1997. The floors were mid-rise floors and comprised a total of 185,000 square feet. The lease term is for 15 years. The base rent begins at $24.00 per square foot and increases to $30.50 per square foot by the end of the leased term. Operating expenses and real estate taxes are the responsibility of the tenant over an initial base year. Electrical costs are billed to the tenant on a submetered basis. The landlord agreed to an alterational allowance of $45.00 per square foot and 12 months of free rent. ================================================================================ -70- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Income Capitaization Approach ================================================================================ Office Lease Comparable No. 13 is located in the Met Life Building at 200 Park Avenue. This lease was signed in May 1997 and involves 42,000 square feet of upper floor space. The base rent is $37.98 per square foot and the tenant is responsible for increases in real estate taxes and operating expenses as well as submetered electric. There is no free rent associated with this lease and the tenant was given a $40.00 per square foot work allowance. After adjustment, the comparable rentals reflect a range of from $30.59 per square foot to $37.00 per square foot. The lower end of these comparables tend to indicate a rent that would be appropriate for lower floor space, while the upper end of this range reflects rentals that have the benefit of the upper floors. As noted within our discussion of the recent leases, the Midtown office market leases include concession packages in the form of free rent and tenant workletter allowances consistent with those which are offered within the subject property. In addition to analyzing the actual deals inside and outside the property, leasing brokers were interviewed in an effort to ascertain competitive packages available in the marketplace today. Most brokers interviewed were of the opinion that 10 months to 14 months of free rent, inclusive of space build-out time, were available for most tenants in the Midtown market. It should also be noted that most brokers were of the opinion that the concession packages would be slightly less generous involving the better space in the primary Class A buildings. In addition, it was found that tenant workletter allowances were in the range of approximately $35.00 to $50.00 per square foot of leasable area. The range in concession packages varies by the size of the space and the prominence of the tenant as well as the strength of the location and the property itself. The leasing brokers interviewed indicated that the Midtown market had stabilized to a large extent. Several expressed concern about the recently announced layoffs from some of the large financial services firms such as Chase Manhattan Bank and Chemical Bank. Although this is unlikely to add to the inventory of vacant primary space, it may indeed slow down the absorption of space within the overall market. Nevertheless, once again, we point out that the subject property falls within the most desirable space category in Midtown Manhattan. Given the desirability of this space, we anticipate that demand for space will be stronger than in, for example, many of the older buildings on Lexington and Third Avenues. Accordingly, we believe that it is likely, that the rental concession packages will become less as space in the primary Class A market continues to be absorbed. In consideration of the occupied area, floor height, relative Midtown location and lease date, the comparable rental data provide fairly consistent evidence of prime rental rates in the better buildings in Midtown Manhattan. This results in a range of market rent for 605 Third Avenue of $33.00 to $37.00 per square foot for initial start-up base rents. We have distributed the rent on a floor by floor level as follows: Floor Level Estimated Rental Floor 2-15 $33.00/SF Floors 16-30 $35.00/SF Floors 31-44 $37.00/SF ================================================================================ -71- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Income Capitaization Approach ================================================================================ Our rental estimates assume that the leases will have terms of 10 years. We have also assumed that the base rentals will increase by $4.00 in the 6th year of a 10 year lease. The above estimated market rents assume the following concession packages:
==================================================================================================================================== Free Rent Tenant Improvements - ------------------------------------------------------------------------------------------------------------------------------------ New Leases All Tenants All Tenants 1997 10 months 1997 $40.00/SF increasing at 4% per year. 1998 8 months Thereafter 1999 6 months Thereafter 5 months - ------------------------------------------------------------------------------------------------------------------------------------ Renewing Leases All Tenants All Tenants 1997 $40.00/SF 1997 10 months 1997 & Thereafter 1998 $41.60/SF 1998 8 months 1999 $43.26/SF 1999 6 months 2000 & Thereafter $22.50/SF Thereafter 5 months increasing at 4% per year. ====================================================================================================================================
Space Measurement Space measurement standards in Midtown Manhattan vary from building to building. Typically, the usable area of each floor (gross area less the core area) is multiplied times an add-on factor to arrive at the rentable area. The add-on factor varies from building to building and is influence most by the strength or weakness of the leasing market. The ratio of rentable area to usable area within the property is known as the loss factor. According to information supplied by management, the measurement of the space within 605 Third Avenue reflects a loss factor of 23 percent. Assumptions Regarding Existing and Proposed Leases With regard to lease expirations, we have projected that 50 percent of the tenants within the property will vacate their premises at the expiration of their leases and that 50 percent will renew leases for the space that they currently occupy. This assumption is based in part upon our experience with other office properties where the retention rates are commonly 60 to 70 percent and also reflecting the character of the subject property and the size of the tenancy within the property. Vacancy between leases includes the period of actual downtime and can also include the construction period for new tenant spaces. Consistent with our experience, we have assumed a 6 month vacancy period between leases inclusive of the construction period. The vacancy is weighted for a 50 percent renewal probability which results in an effective downtime of an effective vacancy period of 3 months of downtime upon lease expiration. Free rent, calculated from the time the new tenant takes occupancy, ranges from 10 to 14 months in the current market. We have assumed 10 months of free rent for leases signed during 1997, 8 months for leases signed in 1998, 6 months for leases signed in 1999 and 5 months for leases signed thereafter. We have assumed that the same free rent package would be offered to renewal tenants as to new tenants. ================================================================================ -72- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Income Capitaization Approach ================================================================================ We have assumed that new tenants in 1997 will receive $40 per square foot as alteration allowances. We further assumed that any renewing tenant would be offered a tenant alteration allowance of $20 per square foot, increasing at 4%, during 1997 through 1999 and $22.50 per square foot for leases signed thereafter increasing at 4% per year. Market Rent Estimate - Retail Space The retail space within 605 Third Avenue is leased by Bank Leumi and UNISYS. In total, this space amounts to 17,070+/- square feet. In order to estimate an appropriate rent level for the retail space, we have analyzed six retail leases which were consummated recently within the Midtown area. A chart which summarizes the terms of these leases is displayed on the facing page. We have included six retail leases on Third Avenue and Lexington Avenue. The leases reflect a time frame of from May 1995 through August 1997. Five of the retail leases involve ground floor space and range between $70.00 per square foot to $100.00 per square foot for the ground floor. Comparable Nos. 1 and 4 also have basement level. Comparable No. 5 is located at 570 Lexington Avenue and reflects the highest overall rent at $100 per square foot. The remaining ground floor retail leases reflect a range of from $70.00 per square foot to $83.37 per square foot. Each, however, is relatively small in size and benefit from retail locations which are superior to the subject. Therefore, we believe that an appropriate rental estimate for the subject space which exists on Third Avenue, is $60.00 per square foot at the lower end of the range after making adjustments. Market Rental Estimate - Garage Space On the facing page is a summary of comparable leases and asking rents for garage properties throughout Manhattan. Properties range from smaller garages containing 70 spaces to larger garages containing as much as 400 spaces. Rents vary from a low of $1,440 per space to a high of $4,500 per space. Contracts with third party operators take two forms - either a straight lease or management agreement. Generally, with a lease, a contract is executed for between 5 and 20 years, wherein the lessee guarantees a minimum rent. Such is the case with parking garage operations at the subject property. Leases are usually negotiated with net terms whereby the lessee is responsible for taxes and expenses associated with the garage. Leases in today's market are being negotiated typically in the range of $2,000 per space to $2,500 per space. The most recently executed leases exhibited in our survey are Comparables No. 1, 2, 3 and 4. Clearly, current economic conditions are reflected in the most recent deals executed. The four leases executed in 1995 and 1996 range from $2,000 per space to $4,500 per space. The leases reviewed prior to 1995 are generally falling within the same range. Most of these leases contain net terms, whereby the tenant is responsible for full pass-throughs of real estate taxes and all expenses associated with the garage. ================================================================================ -73- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Income Capitaization Approach ================================================================================ Many of the leases were written for terms greater than 10 years with the majority having 15 year terms. Given the length of these leases, we would expect the rent to step-up several times over the term of the lease. The garage has a capacity of 750 cars. Based upon our information, we conclude that a market rent of $2,000 per space for the garage is reasonable. This indicates a market rent for the garage of $1,500,000. The garage currently produces a revenue of approximately $1,200,000, including both the Hertz lease and the non-leased spaces. At the present time, there is a lease to Hertz Corporation for 200 spaces for a 10 year period commencing January 1, 1995 and ending December 31, 2004. Miscellaneous Income Miscellaneous income is comprised primarily of tenant service revenues and condenser water sales. Tenant service revenues generated by overtime air conditioning, use of the freight elevator and miscellaneous repairs performed for the tenants. Condenser water sales reflect the overtime usage for the cooling tower. This revenue has been estimated at $200,000 for tenant services revenue and $300,000 for condenser water sales. Reimbursable Expenses Tenants are responsible for their pro-rata share of real estate taxes when this expense exceeds those incurred during the first full year of occupancy. This type of escalation is typically also applied to operating expenses. The majority of the current leases in the subject property includes this form of escalation. The calculation of this revenue is summarized as follows: Billing year operating expense, less base year operating expense equal increase in operating expense multiplied by the tenants pro-rata share. We have assumed that future leases in the subject property will be on a full service basis. The tenant will be responsible for increases in real estate taxes over the base fiscal year amount billed on either a semi-annual or monthly basis and operating expenses billed monthly. Vacancy and Collection Both investor and the appraiser are primarily interested in the annual revenue that an income property is likely to produce over a specified period of time, rather than the income it could produce if it were always 100 percent occupied and all tenants were paying their rent in full and on time. Normally prudent practice is to expect some income loss as tenants vacate, fail to pay rent or pay rent late. Our cash flow projection assumes a tenant vacancy of 6 months upon lease expirations set against our probability of renewal estimated to be 50 percent. In addition, a global vacancy and credit loss vacancy has been applied to gross rental income. The vacancy/global loss provision applies to all tenants except Neuberger & Berman, John Wiley & Sons, Stinnes Corporation, ESPN, Smith Barney, Grant Thornton and Rollins Hudig Hall. Our estimate of global vacancy and credit loss is 2 percent. The effective aggregate vacancy from the property over the projection period is as follows: ================================================================================ -74- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Income Capitaization Approach ================================================================================ Date Vacancy Effective Credit Loss Total Effective Vacancy 1997 2.54% .64% 3.18% 1998 .74% .65% 1.39% 1999 2.38% .59% 2.97% 2000 .88% .54% 1.42% 2001 .14% .58% .72% 2002 .02% .58% .60% 2003 3.91% .72% 4.63% 2004 1.23% .63% 4.63% 2005 .87% .65% 1.86% 2006 0 .61% 1.52% 2007 6.89% .71% 7.60% 2008 2.46% .58% 3.04% Overall Average 1.84% .62% 2.46% Operating Expenses We have analyzed the budged operating expenses for 1997 as provided by management. We forecasted the property's operating expenses after reviewing operating expenses of similar buildings and after consulting local building managers and agents, including Cushman & Wakefield Property Management personnel. We have also examined industry norms as reported by BOMA Experience Exchange Report published by the Building Owners and Managers Association International, a nationally recognized publication. The following analysis attempts to utilize the subject's budgeted expense data supported by comparable expense data. The age and unique physical features of the subject warrant consideration of 605 Third Avenue budget in estimating market operating expenses. Following are projected operating, recoverable and non-recoverable expenses we have used in our cash flow analysis. We have analyzed each item of expense individually and attempted to project what the typical informed investor would consider reasonable. Although every expense category is addressed herein, only those requiring explanation of variations will be discussed in great detail. Wages, Payroll, Taxes and Benefits - This category of expense is estimated to be $1,633,600, or $1.66 per square foot. This is consistent with the past history of the subject and reflects a fairly efficient building. The category includes the salaries and benefits for the mechanical and administrative building employees, including the building manager. This would include managers, assistant managers, life safety director, night manager, day porters, security personnel and engineers. Cleaning - The total cost for contract cleaning services is estimated to be $3,814,800, or an average of $3.88 per square foot. The category includes, general cleaning services, interior and exterior window cleaning, light maintenance and exterminating. Elevators - This category has been estimated at $360,700, or approximately $0.37 per square foot. This category reflects the cost of the elevator maintenance and service contracts. ================================================================================ -75- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Income Capitaization Approach ================================================================================ Repairs and Maintenance - This category is estimated to be $1,022,000, or approximately $1.04 per square foot. This category includes, electrical supplies and repairs, plumbing repairs, HVAC supplies and repairs, general building expenses which include miscellaneous supplies and maintenance expenses, as well as landscaping, window repair, metal maintenance, painting, miscellaneous repairs and maintenance. Rubbish Removal - This expense is estimated to be $79,200, or approximately $0.08 per square foot. Utilities - This expense is estimated to be $3,097,500 which equates to approximately $3.15 per square foot. This expense includes $0.51 per square foot for steam heat, $0.11 per square foot for water, and $2.52 for electricity. Insurance - This category is estimated to be $425,400, or approximately $0.43 per square foot. Insurance premiums account for policies covering the boiler, machinery, property, umbrella/excess liability and supplemental flood insurance. Legal and Accounting - This expense is estimated to be $310,600 which equates to $0.32 per square foot. This is intended to account for the day-to-day cost of legal and accounting services. This is reasonable in light of past history and with regard to comparable office properties. Miscellaneous - This expense is estimated to be $0.43 per square foot, or $424,800. This category is intended to be a catch all of items not covered by the other categories and includes administrative and operating miscellaneous expenses. Management - Management is estimated to be $226,200, or approximately $0.23 per square foot. It is assumed that this category would account for the day to day operation of the property. In addition, this level of expense assumes that the management be given the exclusively leasing rights for the rental of office space within the property. Real Estate Taxes - Real estate taxes were discussed in that section of the report presented earlier. Leasing Commissions and Tenant Alteration Costs - The leasing commissions have been based upon the generally accepted standard schedule. The standard schedule as quoted by Cushman & Wakefield, Inc. depends upon the length of the lease: 5 percent for year 1, 4 percent for year 2, 3 1/2 percent for years 3 through 5, 2 1/2 percent for years 6 through 10 and 2 percent for years 11 through 20. This schedule results in the following percentages for the first year base rent. 5 years - 19.5%, 10 years - 32%, 15 years - 42%, 20 years - 52%. Leasing commissions are typically higher for new tenants than renewal tenants. A new tenant typically causes a full commission to be paid where as a renewing tenant typically results in half commission. We have incorporated the standard assumption in our cash flow projection. ================================================================================ -76- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Income Capitaization Approach ================================================================================ Manhattan office building owners typically refurbish office areas to tenants specifications. Known as tenant workletters, the refurbishment typically takes the form of the demolition of the old improvements, the addition of new partitions, lighting and carpeting. In certain instances, new ceilings and renovated bathrooms are provided. Alternatively, a lump sum amount is given to the tenant to spend for the improvements. Tenant improvements are expressed as a dollar amount per square foot, like leasing commissions, new tenants typically receive a larger amount than renewing tenants. Tenant workletters are typically offered to office tenants, while storage tenants and retail tenants typically take their space on an as is basis. Capital Improvements A capital improvement budget has been established in order to accommodate improvements which include lobby floor repairs, sidewalks repairs, freight car refurbishment, asbestos removal and other miscellaneous improvements. Existing Commissions and Alteration Work An amount has been allocated to existing commissions and tenant alterations which are due in connection with leases that were constructed during 1996. Reserves for Replacements It is customary and prudent to deduct an annual sum from effective gross income to establish a reserve for replacing short-live items throughout the building. These costs may include roof repair, HVAC upgrades and ADA compliance. Our 1997 projection includes $150,000, or approximately $0.15 per square foot of rentable area and this is considered reasonable for capital expenditures over the course of the investment holding period. Discounted Cash Flow Analysis In the discounted cash flow analysis, we employed the PRO-JECT+ software which allowed us to simulate the operating characteristics of the property and to make a variety of operating assumptions. We try to reflect the most likely investment assumptions of typical buyers and sellers in this particular market segment. CASH FLOW PROJECTIONS Cash flow assumptions for 605 Third Avenue are as follows: I Projection Period 1997-2008 II Growth Rates A. Market Rental Rates 4% per annum B. Operating Expenses 4% per annum C. Real Estate Taxes Based on the scenario outlined (see appropriate section). ================================================================================ -77- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Income Capitaization Approach ================================================================================ D. Tenant Work Based upon scenario outlined III Market Rents 1997 Gross A. Office Space Rent/SF Floors 2-14 $33.00/SF Floors 15-30 $35.00/SF Floors 31-44 $37.00/SF B. Basement $15.00/SF C. Bank $60.00/SF D. Other Retail $60.00/SF IV Revenues A. Rental Income Based upon current rent roll B. Tenant Electric $2.75 per square foot increasing at 4 percent at the time of lease expiration. C. Escalation Income Tenants pay, according to their lease terms, a combination of the following escalations; real estate taxes over a base year, operating expenses over a base year and a cleaning/labor clause. D. Other Revenue Consists of the following items: Condenser Water Income - $300,000 in 1997 increasing at 4 percent per year. Net Tenant Service Income - $200,000 in 1997 increasing at 4 percent per annum. Garage Operations - Based upon budgeted 1997 garage income increasing at 4 percent per annum. (Excludes Hertz lease revenue which is shown in the tenant rent section). V Expenses A. Operating Expenses 1. Building Operating Expenses $11.58 per square foot, based upon 1997 actual operating expenses (including tenant electric expense). ================================================================================ -78- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Income Capitaization Approach ================================================================================ B. Real Estate Taxes The transitional assessments for 605 Third Avenue are as follows based upon the actual 1997/98 assessment of $83,350,000: 1996/97 $74,160,000 1997/98 $76,230,000 1998/99 $79,650,000 1999/2000 $81,900,000 2000/2001 $82,170,000 2001/2002 $82,350,000 Real estate taxes include the Business Improvement District Tax. After the 2000/2001 tax year, real estate taxes increase at 2.5% per year. C. Capital Improvements The majority of these costs relate to asbestos removal on the elevator shafts and upgrades to the mechanical systems. D. Vacancy Allowance/Free Rent/ Credit 2 months weighted average vacancy, 10 Loss (Office/Retail) months free rent for all leases through 1998, 8 months for all leases in 1998, 6 months in 1999 and 5 months thereafter. Credit loss of 2.0% for all non-major tenants. E. Tenant Work $40 per square foot for new and renewing tenants, increasing at 4% per year. $22.50 per square foot increasing at 4% per year for renewal tenants after 2000. VI Rollovers and Renewals A. Tenant Mix Upon Office and Basement Space- 50 percent Lease Expiration renew, 50 percent vacate. B. Office Space Characteristics of New Leases 1. Lease Term 10 years 2. Vacant Period 6 months on turnover to a new tenant 3. Base Rent Base rent is assumed to be market rent in the year of rollover with an increase in base rentals of $4.00 per square foot in year 6 and the retention of existing escalation base year. ================================================================================ -79- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Income Capitaization Approach ================================================================================ 4. Type of Escalation: Pass-through of pro rata share of increases in real estate taxes over a base year, pro rata share of operating expenses adjusted for 50 percent electric over a base year; base year is calendar year of lease term. 5. Leasing Commission Calculated based upon standard commission rates for a 10 year lease transaction with a factor for leasing override. On renewals, 50% are in-house and 50% are through the use of an outside broker. C. Retail Space Characteristics of New Leases 1. Lease Term 10 years 2. Vacant Period 6 months on turnover to new tenant 3. Base Rent Base rent is assumed to be market rent in the year of rollover with an increase in base rentals in year 6 of $4.00 per square foot with the retention of the existing escalation base years. 4. Type of Escalation Pass-through of pro-rata share of increases in real estate taxes over a base year, pro-rata share of operating expenses adjusted for 50 percent electric over a base year; base year is calendar year of lease term. 5. Tenant Work None 6. Leasing Commissions Calculated based upon standard commission rates for a 10 year lease transaction with a factor for a leasing override. Cash Flow Projection On the following pages may be found our 12 year cash flow projection which includes our 11 year holding period and 12th year reversionary year. Our assumed holding period is a fiscal period beginning January 1, 1997 and ending December 31, 2009. The cash flow reflects the results of the PRO-JECT +plus. The cash flow exhibits a value matrix with varied discount rates and terminal capitalization rates. ================================================================================ -80- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES ---------------------------
=============================================================================================================================== 605 THIRD AVENUE CASH FLOW ANALYSIS =============================================================================================================================== YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 1997 1998 1999 2000 2001 2002 --------------------------------------------------------------------------------------------- RENTAL INCOME All Tenants $ 34,865,580 $ 34,879,440 $ 33,456,616 $ 34,041,576 $ 34,391,240 $ 34,614,832 Free Rent ($ 286,982) ($ 868,323) ($ 1,534,201) ($ 1,551,773) ($ 47,668) ($ 104,556) --------------------------------------------------------------------------------------------- TOTAL MINIMUM RENTAL INCOME $ 34,578,598 $ 34,011,117 $ 31,922,415 $ 32,489,803 $ 34,343,572 $ 34,510,276 OPERATING EXPENSE $ 2,385,732 $ 2,725,477 $ 2,810,147 $ 2,645,541 $ 2,894,440 $ 3,307,393 REAL ESTATE TAX $ 3,671,770 $ 3,933,085 $ 3,915,060 $ 3,351,367 $ 3,283,397 $ 3,466,096 CPI ADJUSTMENT $ 0 $ 1,846,957 $ 2,770,435 $ 2,770,435 $ 2,770,435 $ 2,770,435 CLEANING EXPENSE $ 146,514 $ 174,601 $ 178,272 $ 192,283 $ 220,135 $ 249,099 PORTER WAGE $ 230,477 $ 250,202 $ 270,715 $ 97,350 $ 0 $ 0 ELECTRIC-NEUBERGER $ 290,001 $ 301,601 $ 408,483 $ 574,257 $ 643,592 $ 669,337 --------------------------------------------------------------------------------------------- TOTAL GROSS RENTAL INCOME $ 41,300,037 $ 43,243,040 $ 42,275,527 $ 42,121,036 $ 44,155,571 $ 44,972,636 Less: Vacancy & Collection Loss $ 266,401 $ 280,197 $ 249,813 $ 225,839 $ 254,319 $ 261,283 --------------------------------------------------------------------------------------------- Effective Rental Income $ 41,033,636 $ 42,962,843 $ 42,025,714 $ 41,895,197 $ 43,901,252 $ 44,711,353 Add: Tenant Service - Net $ 200,000 $ 208,000 $ 216,320 $ 224,973 $ 233,972 $ 243,331 Add: Condenser Water $ 300,000 $ 312,000 $ 324,480 $ 337,459 $ 350,958 $ 364,996 Add: Garage Revenues $ 400,000 $ 416,000 $ 432,640 $ 449,946 $ 467,943 $ 486,661 --------------------------------------------------------------------------------------------- EFFECTIVE GROSS INCOME $ 41,933,636 $ 43,898,843 $ 42,999,154 $ 42,907,575 $ 44,954,125 $ 45,806,341 OPERATING EXPENSES: Real Estate Taxes $ 7,807,524 $ 8,075,947 $ 8,488,636 $ 8,746,918 $ 8,901,962 $ 9,090,000 Operating Expenses $ 11,395,000 $ 11,850,800 $ 12,324,832 $ 12,817,826 $ 13,330,538 $ 13,863,760 --------------------------------------------------------------------------------------------- TOTAL OPERATING EXPENSES $ 19,202,524 $ 19,926,747 $ 20,813,468 $ 21,564,744 $ 22,232,500 $ 22,953,760 NET OPERATING INCOME $ 22,731,112 $ 23,972,096 $ 22,185,686 $ 21,342,831 $ 22,721,625 $ 22,852,581 ALTERATIONS $ 0 $ 778,045 $ 4,156,191 $ 1,677,396 $ 263,229 $ 0 COMMISSIONS $ 0 $ 129,037 $ 788,670 $ 1,022,067 $ 416,086 $ 53,652 CAPITAL REPAIRS $ 3,154,587 $ 430,517 $ 1,011,455 $ 425,000 $ 425,000 $ 384,260 CAPITAL RESERVES $ 150,000 $ 156,000 $ 162,240 $ 168,730 $ 175,479 $ 182,498 --------------------------------------------------------------------------------------------- TOTAL CASH FLOW $ 19,426,525 $ 22,478,497 $ 16,067,130 $ 18,049,638 $ 21,441,831 $ 22,232,171 YEAR 7 YEAR 8 YEAR 9 YEAR 10 YEAR 11 YEAR 12 2003 2004 2005 2006 2007 2008 --------------------------------------------------------------------------------------------- RENTAL INCOME All Tenants $ 34,943,584 $ 37,516,820 $ 39,108,516 $ 40,484,920 $ 44,176,356 $ 49,480,148 Free Rent ($ 4,312,927) ($ 175,421) ($ 2,206,351) ($ 1,394,166) ($ 7,170,686) ($ 1,359,306) --------------------------------------------------------------------------------------------- TOTAL MINIMUM RENTAL INCOME $ 30,630,657 $ 37,341,399 $ 36,902,165 $ 39,090,754 $ 37,005,670 $ 48,120,842 OPERATING EXPENSE $ 2,661,818 $ 2,522,143 $ 2,669,350 $ 2,934,228 $ 2,125,862 $ 2,135,467 REAL ESTATE TAX $ 2,674,694 $ 2,320,122 $ 2,069,608 $ 2,033,044 $ 1,244,698 $ 1,141,716 CPI ADJUSTMENT $ 923,478 $ 0 $ 0 $ 0 $ 0 $ 0 CLEANING EXPENSE $ 279,224 $ 276,201 $ 93,199 $ 66,298 $ 74,393 $ 82,811 PORTER WAGE $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ELECTRIC-NEUBERGER $ 696,111 $ 723,955 $ 752,914 $ 783,030 $ 135,725 $ 0 --------------------------------------------------------------------------------------------- TOTAL GROSS RENTAL INCOME $ 37,865,982 $ 43,183,820 $ 42,487,236 $ 44,907,354 $ 40,586,348 $ 51,480,836 Less: Vacancy & Collection Loss $ 270,899 $ 271,902 $ 273,982 $ 271,795 $ 289,077 $ 297,806 --------------------------------------------------------------------------------------------- Effective Rental Income $ 37,595,083 $ 42,911,918 $ 42,213,254 $ 44,635,559 $ 40,297,271 $ 51,183,030 Add: Tenant Service - Net $ 253,064 $ 263,186 $ 273,714 $ 284,662 $ 296,049 $ 307,891 Add: Condenser Water $ 379,596 $ 394,779 $ 410,571 $ 426,993 $ 444,073 $ 461,836 Add: Garage Revenues $ 506,128 $ 526,373 $ 547,428 $ 569,325 $ 592,098 $ 615,781 --------------------------------------------------------------------------------------------- EFFECTIVE GROSS INCOME $ 38,733,871 $ 44,096,256 $ 43,444,967 $ 45,916,539 $ 41,629,491 $ 52,568,538 OPERATING EXPENSES: Real Estate Taxes $ 9,317,250 $ 9,550,182 $ 9,788,936 $ 10,033,658 $ 10,284,500 $ 10,541,612 Operating Expenses $ 14,418,310 $ 14,995,042 $ 15,594,842 $ 16,218,636 $ 16,867,380 $ 17,542,074 --------------------------------------------------------------------------------------------- TOTAL OPERATING EXPENSES $ 23,735,560 $ 24,545,224 $ 25,383,778 $ 26,252,294 $ 27,151,880 $ 28,083,686 NET OPERATING INCOME $ 14,998,311 $ 19,551,032 $ 18,061,189 $ 19,664,245 $ 14,477,611 $ 24,484,852 ALTERATIONS $ 8,686,524 $ 769,536 $ 4,439,186 $ 1,597,277 $ 14,322,158 $ 1,924,549 COMMISSIONS $ 2,080,060 $ 2,252,496 $ 1,106,948 $ 1,381,474 $ 3,993,253 $ 3,964,364 CAPITAL REPAIRS $ 0 $ 0 $ 300,000 $ 0 $ 0 ($ 0) CAPITAL RESERVES $ 189,798 $ 197,390 $ 205,285 $ 213,497 $ 222,037 $ 230,918 --------------------------------------------------------------------------------------------- TOTAL CASH FLOW $ 4,041,929 $ 16,331,610 $ 12,009,770 $ 16,471,997 ($ 4,059,837) $ 18,365,021 ===============================================================================================================================
CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Income Capitaization Approach ================================================================================ Terminal Capitalization Rate Selection A terminal overall capitalization rate (OAR) was used to estimate the market value of the property at the end of the assumed investment holding period. The rate is applied to the 11th year estimate of net operating income. We estimated an appropriate terminal rate based on indicated rates in today's market (approximately 7.5 to 8.5 percent). A premium was added to today's rates to allow for the risk of unforeseen events or trends which might affect our estimate of net operating income during the holding period, including a possible deterioration in market conditions for the property. Investors typically add 50 to 100 basis points to the "going-in" rate to arrive at a terminal OAR, according to Cushman & Wakefield's periodic investor surveys. Discount Rate Analysis Our valuation endeavored to reflect the most likely actions of typical buyers and sellers in this market. We forecasted cash flows and discounted them and the future property value at reversion to a present value at various internal rates of return (yield rates) currently anticipated by investor in similar-quality investments. The yield rate (internal rate of return or IRR) is the single rate that discounts all future equity benefits (cash flows and equity reversion) to an estimated present value. In the discounted cash flow analysis, we employed the Pro-Ject +plus computer program. This program simulates the operating characteristics of the property and allow us to make a variety of operating assumptions. We tried to reflect the most likely investment assumptions of typical buyers and sellers in this particular market segment. Analysis by the discounted cash flow method is examined over a holding period that allows the investment to mature, the investor to recognize a return commensurate with the risk taken and a recapture of the original investment. Typical holding periods usually range from 10 to 20 years and are sufficient for the majority of institutional grade real estate such as the subject to meet the criteria noted above. In the instance of the subject, we have analyzed the cash flows anticipated over an 12-year fiscal projection period. Our analysis has been performed on a fiscal year basis, commencing August 1, 1997. A sale or reversion is deemed to occur at the end of the 11th year, based upon capitalization of the following year's net operating income. This is based upon the premise that a purchaser in the 11th year is buying the following year's net income. Therefore, our analysis reflects this situation by capitalizing the first year of the next holding period. The present value was formulated by discounting the property cash flows at various rates. The yield rate utilized to discount the projected cash flow and eventual property reversion was based on an analysis of anticipated yield rates of investors dealing in similar investments. The rates reflect acceptable expectations of yields to be achieved by investors currently in the marketplace shown in their current investment criteria and as extracted from office buildings. ================================================================================ -81- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Income Capitaization Approach ================================================================================ A yield rate differs from an income rate, such as cash-on-cash (equity dividend rate or cash flow after debt service), in that it takes into consideration all equity benefits including the equity reversion at the time of resale, in addition to annual cash flows. The internal rate of return is the single-yield rate that discount all of the future equity benefits (cash flows and equity reversion) to the original equity investment. The yield rates currently accepted by investors in the market can be applied to a projected cash flow and reversion in order to estimate the present value of the projected income stream, and therefore, the value of the subject property. Since any real estate investment must compete in the open market for capital, it must be competitive with the various alternatives available in the financial marketplace. In developing an appropriate risk rate for the subject, we have given consideration to a number of different investment opportunities. These other non-real estate alternatives are important to an equity investor when contemplating an investments included long-term rates such as Corporate AAA bonds and 30 year Treasury Bonds. In addition, consideration was also given to the current prime rate of 8.50 percent and the current discount rate of 5.00 percent. Cushman & Wakefield also regularly publishes an Investor Survey outlining current investment parameters of major forces in the real estate marketplace. The results of this most recent survey, prepared as of Winter 1996 is provided in the Addenda section of this report. The investment instruments described above, the pre-tax yield requirements in our survey and the expected yields from the sale transactions previously cited in the Sales Comparison Approach, provide a benchmark for prevailing real estate market conditions, especially when differing investment characteristics are considered. These yields are considered to be the best indicators available of general yield expectations in the marketplace. Major investors in existing investment grade real estate such as office buildings, shopping centers and industrial facilities currently require equity yield rates in the range between 10.0 and 15.0 percent depending upon the attraction, duration and quality of a project's cash flow, the type of property, recent market activity, availability and terms of financing, risk perception, tax benefit potential and future value considerations. Obviously, with risk being commensurate with return, the more secure income streams would tend to fall towards the lower end of current yields, with those properties containing more risk, falling towards the upper end. We also must consider the fact that the subject property, as a primary building located in a prime submarket of Midtown Manhattan is investment grade. This factor will be considered in our analysis of the investment returns cited in the investor survey. The residual cash flows annually generated by the subject property comprise only the first part of the return which an investor will receive. The second component of this investment return is the pre-tax cash proceeds from the resale of the property at the end of a projected investment holding period. Typically, investors will structure a provision in their analysis in the form of a rate differential over a going-in capitalization rate in projecting a future disposition price. The view is that the improvement is then older and the future is more difficult to visualize, hence a slightly higher rate is warranted for added risks in forecasting. ================================================================================ -82- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Income Capitaization Approach ================================================================================ The Cushman & Wakefield Valuation Advisory Services has surveyed national real estate investors to determine their investment objectives. Cushman & Wakefield Valuation Advisory Service's National Investor Survey Winter 1996 details the investment requirements of active investors in the marketplace. Regarding office buildings, these investors generally required internal rates of return from 10.0 to 15.00 percent with the average-low and high ranging from 12.05 to 13.13 percent, respectively. Going-in capitalization rates range from 7.5 to 14 percent, with the average-low and high ranging from 9.36 to 10.45 percent, respectively. Terminal capitalization rates range from 8.0 to 14 percent with the average low and high ranging from 9.51 to 10.30 percent, respectively. Growth rates for income and expenses generally range from 3.0 to 5.0 percent. The following table summarizes Cushman & Wakefield Valuation Advisory Service's National Investor Survey for Winter 1996.
=============================================================================================================== Cushman & Wakefield's Investor Survey Winter 1996 Offices - Urban Class A =============================================================================================================== OAR IRR Growth Rates - ---------------------------------------------- --------------------------------- Number of Responses In Out Income Expenses - --------------------------------------------------------------------------------------------------------------- 10 9.13%-9.73% 9.50%-9.90% 11.28%-11.98% 2.79%-3.79% 3.72%-4.06% ===============================================================================================================
National Market Indicators, as of the second quarter 1997 published by Peter F. Korpacz & Associates, Inc. is summarized as follows: ================================================================================ National Market Indicators Second Quarter 1997 Manhattan Office Buildings ================================================================================ Range Average ================================================================================ IRR 10.0% to 14.0% 11.71% - -------------------------------------------------------------------------------- OAR/In 7.5% to 10.5% 8.88% - -------------------------------------------------------------------------------- OAR/Out 7.0% to 11% 9.0% - -------------------------------------------------------------------------------- (1) Averages ================================================================================ Source: Real Estate Investor Survey, Peter F. Korpacz & Associates ================================================================================ The wide range of investment parameters indicate that property risk and yield are assessed to a particular investment property based on a variety of variables. Risk is the primary determinant, and the risk variables include: whether the property is purchased for cash or will be leveraged; whether current contract rents are significantly above or below current market rents; the amount and timing of tenant roll-overs; the risk to lease-up the property and the strength of the market during the lease-up period; the durability of the cash flow, and its ability to increase with inflation along with the creditworthiness of the existing tenancy; investor demand for the property type; the diversification of the metropolitan area; the property's location within the local market and the supply and demand for the property type within the market; and the effective age of the property. ================================================================================ -83- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Income Capitaization Approach ================================================================================ Our selection of the investment parameters utilized to estimate the market value of the subject property, was based on the preceding data, including Cushman & Wakefield's National Investor Survey, and the national investor surveys provided by CB Korpacz. In our selection of the investment parameters utilized to estimate the market value of the subject property, we have also consulted members of Cushman & Wakefield's Financial Services Group and rates derived from actual sales, as indicated in our Sales Comparison Approach, which reflects the recent downward trend in going-in cap rates, particularly for well located properties with upside potential. In our judgment, the investor survey conclusions should be adjusted downward 50 to 100 basis points to allow for the recent improvement in the marketplace. Based upon the above, it is our opinion that an investor would require a discount rate in the range of 11.0 to 11.5 percent with a terminal capitalization rate ranging from 8.5 to 9.5 percent. Accordingly, we have discounted the projected future pre-tax cash flows to be received by an equity investor in the subject property to a present value from 11.0 to 11.5 percent at 25 basis point intervals. Discounting these cash flows over the range of yields and terminal rates now being required by participants in the market for this type of real estate places additional perspective upon our analysis. A valuation matrix for the subject property is presented on the following page. ================================================================================ Valuation Matrix 605 Third Avenue - Market Value "As Is" ($000) ================================================================================ Terminal Capitalization Rates ---------------------------------------------------------- IRR 8.5% 9.0% 9.5% - -------------------------------------------------------------------------------- 11.00% $192,271 $187,153 $182,574 11.25% $189,094 $185,102 $179,635 11.50% $185,992 $181,121 $176,763 ================================================================================ The value of the subject property varies with the discount rates and range of terminal capitalization rates from approximately $176,763 to $192,271, as rounded. Given consideration to all of the characteristics of the subject property previously discussed, we feel that a prudent investor would require a yield which falls near the middle aspect of the market range outlined above for this property. In view of the analysis presented, it is our opinion that the discounted cash flow analysis indicates a market value of $180,000,000, as rounded, for the subject property. The indices of investment generated through this indication of value are presented as follows. ================================================================================ 605 Third Avenue - Market Value "As Is" New York, New York ================================================================================ Going-in Capitalization Rate 12.81 - -------------------------------------------------------------------------------- Terminal Capitalization Rate 9.5% - -------------------------------------------------------------------------------- Equity Yield 11.22% - -------------------------------------------------------------------------------- Price/SF of NRA $182.84 ================================================================================ In the final analysis, it is our opinion that the value of the leased fee estate in the land and improvements by the Income Approach is $180,000,000. ================================================================================ -84- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- RECONCILIATION AND FINAL VALUE ESTIMATE ================================================================================ We have considered all of the traditional approaches to estimating market value of commercial real estate in our analysis. Two of the three traditional approaches were utilized, indicating the following values for the subject property. Sales Comparison Approach $180,000,000 Income Approach Discounted Cash Flow Analysis $180,000,000 The Cost Approach has not been utilized in this report. The Cost Approach requires an estimation of the cost to reproduce or replace the existing improvements of the property. From this cost new of improvements accrued depreciation from physical, functional and economic sources is deducted to arrive at a cost less depreciation. The estimated land value is then added to arrive at total value. The subjectivity of estimating accrued depreciation of aged existing improvements limits the reliability of this approach. It is questionable whether the subject property would be replaced today given the condition of the Manhattan office leasing market. In addition, we know of few investors who utilize replacement cost as the basis for their investment decisions. The Sales Comparison Approach consists of the collection and analysis of data relevant to actual sales of properties deemed comparable to the subject property. Properties which have been sold are compared to the property under appraisal and adjustments to the sale prices are made based on differences between the subject property and the comparable sales. Adjustments are typically made for location, date of sale, building size, quality of construction and other relevant characteristics. The Income Approach converts anticipated future cash flows into a present value estimate. This method is based on the premise that the motivation for a property purchase is a function of the anticipation of future benefits to be gained from the investment. The potential purchaser, in essence, will trade the purchase price of the property for a projected income stream to be received in the future. Conversion of the anticipated cash flow into a value indication commonly occurs in the form of discounted cash flow analysis or application of a single capitalization rate to a stabilized income estimate. These three traditional methods of estimating the market value of commercial real estate are not mutually exclusive approaches to deriving an estimate of most probable selling price, but are inter-dependent methodologies, each relying on components from at least one of the other approaches. Hence, the Cost Approach requires extensive market data to derive estimates of depreciation and to determine the value of land as if vacant. This approach may also require income data in order to make adjustments for functional and economic obsolescence. The Sales Comparison Approach requires application of methods from the Income Approach in order to make adjustments for differences in income that have influenced the sale price. Consideration of market data is also required for the Income Approach in the selection and application of equity, capitalization and discount rates, and estimation of income and expenses. Consequently, it is our opinion that the purchasers and sellers, at least intuitively, consider components of all three approaches in the process of negotiating an acceptable price for a particular property. ================================================================================ -85- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Reconciliation and Final Value Estimate ================================================================================ It is the Income Approach, however, that is logically considered the most appropriate technique for estimating the value of income-producing property. Not only does this approach represent the most direct and accurate simulation of market behavior, it is the method explicitly employed by buyers and sellers in acquisition and disposition decisions. Therefore, following the implied dictum of the market, we have used an approach based primarily on projected income as the foundation for our valuation of the subject property. There are several additional reasons why the Sales Comparison Approach does not form the primary basis of our value estimate for the subject property. The quantity and quality of market information inhibits the use of the Sales Comparison Approach. Inadequacy of information regarding gross and net income, lease details and expenses of comparable sales often deters accurate and relevant adjustments of unit price indicators. Comparison at one dollar per square foot level precludes the analysis of those key factors which form the basis for projections on which the purchase decision was made. As a result of our analysis, it is our opinion that the market value of the leased fee estate in the subject property, subject to the assumptions, limiting conditions, certifications, and definitions, as of July 30, 1997, is: ONE HUNDRED EIGHTY MILLION DOLLARS $180,000,000. Marketing Time Marketing time is an estimate of the time that might be required to sell a real property interest at the appraised value. Marketing time is presumed to start on the effective date of the appraisal. Marketing time occurs subsequent to the effective date of the appraisal and exposure time is presumed to precede the effective date of the appraisal. The estimate of marketing time uses some of the same data analyzed in the process of estimating reasonable exposure time and it is not intended to be a prediction of a date of sale. We believe, based on the assumptions employed in our analysis, as well as our selection of investment parameters for the subject, our value conclusions represent a price achievable within one year's marketing time on the open market. ================================================================================ -86- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- ASSUMPTIONS AND LIMITING CONDITIONS ================================================================================ "Appraisal" means the appraisal report and opinion of value stated therein; or the letter opinion of value, to which these Assumptions and Limiting Conditions are annexed. "Property" means the subject of the Appraisal. "C&W" means Cushman & Wakefield, Inc. or its subsidiary which issued the Appraisal. "Appraiser(s)" means the employee(s) of C&W who prepared and signed the Appraisal. This appraisal is made subject to the following assumptions and limiting conditions: 1. No opinion is intended to be expressed and no responsibility is assumed for the legal description or for any matters which are legal in nature or require legal expertise or specialized knowledge beyond that of a real estate appraiser. Title to the Property is assumed to be good and marketable and the Property is assumed to be free and clear of all liens unless otherwise stated. No survey of the Property was undertaken. 2. The information contained in the Appraisal or upon which the Appraisal is based has been gathered from sources the Appraiser assumes to be reliable and accurate. Some of such information may have been provided by the owner of the Property. Neither the Appraiser nor C&W shall be responsible for the accuracy or completeness of such information, including the correctness of estimates, opinions, dimensions, sketches, exhibits and factual matters. 3. The opinion of value is only as of the date stated in the Appraisal. Changes since that date in external and market factors or in the Property itself can significantly affect property value. 4. The Appraisal is to be used in whole and not in part. No part of the Appraisal shall be used in conjunction with any other appraisal. Publication of the Appraisal or any portion thereof without the prior written consent of C&W is prohibited. Except as may be otherwise stated in the letter of engagement, the Appraisal may not be used by any person other than the party to whom it is addressed or for purposes other than that for which it was prepared. No part of the Appraisal shall be conveyed to the public through advertising, or used in any sales or promotional material without C&W's prior written consent. Reference to the Appraisal Institute or to the MAI designation is prohibited. 5. Except as may be otherwise stated in the letter of engagement, the Appraiser shall not be required to give testimony in any court or administrative proceeding relating to the Property or the Appraisal. ================================================================================ -87- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- Assumptions and Limiting Conditions ================================================================================ 6. The Appraisal assumes (a) responsible ownership and competent management of the Property; (b) there are no hidden or unapparent conditions of the Property, subsoil or structures that render the Property more or less valuable (no responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them); (c) full compliance with all applicable federal, state and local zoning and environmental regulations and laws, unless noncompliance is stated, defined and considered in the Appraisal; and (d) all required licenses, certificates of occupancy and other governmental consents have been or can be obtained and renewed for any use on which the value estimate contained in the Appraisal is based. 7. The physical condition of the improvements considered by the Appraisal is based on visual inspection by the Appraiser or other person identified in the Appraisal. C&W assumes no responsibility for the soundness of structural members nor for the condition of mechanical equipment, plumbing or electrical components. 8. The forecasted potential gross income referred to in the Appraisal may be based on lease summaries provided by the owner or third parties. The Appraiser has not reviewed lease documents and assumes no responsibility for the authenticity or completeness of lease information provided by others. C&W recommends that legal advice be obtained regarding the interpretation of lease provisions and the contractual rights of parties. 9. The forecasts of income and expenses are not predictions of the future. Rather, they are the Appraiser's best estimates of current market thinking on future income and expenses. The Appraiser and C&W make no warranty or representation that these forecasts will materialize. The real estate market is constantly fluctuating and changing. It is not the Appraiser's task to predict or in any way warrant the conditions of a future real estate market; the Appraiser can only reflect what the investment community, as of the date of the Appraisal, envisages for the future in terms of rental rates, expenses, supply and demand. 10. Unless otherwise stated in the Appraisal, the existence of potentially hazardous or toxic materials which may have been used in the construction or maintenance of the improvements or may be located at or about the Property was not considered in arriving at the opinion of value. These materials (such as formaldehyde foam insulation, asbestos insulation and other potentially hazardous materials) may adversely affect the value of the Property. The Appraisers are not qualified to detect such substances. C&W recommends that an environmental expert be employed to determine the impact of these matters on the opinion of value. 11. Unless otherwise stated in the Appraisal, compliance with the requirements of the Americans With Disabilities Act of 1990 (ADA) has not been considered in arriving at the opinion of value. Failure to comply with the requirements of the ADA may adversely affect the value of the property. C&W recommends that an expert in this field be employed. ================================================================================ -88- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- CERTIFICATION OF APPRAISAL ================================================================================ I certify that, to the best of my knowledge and belief: 1. Travis W. Walsh, MAI, CRE inspected the property,. 2. The statements of fact contained in this report are true and correct. 3. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, unbiased professional analyses, opinions, and conclusions. 4. I have no present or prospective interest in the property that is the subject of this report, and I have no personal interest or bias with respect to the parties involved. 5. My compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event. The appraisal assignment was not based on a requested minimum valuation, a specific valuation or the approval of a loan. 6. No one provided significant professional assistance to the person signing this report. 7. My analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation and the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. 8. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 9. As of the date of this report, Travis W. Walsh, MAI, CRE completed the requirements of the continuing education program of the Appraisal Institute. /s/Travis W. Walsh Travis W. Walsh, MAI, CRE Director Valuation Advisory Services State Certified Appraiser No. 46000005074 ================================================================================ -89- CUSHMAN & WAKEFIELD(R) --------------------------- VALUATION ADVISORY SERVICES --------------------------- ADDENDA ================================================================================ IMPROVED PROPERTY SALES PRIME TENANT RENT ROLL APPRAISERS' QUALIFICATIONS ================================================================================ -90- OFFICE BUILDING SALE 1 ================================================================================ Location Data Property Name: American Home Products Building Location: 685 Third Avenue Btwn. East 43rd and 44th Streets City: New York County: New York State/Zip: New York Assessor's Parcel No(s): BLOCK 1317, LOT 1 Atlas Reference: N/A Physical Data Type: CBD Land Area: 31,127 Sqft Zoning: C5-3; Restricted Cent'l Com'l Gross Building Area: 595,632 SF Net Rentable Area: 584,336 SF Usable Building Area: 584,336 SF Year Built: 1961 # of Stories: 31 Parking: None Condition: Good Exterior Walls: Brick Veneer Amenities: All Available Class: A Sale Data Transaction Type: Contract Date of Transaction: 06/97 Marketing Time: N/A Grantor: Professional Data Mgmt. Inc. c/o Leucadia Nat'l Grantee: Amroc/Black Acre Grp./Jeff Citron Document No.: UNDER CONTRACT. Sale Price: $100,000,000 Financing: Not Available Cash Equivalent Price: $100,000,000 Required Capital Cost: $0 Adjusted Sale Price: $100,000,000 Verification: C&W VAS NY 6/97 Financial Data Assumptions & Forecast: N/A Occupancy at Sale: 34% Existing or Pro Forma Income: N/A TOTAL P.S.F. ----- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: N/A N/A THIRD AVE 685(97) OFFICE BUILDING SALE 1 ================================================================================ Analysis Value Indicators: Price Per S.F. Overall Capitalization Rate (OAR): N/A% Projected IRR: N/A% Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A% Price Per Square Foot: $171.13 Comments 685 Third Avenue comprises two interconnected buildings; the 240,000+/- SF. Southern tower built in 1961 and the 355,000+/- SF. Northern tower built in 1976. The building was purchased by the grantor, Leucadia National Corp. in 1994, with the intention of renovating the property for their own use. The property is reportedly 34 percent leased and still requires substantial refurbishment. The building is reportedly under contract to the grantees, a consortium including the Black Acre Group, Amroc and Jeff Citron, for $100 million. THIRD AVE 685(97) OFFICE BUILDING SALE 2 ================================================================================ Location Data Property Name: 31 West 52nd Street Location: 31 West 52nd Street Btwn. Fifth and Sixth Avenues City: New York County: New York State/Zip: New York Assessor's Parcel No(s): BLOCK 1268, LOT 1002 Atlas Reference: N/A Physical Data Type: CBD Land Area: 45,868 Sqft Zoning: C5-2.51 Restricted Cent'l Com'l Gross Building Area: 711,791 SF Net Rentable Area: 659,724 SF Usable Building Area: 659,724 SF Year Built: 1986 # of Stories: 30 Parking: 120 space parking garage Condition: Good Exterior Walls: Stone Amenities: All Available Class: A Sale Data Transaction Type: Contract Date of Transaction: 04/97 Marketing Time: N/A Grantor: 40 West 53 Partnership c/o G. Hines/Kuwaiti Invest Grantee: Deutsche Bank, AG Document No.: UNDER CONTRACT Sale Price: $278,000,000 Financing: Not Available Cash Equivalent Price: $278,000,000 Required Capital Cost: $0 Adjusted Sale Price: $278,000,000 Verification: C&W-VAS, NY 7/97 Financial Data Assumptions & Forecast: N/A Occupancy at Sale: N/A Existing or Pro Forma Income: N/A TOTAL P.S.F. ----- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: N/A N/A W 52 ST 31 OFFICE BUILDING SALE 2 ================================================================================ Analysis Value Indicators: Overall Capitalization Rate (OAR): N/A% Projected IRR: N/A% Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A% Price Per Square Foot: $421.39 Comments This property was reportedly under contract to Deutsche Bank, AG, the building's largest tenant. W 52 ST 31 OFFICE BUILDING SALE 3 ================================================================================ Location Data Property Name: 90 Park Avenue - Mortgage Location: 90 Park Avenue Btwn. East 39th & East 40th Streets City: New York County: New York State/Zip: New York Assessor's Parcel No(s): BLOCK 869 LOT 34 Atlas Reference: N/A Physical Data Type: CBD Land Area: 38,032 Sqft Zoning: C5-3/C5-2.5 Rest Cent Com'l Gross Building Area: 877,869 SF Net Rentable Area: 877,869 SF Usable Building Area: 877,869 SF Year Built: 1964 # of Stories: 41 Parking: 156 space below grade parking Condition: Good Exterior Walls: Steel & Glass Amenities: N/A Class: A Sale Data Transaction Type: Sale Date of Transaction: 04/97 Marketing Time: N/A Grantor: Sumitomo c/o Brad Giliman Grantee: Vornado Realty c/o Steven Roth Document No.: SEE COMMENTS Sale Price: $185,000,000 Financing: See Comments Cash Equivalent Price: $185,000,000 Required Capital Cost: $0 Adjusted Sale Price: $185,000,000 Verification: C&W VAS NY 7/97 Financial Data Assumptions & Forecast: Advisor Occupancy at Sale: 82.7% Existing or Pro Forma Income: Pro Forma TOTAL P.S.F. ----- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $19,607,142 $22.33 PARK AVE 90 OFFICE BUILDING SALE 3 ================================================================================ Analysis Value Indicators: Price Per S.F. Overall Capitalization Rate (OAR): 10.60% Projected IRR: N/A% Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A% Price Per Square Foot: $210.74 Comments The buyers, Vornado Realty, purchased mortgages on this property following the threat of foreclosure by Sumitomo There was no controlling interest included in the transaction. PARK AVE 90 OFFICE BUILDING SALE 4 ================================================================================ Location Data Property Name: 1370 Avenue Of The Americas - Mortgage Location: 1370 Avenue Of The Americas A/K/A 71 West 55th St & 64-68 West 56th St City: New York County: New York State/Zip: New York Assessor's Parcel No(s): BLOCK 1271 LOT 71 Atlas Reference: N/A Physical Data Type: CBD Land Area: 15,276 Sqft Zoning: C6-6, Midtown Gen'l Com'l Gross Building Area: 387,298 SF Net Rentable Area: 381,345 SF Usable Building Area: 381,345 SF Year Built: 1971 # of Stories: 35 Parking: Attached garage Condition: Good Exterior Walls: Glass Panels Amenities: All Available Class: A Sale Data Transaction Type: Contract Date of Transaction: 03/97 Marketing Time: N/A Grantor: St. Andrews Associates c/o Peter Sharp Grantee: S.L. Green Real Estate c/o Steve Green Document No.: N/A Sale Price: $55,000,000 Financing: See Comments Cash Equivalent Price: $55,000,000 Required Capital Cost: $0 Adjusted Sale Price: $55,000,000 Verification: C&W-VAS, NY 5/97 Financial Data Assumptions & Forecast: Advisor Occupancy at Sale: N/A Existing or Pro Forma Income: N/A TOTAL P.S.F. ----- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: N/A N/A SIXTH AVE 1370 OFFICE BUILDING SALE 4 ================================================================================ Analysis Value Indicators: Price Per S.F. Overall Capitalization Rate (OAR): N/A% Projected IRR: N/A% Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A% Price Per Square Foot: $144.23 Comments This sale involved the purchase of the mortgage on the property by the grantees, S.L. Green Real Estate. The buyer's reported intent is to add the mixed-use office building to a proposed REIT. SIXTH AVE 1370 OFFICE BUILDING SALE 5 ================================================================================ Location Data Property Name: 527 Madison Avenue Location: 527 Madison Avenue S/E/C East 54th Street City: New York County: New York State/Zip: New York Assessor's Parcel No(s): BLOCK 1289, LOT 52 Atlas Reference: N/A Physical Data Type: CBD Land Area: 12,675 Sqft Zoning: C5-3; Restricted Gen'l Com'l Gross Building Area: 248,321 SF Net Rentable Area: 201,148 SF Usable Building Area: 215,686 SF Year Built: 1986 # of Stories: 26 Parking: 40-45 space parking garage Condition: Excellent Exterior Walls: Stone Amenities: Quality retail, small floor plates Class: A Sale Data Transaction Type: Sale Date of Transaction: 02/97 Marketing Time: 12 months Grantor: 527 Madison Holding c/o Louis Dreyfus Property Grp Grantee: Cornerstone Properties Inc. c/o Scott Darymple Document No.: LIBER 2439 PAGE 604 Rec. Date: 03/28/97 Sale Price: $67,000,000 Financing: Cash to Seller Cash Equivalent Price: $67,000,000 Required Capital Cost: $0 Adjusted Sale Price: $67,000,000 Verification: C&W - VAS 3/97 Financial Data Assumptions & Forecast: Appraiser Occupancy at Sale: 88% Existing or Pro Forma Income: Existing TOTAL P.S.F. ----- ------ Potential Gross Income: $12,104,748 $60.18 Vacancy and Credit Loss: N/A N/A Effective Gross Income: $12,104,748 $60.18 Expenses: $4,773,960 $23.73 Net Operating Income: $7,330,788 $36.44 MADISON AVE 527 OFFICE BUILDING SALE 5 ================================================================================ Analysis Value Indicators: Direct Cap, DCF and P.S.F. Overall Capitalization Rate (OAR): 10.94% Projected IRR: N/A% Effective Gross Multiplier (EGIM): 5.54 Operating Expense Ratio (OER): 39.44% Price Per Square Foot: $333.09 Comments The property also contains a 9,271+/- square foot garage area and 5,267+/- square feet of storage area which is included in the usable size. The building was anchored by a foreign Japanese bank at the time of sale with approximately 36% of the rental office space. The anchor tenant lease was to expire in 2001. Approximately 20-25% of the office space was due for renewal in 1997. The financial data was based on 1996 stabilized income and expenses prior to the sale. According to a banker financing the sale, the buyer's purchase price and pro-forma implied an overall rate of 10.8%. The building contains small floorplates and caters to smaller-boutique type office tenants. Asking rents for the vacant space at sale ranged from $50 to $54 per square foot. MADISON AVE 527 OFFICE BUILDING SALE 6 ================================================================================ Location Data Property Name: The Continental Can Building Location: 125 Park Avenue A/K/a 100 East 42nd Street N/E/C East 41st Street City: New York County: New York State/Zip: New York Assessor's Parcel No(s): BLOCK 1296 LOT 1 Atlas Reference: N/A Physical Data Type: CBD Land Area: 24,785 Sqft Zoning: C5-3, Restricted Cent'l Com'l Gross Building Area: 548,582 SF Net Rentable Area: 445,437 SF Usable Building Area: 445,437 SF Year Built: 1922 # of Stories: 26 Parking: None Condition: Good Exterior Walls: Stone Amenities: All Available Class: A Sale Data Transaction Type: Sale Date of Transaction: 01/97 Marketing Time: N/A Grantor: Sutom N.V. c/o Pyne Co. Ltd. Grantee: General Electric Capital Corp. Document No.: LIBER 2413 PAGE 578 Rec. Date: 01/27/97 Sale Price: $92,652,000 Financing: Cash to Seller Cash Equivalent Price: $92,652,000 Required Capital Cost: $0 Adjusted Sale Price: $92,652,000 Verification: C& W VAS NY 1/97 Financial Data Assumptions & Forecast: N/A Occupancy at Sale: 77% Existing or Pro Forma Income: N/A TOTAL P.S.F. ----- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: N/A N/A PARK AVE 125 OFFICE BUILDING SALE 6 ================================================================================ Analysis Value Indicators: Price Per S.F. Overall Capitalization Rate (OAR): N/A% Projected IRR: N/A% Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A% Price Per Square Foot: $208.00 Comments The building was sold following a foreclosure. The purchaser was one of the Property's major tenants. PARK AVE 125 OFFICE BUILDING SALE 7 ================================================================================ Location Data Property Name: 30 Rockefeller Plaza - NBC Condo Space Location: 1250 Avenue Of The Americas Between West 50th and 51st Streets New York City: New York County: New York State/Zip: New York 10019 Assessor's Parcel No(s): BLOCK 1265, LOT 1001 Atlas Reference: N/A Physical Data Type: CBD Land Area: 106,199 Sqft Zoning: C5-2.5; Restricted Cent'l Com'l Gross Building Area: 2,700,000 SF Net Rentable Area: 1,561,277 SF Usable Building Area: 1,561,277 SF Year Built: 1932 # of Stories: 70 Parking: None Condition: Good Exterior Walls: Masonry Amenities: Rockefeller Center Retail Concourse Class: A Sale Data Transaction Type: Sale Date of Transaction: 07/96 Marketing Time: N/A Grantor: RCP Assoc. c/o Tishman Speyer Properties, L.P. Grantee: NBC Trust 1996A c/o National Broadcasting Corp. Document No.: LIBER 2347, PAGE 678 Rec. Date: 07/22/96 Sale Price: $440,000,000 Financing: Cash to Seller Cash Equivalent Price: $440,000,000 Required Capital Cost: $0 Adjusted Sale Price: $440,000,000 Verification: C&W - VAS - 11/96 Financial Data Assumptions & Forecast: Appraiser Occupancy at Sale: 100% Existing or Pro Forma Income: Existing TOTAL P.S.F. -------- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: N/A N/A ROCKEFELLER PLZ 30 OFFICE BUILDING SALE 7 ================================================================================ Analysis Value Indicators: DCF Overall Capitalization Rate (OAR): N/A% Projected IRR: N/A% Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A% Price Per Square Foot: $281.82 Comments The television network purchased a condominium interest within their headquarters building. The condominium was created in December 1988 and the tenant had an option to buy the units devoted to studio and technical use. NBC acquired most of the office and studio space it occupied representing approximately 20 percent of the complex' total footage. This includes NBC's 28-floor headquarters facility at 30 Rockefeller Plaza and all of the adjacent Studio and GE-West buildings. One-third of the space consists of broadcasting facilities for such programs as, "The NBC Nightly News with Tom Brokaw", "Dateline NBC", "Saturday Night Live", "Late Night with Conan O'Brien" and local WNBC news. The transaction did not include the "Today Show" studio at 10 Rockefeller Plaza. However, the purchase agreement reportedly gives NBC extension options for the space. The network's current lease extended for another 20 years from the date of sale and included substantial above-market increases to take effect in late 1997. NBC has been located at the complex since it opened in 1933. The purchase was subject to a number of conditions, including confirmation by the U.S. Bankruptcy Court and approval by New York City. ROCKEFELLER PLZ 30 605 THIRD AVENUE [ILLEGIBLE]: 6596 REVISION: 8/12/98 @ 14:00 RENT ROLL AS OF 8/1997 CALENDAR YEAR BASIS) 8/15/97 @ 9:16
TENANT/ LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES (000)/ RECOVERIES/ REVENUE/ SQUARE FEET PER SF PER SF PER SF PER SF PER SF - ------------------------------------------------------------------------------------------------- #1 - SUITE 1,2,3 UNISYS BASE LEASE 5/89-4/99 3,353,671 0 0 746,909 4,100,580 77,144 SF 43.47 0.00 0.00 9.68 53.15 #2 - SUITE 1 [ILLEGIBLE] BASE LEASE 5/65-4/06 460,205 0 0 68,078 528,283 10,800 SF 42.61 0.00 0.00 6.30 48.92 #4 - SUITE 4,5-7,9, JOHN WILEY BASE LEASE 5/88-4/03 8,603,634 0 0 2,029,881 10,633,515 212,267 SF 40.53 0.00 0.00 9.56 50.09 #5 - SUITE 9/PART JOHN WILEY BASE LEASE 5/88-4/03 671,212 0 0 163,474 834,686 16,560 SF 40.53 0.00 0.00 9.87 50.40 #10 - SUITE 19-22 ROLLINS BURDICK BASE LEASE 5/88-4/00 2,967,590 0 0 780,891 3,748,481 71,080 SF 41.75 0.00 0.00 10.99 52.74 #12 - SUITE 25 SNOW BECKER OPTION 1 9/95- 8/05 564,198 0 0 20,585 584,783 17,770 SF 31.75 0.00 0.00 1.16 32.91 #13 - SUITE 26 NY JOB DEVELOPMENT BASE LEASE 5/85-4/00 741,898 0 0 340,366 1,082,264 17,770 SF 41.75 0.00 0.00 19.15 60.90 #14 - SUITE 30,31 GRANT THORTON OPTION 1 9/94-8/99 1,250,651 0 0 287,624 1,538,275 35,792 SF 34.94 0.00 0.00 8.04 42.98 #15 - SUITE BSMT GRANT THORTON BASE LEASE 9/79-8/99 20,713 0 0 14,277 34,990 2,000 SF 10.36 0.00 0.00 7.14 17.50
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TENANT/ LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES (000)/ RECOVERIES/ REVENUE/ SQUARE FEET PER SF PER SF PER SF PER SF PER SF - ------------------------------------------------------------------------------------------------- #16 - SUITE PT 8 ESPN BASE LEASE 5/89-10/04 1,048,381 0 0 224,218 1,272,599 27,055 SF 38.75 0.00 0.00 8.29 47.04 #17 - SUITE 12 UNIVISION OPTION 1 1/96-6/10 946,259 0 0 36,219 982,478 26,982 SF 35.07 0.00 0.00 1.34 36.41 #18 - SUITE 44 STINNES CORP BASE LEASE 10/90-2/05 513,968 0 0 81,042 595,010 12,930 SF 39.75 0.00 0.00 6.27 46.02 #19 - SUITE 43 STINNES BASE LEASE 3/90-2/05 418,170 0 0 66,184 484,354 10,520 SF 39.75 0.00 0.00 6.29 46.04 #20 - SUITE 32 GRANT THORTON BASE LEASE 7/89-8/99 621,886 0 0 143,812 765,698 17,896 SF 34.75 0.00 0.00 8.04 42.79 #21 - SUITE 29 SHEARS ON BASE LEASE 5/89-4/99 630,622 0 0 160,871 791,493 17,890 SF 35.25 0.00 0.00 8.99 44.24 #22 - SUITE PT 8 ESPN BASE LEASE 7/89-10/04 278,651 0 0 59,593 338,244 7,191 SF 38.75 0.00 0.00 8.29 47.04 #23 - SUITE 27 HUBER LAWRENCE BASE LEASE 9/90-3/06 783,564 0 0 116,320 899,884 18,768 SF 41.75 0.00 0.00 6.20 47.95 #24 - SUITE 34 DAVIDOFF & MALITO BASE LEASE 6/91-8/04 592,251 0 0 83,642 675,893 17,947 SF 33.00 0.00 0.00 4.66 37.66 #25 - SUITE 36-42 NEUBERGER & BERMAN BASE LEASE 6/91-2/07 4,514,169 0 0 844,263 5,358,432 136,793 SF 33.00 0.00 0.00 6.17 39.17
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TENANT/ LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES (000)/ RECOVERIES/ REVENUE/ SQUARE FEET PER SF PER SF PER SF PER SF PER SF - ------------------------------------------------------------------------------------------------- #6 - SUITE 35 NIMS HOWE BASE LEASE 8/91-7/07 696,880 0 0 57,925 754,805 17,984 SF 38.75 0.00 0.00 3.22 41.97 #27 - SUITE 2 NEUBERGER & BERMAN BASE LEASE 6/91-2/07 119,352 0 0 0 119,352 29,838 SF 4.00 0.00 0.00 0.00 4.00 #30 - SUITE 18 PODELL BASE LEASE 4/93-3/09 529,550 0 0 49,910 579,460 17,800 SF 29.75 0.00 0.00 2.80 32.55 #31 - SUITE BSMT JOHN WILEY BASE LEASE 3/92-4/03 23,785 0 0 0 23,785 1,420 SF 16.75 0.00 0.00 0.00 16.75 #32 - SUITE BSMT NEUBERGER BASE LEASE 6/92-2/07 50,250 0 0 0 50,250 3,000 SF 16.75 0.00 0.00 0.00 16.75 #33 - SUITE BSMT PODELL BASE LEASE 4/94-3/09 5,000 0 0 0 5,000 500 SF 10.00 0.00 0.00 0.00 10.00 #34 - SUITE 11 ESPN BASE LEASE 11/93-10/04 375,832 0 0 35,022 410,854 12,633 SF 29.75 0.00 0.00 2.77 32.52 #37 - SUITE 16 ESANU KATSKY BASE LEASE 7/96-6/08 569,107 0 0 33,608 602,715 19,867 SF 28.65 0.00 0.00 1.69 30.34 #38 - SUITE 33 STEINHARDT BASE LEASE 10/94-9/97 372,461 0 0 21,852 394,313 17,896 SF 20.81 0.00 0.00 1.22 22.03 #39 - SUITE PT 43 STINNES BASE LEASE 5/96-2/05 83,873 0 0 13,450 97,323 2,110 SF 39.75 0.00 0.00 6.37 46.12
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TENANT/ LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES (000)/ RECOVERIES/ REVENUE/ SQUARE FEET PER SF PER SF PER SF PER SF PER SF - ------------------------------------------------------------------------------------------------- #41 - SUITE 23 CHARTWELL LEISURE BASE LEASE 7/96-3/07 419.469 0 0 12,928 432,397 18,695 SF 22.44 0.00 0.00 0.69 23.13 #42 - SUITE 24 AIM RESOURCES BASE LEASE 8/95-10/05 41,400 0 0 5,059 46,459 1,656 SF 25.00 0.00 0.00 3.05 28.05 #43 - SUITE PT 24 AIM RESOURCES BASE LEASE 5/95-10/05 151,674 0 0 5,756 157,430 5,919 SF 25.62 0.00 0.00 0.97 26.60 #44 - SUITE PT 24 RAND ROSENZWEIG BASE LEASE 5/95-10/05 294,163 0 0 11,193 305,356 8,847 SF 33.25 0.00 0.00 1.27 34.52 #45 - SUITE PT 15 SYLVOR BASE LEASE 5/95-6/00 190,125 0 0 6,835 196,960 6,084 SF 31.25 0.00 0.00 1.12 32.37 #46 - SUITE PART 15 MA & SHANG BASE LEASE 7/95-6/08 64,800 0 0 0 64,800 3,100 SF 20.90 0 00 0.00 0.00 20.90 #47 - SUITE PART 28 TRAVELERS BASE LEASE 7/95-6/04 22,800 0 0 0 22,800 700 SF 32.57 0.00 0.00 0.00 32.57 #48 - SUITE PART 28 PSS BASE LEASE 3/95-4/00 10,768 0 0 0 10,768 455 SF 23.67 0.00 0.00 0.00 23.67 #49 - SUITE PART 28 TCI ASSOCIATES BASE LEASE 3/95-4/00 10,768 0 0 0 10,768 455 SF 23.67 0.00 0.00 0.00 23.67 #51 - SUITE GARAGE HERTZ BASE LEASE 1/95-12/04 598,217 0 0 171,193 769,410 1 SF 598,217.00 0.00 0.00 171,193.00 769,410.00
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TENANT/ LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES (000)/ RECOVERIES/ REVENUE/ SQUARE FEET PER SF PER SF PER SF PER SF PER SF - ------------------------------------------------------------------------------------------------- #52 - SUITE KIOSK PASQUA BASE LEASE 1/94-1/04 19,080 0 0 534 19,614 500 SF 38.16 0.00 0.00 1.07 39.23 #53 - SUITE GROUND METRO SOUTH BASE LEASE 2/94-1/04 10,750 0 0 214 10,964 200 SF 53.75 0.00 0.00 1.07 54.82 #54 - SUITE PART 24 BAND ROSENZWEIG BASE LEASE 8/95-10/05 55,400 0 0 2,949 58,349 2,216 SF 25.00 0.00 0.00 1.33 26.33 #55 - SUITE PART 14 UNIVISION BASE LEASE 7/96-6/10 309,738 0 0 6,155 315,893 8,832 SF 35.07 0.00 0.00 0.70 35.77 #56 - SUITE PART 28 SNOW BECKER BASE LEASE 1/96-8/05 223,125 0 0 7,761 230,886 7,500 SF 29.75 0.00 0.00 1.03 30.78 #57 - SUITE PART 11 ESPN BASE LEASE 7/96-10/04 110,418 0 0 2,835 113,253 6,795 SF 16.25 0.00 0.00 0.42 16.67 #58 - SUITE PART 14 ARMY CORP ENGINEER BASE LEASE 10/96-9/01 238,125 0 0 8,011 246,136 7,500 SF 31.75 0.00 0.00 1.07 32.82 ---------------------------------------------------------------------- TOTALS 34,578,596 0 0 6,721,439 41,300,044 957,658 SF 36.11 0.00 0.00 7.02 43.13 ======================================================================
QUALIFICATIONS OF TRAVIS W. WALSH ================================================================================ Professional Affiliations Appraisal Institute (MAI Certificate No. 6260) New York Metropolitan Chapter American Society of Real Estate Counselors (CRE Certificate No. 1391) New York Chapter New York State Certified as a Real Estate General Appraiser (Certificate No. 46000005074) New York State Licensed Real Estate Broker The Real Estate Board of New York, Inc. Real Estate Appraisal Experience Actively involved in the and appraisal of real estate since 1972. Entered the real estate business in 1972 with The Equitable Life Assurance Society of the United States. Subsequently held positions with Security Mortgage Investors and with the Franklin Savings Bank of New York as a Staff Appraiser. In 1977 joined the Appraisal Division of Cushman & Wakefield, Inc. as a Staff Appraiser. Commenced employment as an Appraiser and Consultant with Henry Boeckmann, Jr. and Associates, Inc. in 1979; subsequently became Vice President and was appointed Manager of the Stamford, Connecticut office. Joined Cushman & Wakefield, Inc., New York Appraisal Services 1983. Named Assistant Vice President in 1988 and named Director in 1990. Assignments have involved a wide variety of existing and proposed real properties including: office complexes, shopping centers, industrial properties, hotels and multifamily housing. Assignments have been completed for mortgage purposes, estates, certiorari proceedings and arbitration hearings, to aid in the decision making process in the acquisition, disposition and marketing of real estate and to determine a property's most profitable use. Education Past Lecturer - New York University - Real Estate Institute Appraisal Institute Courses: Investment Analysis (Course VI) Urban Properties (Course II) Capitalization Theory & Techniques (Course lB) Basic Appraisal Principles, Methods & Techniques (Course lA) Manhattan College, Bronx, New York, Bachelor of Science, (Business Administration), 1972 This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study THREE FOUNTAINS PLAZA Southeast Corner of Platt Springs Road and Emanuel Church Road West Columbia, Lexington County, South Carolina Prepared by O. Marshall Dodds, MAI Date of Market Study - April 21, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] April 21, 1997 Mr. Steven R. Maeglin Morgan Stanley & Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Three Fountains Plaza SEC Platt Springs Road and Emanuel Church Road West Columbia, Lexington County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that forms the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on April 21, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 41,440 square feet of leaseable area. The center was constructed in 1986 and the Food Lion store expanded during 1996. The anchor tenants are Food Lion and Revco and the subject property is currently 95.17% occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds ------------------------------ O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY ================================================================================ Regional Perspective Columbia is the state capital with the State House being located in downtown Columbia. Also, the University of South Carolina Campus is located in the downtown area. Fort Jackson, which is a large U.S. Army Training Facility is located in the eastern section of the Metropolitan area. The city has numerous specialized office activities such as: insurance, consulting services, advertising, marketing, printing and financial services. Government, distribution, finance and transportation are all important to Columbia, although none are preeminent. Geography also gives Columbia a strategic location in the industrial and commercial spheres. The unemployment rate for Lexington County as of March, 1997 was 2.9 percent while the statewide rate was 5.3 percent. Neighborhood and Site The neighborhood is located around the intersection of Platt Springs Road and Emanuel Church Road. Several single family residential subdivisions are located around this intersection and throughout the neighborhood. Most of the houses throughout the neighborhood would be in the medium priced range ($75,000 to $150,000). Commercial properties are located around the intersection of Platt Springs Road and Emanuel Church Road including Subject, Caroline Square, fast food restaurants, branch banks, convenience markets/self service gasoline facilities and retail/service facilities. Physical features are as follows: 1. Size 4.215 acres or 183,605 SF 2. Identity NEC Platt Springs Road & Emanuel Church Road TMS# 6796-02-08 3. Shape Irregular 4. Topography Level on street grade 5. Accessability Good 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 41,450 SF 2. Layout & Design 1 story - food store, drug store, two shops 3. Parking Spaces 217 5.24 per 1,000 SF of net area 4. Construction Brick and Glass front with concrete block on side and rear and metal seam roof. 1 Market Position and Marketability Conclusions The shopping center market within the area of subject is healthy at this time. Subject is part of the Cayce-West Columbia area. In the overall survey there are approximately 25 shopping centers with approximately 1,500,000 square feet. The available square feet consists of approximately 140,000 square feet with the availability rate being 9.33%. There are not any shopping centers under construction at this time and one small center containing 25,000 square feet and a neighborhood center (Piggly Wiggly, Shops, 44,318 square feet) are planned for the overall market area. There is one vacant shop in subject property and the Caroline Square Shopping Center located across the street has a vacant Rite-Aid Drug Store. The operating history of these two centers have been good. The subject property is in the middle of the neighborhood being at the intersection of Platt Springs Road and Emanuel Church Road. The location of subject is convenient to the single family dwellings that are located throughout the neighborhood. A portion of the neighborhood is developed with the Columbia Metropolitan Airport, but this has not hindered the overall development of the neighborhood with the single family dwellings and the commercial development. The Caroline Square Shopping Center is located across the street from subject property and this center is very similar to subject. The rental range for the shops is from $7.50 to $9.00 per square foot on a triple net basis. The Mills Corner Shopping Center is a new center that was completed in 1995. This center has rental rates ranging from $10.00 to $12.00 per square foot. The location of Mills Corner is at the edge of subject neighborhood. The Woodberry Plaza is an older center that has been expanded and renovated. Winn-Dixie and Revco are the major tenants. The rental range for the shops is from $6.50 to $9.25 per square foot. The average rental rate is $7.75. Red Bank Crossing is located at the edge of the neighborhood. The major tenants are Winn-Dixie and Revco. The rents range from $7.00 to $11.00 per square foot with the average being $9.88 per square foot. The subject property has two shops with one of the shops being leased at $7.50 per square foot and the other shop being vacant and on the market at $7.25 per square foot. It is thought that these are reasonable rental rates for the neighborhood. The rental rate for the Food Lion store is $7.88 per square foot while the rental rate for the Revco store is at $6.50 per square foot, but overage rents are being paid on the Revco store. The subject property has operated at a high occupancy rate and Food Lion has recently expanded their store. The location of subject is strategic within the neighborhood and convenient to shoppers throughout the neighborhood. Trends: The subject property is located in the southwest section of the metropolitan area of Columbia. The development began approximately 25 years ago with single family residential properties. Commercial developments have occurred around the intersection of Platt Springs Road and Emanuel Church Road including subject property and Caroline Square Shopping Center. The Columbia metropolitan Airport is located in the neighborhood. The demand and desirability for the neighborhood has been good. All trends are favorable at this time and expected to continue. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Three Fountains Caroline Square Mills Corner ---------------------- ----------------------- ----------------------- b. Street 3979 Platt Springs NWC Platt Springs & NEC Augusta Road and Road Emanuel Church Road Oak Drive ---------------------- ----------------------- ----------------------- c. City West Columbia, SC West Columbia, SC West Columbia, SC ---------------------- ----------------------- ----------------------- d. Distance from subject N/A Across street 2.5-3.0 mile ---------------------- ----------------------- ----------------------- e. Contact Edens Avant, Inc. Bobbie Culbertson Rex Pollard ---------------------- ----------------------- ----------------------- f. Phone 803-779-4420 803-750-1010 803-779-7777 ---------------------- ----------------------- ----------------------- 2. Attributes a. Year built 1986 1984 1995 ---------------------- ----------------------- ----------------------- b. Net sq. Ft. 41,450 40,155 50,000 ---------------------- ----------------------- ----------------------- c. # building 1 1 1 ---------------------- ----------------------- ----------------------- d. # stories 1 1 1 ---------------------- ----------------------- ----------------------- e. Avg. Floor plate size (SF), if office N/A N/A N/A ---------------------- ----------------------- ----------------------- f. # elevators N/A N/A N/A ---------------------- ----------------------- ----------------------- g. Parking Adequate Adequate Adequate ---------------------- ----------------------- ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ---------------------- ----------------------- ----------------------- I. Vacancy % 4.83% 0% 0% ---------------------- ----------------------- ----------------------- j. Anchors, if Retail Food Lion, Revco Piggly Wiggly Piggly Wiggly ---------------------- ----------------------- ----------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Woodberry Plaza Red Bank Crossing ----------------------- ----------------------- b. Street 3234 Augusta Road NWC South Lake Dr. & Two Notch Rd. ----------------------- ----------------------- c. City West Columbia, SC Lexington, SC ----------------------- ----------------------- d. Distance from subject 2.5 miles 4 miles ----------------------- ----------------------- e. Contact Edens Avant, Inc. The Ogburn Co. ----------------------- ----------------------- f. Phone 803-779-4422 803-779-7777 ----------------------- ----------------------- 2. Attributes a. Year built 1976 - Renov. 1994 1990 ----------------------- ----------------------- b. Net sq. Ft. 82,920 53,500 ----------------------- ----------------------- c. # building 1 1 ----------------------- ----------------------- d. # stories 1 1 ----------------------- ----------------------- e. Avg. Floor plate size (SF), if office N/A N/A ----------------------- ----------------------- f. # elevators N/A N/A ----------------------- ----------------------- g. Parking Adequate Adequate ----------------------- ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block ----------------------- ----------------------- I. Vacancy % 0% 0% ----------------------- ----------------------- j. Anchors, if Retail Winn-Dixie, Revco, Winn-Dixie, Revco Big Lots ----------------------- -----------------------
Comments: Comparable No. 1 is located across the street and has experienced a very high occupancy rate. The lease with Rite-Aid expires and Dollar General will move within a couple of months. Comparable No. 3 was renovated in 1994 and a new Winn-Dixie Store was constructed. The former Winn-Dixie Store is now occupied by Big Lots. Shops are occupied. Comparable No. 4 was built in 1990. The Winn-Dixie store has been expanded. The operating history has been good. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A N/A ----------------------- ----------------------- ---------------------- b. Shop Space $7.50 $7.50 - $9.00 $10.00 - $12.00 ----------------------- ----------------------- ---------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ----------------------- ----------------------- ---------------------- 3. Rent Concessions None None None ----------------------- ----------------------- ---------------------- 4. Effective Rent $7.50 $7.50 - $9.00 $10.00 - $12.00 ----------------------- ----------------------- ---------------------- 5. TI Allowance None None None ----------------------- ----------------------- ---------------------- 6. Expense Stop None None None ----------------------- ----------------------- ---------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 - 5 years (shop) 3 -5 years (shop) ----------------------- ----------------------- ---------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% ----------------------- ----------------------- ---------------------- 9. Percentage Rent (per lease terms) Food Lion, Revco Piggly Wiggly Piggly Wiggly ----------------------- ----------------------- ---------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A ----------------------- ----------------------- ---------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A ----------------------- ----------------------- ---------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A similar superior ----------------------- ----------------------- ---------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A ---------------------- ---------------------- b. Shop Space $6.50 - $8.00 $10.00 - $11.00 ---------------------- ---------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net ---------------------- ---------------------- 3. Rent Concessions None None ---------------------- ---------------------- 4. Effective Rent $6.50 - $8.00 $7.00 - $11.00 ---------------------- ---------------------- 5. TI Allowance None None ---------------------- ---------------------- 6. Expense Stop None None ---------------------- ---------------------- 7. Length of Lease Term 3 - 5 years (shop) 3-5 years (shop) ---------------------- ---------------------- 8. Commissions 5.00% to 7.00% 5.00% - 7.00% ---------------------- ---------------------- 9. Percentage Rent (per lease terms) Winn-Dixie, Revco Winn-Dixie ---------------------- ---------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A ---------------------- ---------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A ---------------------- ---------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) similar similar ---------------------- ----------------------
D. EXPLAIN RANKING/COMMENTS: Subject property is more similar to Comparable No. 1 and 3 because of age and tenant structure. The reason for ranking Comparable No. 2 superior to subject is because this center is new, being built in 1995 and the rental rates are higher than the rental rates at subject property. Comparable No. 4 is similar. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Caroline Square Shopping Center Location: NEC Platt Springs Road and Emanuel Church Road West Columbia, South Carolina Year Built: 1985 Total Size: 40,155 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $7.50 to $9.00 Tenant Expenses: Pass throughs for real estate taxes, hazard insurance and CAM for some tenants, reimbursement of increases in expenses over base year for others. Remarks: Piggly Wiggly is the anchor tenant. The lease with Rite-Aid expired and Dollar General moved in within a couple of months. Other tenants include Trio's Salon, Starlite Video, Golden Wok, Subsand Pizza, Coin Laundry, Alternate Tanning, and Becknell Dry Cleaners. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Mills Corner Shopping Center Location: NEC Augusta Road and Oak Drive West Columbia, South Carolina Year Built: 1995 Total Size: 42,845 SF Vacant Space: 1,200 SF Vacancy Rate: 2.8% Rental Range: $10.00 to $12.00 Average Rent: $10.35 Tenant Expenses: Pass throughs for real estate taxes, hazard insurance and CAM. Remarks: This is a strip center that was completed in 1995. McDonalds and Moovies occupy outlots. One small space is vacant, and this center is still in lease-up. A NationsBank kiosk is located on site. Anchor tenant is Piggly Wiggly, and locals include Subway, Cost Cutters, Burnette's Cleaners, and ABC store, The Grove Bistro, and Imperial China Restaurant. 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Woodberry Plaza Location: NEC Augusta Road and Woodberry Drive West Columbia, South Carolina Year Built: 1974 Total Size: 85,145 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $6.50 to $9.25 Average Rent: $7.75 Tenant Expenses: Pass throughs for real estate taxes, hazard insurance and CAM. Remarks: This is a strip center with Winn Dixie and Revco as anchor tenants. A new Winn Dixie was recently completed, and the old Winn Dixie space is currently leased to Big Lots. 7 Comparable Rental No. 4 ================================================================================ [GRAPHIC OMITTED] Name: Red Bank Crossing Shopping Center Location: NWC South Lake Drive and Two Notch Road Lexington, SC Year Built: 1990 Total Size: 65,936 SF Vacant Space: 1,200 SF Vacancy Rate: 1.82% Local Rent Range: $7.00 - $11.00 SF Average Rent: $9.88/SF Tenant Expenses: CAM, taxes & insurance. Remarks: Center is anchored by Winn-Dixie (46,358SF) and Revco (8,450SF). Other tenants include Subway, All Star Rental, Dry Cleaners, ABC Store, Chinese Restaurant, and Hair Salon. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Three Fountains St. Andrews Crossing Eastgate Shop. Center ----------------------- ----------------------- ----------------------- b. Street Address 3979 Platt Springs Rd. 817 St. Andrews Road NWC Whiskey Rd. & Eastgate Dr. ----------------------- ----------------------- ----------------------- c. City West Columbia, SC Columbia, SC Aiken, SC ----------------------- ----------------------- ----------------------- d. Distance from Subject N/A 8 miles 56 miles ----------------------- ----------------------- ----------------------- 2. Attributes a. Year Built 1986 1994 1995 ----------------------- ----------------------- ----------------------- b. Net sq. feet 41,450 66,910 SF 75,716 SF ----------------------- ----------------------- ----------------------- c. # Buildings 1 1 1 ----------------------- ----------------------- ----------------------- d. # of Stories 1 1 1 ----------------------- ----------------------- ----------------------- e. Vacancy % 4.83% 0% 5.00% ----------------------- ----------------------- ----------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 ----------------------- ----------------------- ----------------------- b. Sales Price PSF N/A $97.89 $88.16 ----------------------- ----------------------- ----------------------- c. Cap. Rate N/A 9.69% 9.86% ----------------------- ----------------------- ----------------------- d. Date N/A 05-25-94 09-28-95 ----------------------- ----------------------- ----------------------- e. NOI at time of Sale N/A $634,797 $657,896 ----------------------- ----------------------- ----------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A superior similar ----------------------- ----------------------- ----------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name One Norman Center Paw Creek Commons -------------------- ------------------------ b. Street Address 19706 One Norman E/S Little Rock Rd. at Blvd. Freedom Dr. -------------------- ------------------------ c. City Cornelius, NC Charlotte, NC -------------------- ------------------------ d. Distance from Subject 100 miles 92 miles -------------------- ------------------------ 2. Attributes a. Year Built 1993 1996 -------------------- ------------------------ b. Net sq. feet 54,185 SF 66,050 -------------------- ------------------------ c. # Buildings 1 1 -------------------- ------------------------ d. # of Stories 1 1 -------------------- ------------------------ e. Vacancy % 0% 2.73% -------------------- ------------------------ 3. Sales Information a. Sales Price $4,650,000 $5,384,000 -------------------- ------------------------ b. Sales Price PSF $85.82 $77.52 -------------------- ------------------------ c. Cap. Rate 9.68% 9.61% -------------------- ------------------------ d. Date 10-12-95 03-25-97 -------------------- ------------------------ e. NOI at time of Sale $450,188 $517,412 -------------------- ------------------------ 4. Rank Relative to Subject (inferior, similar, superior) similar superior -------------------- ------------------------
Explain Ranking/Comments: Comparables 1 and 3 are ranked superior to subject. The reason for this is because of the location of these comparables being superior to subject. Comparable No. 3 is located in a commercial area that is larger than subject, but it is similar. 9 Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS: 6012-1-1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 10 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] TMS: Name: Eastgate Shopping Center Location: Northwest Corner of Whiskey Road & Eastgate Drive Aiken, SC Grantor: Southwest U.S. Retail, LP Grantee: PDG Aiken Partners, LP Deed Reference: N/A Date: September 28, 1995 Sales Price: $6,675,000 Adjusted Sales Price: $6,675,000 Size building: 75,716 Sales Price per S.F.: $88.16 Size Land (Acres): 8.79 Size Land (S.F.): 382,892 Year Built: 1995 Land/Building Ratio: 5.06 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $782,704 Effective Gross Income: $782,704 EGIM: 8.53 Net Operating Income: $657,896 Overall Rate: 9.86% Verification: Public Records Type of Purchaser: Private Investor Comments: Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. 11 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. 12 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] TMS: 59-231-22,23 pt. Name: Paw Creek Commons Location: East side of Little Rock Road at Freedom Drive Grantor: Paw Creek, LLC Grantee: Paw Creek Crossing Limited Partnership Deed Reference: Book 8988, Page 519 Date: March 25, 1997 Sales Price: $5,120,000 Adjusted Sales Price: $5,384,000 Size building: 66,050 Sales Price per S.F.: $77.52 Size Land (Acres): 9.82 Size Land (S.F.): 427,759 Year Built: 1996 Land/Building Ratio: 6.48 to 1 Utilities: Municipal Zoning: CC, Commercial Center Financing: Cash to Seller Gross Potential Income: $568,840 Effective Gross Income: $552,054 Gross Income Multiple: 9.00 EGIM: 9.27 Net Operating Income: $517,412 Overall Rate: 9.61% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was pre-construction. The sales price has been adjusted to reflect this by using 50 basis points in the capitalization rate (.1011 minus .0050 equals .0961). The major tenants are Winn-Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. The income from anchor tenants is 79.41 percent of gross income. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 Comparable Rentals ------------------ [GRAPHIC OMITTED] Improved Sales Map ------------------ [GRAPHIC OMITTED] Site Plan --------- [GRAPHIC OMITTED] EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 56 Property: THREE FOUNTAINS PLAZA 3979 PLATT SPRINGS ROAD WEST COLUMBIA, SC 29169 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ FOOD LION #343 FOOD LION #343 625-30 29,900 12/08/85 10/02/16 0.00 0.00 4.66 01/01/86 135,000.00 5.70 02/10/96 165,368.04 0.00 0.00 0.00 0.00 7.88 11/01/96 228,533.04 - ------------------------------------------------------------------------------------------------------------------------ REVCO #4338 REVCO DISCOUNT DRUG CENTERS, I 625-40 8,450 02/01/86 01/31/01 0.00 0.00 6.50 02/01/86 54,925.08 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ Available 625-50 2,000 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ DOMINO'S/HO PIZZA EDWARD SADIK HATIPOGLU 625-60 2,000 11/29/95 11/30/00 0.00 0.00 0.00 0.00 0.00 0.00 7.00 11/01/95 14,000.04 - ------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 39,450 Current Annual Base Rent 297,458.16 Available. 2,000 Total..... 41,450 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ FOOD LION #343 FOOD LION #343 PRS 1986 PRS 1995 Fixed 0 10/03/16 10/02/21 0.00 1.00 0 Y 10/03/21 10/02/26 0.00 0.01 228,533 Y 10/03/26 10/02/31 0.00 0.01 1653680400 Y 10/03/31 10/02/36 0.00 0.01 0 Y 0.00 0.01 0 Y 0.00 0.01 2285330400 Y - ------------------------------------------------------------------------------------------------------------------------------------ REVCO #4338 REVCO DISCOUNT DRUG CENTERS, I PRS 1987 PRS 1986 Fixed 0 02/01/01 01/31/06 0.00 2.00 0 Y 02/01/06 01/31/11 0.00 2.00 2,746,300 Y 02/01/11 01/31/16 0.00 2.00 0 Y 02/01/16 01/31/21 0.00 2.00 0 Y 02/01/21 01/31/26 0.00 2.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ DOMINO'S/HO PIZZA EDWARD SADIK HATIPOGLU Full 0 Full 0 Full 0 12/01/00 11/30/05 7.00 0.00 0 12/01/05 11/30/10 7.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Platt Springs Road - Looking North [GRAPHIC OMITTED] Platt Springs Road - Looking South [GRAPHIC OMITTED] Emanuel Church Road - Looking East [GRAPHIC OMITTED] Emanuel Church Road - Looking West [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Front View This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study BARNWELL PLAZA 1019 Dunbarton Boulevard Barnwell, Barnwell County, South Carolina Prepared by O. Marshall Dodds, MAI Date of Market Study - April 24, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] April 24, 1997 Mr. Steven R. Maeglin Morgan Stanley & Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Barnwell Plaza 1019 Dunbarton Boulevard Barnwell, Barnwell County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on April2 4, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The subject property consists of a neighborhood shopping center that contains 70,725 square feet of leasable area. The center was constructed in 1985. The major tenants are Wal-Mart Stores, Food Lion, and Revco. The subject property is currently 100.0%. However, there is a new Superstore that is under construction and nearing completion that will be occupied by Wal-Mart. At that time, Wal-Mart will vacate the premises. It is thought that the owners of subject property will be able to secure tenants for the Wal-Mart Store. In any event, Wal-Mart will continue paying rent until May 10th, 2005. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds ------------------------------ O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY ================================================================================ Regional Perspective Barnwell and Barnwell County are located in the southwestern section of the state of South Carolina. The population in the city of Barnwell in 1990 was 5,108 which decreased by 8.3% from 5,572 in 1980. The county population was 19,868 in 1980 and decreased to 19,743 in 1990. The projected population for the county in the year 2000 is 24,100. The population within a 15-mile radius of Barnwell is 31,729 while a population within a 30-mile radius is 116,780. The major employers in the area are Westinghouse Savannah River Plant, Milliken and Co., Burlington Industrial Carpet Division, Shuron, Inc., Chem-Nuclear Systems, Inc. and Carolina Metals, Inc. The predominant development in the Barnwell county area is the Department of Energy's Savannah River site. However, this facility has been up and down in the past and while helping with employment, in bad times the unemployment rates have been somewhat high. Chem-Nuclear Systems, Inc. is also important with the Nuclear Waste Storage Facility in Barnwell county. The unemployment rate for Barnwell County as of March, 1997 was 9 percent while the statewide rate was 5.3 percent. Neighborhood and Site The subject neighborhood is located in the western section of the city of Barnwell. The downtown area of Barnwell is located approximately 1/2 mile to the east at the intersection of Dunbarton Boulevard and Main Street. The major developments in subject neighborhood would be the Barnwell Plaza with tenants being Wal-Mart, Food Lion, Revco, Cato's and Pic'N Pay. The Tri-County Shopping Center is located on Dunbarton Boulevard. across from the Barnwell Plaza. The major tenants are Reid's Red and White Supermarket, Rite-Aid Drug Store, Top Value Stamp Redemption Store, Dollar Store with outlots being occupied by McDonald's and Nations Bank. Retail and service type facilities are located along Dunbarton Boulevard and these would include Advance Auto Parts, Master Lube, Huddle House, China Express, Video House, Boney Motor Co., Hardee's, KCF, Goodyear, Exxon, Goodyear, BP Convenient Markets/Self-Service Gasoline Store, First Citizen's Bank & Trust Co. The Carolina Lodge is located across the street from Barnwell Plaza. The Adams-Millis Plant, which is a division of Sara Lee Corporation is located on Dunbarton Boulevard in subject neighborhood. The plant employs approximately 525 people and is a manufacture of white socks. The Atlantic Coastline Railroad runs through the southern portion of the neighborhood in a east-west direction. The Carter Shopping Center is located on Burr Street on the Town Circle. The major tenant in this center is Heilig-Meyers Furniture Co. There is a Piggly Wiggly Store and Farmer's Furniture Store located in the eastern section of Barnwell along Marlboro Avenue. The new Wal-Mart Superstore with eight shops is nearing completion and is located on Dunbarton Boulevard just west of subject. The Wal-Mart Store in subject property will be vacated upon completion of the Wal-Mart Superstore. Physical features are as follows: 1. Size 11.273 acres or 491,052 SF 2. Identity 1019 Dunbarton Boulevard TMS# 072-06-04-011, 020 3. Shape Irregular 4. Topography Generally level and on street grade 5. Accessability Good 6. Utilities Municipal 1 Physical Description Building features are as follows: 1. Size (net) 70,725 SF 2. Layout & Design One story - discount store - food store - drug store- two shops 3. Parking Spaces 361 5.11 per 1,000 square feet of net area 4. Construction Brick and glass front with concrete block on side and rear and metal seam roof. Market Position and Marketability Conclusions The shopping district in Barnwell is more or less along Dunbarton Boulevard and in subject neighborhood. Barnwell Plaza, which is subject property, was the predominant shopping center in the neighborhood for the past twelve years. The Wal-Mart SuperStore and shops are nearing completion at this time. This will be the new prominent shopping facility in the area. A Tri-County Shopping Center is located across the street from Barnwell Plaza. Carter Shopping Center is located approximately two blocks east in the downtown area. There is another shopping center that is located on the eastern side of the city with Piggly Wiggly and Farmer's Furniture Stores. The occupancy rates are considered to be high at this time. Subject property has experienced a high occupancy rate over the past few years. However, when Wal-Mart moves out of the existing store and into the new SuperStore, a large portion of subject will be vacant. There is a demand for former Wal-Mart Stores with other tenants and generally it is divided into smaller spaces. The location of subject property will attract potential users. Also there is a period of years that Wal-Mart will be paying rent on subject property. The rental rate for the Wal-Mart store will be somewhat less than the rental rate for the new SuperStore. The rental rates for the shops in subject property are at $6.50 - $7.00 per square foot. Comparable No. 1 has rental rates ranging from $2.50 to $6.00 per square foot. Comparable No. 2 has rental rates from $3.25 to $5.00 per square foot. Comparable No. 3 has rental rates ranging from $10.00 to $11.00 per square foot, but this is the new center with the Wal-Mart SuperStore. Subject property rental rates are above the rental rates of the existing shopping centers and are lower than the rental rates at the new Wal-Mart SuperStore Center. It is thought that these rental rates can be maintained in the future. If the existing Wal-Mart Store is placed on the market, the rental rate of at least $3.40 per square foot should be achieved. Trends: The subject property is located in the shopping area of Barnwell and Barnwell County. There are shopping centers and retail stores that are located along Dunbarton Boulevard. The stability of the neighborhood has been maintained in years past and it is thought that it will be maintained in years to come. There will be some growth, but there are no spurts of growth seen in the future. The unemployment rate has been in the range that it is at this time over years past and this probably will not change. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 ------- ------------ 1. Identification a. Name Barnwell Plaza Tri-County Shopping Center ----------------------- ---------------------------- b. Street 1019 Dunbarton Blvd. 1016 Dunbarton Blvd. ----------------------- ---------------------------- c. City Barnwell, SC Barnwell, SC ----------------------- ---------------------------- d. Distance from subject N/A Across street ----------------------- ---------------------------- e. Contact Edens & Avant, Inc. The Williams Co. ----------------------- ---------------------------- f. Phone 803-779-4420 803-873-7610 ----------------------- ---------------------------- 2. Attributes a. Year built 1985 1972 ----------------------- ---------------------------- b. Net sq. Ft. 70,725 36,800 ----------------------- ---------------------------- c. # building 1 1 ----------------------- ---------------------------- d. #stories 1 1 ----------------------- ---------------------------- e. Avg. Floor plate size (SF), if office N/A N/A ----------------------- ---------------------------- f. # elevators N/A N/A ----------------------- ---------------------------- g. Parking Adequate Adequate ----------------------- ---------------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block ----------------------- ---------------------------- I. Vacancy % 0% 6.52% ----------------------- ---------------------------- j. Anchors, if Retail Wal-Mart, Food Lion, Reid's Red & White, Dollar Revco General, Rite-Aid ----------------------- ---------------------------- COMPARABLE 2 COMPARABLE 3 ------------ ------------ 1. Identification a. Name Carter Shopping Center Wal-Mart Superstore --------------------------- --------------------------- b. Street Burr Street SWC Dunbarton Blvd. --------------------------- --------------------------- c. City Barnwell, SC Barnwell, SC --------------------------- --------------------------- d. Distance from subject 2 blocks 2 blocks --------------------------- --------------------------- e. Contact Carter Realty Co. Wyatt Development Co. --------------------------- --------------------------- f. Phone 803-259-3253 803-649-3975 --------------------------- --------------------------- 2. Attributes a. Year built 1968 1997 --------------------------- --------------------------- b. Net sq. Ft. 35,000 127,500 --------------------------- --------------------------- c. # building 1 1 --------------------------- --------------------------- d. # stories 1 1 --------------------------- --------------------------- e. Avg. Floor plate size (SF), if office N/A N/A --------------------------- --------------------------- f. # elevators N/A N/A --------------------------- --------------------------- g. Parking Adequate Adequate --------------------------- --------------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block --------------------------- --------------------------- I. Vacancy % 12.4% 4.08% --------------------------- --------------------------- j. Anchors, if Retail Heilig-Meyers, Mack's Variety Wal-Mart, Cato's --------------------------- ---------------------------
Comments: Comparable No. 1 is located across the street from subject property and is an older center. Comparable No. 2 is located near subject, but is approximately one block off of the town square. This center was built in 1968 and has Heilig-Meyers as the major tenant. The Wal-Mart Superstore is nearing completion and is located appoximately two blocks west of subject. Wal-mart will vacate the store in subject property. The developer should be able to lease the Wal-Mart space within a reasonable time. The rental rates for subject are higher than Comparable No. 1 and 2, but are lower than Comparable No. 3. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 ------- ------------ 1. Asking Rental Rate a. Anchor Space $3.40 - $7.25 N/A ----------------------- ---------------------- b. Shop Space $6.50 - $7.00 $2.50 - $6.00 ----------------------- ---------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net ----------------------- ---------------------- 3. Rent Concessions None None ----------------------- ---------------------- 4. Effective Rent $6.50 - $7.00 $2.50 - $6.00 ----------------------- ---------------------- 5. TI Allowance None None ----------------------- ---------------------- 6. Expense Stop None None ----------------------- ---------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 -5 years (shop) ----------------------- ---------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% ----------------------- ---------------------- 9. Percentage Rent (per lease terms) All Tenants Reid's, Rite-Aid ----------------------- ---------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A ----------------------- ---------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A ----------------------- ---------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A similar ----------------------- ---------------------- COMPARABLE 2 COMPARABLE 3 ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A $4.81 - $9.00 ---------------------- ---------------------- b. Shop Space $3.25 - $5.00 $10.00 - $11.00 ---------------------- ---------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net ---------------------- ---------------------- 3. Rent Concessions None None ---------------------- ---------------------- 4. Effective Rent $3.25 - $5.00 $10.00 - $11.00 ---------------------- ---------------------- 5. TI Allowance None None ---------------------- ---------------------- 6. Expense Stop None None ---------------------- ---------------------- 7. Length of Lease Term 3 - 5 years (shop) 3-5 years (shop) ---------------------- ---------------------- 8. Commissions 5.00% to 7.00% 5.00% - 7.00% ---------------------- ---------------------- 9. Percentage Rent (per lease terms) None None ---------------------- ---------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A ---------------------- ---------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A ---------------------- ---------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) similar superior ---------------------- ----------------------
D. EXPLAIN RANKING/COMMENTS: Comparables No. 1 and 2 have been rated as similar to subject. The reason for this is because of these properties being in a general range. Subject property is newer than these two comparables and has high rental rates. The Wal-Mart Store will be vacating subject premises upon completion of the Wal-Mart SuperStore. Comparable No. 3 is a Wal-Mart SuperStore and shops and this center has been rated as superior to subject. While this center is in subject neighborhood and on Dunbarton Boulevard, it is thought that it should be rated superior as it is new and the income stream is stronger than that of subject. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Tri-County Shopping Center Location: 1016 Dunbarton Boulevard Barnwell, SC Year Built: 1972 Total Size: 36,800 SF Vacant Space: 2,400SF Vacancy Rate: 6.52% Rental Range: $2.50 - $6.00 per square foot Tenant Expenses: Triple Net Remarks: This is an older center. Major tenants are Reid's Red & White Food Store, Rite-Aid Pharmacy, Radio Shack, One-Price Clothing, Computer Solutions of Barnwell. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Carter Shopping Center Location: Burr Street Barnwell, SC Year Built: 1968 Total Size: 35,000 SF Vacant Space: 4,340 SF Vacancy Rate: 12.4% Rental Range: $3.25 - $5.00 per square foot Tenant Expenses: Triple Net Remarks: This is an older center. Major tenants are Heilig-Meyers Furniture Company. It is located just one block from the Town Square. 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Wal-Mart Superstore Center Location: SWC Dunbarton Boulevard & Litchfield Street Barnwell, SC Year Built: 1997 Total Size: 127,500 SF Vacant Space: 5,200 SF Vacancy Rate: 4.08% Rental Range: $10.00 - $11.00 per square foot Tenant Expenses: Triple Net Remarks: This is a new center with a Wal-Mart Superstore. The pre-leasing of shops has been good. Tenants include Cato's, Dollar Tree, Friedman's Jewelers. 7 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 ------------ ------------ 1. Identification a. Name Barnwell Plaza Triangle Village Hampton Plaza ----------------------- ------------------------- ----------------------- b. Street Address 2864 Wilma Rudolph 1019 Dunbarton Blvd. 912-934 N. Lake Dr. Blvd. ----------------------- ------------------------- ----------------------- c. City Barnwell, SC Lexington, SC Clarksville, TN ----------------------- ------------------------- ----------------------- d. Distance from Subject N/A 60 miles 510 miles ----------------------- ------------------------- ----------------------- 2. Attributes a. Year Built 1985 1986 1988 ----------------------- ------------------------- ----------------------- b. Net sq. feet 70,725 SF 115,754 SF 189,302 SF ----------------------- ------------------------- ----------------------- c. # Buildings 1 1 1 ----------------------- ------------------------- ----------------------- d. # of Stories 1 1 1 ----------------------- ------------------------- ----------------------- e. Vacancy % 9.00% 3.24% 0% ----------------------- ------------------------- ----------------------- 3. Sales Information a. Sales Price N/A $4,489,380 $6,150,000 ----------------------- ------------------------- ----------------------- b. Sales Price PSF N/A $38.78 $32.49 ----------------------- ------------------------- ----------------------- c. Date N/A 01-31-95 12-26-95 ----------------------- ------------------------- ----------------------- d. NOI at time of Sale N/A $480,919 $723,627 ----------------------- ------------------------- ----------------------- e. Cap. Rate N/A 10.71% 12.25% ----------------------- ------------------------- ----------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A superior similar ----------------------- ------------------------- ----------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Cunningham Plaza Cumberland Plaza ---------------------- --------------------- b. Street Address 1610 Fort Campbell 209 New Smithville Blvd. Hwy. ---------------------- --------------------- c. City Clarksville, TN McMinnville, TN ---------------------- --------------------- d. Distance from Subject 510 miles 400 miles ---------------------- --------------------- 2. Attributes a. Year Built 1987 1987 ---------------------- --------------------- b. Net sq. feet 140,744 SF 143,951 SF ---------------------- --------------------- c. # Buildings 1 1 ---------------------- --------------------- d. # of Stories 1 1 ---------------------- --------------------- e. Vacancy % 11.23% 8.92% ---------------------- --------------------- 3. Sales Information a. Sales Price $5,025,000 $5,225,050 ---------------------- --------------------- b. Sales Price PSF $35.70 $36.30 ---------------------- --------------------- c. Date 12-26-95 12-26-95 ---------------------- --------------------- d. NOI at time of Sale $667,043 $693,726 ---------------------- --------------------- e. Cap. Rate 13.27% 13.28% ---------------------- --------------------- 4. Rank Relative to Subject (inferior, similar, superior) similar similar ---------------------- ---------------------
Explain Ranking/Comments: These shopping centers are similar to subject. The centers were built about the same time as subject property, but the size of the centers variesas to the size of subject. These comparables were anchored with Wal-Mart stores such as subject and the rental rates for the Wal-Mart stores were about the same as subject. The location of subject is considered similar to the locations of these comparables. However, comparable No. 1 is located in a growth area and is thought to be superior. 8 Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS: Name: Lexington Triangle Village Location: U.S. 378 & North Lake Drive (SC#6) Lexington, SC Grantor: 1994 N1 SC Associates Grantee: Tri Centers, LP Deed Reference: Book 3260, Page 199 Date: January 31, 1995 Sales Price: $4,489,380 Adjusted Sales Price: $4,489,380 Size building 115,754 Sales Price per S.F.: $38.78 Size Land (Acres): 12.51 Size Land (S.F.): 544,936 Year Built: 1985 Land/Building Ratio: 4.71 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $607,469 Effective Gross Income: $607,469 Gross Income Multiple: 7.39 EGIM: 7.39 Net Operating Income: $480,919 Overall Rate: 10.71% Verification: Public Records Type of Purchaser: Private Investor Comments: This center is anchored by Wal-Mart (65,904 SF) and Food Lion (25,000 SF) and there are 7 local shops totaling 24,850 SF (21.5 percent). At the time of sale, the center was 98.7 percent occupied with only 2,000 SF vacant. Wal-Mart has a base rent of $3.55 and the lease expires 11/05. Currently, Wal-Mart is paying about $0.50 per SF overage rent and Wal-Mart is expected to leave the center in the near future as no expansion room is available. The estimated cap rate excludes potential overage rent form Wal-Mart and only excludes income from the 2,000 SF vacant bay. Projected expenses include $0.10 per SF reserves. The center is masonry with brick front and metal mansard canopy roof and in average condition. No outparcels were included with this sale. 9 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] TMS: Name: Hampton Plaza Location: 2864 Wilma Rudolph Boulevard Clarksville, TN Grantor: Aetna Life Insurance Company Grantee: Hampton II, LP Deed Reference: Book 580, Page 1793 Date: December 26, 1995 Sales Price: $6,150,000 Adjusted Sales Price: $6,150,000 Size building: 189,302 Sales Price per S.F.: $32.49 Size Land (Acres): 23.24 Size Land (S.F.): 1,012,334 Year Built: 1988 Land/Building Ratio: 5.35 to 1 Utilities: All Available Zoning: C-3, Shopping Center District Financing: Cash to Seller Gross Potential Income: $966,102 Effective Gross Income: $937,119 Gross Income Multiple: 6.37 EGIM: 6.56 Net Operating Income: $753,627 Overall Rate: 12.25% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a community shopping center with Wal-Mart as a major tenant prior to a new Wal-Mart Superstore being built on the same block. While Wal-Mart remains liable for the lease, the store is vacant. The remainder of the center is occupied. 10 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Cunningham Plaza Location: 1610 Fort Campbell Boulevard Clarksville, TN Grantor: Aetna Life Insurance Company Grantee: Cunningham II, LP Deed Reference: Book 580, Page 1748 Date: December 26, 1995 Sales Price: $5,025,000 Adjusted Sales Price: $5,025,000 Size building: 140,744 Sales Price per S.F.: $35.70 Size Land (Acres): 23.13 Size Land (S.F.): 1,007,543 Year Built: 1987 Land/Building Ratio: 7.16 to 1 Utilities: All Available Zoning: C-5, Arterial Commercial District Financing: Cash to Seller Gross Potential Income: $841,808 Effective Gross Income: $816,554 Gross Income Multiple: 5.97 EGIM: 6.15 Net Operating Income: $667,043 Overall Rate: 13.27% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a community shopping center. Wal-Mart was the major tenant, but is now occupying a new superstore in the same block. Wal-Mart Furniture store is occupying the store. Other shops are occupied. 11 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] TMS: Name: Cumberland Plaza Location: 209 New Smithville Highway McMinnville, TN Grantor: Aetna Life Insurance Grantee: Cumberland II, LP Deed Reference: Book 287, Page 204 Date: December 26, 1995 Sales Price: $5,225,050 Adjusted Sales Price: $5,225,050 Size building: 143,951 Sales Price per S.F.: $36.30 Size Land (Acres): 19.64 Size Land (S.F.): 855,518 Year Built: 1988 Land/Building Ratio: 5.94 to 1 Utilities: All Available Zoning: C-3, Highway Commercial District Financing: Cash to Seller Gross Potential Income: $902,918 Effective Gross Income: $875,830 Gross Income Multiple: 5.79 EGIM: 5.97 Net Operating Income: $693,726 Overall Rate: 13.28% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a community shopping center. Wal-Mart was the major tenant and remains liable for the lease for the remaining term. A new Wal-Mart Superstore was built one block west of this property. 12 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 13 COMPARABLE RENTALS MAP [GRAPHIC OMITTED] COMPARABLE SALES MAP [GRAPHIC OMITTED] Building Sketch --------------- [GRAPHIC OMITTED] EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 158 Property: BARNWELL PLAZA 1019 DUNBARTON BOULEVARD BARNWELL, SC Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ FOOD LION INC. #293 FOOD LION INC. 694-10 21,000 04/28/85 04/27/05 5.40 05/10/85 113,400.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ REVCO #4508 REVCO DISCOUNT DRUG CENTERS O 694-20 8,450 05/01/85 04/30/00 7.25 05/01/85 61,262.52 7.50 05/01/92 63,375.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ CATO CORPORATION #601 THE CATO CORPORATION 694-30 3,600 02/01/85 01/31/00 5.50 02/01/85 19,800.00 6.50 02/01/90 23,400.00 7.00 02/01/95 25,200.00 - ------------------------------------------------------------------------------------------------------------------------ PIC 'N PAY STORES, INC. #144 PIC 'N PAY SHOES 694-40 2,800 08/01/85 07/31/00 6.00 08/01/85 16,800.00 6.25 08/01/90 17,499.96 6.50 08/01/95 18,200.04 6.50 10/01/95 18,199.92 - ------------------------------------------------------------------------------------------------------------------------ WAL-MART #795 WAL-MART STORES INC. 694-50 34,875 05/11/85 05/10/05 3.40 05/11/85 118,575.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ FOOD LION INC. #293 FOOD LION INC. Full 0 Full 0 Full 0 04/28/05 04/27/10 5.40 1.00 11,340,000 Y 04/28/10 04/27/15 5.40 1.00 0 Y 04/28/15 04/27/20 5.40 1.00 0 Y 04/28/20 04/27/25 5.40 1.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ REVCO #4508 REVCO DISCOUNT DRUG CENTERS O Full 0 Full 0 Full 0 05/01/00 04/30/05 8.00 2.00 3,063,100 Y 05/01/05 04/30/10 8.50 2.00 3,168,800 Y 05/01/10 04/30/15 9.00 2.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ CATO CORPORATION #601 THE CATO CORPORATION Full 0 Full 0 Full 0 02/01/95 01/31/00 7.00 5.00 495,000 0.00 5.00 585,000 0.00 5.00 630,000 - ------------------------------------------------------------------------------------------------------------------------------------ PIC 'N PAY STORES, INC. #144 PIC 'N PAY SHOES Full 0 Full 0 Full 0 08/01/90 07/31/95 6.25 4.00 420,000 08/01/95 07/31/00 6.50 4.00 437,500 0.00 4.00 455,000 0.00 4.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ WAL-MART #795 WAL-MART STORES INC. Full 0 None 0 Full 0 05/11/05 05/10/10 3.40 0.75 8,723,837 05/11/10 05/10/15 3.40 0.75 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 159 Property: BARNWELL PLAZA 1019 DUNBARTON BOULEVARD BARNWELL, SC Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ WAL-MART #795 WAL-MART STORES INC. 694-50 34,875 05/11/85 05/10/05 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 70,725 Current Annual Base Rent 338,749.92 Available. 0 Total..... 70,725 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ WAL-MART #795 WAL-MART STORES INC. Full 0 None 0 Full 0 05/11/15 05/10/20 3.40 0.75 0 05/11/20 05/10/25 3.40 0.75 0 05/11/25 05/10/30 3.40 0.75 0 05/11/30 05/10/35 3.40 0.75 0 - ------------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Dunbarton Boulevard Looking East [GRAPHIC OMITTED] Dunbarton Boulevard Looking West [GRAPHIC OMITTED] Subject Front View Looking From Dunbarton Boulevard [GRAPHIC OMITTED] Subject Front View Looking From Dunbarton Boulevard [GRAPHIC OMITTED] Subject Front View Looking From Dunbarton Boulevard [GRAPHIC OMITTED] Subject Front View Looking From Inside Parking Lot [GRAPHIC OMITTED] Subject Front View Looking From Inside Parking Lot [GRAPHIC OMITTED] Subject Front View Looking From Inside Parking Lot [GRAPHIC OMITTED] Subject Rear and Side View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study CAPITOL SQUARE 431 Sunset Blvd. West Columbia, Lexington County, South Carolina Prepared by O. Marshall Dodds, MAI Date of Market Study - April 28, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] April 28, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Capitol Square 431 Sunset Blvd. West Columbia, Lexington County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that forms the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on April 28, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 79,921 square feet of leasable area. The center was constructed in 1974 and Bi-Lo Store expanded during 1993. The anchor tenants Bi-Lo and Revco and the subject property is currently 74.9% occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds ------------------------------ O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY ================================================================================ Regional Perspective Columbia is the state capital with the State House being located in downtown Columbia. Also, the University of South Carolina Campus is located in the downtown area. Fort Jackson, which is a large U.S. Army Training Facility is located in the eastern section of the Metropolitan area. The city has numerous specialized office activities such as: insurance, consulting services, advertising, marketing, printing and financial services. Government, distribution, finance and transportation are all important to Columbia, although none are preeminent. Geography also gives Columbia a strategic location in the industrial and commercial spheres. The unemployment rate for Lexington County as of March, 1997 was 2.9 percent while the statewide rate was 5.3 percent. Neighborhood and Site The neighborhood is located in the downtown area of West Columbia. The city of Columbia is located across the Congaree River from subject property and West Columbia. Meeting Street and Sunset Boulevard as well as State Street are major traffic arteries that run through the neighborhood. Other commercial properties are generally located along Meeting Street and Sunset boulevard. These commercial type properties include retail and service facilities with several fast food restaurants. Columbia Farms has a large poultry processing plant that is located across the street from subject property . The Bridgepoint Condominium Project is located on Sunset Boulevard at the intersection with Meeting Street. Physical features are as follows: 1. Size 8.83 acres or 384,635 square feet 2. Identity 431 Sunset Boulevard TMS #4659-05-003,012 3. Shape irregular 4. Topography slopes gently upward away from Sunset Boulevard 5. Accessability good 6. Utilities municipal Physical Description Building features are as follows: 1. Size (net) 79,921 square feet 2. Layout & Design one-story/food store/drug store, 14 shops 3. Parking Spaces 411 5.4 per 1,000 square feet of net area 4. Construction brick and glass front with concrete block on side and rear and metal seam roof 1 Market Position and Marketability Conclusions Cayce-West Columbia is the fourth largest submarket and contains 23 of 158 centers surveyed. The retail space located in this area consists of 1,481,760 square feet or 11.2% of the completed retail space surveyed. A new center increases this area by 50,000 square feet, a change in size added another 4,538 square feet and one center was deleted for a total 13,500 square feet. The vacant space reported was 144,317 square feet or 9.7%, the seventh highest of the ten areas. Twelve months earlier the vacancy rate was 10.1% or .4 points higher. The average new lease rate for these structures is $7.88 per square foot. This figure is up by $.01 per square foot over past year and up by $ .23 per square foot from two years ago. There is a planned center on Sunset Boulevard that will contain approximately 25,000 square feet. The subject property is located in the downtown area of West Columbia which is on the edge of the neighborhood. However, the area is built up with single family residential properties and commercial properties. The downtown area of Columbia is located across the river from subject property and subject neighborhood. Westland Square is located to the northwest of this property and the rental rates in Westland Square range from $7.00 to $9.50 per square foot. The rental rates in Mills Corner which is located at the other edge of subject neighborhood range from $10.00 to $12.00 per square foot. The Woodberry Plaza is an older center that has been expanded and renovated. Winn-Dixie and Revco are the major tenants and the rental rate for the shops is from $6.50 to $9.25 per square foot. Sunset Court Shopping Center is located to the northwest on Sunset Boulevard with Eckerds being the major tenant and the rents ranging from $6.00 to $8.00 per square foot. The subject property has 14 shops and the rental rates range from $4.50 to $7.67 per square foot for the shops. There are two out lots that are being rented to Columbia Farms and Savannah's. At this time there are several shops that are vacant with the total space available containing 20,050 square feet. There is a store, that contains 11,500 square feet, vacant at this time. Another store has about 4,000 square feet that is available. The occupancy rate for this center has operated at a high level in the past. The rental rate for the Bi Lo Store is at $3.65 per square foot while the rental rate at the Revco Store is at $4.50 per square foot. However, overages are being paid at the Revco Store. Trends: The subject property is located in the downtown area of West Columbia. This is an older neighborhood and there has been some growth that has occurred as several older buildings have been renovated and restaurants have moved into the neighborhood. The Bridgepoint Condominium Project is a high-rise condominium building that is located on Sunset Boulevard at Meeting Street. The downtown area of Columbia is located across the river from Sunset Boulevard. The neighborhood is considered to be stable and it is thought that this stability will be maintained in the future. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Capitol Square Sunset Court Mills Corner ----------------------- ----------------------- ---------------------- b. Street NEC Augusta Rd. & 431 Sunset Blvd. 2247 Sunset Blvd. Oak Dr. ----------------------- ----------------------- ---------------------- c. City West Columbia, SC West Columbia, SC West Columbia, SC ----------------------- ----------------------- ---------------------- d. Distance from subject N/A 3 miles 6 miles ----------------------- ----------------------- ---------------------- e. Contact Edens Avant, Inc. Edens Avant, Inc. Rex Pollard ----------------------- ----------------------- ---------------------- f. Phone 803-779-4420 803-779-4420 803-779-7777 ----------------------- ----------------------- ---------------------- 2. Attributes a. Year built 1974 (Reh. 1990) 1977 1995 ----------------------- ----------------------- ---------------------- b. Net sq. Ft. 79,921 54,704 50,000 ----------------------- ----------------------- ---------------------- c. # building 1 1 1 ----------------------- ----------------------- ---------------------- d. # stories 1 1 1 ----------------------- ----------------------- ---------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A ----------------------- ----------------------- ---------------------- f. # elevators N/A N/A N/A ----------------------- ----------------------- ---------------------- g. Parking Adequate Adequate Adequate ----------------------- ----------------------- ---------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ----------------------- ----------------------- ---------------------- I. Vacancy % 25.09% 13.09% 0% ----------------------- ----------------------- ---------------------- j. Anchors, if Retail Bi-Lo, Revco Eckerds Piggly Wiggly ----------------------- ----------------------- ---------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Woodberry Plaza Westland Square ---------------------- ---------------------- b. Street 3234 August Road 2250 Sunset Blvd. ---------------------- ---------------------- c. City West Columbia, SC West Columbia, SC ---------------------- ---------------------- d. Distance from subject 4 miles 3 miles ---------------------- ---------------------- e. Contact Edens Avant, Inc. Edens Avant, Inc. ---------------------- ---------------------- f. Phone 803-779-4422 803-779-4420 ---------------------- ---------------------- 2. Attributes a. Year built 1976 - Renov. 1994 1987 ---------------------- ---------------------- b. Net sq. Ft. 82,920 62,735 ---------------------- ---------------------- c. # building 1 1 ---------------------- ---------------------- d. # stories 1 1 ---------------------- ---------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A ---------------------- ---------------------- f. # elevators N/A N/A ---------------------- ---------------------- g. Parking Adequate Adequate ---------------------- ---------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block ---------------------- ---------------------- I. Vacancy % 0% 96.46% ---------------------- ---------------------- j. Anchors, if Retail Winn-Dixie, Revco, Big Lots Food Lion/Revco ---------------------- ----------------------
Comments: Comparables No. 1 and 4 are located on Sunset Boulevard, but are about 3 miles northwest of subject property. Comparable No. 1 does not have a food store, but the food store is now occupied by Flowers and Things. Comparables No. 2 and 3 are located on Augusta Road and are at the other end of the neighborhood. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Asking Rental Rate a. Anchor Space $3.65 - $4.50 N/A $8.25 ----------------------- ----------------------- ---------------------- b. Shop Space $3.50 - $7.50 $6.00 - $8.00 $10.00 - $12.00 ----------------------- ----------------------- ---------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ----------------------- ----------------------- ---------------------- 3. Rent Concessions None None None ----------------------- ----------------------- ---------------------- 4. Effective Rent $3.50 - $7.50 $6.00 - $8.00 $10.00 - $12.00 ----------------------- ----------------------- ---------------------- 5. TI Allowance None None None ----------------------- ----------------------- ---------------------- 6. Expense Stop None None None ----------------------- ----------------------- ---------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 - 5 years (shop) 3 - 5 years (shop) ----------------------- ----------------------- ---------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% - 7.00% ----------------------- ----------------------- ---------------------- 9. Percentage Rent Bi-Lo, Revco, Family (per lease terms) Dollar Store Eckerds Piggly Wiggly ----------------------- ----------------------- ---------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A ----------------------- ----------------------- ---------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A ----------------------- ----------------------- ---------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A inferior superior ----------------------- ----------------------- ---------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Asking Rental Rate a. Anchor Space $5.81 - $6.50 $6.60 - $6.75 ---------------------- ---------------------- b. Shop Space $6.50 - $8.00 $7.00 - $9.50 ---------------------- ---------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net ---------------------- ---------------------- 3. Rent Concessions None None ---------------------- ---------------------- 4. Effective Rent $6.50 - $9.25 $7.00 - $9.50 ---------------------- ---------------------- 5. TI Allowance None None ---------------------- ---------------------- 6. Expense Stop None None ---------------------- ---------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 - 5 years (shop) ---------------------- ---------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% ---------------------- ---------------------- 9. Percentage Rent (per lease terms) Winn-Dixie, Revco Food Lion, Revco ---------------------- ---------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A ---------------------- ---------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A ---------------------- ---------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) similar similar ---------------------- ----------------------
D. EXPLAIN RANKING/COMMENTS: Comparable No. 1 is considered to be inferior to subject as the Winn-Dixie Store has moved out of the center and this center does not have a food store. Comparable No. 2 is considered to be superior as this is a new center and the rental rates for the shops are higher than subject. Comparables No. 3 and 4 are considered to be similar to subject. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Sunset Court Location: 2247 Sunset Boulevard West Columbia, SC Year Built: 1977 Total Size: 54,704 SF Vacant Space: 7,163 SF Vacancy Rate: 13.09% Rental Range $6.00 to $8.00 Tenant Expenses: Triple Net Remarks: Eckerds is the anchor tenant. Winn-Dixie moved out approximately 5 years ago. Other tenants are; Pizza Hut Carry Out, Sunset Video, Yan Ping Restaurant, Flexpy's Lounge and Uniforms. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Mills Corner Shopping Center Location: NEC Augusta Road and Oak Drive West Columbia, South Carolina Year Built: 1995 Total Size: 42,845 SF Vacant Space: 1,200 SF Vacancy Rate: 2.8% Rental Range: $10.00 to $12.00 Average Rent: $10.35 Tenant Expenses: Pass throughs for real estate taxes, hazard insurance and CAM Remarks: This is a strip center that was completed in 1995. McDonalds and Moovies occupy outlots. One small space is vacant. A NationsBank kiosk is located on site. Anchor tenant is Piggly Wiggly, and locals include Subway, Cost Cutters, Burnette's Cleaners, and ABC store, The Grove Bistro, and Imperial China Restaurant. 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Woodberry Plaza Location: NEC Augusta Road and Woodberry Drive West Columbia, South Carolina Year Built: 1974 Total Size: 85,145 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $6.50 to 9.25 Average Rent: $7.75 Tenant Expenses: Pass throughs for real estate taxes, hazard insurance and CAM Remarks: This is a strip center with Winn-Dixie and Revco as anchor tenants. A new Winn-Dixie was recently completed, and the old Winn-Dixie space is currently leased to Big Lots. 7 Comparable Rental No. 4 ================================================================================ [GRAPHIC OMITTED] Name: Westland Square Location: 2250 Sunset Boulevard West Columbia, South Carolina Year Built: 1987 Total Size: 62,735 SF Vacant Space: 2,250 SF Vacancy Rate: 3.59% Local Rent Range: $7.00 - $9.50 Tenant Expenses: Triple Net Remarks: This center is anchored by Food Lion and Revco. The Food Lion store was expanded in 1996. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Eastage Shopping Capitol Square St. Andrews Crossing Ctr. ---------------------- ----------------------- --------------------- b. Street Address NWC Whiskey Rd. & 431 Sunset Blvd. 817 St. Andrews Road Eastgate Dr. ---------------------- ----------------------- --------------------- c. City West Columbia, SC Columbia, SC Aiken, SC ---------------------- ----------------------- --------------------- d. Distance from Subject N/A 8 miles 56 miles ---------------------- ----------------------- --------------------- 2. Attributes a. Year Built 1974 (Reh. 1990) 1994 1995 ---------------------- ----------------------- --------------------- b. Net sq. feet 79,921 66,910 SF 75,716 SF ---------------------- ----------------------- --------------------- c. # Buildings 1 1 1 ---------------------- ----------------------- --------------------- d. # of Stories 1 1 1 ---------------------- ----------------------- --------------------- e. Vacancy % 25.09% 0% 5.00% ---------------------- ----------------------- --------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 ---------------------- ----------------------- --------------------- b. Sales Price PSF N/A $97.89 $88.16 ---------------------- ----------------------- --------------------- c. Cap. Rate N/A 9.69% 9.86% ---------------------- ----------------------- --------------------- d. Date N/A 05-24-94 09-28-95 ---------------------- ----------------------- --------------------- e. NOI at time of Sale N/A $634,797 $657,896 ---------------------- ----------------------- --------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A superior similar ---------------------- ----------------------- --------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name One Norman Center Paw Creek Commons ---------------------- ---------------------- b. Street Address 19706 One Norman E/S Little Rock Road Blvd. at Freedom Drive ---------------------- ---------------------- c. City Cornelius, NC Charlotte, NC ---------------------- ---------------------- d. Distance from Subject 100 miles 92 miles ---------------------- ---------------------- 2. Attributes a. Year Built 1993 1996 ---------------------- ---------------------- b. Net sq. feet 54,185 SF 66,050 SF ---------------------- ---------------------- c. # Buildings 1 1 ---------------------- ---------------------- d. # of Stories 1 1 ---------------------- ---------------------- e. Vacancy % 0% 2.73% ---------------------- ---------------------- 3. Sales Information a. Sales Price $4,650,000 $5,384,000 ---------------------- ---------------------- b. Sales Price PSF $85.82 $77.52 ---------------------- ---------------------- c. Cap. Rate 9.68% 9.61% ---------------------- ---------------------- d. Date 10-12-95 03-25-97 ---------------------- ---------------------- e. NOI at time of Sale $450,188 $517,412 ---------------------- ---------------------- 4. Rank Relative to Subject (inferior, similar, superior) similar superior ---------------------- ----------------------
Explain Ranking/Comments: Comparables No. 1 and 4 are ranked superior to subject. The reason for this is because of the location of these comparables being superior to subject. Comparable No. 3 is located in a commercial area that is larger than subject, but it is similar. Comparable No. 2 is similar to subject. 9 Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS: 6012 -1 -1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 10 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] TMS: Name: Eastgate Shopping Center Location: Northwest Corner of Whiskey Road & Eastgate Drive Aiken, SC Grantor: Southwest U.S. Retail, LP Grantee: PDG Aiken Partners, LP Deed Reference: N/A Date: September 28, 1995 Sales Price: $6,675,000 Adjusted Sales Price: $6,675,000 Size building: 75,716 Sales Price per S.F.: $88.16 Size Land (Acres): 8.79 Size Land (S.F.): 382,892 Year Built: 1995 Land/Building Ratio: 5.06 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $782,704 Effective Gross Income: $782,704 EGIM: 8.53 Net Operating Income: $657,896 Overall Rate: 9.86% Verification: Public Records Type of Purchaser: Private Investor Comments: Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. 11 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. 12 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] TMS: 59-231-22,23 pt. Name: Paw Creek Commons Location: East side of Little Rock Road at Freedom Drive Grantor: Paw Creek, LLC Grantee: Paw Creek Crossing Limited Partnership Deed Reference: Book 8988, Page 519 Date: March 25, 1997 Sales Price: $5,120,000 Adjusted Sales Price: $5,384,000 Size building: 66,050 Sales Price per S.F.: $77.52 Size Land (Acres): 9.82 Size Land (S.F.): 427,759 Year Built: 1996 Land/Building Ratio: 6.48 to 1 Utilities: Municipal Zoning: CC, Commercial Center Financing: Cash to Seller Gross Potential Income: $568,840 Effective Gross Income: $552,054 Gross Income Multiple: 9.00 EGIM: 9.27 Net Operating Income: $517,412 Overall Rate: 9.61% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was pre-construction. The sales price has been adjusted to reflect this by using 50 basis points in the capitalization rate (.1011 minus .0050 equals .0961). The major tenants are Winn-Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. The income from anchor tenants is 79.41 percent gross income. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 Comparable Rentals ------------------ [GRAPHIC OMITTED] Improved Sales Map ------------------ [GRAPHIC OMITTED] Site Plan --------- [GRAPHIC OMITTED] EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: CAPITOL SQUARE 431 SUNSET BOULEVARD WEST COLUMBIA, SC 29169 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ CLOTH WORLD #1126 FCA OF OHIO, INC. 626-10 12,000 04/01/95 03/31/00 3.50 04/01/92 42,000.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ Available 626-20 2,900 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ CAROLINA DRYCLEANERS THRESIAMMA J. KAROTTUKUNNEL& 626-30 2,046 02/01/96 01/31/01 7.67 02/01/96 15,692.88 9.00 02/01/99 18,414.00 - ------------------------------------------------------------------------------------------------------------------------ Available 626-40 1,650 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ COLUMBIA METRO TREATMENT COLUMBIA METRO TREATMENT CENT 626-50 2,800 10/01/92 09/30/02 0.00 0.00 0.00 0.00 5.35 12/01/92 14,979.96 5.55 10/01/97 15,540.00 5.85 10/01/99 16,380.00 6.00 10/01/01 16,800.00 - ------------------------------------------------------------------------------------------------------------------------ COIN LAUNDRY COIN LAUNDRY 626-60 2,000 03/01/96 02/28/01 0.00 0.00 6.25 03/01/91 12,499.92 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ CLOTH WORLD #1126 FCA OF OHIO, INC. PRS 1975 PRS 1975 Full 0 04/01/90 03/31/92 3.50 3.00 1,400,000 Y 04/01/92 03/31/95 3.50 3.00 0 Y 04/01/00 03/31/05 4.02 3.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ CAROLINA DRYCLEANERS THRESIAMMA J. KAROTTUKUNNEL& Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ COLUMBIA METRO TREATMENT COLUMBIA METRO TREATMENT CENT Full 0 Full 0 Full 0 10/01/97 09/30/02 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ COIN LAUNDRY COIN LAUNDRY Full 0 Full 0 Full 0 03/01/01 02/28/06 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: CAPITOL SQUARE 431 SUNSET BOULEVARD WEST COLUMBIA, SC 29169 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ COIN LAUNDRY COIN LAUNDRY 626-60 2,000 03/01/96 02/28/01 6.75 03/01/94 13,500.00 7.25 03/01/96 14,499.96 - ------------------------------------------------------------------------------------------------------------------------ J.D.'S FASHIONS #6 WILLIE HARRIS & CHA Y HARRIS 626-80 2,800 01/01/97 12/31/99 0.00 0.00 0.00 0.00 6.00 01/01/94 16,800.00 6.50 01/01/98 18,204.00 7.00 01/01/98 19,596.00 - ------------------------------------------------------------------------------------------------------------------------ Available 626-90 4,000 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ JIN JIN CHINESE RESTAURANT TONG LIN 626-100 2,000 04/01/95 03/31/98 7.50 04/01/95 15,000.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ FAMILY DOLLAR STORE #2735 FAMILY DOLLAR STORES OF W. CO 626-110 6,625 08/04/95 12/31/01 4.35 08/04/95 28,799.40 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ BI-LO, INC. #071 BI-LO, INC. 626-130 22,500 12/20/90 12/31/10 3.65 01/01/91 82,125.00 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ COIN LAUNDRY COIN LAUNDRY Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ J.D.'S FASHIONS #6 WILLIE HARRIS & CHA Y HARRIS Full 0 Full 0 Full 0 01/01/97 12/31/99 0.00 6.00 280,000 0.00 0.06 280,000 0.00 0.06 303,400 0.00 0.06 0 0.00 0.06 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ JIN JIN CHINESE RESTAURANT TONG LIN Full 0 Full 0 Full 0 04/01/98 03/31/01 8.25 0.00 0 04/01/01 03/31/05 9.00 0.00 0 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ FAMILY DOLLAR STORE #2735 FAMILY DOLLAR STORES OF W. CO PRS 1996 None 0 None 0 01/01/02 12/31/06 5.45 3.00 960,000 Y 01/01/07 12/31/11 5.83 3.00 0 Y 01/01/12 12/31/16 6.21 3.00 0 Y 01/01/17 12/31/21 6.58 3.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ BI-LO, INC. #071 BI-LO, INC. Full 0 Full 0 Full 0 01/01/11 12/31/15 3.90 1.00 8,212,500 Y - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: CAPITOL SQUARE 431 SUNSET BOULEVARD WEST COLUMBIA, SC 29169 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ BI-LO, INC. #071 BI-LO, INC. 626-130 22,500 12/20/90 12/31/10 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ REVCO #0573 REVCO DISCOUNT DRUG CENTERS, 626-140 7,100 02/01/91 01/31/01 4.50 02/01/91 31,950.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ Available 626-150 11,500 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ COLUMBIA FARMS COLUMBIA FARMS 626-160 0 P 11/01/87 10/31/98 0.00 0.00 0.00 11/01/92 20,160.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ SAVANNAH'S DIANE F. SMITH 626-170 0 P 05/01/94 04/30/97 0.00 11/01/92 22,800.00 0.00 0.00 0.00 05/01/94 25,080.00 - ------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 59,871 Current Annual Base Rent 307,087.20 Available. 20,050 Total..... 79,921 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ BI-LO, INC. #071 BI-LO, INC. Full 0 Full 0 Full 0 01/01/16 12/31/20 4.15 1.00 0 Y 01/01/21 12/31/25 4.40 1.00 0 Y 01/01/26 12/31/30 4.65 1.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ REVCO #0573 REVCO DISCOUNT DRUG CENTERS, PRS 1974 PRS 1979 Full 0 02/01/01 01/31/06 5.00 2.00 1,597,500 Y 02/01/06 01/31/11 5.50 2.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ COLUMBIA FARMS COLUMBIA FARMS Full 0 Full 0 Full 0 11/01/92 10/31/95 12.12 0.00 0 11/01/95 10/31/98 12.12 0.00 0 11/01/98 10/31/01 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ SAVANNAH'S DIANE F. SMITH Full 0 None 0 None 0 05/01/97 04/30/00 0.00 0.00 0 05/01/00 04/30/03 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Sunset Boulevard - Looking East [GRAPHIC OMITTED] Sunset Boulevard - Looking West [GRAPHIC OMITTED] Meeting Street - Looking South [GRAPHIC OMITTED] Meeting Street - Looking North [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Rear View - Leaphart Street [GRAPHIC OMITTED] Subject - Savannahs's This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study CLUSTERS OF WHITEHALL 300 St. Andrews Road Columbia, Lexington County, South Carolina Prepared by O. Marshall Dodds, MAI Date of Market Study - April 29, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] April 29, 1997 Mr. Steven R. Maeglin Vice President Morgan & Stanley Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Clusters of Whitehall 300 St. Andrews Road Columbia, Lexington County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that forms the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on April 29, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 68,029 square feet of leasable area. The center was constructed in 1973 originally and the major tenants were Winn-Dixie, Revco, and Dodd `s Variety Stores. In 1988, the center was renovated after Winn-Dixie and Dodd's Variety Store vacated the premises. The center was renovated with the major tenants being Fresh Market and Revco, which had expanded into the larger variety store. Since then, Fresh Market has vacated the premises and Revco is the anchor tenant. The shopping center is currently 90.26% occupied as Fresh Market is continuing to pay the rental on the store. The size of the Fresh Market Store was 18,000 square feet. If this space is included with the other vacant space, the center is 63.80% occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds ------------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY ================================================================================ Regional Perspective Columbia is the state capital with the State House being located in downtown Columbia. Also, the University of South Carolina Campus is located in the downtown area. Fort Jackson, which is a large U.S. Army Training Facility is located in the eastern section of the Metropolitan area. The city has numerous specialized office activities such as: insurance, consulting services, advertising, marketing, printing and financial services. Government, distribution, finance and transportation are all important to Columbia, although none are preeminent. Geography also gives Columbia a strategic location in the industrial and commercial spheres. The subject property is located in Lexington County and the unemployment rate was 2.9% in February, 1997. Neighborhood and Site The subject neighborhood is located in the Whitehall section of the St. Andrews area. Development of the Whitehall section began in approximately in 1965 and has been a desirable area for single family dwellings. There are several multi-family properties that are located throughout the neighborhood such as the Clusters, which is a condominium project and the Polo Run Apartments. The price range of the houses in Whitehall section generally range from $85,000 to $200,000. The Allied Chemical Plant is located on St. Andrews Road in the neighborhood. Physical features are as follows: 1. Size 6.56 acres or 285,754 square feet 2. Identity 300 St. Andrews Road (between Bush River Road and St. Andrews Road) TMS #3636-01-001 3. Shape irregular 4. Topography generally level, but slopes downward from St. Andrews Road toward Bush River Road 5. Accessability good 6. Utilities municipal Physical Description Building features are as follows: 1. Size (net) 68,029 square feet 2. Layout & Design 1 story-food store, drug store, 21 shops 3. Parking Spaces 311 3.57 spaces per 1,000 square feet of net area 4. Construction brick and glass front with concrete block on side and rear and metal seamed roof 1 Market Position and Marketability Conclusions The St. Andrews area is the second largest retail submarket in the Columbia MSA with 25 of the 158 completed retail structures surveyed. Dutch Square Mall, one of the regional malls in the MSA, measures 620,000 square feet and is located in this submarket. This area contains 17.3% or 2,282,887 square feet of the retail space surveyed, an increase of 1.8% in gross leasable space since the 1995 survey. Broad River Center added 48,650 square feet to this submarket. Four centers had a change in size and subtracted 1,823 square feet from this area and one center, 5,500 square feet, was deleted. The average rental rate on a new lease for the St. Andrews area is $8.50 per square foot. No new properties are under construction or planned for this submarket. The subject property is located in the middle section of the neighborhood being around the intersection of St. Andrews Road and Bush River Road. The location of subject is convenient to the single family dwellings that are located throughout the neighborhood and several of the multi-family projects. The St. Andrews Crossing is located at St. Andrews Road and I-26 with Kroger Store being the major tenant as rental rates for the shops ranging from $10.00 to $12.00 per square foot. The St. Andrews Square located at St. Andrews Road and Jamil Road has Piggly Wiggly and Eckerds as the major tenant. The shops have rental rates that range from $9.00 to $12.00 per square foot. Richardson Plaza which is located on St. Andrews Road between Ashland Road and Cindy Road has Food Lion and Rite-Aid as major tenants, but Rite-Aid has vacated the premises even though they are continuing to pay rent. The rental rates for the shops range from $8.00 to $12.00 per square foot. Comparable No. 4 is the Widewater Square and is located around the intersection of St. Andrews Road and Broad River Road. The major tenants are Bi-Lo and Revco with the rental rates ranging from $5.00 to $11.00 per square foot. The subject property has 21 shops. The rental rates from $6.50 to $10.00 per square foot. These rates are reasonable rental rates for the neighborhood. The rental rate for the Revco Store is at $6.50 per square foot and this tenant is paying overage rentals. The rental rate for the Fresh Market Store is at $6.50 per square foot. The subject property has operated at a high occupancy rate excluding the vacant Fresh Market Store. The location of subject is strategic within the neighborhood and convenient to shoppers throughout the neighborhood. Trends: The subject property is located in the St. Andrews section of the metropolitan area of Columbia. The development of the Whitehall area began approximately 30 years ago and the neighborhood has had high demand and desirability. There are commercial developments that are located throughout the neighborhood on the major traffic arteries. Allied Chemical has a large plant located on St. Andrews Road. All trends are favorable at this time and expected to continue. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Clusters of Whitehall St. Andrews Crossing St. Andrews Square Richardson Plaza ---------------------- ---------------------- ----------------------- -------------------- b. Street 252 St. Andrews Rd. 817 St. Andrews Road 1978 St. Andrews Rd. 570 St. Andrews Rd. ---------------------- ---------------------- ----------------------- -------------------- c. City Columbia, SC Columbia, SC Columbia, SC Columbia, SC ---------------------- ---------------------- ----------------------- -------------------- d. Distance from subject N/A 1/2 mile 3/4 mile 1 mile ---------------------- ---------------------- ----------------------- -------------------- e. Contact EastCoast Edens Avant, Inc. Keenen Co. The Oglum Co. Development ---------------------- ---------------------- ----------------------- -------------------- f. Phone 803-779-4420 803-254-2300 803-779-7777 803-749-0079 ---------------------- ---------------------- ----------------------- -------------------- 2. Attributes a. Year built 1973 (Reh. 1988) 1994 1978 1981 ---------------------- ---------------------- ----------------------- -------------------- b. Net sq. Ft. 68,029 66,910 60,000 108, 838 ---------------------- ---------------------- ----------------------- -------------------- c. # building 2 2 2 1 ---------------------- ---------------------- ----------------------- -------------------- d. # stories 1 1 1 1 ---------------------- ---------------------- ----------------------- -------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A N/A ---------------------- ---------------------- ----------------------- -------------------- f. # elevators N/A N/A N/A N/A ---------------------- ---------------------- ----------------------- -------------------- g. Parking Adequate Adequate Adequate Adequate ---------------------- ---------------------- ----------------------- -------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ---------------------- ---------------------- ----------------------- -------------------- I. Vacancy % 9.74% 6.13% 0% 13.05% ---------------------- ---------------------- ----------------------- -------------------- j. Anchors, if Retail Revco Kroger Piggly Wiggly, Eckerds Food Lion ---------------------- ---------------------- ----------------------- -------------------- ---------------------- ---------------------- ----------------------- --------------------
COMPARABLE 4 ------------ 1. Identification a. Name Widewater Square --------------------- b. Street 3315 Broad River Rd. --------------------- c. City Columbia, SC --------------------- d. Distance from subject 2 miles --------------------- e. Contact Edens Avant, Inc. --------------------- f. Phone 803-779-4420 --------------------- 2. Attributes a. Year built 1976 --------------------- b. Net sq. Ft. 95,700 --------------------- c. # building 3 --------------------- d. # stories 1 --------------------- e. Avg. Floor plate size N/A (sq. Ft.), if office --------------------- f. # elevators N/A --------------------- g. Parking Adequate --------------------- h. Construction Type Brick/Concrete Block --------------------- I. Vacancy % 4.70% --------------------- j. Anchors, if Retail Bi-Lo, Revco --------------------- --------------------- Comments: These comparable are located in subject neighborhood and are similar to subject. However, the Food Store in these comparable centers is considered to be a national tenant, whereas, the Fresh Market is considered to be a regional or local tenant. While the Fresh Market has vacated the premises, the rent is continuing to be paid. The small shops in subject property are similar to the small shops in each of these shopping centers. The Revco Store in subject is paying overage rentals at this time. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space $6.50 N/A N/A N/A --------------------- --------------------- ---------------------- --------------------- b. Shop Space $4.44 - $9.50 $10.00 - $12.00 $9.00 - $12.00 $8.00 - $12.00 --------------------- --------------------- ---------------------- --------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net --------------------- --------------------- ---------------------- --------------------- 3. Rent Concessions None None None None --------------------- --------------------- ---------------------- --------------------- 4. Effective Rent $4.44 - $9.50 $10.00 - $12.00 $9.00 - $12.00 $8.00 - $12.00 --------------------- --------------------- ---------------------- --------------------- 5. TI Allowance None None None None --------------------- --------------------- ---------------------- --------------------- 6. Expense Stop None None None None --------------------- --------------------- ---------------------- --------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 - 5 years (shop) 3 - 5 years (shop) 3 - 5 years (shop) --------------------- --------------------- ---------------------- --------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% - 7.00% 5.00% to 7.00% --------------------- --------------------- ---------------------- --------------------- 9. Percentage Rent (per lease terms) Revco Kroger Piggly Wiggly, Eckerds Food Lion --------------------- --------------------- ---------------------- --------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A --------------------- --------------------- ---------------------- --------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A --------------------- --------------------- ---------------------- --------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A superior similar similar --------------------- --------------------- ---------------------- ---------------------
COMPARABLE 4 ------------ 1. Asking Rental Rate a. Anchor Space N/A -------------------- b. Shop Space $5.00 - $11.00 -------------------- 2. Lease Type (Gross/Net) Triple Net -------------------- 3. Rent Concessions None -------------------- 4. Effective Rent $5.00 - $11.00 -------------------- 5. TI Allowance None -------------------- 6. Expense Stop None -------------------- 7. Length of Lease Term 3 - 5 years (shop) -------------------- 8. Commissions 5.00% to 7.00% -------------------- 9. Percentage Rent (per lease terms) Bi-Lo, Revco -------------------- 10. Historical Annual Absorption/sq.ft. N/A -------------------- 11. Annual Operating Expense psf (Including taxes) N/A -------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) similar -------------------- D. EXPLAIN RANKING/COMMENTS: Comparable No. 1 has been ranked as superior to subject. The reason for this is because this center is a newer center and is located at the intersection of St. Andrews Road and I-26. The major tenant is Kroger Stores and rental rates being received from the shops are higher than the rental rates being received from the shops in subject. The other comparables are ranked as similar and these centers are similar to subject. The rental rates for the shops in subject are within the range of rental rates in these centers. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 [GRAPHIC OMITTED] Name: St. Andrews Crossing Location: 817 St. Andrews Road Columbia, SC Year Built: 1994 Total Size: 66,910 SF Vacant Space: 4,100 SF Vacancy Rate: 6.13% Rental Range: $10.00 to $12.00 Tenant Expenses: Triple Net Remarks: Kroger is major tenant. Located on St. Andrews Road at I-26. Has operated at a high occupancy level. 5 Comparable Rental No. 2 [GRAPHIC OMITTED] Name: St. Andrews Square Location: 1978 St. Andrews Road Columbia, South Carolina Year Built: 1978 Total Size: 60,000 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $9.00 to $12.00 Tenant Expenses: Triple Net Remarks: Major tenants are Piggly Wiggly and Eckerds. Located on St. Andrews and Jamil Road. Has operated at a high occupancy level. 6 Comparable Rental No. 3 [GRAPHIC OMITTED] Name: Richardson Plaza Location: 570 St. Andrews Road Columbia, South Carolina Year Built: 1981 Total Size: 108,838 SF Vacant Space: 14,200 SF Vacancy Rate: 13.05% Rental Range: $13.05 Tenant Expenses: Triple Net Remarks: The Food Lion Store expanded in 1995. Rite-Aid has vacated their store, but pays rent. Several other tenants have moved out, but were replaced. 7 Comparable Rental No. 4 [GRAPHIC OMITTED] Name: Widewater Square Location: 3315 Broad River Road Columbia, South Carolina Year Built: 1976 Total Size: 95,700 SF Vacant Space: 4,500 SF Vacancy Rate: 4.70% Local Rent Range: $5.00 - $11.00 Tenant Expenses: Triple Net Remarks: This center has been renovated with new front, parking lot was re-sealed and stripped. Occupancy rate has been high. Major tenants are Bi-Lo and Revco. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Clusters of Whitehall St. Andrews Crossing Eastgate Shopping Center One Norman Center ---------------------- -------------------- ------------------------ ---------------------- b. Street Address NWC Whiskey Rd. & 19706 One Norman Blvd. 252 St. Andrews Road 817 St. Andrews Road Eastgate Dr. ---------------------- -------------------- ------------------------ ---------------------- c. City Columbia, SC Columbia, SC Aiken, SC Cornelius, NC ---------------------- -------------------- ------------------------ ---------------------- d. Distance from Subject N/A 1/2 miles 56 miles 100 miles ---------------------- -------------------- ------------------------ ---------------------- 2. Attributes a. Year Built 1973 (Reh. 1988) 1994 1995 1993 ---------------------- -------------------- ------------------------ ---------------------- b. Net sq. feet 68,029 66,910 SF 75,716 SF 54,185 SF ---------------------- -------------------- ------------------------ ---------------------- c. # Buildings 2 1 1 1 ---------------------- -------------------- ------------------------ ---------------------- d. # of Stories 1 1 1 1 ---------------------- -------------------- ------------------------ ---------------------- e. Vacancy % 9.74% 0% 7.21% 6.98% ---------------------- -------------------- ------------------------ ---------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 $4,650,000 ---------------------- -------------------- ------------------------ ---------------------- b. Sales Price PSF N/A $97.89 $88.16 $85.82 ---------------------- -------------------- ------------------------ ---------------------- c. Cap. Rate N/A 9.69% 9.86% 9.68% ---------------------- -------------------- ------------------------ ---------------------- d. Date N/A 05-25-94 09-28-95 10-12-95 ---------------------- -------------------- ------------------------ ---------------------- e. NOI at time of Sale N/A $634,797 $782,704 $474,591 ---------------------- -------------------- ------------------------ ---------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A superior similar similar ---------------------- -------------------- ------------------------ ----------------------
COMPARABLE 4 ------------ 1. Identification a. Name Paw Creek Commons ---------------------- b. Street Address E/S Little Rock Road at Freedom Drive ---------------------- c. City Charlotte, NC ---------------------- d. Distance from Subject 92 miles ---------------------- 2. Attributes a. Year Built 1996 ---------------------- b. Net sq. feet 66,050 SF ---------------------- c. # Buildings 1 ---------------------- d. # of Stories 1 ---------------------- e. Vacancy % 2.73% ---------------------- 3. Sales Information a. Sales Price $5,120,000 ---------------------- b. Sales Price PSF $77.52 ---------------------- c. Cap. Rate 9.60% ---------------------- d. Date 03-25-97 ---------------------- e. NOI at time of Sale ---------------------- 4. Rank Relative to Subject (inferior, similar, superior) superior ---------------------- Explain Ranking/Comments: Comparables No. 1 and 4 are ranked superior to subject. The reason for this is because of the location of these comparables being superior to subject. Comparable No. 3 is located in a commercial area that is larger than subject, but it is similar. Comparable No. 2 is similar to subject. 9 Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: 6012 -1 -1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 10 Comparable Sale No. 2 [GRAPHIC OMITTED] TMS: Name: Eastgate Shopping Center Location: Northwest Corner of Whiskey Road & Eastgate Drive Aiken, SC Grantor: Southwest U.S. Retail, LP Grantee: PDG Aiken Partners, LP Deed Reference: N/A Date: September 28, 1995 Sales Price: $6,675,000 Adjusted Sales Price: $6,675,000 Size building: 75,716 Sales Price per S.F.: $88.16 Size Land (Acres): 8.79 Size Land (S.F.): 382,892 Year Built: 1995 Land/Building Ratio: 5.06 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $782,704 Effective Gross Income: $782,704 EGIM: 8.53 Net Operating Income: $657,896 Overall Rate: 9.86% Verification: Public Records Type of Purchaser: Private Investor Comments: Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. 11 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. 12 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] TMS: 59-231-22,23 pt. Name: Paw Creek Commons Location: East side of Little Rock Road at Freedom Drive Grantor: Paw Creek, LLC Grantee: Paw Creek Crossing Limited Partnership Deed Reference: N/A Date: March 25, 1997 Sales Price: $5,120,000 Adjusted Sales Price: $5,384,000 Size building: 66,050 Sales Price per S.F.: $77.52 Size Land (Acres): 9.82 Size Land (S.F.): 427,759 Year Built: 1996 Land/Building Ratio: 6.48 to 1 Utilities: Municipal Zoning: CC, Commercial Center Financing: Cash to Seller Gross Potential Income: $568,840 Effective Gross Income: $552,054 Gross Income Multiple: 9.00 EGIM: 9.27 Net Operating Income: $517,412 Overall Rate: 9.61% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was pre-construction. The sales price has been adjusted to reflect this by using 50 basis points in the capitalization rate (.1011 minus .0050 equals .0961). The major tenants are Winn-Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. The income from anchor tenants is 79.41 percent of gross income. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject [GRAPHIC OMITTED] Comparable Rentals [GRAPHIC OMITTED] Improved Sales Map [GRAPHIC OMITTED] Site Plan EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: CLUSTERS OF WHITEHALL 300 ST. ANDREWS ROAD COLUMBIA, SC 29210-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- Available 641-10 1,481 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- Available 641-20 1,144 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- NATIONAL SUPPORT CENTER RONALD E. JOHNSON 641-30 1,440 07/01/95 06/30/98 5.50 07/01/95 7,920.00 - -------------------------------------------------------------------------------------------------------------------------- SANDLAPPER BAR & GRILL GARY R. POELLIEN, JR. 641-40 1,144 06/01/95 05/31/98 0.00 0.00 0.00 0.00 8.00 09/01/93 9,152.04 8.50 07/01/96 9,723.96 - -------------------------------------------------------------------------------------------------------------------------- REVCO #1156 REVCO DISCOUNT DRUG STORES OF 641-50 10,000 03/01/90 02/28/98 0.00 0.00 6.00 03/01/90 60,000.00 6.50 03/01/94 65,000.04 - -------------------------------------------------------------------------------------------------------------------------- RESEARCH ASSOCIATES RESEARCH ASSOCIATES, A SOLE P 641-60 5,400 11/17/96 04/30/97 4.44 02/01/97 24,000.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- FRESH MARKET, INC. THE FRESH MARKET INC. 641-70 18,000 07/20/87 10/31/97 0.00 0.00 6.50 12/01/87 117,000.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ NATIONAL SUPPORT CENTER RONALD E. JOHNSON Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ SANDLAPPER BAR & GRILL GARY R. POELLIEN, JR. Full 0 Full 0 Full 0 06/01/98 05/31/01 0.00 5.00 250,000 0.00 5.00 0 0.00 5.00 0 0.00 5.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ REVCO #1156 REVCO DISCOUNT DRUG STORES OF PRS 1977 None 0 Full 0 03/01/90 02/28/98 6.50 2.00 2,000,000 0.00 2.00 0 0.00 2.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ RESEARCH ASSOCIATES RESEARCH ASSOCIATES, A SOLE P None 0 None 0 None 0 05/01/97 10/31/97 4.44 0.00 0 11/01/97 04/30/98 4.44 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ FRESH MARKET, INC. THE FRESH MARKET INC. PRS 1986 PSR 1986 Fixed 0 11/01/97 10/31/02 7.00 1.00 6,475,000 11/01/02 10/31/07 7.50 1.00 0 11/01/07 10/31/12 8.00 1.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: CLUSTERS OF WHITEHALL 300 ST. ANDREWS ROAD COLUMBIA, SC 29210-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- GARDEN PARTY A GARDEN PARTY 641-80 1,500 04/01/91 02/28/98 0.00 0.00 0.00 0.00 8.50 06/01/91 12,756.00 9.00 04/01/95 13,500.00 - -------------------------------------------------------------------------------------------------------------------------- CASUAL LIVING, INC. CASUAL LIVING, INC. 641-90 4,499 01/01/97 12/31/99 0.00 0.00 8.00 07/01/91 35,988.72 8.00 01/01/97 35,991.96 - -------------------------------------------------------------------------------------------------------------------------- TUESDAY MORNING TUESDAY MORNING, INC. 641-110 7,280 08/01/95 12/31/02 4.12 09/01/92 30,000.00 0.00 0.00 5.37 11/01/95 39,120.00 - -------------------------------------------------------------------------------------------------------------------------- GREGORY'S TO GO LEE NICHOLAS 641-120 1,488 05/01/92 04/30/00 0.00 0.00 8.00 07/01/92 11,904.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- GRAND COMPUTERS JAMES E. & CHERYL DRAWDY 641-160 1,963 01/01/96 12/31/98 6.00 01/01/96 11,778.00 - -------------------------------------------------------------------------------------------------------------------------- BRYAN'S CLEANERS & LAUNDRY DRYCLEAN - USA 641-170 1,250 09/01/89 02/28/99 0.00 0.00 8.50 02/01/93 10,625.04 - -------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ GARDEN PARTY A GARDEN PARTY Full 0 Full 0 Full 0 04/01/94 03/31/97 0.00 5.00 0 Y 03/01/98 02/28/01 0.00 0.05 225,120 Y 0.00 0.05 25,512,000 Y 0.00 0.05 27,000,000 Y - ------------------------------------------------------------------------------------------------------------------------------------ CASUAL LIVING, INC. CASUAL LIVING, INC. PRS 1990 PRS 1990 Full 0 01/01/97 12/31/02 9.20 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ TUESDAY MORNING TUESDAY MORNING, INC. None 0 None 0 None 0 01/01/93 12/31/07 7.00 3.00 1,000,000 0.00 3.00 0 Y 0.00 3.00 1,304,000 Y - ------------------------------------------------------------------------------------------------------------------------------------ GREGORY'S TO GO LEE NICHOLAS Full 0 Full 0 Full 0 05/01/97 04/30/00 0.00 5.00 500,000 05/01/00 04/30/03 0.00 5.00 500,000 0.00 5.00 500,000 - ------------------------------------------------------------------------------------------------------------------------------------ GRAND COMPUTERS JAMES E. & CHERYL DRAWDY Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ BRYAN'S CLEANERS & LAUNDRY DRYCLEAN - USA Full 0 Full 0 Full 0 02/01/93 01/31/96 8.50 0.00 0 03/01/96 02/28/99 9.50 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: CLUSTERS OF WHITEHALL 300 ST. ANDREWS ROAD COLUMBIA, SC 29210-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- BRYAN'S CLEANERS & LAUNDRY DRYCLEAN - USA 641-170 1,250 09/01/89 02/28/99 0.00 0.00 9.50 02/01/95 11,874.96 - --------------------------------------------------------------------------------------------------------------------------- Available 641-180 1,250 0.00 0.00 - --------------------------------------------------------------------------------------------------------------------------- APPLAUSE CATERING ANNETTE L. HORTON 641-190 1,250 05/01/96 05/31/99 6.00 06/01/96 7,500.00 6.50 06/01/97 8,124.00 7.00 06/01/98 8,750.04 - --------------------------------------------------------------------------------------------------------------------------- HAIR CAROUSEL BARBARA POKOTELLO 641-200 1,000 07/01/95 06/30/97 9.50 05/01/90 9,499.92 - --------------------------------------------------------------------------------------------------------------------------- Available 641-210 1,500 0.00 0.00 - --------------------------------------------------------------------------------------------------------------------------- HEAVENLY HAMS COLUMBIA HAMS INC. 641-220 1,500 05/01/94 04/30/99 0.00 0.00 - --------------------------------------------------------------------------------------------------------------------------- HAIRPORT PATRICIA ELLISON 641-230 1,000 07/01/95 06/30/97 9.00 03/01/93 9,000.00 9.50 07/01/95 9,499.92 - --------------------------------------------------------------------------------------------------------------------------- PALMETTO ENGRAVERS MARK DITMEYER 641-240 1,250 05/01/95 04/30/98 8.00 05/01/95 9,999.96 - --------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ BRYAN'S CLEANERS & LAUNDRY DRYCLEAN - USA Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ APPLAUSE CATERING ANNETTE L. HORTON Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ HAIR CAROUSEL BARBARA POKOTELLO Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ HEAVENLY HAMS COLUMBIA HAMS INC. Full 0 Full 0 Full 0 05/01/96 04/30/99 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ HAIRPORT PATRICIA ELLISON Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ PALMETTO ENGRAVERS MARK DITMEYER Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: CLUSTERS OF WHITEHALL 300 ST. ANDREWS ROAD COLUMBIA, SC 29210-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- Available 641-250 1,250 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- FLOORCRAFTERS, INC. FLOORCRAFTERS, INC. 641-260 1,440 03/01/97 02/25/00 8.15 03/01/97 11,736.00 - -------------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied.. 61,404 Current Annual Base Rent 408,048.72 Available. 6,625 Total..... 68,029 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ FLOORCRAFTERS, INC. FLOORCRAFTERS, INC. Full 0 Full 0 Full 0 0.00 0.00 0 - -------------------------------------------------------------------------------------- ---------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] St. Andrews Road - Looking West [GRAPHIC OMITTED] St. Andrews Road - Looking East [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front View Building #2 [GRAPHIC OMITTED] Subject - Side View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Bush River Road - Looking West This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study CUMBERLAND PLAZA 1339 New Smithville Highway McMinnville, Warren County, Tennessee Prepared by O. Marshall Dodds, MAI Date of Market Study - April 22, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] April 22, 1997 Mr. Steven R. Maeglin Morgan Stanley & Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Cumberland Plaza 1339 New Smithville Highway McMinnville, Warren County, Tennessee Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on April 22, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The subject property consists of a community shopping center that contains 143,951 square feet of leasable area. The center was constructed in 1988. The anchor tenants are Wal-Mart Stores, Food Lion Stores and Dollar General Stores. The subject property is currently 96.87% occupied. The Wal-Mart Sore is unoccupied, but Wal-Mart is continuing to pay rent until April 30, 2008. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds ------------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY ================================================================================ Regional Perspective The city of McMinnville and Warren County are located along the foothills of the Cumberland Mountains and are located in the central portion of the state of Tennessee. McMinnville is located approximately 69 miles northwest of Chattanooga, Tennessee; approximately 75 miles southeast of Nashville, Tennessee; and approximately 126 miles southwest of Knoxville, Tennessee. The population of McMinnville was estimated at a 11,194 in 1992 with an estimate of 32,992 for the county. The population for the county is projected to increase to approximately to 34,939 by 2000, which is an increase of approximately 5.9%. Some of the major industries and employers in the area are Carrier Corporation-Commercial Air Conditioning with 1,200 employees; Oster Specialty Products-Shearers & Clippers (651 employees); Magnetek/Century Electric-Electric Motors (920 employees), Bridgestone-Radio Truck & Bus Tires (670 employees). The unemployment rate for Warren County as of March, 1997 was 6.3 percent while the statewide rate was 5.3 percent. Neighborhood and Site The subject neighborhood is located in the north central section of the city of McMinnville around the intersection of U.S. Highway #70S By-Pass and New Smithville Highway. The development within the subject neighborhood is a mixture of commercial and residential properties. Subject property is located on the northwest corner of the intersection of U.S. Highway #70 S By-Pass and New Smithville Highway while the Northgate Plaza Shopping Center is located at the southwest intersection and McMinnville Plaza is located in the southeast corner of this intersection. Northgate Plaza and McMinnville Plaza are older shopping centers being constructed in the late 1960's. There is a new Wal-Mart SuperStore that is located on the southwest corner of U.S. Highway #70S By-Pass and Chancery Street. The Three River's Mall is located in the northeast section of the neighborhood along U.S. Highway #70S By-Pass and Sparta Highway. The major tenants are K-Mart, Kroger Stores, Goody's and J.C. Penny's. Physical features are as follows: 1. Size 19.642 acres or 855,650 SF 2. Identity 1339 New Smithville Highway TMS# 059F-006.00, 007.00, 008.00, 008.01, 010.00 3. Shape Irregular 4. Topography Generally level and on street grade with New Smithville Highway 5. Accessability Average 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 143,951 SF 2. Layout & Design One story - discount store - food store - drug store - fourteen shops 3. Parking Spaces 754 5.24 per 1,000 square feet of net area 4. Construction Brick and glass front with concrete block on side and rear and metal seam roof. 1 Market Position and Marketability Conclusions Most of the retail development in the city of McMinnville is in subject neighborhood. Evidence of this can be seen with these commercial developments. The new Wal-Mart SuperStore is nearing completion and this store will replace existing Wal-Mart Store in the Cumberland Plaza. The Northgate Plaza Shopping Center was constructed in 1973 and contains approximately 115,108 square feet. Major tenants include Sear's Appliances, Electronics, Lawn and Garden Tools; Heilig-Meyers Furniture Store; Serve A Lot Food Store; Big Lots; Super D Pharmacy. The McMinnville Plaza was constructed in 1966 and contains approximately 203,474 square feet. The occupancy rate is high and estimated to be 98%. This center does not have a major tenant, but a number of small shops and local tenants in several larger stores. The Bi-Lo Shopping Center is located on the west side of the New Smithville Highway at Chancery Street. This center is between subject property and the downtown area. It was constructed in 1985 and contains a total of 47,855 square feet. The major tenants are Bi-Lo and Family Dollar with several smaller shops. The Three Star Mall contains approximately 200,302 square feet. Major tenants include a K-Mart Store, J.C. Penny, Goody's and a Kroger grocery store. There is a Multi-Cinema Theater located adjacent to the shopping center. The subject property does have a good location, being located at the major intersection in the neighborhood. There are single family dwellings that are located throughout the neighborhood and real residential properties are located north of subject neighborhood. Several multi-family projects are located in the neighborhood as well as an assisted living facility. The McMinnville Plaza has rental rates ranging from $7.00 to $8.50 per square foot. The occupancy rate is approximately 95%. Northgate Shopping Center has rental rates ranging from $3.00 to $5.00 per square foot with the occupancy rate being approximately 85%. The Three Star Mall has average rentals for the shops at $12.00 per square foot with the overall range being from $11.00 to $16.00 per square foot. This center is approximately 97% occupied. The subject property has fourteen shops and the rental rates range from $6.00 to $11.00 per square foot. The rate for the Dollar General Store is at $2.03 per square foot. The outlets are occupied by Taco Bell and Long John Silver. The rental rate for the Wal-Mart Store is at $3.45 per square foot while the rate for the Food Lion Store is $6.25 per square foot. The Big B Drug Store is occupying the former Revco Store and the rental rate is $7.00 per square foot. Trends: The subject property is located in the north central section of the city of McMinnville. This is an older neighborhood and commercial development has been established around the intersection of New Smithville Highway and U.S. Highway #70S By-Pass. There are older centers here and subject property which was constructed in 1978. The new Wal-Mart Store is being constructed approximately one block west of this intersection. The downtown area of McMinnville is located to the south. The neighborhood is considered to be stable and it is thought that the stability will be maintained in the future. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Cumberland Plaza McMinnville Plaza Northgate Shopping Center ----------------------- ---------------------------- --------------------------- b. Street 1339 New Smithville SEC New Smithville Hwy. & SWC New Smithville Hwy. & Hwy. US Hwy. #70S Bypass US Hwy. #70S Bypass ----------------------- ---------------------------- --------------------------- c. City McMinnville, TN McMinnville, TN McMinnville, TN ----------------------- ---------------------------- --------------------------- d. Distance from subject N/A Across Street Across Street ----------------------- ---------------------------- --------------------------- e. Contact McMinnville Northgate Edens & Avant, Inc. Duggin Co. Dev. Co. ----------------------- ---------------------------- --------------------------- f. Phone 803-779-4420 615-473-2370 615-473-5196 ----------------------- ---------------------------- --------------------------- 2. Attributes a. Year built 1988 1966 1977 ----------------------- ---------------------------- --------------------------- b. Net sq. Ft. 143,951 SF 203,474 115,108 SF ----------------------- ---------------------------- --------------------------- c. # building 1 1 1 ----------------------- ---------------------------- --------------------------- d. # stories 1 1 1 ----------------------- ---------------------------- --------------------------- e. Avg. Floor plate size (SF), if office N/A N/A N/A ----------------------- ---------------------------- --------------------------- f. # elevators N/A N/A N/A ----------------------- ---------------------------- --------------------------- g. Parking Adequate Adequate Adequate ----------------------- ---------------------------- --------------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ----------------------- ---------------------------- --------------------------- I. Vacancy % N/A 2.0% 15.0% ----------------------- ---------------------------- --------------------------- j. Anchors, if Retail Wal-Mart, Food Lion, Badcock Furniture, Stewart Heilig-Meyers Furniture, Big `B Drug Drug, Trractor Supply Co. Sears, Jebs ----------------------- ---------------------------- ---------------------------
COMPARABLE 3 ------------ 1. Identification a. Name Three Star Mall --------------------------- b. Street Sparta Road at US Hwy. #70S Bypass --------------------------- c. City McMinnville, TN --------------------------- d. Distance from subject 2 miles --------------------------- e. Contact Continental Development Co. --------------------------- f. Phone 601-932-0032 --------------------------- 2. Attributes a. Year built 1981 --------------------------- b. Net sq. Ft. 200,302 --------------------------- c. # building 1 --------------------------- d. # stories 1 --------------------------- e. Avg. Floor plate size (SF), if office N/A --------------------------- f. # elevators N/A --------------------------- g. Parking Adequate --------------------------- h. Construction Type Brick/Concrete Block --------------------------- I. Vacancy % 3.0% --------------------------- j. Anchors, if Retail J.C. Penny, Goody's, K-Mart, Kroger --------------------------- Comments: Subject property and these comparables are located at the same intersection with the exception of Comparable No. 3 which is located approximately 2 miles east. Comparables No. 1 and 2 are older centers and Comparable No. 1 is in need of deferred maintenance. Comparable No. 2 consists primarily of small shops. Comparable No. 3 is a mall is somewhat different from subject. The new Wal-Mart SuperStore has not been shown as a comparable, but it is located approximately 1 block west of subject property. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space $3.45 - $7.00 N/A N/A N/A --------------------- ------------------- ---------------------- -------------------- b. Shop Space $6.00 - $11.00 $2.50 - $6.25 $1.65 - $3.00 $9.00 - $11.00 --------------------- ------------------- ---------------------- -------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net --------------------- ------------------- ---------------------- -------------------- 3. Rent Concessions None None None None --------------------- ------------------- ---------------------- -------------------- 4. Effective Rent $6.00 - $11.00 $2.50 - $6.25 $1.65 - $3.00 $9.00 - $11.00 --------------------- ------------------- ---------------------- -------------------- 5. TI Allowance None None None None --------------------- ------------------- ---------------------- -------------------- 6. Expense Stop None None None None --------------------- ------------------- ---------------------- -------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 -5 years (shop) 3 - 5 years (shop) 3-5 years (shop) --------------------- ------------------- ---------------------- -------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% 5.00% - 7.00% --------------------- ------------------- ---------------------- -------------------- 9. Percentage Rent (per lease terms) Wal-Mart, Food Lion, None None None Big `D --------------------- ------------------- ---------------------- -------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A --------------------- ------------------- ---------------------- -------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A --------------------- ------------------- ---------------------- -------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A inferior inferior similar --------------------- ------------------- ---------------------- --------------------
D. EXPLAIN RANKING/COMMENTS: Subject property is considered to be superior to Comparables No. 1 and 2. These comparables are in need of deferred maintenance, especially Comparable No. 2. Comparable No. 3 has been ranked as similar, even though it is a mall. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 [GRAPHIC OMITTED] Name: McMinnville Plaza Location: SEC New Smithville Highway & US Hwy. #70S By-Pass McMinnville, TN Year Built: 1969 - Ren. in 1992 Total Size: 203,474 SF Vacant Space: 4,069 SF Vacancy Rate: 2.00% Rental Range: $2.50 - $6.25 per square foot Tenant Expenses: Triple Net Remarks: There was one vacant shop. The center does not have large anchor tenants, but mostly small shops. The local owner manages and leases this center. 5 Comparable Rental No. 2 [GRAPHIC OMITTED] Name: Northgate Shopping Center Location: SWC New Summerville Highway & US Hwy. #70S By-Pass McMinnville, TN Year Built: 1972 Total Size: 115,085 SF Vacant Space: 17,263 SF Vacancy Rate: 15.0% Rental Range: $1.65 to $3.00 per square foot Tenant Expenses: Triple Net Remarks: This is an older center and is in need of repair. Big Lots and a Sear's Appliance Store are the major tenants. 6 Comparable Rental No. 3 [GRAPHIC OMITTED] Name: Three Star Mall Location: Sparta Road & US Hwy. #70S By-Pass McMinnville, TN Year Built: 1981 Total Size: 200,302 SF Vacant Space: 4,006 SF Vacancy Rate: 3.0% Rental Range: $9.00 - $11.00 per square foot Tenant Expenses: Triple Net Remarks: This is not a typical shopping mall as the mall area is small. There are several anchor tenants and these are K-Mart, Kroger, J.C. Penney, Goody's and Dollar General. The Three Star Cinemas are located on an out parcel. This is a successful mall. 7 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Cumberland Plaza Triangle Village Hampton Plaza Cunningham Plaza -------------------- -------------------- ------------------- ------------------- b. Street Address 1339 New Smithville 2864 Wilma Rudolph 1610 Fort Campbell Highway 912-934 N. Lake Dr. Blvd. Blvd. -------------------- -------------------- ------------------- ------------------- c. City McMinnville, TN Lexington, SC Clarksville, TN Clarksville, TN -------------------- -------------------- ------------------- ------------------- d. Distance from Subject N/A 60 miles 510 miles 510 miles -------------------- -------------------- ------------------- ------------------- 2. Attributes a. Year Built 1987 1985 1987 1987 -------------------- -------------------- ------------------- ------------------- b. Net sq. feet 143,951 SF 115,754 SF 189,302 SF 140,744 SF -------------------- -------------------- ------------------- ------------------- c. # Buildings 1 1 1 1 -------------------- -------------------- ------------------- ------------------- d. # of Stories 1 1 1 1 -------------------- -------------------- ------------------- ------------------- e. Vacancy % N/A 3.24% 0% 11.23% -------------------- -------------------- ------------------- ------------------- 3. Sales Information a. Sales Price N/A $4,489,380 $6,150,000 $5,025,000 -------------------- -------------------- ------------------- ------------------- b. Sales Price PSF N/A $38.78 $32.49 $35.70 -------------------- -------------------- ------------------- ------------------- c. Date N/A 01-31-95 12-26-95 12-26-95 -------------------- -------------------- ------------------- ------------------- d. NOI at time of Sale N/A $480,919 $723,627 $667,043 -------------------- -------------------- ------------------- ------------------- e. Cap. Rate N/A 10.71% 12.25% 13.27% -------------------- -------------------- ------------------- ------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A superior similar similar -------------------- -------------------- ------------------- -------------------
COMPARABLE 4 ------------ 1. Identification a. Name Barnwell Plaza --------------------- b. Street Address 1019 Dunbarton Blvd. --------------------- c. City Barnwell, SC --------------------- d. Distance from Subject 400 miles --------------------- 2. Attributes a. Year Built 1985 --------------------- b. Net sq. feet 70,725 SF --------------------- c. # Buildings 1 --------------------- d. # of Stories 1 --------------------- e. Vacancy % 9.00% --------------------- 3. Sales Information a. Sales Price $2,860,620 --------------------- b. Sales Price PSF $40.45 --------------------- c. Date 01-31-95 --------------------- d. NOI at time of Sale $330,327 --------------------- e. Cap. Rate 11.55% --------------------- 4. Rank Relative to Subject (inferior, similar, superior) similar --------------------- Explain Ranking/Comments: These shopping centers are similar to subject. The centers were built about the same time as subject property, but the size of the centers varies as to the size of subject. These comparables were anchored with Wal-Mart stores such as subject and the rental rates for the Wal-Mart stores were about the same as subject. The location of subject is considered similar to the locations of these comparables. However, comparable No. 1 is located in a growth area and is thought to be superior. Wal-Mart has or will move out of these centers into new superstores located nearby. 8 Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: Name: Triangle Village Location: U.S. 378 & North Lake Drive (SC#6) Lexington, SC Grantor: 1994 N1 SC Associates Grantee: Tri Centers, LP Deed Reference: Book 3260, Page 199 Date: January 31, 1995 Sales Price: $4,489,380 Adjusted Sales Price: $4,489,380 Size building 115,754 Sales Price per S.F.: $38.78 Size Land (Acres): 12.51 Size Land (S.F.): 544,936 Year Built: 1985 Land/Building Ratio: 4.71 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $607,469 Effective Gross Income: $607,469 Gross Income Multiple: 7.39 EGIM: 7.39 Net Operating Income: $480,919 Overall Rate: 10.71% Verification: Public Records Type of Purchaser: Private Investor Comments: This center is anchored by Wal-Mart (65,904 SF) and Food Lion (25,000 SF) and there are 7 local shops totaling 24,850 SF (21.5 percent). At the time of sale, the center was 98.7 percent occupied with only 2,000 SF vacant. Wal-Mart has a base rent of $3.55 and the lease expires 11/05. Currently, Wal-Mart is paying about $0.50 per SF overage rent and Wal-Mart is expected to leave the center in the near future as no expansion room is available. The estimated cap rate excludes potential overage rent form Wal-Mart and only excludes income from the 2,000 SF vacant bay. Projected expenses include $0.10 per SF reserves. The center is masonry with brick front and metal mansard canopy roof and in average condition. No outparcels were included with this sale. 9 Comparable Sale No. 2 [GRAPHIC OMITTED] TMS: Name: Hampton Plaza Location: 2864 Wilma Rudolph Boulevard Clarksville, TN Grantor: Aetna Life Insurance Company Grantee: Hampton II, LP Deed Reference: Book 580, Page 1793 Date: December 26, 1995 Sales Price: $6,150,000 Adjusted Sales Price: $6,150,000 Size building: 189,302 Sales Price per S.F.: $32.49 Size Land (Acres): 23.24 Size Land (S.F.): 1,012,334 Year Built: 1987 Land/Building Ratio: 5.35 to 1 Utilities: All Available Zoning: C-3, Shopping Center District Financing: Cash to Seller Gross Potential Income: $966,102 Effective Gross Income: $937,119 Gross Income Multiple: 6.37 EGIM: 6.56 Net Operating Income: $753,627 Overall Rate: 12.25% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a community shopping center with Wal-Mart as a major tenant prior to a new Wal-Mart Superstore being built on the same block. While Wal-Mart remains liable for the lease, the store is vacant. The remainder of the center is occupied. 10 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: Cunningham Plaza Location: 1610 Fort Campbell Boulevard Clarksville, TN Grantor: Aetna Life Insurance Company Grantee: Cunningham II, LP Deed Reference: Book 580, Page 1748 Date: December 26, 1995 Sales Price: $5,025,000 Adjusted Sales Price: $5,025,000 Size building: 140,744 Sales Price per S.F.: $35.70 Size Land (Acres): 23.13 Size Land (S.F.): 1,007,543 Year Built: 1987 Land/Building Ratio: 7.16 to 1 Utilities: All Available Zoning: C-5, Arterial Commercial District Financing: Cash to Seller Gross Potential Income: $841,808 Effective Gross Income: $816,554 Gross Income Multiple: 5.97 EGIM: 6.15 Net Operating Income: $667,043 Overall Rate: 13.27% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a community shopping center. Wal-Mart was the major tenant, but is now occupying a new superstore in the same block. Wal-Mart Furniture store is occupying the store. Other shops are occupied. 11 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: Name: Barnwell Plaza Location: 1019 Dunbarton Boulevard Barnwell, SC Grantor: 1994 N1 SC Associates, LP Grantee: Tri Centers, LP Deed Reference: Book 282, Page 137 Date: January 31, 1995 Sales Price: $2,860,620 Adjusted Sales Price: $2,860,620 Size building 70,725 Sales Price per S.F.: $40.45 Size Land (Acres): 11.28 Size Land (S.F.): 491,357 Year Built: 1985 Land/Building Ratio: 6.95 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $399,045 Effective Gross Income: $399,045 Gross Income Multiple: 7.17 EGIM: 7.17 Net Operating Income: $330,327 Overall Rate: 11.55% Verification: Purchaser Type of Purchaser: Private Investor Comments: This is a good quality community shopping center located in the town of Barnwell in Barnwell County (pop. 20,000) in western South Carolina. Approximately 91% of the center was comprised of anchor space, including Wal-Mart (34,875 SF), Food Lion (21,000 SF) and Revco Drugs (8,450 SF). The income and expense data here is based on the center's actual performance at the time of sale, and include approximately $0.50 SF in overage rents from Wal-Mart and $0.10 SF in reserves. 12 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 13 [GRAPHIC OMITTED] Comparable Rentals Map [GRAPHIC OMITTED] Improved Sales Map [GRAPHIC OMITTED] Site Plan EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: CUMBERLAND PLAZA 1339 SMITHVILLE HIGHWAY MCMINNVILLE, TN 37110 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- WAL-MART #668 WAL-MART STORES, INC. 700-10 65,930 06/01/88 04/30/08 3.45 06/01/88 227,458.56 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- CATO #155 THE CATO CORPORATION 700-20 4,000 02/01/88 01/31/99 8.00 01/01/96 32,000.04 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- Available 700-30 3,000 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- CEDAR HOME HEALTH CARE MID-STATE MEDICAL OXYGEN & EQ 700-40 2,500 08/01/94 10/31/99 8.26 11/01/95 20,652.00 8.51 11/01/96 21,276.00 8.76 11/01/97 21,900.00 9.03 11/01/98 22,572.00 - ------------------------------------------------------------------------------------------------------------------------- SHOWCASE TV RENTAL SHOWCASE TV & APPLIANCE RENTA 700-50 2,000 11/01/95 10/31/00 8.07 11/01/95 16,140.00 8.40 11/01/98 16,800.00 - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ WAL-MART #668 WAL-MART STORES, INC. Full 0 None 0 Full 0 05/01/08 04/30/13 3.45 0.75 25,071,040 05/01/13 04/30/18 3.45 0.75 0 05/01/18 04/30/23 3.45 0.75 0 05/01/23 04/30/28 3.45 0.75 0 05/01/28 04/30/33 3.45 0.75 0 05/01/33 04/30/38 3.45 0.75 0 - ------------------------------------------------------------------------------------------------------------------------------------ CATO #155 THE CATO CORPORATION Full 0 Full 0 Full 0 02/01/94 01/31/99 8.00 5.00 241,666 02/01/99 01/31/04 9.00 5.00 640,000 Y 0.00 5.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ CEDAR HOME HEALTH CARE MID-STATE MEDICAL OXYGEN & EQ Full 0 Full 0 Full 0 11/01/99 10/31/04 9.75 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ SHOWCASE TV RENTAL SHOWCASE TV & APPLIANCE RENTA Full 0 Full 0 Full 0 11/01/00 10/31/05 0.00 3.00 375,000 0.00 3.00 475,000 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: CUMBERLAND PLAZA 1339 SMITHVILLE HIGHWAY MCMINNVILLE, TN 37110 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ MEGA VIDEO GLENN E. KILGORE 700-60 8,000 07/01/90 06/30/97 6.00 01/01/96 48,000.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ Available 700-70 1,500 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ FABULOUS FRED'S HAIR CARE CTR FABULOUS FRED'S, INC. 700-80 1,200 12/01/94 11/30/97 8.76 12/01/94 10,512.00 9.02 12/01/95 10,824.00 9.29 12/01/96 11,148.00 - ------------------------------------------------------------------------------------------------------------------------ CHINA HOUSE LIQUO YANG 700-90 1,200 08/01/93 12/31/98 6.50 01/01/94 7,800.00 7.00 01/01/97 8,400.00 - ------------------------------------------------------------------------------------------------------------------------ HOLLANDS JEWELRY RONALD HOLLAND 700-100 1,200 01/01/97 12/31/99 9.25 01/01/96 11,100.00 9.50 01/01/98 11,400.00 9.75 01/01/99 11,700.00 - ------------------------------------------------------------------------------------------------------------------------ LADIES WORKOUT EXPRESS LADIES WORKOUT EXPRESS OF GEO 700-110 1,200 04/01/97 03/31/02 8.00 05/01/97 9,600.00 - ------------------------------------------------------------------------------------------------------------------------ SUBWAY #5341 SUBWAY RESTAURANTS, INC. #534 700-120 1,200 12/01/88 11/30/98 11.00 12/01/88 13,200.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ MEGA VIDEO GLENN E. KILGORE Full 0 Full 0 Full 0 07/01/95 06/30/97 6.00 5.00 960,000 Y 07/01/97 06/30/00 6.25 5.00 0 Y 0.00 5.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ FABULOUS FRED'S HAIR CARE CTR FABULOUS FRED'S, INC. Full 0 Full 0 Full 0 0.00 5.00 210,220 Y 0.00 5.00 216,500 Y 0.00 5.00 223,000 Y - ------------------------------------------------------------------------------------------------------------------------------------ CHINA HOUSE LIQUO YANG Full 0 Full 0 Full 0 01/01/99 12/31/04 7.50 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ HOLLANDS JEWELRY RONALD HOLLAND Full 0 Full 0 Full 0 0.00 0.03 400,000 0.00 0.03 0 0.00 0.03 0 - ------------------------------------------------------------------------------------------------------------------------------------ LADIES WORKOUT EXPRESS LADIES WORKOUT EXPRESS OF GEO Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ SUBWAY #5341 SUBWAY RESTAURANTS, INC. #534 Full 0 Full 0 Full 0 12/01/93 11/30/95 10.25 5.00 34,375 12/01/95 11/30/98 11.00 5.00 275,000 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: CUMBERLAND PLAZA 1339 SMITHVILLE HIGHWAY MCMINNVILLE, TN 37110 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ SUBWAY #5341 SUBWAY RESTAURANTS, INC. #534 700-120 1,200 12/01/88 11/30/98 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ MCKENZIE CHECK ADVANCE, LLC NATIONAL CASH ADVANCE #336 700-130 1,600 03/01/96 02/28/99 9.00 03/01/96 14,400.00 9.50 03/01/97 15,200.04 10.00 03/01/98 16,000.08 - ------------------------------------------------------------------------------------------------------------------------ ASSOCIATES FINANCIAL SERVICES ASSOCIATED FINANCIAL SERVICES 700-140 1,600 04/01/89 03/31/99 10.50 01/01/96 16,800.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ REVCO #1373 F/K/A/ BIG B, INC. #381 700-150 8,500 12/01/88 11/30/98 7.00 01/01/96 59,499.96 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ FOOD LION #688 FOOD LION, INC. 700-160 29,000 04/09/89 04/30/09 6.21 04/01/89 180,000.00 6.25 04/01/90 181,250.04 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ DOLLAR GENERAL DOLGENCORP, INC. 700-170 10,321 07/01/93 06/30/98 2.03 01/01/96 21,000.00 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ SUBWAY #5341 SUBWAY RESTAURANTS, INC. #534 Full 0 Full 0 Full 0 12/01/98 11/30/03 0.00 5.00 0 0.00 5.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ MCKENZIE CHECK ADVANCE, LLC NATIONAL CASH ADVANCE #336 Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ ASSOCIATES FINANCIAL SERVICES ASSOCIATED FINANCIAL SERVICES Full 0 Full 0 Full 0 04/01/94 03/31/99 10.50 0.00 0 04/01/99 03/31/04 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ REVCO #1373 F/K/A/ BIG B, INC. #381 Full 0 Full 0 Full 0 12/01/93 11/30/98 7.00 2.00 478,125 12/01/98 11/30/03 7.50 2.00 0 Y 12/01/03 11/30/08 8.00 2.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ FOOD LION #688 FOOD LION, INC. Full 0 PRS 1990 Fixed 0 05/01/09 04/30/14 6.21 1.00 18,000,000 Y 05/01/14 04/30/19 6.21 1.00 18,125,000 Y 05/01/19 04/30/24 6.21 1.00 0 Y 05/01/24 04/30/29 6.21 1.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ DOLLAR GENERAL DOLGENCORP, INC. Full 0 Full 0 Full 0 0.00 3.00 700,000 Y - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: CUMBERLAND PLAZA 1339 SMITHVILLE HIGHWAY MCMINNVILLE, TN 37110 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ TACO BELL 700-180 0 05/01/89 04/30/09 0.00 05/01/89 51,999.96 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ LONG JOHN SILVERS JERRICO, INC. 700-190 0 06/09/88 06/30/08 0.00 01/01/96 27,600.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ TACO BELL Full 0 None 0 None 0 05/01/09 04/30/14 0.00 4.00 554,166 05/01/14 04/30/19 0.00 4.00 950,000 - ------------------------------------------------------------------------------------------------------------------------------------ LONG JOHN SILVERS JERRICO, INC. None 0 None 0 None 0 07/01/08 06/30/13 0.00 0.00 0 07/01/13 06/30/18 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 139,451 Current Annual Base Rent 730,072.56 Available. 4,500 Total..... 143,951
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] U.S. Highway #705 Looking East [GRAPHIC OMITTED] U.S. Highway #705 Looking West [GRAPHIC OMITTED] New Smithville Highway Looking North [GRAPHIC OMITTED] New Smithville Highway Looking South [GRAPHIC OMITTED] Entance From New Springville Highway [GRAPHIC OMITTED] Front And Side View Of Vacant Wal-Mart Store [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front And Side View [GRAPHIC OMITTED] Subject Rear View Of Vacant Wal-Mart [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study HAMPTON PLAZA 2864 Wilma Rudolph Blvd. Clarksville, Montgomery County, Tennessee Prepared by O. Marshall Dodds, MAI Date of Market Study - April 23, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] April 23, 1997 Mr. Steven R. Maeglin Morgan Stanley & Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Hampton Plaza 2864 Wilma Rudolph Blvd. Clarksville, Montgomery County, Tennessee Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on April 23, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The subject property consists of a community shopping center that contains 189,302 square feet of leasable area. The center was constructed in 1988. The major tenants are Wal-Mart Stores, Central Tractor Farm & Country Store, Once Upon A Child/Play It AGA, Michaels Arts & Crafts H.H. Gregg. The subject property is currently 97.37% occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds ------------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY ================================================================================ Regional Perspective The city of Clarksville and Montgomery County are located in the north central portion of the state of Tennessee at the Kentucky/Tennessee state line. Clarksville is located 46 miles northwest of Nashville, Tennessee; 171 miles southwest of Louisville, Kentucky; and 95 miles south of Evansville, Indiana. The 1995 census reported the population in the city to be 89,243 and in the county to be 114,515. The population of the county is projected to increase to approximately 129,991 by 2000 and to approximately 147,339 by 2005. Some of the major employers are Trane Company-HVAC Equipments-1,600 employees, Jostens Printing and Publishing Division-yearbooks and commercial printing-770 employees; and Quebecor Printer-Clarksville-magazines-750 employees. The Fort Campbell Military Reservation is located in the northern portion of Clarksville and Montgomery County. There are more than 21,650 military personnel stationed at Ft. Campbell representing an annual payroll exceeding approximately $900,000,000. The city of Clarksville and Montgomery County have a stable and diversified economic base and have experienced commercial and residential growth in recent years. The unemployment rate for Montgomery County was 4.3 percent and the SMA was 4.7 percent. Neighborhood and Site The subject neighborhood is located in the northeastern section of the city of Clarksville, around the intersection of Interstate 24 and Wilma Rudolph Boulevard. The development within the subject neighborhood is a mixture of commercial, industrial and residential properties. This section has been the fastest growing area in the city during the past several years. A number of motels, fast food restaurants and convenient markets/self-service gasoline stations have developed around the intersection of I-24 and Wilma Rudolph Boulevard. The major developments in the neighborhood would be the Governor's Square Mall, Hampton Plaza, and K-Mart Plaza. There is a new Wal-Mart SuperStore that is located adjacent to Hampton Plaza which is subject property. The downtown area of Clarksville is located to the southwest of subject neighborhood by approximately three miles. Physical features are as follows: 1. Size 23.244 acres or 1,012,509 SF 2. Identity 2864 Wilma Rudolph Boulevard TMS# 032-013.06 3. Shape Irregular 4. Topography Generally level, but sits slightly above street grade from Wilma Rudolph Boulevard 5. Accessability Good 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 189,302 SF 2. Layout & Design One story - discount store - large retail store - fifteen shops 3. Parking Spaces 1,425 7.53 per 1,000 square feet of net area 4. Construction Brick and glass front with concrete block on side and rear and metal seam roof. 1 Market Position and Marketability Conclusions The subject property is located in a fast growing neighborhood for the City of Clarksville. A number of commercial developments have occurred Wilma Rudolph Boulevard over the past ten years. Subject property was completed in 1988 and contains 189,302 square feet. The Governor's Square Shopping Mall was completed in 1986 and contains approximately 1,046,974 square feet. The anchor tenants are Dillard's (107,283 SF), Goody's Family Clothing (49,577 SF), J.C. Penny (49,593 SF), Parks-Belk Department Store (90,915 SF), Parks-Belk Department Store II (30,932 SF) and Sear's (86,883 SF). The Austin Square was completed in 1993 and this center contains 322,425 square feet. The anchor tenants are K-Mart and Lowe's Improvement Stores with other tenants such as Shoe Carnival, People Security Finance, Physical Therapy, Satellite Electronics, Haye's Shoes and Express Town. A new Wal-Mart SuperStore was completed in 1995 and is adjacent to subject property. After Wal-Mart vacated the store in Hampton Plaza, Sam's Club moved in to occupy this store. The subject property is located along Wilma Rudolph Boulevard with these other developments in subject neighborhood. The Northpark Plaza is located on Fort Campbell Boulevard and has rental rates ranging from $7.00 to $8.50 per square foot. The Cunningham Plaza is located on Fort Campbell Boulevard and has rental rates ranging from $7.00 to $12.00 per square foot. Austin Square is located on Wilma Rudolph Boulevard with the rental rates for the shops ranging from $9.00 to $10.50 per square foot. The Clarksville Commons is located on the southeast corner of Madison Street and Ashland City Road and the rental rates are ranging from $10.25 to $11.75 per square foot. The Austin Square is located in subject neighborhood, but the other centers are located in another neighborhood in Clarksville. The rental rates in Governor's Square Mall are unknown at this time, but the occupancy rate is approximately 93%. The subject property has fifteen shops and the rental rates range from $5.00 per square foot to $10.00 per square foot. The rental rates for the major tenants range from $3.00 per square foot for the Central Tractor Farm & Country Store to $5.50 per square foot for Michael's Arts & Crafts. The Wal-Mart Store has a rental rate of $3.45 per square foot. As has been previously mentioned the Wal-Mart Store is now occupied by Sam's Club as a leased term expires on January 31, 2008. The owners have negotiated a lease with Books-A-Million for a store to be built on the outlot. The size is 20,000 square feet for ten years at $7.25 per square feet. Trends: The subject property is located in the northeast section of the city of Clarksville and this has been the fastest growing neighborhood in the city over the past ten years. Evidence of this can be seen with the development of commercial properties along Wilma Rudolph Boulevard. The neighborhood is currently in a growth period as the growth is continuing and will probably stabilize within the next few years. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ 1. Identification a. Name Hampton Plaza Northpark Plaza Cunningham Place Austin Square Clarksville Commons ------------------- ------------------- ------------------- ------------------- ------------------- b. Street 2864 Wilma Rudolph SWC Ft. Campbell NWC Ft. Campbell Blvd. Blvd. & Cunningham Blvd. & Cunningham 2710 Wilma Rudolph SEC Madison Street Lane Lane Blvd. & Ashland City Rd. ------------------- ------------------- ------------------- ------------------- ------------------- c. City Clarksville, TN Clarksville, TN Clarksville, TN Clarksville, TN Clarksville, TN ------------------- ------------------- ------------------- ------------------- ------------------- d. Distance from subject N/A 5 miles 5 miles 1/2 miles 4 miles ------------------- ------------------- ------------------- ------------------- ------------------- e. Contact Edens & Avant, Inc. EHM Commercial J & W Management CHM Commercial Properties Edens & Avant, Inc. Corp. Properties ------------------- ------------------- ------------------- ------------------- ------------------- f. Phone 803-779-4420 615-648-4700 803-779-4420 212-265-6600 615-648-4700 ------------------- ------------------- ------------------- ------------------- ------------------- 2. Attributes a. Year built 1988 1973 1987 1993 1990 ------------------- ------------------- ------------------- ------------------- ------------------- b. Net sq. Ft. 189,302 100,325 149,744 322,425 44,000 ------------------- ------------------- ------------------- ------------------- ------------------- c. # building 1 1 1 1 1 ------------------- ------------------- ------------------- ------------------- ------------------- d. #stories 1 1 1 1 1 ------------------- ------------------- ------------------- ------------------- ------------------- e. Avg. Floor plate size (SF), if office N/A N/A N/A N/A N/A ------------------- ------------------- ------------------- ------------------- ------------------- f. # elevators N/A N/A N/A N/A N/A ------------------- ------------------- ------------------- ------------------- ------------------- g. Parking Adequate Adequate Adequate Adequate Adequate ------------------- ------------------- ------------------- ------------------- ------------------- h. Construction Type Brick/Concrete Brick/Concrete Brick/Concrete Brick/Concrete Brick/Concrete Block Block Block Block Block ------------------- ------------------- ------------------- ------------------- ------------------- I. Vacancy % 2.63% 0% 0% 43.0% 3.80% ------------------- ------------------- ------------------- ------------------- ------------------- j. Anchors, if Retail Wal-Mart, Michaels Food Lion, Big B Wal-Mart, Winn- Arts & Crafts Drugs Dixie K-Mart, Lowe's Food Lion ------------------- ------------------- ------------------- ------------------- -------------------
Comments: Comparable No. 3 is located on Wilma Rudolph Boulevard just as subject. The rental rates for the Governor's Square Mall are unknown. Comparables No. 1 and 2 are located on Fort Campbell Boulevard, whereas, Comparable No. 4 on Madison Street. Comparable No. 2 is similar to subject, in that, a Wal-Mart SuperStore was built adjacent to this center and Wal-Mart vacated the premises, but is continuing to pay rent. Comparable No. 3 does have a high vacancy rate at this time. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space $3.00 - $5.50 N/A N/A N/A ------------------ ---------------- ----------------- ---------------- ---------------- b. Shop Space $5.00 - $10.00 $7.00 - $8.50 $7.50 - $12.00 $9.00 - $10.50 $10.25 - $11.75 ------------------ ---------------- ----------------- ---------------- ---------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net Triple Net ------------------ ---------------- ----------------- ---------------- ---------------- 3. Rent Concessions None None None None None ------------------ ---------------- ----------------- ---------------- ---------------- 4. Effective Rent $5.00 - $10.00 $7.00 - $8.50 $7.50 - $12.00 $9.00 - $10.50 $10.25 - $11.75 ------------------ ---------------- ----------------- ---------------- ---------------- 5. TI Allowance None None None None None ------------------ ---------------- ----------------- ---------------- ---------------- 6. Expense Stop None None None None None ------------------ ---------------- ----------------- ---------------- ---------------- 7. Length of Lease Term 3-5 years (shop) 3-5 years (shop) 3-5 years (shop) 3-5 years (shop) 3-5 years (shop) ------------------ ---------------- ----------------- ---------------- ---------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% 5.00% - 7.00% 5.00% - 7.00% ------------------ ---------------- ----------------- ---------------- ---------------- 9. Percentage Rent (per lease terms) Big B Drugs, Winn-Dixie, Michaels, Wal-Mart Food Lion Wal-Mart K-Mart, Lowe's Food Lion ------------------ ---------------- ----------------- ---------------- ---------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A N/A ------------------ ---------------- ----------------- ---------------- ---------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A N/A ------------------ ---------------- ----------------- ---------------- ---------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A similar similar similar similar ------------------ ---------------- ----------------- ---------------- ----------------
D. EXPLAIN RANKING/COMMENTS: Subject property is considered to be similar to all of these comparables. Comparable No. 2 is especially comparable as it was built about the same time as subject with Wal-Mart as the major tenant. The rental rates for these centers are approximately the same as with subject. The Books-A-Million Store for subject property will be located on an outlot. The size of this store is 20,000 SF with a ten-year lease at $7.25 per square foot on a triple net basis. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 [GRAPHIC OMITTED] Name: Northpark Plaza Location: SWC Fort Campbell Boulevard & Cunningham Lane Clarksville, TN Year Built: 1975 Total Size: 100,325 SF Vacant Space: 1,875 SF Vacancy Rate: 1.87% Rental Range: $7.00 - $8.50 per square foot Tenant Expenses: Triple Net Remarks: There were two vacant shops and one large store which was formerly occupied by Drug For Less. This tenant occupied 22,000 SF and continues to pay rent. There is only one shop (1,875) available for lease. 5 Comparable Rental No. 2 [GRAPHIC OMITTED] Name: Cunningham Place Location: NWC Fort Campbell Boulevard & Cunningham Lane Clarksville, TN Year Built: 1987 Total Size: 149,744 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $7.50 - $12.00 per square foot Tenant Expenses: Triple Net Remarks: This is a community center with Wal-Mart as the anchor. However, Wal-mart has vacated the store and moved to a new super Wal-Mart Store in the same block. Wal-Mart continues to pay rent. 6 Comparable Rental No. 3 [GRAPHIC OMITTED] Name: Austin Square Location: 2710 Wilma Rudolph Boulevard Clarksville, TN Year Built: 1993 Total Size: 322,425 SF Vacant Space: 138,643 SF Vacancy Rate: 43.0% Rental Range: $9.00 - $10.50 per square foot for the shops Tenant Expenses: Triple Net Remarks: This is a center that is anchored by K-Mart and Lowe's. This center is experiencing high vacancy rate at this time. 7 Comparable Rental No. 4 [GRAPHIC OMITTED] Name: Clarksville Commons Location: SEC Madison Street & Ashland City Road Clarksville, TN Year Built: 1990 Total Size: 44,000 SF Vacant Space: 1,672 SF Vacancy Rate: 3.80% Rental Range: $10.25 - $11.75 per square foot for the shops Tenant Expenses: Triple Net Remarks: This is a neighborhood center with Food Lion as the major tenant. It is located adjacent to a K-Mart Store. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ 1. Identification a. Name Hampton Plaza Triangle Village Barnwell Plaza Cunningham Plaza Cumberland Plaza ------------------ ----------------- ----------------- ------------------ ------------------ b. Street Address 2864 Wilma Rudolph 912-934 N. 1019 Dunbarton 1610 Fort Campbell 209 New Smithville Blvd. Lake Dr. Blvd. Blvd. Hwy. ------------------ ----------------- ----------------- ------------------ ------------------ c. City Clarksville, TN Lexington, SC Barnwell, SC Clarksville, TN McMinnville, TN ------------------ ----------------- ----------------- ------------------ ------------------ d. Distance from Subject N/A 60 miles 60 miles 510 miles 400 miles ------------------ ----------------- ----------------- ------------------ ------------------ 2. Attributes a. Year Built 1988 1985 1985 1987 1988 ------------------ ----------------- ----------------- ------------------ ------------------ b. Net sq. feet 189,302 SF 115,754 SF 70,725 SF 140,744 SF 143,951 SF ------------------ ----------------- ----------------- ------------------ ------------------ c. # Buildings 1 1 1 1 1 ------------------ ----------------- ----------------- ------------------ ------------------ d. # of Stories 1 1 1 1 1 ------------------ ----------------- ----------------- ------------------ ------------------ e. Vacancy % 0% 3.24% 9.00% 11.23% 8.92% ------------------ ----------------- ----------------- ------------------ ------------------ 3. Sales Information a. Sales Price N/A $4,489,380 $2,860,620 $5,025,000 $5,225,000 ------------------ ----------------- ----------------- ------------------ ------------------ b. Sales Price PSF N/A $38.78 $40.45 $35.70 $36.60 ------------------ ----------------- ----------------- ------------------ ------------------ c. Date N/A 01-31-95 01-31-95 12-26-95 12-26-95 ------------------ ----------------- ----------------- ------------------ ------------------ d. NOI at time of Sale N/A $480,919 $330,327 $667,043 $693,726 ------------------ ----------------- ----------------- ------------------ ------------------ e. Cap. Rate N/A 10.71% 11.55% 13.27% 13.28% ------------------ ----------------- ----------------- ------------------ ------------------ 4. Rank Relative to Subject (inferior, similar, superior) N/A superior similar similar similar ------------------ ----------------- ----------------- ------------------ ------------------
Explain Ranking/Comments: The comparables are similar to subject as they were built about the same time and the tenant mix were about the same. All of these comparables had Wal-Mart stores and had 8 to 10 years remaining on the original lease term. Wal-Mart has built superstores nearby. 9 Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: Name: Triangle Village Location: U.S. 378 & North Lake Drive (SC#6) Lexington, SC Grantor: 1994 N1 SC Associates Grantee: Tri Centers, LP Deed Reference: Book 3260, Page 199 Date: January 31, 1995 Sales Price: $4,489,380 Adjusted Sales Price: $4,489,380 Size building 115,754 Sales Price per S.F.: $38.78 Size Land (Acres): 12.51 Size Land (S.F.): 544,936 Year Built: 1985 Land/Building Ratio: 4.71 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $607,469 Effective Gross Income: $607,469 Gross Income Multiple: 7.39 EGIM: 7.39 Net Operating Income: $480,919 Overall Rate: 10.71% Verification: Public Records Type of Purchaser: Private Investor Comments: This center is anchored by Wal-Mart (65,904 SF) and Food Lion (25,000 SF) and there are 7 local shops totaling 24,850 SF (21.5 percent). At the time of sale, the center was 98.7 percent occupied with only 2,000 SF vacant. Wal-Mart has a base rent of $3.55 and the lease expires 11/05. Currently, Wal-Mart is paying about $0.50 per SF overage rent and Wal-Mart is expected to leave the center in the near future as no expansion room is available. The estimated cap rate excludes potential overage rent form Wal-Mart and only excludes income from the 2,000 SF vacant bay. Projected expenses include $0.10 per SF reserves. The center is masonry with brick front and metal mansard canopy roof and in average condition. No outparcels were included with this sale. 10 Comparable Sale No. 2 [GRAPHIC OMITTED] TMS: Name: Barnwell Plaza Location: 1019 Dunbarton Boulevard Barnwell, SC Grantor: 1994 N1 SC Associates, LP Grantee: Tri Centers, LP Deed Reference: Book 282, Page 137 Date: January 31, 1995 Sales Price: $2,860,620 Adjusted Sales Price: $2,860,620 Size building 70,725 Sales Price per S.F.: $40.45 Size Land (Acres): 11.28 Size Land (S.F.): 491,357 Year Built: 1985 Land/Building Ratio: 6.95 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $399,045 Effective Gross Income: $399,045 Gross Income Multiple: 7.17 EGIM: 7.17 Net Operating Income: $330,327 Overall Rate: 11.55% Verification: Purchaser Type of Purchaser: Private Investor Comments: This is a good quality community shopping center located in the town of Barnwell in Barnwell County (pop. 20,000) in western South Carolina. Approximately 91% of the center was comprised of anchor space, including Wal-Mart (34,875 SF), Food Lion (21,000 SF) and Revco Drugs (8,450 SF). The income and expense data here is based on the center's actual performance at the time of sale, and include approximately $0.50 SF in overage rents from Wal-Mart and $0.10 SF in reserves. 11 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: Cunningham Plaza Location: 1610 Fort Campbell Boulevard Clarksville, TN Grantor: Aetna Life Insurance Company Grantee: Cunningham II, LP Deed Reference: Book 580, Page 1748 Date: December 26, 1995 Sales Price: $5,025,000 Adjusted Sales Price: $5,025,000 Size building: 140,744 Sales Price per S.F.: $35.70 Size Land (Acres): 23.13 Size Land (S.F.): 1,007,543 Year Built: 1987 Land/Building Ratio: 7.16 to 1 Utilities: All Available Zoning: C-5, Arterial Commercial District Financing: Cash to Seller Gross Potential Income: $841,808 Effective Gross Income: $816,554 Gross Income Multiple: 5.97 EGIM: 6.15 Net Operating Income: $667,043 Overall Rate: 13.27% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a community shopping center. Wal-Mart was the major tenant, but is now occupying a new superstore in the same block. Wal-Mart Furniture store is occupying the store. Other shops are occupied. 12 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: Name: Cumberland Plaza Location: 209 New Smithville Highway McMinnville, TN Grantor: Aetna Life Insurance Grantee: Cumberland II, LP Deed Reference: Book 287, Page 204 Date: December 26, 1995 Sales Price: $5,225,050 Adjusted Sales Price: $5,225,050 Size building: 143,951 Sales Price per S.F.: $36.30 Size Land (Acres): 19.64 Size Land (S.F.): 855,518 Year Built: 1988 Land/Building Ratio: 5.94 to 1 Utilities: All Available Zoning: C-3, Highway Commercial District Financing: Cash to Seller Gross Potential Income: $902,918 Effective Gross Income: $875,830 Gross Income Multiple: 5.79 EGIM: 5.97 Net Operating Income: $693,726 Overall Rate: 13.28% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a community shopping center. Wal-Mart was the major tenant and remains liable for the lease for the remaining term. A new Wal-Mart Superstore was built one block west of this property. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: HAMPTON PLAZA 2864 WILMA RUDOLPH BLVD. CLARKSVILLE, TN 37040 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ WAL-MART #673 699-10 81,922 05/14/87 01/31/08 3.45 01/01/96 282,630.96 - ------------------------------------------------------------------------------------------------------------------------ Available 699-20 2,976 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ CATO #191 CATO CORPORATION 699-30 6,400 07/20/92 01/31/98 0.00 0.00 0.00 0.00 0.00 0.00 8.65 07/20/92 55,359.96 - ------------------------------------------------------------------------------------------------------------------------ CENTRAL TRACTOR FARM & COUNTR CT FARM & COUNTRY 699-40 18,450 09/01/95 08/31/00 0.00 0.00 0.00 0.00 3.00 09/01/95 55,350.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ DOLLAR TREE DOLLAR TREE STORES, INC. 699-50 3,154 08/01/93 07/31/98 0.00 0.00 0.00 0.00 0.00 0.00 10.00 01/01/96 31,539.96 - ------------------------------------------------------------------------------------------------------------------------ FIRST FAMILY FINANCIAL FIRST FAMILY FINANCIAL SERVIC 699-60 1,600 07/13/92 10/31/97 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ WAL-MART #673 Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ CATO #191 CATO CORPORATION Full 0 Full 0 Full 0 02/01/98 01/31/03 9.15 5.00 1,200,000 02/01/03 01/31/08 9.65 5.00 450,000 02/01/08 01/31/13 10.15 5.00 0 0.00 5.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ CENTRAL TRACTOR FARM & COUNTR CT FARM & COUNTRY Full 0 Full 0 Full 0 09/01/00 08/31/05 3.50 0.00 0 09/01/05 08/31/10 4.00 0.00 0 09/01/10 08/31/15 4.60 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ DOLLAR TREE DOLLAR TREE STORES, INC. Full 0 Full 0 Full 0 08/01/00 07/31/03 12.00 3.00 0 Y 08/01/98 07/31/00 11.00 3.00 0 Y 0.00 3.00 0 Y 0.00 3.00 1,051,300 Y - ------------------------------------------------------------------------------------------------------------------------------------ FIRST FAMILY FINANCIAL FIRST FAMILY FINANCIAL SERVIC Full 0 Full 0 Full 0 11/01/97 10/31/02 0.00 0.00 0
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: HAMPTON PLAZA 2864 WILMA RUDOLPH BLVD. CLARKSVILLE, TN 37040 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ FIRST FAMILY FINANCIAL FIRST FAMILY FINANCIAL SERVIC 699-60 1,600 07/13/92 10/31/97 0.00 0.00 8.50 01/01/96 13,599.96 - ------------------------------------------------------------------------------------------------------------------------ ONE PRICE CLOTHING STORE #166 ONE PRICE CLOTHING STORES, IN 699-70 4,000 02/15/89 05/31/00 0.00 0.00 0.00 0.00 0.00 0.00 8.00 01/01/97 31,999.92 8.00 06/01/95 31,999.92 - ------------------------------------------------------------------------------------------------------------------------ Available 699-80 2,000 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ DR. BIZER'S VALUEVISION DR. BIZER'S VALUEVISION, INC. 699-90 4,400 09/01/95 08/31/05 0.00 0.00 8.93 09/01/96 39,270.00 9.37 09/01/97 41,233.44 9.84 09/01/98 43,295.16 10.33 09/01/99 45,459.84 10.85 09/01/00 47,732.88 11.39 09/01/01 50,119.56 11.96 09/01/02 52,625.52 12.56 09/01/03 55,256.76 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ FIRST FAMILY FINANCIAL FIRST FAMILY FINANCIAL SERVIC Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ ONE PRICE CLOTHING STORE #166 ONE PRICE CLOTHING STORES, IN Full 0 Full 0 Full 0 06/01/95 05/31/00 0.00 3.00 0 Y 0.00 3.00 0 Y 0.00 3.00 0 Y 0.00 3.00 1,066,700 Y 0.00 3.00 1,066,700 Y - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ DR. BIZER'S VALUEVISION DR. BIZER'S VALUEVISION, INC. Full 0 Full 0 Full 0 09/01/05 08/31/10 14.51 0.00 0 09/01/10 08/31/15 15.96 0.00 0 09/01/15 08/31/20 17.55 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: HAMPTON PLAZA 2864 WILMA RUDOLPH BLVD. CLARKSVILLE, TN 37040 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ DR. BIZER'S VALUEVISION DR. BIZER'S VALUEVISION, INC. 699-90 4,400 09/01/95 08/31/05 13.19 09/01/04 58,019.64 6.33 12/01/95 27,840.00 - ------------------------------------------------------------------------------------------------------------------------ HUNAN GARDEN FOOK OON CHONG 699-100 4,200 12/01/96 01/31/07 9.00 12/01/96 37,800.00 9.00 07/01/97 37,800.00 9.00 01/01/98 37,800.00 10.00 12/01/01 42,000.00 - ------------------------------------------------------------------------------------------------------------------------ OLAN MILLS, INC. 699-110 1,200 12/13/94 05/31/00 0.00 0.00 8.50 06/01/95 10,200.00 5.95 01/01/96 7,140.00 4.25 12/13/94 5,100.00 - ------------------------------------------------------------------------------------------------------------------------ SEWING CENTER CLARKSVILLE SEWING CENTER 699-120 1,500 04/01/96 03/31/99 8.00 01/01/96 12,000.00 0.00 0.00 8.50 04/01/96 12,750.00 - ------------------------------------------------------------------------------------------------------------------------ WALLPAPER AND MORE MARLOW CORPORATION & BRENDA E 699-130 1,500 07/01/95 06/30/98 0.00 0.00 0.00 0.00 8.18 07/01/96 12,264.00 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ DR. BIZER'S VALUEVISION DR. BIZER'S VALUEVISION, INC. Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ HUNAN GARDEN FOOK OON CHONG Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ OLAN MILLS, INC. Full 0 Full 0 Full 0 06/01/00 05/31/05 9.50 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ SEWING CENTER CLARKSVILLE SEWING CENTER Full 0 Full 0 Full 0 04/01/99 03/31/02 0.00 3.00 400,000 Y 0.00 3.00 400,000 Y 0.00 3.00 425,000 Y - ------------------------------------------------------------------------------------------------------------------------------------ WALLPAPER AND MORE MARLOW CORPORATION & BRENDA E Full 0 Full 0 Full 0 03/01/94 02/28/95 0.00 4.00 0 Y 03/01/95 02/28/96 0.00 4.00 288,840 Y 0.00 4.00 297,600 Y
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: HAMPTON PLAZA 2864 WILMA RUDOLPH BLVD. CLARKSVILLE, TN 37040 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ WALLPAPER AND MORE MARLOW CORPORATION & BRENDA E 699-130 1,500 07/01/95 06/30/98 8.42 07/01/97 12,636.00 7.70 07/01/95 11,553.60 - ------------------------------------------------------------------------------------------------------------------------ ONCE UPON A CHILD/PLAY IT AGA R&D ENTERPRISES, INC. 699-140 10,000 06/01/94 09/30/99 0.00 0.00 4.52 10/01/95 49,200.00 5.04 10/01/96 50,400.00 5.20 10/01/97 51,960.00 5.35 10/01/98 53,520.00 4.80 10/01/94 48,000.00 - ------------------------------------------------------------------------------------------------------------------------ PIECE GOODS #191 PIECE GOODS SHOPS, INC. 699-150 6,000 06/06/87 06/05/02 0.00 0.00 6.20 07/01/87 37,200.00 6.50 06/01/90 39,000.00 7.80 06/05/97 46,800.00 6.80 06/01/94 40,800.00 - ------------------------------------------------------------------------------------------------------------------------ MICHAELS ARTS & CRAFTS MICHAEL'S STORES, INC. 699-160 16,000 09/01/95 02/28/01 0.00 0.00 0.00 0.00 5.50 09/01/95 87,999.96 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ WALLPAPER AND MORE MARLOW CORPORATION & BRENDA E Full 0 Full 0 Full 0 0.00 4.00 325,000 Y 0.00 4.00 288,800 Y - ------------------------------------------------------------------------------------------------------------------------------------ ONCE UPON A CHILD/PLAY IT AGA R&D ENTERPRISES, INC. Full 0 Full 0 Full 0 10/01/99 09/30/04 0.00 3.00 0 Y 0.00 3.00 1,640,000 Y 0.00 3.00 1,680,000 Y 0.00 3.00 1,732,000 Y 0.00 3.00 1,784,000 Y 0.00 3.00 1,600,000 Y - ------------------------------------------------------------------------------------------------------------------------------------ PIECE GOODS #191 PIECE GOODS SHOPS, INC. Full 0 Full 0 Full 0 06/06/97 06/05/02 7.80 4.00 930,000 06/06/02 06/05/07 9.00 4.00 975,000 0.00 4.00 1,020,000 0.00 4.00 0 0.00 4.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ MICHAELS ARTS & CRAFTS MICHAEL'S STORES, INC. Full 0 Full 0 Full 0 03/01/01 02/28/06 6.00 3.00 4,000,000 03/01/06 02/28/11 7.50 3.00 0 03/01/11 02/28/16 8.50 3.00 0 03/01/16 02/28/21 9.50 3.00 0
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: HAMPTON PLAZA 2864 WILMA RUDOLPH BLVD. CLARKSVILLE, TN 37040 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ MICHAELS ARTS & CRAFTS MICHAEL'S STORES, INC. 699-160 16,000 09/01/95 02/28/01 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ H.H. GREGG GREGG APPLIANCES, INC. 699-170 24,000 09/01/95 01/31/06 0.00 0.00 0.00 0.00 1.68 11/01/95 40,320.00 4.94 02/01/01 118,656.00 4.80 02/01/96 115,200.00 - ------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 184,326 Current Annual Base Rent 818,744.76 Available. 4,976 Total..... 189,302 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- MICHAELS ARTS & CRAFTS MICHAEL'S STORES, INC. Full 0 Full 0 Full 0 03/01/21 0.00 3.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- H.H. GREGG GREGG APPLIANCES, INC. Full 0 Full 0 Full 0 02/01/06 01/31/11 5.92 1.00 0 Y 02/01/11 01/31/16 6.92 1.00 0 Y 0.00 1.00 4,032,000 Y 0.00 1.00 11,865,600 Y 0.00 1.00 11,520,000 Y - -----------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Wilma Rudolph Boulevard Looking Northeast [GRAPHIC OMITTED] Wilma Rudolph Boulevard Looking Southwest [GRAPHIC OMITTED] Hampton Place Looking West [GRAPHIC OMITTED] Hampton Place Looking East [GRAPHIC OMITTED] Edgewood Place Looking West [GRAPHIC OMITTED] Entrance Way To Subject From Wilma Rudolph Boulevard [GRAPHIC OMITTED] Front View of Sam's Club [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front And Side View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View Looking From Edgewood Place [GRAPHIC OMITTED] Subject Rear View Looking From Edgewood Place This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. Market Study RAVENEL TOWNE CENTRE 6323 Savannah Highway US Highway #17 Ravenel, Charleston County, South Carolina Prepared by O. Marshall Dodds, MAI Date of Market Study - April 22, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] April 22, 1997 Mr. Steven R. Maeglin Vice President Morgan & Stanley Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Ravenel Towne Centre 6323 Savannah Highway U.S. Highway #17 Ravenel, Charleston County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on April 22, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 39,600 square feet of leaseable area. The centre was constructed in 1996. The tenants are Food Lion, Revco and Hollywood Video. The centre is 100% occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds ------------------------------------ O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY Regional Perspective The Charleston Metropolitan area has a stable economic base at this time. Property values throughout the metropolitan area have remained stable and increased to a certain extent even though several military bases were closed during the past five years. The local economic development board has attracted new industry to provide for the jobs that were lost over the past few years and this limited the impact of the closing of the military bases. The State of South Carolina is committed to the continued development of the port of Charleston. This is being expanded and contributes to the stability of the economy of Charleston and the State of South Carolina. The economy is sound at this time and growth is expected to continue in the future. The unemployment rate for Charleston County as of March, 1997 was 4.9 percent while the statewide rate was 5.3 percent. Neighborhood and Site The neighborhood is located around the intersection of the Savannah Highway and South Carolina Highway #165. The older section of Ravenel is located to the south of the intersection by approximately two miles. There are several retail stores in the downtown section of Ravenel. The properties throughout the neighborhood consists of small rural residential properties and large farms. There are also several new rural residential properties with larger houses. The Buckfield farms has a new single family residential development that is located approximately two miles south of the intersection of Savannah Highway and South Carolina Highway #165. The development around the intersection of Savannah Highway and South Carolina #165 would include Ravenel Ace Hardware, Ravenel Ford Dealership, Hardees, Machinery Technicians, Inc., Texaco Convenient Market/Self-Service Gasoline Station, Marchant Chevrolet Dealership and the Bank of Walterboro has a branch office that is under construction. The Ravenel Towne Centre was completed during 1996. An office building is occupied by Hill & Hill Attorneys. Physical features are as follows: 1. Size 5.34 acres or 236,966 square feet 2. Identity Southwest corner of Savannah Highway and South Carolina Highway #165 TMS No. 168-00-00-027 3. Shape irregular 4. Topography level on street grade 5. Accessability good 6. Utilities municipal with a private septic system 1 Physical Description Building features are as follows: 1. Size (net) 39,600 square feet 2. Layout & Design one-story based food store-variety store-video store 3. Parking Spaces 220 5.5 spaces per 1,000 square feet of net area 4. Construction Brick and glass front with concrete block on the side and rear with a metal seam roof Market Position and Marketability Conclusions The subject property is located in the town of Ravenel and there are not any other shopping centers in the immediate area. The western suburbs of the City of Charleston are located approximately 15 miles east of subject neighborhood. There are several shopping centers in this section. The subject property has three stores and the rent per square foot from the Food Lion Store is $7.75 per square foot; the rent from the Family Dollar Store is $4.64 per square foot; the rent from Hollywood Video is $9.00 per square foot for years one and two and $9.50 per square foot for years three, four and five. The rental rate for the supermarket is within the range of similar type stores, while the rental rate for the Family Dollar Store is in the lower end of the range. The rate for the Video Store is typical of the rental rates being received in other shopping centers. The subject property is 100% occupied at this time and the leased terms for the Food Lion Store is 10 years; for the Family Dollar Store 10 years; for the Hollywood Video Store 5 years. The occupancy rates are expected to remain at the 100% level with the terms of these leases. Trends: The subject property is located in a small town being approximately 19 miles from Charleston. The development consists of rural residential properties with a small sub-division. Several large new houses have been built during the past few years. There is evidence of growth in the neighborhood because of the commercial development centers that are located around the intersection of Savannah Highway and South Carolina Highway #165. Also, the tax assessors office has a satellite office in the town of Ravenel. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Ravenel Towne Centre Shoppers Port Quadrangle SHC Ashley Crossing -------------------- -------------------- -------------------- -------------------- b. Street E/S Sam Rittenberg Hwy. #61 at Magwood 6323 Savannah Hwy. S/S Savannah Hwy. Blvd. Rd. -------------------- -------------------- -------------------- -------------------- c. City Ravenel, SC Charleston, SC Charleston, SC Charleston, SC -------------------- -------------------- -------------------- -------------------- d. Distance from subject N/A 15 miles 15 miles 17 miles -------------------- -------------------- -------------------- -------------------- e. Contact Edens Avant, Inc. Edens Avant, Inc. Classic Properties JDN Realty Corp. -------------------- -------------------- -------------------- -------------------- f. Phone 803-779-4420 803-779-4420 803-740-6950 404-262-3252 -------------------- -------------------- -------------------- -------------------- 2. Attributes a. Year built 1996 1974 (Reh. 1992) 1984 1991 -------------------- -------------------- -------------------- -------------------- b. Net sq. Ft. 39,600 74,400 75,793 188,903 -------------------- -------------------- -------------------- -------------------- c. # building 1 1 1 1 -------------------- -------------------- -------------------- -------------------- d. #stories 1 1 1 1 -------------------- -------------------- -------------------- -------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A N/A -------------------- -------------------- -------------------- -------------------- f. # elevators N/A N/A N/A N/A -------------------- -------------------- -------------------- -------------------- g. Parking Adequate Adequate Adequate Adequate -------------------- -------------------- -------------------- -------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block -------------------- -------------------- -------------------- -------------------- I. Vacancy % 0% 0% 5.54% 0% -------------------- -------------------- -------------------- -------------------- j. Anchors, if Retail Food Lion, Revco, Piggly Wiggly, SK Food Lion Family Dollar Menswear Food Lion, Wal-Mart -------------------- -------------------- -------------------- --------------------
COMPARABLE 4 ------------ 1. Identification a. Name Ashley Oaks Plaza -------------------- b. Street 1119 Wappoo Rd. -------------------- c. City Charleston, SC -------------------- d. Distance from subject 15 miles -------------------- e. Contact FDR and Assoc. -------------------- f. Phone 803-256-7452 -------------------- 2. Attributes a. Year built 1985 -------------------- b. Net sq. Ft. 56,220 -------------------- c. # building 1 -------------------- d. #stories 1 -------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A -------------------- f. # elevators N/A -------------------- g. Parking Adequate -------------------- h. Construction Type Brick/Concrete Block -------------------- I. Vacancy % 0% -------------------- j. Anchors, if Retail Food Lion -------------------- Comments: These shopping centers are similar to subject, but are located in the western section of Charleston which is approximately 15 miles east of subject. These shopping centers can be used for comparison purposes with subject which is new. All of these centers are considered to be similar. Comparable No. 3 is adjacent to a Wal-Mart store, but the Food Lion store and shops are, more or less, separate from the Wal-Mart storer. Comparable No. 4 has Food Lion as the major tenant, but Food Lion has vacated the premises and continues to pay rent. All of the shops are occupied. In most instances, replacement tenants are found when major tenants vacate a store in a shopping center. This center has been shown as a comparable since the shops are presently 100 percent occupied. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space $4.64 - $7.75 $5.75 - $6.00 N/A N/A ----------------------- ------------------- ------------------- ------------------- b. Shop Space $9.00 $9.00 - $10.00 $12.50 $13.00 ----------------------- ------------------- ------------------- ------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net ----------------------- ------------------- ------------------- ------------------- 3. Rent Concessions None None None None ----------------------- ------------------- ------------------- ------------------- 4. Effective Rent $9.00 $9.00 - $10.00 $9.00 - $12.50 $10.00 - $13.00 ----------------------- ------------------- ------------------- ------------------- 5. TI Allowance None None None None ----------------------- ------------------- ------------------- ------------------- 6. Expense Stop None None None None ----------------------- ------------------- ------------------- ------------------- 7. Length of Lease Term 5 years 3 - 5 years - Shops 3 - 5 years - Shops 3 - 5 years - Shops ----------------------- ------------------- ------------------- ------------------- 8. Commissions 5.00% - 7.00% 5.00% - 7.00% 5.00% - 7.00% 5.00% - 7.00% ----------------------- ------------------- ------------------- ------------------- 9. Percentage Rent (per lease terms) Food Lion, Family Food Lion, Famil Dollar Dollar Piggly Wiggly Food Lion, Wal-Mart ----------------------- ------------------- ------------------- ------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A ----------------------- ------------------- ------------------- ------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A ----------------------- ------------------- ------------------- ------------------- C. RANK RELATIVE TO SUBJECT N/A Similar Similar Similar ----------------------- ------------------- ------------------- -------------------
COMPARABLE 4 ------------ 1. Asking Rental Rate a. Anchor Space N/A ------------------- b. Shop Space $10.00 ------------------- 2. Lease Type (Gross/Net) Triple Net ------------------- 3. Rent Concessions None ------------------- 4. Effective Rent $9.00 - $10.00 ------------------- 5. TI Allowance None ------------------- 6. Expense Stop None ------------------- 7. Length of Lease Term 3 - 5 years - Shops ------------------- 8. Commissions 5.00% - 7.00% ------------------- 9. Percentage Rent (per lease terms) Food Lion ------------------- 10. Historical Annual Absorption/sq.ft. N/A ------------------- 11. Annual Operating Expense psf (Including taxes) N/A ------------------- C. RANK RELATIVE TO SUBJECT Similar ------------------- D. EXPLAIN RANKING/COMMENTS: These centers are similar to subject even though they are older than subject. These centers are nearby and the lease structure is very similar to subject. There are not any other centers in subject neighborhood, therefore these centers are nearby and comparisons can be made with subject. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 [GRAPHIC OMITTED] Name: Shoppers Port Location: S/S Savannah Highway Charleston, SC Year Built: 1974 (Reh. 1992) Total Size: 74,400 SF Vacant Space: 0 Vacancy Rate: 0% Rental Range: $9.00 - $10.00 per square foot Tenant Expenses: Triple Net Remarks: This is an older center and has experienced a high occupancy rate over the years. Major tenants are Food lion, Revco, and Family Dollar. 5 Comparable Rental No. 2 [GRAPHIC OMITTED] Name: Quadrangle Shopping Center Location: East Side of Sam Rittenberg Boulevard Charleston, SC Year Built: 1984 Total Size: 75,793SF Vacant Space: 4,200 SF Vacancy Rate: 5.54% Rental Range: $9.00 - $12.50 per square foot TenantExpenses: Triple Net Remarks: This center was renovated and the Piggly Wiggly store was expanded. Major tenants are Piggly Wiggly and SK Menswear. 6 Comparable Rental No. 3 [GRAPHIC OMITTED] Name: Ashley Crossing Location: Highway #61 at Magwood Road Charleston, SC Year Built: 1991 Total Size: 188,903 SF Vacant Space: 0 Vacancy Rate: 0% Rental Range: $10.00 - $13.00 Tenant Expenses: Triple Net Remarks: Major tenants are Food Lion and Wal-Mart. Food Lion and shops are to the side of Wal-Mart. 7 Comparable Rental No. 4 [GRAPHIC OMITTED] Name: Ashley Oaks Plaza Location: 1119 Wappoo Road Charleston, SC Year Built: 1985 Total Size: 56,200 SF Vacant Space: 0 Vacancy Rate: 0% Local Rent Range: $9.00 - $10.00 Tenant Expenses: Triple Net Remarks: This center is 100 percent occupied except for Food Lion, who has vacated the store, but is continuing to pay rent. The shops are full occupied. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Ravenel Towne Centre St. Andrews Crsg. Eastgate SHC One Norman Center -------------------- ------------------ ------------------ ----------------- b. Street Address NWC of Whiskey Rd 19706 One Norman 6323 Savannah Hwy. 817 St. Andrews Rd and Eastgate Drive Boulevard -------------------- ------------------ ------------------ ----------------- c. City Ravenel, SC Columbia, SC Aiken, SC Cornelius, NC -------------------- ------------------ ------------------ ----------------- d. Distance from Subject N/A 8 miles 56 miles 100 miles -------------------- ------------------ ------------------ ----------------- 2. Attributes a. Year Built 1996 1994 1995 1993 -------------------- ------------------ ------------------ ----------------- b. Net sq. feet 39,600 66,910 SF 75,716 SF 54,185 SF -------------------- ------------------ ------------------ ----------------- c. # Buildings 1 1 1 1 -------------------- ------------------ ------------------ ----------------- d. # of Stories 1 1 1 1 -------------------- ------------------ ------------------ ----------------- e. Vacancy % 0% 0% 5.00% 0% -------------------- ------------------ ------------------ ----------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 $4,650,000 -------------------- ------------------ ------------------ ----------------- b. Sales Price PSF N/A $97.89 $88.16 $85.82 -------------------- ------------------ ------------------ ----------------- c. Cap. Rate N/A 9.69% 9.86% 9.68% -------------------- ------------------ ------------------ ----------------- d. Date N/A 05-25-94 09-28-95 10-12-95 -------------------- ------------------ ------------------ ----------------- e. NOI at time of Sale N/A $634,797 $657,896 $450,188 -------------------- ------------------ ------------------ ----------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A Superior Similar Similar -------------------- ------------------ ------------------ -----------------
COMPARABLE 4 ------------ 1. Identification a. Name Paw Creek Cmmns. --------------------- b. Street Address E/S Little Rock Rd at Freedom Road --------------------- c. City Charlotte, NC --------------------- d. Distance from Subject 92 miles --------------------- 2. Attributes a. Year Built 1996 --------------------- b. Net sq. feet 66,050 SF --------------------- c. # Buildings 1 --------------------- d. # of Stories 1 --------------------- e. Vacancy % 2.73% --------------------- 3. Sales Information a. Sales Price $5,384,000 --------------------- b. Sales Price PSF $77.52 --------------------- c. Cap. Rate 9.61% --------------------- d. Date 03-25-97 --------------------- e. NOI at time of Sale $517,412 --------------------- 4. Rank Relative to Subject (inferior, similar, superior) Superior --------------------- Explain Ranking/Comments: Comparables No. 1 and No. 4 are ranked superior to subject. The reason for this is because of the location of these comparables being superior to subject. Comparable No. 2 and No. 3 are located in a commercial area that is larger than subject, but is similar. However, the income stream of subject is just as strong as these comparables. 9 Comparable Sale No. 1 {GRAPHIC OMITTED] TMS: 6012 -1 -1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 10 Comparable Sale No. 2 {GRAPHIC OMITTED] TMS: Name: Eastgate Shopping Center Location: Northwest Corner of Whiskey Road & Eastgate Drive Aiken, SC Grantor: Southwest U.S. Retail, LP Grantee: PDG Aiken Partners, LP Deed Reference: N/A Date: September 28, 1995 Sales Price: $6,675,000 Adjusted Sales Price: $6,675,000 Size building: 75,716 Sales Price per S.F.: $88.16 Size Land (Acres): 8.79 Size Land (S.F.): 382,892 Year Built: 1995 Land/Building Ratio: 5.06 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $782,704 Effective Gross Income: $782,704 EGIM: 8.53 Net Operating Income: $657,896 Overall Rate: 9.86% Verification: Public Records Type of Purchaser: Private Investor Comments: Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. 11 Comparable Sale No. 3 {GRAPHIC OMITTED] Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. 12 Comparable Sale No. 4 {GRAPHIC OMITTED] TMS: 59-231-22,23 pt. Name: Paw Creek Commons Location: East side of Little Rock Road at Freedom Drive Grantor: Paw Creek, LLC Grantee: Paw Creek Crossing Limited Partnership Deed Reference: Book 8988, Page 519 Date: March 25, 1997 Sales Price: $5,120,000 Adjusted Sales Price: $5,384,000 Size building: 66,050 Sales Price per S.F.: $77.52 Size Land (Acres): 9.82 Size Land (S.F.): 427,759 Year Built: 1996 Land/Building Ratio: 6.48 to 1 Utilities: Municipal Zoning: CC, Commercial Center Financing: Cash to Seller Gross Potential Income: $568,840 Effective Gross Income: $552,054 Gross Income Multiple: 9.00 EGIM: 9.27 Net Operating Income: $517,412 Overall Rate: 9.61% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was pre-construction. The sales price has been adjusted to reflect this by using 50 basis points in the capitalization rate (.1011 minus .0050 equals .0961). The major tenants are Winn-Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. The income from anchor tenants is 79.41 percent of gross income. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 [GRAPHIC OMITTED] Comparable Rentals Map [GRAPHIC OMITTED] Improved Sales Map [GRAPHIC OMITTED] Map of Ravenel Town Centre EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 165 Property: RAVENEL TOWN CENTRE 6323 SAVANNAH HWY. (US HWY. 17) RAVENEL, SC 29407 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- FOOD LION #1326 FOOD LION INC. 697-10 29,000 10/30/96 12/31/16 7.75 11/10/96 224,750.04 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- FAMILY DOLLAR STORE #2737 FAMILY DOLLAR STORES OF CHARL 697-20 7,000 09/09/96 12/31/05 4.64 11/01/96 32,500.08 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- HOLLYWOOD VIDEO ASSIGNED TO D.P.C., INC. 697-30 3,600 12/24/96 12/31/01 0.00 0.00 0.00 0.00 3.90 01/19/97 14,040.00 9.00 02/01/97 32,400.00 9.50 01/01/99 34,200.00 - ------------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied.. 39,600 Current Annual Base Rent 289,650.12 Available. 0 Total..... 39,600 - ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT INFORMATION Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ---------------------------------------------------------------------------------------------------------------------------------- FOOD LION #1326 FOOD LION INC. Full 0 PRS 1997 Fixed 0 01/01/17 12/31/21 7.75 0.00 0 01/01/22 12/31/26 7.75 0.00 0 01/01/27 12/31/31 7.75 0.00 0 01/01/32 12/31/36 7.75 0.00 0 - ------------------------------------------------------------------------------------------------------------------------- FAMILY DOLLAR STORE #2737 FAMILY DOLLAR STORES OF Full 0 Full 0 Full 0 01/01/06 12/31/10 5.00 3.00 812,500 CHARL 01/01/11 12/31/15 5.35 3.00 0 01/01/16 12/31/20 5.71 3.00 0 01/01/21 12/31/25 6.07 3.00 0 - ------------------------------------------------------------------------------------------------------------------------- HOLLYWOOD VIDEO ASSIGNED TO D.P.C., INC. Full 0 Full 0 Full 0 01/01/02 12/31/06 10.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Savannah Highway Looking North - Subject On Right [GRAPHIC OMITTED] Savannah Highway Looking South - Subject On Left [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Rear And Side View [GRAPHIC OMITTED] Subject Side View This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study SHOPPER'S PORT SHOPPING CENTER 2049 Savannah Highway (US Highway #17) Charleston, Charleston County, South Carolina Prepared by O. Marshall Dodds, MAI Date of Market Study - April 22, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC. April 21, 1997 Mr. Steven R. Maeglin Morgan Stanley & Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Shopper's Port Shopping Center South Side of Savannah Highway (US Highway #17) at Mark Clark Expressway (I-526) Charleston, Charleston County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on April 22, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 74,400 square feet of leaseable area. The center was constructed in 1974 and the Food Lion and Revco stores were rebuilt in 1990. The anchor tenants are Food Lion and Revco and the subject property is currently 100 percent occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds ------------------------------------ O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY ================================================================================ Regional Perspective The Charleston Metropolitan area has a stable economic base at this time. Property values throughout the metropolitan area have remained stable and increased to a certain extent even though several military bases were closed during the past five years. The local economic development board has attracted new industry to provide for the jobs that were lost over the past few years and this limited the impact of the closing of the military bases. The State of South Carolina is committed to the continued development of the port of Charleston. This is being expanded and contributes to the stability of the economy of Charleston and the State of South Carolina. The economy is sound at this time and growth is expected to continue in the future. The unemployment rate for Charleston County as of March, 1997 was 4.9 percent while the statewide rate was 5.3 percent. Neighborhood and Site The subject neighborhood is located around the intersection of Savannah Highway at Mark Clark Expressway. This is a heavily developed intersection with commercial properties. The Citadel Mall is located north of the Savannah Highway while the Quadrangle Shopping Center and other retail developments are located along Savannah Highway and Sam Rittenberg Boulevard. The new developments in the neighborhood would be a Rite Aid store, Holiday Inn Express and Ruby Tuesday's. There are several automobile dealerships as well as motels and other shopping centers that are located along the Savannah Highway. Retail facilities are located along Sam Rittenberg Boulevard. The neighborhood is practically fully developed with commercial properties along the major traffic arteries and single family and multi-family properties being located off of the traffic arteries. Physical features are as follows: 1. Size 8.34 acres or 363,290 SF 2. Identity 2049 Savannah Highway at Mark Clark Expressway TMS# 310-08-00-10,14,20 3. Shape Irregular 4. Topography Level on street grade 5. Accessability Average 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 74,400 SF 2. Layout & Design one story - food store, drug store, variety store seven shops, one ground lease, one retail store 3. Parking Spaces 410 5.51 per 1,000 SF of net area 4. Construction Brick and glass front with concrete block on side and rear and metal seam roof. 1 Market Position and Marketability Conclusions The subject property is located in the West Ashley Zone 2 and 3. Reference has been made to a retail study prepared by the Charleston Metro Commerce and is dated January, 1997. The West Ashley area contains the region's second highest concentration of retail shopping center space with nearly 3,000,000 square feet in nineteen shopping centers. The January 1997 survey identified a total of 197,441 square feet of available space, for an average vacancy of 6.6 percent. The area represents 1/4 of the total retail shopping space in the region and boasts one of the lowest vacancy rates in the three county area. The rental rates range from a low of $4.50 per square foot to a high of $16.00 per square foot. Subject property is an older center, but was renovated in 1992. The Bi-Lo store was replaced by Food Lion, and the drug store is Revco. Other stores are Family Dollar, One Price Clothing, Emergency, P.A., Aaron's Furniture of Charleston, Boat America Corporation, Nevada Bob's of Charleston and First Federal Savings and Loan is on a ground lease. Rental rates for the comparable are $9.00 to $12.50 per square feet for #1; $10.00 to $13.00 for #2; $9.00 - $10.00 for #3; $4.64 to $9.00 for #4. Comparable #3 has a Food Lion store, but Food Lion has vacated the premises. However, rent is still being paid on the store and all of the shops are occupied. The subject property has one shop that is vacant at this time with Ace TV Rentals moving out recently, but continuing to pay rent. The other shops are occupied. Family Dollar has been in this store since the beginning and the rental rate is $1.95 per square foot. The rental rates for these shops range from $6.25 per square foot to $10.49 per square foot which are within the range of the comparable rentals in the neighborhood. The rental rate for the Food Lion store is at $5.75 per square foot and increasing to $6.75 per square foot on February 1, 2001. Revco has a rental rate of $7.00 per square foot and is paying percentage rent at this time. The subject property has operated at a high occupancy rate and the location of the subject is strategic within the neighborhood. There is a neighborhood shopping center that was completed in 1996 on St. Andrews Boulevard at Sycamore Avenue. The major tenants are Food Lion and Revco and 9,000 square feet of shops will be constructed in 1997. Trends The subject property is located in the western section of the metropolitan area of Charleston. The development began approximately 30 years ago in this neighborhood and has continued since that time. There are a number of commercial developments in the neighborhood including the Citadel Mall, which contains 996,093 square feet with the major tenants being Belk's, Sear's, Dillards and JC Penney's. There are newer developments in the neighborhood such as the Rite Aid drug store, Holiday Inn Express Motel and Ruby Tuesday's restaurant. There is a major intersection in the neighborhood with the Savannah Highway and Mark Clark Expressway. The demand and desirability for the neighborhood has been good. All trends are favorable at this time and expected to continue. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Shopper's Port Quadrangle SHC Ashley Crossing SHC Ashley Oaks Plaza -------------------- -------------------- -------------------- -------------------- b. Street 2049 Savannah Hwy. E/S Sam Rittenberg Hwy. #61 at Magwood 1119 Wappoo Rd. -------------------- -------------------- -------------------- -------------------- c. City Charleston, SC Charleston, SC Charleston, SC Charleston, SC -------------------- -------------------- -------------------- -------------------- d. Distance from subject N/A 1 block 4 miles 1 mile -------------------- -------------------- -------------------- -------------------- e. Contact Edens Avant, Inc. Classic Properties JDN Realty Corp. FDR and Assoc. -------------------- -------------------- -------------------- -------------------- f. Phone 803-779-4420 803-740-6950 404-262-3252 803-256-7452 -------------------- -------------------- -------------------- -------------------- 2. Attributes a. Year built 1974 (Reh. 1992) 1984 1991 1985 -------------------- -------------------- -------------------- -------------------- b. Net sq. Ft. 74,400 75,793 188,903 56,220 -------------------- -------------------- -------------------- -------------------- c. # building 3 1 1 1 -------------------- -------------------- -------------------- -------------------- d. #stories 1 1 1 1 -------------------- -------------------- -------------------- -------------------- e. Avg. Floor plate size (SF), if office N/A N/A N/A N/A -------------------- -------------------- -------------------- -------------------- f. # elevators N/A N/A N/A N/A -------------------- -------------------- -------------------- -------------------- g. Parking Adequate Adequate Adequate Adequate -------------------- -------------------- -------------------- -------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block -------------------- -------------------- -------------------- -------------------- I. Vacancy % 100.0% 5.54% 0% 0% -------------------- -------------------- -------------------- -------------------- j. Anchors, if Retail Food Lion, Revco Piggly Wiggly, SK Food Lion, Wal-Mart Food Lion Family Dollar Menswear -------------------- -------------------- -------------------- --------------------
COMPARABLE 4 ------------ 1. Identification a. Name Ravenel Towne Cntr. -------------------- b. Street 6323 Savannah Hwy. -------------------- c. City Ravenel, SC -------------------- d. Distance from subject 15 miles -------------------- e. Contact Edens Avant, Inc. -------------------- f. Phone 803-779-4420 -------------------- 2. Attributes a. Year built 1996 -------------------- b. Net sq. Ft. 39,600 -------------------- c. # building 1 -------------------- d. #stories 1 -------------------- e. Avg. Floor plate size (SF), if office N/A -------------------- f. # elevators N/A -------------------- g. Parking Adequate -------------------- h. Construction Type Brick/Concrete Block -------------------- I. Vacancy % 0% -------------------- j. Anchors, if Retail Food Lion -------------------- Comments: Comparables No. 1, 2, and 3 are located in the neighborhood of subject, whereas, Comparable No. 4 is located approximately 15 miles west. The Ravenel Towne Centre is a new a center, being completed in 1996, but does have Food Lion as a major tenant. The tenant structure for these shopping centers and income streams are very similar to subject. There is a neighborhood center located on St. Andrews Road at Sycamore Street which was completed during 1996 having Food Lion and Revco as the major tenants. The developers are planning to construct 9,000 square feet of shops during 1997 with the projected rental rates to be from $10.00 to $12.00 per square foot. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space $5.75 - $7.00 N/A N/A N/A $7.75 ------------------ ------------------ ------------------- ------------------ --------------- b. Shop Space $1.95 - $10.49 $12.50 $13.00 $10.00 $4.64 - $9.00 ------------------ ------------------ ------------------- ------------------ --------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net Triple Net ------------------ ------------------ ------------------- ------------------ --------------- 3. Rent Concessions None None None None None ------------------ ------------------ ------------------- ------------------ --------------- 4. Effective Rent $1.95 - $10.49 $9.00 - $12.50 $10.00 - $13.00 $9.00 - $10.00 $4.64 - $9.00 ------------------ ------------------ ------------------- ------------------ --------------- 5. TI Allowance None None None None None ------------------ ------------------ ------------------- ------------------ --------------- 6. Expense Stop None None None None None ------------------ ------------------ ------------------- ------------------ --------------- 7. Length of Lease Term 3 - 5 years (shop) 3 - 5 years (shop) 3 -5 years (shop) 3 - 5 years (shop) 5 years ------------------ ------------------ ------------------- ------------------ --------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% 5.00% - 7.00% ------------------ ------------------ ------------------- ------------------ --------------- 9. Percentage Rent Food Lion, Revco, (per lease terms) Family Dollar, One Piggly Wiggly Food Lion, Wal-Mart Food Lion Food Lion Price Clothing ------------------ ------------------ ------------------- ------------------ --------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A N/A ------------------ ------------------ ------------------- ------------------ --------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A N/A ------------------ ------------------ ------------------- ------------------ --------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A similar similar similar similar ------------------ ------------------ ------------------- ------------------ ---------------
D. EXPLAIN RANKING/COMMENTS: These centers are similar to subject and the income streams are similar. Comparable No. 4 is located approximately 15 miles west, but in a new center. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 [GRAPHIC OMITTED] Name: Quadrangle Shopping Center Location: East Side of Sam Rittenberg Boulevard Charleston, SC Year Built: 1984 Total Size: 75,793 SF Vacant Space: 4,200 SF Vacancy Rate: 5.54% Rental Range: $9.00 to $12.50 per square foot Tenant Expenses: Triple Net Remarks: This center was renovated and the Piggly Wiggly store was expanded. Major tenants are Piggly Wiggly and SK Menswear. 5 Comparable Rental No. 2 [GRAPHIC OMITTED] Name: Ashley Crossing Location: Highway #61 at Magwood Road Charleston, SC Year Built: 1991 Total Size: 188,903 SF Vacant Space: 0 Vacancy Rate: 0% Rental Range: $10.00 - $13.00 Tenant Expenses: Triple Net Remarks: Major tenants are Food Lion and Wal-Mart. Food Lion and shops are to the side of Wal-Mart. 6 Comparable Rental No. 3 [GRAPHIC OMITTED] Name: Ashley Oaks Plaza Location: 1119 Wappoo Road Charleston, SC Year Built: 1985 Total Size: 56,200 SF Vacant Space: 0 Vacancy Rate: 0% Local Rent Range: $9.00 - $10.00 Tenant Expenses: Triple Net Remarks: This center is 100 percent occupied except for Food Lion, who has vacated the store, but is continuing to pay rent. The shops are fully occupied. 7 Comparable Rental No. 4 [GRAPHIC OMITTED] Name: Ravenel Towne Centre Location: 6323 Savannah Highway Ravenel, SC Year Built: 1996 Total Size: 39,600 SF Vacant Space: 0 SF Vacancy Rate: 0 % Local Rent Range: $4.64 - $9.00 Tenant Expenses: Triple Net Remarks: This center was completed in 1996. Major tenants include Food Lion with Family Dollar and Hollywood Video. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Shopper's Port St. Andrews Crossing Eastgate Shop. Center One Norman Center ------------------ -------------------- --------------------- ----------------- b. Street Address NWC Whiskey Rd. & 19706 One Norman 2049 Savannah Hwy. 817 St. Andrews Road Eastgate Dr. Blvd. ------------------ -------------------- --------------------- ----------------- c. City Charleston, SC Columbia, SC Aiken, SC Cornelius, NC ------------------ -------------------- --------------------- ----------------- d. Distance from Subject N/A 8 miles 56 miles 100 miles ------------------ -------------------- --------------------- ----------------- 2. Attributes a. Year Built 1974 (Reh. 1992) 1994 1995 1993 ------------------ -------------------- --------------------- ----------------- b. Net sq. feet 74,400 SF 66,910 SF 75,716 SF 54,185 SF ------------------ -------------------- --------------------- ----------------- c. # Buildings 3 1 1 1 ------------------ -------------------- --------------------- ----------------- d. # of Stories 1 1 1 1 ------------------ -------------------- --------------------- ----------------- e. Vacancy % 0% 0% 5.00% 0% ------------------ -------------------- --------------------- ----------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 $4,650,000 ------------------ -------------------- --------------------- ----------------- b. Sales Price PSF N/A $97.89 $88.16 $85.82 ------------------ -------------------- --------------------- ----------------- c. Cap. Rate N/A 9.69% 9.86% 9.68% ------------------ -------------------- --------------------- ----------------- d. Date N/A 05-25-94 09-28-95 10-12-95 ------------------ -------------------- --------------------- ----------------- e. NOI at time of Sale N/A $634,797 $657,896 $450,188 ------------------ -------------------- --------------------- ----------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A superior similar similar ------------------ -------------------- --------------------- -----------------
COMPARABLE 4 ------------ 1. Identification a. Name Paw Creek Commons ---------------------- b. Street Address E/S Little Rock Rd. at Freedom Dr. ---------------------- c. City Charlotte, NC ---------------------- d. Distance from Subject 92 miles ---------------------- 2. Attributes a. Year Built 1996 ---------------------- b. Net sq. feet 66,050 SF ---------------------- c. # Buildings 1 ---------------------- d. # of Stories 1 ---------------------- e. Vacancy % 2.73% ---------------------- 3. Sales Information a. Sales Price $5,384,000 ---------------------- b. Sales Price PSF $77.52 ---------------------- c. Cap. Rate 9.61% ---------------------- d. Date 03-25-97 ---------------------- e. NOI at time of Sale $517,412 ---------------------- 4. Rank Relative to Subject (inferior, similar, superior) superior ---------------------- Explain Ranking/Comments: Comparables 1 and 4 are ranked superior to subject. The reason for this is because of the location of these comparables being superior to subject. Comparable No. 2 and No. 3 are located in a commercial area that is larger than subject, but it is similar. However, the income stream of subject is just as strong as these comparables. 9 Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: 6012 -1 -1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 10 [GRAPHIC OMITTED] Comparable Sale No. 2 TMS: Name: Eastgate Shopping Center Location: Northwest Corner of Whiskey Road & Eastgate Drive Aiken, SC Grantor: Southwest U.S. Retail, LP Grantee: PDG Aiken Partners, LP Deed Reference: N/A Date: September 28, 1995 Sales Price: $6,675,000 Adjusted Sales Price: $6,675,000 Size building: 75,716 Sales Price per S.F.: $88.16 Size Land (Acres): 8.79 Size Land (S.F.): 382,892 Year Built: 1995 Land/Building Ratio: 5.06 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $782,704 Effective Gross Income: $782,704 EGIM: 8.53 Net Operating Income: $657,896 Overall Rate: 9.86% Verification: Public Records Type of Purchaser: Private Investor Comments: Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. 11 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. 12 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: 59-231-22,23 pt. Name: Paw Creek Commons Location: East side of Little Rock Road at Freedom Drive Grantor: Paw Creek, LLC Grantee: Paw Creek Crossing Limited Partnership Deed Reference: Book 8988, Page 519 Date: March 25, 1997 Sales Price: $5,120,000 Adjusted Sales Price: $5,384,000 Size building: 66,050 Sales Price per S.F.: $77.52 Size Land (Acres): 9.82 Size Land (S.F.): 427,759 Year Built: 1996 Land/Building Ratio: 6.48 to 1 Utilities: Municipal Zoning: CC, Commercial Center Financing: Cash to Seller Gross Potential Income: $568,840 Effective Gross Income: $552,054 Gross Income Multiple: 9.00 EGIM: 9.27 Net Operating Income: $517,412 Overall Rate: 9.61% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was pre-construction. The sales price has been adjusted to reflect this by using 50 basis points in the capitalization rate (.1011 minus .0050 equals .0961). The major tenants are Winn-Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. The income from anchor tenants is 79.41 percent of gross income. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 [GRAPHIC OMITTED] Comparable Rentals Map [GRAPHIC OMITTED] Improved Sales Map [GRAPHIC OMITTED] Site Plan EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: SHOPPER'S PORT SHOPPING CENTER 2049 SAVANNAH HIGHWAY CHARLESTON, SC 29407-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------- REVCO #0801 REVCO DISCOUNT DRUG CENTERS, 650- 10 8,450 02/03/91 02/28/01 6.00 02/03/91 50,700.00 7.00 02/03/96 59,149.92 0.00 0.00 0.00 0.00 FOOD LION #0920 650- 20 29,000 12/15/90 12/14/10 0.00 0.00 FOOD LION, INC. 5.75 02/01/91 166,749.96 6.75 02/01/01 195,750.00 0.00 0.00 FAMILY DOLLAR #167 FAMILY DOLLAR STORES OF CHARL 650- 30 6,000 01/31/74 12/31/98 1.85 01/01/89 11,100.00 1.95 01/01/94 11,700.00 0.00 0.00 0.00 0.00 ONE PRICE CLOTHING #032 ONE PRICE CLOTHING STORES, IN 650- 40 4,000 05/01/97 06/30/02 7.00 10/01/91 27,999.96 0.00 0.00 ACE TV RENTALS #412 ACE TV RENTALS 650- 50 2,200 08/01/94 07/31/97 0.00 0.00 9.00 08/01/93 19,800.00 - ------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT INFORMATION Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------ REVCO #0801 REVCO DISCOUNT DRUG CENTERS, Full 0 PRS 1991 Full 0 03/01/01 02/28/06 7.50 2.00 1,690,000 03/01/06 02/28/11 7.50 2.00 1,971,666 03/01/11 02/28/16 7.50 2.00 0 03/01/16 02/28/21 7.50 2.00 0 FOOD LION #0920 Full 0 PRS 1991 Fixed 0 12/15/10 12/14/15 0.00 1.00 0 Y FOOD LION, INC. 12/15/15 12/14/20 0.00 1.00 16,675,000 Y 12/15/20 12/14/25 0.00 1.00 19,575,000 Y 12/15/25 12/14/30 0.00 1.00 0 Y FAMILY DOLLAR #167 FAMILY DOLLAR STORES OF CHARL PRS 1974 PRS 1978 Full 0 01/01/84 12/31/88 1.85 2.50 444,000 Y 01/01/89 12/31/93 1.85 2.50 468,000 Y 01/01/94 12/31/98 1.95 2.50 0 Y 01/01/99 12/31/03 2.05 2.50 0 Y ONE PRICE CLOTHING #032 ONE PRICE CLOTHING STORES, IN Full 0 Full 0 Full 0 10/01/91 09/30/96 7.00 4.00 700,000 Y 0.00 4.00 700,000 Y ACE TV RENTALS #412 ACE TV RENTALS PRS 1986 PRS 1986 Full 0 08/01/94 07/31/97 0.00 0.00 0 0.00 0.00 0
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: SHOPPER'S PORT SHOPPING CENTER 2049 SAVANNAH HIGHWAY CHARLESTON, SC 29407-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------- ACE TV RENTALS #412 ACE TV RENTALS 650- 50 2,200 08/01/94 07/31/97 9.25 08/01/95 20,349.96 9.50 08/01/96 20,899.92 EMERGICARE, PA 650- 60 3,800 06/01/95 05/31/98 0.00 0.00 9.62 06/01/92 36,555.96 0.00 0.00 0.00 0.00 10.49 06/01/95 39,861.96 EMERGICARE, PA EMERGICARE, PA 650- 70 1,950 06/01/92 05/31/98 0.00 0.00 7.97 06/01/92 15,541.44 0.00 0.00 0.00 0.00 8.69 06/01/95 16,945.44 AARON'S FURNITURE OF CHAS. AARON'S FURNITURE OF CHARLEST 650- 80 7,000 02/18/96 02/28/01 6.25 03/01/96 43,749.96 0.00 0.00 6.50 03/01/99 45,500.04 6.75 03/01/00 47,250.00 - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ ACE TV RENTALS #412 ACE TV RENTALS PRS 1986 PRS 1986 Full 0 0.00 0.00 0 0.00 0.00 0 EMERGICARE, PA PRS 1981 PRS 1981 Full 0 06/01/98 05/31/01 0.00 0.00 0 06/01/01 05/31/04 0.00 0.00 0 06/01/04 05/31/07 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 EMERGICARE, PA EMERGICARE, PA PRS 1981 PRS 1981 Full 0 06/01/95 05/31/98 0.00 0.00 0 06/01/98 05/31/01 0.00 0.00 0 06/01/01 05/31/04 0.00 0.00 0 06/01/04 05/31/07 0.00 0.00 0 AARON'S FURNITURE OF CHAS. AARON'S FURNITURE OF CHARLEST Full 0 Full 0 Full 0 02/01/01 01/31/06 7.25 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: SHOPPER'S PORT SHOPPING CENTER 2049 SAVANNAH HIGHWAY CHARLESTON, SC 29407-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ----------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ----------------------------------------------------------------------------------------------------------- BOAT AMERICA CORPORATION BOAT/US MARINE CORPORATION 650- 90 12,000 11/01/96 10/31/01 8.50 11/01/96 102,000.00 0.00 0.00 0.00 0.00 FIRST FEDERAL SAVINGS FIRST FEDERAL OF CHARLESTON 650- 100 0 K 05/27/78 05/31/98 0.00 05/22/78 6,000.00 0.00 0.00 NEVADA BOB'S OF CHARLESTON EAGLE 18 GOLF, INC. 650- 110 0 P 02/01/96 06/30/99 0.00 08/01/96 44,799.96 0.00 0.00 0.00 08/01/97 47,600.04 0.00 08/01/98 50,400.00 - ----------------------------------------------------------------------------------------------------------- Square Feet: Occupied.. 74,000 Current Annual Base Rent 539,857.08 Available. 0 Total..... 74,000 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ BOAT AMERICA CORPORATION BOAT/US MARINE CORPORATION Full 0 Full 0 Full 0 11/01/01 10/31/06 9.50 0.00 0 11/01/06 10/31/11 0.00 0.00 0 0.00 0.00 0 FIRST FEDERAL SAVINGS FIRST FEDERAL OF CHARLESTON PRS 1977 Full 0 None 0 05/27/98 05/31/03 0.00 0.00 0 05/27/03 05/31/08 0.00 0.00 0 NEVADA BOB'S OF CHARLESTON EAGLE 18 GOLF, INC. Full 0 Full 0 None 0 07/01/99 06/30/02 0.00 3.00 2,240,000 0.00 3.00 0 0.00 3.00 0 0.00 3.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Savannah Highway Looking South - Subject On Left [GRAPHIC OMITTED] Savannah Highway Looking North - Subject On Right [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject - Nevada Bob's [GRAPHIC OMITTED] Subject - First Federal Of Charleston This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study TRIANGLE VILLAGE SHOPPING CENTER 912-934 North Lake Drive Lexington, Lexington County, South Carolina Prepared by O. Marshall Dodds, MAI Date of Market Study - May 5, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] May 5, 1997 Mr. Steven R. Maeglin Morgan Stanley & Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Triangle Village Shopping Center 912-934 North Lake Drive Lexington, Lexington County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 5, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The subject property consists of a community shopping center that contains 115,754 square feet of leaseable area. The center was constructed in 1986 with the major tenants being Wal-Mart, Food Lion, andRevco. The subject property is currently 96.76%. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds ------------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY ================================================================================ Regional Perspective Columbia is the state capital with the State House being located in downtown Columbia. Also, the University of South Carolina Campus is located in the downtown area. Fort Jackson, which is a large U.S. Army Training Facility is located in the eastern section of the Metropolitan area. The city has numerous specialized office activities such as: insurance, consulting services, advertising, marketing, printing and financial services. Government, distribution, finance and transportation are all important to Columbia, although none are preeminent. Geography also gives Columbia a strategic location in the industrial and commercial spheres. The unemployment rate for Lexington County as of March, 1997 was 2.9 percent while the statewide rate was 5.3 percent. The Columbia MA unemployment rate was 3.5%. Neighborhood and Site The neighborhood is located in the eastern section of the city of Lexington. The intersection of Sunset Boulevard (US Highway #378) and North Lake Drive (SC Highway #6) is also located in the neighborhood and at subject property. Subject neighborhood is in the direction of the growth for commercial properties for the city of Lexington. A new community shopping center with a Wal-Mart Superstore as a major tenant is located on Sunset Boulevard just east of subject. The Lexington Place Shopping Center, with Publix, is located at the intersection of Sunset Boulevard and Cherokee Road. There are other retail and service type facilities that are located along Sunset Boulevard including convenience markets/self-service gasoline stations, fast food restaurants, office buildings, day care centers and others. There is a medical office park located on Sunset Boulevard to the east of subject property. The Chimney Ridge Apartments were completed approximately two years ago. There are several single family residental subdivisions that are located throughout the neighborhood. The Hites Restaurant site was purchased for $1,300,000 for the development of an Eckerds Drug Store. Richland Memorial Hospital purchased a site on North Lake Drive in subject neighborhood recently while Lexington Medical Center purchased a site on West Main Street. These sites will be developed with medical complexes. Physical features are as follows: 1. Size 12.508 acres or 534,840 SF 2. Identity 912-934 North Lake Drive TMS# 04300-02-026, 06 3. Shape Irregular 4. Topography Generally level and on street grade 5. Accessability Good 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 115,754 SF 2. Layout & Design One story - discount store - food store - drug store and six shops 3. Parking Spaces 604 4.71 per 1,000 square feet of net area 4. Construction Brick and glass front with concrete block on side and rear and metal seam roof. 1 Market Position and Marketability Conclusions Lexington is a sixth largest retail submarket containing 722,567 square feet or 5.5% of all retail space surveyed. The Winn-Dixie Shopping Center in South Congaree, with 44,000 square feet was to added to the submarket. Twelve of the 158 completed retail shopping centers surveyed were in the Lexington area, with 46,190 square feet of space vacant for a vacancy rate of 6.4%, the fourth lowest vacancy rate in the ten areas. Twelve months earlier the vacancy rate was 8.1%, and 24 months earlier the vacancy rate was 11.1%. There is one center that is planned for this area, Lexington Place Phase II, on Sunset Boulevard at Old Cherokee Road. This center will add approximately 63,000 square feet to this market. The Wal-Mart Supercenter on Sunset Boulevard is nearing completion and will add 202,847 square feet to this submarket when completed. The average rental rate of a new lease in this area is $9.23 per square foot, up $ 0.23 per square foot from the last survey and up $ 0.43 per square foot from the survey two years ago. The subject property is located in the northeast section of the city of Lexington. The neighborhood is in the direction of growth for the city of Lexington. There are existing shopping centers in the neighborhood such as subject property, Lexington Place and Pastime Pavillion. There are other shopping centers that are located along Columbia Avenue and West Main Street. Several single family residental subdivisions are located throughout the subject neighborhood as well as several mutli-family projects. The Lexington K-Mart Center is anchored by K-Mart stores and the rental range for the shops is from $9.00 - $10.00 per square foot. The Village Square Shopping Center was renovated approximately two years ago and the Bi-Lo Store was expanded. The rental rates range from $8.00 to $10.00 per square foot. The Lexington Place Shopping Center has Publix Stores as the anchor tenant with shops. Phase II is planned for Lexington Place. The rental range for the shops is from $8.20 to $14.00 per square foot. The subject property has six shops and the rental rates for these shops ranges from $7.50 to $13.50 per square foot. This is within the range of the rental rates for the shops in the comparable shopping centers. It should be mentioned that Wal-Mart will be vacating the store in subject property and occupy the Wal-Mart Superstore after completion which should be shortly. The location of subject property is good as it is in the direction of growth. It is thought that the Wal-Mart Store can be leased to other tenants after Wal-Mart vacates the premises. Wal-Mart will be paying rent until November 30, 2005. The rental rate for the Food Lion store is $5.63 while the rental rate for the Revco store is $7.50 per square foot. Wal-Mart is paying $3.55 per square foot. Trends: The subject property is located in the northeast section of the city of Lexington. This neighborhood is in the direction of the growth of Lexington. A new shopping center is being constructed with Wal-Mart stores being the major tenant in a new superstore. Publix is the anchor tenant in the Lexington Place Shopping Center. Other developments have occurred throughout the neighborhood including commercial developments and single family residential. The neighborhood has maintained its stability over the years and is undergoing a growth period at this time. All trends are favorable. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Triangle Village Lexington K-Mart Village Square Lexington Place, PH. I ---------------------- --------------------- --------------------- ----------------------- b. Street N/S Sunset Blvd. at 912-934 N. Lake Drive N/S West Main Street N/S Columbia Ave. Old Cherokee Rd. ---------------------- --------------------- --------------------- ----------------------- c. City Lexington, SC Lexington, SC Lexington, SC Lexington, SC ---------------------- --------------------- --------------------- ----------------------- d. Distance from subject N/A 1.5 miles 1.0 mile .5 mile ---------------------- --------------------- --------------------- ----------------------- e. Contact Edens & Avant, Inc. Baker & Baker Keenan Company Holmes-Smith Dev. Co. ---------------------- --------------------- --------------------- ----------------------- f. Phone 803-779-4420 803-254-8987 803-254-2300 803-748-1252 ---------------------- --------------------- --------------------- ----------------------- 2. Attributes a. Year built 1986 1986 1975 (Reh. 1994) 1994 ---------------------- --------------------- --------------------- ----------------------- b. Net sq. Ft. 115,754 78,000 67,000 60,944 ---------------------- --------------------- --------------------- ----------------------- c. # building 1 1 1 1 ---------------------- --------------------- --------------------- ----------------------- d. #stories 1 1 1 1 ---------------------- --------------------- --------------------- ----------------------- e. Avg. Floor plate size (SF), if office N/A N/A N/A N/A ---------------------- --------------------- --------------------- ----------------------- f. # elevators N/A N/A N/A N/A ---------------------- --------------------- --------------------- ----------------------- g. Parking Adequate Adequate Adequate Adequate ---------------------- --------------------- --------------------- ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ---------------------- --------------------- --------------------- ----------------------- I. Vacancy % 3.24% 0% 11.94% 0% ---------------------- --------------------- --------------------- ----------------------- j. Anchors, if Retail Wal-Mart, Food Lion, Revco K-Mart Bi-Lo Publix ---------------------- --------------------- --------------------- -----------------------
COMPARABLE 4 ------------ 1. Identification a. Name Wal-Mart Superstore ----------------------- b. Street N/S Sunset Blvd. ----------------------- c. City Lexington, SC ----------------------- d. Distance from subject .5 mile ----------------------- e. Contact Wyatt Development Co. ----------------------- f. Phone 803-649-3975 ----------------------- 2. Attributes a. Year built 1997 ----------------------- b. Net sq. Ft. 202,847 ----------------------- c. # building 1 ----------------------- d. #stories 1 ----------------------- e. Avg. Floor plate size (SF), if office N/A ----------------------- f. # elevators N/A ----------------------- g. Parking Adequate ----------------------- h. Construction Type Brick/Concrete Block ----------------------- I. Vacancy % 4.44% ----------------------- j. Anchors, if Retail Wal-Mart Superstore ----------------------- Comments: These comparables are located in Lexington and nearby subject. Comparable No. 1 is anchored by a K-Mart store and was built in the same year as subject. Comparable No. 4 is anchored by a Wal-Mart Superstore and after the completion of this store, Wal-Mart will vacate the premises on subject property. Comparables No. 2 and 3 are smaller than subject, but are similar. 3 PROPERTY INSPECTION FORM COMMERCIAL
B. RENTAL INFORMATION SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space $3.55 - $7.50 N/A N/A N/A --------------------- ------------------- ------------------ ------------------- b. Shop Space $7.50 - $13.50 $9.00 - $10.00 $8.00 - $10.00 $8.20 - $14.00 --------------------- ------------------- ------------------ ------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net --------------------- ------------------- ------------------ ------------------- 3. Rent Concessions None None None None --------------------- ------------------- ------------------ ------------------- 4. Effective Rent $7.50 - $13.50 $9.00 - $10.00 $8.00 - $10.00 $8.20 - $14.00 --------------------- ------------------- ------------------ ------------------- 5. TI Allowance None None None None --------------------- ------------------- ------------------ ------------------- 6. Expense Stop None None None None --------------------- ------------------- ------------------ ------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 - 5 years (shop) 3 -5 years (shop) 3 - 5 years (shop) --------------------- ------------------- ------------------ ------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% --------------------- ------------------- ------------------ ------------------- 9. Percentage Rent (per lease terms) Wal-Mart, Food Lion, Revco K-Mart Bi-Lo Publix --------------------- ------------------- ------------------ ------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A --------------------- ------------------- ------------------ ------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A --------------------- ------------------- ------------------ ------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A similar similar similar --------------------- ------------------- ------------------ -------------------
B. RENTAL INFORMATION COMPARABLE 4 ------------ 1. Asking Rental Rate a. Anchor Space N/A ----------------- b. Shop Space $9.50 - $13.50 ----------------- 2. Lease Type (Gross/Net) Triple Net ----------------- 3. Rent Concessions None ----------------- 4. Effective Rent $9.50 - $13.50 ----------------- 5. TI Allowance None ----------------- 6. Expense Stop None ----------------- 7. Length of Lease Term 3-5 years (shop) ----------------- 8. Commissions 5.00% - 7.00% ----------------- 9. Percentage Rent (per lease terms) Wal-Mart ----------------- 10. Historical Annual Absorption/sq.ft. N/A ----------------- 11. Annual Operating Expense psf (Including taxes) N/A ----------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) superior ----------------- D. EXPLAIN RANKING/COMMENTS: Subject property is similar to Comparables No. 1, 2 and 3. Comparable No. 1 is very similar, in that, there is a large discount store that is in this center. Also, subject was constructed in 1986 and this comparable was also. Comparables No. 2 and 3 are similar, but these are smaller shopping centers. Comparable No. 4 is superior to subject as there will be a Wal-Mart Superstore in this center. The pre-leasing program has been very good. After the completion of this center, Wal-Mart will vacate the premises in subject and this Wal-Mart Superstore will be replacing the existing Wal-Mart Store. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 [GRAPHIC OMITTED] Name: Lexington K-Mart Shopping Center Location: N/S West Main Street Lexington, SC Year Built: 1986 Total Size: 78,000 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $9.00 to $10.00 per square foot Tenant Expenses: Triple Net Remarks: The anchor tenant is K-Mart. Exposure and visibility are good. This center has always had high occupancy rates. 5 Comparable Rental No. 2 [GRAPHIC OMITTED] Name: Village Square Shopping Center Location: N/S Columbia Avenue Lexington, SC Year Built: 1975 (Reh. 1994) Total Size: 67,000 SF Vacant Space: 8,000 SF Vacancy Rate: 11.94% Rental Range: $8.00 - $10.00 per square foot Tenant Expenses: Triple Net Remarks: The center was renovated two years ago. The Bi-Lo store was expanded. 6 Comparable Rental No. 3 [GRAPHIC OMITTED] Name: Lexington Place Shopping Center Location: N/S Sunset Blvd. at Old Cherokee Blvd. Lexington, SC Year Built: 1994 Total Size: 60,944 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $8.20 - $14.00 per square foot Tenant Expenses: Triple Net Remarks: Publix is the anchor tenant with shops. Phase II is planned and will be built in 1997 or 1998. There are two outlots in this center. 7 Comparable Rental No. 4 [GRAPHIC OMITTED] Name: Wal-Mart Superstore Location: N/S Sunset Blvd. Lexington, SC Year Built: 1997 Total Size: 202,847 SF Vacant Space: 9,000 SF Vacancy Rate: 4.44% Local Rent Range: $9.50 - $13.50 per square foot Tenant Expenses: Triple Net Remarks: This center is nearing completion. Pre-leasing of the shops has been good. Two outlots have been sold - Golden Corral and Chick-Fil-A. 8 PROPERTY INSPECTION FORM COMMERCIAL
II. SALES COMPARABLE SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Triangle Village Barnwell Plaza Hampton Plaza Cunningham Plaza -------------------- --------------------- ------------------- ------------------- b. Street Address 2864 Wilma Rudolph 1610 Fort Campbell 912-934 N. Lake Dr. 1019 Dunbarton Blvd. Blvd. Blvd. -------------------- --------------------- ------------------- ------------------- c. City Lexington, SC Barnwell, SC Clarksville, TN Clarksville, TN -------------------- --------------------- ------------------- ------------------- d. Distance from Subject N/A 60 miles 510 miles 510 miles -------------------- --------------------- ------------------- ------------------- 2. Attributes a. Year Built 1986 1985 1987 1987 -------------------- --------------------- ------------------- ------------------- b. Net sq. feet 115,754 SF 70,725 SF 189,302 SF 140,744 SF -------------------- --------------------- ------------------- ------------------- c. # Buildings 1 1 1 1 -------------------- --------------------- ------------------- ------------------- d. # of Stories 1 1 1 1 -------------------- --------------------- ------------------- ------------------- e. Vacancy % 3.24% 9.00% 0% 11.23% -------------------- --------------------- ------------------- ------------------- 3. Sales Information a. Sales Price N/A $2,860,620 $6,150,000 $5,025,000 -------------------- --------------------- ------------------- ------------------- b. Sales Price PSF N/A $40.45 $32.49 $35.70 -------------------- --------------------- ------------------- ------------------- c. Date N/A 01-31-95 12-26-95 12-26-95 -------------------- --------------------- ------------------- ------------------- d. NOI at time of Sale N/A $330,327 $723,627 $667,043 -------------------- --------------------- ------------------- ------------------- e. Cap. Rate N/A 11.55% 12.25% 13.27% -------------------- --------------------- ------------------- ------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A similar similar similar -------------------- --------------------- ------------------- -------------------
COMPARABLE 4 ------------ 1. Identification a. Name Cumberland Plaza --------------------- b. Street Address 1339 New Smithville Hwy. --------------------- c. City McMinnville, TN --------------------- d. Distance from Subject 400 miles --------------------- 2. Attributes a. Year Built 1987 --------------------- b. Net sq. feet 143,951 SF --------------------- c. # Buildings 1 --------------------- d. # of Stories 1 --------------------- e. Vacancy % 8.92% --------------------- 3. Sales Information a. Sales Price $5,225,050 --------------------- b. Sales Price PSF $36.30 --------------------- c. Date 12-26-95 --------------------- d. NOI at time of Sale $693,726 --------------------- e. Cap. Rate 13.28% --------------------- 4. Rank Relative to Subject (inferior, similar, superior) similar --------------------- Explain Ranking/Comments: These shopping centers are similar to subject. The centers were built about the same time as subject property, but the size of the centers variesas to the size of subject. These comparables were anchored with Wal-Mart stores such as subject and the rental rates for the Wal-Mart stores were about the same as subject. The location of subject could be considered superior to the locations of these comparables. However, comparable No. 2 is also located in a growth area. 9 Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: Name: Barnwell Plaza Location: 1019 Dunbarton Boulevard Barnwell, SC Grantor: 1994 N1 SC Associates, LP Grantee: Tri Centers, LP Deed Reference: Book 282, Page 137 Date: January 31, 1995 Sales Price: $2,860,620 Adjusted Sales Price: $2,860,620 Size building 70,725 Sales Price per S.F.: $40.45 Size Land (Acres): 11.28 Size Land (S.F.): 491,357 Year Built: 1985 Land/Building Ratio: 6.95 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $399,045 Effective Gross Income: $399,045 Gross Income Multiple: 7.17 EGIM: 7.17 Net Operating Income: $330,327 Overall Rate: 11.55% Verification: Purchaser Type of Purchaser: Private Investor Comments: This is a good quality community shopping center located in the town of Barnwell in Barnwell County (pop. 20,000) in western South Carolina. Approximately 91% of the center was comprised of anchor space, including Wal-Mart (34,875 SF), Food Lion (21,000 SF) and Revco Drugs (8,450 SF). The income and expense data here is based on the center's actual performance at the time of sale, and include approximately $0.50 SF in overage rents from Wal-Mart and $0.10 SF in reserves. 10 Comparable Sale No. 2 [GRAPHIC OMITTED] TMS: Name: Hampton Plaza Location: 2864 Wilma Rudolph Boulevard Clarksville, TN Grantor: Aetna Life Insurance Company Grantee: Hampton II, LP Deed Reference: Book 580, Page 1793 Date: December 26, 1995 Sales Price: $6,150,000 Adjusted Sales Price: $6,150,000 Size building: 189,302 Sales Price per S.F.: $32.49 Size Land (Acres): 23.24 Size Land (S.F.): 1,012,334 Year Built: 1987 Land/Building Ratio: 5.35 to 1 Utilities: All Available Zoning: C-3, Shopping Center District Financing: Cash to Seller Gross Potential Income: $966,102 Effective Gross Income: $937,119 Gross Income Multiple: 6.37 EGIM: 6.56 Net Operating Income: $753,627 Overall Rate: 12.25% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a community shopping center with Wal-Mart as a major tenant prior to a new Wal-Mart Superstore being built on the same block. While Wal-Mart remains liable for the lease, the store is vacant. The remainder of the center is occupied. 11 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: Cunningham Plaza Location: 1610 Fort Campbell Boulevard Clarksville, TN Grantor: Aetna Life Insurance Company Grantee: Cunningham II, LP Deed Reference: Book 580, Page 1748 Date: December 26, 1995 Sales Price: $5,025,000 Adjusted Sales Price: $5,025,000 Size building: 140,744 Sales Price per S.F.: $35.70 Size Land (Acres): 23.13 Size Land (S.F.): 1,007,543 Year Built: 1987 Land/Building Ratio: 7.16 to 1 Utilities: All Available Zoning: C-5, Arterial Commercial District Financing: Cash to Seller Gross Potential Income: $841,808 Effective Gross Income: $816,554 Gross Income Multiple: 5.97 EGIM: 6.15 Net Operating Income: $667,043 Overall Rate: 13.27% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a community shopping center. Wal-Mart was the major tenant, but is now occupying a new superstore in the same block. Wal-Mart Furniture store is occupying the store. Other shops are occupied. 12 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: Name: Cumberland Plaza Location: 1339 New Smithville Highway McMinnville, TN Grantor: Aetna Life Insurance Grantee: Cumberland II, LP Deed Reference: Book 287, Page 204 Date: December 26, 1995 Sales Price: $5,225,050 Adjusted Sales Price: $5,225,050 Size building: 143,951 Sales Price per S.F.: $36.30 Size Land (Acres): 19.64 Size Land (S.F.): 855,518 Year Built: 1987 Land/Building Ratio: 5.94 to 1 Utilities: All Available Zoning: C-3, Highway Commercial District Financing: Cash to Seller Gross Potential Income: $902,918 Effective Gross Income: $875,830 Gross Income Multiple: 5.79 EGIM: 5.97 Net Operating Income: $693,726 Overall Rate: 13.28% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a community shopping center. Wal-Mart was the major tenant and remains liable for the lease for the remaining term.A new Wal-Mart Superstore was built one block west of this property. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 [GRAPHIC OMITTED] Comparable Rentals Map [GRAPHIC OMITTED] Comparable Sales Map [GRAPHIC OMITTED] Building Sketch EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 160 Property: TRIANGLE VILLAGE LEXINGTON, SC 29072 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ FOOD LION INC. #371 FOOD LION INC. 695-10 25,000 03/09/86 03/08/06 5.63 03/10/86 140,750.04 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ REVCO #4334 REVCO DISCOUNT DRUG CENTERS O 695-20 9,100 03/01/86 02/28/01 7.50 03/01/86 68,250.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ TRANSOUTH FINANCIAL CORP. # 988 ASSOCIATES CORPORATION OF NOR 695-30 2,000 07/24/95 07/31/00 9.50 08/01/95 18,999.96 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ HAIR CUTTERY #1553 CREATIVE HAIRDRESSERS INC. 695-40 1,500 06/01/95 05/31/98 13.50 06/01/93 20,250.00 - ------------------------------------------------------------------------------------------------------------------------ SUBWAY #1226 SUBWAY SOUTH INC. 695-50 1,500 02/01/86 01/31/98 0.00 0.00 0.00 0.00 0.00 0.00 11.05 02/01/95 16,575.00 - ------------------------------------------------------------------------------------------------------------------------ PIC 'N PAY STORES, INC. #511 PIC 'N PAY SHOES #511 695-60 3,000 02/01/85 01/31/01 8.00 02/01/94 24,000.00 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ FOOD LION INC. #371 FOOD LION INC. PSR 1987 PSR 1987 Fixed 0 03/09/06 03/08/11 5.63 1.00 14,075,000 Y 03/09/11 03/08/16 5.63 1.00 0 Y 03/09/16 03/08/21 5.63 1.00 0 Y 03/09/21 03/08/26 5.63 1.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ REVCO #4334 REVCO DISCOUNT DRUG CENTERS O Full 0 Full 0 Full 0 03/01/01 02/28/06 7.50 2.00 3,412,500 03/01/06 02/28/11 7.50 2.00 0 03/01/11 02/28/16 7.50 2.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ TRANSOUTH FINANCIAL CORP. # 988 ASSOCIATES CORPORATION OF NOR Full 0 Full 0 Full 0 08/01/00 07/31/05 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ HAIR CUTTERY #1553 CREATIVE HAIRDRESSERS INC. Full 0 Full 0 Full 0 0.00 4.00 506,300 Y - ------------------------------------------------------------------------------------------------------------------------------------ SUBWAY #1226 SUBWAY SOUTH INC. Full 0 Full 0 Full 0 02/01/89 01/31/92 9.25 5.00 0 Y 02/01/92 01/31/95 10.10 5.00 0 Y 02/01/95 01/31/98 11.05 5.00 0 Y 02/01/98 01/31/01 12.00 5.00 331,500 Y - ------------------------------------------------------------------------------------------------------------------------------------ PIC 'N PAY STORES, INC. #511 PIC 'N PAY SHOES #511 Full 0 Full 0 Full 0 02/01/91 01/31/94 8.00 4.00 637,500 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 161 Property: TRIANGLE VILLAGE LEXINGTON, SC 29072 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ PIC 'N PAY STORES, INC. #511 PIC 'N PAY SHOES #511 695-60 3,000 02/01/85 01/31/01 0.00 0.00 8.50 02/01/96 25,500.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ JOLLY $ NOT JUST JEWELRY, INC. 695-70 4,000 11/01/95 12/31/98 0.00 0.00 0.00 0.00 7.50 01/01/96 30,000.00 - ------------------------------------------------------------------------------------------------------------------------ Available 695-80 3,750 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ WAL-MART #881 WAL-MART STORES INC. 695-90 65,904 11/11/85 11/30/05 3.55 12/01/85 233,959.20 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ PIC 'N PAY STORES, INC. #511 PIC 'N PAY SHOES #511 Full 0 Full 0 Full 0 02/01/94 01/31/96 8.00 4.00 0 02/01/96 01/31/01 8.50 4.00 0 02/01/01 01/31/06 9.00 4.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ JOLLY $ NOT JUST JEWELRY, INC. Full 0 Full 0 Full 0 01/01/99 12/31/01 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ WAL-MART #881 WAL-MART STORES INC. Full 0 None 0 Full 0 11/30/05 01/31/11 3.55 0.75 14,554,877 02/01/11 01/31/16 3.55 0.75 0 02/01/16 01/31/21 3.55 0.75 0 02/01/21 01/31/26 3.55 0.75 0 02/01/26 01/31/31 3.55 0.75 0 02/01/31 01/31/36 3.55 0.75 0 - ------------------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 112,004 Current Annual Base Rent 554,284.20 Available. 3,750 Total..... 115,754
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Sunset Boulevard (US Highway #378 - Looking East [GRAPHIC OMITTED] Sunset Boulevard (US Highway #378 - Looking West [GRAPHIC OMITTED] North Lake Drive (SC Highway #6) Looking Northeast [GRAPHIC OMITTED] North Lake Drive (SC Highway #6) Looking Southwest [GRAPHIC OMITTED] Subject - Front and Side View [GRAPHIC OMITTED] Subject - Front view [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front and Side View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Entranceway from US Highway #378 [GRAPHIC OMITTED] Subject - Entranceway from US Highway #378 [GRAPHIC OMITTED] Subject - Entranceway from US Highway #378 and Rear View [GRAPHIC OMITTED] Subject - Entranceway from SC Highway #6 [GRAPHIC OMITTED] Subject - Entranceway from SC Highway #6 [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Rear View This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study WESTLAND SQUARE 2250 Sunset Boulevard (US Highway #378) West Columbia, Lexington County, South Carolina Prepared by O. Marshall Dodds, MAI Date of Market Study - April 28, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] April 28, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Westland Square 2250 Sunset Boulevard (US Highway #378) West Columbia, Lexington County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that forms the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on April 28, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 62,735 square feet of leasable area. The center was constructed in 1987 and the Food Lion store was expanded during 1996. The anchor tenants are Food Lion and Revco and the subject property is currently 96.46 percent occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds ------------------------------------ O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY ================================================================================ Regional Perspective Columbia is the state capital with the State House being located in downtown Columbia. Also, the University of South Carolina Campus is located in the downtown area. Fort Jackson, which is a large U.S. Army Training Facility is located in the eastern section of the Metropolitan area. The city has numerous specialized office activities such as: insurance, consulting services, advertising, marketing, printing and financial services. Government, distribution, finance and transportation are all important to Columbia, although none are preeminent. Geography also gives Columbia a strategic location in the industrial and commercial spheres. The unemployment rate for Lexington County as of March, 1997 was 2.9 percent while the statewide rate was 5.3 percent. Neighborhood and Site The subject neighborhood is located around the intersection of Sunset Boulevard and I-26. The make-up of the neighborhood consists of single family residential subdivisions and commercial properties that are located along Sunset Boulevard. Several of these single family residential subdivisions are Westover Acres, Saluda Hills, Westwood Hills and Saluda River Estates. Multi-family developments include the Quail Hollow Apartments and Lexington Place while Hulon Greene, which is located to the rear of the Lexington Medical Center and consists of condominiums and patio homes for the elderly. The New Brookland Place is a townhouse development located to the rear of subject property. Several medical buildings are located around the Lexington Medical Center. Motels located around the intersection of I-26 and Sunset Boulevard include Ramada Inn and Hampton Inn. The State Farm Insurance Center, offices for Allstate Insurance Company and Pitney Bowes are located in the neighborhood. A number of fast food restaurants and convenience markets/self-service gasoline stations are located in the neighborhood. Several branch offices for banks are located along Sunset Boulevard. The Sunset Court Shopping Center is located across the street from subject. Winn-Dixie and Eckerd's were the major tenants in this center, but Winn-Dixie vacated the premise approximately five years ago. This store is now occupied by Silk Flowers and Things while Eckerd's remains in the center. The downtown area of Columbia is located to the southeast of the neighborhood by approximately four miles. Physical features are as follows: 1. Size 5.973 acres or 258,616 SF 2. Identity 2250 Sunset Boulevard TMS# 4674-01-09 3. Shape Irregular 4. Topography Generally level and on street grade, but slopes slightly downward from the western side to the eastern side 5. Accessability Good 6. Utilities Municipal 1 Physical Description Building features are as follows: 1. Size (net) 62,735 SF 2. Layout & Design 1 story - food store, drug store, ten shops 3. Parking Spaces 455 for a ratio of 7.25 spaces per 1,000 square feet of net area 4. Construction Brick and glass front with concrete block on side and rear and metal seam roof. Market Position and Marketability Conclusions Cayce/West Columbia is the fourth largest submarket in the Columbia metropolitan area and contains 23 of the 158 centers surveyed. The size of the retail space surveyed was 1,481,760 square feet or 11.2 percent of the total area. A new center increased this area by 50,000 square feet, a change in size added 4,538 square feet and one center was deleted for a total of 13,500 square feet. The space available was 144,317 square feet with a vacancy rate of 9.7 percent, the seventh highest of the ten areas. Twelve months earlier the vacancy rate was 10.1 percent or four points higher. The average new lease rate for these structures is $7.88 per square foot. This figure is up by $0.01 per square foot over the past year and up by $0.23 per square foot from two years ago. There is a center planned on Sunset Boulevard with 25,000 square feet. The subject property is located in the middle of the neighborhood and near the intersection with Sunset Boulevard and I-26. There are several single family subdivisions that are located throughout the neighborhood as well as several multi-family projects. Sunset Boulevard is a heavily traveled street and is a major traffic artery running through the neighborhood. The Sunset Court Shopping Center is located across the street from subject. While Winn Dixie has vacated the premise, this store is now occupied by Silk Flowers and Things. Eckerd's drugs remains in the center. The rental rate ranges from $6.50 to $8.00 per square foot. Capital Square Shopping Center is located on Sunset Boulevard at the Meeting Street Expressway. Bi-Lo anchors this center with Revco drugs. The rental rate ranges from $4.50 to $8.50 per square foot. The Mills Corner Shopping Center, which is anchored by Piggly Wiggly, is located on Augusta Road and has rental rates ranging from $10.00 to $12.00 per square foot. The Woodberry Plaza, which is also located on Augusta Road has rental rates ranging from $6.50 to $8.00 per square foot. Winn Dixie and Revco are anchor tenants in this center. Big Lots occupies the former Winn Dixie store as a new store was constructed for Winn Dixie. The subject property has ten shops and the rental rates range from $7.00 to $9.50 per square foot. These rates are reasonable rental rates for the neighborhood. The rental rate for the Food Lion store is at $7.75 per square foot while the rental rate for the Revco store is at $6.60 per square foot. The subject property has operated at a high occupancy rate and Food Lion recently expanded their store. The location of subject is strategic within the neighborhood and convenient to the shoppers throughout the neighborhood Trends: The subject property is located in the western section of the metropolitan area of Columbia. This is an older section and the intersection of I-26 and Sunset Boulevard is heavily developed. The Lexington Medical Center is located at this intersection as well as motels, fast food restaurants, offices for branch banks, convenience markets/self-service gasoline stations and offices. The demand and desirability for the neighborhood has been good. All trends are favorable at this time and expected to continue. 2 PROPERTY INSPECTION FORM COMMERCIAL
I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Westland Square Sunset Court Mills Corner Woodberry Plaza ---------------------- --------------------- --------------------- --------------------- b. Street NEC of Augusta Rd and 2250 Sunset Blvd. 2247 Sunset Blvd. Oak Drive 3234 Augusta Road ---------------------- --------------------- --------------------- --------------------- c. City West Columbia, SC West Columbia, SC West Columbia, SC West Columbia, SC ---------------------- --------------------- --------------------- --------------------- d. Distance from subject N/A Across street 2 1/2 to 3 miles 2 1/2miles ---------------------- --------------------- --------------------- --------------------- e. Contact Edens Avant, Inc. Edens Avant, Inc. Rex Pollard Edens Avant, Inc. ---------------------- --------------------- --------------------- --------------------- f. Phone 803-779-4420 (803) 779-4420 (803) 779-7777 (803) 779-4420 ---------------------- --------------------- --------------------- --------------------- 2. Attributes a. Year built 1986 1977 1995 1976 - Renov. 1994 ---------------------- --------------------- --------------------- --------------------- b. Net sq. Ft. 62,734 54,704 50,000 82,920 ---------------------- --------------------- --------------------- --------------------- c. # building 1 1 1 1 ---------------------- --------------------- --------------------- --------------------- d. #stories 1 1 1 ---------------------- --------------------- --------------------- --------------------- e. Avg. Floor plate size (SF), if office N/A N/A N/A N/A ---------------------- --------------------- --------------------- --------------------- f. # elevators N/A N/A N/A N/A ---------------------- --------------------- --------------------- --------------------- g. Parking N/A Adequate Adequate Adequate ---------------------- --------------------- --------------------- --------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ---------------------- --------------------- --------------------- --------------------- I. Vacancy % 3.54% 13.09% 0% 0% ---------------------- --------------------- --------------------- --------------------- j. Anchors, if Retail Winn-Dixie, Revco, Food Lion, Revco Eckerds's Piggly Wiggly Big Lots ---------------------- --------------------- --------------------- ---------------------
I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION COMPARABLE 4 ------------ 1. Identification a. Name Capital Square ----------------------- b. Street 431 Sunset Blvd. ----------------------- c. City West Columbia, SC ----------------------- d. Distance from subject 3 miles ----------------------- e. Contact Edens Avant, Inc. ----------------------- f. Phone (803) 779-4420 ----------------------- 2. Attributes a. Year built 1974 ----------------------- b. Net sq. Ft. 79,921 ----------------------- c. # building 1 ----------------------- d. #stories 1 ----------------------- e. Avg. Floor plate size (SF), if office N/A ----------------------- f. # elevators N/A ----------------------- g. Parking Adequate ----------------------- h. Construction Type Brick/Concrete Block ----------------------- I. Vacancy % 25.09% ----------------------- j. Anchors, if Retail Bi-Lo, Revco ----------------------- Comments: Comparable #1 is located across the street from subject property. Winn Dixie moved out of this center approximately five years ago and the tenant has been replaced and Eckerd's remains in the center. Comparable #4 is located approximately three miles southeast of subject and is on Sunset Boulevard. This is an older center and the Bi-Lo store expanded in this center several years ago. Comparable #2 is the Mills Corner center and is a new center located on Augusta Road. Woodberry Plaza is an older center, but was renovated in 1994 as a new store was built for Winn Dixie. Big Lots now occupies the former Winn Dixie store. 3 PROPERTY INSPECTION FORM COMMERCIAL
B. RENTAL INFORMATION SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space $6.60 - $7.75 N/A N/A N/A --------------------- -------------------- -------------------- -------------------- b. Shop Space $7.00 - $9.50 $6.00 - $8.00 $10.00 - $12.00 $6.50 - $8.00 --------------------- -------------------- -------------------- -------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net --------------------- -------------------- -------------------- -------------------- 3. Rent Concessions None None None None --------------------- -------------------- -------------------- -------------------- 4. Effective Rent $7.00 - $9.50 $6.50 - $7.50 $10.00 - $12.00 $6.50 - $9.25 --------------------- -------------------- -------------------- -------------------- 5. TI Allowance None None None None --------------------- -------------------- -------------------- -------------------- 6. Expense Stop None None None None --------------------- -------------------- -------------------- -------------------- 7. Length of Lease Term 3 - 5 years - shops 3 - 5 years - Shops 3 - 5 years - Shops 3 - 5 years - Shops --------------------- -------------------- -------------------- -------------------- 8. Commissions 5.00% - 7.00% 5.00% - 7.00% 5.00% - 7.00% 5.00% - 7.00% --------------------- -------------------- -------------------- -------------------- 9. Percentage Rent (per lease terms) Food Lion, Revco Piggly Wiggly Piggly Wiggly Winn Dixie, Revco --------------------- -------------------- -------------------- -------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A --------------------- -------------------- -------------------- -------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A --------------------- -------------------- -------------------- -------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Inferior Superior Similar --------------------- -------------------- -------------------- --------------------
B. RENTAL INFORMATION COMPARABLE 4 ------------ 1. Asking Rental Rate a. Anchor Space N/A ---------------------- b. Shop Space $4.50 - $8.50 ---------------------- 2. Lease Type (Gross/Net) Triple Net ---------------------- 3. Rent Concessions None ---------------------- 4. Effective Rent $4.50 - $8.50 ---------------------- 5. TI Allowance None ---------------------- 6. Expense Stop None ---------------------- 7. Length of Lease Term 3 - 5 years - Shops ---------------------- 8. Commissions 5.00% - 7.00% ---------------------- 9. Percentage Rent (per lease terms) Bi-Lo, Revco ---------------------- 10. Historical Annual Absorption/sq.ft. N/A ---------------------- 11. Annual Operating Expense psf (Including taxes) N/A ---------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) Similar ---------------------- D. EXPLAIN RANKING/COMMENTS: Comparable #1 is considered to be inferior to subject since Winn Dixie has moved out of the center. Comparable #2 is considered to be superior to subject since this is a new center and is in a location without any competition. The rent for the shops is higher. Comparables #3 and #4 are considered to be similar to subject. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 [GRAPHIC OMITTED] Name: Sunset Court Location: 2247 Sunset Boulevard West Columbia, South Carolina Year Built: 1977 Total Size: 50,000 SF Vacant Space: 4,800 SF Vacancy Rate: 8.7% Rental Range: $6.00 to $8.00 per square foot Tenant Expenses: Triple Net Remarks: Winn Dixie was the anchor tenant, but moved approximately five years ago. Silk Flowers and Things occupies the former Winn Dixie space. Eckerd Drugs remains in this center, and other tenants include Pizza Hut Carry Out, Sunset Video, Yan Ping restaurant, Floppy's Lounge and Uniforms. 5 Comparable Rental No. 2 [GRAPHIC OMITTED] Name: Mills Corner Shopping Center Location: NEC Augusta Road and Oak Drive West Columbia, South Carolina Year Built: 1995 Total Size: 42,845 SF Vacant Space: 1,200 SF Vacancy Rate: 2.8% Rental Range: $10.00 to $12.00 per SF Tenant Expenses: Triple Net Remarks: This is a strip center that was completed in 1995. McDonalds and Moovies occupy outlots. One small space is vacant, and this center is still in lease-up. A NationsBank kiosk is located on site. Anchor tenant is Piggly Wiggly, and locals include Subway, Cost Cutters, Burnette's Cleaners, and ABC store, The Grove Bistro, and Imperial China Restaurant. 6 Comparable Rental No. 3 [GRAPHIC OMITTED] Name: Woodberry Plaza Location: NEC Augusta Road and Woodberry Drive West Columbia, South Carolina Year Built: 1974 Total Size: 85,145 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $6.50 to $9.25 per SF Average Rent: $7.75 Tenant Expenses: Triple Net Remarks: This is a strip center with Winn Dixie and Revco as anchor tenants. A new Winn Dixie was recently completed, and the old Winn Dixie space is currently leased to Big Lots. 7 Comparable Rental No. 4 [GRAPHIC OMITTED] Name: Capitol Square Location: 431 Sunset Boulevard West Columbia, SC Year Built: 1974 Total Size: 79,921 SF Vacant Space: 20,050 SF Vacancy Rate: 25% Rental Range: $4.50 - $8.50 SF Tenant Expenses: Triple Net Remarks: Center is anchored by Bi-Lo. A large space occupied by Wicker Mart was vacated during 1995 and remains vacant. 8 PROPERTY INSPECTION FORM COMMERCIAL
II. SALES COMPARABLE SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Westland Square St. Andrews Crsg. Eastgate SHC One Norman Center ------------------- ------------------- ------------------- ------------------ b. Street Address NWC of Whiskey Rd 19706 One Norman 2250 Sunset Blvd. 817 St. Andrews Rd and Eastgate Drive Boulevard ------------------- ------------------- ------------------- ------------------ c. City West Columbia, SC Columbia, SC Aiken, SC Cornelius, NC ------------------- ------------------- ------------------- ------------------ d. Distance from Subject N/A 8 miles 56 miles 100 miles ------------------- ------------------- ------------------- ------------------ 2. Attributes a. Year Built 1986 1994 1995 1993 ------------------- ------------------- ------------------- ------------------ b. Net sq. feet 62,734 66,910 SF 75,716 SF 54,185 SF ------------------- ------------------- ------------------- ------------------ c. # Buildings 1 1 1 1 ------------------- ------------------- ------------------- ------------------ d. # of Stories 1 1 1 1 ------------------- ------------------- ------------------- ------------------ e. Vacancy % 3.54% 0% 5.00% 0% ------------------- ------------------- ------------------- ------------------ 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 $4,650,000 ------------------- ------------------- ------------------- ------------------ b. Sales Price PSF N/A $97.89 $88.16 $85.82 ------------------- ------------------- ------------------- ------------------ c. Cap. Rate N/a 9.69% 9.86% 9.68% ------------------- ------------------- ------------------- ------------------ d. Date N/A 05-25-94 09-28-95 10-12-95 ------------------- ------------------- ------------------- ------------------ e. NOI at time of Sale N/A $634,797 $657,896 $450,188 ------------------- ------------------- ------------------- ------------------ 4. Rank Relative to Subject (inferior, similar, superior) N/A Superior Similar Similar ------------------- ------------------- ------------------- ------------------
II. SALES COMPARABLE COMPARABLE 4 ------------ 1. Identification a. Name Paw Creek Cmmns. ---------------------- b. Street Address E/S Little Rock Rd at Freedom Road ---------------------- c. City Charlotte, NC ---------------------- d. Distance from Subject 92 miles ---------------------- 2. Attributes a. Year Built 1996 ---------------------- b. Net sq. feet 66,050 SF ---------------------- c. # Buildings 1 ---------------------- d. # of Stories 1 ---------------------- e. Vacancy % 2.73% ---------------------- 3. Sales Information a. Sales Price $5,384,000 ---------------------- b. Sales Price PSF $77.52 ---------------------- c. Cap. Rate 9.61% ---------------------- d. Date 03-25-95 ---------------------- e. NOI at time of Sale $517,412 ---------------------- 4. Rank Relative to Subject (inferior, similar, superior) Superior ---------------------- Explain Ranking/Comments: Comparables #1 and #3 are ranked superior to subject. The reason for this is because of the location of these comparables being superior to subject. Comparable #3 is located in a commercial area that is larger than subject, but it is similar. 9 Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: 6012 -1 -1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 10 Comparable Sale No. 2 [GRAPHIC OMITTED] TMS: Name: Eastgate Shopping Center Location: Northwest Corner of Whiskey Road & Eastgate Drive Aiken, SC Grantor: Southwest U.S. Retail, LP Grantee: PDG Aiken Partners, LP Deed Reference: N/A Date: September 28, 1995 Sales Price: $6,675,000 Adjusted Sales Price: $6,675,000 Size building: 75,716 Sales Price per S.F.: $88.16 Size Land (Acres): 8.79 Size Land (S.F.): 382,892 Year Built: 1995 Land/Building Ratio: 5.06 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $782,704 Effective Gross Income: $782,704 EGIM: 8.53 Net Operating Income: $657,896 Overall Rate: 9.86% Verification: Public Records Type of Purchaser: Private Investor Comments: Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. 11 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. 12 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: 59-231-22,23 pt. Name: Paw Creek Commons Location: East side of Little Rock Road at Freedom Drive Grantor: Paw Creek, LLC Grantee: Paw Creek Crossing Limited Partnership Deed Reference: Book 8988, Page 519 Date: March 25, 1997 Sales Price: $5,120,000 Adjusted Sales Price: $5,384,000 Size building: 66,050 Sales Price per S.F.: $77.52 Size Land (Acres): 9.82 Size Land (S.F.): 427,759 Year Built: 1996 Land/Building Ratio: 6.48 to 1 Utilities: Municipal Zoning: CC, Commercial Center Financing: Cash to Seller Gross Potential Income: $568,840 Effective Gross Income: $552,054 Gross Income Multiple: 9.00 EGIM: 9.27 Net Operating Income: $517,412 Overall Rate: 9.61% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was pre-construction. The sales price has been adjusted to reflect this by using 50 basis points in the capitalization rate (.1011 minus .0050 equals .0961). The major tenants are Winn-Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. The income from anchor tenants is 79.41 percent of gross income. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject [GRAPHIC OMITTED] Improved Sales Map [GRAPHIC OMITTED] Comparable Rentals Map [GRAPHIC OMITTED] Westland Square Plan EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: WESTLAND SQUARE 2250 SUNSET BOULEVARD WEST COLUMBIA, SC 29169-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ 14 CARROT WHOLE FOODS INC. 14 CARROT WHOLE FOODS INC. 634-10 3,200 12/01/95 11/30/01 0.00 0.00 0.00 0.00 3.50 06/01/91 11,199.96 3.75 04/01/95 12,000.00 8.60 12/01/95 27,519.96 9.00 12/01/98 28,800.00 - ------------------------------------------------------------------------------------------------------------------------ PHILLIPS STAFFING S.B. PHILLIPS COMPANY, INC. 634-30 1,600 10/01/96 09/30/99 9.00 10/01/96 14,400.00 0.00 0.00 0.00 0.00 9.50 10/01/98 15,199.92 - ------------------------------------------------------------------------------------------------------------------------ SOUTHERN CLASS HAIR & NAIL SOUTHERN CLASS HAIR & NAIL DE 634-40 1,600 04/01/94 05/31/00 0.00 0.00 0.00 0.00 7.00 06/01/94 11,200.08 8.25 06/01/97 13,200.00 - ------------------------------------------------------------------------------------------------------------------------ PET'S CHOICE INC. PETS CHOICE INC. 634-50 2,400 06/15/94 07/31/97 7.50 08/01/94 18,000.00 - ------------------------------------------------------------------------------------------------------------------------ MEDICAL SERVICES OF AMERICA, FKA PALMETTO HOME CARE EQUIPM 634-60 2,670 05/01/95 04/30/98 7.00 06/01/92 18,690.00 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ 14 CARROT WHOLE FOODS INC. 14 CARROT WHOLE FOODS INC. Full 0 Full 0 Full 0 12/01/01 11/30/06 0.00 5.00 1,700,000 0.00 5.00 850,000 0.00 5.00 0 0.00 5.00 0 0.00 5.00 0 0.00 5.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ PHILLIPS STAFFING S.B. PHILLIPS COMPANY, INC. Full 0 Full 0 Full 0 10/01/99 09/30/01 10.00 0.00 0 10/01/01 09/30/03 10.50 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ SOUTHERN CLASS HAIR & NAIL SOUTHERN CLASS HAIR & NAIL DE Full 0 Full 0 Full 0 06/01/00 05/31/03 0.00 0.00 0 06/01/97 05/31/00 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ PET'S CHOICE INC. PETS CHOICE INC. Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ MEDICAL SERVICES OF AMERICA, FKA PALMETTO HOME CARE EQUIPM Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: WESTLAND SQUARE 2250 SUNSET BOULEVARD WEST COLUMBIA, SC 29169-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ MEDICAL SERVICES OF AMERICA, FKA PALMETTO HOME CARE EQUIPM 634-60 2,670 05/01/95 04/30/98 8.00 05/01/94 21,360.00 8.25 05/01/95 22,027.44 8.75 05/01/97 23,362.44 - ------------------------------------------------------------------------------------------------------------------------ FOOD LION #390 FOOD LION INC. 634-80 29,000 06/01/96 05/31/16 0.00 0.00 4.96 09/01/86 143,750.04 0.00 0.00 7.75 06/10/96 224,750.04 - ------------------------------------------------------------------------------------------------------------------------ REVCO #4556 634-90 9,375 09/14/86 09/30/01 6.25 09/14/86 58,593.72 6.60 10/01/91 61,875.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ GOONEY BIRDS SPORTS BAR&GRILL KIBLER-MITCHELL ENTERPRISES, 634-110 6,050 10/01/96 09/30/01 7.25 10/01/96 43,862.52 0.00 0.00 7.50 10/01/97 45,375.00 7.75 10/01/98 46,887.48 8.00 10/01/99 48,399.96 8.25 10/01/00 49,912.56 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ MEDICAL SERVICES OF AMERICA, FKA PALMETTO HOME CARE EQUIPM Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ FOOD LION #390 FOOD LION INC. Full 0 None 0 Fixed 0 06/01/16 05/31/21 0.00 1.00 0 Y 06/01/21 05/31/26 0.00 1.00 14,375,000 Y 06/01/26 05/31/31 0.00 1.00 0 Y 06/01/31 05/31/36 0.00 1.00 22,475,000 Y - ------------------------------------------------------------------------------------------------------------------------------------ REVCO #4556 PRS 1987 PRS 1987 Full 0 10/01/01 09/30/06 6.60 0.00 0 10/01/06 09/30/11 6.60 0.00 0 10/01/11 09/30/16 6.60 0.00 0 10/01/16 09/30/21 6.60 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ GOONEY BIRDS SPORTS BAR&GRILL KIBLER-MITCHELL ENTERPRISES, Full 0 Full 0 Full 0 10/01/01 09/30/06 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: WESTLAND SQUARE 2250 SUNSET BOULEVARD WEST COLUMBIA, SC 29169-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ Available 634-120 2,220 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ COMMERCIAL CREDIT CORP. #540 COMMERCIAL CREDIT CORP. 634-130 2,310 09/01/92 10/31/97 7.50 11/01/92 17,325.00 8.00 11/01/93 18,480.00 8.50 11/01/95 19,635.00 8.75 11/01/96 22,212.44 - ------------------------------------------------------------------------------------------------------------------------ BURNETTE'S CLEANERS 634-140 2,310 07/01/91 06/30/01 0.00 0.00 9.00 07/01/91 20,790.00 9.50 07/01/93 21,945.00 10.00 07/01/99 23,100.00 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL CREDIT CORP. #540 COMMERCIAL CREDIT CORP. PSR 1987 PSR 1987 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ BURNETTE'S CLEANERS Full 0 Full 0 Full 0 07/01/96 06/30/01 0.00 5.00 540,000 07/01/01 06/30/04 0.00 5.00 0 0.00 5.00 0 0.00 5.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 60,515 Current Annual Base Rent 465,792.48 Available. 2,220 Total..... 62,735
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Sunset Boulevard - Looking East [GRAPHIC OMITTED] Sunset Boulevard - Looking West [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Hook Street - Looking South This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. Market Study WIDEWATER SQUARE SHOPPING CENTER 3315 Broad River Road Columbia, Richland County, South Carolina Prepared by O. Marshall Dodds, MAI Date of Market Study - April 29, 1997 April 29, 1997 [LETTERHEAD OF O. MARSHALL DODDS COMPANY, INC.] Mr. Steven R. Maeglin Vice President Morgan Stanley & Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Widewater Square Shopping Center 3315 Broad River Road Columbia, Richland County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that forms the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on April 29, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 95,700 square feet of leasable area. The center was constructed in 1976 and the Bi-Lo Store was renovated during 1990. The anchor tenants are Bi-Lo Stores and Revco. The subject property is currently 95.30% occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. ------------------------------- /s/ O. Marshall Dodds, MAI O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY - -------------------------------------------------------------------------------- Regional Perspective Columbia is the state capital with the State House being located in downtown Columbia. Also, the University of South Carolina Campus is located in the downtown area. Fort Jackson, which is a large U.S. Army Training Facility is located in the eastern section of the Metropolitan area. The city has numerous specialized office activities such as: insurance, consulting services, advertising, marketing, printing and financial services. Government, distribution, finance and transportation are all important to Columbia, although none are preeminent. Geography also gives Columbia a strategic location in the industrial and commercial spheres. The unemployment rate for Richland County as of February, 1997 was 3.9% while the unemployment rate for the Columbia Metropolitan area 3.5%. South Carolina had an unemployment rate of 5.5% while the United States had unemployment 5.3%. Neighborhood and Site The subject neighborhood is located in the St. Andrews section of the Columbia metropolitan area near the intersection of Broad River Road and St. Andrews Road. The neighborhood is practically fully built-up as there are a number of single family dwellings and multi-family properties throughout the neighborhood. Commercial properties are located along Broad River Road and St. Andrews Road. The State of South Carolina occupies a large portion of the neighborhood with the Central Correctional Institution being located between Broad River Road and the Broad River. Physical features are as follows: 1. Size 9.31 acres or 405,544 square feet 2. Identity 3315 Broad River Road TMS 6109-01-016 3. Shape irregular 4. Topography level, but slopes slightly downward from Broad River Road 5. Accessability good 6. Utilities municipal Physical Description Building features are as follows: 1. Size (net) 95,700 square feet 2. Layout & Design 1 story-food store, drug store, 26 shops 3. Parking Spaces 505 5.218 spaces per 1,000 square of net area 4. Construction brick and glass front with concrete block on side and rear and metal seamed roof 1 Market Position and Marketability Conclusions The St. Andrews area is a second largest retail submarket in the Columbia MSA with 25 of the 158 completed retail structures surveyed. Dutch Square Mall, one of the regional malls in the MSA, measures 620,000 square feet and is located in this submarket. This area contains 17.3% or 2,282,887 square feet of the retail space surveyed, an increase of 1.8% in gross leasable space since the 1995 survey. Broad River Centre added 48,650 square feet to this submarket. Four centers had a change in size and subtracted 1,823 square feet from this area and one center, 5,500, was deleted. The average rental rate on a new lease for the St. Andrews area is $8.50 per square foot. No new properties are under construction or planned for this submarket. The subject property is in the middle of the neighborhood being around the intersection of Broad River Road and St. Andrews Road. The location of subject is convenient to the single family dwellings and the multi-family properties that are located throughout the neighborhood. Broad River Road and St. Andrews Road are the major traffic arteries running through the area. The St. Andrews Crossing is located approximately 1/2 mile from subject at the intersection of St. Andrews Road and I-26. This center has Kroger Stores as the major tenant and the rental rates for the local shops range from $10.00 to $12.00 per square foot. The St. Andrews Square is located at the intersection of St. Andrews Road and Jamil Road. The major tenant is Piggly Wiggly Stores and Eckerds. The rental rates for the shops range from $9.00 to $12.00 per square foot. The Richland Plaza is located at 570 St. Andrews Road. The major tenants are Food Lion and Rite-Aid, but Rite-Aid has vacated their store and is continuing to pay rent. The rental rates from $8.00 to $12.00 per square foot. The Clusters of Whitehall is located at 252 St. Andrews Road. The center has a vacant supermarket that was formerly occupied by Fresh Market. The major tenant is Revco. Rental rates for the shops range from $6.50 to $10.00 per square foot. The subject property has several shops with rental rates ranging from $5.00 to $11.00 per square foot. However, the majority of the rental rates range from $8.00 to $9.50 per square foot for the shops. These are thought to be reasonable rental rates for the neighborhood. The rental rate for the Bi-Lo Store is $4.00 per square foot while the rental rate for the Revco Store is $5.75 per square foot. Overage rentals are being received from the Revco Store. The subject property has operated at a high occupancy rate and the developer/owner has renovated the center since it was originally constructed. The location of subject is strategic within the neighborhood and convenient to the shoppers throughout the neighborhood. Trends: The subject property is located in the St. Andrrews area of Columbia. The neighborhood is practically fully developed with single family dwellings and multi-family properties. Commercial developments are located along the traffic arteries. The Central Correctional Institution for the State of South Carolina is located in the neighborhood. The demand and desirability for the neighborhood has been good. All trends are favorable at this time and expected to continue. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Widewater Square St. Andrews Crossing St. Andrews Square ------------------------ ------------------------ ------------------------ b. Street 3315 Broad River Rd. 817 St. Andrews Road 1978 St. Andrews Rd. ------------------------ ------------------------ ------------------------ c. City Columbia, SC Columbia, SC Columbia, SC ------------------------ ------------------------ ------------------------ d. Distance from subject N/A 1/2 mile 3/4 mile ------------------------ ------------------------ ------------------------ e. Contact Edens Avant, Inc. Keenen Co. The Oglum Co. ------------------------ ------------------------ ------------------------ f. Phone 803-779-4420 803-254-2300 803-779-7777 ------------------------ ------------------------ ------------------------ 2. Attributes a. Year built 1976 1994 1978 ------------------------ ------------------------ ------------------------ b. Net sq. Ft. 95,700 66,910 60,000 ------------------------ ------------------------ ------------------------ c. # building 3 2 2 ------------------------ ------------------------ ------------------------ d. #stories 1 1 1 ------------------------ ------------------------ ------------------------ e. Avg. Floor plate size N/A (sq. Ft.), if office N/A N/A ------------------------ ------------------------ ------------------------ f. # elevators N/A N/A N/A ------------------------ ------------------------ ------------------------ g. Parking Adequate Adequate Adequate ------------------------ ------------------------ ------------------------ h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ------------------------ ------------------------ ------------------------ I. Vacancy % 4.70% 6.13% 0% ------------------------ ------------------------ ------------------------ j. Anchors, if Retail Bi-Lo, Revco Kroger Piggly Wiggly, Eckerds ------------------------ ------------------------ ------------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Richardson Plaza Clusters of Whitehall ----------------------- ----------------------- b. Street 570 St. Andrews Rd. 252 St. Andrews Rd. ----------------------- ----------------------- c. City Columbia, SC Columbia, SC ----------------------- ----------------------- d. Distance from subject 1 mile 2 miles ----------------------- ----------------------- e. Contact EastCoast Development Edens Avant, Inc. ----------------------- ----------------------- f. Phone 803-749-0079 803-779-4420 ----------------------- ----------------------- 2. Attributes a. Year built 1981 1988 (Rehab.) ----------------------- ----------------------- b. Net sq. Ft. 108, 838 68,029 ----------------------- ----------------------- c. # building 1 2 ----------------------- ----------------------- d. #stories 1 1 ----------------------- ----------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A ----------------------- ----------------------- f. # elevators N/A N/A ----------------------- ----------------------- g. Parking Adequate Adequate ----------------------- ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block ----------------------- ----------------------- I. Vacancy % 6.89% 40.01% ----------------------- ----------------------- j. Anchors, if Retail Food Lion Revco ----------------------- ----------------------- Comments: These comparable rentals are located in subject neighborhood and are located along St. Andrews Road. Comparable No. 1 is the newest center with the other centers being constructed shortly after subject property. Comparable No. 4 has a vacant supermarket that was formerly occupied by Fresh Market. The other comparables are experiencing high occupancy rates at this time. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A N/A ------------------------ ------------------------ ------------------------ b. Shop Space $8.00 - $10.25 $10.00 - $12.00 $9.00 - $12.00 ------------------------ ------------------------ ------------------------ 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ------------------------ ------------------------ ------------------------ 3. Rent Concessions None None None ------------------------ ------------------------ ------------------------ 4. Effective Rent $8.00 - $10.25 $10.00 - $12.00 $9.00 - $12.00 ------------------------ ------------------------ ------------------------ 5. TI Allowance None None None ------------------------ ------------------------ ------------------------ 6. Expense Stop None None None ------------------------ ------------------------ ------------------------ 7. Length of Lease Term 3 -5 years (shop) 3 - 5 years (shop) 3 - 5 years (shop) ------------------------ ------------------------ ------------------------ 8. Commissions 5.00% - 7.00% 5.00% to 7.00% 5.00% - 7.00% ------------------------ ------------------------ ------------------------ 9. Percentage Rent (per lease terms) Bi-Lo, Revco Kroger Piggly Wiggly, Eckerds ------------------------ ------------------------ ------------------------ 10. Historical Annual Absorption/sq.ft. N/A N/A N/A ------------------------ ------------------------ ------------------------ 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A ------------------------ ------------------------ ------------------------ C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A superior similar ------------------------ ------------------------ ------------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A ------------------------ ----------------------- b. Shop Space $8.00 - $12.00 $6.50 - $10.00 ------------------------ ----------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net ------------------------ ----------------------- 3. Rent Concessions None None ------------------------ ----------------------- 4. Effective Rent $8.00 - $12.00 $6.50 - $10.00 ------------------------ ----------------------- 5. TI Allowance None None ------------------------ ----------------------- 6. Expense Stop None None ------------------------ ----------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 - 5 years (shop) ------------------------ ----------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% ------------------------ ----------------------- 9. Percentage Rent (per lease terms) Food Lion Revco ------------------------ ----------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A ------------------------ ----------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A ------------------------ ----------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) similar similar ------------------------ ----------------------- D. EXPLAIN RANKING/COMMENTS: Comparable No. 1 is a newer shopping center and the rental rates that are being received are slightly higher than subject. Also, the center is located at the intersection of St. Andrews Road and I-26. The other shopping centers have been rated as similar and are thought to be so with subject. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 [GRAPHIC OMITTED] Name: St. Andrews Crossing Location: 817 St. Andrews Road Columbia, SC Year Built: 1994 Total Size: 61,910 SF Vacant Space: 400 SF Vacancy Rate: 6.13 % Rental Range: $10.00 to $12.00 Tenant Expenses: Triple Net Remarks: Kroger is major tenant. Located on St. Andrews Road at I-26. Has operated at a high occupancy level. 5 Comparable Rental No. 2 [GRAPHIC OMITTED] Name: St. Andrews Square Location: 1978 St. Andrews Road Columbia, South Carolina Year Built: 1978 Total Size: 60,000 SF Vacant Space: 0 SF Vacancy Rate: 0 % Rental Range: $9.00 to $12.00 Tenant Expenses: Triple Net Remarks: Major tenants are Piggly Wiggly and Eckerds. Located on St. Andrews and Jamil Road. Has operated at a high occupancy level.. 6 Comparable Rental No. 3 [GRAPHIC OMITTED] Name: Richardson Plaza Location: 570 St. Andrews Road Columbia, South Carolina Year Built: 1981 Total Size: 108,838 SF Vacant Space: 14,200 SF Vacancy Rate: 13.05 % Rental Range: $13.05 Tenant Expenses: Triple Net Remarks: The Food Lion Store expanded in 1995. Rite-Aid has vacated their store, but pays rent. Several other tenants have moved out, but were replaced.. 7 Comparable Rental No. 4 [GRAPHIC OMITTED] Name: Clusters of Whitehall Location: 252 St. Andrews Road Columbia, South Carolina Year Built: 1988 Total Size: 68,029 SF Vacant Space: 27,275 SF Vacancy Rate: 40.01 % Local Rent Range: $6.50 - $10.00 Tenant Expenses: Triple Net Remarks: This center was renovated in 1988. Fresh Market was the occupant in the food store, but vacated approximately 1 year ago, but rent is being paid. Revco occupies 10,000 SF. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Widewater Square St. Andrews Crossing Eastage Shopping Center ------------------------ ------------------------ -------------------------- b. Street Address NWC Whiskey Rd. & 3315 Broad River Rd. 817 St. Andrews Road Eastgate Dr. ------------------------ ------------------------ -------------------------- c. City Columbia, SC Columbia, SC Aiken, SC ------------------------ ------------------------ -------------------------- d. Distance from Subject N/A 1/2 miles 56 miles ------------------------ ------------------------ -------------------------- 2. Attributes a. Year Built 1976 1994 1995 ------------------------ ------------------------ -------------------------- b. Net sq. feet 95,700 66,910 SF 75,716 SF ------------------------ ------------------------ -------------------------- c. # Buildings 3 1 1 ------------------------ ------------------------ -------------------------- d. # of Stories 1 1 1 ------------------------ ------------------------ -------------------------- e. Vacancy % 4.70% 0% 7.21% ------------------------ ------------------------ -------------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 ------------------------ ------------------------ -------------------------- b. Sales Price PSF N/A $97.89 $88.16 ------------------------ ------------------------ -------------------------- c. Cap. Rate N/A 9.69% 9.86% ------------------------ ------------------------ -------------------------- d. Date N/A 05-25-94 09-28-95 ------------------------ ------------------------ -------------------------- e. NOI at time of Sale N/A $634,797 $782,704 ------------------------ ------------------------ -------------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A superior similar ------------------------ ------------------------ --------------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name One Norman Center Paw Creek Commons ----------------------- ----------------------- b. Street Address 19706 One Norman E/S Little Rock Road Blvd. at Freedom Drive ----------------------- ----------------------- c. City Cornelius, NC Charlotte, NC ----------------------- ----------------------- d. Distance from Subject 1 miles 92 miles ----------------------- ----------------------- 2. Attributes a. Year Built 1993 1996 ----------------------- ----------------------- b. Net sq. feet 54,185 SF 66,050 SF ----------------------- ----------------------- c. # Buildings 1 1 ----------------------- ----------------------- d. # of Stories 1 1 ----------------------- ----------------------- e. Vacancy % 6.98% 2.73% ----------------------- ----------------------- 3. Sales Information a. Sales Price $4,650,000 $5,120,000 ----------------------- ----------------------- b. Sales Price PSF $85.82 $77.52 ----------------------- ----------------------- c. Cap. Rate 9.68% 9.61% ----------------------- ----------------------- d. Date 10-12-95 03-25-97 ----------------------- ----------------------- e. NOI at time of Sale $474,591 517,412 ----------------------- ----------------------- 4. Rank Relative to Subject (inferior, similar, superior) similar superior ----------------------- ----------------------- Explain Ranking/Comments: Comparables No. 1 and 4 are ranked superior to subject. The reason for this is because of the location of these comparables being superior to subject. Comparable No. 3 is located in a commercial area that is larger than subject, but it is similar. Comparable No. 2 is similar to subject. 9 Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: 6012 -1 -1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 10 Comparable Sale No. 2 [GRAPHIC OMITTED] TMS: Name: Eastgate Shopping Center Location: Northwest Corner of Whiskey Road & Eastgate Drive Aiken, SC Grantor: Southwest U.S. Retail, LP Grantee: PDG Aiken Partners, LP Deed Reference: N/A Date: September 28, 1995 Sales Price: $6,675,000 Adjusted Sales Price: $6,675,000 Size building: 75,716 Sales Price per S.F.: $88.16 Size Land (Acres): 8.79 Size Land (S.F.): 382,892 Year Built: 1995 Land/Building Ratio: 5.06 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $782,704 Effective Gross Income: $782,704 EGIM: 8.53 Net Operating Income: $657,896 Overall Rate: 9.86% Verification: Public Records Type of Purchaser: Private Investor Comments: Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. 11 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. 12 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: 59-231-22,23 pt. Name: Paw Creek Commons Location: East side of Little Rock Road at Freedom Drive Grantor: Paw Creek, LLC Grantee: Paw Creek Crossing Limited Partnership Deed Reference: N/A Date: March 25, 1997 Sales Price: $5,120,000 Adjusted Sales Price: $5,384,000 Size building: 66,050 Sales Price per S.F.: $77.52 Size Land (Acres): 9.82 Size Land (S.F.): 427,759 Year Built: 1996 Land/Building Ratio: 6.48 to 1 Utilities: Municipal Zoning: CC, Commercial Center Financing: Cash to Seller Gross Potential Income: $568,840 Effective Gross Income: $552,054 Gross Income Multiple: 9.00 EGIM: 9.27 Net Operating Income: $517,412 Overall Rate: 9.61% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was pre-construction. The sales price has been adjusted to reflect this by using 50 basis points in the capitalization rate (.1011 minus .0050 equals .0961). The major tenants are Winn-Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. The income from anchor tenants is 79.41 percent of gross income. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 Comparable Rentals [GRAPHIC OMITTED] Improved Sales Map [GRAPHIC OMITTED] Site Plan [GRAPHIC OMITTED] Date: 04/08/97 EDENS & AVANT, INC. Retail Custom Rent Roll Property: WIDEWATER SQUARE 3315 BROAD RIVER ROAD COLUMBIA, SC 29210 Co1umn Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ----------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ----------------------------------------------------------------------------------------------------------------- DOLLAR GENERAL #2757 DOLGENCORP INC. 627- 10 7,200 10/01/95 09/30/98 2.92 10/01/92 21,000.00 4.00 10/01/95 28,800.00 - ----------------------------------------------------------------------------------------------------------------- CATO #7175 / IT'S FASHION IT'S FASHION 627- 20 4,000 07/15/95 01/31/01 5.25 10/01/95 21,000.00 0.00 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------- BI-LO, INC. #064 627- 30 30,000 01/21/91 01/31/11 4.00 02/01/91 120,000.00 0.00 0.00 0.00 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------- REVCO #849 REVCO DISCOUNT DRUGS OF S.C., 627- 40 7,000 02/01/91 01/31/01 0.00 0.00 5.75 02/01/91 40,249.92 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------- JD FASHIONS IN UNG CHOE 627- 45 3,200 01/01/96 12/31/98 7.50 01/01/96 24,000.00 - ----------------------------------------------------------------------------------------------------------------- LADIES CHOICE F/K/A/ FITNESS TODAY OF WIDEW 627- 50 6,800 04/01/95 03/31/00 5.00 04/01/90 33,999.96 6.00 04/01/95 40,800.00 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcent of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- DOLLAR GENERAL #2757 DOLGENCORP INC. Full 0 Full 0 Full 0 0.00 3.00 700,000 Y 0.00 3.00 960,000 Y - ----------------------------------------------------------------------------------------------------------------------------------- CATO #7175 / IT'S FASHION IT'S FASHION Full 0 Full 0 Full 0 02/01/01 01/31/06 6.30 4.00 525,000 Y 02/01/06 01/31/11 7.56 4.00 0 Y 02/01/01 01/31/06 0.00 4.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- BI-LO, INC. #064 Full 0 Full 0 Full 0 02/01/11 01/31/16 4.25 1.00 12,000,000 02/01/16 01/31/21 4.50 1.00 0 02/01/21 01/31/26 4.75 1.00 0 02/01/26 01/31/31 5.00 1.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- REVCO #849 REVCO DISCOUNT DRUGS OF S.C., PRS 1978 PRS 1982 Fixed 0 02/01/01 01/31/06 6.25 2.00 0 Y 02/01/06 01/31/11 6.75 2.00 2,012,500 Y 0.00 2.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- JD FASHIONS IN UNG CHOE Full 0 Full 0 Full 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- LADIES CHOICE F/K/A/ FITNESS TODAY OF WIDEW PRS 1988 PRS 1988 Full 0 0.00 0.00 0 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------------
Date: 04/08/97 EDENS & AVANT, INC. Retail Custom Rent Roll Property: WIDEWATER SQUARE 3315 BROAD RIVER ROAD COLUMBIA, SC 29210 Co1umn Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ----------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ----------------------------------------------------------------------------------------------------------------- LADIES CHOICE F/K/A/ FITNESS TODAY OF WIDEW 627- 50 6,800 04/01/95 03/31/00 6.50 04/01/98 44,200.08 - ----------------------------------------------------------------------------------------------------------------- BESTWAY, INC. F/K/A ALL STAR RENTAL, INC. 627- 60 2,250 10/01/96 09/30/03 0.00 0.00 8.20 10/01/91 18,450.00 9.00 09/01/94 20,250.00 9.50 10/01/97 21,375.00 9.75 10/01/00 21,937.44 - ----------------------------------------------------------------------------------------------------------------- BUTTONS & BOWS CATHERINE CHILES 627- 70 1,125 05/01/95 04/30/98 8.25 05/01/92 9,281.16 8.50 05/01/95 9,562.44 - ----------------------------------------------------------------------------------------------------------------- A+ MAIL SERVICES, INC. 627- 80 1,125 09/01/93 08/31/98 7.24 09/01/93 8,149.92 7.50 09/01/94 8,437.56 8.00 09/01/95 9,000.00 8.25 09/01/96 9,281.28 9.00 09/01/97 10,125.00 - ----------------------------------------------------------------------------------------------------------------- KIM ENTERPRISES TOK CHIN KIM 627- 85 4,500 08/01/96 07/31/99 6.00 08/01/93 27,000.00 6.50 08/01/95 29,250.00 7.00 08/01/96 31,500.00 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcent of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- LADIES CHOICE F/K/A/ FITNESS TODAY OF WIDEW PRS 1988 PRS 1988 Full 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- BESTWAY, INC. F/K/A ALL STAR RENTAL, INC. Full 0 Full 0 Full 0 10/01/03 09/30/06 9.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- BUTTONS & BOWS CATHERINE CHILES Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- A+ MAIL SERVICES, INC. Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- KIM ENTERPRISES TOK CHIN KIM Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------------
Date: 04/08/97 EDENS & AVANT, INC. Retail Custom Rent Roll Property: WIDEWATER SQUARE 3315 BROAD RIVER ROAD COLUMBIA, SC 29210 Co1umn Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ----------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ----------------------------------------------------------------------------------------------------------------- BLAZER FINANCIAL SERVICES, IN 627- 100 1,500 04/01/93 03/31/98 8.00 04/01/88 12,000.00 0.00 0.00 8.50 04/01/95 12,750.00 - ----------------------------------------------------------------------------------------------------------------- CEDAR CHEST CLEANERS EMMA D. MILLER 627- 110 1,500 08/28/93 08/27/98 0.00 0.00 0.00 0.00 7.00 09/01/93 10,500.00 7.50 09/01/94 11,250.00 8.00 09/01/95 12,000.00 8.50 09/01/96 12,750.00 9.00 09/01/97 13,500.00 - ----------------------------------------------------------------------------------------------------------------- Available 627- 120 4,500 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------- FAT BUDDIES JOHN D. GEDDINGS ASSIGNED TO 627- 130 2,250 11/01/95 10/31/98 8.50 08/01/92 19,125.00 9.00 11/01/95 20,250.00 - ----------------------------------------------------------------------------------------------------------------- DEALER'S CHOICE ROBERT A. STRONG 627- 140 2,250 01/01/93 12/31/98 0.00 0.00 8.00 03/01/93 18,000.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcent of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- BLAZER FINANCIAL SERVICES, IN PRS 1978 PRS 1978 Full 0 04/01/98 03/31/03 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- CEDAR CHEST CLEANERS EMMA D. MILLER Full 0 Full 0 Full 0 08/28/98 08/27/01 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- Available Full 0 Full 0 Full 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- FAT BUDDIES JOHN D. GEDDINGS ASSIGNED TO Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- DEALER'S CHOICE ROBERT A. STRONG PRS 1992 PRS 1992 Full 0 01/01/96 12/31/98 0.00 0.00 0 01/01/99 12/31/02 0.00 0.00 0 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------------
Date: 04/08/97 EDENS & AVANT, INC. Retail Custom Rent Roll Property: WIDEWATER SQUARE 3315 BROAD RIVER ROAD COLUMBIA, SC 29210 Co1umn Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ----------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ----------------------------------------------------------------------------------------------------------------- DEALER'S CHOICE ROBERT A. STRONG 627- 140 2,250 01/01/93 12/31/98 8.00 07/01/95 18,000.00 8.74 01/01/96 19,669.08 - ----------------------------------------------------------------------------------------------------------------- LAUNDRY ROOM THE LAUNDRY ROOM 627- 150 2,250 05/01/92 04/30/97 0.00 0.00 8.25 06/01/92 18,562.44 8.50 05/01/94 19,125.00 8.75 05/01/95 19,687.44 - ----------------------------------------------------------------------------------------------------------------- EAST ROOM MARION S. JORDAN, JR. & MARY 627- 160 2,250 08/01/95 07/31/98 8.50 01/01/93 19,125.00 9.25 08/01/95 20,812.44 - ----------------------------------------------------------------------------------------------------------------- TRANSAMERICA FINANCIAL SERVIC TRANSAMERICA FINANCIAL SERVIC 627- 170 1,560 08/01/92 07/31/97 8.00 08/01/92 12,480.00 8.25 08/01/95 12,870.00 - ----------------------------------------------------------------------------------------------------------------- ONE PRICE CLOTHING #10 ONE PRICE CLOTHING STORES INC 627- 180 2,440 09/01/95 08/31/98 0.00 0.00 7.50 09/01/90 18,300.00 8.00 09/01/96 19,519.92 8.50 09/01/97 20,739.96 - ----------------------------------------------------------------------------------------------------------------- ELECTROLUX CORPORATION 627- 190 2,000 08/01/92 03/31/99 0.00 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcent of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk. - ----------------------------------------------------------------------------------------------------------------------------------- DEALER'S CHOICE ROBERT A. STRONG PRS 1992 PRS 1992 Full 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- LAUNDRY ROOM THE LAUNDRY ROOM PRS 1981 PRS 1981 Full 0 05/01/97 04/30/02 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- EAST ROOM MARION S JORDAN, JR. & MARY Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- TRANSAMERICA FINANCIAL SERVIC TRANSAMERICA FINANCIAL SERVIC Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- ONE PRICE CLOTHING #10 ONE PRICE CLOTHING STORES INC Full 0 Full 0 Full 0 09/01/95 08/31/00 7.50 4.00 0 Y 0.00 4.00 457,500 Y 0.00 4.00 488,000 Y 0.00 4.00 518,500 Y - ----------------------------------------------------------------------------------------------------------------------------------- ELECTROLUX CORPORATION Full 0 Full 0 Full 0 04/01/99 03/31/04 0.00 0.00 0 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------------
Date: 04/08/97 EDENS & AVANT, INC. Retail Custom Rent Roll Property: WIDEWATER SQUARE 3315 BROAD RIVER ROAD COLUMBIA, SC 29210 Co1umn Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ----------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ----------------------------------------------------------------------------------------------------------------- ELECTROLUX CORPORATION 627- 190 2,000 08/01/92 03/31/99 8.00 04/01/93 15,999.96 8.25 04/01/94 16,500.00 8.50 04/01/95 17,000.04 8.75 04/01/97 17,499.96 9.00 04/01/98 18,000.00 - ----------------------------------------------------------------------------------------------------------------- K & M JEWELERS TOKYE MANCINE AND SUSAN MANCI 627- 200 1,500 09/07/95 09/30/98 10.00 10/01/95 15,000.00 - ----------------------------------------------------------------------------------------------------------------- AMERICAN GENERAL FINANCE, INC 627- 210 1,500 03/01/97 02/28/00 0.00 0.00 9.08 04/01/91 13,620.00 0.00 0.00 9.35 04/01/94 14,025.00 10.50 03/01/97 15,750.00 - ----------------------------------------------------------------------------------------------------------------- NEW WAVE FAMILY HAIRCUTTERS THE NEW WAVE FAMILY HAIRCUTTE 627- 220 1,500 08/01/95 08/31/98 9.75 08/01/93 14,625.00 - ----------------------------------------------------------------------------------------------------------------- LITTLE CAESAR'S PIZZA #101 CBS FOODS, INC. 627- 230 1,500 09/01/93 08/31/98 0.00 0.00 11.50 01/01/93 17,250.00 9.50 09/01/93 14,250.00 10.00 09/01/95 15,000.00 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcent of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk. - ----------------------------------------------------------------------------------------------------------------------------------- ELECTROLUX CORPORATION Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- K & M JEWELERS TOKYE MANCINE AND SUSAN MANCI Full 0 Full 0 Full 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- AMERICAN GENERAL FINANCE, INC PRS 1984 PRS 1984 Full 0 03/01/97 02/28/00 10.50 0.00 0 03/01/00 02/28/03 11.55 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- NEW WAVE FAMILY HAIRCUTTERS THE NEW WAVE FAMILY HAIRCUTTE Full 0 Full 0 Full 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- LITTLE CAESAR'S PIZZA #101 CBS FOODS, INC. PRS 1984 PRS 1984 Full 0 09/01/98 08/31/03 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------------
Date: 04/08/97 EDENS & AVANT, INC. Retail Custom Rent Roll Property: WIDEWATER SQUARE 3315 BROAD RIVER ROAD COLUMBIA, SC 29210 Co1umn Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ----------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ----------------------------------------------------------------------------------------------------------------- LITTLE CAESAR'S PIZZA #101 CBS FOODS, INC. 627- 230 1,500 09/01/93 08/31/98 11.00 09/01/96 16,500.00 - ----------------------------------------------------------------------------------------------------------------- COLUMBIA OUTDOOR ADVERT.#350 COLUMBIA OUTDOOR ADVERTISING, 627- 240 0 P 06/05/86 MTM 0.00 03/01/94 960.00 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcent of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk. - ----------------------------------------------------------------------------------------------------------------------------------- LITTLE CAESAR'S PIZZA #101 CBS FOODS, INC. PRS 1984 PRS 1984 Full 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- COLUMBIA OUTDOOR ADVERT.#350 COLUMBIA OUTDOOR ADVERTISING, None 0 None 0 None 0 06/05/94 06/04/95 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------------
Square Feet: Occupied... 91,200 Current Annual Base Rent 564,087.48 Available.. 4,500 Total...... 95,700 PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Broad River Road - Looking South [GRAPHIC OMITTED] Broad River Road - Looking North [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Side and Rear View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - St. Andrews Road - Looking East This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study WOODBERRY PLAZA 3234 Augusta Road West Columbia, Lexington County, South Carolina Prepared by O. Marshall Dodds, MAI Date of Market Study - May 2, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] May 2, 1997 Mr. Steven R. Maeglin Morgan Stanley & Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Woodberry Plaza 3234 August Road West Columbia, Lexington County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that forms the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 2, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 82,930 square feet. The center was constructed in 1976 with Winn-Dixie and Revco being the major tenants. During 1994 a new store for Winn-Dixie was constructed and the parking lot was expanded. At the present time, Big Lots is occupying the former Winn-Dixie store. The subject property is currently 100% occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds, MAI ------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY ================================================================================ Regional Perspective Columbia is the state capital with the State House being located in downtown Columbia. Also, the University of South Carolina Campus is located in the downtown area. Fort Jackson, which is a large U.S. Army Training Facility is located in the eastern section of the Metropolitan area. The city has numerous specialized office activities such as: insurance, consulting services, advertising, marketing, printing and financial services. Government, distribution, finance and transportation are all important to Columbia, although none are preeminent. Geography also gives Columbia a strategic location in the industrial and commercial spheres. The unemployment rate for Lexington County as of March, 1997 was 2.9 percent while the statewide rate was 5.3 percent. Neighborhood and Site The subject neighborhood is located around the intersection of Augusta Road (US Highway #1) and Woodberry Drive. There are several single family residential subdivisions that are located throughout the neighborhood and also several mobile home parks. Several food markets are located along Augusta Road. The CSX Railroad line runs through the neighborhood and is more or less parallel to Augusta Road. The West Columbia Antique Market is located across Augusta Road and the railroad tracks from subject property. This store was formerly occupied by Lowe's Home Improvement Center. The present Lowe's Store is near the intersection of Augusta Road and I-26 with this store being approximately 5 years old. A new Lowe's Home Improvement Center is under construction across the street from this existing store. There is a supermarket located adjacent to the existing Lowe's Store, but it is vacant at this time. It was occupied by Brunos and later by Harris Teeter. It is under a long term lease. Physical features are as follows: 1. Size 7.37 acres or 321,037 SF 2. Identity 3234 Augusta Road TMS# 4598-04-05, 07 3. Shape Irregular 4. Topography Slopes downward away from Augusta Road toward the rear 5. Accessability Good 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 82,930 SF 2. Layout & Design one story - food store, drug store, discount store, variety store, three shops 3. Parking Spaces 450 5.43 per 1,000 SF of net area 4. Construction Brick and glass front with concrete block on side and rear and metal seamed roof. 1 Market Position and Marketability Conclusions Cayce/West Columbia is the fourth largest submarket in the Columbia metropolitan area and contains 23 of the 158 centers surveyed. The size of the retail space surveyed was 1,481,760 square feet or 11.2 percent of the total area. A new center increased this area by 50,000 square feet, a change in size added 4,538 square feet and one center was deleted for a total of 13,500 square feet. The space available was 144,317 square feet with a vacancy rate of 9.7 percent, the seventh highest of the ten areas. Twelve months earlier the vacancy rate was 10.1 percent or .4 points higher. The average new lease rate for these structures is $7.88 per square foot. This figure is up by $0.01 per square foot over the past year and up by $0.23 per square foot from two years ago. There is a center planned on Sunset Boulevard with 25,000 square feet. The subject property is located on Augusta Road which is a major traffic artery running through subject neighborhood and the metropolitan area. There are a number of single family dwellings that are located in several subdivisions throughout the neighborhood and several mobile home parks that are located within the neighborhood. The Caroline Square is located approximately 2 1/2 miles southwest of subject. The major tenants in this center are Piggly Wiggly and Dollar General. The rental rates for the shops range from $7.50 to $9.25. The Mills Corner Shopping Center is located west of subject on Augusta Road with Piggly Wiggly as the major tenant. The rental rates for the shops in this center range from $10.00 to $12.00 per square foot. The Three Fountains Shopping Center is located approximately 2.5 miles southwest of subject and is across the street from Caroline Square. The major tenants are Food Lion and Revco. The Food Lion store was expanded during 1996. There are two shops with one of the shops being rented at $7.00 per square foot and the other one on the market for $7.50 per square foot. The West Side Plaza is located approximately 1 mile east of subject on Augusta Road. This is a community center with the major tenants being Wal-Mart, Bi-Lo and Sears. The rental rates for the shops range from $7.50 to $13.50 per square foot. The subject property has several shops and the rental rates range from $5.29 to $9.25. The rental rate for the Big Lots store (18,280 SF) is at $3.35 per square foot. The rental rate for the Winn-Dixie store is at $6.50 per square foot while the rental rate for the Revco is at $6.00 per square foot. The subject property has always operated at high occupancy rate and Winn-Dixie moved into a new store in 1994. Trends: The subject property is located in the southwest section of the metropolitan area of Columbia. This is an older neighborhood and growth is continuing as several single family residential subdivisions are under construction within the neighborhood. These subdivisions are located to the west of subject property just off of Augusta Road. There are no shopping centers planned for the immediate area, but a neighborhood center is planned in the Lexington area which is approximately 10 miles west of subject. This center will have Piggly Wiggly as a major tenant with small shops. The Harris Teeter store located adjacent to the existing Lowe's Home Improvement Center is closed at this time. There is a Kroger Save-On store located across the street from the West Side Plaza. The demand and desirability for the neighborhood has been good. All trends are favorable at this time and expected to continue. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Woodberry Plaza Caroline Square Mills Corner -------------------- ---------------------- -------------------- b. Street NWC Platt Springs & NEC Augusta Road 3234 Augusta Road Emanuel Church Road and Oak Drive -------------------- ---------------------- -------------------- c. City West Columbia, SC West Columbia, SC West Columbia, SC -------------------- ---------------------- -------------------- d. Distance from subject N/A 2.5 miles 2.5-3.0 mile -------------------- ---------------------- -------------------- e. Contact Edens Avant, Inc. Bobbie Culbertson Rex Pollard -------------------- ---------------------- -------------------- f. Phone 803-779-4420 803-750-1010 803-779-7777 -------------------- ---------------------- -------------------- 2. Attributes a. Year built 1976 (Reh. 1994) 1984 1995 -------------------- ---------------------- -------------------- b. Net sq. Ft. 82,930 40,155 50,000 -------------------- ---------------------- -------------------- c. # building 1 1 1 -------------------- ---------------------- -------------------- d. #stories 1 1 1 -------------------- ---------------------- -------------------- e. Avg. Floor plate size (SF), if office N/A N/A N/A -------------------- ---------------------- -------------------- f. # elevators N/A N/A N/A -------------------- ---------------------- -------------------- g. Parking Adequate Adequate Adequate -------------------- ---------------------- -------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block -------------------- ---------------------- -------------------- I. Vacancy % 0% 0% 0% -------------------- ---------------------- -------------------- j. Anchors, if Retail Piggly Wiggly, Dollar Winn Dixie, Revco General Piggly Wiggly -------------------- ---------------------- -------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Three Fountains West Side Plaza ---------------------- ---------------------- b. Street SEC Augusta Rd. and 2979 Platt Springs Rd. Dreher Rd. ---------------------- ---------------------- c. City West Columbia, SC West Columbia, SC ---------------------- ---------------------- d. Distance from subject 2.5 miles 1 mile ---------------------- ---------------------- e. Contact Edens Avant, Inc. Wyatt Development Co. ---------------------- ---------------------- f. Phone 803-779-4422 803-649-3975 ---------------------- ---------------------- 2. Attributes a. Year built 1986 1988 ---------------------- ---------------------- b. Net sq. Ft. 41,450 222,703 ---------------------- ---------------------- c. # building 1 1 ---------------------- ---------------------- d. #stories 1 1 ---------------------- ---------------------- e. Avg. Floor plate size (SF), if office N/A N/A ---------------------- ---------------------- f. # elevators N/A N/A ---------------------- ---------------------- g. Parking Adequate Adequate ---------------------- ---------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block ---------------------- ---------------------- I. Vacancy % 4.83% 0% ---------------------- ---------------------- j. Anchors, if Retail Food Lion, Revco Wal-Mart, Bi-Lo, Sears ---------------------- ----------------------
Comments: Comparables No. 1 and 3 are located to the southwest of subject and are located across the street from one another. Comparable No. 2 is located to the west of subject and is a new center. Comparable No. 4 is located to the east of subject property and is an existing center. All of these centers have experienced high occupancy rates and Three Fountains has the only vacancy which is one store that contains 2,000 square feet. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space $6.00 - $6.50 N/A N/A N/A N/A ------------------ ------------------ ----------------- ------------------ ---------------- b. Shop Space $5.29 - $9.25 $7.50 - $9.00 $10.00 - $12.00 $7.00 - $7.50 $7.50 - $13.25 ------------------ ------------------ ----------------- ------------------ ---------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net Triple Net ------------------ ------------------ ----------------- ------------------ ---------------- 3. Rent Concessions None None None None None ------------------ ------------------ ----------------- ------------------ ---------------- 4. Effective Rent $5.29 - $9.25 $7.50 - $9.00 $10.00 - $12.00 $7.00 - $7.50 $7.50 - $13.25 ------------------ ------------------ ----------------- ------------------ ---------------- 5. TI Allowance None None None None None ------------------ ------------------ ----------------- ------------------ ---------------- 6. Expense Stop None None None None None ------------------ ------------------ ----------------- ------------------ ---------------- 7. Length of Lease Term 3 - 5 years (shop) 3 - 5 years (shop) 3 -5 years (shop) 3 - 5 years (shop) 3-5 years (shop) ------------------ ------------------ ----------------- ------------------ ---------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% 5.00% - 7.00% ------------------ ------------------ ----------------- ------------------ ---------------- 9. Percentage Rent (per lease terms) Winn-Dixie, Revco Piggly Wiggly Piggly Wiggly Food Lion, Revco Wal-Mart, Bi-Lo ------------------ ------------------ ----------------- ------------------ ---------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A N/A ------------------ ------------------ ----------------- ------------------ ---------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A N/A ------------------ ------------------ ----------------- ------------------ ---------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A similar superior similar similar ------------------ ------------------ ----------------- ------------------ ----------------
D. EXPLAIN RANKING/COMMENTS: All of these shopping centers have been ranked as similar to subject property, with exception of Comparable No. 2. The reason for this is because this is a newer center and the rental rates for the shops are higher than subject and in these other centers. These comparables are located in subject neighborhood. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 [GRAPHIC OMITTED] Name: Caroline Square Shopping Center Location: NEC Platt Springs Road and Emanuel Church Road West Columbia, South Carolina Year Built: 1985 Total Size: 40,155 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $7.50 to $9.00 Tenant Expenses: Pass throughs for real estate taxes, hazard insurance and CAM for some tenants, reimbursement of increases in expenses over base year for others. Remarks: Piggly Wiggly is the anchor tenant. The lease with Rite-Aid expired and Dollar General moved in within a couple of months. Other tenants include Trio's Salon, Starlite Video, Golden Wok, Subsand Pizza, Coin Laundry, Alternate Tanning, and Becknell Dry Cleaners. 5 Comparable Rental No. 2 [GRAPHIC OMITTED] Name: Mills Corner Shopping Center Location: NEC Augusta Road and Oak Drive West Columbia, South Carolina Year Built: 1995 Total Size: 42,845 SF Vacant Space: 1,200 SF Vacancy Rate: 2.8% Rental Range: $10.00 to $12.00 Average Rent: $10.35 Tenant Expenses: Pass throughs for real estate taxes, hazard insurance and CAM. Remarks: This is a strip center that was completed in 1995. McDonalds and Moovies occupy outlots. One small space is vacant, and this center is still in lease-up. A NationsBank kiosk is located on site. Anchor tenant is Piggly Wiggly, and locals include Subway, Cost Cutters, Burnette's Cleaners, and ABC store, The Grove Bistro, and Imperial China Restaurant. 6 Comparable Rental No. 3 [GRAPHIC OMITTED] Name: Three Fountains Location: 3979 Platt Springs Road West Columbia, South Carolina Year Built: 1986 Total Size: 41,450 SF Vacant Space: 2,000 SF Vacancy Rate: 4.83% Rental Range: $7.00 - $7.50 PSF Tenant Expenses: Triple Net Remarks: This is a neighborhood shopping center. The Food Lion store was expanded to 29,000 square feet in 1996. 7 Comparable Rental No. 4 [GRAPHIC OMITTED] Name: West Side Plaza Location: SEC August Road and Dreher Road West Columbia, SC Year Built: 1988 Total Size: 222,703 SF Vacant Space: 0 SF Vacancy Rate: 0 % Local Rent Range: $7.50 - $13.25 Tenant Expenses: Triple Net Remarks: This is a community shopping center. Major tenants are Wal-mart, Bi-Lo and Sears. The occupancy rate has always been high and the store appear to be doing well as the customers are attracted to this center. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Woodberry Plaza St. Andrews Crossing Eastgate Shop. Center ------------------------- ------------------------ ------------------------- b. Street Address NWC Whiskey Rd. & 3234 Augusta Road 817 St. Andrews Road Eastgate Dr. ------------------------- ------------------------ ------------------------- c. City West Columbia, SC Columbia, SC Aiken, SC ------------------------- ------------------------ ------------------------- d. Distance from Subject N/A 8 miles 56 miles ------------------------- ------------------------ ------------------------- 2. Attributes a. Year Built 1976 (Reh. 1994) 1994 1995 ------------------------- ------------------------ ------------------------- b. Net sq. feet 82,930 66,910 SF 75,716 SF ------------------------- ------------------------ ------------------------- c. # Buildings 1 1 1 ------------------------- ------------------------ ------------------------- d. # of Stories 1 1 1 ------------------------- ------------------------ ------------------------- e. Vacancy % 0% 0% 5.00% ------------------------- ------------------------ ------------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 ------------------------- ------------------------ ------------------------- b. Sales Price PSF N/A $97.89 $88.16 ------------------------- ------------------------ ------------------------- c. Cap. Rate N/A 9.69% 9.86% ------------------------- ------------------------ ------------------------- d. Date N/A 05-25-94 09-28-95 ------------------------- ------------------------ ------------------------- e. NOI at time of Sale N/A $634,797 $657,896 ------------------------- ------------------------ ------------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A superior similar ------------------------- ------------------------ ------------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name One Norman Paw Creek Commons Center --------------------- ------------------------- b. Street Address 19706 One Norman E/S Little Rock Rd. at Blvd. Freedom Dr. --------------------- ------------------------- c. City Cornelius, NC Charlotte, NC --------------------- ------------------------- d. Distance from Subject 100 miles 92 miles --------------------- ------------------------- 2. Attributes a. Year Built 1993 1996 --------------------- ------------------------- b. Net sq. feet 54,185 SF 66,050 --------------------- ------------------------- c. # Buildings 1 1 --------------------- ------------------------- d. # of Stories 1 1 --------------------- ------------------------- e. Vacancy % 0% 2.73% --------------------- ------------------------- 3. Sales Information a. Sales Price $4,650,000 $5,384,000 --------------------- ------------------------- b. Sales Price PSF $85.82 $77.52 --------------------- ------------------------- c. Cap. Rate 9.68% 9.61% --------------------- ------------------------- d. Date 10-12-95 03-25-97 --------------------- ------------------------- e. NOI at time of Sale $450,188 $517,412 --------------------- ------------------------- 4. Rank Relative to Subject (inferior, similar, superior) similar superior --------------------- -------------------------
Explain Ranking/Comments: Comparables No. 1 and 4 have been rated as superior as the location is superior and the rentals for the shops are higher. Comparables No. 2 and 3 are similar to subject. 9 Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: 6012 -1 -1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 10 Comparable Sale No. 2 [GRAPHIC OMITTED] TMS: Name: Eastgate Shopping Center Location: Northwest Corner of Whiskey Road & Eastgate Drive Aiken, SC Grantor: Southwest U.S. Retail, LP Grantee: PDG Aiken Partners, LP Deed Reference: N/A Date: September 28, 1995 Sales Price: $6,675,000 Adjusted Sales Price: $6,675,000 Size building: 75,716 Sales Price per S.F.: $88.16 Size Land (Acres): 8.79 Size Land (S.F.): 382,892 Year Built: 1995 Land/Building Ratio: 5.06 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $782,704 Effective Gross Income: $782,704 EGIM: 8.53 Net Operating Income: $657,896 Overall Rate: 9.86% Verification: Public Records Type of Purchaser: Private Investor Comments: Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. 11 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. Comparable Sale No. 4 12 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: 59-231-22,23 pt. Name: Paw Creek Commons Location: East side of Little Rock Road at Freedom Drive Grantor: Paw Creek, LLC Grantee: Paw Creek Crossing Limited Partnership Deed Reference: Book 8988, Page 519 Date: March 25, 1997 Sales Price: $5,120,000 Adjusted Sales Price: $5,384,000 Size building: 66,050 Sales Price per S.F.: $77.52 Size Land (Acres): 9.82 Size Land (S.F.): 427,759 Year Built: 1996 Land/Building Ratio: 6.48 to 1 Utilities: Municipal Zoning: CC, Commercial Center Financing: Cash to Seller Gross Potential Income: $568,840 Effective Gross Income: $552,054 Gross Income Multiple: 9.00 EGIM: 9.27 Net Operating Income: $517,412 Overall Rate: 9.61% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was pre-construction. The sales price has been adjusted to reflect this by using 50 basis points in the capitalization rate (.1011 minus .0050 equals .0961). The major tenants are Winn-Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. The income from anchor tenants is 79.41 percent of gross income. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 [GRAPHIC OMITTED] Comparable Rentals [GRAPHIC OMITTED] Improved Sales Map [GRAPHIC OMITTED] Site Plan EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: WOODBERRY PLAZA 3234 AUGUSTA ROAD WEST COLUMBIA, SC 29169-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- WOODBERRY LAUNDRY W.P. BLACK 643- 10 1,350 08/01/96 07/31/99 6.25 08/01/93 8,437.56 6.50 08/01/96 8,775.00 - ------------------------------------------------------------------------------------------------------------------------- RIGHT LOOK, THE BARBARA C. & WILLIAM H. PETER 643- 20 1,500 05/01/96 04/30/01 0.00 0.00 0.00 0.00 9.25 08/01/93 13,875.00 9.75 05/01/99 14,625.00 - ------------------------------------------------------------------------------------------------------------------------- CLYDE'S SPIRITS B. CLYDE, JR. & MARY JANE BYR 643- 30 3,000 02/01/95 01/31/00 7.00 02/01/95 21,000.00 0.00 0.00 7.50 02/01/96 22,500.00 8.00 02/01/97 24,000.00 8.50 02/01/98 25,500.00 9.25 02/01/99 27,750.00 - ------------------------------------------------------------------------------------------------------------------------- BIG LOTS #1010 CONSOLIDATED STORES CORPORATI 643- 40 18,280 05/01/95 01/31/00 3.35 05/01/95 61,237.92 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- FAMILY DOLLAR STORES FAMILY DOLLAR STORES 643- 45 7,000 06/29/94 12/31/03 5.29 07/01/94 37,000.08 - ----------------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- WOODBERRY LAUNDRY W.P. BLACK Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- RIGHT LOOK, THE BARBARA C. & WILLIAM H. PETER Full 0 Full 0 Full 0 05/01/01 04/30/04 0.00 5.00 0 Y 0.00 5.00 0 Y 0.00 5.00 277,500 Y 0.00 5.00 292,500 Y - ----------------------------------------------------------------------------------------------------------------------------------- CLYDE' SPIRITS B. CLYDE, JR. & MARY JANE BYR Full 0 Full 0 Full 0 02/01/00 01/31/05 0.00 3.00 600,000 0.00 3.00 0 0.00 3.00 0 0.00 3.00 0 0.00 3.00 0 0.00 3.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- BIG LOTS #1010 CONSOLIDATED STORES CORPORATI Full 0 Full 0 Full 0 02/01/00 01/31/05 3.85 2.50 2,449,500 Y 02/01/05 01/31/10 4.35 2.50 0 Y 0.00 2.50 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- FAMILY DOLLAR STORES FAMILY DOLLAR STORES PRS 1994 PRS 1994 PRS 1994 01/01/04 12/31/08 6.39 3.00 800,000
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: WOODBERRY PLAZA 3234 AUGUSTA ROAD WEST COLUMBIA, SC 29169-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ FAMILY DOLLAR STORES FAMILY DOLLAR STORES 643- 45 7,000 06/29/94 12/31/03 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5.81 01/01/99 40,700.04 - ------------------------------------------------------------------------------------------------------------------------ REVCO #824 REVCO DISCOUNT DRUG CENTERS I 643- 50 7,800 03/01/77 02/28/02 0.00 0.00 5.10 03/01/92 39,780.00 0.00 0.00 6.00 03/01/94 46,800.00 - ------------------------------------------------------------------------------------------------------------------------ WINN-DIXIE #1233 WINN DIXIE OF GREENVILLE, INC 643- 60 44,000 02/03/94 02/02/14 6.50 03/01/94 285,999.96 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ - ---------------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ---------------------------------------------------------------------------------------------------------------------------------- FAMILY DOLLAR STORES FAMILY DOLLAR STORES PRS 1994 PRS 1994 PRS 1994 01/01/09 12/31/13 7.03 3.00 875,000 01/01/14 12/31/18 7.73 3.00 957,500 01/01/19 12/31/23 8.51 3.00 1,148,075 0.00 3.00 1,048,250 0.00 3.00 1,257,882 - ---------------------------------------------------------------------------------------------------------------------------------- REVCO #824 REVCO DISCOUNT DRUG CENTERS I Full 0 Full 0 Full 0 03/01/92 02/28/97 5.10 2.00 0 Y 03/01/02 02/28/07 6.50 2.00 1,989,000 Y 03/01/97 02/28/02 5.10 2.00 0 Y 0.00 2.00 2,340,000 Y - ---------------------------------------------------------------------------------------------------------------------------------- WINN-DIXIE #1233 WINN DIXIE OF GREENVILLE, INC Full 0 Full 0 Full 0 02/03/14 02/02/19 0.00 1.00 28,600,000 Y 02/03/19 02/02/24 0.00 1.00 0 Y 02/03/24 02/02/29 0.00 1.00 0 Y 02/03/29 02/02/34 0.00 1.00 0 Y 02/03/34 02/02/39 0.00 1.00 0 Y 0.00 1.00 0 Y - ---------------------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied.. 82,930 Current Annual Base Rent 477,687.96 Available. 0 Total..... 82,390
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Augusta Road - Looking West [GRAPHIC OMITTED] Augusta Road - Looking East [GRAPHIC OMITTED] Augusta Road - Looking North [GRAPHIC OMITTED] Augusta Road - Looking South [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Side View This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study BAY VILLAGE SHOPPING CENTER 2300 Church Street (U.S. Highway 501) Conway, Horry County, South Carolina Prepared by O. Marshall Dodds, MAI Date of Market Study - May 13, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] May 13, 1997 Mr. Steven R. Maeglin Morgan Stanley & Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Bay Village Shopping Center 2300 Church Street (U.S. Highway 501) Conway, Horry County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 13, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The subject property consists of a community shopping center that contains 133,480 square feet of leasable area. The center was constructed in 1988. The anchor tenants are Wal-Mart Stores, Big Lots, Goody's Family Clothing, and the property is currently 99.1% occupied. Wal-Mart Stores will be vacating the premises within the next few months as a new SuperStore is being built approximately two blocks west of subject on Church Street. Wal-Mart will occupy the SuperStore, but the original lease calls for Wal-Mart to continue paying rent until May 27, 2008. The rental rate for Wal-Mart is at $3.35 per square foot and it is thought that the store can be sub-let to another tenant at that rental rate or divide it into small stores. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds ------------------------------ O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY ================================================================================ Regional Perspective Conway and Horry County are located in the Northeast portion of the State of South Carolina. According to the 1990 census the population of Conway was 9,819 while the Conway Division had a population of 26,648. Horry County had a population of 144,053. Agriculture, industry and tourism provide for a strong economy in the area. The chief agricultural product is tobacco and Conway is the site of three markets. Produce and grain make up the remainder of the farming products. Major industries include electronics, apparel, draperies, metal work, machinery, furniture and forestry products. The City of Conway is located approximately 15 miles west of the downtown area of Myrtle Beach. These two cities are connected by a four-lane asphalt paved thoroughfare which is U.S. Highway #501. Development has occurred and these two cities are growing towards one another. The tourism at Myrtle Beach is a high profile attraction and contributes to the economy. The City of Conway and Horry County have a stable and diversified economic base and the area has experienced growth in recent years. The unemployment rate for Horry County as of March, 1997 was 5.5 percent while the statewide rate was 5.5 percent. Neighborhood and Site The subject neighborhood is located in the northwest section of the City of Conway. A major traffic artery running through the neighborhood is Church Street or U.S. Highway #501. Several shopping centers are located in subject neighborhood. This would include the new Wal-Mart SuperStore Shopping Center that is under construction at this time. There will be approximately ten small shops that will be constructed in addition to the SuperStore. The Coastal Mall has been renovated and expanded in 1995. The tenants include K-Mart Stores, Winn-Dixie, Eckerds, Peebles Department Stores and others. There are a number of outlots that are located around the Coastal Mall that have been improved with fast food restaurants, TBA stores, branch banks, and others. The Conway High School is located on Church Street across from subject property. Pepsi-Cola Bottling Company has a bottling plant located on Church Street at Fox Point Road which is across the street from subject property. There are a number of single family residential subdivisions located throughout the neighborhood as well as several multi-family properties. The Wilson Supermarket is not included in subject property as this parcel was sold to Wilson to build the building. There are cross-easements between Wilson and the shopping center. Physical features are as follows: 1. Size 22.28 acres or 970,604 SF 2. Identity 2300 Church Street TMS# 122-000-04-045, 046 3. Shape Irregular 4. Topography Generally level and on street grade with Church Street 5. Accessability Good 6. Utilities Municipal 1 Physical Description Building features are as follows: 1. Size (net) 133,480 SF 2. Layout & Design One story - discount store - department store - variety store - fifteen shops 3. Parking Spaces 950 7.12 spaces per 1,000 square feet of net area 4. Construction Brick and glass front with concrete block on side and rear and metal seam roof. Market Position and Marketability Conclusions The subject property is located in the northwest section of the City of Conway. Commercial developments have occurred in this immediate neighborhood over the past 20 years. Recently, the Coastal Mall was renovated and expanded with a new K-Mart Store being constructed as well as a new Winn-Dixie Store. A Wal-Mart SuperStore is under construction approximately 1/2 mile west of subject property. There will be approximately ten small shops along with this SuperStore. Upon completion of the SuperStore, Wal-Mart Stores will vacate the store and subject property, but will continue paying rent until May 27, 2008. The market is healthy in subject neighborhood and tenants could be found to occupy the Wal-Mart Store, especially with the rental rate being $3.35 per square foot. The size of the Coastal Mall is 215,000 square feet with the rental rates ranging from $9.00 to $12.00 per square foot for the shops. The Waccamaw Square is an older center and the Bi-Lo Store is vacant at this time. The other stores are rented with the rents ranging from $2.50 to $6.00 per square foot. The Conway Plaza is located adjacent to the Waccamaw Plaza. Food Lion has vacated the store, but is continuing to pay rent. The shops are being rented from $6.00 to $8.00 per square foot. Comparable No. 4 is Waterway Plaza located in Little River. This is a neighborhood shopping center with Food Lion and Revco as major tenants. This center is 100.0% occupied. The subject property has fifteen shops and the rental rates range from $7.25 to $16.88 per square foot. It is possible that some of these tenants such as Dollar Tree, Friedman's Jewelers, Pic 'n Pay Shoes, Catos will relocate to the new Wal-Mart SuperStore Center. However, with the rental rates being in the range of the comparables, it is thought that tenants can be secured for subject property. The highest rental rate is with Friedman's Jewelers which is at $16.88 per square foot. The second highest rental rate is $13.25 per square foot for Hair Unlimited. The rental rate for the Wal-Mart Store is at $3.35 per square foot while the rental rate with Big Lots is at $4.33 per square foot and the Goody's Store is renting for $4.50 per square foot. There is a Wilson's Supermarket located within the center, but the supermarket owns the land and constructed the building. Cross easements are available between the shopping center and Wilson's Food Market. Trends: The subject property is located in the northwest area of Conway. Development of commercial properties began in this area approximately 30 years ago with the Coastal Mall. Since that time, there have been other commercial developments such as the new Wal-Mart SuperStore that is under construction at this time, subject property that was constructed in 1988 and the expansion and renovation of the Coastal Mall in 1994. The area is most desirable and the demand is high. All trends are favorable and it is thought that these trends will continue to be favorable in the future and that the stability will be maintained. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A. PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Bay Village Coastal Mall Waccamaw Square -------------------------- ------------------------- ----------------------- b. Street 2300 Church Street Church St. at 16th Ave. W/S Church St. -------------------------- ------------------------- ----------------------- c. City Conway, SC Conway, SC Conway, SC -------------------------- ------------------------- ----------------------- d. Distance from subject N/A 1/2 mile 1/3 mile -------------------------- ------------------------- ----------------------- e. Contact Edens & Avant, Inc. Baker & Baker Gator Investments -------------------------- ------------------------- ----------------------- f. Phone 803-779-4420 803-254-8987 305-949-9049 -------------------------- ------------------------- ----------------------- 2. Attributes a. Year built 1988 1994 1976 -------------------------- ------------------------- ----------------------- b. Net sq. Ft. 133,480 215,000 87,039 -------------------------- ------------------------- ----------------------- c. # building 1 1 1 -------------------------- ------------------------- ----------------------- d. #stories 1 1 1 -------------------------- ------------------------- ----------------------- e. Avg. Floor plate size (SF), if office N/A N/A N/A -------------------------- ------------------------- ----------------------- f. # elevators N/A N/A N/A -------------------------- ------------------------- ----------------------- g. Parking Adequate Adequate Adequate -------------------------- ------------------------- ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block -------------------------- ------------------------- ----------------------- I. Vacancy % .90% 0% 25.85% -------------------------- ------------------------- ----------------------- j. Anchors, if Retail Wal-Mart, Goody's, Big K-Mart, Winn-Dixie, Lots Eckerds, Peebles Revco, Dollar General -------------------------- ------------------------- ----------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Conway Plaza Waterway Plaza ------------------------ ----------------------- b. Street W/S Church St. SC Hwy. #9 ------------------------ ----------------------- c. City Conway, SC Little River, SC ------------------------ ----------------------- d. Distance from subject 1/3 mile 22 miles ------------------------ ----------------------- e. Contact CBL & Associates Edens & Avant, Inc. ------------------------ ----------------------- f. Phone 423-855-0001 803-779-4420 ------------------------ ----------------------- 2. Attributes a. Year built 1985 1991 ------------------------ ----------------------- b. Net sq. Ft. 33,000 49,750 ------------------------ ----------------------- c. # building 1 1 ------------------------ ----------------------- d. #stories 1 1 ------------------------ ----------------------- e. Avg. Floor plate size (SF), if office N/A N/A ------------------------ ----------------------- f. # elevators N/A N/A ------------------------ ----------------------- g. Parking Adequate Adequate ------------------------ ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block ------------------------ ----------------------- I. Vacancy % 3.64% 0% ------------------------ ----------------------- j. Anchors, if Retail Food Lion Food Lion, Revco ------------------------ -----------------------
Comments: Comparables No. 1, 2 and 3 are located in the immediate neighborhood of subject, while Comparable No. 4 is located in Little River approximately 22 miles away. These comparables were constructed at different times and the size of these comparables vary. The Bi-Lo Store in Comparable No. 2 is vacant and the K-Mart Store that is located on the adjacent property is also vacant. The Food Lion store in Comparable No. 3 is vacant as Food Lion has vacated the premises, but continues to pay rent. Comparable No. 1 is the Coastal Mall which has been expanded and renovated. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Asking Rental Rate a. Anchor Space $3.35 - $4.50 N/A N/A ------------------------- ------------------------ ----------------------- b. Shop Space $7.25 - $13.25 $9.00 - $12.00 $2.50 - $6.00 ------------------------- ------------------------ ----------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ------------------------- ------------------------ ----------------------- 3. Rent Concessions None None None ------------------------- ------------------------ ----------------------- 4. Effective Rent $7.25 - $13.25 $9.00 - $12.00 $2.50 - $6.00 ------------------------- ------------------------ ----------------------- 5. TI Allowance None None None ------------------------- ------------------------ ----------------------- 6. Expense Stop None None None ------------------------- ------------------------ ----------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 -5 years (shop) 3 - 5 years (shop) ------------------------- ------------------------ ----------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% ------------------------- ------------------------ ----------------------- 9. Percentage Rent K-Mart, Winn-Dixie, (per lease terms) Wal-Mart, Goody's Eckerds, Pebbles Revco ------------------------- ------------------------ ----------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A ------------------------- ------------------------ ----------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A ------------------------- ------------------------ ----------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A superior inferior ------------------------- ------------------------ ----------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A $6.75 - $7.50 --------------------- ------------------------- b. Shop Space $6.00 - $8.00 $8.00 - $9.50 --------------------- ------------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net --------------------- ------------------------- 3. Rent Concessions None None --------------------- ------------------------- 4. Effective Rent $6.00 - $8.00 $8.00 - $9.50 --------------------- ------------------------- 5. TI Allowance None None --------------------- ------------------------- 6. Expense Stop None None --------------------- ------------------------- 7. Length of Lease Term 3-5 years (shop) 3-5 years (shop) --------------------- ------------------------- 8. Commissions 5.00% - 7.00% 5.00% - 7.00% --------------------- ------------------------- 9. Percentage Rent (per lease terms) Food Lion Food Lion, Revco --------------------- ------------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A --------------------- ------------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A --------------------- ------------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) inferior similar --------------------- -------------------------
D. EXPLAIN RANKING/COMMENTS: Comparable No. 1 has been rated as superior since this center has been renovated and expanded. Long term leases have been secured from K-Mart and Winn-Dixie. Comparables No. 2 and No. 3 are inferior as the Food Store is vacant. It is thought that Comparable No. 4 is similar even though it is a smaller center. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 [GRAPHIC OMITTED] Name: Coastal Mall Location: Church Street at 16th Avenue Conway, SC Year Built: 1969 - Reh. 1994 Total Size: 215,000 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $9.00 - $12.00 per square foot Tenant Expenses: Triple Net Remarks: This mall was renovated in 1994. There is a new K-Mart SuperStore and a new Winn-Dixie Store. Peebles Department Store and Eckerds remain in the mall. 5 Comparable Rental No. 2 [GRAPHIC OMITTED] Name: Waccamaw Square Location: W/S Church Street Conway, SC Year Built: 1976 Total Size: 87,039 SF Vacant Space: 22,500 SF Vacancy Rate: 25.85% Rental Range: $2.50 - $6.00 per square foot Tenant Expenses: Triple Net Remarks: This is an older center and Bi-Lo have vacated the premises. The other stores are Dollar General, Ace TV Rentals, Revco. The former K-Mart that is next door is vacant. 6 Comparable Rental No. 3 [GRAPHIC OMITTED] Name: Conway Plaza Location: W/S Church Street Conway, SC Year Built: 1985 Total Size: 33,000 SF Vacant Space: 2,400 SF Vacancy Rate: 3.64% Rental Range: $6.00 - $8.00 per square foot Tenant Expenses: Triple Net Remarks: The Food Lion Store is vacant, but continues to pay rent. There are two small shops that are vacant. 7 Comparable No. 4 [GRAPHIC OMITTED] Name: Waterway Plaza Location: SC Highway #9 Little River, SC Year Built: 1991 Total Size: 49,750 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $8.00 - $9.50 per square foot for the shops Tenant Expenses: Triple Net Remarks: The major tenants are Food Lion and Revco. There is excess land for expansion. The shop leases will expire in the next 1 to 2 years. The rental rates will probably increase. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Bay Village Triangle Village Barnwell Plaza ------------------------- ------------------------ ------------------------ b. Street Address 2300 Church Street 912-934 N. Lake Dr. 1019 Dunbarton Blvd. ------------------------- ------------------------ ------------------------ c. City Conway, SC Lexington, SC Barnwell, SC ------------------------- ------------------------ ------------------------ d. Distance from Subject N/A 60 miles 60 miles ------------------------- ------------------------ ------------------------ 2. Attributes a. Year Built 1988 1985 1985 ------------------------- ------------------------ ------------------------ b. Net sq. feet 133,480 115,754 SF 70,725 SF ------------------------- ------------------------ ------------------------ c. # Buildings 1 1 1 ------------------------- ------------------------ ------------------------ d. # of Stories 1 1 1 ------------------------- ------------------------ ------------------------ e. Vacancy % .90% 3.24% 9.00% ------------------------- ------------------------ ------------------------ 3. Sales Information a. Sales Price N/A $4,489,380 $2,860,620 ------------------------- ------------------------ ------------------------ b. Sales Price PSF N/A $38.78 $40.45 ------------------------- ------------------------ ------------------------ c. Date N/A 01-31-95 01-31-95 ------------------------- ------------------------ ------------------------ d. NOI at time of Sale N/A $480,919 $330,327 ------------------------- ------------------------ ------------------------ e. Cap. Rate N/A 10.71% 11.55% ------------------------- ------------------------ ------------------------ 4. Rank Relative to Subject (inferior, similar, superior) N/A similar similar ------------------------- ------------------------ ------------------------ COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Hampton Plaza Cumberland Place ----------------------- ------------------------ b. Street Address 2864 Wilma Rudolph 209 New Smithville Blvd. Hwy. ----------------------- ------------------------ c. City Clarksville, TN McMinnville, TN ----------------------- ------------------------ d. Distance from Subject 510 miles 400 miles ----------------------- ------------------------ 2. Attributes a. Year Built 1988 1988 ----------------------- ------------------------ b. Net sq. feet 189,302 SF 143,951 ----------------------- ------------------------ c. # Buildings 1 1 ----------------------- ------------------------ d. # of Stories 1 1 ----------------------- ------------------------ e. Vacancy % 0% 8.92% ----------------------- ------------------------ 3. Sales Information a. Sales Price $6,150,000 $5,225,000 ----------------------- ------------------------ b. Sales Price PSF $32.49 $36.60 ----------------------- ------------------------ c. Date 12-26-95 12-26-95 ----------------------- ------------------------ d. NOI at time of Sale $753,627 $693,726 ----------------------- ------------------------ e. Cap. Rate 12.25% 13.28% ----------------------- ------------------------ 4. Rank Relative to Subject (inferior, similar, superior) similar similar ----------------------- ------------------------
Explain Ranking/Comments: These comparables are similar to subject as Wal-Mart Stores were located in these centers and moved into new Wal-Mart SuperStores. Wal-Mart is continuing to pay the rent until the lease term expires in these centers, but in certain instances the Wal-Mart Store has been subdivided into smaller stores or leased and occupied by other tenants. It is thought subject is similar to these properties. 9 Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: Name: Triangle Village Location: U.S. 378 & North Lake Drive (SC#6) Lexington, SC Grantor: 1994 N1 SC Associates Grantee: Tri Centers, LP Deed Reference: Book 3260, Page 199 Date: January 31, 1995 Sales Price: $4,489,380 Adjusted Sales Price: $4,489,380 Size building 115,754 Sales Price per S.F.: $38.78 Size Land (Acres): 12.51 Size Land (S.F.): 544,936 Year Built: 1985 Land/Building Ratio: 4.71 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $607,469 Effective Gross Income: $607,469 Gross Income Multiple: 7.39 EGIM: 7.39 Net Operating Income: $480,919 Overall Rate: 10.71% Verification: Public Records Type of Purchaser: Private Investor Comments: This center is anchored by Wal-Mart (65,904 SF) and Food Lion (25,000 SF) and there are 7 local shops totaling 24,850 SF (21.5 percent). At the time of sale, the center was 98.7 percent occupied with only 2,000 SF vacant. Wal-Mart has a base rent of $3.55 and the lease expires 11/05. Currently, Wal-Mart is paying about $0.50 per SF overage rent and Wal-Mart is expected to leave the center in the near future as no expansion room is available. The estimated cap rate excludes potential overage rent form Wal-Mart and only excludes income from the 2,000 SF vacant bay. Projected expenses include $0.10 per SF reserves. The center is masonry with brick front and metal mansard canopy roof and in average condition. No outparcels were included with this sale. 10 Comparable Sale No. 2 [GRAPHIC OMITTED] TMS: Name: Barnwell Plaza Location: 1019 Dunbarton Boulevard Barnwell, SC Grantor: 1994 N1 SC Associates, LP Grantee: Tri Centers, LP Deed Reference: Book 282, Page 137 Date: January 31, 1995 Sales Price: $2,860,620 Adjusted Sales Price: $2,860,620 Size building 70,725 Sales Price per S.F.: $40.45 Size Land (Acres): 11.28 Size Land (S.F.): 491,357 Year Built: 1985 Land/Building Ratio: 6.95 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $399,045 Effective Gross Income: $399,045 Gross Income Multiple: 7.17 EGIM: 7.17 Net Operating Income: $330,327 Overall Rate: 11.55% Verification: Purchaser Type of Purchaser: Private Investor Comments: This is a good quality community shopping center located in the town of Barnwell in Barnwell County (pop. 20,000) in western South Carolina. Approximately 91% of the center was comprised of anchor space, including Wal-Mart (34,875 SF), Food Lion (21,000 SF) and Revco Drugs (8,450 SF). The income and expense data here is based on the center's actual performance at the time of sale, and include approximately $0.50 SF in overage rents from Wal-Mart and $0.10 SF in reserves. 11 Comparable Sale No. 3 [GRAPHIC OMITTED] TMS: Name: Hampton Plaza Location: 2864 Wilma Rudolph Boulevard Clarksville, TN Grantor: Aetna Life Insurance Company Grantee: Hampton II, LP Deed Reference: Book 580, Page 1793 Date: December 26, 1995 Sales Price: $6,150,000 Adjusted Sales Price: $6,150,000 Size building: 189,302 Sales Price per S.F.: $32.49 Size Land (Acres): 23.24 Size Land (S.F.): 1,012,334 Year Built: 1988 Land/Building Ratio: 5.35 to 1 Utilities: All Available Zoning: C-3, Shopping Center District Financing: Cash to Seller Gross Potential Income: $966,102 Effective Gross Income: $937,119 Gross Income Multiple: 6.37 EGIM: 6.56 Net Operating Income: $753,627 Overall Rate: 12.25% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a community shopping center with Wal-Mart as a major tenant prior to a new Wal-Mart Superstore being built on the same block. While Wal-Mart remains liable for the lease, the store is vacant. The remainder of the center is occupied. 12 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: Name: Cumberland Place Location: 209 New Smithville Highway McMinnville, TN Grantor: Aetna Life Insurance Grantee: Cumberland II, LP Deed Reference: Book 287, Page 204 Date: December 26, 1995 Sales Price: $5,225,050 Adjusted Sales Price: $5,225,050 Size building: 143,951 Sales Price per S.F.: $36.30 Size Land (Acres): 19.64 Size Land (S.F.): 855,518 Year Built: 1988 Land/Building Ratio: 5.94 to 1 Utilities: All Available Zoning: C-3, Highway Commercial District Financing: Cash to Seller Gross Potential Income: $902,918 Effective Gross Income: $875,830 Gross Income Multiple: 5.79 EGIM: 5.97 Net Operating Income: $693,726 Overall Rate: 13.28% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a community shopping center. Wal-Mart was the major tenant and remains liable for the lease for the remaining term. A new Wal-Mart Superstore was built one block west of this property. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 Comparable Rentals [GRAPHIC OMITTED] Comparable Rentals [GRAPHIC OMITTED] Improved Sales Map [GRAPHIC OMITTED] Site Plan [GRAPHIC OMITTED] EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: BAY VILLAGE 2300 CHURCH ST. (US HWY 501) CONWAY, SC 29526 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------------------ WILSON'S FOODS BONEY WILSON & SONS, INC. 698- 10 0 05/15/87 05/14/37 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ BIG LOTS, LTD. CONSOLIDATED STORES INTERNATI 698- 20 23,202 11/05/88 12/31/98 4.33 11/05/88 99,999.96 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ HAIR UNLIMITED EDDIE A. & SUSAN W. ROGERS 698- 30 1,200 11/01/93 10/31/98 13.25 11/01/93 15,900.00 - ------------------------------------------------------------------------------------------------------------------------------------ ROBERT FLOYD & ASSOCIATES INC. ROBERT FLOYD & ASSOCIATES INC. 698- 40 1,200 04/01/94 03/31/97 11.50 04/01/94 13,800.00 - ------------------------------------------------------------------------------------------------------------------------------------ GOODY'S FAMILY CLOTHING #31 GOODY'S FAMILY CLOTHING INC. 698- 50 15,000 09/01/92 08/31/93 4.50 01/01/96 67,500.00 - ------------------------------------------------------------------------------------------------------------------------------------ Available 698- 60 1,200 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ SZECHUAN CHINESE RESTAURANT JIAN G. ZHENG 698- 70 1,200 06/01/96 05/31/06 10.00 06/01/96 12,000.00 11.25 06/01/98 13,500.00 12.50 06/01/01 15,000.00 14.25 06/01/03 17,100.00 - ------------------------------------------------------------------------------------------------------------------------------------ FRIEDMAN'S JEWELERS MS JEWELERS LIMITED PARTNERSH 698- 80 1,500 11/01/93 10/31/96 11.25 01/01/96 16,875.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ WILSON'S FOODS BONEY WILSON & SONS, INC. Full 0 Full 0 Full 0 05/15/37 05/14/87 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ BIG LOTS, LTD. CONSOLIDATED STORES INTERNATI Full 0 Full 0 Full 0 02/31/99 12/31/03 4.87 2.50 4,000,000 01/31/08 12/31/08 5.41 2.50 0 - ------------------------------------------------------------------------------------------------------------------------------------ HAIR UNLIMITED EDDIE A. & SUSAN W. ROGERS Full 0 Full 0 Full 0 0.00 5.00 318,000 Y - ------------------------------------------------------------------------------------------------------------------------------------ ROBERT FLOYD & ASSOCIATES INC. ROBERT FLOYD & ASSOCIATES INC. Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ GOODY'S FAMILY CLOTHING #11 GOODY'S FAMILY CLOTHING INC. Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ SZECHUAN CHINESE RESTAURANT JIAN G. ZHENG Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ FRIEDMAN'S JEWELERS MS JEWELERS LIMITED PARTNERSH Full 0 Full 0 Full 0 11/01/96 10/31/99 12.50 3.00 750,000 11/01/99 10/31/02 13.75 3.00 775,000 0.00 3.00 875,000 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: BAY VILLAGE 2300 CHURCH ST. (US HWY 501) CONWAY, SC 29526 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------------------ FRIEDMAN'S JEWELERS MS JEWELERS LIMITED PARTNERSH 698-80 1,500 11/01/93 10/31/96 16.88 11/01/96 25,312.56 - ------------------------------------------------------------------------------------------------------------------------------------ CELLULAR PLUS CELLULAR PLUS, A SOLE PROPRIE 698-90 1,600 11/01/96 10/31/99 10.00 11/01/96 15,996.00 - ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL CREDIT COMMERCIAL CREDIT CORPORATION 698-100 1,600 03/10/94 03/09/97 10.00 01/01/96 15,999.96 - ------------------------------------------------------------------------------------------------------------------------------------ COLORTYME RENTAL TRINITY LEASING 698-110 2,000 05/01/96 04/30/99 9.84 01/01/96 19,680.00 0.00 0.00 9.84 06/01/96 19,680.00 - ------------------------------------------------------------------------------------------------------------------------------------ RADIO SHACK #O11739 TANDY CORPORATION 698-120 2,500 09/19/90 09/30/00 9.00 01/01/96 22,500.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ DOLLAR TREE ONLY ONE DOLLAR, INC. 698-125 3,500 03/01/97 02/28/00 9.00 01/01/96 31,500.00 0.00 0.00 0.00 0.00 0.00 0.00 9.75 03/01/97 34,125.00 - ------------------------------------------------------------------------------------------------------------------------------------ MATTRESSES PLUS JASON ENTERPRISES, INC. 698-130 3,000 01/01/97 12/31/01 8.50 01/01/97 25,500.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ FRIEDMAN'S JEWELERS MS JEWELERS LIMITED PARTNERSH Full 0 Full 0 Full 0 0.00 3.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ CELLULAR PLUS CELLULAR PLUS, A SOLE PROPRIE Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL CREDIT COMMERCIAL CREDIT CORPORATION Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ COLORTYME RENTAL TRINITY LEASING Full 0 Full 0 Full 0 05/01/99 04/30/02 12.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ RADIO SHACK #NO11739 TANDY CORPORATION Full 0 Full 0 Full 0 10/01/00 09/30/05 12.00 3.00 750,000 0.00 3.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ DOLLAR TREE ONLY ONE DOLLAR, INC. Full 0 Full 0 Fixed 0 03/01/97 02/28/01 9.75 4.00 787,500 Y 03/01/01 02/28/04 10.75 4.00 0 Y 03/01/00 02/28/03 10.75 4.00 0 Y 0.00 4.00 0 Y 0.00 4.00 853,100 Y - ------------------------------------------------------------------------------------------------------------------------------------ MATTRESSES PLUS JASON ENTERPRISES, INC. Full 0 Full 0 Full 0 01/02/02 12/31/06 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: BAY VILLAGE 2300 CHURCH ST. (US HWY 501) CONWAY, SC 29526 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------------------ MATTRESSES PLUS JASON ENTERPRISES, INC. 698-130 3,000 01/01/97 12/31/01 9.50 01/01/00 28,500.00 - ------------------------------------------------------------------------------------------------------------------------------------ PIC 'N PAY #2731/POSTPETITION SHOE CITY #231 698-140 3,000 10/0/88 09/30/98 8.75 01/01/96 26,250.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ CATO #453 THE CATO CORPORATION 698-150 5,950 02/01/88 01/31/99 3.25 01/01/96 43,137.48 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ WAL-MART #586 WALMART STORES INC. 698-160 65,930 05/28/88 05/27/08 3.35 01/01/96 226,865.52 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ MATTRESSES PLUS JASON ENTERPRISES, INC. Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ PIC 'N PAY #2731/POSTPETITION SHOE CITY #231 Full 0 Full 0 Full 0 10/01/93 09/30/98 8.75 4.00 656,300 Y 10/01/98 09/30/03 9.75 4.00 0 Y 0.00 4.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ CATO #453 THE CATO CORPORATION Full 0 Full 0 Full 0 02/01/94 01/31/99 7.25 4.00 1,004,063 02/01/99 01/31/04 8.00 4.00 1,078,438 0.00 4.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ WAL-MART #586 WALMART STORES INC. None 0 None 0 Full 0 05/28/04 01/31/09 3.35 0.75 23,911,209 02/01/09 01/31/14 3.35 0.75 0 02/01/14 01/31/19 3.35 0.75 0 02/01/19 01/31/24 3.35 0.75 0 02/01/24 01/31/29 3.35 0.75 0 02/01/29 01/31/34 3.35 0.75 0 02/01/34 01/31/39 3.35 0.75 0 02/01/39 05/27/40 3.35 0.75 0 - ------------------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 132,280 Current Annual Base Rent 658,566.48 Available. 1,200 Total..... 133,480
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] US Highway #501 - Looking East [GRAPHIC OMITTED] US Highway #501 - Looking West [GRAPHIC OMITTED] US Highway #501 - Looking North [GRAPHIC OMITTED] US Highway #501 - Looking South [GRAPHIC OMITTED] Entrance to Subject from US Highway #501 [GRAPHIC OMITTED] Entrance to Subject from US Highway #501 [GRAPHIC OMITTED] Entrance to Subject from US Highway #501 [GRAPHIC OMITTED] Entrance to Subject [GRAPHIC OMITTED] Subject Front and Side View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front and Side View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study BLOWING ROCK SQUARE 175 U.S. Highway 321 By-Pass Blowing Rock, Watauga County, North Carolina Prepared by O. Marshall Dodds, MAI Date of Market Study - May 2, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] May 2, 1997 Mr. Steven R. Maeglin Morgan Stanley & Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Blowing Rock Square 175 U.S. Highway 321 By-Pass Blowing Rock, Watauga County, North Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 2, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The subject property consists of a neighborhood shopping center that contains 42,559 square feet of leasable area. The center was constructed in 1990. The anchor tenants are Food Lion, and Eckerds. The subject property is currently 100% occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ [ILLEGIBLE] --------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY ================================================================================ Regional Perspective Blowing Rock and Watauga County are located in the northwest mountains of North Carolina. The area has a healthy and diverse economy consisting of a major State University (Appalachian State University in Boone) Regional Medical Center, Industry, Tourism and Agricultural. There are a large number of mountain houses used for vacation purposes located in Blowing Rock. There are also several hotels and motels. This area has attracted tourists for many years. The manufacturing base is relatively small, but spread evenly among several successful consumer products companies. While there are only a few branch plants ranging from cut-n-sew to wire-wound resistors, most of the local industrial base is comprised of highly successful "homegrown" companies ranging from leather products to metal furniture to speciality paint systems. Tourism and second home development are significant to the local economy. The U.S. Census reported that seasonal homes went from 967 in 1980 to 4,261 in 1990. State researchers report that travel and tourism pump more than $100,000,000 into Watauga County's economy annually. The traditional tourist seasons have been summer, fall color and skiing. However, visitors are beginning to take advantage of the "off peak" times when the crowds are reduced. Agriculture continues to play an important roll in the local economy with Christmas trees and other horticultural products. The unemployment rate for Blowing Rock was 2.8 percent in 1996. Neighborhood and Site The subject neighborhood is a town of Blowing Rock. The population is almost 100% tourist and summer residents. Winter estimates are at 1,800 with an increase to 7,500 during the summer and fall months with seasonal residents. The permanent population of Blowing Rock was 1,257 in 1990 with the county having a population of 36,952. The largest tourist attraction in Blowing Rock is the Chetola Resort. This is 94 acre estate with a 7-acre lake for canoeing and trout fishing. The Shoppes On The Parkway is a center that was constructed in 1989 and contains 35 factory outlets, with direct manufacture outlets and off-price and discount shops. Physical features are as follows: 1. Size 5.50 acres or 239,580 SF 2. Identity 175 U.S. Highway 321 By-Pass TMS# 2817-05-19-6351 3. Shape Irregular 4. Topography The site is generally level but sits up above U.S. Highway 321 By-Pass 5. Accessability Good 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 42,559 SF 2. Layout & Design One story - food store - drug store - four shops 3. Parking Spaces 208 4.89 per 1,000 square feet of net area 4. Construction Brick and glass front with concrete block on side and rear and metal seam roof. 1 Market Position and Marketability Conclusions The subject property is the only neighborhood shopping center in Blowing Rock with a food store and drug store. The Shoppes On The Parkway have factory outlet stores, but do not have a food store or a drug store. There are three small grocery stores in Blowing Park, but these are not considered to be comparable to subject. There are several neighborhood shopping centers in Boone, which is located approximately ten miles northwest of Blowing Rock. Also, the Boone Mall, which contains 250,000 square feet, was constructed in 1981 and expanded in 1993. The major tenants are Belks Department Store, Food Lion, Goody's Family Clothing and J.C. Penny. The rental rates in the mall range from $10.00 to $11.00 per square foot and the occupancy rate is 95% at this time. The Highland Common Shopping Center contains 55,650 square feet and was constructed in 1993. The rental rates for the shops range from $9.00 to $12.00 per square foot. The major tenants are Winn-Dixie and Revco Drugs with other tenants being Advanced Realty, Buttercups, Merle Norman Cosmetic Studios, Video Showbiz, Another Novel Idea and Higgins Custom Draperies. The New Market Centre was constructed in 1988 and contains 140,000 square feet of leasable area. The major tenants are Lowe's Food Store and Roses. The Shops At Shadowlane was constructed in 1995 with major tenants being Harris Teeter and Eckerd's Drugs. These centers are located in Boone. The subject property is the only neighborhood shopping center in Blowing Rock. The rental rates for the shops range from $5.00 to $7.00 per square foot. This is a reasonable rental rate for the shops. The rental rate for the Food Lion Store is $6.85 while the rental rate for the Eckerd's is $9.00 per square foot. Trends: The subject property is located in Blowing Rock which has always been a tourist area with a number of second homes for vacation purposes. The demand for second homes and tourists visiting the Blowing Rock area has increased and indications are that this will continue in the future. The neighborhood is considered to be stable and in high demand and most desirable for second homes and tourist. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Blowing Rock Square Shoppes On The Parkway --------------------------- --------------------- ------------------- ------------------- b. Street 175 US Highway #321 By-Pass US Highway #321 --------------------------- --------------------- ------------------- ------------------- c. City Blowing Rock, NC Blowing Rock, NC --------------------------- --------------------- ------------------- ------------------- d. Distance from subject N/A 1/2 mile --------------------------- --------------------- ------------------- ------------------- e. Contact Company Stores Edens & Avant, Inc. Development Corp. --------------------------- --------------------- ------------------- ------------------- f. Phone 803-779-4420 615-371-0686 --------------------------- --------------------- ------------------- ------------------- 2. Attributes a. Year built 1990 1989 --------------------------- --------------------- ------------------- ------------------- b. Net sq. Ft. 42,559 98,085 --------------------------- --------------------- ------------------- ------------------- c. # building 1 1 --------------------------- --------------------- ------------------- ------------------- d. #stories 1 1 --------------------------- --------------------- ------------------- ------------------- e. Avg. Floor plate size (SF), if office N/A N/A --------------------------- --------------------- ------------------- ------------------- f. # elevators N/A N/A --------------------------- --------------------- ------------------- ------------------- g. Parking Adequate Adequate --------------------------- --------------------- ------------------- ------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block --------------------------- --------------------- ------------------- ------------------- I. Vacancy % 0% 0% --------------------------- --------------------- ------------------- ------------------- j. Anchors, if Retail Food Lion, Eckerd's N/A --------------------------- --------------------- ------------------- -------------------
Comments: Subject and Comparable No. 1 are the only shopping centers in Blowing Rock. The others are in Boone which is about 10 miles away. Details of these are on the following page. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space $6.85 - $9.00 N/A ------------------------ ----------------------- --------------------- ------------------- b. Shop Space $5.00 - $7.00 $7.50 - $10.00 ------------------------ ----------------------- --------------------- ------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net ------------------------ ----------------------- --------------------- ------------------- 3. Rent Concessions None None ------------------------ ----------------------- --------------------- ------------------- 4. Effective Rent $5.00 - $7.00 $7.50 - $10.00 ------------------------ ----------------------- --------------------- ------------------- 5. TI Allowance None None ------------------------ ----------------------- --------------------- ------------------- 6. Expense Stop None None ------------------------ ----------------------- --------------------- ------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 - 5 years (shop) ------------------------ ----------------------- --------------------- ------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% ------------------------ ----------------------- --------------------- ------------------- 9. Percentage Rent (per lease terms) Food Lion, Eckerd's N/A ------------------------ ----------------------- --------------------- ------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A ------------------------ ----------------------- --------------------- ------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A ------------------------ ----------------------- --------------------- ------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A similar ------------------------ ----------------------- --------------------- -------------------
D. EXPLAIN RANKING/COMMENTS: The only comparable that has been shown for comparison purposes is the Shoppes On The Parkway. The reason for this is this is the only other large shopping center in Blowing Rock. The other shopping centers are located in Boone, which is approximately 10 miles away. The rental rate for the shops at the Highland Commons Shopping Center ranges from $9.00 to $12.00 per square foot and the rental rate for the shops in the Boone Mall range from $10.00 to $11.00 per square foot. The rentals for subject property range from $5.00 to $7.00 per square foot for the shops which is reasonable and below the rental rates for the shops in Boone. Boone is a larger town and has year around population, especially with Appalachia State University, whereas, subject has a high population in the summer and fall with the population decreasing in the winter time. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 [GRAPHIC OMITTED] Name: Shoppes On The Parkway Location: US Highway #321` Blowing Rock, NC Year Built: 1989 Total Size: 98,085 SF Vacant Space: 9,132 SF Vacancy Rate: 9.31% Rental Range: $7.50 to $10.00 per square foot Tenant Expenses: Triple Net Remarks: This is a typical outlet center with 35 Factory Outlets. The occupants include London Fog, Polo, Arrow Shirt, Izod, Bass Shoes and others. 5 PROPERTY INSPECTION FORM COMMERCIAL
II. SALES COMPARABLE SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ 1. Identification a. Name Blowing Rock Square St. Andrews Crossing Eastgate Shop. Center One Norman Center Paw Creek Commons ------------------- -------------------- --------------------- ----------------- ------------------ b. Street Address 175 US Highway #321 817 St. Andrews Road NWC Whiskey Rd. & 19706 One Norman E/S Little Rock By-Pass Eastgate Dr. Blvd. Rd. at Freedom Dr. ------------------- -------------------- --------------------- ----------------- ------------------ c. City Blowing Rock, NC Columbia, SC Aiken, SC Cornelius, NC Charlotte, NC ------------------- -------------------- --------------------- ----------------- ------------------ d. Distance from Subject N/A 8 miles 56 miles 100 miles 92 miles ------------------- -------------------- --------------------- ----------------- ------------------ 2. Attributes a. Year Built 1990 1994 1995 1993 1996 ------------------- -------------------- --------------------- ----------------- ------------------ b. Net sq. feet 42,559 SF 66,910 SF 75,716 SF 54,185 SF 66,050 ------------------- -------------------- --------------------- ----------------- ------------------ c. # Buildings 1 1 1 1 1 ------------------- -------------------- --------------------- ----------------- ------------------ d. # of Stories 1 1 1 1 1 ------------------- -------------------- --------------------- ----------------- ------------------ e. Vacancy % 0% 0% 5.00% 0% 2.73% ------------------- -------------------- --------------------- ----------------- ------------------ 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 $4,650,000 $5,384,000 ------------------- -------------------- --------------------- ----------------- ------------------ b. Sales Price PSF N/A $97.89 $88.16 $85.82 $77.52 ------------------- -------------------- --------------------- ----------------- ------------------ c. Cap. Rate N/A 9.69% 9.86% 9.68% 9.61% ------------------- -------------------- --------------------- ----------------- ------------------ d. Date N/A 05-25-94 09-28-95 10-12-95 03-25-97 ------------------- -------------------- --------------------- ----------------- ------------------ e. NOI at time of Sale N/A $634,797 $657,896 $450,188 $517,412 ------------------- -------------------- --------------------- ----------------- ------------------ 4. Rank Relative to Subject (inferior, similar, superior) N/A superior similar similar superior ------------------- -------------------- --------------------- ----------------- ------------------
Explain Ranking/Comments: Subject is similar to these comparables. Comparables No. 1 and No. 4 have been rated superior because of the location and high rentals from the shops. The tenant mix of subject and these comparables is similar. 6 Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: 6012 -1 -1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 7 Comparable Sale No. 2 [GRAPHIC OMITTED] TMS: Name: Eastgate Shopping Center Location: Northwest Corner of Whiskey Road & Eastgate Drive Aiken, SC Grantor: Southwest U.S. Retail, LP Grantee: PDG Aiken Partners, LP Deed Reference: N/A Date: September 28, 1995 Sales Price: $6,675,000 Adjusted Sales Price: $6,675,000 Size building: 75,716 Sales Price per S.F.: $88.16 Size Land (Acres): 8.79 Size Land (S.F.): 382,892 Year Built: 1995 Land/Building Ratio: 5.06 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $782,704 Effective Gross Income: $782,704 EGIM: 8.53 Net Operating Income: $657,896 Overall Rate: 9.86% Verification: Public Records Type of Purchaser: Private Investor Comments: Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. 8 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. 9 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: 59-231-22,23 pt. Name: Paw Creek Commons Location: East side of Little Rock Road at Freedom Drive Grantor: Paw Creek, LLC Grantee: Paw Creek Crossing Limited Partnership Deed Reference: Book 8988, Page 519 Date: March 25, 1997 Sales Price: $5,120,000 Adjusted Sales Price: $5,384,000 Size building: 66,050 Sales Price per S.F.: $77.52 Size Land (Acres): 9.82 Size Land (S.F.): 427,759 Year Built: 1996 Land/Building Ratio: 6.48 to 1 Utilities: Municipal Zoning: CC, Commercial Center Financing: Cash to Seller Gross Potential Income: $568,840 Effective Gross Income: $552,054 Gross Income Multiple: 9.00 EGIM: 9.27 Net Operating Income: $517,412 Overall Rate: 9.61% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was pre-construction. The sales price has been adjusted to reflect this by using 50 basis points in the capitalization rate (.1011 minus .0050 equals .0961). The major tenants are Winn-Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. The income from anchor tenants is 79.41 percent of gross income. 10 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 11 ------------------ Comparable Rentals ------------------ [GRAPHIC OMITTED] ------------------ Improved Sales Map ------------------ [GRAPHIC OMITTED] --------- Site Plan --------- [GRAPHIC OMITTED] EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: BLOWING ROCK SQUARE 175 U.S. HIGHWAY #321 BY-PASS BLOWING ROCK, NC Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- ECKERD'S #2927 JACK ECKERD CORP. 646-10 8,640 05/08/91 05/07/11 8.25 06/01/91 71,280.00 9.00 06/01/96 77,760.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- FOOD LION #0922 FOOD LION, INC. 646-20 29,000 04/20/91 04/19/16 0.00 0.00 6.85 06/01/91 198,650.04 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- FLICK VIDEO STAMEY ENTERPRISES, INC. 646-30 1,625 12/01/96 11/30/99 5.00 01/01/97 8,124.96 0.00 0.00 6.00 12/01/97 9,750.00 - -------------------------------------------------------------------------------------------------------------------------- IMAGE GARDEN, THE MELINDA H. ADAMS 646-40 1,038 01/01/95 12/31/97 0.00 0.00 5.78 01/01/95 6,000.00 6.28 01/01/97 6,519.00 - -------------------------------------------------------------------------------------------------------------------------- BLOWING ROCK FRAMEWORKS & GAL BLOWING ROCK FRAMEWORKS AND G 646-50 870 05/15/95 05/31/97 6.89 06/01/95 5,992.08 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- CONTINENTAL DIVIDE REALTY, LL 646-60 1,386 08/01/96 07/31/99 3.97 08/15/96 5,497.80 0.00 0.00 7.00 09/01/96 9,702.00 - --------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ TENANT INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ ECKERD'S #2927 JACK ECKERD CORP. Full 0 Full 0 Full 0 05/08/11 05/07/16 9.50 0.00 0 05/08/16 05/07/21 10.00 0.00 0 05/08/21 05/07/26 10.50 0.00 0 05/08/26 05/07/31 11.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ FOOD LION #0922 FOOD LION, INC. Full 0 PRS 1991 Fixed 0 04/20/16 04/19/21 6.85 1.00 0 Y 04/20/21 04/19/26 6.85 1.00 19,865,000 Y 04/20/26 04/19/31 6.85 1.00 0 Y 04/20/31 04/19/36 6.85 1.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ FLICK VIDEO STAMEY ENTERPRISES, INC. Full 0 Full 0 Full 0 12/01/99 11/30/02 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ IMAGE GARDEN, THE MELINDA H. ADAMS PRS 1994 PRS 1994 Full 0 01/01/98 12/31/00 0.00 5.00 200,000 0.00 5.00 0 0.00 5.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ BLOWING ROCK FRAMEWORKS & GAL BLOWING ROCK FRAMEWORKS AND G Full 0 Full 0 Full 0 05/01/97 04/30/00 0.00 5.00 230,000 0.00 5.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ CONTINENTAL DIVIDE REALTY, LL Full 0 Full 0 Full 0 08/01/99 07/31/02 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] U.S. Highway #321 By-Pass Looking North [GRAPHIC OMITTED] U.S. Highway #321 By-Pass Looking South [GRAPHIC OMITTED] Entrance Way To Subject From U.S. Highway #321 By-Pass [GRAPHIC OMITTED] Entrance Way To Subject [GRAPHIC OMITTED] Front View [GRAPHIC OMITTED] Front View [GRAPHIC OMITTED] Front View [GRAPHIC OMITTED] Front And Side View [GRAPHIC OMITTED] Side View [GRAPHIC OMITTED] Rear View [GRAPHIC OMITTED] Rear View [GRAPHIC OMITTED] Rear View [GRAPHIC OMITTED] Rear View [GRAPHIC OMITTED] Rear View This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. Market Study CATAWBA VILLAGE 807 U.S. Highway #70 Newton-Conover, Catawba County, North Carolina Prepared by O. Marshall Dodds, MAI Date of Market Study - May 2, 1997 - ------------ [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] REAL ESTATE VALUATION May 2, 1997 AND CONSULTATION - ------------ Mr. Steven R. Maeglin Morgan Stanley & Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Catawba Village 807 U.S. Highway #70 Newton-Conover, Catawba County, North Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 2, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 58,450 square feet of leasable area. The center was constructed in 1978. The anchor tenant is Bi-Lo, Inc., but the store is now being occupied by a clothing store as Bi-Lo has closed the store. The lease with Bi-Lo expires on March 31, 1998. There are three 5-year option periods at the same rental rate. The subject property is currently 85.5% occupied which includes the store that Bi-Lo formerly occupied and is continuing to pay the rent. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. -------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) [LOGO] EXECUTIVE SUMMARY ================================================================================ Regional Perspective Newton-Conover is located in the western section of the State of North Carolina along Interstate 40. The population for Catawba County in 1996 was 126,653 people while the 1996 population of Newton-Conover was 18,178. Hickory is located nearby. The major employers in Catawba County with 1,500 plus employees would include Siecor, Catawba County Schools and CommScope, Inc. The major employers with employees between 1,000 to 1,499 are Frye Regional Hospital, Hickory Springs Manufacturing Co., Century Furniture Co, Merchants Distributors, Inc., The Lane Company, Catawba Memorial Hospital, Broyhill Furniture Industries and Catawba County. There are several furniture factories throughout the county. The unemployment rate for Catawba County in 1995 was 4.3 percent while the MSA rate was 4.2 percent and the North Carolina rate was 4.3 percent. Since 1989 the unemployment rate has ranged from 3.2 percent to a high of 6.3 percent in 1991. The range from 1993 through 1995 has been 3.3 percent to 4.9 percent. Neighborhood and Site The neighborhood is located along U.S. Highway #64 & #70 and is between Newton-Conover and Hickory. Commercial developments are located along U.S. Highway #64 & #70. The Catawba Mall is located in subject neighborhood and the size of the mall is 303,650 square feet. There are several other shopping centers that are located along U.S. Highway #64 & #70 which include Catawba Village, Hickory Corners, Canova Center, Village Park Shopping Center. The City of Hickory is located to the west of subject property. There are single family residential properties that are located throughout the neighborhood and off of the major traffic arteries. Physical features are as follows: 1. Size 10.30 acres or 448,668 SF 2. Identity 807 U.S. Highway #70 TMS# 50N-01-12D 3. Shape Irregular 4. Topography Generally level and on street grade with U.S. Highway #70 5. Accessability Good 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 58,450 SF 2. Layout & Design One story - former food store - former drug store- former variety store - ten shops 3. Parking Spaces 308 5.65 per 1,000 square feet of net area 4. Construction Brick and glass front with concrete block on side and rear and metal seam roof. 1 Market Position and Marketability Conclusions Subject property is located between Newton-Conover and Hickory. U.S. Highway #64 & #70 is developed with a number of commercial properties in this area including subject property. The Valley Hills Mall is located in this area and contains 620,000 square feet. This mall was opened in 1978 and has an occupancy rate of 97%. The major tenants are Belk Department Store, J.C. Penny and Sears. There are several other neighborhood shopping centers as well as community shopping centers that are anchored by K-Mart and Wal-Mart. Comparable No. 1 is the Market Place and contains 125,095 square feet. The major tenants are Bi-Lo and Roses and the rental rates are from $4.00 to $6.35 per square foot. The Villa Park Shopping Center was built in 1965 and contains 60,843 square feet. The rental rates range from #3.50 to $5.00 per square foot. Comparable No. 3 is a Winn-Dixie Plaza which was built in 1984. The size is 49,235 square feet and the rental rates range from $5.00 to $7.50 per square foot. The subject property was built in 1978. The Bi-Lo Store lease expires on March 31, 1998. Another tenant is occupying this space at this time, but Bi-Lo will continue paying rent. There is a vacant store that contains 8,450 square feet which was probably a drug store. It is vacant at this time and is not generating any income. The Bikers Dream is a 10,000 square foot store and this lease expires August 31, 2001. The rental rate for this space is at $3.39 per square foot. The rental rates for the small shops range from $3.30 to $5.50 per square foot. Trends: The subject property is located in an area that is developed with retail properties which is along U.S. Highway #64 & #70. The development of these properties began approximately 20 years ago when the mall was developed as well as several of the neighborhood shopping centers. Since that time the shopping centers that have been developed include community shopping centers with K-Mart and Wal-Mart as anchor tenants. The neighborhood is developed with single family residential properties and the furniture industry has several plants that are located throughout the area. The neighborhood is considered to be stable and it is thought that the stability will be maintained in the future. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Catawba Village The Market Place Villa Park Shopping Center Winn-Dixie Plaza ----------------------- -------------------- ------------------------- ----------------------- b. Street U.S. Highway #321 807 U.S. Highway #70 and 30th Street U.S. Hwy #64 & 70 U.S. Hwy. #64 & 70 ----------------------- -------------------- ------------------------- ----------------------- c. City Newton-Conover, NC Newton-Conover, NC Newton-Conover, NC Newton-Conover, NC ----------------------- -------------------- ------------------------- ----------------------- d. Distance from subject N/A 1.5 miles 1.5 miles 3.5 miles ----------------------- -------------------- ------------------------- ----------------------- e. Contact Edens & Avant, Inc. H.V. McCoy & Co. Friday Realty Co. Norcom Development Co. ----------------------- -------------------- ------------------------- ----------------------- f. Phone 803-779-4420 910-545-0059 704-322-9223 704-332-4146 ----------------------- -------------------- ------------------------- ----------------------- 2. Attributes a. Year built 1978 1989 1965 1984 ----------------------- -------------------- ------------------------- ----------------------- b. Net sq. Ft. 58,450 125,095 60,843 49,235 ----------------------- -------------------- ------------------------- ----------------------- c. # building 1 1 1 1 ----------------------- -------------------- ------------------------- ----------------------- d. #stories 1 1 1 1 ----------------------- -------------------- ------------------------- ----------------------- e. Avg. Floor plate size (SF), if office N/A N/A N/A N/A ----------------------- -------------------- ------------------------- ----------------------- f. # elevators N/A N/A N/A N/A ----------------------- -------------------- ------------------------- ----------------------- g. Parking Adequate Adequate Adequate Adequate ----------------------- -------------------- ------------------------- ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ----------------------- -------------------- ------------------------- ----------------------- I. Vacancy % 14.46% 14.0% 5.92% 6.50% ----------------------- -------------------- ------------------------- ----------------------- j. Anchors, if Retail Conover Antique Mall, Winn-Dixie, Revco, Bi-Lo Bi-Lo, Roses Dollar General Family Dollar ----------------------- -------------------- ------------------------- -----------------------
Comments: These three comparables are located in subject neighborhood. Comparable No. 2 was built in 1965 while Comparable No. 3 was built in 1984 and Comparable No. 1 was built in 1989. Comparable No. 1 is larger than subject, whereas, Comparables 2 and 3 are near the same size as subject. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space $3.70 N/A N/A N/A ---------------------- --------------------- --------------------- -------------------- b. Shop Space $3.30 -$5.50 $4.00 - $6.35 $3.50 - $5.00 $5.00 - $7.50 ---------------------- --------------------- --------------------- -------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net ---------------------- --------------------- --------------------- -------------------- 3. Rent Concessions None None None None ---------------------- --------------------- --------------------- -------------------- 4. Effective Rent $3.30 -$5.50 $4.00 - $6.35 $3.50 - $5.00 $5.00 - $7.50 ---------------------- --------------------- --------------------- -------------------- 5. TI Allowance None None None None ---------------------- --------------------- --------------------- -------------------- 6. Expense Stop None None None None ---------------------- --------------------- --------------------- -------------------- 7. Length of Lease Term 3 years 3 -5 years (shop) 3 - 5 years (shop) 3-5 years (shop) ---------------------- --------------------- --------------------- -------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% 5.00% - 7.00% ---------------------- --------------------- --------------------- -------------------- 9. Percentage Rent (per lease terms) Bi-Lo Bi-Lo, Roses N/A N/A ---------------------- --------------------- --------------------- -------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A ---------------------- --------------------- --------------------- -------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A ---------------------- --------------------- --------------------- -------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A superior similar superior ---------------------- --------------------- --------------------- --------------------
D. EXPLAIN RANKING/COMMENTS: Comparables No. 1 and No. 3 have been ranked as superior to subject, whereas, Comparable No. 2 has been ranked as similar. The reason for this is because subject property is an older center and the lease with Bi-Lo, Inc. expires on March 31, 1998. Also, the former drug store is vacant. Another larger store has been occupied by Bikers Dream and this store contains 10,000 SF. The small shops are occupied at this time, short term leases. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 [GRAPHIC OMITTED] Name: The Market Place Location: U.S. Hwy. #321 and 30th Street Newton-Conover, NC Year Built: 1989 Total Size: 125,095 SF Vacant Space: 17,513 SF Vacancy Rate: 14.0% Rental Range: $4.00 - $6.35 per square foot Tenant Expenses: Triple Net Remarks: The major tenants are Bi-Lo and Roses. There are 20 store in the L-shaped building. 5 Comparable Rental No. 2 [GRAPHIC OMITTED] Name: Villa Park Shopping Center Location: U.S. Hwy #64 & 70 Newton-Conover, NC Year Built: 1965 Total Size: 60,843 SF Vacant Space: 3,600 SF Vacancy Rate: 5.92% Rental Range: $3.50 - $5.00 per square foot Tenant Expenses: Triple Net Remarks: The major tenants are Conover Antique Mall and Dollar General. 6 Comparable Rental No. 3 [GRAPHIC OMITTED] Name: Winn-Dixie Plaza Location: U.S. Hwy. #64 & 70 Newton-Conover, NC Year Built: 1984 Total Size: 49,235 SF Vacant Space: 3,200 SF Vacancy Rate: 6.50% Rental Range: $5.00 - $7.50 per square foot for the shops Tenant Expenses: Triple Net Remarks: The major tenants are Winn-Dixie, Revco and Family Dollar. There are four shops. 7 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ 1. Identification a. Name Catawba Village St. Andrews Crossing Eastgate Shop. Center One Norman Center Paw Creek Commons ------------------ -------------------- -------------------- ----------------- ------------------- b. Street Address NWC Whiskey Rd. & 19706 One Norman E/S Little Rock Rd. 803 U.S. Hwy. #70 817 St. Andrews Road Eastgate Dr. Blvd. at Freedom Dr. ------------------ -------------------- -------------------- ----------------- ------------------- c. City Newton-Conover, NC Columbia, SC Aiken, SC Cornelius, NC Charlotte, NC ------------------ -------------------- -------------------- ----------------- ------------------- d. Distance from Subject N/A 8 miles 56 miles 100 miles 92 miles ------------------ -------------------- -------------------- ----------------- ------------------- 2. Attributes a. Year Built 1978 1994 1995 1993 1996 ------------------ -------------------- -------------------- ----------------- ------------------- b. Net sq. feet 58,450 SF 66,910 SF 75,716 SF 54,185 SF 66,050 ------------------ -------------------- -------------------- ----------------- ------------------- c. # Buildings 1 1 1 1 1 ------------------ -------------------- -------------------- ----------------- ------------------- d. # of Stories 1 1 1 1 1 ------------------ -------------------- -------------------- ----------------- ------------------- e. Vacancy % 14.46% 0% 5.00% 0% 2.73% ------------------ -------------------- -------------------- ----------------- ------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 $4,650,000 $5,384,000 ------------------ -------------------- -------------------- ----------------- ------------------- b. Sales Price PSF N/A $97.89 $88.16 $85.82 $77.52 ------------------ -------------------- -------------------- ----------------- ------------------- c. Date N/A 05-25-94 09-28-95 10-12-95 03-25-97 ------------------ -------------------- -------------------- ----------------- ------------------- d. NOI at time of Sale N/A $634,797 $657,896 $450,188 $517,412 ------------------ -------------------- -------------------- ----------------- ------------------- e. Cap. Rate N/A 9.69% 9.86% 9.68% 9.61% ------------------ -------------------- -------------------- ----------------- ------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A superior superior superior superior ------------------ -------------------- -------------------- ----------------- -------------------
Explain Ranking/Comments: These comparables have been ranked as superior to subject. The reason for this is because subject is an older property and the lease with Bi-Lo, Inc. expires on March 31, 1998. Bi-Lo has vacated the premises but there is an occupant in the store at this time. The former drug store is vacant at this time. 8 Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: 6012 -1 -1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 9 Comparable Sale No. 2 [GRAPHIC OMITTED] TMS: Name: Eastgate Shopping Center Location: Northwest Corner of Whiskey Road & Eastgate Drive Aiken, SC Grantor: Southwest U.S. Retail, LP Grantee: PDG Aiken Partners, LP Deed Reference: N/A Date: September 28, 1995 Sales Price: $6,675,000 Adjusted Sales Price: $6,675,000 Size building: 75,716 Sales Price per S.F.: $88.16 Size Land (Acres): 8.79 Size Land (S.F.): 382,892 Year Built: 1995 Land/Building Ratio: 5.06 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $782,704 Effective Gross Income: $782,704 EGIM: 8.53 Net Operating Income: $657,896 Overall Rate: 9.86% Verification: Public Records Type of Purchaser: Private Investor Comments: Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. 10 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. 11 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: 59-231-22,23 pt. Name: Paw Creek Commons Location: East side of Little Rock Road at Freedom Drive Grantor: Paw Creek, LLC Grantee: Paw Creek Crossing Limited Partnership Deed Reference: Book 8988, Page 519 Date: March 25, 1997 Sales Price: $5,120,000 Adjusted Sales Price: $5,384,000 Size building: 66,050 Sales Price per S.F.: $77.52 Size Land (Acres): 9.82 Size Land (S.F.): 427,759 Year Built: 1996 Land/Building Ratio: 6.48 to 1 Utilities: Municipal Zoning: CC, Commercial Center Financing: Cash to Seller Gross Potential Income: $568,840 Effective Gross Income: $552,054 Gross Income Multiple: 9.00 EGIM: 9.27 Net Operating Income: $517,412 Overall Rate: 9.61% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was pre-construction. The sales price has been adjusted to reflect this by using 50 basis points in the capitalization rate (.1011 minus .0050 equals .0961). The major tenants are Winn-Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. The income from anchor tenants is 79.41 percent of gross income. 12 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 13 [GRAPHIC OMITTED] [STREET MAP OF CONOVER AREA] Comparable Rentals [GRAPHIC OMITTED] Improved Sales Map [GRAPHIC OMITTED] [SITE PLAN OF CATAWBA VILLAGE] EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: CATAWBA VILLAGE 607 US HIGHWAY 70 NEWTON-CONOVER, NC 28656-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- NEWTON TAG OFFICE MR. BOB LOVETTE 607- 70 1,500 04/27/95 04/30/00 0.00 0.00 5.50 05/01/98 8,250.00 - ------------------------------------------------------------------------------------------------------------------------- PERFECTION CONNECTION, THE SHEILA R. WILSON 607- 80 1,500 06/01/96 05/31/99 4.65 06/01/96 6,975.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- CATAWBA COUNTY MENTAL HEALTH 607- 90 3,000 08/01/96 07/31/97 4.40 02/01/95 13,200.00 4.90 03/01/96 14,700.00 - ------------------------------------------------------------------------------------------------------------------------- LAMBERTH DANCE STUDIO MS. RHONDA LAMBERTH 607- 110 2,000 10/01/96 09/30/99 5.00 08/01/92 9,999.96 - ------------------------------------------------------------------------------------------------------------------------- FAMILY CARE CENTER FAMILY CARE CENTER OF CATAWBA 607- 120 2,000 08/22/96 08/31/97 0.00 0.00 0.00 0.00 0.00 0.00 1.42 08/22/96 3,966.60 4.25 09/01/96 11,900.04 - ------------------------------------------------------------------------------------------------------------------------- ROCK HEALTH & FITNESS CENTER JAMES L. AND ARAIRA J. PROPST 607- 130 7,200 12/01/96 11/30/99 3.75 12/01/96 27,000.00 0.00 0.00 0.00 0.00 4.00 12/01/97 28,800.00 - ------------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied.. 50,000 Current Annual Base Rent 202,601.04 Available. 8,450 Total..... 58,450 - ----------------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ NEWTON TAG OFFICE MR. BOB LOVETTE PRS 1994 PRS 1994 Full 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ PERFECTION CONNECTION, THE SHEILA R. WILSON Full 0 Full 0 Full 0 06/01/99 05/31/02 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ CATAWBA COUNTY MENTAL HEALTH Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ LAMBERTH DANCE STUDIO MS. RHONDA LAMBERTH PRS 1991 PRS 1991 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ FAMILY CARE CENTER FAMILY CARE CENTER OF CATAWBA Full 0 Full 0 Full 0 09/01/97 08/30/99 4.50 0.00 0 09/01/99 08/30/01 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ ROCK HEALTH & FITNESS CENTER JAMES L. AND ARAIRA J. PROPST Full 0 Full 0 Full 0 12/01/99 11/30/02 0.00 0.00 0 12/01/02 11/30/05 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: CATAWBA VILLAGE 607 US HIGHWAY 70 NEWTON-CONOVER, NC 28656-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- BIKER'S DREAM RONALD A. AND BRENDA W. BOGER 607- 10 10,000 10/01/95 08/31/01 0.00 0.00 2.18 11/01/94 21,776.04 3.30 11/01/95 33,026.04 3.39 09/01/97 33,930.00 3.49 09/01/98 34,910.04 3.67 09/01/99 36,660.00 - ------------------------------------------------------------------------------------------------------------------------- Available 607- 30 8,450 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- BI-LO, INC. #106 607- 40 20,000 04/01/78 03/31/98 3.70 04/01/91 73,999.92 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- SCANS, ETC., INC. 607- 50 2,000 10/01/96 03/31/98 3.35 10/01/96 6,700.08 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- STEVE WHITE MOTORS, INC. STEVE WHITE MOTORS, INC. 607- 60 0 P 01/01/97 12/31/98 0.00 0.00 01/01/95 10,800.00 - ------------------------------------------------------------------------------------------------------------------------- NEWTON TAG OFFICE MR. BOB LOVETTE 607- 70 1,500 04/27/95 04/30/00 5.00 05/01/95 7,500.00 - ----------------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- BIKER'S DREAM RONALD A. AND BRENDA W. BOGER PRS 1994 PRS 1994 Full 0 09/01/01 08/31/04 4.25 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- BI-LO, INC. #106 PRS 1980 None 0 Full 0 04/01/98 03/31/03 3.69 0.00 0 04/01/03 03/31/08 3.69 0.00 0 04/01/08 03/31/13 3.69 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- SCANS, ETC., INC. Full 0 Full 0 Full 0 04/01/98 03/31/00 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- STEVE WHITE MOTORS, INC. STEVE WHITE MOTORS, INC. Full 0 Full 0 None 0 01/01/99 12/31/01 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- NEWTON TAG OFFICE MR. BOB LOVETTE PRS 1994 PRS 1994 Full 0 04/01/00 03/31/05 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] U.S. Highway #64 And #70 Looking East [GRAPHIC OMITTED] U.S. Highway #64 And #70 Looking West [GRAPHIC OMITTED] Entrance To Subject From U.S. Highway #64 and #70 [GRAPHIC OMITTED] Subject - Front And Side View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Rear And Side View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Side View [GRAPHIC OMITTED] Subject - Front View Of Other Shops [GRAPHIC OMITTED] Subject - Front And Side View Of Other Shops [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Rear View This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study CROSSROADS SHOPPING CENTER 1317 East Dixie Drive Asheboro, Randolph County, North Carolina Prepared by O. Marshall Dodds, MAI Date of Market Study - May 1, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] May 1, 1997 Mr. Steven R. Maeglin Morgan Stanley & Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Crossroads Shopping Center 1317 East Dixie Drive Asheboro, Randolph County, North Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 1, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The subject property consists of a neighborhood shopping center that contains 51,440 square feet of leasable area. The center was constructed in 1981. The anchor tenant is Food Lion Stores and the subject property is currently 100% occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds --------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) [LOGO] EXECUTIVE SUMMARY ================================================================================ Regional Perspective Asheboro and Randolph County are considered to be part of the Triad area which encompasses the cities of Winston-Salem, Greensboro, Highpoint and other towns surrounding these larger towns. There are eleven countys included in the Triad area and this is the largest standard metropolitan statistical area in North Carolina and second largest between Washington, D.C. and Atlanta, Georgia. The total population of the area is 1.2 million. The city and county are located in the Piedmont section of North Carolina being approximately 69 miles west of Raleigh, the state capitol; and 73 miles north of Charlotte, the state's largest city. The population of Randolph County in 1995 was 114,624 with the population of the city being approximately 17,000. The majority of the major employers have been located in the county for many years. For example, Acme-McCrary Corporation has been established since 1909 and Bossong Hosiery Mill has operated since 1928. The Klaussner Furniture Company employs 2,500 people; Eveready Battery Company employs 1,110 people; Black & Decker employs 1,020 people; Acme-McCrary Corporation employs 830; Sarah Lee Knit Products employs 600 people; Burlington Industries employs 550 people; Goodyear-Radial Tires employs 480; Arrow International-Medical Devices employs 450 people. There are others, but these are some of the larger employers. Asheboro has a diversification of industries and services and the economic base has been stable for many years. The unemployment rate for Randolph County is 3 percent. Neighborhood and Site The subject property is located in the southeast section of East Dixie Drive and NC Highway #42. There is a large amount of commercial development around this intersection including the Randolph Mall which contains approximately 400,000 square feet. The major tenants are Belk-Yates, J.C. Penny, Roses and Sears. The Village Marketplace with Harris-Teeter and Wal-Mart, containing approximately 170,000 square feet are located along East Dixie Drive across from the mall. The K-Mart Store that was built in 1980 and expanded in 1990 is located across East Dixie Drive from subject. The commercial developments include retail and service facilities as well as branch banks, automobile dealerships and fast food restaurants. The newer developments would include a Ryan's Family Steakhouse, a Lowe's Home Improvement Store and Hampton Inn Motel. A Staples Store is under construction across the street from subject. Physical features are as follows: 1. Size 6.015 acres or 262,013 SF 2. Identity 1317 East Dixie Drive TMS# 7760-59-5737 and 7761-50-5061 3. Shape Irregular 4. Topography The site is generally level, but sits below East Dixie Drive and NC Highway #42. 5. Accessability Good 6. Utilities Municipal 1 [LOGO] Physical Description Building features are as follows: 1. Size (net) 51,440 SF 2. Layout & Design One story - food store - seven shops 3. Parking Spaces 261 5.07 per 1,000 square feet of net area 4. Construction Brick and glass front with concrete block on side and rear and metal seam roof. Market Position and Marketability Conclusions Subject property is located around the intersection of East Dixie Drive, which is US Highway #64, and NC Highway #42. This is an established shopping district with the Randolph Mall being located across NC Highway #42 from subject. Also, a new Staples Store is under construction across the street from subject property. Other shopping centers are located around this intersection such as the Village Marketplace with Harris-Teeter and Wal-Mart as the major tenants. The rental rates in this shopping center for the shops range from $8.50 to $11.00 per square foot. The Hammer Village is located around this intersection and major tenants are Big Lots, Revco and Winn-Dixie Stores. The rental rates range from $3.00 to $10.50 per square foot in this center. The Lowes Plaza is located on North Fayetteville Street with major tenants being Lowe's Food and Revco Drugs. The rental rates range from $8.00 to $9.00 per square foot. The subject property was constructed in 1981 and has operated successfully in this location. New growth is occurring at this time with the new Staples Store that is being built. In addition to the shopping facilities around this intersection there are several automobile dealerships, motels, fast food restaurants and branch offices for banks. The subject property has six small shops and the rental rates range from $6.00 to $10.24 per square foot. Goodwill Industries and Vehicle Parts/Crazy Joe's are occupying stores that contains 6,000 square feet each. The rental rate for Vehicle Parts/ Crazy Joe's is $1.85 per square foot. The rental rate for the Food Lion Store is at $4.00 per square foot. Trends: The subject property is located in the middle of a commercial area. The intersection of NC Highway #42 and East Dixie Drive has several shopping centers, as well as the Randolph Mall which contains approximately 400,000 square feet. This area has been established for a number of years and new growth is occurring at this time. All trends are favorable and it is thought that the stability will be maintained in the future. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Crossroads Shopping Center. The Village Marketplace Hammer Village Lowes Plaza --------------------------- ------------------------ ---------------------- ---------------------- b. Street 1317 East Dixie Drive E/S East Dixie Drive N/S East Dixie Drive N. Fayetteville Street --------------------------- ------------------------ ---------------------- ---------------------- c. City Asheboro, NC Asheboro, NC Asheboro, NC Asheboro, NC --------------------------- ------------------------ ---------------------- ---------------------- d. Distance from subject N/A Across Street Across Street 1 mile --------------------------- ------------------------ ---------------------- ---------------------- e. Contact Edens & Avant, Inc. Tricor Development Corp. Rosen Group Properties Lat Purser & Assoc. --------------------------- ------------------------ ---------------------- ---------------------- f. Phone 803-779-4420 704-547-0440 212-249-1550 704-374-0999 --------------------------- ------------------------ ---------------------- ---------------------- 2. Attributes a. Year built 1981 1988 1968 1986 --------------------------- ------------------------ ---------------------- ---------------------- b. Net sq. Ft. 51,440 170,000 100,000 49,000 --------------------------- ------------------------ ---------------------- ---------------------- c. # building 1 1 1 1 --------------------------- ------------------------ ---------------------- ---------------------- d. #stories 1 1 1 1 --------------------------- ------------------------ ---------------------- ---------------------- e. Avg. Floor plate size (SF), if office N/A N/A N/A N/A --------------------------- ------------------------ ---------------------- ---------------------- f. # elevators N/A N/A N/A N/A --------------------------- ------------------------ ---------------------- ---------------------- g. Parking Adequate Adequate Adequate Adequate --------------------------- ------------------------ ---------------------- ---------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block --------------------------- ------------------------ ---------------------- ---------------------- i. Vacancy % 0% 5.80% 7.50% 4.78% --------------------------- ------------------------ ---------------------- ---------------------- j. Anchors, if Retail Food Lion Wal-Mart, Harris Teeter Winn-Dixie, Revco Lowe's Foods, Revco --------------------------- ------------------------ ---------------------- ----------------------
Comments: These comparables are located around subject property. Comparables No. 1 and 2 are larger centers while Comparable No. 3 is approximately the same size. Comparable No. 2 is an older center being constructed in 1968 but was renovated in 1987. These comparables have low vacancy rates and have operated at high occupancy rates. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space $4.00 N/A N/A N/A ---------------------- ----------------------- ------------------ -------------------- b. Shop Space $1.85 - $10.24 $9.00 - $11.00 $3.00 - $10.50 $8.00 - $9.00 ---------------------- ----------------------- ------------------ -------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net ---------------------- ----------------------- ------------------ -------------------- 3. Rent Concessions None None None None ---------------------- ----------------------- ------------------ -------------------- 4. Effective Rent $1.85 - $10.24 $9.00 - $11.00 $3.00 - $10.50 $8.00 - $9.00 ---------------------- ----------------------- ------------------ -------------------- 5. TI Allowance None None None None ---------------------- ----------------------- ------------------ -------------------- 6. Expense Stop None None None None ---------------------- ----------------------- ------------------ -------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 -5 years (shop) 3 - 5 years (shop) 3-5 years (shop) ---------------------- ----------------------- ------------------ -------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% 5.00% - 7.00% ---------------------- ----------------------- ------------------ -------------------- 9. Percentage Rent Wal-Mart, Harris Teeter Winn-Dixie, Revco Lowe's Foods, Revco (per lease terms) Food Lion ---------------------- ----------------------- ------------------ -------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A ---------------------- ----------------------- ------------------ -------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A ---------------------- ----------------------- ------------------ -------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A superior similar similar ---------------------- ----------------------- ------------------ --------------------
D. EXPLAIN RANKING/COMMENTS: The rental rates for subject are reasonable and within range of these comparables. Comparable No. 2 has a wide range, but this is because of a Big Lots Store. Comparable No. 1 has been rated superior as the major tenants are Wal-Mart and Harris-Teeter and this strengthens the income stream. The other comparables have similar income streams to subject and have been rated as similar. 4 [LOGO] LOCAL RENTAL COMPARABLES Comparable Rental No. 1 [GRAPHIC OMITTED] Name: The Village Marketplace Location: S/S East Dixie Drive Asheboro, North Carolina Year Built: 1988 Total Size: 170,000 SF Vacant Space: 9,860 SF Vacancy Rate: 5.80% Rental Range: $9.00 - $11.00 per square foot Tenant Expenses: Triple Net Remarks: This center is anchored by Wal-mart and Harris-Teeter. Occupancy rate has always been high. 5 [LOGO] Comparable Rental No. 2 [GRAPHIC OMITTED] Name: Hammer Village Location: N/S East Dixie Drive Asheboro, North Carolina Year Built: 1968 Total Size: 100,000 SF Vacant Space: 7,500 SF Vacancy Rate: 7.50% Rental Range: $3.00 - $10.50 per square foot Tenant Expenses: Triple Net Remarks: This is an older center with major tenants being Big Lots, Winn-Dixie and Revco. The Winn-Dixie Store contains 30,912 square feet. The center was renovated in 1987. 6 [LOGO] Comparable Rental No. 3 [GRAPHIC OMITTED] Name: Lowes Plaza Location: N. Fayetteville Street Asheboro, North Carolina Year Built: 1986 Total Size: 49,000 SF Vacant Space: 2,342 SF Vacancy Rate: 4.78% Rental Range: $8.00 - $9.00 per square foot for the shops Tenant Expenses: Triple Net Remarks: This center has experienced a high occupancy rate. Lowe's Foods and Revco Drugs are the major tenants. 7 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Crossroads Shopping St. Andrews Crossing Eastgate Shop. Center Center. ----------------------- --------------------- ---------------------- b. Street Address 1317 East Dixie Drive 817 St. Andrews Road NWC Whiskey Rd. & Eastgate Dr. ----------------------- --------------------- ---------------------- c. City Asheboro, NC Columbia, SC Aiken, SC ----------------------- --------------------- ---------------------- d. Distance from Subject N/A 8 miles 56 miles ----------------------- --------------------- ---------------------- 2. Attributes a. Year Built 1981 1994 1995 ----------------------- --------------------- ---------------------- b. Net sq. feet 51,440 SF 66,910 SF 75,716 SF ----------------------- --------------------- ---------------------- c. # Buildings 1 1 1 ----------------------- --------------------- ---------------------- d. # of Stories 1 1 1 ----------------------- --------------------- ---------------------- e. Vacancy % 0% 0% 5.00% ----------------------- --------------------- ---------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 ----------------------- --------------------- ---------------------- b. Sales Price PSF N/A $97.89 $88.16 ----------------------- --------------------- ---------------------- c. Date N/A 05-25-94 09-28-95 ----------------------- --------------------- ---------------------- d. NOI at time of Sale N/A $634,797 $657,896 ----------------------- --------------------- ---------------------- e. Cap. Rate N/A 9.69% 9.86% ----------------------- --------------------- ---------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A superior similar ----------------------- --------------------- ----------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name One Norman Center Paw Creek Commons ------------------ ------------------- b. Street Address 19706 One Norman E/S Little Rock Rd. Blvd. at Freedom Dr. ------------------ ------------------- c. City Cornelius, NC Charlotte, NC ------------------ ------------------- d. Distance from Subject 100 miles 92 miles ------------------ ------------------- 2. Attributes a. Year Built 1993 1996 ------------------ ------------------- b. Net sq. feet 54,185 SF 66,050 ------------------ ------------------- c. # Buildings 1 1 ------------------ ------------------- d. # of Stories 1 1 ------------------ ------------------- e. Vacancy % 0% 2.73% ------------------ ------------------- 3. Sales Information a. Sales Price $4,650,000 $5,384,000 ------------------ ------------------- b. Sales Price PSF $85.82 $77.52 ------------------ ------------------- c. Date 10-12-95 03-25-97 ------------------ ------------------- d. NOI at time of Sale $450,188 $517,412 ------------------ ------------------- e. Cap. Rate 9.68% 9.61% ------------------ ------------------- 4. Rank Relative to Subject (inferior, similar, superior) similar superior ------------------ ------------------- Explain Ranking/Comments: These comparable sales are similar to subject as the income streams are similar as well as the tenant mix. Comparables No. 1 and 4 have been rated superior because of location and the rental rates for the shops being higher. 8 [LOGO] Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: 6012 -1 -1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 9 [LOGO] Comparable Sale No. 2 [GRAPHIC OMITTED] TMS: Name: Eastgate Shopping Center Location: Northwest Corner of Whiskey Road & Eastgate Drive Aiken, SC Grantor: Southwest U.S. Retail, LP Grantee: PDG Aiken Partners, LP Deed Reference: N/A Date: September 28, 1995 Sales Price: $6,675,000 Adjusted Sales Price: $6,675,000 Size building: 75,716 Sales Price per S.F.: $88.16 Size Land (Acres): 8.79 Size Land (S.F.): 382,892 Year Built: 1995 Land/Building Ratio: 5.06 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $782,704 Effective Gross Income: $782,704 EGIM: 8.53 Net Operating Income: $657,896 Overall Rate: 9.86% Verification: Public Records Type of Purchaser: Private Investor Comments: Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. 10 [LOGO] Comparable Sale No. 3 [GRAPHIC OMITTED] Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. 11 [LOGO] Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: 59-231-22,23 pt. Name: Paw Creek Commons Location: East side of Little Rock Road at Freedom Drive Grantor: Paw Creek, LLC Grantee: Paw Creek Crossing Limited Partnership Deed Reference: Book 8988, Page 519 Date: March 25, 1997 Sales Price: $5,120,000 Adjusted Sales Price: $5,384,000 Size building: 66,050 Sales Price per S.F.: $77.52 Size Land (Acres): 9.82 Size Land (S.F.): 427,759 Year Built: 1996 Land/Building Ratio: 6.48 to 1 Utilities: Municipal Zoning: CC, Commercial Center Financing: Cash to Seller Gross Potential Income: $568,840 Effective Gross Income: $552,054 Gross Income Multiple: 9.00 EGIM: 9.27 Net Operating Income: $517,412 Overall Rate: 9.61% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was pre-construction. The sales price has been adjusted to reflect this by using 50 basis points in the capitalization rate (.1011 minus .0050 equals .0961). The major tenants are Winn-Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. The income from anchor tenants is 79.41 percent of gross income. 12 [LOGO] ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 13 [LOGO] [GRAPHIC OMITTED] Comparable Rentals [LOGO] [GRAPHIC OMITTED] Improved Sales Map [LOGO] [GRAPHIC OMITTED] Site Plan [LOGO] Date: 04/08/97 EDENS & AVANT, INC. Retail Custom Rent Roll Property: CROSSROADS SHOPPING CENTER 1317 EAST DIXIE DRIVE ASHEBORO, NC 27203-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- PIECE GOODS #0173 PIECE GOODS SHOPS CO. L.P. 644- 10 4,800 01/01/97 12/31/01 0.00 0.00 6.75 01/01/92 32,400.00 0.00 0.00 9.66 01/01/97 46,357.92 - ------------------------------------------------------------------------------------------------------------------------- DUEL VIDEO DONALD HOWARD ALLRED 644- 20 4,400 04/01/95 03/31/00 7.85 04/01/92 34,539.96 8.25 04/01/95 36,300.00 8.25 08/01/95 36,300.00 - ------------------------------------------------------------------------------------------------------------------------- ASSOCIATES FINANCIAL SERVICES ASSOCIATES FINANCIAL SERVICES 644- 40 1,640 06/01/96 05/31/01 0.00 0.00 9.00 07/01/91 14,760.00 9.79 06/01/94 16,056.00 10.24 06/01/96 16,800.00 - ------------------------------------------------------------------------------------------------------------------------- FOOD LION #0047 644- 60 30,600 11/23/81 11/30/06 4.00 04/01/91 122,250.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- BLAZER FINANCIAL BLAZER FINANCIAL SERVICES, IN 644- 80 1,633 04/01/96 03/31/01 7.50 09/01/92 12,240.00
- ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- PIECE GOODS #0173 PIECE GOODS SHOPS CO. L.P. PRS 1986 PRS 1986 Full 0 01/01/97 12/31/01 0.00 4.00 0 Y 01/01/02 12/31/06 0.00 4.00 810,000 Y 0.00 4.00 0 Y 0.00 4.00 1,158,900 Y - ----------------------------------------------------------------------------------------------------------------------------------- DUEL VIDEO DONALD HOWARD ALLRED PRS 1994 PRS 1994 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- ASSOCIATES FINANCIAL SERVICES ASSOCIATES FINANCIAL SERVICES Full 0 Full 0 Full 0 06/01/91 05/31/96 9.00 0.00 0 06/01/01 05/31/06 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- FOOD LION #0047 PRS 1982 None 0 Full 0 12/01/06 11/30/11 0.00 0.00 0 12/01/11 11/30/16 0.00 0.00 0 12/01/16 11/30/21 0.00 0.00 0 12/01/21 11/30/26 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- BLAZER FINANCIAL BLAZER FINANCIAL SERVICES, IN Full 0 Full 0 Full 0 0.00 0.00 0
[LOGO] Date: 04/08/97 EDENS & AVANT, INC. Retail Custom Rent Roll Property: CROSSROADS SHOPPING CENTER 1317 EAST DIXIE DRIVE ASHEBORO, NC 27203-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- BLAZER FINANCIAL BLAZER FINANCIAL SERVICES, IN 644- 80 1,633 04/01/96 03/31/01 7.50 04/01/96 12,247.56 - ------------------------------------------------------------------------------------------------------------------------- RENT-A-CENTER THORN AMERICAS,INC. 644- 90 2,367 06/01/95 06/30/98 0.00 0.00 0.00 0.00 7.25 07/01/92 17,160.72 8.00 06/01/95 18,936.00 8.00 09/01/95 18,936.00 - ------------------------------------------------------------------------------------------------------------------------- VEHICLE PARTS/CRAZY JOE'S WALLACE REID KEARNS & ROBERT 644- 70A 6,000 12/01/84 11/30/99 1.25 03/01/92 7,500.00 2.60 12/01/94 15,600.00 1.85 03/01/95 11,100.00 - ------------------------------------------------------------------------------------------------------------------------- GOODWILL INDUS.REHAB.CTR. GOODWILL INDUST. REHAB. CTR O 644- 70B 6,000 03/01/95 02/28/98 0.00 0.00 0.00 03/01/93 36,000.00 6.00 03/01/95 39,000.00 - ------------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied.. 51,440 Current Annual Base Rent 302,991.48 Available. 0 Total..... 51,440
- ---------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ---------------------------------------------------------------------------------------------------------------------------------- BLAZER FINANCIAL BLAZER FINANCIAL SERVICES, IN Full 0 Full 0 Full 0 0.00 0.00 0 - ---------------------------------------------------------------------------------------------------------------------------------- RENT-A-CENTER THORN AMERICAS,INC. Full 0 Full 0 Full 0 06/01/95 06/01/98 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ---------------------------------------------------------------------------------------------------------------------------------- VEHICLE PARTS/CRAZY JOE'S WALLACE REID KEARNS & ROBERT PRS 1991 PRS 1991 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ---------------------------------------------------------------------------------------------------------------------------------- GOODWILL INDUS.REHAB.CTR. GOODWILL INDUST. REHAB. CTR O PRS 1991 PRS 1991 Full 0 03/01/98 11/30/99 0.00 5.00 250,000 0.00 5.00 0 0.00 5.00 0 - ----------------------------------------------------------------------------------------------------------------------------------
[LOGO] USA COUNTIES 1996 Geographic Area: Randolph, NC (37151) Table: GENERAL PROFILE POPULATION AND HOUSING (Bureau of the Census) Total resident population: 1995 .......................................................... 114,624 Percent 65 years and over ................................... 12.7 1990 .......................................................... 106,546 1980 .......................................................... 91,300 Occupied housing units, 1990 .................................... 41,096 Percent owner occupied ........................................ 77.0 BIRTHS AND DEATHS (National Center for Health Statistics) Births, 1993 .................................................... 1,524 Per 1,000 resident population ................................. 13.7 Percent to mothers under 20 years of age ...................... 15.4 Deaths, 1993 .................................................... 957 Per 1,000 resident population ................................. 8.6 Infant deaths per 1,000 live births, 1993 ....................... 5.9 EDUCATION (Bureau of the Census) Persons 25 years and over, 1990 ................................. 70,226 Percent high school graduates ................................. 62.0 Percent college graduates ..................................... 9.1 LABOR FORCE (Bureau of Labor Statistics) Civilian labor force, 1994 ...................................... 65,545 Percent unemployed ............................................ 3.0 PRIVATE NONFARM ESTABLISHMENTS (Bureau of the Census) Total establishments, 1993 ...................................... 2,322 Percent retail trade .......................................... 24.8 Percent services .............................................. 27.0 Paid employees, 1993 (pay period including March 12) ............ 39,651 Annual payroll, 1993 ($1,000) ................................... 732,742 PERSONAL INCOME (Bureau of Economic Analysis) Total personal income, 1993 ($1,000) ............................ 1,910,815 Per capita (dollars) .......................................... 17,127 AGRICULTURE (Bureau of the Census) Number of farms, 1992 ........................................... 1,293 Land in farms as percent of total land ........................ 29 RETAIL TRADE (Bureau of the Census) Retail sales, 1992 ($1,000) ..................................... 615,187 Per capita (dollars) .......................................... 5,570 COMMERCIAL AND SAVINGS BANKS (Fed. Deposit Insurance Corp.) Number of offices, June 30, 1994 ................................ 38 Total deposits ($1,000) ....................................... 933,718 SOCIAL PROGRAMS (Social Security Administration) Total Social Security recipients, December 1993 ................. 18,825 Retired workers ............................................... 12,675 Supplementary Security Income recipients, December 1994 ......... 1,582 FEDERAL FUNDS AND GRANTS (Bureau of the Census) Total direct expenditures or obligations per capita: 1994 (dollars) ................................................ 2,157 1990 (dollars) ................................................ 1,600 (NA) Not available. (D) Avoid disclosure of confidential information. (X) Not applicable. (S) Does not meet publication standards. (Z) Value > 0 but < half unit of measure shown. NOTE: 0 data may indicate geographic/data footnotes. Source: U.S. Bureau of the Census, USA Counties 1996 CD-ROM. [LOGO] PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] U.S. Highway #64 North [GRAPHIC OMITTED] U.S. Highway #64 South [LOGO] [GRAPHIC OMITTED] North Carolina Highway #42 Looking East [GRAPHIC OMITTED] North Carolina Highway #42 Looking West [LOGO] [GRAPHIC OMITTED] Entrance to Subject from North Carolina Highway #42 [GRAPHIC OMITTED] Subject Front And Side View [LOGO] [GRAPHIC OMITTED] Subject Front And Side View [GRAPHIC OMITTED] Subject Front And Side View [LOGO] [GRAPHIC OMITTED] Subject Front And Side View [GRAPHIC OMITTED] Subject Front View [LOGO] [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Rear and Side View [LOGO] [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [LOGO] [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [LOGO] [GRAPHIC OMITTED] Subject Rear View This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study CUNNINGHAM PLACE 1600 Fort Campbell Blvd. Clarksville, Montgomery County, Tennessee Prepared by O. Marshall Dodds, MAI Date of Market Study - April 22, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] April 22, 1997 Mr. Steven R. Maeglin Morgan Stanley & Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Cunningham Place 1600 Fort Campbell Boulevard Clarksville, Montgomery County, Tennessee Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on April 22, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The subject property consists of a community shopping center that contains 149,744 square feet of leasable area. The center was constructed in 1987. The anchor tenants are Wal-Mart Stores, Inc., and Winn-Dixie Stores, Inc. The subject property is currently 100.0 % occupied. Wal-Mart Stores have vacated the premises and now occupy a new SuperStore that is located in the same block as subject. The former Wal-Mart Store is now occupied by Wal-Mart Furniture Company. This is a retail furniture store. Wal-Mart will continue to pay rent on the store until May 30, 2007. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds, MAI ---------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY ================================================================================ Regional Perspective The City of Clarksville and Montgomery County are located in the north central portion of the state of Tennessee at the Kentucky/Tennessee state line. Clarksville is located 46 miles northwest of Nashville, Tennessee; 171 miles southwest of Louisville, Kentucky; and 95 miles south of Evansville, Indiana. The 1995 census reported the population in the city to be 89,243 and in the county to be 114,515. The population of the county is projected to increase to approximately 129,991 by 2000 and to approximately 147,339 by 2005. Some of the major employers are Trane Company-HVAC Equipment-1,600 employees; Jostens Printing and Publishing Division-yearbooks and commercial printing-770 employees; and Quebecor Printer-Clarksville-magazines-750 employees. The Fort Campbell Military Reservation is located in the northern portion of Clarksville and Montgomery County. There are more than 21,650 military personnel stationed at Ft. Campbell representing an annual payroll exceeding approximately $900,000,000. The city of Clarksville and Montgomery County have a stable and diversified economic base and have experienced commercial and residential growth in recent years. The unemployment rate for Montgomery County was 4.3 percent and the SMA was 4.7 percent. Neighborhood and Site The neighborhood would generally include the western portion of the City of Clarksville. The development within the subject neighborhood is a mixture of commercial and residental properties. This is an old section of the City of Clarksville and is practically fully developed. Part of the growth can be attributed to the fact that the immediate neighborhood is just south of the Fort Campbell Military Reservation and four miles north of the central business district of Clarksville. Major shopping centers located in the neighborhood would include the Northpark Center and the Kroger/K-Mart Center. The K-Mart Store is closed and has been so for some time. The major tenant in Northpark Center is Food Lion. There is one large store containing 22,000 square feet that is vacant and was formerly occupied by Drugs For Less. This tenant continues to pay the monthly rental. There is a new Wal-Mart SuperStore that has been constructed in the same block as subject and also a Kroger Store is planned that will be located on Dover Road which is south of subject. Physical features are as follows: 1. Size 23.13 acres or 1,007,543 SF 2. Identity 1600 Fort Campbell Blvd. TMS# 043-001.09 3. Shape Irregular 4. Topography Generally level and on street grade with Fort Campbell Boulevard 5. Accessability Good 6. Utilities Municipal 1 Physical Description Building features are as follows: 1. Size (net) 149,744 SF 2. Layout & Design One story - discount store - food store - seventeen shops 3. Parking Spaces 1,185 7.91 per 1,000 square feet of net area 4. Construction Brick and glass front with concrete block on side and rear and metal seam roof. Market Position and Marketability Conclusions The subject property is located in the western section of the City of Clarksville. This is an older area that is practically fully developed. The reason for this is this neighborhood is located just to the south of the Fort Campbell Military Reservation. There are several shopping facilities along Fort Campbell Boulevard which includes subject property and the new Wal-Mart SuperStore that was completed recently. The Northpark Shopping Center is also located on Fort Campbell Boulevard across Cunningham Lane from subject property. The other shopping centers are located between subject property and the downtown area of Clarksville. The Northpark Plaza is located on Fort Campbell Boulevard and has rental rates from $7.00 to $8.50 per square foot. The Hampton Plaza is located along Wilma Rudolph Boulevard and the rental rates range from $5.00 per square to $10.00 per square foot for the shops. The Austin Square is located on Wilma Rudolph Boulevard and the rental rates for the shops range from $9.00 to $10.50 per square foot. The Clarksville Commons is located on the southeast corner of Madison Street and Ashland City Road. The rental rates from $10.25 to $11.75 per square foot. The subject property has fifteen shops and the rental rates for these shops range from $5.00 to $10.00 per square foot. The Wal-Mart Store has a rental rate of $3.40 per square foot. The Wal-Mart Store has moved into the Wal-Mart SuperStore and the store is presently occupied by Wal-Mart Furniture Company. Wal-Mart will continue to pay rent on this store until May 30, 2007. Trends: The subject property is located in the western section of the City of Clarksville. This area has developed over the years and is practically fully developed with single family residential properties and commercial properties being located along Fort Campbell Boulevard. There is some new growth and this can be seen with the new Wal-Mart SuperStore that has been constructed in the same block as subject. Also a new Kroger Store is planned and this will be located on Dover Road. The 101st Airborne Division Parkway has been completed and extends from Fort Campbell Boulevard to Wilma Rudolph Boulevard. The neighborhood is considered to be stable with some new growth occurring. All trends are favorable. 2 PROPERTY INSPECTION FORM COMMERCIAL
I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Cunningham Place Northpark Plaza Hampton Plaza -------------------------- ------------------------- ----------------------- b. Street NWC Ft. Campbell Blvd. SWC Ft. Campbell Blvd. 2864 Wilma Rudolph & Cunningham Lane & Cunningham Lane Blvd. -------------------------- ------------------------- ----------------------- c. City Clarksville, TN Clarksville, TN Clarksville, TN -------------------------- ------------------------- ----------------------- d. Distance from subject N/A 5 miles 5 miles -------------------------- ------------------------- ----------------------- e. Contact EHM Commercial Edens & Avant, Inc. Properties Edens & Avant, Inc -------------------------- ------------------------- ----------------------- f. Phone 803-779-4420 615-648-4700 803-799-4420 -------------------------- ------------------------- ----------------------- 2. Attributes a. Year built 1987 1973 1988 -------------------------- ------------------------- ----------------------- b. Net sq. Ft. 149,744 100,325 189,302 -------------------------- ------------------------- ----------------------- c. # building 1 1 1 -------------------------- ------------------------- ----------------------- d. #stories 1 1 1 -------------------------- ------------------------- ----------------------- e. Avg. Floor plate size (SF), if office N/A N/A N/A -------------------------- ------------------------- ----------------------- f. # elevators N/A N/A N/A -------------------------- ------------------------- ----------------------- g. Parking Adequate Adequate Adequate -------------------------- ------------------------- ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block -------------------------- ------------------------- ----------------------- I. Vacancy % 0% 0% 2.63% -------------------------- ------------------------- ----------------------- j. Anchors, if Retail Wal-Mart, Winn-Dixie Food Lion, Big B Drugs Wal-Mart, Michaels Arts & Crafts -------------------------- ------------------------- ----------------------- I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Austin Square Clarksville Commons ------------------------ ----------------------- b. Street 2710 Wilma Rudolph SEC Madison Street Blvd. & Ashland City Rd. ------------------------ ----------------------- c. City Clarksville, TN Clarksville, TN ------------------------ ----------------------- d. Distance from subject 1/2 mile 4 miles ------------------------ ----------------------- e. Contact J & W Management CHM Commercial Corp. Properties ------------------------ ----------------------- f. Phone 212-265-6600 615-648-4700 ------------------------ ----------------------- 2. Attributes a. Year built 1993 1990 ------------------------ ----------------------- b. Net sq. Ft. 322,425 44,000 ------------------------ ----------------------- c. # building 1 1 ------------------------ ----------------------- d. #stories 1 1 ------------------------ ----------------------- e. Avg. Floor plate size (SF), if office N/A N/A ------------------------ ----------------------- f. # elevators N/A N/A ------------------------ ----------------------- g. Parking Adequate Adequate ------------------------ ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block ------------------------ ----------------------- I. Vacancy % 43.0% 3.80% ------------------------ ----------------------- j. Anchors, if Retail K-Mart, Lowe's Food Lion ------------------------ -----------------------
Comments: Comparable No. 1 is located on Fort Campbell Boulevard and is across Cunningham Lane from subject property. Comparables No. 2 and 3 are located on Wilma Rudolph Boulevard and Comparable No. 4 is located on Madison Street and Ashland City Road. Comparable No. 2 is very similar to subject as this center had a Wal-Mart Store such as subject and Wal-Mart has vacated the premises and moved to a SuperStore that is located next door to the Hampton Plaza. Sam's Club has occupied the former Wal-Mart Store. Northpark Plaza is a neighborhood shopping center with Food Lion as a major tenant and Big B Drugs paying rent on on a store that is vacant at this time. The Austin Square is anchored by K-Mart and Lowe's and a number of shops. This center is experiencing a high vacancy rate at this time. The Clarksville Commons is a neighborhood center with the major tenant being Food Lion. 3 PROPERTY INSPECTION FORM COMMERCIAL
B. RENTAL INFORMATION SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Asking Rental Rate a. Anchor Space $3.40 N/A $3.00 - $5.50 ------------------------- ------------------------ ----------------------- b. Shop Space $7.50 - $12.00 $7.00 - $8.50 $5.00 - $10.00 ------------------------- ------------------------ ----------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ------------------------- ------------------------ ----------------------- 3. Rent Concessions None None None ------------------------- ------------------------ ----------------------- 4. Effective Rent $7.50 - $12.00 $7.00 - $8.50 $5.00 - $10.00 ------------------------- ------------------------ ----------------------- 5. TI Allowance None None None ------------------------- ------------------------ ----------------------- 6. Expense Stop None None None ------------------------- ------------------------ ----------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 -5 years (shop) 3 - 5 years (shop) ------------------------- ------------------------ ----------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% ------------------------- ------------------------ ----------------------- 9. Percentage Rent Big B Drugs, Food (per lease terms) Wal-Mart, Winn Dixie Lion Michaels, Wal-Mart ------------------------- ------------------------ ----------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A ------------------------- ------------------------ ----------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A ------------------------- ------------------------ ----------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A similar similar ------------------------- ------------------------ ----------------------- B. RENTAL INFORMATION COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A --------------------- ------------------------- b. Shop Space $9.00 - $10.50 $10.25 - $11.75 --------------------- ------------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net --------------------- ------------------------- 3. Rent Concessions None None --------------------- ------------------------- 4. Effective Rent $9.00 - $10.50 $10.25 - $11.75 --------------------- ------------------------- 5. TI Allowance None None --------------------- ------------------------- 6. Expense Stop None None --------------------- ------------------------- 7. Length of Lease Term 3-5 years (shop) 3-5 years (shop) --------------------- ------------------------- 8. Commissions 5.00% - 7.00% 5.00% - 7.00% --------------------- ------------------------- 9. Percentage Rent (per lease terms) K-Mart, Lowe's Food Lion --------------------- ------------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A --------------------- ------------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A --------------------- ------------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) similar similar --------------------- -------------------------
D. EXPLAIN RANKING/COMMENTS: Subject property is considered to be similar to all of these comparables. Comparable No. 2 is especially comparable as it was built about the same time as subject with Wal-Mart as the major tenant. The rental rates for these centers are approximately the same as with subject. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 [GRAPHIC OMITTED] Name: Northpark Plaza Location: SWC Fort Campbell Boulevard & Cunningham Lane Clarksville, TN Year Built: 1975 Total Size: 100,325 SF Vacant Space: 1,875 SF Vacancy Rate: 1.87% Rental Range: $7.00 - $8.50 per square foot Tenant Expenses: Triple Net Remarks: There were two vacant shops and one large store which was formerly occupied by Drugs For Less. This tenant occupied 22,000 SF and continues to pay rent. There is only one shop (1,875) available for lease. 5 Comparable Rental No. 2 [GRAPHIC OMITTED] Hampton Plaza Location: NWC Ft. Campbell Blvd & Cunningham Lane Clarksville, TN Year Built: 1988 Total Size: 189,302 SF Vacant Space: 4,976 SF Vacancy Rate: 2.63% Rental Range: $5.00 - $10.00 per square foot Tenant Expenses: Triple Net Remarks: This is a community shopping center with Wal-Mart as the major tenant, but has vacated the store and moved into a new SuperStore in the same block. Wal-Mart continues to pay rent and Sam's Club now occupys the store. The center has always enjoyed a high occupancy rate. 6 Comparable Rental No. 3 [GRAPHIC OMITTED] Name: Austin Square Location: 2710 Wilma Rudolph Boulevard Clarksville, TN Year Built: 1993 Total Size: 322,425 SF Vacant Space: 138,643 SF Vacancy Rate: 43.0% Rental Range: $9.00 - $10.50 per square foot for the shops Tenant Expenses: Triple Net Remarks: This is a center that is anchored by K-Mart and Lowe's. This center is experiencing high vacancy rate at this time. 7 Comparable No. 4 [GRAPHIC OMITTED] Name: Clarksville Commons Location: SEC Madison Street & Ashland City Road Clarksville, TN Year Built: 1990 Total Size: 44,000 SF Vacant Space: 1,672 SF Vacancy Rate: 3.80% Rental Range: $10.25 - $11.75 per square foot for the shops Tenant Expenses: Triple Net Remarks: This is a neighborhood center with Food Lion as the major tenant. It is located adjacent to a K-Mart Store. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Cunningham Place Triangle Village Barnwell Plaza ------------------------- -------------------------- ------------------------ b. Street Address 1600 Fort Campbell Blvd. 912-934 N. Lake Dr. 1019 Dunbarton Blvd. ------------------------- -------------------------- ------------------------ c. City Clarksville, TN Lexington, SC Barnwell, SC ------------------------- -------------------------- ------------------------ d. Distance from Subject N/A 60 miles 60 miles ------------------------- -------------------------- ------------------------ 2. Attributes a. Year Built 1987 1985 1985 ------------------------- -------------------------- ------------------------ b. Net sq. feet 140,744 SF 115,754 SF 70,725 SF ------------------------- -------------------------- ------------------------ c. # Buildings 1 1 1 ------------------------- -------------------------- ------------------------ d. # of Stories 1 1 1 ------------------------- -------------------------- ------------------------ e. Vacancy % 11.23% 3.24% 9.00% ------------------------- -------------------------- ------------------------ 3. Sales Information a. Sales Price N/A $4,489,380 $2,860,620 ------------------------- -------------------------- ------------------------ b. Sales Price PSF N/A $38.78 $40.45 ------------------------- -------------------------- ------------------------ c. Date N/A 01-31-95 01-31-95 ------------------------- -------------------------- ------------------------ d. NOI at time of Sale N/A $480,919 $330,327 ------------------------- -------------------------- ------------------------ e. Cap. Rate N/A 10.71% 11.55% ------------------------- -------------------------- ------------------------ 4. Rank Relative to Subject (inferior, similar, superior) N/A similar similar ------------------------- -------------------------- ------------------------ COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Hampton Plaza Cumberland Plaza ----------------------- --------------------- b. Street Address 2864 Wilma Rudolph 209 New Smithville Blvd. Hwy. ----------------------- --------------------- c. City Clarksville, TN McMinnville, TN ----------------------- --------------------- d. Distance from Subject 510 miles 400 miles ----------------------- --------------------- 2. Attributes a. Year Built 1988 1988 ----------------------- --------------------- b. Net sq. feet 189,302 SF 143,951 ----------------------- --------------------- c. # Buildings 1 1 ----------------------- --------------------- d. # of Stories 1 1 ----------------------- --------------------- e. Vacancy % 0% 8.92% ----------------------- --------------------- 3. Sales Information a. Sales Price $6,150,000 $5,225,000 ----------------------- --------------------- b. Sales Price PSF $32.49 $36.60 ----------------------- --------------------- c. Date 12-26-95 12-26-95 ----------------------- --------------------- d. NOI at time of Sale $753,627 $693,726 ----------------------- --------------------- e. Cap. Rate 12.25% 13.28% ----------------------- --------------------- 4. Rank Relative to Subject (inferior, similar, superior) similar similar ----------------------- ---------------------
Explain Ranking/Comments: The comparables are similar to subject as they were built about the same time and the tenant mix were about the same. All of these comparables had Wal-Mart stores and had 8 to 10 years remaining on the original lease term. Wal-Mart has built superstores nearby. 9 Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: Name: Triangle Village Location: U.S. 378 & North Lake Drive (SC#6) Lexington, SC Grantor: 1994 N1 SC Associates Grantee: Tri Centers, LP Deed Reference: Book 3260, Page 199 Date: January 31, 1995 Sales Price: $4,489,380 Adjusted Sales Price: $4,489,380 Size building 115,754 Sales Price per S.F.: $38.78 Size Land (Acres): 12.51 Size Land (S.F.): 544,936 Year Built: 1985 Land/Building Ratio: 4.71 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $607,469 Effective Gross Income: $607,469 Gross Income Multiple: 7.39 EGIM: 7.39 Net Operating Income: $480,919 Overall Rate: 10.71% Verification: Public Records Type of Purchaser: Private Investor Comments: This center is anchored by Wal-Mart (65,904 SF) and Food Lion (25,000 SF) and there are 7 local shops totaling 24,850 SF (21.5 percent). At the time of sale, the center was 98.7 percent occupied with only 2,000 SF vacant. Wal-Mart has a base rent of $3.55 and the lease expires 11/05. Currently, Wal-Mart is paying about $0.50 per SF overage rent and Wal-Mart is expected to leave the center in the near future as no expansion room is available. The estimated cap rate excludes potential overage rent form Wal-Mart and only excludes income from the 2,000 SF vacant bay. Projected expenses include $0.10 per SF reserves. The center is masonry with brick front and metal mansard canopy roof and in average condition. No outparcels were included with this sale. 10 Comparable Sale No. 2 [GRAPHIC OMITTED] TMS: Name: Barnwell Plaza Location: 1019 Dunbarton Boulevard Barnwell, SC Grantor: 1994 N1 SC Associates, LP Grantee: Tri Centers, LP Deed Reference: Book 282, Page 137 Date: January 31, 1995 Sales Price: $2,860,620 Adjusted Sales Price: $2,860,620 Size building 70,725 Sales Price per S.F.: $40.45 Size Land (Acres): 11.28 Size Land (S.F.): 491,357 Year Built: 1985 Land/Building Ratio: 6.95 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $399,045 Effective Gross Income: $399,045 Gross Income Multiple: 7.17 EGIM: 7.17 Net Operating Income: $330,327 Overall Rate: 11.55% Verification: Purchaser Type of Purchaser: Private Investor Comments: This is a good quality community shopping center located in the town of Barnwell in Barnwell County (pop. 20,000) in western South Carolina. Approximately 91% of the center was comprised of anchor space, including Wal-Mart (34,875 SF), Food Lion (21,000 SF) and Revco Drugs (8,450 SF). The income and expense data here is based on the center's actual performance at the time of sale, and include approximately $0.50 SF in overage rents from Wal-Mart and $0.10 SF in reserves. 11 Comparable Sale No. 3 [GRAPHIC OMITTED] TMS: Name: Hampton Plaza Location: 2864 Wilma Rudolph Boulevard Clarksville, TN Grantor: Aetna Life Insurance Company Grantee: Hampton II, LP Deed Reference: Book 580, Page 1793 Date: December 26, 1995 Sales Price: $6,150,000 Adjusted Sales Price: $6,150,000 Size building: 189,302 Sales Price per S.F.: $32.49 Size Land (Acres): 23.24 Size Land (S.F.): 1,012,334 Year Built: 1988 Land/Building Ratio: 5.35 to 1 Utilities: All Available Zoning: C-3, Shopping Center District Financing: Cash to Seller Gross Potential Income: $966,102 Effective Gross Income: $937,119 Gross Income Multiple: 6.37 EGIM: 6.56 Net Operating Income: $753,627 Overall Rate: 12.25% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a community shopping center with Wal-Mart as a major tenant prior to a new Wal-Mart Superstore being built on the same block. While Wal-Mart remains liable for the lease, the store is vacant. The remainder of the center is occupied. 12 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: Name: Cumberland Plaza Location: 209 New Smithville Highway McMinnville, TN Grantor: Aetna Life Insurance Grantee: Cumberland II, LP Deed Reference: Book 287, Page 204 Date: December 26, 1995 Sales Price: $5,225,050 Adjusted Sales Price: $5,225,050 Size building: 143,951 Sales Price per S.F.: $36.30 Size Land (Acres): 19.64 Size Land (S.F.): 855,518 Year Built: 1988 Land/Building Ratio: 5.94 to 1 Utilities: All Available Zoning: C-3, Highway Commercial District Financing: Cash to Seller Gross Potential Income: $902,918 Effective Gross Income: $875,830 Gross Income Multiple: 5.79 EGIM: 5.97 Net Operating Income: $693,726 Overall Rate: 13.28% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a community shopping center. Wal-Mart was the major tenant and remains liable for the lease for the remaining term. A new Wal-Mart Superstore was built one block west of this property. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 ------------------ Comparable Rentals ------------------ [GRAPHIC OMITTED] ------------------ Improved Sales Map ------------------ [GRAPHIC OMITTED] ------------------ Site Plan ------------------ [GRAPHIC OMITTED] EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: CUNNINGHAM PLACE 1600 FORT CAMPBELL BLVD. CLARKSVILLE, TN 37042 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- WAL-MART #1075 WAL-MART STORES, INC. 701- 10 81,922 06/01/87 05/30/07 3.40 01/01/96 278,534.76 - -------------------------------------------------------------------------------------------------------------------------- PIC 'N PAY #1034- POSTPETITIO PIC 'N PAY STORES, INC. 701- 20 3,000 02/01/87 01/31/98 0.00 0.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- FASHION CENTS #111 NORSTAN APPAREL SHOPES OF N.Y. 701- 30 4,000 08/06/87 08/31/97 0.00 0.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- G.Q. FASHIONS KUMAR MAHBUBANI 701- 40 3,000 05/01/96 04/30/99 8.00 01/01/96 24,000.00 7.00 05/01/96 21,000.00 7.50 05/01/97 22,500.00 8.00 05/01/98 24,000.00 - -------------------------------------------------------------------------------------------------------------------------- V.I.P. NAILS JIMMY D. PHAN & DIEM DO 701- 50 2,000 08/01/96 07/31/99 0.00 0.00 0.00 0.00 8.00 08/01/96 15,999.96 - -------------------------------------------------------------------------------------------------------------------------- NY FASHIONS KUMAR G. MAHBUBANI 701- 60 2,000 08/01/91 07/31/98 10.00 01/01/96 19,999.92 - ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- WAL-MART #1075 WAL-MART STORES, INC. Full 0 None 0 Full 0 06/01/97 05/31/12 3.40 0.50 0 - ----------------------------------------------------------------------------------------------------------------------------------- PIC 'N PAY #1034- POSTPETITIO PIC 'N PAY STORES, INC. Full 0 Full 0 Full 0 02/01/93 01/31/98 9.00 4.00 0 Y 02/01/98 01/31/03 9.75 4.00 0 Y 0.00 4.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- FASHION CENTS #111 NORSTAN APPAREL SHOPES OF N.Y. Full 0 Full 0 Full 0 09/01/97 08/31/02 8.00 4.00 0 09/01/92 08/31/97 7.50 4.00 700,000 09/01/02 08/31/07 8.50 4.00 750,000 - ----------------------------------------------------------------------------------------------------------------------------------- G.Q. FASHIONS KUMAR MAHBUBANI Full 0 Full 0 Full 0 0.00 5.00 480,000 Y 0.00 5.00 420,000 Y 0.00 5.00 450,000 Y 0.00 5.00 480,000 Y - ----------------------------------------------------------------------------------------------------------------------------------- V.I.P. NAILS JIMMY D. PHAN & DIEM DO Full 0 Full 0 Full 0 08/01/99 07/31/02 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- NY FASHIONS KUMAR G. MAHBUBANI Full 0 Full 0 Full 0 08/01/95 07/31/98 10.00 5.00 400,000 Y
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: CUNNINGHAM PLACE 1600 FORT CAMPBELL BLVD. CLARKSVILLE, TN 37042 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- NY FASHIONS KUMAR G. MAHBUBANI 701- 60 2,000 08/01/91 07/31/98 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- SALLY BEAUTY #232 SALLY BEAUTY COMPANY, INC. 701- 70 1,600 07/25/97 07/24/02 10.00 07/25/92 15,999.96 10.56 07/25/95 16,899.96 10.75 07/25/97 17,199.96 11.25 07/25/00 18,000.00 - ------------------------------------------------------------------------------------------------------------------------- CRITTERS JASON R. & CHARLES NUGENT 701- 80 1,600 11/14/96 11/30/99 5.95 11/14/96 9,519.96 10.50 12/01/96 16,800.00 11.25 12/01/97 18,000.00 - ------------------------------------------------------------------------------------------------------------------------- HOBBY SHOP THE HOBBY SHOP OF TENNESSEE, 701- 90 1,600 01/01/95 12/31/97 10.01 01/01/95 16,008.00 10.50 01/01/96 16,800.00 - ------------------------------------------------------------------------------------------------------------------------- SOUND SHOP CENTRAL SOUTH MUSIC SALES 701- 100 1,200 07/01/87 06/30/00 10.00 07/01/87 12,000.00 11.00 07/01/92 13,200.00 11.50 07/01/97 13,800.00 - ------------------------------------------------------------------------------------------------------------------------- SUBWAY #2964 SUBWAY RESTAURANTS, INC. 701- 110 1,200 08/01/87 07/31/97 10.00 08/01/87 12,000.00 12.00 08/01/92 14,400.00 - ---------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ---------------------------------------------------------------------------------------------------------------------------------- NY FASHIONS KUMAR G. MAHBUBANI Full 0 Full 0 Full 0 08/01/98 07/31/01 10.00 5.00 0 Y 0.00 5.00 0 Y - ---------------------------------------------------------------------------------------------------------------------------------- SALLY BEAUTY #232 SALLY BEAUTY COMPANY, INC. Full 0 Full 0 Full 0 07/25/92 07/24/97 11.50 4.00 400,000 0.00 4.00 422,500 Y 0.00 4.00 430,000 Y 0.00 4.00 450,000 Y - ---------------------------------------------------------------------------------------------------------------------------------- CRITTERS JASON R. & CHARLES NUGENT Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ---------------------------------------------------------------------------------------------------------------------------------- HOBBY SHOP THE HOBBY SHOP OF TENNESSEE, Full 0 Full 0 Full 0 01/01/98 12/31/00 0.00 5.00 320,200 Y 0.00 5.00 336,000 Y - ---------------------------------------------------------------------------------------------------------------------------------- SOUND SHOP CENTRAL SOUTH MUSIC SALES Full 0 Full 0 Full 0 0.00 3.00 500,000 0.00 3.00 460,000 0.00 3.00 0 - ---------------------------------------------------------------------------------------------------------------------------------- SUBWAY #2964 SUBWAY RESTAURANTS, INC. Full 0 Full 0 Full 0 08/01/92 07/31/97 12.00 5.00 240,000 Y 08/01/97 07/31/02 15.00 5.00 288,000 Y
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: CUNNINGHAM PLACE 1600 FORT CAMPBELL BLVD. CLARKSVILLE, TN 37042 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- SUBWAY #2964 SUBWAY RESTAURANTS, INC. 701- 110 1,200 08/01/87 07/31/97 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- FANTASTIC SAMS B&M ASSOCIATES, INC. 701- 120 1,200 10/01/87 09/30/98 5.50 10/01/93 6,600.00 11.00 01/01/94 13,200.00 11.25 10/01/94 13,500.00 11.50 10/01/96 13,800.00 - ------------------------------------------------------------------------------------------------------------------------- ROSALIE'S HALLMARK LOUIS PILLIOD 701- 130 3,250 12/01/93 02/28/99 8.50 12/01/93 27,624.96 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- RENT-A-CENTER #0839 RENT-A-CENTER, INC. 701- 140 3,250 10/01/91 09/30/97 9.00 08/01/91 29,244.00 9.50 10/01/94 30,876.00 - ------------------------------------------------------------------------------------------------------------------------- WINN DIXIE #1695 WINN DIXIE LOUISVILLE, INC. 701- 150 35,922 12/10/87 12/09/07 6.09 01/01/96 218,750.04 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- PORTRAITS PLUS WESCOPP, INC. 701- 160 1,500 09/01/93 08/31/98 8.00 01/01/96 12,000.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - -------------------------------------------------------------------------------------------------------------------------------- SUBWAY #2964 SUBWAY RESTAURANTS, INC. Full 0 Full 0 Full 0 0.00 5.00 0 Y - -------------------------------------------------------------------------------------------------------------------------------- FANTASTIC SAMS B&M ASSOCIATES, INC. Full 0 Full 0 Full 0 10/01/90 09/30/93 0.00 5.00 300,000 10/01/93 09/30/98 5.50 5.00 0 0.00 5.00 0 0.00 5.00 0 - -------------------------------------------------------------------------------------------------------------------------------- ROSALIE'S HALLMARK LOUIS PILLIOD Full 0 Full 0 Full 0 03/01/99 02/28/04 10.00 6.00 460,417 0.00 6.00 501,042 - -------------------------------------------------------------------------------------------------------------------------------- RENT-A-CENTER #0839 RENT-A-CENTER, INC. Full 0 Full 0 Full 0 10/01/94 09/30/97 9.50 0.00 0 0.00 0.00 0 - -------------------------------------------------------------------------------------------------------------------------------- WINN DIXIE #1695 WINN DIXIE LOUISVILLE, INC. Full 0 Full 0 Full 0 12/10/07 12/09/12 6.09 1.00 21,875,000 Y 12/10/12 12/09/17 6.09 1.00 0 Y 12/10/17 12/09/22 6.09 1.00 0 Y 12/10/22 12/09/27 6.09 1.00 0 Y - -------------------------------------------------------------------------------------------------------------------------------- PORTRAITS PLUS WESCOPP, INC. Full 0 Full 0 Full 0 09/01/98 08/31/03 0.00 0.00 0 0.00 0.00 0
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: CUNNINGHAM PLACE 1600 FORT CAMPBELL BLVD. CLARKSVILLE, TN 37042 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- MAILBOXES, ETC. M.B.E. OF CLARKSVILLE, L.L.C. 701- 170 1,500 08/01/96 09/30/99 10.50 10/01/96 15,750.00 - ------------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied.. 149,744 Current Annual Base Rent 704,810.64 Available. 0 Total..... 149,744 - ------------------------------------------------------------------------------------------------------------------------------------ REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ MAILBOXES, ETC. M.B.E. OF CLARKSVILLE, L.L.C. Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] U.S. Highway #41-A Looking Northeast [GRAPHIC OMITTED] U.S. Highway #41-A Looking Southwest [GRAPHIC OMITTED] Cunningham Lane Looking East [GRAPHIC OMITTED] Cunningham Lane Looking West [GRAPHIC OMITTED] Entrance Way From U.S. Highway #41-A [GRAPHIC OMITTED] Entrance Way From U.S. Highway #41-A [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front And Side View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Side And Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study of: GOODY'S STORE JACKSON PLAZA 403 Grindstaff Road Sylva, Jackson County, North Carolina Prepared by: O. Marshall Dodds, MAI Date of Market Study May 9, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] June 16, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, New York 10036 Re: Market Study Fairfield Square and Advance Auto Parts 102 Fairfield Square Winnsboro, Fairfield County, South Carolina Dear Mr. Maeglin: The original market study submitted to you contained Fairfield Square and Advanced Auto Parts in one report. After the report was reviewed by Dan Sang of KMPG, he requested that I separate the Advanced Auto Parts from Fairfield Square. The reason being is that there are different ownerships for these properties. Reports have been submitted for Fairfield Square and the Advanced Auto Store. These are separate reports for each property. Please contact me if additional information is needed. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) OMD:mm [Letterhead of Edens & Avant, Inc.] June 17, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley 1585 Broadway New York, New York 10036 Dear Steve: Per Dan Sang's request, enclosed please find the Revised Market Studies for Fairfield Square, Advance Auto and Goody's Store at Jackson Plaza. If you have any questions, please call me. Sincerely, /s/ Holly Aycock Holly Aycock Asset Management Enclosures [Letterhead of O. Marshall Dodds Co., Inc.] June 13, 1997 Mr. Steven R. Maeglin Morgan Stanley & Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Goody's Store - Jackson Plaza 403 Grindstaff Road Sylva, Jackson County, North Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 9, 1997. This study supercedes the study that was completed on May 9, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The subject property consists of a retail building containing 8,000 square feet that is part of the Jackson Plaza Shopping Center. The building has been leased to Goody's, Inc. The land is not owned in fee simple, but is under a ground lease with the landlord being Midwood Company and the tenant being B.E.T. Details of this can be found in this market study. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY ================================================================================ Regional Perspective Sylva and Jackson County are situated between the Blue Ridge and Great Smokey Mountains in the western section of the state of North Carolina and shares borders with the states of South Carolina and Georgia. Elevations in the county range from 1,850 to 6,450 feet. The Nantahala National Forest covers 28,400 acres of the county. From the Chattooga River in the south end of the county to the forest lands of the Cherokee Indians in the north, Jackson County offers some of North Carolinas most breathtaking natural beauty. Tourism is the primary industry in the area. There are a number of second homes that are located throughout Jackson County. The population for Jackson County in 1995 was 29,029 which is an increase from 1990 that was 26,486 people. The unemployment rate for Jackson County was 5.3 percent. Neighborhood and Site The subject neighborhood is located along US Highway #23-Business. The Town of Sylva is located south of subject property. There are other shopping centers that are located along US Highway #23. There are single family dwellings that are located in the town limits of Sylva, but a large number of residents have rural residential properties that are located around the town. Also there are second homes for a number of visitors to the area. Physical features are as follows: 1. Size 8,000 SF (ground lease) 2. Identity 403 Grindstaff Road 3. Shape Rectangular 4. Topography Level 5. Accessability Good 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 8,000 SF 2. Layout & Design One story retail store 3. Parking Spaces (Jackson Plaza) 443 5.09 per 1,000 square feet of net area 4. Construction Brick and glass front with concrete block on side and rear and metal seam roof. 1 Market Position and Marketability Conclusions Subject property is part of the Jackson Plaza Shopping Center. The shopping center contains 87,000 square feet of net rentable area including the Goody's store.. Tenants are Roses, Plaza Pawn & Gun Shop, Dollar General Stores, Shoe Show Stores, Peking Gourmet Two Restaurant, Kelly's Medical Supplies and Goody's. There was a Western Sizzlin' in the center, but the building burned. The rental rates in the Jackson Plaza range from $4.25 per square foot to $7.00 per square foot. There are two vacant stores with a Bi-Lo Store being vacant. The center was constructed in 1978. Sylva Plaza is located on US Highway #19-23 and this center was constructed in 1977. The major tenants are A&P and Eckerds. Other tenants include Artistic Airstyles, Parkways For Accessibility To Independent Living, H & R Block, Four Seasons Sports, Home Improvements, Westcare Health Services and Vocational Rehabilitation Services. The size of this center is approximately 70,000 square feet. There is a Wal-Mart Center that was constructed in 1995. This center contains 122,272 square feet. Wal-Mart is the major tenant and other tenants are Dollar Tree, Colortime, Shoe Show, Blimpie, Moovies with one vacant shop. There is a Food Lion Store located on US Highway #23 Business North. The owners of subject property have provided the terms and conditions of the ground lease and the lease with Goody's. The landlord in the ground lease is Midwood Company while the tenant is B.E.T. The expiration date of the ground lease is September 20, 2007. There are two, 2-year options at the same rental rate which is $0.12 per square foot plus of any overage rents from the tenant occupying the retail store which is Goody's. During 1995 the ground rental was $5,591 which is the base rent of $960 and the portion of overage rentals of $4,631. B.E.T. constructed the building in 1985 and leased the building to Goody's, Inc. According to the owners the tenant is operating under a 3-year option period with the rental rate being $5.65 per square foot and the annual rental being $45,200. There are two renewal option periods to Goody's, Inc. for two years each at the same rental rate of $5.65 per square foot. The expiration date would be January 31, 2002 if the two option periods are exercised. The subject property has been generating overage rentals. The chart below shows the total sales and the overage rentals over the past three years. ================================================================================ 1996 1995 1994 ================================================================================ Total Sales 1,633,388 $1,753,118 $1,715,732 - -------------------------------------------------------------------------------- Break Point $1,290,000 $1,290,000 $1,290,000 - -------------------------------------------------------------------------------- Overage Sales $ 373,388 $463,118 $425,732 - -------------------------------------------------------------------------------- Rent Factor - 3.0% .03 .03 .03 - -------------------------------------------------------------------------------- Overage Rental $11,201.64 $13,893.54 $12,771.96 - -------------------------------------------------------------------------------- Net Overage Rental to B.E.T. $7,505.10 $9,308.67 $8,557.21 - -------------------------------------------------------------------------------- Net Overage Rental to Midwood $3,696.54 $4,584.87 $4,214.75 ================================================================================ As can be seen the sales had increased from 1994 to 1995 but decreased from 1995 to 1996. The base annual rental is $45,200. The overages have ranged from $11,202 to $13,894 over the past three years. At this time, the center is operating successfully and it is thought that Goody's will continue to maintain a store in the shopping center, especially since overage rentals have been for the past three years. Trends The subject property is located in Sylva and Jackson County in the western section of North Carolina. This section is primarily for tourists and some residences are second home occupants. This has been the trend over the years and it is thought that this will continue in the future. 2 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================ I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Goody's Store Jackson Plaza Wal-Mart Center Sylva Plaza ----------------------- ---------------------- ---------------------- ------------------------ b. Street 403 Grindstaff Road 403 Grindstaff Road W/S of Highway #107 W/S of Hwy #23 Business ----------------------- ---------------------- ---------------------- ------------------------ c. City Sylva, North Carolina Sylva, NC Sylva, NC Sylva, NC ----------------------- ---------------------- ---------------------- ------------------------ d. Distance from subject N/A Next Door 2 miles 2 miles ----------------------- ---------------------- ---------------------- ------------------------ e. Contact Edens Avant, Inc. Vinings Group N/A Southern Real Estate Co. ----------------------- ---------------------- ---------------------- ------------------------ f. Phone 803-779-4420 (770) 984-9500 N/A (704) 375-2384 ----------------------- ---------------------- ---------------------- ------------------------ 2. Attributes a. Year built 1985 1978 1995 1977 ----------------------- ---------------------- ---------------------- ------------------------ b. Net sq. Ft. 8,000 79,000 169,400 70,000 ----------------------- ---------------------- ---------------------- ------------------------ c. # building 1 1 1 1 ----------------------- ---------------------- ---------------------- ------------------------ d. #stories 1 1 1 1 ----------------------- ---------------------- ---------------------- ------------------------ e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A N/A ----------------------- ---------------------- ---------------------- ------------------------ f. # elevators N/A N/A N/A N/A ----------------------- ---------------------- ---------------------- ------------------------ g. Parking Adequate Adequate Adequate Adequate ----------------------- ---------------------- ---------------------- ------------------------ h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ----------------------- ---------------------- ---------------------- ------------------------ i. Vacancy % 0% 0% 1.0% 0% ----------------------- ---------------------- ---------------------- ------------------------ j. Anchors, if Retail N/A Roses, Bi-Lo Wal-Mart Superstore A&P, Eckerds ----------------------- ---------------------- ---------------------- ------------------------
Comments: Comparable #1 is Jackson Plaza and subject is located within this shopping center as the end store that is on-line with the shops. There are cross easements for parking and for ingress/egress. The rental rates for the shops in this center range from $4.25 to $7.00 per square foot. Comparable #2 is located on the south side of town and is a new center being constructed in 1995. The anchor tenant in this center is a Wal-Mart Superstore. The rental rates in this center range from $5.75 to $9.00 per square foot. Comparable #3 is the Sylva Plaza that is located on the north side of town. This center was built in 1977 and is approximately one year older than Jackson Plaza. The major tenants are A&P and Eckerds. The rental range for the local tenants is from $4.50 to $8.00 per square foot. 3 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================ B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A N/A N/A -------------------- ---------------------- --------------------- --------------------- b. Shop Space N/A $4.25 - $7.00 $5.75 - $9.00 $4.50 - $8.00 -------------------- ---------------------- --------------------- --------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net -------------------- ---------------------- --------------------- --------------------- 3. Rent Concessions None None None None -------------------- ---------------------- --------------------- --------------------- 4. Effective Rent $6.59 (1996) $4.25 - $7.00 $5.75 - $9.00 $4.50 - $8.00 -------------------- ---------------------- --------------------- --------------------- 5. TI Allowance None None None None -------------------- ---------------------- --------------------- --------------------- 6. Expense Stop None None None None -------------------- ---------------------- --------------------- --------------------- 7. Length of Lease Term 5 months 1 - 2 years 3 - 5 years 3 - 5 years -------------------- ---------------------- --------------------- --------------------- 8. Commissions None 5.00% to 7.00% 5.00% - 7.00% 5.00% to 7.00% -------------------- ---------------------- --------------------- --------------------- 9. Percentage Rent (per lease terms) 3.0% Roses, Bi-Lo Wal-Mart A&P, Eckerds -------------------- ---------------------- --------------------- --------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A -------------------- ---------------------- --------------------- --------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A -------------------- ---------------------- --------------------- --------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Similar Superior Similar -------------------- ---------------------- --------------------- ---------------------
D. EXPLAIN RANKING/COMMENTS: Subject property is a free standing store located within a shopping center. Comparables #1 and #3 have been ranked as similar to subject. The subject property was constructed in 1988, whereas, these two comparable shopping centers were constructed in 1977 and 1978. It is thought that these comparables would be considered as being similar to subject. Comparable #2 is considered to be superior to subject. The reason for this is this is a newer center being constructed in 1995 and the major tenant is a Wal-Mart Superstore. The Wal-Mart Superstore is capable of attracting potential customers into the center which causes this comparable to be superior. 4 LOCAL RENTAL COMPARABLES - ------------------------ Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Jackson Plaza Location: 403 Grindstaff Road Sylva, NC Year Built: 1978 Total Size: 79,000 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $4.25 - $7.00 Tenant Expenses: Triple Net Remarks: Roses and Bi-Lo are major tenants. Has operated at a high occupancy level. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Wal-Mart Center Location: West Side of Highway #107 Sylva, NC Year Built: 1995 Total Size: 169,400 SF Vacant Space: 1,694 SF Vacancy Rate: 1.0% Rental Range: $5.75 - $9.00 Tenant Expenses: Triple Net Remarks: Major tenant is a Wal-Mart Superstore. Has operated at a high occupancy level.. 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Sylva Plaza Location: West Side of Highway #23 Business Sylva, NC Year Built: 1977 Total Size: 70,000 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $4.50 - $8.00 Tenant Expenses: Triple Net Remarks: A&P and Eckerds are the major tenants. Has operated at a high occupancy level. 7 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES ===============================================================================
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ 1. Identification a. Name Goody's Store Barnwell Plaza Triangle Village Hampton Plaza Cumberland Place ------------------- -------------------- ------------------- --------------- ------------------ Sunset Blvd. & Lake 2864 Wilma 209 New Swithville b. Street Address 403 Grindstaff Road 1019 Dunbarton Blvd. Dr. Randolph Blvd. Hwy. ------------------- -------------------- ------------------- --------------- ------------------ c. City Sylva, NC Barnwell, SC Lexington, SC Clarksville, TN McMinnville, TN ------------------- -------------------- ------------------- --------------- ------------------ d. Distance from Subject N/A 265 miles 200 miles 365 miles 250 miles ------------------- -------------------- ------------------- --------------- ------------------ 2. Attributes a. Year Built 1985 1985 1985 1988 1988 ------------------- -------------------- ------------------- --------------- ------------------ b. Net sq. feet 8,000 70,725 115,754 189,302 143,951 ------------------- -------------------- ------------------- --------------- ------------------ c. # Buildings 1 1 1 1 1 ------------------- -------------------- ------------------- --------------- ------------------ d. # of Stories 1 1 1 1 1 ------------------- -------------------- ------------------- --------------- ------------------ e. Vacancy % 0% 9.00% 1.3% 0% 4.3% ------------------- -------------------- ------------------- --------------- ------------------ 3. Sales Information a. Sales Price N/A $2,860,620 $4,489,380 $6,150,000 $5,225,050 ------------------- -------------------- ------------------- --------------- ------------------ b. Sales Price PSF N/A $40.45 $38.78 $23.24 $36.30 ------------------- -------------------- ------------------- --------------- ------------------ c. Date N/A 01-01-95 01-31-95 12-26-95 12-26-95 ------------------- -------------------- ------------------- --------------- ------------------ d. NOI at time of Sale N/A 330,327 480,919 753,627 693,726 ------------------- -------------------- ------------------- --------------- ------------------ e. Cap. Rate N/A 11.55% 10.71% 12.25% 13.28% ------------------- -------------------- ------------------- --------------- ------------------ 4. Rank Relative to Subject (inferior, similar, superior) N/A Similar Similar Similar Similar ------------------- -------------------- ------------------- --------------- ------------------
Explain Ranking/Comments: These comparable sales are considered to be similar to subject as Wal-Mart stores were located in these centers and moved into new Wal-Mart Superstores within the same block. While subject property is a free standing store, it is thought it would be sold as part of the overall shopping center. Jackson Plaza has a vacant store and this is Bi-Lo, but rent is continuing to be paid. This is the same situation as in these comparable shopping centers as Wal-Mart is continuing to pay rent, even though the premise have been vacated. 8 COMPARABLE IMPROVED SALES - ------------------------- Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS 072- 06- 04- 11, 20 NAME Barnwell Plaza LOCATION 1019 Dunbarton Boulevard, Barnwell, SC GRANTOR 1994 N1 SC Associates, LP GRANTEE Tri Centers, LP DEED REFERENCE Book 282/Page 137 DATE Jan 31, 1995 SALES PRICE $2,860,620 ADJUSTED SALES PRICE $2,860,620 SIZE BUILDING 70,725 SALES PRICE PER S.F. $40.45 SIZE LAND (ACRES) 11.28 SIZE LAND (S.F.) 491,357 YEAR BUILT 1985 LAND/BUILDING RATIO 6.95 To 1 UTILITIES All available VERIFICATION Appraiser ZONING Commercial FINANCING Cash to seller EFFECTIVE GROSS INCOME $399,045 GROSS INCOME MULTIPLE 7.17 EGIM 7.17 NET OPERATING INCOME $330,327 OVERALL RATE 11.55% TYPE OF PURCHASER Private Investor COMMENTS: This is a good quality community shopping center located in the town of Barnwell in Barnwell County (pop. 20,000) in western South Carolina. Approximately 91% of the center was comprised of anchor space, including Wal-Mart (34,875 SF), Food Lion (21,000 SF) and Revco Drugs (8,450 SF). The income and expense data here is based on the center's actual performance at the time of sale, and include approximately $0.50 SF in overage rents from Wal-Mart and $0.10 SF in reserves. (590) 9 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] NAME Lexington Triangle Village LOCATION U.S. 378 and North Lake Drive (SC #6), Lexington, SC GRANTOR 1994 N1 SC Associates GRANTEE Tri Centers, LP DEED REFERENCE Book 3260, Page 199 DATE Jan 31, 1995 SALES PRICE $4,489,380 ADJUSTED SALES PRICE $4,489,380 SIZE BUILDING 115,754 SALES PRICE PER S.F. $38.78 SIZE LAND (ACRES) 12.51 SIZE LAND (S.F.) 544,936 YEAR BUILT 1985 LAND/BUILDING RATIO 4.71 To 1 VERIFICATION Public Records ZONING Commercial FINANCING Cash to seller EFFECTIVE GROSS INCOME $607,469 GROSS INCOME MULTIPLE 7.39 EGIM 7.39 NET OPERATING INCOME $480,919 OVERALL RATE 10.71% TYPE OF PURCHASER Private Investor COMMENTS: This center is anchored by Wal-Mart (65,904 SF) and Food Lion (25,000 SF) and there are 7 local shops totaling 24,850 SF (21.5 percent). At the time of sale, the center was 98.7 percent occupied with only 2,000 SF vacant. Wal-Mart has a base rent of $3.55 and the lease expires 11/05. Currently, Wal-Mart is paying about $0.50 per SF overage rent and Wal-Mart is expected to leave the center in the near future as no expansion room is available. The estimated cap rate excludes potential overage rent form Wal-Mart and only excludes income from the 2,000 SF vacant bay. Projected expenses include $0.10 per SF reserves. The center is masonry with brick front and metal mansard canopy roof and in average condition. No outparcels were included with this sale. (763) 10 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] NAME Hampton Plaza LOCATION 2864 Wilma Rudolph Boulevard, Clarksville, TN GRANTOR Aetna Life Insurance Company GRANTEE Hampton II, LP DEED REFERENCE Book 580, Page 1793 DATE Dec 26, 1995 SALES PRICE $6,150,000 ADJUSTED SALES PRICE $6,150,000 SIZE BUILDING 189,302 SALES PRICE PER S.F. $32.49 SIZE LAND (ACRES) 23.24 SIZE LAND (S.F.) 1,012,334 YEAR BUILT 1988 LAND/BUILDING RATIO 5.35 To 1 UTILITIES All available VERIFICATION Public Records ZONING C-3, Shopping Center District FINANCING Cash to seller EFFECTIVE GROSS INCOME $937,119 GROSS INCOME MULTIPLE 6.37 EGIM 6.56 NET OPERATING INCOME $753,627 OVERALL RATE 12.25% TYPE OF PURCHASER Private Investor COMMENTS: This is a community shopping center with Wal-Mart as a major tenant prior to a new Wal-Mart Superstore being built on the same block. While Wal-Mart remains liable for the lease, the store is vacant. The remainder of the center is occupied. (759) 11 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] NAME Cumberland Place LOCATION 209 New Smithville Highway, McMinnville, TN GRANTOR Aetna Life Insurance GRANTEE Cumberland II, LP DEED REFERENCE Book 287, Page 204 DATE Dec 26, 1995 SALES PRICE $5,225,050 ADJUSTED SALES PRICE $5,225,050 SIZE BUILDING 143,951 SALES PRICE PER S.F. $36.30 SIZE LAND (ACRES) 19.64 SIZE LAND (S.F.) 855,518 YEAR BUILT 1988 LAND/BUILDING RATIO 5.94 To 1 UTILITIES All available VERIFICATION Public Records ZONING C-3, Highway Commercial District FINANCING Cash to seller EFFECTIVE GROSS INCOME $875,830 GROSS INCOME MULTIPLE 5.79 EGIM 5.97 NET OPERATING INCOME $693,726 OVERALL RATE 13.28% TYPE OF PURCHASER Private Investor COMMENTS: This is a community shopping center. Wal-Mart was the major tenant and remains liable for the lease for the remaining term. A new Wal-Mart Superstore was built one block west of this property. (762) 12 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 13 Comparable Rentals [GRAPHIC OMITTED] Improved Sales Map [GRAPHIC OMITTED] Site Plan [GRAPHIC OMITTED] EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: JACKSON PLAZA EXPANSION 403 GRINDSTAFF ROAD SYLVA, NC 28779-00 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------- GOODY'S FAMILY CLOTHING GOODY'S FAMILY CLOTHING, INC. 606-100 8,000 11/01/90 01/31/98 0.00 0.00 5.65 11/01/91 45,200.04 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ GOODY'S FAMILY CLOTHING GOODY'S FAMILY CLOTHING, INC. PRS 1986 PRS 1986 Full 0 11/01/91 10/31/95 5.65 3.00 1,290,000 11/01/95 10/31/98 5.65 3.00 0 02/01/98 01/31/00 5.65 3.00 0 02/01/00 01/31/02 5.65 3.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 8,000 Current Annual Base Rent 45,200.04 Available. 0 Total..... 8,000
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Grindstaff Road - Looking North [GRAPHIC OMITTED] Grindstaff Road - Looking South [GRAPHIC OMITTED] Jackson Plaza In Background [GRAPHIC OMITTED] Subject - Goody's [GRAPHIC OMITTED] Subject - Goody's And Jackson Plaza [GRAPHIC OMITTED] Subject - Goody's And Jackson Plaza [GRAPHIC OMITTED] Entrance To Jackson Plaza [GRAPHIC OMITTED] Entrance To Jackson Plaza [GRAPHIC OMITTED] Jackson Plaza - Front View [GRAPHIC OMITTED] Jackson Plaza - Rear View [GRAPHIC OMITTED] Jackson Plaza - Rear View [GRAPHIC OMITTED] Jackson Plaza - Rear View [GRAPHIC OMITTED] Jackson Plaza - Rear View [GRAPHIC OMITTED] Jackson Plaza - Rear View [GRAPHIC OMITTED] Western Sizzler - Burned This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study KALMIA PLAZA 1680 Richland Avenue - West Aiken, Aiken County, South Carolina Prepared by O. Marshall Dodds, MAI Date of Market Study - May 15, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] May 15, 1997 Mr. Steven R. Maeglin Morgan Stanley & Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Kalmia Plaza 1680 Richland Avenue - West Aiken, Aiken County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 15, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The subject property consists of a community shopping center that contains 215,330 square feet of leasable area. The center was constructed in 1967. A portion of the center is in a mall area. Also, the center has retail space and office space. Aiken County occupies approximately 14,778 square feet and this is being used as office space. The major tenants for the retail space are Rose's Stores, Revco, Food Lion and Western Auto Supply Co. There are three ground leases. The subject property is 75.18% occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ [ILLEGIBLE] -------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) [LOGO] EXECUTIVE SUMMARY ================================================================================ Regional Perspective Aiken and Aiken County are located at the borderline between South Carolina and Georgia in the west central section of the State known as the Midlands. The economy of the area was primarily agricultural until 1951, with some textile manufacturing. The area is also a winter tourist attraction for northerners who have horse farms in the area. The Savannah River Plant of the Atomic Energy Commission was established in the southern portion of Aiken County and part of Barnwell County in 1951. The Atomic Energy Commission subsequently purchased 200,640 acres of land along the Savannah River, approximately 17 miles south of Aiken, with 73,462 acres being located in Aiken County. The construction of the Savannah River Plant basically changed the economic makeup of the county and it is today the single most important industry in the county, directly employing approximately 16,000. This is a down from a high of 26,000 in 1992. This plant has been the primary production facility for nuclear weapons material for the Department of Defense. The changes in the Soviet Block has had an affect on the need for production of nuclear weapons material and it isn't anticipated that defense cutbacks have caused additional downsizing in this facility. While this Savannah River Plant has been an important part of the economy of Aiken, there have been upturns and downturns which have affected the economy. The estimated population for Aiken County in 1995 was 131,900 while the estimated population for the city in 1995 was 24,170. The unemployment rate for Aiken County in March, 1997 was 6.1 percent while the statewide rate was 5.5%. Neighborhood and Site The neighborhood is located along Richland Avenue - West, which is also U.S. Highway #1and #78. The downtown area is located to the east of subject property along Richland Avenue and the By-pass around Aiken is located to the west. Commercial developments are generally located along Richland Avenue and these are older developments. There are several shopping centers and retail-service type facilities in the neighborhood. U.S.C.-Aiken Campus is also located in the neighborhood. The primary shopping district for Aiken has relocated to the south side of the city around the intersection of Whiskey Road, Pine Log Road and Silver Bluff Road. There are several shopping centers in this area and these include Rich Plaza, Heritage Square, Village at Whiskey Shopping Center, Centre South Shopping Center, Wal-Mart Store and the Aiken Mall. Major tenants at the Aiken Mall include J.B. White and Sears. The major food chains located throughout the neighborhood include Food Lion, Winn-Dixie, Bi-Lo and Publix. There is a Lowe's Improvement Store that is located on Whiskey Road across from the mall and two new motels have been constructed in this neighborhood during the past year which are the Hampton Inn and Super 8. Physical features are as follows: 1. Size 21.53 acres or 937,847 SF 2. Identity 1680 Richland Avenue - West 3. Shape Irregular 4. Topography The site is generally on street grade, but slopes downward from the eastern side to the western side. This is typical of the terrain features in the neighborhood. 5. Accessability Good 6. Utilities Municipal 1 Physical Description Building features are as follows: 1. Size (net) 215,330 SF 2. Layout & Design One story - variety store - food store - drug store - office space - shops 3. Parking Spaces 1,059 4.92 spaces per 1,000 square feet of net area 4. Construction Brick and glass front with concrete block on side and rear and built-up roof. Market Position and Marketability Conclusions The subject property is located in an older area of Aiken being along Richland Avenue - West which is also U.S. Highway #1 and #78. There are several shopping centers that are located in the neighborhood of subject and these are older centers as well. The shopping district for retail sales in Aiken has relocated to the south side of the city around intersection Whiskey Road, Pine Log Road and Silver Bluff Road. The future of the Savannah River Plant will have a definite impact on the general retail market in the Aiken area. Interviews with local leasing agents reveal a very cautious attitude from small retail, primarily tenants which would occupy stores in the range of 1,000 to 2,000 square feet. There are several vacant anchor tenant stores, while the newer shopping centers are experiencing the highest occupancy level. Retailers active in the Aiken market include Wal-Mart, Bi-Lo, Publix, Food Lion and Winn-Dixie. According to officials with the City of Aiken Planning Department, there are no proposed shopping centers planned for the Aiken market. In general, the Aiken Shopping Center market is considered to be soft, with no dramatic increases or decreases in rental rates or occupancy levels particularly in the near future. These shopping centers that are located in the south side of Aiken are older and larger centers as well as newer and smaller centers. The rental rates in these centers range from $5.00 to $13.00 per square foot. The vacancy rates range from 9.8% to 15% in this area. The Aiken Mall is also located in the south side. The subject property has 53,454 square feet available and one store contains 41,623 square feet. Aiken County occupies a total of 14,778 square feet and this is used as office space. The subject property has several shops and portions are occupied as office space by Aiken County with other portions being occupied by retail users. The rental rates for the local tenants range from $2.00 per square foot to $8.72 per square foot. The majority of the space is rented from $4.00 to $6.00 per square foot. There are tenants paying $7.00 per square foot with another tenant paying $7.50 per square foot. The rental rate for the Rose's Store is at $1.25 per square foot; the rate for the Revco Store is at $1.63 per square foot; the rate for the Food Lion Store is at $3.61 per square foot; the rate for Western Auto Store is at $2.12 per square foot. The major tenants will probably remain in the center with the rental rates being low. The Rose's Store has always had a good sales history and operated successfully at this particular store. The rental rates for the local shops will probably remain in the same range for the immediate future. The occupancy rate will also continue in the same range as the retail market is rather soft and stable at this time. Trends: The subject property is located in an older section of Aiken. Subject property is an older shopping center being constructed in 1967. The newer shopping centers have relocated to the side of Aiken. There will be an impact to the economy because of cutbacks at the Savannah River Plant. However, it is thought that this will be stable and will not be severe. 2 PROPERTY INSPECTION FORM COMMERCIAL
I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ a. Name Kalmia Plaza Heritage Square Mitchell Center Centre South Publix Center -------------------- ----------------- ----------------- ---------------- -------------------- b. Street Pine Log Rd. at Pine Log Rd. at 1680 Richland Avenue Whiskey Rd. Whiskey Rd. Silver Bluff Rd. Eastgate Drive -------------------- ----------------- ----------------- ---------------- -------------------- c. City Aiken, SC Aiken, SC Aiken, SC Aiken, SC Aiken, SC -------------------- ----------------- ----------------- ---------------- -------------------- d. Distance from subject N/A 3 miles 3 miles 3 miles 3 miles -------------------- ----------------- ----------------- ---------------- -------------------- e. Contact Edens & Avant, Inc. Walker Realty Co. Earl Greif Wyatt Dev. Co. East Coast Mgmt. Co. -------------------- ----------------- ----------------- ---------------- -------------------- f. Phone 803-779-4420 803-642-1408 818-343-2837 803-649-3975 803-553-6960 -------------------- ----------------- ----------------- ---------------- -------------------- 2. Attributes a. Year built 1967 1978 1979 1988 1996 -------------------- ----------------- ----------------- ---------------- -------------------- b. Net sq. Ft. 215,330 132,345 130,000 80,836 78,610 -------------------- ----------------- ----------------- ---------------- -------------------- c. # building 1 1 1 1 1 -------------------- ----------------- ----------------- ---------------- -------------------- d. #stories 1 1 1 1 1 -------------------- ----------------- ----------------- ---------------- -------------------- e. Avg. Floor plate size (SF), if office N/A N/A N/A N/A N/A -------------------- ----------------- ----------------- ---------------- -------------------- f. # elevators N/A N/A N/A N/A N/A -------------------- ----------------- ----------------- ---------------- -------------------- g. Parking Adequate Adequate Adequate Adequate Adequate -------------------- ----------------- ----------------- ---------------- -------------------- h. Construction Type Brick/Concrete Brick/Concrete Brick/Concrete Brick/Concrete Brick/Concrete Block Block Block Block Block -------------------- ----------------- ----------------- ---------------- -------------------- I. Vacancy % 24.81% 14.0% 15.0% 9.80% 14.98% -------------------- ----------------- ----------------- ---------------- -------------------- j. Anchors, if Retail Food Lion, Revco, Food Lion, J.B. Eckerds, Heilig- Food Lion, U.S. Publix Roses, Western Auto White, Revco Meyers, General Post Office Aiken County Physics Corp. -------------------- ----------------- ----------------- ---------------- -------------------
Comments: These comparables are located approximately 3 miles south of subject in the south side of Aiken. Comparables No. 1, 2 and 3 are older centers whereas Comparable No. 4 was constructed in 1996. Subject is larger than these comparables except Comparables No. 1 and No. 2 are probably 130,000 square feet. The vacancy rate in subject is higher than in these comparables. 3 PROPERTY INSPECTION FORM COMMERCIAL
B. RENTAL INFORMATION SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space $1.25 - $3.61 N/A N/A $6.15 - $6.25 N/A ----------------------- ----------------- ------------------- ---------------- ----------------- b. Shop Space $2.00 - $8.72 $5.00 - $7.00 $5.00 - $6.00 $6.25 - $12.20 $8.00 - $13.00 ----------------------- ----------------- ------------------- ---------------- ----------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net Triple Net ----------------------- ----------------- ------------------- ---------------- ----------------- 3. Rent Concessions None None None None None ----------------------- ----------------- ------------------- ---------------- ----------------- 4. Effective Rent $2.00 - $8.72 $5.00 - $7.00 $5.00 - $6.00 $6.25 - $12.20 $8.00 - $13.00 ----------------------- ----------------- ------------------- ---------------- ----------------- 5. TI Allowance None None None None None ----------------------- ----------------- ------------------- ---------------- ----------------- 6. Expense Stop None None None None None ----------------------- ----------------- ------------------- ---------------- ----------------- 7. Length of Lease Term 3 - 5 years (shop) 3 -5 years (shop) 3 - 5 years (shop) 3-5 years (shop) 3-5 years (shop) ----------------------- ----------------- ------------------- ---------------- ----------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% 5.00% - 7.00% 5.00% - 7.00% ----------------------- ----------------- ------------------- ---------------- ----------------- 9. Percentage Rent Roses, Dollar General, Food Lion, Revco, Eckerds, Heilig- Food Lion Publix (per lease terms) Food Lion, Revco, Radio J.B. White Meyers, General Shack, Western Auto Physics Corp. ----------------------- ----------------- ------------------- ---------------- ----------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A N/A ----------------------- ----------------- ------------------- ---------------- ----------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A N/A ----------------------- ----------------- ------------------- ---------------- ----------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A superior superior superior superior ----------------------- ----------------- ------------------- ---------------- -----------------
D. EXPLAIN RANKING/COMMENTS: These comparables have been rated superior to subject because of the age and location. Also, the rental rates for the shops in these comparables is higher than in subject property. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 [GRAPHIC OMITTED] Name: Heritage Square Location: Pine Log Road & Whiskey Road Aiken, SC Year Built: 1978 Total Size: 132,345 SF Vacant Space: 18,528 SF Vacancy Rate: 14.07% Rental Range: $5.00 - $7.00 per square foot Tenant Expenses: Triple Net Remarks: This is an older center and the Food Lion store is vacant. 5 Comparable Rental No. 2 [GRAPHIC OMITTED] Name: Mitchell Center Location: Whiskey Rd. Aiken, SC Year Built: 1979 Total Size: 130,000 SF Vacant Space: 19,520 SF Vacancy Rate: 15.07% Rental Range: $5.00 - $6.00 per square foot Tenant Expenses: Triple Net Remarks: This is an older center. Heilig-Meyers is the major tenant. 6 Comparable Rental No. 3 [GRAPHIC OMITTED] Name: Centre South Location: Pine Log Road at Silver Bluff Road Aiken, SC Year Built: 1988 Total Size: 80,836 SF Vacant Space: 7,920 SF Vacancy Rate: 9.80% Rental Range: $6.25 - $12.20 per square foot Tenant Expenses: Triple Net Remarks: Major tenants are Food Lion and the U.S. Post Office. 7 Comparable No. 4 [GRAPHIC OMITTED] Name: Publix Center Location: Eastgate Drive Aiken, SC Year Built: 1996 Total Size: 78,610 SF Vacant Space: 11,775 SF Vacancy Rate: 14.98% Rental Range: $8.00 - $13.00 per square foot for the shops Tenant Expenses: Triple Net Remarks: This is a newer center with Publix as the major tenant. 8 PROPERTY INSPECTION FORM COMMERCIAL
II. SALES COMPARABLE SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ 1. Identification a. Name Kalmia Plaza Triangle Village Barnwell Plaza Hampton Plaza Cumberland Place ------------------- ------------------- -------------------- ------------------ ------------------ b. Street Address 1680 Richland Ave.- 2864 Wilma Rudolph 209 New Smithville West 912-934 N. Lake Dr. 1019 Dunbarton Blvd. Blvd. Hwy. ------------------- ------------------- -------------------- ------------------ ------------------ c. City Aiken, SC Lexington, SC Barnwell, SC Clarksville, TN McMinnville, TN ------------------- ------------------- -------------------- ------------------ ------------------ d. Distance from Subject N/A 60 miles 60 miles 510 miles 400 miles ------------------- ------------------- -------------------- ------------------ ------------------ 2. Attributes a. Year Built 1967 1985 1985 1988 1988 ------------------- ------------------- -------------------- ------------------ ------------------ b. Net sq. feet 215,330 115,754 SF 70,725 SF 189,302 SF 143,951 ------------------- ------------------- -------------------- ------------------ ------------------ c. # Buildings 1 1 1 1 1 ------------------- ------------------- -------------------- ------------------ ------------------ d. # of Stories 1 1 1 1 1 ------------------- ------------------- -------------------- ------------------ ------------------ e. Vacancy % 24.36% 3.24% 9.00% 0% 8.92% ------------------- ------------------- -------------------- ------------------ ------------------ 3. Sales Information a. Sales Price N/A $4,489,380 $2,860,620 $6,150,000 $5,225,000 ------------------- ------------------- -------------------- ------------------ ------------------ b. Sales Price PSF N/A $38.78 $40.45 $32.49 $36.60 ------------------- ------------------- -------------------- ------------------ ------------------ c. Date N/A 01-31-95 01-31-95 12-26-95 12-26-95 ------------------- ------------------- -------------------- ------------------ ------------------ d. NOI at time of Sale N/A $480,919 $330,327 $753,627 $693,726 ------------------- ------------------- -------------------- ------------------ ------------------ e. Cap. Rate N/A 10.71% 11.55% 12.25% 13.28% ------------------- ------------------- -------------------- ------------------ ------------------ 4. Rank Relative to Subject (inferior, similar, superior) N/A superior superior superior superior ------------------- ------------------- -------------------- ------------------ ------------------
Explain Ranking/Comments: These comparables have been rated as superior to subject. The reason is because of the age and location of these comparables and also the income stream. While Wal-Mart is the major tenant in these comparables, new Wal-Mart SuperStores have been built nearby and Wal-Mart will vacate the premises. However, Wal-Mart will continue paying rent for approximately 10-12 years. 9 Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: Name: Triangle Village Location: U.S. 378 & North Lake Drive (SC#6) Lexington, SC Grantor: 1994 N1 SC Associates Grantee: Tri Centers, LP Deed Reference: Book 3260, Page 199 Date: January 31, 1995 Sales Price: $4,489,380 Adjusted Sales Price: $4,489,380 Size building 115,754 Sales Price per S.F.: $38.78 Size Land (Acres): 12.51 Size Land (S.F.): 544,936 Year Built: 1985 Land/Building Ratio: 4.71 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $607,469 Effective Gross Income: $607,469 Gross Income Multiple: 7.39 EGIM: 7.39 Net Operating Income: $480,919 Overall Rate: 10.71% Verification: Public Records Type of Purchaser: Private Investor Comments: This center is anchored by Wal-Mart (65,904 SF) and Food Lion (25,000 SF) and there are 7 local shops totaling 24,850 SF (21.5 percent). At the time of sale, the center was 98.7 percent occupied with only 2,000 SF vacant. Wal-Mart has a base rent of $3.55 and the lease expires 11/05. Currently, Wal-Mart is paying about $0.50 per SF overage rent and Wal-Mart is expected to leave the center in the near future as no expansion room is available. The estimated cap rate excludes potential overage rent form Wal-Mart and only excludes income from the 2,000 SF vacant bay. Projected expenses include $0.10 per SF reserves. The center is masonry with brick front and metal mansard canopy roof and in average condition. No outparcels were included with this sale. 10 Comparable Sale No. 2 [GRAPHIC OMITTED] TMS: Name: Barnwell Plaza Location: 1019 Dunbarton Boulevard Barnwell, SC Grantor: 1994 N1 SC Associates, LP Grantee: Tri Centers, LP Deed Reference: Book 282, Page 137 Date: January 31, 1995 Sales Price: $2,860,620 Adjusted Sales Price: $2,860,620 Size building 70,725 Sales Price per S.F.: $40.45 Size Land (Acres): 11.28 Size Land (S.F.): 491,357 Year Built: 1985 Land/Building Ratio: 6.95 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $399,045 Effective Gross Income: $399,045 Gross Income Multiple: 7.17 EGIM: 7.17 Net Operating Income: $330,327 Overall Rate: 11.55% Verification: Purchaser Type of Purchaser: Private Investor Comments: This is a good quality community shopping center located in the town of Barnwell in Barnwell County (pop. 20,000) in western South Carolina. Approximately 91% of the center was comprised of anchor space, including Wal-Mart (34,875 SF), Food Lion (21,000 SF) and Revco Drugs (8,450 SF). The income and expense data here is based on the center's actual performance at the time of sale, and include approximately $0.50 SF in overage rents from Wal-Mart and $0.10 SF in reserves. 11 Comparable Sale No. 3 [GRAPHIC OMITTED] TMS: Name: Hampton Plaza Location: 2864 Wilma Rudolph Boulevard Clarksville, TN Grantor: Aetna Life Insurance Company Grantee: Hampton II, LP Deed Reference: Book 580, Page 1793 Date: December 26, 1995 Sales Price: $6,150,000 Adjusted Sales Price: $6,150,000 Size building: 189,302 Sales Price per S.F.: $32.49 Size Land (Acres): 23.24 Size Land (S.F.): 1,012,334 Year Built: 1988 Land/Building Ratio: 5.35 to 1 Utilities: All Available Zoning: C-3, Shopping Center District Financing: Cash to Seller Gross Potential Income: $966,102 Effective Gross Income: $937,119 Gross Income Multiple: 6.37 EGIM: 6.56 Net Operating Income: $753,627 Overall Rate: 12.25% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a community shopping center with Wal-Mart as a major tenant prior to a new Wal-Mart Superstore being built on the same block. While Wal-Mart remains liable for the lease, the store is vacant. The remainder of the center is occupied. 12 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: Name: Cumberland Place Location: 209 New Smithville Highway McMinnville, TN Grantor: Aetna Life Insurance Grantee: Cumberland II, LP Deed Reference: Book 287, Page 204 Date: December 26, 1995 Sales Price: $5,225,050 Adjusted Sales Price: $5,225,050 Size building: 143,951 Sales Price per S.F.: $36.30 Size Land (Acres): 19.64 Size Land (S.F.): 855,518 Year Built: 1988 Land/Building Ratio: 5.94 to 1 Utilities: All Available Zoning: C-3, Highway Commercial District Financing: Cash to Seller Gross Potential Income: $902,918 Effective Gross Income: $875,830 Gross Income Multiple: 5.79 EGIM: 5.97 Net Operating Income: $693,726 Overall Rate: 13.28% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a community shopping center. Wal-Mart was the major tenant and remains liable for the lease for the remaining term. A new Wal-Mart Superstore was built one block west of this property. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: KALMIA PLAZA 1680 RICHLAND AVENUE - WEST AIKEN, SC 29801-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ AMIGO'S RESTAURANT JOSE G. GRANADOS 629-10 2,000 09/01/96 08/31/01 6.50 09/01/96 12,999.96 6.75 09/01/97 13,500.00 7.25 09/01/98 14,499.96 - ------------------------------------------------------------------------------------------------------------------------ SOAP & SUDS 629-20 1,608 07/01/94 06/30/99 7.00 07/01/92 11,256.00 7.50 07/01/96 12,060.00 - ------------------------------------------------------------------------------------------------------------------------ Available 629-30 41,623 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ Available 629-40 2,790 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ Available 629-50 1,133 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ Available 629-60 1,133 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ TWO SISTERS HAIR CARE EVELYN A. MCGAHEE & SUSAN M. 629-80 1,776 06/01/95 05/31/98 5.00 06/01/92 8,880.00 - ------------------------------------------------------------------------------------------------------------------------ AIKEN COUNTY AIKEN COUNTY 629-90 13,278 01/01/90 06/30/98 4.55 10/01/91 60,354.00 0.00 0.00 4.81 07/91/95 63,853.92 3.18 05/01/96 42,224.04 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ AMIGO'S RESTAURANT JOSE G. GRANADOS Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ SOAP & SUDS Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ TWO SISTERS HAIR CARE EVELYN A. MCGAHEE & SUSAN M. Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ AIKEN COUNTY AIKEN COUNTY None 0 None 0 None 0 07/01/95 06/30/98 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: KALMIA PLAZA 1680 RICHLAND AVENUE - WEST AIKEN, SC 29801-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- AIKEN COUNTY HEALTH DEPT. SC DHEC AIKEN COUNTY HEALTH D 629-93 1,500 11/01/96 10/31/97 2.00 11/01/96 3,000.00 - ------------------------------------------------------------------------------------------------------------------------- Available 629-95 5,340 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- EEJAY'S RESTAURANT EEJAY'S, INC. 629-170 5,172 03/01/96 02/28/01 0.00 0.00 2.22 04/01/91 11,484.00 0.00 0.00 5.74 03/01/96 29,676.00 5.97 03/01/97 30,876.00 6.20 03/01/98 32,076.00 6.43 03/01/99 33,276.00 6.67 03/01/00 34,476.00 - ------------------------------------------------------------------------------------------------------------------------- AARON'S RENT TO OWN CAROLINA & CHARLES H. EVANS, 629-190 6,270 10/01/93 12/31/98 0.00 0.00 0.00 0.00 3.75 01/01/94 23,512.56 4.25 01/01/95 26,647.56 4.90 01/01/96 30,723.00 5.15 01/01/98 32,290.56 - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ TENANT INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ AIKEN COUNTY HEALTH DEPT. SC DHEC AIKEN COUNTY HEALTH D None 0 None 0 None 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ EEJAY'S RESTAURANT EEJAY'S, INC. Full 0 Full 0 Full 0 03/01/01 02/28/06 0.00 0.00 0 03/01/01 02/28/06 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ AARON'S RENT TO OWN CAROLINA & CHARLES H. EVANS, Full 0 Full 0 Full 0 01/01/99 12/31/03 5.25 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: KALMIA PLAZA 1680 RICHLAND AVENUE - WEST AIKEN, SC 29801-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- DOLLAR GENERAL #2855 DOLGENCORP, INC. 629-195 8,250 05/01/93 04/30/98 2.55 06/01/93 21,000.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- ROSE'S ROSE'S STORES, INC. 629-200 50,250 05/15/67 05/14/98 1.25 05/01/67 62,812.56 0.77 03/01/93 38,812.56 1.25 03/01/94 62,812.56 - ------------------------------------------------------------------------------------------------------------------------- REVCO #1523 629-210 11,500 11/01/68 08/31/03 1.38 11/01/88 15,870.00 1.63 01/01/97 18,744.96 - ------------------------------------------------------------------------------------------------------------------------- CENTRAL RENTS, INC. F/K/A RENTRONICS D/B/A WBC HO 629-220 3,115 08/01/95 07/31/00 5.72 07/01/92 17,823.96 6.40 08/01/95 19,935.96 7.00 08/01/97 21,804.94 - ------------------------------------------------------------------------------------------------------------------------- OLAN MILLS, INC. OLAN MILLS, INC. 629-240 1,432 08/01/94 07/31/99 0.00 0.00 4.35 02/01/89 6,231.48 5.87 08/01/94 8,400.00 - ------------------------------------------------------------------------------------------------------------------------- RHODES-MURPHY & COMPANY RHODES-MURPHY, INC. 629-250 1,400 01/01/96 12/31/98 7.00 01/01/96 9,799.92 - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ TENANT INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ DOLLAR GENERAL #2855 DOLGENCORP, INC. PRS 1993 PRS 1993 Full 0 05/01/98 04/30/01 0.00 3.00 840,000 05/01/01 04/30/04 0.00 3.00 0 05/01/04 04/30/07 0.00 3.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ ROSE'S ROSE'S STORES, INC. None 0 None 0 None 0 05/15/98 05/14/03 1.25 2.50 2,512,500 Y 0.00 2.50 1,552,500 Y 0.00 2.50 2,512,500 Y - ------------------------------------------------------------------------------------------------------------------------------------ REVCO #1523 None 0 None 0 Full 0 09/01/98 08/31/03 6.50 3.00 529,000 Y 0.00 3.00 624,600 Y - ------------------------------------------------------------------------------------------------------------------------------------ CENTRAL RENTS, INC. F/K/A RENTRONICS D/B/A WBC HO Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ OLAN MILLS, INC. OLAN MILLS, INC. PRS 1983 PRS 1983 Full 0 08/01/99 07/31/04 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ RHODES-MURPHY & COMPANY RHODES-MURPHY, INC. Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: KALMIA PLAZA 1680 RICHLAND AVENUE - WEST AIKEN, SC 29801-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ PIZZA HOUSE CARRIE T. & HERMAN L. LYBRAND 629-260 2,800 07/01/90 06/30/98 0.00 0.00 2.81 07/01/93 7,875.96 6.00 07/01/95 16,800.00 - ------------------------------------------------------------------------------------------------------------------------ RADIO SHACK #01-9616 TANDY CORPORATION 629-280 2,800 06/14/96 06/30/01 0.00 0.00 6.00 07/01/96 16,800.00 - ------------------------------------------------------------------------------------------------------------------------ Available 629-300 1,435 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ RURAL-METRO CORP/EMS VENTURES EMS VENTURES OF SOUTH CAROLIN 629-310 1,400 06/03/96 06/30/99 8.72 07/01/96 12,204.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ FOOD LION #245 FOOD LION 629-410 33,000 04/29/85 04/28/05 3.61 05/10/85 119,122.56 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ WESTERN AUTO SUPPLY CO. WESTERN AUTO SUPPLY CO. 629-420 14,325 10/01/69 09/30/99 2.12 10/01/89 30,431.28 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ PIZZA HOUSE CARRIE T. & HERMAN L. LYBRAND Full 0 Full 0 Full 0 07/01/95 06/30/98 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ RADIO SHACK #01-9616 TANDY CORPORATION PRS 1985 Full 0 Full 0 07/01/01 06/30/06 7.00 3.00 0 Y 07/01/06 06/30/11 8.00 3.00 560,000 Y - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ RURAL-METRO CORP/EMS VENTURES EMS VENTURES OF SOUTH CAROLIN Full 0 Full 0 Full 0 07/01/99 06/30/02 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ FOOD LION #245 FOOD LION PRS 1986 PRS 1986 Full 0 04/29/05 04/28/10 3.61 1.00 11,923,100 Y 04/29/10 04/28/15 3.61 1.00 258,931 Y 04/29/15 04/28/20 3.61 1.00 0 Y 04/29/20 04/28/25 3.61 1.00 0 Y 04/29/25 04/28/30 3.61 1.00 0 Y 04/29/30 04/28/35 3.61 1.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ WESTERN AUTO SUPPLY CO. WESTERN AUTO SUPPLY CO. PRS 1971 None 0 Full 0 10/01/84 09/30/89 1.25 3.00 1,014,375 10/01/89 09/30/94 2.12 3.00 0
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: KALMIA PLAZA 1680 RICHLAND AVENUE - WEST AIKEN, SC 29801-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ WESTERN AUTO SUPPLY CO. WESTERN AUTO SUPPLY CO. 629-420 14,325 10/01/69 09/30/99 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ BASKIN ROBBINS #1586 DAN & BECKY WHITE 629-430 0 P 07/01/92 06/30/97 0.00 06/01/92 6,999.96 0.00 06/01/94 8,000.04 0.00 06/01/95 9,000.00 - ------------------------------------------------------------------------------------------------------------------------ DRYCLEAN 249 D.C.A. MANAGEMENT, INC. 629-450 0 P 07/01/95 06/30/98 0.00 0.00 0.00 09/01/95 13,377.00 - ------------------------------------------------------------------------------------------------------------------------ WACHOVIA WACHOVIA BANK OF S.C. 629-460 0 P 06/15/81 06/14/01 0.00 07/01/91 7,479.84 0.00 06/15/96 8,579.40 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ Available 629-470 0 P 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 161,876 Current Annual Base Rent 507,770.64 Available. 53,454 Total..... 215,330 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ WESTERN AUTO SUPPLY CO. WESTERN AUTO SUPPLY CO. PRS 1971 None 0 Full 0 10/01/94 09/30/99 2.12 3.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ BASKIN ROBBINS #1586 DAN & BECKY WHITE Full 0 Full 0 None 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ DRYCLEAN 249 D.C.A. MANAGEMENT, INC. Full 0 Full 0 None 0 07/01/98 06/30/01 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ WACHOVIA WACHOVIA BANK OF S.C. None 0 None 0 None 0 06/15/06 06/14/91 0.00 0.00 0 06/15/91 06/14/96 0.00 0.00 0 06/15/96 06/14/01 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Richland Avenue - West - Looking West [GRAPHIC OMITTED] Richland Avenue - West - Looking East [GRAPHIC OMITTED] Subject - Front View - Food Lion and Western Auto [GRAPHIC OMITTED] Subject - Front and Side View - Food Lion [GRAPHIC OMITTED] Subject - Front and Side View - Western Auto [GRAPHIC OMITTED] Subject - Front and Side View - Western Auto [GRAPHIC OMITTED] Subject - Front and Side View - Shops [GRAPHIC OMITTED] Subject - Front and Side View - Shops [GRAPHIC OMITTED] Subject - Front View - Revco and Roses [GRAPHIC OMITTED] Subject - Front and Side View - Shops and Roses [GRAPHIC OMITTED] Subject - Front View - Revco and Shops [GRAPHIC OMITTED] Subject - Side View [GRAPHIC OMITTED] Subject - Front View - Shops [GRAPHIC OMITTED] Subject - Front View - Roses and Revco [GRAPHIC OMITTED] Subject - Front and Side View - Shops and Roses [GRAPHIC OMITTED] Subject - Front View - Mall [GRAPHIC OMITTED] Subject - Front View - Office Area [GRAPHIC OMITTED] Subject - Rear View - Mall [GRAPHIC OMITTED] Subject - Side View - Office Area [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Rear View - Shops [GRAPHIC OMITTED] Subject - Rear View - Shops [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Rear View - Food Lion and Shops [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Driveway from Side This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study LAWNDALE VILLAGE 4701 Lawndale Drive Greensboro, Guilford County, North Carolina Prepared by O. Marshall Dodds, MAI Date of Market Study - April 29, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] April 29, 1997 Mr. Steven R. Maeglin Morgan Stanley & Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Lawndale Village 4701 Lawndale Drive Greensboro, Guilford County, North Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on April 29, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The subject property consists of a neighborhood shopping center that contains 46,337 square feet of leasable area. The center was constructed in 1987. The anchor tenant is Winn-Dixie Stores and the property is 100.0% occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds, MAI --------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY - -------------------------------------------------------------------------------- Regional Perspective The Triad is a name given the area in North Carolina's Piedmont, which encompasses the cities of Winston-Salem, Greensboro, Highpoint and dozens of smaller towns and villages surrounding them. It encompasses eleven counties, and is the largest standing metropolitan statistical area of the (SMSA) in North Carolina and second largest between Washington, D.C. and Atlanta, with a population of approximately 1.2 million. The estimated population in 1997 for Guilford County is 368,729 and the Greensboro MSA has a population of 1,125,155. The City of Greensboro had a 1994 population of 194,100 people. There are several major employers in Guilford County which are Moses H. Cone Group of Health-Medical Services-4,000 employees; Cone Mills-Textiles-3,000 employees; Lucent Technologies-Communications-2,672 employees; Sears, Roebuck, and Co.-Retail/Customer Service-2,600 employees; American Express-Regional Card Center-2,600 employees; U.S. Postal Service-Postal Service-2,500 employees; Lorillard-Tobacco-2,400 employees; United Parcel Service-Parcel Ground Service-2,400 employees; AMP, Inc.-Electronics-2,200 employees; Jefferson Pilot Insurance Co.-Insurance-1,400 employees. These are just a few of the major employees. In 1996, new firms provided 606 new jobs and $69,650,000 in new investment. Existing firms that expanded provided 1,559 new jobs and $111,060,319 in new investment. The total in new jobs was 2,165 and new investment was $180,710,319. The estimated total Retail Space in Greensboro is approximately 7,800,000 square feet with the vacancy rate being approximately 7.0%. The Greensboro/Guilford County area has been a progressive city and growth has continued over the years. The economic base is stable and new growth and stability can be expected in the future. The unemployment rate for Guilford County in June 1995 was 3.7 percent with the unemployment rate for the state of North Carolina being approximately 4.5%. Neighborhood and Site The subject neighborhood is located in the northern section of the City of Greensboro. Battleground Avenue, which is U.S. Highway #220, is a major traffic artery in the neighborhood and Lawndale Drive intersects with Battleground Avenue. The Guilford Battleground National Military Park is located in the neighborhood. There are several multi-family properties that are located around the subject property. These would include the Hedges Apartments, Battle Forge Apartments, Sunlet Condominiums, Battleground Apartments, Murisfield Condominiums, Mallard Lakes Apartments, Magnolia Apartments and the Hampton Apartments. A retirement home called Carriton is located in the neighborhood. There are several single family residential subdivisions that are located throughout the neighborhood and these are located off of Lawndale Drive. Lake Brandt Road is also a major traffic artery. Physical features are as follows: 1. Size 4.646 acres or 202,380 SF 2. Identity 4701 Longdale Drive TMS# 06-0352-N0725-00-007 3. Shape Irregular 4. Topography Generally level, but the surrounding terrain features are gently rolling. 5. Accessability Good 6. Utilities Municipal 1 Physical Description Building features are as follows: 1. Size (net) 46,337 SF 2. Layout & Design One story - food store - five shops 3. Parking Spaces 227 4.89 spaces per 1,000 square feet of net area 4. Construction Brick and glass front with concrete block on side and rear and metal seam roof. Market Position and Marketability Conclusions Subject property is located in the northern section of the City of Greensboro. Several shopping centers are located in the immediate neighborhood and these would include Church Crossing, Battleground Plaza and Lawndale North. These shopping centers are experiencing high occupancy rates at this time. The size of this center is 65,754 SF and the rental rate for the shops is at $9.00 per square foot. The Background Plaza is located approximately one mile from subject and this center contains 144,625 square feet. Brendles is a major tenant but has closed the store and is operating through bankruptcy proceedings at this time. The remaining term on the lease is for 12 years and the leasing agent advises that serious inquiries are being made for this space. The rental rate for new space is at $13.00 per square foot. The Lawndale North Shopping Center is located nearby subject. The size of this center is 42,097 and the rental rates for new space is $12.00 per square foot. The Golden Gate Shopping Center is located outside of the immediate neighborhood and contains 154,507 square feet. This center was built in 1961 and renovated in 1985. The rental rate for new space is $8.00 to $8.25 per square foot. The subject property has five shops and the rental rates range from $3.75 to $11.00 per square foot. This is within the range of the rates in the comparable shopping centers. The rental rate for the Winn-Dixie Store is at $6.75 per square foot. Trends: The subject property is located in the north section of the City of Greensboro in an area that is practically fully built up. There are a number of multi-family projects in the neighborhood as well as several single family residential subdivisions. The neighborhood is considered to be stable at this time and the stability has been maintained in the past. It is thought that this will continue in the future. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Lawndale Village Church Crossing Battleground Plaza -------------------------- ------------------------- ----------------------- b. Street Lee Chapel Road & N. Battleground Avenue 4701 Lawndale Drive Church Street & New Garden Road -------------------------- ------------------------- ----------------------- c. City Greensboro, NC Greensboro, NC Greensboro, NC -------------------------- ------------------------- ----------------------- d. Distance from subject N/A 3 miles 1.5 miles -------------------------- ------------------------- ----------------------- e. Contact Edens & Avant, Inc. DMI H.V. McCoy & Co. -------------------------- ------------------------- ----------------------- f. Phone 803-779-4420 704-535-9975 910-545-0059 -------------------------- ------------------------- ----------------------- 2. Attributes a. Year built 1987 1987 1988 -------------------------- ------------------------- ----------------------- b. Net sq. Ft. 46,337 65,754 144,625 -------------------------- ------------------------- ----------------------- c. # building 1 1 1 -------------------------- ------------------------- ----------------------- d. #stories 1 1 1 -------------------------- ------------------------- ----------------------- e. Avg. Floor plate size (SF), if office N/A N/A N/A -------------------------- ------------------------- ----------------------- f. # elevators N/A N/A N/A -------------------------- ------------------------- ----------------------- g. Parking Adequate Adequate Adequate -------------------------- ------------------------- ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block -------------------------- ------------------------- ----------------------- I. Vacancy % 0% 0% 2.30% -------------------------- ------------------------- ----------------------- j. Anchors, if Retail Food Lion, Cloth Winn-Dixie Winn-Dixie, Revco World, Brendles -------------------------- ------------------------- ----------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Lawndale North Golden Gate ------------------------ ----------------------- b. Street N/S Lawndale Drive at Golden Gate Drive at Pisgah Church Rd. Cornwallis Drive ------------------------ ----------------------- c. City Greensboro, NC Greensboro, NC ------------------------ ----------------------- d. Distance from subject 1.5 miles 5.0 miles ------------------------ ----------------------- e. Contact Koury Corp. Lat Purser & Assoc. ------------------------ ----------------------- f. Phone 910-299-9200 704-519-4237 ------------------------ ----------------------- 2. Attributes a. Year built 1976 1961 (Reh. 1985) ------------------------ ----------------------- b. Net sq. Ft. 42,097 154,507 ------------------------ ----------------------- c. # building 1 1 ------------------------ ----------------------- d. #stories 1 1 ------------------------ ----------------------- e. Avg. Floor plate size (SF), if office N/A N/A ------------------------ ----------------------- f. # elevators N/A N/A ------------------------ ----------------------- g. Parking Adequate Adequate ------------------------ ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block ------------------------ ----------------------- I. Vacancy % 3.36% 2.07% ------------------------ ----------------------- j. Anchors, if Retail Food Lion, Revco, Food Lion, Revco Harris Teeter ------------------------ -----------------------
Comments: Comparables No. 1, 2 and 3 are located nearby subject, whereas, Comparable No. 4 is located outside of the immediate neighborhood. Comparable No. 1 was constructed in 1987 while Comparable No. 2 was constructed in 1988 and Comparable No. 3 was constructed in 1976. Comparable No. 4 was constructed in 1961 and rehabilitated in 1985. Comparables No. 1 and 3 are similar size to subject, whereas, Comparables No. 2 and No. 4 are larger than subject. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Asking Rental Rate a. Anchor Space $6.75 N/A $3.00 - $5.50 ------------------------- ------------------------ ----------------------- b. Shop Space $3.75 - $11.00 $9.00 $13.00 ------------------------- ------------------------ ----------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ------------------------- ------------------------ ----------------------- 3. Rent Concessions None None None ------------------------- ------------------------ ----------------------- 4. Effective Rent $3.75 - $11.00 $9.00 $13.00 ------------------------- ------------------------ ----------------------- 5. TI Allowance None None None ------------------------- ------------------------ ----------------------- 6. Expense Stop None None None ------------------------- ------------------------ ----------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 -5 years (shop) 3 - 5 years (shop) ------------------------- ------------------------ ----------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% ------------------------- ------------------------ ----------------------- 9. Percentage Rent Winn-Dixie, Revco Food Lion, Cloth (per lease terms) Winn Dixie World, Brendles ------------------------- ------------------------ ----------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A ------------------------- ------------------------ ----------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A ------------------------- ------------------------ ----------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A similar similar ------------------------- ------------------------ ----------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A --------------------- ------------------------- b. Shop Space $12.00 $8.00 - $8.25 --------------------- ------------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net --------------------- ------------------------- 3. Rent Concessions None None --------------------- ------------------------- 4. Effective Rent $12.00 $8.00 - $8.25 --------------------- ------------------------- 5. TI Allowance None None --------------------- ------------------------- 6. Expense Stop None None --------------------- ------------------------- 7. Length of Lease Term 3-5 years (shop) 3-5 years (shop) --------------------- ------------------------- 8. Commissions 5.00% - 7.00% 5.00% - 7.00% --------------------- ------------------------- 9. Percentage Rent Food Lion, Revco Food Lion, Revco, (per lease terms) Harris-Teeter --------------------- ------------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A --------------------- ------------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A --------------------- ------------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) similar similar --------------------- -------------------------
D. EXPLAIN RANKING/COMMENTS: The subject property is similar to these shopping centers that have been used as comparables. Comparables No. 1 and No. 2 have a rental range from $9.00 to $13.00 per square foot and Comparable No. 3 is at $12.00 per square foot. Comparable No. 4 has rental ranges from $8.00 to $8.25 per square foot, but this is an older center. The rental rates for subject range from $3.75 to $11.00. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 [GRAPHIC OMITTED] Name: Church Crossing Location: Lee Chapel Road at North Church Street Greensboro, NC Year Built: 1987 Total Size: 65,754 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $9.00 per square foot Tenant Expenses: Triple Net Remarks: Average quality center in average location. Area is considered relatively comparable to subject, although new residential development and street improvements are occurring nearby. 5 Comparable Rental No. 2 [GRAPHIC OMITTED] Name: Battleground Plaza Location: Battleground Avenue at New Garden Road Greensboro, NC Year Built: 1988 Total Size: 144,625 SF Vacant Space: 1,920 SF Vacancy Rate: 2.30% Rental Range: $13.00 per square foot Tenant Expenses: Triple Net Remarks: This is a large center. Initially, the lease-up period was extended and there was high vacancy in the local shops, partially due to poor visibility for the center section of the property. A shop containing 2,100 SF was leased approximately 90 days ago for 3 years at an average rental of $13.00 PSF. Brendles closed on August 13, 1996 through Bankruptcy proceedings, but remains liable for the least payments for 12 years. The leasing agent reveals that serious inquiries are being made for this space. 6 Comparable Rental No. 3 [GRAPHIC OMITTED] Name: Lawndale North Location: Northeast Side of Lawndale Drive at Pisgah Church Road Greensboro, NC Year Built: 1976 Total Size: 42,097 SF Vacant Space: 1,500 SF Vacancy Rate: 3.36% Rental Range: $12.00 per square foot Tenant Expenses: Triple Net Remarks: This center is in a different locale, but is an older property. This center has not been renovated. Terry Gibbs of Kourey revealed that they have leased two spaces of this center of the past six months. Both were 1,600 SF and leased at $12.00 PSF with $0.50 PSF increases per year for 3 years and pro rata expenses. 7 Comparable No. 4 [GRAPHIC OMITTED] Name: Golden Gate Location: Golden Gate Drive at Cornwallis Drive Greensboro, NC Year Built: 1961 & Ren. 1985 Total Size: 154,507 SF Vacant Space: 3,200 SF Vacancy Rate: 2.07% Rental Range: $8.00 - $8.25 per square foot for the shops Tenant Expenses: Triple Net Remarks: This center is an older property that underwent extensive renovation approximately 10 years ago. It is inferior even though not located on a main thoroughfare. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Lawndale Village St. Andrews Crossing Eastgate Shop. Center ------------------------- ------------------------ ------------------------ b. Street Address NWC Whiskey Rd. & 4701 Lawndale Drive 817 St. Andrews Road Eastgate Dr. ------------------------- ------------------------ ------------------------ c. City Greensboro, NC Columbia, SC Aiken, SC ------------------------- ------------------------ ------------------------ d. Distance from Subject N/A 8 miles 56 miles ------------------------- ------------------------ ------------------------ 2. Attributes a. Year Built 1987 1994 1995 ------------------------- ------------------------ ------------------------ b. Net sq. feet 46,337 SF 66,910 SF 75,716 SF ------------------------- ------------------------ ------------------------ c. # Buildings 1 1 1 ------------------------- ------------------------ ------------------------ d. # of Stories 1 1 1 ------------------------- ------------------------ ------------------------ e. Vacancy % 0% 0% 5.00% ------------------------- ------------------------ ------------------------ 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 ------------------------- ------------------------ ------------------------ b. Sales Price PSF N/A $97.89 $88.16 ------------------------- ------------------------ ------------------------ c. Date N/A 05-25-94 09-28-95 ------------------------- ------------------------ ------------------------ d. NOI at time of Sale N/A $634,797 $657,896 ------------------------- ------------------------ ------------------------ e. Cap. Rate N/A 9.69% 9.86% ------------------------- ------------------------ ------------------------ 4. Rank Relative to Subject (inferior, similar, superior) N/A superior similar ------------------------- ------------------------ ------------------------ COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name One Norman Center Paw Creek Commons ----------------------- ------------------------ b. Street Address 19706 One Norman E/S Little Rock Rd. at Blvd. Freedom Dr. ----------------------- ------------------------ c. City Cornelius, NC Charlotte, NC ----------------------- ------------------------ d. Distance from Subject 100 miles 92 miles ----------------------- ------------------------ 2. Attributes a. Year Built 1993 1996 ----------------------- ------------------------ b. Net sq. feet 54,185 SF 66,050 ----------------------- ------------------------ c. # Buildings 1 1 ----------------------- ------------------------ d. # of Stories 1 1 ----------------------- ------------------------ e. Vacancy % 0% 2.73% ----------------------- ------------------------ 3. Sales Information a. Sales Price $4,650,000 $5,384,000 ----------------------- ------------------------ b. Sales Price PSF $85.82 $77.52 ----------------------- ------------------------ c. Date 10-12-95 03-25-97 ----------------------- ------------------------ d. NOI at time of Sale $450,188 $517,412 ----------------------- ------------------------ e. Cap. Rate 9.68% 9.61% ----------------------- ------------------------ 4. Rank Relative to Subject (inferior, similar, superior) similar superior ----------------------- ------------------------
Explain Ranking/Comments: These comparables are similar to subject. Comparables No. 1 and No. 4 have been ranked superior to subject because of the location being superior to that of subject and the rental rates for the shops being higher than in subject property. The tenant mix and income streams for all of these comparables are very similar to subject. 9 Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: 6012 -1 -1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 10 Comparable Sale No. 2 [GRAPHIC OMITTED] TMS: Name: Eastgate Shopping Center Location: Northwest Corner of Whiskey Road & Eastgate Drive Aiken, SC Grantor: Southwest U.S. Retail, LP Grantee: PDG Aiken Partners, LP Deed Reference: N/A Date: September 28, 1995 Sales Price: $6,675,000 Adjusted Sales Price: $6,675,000 Size building: 75,716 Sales Price per S.F.: $88.16 Size Land (Acres): 8.79 Size Land (S.F.): 382,892 Year Built: 1995 Land/Building Ratio: 5.06 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $782,704 Effective Gross Income: $782,704 EGIM: 8.53 Net Operating Income: $657,896 Overall Rate: 9.86% Verification: Public Records Type of Purchaser: Private Investor Comments: Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. 11 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. 12 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: 59-231-22,23 pt. Name: Paw Creek Commons Location: East side of Little Rock Road at Freedom Drive Grantor: Paw Creek, LLC Grantee: Paw Creek Crossing Limited Partnership Deed Reference: Book 8988, Page 519 Date: March 25, 1997 Sales Price: $5,120,000 Adjusted Sales Price: $5,384,000 Size building: 66,050 Sales Price per S.F.: $77.52 Size Land (Acres): 9.82 Size Land (S.F.): 427,759 Year Built: 1996 Land/Building Ratio: 6.48 to 1 Utilities: Municipal Zoning: CC, Commercial Center Financing: Cash to Seller Gross Potential Income: $568,840 Effective Gross Income: $552,054 Gross Income Multiple: 9.00 EGIM: 9.27 Net Operating Income: $517,412 Overall Rate: 9.61% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was pre-construction. The sales price has been adjusted to reflect this by using 50 basis points in the capitalization rate (.1011 minus .0050 equals .0961). The major tenants are Winn-Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. The income from anchor tenants is 79.41 percent of gross income. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 Comparable Rentals [GRAPHIC OMITTED] Improved Sales Map [GRAPHIC OMITTED] Site Plan [GRAPHIC OMITTED] EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: LAWNDALE VILLAGE 4701 LAWNDALE DRIVE GREENSBORO, NC Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- --------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - --------------------------------------------------------------------------------------------------------------------- CLEANER IMAGE EDWIN M. CHAPMAN, JR. 620- 10 3,000 10/01/87 09/30/97 0.00 0.00 11.00 10/01/87 33,000.00 0.00 0.00 - --------------------------------------------------------------------------------------------------------------------- GOLDEN PIZZA & SUBS ALI DIB / ISSAM KAYHLAWI 620- 20 1,200 11/01/93 10/31/98 9.00 02/01/94 10,800.00 3.75 05/01/95 4,500.00 - --------------------------------------------------------------------------------------------------------------------- CREATE-A-CAKE VICKY HAYES 620- 30 2,480 10/01/91 09/30/01 0.00 0.00 0.00 0.00 3.97 10/01/92 9,600.00 4.35 10/01/93 10,800.00 4.84 10/01/94 12,000.00 5.32 10/01/95 13,200.00 6.00 10/01/98 14,880.00 - --------------------------------------------------------------------------------------------------------------------- MOVIES INC. ROBERT W. SCHWAB 620- 40 1,635 10/01/93 09/30/98 0.00 0.00 0.00 0.00 8.00 10/01/93 13,080.00 8.54 10/01/95 13,956.36 - --------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ CLEANER IMAGE EDWIN M. CHAPMAN, JR. Full 0 Full 0 Full 0 10/01/97 09/30/02 0.00 4.00 0 Y 10/01/02 09/30/07 0.00 4.00 825,000 Y 0.00 4.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ GOLDEN PIZZA & SUBS ALI DIB / ISSAM KAYHLAWI Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ CREATE-A-CAKE VICKY HAYES Full 0 Full 0 Full 0 10/01/96 09/30/01 0.00 5.00 264,000 0.00 5.00 240,000 0.00 5.00 0 0.00 5.00 0 0.00 5.00 0 0.00 5.00 0 0.00 5.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ MOVIES INC. ROBERT W. SCHWAB Full 0 Full 0 Full 0 10/01/95 09/30/98 8.53 4.00 0 Y 0.00 4.00 0 Y 0.00 4.00 327,000 Y 0.00 4.00 348,900 Y - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: LAWNDALE VILLAGE 4701 LAWNDALE DRIVE GREENSBORO, NC Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ MAHI'S JOEY'S 620- 50 2,100 12/01/92 11/30/98 0.00 0.00 0.00 0.00 11.00 12/01/92 23,100.00 - ------------------------------------------------------------------------------------------------------------------------ WINN-DIXIE CHARLOTTE, INC 620- 60 35,922 05/14/87 05/13/07 6.75 06/01/87 242,474.04 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 46,337 Current Annual Base Rent 336,530.40 Available. 0 Total..... 46,337 - -------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - -------------------------------------------------------------------------------------------------------------------------------- MAHI'S JOEY'S Full 0 Full 0 Full 0 12/01/95 11/30/98 0.00 6.00 700,000 0.00 6.00 0 0.00 6.00 0 - -------------------------------------------------------------------------------------------------------------------------------- WINN-DIXIE CHARLOTTE, INC Full 0 Full 0 Full 0 05/14/07 05/13/12 6.75 0.00 0 05/14/12 05/13/17 6.75 0.00 0 05/14/17 05/13/22 6.75 0.00 0 05/14/22 05/13/27 6.75 0.00 0 05/14/27 05/13/32 6.75 0.00 0 - --------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Lawn Dale Drive Looking North [GRAPHIC OMITTED] Lawn Dale Drive Looking South [GRAPHIC OMITTED] Cottage Place Looking East [GRAPHIC OMITTED] Cottage Place Looking West [GRAPHIC OMITTED] Entrance Way From Lawn Dale Drive [GRAPHIC OMITTED] Entrance Way From Lawn Dale Drive [GRAPHIC OMITTED] Entrance Way From Lawn Dale Drive [GRAPHIC OMITTED] Entrance Way From Lawn Dale Drive [GRAPHIC OMITTED] Entrance Way From Cottage Place [GRAPHIC OMITTED] Front View [GRAPHIC OMITTED] Front And Side View of Winn Dixie Store [GRAPHIC OMITTED] Front And Side View of Other Stores [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear And Side View This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study WATERWAY PLAZA 3369 Highway 9, East Little River, Horry County, South Carolina Prepared by O. Marshall Dodds, MAI Date of Market Study - May 13, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] May 13, 1997 Mr. Steven R. Maeglin Morgan Stanley & Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Waterway Plaza 3369 Highway 9, EAst Little River, Horry County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 13, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The subject property consists of a neighborhood shopping center that contains 49,750 square feet of leasable area. The center was constructed in 1991 and the major tenants are Food Lion and Revco. The center is 100.0% occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds, MAI ------------------------------ O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY ================================================================================ Regional Perspective Little River and Horry County are located in the Northeast portion of the State of South Carolina. The population for Little River Division was 17,833. Horry County had a population of 144,053. Agriculture, industry and tourism provide for a strong economy in the area. The chief agricultural product is tobacco and Little River is the site of three markets. Produce and grain make up the remainder of the farming products. Major industries include electronics, apparel, draperies, metal work, machinery, furniture and forestry products. The City of Little River is located approximately 15 miles east of the downtown area of Conway. The tourism at Myrtle Beach is a high profile attraction and contributes to the economy. The City of Little River and Horry County have a stable and diversified economic base and the area has experienced growth in recent years. The unemployment rate for Horry County as of March, 1997 was 5.5 percent while the statewide rate was 5.5%. Neighborhood and Site The neighborhood is located in the northern portion of the Grand Strand area at the intersection of SC Highway #9 and U.S. Highway #17. The town is known as Little River. The makeup of the neighborhood along SC Highway #9 consists of several single family residential subdivisions and the Bay Tree development with single family dwellings and villas built around a golf course. There are also rural residential properties located to the north along SC Highway #9. The development along U.S. Highway #17 from SC Highway #9 to the North Carolina state line consists of commercial type developments as well as single family residential developments and condominium developments that are located along the waterway. There are a number of restaurants located along U.S. Highway #17 in the Little River area. The North Myrtle Beach area is located to the south of the intersection of SC Highway #9 and U.S. Highway #17. Physical features are as follows: 1. Size 9.66 acres or 420,790 SF 2. Identity 3369 Highway 9, East TMS# 130-00-04-056 3. Shape Irregular 4. Topography Generally level and on street grade with SC Highway #9 5. Accessability Good 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 49,750 SF 2. Layout & Design One story - food store - drug store - nine shops 3. Parking Spaces 268 5.38 spaces per 1,000 square feet of net area 4. Construction Brick and glass front with concrete block on side and rear and metal seam roof. 1 Market Position and Marketability Conclusions The subject property is located in Little River which is at the northern portion of the Grand Strand area of Myrtle Beach. SC Highway #9 intersects with U.S. Highway #17 and the Little River area extends from this point to the North Carolina state line along U.S. Highway #17. The subject property is the prominent shopping center in the Little River area. There is another shopping center located to the northeast of subject along U.S. Highway #17 known as Little River Shopping Center. This center contains 53,282 square feet and Food Lion is the major tenant along with Revco Drugs. There are several other small shops in this center which was constructed in 1984. Due to the location and age of this center, it is not considered to be competition to subject property as subject neighborhood consists of the properties along SC Highway #9 and U.S. Highway #17. There are other shopping centers that are located along U.S. Highway #17 in the North Myrtle Beach area. These centers are located to the southeast of subject neighborhood. There are two or three centers that are experiencing high vacancy rates at this time. A new Food Lion Shopping Center was constructed in 1995 in the Cherry Grove area on U.S. Highway #17, which is several miles to the southeast. In addition to the Food Lion Store, six small shops were constructed. The comparisons that have been made with subject property are the comparable shopping centers that are located in Conway which is felt to be more similar to the location of subject in Little River than the shopping centers in the North Myrtle Beach area. The Coastal Mall has shop space that is renting from $9.00 to $12.00 per square foot. This is a new shopping center being renovated in 1995 with a new K-Mart SuperStore and Winn-Dixie Store. The Eckerds Store and Peebles remained in the Mall area but front to the outside. Waccamaw Square is an older center that is located on the west side of Church Street. Bi-Lo has vacated the premises and the vacancy rate is high. However, several shops are being rented in a rental range from $2.50 to $6.00 per square foot. The Conway Plaza is located on the west side of Church Street and Food Lion is the major tenant, but has vacated the premises and is continuing to pay rent. The rental rates for the shops is from $6.00 to $8.00 per square foot. The Bay Village Shopping Center is a larger shopping center located at 2300 Church Street and Wal-Mart is the major tenant. There is a new SuperStore being built for Wal-Mart and Wal-Mart will be vacating the store in this center. The rental rate for the shop space is from $7.25 to $13.25. The rental rates for subject property range from $8.00 to $9.50 per square foot for the shops while the Food Lion is being rented at $6.75 per square foot and the Revco Drug Store is being rented for $7.50 per square foot. These rental rates are reasonable and within the range of the other shopping centers. Trends: The subject property is located in Little River which is at the northern portion of the Grand Strand area. Developments along U.S. Highway #17 are typical with commercial properties being located on the highway and single family residential properties being located off of the highway and condominium projects also being located off of the highway. There has been growth throughout the neighborhood in recent years and it is thought that this will continue. There is land available along SC Highway #9 for single family residential development. The Bay Tree Development around Bay Tree Golf Course with single family dwellings and golf villas has been most successful. The neighborhood is considered to be stable and it is thought that this stability will be maintained in the future with the continuing growth. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Waterway Plaza Coastal Mall Waccamaw Square -------------------------- ------------------------- ----------------------- b. Street 3639 Highway #9, East Church St. at 16th Ave. W/S Church St. -------------------------- ------------------------- ----------------------- c. City Little River, SC Conway, SC Conway, SC -------------------------- ------------------------- ----------------------- d. Distance from subject N/A 1/2 mile 1/3 mile -------------------------- ------------------------- ----------------------- e. Contact Edens & Avant, Inc. Baker & Baker Gator Investments -------------------------- ------------------------- ----------------------- f. Phone 803-779-4420 803-254-8987 305-949-9049 -------------------------- ------------------------- ----------------------- 2. Attributes a. Year built 1991 1994 1976 -------------------------- ------------------------- ----------------------- b. Net sq. Ft. 49,750 215,000 87,039 -------------------------- ------------------------- ----------------------- c. # building 1 1 1 -------------------------- ------------------------- ----------------------- d. #stories 1 1 1 -------------------------- ------------------------- ----------------------- e. Avg. Floor plate size (SF), if office N/A N/A N/A -------------------------- ------------------------- ----------------------- f. # elevators N/A N/A N/A -------------------------- ------------------------- ----------------------- g. Parking Adequate Adequate Adequate -------------------------- ------------------------- ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block -------------------------- ------------------------- ----------------------- I. Vacancy % 0% 0% 25.85% -------------------------- ------------------------- ----------------------- j. Anchors, if Retail Food Lion, Revco K-Mart, Winn-Dixie, Revco, Dollar General Eckerds, Peebles -------------------------- ------------------------- ----------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Conway Plaza Bay Village ------------------------ ----------------------- b. Street W/S Church St. 2300 Church Street ------------------------ ----------------------- c. City Conway, SC Conway, SC ------------------------ ----------------------- d. Distance from subject 1/3 mile 22 miles ------------------------ ----------------------- e. Contact CBL & Associates Edens & Avant, Inc. ------------------------ ----------------------- f. Phone 423-855-0001 803-779-4420 ------------------------ ----------------------- 2. Attributes a. Year built 1985 1988 ------------------------ ----------------------- b. Net sq. Ft. 33,000 133,480 ------------------------ ----------------------- c. # building 1 1 ------------------------ ----------------------- d. #stories 1 1 ------------------------ ----------------------- e. Avg. Floor plate size (SF), if office N/A N/A ------------------------ ----------------------- f. # elevators N/A N/A ------------------------ ----------------------- g. Parking Adequate Adequate ------------------------ ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block ------------------------ ----------------------- I. Vacancy % 3.64% .90% ------------------------ ----------------------- j. Anchors, if Retail Food Lion Wal-Mart, Goody's, Big Lots ------------------------ -----------------------
Comments: These comparables are located in Conway, but it is thought that these are similar to subject and comparisons can be made with subject property. The reason for this is subject is situated in a neighborhood that is not directly related to the developments along U.S. Highway #17. The shopping center does attract customers from some of the developments along U.S. Highway #17 and can also attract customers from developments that are located along SC Highway #9. These comparables are similar to subject and the income stream of these shopping centers is also similar to subject. 3 PROPERTY INSPECTION FORM COMMERCIAL
B. RENTAL INFORMATION SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Asking Rental Rate a. Anchor Space $6.75 - $7.50 N/A N/A ------------------------- ------------------------ ----------------------- b. Shop Space $8.00 - $9.50 $9.00 - $12.00 $2.50 - $6.00 ------------------------- ------------------------ ----------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ------------------------- ------------------------ ----------------------- 3. Rent Concessions None None None ------------------------- ------------------------ ----------------------- 4. Effective Rent $8.00 - $9.50 $9.00 - $12.00 $2.50 - $6.00 ------------------------- ------------------------ ----------------------- 5. TI Allowance None None None ------------------------- ------------------------ ----------------------- 6. Expense Stop None None None ------------------------- ------------------------ ----------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 -5 years (shop) 3 - 5 years (shop) ------------------------- ------------------------ ----------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% ------------------------- ------------------------ ----------------------- 9. Percentage Rent K-Mart, Winn-Dixie, (per lease terms) Food Lion, Revco Eckerds, Pebbles Revco ------------------------- ------------------------ ----------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A ------------------------- ------------------------ ----------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A ------------------------- ------------------------ ----------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A superior inferior ------------------------- ------------------------ ----------------------- B. RENTAL INFORMATION COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A $3.35 - $4.50 --------------------- ------------------------- b. Shop Space $6.00 - $8.00 $7.25 - $13.25 --------------------- ------------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net --------------------- ------------------------- 3. Rent Concessions None None --------------------- ------------------------- 4. Effective Rent $6.00 - $8.00 $7.25 - $13.25 --------------------- ------------------------- 5. TI Allowance None None --------------------- ------------------------- 6. Expense Stop None None --------------------- ------------------------- 7. Length of Lease Term 3-5 years (shop) 3-5 years (shop) --------------------- ------------------------- 8. Commissions 5.00% - 7.00% 5.00% - 7.00% --------------------- ------------------------- 9. Percentage Rent (per lease terms) Food Lion Wal-Mart, Goody's --------------------- ------------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A --------------------- ------------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A --------------------- ------------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) inferior similar --------------------- -------------------------
D. EXPLAIN RANKING/COMMENTS: Comparable No. 1 has been rated as superior since this center has been renovated and expanded. Long term leases have been secured from K-Mart and Wal-Mart. Comparables No. 2 and No. 3 are inferior as the Supermarket is vacant. It is thought that Comparable No. 4 is similar even though it is a larger center. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 [GRAPHIC OMITTED] Name: Coastal Mall Location: Church Street at 16th Avenue Conway, SC Year Built: 1969 - Reh. 1994 Total Size: 215,000 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $9.00 - $12.00 per square foot Tenant Expenses: Triple Net Remarks: This mall was renovated in 1994. There is a new K-Mart SuperStore and a new Winn-Dixie Store. Peebles Department Store and Eckerds remain in the mall. 5 Comparable Rental No. 2 [GRAPHIC OMITTED] Name: Waccamaw Square Location: W/S Church Street Conway, SC Year Built: 1976 Total Size: 87,039 SF Vacant Space: 22,500 SF Vacancy Rate: 25.85% Rental Range: $2.50 - $6.00 per square foot Tenant Expenses: Triple Net Remarks: This is an older center and Bi-Lo has vacated the premises. The other stores are Dollar General, Ace TV Rentals, Revco. The former K-Mart that is next door is vacant. 6 Comparable Rental No. 3 [GRAPHIC OMITTED] Name: Conway Plaza Location: W/S Church Street Conway, SC Year Built: 1985 Total Size: 33,000 SF Vacant Space: 2,400 SF Vacancy Rate: 3.64% Rental Range: $6.00 - $8.00 per square foot Tenant Expenses: Triple Net Remarks: The Food Lion Store is vacant, but continues to pay rent. There are two small shops that are vacant. 7 Comparable No. 4 [GRAPHIC OMITTED] Name: Bay Village Location: 2300 Church Street Conway, SC Year Built: 1988 Total Size: 133,480 SF Vacant Space: 1,200 SF Vacancy Rate: .90% Rental Range: $7.25 - $13.25 per square foot for the shops Tenant Expenses: Triple Net Remarks: This center has Wal-Mart as the major tenant, but Wal-Mart will vacate the store as a new SuperStore is under construction on Church Street. This center has always experienced a high occupancy rate. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Waterway Plaza St. Andrews Crossing Eastgate Shop. Center ------------------------- ------------------------ ------------------------ b. Street Address NWC Whiskey Rd. & 3639 Highway #9, East 817 St. Andrews Road Eastgate Dr. ------------------------- ------------------------ ------------------------ c. City Little River, SC Columbia, SC Aiken, SC ------------------------- ------------------------ ------------------------ d. Distance from Subject N/A 8 miles 56 miles ------------------------- ------------------------ ------------------------ 2. Attributes a. Year Built 1991 1994 1995 ------------------------- ------------------------ ------------------------ b. Net sq. feet 49,750 66,910 SF 75,716 SF ------------------------- ------------------------ ------------------------ c. # Buildings 1 1 1 ------------------------- ------------------------ ------------------------ d. # of Stories 1 1 1 ------------------------- ------------------------ ------------------------ e. Vacancy % 0% 0% 5.00% ------------------------- ------------------------ ------------------------ 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 ------------------------- ------------------------ ------------------------ b. Sales Price PSF N/A $97.89 $88.16 ------------------------- ------------------------ ------------------------ c. Date N/A 05-25-94 09-28-95 ------------------------- ------------------------ ------------------------ d. NOI at time of Sale N/A $634,797 $657,896 ------------------------- ------------------------ ------------------------ e. Cap. Rate N/A 9.69% 9.86% ------------------------- ------------------------ ------------------------ 4. Rank Relative to Subject (inferior, similar, superior) N/A superior superior ------------------------- ------------------------ ------------------------ COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name One Norman Center Paw Creek Commons ----------------------- ------------------------ b. Street Address 19706 One Norman E/S Little Rock Rd. at Blvd. Freedom Dr. ----------------------- ------------------------ c. City Cornelius, NC Charlotte, NC ----------------------- ------------------------ d. Distance from Subject 100 miles 92 miles ----------------------- ------------------------ 2. Attributes a. Year Built 1993 1996 ----------------------- ------------------------ b. Net sq. feet 54,185 SF 66,050 ----------------------- ------------------------ c. # Buildings 1 1 ----------------------- ------------------------ d. # of Stories 1 1 ----------------------- ------------------------ e. Vacancy % 0% 2.73% ----------------------- ------------------------ 3. Sales Information a. Sales Price $4,650,000 $5,384,000 ----------------------- ------------------------ b. Sales Price PSF $85.82 $77.52 ----------------------- ------------------------ c. Date 10-12-95 03-25-97 ----------------------- ------------------------ d. NOI at time of Sale $450,188 $517,412 ----------------------- ------------------------ e. Cap. Rate 9.68% 9.61% ----------------------- ------------------------ 4. Rank Relative to Subject (inferior, similar, superior) superior superior ----------------------- ------------------------
Explain Ranking/Comments: These comparables are similar to subject as the tenant mix is similar with a food store and drug store. Comparable No. 1 and No. 4 have been ranked as superior because of the location and the rental rates for the shops being higher than subject property. The income stream of these comparables is similar to subject. 9 Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: 6012 -1 -1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 10 Comparable Sale No. 2 [GRAPHIC OMITTED] TMS: Name: Eastgate Shopping Center Location: Northwest Corner of Whiskey Road & Eastgate Drive Aiken, SC Grantor: Southwest U.S. Retail, LP Grantee: PDG Aiken Partners, LP Deed Reference: N/A Date: September 28, 1995 Sales Price: $6,675,000 Adjusted Sales Price: $6,675,000 Size building: 75,716 Sales Price per S.F.: $88.16 Size Land (Acres): 8.79 Size Land (S.F.): 382,892 Year Built: 1995 Land/Building Ratio: 5.06 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $782,704 Effective Gross Income: $782,704 EGIM: 8.53 Net Operating Income: $657,896 Overall Rate: 9.86% Verification: Public Records Type of Purchaser: Private Investor Comments: Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. 11 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. 12 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: 59-231-22,23 pt. Name: Paw Creek Commons Location: East side of Little Rock Road at Freedom Drive Grantor: Paw Creek, LLC Grantee: Paw Creek Crossing Limited Partnership Deed Reference: Book 8988, Page 519 Date: March 25, 1997 Sales Price: $5,120,000 Adjusted Sales Price: $5,384,000 Size building: 66,050 Sales Price per S.F.: $77.52 Size Land (Acres): 9.82 Size Land (S.F.): 427,759 Year Built: 1996 Land/Building Ratio: 6.48 to 1 Utilities: Municipal Zoning: CC, Commercial Center Financing: Cash to Seller Gross Potential Income: $568,840 Effective Gross Income: $552,054 Gross Income Multiple: 9.00 EGIM: 9.27 Net Operating Income: $517,412 Overall Rate: 9.61% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was pre-construction. The sales price has been adjusted to reflect this by using 50 basis points in the capitalization rate (.1011 minus .0050 equals .0961). The major tenants are Winn-Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. The income from anchor tenants is 79.41 percent of gross income. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 ------------ Location Map ------------ [GRAPHIC OMITTED] ------------------ Comparable Rentals ------------------ Myrtle Beach and South Carolina's Grand Strand [GRAPHIC OMITTED] ------------------ Comparable Rentals ------------------ [GRAPHIC OMITTED] ------------------ Improved Sales Map ------------------ [GRAPHIC OMITTED] --------- Site Plan --------- [GRAPHIC OMITTED] EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: WATERWAY PLAZA 3369 HIGHWAY 9 EAST LITTLE RIVER, SC 29566-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- LANE COIN LAUNDRY LANE ENTERPRISES, INC. 624- 10 1,500 09/01/96 08/31/06 0.00 0.00 0.00 0.00 0.00 0.00 8.50 08/05/91 12,750.00 9.50 09/01/96 14,250.00 - -------------------------------------------------------------------------------------------------------------------------- NEW YORK LOOK SARAH & TARLOCHAN FARMAY 624- 20 1,200 11/01/91 10/31/97 0.00 0.00 0.00 0.00 8.50 12/01/91 10,200.00 - -------------------------------------------------------------------------------------------------------------------------- WATERWAY VIDEO HORACE L. RICHARDSON JR. (HAL 624- 30 1,200 05/16/96 05/31/01 8.00 11/09/94 9,600.00 8.00 01/01/95 9,600.00 9.25 01/01/98 11,100.00 - -------------------------------------------------------------------------------------------------------------------------- COASTAL SPIRITS, INC. WATERWAY PLAZA LIQUORS 624- 40 1,200 09/01/96 08/31/99 0.00 0.00 0.00 0.00 8.50 09/01/91 10,200.00 - -------------------------------------------------------------------------------------------------------------------------- $1.00 DEPOT 624- 50 STEPHEN HINDS, BOBBY & CAROLY 1,800 01/01/96 12/31/98 8.50 01/01/96 15,300.00 - -------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- LANE COIN LAUNDRY LANE ENTERPRISES, INC. Full 0 Full 0 Full 0 09/01/01 08/31/06 0.00 0.00 0 09/01/06 08/31/11 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- NEW YORK LOOK SARAH & TARLOCHAN FARMAY Full 0 Full 0 Full 0 11/01/94 10/31/97 0.00 5.00 0 Y 0.00 5.00 0 Y 0.00 5.00 204,000 Y - ----------------------------------------------------------------------------------------------------------------------------------- WATERWAY VIDEO HORACE L. RICHARDSON JR. (HAL Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- COASTAL SPIRITS, INC. WATERWAY PLAZA LIQUORS Full 0 Full 0 Full 0 09/01/99 08/31/04 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- $1.00 DEPOT STEPHEN HINDS, BOBBY & CAROLY Full 0 Full 0 Full 0 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: WATERWAY PLAZA 3369 HIGHWAY 9 EAST LITTLE RIVER, SC 29566-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- FOOD LION #0899 624- 60 29,000 05/25/91 05/24/16 0.00 0.00 6.75 07/01/91 195,750.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- REVCO #4040 624- 70 8,450 05/19/91 05/31/01 7.00 06/01/91 59,149.92 7.50 06/01/96 63,375.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- HORRY TELEPHONE COOPERATIVE HORRY TELEPHONE COOPERATIVE, 624- 80 1,500 05/01/98 04/30/00 8.00 05/01/95 12,000.00 9.00 05/01/98 13,500.00 - -------------------------------------------------------------------------------------------------------------------------- MARY'S HATS AND GIFTS LITTLE RENO CASINO/CC ELECT/M 624- 90 1,500 05/20/94 05/31/02 7.00 07/01/94 10,500.00 7.00 07/01/95 10,500.00 7.00 07/01/96 10,500.00 8.75 06/01/97 13,125.00 9.75 06/01/00 14,625.00 - -------------------------------------------------------------------------------------------------------------------------- EDDIE'S CAFE E&E OF WEST VIRGINIA INC. 624- 100 2,400 04/01/97 03/31/00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- FOOD LION #0899 Full 0 PRS 1991 Fixed 0 05/25/16 05/24/21 6.75 1.00 0 Y 05/25/21 05/24/26 6.75 1.00 19,575,000 Y 05/25/26 05/24/31 6.75 1.00 0 Y 05/25/31 05/24/36 6.75 1.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- REVCO #4040 Full 0 PRS 1991 Full 0 06/01/01 05/31/06 7.50 2.00 1,971,666 06/01/06 05/31/11 7.50 2.00 2,112,500 06/01/11 05/31/16 7.50 2.00 0 06/01/16 05/31/21 7.50 2.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- HORRY TELEPHONE COOPERATIVE HORRY TELEPHONE COOPERATIVE, Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- MARY'S HATS AND GIFTS LITTLE RENO CASINO/CC ELECT/M Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- EDDIE'S CAFE E&E OF WEST VIRGINIA INC. Full 0 Full 0 Full 0 04/01/97 03/31/00 8.50 0.00 0
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: WATERWAY PLAZA 3369 HIGHWAY 9 EAST LITTLE RIVER, SC 29566-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- EDDIE'S CAFE E&E OF WEST VIRGINIA INC. 624- 100 2,400 04/01/97 03/31/00 0.00 0.00 7.50 04/01/93 18,000.00 8.50 04/01/94 20,400.00 9.00 04/01/96 21,600.00 9.60 04/01/97 23,040.00 - -------------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied.. 49,750 Current Annual Base Rent 364,215.00 Available. 0 Total..... 49,750 - ----------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- EDDIE'S CAFE E&E OF WEST VIRGINIA INC. Full 0 Full 0 Full 0 04/01/00 03/31/04 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] SC Highway #9 - Looking West [GRAPHIC OMITTED] Entrance to Subject from SC Highway #9 [GRAPHIC OMITTED] Entrance to Subject from side street (name unknown) [GRAPHIC OMITTED] Subject Front and Side View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Side View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study WAYNESVILLE PLAZA 121 Eagles Nest Road Waynesville, Haywood County, North Carolina Prepared by O. Marshall Dodds, MAI Date of Market Study - May 9, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] May 9, 1997 Mr. Steven R. Maeglin Morgan Stanley & Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Waynesville Plaza 121 Eagles Nest Road Waynesville, Haywood County, North Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 9, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The subject property consists of a neighborhood shopping center that contains 33,300 square feet of leasable area. The center was constructed in 1985. Food Lion is the anchor tenant and the subject property is currently 100.0% occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds, MAI ------------------------------------ O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) 2 EXECUTIVE SUMMARY - -------------------------------------------------------------------------------- Regional Perspective Waynesville and Haywood County are located in the high mountainous areas of western North Carolina. Lake Junaluska Assembly, the worlds religious center, is located three miles from Waynesville on a 250-acre lake. It was started in 1913 with a missionary conference attended by more than 4,000 people in their regular schedules more than 60 major conferences annually, which are attended by thousands. The population for the county in 1995 was 49,737 people. This increased from 46,942 people in 1990. A Canton Mill and a Waynesville Plant combine to be one of the largest pulp and paper facilities in the world. Furniture factories and sawmills are located near Waynesville and Canton and there is a large rubber and plastic products plant in Waynesville. Other industries in the Waynesville-Hazelwood area include manufacturing of shoes, leather products, in-laid wood, chemicals, milk processing and food products. There are six golf courses located in the county for year-round play. The tourist industry is continuing to improve each year. The unemployment rate for Haywood County is 5.8 percent. Neighborhood and Site The subject neighborhood is located around the intersection of Eagles Nest Road and US Highways #19-A, #23 By-Pass. Single family residential properties are located to the south and north of Eagles Nest Road in the immediate neighborhood and also to the west of the Waynesville By-Pass. The Laurel Ridge Country Club Community and a substantial number of large single family houses are located along the mountain ranges. The commercial development in the neighborhood is located around the intersection of Eagles Nest Road and Sulphur Springs Road. These developments would include Mountain Rental and Paint Center, Eagles Nest Grocery, Doodles Marina and Tackle, JR's Movie Mania, Parkway Electric & Heating Co., Calabash West Seafood Restaurant, The Nautilus Fitness Center and Racquetball Center. The Forga Plaza Shopping Center is located on the south side of Eagles Nest Road just west of the intersection with Sulphur Springs Road. This is a strip shopping center containing eleven small stores occupied by local tenants. The U.S. Army Reserve Center and Carolina Power & Light offices are also located on Sulphur Springs Road. Physical features are as follows: 1. Size 3.778 acres or 164,570 SF 2. Identity 121 Eagles Nest Road TMS# 8605-64-5268 3. Shape Irregular 4. Topography Generally level and on street grade with Eagles Nest Road 5. Accessability Good 6. Utilities Municipal 1 Physical Description Building features are as follows: 1. Size (net) 33,300 SF 2. Layout & Design One story - food store - two shops 3. Parking Spaces 158 4.7 per 1,000 square feet of net area 4. Construction Brick and glass front with concrete block on side and rear and metal seam roof. Market Position and Marketability Conclusions The majority of the shopping facilities in Waynesville are located along Dellwood Boulevard/Russ Avenue at the intersection with the Waynesville By-Pass. Subject property is located south of this intersection by approximately two miles. The shopping centers located around this intersection include the K-Mart Plaza which contains 137,914 square feet. The major tenants are K-Mart and Goody's. Other tenants include Advanced Auto Parts, Good Fortune Gifts, Merle Norman Cosmetic Studios, NationsBank, Radio Shack, Ramcell Cellular Communications, Shelley's Jewelers, Blimpie, Little Caesars Pizza and Rack Room. The rental rates for this center range from $4.50 to $7.50 per square foot. The Waynesville Center is located on Russ Avenue and US Highway #276. The major tenants are Winn-Dixie, Eckerds, Heilig-Meyers and Family Dollar with other tenants being Jan's Hallmark, Gibson's Shoe Surplus, Imperial Carpet, Sherwin-Williams Paint Store, Indian Gap Clothing, and a Movie Theater. The Ingles Center is located on Dellwood Boulevard and US Highway #276. This center contains 96,837 square feet and Ingles and Belk's are the major tenants. The Ingles Store is a new store and the former store is vacant and has not been rented. The shops in subject property are being rented at $3.00 per square foot and at $4.00 per square foot. The Food Lion Store contains 25,000 square feet which is 75% of the total area. The rent for the Food Lion Store is at $4.00 per square foot. Trends: The stability of the City of Waynesville has been maintained over the years. The major attraction is the Lake Junaluska Assembly with some industry. Tourism is also an industry in this area. It is thought that the stability of the City of Waynesville and Haywood will be maintained in the future. While there will be some growth, it will not be extensive. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Waynesville Plaza K-Mart Plaza Waynesville Center ---------------------------- ------------------------- ----------------------------- b. Street 121 Eagles Nest Road US Hwy. 23-74 By-Pass Russ Ave. & US Hwy. #276 ---------------------------- ------------------------- ----------------------------- c. City Waynesville, NC Waynesville, NC Waynesville, NC ---------------------------- ------------------------- ----------------------------- d. Distance from subject N/A 2 miles 2 miles ---------------------------- ------------------------- ----------------------------- e. Contact Millenium III Real Estate Edens & Avant, Inc. Greene Associates Corp. ---------------------------- ------------------------- ----------------------------- f. Phone 803-779-4420 704-299-9454 212-986-9193 ---------------------------- ------------------------- ----------------------------- 2. Attributes a. Year built 1985 1987 1980 ---------------------------- ------------------------- ----------------------------- b. Net sq. Ft. 33,300 137,914 75,625 ---------------------------- ------------------------- ----------------------------- c. # building 1 1 1 ---------------------------- ------------------------- ----------------------------- d. #stories 1 1 1 ---------------------------- ------------------------- ----------------------------- e. Avg. Floor plate size (SF), if office N/A N/A N/A ---------------------------- ------------------------- ----------------------------- f. # elevators N/A N/A N/A ---------------------------- ------------------------- ----------------------------- g. Parking Adequate Adequate Adequate ---------------------------- ------------------------- ----------------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ---------------------------- ------------------------- ----------------------------- I. Vacancy % 0% 0% 8.29% ---------------------------- ------------------------- ----------------------------- j. Anchors, if Retail Food Lion K-Mart, Goody's Winn-Dixie, Eckerds ---------------------------- ------------------------- -----------------------------
COMPARABLE 3 ------------ 1. Identification a. Name Ingles Center --------------------------------- b. Street Dellwood Blvd. & US Hwy. #276 --------------------------------- c. City Waynesville, NC --------------------------------- d. Distance from subject 2 miles --------------------------------- e. Contact Lat Purser & Associates --------------------------------- f. Phone 704-525-8700 --------------------------------- 2. Attributes a. Year built 1984 --------------------------------- b. Net sq. Ft. 96,837 --------------------------------- c. # building 1 --------------------------------- d. #stories 1 --------------------------------- e. Avg. Floor plate size (SF), if office N/A --------------------------------- f. # elevators N/A --------------------------------- g. Parking Adequate --------------------------------- h. Construction Type Brick/Concrete Block --------------------------------- I. Vacancy % 21.75% --------------------------------- j. Anchors, if Retail Ingles, Belks --------------------------------- Comments: These comparables are located approximately two miles south of subject around the intersection of Dellwood Boulevard/Russ Avenue and the Waynesville By-Pass. The comparables are similar and age to subject and the income streams are also similar. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Asking Rental Rate a. Anchor Space $5.50 N/A N/A -------------------------- -------------------------- --------------------------- b. Shop Space $3.00 - $4.00 $4.50 - $7.50 $5.25 - $7.25 -------------------------- -------------------------- --------------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net -------------------------- -------------------------- --------------------------- 3. Rent Concessions None None None -------------------------- -------------------------- --------------------------- 4. Effective Rent $3.00 - $4.00 $4.50 - $7.50 $5.25 - $7.25 -------------------------- -------------------------- --------------------------- 5. TI Allowance None None None -------------------------- -------------------------- --------------------------- 6. Expense Stop None None None -------------------------- -------------------------- --------------------------- 7. Length of Lease Term 3 years 3 -5 years (shop) 3 - 5 years (shop) -------------------------- -------------------------- --------------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% -------------------------- -------------------------- --------------------------- 9. Percentage Rent (per lease terms) Food Lion K-Mart, Goody's Winn-Dixie, Eckerds -------------------------- -------------------------- --------------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A -------------------------- -------------------------- --------------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A -------------------------- -------------------------- --------------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A similar similar -------------------------- -------------------------- ---------------------------
COMPARABLE 3 ------------ 1. Asking Rental Rate a. Anchor Space N/A ------------------------- b. Shop Space $4.75 - $7.00 ------------------------- 2. Lease Type (Gross/Net) Triple Net ------------------------- 3. Rent Concessions None ------------------------- 4. Effective Rent $4.75 - $7.00 ------------------------- 5. TI Allowance None ------------------------- 6. Expense Stop None ------------------------- 7. Length of Lease Term 3-5 years (shop) ------------------------- 8. Commissions 5.00% - 7.00% ------------------------- 9. Percentage Rent (per lease terms) Ingles, Belks ------------------------- 10. Historical Annual Absorption/sq.ft. N/A ------------------------- 11. Annual Operating Expense psf (Including taxes) N/A ------------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) similar ------------------------- D. EXPLAIN RANKING/COMMENTS: The comparable rentals have been ranked as similar to subject. These comparables have anchor tenants and local shops just as subject. The rental rates range from $4.50 per square foot to $7.50 per square foot for these comparables. Subject property has two small shops that are renting for $3.00 and $4.00 per square foot. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 [GRAPHIC OMITTED] Name: K-Mart Plaza Location: US Hwy. #74 & US Hwy #23 By-Pass Waynesville, North Carolina Year Built: 1987 Total Size: 137,914 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $4.50 - $7.50 per square foot Tenant Expenses: Triple Net Remarks: This center is anchored by K-Mart and Goody's. Other tenants include Advanced Auto, NationsBank, Merle Norman Cosmetic Studio. 5 Comparable Rental No. 2 [GRAPHIC OMITTED] Name: Waynesville Center Location: Russ Avenue & US Hwy. #276 Waynesville, North Carolina Year Built: 1980 Total Size: 75,625 SF Vacant Space: 6,269 SF Vacancy Rate: 8.29% Rental Range: $5.25 - $7.25 per square foot Tenant Expenses: Triple Net Remarks: This is an older center and is in need of deferred maintenance. Occupancy rate is high at this time. Major tenants are Winn-Dixie, Eckerds, Family Dollar and Movie Theater. 6 Comparable Rental No. 3 [GRAPHIC OMITTED] Name: Ingles Center Location: Dellwood Boulevard and US Hwy. #19-A, 23 By-Pass Waynesville, North Carolina Year Built: 1984 Total Size: 96,837 SF Vacant Space: 21,500 SF Vacancy Rate: 21.75% Rental Range: $4.75 - $7.00 per square foot for the shops Tenant Expenses: Triple Net Remarks: This is an older center. The former Ingles Store is vacant as a new store was built in 1995. The center is in good condition. 7 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Waynesville Plaza St. Andrews Crossing Eastgate Shop. Center -------------------------- ------------------------ ----------------------- b. Street Address 121 Eagles Nest Road 817 St. Andrews Road NWC Whiskey Rd. & Eastgate Dr. -------------------------- ------------------------ ----------------------- c. City Waynesville, NC Columbia, SC Aiken, SC -------------------------- ------------------------ ----------------------- d. Distance from Subject N/A 8 miles 56 miles -------------------------- ------------------------ ----------------------- 2. Attributes a. Year Built 1985 1994 1995 -------------------------- ------------------------ ----------------------- b. Net sq. feet 33,300 SF 66,910 SF 75,716 SF -------------------------- ------------------------ ----------------------- c. # Buildings 1 1 1 -------------------------- ------------------------ ----------------------- d. # of Stories 1 1 1 -------------------------- ------------------------ ----------------------- e. Vacancy % 0% 0% 5.00% -------------------------- ------------------------ ----------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 -------------------------- ------------------------ ----------------------- b. Sales Price PSF N/A $97.89 $88.16 -------------------------- ------------------------ ----------------------- c. Date N/A 9.69% 9.86% -------------------------- ------------------------ ----------------------- d. NOI at time of Sale N/A 05-25-94 09-28-95 -------------------------- ------------------------ ----------------------- e. Cap. Rate N/A $634,797 $657,896 -------------------------- ------------------------ ----------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A superior similar -------------------------- ------------------------ ----------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name One Norman Center Paw Creek Commons ---------------------- ---------------------- b. Street Address 19706 One Norman E/S Little Rock Rd. Blvd. at Freedom Dr. ---------------------- ---------------------- c. City Cornelius, NC Charlotte, NC ---------------------- ---------------------- d. Distance from Subject 100 miles 92 miles ---------------------- ---------------------- 2. Attributes a. Year Built 1993 1996 ---------------------- ---------------------- b. Net sq. feet 54,185 SF 66,050 ---------------------- ---------------------- c. # Buildings 1 1 ---------------------- ---------------------- d. # of Stories 1 1 ---------------------- ---------------------- e. Vacancy % 0% 2.73% ---------------------- ---------------------- 3. Sales Information a. Sales Price $4,650,000 $5,384,000 ---------------------- ---------------------- b. Sales Price PSF $85.82 $77.52 ---------------------- ---------------------- c. Date 9.68% 9.61% ---------------------- ---------------------- d. NOI at time of Sale 10-12-95 03-25-97 ---------------------- ---------------------- e. Cap. Rate $450,188 $517,412 ---------------------- ---------------------- 4. Rank Relative to Subject (inferior, similar, superior) similar superior ---------------------- ----------------------
Explain Ranking/Comments: These sales are similar to subject as the comparables have anchor tenats with local shop and subject has Food Lion Stores with two tenatns. The location of the comparables are considered to be slightly superior to that of subject and the rental rates are slightly higher than for subject. Comparables No. 1 and 4 are rated superior because of the location and income stream as the rentals for the shops are higher. 8 Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: 6012 -1 -1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 9 Comparable Sale No. 2 [GRAPHIC OMITTED] TMS: Name: Eastgate Shopping Center Location: Northwest Corner of Whiskey Road & Eastgate Drive Aiken, SC Grantor: Southwest U.S. Retail, LP Grantee: PDG Aiken Partners, LP Deed Reference: N/A Date: September 28, 1995 Sales Price: $6,675,000 Adjusted Sales Price: $6,675,000 Size building: 75,716 Sales Price per S.F.: $88.16 Size Land (Acres): 8.79 Size Land (S.F.): 382,892 Year Built: 1995 Land/Building Ratio: 5.06 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $782,704 Effective Gross Income: $782,704 EGIM: 8.53 Net Operating Income: $657,896 Overall Rate: 9.86% Verification: Public Records Type of Purchaser: Private Investor Comments: Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. 10 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. 11 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: 59-231-22,23 pt. Name: Paw Creek Commons Location: East side of Little Rock Road at Freedom Drive Grantor: Paw Creek, LLC Grantee: Paw Creek Crossing Limited Partnership Deed Reference: Book 8988, Page 519 Date: March 25, 1997 Sales Price: $5,120,000 Adjusted Sales Price: $5,384,000 Size building: 66,050 Sales Price per S.F.: $77.52 Size Land (Acres): 9.82 Size Land (S.F.): 427,759 Year Built: 1996 Land/Building Ratio: 6.48 to 1 Utilities: Municipal Zoning: CC, Commercial Center Financing: Cash to Seller Gross Potential Income: $568,840 Effective Gross Income: $552,054 Gross Income Multiple: 9.00 EGIM: 9.27 Net Operating Income: $517,412 Overall Rate: 9.61% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was pre-construction. The sales price has been adjusted to reflect this by using 50 basis points in the capitalization rate (.1011 minus .0050 equals .0961). The major tenants are Winn-Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. The income from anchor tenants is 79.41 percent of gross income. 12 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 13 Comparable Rentals [GRAPHIC OMITTED] Improved Sales Map [GRAPHIC OMITTED] Site Plan [GRAPHIC OMITTED] EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: WAYNESVILLE PLAZA 121 EAGLES NEST ROAD WAYNESVILLE, NC 28786 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- KARAKIDO KARATE CHAUNCEY HOOKS 635- 10 2,800 08/01/95 07/31/98 0.00 0.00 4.00 8/01/95 11,199.96 - ------------------------------------------------------------------------------------------------------------------------- REALLY WOOD ALFRED J. SWIGER JR. & CANDAC 635- 30 5,500 06/01/97 05/31/00 3.00 6/01/97 16,500.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- FOOD LION #0392 FOOD LION, INC. 635- 50 25,000 07/13/86 07/12/06 0.00 0.00 5.05 9/01/86 137,499.96 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied.. 33,300 Current Annual Base Rent 148,699.92 Available. 0 Total..... 33,300 - --------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - --------------------------------------------------------------------------------------------------------------------------------- KARAKIDO KARATE Full 0 Full 0 Full 0 08/01/98 07/31/01 0.00 0.00 0 CHAUNCEY HOOKS 0.00 0.00 0 - --------------------------------------------------------------------------------------------------------------------------------- REALLY WOOD Full 0 Full 0 Full 0 06/01/00 05/31/03 0.00 0.00 0 ALFRED J. SWIGER JR. & CANDAC 0.00 0.00 0 - --------------------------------------------------------------------------------------------------------------------------------- FOOD LION #0392 PRS 1987 None 0 Fixed 0 07/13/06 07/12/11 0.00 1.00 0 Y FOOD LION, INC. 07/13/11 07/12/16 0.00 1.00 13,750,000 Y 07/13/16 07/12/21 0.00 1.00 0 Y 07/13/21 07/12/26 0.00 1.00 0 Y - ---------------------------------------------------------------------------------------------------------------------------------
USA COUNTIES 1996 Geographic Area: Haywood, NC (37087) Table: GENERAL PROFILE - -------------------------------------------------------------------------------- POPULATION AND HOUSING (Bureau of the Census) Total resident population: 1995 ........................................................... 49,737 Percent 65 years and over .................................... 19.5 1990 ........................................................... 46,942 1980 ........................................................... 46,495 Occupied housing units, 1990 ..................................... 19,211 Percent owner occupied ......................................... 77.1 BIRTHS AND DEATHS (National Center for Health Statistics) Births, 1993 ..................................................... 551 Per 1,000 resident population .................................. 11.3 Percent to mothers under 20 years of age ....................... 18.0 Deaths, 1993 ..................................................... 578 Per 1,000 resident population .................................. 11.9 Infant deaths per 1,000 live births, 1993 ........................ 7.3 EDUCATION (Bureau of the Census) Persons 25 years and over, 1990 .................................. 33,107 Percent high school graduates .................................. 68.0 Percent college graduates ...................................... 12.8 LABOR FORCE (Bureau of Labor Statistics) Civilian labor force, 1994 ....................................... 23,119 Percent unemployed ............................................. 5.8 PRIVATE NONFARM ESTABLISHMENTS (Bureau of the Census) Total establishments, 1993 ....................................... 1,172 Percent retail trade ........................................... 27.9 Percent services ............................................... 38.2 Paid employees, 1993 (pay period including March 12) ............. 12,399 Annual payroll, 1993 ($1,000) .................................... 273,274 PERSONAL INCOME (Bureau of Economic Analysis) Total personal income, 1993 ($1,000) ............................. 791,070 Per capita (dollars) ........................................... 16,217 AGRICULTURE (Bureau of the Census) Number of farms, 1992 ............................................ 812 Land in farms as percent of total land ......................... 20 RETAIL TRADE (Bureau of the Census) Retail sales, 1992 ($1,000) ...................................... 398,116 Per capita (dollars) ........................................... 8,268 COMMERCIAL AND SAVINGS BANKS (Fed. Deposit Insurance Corp.) Number of offices, June 30, 1994 ................................. 16 Total deposits ($1,000) ........................................ 451,332 SOCIAL PROGRAMS (Social Security Administration) Total Social Security recipients, December 1993 .................. 11,730 Retired workers ................................................ 7,155 Supplementary Security Income recipients, December 1994 .......... 1,382 FEDERAL FUNDS AND GRANTS (Bureau of the Census) Total direct expenditures or obligations per capita: 1994 (dollars) ................................................. 3,730 1990 (dollars) ................................................. 2,867 - -------------------------------------------------------------------------------- (NA) Not available. (D) Avoid disclosure of confidential information. (X) Not applicable. (S) Does not meet publication standards. (Z) Value > 0 but < half unit of measure shown. NOTE: 0 data may indicate geographic/data footnotes. Source: U.S. Bureau of the Census, USA Counties 1996 CD-ROM. 1 of 1 PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Eagles Nest Road - Looking North [GRAPHIC OMITTED] Eagles Nest Road - Looking South [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front View and Entrance [GRAPHIC OMITTED] Subject - Front View and Entrance [GRAPHIC OMITTED] Subject - Front View and Entrance [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Rear View This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study National Bank of South Carolina Office Building 1241 Main Street Columbia, Richland County, South Carolina Prepared by Michael B. Dodds, MAI, CCIM Date of Market Study - May 2, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] May 2, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study 1241 Main Street Columbia, Richland County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that forms the basis of the study was conducted by Michael B. Dodds, MAI, CCIM. The subject property and all comparable data was inspected by Michael B. Dodds, MAI, CCIM on May 2, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a 12 story class "A" office building containing 147,890 rentable square feet. The structure was constructed in 1973 and was extensively renovated in 1994. The building is currently 81.8% leased. NBSC leases approximately 28.8 percent of the building. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ Michael B. Dodds ------------------------------- Michael B. Dodds, MAI, CCIM State Certified General Real Estate Appraiser (CG-543) EXECUTIVE SUMMARY ================================================================================ Regional Perspective Columbia is the state capital with the State House being located in downtown Columbia. Also, the University of South Carolina Campus is located in the downtown area. Fort Jackson, which is a large U.S. Army Training Facility is located in the eastern section of the Metropolitan area. The city has numerous specialized office activities such as: insurance, consulting services, advertising, marketing, printing and financial services. Government, distribution, finance and transportation are all important to Columbia, although none are preeminent. Geography also gives Columbia a strategic location in the industrial and commercial spheres. The unemployment rate for Richland County as of March, 1997 was 3.7 percent while the statewide rate was 5.3 percent. Neighborhood and Site The neighborhood is generally the central business district of Columbia. Considerable new construction and renovation is currently taking place in the downtown area, although most is occurring away from the Main Street corridor. The redevelopment of the CCI prison site along the Congaree River will most likely include a variety of uses including residential, retail and office. Additional new developments includes the relocation of the Columbia Museum of Art to the Main Street building previously occupied by Macy's. This development will also include some office space. Perhaps the largest proposed development is the planned convention center and sports arena. The University of South Carolina is planning to build a multi-purpose sports arena and the city is proposing a 120,000 square foot convention center. The exact location of the project has not been determined. Physical features are as follows: 1. Size 0.574 acres or 25,018 SF 2. Identity 1241 Main Street TMS# 09013-08-04 3. Shape Rectangular - Adequate 4. Topography Level and on grade with Main Street 5. Accessibility Good - two streets 6. Utilities Municipal Physical Description Building features are as follows: 1. Size 160,068 SF(Gross) 147,890 SF (Net) 2. Layout & Design 12 story - Class A with bank lobby 3. Parking Spaces 145 owned and 288 leased (2.93 spaces per 1,000 SF of net area) 4. Construction Structural steel with masonry and glass exterior 1 Market Position and Marketability Conclusions The subject property is located in the central business district on Main Street, as most of the class A office buildings are. Approximately 28.8 percent of the building is leased to NBSC, and the contract rents are close to market levels as of the date of this analysis. Within the three years prior to the date of this analysis, space has been leased at a net rate of 16,525 square feet annually. Much of the leasing occurred in 1995 upon completion of a major renovation by the owner. In general, the building is considered to be attractive and functional for it's use. The subject property is located in Zone 1, as shown in the 1996 Central Carolina Business Review and Investment Guide. According to this survey, there is a total of 4,224,682 rentable square feet of office space in the downtown area, with an overall vacancy level of 15.3 percent. The reported vacancy rate for only class A properties is approximately 8.8 percent vacant. The general office market has been on a positive trend for approximately two years, with no CBD construction occurring. During the first half of 1996, 57,000 square feet of office space was absorbed, compared to a total of 82,000 square feet in 1995. The relocation of the Columbia Museum of Arts to the former Macy's building will include some office space, but it is not expected to have a significant effect on the market. The parking that is available at a building is a primary factor affecting buildings in downtown Columbia. Comparable #2 has limited parking available, and is only 83 percent occupied. The subject property has a lower than average parking ratio, although additional parking is available in nearby parking garages and surface parking lots All of the class A buildings typically structure their leases on a full service basis and this is the case with the subject property. The average lease term ranges from 3 to 10 years, and all of the comparables have bank lobbies on the first floor. NationsBank, which occupies space in two CBD buildings, recently renewed its lease for 85,000 square feet at the NationsBank Plaza. Also, Laidlaw Environmental Services has leased 70,000 square feet in the NationsBank Tower for its North American headquarters. While many corporations are consolidating operations, sub-lease space is not considered to be a major component of the available space. The subject property is one of the older class A office building in the CBD although it competes well with all downtown office buildings. The rental rates received are within the range established by the comparables. In general, the rental rates range from $15.00 to $17.50 per square foot, with expense stops ranging from $4.00 to $6.00 per square foot. The concessions being offered are minimal, and typically consist of free rent or increased upfit allowances. The subject property has many leases on a 3 to 5 year term, which is shorter than many of the leases in newer buildings. Trends The economic development successes in recent years has affected the suburban market greater than it has the CBD market. The lack of large blocks of contiguous space in the CBD will continue to drive build to suit development in the suburbs. The B and C class space in the CBD will see the highest vacancy levels, and the lowering of rental rates will negatively affect the absorption of class A space. Overall, the lack of new construction is expected to tighten the market further, although corporate consolidations will slow the demand for space somewhat. The subject property is in a good position in the competitive marketplace and should continue to lease up at a rate consistent with the past two years. The rental rates are expected to increase at a stable rate. 2 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================ I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name NBSC Building NationsBank Plaza First Union Building ----------------- --------------------- -------------------- b. Street 1421 Main Street 1901 Main Street 1441 Main Street ----------------- --------------------- -------------------- c. City Columbia, SC Columbia, SC Columbia, SC ----------------- --------------------- -------------------- d. Distance from subject N/A 1 Block 4 Blocks ----------------- --------------------- -------------------- e. Contact Edens and Avant Daniel Realty Joseph Welch ----------------- --------------------- -------------------- f. Phone (803)779-4420 (803)256-8920 (803)779-4485 ----------------- --------------------- -------------------- 2. Attributes a. Year built 1970-Renovated in 1989 1988 1994 ----------------- --------------------- -------------------- b. Net sq. Ft. 147,890 302,340 257,511 ----------------- --------------------- -------------------- c. # building 1 1 1 ----------------- --------------------- -------------------- d. #stories 12 17 14 ----------------- --------------------- -------------------- e. Avg. Floor plate size (SF), 12,000 17,800 18,400 if office ----------------- --------------------- -------------------- f. # elevators 4 8 4 ----------------- --------------------- -------------------- g. Parking Adequate - Garage Adequate - 900/Garage Limited - Garage ----------------- --------------------- -------------------- h. Construction Type Masonry and steel Masonry and steel ----------------- --------------------- -------------------- I. Vacancy % 18.2% 6% 17% ----------------- --------------------- -------------------- j. Anchors, if Retail N/A N/A N/A ----------------- --------------------- -------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Fleet Building Affinity Building ----------------- ---------------------- b. Street 1333 Main Street Assembly @ Gervais ----------------- ---------------------- c. City Columbia, SC Columbia, SC ----------------- ---------------------- d. Distance from subject 5 Blocks 6 Blocks ----------------- ---------------------- e. Contact Joseph Welch Bill Geiger ----------------- ---------------------- f. Phone (803)779-4485 (803)748-1245 ----------------- ---------------------- 2. Attributes a. Year built 1983 1987 ----------------- ---------------------- b. Net sq. Ft. 189,632 471,684 ----------------- ---------------------- c. # building 1 1 ----------------- ---------------------- d. #stories 7 25 ----------------- ---------------------- e. Avg. Floor plate size (SF), 27,000 18,900 if office ----------------- ---------------------- f. # elevators 4 12 ----------------- ---------------------- g. Parking Adequate - Garage Adequate - 467/Garage ----------------- ---------------------- h. Construction Type Masonry and steel Masonry and steel ----------------- ---------------------- I. Vacancy % 10% 6% ----------------- ---------------------- j. Anchors, if Retail N/A N/A ----------------- ----------------------
Comments: 3 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================ B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ 1. Asking Rental Rate $12.00 - $14.00/SF $17.50/SF $17.50/SF $15.50/SF $17.25/SF ------------------ ------------- ------------------ ------------------ ------------------ 2. Lease Type (Gross/Net) Full Service Full Service Full Service Full Service Full Service ------------------ ------------- ------------------ ------------------ ------------------ 3. Rent Concessions None None Varies None None ------------------ ------------- ------------------ ------------------ ------------------ 4. Effective Rent $12.00 - $14.00/SF $17.50/SF $16.00/SF $15.50/SF $17.25/SF ------------------ ------------- ------------------ ------------------ ------------------ 5. TI Allowance $15.00 - $18.00/SF $20.00/SF $15.00 - $18.00/SF $15.00 - $18.00/SF $15.00 - $18.00/SF ------------------ ------------- ------------------ ------------------ ------------------ 6. Expense Stop $4.75/SF $6.10/SF $5.70/SF N/A $6.00/SF ------------------ ------------- ------------------ ------------------ ------------------ 7. Length of Lease Term 3 - 5 Years 5 - 10 Years 5 - 10 Years 5 - 10 Years 5 - 10 Years ------------------ ------------- ------------------ ------------------ ------------------ 8. Commissions 2.0% - 6.0% 2.0% - 6.0% 2.0% - 6.0% 2.0% - 6.0% 2.0% - 6.0% ------------------ ------------- ------------------ ------------------ ------------------ 9. Percentage Rent (per lease terms) N/A N/A N/A N/A N/A ------------------ ------------- ------------------ ------------------ ------------------ 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A N/A ------------------ ------------- ------------------ ------------------ ------------------ 11. Annual Operating Expense psf (Including taxes) N/A $4.50 - $5.00 $6.00 $4.50 - $5.00 $5.95 ------------------ ------------- ------------------ ------------------ ------------------ C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Superior Superior Superior Superior ------------------ ------------- ------------------ ------------------ ------------------
D. EXPLAIN RANKING/COMMENTS: All of the comparables are newer than the subject property, and are located on Main Street. The high vacancy rate at comparable #2 is reportedly due to poor parking. Comparable #4 has a private club on the top floor, and comparable #1 has a fitness club available for tenant use. Several of the Main Street buildings offer amenities that are not available at the subject, but the value of these can't be determined from comparing rental rates. Typically, leasing commissions are "cashed out". 4 LOCAL RENTAL COMPARABLES - ------------------------ Comparable Rental No. 1 [GRAPHIC OMITTED] Name: NationsBank Plaza Location: 1901 Main Street Columbia, South Carolina Year Built: 1989 Total Size: 302,340 SF Vacant Space: 66,000 SF Vacancy Rate: 21.8% Rental Range: $17.50 Tenant Expenses: None, full service Remarks: This is the first of two planned "twin" office buildings. Amenities include a fitness center and a 900 space parking garage. Parking spaces are approximately $65 per month. Approximately 50,000 square feet has never been occupied. 5 Comparable Rental No. 2 [GRAPHIC OMITTED] Name: First Union Building Location: 1441 Main Street Columbia, South Carolina Year Built: 1988 Total Size: 257,510 SF Vacant Space: 44,652 SF Vacancy Rate: 17.3 % Rental Range: $17.50 Tenant Expenses: None - full service Remarks: This building has an underground parking facility for 68 vehicles, and an additional 96 spaces are leased in an adjacent parking lot. The building is also identified as Improved Sale #1 in this analysis. Approximately 31,100 square feet in this building has never been upfitted. Poor parking has been mentioned as a reason for the below average occupancy. 6 Comparable Rental No. 3 [GRAPHIC OMITTED] Name: Fleet Building Location: 1333 Main Street Columbia, South Carolina Year Built: 1983 Total Size: 189,632 SF Vacant Space: 18,963 SF Vacancy Rate: 10 % Rental Range: $15.50 Tenant Expenses: None - full service Remarks: This building was previously known locally as the IBM building. The seven story building has historically maintained a high occupancy level. 7 Comparable Rental No. 4 [GRAPHIC OMITTED] Name: Affinity Building Location: NWC of Assembly Street and Gervais Street Columbia, SC Year Built: 1987 Total Size: 471,684 SF Vacant Space: 27,800 SF Vacancy Rate: 6.0% Rent Range: $17.25/SF Tenant Expenses: None - full service Remarks: This 25 story building is primarily occupied by governmental offices which are currently paying above market rents. The government is currently considering whether to renew at a renegotiated rate, or to relocate. A private club is located on the top floor. New leases include a $6.00 per square foot expense stop. The state house is located across Gervais Street from this building. This building was previously known as the AT&T building. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES ================================================================================
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name NBSC Building First Union Building BB&T Financial Center ----------------- -------------------- --------------------- b. Street Address 1241 Main Street 1441 Main Street 200 W. Second St. ----------------- -------------------- --------------------- c. City Columbia, SC Columbia, SC Winston Salem, NC ----------------- -------------------- --------------------- d. Distance from Subject N/A 2 Blocks 200 Miles ----------------- -------------------- --------------------- 2. Attributes ----------------- a. Year Built 1970/94 1988 1987 ----------------- -------------------- --------------------- b. Net sq. feet 147,890 257,511 240,187 ----------------- -------------------- --------------------- c. # Buildings 1 1 1 ----------------- -------------------- --------------------- d. # of Stories 12 14 20 ----------------- -------------------- --------------------- e. Vacancy % 18.2% 17.2% 0% ----------------- -------------------- --------------------- 3. Sales Information ----------------- a. Sales Price N/A $20,500,000 $24,500,000 ----------------- -------------------- --------------------- b. Sales Price PSF N/A $83.32 $102.00 ----------------- -------------------- --------------------- c. Cap. Rate N/A 10.74% 10.42% ----------------- -------------------- --------------------- d. Date N/A November 22,1996 September 30,1996 ----------------- -------------------- --------------------- e. NOI at time of Sale N/A $2,304,297 $2,552,663 ----------------- -------------------- --------------------- 4. Rank Relative to Subject N/A Superior Superior (inferior, similar, superior) ----------------- -------------------- --------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name 2 Coliseum Centre Bissell Building ----------------- ----------------- b. Street Address Tyvola @ Yorkmont 2115 Rexford Road ----------------- ----------------- c. City Charlotte, NC Charlotte, NC ----------------- ----------------- d. Distance from Subject 100 Miles 100 Miles ----------------- ----------------- 2. Attributes a. Year Built 1994 1980 ----------------- ----------------- b. Net sq. feet 133,147 76,620 ----------------- ----------------- c. # Buildings 1 1 ----------------- ----------------- d. # of Stories 6 5 ----------------- ----------------- e. Vacancy % N/A 4% ----------------- ----------------- 3. Sales Information a. Sales Price $17,660,000 $7,725,000 ----------------- ----------------- b. Sales Price PSF $132.64 $100.82 ----------------- ----------------- c. Cap. Rate 8.33% 9.70% ----------------- ----------------- d. Date October 16,1996 January 3, 1996 ----------------- ----------------- e. NOI at time of Sale $1,470,451 $748,952 ----------------- ----------------- 4. Rank Relative to Subject Superior Superior (inferior, similar, superior) ----------------- -----------------
Explain Ranking/Comments: Comparables #1 and #2 are CBD buildings, while the other comparables are suburban locations. All of the buildings are newer than the subject. Quality of construction is similar, although the comparables have more modern mechanical equipment and higher quality insulation and windows. 9 COMPARABLE SHOPPING CENTER SALES - -------------------------------- Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: 9013-04-22 Name: First Union Building Location: 1441 Main Street, Columbia, SC Grantor: New York Life Insurance Company Grantee: Trizec Columbia I, Inc. Deed Reference: Book 1350, Page 283 Date: November 22, 1996 Sales Price: $20,500,000 Adjusted Sales Price: $21,455,000 Size building 257,510 Sales Price per S.F.: $83.32 Size Land (Acres): .837 Size Land (S.F.): 36,455 Year Built: 1988 Land/Building Ratio: 0.14 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $4,120,102 EGIM: 5.21 Net Operating Income: $2,304,297 Overall Rate: 10.74% Verification: Public Records Type of Purchaser: Private Investor Comments: At the time of sale, 44,164 square feet were vacant. Purchaser estimated upfitting costs and rent loss associated with the vacant space at $955,000. This amount has been added to the sales price to arrive at the adjusted price. NOI and EGI shown above were purchaser's estimate for 1996 10 Comparable Sale No. 2 [GRAPHIC OMITTED] Name: BB&T Financial Center Location: 200 W. Second Street Winston Salem, NC Grantor: Aetna Life Insurance Company Grantee: Parkway Carolina, Inc. Deed Reference:Book 1920, Page 51 Date: September 30, 1996 Sales Price: $24,500,000 Adjusted Sales Price: $24,500,000 Size building: 240,187 Sales Price per S.F.: $102.00 Size Land (Acres): 1.2 Size Land (S.F.): 52,272 Year Built: 1987 Land/Building Ratio: 0.22 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Effective Gross Income: $3,915,772 EGIM: 6.26 Net Operating Income: $2,552,663 Overall Rate: 10.42% Verification: Public Records Type of Purchaser: Private Investor Comments: BB&T had a first right of refusal, which was bought out for $1,000,000. Original purchase price was based upon a capitalization rate of 10.0%. The property was 100% occupied at the time of sale, although the above figures include a vacancy allowance of 5%. Expenses are based upon purchaser's projection. Adjacent parking garage is owned by the City. 11 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: Two Coliseum Centre Location: Tyvola and Yorkmont Roads Charlotte, Mecklenburg County, NC Grantor: Crescent Resources, Inc. Grantee: Acquiport Coliseum Centre, Inc. Deed Reference: Book 8781, Page 466 Date: October 16, 1996 Sales Price: $16,440,000 Adjusted Sales Price: $17,660,000 Size building: 133,147 Sales Price per S.F.: $132.64 Size Land (Acres): 7.28 Size Land (S.F.): 317,117 Year Built: 1994 Land/Building Ratio: 2.38 to 1 Utilities: All Public Zoning: Commercial Financing: Cash to Seller Effective Gross Income: $2,100,332 EGIM: 8.41 Net Operating Income: 1,470,451 Overall Rate: 8.33% Verification: Public Records Type of Purchaser: Private Investor Comments: Price was adjusted to account for leasehold interest in the land lease which was determined to be below market. Expenses exclude ground rent of $94,608. Current land value is approximately $6.00 per square foot. The adjacent building, One Coliseum Centre was purchased simultaneously. 12 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: 177-082-16 Name: Bissell Building Location: 2115 Rexford Road Charlotte, NC Grantor: BCI Property Co. #21 Grantee: Rexford, LLC Deed Reference: Book 8420, Page 81 Date: January 3, 1996 Sales Price: $7,725,000 Adjusted Sales Price: $7,725,000 Size building: 76,620 Sales Price per S.F.: $100.82 Size Land (Acres): 5.5 Size Land (S.F.): 239,580 Year Built: 1980 Land/Building Ratio: 3.13 to 1 Utilities: Municipal Zoning: I-1 CD Financing: Cash to Seller Effective Gross Income: $1,179,384 EGIM: 6.55 Net Operating Income: $748,952 Overall Rate: 9.70% Verification: Public Records Type of Purchaser: Private Investor Comments: This mid-rise office building is located in the popular Southpark area of Charlotte. It was approximately 96% occupied at the time of sale 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 [GRAPHIC OMITTED] Comparable Rentals Map [GRAPHIC OMITTED] Comparable Sales Map EDENS & AVANT, INC. Commercial Custom Rent Roll Date: 04/08/97 Page: 26 Property: NBSC BUILDING 1122 LADY STREET COLUMBIA, SC 29201 Column Legends: Renewal Options TYP column: TBD - To be Determined CPI - Consumer Price Index
- ----------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION Monthly Annual per Tenant Name Prop # Unit # Sq Feet Begin Expire MTM Begin Base Rent Base Rent SF/YR - ----------------------------------------------------------------------------------------------------------------------------- NATIONAL BANK OF SOUTH CA 687- 100 42,620 01/01/92 12/31/01 01/01/92 27,672.75 332,073.00 7.79 05/01/94 37,292.50 447,510.00 10.50 01/01/95 42,620.00 511,440.00 12.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 01/01/97 47,947.50 575,370.00 13.50 0.00 0.00 0.00 0.00 0.00 0.00 01/01/99 51,499.17 617,990.04 14.50 01/01/01 58,602.50 703,230.00 16.50 - ----------------------------------------------------------------------------------------------------------------------------- MCI MCI TELECOMMUNICATIONS CO 687- 10B 0 05/01/93 04/30/98 05/01/93 215.63 2,587.56 0.00 - ----------------------------------------------------------------------------------------------------------------------------- QUICK & REILLY INC. 687- 110 890 02/01/94 01/31/99 11/01/94 1,039.00 12,468.00 14.01 - ----------------------------------------------------------------------------------------------------------------------------- STATE FARM (GILBERT) JIMMY E. GILBERT 687- 120 1,338 11/01/93 10/31/98 0.00 0.00 0.00 01/01/94 1,449.50 17,394.00 13.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION RENEWAL OPTIONS EXPENSE RECOVERIES Recovery Stop Base Tenant Name Begin End SF/YR Typ Method Amt Year - ------------------------------------------------------------------------------------ NATIONAL BANK OF SOUTH CA 0.00 Base Year 0.00 1991 0.00 0.00 0.00 0.00 0.00 - 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------ MCI MCI TELECOMMUNICATIONS CO 0.00 0.00 - ------------------------------------------------------------------------------------ QUICK & REILLY INC. 0.00 Base Year 0.00 1994 - ------------------------------------------------------------------------------------ STATE FARM (GILBERT) JIMMY E. GILBERT 0.00 Base Year 0.00 1993 0.00 0.00
EDENS & AVANT, INC. Commercial Custom Rent Roll Date: 04/08/97 Page: 27 Property: NBSC BUILDING 1122 LADY STREET COLUMBIA, SC 29201 Column Legends: Renewal Options TYP column: TBD - To be Determined CPI - Consumer Price Index
- ---------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION Monthly Annual per Tenant Name Prop # Unit # Sq Feet Begin Expire MTM Begin Base Rent Base Rent SF/YR - ---------------------------------------------------------------------------------------------------------------------------- STATE FARM (GILBERT) JIMMY E. GILBERT 687- 120 1,338 11/01/93 10/31/98 0.00 0.00 0.00 11/01/96 1,561.00 18,732.00 14.00 - ---------------------------------------------------------------------------------------------------------------------------- INFONET SERVICES CORPORAT F/K/A COMPUTER SCIENCES C 687- 20B 0 01/01/95 12/31/95 01/01/93 135.78 1,629.36 0.00 - ---------------------------------------------------------------------------------------------------------------------------- PAGING NETWORK, INC PAGING NETWORK OF N.C., I 687- 30B 0 08/01/94 07/31/97 08/01/94 233.33 2,799.96 0.00 08/01/95 238.00 2,856.00 0.00 0.00 0.00 0.00 - ---------------------------------------------------------------------------------------------------------------------------- Available 687- 400 12,196 0.00 0.00 0.00 - ---------------------------------------------------------------------------------------------------------------------------- Available 687- 500 11,491 0.00 0.00 0.00 - ---------------------------------------------------------------------------------------------------------------------------- STEWART TITLE GUARANTY CO 687- 600 2,157 05/01/95 04/30/98 05/01/93 1,692.19 20,306.28 9.41 05/01/94 1,805.00 21,660.00 10.04 0.00 0.00 0.00 0.00 0.00 0.00 05/01/96 2,030.63 24,367.56 11.30 - ---------------------------------------------------------------------------------------------------------------------------- STEWART TITLE GUARANTY CO 687- 610 1,239 05/01/95 04/30/98 05/01/93 1,326.56 15,918.72 12.85 05/01/94 1,415.00 16,980.00 13.70 - ---------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION RENEWAL OPTIONS EXPENSE RECOVERIES Recovery Stop Base Tenant Name Begin End SF/YR Typ Method Amt Year - ---------------------------------------------------------------------------------------------- STATE FARM (GILBERT) JIMMY E. GILBERT 0.00 Base Year 0.00 1993 0.00 - ---------------------------------------------------------------------------------------------- INFONET SERVICES CORPORAT F/K/A COMPUTER SCIENCES C 0.00 Base Year 0.00 1985 - ---------------------------------------------------------------------------------------------- PAGING NETWORK, INC PAGING NETWORK OF N.C., I 08/01/95 07/31/96 12.75 Exp Stop 4.50 08/01/96 07/31/97 12.75 08/01/97 07/31/98 15.00 - ---------------------------------------------------------------------------------------------- Available 0.00 0.00 - ---------------------------------------------------------------------------------------------- Available 0.00 0.00 - ---------------------------------------------------------------------------------------------- STEWART TITLE GUARANTY CO 0.00 Exp Stop 4.50 0.00 0.00 0.00 0.00 - ---------------------------------------------------------------------------------------------- STEWART TITLE GUARANTY CO 0.00 Exp Stop 4.50 0.00
EDENS & AVANT, INC. Commercial Custom Rent Roll Date: 04/08/97 Page: 28 Property: NBSC BUILDING 1122 LADY STREET COLUMBIA, SC 29201 Column Legends: Renewal Options TYP column: TBD - To be Determined CPI - Consumer Price Index
- ---------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION Monthly Annual per Tenant Name Prop # Unit # Sq Feet Begin Expire MTM Begin Base Rent Base Rent SF/YR - ---------------------------------------------------------------------------------------------------------------------------- STEWART TITLE GUARANTY CO 687- 610 1,239 05/01/95 04/30/98 0.00 0.00 0.00 0.00 0.00 0.00 05/01/96 1,591.88 19,102.56 15.42 0.00 0.00 0.00 - ---------------------------------------------------------------------------------------------------------------------------- WILLIAM DIXON ROBERTSON, 687- 620 1,340 12/01/96 11/30/01 12/01/96 1,563.00 18,756.00 14.00 0.00 0.00 0.00 0.00 0.00 0.00 12/01/99 1,619.00 19,428.00 14.50 - ---------------------------------------------------------------------------------------------------------------------------- Available 687- 630 587 0.00 0.00 0.00 - ---------------------------------------------------------------------------------------------------------------------------- BURKETT BURKETT & BURKETT BURKETT, BURKETT, & BURKE 687- 650 3,800 01/16/96 01/31/01 0.00 0.00 0.00 04/01/96 4,789.57 57,474.84 15.12 0.00 0.00 0.00 - ---------------------------------------------------------------------------------------------------------------------------- SC DEPT. OF COMMERCE SC DEPARTMENT OF COMMERCE 687- 700 7,782 07/01/95 06/30/00 07/01/95 8,430.50 101,166.00 13.00 0.00 0.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION RENEWAL OPTIONS EXPENSE RECOVERIES Recovery Stop Base Tenant Name Begin End SF/YR Typ Method Amt Year - -------------------------------------------------------------------------------------------- STEWART TITLE GUARANTY CO 0.00 Exp Stop 4.50 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------- WILLIAM DIXON ROBERTSON, 12/01/01 11/30/06 0.00 Base Year 0.00 1996 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------- Available 0.00 0.00 - -------------------------------------------------------------------------------------------- BURKETT BURKETT & BURKETT BURKETT, BURKETT, & BURKE 0.00 Exp Stop 4.75 0.00 - -------------------------------------------------------------------------------------------- SC DEPT. OF COMMERCE SC DEPARTMENT OF COMMERCE 01/01/00 06/30/05 0.00 Exp Stop 4.50 0.00 0.00
EDENS & AVANT, INC. Commercial Custom Rent Roll Date: 04/08/97 Page: 29 Property: NBSC BUILDING 1122 LADY STREET COLUMBIA, SC 29201 Column Legends: Renewal Options TYP column: TBD - To be Determined CPI - Consumer Price Index
- ---------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION Monthly Annual per Tenant Name Prop # Unit # Sq Feet Begin Expire MTM Begin Base Rent Base Rent SF/YR - ---------------------------------------------------------------------------------------------------------------------------- SC BUDGET & CONTROL BOARD OFFICE OF LOCAL GOVERNMEN 687- 710 2,290 07/01/95 06/30/00 07/01/95 2,480.83 29,769.96 13.00 - ---------------------------------------------------------------------------------------------------------------------------- Available 687- 720 1,419 0.00 0.00 0.00 - ---------------------------------------------------------------------------------------------------------------------------- FIRST SUN SOUTH CORPORATI FIRST SUN SOUTH 687- 800 13,485 04/01/95 08/31/97 09/01/93 8,430.00 101,160.00 7.50 11/01/94 8,430.00 101,160.00 7.50 04/01/95 11,410.00 136,920.00 10.15 09/01/95 13,485.00 161,820.00 12.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION RENEWAL OPTIONS EXPENSE RECOVERIES Recovery Stop Base Tenant Name Begin End SF/YR Typ Method Amt Year - -------------------------------------------------------------------------------------------- SC BUDGET & CONTROL BOARD OFFICE OF LOCAL GOVERNMEN 07/01/00 06/30/05 0.00 Exp Stop 4.50 - -------------------------------------------------------------------------------------------- Available 0.00 0.00 - -------------------------------------------------------------------------------------------- FIRST SUN SOUTH CORPORATI FIRST SUN SOUTH 0.00 Base Year 0.00 1994 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
EDENS & AVANT, INC. Commercial Custom Rent Roll Date: 04/08/97 Page: 30 Property: NBSC BUILDING 1122 LADY STREET COLUMBIA, SC 29201 Column Legends: Renewal Options TYP column: TBD - To be Determined CPI - Consumer Price Index
- ---------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION Monthly Annual per Tenant Name Prop # Unit # Sq Feet Begin Expire MTM Begin Base Rent Base Rent SF/YR - ---------------------------------------------------------------------------------------------------------------------------- FIRST SUN SOUTH CORPORATI FIRST SUN SOUTH 687- 800 13,485 04/01/95 08/31/97 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------- SC VIDEO MALL ASSOCIATION SOUTH CAROLINA VIDEO MALL 687- 900 662 01/01/97 12/31/97 01/01/97 500.00 6,000.00 9.06 - ----------------------------------------------------------------------------------------------------------------------------- Available 687- 905 543 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------- RICHARD H. WALLACE JR. 687- 910 1,149 03/01/96 02/28/99 09/01/94 533.00 6,396.00 5.57 0.00 0.00 0.00 03/01/96 1,149.00 13,788.00 12.00 - -------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION RENEWAL OPTIONS EXPENSE RECOVERIES Recovery Stop Base Tenant Name Begin End SF/YR Typ Method Amt Year - -------------------------------------------------------------------------------------------- FIRST SUN SOUTH CORPORATI FIRST SUN SOUTH 0.00 Base Year 0.00 1994 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------- SC VIDEO MALL ASSOCIATION SOUTH CAROLINA VIDEO MALL 0.00 0.00 - -------------------------------------------------------------------------------------------- Available 0.00 0.00 - -------------------------------------------------------------------------------------------- RICHARD H. WALLACE JR. 0.00 Exp Stop 4.50 0.00 0.00
EDENS & AVANT, INC. Commercial Custom Rent Roll Date: 04/08/97 Page: 31 Property: NBSC BUILDING 1122 LADY STREET COLUMBIA, SC 29201 Column Legends: Renewal Options TYP column: TBD - To be Determined CPI - Consumer Price Index
- ---------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION Monthly Annual per Tenant Name Prop # Unit # Sq Feet Begin Expire MTM Begin Base Rent Base Rent SF/YR - ---------------------------------------------------------------------------------------------------------------------------- DAVID WALLACE COMPANY 687- 911 726 06/11/90 12/10/93 06/11/90 151.25 1,815.00 2.50 06/11/91 726.00 8,712.00 12.00 06/11/92 786.50 9,438.00 13.00 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------- NATIONAL FEDERATION OF IN NATIONAL FEDERATION OF IN 687- 912 620 03/01/96 02/28/99 03/01/96 620.00 7,440.00 12.00 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------- SC ASPHALT PAVEMENT ASSOC SOUTH CAROLINA ASPHALT PA 687- 913 703 09/01/95 08/31/98 02/22/82 773.96 9,287.52 13.21 09/01/95 881.00 10,572.00 15.04 - ----------------------------------------------------------------------------------------------------------------------------- JAMES M. VARDAMAN & CO., 687- 914 591 03/01/97 02/28/00 07/01/88 557.53 6,690.36 11.32 0.00 0.00 0.00 0.00 0.00 0.00 03/01/97 591.00 7,092.00 12.00 - ----------------------------------------------------------------------------------------------------------------------------- MUNN & ASSOCIATES RUSSELL C. MUNN 687- 915 618 10/11/95 11/30/98 10/11/95 338.71 4,064.52 6.58 11/01/95 500.00 6,000.00 9.71 0.00 0.00 0.00 12/01/95 618.00 7,416.00 12.00 - --------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION RENEWAL OPTIONS EXPENSE RECOVERIES Recovery Stop Base Tenant Name Begin End SF/YR Typ Method Amt Year - --------------------------------------------------------------------------------------------- DAVID WALLACE COMPANY 0.00 Base Year 0.00 1990 0.00 0.00 0.00 - ---------------------------------------------------------------------------------------------- NATIONAL FEDERATION OF IN NATIONAL FEDERATION OF IN 0.00 Exp Stop 4.50 0.00 - ---------------------------------------------------------------------------------------------- SC ASPHALT PAVEMENT ASSOC SOUTH CAROLINA ASPHALT PA 0.00 Exp Stop 4.50 0.00 - ---------------------------------------------------------------------------------------------- JAMES M. VARDAMAN & CO., 0.00 Base Year 0.00 1997 0.00 0.00 0.00 - ---------------------------------------------------------------------------------------------- MUNN & ASSOCIATES RUSSELL C. MUNN 0.00 Exp Stop 4.50 0.00 0.00 0.00
EDENS & AVANT, INC. Commercial Custom Rent Roll Date: 04/08/97 Page: 32 Property: NBSC BUILDING 1122 LADY STREET COLUMBIA, SC 29201 Column Legends: Renewal Options TYP column: TBD - To be Determined CPI - Consumer Price Index
- ---------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION Monthly Annual per Tenant Name Prop # Unit # Sq Feet Begin Expire MTM Begin Base Rent Base Rent SF/YR - ---------------------------------------------------------------------------------------------------------------------------- MUNN & ASSOCIATES RUSSELL C. MUNN 687- 915 618 10/11/95 11/30/98 01/01/96 659.39 7,912.68 12.80 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------- SC OFF. OF APPELLATE DEFE APPELLATE DEFENSE 687- 940 5,254 06/01/95 05/31/00 06/01/93 5,472.92 65,675.04 12.50 06/01/94 5,910.75 70,929.00 13.50 06/01/95 5,254.00 63,048.00 12.00 06/01/96 5,472.92 65,675.04 12.50 06/01/98 5,910.75 70,929.00 13.50 06/01/99 6,129.67 73,556.04 14.00 - ----------------------------------------------------------------------------------------------------------------------------- ROBERT A. SCHNEIDER AMERICAN PROPERTIES MGMT, 687- 955 460 09/01/90 MTM 09/01/90 479.17 5,750.04 12.50 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------- GENERAL MAGIC, INC. SEE 687-500 687- 1000 2,413 09/01/96 12/31/96 09/01/96 1,410.00 16,920.00 7.01 0.00 0.00 0.00 10/01/96 2,011.00 24,132.00 10.00 0.00 0.00 0.00 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------- PENNINGTON LAW FIRM, P.A. GARY C. PENNINGTON 687- 1010 1,444 07/01/96 07/31/99 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION RENEWAL OPTIONS EXPENSE RECOVERIES Recovery Stop Base Tenant Name Begin End SF/YR Typ Method Amt Year - -------------------------------------------------------------------------------------------- MUNN & ASSOCIATES RUSSELL C. MUNN 0.00 Exp Stop 4.50 0.00 - -------------------------------------------------------------------------------------------- SC OFF. OF APPELLATE DEFE APPELLATE DEFENSE 06/01/95 05/31/00 0.00 Exp Stop 4.50 06/01/00 05/31/05 0.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------- ROBERT A. SCHNEIDER AMERICAN PROPERTIES MGMT, 0.00 Base Year 0.00 1989 0.00 - -------------------------------------------------------------------------------------------- GENERAL MAGIC, INC. SEE 687-500 0.00 0.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------- PENNINGTON LAW FIRM, P.A. GARY C. PENNINGTON 08/01/99 07/31/02 0.00 Exp Stop 4.50
EDENS & AVANT, INC. Commercial Custom Rent Roll Date: 04/08/97 Page: 33 Property: NBSC BUILDING 1122 LADY STREET COLUMBIA, SC 29201 Column Legends: Renewal Options TYP column: TBD - To be Determined CPI - Consumer Price Index
- ---------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION Monthly Annual per Tenant Name Prop # Unit # Sq Feet Begin Expire MTM Begin Base Rent Base Rent SF/YR - ---------------------------------------------------------------------------------------------------------------------------- PENNINGTON LAW FIRM, P.A. GARY C. PENNINGTON 687- 1010 1,444 07/01/96 07/31/99 08/01/96 1,444.00 17,328.00 12.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------- AMERICAN PROPERTIES MANAG 687- 1015 389 09/01/90 08/31/93 09/01/90 405.21 4,862.52 12.50 - ----------------------------------------------------------------------------------------------------------------------------- HRC ARMCO, INC. 687- 1020 935 09/01/96 08/31/97 09/01/96 818.12 9,817.44 10.50 0.00 0.00 0.00 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------- UNITED TELEPHONE COMPANY UNITED TELEPHONE COMPANY 687- 1050 832 07/01/94 06/30/97 07/01/93 762.67 9,152.04 11.00 0.00 0.00 0.00 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------- FIELDS LAW FIRM, PA JACKSON E. (PETE) FIELDS 687- 1060 1,964 05/01/96 04/30/99 12/01/95 1,063.00 12,756.00 6.49 0.00 0.00 0.00 04/01/96 1,304.00 15,648.00 7.97 05/01/96 2,063.00 24,756.00 12.60 - --------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION RENEWAL OPTIONS EXPENSE RECOVERIES Recovery Stop Base Tenant Name Begin End SF/YR Typ Method Amt Year - --------------------------------------------------------------------------------------------- PENNINGTON LAW FIRM, P.A. GARY C. PENNINGTON 0.00 Exp Stop 4.50 0.00 0.00 0.00 0.00 - --------------------------------------------------------------------------------------------- AMERICAN PROPERTIES MANAG 0.00 Base Year 0.00 1989 - --------------------------------------------------------------------------------------------- HRC ARMCO, INC. 0.00 Base Year 0.00 1996 0.00 0.00 - --------------------------------------------------------------------------------------------- UNITED TELEPHONE COMPANY UNITED TELEPHONE COMPANY 0.00 Base Year 0.00 1991 0.00 0.00 - --------------------------------------------------------------------------------------------- FIELDS LAW FIRM, PA JACKSON E. (PETE) FIELDS 0.00 Exp Stop 4.50 0.00 0.00 0.00
EDENS & AVANT, INC. Commercial Custom Rent Roll Date: 04/08/97 Page: 34 Property: NBSC BUILDING 1122 LADY STREET COLUMBIA, SC 29201 Column Legends: Renewal Options TYP column: TBD - To be Determined CPI - Consumer Price Index
- ---------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION Monthly Annual per Tenant Name Prop # Unit # Sq Feet Begin Expire MTM Begin Base Rent Base Rent SF/YR - ---------------------------------------------------------------------------------------------------------------------------- FIELDS LAW FIRM, PA JACKSON E. (PETE) FIELDS 687- 1060 1,964 05/01/96 04/30/99 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------- RESOLUTE SYSTEMS OF SC LL RESOLUTE SYSTEMS OF SOUTH 687- 1080 2,618 07/11/94 07/14/99 08/01/94 2,395.84 28,750.08 10.98 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 07/01/99 1,197.92 1,197.92 0.46 - ----------------------------------------------------------------------------------------------------------------------------- Available 687- 1085 664 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------- SHERRILL & ROOF, LLP 687- 1100 3,025 02/10/95 02/28/98 03/01/95 2,773.00 33,276.00 11.00 0.00 0.00 0.00 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------- COMMISSION ON INDIGENT DE 687- 1110 2,066 07/01/96 06/30/01 12/01/94 1,539.60 18,475.20 8.94 0.00 0.00 0.00 0.00 0.00 0.00 - ---------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION RENEWAL OPTIONS EXPENSE RECOVERIES Recovery Stop Base Tenant Name Begin End SF/YR Typ Method Amt Year - ---------------------------------------------------------------------------------------------- FIELDS LAW FIRM, PA JACKSON E. (PETE) FIELDS 0.00 Exp Stop 4.50 0.00 0.00 0.00 - ---------------------------------------------------------------------------------------------- RESOLUTE SYSTEMS OF SC LL RESOLUTE SYSTEMS OF SOUTH 0.00 Exp Stop 4.50 0.00 0.00 0.00 0.00 - ---------------------------------------------------------------------------------------------- Available 0.00 0.00 - ---------------------------------------------------------------------------------------------- SHERRILL & ROOF, LLP 0.00 Exp Stop 4.25 0.00 0.00 - ---------------------------------------------------------------------------------------------- COMMISSION ON INDIGENT DE 07/01/01 06/30/03 13.25 Exp Stop 4.00 0.00 0.00
EDENS & AVANT, INC. Commercial Custom Rent Roll Date: 04/08/97 Page: 35 Property: NBSC BUILDING 1122 LADY STREET COLUMBIA, SC 29201 Column Legends: Renewal Options TYP column: TBD - To be Determined CPI - Consumer Price Index
- ---------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION Monthly Annual per Tenant Name Prop # Unit # Sq Feet Begin Expire MTM Begin Base Rent Base Rent SF/YR - ---------------------------------------------------------------------------------------------------------------------------- COMMISSION ON INDIGENT DE 687- 1110 2,066 07/01/96 06/30/01 07/01/96 2,208.89 26,506.68 12.83 - ------------------------------------------------------------------------------------------------------------------------------ INSURETECH ALTERNATIVES, 687- 1145 2,048 09/01/96 08/31/99 09/01/96 2,048.00 24,576.00 12.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------ CAPITOL CONSULTANTS, INC. 687- 1150 1,131 12/01/96 11/30/97 12/01/96 1,060.00 12,720.00 11.25 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------ EDENS & AVANT MAINTENANCE EDENS & AVANT MAINTENANCE 687- 1160 361 MTM 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------ INSURETECH ALTERNATIVES, 687- 1170 2,574 06/01/97 05/31/00 06/01/97 2,145.00 25,740.00 10.00 - ------------------------------------------------------------------------------------------------------------------------------ SC BUDGET & CONTROL BOARD OFFICE OF THE BUDGET 687- 1200 10,410 04/01/95 03/31/98 0.00 0.00 0.00 04/01/95 9,516.48 114,197.76 10.97 - ------------------------------------------------------------------------------------------------------------------------------ BB&T ATM BRANCH BANKING & TRUST CO 687- 1300 0 05/16/88 05/15/98 06/01/93 800.00 9,600.00 0.00 06/01/96 1,000.00 12,000.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION RENEWAL OPTIONS EXPENSE RECOVERIES Recovery Stop Base Tenant Name Begin End SF/YR Typ Method Amt Year - ------------------------------------------------------------------------------------------- COMMISSION ON INDIGENT DE 0.00 Exp Stop 4.00 - ------------------------------------------------------------------------------------------- INSURETECH ALTERNATIVES, 0.00 Exp Stop 4.56 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------- CAPITOL CONSULTANTS, INC. 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------- EDENS & AVANT MAINTENANCE EDENS & AVANT MAINTENANCE 0.00 0.00 - ------------------------------------------------------------------------------------------- INSURETECH ALTERNATIVES, 06/01/00 05/31/03 0.00 Exp Stop 4.56 - ------------------------------------------------------------------------------------------- SC BUDGET & CONTROL BOARD OFFICE OF THE BUDGET 04/01/99 03/31/00 0.00 Exp Stop 4.50 04/01/98 03/31/99 0.00 - ------------------------------------------------------------------------------------------- BB&T ATM BRANCH BANKING & TRUST CO 05/16/98 05/15/03 0.00 Full 0.00 0.00 - -------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Commercial Custom Rent Roll Date: 04/08/97 Page: 36 Property: NBSC BUILDING 1122 LADY STREET COLUMBIA, SC 29201 Column Legends: Renewal Options TYP column: TBD - To be Determined CPI - Consumer Price Index
- ---------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION Monthly Annual per Tenant Name Prop # Unit # Sq Feet Begin Expire MTM Begin Base Rent Base Rent SF/YR - ---------------------------------------------------------------------------------------------------------------------------- CAPITOL CENTER ASSOCIATES MAIN STREET PARKING LOT A 687- 1400 0 05/10/93 05/31/94 06/01/93 3,900.00 46,800.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------- UNLEASABLE COMMON AREA 687- 9998 1,056 MTM 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION RENEWAL OPTIONS EXPENSE RECOVERIES Recovery Stop Base Tenant Name Begin End SF/YR Typ Method Amt Year - ---------------------------------------------------------------------------------------------- CAPITOL CENTER ASSOCIATES MAIN STREET PARKING LOT A 0.00 0.00 - ---------------------------------------------------------------------------------------------- UNLEASABLE COMMON AREA 0.00 0.00 - ---------------------------------------------------------------------------------------------- SQUARE FEET: Occupied... 120,990 Current Annual Base Rent 1,548,642.12 Available.. 26,900 Total ..... 147,890
PHOTOGRAPHS OF SUBJECT PROPERTY - ------------------------------- [GRAPHIC OMITTED] Subject Property - Looking Southwest [GRAPHIC OMITTED] Subject Property - Looking North [GRAPHIC OMITTED] Subject Property - Looking Southeast [GRAPHIC OMITTED] Lady Street - Looking West [GRAPHIC OMITTED] Main Street - Looking North [GRAPHIC OMITTED] Main Street - Looking South [GRAPHIC OMITTED] Subject Property - Looking Northwest [GRAPHIC OMITTED] Aerial View - Looking Looking Southwest [GRAPHIC OMITTED] Aerial View - Looking Southeast This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study 1634 MAIN STREET OFFICE BUILDING 1634 Main Street Columbia, Richland County, South Carolina Prepared by Michael B. Dodds, MAI, CCIM Date of Market Study - May 6, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] May 6, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Office Building 1634 Main Street Columbia, Richland County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that forms the basis of the study was conducted by Michael B. Dodds, MAI, CCIM. The subject property and all comparable data was inspected by Michael B. Dodds, MAI, CCIM on May 6, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the office market and is not intended to state opinions on the value of the subject property. The property consists of a 2 story office building containing 13,994 rentable square feet, and 20,550 gross square feet. The structure was constructed in approximately 1934 and was extensively renovated in 1988. The building is currently 89.3 percent leased. The General Services Administration currently leases 39.9 percent of the building. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ Michael B. Dodds, MAI, CCIM -------------------------------------- Michael B. Dodds, MAI, CCIM State Certified General Real Estate Appraiser (CG-543) EXECUTIVE SUMMARY - -------------------------------------------------------------------------------- Regional Perspective Columbia is the state capital with the State House being located in downtown Columbia. Also, the University of South Carolina Campus is located in the downtown area. Fort Jackson, which is a large U.S. Army Training Facility is located in the eastern section of the Metropolitan area. The city has numerous specialized office activities such as: insurance, consulting services, advertising, marketing, printing and financial services. Government, distribution, finance and transportation are all important to Columbia, although none are preeminent. Geography also gives Columbia a strategic location in the industrial and commercial spheres. The unemployment rate for Richland County as of March, 1997 was 3.7 percent while the statewide rate was 5.3 percent. Neighborhood and Site The neighborhood is generally the central business district of Columbia. Considerable new construction and renovation is currently taking place in the downtown area, although most is occurring away from the Main Street corridor. The redevelopment of the CCI prison site along the Congaree River will most likely include a variety of uses including residential, retail and office. Additional new developments includes the relocation of the Columbia Museum of Art to the Main Street building previously occupied by Macy's. This development will also include some office space. Perhaps the largest proposed development is the planned convention center and sports arena. The University of South Carolina is planning to build a multi-purpose sports arena and the city is proposing a 120,000 square foot convention center. The exact location of the project has not been determined. Physical features are as follows: 1. Size 0.5 acres or 21,718 SF 2. Identity 1634 Main Street TMS# 09014-04-19 3. Shape Rectangular - Very Narrow 4. Topography Level and on grade with Main Street 5. Accessibility Good: Pedestrian - Main Street Vehicular - Sumter Street 6. Utilities Municipal Physical Description Building features are as follows: 1. Size 20,550 SF(Gross) 13,994 SF (Net) 2. Layout & Design 2 story with basement 3. Parking Spaces 39 owned (2.79 spaces per 1,000 SF of net area) 4. Construction Masonry and stucco exterior, Built up roof 1 Market Position and Marketability Conclusions The subject property is located on Main Street in the central business district of Columbia. Many older structures similar to the subject have been renovated during the 1980's and 1990's. Often, the buildings are renovated to include retail on the first floor and office space on the upper floors. Most recently, with the decline of the Main Street retail district, the buildings have been renovated to strictly office uses. During the mid to late 1980's, several buildings were converted to office condominiums. The market was not strong for this type of product, and many of the units are still leased by the developer. This is the case at rent comparables #1 and #3. It is unlikely that office condominium development will take place in the downtown area in the near future. The subject is located within Zone 1, as shown in the 1996 Central Carolina Business Review and Investment Guide. According to this survey, there is a total of 4,224,682 rentable square feet of office space in the downtown area, with an overall vacancy level of 15.3 percent. The reported vacancy rate for only class A properties is approximately 8.8 percent vacant. The general office market has been on a positive trend for approximately two years, with no CBD construction occurring. During the first half of 1996, 57,000 square feet of office space was absorbed, compared to a total of 82,000 square feet in 1995. The relocation of the Columbia Museum of Arts to the former Macy's building will include some office space, but it is not expected to have a significant effect on the market. The parking that is available at a building is a primary factor affecting buildings in downtown Columbia. Comparable #2 has limited parking available, and is only 83 percent occupied. The subject property has a parking ratio which is above average for buildings in the downtown area. Additional parking is also available in nearby parking garages and surface parking lots. NationsBank, which occupies space in two CBD buildings, recently renewed its lease for 85,000 square feet at the NationsBank Plaza. Also, Laidlaw Environmental Services has leased 70,000 square feet in the NationsBank Tower for its North American headquarters. While many corporations are consolidating operations, sub-lease space is not considered to be a major component of the available space. The subject property is an older office building in the CBD and it competes well with the smaller downtown office buildings. The rental rates received are within the range established by the comparables. In general, the rental rates range from $10.00 to $13.50 per square foot, with expense stops ranging from $3.56 to $4.74 per square foot. Parking is included in the rent, which makes it superior to many competing buildings. The only vacant space is a 1,499 square foot space in the basement which is being marketed for $10.00 per square foot. Two leases recently expired, although the leasing agent has stated that all indications are that the leases will be renewed, and that negotiations are underway. The concessions being offered are minimal, and typically consist of free rent. Tenant improvements are minimal in this rental range, generally being from $5.00 to $6.00 per square foot, and commissions are equal to the first months rent and 5 percent as collected. The market for buildings similar to the subject is not as strong as the class A market, although the better quality buildings are experiencing high occupancy rates and rental rates. There is minimal demand for basement space, as reflected by the rental rates achieved for this type of space. The rental rate charged for basement space at the subject is higher than normal for downtown. Trends The economic development successes in recent years has affected the suburban market greater than it has the CBD market. The lack of large blocks of contiguous space in the CBD will continue to drive build to suit development in the suburbs. The B and C class space in the CBD will continue to see the highest vacancy levels, and the lowering of rental rates will negatively affect the absorption of class A space. Overall, the lack of new construction is expected to tighten the market further, although corporate consolidations will slow the demand for space somewhat. The subject property is in a good position in the competitive marketplace and should continue to maintain an occupancy level at or near the average for the CBD. The rental rates are expected to increase at a stable rate. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES - -------------------------------------------------------------------------------- A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name 1634 Main Street Bouchier Building Concord Building ---------------------- ----------------------- ----------------------- b. Street 1634 Main Street 1722-24 Main Street 1301 Sumter Street ---------------------- ----------------------- ----------------------- c. City Columbia, SC Columbia, SC Columbia, SC ---------------------- ----------------------- ----------------------- d. Distance from subject N/A 1 Block 4 Blocks ---------------------- ----------------------- ----------------------- e. Contact Edens and Avant Edens and Avant Edens and Avant ---------------------- ----------------------- ----------------------- f. Phone (803)779-4420 (803)779-4420 (803)779-4420 ---------------------- ----------------------- ----------------------- 2. Attributes a. Year built 1934-Renovated in 1960/1984 Renovation 1955 1988 ---------------------- ----------------------- ----------------------- b. Net sq. Ft. 13,994 14,689 12,482 ---------------------- ----------------------- ----------------------- c. # building 1 1 1 ---------------------- ----------------------- ----------------------- d. #stories 2 + basement 3 2 + Basement ---------------------- ----------------------- ----------------------- e. Avg. Floor plate size (SF), 5,800 5,000 6,000 if office ---------------------- ----------------------- ----------------------- f. # elevators 1 1 1 ---------------------- ----------------------- ----------------------- g. Parking Adequate - Surface Limited - Surface Limited - Surface ---------------------- ----------------------- ----------------------- h. Construction Type Masonry Masonry Masonry ---------------------- ----------------------- ----------------------- I. Vacancy % 10.7% 17.0% 0% ---------------------- ----------------------- ----------------------- j. Anchors, if Retail N/A N/A N/A ---------------------- ----------------------- ----------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name 1720 Main Street Sylvan Building ----------------------- ----------------------- b. Street 1720 Main Street 1500 Main Street ----------------------- ----------------------- c. City Columbia, SC Columbia, SC ----------------------- ----------------------- d. Distance from subject 1 Block 1 Block ----------------------- ----------------------- e. Contact George Lee Al Saad ----------------------- ----------------------- f. Phone (803)771-6004 (803)254-3795 ----------------------- ----------------------- 2. Attributes a. Year built 1940 1870/1984 Renovation ----------------------- ----------------------- b. Net sq. Ft. 9,100 15,000 ----------------------- ----------------------- c. # building 1 1 ----------------------- ----------------------- d. #stories 3 4 + Basement ----------------------- ----------------------- e. Avg. Floor plate size (SF), 3,000 4,000 if office ----------------------- ----------------------- f. # elevators 1 1 ----------------------- ----------------------- g. Parking Adequate - Surface Adequate - Surface ----------------------- ----------------------- h. Construction Type Masonry Masonry ----------------------- ----------------------- I. Vacancy % 0% 8.7% ----------------------- ----------------------- j. Anchors, if Retail N/A N/A ----------------------- -----------------------
Comments: 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION - --------------------------------------------------------------------------------
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Asking Rental Rate $10.00 /SF (basement) $12.50/SF $10.50/SF ----------------------- ----------------------- ---------------------- 2. Lease Type (Gross/Net) Full Service Full Service Full Service ----------------------- ----------------------- ---------------------- 3. Rent Concessions None None Varies ----------------------- ----------------------- ---------------------- 4. Effective Rent $10.00/SF $12.50/SF $10.50/SF ----------------------- ----------------------- ---------------------- 5. TI Allowance $5.00 - $6.00/SF $5.00 - $6.00/SF $5.00 - $6.00/SF ----------------------- ----------------------- ---------------------- 6. Expense Stop $3.75/SF $3.50 - $3.75/SF $3.50 - $3.75/SF ----------------------- ----------------------- ---------------------- 7. Length of Lease Term 3 - 5 Years 3 - 5 Years 3 - 5 Years ----------------------- ----------------------- ---------------------- 8. Commissions 1 mo. Rent + 5%/month 2.0% - 6.0% 2.0% - 6.0% ----------------------- ----------------------- ---------------------- 9. Percentage Rent N/A N/A N/A (per lease terms) ----------------------- ----------------------- ---------------------- 10. Historical Annual N/A N/A N/A Absorption/sq.ft. ----------------------- ----------------------- ---------------------- 11. Annual Operating Expense N/A $3.50 - $3.75 $3.50 - $3.75 psf (Including taxes) ----------------------- ----------------------- ---------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Similar Similar ----------------------- ----------------------- ---------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Asking Rental Rate $10.50/SF $10.00/SF ---------------------- ---------------------- 2. Lease Type (Gross/Net) Net Full Service ---------------------- ---------------------- 3. Rent Concessions None None ---------------------- ---------------------- 4. Effective Rent $10.50/SF $10.00/SF ---------------------- ---------------------- 5. TI Allowance $5.00 - $6.00/SF N/A ---------------------- ---------------------- 6. Expense Stop N/A $3.50 - $3.75/SF ---------------------- ---------------------- 7. Length of Lease Term 1 - 5 Years 3 - 5 Years ---------------------- ---------------------- 8. Commissions 2.0% - 6.0% 2.0% - 6.0% ---------------------- ---------------------- 9. Percentage Rent N/A N/A (per lease terms) ---------------------- ---------------------- 10. Historical Annual N/A N/A Absorption/sq.ft. ---------------------- ---------------------- 11. Annual Operating Expense $3.50 - $3.75 $3.50 - $3.75 psf (Including taxes) ---------------------- ---------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) Inferior Similar ---------------------- ----------------------
D. EXPLAIN RANKING/COMMENTS: Typically, leasing commissions are "cashed out". Comparables #1 and #3 were converted to condominium units in 1989, and some of the units are owner occupied. Parking is limited at comparables #1 and #2 and this has impacted leasing efforts in the past. Basements are common, as comparables #2 and #4 have them, although the rents are usually in the range of 20 - 30 percent below standard space. All of the buildings have been fully renovated and are attractive. The only vacant space at the subject is in the basement. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 [GRAPHIC OMITTED] Name: Bouchier Building Location: 1722-24 Main Street Columbia, South Carolina Year Built: 1960/84 Total Size: 14,689 SF Vacant Space: 2,500 SF Vacancy Rate: 17.0% Rental Range: $12.50 Tenant Expenses: None, full service Remarks: This three story building was converted to condominiums in 1989, although only one unit is owner occupied. Parking is somewhat limited, and this has affected leasing activities. 5 Comparable Rental No. 2 [GRAPHIC OMITTED] Name: Concord Building Location: 1301 Sumter Street Columbia, South Carolina Year Built: 1955 Total Size: 12,482 SF Vacant Space: 0 SF Vacancy Rate: 0 % Rental Range: $10.50 Tenant Expenses: None - full service Remarks: Approximately 5,000 square feet of the rentable area is within a basement. The basement is reportedly leased at a rate in the range of $7.50 per square foot. 6 Comparable Rental No. 3 [GRAPHIC OMITTED] Name: 1720 Main Street Location: 1720 Main Street Columbia, South Carolina Year Built: 1940/84 Total Size: 9,100 SF Vacant Space: 0 SF Vacancy Rate: 0 % Rental Range: $10.50 Tenant Expenses: Janitorial and utilities Remarks: This building was converted to condominiums in 1989, and some of the units are owner occupied. The building is attractive and has adequate parking. 7 Comparable Rental No. 4 [GRAPHIC OMITTED] Name: Sylvan Building Location: 1500 Main Street Columbia, SC Year Built: 1870/84 Total Size: 15,000 SF Vacant Space: 1,300 SF Vacancy Rate: 8.7% Rent Range: $10.00/SF Tenant Expenses: None - full service Remarks: Parking is available at a rate of $50.00 per month per space. The basement space typically leases in the $9.00 per square foot range. Sylvan Jewelers occupies much of the first floor. The building is located on a corner and offers excellent exposure. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name 1634 Main Street SC Dept. Social 900 Elmwood Avenue Services ----------------------- ----------------------- ----------------------- b. Street Address 1634 Main Street 3150 Harden Street 900 Elmwood Avenue ----------------------- ----------------------- ----------------------- c. City Columbia, SC Columbia, SC Columbia, SC ----------------------- ----------------------- ----------------------- d. Distance from Subject N/A 1.5 Miles 6 Blocks ----------------------- ----------------------- ----------------------- 2. Attributes ----------------------- a. Year Built 1934/88 1989 1972 ----------------------- ----------------------- ----------------------- b. Net sq. feet 13,994 63,370 14,182 ----------------------- ----------------------- ----------------------- c. # Buildings 1 1 1 ----------------------- ----------------------- ----------------------- d. # of Stories 2 + Basement 3 2 ----------------------- ----------------------- ----------------------- e. Vacancy % 10.7% 0% 28% ----------------------- ----------------------- ----------------------- 3. Sales Information ----------------------- a. Sales Price N/A $6,600,000 $950,000 ----------------------- ----------------------- ----------------------- b. Sales Price PSF N/A $104.15 $66.99 ----------------------- ----------------------- ----------------------- c. Cap. Rate N/A 8.5% 9.58% ----------------------- ----------------------- ----------------------- d. Date N/A September 28, 1994 July 17, 1995 ----------------------- ----------------------- ----------------------- e. NOI at time of Sale N/A $537,900 $91,023 ----------------------- ----------------------- ----------------------- 4. Rank Relative to Subject N/A Superior Similar (inferior, similar, superior) ----------------------- ----------------------- ----------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name SC Eye Institute Sunset Medical Building -------------------- ------------------------ b. Street Address 4 Medical Pk. Dr. 1816 Marshall Street -------------------- ------------------------ c. City Columbia, SC Columbia, SC -------------------- ------------------------ d. Distance from Subject 1 Miles 1 Miles -------------------- ------------------------ 2. Attributes a. Year Built 1975 1988 -------------------- ------------------------ b. Net sq. feet 23,562 22,300 -------------------- ------------------------ c. # Buildings 1 1 -------------------- ------------------------ d. # of Stories 3 5 -------------------- ------------------------ e. Vacancy % 0% 4% -------------------- ------------------------ 3. Sales Information a. Sales Price $1,995,000 $2,225,000 -------------------- ------------------------ b. Sales Price PSF $84.67 $99.78 -------------------- ------------------------ c. Cap. Rate 10.43% N/A -------------------- ------------------------ d. Date December, 1992 April 8, 1993 -------------------- ------------------------ e. NOI at time of Sale $208,059 $206,323 -------------------- ------------------------ 4. Rank Relative to Subject Superior Superior (inferior, similar, superior) -------------------- ------------------------
Explain Ranking/Comments: Several of the comparables are medical buildings. Comparable #2 is located in the central business district, and similar rental characteristics when compared to the subject. No sale of Main Street office buildings were found which are considered to be truly comparable to the subject or arm's length. All of the sales comparables are newer than the subject. 9 COMPARABLE IMPROVED SALES Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: 11502-01-02 Name: SC Department of Social Services Location: 3150 Harden Street, Columbia, SC Grantor: Harden Street Limited Partnership Grantee: The State of South Carolina Deed Reference: Book 1221, Page 539 and 542 Date: September 28, 1994 Sales Price: $6,600,000 Adjusted Sales Price: $6,600,000 Size building 63,370 Sales Price per S.F.: $104.15 Size Land (Acres): 2.5 Size Land (S.F.): 108,900 Year Built: 1989 Land/Building Ratio: 1.72 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $719,407 EGIM: 9.17 Net Operating Income: $537,900 Overall Rate: 8.15% Verification: Public Records Type of Purchaser: State Government Comments: This was a build to suit for the state agency who occupied the building until the sale. It was purchased for continued occupancy by the purchaser. Building contains 67,800 gross square feet and is three stories. 10 Comparable Sale No. 2 [GRAPHIC OMITTED] Name: 900 Elmwood Avenue Location: 900 Elmwood Avenue Columbia, SC Grantor: Nine Hundred Associates Grantee: GSB, A SC General Partnership Deed Reference: Book 1269, Page 516 Date: July 15, 1995 Sales Price: $950,000 Adjusted Sales Price: $950,000 Size building: 14,182 Sales Price per S.F.: $66.99 Size Land (Acres): 0.74 Size Land (S.F.): 32,234 Year Built: 1972 Land/Building Ratio: 2.27 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Effective Gross Income: $162,353 EGIM: 5.85 Net Operating Income: $91,023 Overall Rate: 9.58% Verification: Public Records Type of Purchaser: Private Investor Comments: Two story walk up building of average to good quality construction. The building was 28 percent vacant at the time of sale, with a market rent of approximately $12.00 to $12.50 per square foot. Figures above are based upon a market vacancy of 10 percent, as the vacant space was to be occupied by the purchaser's law firm. The building had historically maintained a high occupancy level. 11 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: SC Eye Institute Location: 4 Medical Park Drive Columbia, Richland County, SC Grantor: Ophthalmology Associates Grantee: University of South Carolina Deed Reference: Book 1064, Page 784 Date: December, 1992 Sales Price: $1,995,000 Adjusted Sales Price: $1,995,000 Size building: 23,562 Sales Price per S.F.: $84.67 Size Land (Acres): N/A Size Land (S.F.): N/A Year Built: 1975 Land/Building Ratio: N/A Utilities: All Public Zoning: Commercial Financing: Cash to Seller Effective Gross Income: $330,807 EGIM: 6.03 Net Operating Income: $208,059 Overall Rate: 10.43% Verification: Public Records Type of Purchaser: University Comments: Property is located across the street from the Richland Memorial Hospital. The University of South Carolina has purchased several buildings in the area. 12 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: 11504-27-01 and 07 Name: Sunset Medical Office Building Location: 1816 Marshall Street Columbia, SC Grantor: Sunset Medical Partners Grantee: Richland Memorial Hospital Deed Reference: Book 1136, Page 559 Date: April 8, 1993 Sales Price: $2,225,000 Adjusted Sales Price: $2,225,000 Size building: 22,300 Sales Price per S.F.: $99.78 Size Land (Acres): 2.4 Size Land (S.F.): 104,544 Year Built: 1988 Land/Building Ratio: 4.29 to 1 Utilities: Municipal Zoning: C-3 Financing: Cash to Seller Effective Gross Income: $288,152 EGIM: 7.72 Net Operating Income: $206,323 Overall Rate: 9.27% Verification: Public Records Type of Purchaser: Hospital Comments: This mid-rise office building is located across the street from the Richland Memorial Hospital, and portions of the building were leased to the hospital at the time of sale. The gross building area is 24,386 square feet. The largest tenant occupied 15,800 square feet at a rental rate of $10.25 per square foot. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 [GRAPHIC OMITTED] Rental Comparables Map [GRAPHIC OMITTED] Improved Sales Map EDENS & AVANT, INC. Commercial Custom Rent Roll Date: 04/24/97 Property: 1634 MAIN STREET 1634 MAIN STREET COLUMBIA, SC 29201-0000 Column Legends: Renewal Options TYP column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION Monthly Annual per Tenant Name Prop # Unit # Sq Feet Misc Begin Expire MTM Begin Base Rent Base Rent SF/YR - ------------------------------------------------------------------------------------------------------------------------------- Available 660- 90 1,499 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------- ELOFF, LYDIA A. LYDIA A. ELOFF, ATTORNEY 660- 95 820 01/01/97 12/31/99 01/01/97 683.33 8,199.96 10.00 - ------------------------------------------------------------------------------------------------------------------------------- GSA/GS-04B-32085/CRT PREP GENERAL SERVICES ADMINIST 660- 100 5,578 05/21/92 05/20/98 05/21/92 6,178.33 74,139.96 13.29 07/25/93 6,219.33 74,631.96 13.38 06/25/94 6,248.88 74,986.56 13.44 05/21/95 6,292.74 75,512.88 13.54 05/21/96 6,333.74 76,004.88 13.63 - ------------------------------------------------------------------------------------------------------------------------------- BLAND & ARNDT, L.L.P. ERIC S. BLAND & JOSEPH M. 660- 200 3,097 12/01/95 04/30/97 05/01/94 1,775.00 21,300.00 6.88 01/01/95 2,252.00 27,024.00 8.73 12/01/95 3,097.00 37,164.00 12.00 - ------------------------------------------------------------------------------------------------------------------------------- HOWARD HAMMER, P.A. 660- 201 2,494 11/01/94 04/30/97 02/01/91 2,805.00 33,660.00 13.50 01/01/94 2,888.84 34,666.08 13.90 11/01/94 2,660.26 31,923.12 12.80 - ------------------------------------------------------------------------------------------------------------------------------- HOWARD HAMMER, P.A. HOWARD HAMMER 660- 205 506 01/01/95 04/30/97 01/01/95 519.50 6,234.00 12.32 - ------------------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied.. 12,495 Current Annual Base Rent 159,525.96 Available. 1,499 Total..... 13,994 - --------------------------------------------------------------------------------------------------- RENEWAL OPTIONS EXPENSE RECOVERIES per Recovery Stop Base Tenant Name Begin End SF/YR Typ Method Amt Year - --------------------------------------------------------------------------------------------------- Available 0.00 0.00 - --------------------------------------------------------------------------------------------------- ELOFF, LYDIA A. LYDIA A. ELOFF, ATTORNEY 0.00 Exp Stop 4.56 - --------------------------------------------------------------------------------------------------- GSA/GS-04B-32085/CRT PREP GENERAL SERVICES ADMINIST 0.00 Base Year 4.74 1992 0.00 0.00 0.00 0.00 - --------------------------------------------------------------------------------------------------- BLAND & ARNDT, L.L.P. ERIC S. BLAND & JOSEPH M. 05/01/97 04/30/00 0.00 Base Year 4.38 1994 05/01/00 04/30/03 0.00 0.00 - --------------------------------------------------------------------------------------------------- HOWARD HAMMER, P.A. 11/01/94 04/30/97 12.32 Base Year 3.56 1989 0.00 0.00 - --------------------------------------------------------------------------------------------------- HOWARD HAMMER, P.A. HOWARD HAMMER 0.00 Base Year 3.56 1989 - ---------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Alley along south side of building [GRAPHIC OMITTED] Rear Parking Lot - Looking West [GRAPHIC OMITTED] Main Street - Looking North [GRAPHIC OMITTED] Main Street - Looking South [GRAPHIC OMITTED] Aerial View of Main Street - Looking North This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study of: BAINBRIDGE MALL 1400 East Shotwell Street Bainbridge, Decatur County, Georgia Prepared By: O. Marshall Dodds, MAI Date of Market Study: April 15, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] May 19, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Bainbridge Mall 1400 East Shotwell Street Bainbridge, Decatur County, Georgia Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on April 15, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a shopping mall that contains 145,124 square feet of leasable area. The subject improvements were originally constructed in 1972-73. The anchor tenants are Belk-Simpson, Goody's, Heileg-Meyers Furniture and Bargain Towne. There is a space containing 10,500 square feet and the owners are negotiating with Sears Hardware for this space. The center is currently 90.6 percent occupied. If the owners are successful in securing a lease from Sears Hardware for the 10,500 square feet, the occupancy rate will be 97.87 percent. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds ------------------------------ O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY ================================================================================ Regional Perspective Bainbridge and Decatur County are located in the southwest corner of Georgia. Bainbridge, the County Seat, is nestled on the banks of the Flint River and Lake Seminole is located nearby. The population of Bainbridge in 1994 was 11,099 while the population of Decatur County was 26,462. The chart below gives an indication of the population trend over the years. ---------------------------------------------------- POPULATION ---------------------------------------------------- City County ---------------------------------------------------- 1950 7,562 23,620 1960 12,714 25,203 1970 10,887 22,310 1980 10,553 25,495 1990 10,712 25,511 1994 11,099 26,462 ---------------------------------------------------- The per capita income has continued to increase in the county from 1970 through 1992. The chart below shows this information. ---------------------------------------------------- PER CAPITA INCOME ---------------------------------------------------- County Georgia ---------------------------------------------------- 1970 $2,313 $3,373 1980 6,123 8,353 1985 9,362 12,864 1986 10,210 13,798 1988 11,824 15,485 1990 13,446 17,121 1992 14,766 18,549 ---------------------------------------------------- The largest employers in Decatur County are as follows. 1. Amoco Fabrics Company 2. Amoco Fibers 3. Engle Hard Corporation 4. Elberta Crate and Box Company There are several other large industries in adjacent Grady County which would be Ithacha Industries, Tarington Company, W.B. Roddenbery Company and Wight Nurseries, Inc. The Bainbridge economy enjoyed a period of unprecedented expansion during the 1980's. Low labor costs and lack of unions have helped attract and keep business in the area. Local manufacturers have demonstrated their continued commitment to Bainbridge as ten companies have expanded their facilities in the area creating 800 jobs over the past five years. There are two industrial parks in Bainbridge covering 3,200 acres, where 50 corporate plants produce food, textiles, chemical products, paper, rubber, plastics, metal and machinery. Bainbridge is Georgia's premier inland port city. The Georgia State Docks and Barge Terminal in Bainbridge is a major shipping port for goods destined for the Gulf of Mexico. This facility is located on the Flint River. 1 The tourist and sport fishing industry has also been exhibiting vigorous and consistent revenue growth over the past decade with especially strong growth over the past few years. Over 4 million visitors annually are attracted to the area's moderate year-round climate and comfortable surroundings. Natural amenities include 37,500 unspoiled acres of fishing, hunting and water sports on Lake Seminole. The economy of Bainbridge has maintained its stability over the years and is expected to continue in the future. The continued expansion in the Bainbridge economy coupled with an active tourist trade assure the continued strength of the economic foundation of Bainbridge. The subject property is located in Decatur County and the unemployment rate was 8.7 percent in 1994. The unemployment rate statewide for the same year was 5.2 percent. Neighborhood and Site The neighborhood is located along East Shotwell Street which is also US Highway #84. The downtown area of Bainbridge is located to the west of subject neighborhood and the city limit line or county road is located east of the neighborhood. The direction of growth for the City of Bainbridge has been to the east and to the southwest. The reason for this is because of the Flint River which runs in a southwest/northeast direction. There are several developments in the neighborhood which would include the Bainbridge Mall, the Bainbridge Memorial Hospital, Bainbridge Town Center, Market Square Shopping Center, Shotwell Plaza and West Building Materials. There are fast food restaurants are located along Shotwell Street and these include Taco Bell, Pizza Hut, Wendy's, McDonald's, Kentucky Fried Chicken and Golden Corral. Several convenience/self-service gasoline stations are located along East Shotwell Street as well as several automobile dealerships. Physical features are as follows: 1. Size 14.12 acres or 615,067 square feet 2. Identity 1400 East Shotwell Street TMS #B63-1; #B63-1-2; #B63-2 3. Shape Irregular 4. Topography Generally level and on street grade with East Shotwell Street. The site has frontage along Wheat Street, Evans Street and South Boulevard. 5. Accessability Good from either direction 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 145,124 square feet 2. Layout & Design 1 story shopping mall 3. Parking Spaces 751 5.18 per 1,000 square of net area 4. Construction Masonry building with interior mall and built up roof 2 Market Position and Marketability Conclusions Subject property is located along East Shotwell Street and the other competing shopping centers in Bainbridge are also located along East Shotwell Street or just off of this thoroughfare. A brief description of these shopping facilities is as follows. 1. Bainbridge Mall (Subject Property) - The major tenants in Bainbridge Mall are Belk-Simpson (40,800 square feet), Goody's (19,800 square feet), Bargaintown (15,000 square feet), Heileg-Meyers (21,000 square feet) and a vacant store with 10,500 square feet. The owners are negotiating with Sears Hardware as a tenant for this space at this time. The smaller tenants would include Pic-N-Pay shoes, Freidman's Jewelers, Peppermint Music-Post-Petitio, Dress for Less, Goodwyn Jewelers, Cato/Cato Plus, Bombay, Lee Nails, Mane Tamer, Radio Shack, Athletic Attic, Spotlight Cinemas, Bainbridge National Bank ATM and Impulse, Inc. The vacancy rate is 9.37 percent. 2. Bainbridge Town Center - This center has K-Mart, Food Lion and Revco Drugs as the major tenants. Other tenants include Video Superstore, Old Mexico restaurant, Ninety- 9 Cents store, Haircutters and Tans, New China Chinese Food, One Price $7, Shoe City and Its Fashion. There are two vacant shops in this center at this time as the vacancy rate is 2 percent. The rental rates range from $6.00 to $8.00 per square foot. 3. Market Square - The major tenant in this center is Marketplace Winn-Dixie with other tenants being Upton's Fashions, Movie Gallery, Renter's Choice, Yogurt Shop, Financial Services and K&K Beauty Supply. There are three vacant shops in this center at this time and the vacancy rate is 6.5 percent. The rental rates range from $6.50 to $7.00 per square foot. 4. Bainbridge Crossing Shopping Center - The major tenants in this center are Big "B" Drugs and Family Dollar. This center is 100 percent occupied at this time. The rental rates range from $6.25 to $7.50 per square foot. 5. Scott Street Plaza - This is an older center that was built in 1975. There are no anchor tenants in this center. Tenants include Fleet Finance, Flowers by Cooper and Ceborn Printing. The rental rates range from $3.00 to $3.50 per square foot. 6. Shotwell Square - The major tenant in this center is Harvey's Supermarket which contains 22,197 square feet. The total size of the center is 42,037 square feet and there are no vacancies. Other tenants include Goodwill Industries (6,600 square feet), Turner Rental (3,000 square feet), Turner Finance Company (1,600 square feet) and Dollar General (8,640 square feet). The subject property is currently experiencing a high occupancy rate at 90.6 percent. If the owners are successful in securing a tenant for the vacant space with Sears Hardware, the occupancy rate will be 97.87 percent. The rental rates for the anchor tenants are Heileg-Meyers - $1.91 per square foot, Bargaintown - $1.00 per square foot, Goody's - $2.27 per square foot and Belk-Simpson -$1.50 per square foot. The rental rates for the shop space range from $3.00 to $15.00 per square foot. Several of the leases in subject property are nearing the expiration and it is possible that some of these leases can be increased in the next twelve to eighteen months. Trends The subject property is located on a major traffic artery in Bainbridge, Georgia. Several other shopping facilities are located on East Shotwell Street with subject property. The market appears to be stable at this time and there are no other shopping centers that are planned for the area. The neighborhood is stable at this time and it is thought that the stability will be maintained in the future. 3 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================ I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Bainbridge Mall Bainbridge Town Center Market Square --------------------------- ---------------------- -------------------- b. Street 1400 East Shotwell St. N/S East Shotwell St. N/S East Shotwell St. --------------------------- ---------------------- -------------------- c. City Bainbridge, GA Bainbridge, GA Bainbridge, GA --------------------------- ---------------------- -------------------- d. Distance from N/A 2 Blocks 2 Blocks subject --------------------------- ---------------------- -------------------- e. Contact Edens Avant, Inc. American Star Dev. The Gates Company --------------------------- ---------------------- -------------------- f. Phone 803-779-4420 (205) 277-1000 (404) 324-6464 --------------------------- ---------------------- -------------------- 2. Attributes a. Year built 1972-73 1990 1989 --------------------------- ---------------------- -------------------- b. Net sq. Ft. 145,124 132,500 52,325 --------------------------- ---------------------- -------------------- c. # building 1 1 1 --------------------------- ---------------------- -------------------- d. # stories 1 1 1 --------------------------- ---------------------- -------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A --------------------------- ---------------------- -------------------- f. # elevators N/A N/A N/A --------------------------- ---------------------- -------------------- g. Parking Adequate Adequate Adequate --------------------------- ---------------------- -------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block --------------------------- ---------------------- -------------------- i. Vacancy % 9.37% 2.0% 6.50% --------------------------- ---------------------- -------------------- j. Anchors, if Retail Belk-Simpson, Goody's, Food Lion, K-Mart, Heileg-Meyer, Bargain Towne Revco Winn-Dixie --------------------------- ---------------------- --------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Bainbridge Crossing South Street Plaza -------------------- -------------------- NEC of East Shotwell b. Street St. and Russ Street E/S Scott Street -------------------- -------------------- c. City Bainbridge, GA Bainbridge, GA -------------------- -------------------- d. Distance from 4 Blocks 6 Blocks subject -------------------- -------------------- e. Contact The Gates Company Harold Lambert -------------------- -------------------- f. Phone (404) 324-6464 (912) 246-5694 -------------------- -------------------- 2. Attributes a. Year built 1986 1975 -------------------- -------------------- b. Net sq. Ft. 18,100 35,000 -------------------- -------------------- c. # building 1 1 -------------------- -------------------- d. # stories 1 1 -------------------- -------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A -------------------- -------------------- f. # elevators N/A N/A -------------------- -------------------- g. Parking Adequate Adequate -------------------- -------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block -------------------- -------------------- i. Vacancy % 0% 4.21% -------------------- -------------------- j. Anchors, if Retail Big "B" Drugs, Family Dollar Local shops -------------------- -------------------- Comments: These comparables are located in subject neighborhood. Subject property is a mall, but this is the only mall in the City of Bainbridge. These comparables are community and neighborhood shopping centers. The rental rates of subject are primarily in the range of these comparables. The lowest rental rate of subject is at the range of Comparable #4 while the highest rental rate is at the upper limit for the market area. 4 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================ B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space $1.00 - $2.27 $4.60 - $6.00 N/A N/A N/A ------------------ ------------------ ------------------ ------------------ ------------------ b. Shop Space $3.00 - $15.00 $6.00 - $8.00 $6.50 - 47.00 $6.50 - $7.00 $3.00 - $3.50 ------------------ ------------------ ------------------ ------------------ ------------------ 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net Triple Net ------------------ ------------------ ------------------ ------------------ ------------------ 3. Rent Concessions None None None None None ------------------ ------------------ ------------------ ------------------ ------------------ 4. Effective Rent $3.00 - $15.00 $6.00 - $8.00 $6.50 - $7.00 $6.25 - $7.50 $3.00 - $3.50 ------------------ ------------------ ------------------ ------------------ ------------------ 5. TI Allowance None None None None None ------------------ ------------------ ------------------ ------------------ ------------------ 6. Expense Stop None None None None None ------------------ ------------------ ------------------ ------------------ ------------------ 7. Length of Lease Term 3 - 5 years (shop) 3 - 5 years (shop) 3 - 5 years (shop) 3 - 5 years (shop) 3 - 5 years (shop) ------------------ ------------------ ------------------ ------------------ ------------------ 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% - 7.00% 5.00% to 7.00% 5.00% to 7.00% ------------------ ------------------ ------------------ ------------------ ------------------ 9. Percentage Rent Food Lion, K-Mart, Big "B" Drugs, (per lease terms) Most tenants Revco Winn Dixie Family Dollar None ------------------ ------------------ ------------------ ------------------ ------------------ 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A N/A ------------------ ------------------ ------------------ ------------------ ------------------ 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A N/A ------------------ ------------------ ------------------ ------------------ ------------------ C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Similar Similar Similar Similar ------------------ ------------------ ------------------ ------------------ ------------------
D. EXPLAIN RANKING/COMMENTS: These comparable properties have been rated as similar to subject. The location of these comparables is in the same neighborhood as subject property. Comparable #4 has rental rates at the lower end of the range and does not have any anchor tenants. However, this center is operating at a high occupancy level at this time. Overall the comparables and subject property are operating at high occupancy levels. 5 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Bainbridge Town Center Location: N/S East Shotwell Street Bainbridge, GA Year Built: 1990 Total Size: 132,500 SF Vacant Space: 2,860 Sf Vacancy Rate: 2.00% Rental Range: $6.00 - $8.00 per square foot Tenant Expenses: Triple Net Remarks: Major tenants are Food Lion, K-Mart and Revco Drugs. The center has been well-maintained and is experiencing a high occupancy rate. 6 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Market Square Location: N/S East Shotwell Street Bainbridge, GA Year Built: 1989 Total Size: 52,325 SF Vacant Space: 3,400 SF Vacancy Rate: 6.50% Rental Range: $6.50 - $7.00 per square foot Tenant Expenses: Triple Net Remarks: This is an older center that was renovated. Winn-Dixie is the major tenant with a Marketplace store. 7 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Bainbridge Crossing Shopping Center Location: 301-307 Scott Street Bainbridge, GA Year Built: 1986 Total Size: 18,100 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $6.25 - $7.50 per square foot Tenant Expenses: Triple Net Remarks: Major tenants include Big "B" Drugs and Family Dollar. 8 Comparable Rental No. 4 ================================================================================ [GRAPHIC OMITTED] Name: Scott Street Plaza Location: E/S Scott Street Bainbridge, GA Year Built: 1975 Total Size: 35,000 SF Vacant Space: None Vacancy Rate: 0% Local Rent Range: $3.00 - $3.50 per square foot Tenant Expenses: Triple Net Remarks: One-story brick veneer center. Tenants include Fleet Finance, Flowers by Cooper and Ceborn Printing. 9 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES ================================================================================
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Bainbridge Mall Barnwell Plaza Triangle Village ---------------------- -------------------- ------------------- Sunset Blvd. & Lake b. Street Address 1400 East Shotwell St. 1019 Dunbarton Blvd. Dr. ---------------------- -------------------- ------------------- c. City Bainbridge, GA Barnwell, SC Lexington, SC ---------------------- -------------------- ------------------- d. Distance from Subject N/A 175 miles 125 miles ---------------------- -------------------- ------------------- 2. Attributes a. Year Built 1972-73 1985 1985 ---------------------- -------------------- ------------------- b. Net sq. feet 145,124 70,725 115,754 ---------------------- -------------------- ------------------- c. # Buildings 1 1 1 ---------------------- -------------------- ------------------- d. # of Stories 1 1 1 ---------------------- -------------------- ------------------- e. Vacancy % 9.37% 9.00% 1.3% ---------------------- -------------------- ------------------- 3. Sales Information a. Sales Price N/A $2,860,620 $4,489,380 ---------------------- -------------------- ------------------- b. Sales Price PSF N/A $40.45 $38.78 ---------------------- -------------------- ------------------- c. Date N/A 01-01-95 01-31-95 ---------------------- -------------------- ------------------- d. NOI at time of Sale N/A 330,327 480,919 ---------------------- -------------------- ------------------- e. Cap. Rate N/A 11.55% 10.71% ---------------------- -------------------- ------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A Similar Similar ---------------------- -------------------- -------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Hampton Plaza Cumberland Place --------------- ----------------------- 2864 Wilma 209 New Swithville Hwy. b. Street Address Randolph Blvd. --------------- ----------------------- c. City Clarksville, TN McMinnville, TN --------------- ----------------------- d. Distance from Subject 435 miles 315 miles --------------- ----------------------- 2. Attributes a. Year Built 1988 1988 --------------- ----------------------- b. Net sq. feet 189,302 143,951 --------------- ----------------------- c. # Buildings 1 1 --------------- ----------------------- d. # of Stories 1 1 --------------- ----------------------- e. Vacancy % 0% 4.3% --------------- ----------------------- 3. Sales Information a. Sales Price $6,150,000 $5,225,050 --------------- ----------------------- b. Sales Price PSF $23.24 $36.30 --------------- ----------------------- c. Date 12-26-95 12-26-95 --------------- ----------------------- d. NOI at time of Sale 753,627 693,726 --------------- ----------------------- e. Cap. Rate 12.25% 13.28% --------------- ----------------------- 4. Rank Relative to Subject (inferior, similar, superior) Similar Similar --------------- ----------------------- Explain Ranking/Comments: The comparable properties have been ranked as similar to subject. These sales had a Wal-Mart store as an occupant, but the Wal-Mart store has vacated these premises. However, Wal-Mart remains liable on the lease for a period ranging from eight to ten years. In some instances, replacement tenants have been obtained for the Wal-Mart store. 10 COMPARABLE IMPROVED SALES - ------------------------- Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS 072- 06- 04- 11, 20 NAME Barnwell Plaza LOCATION 1019 Dunbarton Boulevard, Barnwell, SC GRANTOR 1994 N1 SC Associates, LP GRANTEE Tri Centers, LP DEED REFERENCE Book 282/Page 137 DATE Jan 31, 1995 SALES PRICE $2,860,620 ADJUSTED SALES PRICE $2,860,620 SIZE BUILDING 70,725 SALES PRICE PER S.F. $40.45 SIZE LAND (ACRES) 11.28 SIZE LAND (S.F.) 491,357 YEAR BUILT 1985 LAND/BUILDING RATIO 6.95 To 1 UTILITIES All available VERIFICATION Appraiser ZONING Commercial FINANCING Cash to seller EFFECTIVE GROSS INCOME $399,045 GROSS INCOME MULTIPLE 7.17 EGIM 7.17 NET OPERATING INCOME $330,327 OVERALL RATE 11.55% TYPE OF PURCHASER Private Investor COMMENTS: This is a good quality community shopping center located in the town of Barnwell in Barnwell County (pop. 20,000) in western South Carolina. Approximately 91% of the center was comprised of anchor space, including Wal-Mart (34,875 SF), Food Lion (21,000 SF) and Revco Drugs (8,450 SF). The income and expense data here is based on the center's actual performance at the time of sale, and include approximately $0.50 SF in overage rents from Wal-Mart and $0.10 SF in reserves. (590) 11 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] NAME Lexington Triangle Village LOCATION U.S. 378 and North Lake Drive (SC #6), Lexington, SC GRANTOR 1994 N1 SC Associates GRANTEE Tri Centers, LP DEED REFERENCE Book 3260, Page 199 DATE Jan 31, 1995 SALES PRICE $4,489,380 ADJUSTED SALES PRICE $4,489,380 SIZE BUILDING 115,754 SALES PRICE PER S.F. $38.78 SIZE LAND (ACRES) 12.51 SIZE LAND (S.F.) 544,936 YEAR BUILT 1985 LAND/BUILDING RATIO 4.71 To 1 VERIFICATION Public Records ZONING Commercial FINANCING Cash to seller EFFECTIVE GROSS INCOME $607,469 GROSS INCOME MULTIPLE 7.39 EGIM 7.39 NET OPERATING INCOME $480,919 OVERALL RATE 10.71% TYPE OF PURCHASER Private Investor COMMENTS: This center is anchored by Wal-Mart (65,904 SF) and Food Lion (25,000 SF) and there are 7 local shops totaling 24,850 SF (21.5 percent). At the time of sale, the center was 98.7 percent occupied with only 2,000 SF vacant. Wal-Mart has a base rent of $3.55 and the lease expires 11/05. Currently, Wal-Mart is paying about $0.50 per SF overage rent and Wal-Mart is expected to leave the center in the near future as no expansion room is available. The estimated cap rate excludes potential overage rent form Wal-Mart and only excludes income from the 2,000 SF vacant bay. Projected expenses include $0.10 per SF reserves. The center is masonry with brick front and metal mansard canopy roof and in average condition. No outparcels were included with this sale. (763) 12 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] NAME Hampton Plaza LOCATION 2864 Wilma Rudolph Boulevard, Clarksville, TN GRANTOR Aetna Life Insurance Company GRANTEE Hampton II, LP DEED REFERENCE Book 580, Page 1793 DATE Dec 26, 1995 SALES PRICE $6,150,000 ADJUSTED SALES PRICE $6,150,000 SIZE BUILDING 189,302 SALES PRICE PER S.F. $32.49 SIZE LAND (ACRES) 23.24 SIZE LAND (S.F.) 1,012,334 YEAR BUILT 1988 LAND/BUILDING RATIO 5.35 To 1 UTILITIES All available VERIFICATION Public Records ZONING C-3, Shopping Center District FINANCING Cash to seller EFFECTIVE GROSS INCOME $937,119 GROSS INCOME MULTIPLE 6.37 EGIM 6.56 NET OPERATING INCOME $753,627 OVERALL RATE 12.25% TYPE OF PURCHASER Private Investor COMMENTS: This is a community shopping center with Wal-Mart as a major tenant prior to a new Wal-Mart Superstore being built on the same block. While Wal-Mart remains liable for the lease, the store is vacant. The remainder of the center is occupied. (759) 13 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] NAME Cumberland Place LOCATION 209 New Smithville Highway, McMinnville, TN GRANTOR Aetna Life Insurance GRANTEE Cumberland II, LP DEED REFERENCE Book 287, Page 204 DATE Dec 26, 1995 SALES PRICE $5,225,050 ADJUSTED SALES PRICE $5,225,050 SIZE BUILDING 143,951 SALES PRICE PER S.F. $36.30 SIZE LAND (ACRES) 19.64 SIZE LAND (S.F.) 855,518 YEAR BUILT 1988 LAND/BUILDING RATIO 5.94 To 1 UTILITIES All available VERIFICATION Public Records ZONING C-3, Highway Commercial District FINANCING Cash to seller EFFECTIVE GROSS INCOME $875,830 GROSS INCOME MULTIPLE 5.79 EGIM 5.97 NET OPERATING INCOME $693,726 OVERALL RATE 13.28% TYPE OF PURCHASER Private Investor COMMENTS: This is a community shopping center. Wal-Mart was the major tenant and remains liable for the lease for the remaining term. A new Wal-Mart Superstore was built one block west of this property. (762) 14 ADDENDA o Decatur County Demographics o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 15 USA COUNTIES 1996 Geographic Area: Decatur, GA (13087) Table: GENERAL PROFILE - -------------------------------------------------------------------------------- POPULATION AND HOUSING (Bureau of the Census) Total resident population: 1995 ......................................................... 26,390 Percent 65 years and over ................................... 12.9 1990 ......................................................... 25,517 1980 ......................................................... 25,495 Occupied housing units, 1990 ................................... 8,962 Percent owner occupied ........................................ 72.0 BIRTHS AND DEATHS (National Center for Health Statistics) Births, 1993 .................................................... 428 Per 1,000 resident population ................................. 16.4 Percent to mothers under 20 years of age ...................... 27.6 Deaths, 1993 .................................................... 282 Per 1,000 resident population ................................. 10.8 Infant deaths per 1,000 live births, 1993 ...................... 9.3 EDUCATION (Bureau of the Census) Persons 25 years and over, 1990 ................................ 15,358 Percent high school graduates ................................. 59.8 Percent college graduates ..................................... 11.7 LABOR FORCE (Bureau of Labor Statistics) Civilian labor force, 1994 ..................................... 11,282 Percent unemployed ............................................ 8.7 PRIVATE NONFARM ESTABLISHMENTS (Bureau of the Census) Total establishments, 1993 ..................................... 582 Percent retail trade .......................................... 34.5 Percent services .............................................. 26.3 Paid employees, 1993 (pay period including March 12) ............ 7,551 Annual payroll, 1993 ($1,000) .................................. 134,391 PERSONAL INCOME (Bureau of Economic Analysis) Total personal income, 1993 ($1,000) ........................... 398,177 Per capita (dollars) .......................................... 15,299 AGRICULTURE (Bureau of the Census) Number of farms, 1992 ........................................... 342 Land in farms as percent of total land ........................ 44 RETAIL TRADE (Bureau of the Census) Retail sales, 1992 ($1,000) .................................... 152,022 Per capita (dollars) .......................................... 5,879 COMMERCIAL AND SAVINGS BANKS (Fed. Deposit Insurance Corp.) Number of offices, June 30, 1994 ............................... 7 Total deposits ($1,000) ...................................... 154,405 SOCIAL PROGRAMS (Social Security Administration) Total Social Security recipients, December 1993 ................ 4,935 Retired workers ............................................... 2,665 Supplementary Security Income recipients, December 1994 ........ 1,424 FEDERAL FUNDS AND GRANTS (Bureau of the Census) Total direct expenditures or obligations per capita: 1994 (dollars) ................................................ 3,732 1990 (dollars) ................................................ 2,813 - -------------------------------------------------------------------------------- (NA) Not available. (D) Avoid disclosure of confidential information. (X) Not applicable. (S) Does not meet publication standards. (Z) Value > 0 but < half unit of measure shown. NOTE: 0 data may indicate geographic/data footnotes. Source: U.S. Bureau of the Census, USA Counties 1996 CD-ROM. ------------------ Comparable Rentals ------------------ BAINBRIDGE [GRAPHIC OMITTED] ------------------ Improved Sales Map ------------------ [GRAPHIC OMITTED] --------- Site Plan --------- [GRAPHIC OMITTED] EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: BAINBRIDGE MALL 1400 EAST SHOTWELL STREET BAINBRIDGE, GA 31717 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ BELK-SIMPSON #269 BELK-SIMPSON CO. OF BAINBRIDG 696-160 40,800 08/23/73 08/22/98 1.50 09/01/95 61,200.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ Available 696-170 10,500 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ BAINBRIDGE NATIONAL BANK ATM BAINBRIDGE NATIONAL BANK 696-180 400 06/01/94 05/31/97 15.00 06/01/94 6,000.00 - ------------------------------------------------------------------------------------------------------------------------ SPOTLIGHT CINEMAS, INC. 696-190 5,746 12/01/96 11/30/99 3.50 12/01/96 20,100.24 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ IMPULSE, INC. F/K/A FUNFAIRE 696-200 0 K 02/01/97 02/28/97 0.00 08/01/93 2,400.00 0.00 02/01/97 1,800.00 - ------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 131,528 Current Annual Base Rent 382,070.28 Available.. 13,596 Total...... 145,124 - ------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS Tax Base Ins Base CAM Base per Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR - ------------------------------------------------------------------------------------------------------- BELK-SIMPSON #269 BELK-SIMPSON CO. OF BAINBRIDG PRS 1976 None 0 Fixed 0 08/23/93 08/22/98 1.50 08/23/98 08/22/03 1.50 08/23/03 08/22/08 1.50 08/23/08 08/22/13 1.50 - ------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 - ------------------------------------------------------------------------------------------------------- BAINBRIDGE NATIONAL BANK ATM BAINBRIDGE NATIONAL BANK Full 0 None 0 None 0 0.00 - ------------------------------------------------------------------------------------------------------- SPOTLIGHT CINEMAS, INC. Full 0 Full 0 Full 0 12/01/99 11/30/02 0.00 0.00 - ------------------------------------------------------------------------------------------------------- IMPULSE, INC. F/K/A FUNFAIRE None 0 None 0 None 0 0.00 0.00 - -------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------- PERCENT RENT Pcnt of Amount Nat Tenant Name Typ Over Brk - ------------------------------------------------------------- BELK-SIMPSON #269 BELK-SIMPSON CO. OF BAINBRIDG 2.50 2,448,000 Y 2.50 0 Y 2.50 0 Y 2.50 0 Y - ------------------------------------------------------------- Available 0.00 0 - ------------------------------------------------------------- BAINBRIDGE NATIONAL BANK ATM BAINBRIDGE NATIONAL BANK 0.00 0 - ------------------------------------------------------------- SPOTLIGHT CINEMAS, INC. 0.00 0 0.00 0 - ------------------------------------------------------------- IMPULSE, INC. F/K/A FUNFAIRE 0.40 9,600 0.40 0 - ------------------------------------------------------------- EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: BAINBRIDGE MALL 1400 EAST SHOTWELL STREET BAINBRIDGE, GA 31717 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- GODWIN JEWELERS MONROE D. GODWIN 696- 80 3,800 08/16/88 08/15/98 3.00 09/01/73 11,400.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- CATO/CATO PLUS #884 THE CATO CORPORATION 696- 90 6,860 03/01/94 01/31/99 7.35 05/01/94 50,421.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- BOMBAY NANEKH LAKHWANI 696-100 1,346 02/01/97 01/31/99 8.61 02/01/95 11,589.12 - -------------------------------------------------------------------------------------------------------------------------- LEE NAILS LEN PHAM 696-110 1,058 11/18/94 11/30/97 7.17 12/01/94 7,590.48 - -------------------------------------------------------------------------------------------------------------------------- MANE TAMER KATRINE WARD 696-120 620 04/05/94 03/31/99 4.10 05/01/94 2,541.96 - -------------------------------------------------------------------------------------------------------------------------- Available 696-130 916 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- RADIO SHACK #01-9688 TANDY CORPORATION 696-140 2,698 06/15/91 06/30/00 7.50 07/01/91 20,227.56 - -------------------------------------------------------------------------------------------------------------------------- ATHLETIC ATTIC T.L. SPORTS INC. 696-150 2,000 10/01/94 09/30/97 4.75 10/01/94 9,500.04 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- Available 696-155 2,180 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS Tax Base Ins Base CAM Base per Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR - -------------------------------------------------------------------------------------------------------- GODWIN JEWELERS MONROE D. GODWIN PRS 1975 None 0 Fixed 0 08/16/98 08/15/01 3.00 0.00 - -------------------------------------------------------------------------------------------------------- CATO/CATO PLUS #884 THE CATO CORPORATION Fixed 0 Fixed 0 Fixed 0 02/01/99 01/31/04 7.85 02/01/04 01/31/09 8.35 0.00 - -------------------------------------------------------------------------------------------------------- BOMBAY NANEKH LAKHWANI Full 0 Full 0 Full 0 0.00 - -------------------------------------------------------------------------------------------------------- LEE NAILS LEN PHAM Fixed 0 Full 0 Fixed 0 0.00 - -------------------------------------------------------------------------------------------------------- MANE TAMER KATRINE WARD Fixed 0 Fixed 0 Fixed 0 0.00 - -------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 - -------------------------------------------------------------------------------------------------------- RADIO SHACK #01-9688 TANDY CORPORATION Full 0 Full 0 Full 0 0.00 - -------------------------------------------------------------------------------------------------------- ATHLETIC ATTIC T.L. SPORTS INC. Fixed 0 Fixed 0 Fixed 0 10/01/97 09/30/00 5.25 10/01/00 09/30/04 5.75 0.00 - -------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 - --------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------- PERCENT RENT Pcnt of Amount Nat Tenant Name Typ Over Brk - ------------------------------------------------------------ GODWIN JEWELERS MONROE D. GODWIN 5.00 228,000 0.00 0 - ------------------------------------------------------------- CATO/CATO PLUS #884 THE CATO CORPORATION 4.00 0 4.00 0 4.00 0 - ------------------------------------------------------------- BOMBAY NANEKH LAKHWANI 5.00 231,780 - ------------------------------------------------------------- LEE NAILS LEN PHAM 6.00 126,500 Y - ------------------------------------------------------------- MANE TAMER KATRINE WARD 6.00 100,000 - ------------------------------------------------------------- Available 0.00 0 - ------------------------------------------------------------- RADIO SHACK #01-9688 TANDY CORPORATION 3.00 674,300 Y - ------------------------------------------------------------- ATHLETIC ATTIC T.L. SPORTS INC. 4.00 237,500 Y 4.00 0 Y 4.00 0 Y - ------------------------------------------------------------- Available 0.00 0 - ------------------------------------------------------------- EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: BAINBRIDGE MALL 1400 EAST SHOTWELL STREET BAINBRIDGE, GA 31717 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ HEILIG-MEYERS FURNITURE HEILIG-MEYERS FURNITURE COMPA 696- 10 21,000 10/01/92 09/30/02 1.74 10/01/92 36,499.92 0.00 0.00 1.91 10/01/97 40,149.96 - ------------------------------------------------------------------------------------------------------------------------ BARGAIN TOWN VARIETY WHOLESALERS INC. 696- 20 15,000 02/01/95 01/31/98 1.00 02/01/95 15,000.00 - ------------------------------------------------------------------------------------------------------------------------ GOODY'S FAMILY CLOTHING INC. GOODY'S FAMILY CLOTHING INC. 696- 30 19,800 11/11/92 01/31/98 2.27 02/01/94 45,000.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ PIC 'N PAY STORES, INC. #212 PIC 'N PAY STORES INC. 696- 40 4,000 07/01/93 06/30/99 4.00 07/01/93 15,999.96 0.00 0.00 4.50 07/01/96 18,000.00 - ------------------------------------------------------------------------------------------------------------------------ FRIEDMAN'S JEWELERS #89 FRIEDMAN'S GEORGIA INC. 696- 50 2,000 08/27/86 12/31/97 14.00 09/01/86 27,999.96 - ------------------------------------------------------------------------------------------------------------------------ PEPPERMINT MUSIC-POST-PETITIO KWC MANAGEMENT CORPORATION, L 696- 60 2,000 06/29/95 06/30/00 12.00 12/01/95 24,000.00 0.00 0.00 14.00 07/01/97 27,999.96 - ------------------------------------------------------------------------------------------------------------------------ DRESS FOR LESS KENWIN SHOPS OF GEORGIA INC. 696- 70 2,400 03/01/96 02/28/98 5.50 03/01/94 13,200.00 - ------------------------------------------------------------------------------------------------------------------------ - -------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS Tax Base Ins Base CAM Base per Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR - -------------------------------------------------------------------------------------------------------- HEILIG-MEYERS FURNITURE HEILIG-MEYERS FURNITURE COMPA None 0 None 0 Fixed 0 10/01/02 09/30/07 2.50 10/01/07 09/30/12 3.00 0.00 - -------------------------------------------------------------------------------------------------------- BARGAIN TOWN VARIETY WHOLESALERS INC. None 0 None 0 None 0 02/01/98 01/31/01 1.00 - -------------------------------------------------------------------------------------------------------- GOODY'S FAMILY CLOTHING INC. GOODY'S FAMILY CLOTHING INC. None 0 None 0 None 0 02/01/98 01/31/03 5.00 02/01/03 01/31/08 5.50 02/01/08 01/31/13 6.00 - -------------------------------------------------------------------------------------------------------- PIC 'N PAY STORES, INC. #212 PIC 'N PAY STORES INC. Full 0 Full 0 Full 0 07/01/96 06/30/99 4.50 0.00 0.00 - -------------------------------------------------------------------------------------------------------- FRIEDMAN'S JEWELERS #89 FRIEDMAN'S GEORGIA INC. Full 0 Full 0 Full 0 0.00 - -------------------------------------------------------------------------------------------------------- PEPPERMINT MUSIC-POST-PETITIO KWC MANAGEMENT CORPORATION, L Full 0 Full 0 Full 0 07/01/00 06/30/03 16.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------- DRESS FOR LESS KENWIN SHOPS OF GEORGIA INC. Full 0 Full 0 Full 0 0.00 - --------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------- PERCENT RENT Pcnt of Amount Nat Tenant Name Typ Over Brk - ------------------------------------------------------------ HEILIG-MEYERS FURNITURE HEILIG-MEYERS FURNITURE COMPA 0.00 0 0.00 0 0.00 0 - ------------------------------------------------------------- BARGAIN TOWN VARIETY WHOLESALERS INC. 3.50 428,571 - ------------------------------------------------------------- GOODY'S FAMILY CLOTHING INC. GOODY'S FAMILY CLOTHING INC. 3.00 1,500,000 3.00 0 3.00 0 - ------------------------------------------------------------- PIC 'N PAY STORES, INC. #212 PIC 'N PAY STORES INC. 3.00 533,300 Y 3.00 0 Y 3.00 600,000 Y - ------------------------------------------------------------- FRIEDMAN'S JEWELERS #89 FRIEDMAN'S GEORGIA INC. 5.00 560,000 - ------------------------------------------------------------- PEPPERMINT MUSIC-POST-PETITIO KWC MANAGEMENT CORPORATION, L 6.00 400,000 Y 6.00 0 Y 6.00 466,700 Y - ------------------------------------------------------------- DRESS FOR LESS KENWIN SHOPS OF GEORGIA INC. 6.00 220,000 Y - ------------------------------------------------------------- PHOTOGRAPHS OF SUBJECT PROPERTY - ------------------------------- [GRAPHIC OMITTED] Shotwell Street Looking West [GRAPHIC OMITTED] Shotwell Street Looking East [GRAPHIC OMITTED] Boulevard Drive Looking North [GRAPHIC OMITTED] Boulevard Drive Looking South [GRAPHIC OMITTED] Evans Street Looking East [GRAPHIC OMITTED] Evans Street Looking West [GRAPHIC OMITTED] Wheat Avenue Looking North [GRAPHIC OMITTED] Wheat Avenue Looking South [GRAPHIC OMITTED] Subject Front View Looking From Inside Of Parking Lot [GRAPHIC OMITTED] Subject Front View Looking From Inside Of Parking Lot [GRAPHIC OMITTED] Subject Front View Looking From Inside Of Parking Lot [GRAPHIC OMITTED] Subject Front View Looking From Inside Of Parking Lot [GRAPHIC OMITTED] Subject Front View Looking From Inside Of Parking Lot [GRAPHIC OMITTED] Subject Front And Side Of The Belk's Side [GRAPHIC OMITTED] Subject Rear And Side Of The Heilig Myers Side [GRAPHIC OMITTED] Subject Rear View Looking From Evans Street [GRAPHIC OMITTED] Subject Rear View Looking From Evans Street [GRAPHIC OMITTED] Subject Rear View Looking From Evans Street [GRAPHIC OMITTED] Subject Rear View Looking From Evans Street [GRAPHIC OMITTED] Subject Entrance From Boulevard Drive This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study of: EDISTO VILLAGE 398 Riverside Drive Orangeburg, Orangeburg County, South Carolina Prepared by: O. Marshall Dodds, MAI Date of Market Study: May 14, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] May 14, 1997 Mr. Steven R. Maeglin Morgan Stanley & Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study Edisto Village 398 Riverside Drive Orangeburg, Orangeburg County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 14, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The subject property consists of a neighborhood shopping center that contains 108,668 square feet of leasable area. The center was constructed in 1972, but was renovated in 1994. The Bi-Lo Store was expanded in 1994. The anchor tenants are Bi-Lo, Maxway, Badcock Furniture, Revco Drugs and Family Dollar. The center is currently 98.16 percent occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds, MAI ------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY - -------------------------------------------------------------------------------- Regional Perspective Orangeburg and Orangeburg County are located in central part of the State. Columbia is located approximately 42 miles to the north and Charleston is located approximately 70 miles to the southeast. Orangeburg County is a rich region in agriculture, and first in the production of corn, soybeans, oats, wheat, dairy products, swine and second in beef cattle. Other farming enterprises of significance are forest products, fresh vegetables, poultry, peaches, hay and pasture, watermelons and cantaloupes. The population within the Orangeburg city limits was 13,739 and the county population was 87,800 in 1994. The metropolitan Orangeburg area had approximately 45,000 people as of 1994. The largest employer in Orangeburg was American Yard Products-tillers, tractors with 2,000 employees. Amber Industries which manufactures boy's coats and pants had 783 employees while American Koyo Bearing Manufacturing Company, which manufactures ball and roller bearings had 610 employees. Orangeburg has a sound economic base and has experienced a modest amount of growth through the years. The number of manufacturing facilities in the county has increased from 1970 to 1997. The unemployment rate for Orangeburg County as of March, 1997 was 8.4 percent while the statewide rate was 5.5 percent. Neighborhood and Site The subject neighborhood is located in the southwest section of the City of Orangeburg and at the intersection of John C. Calhoun Drive and Glover Street. The Edisto Village Shopping Center is the predominant development in this section of the city. There are other commercial developments along John C. Calhoun Drive such as the Holiday Inn, fast food restaurants and branch offices for banks. The Edisto Gardens are also located in the subject neighborhood. The downtown area of Orangeburg is located approximately 1/2 mile to the northeast. Most of the shopping facilities have relocated and are located along Chestnut Street and North Road. The neighborhood is practically fully developed with older single family dwellings located throughout the city limits. There are several subdivisions that have been developed to the west and outside of the city limits along U.S. Highway #301-601. Physical features are as follows: 1. Size 10.739 acres or 467,791 SF 2. Identity 398 Riverside Drive 3. Shape Irregular 4. Topography Generally level, but slopes slight upward from Riverside Dr. 5. Accessability Good 6. Utilities Municipal 1 Physical Description Building features are as follows: 1. Size (net) 108,668 SF 2. Layout & Design One story - food store - drug store - furniture store - variety store - ten shops 3. Parking Spaces 523 4.81 spaces per 1,000 square feet of net area 4. Construction Brick and glass front with concrete block on side and rear and metal seam roof. Market Position and Marketability Conclusions The subject property is located in the western section of the City of Orangeburg along the city limits line. There are older single family dwellings located throughout the neighborhood with commercial properties being located along John C. Calhoun Drive. Several single family residential subdivisions are located outside of the city limits just off of U.S. Highway 301-601. The size of subject property is 108,668 square feet. The center was originally constructed in 1972 and was renovated in 1994 when Bi-Lo expanded their store. There was a Sky City Discount Store in the original development, but this tenant vacated the premises after going bankrupt. During the renovation period, the owners were able to secure other tenants and divided the large discount store into small stores with space available for Bi-Lo to expand. Subject has a vacancy rate of 1.84% at this time. The comparable properties are located along Chestnut Street and are about 3 miles away. Several commercial developments have relocated to this area including the three comparables as well as a K-Mart-Foodmax store, a new Winn-Dixie Store that is nearing completion and the North Plaza with Wal-Mart as the major tenant and eight shops. The Prince of Orange Mall is also located in this area. The rental rates for Chestnut Square are from $5.00 to $7.50 per square foot and the center contains 60,000 square feet. Grove Park Shopping Center contains 60,000 square feet and the rental rates are from $6.00 to $12.00 per square foot. The Food Lion Plaza contains 40,000 square feet and the rental rates are at $7.00 per square foot. The subject property has rental rates for the shops ranging from $5.50 to $10.16 per square foot. The major tenants have rental rates ranging from $1.92 to $7.02 per square foot. Trends The subject property is located in the western section of the City of Orangeburg. This is an older center established neighborhood with older single family dwellings being located throughout the neighborhood and around subject property. The commercial developments along Russell Street include the Holiday Inn, fast food restaurants and branches for banks. The neighborhood is considered to be stable and the stability has been maintained over the years. 2 PROPERTY INSPECTION FORM COMMERCIAL - -------------------------------------------------------------------------------- I. COMPARABLE PROPERTIES A. PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Edisto Village Chestnut Square Grove Park --------------------------- ------------------------- ------------------------- b. Street Chestnut Street at Chestnut Street at St. 398 Riverside Drive Ellis Avenue Mathews Rd. --------------------------- ------------------------- ------------------------- c. City Orangeburg, SC Orangeburg, SC Orangeburg, SC --------------------------- ------------------------- ------------------------- d. Distance from subject N/A 3 miles 3 miles --------------------------- ------------------------- ------------------------- e. Contact Edens & Avant, Inc. McDaniel Leasing Co. Windsor-Aughtry --------------------------- ------------------------- ------------------------- f. Phone 803-779-4420 864-576-4660 864-271-9855 --------------------------- ------------------------- ------------------------- 2. Attributes a. Year built 1972 (Reh. 1994) 1981 1985 --------------------------- ------------------------- ------------------------- b. Net sq. Ft. 108,668 60,000 60,000 --------------------------- ------------------------- ------------------------- c. # building 1 1 1 --------------------------- ------------------------- ------------------------- d. #stories 1 1 1 --------------------------- ------------------------- ------------------------- e. Avg. Floor plate size (SF), if office N/A N/A N/A --------------------------- ------------------------- ------------------------- f. # elevators N/A N/A N/A --------------------------- ------------------------- ------------------------- g. Parking Adequate Adequate Adequate --------------------------- ------------------------- ------------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block --------------------------- ------------------------- ------------------------- I. Vacancy % 1.84% 12.0% 10.0% --------------------------- ------------------------- ------------------------- j. Anchors, if Retail Bi-Lo, Badcock, Maxway, Revco, Family Dollar Bi-Lo Family Dollar, Revco --------------------------- ------------------------- -------------------------
COMPARABLE 3 ------------ 1. Identification a. Name Food Lion Plaza ------------------------ b. Street St. Mathews Rd. At Chestnut St. ------------------------ c. City Orangeburg, SC ------------------------ d. Distance from subject 3 miles ------------------------ e. Contact Shopping Center Group ------------------------ f. Phone 954-492-2644 ------------------------ 2. Attributes a. Year built 1983 ------------------------ b. Net sq. Ft. 40,000 ------------------------ c. # building 1 ------------------------ d. #stories 1 ------------------------ e. Avg. Floor plate size (SF), if office N/A ------------------------ f. # elevators N/A ------------------------ g. Parking Adequate ------------------------ h. Construction Type Brick/Concrete Block ------------------------ I. Vacancy % 0% ------------------------ j. Anchors, if Retail Food Lion, Moovies ------------------------ Comments: These three comparables are located in the section where most of the commercial developments have relocated which is the northern portion of Orangeburg. Subject was renovated in 1994 with the Bi-Lo Store expanding. It is thought that subject does have its place in the market and is firmly established at this time. 3 PROPERTY INSPECTION FORM COMMERCIAL - -------------------------------------------------------------------------------- B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Asking Rental Rate a. Anchor Space $1.92 - $7.02 N/A N/A ---------------------------- ------------------------ ------------------------- b. Shop Space $5.50 - $10.16 $5.00 - $7.50 $6.00 - $12.00 ---------------------------- ------------------------ ------------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ---------------------------- ------------------------ ------------------------- 3. Rent Concessions None None None ---------------------------- ------------------------ ------------------------- 4. Effective Rent $5.50 - $10.16 $5.00 - $7.50 $6.00 - $12.00 ---------------------------- ------------------------ ------------------------- 5. TI Allowance None None None ---------------------------- ------------------------ ------------------------- 6. Expense Stop None None None ---------------------------- ------------------------ ------------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 -5 years (shop) 3 - 5 years (shop) ---------------------------- ------------------------ ------------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% ---------------------------- ------------------------ ------------------------- Fashion Cents, Revco, 9. Percentage Rent Bi-Lo, Maxway, Family (per lease terms) Dollar, Allied Revco, Family Dollar Bi-Lo ---------------------------- ------------------------ ------------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A ---------------------------- ------------------------ ------------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A ---------------------------- ------------------------ ------------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Similar Similar ---------------------------- ------------------------ -------------------------
COMPARABLE 3 ------------ 1. Asking Rental Rate a. Anchor Space N/A ------------------------ b. Shop Space $7.00 ------------------------ 2. Lease Type (Gross/Net) Triple Net ------------------------ 3. Rent Concessions None ------------------------ 4. Effective Rent $7.00 ------------------------ 5. TI Allowance None ------------------------ 6. Expense Stop None ------------------------ 7. Length of Lease Term 3-5 years (shop) ------------------------ 8. Commissions 5.00% - 7.00% ------------------------ 9. Percentage Rent (per lease terms) Food Lion, Moovies ------------------------ 10. Historical Annual Absorption/sq.ft. N/A ------------------------ 11. Annual Operating Expense psf (Including taxes) N/A ------------------------ C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) Similar ------------------------ D. EXPLAIN RANKING/COMMENTS: These comparables have been ranked as similar to subject. The reason for this is because the income stream and tenant mix are similar to subject. The size and age of these centers vary. Comparable No. 1 does not have a major supermarket, but does have a major drug store and variety store occupying space. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Chestnut Square Location: Chestnut Street at Ellis Avenue Orangeburg, SC Year Built: 1981 Total Size: 60,000 SF Vacant Space: 7,200 SF Vacancy Rate: 12.0% Rental Range: $5.00 - $7.50 per square foot Tenant Expenses: Triple Net Remarks: The major tenants are Revco Drugs and Family Dollar Stores. Bi-Lo was in this center when it was built. Other tenants are occupying small stores. 5 Comparable Rental No. 2 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Grove Park Shopping Center Location: Chestnut Street & St. Mathews Road Orangeburg, SC Year Built: 1985 Total Size: 60,000 SF Vacant Space: 6,000 SF Vacancy Rate: 10.0% Rental Range: $6.00 - $12.00 per square foot Tenant Expenses: Triple Net Remarks: The major tenant is Bi-Lo Stores. Other tenants include Andre's Jewelers, Grove Park Pharmacy, Blockbuster, House of Pizza. 6 Comparable Rental No. 3 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Food Lion Plaza Location: St. Mathews Road at Chestnut Street Orangeburg, SC Year Built: 1983 Total Size: 40,000 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $7.00 per square foot Tenant Expenses: Triple Net Remarks: This is an older center with Food Lion as the major tenant. Moovies now occupies the space formerly occupied by Rite-Aid. 7 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Edisto Village St. Andrews Crossing Eastgate Shop. Center ------------------------ ----------------------- ---------------------- b. Street Address NWC Whiskey Rd. & 398 Riverside Drive 817 St. Andrews Road Eastgate Dr. ------------------------ ----------------------- ---------------------- c. City Orangeburg, SC Columbia, SC Aiken, SC ------------------------ ----------------------- ---------------------- d. Distance from Subject N/A 8 miles 56 miles ------------------------ ----------------------- ---------------------- 2. Attributes a. Year Built 1972 (Reh. 1994) 1994 1995 ------------------------ ----------------------- ---------------------- b. Net sq. feet 108,668 66,910 SF 75,716 SF ------------------------ ----------------------- ---------------------- c. # Buildings 1 1 1 ------------------------ ----------------------- ---------------------- d. # of Stories 1 1 1 ------------------------ ----------------------- ---------------------- e. Vacancy % 1.84% 0% 5.00% ------------------------ ----------------------- ---------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 ------------------------ ----------------------- ---------------------- b. Sales Price PSF N/A $97.89 $88.16 ------------------------ ----------------------- ---------------------- c. Date N/A 05-25-94 09-28-95 ------------------------ ----------------------- ---------------------- d. NOI at time of Sale N/A $634,797 $657,896 ------------------------ ----------------------- ---------------------- e. Cap. Rate N/A 9.69% 9.86% ------------------------ ----------------------- ---------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A superior similar ------------------------ ----------------------- ---------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name One Norman Center Paw Creek Commons ---------------------- ----------------------- b. Street Address 19706 One Norman E/S Little Rock Rd. Blvd. at Freedom Dr. ---------------------- ----------------------- c. City Cornelius, NC Charlotte, NC ---------------------- ----------------------- d. Distance from Subject 100 miles 92 miles ---------------------- ----------------------- 2. Attributes a. Year Built 1993 1996 ---------------------- ----------------------- b. Net sq. feet 54,185 SF 66,050 ---------------------- ----------------------- c. # Buildings 1 1 ---------------------- ----------------------- d. # of Stories 1 1 ---------------------- ----------------------- e. Vacancy % 0% 2.73% ---------------------- ----------------------- 3. Sales Information a. Sales Price $4,650,000 $5,384,000 ---------------------- ----------------------- b. Sales Price PSF $85.82 $77.52 ---------------------- ----------------------- c. Date 10-12-95 03-25-97 ---------------------- ----------------------- d. NOI at time of Sale $450,188 $517,412 ---------------------- ----------------------- e. Cap. Rate 9.68% 9.61% ---------------------- ----------------------- 4. Rank Relative to Subject (inferior, similar, superior) similar superior ---------------------- -----------------------
Explain Ranking/Comments: Comparables No. 1 and No. 4 are ranked superior to subject. The reason for this is because of the location and the higher rental rates for the shops in these centers. The tenant mix of all of these centers is similar to subject. The size of subject is larger than the comparables. 8 COMPARABLE IMPROVED SALES Comparable Sale No. 1 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] TMS 6012 -1 -1 NAME St. Andrews Crossing LOCATION St. Andrews Road and I-26, Columbia, SC GRANTOR Hayley-Redd, L.P. GRANTEE F.A.C. Properties DEED REFERENCE Book 1199, Page 331 DATE May 25, 1994 SALES PRICE $6,550,000 ADJUSTED SALES PRICE $6,550,000 SIZE BUILDING 66,910 SALES PRICE PER S.F. $97.89 SIZE LAND (ACRES) 8.08 SIZE LAND (S.F.) 351,965 YEAR BUILT 1994 LAND/BUILDING RATIO 5.26 To 1 UTILITIES All available VERIFICATION Deed ZONING Commercial FINANCING Market EFFECTIVE GROSS INCOME $686,905 EGIM 9.54 NET OPERATING INCOME $634,797 OVERALL RATE 9.69% VERIFICATION Public Records TYPE OF PURCHASER Private Investor COMMENTS This was an arms length sale. This neighborhood shopping center is anchored by Kroger and is located in a good commercial area with good accessibility and fair exposure. The construction is brick veneer and concrete block. (503) 9 Comparable Sale No. 2 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] NAME Eastgate Shopping Center LOCATION Northwest Corner of Whiskey Road and Eastgate Drive, Aiken, SC GRANTOR PDG Aiken Partners, LP GRANTEE Southeast U.S. Retail, LP DATE Sep 28, 1995 SALES PRICE $6,675,000 SIZE BUILDING 75,716 SALES PRICE PER S.F. $88.16 SIZE LAND (ACRES) 8.79 SIZE LAND (S.F.) 382,892 YEAR BUILT 1995 LAND/BUILDING RATIO 5.06 To 1 UTILITIES All available VERIFICATION Public Records ZONING Commercial FINANCING Cash to seller GROSS POTENTIAL INCOME $782,704 EFFECTIVE GROSS INCOME $782,704 GROSS INCOME MULTIPLE 8.53 EGIM 8.53 NET OPERATING INCOME $657,896 OVERALL RATE 9.86% TYPE OF PURCHASER Private Investor COMMENTS Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. (643) 10 Comparable Sale No. 3 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] NAME One Norman Center LOCATION 19706 One Norman Boulevard, Cornelius, Mecklenburg County, NC GRANTOR One Norman Center, LP GRANTEE Lucky Realty DEED REFERENCE Book 8325, Page 721 DATE Oct 12, 1995 SALES PRICE $4,650,000 SIZE BUILDING 54,185 SALES PRICE PER S.F. $85.82 SIZE LAND (ACRES) 5.69 SIZE LAND (S.F.) 247,856 YEAR BUILT 1993 LAND/BUILDING RATIO 4.57 To 1 UTILITIES All Public VERIFICATION Public Records ZONING CUB-2 FINANCING Cash to Seller GROSS POTENTIAL INCOME $474,591 EFFECTIVE GROSS INCOME $474,591 GROSS INCOME MULTIPLE 9.80 EGIM 9.80 NET OPERATING INCOME $450,188 OVERALL RATE 9.68% TYPE OF PURCHASER Private Investor COMMENTS This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot. Triple net lease. (716) 11 Comparable Sale No. 4 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] TMS 59 -231 -22 ,23 pt. NAME Paw Creek Commons LOCATION East side of Little Rock Road at Freedom Drive, Charlotte, NC GRANTOR Paw Creek, LLC GRANTEE Frastacky and Associates DATE Mar 25, 1997 SALES PRICE $5,120,000 ADJUSTED SALES PRICE $5,384,000 SIZE BUILDING 66,050 SALES PRICE PER S.F. $77.52 SIZE LAND (ACRES) 9.82 SIZE LAND (S.F.) 427,759 YEAR BUILT 1996 LAND/BUILDING RATIO 6.48 To 1 UTILITIES Municipal VERIFICATION Public Records ZONING CC, Commercial Center FINANCING Cash to seller GROSS POTENTIAL INCOME $568,840 EFFECTIVE GROSS INCOME $552,054 GROSS INCOME MULTIPLE 9.00 EGIM 9.27 NET OPERATING INCOME $517,412 OVERALL RATE 9.61% TYPE OF PURCHASER Private Investor COMMENTS The overall rate of 10.10 percent has been adjusted down by 50 basis points since the sales contract is pre-construction. The major tenants are Winn Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. Anchor income is 79.41 percent of gross income. (793) 12 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 13 Comparable Rentals [GRAPHIC OMITTED] Improved Sales Map [GRAPHIC OMITTED] Site Plan [GRAPHIC OMITTED] EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: EDISTO VILLAGE 398 RIVERSIDE DRIVE ORANGEBURG, SC 29115-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ FASHION CENTS NORSTAN APPAREL SHOPS OF NY, 609-90 3,328 10/19/94 11/30/99 8.00 11/01/94 26,624.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ SEARS DEALER STORE ROBERT L. & GWENDOLYN F. BELL 609-100 6,787 09/01/95 08/31/98 6.00 09/01/95 40,722.00 0.00 0.00 6.34 09/01/96 43,029.48 6.34 02/01/97 43,029.48 - ------------------------------------------------------------------------------------------------------------------------ J & D FASHIONS MR. KI K. HAN 609-110 4,625 03/15/95 03/31/98 6.50 04/01/95 30,062.40 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ REVCO #572 REVCO DISCOUNT DRUG CENTERS, 609-120 8,500 03/01/91 02/28/01 7.00 02/01/92 59,499.96 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ FAMILY DOLLAR #131 FAMILY DOLLAR STORES OF ORANG 609-130 7,150 07/01/72 12/31/97 1.92 01/01/93 13,712.40 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ ALLIED STORE #53/648 VARIETY WHOLESALERS, INC. 609-140 5,393 04/01/88 03/31/00 0.00 0.00 5.00 04/01/91 26,964.96 - ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- FASHION CENTS Full 0 Full 0 Full 0 12/01/99 11/30/04 8.50 3.00 887,500 Y NORSTAN APPAREL SHOPS OF NY, 12/01/04 11/30/09 9.00 3.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- SEARS DEALER STORE Full 0 Full 0 Full 0 09/01/98 08/31/01 0.00 0.00 0 ROBERT L. & GWENDOLYN F. BELL 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- J & D FASHIONS Full 0 Full 0 Full 0 04/01/98 03/31/01 7.15 0.00 0 MR. KI K. HAN 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- REVCO #572 PRS 1973 PRS 1978 Full 0 03/01/01 02/28/06 7.50 2.00 2,975,000 Y REVCO DISCOUNT DRUG CENTERS, 03/01/06 02/28/11 8.00 2.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- FAMILY DOLLAR #131 PRS 1973 PRS 1978 Full 0 01/01/83 12/31/87 1.75 3.00 457,083 FAMILY DOLLAR STORES OF ORANG 01/01/88 12/31/92 1.83 3.00 0 01/01/93 12/31/97 1.92 3.00 0 10/10/98 2.00 3.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- ALLIED STORE #53/648 PRS 1987 PRS 1987 Full 0 04/01/91 03/31/94 5.00 2.50 0 Y VARIETY WHOLESALERS, INC. 04/01/94 03/31/97 5.00 2.50 1,078,600 Y
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: EDISTO VILLAGE 398 RIVERSIDE DRIVE ORANGEBURG, SC 29115-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ CHAMPION RENT TO OWN #1103 B & G COLUMBIA, INC. 609-10 3,240 01/01/91 02/28/01 0.00 0.00 8.25 04/01/91 26,730.00 8.50 03/01/99 27,540.00 - ------------------------------------------------------------------------------------------------------------------------ BEAUTIFUL NAILS PHONG DO 609-30 1,240 02/01/95 01/31/98 10.16 02/01/95 12,600.00 - ------------------------------------------------------------------------------------------------------------------------ ONE PRICE CLOTHING #006 J.K. APPAREL, INC. 609-40 3,490 04/01/93 07/31/98 6.75 04/01/93 23,557.44 - ------------------------------------------------------------------------------------------------------------------------ NATIONSCREDIT FINANCIAL SERV. NATIONSCREDIT FINANCIAL SERVI 609-50 0 P 08/01/96 07/31/01 0.00 08/01/96 13,343.04 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ BADCOCK FURNITURE W.S. BADCOCK CORP. 609-60 15,200 08/01/93 07/31/98 2.75 01/01/94 41,799.96 - ------------------------------------------------------------------------------------------------------------------------ BI-LO INC. #315 BI-LO 609-70 32,715 05/04/94 05/31/14 0.00 0.00 7.02 06/01/94 229,607.04 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ MAXWAY STORE #847 VARIETY WHOLESALERS, INC. 609-80 15,000 11/01/94 10/31/99 0.00 0.00 2.25 11/01/94 33,750.00 - ------------------------------------------------------------------------------------------------------------------------ - ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- CHAMPION RENT TO OWN #1103 Full 0 Full 0 Full 0 03/01/96 02/28/01 0.00 0.00 0 B & G COLUMBIA, INC. 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- BEAUTIFUL NAILS Full 0 Full 0 Full 0 0.00 0.00 0 PHONG DO - ----------------------------------------------------------------------------------------------------------------------------------- ONE PRICE CLOTHING #006 PRS 1984 PRS 1984 Full 0 0.00 0.00 0 J.K. APPAREL, INC. - ----------------------------------------------------------------------------------------------------------------------------------- NATIONSCREDIT FINANCIAL SERV. Full 0 Full 0 Fixed 0 08/01/01 07/31/04 0.00 0.00 0 NATIONSCREDIT FINANCIAL SERVI 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- BADCOCK FURNITURE PRS 1993 PRS 1993 None 0 08/01/98 07/31/03 2.75 0.00 0 W.S. BADCOCK CORP. - ----------------------------------------------------------------------------------------------------------------------------------- BI-LO INC. #315 Full 0 Full 0 Full 0 06/01/14 05/31/19 7.27 1.00 0 Y BI-LO 06/01/19 05/31/24 7.52 1.00 22,960,700 Y 06/01/24 05/31/29 7.77 1.00 0 Y 06/01/29 05/31/34 8.02 1.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- MAXWAY STORE #847 PRS 1994 PRS 1994 Full 0 11/01/99 10/31/04 2.59 3.00 0 Y VARIETY WHOLESALERS, INC. 0.00 3.00 1,125,000 Y - -----------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: EDISTO VILLAGE 398 RIVERSIDE DRIVE ORANGEBURG, SC 29115-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ ALLIED STORE #53/648 VARIETY WHOLESALERS, INC. 609-140 5,393 04/01/88 03/31/00 0.00 0.00 5.50 04/01/97 29,661.48 - ------------------------------------------------------------------------------------------------------------------------ Available 609-150 2,000 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ BURGER KING CORPORATION 609-160 0 P 11/20/84 11/19/99 0.00 12/01/89 120.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 106,668 Current Annual Base Rent 584,097.24 Available. 2,000 Total..... 108,668 - ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- ALLIED STORE #53/648 VARIETY WHOLESALERS, INC. PRS 1987 PRS 1987 Full 0 04/01/97 03/31/00 5.50 2.50 0 Y 0.00 2.50 1,186,500 Y - ----------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- BURGER KING CORPORATION Full 0 Full 0 Full 0 11/20/89 11/19/94 0.00 0.00 0 11/20/94 10/19/99 0.00 0.00 0
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] John C. Calhoun Boulevard - Looking South [GRAPHIC OMITTED] Riverside Drive Looking East [GRAPHIC OMITTED] Riverside Drive Looking West [GRAPHIC OMITTED] Glover Street Looking North [GRAPHIC OMITTED] Glover Street Looking South [GRAPHIC OMITTED] Entrance Way To Subject From John C. Calhoun Boulevard [GRAPHIC OMITTED] Entrance Way To Subject From Riverside Drive [GRAPHIC OMITTED] Entrance Way To Subject From Glover Street [GRAPHIC OMITTED] Subject Property - Front View [GRAPHIC OMITTED] Subject Property - Front View [GRAPHIC OMITTED] Subject Property - Front View [GRAPHIC OMITTED] Subject Property - Front And Side View [GRAPHIC OMITTED] Subject Property - Side View [GRAPHIC OMITTED] Subject Property - Rear View [GRAPHIC OMITTED] Subject Property - Rear View [GRAPHIC OMITTED] Subject Property - Rear View [GRAPHIC OMITTED] Subject Property - Rear View [GRAPHIC OMITTED] Subject Property - Front And Side View Of Other Stores [GRAPHIC OMITTED] Subject Property - Front And Side View Of Other Stores This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study of: FAIRFIELD SQUARE 102 Fairfield Square Winnsboro, Fairfield County, South Carolina Prepared By: O. Marshall Dodds, MAI Date of Market Study: May 15, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] June 16, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Fairfield Square 102 Fairfield Square Winnsboro, Fairfield County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 15, 1997. This study supercedes the one completed on May 15, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 54,640 square feet of leasable area. The center was originally constructed in 1987. The anchor tenants are Food Lion and Revco with other shops being occupied by such tenants as Subway, First Family Financial, Cato, Family Dollar and Pic-N-Pay. The subject property is currently 100 percent occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds, MAI ----------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY - -------------------------------------------------------------------------------- Regional Perspective Fairfield County is part of the Central Midlands Region, which consists of Richland, Lexington, Newberry and Fairfield Counties. Winnsboro is the county seat of Fairfield County. It covers an area of 2.68 square miles. The Town of Ridgeway is also located in Fairfield County eleven miles from Winnsboro. It encompasses a 1/2 square mile area. Interstate 77 bisects Fairfield County and Interstate 20 and 26 are within 20 to 30 minutes of Winnsboro. All three interstates are connected via SC Highway #34. US Highways running through the county include #321 and #21. Major employers in Fairfield County are as follows:
No. Name & Location Year Established Product No. Employees 1. Mack Trucks, Inc. 1987 Heavy duty truck US Hwy. #321 @ SC Hwy. #34 chasis 780 2. The Standard Products Co. 1978 Automobile Twin US Hwy. #321 @ SC Hwy. 34 Engine Molded Parts 451 3. Uniroyal Goodrich 1917 Tire cord-rayon, Co-Tex Division nylon, polyester, Maple Street steel 299 4. Manhattan Shirt Company 1962 Dress & sports 176 US Hwy. #321 By-Pass shirts, sports knits, ladies apparel 5. Rite Aid 1980 Distribution warehouse 168 SC Hwy. #34 6. Fuji Copian Corporation 1989 Typewriter cassettes, 171 SC Hwy. #34 computer printer cassettes, computer printer ribbons
The subject property is located in Fairfield County and the unemployment rate was 9.8 percent in February, 1997. The unemployment rate statewide for February was 5.5 percent. The population of Fairfield County for 1995 was 22,504 with 13.7 percent being age 65 or older and the population for the Town of Winnsboro was 3,475. Neighborhood and Site The neighborhood is generally the area located in the Town of Winnsboro and outside of the Town of Winnsboro extending from the intersection of US Highway #321 By-Pass with US Highway #321 Business on the south side of town to the intersection of US Highway #321 By-Pass and US Highway #321 Business on the north side of town. Major developments are located along US Highway #321 By-Pass including Fairfield Central High School, Fairfield Middle School and the new Fairfield Intermediate School. The Fairfield Memorial Hospital is located at the intersection of Washington Street and the By-Pass. Manhattan Shirt Company has been in the neighborhood for many years. There is also an Advanced Auto Parts located at the intersection of Calhoun Street and US Highway #321. The Mack Truck plant is located approximately one mile south of the southern neighborhood boundary and there are other manufacturing concerns and employment centers located in relatively close proximity. Multi-family apartments in the area include the Lamplighter Apartments, Castlewood Apartments, Laurelwood I & II, Winnsboro Arms, Winnsboro Apartments and Winnfield West. The downtown area is typical for most small towns. Developments include banks, such as Wachovia and First Union, as well as Belk, Super 10, Winnsboro Furniture and Napa Auto Parts. The Fairfield County Courthouse, Town Hall and Chamber of Commerce are all located in the downtown area. The neighborhood is established and some growth has been occurring. 1 Site Description Physical features for Fairfield Square are as follows: 1. Size 7.50 acres or 326,700 square feet 2. Identity 102 Fairfield Square TMS #151-0-0-4 3. Shape irregular 4. Topography generally level, slopes slightly downward toward rear 5. Accessability good from either direction 6. Utilities municipal Physical Description Building features for Fairfield Square are as follows: 1. Size (net) 54,640 square feet 2. Layout & Design 1 story-food store, drug store and seven shops 3. Parking Spaces 278 5.08 spaces per 1,000 square feet of net area 4. Construction brick and glass front with concrete block on side and rear and metal seamed roof Market Position and Marketability Conclusions There are no other shopping centers located in Winnsboro that are thought to be comparable to the subject. A Wal-Mart Superstore with nine retail shops is under construction at this time. The rental rate range for the shops is projected to be from $9.00 to $12.00 per square foot. The shops will range in size from 1,200 square feet to 5,000 square feet. Generally, Wal-Mart attracts such tenants as Cato, Dollar Tree, Shoe Show, Freidman's Jewelers and Sally's Beauty Supply. The comparables selected are from the Columbia Metropolitan area. The Mitchell Plaza is located on the north side of West Columbia Avenue in Batesburg-Leesville, South Carolina. This center was built in 1986 and contains 41,650 square feet. There is one shop that is vacant at this time containing 1,200 square feet. The major tenants are Food Lion and Rite Aid. The small shops are leased to Cato, Star Nails and Hong Kong Kitchen. The rental range for these stores is from $7.25 to $8.50 per square foot. The Batesburg Plaza is located on the southeast corner of Columbia Avenue and Carolina Avenue in Batesburg, South Carolina. This center was built in 1971 and was renovated in 1987. The size is 68,238 square feet and the center is 100 percent occupied at this time. The major tenant is Winn Dixie with Maxway and Farmer's Furniture Store occupying large stores. There are two small shops in this center. The rental range is from $3.50 to $5.25 per square foot. The Chapin Center is located on the west side of US Highway #76 at St. Peter's Church Road in Chapin, South Carolina. The size of this center is 51,170 square feet. The center was built in 1991 and the Winn Dixie store made an expansion in 1996 into the Rite Aid space after Rite Aid vacated it. There is one vacant shop at this time containing 1,200 square feet. The rental range is from $10.00 to $11.00 per square foot. 2 The subject property is located in the middle of the neighborhood being around the intersection of US Highway #321 By-Pass and US Highway #321 Business. The location of subject is convenient to the single family and multi-family dwellings that are located throughout the neighborhood. These comparable rentals were taken from the Columbia Metropolitan area which is south of the subject neighborhood. The subject property has seven shops. The rental rates range from $5.00 to $9.90 per square foot. This is within the range of the comparable rentals for the stores. The rental rate for Food Lion is at $5.60 per square foot and Revco is paying $7.00 per square foot. Both of the anchor tenants are paying overage rentals. These rates are reasonable rental rates for the neighborhood. The location of subject is strategic within the neighborhood and convenient to shoppers throughout the neighborhood. Trends The subject property is located in the Town of Winnsboro. The development of Winnsboro began approximately 25 years ago and the neighborhood is established with some growth having occurred recently. There are commercial developments that are located throughout the neighborhood on the major traffic arteries. The Fairfield Memorial Hospital is also located in the subject neighborhood. All trends are favorable at this time and expected to continue. 3 PROPERTY INSPECTION FORM COMMERCIAL - -------------------------------------------------------------------------------- I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- --------------------- --------------------- 1. Identification a. Name Fairfield Square Mitchell Plaza Batesburg Plaza ------------------------ -------------------------- --------------------------- b. Street 102 Fairfield Square NS of W. Columbia Ave. 242-252 Columbia Ave. W. ------------------------ -------------------------- --------------------------- c. City Winnsboro, SC Batesburg-Leesville, SC Batesburg, SC ------------------------ -------------------------- --------------------------- d. Distance from subject N/A 81 miles 80 miles ------------------------ -------------------------- --------------------------- e. Contact Edens Avant, Inc. Edens & Avant, Inc. Workman & Company ------------------------ -------------------------- --------------------------- f. Phone (803) 779-4420 (803) 779-4420 (704) 563-1111 ------------------------ -------------------------- --------------------------- 2. Attributes a. Year built 1987 1986 1971, Renovated 1987 ------------------------ -------------------------- --------------------------- b. Net sq. Ft. 54,640 41,650 68,238 ------------------------ -------------------------- --------------------------- c. # building 1 1 1 ------------------------ -------------------------- --------------------------- d. #stories 1 1 1 ------------------------ -------------------------- --------------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A ------------------------ -------------------------- --------------------------- f. # elevators N/A N/A N/A ------------------------ -------------------------- --------------------------- g. Parking Adequate Adequate Adequate ------------------------ -------------------------- --------------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ------------------------ -------------------------- --------------------------- i. Vacancy % 0% 2.9% 0% ------------------------ -------------------------- --------------------------- j. Anchors, if Retail Food Lion, Revco Food Lion, Rite Aid Winn Dixie ------------------------ -------------------------- ---------------------------
COMPARABLE 3 --------------------- 1. Identification a. Name Chapin Center --------------------------- b. Street Chapin Rd. @ Virginia St. --------------------------- c. City Chapin, SC --------------------------- d. Distance from subject 35 miles --------------------------- e. Contact Edens & Avant, Inc. --------------------------- f. Phone (803) 779-4420 --------------------------- 2. Attributes a. Year built 1991, Expanded 1996 --------------------------- b. Net sq. Ft. 51,170 --------------------------- c. # building 1 --------------------------- d. #stories 1 --------------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A --------------------------- f. # elevators N/A --------------------------- g. Parking Adequate --------------------------- h. Construction Type Brick/Concrete Block --------------------------- i. Vacancy % 2.35% --------------------------- j. Anchors, if Retail Winn Dixie --------------------------- Comments: These comparable are located in the Columbia Metropolitan area which is in close proximity to subject neighborhood and are similar to subject. The small shops in subject property are similar to the small shops in each of these shopping centers. 4 PROPERTY INSPECTION FORM COMMERCIAL - -------------------------------------------------------------------------------- B. RENTAL INFORMATION ------------------
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Asking Rental Rate a. Anchor Space $5.60 N/A N/A ------------------------ ------------------------- ---------------------------- b. Shop Space $5.00 - $9.90 $7.25 - $8.50 $3.50 - $5.25 ------------------------ ------------------------- ---------------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ------------------------ ------------------------- ---------------------------- 3. Rent Concessions None None None ------------------------ ------------------------- ---------------------------- 4. Effective Rent $5.00 - $9.90 $7.25 - $8.50 $3.50 - $5.25 ------------------------ ------------------------- ---------------------------- 5. TI Allowance None None None ------------------------ ------------------------- ---------------------------- 6. Expense Stop None None None ------------------------ ------------------------- ---------------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 - 5 years (shop) 3 - 5 years (shop) ------------------------ ------------------------- ---------------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% - 7.00% ------------------------ ------------------------- ---------------------------- 9. Percentage Rent (per lease terms) Food Lion, Revco Food Lion, Rite Aid Winn Dixie ------------------------ ------------------------- ---------------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A ------------------------ ------------------------- ---------------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A ------------------------ ------------------------- ---------------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Similar Similar ------------------------ ------------------------- ----------------------------
COMPARABLE 3 ------------ 1. Asking Rental Rate a. Anchor Space N/A --------------------------- b. Shop Space $10.00 - $11.00 --------------------------- 2. Lease Type (Gross/Net) Triple Net --------------------------- 3. Rent Concessions None --------------------------- 4. Effective Rent $10.00 - $11.00 --------------------------- 5. TI Allowance None --------------------------- 6. Expense Stop None --------------------------- 7. Length of Lease Term 3 - 5 years (shop) --------------------------- 8. Commissions 5.00% to 7.00% --------------------------- 9. Percentage Rent (per lease terms) Winn Dixie --------------------------- 10. Historical Annual Absorption/sq.ft. N/A --------------------------- 11. Annual Operating Expense psf (Including taxes) N/A --------------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) Similar --------------------------- D. EXPLAIN RANKING/COMMENTS: All of these comparables are ranked similar to subject. The reason for this is because all of the centers are close in age and size. The comparables are located in the Columbia Metropolitan area but in small neighborhoods such as subject. The rental rates for the shops in subject are within the range of rental rates in these centers. 5 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Mitchell Plaza Location: North Side of West Columbia Avenue Batesburg-Leesville, SC Year Built: 1986 Total Size: 41,650 SF Vacant Space: 1,200 SF Vacancy Rate: 2.9% Rental Range: $7.25 - $8.50 Tenant Expenses: Triple Net Remarks: Food Lion and Rite Aid are the major tenants. The local space is leased to Cato, Star Nails and Hong Kong Kitchen. A video store that had occupied a 1,200 square foot space since completion of construction moved recently, and this space is currently vacant. The asking rent is $7.25 per square foot. A Wachovia Bank kiosk is also located on this site. 6 Comparable Rental No. 2 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Batesburg Plaza Location: SEC Columbia Avenue and Carolina Avenue Batesburg, South Carolina Year Built: 1971, Renovated 1987 Total Size: 68,238 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $3.50 - $5.25 Tenant Expenses: Triple Net Remarks: This center was built in 1971 and renovated in 1987. Winn Dixie is the major tenant with Maxway and Farmer's Furniture occupying large stores. There are two small shops. 7 Comparable Rental No. 3 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Chapin Center Location: West Side of US Highway #76 Chapin, SC Year Built: 1991 Total Size: 51,170 SF Vacant Space: 1,200 SF Vacancy Rate: 2.35% Rental Range: $10.00 - $11.00 Tenant Expenses: Triple Net Remarks: The major tenant is Winn Dixie and this store was expanded in 1996 after Rite Aid moved out. The center has had a good operating history. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Fairfield Square St. Andrews Crossing Eastgate Shopping Center ------------------------ ------------------------ -------------------------- NWC Whiskey Rd. & b. Street Address 102 Fairfield Square 817 St. Andrews Road Eastgate Dr. ------------------------ ------------------------ -------------------------- c. City Winnsboro, SC Columbia, SC Aiken, SC ------------------------ ------------------------ -------------------------- d. Distance from Subject N/A 39 miles 85 miles ------------------------ ------------------------ -------------------------- 2. Attributes a. Year Built 1987 1994 1995 ------------------------ ------------------------ -------------------------- b. Net sq. feet 54,640 SF 66,910 SF 75,716 SF ------------------------ ------------------------ -------------------------- c. # Buildings 1 1 1 ------------------------ ------------------------ -------------------------- d. # of Stories 1 1 1 ------------------------ ------------------------ -------------------------- e. Vacancy % 0% 0% 7.21% ------------------------ ------------------------ -------------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 ------------------------ ------------------------ -------------------------- b. Sales Price PSF N/A $97.89 $88.16 ------------------------ ------------------------ -------------------------- c. Date N/A 05-25-94 09-28-95 ------------------------ ------------------------ -------------------------- d. NOI at time of Sale N/A $634,797 $782,704 ------------------------ ------------------------ -------------------------- e. Cap. Rate N/A 9.69% 9.86% ------------------------ ------------------------ -------------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A Superior Similar ------------------------ ------------------------ -------------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name One Norman Center Paw Creek Commons ----------------------- ---------------------- 19706 One Norman Blvd. E/S Little Rock Road b. Street Address at Freedom Drive ----------------------- ---------------------- c. City Cornelius, NC Charlotte, NC ----------------------- ---------------------- d. Distance from Subject 120 miles 95 miles ----------------------- ---------------------- 2. Attributes a. Year Built 1993 1996 ----------------------- ---------------------- b. Net sq. feet 54,185 SF 66,050 SF ----------------------- ---------------------- c. # Buildings 1 1 ----------------------- ---------------------- d. # of Stories 1 1 ----------------------- ---------------------- e. Vacancy % 6.98% 2.73% ----------------------- ---------------------- 3. Sales Information a. Sales Price $4,650,000 $5,384,000 ----------------------- ---------------------- b. Sales Price PSF $85.82 $77.52 ----------------------- ---------------------- c. Date 10-12-95 03-25-97 ----------------------- ---------------------- d. NOI at time of Sale $474,591 $517,412 ----------------------- ---------------------- e. Cap. Rate 9.68% 9.61% ----------------------- ---------------------- 4. Rank Relative to Subject (inferior, similar, superior) Similar Superior ----------------------- ----------------------
Explain Ranking/Comments: Comparables #1 and #4 are ranked superior to subject. The reason for this is because of the location of these comparables being superior to subject. Comparable #3 is located in a commercial area that is larger than subject, but it is similar. Comparable #2 is similar to subject. 9 COMPARABLE IMPROVED SALES Comparable Sale No. 1 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] TMS 6012 -1 -1 NAME St. Andrews Crossing LOCATION St. Andrews Road and I-26, Columbia, SC GRANTOR Hayley-Redd, L.P. GRANTEE F.A.C. Properties DEED REFERENCE Book 1199, Page 331 DATE May 25, 1994 SALES PRICE $6,550,000 ADJUSTED SALES PRICE $6,550,000 SIZE BUILDING 66,910 SALES PRICE PER S.F. $97.89 SIZE LAND (ACRES) 8.08 SIZE LAND (S.F.) 351,965 YEAR BUILT 1994 LAND/BUILDING RATIO 5.26 To 1 UTILITIES All available VERIFICATION Deed ZONING Commercial FINANCING Market EFFECTIVE GROSS INCOME $686,905 EGIM 9.54 NET OPERATING INCOME $634,797 OVERALL RATE 9.69% VERIFICATION Public Records TYPE OF PURCHASER Private Investor COMMENTS This was an arms length sale. This neighborhood shopping center is anchored by Kroger and is located in a good commercial area with good accessibility and fair exposure. The construction is brick veneer and concrete block. (503) 10 Comparable Sale No. 2 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] NAME Eastgate Shopping Center LOCATION Northwest Corner of Whiskey Road and Eastgate Drive, Aiken, SC GRANTOR PDG Aiken Partners, LP GRANTEE Southeast U.S. Retail, LP DATE Sep 28, 1995 SALES PRICE $6,675,000 SIZE BUILDING 75,716 SALES PRICE PER S.F. $88.16 SIZE LAND (ACRES) 8.79 SIZE LAND (S.F.) 382,892 YEAR BUILT 1995 LAND/BUILDING RATIO 5.06 To 1 UTILITIES All available VERIFICATION Public Records ZONING Commercial FINANCING Cash to seller GROSS POTENTIAL INCOME $782,704 EFFECTIVE GROSS INCOME $782,704 GROSS INCOME MULTIPLE 8.53 EGIM 8.53 NET OPERATING INCOME $657,896 OVERALL RATE 9.86% TYPE OF PURCHASER Private Investor COMMENTS Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. (643) 11 Comparable Sale No. 3 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] NAME One Norman Center LOCATION 19706 One Norman Boulevard, Cornelius, Mecklenburg County, NC GRANTOR One Norman Center, LP GRANTEE Lucky Realty DEED REFERENCE Book 8325, Page 721 DATE Oct 12, 1995 SALES PRICE $4,650,000 SIZE BUILDING 54,185 SALES PRICE PER S.F. $85.82 SIZE LAND (ACRES) 5.69 SIZE LAND (S.F.) 247,856 YEAR BUILT 1993 LAND/BUILDING RATIO 4.57 To 1 UTILITIES All Public VERIFICATION Public Records ZONING CUB-2 FINANCING Cash to Seller GROSS POTENTIAL INCOME $474,591 EFFECTIVE GROSS INCOME $474,591 GROSS INCOME MULTIPLE 9.80 EGIM 9.80 NET OPERATING INCOME $450,188 OVERALL RATE 9.68% TYPE OF PURCHASER Private Investor COMMENTS This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot. Triple net lease. (716) 12 Comparable Sale No. 4 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] TMS 59 -231 -22 ,23 pt. NAME Paw Creek Commons LOCATION East side of Little Rock Road at Freedom Drive, Charlotte, NC GRANTOR Paw Creek, LLC GRANTEE Frastacky and Associates DATE Mar 25, 1997 SALES PRICE $5,120,000 ADJUSTED SALES PRICE $5,384,000 SIZE BUILDING 66,050 SALES PRICE PER S.F. $77.52 SIZE LAND (ACRES) 9.82 SIZE LAND (S.F.) 427,759 YEAR BUILT 1996 LAND/BUILDING RATIO 6.48 To 1 UTILITIES Municipal VERIFICATION Public Records ZONING CC, Commercial Center FINANCING Cash to seller GROSS POTENTIAL INCOME $568,840 EFFECTIVE GROSS INCOME $552,054 GROSS INCOME MULTIPLE 9.00 EGIM 9.27 NET OPERATING INCOME $517,412 OVERALL RATE 9.61% TYPE OF PURCHASER Private Investor COMMENTS The overall rate of 10.10 percent has been adjusted down by 50 basis points since the sales contract is pre-construction. The major tenants are Winn Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. Anchor income is 79.41 percent of gross income. (793) 13 ADDENDA o Fairfield County Demographics o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 USA COUNTIES 1996 Geographic Area: Fairfield, SC (45039) Table: GENERAL PROFILE - -------------------------------------------------------------------------------- POPULATION AND HOUSING (Bureau of the Census) Total resident population: 1995 .............................................................. 22,504 Percent 65 years and over ....................................... 13.7 1990 .............................................................. 22,295 1980 .............................................................. 20,700 Occupied housing units, 1990 ........................................ 7,467 Percent owner occupied ............................................ 78.1 BIRTHS AND DEATHS (National Center for Health Statistics) Births, 1993 ........................................................ 344 Per 1,000 resident population ..................................... 15.4 Percent to mothers under 20 years of age .......................... 16.9 Deaths, 1993 ........................................................ 281 Per 1,000 resident population ..................................... 12.6 Infant deaths per 1,000 live births, 1993 ........................... 8.7 EDUCATION (Bureau of the Census) Persons 25 years and over, 1990 ..................................... 13,642 Percent high school graduates ..................................... 58.1 Percent college graduates ......................................... 9.6 LABOR FORCE (Bureau of Labor Statistics) Civilian labor force, 1994 .......................................... 10,958 Percent unemployed ................................................ 9.7 PRIVATE NONFARM ESTABLISHMENTS (Bureau of the Census) Total establishments, 1993 .......................................... 316 Percent retail trade .............................................. 29.1 Percent services .................................................. 27.8 Paid employees, 1993 (pay period including March 12) ................ 5,872 Annual payroll, 1993 ($1,000) ....................................... 145,983 PERSONAL INCOME (Bureau of Economic Analysis) Total personal income, 1993 ($1,000) ................................ 310,386 Per capita (dollars) .............................................. 13,872 AGRICULTURE (Bureau of the Census) Number of farms, 1992 ............................................... 189 Land in farms as percent of total land ............................ 13 RETAIL TRADE (Bureau of the Census) Retail sales, 1992 ($1,000) ......................................... 60,270 Per capita (dollars) .............................................. 2,682 COMMERCIAL AND SAVINGS BANKS (Fed. Deposit Insurance Corp.) Number of offices, June 30, 1994 .................................... 5 Total deposits ($1,000) ........................................... 84,751 SOCIAL PROGRAMS (Social Security Administration) Total Social Security recipients, December 1993 ..................... 4,155 Retired workers ................................................... 2,385 Supplementary Security Income recipients, December 1994 ............. 944 FEDERAL FUNDS AND GRANTS (Bureau of the Census) Total direct expenditures or obligations per capita: 1994 (dollars) .................................................... 3,696 1990 (dollars) .................................................... 2,349 - -------------------------------------------------------------------------------- (NA) Not available. (D) Avoid disclosure of confidential information. (X) Not applicable. (S) Does not meet publication standards. (Z) Value > 0 but < half unit of measure shown. NOTE: 0 data may indicate geographic/data footnotes. Source: U.S. Bureau of the Census, USA Counties 1996 CD-ROM. Location Map [GRAPHIC OMITTED] [GRAPHIC OMITTED] [GRAPHIC OMITTED] Site Plan [GRAPHIC OMITTED] Page 47 EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: FAIRFIELD SQUARE 102 FAIRFIELD SQUARE WINNSBORO, SC Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ SUBWAY #1542 SUBWAY RESTAURANTS INC. 621- 10 1,320 07/01/88 06/30/99 0.00 0.00 0.00 0.00 9.49 08/01/92 12,520.56 9.32 07/01/94 12,300.00 - ------------------------------------------------------------------------------------------------------------------------ FIRST FAMILY FINANCIAL SERVIC ASSOCIATES FINANCIAL SERVICE 621- 20 1,200 10/01/94 09/30/97 0.00 0.00 9.90 10/01/91 11,880.00 - ------------------------------------------------------------------------------------------------------------------------ JD FASHIONS KYOUNG H. OH 621- 30 2,400 02/01/97 01/31/00 8.50 02/01/97 20,400.00 - ------------------------------------------------------------------------------------------------------------------------ REVCO #2474 REVCO DISCOUNT DRUG CENTERS, 621- 50 6,720 12/07/87 12/31/97 0.00 0.00 7.00 12/01/92 47,040.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ CATO CORPORATION #74 THE CATO CORPORATION 621- 60 5,600 03/01/88 01/31/98 6.00 03/01/88 33,600.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ FOOD LION #0509 FOOD LION, INC. 621- 70 25,000 12/16/87 12/15/07 0.00 0.00 5.60 02/10/88 140,000.04 - ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- SUBWAY #1542 PRS 1988 PRS 1988 Full 0 07/01/94 06/30/99 8.00 0.00 0 SUBWAY RESTAURANTS INC. 07/01/97 06/30/99 9.32 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------- FIRST FAMILY FINANCIAL SERVIC PRS 1988 PRS 1988 Full 0 10/01/97 09/30/00 0.00 0.00 0 ASSOCIATES FINANCIAL SERVICE 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------- JD FASHIONS Full 0 Full 0 Full 0 0.00 0.00 0 KYOUNG H. OH - ----------------------------------------------------------------------------------------------------------------------------- REVCO #2474 Full 0 Full 0 Full 0 01/01/98 12/31/02 7.50 2.00 0 Y REVCO DISCOUNT DRUG CENTERS, 01/01/03 12/31/07 7.75 2.00 2,352,000 Y 01/01/08 12/31/12 8.00 2.00 0 Y 01/01/13 12/31/17 8.25 2.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------- CATO CORPORATION #74 Full 0 Full 0 Full 0 02/01/98 01/31/03 7.00 4.00 840,000 Y THE CATO CORPORATION 0.00 4.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------- FOOD LION #0509 Full 0 PRS 1988 Fixed 0 12/16/07 12/15/12 0.00 1.00 0 Y FOOD LION, INC. 12/16/12 12/15/17 0.00 1.00 14,000,000 Y
Page 48 EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: FAIRFIELD SQUARE 102 FAIRFIELD SQUARE WINNSBORO, SC Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ FOOD LION #0509 FOOD LION, INC. 621- 70 25,000 12/16/87 12/15/07 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ FAMILY DOLLAR STORE #208 FAMILY DOLLAR STORES OF WINNS 621- 80 6,800 12/01/93 12/31/03 5.00 01/01/94 34,000.08 5.15 01/01/99 35,000.04 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ PIC 'N PAY STORES, INC. PIC 'N PAY SHOES 621- 100 2,800 04/12/94 07/31/04 8.00 05/01/94 22,399.92 0.00 0.00 0.00 0.00 0.00 0.00 8.00 01/01/96 22,399.92 - ------------------------------------------------------------------------------------------------------------------------ MOVIE GALLERY MGA INC. 621- 130 2,800 06/01/95 05/31/00 7.50 06/01/95 21,000.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ WACHOVIA CORPORATION WACHOVIA ATM 621- 140 0 K 12/19/93 12/18/96 0.00 11/01/92 7,200.00 - ------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 54,640 Current Annual Base Rent 349,820.04 Available. 0 Total..... 54,640 - ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- FOOD LION #0509 Full 0 PRS 1988 Fixed 0 12/16/17 12/15/22 0.00 1.00 0 Y FOOD LION, INC. 12/16/22 12/15/27 0.00 1.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------ FAMILY DOLLAR STORE #208 PRS 1993 PRS 1993 PRS 1992 01/01/04 12/31/07 5.40 3.00 971,428 FAMILY DOLLAR STORES OF WINNS 01/01/08 12/31/11 5.67 3.00 1,000,000 01/01/12 12/31/15 5.95 3.00 0 01/01/16 12/31/19 6.26 3.00 0 - ------------------------------------------------------------------------------------------------------------------------------ PIC 'N PAY STORES, INC. Full 0 Full 0 Full 0 08/01/04 07/31/09 9.25 4.00 560,000 Y PIC 'N PAY SHOES 08/01/09 07/31/14 10.50 4.00 0 Y 08/01/14 07/31/19 12.00 4.00 0 Y 0.00 4.00 0 Y 0.00 4.00 560,000 Y - ------------------------------------------------------------------------------------------------------------------------------ MOVIE GALLERY Full 0 Full 0 Full 0 06/01/00 05/31/03 8.50 0.00 0 MGA INC. 06/01/03 05/31/06 9.30 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------ WACHOVIA CORPORATION None 0 None 0 None 0 0.00 0.00 0 WACHOVIA ATM - ------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] US Highway #321 By-Pass - Looking South [GRAPHIC OMITTED] US Highway #321 By-Pass - Looking North [GRAPHIC OMITTED] Washington Street - Looking West [GRAPHIC OMITTED] Washington Street - Looking East [GRAPHIC OMITTED] Subject Property - Front View [GRAPHIC OMITTED] Subject Property - Front View [GRAPHIC OMITTED] Subject Property - Front View [GRAPHIC OMITTED] Subject Property - Front View [GRAPHIC OMITTED] Subject Property - Rear View [GRAPHIC OMITTED] Subject Property - Rear View [GRAPHIC OMITTED] Subject Property - Entrance from Washington Street This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. Market Study of: FLORENCE MALL 104 West Evans Street Florence, Florence County, South Carolina Prepared By: O. Marshall Dodds, MAI Date of Market Study: May 19, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] May 20, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Florence Mall 104 West Evans Street Florence, Florence County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 19,1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a shopping mall that contains 247,064 square feet of leasable area. The mall was originally constructed in 1965, but was renovated in 1984. The effective age would be estimated at 15 years. The major tenants are Peebles-Kimbrell (40,140 square feet), Rogers Brothers Fabrics (21,144 square feet), Eckerd's (10,878 square feet), Books-A-Million (21,153 square feet), Piggly Wiggly (53,380 square feet) and Fleet Mortgage Group (47,441 square feet). The Piggly Wiggly supermarket is not occupying all of the space, but has sublet a large portion to Red Bones restaurant. The Fleet Mortgage Group occupies office space within the mall. The subject property is currently 99.60 percent occupied. There are several outlots and outbuildings that are included in the property. At the present time, space #530 is being improved with a medical building. This building is under construction and is under a long term lease to Carolinas Hospital System. A separate set of rental comparables and sales comparables have been prepared for this particular building. The reason for this is this building is located on an outlot and could be separated from subject property or can be included as part of subject property. It is thought that the building should be compared with office buildings rather that shopping centers. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds -------------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) OMD:mm EXECUTIVE SUMMARY ================================================================================ Regional Perspective Florence and Florence County are located in the Coastal Plain in the northeast quadrant of the state of South Carolina. The city is approximately 70 miles west of Myrtle Beach; 80 miles east of Columbia; 90 miles south of Fayetteville, North Carolina; and 110 miles southeast of Charlotte, North Carolina. The intersection of I-95 and I-20 is within the city limits of Florence. I-95 is the major north-south traffic artery on the east coast and I-20 begins in Florence and extends to west Texas intersecting with I-10 near Pecos. In 1994, the unemployment rate for the Florence metropolitan area ranged from 7.3 percent to 7.5 percent (May through September). During the past four years, the Florence County Economic Development Commission has announced the development of ten new plants and the expansion of seven major existing plants. This has resulted in the creation of 1,390 new jobs with a projected increase to 2,660 jobs. Some of the major industries in the area are as follows. 1. McLeod Regional Medical Center 2. Wellman, Inc. 3. Blue Cross/Blue Shield/Champus 4. The SAB Group 5. Fleet Real Estate Funding Corporation 6. E.I. Dupont de Nemours, Inc. 7. Stones Container Corporation 8. Sare Lee Hosiery There are several industries with foreign affiliations which are: 1. ASEA Brown Boveri-Switzerland 2. Beca Minerals, Inc. - Great Britain 3. The ESAB Group - Sweden 4. Erikson - G.E. Mobile Communications - Sweden 5. NANYA Plastics Corporation - Taiwan 6. Hannaco Knives and Saws - Germany During the past two weeks, an announcement was made that Honda Motor Company would build a large assembly plant in Florence County around Timmonsville, which is approximately seven miles from Florence. This plant will assemble all terrain vehicles. The City of Florence and Florence County have a stable and diversified economic base and both areas have experienced commercial, industrial and residential growth in recent years. Neighborhood and Site The subject neighborhood is located in the western section of Florence around the intersection of West Evans Street, West Palmetto Street, David McLeod Boulevard and Cashua Drive. The Florence Mall was constructed in 1965 and was renovated in 1984. Several other commercial developments are located around the mall and these include the K-Mart shopping center and the BB&T office building. The Magnolia Mall is located to the southeast of subject neighborhood and the G.E. plant is located across David McLeod Boulevard from Magnolia Mall. The downtown area of Florence is located to the east of subject neighborhood by approximately one mile. The Seaboard Coastline Railroad runs through this neighborhood and is more or less parallel to West Evans Street. However, the railroad line does not appear to be detrimental, as development has occurred throughout the neighborhood. 1 Physical features are as follows: 1. Size 36.35 acres Parcel A - 34.06 acres or 1,483,687 square feet Parcel B - 2.29 acres or 99,674 square feet 2. Identity 104 West Evans Street TMS # 90017-01-01, 04, 05, 06, 07,08, 09,13 TMS #90025-01-08, 05 3. Shape Irregular 4. Topography Level and on street grade with West Evans Street and West Palmetto Street 5. Accessability Good 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 247,064 square feet 2. Layout & Design 1 story shopping mall 3. Parking Spaces 1,292 5.23 per 1,000 square of net area 4. Construction Masonry construction Market Position and Marketability Conclusions The subject neighborhood is established and has been so for a number of years. This particular neighborhood is considered to be a relocation of the original downtown area of Florence. After subject property was constructed, a number of other developments have occurred around the property. The Magnolia Mall, Florence Commons and Crossroads Center are located on David McLeod Boulevard. Lowe's Home Improvement Center is also located on David McLeod Boulevard. The core of the shopping area for the Florence area is in subject neighborhood. The stability should be maintained in the future and there should be continued improvement. The subject property is located in the western section of Florence. The development of this neighborhood for commercial properties began in 1965 with the development of subject property. Over the years, commercial developments have occurred around subject property and other shopping centers have occurred on David McLeod Boulevard at the intersection with I-95. The Magnolia Mall contains 567,000 square feet with the anchor tenants being Belk's, JC Penney's, Roses and Sears. This mall has operated at a high occupancy rate. The Florence Commons is located adjacent to the Magnolia Mall. This is a community center containing 197,245 square feet. The major tenants when the mall opened were Goody's, Brendle's and Phar-mor. Brendle's and Phar-mor have vacated the premises because of financial difficulties. Replacement occupants are Electric Avenue for the Phar-mor store and Tag's for the Brendle's store. The rental rates for the shops range from $9.50 to $12.00 per square foot. The K-Mart shopping center is located across Hoffmeyer Road from subject. There are several small shops, but K-Mart occupies the majority of the center. The rental rates for the shops range from $8.25 to $9.00 per square foot. The Cashua Commons is a neighborhood shopping center located on North Cashua Drive. This center contains 39,400 square feet with Food Lion as the major tenant. The rental rates for the shops are from $8.50 to $9.50 per square foot. 2 The subject property contains 247,064 square feet. JC Penney's was an occupant in this center at the beginning. At this time, the major tenants are Peebles-Kimbrell which is a department store, Rogers Brothers Fabrics, Eckerd, Books-A-Million, Piggly Wiggly and Fleet Mortgage Group, who are occupying office space. The rental rates for the anchor tenants range from $2.00 per square foot to $7.51 per square foot. The shop space is being rented at a range from $3.38 to $15.08 per square foot. The majority of the shop space is being rented in a range from $6.00 to $9.00 per square foot. The rental comparables range from $2.50 per square foot to $14.00 per square foot. Subject property also has a medical building that is under construction at this time. This building is a single tenant building located on Hoffmeyer Road across the street from the mall, but is part of subject property. The size of this medical building is 22,080 square feet with an annual rental of $309,120 which computes to $14.00 per square foot. The lessee will be Carolinas Hospital System for a term of ten years. The landlord is responsible for the base year for hazard insurance and structural repairs and maintenance. The tenant is responsible for all other expenses. The Blue Cross/Blue Shield building is a single tenant building and the rental rate is $13.94 per square foot which increases one percent annually. This is a net lease with the landlord being responsible for real estate taxes, hazard insurance and structural repairs. The Medical Park East and the Medical Park West are multi-tenant buildings located in the McLeod Regional Center. The rental rates for Medical Park East are from $13.50 to $14.00 per square foot while the rental rates for Medical Park West are from $11.50 to $12.00 per square foot. These are full service leases with expense stops at $4.00 per square foot for Medical Park East and $3.50 per square foot for Medical Park West. Trends The subject property is located in the western section of Florence which is the commercial retail district of Florence at this time. Development began in 1965 and has continued since that time. While the neighborhood is practically built-out, it is considered to be stable at this time and the stability will be maintained in the future. The make-up of the neighborhood should remain the same without any changes in future years. There are no known shopping malls or shopping centers that are planned for the Florence area at this time. 3 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Florence Mall Magnolia Mall Florence Commons -------------------------------- ------------------------ --------------------------- b. Street 104 West Evans Street I-20 Spur at I-95 I-20 Spur at I-95 -------------------------------- ------------------------ --------------------------- c. City Florence, SC Florence, SC Florence, SC -------------------------------- ------------------------ --------------------------- d. Distance from N/A 1 mile 1 mile subject -------------------------------- ------------------------ --------------------------- e. Contact Edens Avant, Inc. Equity Prop. & Dev. LP Georgetown Mgmt. Co. -------------------------------- ------------------------ --------------------------- f. Phone 803-779-4420 (312) 466-3100 (770) 392-1073 -------------------------------- ------------------------ --------------------------- 2. Attributes a. Year built 1965, Renovated 1984 1979 1990 -------------------------------- ------------------------ --------------------------- b. Net sq. Ft. 247,064 567,000 197,245 -------------------------------- ------------------------ --------------------------- c. # building 1 1 1 -------------------------------- ------------------------ --------------------------- d. # stories 1 1 1 -------------------------------- ------------------------ --------------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A -------------------------------- ------------------------ --------------------------- f. # elevators N/A N/A N/A -------------------------------- ------------------------ --------------------------- g. Parking Adequate Adequate Adequate -------------------------------- ------------------------ --------------------------- h. Construction Type Masonry Masonry Brick/Concrete Block -------------------------------- ------------------------ --------------------------- i. Vacancy % 0.40% 7.20% 14.60% -------------------------------- ------------------------ --------------------------- Peebles-Kimbrell, Rogers Bros. Fabrics, Eckerd, Belk's, JC Penney's, Goody's, Electric Avenue, j. Anchors, if Books-A-Million, Piggly Wiggly, Roses, Sears Tag's Retail Fleet Mort. Group -------------------------------- ------------------------ ---------------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name K-Mart SHC Cashua Commons ---------------------- ------------------------ Hoffmeyer Road at b. Street West Evans Street 330-360 N. Cashua Drive ---------------------- ------------------------ c. City Florence, SC Florence, SC ---------------------- ------------------------ d. Distance from Across street 1 mile subject ---------------------- ------------------------ e. Contact Baker & Baker Crescent Resources, Inc. ---------------------- ------------------------ f. Phone (803) 254-8987 (704) 382-2387 ---------------------- ------------------------ 2. Attributes a. Year built 1969 1990 ---------------------- ------------------------ b. Net sq. Ft. 104,000 39,400 ---------------------- ------------------------ c. # building 1 1 ---------------------- ------------------------ d. # stories 1 1 ---------------------- ------------------------ e. Avg. Floor plate size (sq. Ft.), if office N/A N/A ---------------------- ------------------------ f. # elevators N/A N/A ---------------------- ------------------------ g. Parking Adequate Adequate ---------------------- ------------------------ h. Construction Type Brick/Concrete Block Brick/Concrete Block ---------------------- ------------------------ i. Vacancy % 0% 17.26% ---------------------- ------------------------ j. Anchors, if K-Mart Food Lion Retail ---------------------- ------------------------ Comments: These comparables are located in subject neighborhood. There are other comparable shopping centers that are located in the southern portion of Florence along US Highway #52. The Magnolia Mall in Comparable #1 is approximately twice as large as subject. The community shopping center in Comparable #2 is slightly smaller than subject. Comparable #3 is located across the street from subject, while Comparable #4 is located to the northeast of subject and is a smaller center. Subject is the older center in the neighborhood but was renovated in 1984. Portions of subject are occupied with office space users such as Fleet Mortgage Group and the medical building that is under construction. 4 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space $2.00 - $7.51 N/A N/A N/A -------------------- ---------------------- -------------------- -------------------- b. Shop Space $3.38 - $15.08 $9.00 - $14.00 $9.50 - $12.00 $8.25 - $9.00 -------------------- ---------------------- -------------------- -------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net -------------------- ---------------------- -------------------- -------------------- 3. Rent Concessions None None None None -------------------- ---------------------- -------------------- -------------------- 4. Effective Rent $3.38 - $15.08 $9.00 - $14.00 $9.50 - $12.00 $8.25 - $9.00 -------------------- ---------------------- -------------------- -------------------- 5. TI Allowance None None None None -------------------- ---------------------- -------------------- -------------------- 6. Expense Stop None None None None -------------------- ---------------------- -------------------- -------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 - 5 years (shop) 3 - 5 years (shop) 3 - 5 years (shop) -------------------- ---------------------- -------------------- -------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% - 7.00% 5.00% to 7.00% -------------------- ---------------------- -------------------- -------------------- 9. Percentage Rent Belk's, JC Penney's, Electric Avenue, (per lease terms) Anchor Tenants Roses, Sears Goody's, Tag's K-Mart -------------------- ---------------------- -------------------- -------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A -------------------- ---------------------- -------------------- -------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A -------------------- ---------------------- -------------------- -------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Superior Superior Similar -------------------- ---------------------- -------------------- --------------------
COMPARABLE 4 ------------ 1. Asking Rental Rate a. Anchor Space N/A -------------------- b. Shop Space $2.50 - $7.25 -------------------- 2. Lease Type (Gross/Net) Triple Net -------------------- 3. Rent Concessions None -------------------- 4. Effective Rent $2.50 - $7.25 -------------------- 5. TI Allowance None -------------------- 6. Expense Stop None -------------------- 7. Length of Lease Term 3 - 5 years (shop) -------------------- 8. Commissions 5.00% to 7.00% -------------------- 9. Percentage Rent (per lease terms) Food Lion -------------------- 10. Historical Annual Absorption/sq.ft. N/A -------------------- 11. Annual Operating Expense psf (Including taxes) N/A -------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) Similar -------------------- D. EXPLAIN RANKING/COMMENTS: Comparables #1 and #2 have been ranked as superior to subject. These comparables are not as old as subject and the make-up of the tenants is different. The anchor tenants in these comparables are considered to be stronger than in subject which increases the strength of the income stream. Comparables #3 and #4 are considered to be similar to subject property. K-Mart has been occupying space in Comparable #3 since 1969. 5 LOCAL RENTAL COMPARABLES - ------------------------ Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Magnolia Mall Location: I-20 Spur at I-95 Florence, SC Year Built: 1979 Total Size: 567,000 SF Vacant Space: 40,824 SF Vacancy Rate: 7.2% Rental Range: $9.00 - $14.00 per square foot Tenant Expenses: Triple Net Remarks: Major tenants are Belk's department store, JC Penney's, Roses and Sears. This is an attractive mall and has operated at a high occupancy rate. There are 70 stores in this mall. 6 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Florence Commons Location: I-20 Spur at I-95 Florence, SC Year Built: 1990 Total Size: 197,245 SF Vacant Space: 28,800 SF Vacancy Rate: 14.60% Rental Range: $9.50 - $12.00 per square foot Tenant Expenses: Triple Net Remarks: The major tenant is Goody's. Other major tenants that have closed stores are Brendle's and Phar-mor. Replacements are Electric Avenue in the Phar-mor store and Tag's in the Brendle's store. 7 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: K-Mart shopping center Location: Hoffmeyer Road at West Evans Street Florence, Sc Year Built: 1969 Total Size: 104,000 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $8.25 - $9.00 per square foot Tenant Expenses: Triple Net Remarks: This center is anchored by K-Mart stores who occupies the majority of the space. Other stores are Pic-N-Pay shoes, One Price Clothing, Little Ceasar's and Self Serve Laundry. 8 Comparable Rental No. 4 ================================================================================ [GRAPHIC OMITTED] Name: Cashua Commons Location: 330 - 360 North Cashua Drive Florence, SC Year Built: 1990 Total Size: 39,400 SF Vacant Space: 6,800 SF Vacancy Rate: 17.26% Local Rent Range: $2.50 - $7.25 per square foot Tenant Expenses: Triple Net Remarks: This is a neighborhood center that is located in the neighborhood. The major tenant is Food Lion. 9 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES ================================================================================
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Florence Mall Barnwell Plaza Triangle Village Hampton Plaza --------------------- ---------------------- --------------------- ----------------- Sunset Blvd. & Lake 2864 Wilma b. Street Address 104 West Evans Street 1019 Dunbarton Blvd. Dr. Randolph Blvd. --------------------- ---------------------- --------------------- ----------------- c. City Florence, SC Barnwell, SC Lexington, SC Clarksville, TN --------------------- ---------------------- --------------------- ----------------- d. Distance from Subject N/A 175 miles 125 miles 435 miles --------------------- ---------------------- --------------------- ----------------- 2. Attributes a. Year Built 1965 1985 1985 1988 --------------------- ---------------------- --------------------- ----------------- b. Net sq. feet 247,064 70,725 115,754 189,302 --------------------- ---------------------- --------------------- ----------------- c. # Buildings 1 1 1 1 --------------------- ---------------------- --------------------- ----------------- d. # of Stories 1 1 1 1 --------------------- ---------------------- --------------------- ----------------- e. Vacancy % 0.40% 9.00% 1.3% 0% --------------------- ---------------------- --------------------- ----------------- 3. Sales Information a. Sales Price N/A $2,860,620 $4,489,380 $6,150,000 --------------------- ---------------------- --------------------- ----------------- b. Sales Price PSF N/A $40.45 $38.78 $23.24 --------------------- ---------------------- --------------------- ----------------- c. Date N/A 01-01-95 01-31-95 12-26-95 --------------------- ---------------------- --------------------- ----------------- d. NOI at time of Sale N/A 330,327 480,919 753,627 --------------------- ---------------------- --------------------- ----------------- e. Cap. Rate N/A 11.55% 10.71% 12.25% --------------------- ---------------------- --------------------- ----------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A Similar Similar Similar --------------------- ---------------------- --------------------- -----------------
COMPARABLE 4 ------------ 1. Identification a. Name Cumberland Place ----------------------- 209 New Swithville Hwy. b. Street Address ----------------------- c. City McMinnville, TN ----------------------- d. Distance from Subject 315 miles ----------------------- 2. Attributes a. Year Built 1988 ----------------------- b. Net sq. feet 143,951 ----------------------- c. # Buildings 1 ----------------------- d. # of Stories 1 ----------------------- e. Vacancy % 4.3% ----------------------- 3. Sales Information a. Sales Price $5,225,050 ----------------------- b. Sales Price PSF $36.30 ----------------------- c. Date 12-26-95 ----------------------- d. NOI at time of Sale 693,726 ----------------------- e. Cap. Rate 13.28% ----------------------- 4. Rank Relative to Subject (inferior, similar, superior) Similar ----------------------- Explain Ranking/Comments: These comparables are considered to be similar to subject. Each of these comparables had a Wal-Mart store in the center and Wal-Mart has vacated the premise moving to a superstore that was built within the same block. However, the Wal-Mart lease has eight to 12 years remaining with rents to be paid from Wal-Mart. These are older centers and it is thought that they are similar to subject. 10 COMPARABLE IMPROVED SALES - ------------------------- Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS 072- 06- 04- 11, 20 NAME Barnwell Plaza LOCATION 1019 Dunbarton Boulevard, Barnwell, SC GRANTOR 1994 N1 SC Associates, LP GRANTEE Tri Centers, LP DEED REFERENCE Book 282/Page 137 DATE Jan 31, 1995 SALES PRICE $2,860,620 ADJUSTED SALES PRICE $2,860,620 SIZE BUILDING 70,725 SALES PRICE PER S.F. $40.45 SIZE LAND (ACRES) 11.28 SIZE LAND (S.F.) 491,357 YEAR BUILT 1985 LAND/BUILDING RATIO 6.95 To 1 UTILITIES All available VERIFICATION Appraiser ZONING Commercial FINANCING Cash to seller EFFECTIVE GROSS INCOME $399,045 GROSS INCOME MULTIPLE 7.17 EGIM 7.17 NET OPERATING INCOME $330,327 OVERALL RATE 11.55% TYPE OF PURCHASER Private Investor COMMENTS: This is a good quality community shopping center located in the town of Barnwell in Barnwell County (pop. 20,000) in western South Carolina. Approximately 91% of the center was comprised of anchor space, including Wal-Mart (34,875 SF), Food Lion (21,000 SF) and Revco Drugs (8,450 SF). The income and expense data here is based on the center's actual performance at the time of sale, and include approximately $0.50 SF in overage rents from Wal-Mart and $0.10 SF in reserves. (590) 11 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] NAME Lexington Triangle Village LOCATION U.S. 378 and North Lake Drive (SC #6), Lexington, SC GRANTOR 1994 N1 SC Associates GRANTEE Tri Centers, LP DEED REFERENCE Book 3260, Page 199 DATE Jan 31, 1995 SALES PRICE $4,489,380 ADJUSTED SALES PRICE $4,489,380 SIZE BUILDING 115,754 SALES PRICE PER S.F. $38.78 SIZE LAND (ACRES) 12.51 SIZE LAND (S.F.) 544,936 YEAR BUILT 1985 LAND/BUILDING RATIO 4.71 To 1 VERIFICATION Public Records ZONING Commercial FINANCING Cash to seller EFFECTIVE GROSS INCOME $607,469 GROSS INCOME MULTIPLE 7.39 EGIM 7.39 NET OPERATING INCOME $480,919 OVERALL RATE 10.71% TYPE OF PURCHASER Private Investor COMMENTS: This center is anchored by Wal-Mart (65,904 SF) and Food Lion (25,000 SF) and there are 7 local shops totaling 24,850 SF (21.5 percent). At the time of sale, the center was 98.7 percent occupied with only 2,000 SF vacant. Wal-Mart has a base rent of $3.55 and the lease expires 11/05. Currently, Wal-Mart is paying about $0.50 per SF overage rent and Wal-Mart is expected to leave the center in the near future as no expansion room is available. The estimated cap rate excludes potential overage rent form Wal-Mart and only excludes income from the 2,000 SF vacant bay. Projected expenses include $0.10 per SF reserves. The center is masonry with brick front and metal mansard canopy roof and in average condition. No outparcels were included with this sale. (763) 12 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] NAME Hampton Plaza LOCATION 2864 Wilma Rudolph Boulevard, Clarksville, TN GRANTOR Aetna Life Insurance Company GRANTEE Hampton II, LP DEED REFERENCE Book 580, Page 1793 DATE Dec 26, 1995 SALES PRICE $6,150,000 ADJUSTED SALES PRICE $6,150,000 SIZE BUILDING 189,302 SALES PRICE PER S.F. $32.49 SIZE LAND (ACRES) 23.24 SIZE LAND (S.F.) 1,012,334 YEAR BUILT 1988 LAND/BUILDING RATIO 5.35 To 1 UTILITIES All available VERIFICATION Public Records ZONING C-3, Shopping Center District FINANCING Cash to seller EFFECTIVE GROSS INCOME $937,119 GROSS INCOME MULTIPLE 6.37 EGIM 6.56 NET OPERATING INCOME $753,627 OVERALL RATE 12.25% TYPE OF PURCHASER Private Investor COMMENTS: This is a community shopping center with Wal-Mart as a major tenant prior to a new Wal-Mart Superstore being built on the same block. While Wal-Mart remains liable for the lease, the store is vacant. The remainder of the center is occupied. (759) 13 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] NAME Cumberland Place LOCATION 209 New Smithville Highway, McMinnville, TN GRANTOR Aetna Life Insurance GRANTEE Cumberland II, LP DEED REFERENCE Book 287, Page 204 DATE Dec 26, 1995 SALES PRICE $5,225,050 ADJUSTED SALES PRICE $5,225,050 SIZE BUILDING 143,951 SALES PRICE PER S.F. $36.30 SIZE LAND (ACRES) 19.64 SIZE LAND (S.F.) 855,518 YEAR BUILT 1988 LAND/BUILDING RATIO 5.94 To 1 UTILITIES All available VERIFICATION Public Records ZONING C-3, Highway Commercial District FINANCING Cash to seller EFFECTIVE GROSS INCOME $875,830 GROSS INCOME MULTIPLE 5.79 EGIM 5.97 NET OPERATING INCOME $693,726 OVERALL RATE 13.28% TYPE OF PURCHASER Private Investor COMMENTS: This is a community shopping center. Wal-Mart was the major tenant and remains liable for the lease for the remaining term. A new Wal-Mart Superstore was built one block west of this property. (762) 14 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification Space #530 a. Name Medical Office Building Blue Cross/Blue Shield Medical Park East Medical Park West ------------------------ ------------------------ ---------------------- --------------------- b. Street N/S Hoffmeyer St. 2141 Westgate Place East Cheves Street East Cheves Street ------------------------ ------------------------ ---------------------- --------------------- c. City Florence, SC Florence, SC Florence, SC Florence, SC ------------------------ ------------------------ ---------------------- --------------------- d. Distance from subject N/A 1/2 mile 1 mile 1 mile ------------------------ ------------------------ ---------------------- --------------------- e. Contact Edens Avant, Inc. N/A N/A N/A ------------------------ ------------------------ ---------------------- --------------------- f. Phone 803-779-4420 N/A N/A N/A ------------------------ ------------------------ ---------------------- --------------------- 2. Attributes a. Year built Under Construction 1990 1992 1986 ------------------------ ------------------------ ---------------------- --------------------- b. Net sq. Ft. 22,080 110,454 81,992 54,243 ------------------------ ------------------------ ---------------------- --------------------- c. # building 1 1 1 1 ------------------------ ------------------------ ---------------------- --------------------- d. #stories 1 2 6 3 ------------------------ ------------------------ ---------------------- --------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A 55,227 13,665 18,081 ------------------------ ------------------------ ---------------------- --------------------- f. # elevators 1 4 4 2 ------------------------ ------------------------ ---------------------- --------------------- g. Parking Adequate Adequate Adequate Adequate ------------------------ ------------------------ ---------------------- --------------------- h. Construction Type Brick Veneer & Stucco Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ------------------------ ------------------------ ---------------------- --------------------- i. Vacancy % 0% 0% 5.0% 7.75% ------------------------ ------------------------ ---------------------- --------------------- j. Anchors, if Retail Carolinas Hospital Blue Cross/Blue Shield N/A N/A System ------------------------ ------------------------ ---------------------- ---------------------
Comments: These comparables rentals are located in Florence. Comparable #1 is located in subject neighborhood and is a single tenant building such as subject, but is a larger building. Comparables #2 and #3 are multi-tenant buildings and are located in the McLeod Regional Medical Center Campus. These are multi-story buildings. Subject is under construction and is under a long term lease for ten years, whereas, Comparable #1 has approximately five years remaining on the original lease term. Comparables #2 and #3 have short term leases because of the buildings being multi-tenant buildings. 15 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space $15.15 $13.94 N/A N/A ---------- ------------------- ----------------- ----------------- b. Shop Space N/A N/A $13.50 - $14.00 $11.50 - $12.00 ---------- ------------------- ----------------- ----------------- 2. Lease Type (Gross/Net) Net Net Gross Gross ---------- ------------------- ----------------- ----------------- 3. Rent Concessions None None None None ---------- ------------------- ----------------- ----------------- 4. Effective Rent $15.15 $13.94 $13.50 - $14.00 $11.50 - $12.00 ---------- ------------------- ----------------- ----------------- 5. TI Allowance None None None None ---------- ------------------- ----------------- ----------------- 6. Expense Stop None None None None ---------- ------------------- ----------------- ----------------- 7. Length of Lease Term 10 years 5 years remaining 3 - 5 years 3 - 5 years ---------- ------------------- ----------------- ----------------- 8. Commissions None Cashed Out 5.00% - 7.00% 5.00% - 7.00% ---------- ------------------- ----------------- ----------------- 9. Percentage Rent (per lease terms) None None None None ---------- ------------------- ----------------- ----------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A ---------- ------------------- ----------------- ----------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A ---------- ------------------- ----------------- ----------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Similar Similar Similar ---------- ------------------- ----------------- -----------------
D. EXPLAIN RANKING/COMMENTS: These comparables have been rated as similar to subject. Comparable #1 would probably be the most similar, in that, it is located in the neighborhood and is a single tenant building such as subject. The rental rate increases 1 percent annually for this building. The rental rate for subject was increased from $14.00 per square foot to $15.15 per square foot as additional items were requested by the tenant. The cost was $125,080 for these items which are: 1. Hydro therapy pool and assorted equipment; 2. Data lines; 3. Data lines drops. 16 LOCAL RENTAL COMPARABLES - ------------------------ Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Blue Cross/Blue Shield Location: 2141 Westgate Place Florence, SC Year Built: 1990 Total Size: 110,454 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $13.94 Tenant Expenses: Net lease, tenant is responsible for all expenses except for base year real estate taxes, hazard insurance and structural repairs. Remarks: This is a single tenant building. The base rent increases by 1.0 percent annually. Landlord expenses are estimated to be as follows: Real Estate Taxes - $0.75 per square foot Hazard Insurance - $0.10 per square foot Structural Repairs - $0.10 per square foot. 17 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Medical Park East Location: East Cheves Street Florence, SC Year Built: 1992 Total Size: 81,992 SF Vacant Space: 5,000 SF Vacancy Rate: 5.0% Rental Range: $13.50 - $14.00 Tenant Expenses: Gross lease - full services Remarks: This is a medical building in a multi-tenant building located on the McLeod Regional Center Campus. It is a modern, six story building in good condition. The average expense stop is at $4.00 per square foot. 18 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Medical Park West Location: East Cheves Street Florence, SC Year Built: 1986 Total Size: 54,243 SF Vacant Space: 4,200 SF Vacancy Rate: 7.75% Local Rent Range: $11.50 - $12.00 Tenant Expenses: Gross lease - full services Remarks: This is a medical office building that is located on the McLeod Regional Medical Center Campus with multi-tenants. It is a three story building in average condition. The average expense stop is at $3.50 per square foot. 19 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification Space #530 Pee Dee Mental Health Stokes Regional Eye Sunset Medial Office a. Name Medical Office Building Building Clinic Building ------------------------ ----------------------- ------------------------ ---------------------- b. Street Address N/S Hoffmeyer Street 500 S. Coit Street 602 East Cheves Street 1816 Marshall Street ------------------------ ----------------------- ------------------------ ---------------------- c. City Florence, SC Florence, SC Florence, SC Columbia, SC ------------------------ ----------------------- ------------------------ ---------------------- d. Distance from Subject N/A 0.75 mile 1 mile 75 miles ------------------------ ----------------------- ------------------------ ---------------------- 2. Attributes a. Year Built Under Construction 1975, Renovated 1986 1978, Renovated 1988 1988 ------------------------ ----------------------- ------------------------ ---------------------- b. Net sq. feet 22,080 3,815 25,877 22,300 ------------------------ ----------------------- ------------------------ ---------------------- c. # Buildings 1 1 1 1 ------------------------ ----------------------- ------------------------ ---------------------- d. # of Stories 1 1 1 1 ------------------------ ----------------------- ------------------------ ---------------------- e. Vacancy % 0% 0% 0% 0% ------------------------ ----------------------- ------------------------ ---------------------- 3. Sales Information a. Sales Price N/A $343,500 $4,350,000 $2,225,000 ------------------------ ----------------------- ------------------------ ---------------------- b. Sales Price PSF N/A $90.04 $168.10 $99.78 ------------------------ ----------------------- ------------------------ ---------------------- c. Date N/A 06-12-92 05-01-96 04-08-93 ------------------------ ----------------------- ------------------------ ---------------------- d. NOI at time of Sale N/A $30,710 N/A $206,323 ------------------------ ----------------------- ------------------------ ---------------------- e. Cap. Rate N/A 8.94% N/A 9.27% ------------------------ ----------------------- ------------------------ ---------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A Similar Similar Similar ------------------------ ----------------------- ------------------------ ----------------------
Explain Ranking/Comments: These comparable building sales have been ranked as similar to subject. Comparables #1 and #2 are located in Florence. Comparable #1 is a smaller building while Comparable #2 is approximately the same size building as subject. These are older buildings. Comparable #3 is located in Columbia and across the street from the Richland Memorial Hospital. This building was built in 1988 and is approximately the same size as subject. 20 COMPARABLE IMPROVED SALES - ------------------------- Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS 90088-06-10 NAME Pee Dee Mental Health Building LOCATION 500 South Coit Street, Florence, SC GRANTOR Kenneth H. and Robin R. Hanger GRANTEE McLeod Regional Medical Center DEED REFERENCE Book A-364, Page 1956 DATE Jun 12, 1992 SALES PRICE $343,500 ADJUSTED SALES PRICE $343,500 SIZE BUILDING 3,815 SALES PRICE PER S.F. $90.04 SIZE LAND (ACRES) 0.38 SIZE LAND (S.F.) 16,758 YEAR BUILT 1975 (remodeled 1986) LAND/BUILDING RATIO 4.39 To 1 UTILITIES All municipal available ZONING GB, General Business FINANCING Cash to seller EFFECTIVE GROSS INCOME $38,150 GROSS INCOME MULTIPLE 9.00 EGIM 9.00 NET OPERATING INCOME $30,710 OVERALL RATE 8.94% TYPE OF PURCHASER Private Investor COMMENTS One story masonry medical office building leased to Pee Dee Mental Health. Lessor pays management, taxes, insurance, and repairs and maintenance. Expenses were estimated at 3% management; $0.80 per square foot taxes, $0.10 per square foot insurance, and $0.75 per square foot for repairs and maintenance. The rent is $10.00 per square foot. This building is located approximately one block from the McLeod Regional Hospital, off of the major traffic artery. 21 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] TMS 90102-17-1,6,7,9,14,16; 90102-18-13,14 NAME Stokes Regional Eye Clinic LOCATION 602 East Cheves Street, Florence, SC GRANTOR Stokes Properties GRANTEE McLeod Regional Medical Center of the Pee Dee, Inc. DEED REFERENCE Book A-464; Page 581 DATE May 1, 1996 SALES PRICE $4,350,000 ADJUSTED SALES PRICE $4,350,000 SIZE BUILDING 25,877 SALES PRICE PER S.F. $168.10 SIZE LAND (ACRES) 2.19 SIZE LAND (S.F.) 95,396 YEAR BUILT 1978/1988 LAND/BUILDING RATIO 3.69 To 1 UTILITIES All municipal available ZONING GB, General Business FINANCING Cash to seller TYPE OF PURCHASER Private Investor COMMENTS Site consisted of two non-contiguous parcels, with the building located on approx. 83,230 SF. The remainder is located across McFarlane Street from the improved parcel. Improvements consist of a 2-story medical office building located across from the McLeod Medical Center complex. A one-story addition was constructed in 1988. The major portion was constructed in 1978. It has a hydraulic elevator, emergency generator, insulated aluminum windows and was in good condition at time of sale. Approximately 6,900 SF of 2nd floor space is licenses as an ambulatory surgical center. Dr. Stokes indicated that the Certificate of Need did not transfer with the transfer of the real estate and Stokes Properties retained the CON. Also, Dr. Stokes indicated that this transaction reflects the real estate only, and no business, furniture, or equipment value is included. The sales price is considered by the grantors as an accurate reflection of the market value of the real estate only. This building is now leased to Stokes at an undisclosed rental rate. (662) 22 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] TMS 11504 -27 -01, 07 NAME Sunset Medical Office Building LOCATION 1816 Marshall Street, Columbia, SC GRANTOR Sunset Medical Partners GRANTEE Richland Memorial Hospital DEED REFERENCE Book D-1136, Page 559 DATE Apr 8, 1993 SALES PRICE $2,225,000 ADJUSTED SALES PRICE $2,225,000 SIZE BUILDING 22,300 SALES PRICE PER S.F. $99.78 SIZE LAND (ACRES) 2.40 SIZE LAND (S.F.) 104,544 YEAR BUILT 1988 LAND/BUILDING RATIO 4.29 To 1 UTILITIES All municipal utilities available ZONING C-3, General Commercial FINANCING Cash to seller EFFECTIVE GROSS INCOME $288,152 EGIM 7.72 NET OPERATING INCOME $206,323 OVERALL RATE 9.27% TYPE OF PURCHASER Private Investor COMMENTS This is an office building that was leased to companies related to the medical field. Portions of the building were leased to the purchaser, Richland Memorial Hospital. Richland Memorial Hospital is located across the street from this property. The sale is considered to be arms length, as appraisals were performed by two competent appraisers in the city. The site consists of nearly an entire city block, and has frontage on Marshall St., Sunset Blvd., Broad St., and West Avenue. (147) 23 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 24 Comparable Rentals [GRAPHIC OMITTED] Improved Sales Map [GRAPHIC OMITTED] EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: FLORENCE MALL 104 WEST EVANS STREET FLORENCE, SC 29502-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------- PEOPLES FEDERAL SAVINGS PEOPLES FEDERAL SAVINGS AND L 628- 100 0 P 10/01/94 09/30/04 0.00 10/01/94 33,000.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------- PEEBLES-KIMBRELL COMPANY PEEBLES-KIMBRELL CO. OF ROXBO 628- 110 40,140 04/07/92 05/31/97 0.00 0.00 0.00 0.00 1.25 06/01/92 50,280.00 2.00 06/01/95 80,280.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------- HOLBROOKS JEWELERS INC. BENNY HOLBROOKS 628- 115 3,150 08/17/94 09/30/99 0.00 0.00 0.00 0.00 0.00 0.00 7.50 09/01/94 23,625.00 - ------------------------------------------------------------------------------------------------------------- ROGERS BROTHERS FABRICS 628- 120 21,144 11/01/80 10/31/00 2.11 03/01/92 44,615.88 2.59 11/01/95 54,848.88 0.00 0.00 - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT INFORMATION Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------- PEOPLES FEDERAL SAVINGS PEOPLES FEDERAL SAVINGS AND L None 0 None 0 None 0 10/01/94 09/30/09 0.00 0.00 0 10/01/09 09/30/14 0.00 0.00 0 10/01/14 09/30/19 0.00 0.00 0 10/01/19 09/30/24 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------- PEEBLES-KIMBRELL COMPANY PEEBLES-KIMBRELL CO. OF ROXBO None 0 None 0 Fixed 0 06/01/97 01/31/98 2.00 2.50 0 Y 02/01/98 01/31/99 2.00 2.50 0 Y 02/01/99 01/31/00 2.00 2.50 2,011,200 Y 02/01/00 01/31/01 2.00 2.50 3,211,200 Y 02/01/01 01/31/02 2.00 2.50 0 Y 02/01/02 01/31/03 2.00 2.50 0 Y - ------------------------------------------------------------------------------------------------------------------------------- HOLBROOKS JEWELERS INC. BENNY HOLBROOKS Full 0 Full 0 Full 0 10/01/99 09/30/01 9.00 0.00 0 10/01/01 09/30/04 10.25 0.00 0 10/01/04 09/30/09 11.75 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------- ROGERS BROTHERS FABRICS None 0 None 0 None 0 11/01/95 10/31/00 2.68 4.00 1,000,000 11/01/00 10/31/05 3.18 3.00 1,300,000 11/01/05 10/31/10 3.68 3.00 0 - -------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: FLORENCE MALL 104 WEST EVANS STREET FLORENCE, SC 29502-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------ FLORENCE STEAM LAUNDRY FLORENCE STEAM LAUNDRY 628- 10 0 P 11/01/88 10/31/98 0.00 11/01/91 15,000.00 0.00 11/01/93 16,500.00 - ------------------------------------------------------------------------------------------------------------ BENTON'S RESTAURANT BENTON DUBOSE DARGAN 628- 30 0 P 01/01/96 12/31/00 0.00 01/01/91 30,024.96 0.00 01/01/96 37,980.96 - ------------------------------------------------------------------------------------------------------------ FIRST UNION NATIONAL BANK 628- 40 0 P 05/01/74 04/30/99 0.00 05/01/74 7,200.00 0.00 05/01/94 21,852.00 0.00 08/01/96 27,852.00 - ------------------------------------------------------------------------------------------------------------ S&D LIQUORS RICHARD MAYER 628- 50 0 P 02/01/94 01/31/99 0.00 01/01/93 13,500.00 0.00 02/01/94 18,000.00 0.00 02/01/95 20,400.00 0.00 02/01/96 22,800.00 0.00 02/01/97 25,200.00 0.00 02/01/98 27,600.00 - ------------------------------------------------------------------------------------------------------------ NEW YORK CARPET WORLD INC NEW YORK CARPET WORLD INC 628- 60 0 P 10/15/99 10/31/99 0.00 12/01/89 89,610.00 0.00 11/01/94 97,077.48 - ------------------------------------------------------------------------------------------------------------ - --------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT INFORMATION Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - --------------------------------------------------------------------------------------------------------------------------- FLORENCE STEAM LAUNDRY FLORENCE STEAM LAUNDRY Full 0 Full 0 None 0 11/01/98 10/31/03 0.00 7.00 214,300 Y 11/01/03 10/31/08 0.00 7.00 235,700 Y - --------------------------------------------------------------------------------------------------------------------------- BENTON'S RESTAURANT BENTON DUBOSE DARGAN Full 0 Full 0 None 0 0.00 0.00 0 0.00 0.00 0 - --------------------------------------------------------------------------------------------------------------------------- FIRST UNION NATIONAL BANK Full 0 None 0 None 0 05/01/94 04/30/99 0.00 0.00 0 05/01/99 04/30/04 0.00 0.00 0 05/01/04 04/30/09 0.00 0.00 0 - --------------------------------------------------------------------------------------------------------------------------- S&D LIQUORS RICHARD MAYER Full 0 None 0 Full 0 0.00 5.00 270,000 Y 0.00 5.00 360,000 Y 0.00 5.00 408,000 Y 0.00 5.00 456,000 Y 0.00 5.00 504,000 Y 0.00 5.00 552,000 Y - --------------------------------------------------------------------------------------------------------------------------- NEW YORK CARPET WORLD INC NEW YORK CARPET WORLD INC Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ---------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: FLORENCE MALL 104 WEST EVANS STREET FLORENCE, SC 29502-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ----------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ----------------------------------------------------------------------------------------------------------- PEOPLES FEDERAL SAVINGS PEOPLES FEDERAL SAVINGS AND L 628- 100 0 P 10/01/94 09/30/04 0.00 10/01/94 33,000.00 0.00 0.00 0.00 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------- PEEBLES-KIMBRELL COMPANY PEEBLES-KIMBRELL CO. OF ROXBO 628- 110 40,140 04/07/92 05/31/97 0.00 0.00 0.00 0.00 1.25 06/01/92 50,280.00 2.00 06/01/95 80,280.00 0.00 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------- HOLBROOKS JEWELERS INC. BENNY HOLBROOKS 628- 115 3,150 08/17/94 09/30/99 0.00 0.00 0.00 0.00 0.00 0.00 7.50 09/01/94 23,625.00 - ----------------------------------------------------------------------------------------------------------- ROGERS BROTHERS FABRICS 628- 120 21,144 11/01/80 10/31/00 2.11 03/01/92 44,615.88 2.59 11/01/95 54,848.88 0.00 0.00 - ----------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT INFORMATION Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ PEOPLES FEDERAL SAVINGS PEOPLES FEDERAL SAVINGS AND L None 0 None 0 None 0 10/01/04 09/30/09 0.00 0.00 0 10/01/09 09/30/14 0.00 0.00 0 10/01/14 09/30/19 0.00 0.00 0 10/01/19 09/30/24 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ PEEBLES-KIMBRELL COMPANY PEEBLES-KIMBRELL CO. OF ROXBO None 0 None 0 Fixed 0 06/01/97 01/31/98 2.00 2.50 0 Y 02/01/98 01/31/99 2.00 2.50 0 Y 02/01/99 01/31/00 2.00 2.50 2,011,200 Y 02/01/00 01/31/01 2.00 2.50 3,211,200 Y 02/01/01 01/31/02 2.00 2.50 0 Y 02/01/02 01/31/03 2.00 2.50 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ HOLBROOKS JEWELERS INC. BENNY HOLBROOKS Full 0 Full 0 Full 0 10/01/99 09/30/01 9.00 0.00 0 10/01/01 09/30/04 10.25 0.00 0 10/01/04 09/30/09 11.75 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ ROGERS BROTHERS FABRICS None 0 None 0 None 0 11/01/95 10/31/00 2.68 4.00 1,000,000 11/01/00 10/31/05 3.18 3.00 1,300,000 11/01/05 10/31/10 3.68 3.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: FLORENCE MALL 104 WEST EVANS STREET FLORENCE, SC 29502-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ----------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ----------------------------------------------------------------------------------------------------- ECKERD'S #1042 JACK ECKERD CORPORATION 628- 130 10,878 01/01/66 12/31/00 1.50 01/01/91 16,317.00 7.51 01/01/96 81,675.00 - ----------------------------------------------------------------------------------------------------- MAIL BOXES, ETC. USA BIC COMPANY 628- 160 1,522 02/01/97 01/31/02 0.00 0.00 0.00 0.00 10.00 02/01/92 15,220.08 10.75 02/01/97 16,361.52 11.25 02/01/99 17,122.56 - ----------------------------------------------------------------------------------------------------- WARR'S BARBER SHOP 628- 170 700 09/01/93 08/31/98 7.00 09/01/93 4,899.96 8.00 09/01/96 5,600.04 - ----------------------------------------------------------------------------------------------------- HOME HEALTH, INC. HOME HEALTH, INC. 628- 200 8,861 10/01/93 09/30/98 0.00 0.00 0.00 0.00 9.14 09/01/93 81,001.08 - ----------------------------------------------------------------------------------------------------- HAM'S BARBER SHOP JERRY W. HAM 628- 220 850 08/01/88 07/31/98 0.00 0.00 0.00 0.00 8.00 01/01/94 6,800.04 8.50 08/01/96 7,224.96 - ----------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT INFORMATION Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - --------------------------------------------------------------------------------------------------------------------------- ECKERD'S #1042 JACK ECKERD CORPORATION None 0 None 0 None 0 01/01/96 12/31/00 7.50 2.00 815,900 Y 01/01/01 12/31/05 8.50 2.00 4,083,800 Y - --------------------------------------------------------------------------------------------------------------------------- MAIL BOXES, ETC. USA BIC COMPANY Full 0 Full 0 Full 0 02/01/92 01/31/97 1.00 0.00 0 02/01/02 01/31/07 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - --------------------------------------------------------------------------------------------------------------------------- WARR'S BARBER SHOP Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - --------------------------------------------------------------------------------------------------------------------------- HOME HEALTH, INC. HOME HEALTH, INC. Full 0 Full 0 Full 0 10/01/98 09/30/03 6.75 0.00 0 0.00 0.00 0 0.00 0.00 0 - --------------------------------------------------------------------------------------------------------------------------- HAM'S BARBER SHOP JERRY W. HAM Full 0 Full 0 Full 0 08/01/98 07/31/03 10.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ---------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: FLORENCE MALL 104 WEST EVANS STREET FLORENCE, SC 29502-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------- MOVIE GALLERY MGA INC. (F/K/A FINKLEA'S MAG 628-250 4,500 11/01/87 10/31/97 7.00 11/01/92 31,500.00 7.50 11/01/95 33,750.00 - ------------------------------------------------------------------------------------------------------------- BOOKS A MILLION #376 BOOKS A MILLION, INC. 628-260 21,153 06/15/95 06/30/05 5.50 07/05/95 116,341.44 0.00 0.00 0.00 0.00 5.75 07/05/98 121,629.72 6.00 07/05/02 126,918.00 - ------------------------------------------------------------------------------------------------------------- TOP NAILS REBECCA LAM 628-270 590 06/01/95 05/31/98 15.08 06/01/95 8,897.88 - ------------------------------------------------------------------------------------------------------------- ATHENS COFFEE SHOP JOHN CHOLKAS 628-280 960 02/01/93 01/31/98 0.00 0.00 12.50 02/01/93 12,000.00 - ------------------------------------------------------------------------------------------------------------- Available 628-300 1,000 0.00 0.00 - ------------------------------------------------------------------------------------------------------------- HOME HEALTH, INC. HOME HEALTH MANAGEMENT, INC. 628-310 3,796 01/17/96 01/31/01 11.00 02/01/96 41,756.04 0.00 0.00 - ------------------------------------------------------------------------------------------------------------- CAROLINA PAINT/WALLPAPER FRED R. DAVIES/ALVA C. CATO 628-330 1,950 09/01/81 08/31/86 3.38 09/01/86 6,600.00 - ------------------------------------------------------------------------------------------------------------- PIGGLY WIGGLY #5 PIGGLY WIGGLY CAROLINA CO 628-340 53,380 05/01/89 04/30/09 0.00 0.00 - ------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ---------------------------------------------------------------------------------------------------------------------------------- MOVIE GALLERY MGA INC. (F/K/A FINKLES'S MAG PRS 1986 PRS 1986 Full 0 0.00 0.00 0 0.00 0.00 0 - ---------------------------------------------------------------------------------------------------------------------------------- BOOKS A MILLION #376 BOOKS A MILLION, INC. Full 0 Full 0 Full 0 07/01/05 06/30/10 6.50 3.00 3,878,000 Y 07/01/10 06/30/15 7.00 3.00 0 Y 0.00 3.00 0 Y 0.00 3.00 4,054,300 Y 0.00 3.00 4,230,600 Y - ---------------------------------------------------------------------------------------------------------------------------------- TOP NAILS REBECCA LAM Full 0 Full 0 Full 0 0.00 0.00 0 - ---------------------------------------------------------------------------------------------------------------------------------- ATHENS COFFEE SHOP JOHN CHOLKAS Full 0 Full 0 Full 0 02/01/98 01/31/03 13.75 5.00 0 Y 0.00 5.00 240,000 Y - ---------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - ---------------------------------------------------------------------------------------------------------------------------------- HOME HEALTH, INC. HOME HEALTH MANAGEMENT, INC. Full 0 Full 0 Full 0 02/01/01 01/31/06 0.00 0.00 0 0.00 0.00 0 - ---------------------------------------------------------------------------------------------------------------------------------- CAROLINA PAINT/WALLPAPER FRED R. DAVIES/ALVA C. CATO None 0 Full 0 Full 0 0.00 0.00 0 - ---------------------------------------------------------------------------------------------------------------------------------- PIGGLY WIGGLY #5 PIGGLY WIGGLY CAROLINA CO Full 0 PRS 0 Fixed 0 05/01/09 04/30/14 3.28 1.25 11,600,000 - ----------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: FLORENCE MALL 104 WEST EVANS STREET FLORENCE, SC 29502-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------ PIGGLY WIGGLY #5 PIGGLY WIGGLY CAROLINA CO 628- 340 53,380 05/01/89 04/30/09 3.28 06/01/89 174,999.96 0.00 0.00 - ------------------------------------------------------------------------------------------------------------ MILLER'S BOOTERY INC. MILLER'S BOOTERY, INC. 628- 350 3,849 11/01/93 10/31/98 0.00 0.00 0.00 0.00 10.00 05/01/94 38,490.00 - ------------------------------------------------------------------------------------------------------------ CHILDREN'S BOUTIQUE, THE DRAKE CAPITAL CORPORATION 628- 360 5,600 08/15/93 08/14/98 6.00 09/01/93 33,600.00 7.00 09/01/94 39,200.04 8.00 09/01/95 44,799.96 9.00 09/01/96 50,400.00 - ------------------------------------------------------------------------------------------------------------ ROYAL KNIGHT FORMAL WEAR ROYAL FORMAL KNIGHT WEAR, INC 628- 380 2,500 10/01/93 09/30/98 7.00 04/01/90 17,499.96 0.00 0.00 7.20 10/01/93 18,000.00 8.00 04/01/94 20,000.04 10.00 10/01/96 24,999.96 - ------------------------------------------------------------------------------------------------------------ SALTY'S JOE P. WATERS, III 628- 385 1,600 08/01/93 07/31/98 9.00 08/01/93 14,400.00 - ------------------------------------------------------------------------------------------------------------ - ----------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT INFORMATION Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------- PIGGLY WIGGLY #5 PIGGLY WIGGLY CAROLINA CO Full 0 PRS 0 Fixed 0 05/01/14 04/30/17 3.28 1.25 0 05/01/19 04/30/24 3.28 1.25 0 05/01/24 04/30/29 3.28 1.25 0 - ----------------------------------------------------------------------------------------------------------------------------- MILLER'S BOOTERY INC. MILLER'S BOOTERY, INC. Full 0 Full 0 Full 0 10/01/98 09/30/03 12.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------- CHILDREN'S BOUTIQUE, THE DRAKE CAPITAL CORPORATION Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------- ROYAL KNIGHT FORMAL WEAR ROYAL FORMAL KNIGHT WEAR, INC Full 0 Full 0 Full 0 10/01/98 09/30/03 0.00 4.00 550,000 0.00 4.00 0 0.00 4.00 0 0.00 4.00 0 0.00 4.00 0 - ----------------------------------------------------------------------------------------------------------------------------- SALTY'S JOE P. WATERS, III Full 0 Full 0 Full 0 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: FLORENCE MALL 104 WEST EVANS STREET FLORENCE, SC 29502-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------ FLEET MORTGAGE GROUP FLEET REAL ESTATE FUNDING COR 628-390 47,441 04/15/93 04/30/98 0.00 0.00 0.00 0.00 2.32 04/15/93 110,000.04 3.75 11/01/93 177,864.00 4.12 01/01/95 195,613.92 4.19 06/01/96 198,965.88 - ------------------------------------------------------------------------------------------------------------ MCLEOD REGIONAL MEDICAL CENTE MCLEOD REGIONAL MEDICAL CENTE 628-408 9,350 01/01/96 12/31/98 0.00 0.00 0.00 0.00 0.00 0.00 7.60 01/01/96 71,100.00 9.16 08/01/96 85,599.96 - ------------------------------------------------------------------------------------------------------------ CLIPPERS TAMMY B. & RANDOLPH M. WYATT 628-470 925 03/01/96 02/28/99 9.25 03/01/93 8,556.36 10.00 03/01/96 9,249.96 - ------------------------------------------------------------------------------------------------------------ HOLBROOKS JEWELERS OFFICE HOLBROOKS JEWELERS INC. 628-475 475 08/17/94 09/30/99 0.00 0.00 7.50 09/01/94 3,562.56 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------ - --------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT INFORMATION Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk FLEET MORTGAGE GROUP FLEET REAL ESTATE COR Full 0 Full 0 Full 0 05/01/96 04/30/97 0.00 0.00 0 05/01/97 04/30/98 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - --------------------------------------------------------------------------------------------------------------------------- MCLEOD REGIONAL MEDICAL CENTE MCLEOD REGIONAL MEDICAL CENTE Full 0 Full 0 Full 0 01/01/99 12/31/01 0.00 0.00 0 01/01/02 12/31/04 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - --------------------------------------------------------------------------------------------------------------------------- CLIPPERS TAMMY B. & RANDOLPH M. WYATT Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - --------------------------------------------------------------------------------------------------------------------------- HOLBROOKS JEWLERS OFFICE HOLBROOKS JEWLERS INC. Full 0 Full 0 Full 0 10/01/98 09/30/00 9.00 0.00 0 10/01/00 09/30/02 10.25 0.00 0 10/01/02 09/30/07 11.75 0.00 0 0.00 0.00 0 - ---------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: FLORENCE MALL 104 WEST EVANS STREET FLORENCE, SC 29502-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------ MALL OFFICE 628- 490 750 MTM 0.00 0.00 - ------------------------------------------------------------------------------------------------------------ JARRELL OIL COMPANY INC. JARRELL OIL COMPANY INC 628- 520 0 P 01/01/94 12/31/08 0.00 02/01/92 7,200.00 0.00 01/01/94 30,000.00 - ------------------------------------------------------------------------------------------------------------ Available 628- 530 0 P 0.00 0.00 - ------------------------------------------------------------------------------------------------------------ FIRESTONE INC. BRIDGESTONE/FIRESTONE INC. 628- 540 0 P 07/01/69 06/30/99 0.00 07/01/89 16,500.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------ PAYLESS SHOE SOURCE INC. #455 PAYLESS SHOE SOURCE, INC. 628- 550 0 P 07/01/93 6/60/03 0.00 07/01/93 23,500.00 0.00 07/01/98 27,024.96 - ------------------------------------------------------------------------------------------------------------ CARDINAL TIRE & MUFFLER HAGOOD L. GIBBS & THOMAS C.H 628- 570 0 P 09/01/92 08/31/02 0.00 09/01/92 42,000.00 - ------------------------------------------------------------------------------------------------------------ HARDEE'S CALE YARBOROUGH ENTERPRISES, 628- 580 0 P 07/01/90 06/30/10 0.00 08/01/90 40,722.40 0.00 07/01/95 44,849.64 0.00 07/01/00 49,334.64 0.00 07/01/05 54,268.08 - ------------------------------------------------------------------------------------------------------------ - ----------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT INFORMATION Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------- MALL OFFICE Full 0 Full 0 Full 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------- JARRELL OIL COMPANY INC. JARRELL OIL COMPANY INC Full 0 None 0 None 0 01/01/09 12/31/13 0.00 2.00 360,000 Y 01/01/14 12/31/18 0.00 1.00 75,000 Y - ----------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------- FIRESTONE INC. BRIDGESTONE/FIRESTONE INC. PRS 1970 None 0 None 0 07/01/89 06/30/94 0.00 3.50 471,400 Y 07/01/94 06/30/99 0.00 1.00 0 Y 07/01/99 06/30/04 0.00 1.00 0 Y 07/01/04 06/30/09 0.00 1.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------- PAYLESS SHOE SOURCE INC. #455 PAYLESS SHOE SOURCE, INC. None 0 None 0 None 0 07/01/03 06/30/08 0.00 0.00 0 07/01/08 06/30/13 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------- CARDINAL TIRE & MUFFLER HAGOOD L. GIBBS & THOMAS C.H None 0 None 0 None 0 0.00 4.00 1,050,000 Y - ----------------------------------------------------------------------------------------------------------------------------- HARDEE'S CALE YARBOROUGH ENTERPRISES, None 0 None 0 None 0 07/01/10 06/30/15 0.00 0.00 0 07/01/15 06/30/20 0.00 0.00 0 07/01/20 06/30/25 0.00 0.00 0 07/01/25 06/30/30 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: FLORENCE MALL 104 WEST EVANS STREET FLORENCE, SC 29502-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------- BONAVENTURE DISCOUNT GOLF MARK WILLIS & JOHNNY JACKSON 628- 590 0 P 12/01/95 11/30/00 0.00 12/01/95 26,295.96 0.00 03/01/97 29,583.00 0.00 06/01/98 32,870.04 - ------------------------------------------------------------------------------------------------------------- ROSE QUALITY PAINTS, INC. ROSE QUALITY PAINTS, INC. 628- 600 0 P 12/01/90 11/30/00 0.00 01/01/91 21,791.04 0.00 12/01/93 23,748.36 0.00 12/01/95 25,950.48 - ------------------------------------------------------------------------------------------------------------- Square Feet: Occupied.. 246,064 Current Annual Base Rent 1,620,623.76 Available. 1,000 Total..... 247,064 - ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT INFORMATION Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------- BONAVENTURE DISCOUNT GOLF MARK WILLIS & JOHNNY JACKSON Full 0 Full 0 Fixed 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------- ROSE QUALITY PAINTS, INC. ROSE QUALITY PAINTS, INC. None 0 None 0 None 0 12/01/95 11/30/00 8.34 0.00 0 0.00 0.00 0 0.00 0.00 0 - -------------------------------------------------------------------------------------------------------------------------
Site Plan [GRAPHIC OMITTED] PHOTOGRAPHS OF SUBJECT PROPERTY - ------------------------------- [GRAPHIC OMITTED] West Palmetto Street - Looking West [GRAPHIC OMITTED] West Palmetto Street - Looking East [GRAPHIC OMITTED] West Evans Street - Looking West [GRAPHIC OMITTED] West Evans Street - Looking East [GRAPHIC OMITTED] Hoffmeyer Road - Looking North [GRAPHIC OMITTED] Hoffmeyer Road - Looking South [GRAPHIC OMITTED] David McLeod Boulevard - Looking North [GRAPHIC OMITTED] David McLeod Boulevard - Looking South [GRAPHIC OMITTED] Subject - Peebles [GRAPHIC OMITTED] Subject - Peebles [GRAPHIC OMITTED] Subject - Entrance [GRAPHIC OMITTED] Subject - Entrance [GRAPHIC OMITTED] Subject - Books-A-Million [GRAPHIC OMITTED] Subject - Eckerd - Books-A-Million [GRAPHIC OMITTED] Subject - Eckerd - Rogers Brothers Fabrics [GRAPHIC OMITTED] Subject - Piggly Wiggly [GRAPHIC OMITTED] Subject - Redbone Alley Restaurant [GRAPHIC OMITTED] Subject - Piggly Wiggly PHOTOGRAPHS OF SUBJECT PROPERTY - ------------------------------- [GRAPHIC OMITTED] Hoffmeyer Road - Looking North [GRAPHIC OMITTED] Hoffmeyer Road - Looking South [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front View and Side View [GRAPHIC OMITTED] Subject - Rear View This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study of: FRIARSGATE PLAZA 7948 Broad River Road Irmo, Richland County, South Carolina Prepared By: O. Marshall Dodds, MAI Date of Market Study: May 15, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] May 16, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Friarsgate Plaza 7948 Broad River Road Irmo, Richland County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 15, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 68,235 square feet of leasable area. The center was originally constructed in 1981 with a renovation that took place in 1996. The anchor tenant is Bi-Lo with other shops being occupied by such tenants as Dollar General, Easy Coin Laundry and Friarsgate TV and VCR Repair. The subject property is currently 82.32 percent occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. O. Marshall Dodds --------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) OMD:mm EXECUTIVE SUMMARY ================================================================================ Regional Perspective Columbia is the state capital with the State House being located in downtown Columbia. Also, the University of South Carolina Campus is located in the downtown area. Fort Jackson, which is a large U.S. Army Training Facility is located in the eastern section of the Metropolitan area. The city has numerous specialized office activities such as insurance, consulting services, advertising, marketing, printing and financial services. Government, distribution, finance and transportation are all important to Columbia, although none are preeminent. Geography also gives Columbia a strategic location in the industrial and commercial spheres. The subject property is located in Richland County and the unemployment rate was 3.9 percent in February, 1997. The unemployment rate statewide for February was 5.5 percent. The population of Richland County for 1995 was 289,839 with 10.2 percent being over age 65. Neighborhood and Site The neighborhood is located around the intersection of Broad River Road and North Woodrow Street. The predominant development would be the Friarsgate subdivision and New Friarsgate subdivision. The Town of Irmo is located in the general neighborhood and is south of subject property. Harbison is also south of subject neighborhood and commercial developments have occurred along Harbison Boulevard including the Columbiana Mall. The neighborhood is highly desirable and the demand has been high over the past twenty-five years. Growth is occurring throughout the general neighborhood with several single family residential subdivisions being under construction. Physical features are as follows: 1. Size 6.210 acres or 270,508 square feet 2. Identity 7948 Broad River Road TMS #04006-02-25 3. Shape irregular 4. Topography generally level 5. Accessability good from either direction 6. Utilities municipal Physical Description Building features are as follows: 1. Size (net) 68,235 square feet 2. Layout & Design 1 story-food store, variety store, shops 3. Parking Spaces 290 4.25 per 1,000 square of net area 4. Construction brick and glass front with concrete block on side and rear and metal seamed roof 1 Market Position and Marketability Conclusions The Dutch Fork/Irmo/Chapin area is the third largest retail submarket of the ten as growth continues northwest of the downtown area along Interstate 26. 2,185,253 square feet of gross leaseable area was surveyed in 20 of the total 158 centers that are located in Columbia. Columbiana Centre, one of the four regional malls in the MSA, measures 787,158 square feet and is located in this submarket. This area has under construction the third phase of The Shoppes of St. Andrews, which will add 10,700 square feet to this area when completed. Columbiana Station, 543,000 square feet, is planned for this area. Also, a Food Lion shopping center is proposed for this area to be located on Broad River at Kenly Drive. It will contain a Food Lion, Revco and shops and will be located to the south of subject and east of Interstate 26. A total of 51,800 square feet of space was reported vacant for a vacancy rate of 2.4 percent, the third lowest of the 10 areas located in Columbia. Twelve months earlier, the vacancy rate was 6.4 percent, while 24 months ago it was 6.6 percent. The average rental rate on a new lease for the Dutch Fork/Irmo/Chapin area is $11.23 per square foot, down $0.05 from the survey a year ago. The subject property is located in the middle section of the neighborhood being around the intersection of Broad River Road (US Highway #76 and #176) and North Woodrow Street (SC Highway #27). The location of subject is convenient to the single family dwellings that are located throughout the neighborhood. These comparable rentals were taken from the St. Andrews submarket which is adjacent to the subject submarket. The St. Andrews Crossing is located at St. Andrews Road and I-26 with Kroger Store being the major tenant as rental rates for the shops ranging from $10.00 to $12.00 per square foot. The St. Andrews Square located at St. Andrews Road and Jamil Road has Piggly Wiggly and Eckerds as the major tenants. The shops have rental rates that range from $9.00 to $12.00 per square foot. Richardson Plaza which is located on St. Andrews Road between Ashland Road and Cindy Road has Food Lion and Rite-Aid as major tenants, but Rite-Aid has vacated the premises even though they are continuing to pay rent. The rental rates for the shops range from $8.00 to $12.00 per square foot. Comparable #4 is the Widewater Square which is located around the intersection of St. Andrews Road and Broad River Road. The major tenants are Bi-Lo and Revco with the rental rates ranging from $5.00 to $11.00 per square foot. The subject property has seven shops. The rental rates from $4.05 to $7.50 per square foot. The rental rate for Bi-Lo is at $2.80 per square foot. These rates are reasonable rental rates for the neighborhood. The location of subject is strategic within the neighborhood and convenient to shoppers throughout the neighborhood. Trends The subject property is located in the Dutch Fork/Irmo/Chapin section of the metropolitan area of Columbia. The development of the Friarsgate area began approximately 25 years ago and the neighborhood has had high demand and desirability. There are commercial developments that are located throughout the neighborhood on the major traffic arteries. Columbiana Centre is also located on Harbison Boulevard just south of the subject neighborhood. All trends are favorable at this time and expected to continue. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Friarsgate Plaza St. Andrews Crossing St. Andrews Square Richardson Plaza ---------------------- ---------------------- ----------------------- --------------------- b. Street 7948 Broad River Road 817 St. Andrews Road 1978 St. Andrews Rd. 570 St. Andrews Rd. ---------------------- ---------------------- ----------------------- --------------------- c. City Irmo, SC Columbia, SC Columbia, SC Columbia, SC ---------------------- ---------------------- ----------------------- --------------------- d. Distance from subject N/A 4 miles 4 miles 4 1/2miles ---------------------- ---------------------- ----------------------- --------------------- e. Contact Edens Avant, Inc. Keenen Co. The Oglum Co. East Coast Dev. ---------------------- ---------------------- ----------------------- --------------------- f. Phone 803-779-4420 803-254-2300 803-779-7777 803-749-0079 ---------------------- ---------------------- ----------------------- --------------------- 2. Attributes a. Year built 1981, Renovated 1996 1994 1978 1981 ---------------------- ---------------------- ----------------------- --------------------- b. Net sq. Ft. 68,235 66,910 60,000 108,838 ---------------------- ---------------------- ----------------------- --------------------- c. # building 2 2 2 1 ---------------------- ---------------------- ----------------------- --------------------- d. #stories 1 1 1 1 ---------------------- ---------------------- ----------------------- --------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A N/A ---------------------- ---------------------- ----------------------- --------------------- f. # elevators N/A N/A N/A N/A ---------------------- ---------------------- ----------------------- --------------------- g. Parking Adequate Adequate Adequate Adequate ---------------------- ---------------------- ----------------------- --------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ---------------------- ---------------------- ----------------------- --------------------- i. Vacancy % 17.68% 6.13% 0% 13.05% ---------------------- ---------------------- ----------------------- --------------------- j. Anchors, if Retail Bi-Lo Kroger Piggly Wiggly, Eckerds Food Lion ---------------------- ---------------------- ----------------------- ---------------------
COMPARABLE 4 ------------ 1. Identification a. Name Widewater Square --------------------- b. Street 3315 Broad River Rd. --------------------- c. City Columbia, SC --------------------- d. Distance from subject 5 miles --------------------- e. Contact Edens Avant, Inc. --------------------- f. Phone 803-779-4420 --------------------- 2. Attributes a. Year built 1976 --------------------- b. Net sq. Ft. 95,700 --------------------- c. # building 3 --------------------- d. #stories 1 --------------------- e. Avg. Floor plate size N/A (sq. Ft.), if office --------------------- f. # elevators N/A --------------------- g. Parking Adequate --------------------- h. Construction Type Brick/Concrete Block --------------------- i. Vacancy % 4.70% --------------------- j. Anchors, if Retail Bi-Lo, Revco --------------------- Comments: These comparable are located in the St. Andrews submarket which is in close proximity to subject neighborhood and are similar to subject. The small shops in subject property are similar to the small shops in each of these shopping centers. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space $2.80 N/A N/A N/A ------------------- ------------------- ----------------------- ------------------- b. Shop Space $4.05 - $7.50 $10.00 - $12.00 $9.00 - $12.00 $8.00 - $12.00 ------------------- ------------------- ----------------------- ------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net ------------------- ------------------- ----------------------- ------------------- 3. Rent Concessions None None None None ------------------- ------------------- ----------------------- ------------------- 4. Effective Rent $4.05 - $7.50 $10.00 - $12.00 $9.00 - $12.00 $8.00 - $12.00 ------------------- ------------------- ----------------------- ------------------- 5. TI Allowance None None None None ------------------- ------------------- ----------------------- ------------------- 6. Expense Stop None None None None ------------------- ------------------- ----------------------- ------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 - 5 years (shop) 3 - 5 years (shop) 3 - 5 years (shop) ------------------- ------------------- ----------------------- ------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% - 7.00% 5.00% to 7.00% ------------------- ------------------- ----------------------- ------------------- 9. Percentage Rent (per lease terms) None Kroger Piggly Wiggly, Eckerds Food Lion ------------------- ------------------- ----------------------- ------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A ------------------- ------------------- ----------------------- ------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A ------------------- ------------------- ----------------------- ------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Superior Similar Similar ------------------- ------------------- ----------------------- -------------------
COMPARABLE 4 ------------ 1. Asking Rental Rate a. Anchor Space N/A ------------------- b. Shop Space $5.00 - $11.00 ------------------- 2. Lease Type (Gross/Net) Triple Net ------------------- 3. Rent Concessions None ------------------- 4. Effective Rent $5.00 - $11.00 ------------------- 5. TI Allowance None ------------------- 6. Expense Stop None ------------------- 7. Length of Lease Term 3 - 5 years (shop) ------------------- 8. Commissions 5.00% to 7.00% ------------------- 9. Percentage Rent (per lease terms) Bi-Lo, Revco ------------------- 10. Historical Annual Absorption/sq.ft. N/A ------------------- 11. Annual Operating Expense psf (Including taxes) N/A ------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) Similar ------------------- D. EXPLAIN RANKING/COMMENTS: Comparable #1 has been ranked as superior to subject. The reason for this is because this center is a newer center and is located at the intersection of St. Andrews Road and I-26. The major tenant is Kroger Stores and rental rates being received from the shops are higher than the rental rates being received from the shops in subject. The other comparables are ranked as similar and these centers are similar to subject. The rental rates for the shops in subject are within the range of rental rates in these centers. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: St. Andrews Crossing Location: 817 St. Andrews Road Columbia, SC Year Built: 1994 Total Size: 66,910 SF Vacant Space: 4,100 SF Vacancy Rate: 6.13% Rental Range: $10.00 to $12.00 Tenant Expenses: Triple Net Remarks: Kroger is major tenant. Located on St. Andrews Road at I-26. Has operated at a high occupancy level. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: St. Andrews Square Location: 1978 St. Andrews Road Columbia, South Carolina Year Built: 1978 Total Size: 60,000 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $9.00 to $12.00 Tenant Expenses: Triple Net Remarks: Major tenants are Piggly Wiggly and Eckerds. Located on St. Andrews and Jamil Road. Has operated at a high occupancy level.. 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Richardson Plaza Location: 570 St. Andrews Road Columbia, South Carolina Year Built: 1981 Total Size: 108,838 SF Vacant Space: 14,200 SF Vacancy Rate: 13.05% Rental Range: $13.05 Tenant Expenses: Triple Net Remarks: The Food Lion Store expanded in 1995. Rite-Aid has vacated their store, but pays rent. Several other tenants have moved out, but were replaced. 7 Comparable Rental No. 4 [GRAPHIC OMITTED] Name: Widewater Square Location: 3315 Broad River Road Columbia, South Carolina Year Built: 1976 Total Size: 95,700 SF Vacant Space: 4,500 SF Vacancy Rate: 4.70% Local Rent Range: $5.00 - $11.00 Tenant Expenses: Triple Net Remarks: This center has been renovated with new front, parking lot was re-sealed and stripped. Occupancy rate has been high. Major tenants are Bi-Lo and Revco. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Friarsgate Plaza St. Andrews Crossing Eastgate Shopping Center One Norman Center ---------------------- --------------------- ------------------------- ---------------------- NWC Whiskey Rd. & 19706 One Norman Blvd. b. Street Address 7948 Broad River Road 817 St. Andrews Road Eastgate Dr. ---------------------- --------------------- ------------------------- ---------------------- c. City Irmo, SC Columbia, SC Aiken, SC Cornelius, NC ---------------------- --------------------- ------------------------- ---------------------- d. Distance from Subject N/A 4 miles 56 miles 100 miles ---------------------- --------------------- ------------------------- ---------------------- 2. Attributes a. Year Built 1981, Renovated 1996 1994 1995 1993 ---------------------- --------------------- ------------------------- ---------------------- b. Net sq. feet 68,235 66,910 SF 75,716 SF 54,185 SF ---------------------- --------------------- ------------------------- ---------------------- c. # Buildings 2 1 1 1 ---------------------- --------------------- ------------------------- ---------------------- d. # of Stories 1 1 1 1 ---------------------- --------------------- ------------------------- ---------------------- e. Vacancy % 17.68% 0% 7.21% 6.98% ---------------------- --------------------- ------------------------- ---------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 $4,650,000 ---------------------- --------------------- ------------------------- ---------------------- b. Sales Price PSF N/A $97.89 $88.16 $85.82 ---------------------- --------------------- ------------------------- ---------------------- c. Date N/A 05-25-94 09-28-95 10-12-95 ---------------------- --------------------- ------------------------- ---------------------- d. NOI at time of Sale N/A $634,797 $782,704 $474,591 ---------------------- --------------------- ------------------------- ---------------------- e. Cap. Rate N/A 9.69% 9.86% 9.68% ---------------------- --------------------- ------------------------- ---------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A Superior Similar Similar ---------------------- --------------------- ------------------------- ----------------------
COMPARABLE 4 ------------ 1. Identification a. Name Paw Creek Commons ---------------------- E/S Little Rock Road b. Street Address at Freedom Drive ---------------------- c. City Charlotte, NC ---------------------- d. Distance from Subject 92 miles ---------------------- 2. Attributes a. Year Built 1996 ---------------------- b. Net sq. feet 66,050 SF ---------------------- c. # Buildings 1 ---------------------- d. # of Stories 1 ---------------------- e. Vacancy % 2.73% ---------------------- 3. Sales Information a. Sales Price $5,384,000 ---------------------- b. Sales Price PSF $77.52 ---------------------- c. Date 03-25-97 ---------------------- d. NOI at time of Sale $517,412 ---------------------- e. Cap. Rate 9.61% ---------------------- 4. Rank Relative to Subject (inferior, similar, superior) Superior ---------------------- Explain Ranking/Comments: Comparables #1 and #4 are ranked superior to subject. The reason for this is because of the location of these comparables being superior to subject. Comparable #3 is located in a commercial area that is larger than subject, but it is similar. Comparable #2 is similar to subject. 9 COMPARABLE IMPROVED SALES Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS 6012 -1 -1 NAME St. Andrews Crossing LOCATION St. Andrews Road and I-26, Columbia, SC GRANTOR Hayley-Redd, L.P. GRANTEE F.A.C. Properties DEED REFERENCE Book 1199, Page 331 DATE May 25, 1994 SALES PRICE $6,550,000 ADJUSTED SALES PRICE $6,550,000 SIZE BUILDING 66,910 SALES PRICE PER S.F. $97.89 SIZE LAND (ACRES) 8.08 SIZE LAND (S.F.) 351,965 YEAR BUILT 1994 LAND/BUILDING RATIO 5.26 To 1 UTILITIES All available VERIFICATION Deed ZONING Commercial FINANCING Market EFFECTIVE GROSS INCOME $686,905 EGIM 9.54 NET OPERATING INCOME $634,797 OVERALL RATE 9.69% VERIFICATION Public Records TYPE OF PURCHASER Private Investor COMMENTS This was an arms length sale. This neighborhood shopping center is anchored by Kroger and is located in a good commercial area with good accessibility and fair exposure. The construction is brick veneer and concrete block. (503) 10 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] NAME Eastgate Shopping Center LOCATION Northwest Corner of Whiskey Road and Eastgate Drive, Aiken, SC GRANTOR PDG Aiken Partners, LP GRANTEE Southeast U.S. Retail, LP DATE Sep 28, 1995 SALES PRICE $6,675,000 SIZE BUILDING 75,716 SALES PRICE PER S.F. $88.16 SIZE LAND (ACRES) 8.79 SIZE LAND (S.F.) 382,892 YEAR BUILT 1995 LAND/BUILDING RATIO 5.06 To 1 UTILITIES All available VERIFICATION Public Records ZONING Commercial FINANCING Cash to seller GROSS POTENTIAL INCOME $782,704 EFFECTIVE GROSS INCOME $782,704 GROSS INCOME MULTIPLE 8.53 EGIM 8.53 NET OPERATING INCOME $657,896 OVERALL RATE 9.86% TYPE OF PURCHASER Private Investor COMMENTS Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. (643) 11 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] NAME One Norman Center LOCATION 19706 One Norman Boulevard, Cornelius, Mecklenburg County, NC GRANTOR One Norman Center, LP GRANTEE Lucky Realty DEED REFERENCE Book 8325, Page 721 DATE Oct 12, 1995 SALES PRICE $4,650,000 SIZE BUILDING 54,185 SALES PRICE PER S.F. $85.82 SIZE LAND (ACRES) 5.69 SIZE LAND (S.F.) 247,856 YEAR BUILT 1993 LAND/BUILDING RATIO 4.57 To 1 UTILITIES All Public VERIFICATION Public Records ZONING CUB-2 FINANCING Cash to Seller GROSS POTENTIAL INCOME $474,591 EFFECTIVE GROSS INCOME $474,591 GROSS INCOME MULTIPLE 9.80 EGIM 9.80 NET OPERATING INCOME $450,188 OVERALL RATE 9.68% TYPE OF PURCHASER Private Investor COMMENTS This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot. Triple net lease. (716) 12 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] TMS 59 -231 -22 ,23 pt. NAME Paw Creek Commons LOCATION East side of Little Rock Road at Freedom Drive, Charlotte, NC GRANTOR Paw Creek, LLC GRANTEE Frastacky and Associates DATE Mar 25, 1997 SALES PRICE $5,120,000 ADJUSTED SALES PRICE $5,384,000 SIZE BUILDING 66,050 SALES PRICE PER S.F. $77.52 SIZE LAND (ACRES) 9.82 SIZE LAND (S.F.) 427,759 YEAR BUILT 1996 LAND/BUILDING RATIO 6.48 To 1 UTILITIES Municipal VERIFICATION Public Records ZONING CC, Commercial Center FINANCING Cash to seller GROSS POTENTIAL INCOME $568,840 EFFECTIVE GROSS INCOME $552,054 GROSS INCOME MULTIPLE 9.00 EGIM 9.27 NET OPERATING INCOME $517,412 OVERALL RATE 9.61% TYPE OF PURCHASER Private Investor COMMENTS The overall rate of 10.10 percent has been adjusted down by 50 basis points since the sales contract is pre-construction. The major tenants are Winn Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. Anchor income is 79.41 percent of gross income. (793) 13 ADDENDA o Richland County Demographics o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 USA COUNTIES 1996 Geographic Area: Richland, SC (45079) Table: GENERAL PROFILE - -------------------------------------------------------------------------------- POPULATION AND HOUSING (Bureau of the Census) Total resident population: 1995 ........................................................... 289,839 Percent 65 years and over .................................... 10.2 1990 ........................................................... 286,321 1980 ........................................................... 269,600 Occupied housing units, 1990 ..................................... 101,590 Percent owner occupied ......................................... 59.2 BIRTHS AND DEATHS (National Center for Health Statistics) Births, 1993 ..................................................... 4,492 Per 1,000 resident population .................................. 15.1 Percent to mothers under 20 years of age ....................... 13.9 Deaths, 1993 ..................................................... 2,262 Per 1,000 resident population .................................. 7.6 Infant deaths per 1,000 live births, 1993 ........................ 9.8 EDUCATION (Bureau of the Census) Persons 25 years and over, 1990 .................................. 174,489 Percent high school graduates .................................. 79.4 Percent college graduates ...................................... 28.0 LABOR FORCE (Bureau of Labor Statistics) Civilian labor force, 1994 ....................................... 151,973 Percent unemployed ............................................. 4.6 PRIVATE NONFARM ESTABLISHMENTS (Bureau of the Census) Total establishments, 1993 ....................................... 8,297 Percent retail trade ........................................... 24.9 Percent services ............................................... 39.6 Paid employees, 1993 (pay period including March 12) ............. 138,567 Annual payroll, 1993 ($1,000) .................................... 3,137,287 PERSONAL INCOME (Bureau of Economic Analysis) Total personal income, 1993 ($1,000) ............................. 5,722,615 Per capita (dollars) ........................................... 19,222 AGRICULTURE (Bureau of the Census) Number of farms, 1992 ............................................ 339 Land in farms as percent of total land ......................... 14 RETAIL TRADE (Bureau of the Census) Retail sales, 1992 ($1,000) ...................................... 2,505,025 Per capita (dollars) ........................................... 8,524 COMMERCIAL AND SAVINGS BANKS (Fed. Deposit Insurance Corp.) Number of offices, June 30, 1994 ................................. 99 Total deposits ($1,000) ........................................ 3,281,741 SOCIAL PROGRAMS (Social Security Administration) Total Social Security recipients, December 1993 .................. 39,300 Retired workers ................................................ 22,720 Supplementary Security Income recipients, December 1994 .......... 7,551 FEDERAL FUNDS AND GRANTS (Bureau of the Census) Total direct expenditures or obligations per capita: 1994 (dollars) ................................................. 7,802 1990 (dollars) ................................................. 6,451 (NA) Not available. (D) Avoid disclosure of confidential information. (X) Not applicable. (S) Does not meet publication standards. (Z) Value > 0 but < half unit of measure shown. NOTE: 0 data may indicate geographic/data footnotes. Source: U.S. Bureau of the Census, USA Counties 1996 CD-ROM. [GRAPHIC OMITTED] MAP OF COMPARABLE RENTALS [GRAPHIC OMITTED] MAP OF COMPARABLE SALES [GRAPHIC OMITTED] Site Plan EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 87 Property: FRIARSGATE PLAZA 7948 BROAD RIVER ROAD IRMO, SC 29063 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ EASY COIN LAUNDRY INC. EASY COIN LAUNDRY, INC. 636-10 2,000 08/01/91 07/31/98 0.00 0.00 7.25 09/01/91 14,500.08 7.50 08/01/94 15,000.00 8.00 08/01/97 15,999.96 - ------------------------------------------------------------------------------------------------------------------------ Available 636-20 3,600 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ Available 636-40 6,425 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ BI-LO INC. #126 BI-LO INC. 636-60 44,570 07/22/81 07/31/01 1.76 08/01/81 78,423.84 2.80 02/01/96 124,959.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ Available 636-70 2,040 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ DOLLAR GENERAL #2828 DOLGENCORP INC. 636-75 7,200 05/01/96 04/30/99 2.92 04/21/93 21,000.00 4.05 07/01/96 29,160.00 - ------------------------------------------------------------------------------------------------------------------------ TEZ'S FRANK U. CORTEZ 636-110 2,400 04/01/91 03/11/96 0.00 0.00 8.75 05/01/91 21,000.00 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ EASY COIN LAUNDRY INC. EASY COIN LAUNDRY, INC. PRS 1981 PRS 1981 Full 0 08/01/98 07/31/03 0.00 6.00 175,000 0.00 6.00 0 0.00 6.00 0 0.00 6.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ BI-LO INC. #126 BI-LO INC. PRS 1982 PRS 1987 Full 0 08/01/01 07/31/06 4.94 0.75 10,000,000 08/01/06 07/31/11 4.94 0.75 0 08/01/11 07/31/16 4.94 0.75 0 0.00 0.75 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ DOLLAR GENERAL #2828 DOLGENCORP INC. PRS 1996 PRS 1996 Full 0 05/01/99 04/30/02 4.55 3.00 650,000 0.00 3.00 972,000 Y - ------------------------------------------------------------------------------------------------------------------------------------ TEZ'S FRANK U. CORTEZ PRS 1982 PRS 1982 Full 0 04/01/96 03/31/01 0.00 5.00 336,000 0.00 5.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 88 Property: FRIARSGATE PLAZA 7948 BROAD RIVER ROAD IRMO, SC 29063 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ TEZ'S FRANK U. CORTEZ 636-110 2,400 04/01/91 03/11/96 7.00 01/01/94 16,800.00 - ------------------------------------------------------------------------------------------------------------------------ OUTDOOR EAST #494 LAMAR ADVERTISING 636-120 0 P 06/01/88 MTM 0.00 06/01/95 400.00 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ TEZ'S FRANK U. CORTEZ PRS 1982 PRS 1982 Full 0 0.00 5.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ OUTDOOR EAST #494 LAMAR ADVERTISING None 0 None 0 None 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 56,170 Current Annual Base Rent 186,319.00 Available. 12,065 Total..... 68,235
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Broad River Road (US Highway #76 & #176) - Facing Northwest [GRAPHIC OMITTED] Broad River Road (US Highway #76 & #176) - Facing Southeast [GRAPHIC OMITTED] Woodrow Avenue - Facing South [GRAPHIC OMITTED] Woodrow Avenue - Facing North [GRAPHIC OMITTED] Front View of Subject Property [GRAPHIC OMITTED] Front View of Subject Property [GRAPHIC OMITTED] Front View of Subject Property - Vacant Shops [GRAPHIC OMITTED] Front View of Subject Property - Separate Building - Shops [GRAPHIC OMITTED] Side View of Subject and View of Entrance from Broad River Road (US Highway #76 & #176) [GRAPHIC OMITTED] Side View of Subject - Separate Building - Shops [GRAPHIC OMITTED] Rear View of Subject Property [GRAPHIC OMITTED] Rear View of Subject Property [GRAPHIC OMITTED] Rear View of Subject Property - Separate Building - Shops This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study of: MAULDIN SQUARE 306 North Main Street Mauldin, Greenville County, South Carolina Prepared By: O. Marshall Dodds, MAI Date of Market Study: May 8, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] May 19, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Mauldin Square 306 North Main Street Mauldin, Greenville County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 8, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a strip shopping center that contains 15,800 square feet of leasable area. The center was originally constructed in 1986. The anchor tenant is Sherwin-Williams and the subject property is currently 100 percent occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds ----------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) OMD:mm EXECUTIVE SUMMARY ================================================================================ Regional Perspective Mauldin and Greenville County are located almost equidistant between New York and New Orleans and between Chicago and Miami. They are located in the northwestern part of the state. A portion of the Blue Ridge chain of the Appalachian Mountains crosses the northern part of the county, reaching an altitude of 3,548 feet at Sassafrass Mountain, the highest point in South Carolina. Paris Mountain, located 4 1/2 miles from Greenville rises 2,054 feet. Greenville County's economic trends of recent decades reflect the basic changes taking place in the traditional industries and new directions in the economy of the southeast as a whole. While textiles and apparel manufacturing are still the basic industries and employers, accelerated growth has taken place in new industries as well. Major Greenville employers also produce computer components, computer machine tools, contact lens solutions, gas turbines, automobile tires, household cleaners, electric organs, pharmaceutical products, retail food items, plastic packaging, electronic devices and polyester film. Current efforts to further diversify the area's economic base include a continuing campaign to attract national and regional headquarter facilities and warehouse/distribution operations to the area. The BMW automobile plant in Spartanburg County is now complete and is approximately 15 miles east of the central business district of Greenville. Construction of the new facility began in late 1992 and the assembly plant is in operation. Initially, the plant will employ approximately 1,000 workers capable of producing 300 vehicles per day. The initial investment by BMW totaled over $250 million. The estimated payroll both direct and indirect is expected to by $318.1 million in the first full year of operation. The investment by BMW is having a significant impact on the local economy and spurring further demand for both residential and commercial development in the Greenville and Spartanburg areas. During the first ten months of 1994, five international companies announced plans to move to the Greenville area. Two of the firms were BMW suppliers. Currently, 225 international firms from 19 nations are located within the upstate region. The real estate market in Greenville overall appears to be very good at this time. There has been steady growth in population and unemployment rates have remained relatively low in comparison with the state and national economy. Growth is continuing to occur and it is anticipated that this will be the trend in Greenville County and the surrounding area in the foreseeable future. Mauldin, which is part of the metropolitan area of Greenville, is located in the southern portion of the metropolitan area. The area is also known as the Golden Strip and 51.5 percent of the residents of the Golden Strip have moved to their current address in the last five years. Mauldin grew in population by 40.5 percent as their were 8,245 people in 1980 and the 1990 census shows 11,587 people in Mauldin. The unemployment rate for Greenville County as of March, 1997 was 2.7 percent while the statewide rate was 5.5 percent. Neighborhood and Site The subject neighborhood is located on North Main Street in Mauldin. Commercial developments are located along Main Street and several shopping centers are also located along West Butler Avenue. The growth began in the neighborhood approximately 25 years ago and is continuing at this time. However, the immediate neighborhood is more or less stable. New growth is occurring in the northeast section of Mauldin along Woodruff Road. There is a new community shopping center under construction with Wal-Mart to occupy a superstore. The Publix store at Woodruff is also located on Woodruff Road as well as another shopping center with Bi-Lo as the major tenant. While subject neighborhood will experience some growth, it is thought that most of the retail development has occurred. K-Mart is represented in the neighborhood as well as food stores such as Bi-Lo, Publix, Ingles and Winn Dixie. 1 Physical features are as follows: 1. Size 1.40 acres or 60,984 feet 2. Identity 306 North Main Street 3. Shape Irregular 4. Topography Generally level, but sits slightly above Main Street 5. Accessibility Good 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 15,800 square feet 2. Layout & Design 1 story -five shops 3. Parking Spaces 81 5.13 per 1,000 square of net area 4. Construction Brick and glass front with concrete block on side and rear and metal seamed roof Market Position and Marketability Conclusions Single tenant big boxes continue to enter the Greenville market. Grand Piano and Furniture, Rooms-To-Go, Wal-Mart and Home Depot are active in developing free-standing sites. Restaurant chains such as Johnny Rockets, Macaroni's Grill and Lone Star continue to add to the many already successful eateries in the Greenville area with over four-dozen restaurants in downtown Greenville. Greenville Mall completed a $65 million renovation and expansion project and is leasing to speciality tenants such as Eddie Bauer, Sharon Luggage, Talbots and Williams-Sonoma. Harris Teeter and Publix continue to expand into the upstate, challenging local giants Bi-Lo and Winn Dixie. The total of all retail space surveyed in one of the publications report is 7,555,315 square feet and the occupancy rate is 93 percent. Speciality centers in the survey reported 938,573 square feet of gross leasable area with 99,834 square feet vacant which is an occupancy rate of 89.4 percent. The neighborhood centers in the survey reported total gross leasable area of 1,757,729 square feet with 73,000 square feet being vacant for a occupancy rate of 95.9 percent. The community centers included in the survey reported a total gross leasable area of 2,334,952 square feet with 65,153 square feet vacant with an occupancy rate of 97.2 percent. The regional malls reported in the survey a total gross leasable area of 2,524,061 square feet with 262,274 square feet vacant with an occupancy rate of 89.6 percent. The subject property is located on Main Street in the downtown area of Mauldin. There are several older shopping centers located along Main Street such as the Golden Strip Mall, but the newer centers are located on West Butler Avenue. The Butler Square and Watley Square are located on West Butler Avenue. Butler Square contains approximately 80,000 square feet with major tenants being Bi-Lo, Revco and Cato Fashions. The rental rates are ranging from $10.00 to $11.00 per square foot. The Watley Square is located across the street from the Butler Square and this center contains 114,300 square feet with major tenants being Ingles and Eckerds Drugs. The former Ingles store is vacant as a new store was built next door and is now occupied by Ingles. The rental rates for the shops range from $9.00 to $10.00 per square foot in this center. The Butler East is a small strip center containing 12,000 square feet and is 90 percent occupied at this time. The rental rates are approximately $7.00 per square foot. The Mauldin Plaza contains 100,000 square feet and is 100 percent occupied. The Golden Strip shopping center contains 57,000 square feet and is also 100 percent occupied. 2 The tenants at subject property are Sherwin-Williams, Domino's Pizza, One Price Dry Cleaning, American General Finance and Cactus Jack's. The center is 100 percent occupied and the rental rates range from $5.50 to $8.50 per square foot. The occupancy rate for subject property has always been high. Trends The subject neighborhood is an older neighborhood and is established. Most of the growth in the neighborhood occurred during the 1980's. While some new growth is occurring at this time, it is thought that the neighborhood is in a stabilized period. New growth is occurring in the northeast section of Mauldin along Woodruff Road. The new community shopping center is under construction with a Wal-Mart Superstore as the major tenant. Other shopping centers have been built along Woodruff Road with Publix, Bi-Lo and Winn Dixie as major tenants. It is thought that the stability of the neighborhood will be maintained in the future and that there will be some new growth. 3 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A. PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Mauldin Square Butler East Watley Square Butler Square --------------------- --------------------------- ------------------------ ----------------------- b. Street 306 North Main Street 107 Butler Avenue West Butler Avenue W. Butler Ave. @ Watley Cir. --------------------- --------------------------- ------------------------ ----------------------- c. City Mauldin, SC Mauldin, SC Mauldin, SC Mauldin, SC --------------------- --------------------------- ------------------------ ----------------------- d. Distance from subject N/A 0.5 mile 0.5 mile 0.5 mile --------------------- --------------------------- ------------------------ ----------------------- e. Contact Edens Avant, Inc. Sale Star John Spake Real Est. Co. Caine Company --------------------- --------------------------- ------------------------ ----------------------- f. Phone (803) 233-5011 (864) 246-2741 (864) 269-3786 (864) 250-2600 --------------------- --------------------------- ------------------------ ----------------------- 2. Attributes a. Year built 1986 1987 1987 1988 --------------------- --------------------------- ------------------------ ----------------------- b. Net sq. Ft. 15,800 12,000 114,300 80,500 --------------------- --------------------------- ------------------------ ----------------------- c. # building 1 1 1 1 --------------------- --------------------------- ------------------------ ----------------------- d. #stories 1 1 1 1 --------------------- --------------------------- ------------------------ ----------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A N/A --------------------- --------------------------- ------------------------ ----------------------- f. # elevators N/A N/A N/A N/A --------------------- --------------------------- ------------------------ ----------------------- g. Parking Adequate Adequate Adequate Adequate --------------------- --------------------------- ------------------------ ----------------------- h. Construction Type Brick/Metal Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block --------------------- --------------------------- ------------------------ ----------------------- i. Vacancy % 0% 10.0% 34.0% 19.0% --------------------- --------------------------- ------------------------ ----------------------- j. Anchors, if Retail Sherwin-Williams EL Jacks Mexican restaurant Ingles, Eckerds Bi-Lo, Revco --------------------- --------------------------- ------------------------ -----------------------
Comments: The comparables are located on Butler Avenue which is in the subject neighborhood. Subject is located on Main Street, but these three comparables are located within1/2mile of subject. Comparable #1 is very similar to subject, in that, it only has 12,000 square feet and has several small shops. Comparables #2 and #3 are anchored by a food store and drug store. Comparable #2 has a high vacancy rate, but Ingles has vacated their store which causes the high percentage of vacancy. Ingles has constructed a new store next door to the existing store. Several stores are vacant in the Butler Square. Subject property has always operated at a high occupancy rate. 4 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space $8.38 N/A N/A N/A ------------------- -------------------- -------------------- --------------------- b. Shop Space $5.50 - $8.50 $7.00 $9.00 - $10.00 $10.00 - $11.00 ------------------- -------------------- -------------------- --------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net ------------------- -------------------- -------------------- --------------------- 3. Rent Concessions None None None None ------------------- -------------------- -------------------- --------------------- 4. Effective Rent $5.50 - $8.50 $7.00 $9.00 - $10.00 $10.00 - $11.00 ------------------- -------------------- -------------------- --------------------- 5. TI Allowance None None None None ------------------- -------------------- -------------------- --------------------- 6. Expense Stop None None None None ------------------- -------------------- -------------------- --------------------- 7. Length of Lease Term 3 - 5 years - Shops 3 - 5 years - Shops 3 - 5 years - Shops 3 - 5 years - Shops ------------------- -------------------- -------------------- --------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% - 7.00% 5.00% - 7.00% ------------------- -------------------- -------------------- --------------------- 9. Percentage Rent (per lease terms) None None Ingles, Eckerds Bi-Lo, Revco ------------------- -------------------- -------------------- --------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A ------------------- -------------------- -------------------- --------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A ------------------- -------------------- -------------------- --------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Similar Similar Similar ------------------- -------------------- -------------------- ---------------------
D. EXPLAIN RANKING/COMMENTS: The comparables have been rated as similar to subject. However, Comparable #1 is the most similar as it is approximately the same size and consist of several small shops such as subject. The rental rate for Comparable #1 is similar to the rental rate in subject, whereas, the rental rates for the shops in Comparables #2 and #3 are higher. This is caused by the attraction of the food store and drug store. 5 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Butler East Location: 107 Butler Avenue Mauldin, SC Year Built: 1987 Total Size: 12,000 SF Vacant Space: 1,200 Sf Vacancy Rate: 10.0% Rental Range: $7.00 Tenant Expenses: Triple Net Remarks: This center is located on Butler Avenue. The major tenant is EL Jacks Mexican restaurant. 6 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Watley Square Location: West Butler Avenue Mauldin, SC Year Built: 1987 Total Size: 114,300 SF Vacant Space: 38,862 SF Vacancy Rate: 34.0% Rental Range: $9.00 - $10.00 Tenant Expenses: Triple Net Remarks: This center is located on West Butler Avenue. Major tenants are Ingles and Eckerds. 7 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Butler Square Location: West Butler Avenue at Watley Circle Mauldin, SC Year Built: 1988 Total Size: 80,500 SF Vacant Space: 15,295 SF Vacancy Rate: 19.0% Local Rent Range: $10.00 - $11.00 Tenant Expenses: Triple Net Remarks: This center is located on West Butler Avenue at Watley Circle. Major tenants include Bi-Lo and Revco. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Mauldin Square St. Andrews Crossing Eastgate Shopping Center One Norman Center ---------------------- --------------------- ------------------------ ---------------------- NWC Whiskey Rd. & 19706 One Norman Blvd. b. Street Address 306 North Main Street 817 St. Andrews Road Eastgate Dr. ---------------------- --------------------- ------------------------ ---------------------- c. City Mauldin, SC Columbia, SC Aiken, SC Cornelius, NC ---------------------- --------------------- ------------------------ ---------------------- d. Distance from Subject N/A 101 miles 108 miles 95 miles ---------------------- --------------------- ------------------------ ---------------------- 2. Attributes a. Year Built 1986 1994 1995 1993 ---------------------- --------------------- ------------------------ ---------------------- b. Net sq. feet 15,800 66,910 SF 75,716 SF 54,185 SF ---------------------- --------------------- ------------------------ ---------------------- c. # Buildings 1 1 1 1 ---------------------- --------------------- ------------------------ ---------------------- d. # of Stories 1 1 1 1 ---------------------- --------------------- ------------------------ ---------------------- e. Vacancy % 0% 0% 7.21% 6.98% ---------------------- --------------------- ------------------------ ---------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 $4,650,000 ---------------------- --------------------- ------------------------ ---------------------- b. Sales Price PSF N/A $97.89 $88.16 $85.82 ---------------------- --------------------- ------------------------ ---------------------- c. Date N/A 05-25-94 09-28-95 10-12-95 ---------------------- --------------------- ------------------------ ---------------------- d. NOI at time of Sale N/A $634,797 $782,704 $474,591 ---------------------- --------------------- ------------------------ ---------------------- e. Cap. Rate N/A 9.69% 9.86% 9.68% ---------------------- --------------------- ------------------------ ---------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A Superior Superior Superior ---------------------- --------------------- ------------------------ ----------------------
II. SALES COMPARABLES COMPARABLE 4 ------------ 1. Identification a. Name Paw Creek Commons ---------------------- E/S Little Rock Road b. Street Address at Freedom Drive ---------------------- c. City Charlotte, NC ---------------------- d. Distance from Subject 92 miles ---------------------- 2. Attributes a. Year Built 1996 ---------------------- b. Net sq. feet 66,050 SF ---------------------- c. # Buildings 1 ---------------------- d. # of Stories 1 ---------------------- e. Vacancy % 2.73% ---------------------- 3. Sales Information a. Sales Price $5,384,000 ---------------------- b. Sales Price PSF $77.52 ---------------------- c. Date 03-25-97 ---------------------- d. NOI at time of Sale $517,412 ---------------------- e. Cap. Rate 9.61% ---------------------- 4. Rank Relative to Subject (inferior, similar, superior) Superior ---------------------- Explain Ranking/Comments: The comparables have been ranked as superior to subject. The reason for this is because these comparables have large anchor tenants such as a food store and a drug store. While subject property is currently at an occupancy rate of 100 percent and has always operated at a high occupancy rate, it is thought that there would be more risk involved with a property with smaller tenants and shorter term leases. Subject property does have a place in the marketplace and it is thought that there would be a demand from purchasers, if the property were to be placed on the market. 9 COMPARABLE IMPROVED SALES Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS 6012 -1 -1 NAME St. Andrews Crossing LOCATION St. Andrews Road and I-26, Columbia, SC GRANTOR Hayley-Redd, L.P. GRANTEE F.A.C. Properties DEED REFERENCE Book 1199, Page 331 DATE May 25, 1994 SALES PRICE $6,550,000 ADJUSTED SALES PRICE $6,550,000 SIZE BUILDING 66,910 SALES PRICE PER S.F. $97.89 SIZE LAND (ACRES) 8.08 SIZE LAND (S.F.) 351,965 YEAR BUILT 1994 LAND/BUILDING RATIO 5.26 To 1 UTILITIES All available VERIFICATION Deed ZONING Commercial FINANCING Market EFFECTIVE GROSS INCOME $686,905 EGIM 9.54 NET OPERATING INCOME $634,797 OVERALL RATE 9.69% VERIFICATION Public Records TYPE OF PURCHASER Private Investor COMMENTS This was an arms length sale. This neighborhood shopping center is anchored by Kroger and is located in a good commercial area with good accessibility and fair exposure. The construction is brick veneer and concrete block. (503) 10 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] NAME Eastgate Shopping Center LOCATION Northwest Corner of Whiskey Road and Eastgate Drive, Aiken, SC GRANTOR PDG Aiken Partners, LP GRANTEE Southeast U.S. Retail, LP DATE Sep 28, 1995 SALES PRICE $6,675,000 SIZE BUILDING 75,716 SALES PRICE PER S.F. $88.16 SIZE LAND (ACRES) 8.79 SIZE LAND (S.F.) 382,892 YEAR BUILT 1995 LAND/BUILDING RATIO 5.06 To 1 UTILITIES All available VERIFICATION Public Records ZONING Commercial FINANCING Cash to seller GROSS POTENTIAL INCOME $782,704 EFFECTIVE GROSS INCOME $782,704 GROSS INCOME MULTIPLE 8.53 EGIM 8.53 NET OPERATING INCOME $657,896 OVERALL RATE 9.86% TYPE OF PURCHASER Private Investor COMMENTS Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. (643) 11 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] NAME One Norman Center LOCATION 19706 One Norman Boulevard, Cornelius, Mecklenburg County, NC GRANTOR One Norman Center, LP GRANTEE Lucky Realty DEED REFERENCE Book 8325, Page 721 DATE Oct 12, 1995 SALES PRICE $4,650,000 SIZE BUILDING 54,185 SALES PRICE PER S.F. $85.82 SIZE LAND (ACRES) 5.69 SIZE LAND (S.F.) 247,856 YEAR BUILT 1993 LAND/BUILDING RATIO 4.57 To 1 UTILITIES All Public VERIFICATION Public Records ZONING CUB-2 FINANCING Cash to Seller GROSS POTENTIAL INCOME $474,591 EFFECTIVE GROSS INCOME $474,591 GROSS INCOME MULTIPLE 9.80 EGIM 9.80 NET OPERATING INCOME $450,188 OVERALL RATE 9.68% TYPE OF PURCHASER Private Investor COMMENTS This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot. Triple net lease. (716) 12 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] TMS 59 -231 -22 ,23 pt. NAME Paw Creek Commons LOCATION East side of Little Rock Road at Freedom Drive, Charlotte, NC GRANTOR Paw Creek, LLC GRANTEE Frastacky and Associates DATE Mar 25, 1997 SALES PRICE $5,120,000 ADJUSTED SALES PRICE $5,384,000 SIZE BUILDING 66,050 SALES PRICE PER S.F. $77.52 SIZE LAND (ACRES) 9.82 SIZE LAND (S.F.) 427,759 YEAR BUILT 1996 LAND/BUILDING RATIO 6.48 To 1 UTILITIES Municipal VERIFICATION Public Records ZONING CC, Commercial Center FINANCING Cash to seller GROSS POTENTIAL INCOME $568,840 EFFECTIVE GROSS INCOME $552,054 GROSS INCOME MULTIPLE 9.00 EGIM 9.27 NET OPERATING INCOME $517,412 OVERALL RATE 9.61% TYPE OF PURCHASER Private Investor COMMENTS The overall rate of 10.10 percent has been adjusted down by 50 basis points since the sales contract is pre-construction. The major tenants are Winn Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. Anchor income is 79.41 percent of gross income. (793) 13 ADDENDA o Greenville County Demographics o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject USA COUNTIES 1996 Geographic Area: Greenville, SC (45045) Table: GENERAL PROFILE - -------------------------------------------------------------------------------- POPULATION AND HOUSING (Bureau of the Census) Total resident population: 1995 ............................................................ 339,908 Percent 65 years and over ..................................... 12.3 1990 ............................................................ 320,167 1980 ............................................................ 287,895 Occupied housing units, 1990 ...................................... 122,878 Percent owner occupied .......................................... 66.2 BIRTHS AND DEATHS (National Center for Health Statistics) Births, 1993 ...................................................... 4,704 Per 1,000 resident population ................................... 14.2 Percent to mothers under 20 years of age ........................ 14.1 Deaths, 1993 ...................................................... 2,789 Per 1,000 resident population ................................... 8.4 Infant deaths per 1,000 live births, 1993 ......................... 5.7 EDUCATION (Bureau of the Census) Persons 25 years and over, 1990 ................................... 207,093 Percent high school graduates ................................... 71.6 Percent college graduates ....................................... 21.0 LABOR FORCE (Bureau of Labor Statistics) Civilian labor force, 1994 ........................................ 182,133 Percent unemployed .............................................. 4.1 PRIVATE NONFARM ESTABLISHMENTS (Bureau of the Census) Total establishments, 1993 ........................................ 9,966 Percent retail trade ............................................ 23.6 Percent services ................................................ 34.3 Paid employees, 1993 (pay period including March 12) .............. 205,350 Annual payroll, 1993 ($1,000) ..................................... 4,983,364 PERSONAL INCOME (Bureau of Economic Analysis) Total personal income, 1993 ($1,000) .............................. 6,498,827 Per capita (dollars) ............................................ 19,655 AGRICULTURE (Bureau of the Census) Number of farms, 1992 ............................................. 689 Land in farms as percent of total land .......................... 13 RETAIL TRADE (Bureau of the Census) Retail sales, 1992 ($1,000) ....................................... 3,022,379 Per capita (dollars) ............................................ 9,246 COMMERCIAL AND SAVINGS BANKS (Fed. Deposit Insurance Corp.) Number of offices, June 30, 1994 .................................. 121 Total deposits ($1,000) ......................................... 3,269,128 SOCIAL PROGRAMS (Social Security Administration) Total Social Security recipients, December 1993 ................... 55,200 Retired workers ................................................. 35,020 Supplementary Security Income recipients, December 1994 ........... 7,014 FEDERAL FUNDS AND GRANTS (Bureau of the Census) Total direct expenditures or obligations per capita: 1994 (dollars) .................................................. 4,036 1990 (dollars) .................................................. 2,203 - -------------------------------------------------------------------------------- A) Not available. (D) Avoid disclosure of confidential information. (X) Not applicable. (S) Does not meet publication standards. (Z) Value > 0 but < half unit of measure shown. NOTE: 0 data may indicate geographic/data footnotes. Source: U.S. Bureau of the Census, USA Counties 1996 CD-ROM. 1 of 1 [GRAPHIC OMITTED] Comparable Rentals Map [GRAPHIC OMITTED] Improved Sales Map [GRAPHIC OMITTED] Site Plan EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: MAULDIN SQUARE 306 N. MAIN STREET MAULDIN, SC 29662-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ SHERWIN-WILLIAMS #2194 THE SHERWIN-WILLIAMS CO. 638-10 5,000 08/01/86 07/31/01 8.38 08/01/91 41,880.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ DOMINO'S PIZZA GARTH RACH, INC. 638-20 2,000 03/01/93 02/28/01 0.00 0.00 6.00 03/15/93 12,000.00 6.00 03/01/96 12,000.00 6.50 03/01/97 12,999.96 7.00 03/01/98 13,999.92 - ------------------------------------------------------------------------------------------------------------------------ OLYMPUS/ONE PRICE CLEANERS OPC INC. 638-30 2,800 07/01/95 06/30/00 6.50 07/01/95 18,200.04 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ AMERICAN GENERAL FINANCE AMERICAN GENERAL FINANCE 638-40 1,600 08/01/94 07/31/99 0.00 0.00 0.00 0.00 8.25 08/01/94 13,200.00 8.50 08/01/96 13,599.96 - ------------------------------------------------------------------------------------------------------------------------ CACTUS JACK'S OVERLAND CATTLE COMPANY, INC. 638-50 4,400 07/01/95 06/30/00 5.50 07/01/95 24,200.04 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ CACTUS JACK'S OVERLAND CATTLE COMPANY, INC. 638-50 4,400 07/01/95 06/30/00 6.00 07/01/97 26,400.00 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ SHERWIN-WILLIAMS #2194 THE SHERWIN-WILLIAMS CO. Full 0 None 0 None 0 08/01/96 07/31/01 0.00 0.00 0 08/01/01 07/31/06 0.00 0.00 0 08/01/06 07/31/11 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ DOMINO'S PIZZA GARTH RACH, INC. Full 0 Full 0 Full 0 03/01/96 02/28/01 6.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ OLYMPUS/ONE PRICE CLEANERS OPC INC. Full 0 Full 0 Full 0 07/01/00 06/30/05 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ AMERICAN GENERAL FINANCE AMERICAN GENERAL FINANCE Full 0 Full 0 Full 0 08/01/99 07/31/04 9.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ CACTUS JACK'S OVERLAND CATTLE COMPANY, INC. Full 0 Full 0 Full 0 07/01/00 06/30/05 0.00 0.05 750,000 0.00 0.05 0 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ CACTUS JACK'S OVERLAND CATTLE COMPANY, INC. Full 0 Full 0 Full 0 0.00 0.05 0 - ------------------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 15,800 Current Annual Base Rent 110,880.00 Available. 0 Total..... 15,800
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Laurens Road Looking North [GRAPHIC OMITTED] Laurens Road Looking South [GRAPHIC OMITTED] Subject - Front And Side View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Entrance Way To Subject From Laurens Road [GRAPHIC OMITTED] Subject - Rear View This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study of: SHOTWELL SQUARE 1614 East Shotwell Street Bainbridge, Decatur County, Georgia Prepared By: O. Marshall Dodds, MAI Date of Market Study: April 15, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] May 19, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Shotwell Square 1614 East Shotwell Street Bainbridge, Decatur County, Georgia Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on April 15, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood center that contains 42,037 square feet of leasable area. The center was originally constructed in 1980. The anchor tenant is Harvey's Supermarket and the subject property is currently 100 percent occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds -------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) OMD:mm EXECUTIVE SUMMARY ================================================================================ Regional Perspective Bainbridge and Decatur County are located in the southwest corner of Georgia. Bainbridge, the County Seat, is nestled on the banks of the Flint River and Lake Seminole is located nearby. The population of Bainbridge in 1994 was 11,099 while the population of Decatur County was 26,462. The chart below gives an indication of the population trend over the years. --------------------------------------------------- POPULATION --------------------------------------------------- City County --------------------------------------------------- 1950 7,562 23,620 1960 12,714 25,203 1970 10,887 22,310 1980 10,553 25,495 1990 10,712 25,511 1994 11,099 26,462 --------------------------------------------------- The per capita income has continued to increase in the county from 1970 through 1992. The chart below shows this information. --------------------------------------------------- PER CAPITA INCOME --------------------------------------------------- County Georgia --------------------------------------------------- 1970 $2,313 $3,373 1980 6,123 8,353 1985 9,362 12,864 1986 10,210 13,798 1988 11,824 15,485 1990 13,446 17,121 1992 14,766 18,549 --------------------------------------------------- The largest employers in Decatur County are as follows. 1. Amoco Fabrics Company 2. Amoco Fibers 3. Engle Hard Corporation 4. Elberta Crate and Box Company There are several other large industries in adjacent Grady County which would be Ithacha Industries, Tarington Company, W.B. Roddenbery Company and Wight Nurseries, Inc. The Bainbridge economy enjoyed a period of unprecedented expansion during the 1980's. Low labor costs and lack of unions have helped attract and keep business in the area. Local manufacturers have demonstrated their continued commitment to Bainbridge as ten companies have expanded their facilities in the area creating 800 jobs over the past five years. There are two industrial parks in Bainbridge covering 3,200 acres, where 50 corporate plants produce food, textiles, chemical products, paper, rubber, plastics, metal and machinery. Bainbridge is Georgia's premier inland port city. The Georgia State Docks and Barge Terminal in Bainbridge is a major shipping port for goods destined for the Gulf of Mexico. This facility is located on the Flint River. 1 The tourist and sport fishing industry has also been exhibiting vigorous and consistent revenue growth over the past decade with especially strong growth over the past few years. Over 4 million visitors annually are attracted to the area's moderate year-round climate and comfortable surroundings. Natural amenities include 37,500 unspoiled acres of fishing, hunting and water sports on Lake Seminole. The economy of Bainbridge has maintained its stability over the years and is expected to continue in the future. The continued expansion in the Bainbridge economy coupled with an active tourist trade assure the continued strength of the economic foundation of Bainbridge. The subject property is located in Decatur County and the unemployment rate was 8.7 percent in 1994. The unemployment rate statewide for the same year was 5.2 percent. Neighborhood and Site The neighborhood is located along East Shotwell Street which is also US Highway #84. The downtown area of Bainbridge is located to the west of subject neighborhood and the city limit line or county road is located east of the neighborhood. The direction of growth for the City of Bainbridge has been to the east and to the southwest. The reason for this is because of the Flint River which runs in a southwest/northeast direction. There are several developments in the neighborhood which would include the Bainbridge Mall, the Bainbridge Memorial Hospital, Bainbridge Town Center, Market Square Shopping Center, Shotwell Plaza and West Building Materials. There are fast food restaurants are located along Shotwell Street and these include Taco Bell, Pizza Hut, Wendy's, McDonald's, Kentucky Fried Chicken and Golden Corral. Several convenience/self-service gasoline stations are located along East Shotwell Street as well as several automobile dealerships. Physical features are as follows: 1. Size 6.20 acres or 270,072 square feet 2. Identity 1614 East Shotwell Street 3. Shape Irregular 4. Topography Generally level and on street grade with East Shotwell Street 5. Accessability Good from either direction 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 42,037 square feet 2. Layout & Design 1 story-food store, variety store, three shops 3. Parking Spaces 260 6.19 per 1,000 square of net area 4. Construction Brick and glass front with concrete block on side and rear and metal seam roof 2 Market Position and Marketability Conclusions Subject property is located along East Shotwell Street and the other competing shopping centers in Bainbridge are also located along East Shotwell Street or just off of this thoroughfare. A brief description of these shopping facilities is as follows. 1. Shotwell Square (Subject Property) - The major tenant in this center is Harvey's Supermarket which contains 22,197 square feet. The total size of the center is 42,037 square feet and there are no vacancies. Other tenants include Goodwill Industries (6,600 square feet), Turner Rental (3,000 square feet), Turner Finance Company (1,600 square feet) and Dollar General (8,640 square feet). 2. Bainbridge Mall - The major tenants in Bainbridge Mall are Belk-Simpson (40,800 square feet), Goody's (19,800 square feet), Bargaintown (15,000 square feet), Heileg-Meyers (21,000 square feet) and a vacant store with 10,500 square feet. The owners are negotiating with Sears Hardware as a tenant for this space at this time. The smaller tenants would include Pic-N-Pay shoes, Freidman's Jewelers, Peppermint Music-Post-Petitio, Dress for Less, Goodwyn Jewelers, Cato/Cato Plus, Bombay, Lee Nails, Mane Tamer, Radio Shack, Athletic Attic, Spotlight Cinemas, Bainbridge National Bank ATM and Impulse, Inc. The vacancy rate is 9.37 percent. 3. Bainbridge Town Center - This center has K-Mart, Food Lion and Revco Drugs as the major tenants. Other tenants include Video Superstore, Old Mexico restaurant, Ninety- 9 Cents store, Haircutters and Tans, New China Chinese Food, One Price $7, Shoe City and Its Fashion. There are two vacant shops in this center at this time as the vacancy rate is 2 percent. The rental rates range from $6.00 to $8.00 per square foot. 4. Market Square - The major tenant in this center is Marketplace Winn-Dixie with other tenants being Upton's Fashions, Movie Gallery, Renter's Choice, Yogurt Shop, Financial Services and K&K Beauty Supply. There are three vacant shops in this center at this time and the vacancy rate is 6.5 percent. The rental rates range from $6.50 to $7.00 per square foot. 5. Bainbridge Crossing Shopping Center - The major tenants in this center are Big "B" Drugs and Family Dollar. This center is 100 percent occupied at this time. The rental rates range from $6.25 to $7.50 per square foot. 6. Scott Street Plaza - This is an older center that was built in 1975. There are no anchor tenants in this center. Tenants include Fleet Finance, Flowers by Cooper and Ceborn Printing. The rental rates range from $3.00 to $3.50 per square foot. The subject property has Harvey's Supermarket occupying the largest store of 22,197 square feet at a rental rate of $3.44 per square foot. Dollar General is occupying a store containing 8,640 square feet at $2.99 per square foot. The other stores are occupying shops and the rental rate ranges from $4.55 per square foot to $5.25 per square foot. These rental rates are within the range of the rental rates for the other shopping centers along East Shotwell Street. Trends The subject property is located on a major traffic artery in Bainbridge, Georgia. Several other shopping facilities are located on East Shotwell Street with subject property. The market appears to be stable at this time and there are no other shopping centers that are planned for the area. The neighborhood is stable at this time and it is thought that the stability will be maintained in the future. 3 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Shotwell Square Bainbridge Town Center Market Square Bainbridge Crossing -------------------------- ----------------------- ---------------------- -------------------- NEC of East Shotwell b. Street 1614 East Shotwell Street N/S East Shotwell St. N/S East Shotwell St. St. and Russ Street -------------------------- ----------------------- ---------------------- -------------------- c. City Bainbridge, GA Bainbridge, GA Bainbridge, GA Bainbridge, GA -------------------------- ----------------------- ---------------------- -------------------- d. Distance from subject N/A 2 Blocks 2 Blocks 4 Blocks -------------------------- ----------------------- ---------------------- -------------------- e. Contact Edens Avant, Inc. American Star Dev. The Gates Company The Gates Company -------------------------- ----------------------- ---------------------- -------------------- f. Phone 803-779-4420 (205) 277-1000 (404) 324-6464 (404) 324-6464 -------------------------- ----------------------- ---------------------- -------------------- 2. Attributes a. Year built 1980 1990 1989 1986 -------------------------- ----------------------- ---------------------- -------------------- b. Net sq. Ft. 42,037 132,500 52,325 18,100 -------------------------- ----------------------- ---------------------- -------------------- c. # building 1 1 1 1 -------------------------- ----------------------- ---------------------- -------------------- d. #stories 1 1 1 1 -------------------------- ----------------------- ---------------------- -------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A N/A -------------------------- ----------------------- ---------------------- -------------------- f. # elevators N/A N/A N/A N/A -------------------------- ----------------------- ---------------------- -------------------- g. Parking Adequate Adequate Adequate Adequate -------------------------- ----------------------- ---------------------- -------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block -------------------------- ----------------------- ---------------------- -------------------- i. Vacancy % 0% 2.0% 6.50% 0% -------------------------- ----------------------- ---------------------- -------------------- Food Lion, K-Mart, Big "B" Drugs, j. Anchors, if Retail Harvey's Supermarket Revco Winn-Dixie Family Dollar -------------------------- ----------------------- ---------------------- --------------------
COMPARABLE 4 ------------ 1. Identification a. Name South Street Plaza ----------------------- b. Street E/S Scott Street ----------------------- c. City Bainbridge, GA ----------------------- d. Distance from subject 6 Blocks ----------------------- e. Contact Harold Lambert ----------------------- f. Phone (912) 246-5694 ----------------------- 2. Attributes a. Year built 1975 ----------------------- b. Net sq. Ft. 35,000 ----------------------- c. # building 1 ----------------------- d. #stories 1 ----------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A ----------------------- f. # elevators N/A ----------------------- g. Parking Adequate ----------------------- h. Construction Type Brick/Concrete Block ----------------------- i. Vacancy % 4.21% ----------------------- j. Anchors, if Retail Local shops ----------------------- Comments: The rental rates for subject property are lower than the rental rates for these comparables with the exception of Comparable #4 which is at the lower end of the range. The rental rate for the major tenant is slightly higher than the rental rates for the major tenants in Bainbridge Mall. It is thought that these properties are comparable and subject is being rented within the range of these comparables. PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space $3.44 $4.60 - $6.00 N/A N/A ------------------- ------------------- ------------------- ------------------- b. Shop Space $4.55 - $5.25 $6.00 - $8.00 $6.50 - 47.00 $6.50 - $7.00 ------------------- ------------------- ------------------- ------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net ------------------- ------------------- ------------------- ------------------- 3. Rent Concessions None None None None ------------------- ------------------- ------------------- ------------------- 4. Effective Rent $4.55 - $5.25 $6.00 - $8.00 $6.50 - $7.00 $6.25 - $7.50 ------------------- ------------------- ------------------- ------------------- 5. TI Allowance None None None None ------------------- ------------------- ------------------- ------------------- 6. Expense Stop None None None None ------------------- ------------------- ------------------- ------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 - 5 years (shop) 3 - 5 years (shop) 3 - 5 years (shop) ------------------- ------------------- ------------------- ------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% - 7.00% 5.00% to 7.00% ------------------- ------------------- ------------------- ------------------- 9. Percentage Rent Food Lion, K-Mart, Big "B" Drugs, (per lease terms) None Revco Winn Dixie Family Dollar ------------------- ------------------- ------------------- ------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A ------------------- ------------------- ------------------- ------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A ------------------- ------------------- ------------------- ------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Similar Similar Similar ------------------- ------------------- ------------------- -------------------
COMPARABLE 4 ------------ 1. Asking Rental Rate a. Anchor Space N/A ------------------- b. Shop Space $3.00 - $3.50 ------------------- 2. Lease Type (Gross/Net) Triple Net ------------------- 3. Rent Concessions None ------------------- 4. Effective Rent $3.00 - $3.50 ------------------- 5. TI Allowance None ------------------- 6. Expense Stop None ------------------- 7. Length of Lease Term 3 - 5 years (shop) ------------------- 8. Commissions 5.00% to 7.00% ------------------- 9. Percentage Rent (per lease terms) None ------------------- 10. Historical Annual Absorption/sq.ft. N/A ------------------- 11. Annual Operating Expense psf (Including taxes) N/A ------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) Similar ------------------- D. EXPLAIN RANKING/COMMENTS: These comparable properties have been rated as similar to subject. It is thought that subject property is similar to these comparables. All of the comparables and subject are located along East Shotwell Street. The comparables and subject property are experiencing high occupancy rates at this time. 5 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Bainbridge Town Center Location: N/S East Shotwell Street Bainbridge, GA Year Built: 1990 Total Size: 132,500 SF Vacant Space: 2,860 SF Vacancy Rate: 2.00% Rental Range: $6.00 - $8.00 per square foot Tenant Expenses: Triple Net Remarks: Major tenants are Food Lion, K-Mart and Revco Drugs. The center has been well-maintained and is experiencing a high occupancy rate. 6 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Market Square Location: N/S East Shotwell Street Bainbridge, GA Year Built: 1989 Total Size: 52,325 SF Vacant Space: 3,400 SF Vacancy Rate: 6.50% Rental Range: $6.50 - $7.00 per square foot Tenant Expenses: Triple Net Remarks: This is an older center that was renovated. Winn-Dixie is the major tenant with a Marketplace store. 7 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Bainbridge Crossing Shopping Center Location: 301-307 Scott Street Bainbridge, GA Year Built: 1986 Total Size: 18,100 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $6.25 - $7.50 per square foot Tenant Expenses: Triple Net Remarks: Major tenants include Big "B" Drugs and Family Dollar. 8 Comparable Rental No. 4 ================================================================================ [GRAPHIC OMITTED] Name: Scott Street Plaza Location: E/S Scott Street Bainbridge, GA Year Built: 1975 Total Size: 35,000 SF Vacant Space: None Vacancy Rate: 0% Local Rent Range: $3.00 - $3.50 per square foot Tenant Expenses: Triple Net Remarks: One-story brick veneer center. Tenants include Fleet Finance, Flowers by Cooper and Ceborn Printing. 9 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Shotwell Square St. Andrews Crossing Eastgate Shopping Center One Norman Center ----------------------- ---------------------- ------------------------- ---------------------- NWC Whiskey Rd. & 19706 One Norman Blvd. b. Street Address 1614 East Shotwell St. 817 St. Andrews Road Eastgate Dr. ----------------------- ---------------------- ------------------------- ---------------------- c. City Bainbridge, GA Columbia, SC Aiken, SC Cornelius, NC ----------------------- ---------------------- ------------------------- ---------------------- d. Distance from Subject N/A 101 miles 108 miles 95 miles ----------------------- ---------------------- ------------------------- ---------------------- 2. Attributes a. Year Built 1980 1994 1995 1993 ----------------------- ---------------------- ------------------------- ---------------------- b. Net sq. feet 42,037 66,910 SF 75,716 SF 54,185 SF ----------------------- ---------------------- ------------------------- ---------------------- c. # Buildings 1 1 1 1 ----------------------- ---------------------- ------------------------- ---------------------- d. # of Stories 1 1 1 1 ----------------------- ---------------------- ------------------------- ---------------------- e. Vacancy % 0% 0% 7.21% 6.98% ----------------------- ---------------------- ------------------------- ---------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 $4,650,000 ----------------------- ---------------------- ------------------------- ---------------------- b. Sales Price PSF N/A $97.89 $88.16 $85.82 ----------------------- ---------------------- ------------------------- ---------------------- c. Date N/A 05-25-94 09-28-95 10-12-95 ----------------------- ---------------------- ------------------------- ---------------------- d. NOI at time of Sale N/A $634,797 $782,704 $474,591 ----------------------- ---------------------- ------------------------- ---------------------- e. Cap. Rate N/A 9.69% 9.86% 9.68% ----------------------- ---------------------- ------------------------- ---------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A Superior Similar Similar ----------------------- ---------------------- ------------------------- ----------------------
COMPARABLE 4 ------------ 1. Identification a. Name Paw Creek Commons ---------------------- E/S Little Rock Road b. Street Address at Freedom Drive ---------------------- c. City Charlotte, NC ---------------------- d. Distance from Subject 92 miles ---------------------- 2. Attributes a. Year Built 1996 ---------------------- b. Net sq. feet 66,050 SF ---------------------- c. # Buildings 1 ---------------------- d. # of Stories 1 ---------------------- e. Vacancy % 2.73% ---------------------- 3. Sales Information a. Sales Price $5,384,000 ---------------------- b. Sales Price PSF $77.52 ---------------------- c. Date 03-25-97 ---------------------- d. NOI at time of Sale $517,412 ---------------------- e. Cap. Rate 9.61% ---------------------- 4. Rank Relative to Subject (inferior, similar, superior) Superior ---------------------- Explain Ranking/Comments: Comparables #1 and #4 have been ranked as superior to subject. The reason for this is because of the location being superior to subject and the shops are achieving higher rental rates than the shops in subject property. 10 COMPARABLE IMPROVED SALES Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS 6012 -1 -1 NAME St. Andrews Crossing LOCATION St. Andrews Road and I-26, Columbia, SC GRANTOR Hayley-Redd, L.P. GRANTEE F.A.C. Properties DEED REFERENCE Book 1199, Page 331 DATE May 25, 1994 SALES PRICE $6,550,000 ADJUSTED SALES PRICE $6,550,000 SIZE BUILDING 66,910 SALES PRICE PER S.F. $97.89 SIZE LAND (ACRES) 8.08 SIZE LAND (S.F.) 351,965 YEAR BUILT 1994 LAND/BUILDING RATIO 5.26 To 1 UTILITIES All available VERIFICATION Deed ZONING Commercial FINANCING Market EFFECTIVE GROSS INCOME $686,905 EGIM 9.54 NET OPERATING INCOME $634,797 OVERALL RATE 9.69% VERIFICATION Public Records TYPE OF PURCHASER Private Investor COMMENTS This was an arms length sale. This neighborhood shopping center is anchored by Kroger and is located in a good commercial area with good accessibility and fair exposure. The construction is brick veneer and concrete block. (503) 11 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] NAME Eastgate Shopping Center LOCATION Northwest Corner of Whiskey Road and Eastgate Drive, Aiken, SC GRANTOR PDG Aiken Partners, LP GRANTEE Southeast U.S. Retail, LP DATE Sep 28, 1995 SALES PRICE $6,675,000 SIZE BUILDING 75,716 SALES PRICE PER S.F. $88.16 SIZE LAND (ACRES) 8.79 SIZE LAND (S.F.) 382,892 YEAR BUILT 1995 LAND/BUILDING RATIO 5.06 To 1 UTILITIES All available VERIFICATION Public Records ZONING Commercial FINANCING Cash to seller GROSS POTENTIAL INCOME $782,704 EFFECTIVE GROSS INCOME $782,704 GROSS INCOME MULTIPLE 8.53 EGIM 8.53 NET OPERATING INCOME $657,896 OVERALL RATE 9.86% TYPE OF PURCHASER Private Investor COMMENTS Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. (643) 12 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] NAME One Norman Center LOCATION 19706 One Norman Boulevard, Cornelius, Mecklenburg County, NC GRANTOR One Norman Center, LP GRANTEE Lucky Realty DEED REFERENCE Book 8325, Page 721 DATE Oct 12, 1995 SALES PRICE $4,650,000 SIZE BUILDING 54,185 SALES PRICE PER S.F. $85.82 SIZE LAND (ACRES) 5.69 SIZE LAND (S.F.) 247,856 YEAR BUILT 1993 LAND/BUILDING RATIO 4.57 To 1 UTILITIES All Public VERIFICATION Public Records ZONING CUB-2 FINANCING Cash to Seller GROSS POTENTIAL INCOME $474,591 EFFECTIVE GROSS INCOME $474,591 GROSS INCOME MULTIPLE 9.80 EGIM 9.80 NET OPERATING INCOME $450,188 OVERALL RATE 9.68% TYPE OF PURCHASER Private Investor COMMENTS This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot. Triple net lease. (716) 13 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] TMS 59 -231 -22 ,23 pt. NAME Paw Creek Commons LOCATION East side of Little Rock Road at Freedom Drive, Charlotte, NC GRANTOR Paw Creek, LLC GRANTEE Frastacky and Associates DATE Mar 25, 1997 SALES PRICE $5,120,000 ADJUSTED SALES PRICE $5,384,000 SIZE BUILDING 66,050 SALES PRICE PER S.F. $77.52 SIZE LAND (ACRES) 9.82 SIZE LAND (S.F.) 427,759 YEAR BUILT 1996 LAND/BUILDING RATIO 6.48 To 1 UTILITIES Municipal VERIFICATION Public Records ZONING CC, Commercial Center FINANCING Cash to seller GROSS POTENTIAL INCOME $568,840 EFFECTIVE GROSS INCOME $552,054 GROSS INCOME MULTIPLE 9.00 EGIM 9.27 NET OPERATING INCOME $517,412 OVERALL RATE 9.61% TYPE OF PURCHASER Private Investor COMMENTS The overall rate of 10.10 percent has been adjusted down by 50 basis points since the sales contract is pre-construction. The major tenants are Winn Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. Anchor income is 79.41 percent of gross income. (793) 14 ADDENDA o Decatur County Demographics o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 15 USA COUNTIES 1996 Geographic Area: Decatur, GA (13087) Table: GENERAL PROFILE - -------------------------------------------------------------------------------- POPULATION AND HOUSING (Bureau of the Census) Total resident population: 1995 ...................................................... 26,390 Percent 65 years and over ............................... 12.9 1990 ...................................................... 25,517 1980 ...................................................... 25,495 Occupied housing units, 1990 ................................ 8,962 Percent owner occupied .................................... 72.0 BIRTHS AND DEATHS (National Center for Health Statistics) Births, 1993 ................................................ 428 Per 1,000 resident population ............................. 16.4 Percent to mothers under 20 years of age .................. 27.6 Deaths, 1993 ................................................ 282 Per 1,000 resident population ............................. 10.8 Infant deaths per 1,000 live births, 1993 ................... 9.3 EDUCATION (Bureau of the Census) Persons 25 years and over, 1990 ............................. 15,358 Percent high school graduates ............................. 59.8 Percent college graduates ................................. 11.7 LABOR FORCE (Bureau of Labor Statistics) Civilian labor force, 1994 .................................. 11,282 Percent unemployed ........................................ 8.7 PRIVATE NONFARM ESTABLISHMENTS (Bureau of the Census) Total establishments, 1993 .................................. 582 Percent retail trade ...................................... 34.5 Percent services .......................................... 26.3 Paid employees, 1993 (pay period including March 12) ........ 7,551 Annual payroll, 1993 ($1,000) ............................... 134,391 PERSONAL INCOME (Bureau of Economic Analysis) Total personal income, 1993 ($1,000) ........................ 398,177 Per capita (dollars) ...................................... 15,299 AGRICULTURE (Bureau of the Census) Number of farms, 1992 ....................................... 342 Land in farms as percent of total land .................... 44 RETAIL TRADE (Bureau of the Census) Retail sales, 1992 ($1,000) ................................. 152,022 Per capita (dollars) ...................................... 5,879 COMMERCIAL AND SAVINGS BANKS (Fed. Deposit Insurance Corp.) Number of offices, June 30, 1994 ............................ 7 Total deposits ($1,000) ................................... 154,405 SOCIAL PROGRAMS (Social Security Administration) Total Social Security recipients, December 1993 ............. 4,935 Retired workers ........................................... 2,665 Supplementary Security Income recipients, December 1994 ..... 1,424 FEDERAL FUNDS AND GRANTS (Bureau of the Census) Total direct expenditures or obligations per capita: 1994 (dollars) ............................................ 3,732 1990 (dollars) ............................................ 2,813 - -------------------------------------------------------------------------------- (NA) Not available. (D) Avoid disclosure of confidential information. (X) Not applicable. (S) Does not meet publication standards. (Z) Value > 0 but < half unit of measure shown. NOTE: 0 data may indicate geographic/data footnotes. Source: U.S. Bureau of the Census, USA Counties 1996 CD-ROM. [GRAPHIC OMITTED] Comparable Rentals Map [GRAPHIC OMITTED] Improved Sales Map [GRAPHIC OMITTED] Site Plan EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: SHOTWELL SQUARE 1614 WEST SHOTWELL STREET BAINBRIDGE, GA Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ GOODWILL INDUSTRIES GOODWILL INDUSTRIES-BIG BEND 685-20 6,600 10/01/96 09/30/99 3.10 09/01/93 20,475.00 3.25 09/01/94 21,450.00 3.10 09/01/95 20,475.00 5.25 10/01/96 34,650.00 - ------------------------------------------------------------------------------------------------------------------------ TURNER RENTAL INC. TURNER RENTAL INC. 685-30 3,000 08/01/92 07/31/98 4.25 08/01/92 12,750.00 4.35 08/01/95 13,050.00 4.45 08/01/96 13,350.00 4.55 08/01/97 13,650.00 - ------------------------------------------------------------------------------------------------------------------------ TURNER FINANCE COMPANY INC. TURNER FINANCE COMPANY INC. 685-40 1,600 08/01/92 07/31/98 4.25 08/01/92 6,800.04 4.35 08/01/95 6,960.00 4.45 08/01/96 7,119.96 4.55 08/01/97 7,280.04 - ------------------------------------------------------------------------------------------------------------------------ HARVEY'S SUPERMARKET #30 J. H. HARVEY COMPANY 685-50 22,197 07/01/80 06/30/00 0.00 0.00 3.44 07/01/80 76,356.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ HARVEY'S SUPERMARKET #30 J. H. HARVEY COMPANY 685-50 22,197 07/01/80 06/30/00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ DOLLAR GENERAL #3323 DOLGENCORP INC. 685-60 8,640 10/01/95 09/30/98 2.99 11/01/95 25,800.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ GOODWILL INDUSTRIES GOODWILL INDUSTRIES-BIG BEND Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------ TURNER RENTAL INC. TURNER RENTAL INC. None 0 None 0 None 0 08/01/98 07/31/01 0.00 0.00 0 08/01/95 07/31/98 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------ TURNER FINANCE COMPANY INC. TURNER FINANCE COMPANY INC. None 0 None 0 None 0 08/01/95 07/31/98 0.00 0.00 0 08/01/98 07/31/01 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------ HARVEY'S SUPERMARKET #30 J. H. HARVEY COMPANY PSR 1981 None 0 Fixed 0 07/01/00 06/30/05 3.44 1.00 7,635,600 07/01/05 06/30/10 3.44 1.00 0 07/01/10 06/30/15 3.44 1.00 0 07/01/15 06/30/20 3.44 1.00 0 - ------------------------------------------------------------------------------------------------------------------------ HARVEY'S SUPERMARKET #30 J. H. HARVEY COMPANY PSR 1981 None 0 Fixed 0 07/01/20 06/30/25 3.44 1.00 0 - ------------------------------------------------------------------------------------------------------------------------ DOLLAR GENERAL #3323 DOLGENCORP INC. Full 0 Full 0 Full 0 10/01/98 09/30/01 3.13 3.00 860,000 Y 10/01/01 09/30/04 3.26 3.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 42,037 Current Annual Base Rent 157,275.96 Available. 0 Total..... 42,037
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Shotwell Street Looking East [GRAPHIC OMITTED] Shotwell Street Looking West [GRAPHIC OMITTED] Subject Front View Looking From Shotwell Street [GRAPHIC OMITTED] Subject Front View Looking From Inside The Parking Lot [GRAPHIC OMITTED] Subject Front View Looking From Inside The Parking Lot [GRAPHIC OMITTED] Subject Front View Looking From Inside The Parking Lot [GRAPHIC OMITTED] Subject Front And Side View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View [GRAPHIC OMITTED] Subject Rear View This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study of: ST. GEORGE PLAZA 5974 Jim Bilton Boulevard St. George, Dorchester County, South Carolina Prepared by: O. Marshall Dodds, MAI Date of Market Study: May 14, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] May 14, 1997 Mr. Steven R. Maeglin Morgan Stanley & Co., Inc. 1585 Broadway New York, New York 10036 Re: Market Study St. George Plaza 5974 Jim Bilton Boulevard St. George, Dorchester County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 14, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The subject property consists of a neighborhood shopping center that contains 53,211 square feet of leasable area. The center was constructed in 1982. The anchor tenants are Food Lion, Revco and Family Dollar. The U.S. Postal Service occupies 3,250 square feet in this center. The center is 77.81% occupied. At this time, Food Lion is expanding into the Family Dollar Store as the owners have relocated Family Dollar. In addition to the expanded store, a new facade will be placed on the front of the building and the parking lot will be repaved and restriped. These improvements are expected to be completed by July 1, 1997. If additional information is needed regarding the renovation and expansion, please contact the owners. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds --------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY ================================================================================ Regional Perspective Dorchester County, located in the southeastern section of South Carolina, is part of the Charleston metropolitan statistical area which also comprises Charleston and Berkley Counties. The total population of the region is 506,875 people according to the 1990 Census. St. George, the county seat is located in the northern portion of the county. It is thought that St. George is not part of the Charleston metropolitan area, since the distance between Charleston and St. George is 50 miles. Dorchester County is the second fastest growing county in the state, but most of this growth is in the southern portion of the county around Summerville and Charleston and it is not around St. George which is considered a small rural city in South Carolina. I-95 is located approximately 3 miles north of the downtown area of St. George while I-26 is located approximately 15 miles east of St. George. U.S. Highway #78 runs through St. George and intersects with I-95 and U.S. Highway #15 runs through St. George and intersects with I-26. The population of Dorcheester County in 1994 was 80,887 while the population of St. George in 1994 was 2,635. The unemployment rate for Dorchester County as of March, 1997 was 4.3 percent while the statewide rate was 5.5%. Neighborhood and Site The subject neighborhood is located around the intersection of I-95 and U.S. Highway #78. The development around this intersection began approximately 25 years ago. There is a Holiday Inn Motel as well as four Budget Motels. Hardees and McDonald's have fast food restaurants and there is a Western Sizzlin Restaurant. The St. George Plaza which is a neighborhood shopping center is located around this intersection. Several convenient stores/self-service gasoline stations are located along U.S. Highway #78. Jim Bilton, an automobile dealership (Ford-Lincoln-Mercury), is located on U.S. Highway #78 in the neighborhood. The makeup of the downtown area of Dorchester is older commercial buildings. There is a Piggly Wiggly store located in the downtown area. The Dorchester County Courthouse is also located in the downtown area. Physical features are as follows: 1. Size 8.33 acres or 462,855 SF 2. Identity 5974 Jim Bilton Boulevard 3. Shape Irregular 4. Topography Generally level and on street grade with Jim Bilton Blvd. 5. Accessability Good 6. Utilities Municipal 1 Physical Description Building features are as follows: 1. Size (net) 53,211 SF 2. Layout & Design One story - food store - drug store - variety store - six shops - two kiosks 3. Parking Spaces 281 spaces 5.28 spaces per 1,000 square feet of net area 4. Construction Brick and glass front with concrete block on side and rear and metal seam roof Market Position and Marketability Conclusions The subject property is located in St. George, South Carolina at the intersection of I-95 and US Highway #78. The City of Orangeburg is located approximately 32 miles northwest of St. George and the City of Summerville is located approximately 30 miles southeast of St. George. The only other food market in St. George is a Piggly Wiggly store that is located in the downtown area. There are several convenience markets located throughout the St. George area, but subject property is the only neighborhood shopping center. The rental comparables that have been used are located in Orangeburg and these are the only rental comparables available to subject property. These are based on the tenant mix and strength of the income stream. These comparables and subject property are similar in these respects. The rental rates for subject are within the range of these comparables. The shops for subject property are renting from $6.00 per square foot to $7.50 per square foot. The US Postal Service has been shown as one of the smaller shops since it contains 3,250 square feet. The rental rates for the anchor tenants range from $4.03 per square foot for the Family Dollar store to $5.50 per square foot for the Revco store. The rental rate for the Food Lion store is at $4.25 per square foot. The Food Lion store is being expanded at this time as the Family Dollar store has been relocated. A new facade will be placed on the front of the store and the parking lot will be repaved and restriped. Trends The subject property is located around the intersection of I-95 and US Highway #78 in St. George. The development around this intersection began approximately 25 years ago and has been rather active during the last seven years. There are five motels around this intersection including a Holiday Inn which was constructed in 1978. The St. George Plaza was constructed in 1982. The newer motels have been constructed during the past three years. There are convenience markets/self-service gasoline stations and fast food restaurants. It is thought that there will be some growth in the future, but it will be steady. The neighborhood is thought to be stable at this time. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A. PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name St. George Plaza Chestnut Square Grove Park Food Lion Plaza ------------------------- ------------------------ ---------------------- ---------------------- Chestnut Street at Ellis Chestnut Street at St. St. Mathews Rd. At b. Street 5974 Jim Bilton Blvd. Avenue Mathews Rd. Chestnut St. ------------------------- ------------------------ ---------------------- ---------------------- c. City St. George, SC Orangeburg, SC Orangeburg, SC Orangeburg, SC ------------------------- ------------------------ ---------------------- ---------------------- d. Distance from subject N/A 3 miles 3 miles 3 miles ------------------------- ------------------------ ---------------------- ---------------------- e. Contact Edens & Avant, Inc. McDaniel Leasing Co. Windsor-Aughtry Shopping Center Group ------------------------- ------------------------ ---------------------- ---------------------- f. Phone 803-779-4420 864-576-4660 864-271-9855 954-492-2644 ------------------------- ------------------------ ---------------------- ---------------------- 2. Attributes a. Year built 1982 1981 1985 1983 ------------------------- ------------------------ ---------------------- ---------------------- b. Net sq. Ft. 53,211 60,000 60,000 40,000 ------------------------- ------------------------ ---------------------- ---------------------- c. # building 1 1 1 1 ------------------------- ------------------------ ---------------------- ---------------------- d. #stories 1 1 1 1 ------------------------- ------------------------ ---------------------- ---------------------- e. Avg. Floor plate size (SF), if office N/A N/A N/A N/A ------------------------- ------------------------ ---------------------- ---------------------- f. # elevators N/A N/A N/A N/A ------------------------- ------------------------ ---------------------- ---------------------- g. Parking Adequate Adequate Adequate Adequate ------------------------- ------------------------ ---------------------- ---------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ------------------------- ------------------------ ---------------------- ---------------------- i. Vacancy % 22.19% 12.0% 10.0% 0% ------------------------- ------------------------ ---------------------- ---------------------- j. Anchors, if Retail Food Lion, Revco, Family Dollar Revco, Family Dollar Bi-Lo Food Lion, Moovies ------------------------- ------------------------ ---------------------- ----------------------
Comments: These comparable properties are located in Orangeburg but are considered to be similar to subject property as the tenant mix and income stream for subject and these comparables are similar. While the location of these comparables would be considered as slightly superior, it is thought that overall the properties are similar. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space $4.03 - $5.50 N/A N/A N/A ------------------------ -------------------- ------------------ ------------------ b. Shop Space $6.00 - $7.50 $5.00 - $7.50 $6.00 - $12.00 $7.00 ------------------------ -------------------- ------------------ ------------------ 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net ------------------------ -------------------- ------------------ ------------------ 3. Rent Concessions None None None None ------------------------ -------------------- ------------------ ------------------ 4. Effective Rent $6.00 - $7.50 $5.00 - $7.50 $6.00 - $12.00 $7.00 ------------------------ -------------------- ------------------ ------------------ 5. TI Allowance None None None None ------------------------ -------------------- ------------------ ------------------ 6. Expense Stop None None None None ------------------------ -------------------- ------------------ ------------------ 7. Length of Lease Term 3 - 5 years (shop) 3 -5 years (shop) 3 - 5 years (shop) 3-5 years (shop) ------------------------ -------------------- ------------------ ------------------ 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% 5.00% - 7.00% ------------------------ -------------------- ------------------ ------------------ 9. Percentage Rent Food Lion, Revco, Family (per lease terms) Dollar, Sand D. Fashions Revco, Family Dollar Bi-Lo Food Lion, Moovies ------------------------ -------------------- ------------------ ------------------ 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A ------------------------ -------------------- ------------------ ------------------ 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A ------------------------ -------------------- ------------------ ------------------ C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Similar Similar Similar ------------------------ -------------------- ------------------ ------------------
D. EXPLAIN RANKING/COMMENTS: The comparables have been ranked as similar to subject property. The income stream and tenant mix of these properties are very similar to subject property. Subject property is experiencing a high vacancy rate at this time, but after the completion of the renovation program and the expansion of Food Lion, it is thought that the leasing agents will be able to secure tenants for these vacant stores. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Chestnut Square Location: Chestnut Street at Ellis Avenue Orangeburg, SC Year Built: 1981 Total Size: 60,000 SF Vacant Space: 7,200 SF Vacancy Rate: 12.0% Rental Range: $5.00 - $7.50 per square foot Tenant Expenses: Triple Net Remarks: The major tenants are Revco Drugs and Family Dollar Stores. Bi-Lo was in this center when it was built. Other tenants are occupying small stores. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Grove Park Shopping Center Location: Chestnut Street & St. Mathews Road Orangeburg, SC Year Built: 1985 Total Size: 60,000 SF Vacant Space: 6,000 SF Vacancy Rate: 10.0% Rental Range: $6.00 - $12.00 per square foot Tenant Expenses: Triple Net Remarks: The major tenant is Bi-Lo Stores. Other tenants include Andre's Jewelers, Grove Park Pharmacy, Blockbuster, House of Pizza. 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Food Lion Plaza Location: St. Mathews Road at Chestnut Street Orangeburg, SC Year Built: 1983 Total Size: 40,000 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $7.00 per square foot Tenant Expenses: Triple Net Remarks: This is an older center with Food Lion as the major tenant. Moovies now occupies the space formerly occupied by Rite-Aid. 7 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name St. George Plaza St. Andrews Crossing Eastgate Shop. Center ------------------------- ------------------------ ------------------------ b. Street Address NWC Whiskey Rd. & 5974 Jim Bilton Blvd. 817 St. Andrews Road Eastgate Dr. ------------------------- ------------------------ ------------------------ c. City St. George, SC Columbia, SC Aiken, SC ------------------------- ------------------------ ------------------------ d. Distance from Subject N/A 8 miles 56 miles ------------------------- ------------------------ ------------------------ 2. Attributes a. Year Built 1982 1994 1995 ------------------------- ------------------------ ------------------------ b. Net sq. feet 53,211 66,910 SF 75,716 SF ------------------------- ------------------------ ------------------------ c. # Buildings 1 1 1 ------------------------- ------------------------ ------------------------ d. # of Stories 1 1 1 ------------------------- ------------------------ ------------------------ e. Vacancy % 22.19% 0% 5.00% ------------------------- ------------------------ ------------------------ 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 ------------------------- ------------------------ ------------------------ b. Sales Price PSF N/A $97.89 $88.16 ------------------------- ------------------------ ------------------------ c. Date N/A 05-25-94 09-28-95 ------------------------- ------------------------ ------------------------ d. NOI at time of Sale N/A $634,797 $657,896 ------------------------- ------------------------ ------------------------ e. Cap. Rate N/A 9.69% 9.86% ------------------------- ------------------------ ------------------------ 4. Rank Relative to Subject (inferior, similar, superior) N/A Superior Similar ------------------------- ------------------------ ------------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name One Norman Center Paw Creek Commons ----------------- ----------------------- b. Street Address 19706 One Norman E/S Little Rock Rd. at Blvd. Freedom Dr. ----------------- ----------------------- c. City Cornelius, NC Charlotte, NC ----------------- ----------------------- d. Distance from Subject 100 miles 92 miles ----------------- ----------------------- 2. Attributes a. Year Built 1993 1996 ----------------- ----------------------- b. Net sq. feet 54,185 SF 66,050 ----------------- ----------------------- c. # Buildings 1 1 ----------------- ----------------------- d. # of Stories 1 1 ----------------- ----------------------- e. Vacancy % 0% 2.73% ----------------- ----------------------- 3. Sales Information a. Sales Price $4,650,000 $5,384,000 ----------------- ----------------------- b. Sales Price PSF $85.82 $77.52 ----------------- ----------------------- c. Date 10-12-95 03-25-97 ----------------- ----------------------- d. NOI at time of Sale $450,188 $517,412 ----------------- ----------------------- e. Cap. Rate 9.68% 9.61% ----------------- ----------------------- 4. Rank Relative to Subject (inferior, similar, superior) Similar Superior ----------------- ----------------------- Explain Ranking/Comments: Comparables #1 and #4 are ranked superior to subject. The reason for this is because of the location and the rental rates for the shops are higher than the rental rates for the shops in subject property. However, the tenant mix and income stream of the subject and these comparables are similar. 8 COMPARABLE IMPROVED SALES Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS 6012 -1 -1 NAME St. Andrews Crossing LOCATION St. Andrews Road and I-26, Columbia, SC GRANTOR Hayley-Redd, L.P. GRANTEE F.A.C. Properties DEED REFERENCE Book 1199, Page 331 DATE May 25, 1994 SALES PRICE $6,550,000 ADJUSTED SALES PRICE $6,550,000 SIZE BUILDING 66,910 SALES PRICE PER S.F. $97.89 SIZE LAND (ACRES) 8.08 SIZE LAND (S.F.) 351,965 YEAR BUILT 1994 LAND/BUILDING RATIO 5.26 To 1 UTILITIES All available VERIFICATION Deed ZONING Commercial FINANCING Market EFFECTIVE GROSS INCOME $686,905 EGIM 9.54 NET OPERATING INCOME $634,797 OVERALL RATE 9.69% VERIFICATION Public Records TYPE OF PURCHASER Private Investor COMMENTS This was an arms length sale. This neighborhood shopping center is anchored by Kroger and is located in a good commercial area with good accessibility and fair exposure. The construction is brick veneer and concrete block. (503) 9 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] NAME Eastgate Shopping Center LOCATION Northwest Corner of Whiskey Road and Eastgate Drive, Aiken, SC GRANTOR PDG Aiken Partners, LP GRANTEE Southeast U.S. Retail, LP DATE Sep 28, 1995 SALES PRICE $6,675,000 SIZE BUILDING 75,716 SALES PRICE PER S.F. $88.16 SIZE LAND (ACRES) 8.79 SIZE LAND (S.F.) 382,892 YEAR BUILT 1995 LAND/BUILDING RATIO 5.06 To 1 UTILITIES All available VERIFICATION Public Records ZONING Commercial FINANCING Cash to seller GROSS POTENTIAL INCOME $782,704 EFFECTIVE GROSS INCOME $782,704 GROSS INCOME MULTIPLE 8.53 EGIM 8.53 NET OPERATING INCOME $657,896 OVERALL RATE 9.86% TYPE OF PURCHASER Private Investor COMMENTS Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. (643) 10 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] NAME One Norman Center LOCATION 19706 One Norman Boulevard, Cornelius, Mecklenburg County, NC GRANTOR One Norman Center, LP GRANTEE Lucky Realty DEED REFERENCE Book 8325, Page 721 DATE Oct 12, 1995 SALES PRICE $4,650,000 SIZE BUILDING 54,185 SALES PRICE PER S.F. $85.82 SIZE LAND (ACRES) 5.69 SIZE LAND (S.F.) 247,856 YEAR BUILT 1993 LAND/BUILDING RATIO 4.57 To 1 UTILITIES All Public VERIFICATION Public Records ZONING CUB-2 FINANCING Cash to Seller GROSS POTENTIAL INCOME $474,591 EFFECTIVE GROSS INCOME $474,591 GROSS INCOME MULTIPLE 9.80 EGIM 9.80 NET OPERATING INCOME $450,188 OVERALL RATE 9.68% TYPE OF PURCHASER Private Investor COMMENTS This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot. Triple net lease. (716) 11 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] TMS 59 -231 -22 ,23 pt. NAME Paw Creek Commons LOCATION East side of Little Rock Road at Freedom Drive, Charlotte, NC GRANTOR Paw Creek, LLC GRANTEE Frastacky and Associates DATE Mar 25, 1997 SALES PRICE $5,120,000 ADJUSTED SALES PRICE $5,384,000 SIZE BUILDING 66,050 SALES PRICE PER S.F. $77.52 SIZE LAND (ACRES) 9.82 SIZE LAND (S.F.) 427,759 YEAR BUILT 1996 LAND/BUILDING RATIO 6.48 To 1 UTILITIES Municipal VERIFICATION Public Records ZONING CC, Commercial Center FINANCING Cash to seller GROSS POTENTIAL INCOME $568,840 EFFECTIVE GROSS INCOME $552,054 GROSS INCOME MULTIPLE 9.00 EGIM 9.27 NET OPERATING INCOME $517,412 OVERALL RATE 9.61% TYPE OF PURCHASER Private Investor COMMENTS The overall rate of 10.10 percent has been adjusted down by 50 basis points since the sales contract is pre-construction. The major tenants are Winn Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. Anchor income is 79.41 percent of gross income. (793) 12 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 13 [GRAPHIC OMITTED] Location Map [GRAPHIC OMITTED] Location Map [GRAPHIC OMITTED] Comparable Rentals Map [GRAPHIC OMITTED] Improved Sales Map [GRAPHIC OMITTED] Site Plan Date: 04/08/97 EDENS & AVANT, INC. Retail Custom Rent Roll Property: ST. GEORGE PLAZA 5974 JIM BILTIN BLVD. ST. GEORGE, SC 29477-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- U.S. POSTAL SERVICE 603- 10 3,250 11/26/93 11/25/98 6.00 01/26/91 19,500.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- Available 603- 15 3,250 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- Available 603- 20 6,000 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- FOOD LION #0131 FOOD LION 603- 30 18,200 04/01/82 03/31/02 4.25 04/01/82 77,349.96 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- REVCO # 2548 REVCO DISCOUNT DRUG CENTER OF 603- 40 8,450 03/01/82 02/28/02 5.50 03/01/82 46,475.04 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- FAMILY DOLLAR #0518 FAMILY DOLLAR STORES OF ST. G 603- 50 8,001 10/01/84 12/31/06 3.00 01/01/92 24,000.00 4.03 04/01/97 32,215.08 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- VIDEO ISLAND OF ST.GEORGE NORMA B. LONG 603- 70 2,000 12/01/94 11/30/97 6.25 01/01/92 12,499.92 - ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- U.S. POSTAL SERVICE None 0 None 0 None 0 11/26/98 11/25/05 6.45 0.00 0 11/26/05 11/25/10 6.95 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- FOOD LION #0131 FOOD LION PRS 1983 None 0 Full 0 04/01/02 03/31/07 4.46 1.00 7,735,000 Y 04/01/07 03/31/12 4.68 1.00 0 Y 04/01/12 03/31/17 4.89 1.00 0 Y 04/01/17 03/31/22 5.10 1.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- REVCO # 2548 REVCO DISCOUNT DRUG CENTER OF PRS 1983 PRS 1988 Fixed 0 03/01/97 02/28/02 6.30 2.00 1,267,500 03/01/02 02/28/07 6.91 2.00 0 03/01/07 02/28/12 7.57 2.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- FAMILY DOLLAR #0518 FAMILY DOLLAR STORES OF ST. G PRS 1985 PRS 1984 Full 0 01/01/07 12/31/11 4.35 3.00 800,000 Y 01/01/12 12/31/16 4.70 3.00 1,073,833 Y 01/01/17 12/31/21 5.07 3.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- VIDEO ISLAND OF ST.GEORGE NORMA B. LONG PRS 1985 PRS 1985 Full 0 0.00 0.00 0
Date: 04/08/97 EDENS & AVANT, INC. Retail Custom Rent Roll Property: ST. GEORGE PLAZA 5974 JIM BILTIN BLVD. ST. GEORGE, SC 29477-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- VIDEO ISLAND OF ST.GEORGE NORMA B. LONG 603- 70 2,000 12/01/94 11/30/97 6.50 12/01/93 12,999.96 6.75 12/01/95 13,500.00 7.00 12/01/96 13,999.92 - ------------------------------------------------------------------------------------------------------------------------- Available 603- 80 2,560 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- SAND D FASHIONS YONG O. MCGHEE 603- 90 1,500 07/01/96 06/30/99 7.50 07/01/96 11,250.00 - ------------------------------------------------------------------------------------------------------------------------- FIRST NATIONAL BANK FIRST NATIONAL BANK OF ORANGE 603- 100 0 K 09/01/82 08/31/02 0.00 09/01/82 5,400.00 0.00 09/01/85 6,600.00 - ------------------------------------------------------------------------------------------------------------------------- TROPICAL SNO KEITH WALTERS 603- 500 0 K 05/10/96 09/09/96 0.00 05/01/94 3,600.00 0.00 05/10/95 3,600.00 0.00 05/10/96 3,600.00 - ------------------------------------------------------------------------------------------------------------------------- SQUARE FEET: Occupied.. 41,401 Current Annual Base Rent 207,390.00 Available. 11,810 Total..... 53,211 - ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- VIDEO ISLAND OF ST.GEORGE NORMA B. LONG PRS 1985 PRS 1985 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- SAND D FASHIONS YONG O. MCGHEE Full 0 Full 0 Full 0 0.00 5.00 225,000 Y - ----------------------------------------------------------------------------------------------------------------------------------- FIRST NATIONAL BANK FIRST NATIONAL BANK OF ORANGE Full 0 Full 0 None 0 09/01/02 08/31/07 0.00 0.00 0 09/01/07 08/31/12 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- TROPICAL SNO KEITH WALTERS None 0 None 0 None 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Memorial Drive (Route #78) Looking East [GRAPHIC OMITTED] Memorial Drive (Route #78) Looking West [GRAPHIC OMITTED] Entrance Way To Subject From Memorial Drive [GRAPHIC OMITTED] Entrance Way To Subject From Memorial Drive [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Front View [GRAPHIC OMITTED] Subject - Side View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Rear View This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study of: TACO CID RESTAURANT 1416 Charleston Highway West Columbia, Lexington County, South Carolina Prepared By: O. Marshall Dodds, MAI Date of Market Study: May 19, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] May 20, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Taco Cid 1416 Charleston Highway West Columbia, Lexington County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 19,1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a free-standing Mexican restaurant that contains 2,090 square feet of leasable area. The building was originally constructed in 1979-80 for the present occupant. The lease began March 1, 1980 and expires on February 28, 2000. The annual rental is $21,600. The original lease term was for 20 years with two, five year renewal periods. There is a percentage clause in the lease with the guaranteed rent versus six percent of gross sales. The landlord had a cap of $75,000 for the construction costs of the building and the tenant paid any costs over and above $75,000. This is a triple net lease. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds --------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) OMD:mm EXECUTIVE SUMMARY ================================================================================ Regional Perspective Columbia is the state capital with the State House being located in downtown Columbia. Also, the University of South Carolina Campus is located in the downtown area. Fort Jackson, which is a large U.S. Army Training Facility is located in the eastern section of the Metropolitan area. The city has numerous specialized office activities such as insurance, consulting services, advertising, marketing, printing and financial services. Government, distribution, finance and transportation are all important to Columbia, although none are preeminent. Geography also gives Columbia a strategic location in the industrial and commercial spheres. The subject property is located in Lexington County and the unemployment rate was 2.9 percent in March, 1997. The unemployment rate statewide for March was 5.3 percent. Neighborhood and Site The neighborhood is located in West Columbia along the Charleston Highway between the intersection of Knox Abbott Boulevard and Edmund Road. Commercial properties are located along the Charleston Highway in this area and includes a number of fast food restaurants such as Taco Cid, Burger King, Hardee's, Church's Fried Chicken and McDonald's. Quincy's Family Steakhouse and Ryan's are also in the neighborhood. The Piggie Park barbeque restaurant is also located along the Charleston Highway at Edmund Road. A K-Mart store was constructed in the neighborhood in 1969 and continues in operation. The Airport Square shopping center and Granby Square shopping center are located along the Charleston Highway. There is a railroad overpass which extends over the Charleston Highway in the neighborhood. Physical features are as follows: 1. Size .60 acres or 26,136 square feet 2. Identity 1416 Charleston Highway TMS #5746-03-016 3. Shape Irregular 4. Topography Generally level and on street grade with Charleston Highway 5. Accessability Good 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 2,090 square feet 2. Layout & Design 1 story restaurant building 3. Parking Spaces 28 1.34 spaces per 1,000 square feet of net area 4. Construction Concrete block with stucco built-up roof 1 Market Position and Marketability Conclusions The subject property is located in West Columbia along the Charleston Highway. This is an older area that is built up with commercial properties along Charleston Highway and older single residential properties off of the Charleston Highway. There are several restaurants that are located in the immediate area of subject property including Church's Fried Chicken, McDonald's, Burger King, Hardee's, Piggie Park BBQ, Quincy's and Ryan's. These restaurants were constructed during the early 1980's. The Piggie Park restaurant has been in the neighborhood for 30 years or more. The rental comparables are located in the Columbia metropolitan area. Comparables #1 and #4 are very similar to subject property. The size of these restaurants are also near the same size as subject property. The rental rates for these comparables range from $22.50 per square foot to $41.46 per square foot. The subject property was constructed in 1979-80. It is a free-standing restaurant just as the comparables and has been occupied by the same occupant over the years. There is good reason to assume that the renewal periods in the lease will be exercised because of the continued operation of subject and the other restaurants in the area. The rental rate for subject is $10.34 per square foot. This is lower than the rental rates of the other restaurants, but it is thought that these restaurants are superior to subject and the lease for subject was negotiated in 1979. Trends The subject property is located in West Columbia along the Charleston Highway. This is an older neighborhood and is considered to be stabilized at this time. There are a number of restaurants located along the Charleston Highway in the neighborhood. Most of the commercial lots along Charleston Highway have been developed with some type of commercial property. There are no known restaurants that are planned or that will be constructed in the neighborhood. It is thought that the stability of the neighborhood will continue to be maintained in the future. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A. PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Taco Cid Taco Bell Bojangle's ------------------------ -------------------------- ----------------------------- b. Street 1416 Charleston Hwy. 509 West Main Street N/S Harbison Boulevard ------------------------ -------------------------- ----------------------------- c. City West Columbia, SC Lexington, SC Columbia, SC ------------------------ -------------------------- ----------------------------- d. Distance from subject N/A 15 miles 10 miles ------------------------ -------------------------- ----------------------------- e. Contact Edens Avant, Inc. Edens & Avant, Inc. N/A ------------------------ -------------------------- ----------------------------- f. Phone 803-779-4420 803-779-4420 N/A ------------------------ -------------------------- ----------------------------- 2. Attributes a. Year built 1979-80 1990 1994 ------------------------ -------------------------- ----------------------------- b. Net sq. Ft. 2,090 2,268 3,200 ------------------------ -------------------------- ----------------------------- c. # building 1 1 1 ------------------------ -------------------------- ----------------------------- d. #stories 1 1 1 ------------------------ -------------------------- ----------------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A ------------------------ -------------------------- ----------------------------- f. # elevators N/A N/A N/A ------------------------ -------------------------- ----------------------------- g. Parking Adequate Adequate Adequate ------------------------ -------------------------- ----------------------------- h. Construction Type Stucco/Concrete Block Stucco/Concrete Block Brick/Concrete Block ------------------------ -------------------------- ----------------------------- i. Vacancy % 0% 0% 0% ------------------------ -------------------------- ----------------------------- j. Anchors, if Retail N/A N/A N/A ------------------------ -------------------------- -----------------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Sandy's Hot Dogs Taco Bell --------------------- ----------------------- b. Street N/S Marshall Street 1927 Broad River Rd. --------------------- ----------------------- c. City Columbia, SC Columbia, SC --------------------- ----------------------- d. Distance from subject 5 miles 5 miles --------------------- ----------------------- e. Contact Sandy's, Inc. N/A --------------------- ----------------------- f. Phone 803-254-6914 N/A --------------------- ----------------------- 2. Attributes a. Year built 1987 1980 --------------------- ----------------------- b. Net sq. Ft. 2,000 1,580 --------------------- ----------------------- c. # building 1 1 --------------------- ----------------------- d. #stories 1 1 --------------------- ----------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A --------------------- ----------------------- f. # elevators N/A N/A --------------------- ----------------------- g. Parking Adequate Adequate --------------------- ----------------------- h. Construction Type Brick/Concrete Block Stucco/Concrete Block --------------------- ----------------------- i. Vacancy % 0% 0% --------------------- ----------------------- j. Anchors, if Retail N/A N/A --------------------- ----------------------- Comments: These comparables are located throughout the metropolitan area of Columbia. Comparables #1 and #4 are very similar to subject as these are occupied by Taco Bell. Comparable #3 is located across the street from the Richland Memorial Hospital. Comparable #2 is located on Harbison Boulevard and this is a very active location with rapid growth at this time. Comparable #1 is located in Lexington on West Main Street. There is new growth occurring in this neighborhood at this time with a new free-standing Eckerds Drugs and a tract that was purchased by the Lexington County Hospital. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space $10.34 $41.46 $30.94 $22.50 $28.11 --------------- ------------------ ------------------ ------------------------ ------------------ b. Shop Space N/A N/A N/A N/A N/A --------------- ------------------ ------------------ ------------------------ ------------------ 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net Triple Net --------------- ------------------ ------------------ ------------------------ ------------------ 3. Rent Concessions None None None None None --------------- ------------------ ------------------ ------------------------ ------------------ 4. Effective Rent $10.34 $41.46 $30.94 $22.50 $28.11 --------------- ------------------ ------------------ ------------------------ ------------------ 5. TI Allowance None None None None None --------------- ------------------ ------------------ ------------------------ ------------------ 6. Expense Stop None None None None None --------------- ------------------ ------------------ ------------------------ ------------------ 7. Length of Lease Term 3 - 5 remaining 13 years remaining 14 years remaining 10 years (option period) 10 years remaining --------------- ------------------ ------------------ ------------------------ ------------------ 8. Commissions None None None None None --------------- ------------------ ------------------ ------------------------ ------------------ 9. Percentage Rent (per lease terms) 6.0% 6.5% 6.0% 5.0% 6.0% --------------- ------------------ ------------------ ------------------------ ------------------ 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A N/A --------------- ------------------ ------------------ ------------------------ ------------------ 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A N/A --------------- ------------------ ------------------ ------------------------ ------------------ C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Superior Superior Superior Superior --------------- ------------------ ------------------ ------------------------ ------------------
D. EXPLAIN RANKING/COMMENTS: These comparables have been ranked as superior to subject because of the location. These comparables are located in growth areas at this particular time, whereas, subject is located in a stabilized area. The lease for subject was exercised prior to the leases being exercised for these comparables. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] NAME: Taco Bell LOCATION: 509 West Main Street (US Highway #1/#378) Lexington, South Carolina LESSOR: Edens KW Lex. #1 Partners-89 LESSEE: Mexican Restaurant Enterprises, Inc. DATE OF LEASE: November 1, 1989 TERM OF LEASE: 20 Years BUILDING SIZE (S.F.): 2,268 YEAR BUILT: 1990 LAND AREA (S.F.): 34,004 BUILDING CONDITION: Good RENT PER SQUARE FOOT: $38.79 First Five Year Period LEASE BREAKDOWN: ANNUAL PER S.F. ----------------------- YEARS 1 - 5 $88,372 $38.97 YEARS 6 - 10 $90,603 $39.95 YEARS 11 - 15 $95,000 $41.89 YEARS 16 - 20 $102,125 $45.03 AVERAGE OVER TERM: $41.46 EXPENSES: LANDLORD: Management, Structural TENANT: All other expenses COMMENTS: Steel frame; stucco, glass and steel exterior, built up roof, tile floors, sheetrock walls, acoustic tile ceiling. Base rent of $88,372 or 6.5% of gross sales, whichever is greater. Lease includes four 5-year options at escalating rents. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] NAME: Bojangle's Restaurant LOCATION: North Side of Harbison Boulevard Columbia, SC LESSOR: William J. Branstrom, III and Ralph H. Falls, III LESSEE: Bojangle's DATE OF LEASE: March 1996 TERM OF LEASE: 15 Years BUILDING SIZE (S.F.): 3,200 YEAR BUILT: 1994 LAND AREA (S.F.): 43,913 BUILDING CONDITION: Good RENT PER SQUARE FOOT: $30.94 (Level over term) EXPENSES: LANDLORD: Management, Structural TENANT: All other expenses COMMENTS: Steel frame; stucco, glass and steel exterior, built up roof, tile floors, sheetrock walls, acoustic tile ceiling. This property was originally built for owner occupancy by Kenny Rogers Roasters, which closed during 1995. A lease was executed with Bojangles for a 15 year term to occupy the building. The rental rate includes $60,000 in equipment left in the building by Kenny Rogers and paid for by the owners. According to the agent, if the equipment had not been included, Bojangles would have had to pay for these items and the rental rate would have been reduced. The effective rental rate, excluding equipment equals $28.79 (assuming additional $60,000 cost, 15 year mortgage at 8 percent). 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] NAME: Sandy's Hot Dogs LOCATION: Marshall Street Columbia, SC LESSOR: Dolphin Associates LESSEE: Sandy's, Inc. DATE OF LEASE: 1987 TERM OF LEASE: 10 Years BUILDING SIZE (S.F.): 2,000 YEAR BUILT: 1987 BUILDING CONDITION: Average-Good RENT PER SQUARE FOOT: $21.00 EXPENSES: LANDLORD: Management TENANT: All other expenses COMMENTS: Base rent increases $3,000 to $45,000 annually in 1997 at end of lease term, which equals $22.50 per square foot. Rate increased each three year period over the five year option. The lessee expects to remain in the building through the option period. 7 Comparable Rental No. 4 ================================================================================ [GRAPHIC OMITTED] NAME: Taco Bell LOCATION: 1927 Broad River Road Columbia, South Carolina LESSOR: Restaurant Income Properties LESSEE: Mexican Restaurant Ventures LEASE DATE: July 8, 1992 LEASE TERM: 15 years, 8 months BUILDING SIZE: 1,580 SF YEAR BUILT: 1980 SITE SIZE: 14,928 SF OPTIONS TO RENEW: Four 5-year options RENTAL RATE: Rent Per Year SF ------------------ 1-5 $26.40 6-10 $28.11 11-15.7 $29.97 EXPENSES: Tenant pays all property taxes, insurance premiums, common area maintenance, and structural maintenance. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Taco Cid Hardee's Bojangles Sonic Restaurant -------------------- ------------------ ---------------------- ---------------- 7924 Garners Ferry 3036 Broad River b. Street Address 1416 Charleston Hwy. Road N/S Harbison Boulevard Road -------------------- ------------------ ---------------------- ---------------- c. City West Columbia, SC Columbia, SC Columbia, SC Columbia, SC -------------------- ------------------ ---------------------- ---------------- d. Distance from Subject N/A 8 miles 10 miles 10 miles -------------------- ------------------ ---------------------- ---------------- 2. Attributes a. Year Built 1979-80 1993 1994 1992 -------------------- ------------------ ---------------------- ---------------- b. Net sq. feet 2,090 3,550 3,200 1,187 -------------------- ------------------ ---------------------- ---------------- c. # Buildings 1 1 1 1 -------------------- ------------------ ---------------------- ---------------- d. # of Stories 1 1 1 1 -------------------- ------------------ ---------------------- ---------------- e. Vacancy % 0% 0% 0% 0% -------------------- ------------------ ---------------------- ---------------- 3. Sales Information a. Sales Price N/A $808,790 $817,500 $411,000 -------------------- ------------------ ---------------------- ---------------- b. Sales Price PSF N/A $227.83 $274.22 $346.25 -------------------- ------------------ ---------------------- ---------------- c. Date N/A 04-28-94 03-12-96 03-04-92 -------------------- ------------------ ---------------------- ---------------- d. NOI at time of Sale N/A N/A $87,513 N/A -------------------- ------------------ ---------------------- ---------------- e. Cap. Rate N/A N/A 10.71% N/A -------------------- ------------------ ---------------------- ---------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A Superior Superior Superior -------------------- ------------------ ---------------------- ----------------
Explain Ranking/Comments: These three comparables are located in the Columbia area and have been ranked superior over subject. Subject was constructed in 1979-80 and these comparables were constructed during the 1990's. The lease for subject property was also negotiated in 1979 and the leases for these comparables were negotiated in the 1990's. 9 COMPARABLE IMPROVED SALES Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS 19105-01-05 NAME Hardees LOCATION 7924 Garners Ferry Road, Columbia, SC GRANTOR Flagstar Enterprises, Inc. GRANTEE CNL Income Fund XV, Ltd. DEED REFERENCE Book D-1195, Page 121 DATE Apr 28, 1994 SALES PRICE $808,790 ADJUSTED SALES PRICE $808,790 SIZE BUILDING 3,550 SALES PRICE PER S.F. $227.83 SIZE LAND (ACRES) 1.189 SIZE LAND (S.F.) 51,793 YEAR BUILT 1993 LAND/BUILDING RATIO 14.59 To 1 UTILITIES All Municipal Available ZONING C-3, General Commercial, Richland County FINANCING Cash to seller. TYPE OF PURCHASER Private Investor COMMENTS This is the sale of a new Hardees restaurant located in the southeast section of Columbia. It was a sale-leaseback transaction with rent at market and was reportedly arms length. Equipment was not included in the sale. PROPERTY HISTORY This is part of a larger 4.3 acre parcel acquired by the above grantor as vacant land for $400,000 in 1993. The building was constructed on a portion of the parcel and the remainder is for sale. The majority of the excess land is located off of Garners Ferry Road. 10 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] NAME Bojangles LOCATION North Side of Harbison Boulevard, Columbia, SC GRANTOR 1) Columbia Roasters Land Co., Inc. 2) Columbia Roasters, Inc. GRANTEE William J. Branstrom, III and Ralph H. Falls, III DEED REFERENCE Book 3655, Pages 210 and 215 DATE March 12, 1996 SALES PRICE $717,500 ADJUSTED SALES PRICE $817,500 SIZE BUILDING 3,200 SALES PRICE PER S.F. $274.22 SIZE LAND (ACRES) 1.0081 SIZE LAND (S.F.) 43,913 YEAR BUILT 1994 LAND/BUILDING RATIO 13.72 To 1 UTILITIES Water-Sewer ZONING PUD, Commercial FINANCING Cash to seller TYPE OF PURCHASER Private Investor GROSS POTENTIAL INCOME $92,119 GROSS INCOME MULTIPLE 8.87 NET OPERATING INCOME $87,513 OVERALL RATE 10.71% COMMENTS Steel frame; stucco, glass and steel exterior, built up roof, tile floors, sheetrock walls, acoustic tile ceiling. This property was originally built for owner occupancy by Kenny Rogers Roasters, which closed during 1995. A lease was executed with Bojangles for a 15 year term to occupy the building. The cost of upfit to Bojangles is reported at $100,000, and this was added to the sales price. The total cost was $877,000, as the grantees paid an additional $60,000 for equipment, which is not included in the sales price above. The rental rate and gross potential income was adjusted downward to allow for the cost or equipment. If the equipment had not been included, Bojangles would have had to pay for these items and the rental rate would have been reduced according to the grantee agent. The actual annual rental was $99,000 annually. 11 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] TMS 6113 02 36 NAME Sonic Restaurant LOCATION 3036 Broad River Road (Near St. Andrews Road), Columbia, SC GRANTOR American Printing Industries, Inc. GRANTEE Leon Irons and Robert E. Elmerich DEED REFERENCE Book D-1076, Page 846 DATE Mar 4, 1992 SALES PRICE $411,000 ADJUSTED SALES PRICE $411,000 SIZE BUILDING 1,187 SALES PRICE PER S.F. $346.25 SIZE LAND (ACRES) 0.70 SIZE LAND (S.F.) 30,492 YEAR BUILT 1992 LAND/BUILDING RATIO 25.69 To 1 UTILITIES All Available ZONING C-3, General Commercial - Richland County FINANCING Mortgage to AT&T Financial Services for $257,655 and assignment of leases (3/11/92 Book M-1423/163). TYPE OF PURCHASER Private Investor COMMENTS The site size above includes a 4,823 square foot perpetual, non-exclusive easement to St. Andrews Road at the rear of the site. A Sonic Restaurant was constructed in 1992. Two drive-up canopies containing 1,400 square feet are not included in the above size. No details concerning lease were available. (98) 12 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 13 [GRAPHIC OMITTED] COMPARABLE RENTALS MAP [GRAPHIC OMITTED] COMPARABLE SALES MAP Date: 04/08/97 EDENS & AVANT, INC. Page 194 Retail Custom Rent Roll Property: TACO CID - KNOX ABBOTT WEST COLUMBIA, SC 29169 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- TACO CID JOHNSON ENTERPRISES, INC. 710- 10 0 03/01/80 02/28/00 0.00 03/01/80 21,600.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied.. 0 Current Annual Base Rent 21,600.00 Available. 0 Total..... 0 - ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- TACO CID JOHNSON ENTERPRISES, INC. Full 0 Full 0 Full 0 03/01/00 02/28/05 0.00 0.00 0 03/01/05 02/28/10 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Charleston Highway - Looking South [GRAPHIC OMITTED] Charleston Highway - Looking North [GRAPHIC OMITTED] Subject - Front and Side View [GRAPHIC OMITTED] Subject - Front and Side View [GRAPHIC OMITTED] Subject - Rear View [GRAPHIC OMITTED] Subject - Rear and Side View This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study of: BLOCKBUSTER - WARNER ROBBINS 1871 Watson Boulevard Warner Robbins, Houston County Georgia Prepared By: O. Marshall Dodds, MAI Date of Market Study: April 16, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] May 21, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Blockbuster - Warner Robbins 1871 Watson Boulevard Warner Robbins, Houston County, Georgia Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on April 16, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a free-standing Blockbuster video store that contains 6,400 square feet of leasable area. The store was originally constructed in 1989. The major tenant is Blockbuster Video and the subject property is 100 percent occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds ------------------------------ O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) OMD:mm EXECUTIVE SUMMARY ================================================================================ Regional Perspective Warner Robbins and Houston County are located in the center of the State of Georgia and are easily accessible to both I-75 and I-16. Macon is located approximately 20 miles north and Atlanta is located approximately 100 miles to the north. Columbus is located approximately 90 miles to the west while Savannah is located approximately 157 miles to the east. The population of Warner Robbins and Houston County has shown consistent increases over the years. The estimated population for Warner Robbins in 1990 was 43,726 with the projected population in the year of 2000 being 55,813. The population of Houston County in 1990 was 89,208 with the projected population in the year of 2000 being 108,124. The estimated population in 1995 for Houston County was 99,647. Approximately 12,409 civilians and 4,613 military personnel find employment at Robbins Air Force Base. In recent years, new industry has moved to the middle Georgia area providing job opportunities in blue collar and white collar classifications. Diverse products such as beer, glass containers, textiles, farm products and electronic components are produced by area plants. Warner Robbins is an important trade center for middle Georgia with several shopping centers and an ever-climbing retail sales figure. The Anchor Glass Container Corporation which employees 433 people is also located in Warner Robbins. The economic base of Warner Robbins is good and has continued to improve over the years. The population has continued to increase in recent years. The major impact of Warner Robbins is Robbins Air Force Base which provides the largest source of employment. All trends are favorable at this time and expected to continue. The subject property is located in Houston County where the unemployment rate was 4.6 percent in 1994. The unemployment rate statewide for 1994 was 5.2 percent. Neighborhood and Site The subject neighborhood is located around the intersection of Watson Boulevard and Houston Road which is more or less the center portion of the city. Watson Boulevard, which is the major traffic artery in the neighborhood extends from State Highway #247 on the east to US Highway #41 on the west side. This street runs in an east/west direction. The major developments in the neighborhood include several shopping centers and a number of retail/service facilities. There is a large shopping center in the neighborhood which is International Square. Several tenants in this shopping center are Gold's Gym, Macon Feed and Seed store, Coast to Coast Wireless Cable, Dollar General, Downtown Optic World, Mercer Engineering Research Center, International Beauty College and others. The Miller Hill shopping center is located east of Houston Road on Watson Boulevard. Most of the tenants in this center occupy small stores. The Houston Mall is located around the intersection of Watson Boulevard and Houston Road with the major tenant being Sears. Galleria Mall is located to the west of subject neighborhood on Watson Boulevard with the major tenant being Belk's. Food stores represented in small shopping centers along Watson Boulevard include Winn Dixie, Food Lion and similar type tenants. Several individual stores located on Watson Boulevard include Blockbuster, McDonald's, NationsBank, BP convenience market/self-service gasoline station, Video Warehouse, Big Daddy Sports, Wendy's, Auto Service Tires, Handy Hardware, Checkers, Sears Auto Center, Nationwide, Midas Mufflers and others. The neighborhood is established with commercial properties and residential properties. The stability has been maintained over the years. 1 Physical features are as follows: 1. Size 0.5 acres or 21,769 square feet 2. Identity 1871 Watson Boulevard TMS #W-49-A-23F 3. Shape Rectangular 4. Topography Level and is on street grade with Watson Boulevard 5. Accessability Good 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 6,400 square feet 2. Layout & Design 1 story retail store occupied by Blockbuster 3. Parking Spaces 31 2.06 spaces per 1,000 square feet of net area 3. Construction Brick and stucco with glass front and metal seamed roof Market Position and Marketability Conclusions The subject property is located in the retail district of the City of Warner Robbins on Watson Boulevard which is a major traffic artery. There are shopping centers and retail/service facilities that are located along Watson Boulevard. Subject property is a free-standing retail building occupied by Blockbuster. There are other video stores in the neighborhood. At the present time, subject property is operating in the first option period. The original lease was for a term of five years. There is another five year option period beginning on November 1, 1999 and expiring on October 31, 2004. The rental rate for the second option period is at $14.09 per square foot. The rental rate at the present time is at $12.25 per square foot. The rental comparables have rental rates ranging from $9.50 to $18.81 per square foot. Comparable #1 is located in Macon and this is an older area that is stabilized. Comparable #2 is located in an area in West Columbia, South Carolina that is experiencing some growth at this time. However, this neighborhood is considered to be middle aged. Comparable #3 is situated on an outparcel in a community shopping center anchored by a Wal-Mart Superstore. This is the highest rental of the three comparables and the location causes the rental rate to be high, especially with the Wal-Mart Superstore. The subject property contains 6,400 square feet and the rental rate is $12.25 per square foot. Trends The subject is located in the retail district of Warner Robbins. This area is developed with shopping centers and individual retail stores. It is thought that the neighborhood is in a stabilized period and future developments will be limited. Also, the neighborhood is practically fully developed. The economy in Warner Robbins is good at this time. All trends are favorable. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A. PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Blockbuster - Warner Robbins Blockbuster Video Moovies ------------------------ ---------------------------- ----------------------------- b. Street 1871 Watson Boulevard 3627 Mercer University Dr. Augusta Road @ Oak Dr. ------------------------ ---------------------------- ----------------------------- c. City Warner Robbins, Ga Macon, GA West Columbia, SC ------------------------ ---------------------------- ----------------------------- d. Distance from subject N/A 20 miles 175 miles ------------------------ ---------------------------- ----------------------------- e. Contact Edens Avant, Inc. N/A N/A ------------------------ ---------------------------- ----------------------------- f. Phone 803-779-4420 N/A N/A ------------------------ ---------------------------- ----------------------------- 2. Attributes a. Year built 1989 1984 1996 ------------------------ ---------------------------- ----------------------------- b. Net sq. Ft. 6,400 8,000 7,700 ------------------------ ---------------------------- ----------------------------- c. #building 1 1 1 ------------------------ ---------------------------- ----------------------------- d. #stories 1 1 1 ------------------------ ---------------------------- ----------------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A ------------------------ ---------------------------- ----------------------------- f. # elevators N/A N/A N/A ------------------------ ---------------------------- ----------------------------- g. Parking Adequate Adequate Adequate ------------------------ ---------------------------- ----------------------------- h. Construction Type Stucco/Concrete Block Stucco/Concrete Block Stucco/Concrete Block ------------------------ ---------------------------- ----------------------------- i. Vacancy % 0% 0% 0% ------------------------ ---------------------------- ----------------------------- j. Anchors, if Retail Blockbuster Video Blockbuster Video Moovies ------------------------ ---------------------------- ----------------------------- COMPARABLE 3 ------------ 1. Identification a. Name Hollywood Video ---------------------------- b. Street Outparcel, Westwood Place ---------------------------- c. City Greenwood, SC ---------------------------- d. Distance from subject 155 miles ---------------------------- e. Contact N/A ---------------------------- f. Phone N/A ---------------------------- 2. Attributes a. Year built 1996 ---------------------------- b. Net sq. Ft. 6,000 ---------------------------- c. #building 1 ---------------------------- d. #stories 1 ---------------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A ---------------------------- f. # elevators N/A ---------------------------- g. Parking Adequate ---------------------------- h. Construction Type Stucco/Concrete Block ---------------------------- i. Vacancy % 0% ---------------------------- j. Anchors, if Retail Hollywood Video ----------------------------
Comments: These rental comparables are similar to subject even thought they are located outside of Warner Robbins. Comparable #1 is located in Macon which is nearby. Comparables #2 and #3 are located in West Columbia, South Carolina and Greenwood, South Carolina. These types of properties are regional in nature and it is appropriate to use comparables throughout the region. The comparables are occupied by video stores which is the same occupant as subject. The size of these comparable is similar to that of subject. Subject is located on a major traffic artery. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Asking Rental Rate a. Anchor Space $12.25 $9.50 $12.50 ------------------------ ------------------------ ------------------------ b. Shop Space N/A N/A N/A ------------------------ ------------------------ ------------------------ 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ------------------------ ------------------------ ------------------------ 3. Rent Concessions None None None ------------------------ ------------------------ ------------------------ 4. Effective Rent $12.25 $9.50 $12.50 ------------------------ ------------------------ ------------------------ 5. TI Allowance None None None ------------------------ ------------------------ ------------------------ 6. Expense Stop None None None ------------------------ ------------------------ ------------------------ 7. Length of Lease Term 2.5 remaining 4 years remaining 10 years remaining ------------------------ ------------------------ ------------------------ 8. Commissions None None None ------------------------ ------------------------ ------------------------ 9. Percentage Rent (per lease terms) 5.0% of gross sales 5.0% of gross sales 6.0% of gross sales ------------------------ ------------------------ ------------------------ 10. Historical Annual Absorption/sq.ft. N/A N/A N/A ------------------------ ------------------------ ------------------------ 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A ------------------------ ------------------------ ------------------------ C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Inferior Similar ------------------------ ------------------------ ------------------------ COMPARABLE 3 ------------ 1. Asking Rental Rate a. Anchor Space $18.81 ------------------------ b. Shop Space N/A ------------------------ 2. Lease Type (Gross/Net) Triple Net ------------------------ 3. Rent Concessions None ------------------------ 4. Effective Rent $18.81 ------------------------ 5. TI Allowance None ------------------------ 6. Expense Stop None ------------------------ 7. Length of Lease Term 15 years remaining ------------------------ 8. Commissions None ------------------------ 9. Percentage Rent (per lease terms) None ------------------------ 10. Historical Annual Absorption/sq.ft. N/A ------------------------ 11. Annual Operating Expense psf (Including taxes) N/A ------------------------ C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) Similar ------------------------
D. EXPLAIN RANKING/COMMENTS: These comparables have been rated as similar to subject. Comparable #1 is located in an older area and the rent is lower than subject property. The highest rent is for Comparable #3 which is the Hollywood Video store. In any event, these comparables are similar to subject. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Blockbuster Video Location: 3627 Mercer University Drive Macon, GA Year Built: 1984 Total Size: 8,000 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $9.50 Tenant Expenses: Triple Net Remarks: This was an existing building that was renovated and remodeled. This is an older neighborhood that is stabilized. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Moovies Location: Augusta Road at Oak Drive West Columbia, SC Year Built: 1996 Total Size: 7,700 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $12.50 Tenant Expenses: Triple Net Remarks: The store is situated on an outparcel in the Mills Corner Shopping Center. The lease term is for ten years. 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Hollywood Video Location: Outparcel, Westwood Place Greenwood, SC Year Built: 1996 Total Size: 6,000 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $18.81 Tenant Expenses: Triple Net Remarks: This is a free-standing video store situated on an outparcel of the Westwood Place shopping center, anchored by a Wal-Mart Superstore. 7 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification Blockbuster - Warner a. Name Robbins Blockbuster Video Blockbuster Video ------------------------ ------------------------ -------------------------- 3627 Mercer University b. Street Address 1871 Watson Boulevard Drive I-385 Frontage Road ------------------------ ------------------------ -------------------------- c. City Warner Robbins, GA Macon, GA Simpsonville, SC ------------------------ ------------------------ -------------------------- d. Distance from Subject N/A 20 miles 200 miles ------------------------ ------------------------ -------------------------- 2. Attributes a. Year Built 1989 1984 1995 ------------------------ ------------------------ -------------------------- b. Net sq. feet 6,400 8,000 4,800 ------------------------ ------------------------ -------------------------- c. # Buildings 1 1 1 ------------------------ ------------------------ -------------------------- d. # of Stories 1 1 1 ------------------------ ------------------------ -------------------------- e. Vacancy % 0% 0% 0% ------------------------ ------------------------ -------------------------- 3. Sales Information a. Sales Price N/A $511,000 $605,000 ------------------------ ------------------------ -------------------------- b. Sales Price PSF N/A $63.38 $126.04 ------------------------ ------------------------ -------------------------- c. Date N/A 08-07-90 07-14-95 ------------------------ ------------------------ -------------------------- d. NOI at time of Sale N/A $68,956 $58,800 ------------------------ ------------------------ -------------------------- e. Cap. Rate N/A 13.49% 9.72% ------------------------ ------------------------ -------------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A Inferior Similar ------------------------ ------------------------ -------------------------- COMPARABLE 3 ------------ 1. Identification a. Name Hollywood Video ----------------------- Outparcel of b. Street Address Westwood Place ----------------------- c. City Greenwood, SC ----------------------- d. Distance from Subject 155 miles ----------------------- 2. Attributes a. Year Built 1996 ----------------------- b. Net sq. feet 6,000 ----------------------- c. # Buildings 1 ----------------------- d. # of Stories 1 ----------------------- e. Vacancy % 0% ----------------------- 3. Sales Information a. Sales Price $1,099,000 ----------------------- b. Sales Price PSF $183.17 ----------------------- c. Date 05-97 ----------------------- d. NOI at time of Sale $110,610 ----------------------- e. Cap. Rate 10.06% ----------------------- 4. Rank Relative to Subject (inferior, similar, superior) Similar -----------------------
Explain Ranking/Comments: These sales comparables were occupied by Blockbuster and Hollywood Video. Sale #3 is actually a contract that has not closed, but the contract is strong and is expected to close during May of 1997. Comparable #1 is located in Macon and is in an older neighborhood. Subject would be considered as being superior to this comparable. The rent is lower for this store than with subject and the other comparables. The sale occurred in 1990 and economic conditions were not as good then as they are now. 8 COMPARABLE IMPROVED SALES Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] NAME Blockbuster LOCATION 3627 Mercer University Drive, Macon, GA GRANTOR Robert E. Lee, Walter S. Lee, Ruben L. Hamrock GRANTEE Tony H. Towson DEED REFERENCE Book 1898, Page 232 DATE Aug 7, 1990 SALES PRICE $511,000 ADJUSTED SALES PRICE $511,000 SIZE BUILDING 8,000 SALES PRICE PER S.F. $63.88 SIZE LAND (ACRES) 0.79 SIZE LAND (S.F.) 34,412 YEAR BUILT 1984 LAND/BUILDING RATIO 4.30 To 1 UTILITIES All Available VERIFICATION Public Records ZONING C-2, General Commercial FINANCING Cash to Seller TYPE OF PURCHASER Private Investor EFFECTIVE GROSS INCOME $72,200 GROSS INCOME MULTIPLE 6.72 EGIM 7.08 NET OPERATING INCOME $68,956 OVERALL RATE 13.49% COMMENTS This was an existing building that was renovated. The neighborhood is an older, stabilized area. (351) 9 Comparable Sale No. 2 ================================================================================ NAME Blockbuster Video LOCATION I-385 Frontage Road, Simpsonville, SC GRANTOR Thomas and Vivian Wong GRANTEE Wachovia Bank of SC DEED REFERENCE N/A DATE Jul 14, 1995 SALES PRICE $605,000 ADJUSTED SALES PRICE $605,000 SIZE BUILDING 4,800 SALES PRICE PER S.F. $126.04 SIZE LAND (ACRES) 0.84 SIZE LAND (S.F.) 36,590 YEAR BUILT 1995 LAND/BUILDING RATIO 7.62 To 1 UTILITIES All available VERIFICATION Purchaser ZONING Commercial FINANCING At market TYPE OF PURCHASER Institution Trust Account EFFECTIVE GROSS INCOME $60,000 EGIM 10.08 NET OPERATING INCOME $58,800 OVERALL RATE 9.72% COMMENTS This is an arms length sale of a free-standing video store in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. The lease is triple net. (802) 10 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] NAME Hollywood Video LOCATION Outparcel of Westwood Place, Greenwood, SC GRANTOR Zimmer Development, Inc. GRANTEE W.D. Morris DEED REFERENCE N/A DATE Current contract SALES PRICE $1,099,000 ADJUSTED SALES PRICE $1,099,000 SIZE BUILDING 6,000 SALES PRICE PER S.F. $183.17 SIZE LAND (ACRES) 1.01 SIZE LAND (S.F.) 43,996 YEAR BUILT 1997 LAND/BUILDING RATIO 7.33 To 1 UTILITIES All available VERIFICATION Public records and seller ZONING Commercial FINANCING At market TYPE OF PURCHASER Private Investor EFFECTIVE GROSS INCOME $112,838 EGIM 9.74 NET OPERATING INCOME $110,610 OVERALL RATE 10.06% COMMENTS This is an arms length sale of a free-standing video store in a good commercial are with good accessibility and fair exposure. Construction is brick veneer/concrete block. The property is located on an outparcel of a community shopping center anchored by a Wal-Mart Superstore. (803) 11 ADDENDA o Houston County Demographics o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 12 USA COUNTIES 1996 Geographic Area: Houston, GA (13153) Table: GENERAL PROFILE - -------------------------------------------------------------------------------- POPULATION AND HOUSING (Bureau of the Census) Total resident population: 1995 ......................................................... 99,647 Percent 65 years and over .................................. 8.8 1990 ......................................................... 89,208 1980 ......................................................... 77,605 Occupied housing units, 1990 ................................... 32,433 Percent owner occupied ....................................... 65.1 BIRTHS AND DEATHS (National Center for Health Statistics) Births, 1993 ................................................... 1,409 Per 1,000 resident population ................................ 14.8 Percent to mothers under 20 years of age ..................... 15.2 Deaths, 1993 ................................................... 619 Per 1,000 resident population ................................ 6.5 Infant deaths per 1,000 live births, 1993 ...................... 9.9 EDUCATION (Bureau of the Census) Persons 25 years and over, 1990 ................................ 55,396 Percent high school graduates ................................ 79.5 Percent college graduates .................................... 16.0 LABOR FORCE (Bureau of Labor Statistics) Civilian labor force, 1994 ..................................... 45,214 Percent unemployed ........................................... 4.6 PRIVATE NONFARM ESTABLISHMENTS (Bureau of the Census) Total establishments, 1993 ..................................... 1,748 Percent retail trade ......................................... 29.1 Percent services ............................................. 38.2 Paid employees, 1993 (pay period including March 12) ........... 19,842 Annual payroll, 1993 ($1,000) .................................. 337,263 PERSONAL INCOME (Bureau of Economic Analysis) Total personal income, 1993 ($1,000) ........................... 1,601,312 Per capita (dollars) ......................................... 16,753 AGRICULTURE (Bureau of the Census) Number of farms, 1992 .......................................... 222 Land in farms as percent of total land ....................... 30 RETAIL TRADE (Bureau of the Census) Retail sales, 1992 ($1,000) .................................... 879,819 Per capita (dollars) ......................................... 9,430 COMMERCIAL AND SAVINGS BANKS (Fed. Deposit Insurance Corp.) Number of offices, June 30, 1994 ............................... 20 Total deposits ($1,000) ...................................... 504,435 SOCIAL PROGRAMS (Social Security Administration) Total Social Security recipients, December 1993 ................ 10,620 Retired workers .............................................. 5,855 Supplementary Security Income recipients, December 1994 ...... 1,984 FEDERAL FUNDS AND GRANTS (Bureau of the Census) Total direct expenditures or obligations per capita: 1994 (dollars) ............................................... 11,880 1990 (dollars) ............................................... 9,764 - -------------------------------------------------------------------------------- (NA) Not available. (D) Avoid disclosure of confidential information. (X) Not applicable. (S) Does not meet publication standards. (Z) Value > 0 but < half unit of measure shown. NOTE: 0 data may indicate geographic/data footnotes. Source: U.S. Bureau of the Census, USA Counties 1996 CD-ROM. [GRAPHIC OMITTED] COMPARABLE RENTALS MAP [GRAPHIC OMITTED] COMPARABLE SALES MAP [GRAPHIC OMITTED] PROPERTY PLAT EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: BLOCKBUSTER - WARNER ROBBINS 1871 WATSON BOULEVARD WARNER ROBBINS, GA Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------------------ BLOCKBUSTER #92571-W.R. BLOCKBUSTER #92571 671- 10 6,400 11/01/89 10/31/99 12.25 01/01/92 78,399.96 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ BLOCKBUSTER #92571-H.R. BLOCKBUSTER #92571 Full 0 Full 0 Full 0 11/01/94 10/31/99 12.25 0.00 0 11/01/99 10/31/04 14.09 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 6,400 Current Annual Base Rent 78,399.96 Available. 0 Total..... 6,400
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Watson Boulevard Looking East [GRAPHIC OMITTED] Watson Boulevard Looking West [GRAPHIC OMITTED] Subject Front View [GRAPHIC OMITTED] Subject Front And Side View [GRAPHIC OMITTED] Subject Side And Rear View This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study of: ADVANCED AUTO STORE 160 South 321 By-Pass Winnsboro, Fairfield County, South Carolina Prepared By: O. Marshall Dodds, MAI Date of Market Study: June 12, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] June 16, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Advanced Auto Store 160 South 321 By-Pass Winnsboro, Fairfield County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that formed the basis of the study was conducted by O. Marshall Dodds, MAI. The subject property and all comparable data was inspected by O. Marshall Dodds, MAI on May 15, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a free standing retail store occupied by Advanced Auto Stores. The size of the store is 7,200 square feet. The lease began on October 1, 1990 and expired on December 31, 1993. The first renewal option period has been used and the lease is in the second option period which began January 1, 1997 and expires December 31, 1999. There is one other additional two year option period that begins January 1, 2000 and ends December 31, 2002. The rental rate at the present time is $4.75 per square foot and will increase to $5.00 per square foot in the next option period. The property is 100 percent occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ O. Marshall Dodds --------------------------------- O. Marshall Dodds, MAI State Certified General Real Estate Appraiser (CG-356) OMD:mm EXECUTIVE SUMMARY ================================================================================ Regional Perspective Fairfield County is part of the Central Midlands Region, which consists of Richland, Lexington, Newberry and Fairfield Counties. Winnsboro is the county seat of Fairfield County. It covers an area of 2.68 square miles. The Town of Ridgeway is also located in Fairfield County eleven miles from Winnsboro. It encompasses a 1/2 square mile area. Interstate 77 bisects Fairfield County and Interstate 20 and 26 are within 20 to 30 minutes of Winnsboro. All three interstates are connected via SC Highway #34. US Highways running through the county include #321 and #21. Major employers in Fairfield County are as follows:
No. Name & Location Year Established Product No. Employees 1. Mack Trucks, Inc. 1987 Heavy duty truck US Hwy. #321 @ SC Hwy. #34 chasis 780 2. The Standard Products Co. 1978 Automobile Twin US Hwy. #321 @ SC Hwy. 34 Engine Molded Parts 451 3. Uniroyal Goodrich 1917 Tire cord-rayon, Co-Tex Division nylon, polyester, Maple Street steel 299 4. Manhattan Shirt Company 1962 Dress & sports 176 US Hwy. #321 By-Pass shirts, sports knits, ladies apparel 5. Rite Aid 1980 Distribution warehouse 168 SC Hwy. #34 6. Fuji Copian Corporation 1989 Typewriter cassettes, 171 SC Hwy. #34 computer printer cassettes, computer printer ribbons
The subject property is located in Fairfield County and the unemployment rate was 9.8 percent in February, 1997. The unemployment rate statewide for February was 5.5 percent. The population of Fairfield County for 1995 was 22,504 with 13.7 percent being age 65 or older and the population for the Town of Winnsboro was 3,475. Neighborhood and Site The neighborhood is generally the area located in the Town of Winnsboro and outside of the Town of Winnsboro extending from the intersection of US Highway #321 By-Pass with US Highway #321 Business on the south side of town to the intersection of US Highway #321 By-Pass and US Highway #321 Business on the north side of town. Major developments are located along US Highway #321 By-Pass including Fairfield Central High School, Fairfield Middle School and the new Fairfield Intermediate School. The Fairfield Memorial Hospital is located at the intersection of Washington Street and the By-Pass. Manhattan Shirt Company has been in the neighborhood for many years. There is also an Advanced Auto Parts located at the intersection of Calhoun Street and US Highway #321. The Mack Truck plant is located approximately one mile south of the southern neighborhood boundary and there are other manufacturing concerns and employment centers located in relatively close proximity. Multi-family apartments in the area include the Lamplighter Apartments, Castlewood Apartments, Laurelwood I & II, Winnsboro Arms, Winnsboro Apartments and Winnfield West. The downtown area is typical for most small towns. Developments include banks, such as Wachovia and First Union, as well as Belk, Super 10, Winnsboro Furniture and Napa Auto Parts. The Fairfield County Courthouse, Town Hall and Chamber of Commerce are all located in the downtown area. The neighborhood is established and some growth has been occurring. 1 Site Description Physical features for Advanced Auto Parts are as follows: 1. Size 1.69 acres or 73,616 square feet 2. Identity NEC of US Highway #321 By-Pass and Calhoun St. 3. Shape irregular 4. Topography level, on street grade 5. Accessability good from either direction 6. Utilities municipal Physical Description Building features for Advanced Auto Parts are as follows: 1. Size (net) 7,200 square feet 2. Layout & Design 1 story retail store 3. Construction brick and glass front with concrete block on side and rear and metal seamed roof Market Position and Marketability Conclusions The subject property is located on the South 321 By-Pass at Calhoun Street near the intersection with Moultrie Street. The Fairfield Square Shopping Center is located in the same block with subject and the Heilig Meyers furniture store is located in the next block from subject. There are several fast food restaurants such as Kentucky Fried Chicken, McDonald's and Hardee's that are located in the immediate neighborhood. Subject is the only free standing auto parts store that is located in the immediate neighborhood. There are other auto parts stores that are located along Main Street in the downtown area of Winnsboro, but these stores are located in older buildings in the older retail district. The comparable rentals selected are from the Columbia Metropolitan Area. The Advanced Auto Store located at 6432 Two Notch Road is in the Arcadia Plaza Shopping Center. The rental rate for this store is $6.75 per square foot and the tenant is operating in the first renewal option. The New York Carpet World Store is located at 800 Bush River Road. This store contains 12,000 square feet and the rental rate is $9.00 per square foot. This lease was originally for ten years and there are approximately four years remaining. The Advanced Auto Store located at 7613 Garners Ferry Road is new and was completed in December of 1996. The size of this store is 5,500 square feet and the rental rate is $11.09 per square foot. These comparable rentals were taken from the Columbia Metropolitan Area which is south of the subject neighborhood. The subject property contains 7,200 square feet and was constructed in 1989. The rental rate is at $4.75 per square foot. The subject property is located in the same block as the Fairfield Square. The rental rates for the comparables are higher than subject, but it is thought that rates are generally higher in Columbia than in Winnsboro. Trends The subject property is located in the Town of Winnsboro. The neighborhood is established with the Fairfield Square Shopping Center, several fast food restaurants, the hospital, several retail stores and a new Wal-Mart Store is under construction that will be located on the By-Pass. All trends are favorable at this time and expected to continue. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A. PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Advanced Auto Advanced Auto New York Carpet World Advanced Auto --------------------- --------------------- ----------------------------- ---------------------- b. Street 160 S. 321 By-Pass 6432 Two Notch Road 800 Bush River Road 7613 Garners Ferry Rd. --------------------- --------------------- ----------------------------- ---------------------- c. City Winnsboro, SC Columbia, SC Columbia, SC Columbia, SC --------------------- --------------------- ----------------------------- ---------------------- d. Distance from subject N/A 25 miles 25 miles 25 miles --------------------- --------------------- ----------------------------- ---------------------- e. Contact Edens & Avant, Inc. Edens & Avant, Inc. Simmerville Investment Prop. Phil McCorkle --------------------- --------------------- ----------------------------- ---------------------- f. Phone (803) 779-4420 (803) 779-4420 (704) 364-0093 (803) 376-2000 --------------------- --------------------- ----------------------------- ---------------------- 2. Attributes a. Year built 1989 1991 1991 1996 --------------------- --------------------- ----------------------------- ---------------------- b. Net sq. Ft. 7,200 3,375 12,000 5,500 --------------------- --------------------- ----------------------------- ---------------------- c. # building 1 1 1 1 --------------------- --------------------- ----------------------------- ---------------------- d. # stories 1 1 1 1 --------------------- --------------------- ----------------------------- ---------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A N/A --------------------- --------------------- ----------------------------- ---------------------- f. # elevators N/A N/A N/A N/A --------------------- --------------------- ----------------------------- ---------------------- g. Parking Adequate Adequate Adequate Adequate --------------------- --------------------- ----------------------------- ---------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block --------------------- --------------------- ----------------------------- ---------------------- I. Vacancy % 0% 0% 0% 0% --------------------- --------------------- ----------------------------- ---------------------- j. Anchors, if Retail Advanced Auto Advanced Auto New York Carpet World Advanced Auto --------------------- --------------------- ----------------------------- ----------------------
Comments: These rental comparables are located in Columbia, South Carolina which is approximately 25 miles south of subject property. The reason for using these comparables is because they are more similar to subject than the retail stores in Winnsboro. The other auto parts stores in Winnsboro are located in the older retail stores in the downtown area of Winnsboro and are not considered to be comparable. Comparables #1 and #3 are Advanced Auto stores while Comparable #2 is a New York Carpet World Store. The lease in Comparable #1 was negotiated in 1991 while the lease in Comparable #3 was negotiated in 1996. The size in Comparable #1 is smaller than subject and Comparable #3 is also smaller. Comparable #2 is a larger store. PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space $4.75 $6.75 $9.00 $11.09 ------------------ -------------------- -------------------- ------------------- b. Shop Space N/A N/A N/A N/A ------------------ -------------------- -------------------- ------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net ------------------ -------------------- -------------------- ------------------- 3. Rent Concessions None None None None ------------------ -------------------- -------------------- ------------------- 4. Effective Rent $4.75 $6.75 $9.00 $11.09 ------------------ -------------------- -------------------- ------------------- 5. TI Allowance None None None None ------------------ -------------------- -------------------- ------------------- 6. Expense Stop None None None None ------------------ -------------------- -------------------- ------------------- 7. Length of Lease Term 1.5 years 3 years 4 years 10 years ------------------ -------------------- -------------------- ------------------- 8. Commissions 5.00% - 7.00% 5.00% to 7.00% 5.00% - 7.00% 5.00% to 7.00% ------------------ -------------------- -------------------- ------------------- 9. Percentage Rent (per lease terms) None None None None ------------------ -------------------- -------------------- ------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A ------------------ -------------------- -------------------- ------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A ------------------ -------------------- -------------------- ------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Similar Similar Superior ------------------ -------------------- -------------------- -------------------
D. EXPLAIN RANKING/COMMENTS: Subject property is considered to be similar to Comparables #1 and #2 and Comparable #3 is considered to be superior. The reason for Comparable #3 being superior is that the building was completed in 1996 and the lease was negotiated in 1996 at a higher rental rate than subject. Comparable #1 is located on Two Notch Road and is an in-line store with a strip shopping center. This store does have a higher rental rate than subject. Comparable #2 is a free standing store and is a larger store than subject. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Advanced Auto Location: 6432 Two Notch Road Columbia, SC Year Built: 1991 Total Size: 3,375 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $6.75 Tenant Expenses: Triple Net Remarks: This store is located on Two Notch Road in Columbia, SC. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: New York Carpet World Location: 800 Bush River Road Columbia, SC Year Built: 1991 Total Size: 12,000 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $9.00 Tenant Expenses: Triple Net Remarks: This store is located in Columbia, SC. 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Advanced Auto Location: 7613 Garners Ferry Road Columbia, SC Year Built: 1996 Total Size: 5,500 SF Vacant Space: None Vacancy Rate: 0% Rental Range: $11.09 Tenant Expenses: Triple Net Remarks: The tenant is Advanced Auto and this store was completed in 1996. 7 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Advanced Auto Alpha Graphic Building Heilig Meyers Furniture Store New York Carpet World -------------------- ----------------------- ----------------------------- --------------------- b. Street Address 160 S. 321 By-Pass 1415 Gervais Street 100 Greystone Boulevard 800 Bush River Road -------------------- ----------------------- ----------------------------- --------------------- c. City Winnsboro, SC Columbia, SC Columbia, SC Columbia, SC -------------------- ----------------------- ----------------------------- --------------------- d. Distance from Subject N/A 25 miles 25 miles 25 miles -------------------- ----------------------- ----------------------------- --------------------- 2. Attributes a. Year Built 1989 1949, Renovated 1994 1991 1991 -------------------- ----------------------- ----------------------------- --------------------- b. Net sq. feet 7,200 SF 4,399 SF 26,400 SF 12,000 SF -------------------- ----------------------- ----------------------------- --------------------- c. # Buildings 1 1 1 1 -------------------- ----------------------- ----------------------------- --------------------- d. # of Stories 1 1 1 1 -------------------- ----------------------- ----------------------------- --------------------- e. Vacancy % 0% 0% 0% 0% -------------------- ----------------------- ----------------------------- --------------------- 3. Sales Information a. Sales Price N/A $390,005 $1,130,000 $907,000 -------------------- ----------------------- ----------------------------- --------------------- b. Sales Price PSF N/A $88.66 $42.80 $75.58 -------------------- ----------------------- ----------------------------- --------------------- c. Date N/A 11/2/94 8/26/91 11/17/92 -------------------- ----------------------- ----------------------------- --------------------- d. NOI at time of Sale N/A $39,061 $115,120 $100,560 -------------------- ----------------------- ----------------------------- --------------------- e. Cap. Rate N/A 10.02% 10.20% 11.09% -------------------- ----------------------- ----------------------------- --------------------- 4. Rank Relative to Subject inferior, similar, superior) N/A Similar Similar Similar -------------------- ----------------------- ----------------------------- ---------------------
COMPARABLE 4 ------------ 1. Identification a. Name Advanced Auto ------------------------ b. Street Address 7613 Garners Ferry Rd. ------------------------ c. City Columbia, SC ------------------------ d. Distance from Subject 25 miles ------------------------ 2. Attributes a. Year Built 1996 ------------------------ b. Net sq. feet 5,500 SF ------------------------ c. # Buildings 1 ------------------------ d. # of Stories 1 ------------------------ e. Vacancy % 0% ------------------------ 3. Sales Information a. Sales Price $570,000 ------------------------ b. Sales Price PSF $103.64 ------------------------ c. Date 1/97 ------------------------ d. NOI at time of Sale $59,440 ------------------------ e. Cap. Rate 10.43% ------------------------ 4. Rank Relative to Subject inferior, similar, superior) Superior ------------------------ Explain Ranking/Comments: Comparables #1, #2 and #3 have been ranked as similar to subject while Comparable #4 is considered to be superior to subject. The reason for the superior rating of Comparable #4 is that this store was completed in December of 1996 and the lease was negotiated in 1996. The rental rate is higher in Comparable #4 than in subject. These comparables are located in Columbia which is approximately 25 miles south of Winnsboro. It is thought that these comparables can be used for comparison purposes with subject. 8 COMPARABLE IMPROVED SALES Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS 11401 -4 -8 NAME Alpha Graphics Building LOCATION 1415 Gervais Street, Columbia, SC GRANTOR C.D. Sexton GRANTEE J.D.J. Enterprises, Inc. DEED REFERENCE Book 1227, Page 291 DATE Nov 2, 1994 SALES PRICE $390,005 ADJUSTED SALES PRICE $390,005 SIZE BUILDING 4,399 SALES PRICE PER S.F. $88.66 SIZE LAND (ACRES) 0.19 SIZE LAND (S.F.) 8,276 YEAR BUILT 1949 LAND/BUILDING RATIO 1.88 To 1 UTILITIES All available ZONING Commercial FINANCING Cash to seller GROSS POTENTIAL INCOME $46,200 EFFECTIVE GROSS INCOME $41,580 GROSS INCOME MULTIPLE 8.44 EGIM 9.38 NET OPERATING INCOME $39,061 OVERALL RATE 10.02% COMMENTS This building was renovated in 1988 with a new facelift in May of 1994. The building is an older masonry structure with a stucco/glass storefront and has a bow roof with a membrane cover. The building is 100 percent heated and cooled and includes about 1,700 square feet of office space and the remainder is good quality retail space. The purchasers are the principals of Alpha Graphics and had leased the property in May 1994 through April 2000 then decided to purchase the property. The lease has absolute net terms - rent of $3,325 per month in year 1, $3,675 per month in year 2, and $4,025 per month in years 3 - 6 (average $46,200 per year or $10.50 per square foot). About 1,700 square feet of rear office space is subleased with similar terms as the master lease. (839) 9 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] NAME Heilig Meyers Furniture Store LOCATION 100 Greystone Blvd.. Columbia, SC GRANTOR Riverland Development Corp. Inc. GRANTEE Liscomb Family Foundation DEED REFERENCE Book 1048, Page 560 DATE Aug 26, 1991 SALES PRICE $1,130,000 ADJUSTED SALES PRICE $1,130,000 SIZE BUILDING 26,400 SALES PRICE PER S.F. $42.80 SIZE LAND (ACRES) 1.61 SIZE LAND (S.F.) 70,132 YEAR BUILT 1970 LAND/BUILDING RATIO 2.66 To 1 UTILITIES All Available VERIFICATION Public Records ZONING Commercial FINANCING Cash to Seller GROSS POTENTIAL INCOME $123,960 EFFECTIVE GROSS INCOME $123,960 GROSS INCOME MULTIPLE 9.12 EGIM 9.12 NET OPERATING INCOME $115,120 OVERALL RATE 10.19% COMMENTS This is a single tenant building leased and occupied by Heilig Meyers Furniture Company. Rental rate is $4.70 PSF for seven years. TENANTS: Heilig Meyers (418) 10 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] NAME New York Carpet World LOCATION 800 Bush River Road, Columbia, SC GRANTOR BGI GRANTEE Ten Fourteen Company (a North Carolina Partnership) DEED REFERENCE Book D-1115, Page 894 DATE Nov 17, 1992 SALES PRICE $907,000 ADJUSTED SALES PRICE $907,000 SIZE BUILDING 12,000 SALES PRICE PER S.F. $75.58 SIZE LAND (ACRES) 0.88 SIZE LAND (S.F.) 38,333 YEAR BUILT 1992 LAND/BUILDING RATIO 3.19 To 1 UTILITIES All Available VERIFICATION Public Records ZONING Commercial FINANCING Cash to Seller GROSS POTENTIAL INCOME $104,000 EFFECTIVE GROSS INCOME $104,000 GROSS INCOME MULTIPLE 8.72 EGIM 8.72 NET OPERATING INCOME $100,560 OVERALL RATE 11.09% COMMENTS This is a free standing retail store leased and occupied by New York Carpet World. The seller was in need to sell the property. While this was not a distress sale, it is not considered to be a normal sale. The purchaser was able to obtain favorable conditions in the sale. TENANTS: New York Carpet World (438) 11 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] TMS 16314 -03 -16 pt. NAME Advanced Auto LOCATION 7613 Garners Ferry Road, Columbia, SC GRANTOR Car Associates GRANTEE Phillip J. McCorkle DEED REFERENCE Book 1357, Page 593 DATE January 1997 SALES PRICE $570,000 ADJUSTED SALES PRICE $570,000 SIZE BUILDING 5,500 SALES PRICE PER S.F. $103.64 SIZE LAND (ACRES) 0.68 SIZE LAND (S.F.) 29,621 YEAR BUILT 1996 LAND/BUILDING RATIO 5.39 To 1 UTILITIES All available VERIFICATION Public Records ZONING Commercial FINANCING Cash to seller EFFECTIVE GROSS INCOME $61,000 EGIM 9.34 NET OPERATING INCOME $59,440 OVERALL RATE 10.43% COMMENTS An Advanced Auto Parts Store was constructed on this site in December of 1996. (840) 12 ADDENDA o Fairfield County Demographics o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 13 ADDENDA o Fairfield County Demographics o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 USA COUNTIES 1996 Geographic Area: Fairfield, SC (45039) Table: GENERAL PROFILE - -------------------------------------------------------------------------------- POPULATION AND HOUSING (Bureau of the Census) Total resident population: 1995 ........................................................... 22,504 Percent 65 years and over .................................... 13.7 1990 ........................................................... 22,295 1980 ........................................................... 20,700 Occupied housing units, 1990 ..................................... 7,467 Percent owner occupied ......................................... 78.1 BIRTHS AND DEATHS (National Center for Health Statistics) Births, 1993 ..................................................... 344 Per 1,000 resident population .................................. 15.4 Percent to mothers under 20 years of age ....................... 16.9 Deaths, 1993 ..................................................... 281 Per 1,000 resident population .................................. 12.6 Infant deaths per 1,000 live births, 1993 ........................ 8.7 EDUCATION (Bureau of the Census) Persons 25 years and over, 1990 .................................. 13,642 Percent high school graduates .................................. 58.1 Percent college graduates ...................................... 9.6 LABOR FORCE (Bureau of Labor Statistics) Civilian labor force, 1994 ....................................... 10,958 Percent unemployed ............................................. 9.7 PRIVATE NONFARM ESTABLISHMENTS (Bureau of the Census) Total establishments, 1993 ....................................... 316 Percent retail trade ........................................... 29.1 Percent services ............................................... 27.8 Paid employees, 1993 (pay period including March 12) ............. 5,872 Annual payroll, 1993 ($1,000) .................................... 145,983 PERSONAL INCOME (Bureau of Economic Analysis) Total personal income, 1993 ($1,000) ............................. 310,386 Per capita (dollars) ........................................... 13,872 AGRICULTURE (Bureau of the Census) Number of farms, 1992 ............................................ 189 Land in farms as percent of total land ......................... 13 RETAIL TRADE (Bureau of the Census) Retail sales, 1992 ($1,000) ...................................... 60,270 Per capita (dollars) ........................................... 2,682 COMMERCIAL AND SAVINGS BANKS (Fed. Deposit Insurance Corp.) Number of offices, June 30, 1994 ................................. 5 Total deposits ($1,000) ........................................ 84,751 SOCIAL PROGRAMS (Social Security Administration) Total Social Security recipients, December 1993 .................. 4,155 Retired workers ................................................ 2,385 Supplementary Security Income recipients, December 1994 .......... 944 FEDERAL FUNDS AND GRANTS (Bureau of the Census) Total direct expenditures or obligations per capita: 1994 (dollars) ................................................. 3,696 1990 (dollars) ................................................. 2,349 - -------------------------------------------------------------------------------- (NA) Not available. (D) Avoid disclosure of confidential information. (X) Not applicable. (S) Does not meet publication standards. (Z) Value > 0 but < half unit of measure shown. NOTE: 0 data may indicate geographic/data footnotes. Source: U.S. Bureau of the Census, USA Counties 1996 CD-ROM. [GRAPHIC OMITTED] Location Map [GRAPHIC OMITTED] Comparable Rentals Map [GRAPHIC OMITTED] Improved Sales Map EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: EDENS KW WINNSBORO BYPASS 160 SOUTH HWY. #321 WINNSBORO, SC Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ ADVANCE AUTO STORE #579 ADVANCE STORES CO., INC. 673-10 7,200 10/01/90 12/31/99 4.58 10/01/90 33,000.00 4.75 01/01/97 34,200.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ ADVANCE AUTO STORE #579 ADVANCE STORES CO., INC. PSR 1990 PSR 1990 None 0 01/04/94 12/31/96 4.58 2.50 1,320,000 Y 01/04/97 12/31/99 4.75 2.50 1,368,000 Y 01/04/00 12/31/02 5.00 2.50 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 7,200 Current Annual Base Rent 34,200.00 Available. 0 Total..... 7,200
[GRAPHIC OMITTED] Site Plan PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] US Highway #321 By-Pass - Looking South [GRAPHIC OMITTED] US Highway #321 By-Pass - Looking North [GRAPHIC OMITTED] Subject - Front and Side View - Washington Street - Looking East [GRAPHIC OMITTED] Subject - Front and Side View - Washington Street - Looking West This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study FREESTANDING BLOCKBUSTER VIDEO STORE 2419 Broad River Road Columbia, Richland County, South Carolina Prepared by Michael B. Dodds, MAI, CCIM Date of Market Study - May 7, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] May 6, 1997 Ms. Jodie McLean Vice President Edens and Avant, Inc. P.O. Box 528 Columbia, SC 29202 Re: Market Study Freestanding Blockbuster Video Store 2419 Broad River Road Columbia, Richland County, South Carolina Dear Ms. McLean: At your request, we have completed a market study of the above referenced property. This analysis that forms the basis of the study was conducted by Michael B. Dodds, MAI, CCIM. The subject property and all comparable data were inspected by Michael B. Dodds, MAI, CCIM on May 7, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a freestanding retail store that contains 6,000 square feet of leasable area. The store was constructed in 1988. The tenant is Blockbuster, which occupies the entire store. The store is situated on a 0.86 acre site. For our market study, we relied on sources specified in the study, as well as site information and tenant rent roll submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. _________________________________ Michael B. Dodds, MAI, CCIM State Certified General Real Estate Appraiser (CG-543) [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] May 6, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Freestanding Blockbuster Video Store 2419 Broad River Road Columbia, Richland County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that forms the basis of the study was conducted by Michael B. Dodds, MAI, CCIM. The subject property and all comparable data were inspected by Michael B. Dodds, MAI, CCIM on May 7, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a freestanding retail store that contains 6,000 square feet of leasable area. The store was constructed in 1988. The tenant is Blockbuster, which occupies the entire store. The store is situated on a 0.86 acre site. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. _________________________________ Michael B. Dodds, MAI, CCIM State Certified General Real Estate Appraiser (CG-543) EXECUTIVE SUMMARY ================================================================================ Regional Perspective Columbia is the state capital with the State House being located in downtown Columbia. Also, the University of South Carolina Campus is located in the downtown area. Fort Jackson, which is a large U.S. Army Training Facility is located in the eastern section of the Metropolitan area. The city has numerous specialized office activities such as: insurance, consulting services, advertising, marketing, printing and financial services. Government, distribution, finance and transportation are all important to Columbia, although none are preeminent. Geography also gives Columbia a strategic location in the industrial and commercial spheres. The unemployment rate for Richland County as of March, 1997 was 3.7 percent while the statewide rate was 5.3 percent. Neighborhood and Site The subject neighborhood is located to the northwest of the central business district of Columbia in an area generally referred to as St. Andrews. The neighborhood is centered around the intersection of Interstates #20 and #26. A high concentration of multi family development has occurred in the neighborhood since 1980, although there has been limited single family growth. The largest retail development in the area is the Dutch Square Mall, which was built in 1970. This 525,000 square foot regional mall is currently undergoing a major renovation. Tenants now include Office Depot, JB Whites and Eckerds. A 43,393 square foot anchor store is available, and was previously occupied by a local department store. Other tenants occupying space in the immediate area include Food Lion, Bi-Lo, K-Mart and OfficeMax. The neighborhood also has a reasonable mix of office and general commercial developments. No uses were found which would negatively affect the neighborhood. Physical features are as follows: 1. Site Size 0.86 Acres or 37,462 square feet 2. Identity TMS# 7403-05-05 - Richland County 3. Shape Square- Adequate 4. Topography Generally level - on grade with Broad River Road 5. Accessibility Good 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 6,000 square feet - Single tenant 2. Layout & Design 1 story - Design is functional 3. Parking Spaces Approximately 54 9 spaces per 1,000 SF of building area 4. Construction Brick and glass front with concrete block on side and rear. Roof is built up composition. 1 Market Position and Marketability Conclusions The subject property is located in a sub-market that is identified as St. Andrews. There are few new shopping centers in this area, with most having been constructed in the 1970's and 1980's. The lack of new construction has created a relatively strong market. The majority of the vacant space is made up of a vacant anchor stores at Dutch Square. Several new freestanding drug stores have been built in the general area during 1996 and 1997. The St. Andrews sub-market is listed in the 1996 Central Carolina Business Review and Investment Guide as having 2,241,560 square feet of retail space, and an average new lease rate of $12.60 per square foot. The survey reports no retail space planned or under construction. The overall vacancy rate for this sub-market was reported at 11.4%, compared to 9.7% for Columbia overall. It should be noted that the survey does not include freestanding stores the size of the subject, although the survey provides a reasonable indication of the state of the retail market in general. The subject property is a freestanding building, and would attract a different typical tenant than a traditional shopping center. Businesses occupying freestanding buildings along Broad River Road include bicycle shops, paint stores, gift shops, jewelry stores and automobile parts stores. An inspection of the market revealed no vacant buildings in the size and quality range that the subject property fits into. The subject property is accessible from all areas of northwest Columbia, and is within one mile of the intersection of Interstate #20 and Broad River Road. The general population living in proximity of the subject can be described as middle income, with the majority of the subdivisions being built out. The subject property is within four miles of the fastest growing retail district in Columbia, the Harbison area. Major tenants occupying space in the Harbison area include Wal-Mart, Dillards, JB Whites, Parisian, Sears, Lowes and Home Depot. A Sam's Club is currently under construction and a 600,000 square foot power center is planned. The subject property does not benefit from the proximity to Harbison, although Broad River Road is a traffic artery which is used to travel to the Harbison area. In summary, the subject property is considered to be in a desirable sub-market. Visibility from Broad River Road is good, and the property is in average condition. The subject property should continue to operate successfully. The contract rent for the subject property is at the upper end of the range for freestanding buildings along Broad River Road, and is most likely slightly above market. Trends The subject property is located in an area of Columbia that has experienced steady growth in recent years. The largest retail development in the sub-market, Dutch Square, is currently undergoing a renovation in an effort to reposition it in the market. The 620,000 square foot mall is attempting to become more of a power center. In recent years, rental rates in the immediate area have remained stable, as Harbison experienced the rapid growth and rising rental rates. The future of Dutch Square will have a significant effect on the sub-market. Positive trends which impact the subject include proximity to Interstate #20 and the increasing traffic counts along Broad River Road. Upon expiration of the subject lease in September 1998, it is expected that the building will be very marketable based upon the size and location of the structure. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Blockbuster Eckerds Moovies Eckerds --------------------- -------------------- -------------------- -------------------- b. Street 2419 Broad River Road Columbia Ave. @ Old Augusta Road @ Oak 2200 Augusta Road Chapin Road --------------------- -------------------- -------------------- -------------------- c. City Columbia, SC Lexington, SC West Columbia, SC West Columbia, SC --------------------- -------------------- -------------------- -------------------- d. Distance from subject N/A 8 miles 6 miles 5 miles --------------------- -------------------- -------------------- -------------------- e. Contact Edens & Avant N/A N/A N/A --------------------- -------------------- -------------------- -------------------- f. Phone (803)779-4420 N/A N/A N/A --------------------- -------------------- -------------------- -------------------- 2. Attributes a. Year built 1988 1997 1996 1997 --------------------- -------------------- -------------------- -------------------- b. Net sq. Ft. 6,000 10,728 7,700 13,938 --------------------- -------------------- -------------------- -------------------- c. # building 1 1 1 1 --------------------- -------------------- -------------------- -------------------- d. #stories 1 1 1 1 --------------------- -------------------- -------------------- -------------------- e. Avg. Floor plate size N/A N/A N/A N/A (sq. Ft.), if office --------------------- -------------------- -------------------- -------------------- f. # elevators N/A N/A N/A N/A --------------------- -------------------- -------------------- -------------------- g. Parking Adequate - 54 Spaces Adequate - 56 spaces Adequate - 41 spaces Adequate - 55 spaces --------------------- -------------------- -------------------- -------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block --------------------- -------------------- -------------------- -------------------- i. Vacancy % 0% 0% 0% 0% --------------------- -------------------- -------------------- --------------------
COMPARABLE 4 ------------ 1. Identification a. Name Revco -------------------- b. Street Forest Drive @ Pinehurst -------------------- c. City Columbia, SC -------------------- d. Distance from subject 7 miles -------------------- e. Contact N/A -------------------- f. Phone N/A -------------------- 2. Attributes a. Year built 1996 -------------------- b. Net sq. Ft. 12,608 -------------------- c. # building 1 -------------------- d. #stories 1 -------------------- e. Avg. Floor plate size N/A (sq. Ft.), if office -------------------- f. # elevators N/A -------------------- g. Parking Adequate -------------------- h. Construction Type Brick/Concrete Block -------------------- i. Vacancy % 0% -------------------- 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Rental Rate $16.76/SF $19.77/SF $12.50/SF $15.97/SF -------------------- -------------------- -------------------- -------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net -------------------- -------------------- -------------------- -------------------- 3. Rent Concessions None - Build to suit None - Build to suit None - Build to suit None - Build to suit -------------------- -------------------- -------------------- -------------------- 4. Effective Rent $16.76/SF $19.77/SF $12.50 /SF $15.97/SF -------------------- -------------------- -------------------- -------------------- 5. TI Allowance None None None None -------------------- -------------------- -------------------- -------------------- 6. Expense Stop None None None None -------------------- -------------------- -------------------- -------------------- 7. Length of Lease Term 10 years 20 years 10 years 20 years -------------------- -------------------- -------------------- -------------------- 8. Commissions 5.00% - 7.00% 5.00% - 7.00% 5.00% - 7.00% 5.00% - 7.00% -------------------- -------------------- -------------------- -------------------- 9. Percentage Rent None N/A N/A N/A (per lease terms) -------------------- -------------------- -------------------- -------------------- 10. Historical Annual N/A N/A N/A N/A Absorption/sq.ft. -------------------- -------------------- -------------------- -------------------- 11. Annual Operating Expense N/A N/A N/A N/A psf (Including taxes) -------------------- -------------------- -------------------- -------------------- C. RANK RELATIVE TO SUBJECT (inferior, N/A Similar Similar Similar similar, superior) -------------------- -------------------- -------------------- --------------------
COMPARABLE 4 ------------ 1. Rental Rate $13.08/SF ---------------------- 2. Lease Type (Gross/Net) Triple Net ---------------------- 3. Rent Concessions None - Build to suit ---------------------- 4. Effective Rent $13.08/SF ---------------------- 5. TI Allowance None ---------------------- 6. Expense Stop None ---------------------- 7. Length of Lease Term 20 years ---------------------- 8. Commissions 5.00% ---------------------- 9. Percentage Rent N/A (per lease terms) ---------------------- 10. Historical Annual N/A Absorption/sq.ft. ---------------------- 11. Annual Operating Expense N/A psf (Including taxes) ---------------------- C. RANK RELATIVE TO SUBJECT (inferior, Similar similar, superior) ---------------------- D. EXPLAIN RANKING/COMMENTS: All of the rent comparables were build to suit developments. No speculative construction of buildings similar to the subject were found. The comparables are similar to the subject with respect to size, and comparable #2 is occupied by a movie rental operation. The physical characteristics of the buildings are similar, with the exception of a drive through window at the drug store comparables. Comparable #1 required the demolition of a restaurant, which increased the cost of development significantly. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Eckerds Location: NWC Columbia Avenue and Old Chapin Road Lexington, SC Year Built: 1997 Total Size: 10,728 SF Rental Rate: $19.77/ SF Tenant Expenses: Triple Net Remarks: This freestanding store will have 56 parking spaces, and is situated on 1.177 acres. The rent increases approximately $0.50 every 5 years of the 20 year lease term. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Moovies Location: Augusta Road at Oak Drive West Columbia, SC Year Built: 1996 Total Size: 7,700 SF Rental Rate: $12.50/ SF Tenant Expenses: Triple Net Remarks: This freestanding store has 41 parking spaces, and is situated on an outparcel of the Mills Corner Shopping Center. The store was completed in February, 1996 and is leased for a term of approximately 10 years. 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Eckerds Location: 2200 Augusta Road West Columbia, SC Year Built: 1997 Total Size: 10,938 SF Rental Rate: $15.97/ SF Tenant Expenses: Triple Net Remarks: This freestanding store has 55 parking spaces, and is situated on 1.95 acre site which fronts on a road with a traffic count of 32,100 vehicles per day. The store is leased for a term of 20 years. The rental rate increases approximately $0.50 per square foot each 5 years. 7 Comparable Rental No. 4 ================================================================================ [GRAPHIC OMITTED] Name: Revco Location: Forest Drive at Pinehurst Road Columbia, SC Year Built: 1996 Total Size: 12,608 SF Rental Rate: $13.08/ SF Tenant Expenses: Triple Net Remarks: This freestanding store is leased at a level rental rate over the 20 year lease term. The store was completed in 1996 and is in a desirable location for a drug store. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ 1. Identification a. Name Blockbuster Video Hollywood Video Eckerds Revco Rite Aid --------------------- --------------------- ------------------ ------------ ------------------ b. Street Address 2419 Broad River Road Outparcel of Westwood 1720 Taylor Street Forest Drive W Main Street @ N. Place Forest Street --------------------- --------------------- ------------------ ------------ ------------------ c. City Columbia, SC Greenwood, SC Columbia, SC Columbia, SC Spartanburg, SC --------------------- --------------------- ------------------ ------------ ------------------ d. Distance from Subject N/A 74 miles 10 miles 10 miles 90 miles --------------------- --------------------- ------------------ ------------ ------------------ 2. Attributes a. Year Built 1988 1997 1996 1996 1996 --------------------- --------------------- ------------------ ------------ ------------------ b. Net sq. feet 6,000 6,000 9,504 12,608 10,752 --------------------- --------------------- ------------------ ------------ ------------------ c. # Buildings 1 1 1 1 1 --------------------- --------------------- ------------------ ------------ ------------------ e. Vacancy % 0% 0% 0% 0.0% 0% --------------------- --------------------- ------------------ ------------ ------------------ 3. Sales Information a. Sales Price N/A $1,099,000 $1,835,000 $1,725,000 $1,530,000 --------------------- --------------------- ------------------ ------------ ------------------ b. Sales Price PSF N/A $183.17 $193.08 $136.82 $142.30 --------------------- --------------------- ------------------ ------------ ------------------ c. Cap. Rate N/A 10.06% 9.32% 9.36% 9.35% --------------------- --------------------- ------------------ ------------ ------------------ d. Date N/A Current Contract January 16,1997 July 1, 1996 June 26, 1996 --------------------- --------------------- ------------------ ------------ ------------------ e. NOI at time of Sale N/A $110,610 $171,104 $161,390 $143,035 --------------------- --------------------- ------------------ ------------ ------------------ 4. Rank Relative to Subject N/A Superior Superior Superior Superior (inferior, similar, superior) --------------------- --------------------- ------------------ ------------ ------------------
Explain Ranking/Comments: The sales selected are freestanding retail stores occupied by national tenants. Three of the comparables are drug stores while one is a video store. All of the comparables are located in the state of South Carolina, although the market for this type of investment is regional or national in nature. The credit of the tenant is the primary consideration, and the subject property is believed to have a desirable tenant. 9 Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Hollywood Video Location: Outparcel of Westwood Place Greenwood, SC Grantor: Zimmer Development, Inc. Grantee: W.D. Morris Deed Reference: N/A Date: Current Contract Sales Price: $1,099,000 Adjusted Sales Price: $1,099,000 Size building 6,000 Sales Price per S.F.: $183.17 Size Land (Acres): 1.014 Size Land (S.F.): 44,170 Year Built: 1997 Land/Building Ratio: 7.36 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $112,838 EGIM: 9.74 Net Operating Income: $110,610 Overall Rate: 10.06% Verification: Public Records and seller Type of Purchaser: Private Investor Comments: This is an arms length sale of a freestanding video store in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. The property is located on an outparcel of a community shopping center anchored by a Wal-Mart Supercenter. 10 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Eckerds Location: 1720 Taylor Street, Columbia, SC Grantor: Baker &Baker Grantee: C. Dan Watts Deed Reference: N/A Date: January 16, 1997 Sales Price: $1,835,000 Adjusted Sales Price: $1,835,000 Size building: 9,504 Sales Price per S.F.: $193.08 Size Land (Acres): 1.14 Size Land (S.F.): 49,658 Year Built: 1996 Land/Building Ratio: 5.22 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $174,398 Effective Gross Income: $174,398 EGIM: 10.52 Net Operating Income: $171,104 Overall Rate: 9.32% Verification: Public Records Type of Purchaser: Private Investor Comments: This freestanding store is leased for a 20 year term. The store opened in June, 1996. Developing this site involved demolition of a light industrial building. Location is within 2 miles of the CBD of Columbia. 11 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Revco Drug Store Location: Forest Drive Columbia, SC Grantor: D.S. Forest Partners Grantee: Lawyers Title of NC, Inc. Deed Reference: N/A Date: July 1, 1996 Sales Price: $1,725,000 Adjusted Sales Price: $1,725,000 Size building: 12,608 Sales Price per S.F.: $136.82 Size Land (Acres): 1.04 Size Land (S.F.): 45,302 Year Built: 1996 Land/Building Ratio: 3.59 to 1 Utilities: All Public Zoning: C-3 Financing: Cash to Seller Gross Potential Income: $164,900 Effective Gross Income: $164,900 EGIM: 10.46 Net Operating Income: $161,390 Overall Rate: 9.36% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a freestanding drug store that is leased for a twenty year term with the lease rate being level throughout the entire term. 12 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] Name: Rite Aid Drug Store Location: W. Main Street and N. Forest Street Spartanburg, SC Grantor: C-3 Investments Grantee: Larry Hatter Deed Reference: Book 64K, Page 465 Date: June 26,1996 Sales Price: $1,530,000 Adjusted Sales Price: $1,530,000 Size building: 10,752 Sales Price per S.F.: $142.30 Size Land (Acres): 1.7 Size Land (S.F.): 74,052 Year Built: 1996 Land/Building Ratio: 6.89 to 1 Utilities: Municipal Zoning: Commercial Financing: Cash to Seller Effective Gross Income: $146,172 EGIM: 10.47 Net Operating Income: $143,035 Overall Rate: 9.35% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was negotiated during the construction of the building. The site was improved with several buildings that were occupied at the time of acquisition. Rent is level over a 20 year term. Property is within 2 miles of the CBD of Spartanburg. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 [GRAPHIC OMITTED] COMPARABLE RENTALS MAP [GRAPHIC OMITTED] COMPARABLE SALES MAP [GRAPHIC OMITTED] BUILDING SKETCH Date: 04/08/97 EDENS & AVANT, INC. Page 134 Retail Custom Rent Roll Property: BLOCKBUSTER - BROAD RIVER 2419 BROAD RIVER RAOD COLUMBIA, SC Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- BLOCKBUSTER #92511 - BROAD RIVE BLOCKBUSTER #92511 - BROAD RIVE 668- 10 6,000 10/01/88 09/30/98 14.25 10/01/88 85,500.00 16.76 10/01/93 100,554.96 - -------------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied.. 6,000 Current Annual Base Rent 100,554.96 Available. 0 Total..... 6,000 - ------------------------------------------------------------------------------------------------------------------------------------ REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ BLOCKBUSTER #92511 - BROAD RIVE BLOCKBUSTER #92511 - BROAD RIVE Full 0 Full 0 Full 0 10/01/98 09/30/03 0.00 0.00 0 10/01/03 09/30/08 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Front of Subject Property [GRAPHIC OMITTED] Side of Subject Property [GRAPHIC OMITTED] Rear of Subject Property [GRAPHIC OMITTED] Side of Subject Property [GRAPHIC OMITTED] Broad River Road - Looking North [GRAPHIC OMITTED] Broad River Road - Looking South [GRAPHIC OMITTED] Briargate Circle - Looking West This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study FREESTANDING BLOCKBUSTER VIDEO STORE 2525 Decker Boulevard Columbia, Richland County, South Carolina Prepared by Michael B. Dodds, MAI, CCIM Date of Market Study - May 7, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] May 6, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Freestanding Blockbuster Video Store 2525 Decker Boulevard Columbia, Richland County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that forms the basis of the study was conducted by Michael B. Dodds, MAI, CCIM. The subject property and all comparable data were inspected by Michael B. Dodds, MAI, CCIM on May 7, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a freestanding retail store that contains 6,000 square feet of leasable area. The store was constructed in 1989. The tenant is Blockbuster, whose lease expires June 1, 1999. The store is situated on a 0.87 acre site, and there are approximately 50 parking spaces available. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ Michael B. Dodds ------------------------------ Michael B. Dodds, MAI, CCIM State Certified General Real Estate Appraiser (CG-543) 2 EXECUTIVE SUMMARY ================================================================================ Regional Perspective Columbia is the state capital with the State House being located in downtown Columbia. Also, the University of South Carolina Campus is located in the downtown area. Fort Jackson, which is a large U.S. Army Training Facility is located in the eastern section of the Metropolitan area. The city has numerous specialized office activities such as: insurance, consulting services, advertising, marketing, printing and financial services. Government, distribution, finance and transportation are all important to Columbia, although none are preeminent. Geography also gives Columbia a strategic location in the industrial and commercial spheres. The unemployment rate for Richland County as of March, 1997 was 3.7 percent while the statewide rate was 5.3 percent. Neighborhood and Site The subject neighborhood is located to the northeast of the central business district of Columbia. No uses were found which would negatively affect the neighborhood. The northeast Columbia region has become a major growth area for single family subdivisions. Homes available in a wide variety of price ranges up to $500,000. Fort Jackson has influenced the housing characteristics in the section of town, with several mobile home parks and low end apartment complexes scattered throughout the region. A positive factor on the appeal of the area is Forest Acres, which has one of the highest household incomes in the metropolitan area. Forest Acres is an older established section which is one of the most desirable areas to live. In general, the subject neighborhood is in an area which is affected by a wide variety of influences, with none of them being detrimental to the subject. Physical features are as follows: 1. Site Size 0.87 Acres or 37,897 square feet 2. Identity TMS# 16907-02-03 Richland County 3. Shape Irregular - Adequate 4. Topography Generally level - on grade with Decker Boulevard 5. Accessibility Good 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 6,000 square feet - Single tenant 2. Layout & Design 1 story - Design is functional 3. Parking Spaces Approximately 50 8.3 spaces per 1,000 SF of building area 4. Construction Brick and glass front with concrete block on side and rear. Roof is built up composition. 1 Market Position and Marketability Conclusions The subject property is located in a sub-market that is identified as East Columbia. The demographics of this area are very attractive to most retailers, with Forest Acres having one of the highest household incomes in the Columbia region. Many shopping centers are located in the area, with most having been constructed in the 1970's and 1980's. The largest new retail development is the East Forest Plaza, which is anchored by a Wal-Mart Supercenter. The local shops at this center were 100 percent pre-leased upon completion of construction, and a Sam's Club is also planned to be constructed adjacent to the Wal-Mart. In addition to the shopping centers, several freestanding drug stores have been built in the general area during 1996 and 1997. Shopping centers in the immediate area include Decker Village and High Point on Decker. These centers are experiencing vacancy levels similar to the sub-market. The East Columbia sub-market is listed in the 1996 Central Carolina Business Review and Investment Guide as having 3,865,752 square feet, and represents 31.3 percent of the total Columbia retail market. The overall vacancy rate for this sub-market was reported at 6.9 percent. The vacancy rate is below the rate for the overall Columbia area of 9.7 percent. It should be noted that the survey does not include freestanding stores the size of the subject, although the survey provides a reasonable indication of the state of the retail market in general. The subject property would typically attract a different typical tenant than a traditional shopping center due to it being a freestanding building. Businesses occupying freestanding buildings along Decker Boulevard include jewelry stores, paint stores, gift shops, and automobile parts stores. An inspection of the market revealed no vacant buildings the size and quality of the subject property. The subject property is accessible from all areas of northeast Columbia, and is within two miles of the intersection of Interstate #20 and Two Notch Road. The general population living in proximity of the subject can be described as middle income. The majority of the new construction in the neighborhood has been taking place to the west of the subject and to the south. The Dentsville Square is being renovated to include a Winn Dixie Marketplace, and a Longhorn Steakhouse will be built on an outparcel. Considerable new construction is occurring along Two Notch Road, near Interstate #20, including several lodging facilities and restaurants. This new development will have a positive impact on the subject, even though the subject is 2 to 3 miles away. The development to the south is the previously mentioned East Forest Plaza. In summary, the subject property is in an older but desirable sub-market. Visibility from Decker Boulevard is good. The property is in average condition and should continue to operate successfully. The contract rent for the subject property is at the upper end of the range for freestanding buildings along Decker Boulevard, but is reasonable. Trends The East Columbia sub-market includes Columbia Mall, a 1,200,000 regional mall which was built in 1977. The local stores at the mall are approximately 83 percent occupied. The sub-market includes the high income area of Forest Acres and the rapidly growing Dentsville area, north of Interstate #20. The immediate area surrounding the subject is influenced by Fort Jackson and several lower end housing developments, however it is expected to remain a desirable area. Rental rates should increase slowly but steadily, and occupancy levels should remain stable. Upon expiration of the subject lease on June 1, 1999, it is expected that the building will be marketable based upon the size and location of the structure. 2 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================ I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Blockbuster Eckerds Moovies ------------------------ ------------------------ ------------------------- b. Street 2525 Decker Boulevard Columbia Ave. @ Old Augusta Road @ Oak Chapin Road ------------------------ ------------------------ ------------------------- c. City Columbia, SC Lexington, SC West Columbia, SC ------------------------ ------------------------ ------------------------- d. Distance from subject N/A 8 miles 6 miles ------------------------ ------------------------ ------------------------- e. Contact Edens & Avant N/A N/A ------------------------ ------------------------ ------------------------- f. Phone (803)779-4420 N/A N/A ------------------------ ------------------------ ------------------------- 2. Attributes a. Year built 1989 1997 1996 ------------------------ ------------------------ ------------------------- b. Net sq. Ft. 6,000 10,728 7,700 ------------------------ ------------------------ ------------------------- c. # building 1 1 1 ------------------------ ------------------------ ------------------------- d. # stories 1 1 1 ------------------------ ------------------------ ------------------------- e. Avg. Floor plate size N/A N/A N/A (sq. Ft.), if office ------------------------ ------------------------ ------------------------- f. # elevators N/A N/A N/A ------------------------ ------------------------ ------------------------- g. Parking Adequate - 50 Spaces Adequate - 56 spaces Adequate - 41 spaces ------------------------ ------------------------ ------------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ------------------------ ------------------------ ------------------------- I. Vacancy % 0% 0% 0% ------------------------ ------------------------ ------------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Eckerds Revco ---------------------- ----------------------- b. Street 2200 Augusta Road Forest Drive @Pinehurst ---------------------- ----------------------- c. City West Columbia, SC Columbia, SC ---------------------- ----------------------- d. Distance from subject 5 miles 7 miles ---------------------- ----------------------- e. Contact N/A N/A ---------------------- ----------------------- f. Phone N/A N/A ---------------------- ----------------------- 2. Attributes a. Year built 1997 1996 ---------------------- ----------------------- b. Net sq. Ft. 13,938 12,608 ---------------------- ----------------------- c. # building 1 1 ---------------------- ----------------------- d. # stories 1 1 ---------------------- ----------------------- e. Avg. Floor plate size N/A N/A (sq. Ft.), if office ---------------------- ----------------------- f. # elevators N/A N/A ---------------------- ----------------------- g. Parking Adequate - 55 spaces Adequate ---------------------- ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block ---------------------- ----------------------- I. Vacancy % 0% 0% ---------------------- -----------------------
3 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================
B. RENTAL INFORMATION SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Rental Rate $19.96/SF $19.77/SF $12.50/SF -------------------------------------------------------------------------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ------------------------ ------------------------ ------------------------ 3. Rent Concessions None - Build to suit None - Build to suit None - Build to suit ------------------------ ------------------------ ------------------------ 4. Effective Rent $16.96/SF $19.77/SF $12.50 /SF ------------------------ ------------------------ ------------------------ 5. TI Allowance None None None ------------------------ ------------------------ ------------------------ 6. Expense Stop None None None ------------------------ ------------------------ ------------------------ 7. Length of Lease Term 15 years 20 years 10 years ------------------------ ------------------------ ------------------------ 8. Commissions 5.00% - 7.00% 5.00% - 7.00% 5.00% - 7.00% ------------------------ ------------------------ ------------------------ 9. Percentage Rent None N/A N/A (per lease terms) ------------------------ ------------------------ ------------------------ 10. Historical Annual N/A N/A N/A Absorption/sq.ft. ------------------------ ------------------------ ------------------------ 11. Annual Operating N/A N/A N/A Expense psf (Including taxes) ------------------------ ------------------------ ------------------------ C. RANK RELATIVE TO SUBJECT (inferior, N/A Similar Similar similar, superior) ------------------------ ------------------------ ------------------------ B. RENTAL INFORMATION COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Rental Rate $15.97/SF $13.08/SF ------------------------------------------------------ 2. Lease Type (Gross/Net) Triple Net Triple Net ------------------------ ----------------------- 3. Rent Concessions None - Build to suit None - Build to suit ------------------------ ----------------------- 4. Effective Rent $15.97/SF $13.08/SF ------------------------ ----------------------- 5. TI Allowance None None ------------------------ ----------------------- 6. Expense Stop None None ------------------------ ----------------------- 7. Length of Lease Term 20 years 20 years ------------------------ ----------------------- 8. Commissions 5.00% - 7.00% 5.00% ------------------------ ----------------------- 9. Percentage Rent N/A N/A (per lease terms) ------------------------ ----------------------- 10. Historical Annual N/A N/A Absorption/sq.ft. ------------------------ ----------------------- 11. Annual Operating N/A N/A Expense psf (Including taxes) ------------------------ ----------------------- C. RANK RELATIVE TO SUBJECT (inferior, Similar Similar similar, superior) ------------------------ -----------------------
D. EXPLAIN RANKING/COMMENTS: All of the rent comparables were build to suit developments. No speculative construction of buildings similar to the subject were found. The comparables are similar to the subject with respect to size, and comparable #2 is occupied by a movie rental operation. The physical characteristics of the buildings are similar, with the exception of a drive through window at the drug store comparables. Comparable #1 required the demolition of a restaurant, which increased the cost of development significantly. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Eckerds Location: NWC Columbia Avenue and Old Chapin Road Lexington, SC Year Built: 1997 Total Size: 10,728 SF Rental Rate: $19.77/ SF Tenant Expenses: Triple Net Remarks: This freestanding store will have 56 parking spaces, and is situated on 1.177 acres. The rent increases approximately $0.50 every 5 years of the 20 year lease term. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Moovies Location: Augusta Road at Oak Drive West Columbia, SC Year Built: 1996 Total Size: 7,700 SF Rental Rate: $12.50/ SF Tenant Expenses: Triple Net Remarks: This freestanding store has 41 parking spaces, and is situated on an outparcel of the Mills Corner Shopping Center. The store was completed in February, 1996 and is leased for a term of approximately 10 years. 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Eckerds Location: 2200 Augusta Road West Columbia, SC Year Built: 1997 Total Size: 10,938 SF Rental Rate: $15.97/ SF Tenant Expenses: Triple Net Remarks: This freestanding store has 55 parking spaces, and is situated on 1.95 acre site which fronts on a road with a traffic count of 32,100 vehicles per day. The store is leased for a term of 20 years. The rental rate increases approximately $0.50 per square foot each 5 years. 7 Comparable Rental No. 4 ================================================================================ [GRAPHIC OMITTED] Name: Revco Location: Forest Drive at Pinehurst Road Columbia, SC Year Built: 1996 Total Size: 12,608 SF Rental Rate: $13.08/ SF Tenant Expenses: Triple Net Remarks: This freestanding store is leased at a level rental rate over the 20 year lease term. The store was completed in 1996 and is in a desirable location for a drug store. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE ================================================================================
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Blockbuster Video Hollywood Video Eckerds ------------------------ ------------------------ -------------------------- b. Street Address 2525 Decker Boulevard Outparcel @ Westwood 1720 Taylor Street Place ------------------------ ------------------------ -------------------------- c. City Columbia, SC Greenwood, SC Columbia, SC ------------------------ ------------------------ -------------------------- d. Distance from Subject N/A 74 miles 6 miles ------------------------ ------------------------ -------------------------- 2. Attributes a. Year Built 1989 1997 1996 ------------------------ ------------------------ -------------------------- b. Net sq. feet 6,000 6,000 9,504 ------------------------ ------------------------ -------------------------- c. # Buildings 1 1 1 ------------------------ ------------------------ -------------------------- e. Vacancy % 0% 0% 0% ------------------------ ------------------------ -------------------------- 3. Sales Information a. Sales Price N/A $1,099,000 $1,835,000 ------------------------ ------------------------ -------------------------- b. Sales Price PSF N/A $183.17 $193.08 ------------------------ ------------------------ -------------------------- c. Cap. Rate N/A 10.06% 9.32% ------------------------ ------------------------ -------------------------- d. Date N/A Current Contract January 16,1997 ------------------------ ------------------------ -------------------------- e. NOI at time of Sale N/A $110,610 $171,104 ------------------------ ------------------------ -------------------------- c. Cap. Rate N/A 10.06% 9.32% ------------------------ ------------------------ -------------------------- 4. Rank Relative to Subject N/A Superior Superior (inferior, similar, superior) ------------------------ ------------------------ -------------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Revco Rite Aid ----------------------- ----------------------- b. Street Address Forest Drive W Main Street @ N. Forest Street ----------------------- ----------------------- c. City Columbia, SC Spartanburg, SC ----------------------- ----------------------- d. Distance from Subject 5 miles 90 miles ----------------------- ----------------------- 2. Attributes a. Year Built 1996 1996 ----------------------- ----------------------- b. Net sq. feet 12,608 10,752 ----------------------- ----------------------- c. # Buildings 1 1 ----------------------- ----------------------- e. Vacancy % 0.0% 0% ----------------------- ----------------------- 3. Sales Information a. Sales Price $1,725,000 $1,530,000 ----------------------- ----------------------- b. Sales Price PSF $136.82 $142.30 ----------------------- ----------------------- c. Cap. Rate 9.36% 9.35% ----------------------- ----------------------- d. Date July 1, 1996 June 26, 1996 ----------------------- ----------------------- e. NOI at time of Sale $161,390 $143,035 ----------------------- ----------------------- c. Cap. Rate 9.36% 9.35% ----------------------- ----------------------- 4. Rank Relative to Subject Superior Superior (inferior, similar, superior) ----------------------- -----------------------
Explain Ranking/Comments: The sales selected are freestanding retail stores occupied by national tenants. Three of the comparables are drug stores while one is a video store. All of the comparables are located in the state of South Carolina, although the market for this type of investment is regional or national in nature. The credit of the tenant is the primary consideration, and the subject property is believed to have a desirable tenant. Subject property is located in a desirable sub-market in Columbia. 9 Comparable Sale No. 1 [GRAPHIC OMITTED] Name: Hollywood Video Location: Outparcel of Westwood Place Greenwood, SC Grantor: Zimmer Development, Inc. Grantee: W.D. Morris Deed Reference: N/A Date: Current Contract Sales Price: $1,099,000 Adjusted Sales Price: $1,099,000 Size building 6,000 Sales Price per S.F.: $183.17 Size Land (Acres): 1.014 Size Land (S.F.): 44,170 Year Built: 1997 Land/Building Ratio: 7.36 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $112,838 EGIM: 9.74 Net Operating Income: $110,610 Overall Rate: 10.06% Verification: Public Records and seller Type of Purchaser: Private Investor Comments: This is an arms length sale of a freestanding video store in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. The property is located on an outparcel of a community shopping center anchored by a Wal-Mart Supercenter. 10 Comparable Sale No. 2 [GRAPHIC OMITTED] Name: Eckerds Location: 1720 Taylor Street Columbia, SC Grantor: Baker &Baker Grantee: C. Dan Watts Deed Reference: N/A Date: January 16, 1997 Sales Price: $1,835,000 Adjusted Sales Price: $1,835,000 Size building: 9,504 Sales Price per S.F.: $193.08 Size Land (Acres): 1.14 Size Land (S.F.): 49,658 Year Built: 1996 Land/Building Ratio: 5.22 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $174,398 Effective Gross Income: $174,398 EGIM: 10.52 Net Operating Income: $171,104 Overall Rate: 9.32% Verification: Public Records Type of Purchaser: Private Investor Comments: This freestanding store is leased for a 20 year term. The store opened in June, 1996. Developing this site involved demolition of a light industrial building. Location is within 2 miles of the CBD of Columbia. 11 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: Revco Drug Store Location: Forest Drive Columbia, SC Grantor: D.S. Forest Partners Grantee: Lawyers Title of NC, Inc. Deed Reference: N/A Date: July 1, 1996 Sales Price: $1,725,000 Adjusted Sales Price: $1,725,000 Size building: 12,608 Sales Price per S.F.: $136.82 Size Land (Acres): 1.04 Size Land (S.F.): 45,302 Year Built: 1996 Land/Building Ratio: 3.59 to 1 Utilities: All Public Zoning: C-3 Financing: Cash to Seller Gross Potential Income: $164,900 Effective Gross Income: $164,900 EGIM: 10.46 Net Operating Income: $161,390 Overall Rate: 9.36% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a freestanding drug store that is leased for a twenty year term with the lease rate being level throughout the entire term. 12 Comparable Sale No. 4 [GRAPHIC OMITTED] Name: Rite Aid Drug Store Location: W. Main Street and N. Forest Street Spartanburg, SC Grantor: C-3 Investments Grantee: Larry Hatter Deed Reference: Book 64K, Page 465 Date: June 26,1996 Sales Price: $1,530,000 Adjusted Sales Price: $1,530,000 Size building: 10,752 Sales Price per S.F.: $142.30 Size Land (Acres): 1.7 Size Land (S.F.): 74,052 Year Built: 1996 Land/Building Ratio: 6.89 to 1 Utilities: Municipal Zoning: Commercial Financing: Cash to Seller Effective Gross Income: $146,172 EGIM: 10.47 Net Operating Income: $143,035 Overall Rate: 9.35% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was negotiated during the construction of the building. The site was improved with several buildings that were occupied at the time of acquisition. Rent is level over a 20 year term. Property is within 2 miles of the CBD of Spartanburg. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 Comparable Rental Map [GRAPHIC OMITTED] Comparable Sales Map [GRAPHIC OMITTED] --------- Site Plan --------- [GRAPHIC OMITTED] EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 135 Property: BLOCKBUSTER - DECKER BLVD. 2525 DECKER BOULEVARD COLUMBIA, SC Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- BLOCKBUSTER #92561 - DECKER 669-10 6,000 06/01/89 05/31/04 14.75 06/01/89 88,500.00 16.96 06/01/99 101,760.00 - ------------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied.. 6,000 Current Annual Base Rent 88,500.00 Available. 0 Total..... 6,000 - --------------------------- ------------------------------------------------------------------------------------------------------ REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - --------------------------- ------------------------------------------------------------------------------------------------------ BLOCKBUSTER #92561 - DECKER Full 0 Full 0 Full 0 06/01/94 10/31/99 14.75 0.00 0 06/01/99 05/31/04 16.96 0.00 0 - --------------------------- ------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Subject Property Looking Southwest [GRAPHIC OMITTED] Subject Property Looking Northwest [GRAPHIC OMITTED] Subject Property Looking Southeast [GRAPHIC OMITTED] Subject Property Looking South [GRAPHIC OMITTED] Subject Property Looking Southeast [GRAPHIC OMITTED] Subject Property Looking North [GRAPHIC OMITTED] Decker Boulevard Looking South This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study DREHER PLAZA SHOPPING CENTER 100 Dreher Road West Columbia, Lexington County, South Carolina Prepared by Michael B. Dodds, MAI, CCIM Date of Market Study - May 12, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] May 12, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Dreher Plaza 100 Dreher Road West Columbia, Lexington County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. The analysis that forms the basis of the study was conducted by Michael B. Dodds, MAI, CCIM. The subject property and all comparable data were inspected by Michael B. Dodds, MAI, CCIM on May 12, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of an unanchored shopping center that contains 20,276 square feet of leasable area. The center was constructed in 1989, and the largest tenant is Blockbuster Video, which occupies 6,400 square feet. The center is currently 100 percent occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ Michael B. Dodds ------------------------------ Michael B. Dodds, MAI, CCIM State Certified General Real Estate Appraiser (CG-543) EXECUTIVE SUMMARY ================================================================================ Regional Perspective Columbia is the state capital with the State House being located in downtown Columbia. Also, the University of South Carolina Campus is located in the downtown area. Fort Jackson, which is a large U.S. Army Training Facility is located in the eastern section of the Metropolitan area. The city has numerous specialized office activities such as: insurance, consulting services, advertising, marketing, printing and financial services. Government, distribution, finance and transportation are all important to Columbia, although none are preeminent. Geography also gives Columbia a strategic location in the industrial and commercial spheres. The unemployment rate for Lexington County as of March, 1997 was 2.6 percent while the statewide rate was 5.3 percent. Neighborhood and Site The subject neighborhood is an established area located in Lexington, South Carolina. The neighborhood is generally the developments along Columbia Avenue, within Lexington. Developments in the immediate area consist of commercial type properties located along the major thoroughfares and residential uses on the secondary streets. The area just east of Lexington has grown considerably in recent years, due primarily to the availability of vacant land. The immediate area surrounding the subject is built up, with little land available for development. A new Eckerd drug store is under construction across Old Chapin Road from the subject. An established restaurant was purchased for $1,300,000 and demolished to create the drug store site. Other new construction in the Lexington area includes several medical clinics and a Wal-Mart Supercenter. The neighborhood around the Wal-Mart has developed rapidly as a result of the construction of the store. Physical features are as follows: 1. Site Size 1.68+ Acres or 73,181 square feet 2. Identity Lexington County TMS# 4627-04-12 3. Shape Rectangular - Adequate 4. Topography Generally level, on grade with Dreher Road 5. Accessibility Good - Dreher Road and Augusta Road 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 20,276 square feet 2. Layout & Design 1 story, single building - 9 tenant spaces. Design is functional 3. Parking Spaces 104 (5.05 spaces per 1,000 SF of building area) 4. Construction Brick and glass front with concrete block on side. Roof is built up composition. 1 Market Position and Marketability Conclusions The sub-market in which the subject property is located is the Cayce-West Columbia area. According to the 1996 Central Carolina Business Review and Investment Guide, there are approximately 25 shopping centers with approximately 1,500,000 square feet. The available square feet consists of approximately 140,000 square feet with the availability rate being 9.33 percent. There are no shopping centers under construction at this time, although one small center containing 25,000 square feet and a 44,318 square foot neighborhood center anchored by Piggly Wiggly are planned for the overall sub- market. The subject property is currently 100 percent occupied. The subject property is located on US Hwy #1, just east of its intersection with Interstate #26. The location is convenient to the single family dwellings that are located throughout the neighborhood. The shopping centers in the neighborhood are generally anchored by supermarkets or discount stores. The highest local shop rental rates are achieved at these centers. The rental range for the shops in these centers is from $8.00 to $13.50 per square foot on a triple net basis. The smaller and older centers have rental rates ranging from $6.00 to $10.00 per square foot. The subject property is an unanchored retail center. The subject would typically attract a different typical tenant than a standard shopping center due to it having no true anchor tenant. The largest tenant is Blockbuster Video, which has eight stores in the Columbia area. In addition to Blockbuster, tenants at the subject include a chiropractor, a dentist office, a mail center, several restaurants, and a finance company. The lower rental rates would attract these office/service tenants that might not be found in the large Wal-Mart Center. In general, the subject property is attractive and should compete well with the smaller shopping centers. Accessibility and location are positive factors affecting the marketability of the subject. The rental rates charged at the subject range from $10.00 to $12.00 per square foot. These rents are considered reasonable for the market, although the Blockbuster appears to be slightly above market for the location. The subject property has operated at a high occupancy rate, and three of the tenants have occupied their respective spaces since completion of construction in 1989. The location of subject is strategic within the neighborhood and convenient to shoppers throughout the neighborhood. Trends: The subject property is located in the west section of the metropolitan area of Columbia. Commercial developments have occurred along US Highway #1 due to the proximity to Interstate #26 and that US Highway #1 leads into the central business district. The future of the subject is expected to include steady increases in rental rates, and stable occupancy rates. The demand and desirability for the neighborhood has been good. All trends are favorable at this time and this is expected to continue. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Dreher Plaza West Side Plaza Danwood Center ------------------------ ------------------------ ----------------------- b. Street 100 Dreher Road US #1 @ Dreher Road US #1 @ Leaphart Rd. ------------------------ ------------------------ ----------------------- c. City West Columbia, SC West Columbia, SC West Columbia, SC ------------------------ ------------------------ ----------------------- d. Distance from subject N/A 0.25 mile 0.25 mile ------------------------ ------------------------ ----------------------- e. Contact Edens & Avant, Inc. Wyatt Development ECDC ------------------------ ------------------------ ----------------------- f. Phone 803-779-4420 803-649-3975 803-553-6960 ------------------------ ------------------------ ----------------------- 2. Attributes a. Year built 1989 1988 1987 ------------------------ ------------------------ ----------------------- b. Net sq. Ft. 20,276 222,703 54,340 ------------------------ ------------------------ ----------------------- c. # building 1 1 1 ------------------------ ------------------------ ----------------------- d. # stories 1 1 1 ------------------------ ------------------------ ----------------------- e. Avg. Floor plate size (SF), if office N/A N/A N/A ------------------------ ------------------------ ----------------------- f. # elevators N/A N/A N/A ------------------------ ------------------------ ----------------------- g. Parking Adequate Adequate Adequate ------------------------ ------------------------ ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ------------------------ ------------------------ ----------------------- I. Vacancy % 0% 0% 4% ------------------------ ------------------------ ----------------------- j. Anchors, if Retail Blockbuster Wal-Mart, Bi-Lo Old America ------------------------ ------------------------ ----------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Three Fountains Plaza Caroline Square ------------------------ ------------------------ b. Street SEQ Platt Springs @ NWQ Platt Springs @ Emanual Church Emanual Church ------------------------ ------------------------ c. City West Columbia, SC West Columbia, SC ------------------------ ------------------------ d. Distance from subject 5 miles 5 mile ------------------------ ------------------------ e. Contact Edens & Avant Bobbie Culbertson ------------------------ ------------------------ f. Phone 803-779-4420 803-750-1010 ------------------------ ------------------------ 2. Attributes a. Year built 1986 1984 ------------------------ ------------------------ b. Net sq. Ft. 41,450 40,150 ------------------------ ------------------------ c. # building 1 1 ------------------------ ------------------------ d. # stories 1 1 ------------------------ ------------------------ e. Avg. Floor plate size (SF), if office N/A N/A ------------------------ ------------------------ f. # elevators N/A N/A ------------------------ ------------------------ g. Parking Adequate Adequate ------------------------ ------------------------ h. Construction Type Brick/Concrete Block Brick/Concrete Block ------------------------ ------------------------ I. Vacancy % 4.8% 0% ------------------------ ------------------------ j. Anchors, if Retail Food Lion, Revco Piggly Wiggly ------------------------ ------------------------
Comments: The vacancy at comparable #2 is a corner store which has always been difficult to lease. Comparable #3 only has two local shops, and one is vacant. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A N/A ------------------------- ------------------------- ------------------------ b. Shop Space $7.00 - $12.45 $8.00 - $13.50 $6.00 - $8.00 ------------------------- ------------------------- ------------------------ 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ------------------------- ------------------------- ------------------------ 3. Rent Concessions None None None ------------------------- ------------------------- ------------------------ 4. Effective Rent $7.00 - $12.45 $8.00 - $13.50 $6.00 - $8.00 ------------------------- ------------------------- ------------------------ 5. TI Allowance None None None ------------------------- ------------------------- ------------------------ 6. Expense Stop None None None ------------------------- ------------------------- ------------------------ 7. Length of Lease Term 3 - 5 years (shop) 3 - 5 years (shop) 1 -5 years (shop) ------------------------- ------------------------- ------------------------ 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% ------------------------- ------------------------- ------------------------ 9. Percentage Rent (per lease terms) N/A Wal-Mart, Bi-Lo Old America ------------------------- ------------------------- ------------------------ 10. Historical Annual Absorption/sq.ft. N/A N/A N/A ------------------------- ------------------------- ------------------------ 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A ------------------------- ------------------------- ------------------------ C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Superior Similar ------------------------- ------------------------- ------------------------ COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A ----------------------- ----------------------- b. Shop Space $7.50 $7.50 - $9.00 ----------------------- ----------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net ----------------------- ----------------------- 3. Rent Concessions None None ----------------------- ----------------------- 4. Effective Rent $7.50 $7.50 - $9.00 ----------------------- ----------------------- 5. TI Allowance None None ----------------------- ----------------------- 6. Expense Stop None None ----------------------- ----------------------- 7. Length of Lease Term 3 - 5 years (shop) 3-5 years (shop) ----------------------- ----------------------- 8. Commissions 5.00% to 7.00% 5.00% - 7.00% ----------------------- ----------------------- 9. Percentage Rent (per lease terms) Food Lion, Revco Piggly Wiggly ----------------------- ----------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A ----------------------- ----------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A ----------------------- ----------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) Superior Superior ----------------------- -----------------------
D. EXPLAIN RANKING/COMMENTS: Comparable #1 is much larger than the subject property, but is right across the street from the subject. Comparable #2 is very near the subject also, although is larger. Comparables #3 and #4 are both anchored by supermarkets, but are slightly older than the subject. The subject property's location is considered superior to comparables #3 and #4. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 [GRAPHIC OMITTED] Name: West Side Plaza Location: US Hwy #1 at Dreher Road West Columbia, SC Year Built: 1988 Total Size: 222,703 SF Vacant Space: 2,400 SF Vacancy Rate: 1.1% overall Rental Range: $8.00 to $13.50/SF Tenant Expenses: Triple Net Remarks: The anchor tenant is Wal-Mart. Exposure and visibility are good. This center has always had high occupancy rates and was expanded in 1992. Other tenants include Bi-Lo, Cato and Radio Shack. 5 Comparable Rental No. 2 [GRAPHIC OMITTED] Name: Danwood Center Location: US Hwy #1 at Leaphart Road West Columbia, SC Year Built: 1987 Total Size: 54,340 SF Vacant Space: 1,050 SF Vacancy Rate: 4.0% Rental Range: $6.00 - $8.00 per square foot Tenant Expenses: Triple Net Remarks: The 1,050 square foot store is located in the corner of the building and has historically been difficult to lease. The original anchor tenant was Bi-Lo, which moved to West Side Plaza. Old America sub-leases the space from Bi-Lo. 6 Comparable Rental No. 3 [GRAPHIC OMITTED] Name: Three Fountains Plaza Location: Southeast corner of Platt Springs Road and Emanual Church West Columbia, SC Year Built: 1986 Total Size: 41,450 SF Vacant Space: 2,000 SF Vacancy Rate: 4.8% Rental Rate: $7.50 per square foot Tenant Expenses: Triple Net Remarks: Food Lion and Revco are the anchor tenants. There are two local tenant shops. The property is located near the airport. The asking rate for the 2,000 square foot space is $7.50/SF. 7 Comparable Rental No. 4 [GRAPHIC OMITTED] Name: Caroline Square Shopping Center Location: NEC Platt Springs Road and Emanuel Church Road West Columbia, South Carolina Year Built: 1985 Total Size: 40,155 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $7.50 to $9.00 Tenant Expenses: Triple Net Remarks: Piggly Wiggly is the anchor tenant. The lease with Rite-Aid expired and Dollar General moved in within a couple of months. Other tenants include Trio's Salon, Starlite Video, Golden Wok, Subs and Pizza, Coin Laundry, Alternate Tanning, and Becknell Dry Cleaners. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Dreher Plaza Unnamed center Pastime Pavilion ------------------------ ------------------------ -------------------------- b. Street Address 100 Dreher Road Broad River Road@ 929 North Lake Rushmore ------------------------ ------------------------ -------------------------- c. City West Columbia, SC Columbia, SC Lexington, SC ------------------------ ------------------------ -------------------------- d. Distance from Subject N/A 6 miles 3 miles ------------------------ ------------------------ -------------------------- 2. Attributes a. Year Built 1989 1986 1990 ------------------------ ------------------------ -------------------------- b. Net sq. feet 20,276 35,000 36,903 ------------------------ ------------------------ -------------------------- c. # Buildings 1 1 1 ------------------------ ------------------------ -------------------------- d. # of Stories 1 1 1 ------------------------ ------------------------ -------------------------- e. Vacancy % 0% 0.0% 22% ------------------------ ------------------------ -------------------------- 3. Sales Information a. Sales Price N/A $1,662,860 $1,900,000 ------------------------ ------------------------ -------------------------- b. Sales Price PSF N/A $47.51 $51.49 ------------------------ ------------------------ -------------------------- c. Cap. Rate N/A 10.89% 10.23% ------------------------ ------------------------ -------------------------- d. Date N/A May 24,1990 November 1, 1996 ------------------------ ------------------------ -------------------------- e. NOI at time of Sale N/A $181,125 $194,294 ------------------------ ------------------------ -------------------------- 4. Rank Relative to Subject N/A Inferior Superior (inferior, similar, superior) ------------------------ ------------------------ -------------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name River Center Murraywood Center ----------------------- ----------------------- b. Street Address 1720 Broad River 7001 St. Andrews Road Road ----------------------- ----------------------- c. City Columbia, NC Irmo, SC ----------------------- ----------------------- d. Distance from Subject 6 miles 10 miles ----------------------- ----------------------- 2. Attributes a. Year Built 1985 1987 ----------------------- ----------------------- b. Net sq. feet 23,421 35,800 ----------------------- ----------------------- c. # Buildings 1 1 ----------------------- ----------------------- d. # of Stories 1 1 ----------------------- ----------------------- e. Vacancy % 0.0% 5.6% ----------------------- ----------------------- 3. Sales Information a. Sales Price $1,605,000 $2,020,000 ----------------------- ----------------------- b. Sales Price PSF $68.53 $56.42 ----------------------- ----------------------- c. Cap. Rate 10.40% 10.75% ----------------------- ----------------------- d. Date February 14, 1990 November 13, 1995 ----------------------- ----------------------- e. NOI at time of Sale $167,000 $217,085 ----------------------- ----------------------- 4. Rank Relative to Subject Inferior Superior (inferior, similar, superior) ----------------------- -----------------------
Explain Ranking/Comments: The comparable sales are all similar to the subject property with respect to size. Sales #1 and #3 are very similar, due to there being no anchor tenant at these properties. Comparables #2 and #4 are more specialty type centers which are less comparable to the subject. Comparable #2 also has a theater as part of the property. 9 COMPARABLE IMPROVED SALES Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: 6015-02-01 Name: Unnamed Center Location: Corner of Broad River Road and Rushmore Columbia, Richland County, SC Grantor: 2700 Partnership Grantee: SC National Bank as trustee Deed Reference: Book 982, Page 151 Date: May 24, 1990 Sales Price: $1,572,000 Adjusted Sales Price: $1,662,860 Size building 35,000 Sales Price per S.F.: $47.51 Size Land (Acres): 2.42 Size Land (S.F.): 105,415 Year Built: 1986 Land/Building Ratio: 3.01 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $247,275 EGIM: 6.72 Net Operating Income: $181,125 Overall Rate: 10.89% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of an unanchored strip shopping center in a good commercial area with good accessibility and exposure. Construction is brick veneer/concrete block. The sellers are managing the property. The sales price was adjusted to account for above market financing which was assumed. The average rent was $7.85/SF and the center was 100% occupied. 10 Comparable Sale No. 2 [GRAPHIC OMITTED] Name: Pastime Pavilion Location: 929 North Lake Drive Lexington, SC Grantor: Dixie South Land Development Corp. Grantee: Brigham Realty & Investment Date: November 1, 1996 Sales Price: $1,852,500 Adjusted Sales Price: $1,900,000 Size building: 36,903 Sales Price per S.F.: $51.49 Size Land (Acres): 5.23 Size Land (S.F.): 227,819 Year Built: 1990 Land/Building Ratio: 6.17 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Effective Gross Income: $250,577 EGIM: 7.58 Net Operating Income: $194,294 Overall Rate: 10.23% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood shopping center that was constructed in 1990. The primary tenant is a theater. An expansion of the theater was planned by the buyer. Parking is considered adequate. The occupancy at the time of sale was 22 percent. Adjusted price reflects a rent abatement/"investment" in theater. 11 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: River Center Location: 1720 Broad River Road Columbia, Richland County, SC Grantor: AR Partners - 84 Grantee: River Center Associates Date: February 14, 1990 Sales Price: $1,500,000 Adjusted Sales Price: $1,605,000 Size building: 23,421 Sales Price per S.F.: $68.53 Size Land (Acres): 1.37 Size Land (S.F.): 59,677 Year Built: 1985 Land/Building Ratio: 2.55 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Effective Gross Income: $187,089 EGIM: 8.58 Net Operating Income: $167,000 Overall Rate: 10.40% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a strip shopping center that was constructed in 1985. The primary tenant is a Color Tile. The sales price was adjusted to reflect that there was no commission paid in the sale. The property is located across from Dutch Square Mall and has 8 tenants. 12 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: 2715-2-1 Name: Murraywood Center Location: 7001 St. Andrews Road Irmo, SC Grantor: LPC of SC, Inc. Grantee: Coldwater Portfolio Investors, LLC Deed Reference: Book 3539, Page 84 Date: November 13, 1995 Sales Price: $2,020,000 Adjusted Sales Price: $2,020,000 Size building: 35,800 Sales Price per S.F.: $56.42 Size Land (Acres): 4.092 Size Land (S.F.): 178,248 Year Built: 1987 Land/Building Ratio: 4.98 to 1 Utilities: Municipal Zoning: CG, General Commercial Financing: Cash to Seller Effective Gross Income: $290,131 EGIM: 6.96 Net Operating Income: $217,085 Overall Rate: 10.75% Verification: Public Records Type of Purchaser: Private Investor Comments: New rents on shops range from $10.00 to $11.00 per square foot. The center was originally designed as a specialty center, and has over time attracted more office users. The center has good visibility and is of above average condition. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 [GRAPHIC OMITTED] Rental Comparables Map [GRAPHIC OMITTED] Improved Sale Comparables Map [GRAPHIC OMITTED] Site Plan EDENS & AVANT, INC. Retail Custom Rent Roll Date: 4/8/97 Page 103 Property: DREHER PLAZA 100 DREHER ROAD WEST COLUMBIA, SC 29169 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------------------ BLOCKBUSTER VIDEO #92578 BLOCKBUSTER VIDEOS INC. 642- 10 6,400 11/01/89 10/31/99 17.25 11/01/89 110,400.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ LITTLE CAESAR'S PIZZA #105 CBS FOODS, INC. 642- 20 1,600 04/01/90 03/31/00 0.00 0.00 0.00 11.50 04/01/93 18,399.96 12.00 04/01/94 19,200.00 - ------------------------------------------------------------------------------------------------------------------------------------ TCBY OF WEST COLUMBIA TCBY OF WEST COLUMBIA, SOLE P 642- 30 1,320 02/01/97 01/31/00 10.00 02/01/97 13,200.00 10.50 02/01/98 13,860.00 11.00 02/01/99 14,520.00 - ------------------------------------------------------------------------------------------------------------------------------------ WILLIS CHIRO-MED, INC. WILLIS CHIRO-MED 642- 40 1,650 02/01/97 01/31/00 9.75 02/01/92 16,087.56 10.25 02/01/97 16,912.56 10.50 02/01/97 17,325.00 - ------------------------------------------------------------------------------------------------------------------------------------ KIM NAILS F/K/A THE NEW WAVE, INC. 642- 50 1,320 10/01/94 09/30/99 0.00 0.00 9.50 10/01/94 12,540.00 10.50 10/01/95 13,860.00 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ BLOCKBUSTER VIDEO #92578 BLOCKBUSTER VIDEOS INC. Full 0 Full 0 Full 0 11/01/94 10/31/99 17.25 5.00 2,208,000 Y 11/01/99 10/31/04 19.84 5.00 0 Y 0.00 5.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ LITTLE CAESAR'S PIZZA #105 CBS FOODS, INC. Full 0 Full 0 Full 0 04/01/95 03/31/00 12.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ TCBY OF WEST COLUMBIA TCBY OF WEST COLUMBIA, SOLE P Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ WILLIS CHIRO-MED, INC. WILLIS CHIRO-MED Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ KIM NAILS F/K/A THE NEW WAVE, INC. Full 0 Full 0 Full 0 10/01/99 09/30/04 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 4/8/97 Page 104 Property: DREHER PLAZA 100 DREHER ROAD WEST COLUMBIA, SC 29169 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------------------ KIM NAILS F/K/A THE NEW WAVE, INC. 642- 50 1,320 10/01/94 09/30/99 11.00 10/01/96 14,520.00 - ------------------------------------------------------------------------------------------------------------------------------------ FIRST FAMILY FINANCIAL SERVIC ASSOCIATES CORPORATION OF NOR 642- 60 2,211 07/01/90 06/30/98 9.50 08/01/90 21,004.56 0.00 0.00 10.50 07/01/95 23,215.56 - ------------------------------------------------------------------------------------------------------------------------------------ NAIL CENTER USA DARREL GEORGE 642- 70 1,320 06/01/96 05/31/99 10.58 01/01/95 13,965.60 11.00 01/01/98 14,520.00 - ------------------------------------------------------------------------------------------------------------------------------------ FORM YOU 3 JJM ENTERPRISES INC. 642- 80 1,320 08/01/95 07/31/98 0.00 0.00 0.00 0.00 10.00 08/01/95 13,200.00 - ------------------------------------------------------------------------------------------------------------------------------------ DENTALCARE PARTNERS, INC. F/K/A DENTURE CARE, INC. 642- 90 3,135 06/01/90 05/31/00 0.00 0.00 0.00 0.00 0.00 0.00 9.00 06/01/93 28,215.00 9.80 06/01/95 30,723.00 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ KIM NAILS F/K/A THE NEW WAVE, INC. Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ FIRST FAMILY FINANCIAL SERVIC ASSOCIATES CORPORATION OF NOR Full 0 Full 0 Full 0 07/01/95 06/30/98 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ NAIL CENTER USA DARREL GEORGE Full 0 Full 0 Full 0 0.00 5.00 279,300 Y 0.00 5.00 290,400 Y - ------------------------------------------------------------------------------------------------------------------------------------ FORM YOU 3 JJM ENTERPRISES INC. Full 0 Full 0 Full 0 08/01/98 07/31/01 10.50 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ DENTALCARE PARTNERS, INC. F/K/A DENTURE CARE, INC. Full 0 Full 0 Full 0 06/01/95 05/31/00 9.80 0.00 0 06/01/00 05/31/05 11.25 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 20,276 Current Annual Base Rent 255,749.16 Available. 0 Total..... 20,276
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Subject Property - Looking Southeast [GRAPHIC OMITTED] Subject Property - Looking Northwest [GRAPHIC OMITTED] Subject Property - Looking North [GRAPHIC OMITTED] Parking Lot - Looking Northwest [GRAPHIC OMITTED] Dreher Road - Looking North [GRAPHIC OMITTED] Dreher Road - Looking South [GRAPHIC OMITTED] Augusta Road - Looking East [GRAPHIC OMITTED] Augusta Road - Looking West This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study FOREST DRIVE SHOPPING CENTER 1551 Sunnyside Lane Columbia, Richland County, South Carolina Prepared by Michael B. Dodds, MAI, CCIM Date of Market Study - May 15, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] May 15, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Forest Drive Shopping Center 1551 Sunnyside Drive Columbia, Richland County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. The analysis that forms the basis of the study was conducted by Michael B. Dodds, MAI, CCIM. The subject property and all comparable data were inspected by Michael B. Dodds, MAI, CCIM on May 15, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of an unanchored shopping center that contains 16,399 square feet of leasable area. The center was constructed in 1988, and the largest tenant is Blockbuster Video, which occupies 6,528 square feet. The center is currently 85.1 percent occupied, with one 2,437 square foot space available. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ Michael B. Dodds --------------------------- Michael B. Dodds, MAI, CCIM State Certified General Real Estate Appraiser (CG-543) EXECUTIVE SUMMARY ================================================================================ Regional Perspective Columbia is the state capital with the State House being located in downtown Columbia. Also, the University of South Carolina Campus is located in the downtown area. Fort Jackson, which is a large U.S. Army Training Facility is located in the eastern section of the Metropolitan area. The city has numerous specialized office activities such as: insurance, consulting services, advertising, marketing, printing and financial services. Government, distribution, finance and transportation are all important to Columbia, although none are preeminent. Geography also gives Columbia a strategic location in the industrial and commercial markets. The unemployment rate for Richland County as of March, 1997 was 3.7 percent while the statewide rate was 5.3 percent. Neighborhood and Site The subject neighborhood is within one of the most desirable sections of Columbia. The Forest Acres area has a very high average household income, and is attractive on both a residential and commercial level. Recent construction within two miles of the subject property includes the Forest Pines Retirement Residence, a 115 unit apartment community for the elderly. Other developments currently under construction includes a full service car wash and an assisted living facility. A second assisted living facility is proposed for Trenholm Road, east of the subject. The largest development in the immediate area is the Richland Fashion Mall, a 780,000 square foot regional mall. Forest Drive is a heavily traveled thoroughfare, and provides good exposure for the subject. The neighborhood is built up, and future development may require the demolition of existing structures to create a developable site. In general, the area is growing, and this positive growth should continue in the near future. Physical features are as follows: 1. Site Size 1.50+/- Acres or 65,340 square feet 2. Identity Richland County TMS# 13904-06-02 and 03 3. Shape Rectangular - Adequate 4. Topography Generally level, on grade of Forest and Sunnyside 5. Accessibility Good - Forest Dr. and Sunnyside 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 16,399 square feet 2. Layout & Design 1 story, single building - 4 tenant spaces. Design is functional 3. Parking Spaces N/A - Appears adequate 4. Construction Brick and glass front with concrete block on side. Roof is built up composition. 1 Market Position and Marketability Conclusions The sub-market in which the subject property is located is the East Columbia sub-market, which is the largest sub-market with respect to total square footage. The East Columbia sub-market is listed in the 1996 Central Carolina Business Review and Investment Guide as having 3,865,752 square feet, and represents 31.3% of the total Columbia retail market. The survey reports no retail space planned or under construction in the immediate subject area. The overall vacancy rate for this sub-market was reported at 6.9%. The second largest retail development in the sub-market is located just east of the subject property. The 780,000 square foot Richland Fashion Mall was built in 1988, and approximately 160 tenants. The mall experienced leasing difficulties in the early 1990's and lost several of its anchor tenants. An effort to reposition the mall in the retail marketplace has increased the occupancy steadily during the period between 1995 and the date of this analysis. Current anchor tenants include Parisian, JB Whites and Dillard's. The reported vacancy rate is less than 10 percent. This mall is a major influence on the retail market in the neighborhood, and has been a factor contributing to much of the smaller retail and commercial developments. The subject property is located on Forest Drive, just west of its intersection with Belt Line Boulevard. The location is convenient to the single family dwellings that are located throughout the neighborhood, as well as commuters to employment areas. The unanchored center would typically attract a different typical tenant than a standard shopping center due to it having no true anchor tenant. The largest tenant is Blockbuster Video, which has eight stores in the Columbia area. The tenant mix is considered to be average and the parking provided is adequate. According to the above mentioned survey, the subject property has rental rates in the middle of the range for the sub-market. In general, the subject property is attractive and competes well with the smaller shopping centers. There are a variety of types of retail properties in the neighborhood, including many unanchored strip centers similar to the subject. The Providence Hospital is located approximately one mile west of the subject. As a result, a large portion of the retail shops in proximity to the hospital have office/service related tenants such as medical supply companies. The rental rates charged at the subject range from$5.30 to $14.25 per square foot. These rents, for the respective spaces, are considered reasonable for the East Columbia sub-market. The subject property is configured on the site in a manner that limits the visibility of the shops to only westbound traffic. The property is somewhat affected by the absence of a traffic signal at the intersection of Forest Drive and Sunnyside Lane. Access from Sunnyside Lane to the westbound lane of Forest Drive is difficult, although this is the case with many commercial developments along Forest Drive. On the date of inspection, there was one space available that contains 2,437 square feet. This is considered to be indicative of average market conditions in the neighborhood. Trends The subject property is located on Forest Drive in the east section of the metropolitan area of Columbia. There has been little new retail development in the immediate area in recent years, and the largest retail center experienced difficulties in the early 1990's. The Richland Fashion Mall has rebounded from its problems, and appears to be operating successfully. The traffic count along Forest Drive and the attractive demographics of the surrounding neighborhoods make the immediate area appealing to a wide variety of retailers, and this trend is expected to continue. The vacancy rate for the sub-market is below the city average, and rental rates have remained stable during 1995 and 1996, with possibly a small increase in the more established centers. This is expected to remain the same in the near future for the overall market. In general, the subject property is in a good position in the marketplace, and should continue to operate successfully. 2 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================
I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Forest Drive Center Rosewood Extension Dreher Plaza -------------------- -------------------- -------------------- b. Street 1551 Sunnyside Drive 4450 Rosewood Drive 100 Dreher Road -------------------- -------------------- -------------------- c. City Columbia, SC Columbia, SC West Columbia, SC -------------------- -------------------- -------------------- d. Distance from subject N/A 5 miles 8 miles -------------------- -------------------- -------------------- e. Contact Edens & Avant, Inc. Edens & Avant, Inc. Edens & Avant, Inc. -------------------- -------------------- -------------------- f. Phone 803-779-4420 803-779-4420 803-779-4420 -------------------- -------------------- -------------------- 2. Attributes a. Year built 1988 1989 1989 -------------------- -------------------- -------------------- b. Net sq. Ft. 16,399 13,188 20,276 -------------------- -------------------- -------------------- c. # building 2 2 1 -------------------- -------------------- -------------------- d. #stories 1 1 1 -------------------- -------------------- -------------------- e. Avg. Floor plate size (SF), if office N/A N/A N/A -------------------- -------------------- -------------------- f. # elevators N/A N/A N/A -------------------- -------------------- -------------------- g. Parking Adequate Adequate Adequate -------------------- -------------------- -------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block -------------------- -------------------- -------------------- I. Vacancy % 14.9% overall 12.3% 0% -------------------- -------------------- -------------------- j. Anchors, if Retail Blockbuster Blockbuster Blockbuster -------------------- -------------------- --------------------
I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name The Forum Shoppes at 4600 -------------------- -------------------- b. Street 2818 Devine Street 4600 Forest Drive -------------------- -------------------- c. City Columbia, SC Columbia, SC -------------------- -------------------- d. Distance from subject 3 miles 4 miles -------------------- -------------------- e. Contact Edens & Avant Walter Taylor -------------------- -------------------- f. Phone 803-779-4420 803-256-1050 -------------------- -------------------- 2. Attributes a. Year built 1987 1977 -------------------- -------------------- b. Net sq. Ft. 19,570 16,060 -------------------- -------------------- c. # building 1 1 -------------------- -------------------- d. #stories 1 1 -------------------- -------------------- e. Avg. Floor plate size (SF), if office N/A N/A -------------------- -------------------- f. # elevators N/A N/A -------------------- -------------------- g. Parking Adequate Adequate -------------------- -------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block -------------------- -------------------- I. Vacancy % 0% 0% -------------------- -------------------- j. Anchors, if Retail Storehouse None -------------------- -------------------- Comments: 3 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================
B. RENTAL INFORMATION SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A N/A ----------------------- ----------------------- ---------------------- b. Shop Space $5.30 - $14.25/SF $13.00 - $15.00/SF $7.00 - $12.45/SF ----------------------- ----------------------- ---------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ----------------------- ----------------------- ---------------------- 3. Rent Concessions None None None ----------------------- ----------------------- ---------------------- 4. Effective Rent $5.30 - $14.25/SF $13.00 - $15.00/SF $7.00 - $12.45/SF ----------------------- ----------------------- ---------------------- 5. TI Allowance None None None ----------------------- ----------------------- ---------------------- 6. Expense Stop None None None ----------------------- ----------------------- ---------------------- 7. Length of Lease Term 3 - 5 years 3 - 5 years 3 - 5 years ----------------------- ----------------------- ---------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% ----------------------- ----------------------- ---------------------- 9. Percentage Rent (per lease terms) Blockbuster Video Blockbuster Video N/A ----------------------- ----------------------- ---------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A ----------------------- ----------------------- ---------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A ----------------------- ----------------------- ---------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Similar Similar ----------------------- ----------------------- ----------------------
B. RENTAL INFORMATION COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A ------------------ -------------------- b. Shop Space $12.00 - $13.00/SF $8.00 - $12.00 /SF ------------------ -------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net ------------------ -------------------- 3. Rent Concessions None None ------------------ -------------------- 4. Effective Rent $12.00 - $13.00/SF $8.00 - $12.00 /SF ------------------ -------------------- 5. TI Allowance None None ------------------ -------------------- 6. Expense Stop None None ------------------ -------------------- 7. Length of Lease Term 3 - 5 years 1 - 3 years ------------------ -------------------- 8. Commissions 5.00% to 7.00% 5.00% - 7.00% ------------------ -------------------- 9. Percentage Rent (per lease terms) N/A N/A ------------------ -------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A ------------------ -------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A ------------------ -------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) Similar Similar ------------------ -------------------- D. EXPLAIN RANKING/COMMENTS: Comparable #1 is very similar to the subject property physically, although is achieving rental rates higher than the subject. Comparable #1 has one vacant store, reflecting a vacancy rate of 12.3%. Comparable #2 is very similar to the subject also, and has a Blockbuster Video as the largest tenant. Comparables #2, #3 and #4 are unanchored strip centers and are considered very comparable to the subject. All three are 100% occupied. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 [GRAPHIC OMITTED] Name: Rosewood Extension Location: 4450 Rosewood Drive Columbia, SC Year Built: 1989 Total Size: 13,188 SF Vacant Space: 1,625+/- SF Vacancy Rate: 12.3 % Rental Range: $13.00 - $15.00/SF Tenant Expenses: Triple Net Remarks: Exposure and visibility are good. There are four tenants with Blockbuster Video occupying 6,400 square feet in a single building. The center is attractive and of good quality construction. 5 Comparable Rental No. 2 [GRAPHIC OMITTED] Name: Dreher Plaza Location: 100 Dreher Road West Columbia, SC Year Built: 1989 Total Size: 20,276 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $7.00 - $12.45 per square foot Tenant Expenses: Triple Net Remarks: A 6,400 square foot Blockbuster Video is the largest tenant in this center. It is located adjacent to a Wal-Mart Shopping Center at a heavily traveled intersection. 6 Comparable Rental No. 3 [GRAPHIC OMITTED] Name: The Forum Location: 2818 Devine Street Columbia, SC Year Built: 1987 Total Size: 19,570 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Rate: $12.00 - $13.00 per square foot Tenant Expenses: Triple Net Remarks: There are ten local tenant shops. The property is located on Devine Street near the Shandon neighborhood, a popular downtown residential area. The largest tenants are Storehouse and Round Robin. 7 Comparable Rental No. 4 [GRAPHIC OMITTED] Name: Shoppes at 4600 Location: 4600 Forest Drive Columbia, South Carolina Year Built: 1977 Total Size: 16,060 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $8.00 to $12.00 Tenant Expenses: Triple Net Remarks: This unanchored retail center has 6 tenant spaces and is 100 percent occupied. The center has historically maintained a high occupancy level. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES ================================================================================
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Forest Drive Center Unnamed center Pastime Pavilion ------------------------ ------------------------ -------------------------- b. Street Address 1551 Sunnyside Lane Broad River Road@ 929 North Lake Rushmore ------------------------ ------------------------ -------------------------- c. City Columbia, SC Columbia, SC Lexington, SC ------------------------ ------------------------ -------------------------- d. Distance from Subject N/A 8 miles 13 miles ------------------------ ------------------------ -------------------------- 2. Attributes a. Year Built 1988 1986 1990 ------------------------ ------------------------ -------------------------- b. Net sq. feet 16,399 35,000 36,903 ------------------------ ------------------------ -------------------------- c. # Buildings 1 1 1 ------------------------ ------------------------ -------------------------- d. # of Stories 1 1 1 ------------------------ ------------------------ -------------------------- e. Vacancy % 14.86% 0.0% 22% ------------------------ ------------------------ -------------------------- 3. Sales Information a. Sales Price N/A $1,662,860 $1,900,000 ------------------------ ------------------------ -------------------------- b. Sales Price PSF N/A $47.51 $51.49 ------------------------ ------------------------ -------------------------- c. Cap. Rate N/A 10.89% 10.23% ------------------------ ------------------------ -------------------------- d. Date N/A May 24,1990 November 1, 1996 ------------------------ ------------------------ -------------------------- e. NOI at time of Sale N/A $181,125 $194,294 ------------------------ ------------------------ -------------------------- 4. Rank Relative to Subject N/A Inferior Superior (inferior, similar, superior) ------------------------ ------------------------ --------------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name River Center Murraywood Center ---------------------- ---------------------- b. Street Address 1720 Broad River Road 7001 St. Andrews Road ---------------------- ---------------------- c. City Columbia, NC Irmo, SC ---------------------- ---------------------- d. Distance from Subject 7 miles 2miles ---------------------- ---------------------- 2. Attributes a. Year Built 1985 1987 ---------------------- ---------------------- b. Net sq. feet 23,421 35,800 ---------------------- ---------------------- c. # Buildings 1 1 ---------------------- ---------------------- d. # of Stories 1 1 ---------------------- ---------------------- e. Vacancy % 0.0% 5.6% ---------------------- ---------------------- 3. Sales Information a. Sales Price $1,605,000 $2,020,000 ---------------------- ---------------------- b. Sales Price PSF $68.53 $56.42 ---------------------- ---------------------- c. Cap. Rate 10.40% 10.75% ---------------------- ---------------------- d. Date February 14, 1990 November 13, 1995 ---------------------- ---------------------- e. NOI at time of Sale $167,000 $217,085 ---------------------- ---------------------- 4. Rank Relative to Subject Inferior Superior (inferior, similar, superior) ---------------------- ---------------------- Explain Ranking/Comments: The comparable sales are all larger than the subject property with respect to size. Sales #1 and #3 are very similar, due to there being no anchor tenant at these properties. Comparables #2 and #4 are more specialty type centers which are less comparable to the subject. Comparable #2 also has a theater as part of the property. 9 COMPARABLE IMPROVED SALES Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: 6015-02-01 Name: Unnamed Center Location: Corner of Broad River Road and Rushmore Columbia, Richland County, SC Grantor: 2700 Partnership Grantee: SC National Bank as trustee Deed Reference: Book 982, Page 151 Date: May 24, 1990 Sales Price: $1,572,000 Adjusted Sales Price: $1,662,860 Size building 35,000 Sales Price per S.F.: $47.51 Size Land (Acres): 2.42 Size Land (S.F.): 105,415 Year Built: 1986 Land/Building Ratio: 3.01 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $247,275 EGIM: 6.72 Net Operating Income: $181,125 Overall Rate: 10.89% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of an unanchored strip shopping center in a good commercial area with good accessibility and exposure. Construction is brick veneer/concrete block. The sellers are managing the property. The sales price was adjusted to account for above market financing which was assumed. The average rent was $7.85/SF and the center was 100 % occupied. 10 Comparable Sale No. 2 [GRAPHIC OMITTED] Name: Pastime Pavilion Location: 929 North Lake Drive Lexington, SC Grantor: Dixie South Land Development Corp. Grantee: Brigham Realty & Investment Date: November 1, 1996 Sales Price: $1,852,500 Adjusted Sales Price: $1,900,000 Size building: 36,903 Sales Price per S.F.: $51.49 Size Land (Acres): 5.23 Size Land (S.F.): 227,819 Year Built: 1990 Land/Building Ratio: 6.17 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Effective Gross Income: $250,577 EGIM: 7.58 Net Operating Income: $194,294 Overall Rate: 10.23% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood shopping center that was constructed in 1990. The primary tenant is a theater. An expansion of the theater was planned by the buyer. Parking is considered adequate. The occupancy at the time of sale was 22 percent. Adjusted price reflects a rent abatement/"investment" in theater. 11 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: River Center Location: 1720 Broad River Road Columbia, Richland County, SC Grantor: AR Partners - 84 Grantee: River Center Associates Date: February 14, 1990 Sales Price: $1,500,000 Adjusted Sales Price: $1,605,000 Size building: 23,421 Sales Price per S.F.: $68.53 Size Land (Acres): 1.37 Size Land (S.F.): 59,677 Year Built: 1985 Land/Building Ratio: 2.55 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Effective Gross Income: $187,089 EGIM: 8.58 Net Operating Income: $167,000 Overall Rate: 10.40% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a strip shopping center that was constructed in 1985. The primary tenant is a Color Tile. The sales price was adjusted to reflect that there was no commission paid in the sale. The property is located across from Dutch Square Mall and has 8 tenants. 12 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: 2715-2-1 Name: Murraywood Center Location: 7001 St. Andrews Road Irmo, SC Grantor: LPC of SC, Inc. Grantee: Coldwater Portfolio Investors, LLC Deed Reference: Book 3539, Page 84 Date: November 13, 1995 Sales Price: $2,020,000 Adjusted Sales Price: $2,020,000 Size building: 35,800 Sales Price per S.F.: $56.42 Size Land (Acres): 4.092 Size Land (S.F.): 178,248 Year Built: 1987 Land/Building Ratio: 4.98 to 1 Utilities: Municipal Zoning: CG, General Commercial Financing: Cash to Seller Effective Gross Income: $290,131 EGIM: 6.96 Net Operating Income: $217,085 Overall Rate: 10.75% Verification: Public Records Type of Purchaser: Private Investor Comments: New rents on shops range from $10.00 to $11.00 per square foot. The center was originally designed as a specialty center, and has over time attracted more office users. The center has good visibility and is of above average condition. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 [GRAPHIC OMITTED] MAP OF RENTAL COMPARABLES [GRAPHIC OMITTED] MAP OF IMPROVED SALE COMPARABLES [GRAPHIC OMITTED] Site Plan EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 28 Property: FOREST DRIVE SHOPPING CENTER 1551 SUNNYSIDE DRIVE COLUMBIA, SC 29202-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- BLOCKBUSTER VIDEO #92512 BLOCKBUSTER VIDEOS, INC. 613-10 6,528 10/01/93 09/30/98 14.25 11/01/88 93,024.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- Available 613-20 2,437 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- MAYFIELDS INC. SNIPPERS MAYFIELDS, INC. 613-30 2,434 07/01/96 06/30/99 4.82 06/01/91 11,722.92 8.02 01/01/94 19,522.92 - ------------------------------------------------------------------------------------------------------------------------- CARPET ONE DESIGN CENTERS INC WAYNE KIRBY 613-50 5,000 04/01/95 03/31/00 5.30 04/01/95 26,500.08 - ------------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied.. 13,962 Current Annual Base Rent 139,047.00 Available. 2,437 Total..... 16,399 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- BLOCKBUSTER VIDEO #92512 BLOCKBUSTER VIDEOS, INC. Full 0 Full 0 Full 0 10/01/93 09/30/98 14.25 0.00 0 10/01/98 09/30/03 16.39 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- MAYFIELDS INC. SNIPPERS MAYFIELDS, INC. Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- CARPET ONE DESIGN CENTERS INC WAYNE KIRBY Full 0 Full 0 Full 0 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Subject Property - Looking Northwest [GRAPHIC OMITTED] Subject Property - Looking South [GRAPHIC OMITTED] Subject Property - Looking East [GRAPHIC OMITTED] Subject Property - Looking Southwest [GRAPHIC OMITTED] Subject Property - Looking West [GRAPHIC OMITTED] Subject Property - Looking Southeast [GRAPHIC OMITTED] Subject Property - Looking East [GRAPHIC OMITTED] Subject Property - Looking West [GRAPHIC OMITTED] Sunnyside Lane - Looking North [GRAPHIC OMITTED] Sunnyside Lane - Looking South This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study GATEWAY PLAZA SHOPPING CENTER 1324 Broad Street Extension Sumter, Sumter County, South Carolina Prepared by Michael B. Dodds, MAI, CCIM Date of Market Study - May 8, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] May 8, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Gateway Plaza 1324 Broad Street Extension Sumter, Sumter County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. The analysis that forms the basis of the study was conducted by Michael B. Dodds, MAI, CCIM. The subject property and all comparable data were inspected by Michael B. Dodds, MAI, CCIM on May 8, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 91,150 square feet of leasable area. The center was constructed in 1989. The anchor tenant is Bi-Lo, which occupies 36,000 square foot. The shopping center local stores are currently 76.7% occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ Michael B. Dodds -------------------- Michael B. Dodds, MAI, CCIM State Certified General Real Estate Appraiser (CG-543) EXECUTIVE SUMMARY ================================================================================ Regional Perspective The subject property is located in Sumter, approximately 44 miles southeast of Columbia. The Sumter area is heavily influenced by the proximity to the Shaw Air Force Base which is located 10 miles west of Sumter. The Base employs approximately 6,900 and was established in 1942. It appears that the future of Shaw Air Force Base is safe, with the base not being included on any of the base closure lists as part of the U.S. Base Realignment Program. Other large employers in the area include Carolina Golden Products, Santee Print Works and Tuomey Regional Medical Center. The unemployment rate for Sumter County as of March, 1997 was 6.2 percent while the statewide rate was 5.3 percent. Neighborhood and Site The subject neighborhood is an established area to the northwest of the central business district of Sumter. The immediate neighborhood has been the location of several new developments in recent years. A Hampton Inn and a Comfort Suites have been built within one half mile of the subject property. Developments in the immediate area consist of commercial type properties located along the major thoroughfares and residential uses on the secondary streets. U.S. Highway #378 (Broad Street Extension) is a main road leading into the downtown region. The property is also fronts on Alice Drive, which is a secondary north/south thoroughfare. The general population of the residential areas surrounding the subject can be described as moderate to middle income. In general, the area is expected to grow at a steady rate in the near future, with both residential or commercial construction anticipated. Physical features are as follows: 1. Site Size 9.68 Acres 2. Identity Sumter County TMS# 203-11-02-009 3. Shape Irregular - Adequate 4. Topography Generally level, slightly below grade with U.S. Highway #378 5. Accessibility Good - U.S. Highway #378 & Alice Drive 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 91,150 square feet 2. Layout & Design 1 story, one building. Design is functional 3. Parking Spaces Approximately 475 (5.21 spaces per 1,000 SF of building area) 4. Construction Brick and glass front with concrete block on side. Roof is built up composition. 1 Market Position and Marketability Conclusions The subject property is located on the heavily traveled U.S. Highway #378, northwest of downtown Sumter. There are few new traditional shopping centers in this area, although two new motels were recently built. U.S. Highway #378 is also known as Broad Street Extension, and leads into the central business district. There is no formal real estate survey available for the Sumter area, therefore, published historical trends pertaining to the retail market could be reviewed. The current market appears to be stable, with several of the older shopping centers rebounding from low occupancy levels. The Wesmark Square has a vacant Rose's department store, but recently signed leases with Staples Office Supplies and Old America. The center is configured in an "L" shape, and the visibility from Broad Street is poor. A Piggly Wiggly supermarket was located in the center prior to relocating to Sumter Square. The Sumter Square shopping center was renovated in approximately 1994-95 and the anchor tenant leases were renegotiated and extended at that time. This center has reportedly experienced a high occupancy level for several years. The Piggly Wiggly store was previously occupied by Bi-Lo. The location of this neighborhood is considered to be good. The Market Place shopping center is anchored by Winn Dixie, and was built in 1990. Lease-up at this center was slow, partly due to its location on secondary thoroughfares. On the date of inspection, the center was approximately 85 - 90 percent occupied, which is considered to be its stabilized level. This shopping center is one of the more attractive centers in Sumter. The Palmetto Plaza shopping center is located on Guignard Drive closer to downtown. This shopping center in anchored by Food Lion and has a freestanding theater as part of the property. The property was recently renovated, and is only 3.2 percent vacant. The rental rates at this shopping center are similar to the subject property. The largest retail development in Sumter is the Jessamine Mall, a 345,850 square foot regional mall that was constructed in 1980. This mall is anchored by Belk's(63,913 SF), JC Penney(51,649 SF), Sears(51,633 SF), and Service Merchandise(39,329 SF). The mall was renovated in 1992, and is reportedly approximately 95 percent occupied. Freestanding retail stores are also scattered along Broad Street, with some of these having tenants including Wal-Mart, Lowes, K-Mart and Kroger. The small, unanchored strip centers along Broad Street and U.S. Highway #378 appear to have occupancy rates in the range of 75 to 85 percent. Most of the retail development in Sumter is located on Broad Street, in proximity to Jessamine Mall. With the exception of Wesmark Square, the shopping centers in the market are operating at stabilized occupancy levels which appear to be in the range of 85 to 90 percent. The vacant anchor tenants at Wesmark Square will be difficult to lease, taking into consideration many tenant's preferences to occupy freestanding stores. The tenant mix at the subject property and the comparables is typical, and tenant turnover at these centers appears to be average. The vacant stores at the subject are concentrated in the corner of the building, in a location which has limited visibility. It is likely that the rental rates for these spaces will be at the lower end of the range established by the comparables. Rental rates have increased slowly and steadily, and no proposed retail construction was discovered. The economy of Sumter is such that the demand for retail space should continue to increase moderately. Trends The subject property is located in an area of Sumter that experienced some commercial growth during 1996. The neighborhood is built up, with few large tracts of vacant land available for development. Surrounding neighborhoods provide a good population base for the retailers at the subject property, and this demand is expected to continue. Several new motels have been built in the immediate area, and this is indicative of the positive trends occurring along U.S. Highway #378. The high traffic count along U.S. Highway #378 provides excellent exposure for the subject property, and neighborhood is likely to continue to grow. The rental rates at the subject property generally are in the range of the comparables, and should maintain a competitive position in the marketplace. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Gateway Plaza Wesmark Plaza Sumter Square Market Place -------------------- -------------------- --------------------- -------------------- b. Street 1324 Broad Street Broad @ Wesmark Broad @ Bultman Alice Dr @ Wesmark Extension -------------------- -------------------- --------------------- -------------------- c. City Sumter, SC Sumter, SC Sumter, SC Sumter, SC -------------------- -------------------- --------------------- -------------------- d. Distance from subject N/A 1 mile 2 miles 1 mile -------------------- -------------------- --------------------- -------------------- e. Contact Edens & Avant Don Epley Ogburn Company Joe Davis -------------------- -------------------- --------------------- -------------------- f. Phone (803)779-4420 (717) 288-1028 (803)779-7777 (803)773-1939 -------------------- -------------------- --------------------- -------------------- 2. Attributes a. Year built 1989 1966 1972 (renovated 1995) 1990 -------------------- -------------------- --------------------- -------------------- b. Net sq. Ft. 91,150 229,417 54,140 50,000 -------------------- -------------------- --------------------- -------------------- c. # building One One One Two -------------------- -------------------- --------------------- -------------------- d. #stories One One One One -------------------- -------------------- --------------------- -------------------- e. Avg. Floor plate size N/A N/A N/A N/A (sq. Ft.), if office -------------------- -------------------- --------------------- -------------------- f. # elevators N/A N/A N/A N/A -------------------- -------------------- --------------------- -------------------- g. Parking Adequate Adequate Adequate Adequate -------------------- -------------------- --------------------- -------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block -------------------- -------------------- --------------------- -------------------- I. Vacancy % 23.3% 48% overall 0% 12 - 15 % -------------------- -------------------- --------------------- -------------------- j. Anchors, if Retail Bi-Lo, Revco Staples, Old America Piggly Wiggly Winn-Dixie -------------------- -------------------- --------------------- --------------------
COMPARABLE 4 ------------ 1. Identification a. Name Palmetto Plaza ---------------------- b. Street 493 Guignard Drive ---------------------- c. City Sumter, SC ---------------------- d. Distance from subject 2.5 miles ---------------------- e. Contact Edens & Avant ---------------------- f. Phone (803)779-4420 ---------------------- 2. Attributes a. Year built 1964-85 ---------------------- b. Net sq. Ft. 97,864 ---------------------- c. # building Five ---------------------- d. #stories One ---------------------- e. Avg. Floor plate size N/A (sq. Ft.), if office ---------------------- f. # elevators N/A ---------------------- g. Parking Adequate ---------------------- h. Construction Type Brick/Concrete Block ---------------------- I. Vacancy % 3.2% ---------------------- j. Anchors, if Retail Food Lion, McCrory's, Eckerds ---------------------- Comments: No recent retail development has occurred, with the exception of free standing drug stores. No planned retail construction was discovered during the primary research. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A N/A N/A N/A ------------------- ------------------- ------------------- ------------------- ------------------- b. Shop Space $6.50 - $9.00/SF $6.00 - $8.00/SF $6.00 - $10.00/SF $7.75 - $10.00/SF $6.00 - $8.75/SF ------------------- ------------------- ------------------- ------------------- ------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net Triple Net ------------------- ------------------- ------------------- ------------------- ------------------- 3. Rent Concessions Minimal Minimal None None None ------------------- ------------------- ------------------- ------------------- ------------------- 4. Effective Rent $6.50 - $9.00/SF $6.00 - $8.00/SF $6.00 - $10.00/SF $7.75 - $10.00/SF $6.00 - $8.75/SF ------------------- ------------------- ------------------- ------------------- ------------------- 5. TI Allowance None None None None None ------------------- ------------------- ------------------- ------------------- ------------------- 6. Expense Stop None None None None None ------------------- ------------------- ------------------- ------------------- ------------------- 7. Length of Lease Term 3 - 5 years (shops) 1 - 5 years (shops) 1 - 3 years (shops) 3 - 5 years (shops) 1 - 3 years (shops) ------------------- ------------------- ------------------- ------------------- ------------------- 8. Commissions 5.00% - 7.00% 5.00% - 7.00% 5.00% - 7.00% 5.00% - 7.00% 5.00% - 7.00% ------------------- ------------------- ------------------- ------------------- ------------------- 9. Percentage Rent Bi-Lo, Revco None None None Food Lion (per lease terms) ------------------- ------------------- ------------------- ------------------- ------------------- 10. Historical Annual N/A N/A N/A N/A N/A Absorption/sq.ft. ------------------- ------------------- ------------------- ------------------- ------------------- 11. Annual Operating N/A N/A N/A N/A N/A Expense psf (Including taxes) ------------------- ------------------- ------------------- ------------------- ------------------- C. RANK RELATIVE TO SUBJECT (inferior, Inferior Similar Superior Similar similar, superior) ------------------- ------------------- ------------------- ------------------- -------------------
D. EXPLAIN RANKING/COMMENTS: Comparable #1 has a significant amount of vacant space, with much of it being in two vacant anchor tenant stores. The center has poor visibility from Broad Street. Comparable #2 was renovated in 1995 and all leases were renegotiated and extended. This center is operating successfully and is attractive. Comparable #3 is the newest center in the area and is of above average quality construction. Comparable #4 is located on Guignard Drive, closer to downtown. This center is similar to the subject, and was recently renovated. Leasing commissions are typically cashed out in this market. 4 LOCAL RENTAL COMPARABLES ================================================================================ Comparable Rental No. 1 [GRAPHIC OMITTED] Name: Wesmark Square Location: Broad Street and Wesmark Boulevard Sumter, SC Year Built: 1966 Total Size: 229,417 SF Vacant Space: N/A Vacancy Rate: 48% overall Rental Range: $6.00 - $8.00/ SF Tenant Expenses: Triple Net Remarks: This shopping center has two large vacant anchor stores, including a 59,883 square foot Rose's store. The property is configured in an "L" shape, with one end being mostly vacant, and the other end being recently renovated. Current anchor tenants include a 21,696 square foot Staples Office Supply store and an Old America store. The property has limited visibility from Broad Street, although is across from Jessamine Mall. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Sumter Square Location: Broad Street @ Bultman Sumter, South Carolina Year Built: 1972 Total Size: 54,140 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $6.00 - $10.00 Tenant Expenses: Triple Net Remarks: The anchor tenant is Piggly Wiggly, and the property was renovated recently, and the anchor tenant leases were renegotiated at that time. The property is in good condition for its age. Other tenants include Blockbuster Video and Family Dollar. This center is attractive and has good exposure from Broad Street. 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Market Place Shopping Center Location: Alice Drive @ Wesmark Blvd. Sumter, South Carolina Year Built: 1990 Total Size: 50,000 SF Vacant Space: 2,500 - 3,000 SF Vacancy Rate: 12.5 - 15 % locals Rental Range: $7.75 - $10.00/SF Tenant Expenses: Triple Net Remarks: The anchor tenant is Winn-Dixie, which occupies 29,888 Square feet. The property is an established center in the neighborhood and was approximately 85 to 90 percent occupied on the date of inspection. The vacancy consisted of two small stores. The property overall is in good condition. 7 Comparable Rental No. 4 ================================================================================ [GRAPHIC OMITTED] Name: Palmetto Plaza Location: 493 Guignard Drive Sumter, South Carolina Year Built: 1964/96 renovation Total Size: 97,864 SF Vacant Space: 1,156 SF Vacancy Rate: 3.2% Local Rent Range: $6.00 - $8.75/SF Tenant Expenses: Triple Net Remarks: This center has an anchor tenant space that is occupied by Food Lion(32,510 SF). The vacant store contains 1,156 square feet. The property is in good condition, having been renovated in 1996.The property also has a freestanding theater building. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Gateway Plaza St. Andrews Crossing Eastgate Center ------------------------ ------------------------ -------------------------- b. Street Address 1324 Broad Street 817 St. Andrews Road NWC Whiskey Rd. & Extension Eastgate Dr. ------------------------ ------------------------ -------------------------- c. City Sumter, SC Columbia, SC Aiken, SC ------------------------ ------------------------ -------------------------- d. Distance from Subject N/A 45 miles 80 miles ------------------------ ------------------------ -------------------------- 2. Attributes a. Year Built 1989 1994 1995 ------------------------ ------------------------ -------------------------- b. Net sq. feet 91,150 66,910 75,716 ------------------------ ------------------------ -------------------------- c. # Buildings 1 1 1 ------------------------ ------------------------ -------------------------- d. # of Stories 1 1 1 ------------------------ ------------------------ -------------------------- e. Vacancy % 23.3% 0.0% 5.0% ------------------------ ------------------------ -------------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 ------------------------ ------------------------ -------------------------- b. Sales Price PSF N/A $97.89 $88.16 ------------------------ ------------------------ -------------------------- c. Cap. Rate N/A 9.69% 9.86% ------------------------ ------------------------ -------------------------- d. Date N/A May 24,1994 September 28, 1995 ------------------------ ------------------------ -------------------------- e. NOI at time of Sale N/A $634,797 $657,896 ------------------------ ------------------------ -------------------------- 4. Rank Relative to Subject N/A Superior Superior (inferior, similar, superior) ------------------------ ------------------------ --------------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name One Norman Center Paw Creek Commons ----------------------- ------------------- b. Street Address 19706 One Norman Blvd. E/S Little Rock Rd. At Freedom Drive ----------------------- ------------------- c. City Cornelius, NC Charlotte, NC ----------------------- ------------------- d. Distance from Subject 145 miles 130 miles ----------------------- ------------------- 2. Attributes a. Year Built 1993 1996 ----------------------- ------------------- b. Net sq. feet 54,185 66,050 ----------------------- ------------------- c. # Buildings 1 1 ----------------------- ------------------- d. # of Stories 1 1 ----------------------- ------------------- e. Vacancy % 0.0% 2.73% ----------------------- ------------------- 3. Sales Information a. Sales Price $4,650,000 $5,120,000 ----------------------- ------------------- b. Sales Price PSF $85.82 $77.52 ----------------------- ------------------- c. Cap. Rate 9.68% 9.60% ----------------------- ------------------- d. Date October 12, 1995 March 25, 1997 ----------------------- ------------------- e. NOI at time of Sale $450,188 $517,412 ----------------------- ------------------- 4. Rank Relative to Subject Superior Superior (inferior, similar, superior) ----------------------- ------------------- Explain Ranking/Comments: The comparable sales are all superior to the subject property with respect to age, although the subject property is in good condition and is attractive. The subject property has a desirable tenant mix and has been well managed. 9 Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: 6012 -1 -1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 10 Comparable Sale No. 2 [GRAPHIC OMITTED] Name: Eastgate Shopping Center Location: Northwest Corner of Whiskey Road & Eastgate Drive Aiken, SC Grantor: Southwest U.S. Retail, LP Grantee: PDG Aiken Partners, LP Deed Reference: N/A Date: September 28, 1995 Sales Price: $6,675,000 Adjusted Sales Price: $6,675,000 Size building: 75,716 Sales Price per S.F.: $88.16 Size Land (Acres): 8.79 Size Land (S.F.): 382,892 Year Built: 1995 Land/Building Ratio: 5.06 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Effective Gross Income: $782,704 EGIM: 8.53 Net Operating Income: $657,896 Overall Rate: 9.86% Verification: Public Records Type of Purchaser: Private Investor Comments: Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. 11 Comparable Sale No. 3 Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. 12 Comparable Sale No. 4 TMS: 59-231-22,23 pt. Name: Paw Creek Commons Location: East side of Little Rock Road at Freedom Drive Grantor: Paw Creek, LLC Grantee: Paw Creek Crossing Limited Partnership Deed Reference: Book 8988, Page 519 Date: March 25, 1997 Sales Price: $5,120,000 Adjusted Sales Price: $5,384,000 Size building: 66,050 Sales Price per S.F.: $77.52 Size Land (Acres): 9.82 Size Land (S.F.): 427,759 Year Built: 1996 Land/Building Ratio: 6.48 to 1 Utilities: Municipal Zoning: CC, Commercial Center Financing: Cash to Seller Gross Potential Income: $568,840 Effective Gross Income: $552,054 Gross Income Multiple: 9.00 EGIM: 9.27 Net Operating Income: $517,412 Overall Rate: 9.61% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was pre-construction. The sales price has been adjusted to reflect this by using 50 basis points in the capitalization rate (.1011 minus .0050 equals .0961). The major tenants are Winn-Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. The income from anchor tenants is 79.41 percent of gross income. 13 ADDENDA Comparables Rental Map Comparables Sales Map Building Layout Rent Roll Photographs of Subject 14 [GRAPHIC OMITTED] RENTALS COMPARABLES MAP [GRAPHIC OMITTED] Improved Sales Comparables Map [GRAPHIC OMITTED] Site Plan Date: 04/08/97 EDENS & AVANT, INC. Page 153 Retail Custom Rent Roll Property: GATEWAY PLAZA 1324 BROAD STREET EXTENSION SUMTER, SC 29150 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- GATEWAY LIQUOR SUNSHINE GROCERY,INC. 689- 10 1,500 07/01/95 06/30/00 0.00 0.00 8.00 07/01/95 12,000.00 8.50 07/01/97 12,750.00 - -------------------------------------------------------------------------------------------------------------------------- FACTORY OUTLETS LUKY LYNN STORES, INC. 689- 20 2,500 01/01/97 12/31/99 8.70 01/01/97 21,750.00 0.00 0.00 8.75 01/01/98 21,876.00 - -------------------------------------------------------------------------------------------------------------------------- RENT-A-CENTER RAC USA, INC., SUBSIDIARY OF 689- 30 3,400 03/15/95 07/31/98 7.00 06/01/95 23,799.96 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- BI-LO #191 BI-LO, INC. 689- 40 36,000 06/29/88 06/28/08 0.00 0.00 6.15 06/29/88 221,400.00 6.30 07/01/93 226,800.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- REVCO #1184 REVCO DISCOUNT DRUG CENTERS, 689- 50 8,450 09/01/88 08/31/98 7.00 08/01/88 59,149.92 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ GATEWAY LIQUOR SUNSHINE GROCERY,INC. Full 0 Full 0 Full 0 07/01/00 06/30/05 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ FACTORY OUTLETS LUKY LYNN STORES, INC. Full 0 Full 0 Full 0 01/01/95 12/31/95 8.82 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ RENT-A-CENTER RAC USA, INC., SUBSIDIARY OF Full 0 Full 0 Full 0 08/01/98 07/31/00 8.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ BI-LO #191 BI-LO, INC. Full 0 Full 0 Full 0 06/29/08 06/28/13 6.30 0.75 22,140,000 06/29/13 06/28/18 6.30 0.75 0 06/29/18 06/29/23 6.30 0.75 0 06/29/23 06/28/28 6.30 0.75 0 0.00 0.75 0 - ------------------------------------------------------------------------------------------------------------------------------------ REVCO #1184 REVCO DISCOUNT DRUG CENTERS, Full 0 Full 0 Full 0 09/01/98 08/31/03 7.25 2.00 2,957,500 Y 09/01/03 08/31/08 7.50 2.00 0 Y 09/01/08 08/31/13 7.75 2.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------
Date: 04/08/97 EDENS & AVANT, INC. Page 154 Retail Custom Rent Roll Property: GATEWAY PLAZA 1324 BROAD STREET EXTENSION SUMTER, SC 29150 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- REVCO #1184 REVCO DISCOUNT DRUG CENTERS, 689- 50 8,450 09/01/88 08/31/98 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- LEGACIES RESTAURANT LEGACIES BY MIKE INC. 689- 60 6,000 01/01/97 12/31/99 7.75 05/01/93 46,500.00 3.00 01/01/94 18,000.00 3.50 01/01/95 21,000.00 4.00 01/01/96 24,000.00 6.00 01/01/97 36,000.00 - -------------------------------------------------------------------------------------------------------------------------- Available 689- 70 5,400 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- Available 689- 80 1,500 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- BENEFICIAL SOUTH CAROLINA INC BENEFICIAL MANAGEMENT CORP. O 689- 90 1,500 11/01/94 01/31/00 0.00 0.00 0.00 0.00 0.00 0.00 7.50 02/01/95 11,250.00 8.00 02/01/97 12,000.00 8.25 02/01/98 12,375.00 8.50 02/01/99 12,750.00 - -------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ REVCO #1184 REVCO DISCOUNT DRUG CENTERS, Full 0 Full 0 Full 0 09/01/13 08/31/18 8.00 2.00 0 Y 09/01/18 08/31/23 8.25 2.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ LEGACIES RESTAURANT LEGACIES BY MIKE INC. Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ BENEFICIAL SOUTH CAROLINA INC BENEFICIAL MANAGEMENT CORP. O Full 0 Full 0 Full 0 02/01/00 01/31/02 9.00 0.00 0 02/01/02 01/31/04 9.50 0.00 0 02/01/04 01/31/06 10.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
Date: 04/08/97 EDENS & AVANT, INC. Page 155 Retail Custom Rent Roll Property: GATEWAY PLAZA 1324 BROAD STREET EXTENSION SUMTER, SC 29150 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- THERESA MILEY/STATE FARM THERESA B. MILEY 689- 100 1,500 03/01/95 02/28/00 6.80 01/01/89 10,200.00 6.00 03/01/94 9,000.00 6.50 03/01/95 9,750.00 7.11 03/01/97 10,665.00 - -------------------------------------------------------------------------------------------------------------------------- GOLF USA DUCOM SPORTS INC. 689- 110 2,400 09/01/94 02/28/00 7.00 03/01/95 16,800.00 - -------------------------------------------------------------------------------------------------------------------------- BANGKOK EXPRESS WANTHANI OKUHARA 689- 120 1,500 04/12/94 03/31/97 0.00 0.00 0.00 0.00 0.00 0.00 6.00 04/01/94 9,000.00 6.50 04/01/95 9,750.00 7.00 04/01/96 10,500.00 - -------------------------------------------------------------------------------------------------------------------------- FANTASTIC SAM'S FANTASTIC SAM'S, THE ORIG. FA 689- 130 1,500 09/01/94 08/31/97 6.80 09/01/91 10,200.00 0.00 0.00 0.00 0.00 0.00 0.00 6.50 09/01/94 9,750.00 - -------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ THERESA MILEY/STATE FARM THERESA B. MILEY Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ GOLF USA DUCOM SPORTS INC. Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ BANGKOK EXPRESS WANTHANI OKUHARA Full 0 Full 0 Full 0 04/01/97 03/31/98 8.00 0.00 0 04/01/98 03/31/99 8.50 0.00 0 04/01/99 03/31/00 9.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ FANTASTIC SAM'S FANTASTIC SAM'S, THE ORIG. FA Full 0 Full 0 Full 0 09/01/91 08/31/94 9.00 0.00 0 09/01/94 08/31/97 0.00 0.00 0 09/01/97 08/31/00 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
Date: 04/08/97 EDENS & AVANT, INC. Page 156 Retail Custom Rent Roll Property: GATEWAY PLAZA 1324 BROAD STREET EXTENSION SUMTER, SC 29150 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- WESTERN FLORIST BRUCE S. & DENISE MURRAY 689- 140 1,500 08/01/88 07/31/97 6.80 11/01/91 10,200.00 6.50 08/01/94 9,750.00 - -------------------------------------------------------------------------------------------------------------------------- LONG NAILS BAI LE 689- 150 1,500 10/01/96 10/31/99 8.10 10/01/96 12,150.00 9.00 11/01/98 13,500.00 - -------------------------------------------------------------------------------------------------------------------------- MOVIEMAX ABRAHAM ALSTON 689- 160 5,000 01/01/91 12/31/97 6.00 10/01/93 30,000.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- Available 689- 170 4,000 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- OMAHA STOCKYARD & SALOON WALTER I. DAVIDS 689- 180 6,000 06/01/95 05/31/00 6.00 06/01/95 36,000.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied.. 80,250 Current Annual Base Rent 527,114.88 Available. 10,900 Total..... 91,150 - ------------------------------------------------------------------------------------------------------------------------------------ REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ WESTERN FLORIST BRUCE S. & DENISE MURRAY Full 0 Full 0 Full 0 11/01/91 10/31/94 8.50 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ LONG NAILS BAI LE Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ MOVIEMAX ABRAHAM ALSTON Full 0 Full 0 Full 0 10/01/94 09/30/97 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ OMAHA STOCKYARD & SALOON WALTER I. DAVIDS Full 0 Full 0 Full 0 06/01/00 05/31/05 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Subject Property Looking South [GRAPHIC OMITTED] Subject Property Looking Southwest [GRAPHIC OMITTED] Subject Property Looking Southwest [GRAPHIC OMITTED] Subject Property Looking West [GRAPHIC OMITTED] Rear of Subject Looking East [GRAPHIC OMITTED] Rear of Subject Looking North [GRAPHIC OMITTED] Highway #378 Looking East [GRAPHIC OMITTED] Highway #378 Looking West [GRAPHIC OMITTED] Alice Drive Looking South [GRAPHIC OMITTED] Alice Drive Looking North This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study GOLD RUSH SHOPPING CENTER 316 South Mine Street McCormick, McCormick County, South Carolina Prepared by Michael B. Dodds, MAI, CCIM Date of Market Study - May 19, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] May 19, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Gold Rush Shopping Center 316 South Mine Street McCormick, McCormick County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. The analysis that forms the basis of the study was conducted by Michael B. Dodds, MAI, CCIM. The subject property and all comparable data were inspected by Michael B. Dodds, MAI, CCIM on May 19, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 39,700 square feet of leasable area. The center was constructed in 1993. The three tenants at the property are Food Lion, which occupies 25,000 square foot, Eckerd's, which occupies 7,680 square feet, and Family Dollar, with 7,020 square feet. The shopping center has no local stores. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ Michael B. Dodds --------------------------- Michael B. Dodds, MAI, CCIM State Certified General Real Estate Appraiser (CG-543) [LOGO] EXECUTIVE SUMMARY ================================================================================ Regional Perspective The subject property is located in McCormick, which is the county seat of McCormick County. McCormick is approximately 70 miles southwest of Columbia and 40 miles northwest of Augusta, Georgia. The population of McCormick County is approximately 8,868, with 1,659 living in the town of McCormick. The county population is projected to increase at a steady rate in due in part to the construction of Savannah Lakes, a 4,000 acre retirement development on Lake Thurmond. The economic base of the McCormick area is heavily associated with recreation and textiles. Milliken and Company, in operation since 1946, employs approximately 180,.With over 90 percent of the land in the county being forested, the timber business is also very strong. Recreational business in the area is centered around activities on Lake Thurmond and hunting . Approximately 6 million people visit Lake Thurmond annually. The unemployment rates for McCormick County as of March, 1997 was 9.8 percent, while the statewide rate was 5.3. Neighborhood and Site The subject property is located in an established area which is generally the downtown area of McCormick. The immediate neighborhood has had minimal new construction in recent years. The newer developments, which were built during the 1990's, include the McCormick Manor apartments, the Willow Creek apartments and a small office complex. Developments in the immediate area consist of commercial type properties located along the major roads and residential uses on the secondary streets. U.S. Highway #378 is a main road leading into the downtown area, and connects McCormick with Lexington and Columbia to the northeast. U.S. Highway #221 connects the area to Greenwood and Augusta. The general population of the residential areas surrounding the subject can be described as moderate to middle income. Many of the single family residential structures in the downtown area are older, and have been converted to commercial uses. In general, the McCormick area is expected to grow at a slow but steady rate in the near future. Physical features are as follows: 1. Site Size 5.54 Acres 2. Identity McCormick County TMS# 126-05-11-027 3. Shape Irregular - Adequate 4. Topography Generally level, slightly above grade of U.S. Hwy #221 5. Accessibility Good - U.S. Highway #221 (South Mine Street) 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 39,700 square feet 2. Layout & Design 1 story, one building. Design is functional 3. Parking Spaces N/A - Appears adequate 4. Construction Brick and glass front with concrete block on side. Roof is built up composition. 1 Market Position and Marketability Conclusions The subject property is located on U.S. Highway #221 in the downtown area of McCormick. There are no new traditional shopping centers in this area. The retail establishments in the region generally consist of local stores in renovated single family residences or older strip centers. There are several locally owned supermarkets and drug stores that are considerably smaller than the subject property. The subject property is the new supermarket in the region, having opened for business during the 1993. Food Lion has operated in South Carolina for many years, and has a loyal shopper base. The subject Food Lion appears to be operating successfully. The subject property is the newest and highest quality shopping center in the McCormick area. Larger department stores and regional shopping centers are located in Augusta to the southeast. These centers are not considered to be competitive with the subject property, and therefore have not been analyzed. In general, the McCormick retail market serves the immediate town population and nearby rural areas. An inspection of the McCormick market and surrounding areas revealed no retail properties under construction that would compete with the retailers at the subject property. The three tenants at the subject property are occupying their space on long term leases, and there are no local tenants. The Food Lion lease will expire in 2013, the Eckerd's lease will expire in 2003, and the Family Dollar lease will expire in 2002. The subject site has additional space available for expansion of the shopping center. The rental rate for the Food Lion is $5.55 per square foot on a level basis for a 20 year term. This is at the low end of the range of the rental rates being paid for other supermarkets in the region. Eckerd's pays a rental rate of $6.90 per square foot for the remaining 6 years and 4 months. This rate is also reasonable, and supported by comparable drug store rental comparables throughout the state of South Carolina. The Family Dollar lease is for $4.64 per square foot which is also reasonable. The subject property is occupied by three high credit tenants, with no local shops. The long term leases make the subject less vulnerable to changes in the local market. The contract rental rates are at levels which are considered to be equal to market rents, and the subject property is less than one year old. In general, the subject property is in a very competitive position in the marketplace, and is the tenants appear to operate successfully. Trends The subject property is located in the downtown area of McCormick. The immediate area and surrounding rural regions provide a good population base for the retailers at the subject property, and this demand is expected to continue. The traffic count along U.S. Highway #221 provides good exposure for the subject property, and the subject is accessible from surrounding areas. The rental rates for the tenants at the subject property are within the range of comparable properties, and the retailers should maintain a competitive position in the marketplace. No detrimental conditions were found which would have a negative impact on the future of the subject property. No planned retail construction was discovered, and the subject property should continue to be the primary shopping center in the market. 2 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================
I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Gold Rush Center Broad River Center Mills Corner ------------------------ ------------------------ ------------------------- 316 S. Mine Street 1003 Broad River Road Augusta Road @ Old b. Street Cherokee Road ------------------------ ------------------------ ------------------------- c. City McCormick, SC Columbia, SC Lexington, SC ------------------------ ------------------------ ------------------------- d. Distance from subject N/A 45 miles 35 miles ------------------------ ------------------------ ------------------------- e. Contact Edens & Avant Edens & Avant Ron Swinson ------------------------ ------------------------ ------------------------- f. Phone (803)779-4420 (803)779-4420 (803)779-7777 ------------------------ ------------------------ ------------------------- 2. Attributes a. Year built 1992 1996 1995 ------------------------ ------------------------ ------------------------- b. Net sq. Ft.(tenant) 39,700 29,000 33,413 ------------------------ ------------------------ ------------------------- c. # building One One One ------------------------ ------------------------ ------------------------- d. #stories One One One ------------------------ ------------------------ ------------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A ------------------------ ------------------------ ------------------------- f. # elevators N/A N/A N/A ------------------------ ------------------------ ------------------------- g. Parking Adequate Adequate Adequate ------------------------ ------------------------ ------------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ------------------------ ------------------------ ------------------------- I. Vacancy % 0% N/A N/A ------------------------ ------------------------ ------------------------- j. Anchors, if Retail Food Lion, Eckerd's, Food Lion, Revco Piggly Wiggly Family Dollar ------------------------ ------------------------ -------------------------
I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Saluda Towne Center Broad River Center ---------------------- ---------------------- 1003 Broad River Road b. Street ---------------------- ---------------------- c. City Saluda, SC Columbia, SC ---------------------- ---------------------- d. Distance from subject 45 miles 45 miles ---------------------- ---------------------- e. Contact Edens & Avant Edens & Avant ---------------------- ---------------------- f. Phone (803)779-4420 (803)779-4420 ---------------------- ---------------------- 2. Attributes ---------------------- a. Year built 1996 1996 ---------------------- ---------------------- b. Net sq. Ft.(tenant) 7,680 8,450 ---------------------- ---------------------- c. # building One One ---------------------- ---------------------- d. #stories One One ---------------------- ---------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A ---------------------- ---------------------- f. # elevators N/A N/A ---------------------- ---------------------- g. Parking Adequate Adequate ---------------------- ---------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block ---------------------- ---------------------- I. Vacancy % N/A N/A ---------------------- ---------------------- j. Anchors, if Retail Food Lion, Revco Food Lion, Revco ---------------------- ---------------------- Comments: No recent retail development has occurred. No planned retail construction was discovered during the primary research. 3 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================
B. RENTAL INFORMATION SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Contract Rental Rates a. Supermarket $5.55/SF $7.98/SF $7.60/SF ----------------------- ------------------------ -------------------------- b. Drug Store $6.90/SF N/A N/A ----------------------- ------------------------ -------------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ----------------------- ------------------------ -------------------------- 3. Rent Concessions None None None ----------------------- ------------------------ -------------------------- 4. Effective Rent $5.55 - $6.90/SF $7.98/SF $7.60/SF ----------------------- ------------------------ -------------------------- 5. TI Allowance None None None ----------------------- ------------------------ -------------------------- 6. Expense Stop None None None ----------------------- ------------------------ -------------------------- 7. Length of Lease Term 15 - 20 years 20 years 20 years ----------------------- ------------------------ -------------------------- 8. Commissions N/A N/A N/A ----------------------- ------------------------ -------------------------- 9. Percentage Rent (per lease terms) Food Lion , Revco Food Lion Piggly Wiggly ----------------------- ------------------------ -------------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A ----------------------- ------------------------ -------------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A ----------------------- ------------------------ -------------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Similar Similar ----------------------- ------------------------ --------------------------
B. RENTAL INFORMATION COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Contract Rental Rates a. Supermarket N/A N/A ---------------------- --------------------- b. Drug Store $8.30/SF $9.75/SF ---------------------- --------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net ---------------------- --------------------- 3. Rent Concessions None None ---------------------- --------------------- 4. Effective Rent $8.30/SF $9.75/SF ---------------------- --------------------- 5. TI Allowance None None ---------------------- --------------------- 6. Expense Stop None None ---------------------- --------------------- 7. Length of Lease Term 15 years 15 years ---------------------- --------------------- 8. Commissions N/A N/A ---------------------- --------------------- 9. Percentage Rent (per lease terms) N/A N/A ---------------------- --------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A ---------------------- --------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A ---------------------- --------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) Similar Similar ---------------------- --------------------- D. EXPLAIN RANKING/COMMENTS: Comparable #1 and #2 are supermarket leases which are considered to be similar to the subject. The subject supermarket rental rate is below the range, which reflects the very low land values in the area. Comparable #1 is a lease to Food Lion, the same tenant as the subject anchor. Comparables #3 and #4 are in-line drug store leases. These are becoming less common, due to the popularity of freestanding stores. The physical characteristics of the comparables and the subject are considered to be similar. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Broad River Center Location: 1003 Broad River Road Columbia, South Carolina Year Built: 1996 Total Size: 29,000 SF (Food Lion) Vacant Space: 0 Vacancy Rate: 0% Rental Rate: $7.98/ SF Tenant Expenses: Triple Net Remarks: This shopping center has anchor stores, including a Food Lion and Revco. The Food Lion lease is for twenty years at a level rental rate. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Mills Corner Shopping Center Location: Augusta Road at Old Cherokee Road Lexington, South Carolina Year Built: 1995 Total Size: 43,613 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Rate: $8.55/SF Tenant Expenses: Triple Net Remarks: The anchor tenant is Piggly Wiggly with approximately 33,413 square feet. 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Saluda Towne Center Location: U.S. Highway #378 at Clemson Road Saluda, South Carolina Year Built: 1996 Total Size: 7,680 SF(Revco) Vacant Space: 0 SF Vacancy Rate: 0% locals Rental Rate: $8.30/SF (Revco) Tenant Expenses: Triple Net Remarks: This center is located in the downtown area of a small town. The property is an new center that was built in 1996. Other anchor tenant is Food Lion. There are no local tenants, and there is no room for expansion. 7 Comparable Rental No. 4 ================================================================================ [GRAPHIC OMITTED] Name: Broad River Center Location: 1003 Broad River Road Columbia, South Carolina Year Built: 1996 Total Size: 8,450 SF (Revco) Vacant Space: 0 Vacancy Rate: 0% Rental Rate: $9.75/ SF Tenant Expenses: Triple Net Remarks: This shopping center has anchor stores including a Food Lion and Revco. The Revco lease is for fifteen years at a level rental rate. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES ================================================================================
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Gold Rush Shopping St. Andrews Crossing Eastgate Center Center ------------------------ ------------------------ -------------------------- 316 S. Mine Street 817 St. Andrews Road NWC Whiskey Rd. & b. Street Address Eastgate Dr. ------------------------ ------------------------ -------------------------- c. City McCormick, SC Columbia, SC Aiken, SC ------------------------ ------------------------ -------------------------- d. Distance from Subject N/A 35 miles 28 miles ------------------------ ------------------------ -------------------------- 2. Attributes a. Year Built 1992 1994 1995 ------------------------ ------------------------ -------------------------- b. Net sq. feet 39,700 66,910 75,716 ------------------------ ------------------------ -------------------------- c. # Buildings 1 1 1 ------------------------ ------------------------ -------------------------- d. # of Stories 1 1 1 ------------------------ ------------------------ -------------------------- e. Vacancy % 0.0% 0.0% 5.0% ------------------------ ------------------------ -------------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 ------------------------ ------------------------ -------------------------- b. Sales Price PSF N/A $97.89 $88.16 ------------------------ ------------------------ -------------------------- c. Cap. Rate N/A 9.69% 9.86% ------------------------ ------------------------ -------------------------- d. Date N/A May 24,1994 September 28, 1995 ------------------------ ------------------------ -------------------------- e. NOI at time of Sale N/A $634,797 $657,896 ------------------------ ------------------------ -------------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A Similar Similar ------------------------ ------------------------ --------------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name One Norman Center Paw Creek Commons ----------------------- -------------------- 19706 One Norman Blvd. E/S Little Rock Rd. b. Street Address At Freedom Drive ----------------------- -------------------- c. City Cornelius, NC Charlotte, NC ----------------------- -------------------- d. Distance from Subject 145 miles 130 miles ----------------------- -------------------- 2. Attributes a. Year Built 1993 1996 ----------------------- -------------------- b. Net sq. feet 54,185 66,050 ----------------------- -------------------- c. # Buildings 1 1 ----------------------- -------------------- d. # of Stories 1 1 ----------------------- -------------------- e. Vacancy % 0.0% 2.73% ----------------------- -------------------- 3. Sales Information a. Sales Price $4,650,000 $5,120,000 ----------------------- -------------------- b. Sales Price PSF $85.82 $77.52 ----------------------- -------------------- c. Cap. Rate 9.68% 9.60% ----------------------- -------------------- d. Date October 12, 1995 March 25, 1997 ----------------------- -------------------- e. NOI at time of Sale $450,188 $517,412 ----------------------- -------------------- 4. Rank Relative to Subject (inferior, similar, superior) Superior Superior ----------------------- -------------------- Explain Ranking/Comments: The comparable sales are all superior to the subject property with respect to location. The subject property has a desirable tenant mix and has been well managed. The subject property has three stores, with each being occupied by high credit tenants on net leases. There are no local tenant spaces at the subject property. This type of development would be very attractive to investors, and a capitalization rate at the low end of the range would be justified. 9 COMPARABLE IMPROVED SALES Comparable Sale No. 1 ================================================================================ [GRAPHIC OMITTED] TMS: 6012 -1 -1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 10 Comparable Sale No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Eastgate Shopping Center Location: Northwest Corner of Whiskey Road & Eastgate Drive Aiken, SC Grantor: Southwest U.S. Retail, LP Grantee: PDG Aiken Partners, LP Deed Reference: N/A Date: September 28, 1995 Sales Price: $6,675,000 Adjusted Sales Price: $6,675,000 Size building: 75,716 Sales Price per S.F.: $88.16 Size Land (Acres): 8.79 Size Land (S.F.): 382,892 Year Built: 1995 Land/Building Ratio: 5.06 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Effective Gross Income: $782,704 EGIM: 8.53 Net Operating Income: $657,896 Overall Rate: 9.86% Verification: Public Records Type of Purchaser: Private Investor Comments: Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. 11 Comparable Sale No. 3 ================================================================================ [GRAPHIC OMITTED] Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. 12 Comparable Sale No. 4 ================================================================================ [GRAPHIC OMITTED] TMS: 59-231-22,23 pt. Name: Paw Creek Commons Location: East side of Little Rock Road at Freedom Drive Grantor: Paw Creek, LLC Grantee: Paw Creek Crossing Limited Partnership Deed Reference: Book 8988, Page 519 Date: March 25, 1997 Sales Price: $5,120,000 Adjusted Sales Price: $5,384,000 Size building: 66,050 Sales Price per S.F.: $77.52 Size Land (Acres): 9.82 Size Land (S.F.): 427,759 Year Built: 1996 Land/Building Ratio: 6.48 to 1 Utilities: Municipal Zoning: CC, Commercial Center Financing: Cash to Seller Effective Gross Income: $552,054 Gross Income Multiple: 9.00 EGIM: 9.27 Net Operating Income: $517,412 Overall Rate: 9.61% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was pre-construction. The sales price has been adjusted to reflect this by using 50 basis points in the capitalization rate (.1011 minus .0050 equals .0961). The major tenants are Winn-Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. The income from anchor tenants is 79.41 percent of gross income. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 [GRAPHIC OMITTED] MAP OF RENTAL COMPARABLES [GRAPHIC OMITTED] MAP OF IMPROVED SALES COMPARABLES [GRAPHIC OMITTED] Site Plan EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 148 Property: GOLDRUSH SHOPPING CENTER 316 SOUTH MINE STREET MCCORMICK, SC Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- ECKERD'S #8079 F/K/A RITE AID #3332 683-10 7,680 09/20/93 09/30/03 6.90 10/01/93 52,992.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- FOOD LION #1246 FOOD LION, INC. 683-20 25,000 09/22/93 09/30/13 0.00 0.00 5.55 10/01/93 138,750.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- FAMILY DOLLAR STORES INC. #93 FAMILY DOLLAR STORES, INC. 683-30 7,020 08/24/93 12/31/02 4.64 09/01/93 32,550.00 0.00 0.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied.. 39,700 Current Annual Base Rent 224,292.00 Available. 0 Total..... 39,700 - ----------------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- ECKERD'S #8079 F/K/A RITE AID #3332 Full 0 Full 0 Full 0 10/01/03 09/30/08 7.40 2.00 2,649,600 Y 10/01/09 09/30/14 7.90 2.00 0 Y 10/01/14 09/30/19 8.40 2.00 0 Y 10/01/19 09/30/24 8.90 2.00 0 Y 10/01/24 09/30/29 9.40 2.00 0 Y 10/01/29 09/30/34 9.90 2.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- FOOD LION #1246 FOOD LION, INC. Full 0 PRS 1994 Fixed 0 10/01/13 09/30/18 0.00 1.00 0 Y 10/01/18 09/30/23 0.00 1.00 13,875,000 Y 10/01/23 09/30/28 0.00 1.00 0 Y 10/01/28 09/30/33 0.00 1.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- FAMILY DOLLAR STORES INC. #93 FAMILY DOLLAR STORES, INC. PRS 1994 PRS 1994 Full 0 01/01/03 12/31/07 4.92 2.50 1,302,000 Y 01/01/08 12/31/12 5.09 2.50 0 Y 01/01/13 12/31/17 5.26 2.50 0 Y 01/01/18 12/31/22 5.43 2.50 0 Y - -----------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Subject Property Looking North [GRAPHIC OMITTED] Subject Property Looking East [GRAPHIC OMITTED] Subject Property Looking Northeast [GRAPHIC OMITTED] Rear Of Food Lion Looking West [GRAPHIC OMITTED] Rear Of Family Dollar Looking West [GRAPHIC OMITTED] Rear Of Eckerd Looking Southwest [GRAPHIC OMITTED] Entrance From U.S. Highway #221 [GRAPHIC OMITTED] Entrance From U.S. Highway #221 [GRAPHIC OMITTED] U.S. Highway #221 Looking Southeast This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study LEXINGTON VILLAGE SHOPPING CENTER 205 Columbia Avenue Lexington, Lexington County, South Carolina Prepared by Michael B. Dodds, MAI, CCIM Date of Market Study - May 9, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] May 9, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Lexington Village 205 Columbia Village Lexington, Lexington County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that forms the basis of the study was conducted by Michael B. Dodds, MAI, CCIM. The subject property and all comparable data were inspected by Michael B. Dodds, MAI, CCIM on May 9, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of an unanchored shopping center that contains 30,764 square feet of leasable area. The center was constructed in 1988, and the largest tenant is Sansbury Opticians, which occupies 4,845 square feet. The shopping center is currently 95.1% occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ Michael B. Dodds -------------------- Michael B. Dodds, MAI, CCIM State Certified General Real Estate Appraiser (CG-543) EXECUTIVE SUMMARY ================================================================================ Regional Perspective Columbia is the state capital with the State House being located in downtown Columbia. Also, the University of South Carolina Campus is located in the downtown area. Fort Jackson, which is a large U.S. Army Training Facility is located in the eastern section of the Metropolitan area. The city has numerous specialized office activities such as: insurance, consulting services, advertising, marketing, printing and financial services. Government, distribution, finance and transportation are all important to Columbia, although none are preeminent. Geography also gives Columbia a strategic location in the industrial and commercial spheres. The unemployment rate for Lexington County as of March, 1997 was 2.6 percent while the statewide rate was 5.3 percent. Neighborhood and Site The subject neighborhood is an established area located in Lexington, South Carolina. The neighborhood is generally the developments along Columbia Avenue, within Lexington. Developments in the immediate area consist of commercial type properties located along the major thoroughfares and residential uses on the secondary streets. The area just east of Lexington has grown considerably in recent years, due primarily to the availability of vacant land. The immediate area surrounding the subject is built up, with little land available for development. A new Eckerd drug store is under construction across Old Chapin Road from the subject. An established restaurant was purchased for $1,300,000 and demolished to create the drug store site. Other new construction in the Lexington area includes several medical clinics and a Wal-Mart Supercenter. The neighborhood around the Wal-Mart has developed rapidly as a result of the construction of the store. Physical features are as follows: 1. Site Size 4.073+/- Acres or 177,420 square feet 2. Identity Lexington County TMS# 4323-03-17 3. Shape Irregular - Adequate 4. Topography Generally level, on grade with Columbia Avenue 5. Accessibility Good - Columbia Avenue and Old Chapin Road 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 30,764 square feet 2. Layout & Design 1 story, two buildings, one structure is located on ground leased site. Design is functional 3. Parking Spaces N/A - Appears adequate 4. Construction Brick and glass front with concrete block on side. Roof is built up composition. 1 Market Position and Marketability Conclusions The subject property is located in a sub-market that is identified as Lexington. The demographics of this area are very attractive to most retailers, with the subdivisions expanding rapidly and the high income characteristics of Lake Murray neighborhoods. The largest new retail development is the new Wal-Mart Supercenter. The local shops at this center were 100 percent pre-leased upon completion of construction. In addition to the shopping centers, several freestanding drug stores have been built in the general area during 1996 and 1997. Shopping centers in the immediate area of the subject include Village Square and Town Square. These centers are experiencing vacancy levels similar to the sub-market. According to the 1996 Central Carolina Business Review and Investment Guide, Lexington is a sixth largest retail sub-market containing 722,567 square feet or 5.5% of all retail space surveyed. The Winn-Dixie Shopping Center in South Congaree, with 44,000 square feet was to added to the sub-market. Twelve of the 158 completed retail shopping centers surveyed were in the Lexington area, with 46,190 square feet of space vacant for a vacancy rate of 6.4%, the fourth lowest vacancy rate in the ten areas. Twelve months earlier the vacancy rate was 8.1%, and 24 months earlier the vacancy rate was 11.1%. There is one center that is planned for this area, Lexington Place Phase II, on Sunset Boulevard at Old Cherokee Road. This center will add approximately 63,000 square feet to this market. The Wal-Mart Supercenter on Sunset Boulevard is nearing completion and will add 202,847 square feet to this submarket when completed. The average rental rate of a new lease in this area is $9.23 per square foot, up $ 0.23 per square foot from the last survey and up $ 0.43 per square foot from the survey two years ago. The subject property is located in the west section of the city of Lexington. The neighborhood is an older area that is built up. Several of the oldest shopping centers in Lexington are in the neighborhood. These include the subject property, Town Square and Lexington K-Mart Center. There are other shopping centers that are located along Highway #378. The Lexington K-Mart Center is anchored by K-Mart stores and the rental range for the shops is from $9.00 - $10.00 per square foot. The Village Square Shopping Center was renovated approximately two years ago and the Bi-Lo Store was expanded. The rental rates range from $8.00 to $10.00 per square foot. The Lexington Place Shopping Center has Publix Stores as the anchor tenant with shops. Phase II is planned for Lexington Place. The rental range for the shops is from $8.20 to $14.00 per square foot. The subject property rental rates for the shops ranges from $8.00 to $12.45 per square foot. This is within the range of the rental rates for the shops in the comparable shopping centers. The vacancy rate at the subject was 4.9 percent on the date of inspection, and the center has historically maintained a high occupancy level. It should be mentioned that Wal-Mart will be vacating the store in Triangle Village to occupy the Wal-Mart Superstore after completion.The location of subject property is good, as it is in the highly traveled downtown area. The subject property is an unanchored retail center. The subject would typically attract a different typical tenant than a standard shopping center due to it having no true anchor tenant. Tenants at the subject include an optician, a travel agency, a mail center, several restaurants, and a temporary personnel agency. The lower rental rates would attract these office/service tenants that would not be found in the large Wal-Mart Center. In general, the subject property is attractive and should compete well with the smaller shopping centers. Accessibility and location are positive factors affecting the marketability of the subject. 2 Trends The subject property is located in the west section of the city of Lexington. This neighborhood is in the older, built up area, near downtown. Much of the new growth is occurring to the east of the subject, and this trend is expected to continue. The future of the subject is expected to include steady increases in rental rates, and stable occupancy rates. The single family developments in the Lexington area have grown rapidly, which should positively affect all retail centers. 3 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Lexington Village Lexington K-Mart Village Square ---------------------- ----------------------- ----------------------- b. Street 205 Columbia Avenue N/S West Main Street N/S Columbia Ave. ---------------------- ----------------------- ----------------------- c. City Lexington, SC Lexington, SC Lexington, SC ---------------------- ----------------------- ----------------------- d. Distance from subject N/A 1 mile 2.0 miles ---------------------- ----------------------- ----------------------- e. Contact Edens & Avant, Inc. Baker & Baker Keenan Company ---------------------- ----------------------- ----------------------- f. Phone 803-779-4420 803-254-8987 803-254-2300 ---------------------- ----------------------- ----------------------- 2. Attributes a. Year built 1988 1986 1975 (Reh. 1994) ---------------------- ----------------------- ----------------------- b. Net sq. Ft. 30,764 78,000 67,000 ---------------------- ----------------------- ----------------------- c. # building 1 1 1 ---------------------- ----------------------- ----------------------- d. #stories 1 1 1 ---------------------- ----------------------- ----------------------- e. Avg. Floor plate size (SF), if office N/A N/A N/A ---------------------- ----------------------- ----------------------- f. # elevators N/A N/A N/A ---------------------- ----------------------- ----------------------- g. Parking Adequate Adequate Adequate ---------------------- ----------------------- ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ---------------------- ----------------------- ----------------------- i. Vacancy % 4.9% 0% 11.94% ---------------------- ----------------------- ----------------------- j. Anchors, if Retail None K-Mart Bi-Lo ---------------------- ----------------------- ----------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Lexington Place, PH. I Towne Square ----------------------- ----------------------- b. Street N/S Sunset Blvd. at Old Cherokee Rd. US HWY #1 @ Postal ----------------------- ----------------------- c. City Lexington, SC Lexington, SC ----------------------- ----------------------- d. Distance from subject 2.5 miles 1 mile ----------------------- ----------------------- e. Contact Holmes-Smith Dev. Co. Bob Wright ----------------------- ----------------------- f. Phone 803-748-1252 803-799-9683 ----------------------- ----------------------- 2. Attributes a. Year built 1994 1975 ----------------------- ----------------------- b. Net sq. Ft. 60,944 76,000 ----------------------- ----------------------- c. # building 1 1 ----------------------- ----------------------- d. #stories 1 1 ----------------------- ----------------------- e. Avg. Floor plate size (SF), if office N/A N/A ----------------------- ----------------------- f. # elevators N/A N/A ----------------------- ----------------------- g. Parking Adequate Adequate ----------------------- ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block ----------------------- ----------------------- i. Vacancy % 0% 8+% - ----------------------- ----------------------- j. Anchors, if Retail Publix Food Lion ----------------------- -----------------------
Comments: These comparables are located in Lexington and nearby the subject. Comparable No. 1 is anchored by a K-Mart store. Comparable No. 4 is anchored by a Food Lion and is the oldest shopping center in the area. All of the comparables are larger than subject, but are considered similar. The subject property has a vacancy rate below the average for the sub-market. 4 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A N/A ----------------------- ----------------------- ---------------------- b. Shop Space $7.00 - $12.45 $9.00 - $10.00 $8.00 - $10.00 ----------------------- ----------------------- ---------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ----------------------- ----------------------- ---------------------- 3. Rent Concessions None None None ----------------------- ----------------------- ---------------------- 4. Effective Rent $7.00 - $12.45 $9.00 - $10.00 $8.00 - $10.00 ----------------------- ----------------------- ---------------------- 5. TI Allowance None None None ----------------------- ----------------------- ---------------------- 6. Expense Stop None None None ----------------------- ----------------------- ---------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 - 5 years (shop) 3 -5 years (shop) ----------------------- ----------------------- ---------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% ----------------------- ----------------------- ---------------------- 9. Percentage Rent (per lease terms) N/A K-Mart Bi-Lo ----------------------- ----------------------- ---------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A ----------------------- ----------------------- ---------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A ----------------------- ----------------------- ---------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Superior Superior ----------------------- ----------------------- ----------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A -------------------- ------------------ b. Shop Space $8.20 - $14.00 $4.00 - $7.50 -------------------- ------------------ 2. Lease Type (Gross/Net) Triple Net Triple Net -------------------- ------------------ 3. Rent Concessions None None -------------------- ------------------ 4. Effective Rent $8.20 - $14.00 $4.00 - $7.50 -------------------- ------------------ 5. TI Allowance None None -------------------- ------------------ 6. Expense Stop None None -------------------- ------------------ 7. Length of Lease Term 3 - 5 years (shop) 3-5 years (shop) -------------------- ------------------ 8. Commissions 5.00% to 7.00% 5.00% - 7.00% -------------------- ------------------ 9. Percentage Rent (per lease terms) Publix Food Lion -------------------- ------------------ 10. Historical Annual Absorption/sq.ft. N/A N/A -------------------- ------------------ 11. Annual Operating Expense psf (Including taxes) N/A N/A -------------------- ------------------ C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) Superior Similar -------------------- ------------------ D. EXPLAIN RANKING/COMMENTS: Comparables No. 2 and 3 are similar, but these are smaller shopping centers. Comparable No. 4 is similar to subject as they are located near each other and are older. After the completion of the new Wal-Mart Supercenter, Wal-Mart will vacate the premises in Triangle Village. 5 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 [GRAPHIC OMITTED] Name: Lexington K-Mart Shopping Center Location: N/S West Main Street Lexington, SC Year Built: 1986 Total Size: 78,000 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $9.00 to $10.00 per square foot Tenant Expenses: Triple Net Remarks: The anchor tenant is K-Mart. Exposure and visibility are good. This center has always had high occupancy rates. 6 Comparable Rental No. 2 [GRAPHIC OMITTED] Name: Village Square Shopping Center Location: N/S Columbia Avenue Lexington, SC Year Built: 1975 (Reh. 1994) Total Size: 67,000 SF Vacant Space: 8,000 SF Vacancy Rate: 11.94% Rental Range: $8.00 - $10.00 per square foot Tenant Expenses: Triple Net Remarks: The center was renovated two years ago. The Bi-Lo store was expanded. 7 Comparable Rental No. 3 [GRAPHIC OMITTED] Name: Lexington Place Shopping Center Location: N/S Sunset Blvd. at Old Cherokee Blvd. Lexington, SC Year Built: 1994 Total Size: 60,944 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $8.20 - $14.00 per square foot Tenant Expenses: Triple Net Remarks: Publix is the anchor tenant with shops. Phase II is planned and will be built in 1997 or 1998. There are two outlots in this center. 8 Comparable Rental No. 4 [GRAPHIC OMITTED] Name: Towne Square Location: US HWY #1 @ Postal Lane Lexington, SC Year Built: 1975 Total Size: 76,000 SF Vacant Space: 3,000 SF Vacancy Rate: 8% Local Rent Range: $4.00 - $7.50 per square foot Tenant Expenses: Triple Net Remarks: This is an older center anchored by Food Lion. There are a total of 13 tenants. A renovation was completed in 1987. 9 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Lexington Village St. Andrews Crossing Pastime Pavilion ------------------------ ------------------------ -------------------------- b. Street Address 205 Columbia Avenue 817 St. Andrews Road 929 North Lake ------------------------ ------------------------ -------------------------- c. City Lexington, SC Columbia, SC Lexington, SC ------------------------ ------------------------ -------------------------- d. Distance from Subject N/A 10 miles 3 miles ------------------------ ------------------------ -------------------------- 2. Attributes a. Year Built 1988 1994 1990 ------------------------ ------------------------ -------------------------- b. Net sq. feet 30,764 66,910 36,903 ------------------------ ------------------------ -------------------------- c. # Buildings 2 1 1 ------------------------ ------------------------ -------------------------- d. # of Stories 1 1 1 ------------------------ ------------------------ -------------------------- e. Vacancy % 4.9% 0.0% 22% ------------------------ ------------------------ -------------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $1,900,000 ------------------------ ------------------------ -------------------------- b. Sales Price PSF N/A $97.89 $51.49 ------------------------ ------------------------ -------------------------- c. Cap. Rate N/A 9.69% 10.23% ------------------------ ------------------------ -------------------------- d. Date N/A May 24,1994 November 1, 1996 ------------------------ ------------------------ -------------------------- e. NOI at time of Sale N/A $634,797 $194,294 ------------------------ ------------------------ -------------------------- 4. Rank Relative to Subject N/A Superior Superior (inferior, similar, superior) ------------------------ ------------------------ --------------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name One Norman Center Murraywood Center ----------------------- ---------------------- b. Street Address 19706 One Norman Blvd. 7001 St. Andrews Road ----------------------- ---------------------- c. City Cornelius, NC Irmo, SC ----------------------- ---------------------- d. Distance from Subject 115 miles 10 miles ----------------------- ---------------------- 2. Attributes a. Year Built 1993 1987 ----------------------- ---------------------- b. Net sq. feet 54,185 35,800 ----------------------- ---------------------- c. # Buildings 1 1 ----------------------- ---------------------- d. # of Stories 1 1 ----------------------- ---------------------- e. Vacancy % 0.0% 5.6% ----------------------- ---------------------- 3. Sales Information a. Sales Price $4,650,000 $2,020,000 ----------------------- ---------------------- b. Sales Price PSF $85.82 $56.42 ----------------------- ---------------------- c. Cap. Rate 9.68% 10.75% ----------------------- ---------------------- d. Date October 12, 1995 November 13, 1995 ----------------------- ---------------------- e. NOI at time of Sale $450,188 $217,085 ----------------------- ---------------------- 4. Rank Relative to Subject Superior Superior (inferior, similar, superior) ----------------------- ---------------------- Explain Ranking/Comments: The comparable sales are all superior to the subject property with respect to location and condition. It is likely that the capitalization rate for the subject property would be 25 to 50 basis point higher than the sales #1 and #3. Sales #2 and #4 are most similar, due to there being no anchor tenant at these properties. 10 COMPARABLE IMPROVED SALES Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: 6012 -1 -1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 11 Comparable Sale No. 2 [GRAPHIC OMITTED] Name: Pastime Pavilion Location: 929 North Lake Drive Lexington, SC Grantor: Dixie South Land Development Corp. Grantee: Brigham Realty & Investment Date: November 1, 1996 Sales Price: $1,852,500 Adjusted Sales Price: $1,900,000 Size building: 36,903 Sales Price per S.F.: $51.49 Size Land (Acres): 5.23 Size Land (S.F.): 227,819 Year Built: 1990 Land/Building Ratio: 6.17 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Effective Gross Income: $250,577 EGIM: 7.58 Net Operating Income: $194,294 Overall Rate: 10.23% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood shopping center that was constructed in 1990. The primary tenant is a theater. An expansion of the theater was planned by the buyer. Parking is considered adequate. The occupancy at the time of sale was 22 percent. Adjusted price reflects a rent abatement/"investment" in theater. 12 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. 13 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: 2715-2-1 Name: Murraywood Center Location: 7001 St. Andrews Road Irmo, SC Grantor: LPC of SC, Inc. Grantee: Coldwater Portfolio Investors, LLC Deed Reference: Book 3539, Page 84 Date: November 13, 1995 Sales Price: $2,020,000 Adjusted Sales Price: $2,020,000 Size building: 35,800 Sales Price per S.F.: $56.42 Size Land (Acres): 4.092 Size Land (S.F.): 178,248 Year Built: 1987 Land/Building Ratio: 4.98 to 1 Utilities: Municipal Zoning: CG, General Commercial Financing: Cash to Seller Effective Gross Income: $290,131 EGIM: 6.96 Net Operating Income: $217,085 Overall Rate: 10.75% Verification: Public Records Type of Purchaser: Private Investor Comments: New rents on shops range from $10.00 to $11.00 per square foot. The center was originally designed as a specialty center, and has over time attracted more office users. The center has good visibility and is of above average condition. 14 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 15 [GRAPHIC OMITTED] Rental Comparables Map [GRAPHIC OMITTED] Comparable Improved Sales Map [GRAPHIC OMITTED] Site Plan Date: 04/08/97 EDENS & AVANT, INC. Page 93 Retail Custom Rent Roll Property: LEXINGTON VILLAGE 205 COLUMBIA AVENUE LEXINGTON, SC 29072-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- TCBY YOGURT, INC. DWIGHT FRIERSON 639- 10 1,500 07/01/88 06/30/98 0.00 0.00 13.37 07/01/92 20,052.00 - -------------------------------------------------------------------------------------------------------------------------- FLIGHT DECK RESTAURANT TED STOMBOLITIS 639- 20 2,000 07/01/94 06/30/99 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 6.75 02/01/93 13,500.00 7.16 07/01/97 14,310.00 - -------------------------------------------------------------------------------------------------------------------------- SANSBURY OPTICIANS INC. RAY A. SANSBURY 639- 30 4,845 12/01/96 11/30/99 8.25 01/01/92 39,971.28 8.50 12/01/96 41,182.44 - -------------------------------------------------------------------------------------------------------------------------- MOOVIES OF THE CAROLINAS INC. PIC-A-FLICK INTERNATIONAL INC. 639- 50 4,505 04/24/95 04/30/98 7.00 05/01/95 31,535.04 - -------------------------------------------------------------------------------------------------------------------------- LITTLE CAESAR'S PIZZA #107 CBS FOODS, INC. 639- 60 1,560 12/01/93 11/30/98 0.00 0.00 0.00 0.00 9.50 12/01/93 14,820.00 10.00 12/01/96 15,600.00 - -------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ TCBY YOGURT, INC. DWIGHT FRIERSON PRS 1988 PRS 1988 Full 0 07/01/93 06/30/98 13.37 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ FLIGHT DECK RESTAURANT TED STOMBOLITIS Full 0 Full 0 Full 0 07/01/99 06/30/04 0.00 0.00 0 07/01/04 06/30/09 0.00 0.00 0 07/01/09 06/30/14 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ SANSBURY OPTICIANS INC. RAY A. SANSBURY PRS 1989 PRS 1989 Full 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ MOOVIES OF THE CAROLINAS INC. PIC-A-FLICK INTERNATIONAL INC. Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ LITTLE CAESAR'S PIZZA #107 CBS FOODS, INC. Full 0 Full 0 Full 0 12/01/98 11/30/03 0.00 0.00 0 12/01/03 11/30/08 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
Date: 04/08/97 EDENS & AVANT, INC. Page 94 Retail Custom Rent Roll Property: LEXINGTON VILLAGE 205 COLUMBIA AVENUE LEXINGTON, SC 29072-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- ADIA SOUTHERN TEMPORARY PERSONNEL 639- 70 2,080 06/29/96 06/30/01 9.59 09/01/92 19,950.00 6.34 09/01/93 13,181.28 6.51 09/01/94 13,537.56 6.68 09/01/95 13,893.72 12.45 07/01/96 25,896.00 - -------------------------------------------------------------------------------------------------------------------------- PERSONAL BEST COOKS PERSONAL BEST OF LEXING 639- 80 1,560 09/01/94 08/30/97 9.00 09/01/94 14,040.00 9.25 09/01/95 14,430.00 9.50 09/01/96 14,820.00 - -------------------------------------------------------------------------------------------------------------------------- GLOBAL CRUISE & TRAVEL, INC. GLOBAL CRUISE & TRAVEL, INC. 639- 90 2,015 11/01/95 10/31/98 9.00 11/01/95 18,135.00 - -------------------------------------------------------------------------------------------------------------------------- MAIL CENTER USA CHARLES H. MYRICK 639- 100 1,575 06/01/94 05/31/99 9.00 12/01/91 14,175.00 0.00 0.00 9.00 07/01/94 14,175.00 - -------------------------------------------------------------------------------------------------------------------------- COMMERCIAL CREDIT CORP. #558 COMMERCIAL CREDIT CORPORATION 639- 110 1,590 04/01/97 03/31/00 0.00 0.00 0.00 0.00 8.69 05/01/91 13,815.00 9.20 04/01/94 14,628.00 - ------------------------------------------------------------------------------------------------------------------------------------ REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ ADIA SOUTHERN TEMPORARY PERSONNEL Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- PERSONAL BEST COOKS PERSONAL BEST OF LEXING Full 0 Full 0 Full 0 0.00 5.00 280,800 Y 0.00 5.00 288,600 Y 0.00 5.00 296,400 Y - ----------------------------------------------------------------------------------------------------------------------------------- GLOBAL CRUISE & TRAVEL, INC. GLOBAL CRUISE & TRAVEL, INC. Full 0 Full 0 Full 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- MAIL CENTER USA CHARLES H. MYRICK Full 0 Full 0 Full 0 06/01/99 05/31/04 0.00 5.00 283,500 Y 0.00 5.00 0 Y 0.00 5.00 283,500 Y - ----------------------------------------------------------------------------------------------------------------------------------- COMMERCIAL CREDIT CORP. #558 COMMERCIAL CREDIT CORPORATION Full 0 Full 0 Full 0 04/01/94 03/31/97 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
Date: 04/08/97 EDENS & AVANT, INC. Page 95 Retail Custom Rent Roll Property: LEXINGTON VILLAGE 205 COLUMBIA AVENUE LEXINGTON, SC 29072-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- COMMERCIAL CREDIT CORP. #558 COMMERCIAL CREDIT CORPORATION 639- 110 1,590 04/01/97 03/31/00 10.00 04/01/97 15,900.00 - -------------------------------------------------------------------------------------------------------------------------- SUB STATION II MICHAEL A. TILL 639- 120 1,335 06/01/94 05/31/97 0.00 0.00 9.00 10/01/91 12,015.00 - -------------------------------------------------------------------------------------------------------------------------- Available 639- 130 1,500 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- NATIONSCREDIT FINANCIAL SERV. NATIONSCREDIT FINANCIAL SERVI 639- 140 1,425 08/01/96 07/31/99 9.25 08/01/96 13,181.16 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- BEAUTIFUL NAILS BEAUTIFUL NAILS 639- 150 1,360 06/01/94 05/31/97 9.00 06/01/94 12,240.00 - -------------------------------------------------------------------------------------------------------------------------- LEXINGTON CAMERA CHARLES EDWARD JERNIGAN/JACKS 639- 160 1,098 06/01/93 05/31/99 0.00 0.00 0.00 0.00 9.23 06/01/93 10,140.00 9.50 06/01/96 10,431.00 - -------------------------------------------------------------------------------------------------------------------------- DELUXE CLEANERS ARROWOOD DISTRIBUTORS, INC. 639- 170 816 02/01/95 01/31/98 11.00 02/01/95 8,976.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- RUSH'S FOOD SYSTEMS, INC. 639- 500 0 P 01/01/98 12/31/99 0.00 01/01/95 500.00 - -------------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied.. 29,264 Current Annual Base Rent 268,138.64 Available. 1,500 Total..... 30,764 - ------------------------------------------------------------------------------------------------------------------------------------ REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL CREDIT CORP. #558 COMMERCIAL CREDIT CORPORATION Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ SUB STATION II MICHAEL A. TILL Full 0 Full 0 Full 0 06/01/97 05/31/00 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ NATIONSCREDIT FINANCIAL SERV. NATIONSCREDIT FINANCIAL SERVI Full 0 Full 0 Full 0 08/01/99 07/31/02 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ BEAUTIFUL NAILS BEAUTIFUL NAILS Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ LEXINGTON CAMERA CHARLES EDWARD JERNIGAN/JACKS Full 0 Full 0 Full 0 06/01/96 05/31/99 0.00 0.00 0 06/01/99 05/31/04 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ DELUXE CLEANERS ARROWOOD DISTRIBUTORS, INC. Full 0 Full 0 Full 0 02/01/98 01/31/01 12.00 5.00 179,500 Y 02/01/01 01/31/04 13.00 5.00 0 Y 0.00 5.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ RUSH'S FOOD SYSTEMS, INC. Full 0 Full 0 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Subject Property Looking Northeast [GRAPHIC OMITTED] Subject Property Looking Northwest [GRAPHIC OMITTED] Subject Property Looking North [GRAPHIC OMITTED] Subject Property Looking Northeast [GRAPHIC OMITTED] Rear of Subject Property [GRAPHIC OMITTED] Rear Of Subject Property [GRAPHIC OMITTED] Columbia Avenue Looking East [GRAPHIC OMITTED] Old Chapin Road Looking North [GRAPHIC OMITTED] Old Chapin Road Looking South This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study MITCHELL PLAZA SHOPPING CENTER 215 West Columbia Avenue Batesburg, Lexington County, South Carolina Prepared by Michael B. Dodds, MAI, CCIM Date of Market Study - May 16, 1997 [LETTERHEAD OF O. MARSHALL DODDS COMPANY, INC.] May 16, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Mitchell Plaza 215 West Columbia Avenue Batesburg, Lexington County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. The analysis that forms the basis of the study was conducted by Michael B. Dodds, MAI, CCIM. The subject property and all comparable data were inspected by Michael B. Dodds, MAI, CCIM on May 16, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 39,970 square feet of leasable area. The center was constructed in 1987. The anchor tenant is Food Lion, which occupies 25,000 square foot. The shopping center local stores are currently 100 percent occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ Michael B. Dodds ---------------------------------- Michael B. Dodds, MAI, CCIM State Certified General Real Estate Appraiser (CG-356) EXECUTIVE SUMMARY ================================================================================ Regional Perspective The subject property is located in Batesburg, approximately 32 miles southwest of Columbia and 28 miles northwest of Aiken, South Carolina. Batesburg is a small town, having a population of approximately 4,000. The economic base of the Batesburg area is relatively diverse, with a mix of manufacturing and agricultural employment. Manufacturing employers in the area include Columbia Farms with 1,300 employees and Union Switch and Signal with 500 employees. Many of the residents of the Batesburg area commute to Columbia and Aiken every day. Others are employed at the Department of Energy's Savannah River Site, in the lower portion of Aiken County. The unemployment rates for Lexington and Saluda Counties as of March, 1997 were 2.6 percent and 4.8 percent respectively, while the statewide rate was 5.3 percent. Neighborhood and Site The subject neighborhood is an established area near the east central portion of the downtown area of Batesburg. The immediate neighborhood has had very little new development in recent years. Developments in the immediate area consist of commercial type properties located along the major roads and residential uses on the secondary streets. U.S. Highway #1 is a main road leading into the downtown region, and connects Batesburg with Lexington and Columbia to the northeast, and Aiken to the south. Many of the single family residential structures in the downtown area have been converted to office and retail uses. The general population of the residential areas surrounding the subject can be described as moderate to middle income. In general, the area is expected to grow at a slow but steady rate in the near future. Physical features are as follows: 1. Site Size 6.37 Acres 2. Identity Lexington County TMS# 7023-01-003 3. Shape Generally rectangular - Adequate 4. Topography Generally level, on grade with West Columbia Avenue 5. Accessibility Good - West Columbia Avenue 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 39,970 square feet 2. Layout & Design 1 story, one building. Design is functional 3. Parking Spaces Approximately 183 (4.6 spaces per 1,000 SF of building area) 4. Construction Brick and glass front with concrete block on side. Roof is built up composition. 1 Market Position and Marketability Conclusions The subject property is located on U.S. Highway #1 in the downtown area of Batesburg. There are few new traditional shopping centers in this area. U.S. Highway #1 is also known as Columbia Avenue, and leads into the central business district, and connects the area with Columbia to the northeast. The subject retail market is the Batesburg - Leesville sub-market. According to the 1996 Central Carolina Business Review and Investment Guide, Batesburg - Leesville is the second smallest retail sub-market containing 160,200 square feet or 1.3 percent of all retail space surveyed. Three of the 158 completed retail shopping centers surveyed were in the Batesburg - Leesville area, with 9,750 square feet of space vacant for a vacancy rate of 6.1 percent, the second lowest vacancy rate in the ten areas. Twelve months earlier the vacancy rate was 7.9 percent, and 24 months earlier the vacancy rate was also 7.9 percent. The average rental rate of a new lease in this area is $6.12 per square foot, the same as the last survey and down $0.25 per square foot from the survey two years ago. The survey reports no proposed or planned shopping centers for the sub-market. The Batesburg Plaza shopping center was built in 1987 and is located in the immediate neighborhood. Anchor tenants include Winn Dixie, Maxway and Farmers Furniture. Approximately 2,250 square feet are available, with rental rates ranging from $5.50 to $6.00 per square foot. The Twin City shopping center is anchored by Bi-Lo, Revco and Family Dollar, and was built in 1986. This center is located directly across Columbia Avenue from the subject property. On the date of inspection, the local shops in this center were approximately 75 percent occupied. This shopping center is 54,130 square feet, and rental rates are generally in the range of $5.00 to $6.00 per square foot. There are only three shopping centers in the Batesburg - Leesville area, including the subject property. Larger department stores and regional shopping centers are located in Aiken to the southeast, and Columbia to the northeast. These centers are not considered to be competitive with the subject property, and therefore only the local centers will be analyzed. In general, the Batesburg - - Leesville retail market serves the immediate town population and nearby rural areas. The publication Shopping Center Directory 1996, published by Urban Decision Systems, includes a listing of market population estimates made by the individual center managers. Two of the three shopping centers in the Batesburg - Leesville market listed market population estimates, with both being 20,000. The tenant mix at the subject property and the comparables is typical, and tenant turnover at these centers appears to be average. The subject property is 100 percent leased, and the market overall appears to be relatively strong. Rental rates have remained steady, and no proposed retail construction was discovered. Vacancy levels have declined over the last 24 months. The economy of Batesburg - Leesville is such that the demand for retail space should continue to increase moderately. Trends The subject property is located in the downtown area of Batesburg - Leesville. The neighborhood is built up, with few large tracts of vacant land available for development. The immediate area and surrounding rural regions provide a good population base for the retailers at the subject property, and this demand is expected to continue. The traffic count along U.S. Highway #1 provides good exposure for the subject property, and the subject is accessible from surrounding areas. The rental rates at the subject property are within the range of the comparables, and should maintain a competitive position in the marketplace. No detrimental conditions were discovered which should have a negative impact on the future of the subject property. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Twin City Shopping Mitchell Plaza Batesburg Plaza Center Lexington Village -------------------- -------------------- -------------------- -------------------- b. Street 215 W. Columbia Ave. 252 W. Columbia Ave. US #1 at Hwy #178 205 Columbia Ave -------------------- -------------------- -------------------- -------------------- c. City Batesburg, SC Batesburg, SC Batesburg, SC Lexington, SC -------------------- -------------------- -------------------- -------------------- d. Distance from subject N/A .25 miles 2 miles N/A -------------------- -------------------- -------------------- -------------------- e. Contact Edens & Avant Workman Realtors Garrett and Garrett Edens & Avant, Inc. -------------------- -------------------- -------------------- -------------------- f. Phone (803)779-4420 (704) 563-0438 (864)862-3501 803-779-4420 -------------------- -------------------- -------------------- -------------------- 2. Attributes a. Year built 1987 1971/87 renovation 1985 1988 -------------------- -------------------- -------------------- -------------------- b. Net sq. Ft. 39,970 68,238 54,130 30,764 -------------------- -------------------- -------------------- -------------------- c. # building One One One 1 -------------------- -------------------- -------------------- -------------------- d. # stories One One One 1 -------------------- -------------------- -------------------- -------------------- e. Avg. Floor plate size N/A N/A N/A (sq. Ft.), if office N/A -------------------- -------------------- -------------------- -------------------- f. # elevators N/A N/A N/A N/A -------------------- -------------------- -------------------- -------------------- g. Parking Adequate Adequate Adequate Adequate -------------------- -------------------- -------------------- -------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block -------------------- -------------------- -------------------- -------------------- I. Vacancy % 0% 50% 25% 4.9% -------------------- -------------------- -------------------- -------------------- Winn-Dixie, Maxway, j. Anchors, if Retail Food Lion, Eckerd's Farmers Furniture Bi-Lo, Revco None -------------------- -------------------- -------------------- --------------------
Comments: Comparable #1 only has 4,500 square feet of local shops, with 2,250 square feet being vacant. Comparable #2 has approximately 31,400 square feet of local shops, with 7,500 square feet vacant. Comparable #3 is similar to the subject with respect to size, although is located in a larger market. The higher rental rates reflect the more desirable location. No recent retail development has occurred. No planned retail construction was discovered during the primary research. A fourth comparable was not used due to the size of the market. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A N/A N/A --------------------- ------------------- ------------------- -------------------- b. Shop Space $6.00 - $8.50/SF $5.50 - $6.00/SF $4.00 - $7.00/SF $7.00 - $12.45/SF --------------------- ------------------- ------------------- -------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net --------------------- ------------------- ------------------- -------------------- 3. Rent Concessions None Minimal Minimal None --------------------- ------------------- ------------------- -------------------- 4. Effective Rent $6.00 - $8.50/SF $5.50 - $6.00/SF $4.00 - $7.00/SF $7.00 - $12.45/SF --------------------- ------------------- ------------------- -------------------- 5. TI Allowance None None None None --------------------- ------------------- ------------------- -------------------- 6. Expense Stop None None None None --------------------- ------------------- ------------------- -------------------- 7. Length of Lease Term 3 - 5 years (shops) 1 - 5 years (shops) 1 - 5 years (shops) 3 - 5 years (shop) --------------------- ------------------- ------------------- -------------------- 8. Commissions 5.00% - 7.00% 5.00% - 7.00% 5.00% - 7.00% 5.00% to 7.00% --------------------- ------------------- ------------------- -------------------- 9. Percentage Rent Food Lion , Eckerd's, (per lease terms) Cato Winn-Dixie Bi-Lo N/A --------------------- ------------------- ------------------- -------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A N/A --------------------- ------------------- ------------------- -------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A N/A --------------------- ------------------- ------------------- -------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Similar Similar Superior --------------------- ------------------- ------------------- --------------------
D. EXPLAIN RANKING/COMMENTS: Comparable #2 is located across Columbia avenue from the subject property. Comparable #1 has minimal local space available. The physical characteristics of the comparables and the subject are considered to be similar. Leasing commissions are typically cashed out in this market. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Batesburg Plaza Location: 252 West Columbia Avenue Batesburg, SC Year Built: 1971/87 Total Size: 68,238 SF Vacant Space: 2,250 Vacancy Rate: 50% locals Rental Range: $5.50 - $6.00/ SF Tenant Expenses: Triple Net Remarks: This shopping center has three large anchor stores, including a 30,944 square foot Winn-Dixie, a 16,576 square foot Maxway, and a 16,576 square foot Farmers Furniture Store. There is only 4,500 square feet of local shops. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Twin City Shopping Center Location: U.S. Highway #1 at Highway #178 Batesburg, South Carolina Year Built: 1985 Total Size: 54,130 SF Vacant Space: 7,500 SF Vacancy Rate: 25% Rental Range: $4.00 - $7.00/SF Tenant Expenses: Triple Net Remarks: The anchor tenant is Bi-Lo with approximately 22,720 square feet. Additional tenants include Revco, Advance Auto Parts, and Family Dollar. This center is located across Columbia Avenue from the subject property. 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Lexington Village Shopping Center Location: 205 Columbia Avenue. Lexington, South Carolina Year Built: 1988 Total Size: 30,764 SF Vacant Space: 1,500 SF Vacancy Rate: 4.9 % locals Rental Range: $8.00 - $12.45/SF Tenant Expenses: Triple Net Remarks: This unanchored center is located in the downtown area of Lexington. The property is an established center that has reportedly maintained a high occupancy rate in recent years. The property overall is in good condition. 7 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ 1. Identification a. Name Mitchell Plaza St. Andrews Crossing Eastgate Center One Norman Center Paw Creek Commons --------------- -------------------- ------------------ ----------------- ---------------------- 215 W. Columbia NWC Whiskey Rd. & 19706 One Norman E/S Little Rock Rd. At b. Street Address Avenue 817 St. Andrews Road Eastgate Dr. Blvd. Freedom Drive --------------- -------------------- ------------------ ----------------- ---------------------- c. City Batesburg, SC Columbia, SC Aiken, SC Cornelius, NC Charlotte, NC --------------- -------------------- ------------------ ----------------- ---------------------- d. Distance from Subject N/A 35 miles 28 miles 145 miles 130 miles --------------- -------------------- ------------------ ----------------- ---------------------- 2. Attributes a. Year Built 1986 1994 1995 1993 1996 --------------- -------------------- ------------------ ----------------- ---------------------- b. Net sq. feet 39,970 66,910 75,716 54,185 66,050 --------------- -------------------- ------------------ ----------------- ---------------------- c. # Buildings 1 1 1 1 1 --------------- -------------------- ------------------ ----------------- ---------------------- d. # of Stories 1 1 1 1 1 --------------- -------------------- ------------------ ----------------- ---------------------- e. Vacancy % 0% 0.0% 5.0% 0.0% 2.73% --------------- -------------------- ------------------ ----------------- ---------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 $4,650,000 $5,120,000 --------------- -------------------- ------------------ ----------------- ---------------------- b. Sales Price PSF N/A $97.89 $88.16 $85.82 $77.52 --------------- -------------------- ------------------ ----------------- ---------------------- c. Cap. Rate N/A 9.69% 9.86% 9.68% 9.60% --------------- -------------------- ------------------ ----------------- ---------------------- d. Date N/A May 24,1994 September 28, 1995 October 12, 1995 March 25, 1997 --------------- -------------------- ------------------ ----------------- ---------------------- e. NOI at time of Sale N/A $634,797 $657,896 $450,188 $517,412 --------------- -------------------- ------------------ ----------------- ---------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A Superior Superior Superior Superior --------------- -------------------- ------------------ ----------------- ----------------------
Explain Ranking/Comments: The comparable sales are all superior to the subject property with respect to age, although the subject property is in good condition and is attractive. The subject property has a desirable tenant mix and has been well managed. The subject property has the highest occupancy in the local market. 8 Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: 6012 -1 -1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 9 Comparable Sale No. 2 [GRAPHIC OMITTED] Name: Eastgate Shopping Center Location: Northwest Corner of Whiskey Road & Eastgate Drive Aiken, SC Grantor: Southwest U.S. Retail, LP Grantee: PDG Aiken Partners, LP Deed Reference: N/A Date: September 28, 1995 Sales Price: $6,675,000 Adjusted Sales Price: $6,675,000 Size building: 75,716 Sales Price per S.F.: $88.16 Size Land (Acres): 8.79 Size Land (S.F.): 382,892 Year Built: 1995 Land/Building Ratio: 5.06 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Effective Gross Income: $782,704 EGIM: 8.53 Net Operating Income: $657,896 Overall Rate: 9.86% Verification: Public Records Type of Purchaser: Private Investor Comments: Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. 10 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. 11 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: 59-231-22,23 pt. Name: Paw Creek Commons Location: East side of Little Rock Road at Freedom Drive Grantor: Paw Creek, LLC Grantee: Paw Creek Crossing Limited Partnership Deed Reference: Book 8988, Page 519 Date: March 25, 1997 Sales Price: $5,120,000 Adjusted Sales Price: $5,384,000 Size building: 66,050 Sales Price per S.F.: $77.52 Size Land (Acres): 9.82 Size Land (S.F.): 427,759 Year Built: 1996 Land/Building Ratio: 6.48 to 1 Utilities: Municipal Zoning: CC, Commercial Center Financing: Cash to Seller Effective Gross Income: $552,054 Gross Income Multiple: 9.00 EGIM: 9.27 Net Operating Income: $517,412 Overall Rate: 9.61% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was pre-construction. The sales price has been adjusted to reflect this by using 50 basis points in the capitalization rate (.1011 minus .0050 equals .0961). The major tenants are Winn-Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. The income from anchor tenants is 79.41 percent of gross income. 12 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 13 [GRAPHIC OMITTED] Comparable Rentals [GRAPHIC OMITTED] Improved Sales Comparables [GRAPHIC OMITTED] Site Plan Date: 04/08/97 Page 89 EDENS & AVANT, INC. Retai1 Custom Rent Roll Property: MITCHELL PLAZA 215 WEST COLUMBIA AVENUE BATESBURG, SC Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------- CATO CORPORATION E.J. BATESBURG GROUP 637-10 4,050 01/01/87 01/31/02 6.00 06/01/87 24,300.00 0.00 0.00 6.50 02/01/97 26,325.00 7.00 02/01/99 28,350.00 - -------------------------------------------------------------------------------------------------------------------- ECKERD'S #8066 F/K/A RITE AID #1785 637-20 6,720 12/08/86 12/07/96 7.10 01/01/87 47,712.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------- FOOD LION #442 FOOD LION INC 637-30 25,000 12/14/86 12/13/06 0.00 0.00 5.25 02/01/87 131,250.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------- ACE TV RENTALS PARADISE VALLEY HOLDINGS, INC 637-40 2,800 11/17/96 11/30/99 3.03 11/17/96 8,495.16 6.50 12/01/96 18,204.00 - -------------------------------------------------------------------------------------------------------------------- HONG KONG KITCHEN YONG XIANG ZHENG AND XIU LIN 637-60 1,400 06/07/95 06/30/00 7.25 07/01/95 10,150.08 - -------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ---------------------------------------------------------------------------------------------------------------------------------- CATO CORPORATION E.J. BATESBURG GROUP Full 0 Full 0 Full 0 02/01/97 01/31/02 7.00 4.00 607,500 0.00 4.00 658,125 0.00 4.00 0 0.00 4.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- ECKERD'S #8066 F/K/A RITE AID #1785 PRS 1987 PRS 1987 Full 0 12/08/96 12/07/01 7.60 2.00 2,385,600 Y 12/08/01 12/07/06 8.10 2.00 0 Y 12/08/06 12/07/11 8.60 2.00 0 Y 12/08/11 12/07/16 9.10 2.00 0 Y 12/08/16 12/07/21 9.60 2.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- FOOD LION #442 FOOD LION INC PRS 1987 None 0 Fixed 0 12/14/06 12/13/11 5.25 1.00 0 Y 12/14/11 12/13/16 5.25 1.00 13,125,000 Y 12/14/16 12/13/21 5.25 1.00 0 Y 12/14/21 12/13/26 5.25 1.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- ACE TV RENTALS PARADISE VALLEY HOLDINGS, INC Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- HONG KONG KITCHEN YONG XIANG ZHENG AND XIU LIN Full 0 Full 0 Full 0 07/01/00 06/30/05 9.50 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------------
Date: 04/08/97 Page 90 EDENS & AVANT, INC. Retai1 Custom Rent Roll Property: MITCHELL PLAZA 215 WEST COLUMBIA AVENUE BATESBURG, SC Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------- HONG KONG KITCHEN YONG XIANG ZHENG AND XIU LIN 637-60 1,400 06/07/95 06/30/00 0.00 0.00 8.50 07/01/98 11,900.04 - -------------------------------------------------------------------------------------------------------------------- WACHOVIA CORPORATION/ATM WACHOVIA ATM 637-200 0 K 06/01/95 05/31/98 0.00 07/01/92 5,400.00 0.00 06/01/95 6,600.00 - -------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied ........ 39,970 Current Annual Base Rent: 240,241.08 Available ....... 0 Total ........... 39,970 - ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- HONG KONG KITCHEN YONG XIANG ZHENG AND XIU LIN Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- WACHOVIA CORPORATION/ATM WACHOVIA ATM None 0 None 0 None 0 06/01/98 05/31/01 0.00 0.00 0 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------------
Square Feet: Occupied. ..... 39,970 Current Annual Base Rent 240,241.08 Available ..... 0 Total ......... 39,970 PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Subject Property Looking Northwest [GRAPHIC OMITTED] Subject Property Looking North [GRAPHIC OMITTED] Subject Property Looking Northwest [GRAPHIC OMITTED] Side Of Subject Looking Southeast [GRAPHIC OMITTED] Side Of Subject Looking South [GRAPHIC OMITTED] Rear Of Subject Looking East [GRAPHIC OMITTED] Rear Of Subject Looking South [GRAPHIC OMITTED] East Columbia Avenue Looking Northeast [GRAPHIC OMITTED] East Columbia Avenue Looking Southwest This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study NORTHWAY PLAZA SHOPPING CENTER 5100 Fairfield Road Columbia, South Carolina Prepared by Michael B. Dodds, MAI, CCIM Date of Market Study - April 29, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] April 29, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Northway Plaza 5100 Fairfield Road Columbia, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that forms the basis of the study was conducted by Michael B. Dodds, MAI, CCIM. The subject property and all comparable data were inspected by Michael B. Dodds, MAI, CCIM on April 29, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 74,689 square feet of leasable area. The center was constructed in 1974, with an addition in 1988. The anchor tenant is Food Lion, which occupies 26,060 square foot. The shopping center local stores are currently 88.8% occupied. In addition to the shopping center, there are several tenants occupying buildings on a ground lease basis. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ Michael B. Dodds ------------------------------ Michael B. Dodds, MAI, CCIM State Certified General Real Estate Appraiser (CG-543) EXECUTIVE SUMMARY ================================================================================ Regional Perspective Columbia is the state capital with the State House being located in downtown Columbia. Also, the University of South Carolina Campus is located in the downtown area. Fort Jackson, which is a large U.S. Army Training Facility is located in the eastern section of the Metropolitan area. The city has numerous specialized office activities such as: insurance, consulting services, advertising, marketing, printing and financial services. Government, distribution, finance and transportation are all important to Columbia, although none are preeminent. Geography also gives Columbia a strategic location in the industrial and commercial spheres. The unemployment rate for Richland County as of March, 1997 was 3.7 percent while the statewide rate was 5.3 percent. Neighborhood and Site The subject neighborhood is located to the north of the central business district of Columbia. There has been very little new development occurring in the area in recent years, with most of the development being to the north of the subject, at the intersection of Fairfield Road and Interstate #20. The general population of the residential areas surrounding the subject can be described as lower income. Alcorn Middle School is located across the street from the subject property, and there are scattered, older neighborhood commercial developments along Fairfield Road. In general, the area is expected to remain stable in the near future, with very little new residential or commercial construction anticipated. Physical features are as follows: 1. Site Size 9.33 Acres 2. Identity TMS# 11701-02-01, 02, 03, 04 - Richland County 3. Shape Irregular - Adequate 4. Topography Generally level, slight downward slope to the south 5. Accessibility Good 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 74,689 square feet (Food Lion to expand from 26,060 SF to 29,000 SF) 2. Layout & Design 1 story, five buildings, several structures are located on ground leased sites. Design is functional 3. Parking Spaces Approximately 302 4.04 spaces per 1,000 SF of building area 4. Construction Brick and glass front with concrete block on side. Roof is built up composition. 1 Market Position and Marketability Conclusions The subject property is located in a sub-market that is identified as North Columbia. There are few traditional shopping centers in this area, with most having been constructed in the 1960's and 1970's. The lack of new construction has created a relatively strong market. The majority of the vacant space is made up of a vacant anchor store previously occupied by Rite Aid. Several new freestanding drug stores have been built in the general area during 1996 and 1997 and it is doubtful that in-line drug stores occupied by Revco, Rite Aid or Eckerd will be renewed at the expiration of their leases. The North Columbia sub-market is listed in the 1996 Central Carolina Business Review and Investment Guide as having 280,464 square feet, and an average new lease rate of $6.59 per square foot. The survey reports no retail space planned or under construction. The overall vacancy rate for this sub-market was reported at 1.5%, compared to 1.3% in the 1994 survey. It should be noted that the vacant anchor store listed in this market study was not shown in the survey. The tenant mix at the subject property and the comparables is indicative of the economic characteristics of the neighborhood. Many of the tenants are discount retailers. Tenant turnover at these centers appears to be average, and rental rates have increased slowly and steadily. Several of the centers have office/service related tenants such as finance companies and insurance companies. The rental rates generally range from $6.00 to $9.00 per square foot, with the subject property achieving rates at the upper end of this range. Of the four centers surveyed, only two spaces were available, an 800 square foot space at Sunset Center and the vacant Rite Aid at Northside Shopping Center. None of the shopping centers selected as comparables have been renovated in recent years. All have deferred maintenance, and Greenview Plaza has serious problems with it's parking lot surface. It appears that the rental rates being received at each comparable is reflective of the current physical condition of the property. The subject Food Lion is being expanded, as the store is currently smaller than the typical Food Lion store. The expansion of the Food Lion should have a positive effect on the marketability of the subject local space. Several ground leased properties are also part of the subject property. A building previously occupied by Advance Auto Parts is vacant, although the tenant will continue to pay rent through the end of 1997. Other ground lease tenants include a coin laundry and a Chinese restaurant. The ground leases do not detrimentally affect the desirability of the subject. In summary, the subject property is considered to be the most desirable center in the sub-market. It is the largest property and has the best tenant mix. Visibility from Fairfield Road is excellent, and the property is in average condition. The subject property should continue to command rental rates at the upper end of the range. Trends The subject property is located in an area of Columbia that has experienced very little growth in recent years. Much of the new construction that has occurred is located at the intersection of Fairfield Road and Interstate #20. This development consists of a truck stop, small motel and convenience stores. It is not expected that this construction will create more growth in the immediate area surrounding the subject, due to the distance from Interstate #20. The overall lack of growth has had a positive effect on the retail market, as the demand for space has surpassed the supply. A high overall occupancy level and slow, steady rental rate increases are expected. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Northway Plaza Northside Plaza Greenview Plaza ------------------------ ------------------------ ------------------------- b. Street 5100 Fairfield Road 6300 N. Main N. Main @ Wilkes ------------------------ ------------------------ ------------------------- c. City Columbia, SC Columbia, SC Columbia, SC ------------------------ ------------------------ ------------------------- d. Distance from subject N/A 2.0 -2.5 miles 2.0 -2.5 miles ------------------------ ------------------------ ------------------------- e. Contact Edens & Avant John Baxter Charles Gary ------------------------ ------------------------ ------------------------- f. Phone (803)779-4420 (803)740-6950 98030791-4626 ------------------------ ------------------------ ------------------------- 2. Attributes a. Year built 1974-88 1973 1988 ------------------------ ------------------------ ------------------------- b. Net sq. Ft. 74,689 50,490 17,000 ------------------------ ------------------------ ------------------------- c. # building Five One One ------------------------ ------------------------ ------------------------- d. # stories One One One ------------------------ ------------------------ ------------------------- e. Avg. Floor plate size N/A N/A N/A (sq. Ft.), if office ------------------------ ------------------------ ------------------------- f. # elevators N/A N/A N/A ------------------------ ------------------------ ------------------------- g. Parking Adequate Adequate Adequate ------------------------ ------------------------ ------------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ------------------------ ------------------------ ------------------------- I. Vacancy % 11.2% (Rite Aid) 32+/- 0 ------------------------ ------------------------ ------------------------- j. Anchors, if Retail Food Lion Giant Food World None Rite Aid (vacant) ------------------------ ------------------------ ------------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Edens Plaza Sunset Center ---------------------- ----------------------- b. Street 4015 W. Beltline US #76 @ SC #16 ---------------------- ----------------------- c. City Columbia, SC Columbia, SC ---------------------- ----------------------- d. Distance from subject 2.5 - 3.0 miles 3.0 miles ---------------------- ----------------------- e. Contact Mid-South Rox Pollard ---------------------- ----------------------- f. Phone (803)254-8777 (803)779-7777 ---------------------- ----------------------- 2. Attributes a. Year built 1961 1961 ---------------------- ----------------------- b. Net sq. Ft. 96,935 33,853 ---------------------- ----------------------- c. # building One One ---------------------- ----------------------- d. # stories One One ---------------------- ----------------------- e. Avg. Floor plate size N/A N/A (sq. Ft.), if office ---------------------- ----------------------- f. # elevators N/A N/A ---------------------- ----------------------- g. Parking Adequate Adequate ---------------------- ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block ---------------------- ----------------------- I. Vacancy % 0 2.4% ---------------------- ----------------------- j. Anchors, if Retail Giant Food World, None Revco ---------------------- -----------------------
Comments: The only vacancies at the comparables are an anchor tenant space and an 800 SF space. Rite Aid vacated their 8,200 SF store at comparable #1 to occupy a free standing store in the neighborhood. Comparable #2 is smaller and has no anchor, while comparable #4 has a 14,944 SF space occupied by a Bingo operation. In general, the market for small local shops is good. No recent retail development has occurred, with the exception of free standing drug stores. No planned construction was discovered during the primary research. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A $7.00 (Rite Aid) N/A ------------------------ ------------------------ ------------------------ b. Shop Space $7.00 - $9.00 $6.00 - $8.00 $7.00 - $9.00 ------------------------ ------------------------ ------------------------ 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ------------------------ ------------------------ ------------------------ 3. Rent Concessions Minimal Minimal None ------------------------ ------------------------ ------------------------ 4. Effective Rent $7.00 - $9.00 $6.00 - $7.00 $7.00 - $9.00 ------------------------ ------------------------ ------------------------ 5. TI Allowance None None None ------------------------ ------------------------ ------------------------ 6. Expense Stop None None None ------------------------ ------------------------ ------------------------ 7. Length of Lease Term 3 - 5 years (shops) 1 - 5 years (shops) 1 - 3 years (shops) ------------------------ ------------------------ ------------------------ 8. Commissions 5.00% - 7.00% 5.00% - 7.00% 5.00% - 7.00% ------------------------ ------------------------ ------------------------ 9. Percentage Rent Food Lion None None (per lease terms) ------------------------ ------------------------ ------------------------ 10. Historical Annual N/A N/A N/A Absorption/sq.ft. ------------------------ ------------------------ ------------------------ 11. Annual Operating N/A N/A N/A Expense psf (Including taxes) ------------------------ ------------------------ ------------------------ C. RANK RELATIVE TO SUBJECT (inferior, Similar Inferior similar, superior) ------------------------ ------------------------ ------------------------ COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A ------------------------ ----------------------- b. Shop Space $6.00 - $7.50 $6.75 ------------------------ ----------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net ------------------------ ----------------------- 3. Rent Concessions None None ------------------------ ----------------------- 4. Effective Rent $6.00 - $7.50 $6.75 ------------------------ ----------------------- 5. TI Allowance None None ------------------------ ----------------------- 6. Expense Stop None None ------------------------ ----------------------- 7. Length of Lease Term 3 - 5 years (shops) 1 - 3 years (shops) ------------------------ ----------------------- 8. Commissions 5.00% - 7.00% 5.00% ------------------------ ----------------------- 9. Percentage Rent None None (per lease terms) ------------------------ ----------------------- 10. Historical Annual N/A N/A Absorption/sq.ft. ------------------------ ----------------------- 11. Annual Operating N/A $1.25 Expense psf (Including taxes) ------------------------ ----------------------- C. RANK RELATIVE TO SUBJECT (inferior, Similar Inferior similar, superior) ------------------------ -----------------------
D. EXPLAIN RANKING/COMMENTS: Leasing commissions are typically cashed out in this market. The two inferior properties have no anchor tenants and have significant deferred maintenance. Locations are basically similar with the condition and tenant mix being the primary factors in the rental rate differences. Minimal concessions due to the overall tight sub-market. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Northside Plaza Location: 6300 N. Main Street Columbia, SC Year Built: 1973 Total Size: 50,490 SF Vacant Space: 8,200+/- SF Vacancy Rate: 32% Locals Rental Range: $6.00 to $8.00 Tenant Expenses: Triple Net Remarks: A Giant Food World is the anchor tenant and there is a vacant Rite Aid drug store available for lease. Other tenants include a karate school and Family Dollar. The center is in average condition for it's age. Good visibility an d accessibility from North Main Street. The 8,200 SF Rite Aid store is available for lease at a quoted rate of $7.00/SF but the leasing agent stated that they "would entertain any offer." 5 Comparable Rental No. 2 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Greenview Plaza Location: N. Main Street @ Wilkes Columbia, South Carolina Year Built: 1988 Total Size: 17,000 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $7.00 to $9.00 Tenant Expenses: Triple Net Remarks: This unanchored center is 100% occupied. Tenants include a dry cleaners, a package store, several restaurants, and a nightclub. The parking lot is in very poor condition and the building is in below average condition for it's age. The property is not considered to be direct competition for the subject. 6 Comparable Rental No. 3 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Edens Plaza Location: 4015 W. Beltline Boulevard Columbia, South Carolina Year Built: 1961 Total Size: 96,935 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $6.00 - $7.50 Tenant Expenses: Triple Net Remarks: The anchor tenants are Giant Food World and Revco. Other tenants include Pic-n-Pay, Super 10, Family Dollar and Nationwide Mattress. The property is an established center in the neighborhood and was 100% occupied on the date of inspection. Historically, the center has maintained a fairly high occupancy level. The property overall is in good condition. 7 Comparable Rental No. 4 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Sunset Shopping Center Location: US #76 at SC #16 Columbia, South Carolina Year Built: 1961 Total Size: 33,853 SF Vacant Space: 800 SF Vacancy Rate: 2.4% total Local Rent Range: $ 3.00 - $7.00 Tenant Expenses: Triple Net ( $1.25/SF) Remarks: This center has an anchor tenant space that is occupied by a bingo operation. The property is in poor condition, although the small shops are full. Significant deferred maintenance was noted. The largest tenant is Super 10 with 7,216 square feet. The 800 square foot space is available for $450 per month or $6.75/SF. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Northway Plaza St. Andrews Crossing Eastgate Center ------------------------ ------------------------ -------------------------- b. Street Address 5100 N. Main St. 817 St. Andrews Road NWC Whiskey Rd. & Eastgate Dr. ------------------------ ------------------------ -------------------------- c. City Columbia, SC Columbia, SC Aiken, SC ------------------------ ------------------------ -------------------------- d. Distance from Subject N/A 10 miles 60 miles ------------------------ ------------------------ -------------------------- 2. Attributes a. Year Built 1974-88 1994 1995 ------------------------ ------------------------ -------------------------- b. Net sq. feet 74,689 66,910 75,716 ------------------------ ------------------------ -------------------------- c. # Buildings 3 1 1 ------------------------ ------------------------ -------------------------- d. # of Stories 1 1 1 ------------------------ ------------------------ -------------------------- e. Vacancy % 11.2% 0.0% 5.0% ------------------------ ------------------------ -------------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 ------------------------ ------------------------ -------------------------- b. Sales Price PSF N/A $97.89 $88.16 ------------------------ ------------------------ -------------------------- c. Cap. Rate N/A 9.69% 9.86% ------------------------ ------------------------ -------------------------- d. Date N/A May 24,1994 September 28, 1995 ------------------------ ------------------------ -------------------------- e. NOI at time of Sale N/A $634,797 $657,896 ------------------------ ------------------------ -------------------------- 4. Rank Relative to Subject N/A Superior Superior (inferior, similar, superior) ------------------------ ------------------------ -------------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name One Norman Center Paw Creek Commons ----------------------- ----------------------- b. Street Address 19706 One Norman E/S Little Rock Rd. At Blvd. Freedom Drive ----------------------- ----------------------- c. City Cornelius, NC Charlotte, NC ----------------------- ----------------------- d. Distance from Subject 115 miles 100 miles ----------------------- ----------------------- 2. Attributes a. Year Built 1993 1996 ----------------------- ----------------------- b. Net sq. feet 54,185 66,050 ----------------------- ----------------------- c. # Buildings 1 1 ----------------------- ----------------------- d. # of Stories 1 1 ----------------------- ----------------------- e. Vacancy % 0.0% 2.73% ----------------------- ----------------------- 3. Sales Information a. Sales Price $4,650,000 $5,120,000 ----------------------- ----------------------- b. Sales Price PSF $85.82 $77.52 ----------------------- ----------------------- c. Cap. Rate 9.68% 9.60% ----------------------- ----------------------- d. Date October 12, 1995 March 25, 1997 ----------------------- ----------------------- e. NOI at time of Sale $450,188 $517,412 ----------------------- ----------------------- 4. Rank Relative to Subject Superior Superior (inferior, similar, superior) ----------------------- -----------------------
Explain Ranking/Comments: The comparable sales are all superior to the subject property with respect to location and condition. It is likely that the capitalization rate for the subject property would be 50 to 100 basis point higher than the sales. 9 Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: 6012 -1 -1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 10 Comparable Sale No. 2 [GRAPHIC OMITTED] Name: Eastgate Shopping Center Location: Northwest Corner of Whiskey Road & Eastgate Drive Aiken, SC Grantor: Southwest U.S. Retail, LP Grantee: PDG Aiken Partners, LP Deed Reference: N/A Date: September 28, 1995 Sales Price: $6,675,000 Adjusted Sales Price: $6,675,000 Size building: 75,716 Sales Price per S.F.: $88.16 Size Land (Acres): 8.79 Size Land (S.F.): 382,892 Year Built: 1995 Land/Building Ratio: 5.06 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $782,704 Effective Gross Income: $782,704 EGIM: 8.53 Net Operating Income: $657,896 Overall Rate: 9.86% Verification: Public Records Type of Purchaser: Private Investor Comments: Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. 11 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. 12 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: 59-231-22,23 pt. Name: Paw Creek Commons Location: East side of Little Rock Road at Freedom Drive Grantor: Paw Creek, LLC Grantee: Paw Creek Crossing Limited Partnership Deed Reference: Book 8988, Page 519 Date: March 25, 1997 Sales Price: $5,120,000 Adjusted Sales Price: $5,384,000 Size building: 66,050 Sales Price per S.F.: $77.52 Size Land (Acres): 9.82 Size Land (S.F.): 427,759 Year Built: 1996 Land/Building Ratio: 6.48 to 1 Utilities: Municipal Zoning: CC, Commercial Center Financing: Cash to Seller Gross Potential Income: $568,840 Effective Gross Income: $552,054 Gross Income Multiple: 9.00 EGIM: 9.27 Net Operating Income: $517,412 Overall Rate: 9.61% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was pre-construction. The sales price has been adjusted to reflect this by using 50 basis points in the capitalization rate (.1011 minus .0050 equals .0961). The major tenants are Winn-Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. The income from anchor tenants is 79.41 percent of gross income. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 [GRAPHIC OMITTED] RENT COMPARABLES MAP [GRAPHIC OMITTED] COMPARABLE SALES MAP [GRAPHIC OMITTED] Building Sketch EDENS & AVANT, INC. Retail Custom Rent Roll Date: 4/4/97 Page 8 Property: NORTHWAY PLAZA 5100 FAURVIEW ROAD COLUMBIA, SC Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------------------ EASY COIN LAUNDRY INC. EASY COIN LAUNDRY, INC. 604- 10 2,300 08/01/93 07/31/98 5.46 08/01/89 12,558.00 5.68 08/01/94 13,063.92 5.91 08/01/95 13,593.00 6.14 08/01/96 14,121.96 3.77 09/01/96 8,678.88 6.14 12/01/96 14,121.96 6.39 08/01/97 14,697.00 - ------------------------------------------------------------------------------------------------------------------------------------ NORTHWAY PACKAGE STORE HANI DAGHESTANI 604- 20 765 09/01/94 08/31/98 8.50 10/01/91 6,502.44 9.50 09/01/94 7,270.44 - ------------------------------------------------------------------------------------------------------------------------------------ REFLECTIONS TWO LEILA RIVERS GOLDEN 604- 30 612 06/01/96 05/31/99 9.80 06/01/93 6,000.00 10.00 06/01/96 6,120.00 - ------------------------------------------------------------------------------------------------------------------------------------ FOOD LION #0194 FOOD LION, INC. 604- 40 26,060 08/01/82 07/31/02 2.85 09/01/82 74,280.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ SIMPLY 6 #37 SIMPLY FASHION STORES, INC. 604- 50 2,700 02/10/93 08/09/98 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ EASY COIN LAUNDRY INC. EASY COIN LAUNDRY, INC. PRS 1976 PRS 1976 Full 0 08/01/98 07/31/03 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ NORTHWAY PACKAGE STORE HANI DAGHESTANI PRS 1993 PRS 1993 Full 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ REFLECTIONS TWO LEILA RIVERS GOLDEN Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ FOOD LION #0194 FOOD LION, INC. PRS 1974 None 0 Full 0 08/01/02 07/31/07 2.99 1.00 7,428,000 08/01/07 07/31/12 3.13 1.00 0 08/01/12 07/31/17 3.27 1.00 0 08/01/17 07/31/22 3.42 1.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ SIMPLY 6 #37 SIMPLY FASHION STORES, INC. Full 0 Full 0 Full 0 08/10/98 08/09/03 8.00 3.00 630,000
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 4/08/97 Page 9 Property: NORTHWAY PLAZA 5100 FAURVIEW ROAD COLUMBIA, SC Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------------------ SIMPLY 6 #37 SIMPLY FASHION STORES, INC. 604- 50 2,700 02/10/93 08/09/98 0.00 0.00 7.00 08/10/93 18,900.00 - ------------------------------------------------------------------------------------------------------------------------------------ Available 604- 55 2,100 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ Available 604- 60 3,360 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ G.Q. FASHIONS YUSEF B. HAMEEN 604- 70 3,600 12/01/92 02/28/98 0.00 0.00 6.75 03/01/93 24,300.00 - ------------------------------------------------------------------------------------------------------------------------------------ SUNBELT CREDIT SECURITY FINANCE 604- 100 1,268 12/01/94 11/30/97 7.25 01/01/93 9,192.96 7.50 12/01/94 9,510.00 - ------------------------------------------------------------------------------------------------------------------------------------ VARIETY WHOLESALERS #558 ALLIED DEPARTMENT STORE #77/5 604- 110 8,000 08/01/89 05/31/00 2.50 09/01/89 20,000.04 0.00 0.00 2.75 06/01/94 21,999.96 3.03 06/01/97 24,200.04 - ------------------------------------------------------------------------------------------------------------------------------------ REVCO #2596 REVCO DISCOUNT DRUG CENTERS O 604- 130 9,676 02/01/83 01/31/98 0.00 0.00 3.25 02/01/83 31,446.96 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ SIMPLY 6 #37 SIMPLY FASHION STORES, INC. Full 0 Full 0 Full 0 0.00 3.00 0 0.00 3.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ G.Q. FASHIONS YUSEF B. HAMEEN PRS 1985 PRS 1985 Full 0 03/01/98 02/28/03 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ SUNBELT CREDIT SECURITY FINANCE PRS 1987 PRS 1987 Full 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ VARIETY WHOLESALERS #558 ALLIED DEPARTMENT STORE #77/5 PRS 1983 PRS 1983 Full 0 06/01/97 05/31/00 3.03 3.00 666,700 Y 0.00 3.00 0 Y 0.00 3.00 733,300 Y 0.00 3.00 806,700 Y - ------------------------------------------------------------------------------------------------------------------------------------ REVCO #2596 REVCO DISCOUNT DRUG CENTERS O PRS 1982 None 0 Fixed 0 02/01/98 01/31/03 3.57 2.00 1,000,000 02/01/03 01/31/08 3.93 2.00 0 02/01/08 01/31/13 4.33 2.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 4/08/97 Page 10 Property: NORTHWAY PLAZA 5100 FAURVIEW ROAD COLUMBIA, SC Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------------------ RICHLAND MEMORIAL HOSPITAL RICHLAND MEMORIAL HOSPITAL (5 604- 140 4,248 12/01/94 11/30/99 6.50 05/01/91 27,612.00 7.00 12/01/94 29,736.00 - ------------------------------------------------------------------------------------------------------------------------------------ FAMILY DOLLAR STORES OF W. COL FAMILY DOLLAR STORES OF W. COL 604- 150 8,000 01/01/87 12/31/01 3.13 01/01/92 25,000.08 3.25 01/01/97 26,000.04 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ LORETTA'S HAIR BOUTIQUE CHARLES AND LORETTA THOMAS 604- 160 2,000 11/01/96 10/31/99 6.50 12/01/90 12,999.96 7.00 11/01/93 14,000.04 - ------------------------------------------------------------------------------------------------------------------------------------ GOOD DAY CHINESE YUEN TSANG FUND, YUEN HONG FU 604- 170 0 P 04/16/87 03/31/97 0.00 04/16/97 12,600.00 0.00 04/01/88 13,800.00 0.00 04/01/90 15,000.00 0.00 04/01/91 15,600.00 0.00 04/01/92 16,200.00 0.00 04/01/93 16,800.00 - ------------------------------------------------------------------------------------------------------------------------------------ NORTHWAY COIN LAUNDRY FREDDIE MCCONNELL 604- 180 0 P 09/01/93 08/31/03 0.00 09/01/88 7,200.00 0.00 09/01/93 10,764.00 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ RICHLAND MEMORIAL HOSPITAL RICHLAND MEMORIAL HOSPITAL PRS 1987 PRS 1987 Full 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ FAMILY DOLLAR STORES OF W. COL FAMILY DOLLAR STORES OF W. COL. PRS 1987 PRS 1987 Full 0 01/01/92 12/31/96 3.13 3.00 833,300 Y 01/01/97 12/31/01 3.25 3.00 866,700 Y 01/01/02 12/31/06 3.38 3.00 0 Y 01/01/07 12/31/11 3.50 3.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ LORETTA'S HAIR BOUTIQUE CHARLES AND LORETTA THOMAS Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ GOOD DAY CHINESE YUEN TSANG FUND, YUEN HONG FU Full 0 None 0 None 0 0.00 6.00 210,000 Y 0.00 6.00 230,000 Y 0.00 6.00 250,000 Y 0.00 6.00 260,000 Y 0.00 6.00 270,000 Y 0.00 6.00 280,000 Y - ------------------------------------------------------------------------------------------------------------------------------------ NORTHWAY COIN LAUNDRY FREDDIE MCCONNELL Full 0 Full 0 None 0 09/01/03 08/31/08 6.97 0.00 0 0.00 0.00 0
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 4/08/97 Page 11 Property: NORTHWAY PLAZA 5100 FAURVIEW ROAD COLUMBIA, SC Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------------------ NORTHWAY COIN LAUNDRY FREDDIE MCCONNELL 604- 180 0 P 09/01/93 08/31/03 0.00 09/01/98 14,352.00 - ------------------------------------------------------------------------------------------------------------------------------------ ADVANCE AUTO STORE #508 ADVANCE STORES CO., INC. 604- 190 0 P 01/06/89 12/31/97 0.00 01/06/89 39,984.00 0.00 01/01/93 41,652.00 - ------------------------------------------------------------------------------------------------------------------------------------ OUTDOOR EAST #308 LAMAR ADVERTISING 604-2000 0 P 04/01/86 03/31/98 0.00 04/01/94 400.00 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ NORTHWAY COIN LAUNDRY FREDDIE MCCONNELL Full 0 Full 0 None 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ ADVANCE AUTO STORE #508 ADVANCE STORES CO., INC. PRS 1988 PRS 1988 None 0 01/01/98 12/31/02 7.50 2.50 1,599,400 Y 0.00 2.50 1,666,100 Y - ------------------------------------------------------------------------------------------------------------------------------------ OUTDOOR EAST #308 LAMAR ADVERTISING None 0 None 0 None 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 69,229 Current Annual Base Rent 347,301.40 Available. 5,460 Total..... 74,689
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Subject Property - Looking East [GRAPHIC OMITTED] Subject Property - Looking Northeast [GRAPHIC OMITTED] Subject Property - Looking Southeast [GRAPHIC OMITTED] Subject Property - Looking Northeast [GRAPHIC OMITTED] Subject Property - Looking North [GRAPHIC OMITTED] Subject Property - Looking Northeast [GRAPHIC OMITTED] Fairfield Road - Looking South [GRAPHIC OMITTED] Fairfield Road - Looking North This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study PALMETTO PLAZA SHOPPING CENTER 493 Guignard Drive Sumter, Sumter County, South Carolina Prepared by Michael B. Dodds, MAI, CCIM Date of Market Study - May 8, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] May 8, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Palmetto Plaza 493 Guignard Drive Sumter, Sumter County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. The analysis that forms the basis of the study was conducted by Michael B. Dodds, MAI, CCIM. The subject property and all comparable data were inspected by Michael B. Dodds, MAI, CCIM on May 8, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 97,864 square feet of leasable area. The center was constructed in 1964, with renovations in 1985 and 1996. The anchor tenant is Food Lion, which occupies 32,510 square foot. The shopping center local stores are currently 96.8% occupied. In addition to the shopping center, there are several tenants occupying buildings on a ground lease basis. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ Michael B. Dodds -------------------- Michael B. Dodds, MAI, CCIM State Certified General Real Estate Appraiser (CG-543) EXECUTIVE SUMMARY ================================================================================ Regional Perspective The subject property is located in Sumter, approximately 44 miles southeast of Columbia. The Sumter area is heavily influenced by the proximity to the Shaw Air Force Base which is located 10 miles west of Sumter. The Base employs approximately 6,900 and was established in 1942. It appears that the future of Shaw Air Force Base is safe, with the base not being included on any of the base closure lists as part of the U.S. Base Realignment Program. Other large employers in the area include Carolina Golden Products, Santee Print Works and Tuomey Regional Medical Center. The unemployment rate for Sumter County as of March, 1997 was 6.2 percent while the statewide rate was 5.3 percent. Neighborhood and Site The subject neighborhood is an established area to the northwest of the central business district of Sumter. There has been very little new development occurring in the area in recent years, due in part to the lack of vacant land suitable for development. Developments in the immediate area consist of commercial type properties located along the major thoroughfares and residential uses on the secondary streets. The subject property is easily accessible to Broad Street, a main road leading into the downtown region. The property is also fronts on North Guignard Drive, which is a primary north/south thoroughfare. The general population of the residential areas surrounding the subject can be described as middle income. In general, the area is expected to remain stable in the near future, with very little new residential or commercial construction anticipated. Physical features are as follows: 1. Site Size 11.95 Acres 2. Identity Richland County TMS# 228-00-01-002 and 228-00-02-019 & 03 3. Shape Irregular - Adequate 4. Topography Generally level, on grade with North Guignard Road 5. Accessibility Good - North Guignard Road & Miller Road 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 97,864 square feet 2. Layout & Design 1 story, five buildings, several structures are located on ground leased sites. Design is functional 3. Parking Spaces Approximately 500 (5.11 spaces per 1,000 SF of building area) Recently repaved 4. Construction Brick and glass front with concrete block on side. Roof is built up composition. 1 Market Position and Marketability Conclusions The subject property is located in near downtown Sumter. There are few new traditional shopping centers in this area, with most having been constructed in the 1960's and 1970's. The lack of new construction has created a relatively strong market. Several new freestanding drug stores have been built in the general area during 1996 and 1997. The freestanding store concept has become popular in both small and large towns in South Carolina. There is no formal real estate survey available for the Sumter area, therefore, published historical trends pertaining to the retail market could be reviewed. The current market appears to be stable, with several of the older shopping centers rebounding from low occupancy levels. The Wesmark Square has a vacant Rose's department store, but recently signed leases with Staples Office Supplies and Old America. The center is configured in an "L" shape, and the visibility from Broad Street is poor. A Piggly Wiggly supermarket was located in the center prior to relocating to Sumter Square. The Sumter Square shopping center was renovated in approximately 1994-95 and the anchor tenant leases were renegotiated and extended at that time. This center has reportedly experienced a high occupancy level for several years. The Piggly Wiggly store was previously occupied by Bi-Lo. The location of this neighborhood is considered to be good. The Market Place shopping center is anchored by Winn Dixie, and was built in 1990. Lease-up at this center was slow, partly due to its location on secondary thoroughfares. On the date of inspection, the center was approximately 85 - 90 percent occupied, which is considered to be its stabilized level. This shopping center is one of the more attractive centers in Sumter. The Gateway shopping center is located on U.S. Highway #378, on the west side of town. This shopping center in anchored by Bi-Lo and has several vacant stores. The property was constructed in an "L" configuration, and several of the vacant stores are located in the corner portion of the building which has limited visibility. The rental rates at this shopping center are similar to the subject property. The largest retail development in Sumter is the Jessamine Mall, a 345,850 square foot regional mall that was constructed in 1980. This mall is anchored by Belk's(63,913 SF), JC Penney(51,649 SF), Sears(51,633 SF), and Service Merchandise(39,329 SF). The mall was renovated in 1992, and is reportedly approximately 95 percent occupied. Freestanding retail stores are also scattered along Broad Street, with some of these having tenants including Wal-Mart, Lowes, K-Mart and Kroger. The small, unanchored strip centers along Broad Street and U.S. Highway #378 appear to have occupancy rates in the range of 75 to 85 percent. Most of the retail development in Sumter is located on Broad Street, in proximity to Jessamine Mall. With the exception of Wesmark Square, the shopping centers in the market are operating at stabilized occupancy levels which appear to be in the range of 85 to 90 percent. The vacant anchor tenants at Wesmark Square will be difficult to lease, taking into consideration many tenant's preferences to occupy freestanding stores. The tenant mix at the subject property and the comparables is typical, and tenant turnover at these centers appears to be average. Rental rates have increased slowly and steadily, and no proposed construction was discovered. The economy of Sumter is such that the demand for retail space should continue to increase moderately. Trends The subject property is located in an area of Sumter that has experienced little growth in recent years. The neighborhood is built up, with little vacant land available for development. Surrounding neighborhoods provide a good population base for the retailers at the subject property, and this demand is expected to continue. Most of the retail development in Sumter is located on Broad Street, in proximity to Jessamine Mall, and these properties are expected to continue to operate at high occupancy levels. The rental rates at the subject property generally are in the range of the comparables, and the recent renovation at the subject should place it in a more competitive position in the marketplace. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Palmetto Plaza Wesmark Plaza Sumter Square ----------------------- ------------------------ ------------------------- b. Street 493 Guignard Drive Broad @ Wesmark Broad @ Bultman ----------------------- ------------------------ ------------------------- c. City Sumter, SC Sumter, SC Sumter, SC ----------------------- ------------------------ ------------------------- d. Distance from subject N/A 2 miles 1 mile ----------------------- ------------------------ ------------------------- e. Contact Edens & Avant Don Epley Ogburn Company ----------------------- ------------------------ ------------------------- f. Phone (803)779-4420 (717) 288-1028 (803)779-7777 ----------------------- ------------------------ ------------------------- 2. Attributes a. Year built 1964-85 1966 1972 (renovated 1995) ----------------------- ------------------------ ------------------------- b. Net sq. Ft. 97,864 229,417 54,140 ----------------------- ------------------------ ------------------------- c. # building Five One One ----------------------- ------------------------ ------------------------- d. #stories One One One ----------------------- ------------------------ ------------------------- e. Avg. Floor plate size N/A N/A N/A (sq. Ft.), if office ----------------------- ------------------------ ------------------------- f. # elevators N/A N/A N/A ----------------------- ------------------------ ------------------------- g. Parking Adequate Adequate Adequate ----------------------- ------------------------ ------------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ----------------------- ------------------------ ------------------------- I. Vacancy % 3.2% 48% overall 0% ----------------------- ------------------------ ------------------------- j. Anchors, if Retail Food Lion, McCrory's, Staples, Old America Piggly Wiggly Eckerds ----------------------- ------------------------ -------------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Market Place Gateway Plaza -------------------- -------------------- b. Street Alice Dr @ Wesmark 1324 Broad Street -------------------- -------------------- c. City Sumter, SC Sumter, SC -------------------- -------------------- d. Distance from subject 2 miles 2.5 miles -------------------- -------------------- e. Contact Joe Davis Edens & Avant -------------------- -------------------- f. Phone (803)773-1939 (803)779-4420 -------------------- -------------------- 2. Attributes a. Year built 1990 1989 -------------------- -------------------- b. Net sq. Ft. 50,000 91,150 -------------------- -------------------- c. # building Two One -------------------- -------------------- d. #stories One One -------------------- -------------------- e. Avg. Floor plate size N/A N/A (sq. Ft.), if office -------------------- -------------------- f. # elevators N/A N/A -------------------- -------------------- g. Parking Adequate Adequate -------------------- -------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block -------------------- -------------------- I. Vacancy % 12 - 15 % 23.3% -------------------- -------------------- j. Anchors, if Retail Winn-Dixie Bi-Lo, Revco -------------------- -------------------- Comments: . No recent retail development has occurred, with the exception of free standing drug stores. No planned construction was discovered during the primary research. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A N/A ----------------------- ------------------------ ------------------------ b. Shop Space $6.00 - $8.75/SF $6.00 - $8.00/SF $6.00 - $10.00/SF ----------------------- ------------------------ ------------------------ 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ----------------------- ------------------------ ------------------------ 3. Rent Concessions Minimal Minimal None ----------------------- ------------------------ ------------------------ 4. Effective Rent $6.00 - $8.75/SF $6.00 - $8.00/SF $6.00 - $10.00/SF ----------------------- ------------------------ ------------------------ 5. TI Allowance None None None ----------------------- ------------------------ ------------------------ 6. Expense Stop None None None ----------------------- ------------------------ ------------------------ 7. Length of Lease Term 3 - 5 years (shops) 1 - 5 years (shops) 1 - 3 years (shops) ----------------------- ------------------------ ------------------------ 8. Commissions 5.00% - 7.00% 5.00% - 7.00% 5.00% - 7.00% ----------------------- ------------------------ ------------------------ 9. Percentage Rent Food Lion None None (per lease terms) ----------------------- ------------------------ ------------------------ 10. Historical Annual N/A N/A N/A Absorption/sq.ft. ----------------------- ------------------------ ------------------------ 11. Annual Operating Expense N/A N/A N/A psf (Including taxes) ----------------------- ------------------------ ------------------------ C. RANK RELATIVE TO SUBJECT (inferior, Inferior Similar similar, superior) ----------------------- ------------------------ ------------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A ------------------------ ------------------- b. Shop Space $7.75 - $10.00/SF $6.50 - $9.00/SF ------------------------ ------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net ------------------------ ------------------- 3. Rent Concessions None None ------------------------ ------------------- 4. Effective Rent $7.75 - $10.00/SF $6.50 - $9.00/SF ------------------------ ------------------- 5. TI Allowance None None ------------------------ ------------------- 6. Expense Stop None None ------------------------ ------------------- 7. Length of Lease Term 3 - 5 years (shops) 1 - 3 years (shops) ------------------------ ------------------- 8. Commissions 5.00% - 7.00% 5.00% - 7.00% ------------------------ ------------------- 9. Percentage Rent None None (per lease terms) ------------------------ ------------------- 10. Historical Annual N/A N/A Absorption/sq.ft. ------------------------ ------------------- 11. Annual Operating Expense N/A N/A psf (Including taxes) ------------------------ ------------------- C. RANK RELATIVE TO SUBJECT (inferior, Superior Similar similar, superior) ------------------------ ------------------- D. EXPLAIN RANKING/COMMENTS: Comparable #1 has a significant amount of vacant space, with much of it being in two vacant anchor tenant stores. The center has poor visibility from Broad Street. Comparable #2 was renovated in 1995 and all leases were renegotiated and extended. This center is operating successfully and is attractive. Comparable #3 is the newest center in the area and is of above average quality construction. Comparable #4 is located on US Highway #378, on the west side of town. This center is similar to the subject. Leasing commissions are typically cashed out in this market. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Wesmark Square Location: Broad Street and Wesmark Boulevard Sumter, SC Year Built: 1966 Total Size: 229,417 SF Vacant Space: N/A Vacancy Rate: 48% overall Rental Range: $6.00 - $8.00/ SF Tenant Expenses: Triple Net Remarks: This shopping center has two large vacant anchor stores, including a 59,883 square foot Rose's store. The property is configured in an "L" shape, with one end being mostly vacant, and the other end being recently renovated. Current anchor tenants include a 21,696 square foot Staples Office Supply store and an Old America store. The property has limited visibility from Broad Street, although is across from Jessamine Mall. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: Sumter Square Location: Broad Street @ Bultman Sumter, South Carolina Year Built: 1972 Total Size: 54,140 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $6.00 - $10.00 Tenant Expenses: Triple Net Remarks: The anchor tenant is Piggly Wiggly, and the property was renovated recently, and the anchor tenant leases were renegotiated at that time. The property is in good condition for its age. Other tenants include Blockbuster Video and Family Dollar. This center is attractive and has good exposure from Broad Street. 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Market Place Shopping Center Location: Alice Drive @ Wesmark Blvd. Sumter, South Carolina Year Built: 1990 Total Size: 50,000 SF Vacant Space: 2,500 - 3,000 SF Vacancy Rate: 12.5 - 15 % locals Rental Range: $7.75 - $10.00/SF Tenant Expenses: Triple Net Remarks: The anchor tenant is Winn-Dixie, which occupies 29,888 Square feet. The property is an established center in the neighborhood and was approximately 85 to 90 percent occupied on the date of inspection. The vacancy consisted of two small stores. The property overall is in good condition. 7 Comparable Rental No. 4 ================================================================================ [GRAPHIC OMITTED] Name: Gateway Plaza Location: 1324 Broad Street Extension Sumter, South Carolina Year Built: 1989 Total Size: 91,150 SF Vacant Space: 10,900 SF Vacancy Rate: 23.3% Local Rent Range: $ 6.50 - $9.00 Tenant Expenses: Triple Net Remarks: This center has an anchor tenant space that is occupied by Bi-Lo(36,000 SF). Three vacant stores ranging from 1,500 to 5,400 square feet are available. The property is in good condition. Several of the vacant stores are in an area of the center which has very poor visibility. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Palmetto Plaza St. Andrews Crossing Eastgate Center ------------------------ ------------------------ -------------------------- b. Street Address 493 Guignard Drive 817 St. Andrews Road NWC Whiskey Rd. & Eastgate Dr. ------------------------ ------------------------ -------------------------- c. City Sumter, SC Columbia, SC Aiken, SC ------------------------ ------------------------ -------------------------- d. Distance from Subject N/A 45 miles 80 miles ------------------------ ------------------------ -------------------------- 2. Attributes a. Year Built 1964 1994 1995 ------------------------ ------------------------ -------------------------- b. Net sq. feet 97,864 66,910 75,716 ------------------------ ------------------------ -------------------------- c. # Buildings 5 1 1 ------------------------ ------------------------ -------------------------- d. # of Stories 1 1 1 ------------------------ ------------------------ -------------------------- e. Vacancy % 3.2% 0.0% 5.0% ------------------------ ------------------------ -------------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 ------------------------ ------------------------ -------------------------- b. Sales Price PSF N/A $97.89 $88.16 ------------------------ ------------------------ -------------------------- c. Cap. Rate N/A 9.69% 9.86% ------------------------ ------------------------ -------------------------- d. Date N/A May 24,1994 September 28, 1995 ------------------------ ------------------------ -------------------------- e. NOI at time of Sale N/A $634,797 $657,896 ------------------------ ------------------------ -------------------------- 4. Rank Relative to Subject N/A Superior Superior (inferior, similar, superior) ------------------------ ------------------------ --------------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name One Norman Center Paw Creek Commons ----------------------- -------------------- b. Street Address 19706 One Norman Blvd. E/S Little Rock Rd. At Freedom Drive ----------------------- -------------------- c. City Cornelius, NC Charlotte, NC ----------------------- -------------------- d. Distance from Subject 145 miles 130 miles ----------------------- -------------------- 2. Attributes a. Year Built 1993 1996 ----------------------- -------------------- b. Net sq. feet 54,185 66,050 ----------------------- -------------------- c. # Buildings 1 1 ----------------------- -------------------- d. # of Stories 1 1 ----------------------- -------------------- e. Vacancy % 0.0% 2.73% ----------------------- -------------------- 3. Sales Information a. Sales Price $4,650,000 $5,120,000 ----------------------- -------------------- b. Sales Price PSF $85.82 $77.52 ----------------------- -------------------- c. Cap. Rate 9.68% 9.60% ----------------------- -------------------- d. Date October 12, 1995 March 25, 1997 ----------------------- -------------------- e. NOI at time of Sale $450,188 $517,412 ----------------------- -------------------- 4. Rank Relative to Subject Superior Superior (inferior, similar, superior) ----------------------- -------------------- Explain Ranking/Comments: The comparable sales are all superior to the subject property with respect to age, although the subject property has been renovated several times. The most renovation was in 1996, and the parking lot was recently repaved. The subject property has a desirable tenant mix and has been well managed. 9 Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: 6012 -1 -1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 10 Comparable Sale No. 2 [GRAPHIC OMITTED] Name: Eastgate Shopping Center Location: Northwest Corner of Whiskey Road & Eastgate Drive Aiken, SC Grantor: Southwest U.S. Retail, LP Grantee: PDG Aiken Partners, LP Deed Reference: N/A Date: September 28, 1995 Sales Price: $6,675,000 Adjusted Sales Price: $6,675,000 Size building: 75,716 Sales Price per S.F.: $88.16 Size Land (Acres): 8.79 Size Land (S.F.): 382,892 Year Built: 1995 Land/Building Ratio: 5.06 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Effective Gross Income: $782,704 EGIM: 8.53 Net Operating Income: $657,896 Overall Rate: 9.86% Verification: Public Records Type of Purchaser: Private Investor Comments: Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. 11 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. 12 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: 59-231-22,23 pt. Name: Paw Creek Commons Location: East side of Little Rock Road at Freedom Drive Grantor: Paw Creek, LLC Grantee: Paw Creek Crossing Limited Partnership Deed Reference: Book 8988, Page 519 Date: March 25, 1997 Sales Price: $5,120,000 Adjusted Sales Price: $5,384,000 Size building: 66,050 Sales Price per S.F.: $77.52 Size Land (Acres): 9.82 Size Land (S.F.): 427,759 Year Built: 1996 Land/Building Ratio: 6.48 to 1 Utilities: Municipal Zoning: CC, Commercial Center Financing: Cash to Seller Gross Potential Income: $568,840 Effective Gross Income: $552,054 Gross Income Multiple: 9.00 EGIM: 9.27 Net Operating Income: $517,412 Overall Rate: 9.61% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was pre-construction. The sales price has been adjusted to reflect this by using 50 basis points in the capitalization rate (.1011 minus .0050 equals .0961). The major tenants are Winn-Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. The income from anchor tenants is 79.41 percent of gross income. 13 ADDENDA Comparables Rental Map Comparables Sales Map Building Layout Rent Roll Photographs of Subject 14 [GRAPHIC OMITTED] Rental Comparables Map [GRAPHIC OMITTED] Improved Sales Comparables Map [GRAPHIC OMITTED] Site Plan Date: 04/08/97 EDENS & AVANT, INC. Page 24 Retail Custom Rent Roll Property: PALMETTO PLAZA 493 GUIGNARD DRIVE SUMTER, SC Column Legends: Tenant/Propert MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- WASH TUB LAUNDRY, INC. WASH TUB LAUNDRY, INC. 612- 10 3,400 09/01/96 08/31/01 0.00 0.00 8.00 10/01/92 27,199.92 0.00 0.00 8.75 09/01/96 29,750.04 9.25 09/01/98 31,449.96 - -------------------------------------------------------------------------------------------------------------------------- FOOD LION #179 FOOD TOWN STORES, INC. 612- 30 32,510 05/18/83 05/17/03 3.12 06/10/83 101,499.96 3.68 04/10/96 119,499.96 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- HI-LITES GRIFFIN 88, INC. 612- 40 3,000 10/01/91 09/30/98 0.00 0.00 0.00 0.00 6.00 11/01/91 18,000.00 6.25 10/01/93 18,750.00 6.50 10/01/94 19,500.00 6.83 10/01/96 20,475.00 - -------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ WASH TUB LAUNDRY, INC. WASH TUB LAUNDRY, INC. Full 0 Full 0 Full 0 09/01/01 09/31/06 10.00 5.00 500,000 09/01/06 08/31/11 11.00 5.00 544,000 Y 0.00 5.00 475,000 Y 0.00 5.00 595,000 Y 0.00 5.00 629,000 Y - ------------------------------------------------------------------------------------------------------------------------------------ FOOD LION #l79 FOOD TOWN STORES, INC. PRS 1984 PRS 1983 Full 0 05/18/03 05/17/08 3.34 1.00 10,150,000 Y 05/18/08 05/17/13 3.64 0.01 237,136 Y 05/18/13 05/17/18 3.95 0.01 0 Y 05/18/18 05/17/23 4.25 0.01 0 Y 05/18/23 05/17/28 0.00 0.01 0 Y 05/18/28 05/17/33 0.00 0.01 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ HI-LITES GRIFFIN 88, INC. Full 0 Full 0 Full 0 10/01/96 09/30/98 6.83 4.50 500,000 10/01/98 09/30/00 7.17 4.50 0 0.00 4.50 0 0.00 4.50 0 0.00 4.50 0 0.00 4.50 0 - ------------------------------------------------------------------------------------------------------------------------------------
Date: 04/08/97 EDENS & AVANT, INC. Page 25 Retail Custom Rent Roll Property: PALMETTO PLAZA 493 GUIGNARD DRIVE SUMTER, SC Column Legends: Tenant/Propert MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- FOUR SEASONS FASHIONS, INC. FOUR SEASONS FASHIONS, INC. 612- 50 4,000 08/01/95 12/31/98 0.00 0.00 0.00 0.00 5.00 11/01/91 19,999.92 6.00 01/01/96 24,000.00 6.50 01/01/97 25,999.92 7.00 01/01/98 27,999.96 - -------------------------------------------------------------------------------------------------------------------------- ONE PRICE CLOTHING #14 ONE PRICE CLOTHING STORES, IN 612- 70 3,000 02/01/96 01/31/01 6.07 11/01/90 18,200.04 0.00 0.00 8.00 02/01/96 24,000.00 - -------------------------------------------------------------------------------------------------------------------------- PIECE GOODS #0101 612- 90 5,000 12/01/88 11/30/93 6.60 12/01/88 33,000.00 - -------------------------------------------------------------------------------------------------------------------------- GREAT WALL CHINESE RESTAURANT 612- 100 1,690 09/01/93 08/31/03 6.06 09/01/93 10,233.84 6.77 09/01/96 11,433.84 7.76 09/01/98 13,114.32 8.51 09/01/00 14,381.88 - -------------------------------------------------------------------------------------------------------------------------- ECKERD'S #2410 612- 120 8,850 08/01/83 07/31/03 5.75 08/01/83 50,887.56 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ FOUR SEASONS FASHIONS, INC. FOUR SEASONS FASHIONS, INC. Full 0 Full 0 Full 0 11/01/94 10/31/97 0.00 4.00 650,000 0.00 4.00 0 0.00 4.00 0 0.00 4.00 0 0.00 4.00 0 0.00 4.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ ONE PRICE CLOTHING #14 ONE PRICE CLOTHING STORES, IN Full 0 Full 0 Full 0 02/01/01 01/31/06 9.00 4.00 455,000 Y 0.00 4.00 0 Y 0.00 4.00 600,000 Y - ------------------------------------------------------------------------------------------------------------------------------------ PIECE GOODS #0101 PRS 1982 PRS 1982 Fixed 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ GREAT WALL CHINESE RESTAURANT Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ ECKERD'S #2410 PRS 1984 None 0 Full 0 08/01/03 07/31/08 5.75 0.00 0 08/01/08 07/31/13 5.75 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
Date: 04/08/97 EDENS & AVANT, INC. Page 26 Retail Custom Rent Roll Property: PALMETTO PLAZA 493 GUIGNARD DRIVE SUMTER, SC Column Legends: Tenant/Propert MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- MCCRORY CORPORATION MCCRORY STORES 612- 130 20,040 02/01/64 02/12/99 0.00 0.00 1.20 02/13/89 24,000.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- SIMPSON HARDWARE INC. SIMPSON PALMETTO PLAZA HARDWA 612- 140 14,300 11/01/94 10/31/98 0.00 0.00 3.50 11/01/90 50,049.96 0.00 0.00 4.25 11/01/94 60,774.96 - -------------------------------------------------------------------------------------------------------------------------- MARTIN THEATRES MARTIN THEATRES OF GEORGIA, I 612- 150 0 P 07/01/92 06/30/97 0.00 07/01/92 4,950.00 0.00 0.00 0.00 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- Available 612- 160 0 P 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- HARDEE'S CALE YARBOROUGH ENTERPRISES, 612- 170 0 P 09/16/80 09/15/00 0.00 0.00 0.00 10/01/80 27,555.96 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ MCCRORY CORPORATION MCCRORY STORES None 0 None 0 Fixed 0 02/01/79 01/31/84 0.95 4.00 24,000 02/13/84 02/12/89 1.20 3.00 600,000 02/13/89 02/12/94 1.20 3.00 0 02/13/94 02/12/99 1.20 3.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ SIMPSON HARDWARE INC. SIMPSON PALMETTO PLAZA HARDWA PRS 1988 None 0 Fixed 0 11/01/98 10/31/03 0.00 0.00 0 11/01/03 10/31/08 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ MARTIN THEATRES MARTIN THEATRES OF GEROGIA, I None 0 None 0 Fixed 0 07/01/92 06/30/97 0.47 0.00 0 07/01/97 06/30/02 0.53 0.00 0 07/01/02 06/30/07 0.59 0.00 0 07/01/07 06/30/12 0.64 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ HARDEE'S CALE YARBOROUGH ENTERPRISES, None 0 None 0 Fixed 0 10/01/00 09/30/05 0.00 5.00 0 Y 10/01/05 09/30/10 0.00 5.00 551,100 Y 10/01/10 09/30/15 0.00 5.00 0 Y
Date: 04/08/97 EDENS & AVANT, INC. Page 27 Retail Custom Rent Roll Property: PALMETTO PLAZA 493 GUIGNARD DRIVE SUMTER, SC Column Legends: Tenant/Propert MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------------- HARDEE'S CALE YARBOROUGH ENTERPRISES, 612- 170 0 P 09/16/80 09/15/00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- NATIONAL BANK OF SC NATIONAL BANK OF S.C. 612- 180 0 P 01/01/88 12/31/03 0.00 01/01/88 7,399.92 0.00 01/01/89 8,599.92 0.00 01/01/94 12,000.00 0.00 01/01/99 15,999.96 - -------------------------------------------------------------------------------------------------------------------------- Available 612- 190 1,156 P 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- CHOCOLATE BLOCK JOHN G. MOISE 612- 200 918 04/12/97 04/30/00 8.25 05/01/97 7,573.56 - -------------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied.. 96,708 Current Annual Base Rent 444,327.24 Available. 1,156 Total..... 97,864 - ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- HARDEE'S CALE YARBOROUGH ENTERPRISES, None 0 None 0 Fixed 0 10/01/15 09/30/20 0.00 5.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- NATIONAL BANK OF SC NATIONAL BANK OF S.C. Full 0 Full 0 Fixed 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- CHOCOLATE BLOCK JOHN G. MOISE Full 0 Full 0 Full 0 0.00 0.00 0 - -----------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Subject Property Looking Southeast [GRAPHIC OMITTED] Subject Property Looking Northeast [GRAPHIC OMITTED] Theater Building Looking Northeast [GRAPHIC OMITTED] Hardees Looking South [GRAPHIC OMITTED] Shops and Bank Looking West [GRAPHIC OMITTED] Rear Of Subject Looking Northwest [GRAPHIC OMITTED] Rear Of Subject Looking South [GRAPHIC OMITTED] Guignard Drive Looking South [GRAPHIC OMITTED] Guignard Drive Looking North [GRAPHIC OMITTED] Miller Road Looking East [GRAPHIC OMITTED] Miller Road Looking West This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study ROSEWOOD EXTENSION RETAIL CENTER 4450 Rosewood Drive Columbia, Richland County, South Carolina Prepared by Michael B. Dodds, MAI, CCIM Date of Market Study - May 13, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] May 13, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Rosewood Extension Retail Center 4450 Rosewood Drive Columbia, Richland County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. The analysis that forms the basis of the study was conducted by Michael B. Dodds, MAI, CCIM. The subject property and all comparable data were inspected by Michael B. Dodds, MAI, CCIM on May 13, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of an unanchored shopping center that contains 13,188 square feet of leasable area. The center was constructed in 1989, and the largest tenant is Blockbuster Video, which occupies 6,400 square feet. The center is currently 87.7 percent occupied. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ Michael B. Dodds ----------------------------------- Michael B. Dodds, MAI, CCIM State Certified General Real Estate Appraiser (CG-543) EXECUTIVE SUMMARY ================================================================================ Regional Perspective Columbia is the state capital with the State House being located in downtown Columbia. Also, the University of South Carolina Campus is located in the downtown area. Fort Jackson, which is a large U.S. Army Training Facility is located in the eastern section of the Metropolitan area. The city has numerous specialized office activities such as: insurance, consulting services, advertising, marketing, printing and financial services. Government, distribution, finance and transportation are all important to Columbia, although none are preeminent. Geography also gives Columbia a strategic location in the industrial and commercial markets. The unemployment rate for Richland County as of March, 1997 was 3.7 percent while the statewide rate was 5.3 percent. Neighborhood and Site The subject property is located on Rosewood Drive Extension, just west of its intersection with Garners Ferry Road. Garners Ferry Road is a major thoroughfare leading into Columbia from the southeast region of Richland County. The new Southeastern Beltway, which connects Interstate #20 with Interstate #26 intersects with Garners Ferry Road approximately 2 miles east of the subject. This new freeway has increased the accessibility to the retail and service related facilities in the neighborhood. The location is convenient to the single and multi family dwellings that are located throughout the neighborhood. Other major developments in the neighborhood include Midlands Technical College, VA Hospital and Woodhill Mall. Generally, the neighborhood is an established area that offers a wide range of housing options. Fort Jackson is located to the north of the subject and influences the housing market. Overall, the area is desirable, although future growth is expected to be limited. Physical features are as follows: 1. Site Size 1.54+/- Acres or 67,082 square feet 2. Identity Richland County TMS# 13809-05-01 3. Shape Rectangular - Adequate 4. Topography Generally level, slightly above grade of Rosewood 5. Accessibility Good - Rosewood Dr. and Gills Creek Parkway 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 13,188 square feet 2. Layout & Design 1 story, two buildings - 4 tenant spaces. Design is functional 3. Parking Spaces Approximately 101 (7.66 spaces per 1,000 SF of building area) 4. Construction Brick and glass front with concrete block on side. Roof is built up composition. 1 Market Position and Marketability Conclusions The sub-market in which the subject property is located is the South Columbia area. According to the 1996 Central Carolina Business Review and Investment Guide, there are 13 shopping centers totaling approximately 1,226,087 square feet. The available square footage consists of approximately 220,238 square feet with the vacancy rate being 17.4 percent. There are no shopping centers under construction at this time, or planned according to the survey. The newest shopping center in the neighborhood is the Crossroads Commons shopping center. This center contains 85,000 square feet, and is anchored by a 35,225 square foot Bi-Lo, a 19,648 square foot Staples and a Revco. There are two vacancies in this center, with one being a store previously occupied by Hollywood Video. The subject property is located on Rosewood Drive Extension, just west of its intersection with Garners Ferry Road. The location is convenient to the single family dwellings that are located throughout the neighborhood, as well as commuters to employment areas. The area is influenced by the proximity to Fort Jackson to the north and the University of South Carolina and Midlands Technical College to the south. Much of the multi family housing in the area is marketed to students and military personnel. Anchor tenants occupying space in the neighborhood include K-Mart, Wal-Mart, Food Lion, Piggly Wiggly, Target and Harris Teeter. The shopping centers in the neighborhood are generally anchored by supermarkets or discount stores. The rental range for the shops in these centers is from $8.00 to $13.50 per square foot on a triple net basis. The smaller and older centers have rental rates generally ranging from $6.00 to $10.00 per square foot. The subject property is an unanchored retail center and would typically attract a different typical tenant than a standard shopping center due to it having no true anchor tenant. The largest tenant is Blockbuster Video, which has eight stores in the Columbia area. In addition to Blockbuster, tenants at the subject include TCBY Yogurt and Sounds Familiar. The tenant mix is considered to be good and the parking provided is adequate. According to the above mentioned survey, the subject property has the highest rental rates in the sub-market. Accessibility and location are positive factors affecting the marketability of the subject. In general, the subject property is attractive and should compete well with the smaller shopping centers. The rental rates charged at the subject range from$13.00 to $15.00 per square foot. These rents are considered reasonable for the market, and are at the upper end of the range for properties in the South Columbia sub-market. The subject property has operated at a high occupancy rate, and three of the tenants have occupied their respective spaces since completion of construction in 1989. Trends: The subject property is located in the southeast section of the metropolitan area of Columbia. There has been little new retail development in the immediate area in recent years, and the largest retail center has experienced difficulties. The vacancy rate for the sub-market is the second highest in Columbia, with much of the vacant space being attributable to vacant anchor tenant spaces. Rental rates have remained stable during 1995 and 1996 and this is expected to remain the same in the near future for the overall market. The subject property is considered to be in a better position to command rental rate increases. It is believed that the 1,625 square foot vacant store at the subject will lease quickly. 2 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================ I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Rosewood Extension Crossroads Commons Dreher Plaza ---------------------- ----------------------- ----------------------- b. Street 4450 Rosewood Drive Devine Street @ Ft. 100 Dreher Road Jackson Boulevard ---------------------- ----------------------- ----------------------- c. City Columbia, SC Columbia, SC West Columbia, SC ---------------------- ----------------------- ----------------------- d. Distance from subject N/A 0.25 mile 8 miles ---------------------- ----------------------- ----------------------- e. Contact Edens & Avant, Inc. Ahold Edens & Avant, Inc. ---------------------- ----------------------- ----------------------- f. Phone 803-779-4420 803-776-9015 803-779-4420 ---------------------- ----------------------- ----------------------- 2. Attributes a. Year built 1989 1993 1989 ---------------------- ----------------------- ----------------------- b. Net sq. Ft. 13,188 85,000 20,276 ---------------------- ----------------------- ----------------------- c. # building 2 1 1 ---------------------- ----------------------- ----------------------- d. #stories 1 1 1 ---------------------- ----------------------- ----------------------- e. Avg. Floor plate size (SF), if office N/A N/A N/A ---------------------- ----------------------- ----------------------- f. # elevators N/A N/A N/A ---------------------- ----------------------- ----------------------- g. Parking Adequate Adequate Adequate ---------------------- ----------------------- ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ---------------------- ----------------------- ----------------------- I. Vacancy % 12.3% 0% 0% ---------------------- ----------------------- ----------------------- j. Anchors, if Retail Blockbuster Staples, Bi-Lo, Revco Blockbuster ---------------------- ----------------------- ----------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name The Forum Shoppes at 4600 ----------------------- ----------------------- b. Street 2818 Devine Street 4600 Forest Drive ----------------------- ----------------------- c. City Columbia, SC Columbia, SC ----------------------- ----------------------- d. Distance from subject 3 miles 4 miles ----------------------- ----------------------- e. Contact Edens & Avant Walter Taylor ----------------------- ----------------------- f. Phone 803-779-4420 803-256-1050 ----------------------- ----------------------- 2. Attributes a. Year built 1987 1977 ----------------------- ----------------------- b. Net sq. Ft. 19,570 16,060 ----------------------- ----------------------- c. # building 1 1 ----------------------- ----------------------- d. #stories 1 1 ----------------------- ----------------------- e. Avg. Floor plate size (SF), if office N/A N/A ----------------------- ----------------------- f. # elevators N/A N/A ----------------------- ----------------------- g. Parking Adequate Adequate ----------------------- ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block ----------------------- ----------------------- I. Vacancy % 0% 0% ----------------------- ----------------------- j. Anchors, if Retail Storehouse None ----------------------- -----------------------
Comments: One vacancy at comparable #1 is a store which was leased to Hollywood Video. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION ================================================================================
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A N/A ----------------------- ----------------------- ---------------------- b. Shop Space $13.00 - $15.00/SF $11.00 - $12.00/SF $7.00 - $12.45/SF ----------------------- ----------------------- ---------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ----------------------- ----------------------- ---------------------- 3. Rent Concessions None None None ----------------------- ----------------------- ---------------------- 4. Effective Rent $13.00 - $15.00/SF $11.00 - $12.00/SF $7.00 - $12.45/SF ----------------------- ----------------------- ---------------------- 5. TI Allowance None None None ----------------------- ----------------------- ---------------------- 6. Expense Stop None None None ----------------------- ----------------------- ---------------------- 7. Length of Lease Term 3 - 5 years (shop) 3 - 5 years (shop) 3 - 5 years ----------------------- ----------------------- ---------------------- 8. Commissions 5.00% to 7.00% 5.00% to 7.00% 5.00% to 7.00% ----------------------- ----------------------- ---------------------- 9. Percentage Rent (per lease terms) Blockbuster Video Bi-Lo, Revco N/A ----------------------- ----------------------- ---------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A ----------------------- ----------------------- ---------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A ----------------------- ----------------------- ---------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Similar Similar ----------------------- ----------------------- ---------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A ---------------------- ---------------------- b. Shop Space $12.00 - $13.00/SF $8.00 - $12.00 /SF ---------------------- ---------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net ---------------------- ---------------------- 3. Rent Concessions None None ---------------------- ---------------------- 4. Effective Rent $12.00 - $13.00/SF $8.00 - $12.00 /SF ---------------------- ---------------------- 5. TI Allowance None None ---------------------- ---------------------- 6. Expense Stop None None ---------------------- ---------------------- 7. Length of Lease Term 3 - 5 years 1 - 3 years ---------------------- ---------------------- 8. Commissions 5.00% to 7.00% 5.00% - 7.00% ---------------------- ---------------------- 9. Percentage Rent (per lease terms) N/A N/A ---------------------- ---------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A ---------------------- ---------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A ---------------------- ---------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) Similar Similar ---------------------- ----------------------
D. EXPLAIN RANKING/COMMENTS: Comparable #1 is much larger than the subject property, but is within one quarter of a mile from the subject. Comparable #2 is very similar to the subject also, and has a Blockbuster Video as the largest tenant. Comparables #2, #3 and #4 are unanchored strip centers and are considered most comparable to the subject. All three are 100% occupied. 4 LOCAL RENTAL COMPARABLES - ------------------------ Comparable Rental No. 1 [GRAPHIC OMITTED] Name: Crossroads Commons Location: Devine Street at Fort Jackson Boulevard Columbia, SC Year Built: 1993 Total Size: 85,000 SF Vacant Space: 8,000+/- SF Vacancy Rate: 37+/- % Rental Range: $11.00 to $12.00/SF Tenant Expenses: Triple Net Remarks: The anchor tenants are Bi-Lo, Revco and Staples. There are two vacancies, with one having previously occupied by Hollywood Video. Exposure and visibility are good. The center is attractive and of good quality construction. 5 Comparable Rental No. 2 [GRAPHIC OMITTED] Name: Dreher Plaza Location: 100 Dreher Road West Columbia, SC Year Built: 1989 Total Size: 20,276 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $7.00 - $12.45 per square foot Tenant Expenses: Triple Net Remarks: A 6,400 square foot Blockbuster Video is the largest tenant in this center. It is located adjacent to a Wal-Mart Shopping Center at a heavily traveled intersection. 6 Comparable Rental No. 3 [GRAPHIC OMITTED] Name: The Forum Location: 2818 Devine Street Columbia, SC Year Built: 1987 Total Size: 19,570 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Rate: $12.00 - $13.00 per square foot Tenant Expenses: Triple Net Remarks: There are ten local tenant shops. The property is located on Devine Street near the Shandon neighborhood, a popular downtown residential area. The largest tenants are Storehouse and Round Robin. 7 Comparable Rental No. 4 [GRAPHIC OMITTED] Name: Shoppes at 4600 Location: 4600 Forest Drive Columbia, South Carolina Year Built: 1977 Total Size: 16,060 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $8.00 to $12.00 Tenant Expenses: Triple Net Remarks: This unanchored retail center has 6 tenant spaces and is 100 percent occupied. The center has historically maintained a high occupancy level. 8 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================ II. SALES COMPARABLES
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Rosewood Extension Unnamed center Pastime Pavilion ------------------------ ------------------------ -------------------------- b. Street Address 2450 Rosewood Drive Broad River Road@ 929 North Lake Rushmore ------------------------ ------------------------ -------------------------- c. City Columbia, SC Columbia, SC Lexington, SC ------------------------ ------------------------ -------------------------- d. Distance from Subject N/A 10 miles 16 miles ------------------------ ------------------------ -------------------------- 2. Attributes a. Year Built 1989 1986 1990 ------------------------ ------------------------ -------------------------- b. Net sq. feet 13,188 35,000 36,903 ------------------------ ------------------------ -------------------------- c. # Buildings 2 1 1 ------------------------ ------------------------ -------------------------- d. # of Stories 1 1 1 ------------------------ ------------------------ -------------------------- e. Vacancy % 0% 0.0% 22% ------------------------ ------------------------ -------------------------- 3. Sales Information a. Sales Price N/A $1,662,860 $1,900,000 ------------------------ ------------------------ -------------------------- b. Sales Price PSF N/A $47.51 $51.49 ------------------------ ------------------------ -------------------------- c. Cap. Rate N/A 10.89% 10.23% ------------------------ ------------------------ -------------------------- d. Date N/A May 24,1990 November 1, 1996 ------------------------ ------------------------ -------------------------- e. NOI at time of Sale N/A $181,125 $194,294 ------------------------ ------------------------ -------------------------- 4. Rank Relative to Subject N/A Inferior Superior (inferior, similar, superior) ------------------------ ------------------------ -------------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name River Center Murraywood Center ----------------------- ---------------------- b. Street Address 1720 Broad River Road 7001 St. Andrews Road ----------------------- ---------------------- c. City Columbia, NC Irmo, SC ----------------------- ---------------------- d. Distance from Subject 9 miles 15 miles ----------------------- ---------------------- 2. Attributes a. Year Built 1985 1987 ----------------------- ---------------------- b. Net sq. feet 23,421 35,800 ----------------------- ---------------------- c. # Buildings 1 1 ----------------------- ---------------------- d. # of Stories 1 1 ----------------------- ---------------------- e. Vacancy % 0.0% 5.6% ----------------------- ---------------------- 3. Sales Information a. Sales Price $1,605,000 $2,020,000 ----------------------- ---------------------- b. Sales Price PSF $68.53 $56.42 ----------------------- ---------------------- c. Cap. Rate 10.40% 10.75% ----------------------- ---------------------- d. Date February 14, 1990 November 13, 1995 ----------------------- ---------------------- e. NOI at time of Sale $167,000 $217,085 ----------------------- ---------------------- 4. Rank Relative to Subject Inferior Superior (inferior, similar, superior) ----------------------- ----------------------
Explain Ranking/Comments: The comparable sales are all larger than the subject property with respect to size. Sales #1 and #3 are very similar, due to there being no anchor tenant at these properties. Comparables #2 and #4 are more specialty type centers which are less comparable to the subject. Comparable #2 also has a theater as part of the property. 9 COMPARABLE IMPROVED SALES - ------------------------- Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: 6015-02-01 Name: Unnamed Center Location: Corner of Broad River Road and Rushmore Columbia, Richland County, SC Grantor: 2700 Partnership Grantee: SC National Bank as trustee Deed Reference: Book 982, Page 151 Date: May 24, 1990 Sales Price: $1,572,000 Adjusted Sales Price: $1,662,860 Size building 35,000 Sales Price per S.F.: $47.51 Size Land (Acres): 2.42 Size Land (S.F.): 105,415 Year Built: 1986 Land/Building Ratio: 3.01 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $247,275 EGIM: 6.72 Net Operating Income: $181,125 Overall Rate: 10.89% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of an unanchored strip shopping center in a good commercial area with good accessibility and exposure. Construction is brick veneer/concrete block. The sellers are managing the property. The sales price was adjusted to account for above market financing which was assumed. The average rent was $7.85/SF and the center was 100 % occupied. 10 Comparable Sale No. 2 [GRAPHIC OMITTED] Name: Pastime Pavilion Location: 929 North Lake Drive Lexington, SC Grantor: Dixie South Land Development Corp. Grantee: Brigham Realty & Investment Date: November 1, 1996 Sales Price: $1,852,500 Adjusted Sales Price: $1,900,000 Size building: 36,903 Sales Price per S.F.: $51.49 Size Land (Acres): 5.23 Size Land (S.F.): 227,819 Year Built: 1990 Land/Building Ratio: 6.17 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Effective Gross Income: $250,577 EGIM: 7.58 Net Operating Income: $194,294 Overall Rate: 10.23% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood shopping center that was constructed in 1990. The primary tenant is a theater. An expansion of the theater was planned by the buyer. Parking is considered adequate. The occupancy at the time of sale was 22 percent. Adjusted price reflects a rent abatement/"investment" in theater. 11 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: River Center Location: 1720 Broad River Road Columbia, Richland County, SC Grantor: AR Partners - 84 Grantee: River Center Associates Date: February 14, 1990 Sales Price: $1,500,000 Adjusted Sales Price: $1,605,000 Size building: 23,421 Sales Price per S.F.: $68.53 Size Land (Acres): 1.37 Size Land (S.F.): 59,677 Year Built: 1985 Land/Building Ratio: 2.55 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Effective Gross Income: $187,089 EGIM: 8.58 Net Operating Income: $167,000 Overall Rate: 10.40% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a strip shopping center that was constructed in 1985. The primary tenant is a Color Tile. The sales price was adjusted to reflect that there was no commission paid in the sale. The property is located across from Dutch Square Mall and has 8 tenants. 12 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: 2715-2-1 Name: Murraywood Center Location: 7001 St. Andrews Road Irmo, SC Grantor: LPC of SC, Inc. Grantee: Coldwater Portfolio Investors, LLC Deed Reference: Book 3539, Page 84 Date: November 13, 1995 Sales Price: $2,020,000 Adjusted Sales Price: $2,020,000 Size building: 35,800 Sales Price per S.F.: $56.42 Size Land (Acres): 4.092 Size Land (S.F.): 178,248 Year Built: 1987 Land/Building Ratio: 4.98 to 1 Utilities: Municipal Zoning: CG, General Commercial Financing: Cash to Seller Effective Gross Income: $290,131 EGIM: 6.96 Net Operating Income: $217,085 Overall Rate: 10.75% Verification: Public Records Type of Purchaser: Private Investor Comments: New rents on shops range from $10.00 to $11.00 per square foot. The center was originally designed as a specialty center, and has over time attracted more office users. The center has good visibility and is of above average condition. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 Comparable Rentals [GRAPHIC OMITTED] Comparable Improved Sales Map [GRAPHIC OMITTED] Site Plan [GRAPHIC OMITTED] EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 123 Property: ROSEWOOD EXTENSION 4450 ROSEWOOD DRIVE COLUMBIA, SC 29205-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- -------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - -------------------------------------------------------------------------------------------------------------------- TCBY YOGURT, INC. KBO ENTERPRISES, INC. 651- 10 1,625 06/01/90 05/31/00 0.00 0.00 15.00 07/01/90 24,375.00 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------- BLOCKBUSTER #92555 - ROSEWOOD BLOCKBUSTER VIDEO, INC. 651- 20 6,400 03/01/94 02/28/99 14.60 04/01/89 93,440.04 17.07 03/01/94 109,246.44 14.60 09/01/94 93,440.04 - -------------------------------------------------------------------------------------------------------------------- Available 651- 30 1,625 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------- SOUNDS FAMILIAR WILMAR, INC. 651- 40 3,538 06/01/90 05/31/00 0.00 0.00 0.00 0.00 13.00 06/01/93 45,993.96 0.00 0.00 0.00 0.00 13.00 06/01/95 45,994.20 - -------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ TCBY YOGURT, INC. KBO ENTERPRISES, INC. Full 0 Full 0 Full 0 06/01/95 05/31/00 0.00 5.00 0 Y 06/01/00 05/31/05 0.00 5.00 487,500 Y 0.00 5.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ BLOCKBUSTER #92555 - ROSEWOOD BLOCKBUSTER VIDEO, INC. Full 0 Full 0 None 0 03/01/99 02/28/04 16.79 5.00 1,868,800 Y 0.00 5.00 2,184,900 Y 0.00 5.00 1,868,800 Y - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ SOUNDS FAMILIAR WILMAR, INC. Full 0 Full 0 Full 0 06/01/95 05/31/00 0.00 0.00 0 06/01/00 05/31/05 0.00 0.00 0 06/01/05 05/31/10 0.00 0.00 0 06/01/10 05/31/15 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 11,563 Current Annual Base Rent 163,809.24 Available. 1,625 Total..... 13,188
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Subject Property Looking South [GRAPHIC OMITTED] Subject Property Looking Southeast [GRAPHIC OMITTED] Subject Property Looking East [GRAPHIC OMITTED] Rear Of Subject Property Looking Northeast [GRAPHIC OMITTED] Rosewood Drive Looking East [GRAPHIC OMITTED] Rosewood Drive Looking West This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study SALUDA TOWN CENTER U.S. Highway #378 at Clemson Road Saluda, Saluda County, South Carolina Prepared by Michael B. Dodds, MAI, CCIM Date of Market Study - May 16, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] May 16, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Saluda Town Center U.S. Highway #378 at Clemson Road Saluda, Saluda County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. The analysis that forms the basis of the study was conducted by Michael B. Dodds, MAI, CCIM. The subject property and all comparable data were inspected by Michael B. Dodds, MAI, CCIM on May 16, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 37,450 square feet of leasable area. The center was constructed in 1996. The two tenants at the property are Food Lion, which occupies 29,000 square foot and Revco, which occupies 8,450 square feet. The shopping center has no local stores. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ Michael B. Dodds ------------------------------ Michael B. Dodds, MAI, CCIM State Certified General Real Estate Appraiser (CG-543) EXECUTIVE SUMMARY ================================================================================ Regional Perspective The subject property is located in Saluda, approximately 45 miles southwest of Columbia and 41 miles northwest of Augusta, Georgia. Between 1980 and 1990, the population of Saluda County increased 4.4 percent to 16,857. The county population is projected to increase 17.3 percent between 1990 and 2000. The economic base of the Batesburg area is relatively diverse, with a mix of manufacturing and agricultural employment. Manufacturing employment in the area makes up approximately 46.7 percent of the total employment, with the largest employer being Amick Farms. Many of the residents of the area commute to Columbia and Augusta every day. The unemployment rates for Saluda County as of March, 1997 was 4.8 percent, while the statewide rate was 5.3 percent. Neighborhood and Site The subject property is located in an established area northeast of the downtown area of Saluda. The immediate neighborhood has had minimal new development in recent years. The newer developments include Hardees and Pizza Hut. Developments in the immediate area consist of commercial type properties located along the major roads and residential uses on the secondary streets. U.S. Highway #378 is a main road leading into the downtown area, and connects Saluda with Lexington and Columbia to the northeast, and Aiken to the south. The general population of the residential areas surrounding the subject can be described as moderate to middle income. Many of the single family residential structures in the downtown area have been converted to office and retail uses. In general, the Saluda area is expected to grow at a slow but steady rate in the near future. The growth should exceed the growth experienced over the past ten years. Physical features are as follows: 1. Site Size 3.71 Acres 2. Identity Saluda County TMS# 79-00-00-050 3. Shape Irregular - Adequate 4. Topography Generally level, on grade with U.S. Highway #378 5. Accessibility Good - U.S. Highway #378 and Clemson Road 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 37,450 square feet 2. Layout & Design 1 story, one building. Design is functional 3. Parking Spaces Approximately 150 (4.0 spaces per 1,000 SF of building area) 4. Construction Brick and glass front with concrete block on side. Roof is built up composition. 1 Market Position and Marketability Conclusions The subject property is located on U.S. Highway #378 in the downtown area of Saluda. There are no new traditional shopping centers in this area. The retail establishments in the region generally consist of local stores in renovated single family residences or older strip centers. The two supermarkets serving the area for years were the Piggly Wiggly that was built in 1971, and the Red and White Grocery that was built in 1965. The subject property is the new supermarket in the region, having opened for business during the fourth quarter of 1996. Food Lion has operated in South Carolina for many years, and has a loyal shopper base. The subject Food Lion appears to be operating successfully. A general inspection of the area revealed no retail properties under construction that would compete with the retailers at the subject property. The two tenants at the subject property are occupying their space on long term leases, and there are no local tenants. The Food Lion lease will expire in 2016, while the Revco lease will expire in 2011. The subject site is fully developed, and there is no additional space available for expansion of the shopping center. The subject property is the newest and highest quality shopping center in the Saluda area. Larger department stores and regional shopping centers are located in Augusta to the southeast, and Columbia to the northeast. These centers are not considered to be competitive with the subject property, and therefore have not been analyzed. In general, the Saluda retail market serves the immediate town population and nearby rural areas. The rental rate for the Food Lion is $7.60 per square foot on a level basis for a 20 year term. This is very similar to the rental rates being paid for other supermarkets in smaller towns in the region. Revco will pay a rental rate of $8.30 per square foot for the first seven years of the term, and $8.75 per square foot for the remaining 8 years. This rate is also reasonable, and supported by comparable drug store rental comparables throughout the state of South Carolina. The subject property is occupied by two high credit tenants, with no local shops. The long term leases make the subject less vulnerable to changes in the local market. The contract rental rates are at levels which are considered to be equal to market rents, and the subject property is less than one year old. In general, the subject property is in a very competitive position in the marketplace, and is the two tenants should operate successfully. Trends The subject property is located just outside the downtown area of Saluda. The immediate area and surrounding rural regions provide a good population base for the retailers at the subject property, and this demand is expected to continue. The traffic count along U.S. Highway #378 provides good exposure for the subject property, and the subject is accessible from surrounding areas. The rental rates for the two high credit tenants at the subject property are within the range of comparable properties, and the retailers should maintain a competitive position in the marketplace. Information provided indicates that retail sales in the county should increase at a rate faster than the rate experienced in recent years. No detrimental conditions were found which would have a negative impact on the future of the subject property. 2 PROPERTY INSPECTION FORM COMMERCIAL I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Saluda Town Center Broad River Center Mills Corner ------------------------ ------------------------ ------------------------- U.S. Hwy #378 @ Augusta Road @ Old b. Street Clemson Road 1003 Broad River Road Cherokee Road ------------------------ ------------------------ ------------------------- c. City Saluda, SC Columbia, SC Lexington, SC ------------------------ ------------------------ ------------------------- d. Distance from subject N/A 45 miles 35 miles ------------------------ ------------------------ ------------------------- e. Contact Edens & Avant Edens & Avant Ron Swinson ------------------------ ------------------------ ------------------------- f. Phone (803)779-4420 (803)779-4420 (803)779-7777 ------------------------ ------------------------ ------------------------- 2. Attributes a. Year built 1996 1996 1995 ------------------------ ------------------------ ------------------------- b. Net sq. Ft.(tenant) 37,450 29,000 33,413 ------------------------ ------------------------ ------------------------- c. # building One One One ------------------------ ------------------------ ------------------------- d. # stories One One One ------------------------ ------------------------ ------------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A N/A ------------------------ ------------------------ ------------------------- f. # elevators N/A N/A N/A ------------------------ ------------------------ ------------------------- g. Parking Adequate Adequate Adequate ------------------------ ------------------------ ------------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ------------------------ ------------------------ ------------------------- I. Vacancy % 0% N/A N/A ------------------------ ------------------------ ------------------------- j. Anchors, if Retail Food Lion, Revco Food Lion, Revco Piggly Wiggly ------------------------ ------------------------ ------------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Gold Rush Center Broad River Center ---------------------- ----------------------- 1003 Broad River b. Street 316 S Mine Street Road ---------------------- ----------------------- c. City McCormick, SC, SC Columbia, SC ---------------------- ----------------------- d. Distance from subject 45 miles 45 miles ---------------------- ----------------------- e. Contact Edens & Avant Edens & Avant ---------------------- ----------------------- f. Phone (803)779-4420 (803)779-4420 ---------------------- ----------------------- 2. Attributes a. Year built 1992 1996 ---------------------- ----------------------- b. Net sq. Ft.(tenant) 7,680 8,450 ---------------------- ----------------------- c. # building One One ---------------------- ----------------------- d. # stories One One ---------------------- ----------------------- e. Avg. Floor plate size (sq. Ft.), if office N/A N/A ---------------------- ----------------------- f. # elevators N/A N/A ---------------------- ----------------------- g. Parking Adequate Adequate ---------------------- ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block ---------------------- ----------------------- I. Vacancy % N/A N/A ---------------------- ----------------------- j. Anchors, if Retail Food Lion, Eckerd's Food Lion, Revco ---------------------- -----------------------
Comments: No recent retail development has occurred. No planned retail construction was discovered during the primary research. 3 PROPERTY INSPECTION FORM COMMERCIAL B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Contract Rental Rates a. Supermarket $7.60/SF $7.98/SF $8.55/SF ------------------------ ------------------------- --------------------------- b. Drug Store $8.30/SF N/A N/A ------------------------ ------------------------- --------------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ------------------------ ------------------------- --------------------------- 3. Rent Concessions None None None ------------------------ ------------------------- --------------------------- 4. Effective Rent $7.60 - $8.30/SF $7.98/SF $8.55/SF ------------------------ ------------------------- --------------------------- 5. TI Allowance None None None ------------------------ ------------------------- --------------------------- 6. Expense Stop None None None ------------------------ ------------------------- --------------------------- 7. Length of Lease Term 15 - 20 years 20 years 20 years ------------------------ ------------------------- --------------------------- 8. Commissions N/A N/A N/A ------------------------ ------------------------- --------------------------- 9. Percentage Rent (per lease terms) Food Lion, Revco Food Lion Piggly Wiggly ------------------------ ------------------------- --------------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A N/A ------------------------ ------------------------- --------------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A N/A ------------------------ ------------------------- --------------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Similar Similar ------------------------ ------------------------- --------------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Contract Rental Rates a. Supermarket N/A N/A ----------------------- ---------------------- b. Drug Store $6.90/SF $9.75/SF ----------------------- ---------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net ----------------------- ---------------------- 3. Rent Concessions None None ----------------------- ---------------------- 4. Effective Rent $6.90/SF $9.75/SF ----------------------- ---------------------- 5. TI Allowance None None ----------------------- ---------------------- 6. Expense Stop None None ----------------------- ---------------------- 7. Length of Lease Term 15 years 15 years ----------------------- ---------------------- 8. Commissions N/A N/A ----------------------- ---------------------- 9. Percentage Rent (per lease terms) N/A N/A ----------------------- ---------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A ----------------------- ---------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A ----------------------- ---------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) Similar Similar ----------------------- ----------------------
D. EXPLAIN RANKING/COMMENTS: Comparable #1 and #2 are supermarket leases which are considered to be similar to the subject. Comparable #1 is a lease to Food Lion, the same tenant as the subject anchor. Comparables #3 and #4 are in-line drug store leases. These are becoming less common, due to the popularity of freestanding stores. The physical characteristics of the comparables and the subject are considered to be similar. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Broad River Center Location: 1003 Broad River Road Columbia, South Carolina Year Built: 1996 Total Size: 29,000 SF (Food Lion) Vacant Space: 0 Vacancy Rate: 0% Rental Rate: $7.98/ SF Tenant Expenses: Triple Net Remarks: This shopping center has anchor stores, including a Food Lion and Revco. The Food Lion lease is for twenty years at a level rental rate. 5 Comparable Rental No. 2 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Mills Corner Shopping Center Location: Augusta Road at Old Cherokee Road Lexington, South Carolina Year Built: 1995 Total Size: 43,613 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Rate: $8.55/SF Tenant Expenses: Triple Net Remarks: The anchor tenant is Piggly Wiggly with approximately 33,413 square feet. 6 Comparable Rental No. 3 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Gold Rush Shopping Center Location: 316 South Mine Street McCormick, South Carolina Year Built: 1992 Total Size: 7,680 SF (Eckerd's) Vacant Space: 0 SF Vacancy Rate: 0% locals Rental Rate: $6.90/SF (Eckerd's) Tenant Expenses: Triple Net Remarks: This center is located in the downtown area of a small town. The property is an established center that was built in 1992. Other anchor tenants include Food Lion and Family Dollar. 7 Comparable Rental No. 4 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Broad River Center Location: 1003 Broad River Road Columbia, South Carolina Year Built: 1996 Total Size: 8,450 SF (Revco) Vacant Space: 0 Vacancy Rate: 0% Rental Rate: $9.75/ SF Tenant Expenses: Triple Net Remarks: This shopping center has anchor stores including a Food Lion and Revco. The Revco lease is for fifteen years at a level rental rate. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Saluda Towne Center St. Andrews Crossing Eastgate Center ------------------------ ------------------------ -------------------------- U.S. Hwy #378 @ NWC Whiskey Rd. & b. Street Address Clemson Road 817 St. Andrews Road Eastgate Dr. ------------------------ ------------------------ -------------------------- c. City Saluda, SC Columbia, SC Aiken, SC ------------------------ ------------------------ -------------------------- d. Distance from Subject N/A 35 miles 28 miles ------------------------ ------------------------ -------------------------- 2. Attributes a. Year Built 1996 1994 1995 ------------------------ ------------------------ -------------------------- b. Net sq. feet 37,450 66,910 75,716 ------------------------ ------------------------ -------------------------- c. # Buildings 1 1 1 ------------------------ ------------------------ -------------------------- d. # of Stories 1 1 1 ------------------------ ------------------------ -------------------------- e. Vacancy % 0.0% 0.0% 5.0% ------------------------ ------------------------ -------------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 ------------------------ ------------------------ -------------------------- b. Sales Price PSF N/A $97.89 $88.16 ------------------------ ------------------------ -------------------------- c. Cap. Rate N/A 9.69% 9.86% ------------------------ ------------------------ -------------------------- d. Date N/A May 24,1994 September 28, 1995 ------------------------ ------------------------ -------------------------- e. NOI at time of Sale N/A $634,797 $657,896 ------------------------ ------------------------ -------------------------- 4. Rank Relative to Subject (inferior, similar, superior) N/A Similar Similar ------------------------ ------------------------ -------------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name One Norman Center Paw Creek Commons ----------------------- ----------------------- 19706 One Norman E/S Little Rock Rd. At b. Street Address Blvd. Freedom Drive ----------------------- ----------------------- c. City Cornelius, NC Charlotte, NC ----------------------- ----------------------- d. Distance from Subject 145 miles 130 miles ----------------------- ----------------------- 2. Attributes a. Year Built 1993 1996 ----------------------- ----------------------- b. Net sq. feet 54,185 66,050 ----------------------- ----------------------- c. # Buildings 1 1 ----------------------- ----------------------- d. # of Stories 1 1 ----------------------- ----------------------- e. Vacancy % 0.0% 2.73% ----------------------- ----------------------- 3. Sales Information a. Sales Price $4,650,000 $5,120,000 ----------------------- ----------------------- b. Sales Price PSF $85.82 $77.52 ----------------------- ----------------------- c. Cap. Rate 9.68% 9.60% ----------------------- ----------------------- d. Date October 12, 1995 March 25, 1997 ----------------------- ----------------------- e. NOI at time of Sale $450,188 $517,412 ----------------------- ----------------------- 4. Rank Relative to Subject (inferior, similar, superior) Superior Superior ----------------------- -----------------------
Explain Ranking/Comments: The comparable sales are all superior to the subject property with respect to location. The subject property has a desirable tenant mix and has been well managed. The subject property has only two stores, with both being occupied by high credit tenants on net leases. This type of development would be very attractive to investors, and a capitalization rate at the low end of the range would be justified. 9 COMPARABLE IMPROVED SALES Comparable Sale No. 1 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] TMS: 6012 -1 -1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 10 Comparable Sale No. 2 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Eastgate Shopping Center Location: Northwest Corner of Whiskey Road & Eastgate Drive Aiken, SC Grantor: Southwest U.S. Retail, LP Grantee: PDG Aiken Partners, LP Deed Reference: N/A Date: September 28, 1995 Sales Price: $6,675,000 Adjusted Sales Price: $6,675,000 Size building: 75,716 Sales Price per S.F.: $88.16 Size Land (Acres): 8.79 Size Land (S.F.): 382,892 Year Built: 1995 Land/Building Ratio: 5.06 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Effective Gross Income: $782,704 EGIM: 8.53 Net Operating Income: $657,896 Overall Rate: 9.86% Verification: Public Records Type of Purchaser: Private Investor Comments: Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. 11 Comparable Sale No. 3 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. 12 Comparable Sale No. 4 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] TMS: 59-231-22,23 pt. Name: Paw Creek Commons Location: East side of Little Rock Road at Freedom Drive Grantor: Paw Creek, LLC Grantee: Paw Creek Crossing Limited Partnership Deed Reference: Book 8988, Page 519 Date: March 25, 1997 Sales Price: $5,120,000 Adjusted Sales Price: $5,384,000 Size building: 66,050 Sales Price per S.F.: $77.52 Size Land (Acres): 9.82 Size Land (S.F.): 427,759 Year Built: 1996 Land/Building Ratio: 6.48 to 1 Utilities: Municipal Zoning: CC, Commercial Center Financing: Cash to Seller Effective Gross Income: $552,054 Gross Income Multiple: 9.00 EGIM: 9.27 Net Operating Income: $517,412 Overall Rate: 9.61% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was pre-construction. The sales price has been adjusted to reflect this by using 50 basis points in the capitalization rate (.1011 minus .0050 equals .0961). The major tenants are Winn-Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. The income from anchor tenants is 79.41 percent of gross income. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 [GRAPHIC OMITTED] Rental Comparables Map [GRAPHIC OMITTED] Improved Sales Comparables Map [GRAPHIC OMITTED] Site Plan EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 182 Property: SALUDA TOWN CENTRE US 378 AT CLEMSON ROAD SALUDA, SC Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------------------ FOOD LION #1341 FOOD LION, INC. 702- 10 29,000 10/23/96 12/31/16 2.25 10/23/96 65,214.24 0.00 0.00 7.60 11/10/96 220,400.04 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ REVCO #869 REVCO DISCOUNT DRUG CENTERS, 702- 20 8,450 11/10/96 11/30/11 8.30 12/01/96 70,134.96 8.75 12/01/03 73,937.52 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ FOOD LION #1341 FOOD LION, INC. Full 0 PRS 1997 Fixed 0 01/01/17 12/31/22 5.89 1.00 6,521,400 Y 01/01/22 12/31/27 5.89 1.00 0 Y 01/01/28 12/31/32 5.89 1.00 22,040,000 Y 01/01/33 12/31/37 5.89 1.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ REVCO #869 REVCO DISCOUNT DRUG CENTERS, Full 0 Full 1987 Full 0 12/01/11 11/30/16 9.00 2.00 3,506,700 Y 12/01/16 11/30/21 9.25 2.00 3,696,900 Y 12/01/21 11/30/21 9.50 2.00 0 Y 12/01/26 11/30/31 9.75 2.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 37,450 Current Annual Base Rent 290,535.00 Available. 0 Total..... 37,450
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Subject Property Looking Northeast [GRAPHIC OMITTED] Subject Property Looking East [GRAPHIC OMITTED] Subject Property Looking North [GRAPHIC OMITTED] Rear of Subject Looking South [GRAPHIC OMITTED] Rear of Subject Looking Northwest [GRAPHIC OMITTED] Rear of Subject Looking Northwest [GRAPHIC OMITTED] U.S. Highway #378 Looking West [GRAPHIC OMITTED] U.S. Highway #378 Looking East [GRAPHIC OMITTED] Clemson Road Looking Northeast [GRAPHIC OMITTED] Clemson Road Looking Southwest This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. Market Study FREESTANDING BLOCKBUSTER VIDEO STORE 7249 St. Andrews Road Irmo, Lexington County, South Carolina Prepared by Michael B. Dodds, MAI, CCIM Date of Market Study - May 7, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] May 6, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Freestanding Blockbuster Video Store 7249 St. Andrews Road Irmo, Lexington County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that forms the basis of the study was conducted by Michael B. Dodds, MAI, CCIM. The subject property and all comparable data were inspected by Michael B. Dodds, MAI, CCIM on May 7, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a freestanding retail store that contains 6,000 square feet of leasable area. The store was constructed in 1988. The tenant is Blockbuster, whose lease expires December 31, 2003. The store is situated on a 1.09 acre site, and there are 60 parking spaces available. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ Michael B. Dodds --------------------------------------- Michael B. Dodds, MAI, CCIM State Certified General Real Estate Appraiser (CG-543) EXECUTIVE SUMMARY - -------------------------------------------------------------------------------- Regional Perspective Columbia is the state capital with the State House being located in downtown Columbia. Also, the University of South Carolina Campus is located in the downtown area. Fort Jackson, which is a large U.S. Army Training Facility is located in the eastern section of the Metropolitan area. The city has numerous specialized office activities such as: insurance, consulting services, advertising, marketing, printing and financial services. Government, distribution, finance and transportation are all important to Columbia, although none are preeminent. Geography also gives Columbia a strategic location in the industrial and commercial spheres. The unemployment rate for Lexington County as of March, 1997 was 2.6 percent while the statewide rate was 5.3 percent. Neighborhood and Site The subject neighborhood is located to the northwest of the central business district of Columbia in Irmo. A high concentration of single family development has occurred in the neighborhood since 1980. The largest retail development in the area is in the in the Harbison area, which in approximately 3 miles south of the subject. The Columbiana Centre, a 607,000 regional mall has Sears, Parisian, Dillards and JB Whites as anchor tenants. Other tenants occupying space in the general area include Wal-Mart, Lowes, Home Depot, Bi-Lo, Books A Million, and Piggly Wiggly. The neighborhood also has a reasonable mix of office and general commercial developments. The area is also influenced by its proximity to Lake Murray, a 50,000 acre lake which is located approximately 4 miles northwest of the subject. This lake has generated significant residential growth. No uses were found which would negatively affect the neighborhood. Physical features are as follows: 1. Site Size 1.09 Acres or 47,480 square feet 2. Identity TMS# 1920-03-03 Lexington County 3. Shape Rectangular- Adequate 4. Topography Generally level - on grade with St. Andrews Road 5. Accessibility Good 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 6,000 square feet - Single tenant 2. Layout & Design 1 story - Design is functional 3. Parking Spaces Approximately 54 10 spaces per 1,000 SF of building area 4. Construction Brick and glass front with concrete block on side and rear. Roof is built up composition. 1 Market Position and Marketability Conclusions The subject property is located in a sub-market that is identified as Dutch Fork/Irmo. There are several new shopping centers in this area, although the market has remained relatively strong. Much of the vacant space is made up of a vacant anchor stores at older shopping centers. Many new freestanding stores have been built in the general area during 1996 and 1997. Major developments in the immediate area include Irmo Elementary School, Irmo Middle School, Irmo High School and Lexington Medical Center/Irmo. The Dutch Fork/Irmo sub-market is listed in the 1996 Central Carolina Business Review and Investment Guide as having 1,643,386 square feet of retail space, and an average new lease rate of $11.28 per square foot. Columbiana Centre has 607,000 square feet and represents 36.9 percent of the sub-market total. The overall vacancy rate for this sub-market was reported at 6.4%, compared to 9.7% for Columbia overall. It should be noted that the survey does not include freestanding stores the size of the subject, although the survey provides a reasonable indication of the state of the retail market in general. The freestanding building which is the subject property would attract a different typical tenant than a traditional shopping center. Businesses occupying freestanding buildings along St. Andrews Road include paint stores, gift shops, jewelry stores and automobile parts stores. An inspection of the market revealed no vacant buildings in the size and quality range that the subject property fits into. The subject property is accessible from all areas of northwest Columbia, and is within two miles of the intersection of Interstate #26 and SC Highway #60. The general population living in proximity of the subject can be described as middle to upper income. The subject property is within three miles of the fastest growing retail district in Columbia, the Harbison area. Major tenants occupying space in the Harbison area include Wal-Mart, Dillards, JB Whites, Parisian, Sears, Lowes and Home Depot. A Sam's Club is currently under construction and a 600,000 square foot power center is planned. The subject property does benefit from the proximity to Harbison, as St Andrews Road is a traffic artery which is used to travel to the Harbison area. In summary, the subject property is considered to be in a desirable sub-market. Visibility from St. Andrews Road is good, and the property is in average condition. The subject property should continue to operate successfully. The contract rent for the subject property is at the upper end of the range for freestanding buildings along St. Andrews, but is reasonable. Free standing buildings along Harbison Boulevard are achieving rental rates in the $17.00 to $20.00 per square foot range. Trends The subject property is located in an area of Columbia that has experienced steady growth in recent years. The largest retail development in the sub-market, Columbiana Centre, recently expanded and is operating very successfully. In recent years, rental rates in the immediate area have risen, as Harbison experienced the rapid growth and rising rental rates. The Harbison area is expected to remain the dominant retail district in Columbia in the near future, and rental rates are projected to rise at a rate greater than the other sub-markets. Positive trends which impact the subject include proximity to Lake Murray and the increasing traffic counts along St. Andrews Road. Upon expiration of the subject lease on December 31,2003, it is expected that the building will be very marketable based upon the size and location of the structure. 2 PROPERTY INSPECTION FORM COMMERCIAL
I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Identification a. Name Blockbuster Eckerds Moovies Eckerds --------------------- -------------------- -------------------- -------------------- b. Street 7249 St. Andrews Road Columbia Ave. @ Old Augusta Road @ Oak 2200 Augusta Road Chapin Road --------------------- -------------------- -------------------- -------------------- c. City Irmo, SC Lexington, SC West Columbia, SC West Columbia, SC --------------------- -------------------- -------------------- -------------------- d. Distance from subject N/A 8 miles 6 miles 5 miles --------------------- -------------------- -------------------- -------------------- e. Contact Edens & Avant N/A N/A N/A --------------------- -------------------- -------------------- -------------------- f. Phone (803)779-4420 N/A N/A N/A --------------------- -------------------- -------------------- -------------------- 2. Attributes a. Year built 1988 1997 1996 1997 --------------------- -------------------- -------------------- -------------------- b. Net sq. Ft. 6,000 10,728 7,700 13,938 --------------------- -------------------- -------------------- -------------------- c. # building 1 1 1 1 --------------------- -------------------- -------------------- -------------------- d. #stories 1 1 1 1 --------------------- -------------------- -------------------- -------------------- e. Avg. Floor plate size N/A N/A N/A N/A (sq. Ft.), if office --------------------- -------------------- -------------------- -------------------- f. # elevators N/A N/A N/A N/A --------------------- -------------------- -------------------- -------------------- g. Parking Adequate - 60 Spaces Adequate - 56 spaces Adequate - 41 spaces Adequate - 55 spaces --------------------- -------------------- -------------------- -------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block --------------------- -------------------- -------------------- -------------------- I. Vacancy % 0% 0% 0% 0% --------------------- -------------------- -------------------- --------------------
COMPARABLE 4 ------------ 1. Identification a. Name Revco ----------------------- b. Street Forest Drive @Pinehurst ----------------------- c. City Columbia, SC ----------------------- d. Distance from subject 7 miles ----------------------- e. Contact N/A ----------------------- f. Phone N/A ----------------------- 2. Attributes a. Year built 1996 ----------------------- b. Net sq. Ft. 12,608 ----------------------- c. # building 1 ----------------------- d. #stories 1 ----------------------- e. Avg. Floor plate size N/A (sq. Ft.), if office ----------------------- f. # elevators N/A ----------------------- g. Parking Adequate ----------------------- h. Construction Type Brick/Concrete Block ----------------------- I. Vacancy % 0% ----------------------- 3 PROPERTY INSPECTION FORM COMMERCIAL
B. RENTAL INFORMATION SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 ------- ------------ ------------ ------------ 1. Rental Rate $15.81/SF $19.77/SF $12.50/SF $15.97/SF -------------------- -------------------- -------------------- -------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net -------------------- -------------------- -------------------- -------------------- 3. Rent Concessions None - Build to suit None - Build to suit None - Build to suit None - Build to suit -------------------- -------------------- -------------------- -------------------- 4. Effective Rent $15.81/SF $19.77/SF $12.50 /SF $15.97/SF -------------------- -------------------- -------------------- -------------------- 5. TI Allowance None None None None -------------------- -------------------- -------------------- -------------------- 6. Expense Stop None None None None -------------------- -------------------- -------------------- -------------------- 7. Length of Lease Term 14 years 20 years 10 years 20 years -------------------- -------------------- -------------------- -------------------- 8. Commissions 5.00% - 7.00% 5.00% - 7.00% 5.00% - 7.00% 5.00% - 7.00% -------------------- -------------------- -------------------- -------------------- 9. Percentage Rent None N/A N/A N/A (per lease terms) -------------------- -------------------- -------------------- -------------------- 10. Historical Annual N/A N/A N/A N/A Absorption/sq.ft. -------------------- -------------------- -------------------- -------------------- 11. Annual Operating N/A N/A N/A N/A Expense psf (Including taxes) -------------------- -------------------- -------------------- -------------------- C. RANK RELATIVE TO SUBJECT (inferior, N/A Similar Similar Similar similar, superior) -------------------- -------------------- -------------------- --------------------
COMPARABLE 4 ------------ 1. Rental Rate $13.08/SF -------------------- 2. Lease Type (Gross/Net) Triple Net -------------------- 3. Rent Concessions None - Build to suit -------------------- 4. Effective Rent $13.08/SF -------------------- 5. TI Allowance None -------------------- 6. Expense Stop None -------------------- 7. Length of Lease Term 20 years -------------------- 8. Commissions 5.00% -------------------- 9. Percentage Rent N/A (per lease terms) -------------------- 10. Historical Annual N/A Absorption/sq.ft. -------------------- 11. Annual Operating N/A Expense psf (Including taxes) -------------------- C. RANK RELATIVE TO SUBJECT (inferior, Similar similar, superior) -------------------- D. EXPLAIN RANKING/COMMENTS: All of the rent comparables were build to suit developments. No speculative construction of buildings similar to the subject were found. The comparables are similar to the subject with respect to size, and comparable #2 is occupied by a movie rental operation. The physical characteristics of the buildings are similar, with the exception of a drive through window at the drug store comparables. Comparable #1 required the demolition of a restaurant, which increased the cost of development significantly. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Eckerds Location: NWC Columbia Avenue and Old Chapin Road Lexington, SC Year Built: 1997 Total Size: 10,728 SF Rental Rate: $19.77/ SF Tenant Expenses: Triple Net Remarks: This freestanding store will have 56 parking spaces, and is situated on 1.177 acres. The rent increases approximately $0.50 every 5 years of the 20 year lease term. 5 Comparable Rental No. 2 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Moovies Location: Augusta Road at Oak Drive West Columbia, SC Year Built: 1996 Total Size: 7,700 SF Rental Rate: $12.50/ SF Tenant Expenses: Triple Net Remarks: This freestanding store has 41 parking spaces, and is situated on an outparcel of the Mills Corner Shopping Center. The store was completed in February, 1996 and is leased for a term of approximately 10 years. 6 Comparable Rental No. 3 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Eckerds Location: 2200 Augusta Road West Columbia, SC Year Built: 1997 Total Size: 10,938 SF Rental Rate: $15.97/ SF Tenant Expenses: Triple Net Remarks: This freestanding store has 55 parking spaces, and is situated on 1.95 acre site which fronts on a road with a traffic count of 32,100 vehicles per day. The store is leased for a term of 20 years. The rental rate increases approximately $0.50 per square foot each 5 years. 7 Comparable Rental No. 4 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Revco Location: Forest Drive at Pinehurst Road Columbia, SC Year Built: 1996 Total Size: 12,608 SF Rental Rate: $13.08/ SF Tenant Expenses: Triple Net Remarks: This freestanding store is leased at a level rental rate over the 20 year lease term. The store was completed in 1996 and is in a desirable location for a drug store. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ 1. Identification a. Name Blockbuster Video Hollywood Video Eckerds Revco Rite Aid --------------------- -------------------- ------------------ ------------ ------------------ b. Street Address 7249 St. Andrews Road Outparcel @ Westwood 1720 Taylor Street Forest Drive W Main Street @ N. Place Forest Street --------------------- -------------------- ------------------ ------------ ------------------ c. City Irmo, SC Greenwood, SC Columbia, SC Columbia, SC Spartanburg, SC --------------------- -------------------- ------------------ ------------ ------------------ d. Distance from Subject N/A 74 miles 10 miles 10 miles 90 miles --------------------- -------------------- ------------------ ------------ ------------------ 2. Attributes a. Year Built 1988 1997 1996 1996 1996 --------------------- -------------------- ------------------ ------------ ------------------ b. Net sq. feet 6,000 6,000 9,504 12,608 10,752 --------------------- -------------------- ------------------ ------------ ------------------ c. # Buildings 1 1 1 1 1 --------------------- -------------------- ------------------ ------------ ------------------ e. Vacancy % 0% 0% 0% 0.0% 0% --------------------- -------------------- ------------------ ------------ ------------------ 3. Sales Information a. Sales Price N/A $1,099,000 $1,835,000 $1,725,000 $1,530,000 --------------------- -------------------- ------------------ ------------ ------------------ b. Sales Price PSF N/A $183.17 $193.08 $136.82 $142.30 --------------------- -------------------- ------------------ ------------ ------------------ c. Cap. Rate N/A 10.06% 9.32% 9.36% 9.35% --------------------- -------------------- ------------------ ------------ ------------------ d. Date N/A Current Contract January 16,1997 July 1, 1996 June 26, 1996 --------------------- -------------------- ------------------ ------------ ------------------ e. NOI at time of Sale N/A $110,610 $171,104 $161,390 $143,035 --------------------- -------------------- ------------------ ------------ ------------------ 4. Rank Relative to Subject N/A Superior Superior Superior Superior (inferior, similar, superior) --------------------- -------------------- ------------------ ------------ ------------------
Explain Ranking/Comments: The sales selected are freestanding retail stores occupied by national tenants. Three of the comparables are drug stores while one is a video store. All of the comparables are located in the state of South Carolina, although the market for this type of investment is regional or national in nature. The credit of the tenant is the primary consideration, and the subject property is believed to have a desirable tenant. Subject property is located in the best performing sub-market in Columbia. 9 Comparable Sale No. 1 [GRAPHIC OMITTED] Name: Hollywood Video Location: Outparcel of Westwood Place Greenwood, SC Grantor: Zimmer Development, Inc. Grantee: W.D. Morris Deed Reference: N/A Date: Current Contract Sales Price: $1,099,000 Adjusted Sales Price: $1,099,000 Size building 6,000 Sales Price per S.F.: $183.17 Size Land (Acres): 1.014 Size Land (S.F.): 44,170 Year Built: 1997 Land/Building Ratio: 7.36 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $112,838 EGIM: 9.74 Net Operating Income: $110,610 Overall Rate: 10.06% Verification: Public Records and seller Type of Purchaser: Private Investor Comments: This is an arms length sale of a freestanding video store in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. The property is located on an outparcel of a community shopping center anchored by a Wal-Mart Supercenter. 10 Comparable Sale No. 2 [GRAPHIC OMITTED] Name: Eckerds Location: 1720 Taylor Street, Columbia, SC Grantor: Baker &Baker Grantee: C. Dan Watts Deed Reference: N/A Date: January 16, 1997 Sales Price: $1,835,000 Adjusted Sales Price: $1,835,000 Size building: 9,504 Sales Price per S.F.: $193.08 Size Land (Acres): 1.14 Size Land (S.F.): 49,658 Year Built: 1996 Land/Building Ratio: 5.22 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $174,398 Effective Gross Income: $174,398 EGIM: 10.52 Net Operating Income: $171,104 Overall Rate: 9.32% Verification: Public Records Type of Purchaser: Private Investor Comments: This freestanding store is leased for a 20 year term. The store opened in June, 1996. Developing this site involved demolition of a light industrial building. Location is within 2 miles of the CBD of Columbia. 11 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: Revco Drug Store Location: Forest Drive Columbia, SC Grantor: D.S. Forest Partners Grantee: Lawyers Title of NC, Inc. Deed Reference: N/A Date: July 1, 1996 Sales Price: $1,725,000 Adjusted Sales Price: $1,725,000 Size building: 12,608 Sales Price per S.F.: $136.82 Size Land (Acres): 1.04 Size Land (S.F.): 45,302 Year Built: 1996 Land/Building Ratio: 3.59 to 1 Utilities: All Public Zoning: C-3 Financing: Cash to Seller Gross Potential Income: $164,900 Effective Gross Income: $164,900 EGIM: 10.46 Net Operating Income: $161,390 Overall Rate: 9.36% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a freestanding drug store that is leased for a twenty year term with the lease rate being level throughout the entire term. 12 Comparable Sale No. 4 [GRAPHIC OMITTED] Name: Rite Aid Drug Store Location: W. Main Street and N. Forest Street, Spartanburg, SC Grantor: C-3 Investments Grantee: Larry Hatter Deed Reference: Book 64K, Page 465 Date: June 26,1996 Sales Price: $1,530,000 Adjusted Sales Price: $1,530,000 Size building: 10,752 Sales Price per S.F.: $142.30 Size Land (Acres): 1.7 Size Land (S.F.): 74,052 Year Built: 1996 Land/Building Ratio: 6.89 to 1 Utilities: Municipal Zoning: Commercial Financing: Cash to Seller Effective Gross Income: $146,172 EGIM: 10.47 Net Operating Income: $143,035 Overall Rate: 9.35% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was negotiated during the construction of the building. The site was improved with several buildings that were occupied at the time of acquisition. Rent is level over a 20 year term. Property is within 2 miles of the CBD of Spartanburg. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 [GRAPHIC OMITTED] [Comparable Rental Map] [GRAPHIC OMITTED] [Comparable Sales Map] [GRAPHIC OMITTED] [Building Sketch] EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 136 Property: BLOCKBUSTER - IRMO 7249 ST. ANDREWS ROAD IRMO, SC 29063-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- BLOCKBUSTER #92554 - IRMO 670- 10 6,000 01/01/89 12/31/03 13.75 01/01/89 82,500.00 15.81 01/01/99 94,860.00 - ------------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied.. 6,000 Current Annual Base Rent 82,500.00 Available. 0 Total..... 6,000 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ BLOCKBUSTER #92554 - IRMO Full 0 Full 0 Full 0 01/01/94 12/31/98 13.75 0.00 0 01/01/99 12/31/98 15.81 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
Photographs of Subject Property ================================================================================ [GRAPHIC OMITTED] Subject Property - Looking West [GRAPHIC OMITTED] Subject Property - Looking South [GRAPHIC OMITTED] Subject Property - Looking Southeast [GRAPHIC OMITTED] Subject Property - Looking North [GRAPHIC OMITTED] Subject Property - Looking Northwest [GRAPHIC OMITTED] St. Andrews Road - Looking Northwest [GRAPHIC OMITTED] St. Andrews Road - Looking Southeast [GRAPHIC OMITTED] Fork Avenue - Looking Southwest This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study BLOCKBUSTER VIDEO AND TACO BELL RESTAURANT 509 - 515 West Main Street Lexington, Lexington County, South Carolina Prepared by Michael B. Dodds, MAI, CCIM Date of Market Study - May 10, 1997 [Letterhead of O. Marshall Dodds Co., Inc.] May 11, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Blockbuster Video and Taco Bell Restaurant 509-515 West Main Street Lexington, Lexington County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that forms the basis of the study was conducted by Michael B. Dodds, MAI, CCIM. The subject property and all comparable data were inspected by Michael B. Dodds, MAI, CCIM on May 10, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail and restaurant markets and is not intended to state opinions on the value of the subject property. The property consists of two freestanding buildings. The Blockbuster Video contains 6,400 square feet and the Taco Bell contains 2,268 Square feet. The buildings were constructed in 1990, and are in good condition. The two buildings could easily be sold as separate investment properties. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ Michael B. Dodds, MAI, CCIM ----------------------------------- Michael B. Dodds, MAI, CCIM State Certified General Real Estate Appraiser (CG-543) EXECUTIVE SUMMARY - -------------------------------------------------------------------------------- Regional Perspective Columbia is the state capital with the State House being located in downtown Columbia. Also, the University of South Carolina Campus is located in the downtown area. Fort Jackson, which is a large U.S. Army Training Facility is located in the eastern section of the Metropolitan area. The city has numerous specialized office activities such as: insurance, consulting services, advertising, marketing, printing and financial services. Government, distribution, finance and transportation are all important to Columbia, although none are preeminent. Geography also gives Columbia a strategic location in the industrial and commercial spheres. The unemployment rate for Lexington County as of March, 1997 was 2.6 percent while the statewide rate was 5.3 percent. Neighborhood and Site The subject neighborhood is an established area located in Lexington, South Carolina. The neighborhood is generally the developments along Columbia Avenue, or West Main Street, within Lexington. Developments in the immediate area consist of commercial type properties located along the major thoroughfares and residential uses on the secondary streets. The area just east of Lexington has grown considerably in recent years, due primarily to the availability of vacant land. The immediate area surrounding the subject is built up, with little land available for development. A new Eckerd drug store is under construction at the intersection of Columbia Avenue and Old Chapin Road. An established restaurant was purchased for $1,300,000 and demolished to create the drug store site. Other new construction in the Lexington area includes several medical clinics, a Wal-Mart Supercenter, and a self serve car wash. The neighborhood around the Wal-Mart has developed rapidly as a result of the construction of the store. Physical features are as follows: 1. Site Size Taco Bell- 30,004 SF ; Blockbuster Video- 40,078 SF 2. Identity Lexington County TMS# 4325-02-29 and 30 3. Shape Rectangular - Adequate 4. Topography Generally level, on grade with West Main Street 5. Accessibility Good - West Main Street and Black Avenue 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) Taco Bell- 2,268 SF ; Blockbuster Video- 6,400 SF 2. Layout & Design 1 story, two buildings, one structure is located on ground leased site. Design is functional 3. Parking Spaces Taco Bell- 42 (18.7 per 1,000 SF) Blockbuster Video- 60 (9.4 per 1,000 SF) 4. Construction Brick and glass front on Blockbuster and stucco on Taco Bell. Roof is built up composition. 1 Market Position and Marketability Conclusions The subject property is located in a sub-market that is identified as Lexington. The demographics of this area are very attractive to most retailers, with the subdivisions expanding rapidly and the high income characteristics of Lake Murray neighborhoods. The largest new retail development is the new Wal-Mart Supercenter. The local shops at this center were 100 percent pre-leased upon completion of construction. In addition to the shopping centers, several freestanding drug stores have been built in the general area during 1996 and 1997. Shopping centers in the immediate area of the subject include Lexington Village, Village Square and Town Square. These centers are experiencing vacancy levels similar to the sub-market. According to the 1996 Central Carolina Business Review and Investment Guide, Lexington is a sixth largest retail sub-market containing 722,567 square feet or 5.5% of all retail space surveyed. The Winn-Dixie Shopping Center in South Congaree, with 44,000 square feet was to added to the sub-market. Twelve of the 158 completed retail shopping centers surveyed were in the Lexington area, with 46,190 square feet of space vacant for a vacancy rate of 6.4%, the fourth lowest vacancy rate in the ten areas. Twelve months earlier the vacancy rate was 8.1%, and 24 months earlier the vacancy rate was 11.1%. There is one center that is planned for this area, Lexington Place Phase II, on Sunset Boulevard at Old Cherokee Road. This center will add approximately 63,000 square feet to this market. The Wal-Mart Supercenter on Sunset Boulevard is nearing completion and will add 202,847 square feet to this submarket when completed. The average rental rate of a new lease in this area is $9.23 per square foot, up $ 0.23 per square foot from the last survey and up $ 0.43 per square foot from the survey two years ago. The subject property is located in the west section of the city of Lexington. The neighborhood is an older area that is built up. Several of the oldest shopping centers in Lexington are in the neighborhood. These include the Lexington Village, Town Square and Lexington K-Mart Center. There are other shopping centers that are located along Highway #378. The subject property was built in 1990, and both tenants have an established customer base. The rapid population growth in the area is a positive sign for the future success of the subject. An investigation of the neighborhood revealed no vacant freestanding buildings which are considered to be competitive with the subject. The immediate market for freestanding retail stores and restaurant properties is considered to be strong. The rental rates received at the subject are within the range of rental rates being charged for similar buildings in comparable locations. The location and size of the buildings which make up the subject property are good, and would be positive factors on the marketability of the properties either individually or combined. Trends The subject property is located in the west section of the city of Lexington. This neighborhood is in the older, built up area, near downtown. Much of the new growth is occurring to the east of the subject, and this trend is expected to continue. The growth in the eastern sector of Lexington will not detrimentally affect the subject property, as the downtown area is expected to remain a viable location for tenants which would be interested in the subject property. The future of the neighborhood is expected to include steady increases in rental rates, and stable occupancy rates. The single family developments in the Lexington area have grown rapidly, which should positively affect all retail centers. 2 PROPERTY INSPECTION FORM COMMERCIAL - -------------------------------------------------------------------------------- I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Taco Bell & Eckerds Moovies Blockbuster Video ---------------------- ----------------------- ----------------------- b. Street Columbia Ave. @ Old Augusta Road @ Oak 509-515 W. Main St. Chapin Road ---------------------- ----------------------- ----------------------- c. City Lexington, SC Lexington, SC West Columbia, SC ---------------------- ----------------------- ----------------------- d. Distance from subject N/A 0.5 miles 4 miles ---------------------- ----------------------- ----------------------- e. Contact N/A N/A Edens & Avant, Inc. ---------------------- ----------------------- ----------------------- f. Phone 803-779-4420 N/A N/A ---------------------- ----------------------- ----------------------- 2. Attributes a. Year built 1990 1997 1996 ---------------------- ----------------------- ----------------------- b. Net sq. Ft. Taco Bell - 2,268 SF 10,728 SF 7,700 SF Blockbuster - 6,400 SF ---------------------- ----------------------- ----------------------- c. # building 2 1 1 ---------------------- ----------------------- ----------------------- d. #stories 1 1 1 ---------------------- ----------------------- ----------------------- e. Avg. Floor plate size (SF), if office N/A N/A N/A ---------------------- ----------------------- ----------------------- f. # elevators N/A N/A N/A ---------------------- ----------------------- ----------------------- g. Parking Adequate Adequate - 56 spaces Adequate - 41 spaces ---------------------- ----------------------- ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ---------------------- ----------------------- ----------------------- I. Vacancy % 0% 0% 0% ---------------------- ----------------------- ----------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Taco Bell Bojangles ----------------------- ----------------------- b. Street 1927 Broad River Road 151 Harbison Boulevard ----------------------- ----------------------- c. City Columbia, SC Columbia, SC ----------------------- ----------------------- d. Distance from subject 7 miles 5 miles ----------------------- ----------------------- e. Contact N/A N/A ----------------------- ----------------------- f. Phone N/A N/A ----------------------- ----------------------- 2. Attributes a. Year built 1980 1975 ----------------------- ----------------------- b. Net sq. Ft. 1,580 SF 3,200 SF ----------------------- ----------------------- c. # building 1 1 ----------------------- ----------------------- d. #stories 1 1 ----------------------- ----------------------- e. Avg. Floor plate size (SF), if office N/A N/A ----------------------- ----------------------- f. # elevators N/A N/A ----------------------- ----------------------- g. Parking Adequate Adequate ----------------------- ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block ----------------------- ----------------------- I. Vacancy % 0% 0% ----------------------- -----------------------
3 PROPERTY INSPECTION FORM COMMERCIAL - -------------------------------------------------------------------------------- B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Rental Rate a. Restaurant Space $39.95/SF N/A N/A ----------------------- ----------------------- ---------------------- b. Retail Space $13.75/SF $19.77/SF $12.50/SF ----------------------- ----------------------- ---------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ----------------------- ----------------------- ---------------------- 3. Rent Concessions None None - Build to suit None - Build to suit ----------------------- ----------------------- ---------------------- 4. Effective Rent $13.75/SF & $39.95/SF $19.77/SF $12.50 /SF ----------------------- ----------------------- ---------------------- 5. TI Allowance None None None ----------------------- ----------------------- ---------------------- 6. Expense Stop None None None ----------------------- ----------------------- ---------------------- 7. Length of Lease Term 10 - 20 Years 20 years 10 years ----------------------- ----------------------- ---------------------- 8. Commissions 5.00% to 7.00% 5.00% - 7.00% 5.00% - 7.00% ----------------------- ----------------------- ---------------------- 9. Percentage Rent N/A N/A N/A (per lease terms) ----------------------- ----------------------- ---------------------- 10. Historical Annual N/A N/A Absorption/sq.ft. N/A ----------------------- ----------------------- ---------------------- 11. Annual Operating Expense N/A N/A psf (Including taxes) N/A ----------------------- ----------------------- ---------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) N/A Similar Similar ----------------------- ----------------------- ---------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Rental Rate a. Restaurant Space $26.40/SF $30.94/SF ---------------------- ---------------------- b. Retail Space N/A N/A ---------------------- ---------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net ---------------------- ---------------------- 3. Rent Concessions None None ---------------------- ---------------------- 4. Effective Rent $26.40/SF $30.94/SF ---------------------- ---------------------- 5. TI Allowance None None ---------------------- ---------------------- 6. Expense Stop None None ---------------------- ---------------------- 7. Length of Lease Term 15 years 15 years ---------------------- ---------------------- 8. Commissions 5.00% to 7.00% 5.00% - 7.00% ---------------------- ---------------------- 9. Percentage Rent N/A N/A (per lease terms) ---------------------- ---------------------- 10. Historical Annual Absorption/sq.ft. N/A N/A ---------------------- ---------------------- 11. Annual Operating Expense psf (Including taxes) N/A N/A ---------------------- ---------------------- C. RANK RELATIVE TO SUBJECT (inferior, similar, superior) Superior Superior ---------------------- ----------------------
D. EXPLAIN RANKING/COMMENTS: The rental rate at comparable #1 is high due to the extremely high site acquisition costs. This property is very near the subject property. Comparable #2 is believed to be very similar to the subject property. Comparable #3 is an older property, although is occupied by the same tenant. Comparable #4 is located in the dominant retail district in Columbia, and the location is far superior to the subject. All of the comparables are freestanding buildings. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Eckerds Location: NWC Columbia Avenue and Old Chapin Road Lexington, SC Year Built: 1997 Total Size: 10,728 SF Rental Rate: $19.77/ SF Tenant Expenses: Triple Net Remarks: This freestanding store will have 56 parking spaces, and is situated on 1.177 acres. The rent increases approximately $0.50 every 5 years of the 20 year lease term. 5 Comparable Rental No. 2 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Moovies Location: Augusta Road at Oak Drive West Columbia, SC Year Built: 1996 Total Size: 7,700 SF Rental Rate: $12.50/ SF Tenant Expenses: Triple Net Remarks: This freestanding store has 41 parking spaces, and is situated on an outparcel of the Mills Corner Shopping Center. The store was completed in February, 1996 and is leased for a term of approximately 10 years. 6 Comparable Rental No. 3 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Taco Bell Location: 1927 Broad River Road Columbia, SC Year Built: 1980 Total Size: 1,580 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $26.40 per square foot Tenant Expenses: Triple Net Remarks: The rental rate increases to $28.11 per square foot during years 6 through 10 and to $29.97 per square foot in years 11 through 15. There are 4, five year options to renew the lease. The lease commenced July 8, 1996 7 Comparable Rental No. 4 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Bojangles Location: 151 Harbison Boulevard Columbia, SC Year Built: 1994 Total Size: 3,200 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Rate: $30.94 per square foot Tenant Expenses: Triple Net Remarks: This fifteen year lease includes equipment reportedly worth $60,000. The restaurant is located in the rapidly growing Harbison area. Prior to this lease, the building was occupied by Kenny Rogers Roasters. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLES - --------------------------------------------------------------------------------
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Taco Bell/Blockbuster Hollywood Video Eckerds ------------------------ ------------------------ -------------------------- b. Street Address 509-515 W. Main St. Outparcel @ Westwood 1720 Taylor Street Place ------------------------ ------------------------ -------------------------- c. City Lexington, SC Greenwood, SC Columbia, SC ------------------------ ------------------------ -------------------------- d. Distance from N/A 74 miles 10 miles Subject ------------------------ ------------------------ -------------------------- 2. Attributes a. Year Built 1990 1997 1996 ------------------------ ------------------------ -------------------------- b. Net sq. feet 2,268 + 6,400 6,000 9,504 ------------------------ ------------------------ -------------------------- c. # Buildings 2 1 1 ------------------------ ------------------------ -------------------------- d. # of Stories 1 1 1 ------------------------ ------------------------ -------------------------- e. Vacancy % 0% 0% 0% ------------------------ ------------------------ -------------------------- 3. Sales Information a. Sales Price N/A $1,099,000 $1,835,000 ------------------------ ------------------------ -------------------------- b. Sales Price PSF N/A $183.17 $193.08 ------------------------ ------------------------ -------------------------- c. Cap. Rate N/A 10.06% 9.32% ------------------------ ------------------------ -------------------------- d. Date N/A Current Contract January 16,1997 ------------------------ ------------------------ -------------------------- e. NOI at time of Sale N/A $110,610 $171,104 ------------------------ ------------------------ -------------------------- 4. Rank Relative to Subject N/A Superior Superior (inferior, similar, superior) ------------------------ ------------------------ -------------------------- COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Bojangles Hardees ----------------------- ---------------------- b. Street Address 151 Harbison Blvd. 7924 Garners Ferry Road ----------------------- ---------------------- c. City Columbia, SC Columbia, SC ----------------------- ---------------------- d. Distance from 5 miles 15 miles Subject ----------------------- ---------------------- 2. Attributes a. Year Built 1994 1993 ----------------------- ---------------------- b. Net sq. feet 3,200 3,550 ----------------------- ---------------------- c. # Buildings 1 1 ----------------------- ---------------------- d. # of Stories 1 1 ----------------------- ---------------------- e. Vacancy % 0% 0% ----------------------- ---------------------- 3. Sales Information a. Sales Price $877,500 $808,790 ----------------------- ---------------------- b. Sales Price PSF $274.22 $227.83 ----------------------- ---------------------- c. Cap. Rate 11.06% N/A ----------------------- ---------------------- d. Date March 12, 1996 April 28, 1994 ----------------------- ---------------------- e. NOI at time of Sale $97,090 N/A ----------------------- ---------------------- 4. Rank Relative to Subject Superior Similar (inferior, similar, superior) ----------------------- ----------------------
Explain Ranking/Comments: No sales of combination properties containing a restaurant and a retail store were found . Since the two properties which make up the subject could be separated, sales of restaurants and freestanding retail stores have been collected. Comparables #1 and #2 are retail stores which are believed to be very comparable to the subject. Comparables #3 and #4 are restaurants which are also considered similar to the Taco Bell. Comparable #3 is superior to the subject with respect to location. 9 COMPARABLE IMPROVED SALES Comparable Sale No. 1 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Hollywood Video Location: Outparcel of Westwood Place Greenwood, SC Grantor: Zimmer Development, Inc. Grantee: W.D. Morris Deed Reference: N/A Date: Current Contract Sales Price: $1,099,000 Adjusted Sales Price: $1,099,000 Size building 6,000 Sales Price per S.F.: $183.17 Size Land (Acres): 1.014 Size Land (S.F.): 44,170 Year Built: 1997 Land/Building Ratio: 7.36 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $112,838 EGIM: 9.74 Net Operating Income: $110,610 Overall Rate: 10.06% Verification: Public Records and seller Type of Purchaser: Private Investor Comments: This is an arms length sale of a freestanding video store in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. The property is located on an outparcel of a community shopping center anchored by a Wal-Mart Supercenter. 10 Comparable Sale No. 2 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Eckerds Location: 1720 Taylor Street, Columbia, SC Grantor: Baker & Baker Grantee: C. Dan Watts Deed Reference: N/A Date: January 16, 1997 Sales Price: $1,835,000 Adjusted Sales Price: $1,835,000 Size building: 9,504 Sales Price per S.F.: $193.08 Size Land (Acres): 1.14 Size Land (S.F.): 49,658 Year Built: 1996 Land/Building Ratio: 5.22 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $174,398 Effective Gross Income: $174,398 EGIM: 10.52 Net Operating Income: $171,104 Overall Rate: 9.32% Verification: Public Records Type of Purchaser: Private Investor Comments: This freestanding store is leased for a 20 year term. The store opened in June, 1996. Developing this site involved demolition of a light industrial building. Location is within 2 miles of the CBD of Columbia. 11 Comparable Sale No. 3 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Bojangles Location: 151 Harbison Boulevard Columbia, SC Grantor: Columbia Roasters, Inc. Grantee: W. J. Branstrom and R. H. Falls III Deed Reference: Book 3655, Page 210 and 215 Date: March 12, 1996 Sales Price: $717,500 Adjusted Sales Price: $877,500 Size building: 3,200 Sales Price per S.F.: $274.22 Size Land (Acres): 1.008 Size Land (S.F.): 43,913 Year Built: 1994 Land/Building Ratio: 13.72 to 1 Utilities: All Public Zoning: PUD Commercial Financing: Cash to Seller Gross Potential Income: $99,000 Effective Gross Income: $99,000 Gross Income Multiple: 8.86 EGIM: 8.86 Net Operating Income: $97,090 Overall Rate: 11.06% Verification: Public Records Type of Purchaser: Private Investor Comments: This property was originally built for occupancy by Kenny Rogers Roasters, and closed in 1995. The adjusted price reflects costs to upfit the building and equipment costs. Bojangles leased the building for a 15 year term on a triple net lease structure. 12 Comparable Sale No. 4 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] TMS: 19105-01-05 Name: Hardees Location: 7924 Garners Ferry Road Columbia, SC Grantor: Flagstar Enterprises Grantee: CNL Income Fund XV, Ltd. Deed Reference: Book 1195, Page 121 Date: April 28, 1994 Sales Price: $808,790 Adjusted Sales Price: $808,790 Size building: 3,550 Sales Price per S.F.: $227.83 Size Land (Acres): 1.189 Size Land (S.F.): 51,793 Year Built: 1993 Land/Building Ratio: 14.59 to 1 Utilities: Municipal Zoning: C-3, General Commercial Financing: Cash to Seller Effective Gross Income: N/A EGIM: N/A Net Operating Income: N/A Overall Rate: N/A Verification: Public Records Type of Purchaser: Private Investor Comments: This was a sale leaseback of a new Hardees restaurant. The equipment was not included in the sale. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 [GRAPHIC OMITTED] Rent Comparables Map [GRAPHIC OMITTED] Improved Sales Comparables Map Site Plan [GRAPHIC OMITTED] Page 138 EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Property: BLOCKBUSTER - LEXINGTON 415 WEST MAIN STREET LEXINGTON, SC 29272-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ---------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ---------------------------------------------------------------------------------------------------------------------- BLOCKBUSTER #92581 - LEXINGTO BLOCKBUSTER BIDEOS, INC., A T 672- 10 6,400 11/01/89 10/31/99 13.75 11/01/89 87,999.96 15.81 11/01/99 101,184.00 - ---------------------------------------------------------------------------------------------------------------------- TACO BELL MEXICAN RESTAURANT VENTURES, 672- 20 0 12/01/89 11/30/09 0.00 12/01/89 88,371.36 0.00 12/01/94 90,602.52 0.00 12/01/99 95,000.04 0.00 12/01/04 102,125.04 - ---------------------------------------------------------------------------------------------------------------------- Square Feet: Occupied.. 6,400 Current Annual Base Rent 178,602.48 Available. 0 Total..... 6,400 - ----------------------------------------------------------------------------------------------------------------------------------- REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- BLOCKBUSTER #92581 - LEXINGTO Full 0 Full 0 None 0 11/01/94 10/31/99 13.75 5.00 1,760,000 Y BLOCKBUSTER BIDEOS, INC., A T 11/01/99 10/31/04 15.81 5.00 2,023,700 Y - ----------------------------------------------------------------------------------------------------------------------------------- TACO BELL Full 0 None 0 None 0 12/01/09 11/30/14 0.00 6.50 1,359,600 Y MEXICAN RESTAURANT VENTURES, 12/01/14 11/30/19 0.00 6.50 1,393,900 Y 12/01/19 11/30/24 0.00 6.50 1,461,500 Y 12/01/24 11/30/29 0.00 6.50 1,571,200 Y - -----------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Blockbuster Video - Looking South [GRAPHIC OMITTED] Blockbuster Video - Looking East [GRAPHIC OMITTED] Blockbuster Video - Looking Northeast [GRAPHIC OMITTED] Taco Bell - Looking South [GRAPHIC OMITTED] Taco Bell - Looking East [GRAPHIC OMITTED] Taco Bell - Looking Northwest [GRAPHIC OMITTED] Intersection of West Main Street and Black Avenue [GRAPHIC OMITTED] West Main Street - Looking East [GRAPHIC OMITTED] West Main Street - Looking West [GRAPHIC OMITTED] Black Avenue - Looking North This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study TRENHOLM PLAZA Southeast Corner of Trenholm Road and Forest Drive Forest Acres, South Carolina Prepared by Michael B. Dodds, MAI, CCIM Date of Market Study - April 29, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] April 29, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Trenholm Plaza Southeast Corner of Trenholm Road and Forest Drive Forest Acres, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. This analysis that forms the basis of the study was conducted by Michael B. Dodds, MAI, CCIM. The subject property and all comparable data was inspected by Michael B. Dodds, MAI, CCIM on April 29, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a community shopping center that contains 172,957 square feet of leasable area. The center was constructed in 1960 with an addition in 1996. The anchor tenant is Publix, which will occupy 37,912 square feet when the store opens in May or June of 1997. Additional anchor tenants include the United States Postal Service, Books A Million, Eckerds and The Fresh Market. The shopping center local stores are currently 70% occupied. In addition to the shopping center, there are several tenants occupying buildings on a ground lease basis. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ Michael B. Dodds ---------------------------------- Michael B. Dodds, MAI, CCIM State Certified General Real Estate Appraiser (CG-543) [LOGO] EXECUTIVE SUMMARY ================================================================================ Regional Perspective The subject is located in Columbia, South Carolina, in the eastern section of the metropolitan area. Columbia is the state capital and is also the location of the University of South Carolina. Fort Jackson is located on the east side of Columbia and is the largest basic training facility in the United States. The city has a diverse economy, with industries including banking, government, distribution and transportation. Geography also gives Columbia a strategic location, with three interstates coming together in Columbia. As of March, 1997 the unemployment rate for Richland County was 3.7%, which was below the state average of 5.3%. Neighborhood and Site The subject neighborhood is within one of the most desirable sections of Columbia. The Forest Acres area has a very high average household income, and is attractive on both a residential and commercial level. Recent construction within two miles of the subject property includes the East Forest Plaza, which is identified as Rental Comparable #2 in this analysis. Other developments currently under construction includes a full service car wash and an assisted living facility. A second assisted living facility is proposed for Trenholm Road, south of the subject. The intersection of Trenholm Road and Forest Drive is heavily traveled, and provides excellent exposure for the subject. The neighborhood is built up, and future development may require the demolition of existing structures to create a developable site. In general, the area is growing, and this positive growth should continue in the near future. Physical features are as follows: 1. Site Size 20.39 Acres 2. Identity TMS# 16604-01-20 and 16701-04-02,04 - Richland County 3. Shape Irregular - Adequate 4. Topography Generally level 5. Accessibility Good - 2 streets 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 172,957 square feet Publix store to open in May/June 1997 2. Layout & Design 1 story, five buildings, several structures are located on ground leased sites. 3. Parking Spaces approximately 865 5.0 spaces per 1,000 square feet 4. Construction Brick and glass front with concrete block on side. Roof is built up composition. 1 Market Position and Marketability Conclusions The subject property is located in a sub-market that is identified as East Columbia. The demographics of this area are very attractive to most retailers, with Forest Acres having one of the highest household incomes in the Columbia region. There are many shopping centers in this area, with most having been constructed in the 1970's and 1980's. The largest retail development is the East Forest Plaza, which is anchored by a Wal-Mart Supercenter. The local shops at this center were 100% pre-leased upon completion of construction. Several new freestanding drug stores have been built in the general area during 1996 and 1997. The East Columbia sub-market is listed in the 1996 Central Carolina Business Review and Investment Guide as having 3,865,752 square feet, and represents 31.3% of the total Columbia retail market. The survey reports no retail space planned or under construction in the immediate subject area. The overall vacancy rate for this sub-market was reported at 6.9%. The tenant mix at the subject property and the comparables is indicative of the economic characteristics of the neighborhood. Many of the tenants are high end retailers. Tenant turnover at these centers appears to be average, and rental rates have increased steadily. The rental rates generally range from $8.00 to $14.00 per square foot, with the subject property achieving rates at the middle to upper end of this range. The vacant spaces at the comparables range from small stores of 1,200 square feet to stores approximately 3,500 square feet in size. Any concessions being offered are minimal, and the leasing agents interviewed would not quote a "typical" concession scenario. The subject property has an atypical tenant mix, with two supermarkets and a Post Office. The two supermarkets are expected to operate successfully, with each offering different product lines. The Post Office appears to create considerable traffic, which provides increased exposure for the local retailers. Several ground leased properties are also part of the subject property. These include branch bank sites for Carolina First and NationsBank. Other tenants include a gift shop located in a small portable type building. The ground leases do not detrimentally affect the desirability of the subject. In summary, the subject property is considered to be a very desirable shopping center in the sub-market. It is an older, established property, and has a loyal customer base. Visibility from Trenholm Road and Forest Drive is excellent, and the property is in good condition. The subject property should continue to command rental rates at the upper end of the range. Trends The subject property is located in an area of Columbia that has experienced considerable growth in recent years. Much of the new construction that has occurred is located at the intersection of Forest Drive and the new Interstate #77 By-Pass. This development consists of the East Forest Plaza, several banks, fast food restaurants and convenience stores. Properties under construction include an all suite motel and a Sam's Club store. This growth has had a positive effect on the retail market, due to the increased traffic which has resulted. A high overall occupancy level and steady rental rate increases are expected in the near future. 2 PROPERTY INSPECTION FORM COMMERCIAL
I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ 1. Identification a. Name Trenholm Plaza Forest Park East Forest Plaza Decker Village High Point on Decker -------------------- -------------------- -------------------- -------------------- -------------------- b. Street SEQ Forest @Trenholm 4711 Forest Drive Forest Drive 2300 Decker Blvd. 2230 Decker Blvd. -------------------- -------------------- -------------------- -------------------- -------------------- c. City Forest Acres, SC Forest Acres, SC Columbia, SC Columbia, SC Columbia, SC -------------------- -------------------- -------------------- -------------------- -------------------- d. Distance from subject N/A 0.5 miles 1.0 miles 2.5 - 3.0 miles 3.0 miles -------------------- -------------------- -------------------- -------------------- -------------------- e. Contact Edens & Avant Julie Gardner Gary Anthony Danny Bonds Ahold -------------------- -------------------- -------------------- -------------------- -------------------- f. Phone (803)779-4420 (704)332-4146 (803)649-3975 (803)779-4420 (803)776-9015 -------------------- -------------------- -------------------- -------------------- -------------------- 2. Attributes a. Year built 1960-97 1991-96 1995 1975 1991 -------------------- -------------------- -------------------- -------------------- -------------------- b. Net sq. Ft. 172,957 93,000 240,185 56,270 50,143 -------------------- -------------------- -------------------- -------------------- -------------------- c. # building Three One One One One -------------------- -------------------- -------------------- -------------------- -------------------- d. #stories One One One One One -------------------- -------------------- -------------------- -------------------- -------------------- e. Avg. Floor plate size N/A N/A N/A N/A N/A (sq. Ft.), if office -------------------- -------------------- -------------------- -------------------- -------------------- f. # elevators N/A N/A N/A N/A N/A -------------------- -------------------- -------------------- -------------------- -------------------- g. Parking Adequate Adequate Adequate Adequate Adequate -------------------- -------------------- -------------------- -------------------- -------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block -------------------- -------------------- -------------------- -------------------- -------------------- I. Vacancy %(Locals) 30.0% 2.9% 0 7+/-% 20-25% -------------------- -------------------- -------------------- -------------------- -------------------- j. Anchors, if Retail Publix,Fresh Market, Harris Teeter, Revco Wal-Mart Supercenter Food Lion, Eckerds Bi-Lo, Moovies US Postal Service -------------------- -------------------- -------------------- ------------------- --------------------
Comments: The subject property is an older center that has been renovated several times. The subject compares favorably with the comparables, with comparable #1 being the closest to the subject. Comparables #1 and #4 each have 2 vacant stores, while comparable #3 has one vacant store. The shops at comparable #2 were 100% pre-leased prior to completion of construction. The highest rental rates are received at the two newest centers (#1 & #2). Vacant stores at subject are in locations with poor exposure. No planned construction was discovered during the primary research. 3 PROPERTY INSPECTION FORM COMMERCIAL
B. RENTAL INFORMATION SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A N/A N/A N/A -------------------- -------------------- ------------------- ------------------- ------------------- b. Shop Space $7.00 - $9.00 $13.00 $8.50 - $14.00 $8.00 - $9.50 $8.00 - $9.00 -------------------- -------------------- ------------------- ------------------- ------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net Triple Net Triple Net -------------------- -------------------- ------------------- ------------------- ------------------- 3. Rent Concessions Minimal None None None Minimal -------------------- -------------------- ------------------- ------------------- ------------------- 4. Effective Rent $7.00 - $9.00 $13.00 $8.50 - $14.00 $8.00 - $9.50 $8.00 - $9.00 -------------------- -------------------- ------------------- ------------------- ------------------- 5. TI Allowance None None None None None -------------------- -------------------- ------------------- ------------------- ------------------- 6. Expense Stop None None None None None -------------------- -------------------- ------------------- ------------------- ------------------- 7. Length of Lease Term 3 - 5 years (shops) 3 - 5 years (shops) 3 - 5 years (shops) 3 - 5 years (shops) 1 - 3 years (shops) -------------------- -------------------- ------------------- ------------------- ------------------- 8. Commissions 5.00% - 7.00% 5.00% - 7.00% 5.00% - 7.00% 5.00% - 7.00% 5.00% - 7.00% -------------------- -------------------- ------------------- ------------------- ------------------- 9. Percentage Rent Fresh Market, Harris Teeter, Revco Wal-Mart Food Lion Bi-Lo (per lease terms) Eckerds, Books A Million -------------------- -------------------- ------------------- ------------------- ------------------- 10. Historical Annual N/A N/A N/A N/A N/A Absorption/sq.ft. -------------------- -------------------- ------------------- ------------------- ------------------- 11. Annual Operating N/A $1.50 $1.50 N/A N/A Expense psf (Including taxes) -------------------- -------------------- ------------------- ------------------- ------------------- C. RANK RELATIVE TO SUBJECT (inferior, Similar/Superior Superior Inferior Similar similar, superior) -------------------- -------------------- ------------------- ------------------- -------------------
D. EXPLAIN RANKING/COMMENTS: Leasing commissions are typically cashed out in this market. Comparable #1 has one 1,200 SF space available, and is of better quality construction. Tenants at comparable #2 are typical of Wal-Mart anchored centers. Comparables #3 and #4 are located in inferior locations. The opening of Publix should enhance the competitive position in the marketplace. Minimal concessions due to the overall tight sub-market. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 ================================================================================ [GRAPHIC OMITTED] Name: Forest Park Location: 4711 Forest Drive Forest Acres, SC Year Built: 1991-96 Total Size: 93,000 SF Vacant Space: 1,200 SF Vacancy Rate: 2.9% Locals Rental Range: $9.00 - $13.00 Tenant Expenses: Triple Net ($1.50/SF) Remarks: The anchor tenant is Harris Teeter, which recently expanded from 33,153 to 42,000 SF. Other tenants include Revco and Baskin Robbins. The center is of above average quality construction and is in good condition. The asking rate for the 1,200 SF space is $13.00/SF. Good accessibility from Forest Drive. 5 Comparable Rental No. 2 ================================================================================ [GRAPHIC OMITTED] Name: East Forest Plaza Location: Forest Drive at Southeastern Beltway Columbia, South Carolina Year Built: 1995 Total Size: 240,185 SF Vacant Space: 0 SF Vacancy Rate: 0% Rental Range: $8.50 to $14.00 Tenant Expenses: Triple Net ($1.50/SF) Remarks: This center is 100% occupied. Tenants include a Wal-Mart Supercenter, Shoe Carnival, Dollar Tree, Cato and Fatz. A Sam's Club store is planned for a pad site adjacent to the Wal-Mart. The shops are not connected to the Wal-Mart store, and outparcels have been developed with banks and fast food restaurants. Excellent accessibility. 6 Comparable Rental No. 3 ================================================================================ [GRAPHIC OMITTED] Name: Decker Village Location: 2300 Decker Boulevard Columbia, South Carolina Year Built: 1975 Total Size: 56,270 SF Vacant Space: 1,200 - 1,500 SF Vacancy Rate: 7+% - Rental Range: $8.00 - $9.50 Tenant Expenses: Triple Net Remarks: The anchor tenants are Food Lion and Eckerds. The property is an established center in the neighborhood and approximately 8 of the 9 local shops were occupied on the date of inspection. Historically, the center has maintained a fairly high occupancy level. The property overall is in average condition. 7 Comparable Rental No. 4 ================================================================================ [GRAPHIC OMITTED] Name: High Point on Decker Location: 2230 Decker Boulevard Columbia, South Carolina Year Built: 1991 Total Size: 50,143 SF Vacant Space: 3,000 - 3,500 SF Vacancy Rate: 20 - 25% Local Rent Range: $ 8.00 - $9.00 Tenant Expenses: Triple Net Remarks: Two spaces are currently available, which were previously used as one space by a computer sales/service company. The center is situated on the site in a manner that limits the visibility of the local shops. The condition of the property is considered to be good, while the location is inferior to the subject. 8 PROPERTY INSPECTION FORM COMMERCIAL
II. SALES COMPARABLE SUBJECT COMPARABLE 1 COMPARABLE 2 COMPARABLE 3 COMPARABLE 4 ------- ------------ ------------ ------------ ------------ 1. Identification a. Name Trenholm Plaza St. Andrews Crossing Eastgate Center One Norman Center Paw Creek Commons --------------------- -------------------- ------------------ ----------------- ------------------- b. Street Address Forest Dr. @ Trenholm 817 St. Andrews Road NWC Whiskey Rd. & 19706 One Norman E/S Little Rock Rd. Eastgate Dr. Blvd. At Freedom Drive --------------------- -------------------- ------------------ ----------------- ------------------- c. City Forest Acres, SC Columbia, SC Aiken, SC Cornelius, NC Charlotte, NC --------------------- -------------------- ------------------ ----------------- ------------------- d. Distance from Subject N/A 10 miles 60 miles 115 miles 100 miles --------------------- -------------------- ------------------ ----------------- ------------------- 2. Attributes a. Year Built 1960-96 1994 1995 1993 1996 --------------------- -------------------- ------------------ ----------------- ------------------- b. Net sq. feet 172,957 66,910 75,716 54,185 66,050 --------------------- -------------------- ------------------ ----------------- ------------------- c. # Buildings Three 1 1 1 1 --------------------- -------------------- ------------------ ----------------- ------------------- d. # of Stories one 1 1 1 1 --------------------- -------------------- ------------------ ----------------- ------------------- e. Vacancy % 30.0% 0.0% 5.0% 0.0% 2.73% --------------------- -------------------- ------------------ ----------------- ------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 $4,650,000 $5,120,000 --------------------- -------------------- ------------------ ----------------- ------------------- b. Sales Price PSF N/A $97.89 $88.16 $85.82 $77.52 --------------------- -------------------- ------------------ ----------------- ------------------- c. Cap. Rate N/A 9.69% 9.86% 9.68% 9.60% --------------------- -------------------- ------------------ ----------------- ------------------- d. Date N/A May 24,1994 September 28, 1995 October 12, 1995 March 25, 1997 --------------------- -------------------- ------------------ ----------------- ------------------- e. NOI at time of Sale N/A $634,797 $657,896 $450,188 $517,412 --------------------- -------------------- ------------------ ----------------- ------------------- 4. Rank Relative to Subject N/A Similar Similar Superior Superior (inferior, similar, superior) --------------------- -------------------- ------------------ ----------------- -------------------
Explain Ranking/Comments: The comparable sales are all superior to the subject property with respect to age of the property, although the demographics of the subject neighborhood and tenant mix are similar. 9 Comparable Sale No. 1 [GRAPHIC OMITTED] TMS: 6012 -1 -1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 10 Comparable Sale No. 2 [GRAPHIC OMITTED] Name: Eastgate Shopping Center Location: Northwest Corner of Whiskey Road & Eastgate Drive Aiken, SC Grantor: Southwest U.S. Retail, LP Grantee: PDG Aiken Partners, LP Deed Reference: N/A Date: September 28, 1995 Sales Price: $6,675,000 Adjusted Sales Price: $6,675,000 Size building: 75,716 Sales Price per S.F.: $88.16 Size Land (Acres): 8.79 Size Land (S.F.): 382,892 Year Built: 1995 Land/Building Ratio: 5.06 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $782,704 Effective Gross Income: $782,704 EGIM: 8.53 Net Operating Income: $657,896 Overall Rate: 9.86% Verification: Public Records Type of Purchaser: Private Investor Comments: Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. 11 Comparable Sale No. 3 [GRAPHIC OMITTED] Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. 12 Comparable Sale No. 4 [GRAPHIC OMITTED] TMS: 59-231-22,23 pt. Name: Paw Creek Commons Location: East side of Little Rock Road at Freedom Drive Grantor: Paw Creek, LLC Grantee: Paw Creek Crossing Limited Partnership Deed Reference: Book 8988, Page 519 Date: March 25, 1997 Sales Price: $5,120,000 Adjusted Sales Price: $5,384,000 Size building: 66,050 Sales Price per S.F.: $77.52 Size Land (Acres): 9.82 Size Land (S.F.): 427,759 Year Built: 1996 Land/Building Ratio: 6.48 to 1 Utilities: Municipal Zoning: CC, Commercial Center Financing: Cash to Seller Gross Potential Income: $568,840 Effective Gross Income: $552,054 Gross Income Multiple: 9.00 EGIM: 9.27 Net Operating Income: $517,412 Overall Rate: 9.61% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was pre-construction. The sales price has been adjusted to reflect this by using 50 basis points in the capitalization rate (.1011 minus .0050 equals .0961). The major tenants are Winn-Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. The income from anchor tenants is 79.41 percent of gross income. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 [GRAPHIC OMITTED] COMPARABLE RENTALS MAP [GRAPHIC OMITTED] COMPARABLE SALES MAP --------------- Building Sketch --------------- [GRAPHIC OMITTED] EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 126 Property: TRENHOLM PLAZA 4840 FOREST DRIVE COLUMBIA, SC 29206 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ PUBLIX SUPER MARKETS INC. PUBLIX SUPER MARKETS INC. 653-10 37,912 MTM 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ BOOKS A MILLION, INC. BOOKS A MILLION, A DELAWARE C 653-20 19,950 11/10/93 03/31/04 0.00 0.00 0.00 0.00 0.00 0.00 4.07 05/01/94 97,140.48 5.75 10/01/94 114,712.44 0.00 0.00 0.00 0.00 6.00 04/01/97 119,700.00 6.25 04/01/01 124,687.56 - ------------------------------------------------------------------------------------------------------------------------ RADIO SHACK TANDY CORPORATION 653-30 2,636 06/01/87 07/31/97 7.00 06/01/87 18,452.04 0.00 0.00 11.00 08/01/92 28,995.96 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ PUBLIX SUPER MARKETS INC. PUBLIX SUPER MARKETS INC. Full 0 Full 0 Full 0 04/01/17 03/31/22 0.00 1.00 0 Y 04/01/22 03/31/27 0.00 1.00 0 Y 04/01/27 03/31/32 0.00 1.00 0 Y 04/01/32 03/31/37 0.00 1.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ BOOKS A MILLION, INC. BOOKS A MILLION, A DELAWARE C Full 0 Full 0 Full 0 04/01/04 03/31/06 6.80 3.50 0 Y 04/01/06 03/31/08 7.10 3.50 0 Y 04/01/08 03/31/09 7.40 3.50 0 Y 04/01/09 03/31/10 7.40 3.50 2,775,400 Y 04/01/10 03/31/12 7.70 3.50 3,277,500 Y 04/01/12 03/31/14 8.00 3.50 0 Y 0.00 3.50 0 Y 0.00 3.50 3,420,000 Y 0.00 3.50 3,562,500 Y - ------------------------------------------------------------------------------------------------------------------------------------ RADIO SHACK TANDY CORPORATION PRS 1987 None 0 Full 0 06/01/97 05/31/02 0.00 3.00 615,100 Y 08/01/00 07/31/03 12.65 3.00 0 Y 0.00 3.00 966,500 Y -----------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 127 Property: TRENHOLM PLAZA 4840 FOREST DRIVE COLUMBIA, SC 29206 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ QUACKERS LYNN B. CLEGG 653-40 1,698 11/01/95 10/31/98 0.00 0.00 0.00 0.00 9.16 12/01/92 15,553.68 9.53 11/01/93 16,175.88 9.91 11/01/94 16,822.92 10.38 11/01/95 17,625.24 - ------------------------------------------------------------------------------------------------------------------------ Available 653-50 3,510 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ SECOND LOOK, THE JUNIOR LEAGUE OF COLUMBIA 653-60 5,930 09/01/94 08/31/97 7.00 09/01/94 41,510.04 0.00 0.00 7.25 09/01/95 42,992.52 8.00 09/01/96 47,439.96 - ------------------------------------------------------------------------------------------------------------------------ U.S. POSTAL SERVICE UNITED STATES POSTAL SERVICE 653-70 8,155 06/01/95 05/31/05 6.76 12/01/90 55,116.00 7.37 11/01/93 60,132.00 8.37 06/01/95 60,268.00 - ------------------------------------------------------------------------------------------------------------------------ Available 653-80 14,973 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ Available 653-90 5,900 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ QUACKERS LYNN B. CLEGG PRS 1986 PRS 1986 Full 0 11/01/95 10/31/98 0.00 5.50 0 Y 11/01/98 10/31/01 0.00 5.50 282,794 Y 0.00 5.50 294,106 Y 0.00 5.50 305,870 Y 0.00 5.50 305,900 Y 0.00 5.50 320,500 Y - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ SECOND LOOK, THE JUNIOR LEAGUE OF COLUMBIA PRS 1994 PRS 1994 Full 0 09/01/97 08/31/00 0.00 5.00 948,800 0.00 5.00 0 0.00 5.00 0 0.00 5.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ U.S. POSTAL SERVICE UNITED STATES POSTAL SERVICE None 0 None 0 None 0 06/01/05 05/31/10 11.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 128 Property: TRENHOLM PLAZA 4840 FOREST DRIVE COLUMBIA, SC 29206 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ TUESDAY MORNING TUESDAY MORNING, INC. 653-100 5,828 10/01/93 12/31/97 6.41 11/01/93 37,342.44 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ KITTY'S HALLMARK K.S.M., INC. 653-105 5,828 11/20/96 12/31/01 8.00 01/01/97 46,623.96 9.00 01/01/00 52,452.00 - ------------------------------------------------------------------------------------------------------------------------ LOURIE'S INC. LOURIES, INC. 653-110 4,700 06/01/96 05/31/99 8.00 03/01/92 37,599.96 8.25 03/01/93 38,775.00 8.75 06/01/96 41,124.96 - ------------------------------------------------------------------------------------------------------------------------ ECKERD'S #8015 F/K/A RITE AID #0191 653-120 8,254 03/01/90 02/28/00 0.00 0.00 4.00 03/01/90 33,024.00 0.00 0.00 4.50 03/01/95 37,152.00 - ------------------------------------------------------------------------------------------------------------------------ FRESH MARKET, INC. THE FRESH MARKET, INC. 653-130 17,400 03/15/93 03/30/07 0.00 0.00 0.00 0.00 7.00 04/01/93 121,800.00 - ------------------------------------------------------------------------------------------------------------------------ ORIGINAL PANCAKE HOUSE, THE BEDUCIAN, INC. 653-140 4,725 04/15/97 04/30/07 10.00 05/01/97 47,250.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ TUESDAY MORNING TUESDAY MORNING, INC. None 0 None 0 None 0 01/01/98 12/31/02 7.26 3.00 1,244,700 Y 01/01/03 12/31/07 8.12 3.00 0 Y - ------------------------------------------------------------------------------------------------------------------------------------ KITTY'S HALLMARK K.S.M., INC. Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ LOURIE'S INC. LOURIES, INC. Full 0 Full 0 Full 0 0.00 5.00 752,000 Y 0.00 5.00 775,500 Y 0.00 5.00 822,500 Y - ------------------------------------------------------------------------------------------------------------------------------------ ECKERD'S #8015 F/K/A RITE AID #0191 Full 0 Full 0 Full 0 03/01/95 02/28/00 4.50 2.00 0 Y 03/01/00 02/28/05 5.00 2.00 1,651,200 Y 0.00 2.00 0 Y 0.00 2.00 1,857,600 Y - ------------------------------------------------------------------------------------------------------------------------------------ FRESH MARKET, INC. THE FRESH MARKET, INC. Full 0 Full 0 Full 0 04/01/07 03/30/17 7.50 1.00 5,000,000 04/01/17 03/30/27 8.00 1.00 0 0.00 1.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ ORIGINAL PANCAKE HOUSE, THE BEDUCIAN, INC. Full 0 Full 0 Full 0 05/01/07 04/30/12 13.33 5.00 1,050,000 05/01/12 04/30/17 15.33 5.00 1,216,950 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 129 Property: TRENHOLM PLAZA 4840 FOREST DRIVE COLUMBIA, SC 29206 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ ORIGINAL PANCAKE HOUSE, THE BEDUCIAN, INC. 653-140 4,725 04/15/97 04/30/07 0.00 0.00 11.59 05/01/02 54,762.72 - ------------------------------------------------------------------------------------------------------------------------ ROGERS BROTHERS FABRICS ROGERS BROTHERS INVESTMENTS 653-145 7,998 03/01/92 05/31/98 8.00 03/01/92 63,984.00 0.00 0.00 6.67 04/01/93 53,320.00 8.00 04/01/94 63,984.00 - ------------------------------------------------------------------------------------------------------------------------ CAROLINA FIRST FKA REPUBLIC NATIONAL BANK 653-150 0 P 02/01/87 01/31/97 0.00 02/01/87 8,400.00 0.00 02/01/97 32,359.32 - ------------------------------------------------------------------------------------------------------------------------ HEAVENLY HAMS HAM BONE INC/COLUMBIA HAMS IN 653-160 1,887 05/01/96 04/30/99 10.00 05/01/93 18,870.00 11.00 05/01/94 20,757.00 12.00 05/01/95 22,644.00 12.50 05/01/96 23,587.44 13.00 05/01/97 24,531.00 13.50 05/01/98 25,474.44 - ------------------------------------------------------------------------------------------------------------------------ MANHATTAN BAGEL MBSE, INC. 653-170 1,905 05/01/97 04/30/02 16.00 05/01/97 30,480.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ ORIGINAL PANCAKE HOUSE, THE BEDUCIAN, INC. Full 0 Full 0 Full 0 0.00 5.00 0 0.00 5.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ ROGERS BROTHERS FABRICS ROGERS BROTHERS INVESTMENTS PRS 1988 PRS 1988 Full 0 06/01/98 05/31/03 9.00 3.00 1,300,000 0.00 3.00 0 0.00 3.00 0 0.00 3.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ CAROLINA FIRST FKA REPUBLIC NATIONAL BANK PRS 1972 None 0 None 0 02/01/97 01/31/12 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ HEAVENLY HAMS HAM BONE INC/COLUMBIA HAMS IN Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ MANHATTAN BAGEL MBSE, INC. Full 0 Full 0 Full 0 05/01/02 04/30/07 17.00 0.05 609,600 05/01/07 04/30/12 18.75 0.05 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 130 Property: TRENHOLM PLAZA 4840 FOREST DRIVE COLUMBIA, SC 29206 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ MANHATTAN BAGEL MBSE, INC. 653-170 1,905 05/01/97 04/30/02 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ LAZY CHEF & INTERIORS, INC. LAZY CHEF & INTERIORS, INC. 653-180 1,476 09/01/92 08/31/98 0.00 0.00 0.00 0.00 12.00 09/01/92 17,712.00 - ------------------------------------------------------------------------------------------------------------------------ HAIR CUTTERY #1698 CREATIVE HAIRDRESSERS INC. 653-190 1,488 09/01/91 08/31/99 11.00 09/01/91 16,368.00 0.00 0.00 0.00 0.00 12.00 09/01/93 17,856.00 13.50 09/01/96 20,088.00 - ------------------------------------------------------------------------------------------------------------------------ SYLVAN BROTHERS, INC. SYLVAN BROTHERS, INC. 653-200 2,400 03/01/93 02/28/98 10.00 03/01/93 24,000.00 - ------------------------------------------------------------------------------------------------------------------------ FOLLINE OPTICIANS INC. 653-220 617 05/01/93 04/30/01 0.00 0.00 FOLLINE OPTICIANS INC. 0.00 0.00 12.00 05/01/93 7,404.00 14.00 05/01/96 8,640.00 - ------------------------------------------------------------------------------------------------------------------------ PALMETTO TRAVEL, INC. FIRST CLASS TRAVEL, INC. 653-230 800 01/01/96 03/31/99 14.00 04/01/96 11,199.96 15.00 04/01/97 12,000.00 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ MANHATTAN BAGEL MBSE, INC. Full 0 Full 0 Full 0 0.00 0.05 0 - ------------------------------------------------------------------------------------------------------------------------------------ LAZY CHEF & INTERIORS, INC. LAZY CHEF & INTERIORS, INC. Full 0 Full 0 Full 0 09/01/95 08/31/98 0.00 5.00 0 Y 0.00 5.00 0 Y 0.00 5.00 354,200 Y - ------------------------------------------------------------------------------------------------------------------------------------ HAIR CUTTERY #1698 CREATIVE HAIRDRESSERS INC. Full 0 Full 0 Full 0 09/01/96 08/31/99 13.50 0.00 0 09/01/99 08/31/02 14.25 0.00 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ SYLVAN BROTHERS, INC. SYLVAN BROTHERS, INC. PRS 1986 PRS 1986 Full 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ FOLLINE OPTICIANS INC. Full 0 Full 0 Full 0 05/01/96 04/30/01 14.00 0.00 0 FOLLINE OPTICIANS INC. 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ PALMETTO TRAVEL, INC. FIRST CLASS TRAVEL, INC. Full 0 Full 0 Full 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 131 Property: TRENHOLM PLAZA 4840 FOREST DRIVE COLUMBIA, SC 29206 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------ HUMPHRIES BARBER SHOP BOBBY'S BARBER SHOP (ROBERT E 653-240 656 01/01/95 12/31/97 12.00 01/01/95 7,872.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ CORMA'S INC. CORMA'S INC. 653-250 799 09/01/93 08/31/98 11.50 09/01/93 9,188.40 12.00 09/01/94 9,588.00 - ------------------------------------------------------------------------------------------------------------------------ HOOLIGAN'S HOOLIGAN'S INC. 653-260 1,802 01/01/97 12/31/01 0.00 0.00 0.00 0.00 11.00 01/01/92 19,821.96 11.50 01/01/95 20,723.04 12.00 01/01/97 21,624.00 13.00 01/01/99 23,426.04 - ------------------------------------------------------------------------------------------------------------------------ NATIONAL BANK OF SC (NBSC) NATIONAL BANK OF SOUTH CAROLI 653-270 3,730 P 06/01/94 05/31/04 11.93 05/01/90 44,484.00 13.46 06/01/94 50,195.04 - ------------------------------------------------------------------------------------------------------------------------ WHISTLESTOP, INC., THE LAVINA S. CHANDLER 653-290 0 K 05/01/96 04/30/97 0.00 05/01/93 10,200.00 - ------------------------------------------------------------------------------------------------------------------------ NATIONSBANK NATIONSBANK 653-300 0 P 04/01/92 12/31/00 0.00 04/01/92 70,908.72 0.00 01/01/96 82,908.72 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied.. 148,574 Current Annual Base Rent 950,831.04 Available. 24,383 Total..... 172,957 - ------------------------------------------------------------------------------------------------------------------------------------ TENANT INFORMATION REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ HUMPHRIES BARBER SHOP BOBBY'S BARBER SHOP (ROBERT E Full 0 Full 0 Full 0 01/01/98 12/31/00 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ CORMA'S INC. CORMA'S INC. PRS 1984 PRS 1984 Full 0 0.00 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ HOOLIGAN'S HOOLIGAN'S INC. Full 0 Full 0 Full 0 01/01/97 12/31/02 0.00 4.00 504,560 01/01/02 12/31/06 0.00 0.04 540,600 0.00 0.04 585,650 0.00 0.04 0 0.00 0.04 0 0.00 0.04 0 - ------------------------------------------------------------------------------------------------------------------------------------ NATIONAL BANK OF SC (NBSC) NATIONAL BANK OF SOUTH CAROLI PRS 1980 PRS 1980 Full 0 06/01/04 05/31/09 0.00 0.00 0 06/01/09 05/31/14 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ WHISTLESTOP, INC., THE LAVINA S. CHANDLER None 0 None 0 Fixed 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ NATIONSBANK NATIONSBANK Full 0 None 0 None 0 01/01/96 12/31/00 0.00 0.00 0 01/01/01 12/31/05 0.00 0.00 0 01/01/06 12/31/10 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Subject Property - Looking Southeast [GRAPHIC OMITTED] Subject Property - Looking East [GRAPHIC OMITTED] Subject Property - Looking Northwest [GRAPHIC OMITTED] Subject Property - Looking Southeast [GRAPHIC OMITTED] Publix Supermarket (under construction) [GRAPHIC OMITTED] Carolina First Bank (Ground Lease) [GRAPHIC OMITTED] NBSC Bank [GRAPHIC OMITTED] Rear of Subject - Looking Northwest [GRAPHIC OMITTED] Rear of Subject Property - Looking East [GRAPHIC OMITTED] Rear of Subject Property - Looking West [GRAPHIC OMITTED] Forest Drive - Looking East [GRAPHIC OMITTED] Forest Drive - Looking West [GRAPHIC OMITTED] Trenholm Road - Looking South [GRAPHIC OMITTED] Trenholm Road - Looking North This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] Market Study WESTERN SQUARE SHOPPING CENTER 1500 West Main Street Laurens, Laurens County, South Carolina Prepared by Michael B. Dodds, MAI, CCIM Date of Market Study - April 29, 1997 [LETTERHEAD OF O. MARSHALL DODDS CO., INC.] May 8, 1997 Mr. Steven R. Maeglin Vice President Morgan Stanley & Company, Inc. 1585 Broadway New York, NY 10036 Re: Market Study Western Square 1500 West Main Street Laurens, Laurens County, South Carolina Dear Mr. Maeglin: At your request, we have completed a market study of the above referenced property. The analysis that forms the basis of the study was conducted by Michael B. Dodds, MAI, CCIM. The subject property and all comparable data were inspected by Michael B. Dodds, MAI, CCIM on May 8, 1997. The study states our opinion of the subject property's market positioning relative to current, as well as anticipated competition, rent and occupancy levels, as well as supporting demographic information relating to age and housing characteristics. This market analysis provides a basis for our opinions which are subject to the various assumptions and limiting conditions set forth in the report. The market study is intended to be a general analysis of the retail market and is not intended to state opinions on the value of the subject property. The property consists of a neighborhood shopping center that contains 80,764 square feet of leasable area. The center was constructed in 1978. The anchor tenant is Bi-Lo, which occupies 30,623 square feet. The shopping center local stores are currently 82.3 percent occupied. A 7,200 square foot store leased to Cato through January, 1999 is currently vacant, as the tenant has relocated to another shopping center. For our market study, we relied on sources specified in the study, as well as site information and tenant rent rolls submitted by the subject owner. We have retained back-up information for review, if necessary. This study can be supplemented by a complete self-contained appraisal report. Respectfully submitted, O. MARSHALL DODDS COMPANY, INC. /s/ Michael B. Dodds, MAI, CCIM ------------------------------- Michael B. Dodds, MAI, CCIM State Certified General Real Estate Appraiser (CG-543) EXECUTIVE SUMMARY - -------------------------------------------------------------------------------- Regional Perspective Laurens is approximately 40 miles south of Greenville and 60 miles northwest of Columbia. The population of Laurens County is approximately 60,800 and the median household effective buying income is $27,558. Laurens County's largest employer is Wal-Mart Distribution Center, which was built in 1988. Total employment is approximately 1,500. Whitten Center, CMI, Inc. and Torrington Co. Each employ over 1,000. Laurens has benefitted from the construction of the BMW manufacturing plant in Greenville. Once known as a textile manufacturing community, Laurens now has a diverse economy. Recently, corporations including Michelin, Consolidated Fabricators, Lacks Industries and Allibert-Inoac have opened facilities in Laurens County. The unemployment rate for Laurens County as of March, 1997 was 4.7 percent while the statewide rate was 5.3 percent. Neighborhood and Site The subject neighborhood is located to the west of the central business district of Laurens. There has been very little new development occurring in the area in recent years, with most of the development being to the east of Laurens, along East Main Street. Land uses in the subject neighborhood include single family and multi family residential, institutional and commercial. The general population of the residential areas surrounding the subject can be described as middle income, and the neighborhood is a desirable place to live. In general, the area is expected to remain stable in the near future, with very little new commercial construction anticipated. Physical features are as follows: 1. Site Size 11.465 Acres 2. Identity TMS#906-04-01-66 - Laurens County 3. Shape Irregular - Adequate 4. Topography Generally level, slight downward slope to the south 5. Accessibility Good 6. Utilities Municipal Physical Description Building features are as follows: 1. Size (net) 80,764 square feet (Bi-Lo occupies 30,623 square feet) 2. Layout & Design 1 story, one building, Design is functional 3. Parking Spaces Approximately 452 5.60 spaces per 1,000 SF of building area 4. Construction Brick and glass front with concrete block on side. Roof is built up composition. 1 Market Position and Marketability Conclusions The subject property is located in the western region of Laurens. There are few traditional shopping centers in this area, with most being on the north and east sides of town. The subject property was built in 1978, and is the primary retail center serving the western side of town. On the date of inspection, the 7,380 square feet of vacant space represented 17.7 percent of the local space and 9.1 percent of the total shopping center space. Recent concessions at the subject have include 2 months free rent on a 3 year lease and 4 months free on a 5 year lease. These terms appear to be typical for the market. During the inspection of the shopping centers in the Laurens market, it was noted that the older shopping centers were in need of repair, with very little renovation work done in recent years. These older centers were also experiencing the highest vacancy levels and had vacant anchor tenant spaces. Vacant anchor tenant stores include Food Town and Roses stores at the Barksdale Square shopping center. There is also a leased but vacant 7,200 square foot Cato store at the subject. Reportedly, Laurens County is interested in purchasing Barksdale Square for office use. The tenant mix at the subject property and the comparables is typical of shopping centers in towns the size of Laurens. Anchor tenants occupying space include Food Lion, Ingles, Winn-Dixie, Eckerds and Revco. Wal-Mart and Lowes occupy freestanding buildings. Tenant turnover at these centers appears to be average, and rental rates have increased slowly but steadily. Several of the centers have office/service related tenants such as finance companies and insurance companies. The rental rates generally range from $5.00 to $10.00 per square foot, with the subject property achieving rates at the middle of this range. The newest retail development in Laurens is a small unanchored strip center which has Cato as its largest tenant. The Cato store at the subject relocated to this center. Other tenants include an insurance agency, Friedmans Jewelers and Pic 'n Pay Shoes. The center is located at the intersection of East Main Street and State Highway #127. Officials with the Laurens County Assessors office stated that a retail development is to be developed on East Main Street near the Wal-Mart. The center will be anchored by a Moore's Department Store and a sporting goods store. The size of the development was not available. In summary, the subject property is considered to be a desirable center in an area of Laurens that has no other shopping centers. Visibility from West Main Street is good, and the property is in average condition. The subject property should continue to command rental rates at the middle of the range, although aggressive leasing efforts will be required. Trends Much of the new construction that has occurred in Laurens is located along East Main Street, on the opposite side of town from the subject. The subject property is located in an area of Laurens that has experienced very little growth in recent years. Because the subject property is the only shopping center in the immediate area, it is believed that the subject will maintain an occupancy level similar to the current level in the near future. This is due to the residential population base on the west side of Laurens. Rental rates for the local shops at the subject are not expected to increase substantially, and concessions will most likely be required. 2 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================ I. COMPARABLE PROPERTIES A PROPERTY DESCRIPTION ---------------------
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Western Square Laurens Plaza Barksdale Square ------------------------ ------------------------ ------------------------- b. Street 1500 W. Main Street Hillcrest Drive Hillcrest Drive ------------------------ ------------------------ ------------------------- c. City Laurens, SC Laurens, SC Laurens, SC ------------------------ ------------------------ ------------------------- d. Distance from subject N/A 2.0 -2.5 miles 2.0 -2.5 miles ------------------------ ------------------------ ------------------------- e. Contact Edens & Avant John Abney Furman Company ------------------------ ------------------------ ------------------------- f. Phone (803)779-4420 (803)779-4420 (800)948-6367 ------------------------ ------------------------ ------------------------- 2. Attributes a. Year built 1988 N/A 1975+/- ------------------------ ------------------------ ------------------------- b. Net sq. Ft. 80,764 116,162 69,990 ------------------------ ------------------------ ------------------------- c. # building One One One ------------------------ ------------------------ ------------------------- d. #stories One One One ------------------------ ------------------------ ------------------------- e. Avg. Floor plate size N/A N/A N/A (sq. Ft.), if office ------------------------ ------------------------ ------------------------- f. # elevators N/A N/A N/A ------------------------ ------------------------ ------------------------- g. Parking Adequate Adequate Adequate ------------------------ ------------------------ ------------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block Brick/Concrete Block ------------------------ ------------------------ ------------------------- I. Vacancy % 17.7% 18+/- % locals 88.6 % overall ------------------------ ------------------------ ------------------------- j. Anchors, if Retail Bi-Lo Food Lion Eckerd Sears ------------------------ ------------------------ -------------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name Ingles Plaza Cato Center ---------------------- ----------------------- b. Street Hwy #76 By-Pass US #76 @ SC #127 ---------------------- ----------------------- c. City Laurens, SC Laurens, SC ---------------------- ----------------------- d. Distance from subject 4 miles 4 miles ---------------------- ----------------------- e. Contact Garrett & Garrett Cleveland White ---------------------- ----------------------- f. Phone (864)862-3501 (803)583-4287 ---------------------- ----------------------- 2. Attributes a. Year built 1976 1997 ---------------------- ----------------------- b. Net sq. Ft. 85,000 17,455 ---------------------- ----------------------- c. # building One One ---------------------- ----------------------- d. #stories One One ---------------------- ----------------------- e. Avg. Floor plate size N/A N/A (sq. Ft.), if office ---------------------- ----------------------- f. # elevators N/A N/A ---------------------- ----------------------- g. Parking Adequate Adequate ---------------------- ----------------------- h. Construction Type Brick/Concrete Block Brick/Concrete Block ---------------------- ----------------------- I. Vacancy % 50.4 % locals 0% ---------------------- ----------------------- j. Anchors, if Retail Ingles, Farmers Cato Furniture ---------------------- ----------------------- Comments: Vacant space at comparable #1 is in a poor location in the center and has very limited visibility. Laurens County is negotiating to purchase comparable #2 for office space. While this would remove 69,990 SF from the retail market, the agent stated that they have not been aggressively marketing the center recently. Comparable #3 has minimal local space, with the smallest tenant occupying 7,500 SF. Comparable #4 has no true anchor tenant, although is 100 percent leased. 3 PROPERTY INSPECTION FORM COMMERCIAL ================================================================================ B. RENTAL INFORMATION
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A N/A ------------------------ ------------------------ ------------------------ b. Shop Space $7.00 - $9.00 $5.00 - $6.00 $3.00 - $4.00 ------------------------ ------------------------ ------------------------ 2. Lease Type (Gross/Net) Triple Net Triple Net Triple Net ------------------------ ------------------------ ------------------------ 3. Rent Concessions Minimal Minimal None ------------------------ ------------------------ ------------------------ 4. Effective Rent $7.00 - $9.00 $5.00 - $6.00 $3.00 - $4.00 ------------------------ ------------------------ ------------------------ 5. TI Allowance None None None ------------------------ ------------------------ ------------------------ 6. Expense Stop None None None ------------------------ ------------------------ ------------------------ 7. Length of Lease Term 3 - 5 years (shops) 1 - 5 years (shops) 1 - 3 years (shops) ------------------------ ------------------------ ------------------------ 8. Commissions 5.00% - 7.00% 5.00% - 7.00% 5.00% - 7.00% ------------------------ ------------------------ ------------------------ 9. Percentage Rent Bi-Lo, Revco None None (per lease terms) ------------------------ ------------------------ ------------------------ 10. Historical Annual N/A N/A N/A Absorption/sq.ft. ------------------------ ------------------------ ------------------------ 11. Annual Operating N/A N/A N/A Expense psf (Including taxes) ------------------------ ------------------------ ------------------------ C. RANK RELATIVE TO SUBJECT (inferior, Similar Inferior similar, superior) ------------------------ ------------------------ ------------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Asking Rental Rate a. Anchor Space N/A N/A --------------------- -------------------- b. Shop Space $4.00 $8.00 - $11.00 --------------------- -------------------- 2. Lease Type (Gross/Net) Triple Net Triple Net --------------------- -------------------- 3. Rent Concessions None None --------------------- -------------------- 4. Effective Rent $4.00 $8.00 - $11.00 --------------------- -------------------- 5. TI Allowance None None --------------------- -------------------- 6. Expense Stop None None --------------------- -------------------- 7. Length of Lease Term 1 - 5 years (shops) 3 -5 years (shops) --------------------- -------------------- 8. Commissions 5.00% - 7.00% 5.00% --------------------- -------------------- 9. Percentage Rent None None (per lease terms) --------------------- -------------------- 10. Historical Annual N/A N/A Absorption/sq.ft. --------------------- -------------------- 11. Annual Operating N/A $1.25 Expense psf (Including taxes) --------------------- -------------------- C. RANK RELATIVE TO SUBJECT (inferior, Similar Superior similar, superior) --------------------- -------------------- D. EXPLAIN RANKING/COMMENTS: Leasing commissions are typically cashed out in this market. Comparable #3 rental rate is for the entire 9,000 square feet with negotiable concessions. Comparable #4 is new, and of superior quality construction. 4 LOCAL RENTAL COMPARABLES Comparable Rental No. 1 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Laurens Plaza Location: Hillcrest Drive @ Caroline Street Laurens, SC Year Built: N/A Total Size: 116,162 SF Vacant Space: 14,600+/- SF Vacancy Rate: 18+/-% (Locals) Rental Range: $5.00 - $6.00/SF Tenant Expenses: Triple Net Remarks: A Food Lion is the anchor tenant and there three local stores available for lease. Other tenants include a Sears and Carolina Tire. The center is in average condition for its age. Good visibility and accessibility from Hillcrest Drive. The available local shops are located in an area of the building which offers no visibility to the storefronts, and will be difficult to lease. An 11,000 SF space that was previously occupied by a nightclub has no storefront. 5 Comparable Rental No. 2 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Barksdale Square Location: Hillcrest Drive near Church Street Laurens, South Carolina Year Built: 1975+/- Total Size: 69,990 SF Vacant Space: 62,000+/- SF Vacancy Rate: 88.6% overall Rental Range: $3.00 - $4.00/SF Tenant Expenses: Triple Net Remarks: This neighborhood center has its two largest space vacant. They were previously occupied by Roses and Food Town. Eckerd Drug is the only remaining tenant. The parking lot is in poor condition and the building is in below average condition for its age. The property is not considered to be direct competition for the subject. Reportedly, Laurens County is negotiating to purchase this property for office use. 6 Comparable Rental No. 3 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Ingles Plaza Location: Highway #76 By-Pass Laurens, South Carolina Year Built: 1961 Total Size: 85,000 SF Vacant Space: 9,000+/- SF Vacancy Rate: 50.4+/- % Rental Range: $4.00/SF Tenant Expenses: Triple Net Remarks: The anchor tenants are Ingles (25,792 SF) and Farmers Furniture(41,345 SF). Other tenants include, Dollar General and Sherwin Williams. The property is an established center in a desirable neighborhood. The available 9,000 square foot space is a portion of a larger space that was once occupied by Sky City. The depth of the space would make it functional for a single user, and subdividing it further would limit the marketability. The property overall is in average condition. 7 Comparable Rental No. 4 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Cato Shopping Center Location: US #76 at SC #127 Laurens, South Carolina Year Built: 1997 Total Size: 17,455 SF Vacant Space: 0 SF Vacancy Rate: 0% total Local Rent Range: $8.00 - $11.00 Tenant Expenses: Triple Net Remarks: This strip center is the newest retail development in the Laurens area. The property is in excellent condition, and the shops are full. No deferred maintenance was noted. The largest tenant is Cato, which relocated from the subject property. 8 PROPERTY INSPECTION FORM COMMERCIAL II. SALES COMPARABLE
SUBJECT COMPARABLE 1 COMPARABLE 2 ------- ------------ ------------ 1. Identification a. Name Western Square St. Andrews Crossing Eastgate Center ------------------------ ------------------------ -------------------------- b. Street Address 1500 West Main St. 817 St. Andrews Road NWC Whiskey Rd. & Eastgate Dr. ------------------------ ------------------------ -------------------------- c. City Laurens, SC Columbia, SC Aiken, SC ------------------------ ------------------------ -------------------------- d. Distance from Subject N/A 60 miles 100 miles ------------------------ ------------------------ -------------------------- 2. Attributes a. Year Built 1988 1994 1995 ------------------------ ------------------------ -------------------------- b. Net sq. feet 80,764 66,910 75,716 ------------------------ ------------------------ -------------------------- c. # Buildings 1 1 1 ------------------------ ------------------------ -------------------------- d. # of Stories 1 1 1 ------------------------ ------------------------ -------------------------- e. Vacancy % 17.7% (locals) 0.0% 5.0% ------------------------ ------------------------ -------------------------- 3. Sales Information a. Sales Price N/A $6,550,000 $6,675,000 ------------------------ ------------------------ -------------------------- b. Sales Price PSF N/A $97.89 $88.16 ------------------------ ------------------------ -------------------------- c. Cap. Rate N/A 9.69% 9.86% ------------------------ ------------------------ -------------------------- d. Date N/A May 24,1994 September 28, 1995 ------------------------ ------------------------ -------------------------- e. NOI at time of Sale N/A $634,797 $657,896 ------------------------ ------------------------ -------------------------- 4. Rank Relative to Subject N/A Superior Superior (inferior, similar, superior) ------------------------ ------------------------ --------------------------
COMPARABLE 3 COMPARABLE 4 ------------ ------------ 1. Identification a. Name One Norman Center Paw Creek Commons ---------------------- ----------------------- b. Street Address 19706 One Norman E/S Little Rock Rd. At Blvd. Freedom Drive ---------------------- ----------------------- c. City Cornelius, NC Charlotte, NC ---------------------- ----------------------- d. Distance from Subject 90 miles 90 miles ---------------------- ----------------------- 2. Attributes a. Year Built 1993 1996 ---------------------- ----------------------- b. Net sq. feet 54,185 66,050 ---------------------- ----------------------- c. # Buildings 1 1 ---------------------- ----------------------- d. # of Stories 1 1 ---------------------- ----------------------- e. Vacancy % 0.0% 2.73% ---------------------- ----------------------- 3. Sales Information a. Sales Price $4,650,000 $5,120,000 ---------------------- ----------------------- b. Sales Price PSF $85.82 $77.52 ---------------------- ----------------------- c. Cap. Rate 9.68% 9.60% ---------------------- ----------------------- d. Date October 12, 1995 March 25, 1997 ---------------------- ----------------------- e. NOI at time of Sale $450,188 $517,412 ---------------------- ----------------------- 4. Rank Relative to Subject Superior Superior (inferior, similar, superior) ---------------------- --------------------- Explain Ranking/Comments: The comparable sales are all superior to the subject property with respect to location and condition. The subject property has a higher vacancy rate than the comparables also. No sales of shopping centers in Laurens were discovered. 9 Comparable Sale No. 1 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] TMS: 6012 -1 -1 Name: St. Andrews Crossing Location: 817 St. Andrews Road, Columbia, SC Grantor: Hayley-Redd, L.P. Grantee: F.A.C. Properties Deed Reference: Book 1199, Page 331 Date: May 25, 1994 Sales Price: $6,550,000 Adjusted Sales Price: $6,550,000 Size building 66,910 Sales Price per S.F.: $97.89 Size Land (Acres): 8.08 Size Land (S.F.): 351,965 Year Built: 1994 Land/Building Ratio: 5.26 to 1 Utilities: All Available Zoning: Commercial Financing: At Market Effective Gross Income: $686,905 EGIM: 9.54 Net Operating Income: $634,797 Overall Rate: 9.69% Verification: Public Records Type of Purchaser: Private Investor Comments: This is an arms length sale of a neighborhood shopping center anchored by Kroger in a good commercial area with good accessibility and fair exposure. Construction is brick veneer/concrete block. 10 Comparable Sale No. 2 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: Eastgate Shopping Center Location: Northwest Corner of Whiskey Road & Eastgate Drive Aiken, SC Grantor: Southwest U.S. Retail, LP Grantee: PDG Aiken Partners, LP Date: September 28, 1995 Sales Price: $6,675,000 Adjusted Sales Price: $6,675,000 Size building: 75,716 Sales Price per S.F.: $88.16 Size Land (Acres): 8.79 Size Land (S.F.): 382,892 Year Built: 1995 Land/Building Ratio: 5.06 to 1 Utilities: All Available Zoning: Commercial Financing: Cash to Seller Gross Potential Income: $782,704 Effective Gross Income: $782,704 EGIM: 8.53 Net Operating Income: $657,896 Overall Rate: 9.86% Verification: Public Records Type of Purchaser: Private Investor Comments: Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall. Publix is the major tenant occupying 57,348 square feet (75.7 percent). Most of the local tenants are on 5 year leases, with rental rates generally ranging from $8.00 to $13.00 per square foot. This is a neighborhood shopping center with stucco and brick exterior that was constructed in early 1995. Parking is considered adequate. The occupancy at the time of sale was 95 percent. 11 Comparable Sale No. 3 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Name: One Norman Center Location: 19706 One Norman Boulevard Cornelius, Mecklenburg County, NC Grantor: One Norman Center, LP Grantee: Lucky Realty Deed Reference: Book 8325, Page 721 Date: October 12, 1995 Sales Price: $4,650,000 Adjusted Sales Price: $4,650,000 Size building: 54,185 Sales Price per S.F.: $85.82 Size Land (Acres): 5.69 Size Land (S.F.): 247,856 Year Built: 1993 Land/Building Ratio: 4.57 to 1 Utilities: All Public Zoning: CUB-2 Financing: Cash to Seller Gross Potential Income: $474,591 - $8.76/SF Effective Gross Income: $474,591 - $8.76/SF Gross Income Multiple: 9.80 EGIM: 9.80 Net Operating Income: $450,188 - $8.31/SF Overall Rate: 9.68% Verification: Public Records Type of Purchaser: Private Investor Comments: This is a neighborhood center with Bi-Lo as the major tenant (42,680 SF). Locals include Blockbuster Video, El Cancun Restaurant, Papa John's Pizza, Baskin Robbins. The rent for Bi-Lo is $8.25 per square foot; local shops range from $10.50 to $13.00 per square foot on a triple net basis. 12 Comparable Sale No. 4 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] TMS: 59-231-22,23 pt. Name: Paw Creek Commons Location: East side of Little Rock Road at Freedom Drive Grantor: Paw Creek, LLC Grantee: Paw Creek Crossing Limited Partnership Deed Reference: Book 8988, Page 519 Date: March 25, 1997 Sales Price: $5,120,000 Adjusted Sales Price: $5,384,000 Size building: 66,050 Sales Price per S.F.: $77.52 Size Land (Acres): 9.82 Size Land (S.F.): 427,759 Year Built: 1996 Land/Building Ratio: 6.48 to 1 Utilities: Municipal Zoning: CC, Commercial Center Financing: Cash to Seller Gross Potential Income: $568,840 Effective Gross Income: $552,054 EGIM: 9.27 Net Operating Income: $517,412 Overall Rate: 9.61% Verification: Public Records Type of Purchaser: Private Investor Comments: The contract for subject was pre-construction. The sales price has been adjusted to reflect this by using 50 basis points in the capitalization rate (.1011 minus .0050 equals .0961). The major tenants are Winn-Dixie and Revco. Blockbuster occupies a store containing 5,500 square feet at $11.20 per square foot. Rents on shops range from $13.00 to $14.00 per square foot. The income from anchor tenants is 79.41 percent of gross income. 13 ADDENDA o Comparables Rental Map o Comparables Sales Map o Building Layout o Rent Roll o Photographs of Subject 14 [GRAPHIC OMITTED] Comparable Rental Map [GRAPHIC OMITTED] Improved Sales Map [GRAPHIC OMITTED] Site Plan EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 15 Property: WESTERN SQUARE (LAURENS) 1500 WEST MAIN STREET LAURENS, SC 29360-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- LADIES HEALTH QUEST, INC. LADIES HEALTH QUEST, INC. 608-10 1,500 02/01/97 03/31/00 6.50 4/01/97 9,750.00 0.00 0.00 7.50 4/01/98 11,250.00 - ------------------------------------------------------------------------------------------------------------------------- CLASSIC BOUTIQUE, THE COLUMBUS M. STEPHENS 608-15 1,500 04/01/96 03/31/99 6.25 07/01/96 9,375.00 - ------------------------------------------------------------------------------------------------------------------------- BI-LO #267 BI-L0, INC. 608-20 30,623 02/23/92 02/22/12 7.25 03/01/92 222,016.80 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- HOUSE OF PIZZA MOHAMMAD H./FAROUG/TEISIR FAR 608-30 2,266 01/01/95 12/31/99 5.25 09/01/90 11,904.00 6.25 01/01/95 14,162.52 6.50 01/01/98 14,729.04 - ------------------------------------------------------------------------------------------------------------------------- MOVIE GALLERY MGA, INC. 608-40 4,520 02/01/96 03/31/99 6.00 04/01/96 27,120.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- REVCO #1279 REVCO DISCOUNT DRUG CENTERS, 608-50 8,450 03/01/92 02/28/02 0.00 0.00 5.25 03/01/92 44,362.56 - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ----------------------------------------------------------------------------------------------------------------------------------- LADIES HEALTH QUEST, INC. LADIES HEALTH QUEST, INC. Full 0 Full 0 Full 0 04/01/00 03/31/03 8.00 0.00 0 0.00 0.00 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- CLASSIC BOUTIQUE, THE COLUMBUS M. STEPHENS Full 0 Full 0 Full 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- BI-LO #267 BI-L0, INC. Full 0 Full 0 Full 0 02/23/12 02/22/17 0.00 1.00 22,201,700 Y 02/23/17 02/22/22 0.00 1.00 0 Y 02/23/22 02/22/27 0.00 1.00 0 Y 02/23/27 02/22/32 0.00 1.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- HOUSE OF PIZZA Full 0 Full 0 Full 0 0.00 5.00 237,930 MOHAMMAD H./FAROUG/TEISIR FAR 0.00 5.00 0 0.00 5.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ MOVIE GALLERY MGA, INC. Full 0 Full 0 Full 0 04/01/99 03/31/02 6.50 0.00 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ REVCO #1279 REVCO DISCOUNT DRUG CENTERS, PRS 1980 PRS 1983 Fixed 0 03/01/02 02/28/07 5.50 2.00 0 Y 03/01/07 02/28/12 5.75 2.00 2,218,100 Y - ------------------------------------------------------------------------------------------------------------------------------------
EDENS & AVANT, INC. Retail Custom Rent Roll Date: 04/08/97 Page 16 Property: WESTERN SQUARE (LAURENS) 1500 WEST MAIN STREET LAURENS, SC 29360-0000 Column Legends: Tenant/Property MISC column: K - Kiosk / P - Perimeter Tenant Renewal Options TYP Column: TBD - To be Determined CPI - Consumer Price Index
- ------------------------------------------------------------------------------------------------------------------------- TENANT AND PROPERTY INFORMATION LEASE TERM RENT INFORMATION per Annual Tenant Name Unit # Sq Feet Misc From To MTM SF/YR Begin Base Rent - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- J.D. FASHIONS CHONG O. CHO 608-60 7,275 12/01/95 03/31/00 3.44 04/01/96 24,999.96 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------- CATO #199 608-70 7,200 11/01/93 01/31/99 0.00 0.00 3.00 05/01/94 21,600.00 0.00 0.00 0.00 0.00 6.50 05/01/95 46,800.00 - ------------------------------------------------------------------------------------------------------------------------- DOLLAR GENERAL #2964 DOLGENCORP, INC. 608-80 7,500 10/01/96 09/30/97 2.40 11/01/93 18,000.00 - ------------------------------------------------------------------------------------------------------------------------------------ Available 608-90 3,330 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ Available 608-100 4,050 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ SPARKY'S LAUNDROMAT JOYCE W/ CHARLES B. WATTS D/B 608-110 2,550 10/01/93 09/30/98 0.00 0.00 4.71 11/01/88 12,000.00 5.18 10/01/93 13,200.00 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ TENANT AND PROPERTY REIMBURSEMENTS RENEWAL OPTIONS PERCENT RENT Tax Base Ins Base CAM Base per Pcnt of Amount Nat Tenant Name Recov Year Recov Year Recov Year Begin End SF/YR Typ Over Brk - ------------------------------------------------------------------------------------------------------------------------------------ J.D. FASHIONS CHONG O. CHO Full 0 Full 0 Full 0 04/01/00 03/31/03 0.00 6.00 416,700 Y 0.00 6.00 0 Y - ----------------------------------------------------------------------------------------------------------------------------------- CATO #199 Full 0 Full 0 Full 0 02/01/99 01/31/04 7.00 4.00 1,170,000 02/01/04 01/31/09 7.50 4.00 1,260,000 02/01/09 01/31/14 8.00 4.00 1,350,000 02/01/14 01/31/19 8.50 4.00 1,440,000 0.00 4.00 1,530,000 - ----------------------------------------------------------------------------------------------------------------------------------- DOLLAR GENERAL #2964 DOLGENCORP, INC. PRS 1993 PRS 1993 Full 0 0.00 3.00 600,000 - ----------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - ----------------------------------------------------------------------------------------------------------------------------------- Available 0 0 0 0.00 0.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ SPARKY'S LAUNDROMAT JOYCE W/ CHARLES B. WATTS D/B PRS 1987 PRS 1987 Full 0 10/01/98 09/30/03 0.00 5.00 200,000 0.00 5.00 0 0.00 5.00 0 - ------------------------------------------------------------------------------------------------------------------------------------ Square Feet: Occupied. 73,384 Current Annual Base Rent 429,786.84 Available 7,380 Total.... 80,764
PHOTOGRAPHS OF SUBJECT PROPERTY [GRAPHIC OMITTED] Subject Property - Looking North [GRAPHIC OMITTED] Subject Property - Looking East [GRAPHIC OMITTED] Subject Property - Looking Northeast [GRAPHIC OMITTED] Subject Property - Looking Northeast [GRAPHIC OMITTED] Rear of Subject - Looking West [GRAPHIC OMITTED] West Main Street - Looking East [GRAPHIC OMITTED] West Main Street - Looking West This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. APPRAISAL OF KEYSTONE AT THE CROSSING FASHION MALL INDIANAPOLIS, INDIANA AS OF MARCH 18, 1997 PREPARED FOR MORGAN STANLEY MORTGAGE CAPITAL, INC. 1585 BROADWAY, 37TH FLOOR NEW YORK, NY 10036 PREPARED BY LANDAUER ASSOCIATES, INC. 666 FIFTH AVENUE NEW YORK, NEW YORK 10103 [LETTERHEAD OF LANDAUER REAL ESTATE COUNSELORS] April 15, 1997 Mr. Shirish Godbole Morgan Stanley Mortgage Capital, Inc. 1585 Broadway, 37th Floor New York, NY 10036 Re: Keystone at the Crossing Fashion Mall Indianapolis, Indiana Dear Mr. Godbole: As directed, we have made an appraisal of the above-captioned property. The subject property is a regional shopping center which contains about 682,912 square feet situated on 48.155 acres. The entire mall area is under a ground lease which terminates on October 31, 2067. The improvements were first completed in 1973 but were expanded over a period of time to 1992. Owned square footage includes: 249,721 square feet in two anchor department stores, 349,222 square feet of enclosed mall area, seven outlot ground leases with six restaurants containing 54,829 square feet and a strip center containing 29,140 square feet. The two mall anchors include: Jacobson's Department Store (119,555 square feet) and Parisian Department Store (129,721 square feet). The purpose of this self-contained appraisal report is to estimate the Market Value of the Leasehold Interest in the real property described herein, subject to the existing leases and encumbrances, and the general and specific assumptions and limiting conditions as discussed in the attached report. The estimate of Market Value is made as of March 18, 1997. It is assumed that physical and economic conditions affecting the property at the valuation date are the same as those existing at the date of our inspection. John P. Baker personally inspected the subject property on March 18, 1997. James C. Kafes, Kevin D. Gray, and Paul F. Engel did not inspect the property. The attached report includes our analysis of the property and market information, and a detailed explanation of the appraisal procedures used for valuation. This report has been made in conformity with the requirements of the Code of Professional Ethics of the Appraisal Institute and the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation. This appraisal report was also prepared in accordance with the appraisal policies and guidelines set forth by Morgan Stanley Mortgage Capital, Inc. A Summary of Salient Facts and Conclusions is presented on page 1 followed by the Certification and Assumptions and Limiting Conditions that may limit or qualify the value estimates presented herein. LANDAUER REAL ESTATE COUNSELORS Morgan Stanley Mortgage Capital, Inc. April 15, 1997 Page Two Based upon our analysis, we estimate the Market Value of the Leasehold Estate in Keystone at the Crossing Fashion Mall, assuming a marketing period of 9 to 12 months, subject to the existing leases and the assumptions and limiting conditions contained in this report, as of March 18, 1997, to be: ONE HUNDRED SIXTEEN MILLION DOLLARS $116,000,000 A summary of our analyses, opinions, and conclusions is contained in the following report, of which this letter is a part. Thank you for the opportunity to be of service. Respectfully submitted, LANDAUER ASSOCIATES, INC. /s/ James C. Kafes /s/ Kevin D. Gray James C. Kafes, MAI, CRE Kevin D. Gray, CRE Executive Managing Director Managing Director /s/ Paul F. Engel /s/ John P. Baker Paul F. Engel John P. Baker, MAI Managing Director Director Certified Indiana Appraiser License #CG69201411 JCK/JIW/KDG/JPB:mjk LAI File No. C-141-971/7141 LANDAUER REAL ESTATE COUNSELORS TABLE OF CONTENTS Page Summary of Salient Facts and Conclusions.....................................1 Assumptions and Limiting Conditions..........................................3 Certification................................................................8 Nature of the Appraisal......................................................9 Identification of the Property and Interest Appraised....................9 Purpose, Function and Date of Appraisal.................................10 Scope of the Appraisal..................................................11 History of Property.....................................................11 Estimated Marketing Period..............................................15 Indianapolis Area Analysis..................................................17 Population..............................................................18 Households..............................................................18 Income..................................................................19 Retail Sales............................................................20 Employment..............................................................21 Unemployment............................................................23 Housing Starts..........................................................23 Transportation..........................................................24 Conclusion..............................................................25 Neighborhood Analysis.......................................................27 Retail Market Overview......................................................29 Overview................................................................29 Trade Area Delineation..................................................30 Demographic and Economic Data...........................................31 Demographics, Household Income, Disposable Income.......................31 Expenditure Potential...................................................32 Indianapolis Retail Sales...............................................33 Competing Mall Sales....................................................33 Mall Store Sales........................................................34 Anchor Store Sales......................................................35 Conclusion..............................................................35 Competitive Retail Analysis.............................................36 Conclusion..............................................................39 LANDAUER REAL ESTATE COUNSELORS TABLE OF CONTENTS (Cont'd) Page Property Description........................................................40 Site Analysis...........................................................40 Zoning..................................................................41 Real Estate Taxes.......................................................41 Improvements............................................................41 Highest and Best Use........................................................46 As If Vacant............................................................46 As Improved.............................................................46 Valuation Methodology.......................................................47 Cost Approach...............................................................49 Sales Comparison Approach...................................................50 Elements of Comparison..................................................52 Applicability of Adjustments............................................54 Analysis and Interpretation of Data.....................................54 Direct Comparison Method................................................55 Sale/Price Ratio Method.................................................55 Income Approach.............................................................57 Discounted Cash Flow ("DCF") Analysis Assumptions.......................57 Revenue.................................................................62 Expenses................................................................65 Occupancy Costs.........................................................68 Capital Items...........................................................68 Cash Flow...............................................................71 Discounted Cash Flow Analysis...........................................72 Rate Selection..........................................................73 Valuation by Discounted Cash Flow Analysis..............................75 Market Value Analysis as of March 18, 1997..............................76 LANDAUER REAL ESTATE COUNSELORS TABLE OF CONTENTS (Cont'd) Page Correlation and Conclusion .................................................78 ADDENDA Legal Description Photographs of Subject Property Ground Lease Summary Leasing Plan Real Estate Taxes Rental Rates Retail Sales Occupancy Costs Lease Abstract Reports Professional Qualifications LANDAUER 1 REAL ESTATE COUNSELORS SUMMARY OF SALIENT FACTS AND CONCLUSIONS Property Identification: Keystone at the Crossing Fashion Mall Indianapolis, Indiana Location: Northeast quadrant of Keystone Avenue and 86th Street, Indianapolis, Indiana. Improvements/Site: The subject property is a modern enclosed regional mall with two anchor department stores. The original construction was in 1973, and was expanded at various times to 1992. The entire site is on a ground lease that extends into 2067. The improvements consist of a 682,912 square foot regional shopping center situated on a site of approximately 48.155-acres. Fashion Mall Drive separates the mall into two parcels with Jacobson's on the east and Parisian on the west. The eastern parcel has been named Guinevere after the name of the ownership entity. Included with the Guinevere parcel are Jacobson's, enclosed mall shops, four outlot restaurants and a strip center which is located south of 86th Street. The western parcel has been named Galahad and includes Parisian, enclosed mall shops and two outlot restaurants and an outlot bank facility. In total, the improvements include the two anchors (249,721 square feet), enclosed mall shops (349,222 square feet), strip center (29,140 square feet) and seven outlots (35,829 square feet). Jacobson's Department Store contains 120,000 square feet and Parisian contains 129,721 square feet. Additionally, two multi-level parking structures are connected to the Fashion Mall. Zoning: C-4, Community-Regional Commercial District Occupancy: The Fashion Mall enclosed shops are 87.2 percent leased and occupied with permanent enclosed mall tenants (excludes the anchor stores, strip center and outlots). The strip center has two vacancies and an occupancy of 91.2 percent. Highest and Best Use: Present Use; Regional Mall LANDAUER 2 REAL ESTATE COUNSELORS Interest Appraised: Leasehold Interest, subject to the existing and pending tenant leases and assumptions and limiting conditions stated herein. Date of Valuation: March 18, 1997 Date of Inspection: March 18, 1997 Market Value Indications Cost Approach: Not Applicable Sales Comparison Approach: $105,000,000 to $123,000,000 Income Approach: $116,000,000 Final Value Conclusion: $116,000,000 LANDAUER 3 REAL ESTATE COUNSELORS ASSUMPTIONS AND LIMITING CONDITIONS This appraisal report has been made with the following general assumptions: o Title to the property is assumed to be good and marketable unless otherwise stated. No responsibility is assumed for the legal description or any legal matter. The property is considered to be under responsible ownership, management, subject to responsible leasing efforts, and free of all liens and encumbrances except as specifically discussed herein. o The definition of value, together with other definitions and assumptions on which our analyses are based are set forth in appropriate sections of this report and are to be part of these General Assumptions as if included here in their entirety. o The information furnished to the appraisers by the client and others, as contained in this report, is considered to be from reliable sources and, where feasible, has been verified; however, no responsibility is assumed for the accuracy of the information. The appraisers reserve the right to modify the value conclusion should the accuracy of that information change subsequent to delivery of this report. o All engineering is assumed to be correct. o It is assumed that there are no hidden or unapparent conditions in the property, soil, subsoil, or structures which would render the property more or less valuable. No responsibility is assumed for such conditions or for arranging for engineering which would be required to discover them. All materials used in the structures on the appraised property are assumed to be free of asbestos, toxic materials, or any other potential health risks unless otherwise so stated and identified herein. No opinion is expressed on structural or mechanical conditions. o Landauer has reviewed and relied upon the tenant leases or abstracts provided by the client. LANDAUER 4 REAL ESTATE COUNSELORS o It is assumed that there is full compliance with all applicable federal, state and local environmental regulations and laws, that all applicable zoning and use regulations and restrictions have been complied with, unless a non-conformity has been stated, defined and considered in the appraisal report. o It is assumed that all required licenses, certificates of occupancy, legislative or administrative consents from any local or national governmental or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based. o It is assumed that the utilization of the land and/or improvements is within the boundaries or property lines of the property described herein and that there is no encroachment or trespass unless noted within the report. The appraisal report has been made with, and is subject to, the following general limiting conditions: o The appraisers herein, by reason of this appraisal report, are not required to give further consultation, testimony or to be in attendance in court or at any governmental or other hearing with reference to the property without prior arrangements having been made relative to such additional employment. o The distribution, if any, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and buildings must not be used in conjunction with any other appraisal and are invalid if so used. o Use and disclosure of the contents of this report is governed by the bylaws and regulations of the Appraisal Institute. LANDAUER 5 REAL ESTATE COUNSELORS o The client may show the reports in their entirety to interested parties outside its organization. Furthermore, the client may reference Landauer as its appraiser of record and the limited reports in their entirety only in any registration statement, prospectus, proxy materials, other offering materials or other communication (whether oral or written) distributed to third parties, subject to Landauer's prior written consent to any such reference. It is the understanding of Landauer that among the uses of the reports will be the disclosure of their contents in offering materials for the sale of securities and in various filings pursuant to state and federal securities laws. o This appraisal report is based upon and supported by available factual economic and market data and our interpretation of market conditions as of the date of the appraisal. Though we believe that our assumptions and forecasts are well supported, we cannot be held responsible for events which may alter market and property conditions between the date of inspection and the effective date of the opinion of value. o The information furnished to the appraisers by the client and others, as contained in this report, is considered to be from reliable sources; however, no responsibility is assumed for its accuracy. The appraisers reserve the right to modify the value conclusion should the accuracy of that information change subsequent to delivery of this appraisal report. o The Americans with Disabilities Act ("ADA") became effective January 26, 1992. Landauer has not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the property. Since we have no direct evidence relating to this issue, we did not consider possible non-compliance with the requirements of ADA in estimating the value of the property. LANDAUER 6 REAL ESTATE COUNSELORS The appraisal report has been made with, and is subject to, the following specific limiting conditions. o We have relied upon information supplied by the property manager and the owner. Additional details including landlord's tenant finish contribution, environmental reports, and some lease amendments were not provided. o A legal description and ground lease summary were provided for the appraisal. A survey was provided, which identifies the site area as 48.155 acres. The ground lease summary cites 47.394 acres. The difference between the two areas is 0.761 acres or 1.6 percent of the total area identified in the survey. For the appraisal, we have assumed the site area contains 48.155 acres as shown in the survey. The survey was quite large and if reduced to a size to be included in the appraisal, it would be unreadable. For this reason, it is not included in the appraisal but is retained in our files. The legal descriptions for the subject are included in the Addenda. o We have used a rent roll, leases and verbal confirmation of occupancy and tenant retention as the basis for our estimate of potential gross income. o In concluding operating expenses, we have relied upon 1995 actual, 1996 year end projections and the 1997 operating budget. o From the information provided, there appears to be one expense recovery method based on the tenant's pro rata share of gross leasable area (GLA) which is used to calculate tenant recoveries. In the appraisal, the basic recovery method is applied for the enclosed mall tenants and plaza tenants. Special recovery methods as stated in the leases were applied to the anchor and outlot tenants and some specific mall tenants. LANDAUER 7 REAL ESTATE COUNSELORS o It is assumed that the anchor tenants will not vacate during the analysis period. o Special Limiting Conditions are also stated in various portions of the Self-Contained Appraisal Report and are to be carefully noted in accepting the limited restricted appraisal report. LANDAUER 8 REAL ESTATE COUNSELORS CERTIFICATION The undersigned certify to the best of their knowledge and belief that: The statements of fact contained in this appraisal report and upon which the analyses, opinions and conclusions expressed herein are based are true and correct. This report is made subject to the Assumptions and Limiting Conditions set forth on the following pages which set forth all of the limiting conditions (imposed by the terms of the assignment or by the appraisers) affecting the analyses, opinions and conclusions contained in this report. Employment and compensation for making this appraisal are not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the attainment of a stipulated result, or the occurrence of a subsequent event. We have no direct or indirect current or prospective personal interest or bias in the subject matter of this appraisal report or to the parties involved. The appraisal assignment was not based on a requested minimum valuation, a specific valuation, or the approval of a loan. This report has been performed in accordance with the Uniform Standards of Professional Appraisal Practice as promulgated by the Appraisal Standards Board of the Appraisal Foundation adopted by the Appraisal Institute, and the Code of Professional Ethics of the Appraisal Institute. The use of this report is subject to the requirements of the Appraisal Institute relating to review by their duly authorized representatives. As of the date of this report, James C. Kafes and John P. Baker have completed the requirements of the continuing education program of the Appraisal Institute. No one other than the undersigned prepared the analyses, opinion and conclusions concerning real estate that are set forth in this report. John P. Baker inspected the property on march 18, 1997. James C. Kafes, Kevin D. Gray and Paul F. Engel did not inspect the property. /s/ James C. Kafes /s/ Kevin D. Gray James C. Kafes, MAI, CRE Kevin D. Gray, CRE Executive Managing Director Managing Director /s/ Paul F. Engel /s/ John P. Baker Paul F. Engel John P. Baker, MAI Managing Director Director Certified Indiana Appraiser License #CG69201411 LANDAUER 9 REAL ESTATE COUNSELORS NATURE OF THE APPRAISAL IDENTIFICATION OF THE PROPERTY AND INTEREST APPRAISED The subject of the appraisal is the Keystone at the Crossing Fashion Mall which is a modern enclosed regional mall with two anchor department stores. The subject is located at the northeast quadrant of Keystone Avenue and 86th Street in, Indianapolis, Marion County, Indiana. The improvements consist of a 682,912 square foot regional shopping center situated on a site of approximately 48.155-acres. Fashion Mall Drive separates the mall into two parcels with Jacobson's on the east and Parisian on the west. The eastern parcel has been named Guinevere after the name of the ownership entity. Included with the Guinevere parcel are Jacobson's, enclosed mall shops, four outlot restaurants and a strip center which is located south of 86th Street. The western parcel has been named Galahad and includes Parisian, enclosed mall shops and two outlot restaurants and an outlot bank facility. The Fashion Mall consists of 249,721 square feet in two anchors, 349,222 square feet of owned mall improvements, a 29,160 square foot strip center and seven outlots containing a total of 54,829 square feet. The two attached anchors are Jacobson's Department Store (120,000 square feet) and Parisian Department Store (129,721 square feet). The mall is situated on a 48.155-acre site which is under a ground lease through October 31, 2067. On-site asphalt surface parking is available with 2,157 surface spaces and 990 spaces are available in two attached parking garages. The property is in excellent condition with no deferred maintenance observed. A copy of the legal description is included in the Addenda. LANDAUER 10 REAL ESTATE COUNSELORS The property rights appraised in this report consist of the Leasehold Estate. Leasehold Estate, as defined by the Appraisal Institute Dictionary of Real Estate Appraisal, Third Edition, page 204, is: The interest held by the lessee (tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions. PURPOSE, FUNCTION AND DATE OF APPRAISAL The purpose of the appraisal is to estimate the Market Value of the Leasehold Estate as of March 18, 1997. The function of the appraisal is to assist Morgan Stanley Mortgage Capital, Inc. with loan underwriting. The Uniform Standards of Professional Appraisal Practice defines Market Value as: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: - Buyer and seller are typically motivated. - Both parties are well informed or well advised, and acting in what they consider their own best interests. - A reasonable time is allowed for exposure in the open market. - Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto. - 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. LANDAUER 11 REAL ESTATE COUNSELORS SCOPE OF THE APPRAISAL The scope of this complete appraisal involved the systematic research and analysis necessary to reach a market value conclusion for the subject. The initial step was to inspect the property, the general market area and the neighborhood. After investigating the area regarding economic, political, social and physical factors, research was conducted relevant to the valuation process, including gathering land sales, financial information, data concerning competitive shopping center properties and comparable improved sales, and other information pertinent to the valuation. This information was reviewed, confirmed and analyzed through the use of the Sales Comparison and Income Approaches to value. These approaches are detailed in the appropriate sections of the report. The Cost Approach is not considered to provide a meaningful value indication and is excluded from the analysis as agreed upon by the client. Lastly, a final value estimate was concluded based on the above analyses, which, in turn, were influenced by the most reliable and appropriate data. This narrative report is the result of our findings and analyses. HISTORY OF PROPERTY The Keystone at the Crossing Fashion Mall is owned by two entities: Galahad and Guinevere. The ownership entity called Galahad was a joint venture that was formed in 1984 to develop the western part of the mall. The joint venture partners included: Galahad, Duke Realty and Prudential Insurance Company. The Fashion Mall Expansion Joint Venture was formed in 1988 to develop the eastern part of the mall and the named joint venture partners were Guinevere (Galahad as owner) and Duke Realty. In June 1989, Galahad bought out all of the other partners (Duke and Prudential) in both Galahad and Fashion Mall Expansion Joint Venture but for tax reasons retained Galahad as the named owner of the west part of the mall and Guinevere as the named owner of the eastern part of the mall. The Duane Real Estate Corporation has Galahad as the principal owner but was originally formed by Galahad and LANDAUER 12 REAL ESTATE COUNSELORS Parisian Department Store to develop the parking structure located north of the Galahad parcel. Based on the information we were able to discover, the subject property has been in the continuous ownership of the named entities for more than four years. About three years ago the subject property was placed on the market for sale. It was reported that negotiations for the sale of the subject to a potential purchaser failed after a price had been agreed upon. However, the details of the negotiations and the negotiated sale price were not revealed to the appraisers. After these negotiations failed the subject was taken off the market, and it is reported that the subject is no longer for sale. The subject property is situated on seven separate ground leases which were summarized by the landlord in a document which is found in the Addenda. The document identifies eight separate parcels of which seven are included in the appraisal assignment. We have not reviewed each ground lease document but have relied upon the details provided in the summary, with additional data and facts obtained during phone conversations with the landlord. The map on the facing page shows the location of the various ground leased parcels. The following is a summary of the Ground Leases. 1) Parking Garage Site - 2.476 acres ---------------------------------- This site is located north of the Parisian Department store in the Galahad area of the mall. WRC Properties (Teachers Insurance and Annuity Association) leased the site to Duane Real Estate Corporation (lessee) on March 31, 1993. The primary lease term is for 24 years, expiring on December 31, 2017 which has a base rental of $1.00 per year. Duane Real Estate has ten 5-year renewal options for which the rental is to be established as 7.5 percent of the land value, adjusted every five years. The lessee is responsible for all real estate taxes, garage taxes and operating expenses. Duane Real Estate does not have a right to purchase the property. 2) Fashion Mall Sites I & II - 15.883 acres ----------------------------------------- These sites are the enclosed mall and Parisian department store parcels of Galahad located west of Fashion Mall Drive. George F. Kerr, et al, (original land owner) leased the sites to Galahad Real LANDAUER 13 REAL ESTATE COUNSELORS Estate Corporation (lessee) on December 20, 1984, as amended. The primary lease term is for 85 years, expiring on October 31, 2067. The minimum base rental is $36,020.04 per year. However, the total rent will be the greater of the minimum base rent or (and) 5.0 percent of the base and percentage sublease rent (from tenants). The lessee is responsible for all real estate taxes and operating expenses. The lessee has the option to purchase the site for $200,000 per acre multiplied by the dividend of the July 2014 Consumer Price Index (CPI) divided by the July 1984 CPI. 3) Rosa Corona Parcel - 2.114 acres -------------------------------- This is the Keystone Grill site located in Galahad. George F. Kerr, et al, (original land owner) leased the site to Galahad Real Estate Corporation (lessee) on December 20, 1984, as amended. The primary lease term is for 85 years, expiring on October 31, 2067. The minimum base rental is $4,227.96 per year. However, the total rent will be the greater of the minimum base rent or (and) 5.0 percent of the base and percentage sublease rent (from tenants). The lessee is responsible for all real estate taxes and operating expenses. The lessee has the option to purchase the site for $200,000 per acre multiplied by the dividend of the July 2014 Consumer Price Index (CPI) divided by the July 1984 CPI. 4) Cork and Cleaver Parcel - 1.068 acres ------------------------------------- This is the location of Sullivan's Restaurant located in Galahad. George F. Kerr, et al, (original land owner) leased the site to Galahad Real Estate Corporation (lessee) on December 20, 1984, as amended. The primary lease term is for 85 years, expiring on October 31, 2067. The minimum base rental is $2,136.00 per year, but the total rent will be the greater of the minimum base rent or (and) 5.0 percent of the base and percentage sublease rent (from tenants). The lessee is responsible for all real estate taxes and operating expenses. The lessee has the option to purchase the site for $200,000 per acre multiplied by the dividend of the July 2014 Consumer Price Index (CPI) divided by the July 1984 CPI. 5) INB Branch Parcels - 1.501 acres -------------------------------- This is the current location of NBD Bank and a small parking lot in Galahad. George F. Kerr, et al, (original land owner) leased the sites to Galahad Real Estate Corporation (lessee) on December 20, LANDAUER 14 REAL ESTATE COUNSELORS 1984, as amended. The primary lease term is for 85 years, expiring on October 31, 2067. The minimum base rental is $2,721.96 per year, but the total rent will be the greater of the minimum base rent or (and) 5.0 percent of the base and percentage sublease rent (from tenants). The lessee is responsible for all real estate taxes and operating expenses. The lessee has the option to purchase the sites for $200,000 per acre multiplied by the dividend of the July 2014 Consumer Price Index (CPI) divided by the July 1984 CPI. 6) North River Road Office Building - 5.424 acres ---------------------------------------------- This parcel is not part of the appraisal. 7) Teachers Tract Lease Parcels - 22.844 acres ------------------------------------------- Seven leased parcels comprised the Guinevere portion of the enclosed mall including the Jacobson's Department Store site. George F. Kerr, et al, (original land owner) leased the sites to Keystone Crossing Joint Venture as assigned to Guinevere Real Estate Corporation (lessee) on December 15, 1988, as amended. The primary lease term is for 85 years, expiring on October 31, 2067. The minimum base rental is $47,880.00 per year; however, the total rent will be the greater of the minimum base rent or (and) 5.0 percent of the base and percentage sublease rent (from tenants). The lessee is responsible for all real estate taxes and operating expenses. The lessee has the option to purchase the site for $500,000 per acre multiplied by the dividend of the July 2017 Consumer Price Index (CPI) divided by the July 1987 CPI. 8) Sign and Roadway Parcel Tract - 1.508 acres ------------------------------------------- This site is also part of the Guinevere portion of the Fashion Mall. George F. Kerr, et al, (original land owner) leased the site to Keystone Crossing Joint Venture as assigned to Guinevere Real Estate Corporation (lessee) on December 15, 1988, as amended. The primary lease term is for 85 years, expiring on October 31, 2067. Only minimum base rental of $3,076.08 per year is paid on this parcel. The lessee is responsible for all real estate taxes and operating expenses. The lessee has the option to purchase the site for $500,000 per acre multiplied by the dividend of the July 2017 Consumer Price Index (CPI) divided by the July 1987 CPI. LANDAUER 15 REAL ESTATE COUNSELORS Ground Lease Summary - 47.394 acres - ----------------------------------- The seven ground leased parcels comprise a total of 47.394 acres. The rental from Lease No. 1 at $1.00 per year has no material effect on the value of the subject. Leases Nos. 2, 3, 4, 5 and 7 have a rental rate which is based on 5.0 percent of sublease (tenant) base rent and percentage rent. Lease No. 8 has a rental based on 5.0 percent of base rent only. The computer model used in this analysis permitted the appraisers to estimate the ground rent payment based on 5.0 percent of base rent and percentage rent. However, to compensate for the slightly different lease structure of Lease No. 7, we have applied 4.8 percent to the percentage rent component of the ground lease calculation. The 4.8 percent amount was determined as follows. Lease No. 7 represents about 3.2 percent of the total land area included in the appraisal assignment (1.508 ac./ 47.394 ac. = 3.2 percent). As the percentage rent component of ground rent is 5.0 percent, it stands to reason that the component should be reduced by 3.2 percent [5.0% percent X (100.0% - 3.2%) = 4.8%]. ESTIMATED MARKETING PERIOD The current market for regional shopping malls is such that supply exceeds demand. Currently, there are more properties available for sale than there are interested buyers. The lack of investor interest for Class A and marginal properties in this category have resulted in a general lowering of prices. The top tier properties, those well leased malls that dominate a prime trade area, are still highly coveted assets though the general rise in yield rates demanded by buyers has caused some reluctance on the part of sellers. The recent availability of capital has opened the market somewhat, however, some of this available capital is being used to renovate or expand existing centers in order to better compete in a very competitive market for retail sales. In real estate, the regional mall category maintains a reasonable amount of liquidity, based on the all-cash investment philosophy of most institutional investors. The Korpacz Real Estate Investor Survey - 1st Quarter 1997 identifies the average marketing time for regional malls to be about 10.11 months, up from 9.94 months one year ago. The subject property is considered to appeal to a national or international investment community and a typical buyer would probably be an institutional-type investor. The subject is well located and has LANDAUER 16 REAL ESTATE COUNSELORS some expansion potential. The subject is the dominant mall in the community and the competition is average which strengthens the subject property's potential market share. Fashion Mall has two anchors but has a partial 2nd floor level that is difficult to lease. The subject has name recognition in the marketplace and is an identifiable place to shop. The subject is well-located directly near I-465 and Keystone Avenue and is easily accessible. Well-located malls are considered in demand, as a result, we are of the opinion that the subject property has an estimated marketing period of 9 to 12 months. LANDAUER 17 REAL ESTATE COUNSELORS INDIANAPOLIS AREA ANALYSIS The subject property is located in the north central section of the Indianapolis metropolitan area in Washington Township, Marion County, Indiana as shown on the facing page. Indianapolis is located in Marion County near the geographic center of Indiana and is the state capital, the county seat, and the state's largest city. The Consolidated City of Indianapolis was created in 1970 and encompasses 373 of the 392 square miles, or 95 percent, of Marion County. The separate cities of Beech Grove, Lawrence, Southport, and the Town of Speedway together occupy the county's remaining 19 square miles. The City and county are operated under a unified governmental system known as UNIGOV. Headed by an elected mayor and 29 city/county council members, this progressive UNIGOV system is credited with streamlining the delivery of municipal services, encouraging economic growth by broadening the tax base, simplifying business access to government, and fostering an atmosphere of business/government cooperation. Indianapolis is the financial and service center of Indiana and is a major regional trade and distribution center. The city has historically been a center of heavy manufacturing businesses with concentrations in aircraft and automotive parts, machinery, and chemicals fields. The economic outlook for Indianapolis benefits from expected enhancement of the city's role as a distribution center and a positive outlook on the employment for transportation, finance, and insurance industries. Indianapolis is known as an important center of the biotechnology and pharmaceuticals industries, and the area is poised to benefit from the expected long-term growth of this sector. Economic and demographic data are shown on the chart on the following facing page based on the Indianapolis PMSA. The PMSA is comprised of Marion County and the seven surrounding counties of Boone, Hamilton, Hancock, Shelby, Johnson, Hendricks, and Morgan, plus adjoining Madison County which contains the City of Anderson. The nine-county area is organized as MAGIC (Metropolitan Association of Greater Indianapolis Commuters), a well-organized promotion group. LANDAUER 18 REAL ESTATE COUNSELORS POPULATION According to 1995 population estimates from Sales & Marketing Management, Indianapolis is the 35th largest metropolitan area in the country. The 1990 Census recorded 1,380,491 persons residing in the nine county metro area, which is estimated to have increased to 1,495,570 in 1996. The population in the metro area has been increasing at an annual compound rate of approximately 0.6 percent since 1980 and 1.3 percent since 1990. Urban Decision Systems (UDS) projections to 2001 forecast the population to increase to approximately 1,579,772, a total increase of 5.6 percent over 1996. Among midwestern cities, Indianapolis is one of the fastest growing. The MSA's population increase of 5.7 percent during the 1980s compares favorably with such cities as Cleveland, Cincinnati, St. Louis, or Detroit. Columbus, Ohio, a city similar to Indianapolis in many respects, registered a population increase of nearly 11.0 percent during the 1980s. HOUSEHOLDS Since 1980, the growth in the number of households in the Indianapolis MSA has increased more rapidly than in the nation as a whole. Typical of most areas of the country, household growth has generally outpaced population growth due to the increased number of young people living alone, the increased number of single parent households, and an increased number of elderly persons choosing to maintain their own households. The above trends have resulted in slight declines in the average household size, which despite only moderate increases in population, has lead to greater increases in household formation and the number of housing units developed. The average household size for the Indianapolis area declined from 2.73 in 1980 to 2.55 in 1996 and is expected to stabilize through the year 2001. Although experiencing similar trends in the relationship between population growth and household formation, the Indianapolis MSA has experienced greater relative growth in households than the country as a whole, and is projected to continue outpacing the nation through 2001. LANDAUER 19 REAL ESTATE COUNSELORS INCOME Average household income growth from 1990 to 1996, at 2.6 percent per year, was slightly lower than the national income growth rate of 2.5 percent per year. Average household income is estimated to increase at a rate of 3.8 percent per year from 1996 to 2001, similar to the projected national growth rate of 3.8 percent. The Indianapolis MSA currently has average household income levels similar to the nation as a whole. Between 1996 and 2001, however, average household income levels in Indianapolis are projected to have moved from a level of 0.36 percent higher than the national average to 0.55 percent higher. Indianapolis PMSA Household Income Distribution 1990 Census 1996 Estimate 2001 Projection ----------- ------------- --------------- % of % of % of HOUSEHOLDS: 529,614 Total 587,415 Total 621,980 Total ------- ----- ------- ----- ------- ----- By Income Less Than $10,000 66,093 12.5 61,022 10.4 46,464 7.5 $10,000 - $19,999 92,417 17.4 87,157 14.8 78,922 12.7 $20,000 - $29,999 92,911 17.5 89,743 15.3 78,718 12.7 $30,000 - $39,999 82,166 15.5 90,806 15.5 77,222 12.4 $40,000 - $49,999 64,428 12.2 63,231 10.8 77,947 12.5 $50,000 - $74,999 86,922 16.4 118,006 21.2 136,458 21.9 $75,000 - $99,999 25,829 4.9 42,079 7.2 61,194 9.8 $100,000 - $124,999 8,490 1.6 18,091 3.1 34,267 5.5 $125,000 and over 10,542 2.0 16,480 2.8 30,788 4.9 Median Household Income $31,370 $36,161 $43,806 Average Household Income 38,544 $44,840 $54,140 Source: Urban Decision Systems A review of income categories reveals that the largest concentration of Indianapolis households (21.2 percent) have current income levels in the $50,000 to $74,999 range. Households in this income bracket are expected to increase, reaching 21.9 percent by 2001. LANDAUER 20 REAL ESTATE COUNSELORS RETAIL SALES According to Sales and Marketing Management, retail sales in the Indianapolis metropolitan area totaled $15.3 billion in 1995. Continued growth is anticipated in most retail sectors. Total retail sales are projected to grow to $19.6 billion by 2000, an annual increase of 5.2 percent. The International Council of Shopping Centers ("ICSC") tracks general merchandise sales volume for all GAFO type retailers in 494 of the nation's largest regional malls. Below is a chart depicting general merchandise sales volume for GAFO for August 1996 and year-to-date 1996 for the Midwest, the East North Central Region and the United States. General GAFO Merchandise Sales Through August 1996 (Sales Per Sq. Ft.) Y-T-D % Chg. August August YTD Regions 1995 1996 1996 Sales ------- ---- ---- ---- ----- East North Central $263 $21 $151 +3.% Midwest Region $259 $22 $150 +4.% Nation $268 $22 $161 +4.% Source: ICSC, October 1996 Merchandise Index The sales figures shown above illustrate that in terms of percentage change, the Indianapolis metro area and encompassing regions outperformed the nation as a whole. The sales level in the Midwest and region has somewhat lagged the national average during 1995 and year-to-date 1996, but the Midwest slightly outperformed the nation thus far in 1996 in rate of growth. Indianapolis should continue to remain an attractive area for future growth. The area has a diverse economic base that has become less vulnerable to national cyclical trends, an expanding population, and a well-regarded "quality of life" with a relatively low cost-of-living. A progressive and efficient LANDAUER 21 REAL ESTATE COUNSELORS local government has helped Indianapolis avoid much of the urban ills experienced by other midwestern cities. EMPLOYMENT Indianapolis' MSA employment base has continued to grow at an estimated 1.9 percent compound annual rate between 1990 and 1996. Employment is projected to continue to grow at approximately 2.0 percent compound annual rate from 1996 to 2001. The following table illustrates the changes which have occurred over the past thirteen years. Non-Agricultural Employment Indianapolis, Indiana MSA (Thousands) Change - 1990-2001 ------------------ Estimate Projection Compound 1990 1996 2001 Total Annual Change ---- ---- ---- ----- ------------- Total Employment 718.1 806.1 889.2 171.1 2.0% Manufacturing: 127.2 124.8 127.2 0.0 0.0% Construction & Mining 39.0 43.9 46.3 7.3 1.6% Transportation/Utilities 43.5 47.1 49.3 5.8 1.1% Wholesale/Retail Trade 187.1 216.5 244.3 57.2 2.5% FIRE 51.2 58.7 64.1 12.9 2.1% Services 167.3 206.1 239.2 71.9 3.3% Government 102.8 109.0 118.8 16.0 1.3% - ------------------------ Source: Data Resources, Inc. In 1990, approximately 17.7 percent of Indianapolis' employment base was concentrated in the manufacturing sector. Over the 6-year period that followed, total manufacturing employment decreased to only 15.5 percent of the employment base. Several economic factors contributed to the decline of manufacturing employment within this MSA during the 1980s, including the strength of the dollar combined with high interest rates which resulted in the purchase of foreign goods at the expense LANDAUER 22 REAL ESTATE COUNSELORS of domestic investment. The increase in automation also occurring since the early 1980s is yet another cause of declining manufacturing employment. During 1990, the proportion of service oriented jobs accounted for approximately 167,300 jobs, or 23.3 percent of the total employment base. Employment within this category has continued to expand at an estimated 3.5 percent average annual rate over the past 6 years, resulting in a 1996 estimate of 206,100 jobs, or 25.6 percent of the employment base. Indianapolis serves as the financial center for the State, as exemplified by being home to Indiana's four largest banking firms (as ranked by total 1995 year-end assets), NBD Indiana, National City Bank Indiana, Bank One Indianapolis, and Huntington National Bank of Indiana. The proportion of the employment base categorized as finance, insurance, and real estate (FIRE) jobs represents an estimated 7.3 percent of the employment base in 1996, up slightly from 7.1 percent in 1990. The number of jobs within this category increased at a 2.3 percent average annual rate over this period, resulting in a 1996 estimate of 58,700 FIRE employees. This growth is a result of the expansion and merger of banks, insurance companies, and real estate firms within the Indianapolis market. The construction sector represents an estimated 5.4 percent of the MSA employment base in 1996, similar to the MSA employment base in 1990. The number of those employed within this category for 1996 is estimated to be 43,900 jobs. As the center for state, county, and city government, the employment within these levels accounts for approximately 13.5 percent of the total MSA employment base, down slightly from 14.3 percent 6 years earlier. This results in an estimate of 109,000 jobs. LANDAUER 23 REAL ESTATE COUNSELORS UNEMPLOYMENT As shown on the following table, the rate of unemployment within the Indianapolis metropolitan area has been consistently lower than national or state levels. Indianapolis benefits from a diversified economic base that has expanded at a healthy pace over the past sixteen years. The following table depicts historic and project unemployment rates for the Indianapolis MSA. Rates of Unemployment YE 1994 YE 1995 YE 1996(E) 2001(P) ------- ------- ---------- ------- Indianapolis MSA 4.1% 3.9% 3.6% 3.9% State of Indiana 4.9% 4.7% 4.3% 4.1% United States 6.1% 5.6% 5.4% 5.6% Source: DRI/McGraw Hill In general, the historic Indianapolis MSA unemployment rates have been below the national average. These lower-than-average rates are due in part to the insulating employment effects resulting from a high concentration of government employment and a diversified employment base. The following table depicts the historic unemployment rates for the nation and the Indianapolis MSA. HOUSING STARTS As the table below indicates, housing starts in the Indianapolis PMSA appear to have peaked after a compounded annual increase in housing starts of 8.7 percent from 1990 to 1994. Compared with other large midwestern cities, Indianapolis' economy has been relatively resilient to the recessionary periods, which housing starts remaining relatively stable while other areas experienced a significant decline. While in 1980, 53 percent of new housing starts were for single-family residencies, in the 1990's this proportion ranged from 75 percent to 83 percent indicating a higher level of purchase per household. In addition, most housing starts have been concentrated in Marion County and adjacent Hamilton County, which provide a growing customer base for Circle Centre. LANDAUER 24 REAL ESTATE COUNSELORS Housing Permits Authorized in Indianapolis PMSA Single Annualized Year Total Family Other Growth/Decline ---- ----- ------ ----- -------------- 1980 6,550 3,463 3,087 -- 1990 8,652 6,549 2,103 2.82% 1994 12,100 10,100 2,000 8.7% 1995 13,300 10,300 3,100 9.9% 1996(E) 12,200 9,400 2,700 (8.3%) 2001(P) 11,100 8,200 2,900 (1.9%) Source: DRI/McGraw Hill TRANSPORTATION Because of its central location, Indianapolis is an important transportation hub for the East North Central Region. More interstate highways converge here than in most any other U.S. cities. Interstates 65, 69, 70, and 74 serve the City and are connected by the I-465 beltway, a 35-mile circumferential freeway. Approximately 50 inter- and intra-state trucking companies operate out of Indianapolis. The ability for motor freight to reach a majority of the continental U.S. destinations within two days travel is a critical determinant of this region's transportation success. Indianapolis is served by the three largest railroads east of the Mississippi River: Consolidated Rail Corp., Norfolk Southern Corp., and CSX Corp.; as well as the Indiana Rail Road Company. This rail network provides good access to connecting ports of the Great Lakes and Ohio River. More than 150,000 freight cars and piggyback shipments annually are dispatched or received by Indianapolis area firms. Additionally, passenger rail service to this City is provided by Amtrak. The Indianapolis International Airport is located approximately five miles southwest of the Central Business District (CBD). This airport is served by more than 20 airlines providing over 360 flights LANDAUER 25 REAL ESTATE COUNSELORS daily to over 75 destinations. Air cargo is an important industry at the airport as it is the regional hub for Federal Express and CF Airfreight, Inc. Indianapolis was recently chosen by United Airlines as the site for its consolidated national aircraft maintenance facility and by the US Postal Service as the site for an expanded Express Mail hub. Both of these high profile projects will have positive effects on local employment and economic activity. Inter- and intra-state bus service is provided by Greyhound, along with a number of private tour and motorcoach lines. The City of Indianapolis is served by the Metro Bus Line which provides commuters with adequate transportation to major destinations throughout the Indianapolis metropolitan area. CONCLUSION Overall, the forecasted economic outlook for Indianapolis is considered favorable, resulting from the insulating economic effect associated with a high concentration of government employment, the diversity of the remaining employment base, and its central United States geographic location which is the metro area's most profound attribute. Additionally, the educational, recreational, and entertainment amenities of Indianapolis have assisted in establishing the city as a cultural center for the East North Central Region of the United States. The Indianapolis MSA population grew by 8.3 percent between 1990 and 1996. Projections through 2001 indicate growth of 5.6 percent. Growth in the service industries, distribution, and the increasing importance of biotechnology and pharmaceuticals is expected to make the economy more resilient and enhance Indianapolis' position as an attractive location for investment properties. NEIGHBORHOOD MAP [GRAPHIC OMITTED] LANDAUER 27 REAL ESTATE COUNSELORS NEIGHBORHOOD ANALYSIS The subject property is located in the north of Indianapolis, Marion County, Indiana at the northeast quadrant of Keystone Avenue and 86th Street. The immediate neighborhood is considered the Keystone Crossing development which is a 165-acre multi-use development managed by Duke Associates. The neighborhood is bounded by Keystone Avenue (State Route 431) to the west, Interstate 465 to the north, White River and Rean Road to the east and the White River and Union Chapel Road to the south. The White River traverses the neighborhood in a south and east direction, south of the subject. Included in the neighborhood are numerous office buildings, two hotels, a health club and numerous retail facilities highlighted by the Fashion Mall (subject). A neighborhood map on the preceding page shows the general neighborhood boundaries. The neighborhood is considered to be an upper middle class area characterized by upscale retail facilities and gourmet restaurants. The area is also considered to have the most affluent single- and multi-family development in the greater Indianapolis area. Development began in the early 1970's with the construction of a shopping center which presently comprises about 1/3rd of the subject property. A second phase of the Fashion Mall was added in 1979. Office development languished in the early 1970's but gained momentum when Duke Associates became involved in 1978. The continued development of office, hotel and ancillary commercial structures accelerated through the mid-1980's The most recent development at Keystone Crossing include the 115,000 square foot River Crossing retail power center located east of the Fashion Mall. Also, Fashion Mall Commons is under construction at the southeast corner of Union Chapel Road. This retail center is anchored by a Kohl's department store. The area is primarily developed with retail uses including the Keystone at the Crossing Fashion Mall, River Crossing, Fashion Mall Commons, Clearwater Crossing, Clearwater Commons and Rivers Edge. Other retail developments include Woodfield Center and Homewood Suites Hotel located in the southwest quadrant of Keystone Avenue and 86th Street. Office buildings dominate the land uses north of the subject. LANDAUER 28 REAL ESTATE COUNSELORS The neighborhood is a developing area, and the potential for more residential development enhances the continued use of the subject as a regional mall. It is unlikely that another regional mall will be developed in the neighborhood; however, the abundance of vacant commercially zoned land suggests that other commercial development could potentially provide competition for the Keystone at the Crossing Fashion Mall tenants. The additional development of off-price retailers and discounters such as Target, Wal-Mart and Sam's Club and the potential for other department stores such as Kohl's could pose a risk to future retail sales volume at the subject. LANDAUER 29 REAL ESTATE COUNSELORS RETAIL MARKET OVERVIEW OVERVIEW The following table displays the distribution of shopping centers containing more than 150,000 square feet in the Indianapolis metropolitan area. As illustrated below, the majority of retail inventory is concentrated in Marion County. Similar to other areas of the country, retail space has grown dramatically in the last two years. In Indianapolis, most of the new space is located in power centers, but Circle Centre, a new mall that opened in downtown Indianapolis in 1995, accounted for a large amount of the increase. Circle Centre is the first regional mall to open in Indianapolis in seventeen years. Indianapolis MSA Shopping Centers With 150,000 Sq. Ft. and Greater 1994 1996 % Total Area Total Area Increase 1994 (000) 1996 (000) in No. Of Centers Sq. Ft. No. Of Centers Sq. Ft. Sq. Ft. -------------- ------- -------------- ------- ------- Marion County 30 11,850 38 13,340 12.6%(a) Johnson County 5 2,100 5 2,480 18.1% Madison County 2 579 4 1,171 102.2% Hamilton County 1 265 3 1,000 277.4% Morgan County 1 166 1 166 -- -- ------ -- ------ ------ Total 39 14,960 51 18,157 21.4%(b) (a) 54% of Marion County increase due to Circle Centre opening, 1995. (b) 25% of MSA total due to Circle Centre opening, 1995. - ---------- Source: Shopping Center Directory, 1994 and 1996. There are seven regional malls in Indianapolis (including the subject) with a total GLA including anchors of 7,130,000 square feet. All are in Marion County except for Greenwood Park Mall located in Johnson County. The six malls are the following: Circle Centre, Washington Square, Castleton LANDAUER 30 REAL ESTATE COUNSELORS Square, Lafayette Square, Greenwood Park Mall, Glendale Center and Keystone at the Crossing Fashion Mall. Common department store anchors in the market include Sears, Montgomery Ward, J.C. Penney, Lazarus, and LS Ayres. Jacobson's and Nordstrom each have one outlet in the market. Parisian has two units, at Circle Centre and Keystone. Overall MSA retail space per capita is below the national average, as is mall space. However, the supply of regional mall space within Marion County is well above national per capita averages, as follows: Regional Mall Supply Total Regional Shopping Center Mall GLA Per Person GLA Per Person -------------- -------------- Marion County 16.2 sq. ft. 7.1 sq. ft. Indianapolis MSA 12.1 sq. ft. 4.8 sq. ft. National Average 18.0 to 19.0 sq. ft. 4.5 to 5.5 sq. ft. TRADE AREA DELINEATION A retail center's trade area contains people who are likely to patronize that particular center. These customers are drawn by a given class of goods and services from a particular tenant mix. A center's fundamental drawing power comes from the strength of the anchor tenants as well as the regional and local tenants which complement and support the anchors. A successful combination of these elements creates a destination for customers seeking a variety of goods and services while enjoying the comfort and convenience of an enclosed climate-controlled shopping environment. The subject property is situated in north Indianapolis, a location that has an expanding retail component. As a suburban mall, the customers are drawn from the northern part of the metropolitan area, primarily along I-465 beltway. The mall's claim to a large trade area is reinforced by an upscale merchandise mix and the ability to travel the Interstate Highway system throughout Indianapolis. Thus, the boundaries of the trade area are mostly influenced by distance rather than natural or competitive LANDAUER 31 REAL ESTATE COUNSELORS boundaries. The map facing page 37 displays the boundaries of the defined Fashion Mall trade area defined by zip code and the location of competing regional malls. DEMOGRAPHIC AND ECONOMIC DATA Demographic and economic data for the trade area has been provided by Urban Decision Systems (UDS). Because the trade area boundaries are smaller than the PMSA, the demographic information for trade area is presented. In the following sections we summarize that data. DEMOGRAPHICS, HOUSEHOLD INCOME, DISPOSABLE INCOME As previously discussed, the population of the Indianapolis metro area is estimated to be 1,495,570 in 1996 and is projected to increase by 1.1 percent annually to 1,579,772 in 2001. Within the trade area population is estimated to increase by a faster rate of 1.4 percent from 1996 to 2001. The number of households in the PMSA is 587,415 and is projected to increase by 1.2 percent annually to 621,980 in 2001. In the trade area, the number of households are projected to increase by 1.4 percent over the same period, as shown in the chart on the facing page. The metro area's average household income is estimated to be $44,840 and is projected to increase by 3.8 percent per year to $54,140 in 2001. For the subject, the 1996 estimate is $50,037 increasing to $61,024 in 2001, an annual increase of 4.0 percent. Household income in Indianapolis is currently close to the national average but is projected to decline slightly below this level during the next five years. Comparatively, the trade area average household income would be continue to be above the national average. Income distribution in the metro area and the trade area is favorable for the subject development. In the trade area, households earning more than $60,000 are projected to increase in share from 25.4 percent to 36.6 percent by 2001. In 1996, 46.0 percent of households are estimated to earn incomes in excess of $40,000, increasing to 57.4 percent in 2001. LANDAUER 32 REAL ESTATE COUNSELORS Disposable income is that income which remains after standard federal, state, and local taxes. According to the United States Department of Commerce Survey of Current Business (August 1993), disposable income within Indiana was 87.00 percent of total personal (available) income in 1990 and is estimated to be 86.6 percent in 1995 (the most recent year available). By applying the disposability factor to the trade area's aggregate household income results in an estimated 1996 disposable income of $11,085,000 and a projected 2001 disposable income of $14,510,000, implying a compound average annual increase of 5.5 percent, indicating that income growth will exceed the expected rate of inflation. From 1990 to 1996, disposable income grew at 4.9 percent per year. EXPENDITURE POTENTIAL In analyzing the sales potential for a given property, it is usually of critical importance to understand the retail gross sales potential for the trade area within which the center is situated. For a regional center, one measurement is found in GAFO growth trends and projections. According to an industry standard, GAFO expenditure in a given trade area is approximately 20.0 percent of aggregate disposable income. Between 1990 and 1996, annual GAFO growth in the subject's trade area was estimated at 4.0 percent annual growth, outpacing the Consumer Price Index ("CPI") for the same period. Particularly important to retailers is the projection for annual growth in GAFO potential of 5.5 percent from 1996 to 2001, at a level above the anticipated rate of inflation. The subject property is well situated in terms of location and format to facilitate the continued patronage of local and area wide residents attracted to the property by virtue of its tenant mix and ease of access. In the following section, we describe the characteristics of the existing Indianapolis retail market. LANDAUER 33 REAL ESTATE COUNSELORS INDIANAPOLIS RETAIL SALES Given that Fashion Mall has a trade area larger than ten miles and is located near the I-465 beltway in north Indianapolis, it is able to generate total mall sales in the range of $257 per square foot, and it is reasonable to assume that Fashion Mall should continue to be able to achieve sales within this range. Our analysis of tenant retail sales is found in the tables located in the Addenda and our sales projections are found on the facing page. COMPETING MALL SALES One method of estimating sales is to analyze the sales of competing area shopping centers. The following 1996 data has been obtained from a third party for competing Indianapolis centers. We note that our estimate of the mall area of the subject is 349,222 square feet and that our estimate of mall sales for 1997 is $307 per square foot. Competing Regional Malls Mall Small Store GLA Total (excluding Projected Mall Small tenants over 1996 Store GLA 10,000 sq. ft.) Sales Comparable Mall (Sq. Ft.) (Sq. Ft.) Per Sq. Ft. --------------- --------- --------- ----------- Fashion Mall/Keystone 352,698 240,000 $322 Circle Centre 450,416 217,000 310 Greenwood Park 358,134 343,000 308 Castleton Square 373,080 353,000 292 Lafayette Square 403,049 359,000 243 Washington Square 341,988 338,000 209 ------- ------- --- Average w/o subject 385,333 322,000 $274 Source: Simon DeBartolo Group, 1996 LANDAUER 34 REAL ESTATE COUNSELORS A survey of small store sales activity at area centers indicates a weighted average sales per square foot of approximately $274 (excluding Glendale Center, for which data was not available), which is distorted by low sales productivity at Washington Square. Fashion Mall, a high quality center located in a suburban area, generates the highest mall store sales per square foot of all of the malls in the Indianapolis area, and it is reasonable to assume that sales performance at the mall will at least maintain its position relative to other area centers, at the upper end of the range. Given GAFO expenditure potential of $2.217 billion in 1996 within the subject's trade area and actual 1996 sales of $175.2 million, a capture rate of only 7.9 percent is indicated. MALL STORE SALES Mall store sales at competing centers within metropolitan Indianapolis are varied, depending upon tenant mix, location, anchor alignment, consumer orientation, and other factors. As previously illustrated, estimated 1996 sales at these centers ranged from $209 to $310 per square foot. Given that Fashion Mall is located in a market with anticipated growth in gross expenditure potential which outpaces inflation, and that centers located in markets with lower expenditure potential are able to generate mall sales in excess of $300, it is reasonable to assume that Fashion Mall will continue to achieve favorable sales results. Some of the anticipated sales productivity is attributable to population growth and latent demand, but a large portion of these sales appear to come at the expense of Glendale Center, Washington Square, Lafayette Square and Greenwood Park. For Fashion Mall, total projected 1997 sales are $175.2 million, and are forecast to be $183.1 million in 1998, a 4.5 percent increase. In the enclosed mall area of Fashion Mall the 1997 sales are estimated to be $107.3 million increasing to $112.6 million in 1998, a 4.9 percent increase. The enclosed mall sales equate to $307 per square foot in 1998 and $322 per square foot in 1998. In the projection, mall store sales are grown by 3.5 percent, less than the projected GAFO growth from 1996 to 2001. LANDAUER 35 REAL ESTATE COUNSELORS ANCHOR STORE SALES It is anticipated that sales at the anchor stores should mirror trends exhibited at similar units at other centers in metropolitan areas and 1997 sales performance. Total estimated sales for the anchors are about $48,730,000 or about $195 per square foot, increasing to $50,435,000 or $202 per square foot in 1998. The projected increase is 3.5 percent. Noticeably absent from the Fashion Mall anchor alignment are the two traditional local department stores, Lazarus and L.S. Ayres, one of which is present at each of the major competing malls. Lazarus provides approximately 926,000 square feet of retail GLA within the metropolitan region, rivaling L.S. Ayre's market share. L.S. Ayre's coverage program virtually mirrors that of Lazarus. Without exception, these two stores compete head-to-head in all other major malls. Estimated 1997 retail sales for both department stores equates to 2.2 percent of trade area GAFO Sales Potential for 1996, a low capture rate ($195 per square foot), which is an acceptable and sustainable level. Based upon the specific performance of similar department stores at competitive centers, some inferior in quality and location, we have concluded that anchor retail sales as projected are reasonable. Anchor sales are grown at 3.5 percent after 1997, which is less than the projected GAFO growth rate from 1996 to 2001. Our projections are based on 1996 actual sales performance .. CONCLUSION Based on our analysis, we have concluded that Fashion Mall will achieve retail sales in fiscal years as shown in the tables located in the Addenda. Overall, as described above, $175.2 million in total sales represents 7.9 percent of the 1997 trade area retail expenditure potential. If inflow from tourists, convention-goers and other non-residents is considered, the capture rate is would likely be less than 7.9 percent, which should be easily sustainable. LANDAUER 36 REAL ESTATE COUNSELORS COMPETITIVE RETAIL ANALYSIS Fashion Mall competes to varying degrees with all of the regional malls in metropolitan Indianapolis. The only head-to-head competition, however, would be expected to come from Circle Centre and Castleton Square. The other regional malls can be characterized as traditional malls--all share the same anchors and general mix of stores. These malls primarily serve geographic trade areas defined by convenience of access. Competition with the subject from the traditional malls will not be strong because of differing merchandising formats. Also, as a positive factor, most malls in the market are controlled by the Simon DeBartolo Group as a result of the 1996 merger of two REITs. In the following paragraphs, we discuss each of the five competitive properties. On the facing page is a summary of the characteristics of these properties. A trade area and competition location map is shown on the following facing page. Circle Centre and the Downtown Retail Component: Circle Centre is a new vertical regional mall which opened in 1995. The mall contains about 800,400 square feet of GLA and is anchored by Nordstrom's and Parisian on two city blocks. The mall stores occupy about 450,416 square feet on four levels. The trade area for Circle Centre is considered to be the entire Indianapolis metropolitan area. Circle Centre provides direct competition for the subject considering its anchors and tenant mix. Downtown Indianapolis has no concentration of department stores or national retailers. L.S. Ayres closed its downtown store in 1992. Lazarus closed the last downtown department store and it may yet relocate to Circle Centre at some time in the future. Interestingly, neither of the two established department stores in Indianapolis was willing to commit to participation in the Circle Centre Mall project, and both committed anchors (Nordstrom and Parisian) are newcomers. Union Station offers mostly festival-type retailers including extensive food service, entertainment options and tourist-oriented shops. Clothing and convenience stores are located throughout downtown in various office buildings and hotel lobbies. LANDAUER 37 REAL ESTATE COUNSELORS Castleton Square: The mall is located two miles northeast of the subject, and this regional mall was built in 1972 and was expanded in 1990. Castleton Square contains approximately 1,353,213 square feet of building area and is positioned as the dominant regional mall in the Indianapolis metropolitan area. It is located adjacent to the Beltway at I-88 in an area with a heavy retail concentration. The anchors at this mall include Sears, Lazarus, L.S. Ayres, Montgomery Ward, J.C. Penney, and Kohl's. The traditional tenant mix features many of the same national and regional retailers that are found at other malls in Indianapolis. Castleton's trade area consists of the north and northeast section of the City. The mall benefits from the surrounding commercial district and its close proximity to Keystone at the Crossing. The 1996 estimated average sales volume was $292 per square foot and the average rental rate approximately $20.00 per square foot. Non-anchor occupancy appears to be 97 percent. Despite its superior performance and occupancy, and the dominant Lazarus store in the market, this center is very tired in appearance and lacks a sense of fashion and excitement. Washington Square: This traditional mall is located southeast of the subject on the east side of Indianapolis and outside of the I-465 Beltway. The 1,177,986 square foot, five-anchor property contains a traditional mix of shops heavily represented by national and regional chains. Washington Square's trade area is characterized as a lower middle class area with a stable to declining population base. Washington Square has not been recently renovated or expanded and is considered to be the least competitive of the area's large regional malls. It suffers from comparatively low sales volumes and a high vacancy rate, 40.0 percent of enclosed mall space. In 1996, the average store sales volume was only $209 per square foot, the lowest of malls surveyed. The average rental rate in 1996 is estimated to be approximately $18.00 per square foot. Lafayette Square: This five-anchor mall is located southwest of the subject and provides the closest competition. The mall is conveniently located on I-65 inside the Beltway. Lafayette Square is a 1,246,705 square foot property with a traditional merchandise mix. Like Castleton and Washington LANDAUER 38 REAL ESTATE COUNSELORS Squares, Lafayette is owned and managed by the Simon DeBartolo Group. Lafayette's trade area is a mostly stable, middle class area. The west side is characterized by the region's heaviest concentration of manufacturing uses. The immediate vicinity of the mall is dominated by retail uses. Lafayette Square is currently under renovation, with a new food court, raised ceilings, new flooring and restrooms. The estimated current average rental rate is approximately $20.00 per square foot. Comparable store sales were $243 per square foot in 1996. As of early 1996, non-anchor space was only 85 percent leased. Glendale Center: Located southwest of the subject on Keystone Street, this regional mall was originally opened in 1958 and was last expanded and attractively renovated in 1985. Glendale Center contains 800,000 square feet and is positioned as a traditional center anchored by L.S. Ayres and Lazarus. The tenant mix is typical of the other traditional malls, except that Glendale is smaller than all except Keystone. Glendale is located inside the Beltway and does not have expressway access. The mall primarily serves residents of the northeast side of the City but suffers from competition from Keystone, Castleton Square and Circle Centre. Nevertheless, the L.S. Ayres and Lazarus are reportedly the second best stores in their respective chains. Occupancy at Glendale Center is estimated to be only 80 percent excluding consideration of poorly located basement level space. The 1996 average store sales are estimated to be approximately $250 per square foot, and the average rent is estimated to be approximately $20.00 per square foot. Glendale was recently improved with a food court, and the center is owned by Equity Property and Development (a Zell Company). Greenwood Park Mall: This mall is located in the south side of Indianapolis. The 1,257,862 square foot property was originally constructed in 1958 and is positioned as a traditional center. The tenant mix at this property is typical of most of the other enclosed malls in the market. Greenwood Park's trade area encompasses most of the south half of the metro area which is considered to be a stable, LANDAUER 39 REAL ESTATE COUNSELORS middle income area characterized by single family developments. The far south side lacks the large multi-family component and office space that is found on the more upwardly mobile far north side. Because Greenwood is the only mall serving the south side, the subject could expect to achieve strong market penetration there and effectively eliminate Keystone's drawing power south of downtown. This center is also owned by the Simon DeBartolo Group. Greenwood Park is estimated to have a current occupancy rate of 95 percent. The 1996 average store sales were $308 per square foot, and the average rental rate is estimated to be approximately $23.00 per square foot. CONCLUSION Fashion Mall is a suburban retail complex located in north Indianapolis. The mall contains GLA of approximately 680,000 square feet with Jacobson's and Parisian as anchors. The tenant mix is upscale, with heavy representation by the Limited group of stores and other national chains of similar prestige. Within Indianapolis, only the Circle Centre Mall has a similar orientation. The demographic profile of Indianapolis and the trade area and an analysis of the competitive retail market indicates that conditions are conducive for continued acceptable sales performance at Fashion Mall. LANDAUER 40 REAL ESTATE COUNSELORS PROPERTY DESCRIPTION SITE ANALYSIS The subject site is located at the northeast quadrant of Keystone Avenue and 86th Street (southeast corner of Keystone Avenue and I-465) in Indianapolis, Marion County, Indiana. The site is bounded by 86th Street on the south, Union Chapel Road on the east, Keystone Avenue on the west and office development to the north. The subject is bisected by Fashion Mall Drive which separated the subject into its east and west components. The east side of the mall is referred to as the "Guinevere" component and the west side of the mall is referred to as the "Galahad" component. On the north the Radisson Hotel is connected to the mall by an elevated walk way. Also, the mall is connected to an adjoining office building through a common parking garage and walk way. Also, the strip retail center is located south of 86th Street, at the southwest corner of 86th Avenue and Union Chapel Road. All the public utilities are available to the site. No soils tests were available for our review, and we assume that no adverse soil conditions exist. The area contained in the ownership, as identified within as survey which was provided is 48.155 acres. The ground lease summary identifies 47.394 acres. The difference between the two areas is 0.751 acres or only 1.6 percent of the area identified in the survey. For this appraisal, we have assumed 48.155 acres. The site is irregular in shape but generally at grade with its fronting streets, 86th Street, Fashion Mall Drive and Union Chapel Road. According to the Indianapolis Engineering Department, the subject property is identified on Flood Insurance Rate Map (FIRM) 180159-0015 (Panel 15 of 100) dated June 3, 1988. The subject is included in Zone C (Unshaded) which is the area outside of the 500-year flood plain. LANDAUER 41 REAL ESTATE COUNSELORS ACCESS AND VISIBILITY Visibility to the site is good from both Keystone Avenue (US-431) and 86th Street. Access is available directly from 86th Street and from two locations on Union Chapel Road. Fashion Mall Drive is a through street which links the office developments to the north of the subject with 86th Street, and the subject has four access locations along the street. The two halves of the Fashion Mall development are connected by a walk way above Fashion Mall Drive. Signal lights permitting full turning movements are located at the subject at two locations on 86th Street (Fashion Mall Drive and Union Chapel Road). ZONING The subject property is zoned C-4, Community-Regional Commercial District, by Indianapolis. This zoning classification allows a variety of commercial and office uses, including retail. It appears that the subject improvements are in conformance with the zoning ordinance. A copy of the C-4 zoning requirements is retained in our files. REAL ESTATE TAXES The real estate taxes for the Keystone at the Crossing Fashion Mall are administered by Marion County and Washington Township. The fiscal year for the county and township is from March 1 to February 28 with taxes due May 10 and November 10. The taxes are based on the current assessment and the prior years tax rate. The subject property is identified by various parcel numbers on the Washington Township tax parcel maps. Reassessments occur on a five-year cycle with the next reassessment scheduled for 2000. The assessed value remained fixed between reassessment periods, provided there were no changes to the improvements and assuming the value was not appealed. LANDAUER 42 REAL ESTATE COUNSELORS ASSESSED VALUES Assessed value is determined through a process known as mass-assessment performed by private, independent mass-appraisal firms. This process involves estimating the reproduction cost of the improvements through the use of the Indiana state costing manual. The cost estimate is adjusted for observable, physical depreciation of the improvements. The resulting depreciated reproduction cost is then added to the assessor's estimated land value, as determined by state-established land value figures, to arrive at the assessor's indication of "true cash value". Once the "true cash value" is determined, it is multiplied by one-third to arrive at an assessed value. With improved properties the assessed value remains unchanged throughout the assessment period. However, if a property is substantially altered within the assessment period, the assessed value is adjusted accordingly. Discussions with tax officials revealed the existence of a state law which limits total tax increases to 5 percent per year on a township-wide basis. While this is true, it is possible for a single property to realize a tax increase in excess of 5 percent in a given year. It is noted that some of the tax parcel numbers were combined for the 1996 assessment and tax period. In general real estate taxes have been stable over the last two years. In this analysis, we have applied the real estate taxes as estimated by the Marion County Treasurer as shown in the Real Estate Tax tables found in the Addenda. IMPROVEMENTS Keystone at the Crossing Fashion Mall is a two-level, masonry and steel, regional shopping center containing a total of 349,222 square feet of enclosed mall space, a one story strip center containing 29,140 square feet and seven outlots with a total of 54,829 square feet. Two anchor department stores (Parisian - 127,747 square feet and Jacobson's - 120,000 square feet) increase the total area of the mall to 682,912 square feet. The subject property consists of two department store anchors, the in-line stores in the enclosed mall, the strip center and seven outlots. A leasing plan showing the shape of the enclosed mall and tenant locations is found in the Addenda. The mall's square footage is distributed as shown on the facing page. LANDAUER 43 REAL ESTATE COUNSELORS Keystone at the Crossing Fashion Mall was developed in late 1973; however, it has undergone renovation and expansion at various times through 1992. The enclosed mall occupancy (all tenants) is currently 87.2 percent with most of the vacancy contained on the west side, Galahad portion, of the mall. The strip center presently has two vacant units and an occupancy of 91.2 percent. As previously described the mall is divided by Fashion Mall Drive into two components referred to as the west, "Galahad" component and the east side, "Guinevere" component. Also a strip retail center is located south of 86th Street. There are seven outlots associated with the subject. Located along 86th Street are five restaurant buildings and a drive-up branch bank facility of NBD Bank. One restaurant is located south of the Guinevere component on Fashion Mall Drive. The following is a brief description of the physical components of the subject property. "Guinevere": This is the two level eastern portion of the Fashion Mall, and Jacobson's is the anchor department store. The second floor of the Guinevere extends entirely over the first level. Both levels are served by elevators and escalators, and both levels are connected to parking structure. Also, an enclosed walk-way connects the second level of Guinevere with the Radisson Hotel. The second level is attached to the food court and elevated walk-way that links Guinevere with Galahad and spans Fashion Mall Drive. The tenant layout is linear along both common corridors and is typical of other two story regional malls. Foundation and Structure: Spread reinforced concrete footings. Structural steel frame with metal roof decking. Exterior Walls: Brick veneer over concrete block with R-19 insulation. Roof: Ballasted EPDM membrane over rigid insulation. Ceilings: Sheet rock and dropped ceilings with skylights in some areas of the mall. Painted exposed structure with skylights are found in the food court, Jacobson's and other portions of the mall. Floor: Terrazzo or floor tile on the mall corridor. Lighting: Incandescent downlights, track lighting and florescent coves. Skylights in the mall corridor provide secondary illumination during the daylight hours. LANDAUER 44 REAL ESTATE COUNSELORS HVAC System: All mall tenants are heated by individual packaged units located on the roof. Tenants are required to provide their own HVAC units. Anchor tenants have separate HVAC systems. Heating is supplied by fan powered variable air volume boxes and electric coils and by constant volume electric coil roof top units. Fire Protection: The shopping center is fully sprinklered with a wet system. "Galahad": Galahad is a partial two level mall with Parisian as the anchor department store. The second level of Galahad is located adjacent to Parisian and is accessed by one elevator and two "up" and one "down" escalators. The design of Galahad has resulted in non-connecting corridors, except through the department store, and the second level has a dead-end corridor. Most of the vacancy at Fashion Mall is located in this second level. Galahad is linked to a parking garage by an enclosed walk-way from the second mall level. Also, an escalator directs shoppers up to the food court and the elevated walk-way over Fashion Mall Drive to Guinevere. Foundations and Structure: Spread reinforced concrete footings. Structural steel frame with metal roof decking. Exterior Walls: Brick veneer over concrete block with R-19 insulation. Roof: Portions of the roof are rubber membrane and built-up systems over rigid insulation. Ceilings: Sheet rock and dropped ceilings with skylights in some areas of the mall. Painted exposed structure with skylights are found in some portions of the mall. Floor: Terrazzo or floor tile on the mall corridor. Lighting: Incandescent downlights, track lighting and florescent coves. Skylights in the mall corridor provide secondary illumination during the daylight hours. HVAC System: All mall tenants are heated by individual package units located on the roof. Tenants are required to provide their own HVAC units. Anchor tenants have separate HVAC systems. Heating is supplied by fan powered variable air volume boxes and electric coils and by constant volume electric coil roof top units. Fire Protection: The shopping center is fully sprinklered with a wet system. LANDAUER 45 REAL ESTATE COUNSELORS Parking Garages: Two multi-level parking garages are connected to the east and west portions of the mall. A three level garage of precast concrete construction adjoins the Guinevere portion of the mall. This garage provides for about 352 parking spaces. A three level garage also serves the Galahad portion of the mall. This garage is also constructed of precast concrete. This garage contains parking spaces for about 1,048 vehicles; however, only 638 spaces are allocated to the mall while 410 are allocated to an adjoining office building. These office building parking spaces are made available to the mall during peak shopping periods when the office building is not in use. Keystone Shoppes: This is a single-level wood frame retail center located on the south side of 86th Street at Union Chapel Road. Access is at Fashion Mall Drive and Union Chapel Road. The structure is poured concrete spread footings with block foundation walls. The floor is poured concrete. The building improvement constructed in 1985 and has wood frame construction (trusses and studs) with a brick facade. A canopy extends along the entire north side of the building over the tenant entry doors. Service entrances for the tenants are located on the south side of the building. Surface parking is provided on the north side of the building. Outlot Buildings: American Bandstand was reportedly constructed in 1985 but has been remodeled on at least two occasions. Stuart Anderson's is a one story building with a small mezzanine. The building was constructed in 1984. The Cooker is a one-story building that was constructed in about 1984 but was remodeled in 1988. T.G.I Friday's is located south of Guinevere. This restaurant building was constructed in 1974. NBD Bank building was constructed in about 1980. This bank has two covered drive-through banking lanes on the south side of the building. The Sullivan's Restaurant building was originally developed in 1977-1978 as the Cork and Clever, which was demolished in 1985 and the existing building was constructed. The Keystone Grill restaurant was built in 1980. Condition: Based on our inspection, the property is considered to be in excellent condition with no deferred maintenance noted. The center is of good-quality construction with an appealing two-level design. The continual expansion of the mall has created some functional obsolescence in the design of the mall. First, the mall is separated by a public street but connected by an overhead walk-way. To walk between the Guinevere and Galahad sections, shoppers must take an escalator or elevator and pass through the food court or walk outside and cross Fashion Mall Drive. The layout of the Galahad section has resulted in non-connecting corridors, except by walking through the anchor store. Also, the second retail level in the Galahad section does not extend over the entire first level, and has a dead-end corridor which is difficult to lease. The most of the vacancy in the Fashion Mall is in the Galahad section's second floor. Vehicle circulation and parking are adequate and appropriate for a multi-tenant shopping center. It is reported that there are no detrimental environmental issues associated with Keystone at the Crossing Fashion Mall. LANDAUER 46 REAL ESTATE COUNSELORS HIGHEST AND BEST USE Highest and best use is defined in The Appraisal of Real Estate, 10th Edition, as: The reasonably, probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible and that results in the highest value. Inherent in this definition is the separation of land and improvements. That is, the highest and best use for the land, as if vacant and available, could be different from the highest and best use of the improved property. All criteria must be met separately for both land and improvements. AS IF VACANT The subject property is located near a well-traveled interstate highway and along two major transportation corridors through Indianapolis. The best potential use would be one that benefits from the site's exposure and accessibility. The existing terrain is suitable for almost any type of commercial development. The property is zoned for commercial development and has been approved as a regional shopping center site by the city of Indianapolis. Surrounding land uses include commercial retail and office developments. Commercial retail use as the dominant use along 86th Street while office and hotel uses predominate north of the mall. Considering these factors, the highest and best use of the site, if vacant, would be for a regional shopping center. AS IMPROVED The appraised property is improved with a regional shopping center. The design and layout of the center are suitable for typical tenant needs. Having analyzed competing retail centers, as well as the property's location, design, and condition, we conclude that the present use represents the highest and best use of the site, as improved. LANDAUER 47 REAL ESTATE COUNSELORS VALUATION METHODOLOGY All three approaches to value--the Cost Approach, Sales Comparison Approach, and Income Approach--were considered in the valuation of the Leasehold Estate in the subject property. The Cost Approach is based upon the theory of substitution, which implies that a prudent investor will not pay more to purchase a property than it would cost to create a comparable substitute property. The value of the underlying land as if vacant and available for development is first estimated. To this is added the estimated cost of reproducing or replacing the subject property, minus the estimated amount of any depreciation (physical and functional) and obsolescence (economic). As the original construction was 1973, with various renovations and expansions since that time through 1992, the subject is not a good candidate for the Cost Approach. Estimating physical deterioration on a property that has been modified like the subject is not practical. Also with all of the changes that have occurred, the improvements are likely to have a significant amount of functional obsolescence contained in the improvements which would be impossible to measure. For these reasons, the Cost Approach is not used in this appraisal and the exclusion of the Cost Approach has as agreed to by the client. The Sales Comparison Approach involves a direct comparison of the subject property with similar properties that have sold, in order to derive an estimate of market value. It is also based on the theory of substitution, and implies that a prudent investor would not pay more to buy the subject property than he would to buy an equally desirable substitute property. Because of wide differences in age, condition, tenancy, location, and (most importantly) anticipated net income, this analysis often provides only broad indications of general valuation parameters, such as price per square foot of gross building or rentable area, and overall capitalization rates. The Income Approach is usually relied upon as the primary indicator of value when analyzing income-producing properties. Either through the direct capitalization of net income or the discounting of projected cash flows into a present worth indication, the analyst has reliable tools with which to formulate an estimate of market value. Essential to this approach is an awareness of market rents, LANDAUER 48 REAL ESTATE COUNSELORS operating costs, current investor yield requirements, and the relative risks associated with varying types of investment instruments. Based on the methodologies of the three approaches to value, we have conducted our analysis of the subject property. Our assumptions and conclusions for each approach are presented in the following sections of the report. LANDAUER 49 REAL ESTATE COUNSELORS COST APPROACH The Cost Approach to value has not been used in this report for two specific reasons: Lack of truly comparable construction cost data and difficulty in measuring accrued depreciation; and the inappropriateness of the valuation technique. Current land value and construction cost estimates may be higher or lower than those estimated in the last 24 years since the mall was originally built; and since it has been renovated and expanded, as a result, the lack of recent construction data prevents us from quantifying the changes in replacement costs. The lack of comparable regional mall development activity also precludes us from making a reliable estimate of developer's profit. What was once achievable in the previous market may not be achievable today, and without an active market, the estimation of an appropriate profit margin becomes even more subjective. Income producing properties like the subject property do not lend themselves to reliable estimates of value by the Cost Approach. The purpose of this appraisal is to estimate the market value of the leasehold interest in the subject property. Because of the potential impact of above or below market leases, specific anchor tenant operating agreements, ground leases, and other unique lease requirements oftentimes found in shopping centers, the Cost Approach cannot accurately measure the effect of such factors. In addition, the Cost Approach does not reflect the motivations inherent in purchasing income-producing properties. Regional shopping centers in many instances require intensive leasing, management and operational skills in order to maximize their performance. The above relationships are economic in nature, and in our opinion are best measured by proper application of the Income Approach to value. As a result of this, we have not undertaken an analysis of the property by the Cost Approach as previously agreed to by the client and Landauer. LANDAUER 50 REAL ESTATE COUNSELORS SALES COMPARISON APPROACH The Sales Comparison Approach to value is a technique by which market value is estimated by direct comparison of the subject property with current offerings and/or actual sales transactions of like or similar properties that occurred recently. The process is one of analyzing the listing or sale and correlating the characteristics of the property involved and the known details of the transaction so that such data can then be adjusted relative to the subject property. Consideration is given to a variety of valuation factors, including: 1) The degree of comparability of each property with the subject property; 2) The date of the sale in relation to the date of the current appraisal, taking into account market changes during the interim; 3) Reliability of the sales data; and 4) Appropriate adjustments for unusual conditions, if any, affecting price or terms of the sale. Through an analysis of regional shopping center sales which have occurred over the past five years, insight into investor demand for this product type can be discerned. Throughout the early portion of this period, the number of regional shopping centers available for sale remained relatively constant, while the demand for this product increased dramatically; resulting in a lowering of investor yield requirements. However, more recently, the market for this product has become increasingly more segmented, with demand remaining relatively strong for the centers of great quality but significantly diminished for all other centers. In this environment, it is supply and demand constraints which have contributed to a widening in the required investor yield requirements for prime centers and for all others. The overall attractiveness of all shopping centers to investors can be attributed to a number of factors, including: a) the recognition by investors of the continued volatility of the office sector (as many markets across the country remain saturated with office product and low occupancies); and b) the continued awareness by investors of the regional center's ability to perform adequately in stable environments as well as in periods of inflation. LANDAUER 51 REAL ESTATE COUNSELORS Although investment criteria may vary, the quality of a center (as seen in its size, condition, tenant mix, productivity and location), remains a strong determinant of sales and price. In regard to location, investors continue to be less concerned with a property's regional location within the country than with the desirability of a center's location within a given marketplace. Therefore, a center located in Atlanta, Georgia, would not necessarily sell for more or less than a center in Seattle, Washington, merely because it is located in the southeast but might sell for more due to a superior location within its market. Most recently, investors have focused more closely on the property's location, with locations in cities classified as secondary or tertiary viewed as less desirable than those located in larger metropolitan areas. This preference mirrors that of a number of the stronger national retailers that have set criteria relating to the size of a trade area in which they will locate. A number of factors have contributed to a general decline in shopping center prices from 1989 to 1993. First, the overall performance of most centers has been impacted by a weakened economy, resulting in flat rents and lower sales bases and in reduced expectations by investors. Second, the excessive credit available in the 1980s contributed to the creation of an oversupplied real estate market in the 1990s and declining real estate values. Third, with the oversupply of product and declining values, capital sources diminished, thereby limiting potential buyers of property to equity investors. Fourth, future economic perceptions and the onset of the recession in 1990 have impacted the attitude of the marketplace. Retail sales continued to suffer in 1994 and 1995, and tenant credit quality continued to deteriorate through 1995. The shortage of credit generally limits potential buyers of these properties to equity investors such as REITs. These equity buyers also include institutional investors such as domestic pension funds or insurance companies or public companies. Today's investors wish to acquire properties producing stable, predictable cash flows. This investment objective is achieved by investing in fully leased properties, or by investing in a non-stabilized property in which yield or cash flow guarantees are granted by a seller. Real estate yield rates tend to move more slowly and fluctuate less than money market rates. The immediate impact of these changes on real estate markets, therefore, is more difficult to quantify LANDAUER 52 REAL ESTATE COUNSELORS precisely than for marketable securities such as mortgages and bonds. It is clear, however, that real estate yield requirements have followed a general upward trend over the past several years for all types of shopping centers. Observations of known market transactions along with surveys of informed market participants have confirmed this overall trend. To apply the Sales Comparison Approach, an appraiser considers data on sales, contracts, offers, refusals, and listings of properties considered comparable to the subject property. First, the appraiser thoroughly researches the prices, real property rights conveyed, financing terms, motivations of buyers and sellers, and transaction dates of the sale properties. Then details on each property's location, physical and functional condition, and income producing characteristics must be examined. ELEMENTS OF COMPARISON These are the characteristics of properties and transactions that cause the prices paid for real estate to vary. The appraiser considers and compares all differences between the comparable properties and the subject property that could affect value. Adjustments for dissimilarities are made to the price of each comparable property to make the comparable equal to the subject on the date of the appraisal. There are several common elements of comparison that should always be considered in a sales comparison analysis. Each is described as follows: Real Property Rights Conveyed: A transaction price is always predicated upon the real property interest conveyed. Many types of real estate, particularly income producing property, are sold subject to existing leases. The revenue generating potential of a property is often fixed or limited by the terms of existing leases. In the valuation process, adjustments must be made to any limitations which may inhibit the property's ability to generate a level of net operating income constrained only by market events. Financing Terms: The transaction price of one property may differ from that of an identical property due to different financing arrangements. Estimates of market value are generally based upon an all LANDAUER 53 REAL ESTATE COUNSELORS cash basis or subject to financing terms typically available in the market. Calculations for atypical financing vary depending upon the type of financing arrangement and the market perceptions of the added value. These adjustments are commonly referred to as "cash equivalency". Conditions of Sale: These adjustments usually reflect the motivations of the buyer and the seller. When non-market conditions of sales are detected in a transaction, e.g. distressed sale, related parties or foreclosure, the sale can be used as a comparable only after extensive investigation. The motivations of the sale must be thoroughly researched before an adjustment is made. Date of Sale: Market conditions generally change over time, but the date of an appraisal is a specific time. Therefore, past sales must be examined in light of the direction of change between the sale date of the comparable and the valuation date of the subject property. This adjustment reflects change in value and is often called a "time adjustment". Location: An adjustment may be required when the locational characteristics of a comparable property are different from those of the subject property. Adjustments for location are usually expressed as percentages that reflect the increase or decrease in value attributable to the property's location or neighborhood. Physical Characteristics: If the physical characteristics of a comparable property and the subject property differ in any way, each of these dissimilarities may require comparison and adjustment to equal the attributes of the subject. Physical divergences may include magnitude of improvement, quality of construction, age/condition, functional utility, site size and amenities. Income Characteristics: Factors that affect the income a property can generate include the quality of management and resulting efficiencies of operations, as well as demand, property condition, average rental rates and growth rates. LANDAUER 54 REAL ESTATE COUNSELORS APPLICABILITY OF ADJUSTMENTS In practice, when considering the purchase of a regional mall, buyers tend to relate one mall to another in income-oriented terminology, i.e., discount rates, capitalization rates. The rating process would include judgments of a center's location, market potential, development or expansion potential, and competitive advantage. This information would form the conclusions relating to capitalizing net income or discounting cash flows. Very little emphasis is given to the usual comparison factors utilized in the Sales Comparison Approach such as price per square foot or gross income multiplier. The presence or absence of owned anchor stores, ground leases or other factors tend to result in a desperate price per square foot comparison, while gross income characteristics can vary widely depending on escalation practices, real estate tax levels, etc. The foregoing factors make it very difficult to adjust the traditional comparison factors from one mall to another. ANALYSIS AND INTERPRETATION OF DATA A summary of the comparable sales can be found on the facing page. All of the sales occurred between February 1996 and November 1996, and the sale prices range from $114 to $506 per square foot, with first year capitalization rates of 6.8 to 10.3 percent. Details on the transactions are included in the remarks column of the table. None of the sales contain attributes which can be considered comparable to the subject. The subject contains a second floor over one section of the mall, and this floor has had difficulty retaining tenants. In fact part of the second floor has never been built out. Additionally, the subject is a leasehold estate with both anchor tenants on subleases. The subject also has a retail strip shopping center associated with it that contains about 29,140 square feet. None of the sales have these physical attributes either singly or in combination. Nevertheless, we have attempted to compare the seven sales to the subject on a price per square foot and sales volume to price ratio. Typically, the unit value of a sale is significantly affected by the inclusion of anchor tenants; thus, a comparison among properties is most meaningful when there is a match among the property LANDAUER 55 REAL ESTATE COUNSELORS components included in the transfer. Other important price variables include differences in age, condition, quality, the interest transferred, and the extent to which the properties are leased at market rentals, as well as the impact of income from other sources not being accounted for within the expression of a mall gross leasable area measure. DIRECT COMPARISON METHOD From the Income Approach, the indicated value is $170 per square foot based on the square footage in the entire mall: anchors, enclosed mall, shoppes and outlots. The sales presented in this analysis are difficult to compare as finite details of the physical and economic attributes of the sales are not known. Nevertheless, we have attempted to make a comparison of the sales. The most comparable properties in terms of age are Sale Nos. 4 and 7, which indicate prices of $234 to $506 per square foot. These sales did not include the department stores. Although these properties are similar in age, there are great differences in the sale indicators (price per square foot, Sale/Price Ratio and OAR). In terms of sales per square foot, all of the sales are higher than the value indicated by the Income Approach. Confounding this traditional analysis is the fact that the subject property includes two anchor stores and the entire center is on a ground lease, which serves to reduce the sales per square foot comparison. The sales suggest a value that is less than $200 per square foot. SALE/PRICE RATIO METHOD In general, the subject is a good-quality center in an area which is relatively insulated from new competition in the near term. Our analysis indicates that 1997 retail sales at the subject will be about $175.2 million or about $257 per square foot, based on the total Fashion Mall area. From the Income Approach, the indicated value and estimated sales produce a sales-to-price ratio of 0.66:1. The sales indicate a range of ratios from 0.56:1 to 1.26:1. Sale No. 4 at 0.69:1 did not include department stores but Sale No. 5 at 0.56:1 had four anchors included in the sale. Sale No. 3 at 0.80:1 had one anchor. It is our opinion that the appropriate ratio of sales to price should be greater than 0.56:1 but less than 0.80:1. Based on the data, the price to sales applicable to the subject property is considered to be between 0.60 and 0.70 because of the inclusion of the two anchors, retail shoppes and outlots. LANDAUER 56 REAL ESTATE COUNSELORS The results of our analysis using the Direct Comparison and Sale/Price Ration methods are presented below. Direct Comparison 682,912 square feet x <$200 = <$136,600,000 and Sales/Price Ratio FY-1998 sales of $257 psf x 0.6 x 682,912 = $105,000,000 FY-1998 sales of $257 psf x 0.7 x 682,912 = $123,000,000 The Direct Comparison method produces a value indication that is much greater than the Sale/Price Ratio Method and well above the value indication of the Income Approach. The greatest weakness of Direct Comparison is the lack of comparability based on the physical and economic attributes of the sales and the lack of finite details regarding the transaction. For these reasons, we do not believe the Direct Comparison method provides a meaningful value indication. The Sales/Price Ratio method also has weaknesses because of the lack of detailed information related to the composition of the retail sales generated from various cost centers. Like the subject these cost centers include: anchors, mall stores, strip center and outlots. The contribution each these cost centers have toward the generation of retail sales would have an impact on the sale price of the property and, therefore, the sale/price ratio. Nevertheless, we are of the opinion that this method provides a more meaningful value range and brackets the value indication produced by the Income Approach. We have given greatest weight to the sale/price ratio methodology which indicates a value range for the subject by the Sales Comparison Approach of: $105,000,000 to $123,000,000. INDICATED VALUE BY THE SALES COMPARISON APPROACH.........................$105,000,000 to $123,000,000 LANDAUER 57 REAL ESTATE COUNSELORS INCOME APPROACH Income property exists for the production of income. It is only natural that the value of an income producing property should be a function of earning power. This is the essence of the Income Approach to Value and all related theory and techniques. This is not to say that the production of income is necessarily the sole reason for such a property's existence, nor is it meant to suggest that factors not related to earning power cannot influence value. There is no question, however, that the expectation of monetary gain is the major consideration in the valuation of income properties. Indeed, the anticipation of future benefits, either amenities or dollars, is the very basis of the value of any kind of property. The theory of the Income Approach is based on the present worth of the net income, cash flow, and reversionary value in the property it will produce during the remainder of its productive life over a reasonable holding (ownership) period. The Income Approach, therefore, is a process of measuring or estimating the extent of future benefits which might reasonably be expected and translating these benefits into a present value at a particular point in time. DISCOUNTED CASH FLOW ANALYSIS ("DCF") ASSUMPTIONS We have utilized a computer-generated (Pro-Ject) discounted cash flow analysis program to estimate the future financial performance of the subject property. The assumptions employed to structure the pro forma cash flow and determine future income and expense estimates in addition to capital items are summarized below. The model also allows for the entry of basic assumptions concerning future lease revenues and expenses. LEASING SUMMARY The subject property has 113 enclosed mall retail tenants, 2 kiosk tenants, 2 anchors and 20 tenants located in the strip center (Shoppes) on the south side of 86th Street. Additionally, seven outlot tenants have either direct or ground leases. Eighteen of the enclosed mall and two shoppes tenant spaces are LANDAUER 58 REAL ESTATE COUNSELORS vacant. The 1997 estimated average occupancy for Keystone at the Crossing Fashion Mall is about 93.2 percent. Excluding the anchors but including all retail tenant spaces the mall is 88.5 percent occupied in 1997. Over the ten year holding period, the average occupancy of the enclosed mall tenants is 96.4 percent. Below follows a brief summary of the more pertinent details of the anchor leases, outlot leases and a general description of the enclosed mall and plaza leases. ANCHOR LEASES Jacobson's: Jacobson's contains about 120,000 square feet and has a 30 year lease that commenced in March 1987 and will terminate in February 2017. The annual rental rate is 1.0 percent of sales for the first year, 2.0 percent of sales for the second year, 3.0 percent of sales for the third year. In the fourth year the annual rental is the greater of 9.0 percent of sales or 125 percent of (a) the cost of landlord's work, (b) the tenant allowance or (c) percentage rent based on the following schedule: Jacobson's Percentage Rent Gross Sales % ----------- - a) up to $36,000,000 4.0% b) from $36,000,001 to $48,000,000 3.0% c) from $48,000,001 to $60,000,000 2.0% d) from $60,000,001 to $96,000,000 1.0% Jacobson's pays its own real estate taxes and insurance expenses. Common area expenses were established as $72,000 but increase each year based on the increases in the owner's common area expenses. The common area expense is limited to 15.0 percent of Jacobson's minimum rent and percentage rent but shall not be less than $72,000. At present the landlord has estimated that Jacobson's common area expense is $76,000. When the lease was executed the landlord provided the tenant with an allowance of $4,000,000 to be used for furnishing and fixturing the tenant's space. Jacobson's has three, 10-year renewal options at the same terms and conditions as the initial lease. LANDAUER 59 REAL ESTATE COUNSELORS Parisian: Parisian contains 129,721 square feet and has a 20 year lease that commenced in October 1992 and will terminate in September 2012. The rental rate for the initial term includes the rental for the building and leased equipment. The rental is cited in the lease as: Years 1-5, $8.35 per square foot; Years 6-9, $9.10 per square foot; Years 10-15, $9.35 per square foot and Years 16-20, $9.75 per square foot. The tenant has six 5-year renewal options with the rental rate established as $9.14 per square foot. In each year of the lease, Parisian is to pay percentage rent of 2.5 percent of sales up to $41,416,000, 2.25 percent for sales between $41,416,001 and $43,000,000 and 2.0 percent over $43,000,000. Parisian its own real estate taxes and insurance expenses. Enclosed mall and CAM expenses are fixed at $0.25 per square foot for the first five years which increases by $0.05 per square foot every five years, including the option periods. ENCLOSED MALL TENANT LEASES We have been provided with a standard form lease for both Galahad and Guinevere enclosed mall tenants. The leases are formatted and written with the same terms. Within the master lease, the term, annual base rental and percentage rent would be clearly identified. The common area is defined and the charges for maintaining and managing the common areas would be clearly identified. The tenant pays its pro rata share of expenses based on gross leasable area which are related to the repairing, maintaining and operating of the common area. These costs would be for the paving, roadways, garage, lighting, trash removal, landscaping, snow and ice removal reasonable depreciation of amortized improvements. Additionally, a 15.0 percent administrative surcharge on the CAM expenses is included. The tenant pays its pro rata share of real estate taxes and insurance expenses based on gross rentable area. The administrative surcharge is not applied to taxes, insurance and utility expenses. KEYSTONE SHOPPES LEASES Within this standard lease, the term, annual base rental and percentage rent would be clearly identified. Expense reimbursements are defined, and the charges for maintaining and managing the building and LANDAUER 60 REAL ESTATE COUNSELORS common areas would be clearly identified. The tenant pays its pro rata share of expenses based on gross leasable area which are related to the repairing, maintaining and operating of the common area. These costs would be for the paving, roadways, garage, lighting, trash removal, landscaping, snow and ice removal reasonable depreciation of amortized improvements. Additionally, a 15.0 percent administrative surcharge on the CAM expenses is included. The tenant pays its pro rata share of real estate taxes and insurance expenses based on gross rentable area. The administrative surcharge is not applied to taxes, insurance and utility expenses. OUTLOT LEASES Individual outlot leases were not reviewed, and we have assumed the lease terms for the seven outlots which are described in the lease abstracts are true and correct. In this analysis, we have projected that four outlot tenants will not exercise their options. However, two restaurants (American Bandstand and Stuart Anderson's) and the NBD Bank tenants renewal options are assumed to be exercised primarily because of their perceived creditworthiness. Additionally, both Stuart Andersons and NBD Bank have been at the location since the beginning of their leases. MARKET RENT In estimating market rents for Keystone at the Crossing Fashion Mall, recent leases were analyzed, actual spaces were examined and leasing plans were reviewed at the subject center and at competitive centers. The charts for the rental rate analysis of the subject's leases are summarized in the Addenda. Although all leases are included within the analysis, greatest weight was given to the more recent leases. As the second level of the Galahad enclosed mall has been a difficult area to lease, we have chosen to temper the rental rates for the spaces available on Galahad's second level. Some of the second level vacant units have never been finished for occupancy and others have recently lost the tenants. Therefore, we have applied a rental rate for the appropriate size units on the second level of Galahad that is 50.0 percent of the rental rate for a similar size units in the enclosed mall. LANDAUER 61 REAL ESTATE COUNSELORS On the facing page is a survey of some of the competing strip shopping centers in the area. Data from River Center and Fashion Commons could not be obtained; however, as much newer centers (1996-1997 construction), the rental rates found in them might not be comparable to the subject which was built in 1985. The shopping centers indicate rental rates ranging from $12.00 to $18.00 per square foot. The more recent leases in the shoppes range from $14.00 to $16.50 per square foot, with $15.00 per square foot most commonly found. We have concluded $15.00 per square foot as most commonly found in the shoppes, which is supported by rental rates in other centers. Also found on the facing page is a survey of restaurant outlot rentals. The rental rates range from $15.71 to $28.40 per square foot and some of the tenants have percentage rent clauses. Rentals 1 and 2 are considered to have inferior locations compared to the subject. Although Rental 3 is located near the subject, it does not have E. 86th Street exposure and is considered inferior as to location. Rentals 4 and 5 are two of the subject's outlot tenants which have exposure to East 86th Street and Fashion Mall identity. Based on the leases at the subject as supported by the other comparable leases, we are of the opinion that a market rental rate of $20.00 per square foot should be applied to the subject's outlot buildings. The rental rate conclusions are summarized as follows: Rental Rate Conclusions Size of Space No. of Average (Sq. Ft.) Leases Rent/SF --------- ------ ------- Food Court 6 $40.00 Food Specialty 4 $30.00 Jewelry 5 $30.00 Restaurant 4 $20.00 500-1,000 9 $35.00 1,001-2,000 19 $30.00 2,001-10,000 44 $25.00 10,001 + 3 $20.00 Shoppes 19 $15.00 Outlots 7 $20.00 LANDAUER 62 REAL ESTATE COUNSELORS The forecasted basic lease structure and assumptions have been derived from the market, as determined by the rent survey and activity at the subject. The assumptions used in the DCF Analysis are: Projection Period: The projection period begins April 1, 1997, and extends for a term of 10 years through March, 2006. Fiscal year 1998 (the first full year) is used as the initial base year. The 11th year's (FY-2007) net operating income is capitalized to establish the reversionary value and is added to the 10th year cash flow. Gross Leasable Area: 349,222 square feet (Enclosed Mall) Lease Term: Typical leases at the subject are for a 10-year term. Although lease terms in the Shoppes vary from 3 to 10 years, we have also selected 10-year terms for these tenants. Growth Rates: Market rental rates have annual escalations of 3.5 percent from the first year. Expense categories are escalated annually at a rate of 3.5 percent through the projection period, except for management fees which are based upon a percentage of base rent and percentage rent. REVENUE Minimum Rent: Rental rates for current tenants are dependent on specific lease terms which have been modeled in our analysis. For currently vacant spaces and for lease rollovers, tenant spaces have been assigned the market rent for the appropriate category. Expense Recoveries: Most of the leases at the center are structured on a net basis with the tenant responsible for their defined pro rata share of operating expenses and real estate taxes based on gross leasable area. Common Area (CAM) and Food Court Expenses are related to the maintenance and repair of the common area of the center (site, parking area, etc.) and the food court. Items included within the CAM include: landscaping, snow removal, insurance, lighting and parking lot repairs. In LANDAUER 63 REAL ESTATE COUNSELORS the food court area, maintenance and cleaning expenses are found. Most tenants pay a direct pro-rata share of these expenses based on the GLA at the mall and the food court tenants pay a pro rata share of food court GLA. These expenses include a 15.0 percent administrative charge, and the CAM expense total is offset by anchor tenant contributions. Real Estate Taxes and Insurance Expenses are recovered based on the tenants prorated share of the GLA. The anchor tenants and outlot tenants are separately assessed for real estate taxes. We have not included the anchor and outlot tenant taxes in this analysis. The anchor tenants are considered credit tenants and no vacancy and credit loss is charged against their rent and operating expense contributions, including real estate taxes. However, we have included outlot taxes for the fact than if the outlot tenants ever vacate their buildings, the landlord would be required to pay the taxes on the improvements during the time required to release the buildings. Therefore, we have applied taxes to the outlots with recoveries based on a pro rata share of total outlot GLA. Percentage Rent: Also known as overage rent, percentage rent cited in the existing leases vary from 1.0 to 10.0 percent of sales above a natural or predetermined breakpoint. The most typical percentage rent rates found at the subject are 5.0 to 6.0 percent. Future sales volume forecasts for each tenant are based upon the information from 1994, 1995, and 1996 sales volume. Also, the previous owner's 1997 sales projections were considered. Vacancy/Credit Loss: A 2.0 percent deduction is taken against effective gross income to account for anticipated future vacancies and credit losses. All mall tenants are subject to the vacancy credit; however, the anchor stores are not subject to the credit loss factor. Other Incomes: Other incomes are generated from temporary tenants, kiosk tenants and storage leases. In this analysis, the temporary tenant category includes income from common area licenses, cart rental and temporary tenants. We have also projected storage rental and kiosk rental income. Temporary tenant income is estimated to be $50,000 for 1997. Kiosk income is estimated to be $20,500 and storage income is estimated to be $9,500. All of these incomes are increased at the general growth rate of 3.5 percent per year. LANDAUER 64 REAL ESTATE COUNSELORS Tenant Retention Ratio: Upon the expiration of the existing leases, it is estimated that 80.0 percent of the expiring tenants will renew and 20.0 percent will vacate when the leases expire. This ratio is applied to both enclosed mall tenants and shoppes tenants based on historical retention. Vacancy Between Leases: A weighted average of two months vacancy between leases is assumed at rollover for all enclosed mall, shoppes and outlot tenants, except the second floor units in Galahad. The second floor of Galahad is difficult to lease, and if a tenant vacated, it is our opinion that a longer period of time will be required to find a tenant for these spaces; therefore, we have applied a 4 month vacancy between leases for the second floor Galahad units. The weighted averages assume an actual downtime of six to nine months for all tenants, but 12 to 18 months for second floor Galahad tenants. Rent Concessions: Rent concessions are not common in the regional mall market. However, some malls will give free rent in lieu of contributing toward the tenant's alterations. No rent concessions are assumed in this analysis. Lease-up Assumptions: As of April 1, 1997, the subject is projected to have 45,767 square feet of vacant space, including 26,643 square feet on the second floor of Galahad and 2,560 square feet in the retail shoppes building. Our assumptions for leasing the vacant units are shown in the chart on the facing page. When leasing the enclosed mall and shoppes tenants, we have given consideration to the leasing projections presented by the landlord for Units 123, 41, 3329 and 134. We have projected the lease-up of the remaining spaces at one month intervals beginning in July 1997 and extending to May 1998. Rental rates and tenant finish allowances are taken into consideration based on the characteristics of individual spaces. For the second floor of Galahad, we have chosen to lease these vacant units last, at three month intervals beginning in July 1998. The landlord has provided a leasing projection and schedule for the second floor of Galahad, showing plans to lease 41,426 square feet between March and November 1997. The plan necessitates the relocation of some first floor tenants to create two units that would have both first and second floor access to shoppers. The rental rates were projected to be from $20.00 LANDAUER 65 REAL ESTATE COUNSELORS to $50.00 per square foot. Tenant finish costs were estimated to be from $30.00 to $100.00 per square foot. The leasing plan is already behind schedule and there is no assurance that the plan will be fulfilled. Therefore, we have made our own lease-up projections which are conservative and include a delayed and lengthy period of lease-up and lower rental rates. We have also included lower tenant finish costs of $20.00 per square foot. Options: Many of the tenants have renewal options included in their original leases. Most of the renewal terms cited in the leases indicate that the renewal rental rate will be at the prevailing market level. For this reason, we have not exercised any renewal options. However, for three outlot tenants (American Bandstand, Stuart Anderson's and NBD Bank), we have exercised their options because of their perceived creditworthiness and longevity at the subject for two of the tenants. Renewals: Upon expiration of current leases, tenants are renewed at the rental rate established for the unit characteristics, and we have included a rental step of $3.00 per square foot after the 60th month. The sales volume continues from the base lease is 100.0 percent of the prior sales. Each tenant is charged with a weighted average tenant improvement allowance. EXPENSES Operating Expenses: Operating expense estimates for Keystone at the Crossing Fashion Mall were based primarily upon historical data from 1995 actual, and 1996 projected figures. The 1997 budget estimate of expenses was also analyzed. We have also taken into consideration expense data from other similar shopping centers as well as from trade publications such as Dollars and Cents of Shopping Centers: 1995, published by the Urban Land Institute. However, our expense conclusion is based primarily upon the historical levels found at the subject and the 1997 budget. When analyzing the operating statements, we have reconciled the anchor tenant contributions which shows as a deduction in the statement. A summary of the historical operating levels are found in the table on the facing page. Within the table we have also made an allocation of expenses between the various areas: Guinevere, Galahad, shoppes and outlots. LANDAUER 66 REAL ESTATE COUNSELORS Recoverable Common Area (CAM) Expenses: Common area expenses include items such as utilities, HVAC, cleaning, repairs, lighting, landscaping, music, pest control security, supplies, water and sewer. This expense has been increasing steadily since 1995. The projected 1996 amount is $1,798,026 with the 1997 budget estimated to be about 6.0 percent higher at $1,926,799. We have included a small amount of expenses attributable to the outlot buildings in this category. We have concluded on the 1997 budget amount and have increased the expense by 3.5 percent. Insurance Expense: The insurance expenses have fluctuated over the last three years. In 1995 the expense was the highest at $171,854 and declined to $130,141 in 1996, as projected. The 1997 budget shows a 7.2 percent increase over the 1996 projection. In this analysis, we have concluded insurance expenses based on the estimated 1997 budget amount which increases each year based on an expense growth rate of 3.5 percent. Real Estate Taxes: Real estate taxes are concluded at an estimated level as discussed in the previous Real Estate Tax section of the report. Taxes for the enclosed, retail shoppes and outlots are included in the analysis. We have not included the real estate taxes for the owned anchor tenant parcels, as they pay the taxes directly to the Treasurer. As displayed in the Real Estate Tax Section of this report, the subject's taxes are based on historical levels levied against the subject and as estimated by the Treasurer for payment in 1997. Real estate taxes will increase each year based on an annual growth rate of 3.5 percent. Management Fee: Management fees in the regional mall market range from 3.0 percent to 5.0 percent, depending on the revenues to which it is applied and whether leasing commissions are paid separately. For most malls, the management fee is typically in the range of 4.5 percent of minimum and percentage rent and utility sales, charged between related entities. When applied to all revenue, management fees range between 3.0 and 3.5 percent. A higher management fee of 5.0 percent would be applied to a lower level of minimum and percentage rent; however, when leasing commissions are separately charged, the management fee would be lower. At the subject, the management fee is 4.0 percent of base rent and percentage rent for mall and shoppes tenants and 2.0 percent for outlot tenants. Additionally, leasing commissions are charged separately from the management fee. For the Keystone LANDAUER 67 REAL ESTATE COUNSELORS at the Crossing Fashion Mall, we conclude 4.0 percent which is applied to all base and percentage rent for all tenants, including the outlot tenants. Leasing Commissions are charged separately Merchant's Association: The landlord contributes to the merchant's association. In some leases the landlord's contribution is identified as 25.0 percent of the tenant's contribution. Historically, the landlord's merchant's association expense has ranged from $85,712 to $126,227, but is not identified in the 1997 budget. For this analysis, we have concluded $100,000 as the landlord's contribution to the merchant's association. Other and Professional: The concluded amount is supported by the historical levels shown in the chart. We note that the landlord did not provide an estimate of other expenses in the 1997 budget. In this analysis, we have concluded $115,000 for the combination of other ($60,000) and professional fee ($50,000) expenses. This expense increases by 3.5 percent per year in the analysis. Ground Rent: The Fashion Mall is subject to seven ground leases as previously discussed. The ground lease rental is specified as 5.0 percent of base and percentage rent from the tenants, and our ground lease rental for 1997 is estimated to be about $590,000. In this analysis, we have applied 5.0 percent to base rent and 4.8 percent to percent rent because of the terms of one of the ground leases. TOTAL EXPENSES The total expenses as concluded for 1997 are projected to be $4,109,066. The 1995 actual expenses were $3,009,461, and the 1996 projected expenses were $3,653,559. The 1997 budget estimate is $3,919,513 and our conclusion is 6.0 percent higher because of the inclusion of the landlord's contribution to the merchant's association, other expenses and a higher ground rent estimate. Overall, the expenses are considered typical for a regional mall. LANDAUER 68 REAL ESTATE COUNSELORS OCCUPANCY COSTS Occupancy cost tables are located in the Addenda. The mall occupancy costs are relatively stable averaging 8.51 percent, but over the ten year holding period, range from a low of 8.38 to a high of 8.66 percent. Occupancy costs for the enclosed mall tenants were reviewed which range from as low as 6.0 percent to as high as 29.0 percent. The occupancy costs for Guinevere tenants are lower (about 10.0 percent) compared to Galahad tenants (about 10.4 percent). For the retail shoppes tenants, the occupancy cost is about 17.5 percent over the holding period. The occupancy cost for the anchors is about 4.6 percent over the holding period. We note for these calculations, that the tenant's Merchant Association Fees are not included in the calculation, and if included, the occupancy costs would likely increase a small amount. Within the regional mall market, enclosed mall (in-line) retail tenant's occupancy costs would be below the 12.0 percent range, and the subject's occupancy costs of 10.25 percent are well below the average. On a tenant by tenant basis for enclosed mall tenants, the occupancy cost ranges from 6.0 to 29.0 percent. Those tenants with low occupancy costs would likely have a high probability of renewing their leases upon expiration of their lease. Conversely, the tenants with high occupancy costs would have a low probability of renewing their leases upon lease expiration. Nevertheless, the total mall occupancy cost is within reason, and we have confidence in the cash flow and assumptions used in the analysis. The occupancy costs from this analysis appear reasonable, and point to a stable mall operation. CAPITAL ITEMS This non-operating expense category includes tenant alteration and improvement costs, leasing commissions, and a capital reserve (or reserve for capital replacements). Tenant Alterations: We note that about the time that many of the current enclosed mall tenant leases expire, the tenant spaces will be 10-years old and would require some refurbishing. Furthermore, the LANDAUER 69 REAL ESTATE COUNSELORS enclosed mall tenants' renewal options specify that the renewal rental rate will be renegotiated to a market level, and there is no rental rate incentive for the tenant to renew. The landlord and tenant will renegotiate the rental rate with the tenant most likely demanding that the landlord contribute to refurbishing its space as if it was a new lease. To remain competitive in the future, new tenants will likely demand and receive from the landlord a larger amount of tenant finish. Local tenants would typically receive a lesser amount of tenant finish as will tenants with short term leases. National and retail tenants with longer lease terms or good credit would receive a greater amount of tenant finish from the landlord. Detail on landlord's new tenant improvement allowance has been provided. The information indicates that the tenant finish contribution for new tenants will average about $7.62 per square foot for new mall tenants on the first floor of Galahad and $32.77 on both floors of Guinevere. The landlord's contribution toward tenant finish is estimated to be from $30.00 to $100.00 per square foot for the second floor of Galahad. For renewals, the average tenant finish contribution was about $5.33 per square foot for Galahad and $0.00 per square foot for Guinevere. For this analysis, we will conclude $20.00 per square foot for new tenants and $5.00 per square foot for renewing tenants. This rate will be applied to all tenants including second floor Galahad space which has a reduced market rental rate that is 50.0 percent of the rental rate for comparable space in other parts of the mall. The landlord does not contribute toward the tenant finish of spaces in the retail shoppes. However, free rent has been given in lieu of tenant finish which has averaged $5.33 per square foot for new leases and nothing for renews. For this analysis, we have applied $5.00 per square foot for new tenants and no allowance for renewing tenants. The leasing probability ratio of 80.0 percent renew and 20.0 percent vacate is applied to both the enclosed mall and shoppes tenants. Leasing Commissions: Leasing commissions at the subject property were detailed by the landlord. For enclosed mall tenants the leasing commission has been about $5.50 per square foot for new tenants and $2.00 per square foot for renewing tenants. At the retail shoppes, the leasing commission for new tenants is about $3.20 per square foot for new tenants and $1.00 per square foot for renewing tenants. LANDAUER 70 REAL ESTATE COUNSELORS In this analysis, the leasing commissions are applied as described above. The leasing probability ratio of 80.0 percent renew and 20.0 percent vacate is applied to all of the leasing commissions. Capital Reserves: This category accounts for the fact that capital items such as the roof, building mechanical systems, and parking lot eventually will need major repairs or replacement. We are projecting a $0.10 per square foot replacement reserve expense, growing at a 3.5 percent rate. Cash Flow Analysis: Based upon the foregoing assumptions and projections, the cash flow forecast for Keystone at the Crossing Fashion Mall is presented on the following page. KEYSTONE AT THE CROSSING ANNUAL CASH FLOW REPORT BEGINNING 4/1/97 FOR 11 YEARS
FY1998 FY1999 FY2OOO FY2OOl FY2002 INCOME - ------ MINIMUM RENT: ALL TENANTS 11,075,384 11,566,158 12,094,548 12,496,258 12,893,642 ---------- ---------- ---------- ---------- ---------- TOTAL MINIMUM RENT 11,075,384 11,566,158 12,094,548 12,496,258 12,893,642 RECOVERIES: COMMON AREA MAINT. 2,106,590 2,260,875 2,430,636 2,555,140 2,706,575 REAL ESTATE TAX 715,655 767,765 818,138 859,447 902,029 INSURANCE 123,295 133,970 143,216 150,713 158,711 FOOD COURT CAM 98,556 87,863 105,576 106,263 113,094 ---------- ---------- ---------- ---------- ---------- TOTAL RECOVERIES 3,044,096 3,250,473 3,497,566 3,671,563 3,880,409 OVERAGE RENT 560,486 684,958 786,883 819,669 922,207 ---------- ---------- ---------- ---------- ---------- GROSS RENTAL INCOME 14,679,966 15,501,589 16,378,997 16,987,490 17,696,258 CREDIT LOSS (247,440) (262,102) (277,383) (288,649) (301,890) TEMPORARY TENANTS 50,438 52,203 54,030 55,921 57,878 KIOSKS 20,679 21,403 22,152 22,928 23,730 STORAGE 9,583 9,919 10,266 10,625 10,997 ---------- ---------- ---------- ---------- ---------- TOTAL INCOME 14,513,226 15,323,012 16,188,062 16,788,316 17,486,974 EXPENSES - -------- COMMON AREA MAINT. 1,943,659 2,011,686 2,082,095 2,154,969 2,230,392 REAL ESTATE TAX 790,464 818,130 846,764 876,401 907,075 NON-RECOVERABLE 116,006 120,066 124,269 128,618 133,120 MERCHANT'S ASSOC. 100,875 104,406 108,060 111,842 115,756 GROUND RENT 588,301 619,014 647,913 670,355 692,892 FOOD COURT CAM 98,555 102,004 105,574 109,270 113,094 INSURANCE 140,519 145,437 150,527 155,796 161,249 MANAGEMENT FEE 465,435 490,045 515,258 532,637 552,633 ---------- ---------- ---------- ---------- ---------- TOTAL EXPENSES 4,243,814 4,410,788 4,580,460 4,739,888 4,906,211 ---------- ---------- ---------- ---------- ---------- NET OPERATING INCOME 10,269,412 10,912,224 11,607,602 12,048,428 12,580,763 ALTERATIONS 419,594 452,457 655,335 364,245 225,656 COMMISSIONS 129,985 139,149 213,175 135,176 79,283 RESERVES 70,000 72,450 74,986 77,610 80,327 ---------- ---------- ---------- ---------- ---------- CASH FLOW 9,649,833 10,248,168 10,664,106 11,471,397 12,195,497 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 INCOME - ------ MINIMUM RENT: ALL TENANTS 13,074,942 13,135,724 13,536,240 13,973,260 14,312,294 14,542,734 ---------- ---------- ---------- ---------- ---------- ---------- TOTAL MINIMUM RENT 13,074,942 13,135,724 13,536,240 13,973,260 14,312,294 14,542,734 RECOVERIES: COMMON AREA MAINT. 2,793,916 2,862,614 2,952,166 3,072,765 3,179,443 3,293,696 REAL ESTATE TAX 937,030 960,491 990,853 1,030,320 1,061,225 1,101,570 INSURANCE 163,522 167,038 172,608 179,180 184,687 190,479 FOOD COURT CAM 117,054 121,152 125,388 129,780 134,322 139,020 ---------- ---------- ---------- ---------- ---------- ---------- TOTAL RECOVERIES 4,011,522 4,111,295 4,241,015 4,412,045 4,559,677 4,724,765 OVERAGE RENT 1,062,003 1,176,284 1,257,713 1,337,564 1,300,546 1,456,292 ---------- ---------- ---------- ---------- ---------- ---------- GROSS RENTAL INCOME 18,148,468 18,423,304 19,034,968 19,722,868 20,172,518 20,723,792 CREDIT LOSS (309,751) (313,780) (324,880) (337,793) (345,934) (356,080) TEMPORARY TENANTS 59,904 62,001 64,171 66,417 68,741 71,147 KIOSKS 24,561 25,420 26,310 27,231 28,184 29,170 STORAGE 11,382 11,780 12,192 12,619 13,061 13,518 ---------- ---------- ---------- ---------- ---------- ---------- TOTAL INCOME 17,934,564 18,208,724 18,812,762 19,491,344 19,936,570 20,481,548 EXPENSES - -------- COMMON AREA MAINT. 2,308,456 2,389,252 2,472,876 2,559,426 2,649,006 2,741,721 REAL ESTATE TAX 938,823 971,681 1,005,690 1,040,889 1,077,320 1,115,027 NON-RECOVERABLE 137,779 142,601 147,592 152,758 158,105 163,638 MERCHANT'S ASSOC. 119,808 124,001 128,341 132,833 137,482 142,294 GROUND RENT 706,854 719,231 743,603 766,660 782,790 804,501 FOOD COURT CAM 117,052 121,149 125,389 129,778 134,320 139,021 INSURANCE 166,892 172,734 178,779 185,037 191,513 198,216 MANAGEMENT FEE 565,476 572,479 591,756 612,431 624,511 639,959 ---------- ---------- ---------- ---------- ---------- ---------- TOTAL EXPENSES 5,061,140 5,213,128 5,394,026 5,579,812 5,755,047 5,944,377 ---------- ---------- ---------- ---------- ---------- ---------- NET OPERATING INCOME 12,873,424 12,995,596 13,418,736 13,911,532 14,181,523 14,537,171 ALTERATIONS 35,696 208,805 369,918 497,322 560,829 348,984 COMMISSIONS 12,047 72,044 150,294 174,430 189,279 131,640 RESERVES 83,138 86,048 89,060 92,177 95,403 98,742 ---------- ---------- ---------- ---------- ---------- ---------- CASH FLOW 12,742,543 12,628,699 12,809,464 13,147,603 13,336,012 13,957,805
LANDAUER 72 REAL ESTATE COUNSELORS DISCOUNTED CASH FLOW ANALYSIS As previously discussed, once the projected income stream over the projection period is determined, the next step is to discount the periodic cash flow and the reversion at the end of the holding period to an indicated value as of the valuation date. The following definitions and assumptions were employed in our analysis. Net Operating Income: Net income remaining after all expenses but before capital items, i.e., tenant improvement cost, leasing commissions, and capital expenditures. Cash Flow: Income available after all capital items, including reserves, leasing commissions and tenant improvements. Overall Rate: A rate which reflects the relationship of the first year's net income to total value, derived by dividing the net income by the indicated value. Discount Rate: A rate of return used to estimate the present value of future cash flows including the reversion (sales proceeds) of the property at the end of the holding period. The discount rate is alternately called an Internal Rate of Return. Terminal Capitalization Rate: An overall rate applied to the projected net operating income at the end of the holding period to determine the amount of the reversion. A disposition fee is usually deducted from the reversion. Holding Period: A holding period is the term of ownership of an investment, also referred to as the projection period for the purposes of analysis and valuation. LANDAUER 73 REAL ESTATE COUNSELORS RATE SELECTION The selection of appropriate Discount Rates and Terminal Capitalization Rates for use in arriving at an estimate of value is a judgmental process. Regional malls similar to the subject have a market appeal to both national and local investors. Therefore, competition with many other investment vehicles has an influence on rates of return required by investors. One method used to estimate an appropriate discount rate to apply in the discounted cash flow model is to analyze the investment parameters of institutional-type investors, both for real estate and non-real estate types of investments. The following yields were noted for non-real estate investments for the year ending March 21, 1997. Non-Real Estate Investment Yields Investment Instrument Yield Rate --------------------- ---------- Government Bonds (10 Years) 6.73% U.S. Treasury (30 Years) 6.97% Aaa-rated Corporate Bonds 7.61% Baa-rated Corporate Bonds 8.22% A-rated Utility Bonds (30 Years) 8.11% Government issues, considered near risk-free, tend to offer the lowest yield, while Baa-rated issues are generally among the highest. Yield rates have increased since one year ago in response to a slowing economy. Ten-year government bonds have increased over 37 basis points since last year, with 30-year treasury bills increasing 30 basis points. For real estate investments, rates may be influenced by risk, degree of liquidity, burden of management, tax benefits, and future appreciation or depreciation. Adjustments must be made to the safe rate to compensate for these factors. Consequently, required real estate yields are generally higher than those for non-real estate investments. LANDAUER 74 REAL ESTATE COUNSELORS The discount rates and terminal capitalization rates applicable to first-tier regional malls have remained relatively stable over the last year. As summarized on the facing page, according to the Korpacz Real Estate Investor Survey, First Quarter 1997, discount rates range from 10.0 to 14.0 percent, with an average of 11.69 percent. This represents a 19 basis point increase from average rates of one year ago. Residual capitalization rates range from 7.0 to 11.0 percent, with an average of 8.76 percent, a 20 basis point increase from first quarter 1996 levels. First year overall rates are reported at 7.00 to 11.0 percent with an average of 8.57 percent, representing a 46 basis point increase from last year's rates. CB Commercial's National Investor Survey, Third Quarter 1996, also indicates lower ranges for Class A regional malls, but similar averages in discount rates (10.0-11.8 percent, average 11.1 percent), terminal capitalization rates (7.0-9.5 percent, average 8.7 percent), and going-in capitalization rates (7.0-9.0 percent, average 8.2 percent). These rates show changes from the first quarter of 1996, with the exception of the terminal capitalization rate which did not change. In addition to the investor survey, we have reviewed the market for recent sales of regional malls in order to extract rates from the market. The table on the following facing page shows the rates for the regional mall sales that have sold since 1991. The sales indicate a range of discount rates (IRR) from 10.50 to 14.70 percent with an average of 11.91 percent. Initial capitalization rates range from 6.80 to 12.60 percent with an average of 8.44 percent. Overall rates varied based on the number of anchors included in the sale as well as on expansion opportunities of a center. This usually results in a lower rate because investors can expect to reap a development profit from a potential increase in cash flow. Yield requirements for investment properties throughout the United States have been relatively stable over the past year and competition for the better properties appears to be steady due to a variety of factors, including the scarcity of good quality investment real estate, the desire for an adequate hedge against inflation, and the quest for a safe haven for investment capital. Arising out of concerns over troubled real estate markets due to a receding economy and overbuilding, investor cash flow LANDAUER 75 REAL ESTATE COUNSELORS projections today tend to be more "realistic", incorporating assumptions and probabilities in keeping with actual market experience and predicated upon moderate future expectations. Good quality regional malls remain the top property preference for investors. Demand for these relatively scarce properties is strong and the market is characterized as a "seller's" market whereby the best properties are bid up in price. The market for average or "B" quality malls is less active than "A" malls like the subject in similar locations, and these properties must be competitively priced in order to attract buyers. The subject property is considered among the top malls in its metropolitan area, second to Circle Centre but equal to Castleton Square. Competition primarily comes from existing retail in the neighborhood which is presently being expanded with the construction of River Center and Fashion Commons. Regional mall competition is from Castleton Square, Glendale Center and Circle Centre. The entire subject property is on a ground lease which extends to 2067 and has an annual rental based on a percentage of tenant base rent and percentage rent. Taking these factors into consideration, it is our opinion that a discount rate of 11.75 percent is applicable to the cash flows forecast during the ten year holding period. Further, a terminal capitalization rate of 9.5 percent applied to the 11th year net operating income is appropriate to calculate the reversion value estimate. VALUATION BY DISCOUNTED CASH FLOW ANALYSIS The initial step when discounting with this methodology is to estimate the appraised property's reversionary value. Our reversion calculation assumes that the property would be sold at the end of the previously stated holding period. The reversion value of the property at that time is estimated by dividing the forecast net operating income (NOI) from the year following the projected holding period by the terminal capitalization rate. In addition, disposition costs of 0.5 percent are applied against the reversionary value in order to arrive at an estimate of the net reversion. The net reversion value is added to the last year of the projection period's net cash flow, which then represents the total future net cash flow to be received in that last year. LANDAUER 76 REAL ESTATE COUNSELORS MARKET VALUE ANALYSIS AS OF MARCH 18, 1997 This analysis begins April 1, 1997, and continues for ten years, ending March 31, 2006. The 11th year net operating income (Fiscal Year 2008) is capitalized to produce an estimated reversionary value at the end of the holding period. Considering the foregoing, the results of our analysis for Keystone at the Crossing Fashion Mall is as follows: Calculation of the Reversion 11th Year NOI (FY 2008) $14,537,171 Terminal Cap Rate 9.5% Gross Reversion $153,022,853 Disposition Costs (0.5%) (765,114) ------------ Net Reversion $152,257,738 This net reversion is then added to the 10th year's net cash flow, which then represents the total future net cash flow to be received in the 10th year. The following matrix shows the values indicated by discounting the cash flows at rates of 11.50, 11.75 and 12.00 percent. The square foot value equivalent is based on 648,222 square feet for Fashion Mall including anchors, mall, shoppes and outlots. Valuation Matrix Discount Rate Property Value Price/SF ---- -------------- -------- 11.50% $117,669,846 $181.53 11.75% $115,808,148 $178.66 12.00% $113,986,324 $175.84 LANDAUER 77 REAL ESTATE COUNSELORS Utilizing a 11.75 percent discount rate, the estimated value is $116,000,000 (rounded). Based on the concluded value, the overall rate in the first year is 8.9 percent and 9.4 percent in second year. The discounted reversionary value of $50,130,733 represents 43.2 percent of the final value, below 50/50 ratio preferred by many investors for a stabilized property. However, the reversion contribution to value also suggests that more reliance is placed in the cash flow, which is an investment assumption confirmed by numerous investors who have purchased malls in secondary markets. INDICATED VALUE BY THE DISCOUNTED CASH FLOW ANALYSIS.....................................$116,000,000 ============ LANDAUER 78 REAL ESTATE COUNSELORS CORRELATION AND CONCLUSION In this report, we have utilized the Sales Comparison and Income Approaches in estimating the Market Value of the Leasehold Interest of the subject property. A summary of our value estimates by each approach is as follows: Cost Approach Not Applicable Sales Comparison Approach $105,000,000 to $123,000,000 Income Approach $116,000,000 The reliability of the Cost Approach for the appraised property is weakened because an investor--the most probable potential purchaser of the property--typically is more concerned with the property's location, amenities, and ability to generate a required cash flow than with its replacement cost. In addition, the Cost Approach does not directly reflect the specific terms of actual leases signed or in negotiation at the property. Therefore, we have not used a Cost Approach in this analysis. The Sales Comparison Approach is an appraisal technique whereby the data of recent transactions involving similar or like properties is analyzed in order to derive an indication of the most probable sale price of the property being appraised. The reliability of this technique is dependent upon (a) the availability of comparable sales data, (b) the verification of the sales data, (c) the degree of comparability or extent of adjustment necessary for various factors, and (d) the absence of non-typical conditions affecting the sale price. In this instance, the significant amount of income received from the garage operation serves to skew traditional multipliers and indications of value. This approach is most meaningful when income properties exhibit similar income and expense characteristics. The sales utilized in the analysis are national in nature, but are not truly comparable because of varying economic structures of the transactions, including lease structures, occupancy, etc. However, the adjusted value range and the rates exhibited by the sales is useful as a check of the reasonableness of the Income Approach. The value range in this analysis is wide, 17.1 percent, LANDAUER 79 REAL ESTATE COUNSELORS because of the weaknesses in the methodology and does not provide us with much confidence in the Sales Comparison Approach. However, the value range brackets and supports the value indication produced by the Income Approach. Most significant is the Income Approach, which focuses on investors' primary concerns about the property's potential for generating income and value appreciation. This approach is particularly relevant when well-supported market rent and income data are available, and when major cash flow assumptions are supported by market-derived analysis. Because this approach closely parallels the thinking of well-informed buyers and sellers of income-producing properties, the present value estimate by this approach is given the most weight. Greatest reliance is placed on the Discounted Cash Flow Analysis value estimate. After consideration of the factors presented in this report and with greatest consideration given to the Discounted Cash Flow Analysis of the Income Approach in arriving at a final value, the Market Value of the Leasehold Interest in Keystone at the Crossing Fashion Mall, as of March 18, 1997, subject to existing tenant leases and the Assumptions and Limiting Conditions stated herein, is estimated to be: ONE HUNDRED SIXTEEN MILLION DOLLARS $116,000,000 ADDENDA Legal Description Photographs of Subject Property Ground Lease Summary Leasing Plan Real Estate Taxes Rental Rates Retail Sales Occupancy Costs Lease Abstract Reports Professional Qualifications EXHIBIT A PARCEL 1: The [ILLEGIBLE] Parcel (Fashion Mall II) Land being a part of the West Half of the Southwest Quarter of Section 17 and part of the Southeast-Quarter of Section 18, of Township 17 North, Range 4 East in Marion County, State of Indiana, more particularly described as follows: Commencing at the Southwest corner of the Southeast Quarter of said Section 8 (said corner being marked by a brass plug;) thence South 89 degrees 34 minutes 30 seconds East (record bearings) along the South line of said Southeast Quarter Section 2651.67 feet to the Southeast corner of said Section 18; thence South 89 degrees 08 minutes 38 seconds East along the South line of the West Half of the Southwest Quarter of Section 17, Township 7 North, Range 4 East in said county, 322.83 feet to a point on the West right-of-way line of an access road constructed by the Indiana State Highway Commission as a part of Project No. S-165(13); thence North 00 degrees 12 minutes 18 seconds East along said West right-of-way line and parallel with the West line of the Southwest Quarter of said Section 17, 106.94 feet to the point of Beginning of the real estate described herein; thence continuing North 00 degrees 12 minutes 18 seconds East along said West right-of-way line and parallel with said West line of the Southwest Quarter of said Section 17, 116.55 feet to the Northwest corner of Parcel 3 Permanent right-of-way 1, recorded as Instrument #72-29001 in the Office of the Recorder of Marion County, Indiana; thence North 89 degrees 12 minutes 36 seconds West 205.08 feet; thence South 00 degrees 12 minutes 18 seconds West parallel with said East line 380.24 feet; thence North 89 degrees 47 minutes 42 seconds West 44.50 feet to a point on the East line of Access Road No. 5 recorded as instrument #78-38380 in said Office of the Recorder of Marion County; thence South 00 degrees 12 minutes 18 seconds West along said East line a distance of 202.83 feet; thence South 89 degrees 47 minutes 42 seconds East perpendicular to said East line a distance of 195.00 feet; thence South 00 degrees 12 minutes 18 seconds West parallel with said East line a distance of 22.00 feet; thence North 89 degrees 47 minutes 42 seconds West perpendicular to said East line a distance of 195.00 feet to a point on said East line; thence South 00 degrees 12 minutes 18 seconds West along said East line a distance of 116.54 feet to a point on the Northerly line of Access Road No. 7 as per Instrument #78-51427 recorded in said Office of the Recorder of Marion County; thence the following 3 courses along said Northerly line; (1) South 6 degrees 09 minutes 42 seconds East 317.81 feet to a point on a curve concave Northerly having a central angle of 33 degrees 30 minutes 30 seconds and a radius of 120.00 feet; (2) Easterly along said curve an arc distance of 10.18 feet, said arc being subtended by a chord bearing South 72 degrees 54 minutes 57 seconds East having a length of 69.18 feet; (3) South 89 degrees 30 minutes 12 seconds East 418.76 feet to the Point of Beginning. Continued EXHIBIT A page 1 of 9 [ILLEGIBLE] therefore, the following described portion that was added as [ILLEGIBLE] A part of the Southeast Quarter of Section 18, Township 17 North, Range 4 East, in Marion County, Indiana, more particularly described as follows: From the Southwest corner of the Southeast Quarter of said Section 18, South 89 degrees 34 minutes 30 seconds East along the South line of said Southeast Quarter a distance of 2651.67 feet to the Southeast corner of Section 18; thence North 00 degrees 12 minutes 18 seconds East along the East line of said Southeast Quarter 1223.12 feet; thence North 89 degrees 12 minutes 36 seconds West a distance of 426.78 feet, said point being the Northeast corner of Access Road Number 5; thence South 00 degrees 12 minutes 18 seconds West on the East line of Access Road Number 5, a distance of 826.80 feet, said point being the point of beginning of this description. From the point of beginning South 89 degrees 47 minutes 42 seconds East, 149.01 feet; thence South 00 degrees 12 minutes 18 seconds West, 199.50 feet; thence North 56 degrees 09 minutes 42 seconds West, 33.63 feet; thence North 00 degrees 12 minutes 18 seconds East, 152.87 feet; thence North 89 degrees 47 minutes 42 seconds West, 121.01 feet to the East line of Access Road Number 5; thence North 00 degrees 12 minutes 18 seconds East along said East line, 28.00 feet to the point of beginning. PARCEL 1A: (Fashion Mall II - Part of Vacated Access Road Number 7) A part of the Southeast Quarter of Section 18, Township 17 North, Range 4 East, in Marion County, Indiana, more particularly described as follows: From the Southwest corner of the Southeast Quarter of said Section 18, South 89 degrees 34 minutes 30 seconds East along the South line of said Southeast Quarter a distance of 2651.67 feet to the Southeast corner of Section 18; thence North 00 degrees 12 minutes 18 seconds East along the East line of said Southeast Quarter 1223.12 feet; thence North 89 degrees 12 minutes 36 seconds West a distance of 426.78 feet, said point being the Northeast corner of Access Road Number 5; thence South 00 degrees 12 minutes 18 seconds West on the East line of Access Road Number 5, a distance of 927.17 feet, said point being the point of beginning of this description. From the point of beginning South 56 degrees 09 minutes 42 seconds East, 94.96 feet; thence South 63 degrees 40 minutes 37 seconds West, 69.17 feet; thence North 56 degrees 09 minutes 42 seconds West, 20.63 feet to the said East line of Access Road Number 5; thence North 00 degrees 12 minutes 18 seconds East, 72.06 feet to the point of beginning. Parcel 2: (Deleted) Continued EXHIBIT A page 2 of 9 PARCEL 3: James Tavern-Lease Parcel A part of the Southeast Quarter of Section 18, and a part of the Northeast Quarter of Section 19, all in Township 17 North, Range 4 East in Marion County, State of Indiana, more particularly described as follows: Commencing at the Southwest corner of the Southeast Quarter of said Section 18 (said corner being marked by a brass plug); thence South 89 degrees 34 minutes 30 seconds East (record bearings) along the South line of said Southeast Quarter Section 2651.67 feet to the Southeast corner of said Section 18; thence South 89 degrees 08 minutes 38 seconds East along the South line of the West half of the Southwest Quarter of Section 17, Township 17 North, Range 4 East in said County, 322.83 feet to a point on the West right-of-way line of an access road constructed by the Indiana State Highway Commission as a part of Project No. S-165(13); thence North 00 degrees 12 minutes 18 seconds East along said West right-of-way and parallel with the West line of the Southwest Quarter of said Section 17, 1223.49 feet to the Northwest corner of Parcel 3 Permanent Right-of-Way 1, recorded as Instrument #72-29001 in the Office of the Recorder of Marion County, Indiana; thence North 89 degrees 12 minutes 36 seconds West 749.61 feet to a point on the East right-of-way line of a North-South access road; thence South 00 degrees 12 minutes 18 seconds West along said East line 1030.20 feet; thence South 89 degrees 47 minutes 42 seconds East a distance of 43.53 feet to the point of beginning of real estate described herein thence South 00 degrees 12 minutes 18 seconds West a distance of 262.99 feet to a point on the North right-of-way line of 86th Street; thence South 55 degrees 50 minutes 03 seconds East along said North line 310.44 feet; thence South 62 degrees 53 minutes 55 seconds East along said North line 68.40 feet; thence North 00 degrees 12 minutes 18 seconds East a distance of 314.21 feet to a point on the South line of an East-West access road; thence North 89 degrees 40 minutes 12 seconds West along said South line 64.40 feet; thence North 59 degrees 46 minutes 16 seconds West 115.35 feet; thence North 58 degrees 04 minutes 53 seconds West 181.28 feet to the point of beginning. Except that portion of the above described real estate that was conveyed to the Consolidated City of Indianapolis, by Quitclaim Deed acknowledged March 30, 1988, recorded April 7, 1988, as Instrument #88-31277, in the Office of the Recorder of Marion County, Indiana. PARCEL 4: Saga Property-Lease Parcel Land being a part of the Southeast Quarter of Section 18, part of the Southwest Quarter of Section 17, part of the Northeast Quarter of Section 19 and part of the Northwest Quarter of Section 20 of Township 17 North, Range 4 East, in Marion County, State of Indiana, more particularly described as follows: Continued EXHIBIT A page 3 of 9 Commencing at the Southwest corner of the Southeast Quarter of said Section [ILLEGIBLE] (said corner being marked by a brass plug); thence South 89 degrees 04 minutes 30 seconds East (record bearings) along the South line of said Southeast Quarter Section 2651.67 feet to the Southeast corner of said Section 18; thence South 89 degrees 37 minutes 53 seconds East along the South line of the West Half of the Southwest Quarter of Section 17, Township 17 North, Range 4 East in said County, 322.81 feet to a point on the Westerly right of way line of an access road constructed by the Indiana State Highway Commission as part of Project No. S-165(13), said point also being on the Northerly line of a right of way grant to the City of Indianapolis, recorded as Instrument No. 82-68938, in the Office of the Recorder of said County; thence North 00 degrees 12 minutes 18 seconds East, along said Westerly right of way line and parallel with the West line of the Southwest Quarter of said Section 17 a distance of 44.19 feet to a point on the South line of Access Road No. 7 as recorded as Instrument No. 78-51427 in the Office of the Recorder of said County; thence North 89 degrees 40 minutes 12 seconds West along said South line 153.56 feet to the point of beginning; thence continuing North 89 degrees 40 minutes 12 seconds West along said South line 234.00 feet; thence South 00 degrees 12 minutes 18 seconds West parallel with the West line of the Southwest Quarter of said Section 17, a distance of 314.21 feet to a point on the Northerly right of way line of 86th Street; thence South 62 degrees 53 minutes 55 seconds East along said Northerly right of way line 262.38 feet; thence North 00 degrees 12 minutes 18 seconds East parallel with the West line of the Southwest Quarter of said Section 17 a distance of 432.40 feet to the point of beginning. Except that portion of the above described real estate that was conveyed to the Consolidated City of Indianapolis, by Quitclaim Deed acknowledged March 30, 1988, recorded April 7, 1988, as Instrument #88-31277, in the Office of the Recorder of Marion County, Indiana. PARCEL 5: (West of James Tavern - Lease Parcel) Land being a part of the Southeast Quarter of Section 18, and a part of the Northeast Quarter of Section 19, all in Township 17 North, Range 4 East in Marion County, Indiana, more particularly described as follows: Commencing at the Southwest corner of the Southeast Quarter of said Section 18 (Said corner being marked by a brass plug); thence South 89 degrees 34 minutes 30 seconds East (record bearings) along the South line of said Southeast Quarter Section 2651.67 feet to the Southeast corner of said Section 18; thence South 89 degrees 08 minutes 38 seconds East along the South line of the West half of the Southwest Quarter of Section 17, Township 17 North, Range 4 East in said County, 322.83 feet to a point on the West right-of-way line of an access road constructed by the Indiana State Highway Commission as a part of Project No. S-165(13); thence North 00 degrees 12 minutes 18 seconds East along said West right-of-way line and parallel with the West line of the Southwest Quarter of said Section 17, 1223.49 feet the Northwest corner of Parcel 3 Permanent Right-of-Way 1, recorded as Continued EXHIBIT A page 4 of 9 [ILLEGIBLE] feet to a point on [ILLEGIBLE] line of a North-South access road; being access road [ILLEGIBLE], as recorded as Instrument No. 78-38380, in the Office of the Recorder; thence South 00 degrees 12 minutes 18 seconds West along said East right-of-way line 999.23 feet to the point of beginning of the real estate described herein; thence South 56 degrees 09 minutes 42 seconds East along the Southerly right-of-way line of access road number 7 as recorded as Instrument $78-51427, in the Office of the Recorder, 52.28 feet; thence South 30 degrees 12 minutes 18 seconds West 265.02 feet to a point on the North right-of-way line of 86th Street; thence North 73 degrees 21 minutes 52 seconds West along said North line 57.10 feet to a point on the aforementioned East right-of-way of access road number 5; thence North 03 degrees 30 minutes 57 seconds East along said East line 194.67 feet; thence North 00 degrees 12 minutes 18 seconds East along said East line 83.48 feet to the point of beginning. Excepting from the above described real estate, that portion added as part of access Road No. 7, to-wits: A part of the Southeast Quarter of Section 18, Township 17 North, Range 4 East, in Marion County, Indiana, more particularly described as follows: From the Southwest corner of the Southeast Quarter of said Section 18, South 89 degrees 34 minutes 30 seconds East along the South line of said Southeast Quarter a distance of 2651.67 feet to the Southeast corner of Section 18; thence North 00 degrees 12 minutes 18 seconds East along the East line of said Southeast Quarter 1223.12 feet; thence North 89 degrees 12 minutes 36 seconds West a distance of 426.78 feet, said point being the Northeast corner of Access Road Number 5; thence South 00 degrees 12 minutes 18 seconds West on the East line of Access Road Number 5, a distance of 1019.23 feet, said point being the point of beginning of this description. From the point of beginning, North 63 degrees 40 minutes 37 seconds East, 19.20 feet; thence South 56 degrees 09 minutes 42 seconds East, 31.65 feet; thence South 00 degrees 12 minutes 18 seconds West 2.01 feet; thence South 56 degrees 30 minutes 08 seconds West 42.32 feet; thence South 28 degrees 21 minutes 13 seconds West 17.63 feet to the East line of said Access Road Number 5; thence North 00 degrees 12 minutes 18 seconds East along said line; 50.00 feet to the point of beginning. ALSO, except that portion of the above described real estate that was conveyed to the Consolidated City of Indianapolis, by Quitclaim Deed acknowledged March 30, 1988, recorded April 7, 1988, as Instrument #88-31277, in the Office of the Recorder of Marion County, Indiana. Continued EXHIBIT A page 5 of 9 [ILLEGIBLE] [ILLEGIBLE] of the Southeast Quarter of Section 18, Township 17 North, Range 4 East in Marion County, Indiana, being more particularly described as follows: Commencing at the Southwest corner of the Southeast Quarter of said Section 18 (said corner being marked by a brass plug); thence South 89 degrees 34 minutes 30 seconds East (record bearing) along the South line of said Southeast Quarter Section 2651.67 feet to the Southeast corner of said Section 18; thence South 89 degrees 08 minutes 38 seconds East along the South line of the West half of the Southwest Quarter of Section 17, Township 17 North, Range 4 East in said County, 322.83 feet to a point on the West right of way line of an access road constructed by the Indiana State Highway Commission as a part of Project No. S-165 (13); thence North 00 degrees 12 minutes 18 seconds East along said West right of way line and parallel with the West line of the Southwest Quarter of said Section 17, 1223.49 feet to the Northwest corner of Parcel 3 Permanent Right of way 1, recorded as Instrument #72-29001, in the Office of the Recorder of Marion County, Indiana; thence North 89 degrees 12 minutes 36 seconds West 749.61 feet to a point on the East right of way line of Access Road No. 5 recorded as Instrument #78-038380 in the Office of the Recorder of Marion County;, Indiana; thence South 00 degrees 12 minutes 18 seconds West along said West right of way line 588.63 feet to the point of beginning of the real estate described herein; thence South 89 degrees 47 minutes 42 seconds East 195.00 feet; thence South 00 degrees 12 minutes 18 seconds West 222.00 feet; thence North 89 degrees 47 minutes 42 seconds West 195.00 feet to a point on said East right of way line; thence North 00 degrees 12 minutes 18 seconds East on and along said East right of way line 222.00 feet to the point of beginning. PARCEL 7: (Ciatti's - Lease Parcel) Land being a part of the Southwest Quarter of Section 17 and part of the Northwest Quarter of Section 20 of Township 17 North, Range 4 East, in Marion County, Indiana, more particularly described by the following two parcels: Commencing at the Southwest corner of the Southeast Quarter of said Section 18 (said corner being marked by a brass plug); thence South 89 degrees 34 minutes 30 seconds East (record bearing) along the South line of said Southeast Quarter Section 2651.67 feet to the Southeast corner of said Section 18; thence South 89 degrees 37 minutes 53 seconds East along the South line of the West Half of the Southwest Quarter of Section 17, Township 17 North, Range 4 East in said County, 322.81 feet to a point on the Westerly right of way line of an access road constructed by the Indiana State Highway Commission as a part of Project No. S-165 (13) said point also being on the Continued EXHIBIT A page 6 of 9 REAL ESTATE DESCRIPTION Northerly line of a right of way grant to the City of Indianapolis recorded as Instrument No. 83-68938 in the Office of the Recorder of said County, said point being the point of beginning; thence North 00 degrees 12 minutes 18 seconds East along said Westerly right of way line and parallel with the West line of the Southwest Quarter of said Section 17 a distance of 44.19 feet to a point on the South line of Access Road No. 7 recorded as Instrument No. 78-51427 in the Office of the Recorder of said County; thence North 89 degrees 40 minutes 12 seconds West along said South line 153.56 feet; thence South 00 degrees 12 minutes 18 seconds West parallel with the West line of the Southwest Quarter of said Section 17 a distance of 432.40 feet to a point on the Northerly right of way line of 86th Street; thence South 62 degrees 53 minutes 55 seconds East along said Northerly right of way line 119.22 feet to a point on the Westerly line of said right of way Grant to the City of Indianapolis; thence the following five (5) courses being along the Westerly and Northerly line of said right of way grant; (1) North 50 degrees 38 minutes 15 seconds East 100.17 feet; (2) North 10 degrees 28 minutes 37 seconds East 140.32 feet (3) North 16 degrees 45 minutes 25 seconds West 137.64 feet to a point on a curve concave Easterly having a central angle of 21 degrees 50 minute 53 seconds and a radius of 290.44 feet; (4) Northerly along said curve an arc distance of 110.75 feet (said arc being subtended by a chord having a bearing of North 10 degrees 10 minutes 31 seconds Westand a length of 110.08 feet); (5) South 89 degrees 37 minutes 53 seconds East 4.99 feet to the point of beginning. Except that portion of the above described real estate that was conveyed to the Consolidated City of Indianapolis, by Quiteclaim Deed acknowledged March 30, 1988, recorded April 7, 1988, as Instrument #88-31277, in the Office of the Recorder of Marion County, Indiana. PARCEL 8: Together with the non-exclusive easements for ingress and egress and for public utilities in favor of Parcels 1 through 7, above, as granted in Grant of Roadway Easement recorded as Instruments #78-38380, #78-51427, #80-79865, and #83-88564, as modified by the Fifth Grant and Relocation of Roadway Easement dated December 15, 1987, recorded February 3, 1988, as Instrument #88-10313, and in the Sixth Grant of Roadway Easement recorded as Instrument #88-42768, and further modified by the Seventh Grant and Relocation of Roadway Easement dated February 22, 1989, recorded February 27, 1989, as Instrument #89-17963, in the Office of the Recorder of Marion County, Indiana; and further modified by the Eighth Grant and Relocation of Roadway Easement dated July 20, 1989, recorded _________, 1989, as Instrument No. _____ in the Office of the Recorder of Marion County, Indiana. Continued EXHIBIT A page 7 of 9 REAL ESTATE DESCRIPTION (Continued) PARCEL 9 - (Keystone Crossing Shoppes - Lease Parcel) Part of the North Half of the Northeast Quarter of Section 19 and a part of the North Half of the Northwest Quarter of Section 20, all in Township 17 North, Range 4 East of the Second Principal Meridian, Marion County, Indiana, more particularly described as follows: Commencing at the Northwest corner of the Northeast Quarter of Section 19, Township 17 North, Range 4 East; thence South 89 degrees 34 minutes 31 seconds East 1215.88 feet; thence South 00 degrees 17 minutes 46 seconds West 641.50 feet; thence South 89 degrees 34 minutes 31 seconds East 944.34 feet to the point of beginning; thence North 00 degrees 25 minutes 29 seconds East 120.27 feet to a non-tangent curve concave Northerly having a central angle of 09 degrees 08 minutes 24 seconds and a radius of 252.89 feet, the radius point of which bears North 08 degrees 47 minutes 54 seconds East; thence Westerly along the arc of said curve a distance of 40.34 feet (said arc being subtended by a long chord having a bearing of North 76 degrees 37 minutes 54 seconds West and a length of 40.30 feet; thence North 69 degrees 57 minutes 13 seconds West 77.41 feet to a non-tangent curve concave Southeasterly having a central angle of 90 degrees 39 minutes 02 seconds and a radius of 25.20 feet, the radius point of which bears South 23 degrees 51 minutes 43 seconds West; thence Westerly, Southwesterly,, and Southerly along the arc of said curve a distance of 39.87 feet (said arc being subtended by a long chord having a bearing of South 68 degrees 32 minutes 12 seconds West and a length of 35.84 feet); thence North 20 degrees 11 minutes 02 seconds East 54.84 feet; thence South 69 degrees 48 minutes 58 seconds East 214.94 feet; thence North 20 degrees 11 minutes 02 seconds East 199.50 feet to the South right-of-way of State Road 100; thence along said right-of-way the following 2 courses: (1) South 68 degrees 05 minutes 42 seconds East 38.95 feet; (2) South 62 degrees 54 minutes 07 seconds East 517.69 feet; thence South 44 degrees 12 minutes 16 seconds East 103.99 feet to the centerline of Union Chapel Road; thence along said centerline South 48 degrees 57 minutes 11 seconds West 215.09 feet to the Southeast corner of a 0.88 acre parcel of land deeded to Archie F. and Pamela K. Kerr as described in Instrument No. 47421-62 in the Office of the Recorder of Marion County, Indiana; thence North 43 degrees 47 minutes 50 seconds West 215.54 feet to the Northeast corner of said 0.88 acre parcel; thence North 89 degrees 34 minutes 31 seconds West 403.23 feet to the Point of Beginning. Together with the subject to the non-exclusive easements for ingress and egress as set out in Declaration of Easements dated August 29, 1983, recorded September 7, 1983, as Instrument #83-64376, as supplemented by Declarations recorded as Instruments #83-74602, #83-77949, #84-626, #84-12710, #84-16887, and in Grant and Relocation of Easement for Ingress and Egress dated July 20, 1989, recorded _____________, 1989, as Instrument #89-___________________, in the Office of the Recorder of Marion County, Indiana. Continued EXHIBIT A page 8 of 9 REAL ESTATE DESCRIPTION (Continued) PARCEL 10: (Revised Access Road No. 7) A part of the Southeast Quarter of Section 18 and Southwest Quarter of Section 17, Township 17 North, Range 4 East, in Marion County, Indiana, more particularly described as follows: From the Southwest corner of the Southeast Quarter of said Section 18, South 39 degrees 34 minutes 30 seconds East along the South line of said Southeast Quarter a distance of 2651.67 feet to the Southeast corner of Section 18; thence North 00 degrees 12 minutes 18 seconds East along the East line of said Southeast Quarter 1223.12 feet; thence North 89 degrees 12 minutes 36 seconds West a distance of 426.78 feet, said point being the Northeast corner of Access Road Number 5; thence South 00 degrees 12 minutes 18 seconds West on the East ine of Access Road Number 5, a distance of 826.80 feet, said point being the point of beginning of the Revised Access Road Number 7. From the point of beginning South 89 degrees 47 minutes 42 seconds East 149.01 feet; thence South 00 degrees 12 minutes 18 seconds West, 199.50 feet; thence South 56 degrees 09 minutes 42 seconds East, 138.83 feet to a point on a tangent curve to the left having a radius of 120.00 feet and a central angle of 33 degrees 30 minutes 30 seconds; thence along said curve an arc distance of 70.18 feet (said arc being subtended by a chord having a bearing of South 72 degrees 55 minutes 02 seconds East, and a length of 69.19 feet); thence South 89 degrees 40 minutes 12 seconds East, 418.76 feet; thence South 00 degrees 12 minutes 18 seconds West, 60.00 feet; thence North 89 degrees 40 minutes 12 seconds West, 451.95 feet; thence North 59 degrees 46 minutes 16 seconds West, 115.35 feet; thence North 58 degrees 04 minutes 53 seconds West, 181.28 feet; thence South 56 degrees 30 minutes 08 seconds West, 42.32 feet; thence South 28 degrees 21 minutes 13 seconds West 17.63 feet to the East line of Access Road Number 5; thence North 00 degrees 12 minutes 18 seconds East, 50.00 feet along said East line; thence North 63 degrees 40 minutes 37 seconds East, 88.37 feet; thence South 56 degrees 09 minutes 42 seconds East, 50.38 feet; thence North 00 degrees 12 minutes 18 seconds East, 152.87 feet; thence North 89 degrees 47 minutes 42 seconds West, 121.01 feet to the East line of Access Road Number 5; thence North 00 degrees 12 minutes 18 seconds East along said East line, 28.00 feet to the point of beginning. END OF REAL ESTATE DESCRIPTION EXHIBIT A page 9 of 9 Parcel 2 (Fashion Mall West II) Part of the Southeast Quarter of Section 18, Township 17 North, Range 4 East in Marion County, State of Indiana, more particularly described as follows: Commencing at the Southwest corner of the Southeast Quarter of said Section 18 (said corner being marked by a brass plug); thence South 89 degrees 34 minutes 30 seconds East (record bearings) along the South line of said Southeast Quarter Section 2651.67 feet to the Southeast corner of said Section 18; thence South 89 degrees 08 minutes 38 seconds East along the South line of the West half of the Southwest Quarter of Section 17, Township 17 North, Range 4 East in said County, 322.83 feet to a point on the West right-of-way line of an access road constructed by the Indiana State Highway Commission as a part of Project No. S-165 (13); thence North 00 degrees 12 minutes 18 seconds East along said West right-of-way line and parallel with the West line of the Southwest Quarter of said Section 17, 1223.49 feet to the Northwest corner of Parcel 3 Permanent Right-of-Way 1, recorded as Instrument #72-29001 in the Office of the Recorder of Marion County, Indiana; thence North 89 degrees 12 minutes 36 seconds West 819.61 feet to a point on the West right-of-way line of an existing North-South access road; thence South 00 degrees 12 minutes 18 seconds West along said West right-of-way line of said interior access road 872.227 feet to a point on the North right-of-way line of an interior East-West access road, said point being the Northeast corner of Access Road No. 6 as recorded as Instrument #78-38380 in the Office of the Recorder of Marion County; thence South 89 degrees 20 minutes 00 seconds West along said North right-of-way line and its prolongation 492.561 feet to the point of beginning of the real estate described herein; thence North 00 degrees 00 minutes 00 seconds East 176.785 feet; thence North 90 degrees 00 minutes 00 seconds West 37.318 feet; thence North 00 degrees 00 minutes 44 seconds West 170.700 feet; thence North 89 degrees 58 minutes 36 seconds West 20.500 feet; thence North 00 degrees 05 minutes 12 seconds West 41.886 feet; thence South 89 degrees 51 minutes 10 seconds East 20.530 feet; thence North 00 degrees 06 minutes 34 seconds West 375.466 feet; thence North 90 degrees 00 minutes 00 seconds West 236.346 feet to the Easterly right-of-way line of State Road 431; thence South 10 degrees 08 minutes 06 seconds West along said Easterly right-of-way line 280.419 feet; thence South 01 degrees 44 minutes 13 seconds East along said Easterly right-of-way line 492.570 feet; thence North 89 degrees 20 minutes 00 seconds East 308.887 feet to the point of beginning. Together with the non-exclusive easements for ingress and egress and for public utilities granted in Grant of Roadway Easement dated June 14, 1978, recorded June 19, 1978 as Instrument #78-38380 and in Grants of Roadway Easements recorded as Instruments #78-51427, #80-79865, #83-88564, as modified by Instruments #88-10313, #88-42768, and #89-17963 in the Office of the Recorder of Marion County, Indiana, and as further modified by Eighth Grant and Relocation of Roadway Easement dated March 11, 1991, recorded January 16, 1992 as Instrument #92-6391. ALSO: Together with the subject to the non-exclusive easements created in the Declaration of Easements, Rights, Restrictions, Covenants, and Agreements Relating to Skywalks at Keystone at the Crossing dated June 30, 1988, recorded June 30, 1988 as Instrument #88-64499, and amended by Corrective Declaration dated December 21, 1988, recorded January 25, 1989 as Instrument #89-7803. Parcel 3 (Fashion Mall West I) Part of the Southeast Quarter of Section 18, Township 17 North, Range 4 East, in Marion County, State of Indiana, more particularly described as follows: Commencing at the Southwest corner of the Southeast Quarter of said Section 18 (said corner being marked by a brass plug); thence South 89 degrees 34 minutes 30 seconds East (record bearings) along the South line of said Southeast Quarter Section 2651.67 feet to the Southeast corner of said Section 18; thence South 89 degrees 08 minutes 38 seconds East along the South line of the West Half of the Southwest Quarter of Section 17, Township 17 North, Range 4 East in said County 322.83 feet to a point on the West right of way line of an access road constructed by the Indiana State Highway Commission as a part of Project No. S-165(13); thence North 00 degrees 12 minutes 18 seconds East along said West right of way line and parallel with the West line of the Southwest Quarter of said Section 17, 1223.49 feet to the Northwest corner of Parcel 3 Permanent Right of Way 1, recorded as Instrument #72-29001, in the Office of the Recorder of Marion County Indiana; thence North 89 degrees (Continued) 12 minutes 36 seconds West 819.61 feet to the Northwest corner of Access Road No. 5 as per Grant of Roadway Easement recorded as Instrument #78-38380 said point being the Point of Beginning of the real estate described herein; thence South 00 degrees 12 minutes 18 seconds West along the West right of way line of said Access Road 812.23 feet to the Northeast corner of Revised Access Road No. 6 as per Fifth Grant and Relocation of Roadway Easement recorded as Instrument #88-10313; thence on the following two courses along the North line of said Revised Access Road No. 6; (1) South 89 degrees 20 minutes 00 seconds West 120.75 feet to the point of curvature of a curve concave Southeasterly, having a central angle of 55 degrees 08 minutes 53 seconds and a radius of 140.00 feet; (2) Southwesterly along said curve an arc distance of 134.75 feet (said arc being subtended by a chord having a bearing of South 61 degrees 45 minutes 33 seconds West and a length of 129.61 feet) to the North line of Access Road No. 6 per said Grant of Roadway Easement; thence South 89 degrees 20 minutes 00 seconds West along said North right of way line and its prolongation 257.84 feet; thence North 00 degrees 00 minutes 00 seconds East 176.79 feet; thence North 90 degrees 00 minutes 00 seconds West 37.32 feet; thence North 00 degrees minutes 44 seconds West 170.70 feet; thence North 89 degrees 58 minutes 36 seconds West 20.500 feet; thence North 00 degrees 05 minutes 12 seconds West 41.89 feet; thence South 89 degrees 51 minutes 10 seconds East 20.53 feet; thence North 00 degrees 06 minutes 34 seconds West 375.47 feet; thence North 90 degrees 00 minutes 00 seconds West 236.35 to the Easterly right of way line of State Road 431; thence North 10 degrees 08 minutes 06 seconds East along said Easterly right of way line 125.43 feet; thence South 89 degrees 12 minutes 36 seconds East 748.10 feet to the Point of Beginning. Together with the non-exclusive easements for ingress and egress and for public utilities granted in Grant of Roadway Easement dated June 14, 1978, recorded June 19, 1978 as Instrument #78-38380 and in Grants of Roadway Easements recorded as Instruments #78-51427, #80-79865, #83-88564 as modified by Instruments #88-10313, #88-42768, and #89-17963 in the Office of the Recorder of Marion County, Indiana, and as further modified by Eighth Grant and Relocation of Roadway Easement dated March 11, 1991, recorded January 16, 1992 as Instrument #92-6391. ALSO: Together with a subject to the non-exclusive easements created in the Declaration of Easements, Rights, Restrictions, Covenants, and Agreements Relating to Skywalks at Keystone at the Crossing dated June 30, 1988, recorded June 30, 1988 as Instrument #88-64499 and amended by Corrective Declaration dated December 21, 1988, recorded January 25, 1989 and #89-7803. Parcel 4: Rosa Corona-Lease Parcel Land being a part of the Southeast Quarter of Section 18, Township 17 North, Range 4 East in Marion County, State of Indiana, more particularly described as follows: Commencing at the Southwest corner of the Southeast Quarter of said Section 18 (said corner being marked by a brass plug); thence South 89 degrees 34 minutes 30 seconds East (record bearings) along the South line of said Southeast Quarter Section 2651.67 feet to the Southeast corner of said Section 18; thence South 89 degrees 08 minutes 38 seconds East along the South line of the West Half of the Southwest Quarter of Section 17, Township 17 North, Range 4 East in said county, 322.83 feet to a point on the West right-of-way line of an access road constructed by the Indiana State Highway Commission as a part of Project S-165(13); thence North 00 degrees 12 minutes 18 seconds East along said West right-of-way line and parallel with the West line of the Southwest Quarter of said Section 17, 1223.49 feet to the Northwest corner of Parcel 3 Permanent Right-of-Way 1, recorded as Instrument No. 72-29001 in the Office of the Recorder of Marion County, Indiana; thence North 89 degrees 12 minutes 36 seconds West 819.61 feet to a point on the West right-of-way line of Access Road No. 5 recorded as Instrument No. 78-38380 in the Office of the Recorder of Marion County; thence South 00 degrees 12 minutes 18 seconds West along said West right-of-way line 872.22 feet to a point on the North right-of-way line of Access Road No. 6 recorded as Instrument No. 78-38380 in the Office of the Recorder of Marion County; thence South 89 degrees 20 minutes 00 seconds West on and along said North right-of-way line of said East-West access road and its prolongation 542.56 feet to the point of beginning of the real estate described herein; continuing thence South 89 degrees 20 minutes 00 seconds West 258.88 feet to a point on the Easterly right-of-way of State (Continued) Road 431 (the following three calls being along the Easterly right-of-way of said State Road 431 and the Northerly right-of-way of 86th Street); thence South 01 degrees 44 minutes 13 seconds East 199.19 feet; thence South 66 degrees 17 minutes 47 seconds East 105.66 feet; thence South 82 degrees 36 minutes 51 seconds East 301.74 feet; thence North 00 degrees 40 minutes 00 seconds West 225.02 feet; thence South 89 degrees 20 minutes 00 seconds West 140.54 feet; thence North 00 degrees 00 minutes 00 seconds East 60.00 feet to the point of beginning. Together with the non-exclusive easements for ingress and egress and for public utilities granted in Grant of Roadway Easement dated June 14, 1978, recorded June 19, 1978 as Instrument #78-38380 and in Grants of Roadway Easements recorded as Instruments #78-51427, #80-79865, #83-88564, as modified by Instruments #88-10313, #88-42768, and #89-17963 in the Office of the Recorder of Marion County, Indiana, and as further modified by Eighth Grant and Relocation of Roadway Easement dated March 11, 1991, recorded January 16, 1992 as Instrument #92-6391. ALSO: Together with and subject to the non-exclusive easements created in the Declaration of Easements, Rights, Restrictions, Covenants, and Agreements Relating to Skywalks at Keystone at the Crossing dated June 30, 1988, recorded June 30, 1988 as Instrument #88-64499, and amended by Corrective Declaration dated December 21, 1988, recorded January 25, 1989 as Instrument #89-7803. Parcel 5: INB Branch-Lease Parcel Land being a part of the Southeast Quarter of Section 18, Township 17 North, Range 4 East in Marion County, State of Indiana, more particularly described as follows: Commencing at the Southwest corner of the Southeast Quarter of said Section 18 (said corner being marked by a brass plug); thence South 89 degrees 34 minutes 30 seconds East (record bearings) along the South line of said Southeast Quarter Section 2651.67 feet to the Southeast corner of said Section 18; thence South 89 degrees 08 minutes 38 seconds East along the South line of the West Half of the Southwest Quarter of Section 17, Township 17 North, Range 4 East in said county, 322.83 feet to a point on the West right-of-way line of an access road constructed by the Indiana State Highway Commission as a part of Project No. S-165(13); thence North 00 degrees 12 minutes 18 seconds East along said West right-of-way line and parallel with the West line of the Southwest Quarter of said Section 17, 1223.49 feet to the Northwest corner of Parcel 3 Permanent Right-of-Way #1, recorded as Instrument #72-29001 in the Office of the Recorder of Marion County, Indiana; thence North 89 degrees 12 minutes 36 seconds West 819.61 feet to a point on the West right-of-way line of Access Road No. 5, as recorded as Instrument #78-38380 in the Office of the Recorder of Marion County; thence South 00 degrees 12 minutes 18 seconds West along said West line a distance of 932.23 feet to a point on the South line of Access Road No. 6 as per Instrument #78-3830, said point being the point of beginning of the real estate described herein; thence South 89 degrees 20 minutes West along said South line a distance of 213.81 feet; thence South 00 degrees 40 minutes 00 seconds East 190.00 feet; thence North 89 degrees 20 minutes 00 seconds East parallel with the South line of said Access Road No. 6 a distance of 207.48 feet to a point on the West right-of-way line of said Access Road No. 5, said point being on a non-tangent curve concave Westerly having a central angle of 10 degrees 01 minutes 27 seconds and a radius of 225.00 feet; (the following 2 calls being along said West right-of-way line), (1) thence Northerly along said curve an arc distance of 39.37 feet (said arc being subtended by a chord having a bearing of North 05 degrees 13 minutes 02 seconds East and a length of 39.32 feet); (2) thence North 00 degrees 12 minutes 18 seconds East 150.91 feet to the point of beginning. Also, A part of the Southeast Quarter of Section 18, Township 17 North, Range 4 East, in Marion County, Indiana, more particularly described as follows: From the Southwest corner of the Southeast Quarter of said Section 18, South 89 degrees 34 minutes 30 seconds East along the South line of said Southeast Quarter a distance of 2651.67 feet to the Southeast corner of Section 18; thence North 00 degrees 12 minutes 18 seconds East along the East line of said Southeast Quarter (Continued) 1223.12 feet; thence North 89 degrees 12 minutes 36 seconds West a distance of 496.78 feet; said point being the Northwest corner of Access Road Number 5; thence South 00 degrees 12 minutes 18 seconds West on and along the West line of Access Road Number 5, a distance of 872.22 feet, said point being the Point of Beginning. From the Point of Beginning, continue South 00 degrees 12 minutes 18 seconds West, 60.01 feet along said West line of Access Road Number 5; thence South 89 degrees 20 minutes 00 seconds West, 174.55 feet to a point on a non-tangent curve with a central angle of 75 degrees 31 minutes 29 seconds and a radius of 80.00 feet and whose radius point bears South 76 degrees 11 minutes 29 seconds East; thence Northwesterly along said curve an arc distance of 105.45 feet (said arc being subtended by a chord having a bearing of North 51 degrees 34 minutes 15 seconds East and length of 97.98 feet); thence North 89 degrees 20 minutes 00 seconds East, 98.00 feet to the Point of Beginning. Except, A part of the Southeast Quarter of Section 18, Township 17 North, Range 4 East, Marion County, Indiana, described as follows: Commencing at the Southeast corner of said Section; thence South 89 degrees 08 minutes 38 seconds East 322.83 feet along the South line of Section 17, same township and range to the West boundary of an access road constructed by the Indiana Department of Highways under Project S-165(13); thence North 0 degrees 12 minutes 18 seconds East 1223.49 feet along the boundary of said access road to the Northwest corner of Parcel 3 Permanent Right-of-Way 1 as recorded in Instrument No. 72-29001 in the Office of the Recorder of Marion County, Indiana; thence North 89 degrees 12 minutes 36 seconds West 819.61 feet to the West boundary of Access Road No. 5 as recorded in Instrument No. 78-38380 in said Recorder's Office; thence South 0 degrees 12 minutes 18 seconds West 932.23 feet along the boundary of Access Road No. 5 to the point of beginning of this description, which point is where the said West boundary of Access Road No. 5 meets the South boundary of Access Road No. 6, said Access Road No. 6 being recorded in Instrument No. 78-38380 in said Recorder's Office; thence South 0 degrees 12 minutes 18 seconds West 150.91 feet along the boundary of said Access Road No. 5; thence along said boundary Southwesterly 39.37 feet along an arc to the right and having a radius of 225.00 feet and subtended by a long chord having a bearing of South 5 degrees 13 minutes 02 seconds West and a length of 39.37 feet to the Northeast corner of the land surveyed by Mid-States Engineering for Keystone Crossing Joint Venture, dated March 28, 1985 as Job No. 385-074; thence South 89 degrees 20 minutes 00 seconds West 25.00 feet along the North line of said land; thence North 0 degrees 40 minutes 00 seconds West 20.00 feet; thence North 15 degrees 05 minutes 07 seconds East 45.72 feet; thence North 2 degrees 57 minutes 19 seconds East 104.21 feet; thence North 17 degrees 46 minutes 29 seconds East 23.19 feet to the South boundary of said Access Road No. 6; thence North 89 degrees 20 minutes 00 seconds East 5.00 feet along the boundary of said Access Road No. 6 to the Point of Beginning. Together with the non-exclusive easements for ingress and egress for public utilities granted in Grant of Roadway Easement dated June 14, 1978, recorded June 19, 1978, as Instrument #78-38380 and in Grants of Roadway Easements recorded as Instruments #78-51427, #80-79865, #83-88564, as modified by Instruments #88-10313, #88-42768, and #89-17963 in the Office of the Recorder of Marion County, Indiana, and as further modified by Eighth Grant and Relocation of Roadway Easement dated March 11, 1991, recorded January 16, 1992 as Instrument #92-6391. ALSO: Together with a subject to the non-exclusive easements created in the Declaration of Easements, Rights, Restrictions, Covenants, and Agreements Relating to Skywalks at Keystone at the Crossing dated June 30, 1988, recorded June 30, 1988, as Instrument #88-64499, and amended by Corrective Declaration dated December 21, 1988, recorded January 25, 1989 as Instrument #89-7803. Parcel 6: Cork 'n' Cleaver-Lease Parcel A part of the Southeast Quarter of Section 18, Township 17 North, Range 4 East in Marion County, State of Indiana, more particularly described as follows: Commencing at the Southwest corner of the Southeast Quarter of said Section 18 (said corner being marked by a brass plug); thence South 89 degrees 34 minutes 30 seconds East (record bearings) along the South line of said Southeast Quarter Section 2651.67 feet to the Southeast corner of said Section 18; thence South 89 degrees 08 minutes 38 seconds East along the South line of the West Half of the Southwest Quarter of Section 17, Township 17 North, Range 4 East in said county, 322.83 feet to a point on the West right-of-way line of an access road constructed by the Indiana State Highway Commission as a part of Project Number S-165(13): thence North 0 degrees 12 minutes 18 seconds East along said West right-of-way line and parallel with the West line of the Southwest Quarter of said Section 17, 1223.49 feet to the Northwest corner of Parcel 3 Permanent Right-of-Way 1, recorded as Instrument No. 72-29001 in the Office of the Recorder of Marion County, Indiana; thence North 89 degrees 12 minutes 36 seconds West 819.61 feet to a point on the West right-of-way line of Access Road No. 5 recorded as Instrument No. 78-38380 in the Office of the Recorder of Marion County; thence South 0 degrees 12 minutes 18 seconds West on and along said West right-of-way line of said interior access road 872.22 feet to a point on the North right-of-way line of Access Road No. 6 recorded as Instrument No. 78-38380 in the Office of the Recorder of Marion County; thence South 89 degrees 20 minutes 00 seconds West on and along said North right-of-way line 214.72 feet to a point; thence South 0 degrees 40 minutes 00 seconds East 60.00 feet to a point on the South right-of-way line of said Access Road No. 6 said point being the point of beginning of the real estate described herein; thence continue South 0 degrees 40 minutes 00 seconds East 270.85 feet to a point on the North right-of-way line of East 86th Street; thence North 76 degrees 42 minutes 50 seconds West along the North right-of-way line of East 86th Street 185.11 feet; thence North 82 degrees 36 minutes 51 seconds West along the North right-of-way line of East 86th Street 8.44 feet; thence North 0 degrees 40 minutes 00 seconds West 225.02 feet to a point on the South line of Access Road No. 6 extended Westerly; thence North 89 degrees 20 minutes 00 seconds East along the South line of South line of said Access Road and its extension 188.00 feet to the Point of Beginning. Together with the non-exclusive easements for ingress and egress and for public utilities granted in Grant of Roadway Easement dated June 14, 1978, recorded June 19, 1978, as Instrument #78-38380 and in Grants of Roadway Easements recorded as Instruments #78-51427, #80-79865, #83-88564, as modified by Instruments #88-10313, #88-88-42768, and #89-17963 in the Office of the Recorder of Marion County, Indiana, and as further modified by Eighth Grant and Relocation of Roadway Easement dated March 11, 1991, recorded January 16, 1992, as Instrument #92-6391. ALSO: Together with and subject to the non-exclusive easements created in the Declaration of Easements, Rights, Restrictions, Covenants, and Agreements Relating to Skywalks at Keystone at the Crossing dated June 30, 1988, recorded June 30, 1988, as Instrument #88-64499, and amended by Corrective Declaration dated December 21, 1988, recorded January 25, 1989 as Instrument #89-7803. Parcel 7: (South of INB Branch-Lease Parcel) Land being a part of the Southeast Quarter of Section 18, Township 17 North, Range 4 East in Marion County, State of Indiana more particularly described as follows: Commencing at the Southwest corner of the Southeast Quarter of said Section 18 (said corner being marked by a brass plug); thence South 89 degrees 34 minutes 30 seconds East (record bearings) along the South line of said Southeast Quarter Section 2651.67 feet to the Southeast corner of said Section 18; thence South 89 degrees 08 minutes 38 seconds East along the South line of the West Half of the Southwest Quarter of Section 17, Township 17 North, Range 4 East in said County, 322.83 feet to a point on the West right-of-way line of an access road constructed by the Indiana State Highway Commission as a part of Project No. (Continued) S-165(13); thence North 00 degrees 12 minutes 18 seconds East along said West right-of-way line and parallel with the West line of the Southwest Quarter of said Section 17, 1223.49 feet to the Northwest corner of Parcel 3 Permanent right-of-way 1, recorded as Instrument #72-29001, in the Office of the Recorder of Marion County, Indiana; thence North 89 degrees 12 minutes 36 seconds West 819.61 feet to a point on the West right-of-way line of Access Road No. 5, as recorded as Instrument #78-38380 in the Office of the Recorder of Marion County; thence South 00 degrees 12 minutes 18 seconds West along said West line a distance of 932.23 feet to a point on the South line of Access Road No. 6 as per Instrument #78-38380; thence South 89 degrees 20 minutes 00 seconds West along said South line 213.81 feet; thence South 00 degrees 40 minutes 00 seconds East 190.000 feet to the point of beginning of the real estate described herein; thence continuing South 00 degrees 40 minutes 00 seconds East 80.84 feet to a point on the Northerly right-of-way of 86th Street (the following two calls being along said Northerly right-of-way line); thence South 76 degrees 42 minutes 50 seconds East 126.06 feet; thence South 73 degrees 21 minutes 51 seconds East 28.31 feet to a point on the West line of said Access Road No. 5 (the following two calls being along said West line); thence North 32 degrees 37 minutes 30 seconds East 46.85 feet to a point on a curve concave Northwesterly having a central angle of 22 degrees 13 minutes 45 seconds and a radius of 225.00 feet; thence Northerly along said curve an arc length of 87.29 feet (said arc being subtended by a long chord bearing North 21 degrees 20 minutes 38 seconds East and a length of 86.75 feet); thence South 89 degrees 20 minutes 00 seconds West 207.48 feet to the Point of Beginning. Except, A part of the Southeast Quarter of Section 18, Township 17 North, Range 4 East of the Second Principal Meridian in Marion County, Indiana, more particularly described as follows: Commencing at the Southwest corner of the Southeast Quarter of said Section 18 (said corner being marked by a brass plug); thence South 89 degrees 34 minutes 30 seconds East (record bearings) along the South line of said Southeast Quarter 2651.67 feet to the Southeast corner of said Section 18; thence South 89 degrees 08 minutes 38 seconds East along the South line of the Wet Half of the Southwest Quarter of Section 17, Township 17 North, Range 4 East in said County, 322.83 feet to a point on the West right of way line of an access road constructed by the Indiana State Highway Commission as a part of Project No. S-165(13); thence North 00 degrees 12 minutes 18 seconds East along said West right of way line and parallel with the West line of the Southwest Quarter of said Section 17, 1223.49 feet to the Northwest corner of Parcel 3 Permanent Right-of-Way 1 recorded as Instrument No. 72-29001 in the Office of the Recorder of Marion County, Indiana; thence North 89 degrees 12 minutes 36 seconds West 819.61 feet to a point on the West right of way line of Access Road No. 5, recorded as Instrument No. 78-38380 in the Office of the Recorder of Marion County; thence the following six courses along said right of way; 1) South 00 degrees 12 minutes 18 seconds West 932.23 feet to a point on the South line of a Partial Release of Access Road No. 6 recorded as Instrument No. 88-10313 in the Office of the Recorder of said County, 2) South 89 degrees 20 minutes 00 seconds West along said South line 5.00 feet; 3) South 17 degrees 46 minutes 29 seconds West 23.19 feet; 4) South 02 degrees 57 minutes 19 seconds West 104.21 feet; 5) South 15 degrees 05 minutes 07 seconds West 45.72 feet, 6) South 00 degrees 40 minutes 00 seconds East 20.00 feet to the Point of Beginning; thence North 89 degrees 20 minutes 00 seconds East 25.00 feet to the Point of Curvature of a non-tangent curve concave Northwesterly having a central angle of 22 degrees 13 minutes 45 seconds and a radius of 225.00 feet, said Point of Curvature being on the existing West right of way line of Keystone Crossing; thence the following two courses along said right of way 1) Southerly along said curve an arc distance of 87.29 feet (said arc being subtended by a chord bearing South 21 degrees 20 minutes 38 seconds West and a length of 86.75 feet, 2) South 32 degrees 37 minutes 30 seconds West 46.85 feet to the North right of way line of 86th Street; thence North 73 degrees 21 minutes 51 seconds West along said right of way 28.31 feet; thence North 32 degrees 27 minutes 27 seconds East 90.97 feet to the Point of Curvature of a curve concave Westerly having a central angle of 33 degrees 07 minutes 27 seconds and a radius of 64.15 feet; thence Northerly along said curve an arc distance of 37.09 feet (said arc being subtended by a chord bearing North 15 degrees 53 minutes 44 seconds East and a length of 36.57 feet) to the Point of Beginning. (Continued) Together with the non-exclusive easements for ingress and egress and for public utilities granted in Grant of Roadway Easement dated June 14, 1978, recorded June 13, 1978, as Instrument #78-38380 and in Grants of Roadway Easements recorded as Instruments #78-51427, #80-79865, #83-88564, as modified by Instruments #86-10313, #88-42768, and #89-17963 in the Office of the Recorder of Marion County, Indiana, and as further modified by Eighth Grant and Relocation of Roadway Easement dated March 11, 1991, recorded January 16, 1992 as Instrument #92-6391. ALSO: Together with and subject to the non-exclusive easements created in the Declaration of Easements, Rights, Restrictions, Covenants, and Agreements Relating to Skywalks at Keystone at the Crossing dated June 30, 1988, recorded June 30, 1988 as Instrument #88-64499 and amended by Corrective Declaration dated December 21, 1988, recorded January 25, 1989 as Instrument #89-7803. EXHIBIT A-1 A part of the Southeast Quarter of Section 18, Township 17 North, Range 4 East, Washington Township, Marion County, Indiana being bounded as follows: Commencing at the Southwest corner of said Quarter Section (P.K. Nail found per Marion County Surveyor's ties); thence South 89 degrees 34 minutes 30 seconds East (assumed bearing) along the South line of said Quarter Section 2,651.67 feet to the Southeast corner of said Quarter Section (Brass Plug with punch hole found); thence South 89 degrees 08 minutes 38 seconds East along the South line of the Southwest Quarter of Section 17, Township 17 North, Range 4 East, a distance of 322.83 feet to a point on the Western right-of-way line of an access road constructed by the Indiana State Highway Commission as a part of Project Number S-165 (13); thence North 00 degrees 12 minutes 18 seconds East along said Western right-of-way line and parallel with the West line of Southwest Quarter of said Section 17, a distance of 1233.49 feet to the Northwestern corner of Parcel 3 Right-of-Way 1, recorded as Instrument #72-29001 in the Offices of the Marion County Recorder; thence North 89 degrees 12 minutes 36 seconds West 819.61 feet to a point on the Western right-of-way line of an existing North/South access road (Keystone Crossing); thence continuing North 89 degrees 12 minutes 36 seconds West 300.01 feet to the Point of Beginning of this lease description; thence continuing North 89 degrees 12 minutes 36 seconds West 448.09 feet to a point on the Eastern right-of-way line of State Road 431 (Keystone Avenue) (the following three (3) calls are along said Eastern right-of-way line); 1) thence North 10 degrees 56 minutes 31 seconds East 20.46 feet; 2) thence North 09 degrees 00 minutes 38 seconds East 158.76 feet to a point on a non-tangent curve being concave to the West, said point lying South 80 degrees 04 minutes 31 seconds East 5,156.05 feet from the radius point of said curve; 3) thence Northerly along said curve 72.90 feet to a point, said point lying South 80 degrees 53 minutes 07 seconds East 5,156.05 feet from the radius point of said curve; thence South 89 degrees 59 minutes 31 seconds East 508.15 feet to a point that is North 00 degrees 12 minutes 18 seconds East from the Point of Beginning; thence South 00 degrees 12 minutes 18 seconds West 254.91 feet to the Point of Beginning. Together with the non-exclusive easement for ingress and egress and for utilities granted in Grant of Roadway Easement dated June 14, 1978, recorded June 19, 1978 as instrument #78-38380 and in Grant of Roadway Easements recorded as Instruments #78-51427, #80-79665, #83-86564, as modified by Instruments #86-10313, #88-42768, #89-17963 and Eighth Grant and Relocation of Roadway Easement recorded January 16, 1992 as Instrument No. 92-6391 in the Office of the Recorder of Marion County, Indiana. ALSO Together with a non-exclusive utility easement created by a Declaration of Utility Easement dated March 31, 1993, recorded April 2, 1993 as Instrument No. 93-36939 described as follows: A strip of land being 15.00 feet in width, lying 7.50 feet on each side of the following described centerline: (Continued) A part of the Southeast Quarter of Section 18, Township 17 North, Range 4 East, Washington Township, Marion County, Indiana being bounded as follows: Commencing at the Southwest corner of said Quarter Section (P.K. Nail found per Marion County Surveyor's ties); thence South 89 degrees 34 minutes 30 seconds East (assumed bearing) along the South line of said Quarter Section 2,651.84 feet to the Southeast corner of said Quarter Section (Brass Plug with punch hole found); thence South 89 degrees 08 minutes 28 seconds East along the South line of the Southwest Quarter of Section 17, Township 17 North, Range 4 East, a distance of 322.83 feet to a point on the Western right-of-way line of an access road constructed by the Indiana State Highway Commission as a part of Project Number S-165(13); thence North 00 degrees 12 minutes 18 seconds East along said Western right-of-way line and parallel with the West line of Southwest Quarter of said Section 17, a distance of 1,233.49 feet to the Northwestern corner of parcel 3 Permanent Right-of-Way 1, recorded as Instrument #72-29001 in the Office of the Marion County Recorder; thence North 89 degrees 12 minutes 36 seconds West 819.61 feet to a point on the Western right-of-way line of an existing North/South access road (Keystone Crossing); thence continuing North 89 degrees 12 minutes 36 seconds West 748.09 feet to a point on the eastern right-of-way line of State Road 431 (Keystone Avenue) (the following two (2) calls are along said eastern right-of-way line); 1) thence North 10 degrees 56 minutes 31 seconds East 20.46 feet; 2) thence North 09 degrees 00 minutes 38 seconds East 21.45 feet to a POINT OF BEGINNING of this centerline easement description; thence North 41 degrees 09 minutes 23 seconds East 54.79 feet; thence North 18 degrees 37 minutes 43 seconds East 40.43 feet to a point, said point being 8.00 feet west of and at right angles to the western face of a parking garage; thence North 00 degrees 00 minutes 29 seconds East 118.36 feet parallel with said fact of the parking garage; thence North 45 degrees 00 minutes 29 seconds East 22.08 feet to a point 20.03 feet north of and at right angles to the northern face of said parking garage; thence South 89 degrees 59 minutes 31 seconds East 354.58 feet parallel with said face of the parking garage; thence South 66 degrees 00 minutes 44 seconds East 34.58 feet; thence South 00 degrees 12 minutes 18 secons West 10.21 feet to the terminus point of this centerline easement description. The sidelines of this easement are to be lengthened or shortened to terminate at the property lines of the grantor. ALSO Together with the non-exclusive easement for ingress, egress to the insured for their benefited parties created by that certain Declaration of Construction and Maintenance Easement, dated March 31, 193, recorded April 3, 1993 as Instrument #93-36940; and ALSO Together with a non-exclusive easement for ingress and egress granted to the insured for their benefited parties as created by that certain Declaration of Reciprocal Easement Agreement dated March 31, 1993, recorded April 2, 1993 as Instrument #93-36941. KEYSTONE AT THE CROSSING FASHION MALL INDIANAPOLIS, INDIANA [GRAPHIC OMITTED] GUINEVERE [GRAPHIC OMITTED] GUINEVERE PARKING GARAGE KEYSTONE AT THE CROSSING FASHION MALL INDIANAPOLIS, INDIANA [GRAPHIC OMITTED] GALAHAD [GRAPHIC OMITTED] WALKWAY OVER FASHION MALL DRIVE CONNECTING GALAHAD AND GUINEVERE KEYSTONE AT THE CROSSING FASHION MALL INDIANAPOLIS, INDIANA [GRAPHIC OMITTED] FOOD COURT [GRAPHIC OMITTED] GUINEVERE - SECOND FLOOR KEYSTONE AT THE CROSSING FASHION MALL INDIANAPOLIS, INDIANA [GRAPHIC OMITTED] VIEW OF GALAHAD CORRIDOR KEYSTONE AT THE CROSSING FASHION MALL INDIANAPOLIS, INDIANA [GRAPHIC OMITTED] RETAIL SHOPPES [GRAPHIC OMITTED] AMERICAN BANDSTAND KEYSTONE AT THE CROSSING FASHION MALL INDIANAPOLIS, INDIANA [GRAPHIC OMITTED] NBD BANK GROUND LEASE SUMMARIES The entire property offered for sale is subject to a series of non-subordinated ground leases, the majority held by George F. Kerr, et al with one held by WRC Properties, Inc. an entity of the Teachers Insurance and Annuity Association. The following is a summary of the individual ground leases. The area covered by each ground lease is depicted on the following site map. 1. Parking Garage Site - 2.476 acres Lessor: WRC Properties, Inc. (Teachers Insurance and Annuity Association) Lessee: Duane Real Estate Corp. Ground Lease Agreement: 3/31/1993 Memorandum of Lease: Recorded 4/2/1993 (93-36938) Guaranty Agreement - Galahad to WRC Properties, Inc.: 3/31/93 Amendments: None Primary Term: 3/31/93 - 12/31/2017 Renewal Term(s): Ten (10) - Five (5) Year Periods Base Minimum Rent: $1.00 per calendar annual period (Primary Term) Renewal Term Rent: 7.5% of the land value, adjusted every 5 years. Total Rent: Garage Taxes & Operating Expenses Option To Purchase Fee: No 2. Fashion Mall Site I - 4.931 acres Fashion Mall Site II - 10.952 acres Subtotal 15.883 acres Lessor: George F. Kerr, et al Lessee: Galahad Real Estate Corp. Ground Lease Agreement: 12/20/1984, as Amended Memorandum of Lease: Recorded 12/31/1984 (84-101576) Primary Term: 12/20/82 - 10/31/2067 Renewal Term(s): None Base Minimum Rent: $36,020.04 per annum Total Rent: Greater of Base Min. Rent and 5% of Base & Percentage Sublease Rent Option to Purchase Fee of All Kerr Parcels: 12/20/2014 $200,000 per acre, (multiplied by) July, 2014 CPI Index (divided by) July 1984 CPI Index (All Urban Consumers, All Items (1967-100)). 3. Rosa Corona Parcel - 2.114 acres Title Policy Description: Parcel 4 Lessor: George F. Kerr, et al Lessee: Galahad Real Estate Corp. Ground Lease Agreement: 12/20/1984, as Amended Memorandum of Lease: Recorded 12/31/1984 (84-101573) Primary Term: 12/20/82 - 10/31/2067 Renewal Term(s): None Base Minimum Rent: $4,227.96 per annum Total Rent: Greater of Base Min. Rent and 5% of Base & Percentage Sublease Rent Option To Purchase Fee: See Fashion Mall Sites I & II 4. Cork And Cleaver Parcel - 1.068 acres Lessor: George F. Kerr, et al Lessee: Galahad Real Estate Corp. Ground Lease Agreement: 12/20/1984, as Amended Memorandum of Lease: Recorded 12/31/1984 (84-101574) Primary Term: 12/20/82-10/31/2067 Renewal Term(s): None Base Minimum Rent: $2,136 per annum Total Rent: Greater of Base Min. Rent and 5% of Base & Percentage Sublease Rent Option To Purchase Fee: See Fashion Mall Sites I & II 5. INB Branch Parcel- 1.065 acres South of INB Parcel- 0.436 acres Subtotal 1.501 acres (Now NBD) Lessor: George F. Kerr, et al Lessee: Galahad Real Estate Corp. Ground Lease Agreement: 12/20/1984, as Amended Memorandum of Lease: Recorded 12/31/1984 (84-101572) Primary Term: 12/20/82 - 10/31/2067 Renewal Term(s): None Base Minimum Rent: $2,721.96 per annum Total Rent: Greater of Base Min. Rent and 5% of Base & Percentage Sublease Rent Option To Purchase Fee: See Fashion Mall Sites I & II 6. 8555 North River Road Office Building - 5.424 acres Lessor: George F. Kerr, et al Lessee: Galahad Real Estate Corp. Ground Lease Agreement: 12/20/1984, as Amended Memorandum of Lease: Recorded 12/31/1984 (84-10/15/75) Primary Term: 12/20/82-10/31/2067 Renewal Term(s): None Base Minimum Rent: $10,848.00 per annum Total Rent: Greater of Base Min. Rent and 5% of Base & Percentage Sublease Rent Option To Purchase Fee: See Fashion Mall Sites I & II 7. Teachers Tract Lease - Kerr Real Estate (Non-subordinated) Parcel 1 - Bazaar Parcel (Fashion Mall 11) 12.590 acres Parcel 1A - Vacated Access Road (Fashion Mall II) 0.080 Parcel 3 - James Tavern (now The Cooker) 2.004 Parcel 4 - Saga Property (now Stuart Anderson's) 1.955 Parcel 6 - T.G.I. Friday's 0.994 Parcel 7 - East of Saga (now Dick Clark's) 1.796 Parcel 9 - (East-Tucker Bldg. (now Keystone Shps.) 3.426 ------ 22.844 Lessor: George F. Kerr, et al Lessee: Keystone Crossing Joint Venture (assigned to Guinevere Real Estate Corporation) Ground Lease Agreement: 12/15/1988, as Amended Memorandum of Lease: Recorded 12/15/1988 (88-0128177) Primary Term: 12/15/88 - 10/31/2067 Renewal Term(s): None Base Minimum Rent: $47,880.00 per annum Total Rent: Greater of Base Min. Rent and 5% of Base & Percentage Sublease Rent Option To Purchase Fee: (See Amendment 2/22/89) - 12/15/2018 $500,000 per acre, (multiplied by) July, 2017 CPI Index (divided by) July 1987 CPI Index (All Urban Consumers, All Items (1967-100)). 8. Sign and Roadway Parcel Tract - Kerr Real Estate - 1.508 acres Lessor: George F. Kerr, et al Lessee: Keystone Crossing Joint Venture (Assigned to Guinevere Real Estate Corporation) Ground Lease Agreement: 12/15/1988, as Amended Memorandum of Lease: Recorded 12/15/1988 (88-0128176) Primary Term: 12/15/88 - 10/31/2067 Renewal Term(s): None Base Minimum Rent: $3,076.08 per annum Total Rent: Greater of Base Min. Rent and 5% of Base & Percentage Sublease Rent. (Only base minimum rent paid on this parcel) Option To Purchase Fee: (See Amendment 2/22/89) - 12/15/2018 $500,000 per acre, (multiplied by) July, 2017 CPI Index (divided by) July 1987 CPI Index (All Urban Consumers, All Items (1967-100)). TOTAL ACRES - TEACHERS 2.476 TOTAL ACRES - KERR 50.342 ------ TOTAL ACRES 52.818 [GRAPHIC OMITTED] GROUND LEVEL PLAN [GRAPHIC OMITTED] UPPER LEVEL PLAN FASHION MALL (Galahad) 1996 ASSESSMENTS AND 1996/7 TAXES
Assessed Value Assessed Value Adjusted Tax Paid Estimated Tax Parcel Number Land Improvements Total Land Improvements Total In 1996 for 1997 =========================================================================================================================== 8052943 South Lot $ 60,630 $ -- $ 60,630 $ -- $ -- $ -- $ 0 $ 0 8057238 INB Lot 9,270 -- 9,270 14,830 -- 14,830 1,070 1,055 8058191 INB Lot -- 3,070 3,070 -- 2,900 2,900 209 206 8051284 FMall West 303,270 -- 303,270 -- -- -- -- -- 8058186 FMall West -- 2,018,770 2,018,770 -- 2,974,230 2,974,230 214,541 211,530 8004233 FM Lot 609,100 -- 609,100 974,570 -- 974,570 70,299 69,312 8059229 Garage 107,870 1,055,870 1,163,740 107,870 1,373,800 1,481,670 106,878 105,378 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Subtotal $1,090,140 $3,077,710 $4,167,850 $1,097,270 $4,350,930 $5,448,200 $ 392,996 $ 387,480 8058189 Parisian $ 8,630 $ 8,630 $ -- $1,834,260 $1,834,260 N/A $ 130,452 8059238 Parisian 68,830 -- 68,830 110,130 -- 110,130 N/A 7,833 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Subtotal $ 68,830 $ 8,630 $ 77,460 $ 110,130 $1,834,260 $1,944,390 N/A $ 138,284 8051886 NBD $ 47,030 $ 47,030 $ 73,670 $ -- $ 73,670 N/A $ 5,239 8058187 NBD -- 81,300 81,300 -- 91,800 91,800 N/A 6,529 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Subtotal $ 47,030 $ 81,300 $ 128,330 $ 73,670 $ 91,800 $ 165,470 N/A $ 11,768 8058185 Sullivan's $ -- $ 83,770 $ 83,770 $ -- $ 80,800 $ 80,800 N/A $ 5,747 8059240 Sullivan's 13,970 -- 13,970 21,700 -- 21,700 N/A 1,543 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Subtotal $ 13,970 $ 83,770 $ 97,740 $ 21,700 $ 80,800 $ 102,500 N/A $ 7,290 8058184 K-Grill $ -- $ 153,570 $ 153,570 $ -- $ 150,630 $ 150,630 N/A $ 10,713 8059239 K-Grill 92,100 -- 92,100 147,330 -- 147,330 N/A 10,478 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Subtotal $ 92,100 $ 153,570 $ 245,670 $ 147,330 $ 150,630 $ 297,960 N/A $ 21,191 Total $1,312,070 $3,404,980 $4,717,050 $1,450,100 $6,508,420 $7,958,520 $ 392,996 $ 387,480
FASHION MALL (Guinevere) 1996 ASSESSMENTS AND 1996/7 TAXES
Assessed Value Assessed Value Adjusted Tax Paid Estimated Tax Parcel Number Land Improvements Total Land Improvements Total In 1996 for 1997 =========================================================================================================================== 8057594 FM East $ -- $2,306,170 $2,306,170 $ -- $2,333,270 $2,333,270 $ 168,306 $ 165,944 8051286 FM East 463,270 -- 463,270 741,230 -- 741,230 53,467 52,717 8051867 Lot 18,300 -- 18,300 18,300 -- 18,300 1,320 1,302 8052947 Sign 15,170 -- 15,170 24,270 -- 24,270 1,751 1,726 8057599 Sign -- 3,470 3,470 -- 3,270 3,270 236 233 8057290 Garage 40,500 -- 40,500 64,830 -- 64,830 4,676 4,611 8057597 Garage -- 341,070 341,070 -- 340,470 340,470 24,559 24,214 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Subtotal $ 537,240 $2,650,710 $3,187,950 $ 848,630 $2,677,010 $3,525,640 $ 254,316 $ 250,746 8057289 Jacobson's $ 40,070 $ -- $ 40,070 $ 64,130 $ -- $ 64,130 N/A $ 4,561 8057596 Jacobson's -- 1,525,630 1,525,630 -- 1,528,070 1,528,070 N/A 108,678 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Subtotal $ 40,070 $1,525,630 $1,565,700 $ 64,130 $1,528,070 $1,592,200 N/A $ 113,239 8054386 K-Shoppes $ 149,230 $ 149,230 $ 238,770 $ -- $ 238,770 $ 17,223 $ 17,532 8057602 K-Shoppes -- 283,770.0 283,770.0 -- 286,300.0 286,300.0 20,651.7 20,361.9 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Subtotal $ 149,230 $ 283,770 $ 433,000 $ -- $ 286,300 $ 525,070 $ 37,875 $ 37,894 8051285 Friday's $ 42,900 $ 42,900 $ 68,670 $ -- $ 68,670 N/A $ 4,884 8057600 Friday's -- 89,170 89,170 -- 102,330 102,330 N/A 7,278 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Subtotal $ 42,900 $ 89,170 $ 132,070 $ 68,670 $ 102,330 $ 171,000 N/A $ 12,162 8057240 Dick Clark's $ 57,570 $ 57,570 $ 88,570 $ -- $ 88,570 N/A $ 6,299 8057601 Dick Clark's -- 144,730 144,730 -- 145,730 145,730 N/A 10,376 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Subtotal $ 57,570 $ 144,730 $ 202,300 $ 88,570 $ 145,730 $ 234,300 N/A $ 16,676 8051864 Cattle Co. $ 87,330 $ 151,200 $ 238,530 $ 139,730 $ 150,130 $ 289,860 N/A $ 20,615 8057598 Cooker $ 88,000 $ 88,000 $ 140,800 $ -- $ 140,800 N/A $ 7,771 8052948 Cooker -- 112,030 112,030 -- 109,370 109,370 N/A 10,014 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Subtotal $ 88,000 $ 112,030 $ 200,030 $ 140,800 $ 109,370 $ 250,170 N/A $ 17,785 Total $1,002,340 $4,957,240 $5,959,580 $1,350,530 $4,998,940 $6,588,240 $ 292,191 $ 288,641
RENTAL RATE ANALYSIS
Rental Lease Term Rental Rate/ Rate Breakpoint Unit Name Start Yrs. Size Month Sq. Ft. Sq. Ft. Percent ===================================================================================================================== Food Court 51 Freshens Aug-88 10.0 456 $1,520.00 $40.00 $599 8.0% 52 Milano To Go Mar-94 4.8 456 $1,520.00 $40.00 $500 8.0% 53 Steak Express Aug-88 10.0 456 $1,368.00 $36.00 $914 8.0% 54 Enzo Pizza Aug-88 10.0 456 $1,368.00 $36.00 $877 10.0% 55 Wok Right In Sep-93 4.9 456 $1,520.00 $40.00 $658 8.0% 56 Indy's Hot Dogs Jun-90 10.3 456 $1,520.00 $40.00 $914 8.0% ---- ------ ---------- ------ Summary 8.3 2,736 $8,816.00 $38.67 Conclude $40.00 Food Specialty 20 Gloria Jeans Nov-95 10.2 1,039 $3,896.25 $45.00 $562 8.0% 155 Mrs. Field's Cookies Apr-95 6.9 1,128 $2,444.00 $26.00 $434 6.0% 8 Cheryl & Co. Jun-88 10.6 1,250 $3,021.00 $29.00 $483 6.0% 143 Cheese Shop, The Nov-93 9.9 2,020 $4,545.00 $27.00 $450 6.0% ---- ------ ---------- ------ Summary 9.4 5,437 $13,906.25 $30.69 Conclude $30.00 Jewelry 119 J.C. Sipe Aug-92 4.9 861 $1,678.59 $23.39 $510 1.0% 142 Sloan & Co. Dec-82 M-t-M 900 $2,475.00 $33.00 N/A N/A 12 Alexandria's Jun-90 10.4 902 $2,083.33 $27.72 $554 5.0% 38 A Barrington Jewels Sep-93 4.9 1,047 $2,792.00 $32.00 $533 6.0% 40 Goodman Jewelers Jun-88 10.5 1,305 $3,480.00 $32.00 $640 5.0% ------ ---------- ------ Summary 5,015 $12,508.92 $29.93 Conclude $30.00 Restaurant 210 California Pizza Sep-95 15.0 5,566 $9,276.67 $20.00 $683 3.0% 115 Crackers Comedy Jun-84 14.9 6,057 $7,571.25 $15.00 $250 6.0% 111 Dalts May-90 9.9 6,386 $7,780.18 $14.62 $238 5.0% 124 Houlahan's Aug-96 9.9 7,005 $11,675.00 $20.00 $500 4.0% Summary 12.4 25,014 $36,303.10 $17.42 Conclude $20.00 500 to 1,000 Sq. Ft. 102 Sunglass Hut Nov-93 10.2 577 $2,885.00 $60.00 $750 8.0% 32 Crabtree & Eveyln Oct-88 9.9 667 $2,112.17 $38.00 $633 6.0% 146 Body Shop, The Aug-93 10.2 737 $2,763.75 $45.00 $750 6.0% 11 Bercot Nov-95 10.0 800 $1,667.00 $25.01 $416 6.0% 1 Earle Travel Aug-93 5.2 802 $1,336.67 $20.00 N/A N/A 148 B Colorado Pen Sep-94 11.3 807 $2,690.00 $40.00 $800 5.0% 136 Scandia Down Dec-93 5.0 971 $2,103.83 $26.00 $434 6.0% 164 Johnson & Murphy Nov-93 10.0 980 $3,224.00 $39.48 $582 6.0% 10 Am. Spoon Foods Nov-95 M-t-M 1,000 $2,500.00 $30.00 N/A N/A ------ ---------- ------ Summary 7,341 $21,282.42 $34.79 Conclude $35.00
RENTAL RATE ANALYSIS
Rental Lease Term Rental Rate/ Rate Breakpoint Unit Name Start Yrs. Size Month Sq. Ft. Sq. Ft. Percent ===================================================================================================================== 1,001 to 2,000 Sq. Ft. 33 Aveda Lifestyle Nov-95 7.0 1,048 $3,930.00 $45.00 $750 6.0% 147 Papyrus Sep-95 10.3 1,143 $3,810.00 $40.00 $667 6.0% 148 A Speedo Fitness Sep-94 10.3 1,207 $4,023.33 $40.00 $800 5.0% 165 Mimi Materity Jul-93 10.3 1,209 $3,224.00 $32.00 $533 6.0% 24 Game Preserve, The Oct-94 4.9 1,210 $2,520.83 $25.00 $500 5.0% 107 Chico's of Indy, Inc. Jun-94 4.9 1,220 $2,643.33 $26.00 $434 6.0% 123 1 Gymboree Jan-95 10.0 1,222 $3,564.17 $35.00 $700 5.0% 206 Unique Perfume Nov-93 10.0 1,281 $3,736.25 $35.00 $500 7.0% 131 Micheal Garret Shoes Aug-93 7.0 1,286 $2,357.67 $22.00 $480 5.0% 152 Nine West Nov-93 10.2 1,288 $3,434.67 $32.00 $533 6.0% 47 Coach Store, The May-88 10.3 1,403 $4,910.50 $42.00 $700 6.0% 154 Nordicktrack Nov-93 10.2 1,486 $3,962.67 $32.00 $800 4.0% 209 All Stars, Inc. Nov-95 6.9 1,492 $2,486.67 $20.00 $333 6.0% 114 Visconti Shoes Aug-94 5.2 1,538 $2,563.33 $20.00 $400 5.0% 27 Englin's Footwear Jun-88 10.5 1,559 $3,375.00 $25.98 $433 6.0% 121 Baby Gap Nov-96 4.0 1,680 $4,900.00 $35.00 $700 5.0% 44 H2O Plus Oct-89 10.2 1,830 $4,575.00 $30.00 $600 5.0% 132 Maternite' Mar-94 10.0 1,910 $4,456.67 $28.00 $466 6.0% 28 Pasta May-88 9.7 1,970 $4,268.35 $26.00 $520 5.0% Summary 26,982 $68,742.44 $30.57 Conclude $30.00 2,001 to 10,000 Sq. Ft. 153 Cache' Nov-93 10.2 2,003 $4,673.67 $28.00 $560 5.0% 151 Finish Line, The Nov-93 10.0 2,139 $4,991.00 $28.00 $560 5.0% 22 Pier One Oct-95 5.0 2,362 $4,920.00 $25.00 $500 5.0% 6 Waves Aug-88 10.0 2,408 $5,418.00 $27.00 $450 6.0% 135 Redwood & Ross Jul-95 10.0 2,444 $4,684.33 $23.00 $383 6.0% 133 Abigail's Aug-96 0.9 2,448 $6,800.00 $33.33 N/A N/A 109 Renditions Jun-94 7.1 2,481 $3,101.25 $15.00 $300 5.0% 139 Talbot's Kids Jun-93 10.6 2,500 $5,000.00 $24.00 $480 5.0% 108 Britches Jul-93 10.1 2,501 $5,418.83 $26.00 $650 4.0% 123 A Bebe Jul-94 10.5 2,585 $7,755.00 $36.00 N/A N/A 3 Earthly Designs Aug-90 7.3 2,622 $5,244.00 $24.00 $480 5.0% 122 Charter Club Nov-89 10.0 2,817 $6,103.50 $26.00 $520 5.0% 140 Bath & Body Works Jan-95 9.0 2,888 $5,535.33 $23.00 $460 5.0% 117 J.T. Muesing, Inc. Apr-94 M-t-M 2,968 $3,915.29 $15.83 N/A N/A 150 Elisabeth Aug-93 9.4 3,027 $8,072.00 $32.00 $640 5.0% 112 Hold Everything Aug-91 12.4 3,068 $5,866.85 $22.95 $459 5.0% 128 William's-Sonoma Aug-90 12.4 3,122 $6,213.04 $23.88 $478 5.0% 7 Gap Kids Aug-91 15.0 3,250 $4,775.00 $17.63 $552 5.0% 134 Acorn, The Aug-95 9.9 3,263 $6,526.00 $24.00 $400 6.0% 29 Icing Mar-89 9.9 3,366 $3,876.00 $13.82 $276 5.0%
RENTAL RATE ANALYSIS
Rental Lease Term Rental Rate/ Rate Breakpoint Unit Name Start Yrs. Size Month Sq. Ft. Sq. Ft. Percent ===================================================================================================================== 113 Mole Hole May-89 9.9 3,416 $6,262.67 $22.00 $440 5.0% 21 Brookstone May-88 12.7 3,500 $7,875.00 $27.00 $540 5.0% 42 A Bombay Co. Mar-93 10.1 3,567 $8,323.00 $28.00 $467 6.0% 45 Victoria's Secret May-88 12.3 3,594 $5,391.00 $18.00 $360 5.0% 46 Ann Taylor Jul-88 10.5 3,635 $6,664.00 $22.00 N/A N/A 103 M.G. Tates Dec-93 4.9 3,745 $7,177.92 $23.00 $383 6.0% 106 J. Shepard, Inc. Jul-94 10.1 3,867 $6,378.50 $19.79 $520 5.0% 149 Cacique Nov-93 12.0 4,000 $7,666.67 $23.00 $460 5.0% 5 Sharper Image May-88 12.7 4,132 $9,641.33 $28.00 $933 3.0% 23 Coorpersmith's Feb-89 9.9 4,422 $8,475.00 $23.00 $383 6.0% 110 Royal Gallery Oct-88 M-t-M 4,628 $9,641.67 $25.00 N/A N/A 104 Bacharach Aug-96 10.4 4,673 $10,124.83 $26.00 $520 5.0% 50 Banana Republic Oct-89 17.6 5,107 $11,916.33 $28.00 $560 5.0% 116 Davidson's Aug-94 10.5 5,271 $7,028.00 $16.00 $320 5.0% 30 Gap, The Aug-88 18.0 5,300 $10,600.00 $24.00 $480 5.0% 25 Kits & Kaboodle Jun-88 10.3 5,918 $9,370.17 $19.00 $380 5.0% 127 Raleigh Limited, Inc. Aug-89 10.0 6,000 $11,325.00 $22.65 $617 4.0% 166 Structure Nov-93 12.0 6,454 $12,370.17 $23.00 $460 5.0% 161 Brooks Bros. Sep-93 10.5 6,678 $12,799.50 $23.00 $460 5.0% 137 Talbots Jun-93 10.6 7,008 $13,181.33 $22.57 $451 5.0% 4 Jos. A. Bank Sep-91 8.4 7,608 $12,046.00 $19.00 $633 3.0% 145 Laura Ashely Jun-96 10.2 8,000 $17,333.33 $26.00 N/A 5.0% 158 J. Crew Nov-93 12.2 8,566 $25,698.00 $36.00 $720 5.0% 125 Abbercrombie/Fitch Nov-93 12.0 8,661 $15,156.75 $21.00 $420 5.0% ------- ----------- ------ Summary 182,012 $361,335.26 $23.82 Conclude $25.00 >10,001 Sq. Ft. 129 Pottery Barn Aug-95 M-t-M 13,958 $23,263.33 $20.00 $400 5.0% 35 Limited May-88 12.1 15,934 $21,245.33 $16.00 $320 5.0% 18 Eddie Bauer Jun-94 10.6 17,534 $33,606.83 $23.00 $460 5.0% ------- ----------- ------ Summary 47,426 $78,115.49 $19.77 Conclude $20.00
RENTAL RATE ANALYSIS
Rental Lease Term Rental Rate/ Rate Breakpoint Unit Name Start Yrs. Size Month Sq. Ft. Sq. Ft. Percent ===================================================================================================================== Shoppes 3407 Quick & Reilly, Inc. Apr-93 10.6 1,120 $1,260.00 $13.50 N/A N/A 3443 Yogurt Crossing Sep-94 4.9 1,200 $1,485.00 $14.85 $325 4.0% 3309 Sunrise Deli Oct-95 4.9 3,080 $4,131.44 $16.10 N/A N/A 3357 Next Day Signs Jul-96 5.1 1,200 $1,600.00 $16.00 N/A N/A 3439 Crossings Pack & Post Jun-94 2.9 1,200 $1,400.00 $14.00 $233 6.0% 3425 Needle Fever Aug-95 1.9 1,500 $1,781.25 $14.25 $237 6.0% 3335 Charles Walker, Inc. Jul-94 2.9 900 $1,200.00 $16.00 N/A N/A 3417 Atomik Design Jul-94 2.9 900 $1,350.00 $18.00 N/A N/A 3413 Indiana Personnel May-96 5.2 1,120 $1,400.00 $15.00 N/A N/A 3435 Countrywide Loans Sep-95 4.9 1,200 $1,400.00 $14.00 N/A N/A 3363 Blimpie Subs Dec-91 9.9 1,227 $1,533.75 $15.00 N/A N/A 3319 Am. Paging Jul-96 3.4 1,500 $1,875.00 $15.00 N/A N/A 3449 Market Place Oct-96 2.9 1,740 $2,175.00 $15.00 N/A N/A 3367 H. & R. Block Dec-93 5.3 1,773 $1,994.63 $13.50 N/A N/A 3349 Donato's Pizza Jan-96 3.2 1,800 $2,250.00 $15.00 N/A N/A 3437 Laser Age, Inc. Apr-94 5.6 2,400 $3,018.00 $15.09 N/A N/A 3315 Nargang Tailors Oct-95 3.2 900 $1,125.00 $15.00 N/A N/A 3353 Ferrarri Photo Corp. Dec-94 5.5 1,200 $1,400.00 $14.00 $280 5.0% 3345 Gold Mine Jewelers Nov-85 11.8 1,740 $3,045.00 $21.00 N/A N/A ------- ----------- ------ Summary 27,700 $35,424.07 $15.35 Conclude $15.00 Outlot 2 Sullivan's Steakhouse Feb-96 5.2 6,500 $10,000.00 $18.46 N/A 4.5% 1 TGI Friday's Nov-91 10.0 7,400 $17,500.00 $28.38 $568 5.0% 5 Keystone Grill Apr-91 15.0 10,000 $15,000.00 $18.00 $300 6.0% 7 S. Anderson's Cattle Jun-84 19.9 10,000 $4,958.33 $5.95 $350 1.7% 3550 Am. Bandstand Grill Dec-93 19.9 10,000 $15,833.00 $19.00 $810 3.0% 6 NBD Bank NA Nov-80 19.9 2,500 $6,591.00 $31.64 N/A N/A 3 Cooker Resaurant Jan-88 20.2 8,429 $11,666.67 $16.61 N/A N/A ------- ----------- ------ Summary 54,829 $81,549.00 $17.85 Conclude $20.00
RETAIL SALES ANALYSIS
Rental Lease Term Rate Breakpoint Location Unit Name Start Yrs. Size Sq. Ft. Sq. Ft. Percent ======================================================================================================= Food Court East 51 Freshens Aug-88 10.0 456 $40.00 $599 8.0% East 52 Milano To Go Mar-94 4.8 456 $40.00 $500 8.0% East 53 Steak Express Aug-88 10.0 456 $36.00 $914 8.0% East 54 Enzo Pizza Aug-88 10.0 456 $36.00 $877 10.0% East 55 Wok Right In Sep-93 4.9 456 $40.00 $658 8.0% East 56 Indy's Hot Dogs Jun-90 10.3 456 $40.00 $914 8.0% ----- ------ ------ Summary 8.3 2,736 $38.67 Conclude $40.00 Food Specialty East 20 Gloria Jeans Nov-95 10.2 1,039 $45.00 $562 8.0% West 155 Mrs. Field's Cookies Apr-95 6.9 1,128 $26.00 $434 6.0% East 8 Cheryl & Co. Jun-88 10.6 1,250 $29.00 $483 6.0% West 143 Cheese Shop, The Nov-93 9.9 2,020 $27.00 $450 6.0% ----- ------ ------ Summary 9.4 5,437 $30.69 Conclude $30.00 Jewelry West 119 J.C. Sipe Aug-92 4.9 861 $23.39 $510 1.0% West 142 Sloan & Co. Dec-82 M-t-M 900 $33.00 N/A N/A East 12 Alexandria's Jun-90 10.4 902 $27.72 $554 5.0% East 38 A Barrington Jewels Sep-93 4.9 1,047 $32.00 $533 6.0% East 40 Goodman Jewelers Jun-88 10.5 1,305 $32.00 $640 5.0% ------ ------ Summary 5,015 $29.93 Conclude $30.00 Restaurant West 210 California Pizza Sep-95 15.0 5,566 $20.00 $683 3.0% West 115 Crackers Comedy Jun-84 14.9 6,057 $15.00 $250 6.0% West 111 Dalts May-90 9.9 6,386 $14.62 $238 5.0% West 124 Houlahan's Aug-96 9.9 7,005 $20.00 $500 4.0% ------ Summary 12.4 25,014 $17.42 Conclude $20.00 Retail Sales Amount per Year 1997 Conclude Location 1993 1994 1995 1996 Amount /Sq. Ft. ========================================================================================================= East $248,753 $248,753 $315,297 $292,953 $294,120 $645 East $213,349 $213,349 $265,032 $249,592 $250,800 $550 East $283,732 $283,732 $230,731 $214,771 $214,320 $470 East $416,766 $416,766 $447,382 $458,385 $471,960 $1,035 East $330,349 $330,349 $304,521 $315,680 $328,320 $720 East $320,372 $320,372 $384,932 $329,460 $330,600 $725 ---------- ---------- ---------- ---------- ---------- ------ $1,813,320 $1,813,320 $1,947,895 $1,860,840 $1,890,120 $691 East N/A N/A N/A $234,513 $233,775 $225 West N/A N/A N/A $248,228 $248,160 $220 East $392,713 $392,713 $405,463 $386,225 $387,500 $310 West $716,858 $716,858 $950,390 $920,413 $919,100 $455 ---------- ---------- ---------- ---------- ---------- ------ $1,109,570 $1,109,570 $1,355,852 $1,789,378 $1,788,535 $329 West $1,452,972 $1,452,972 $1,479,973 $1,298,612 $1,300,110 $1,510 West $401,958 $401,958 $424,161 $315,729 $315,000 $350 East N/A N/A $401,724 $386,832 $387,860 $430 East $305,232 $305,232 $519,658 $506,245 $502,560 $480 East $904,796 $904,796 $768,684 $652,696 $652,500 $500 ---------- ---------- ---------- ---------- ---------- ------ $3,064,958 $3,064,958 $3,594,199 $3,160,114 $3,158,030 $630 West N/A N/A N/A $1,634,901 $1,669,800 $300 West $919,089 $919,089 $1,021,210 $995,407 $817,695 $135 West $3,127,480 $3,127,480 $2,736,656 $2,476,427 $2,490,540 $390 West N/A N/A N/A N/A N/A N/A ---------- ---------- ---------- ---------- ---------- ------ $4,046,569 $4,046,569 $3,757,867 $5,106,736 $4,978,035 $199
RETAIL SALES ANALYSIS
Rental Lease Term Rate Breakpoint Location Unit Name Start Yrs. Size Sq. Ft. Sq. Ft. Percent ====================================================================================================== 500 to 1,000 Sq. Ft. West 102 Sunglass Hut Nov-93 10.2 577 $60.00 $750 8.0% East 32 Crabtree & Eveyln Oct-88 9.9 667 $38.00 $633 6.0% West 146 Body Shop, The Aug-93 10.2 737 $45.00 $750 6.0% East 11 Bercot Nov-95 10.0 800 $25.01 $416 6.0% East 1 Earle Travel Aug-93 5.2 802 $20.00 N/A N/A West 148 B Colorado Pen Sep-94 11.3 807 $40.00 $800 5.0% West 136 Scandia Down Dec-93 5.0 971 $26.00 $434 6.0% West 164 Johnson & Murphy Nov-93 10.0 980 $39.48 $582 6.0% East 10 Am. Spoon Foods Nov-95 M-t-M 1,000 $30.00 N/A N/A ------ ------ Summary 7,341 $34.79 Conclude $35.00 1,001 to 2,000 Sq. Ft. East 33 Aveda Lifestyle Nov-95 7.0 1,048 $45.00 $750 6.0% West 147 Papyrus Sep-95 10.3 1,143 $40.00 $667 6.0% West 148 A Speedo Fitness Sep-94 10.3 1,207 $40.00 $800 5.0% West 165 Mimi Materity Jul-93 10.3 1,209 $32.00 $533 6.0% East 24 Game Preserve, The Oct-94 4.9 1,210 $25.00 $500 5.0% West 107 Chico's of Indy, Inc. Jun-94 4.9 1,220 $26.00 $434 6.0% West 123 1 Gymboree Jan-95 10.0 1,222 $35.00 $700 5.0% West 206 Unique Perfume Nov-93 10.0 1,281 $35.00 $500 7.0% West 131 Micheal Garret Shoes Aug-93 7.0 1,286 $22.00 $480 5.0% West 152 Nine West Nov-93 10.2 1,288 $32.00 $533 6.0% East 47 Coach Store, The May-88 10.3 1,403 $42.00 $700 6.0% West 154 Nordicktrack Nov-93 10.2 1,486 $32.00 $800 4.0% West 209 All Stars, Inc. Nov-95 6.9 1,492 $20.00 $333 6.0% West 114 Visconti Shoes Aug-94 5.2 1,538 $20.00 $400 5.0% East 27 Englin's Footwear Jun-88 10.5 1,559 $25.98 $433 6.0% West 121 Baby Gap Nov-96 4.0 1,680 $35.00 $700 5.0% East 44 H2O Plus Oct-89 10.2 1,830 $30.00 $600 5.0% West 132 Maternite' Mar-94 10.0 1,910 $28.00 $466 6.0% East 28 Pasta May-88 9.7 1,970 $26.00 $520 5.0% ------ Summary 26,982 $30.57 Conclude $30.00 Retail Sales Amount per Year 1997 Conclude Location 1993 1994 1995 1996 Amount /Sq. Ft. ======================================================================================================== West N/A N/A $358,606 $341,019 $340,430 $590 East N/A N/A $249,725 $189,381 $190,095 $285 West N/A N/A $639,650 $484,924 $486,420 $660 East N/A N/A N/A $94,296 $96,000 $120 East N/A N/A N/A N/A N/A N/A West N/A N/A $211,620 $294,176 $302,625 $375 West $325,557 $325,557 $402,693 $347,035 $339,850 $350 West N/A N/A $316,814 $408,660 $490,000 $500 East N/A N/A N/A N/A N/A N/A ---------- ---------- ---------- ---------- ---------- ------ $325,557 $325,557 $2,179,107 $2,159,491 $2,245,420 $306 East N/A N/A N/A $799,152 $801,720 $765 West N/A N/A N/A $393,764 $400,050 $350 West N/A N/A $309,185 $254,653 $253,470 $210 West N/A N/A $387,569 $403,141 $423,150 $350 East $479,257 $479,257 $580,074 $491,429 $496,100 $410 West $606,889 $606,889 $436,199 $495,137 $518,500 $425 West N/A N/A $1,480,416 $1,409,284 $1,405,300 $1,150 West $88,312 $88,312 $236,665 $264,450 $288,225 $225 West $450,241 $450,241 $366,073 $255,631 $257,200 $200 West $115,508 $115,508 $691,733 $726,149 $759,920 $590 East $1,321,654 $1,321,654 $1,356,477 $1,379,921 $1,403,000 $1,000 West N/A N/A $1,644,541 $1,004,670 $1,004,536 $676 West N/A N/A N/A $193,751 N/A N/A West N/A N/A $176,793 $178,177 $184,560 $120 East $393,913 $393,913 $452,656 $511,336 $545,650 $350 West N/A N/A N/A N/A N/A N/A East $659,514 $659,514 $387,850 $281,966 $283,650 $155 West N/A N/A $429,635 $399,954 $401,100 $210 East $934,056 $934,056 $743,399 $857,364 $985,000 $500 ---------- ---------- ---------- ---------- ---------- ------ $5,049,343 $5,049,343 $9,679,266 $10,299,929 $10,411,131 $386
RETAIL SALES ANALYSIS
Rental Lease Term Rate Breakpoint Location Unit Name Start Yrs. Size Sq. Ft. Sq. Ft. Percent ====================================================================================================== 2,001 to 10,000 Sq. Ft. West 153 Cache' Nov-93 10.2 2,003 $28.00 $560 5.0% West 151 Finish Line, The Nov-93 10.0 2,139 $28.00 $560 5.0% East 22 Pier One Oct-95 5.0 2,362 $25.00 $500 5.0% East 6 Waves Aug-88 10.0 2,408 $27.00 $450 6.0% West 135 Redwood & Ross Jul-95 10.0 2,444 $23.00 $383 6.0% West 133 Abigail's Aug-96 0.9 2,448 $33.33 N/A N/A West 109 Renditions Jun-94 7.1 2,481 $15.00 $300 5.0% West 139 Talbot's Kids Jun-93 10.6 2,500 $24.00 $480 5.0% West 108 Britches Jul-93 10.1 2,501 $26.00 $650 4.0% West 123 A Bebe Jul-94 10.5 2,585 $36.00 N/A N/A East 3 Earthly Designs Aug-90 7.3 2,622 $24.00 $480 5.0% West 122 Charter Club Nov-89 10.0 2,817 $26.00 $520 5.0% West 140 Bath & Body Works Jan-95 9.0 2,888 $23.00 $460 5.0% West 117 J.T. Muesing, Inc. Apr-94 M-t-M 2,968 $15.83 N/A N/A West 150 Elisabeth Aug-93 9.4 3,027 $32.00 $640 5.0% West 112 Hold Everything Aug-91 12.4 3,068 $22.95 $459 5.0% West 128 William's-Sonoma Aug-90 12.4 3,122 $23.88 $478 5.0% East 7 Gap Kids Aug-91 15.0 3,250 $17.63 $552 5.0% West 134 Acorn, The Aug-95 9.9 3,263 $24.00 $400 6.0% East 29 Icing Mar-89 9.9 3,366 $13.82 $276 5.0% West 113 Mole Hole May-89 9.9 3,416 $22.00 $440 5.0% East 21 Brookstone May-88 12.7 3,500 $27.00 $540 5.0% East 42 A Bombay Co. Mar-93 10.1 3,567 $28.00 $467 6.0% East 45 Victoria's Secret May-88 12.3 3,594 $18.00 $360 5.0% East 46 Ann Taylor Jul-88 10.5 3,635 $22.00 N/A N/A West 103 M.G. Tates Dec-93 4.9 3,745 $23.00 $383 6.0% West 106 J. Shepard, Inc. Jul-94 10.1 3,867 $19.79 $520 5.0% West 149 Cacique Nov-93 12.0 4,000 $23.00 $460 5.0% East 5 Sharper Image May-88 12.7 4,132 $28.00 $933 3.0% East 23 Coorpersmith's Feb-89 9.9 4,422 $23.00 $383 6.0% West 110 Royal Gallery Oct-88 M-t-M 4,628 $25.00 N/A N/A West 104 Bacharach Aug-96 10.4 4,673 $26.00 $520 5.0% East 50 Banana Republic Oct-89 17.6 5,107 $28.00 $560 5.0% West 116 Davidson's Aug-94 10.5 5,271 $16.00 $320 5.0% East 30 Gap, The Aug-88 18.0 5,300 $24.00 $480 5.0% East 25 Kits & Kaboodle Jun-88 10.3 5,918 $19.00 $380 5.0% West 127 Raleigh Limited, Inc. Aug-89 10.0 6,000 $22.65 $617 4.0% West 166 Structure Nov-93 12.0 6,454 $23.00 $460 5.0% Retail Sales Amount per Year 1997 Conclude Location 1993 1994 1995 1996 Amount /Sq. Ft. ======================================================================================================== West $163,184 $163,184 $726,708 $642,222 $640,960 $320 West $150,393 $150,393 $647,112 $722,233 $748,650 $350 East N/A N/A N/A $372,417 $377,920 $160 East $566,217 $566,217 $537,562 $497,758 $505,680 $210 West N/A N/A N/A $498,796 $501,020 $205 West $535,524 $535,524 N/A N/A N/A N/A West $464,642 $464,642 $559,267 $495,208 $496,200 $200 West N/A N/A $754,950 $762,900 $775,000 $310 West $633,203 $633,203 $860,244 $695,703 $687,775 $275 West N/A N/A N/A N/A N/A N/A East N/A N/A $982,542 $880,101 $878,370 $335 West $1,201,929 $1,201,929 $1,205,901 $1,158,857 $1,154,970 $410 West N/A N/A N/A $720,383 $722,000 $250 West $708,788 $708,788 $699,320 $725,409 $742,000 $250 West N/A N/A $990,888 $1,029,301 $1,059,450 $350 West $714,230 $714,230 $912,515 $976,238 $997,100 $325 West $1,598,901 $1,598,901 $2,123,928 $2,176,783 $2,216,620 $710 East $2,934,068 $2,934,068 $2,942,583 $2,683,655 $2,681,250 $825 West $430,031 $430,031 $676,420 $566,228 $571,025 $175 East $3,410,768 $3,410,768 N/A N/A N/A N/A West $1,146,341 $1,146,341 $1,229,213 $1,097,834 $1,110,200 $325 East $1,131,200 $1,131,200 $1,094,555 $1,024,625 $1,015,000 $290 East $1,191,913 $1,191,913 $1,218,559 $1,211,567 $1,212,780 $340 East $2,285,353 $2,285,353 $1,923,185 $1,789,273 $1,797,000 $500 East $2,215,678 $2,215,678 N/A N/A N/A N/A West $936,962 $936,962 $1,356,289 $1,254,575 $1,254,575 $335 West $1,377,348 $1,377,348 $1,530,327 $1,543,320 $1,546,800 $400 West $272,400 $272,400 $519,280 $501,760 $500,000 $125 East $1,450,332 $1,450,332 $1,825,352 $1,769,364 $1,776,760 $430 East $1,211,318 $1,211,318 $1,077,332 $952,278 $972,840 $220 West $1,118,125 $1,118,125 $1,178,752 $1,326,755 $1,504,100 $325 West N/A N/A N/A N/A N/A N/A East $3,642,976 $3,642,976 $3,564,380 $3,011,649 $3,013,130 $590 West N/A N/A $868,397 $918,630 $948,780 $180 East $3,874,671 $3,874,671 $3,816,636 $3,479,450 $3,498,000 $660 East $1,800,552 $1,800,552 $2,093,137 $2,306,777 $2,515,150 $425 West $3,246,120 $3,246,120 $3,158,040 $3,556,860 $3,900,000 $650 West $756,990 $756,990 $1,115,445 $1,007,598 $1,032,640 $160
RETAIL SALES ANALYSIS
Rental Lease Term Rate Breakpoint Location Unit Name Start Yrs. Size Sq. Ft. Sq. Ft. Percent ====================================================================================================== West 161 Brooks Bros. Sep-93 10.5 6,678 $23.00 $460 5.0% West 137 Talbots Jun-93 10.6 7,008 $22.57 $451 5.0% East 4 Jos. A. Bank Sep-91 8.4 7,608 $19.00 $633 3.0% West 145 Laura Ashely Jun-96 10.2 8,000 $26.00 N/A 5.0% West 158 J. Crew Nov-93 12.2 8,566 $36.00 $720 5.0% West 125 Abbercrombie/Fitch Nov-93 12.0 8,661 $21.00 $420 5.0% ------ ------ Summary 182,012 $23.82 Conclude $25.00 >10,001 Sq. Ft. West 129 Pottery Barn Aug-95 M-t-M 13,958 $20.00 $400 5.0% East 35 Limited May-88 12.1 15,934 $16.00 $320 5.0% East 18 Eddie Bauer Jun-94 10.6 17,534 $23.00 $460 5.0% ------ ------ Summary 47,426 $19.77 Conclude $20.00 Shoppes Shoppes 3407 Quick & Reilly, Inc. Apr-93 10.6 1,120 $13.50 N/A N/A Shoppes 3443 Yogurt Crossing Sep-94 4.9 1,200 $14.85 $325 4.0% Shoppes 3309 Sunrise Deli Oct-95 4.9 3,080 $16.10 N/A N/A Shoppes 3357 Next Day Signs Jul-96 5.1 1,200 $16.00 N/A N/A Shoppes 3439 Crossings Pack & Post Jun-94 2.9 1,200 $14.00 $233 6.0% Shoppes 3425 Needle Fever Aug-95 1.9 1,500 $14.25 $237 6.0% Shoppes 3335 Charles Walker, Inc. Jul-94 2.9 900 $16.00 N/A N/A Shoppes 3419 Atomik Design Jul-94 2.9 900 $18.00 N/A N/A Shoppes 3413 Indiana Personnel May-96 5.2 1,120 $15.00 N/A N/A Shoppes 3435 Countrywide Loans Sep-95 4.9 1,200 $14.00 N/A N/A Shoppes 3363 Blimpie Subs Dec-91 9.9 1,227 $15.00 N/A N/A Shoppes 3317 Am. Paging Jul-96 3.4 1,500 $15.00 N/A N/A Shoppes 3449 Market Place Oct-96 2.9 1,740 $15.00 N/A N/A Shoppes 3367 H. & R. Block Dec-93 5.3 1,773 $13.50 N/A N/A Shoppes 3349 Donato's Pizza Jan-96 3.2 1,800 $15.00 N/A N/A Shoppes 3437 Laser Age, Inc. Apr-94 5.6 2,400 $15.09 N/A N/A Shoppes 3315 Nargang Tailors Oct-95 3.2 900 $15.00 N/A N/A Shoppes 3353 Ferrarri Photo Corp. Dec-94 5.5 1,200 $14.00 $280 5.0% Shoppes 3345 Gold Mine Jewelers Nov-85 11.8 1,740 $21.00 N/A N/A ------ ------ Summary 27,700 $15.35 Conclude $15.00 Retail Sales Amount per Year 1997 Conclude Location 1993 1994 1995 1996 Amount /Sq. Ft. ======================================================================================================== West $1,751,506 $1,751,506 $1,578,279 $1,679,383 $1,736,280 $260 West $2,787,362 $2,787,362 $3,003,348 $2,962,632 $2,978,400 $425 East $2,565,874 $2,565,874 $2,095,015 $1,776,468 $1,772,664 $233 West $4,352,800 $4,352,800 N/A N/A N/A N/A West $931,467 $931,467 $2,802,967 $2,869,781 $2,955,270 $345 West $1,152,173 $1,152,173 $4,146,021 $4,546,505 $5,023,380 $580 ----------- ----------- ----------- ----------- ----------- ------ $54,713,332 $54,713,333 $55,816,444 $56,193,272 $57,819,739 $318 West N/A N/A N/A $3,633,686 $3,629,080 $260 East $4,156,225 $4,156,225 $3,330,365 $3,143,938 $3,186,800 $200 East $5,109,408 $5,109,408 $7,031,485 $6,445,674 $6,487,580 $370 ----------- ----------- ----------- ----------- ----------- ------ $9,265,632 $9,265,632 $10,361,850 $13,223,297 $13,303,460 $281 Shoppes N/A N/A N/A N/A N/A N/A Shoppes N/A N/A $318,732 $314,904 $318,000 $265 Shoppes N/A N/A $684,776 $685,916 $693,000 $225 Shoppes N/A N/A $149,592 $144,720 $144,000 $120 Shoppes N/A N/A $155,136 $148,416 $150,000 $125 Shoppes N/A N/A $266,520 $277,845 $292,500 $195 Shoppes N/A N/A N/A N/A N/A N/A Shoppes N/A N/A N/A N/A N/A N/A Shoppes N/A N/A N/A N/A N/A N/A Shoppes N/A N/A N/A N/A N/A N/A Shoppes N/A N/A N/A N/A N/A N/A Shoppes N/A N/A N/A N/A N/A N/A Shoppes N/A N/A N/A N/A N/A N/A Shoppes N/A N/A N/A N/A N/A N/A Shoppes N/A N/A N/A N/A N/A N/A Shoppes N/A N/A N/A N/A N/A N/A Shoppes N/A N/A $58,860 $73,665 $90,000 $100 Shoppes N/A N/A $188,136 $200,088 $300,000 $250 Shoppes N/A N/A $767,584 $850,338 $913,500 $525 ----------- ----------- ----------- ----------- ----------- ------ $951,901 $952,291 $952,291 $633,559 $318,655 $12
RETAIL SALES ANALYSIS
Rental Lease Term Rate Breakpoint Location Unit Name Start Yrs. Size Sq. Ft. Sq. Ft. Percent ====================================================================================================== Outlot Outlot 2 Sullivan's Steakhouse Feb-96 5.2 6,500 $18.46 N/A 4.5% Outlot 1 TGI Friday's Nov-91 10.0 7,400 $28.38 $568 5.0% Outlot 5 Keystone Grill Apr-91 15.0 10,000 $18.00 $300 6.0% Outlot 7 S. Anderson's Cattle Jun-84 19.9 10,000 $5.95 $350 1.7% Outlot 3550 Am. Bandstand Grill Dec-93 19.9 10,000 $19.00 $810 3.0% Outlot 6 NBD Bank NA Nov-80 19.9 2,500 $31.64 N/A N/A Outlot 3 Cooker Restaurant Jan-88 20.2 8,429 $16.61 N/A N/A ------ ------ Summary 54,829 $17.85 Conclude $20.00 Retail Sales Amount per Year 1997 Conclude Location 1993 1994 1995 1996 Amount /Sq. Ft. ======================================================================================================== Outlot N/A N/A N/A N/A N/A N/A Outlot N/A N/A $4,517,330 $4,222,292 $4,218,000 $570 Outlot N/A N/A $4,467,000 $4,470,200 $4,500,000 $450 Outlot N/A N/A $1,829,700 $1,887,100 $1,950,000 $195 Outlot N/A N/A $4,484,100 $3,366,400 $3,400,000 $340 Outlot N/A N/A N/A N/A N/A N/A Outlot N/A N/A N/A N/A N/A N/A ----------- ----------- ----------- ----------- ----------- ------ N/A N/A $15,298,130 $13,945,992 $14,068,000 $257
OCCUPANCY COSTS FOR FASHION MALL All Tenants
Fiscal Minimum Overage Sub Total Expense Total Total Occupancy Cost (1) Year Rent Rent Expense Recoveries Tenant Cost Retail Sales Sub/Sales Total/Sales ===================================================================================================================== 1998 $11,075,384 $ 560,486 $11,635,870 $3,044,096 $14,679,966 $175,215,000 6.64% 8.38% 1999 $11,566,158 $ 684,958 $12,251,116 $3,250,473 $15,501,589 $183,050,000 6.69% 8.47% 2000 $12,094,548 $ 786,883 $12,881,431 $3,497,566 $16,378,997 $190,254,000 6.77% 8.61% 2001 $12,496,258 $ 819,669 $13,315,927 $3,671,563 $16,987,490 $196,152,000 6.79% 8.66% 2002 $12,893,642 $ 922,207 $13,815,849 $3,880,409 $17,696,258 $204,762,000 6.75% 8.64% 2003 $13,074,942 $1,062,003 $14,136,945 $4,011,522 $18,148,467 $211,864,000 6.67% 8.57% 2004 $13,135,724 $1,176,284 $14,312,008 $4,111,295 $18,423,303 $217,473,000 6.58% 8.47% 2005 $13,536,240 $1,257,713 $14,793,953 $4,241,015 $19,034,968 $225,027,000 6.57% 8.46% 2006 $13,973,260 $1,337,564 $15,310,824 $4,412,045 $19,722,869 $233,578,000 6.55% 8.44% 2007 $14,312,294 $1,300,546 $15,612,840 $4,559,677 $20,172,517 $239,995,000 6.51% 8.41% ========================================================================================================== Totals $12,815,845 $ 990,831 $13,806,676 $3,867,966 $17,674,642 $207,737,000 6.65% 8.51%
Note: 1) Occupancy cost percentages are estimated two ways: a) by dividing base rent and overage rent by total sales (Sub/Sales) and b) dividing the total rental, including expense recoveries, by total sales (Total/Sales). Enclosed Mall Tenants
Fiscal Minimum Overage Sub Total Expense Total Total Occupancy Cost (1) Year Rent Rent Expense Recoveries Expenses Retail Sales Sub/Sales Total/Sales ===================================================================================================================== 1998 $ 7,524,239 $ 428,490 $ 7,952,729 $2,725,152 $10,677,881 $107,341,000 7.41% 9.95% 1999 $ 7,942,280 $ 484,204 $ 8,426,484 $2,912,082 $11,338,566 $112,582,000 7.48% 10.07% 2000 $ 8,418,737 $ 527,693 $ 8,946,430 $3,149,393 $12,095,823 $117,360,000 7.62% 10.31% 2001 $ 8,796,683 $ 499,999 $ 9,296,682 $3,309,445 $12,606,127 $120,831,000 7.69% 10.43% 2002 $ 9,220,121 $ 540,274 $ 9,760,395 $3,510,836 $13,271,231 $127,462,000 7.66% 10.41% 2003 $ 9,335,595 $ 580,715 $ 9,916,310 $3,622,742 $13,539,052 $130,983,000 7.57% 10.34% 2004 $ 9,363,329 $ 627,747 $ 9,991,076 $3,709,435 $13,700,511 $133,761,000 7.47% 10.24% 2005 $ 9,721,561 $ 637,759 $10,359,320 $3,820,839 $14,180,159 $138,385,000 7.49% 10.25% 2006 $10,109,995 $ 645,647 $10,755,642 $3,978,745 $14,734,387 $143,903,000 7.47% 10.24% 2007 $10,366,433 $ 641,705 $11,008,138 $4,117,694 $15,125,832 $148,204,000 7.43% 10.21% ========================================================================================================== Totals $ 9,079,897 $ 561,423 $ 9,641,321 $3,485,636 $13,126,957 $128,081,200 7.53% 10.25%
Note: 1) Occupancy cost percentages are estimated two ways: a) by dividing base rent and overage rent by total sales (Sub/Sales) and b) dividing the total rental, including expense recoveries, by total sales (Total/Sales). OCCUPANCY COSTS FOR FASHION MALL Galahad Mall Tenants
Fiscal Minimum Overage Sub Total Expense Total Total Occupancy Cost (1) Year Rent Rent Expense Recoveries Expenses Retail Sales Sub/Sales Total/Sales ===================================================================================================================== 1998 $ 4,691,359 $ 244,000 $ 4,935,359 $1,450,993 $ 6,386,352 $ 64,154,000 7.69% 9.95% 1999 $ 5,083,765 $ 281,257 $ 5,365,022 $1,618,444 $ 6,983,466 $ 68,397,000 7.84% 10.21% 2000 $ 5,342,586 $ 296,453 $ 5,639,039 $1,755,782 $ 7,394,821 $ 69,906,000 8.07% 10.58% 2001 $ 5,634,156 $ 258,030 $ 5,892,186 $1,921,028 $ 7,813,214 $ 73,185,000 8.05% 10.68% 2002 $ 5,769,066 $ 279,032 $ 6,048,098 $2,002,996 $ 8,051,094 $ 76,262,000 7.93% 10.56% 2003 $ 5,848,207 $ 295,331 $ 6,143,538 $2,064,256 $ 8,207,794 $ 78,152,000 7.86% 10.50% 2004 $ 5,838,239 $ 316,235 $ 6,154,474 $2,101,588 $ 8,256,062 $ 79,162,000 7.77% 10.43% 2005 $ 6,174,764 $ 303,320 $ 6,478,084 $2,188,030 $ 8,666,114 $ 83,042,000 7.80% 10.44% 2006 $ 6,334,182 $ 274,933 $ 6,609,115 $2,252,656 $ 8,861,771 $ 85,224,000 7.75% 10.40% 2007 $ 6,541,662 $ 268,540 $ 6,810,202 $2,346,979 $ 9,157,181 $ 88,793,000 7.67% 10.31% ========================================================================================================== Totals $ 5,725,799 $ 281,713 $ 6,007,512 $1,970,275 $ 7,977,787 $ 76,627,700 7.84% 10.41%
Note: 1) Occupancy cost percentages are estimated two ways: a) by dividing base rent and overage rent by total sales (Sub/Sales) and b) dividing the total rental, including expense recoveries, by total sales (Total/Sales). Guinevere Mall Tenants
Fiscal Minimum Overage Sub Total Expense Total Total Occupancy Cost (1) Year Rent Rent Expense Recoveries Expenses Retail Sales Sub/Sales Total/Sales ===================================================================================================================== 1998 $ 2,832,880 $ 184,490 $ 3,017,370 $1,274,159 $ 4,291,529 $ 43,187,000 6.99% 9.94% 1999 $ 2,858,515 $ 202,947 $ 3,061,462 $1,293,638 $ 4,355,100 $ 44,185,000 6.93% 9.86% 2000 $ 3,076,151 $ 231,240 $ 3,307,391 $1,393,611 $ 4,701,002 $ 47,454,000 6.97% 9.91% 2001 $ 3,162,527 $ 241,969 $ 3,404,496 $1,388,417 $ 4,792,913 $ 47,646,000 7.15% 10.06% 2002 $ 3,451,055 $ 261,242 $ 3,712,297 $1,507,840 $ 5,220,137 $ 51,200,000 7.25% 10.20% 2003 $ 3,487,388 $ 285,384 $ 3,772,772 $1,558,486 $ 5,331,258 $ 52,831,000 7.14% 10.09% 2004 $ 3,525,090 $ 311,512 $ 3,836,602 $1,607,847 $ 5,444,449 $ 54,599,000 7.03% 9.97% 2005 $ 3,546,797 $ 334,439 $ 3,881,236 $1,632,809 $ 5,514,045 $ 55,343,000 7.01% 9.96% 2006 $ 3,775,813 $ 370,714 $ 4,146,527 $1,726,089 $ 5,872,616 $ 58,679,000 7.07% 10.01% 2007 $ 3,824,771 $ 373,165 $ 4,197,936 $1,770,715 $ 5,968,651 $ 59,411,000 7.07% 10.05% ========================================================================================================== Totals $ 3,354,099 $ 279,710 $ 3,633,809 $1,515,361 $ 5,149,170 $ 51,453,500 7.06% 10.01%
Note: 1) Occupancy cost percentages are estimated two ways: a) by dividing base rent and overage rent by total sales (Sub/Sales) and b) dividing the total rental, including expense recoveries, by total sales (Total/Sales). OCCUPANCY COSTS FOR FASHION MALL Shoppes Tenants
Fiscal Minimum Overage Sub Total Expense Total Total Occupancy Cost (1) Year Rent Rent Expense Recoveries Expenses Retail Sales Sub/Sales Total/Sales ===================================================================================================================== 1998 $ 410,567 $ -- $ 410,567 $ 90,628 $ 501,195 $ 2,700,000 15.21% 18.56% 1999 $ 445,895 $ -- $ 445,895 $ 101,601 $ 547,496 $ 3,013,000 14.80% 18.17% 2000 $ 432,969 $ -- $ 432,969 $ 99,421 $ 532,390 $ 3,078,000 14.07% 17.30% 2001 $ 451,795 $ -- $ 451,795 $ 106,020 $ 557,815 $ 3,061,000 14.76% 18.22% 2002 $ 457,643 $ -- $ 457,643 $ 111,670 $ 569,313 $ 3,331,000 13.74% 17.09% 2003 $ 487,891 $ -- $ 487,891 $ 117,210 $ 605,101 $ 3,476,000 14.04% 17.41% 2004 $ 490,318 $ -- $ 490,318 $ 120,528 $ 610,846 $ 3,597,000 13.63% 16.98% 2005 $ 513,379 $ -- $ 513,379 $ 125,552 $ 638,931 $ 3,723,000 13.79% 17.16% 2006 $ 538,444 $ -- $ 538,444 $ 129,951 $ 668,395 $ 3,853,000 13.97% 17.35% 2007 $ 550,318 $ -- $ 550,318 $ 134,495 $ 684,813 $ 3,988,000 13.80% 17.17% ============================================================================================================ Totals $ 477,922 $ -- $ 477,922 $ 113,708 $ 591,630 $ 3,382,000 14.13% 17.49%
Note: 1) Occupancy cost percentages are estimated two ways: a) by dividing base rent and overage rent by total sales (Sub/Sales) and b) dividing the total rental, including expense recoveries, by total sales (Total/Sales). Anchor Mall Tenants
Fiscal Minimum Overage Sub Total Expense Total Total Occupancy Cost (1) Year Rent Rent Expense Recoveries Expenses Retail Sales Sub/Sales Total/Sales ===================================================================================================================== 1998 $ 2,161,670 $ 36,900 $ 2,198,570 $ 109,095 $ 2,307,665 $ 48,729,000 4.51% 4.74% 1999 $ 2,194,401 $ 88,680 $ 2,283,081 $ 113,400 $ 2,396,481 $ 50,435,000 4.53% 4.75% 2000 $ 2,259,261 $ 129,542 $ 2,388,803 $ 121,041 $ 2,509,844 $ 52,200,000 4.58% 4.81% 2001 $ 2,259,261 $ 171,834 $ 2,431,095 $ 123,916 $ 2,555,011 $ 54,027,000 4.50% 4.73% 2002 $ 2,259,261 $ 215,606 $ 2,474,867 $ 126,891 $ 2,601,758 $ 55,918,000 4.43% 4.65% 2003 $ 2,270,071 $ 260,910 $ 2,530,981 $ 129,970 $ 2,660,951 $ 57,875,000 4.37% 4.60% 2004 $ 2,291,691 $ 307,800 $ 2,599,491 $ 134,779 $ 2,734,270 $ 59,901,000 4.34% 4.56% 2005 $ 2,291,691 $ 356,331 $ 2,648,022 $ 142,941 $ 2,790,963 $ 61,997,000 4.27% 4.50% 2006 $ 2,291,691 $ 395,220 $ 2,686,911 $ 146,355 $ 2,833,266 $ 64,167,000 4.19% 4.42% 2007 $ 2,291,691 $ 434,211 $ 2,725,902 $ 149,888 $ 2,875,790 $ 66,413,000 4.10% 4.33% ========================================================================================================== Totals $ 2,257,069 $ 239,703 $ 2,496,772 $ 129,828 $ 2,626,600 $ 57,166,200 4.37% 4.59%
Note: 1) Occupancy cost percentages are estimated two ways: a) by dividing base rent and overage rent by total sales (Sub/Sales) and b) dividing the total rental, including expense recoveries, by total sales (Total/Sales).
KEYSTONE AT THE CROSSING LEASE ABSTRACT REPORT FOR ALL TENANTS PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) - --------------- -------- ------ ----- ----- ------ ------------- ------- ------- ------- # 1-SUITE 125 200 8,661 11/93 11/05 - 21.00 181,881 5.00 UNLIMITED ABERCROMBIE 100 12/97 23.00 199,203 12/01 25.00 216,525 # 2-SUITE 133 200 2,448 8/96 7/97 - 33.33 81,592 6.00 UNLIMITED ABIGAIL'S 100 # 3-SUITE 012 100 902 6/90 11/00 - 27.72 25,003 5.00 UNLIMITED ALEXANDRIA'S 300 12/98 28.82 25,996 # 4-SUITE 209 200 1,492 11/95 10/02 - 20.00 29,840 6.00 UNLIMITED ALL STARS, INC. 600 11/97 22.00 32,824 11/00 32.04 47,804 # 5-SUITE OUTLOT 500 10,000 1/94 6/05 - 19.00 190,000 3.00 UNLIMITED AMER. BANDSTAND GR 700 1-101 21.00 210,000 5.00 UNLIMITED 12/08 23.00 230,000 # 6-SUITE 3317 300 15,000 7/96 12/99 - 15.00 22,500 AMERICAN PAGING 900 # 7-SUITE 046 100 3,635 7/88 1/99 - 22.00 79,970 5.00 UNLIMITED ANN TAYLOR 100 # 8-SUITE 3417 300 900 7/94 6/97 - 18.00 16,200 ATOMIK DESIGN 900 # 9-SUITE 033 100 1,048 11/95 11/02 - 45.00 47,160 6.00 UNLIMITED AVEDA LIFESTYLE 100 12/98 50.00 52,400 # 10-SUITE 121 200 1,680 12/96 11/00 - 35.00 58,800 5.00 UNLIMITED BABY GAP 100
BREAKPOINT PRO RATA % OF RENT TENANT (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - --------------- ------------ ------------------ ---------- ----------- # 1-SUITE 125 NATURAL WEST CAM + ADMIN ZERO ABERCROMBIE WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 2-SUITE 133 734 NONE ZERO ABIGAIL'S # 3-SUITE 012 NATURAL EAST CAM + ADMIN. ZERO ALEXANDRIA'S EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 4-SUITE 209 NATURAL WEST CAM + ADMIN ZERO ALL STARS, INC. WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 5-SUITE OUTLOT 4,300 OUTLOT R.E. TAXES ZERO AMER. BANDSTAND GR OUTLOT CAM ZERO 4,200 OUTLOT R.E. TAXES ZERO OUTLOT CAM ZERO # 6-SUITE 3317 NATURAL SHOPPES CAM + ADMIN ZERO AMERICAN PAGING SHOPPES TAX ZERO SHOPPES INSURANCE ZERO # 7-SUITE 046 1,454 EAST CAM + ADMIN ZERO ANN TAYLOR 2/94 1,635 EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 8-SUITE 3417 NATURAL SHOPPES CAM + ADMIN ZERO ATOMIK DESIGN SHOPPES TAX ZERO SHOPPES INSURANCE ZERO # 9-SUITE 033 NATURAL EAST CAM + ADMIN. ZERO AVEDA LIFESTYLE EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 10-SUITE 121 NATURAL WEST CAM + ADMIN ZERO BABY GAP WEST MALL TAX ZERO WEST MALL INSURANC ZERO PAGE 2
PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- --------------- --------- # 11-SUITE 104 200 4,673 8/96 1/07 -- 26.00 121,498 BACHRACH 100 -- 12/99 28.00 130,844 -- 12/03 30.00 140,190 # 12-SUITE 050 100 5,107 10/89 5/07 -- 28.00 142,996 BANANA REPUBLIC 100 -- 6/99 32.00 163,424 -- 6/02 34.00 173,638 # 13-SUITE 038A 100 1,047 9/93 8/98 -- 32.00 33,504 BARRINGTON JEWELS 300 # 14-SUITE 140 200 2,888 1/95 1/04 -- 23.00 66,424 BATH & BODY WORKS 100 -- 1/98 25.00 72,200 # 15-SUITE 123A 200 2,585 7/94 1/05 -- 36.00 93,060 BEBE 100 -- 1/99 40.00 103,400 -- 1/02 42.00 108,570 # 16-SUITE 011 100 800 11/95 11/05 -- 25.01 20,008 BERCOT 100 -- 12/98 26.00 20,800 -- 12/02 27.00 21,600 # 17-SUITE 3363 300 1,227 12/91 11/01 -- 15.00 18,405 BLIMPIE SUBS 900 -- 12/97 15.50 19,019 -- 12/98 16.00 19,632 -- 12/99 16.50 20,246 -- 12/00 17.00 20,859 # 18-SUITE 146 200 737 8/93 10/03 -- 45.00 33,165 BODY SHOP, THE 100 -- 11/00 50.00 36,850 # 19-SUITE 042A 100 3,567 3/93 4/03 -- 28.00 99,876 BOMBAY COMPANY 100 -- 5/00 30.00 107,010 # 20-SUITE 217 200 3,276 8/94 7/04 -- 0.00 0 BRENNER LUGGAGE 600 OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------- ------- --------- -------------- ------------------ ---------- ----------- # 11-SUITE 104 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO BACHRACH WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 12-SUITE 050 5.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO BANANA REPUBLIC EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 13-SUITE 038A 6.00 UNLIMITED 524 EAST CAM + ADMIN. ZERO BARRINGTON JEWELS 9/95 558 EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 14-SUITE 140 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO BATH & BODY WORKS WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 15-SUITE 123A 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO BEBE WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 16-SUITE 011 6.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO BERCOT EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 17-SUITE 3363 NATURAL SHOPPES CAM + ADMN ZERO BLIMPIE SUBS SHOPPES TAX ZERO SHOPPES INSURANCE ZERO # 18-SUITE 146 6.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO BODY SHOP, THE WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 19-SUITE 042A 6.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO BOMBAY COMPANY EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 20-SUITE 217 7.00 UNLIMITED ZERO WEST CAM + ADMIN ZERO BRENNER LUGGAGE WEST MALL TAX ZERO WEST MALL INSURANC ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- --------------- --------- # 21-SUITE 108 200 2,501 7/93 8/03 -- 26.00 65,026 BRITCHES GREAT OUT 100 9/00 28.00 70,028 # 22-SUITE 161 200 6,678 9/93 3/04 -- 23.00 153,594 BROOKS BROTHERS 100 4/99 26.00 173,628 # 23-SUITE 021 100 3,500 5/88 1/01 -- 27.00 94,500 BROOKSTONE 100 # 24-SUITE 153 200 2,003 11/93 1/04 -- 28.00 56,084 CACHE' 100 12/00 30.00 60,090 # 25-SUITE 149 200 4,000 11/93 11/05 -- 23.00 92,000 CACIQUE 100 # 26-SUITE 210 200 5,566 10/95 9/10 -- 20.00 111,320 CALIFORNIA PIZZA K 500 10/00 21.00 116,886 10/05 23.00 128,018 # 27-SUITE 3335 300 900 7/94 6/97 -- 16.00 14,400 CHARLES WALKER, INC 900 # 28-SUITE 122 200 2,817 11/89 11/99 -- 26.00 73,242 CHARTER CLUB 100 # 29-SUITE 143 200 2,020 11/93 10/03 -- 27.00 54,540 CHEESE SHOP, THE 100 11/00 29.00 58,580 # 30-SUITE 008 100 1,250 6/88 1/99 -- 29.00 36,250 CHERYL & CO 400 # 31-SUITE 107 200 1,220 6/94 5/99 -- 26.00 31,720 CHICOS OF INDY 100 6/97 28.00 34,160 OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------- ------- --------- -------------- ------------------ ---------- ----------- # 21-SUITE 108 4.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO BRITCHES GREAT OUT WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 22-SUITE 161 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO BROOKS BROTHERS WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 23-SUITE 021 5.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO BROOKSTONE EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 24-SUITE 153 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO CACHE' WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 25-SUITE 149 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO CACIQUE WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 26-SUITE 210 3.00 UNLIMITED 3,800 WEST CAM + ADMIN ZERO CALIFORNIA PIZZA K WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 27-SUITE 3335 NATURAL SHOPPES CAM + ADMN ZERO CHARLES WALKER, INC SHOPPES TAX ZERO SHOPPES INSURANCE ZERO # 28-SUITE 122 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO CHARTER CLUB WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 29-SUITE 143 6.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO CHEESE SHOP, THE WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 30-SUITE 008 6.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO CHERYL & CO. EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 31-SUITE 107 6.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO CHICOS OF INDY WEST MALL TAX ZERO WEST MALL INSURANC ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- --------------- --------- # 32-SUITE 047 100 1,403 5/88 8/98 -- 42.00 58,926 COACH STORE, THE 100 # 33-SUITE 148B 200 807 10/94 1/06 -- 40.00 32,280 COLORADO PEN CO. 100 3/98 45.00 36,315 3/02 50.00 40,350 # 34-SUITE OUTLOT 500 8,429 1/88 3/08 -- 16.61 140,006 COOKER RESTAURANT 700 4/98 17.20 144,979 4/04 17.80 150,036 # 35-SUITE 023 100 4,422 2/89 1/99 -- 23.00 101,706 COOPERSMITH'S 100 # 36-SUITE 3435 300 1,200 9/95 8/00 -- 14.00 16,800 COUNRTYWIDE HOME L 900 9/98 14.42 17,304 9/99 14.85 17,820 # 37-SUITE 032 100 667 10/88 9/98 -- 38.00 25,346 CRABTREE & EVELYN 100 # 38-SUITE 115 200 6,057 6/84 5/99 -- 15.00 90,855 CRACKERS COMEDY 500 # 39-SUITE 3439 300 1,200 6/94 5/97 -- 14.00 16,800 CROSSING PACK & 900 # 40-SUITE 111 200 6,386 5/80 4/00 -- 14.62 93,363 DALT'S 500 5/97 15.06 96,164 5/98 15.51 99,049 5/99 15.98 102,021 # 41-SUITE 116 200 5,271 8/94 2/05 -- 16.00 84,336 DAVIDSON'S 100 3/98 18.00 94,878 3/02 21.00 110,691 OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------- ------- --------- -------------- ------------------ ---------- ----------- # 32-SUITE 047 6.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO COACH STORE, THE EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 33-SUITE 148B 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO COLORADO PEN CO. WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 34-SUITE OUTLOT NATURAL OUTLOT R.E. TAXES ZERO COOKER RESTAURANT OUTLOT CAM ZERO # 35-SUITE 023 6.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO COOPERSMITH'S EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 36-SUITE 3435 NATURAL SHOPPES CAM + ADMN ZERO COUNRTYWIDE HOME L SHOPPES TAX ZERO SHOPPES INSURANCE ZERO # 37-SUITE 032 6.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO CRABTREE & EVELYN EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 38-SUITE 115 6.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO CRACKERS COMEDY WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 39-SUITE 3439 6.00 UNLIMITED NATURAL SHOPPES CAM + ADMN ZERO CROSSING PACK & SHOPPES TAX ZERO SHOPPES INSURANCE ZERO # 40-SUITE 111 5.00 UNLIMITED 1,518 WEST CAM + ADMIN ZERO DALT'S WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 41-SUITE 116 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO DAVIDSON'S WEST MALL TAX ZERO WEST MALL INSURANC ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- --------------- --------- # 42-SUITE 3349 300 1,800 1/96 4/99 -- 15.00 27,000 DONATO'S PIZZA 900 # 43-SUITE 001 100 802 8/93 10/98 -- 20.00 16,040 EARLE TRAVEL AGENT 100 # 44-SUITE 003 100 2,622 8/90 12/97 -- 24.00 62,928 EARTHLY DESIGNS 100 # 45-SUITE 018 100 17,534 6/94 1/05 -- 23.00 403,282 EDDIE BAUER 100 9/97 25.00 438,350 9/01 27.00 473,418 # 46-SUITE 150 200 3,027 9/93 1/03 -- 32.00 96,864 ELISABETH 100 12/00 34.00 102,918 # 47-SUITE 027 100 1,559 6/88 12/98 -- 25.98 40,503 ENGLIN'S FINE FOOT 100 # 48-SUITE 054 100 456 9/88 8/98 -- 36.00 16,416 ENZO PIZZA OF KEYS 200 # 49-SUITE 3353 300 1,200 12/94 6/00 -- 14.00 16,800 FERRARRI PHOTO 900 12/97 14.50 17,400 12/98 15.00 18,000 # 50-SUITE 151 200 2,139 12/93 11/03 -- 28.00 59,892 FINISH LINE, THE 100 12/00 30.00 64,170 # 51-SUITE 051 100 456 9/88 8/98 -- 40.00 18,240 FRESHENS YOGURT 200 OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------- ------- --------- -------------- ------------------ ---------- ----------- # 42-SUITE 3349 NATURAL SHOPPES CAM + ADMN ZERO DONATO'S PIZZA SHOPPES TAX ZERO SHOPPES INSURANCE ZERO # 43-SUITE 001 -- -- -- EAST CAM + ADMIN. ZERO EARLE TRAVEL AGENT EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 44-SUITE 003 5.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO EARTHLY DESIGNS EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 45-SUITE 018 5.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO EDDIE BAUER EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 46-SUITE 150 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO ELISABETH WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 47-SUITE 027 6.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO ENGLIN'S FINE FOOT EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 48-SUITE 054 10.00 UNLIMITED 400 EAST CAM + ADMIN. ZERO ENZO PIZZA OF KEYS EAST MALL TAX ZERO INSURANCE- EAST ML ZERO FOOD COURT CAM ZERO # 49-SUITE 3353 5.00 UNLIMITED NATURAL SHOPPES CAM + ADMN ZERO FERRARRI PHOTO SHOPPES TAX ZERO SHOPPES INSURANCE ZERO # 50-SUITE 151 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO FINISH LINE, THE WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 51-SUITE 051 8.00 UNLIMITED 273 EAST CAM + ADMIN. ZERO FRESHENS YOGURT EAST MALL TAX ZERO INSURANCE- EAST ML ZERO FOOD COURT CAM ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- --------------- --------- # 52-SUITE 024 100 1,210 10/94 9/99 -- 25.00 30,250 GAME PRESERVE, THE 100 10/97 27.00 32,670 # 53-SUITE 030 100 5,300 9/88 8/06 -- 24.00 127,200 GAP 100 8/98 28.00 148,400 8/03 32.00 169,600 # 54-SUITE 007 100 3,450 8/91 8/06 -- 26.00 89,700 GAP KIDS 100 9/01 30.00 103,500 # 55-SUITE 020 100 1,039 12/95 1/06 -- 45.00 46,755 GLORIA JEAN'S COFF 400 12/98 47.00 48,833 12/02 50.00 51,950 # 56-SUITE 3345 300 1,740 12/85 8/97 -- 21.00 36,540 GOLD MINE JEWELERS 900 # 57-SUITE 040 100 1,305 6/88 12/98 -- 32.00 41,760 GOODMAN JEWELERS 300 # 58-SUITE 126 200 2,444 2/97 1/07 -- 35.00 85,540 GYMBOREE 100 2/02 40.00 97,760 # 59-SUITE 3367 300 1,773 12/93 4/99 -- 13.50 23,936 H&R BLOCK TAX 900 5/97 14.50 25,709 # 60-SUITE 044 100 1,830 10/89 12/99 -- 30.00 54,900 H20 PLUS 100 # 61-SUITE 112 200 3,068 9/91 1/04 -- 22.95 70,411 HOLD EVERYTHING 100 9/97 25.08 76,945 9/00 27.40 84,063 # 62-SUITE 124 200 7,005 8/96 7/06 -- 20.00 140,100 HOULIHAN'S 500 8/01 22.00 154,110 OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------- ------- --------- -------------- ------------------ ---------- ----------- # 52-SUITE 024 5.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO GAME PRESERVE, THE EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 53-SUITE 030 5.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO GAP EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 54-SUITE 007 5.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO GAP KIDS EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 55-SUITE 020 8.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO GLORIA JEAN'S COFF EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 56-SUITE 3345 NATURAL SHOPPES CAM + ADMN ZERO GOLD MINE JEWELERS SHOPPES TAX ZERO SHOPPES INSURANCE ZERO # 57-SUITE 040 5.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO GOODMAN JEWELERS EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 58-SUITE 126 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO GYMBOREE WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 59-SUITE 3367 NATURAL SHOPPES CAM + ADMN ZERO H&R BLOCK TAX SHOPPES TAX ZERO SHOPPES INSURANCE ZERO # 60-SUITE 044 5.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO H20 PLUS EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 61-SUITE 112 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO HOLD EVERYTHING WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 62-SUITE 124 4.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO HOULIHAN'S WEST MALL TAX ZERO WEST MALL INSURANCE ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- --------------- --------- # 63-SUITE 029 100 1,368 3/89 2/99 -- 34.00 46,512 ICING, THE 100 # 64-SUITE 056 100 456 6/90 9/00 -- 40.00 18,240 INDY'S HOT DOGS & 200 # 65-SUITE 158 200 8,566 11/93 1/06 -- 36.00 308,376 J. CREW 100 # 66-SUITE 106 200 3,867 7/94 8/04 -- 26.00 100,542 J. SHEPARD 100 9/97 28.00 108,276 9/01 30.00 116,010 # 67-SUITE 119 200 861 8/92 7/97 -- 23.39 20,139 J.C. SIPE 300 # 68-SUITE E-MAJOR 400 120,000 9/88 8/18 -- 8.99 1,078,800 JACOBSON'S 800 1-120 8.99 1,078,800 # 69-SUITE 164 200 980 11/93 11/03 -- 32.00 31,360 JOHNSTON & MURPHY 100 12/00 34.00 33,320 # 70-SUITE 004 100 7,608 9/89 2/00 -- 19.00 144,552 JOS. A. BANK CLOTH 100 # 71-SUITE OUTLOT 500 10,000 4/81 4/06 -- 18.00 180,000 KEYSTONE GRILL 700 OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------- ------- --------- -------------- ------------------ ---------- ----------- # 63-SUITE 029 5.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO ICING, THE EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 64-SUITE 056 8.00 UNLIMITED 417 EAST CAM + ADMIN. ZERO INDY'S HOT DOGS & EAST MALL TAX ZERO INSURANCE- EAST ML ZERO FOOD COURT CAM ZERO # 65-SUITE 158 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO J. CREW WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 66-SUITE 106 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO J. SHEPARD WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 67-SUITE 119 8.00 146 ZERO WEST CAM + ADMIN ZERO J.C. SIPE 3.00 292 WEST MALL TAX ZERO 1.00 UNLIMITED WEST MALL INSURANC ZERO # 68-SUITE E-MAJOR 4.00 36,000 ZERO MAJOR'S CAM JACOBSON'S 3.00 48,000 2.00 60,000 1.00 UNLIMITED 4.00 36,000 ZERO MAJOR'S CAM 3.00 48,000 2.00 60,000 1.00 UNLIMITED # 69-SUITE 164 6.00 UNLIMITED 535 WEST CAM + ADMIN ZERO JOHNSTON & MURPHY 12/96 570 WEST MALL TAX ZERO 12/00 606 WEST MALL INSURANC ZERO # 70-SUITE 004 3.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO JOS. A. BANK CLOTH EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 71-SUITE OUTLOT 6.00 UNLIMITED NATURAL OUTLOT R.E. TAXES ZERO KEYSTONE GRILL OUTLOT CAM ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- --------------- --------- # 72-SUITE 025 100 5,918 7/88 9/98 -- 19.00 112,442 KITS AND KABOODLE 100 # 73-SUITE 3437 300 2,400 5/94 11/99 -- 15.09 36,216 LASER AGE 900 6/97 15.39 36,936 6/98 15.70 37,680 # 74-SUITE 145 200 8,000 6/96 8/06 -- 26.00 208,000 LAURA ASHLEY 100 9/99 28.00 224,000 9/03 30.00 240,000 # 75-SUITE 035 100 15,934 5/88 8/00 -- 16.00 254,944 LIMITED 100 # 76-SUITE 103 200 3,745 12/93 11/98 -- 23.00 86,135 M.G. TATES 100 12/97 24.00 89,880 # 77-SUITE 3449 300 1,740 10/96 9/99 -- 15.00 26,100 MARKET PLACE, THE 900 # 78-SUITE 131 200 1,286 8/93 8/00 -- 22.00 28,292 MICHAEL GARRETT SH 100 9/97 24.00 30,864 # 79-SUITE 052 100 456 3/94 12/98 -- 40.00 18,240 MILANO TO GO 200 # 80-SUITE 165 200 1,209 8/93 11/03 -- 32.00 38,688 MIMI MATERNITY 100 12/00 34.00 41,106 # 81-SUITE 113 200 3,416 5/89 4/99 -- 22.00 75,152 MOLE HOLE @ CROSSG 100 5/97 24.00 81,984 OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------- ------- --------- -------------- ------------------ ---------- ----------- # 72-SUITE 025 5.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO KITS AND KABOODLE EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 73-SUITE 3437 NATURAL SHOPPES CAM + ADMN ZERO LASER AGE SHOPPES TAX ZERO SHOPPES INSURANCE ZERO # 74-SUITE 145 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO LAURA ASHLEY WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 75-SUITE 035 5.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO LIMITED EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 76-SUITE 103 6.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO M.G. TATES WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 77-SUITE 3449 NATURAL SHOPPES CAM + ADMN ZERO MARKET PLACE, THE SHOPPES TAX ZERO SHOPPES INSURANCE ZERO # 78-SUITE 131 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO MICHAEL GARRETT SH WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 79-SUITE 052 8.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO MILANO TO GO EAST MALL TAX ZERO INSURANCE- EAST ML ZERO FOOD COURT CAM ZERO # 80-SUITE 165 6.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO MIMI MATERNITY WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 81-SUITE 113 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO MOLE HOLE @ CROSSG WEST MALL TAX ZERO WEST MALL INSURANC ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- --------------- --------- # 82-SUITE 132 200 1,910 4/94 3/04 - 28.00 53,480 MOTHERS WORK 100 4/99 30.00 57,300 # 83-SUITE 155 200 1,128 4/95 3/02 - 26.00 29,328 MRS. FIELDS COOKIE 400 4/98 28.00 31,584 # 84-SUITE 3315 300 900 10/95 12/98 - 15.00 13,500 NARGANG TAILORS 900 # 85-SUITE OUTLOT 500 2,500 11/80 10/00 - 31.64 79,100 NBD BANK 700 1 - 60 36.38 90,950 2 - 60 41.84 104,600 3 - 60 48.12 120,300 4 - 60 55.33 138,325 # 86-SUITE 3425 300 1,500 8/95 7/97 - 14.25 21,375 NEEDLE FEVER 900 # 87-SUITE 3357 300 1,200 7/96 8/01 - 16.00 19,200 NEXT DAY SIGNS 900 9/99 17.00 20,400 # 88-SUITE 152 200 1,288 11/93 1/04 - 32.00 41,216 NINE WEST 100 # 89-SUITE 154 200 1,486 11/93 11/03 - 32.00 47,552 NORDICTRACK FITNES 100 12/00 36.00 53,496 OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ------------------- ------- --------- -------------- ------------------ ---------- ----------- # 82-SUITE 132 6.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO MOTHERS WORK WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 83-SUITE 155 6.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO MRS. FIELDS COOKIE WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 84-SUITE 3315 NATURAL SHOPPES CAM + ADMN ZERO NARGANG TAILORS SHOPPES TAX ZERO SHOPPES INSURANCE ZERO # 85-SUITE OUTLOT - - - OUTLOT R.E. TAXES ZERO NBD BANK OUTLOT CAM ZERO - - - OUTLOT R.E. TAXES ZERO OUTLOT CAM ZERO - - - OUTLOT R.E. TAXES ZERO OUTLOT CAM ZERO - - - OUTLOT R.E. TAXES ZERO OUTLOT CAM ZERO - - - OUTLOT R.E. TAXES ZERO OUTLOT CAM ZERO # 86-SUITE 3425 6.00 UNLIMITED NATURAL SHOPPES CAM + ADMN ZERO NEEDLE FEVER SHOPPES TAX ZERO SHOPPES INSURANCE ZERO # 87-SUITE 3357 NATURAL SHOPPES CAM + ADMN ZERO NEXT DAY SIGNS SHOPPES TAX ZERO SHOPPES INSURANCE ZERO # 88-SUITE 152 6.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO NINE WEST WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 89-SUITE 154 4.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO NORDICTRACK FITNES WEST MALL TAX ZERO WEST MALL INSURANC ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- ---------------- ---------- # 90-SUITE 147 200 1,143 10/95 1/06 - 40.00 45,720 PAPYRUS 100 12/98 43.00 49,149 12/00 45.00 51,435 # 91-SUITE W-MAJOR 400 129,721 11/93 11/13 - 8.35 1,083,170 PARISIAN 800 12/98 9.10 1,180,461 12/02 9.35 1,212,891 12/08 9.75 1,264,780 1-120 9.75 1,264,780 # 92-SUITE 028 100 1,970 5/88 1/99 - 26.00 51,220 PASTA 100 # 93-SUITE 022 100 2,362 10/95 10/00 - 25.00 59,050 PIER ONE 100 # 94-SUITE 129 200 13,958 9/95 1/08 - 20.00 279,160 POTTERY BARN 100 12/98 21.80 304,284 12/01 23.76 331,642 12/04 25.90 361,512 # 95-SUITE 3407 300 1,120 4/93 11/03 - 13.50 15,120 QUICK & REILLY, INC 100 # 96-SUITE 127 200 6,000 8/89 8/99 - 22.65 135,900 RALIEGH LIMITED 100 # 97-SUITE 109 200 2,481 7/94 7/01 - 15.00 37,215 RENDITIONS 100 8/98 18.00 44,658 # 98-SUITE 136 200 971 12/93 12/98 - 26.00 25,246 SCANDIA DOWN 100 # 99-SUITE 005 100 4,132 10/88 1/01 - 28.00 115,696 SHARPER IMAGE 100 9/97 32.00 132,224 OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ------------------- ------- --------- -------------- ------------------ ---------- ----------- # 90-SUITE 147 6.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO PAPYRUS WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 91-SUITE W-MAJOR 2.50 UNLIMITED 42,752 PARISIAN CAM PARISIAN 2.50 UNLIMITED 42,752 PARISIAN CAM # 92-SUITE 028 5.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO PASTA EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 93-SUITE 022 5.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO PIER ONE EAST MALL TAX ZERO INSURANCE- EAST ML ZERO # 94-SUITE 129 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO POTTERY BARN WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 95-SUITE 3407 NATURAL SHOPPES CAM + ADMN ZERO QUICK & REILLY, INC SHOPPES TAX ZERO SHOPPES INSURANCE ZERO # 96-SUITE 127 4.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO RALIEGH LIMITED WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 97-SUITE 109 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO RENDITIONS WEST MALL TAX ZERO WEST MALL INSURRNC ZERO # 98-SUITE 136 6.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO SCANDIA DOWN WEST MALL TAX ZERO WEST MALL INSURANC ZERO # 99-SUITE 005 3.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO SHARPER IMAGE EAST MALL TAX ZERO INSURANCE- EAST ML ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- ---------------- ---------- #100-SUITE 130 200 2,915 2/97 1/07 - 25.00 72,875 SLEEP OPTIONS 100 2/02 28.00 81,620 #101-SUITE 148A 200 1,207 9/94 1/05 - 40.00 48,280 SPEEDO AUTH. FITNS 100 12/97 43.00 51,901 12/01 46.00 55,522 #102-SUITE 053 100 456 9/88 8/98 - 40.00 18,240 STEAK EXPRESS 200 #103-SUITE 166 200 6,454 11/93 11/05 - 23.00 148,442 STRUCTURE 100 #104-SUITE OUTLOT 500 10,000 6/84 5/04 - 5.95 59,500 STUART ANDERSON'S 700 1- 60 7.65 76,500 2- 60 8.50 85,000 #105-SUITE OUTLOT 500 6,500 2/96 4/01 - 18.46 119,990 SULLIVAN'S STEAKHS 700 #106-SUITE 102 200 577 11/93 1/04 - 60.00 34,620 SUNGLASS HUT 100 12/00 65.00 37,505 #107-SUITE 3309 300 3,080 10/95 9/00 - 16.90 52,052 SUNRISE DELI 900 10/97 17.75 54,670 10/98 18.63 57,380 10/99 19.57 60,276 #108-SUITE 137 200 7,008 6/93 1/04 - 22.57 158,171 TALBOTS 100 9/00 23.14 162,165 1/03 24.57 172,187 OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ------------------- ------- --------- -------------- ------------------ ---------- ----------- #100-SUITE 130 6.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO SLEEP OPTIONS WEST MALL TAX ZERO WEST MALL INSURANC ZERO #101-SUITE 148A 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO SPEEDO AUTH. FITNS WEST MALL TAX ZERO WEST MALL INSURANC ZERO #102-SUITE 053 8.00 UNLIMITED 417 EAST CAM + ADMIN. ZERO STEAK EXPRESS EAST MALL TAX ZERO INSURANCE- EAST ML ZERO FOOD COURT CAM ZERO #103-SUITE 166 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO STRUCTURE WEST MALL TAX ZERO WEST MALL INSURANC ZERO #104-SUITE OUTLOT 1.70 UNLIMITED NATURAL OUTLOT R.E. TAXES ZERO STUART ANDERSON'S OUTLOT CAM ZERO 1.70 UNLIMITED NATURAL OUTLOT R.E. TAXES ZERO OUTLOT CAM ZERO 1.70 UNLIMITED NATURAL OUTLOT R.E. TAXES ZERO OUTLOT CAM ZERO #105-SUITE OUTLOT NATURAL OUTLOT R.E. TAXES ZERO SULLIVAN'S STEAKHS OUTLOT CAM ZERO #106-SUITE 102 8.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO SUNGLASS HUT WEST MALL TAX ZERO WEST MALL INSURANC ZERO #107-SUITE 3309 NATURAL SHOPPES CAM + ADMN ZERO SUNRISE DELI SHOPPES TAX ZERO SHOPPES INSURANCE ZERO #108-SUITE 137 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO TALBOTS WEST MALL TAX ZERO WEST MALL INSURANT ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- ---------------- ---------- #109-SUITE 139 200 2,500 6/93 1/04 - 24.00 60,000 TALBOTS KIDS 100 9/00 26.00 65,000 #110-SUITE OUTLOT 500 7,400 12/91 11/01 - 28.38 210,012 TGI FRIDAY'S 700 #111-SUITE 206 200 1,281 11/93 11/03 - 35.00 44,835 UNIQUE PERFUME 600 12/98 38.00 48,678 #112-SUITE 110 200 4,628 1/97 12/06 - 25.00 115,700 ROYAL GALLERY 100 #113-SUITE 010 100 1,000 11/95 7/97 - 30.00 30,000 AM. SPOON FOODS 100 #114-SUITE 039 100 1,076 9/97 8/07 - 30.00 32,280 VACANT 100 9/02 35.63 38,339 #115-SUITE 041 100 2,062 7/97 6/07 - 25.00 51,550 VACANT 100 7/02 29.69 61,225 #116-SUITE 201 200 8,101 7/98 6/08 - 12.94 104,807 VACANT 600 7/03 15.37 124,477 #117-SUITE 117 200 2,968 4/90 3/98 - 15.95 47,340 J.T. MUESING 100 #118-SUITE 120 200 820 1/98 12/07 - 36.22 29,704 VACANT 100 1/03 43.02 35,280 #119-SUITE 147A 200 492 5/98 4/08 - 36.22 17,823 VACANT 100 5/03 43.02 21,168 OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ------------------- ------- --------- -------------- ------------------ ---------- ----------- #109-SUITE 139 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO TALBOTS KIDS WEST MALL TAX ZERO WEST MALL INSURANC ZERO #110-SUITE OUTLOT 5.00 UNLIMITED NATURAL OUTLOT R.E. TAXES ZERO TGI FRIDAY'S OUTLOT CAM ZERO #111-SUITE 206 7.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO UNIQUE PERFUME WEST MALL TAX ZERO WEST MALL INSURANC ZERO #112-SUITE 110 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO ROYAL GALLERY WEST MALL TAX ZERO WEST MALL INSURANC ZERO #113-SUITE 010 5.00 UNLIMITED NATURAL NONE AM. SPOON FOODS #114-SUITE 039 5.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO VACANT EAST MALL TAX ZERO INSURANCE- EAST ML ZERO #115-SUITE 041 5.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO VACANT EAST MALL TAX ZERO INSURANCE- EAST ML ZERO #116-SUITE 201 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO VACANT WEST MALL TAX ZERO WEST MALL INSURANC ZERO #117-SUITE 117 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO J.T. MUESING WEST MALL TAX ZERO WEST MALL INSURANC ZERO #118-SUITE 120 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO VACANT WEST MALL TAX ZERO WEST MALL INSURANC ZERO #119-SUITE 147A 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO VACANT WEST MALL TAX ZERO WEST MALL INSURANC ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- ---------------- ---------- #120-SUITE 134 200 3,263 2/98 1/08 - 25.88 84,430 VACANT 100 2/03 30.73 100,276 #121-SUITE 135 200 2,444 3/98 2/08 - 25.88 63,239 VACANT 100 3/03 30.73 75,107 #122-SUITE 142 200 900 12/82 3/98 - 33.00 29,700 SLOAN & CO. 100 #123-SUITE 204 200 1,122 1/99 12/08 - 16.07 18,029 VACANT 600 1/04 19.08 21,412 #124-SUITE 218 200 6,682 1/00 12/09 - 13.86 92,606 VACANT 600 1/05 19.75 131,984 #125-SUITE 141 200 475 8/97 7/07 - 35.00 16,625 VACANT 100 8/02 41.57 19,745 #126-SUITE 3329 300 1,440 1/98 12/07 - 15.52 22,356 VACANT 900 1/03 18.44 26,552 #127-SUITE 002 100 1,442 9/93 12/97 - 4.16 5,999 EARTHLY STORAGE 100 #128-SUITE 042 100 1,375 10/97 9/07 - 30.00 41,250 VACANT 100 10/02 35.63 48,992 #129-SUITE 144 200 2,132 4/97 3/07 - 25.00 53,300 VACANT 100 4/03 30.73 65,519 #130-SUITE 156 200 1,292 12/97 12/06 - 30.00 38,760 VACANT 100 12/02 35.63 46,035 OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ------------------- ------- --------- -------------- ------------------ ---------- ----------- #120-SUITE 134 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO VACANT WEST MALL TAX ZERO WEST MALL INSURANC ZERO #121-SUITE 135 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO VACANT WEST MALL TAX ZERO WEST MALL INSURANC ZERO #122-SUITE 142 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO SLOAN & CO. WEST MALL TAX ZERO WEST MALL INSURANC ZERO #123-SUITE 204 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO VACANT WEST MALL TAX ZERO WEST MALL INSURANC ZERO #124-SUITE 218 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO VACANT WEST MALL TAX ZERO WEST MALL INSURANC ZERO #125-SUITE 141 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO VACANT WEST MALL TAX ZERO WEST MALL INSURANC ZERO #126-SUITE 3329 5.00 UNLIMITED NATURAL SHOPPES CAM + ADMN ZERO VACANT SHOPPES TAX ZERO SHOPPES INSURANCE ZERO #127-SUITE 002 5.00 UNLIMITED NATURAL NONE EARTHLY STORAGE #128-SUITE 042 5.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO VACANT EAST MALL TAX ZERO INSURANCE- EAST ML ZERO #129-SUITE 144 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO VACANT WEST MALL TAX ZERO WEST MALL INSURANC ZERO #130-SUITE 156 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO VACANT WEST MALL TAX ZERO WEST MALL INSURANC ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- ---------------- ---------- #131-SUITE 205 200 850 4/99 3/09 - 18.75 15,934 VACANT 600 4/04 22.26 18,925 #132-SUITE 207 200 2,482 7/99 6/09 - 13.39 33,235 VACANT 600 7/04 15.90 39,472 #133-SUITE 213 200 5,033 10/99 9/09 - 13.39 67,393 VACANT 600 10/04 15.90 80,042 #134-SUITE 118 200 1,133 11/97 10/07 - 30.00 33,990 VACANT 100 11/02 35.63 40,369 #135-SUITE 3413 300 1,120 7/97 6/07 - 15.00 16,800 VACANT 900 7/02 17.82 19,953 #136-SUITE 045 100 3,594 6/88 8/00 - 18.00 64,692 VICTORIA'S SECRET 100 #137-SUITE 114 200 1,538 8/94 10/99 - 20.00 30,760 VISCONTI SHOES 100 #138-SUITE 123 200 1,222 5/97 4/07 - 45.00 54,990 WALKING CO., THE 100 5/02 50.00 61,100 #139-SUITE 006 100 2,408 9/88 8/98 - 27.00 65,016 WAVES 100 #140-SUITE 128 200 3,122 9/90 1/03 - 23.88 74,553 WILLIAMS-SONOMA 100 12/99 26.10 81,484 OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ------------------- ------- --------- -------------- ------------------ ---------- ----------- #131-SUITE 205 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO VACANT WEST MALL TAX ZERO WEST MALL INSURANC ZERO #132-SUITE 207 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO VACANT WEST MALL TAX ZERO WEST MALL INSURANC ZERO #133-SUITE 213 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO VACANT WEST MALL TAX ZERO WEST MALL INSURANC ZERO #134-SUITE 118 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO VACANT WEST MALL TAX ZERO WEST MALL INSURANC ZERO #135-SUITE 3413 5.00 UNLIMITED NATURAL SHOPPES CAM + ADMN ZERO VACANT SHOPPES TAX ZERO SHOPPES INSURANCE ZERO #136-SUITE 045 5.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO VICTORIA'S SECRET EAST MALL TAX ZERO INSURANCE- EAST ML ZERO #137-SUITE 114 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO VISCONTI SHOES WEST MALL TAX ZERO WEST MALL INSURANC ZERO #138-SUITE 123 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO WALKING CO., THE WEST MALL TAX ZERO WEST MALL INSURANC ZERO #139-SUITE 006 6.00 UNLIMITED NATURAL EAST CAM + ADMIN. ZERO WAVES EAST MALL TAX ZERO INSURANCE- EAST ML ZERO #140-SUITE 128 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO WILLIAMS-SONOMA WEST MALL TAX ZERO WEST MALL INSURANC ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT - ------------------- ---------- ------ ----- ----- ------- ---------------- ---------- #141-SUITE 055 100 456 9/93 8/98 - 40.00 18,240 WOK RIGHT IN 200 #142-SUITE 3443 300 1,200 9/94 8/99 - 14.85 17,820 YOGURT CROSSING 900 9/97 15.30 18,360 9/98 15.76 18,912 #143-SUITE 203 200 1,544 10/98 9/08 - 15.52 23,971 VACANT 600 10/03 18.44 28,470 #144-SUITE 210A 200 829 1/97 1/97 - 0.00 0 VACANT 600 #145-SUITE MGT.EAST 100 455 1/97 7/24 - 0.00 0 MANAGEMENT OFFICE 1000 #146-SUITE MGT.WEST 200 1,025 1/97 7/24 - 0.00 0 MANAGEMENT OFFICE 1000 ------- 682,912 ======= OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ------------------- ------- --------- -------------- ------------------ ---------- ----------- #141-SUITE 055 8.00 UNLIMITED 300 EAST CAM + ADMIN. ZERO WOK RIGHT IN EAST MALL TAX ZERO INSURANCE- EAST ML ZERO FOOD COURT CAM ZERO #142-SUITE 3443 4.00 UNLIMITED NATURAL SHOPPES CAM + ADMN ZERO YOGURT CROSSING SHOPPES TAX ZERO SHOPPES INSURANCE ZERO #143-SUITE 203 5.00 UNLIMITED NATURAL WEST CAM + ADMIN ZERO VACANT WEST MALL TAX ZERO WEST MALL INSURANC ZERO #144-SUITE 210A NATURAL NONE VACANT #145-SUITE MGT.EAST - - - NONE MANAGEMENT OFFICE #146-SUITE MGT.WEST - - - NONE MANAGEMENT OFFICE
LANDAUER REAL ESTATE COUNSELORS - -------------------------------------------------------------------------------- Professional Qualifications JAMES C. KAFES, MAI, CRE EXPERIENCE: Landauer Associates, Inc. (since 1986) Managing Director, Member of the Board of Directors, Member of the Management Committee, and General Manager of the New York Valuation and Technical Services Division. Valuation and real estate counseling on major urban properties and portfolios, including financial and feasibility analyses, appraisal reviews and independent fiduciary services. Miller & Kafes Associates, Inc. (1972-1986) Principal. Valuations, market studies, investment analyses and counseling services on major commercial developments nationwide and in the Caribbean. James E. Gibbons Associates (1970-1972) Assistant Director. Real estate valuations and counseling services. National Bank of North America (1969-1970) Chief Appraiser. Market valuations and analysis of investment opportunities. General Services Administration (1962-1968) Economic analyses, highest and best use studies, market valuations. PROFESSIONAL ACTIVITIES: MAI: Appraisal Institute CRE: American Society of Real Estate Counselors Has served on national committees of the Appraisal Institute and ASREC since 1971, including current service as a board member and past service as Editor-in-Chief and Chairman of the Editorial Board of The Appraisal Journal, published quarterly by the Appraisal Institute. Member: Board of Directors, Cedar Income Fund Board of Directors, Realty Credit Corp. Roundtable of Advisors, Murray H. Goodman Center for Real Estate Studies, Lehigh University The Real Estate Board of New York, Inc. CERTIFICATION: Currently certified in the Appraisal Institute's voluntary program of continuing education for its designated members. EDUCATION: BS, MBA, Lehigh University LANDAUER REAL ESTATE COUNSELORS - -------------------------------------------------------------------------------- Professional Qualifications KEVIN D. GRAY, CRE EXPERIENCE: Landauer Associates, Inc., (since 1985) Senior Vice President, Valuation and Technical Services Division. Real estate consulting emphasizing appraisals, market and feasibility studies, cash flow analyses and portfolio valuation. All property types, national assignments. Price Waterhouse (1985) Senior Associate. General management and real estate consulting; strategic planning and expansion into new markets and new operations, and incorporation of real estate investment into overall corporate strategic goals. Becker, Becker and Lamont, Inc. Senior Associate (1983-1984), Associate (1981-1983). Real estate programming and feasibility studies; special emphasis on retail planning, new product development and reorganization strategies to increase effectiveness of client operations. Supreme Court, State of Connecticut (1978-1981) Consultant on Court Facilities. Management of real estate planning during reorganization of the Connecticut court system. PROFESSIONAL ACTIVITIES: Member: American Society of Real Estate Counselors (CRE) Member: International Council of Shopping Centers Registered Architect, Connecticut Commissioner of Planning and Zoning, Town of Darien, Connecticut, 1989-1993 EDUCATION: MPPM, Finance and Accounting, Yale University, 1985 M, Architecture, University of Pennsylvania, 1977 BA, Architecture, University of Pennsylvania, 1973 STATE CERTIFICATION: State of New York General Appraiser State of California General Appraiser State of Texas General Appraiser LANDAUER REAL ESTATE COUNSELORS - -------------------------------------------------------------------------------- Professional Qualifications PAUL F. ENGEL EXPERIENCE: Landauer Associates, Inc., Chicago, IL (since 1984) Managing Director, Valuation and Technical Services Division Management, preparation and review of real estate valuation services in all types of real property including portfolio valuation, partial interests and investment consulting in the Midwest region and nationally. Talman Home Federal Savings & Loan, Chicago, IL (1982-1984) Assistant Vice President, Appraisal Specialist. Real estate appraisals, feasibility studies, market analyses and liquidation pricing for all types of properties, Chicago area and nationally. Northwest Federal Savings and Loan, Chicago, IL (1968-1982) Assistant Vice President, Chief Appraiser and Manager of Appraisal Services. Real estate appraisals, loan committee participation, appraisal policy formation and administration of Appraisal Department. PROFESSIONAL ACTIVITIES: Candidate Member - Appraisal Institute Past Secretary - Chicagoland Market Data Center Past Committee Member - Appraisal Institute Market Data Center (Chicagoland) Participated in various programs for the Appraisal Institute; contributed to forming a monthly market data publication for Chicago-area appraisers. CERTIFICATION: Currently certified as State General Appraiser in: Illinois (License No. 153-000410) Indiana (License No. CG 69201411) EDUCATION: Northeastern Illinois University Central YMCA College of Real Estate Appraisal Institute Courses 101, 201, R-2 Exam, Narrative Report Writing, Standards of Professional Practice. SEMINARS: Tax Considerations in Real Estate, Investment Feasibility Analysis, Special Use Properties, Regression Analysis, and others. Savings & Loan Institute; various courses related to real estate and Financial Industry. LANDAUER REAL ESTATE COUNSELORS - -------------------------------------------------------------------------------- Professional Qualifications JOHN P. BAKER, MAI EXPERIENCE: Landauer Associates, Inc., Chicago, IL (since 1994) Director, Valuation and Technical Services Division. Research and valuation of income-producing properties throughout the United States. Experience includes general real estate consulting, valuation, market assessments, and litigation support. Chase and Company, Denver, CO (1985-1993) Appraiser. Research and appraise land and income-producing properties. Jefferson County, Golden, CO (1974-1985) Acquisition Administrator. Negotiated the acquisition of real estate and water rights for Jefferson County's Open Space Program. PROFESSIONAL ACTIVITIES: Member, Appraisal Institute (MAI) CERTIFICATION: Currently certified as State General Appraiser in Illinois (License Number 153-000915) and Colorado Certified General Appraiser (License Number CG0l313629) Licensed Real Estate Salesman, State of Colorado Currently certified in the voluntary program of continuing education for designated members conducted by the Appraisal Institute. EDUCATION: MA Social Science/Public Administration, University of Northern Colorado, Greeley, CO BS Degree - Geography/Urban Planning, Northern Michigan University, Marquette, MI Real Estate Practice (1980) and Water Law (1984), University of Denver, School of Law, Continuing Education Legal Aspects of Planning (Zoning Law), University of Colorado, Boulder, CO, 1976 Numerous professional practice and real estate related courses offered by the Appraisal Institute. Also, various seminars, workshops, and continuing education courses sponsored by the Appraisal Institute. TRADE AREA INFORMATION The following information is based upon a retail market analysis prepared by HSG/Gould Associates. The study was prepared primarily to evaluate the market, locational and demographic factors relating to the feasibility of a prospective Parisian department store as a second anchor tenant at Keystone at the Crossing The Fashion Mall. The results of this study were integral in Parisian's making the decision to locate at The Fashion Mall, which was accomplished in November 1993. Trade Area Keystone at the Crossing The Fashion Mall (hereafter referred to as The Fashion Mall) is located at the northern boundary of the city of Indianapolis, the 12th largest city in the U.S. It is also part of the broader Indianapolis metropolitan area-- an eight-county market with a 1990 population exceeding 1.2 million persons. (See Map- 1 Trading Area) Best known as the State Capitol of Indiana, Indianapolis has undergone tremendous growth as a business center, university town and amateur sports center. It is also the site of the famed Indianapolis 500 (an annual event) and home to two major league sports teams-- the NBA's Indiana Pacers and the NFL's Indianapolis Colts. The combination of these and other features provided the basis for moderate but balanced growth in the metro area. The continuing importance of this mid-western market is reflected in population growth rates, which increased from five percent in the 1970's to seven percent in the 1980's. These gains are a contrast to more sluggish growth underway in such nearby markets as Chicago, Louisville and Cincinnati. As will be noted shortly, the geography and demography of metro growth strongly favors The Fashion Mall. The dominant county is Marion, which contains the subject site, the city of Indianapolis and the metro area's major concentration of retail facilities. Although Marion's share of the total metro population has decreased from roughly 71% in 1970 to about 64% in 1990, it remains the principal population center and accounted for almost 40 percent of metro population growth in the 1980's. Population growth trends for the metro area as a whole and its constituent counties are shown in Table 1, below. Table 1. ================================================================================ POPULATION TRENDS IN METRO INDIANAPOLIS, 1970-1990 ================================================================================ 1980-1990 Change County 1970 1980 1990 Number Percent ================================================================================ Marion 793,767 765,233 797,159 31,927 4.2% - -------------------------------------------------------------------------------- Hamilton 54,531 82,027 108,936 26,909 32.8% - -------------------------------------------------------------------------------- Johnson 61,138 77,240 88,109 10,869 14.1% - -------------------------------------------------------------------------------- Hendricks 53,974 69,804 75,717 5,913 8.5% - -------------------------------------------------------------------------------- Morgan 44,176 51,999 55,920 3,921 7.5% - -------------------------------------------------------------------------------- Hancock 35,096 43,939 45,527 1,588 3.6% - -------------------------------------------------------------------------------- Shelby 37,797 39,887 40,307 420 1.1% - -------------------------------------------------------------------------------- Boone 30,870 36,446 38,147 1,701 4.7% ================================================================================ Metro Total 1,111,350 1,166,575 1,249,822 83,248 7.1% ================================================================================ Source: US. Bureau of the Census Trading Area Delineation The effective trading area for The Fashion Mall encompasses three of the eight metro counties, including portions of Marion, Hamilton and Boone. The trading area delineation (and its subsequent division into sectors) was established after a careful review of the following conditions and factors: 1. Patronage patterns characterizing major department store-type units presently operating within the overall Indianapolis market; 2. Location, size and strength of principal individual retail units, major shopping centers and business districts located throughout Indianapolis, particularly Marion county; 3. Regional highway patterns, socioeconomic features and accessibility characteristics of the market; and 4. Other retail studies undertaken by HSG/Gould Associates for retail firms and developers in the Indianapolis metro area. Careful consideration of these factors and other conditions have shown that the trading area for the proposed center would generate the overwhelming bulk of Parisian's potential customer patronage and sales support. Varying degrees of additional sales would originate from outlying counties within the broader Indianapolis metro area from the adjacent regional market. Character of the Trading Area The delineated trading area is in the midst of a dynamic period of growth and change which, since the early 1970's, has been a principal economic force in central Indiana. Between 1970 and 1980, the trading area generated better than 95 percent of metro gains. These continuing inroads are an impressive dynamic, given that the trading area accounts for just 30 percent of the total metro population base. The growth patterns of the trading area cut through divergent but predominantly better income residential neighborhoods. The Indianapolis portion of the trading area (38th Street to 96th Street) resembles a series of village or suburban communities, with only a few pockets of inner-city type growth. Unlike many central cities, Indianapolis has several enclaves of "old money" wealth, almost all of which lie in the trading area. These enclaves are principally clustered along Meridian and College streets (two prominent north/south arterioles) or near exclusive country clubs. In terms of more recent development, "new money" subdivisions are emerging near the Eagle Creek and Geist reservoirs. The appeal of these areas has local renown-- lakefront homes, large-lot homes and wooded surroundings. The success of Geist Reservoir subdivisions has prompted plans for a 3,000-unit golf course community just east of the town of Fishers. Similarly, the appeal of Eagle Creek homes has led to approvals for several 100-lot developments just west of the I-465 corridor. Both of these reservoirs and their surrounding development occupy opposite ends of the trading area-- again, placing The Fashion Mall at a central position with respect to future development. There are several driving forces behind the steady trading area growth. One major factor is the emergence of suburban employment centers off the interstate corridors (I-465, I-65 and I-69). The four most successful employment centers (i.e. growth nodes) include : The Fashion Mall (location of the subject site, several office buildings and a hotel); Park 100 (a 1,500-acre industrial park north of the I-465/I-65 juncture); Castleton (a corridor of commercial, office and light industrial use west of Geist Reservoir); and South Carmel (an office research and commerce region which begins at the I-465/U.S. 31 juncture). Although trading area growth patterns can be traced to several factors, the emergence of employment centers at various junctures north of the 38th Street corridor was a key factor that sustained population growth in the trading area. Sector Descriptions Since various portions of the trading area possess diverse demographic characteristics and are subject to the influence of different travel patterns and competitive shopping opportunities, the trading area has been subdivided into four sectors. The use of sectors in this analysis will permit more accurate projections of the potential market support. The sectors are identified by the letters A through D and are illustrated on Map 2 Sectors. Descriptions of these sectors (with their 1990 population in parenthesis) follow. Sector A (170,630), which contains the subject site, stretches north from 38th Street to the county line. The overall character of this sector can be fairly described as "better income residential," though it also contains such premier neighborhoods as Meridian Hills (home to the Governor's Mansion), Williams Creek and Highland. Roughly 45 percent of the trading area population lives in Sector A. The sector also encompasses two of the metro area's most dynamic employment nodes: The Fashion Mall and Castleton, both of which( according to a recent Indianapolis Star article) will likely "remain strong despite downturns while other areas will continue to struggle." Broad Ripple, an arts and entertainment district which straddles the White River off College Street, is also part of Sector A. Sector B (61,716) covers a portion of Indianapolis, all of the town of Lawrence, the Geist Reservoir and Fort Harrison. Basically, the sector is a bedroom community for either downtown Indianapolis or one of the growth nodes located in Sector A. Much of this sector absorbed spill-over growth from Indianapolis during the 1960's due its affordable housing and convenient access to major commuter routes (I-465 and the Pendleton Pike). One exception, however, is the Geist Reservoir area which has been a magnet for luxury lakefront development. Fort Harrison, expected to be closed by the mid-1990's, contains prime real estate which county planners hope to convert into luxury homes and a golf course community. (One component of the fort, the Defense Financing and Accounting Service, issues payroll checks for the military and will likely remain open.) Sector C (41,375), which lies in northwestern Marion, is a "mixed-bag" of residential and industrial activity. Development trends have been shaped by two physical features: the I-465 alignment and the Eagle Creek Reservoir. The former has emerged as a haven of major industrial uses, partly because it lies along a distribution route to Chicago. In contrast, the reservoir area has been exclusively residential in focus, sparking dozens of subdivision ranging from 100-lot to 1,200-lot developments. Though 1,200 acres of the reservoir are set-aside for park and recreation uses, planners expect growth trends to continue, prompted by the recent addition of sewer and water lines north of Eagle Creek. Sector D (104,408) contains many of the metro area's most upscale and monied neighborhoods. The most dynamic of these very affluent areas is Carmel, a former cornfield community which has emerged as a corporate and residential boomtown. Located directly north of the subject site, Carmel is seen as the residence of choice for mid- and upper-level corporate executives. Although Carmel is regarded as an affluent residential area, major office development exists along U.S. 31 (Meridian Street) and other main corridors within the city. Other incorporated communities include the affluent Zionsville area, Fishers, Noblesville and Westfield. In addition to its high corporate profile, Sector D has three other distinctions that bode will for the subject site: it is the fastest-growing sector of the trading area; it had the highest 1990 average household income ($60,000); and it offers most of the trading area's developable land. In summary, the four trading area sectors form the core of the metro area's residential and employment growth nodes. Though portions of Sector A have reached built-out potential, the site itself occupies a central position along the path of recent and future development. Site Accessibility The Fashion Mall benefits from an excellent roadway system that provides site accessibility from either an interstate highway, a major east-west arterial or a key north-south boulevard. Taken together, these three alternatives provide a regional reach which will play a pivotal role in the success of an expanded Fashion Mall. The Fashion Mall is located east of Keystone Avenue between I-465 and East 86th. Keystone Avenue is a major north/south arterial tying together urbanized portions of northern Indianapolis with suburban developments in Carmel and Indianapolis, Keystone Avenue is a major plus for the site. The most extensive accessibility feature for The Fashion Mall is Interstate 465-- a limited access regional "beltway" that binds the site with the otherwise fragmented western, eastern and northern portions of Marion County. It also acts as a collector arterial for the wide variety of urban arteries and secondary roads that emanate from the Hamilton and Boone portions of the trading area. The list includes: Interstate 65, a diagonal north/south highway at the western fringes of the trading area; Interstate 69, a diagonal north/south highway at the eastern fringes of the trading area; U.S. 31, (Meridian St.), which serves old money neighborhoods in northern Indianapolis as well as newly monied neighborhoods in Carmel and Westfield; Indiana 431 (Keystone Ave.), a north/south highway connecting the cities of Indianapolis and Carmel; and U.S. 421 (Michigan Ave.), a north/south boulevard connecting Zionsville and Indianapolis; and Indiana 37-A (Allisonville Rd.), a diagonal north/south highway serving the Castleton area of Marion and the Fishers area of Hamilton. Parallel to I-465 is East 86th Street, which is a signalized highway spanning the diameter of the trading area. East 86th (which emerges with another major arterial, 82nd Street) is a primary commuter arterial for employment centers proximate to The Fashion Mall and Castleton areas and, consequently, provides a linkage with urban arteries and secondary roads not directly served by I-465. Improvements to Existing Roads The regional significance of I-465 has prompted on-going lane widenings and interchange repairs, some of which directly improve accessibility to The Fashion Mall. The Indiana Department of Transportation has recently awarded contracts to widen the I-465 interchange at U.S. 31 (Meridian) and resurface the segment between Fall Creek Bridge and the White River. These changes, now complete, are expected to alleviate traffic delays on the interstate, which now divert motorists to east 82nd and 96th streets. Marion County is currently making improvements to segments of 96th Street, specifically the construction of bridges over the White River and Carmel Creek. These improvements will require the extension and widening of 96th Street and are scheduled for completion by 1994. Because the revised East 96th Street will parallel the East 82nd and East 86th corridors plus provide comparable access to Keystone Avenue, the changes will provide an alternate east-west access to the subject site. In summary: The three accessibility options enjoyed by The Fashion Mall provide a critical advantage for the subject site. The advantage, simply stated, is exposure to both old and newly-monied neighborhoods while retaining a regional reach to outlying but significant components of the trading area. The scheduled completion of the 96th Street bridge and extensions promise to reinforce the advantage. Market Support Factors This segment of the report presents the key indices of market support available within the delineated trading area during selected years of this reports's analysis period, i.e. 1980 to 1996. These market support factors include: population; households; and average household income. The market support factors are presented in the tables that follow for these selected years: 1980 and 1990 (Census base years for analyzing past trends); and 1994 and 1996 (anticipated first and third full year of business). Estimates and projections of population, households and income are based upon the following sources: 1. U.S. Department of Commerce, Bureau of the Census, Census of Population and Housing, 1970 to 1980; 2. U.S. Department of Commerce reports on residential construction permits and demolitions since 1980; 3. Information on population trends, local building permit and demolition data, economic and employment growth and housing development activities provided by the Indianapolis Department of Metropolitan Development, the Indiana State Data Center, the Indianapolis Star-News and the respective planning departments in Hamilton County, Boone County, Carmel and Fishers; 4. The 1990 Census of Population, which itemizes housing unit and population counts (by census tract) for the delineated trading area; 5. U.S. Department of Commerce, Bureau of the Census, Current Population Reports, Series P-26, No. 88, 1988 Population and 1987 Per Capita Income Estimates for Counties and Incorporated Places: 6. U.S. Department of Commerce, Bureau of the Census, Current Population Reports, Consumer Income Series P-6O, Money Income of Households, Families and Persons in the United States; and 7. Field surveys, judgments and assessments made by HSG/Gould Associates specifically for this study. Trading Area Population During the 1980-1990 period, trading area population grew from 298,750 persons to 378,129 persons, representing a gain of 79,380 persons between the two Census years. In percentage terms, this gain was an increase of 26.6 percent. By 1997, the trading area population is projected to reach 422,900 (a gain of roughly 45,000 persons or 11.8 percent). Between the last two Census years, about 33 percent of the population gains occurred in Sector A (home sectors for The Fashion Mall) and 46 percent of the gains occurred in Sector B (the Carmel Zionsville-Fishers region). Though Sectors C and D generated a smaller share of the overall trading area increase, they continued to post strong gains relative to their smaller population bases. On an annual basis, the four sectors are expected to sustain their growth rates through the 1990-1996 analyses period. Table 2. ================================================================================ POPULATION TRENDS IN THE FASHION MALL TRADING AREA, 1980-1996 I ================================================================================ U.S. Census 1990-1996 Change Sector 1980 1990 1994 1996 Number Percent ================================================================================ A 143,446 170,630 180,500 185,500 14,870 8.7% - -------------------------------------------------------------------------------- B 59,077 61,716 62,800 63,400 1,684 2.7% - -------------------------------------------------------------------------------- C 27,681 41,375 46,500 49,100 7,725 18.7% - -------------------------------------------------------------------------------- D 68,546 104,408 118,000 124,900 20,492 19.6% ================================================================================ Trading Area Total 298,750 378,129 407,800 422,900 44,771 11.8% ================================================================================ Source: U.S. Bureau of the Census Trade Area Households While population provides one key measure of growth and change, the balance of this report will focus on households since the household represents the most important consumer spending unit. According to the U.S. Census, households are defined as year-round, occupied housing units (owner or renter occupied). In 1990, there were 152,282 households in the trading area-- an increase of 36.8 percent since the 1980 Census. By the end of the analysis period (i.e. 1996) the household base will be 175,300 (a 15.1 percent gain). Every sector is projected to gain households, with 39.3 percent of the gains focused in Sector A and 37.7 percent of the gains occurring in Sector D. Since 1970, the rate of household growth has exceeded that of population growth, both nationally and locally. The result is a contrast between the trading area's 11.8 percent population increase between 1990 and 1995 and its 15.1 percent household gain. Table 3 ================================================================================ HOUSEHOLD TRENDS IN THE FASHION MALL TRADING AREA, 1980-1996 ================================================================================ U.S. Census 1990-1996 Change Sector 1980 1990 1994 1996 Number Percent ================================================================================ A 56,899 74,059 80,100 83,100 9,042 12.2% B 21,176 23,517 24,400 24,900 1,383 5.9% C 10,708 17,591 20,200 21,500 3,909 22.2% D 22,496 37,115 42,900 45,800 8,685 23.4% ================================================================================ Trading Area Total 111,279 152,282 167,600 175,300 23,019 15.1% ================================================================================ Source: U.S. Bureau of the Census Trading Area Income A key factor in determining the amount of dollars available for spending in the trading area's retail facilities is average household income. This is one of the most important single determinants of the amount that individual households spend for retail goods and services that may be offered by virtually any store at The Fashion Mall, including the Parisian unit. Although the income patterns vary from neighborhood to neighborhood, the trading area may be generally characterized as an affluent market. The trading area's estimated 1990 average household income of $50,000 reflects this orientation. By comparison, this average is 29 percent higher than the U.S. average of $38,800. Sectorwise, the most affluent in terms of 1990 average household incomes are Sector D (at $60,000) and Sector A (at $50,000). The relatively lower averages in Sector C (at $45,200) and Sector B (at $38,000) reflects the moderate income character of neighborhoods close to the 38th Street corridors and will likely be diluted by the better income subdivisions now emerging off the Eagle Creek and Geist reservoir area. The trading area's average household income to increase to $62,300 in 1994 and $68,400 in 1996. It should be noted that these figures have been expressed in terms of constant 1990 dollar values; consequently, the income figures presented for the projection years, 1994 an 1996, indicate only real, noninflationary income trends. MAP 1 Trading Area [GRAPHIC OMITTED] TRADING AREA Keystone Crossing Trading Area Boundary Map 2 Sectors [GRAPHIC OMITTED] SECTORS Keystone Crossing Sector Boundary Mon Jul 29, 1996 Page 1 POP-FACTS: FULL DATA REPORT CENSUS ' 90, UPDATES & PROJECTIONS BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510 PREPARED FOR Morgan Stanley Real Estate
86th Street & Keystone Avenue HARDING DAHM & COMPANY COORD: 3991295 8610852 - ----------------------------------------------------------------------------------------- 3.00 MILE 5.00 MILE 10.00 MILE DESCRIPTION RADIUS RADIUS RADIUS - ----------------------------------------------------------------------------------------- POPULATION 2000 PROJECTION 57,768 174,452 567,996 1995 ESTIMATE 55,257 168,247 554,565 1990 CENSUS 50,820 154,768 524,974 1980 CENSUS 40,001 126,657 481,375 GROWTH 1980-1990 27.05% 22.19% 9.06% HOUSEHOLDS 2000 PROJECTION 27,339 78,956 240,531 1995 ESTIMATE 25,660 74,485 229,781 1990 CENSUS 22,650 66,346 210,112 1980 CENSUS 15,388 49,879 178,975 GROWTH 1980-1990 47.20% 33.01% 17.40% 1995 ESTIMATED POPULATION BY RACE 55,257 168,247 554,565 WHITE 94.75% 87.94% 67.86% BLACK 3.63% 10.28% 30.58% ASIAN & PACIFIC ISLANDER 1.31% 1.41% 1.07% OTHER RACES 0.31% 0.36% 0.49% 1995 ESTIMATED POPULATION 55,257 168,247 554,565 HISPANIC ORIGIN 0.93% 0.97% 1.05% OCCUPIED UNITS 22,650 66,346 210,112 OWNER OCCUPIED 57.09% 59.09% 57.26% RENTER OCCUPIED 42.91% 40.91% 42.74% 1990 PERSONS PER HOUSEHOLD 2.24 2.33 2.50 1995 EST. HOUSEHOLDS BY INCOME 25,660 74,485 229,781 $150,000 + 9.72% 9.75% 6.16% $100,000 TO $149,999 7.22% 7.79% 5.57% $ 75,000 TO $ 99,999 9.90% 10.46% 7.93% $ 50,000 TO $ 74,999 21.60% 21.87% 18.73% $ 35,000 TO $ 49,999 16.30% 15.51% 15.74% $ 25,000 TO $ 34,999 12.78% 12.28% 13.34% $ 15,000 TO $ 24,999 11.69% 11.55% 14.71% $ 5,000 TO $ 14,999 8.67% 8.82% 13.51% UNDER $ 5,000 2.12% 1.97% 4.32% 1995 EST. AVERAGE HOUSEHOLD INCOME $67,075 $68,008 $54,547 1995 EST. MEDIAN HOUSEHOLD INCOME $48,563 $49,872 $38,924 1995 EST. PER CAPITA INCOME $31,294 $30,415 $22,898
Mon Jul 29, 1996 Page 2 POP-FACTS: FULL DATA REPORT CENSUS ' 90, UPDATES & PROJECTIONS BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510 PREPARED FOR Morgan Stanley Real Estate 86th Street & Keystone Avenue HARDING DAHM & COMPANY COORD: 3991295 8610852 - -------------------------------------------------------------------------------- 3.00 MILE 5.00 MILE 10.00 MILE DESCRIPTION RADIUS RADIUS RADIUS - -------------------------------------------------------------------------------- 1995 ESTIMATED POPULATION BY SEX 55,257 168,247 554,565 MALE 47.03% 47.13% 47.21% FEMALE 52.97% 52.87% 52.79% MARITAL STATUS 41,690 125,146 409,209 SINGLE MALE 13.05% 12.91% 14.34% SINGLE FEMALE 13.60% 12.91% 14.26% MARRIED 56.91% 56.90% 50.60% PREVIOUSLY MARRIED MALE 4.65% 4.84% 6.49% PREVIOUSLY MARRIED FEMALE 11.79% 12.43% 14.31% HOUSEHOLDS WITH CHILDREN 6,024 19,616 72,860 MARRIED COUPLE FAMILY 80.27% 79.18% 66.54% OTHER FAMILY - MALE HEAD 2.57% 3.01% 4.64% OTHER FAMILY - FEMALE HEAD 16.17% 17.00% 27.60% NON FAMILY 1.00% 0.81% 1.21% 1995 ESTIMATED POPULATION BY AGE 55,257 168,247 554,565 UNDER 5 YEARS 6.68% 7.21% 8.29% 5 TO 9 YEARS 6.21% 6.38% 7.28% 10 TO 14 YEARS 4.85% 5.30% 6.17% 15 TO 17 YEARS 3.23% 3.62% 4.06% 18 TO 20 YEARS 2.36% 2.58% 3.33% 21 TO 24 YEARS 6.27% 5.38% 5.35% 25 TO 29 YEARS 10.79% 9.46% 9.23% 30 TO 34 YEARS 9.59% 9.49% 9.70% 35 TO 39 YEARS 9.02% 9.71% 9.33% 40 TO 49 YEARS 14.83% 15.49% 13.83% 50 TO 59 YEARS 9.40% 9.07% 8.56% 60 TO 64 YEARS 4.12% 3.75% 3.58% 65 TO 69 YEARS 4.13% 3.76% 3.45% 70 TO 74 YEARS 3.32% 3.06% 2.80% 75 + YEARS 5.21% 5.73% 5.04% MEDIAN AGE 35.02 35.30 33.24 AVERAGE AGE 37.07 36.79 34.95 Mon Jul 29, 1996 Page 3 POP-FACTS: FULL DATA REPORT CENSUS ' 90, UPDATES & PROJECTIONS BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510 PREPARED FOR Morgan Stanley Real Estate 86th Street & Keystone Avenue HARDING DAHM & COMPANY COORD: 3991295 8610852 - -------------------------------------------------------------------------------- 3.00 MILE 5.00 MILE 10.00 MILE DESCRIPTION RADIUS RADIUS RADIUS - -------------------------------------------------------------------------------- 1995 ESTIMATED FEMALE POP. BY AGE 29,270 88,952 292,765 UNDER 5 YEARS 6.14% 6.57% 7.66% 5 TO 9 YEARS 5.53% 5.91% 6.74% 10 TO 14 YEARS 4.49% 4.88% 5.69% 15 TO 17 YEARS 3.03% 3.34% 3.85% 18 TO 20 YEARS 2.23% 2.44% 3.32% 21 TO 24 YEARS 6.84% 5.52% 5.53% 25 TO 29 YEARS 10.82% 9.41% 9.24% 30 TO 34 YEARS 9.43% 9.36% 9.48% 35 TO 39 YEARS 8.89% 9.73% 9.27% 40 TO 49 YEARS 14.68% 15.33% 13.61% 50 TO 59 YEARS 9.36% 9.12% 8.69% 60 TO 64 YEARS 4.03% 3.74% 3.66% 65 TO 69 YEARS 4.28% 3.89% 3.61% 70 TO 74 YEARS 3.58% 3.38% 3.15% 75 + YEARS 6.68% 7.37% 6.51% FEMALE MEDIAN AGE 35.84 36.32 34.21 FEMALE AVERAGE AGE 38.33 38.25 36.38 POPULATION BY HOUSEHOLD TYPE 50,820 154,768 524,974 FAMILY HOUSEHOLDS 77.97% 79.36% 80.94% NON FAMILY HOUSEHOLDS 21.63% 19.41% 17.37% GROUP QUARTERS 0.40% 1.23% 1.69% HOUSEHOLDS BY TYPE 22,650 66,346 210,112 SINGLE MALE 11.96% 11.44% 12.11% SINGLE FEMALE 20.28% 19.28% 17.41% MARRIED COUPLE 51.39% 52.50% 47.55% OTHER FAMILY - MALE HEAD 1.64% 1.94% 2.94% OTHER FAMILY - FEMALE HEAD 7.11% 8.11% 13.76% NON FAMILY - MALE HEAD 4.05% 3.73% 3.62% NON FAMILY - FEMALE HEAD 3.59% 3.01% 2.62% POPULATION BY URBAN VS RURAL 50,863 154,847 524,891 URBAN 99.65% 98.58% 97.10% RURAL 0.35% 1.42% 2.90% Mon Jul 29, 1996 Page 4 POP-FACTS: FULL DATA REPORT CENSUS ' 90, UPDATES & PROJECTIONS BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510 PREPARED FOR Morgan Stanley Real Estate 86th Street & Keystone Avenue HARDING DAHM & COMPANY COORD: 3991295 8610852 - -------------------------------------------------------------------------------- 3.00 MILE 5.00 MILE 10.00 MILE DESCRIPTION RADIUS RADIUS RADIUS - -------------------------------------------------------------------------------- FEMALES 16+ WITH CHILDREN 0-17:BASE 22,096 66,494 217,213 WORKING WITH CHILD 0-5 5.38% 5.82% 6.04% NOT WORKING WITH CHILD 0-5 0.17% 0.19% 0.51% NOT IN LABOR FORCE WITH CHILD 0-5 2.08% 2.56% 2.88% WORKING WITH CHILD 6-17 10.23% 11.26% 11.98% NOT WORKING WITH CHILD 6-17 0.21% 0.23% 0.71% NOT IN LAB. FORCE WITH CHILD 6-17 2.86% 2.72% 3.11% WORKING WITH CHILD 0-5 & 6-18 2.91% 3.17% 3.95% NOT WORKING WITH CHILD 0-5 & 6-18 0.17% 0.18% 0.37% NOT IN LAB. FORCE W/CHILD 0-5 & 6-18 2.14% 2.03% 2.23% WORKING WITH NO CHILDREN 45.86% 43.65% 38.52% NOT WORKING WITH NO CHILDREN 1.01% 1.02% 1.66% NOT IN LAB. FORCE WITH NO CHILD 26.99% 27.17% 28.05% HOUSEHOLDS: AGE BY POVERTY STATUS 22,676 66,562 210,029 ABOVE POVERTY UNDER AGE 65 78.55% 78.19% 73.14% ABOVE POVERTY AGE 65 + 16.90% 17.41% 16.02% BELOW POVERTY UNDER AGE 65 3.05% 3.11% 8.33% BELOW POVERTY AGE 65 + 1.50% 1.29% 2.51% POPULATION 16+ BY EMPLOYMENT STATUS 41,102 123,422 402,533 EMPLOYED IN ARMED FORCES 0.24% 0.38% 0.62% EMPLOYED CIVILIANS 72.48% 71.69% 66.73% UNEMPLOYED CIVILIANS 1.55% 1.74% 3.75% NOT IN LABOR FORCE 25.72% 26.19% 28.90% POPULATION 16+ BY OCCUPATION 29,793 88,481 268,619 EXECUTIVE AND MANAGERIAL 21.27% 20.71% 15.42% PROFESSIONAL SPECIALTY 22.17% 22.49% 17.04% TECHNICAL SUPPORT 3.56% 3.78% 3.79% SALES 20.84% 19.43% 14.55% ADMINISTRATIVE SUPPORT 15.51% 15.70% 17.54% SERVICE: PRIVATE HOUSEHOLDS 0.31% 0.35% 0.46% SERVICE: PROTECTIVE 0.76% 0.89% 1.50% SERVICE: OTHER 5.69% 6.41% 10.78% FARMING FORESTRY & FISHING 0.54% 0.56% 0.68% PRECISION PRODUCTION & CRAFT 5.29% 4.91% 7.63% MACHINE OPERATOR 1.62% 1.85% 4.57% TRANS. AND MATERIAL MOVING 1.10% 1.24% 2.83% LABORERS 1.34% 1.68% 3.22% Mon Jul 29, 1996 Page 5 POP-FACTS: FULL DATA REPORT CENSUS ' 90, UPDATES & PROJECTIONS BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510 PREPARED FOR Morgan Stanley Real Estate 86th Street & Keystone Avenue HARDING DAHM & COMPANY COORD: 3991295 8610852 - -------------------------------------------------------------------------------- 3.00 MILE 5.00 MILE 10.00 MILE DESCRIPTION RADIUS RADIUS RADIUS - -------------------------------------------------------------------------------- FAMILY BY NUMBER OF WORKERS 13,801 41,947 136,276 NO WORKERS 8.95% 7.97% 10.08% ONE WORKER 24.20% 25.39% 28.02% TWO WORKERS 55.60% 55.42% 49.82% THREE + WORKERS 11.26% 11.22% 12.08% HISPANIC POPULATION BY TYPE 50,820 154,768 524,974 NOT HISPANIC 99.18% 99.10% 98.97% MEXICAN 0.36% 0.34% 0.50% PUERTO RICAN 0.07% 0.11% 0.14% CUBAN 0.05% 0.06% 0.05% OTHER HISPANIC 0.33% 0.38% 0.34% 1995 HISPANIC RACE BASE 516 1,637 5,834 WHITE 75.86% 70.36% 57.83% BLACK 2.76% 4.70% 13.32% ASIAN 2.53% 2.76% 1.93% OTHER 18.85% 22.18% 26.92% POPULATION BY TRANSPORTATION TO WORK 29,493 87,836 266,592 DRIVE ALONE 88.85% 86.44% 79.33% CAR POOL 6.70% 8.03% 11.93% PUBLIC TRANSPORTATION 0.53% 0.88% 3.46% DRIVE MOTORCYCLE 0.03% 0.07% 0.06% WALKED ONLY 0.76% 1.06% 2.22% OTHER MEANS 0.44% 0.52% 0.65% WORKED AT HOME 2.68% 3.00% 2.34% POPULATION BY TRAVEL TIME TO WORK 29,493 87,836 266,592 UNDER 10 MINUTES / WORK AT HOME 16.57% 16.13% 14.37% 10 TO 29 MINUTES 58.48% 59.70% 61.20% 30 TO 59 MINUTES 22.70% 21.61% 21.41% 60 TO 89 MINUTES 1.35% 1.53% 1.75% 90+ MINUTES 0.90% 1.03% 1.26% AVERAGE TRAVEL TIME IN MINUTES 19.93 20.11 20.56 HOUSEHOLDS BY NUMBER OF VEHICLES 22,722 66,321 209,980 NO VEHICLES 3.85% 4.19% 11.23% 1 VEHICLE 35.17% 36.04% 37.03% 2 VEHICLES 45.98% 45.00% 38.02% 3+ VEHICLES 15.00% 14.77% 13.72% ESTIMATED TOTAL VEHICLES 39,790 114,937 329,624 Mon Jul 29, 1996 Page 6 POP-FACTS: FULL DATA REPORT CENSUS ' 90, UPDATES & PROJECTIONS BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510 PREPARED FOR Morgan Stanley Real Estate 86th Street & Keystone Avenue HARDING DAHM & COMPANY COORD: 3991295 8610852 - -------------------------------------------------------------------------------- 3.00 MILE 5.00 MILE 10.00 MILE DESCRIPTION RADIUS RADIUS RADIUS - -------------------------------------------------------------------------------- POPULATION 25+ BY EDUCATION LEVEL 35,274 106,468 338,586 ELEMENTARY (0-8) 1.37% 1.79% 5.15% SOME HIGH SCHOOL (9-11) 4.39% 4.74% 13.14% HIGH SCHOOL GRADUATE (12) 19.56% 19.07% 26.00% SOME COLLEGE (13-15) 20.91% 21.34% 20.40% ASSOCIATES DEGREE ONLY 5.75% 5.98% 5.69% BACHELORS DEGREE ONLY 32.15% 30.34% 18.94% GRADUATE DEGREE 15.86% 16.73% 10.68% POPULATION ENROLLED IN SCHOOL 11,535 36,405 129,658 PUBLIC PRE - PRIMARY 4.74% 4.02% 4.17% PRIVATE PRE - PRIMARY 6.02% 6.40% 4.45% PUBLIC ELEM/HIGH 48.77% 47.97% 56.50% PRIVATE ELEM/HIGH 9.86% 11.66% 8.94% ENROLLED IN COLLEGE 30.61% 29.95% 25.95% HOUSING UNITS BY OCCUPANCY STATUS 24,147 70,948 230,912 OCCUPIED 93.80% 93.51% 90.99% VACANT 6.20% 6.49% 9.01% VACANT UNITS 1,497 4,602 20,800 FOR RENT 60.24% 66.68% 49.96% FOR SALE ONLY 15.90% 14.95% 12.79% SEASONAL 5.51% 4.52% 2.47% OTHER 18.35% 13.84% 34.78% OWNER OCCUPIED PROPERTY VALUES 12,015 36,043 107,562 UNDER $25,000 0.57% 0.45% 5.84% $25,000 TO $49,999 3.34% 3.96% 24.70% $50,000 TO $74,999 15.27% 16.18% 19.66% $75,000 TO $99,999 28.06% 28.85% 19.80% $100,000 TO $149,999 31.11% 28.75% 16.99% $150,000 TO $199,999 11.70% 11.89% 6.59% $200,000 TO $299,999 6.27% 6.40% 4.05% $300,000 TO $399,999 2.21% 1.92% 1.21% $400,000 TO $499,999 0.80% 0.74% 0.52% $500, 000 + 0.65% 0.86% 0.64% MEDIAN PROPERTY VALUE $110,986 $111,281 $84,016 TOTAL RENTAL UNITS 9,567 26,554 86,445 MEDIAN RENT $454 $443 $359 Mon Jul 29, 1996 Page 7 POP-FACTS: FULL DATA REPORT CENSUS 90, UPDATES & PROJECTIONS BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510 PREPARED FOR Morgan Stanley Real Estate 86th Street & Keystone Avenue HARDING DAHM & COMPANY COORD: 3991295 8610852 - -------------------------------------------------------------------------------- 3.00 MILE 5.00 MILE 10.00 MILE DESCRIPTION RADIUS RADIUS RADIUS - -------------------------------------------------------------------------------- PERSONS IN UNIT 22,650 66,346 210,112 1 PERSON UNITS 32.23% 30.72% 29.52% 2 PERSON UNITS 36.99% 35.58% 31.85% 3 PERSON UNITS 13.58% 14.90% 16.28% 4 PERSON UNITS 11.42% 12.52% 13.43% 5 PERSON UNITS 4.31% 4.63% 5.72% 6 PERSON UNITS 1.12% 1.22% 2.02% 7 + UNITS 0.35% 0.44% 1.18% YEAR ROUND UNITS IN STRUCTURE 24,147 70,948 230,912 SINGLE UNITS DETACHED 51.57% 53.57% 54.63% SINGLE UNITS ATTACHED 7.06% 6.91% 8.42% DOUBLE UNITS 0.91% 1.15% 2.47% 3 TO 9 UNITS 21.53% 21.63% 16.02% 10 TO 19 UNITS 10.88% 10.60% 8.84% 20 TO 49 UNITS 5.14% 3.58% 4.72% 50 + UNITS 2.36% 1.92% 2.74% MOBILE HOME OR TRAILER 0.02% 0.03% 1.22% ALL OTHER 0.54% 0.61% 0.94% SINGLE/MULTIPLE UNIT RATIO 1.44 1.56 1.81 HOUSING UNITS BY YEAR BUILT 22,722 66,321 209,98 BUILT 1989 TO MARCH 1990 2.87% 2.08% 2.03% BUILT 1985 TO 1988 18.49% 13.74% 10.20% BUILT 1980 TO 1984 12.59% 10.78% 7.81% BUILT 1970 TO 1979 22.78% 24.33% 18.36% BUILT 1960 TO 1969 19.94% 21.59% 19.38% BUILT 1950 TO 1959 16.20% 14.25% 16.29% BUILT 1940 TO 1949 4.48% 6.48% 8.76% BUILT 1939 OR EARLIER 2.65% 6.75% 17.17% Mon Jul 29, 1996 Page 1 CONSUMER EXPENDITURE REPORT BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510 PREPARED FOR Morgan Stanley Real Estate 86th Street & Keystone Avenue HARDING DAHM & COMPANY COORD: 3991295 8610852 - -------------------------------------------------------------------------------- 3.00 MILE 5.00 MILE 10.00 MILE CEP BY CATEGORY RADIUS RADIUS RADIUS - -------------------------------------------------------------------------------- TOTAL RETAIL $680 $1,993 $5,666 FOOD STORES $115 $337 $978 EATING & DRINKING PLACES $67 $196 $571 DRUG & PROPRIETARY $23 $67 $200 GASOLINE SERVICE STATION $43 $126 $361 GENERAL MERCHANDISE $81 $235 $696 APPAREL & ACCESSORY $34 $99 $274 FURNITURE, FURNISHINGS & EQUIP. $41 $120 $321 AUTOMOTIVE DEALER $165 $483 $1,367 HARDWARE, LUMBER & GARDEN $37 $108 $308 IN (000,000's) To: Jim Flom, Shirish Godbole, Morgan Stanley Mortgage Capital inc. FT: Kevin Gray Re: Leasing Commissions and Tenant Improvement Allowances for Regional Malls, Project Whisper Dt: September 16. 1996 Following is our analysis of leasing commissions and tenant improvement allowances for the regional malls in the Project Whisper portfolio. This information will be in the final version of our report, but I wanted to present it to you separately for discussion. Leasing Commissions As you know, regional malls are usually leased by companies which own multiple mall properties and leasing is centralized. The industry norm is for leasing commissions to be included in management fees. We have reviewed our appraisal work from the past few years and have determined that there is a fairly narrow range of management fee arrangements: For most malls, management fees were typically in the range of 4.5% of minimum and percentage rent and utility sales, charged between related entities. Alternatively, a higher percentage of 5.0% is applied to a lower number of minimum and percentage rent and other income. In some cases, management fees are in the range of 3.0% to 3.5% applied to all revenue. Fees for third party management for institutional and off-shore investors are similar. In instances where leasing commissions are not included in the management fee, which is very rare, commissions are usually calculated at a rate of 20% to 25% of the first year's rent. In some instances, we have also seen incentive management fees over a base year. Also, for more difficult properties or urban properties, management fees should be at the high end of the range. Thus, for the Project Whisper assets, our assessment of management fees, which include leasing commissions, would be 4.5% of minimum and percentage rent, other income and sale of utilities, excluding recoveries which are already subject to a surcharge. This assumption should be applied to Fox Hills, Eastridge, Parkway Plaza and Golf Mill Mall. At Keystone and The Brickyard, given the specialized nature of these assets, we would assume that the management fees would be higher, at 5.0% applied to the same income. At Westshore, the small size of the property and low achieved rents suggest that the management fee is probably in the 4.0% to 4.5% range. Tenant Allowances Tenant allowances at regional malls are highly negotiable and variable. In recent years, there has been a trend towards tenant allowances whereas none were given in the past. Restaurants and trophy tenants such as the Disney Store have been receiving large allowances of $150,000 to $250,000 (or more), but many tenants receive no allowances, even at average properties. Obviously, the best data for tenant allowance assumptions is at each subject property's recent leasing experience. However, no data on actual allowances paid was available for our review. Therefore, we would conclude a range of allowances based on industry norms, according to the age, condition and strength of each center as follows: Arrowhead Towne Center At this relatively new center in an emerging market, we would conclude a very low allowance assumption of $2.00 per sq. ft., applied to all spaces as they expire. However, some of the vacant space may never have been leased, and this "virgin" space should be assigned a higher rate of $7.00 per sq. ft. unless funds from the construction budget are still available to complete build out. Fox Hills An allowance of $5.00 per sq. ft. applied to all expiring space. Eastridge An allowance of $3.00 to $5.00 per sq. ft. average applied to all expiring space. Parkway Plaza An allowance of $3.00 to $5.00 per sq. ft. average applied to all expiring space. No allowance for strip space. Golf Mill Mall An allowance of $3.00 to $5.00 per sq. ft average applied to all expiring space. The Brickyard This is an older, urban center with a small number of national tenants compared with most malls, and a discount orientation. At the market rents assumed of $19.00 per sq. ft., we would probably assume a low allowance of $1.00 to $2.00 per sq. ft. for minor cosmetic changes. Keystone Fashion Mall Typically, fashion-oriented specialty centers such as Keystone have above-average tenant allowances, especially if the tenants are very high-end. However, at the market rents achieved at this center, of $ 30.00 per sq. ft., and in consideration of its excellent physical condition, we would ascribe an allowance only slightly above average, in the $4.00 to $6.00 range per sq. ft., applied to expiring space. No allowance for strip space. Westshore Mall At this small center with low vacancy, allowances should be minimal, at $1.00 to $2.00 per sq. ft. for all expiring space, with no allowance for Westshore Plaza strip space. I should also note that it has been our appraisal practice to not inflate tenant allowance expenses over time, as it is generally thought that the retail property market is at a very weak point and will improve going forward. This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. ============= HVS ------------- INTERNATIONAL ============= ============= HVS - ------------- INTERNATIONAL ============= ===================================================== ---------------------------------- Complete, Self-Contained Appraisal Report ---------------------------------- Ramada Hotel ---------------------------------- Omaha, Nebraska ---------------------------------- Prepared by: Hospitality Valuation Services Division of H & R Valuation Services, Inc. 4730 Walnut Street, Suite 201 Boulder, Colorado 80301 303-443-3933 303-443-4186 FAX Submitted to: Mr. Shirish Godbole, Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 [Letterhead of HVS International] December 31, 1996 Mr. Shirish Godbole, Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 Re: Ramada Hotel Omaha, Nebraska HVS Ref. #9690240 Dear Mr. Godbole: Pursuant to your request, we herewith submit our complete, self-contained appraisal report pertaining to the above-captioned property. We have inspected the site and facilities and analyzed the hostelry market conditions in the Omaha and Douglas County area. Our report was prepared in accordance with, and is subject to, the requirements of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and the Uniform Standards of Professional Practice (USPAP), as provided by the Appraisal Institute. Based on the available data, our analysis, and our experience in the hotel industry, it is our opinion that the market value of the fee simple interest in the subject property described in this report, as of January 1, 1997, is: $3,600,000 THREE MILLION SIX HUNDRED THOUSAND DOLLARS We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings and valuation. The complete, self-contained appraisal report is made part hereof, and must remain attached in order for the value opinion set forth to be considered valid. 2 ============= HVS - ------------- INTERNATIONAL ============= This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. Very truly yours, HOSPITALITY VALUATION SERVICES /s/ Tanya J. Pierson Tanya J. Pierson Senior Associate - HVS Denver H & R Valuation Services, Inc. /s/ Anne R. Lloyd-Jones, CRE Anne R. Lloyd-Jones, CRE Senior Vice President - HVS New York Division of Hotel Consulting Services, Inc. /s/ Gregory Hartmann, CHA Gregory Hartmann, CHA Managing Director - HVS Denver H & R Valuation Services, Inc. /s/ Stephen Rushmore, CRE, MAI, CHA Stephen Rushmore, CRE, MAI, CHA President - HVS New York Division of Hotel Consulting Services, Inc. TJP:ARL-J:GH:SR:DTQ Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Table of Contents - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table of Contents 1. Executive Summary ...................................................... 1 2. Nature of the Assignment ............................................... 3 3. Description of the Land, Improvements, Zoning, Taxes and Neighborhood ......................................... 7 4. Market Area Analysis ................................................... 20 5. Overview of External Forces Affecting the U.S. Lodging Industry ........ 31 6. Lodging Market Supply and Demand Analysis .............................. 47 7. Projection of Occupancy and Average Rate ............................... 65 8. Highest and Best Use ................................................... 81 9. Approaches to Value .................................................... 83 10. Income Capitalization Approach ........................................ 86 11. Sales Comparison Approach ............................................. 124 12. Cost Approach ......................................................... 133 13. Reconciliation of Value Indications139 14. Statement of Assumptions and Limiting Conditions ...................... 143 15. Certification ......................................................... 147 Addenda Photographs of the Subject Property Legal Description Synopsis of Franchise and License Agreements Synopsis of Hotel Management Agreement Explanation of the Simultaneous Valuation Formula Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Table of Contents - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Qualifications Tanya J. Pierson Anne R. Lloyd-Jones, CRE Gregory Hartmann, CHA Stephen Rushmore, CRE, MAI, CHA Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Executive Summary 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 1. Executive Summary Property: Ramada Hotel Location: 7007 Grover Street Omaha, Nebraska 68106 Date of Inspection: October 17, 1996 Interest Appraised: Fee Simple Date of Value: January 1, 1997 Land Description Area: +/-3.995 acres, or +/-174,039 square feet Zoning: CC - Community Commercial Assessor's Parcel Number: Lawnfield Lot 5, Block 12 Improvements Description Age: Constructed in 1973 Property Type: Full Service Guestrooms: 215 Number of Stories: Nine Stories Food and Beverage Facilities: Thoroughbreds Restaurant - 100 seats Bumpers Lounge - 173 seats Meeting Space: Six Rooms - +/-5,787 square feet Parking: 282 Surface Spaces Summary of Value Parameters Highest and Best Use (as if vacant): Hold for Speculative Commercial Use Highest and Best Use (as improved): Full Service Lodging Facility Marketing Period: Six to Twelve Months Number of Years to Stabilize: Two Stabilized Year: 1998 Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Executive Summary 2 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Valuation Assumptions Mortgage Interest Rate: 9.5% Amortization Period: 20 Years Debt Service Constant: 0.111856 Loan-to-Value Ratio: 70% Stabilized Inflation Rate: 3.5% Equity Yield Rate: 22% Terminal Capitalization Rate: 12% Brokerage and Legal Fees: 3% Holding Period: 10 years Calculated Discount Rate: 14.4% Estimates of Value Income Capitalization Approach: $3,500,000 Sales Comparison Approach: $2,500,000 to $6,700,000 Cost Approach (Replacement Cost): $12,400,000 Market Value Conclusion: $3,600,000 Market Value Conclusion per Room: $16,700 Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Executive Summary 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 2. Nature of the Assignment Subject of the The subject of the complete, self-contained appraisal Complete, report is the fee simple interest in a +174,039-square- Self-Contained foot (+3.995-acre) parcel improved with a 215-room, full Appraisal service lodging facility known as the Ramada Hotel, which opened in 1973. In addition to guestrooms, the subject property contains a restaurant and lounge, approximately 5,800 square feet of meeting space, an exercise room, indoor swimming pool and back-of-the-house facilities typical of this type of property. The hotel is located on the northeastern corner of the intersection formed by Interstate 80 and 72nd Street, roughly ten miles south of downtown Omaha. Municipal jurisdictions governing the property include the City of Omaha, Douglas County, and the State of Nebraska. The hotel's civic address is 7007 Grover Street, Omaha, Nebraska, 68106. Objective of the The objective of the complete, self-contained appraisal Complete, report is to evaluate the supply and demand factors Self-Contained affecting the market for transient accommodations in the Appraisal Omaha area for the purpose of estimating the market value of the subject property. Market value is defined by the Office of the Comptroller of the Currency (OCC), 12 CFR, Part 34, 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 and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. buyer and seller are typically motivated; 2. both parties are well informed or well advised, and acting in what they consider their own best interests; Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Executive Summary 4 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 3. a reasonable time is allowed for exposure in the open market; 4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) Use of the This appraisal is being prepared for use by Morgan Appraisal Stanley Mortgage Capital, Inc. in connection with their proposed financing of a package of seventeen hotels, including the subject property, which are owned by Ashford Financial Corporation or related entities. The information presented in this report should not be disseminated to the public or third parties without the express written consent of Hospitality Valuation Services. Scope of All information was collected and analyzed by the staff the Appraisal of Hospitality Valuation Services. Data such as historical operating statements, site plans, floor plans, and so forth were supplied by Ashford Financial Corporation and Remington Hotel Company. Unless noted otherwise, we have inspected the competitive lodging facilities and analyzed the sales summarized in this report, and our value conclusion is based on this investigation and analysis. Property The property rights appraised are the fee simple Rights Appraised ownership of the land and improvements, including the furniture, fixtures, and equipment. The fee simple interest is defined as "absolute ownership unencumbered by any other interest or estate subject only to the four powers of government."(2) The subject property is appraised as a going concern (i.e., an open and operating facility). (1) Federal Register, Vol. 55, No. 165, August 24, 1990; p. 34696. (2) The Dictionary of Real Estate Appraisal - Second Edition, American Institute of Real Estate Appraisers, Chicago, IL, 1989, p. 120. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Executive Summary 5 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Method of Study The methodology used to develop this complete, self-contained appraisal report is based on the market research and valuation techniques set forth in the textbooks authored by HVS International for the American Institute of Real Estate Appraisers and the Appraisal Institute, entitled The Valuation of Hotels and Motels,(1) Hotels, Motels and Restaurants: Valuations and Market Studies,(2) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations,(3) and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations.(4) The appraisal will consider the three standard approaches to value: income capitalization, sales comparison, and cost. Because lodging facilities are income-producing properties that are normally bought and sold on the basis of capitalization of their anticipated stabilized earning power, the greatest weight is given to the value indicated by the income capitalization approach. We find that most hotel investors employ a similar procedure in formulating their purchase decisions, and thus the income capitalization approach most closely reflects the rationale of typical buyers. When appropriate, the sales comparison and cost approaches are used to test the reasonableness of the results indicated by the income capitalization approach. Ownership, Franchise, A photocopy of the subject property's legal description, and Management which was provided by Ashford Financial Corporation is History and presented in the Addenda to this report; the appraisers Assumptions assume no responsibility regarding the accuracy of this legal description. The Ramada was one of ten hotels purchased in 1987 from the Ramada Hotel Operating Company (RHOC). RHOC developed and opened the subject property in 1973 and was the owner until 1987. On October 4, 1994, Ashford Financial purchased six Ramada properties owned by Ramada Assured Income Associates, L.P., which included the subject property at an allocated price of $3,000,000. The current owner of the subject property is (1) The Valuation of Hotels and Motels, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1978. (2) Hotels, Motels and Restaurants: Valuations and Market Studies, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1983. (3) The Computerized Income Approach to Hotel Motel Market Studies and Valuations, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1990. (4) Hotels and Motels: A Guide to Market Analysis Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Executive Summary 6 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Omaha Nebraska Hotel Limited Partnership, an entity controlled by Ashford Financial Corporation. The subject property is operated under a franchise agreement with Ramada Franchise Systems, Inc.; this agreement expires in 2010. The hotel is also subject to a management agreement with Remington. Abstract of both of these agreements are presented in the Addenda to this report. Marketing Period In light of the renewed interest in hotel investments and the increasing availability of debt and equity capital, we believe that it will take six to twelve months to sell the subject property assuming it is placed on the market at the concluded value. Effective Date The effective date of the appraisal is January 1, 1997. of the Appraisal All projections are expressed in inflated dollars, and the value estimate represents 1997 dollars. Date of Inspection The subject property was inspected by Tanya I. Pierson on October 17, 1996. Hospitality Valuation Services, Description of the Land, Improvements 7 Boulder, Colorado Zoning, Taxes, and Neighborhood Ramada Hotel - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 3. Description of the Land, Improvements, Zoning, Taxes, and Neighborhood LAND The suitability of the land for the operation of a lodging facility is an important consideration affecting the economic viability of a property and its overall value. Factors such as size, topography, access, visibility, and the availability of utilities have a direct impact on the desirability of a particular site. Size and Topography The subject site is located on the northeastern corner of the intersection formed by Interstate 80 and 72nd Street. Municipal jurisdictions governing the property include the City of Omaha, the County of Douglas, and the State of Nebraska. According to an Alta survey provided by the property owners, the subject parcel measures approximately +/-174,039 square feet, or +/-3.995 acres. The site is roughly rectangular in shape with approximately 299 feet of frontage along Grover Street to the north; 583 feet abutting an apartment complex to the east; 299 feet abutting Interstate 80 to the south; and 583 feet abutting a parcel improved with a restaurant and motel to the west. Primary vehicular access to the subject property is provided by Grover Street, via 72nd Street. The topography of the parcel is relatively flat. In conclusion, the size and topography of the subject parcel appear appropriate for hotel use. The site is fully developed, with no excess land available for expansion. Easements The appraisers were not provided with any information concerning easements affecting the subject property. For the purpose of this appraisal, we have assumed that the property is not encumbered by any unusual or onerous easements which would affect its use or marketability. Hospitality Valuation Services, Description of the Land, Improvements 8 Boulder, Colorado Zoning, Taxes, and Neighborhood Ramada Hotel - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Regional Access It is important to analyze a lodging facility's ease of access with respect to regional and local transportation routes and demand generators. The subject site is readily accessible to a variety of local, county, state, and interstate highways. With its western Omaha location, the subject property is readily accessible to a mixture of highways. Interstates 80, 680 and 480, as well as U.S. Highway 275 (L Street), Highway 6 (Dodge Road) and State Highway 38 (West Center Road) all pass within several miles of the subject property and serve as major commutation and regional transportation routes linking Omaha to Wyoming and the central United States. Interstate 80 (I-80) passes immediately south of the subject property. This major interstate originates in Toledo, Ohio and extends westward through Chicago, Illinois. Interstate 80 continues in a westerly direction passing through Des Moines, Iowa; Omaha, Nebraska; Salt Lake City, Utah; and then extends to the southwest, terminating in Oakland, California. This highway serves as the major east/west corridor in Nebraska and is a primary means of access to the subject property for guests arriving from the midwestern United States. Interstate 680 runs in a north/northeast direction and serves as a northern loop for the City of Omaha. Interstate 680 is located approximately five miles southwest of the subject property where it originates at its intersection with I-80, and extends in a northeasterly direction to its terminus at its intersection with Interstate 29 in Iowa. Overall, regional access to the Ramada Hotel is considered very good for a property of this type. Local Access and Visibility US Highway 275 (L Street) intersects with I-80 approximately one mile south of the intersection of I-80 and I-680. This route serves as a major local thoroughfare and significantly increases the subject property's primary market area. Guests arriving at the subject property from the east, Iowa direction, or west, Lincoln direction, would take the 72nd Street exit off of Interstate 80. Motorists proceed northbound on 72nd Street for roughly one-half block before making a right hand turn onto Grover Street, then making another right hand turn into the subject property's parking lot. Guests arriving from the north would take Interstate 680 (on the west side of Omaha) or Hospitality Valuation Services, Description of the Land, Improvements 9 Boulder, Colorado Zoning, Taxes, and Neighborhood Ramada Hotel - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Interstate 480 (on the east side of Omaha) south to Interstate 80 and follow the above directions. Area access to the subject property is considered very good. The well-developed network of high-speed interstate highways along with superior local roadways, significantly increases the subject property's primary market area and facilitates the capture of both transient travelers for rooms business and local residents for food and beverage sales. Visibility of the subject property is considered good for a hotel of this type. As a result of the subject property's proximity to Interstate 80 and the topography of the area, there is good visibility from this roadway. Visibility of the subject site is also good from both directions on 72nd Street. The subject property's location is well suited for a transient lodging site. The Ramada Inn's proximity to demand generators of transient visitation is good and is considered comparable to that of the competitive properties. Numerous commercial businesses are located nearby, as is Bergan Mercy Hospital, Ak-sar-ben, the Henry Doorly Zoo, Rosenblatt Stadium, and a number of other tourist attractions. The subject property is centrally located with regard to many of the area's businesses and demand generators. With the excellent highway system throughout the immediate market area, access to most of the nearby generators of visitation is equal to that of the other competitive lodging facilities. Overall, the subject site is considered good for a lodging facility of this type. Airport Access Additional transportation into the Omaha area is provided by Omaha Municipal Airport (Eppley Airport), approximately fifteen miles northeast of the subject property. This airport is serviced by all of the major air carriers and recently attracted several discount airlines. Travelers into Omaha Municipal Airport often rent automobiles and drive to demand generators located near the subject property. Guests arriving at the airport can access the subject property via the Stortz Expressway. Motorists follow this roadway westbound until its intersection with I-480. Proceeding southbound on I-480, motorists take the westbound exit for I-80 and continue for approximately five miles until reaching the 72nd Street exit. The subject property is located in the northeastern corner of the 72nd Street/I-80 intersection. Hospitality Valuation Services, Description of the Land, Improvements 10 Boulder, Colorado Zoning, Taxes, and Neighborhood Ramada Hotel - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Access to Local Demand Generators The Ramada Hotel is well situated with respect to many of the area's primary generators of lodging demand. The following table outlines some of these major demand generators and their distances from the subject site. ================================================================================ Table 3-1 Local Demand Generators - -------------------------------------------------------------------------------- Approximate Distance Approximate Driving Demand Generator from Subject Site (in Miles) Time (in Minutes) - ---------------- ---------------------------- ----------------- First Data Resources 1.0 3.0 Xerox 1.0 3.0 Ak-sar-ben 1.0 3.0 Rosenblatt Stadium 5.0 10.0 Boys Town 7.0 15.0 University of Nebraska at Omaha 8.0 15.0 ConAgra 10.0 15.0 Union Pacific 10.0 15.0 Downtown Insurance Companies 10.0 15.0 Council Bluffs Riverboat Casinos 10.0 15.0 - -------------------------------------------------------------------------------- The subject site's capacity, configuration, and access are considered good for its current use. The site is well situated with regard to various demand generators as a result of its proximity to major thoroughfares such as I-80 and 72nd Street. Overall, the subject site appears appropriate for its current use as a full service lodging facility given the nature of the surrounding market area, as well as the current infrastructure of Omaha. Utilities The subject site is served by all necessary utilities, which are provided as follows. ================================================================================ Table 3-2 Available Utilities - -------------------------------------------------------------------------------- Utility Provider ------- -------- Water Metro Utility District Electricity Omaha Public Power District Telephone US West/AT&T Sewer Metro Utility District Gas Peoples Natural Gas Fire & Police City of Omaha - -------------------------------------------------------------------------------- Hospitality Valuation Services, Description of the Land, Improvements 11 Boulder, Colorado Zoning, Taxes, and Neighborhood Ramada Hotel - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Soil and Subsoil Conditions Geological and soil reports were not provided to the appraisers or made available for review during the preparation of this report. The appraisers are not qualified to evaluate soil conditions other than by a visual inspection of the surface. Nuisances and Hazards The appraisers have not been informed of any site-specific nuisances or hazards, and there were no visible signs of toxic ground contaminants at the time of our inspection. Because the appraisers are not experts in this field, we do not warrant the absence of hazardous waste, and we urge the reader to obtain an independent analysis of these factors. Flood Zone Possible locational hazards include flood potential. The subject property is located in Zone C per the Federal Emergency Management Agency's Community Panel Number 315274 0050F, effective October 15, 1991. Zone C flood areas are determined to be areas of minimal flooding. This flood zone, as such, represents little risk to the improvements. Seismicity The seismicity of the area in which the subject property is located was not available. We have assumed that the subject property is not located in an area of seismic danger. Legal Description As noted earlier, a copy of the subject property's legal description, as provided by Ashford Financial, is presented in the Addenda to this report. Conclusion The subject parcel appears appropriate for the site of a transient lodging facility. We have analyzed the issues of size, topography, access, visibility, and the availability of utilities, and we note the following advantages and disadvantages. Advantages o Access and visibility from I-80 and 72nd Street is considered good. o The size and topography of the site favor hotel development. o The location of the site is close to many area demand generators. o All utilities are available to the site. Disadvantages o The subject property is located ten miles southwest of downtown Omaha and fifteen miles from the local airport. Hospitality Valuation Services, Description of the Land, Improvements 12 Boulder, Colorado Zoning, Taxes, and Neighborhood Ramada Hotel - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The advantages noted above are important locational characteristics. Although the subject property is located away from the downtown and airport area, the immediate area includes many demand generators which provide significant room nights for the subject property's competitive set. IMPROVEMENTS The quality of a lodging facility's physical improvements has a direct influence on its marketability and attainable occupancy and average rate. The design and functionality of the structure can also affect operating efficiency and overall profitability. This section investigates the subject property's physical improvements and personal property in an effort to determine how they contribute to total value. The following description of the improvements is based on our inspection of the hotel and information provided by Ashford Financial Corporation. The Ramada Hotel is a full service lodging facility containing 215 rentable units, +/-5,787 square feet of meeting space, an indoor pool and exercise room, a restaurant and lounge, and appropriate back-of-the-house facilities. The nine-story property opened in 1973, and is twenty-three years old as of the date of this appraisal. The hotel was acquired by Ashford Financial Corporation in October of 1994. At the time of this acquisition, the hotel was reportedly in poor condition. Subsequent to the acquisition, the subject property was extensively renovated, at an estimated cost of roundly $700,000. In scope, this renovation included the exterior of the building, public areas and half of the guestrooms. In addition, in 1996 year-to-date, invoices have been received for more than $210,000 worth of capital improvements. These included new meeting room carpet and wall vinyl, guestroom carpet and soft goods, landscaping, and ADA compliance issues. The hotel is now judged to be in fair to good condition, and management representatives report that all building systems are in working order. The hotel is operated under a license agreement with Ramada Franchise Systems, Inc. and reportedly meets the standards for lodging facilities of that brand. Based on our inspection and information provided by property management, the following table summarizes the facilities available at the subject property. Hospitality Valuation Services, Description of the Land, Improvements 13 Boulder, Colorado Zoning, Taxes, and Neighborhood Ramada Hotel - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 3-3 Facilities Summary - -------------------------------------------------------------------------------- Guestrooms King Beds 127 Double/Doubles 80 Suites 8 -------------- Total 215 Food and Beverage Outlets Thoroughbreds Restaurant 100 Bumpers Lounge 173 Meeting and Banquet Rooms Main Ballroom (divisible by three) 2,674 South Ballroom 2,304 Cornhusker Rom 439 Board Room 370 -------------- Total 5,787 Recreational & Other Amenities Indoor Pool, Whirlpool and Sauna Exercise Room Parking Spaces 282 Elevators 3 Life Safety Systems Hard Wired Smoke Dectectors Laundry Three Uniwash Washers Three Hammond Dryers Construction Details Concrete Panel Construction Aggregate Facade Asphalt and Gravel Roof - -------------------------------------------------------------------------------- Property Exterior The hotel structure is situated in the center of the parcel. Paved parking areas accommodating 282 vehicles are located to the north and south of the hotel building. Vehicular access to the subject site is provided by a private driveway off of Grover Street to the north of the property. After entering the site, guests proceed to the hotel's main entrance, which is located in the center of the building on the hotel's north side. Service traffic can gain access to the loading dock, located on the south side of the property. The exterior of the building is primarily made up of glass windows of the guestrooms and Hospitality Valuation Services, Description of the Land, Improvements 14 Boulder, Colorado Zoning, Taxes, and Neighborhood Ramada Hotel - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= concrete and aggregate facade. Signage is prevalent on the north and south sides of the property, however, the west side, which faces 72nd street does not have any signage. Construction and Design The building structure is constructed of poured, cast-in-place concrete panels with an aggregate facade. The property's chief engineer reports that the seals have been going bad in between the panels, and future repairs will be needed. The building is straightforward in design and is nine stories, including the elevator penthouse. All of the public and back-of-the-house facilities are housed within one main building, with guestrooms located on floors two through nine. All guestroom exterior windows face either north or south. Lobby The lobby is located directly inside the main entrance, on the north side of the building. Its furnishings were reportedly recently updated and appeared to be in good condition. The front desk is located on the west side of the lobby, and appeared to be in fair condition. Food and Beverage Outlets Thoroughbreds Restaurant is the subject property's main restaurant serving breakfast, lunch and dinner seven days a week. Located adjacent to the lobby, this area appeared dated and in need of renovation at the time of our inspection. Although this area was budgeted for renovation in 1996, improvements had not been made. According to the 1996 cost budget, this renovation is estimated to cost roughly $16,500. To the north of the restaurant is the subject property's lounge, Bumpers. This area is also the location of the subject property's Pizza Hut franchise operation. The appearance of this area was considered fair to good. Meeting and Banquet Space The subject property's function space is located to the south of the lobby area. Between 1995 and 1996, the meeting and banquet facilities underwent substantial renovations, at a cost of roundly $48,000. This included new carpeting, pad and wall vinyl for all meeting areas. The subject property's meeting space is considered to be in good condition, relative to competitive hotels. Guestrooms At the time of our inspection, the subject property's guestrooms appeared to be in fair to good condition. While the soft goods have been replaced in roughly half of the subject property's 215 guestrooms, the remaining half are in need of renovation. However, all of the guest bathrooms need Hospitality Valuation Services, Description of the Land, Improvements 15 Boulder, Colorado Zoning, Taxes, and Neighborhood Ramada Hotel - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= facelifts as the current vanity tops in the bathrooms are dark brown and unappealing to guests. Guestroom Corridors Guestroom corridors are wide enough to permit the easy passage of housekeeping and room service carts. Recreational Amenities Recreational amenities at the subject property include an indoor pool, whirlpool, sauna and exercise room. These amenities are located in the southwest corner of the property. All of these facilities have been recently renovated and appeared to be in good condition. Back-of-the-House Space The housekeeping, sales, and executive offices are located on the first floor of the property, to the west of the front desk. The kitchen is located south of the restaurant and offers good access to the subject property's restaurant, lounge and meeting rooms. Much of the mechanical equipment is located in the attic space of the hotel, accessible from the ninth floor. Based on information provided by Ashford Financial, all of the subject property's operating systems are in good working order. Vertical Transportation Access to all guestroom floors is provided by three passenger elevators located directly off of the main lobby, in between the front desk area and the meeting rooms. These elevators are used by hotel guests, as well as hotel employees, as no service elevator is available. Heating, Ventilation, and Air Conditioning Each guestroom features individual through-the-wall HVAC units. Property management indicates that all HVAC equipment is in good condition. Fire Protection The subject property features hard wired smoke detectors located throughout the property with the interface panel located near the front desk. Security Within the past year, all guestrooms have received new electronic locks, as well as new door hardware (security locks inside the room). All of the exterior doors of the building are also equipped with these locks so that only registered guests can enter the building after certain hours of the night. Asbestos According to information provided by management representatives, there is no asbestos present in the subject property's improvements; however, we have not been provided with an asbestos report to confirm this assertion. The reader should be advised that any costs associated with asbestos Hospitality Valuation Services, Description of the Land, Improvements 16 Boulder, Colorado Zoning, Taxes, and Neighborhood Ramada Hotel - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= removal or containment may have an unfavorable impact on the hotel's market value, and the estimate set forth in this appraisal reflects our value conclusions prior to the deduction of any such costs. We suggest that interested parties initiate an independent analysis regarding current asbestos levels and the capital expenditures necessary to remove any asbestos that is present. ADA Conformance Following the January 26, 1992 passage of the Americans with Disabilities Act (ADA), hotels are subject to new physical standards. The appraisers are not experts on ADA compliance, and we render no opinion regarding the subject property's conformance to ADA standards. Capital expenditures that may be necessary to bring the property into accordance with the ADA will reduce our estimate of market value. Any ongoing costs related to ADA regulations are expected to be funded by normal replacement reserves. Conclusion Overall, the subject property's improvements appear appropriate for hotel use. The appraisers have not been provided with any capital expenditure budgets for the following year. For the purposes of this appraisal, we have assumed that the subject property will be maintained in its present condition throughout the assumed ten-year holding period. Specifically, it is assumed that hotel management will employ standard preventive maintenance measures, and that a reserve for replacement fund will be established which will fund the cost of any future necessary capital expenditures. ZONING According to the City of Omaha zoning regulations, the subject property is zoned as follows. CC - Community Commercial District The CC - Community Commercial District is intended for commercial facilities which serve the needs of several neighborhoods. Permitted uses include office buildings, grocery stores, hotels and motels, restaurants, hospitals, and colleges. Based on this information, the subject property appears to conform to local zoning regulations. We assume that all necessary permits and approvals have been secured (including an appropriate liquor license), and that the subject property was constructed in accordance with local zoning ordinances, building codes, and all other applicable regulations. Our zoning analysis should be verified before any physical changes are made to the hotel. Hospitality Valuation Services, Description of the Land, Improvements 17 Boulder, Colorado Zoning, Taxes, and Neighborhood Ramada Hotel - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ASSESSED VALUE AND TAXES Property (or ad valorem) tax is one of the primary revenue sources of municipalities. Based on the concept that the tax burden should be distributed in proportion to the value of all properties within a taxing jurisdiction, a system of assessments is established. Theoretically, the assessed value placed on each parcel bears a definite relationship to market value, so properties with equal market values will have similar assessments and properties with higher and lower values will have proportionately larger and smaller assessments. Depending on the taxing policy of the municipality, property taxes can be based on the value of the real property or the value of the personal property and the real property. Because the objective of assessed value is to maintain a specific value relationship among all properties in a taxing jurisdiction, comparable hotel assessments should be evaluated to determine whether the subject property's assessed value is equitable. The taxing jurisdiction governing the subject property assesses real property at roughly 94% of market value and personal property at its depreciated value. A review of the assessed values of four comparable hotels located in the Douglas and Pottawattamie taxing jurisdictions revealed the following information. We have included the subject property's assessment for the purpose of comparison. ================================================================================ Table 3-4 Assessed Value of Comparable Hotels - --------------------------------------------------------------------------------
Total Assessment Assessment per Room Number ------------------------------ ----------------------------- Hotel of Rooms Land Improvements Land Improvements - --------------------------------------------------------------------------------------------------- Sheraton Four Points 168 $435,000 $2,268,500 $2,589 $13,503 Best Western Central 213 696,700 2,745,600 3,271 12,890 Best Western Metro 89 165,400 1,355,700 1,858 15,233 Days Inn 40 135,200 915,000 3,380 22,875 Subject Property 215 547,900 3,672,400 2,548 17,081
Source: Douglas and Pottawattamie County Assessor's Office - -------------------------------------------------------------------------------- As shown in the above table, the subject property's land assessment on a per room basis is most comparable with the Sheraton Four Points. The improvements assessment at the subject property is high relative to most of the comparable properties, however, due to recent improvements the assessment is justifiable. Hospitality Valuation Services, Description of the Land, Improvements 18 Boulder, Colorado Zoning, Taxes, and Neighborhood Ramada Hotel - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The tax rates applicable to the subject property are presented in the following table. ================================================================================ Table 3-5 Tax Rates Applicable to the Subject Property - -------------------------------------------------------------------------------- Tax Rate per $100 Year of Assessment ---------------------------------------------------- 1995 $2.8061 1996 2.7707 - -------------------------------------------------------------------------------- The subject property's 1996 real property tax burden is calculated as follows. $4,220,300/100 X 2.77074 = $116,934 In addition, personal property in Douglas County is assessed at 100% of its depreciated value, however, at the same tax rate as real property. In 1996, the personal property of the subject property was assessed at $634,325. The subject property's 1996 personal property tax burden is calculated as follows. $634,325/100 X 2.77074 = $17,575 Total 1996 taxes: $116,934 + $17,575 = $134,509 Applying the projected inflationary increases to the 1996 tax burden yields the following forecast of property taxes for the subject property. ================================================================================ Table 3-6 Forecast of Property Tax Expense (+000) - -------------------------------------------------------------------------------- 1997 Stabilized 1999 2000 2001 - -------------------------------------------------------------------------------- Forecast Property Taxes $139 $144 $149 $154 $160 - -------------------------------------------------------------------------------- NEIGHBORHOOD The neighborhood surrounding a lodging facility often has an impact on a hotel's status, image, class, style of operation, and sometimes its ability to attract and properly serve a particular market segment. This section investigates the subject property's neighborhood and evaluates any pertinent locational factors that could affect its occupancy, average rate, food and beverage revenues, and overall profitability. Hospitality Valuation Services, Description of the Land, Improvements 19 Boulder, Colorado Zoning, Taxes, and Neighborhood Ramada Hotel - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The subject property is located in the south portion of the City of Omaha. The neighborhood surrounding the subject property is characterized by a mixture of commercial and retail developments along 72nd Street, with residential areas located to the east and west. A majority of the land along 72nd Street from I-80 to downtown Omaha is improved, with very few developable sites available. According to the Omaha Chamber of Commerce, the southwest and northwest areas of Omaha are currently experiencing the most growth. Conclusion Overall, the subject property's neighborhood appears well suited to the operation of a transient lodging facility. A base level of commercial and meeting visitation is generated by the nearby businesses, local visitor attractions, colleges and universities. The retail improvements along 72nd Street provide a source of diversion for the hotel's guests. Omaha's location in the central United States helps draw many local, regional, and national events to the city, benefiting the subject property, as well as the surrounding lodging facilities in the capturing of room nights. The subject property's neighborhood appears well suited for the operation of a full service lodging facility. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Market Area Analysis 20 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 4. Market Area Analysis The economic vitality of the market surrounding the subject property is an important consideration in forecasting lodging demand and income potential. Economic and demographic trends that reflect the amount of visitation provide a basis from which to project hostelry demand. The purpose of the area analysis is to review available economic and demographic data to determine whether the local market will undergo economic growth, stability, or decline. In addition to predicting the direction of the economy, the rate of change must be quantified. These trends are then correlated based on their propensity to reflect variations in lodging demand with the objective of forecasting the growth or decline in visitation by individual market segment. Market Area Definition The subject property is situated within the city limits of Omaha, Douglas County, Nebraska. Douglas County is included in the Omaha, NE Metropolitan Statistical Area (MSA). Douglas County accounted for approximately 65% of the MSA's total population in 1995. Economic and Demographic Data Based on fieldwork conducted in the area and our in-house sources, we have evaluated various economic and demographic statistics to determine trends in lodging demand. A primary source of economic and demographic statistics used in this analysis is the Complete Economic and Demographic Data Source published by Woods & Poole Economics, Inc., a well-regarded forecasting service based in Washington, DC. Using a data base containing more than 300 variables for each county in the nation, Woods & Poole employs a sophisticated regional model to forecast economic and demographic trends. Historical statistics are based on census data and information published by the Bureau of Economic Analysis. Projections are formulated by Woods and Poole. All dollar amounts have been adjusted for inflation, and thus growth or decline represents real change in constant dollars. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Market Area Analysis 21 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Population Between 1990 and 1995, countywide population has grown at a level slightly above that of the State of Nebraska, at an annual rate of 0.7%. The Omaha MSA, however, grew at a slightly higher rate of 0.8%, which could have resulted from the introduction of gaming into the Council Bluffs area. These properties require a large employment base, which may have attracted additional people into the area. Between 1995 and 2000, areawide population is expected to continue to grow, however, at levels slightly below that historically realized. We find that the rate of population growth generally establishes a minimum rate of increase for commercial hotel demand; this observation also holds true for the meeting and convention segment if a majority of the meetings are business-oriented. Retail Sales The State of Nebraska experienced strong growth in retail sales between 1990 and 1995. On a per capita basis, sales rose from roundly $5,800 in 1990 to $6,500 in 1995, or 2.2% annually. In terms of Douglas County, retail sales increased by 1.8%, compared to the 1.5% increase nationwide. Projections for 1996 to 2000 indicate little growth in retail sales, which could indicate little growth in the leisure segment of the market. Personal Income Historically, Douglas County has incurred the largest amount of growth in personal income, when compared with the MSA and the State of Nebraska. Between 1990 and 1995, Douglas County personal income increased by 2.8% annually compared with the 2.4% realized at the MSA level, and 2.0% by the State of Nebraska. Future projections indicate that growth in personal income in Douglas County will continue, however, at a slightly lower rate than previous periods (1.8%). Work Force Characteristics The Omaha economy is primarily reliant upon telecommunications and various other service related companies. The city is also home to several colleges, including Creighton University and University of Nebraska at Omaha. The largest area employer is the Offutt Air Force Base, located outside the Omaha city limits, employing more than 2,500 people. First Data Resources (FDR), a credit card processing company, is the area's second largest employer. This company has recently announced plans for expansion of its company, to be located in the Ak-sar-ben area, across from FDR's existing facility. Once completed, the addition will allow the company to increase its total employment base by 2,000. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Market Area Analysis 22 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Although there has been minimal growth in countywide employment during the last five years, sectors such as mining, manufacturing, and wholesale trade are expected to grow above historic levels. Improvements to the area's infrastructure is projected to be positive for the area's economy as investments are made to increase business and tourism. Although several sectors have lost employment between 1980 and 1995, such as Farm (-1.9%), Mining (-1.1%), and Federal Civilian (-0.2%) and Federal Military Government (-1.1%), there are segments which have grown, such as Agricultural Services (5.7%), Construction (3.0%), T.C.P.U. (0.3%), Total Trade (1.9%), F.I.R.E. (1.5%), Services (4.3%), and State Government (1.1%). Total employment over the 15 year period has grown at an average annual compounded rate of 2.0%. For the five years between 1995 and 2000, the county's population and total employment are projected to grow at average compounded rates of 0.9% and 0.7%, respectively. The major employers in Omaha represent a cross section of hotel demand potential. Some are national in scope, while others operate on a more local basis; some are engaged in manufacturing, and others are active in telecommunications. The following table outlines some of the major employers in Douglas County. ================================================================================ Table 4-1 Major Omaha Employers - 2,500 Employees and Over - -------------------------------------------------------------------------------- Firm Product - -------------------------------------------------------------------------------- Offutt Air Force Base Government First Data Card Services Financial Services Mutual of Omaha Companies Insurance Omaha Public Schools Education University of Nebraska Medical Center Education/Health Services Methodist Health System Health Services Alegent Health/Bergan Mercy Medical Center Health Services Baker's Supermarkets, Inc. Grocery Distribution Oriental Trading Company Wholesale Trade Union Pacific Railroad Transportation US West Communications Communications Source: Omaha Chamber of Commerce - -------------------------------------------------------------------------------- Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Market Area Analysis 23 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Tourist Attractions Local Attractions: (Descriptions provided by the Greater Omaha Convention and Visitors Guide) o Boy's Town - Father Flanagan's Boys Home listed as a National Historic Landmark. Includes Father Flanagan's Shrine and Historic House, Hall of History, Bible and Rose Gardens, Dowd Catholic and Chambers Protestant Chapels. o Gerald R. Ford Birthsite - Features a replica of the house where President Ford was born, and also displays Nebraska history, White House memorabilia and the Betty Ford Rose Garden. o Heartland of America Park and Fountain - A computer driven fountain featuring a 300' water jet and light show. Ferry boat rides allow for a closer look. o Joslyn Art Museum - Center for the visual arts featuring works from antiquity to the present. Museum features an extensive Bodmer collection of the American West. The facility went through a $16 million addition and renovation in 1994. o Mormon Pioneer Winter Quarters - Replica town featuring a log cabin, covered wagon and handcart, commemorating the greatest planned exodus in American History. o Old Market - Revived downtown district featuring unique shops, boutiques, pubs, restaurants and entertainment. o Henry Doorly Zoo - Home of the world's largest enclosed rainforest, and North America's largest cat complex and free flight aviary. Ranked as Nebraska's most popular attraction encompassing 104 acres. o Western Heritage Museum - Featuring 100 years of Omaha's history, this museum offers an impressive world-class coin collection, traveling historic exhibits as well as an old soda fountain. Over $22 million in expansion and renovation is reaching completion. o Harvey's and Ameristar's Riverboat Casinos - Located across the Missouri river from Omaha, these two riverboats offer daily rides along the Missouri. In addition, full stakes gambling is featured on each, including slot machines, blackjack, and roulette. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Market Area Analysis 24 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Office Space Office vacancy rates in the central business district (CBD) are currently higher than those outside of the downtown area. Currently, the vacancy rate in the CBD is 3.3% compared with the surrounding areas at 0.7%. This confirms the current economic development stage of Omaha, as more businesses are moving out of downtown, and into the surrounding suburbs. Due to a number of factors, including crime, businesses have relocated out of downtown. Highway Traffic Traffic counts for 1995 and 1996 were not available, primarily due to ongoing construction on Interstate 80. Previous years indicate, however, that traffic volume has increased between 2.4% and 3.4% annually at the Interstate exit nearest to the subject property. Construction on Interstate 80 has reportedly hindered traffic volume in the subject property's immediate area, however, officials anticipate volume to resume to historical levels by year-end 1996. Airport Traffic The airport is located roughly fifteen miles northeast of the subject property, and as a result, the property receives little demand from overnight visitors. The subject property does, however, accommodate a large share of airline crew demand. Convention Center Due to the lack of a major convention center in Omaha, the largest meeting facility is located in the Holiday Inn Central, adjacent to the subject property. This property reportedly turns away a substantial amount of business due to the strong existing demand in the area. The new Embassy Suites Hotel in downtown is projected to have a significant amount of meeting space, and should serve as a secondary facility for large meetings, as well as citywide events. The city is still discussing the possibility of turning the vacant Ak-sar-ben facility into a convention center, however, at the time of this appraisal, no decisions had been made. In addition, in order for construction to take place, the city would either have to attract an outside investor or have a citywide vote to approve local funding. Conclusion Our review of various economic and demographic data indicates that the subject property's market area is projected to continue to experience growth, albeit at a slower pace than historically realized. Strong factors including the expansion of First Data Resources and the possible construction of a convention center would prove beneficial for the subject property, however, the certainty of each is unknown. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Market Area Analysis 25 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The following tables summarize the economic and demographic trends discussed throughout this section, provided by Woods & Poole Economics, Inc. All figures that reflect dollar amounts have been adjusted for inflation, and thus reflect real change. It should be noted that the percent changes indicated in the following tables are based on unrounded figures, and thus may not calculate exactly. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Market Area Analysis 26 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-2 Economic and Demographic Data for the Subject Property's Market Area - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - -------------------------------------------------------------------------------------------- Long-Term Historical Population Douglas County 1980-1995 397.6 432.5 0.6% Omaha, NE-IA MSA 1980-1995 606.6 667.0 0.6 State of Nebraska 1980-1995 1,572.8 1,631.1 0.2 United States 1980-1995 227,225.6 262,791.0 1.0 Short-Term Historical Population Douglas County 1990-1995 417.6 432.5 0.7 Omaha, NE-IA MSA 1990-1995 641.4 667.0 0.8 State of Nebraska 1990-1995 1,580.6 1,631.1 0.6 United States 1990-1995 249,401.4 262,791.0 1.1 Projected Population Douglas County 1995-2000 432.5 443.0 0.5 Omaha, NE-IA MSA 1995-2000 667.0 687.3 0.6 State of Nebraska 1995-2000 1,631.1 1,667.8 0.4 United States 1995-2000 262,791.0 274,758.4 0.9 Long-Term Historical Retail Sales Douglas County 1980-1995 2,806.8 3,556.7 1.6 Omaha, NE-IA MSA 1980-1995 3,751.4 4,760.6 1.6 State of Nebraska 1980-1995 9,030.0 10,586.9 1.1 United States 1980-1995 1,340,768.9 1,765,826.1 1.9 Short-Term Historical Retail Sales Douglas County 1990-1995 3,138.5 3,556.7 2.5 Omaha, NE-IA MSA 1990-1995 4,181.9 4,760.6 2.6 State of Nebraska 1990-1995 9,204.6 10,586.9 2.8 United States 1990-1995 1,557,380.2 1,765,826.1 2.5 Projected Retail Sales Douglas County 1995-2000 3,556.7 3,638.2 0.5 Omaha, NE-IA MSA 1995-2000 4,760.6 4,877.6 0.5 State of Nebraska 1995-2000 10,586.9 10,821.6 0.4 United States 1995-2000 1,765,826.1 1,846,830.4 0.9 Long-Term Historical Retail Sales Per Capita Douglas County 1980-1995 7,059.2 8,224.2 1.0 Omaha, NE-IA MSA 1980-1995 6,184.0 7,137.6 1.0 State of Nebraska 1980-1995 5,741.2 6,490.7 0.8 United States 1980-1995 5,900.6 6,719.5 0.9 Short-Term Historical Retail Sales Per Capita Douglas County 1990-1995 7,515.4 8,224.2 1.8 Omaha, NE-IA MSA 1990-1995 6,520.4 7,137.6 1.8 State of Nebraska 1990-1995 5,823.4 6,490.7 2.2 United States 1990-1995 6,244.5 6,719.5 1.5 - --------------------------------------------------------------------------------------------
Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Market Area Analysis 27 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-3 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - -------------------------------------------------------------------------------------------- Projected Personal Retail Sales Per Capita Douglas County 1995-2000 8,224.2 8,213.6 (0.0) Omaha, NE-IA MSA 1995-2000 7,137.6 7,096.9 (0.1) State of Nebraska 1995-2000 6,490.7 6,488.7 (0.0) United States 1995-2000 6,719.5 6,721.7 0.0 Long-Term Historical Eating and Drinking Place Sales Douglas County 1980-1995 305.6 393.8 1.7 Omaha, NE-IA MSA 1980-1995 394.3 506.1 1.7 State of Nebraska 1980-1995 865.8 1,097.8 1.6 United States 1980-1995 126,131.6 185,035.4 2.6 Short-Term Historical Eating and Drinking Place Sales Douglas County 1990-1995 353.2 393.8 2.2 Omaha, NE-IA MSA 1990-1995 452.1 506.1 2.3 State of Nebraska 1990-1995 954.5 1,097.8 2.8 United States 1990-1995 161,197.4 185,035.4 2.8 Projected Eating and Drinking Place Sales Douglas County 1995-2000 393.8 413.4 1.0 Omaha, NE-IA MSA 1995-2000 506.1 532.5 1.0 State of Nebraska 1995-2000 1,097.8 1,152.4 1.0 United States 1995-2000 185,035.4 199,127.3 1.5 Long-Term Historical Eating and Drinking Place Sales Per Capita Douglas County 1980-1995 768.5 910.5 1.1 Omaha, NE-IA MSA 1980-1995 649.9 758.8 1.0 State of Nebraska 1980-1995 550.5 673.0 1.3 United States 1980-1995 555.1 704.1 1.6 Short-Term Historical Eating and Drinking Place Sales Per Capita Douglas County 1990-1995 845.7 910.5 1.5 Omaha, NE-IA MSA 1990-1995 705.0 758.8 1.5 State of Nebraska 1990-1995 603.9 673.0 2.2 United States 1990-1995 646.3 704.1 1.7 Projected Eating and Drinking Place Sales Per Capita Douglas County 1995-2000 910.5 933.2 0.5 Omaha, NE-IA MSA 1995-2000 758.8 774.8 0.4 State of Nebraska 1995-2000 673.0 691.0 0.5 United States 1995-2000 704.1 724.7 0.6 Long-Term Historical Personal Income Douglas County 1980-1995 5,968.7 8,324.6 2.2 Omaha, NE-IA MSA 1980-1995 8,554.7 11,622.9 2.1 State of Nebraska 1980-1995 19,803.6 26,357.3 1.9 United States 1980-1995 3,163,874.0 4,443,243.2 2.3 - --------------------------------------------------------------------------------------------
Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Market Area Analysis 28 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-4 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - -------------------------------------------------------------------------------------------- Short-Term Historical Personal Income Douglas County 1990-1995 7,264.6 8,324.6 2.8 Omaha, NE-IA MSA 1990-1995 10,313.9 11,622.9 2.4 State of Nebraska 1990-1995 23,907.5 26,357.3 2.0 United States 1990-1995 4,051,714.6 4,443,243.2 1.9 Projected Personal Income Douglas County 1995-2000 8,324.6 9,083.0 1.8 Omaha, NE-IA MSA 1995-2000 11,622.9 12,719.3 1.8 State of Nebraska 1995-2000 26,357.3 28,978.9 1.9 United States 1995-2000 4,443,243.2 4,972,219.5 2.3 Long-Term Personal Income per Capita Douglas County 1980-1995 15,011.0 19,249.0 1.7 Omaha, NE-IA MSA 1980-1995 14,102.0 17,426.0 1.4 State of Nebraska 1980-1995 12,591.0 16,159.0 1.7 United States 1980-1995 13,924.0 16,908.0 1.3 Short-Term Historical Personal Income per Capita Douglas County 1990-1995 17,396.0 19,249.0 2.0 Omaha, NE-IA MSA 1990-1995 16,081.0 17,426.0 1.6 State of Nebraska 1990-1995 15,125.0 16,159.0 1.3 United States 1990-1995 16,246.0 16,908.0 0.8 Projected Personal Income per Capita Douglas County 1995-2000 19,249.0 20,505.0 1.3 Omaha, NE-IA MSA 1995-2000 17,426.0 18,507.0 1.2 State of Nebraska 1995-2000 16,159.0 17,376.0 1.5 United States 1995-2000 16,908.0 18,097.0 1.4 Long-Term Historical Employment - Omaha, NE-IA MSA Farm 1980-1995 6.4 4.8 (1.9) Agriculture Services, Other 1980-1995 1.4 3.2 5.7 Mining 1980-1995 0.5 0.4 (1.1) Construction 1980-1995 14.5 22.6 3.0 Manufacturing 1980-1995 37.0 36.9 (0.0) Trans., Comm. & Public Utils. 1980-1995 27.2 28.3 0.3 Total Trade 1980-1995 79.0 105.4 1.9 Wholesale Trade 1980-1995 23.0 28.6 1.5 Retail Trade 1980-1995 56.0 76.8 2.1 Finance, Insurance, & Real Estate 1980-1995 33.8 42.3 1.5 Services 1980-1995 77.6 145.7 4.3 Total Government 1980-1995 59.6 63.6 0.4 Federal Civilian Govt. 1980-1995 9.1 8.9 (0.2) Federal Military Govt. 1980-1995 14.7 12.5 (1.1) State & Local Govt. 1980-1995 35.8 42.2 1.1 TOTAL 1980-1995 336.9 453.2 2.0 - --------------------------------------------------------------------------------------------
Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Market Area Analysis 29 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-5 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - -------------------------------------------------------------------------------------------- Short-Term Historical Employment - Omaha, NE-IA MSA Farm 1990-1995 5.1 4.8 (1.2) Agriculture Services, Other 1990-1995 2.7 3.2 3.8 Mining 1990-1995 0.5 0.4 (3.3) Construction 1990-1995 18.5 22.6 4.1 Manufacturing 1990-1995 37.1 36.9 (0.1) Trans., Comm. & Public Utils. 1990-1995 27.0 28.3 0.9 Total Trade 1990-1995 95.2 105.4 2.1 Wholesale Trade 1990-1995 27.8 28.6 0.6 Retail Trade 1990-1995 67.4 76.8 2.6 Finance, Insurance, & Real Estate 1990-1995 40.6 42.3 0.8 Services 1990-1995 127.8 145.7 2.7 Total Government 1990-1995 65.7 63.6 (0.7) Federal Civilian Govt. 1990-1995 9.8 8.9 (2.0) Federal Military Govt. 1990-1995 16.8 12.5 (5.7) State & Local Govt. 1990-1995 39.1 42.2 1.5 TOTAL 1990-1995 420.2 453.2 1.5 Projected Employment - Omaha, NE-IA MSA Farm 1995-2000 4.8 4.5 (1.0) Agriculture Services, Other 1995-2000 3.2 3.3 0.8 Mining 1995-2000 0.4 0.4 0.7 Construction 1995-2000 22.6 23.0 0.4 Manufacturing 1995-2000 36.9 37.8 0.5 Trans., Comm. & Public Utils. 1995-2000 28.3 29.1 0.6 Total Trade 1995-2000 105.4 110.2 0.9 Wholesale Trade 1995-2000 28.6 29.7 0.8 Retail Trade 1995-2000 76.8 80.4 0.9 Finance, Insurance, & Real Estate 1995-2000 42.3 43.9 0.7 Services 1995-2000 145.7 153.8 1.1 Total Government 1995-2000 63.6 64.3 0.2 Federal Civilian Govt. 1995-2000 8.9 8.9 0.1 Federal Military Govt. 1995-2000 12.5 12.6 0.2 State & Local Govt. 1995-2000 42.2 42.7 0.2 TOTAL 1995-2000 453.2 470.3 0.7 - --------------------------------------------------------------------------------------------
Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Market Area Analysis 30 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-6 Economic and Demographic Data for the Subject Property's Market Area (continued) - -------------------------------------------------------------------------------- Office Space Total Available in CBD 1995 1,757,533 Occupied in CBD 1995 1,699,487 96.70% Total Available Outside CBD 1995 4,948,562 Occupied Outside CBD 1995 4,910,644 99.23% Traffic Counts I-80 and 72nd (East I-80) 1990-1994 108,000 119,600 2.6 I-80 and 72nd (West I-80) 1990-1994 99,500 109,300 2.4 I-80 and 72nd (Interchange) 1990-1994 145,850 166,400 3.4 Airport Statistics Total Passengers 1990-1995 2,151,175 3,172,032 8.1 Tourist Information Mail Responses 1990-1995 10,963 43,788 31.9 Building Permits Number of Total Permits 1985-1994 4,131 4,314 0.5 Valuation of Total Permits 1985-1994 $234,800,000 $362,700,000 5.0 - -------------------------------------------------------------------------------- The Lodging Market Supply and Demand Analysis section of this complete, self-contained appraisal report will relate these historical and projected growth trends to specific market segments based on their propensity to reflect visitation. This analysis will provide a basis for forecasting changes in room night demand in the subject property's area. Hospitality Valuation Services, Boulder, Colorado Overview of External Forces Ramada Hotel Affecting the U.S. Lodging Industry 31 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 5. Overview of External Forces Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- Introduction Hotel ownership is ultimately the business of creating and enhancing value. To understand the investment potential of lodging facilities, investors must be thoroughly aware of the many forces that can cause changes in the value of their properties. Although some of these forces are internal (such as the layout and design of the facilities, the quality of management, and the condition of the property), others are external (such as the local economic environment and the competitive nature of the market). The risk associated with hotel investment lies largely with the external forces that are beyond the control of ownership and contribute to the variability of future income flows. Investors and appraisers can project financial results by evaluating the historical impact of external forces on hotel values. Successful hotel investors seek opportunities where the risk of external forces can be minimized, thus reducing the uncertainty associated with income expectations. When investors engage in due diligence prior to acquiring a lodging facility, they are primarily interested in trends affecting a limited geographic market area, such as a town, city, or county. A broader overview takes into account national and international travel patterns and trends. An understanding of the general characteristics of the United States hotel market is important because these trends often foreshadow economic and demographic changes in smaller areas. This section of the appraisal will present an overview of the U.S. lodging industry by tracing many of the forces that influence hotel values. Historical economic and demographic data, and industry statistics will be analyzed to provide a basis for projections. Forecasts will be evaluated to determine their reasonableness. The conclusions represent another set of criteria that hotel investors consider in making their acquisition decisions. Hospitality Valuation Services, Boulder, Colorado Overview of External Forces Ramada Hotel Affecting the U.S. Lodging Industry 32 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The Supply and Demand Relationship Most business ventures are influenced by the relationship between supply and demand. In the hotel industry, supply refers to the number of units. A unit consists of one or more rooms and represents the smallest accommodation that can be rented to a guest. Each unit must have a full bath and its own entrance to a public hallway or the building exterior. Demand refers to a room night, which is one unit that is occupied for one night. The supply and demand relationship has a significant influence on a hotel's occupancy and/or average room rate. Occupancy is calculated by dividing the number of rooms that are occupied for a specific period by the total number of rooms that are available during the same period. Average room rate is determined by dividing the total rooms revenue achieved during a specific period by the number of rooms occupied during that period; it also represents the weighted average of all the room rates charged during that period. In a market where demand is increasing faster than supply, occupancies rise and average rate growth generally exceeds inflation. When supply is increasing faster than demand, occupancies fall and average rates typically remain level or decline. Hotels generate revenue based on occupancy and average rate, and thus the supply and demand relationship is an important factor in analyzing profits and value. Hotel occupancy levels have shown definite cycles that reflect the balance between supply and demand. The early 1970s marked the beginning of a hotel building boom reminiscent of the 1920s. Many factors contributed to this expansion, but the two main elements were readily available financing and aggressive chains that were eager to sell franchises. The new construction during the 1970s was made possible by the enormous amount of financing generated by all lenders, particularly real estate investment trusts (REITs). These high-leverage finance companies were created to allow small investors to participate in real estate mortgages and equities. The concept was quickly accepted by Wall Street, and soon billions of dollars were available to finance real estate projects. Many lenders became so overwhelmed with new money that their underwriting procedures broke down and some marginal developments were approved. During the late 1960s and early 1970s, hotel companies actively expanded their chains through franchising. Franchising was a source of new capital, allowing hotel companies to grow and achieve national recognition using the franchisee's financial investment in individual properties. Some franchisors, eager to demonstrate sustained growth and establish a national Hospitality Valuation Services, Boulder, Colorado Overview of External Forces Ramada Hotel Affecting the U.S. Lodging Industry 33 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= presence, employed questionable marketing tactics to sell new franchises. Salespeople were often compensated based on the number of franchises sold, so there was little incentive to discourage developers from investing in poor locations and overbuilt markets. Many lenders and hostelry developers were led to believe that a national franchise would guarantee a successful operation. The combination of readily available financing and aggressive hotel chains eager to sell franchises resulted in overbuilding and development of many poorly located, undercapitalized hostelries managed by inexperienced owners. The bubble burst on the lodging industry when inflation caused construction costs and interest rates to escalate. The 1974 energy crisis drastically reduced travel, and the accompanying recession curtailed business trips, conferences, and conventions. Operators of marginal properties quickly fell behind in their mortgage payments, and lenders were forced to foreclose. As lenders became hostelry owners, they either organized work-out departments headed by experienced hoteliers or engaged professional hotel management companies to assume operational responsibilities. Sales data indicate that lenders who were looking for quick sales to remove nonperforming hotel assets from their books had to lower their prices substantially to attract all-cash buyers. Lenders who were willing to hold on to foreclosed hotels and employ professional management to reposition and improve the properties' operation were generally able to recoup their original investments in three to five years, once the industry began to recover. However, even lenders who repositioned their hotels had to take back favorable purchase-money financing to sell the properties because money from other sources was not available. History has shown that during economic downturns, hotel values generally do not fall in proportion to the properties' declining incomes. Sellers, and particularly lenders who take back hotels through foreclosure, are often unwilling to sell at substantially reduced prices. They are more likely to wait out the downward cycle and dispose of their assets when the market begins to rebound. Thus, appraisers can best reflect market behavior by projecting a facility's net income to a point of recovery and applying the proper discounted cash flow procedure over that time period. Hospitality Valuation Services, Boulder, Colorado Overview of External Forces Ramada Hotel Affecting the U.S. Lodging Industry 34 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The late 1970s was a period of relative calm for the lodging industry. Because most lenders were recovering from the financial wounds inflicted by the 1975 recession, they had little interest in making hotel mortgages. New construction was restrained, and primarily consisted of additions to existing properties and the development of some large, downtown hotels oriented toward the commercial and convention markets. The rebirth of center-city hostelries was a direct result of fuel shortages and the availability of government financing for inner-city redevelopment projects. Highway-oriented properties, on the other hand, were adversely affected by escalating gasoline prices and decreased automobile travel, and these lodging facilities lost some of their appeal among investors and hotel companies. Decreased building activity, the normal retirement of older hostelries from the market, and an improving economy created a favorable supply and demand relationship and record-high occupancy levels from 1979 to 1980. Average room rates increased rapidly as operators took advantage of the excess demand to recoup earlier losses and keep up with inflation. After the decline in hotel development during the late 1970s, the environment appeared suitable for a period of renewed expansion. However, the Federal Reserve tightened the money supply in the early 1980s, sending the prime interest rate up to double-digit levels. Most of the projects that were in the preliminary planning stages but lacked sensible financing were put on hold. Fiscal policy and declining energy prices eventually reduced the national inflation rate. This caused a decline in hotel interest rates beginning in 1983, and suddenly massive amounts of capital were available for real estate investments. Hotel developers who had been out of the market since the mid-1970s rushed to initiate new projects. They were aided by several major real estate development incentives: high occupancies and escalating room rates, readily available debt and equity financing, and unique income tax benefits designed to stimulate the national economy out of a recession. During the early 1980s, trends were generally favorable for new hotel development. Although the recession caused a decline in lodging demand, many markets showed relatively high occupancy levels. Room rates were usually able to keep up with inflation, and the travel industry was expected to boom as a result of a recovering economy. Franchise sellers signed up Hospitality Valuation Services, Boulder, Colorado Overview of External Forces Ramada Hotel Affecting the U.S. Lodging Industry 35 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= new prospects aggressively, using product segmentation to justify the saturation of a market with a common brand. Financing was readily available from the savings and loan industry. Following deregulation, these banks were permitted to lend on commercial real estate, such as hotels. Although savings and loans had experience in making loans on single-family homes, few had expertise with commercial properties, and fewer still with hotels. The result was almost identical to the real estate investment trust fiasco the decade before: loan underwriting and administration were inept and sometimes nonexistent, the number of loans made seemed more important than the quality of the real estate and the integrity of the borrower, and short-term funds were often used to finance long-term mortgages. In the early 1990s, the industry suffered the consequences of this lending spree: most major hotel markets became severely overbuilt and many savings and loans went out of business. Another factor contributing to hotel development in the 1980s was the very favorable treatment provided by income tax regulations. By carefully structuring hotel syndications to take advantage of all available tax benefits, investors could virtually recoup their total cash outlay in the first year and reap additional benefits in the future regardless of the economic success of the underlying asset. Because there was little incentive to justify a transaction's economics (i.e., cash flow and reversionary benefits), a number of syndicators overpaid for hotel properties, took out usurious fees, and overloaded their hotels with debt. A change in the tax law in the mid-1980s eliminated many of the benefits associated with hotels, but the overbuilding in most markets was either in progress or had already taken place. By the end of the 1980s, the abuses of the savings and loans had become apparent, but it was too late to reverse the overbuilding. Between 1985 and 1990, approximately 556,000 rooms were added to the U.S. hotel supply. The national economy entered another recession in 1990, and this factor (coupled with overbuilding and the Persian Gulf War in 1991) caused the national hotel occupancy rate to bottom out at 60.9%. In some markets, hotel occupancies were as low as 35%. This supply and demand imbalance was almost identical to the situation in the 1970s that led to numerous hotel failures. As in the REIT days, the number of non-performing loans reached record levels, and lenders moved to a work-out mode of operation in order to foreclose and restructure their hotel investments. Many of the savings Hospitality Valuation Services, Boulder, Colorado Overview of External Forces Ramada Hotel Affecting the U.S. Lodging Industry 36 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= and loans were taken over by the government and their hotel assets were sold at auction. According to the American Council of Life Insurance, which represents major life insurance companies, the number of delinquent hotel loans and the number of hotel loans in foreclosure peaked in 1991. This trend is undergoing a reversal as the U.S. lodging industry begins to recover. Loan restructuring was an attractive alternative to foreclosure during this period, and the number of loans in good standing with restructured terms almost doubled. By 1993, new hotel construction had declined significantly. Lenders, trying to get out from under problematic hotel portfolios, curtailed all real estate lending and would not even consider hotels. The tax benefits associated with lodging facilities had been reduced significantly, and passive investors left the hospitality market entirely. The slowdown in the growth of supply had a beneficial impact on occupancy levels, which started to recover in 1992. Improved occupancies are expected to continue through the late 1990s as increases in lodging demand outpace growth in supply. Beginning in 1991, many lenders and the Resolution Trust Corporation (RTC) sold their oldest and least desirable hotels at liquidation prices. Because virtually no third-party financing was available, most lenders were forced to take back purchase-money mortgages at favorable terms in order to sell these properties without suffering massive write-downs. The newer and more desirable hotels were not put on the market, because their lenders/owners were waiting for values to recover. This course of action significantly reduced the number of transactions involving good-quality lodging facilities. The following table shows the volume of hotel transactions exceeding $10,000,000 between 1990 and 1995. ================================================================================ Table 5-1 Summary of Major Hotel Transactions - -------------------------------------------------------------------------------- Year 1990 1991 1992 1993 1994 1995 - -------------------------------------------------------------------------------- Number of Transactions 130 54 67 52 92 104 Number of Rooms 40,543 16,427 25,187 19,935 33,503 36,951 Average Price Per Room $136,000 $91,000 $85,000 $79,000 $80,000 $83,000 Source: HVS International - -------------------------------------------------------------------------------- Hospitality Valuation Services, Boulder, Colorado Overview of External Forces Ramada Hotel Affecting the U.S. Lodging Industry 37 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= In 1991, there were only 54 major hotel sales recorded. This number increased to 67 in 1992 and declined to 52 in 1993, then rose dramatically in 1994 and 1995. During the low-volume years, many sellers remained on the sidelines waiting for values to increase before placing their properties on the market. The jump in 1994 is attributable to a number of factors, including the greater availability of mortgage funds, a return of institutional investors to the market, and a resurgence of investor interest in lodging facilities. The profile of typical hotel buyers has changed somewhat. During the mid-1980s, when tax-driven syndication's were popular, many hotels were purchased by passive investors who hired management companies to operate their properties. These owners had little involvement in day-to-day management decisions, which occasionally led to poor management and financial losses. Today, most buyers of major hotels are owner-operators who bring with them both the acquisition funds (usually from a joint venture partner) and management expertise. We also note that real estate investment trusts (REITs) and public hotel companies (C-Corps) are actively acquiring hotels using funds from public equity stock offerings. The supply of new hotel rooms is expected to increase slowly during the next several years. Lenders are beginning to return to the market, and are making some hotel loans based on conservative criteria. Initially, mortgage funds were available mainly to the budget and economy lodging sectors, for the purpose of refinancing existing properties or assisting buyers in acquisitions. Now, a number of lenders are willing to finance new construction for these small, low-end properties. Although financing is also becoming available for the acquisition of large, full-service hotels, very little has been allocated for new construction. At present, active hotel lenders are not necessarily traditional banks and insurance companies, but may include credit companies and Wall Street securities firms. A number of hotel owners and developers are now constructing budget and economy hotels; a few are planning more upscale, full-service properties. Most lenders are taking a conservative approach to new hotel loans, which should limit new development to those projects that demonstrate true economic feasibility. As a result, severe short-term overbuilding is unlikely. Hospitality Valuation Services, Boulder, Colorado Overview of External Forces Ramada Hotel Affecting the U.S. Lodging Industry 38 ============= HVS - ------------- INTERNATIONAL ============= Room Rates The supply and demand relationship has a direct impact on hotel occupancies and an indirect influence on room rate growth. Between 1978 and 1995, hotel room rates increased at an average annual compounded rate of almost 6%. Significant rate growth was recorded during the late 1970s and early 1980s as a result of strong occupancies (70%'s) coupled with a high monetary inflation rate (14%). In recent years, room rate growth slowed as a result of low occupancies and a drop in inflation. Hotel room rates generally increase faster than the Consumer Price Index (CPI) when occupancies are strong or moving upward. When occupancies are low or declining, room rate growth tends to lag behind the CPI; in some cases, rates may remain flat or actually drop. The following table compares the historical and projected annual increase in hotel room rates in the United States to the change in the national CPI. Hospitality Valuation Services, Boulder, Colorado Overview of External Forces Ramada Hotel Affecting the U.S. Lodging Industry 39 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-2 Percent Change in Average Room Rates Versus CPI - U.S. Hotels - -------------------------------------------------------------------------------- Consumer Price Hotel Room Rate Index Hotel Year Percent Change Percent Change Occupancy - ------------------------------------------------------------------ 1973 4.2% 6.2% 70.2% 1974 7.6 11.0 64.0 1975 7.3 9.1 63.7 1976 8.2 5.7 65.8 1977 8.1 6.5 67.3 1978 14.0 7.7 69.2 1979 17.0 11.3 71.9 1980 15.2 13.5 70.6 1981 10.0 10.3 67.9 1982 6.5 6.2 66.7 1983 5.1 3.2 64.4 1984 6.9 4.3 64.0 1985 4.6 3.6 63.1 1986 3.2 1.9 62.5 1987 3.6 3.6 61.9 1988 3.6 4.1 62.3 1989 3.5 4.8 63.2 1990 3.0 5.4 62.4 1991 0.6 4.2 60.9 1992 1.4 3.0 62.1 1993 2.8 3.0 63.1 1994 4.8 2.6 64.7 1995 4.8 2.8 65.5 1996* 5.0 3.0 66.0 1997* 5.5 3.5 67.0 1998* 6.0 4.0 68.0 1999* 5.5 4.0 68.0 Sources: Smith Travel Research & HVS International * Projected - -------------------------------------------------------------------------------- This table shows two periods when hotel room rate growth failed to keep pace with the CPI. From 1973 to 1975, the hotel industry was suffering from overbuilding related to real estate investment trusts, a recession, and a downturn in travel caused by the oil embargo. The second period of slow room rate growth occurred between 1988 and 1993, when the industry was again affected by overbuilding and a weak economy. The table illustrates that during periods of prosperity, room rates are a good hedge against inflation; this was true even when the CPI increased at double-digit levels. Hospitality Valuation Services, Boulder, Colorado Overview of External Forces Ramada Hotel Affecting the U.S. Lodging Industry 40 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The projections indicate a strong recovery of room rates as the relationship between supply and demand becomes more favorable. Growth is expected to peak in 1998 at 6%, which is significantly higher than the projected gain in the CPI. This may appear high, but a similar trend occurred in 1978, when room rates rose 14.0% and the CPI increased by only 7.7%. Hotels are unique because their room rates can be adjusted at any time. Unlike office space, where rents are typically negotiated for a five-year period, hotel operators are free to base rates on occupancy trends. Using sophisticated yield management programs, modern lodging facilities can ride the demand curve and maximize room rates whenever the market permits. As a result, hotels generally offer significant upside potential during periods of economic prosperity. If lodging facilities can increase room rates faster than the CPI and still maintain occupancies, bottom-line profits usually escalate. If they can raise room rates and occupancy at the same time, profits will grow significantly. The opposite occurs when room rates fail to keep pace with inflation. Because market value is basically a multiple of bottom-line profits, changes caused by fluctuations in occupancy and average rate have a direct impact on value. Rooms Revenue per Available Room (RevPAR) The ability of a hotel to maximize its occupancy and room rate is measured in terms of rooms revenue per available room (RevPAR), which is the product of occupancy and average rate. Between 1978 and 1995, RevPAR in the U.S. lodging industry increased at an average annual compounded rate of approximately 5%. As in the case of average rate, most of the increase occurred during the late 1970s, when occupancies escalated rapidly. The only decline in RevPAR occurred in 1991. Trends in Hotel Sales HVS International constantly monitors hotel markets in order to collect information on sales of lodging facilities. This comprehensive database is known as the Hospitality Market Data Exchange (HMDE). The HMDE includes more than 90% of all hotel sales that took place during this period. The HMDE data shows that the number of transactions peaked at 726 in 1986. This strong activity is largely attributable to pending changes in the tax laws, which made it less favorable to own hotels. It is also possible that forward-thinking investors noted the substantial overbuilding and declining economy and decided to bail out at that time. In 1987 and 1990, Hospitality Valuation Services, Boulder, Colorado Overview of External Forces Ramada Hotel Affecting the U.S. Lodging Industry 41 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the average sales price per room peaked at $75,000. This was more than twice the 1981 average of $36,000. Following the 1990 peak, hotel prices fell rapidly as occupancies and profits were eroded by the massive number of hotel rooms entering the market. By 1991, the year of the Persian Gulf War, sales prices had fallen to $38,000 per room. Even the highest price per room declined from the record $1,195,652 (for the sale of the Bel Aire Hotel) to $251,816 in 1992. The market hit bottom in 1993 when the average sales price dropped to $36,000 per room. Prices recovered rapidly in 1994 and 1995 as investors became interested in hotels again and more full-service properties were put on the market. In 1995, the average sales price was $61,000 per room. The figures presented in the HMDE represent actual sales prices; no attempt was made to adjust for factors such as favorable or unfavorable financing, forced or liquidation sales, bankruptcy sales, foreclosures, and so forth. As a result, the average price per room does not necessarily reflect market value, which assumes a willing buyer and a willing seller. Many of the transactions that took place during the early 1990s involved unwilling sellers - usually lenders who were forced to liquidate hotel portfolios quickly at prices that were below market levels. Most hotel experts agree that a recovery is underway, and they recommend that owners hold their properties until more favorable conditions prevail. Trends in Hotel Values A more meaningful indicator of trends in hotel value is the Hotel Valuation Index (HVI), developed by HVS International. This index tracks changes in hotel values in 23 major markets and the nation as a whole. It is developed through an income approach, using market area data provided by Smith Travel Research and operational and capitalization rate information from HVS International, and is indexed to the 1986 U.S.A. value (1.0000). The following table sets forth the HVI from 1986 to 1995. Hospitality Valuation Services, Boulder, Colorado Overview of External Forces Ramada Hotel Affecting the U.S. Lodging Industry 42 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-3 Hotel Valuation Index per Room - -------------------------------------------------------------------------------- Valuation Index Per Room
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 ------------------------------------------------------------------------------------------------------- Honolulu 3.3571 4.0357 4.6964 5.2857 5.3214 4.7857 4.9286 4.2857 4.3929 5.6071 New Orleans 1.5357 1.7500 2.2857 2.3929 2.5000 2.6071 3.2857 3.2500 3.8929 4.4286 New York 3.5714 4.1071 4.6429 4.5357 3.9286 3.0357 2.5714 2.5714 3.1429 4.1071 San Francisco 2.5000 3.0893 3.2500 3.0714 2.9286 2.5714 2.5714 2.9643 3.2143 4.0000 Phoenix 1.2143 1.0714 1.1786 1.5357 1.4286 1.2500 1.5000 1.9643 2.3571 3.2143 San Diego 2.8571 2.3571 2.5714 2.6786 2.3929 2.5357 2.5357 2.2143 2.3571 3.0357 Miami 1.4286 1.6071 1.7321 2.1429 2.1786 2.2500 2.5714 2.7857 2.3214 2.9286 Washington, DC 2.1786 2.1786 2.4464 2.6071 2.2500 1.8571 2.0357 2.5000 2.3929 2.8929 Atlanta 1.0714 1.0179 1.0536 1.0357 1.1429 1.1250 1.2857 1.7857 2.1429 2.6786 Minneapolis 0.7321 0.6964 0.7143 0.7143 0.7857 1.0000 1.2857 1.5714 1.8214 2.1786 Chicago 1.4643 1.5000 1.5714 1.5000 1.4286 1.2143 1.2500 1.5000 1.8571 2.1786 Boston 2.3571 2.7143 2.6071 2.1429 1.8214 1.2500 1.3036 1.3214 1.6071 2.1071 Fort Lauderdale 1.4643 1.2679 1.3214 1.4286 1.4821 1.3571 1.7143 1.8929 1.6071 1.9286 Orlando 1.5000 1.6429 1.9286 2.5000 2.5357 1.8929 2.0714 1.7857 1.6071 1.8929 Denver 0.5357 0.4464 0.4643 0.4821 0.7857 0.9268 1.0357 1.3214 1.5000 1.8571 Dallas 0.5536 0.6250 0.6607 0.7321 0.7857 0.7143 0.9643 1.0357 1.3214 1.7143 USA 1.0000 0.9464 1.0536 1.1250 1.0714 0.9214 0.9929 1.1429 1.3214 1.6071 Los Angeles 2.1071 2.2857 2.3929 2.4643 2.1786 1.5714 1.0714 0.9643 1.1964 1.5000 Tampa 0.8393 0.7679 0.8571 1.1429 1.2857 1.0357 1.0714 1.0357 1.1071 1.3214 Anaheim 1.7679 1.7321 1.7500 1.8571 1.6071 1.2857 0.9642 0.9464 0.8393 1.2500 Houston 0.3571 0.4286 0.6964 0.7857 1.1071 1.1607 1.1429 1.0357 1.0000 1.1786 Philadelphia 1.4643 1.5357 1.4286 1.3214 1.0714 0.6786 0.5714 0.6071 0.7500 1.0714 Norfolk 1.1786 1.0536 0.9286 0.7857 0.6429 0.5357 0.6071 0.6429 0.7500 0.9643 Riverside 0.9643 1.2143 1.5714 1.7143 1.4643 1.2500 0.7857 0.5357 0.4286 0.5357
Source: HVS International - -------------------------------------------------------------------------------- The HVI can be used to show the value change in a particular market over time or to show the relative difference in hotel values in various cities. The following table shows the annual change in hotel values in 23 major markets and the United States as a whole. Hospitality Valuation Services, Boulder, Colorado Overview of External Forces Ramada Hotel Affecting the U.S. Lodging Industry 43 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-4 Percent Change in the Hotel Valuation Index - -------------------------------------------------------------------------------- Annual Percent Change
'86-87 '87-88 '88-'89 '89-'90 '90-'91 '91-'92 '92-'93 93-'94 '94-'95 '86-'95 - ----------------------------------------------------------------------------------------------------------- Honolulu 20 % 16 % 13 % 1 % -10 % 3 % -13 % 3 % 28 % 67 % New Orleans 14 31 5 4 4 26 -1 20 14 188 New York 15 13 -2 -13 -23 -15 0 22 31 15 San Francisco 24 5 -5 -5 -12 0 15 8 24 60 Phoenix -12 10 30 -7 -13 20 31 20 36 165 San Diego -18 9 4 -11 6 0 -13 6 29 6 Miami 12 8 24 2 3 14 8 -17 26 105 Washington, DC 0 12 7 -14 -17 10 23 -4 21 33 Atlanta -5 4 -2 10 -2 14 39 20 25 150 Minneapolis -5 3 0 10 27 29 22 16 20 198 Chicago 2 5 -5 -5 -15 3 20 24 17 49 Boston 15 -4 -18 -15 -31 4 1 22 31 -11 Fort Lauderdale -13 4 8 4 -8 26 10 -15 20 32 Orlando 10 17 30 1 -25 9 -14 -10 18 26 Denver -17 4 4 63 18 12 28 14 24 247 Dallas 13 6 11 7 -9 35 7 28 30 210 USA -5 11 7 -5 -14 8 15 16 22 61 Los Angeles 8 5 3 -12 -28 -32 -10 24 25 -29 Tampa -9 12 33 12 -19 3 -3 7 19 57 Anaheim -2 1 6 -13 -20 -25 -2 -11 49 -29 Houston 20 62 13 41 5 -2 -9 -3 18 230 Philadelphia 5 -7 -8 -19 -37 -16 6 24 43 -27 Norfolk -11 -12 -15 -18 -17 13 6 17 29 -18 Riverside 26 29 9 -15 -15 -37 -32 -20 25 -44
Source: HVS International - -------------------------------------------------------------------------------- On a national basis, hotel values rose in 1988 and 1989, then declined in 1990 and dropped by 14% in 1991. A turnaround commenced in 1992, when values increased by 8%; still greater increases of 15% in 1993, 16% in 1994, and 22% in 1995 signaled that a recovery was well underway. In the case of the individual cities, it is obvious that the movement in national hotel values has been offset somewhat by trends in local markets. Between 1986 and 1995, Riverside hotels lost more than 40% of their value, while San Francisco showed a 60% increase. Anaheim, Los Angeles, and Philadelphia also suffered significant drops. Hospitality Valuation Services, Boulder, Colorado Overview of External Forces Ramada Hotel Affecting the U.S. Lodging Industry 44 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Future Trends Most hotel owners, operators and lenders agree that the U.S. lodging industry has emerged from one of the worst periods since the Depression of 1929. Today, there are many indications that signal a strong recovery is underway, and most hotels have experienced a dramatic rise in profitability. Conversely, the hotel industry remains cyclical, and there are long-term trends and risk factors that could have an unfavorable impact on the operating results and investment potential of lodging facilities. The following list summarizes the positive and negative factors that are likely to influence the U.S. lodging industry in coming years. o No significant amount of new hotel development is likely to occur during the next three to five years. Lenders stopped financing new hotels in the early 1990s because of the high rate of loan defaults, and they are only now starting to make construction loans. Although mortgage funds are available to refinance existing properties and construction loans are being made for economy hotels, mortgages for new hotels in the mid-rate, first-class, and luxury categories are still difficult to secure. This lack of financing is major barrier to entry, and will prevent a number of proposed projects from moving forward. With only a slow increase in supply, hotel occupancies should rebound as fast as the growth in demand permits. o An additional barrier to entry is the current discrepancy between market values and replacement costs for first-class and luxury hotels. In today's market, many upscale hotels are still selling for prices that are below what it would cost to develop a comparable hotel. As a result, there is little justification for building a new hotel when a similar, existing facility is available for sale at some fraction of the cost. Until the gap between market value and replacement cost narrows, there will be minimal new hotel construction in the upper-tier segments. The market values and replacement costs of budget and economy hotels have been in equilibrium for several years which is another reason why new development is proceeding in these segments. o The U.S. economy continues to improve, which suggests that more people are traveling. Many people curtailed their travel plans during the recent recession, and there is likely to be pent-up demand that will be released as consumer confidence escalates. o Minimal additions to the hotel supply coupled with growth in demand should result in further improvement in occupancies during the next several years. Hospitality Valuation Services, Boulder, Colorado Overview of External Forces Ramada Hotel Affecting the U.S. Lodging Industry 45 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= o As shown by the historical data, hotel room rates rise rapidly as occupancies escalate. The most frequent complaint that owners and operators had during the recent recession was their inability to achieve average rate gains. Starting in 1994, gains in hotel room rates returned to levels in excess of inflation, foreshadowing enhanced profitability. In real dollars, hotel room rates are expected to return to 1988 levels by 1998. This is a good indication that hotel values will return to record levels in the next two to four years. o The low cost of capital is another factor that tends to enhance value. Because capitalization rates are tied directly to the price of capital, the lower the cost, the lower the cap rate and the higher the value. The cost of hotel debt capital averaged 10.5% in 1990. Today, similar financing is available at 8.5% to 9.5%. Recent hotel sales support the downward trend in capitalization rates. o Government regulations are becoming increasingly expensive for the U.S. hotel industry. A national health care policy could force small operators to provide better benefits for many more employees, particularly the part-time workers who are used extensively by hotels and restaurants. Environmental laws are becoming stricter and will require hotels to implement recycling, reuse, and conservation procedures. Congress has limited deductions for meals and entertainment expenses, which increases the cost of doing business in hotels and restaurants. Local municipalities use hotel rooms taxes as a source of revenue for general use, and the hotel rooms tax is so high in some areas that it has driven away demand. This is particularly true with respect to meetings and conventions, which can be held in cities that tax accommodations at a lower rate. o Improved technology is rapidly changing the way business is conducted. During the next decade, advances such as video communication, enhanced data transfer, and faster transportation are expected to limit the need for face-to-face meetings and shorten the time that executives are away from their offices. Commercial hotels are bound to be influenced by this trend. Hospitality Valuation Services, Boulder, Colorado Overview of External Forces Ramada Hotel Affecting the U.S. Lodging Industry 46 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Conclusion Interest in hotel acquisition has increased significantly during the past several years. Buyers have concluded that future earnings trends are likely to be favorable, and the risks posed by overbuilding or an economic downturn are small. Some sellers are holding their properties until prices reach a higher level. Consequently, we believe there is pent-up desire to sell once prices begin to approach levels that allow the existing (or restructured) debt to be paid off. The fact that numerous buyers are chasing very few acquisition opportunities has had a favorable impact on recent sales prices. For buyers to be successful in this highly competitive market, their projected operating results must take into account at least a portion of any upside created from improved performance, particularly if the improvement can be readily achieved through management efficiencies. Capitalization rates based on historical operating income have fallen during the past several years. Hotel buyers in today's market must be aggressive in all of their acquisition assumptions. As a result, hotel values in some parts of the country are approaching the levels registered during the mid-1980s, and a full recovery is expected to occur in the next two to four years. Hospitality Valuation Services, Lodging Market Study and Boulder, Colorado Ramada Hotel Demand Analysis 47 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 6. Lodging Market Study and Demand Analysis MARKET FOR TRANSIENT ACCOMMODATIONS The market for transient accommodations is an all-encompassing term referring to the many types of travelers who use lodging facilities in a given area. These travelers represent the market's accommodated room night demand. This section will begin with an analysis of historical demand trends to determine what changes have occurred; the historical number of competitive hotel rooms will then be estimated to evaluate local supply trends. Areawide occupancy levels can be calculated based on the number of hotel rooms available in the market and the demand for lodging accommodations. The total hotel room night demand will be divided into individual market segments to allow us to forecast growth rates based on the economic and demographic data set forth earlier in this report. Historical Supply and Demand Data Smith Travel Research (STR) has compiled historical supply and demand data for the subject property and its competitors. This information is presented in the following table, along with the marketwide occupancy, average rate, and rooms revenue per available room (RevPAR). RevPAR is calculated by multiplying occupancy by average rate, and provides an indication of how well rooms revenue is being maximized. Hospitality Valuation Services, Lodging Market Study and Boulder, Colorado Ramada Hotel Demand Analysis 48 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-1 Historical Roam Supply and Demand Trends (STR) - --------------------------------------------------------------------------------
Year to Date --------------------- 1989 1990 1991 1992 1993 1994 1995 1995 1996 - ------------------------------------------------------------------------------------------------------------------------- Number of Rooms 1,718 1,718 1,851 1,851 1,851 1,851 1,851 1,851 1,851 Annual Guestroom Supply 627,070 627,070 675,615 675,615 675,615 675,615 675,615 449,793 449,793 Percent change -- 0.0% 7.7% 0.0% 0.0% 0.0% 0.0% -- 0.0% Room Night Demand 371,225 363,701 387,127 369,561 395,910 401,991 442,528 303,160 286,968 Percent Change -- (2.0)% 6.4% -4.5% 7.1% 1.5% 10.1% -- -5.3% Occupancy 59.2% 58.0% 57.3% 54.7% 58.6% 59.5% 65.5% 67.4% 63.8% Percent Change -- (2.0)% (1.2)% -4.5% 7.1% 1.5% 10.1% -- -5.3% Average Rate $ 57.37 $ 61.61 $ 60.59 $ 61.25 $ 60.53 $ 63.42 $ 66.69 $ 66.75 $ 69.24 Percent Change -- 7.4% (1.7)% 1.1% -1.2% 4.8% 5.2% -- 3.7% RevPAR $ 33.96 $ 35.73 $ 34.72 $ 33.50 $ 35.47 $ 37.73 $ 43.68 $ 44.99 $ 44.18 Percent Change -- 5.2% (2.8)% -3.5% 5.9% 6.4% 15.8% -- -1.8%
Average Annual Compounded Growth 1989-1995 - ------------------------------------------- Number of Rooms Annual Guestroom Supply Percent change 1.3% Room Night Demand Percent Change 3.0% Occupancy Percent Change 1.7% Average Rate Percent Change 2.5% RevPAR Percent Change 4.3% Hampton Inn opened in January of 1991 Source: Smith Travel Research - -------------------------------------------------------------------------------- Hospitality Valuation Services, Lodging Market Study and Boulder, Colorado Ramada Hotel Demand Analysis 49 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= It is important to note some limitations of the STR data. Hotels are occasionally added to or removed from the sample, and not every property reports data in a consistent and timely manner; these factors can influence the overall quality of the information by skewing the results. These inconsistencies may also cause the STR data to differ from the results of our competitive survey. Nonetheless, we find that hotel buyers often rely on STR statistics, and thus they are considered relevant to this study. As shown in the previous STR table, room night demand has increased at an average annual compounded rate of 3.0%, resulting from a 1.3% increase in supply and a 1.7% increase in occupancy annually over the six year period. Average rate increased annually at a below inflationary level of 2.5%, although, coupled with occupancy, RevPAR increased at an annual compounded growth rate of 4.3%. On a calendar year basis, guestroom supply increased from 1,718 in 1990 to 1,851 in 1991, as a result of the introduction of the 133-room Hampton Inn into the competitive market. The table illustrates a 6.4% increase in demand in the same year as the room supply increases, providing evidence of either induced or unaccommodated demand. Average rate, however, did not increase, but rather decreased in this same year, indicating the lower rates offered at the new Hampton Inn. In 1992, demand declined by -4.5%, largely indicative of the national economic recession. Strong recovery, however, was experienced in 1993, as demand grew by 7.1%, while rate dropped by -1.2% in 1993 to produce a 5.9% increase in RevPAR. Years 1994 and 1995 show strong growth levels both in terms of occupancy and average rate, particularly in 1995, where a 10.1% growth rate in occupancy was largely generated by construction crew demand associated with the construction of numerous casino hotels in nearby Council Bluffs, Iowa. Year-to-date numbers indicate a drop in demand, as most of the casino construction work is completed, along with a 3.7% growth in average rate. In addition to the decline in construction demand, several other hotels have opened which are not part of our competitive set, however, they have attracted a portion of the existing demand away from the central Omaha area, based on the newness of the products. Demand Analysis Using Market Segmentation For the purpose of demand analysis, the overall market is divided into individual segments based on the nature of travel. Although a market may have various segments, the three primary classifications occurring in most areas are commercial, meeting and group, and leisure. Hospitality Valuation Services, Lodging Market Study and Boulder, Colorado Ramada Hotel Demand Analysis 50 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Market segmentation is a useful procedure because individual classifications often exhibit unique characteristics in terms of growth potential, seasonality of demand, average length of stay, double occupancy, facility requirements, price sensitivity, and so forth. By quantifying the room night demand by market segment and analyzing the characteristics of each segment, the overall demand for transient accommodations can be projected. Lodging demand in central Omaha is generated primarily by the following four market segments. Segment 1 Commercial Segment 2 Meeting and Group Segment 3 Leisure Segment 4 Airline Based on our fieldwork, area analysis, and knowledge of the local lodging market, we estimate the 1996 distribution of accommodated hotel room night demand as follows. ================================================================================ Table 6-2 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- 1996 Annual Room Night Demand (Rounded) -------------------------------------------------------------- Percentage Percentage Market Segment Market Wide of Total Subject Property of Total - -------------------------------------------------------------------------------- Commercial 155,000 45 % 6,000 13 % Meeting and Group 107,000 31 14,000 31 Leisure 66,000 19 13,000 29 Airline 16,000 5 12,000 27 ----------- -------- ----------- ------ Total 343,000 100 % 45,000 100 % - -------------------------------------------------------------------------------- According to the previous table, roughly 27% of the subject property's demand is from airline business, compared to the 5% accommodated by the market. As a result, the market is able to capture 45% of its total demand from the commercial segment, while the subject property's commercial segment represents only 13% of total demand. The subject property is comparable to the market in terms of the amount of meeting and group business accommodated and higher than the market in the accommodated leisure segment business. Hospitality Valuation Services, Lodging Market Study and Boulder, Colorado Ramada Hotel Demand Analysis 51 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Using the distribution of accommodated hotel demand as a starting point, we will analyze the characteristics of each market segment in an effort to determine future trends in room night demand. Commercial Segment The commercial segment consists of individual business people who are visiting various firms in the subject property's market. Commercial demand in the subject property's market is generated by a wide variety of corporations with the telecommunications and insurance industries exhibiting some dominance. Large firms operating in the area include First Data Resources, Mutual of Omaha Companies, Con Agra, Inc., Lucent Technologies, Farm Credit, and Union and Southern Pacific Railroad. Individuals visiting smaller local companies also contribute a significant portion of the area's hotel demand. In addition, business travelers passing through Omaha en route to other destinations may stop at local lodging facilities because they provide a convenient resting point along the area's major highways. Commercial demand is strongest Monday through Thursday nights, declines significantly on Friday and Saturday, and increases somewhat on Sunday. The typical length of stay ranges from one to three days, and the rate of double occupancy is a low 1.2 to 1.3 people per room. Commercial demand is relatively constant throughout the year, although some declines are noticeable in late December and during other holiday periods. In general, commercial travelers are not overly rate-sensitive and will make use of a hotel's food and beverage outlets and recreational facilities. The commercial segment represents a highly desirable and lucrative market that provides a consistent level of demand at relatively high room rates. Office vacancy outside of the downtown central business district of Omaha is currently at 0.7%, indicating a very strong commercial market. Growth in total employment has increased by 1.5% annually over the last five years, with the service industry as the largest employment sector with 127,800 jobs in 1995. According to numerous sources, many of the larger downtown insurance companies are relocating to the western side of Omaha, where more space is available for new development. In addition, a new Federal Courts building to be located in downtown, is currently in the planning and initial construction phase. Once constructed, this facility is expected to generate additional commercial demand for area hotels. Hospitality Valuation Services, Lodging Market Study and Boulder, Colorado Ramada Hotel Demand Analysis 52 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Based on the economic and demographic data presented earlier, we estimate that commercial hotel demand in the Omaha market rose at rates ranging from 0.5% to 3.0% annually during the early 1990s. We generally find a multiplier effect between employment growth in certain sectors and the increase in commercial lodging demand (i.e., one new FIRE employee will correspond to more than one new visitor). In conjunction with the recent trend of slower growth in the local economy, commercial demand increases have become more moderate. As the national and international economy improves and prominent local businesses increase their production and employment levels, commercial hotel demand is expected to rebound quickly. Smith Travel Research estimates that total hotel demand in the competitive market rose by 10.1% in 1995. We project that commercial demand (which comprises roughly 45% of the total market) will increase by 3.0% in 1997. Thereafter, we project commercial demand growth to stabilize at 2.0% annually. Meeting and Group Segment The meeting and group market includes meetings, seminars, conventions, trade association shows, and similar gatherings of ten or more people. Peak convention demand typically occurs in the spring and fall. Because of vacations, the summer months represent the slowest period for this market segment; winter demand varies. The average length of stay for typical meetings and groups ranges from three to five days. Most commercial groups meet during the weekday period of Monday through Thursday, but associations and social groups will sometimes gather on weekends. Commercial groups tend to have a low double occupancy of 1.3 to 1.5 people per room, while social groups are likely to have double occupancy rates ranging from 1.5 to 1.9. In addition to the above mentioned businesses, local educational institutions also contribute to the commercial meeting and group demand in Omaha. However, the meeting and group segment does not consist of commercial groups exclusively. Visiting sports and recreational teams also contribute to the group demand in the market, especially during the summer season. Leisure groups include weddings, family reunions, military groups, and the like, but are usually only part of weekend demand. Meeting and group patronage is quite profitable for hotels. Although room rates are discounted for large groups, the property benefits from the use of meeting space and the revenues generated by in-house banquets and cocktail receptions. Hospitality Valuation Services, Lodging Market Study and Boulder, Colorado Ramada Hotel Demand Analysis 53 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Facilities that are necessary to attract meetings and groups include function areas with adequate space for breakout, meals, and receptions; recreational amenities; and a sufficient number of guestrooms to house the attendees. Future meeting and group demand is closely related to growth in the commercial segment. Because most meetings have either a direct or an indirect business purpose, the economic considerations that have an impact on commercial travel also affect meeting and group demand. The exception is non-commercial meetings, which are tied to the economic factors that influence leisure travel. It should be noted that meetings and similar events are booked in advance, and thus growth in this segment tends to lag slightly behind increases in commercial demand. The City of Omaha is without a major convention facility, consequently, the Holiday Inn Central, adjacent to the subject property, houses the largest amount of meeting space. There are no future plans to build a convention facility within the city, however, the new casino hotels in Council Bluffs, as well as the proposed Embassy Suites in downtown Omaha, provide additional facilities for interested parties. The increase in meeting room supply is expected to serve as a catalyst for growth in this segment. Historically, meeting and group demand in the Omaha area is estimated to have increased at a rate similar to the overall average annual compounded rate of 3.0% achieved by the market. The new supply entering the market is expected to include a significant amount of meeting space, which we believe will provide an increased opportunity for growth. In light of this information and the relevant economic and demographic trends, we estimate that meeting and group demand in the subject property's market area will increase by 3.0% in 1997, before stabilizing at 4.0% annually thereafter. Leisure Segment The leisure market segment consists of individuals and families who are spending time in the area or passing through en route to other destinations. Their travel purposes may include sightseeing, recreation, visiting friends and relatives, or numerous other non-business activities. Leisure demand is strongest Friday and Saturday nights and all week during holiday periods and the summer months. These peak periods are negatively correlated with commercial visitation, underscoring the stabilizing effect of capturing weekend and summer tourist travel. The typical length of stay ranges from one to four days, depending on the destination and travel purpose, and the rate of double occupancy generally ranges from 1.8 to 2.5 people per room. Hospitality Valuation Services, Lodging Market Study and Boulder, Colorado Ramada Hotel Demand Analysis 54 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Leisure travelers tend to be the most price-sensitive segment in the lodging market. They often prefer low-rise accommodations where parking is convenient to the rooms, and they typically demand extensive recreational facilities and amenities. Ease of highway access and proximity to tourist attractions are important locational considerations. Leisure demand in the subject property's market is generated by the College World Series, held annually in June, the Henry Doorly Zoo, youth sporting events held in the area, events held at Ak-sar-ben, and riverboat gaming in nearby Council Bluffs, Iowa. Future leisure demand is related to the overall economic health of the nation. Trends showing changes in state and regional unemployment and disposable personal income often have a strong impact on non-commercial visitation. Traffic counts on nearby highways and attendance at local attractions can also form a basis for projections. There are numerous indicators of leisure demand, which include traffic counts, airport statistics, area attraction visitors and visitor bureau statistics. Growth rates in these areas have ranged from 2.0% to 8.0% during the last five years. We have estimated leisure demand will continue to grow 2.0% annually, throughout our projection period. Airline Segment Airline demand is generated by flight crews and delayed passengers. The airlines typically contract rooms in nearby lodging facilities for extended periods to ensure the availability of accommodations. Because they are able to guarantee a specific level of usage on a daily basis, airlines can usually negotiate deeply discounted room rates. This type of demand is advantageous because it provides a base level of occupancy over a long period that normally includes weekends and slow seasons. The occupancy benefit is offset by low contract room rates, which have an adverse impact on average rate. Skilled hotel operators use airline patronage to fill in during periods of low occupancy and quickly displace this demand when higher-rated market segments offer better potential. Since Omaha is not a major "hub" for any of its servicing airlines, the area has experienced a lower amount of airline (contract) demand than other cities in the Midwest. Although the total passenger counts have increased by more than 8% annually since 1990, the number of crew room nights has remained relatively stable in the market, according to several area hotel managers. Hospitality Valuation Services, Lodging Market Study and Boulder, Colorado Ramada Hotel Demand Analysis 55 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Without the introduction of a major airline relocating to the area, little growth in airline demand is anticipated. In the interest of conservatism, we have estimated airline demand to grow by 1.0% in each year of our projection period. Conclusion The purpose of segmenting the lodging market is to define each major type of demand, identify customer characteristics, and estimate future growth trends. Starting with an analysis of the local area, four segments were defined as representing the subject property's lodging market. Various types of economic and demographic data were then evaluated to determine their propensity to reflect changes in hotel demand. Based on this procedure, we forecast the following average annual compounded market segment growth rates. ================================================================================ Table 6-3 Annual Compounded Market Segment Growth Rates - -------------------------------------------------------------------------------- Annual Compounded Growth Rate ----------------------------------------------------- 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Commercial 3.0% 2.0% 2.0% 2.0% 2.0% 2.0% Meeting and Group 3.0 4.0 4.0 4.0 4.0 4.0 Leisure 2.0 2.0 2.0 2.0 2.0 2.0 Airline 1.0 1.0 1.0 1.0 1.0 1.0 Annual Average Growth -- 2.9% 2.6% 2.6% 2.6% 2.0% - -------------------------------------------------------------------------------- These growth rates will be used in subsequent sections of this study to forecast changes in lodging demand. Hospitality Valuation Services, Lodging Market Study and Boulder, Colorado Ramada Hotel Demand Analysis 56 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= COMPETITION An integral component of the supply and demand relationship that has a direct impact on the availability of lodging demand is the current and anticipated supply of competitive lodging facilities. The Omaha area is serviced by numerous hotels and motels located throughout the region. The subject property is located in Central Omaha, an area where a large concentration of businesses are located. Other concentrations of hotels include the downtown district, the northwestern corridor, and the airport. We have identified four properties that are considered primarily competitive with the Ramada Hotel. Including the subject property, these primary competitors total 1,129. Five additional lodging facilities are judged to be only secondarily competitive; although the facilities, rate structures, or market orientations of these hotels prevent their inclusion among the primarily competitive supply, they do compete with the subject property to some extent. The room count of each secondary competitor has been weighted to reflect the degree to which it competes with the Ramada Hotel; the aggregate weighted room count of the secondary competitors is 419. Primary Competitors The following table summarizes the important operating characteristics of the primary competitors and the aggregate secondary competitors. This information was compiled from personal interviews, inspections, lodging directories, and our in-house library of operating data. The table also sets forth each property's penetration factors; penetration is the ratio between a specific hotel's operating results and the corresponding data for the market. If the penetration factor is greater than 100%, the property is performing better than the market as a whole; conversely, if the penetration is less than 100%, the hotel is performing at a level below the marketwide average. Hospitality Valuation Services, Lodging Market Study and Boulder, Colorado Ramada Hotel Demand Analysis 57 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-4 Primary Competitors and Aggregate Secondary Competitors - --------------------------------------------------------------------------------
Estimated 1996 Market Segmentation ----------------------------------- Year Number Meeting Meeting Mtg. & Property/Location Opened of Rooms Space Space/Room Comm. Group Leisure Airline - ----------------------------------------------------------------------------------------------------------- Ramada Hotel 7007 Grover Street 1973 215 5,787 27 14% 31% 28% 27% Best Western Central 3650 S. 72nd Street 1970 213 4,600 22 42 29 22 7 Holiday Inn Central 3321 S. 72nd Street 1968 406 49,276 121 25 60 15 0 Clarion Carlisle 10909 M Street 1978 127 4,420 35 65 20 15 0 Sheraton Four Points 4888 S. 118th Street 1974 168 3,790 23 63 17 20 0 - ----------------------------------------------------------------------------------------------------------- Sub-Totals and Averages 1,129 13,575 45 36% 38% 20% 7% Secondary Competition 419 66% 15% 18% 0% Totals/Averages 1,548 45% 31% 19% 5% - ----------------------------------------------------------------------------------------------------------- Estimated 1995 Estimated 1996 ----------------------------- ----------------------------------------------------- Average Average Occupancy Yield Property/Location Occupancy Rate Rev PAR Occupancy Rate Rev PAR Penetration Penetration - ------------------------------------------------------------------------------------------------------------------- Ramada Hotel 7007 Grover Street 62.2% $43.31 $26.94 58.0% $47.00 $27.26 95.4% 72.4% Best Western Central 3650 S. 72nd Street 66.0 51.00 33.66 64.0 53.00 33.92 105.2 90.1 Holiday Inn Central 3321 S. 72nd Street 62.0 67.00 41.54 58.0 67.00 38.86 95.4 103.2 Clarion Carlisle 10909 M Street 50.0 53.00 26.50 49.0 56.00 27.44 80.6 72.9 Sheraton Four Points 4888 S. 118th Street 62.0 53.00 32.86 60.0 54.00 32.40 98.6 86.0 - ------------------------------------------------------------------------------------------------------------------ Sub-Totals and Averages 61.4% $55.81 $34.29 58.4% $57.30 $33.47 96.0% 88.9% Secondary Competition 69.0% $68.91 $47.55 67.0% $72.72 $48.72 110.2% 129.4% Totals/Averages 63.5% $59.66 $37.91 60.8% $61.91 $37.66 100.0% 100.0% - -------------------------------------------------------------------------------------------------------------------
Hospitality Valuation Services, Lodging Market Study and Boulder, Colorado Ramada Hotel Demand Analysis - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Competition Map for Ramada Inn, Omaha, Nebraska [GRAPHIC OMITTED] Hospitality Valuation Services, Lodging Market Study and Boulder, Colorado Ramada Hotel Demand Analysis 58 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Our survey of the primarily competitive hotels in the Central Omaha market indicates that all are affiliated with nationally recognized lodging chains. These properties range in size from 127 rooms at the Clarion Carlisle to 406 rooms at the Holiday Inn Central and in age from 18 to 28 years. The overall market demand, including both primary and secondary competitors, has a strong commercial and meeting and group orientation as these segments comprise 45% and 31%, respectively, of the total accommodated demand. The leisure market follows, with 19% of the total demand. Airline demand comprises the balance of demand accounting for 5%. In 1996, the primary competitors are expected to achieve an annual overall occupancy of 58.4% at an average rate of $57.30, yielding a RevPAR of $33.47. The Best Western Central is estimated to have achieved the highest occupancy of the primary competitors, while the Holiday Inn is estimated to have received the highest average rate and RevPAR. It should be noted that the Clarion Carlisle has been able to increase its 1996 average rate, largely as a result of renovations. The secondary competitors achieved a higher occupancy and average rate than the primary competitors, largely as a result of the inclusion of higher end, full service properties. In 1996, the secondary competitors achieved an occupancy of 67% at an average rate of $72.72 to produce a RevPAR of $48.72. The subject property has been under-performing the market, both in terms of average rate and occupancy during the past two years. A large factor causing this below average performance is the heavy reliance on rate sensitive airline business. As previously mentioned, the subject property's market segmentation is made up of 27% airline business, while the primary competitors total demand is made up of only 7% airline demand. As a comparison, the subject property's average airline rate is approximately $30.00, while its overall average rate is expected to be $47.00 in 1996. This represents a substantial discount, which results in the subject property's below average rate. In 1996, the subject property obtained an occupancy level of 58% with an average rate of $47.00. This produced a RevPAR of $27.26 and a yield penetration of 72.4%. Hospitality Valuation Services, Lodging Market Study and Boulder, Colorado Ramada Hotel Demand Analysis 59 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Primary Competitors Each primary competitor was inspected and evaluated. Descriptions of our findings are presented below. Best Western Central The Best Western Central is located to the west of the subject property, directly across 72nd Street. Approximately twenty-six years old, this former Howard Johnson's property recently received renovations to its public areas as well as new soft goods in its guestrooms. This property was recently sold to Servico, Inc. by Seldin Properties of Omaha. The new property owners anticipate additional renovations, however, not to a large extent. As a result of its recent renovation, management reports improved positioning in terms of attracting a larger share of commercial demand. The Best Western Central features 213 guestrooms in addition to its more than 4,600 square feet of meeting space. The Best Western also offers its guests an indoor swimming pool and whirlpool, barber shop, and Great American Diner Restaurant. Holiday Inn Central The Holiday Inn Central is located adjacent to the subject property, across Grover Street to the north. At the time of our inspection, the Holiday Inn's tower guestrooms had just finished a renovation. In talking with property management, approximately $2,500,000 is budgeted for renovation of the Holidome area, currently in progress. The pool is being completely replaced, while the guestrooms surrounding the Holidome will be converted to suites. A majority of the renovations should be completed by the end of 1996. The Holiday Inn boasts the largest amount of meeting space in Omaha with over 49,000 square feet. This sprawling facility contains 406 rooms, housed in a two-story Holidome area and a six-story guestroom tower. In addition, the property contains a leased full service restaurant and lounge, Grandma's; an express restaurant and lounge; and an indoor pool and game room. Clarion Carlisle The Clarion Carlisle is located in south central Omaha, approximately four miles southwest of the subject property. This property opened roughly eighteen years ago and is currently owned by Devon Development of Chicago, Illinois. In 1996, the Clarion was able to improve its average rate by approximately $3.00. According to property management, the property has recently completed a full renovation and appeared in good condition at the time of our inspection. Reportedly, prior to renovation, the property was in poor Hospitality Valuation Services, Lodging Market Study and Boulder, Colorado Ramada Hotel Demand Analysis 60 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= condition and service was below average. We anticipate this property to increase its market share in the next few years. The property offers 127 rooms contained in a high rise building. Along with +/-4,420 square feet of meeting space, the Clarion has one restaurant and lounge, as well as a heated indoor pool and whirlpool, and a complimentary airport shuttle service. Sheraton Four Points Hotel The Sheraton Four Points Hotel is also located in south central Omaha, approximately one-half mile west of the Clarion Carlisle. This property opened roughly twenty-two years ago, and was recently sold to Servico, Inc., by Seldin Properties. According to property management, this property will soon begin a $2,500,000 renovation, to convert from its existing affiliation, Sheraton Inn, to a Sheraton Four Points Hotel. This renovation is much needed as its current condition is fair to poor. Once renovated, this property is expected to compete at a level higher than that of the market average. The property offers 168 guestrooms, in addition to an indoor pool and spa, roughly 3,800 square feet of meeting space, restaurant and lounge. This property accommodates a large amount of commercial demand, 63%, largely as a result of its convenient location, proximate to the office parks in western Omaha. Secondary Competitors The five secondary competitors are made up of three full service properties and two limited service hotels. Two of the secondary competitors represent properties with larger rooms and more amenities which command higher average rates than any of the primary competitors. The Marriott Hotel is located approximately seven miles west of the subject property and features 297 guestrooms, an indoor pool, ballroom and meeting rooms, two restaurants, lounge, and exercise room. The Embassy Suites is located one mile north of the subject property and features 189 suites, along with an indoor pool, meeting rooms and restaurant. This property commands a higher rate as a result of the size of the guestrooms, free cook-to-order breakfast and evening cocktails. The third full service secondary competitor is the Best Western Regency, which features 147 guestrooms, indoor swimming pool, restaurant, lounge and several meeting rooms. This property attracts lower rated business as a result of the age and condition of its facilities. Hospitality Valuation Services, Lodging Market Study and Boulder, Colorado Ramada Hotel Demand Analysis 61 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The Hampton Inn and Best Western Omaha Inn are limited service properties located one block and four miles, respectively, from the subject property. Both of these properties have recently gone through renovations and were in good condition at the time of our fieldwork. The Hampton Inn does not have a swimming pool, however, guests are allowed access to the pool at the neighboring Holiday Inn. The Best Western Omaha Inn features an indoor swimming pool, exercise room, and some whirlpool suites. The following table sets forth the operating statistics for the secondary competitors, including the weighted competitiveness of each property. In 1996, the secondary competitors achieved and overall occupancy level of 67% at an average rate of $72.72, resulting in a RevPAR of $48.72. The market segmentation of the secondary competitors is considerably different than the primary competitors, thereby supporting the fact that these properties are secondary competitors. For 1996, the market segmentation of the secondary competitors is estimated to be comprised of 66% commercial demand, 18% leisure demand, and 15% meeting and group demand. None of the secondary competitors captured a significant amount of airline demand. Hospitality Valuation Services, Lodging Market Study and Boulder, Colorado Ramada Hotel Demand Analysis 62 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-5 Secondary Competitors - --------------------------------------------------------------------------------
Estimated 1996 Market Segmentation ----------------------------------- Year Number Meeting Meeting Mtg. & Property/Location Opened of Rooms Space Space/Room Comm. Group Leisure Airline - ----------------------------------------------------------------------------------------------------------- Marriott Hotel 1982 297 25% 74 52% 35% 13% 0% Hampton Inn 1991 133 75 100 70 5 25 0 Best Western Regency Inn 1972 147 50 74 65 15 20 0 Embassy Suites 1973 189 50 95 70 15 15 0 Best Western Omaha Inn 1974 102 75 77 75 5 20 0 - ----------------------------------------------------------------------------------------------------------- Totals/Averages 868 419 66% 15% 18% 0% Estimated 1995 Estimated 1996 ----------------------------- ----------------------------- Average Average Property/Location Occupancy Rate Rev PAR Occupancy Rate Rev PAR - ------------------------------------------------------------------------------------------- Marriott Hotel 80% $94.00 $75.20 80% $100.00 $80.00 Hampton Inn 65 54.00 35.10 62 56.00 34.72 Best Western Regency Inn 59 54.00 31.86 56 54.00 30.24 Embassy Suites 74 81.00 59.94 72 85.00 61.20 Best Western Omaha Inn 68 55.00 37.40 67 60.00 40.20 - ---------------------------------------------------------------------------------------- Totals/Averages 69% $68.91 $47.55 67% $72.72 $48.72
- -------------------------------------------------------------------------------- Hospitality Valuation Services, Lodging Market Study and Boulder, Colorado Ramada Hotel Demand Analysis 63 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Proposed Competitors It is important to consider any new hotels that may have an impact on the subject property's operating performance. Based on our fieldwork in the market and our discussions with local hotel operators, developers, and government officials, we have identified several properties that are proposed or under development in the Omaha Metropolitan area. Of the numerous hotel projects proposed in the area, two properties are expected to impact the subject property's competitive market. A 72-unit Holiday Inn Express is currently under construction approximately four miles southwest of the subject property, adjacent to the Clarion Carlisle Hotel. This hotel is being developed by Omaha Hotels, Inc., the same owners as the Holiday Inn and Hampton Inn Central. This property is expected to open on November 1, 1996, and is projected to be 100% competitive with the subject property. The second hotel project anticipated to impact the subject property's market is a 246-room Embassy Suites. This six story property, located in downtown Omaha, is being developed by John Q. Hammons and is scheduled to open in February of 1997. Along with suites, this property will feature +/-12,800 square feet of meeting space, indoor pool, health and fitness center, and restaurant. Due to its location and upscale nature, we estimate this property to be 25% competitive with the subject property. In addition, several properties have either recently entered the market or are expected to enter the market within the next year, however, largely due to their locations, we have not considered them to be competitive with the subject property. These properties include an 80-room Ramada Limited located in western Omaha, off of Interstate 680; this property opened in the summer of 1996. Also recently opened is a 105-room Comfort Inn located at the intersection of Dodge Street and 87th Street. Finally, a 131-unit Candlewood Hotel is scheduled for development in the Old Mill area of Omaha. This facility will be a mid-priced, extended stay oriented property catering primarily to the Regency Business Park; it is expected to open in the first half of 1997. Legalized gambling was introduced in Iowa in 1996, which resulted in the development of two casino hotels within ten miles of the subject property. In addition, a 150-room Holiday Inn and Suites is currently under construction, adjacent to the Ameristar Casino Hotel. Although these hotels are not considered to be competitive with the Ramada Hotel, we believe they may impact the Omaha economy as a whole by attracting more Hospitality Valuation Services, Lodging Market Study and Boulder, Colorado Ramada Hotel Demand Analysis 64 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= visitors away from downtown Omaha to the riverboat casino activity. We do believe, however, that local hotels will benefit from the overflow of casino traffic in need of lower priced hotel rooms. We have taken this into consideration in our projections when selecting an appropriate stabilized occupancy level and an appropriate stabilized average rate level for the subject property. Conclusion This section illustrates an upward trend in the central Omaha market in terms of accommodated room night demand. We have analyzed various factors pertaining to each of the four market segments to project a level of future growth. These factors include, but have not been limited to employment, traffic counts, meeting demand, and airport passenger statistics. With the entrance of two competitive properties, as well as the legalization of gambling in Iowa, we anticipate a continued increase in overall room night demand. Once all of the new hotels enter the competitive market, the total competitive room supply will equal 1,682 rooms, representing an increase of 8.7% over the historic 1,548 rooms. Hospitality Valuation Services, Projection of Occupancy Boulder, Colorado Ramada Hotel and Average Rate 65 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 7. Projection of Occupancy and Average Rate Historical Operating Performance The following table sets forth the subject property's historical occupancy, average rate, and RevPAR. For the purpose of comparison, we have also presented corresponding data (as provided by Smith Travel Research) for the competitive hotels described in the previous section. In addition to the annual percent change calculations, we have determined the subject property's occupancy, average rate, and RevPAR penetration factors. ================================================================================ Table 7-1 Historical Trends - -------------------------------------------------------------------------------- Year to Date ----------------------- 1994 1995 1995 1996 - -------------------------------------------------------------------------- Subject Property Occupancy 44.8 % 62.2 % 59.5 % 61.2 % Percent Change -- % 38.8 % -- 2.8 % Occupancy Penetration 75.3 % 95.0 % 88.3 % 95.9 % Average Rate $41.93 $43.23 $45.06 $45.95 Percent Change -- % 3.1 % -- 2.0 % Average Rate Penetration 66.1 % 64.8 % 67.5 % 66.4 % RevPAR $18.79 $26.89 $26.81 $28.11 Percent Change -- % 43.1 % -- 4.9 % RevPAR Penetration 49.8 % 61.6 % 59.6 % 63.6 % Areawide (STR) Occupancy 59.5 % 65.5 % 67.4 % 63.8 % Percent Change -- % 10.1 % -- (5.3)% Average Rate $63.42 $66.69 $66.75 $69.24 Percent Change -- % 5.2 % -- 3.7 % RevPAR $37.73 $43.68 $44.99 $44.18 Percent Change -- % 15.8 % -- (1.8)% - -------------------------------------------------------------------------------- Hospitality Valuation Services, Projection of Occupancy Boulder, Colorado Ramada Hotel and Average Rate 66 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= It should be noted that the 1994 statistics for the subject property represent only three months of operation, due to the October 4, 1994 purchase of the property. As illustrated in the above chart, in 1995 the subject property achieved an occupancy penetration of 95%, with an occupancy level of 62.2%, compared to the 65.5% level achieved by the market. In terms of average rate, the subject property realized a $43.23 average annual rate, to equate to a penetration level of 64.8%. The combination of occupancy and average rate resulted in a RevPAR level of $26.89, and a RevPAR penetration level of 61.6%. Year-to-date numbers indicate improvement at the subject property over the same period in 1995, both in terms of occupancy and average rate. Through August, the subject property has realized a 2.8% growth in occupancy and a 2.0% growth in average rate. The subject property's growth in occupancy was larger than that experience by the market, however, average rate did not increase as much as the marketwide average. RevPAR at the subject property through August 1996 was $28.11, to result in a penetration level of 63.6%. This indicates that the subject property is still under-performing the market. A hotel's occupancy should also be evaluated on a monthly basis to identify seasonality trends. The following table sets forth the subject property's monthly occupancy from 1995 through August of 1996. ================================================================================ Table 7-2 Subject Property's Monthly Occupancy History - -------------------------------------------------------------------------------- 1995 1996 ---- ---- Occupancy Occupancy % Change --------- ------------------------ January 43.2% 46.4% 7.3% February 41.5 47.9 15.5 March 48.5 54.0 11.2 April 60.6 52.2 (13.8) May 66.1 68.0 2.8 June 73.6 83.8 13.8 July 69.1 66.1 (4.4) August 72.2 70.4 (2.5) September 74.1 -- -- October 80.4 -- -- November 73.6 -- -- December 42.6 -- -- ---- ---- ---- Full Year 62.2% NA% NA% - -------------------------------------------------------------------------------- Hospitality Valuation Services, Projection of Occupancy Boulder, Colorado Ramada Hotel and Average Rate 67 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= As shown in the previous table, the months of June through October represent the strongest period at the subject property. Year-to-date occupancy statistics show strong increases in monthly occupancy over the previous year in the months of January, February, March and June. This is the result of improved marketing efforts at the subject property as well as the improved physical appearance of property's meeting space. Premise of the Projections To a certain degree, occupancy and rate attainment can be manipulated by management. For example, hotel operators may choose to lower rates in an effort to maximize occupancy. Our forecasts reflect an operating strategy that we believe would be implemented by competent hotel management to achieve an optimal mix of occupancy and average rate. Projected Room Night Demand Lodging demand and occupancy can be projected through a process known as room night analysis. A room night is a unit of hotel demand that equals one room that is occupied for one night. After estimating the number of room nights a hotel can be expected to attract during a 12-month period, we can determine occupancy by dividing the number of room nights of demand captured by the number of room nights available (calculated as the room count x 365). The total annual number of room nights occupied in the competitive hotels equates to the market's accommodated room night demand, as shown in the following table. ================================================================================ Table 7-3 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- 1996 Annual Room Night Demand (Rounded) -------------------------------------------------------------- Percentage Percentage Market Segment Market Wide of Total Subject Property of Total - -------------------------------------------------------------------------------- Commercial 155,000 45 % 6,000 13 % Meeting and Group 107,000 31 14,000 31 Leisure 66,000 19 13,000 29 Airline 16,000 5 12,000 27 ----------- -------- ----------- ------ Total 343,000 100 % 45,000 100 % - -------------------------------------------------------------------------------- Latent Demand The previous table illustrates the accommodated room night demand in the subject property's competitive market. Because this estimate is based on occupancies, it includes only those hotel rooms that were used by guests. Latent demand considers guests who could not be accommodated by the Hospitality Valuation Services, Projection of Occupancy Boulder, Colorado Ramada Hotel and Average Rate 68 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= existing competitive supply, and can be divided into unaccommodated demand and induced demand. Unaccommodated Demand Unaccommodated demand refers to individuals who are unable to secure accommodations in the market because all of the local hotels are filled. These travelers must defer their trips, settle for less desirable accommodations, or stay in properties located outside the market area. Because this demand did not yield occupied room nights, it is not included in the estimate of historical accommodated room night demand. We have estimated that roughly 5% of the total accommodated meeting and group demand is currently unaccommodated. This equates to approximately 5,300 room nights, or roundly 100 room nights per week. This demand is expected to be accommodated once the Embassy Suites Hotel in downtown Omaha is open. ================================================================================ Table 7-4 1996 Accommodated and Unaccommodated Demand - -------------------------------------------------------------------------------- Accommodated Room Night Unaccommodated Unaccommodated Market Segment Demand Demand Percentage Room Night Demand - -------------------------------------------------------------------------------- Commercial 155,000 0.0% 0 Meeting and Group 107,000 5.0 5,327 Leisure 66,000 0.0 0 Airline 16,000 0.0 0 --------------- ----------- Total 343,000 5,327 - -------------------------------------------------------------------------------- Induced Demand Induced demand represents the additional room nights that are expected to be attracted to the market following the introduction of a new demand generator. Situations that can induce demand include the opening of a new manufacturing plant, the expansion of a convention center, or the addition of a new hotel with a distinct chain affiliation or unique facilities. As previously mentioned, Iowa recently passed legislation which permitted riverboat gaming. As a result of Omaha's proximate location to the Missouri River and the Iowa state line, casino gaming is expected to attract a substantial amount of transient business into the Omaha area. We have estimated this demand to equate to roughly 5,000 room nights annually and have phased in its impact over the first two projection years. Hospitality Valuation Services, Projection of Occupancy Boulder, Colorado Ramada Hotel and Average Rate 69 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-5 Induced Demand Calculation - -------------------------------------------------------------------------------- 1997 1998 1999 2000 - -------------------------------------------------------------------------------- Phase-in: 75% 100% 100% 100% Commercial 0 0 0 0 Meeting and Group 0 0 0 0 Leisure 3,750 5,000 5,000 5,000 Airline 0 0 0 0 ----------- ----------- ----------- ----------- Total 3,750 5,000 5,000 5,000 - -------------------------------------------------------------------------------- Total Usable Room Night Demand Total usable room night demand is estimated by combining accommodated demand and usable latent demand. Usable latent demand is that portion of latent demand that can be absorbed based on the number of existing and proposed hotel rooms in the market. When the Holiday Inn Express and Embassy Suites open in 1997, all of the unaccommodated demand is expected to be absorbed. As a result of the additional hotel rooms entering the market, all of the latent demand is considered usable. The following table shows the projected annual change in accommodated and usable room night demand in the subject property's competitive market. Hospitality Valuation Services, Projection of Occupancy Boulder, Colorado Ramada Hotel and Average Rate 70 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-6 Total Usable Room Night Demand - -------------------------------------------------------------------------------- Historical 1997 1998 1999 2000 - -------------------------------------------------------------------------------- Commercial Growth Rate -- 3.0% 2.0% 2.0% 2.0% Accommodated Demand 154,880 159,526 162,717 165,971 169,290 Usable Latent -- 0 0 0 0 Meeting and Group Growth Rate -- 3.0% 4.0% 4.0% 4.0% Accommodated Demand 106,547 109,743 114,133 118,698 123,446 Usable Latent -- 5,487 5,706 5,934 6,171 Leisure Growth Rate -- 2.0% 2.0% 2.0% 2.0% Accommodated Demand 66,286 67,612 68,964 70,343 71,750 Usable Latent -- 3,750 5,000 5,000 5,000 Airline Growth Rate -- 1.0% 1.0% 1.0% 1.0% Accommodated Demand 15,773 15,931 16,090 16,251 16,414 Usable Latent -- 0 0 0 0 Totals Commercial 154,880 159,526 162,717 165,971 169,290 Meeting and Group 106,547 115,230 119,839 124,632 129,617 Leisure 66,286 71,362 73,964 75,343 76,750 Airline 15,773 15,931 16,090 16,251 16,414 ------- ------- ------- ------- ------- TOTAL DEMAND 343,486 362,049 372,610 382,197 392,071 Annual Forecasted Growth 5.4% 2.9% 2.6% 2.6% - -------------------------------------------------------------------------------- Guestroom Supply In 1996, the competitive properties provided a weighted total of 1,548 guestrooms. The total available rooms is anticipated to increase to 1,677 rooms in 1997, with the opening of the Holiday Inn Express, and the partial opening of the Embassy Suites. In 1998, the stabilized year, the total available rooms is expected to equate to 1,682 - resulting from the full operation of the Embassy Suites. The following table shows total room night demand, the projected competitive supply of available rooms and available room nights - to calculate the annual number of available room nights, the number of available rooms is multiplied by 365, as well as the overall competitive occupancy. Hospitality Valuation Services, Projection of Occupancy Boulder, Colorado Ramada Hotel and Average Rate 71 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-7 Total Room Night Demand, Available Rooms, Available Room Nights, and Overall Occupancy - -------------------------------------------------------------------------------- Total Room Overall Night Available Room Nights Competitive Year Demand Rooms Available Occupancy - --------------------------------------------------------------------------- Historical 343,486 1,548 564,838 61% 1997 362,049 1,677 611,923 59 1998 372,610 1,682 613,748 61 1999 382,197 1,682 613,748 62 2000 392,071 1,682 613,748 64 2001 402,241 1,682 613,748 66 2002 412,717 1,682 613,748 67 2003 423,508 1,682 613,748 69 - -------------------------------------------------------------------------------- Overall Competitive Occupancy The overall competitive occupancy is expected to drop in 1997 to 59%, from 61%, largely due to the impact of the two new properties entering the market. In 1998, the market is expected to rebound to an occupancy level of 61%. Due to the limited amount of growth in the market, coupled with increases in room count, overall occupancy is expected to improve, however, at a slow pace. Competitive Index Analysis Competitive indexes are used to analyze the relative market position of each property on the basis of a particular demand segment. The index represents the number of times each year that one room is occupied by one type of traveler (e.g., commercial, meeting and group, leisure, or airline), or the number of room nights actually accommodated per year, per room, per market segment. For example, if a hotel has a commercial competitive index of 190, each room in the property is occupied 190 times a year by a commercial traveler. The competitive index is calculated by dividing a hotel's annual accommodated room night demand in a particular market segment by that property's room count. Competitive indexes will be used to illustrate each property's position in the market based on its ability to compete with other local lodging facilities. Commercial Segment The historical commercial segment competitive indexes in the subject property's market ranged from 29 to 163. The secondary competitors were the most competitive properties in the commercial market in 1996, with an index of 163. The Sheraton Four Points achieved the second highest commercial competitive index of 138, followed by the Clarion Carlisle with 116. Hospitality Valuation Services, Projection of Occupancy Boulder, Colorado Ramada Hotel and Average Rate 72 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= We have anticipated that the subject property will increase its competitive index in the commercial segment in 1997 and 1998, largely due to its loss of airline business. We believe the subject property's market orientation will change in an effort to maintain its current level of occupancy. The commercial competitive indexes of the Clarion and the Sheraton are also expected to increase, as a result of recent and upcoming renovations at each property. The following table shows the projected commercial segment competitive indexes of the area's hotels. ================================================================================ Table 7-8 Commercial Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 - -------------------------------------------------------------------------------- Ramada Hotel 29 35 37 37 37 Best Western Central 98 98 98 98 98 Holiday Inn Central 53 53 53 53 53 Clarion Carlisle 116 120 120 120 120 Sheraton Four Points 138 138 145 145 145 Secondary 163 163 163 163 163 Holiday Inn Express 0 165 170 175 175 Embassy Suites 0 85 90 100 100 - -------------------------------------------------------------------------------- Meeting and Group Segment The meeting and group competitive indexes are expected to increase at the Clarion and Sheraton, again as a result of the renovations and improved products. The subject property is expected to remain at its historic level. The following table illustrates the competitive indexes in the meeting and group segment. ================================================================================ Table 7-9 Meeting and Group Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 - -------------------------------------------------------------------------------- Ramada Hotel 66 66 66 66 66 Best Western Central 68 68 68 68 68 Holiday Inn Central 127 127 127 127 127 Clarion Carlisle 36 40 40 40 40 Sheraton Four Points 37 37 38 38 38 Secondary 37 37 37 37 37 Holiday Inn Express 0 5 10 15 15 Embassy Suites 0 100 110 115 115 - -------------------------------------------------------------------------------- Hospitality Valuation Services, Projection of Occupancy Boulder, Colorado Ramada Hotel and Average Rate 73 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Leisure Segment With the exception of the Clarion and the Sheraton Four Points, the leisure competitive indexes for the subject property and its competitive set are expected to remain at their historic level. The following table illustrates the competitive indexes in the leisure segment. ================================================================================ Table 7-10 Leisure Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 - -------------------------------------------------------------------------------- Ramada Hotel 59 59 59 59 59 Best Western Central 51 51 51 51 51 Holiday Inn Central 32 32 32 32 32 Clarion Carlisle 27 30 30 30 30 Sheraton Four Points 44 44 45 45 45 Secondary 45 45 45 45 45 Holiday Inn Express 0 50 55 60 60 Embassy Suites 0 20 25 30 30 - -------------------------------------------------------------------------------- Airline Segment As a hotel's occupancy improves, its reliance on airline demand generally diminishes. Because this segment commands deeply discounted rates, operators prefer to accommodate more lucrative types of demand whenever possible. According to property management, the subject property will lose one airline contract at the end of 1996. This will result in a decline in the subject property's airline competitive index. With the introduction of newer properties into the area, which are closer to the airport, the subject property has a greater chance of losing this market segment. We have estimated a decline in the airline competitive index in 1997, as well as 1998. The following table illustrates this change. Hospitality Valuation Services, Projection of Occupancy Boulder, Colorado Ramada Hotel and Average Rate 74 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-11 Airline Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 - -------------------------------------------------------------------------------- Ramada Hotel 57 40 35 35 35 Best Western Central 16 16 16 16 16 Holiday Inn Central 0 0 0 0 0 Clarion Carlisle 0 0 0 0 0 Sheraton Four Points 0 0 0 0 0 Secondary 0 0 0 0 0 Holiday Inn Express 0 0 0 0 0 Embassy Suites 0 0 0 0 0 - -------------------------------------------------------------------------------- Subject Property's Room Night Capture and Occupancy After the competitive index is calculated, it is adjusted to reflect the property's room count, yielding a figure referred to as the market share adjuster. The market share adjuster of each property is then divided by the total market share adjuster for all of the competitors, resulting in each hotel's market share. By multiplying the projected market share by the area's usable room night demand, we can determine the total number of room nights captured by a specific hotel. Occupancy is then calculated by dividing the projected number of room nights captured by the property's total number of available room nights. Multiplying the subject property's projected market share by the estimated room night demand in each segment results in the following estimate of room nights captured by the hotel. Hospitality Valuation Services, Projection of Occupancy Boulder, Colorado Ramada Hotel and Average Rate 75 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-12 Room Nights Captured by the Subject Property - -------------------------------------------------------------------------------- 1997 1998 1999 2000 ---------------------------------------------- Commercial Demand 159,526 162,717 165,971 169,290 Market Share 0.0434 0.0452 0.0450 0.0450 Capture 6,928 7,355 7,461 7,610 Meeting and Group Demand 115,230 119,839 124,632 129,617 Market Share 0.1255 0.1237 0.1230 0.1230 Capture 14,460 14,823 15,326 15,939 Leisure Demand 71,362 73,964 75,343 76,750 Market Share 0.1779 0.1756 0.1740 0.1740 Capture 12,693 12,985 13,106 13,351 Airline Demand 15,931 16,090 16,251 16,414 Market Share 0.7162 0.6883 0.6883 0.6883 Capture 11,410 11,074 11,185 11,297 ------- ------- ------- ------- Total Capture 45,491 46,237 47,078 48,197 - -------------------------------------------------------------------------------- Dividing the total number of room nights captured by the subject property's number of available room nights per year (calculated as 215 x 365) produces the projected occupancy percentage. ================================================================================ Table 7-13 Calculation of the Subject Property's Projected Occupancy - -------------------------------------------------------------------------------- 1997 1998 1999 --------------------------------------- Total Room Nights Captured/Year 45,491 46,237 47,078 Available Room Nights 78,475 78,475 78,475 Occupancy 57.9% 58.9% 59.99% Rounded 58% 59% 60% - -------------------------------------------------------------------------------- Hospitality Valuation Services, Projection of Occupancy Boulder, Colorado Ramada Hotel and Average Rate 76 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= For the purpose of forecasting income and expense, we will use the following occupancy levels. ================================================================================ Table 7-14 Occupancy Forecast - -------------------------------------------------------------------------------- Year Occupancy -------------------------- 1997 58% Stabilized 59 - -------------------------------------------------------------------------------- Although the preceding room night analysis shows the subject property achieving a 60% occupancy in 1999, we have chosen to use a stabilized level of 59%. The stabilized occupancy is intended to reflect the anticipated results of the property over its remaining economic life, given any and all changes in the life cycle of the hotel. Thus, the stabilized occupancy excludes from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusually high or low occupancies. Although the subject property may operate at occupancies above this stabilized level, we believe it equally possible for new competition and temporary economic downturns to force the occupancy below this selected point of stability. AVERAGE RATE ANALYSIS One of the most important considerations in estimating the value of a lodging facility is a supportable forecast of its attainable average rate, which is more formally defined as the average rate per occupied room. Average rate can be calculated by dividing the total rooms revenue achieved during a specified period by the number of rooms sold during the same period. The projected average rate and the anticipated occupancy percentage are used to forecast rooms revenue, which in turn provides the basis for estimating most other income and expense categories. Hospitality Valuation Services, Projection of Occupancy Boulder, Colorado Ramada Hotel and Average Rate 77 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Average Rate by Month The following table shows the subject property's monthly occupancy and average rate from 1995 through August of 1996. ================================================================================ Table 7-15 Subject Property's Occupancy and Average Rate by Month - -------------------------------------------------------------------------------- 1995 1996 ---- ---- Average Average Occupancy Rate Occupancy % Chg Rate % Chg ------------------ ---------------------------------------- January 43.2% $40.60 46.4% 7.3% $40.27 (0.8)% February 41.5 42.95 47.9 15.5 41.07 (4.4) March 48.5 44.96 54.0 11.2 43.62 (3.0) April 60.6 43.83 52.2 (13.8) 44.82 2.3 May 66.1 46.11 68.0 2.8 47.81 3.7 June 73.6 46.55 83.8 13.8 48.86 5.0 July 69.1 46.81 66.1 (4.4) 45.82 (2.1) August 72.2 45.79 70.4 (2.5) 50.27 9.8 September 74.1 45.38 -- -- -- -- October 80.4 36.31 -- -- -- -- November 73.6 38.21 -- -- -- -- December 42.6 41.07 -- -- -- -- ------ ------ ------ ------ ------ ------ Weighted Average 62.2% $43.23 NA% NA% NA% NA% - -------------------------------------------------------------------------------- The previous table underscores the correlation between a hotel's occupancy and its average rate: as occupancy increases, rates tend to follow. On a monthly basis, the Ramada Hotel achieves its highest average rate during the peak occupancy periods of May, June, July, August and September. The slowest and most rate sensitive months tend to be December, January and February at the subject property. Conversely, the highest occupancy and rate levels occur in the summer months. Given the short twenty-month history, it would appear that guests are highly rate sensitive at the subject property; occupancy tends to decreases when rate increases, and vice versa. We have taken this into consideration when we projected our estimate of occupancy and average rate for the Ramada Inn. Competitive Positioning The Ramada Hotel's average rate will be projected using a competitive positioning method. This technique begins with an analysis of the average rates achieved by the subject property and its competitors. These rates establish a range that reflects certain characteristics of the specific market, such as price sensitivity, demand orientation, and occupancy. The subject property's average rate is then compared to those of the hotels to which it is most similar in terms of size, quality, facilities, amenities, market Hospitality Valuation Services, Projection of Occupancy Boulder, Colorado Ramada Hotel and Average Rate 78 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= orientation, location, management, image, and affiliation. Adjustments are made to reflect any relevant differences. In addition, we have also projected the average rate for each market segment, however, for the purpose of this appraisal, we have shown the competitive positioning method. Although the average rate analysis presented here follows the occupancy projections, these two statistics are highly correlated; in reality, one can not project occupancy without making specific assumptions regarding average rate. This relationship is best illustrated by rooms revenue per available room (RevPAR), which reflects a property's ability to maximize rooms revenue. The following table summarizes the 1996 average rate and RevPAR of the subject property and its competitors. ================================================================================ Table 7-16 1996 Average Rate and RevPAR of the Primary Competitors - -------------------------------------------------------------------------------- 1996 1996 Average Rooms Revenue Property Room Rate Per Available Room - -------------------------------------------------------------------------------- Ramada Hotel $47.00 $27.26 Best Western Central 53.00 33.92 Holiday Inn Central 67.00 38.86 Clarion Carlisle 56.00 27.44 Sheraton Four Points 54.00 32.40 ------ ------ Average $57.30 $33.47 - -------------------------------------------------------------------------------- As shown in the above table, the subject property's average rate is significantly lower than all of its primary competitors. We believe this is the result of several factors including the physical condition of the subject property compared to its competitors, as well as the large amount of airline demand accommodated at the subject property. Given the anticipated decline in airline business, we feel the subject property will be able to greatly increase its average rate to a level closer to that of the Best Western. Average Rate Increases It is important to note that hotel room rate increases do not necessarily conform to the underlying monetary inflation rate, because lodging facilities are influenced by market conditions such as the relationship between supply and demand. A hotel's ability to raise room rates is affected by a number of factors, including the following. Hospitality Valuation Services, Projection of Occupancy Boulder, Colorado Ramada Hotel and Average Rate 79 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= o Supply and Demand Relationships - The relationship between supply and demand is one of the factors that determine hotel occupancies and average rates. Strong markets where lodging demand is increasing faster than supply are often characterized by rate growth that exceeds inflation. Markets that are overbuilt or suffering from declining demand are unlikely to exhibit any significant increases in average rates. o Inflationary Pressures - Price increases caused by inflation affect hotel room rates by eroding profit margins and encouraging operators to raise prices. This strategy is effective only in markets that are characterized by a healthy supply and demand relationship. o Improving the Competitive Standard - When a new lodging facility enters a mature market, its rates may be set higher than the marketwide average in an effort to justify the development costs. This may allow other competitors to achieve corresponding gains by effectively raising the amount the market will bear. However, if the addition to supply has a severe impact on the occupancy levels of other hotels, price competition may ensue. o Property-Specific Improvements - Changes that make a hotel more or less attractive to guests can have an impact on average rate. An expansion, renovation, upgrading, or the introduction of additional facilities and amenities may enable greater-than-inflationary room rate increases. Likewise, deferred maintenance may make a property less competitive, engendering a decline in room rates. In determining average rate projections, changes that occur prior to occupancy stabilization are generally attributable to factors that are specific to the property and the market. After a hotel achieves a stabilized occupancy, room rates are generally expected to continue to increase at the underlying inflation rate throughout the remainder of the projection period. As shown in a previous chapter of this report, areawide average rate has increased at an annual compounded rate of 2.5% over the last six years. In more recent years, areawide average rate has grown at levels between 4.8% and 5.2%. Therefore, we estimate average rate to grow between 4% and 6% in 1997. We have also estimated average rate to grow at inflationary levels once a stabilized occupancy is achieved, with inflation estimated to be 3.5%. Based on these considerations, the following table shows our projection of average rate increases. Hospitality Valuation Services, Projection of Occupancy Boulder, Colorado Ramada Hotel and Average Rate 80 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-17 Average Rate Forecast - -------------------------------------------------------------------------------- Areawide Subject Property's Subject Property's Areawide Rate Rate Projected Year Occupancy Increase Increase Average Rate - -------------------------------------------------------------------------------- Positioned Base -- -- -- $47.00 1997 59% 4% to 6% 9.0% 51.24 1998 61 3 to 4 3.5 53.04 1999 62 3 to 4 3.5 54.89 2000 64 3 to 4 3.5 56.81 - -------------------------------------------------------------------------------- As previously mentioned, the subject property is expected to realized a strong level of growth in 1997 as a result of the loss of an airline contract. In 1998, the subject property's stabilized year, an inflationary growth rate of 3.5% is projected. The following average rates will be used to project the subject property's rooms revenue. ================================================================================ Table 7-18 Forecast of Occupancy and Average Rate - -------------------------------------------------------------------------------- Year Occupancy Average Rate --------------------------------------------- 1997 58% $51.24 Stabilized 59 $53.04 - -------------------------------------------------------------------------------- Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Highest and Best Use 81 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 8. Highest and Best Use The concept of highest and best use recognized by the Appraisal Institute distinguishes between the highest and best use of the land (as though vacant) and that of the property (as improved). Highest and best use is defined as: The reasonably probable and legal use of vacant land or improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.(1) The concept of highest and best use is the premise upon which value is based, and is a product of competitive forces in the marketplace. The principle of balance holds that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium. This principle applies to relationships among various property components as well as the relationship between the costs of production and the property's productivity. The point of economic balance is achieved when the combination of land and building is optimal (i.e., when no marginal benefit or utility is achieved by adding another unit of capital). The law of increasing returns holds that larger amounts of the agents of production produce greater net income up to a certain point, after which the law of diminishing returns is applied.(2) It is important to recognize that the highest and best use of the land (as though vacant) may differ from the highest and best use of the property (as improved). This may occur when a site has existing improvements and the highest and best use of the land differs from the current use. Nonetheless, the current property use will continue until the value of the land under its (1) The Appraisal of Real Estate - Tenth Edition, Appraisal Institute, Chicago, IL, 1992, p. 45. (2) Ibid., p. 40. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Highest and Best Use 82 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= highest and best use exceeds the value of the property in its current use, plus the cost to remove the existing improvements. In consideration of the factors influencing development in the immediate area, it is the appraisers' opinion that the highest and best use of the subject site, as vacant, would be to hold it for speculative commercial use. Based on the fact that the value of the land does not exceed the value of the hotel plus the cost of demolition, it is our opinion that the subject property's highest and best use, as improved, is its current use as a full service lodging facility. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Approaches to Value 83 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 9. Approaches to Value In appraising real estate for market value, the appraiser has three approaches from which to select: the income capitalization, sales comparison, and cost approaches. Although all three valuation procedures are given consideration, the inherent strengths of each approach and the nature of the subject property must be evaluated to determine which will provide supportable estimates of market value. The appraiser is then free to select one or more of the appropriate approaches in arriving at a final value estimate. The Income Capitalization Approach The income capitalization approach takes a property's projected net income before debt service and allocates this future benefit to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component is calculated. The total of the mortgage component and the equity component equals the value of the property. This approach is often selected as the preferred valuation method for income-producing properties, because it most closely reflects the investment rationale of knowledgeable buyers. The Sales Comparison Approach The sales comparison approach estimates the value of a property by comparing it to similar properties that have been sold on the open market. To obtain a supportable estimate of value, the sales price of a comparable property must be adjusted to reflect any dissimilarities between it and the property being appraised. The sales comparison approach may provide a useful value estimate in the case of simple forms of real estate, such as vacant land and single-family homes, where the properties are homogeneous and the adjustments are few and relatively simple to compute. In the case of complex investments such as shopping centers, office buildings, restaurants, and lodging facilities, where the adjustments are numerous and more difficult to quantify, the sales comparison approach loses much of its reliability. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Approaches to Value 84 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Hotel investors typically do not employ the sales comparison approach in reaching their final purchase decisions. Factors such as the lack of recent sales data, the numerous insupportable adjustments that are necessary, and the general inability to determine the true financial terms and human motivations of comparable transactions often make the results of this technique questionable. Although the sales comparison approach may provide a range of values that supports the final estimate, reliance on this method beyond the establishment of broad parameters is rarely justified by the quality of the sales data. The market-derived capitalization rates sometimes used by appraisers are susceptible to the same shortcomings inherent in the sales comparison approach. To substantially reduce the reliability of the income capitalization approach by employing capitalization rates obtained from unsupported market data weakens the final value estimate and ignores the typical investment analysis procedures employed by hotel purchasers. Because appraisers are obligated to mirror the actions of the marketplace, we generally give the sales comparison approach minimal weight in the hotel appraisal process beyond bracketing the final estimate.(1) The Cost Approach The cost approach estimates market value by computing the current cost to replace the property and subtracting any depreciation resulting from physical deterioration, functional obsolescence, and external (or economic) obsolescence. The value of the land, as if vacant and available, is then added to the depreciated value of the improvements to produce a total value estimate. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements grow older and begin to deteriorate, the resultant loss in value becomes increasingly difficult to quantify accurately. We find that knowledgeable hotel buyers base their purchase decisions on economic factors such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, this approach is given minimal weight in the hotel valuation process. As noted in Hotels and Motels: A Guide to Market (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 209. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Approaches to Value 85 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Analysis, Investment Analysis, and Valuations, "the cost approach is seldom used to value existing hotels and motels."(1) Reconciliation The final step in the valuation process is the reconciliation and correlation of the value indications. Factors that are considered in assessing the reliability of each approach include the purpose of the appraisal, the nature of the subject property, and the reliability of the data used. In reconciliation, the applicability and supportability of each approach is considered and the range of value indications is examined. The most significant weight is given to the approach that produces the most reliable solution and most closely reflects the criteria used by typical investors. Our nationwide experience with numerous hostelry buyers and sellers indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the investors who constitute the marketplace. For this reason, the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in the hotel valuation process. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 208. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 86 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 10. Income Capitalization Approach The income capitalization approach is based on the principle that the value of a property is indicated by its net return, or what is known as the present worth of future benefits. The future benefits of income-producing properties, such as hotels, are net income before debt service and depreciation (as estimated by a forecast of income and expense) and any anticipated reversionary proceeds from a sale. These future benefits can be converted into an indication of market value through a capitalization process and discounted cash flow analysis. Using the income capitalization approach, the subject property has been valued by analyzing the local market for transient accommodations, examining existing and proposed competition, and developing a forecast of income and expense that reflects current and anticipated income trends and cost components through a stabilized year of operation. The forecast of income and expense is expressed in current dollars for each year. The stabilized year is intended to reflect the anticipated operating results of the property over its remaining economic life, given any or all applicable stages of build-up, plateau, and decline in the life cycle of the hotel. Thus, income and expense estimates from the stabilized year forward exclude from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusual revenues or expenses. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, published by the Appraisal Institute, "of the three valuation approaches available to the appraiser, the income capitalization approach generally provides the most persuasive and supportable conclusions when valuing a lodging facility."(1) This text recommends that using a ten-year forecast and an equity yield rate "most accurately reflects the actions of typical hotel buyers, who purchase (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 87 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= properties based on their leveraged discounted cash flow."(1) The simpler procedure of using a ten-year forecast and a discount rate is "less reliable because the derivation of the discount rate has little support. Moreover, it is difficult to adjust the discount rate for changes in the cost of capital."(2) We have used both methods to discount the subject property's projected net income into an estimate of value. Method One is a ten-year discounted cash flow analysis in which the cash flow to equity and the equity reversion are discounted to the present value at the equity yield rate, and the income to the mortgagee is discounted at a mortgage interest rate. The sum of the equity and mortgage values is the total property value. Method Two is a simple ten-year discounted cash flow analysis in which the annual net income before debt service and the reversionary proceeds following a sale at the end of the tenth year are discounted back to the date of the appraisal at an overall discount rate, and then totaled to produce an indication of the present worth of future benefits. To convert the projected income stream into an estimate of value through Method One, the anticipated net income (before debt service and depreciation) is allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. The total of the mortgage component and the equity component equals the value of the property. The process is described as follows. 1. The terms of typical hotel financing are set forth, including interest rate, amortization term, and loan-to-value ratio. 2. An equity yield rate of return is established. Numerous hotel buyers base their equity investments on a ten-year equity yield rate projection that takes into account ownership benefits such as periodic cash flow distributions, residual sale or refinancing distributions that return any property appreciation and mortgage amortization, income tax benefits, and various non-financial considerations such as status and prestige. The equity yield rate is also known as the internal rate of return on equity. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236 (2) Ibid. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 88 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 3. The value of the equity component is calculated by first deducting the annual debt service from the projected net income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value. After deducting the mortgage balance at the end of the tenth year and the typical brokerage and legal costs, the equity residual is discounted back to the date of value at the equity yield rate. The net income to equity for each of the ten projection years is also discounted to the present value. The sum of these discounted values equates to the value of the equity component. Adding the equity component to the initial mortgage balance yields the overall property value. Because the mortgage and the debt service amounts are unknown but the loan-to-value ratio was determined in Step #1, the preceding calculation can be solved through an iterative process or by use of a linear algebraic equation that computes the total property value. The algebraic equation that solves for the total property value using a ten-year mortgage and equity technique was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(1) 4. The value is proven by allocating the total property value between the mortgage and equity components and verifying that the rates of return set forth in Steps #1 and #2 can be met from the projected net income. The process of converting the projected income stream into an estimate of value through Method Two is described as follows. 1. A discount rate is established by evaluating the total property yield derived by Method One. Occasionally, the discount rate may be adjusted slightly based on the total property yields indicated by recent transactions involving hotels similar to the subject property. 2. The reversionary value is calculated by capitalizing the 11th-year net income by the terminal capitalization rate and deducting typical brokerage and legal fees. (1) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 89 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 3. The ten-year forecast of net income (before debt service and depreciation) and the reversionary value are discounted to the date of value at the rate derived above. Review of Operating History Because the Ramada Hotel is an existing hotel with an established operating performance, its historical income and expense experience can serve as a basis for projections. The subject property opened in 1973, and achieved occupancy levels of 62.2% in 1995 and 61.1% in year-to-date 1996. The following income and expense statements were provided by Ashford Financial, and are unaudited. Where applicable, we have reorganized the statements in accordance with the Uniform System of Accounts for Hotels. It should be noted that complete operating statements for 1994 were unavailable, and the 1994 statement reflects only a partial year of operation due to the change in ownership of the property. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 90 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-1 Historical Operating Performance - Calendar Years - --------------------------------------------------------------------------------
Calendar Year Ending: 1995 1994 (Partial Year) Total Rooms: 215 215 Occupied Rooms: 48,804 9,058 Complimentary Rooms: 1,436 379 Days Open: 365 Amount per Amount per 91 Amount per Amount per Occupancy: 62.2% Percentage Available Occupied 46.3% Percentage Available Occupied Average Rate: $41.46 of Revenue Room Room $40.14 of Revenue Room Room - ----------------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $2,024 76.8% $9,412 $41.46 $364 68.0% $1,691 $40.14 Food 358 13.6 1,666 7.34 99 18.6 463 10.98 Beverage 147 5.6 683 3.01 56 10.4 259 6.14 Telephone 87 3.3 405 1.79 13 2.5 62 1.48 Other Income 20 0.8 93 11.71 3 0.5 13 0.32 Total 2,636 100.1 12,260 54.01 535 100.0 2,488 59.06 - ----------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES Rooms 572 28.3 2,659 11.71 105 28.9 489 11.61 Food & Beverage 471 93.2 2,190 9.65 143 92.4 667 15.83 Telephone 43 49.7 202 0.89 13 98.0 61 1.45 Other Income 4 21.6 20 0.09 0 4.9 1 0.02 Total 1,090 41.4 5,071 22.34 262 48.9 1,218 28.90 - ----------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 1,546 58.7 7,189 31.67 273 51.1 1,271 30.16 - ----------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 288 10.9 1,339 5.90 61 11.4 285 6.76 Management Fee 79 3.0 368 1.62 16 3.0 75 1.77 Marketing 212 8.0 986 4.35 23 4.3 107 2.55 Franchise Fees 60 2.3 277 1.22 10 1.9 48 1.14 Property Oper. & Maint. 139 5.3 647 2.85 23 4.2 105 2.49 Energy 194 7.4 903 3.98 36 6.8 170 4.02 Total 972 36.9 4,520 19.91 170 31.6 789 18.73 - ----------------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 574 21.8 2,669 11.76 104 19.5 482 11.43 - ----------------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 147 5.6 685 3.02 33 6.1 153 3.63 Insurance 52 2.0 240 1.06 13 2.4 61 1.44 Reserve for Replacement 105 4.0 490 2.16 0 0.0 0 0.00 Equipment Rental 60 2.3 278 1.22 7 1.3 32 0.76 Total 364 13.9 1,693 7.46 53 9.8 246 5.83 - ----------------------------------------------------------------------------------------------------------------------------------- NET INCOME $210 7.9% $976 $4.30 $51 9.7% $236 $5.60 ===================================================================================================================================
- -------------------------------------------------------------------------------- Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 91 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-2 Historical Operating Performance - Year-to-Date Through August - --------------------------------------------------------------------------------
Calendar Year Ending: YTD 1996 YTD 1995 Total Rooms: 215 215 Occupied Rooms: 32,069 31,081 Complimentary Rooms: 1,165 919 Days Open: 244 Amount per Amount per 243 Amount per Amount per Occupancy: 61.1% Percentage Available Occupied 59.5% Percentage Available Occupied Average Rate: $44.17 of Revenue Room Room $43.76 of Revenue Room Room - ----------------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $1,416 79.0 % $6,588 $44.17 $1,360 76.9% $6,326 $43.76 Food 243 13.5 1,129 7.57 236 13.3 1,097 7.59 Beverage 60 3.4 280 1.88 105 5.9 489 3.38 Telephone 60 3.3 277 1.86 57 3.2 265 1.84 Other Income 14 0.8 65 0.44 10 0.6 45 0.31 Total 1,793 100.0 8,339 55.91 1,768 99.9 8,223 56.88 - ----------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES Rooms 378 26.7 1,760 11.80 356 26.2 1,658 11.47 Food & Beverage 294 96.9 1,365 9.15 320 93.8 1,488 10.30 Telephone 28 46.6 129 0.87 29 50.4 134 0.93 Other Income 1 6.6 4 0.03 3 27.9 13 0.09 Total 701 39.1 3,259 21.85 708 40.0 3,293 22.78 - ----------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 1,092 60.9 5,080 34.06 1,060 59.9 4,931 34.11 - ----------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 239 13.3 1,110 7.44 183 10.4 852 5.89 Management Fee 54 3.0 250 1.68 53 3.0 247 1.71 Marketing 121 6.8 564 3.78 141 8.0 655 4.53 Franchise Fees 43 2.4 200 1.34 40 2.3 186 1.29 Property Oper. & Maint. 101 5.6 471 3.15 92 5.2 429 2.97 Energy 134 7.5 625 4.19 137 7.8 639 4.42 Total 692 38.6 3,219 21.58 647 36.7 3,007 20.80 - ----------------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 400 22.3 1,861 12.48 413 23.2 1,924 13.31 - ----------------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 100 5.6 466 3.12 102 5.8 475 3.29 Insurance 36 2.0 169 1.14 31 1.8 145 1.01 Reserve for Replacement 72 4.0 334 2.24 71 4.0 329 2.28 Equipment Rental 23 1.3 106 0.71 49 2.7 226 1.56 Total 231 12.9 1,075 7.21 253 14.3 1,176 8.13 =================================================================================================================================== NET INCOME $169 9.4 % $786 $5.27 $161 8.9% $748 $5.18 ===================================================================================================================================
- -------------------------------------------------------------------------------- Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 92 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Review of Operating Statements These historical income and expense statements show a property that has operated at a consistent level over the past year and a half. Comparing year-to-date 1995 with year-to-date 1996 shows improved performance in terms of overall revenue, largely as a result of increases in occupancy and average rate. In terms of expenses, telephone, marketing, and energy showed slight declines, while rooms, food and beverage and administrative and general showed increases. A portion of the increase in administrative and general expenses can reportedly be attributed to the costs associated with management staff turnover, as well as increased travel expenses. In addition, equipment rental expense declined significantly as the result of a recent purchase of new vans; this cost is estimated to remain closer to the 1996 level, and has, therefore, been adjusted in our projections. Forecast of Income and Expense The forecast of income and expense is intended to reflect the appraiser's subjective estimate of how a typical buyer would project the subject property's future operating results. Depending on the dynamics of the local market, a typical buyer's projection may be adjusted upward or downward. We have attempted to consider these factors in formulating this forecast. HVS International uses a fixed and variable component model to project a lodging facility's revenue and expense levels. This model is based on the premise that hotel revenues and expenses have one component that is fixed and another that varies directly with occupancy and facility usage. A projection can be made by taking a known level of revenue or expense and calculating its fixed and variable components. The fixed component is then held constant, while the variable component is adjusted for the percent change between the projected occupancy and facility usage and that which produced the known level of revenue or expense. Base-Year Statement of Income and Expense Based on our review of the operating histories of the subject property and comparable hotels, we have derived a base-year statement of income and expense expressed in 1996 dollars. The units of comparison include a percentage of departmental and total revenue, amounts per available room, and amounts per occupied room. The income and expense ratios reflect an occupancy level of 62.2%. The base-year profit and loss statement will be used to determine the relationship between the fixed and variable components. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 93 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-4 Base-Year Statement of Income and Expense - -------------------------------------------------------------------------------- Calendar Year Ending: 1995 Number of Rooms: 215 Occupancy: 62.2% Percent of Amount per Amount per Average Rate: $41.46 Total Available Occupied Occupied Rooms: 48,804 Revenue Room Room - -------------------------------------------------------------------------------- Revenue: Rooms $2,024 76.8% $9,412 $41.46 Food 358 13.6 1,666 7.34 Beverage 147 5.6 683 3.01 Telephone 87 3.3 405 1.79 Other Income 20 0.8 93 0.41 Total Revenue $2,636 100.0 $12,260 $54.01 - -------------------------------------------------------------------------------- Expenses: Rooms* $572 28.3% $2,659 $11.71 Food & Beverage* 471 93.2 2,190 9.65 Telephone* 43 49.7 202 0.89 Other Income* 4 21.6 20 0.09 Administrative & General 288 10.9 1,339 5.90 Management Fee 79 3.0 368 1.62 Marketing 212 8.0 986 4.35 Franchise Fees 60 2.3 277 1.22 Property Oper. & Maint. 139 5.3 647 2.85 Energy 184 7.0 855 3.77 Property Taxes 147 5.6 685 3.02 Insurance 75 2.9 350 1.54 Reserve for Replacement 105 4.0 490 2.16 Equipment Rental 38 1.4 175 0.77 Total Expenses $2,417 91.7% $11,243 $49.53 - -------------------------------------------------------------------------------- Net Income $219 8.3% $1,017 $4.48 ================================================================================ * Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- Inflation Assumptions The base revenue and expense amounts are inflated to reflect current dollars for each projection year. Line items can be affected by different factors. We must establish a general rate of inflation that will be applied to most revenue and expense categories. The following table shows inflation estimates made by economists at some noted institutions and corporations. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 94 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-5 Inflation Estimates - -------------------------------------------------------------------------------- Projected Increase in Consumer Price Index (Annualized Rate Versus 12 Months Earlier) ------------------------------------------ November May Source of 1996 of 1997 - -------------------------------------------------------------------------------- Maureen Allyn, Scudder Stevens Clark 3.1% 2.3% Wayne Angell, Bear Stearns 3.0 3.2 Richard Berner, Mellon Bank 2.9 2.8 David Berson, Fannie Mae 2.9 2.8 David Blitzer, S&P 3.0 2.7 Paul Boltz, T. Rowe Price 3.2 3.5 David Bostian, Herzog, Heine, Geduld 2.9 2.5 Philip Braverman, DKB Securities 3.0 2.8 William Brown, J.P. Morgan 3.3 3.2 Rosanne Cahn, CS First Boston 3.1 2.6 James Coons, Huntington National Bank 3.2 3.0 Michael Cosgrove, The Econoclast 3.2 3.3 Dewey Daane, Vanderbilt University 3.4 3.6 Robert Dederick, Northern Trust 3.1 3.4 W.Dudley, Goldman Sachs 3.4 3.2 Michael Englund, MMS Intl. 3.2 3.3 Michael Evans, Evans Group 3.0 3.0 Gail Fosler, Conference Board 3.5 3.6 Maury Harris, Paine Weber, Inc. 2.8 2.8 Tracy Herrick, Jefferies & Co. 3.2 3.6 Stuart Hoffman, PNC Bank 3.1 2.8 William Hummer, Wayne Hummer 2.9 3.0 Edward Hyman, ISI Group 2.8 2.1 Saul Hymans, University of Michigan 2.7 1.7 Mieczyslaw Karczmar, Deutsche Bank 2.8 3.2 Kurt Karl, WEFA Group 2.6 2.3 Irwin Kellner, Chase Manhattan Bank 2.6 2.3 D. Laufenberg, American Express Financial Advisors 3.2 3.4 Michelle Laughlin, Sanwa Securities 3.0 3.2 Carol Leisenring, CoreStates Financial 2.7 2.5 Richard Lemmon, General Motors 3.0 3.0 Mickey Levy, NationsBank Capital Markets 2.6 2.4 David Littmann, Comerica 3.1 3.0 John Lonski, Moody's Investors Service 3.3 3.2 Paul McCulley, UBS Securities 3.0 2.8 John McDevitt, 3M 2.6 2.5 Arnold Moskowitz, Moskowitz Capital 3.1 3.5 John Mueller, LBMC, Inc. 3.2 2.5 David Munro, High Frequency Econ. 3.0 2.5 Carl Palash, MCM MoneyWatch 3.0 3.0 Nicholas Perna, Fleet Financial Group 3.3 3.3 Elliott Platt, Donaldson Lufkin 2.8 2.0 Maria F. Ramirez, MF Ramirez 3.0 3.0 Donald Ratajczak, Georgia State University 3.0 3.3 David Resler, Nomura Securities International 2.9 2.6 Allan Reynolds, Hudson Institute 3.3 3.6 Richard Rippe, Prudential Securities 3.1 3.3 A. Gary Schilling, Schilling & Co. 3.0 3.0 Allen Sinai, Lehman Brothers 3.2 3.4 James Smith, University of North Carolina 2.1 1.9 Susan Sterne, Economic Analysis 2.5 2.5 Donald Straszheim, Merrill Lynch 2.7 2.3 Thomas Synott III, U.S. Trust Company 3.3 3.4 John Williams, Bankers Trust 3.0 3.1 Raymond Worseck, A.G. Edwards 3.6 3.3 David Wyss, DRI/McGraw-Hill 3.0 2.5 Edward Yardeni, Deutsche Morgan Grenfell 2.2 2.0 Mark Zandi, Regional Financial Associates 3.0 3.2 ---- ---- Average 3.0% 2.9% Source: Wall Street Journal, July 1, 1996 - -------------------------------------------------------------------------------- Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 95 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The preceding table shows inflation forecasts averaging 3.0% through November of 1996 and 2.9% through May of 1997. Most of the economists in the sample estimate inflation rates ranging from 2.5% to 3.4% for the 12-month period, although several anticipate levels of slightly greater than 3.4%. As a further check on these inflation projections, we have reviewed historical increases in the Consumer Price Index. Because the value of real estate is predicated on cash flows over a relatively long period, inflation should be considered from a long-term perspective. Between 1986 and 1994, the national CPI increased at an average annual compounded rate of 3.8%. In consideration of these historical trends, the projections set forth above, and our assessment of probable property appreciation levels, we have selected an annual stabilized inflation rate of 3% in 1997 increasing to 3.5% annually thereafter. One of the exceptions to this general inflation assumption is the projected growth in average rate. As noted earlier, increases in the subject property's room rate are projected as follows. ================================================================================ Table 10-6 Projected Growth in Average Rate - -------------------------------------------------------------------------------- Increase From Year Previous Year --------------------------------------------------------- 1997 23.6% 1998 3.5 1999 3.5 2000 3.5 Thereafter 3.5 - -------------------------------------------------------------------------------- Using these inflation assumptions, the base-year income and expense statement (which is expressed in 1995 dollars) is inflated to arrive at projections. Each revenue and expense category will be projected using the inflated base statement to determine the fixed and variable component relationships. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 96 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Rooms Revenue Rooms revenue is determined by two variables: occupancy and average rate. Earlier in this report, we estimated the subject property's occupancy and average rate as follows. ================================================================================ Table 10-7 Projected Occupancy and Average Rate - -------------------------------------------------------------------------------- 1997 Stabilized 1999 2000 2001 - -------------------------------------------------------------------------------- Forecast Occupancy Percentage 58.0% 59.0% 59.0% 59.0% 59.0% Forecast Average Rate $51.24 $53.04 $54.89 $56.81 $58.80 - -------------------------------------------------------------------------------- Rooms revenue is calculated as follows ================================================================================ Table 10-8 Forecast of Rooms Revenue - --------------------------------------------------------------------------------
Number of Forecast Calendar Years Projected Average Number Days in Rooms Ending: Occupancy Room Rate of Units in Year Revenue - --------------------------------------------------------------------------------------------- 1997 58.0 X $ 51.24 X 215 X 365 = $ 2,332 Stabilized 59.0 X 53.04 X 215 X 365 = 2,456 1999 59.0 X 54.89 X 215 X 365 = 2,541 2000 59.0 X 56.81 X 215 X 365 = 2,630 2001 59.0 X 58.80 X 215 X 365 = 2,722
- -------------------------------------------------------------------------------- Food and Beverage Revenue Food and beverage revenue is generated by a hotel's restaurants, lounges, coffee shops, snack bars, banquet rooms, and room service. In addition to providing a source of revenue, these outlets serve as an amenity that assists in the sale of guestrooms. With the exception of properties with active lounges or banquet facilities that draw local residents, in-house guests generally represent a substantial percentage of a hotel's food and beverage patrons. The Uniform System of Accounts for Hotels/Eighth Revised Edition defines food revenue as "revenue derived from the sale of food, including coffee, milk, tea and soft drinks. Food sales do not include meals charged on employees' (staff) checks." Beverage revenues are "derived from the sale of beverages." In addition to the revenue generated by the sale of food and beverages, hotels often produce other income that is related to this department, such as meeting room rentals, cover charges, service charges, and miscellaneous banquet revenue. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 97 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Although food revenue varies directly with changes in occupancy, the small portion generated by banquet sales and outside capture is relatively fixed. Food revenue was projected based on this relationship between the fixed and variable components. The following table shows the projected food revenue and several units of comparison that can be used to check the reasonableness of the forecast. ================================================================================ Table 10-9 Forecast of Food Revenue - --------------------------------------------------------------------------------
1997 Stabilized 1999 2000 2001 - ---------------------------------------------------------------------------------------------- Total Food Revenue $ 364 $ 382 $ 395 $ 409 $ 423 Percent of Total Revenue 12.3% 12.3% 12.3% 12.3% 12.3% Per Available Room $ 1,695 $ 1,776 $ 1,839 $ 1,903 $ 1,969 Per Occupied Room $ 8.00 $ 8.25 $ 8.53 $ 8.83 $ 9.14
- -------------------------------------------------------------------------------- Based on these units of comparison, the projected food revenue appears reasonable when compared with industry standards. Beverage Revenue Beverage revenue is generated by the sale of alcoholic beverages in a hotel's restaurants and banquet rooms and the sale of alcoholic and nonalcoholic beverages in the bars and lounges. According to financial statements, as well as property management, beverage revenues were much lower in year-to-date 1996 that in the same period for 1996. This is the result of the lack of bar promotions. Although there was still no program in place at the time of our appraisal, management indicated that these promotions would return at the subject property. Based on an analysis of comparable lodging facilities, beverage revenue is estimated to average approximately 40% of food revenue. Thus, based on industry average, as well as historical performance, beverage revenue is projected by multiplying the projected food revenue by 41%. The following table illustrates the forecast of beverage revenue. ================================================================================ Table 10-10 Forecast of Beverage Revenue - -------------------------------------------------------------------------------- 1997 Stabilized 1999 2000 2001 - -------------------------------------------------------------------------------- Total Beverage Revenue $149 $157 $162 $168 $173 - -------------------------------------------------------------------------------- Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 98 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Telephone Revenue Telephone revenue is generated by hotel guests who charge local and long-distance calls to their rooms, and by individuals who use the property's public telephones. Prior to the deregulation of the telephone industry in the early 1980s, hotels were limited to a 15% commission on long-distance calls, a mark-up that allowed few profits. Deregulation and the development of sophisticated call-accounting equipment have resulted in profitable telephone departments. State-of-the-art equipment is capable of least-cost routing, automatic price billing, and posting telephone charges to guest folios. Hotels can select among various long-distance services, and can also work with any one of a number of Alternative Operator Services (AOS). These systems route and price calls, and may provide additional services. In recent years, the hospitality industry has experienced diverging trends with respect to telephone revenue. Prices per call have increased, in some cases dramatically, yielding departmental profits as high as 50% to 55%. However, the number of long-distance calls billed per occupied room has declined as a result of the extensive use of long-distance carrier services that can be accessed locally or through a toll-free number. When guests charge long-distance calls to their personal or business accounts in this manner, the hotel loses the revenue associated with long-distance tariffs and mark-ups, and only receives an access fee. Most telephone revenue varies directly with changes in occupancy. However, there is a small fixed component consisting of public telephone revenue, which is primarily generated by individuals using the hotel's food, beverage, and meeting facilities. Using this fixed and variable relationship, the subject property's telephone revenue is projected as follows. ================================================================================ Table 10-11 Forecast of Telephone Revenue - -------------------------------------------------------------------------------- 1997 Stabilized 1999 2000 2001 - ------------------------------------------------------------------------------- Total Telephone Revenue $ 88 $ 92 $ 95 $ 99 $ 102 Percent of Total Revenue 3.0% 3.0% 3.0% 3.0% 3.0% Amount Per Available Room $ 408 $ 429 $ 444 $ 459 $ 475 Amount Per Occupied Room $ 1.93 $ 1.99 $ 2.05 $ 2.14 $ 2.20 - -------------------------------------------------------------------------------- Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 99 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Other Income Other income is derived from sources other than guestrooms, food and beverages, and telephone services. Depending on the type of hotel and the facilities and amenities offered, other income may include the following items. o Rentals - stores, office space, concession space, showcases, clubs, and storage. o Commissions from auto rentals, photography, telegrams, and vending services. o Concessions - revenue derived from charges for the privilege of operating departments that could be operated by the hotel. Gift shops, barber shops, and beauty salons are often operated as concessions. o Laundry, dry cleaning, and fax services. o Cash discounts earned - discounts from creditors' accounts for payment within the discount period. This item does not include trade discounts, which are a deduction from the cost of goods sold. o Electronic games and pinball machines. o Forfeited advance deposits and guaranteed no-shows. o Service charges - service charges that are added to a customer's account but are not paid to service personnel. o Interest income - interest from house accounts. o Salvage - revenue from the sale of old or obsolete items. Other income is highly sensitive to changes in occupancy and slightly correlated to food and beverage volume. Using this fixed and variable relationship, the subject property's other income is projected as follows. ================================================================================ Table 10-12 Forecast of Other Income - -------------------------------------------------------------------------------- 1997 Stabilized 1999 2000 2001 - -------------------------------------------------------------------------------- Total Other Income $ 21 $ 22 $ 23 $ 24 $ 24 Percent of Total Revenue 0.7% 0.7% 0.7% 0.7% 0.7% Amount Per Available Room $ 98 $ 102 $ 106 $ 109 $ 113 Amount Per Occupied Room $ 0.46 $ 0.48 $ 0.50 $ 0.52 $ 0.52 - -------------------------------------------------------------------------------- Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 100 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Rooms Expense Rooms expense consists of items related to the sale and upkeep of guestrooms and public space. Salaries, wages, and employee benefits account for a substantial portion of this category. Although payroll varies somewhat with occupancy (because managers can schedule maids, bell personnel, and house cleaners to work when demand requires), much of a hotel's payroll is fixed. Front desk personnel, public area cleaners, the housekeeper, and other supervisors must be maintained at all times. As a result, salaries, wages, and employee benefits are only moderately sensitive to changes in occupancy. Commissions represent remuneration to travel agents for booking rooms. Because these fees are based on a percentage of rooms revenue, they are highly dependent on occupancy and rate. Reservations is a similar expense that reflects the cost of a franchise reservation system that typically bills as a percentage of rooms revenue. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are only slightly affected by changes in volume. In light of these considerations, we project the subject property's rooms expense as follows. ================================================================================ Table 10-13 Forecast of Rooms Expense - -------------------------------------------------------------------------------- 1997 Stabilized 1999 2000 2001 - -------------------------------------------------------------------------------- Total Rooms Expense $ 596 $ 621 $ 643 $ 665 $ 688 Percent of Rooms Revenue 25.6% 25.3% 25.3% 25.3% 25.3% Amount per Available Room $ 2,772 $ 2,888 $ 2,989 $ 3,094 $ 3,202 Amount per Occupied Room $ 13.09 $ 13.41 $ 13.89 $ 14.36 $ 14.86 - -------------------------------------------------------------------------------- Food and Beverage Expense Food and beverage expenses consist of items necessary for the operation of a hotel's food, beverage, and banquet facilities. Although food and beverage revenues are projected separately and occupy separate categories on a hotel's income and expense statement, the corresponding expenses are combined into a single category. The costs associated with food and beverage sales and payroll are moderately to highly correlated to food and beverage revenues, and comprise a substantial portion of this category. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are very slightly dependent on volume. Although the other expense items are basically fixed, they represent a relatively insignificant factor. After considering the fixed and variable components, we forecast the subject property's food and beverage expense as follows. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 101 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-14 Forecast of Food and Beverage Expense - -------------------------------------------------------------------------------- 1997 Stabilized 1999 2000 2001 - -------------------------------------------------------------------------------- Total F&B Expense $ 493 $ 513 $ 531 $ 550 $ 568 Percent of Food and Beverage Revenue 96.1% 95.2% 95.3% 95.3% 95.3% Amount per Available Room $2,291 $2,387 $2,469 $2,556 $2,643 Amount per Occupied Room $10.83 $11.08 $11.47 $11.88 $12.27 - -------------------------------------------------------------------------------- Telephone Expense Telephone expense consists of all costs associated with this department. In the case of small hotels with automated systems, the operation of telephones may be an additional responsibility of front desk personnel; however, most large properties employ full-time operators. The bulk of the telephone expense consists of the cost of local and long-distance calls billed by the telephone companies that provide these services. Because most calls are made by in-house guests, these costs are moderately correlated to occupancy. Unless a particular hotel department incurs high expenses, use of telephone services by hotel employees is charged to this account. The remaining costs, which include salaries, wages, printing, and other expenses, are moderately fixed. The following table illustrates our forecast of telephone expense. ================================================================================ Table 10-15 Forecast of Telephone Expense - -------------------------------------------------------------------------------- 1997 Stabilized 1999 2000 2001 - -------------------------------------------------------------------------------- Total Telephone Expense $ 45 $ 47 $ 49 $ 51 $ 52 Percent of Telephone Revenue 51.1% 51.1% 51.6% 51.5% 51.0% Amount per Available Room $ 211 $ 219 $ 227 $ 235 $ 243 Amount per Occupied Room $ 0.99 $ 1.02 $ 1.06 $ 1.10 $ 1.12 - -------------------------------------------------------------------------------- Other Income Expense Other income expense consists of costs associated with other income, and is dependent on the nature of the revenue. For example, if a hotel leases its gift shop to an outside operator, the expenses are limited to items such as rental fees and commissions. If the property operates its own gift shop, both revenues and expenses will be higher, and the hotel is responsible for the cost of goods sold, payroll, and so forth. Using a fixed and variable forecasting model, we project the subject property's other income expense as follows. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 102 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-16 Forecast of Other Income Expense - -------------------------------------------------------------------------------- 1997 Stabilized 1999 2000 2001 - -------------------------------------------------------------------------------- Total Other Income Expense $ 5 $ 5 $ 5 $ 5 $ 5 Percent of Other Income Revenue 23.8% 22.7% 21.7% 20.8% 20.8% Amount per Available Room $ 21 $ 22 $ 23 $ 24 $ 25 Amount per Occupied Room $ 0.11 $ 0.11 $ 0.11 $ 0.11 $ 0.11 - -------------------------------------------------------------------------------- Administrative and General Expense Administrative and general expense includes the salaries and wages of all administrative personnel who are not directly associated with a particular department. Expense items related to the management and operation of the property are also allocated to this category. Most administrative and general expenses are relatively fixed. The exceptions are cash overages and shortages; commissions on credit card charges; provision for doubtful accounts, which are moderately affected by the number of transactions or total revenue; and salaries, wages, and benefits, which are very slightly influenced by volume. In recent years, several new items have been added to the administrative and general expense category. Human resources includes the cost of recruiting, relocating, and training personnel. Security consists of the cost of contract security for the property and related expenses. The general insurance category includes premiums for liability, fidelity, life, theft coverage, and business interruption insurance. Fire and extended-coverage insurance on the building and contents is a separate insurance expense category. Liability insurance covers third-party actions involving bodily injury and personal property, and is typically based on rooms receipts, meeting and banquet income, and food and beverage revenue. Factors that may have an impact on a hotel's liability expense include the size of the meeting, banquet, and restaurant facilities; the ratio between the amount of alcohol served and total food and beverage sales; the presence of a dance floor; a high-rise structure; a swimming pool; life safety support systems; and the guest transportation services provided by the hotel. The following table illustrates our forecast of administrative and general expense. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 103 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-17 Forecast of Administrative and General Expense - --------------------------------------------------------------------------------
1997 Stabilized 1999 2000 2001 - ------------------------------------------------------------------------------------- Total Administrative & General Expense $ 313 $ 325 $ 337 $ 348 $ 361 Percentage of Total Revenue 10.6% 10.5% 10.5% 10.5% 10.5% Amount per Available Room $1,456 $1,512 $1,567 $1,619 $1,679 Amount per Occupied Room $ 6.87 $ 7.03 $ 7.27 $ 7.53 $ 7.79
- -------------------------------------------------------------------------------- Management Fee Management expense consists of the basic fee paid to the type of company that is anticipated to operate the subject property. Some companies provide management services alone, while others also provide a brand name affiliation. When a management company has no brand identification, the property owner often acquires a franchise that provides the necessary image and recognition. Although most hotel management companies employ a fee schedule that includes a basic fee (usually a percentage of total revenue) and an incentive fee (usually a percentage of defined profit), the incentive portion is often subordinated to debt service and does not appear in a forecast of net income before debt service. Basic hotel management fees are almost always based on a percentage of total revenue, which means they have no fixed component. Although the incentive fee does not decrease the cash flow available for debt service, it does reduce the potential cash flow to equity, and must be accounted for in the valuation process. Generally, the most appropriate procedure for handling the impact of the incentive fee on the equity component is to use the projected net income before debt service and incentive fee, but adjust the equity dividend or yield rate upward to reflect this added management cost. The adjusted equity dividend and yield rates will be described later in this section. The subject property is operated by Remington. According the management agreement, fees are equal to 3% of total revenues. Based on our review of the current market for management contracts, we are of the opinion that this fee is consistent with prevailing market terms. Applying this management fee structure to the projection of total revenue yields the following forecast of the subject property's management fee. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 103 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-18 Forecast of Management Fee - -------------------------------------------------------------------------------- 1997 Stabilized 1999 2000 2001 - -------------------------------------------------------------------------------- Management Fee Expense $ 89 $ 93 $ 96 $ 100 $ 103 - -------------------------------------------------------------------------------- Marketing Expense Marketing expense consists of all costs associated with advertising, sales, and promotion; these activities are intended to attract and retain customers. Marketing can be used to create an image, develop customer awareness, and stimulate patronage of a property's various facilities. The marketing category is unique in that all expense items, with the exception of fees and commissions, are totally controlled by management. Most hotel operators establish an annual marketing budget that sets forth all planned expenditures. If the budget is followed, total marketing expenses can be projected accurately. Marketing expenditures are unusual because although there is a lag period before results are realized, the benefits are often extended over a long period. Depending on the type and scope of the advertising and promotion program implemented, the lag time can be as short as a few weeks or as long as several years. However, the favorable results of an effective marketing campaign tend to linger, and a property often enjoys the benefits of concentrated sales efforts for many months. Marketing expense can be divided into five categories: sales, reservations, advertising and merchandising, other marketing activities, and fees and commissions. Together, these categories include all marketing efforts made by hotel personnel and outside parties. Marketing expenses are fixed with the exception of reservations, fees, and commissions, which are calculated as a percentage of rooms revenue. Based on the location of the subject property, the local market for transient accommodations, the competitive environment, and the hotel's anticipated market segmentation, we have developed the following marketing forecast using a fixed and variable component model. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 105 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-19 Forecast of Marketing Expense - -------------------------------------------------------------------------------- 1997 Stabilized 1999 2000 2001 - -------------------------------------------------------------------------------- Total Marketing Expense $ 230 $ 240 $ 248 $ 257 $ 266 Percentage of Total Revenue 7.8% 7.7% 7.7% 7.7% 7.7% Amount per Available Room $1,071 $1,115 $1,153 $1,194 $1,235 Amount per Occupied Room $ 5.06 $ 5.18 $ 5.36 $ 5.54 $ 5.74 - -------------------------------------------------------------------------------- Franchise Fee Franchise expense represents the fees paid to Ramada Franchise Systems, Inc. for the use of the company's name, trade marks, and service marks. The following table illustrates the projection of the subject property's franchise fee. ================================================================================ Table 10-20 Forecast of Franchise Fee - -------------------------------------------------------------------------------- 1997 Stabilized 1999 2000 2001 - -------------------------------------------------------------------------------- Franchise Fees Expense $ 71 $ 77 $ 82 $ 87 $ 92 - -------------------------------------------------------------------------------- Property Operations and Maintenance Property operations and maintenance expense is another expense category that is largely controlled by management. Except for repairs that are necessary to keep the facility open and prevent damage (e.g., plumbing, heating, and electrical items), most maintenance can be deferred for varying lengths of time. Maintenance is an accumulating expense. If management elects to postpone performing a required repair, they have not eliminated or saved the expenditure; they have only deferred payment until a later date. A lodging facility that operates with a lower-than-normal maintenance budget is likely to accumulate a considerable amount of deferred maintenance. The age of a lodging facility has a strong influence on the required level of maintenance. A new or thoroughly renovated property is protected for several years by modern equipment and manufacturers' warranties. However, as a hostelry grows older, maintenance expenses escalate. A well-organized preventive maintenance system often helps delay deterioration, but most facilities face higher property operations and maintenance costs each year, regardless of the occupancy trend. The quality of initial construction can also have a direct impact on future Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 106 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= maintenance requirements. The use of high-quality building materials and construction methods generally reduces the need for maintenance expenditures over the long term. Property operations and maintenance is considered an operating expense; as such, it includes only those components that can be expensed, rather than capitalized, under Internal Revenue Service regulations. For example, if a table leg is broken, the repair of that leg is considered an expense and is chargeable to property operations and maintenance. If the table is replaced, it becomes a capital expenditure and does not appear under the property operations and maintenance category. Appraisers account for capital replacement of items such as furniture and equipment in the reserve for replacement account, which is discussed later in this section. Property operations and maintenance costs are relatively fixed, and are projected as follows. ================================================================================ Table 10-21 Forecast of Property Operations and Maintenance Expense - -------------------------------------------------------------------------------- 1997 Stabilized 1999 2000 2001 - -------------------------------------------------------------------------------- Total Property Oper. & Maint. Expense $ 151 $ 157 $ 163 $ 168 $ 174 Percentage of Total Revenue 5.1% 5.0% 5.1% 5.0% 5.1% Amount per Available Room $ 703 $ 732 $ 757 $ 784 $ 811 Amount per Occupied Room $ 3.32 $ 3.40 $ 3.52 $ 3.64 $ 3.77 - -------------------------------------------------------------------------------- Energy Expense The energy consumption of a lodging facility takes several forms, including water and space heating, air conditioning, lighting, cooking fuel, and other miscellaneous power requirements. The most common sources of hotel energy are electricity, natural gas, fuel oil, and steam. This category also includes the cost of water service. Total energy cost depends on the source and quantity of fuel used. Electricity tends to be the most expensive source, followed by oil and gas. Although all hotels consume a sizable amount of electricity, many properties supplement their energy requirements with less expensive sources, such as gas and oil, for heating and cooking. A large portion of a hostelry's energy consumption is relatively fixed. Restaurants, kitchens, public areas, and corridors must be continually lighted and climate-controlled, regardless of occupancy. The energy cost of an additional occupied room (i.e., a few hours of light, television, heat, or Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 107 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= air conditioning) is minimal. The following table presents our forecast of the subject property's energy expense. ================================================================================ Table 10-22 Forecast of Energy Expense - -------------------------------------------------------------------------------- 1997 Stabilized 1999 2000 2001 - -------------------------------------------------------------------------------- Total Energy Expense $ 198 $ 205 $ 212 $ 220 $ 227 Percentage of Total Revenue 6.7% 6.6% 6.6% 6.6% 6.6% Amount per Available Room $ 920 $ 954 $ 987 $1,022 $1,058 Amount per Occupied Room $ 4.35 $ 4.43 $ 4.59 $ 4.75 $ 4.91 - -------------------------------------------------------------------------------- Property Taxes The estimate of property taxes was detailed in a previous section of this report. The following table summarizes these projections. ================================================================================ Table 10-23 Forecast of Property Taxes - -------------------------------------------------------------------------------- 1997 Stabilized 1999 2000 2001 - -------------------------------------------------------------------------------- Forecast Property Taxes $ 139 $ 144 $ 149 $ 154 $ 160 - -------------------------------------------------------------------------------- Insurance Expense The insurance expense category consists of the cost of insuring the hotel and its contents against damage or destruction by fire, weather, sprinkler leakage, boiler explosion, plate glass breakage, and so forth. It does not include liability coverage, which is a component of administrative and general expense. Insurance rates are based on many factors, including building design and construction, fire detection and extinguishing equipment, fire district, distance from the firehouse, and the area's fire experience. Insurance expenses do not vary with occupancy. Based on industry averages, we project the subject property's insurance expense at approximately $81,000 in 1997 (the first projection period). In subsequent years, this amount is assumed to increase in tandem with inflation. The following table outlines our projection of insurance expense. ================================================================================ Table 10-24 Forecast of Insurance Expense - -------------------------------------------------------------------------------- 1997 Stabilized 1999 2000 2001 - -------------------------------------------------------------------------------- Forecast Insurance Expense $ 81 $ 83 $ 86 $ 89 $ 93 - -------------------------------------------------------------------------------- Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 108 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Reserve for Replacement Furniture, fixtures, and equipment are essential to the operation of a lodging facility, and their quality often influences a property's class. This category includes all non-real estate items that are capitalized, rather than expensed. The furniture, fixtures, and equipment of a hotel are exposed to heavy use and must be replaced at regular intervals. The useful life of these items is determined by their quality, durability, and the amount of guest traffic and use. Periodic replacement of furniture, fixtures, and equipment is essential to maintain the quality, image, and income-producing potential of a lodging facility. Because capitalized expenditures are not included in the operating statement but nevertheless affect an owner's cash flow, an appraisal should reflect these expenses in the form of an appropriate reserve for replacement. Our industry experience indicates that a reserve for replacement of 3% to 5% of total revenue is generally sufficient to provide for the timely replacement of furniture, fixtures, and equipment. Because the reserve for replacement is based on a percentage of total revenue, it has no fixed component. Based on an analysis of comparable lodging facilities, we believe that a reserve for replacement of 4% of total revenue is sufficient to provide for the periodic replacement of the subject property's furniture, fixtures, and equipment. This amount is consistent with the reserve account contributions currently made by the hotel. The following table summarizes the projected reserve for replacement. ================================================================================ Table 10-25 Forecast of Reserve for Replacement - -------------------------------------------------------------------------------- 1997 Stabilized 1999 2000 2001 - -------------------------------------------------------------------------------- Reserve for Replacement Expense $ 118 $ 124 $ 129 $ 133 $ 138 - -------------------------------------------------------------------------------- Equipment Rental The equipment rental category consists of the cost of renting equipment for use at the property level. Such equipment may include copy machines, office equipment and transportation vehicles. According to property management and financial statements, 1996 vehicle expenses have declined. Based on 1996 historical levels, we project the subject property's equipment rent expense at approximately $40,000 in 1997 (the first projection period). In subsequent years, this amount is assumed to increase Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 109 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= in tandem with inflation. The following table summarizes the projected expense. ================================================================================ Table 10-26 Forecast of Equipment Rent Expense - -------------------------------------------------------------------------------- 1997 Stabilized 1999 2000 2001 - -------------------------------------------------------------------------------- Equipment Rental $ 40 $ 42 $ 43 $ 45 $ 46 - -------------------------------------------------------------------------------- Summary of Projections Based on the preceding analysis, we have formulated a forecast of income and expense. The table on the following page presents a detailed forecast through the stabilized year, including amounts per available room (PAR) and per occupied room (POR). For the purpose of comparison, this table also presents the subject property's most recent full year of operating history. The second table illustrates our ten-year forecast of income and expense in less detail. The forecasts pertain to calendar operating years beginning January 1, 1997, and are expressed in inflated dollars for each year. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 110 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-27 Detailed Forecast of Income and Expense through the Stabilized Year and Most Recent Operating History, Ramada Hotel, Omaha, Nebraska - --------------------------------------------------------------------------------
Historical Operating Results ----------------------------------------- Calendar Years Ending: 1995 1997 Stabilized Number of Rooms: 215 215 215 Occupancy: 62.2% 58.0% 59.0% Average Rate: $41.46 $51.24 $53.04 Days Open: 365 365 365 Occupied Rooms: 48,804 %Gross PAR POR 45,516 %Gross PAR POR 46,300 - ------------------------------------------------------------------------------------------------------------------------------------ REVENUE Rooms $2,024 76.8% $9,412 $41.46 $2,332 79.0% $10,847 $51.24 $2,456 Food 358 13.6 1,666 7.34 364 12.3 1,693 8.00 382 Beverage 147 5.6 683 3.01 149 5.0 693 3.27 157 Telephone 87 3.3 405 1.79 88 3.0 409 1.93 92 Other Income 20 0.8 93 0.41 21 0.7 98 0.46 22 Total Revenues 2,636 100.1 12,260 54.01 2,954 100.0 13,740 64.90 3,109 - ------------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL EXPENSES * Rooms 572 28.3 2,659 11.71 596 25.6 2,772 13.09 621 Food & Beverage 471 93.2 2,190 9.65 493 96.1 2,293 10.83 513 Telephone 43 49.7 202 0.89 45 51.1 209 0.99 47 Other Income 4 21.6 20 0.09 5 23.8 23 0.11 5 Total Dept. Expenses 1,090 41.4 5,071 22.34 1,139 38.6 5,298 25.02 1,186 - ------------------------------------------------------------------------------------------------------------------------------------ DEPARTMENTAL INCOME 1,546 58.7 7,189 31.67 1,815 61.4 8,442 39.88 1,923 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING EXPENSES Administrative & General 288 10.9 1,339 5.90 313 10.6 1,456 6.88 325 Management Fee 79 3.0 368 1.62 89 3.0 414 1.96 93 Marketing 212 8.0 986 4.35 230 7.8 1,070 5.05 240 Franchise Fees 60 2.3 277 1.22 71 2.4 330 1.56 77 Property Oper. & Maint. 139 5.3 647 2.85 151 5.1 702 3.32 157 Energy 194 7.4 903 3.98 198 6.7 921 4.35 205 Total Operating Expenses 972 36.9 4,520 19.91 1,052 35.6 4,893 23.11 1,097 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSE PROFIT 574 21.8 2,669 11.76 763 25.8 3,549 16.76 826 - ------------------------------------------------------------------------------------------------------------------------------------ FIXED EXPENSES Property Taxes 147 5.6 685 3.02 139 4.7 648 3.06 144 Insurance 52 2.0 240 1.06 81 2.7 377 1.78 83 Reserve for Replacement 105 4.0 490 2.16 118 4.0 549 2.59 124 Equipment Rental 60 2.3 278 1.22 40 1.4 186 0.88 42 Total 364 13.9 1,693 7.46 378 12.8 1,759 8.31 393 - ------------------------------------------------------------------------------------------------------------------------------------ NET INCOME $210 7.9 976 $4.30 $385 13.0 $1,790 $8.45 $433 ==================================================================================================================================== Food/Rooms 17.7% 15.6% 15.6% Beverage/Food 41.0% 40.9% 41.1% Telephone/Rooms 4.3% 3.8% 3.7% Other Income/Rooms 1.0% 0.9% 0.9%
Calendar Years Ending: Number of Rooms: Occupancy: Average Rate: Days Open: Occupied Rooms: %Gross PAR POR - ------------------------------------------------------------- REVENUE Rooms 79.0% $11,423 $53.05 Food 12.3 1,777 8.25 Beverage 5.0 730 3.39 Telephone 3.0 428 1.99 Other Income 0.7 102 0.48 Total Revenues 100.0 14,460 67.15 - ------------------------------------------------------------- DEPARTMENTAL EXPENSES * Rooms 25.3 2,888 13.41 Food & Beverage 95.2 2,386 11.08 Telephone 51.1 219 1.02 Other Income 22.7 23 0.11 Total Dept. Expenses 38.1 5,516 25.62 - ------------------------------------------------------------- DEPARTMENTAL INCOME 61.9 8,944 41.53 - ------------------------------------------------------------- OPERATING EXPENSES Administrative & General 10.5 1,512 7.02 Management Fee 3.0 433 2.01 Marketing 7.7 1,116 5.18 Franchise Fees 2.5 358 1.66 Property Oper. & Maint. 5.0 730 3.39 Energy 6.6 953 4.43 Total Operating Expenses 35.3 5,102 23.69 - ------------------------------------------------------------- HOUSE PROFIT 26.6 3,842 17.84 - ------------------------------------------------------------- FIXED EXPENSES Property Taxes 4.6 670 3.11 Insurance 2.7 386 1.79 Reserve for Replacement 4.0 577 2.68 Equipment Rental 1.4 195 0.91 Total 12.7 1,828 8.49 - ------------------------------------------------------------- NET INCOME 13.9 $2,014 $9.35 ============================================================= Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 111 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-28 Ten-Year Forecast of Income and Expense, Ramada Hotel, Omaha, Nebraska - --------------------------------------------------------------------------------
Calendar Years Ending: 1997 1998 1999 2000 2001 ------------------ ------------------ ------------------ ------------------ ------------------ Number of Rooms: 215 215 215 215 215 Occupied Rooms: 45,516 46,300 46,300 46,300 46,300 Occupancy: 58.0% % of 59.0% % of 59.0% % of 59.0% % of 59.0% % of Average Rate: $ 51.24 Gross $ 53.04 Gross $ 54.89 Gross $ 56.81 Gross $ 58.80 Gross - -------------------------- ------------------ ------------------ ------------------ ------------------ ------------------ REVENUE Rooms $ 2,332 79.0% $ 2,456 79.0% $ 2,541 79.0% $ 2,630 79.0% $ 2,722 79.0% Food 364 12.3 382 12.3 395 12.3 409 12.3 423 12.3 Beverage 149 5.0 157 5.0 162 5.0 168 5.0 173 5.0 Telephone 88 3.0 92 3.0 95 3.0 99 3.0 102 3.0 Other Income 21 0.7 22 0.7 23 0.7 24 0.7 24 0.7 Total 2,954 100.0 3,109 100.0 3,216 100.0 3,330 100.0 3,444 100.0 - -------------------------- ------------------ ------------------ ------------------ ------------------ ------------------ DEPARTMENTAL EXPENSES Rooms 596 25.6 621 25.3 643 25.3 665 25.3 688 25.3 Food & Beverage 493 96.1 513 95.2 531 95.3 550 95.3 568 95.3 Telephone 45 51.1 47 51.1 49 51.6 51 51.5 52 51.0 Other Income 5 23.8 5 22.7 5 21.7 5 20.8 5 20.8 Total 1,139 38.6 1,186 38.1 1,228 38.2 1,271 38.2 1,313 38.1 - -------------------------- ------------------ ------------------ ------------------ ------------------ ------------------ DEPARTMENTAL INCOME 1,815 61.4 1,923 61.9 1,988 61.8 2,059 61.8 2,131 61.9 - -------------------------- ------------------ ------------------ ------------------ ------------------ ------------------ OPERATING EXPENSES Administrative & General 313 10.6 325 10.5 337 10.5 348 10.5 361 10.5 Management Fee 89 3.0 93 3.0 96 3.0 100 3.0 103 3.0 Marketing 230 7.8 240 7.7 248 7.7 257 7.7 266 7.7 Franchise Fees 71 2.4 77 2.5 82 2.5 87 2.6 92 2.7 Property Oper. & Maint 151 5.1 157 5.0 163 5.1 168 5.0 174 5.1 Energy 198 6.7 205 6.6 212 6.6 220 6.6 227 6.6 Total 1,052 35.6 1,097 35.3 1,138 35.4 1,180 35.4 1,223 35.6 - -------------------------- ------------------ ------------------ ------------------ ------------------ ------------------ HOUSE PROFIT 763 25.8 826 26.6 850 26.4 879 26.4 908 26.3 - -------------------------- ------------------ ------------------ ------------------ ------------------ ------------------ FIXED EXPENSES Property Taxes 139 4.7 144 4.6 149 4.6 154 4.6 160 4.6 Insurance 81 2.7 83 2.7 86 2.7 89 2.7 93 2.7 Reserve for Replacement 118 4.0 124 4.0 129 4.0 133 4.0 138 4.0 Equipment Rental 40 1.4 42 1.4 43 1.3 45 1.4 46 1.3 Total 378 12.8 393 12.7 407 12.6 421 12.7 437 12.6 - -------------------------- ------------------ ------------------ ------------------ ------------------ ------------------ NET INCOME $ 385 13.0% $ 433 13.9% $ 443 13.8% $ 458 13.7% $ 471 13.7% =========================== ================== ================== ================== ================== ================== Calendar Years Ending: 2002 2003 2004 2005 2006 ------------------ ------------------ ------------------ ------------------ ------------------ Number of Rooms: 215 215 215 215 215 Occupied Rooms: 46,300 46,300 46,300 46,300 46,300 Occupancy: 59.0% % of 59.0% % of 59.0% % of 59.0% % of 59.0% % of Average Rate: $60.86 Gross $ 62.99 Gross $ 65.19 Gross $ 67.47 Gross $ 69.84 Gross - -------------------------- ------------------ ------------------ ------------------ ------------------ ------------------ REVENUE Rooms $2,818 79.0% $ 2,916 79.0% $ 3,018 79.0% $ 3,124 79.0% $ 3,233 79.0% Food 438 12.3 454 12.3 469 12.3 486 12.3 503 12.3 Beverage 180 5.0 186 5.0 192 5.0 199 5.0 206 5.0 Telephone 106 3.0 109 3.0 113 3.0 117 3.0 121 3.0 Other Income 25 0.7 26 0.7 27 0.7 28 0.7 29 0.7 Total 3,567 100.0 3,691 100.0 3,819 100.0 3,954 100.0 4,092 100.0 - -------------------------- ------------------ ------------------ ------------------ ------------------ ------------------ DEPARTMENTAL EXPENSES Rooms 713 25.3 737 25.3 763 25.3 790 25.3 818 25.3 Food & Beverage 589 95.3 609 95.2 630 95.3 653 95.3 675 95.2 Telephone 54 50.9 56 51.4 58 51.3 60 51.3 62 51.2 Other Income 5 20.0 6 23.1 6 22.2 6 21.4 6 20.7 Total 1,361 38.2 1,408 38.1 1,457 38.2 1,509 38.2 1,561 38.1 - -------------------------- ------------------ ------------------ ------------------ ------------------ ------------------ DEPARTMENTAL INCOME 2,206 61.8 2,283 61.9 2,362 61.8 2,445 61.8 2,531 61.9 - -------------------------- ------------------ ------------------ ------------------ ------------------ ------------------ OPERATING EXPENSES Administrative & General 373 10.5 386 10.5 400 10.5 414 10.5 428 10.5 Management Fee 107 3.0 111 3.0 115 3.0 119 3.0 123 3.0 Marketing 275 7.7 285 7.7 295 7.7 305 7.7 316 7.7 Franchise Fees 98 2.7 104 2.8 110 2.9 117 3.0 124 3.0 Property Oper. & Maint 180 5.0 187 5.1 193 5.1 200 5.1 207 5.1 Energy 235 6.6 244 6.6 252 6.6 261 6.6 270 6.6 Total 1,268 35.5 1,317 35.7 1,365 35.8 1,416 35.9 1,468 35.9 - -------------------------- ------------------ ------------------ ------------------ ------------------ ------------------ HOUSE PROFIT 938 26.3 966 26.2 997 26.0 1,029 25.9 1,063 26.0 - -------------------------- ------------------ ------------------ ------------------ ------------------ ------------------ FIXED EXPENSES Property Taxes 165 4.6 171 4.6 177 4.6 183 4.6 190 4.6 Insurance 96 2.7 99 2.7 103 2.7 106 2.7 110 2.7 Reserve for Replacement 143 4.0 148 4.0 153 4.0 158 4.0 164 4.0 Equipment Rental 48 1.3 50 1.4 51 1.3 53 1.3 55 1.3 Total 452 12.6 468 12.7 484 12.6 500 12.6 519 12.6 - -------------------------- ------------------ ------------------ ------------------ ------------------ ------------------ NET INCOME $ 486 13.7% $ 498 13.5% $ 513 13.4% $ 529 13.3% $ 544 13.4% ================= ================== ================== ================== ==================
- -------------------------------------------------------------------------------- Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 112 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The conversion of a property's projected net income into an estimate of value is based on the premise that investors typically purchase real estate with a small amount of equity cash (25% to 40%) and a large amount of mortgage financing (60% to 75%). The amounts and terms of available mortgage financing and the rates of return that are required to attract sufficient equity capital form the basis for allocating the net income between the mortgage and equity components and deriving a value estimate. Mortgage Component Data for the mortgage component may be developed from statistics of actual hotel mortgages made by long-term lenders. The American Council of Life Insurance, which represents 20 large life insurance companies, publishes quarterly information pertaining to the hotel mortgages issued by its member companies. The following table summarizes the average mortgage interest rates of the hotel loans made by these lenders. In addition, the A corporate bond yield (as reported by Moody's Bond Record) is shown for the purpose of comparison. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 113 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-29 Average Mortgage Interest Rates and Average A Corporate Bond Yields - -------------------------------------------------------------------------------- Average A Average Corporate Period Interest Rate Bond Yield - -------------------------------------------------------------------------------- 1st Quarter 1996 7.79 % 7.37 % 4th Quarter 1995 8.44 7.28 3rd Quarter 1995 8.61 7.67 2nd Quarter 1995 9.25 7.87 1st Quarter 1995 9.14 8.50 3rd Quarter 1994 9.64 8.48 2nd Quarter 1994 9.38 8.28 4th Quarter 1993 9.38 7.80 3rd Quarter 1993 8.41 7.28 2nd Quarter 1993 10.53 9.65 4th Quarter 1992 9.43 8.48 3rd Quarter 1992 9.99 8.38 2nd Quarter 1992 9.47 8.79 1st Quarter 1992 10.02 8.81 4th Quarter 1991 10.49 8.97 3rd Quarter 1991 10.03 9.29 2nd Quarter 1991 10.75 9.45 3rd Quarter 1990 10.47 9.89 2nd Quarter 1990 10.58 9.83 4th Quarter 1989 9.96 9.42 3rd Quarter 1989 9.55 9.46 2nd Quarter 1989 10.54 9.93 1st Quarter 1989 10.39 10.16 4th Quarter 1988 10.07 10.03 3rd Quarter 1988 10.66 10.51 2nd Quarter 1988 10.09 10.33 4th Quarter 1987 10.41 10.45 3rd Quarter 1987 10.00 9.95 2nd Quarter 1987 9.81 9.46 1st Quarter 1987 9.43 9.19 4th Quarter 1986 9.44 9.55 3rd Quarter 1986 9.56 9.71 2nd Quarter 1986 9.80 9.91 1st Quarter 1986 10.99 10.62 Sources: American Council of Life Insurance; Moody's Bond Record - -------------------------------------------------------------------------------- Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 114 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Because of the six- to nine-month lag time in reporting and publishing hotel mortgage statistics, it is necessary to update this information to reflect current lending practices. Research by HVS International indicates that there is a close mathematical relationship between the average interest rate of a hotel mortgage and the concurrent yield on an average A corporate bond. Through a regression analysis, this relationship is expressed as follows. Y = 2.76078 + 0/782280 X Where: Y = Estimated Hotel/Motel Mortgage Interest Rate X = Current Average A Corporate Bond Yield (Coefficient of correlation is 96.4%) The yield on A corporate bonds for the third quarter of 1996, as reported by Moody's Bond Record, was 7.91%. Using a factor of 7.91 in the equation presented above produces an estimated hotel/motel interest rate of 8.95%. In addition to the mortgage interest rate estimate derived from this regression analysis, HVS International constantly monitors the terms of hotel mortgage loans made by our institutional lending clients. In the past year, we have noted an increase in the availability of debt financing, and many lenders have returned to the market. The current level of lending activity represents a significant increase from the restricted environment of the early 1990s. Nonetheless, the market for hotel mortgage loans remains somewhat tight, particularly when compared to the conditions that prevailed in the mid-to late 1980s. In the current lending climate, strong hotel projects that are structured on an economic basis can secure mortgage financing at interest rates ranging from 8% to 11%, depending on the property, location, affiliation, and operator. In the 1980s, when hotel mortgages were widely available, loan-to-value ratios typically ranged from 75% to 80%. Amortization schedules were generally based on 30 years, although the term of the loan was more likely to be seven to ten years. The few loans that were underwritten in the early 1990s were based on far more stringent parameters: loan-to-value ratios declined to a range of 50% to 65%, and amortization periods of 20 to 25 years were most common. With the recent reemergence of hotel financing, loan-to-value requirements and amortization schedules have loosened somewhat. At present, we find that lenders who are active in the market are using loan-to-value ratios of Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 115 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 65% to 75%, and amortization periods of 25 to 30 years. The exact terms offered depend on specific factors such as the property's location, the age and quality of the physical facility, local hostelry market conditions, and (perhaps more significantly) the profile of the borrower. The strongest projects typically command the highest loan-to-value ratios. Based on the preceding analysis of the current lodging industry mortgage market and adjustments for specific factors such as the property's location and conditions in the local hotel market, it is our opinion that a 9.5% interest, 20-year amortization mortgage with a 0.111856 constant is appropriate for the subject property. We believe that a mortgage lender will lend up to 70% of the hotel's market value as determined by this appraisal. Equity Component The remaining capital required for a hotel investment generally comes from the equity investor. The rate of return that an equity investor expects over a ten-year holding period is known as the equity yield. Unlike the equity dividend, which is a short-term rate of return, the equity yield specifically considers a long-term holding period (generally ten years), annual inflation- adjusted cash flows, property appreciation, mortgage amortization, and proceeds from a sale at the end of the holding period. It is difficult to quantify the rate of return required by equity investors who are seeking to purchase hotel properties. To establish an appropriate equity yield rate, HVS International uses two sources of data: past appraisals and investor interviews. Past Appraisals - During the past 12 months, HVS International has appraised more than 400 hotels, including properties located in most major national markets. Each appraisal used a similar mortgage-equity approach in which income is projected and then discounted to a current value at rates reflecting the cost of debt and equity capital. In the case of hotels that were sold subsequent to our valuations, we are able to determine an appropriate equity yield rate by excluding incentive management fees from the projection of income and expense, inserting the projection into a valuation model, and adjusting the appraised value to reflect the actual sales price by modifying the return assumptions. The following table shows a representative sample of hotels that were sold shortly after we appraised them, along with the imputed equity return based on our valuation approach. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 116 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-30 Sample of Hotels Sold - --------------------------------------------------------------------------------
No. of Date of Overall Total Property Equity Hotel City and State Rooms Sale Sales Price Rate Yield Yield - ---------------------------------------------------------------------------------------------------------------------------------- Ritz-Carlton Phoenix, AZ 281 2/94 $23,000,000 11.0% 14.6% 21.7% Marriott Marina Fort Lauderdale, FL 580 2/94 40,000,000 12.2 16.4 26.7 Holiday Inn Edison, NJ 274 3/94 11,803,000 7.8 17.0 26.3 Crescent Hotel Phoenix, AZ 342 3/94 26,000,000 6.5 7.2 2.2 Checkers Hotel Kempinski Los Angeles, CA 173 4/94 12,750,000 3.0 18.3 27.0 Best Western Fireside Inn Cambria, CA 46 4/94 3,377,000 11.7 15.8 24.3 Phoenician Resort Phoenix, AZ 580 4/94 224,000,000 6.6 9.3 8.9 Newark-Fremont Hilton Newark, CA 300 5/94 8,950,000 8.8 14.9 20.7 Radisson Inn Orlando, FL 299 5/94 11,150,000 12.9 18.0 28.2 Westin Kauai Lihue, Kauai, HI 840 6/94 97,400,000 (1.9) 8.1 7.2 Residence Inn Binghamton, NY 72 6/94 6,325,000 10.8 13.9 21.9 Hotel Millenium New York, NY 561 6/94 75,000,000 9.5 14.1 23.0 Best Western Otay Valley Chula Vista, CA 120 7/94 2,350,000 13.2 21.1 31.8 Hampton Inn Islandia, NY 121 7/94 6,572,000 12.6 16.6 28.2 Hampton Inn Willow Grove, PA 150 7/94 10,220,000 11.0 14.3 23.0 Hampton Inn West Palm Beach, FL 136 7/94 4,220,000 10.8 10.8 14.3 Hampton Inn Naples, FL 107 7/94 5,700,000 11.4 11.5 24.9 Hampton Inn Albany, NY 126 7/94 9,204,000 9.3 11.5 15.8 Marriott Hotel South Bend, IN 299 7/94 11,500,000 10.5 13.2 18.9 Marriott SFO Burlingame, CA 684 8/94 61,700,000 10.2 13.2 19.0 Westfields Conference Center Chantilly, VA 340 8/94 46,000,000 12.3 15.9 25.3 Radisson Mark Resort Vail, CO 349 9/94 25,200,000 8.9 15.8 24.1 Marriott East Side New York, NY 664 10/94 55,000,000 8.5 9.7 11.1 Marriott Resort Vail, CO 349 10/94 25,200,000 14.2 18.9 30.5 Marriott Quorum Addison, TX 547 10/94 29,815,000 13.5 18.2 31.8 Sheraton Hotel Hasbrouck Heights, NJ 338 11/94 10,450,000 18.3 21.1 30.7 Sheraton Inn Napa, CA 191 12/94 9,968,000 8.9 13.7 19.8 Marriott Fisherman's Wharf San Francisco, CA 255 12/94 27,755,000 10.8 13.4 19.4 Marriott Hotel Portland, OR 503 12/94 45,000,000 12.9 17.4 30.0 Radisson Inn Springfield, MO 199 12/94 5,800,000 8.2 10.1 11.3 Williamsburg Hilton Williamsburg, VA 291 12/94 15,000,000 15.4 19.0 32.0 Marriott Tech Center Denver, CO 625 12/94 36,000,000 13.7 16.4 27.1 Holiday Inn Sunspree Singer Island, FL 222 12/94 11,900,000 8.6 10.6 12.4 The Plaza New York, NY 805 6/95 325,000,000 7.0 11.0 14.0 Fullerton Suites Fullerton, CA 96 5/95 5,000,000 12.9 18.7 28.5 Residence Inn Baton Rouge, LA 80 6/95 6,518,000 12.7 14.8 21.2 Residence Inn Overland Park, KS 112 6/95 8,500,000 8.9 14.7 20.8 Residence Inn Des Moines, IA 112 6/95 7,660,000 9.8 14.1 19.6 Residence Inn Hunt Valley, MD 96 6/95 6,580,000 12.3 13.6 18.3 Residence Inn Kansas City, MO 112 6/95 6,560,000 10.4 13.2 19.8 Residence Inn Lincoln, NE 120 6/95 7,100,000 10.0 13.7 18.5 Embassy Suites Schaurmburg, IL 209 12/95 17,800,000 10.0 13.5 18.9 Marriott Hotel Andover, MA 293 12/95 24,000,000 9.7 13.5 19.2 Doubletree Suites Valley Forge, PA 229 12/95 28,500,000 10.7 14.2 15.5 Marriott Hotel Tysons Corner, VA 390 12/95 41,100,000 10.7 13.1 18.0 Marriott Hotel Warner Center, CA 461 12/95 57,900,000 6.2 11.6 14.2 Hilton at the Club Pleasanton, CA 294 12/95 22,000,000 10.5 13.4 17.0
Source: HVS International - -------------------------------------------------------------------------------- Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 117 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Investor Interviews - HVS International is in constant contact with numerous institutional and individual hotel investors. This source of equity funds has definite return requirements that can be expressed as an equity yield rate based on a ten-year projection of net income before incentive management fees but after debt service. Based on our surveys and investor interviews, the following table illustrates the range of equity yields generally required by individual and institutional investors. ================================================================================ Table 10-31 Equity Yield Requirements - -------------------------------------------------------------------------------- Source Equity Yield Requirement ------ ------------------------ Individual 20% - 24% Institution 18% - 22% - -------------------------------------------------------------------------------- Based on the assumed 70% loan-to-value ratio, the risk inherent in achieving the projected income stream, and the age, condition, and anticipated market position of the subject property, it is our opinion that an equity investor is likely to require an equity yield rate of 22% before payment of incentive management fees. This estimate is well supported by the equity yield requirements presented previously. Terminal Capitalization Rate Inherent in this valuation process is the assumption of a sale at the end of the ten-year holding period. The estimated reversionary sales price as of that date is calculated by capitalizing the projected 11th-year net income by an overall terminal capitalization rate. A percentage for the seller's brokerage and legal fees is deducted from this sales price, and the net proceeds to the equity interest (also known as the equity residual) are calculated by deducting the outstanding mortgage balance from the reversion. To estimate a property's reversionary value, the appraiser must select a terminal capitalization rate and an allocation for brokerage and legal fees. The terminal capitalization rate is an overall rate that is applied to one stabilized year, and thus it inherently incorporates the cost of debt and equity capital. The terminal capitalization rate can be derived through a mortgage and equity band of investment technique which calculates the weighted average cost of the capital used in a hotel investment. Combining the mortgage financing terms derived previously (namely, a 70% loan-to-value ratio and a 0.111856 debt service constant) with a Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 118 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= cash-on-cash equity dividend rate of 12% produces the following overall capitalization rate. Percent of Rate of Weighted Value Return Average -------------- ----------- -------- Mortgage 70 X 0.11186 = 7.82990 Equity 30 X 0.12000 = 3.60000 -------- Overall Capitalization Rate 11.42990 Because this overall rate will be used to capitalize net income ten years from the date of value, an upward adjustment is appropriate to reflect the uncertainty inherent in this extended period. For the purpose of this valuation, we will use a terminal capitalization rate of 12%. As a point of reference, the terminal capitalization rate can be compared to the going-in rate implied by the subject property's estimated value. The going-in rate reflects the capitalization rate that would be applicable if the hotel were operating at a stabilized level as of the date of value. This rate is calculated by dividing the stabilized net income (expressed in current dollars as of the date of value) by the value indicated by the income capitalization approach. Generally, the terminal capitalization rate is approximately 100 to 200 basis points above the going-in rate. Summary of Valuation Variables The following table summarizes the valuation variables that have been used to estimate the subject property's value via the income capitalization approach. ================================================================================ Table 10-32 Summary of Valuation Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Ten-Year Forecast Loan-To-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.111856 Equity Yield Ye 22.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 12.0% - -------------------------------------------------------------------------------- Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 119 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Valuation of the Mortgage and Equity Components The valuation of the mortgage and equity components is accomplished through use of an algebraic equation that calculates the exact amount of debt and equity that the hotel will be able to support based on the anticipated cash flow (derived from the forecast of income and expense) and the specific return requirements demanded by the mortgage lender (interest) and the equity investor (equity yield). The equation and the calculations associated with this simultaneous valuation formula are set forth in the Addenda to this report. Using the variables summarized above, we estimate the value of the subject property via the income capitalization approach at $3,500,000. Proof of Value The value is proven by calculating the yields to the mortgage and equity components during the projection period. If the mortgagee achieves a 9.5% yield and the equity yield is 22%, then $3,500,000 is the correct value by the income capitalization approach. Using the assumed financial structure set forth in the previous calculations, market value can be allocated between the debt and equity as follows. Mortgage Component (70%) $2,477,000 Equity Component (30%) 1,062,000 ---------- Total $3,539,000 The annual debt service is calculated by multiplying the mortgage component by the mortgage constant. Mortgage Component $2,477,000 Mortgage Constant 0.111856 ---------- Annual Debt Service $277,067 The cash flow to equity is calculated by deducting the debt service from the projected net income before debt service. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 120 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-33 Forecast of Net Income to Equity - -------------------------------------------------------------------------------- Net Income Available for Total Annual Net Income Year Debt Service Debt Service to Equity - -------------------------------------------------------------------------------- 1997 $385,000 - $277,000 = $108,000 1998 433,000 - 277,000 = 156,000 1999 443,000 - 277,000 = 166,000 2000 458,000 - 277,000 = 181,000 2001 471,000 - 277,000 = 194,000 2002 486,000 - 277,000 = 209,000 2003 498,000 - 277,000 = 221,000 2004 513,000 - 277,000 = 236,000 2005 529,000 - 277,000 = 252,000 2006 544,000 - 277,000 = 267,000 - -------------------------------------------------------------------------------- The equity residual at the end of the tenth year is calculated as follows. Reversionary Value ($563,000 /0.120 ) $4,692,000 Less: Brokerage and Legal Fees 141,000 Mortgage Balance 1,784,000 ------------ Net Sale Proceeds to Equity $2,767,000 - -------------------------------------------------------------------------------- The overall property yield (before debt service), the yield to the lender, and the yield to the equity position have been calculated by computer with the following results. ================================================================================ Table 10-34 Overall Property Yields - -------------------------------------------------------------------------------- Projected Yield (Internal Rate of Return) Position Value Over 10-Year Holding Period - -------------------------------------------------------------------------------- Total Property $3,539,000 14.% Mortgage 2,477,000 9.4 Equity 1,062,000 22.0 Note: Whereas the mortgage constant and value are calculated on the basis of monthly mortgage payments, the mortgage yield in this proof assumes single annual payments. As a result, the proof's derived yield may be slightly less than that actually input. - -------------------------------------------------------------------------------- Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 121 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The following tables demonstrate that the property receives its anticipated yields, proving that the $3,500,000 value is correct based on the assumptions used in this approach. ================================================================================ Table 10-35 Total Property Yield - -------------------------------------------------------------------------------- Net Income before Present Worth of $1 Discounted Year Debt Service Factor @ 14.4% Cash Flow - -------------------------------------------------------------------------------- 1997 $385,000 x 0.874022 = $336,000 1998 433,000 x 0.763915 = 331,000 1999 443,000 x 0.667679 = 296,000 2000 458,000 x 0.583566 = 267,000 2001 471,000 x 0.510050 = 240,000 2002 486,000 x 0.445795 = 217,000 2003 498,000 x 0.389635 = 194,000 2004 513,000 x 0.340550 = 175,000 2005 529,000 x 0.297648 = 157,000 2006 5,095,000 * x 0.260151 = 1,325,000 ---------- Total Property Value $3,538,000 *10th year net income of $544,000 plus sales proceeds of $4,551,000 - -------------------------------------------------------------------------------- ================================================================================ Table 10-36 Mortgage Component Yield - -------------------------------------------------------------------------------- Total Annual Present Worth of $1 Discounted Year Debt Service Factor @ 9.4% Cash Flow - -------------------------------------------------------------------------------- 1997 $277,000 x 0.914282 = $253,000 1998 277,000 x 0.835912 = 232,000 1999 277,000 x 0.764259 = 212,000 2000 277,000 x 0.698748 = 194,000 2001 277,000 x 0.638853 = 177,000 2002 277,000 x 0.584092 = 162,000 2003 277,000 x 0.534024 = 148,000 2004 277,000 x 0.488249 = 135,000 2005 277,000 x 0.446397 = 124,000 2006 2,062,000 * x 0.408133 = 842,000 ---------- Value Of Mortgage Component $2,479,000 *10th year debt service of $277,000 plus outstanding mortgage balance of $1,784,000 - -------------------------------------------------------------------------------- Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 122 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-37 Equity Component Yield - -------------------------------------------------------------------------------- Net Income Present Worth of $1 Discounted Year to Equity Factor @ 22.0% Cash Flow - -------------------------------------------------------------------------------- 1997 $108,000 x 0.819639 = $ 89,000 1998 156,000 x 0.671808 = 105,000 1999 166,000 x 0.550640 = 91,000 2000 181,000 x 0.451326 = 82,000 2001 194,000 x 0.369924 = 72,000 2002 209,000 x 0.303205 = 63,000 2003 221,000 x 0.248518 = 55,000 2004 236,000 x 0.203695 = 48,000 2005 252,000 x 0.166957 = 42,000 2006 3,033,000 * x 0.136844 = 415,000 ---------- Value of Equity Component $1,062,000 *10th year net income to equity of $267,000 plus sales proceeds of $2,766,000 - -------------------------------------------------------------------------------- Valuation Method Two: Discounted Cash Flow The total property yield derived from the previous valuation method was 14.4%. After reviewing the total property yields indicated by recent hotel sales, which ranged from 7.2% to 21.1%, it is our opinion that a 14% discount factor would be appropriate for the Ramada Hotel. The following table illustrates the discounted cash flow analysis using a 14% discount factor. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Income Capitalization Approach 123 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-38 Discounted Cash Flow Analysis - -------------------------------------------------------------------------------- Discount Net Factor Discounted Calendar Year Income @ 14.0% Cash Flow ---------------------------------------------------------------------------- 1997 $385,000 0.87719 $337,719 1998 433,000 0.76947 333,179 1999 443,000 0.67497 299,012 2000 458,000 0.59208 271,173 2001 471,000 0.51937 244,623 2002 486,000 0.45559 221,415 2003 498,000 0.39964 199,019 2004 513,000 0.35056 179,837 2005 529,000 0.30751 162,672 2006 5,094,917 * 0.26974 1,374,322 Estimated Market Value: $3,622,972 (Say:) $3,600,000 Reversion Analysis ------------------ 11th Year's Net Income $563,000 Capitalization Rate 12.0% Total Sales Proceeds $4,691,667 Less: Broker & Legal @ 3.0% 140,750 ---------------- Net Sales Proceeds $4,550,917 * 10th year net income of $544,000 plus sales proceeds of $4,550,917 - -------------------------------------------------------------------------------- Conclusion Based on our extensive experience in the hotel industry and comprehensive support provided by literature published by the Appraisal Institute, it is our opinion that the valuation procedure embodied by Method One most closely reflects the investment rationale of typical hotel buyers. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis and Valuations,5 Method Two (which discounts the projected net income and reversion using an overall discount rate, or total property yield) "does not consider the impact of mortgage debt, leverage and the specific equity demands of typical hotel investors...This technique is simple but less reliable because the derivation of the discount rate has little support." In light of this consideration, we have relied on the $3,500,000 value conclusion indicated by Method One. (1) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236 Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Sales Comparison Approach 124 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 11. Sales Comparison Approach The sales comparison approach is based on the assumption that an informed purchaser will pay no more for a property than the cost to acquire an existing property with equal utility. This approach estimates market value by considering the sales prices indicated by recent transactions involving properties that are similar to the property being appraised. Dissimilarities are resolved with appropriate adjustments; these differences may pertain to the date of sale, the age of the property, location, construction, condition, layout, equipment, size, or external economic factors. The reliability of the sales comparison approach depends on three factors: 1. the availability of timely, comparable sales data; 2. an understanding of the true terms of the sales and the motivation of the buyer and seller; and 3. the degree of comparability, or the extent of the adjustments needed to reflect differences between the subject property and the comparable property. In appraising lodging facilities, it is often difficult to find an adequate number of recent sales involving hotels that are truly comparable to the subject property. Consequently, it may be necessary to consider transactions involving properties in different market areas, and the required adjustments greatly diminish the reliability of the conclusions. Moreover, it is virtually impossible for an observer to determine the true motivations of the buyers and sellers involved in transactions. Hotel acquisition often represents a highly ego-driven process in which a number of external, non-market factors influence the purchase price. Unless the appraiser can quantify these influences, there is no way of knowing whether the purchase price paid actually reflects market value. A final consideration is the degree of similarity between the subject property and the comparable; in most cases, the differences are significant enough to Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Sales Comparison Approach 125 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= require numerous subjective and unsubstantiated adjustments. Each adjustment represents a potential for error, and thus diminishes the reliability of this approach. As a result of these shortcomings, the use of the sales comparison approach in valuing hotels is primarily as a check against the value indicated by the income capitalization approach. Hotel values declined in many areas of the country during the late 1980s and early 1990s, although a rebound began in 1994 and 1995. The downturn, which began in most markets in 1988, was largely attributable to lower operating incomes caused by an oversupply of new hotel rooms constructed during the mid-1980s. Overbuilding resulted in flat or declining average rates and occupancies, which caused revenues to fall. A number of other factors exacerbated the situation. The national recession caused a drop in demand in many markets during the early 1990s, and the Persian Gulf War created a virtual freeze on travel in the beginning of 1991, further limiting hotel demand. Operating costs continued to rise despite poor market conditions, resulting in a decline in the net operating income of hotels throughout the nation. Because operating costs have a large fixed component, many lodging facilities experienced precipitous drops in net income. As bottom-line profits eroded, many hotels were unable to meet debt service, and hundreds of properties entered foreclosure or bankruptcy. Lenders and government agencies soon became hotel owners. Because most financial institutions were preoccupied with their distressed real estate, very little mortgage capital was available and the nation suffered from a well-publicized credit crunch. Most hotel transactions that occurred during the early 1990s were financed by the property owners, who, in most cases, were lenders. In the early 1990s, the primary market participants were owner-operators with the expertise to turn around under-performing properties. Hotels were out of favor with passive investors as a result of the industry's poor operating performance and the uncertainty of future appreciation. The wide disparity in buyer and seller expectations also limited the number of transactions. Many sellers were unwilling to accept the fact that the market value of their hotel investments had declined below the cost of the project or the original investment. Moreover, many owners were faced with a significant tax burden upon sale, further reducing their willingness to settle for a price that was below the original acquisition cost. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Sales Comparison Approach 126 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= As a result of these market forces, there was very little sales activity involving large, high-quality hotels. The primary difficulty was the lack of properties available for sale; owners who were not forced to sell opted to wait for prices to recover. The few hotels that did enter the market generally attracted 15 to 20 interested bidders, mostly consisting of owner-operators. As a result of the competition for these few assets, the prices of better-quality hotels began to escalate rapidly. In response, more sellers have been encouraged to place their products on the market. An indicator of this market trend is the number of hotel sales that have occurred during the past few years. HVS International tracks major hotel transactions of more than $10,000,000 on an annual basis. In 1992, the number of major transactions was 67; a slightly lower level of 52 was registered in 1993. This total increased significantly (to 92) in 1994, and the 1995 total is estimated to have been 104. In tandem with escalating prices, hotels are again being considered by traditional financing sources, which had virtually abandoned the hospitality industry by the early 1990s. Although many lenders are still approaching the market with a high degree of caution, it is now possible to obtain third-party financing for hotel transactions. The mortgage loans that are now being made are subject to fairly stringent requirements: loan-to-value ratios remain in the 65% to 75% range. The qualification of the borrower is also a crucial consideration for most lenders. We believe that the upward trend in both pricing and sales activity will continue as financing becomes more available and additional buyers (particularly passive investors) enter the market. Consequently, it is important to consider the date of the transactions used in the sales comparison approach. When the comparable sales are not recent enough to provide an accurate picture of the current market, it may be necessary to make upward adjustments to the values indicated by the sales comparison and income capitalization approaches in recognition of the recent escalation. Comparable Sales Based on information provided by the Hospitality Market Data Exchange and compiled by the six offices of HVS International, the following transactions involved hotels that appear to have some degree of comparability to the subject property. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Sales Comparison Approach 127 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #1: - -------- Property: Best Western Central Location: 72nd Street and Interstate 80 Omaha, Nebraska Date of Sale: July, 1996 Sales Price: $6,583,000 Grantor: Seldin Properties Grantee: Servico Omaha, Inc. Number of Rooms: 213 Price per Room: $30,906 Confirmed By: Douglas County Clerk and Recorder Comments: This property is located across the street from the subject property. Sale #2: - -------- Property: Sheraton Inn Location: 118th Street and L Street Omaha, Nebraska Date of Sale: July, 1996 Sales Price: $5,201,000 Grantor: Seldin Properties Grantee: Servico Omaha, Inc. Number of Rooms: 168 Price per Room: $30,958 Confirmed By: Douglas County Clerk and Recorder Comments: This property is roughly four miles southwest of the subject property. Servico plans to renovate and convert the property to a Sheraton Four Points. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Sales Comparison Approach 128 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #3: - -------- Property: Ramada Inn Location: 1475 S. Colorado Boulevard Denver, Colorado Date of Sale: June, 1995 Sales Price: $6,700,000 Grantor: Empire Denver Associates Grantee: BRP Denver Garden Partners Number of Rooms: 250 Price per Room: $26,800 Confirmed By: Wyndham Hotels Comments: The buyer plans to renovate the property and reposition it as a Wyndham Garden Hotel. Sale #4: - -------- Property: Ramada Inn Location: 200 North Perkins Grand Chute, Wisconsin Date of Sale: September, 1995 Sales Price: $1,600,000 Grantor: Francis D. Danieski Grantee: KAD, Inc. Number of Rooms: 96 Price per Room: $16,667 Confirmed By: Outagamie County Comments: This property contains an indoor pool, restaurant and lounge. The property was originally constructed in 1978. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Sales Comparison Approach 129 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #5: - -------- Property: Ramada Inn Location: Flint, Michigan Date of Sale: August, 1995 Sales Price: $2,175,000 Grantor: Motor Inn Limited Partnership Grantee: Poota Acquisition Corporation Number of Rooms: 190 Price per Room: $11,447 Confirmed By: Hotel Partners Comments: Owner is in process of completing extensive renovations. Sale #6: - -------- Property: Best Western Location: Columbus, Ohio Date of Sale: June, 1996 Sales Price: $3,050,000 Grantor: Starwood Lodging Corporation Grantee: Mr. Jui Jer Lin Number of Rooms: 178 Price per Room: $17,135 Confirmed By: Starwood Lodging Corporation Comments: This hotel property contains indoor and outdoor pools, meeting space, restaurant and lounge. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Sales Comparison Approach 130 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #7: - -------- Property: Holiday Inn Location: Lincoln, Nebraska Date of Sale: December, 1995 Sales Price: $1,800,000 Grantor: Unknown Grantee: Manor Care Number of Rooms: 106 Price per Room: $16,918 Confirmed By: Hotel Business Comments: This hotel property will be converted to a Quality Inn. In addition to considering the above recent transactions, we have also reviewed the sale of the subject property, which occurred in 1994. The details of this transaction are summarized as follows: Subject Property: - ----------------- Property: Ramada Inn Location: 7007 Grover Street Omaha, Nebraska Date of Sale: October 4, 1994 Sales Price: $3,000,000 Grantor: Ramada Assured Income Associates, L.P. Grantee: Ashford Financial Investment Partnership Year Opened: 1973 Number of Rooms: 215 Price per Room: $13,953 Confirmed By: Ashford Financial Corporation In analyzing the sale of the subject property, it is important to consider the terms and conditions pertaining to the transaction. According to information provided by Ashford Financial Corporation, the subject property was one of six Ramada Inns purchased as a package from an investment partnership sponsored by Lehman Brothers. The above listed price represents an allocation of the total package price rather than a negotiated value for this single asset. The total package price was $20,250,000, and was paid in cash, using all equity financing. At the time of Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Sales Comparison Approach 131 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the transaction, the group of hotels was generating virtually no operating income, and all were in extremely poor condition. The previous owners were reportedly strongly motivated to sell due to the poor performance of the hotels. Based on our understanding of the circumstances of this transaction, we do not believe that this sale was reflective of market value. The relevance of the previous transaction involving the subject property is also undermined by the material change in market conditions which occurred between the date of this sale and the present date of value. Areawide occupancy and average rate have improved dramatically in the intervening months, and are forecast to continue this positive trend. As previously discussed, the market for hotel investments has also improved significantly, due to changes in lender and investor attitudes. Finally, the property itself has undergone a significant renovation, with a total of roundly $900,000 spent on upgrading the facilities and amenities. For these reasons, we are of the opinion that the 1994 sale involving the subject property is not a reliable indicator of the current value of the hotel. Conclusion Although the sales comparison approach may be useful in providing a value range and reflecting certain market characteristics, its applicability is limited by the numerous possible points of difference between the subject property and other hotels that have sold in recent years. These factors may include location, access, size, services and facilities offered, market conditions, chain affiliation, market orientation, management, rate structure, age, physical condition, date of sale, the highest and best use of the land, and the anticipated profitability of the operation. Circumstances surrounding a sale, such as financing terms, tax considerations, income guarantees, sales of partial interests, duress on the part of the buyer or seller, or a particular deal structure can also cause a disparity between the sales price and pure market value. Moreover, it is often difficult to determine the marketing periods that were necessary to consummate the transactions. It is extremely difficult to quantify the appropriate adjustment factors accurately because of their number and complexity, as well as the difficulty in obtaining specific, detailed information. Any attempt to manipulate the necessary adjustments is insupportable and purely speculative. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Sales Comparison Approach 132 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Because appraisers are expected to reflect the analytical processes and actions of typical buyers and sellers rather than to create a highly subjective valuation approach, the investment rationale of hotel owners is an essential consideration. As specialists in the valuation of hotels, we find that typical buyers purchase properties based on a thorough analysis of the anticipated economic benefits of property ownership, rather than on historical sales data. In light of these factors, it is our opinion that the sales comparison approach is unsuitable for indicating a specific estimate of the subject property's market value; however, this approach may indicate a range of values that can be used to test the reasonableness of the value indicated by the income capitalization approach. Excluding the prior sale of the subject property, the sales prices range from approximately $11,400 to $31,000 per room, or $2,500,000 to $6,700,000 for the 215-unit subject property. The income capitalization approach indicates a value of $3,500,000, which falls within this range. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Cost Approach 133 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 12. Cost Approach The cost approach is founded on the principle of substitution, which implies that no prudent person will pay more for a property than the amount to acquire a site and construct a building of equal desirability and utility without undue delay. This approach estimates market value by first calculating the current cost of replacing the improvements. Appropriate deductions are made for depreciation resulting from physical deterioration, functional obsolescence, and external (economic) obsolescence, and the land value is added to the depreciated replacement cost to provide an estimate of market value. The cost approach employs the following steps. 1. The current replacement or reproduction cost is estimated. 2. Land value is estimated using techniques such as allocation, extraction, or ground rent capitalization. 3. Accrued depreciation, which can be divided into physical deterioration, functional obsolescence, and external obsolescence, is estimated. 4. Total depreciation is deducted from the subject property's replacement cost, and the land value is added to arrive at an estimate of value via the cost approach. When forming their purchase decisions regarding existing properties, market participants tend to consider the cost of developing a new hotel with optimal physical and functional utility. External conditions, such as the depressed market for real estate (and hotels in particular), can cause a property to be worth less than its replacement cost as new. The task of estimating the loss in value resulting from incurable functional and external obsolescence is highly subjective. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Cost Approach 134 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements age and begin to deteriorate, the loss in value resulting from physical obsolescence becomes increasingly difficult to quantify accurately. Loss in value attributable to functional obsolescence can be even more difficult to determine. The subject property was constructed in 1973, and will be approximately twenty three years old as of the date of this appraisal. The property appeared to be in fair condition at the time of our appraisal. The depressed hotel market conditions that prevailed in the late 1980s and the early 1990s have also led to a degree of external obsolescence. In our opinion, it is impossible to identify and quantify the impact of these factors on the property's value with any accuracy, so we will only estimate the replacement cost of the subject property. Replacement Cost Replacement cost is the current construction cost of a building with the same utility as the subject property, but built with modern materials and according to current construction and design standards. For the purpose of estimating the replacement cost of the subject property, we have used a hotel development cost survey conducted by HVS International. This survey is published annually in a newsletter entitled The Hotel Valuation Journal, and appeared in the May, 1996, issue of Lodging Hospitality. The survey presents the range of per-room costs associated with various components of hotel development, including the improvements, the furniture, fixtures, and equipment, pre-opening expenses, and operating capital. Statistics are compiled for three broad categories of hotels: luxury, standard, and economy. The results of this survey are presented in the following table. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Cost Approach 135 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 12-1 Hotel Development Cost Survey (Amounts per Room) - --------------------------------------------------------------------------------
Improvements Furniture & Equipment Pre-Opening Operating Capital Total Percent Change - ------------------------------------------------------------------------------------------------------------------------------------ 1976 Luxury $32,000 - $55,000 $5,000 - $10,000 $1,000 - $2,000 $1,000 - $1,500 $39,000 - $68,500 --- - --- Standard 20,000 - 32,000 3,000 - 6,000 750 - 1,000 750 - 1,000 24,500 - 40,000 --- --- Economy 8,000 - 15,000 2,000 - 4,000 500 - 1,000 500 - 750 11,000 - 20,750 --- - --- 1979 Luxury 36,000 - 65,000 8,000 - 15,000 1,500 - 3,000 1,500 - 2,000 47,000 - 85,000 6.8 - 8.0 Standard 25,000 - 36,000 5,000 - 10,000 1,000 - 2,000 1,000 - 1,500 32,000 - 49,500 10.2 - 7.9 Economy 10,000 - 20,000 3,000 - 5,000 750 - 1,000 750 - 1,000 14,500 - 27,000 10.6 - 10.0 1981 Luxury 45,000 - 80,000 10,000 - 20,000 2,000 - 3,500 2,000 - 2,500 59,000 - 106,000 12.8 - 12.4 Standard 25,000 - 40,000 7,000 - 13,000 1,200 - 2,500 1,200 - 2,000 34,400 - 57,500 3.8 - 8.1 Economy 13,000 - 25,000 4,000 - 7,000 700 - 1,200 900 - 1,200 18,600 - 34,400 14.1 - 13.7 1983 Luxury 55,000 - 100,000 12,500 - 20,000 2,300 - 4,000 2,000 - 2,800 71,800 - 126,800 10.8 - 9.8 Standard 35,000 - 50,000 9,000 - 15,000 1,400 - 3,000 1,300 - 2,200 46,700 - 70,200 17.9 - 11.0 Economy 18,000 - 32,000 5,000 - 8,000 800 - 1,500 900 - 1,300 24,700 - 42,800 16.4 - 12.2 1985 Luxury 60,000 - 115,000 13,400 - 30,000 3,000 - 5,000 2,100 - 3,100 78,500 - 153,100 4.7 - 10.4 Standard 38,000 - 57,000 9,500 - 16,500 1,900 - 3,600 1,500 - 2,500 50,900 - 79,600 4.5 - 6.7 Economy 20,000 - 36,000 5,000 - 8,800 1,000 - 1,700 1,000 - 1,500 27,000 - 48,000 4.7 - 6.1 1986 Luxury 62,000 - 120,000 13,700 - 30,600 3,100 - 5,200 2,300 - 3,100 81,100 - 158,900 3.3 - 3.8 Standard 39,000 - 60,000 9,700 - 16,800 2,000 - 3,800 1,500 - 2,600 52,200 - 83,200 2.6 - 4.5 Economy 21,000 - 37,000 5,100 - 9,000 1,000 - 1,800 1,100 - 1,500 28,200 - 49,300 4.4 - 2.7 1987 Luxury 63,000 - 122,000 13,800 - 30,900 3,300 - 5,500 2,300 - 3,200 82,400 - 161,600 1.6 - 1.7 Standard 40,000 - 61,000 9,800 - 16,800 2,100 - 3,900 1,500 - 2,600 53,400 - 84,300 2.3 - 1.3 Economy 21,000 - 39,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 28,400 - 51,400 0.7 - 4.3 1988 Luxury 65,000 - 125,000 14,000 - 31,000 3,300 - 5,500 2,300 - 3,200 84,600 - 164,700 2.7 - 1.9 Standard 41,000 - 63,000 10,000 - 17,100 2,100 - 3,900 1,500 - 2,600 54,600 - 86,600 2.2 - 2.7 Economy 22,000 - 40,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 29,400 - 52,400 3.5 - 1.9 1989 Luxury 66,000 - 126,000 15,000 - 32,000 3,300 - 5,500 2,300 - 3,200 86,600 - 166,700 2.4 - 1.2 Standard 41,000 - 64,000 10,500 - 18,000 2,100 - 3,900 1,500 - 2,600 55,100 - 88,500 0.9 - 2.2 Economy 22,000 - 40,000 5,500 - 9,700 1,100 - 1,800 1,100 - 1,500 29,700 - 53,000 1.0 - 1.1 1990 Luxury 67,000 - 128,000 15,400 - 33,000 3,500 - 5,700 2,500 - 3,500 88,400 - 170,200 2.1 - 2.1 Standard 42,000 - 65,000 10,800 - 18,500 2,200 - 4,000 1,600 - 2,800 56,600 - 90,300 2.7 - 2.0 Economy 22,500 - 41,000 5,600 - 10,000 1,200 - 1,800 1,200 - 1,600 30,500 - 54,400 2.7 - 2.6 1991 Luxury 65,000 - 122,000 14,500 - 31,500 3,700 - 5,900 2,600 - 3,600 85,800 - 163,000 (2.9) - (4.2) Standard 40,000 - 63,000 10,000 - 17,800 2,300 - 4,200 1,700 - 2,900 54,000 - 87,900 (4.6) - (2.7) Economy 21,000 - 39,000 5,000 - 9,500 1,300 - 2,000 1,300 - 1,700 28,600 - 52,200 (6.2) - (4.0) 1992 Luxury 64,000 - 120,000 14,200 - 30,900 3,800 - 6,100 2,700 - 3,700 84,700 - 160,700 (1.3) - (1.4) Standard 39,000 - 62,000 9,800 - 17,400 2,300 - 4,400 1,800 - 3,000 52,900 - 86,800 (2.0) - (1.3) Economy 21,000 - 38,000 4,900 - 9,300 1,400 - 2,100 1,300 - 1,800 28,600 - 51,200 0.0 - (1.9) 1993 Luxury 63,000 - 119,000 14,000 - 30,500 3,900 - 6,200 2,800 - 3,800 83,700 - 159,500 (1.2) - (0.7) Standard 39,000 - 61,000 9,700 - 17,200 2,300 - 4,500 1,800 - 3,000 52,800 - 85,700 (0.2) - (1.3) Economy 21,000 - 38,000 4,900 - 9,200 1,400 - 2,100 1,300 - 1,800 28,600 - 51,100 0.0 - (0.2) 1994 Luxury 64,000 - 121,000 14,300 - 31,100 3,900 - 6,200 2,800 - 3,800 85,000 - 162,100 1.6 - 1.6 Standard 40,000 - 63,000 10,000 - 17,600 2,400 - 4,600 1,800 - 3,000 54,200 - 88,200 2.7 - 2.9 Economy 22,000 - 40,000 5,100 - 9,500 1,500 - 2,200 1,300 - 1,800 29,900 - 53,500 4.5 - 4.7 1995 Luxury 65,000 - 124,000 14,800 - 32,300 4,100 - 6,400 2,900 - 4,000 86,800 - 166,700 2.1 - 2.8 Standard 41,000 - 65,000 10,400 - 18,300 2,500 - 4,800 1,900 - 3,100 55,800 - 91,200 3.0 - 3.4 Economy 23,000 - 42,000 5,400 - 9,900 1,600 - 2,300 1,300 - 1,800 31,300 - 56,000 4.7 - 4.7
Average Annual Compounded Percent Change: 1976 - 1995: Luxury 4.3% - 4.8% 1986 - 1995: Luxury 0.8% - 0.5% Standard 4.4% - 4.4% Standard 0.7% - 1.0% Economy 5.7% - 5.4% Economy 1.2% - 1.4% - -------------------------------------------------------------------------------- Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Cost Approach 136 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= As illustrated by the previous table, hotel development costs rose significantly during the late 1970s and the early 1980s; however, the rate of increase slowed substantially in 1987. In 1991, hotel development costs declined for the first time since 1976. Further drops of as much as 2.0% were registered in 1992. Between 1986 and 1990, average annual compounded increases ranged from 1.7% to 2.5%. Costs rose slowly (at average annual compounded rates ranging from 0.5% to 1.4%) between 1986 and 1995, largely as a result of the declines in 1991, 1992, and 1993. In 1995, hotel development costs started to escalate more rapidly, reaching 4.7% in the economy segment. As more hotels are developed, we expect costs to continue to rise. Because the replacement cost tends to set the upper limit of a particular hotel's value, this figure is relevant to our analysis. We estimate the replacement cost of the subject property as follows, based on the development cost survey discussed earlier. ================================================================================ Table 12-2 Subject Property's Replacement Cost - -------------------------------------------------------------------------------- Cost Number of Hotel Cost Per Room Rooms Total Cost - -------------------------------------------------------------------------------- Building $40,000 215 $8,600,000 FF&E 10,000 215 2,150,000 Pre-opening 2,500 215 537,500 Operating Capital 2,000 215 430,000 --------- ------------- Total $54,500 $11,717,500 - -------------------------------------------------------------------------------- Ground Lease Approach to Land Valuation Land value may be estimated either by the sales comparison approach, using comparable land sales, or by the ground lease approach, which is based on the economic value generated by an improvement that represents the property's highest and best use. Because it is unusual to find recent sales of comparable vacant land that is slated for imminent hotel development, we have used the ground lease approach to determine the subject property's land value. Hotels are often constructed on leased land, and although lease terms differ somewhat, the basis for the rental calculation is frequently tied to a percentage of revenue. By applying a typical ground lease rental formula to the subject property's stabilized revenues, the appraiser can determine Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Cost Approach 137 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the hotel's economic rent, or what is also known as the income attributable to the land. Land value is then calculated by dividing the economic rent by an appropriate capitalization rate. The self-adjusting aspect of this approach is key to its reliability. Because the rental formula is tied to a percentage of revenue that inherently reflects both the locational attributes of the site (occupancy and rate) and the allowable density of development, the resulting economic ground rent justly represents the greatest net return to the land over a given period. Because the Ramada Hotel appears to represent the highest and best use of the property, the ground lease approach is an appropriate method of determining land value. We have researched long-term hotel ground leases in search of rental formulas that are based on a percentage of rooms revenue or on a combination of rooms, food, and beverage revenue. This analysis indicates that economic ground rents for hotels similar to the subject property typically range from 2.7% to 7.8% of rooms revenue. Although this range is quite broad, most of the formulas yield rental percentages of between 3% and 5% of rooms revenue. After considering these comparable ground leases and the locational attributes of the subject property, we believe the appropriate economic ground rental percentage is 3% of stabilized rooms revenue. The subject property's stabilized rooms revenue has been deflated to reflect 1997 dollars. The following calculation shows the derivation of the subject property's economic ground rent. Stabilized Rooms Revenue (1997 dollars) $2,384,466 Rental Percentage 0.03 ------------- Economic Ground Rent $71,534 Rent generated by a ground lease represents a fairly low-risk income flow. Because the tenant improvements typically amount to more than eight times the value of the land, the risk of default is low. When the ground lease terms are tied to rooms revenue, the landlord is also protected from the adverse effects of inflation. Based on these risk factors and the current cost of long-term capital, we estimate the appropriate ground rental overall capitalization rate at 10%. Applying this indicated capitalization rate to the subject property's economic ground rent yields the following estimate of land value. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Cost Approach 138 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Economic Ground Rent $71,534 $715,340 --------------------------- = ----------- = Capitalization Rate 0.10 Estimated Land Value (Say) $715,000 A new hotel's land value typically ranges from 10% to 20% of the overall value. The estimate of land value presented above is approximately 20% of the subject property's total value as indicated by the income capitalization approach. Replacement Cost Combining the replacement cost of the property with the land value yields the subject property's total replacement cost. ================================================================================ Table 12-3 Total Replacement Cost - -------------------------------------------------------------------------------- Cost of Improvements and FF&E $11,717,500 Land Value 715,000 ------------- Total Replacement Costs $12,432,500 Total Replacement Costs (SAY) $12,400,000 - -------------------------------------------------------------------------------- If a property's replacement cost is significantly higher than the values indicated by the income capitalization and sales comparison approaches, it may indicate that an upward adjustment of these values is appropriate. This would also reduce the probability of new hotel development, which is not likely to be feasible under those conditions. This creates an effective barrier to entry for new competition, thus reducing the risk associated with the subject property's income-generating potential. An upward adjustment of the value indicated by the income capitalization approach is also justified by this barrier to entry. We find that knowledgeable hotel buyers generally base their purchase decisions on economic factors, such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, it is our opinion that the cost approach is inapplicable in estimating the market value of the Ramada Hotel. However, we have estimated the subject property's replacement cost as new, which may set the upper limit of the hotel's value. Hospitality Valuation Services, Reconciliation of Boulder, Colorado Ramada Hotel Value Indications 139 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 13. Reconciliation of Value Indications The reconciliation, which is the last step in the appraisal process, involves summarizing and correlating the data and procedures employed throughout the analysis. The final conclusion of value is arrived at after reviewing the estimates indicated by the income capitalization, sales comparison, and cost approaches. The relative significance, applicability, and defensibility of each indicated value is considered, and the greatest weight is given to that approach deemed most appropriate for the property being appraised. The purpose of this report is to estimate the market value of the fee simple interest in the subject property. Our appraisal involves a careful analysis of the property itself and the economic, demographic, political, physical, and environmental factors that influence real estate values. Based on the data set forth in this report, the following value indications were developed. Approach Value Indication -------- ---------------- Income Capitalization $3,500,000 Sales Comparison $2,500,000 to $6,700,000 Cost (Replacement Cost) $12,400,000 Income Capitalization Approach To estimate the subject property's value via the income capitalization approach, we analyzed the local market for transient accommodations, examined the competitive environment, projected occupancy and average rate levels, and developed a forecast of income and expense that reflects anticipated income trends and cost components through a stabilized year of operation. The subject property's projected net income before debt service was then allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component was calculated; the total of the mortgage and equity components equates to the value of the property. Hospitality Valuation Services, Reconciliation of Boulder, Colorado Ramada Hotel Value Indications 140 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Our nationwide experience indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the hotel investors who constitute the marketplace. For this reason, we believe that the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in our final estimate of the subject property's market value. Sales Comparison Approach The sales comparison approach uses actual sales of similar properties to provide an indication of the subject property's value. The strength of this approach is that it measures value based on the investment decisions made by actual buyers and sellers. Although we have investigated a number of sales in an attempt to develop a range of value indications, several adjustments are necessary to render the sales prices applicable to the subject property. These adjustments, which are numerous and highly subjective, diminish the reliability of the sales comparison approach. Furthermore, we find that typical hotel investors employ a sales comparison procedure only to establish broad value parameters. The hotel sales outlined earlier in this report indicate an adjusted value range of $11,400 to $31,000 per available room. The income capitalization approach indicates a per-room value of approximately $16,300 This information suggests that a slight upward adjustment of the value indicated by the income capitalization approach may be warranted. Cost Approach To estimate the subject property's value via the cost approach, we estimated the current replacement cost of the property and added the land value. We give the cost approach limited weight in arriving at a final value estimate, because knowledgeable buyers of lodging facilities generally base their purchase decisions on economic factors (such as projected net income and return on investment) rather than on a property's depreciated replacement cost. The replacement cost estimate developed via the cost approach can help to corroborate the results of the income capitalization and sales comparison approaches to value. If the replacement cost is substantially higher or lower than the value indicated by the income capitalization approach, an upward or downward adjustment of the income capitalization approach value may be necessary. Based on the estimated replacement cost of $12,400,000, an upward adjustment of the income capitalization value is warranted. Hospitality Valuation Services, Reconciliation of Boulder, Colorado Ramada Hotel Value Indications 141 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Value Conclusion Careful consideration has been given to the strengths and weaknesses of the three approaches to value discussed above. In recognition of the purpose of this appraisal, we have given primary weight to the value indicated by the income capitalization approach and made some subjective adjustments based on the replacement cost estimate, the sales comparison approach, and our extensive experience in the hospitality industry. It is our opinion that the market value of the fee simple interest in the Ramada Hotel - Omaha, as of January 1, 1997, is: $3,600,000 THREE MILLION SIX HUNDRED THOUSAND DOLLARS The estimate of market value includes the land, the improvements, and the furniture, fixtures, and equipment. The appraisal assumes that the hotel is open and operational. This value estimate equates to roundly $16,700 per room, which is well supported by market sales and approximately 3% higher than the value indicated by the income capitalization approach. The estimate of value assumes either the availability of third-party financing or the willingness and capability of the seller to take back purchase-money financing so that a buyer can obtain the level of debt set forth in the Income Capitalization Approach section of this appraisal. Marketing Period Our estimate of market value assumes a marketing period of six to twelve months. Under normal economic conditions, hotels are transferred within this time frame. Exposure Period We believe that it would take between three and six months of exposure, at a value between $3,600,000 and $3,900,000 to sell the subject property at the concluded value. Personal Property In accordance with the appraisal standards set forth by the Office of the Comptroller of the Currency, it is necessary for bank appraisals to identify and value any personal property, fixtures, or intangible items that are included in the appraisal and discuss their impact on the overall estimate of market value. A hotel's income-generating ability depends on a suitable inventory of furniture, fixtures, and equipment. Removal of these items can decrease the property value by as much as the cost to replace the inventory plus the loss of income incurred while the hotel cannot function. Hospitality Valuation Services, Reconciliation of Boulder, Colorado Ramada Hotel Value Indications 142 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= A hotel's personal property consists of a wide variety of components, including bedroom furnishings, bathroom fixtures, restaurant and kitchen equipment, front office and accounting computers, exterior signs, and similar items. Our inspection of the Ramada Hotel indicates that the personal property and fixtures are in relatively good condition, as a portion of the hotel's inventory was replaced in years 1995 and 1996. Based on an annual construction cost survey conducted by HVS International, we estimate the total replacement cost of the subject property's furniture, fixtures, and equipment at $10,000 per available room. Assuming an average useful life of ten years and an effective age of five years, the value of the furniture, fixtures, and equipment currently in place is approximately $5,000 per room, or a total of $1,075,000. The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) stipulates that "...any business interest or other intangible item should be valued separately within the appraisal."(1) Hotels have both business and real estate components; without the business expertise necessary to operate the facility, a hostelry would have little real estate value. Because furniture, fixtures, and equipment are essential to a hotel's income-generating ability and are seldom removed from the property or sold separately, the separation of the personal property component from the real property is not particularly meaningful. (1) Federal Register, Vol. 55, No. 143, July 25, 1990, p. 30205. Hospitality Valuation Services, Statement of Assumptions Boulder, Colorado Ramada Hotel and Limiting Conditions 143 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 14. Statement of Assumptions and Limiting Conditions 1. This report is to be used in whole and not in part. 2. No responsibility is assumed for matters of a legal nature, nor do we render any opinion as to title, which is assumed to be marketable and free of any deed restrictions and easements. The property is valued as though free and clear unless otherwise stated. 3. We assume that there are no hidden or unapparent conditions of the sub-soil or structures, such as underground storage tanks, that would render the property more or less valuable. No responsibility is assumed for these conditions or for any engineering that may be required to discover them. 4. We have not considered the presence of potentially hazardous materials such as asbestos, urea formaldehyde foam insulation, PCBs, any form of toxic waste, polychlorinated biphengyls, pesticides, or lead-based paints. The appraisers are not qualified to detect hazardous substances, and we urge the client to retain an expert in this field if desired. 5. The Americans with Disabilities Act (ADA) became effective on January 26, 1992. We have conducted no specific compliance survey to determine whether the subject property is operating in accordance with the various detailed requirements of the ADA. It is possible that the property does not conform to the requirements of the act, and this could have an unfavorable effect on value. Because we have no direct evidence regarding this issue, our estimate of value does not consider possible non-compliance with the ADA. Hospitality Valuation Services, Statement of Assumptions Boulder, Colorado Ramada Hotel and Limiting Conditions 144 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 6. We have made no survey of the property, and we assume no responsibility in connection with such matters. Sketches, photographs, maps, and other exhibits are included to assist the reader in visualizing the property. It is assumed that the use of the land and improvements is within the boundaries of the property described, and that there is no encroachment or trespass unless noted. 7. All information, financial operating statements, estimates, and opinions obtained from parties not employed by HVS International are assumed to be true and correct. We can assume no liability resulting from misinformation. 8. Unless noted, we assume that there are no encroachments, zoning violations, or building violations encumbering the subject property. 9. The property is assumed to be in full compliance with all applicable federal, state, local, and private codes, laws, consents, licenses, and regulations (including a liquor license where appropriate), and that all licenses, permits, certificates, franchises, and so forth can be freely renewed or transferred to a purchaser. 10. All mortgages, liens, encumbrances, leases, and servitudes have been disregarded unless specified otherwise. 11. None of this material may be reproduced in any form without our written permission, and the report cannot be disseminated to the public through advertising, public relations, news, sales, or other media. 12. We are not required to testify or appear in court by reason of this analysis without previous arrangements, and only when our standard per diem fees and travel costs are paid prior to the appearance. 13. If the reader is making a fiduciary or individual investment decision and has any questions concerning the material presented in this report, it is recommended that the reader contact us. 14. We take no responsibility for any events or circumstances that take place subsequent to either the date of value or the date of our field inspection, whichever occurs first. Hospitality Valuation Services, Statement of Assumptions Boulder, Colorado Ramada Hotel and Limiting Conditions 145 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 15. The quality of a lodging facility's on-site management has a direct effect on a property's economic viability and value. The financial forecasts presented in this analysis assume responsible ownership and competent management. Any departure from this assumption may have a significant impact on the projected operating results and the value estimate. 16. The estimated operating results presented in this report are based on an evaluation of the overall economy, and neither take into account nor make provision for the effect of any sharp rise or decline in local or national economic conditions. To the extent that wages and other operating expenses may advance during the economic life of the property, we expect that the prices of rooms, food, beverages, and services will be adjusted to at least offset those advances. We do not warrant that the estimates will be attained, but they have been prepared on the basis of information obtained during the course of this study and are intended to reflect the expectations of a typical hotel buyer. 17. This analysis assumes continuation of all Internal Revenue Service tax code provisions as stated or interpreted on either the date of value or the date of our field inspection, whichever occurs first. 18. Many of the figures presented in this report were generated using sophisticated computer models that make calculations based on numbers carried out to three or more decimal places. In the interest of simplicity, most numbers have been rounded to the nearest tenth of a percent. Thus, these figures may be subject to small rounding errors. 19. It is agreed that our liability to the client is limited to the amount of the fee paid as liquidated damages. Our responsibility is limited to the client, and use of this report by third parties shall be solely at the risk of the client and/or third parties. The use of this report is also subject to the terms and conditions set forth in our engagement letter with the client. 20. Appraising hotels is both a science and an art. Although this analysis employs various mathematical calculations to provide value indications, the final estimate is subjective and may be influenced by our experience and other factors not specifically set forth in this report. Hospitality Valuation Services, Statement of Assumptions Boulder, Colorado Ramada Hotel and Limiting Conditions 146 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 21. Any distribution of the total value between the land and improvements or between partial ownership interests applies only under the stated use. Moreover, separate allocations between components are not valid if this report is used in conjunction with any other analysis. 22. This study was prepared by Hospitality Valuation Services, divisions of H & R Valuation Services, Inc. and Hotel Consulting Services, Inc. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of Hotel Consulting Services, Inc. as employees, rather than as individuals. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Certification 147 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 15. Certification We, the undersigned appraisers, hereby certify: 1. that the statements and opinions presented in this report, subject to the limiting conditions set forth, are correct to the best of our knowledge and belief; 2. that Tanya J. Pierson personally inspected the property described in this report; and Anne Lloyd-Jones, Gregory Hartmann, and Stephen Rushmore participated in the analysis and has reviewed the findings, but has not personally inspected the property; 3. that we have no current or contemplated interests in the real estate that is the subject of this report; 4. that we have no personal interest or bias with respect to the subject matter of this report or the parties involved; 5. that this report sets forth all of the limiting conditions (imposed by the terms of this assignment) affecting the analyses, opinions, and conclusions presented herein; 6. that the fee paid for the preparation of this report is not contingent upon our conclusions; 7. that this report has been prepared in accordance with, and is subject to, the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute; 8. that the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives; 9. that this report has been prepared in accordance with the Uniform Standards of Professional Appraisal Practice (as adopted by the Appraisal Foundation); Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Certification 148 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 10. that no one other than the undersigned prepared the analyses, conclusions, and opinions concerning real estate that are set forth in this appraisal report; 11. that as of the date of this report, Stephen Rushmore has completed the requirements of the continuing education program of the Appraisal Institute; 12. that this appraisal is not based on a requested minimum value, a specific value, or the approval of a loan. /s/ Tanya J. Pierson -------------------------------------- Tanya J. Pierson Senior Associate - HVS Denver /s/ Anne R. Lloyd-Jones -------------------------------------- Anne R. Lloyd-Jones, CRE Senior Vice President - HVS New York /s/ Gregory Hartmann -------------------------------------- Gregory Hartmann, CHA Managing Director - HVS Denver /s/ Stephen Rushmore -------------------------------------- Stephen Rushmore, CRE, MAI, CHA President - HVS New York TJP:ARL-J:GH:SR:dtq Hospitality Valuation Services, Boulder, Colorado Ramada Inn Addendum - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Addendum [GRAPHIC OMITTED] Exterior View of Subject Property Looking North Hospitality Valuation Services, Boulder, Colorado Ramada Inn Addendum - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] View of Subject Property from 72nd Street [GRAPHIC OMITTED] View of Subject Property's Swimming Pool Hospitality Valuation Services, Boulder, Colorado Ramada Inn Addendum - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] View of Subject Property's Restaurant [GRAPHIC OMITTED] View of Meeting Room Hospitality Valuation Services, Boulder, Colorado Ramada Inn Addendum - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] View of Double/Double Room [GRAPHIC OMITTED] View of Typical Guest Bathroom Hospitality Valuation Services, Boulder, Colorado Ramada Inn Addendum - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] View of Primary Competitor - Best Western Central [GRAPHIC OMITTED] View of Primary Competitor - Holiday Inn Central Hospitality Valuation Services, Boulder, Colorado Ramada Inn Addendum - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] View of Primary Competitor - Clarion Carlisle [GRAPHIC OMITTED] View of Primary Competitor - Sheraton Four Points LEGAL DESCRIPTION Lot 1, except the North 17 feet thereof, and all of Lots 2, 3, 4 and 5, in block 12, LAWNFIELD, an addition to the City of Omaha, as surveyed, plotted and recorded in Douglas County, Nebraska, more particularly described as follows: Beginning at the Southeast corner of Lot 5, said Block 12; thence North 89(degrees)26'29" West (assumed bearings) for 298.50 feet to the Southwest corner of said Lot 5; thence North 0(degrees)00'07" West for 583.00 feet along the West line of Lots 5, 4, 3, 2, & 1, said Block 12; thence South 89(degrees)28'41" East for 298.50 feet 17.00 feet South of and parallel to the North line of Lot 1 to the East Line of Lot 1, said Block 12; thence South 0(degrees)00'00" East for 583.00 feet along the East line of Lots 1, 2, 3, 4 and 5, to the point of beginning. Contains 174,039 square feet. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Addendum - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Synopsis of Franchise and License Agreements Date: October 3, 1994 Licensor: Ramada Franchise Systems, Inc. Licensee: Omaha Nebraska Hotel Limited Partnership Premises: Franchise agreement is for the Ramada Inn located at 7007 Grover Street, Omaha, Nebraska 68106 Term: Fifteen Years Renewal: No Terms Stated Fees: Initial fee of $350 per guest room; recurring fees consist of a royalty fee of 4% of gross rooms revenue (maximum), and a RINA Services Assessment Fee of 4.5% of gross rooms revenue. There is a special provision in place for the royalty fees. It states "for the period commencing with the opening date until and including December 31, 1995, the royalty payable pursuant to this agreement shall be 2.85% of gross room sales. Effective each January 1 thereafter, the royalty percentage shall increase by 0.09%, but in no event shall the royalty percentage exceed 4%." Licensor Services: Ramada will maintain a computerized central reservation system. Ramada will use marketing and reservation assessments to promote public awareness and usage of system hotels by implementing advertising, promotion, publicity, market research and other marketing programs. Publish a system directory. Assure the property has a reasonable level of training. Licensee Obligations: Licensee must commence renovation of the facility no later than 30 days after the effective date, and complete renovation no later than ninety days after the effective date. All hotel modifications must receive Ramada's written consent. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Addendum - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Licensee must also send Ramada, on the 10th day of each month, a written financial report in the form prescribed by Ramada. Exercise best efforts to maximize the good will, guest satisfaction and usage of the system and property. Licensee must comply with the system in place, legally and ethically, as well as provide lodging at a discounted rate to all Ramada employees and representatives. Termination: Ramada may terminate this agreement at any time with notice for a number of reasons including, 1) if the licensee fails to submit monthly reports within 10 days after receipt of Ramada's written demand, 2) if the licensee fails to pay any amount due to Ramada, 3) if the licensee fails to remedy any other breach of its obligations, 4) if the licensee loses possession of or the right to possess all of the facility, 5) if the licensee knowingly maintains false books or records, 6) if the licensee fails to pay its debts as they fall due, 7) if the licensee makes or made a misstatement or omission of any material fact in connection with the agreement or 8) if the licensee fails to deliver within 30 days any other agreement with Ramada. Ramada may terminate this agreement without notice if the licensee violates or suffers a violation, if the facility ceases to be operated under the system after the opening date, or if the licensee contests in any court proceeding the ownership of or Ramada's right to license the system or the validity of any of the marks. In addition if any involuntary proceeding in bankruptcy is filed, the license is dissolved. If the facility suffers a casualty such that the facility cannot continue to operate in a normal course of business, licensee shall promptly notify Ramada in writing of such casualty. If the licensee plans to restore, rebuild and refurbish the facility, it must be completed within 180 days, or it elects to terminate the license. If condemnation occurs, then the license will be deemed terminated on the date the facility is taken over by the condemning authority. The licensee shall have the right to terminate this agreement at any time after the seventh anniversary of the opening date, provided that the licensee is not then in default of the agreement, and provides Ramada with at least 60 days advance notice and pays to Ramada a fee equal to $100 per guest room. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Addendum - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Synopsis of Hotel Management Agreement Date: October 1, 1994 Owner: Omaha Nebraska Hotel Limited Partnership Manager: Remington Hospitality, Inc. Premises: Management agreement is for the Ramada Inn, located at 7007 Grover Street, Omaha, Nebraska 68106 Term: Fifteen Years Renewal: May be renewed by the manager for each of two successive periods of five fiscal years. Notice of renewal must be given six months prior to the expiration of the current term. Management Fee: A sum equal to three percent of the gross revenues for each accounting period, payable monthly. Reserve for Replacement: The manager shall establish a reserve account on the property's books of account to cover the cost of 1) replacement and renewals to the FF&E, and 2) certain non-routine repairs and maintenance. For each fiscal year, the capital improvement reserve shall be an amount equal to 3% of the premises gross revenues or in such other amount agreed to by owner and manager. All changes, repairs, renewals or replacements shall be the property of the owner. The manager is responsible for preparing a budget of necessary expenditures of replacement for approval by the owner. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Addendum - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Termination: Upon the occurrence of any of such events of default, the non-defaulting party may give the defaulting party notice of intention to terminate the agreement and upon the expiration of thirty days from the date of such notice, this agreement shall terminate. In the event that the agreement is terminated, the manager shall be entitled to receive any and all amounts due to the manager under the agreement through and prorated to the date of termination. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Explanation of the Simultaneous Valuation Formula The algebraic equation known as the simultaneous valuation formula, which solves for the total property value using a ten-year mortgage and equity technique, was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."1 The process of solving for the value of the mortgage and equity components begins by deducting the annual debt service from the projected income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value using the terminal capitalization rate. The equity residual, which is the total reversionary value less the mortgage balance at that point in time and less any brokerage and legal costs associated with the sale, is discounted to the date of value at the equity yield rate. The net income to equity for each projection year is also discounted back to the date of value. The sum of these discounted values equals the value of the equity component. Because the equity component comprises a specific percentage of the total value, the value of the mortgage and the total property can be computed easily. This process can be expressed in two algebraic equations that set forth the mathematical relationships between the known and unknown variables using the following symbols. (17) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= NI = Net income available for debt service V = Value M = Loan-to-value ratio f = Annual debt service constant n = Number of years in the projection period de = Annual cash available to equity dr = Residual equity value b = Brokerage and legal cost percentage P = Fraction of the loan paid off during the projection period fp = Annual constant required to amortize the entire loan during the projection period Rr = Overall terminal capitalization rate that is applied to net income to calculate the total property reversion (sales price at the end of the projection period) 1/Sn = Present worth of $1 factor (discount factor) at the equity yield rate Using these symbols, the following formulas can be used to express some of the components of this mortgage and equity valuation process. Debt Service - A property's debt service is calculated by first determining the mortgage amount that equals the total value (V) multiplied by the loan-to-value ratio (M). Debt service is derived by multiplying the mortgage amount by the annual debt service constant (f). The following formula represents debt service. f x M x V = Debt Service Net Income to Equity (Equity Dividend) - The net income to equity (de) is the property's net income before debt service (NI) less debt service. The following formula represents the net income to equity. NI - (f x M x V) = de Reversionary Value - The value of the hotel at the end of the tenth year is calculated by dividing the 11th-year net income before debt service (NI^11) by Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the terminal capitalization rate (Rr). The following formula represents the property's tenth-year reversionary value. (NI^11/Rr) = Reversionary Value Brokerage and Legal Costs - When a hotel is sold, certain costs are associated with the transaction. Normally, the broker is paid a commission and the attorney collects legal fees. In the case of hotel transactions, brokerage and legal costs typically range from 1% to 4% of the sales price. Because these expenses reduce the proceeds to the seller, they are usually deducted from the reversionary value in the mortgage and equity valuation process. Brokerage and legal costs (b), expressed as a percentage of reversionary value (NI^11/Rr), are calculated by application of the following formula. b(NI^11/Rr) = Brokerage and Legal Costs Ending Mortgage Balance - The mortgage balance at the end of the tenth year must be deducted from the total reversionary value (debt and equity) in order to determine the equity residual. The formula used to determine the fraction of the loan remaining (expressed as a percentage of the original loan balance) at any point in time (P) takes the annual debt service constant of the loan over the entire amortization period (f) less the mortgage interest rate (i), and divides it by the annual constant required to amortize the entire loan during the ten-year projection period (fp) less the mortgage interest rate. The following formula represents the fraction of the loan paid off (P). (f - i)/(fp - i) = P If the fraction of the loan paid off (expressed as a percentage of the initial loan balance) is P, then the remaining loan percentage is expressed as 1 - P. The ending mortgage balance is the fraction of the remaining loan (1 - P) multiplied by the initial loan amount (M x V). The following formula represents the ending mortgage balance. (1 - P) x M x V Equity Residual Value - The value of the equity upon the sale at the end of the projection period (dr) is the reversionary value less the brokerage and legal costs and the ending mortgage balance. The following formula represents the equity residual value. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= (NI^11/Rr) - (b(NI^11/Rr) - ((1 - P) x M x V) = dr Annual Cash Flow to Equity - The annual cash flow to equity consists of the equity dividend for each projection year plus the equity residual at the end of the tenth year. The following formula represents the annual cash flow to equity. NI^1 - (f x M x V) = de^1 NI^2 - (f x M x V) = de^2 NI^10 - (f x M x V) = de^10 (NI^11/Rr) - (b(NI^11/Rr) - ((1 - P) x M x V) = dr Value of the Equity - If the initial mortgage amount is calculated by multiplying the loan-to-value ratio (M) by the property value (V), then the equity value is one minus the loan-to-value ratio multiplied by the property value. The following formula represents the value of the equity. (1 - M) V Discounting the Cash Flow to Equity to the Present Value - The cash flow to equity in each projection year is discounted to the present value at the equity yield rate (1/S^n). The sum of these cash flows is the value of the equity (1 - M) V. The following formula represents the calculation of equity as the sum of the discounted cash flows. (de^1 x 1/S^1) + (de^2 x 1/S^2) + . . . + (de^10 x 1/S^10) + (dr x 1/S^10) = (1 - M) V Combining the Equations: Annual Cash Flow to Equity and Discounting the Cash Flow to Equity to the Present Value - The last step is to arrive at one overall equation that shows that the annual cash flow to equity plus the yearly discounting to the present value equals the value of the equity. ((NI^1 - (f x M x V)) 1/S^1) + ((NI^2 - (f x M x V)) 1/S^2) + . . . ((NI^10 - (f x M x V)) 1/S^10) + (((NI^11/Rr) - (b(NI^11/Rr)) - ((1 - P) x M x V)) 1/S^10) = (1 -M) V Because the property's value (V) is the only unknown, this equation can be solved readily. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Ten-Year Projection of Income and Expense - Because the fixed and variable forecast of income and expense is carried out only to the stabilized year, it is necessary to continue the projection to the 11th year. In most cases, net income before debt service beyond the stabilized year is projected at an assumed inflation rate. By increasing a property's revenue and expenses at the same rate of inflation, net income remains constant as a percentage of total revenue, and the dollar amount escalates at the annual inflation rate. Hotel investors are currently using inflation rates of approximately 3.5% annually. The ten-year forecast of income and expense illustrates the subject property's net income, which is assumed to increase by 3.5% annually subsequent to the hotel's stabilized year of operation. Solving for Value Using the Simultaneous Valuation Formula - In the case of the subject property, the following known variables have been determined. ================================================================================ Table 1: Summary of Known Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Ten-Year Forecast Loan-To-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.111856 Equity Yield Ye 22.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 12.0% - -------------------------------------------------------------------------------- The following table illustrates the present worth of a $1 factor at the 22% equity yield rate. Hospitality Valuation Services, Boulder, Colorado Ramada Hotel Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 2: Present Worth of $1 Factor at the Equity Yield Rate - -------------------------------------------------------------------------------- Calendar Year Present Worth of $1 Ending: Factor @ 22.0% ---------------------------------------------- 1997 0.819639 1998 0.671808 1999 0.550640 2000 0.451326 2001 0.369924 2002 0.303205 2003 0.248518 2004 0.203695 2005 0.166957 2006 0.136844 - -------------------------------------------------------------------------------- Using these known variables, the following intermediary calculations must be made before applying the simultaneous valuation formula. The fraction of the loan paid off during the projection period is calculated as follows. P = (0.111856 - 0.095 ) / (0.155277 - 0.095 ) = 0.279638 The annual debt service is calculated as f x M x V. (f x M x V)= 0.111856 x 0.70 x V = 0.078299 V Inserting the known variables into the hotel valuation formula produces the following. ( 385,000 - 0.078299 V ) x 0.819672 + ( 433,000 - 0.078299 V ) x 0.671862 + ( 443,000 - 0.078299 V ) x 0.550707 + ( 458,000 - 0.078299 V ) x 0.451399 + ( 471,000 - 0.078299 V ) x 0.369999 + ( 486,000 - 0.078299 V ) x 0.303278 + ( 498,000 - 0.078299 V ) x 0.248589 + ( 513,000 - 0.078299 V ) x 0.203761 + ( 529,000 - 0.078299 V ) x 0.167017 + ( 544,000 - 0.078299 V ) x 0.136899 + ((( 563,000 / 0.120 ) - ( 0.03 x ( 563,000 / 0.120 )) - (( 1 - 0.279638 ) x 0.70 x V)) x 0.136899 ) = (1 - 0.70 ) V Like terms are combined as follows. $2,393,027 - 0.376214 V = (1 - 0.70)V $2,393,027 = 0.67621 V V = $2,393,027 / 0.67621 V = $3,538,863 Total Property Value as Indicated by the Income Capitalization Approach (Say) = $3,500,000 HVS International, Boulder, Colorado Qualifications of Tanya J. Pierson - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Tanya J. Pierson Employment 1994 to present HVS INTERNATIONAL (Division of H & R Valuation Services, Inc.) Boulder, Colorado 1993-1994 TABLE MOUNTAIN INN Golden, Colorado 1993 RICHFIELD HOTEL MANAGEMENT Denver, Colorado 1992-1993 HOTEL BOULDERADO Boulder, Colorado 1991 CAESARS TAHOE Stateline, Nevada 1990 LA QUINTA MOTOR INN Denver, Colorado Memberships and Eta Sigma Delta Affiliations University of Denver, CO Education BSBA, University of Denver Denver, Colorado HVS International, Boulder, Colorado Qualifications of Tanya J. Pierson - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Corporate and Institutional Clients Served Aldrich, Eastman & Waltch, L.P. Bank of Boston BHA Stonehouse Association Columbia Sussex Concept Restaurants, Inc. Credit Lyonnaise HEI Hotels Host Marriott Independence Bank One of California Investco ITT Sheraton Corporation Kirsch Hotels, Inc. Larken, Inc. Lehman Brothers Lexington Mortgage Manor Care Nomura Asset Capital Corp. Shaner Hotel Group Servico, Inc. Skopbank Stonebridge Development Corp. Snow Goose Investments US Bancorp White Lodging Services Walker Field Airport Authority Examples of Properties Appraised or Evaluated Alabama Holiday Inn, Dothan Hampton Inn, Dothan Holiday Inn Express, Gasden Clarion Hotel, Mobile Arizona Sheraton El Conquistador, Tucson Proposed Comfort Suites, Tucson Ramada, Palo Verde, Tucson Caribbean Hyatt Regency St. John, USVI Sands Hotel & Casino, Pureto Rico Aruba Marriott Resort & Casino - Aruba HVS International, Boulder, Colorado Qualifications of Tanya J. Pierson - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Properties Appraised or Evaluated (continued) Colorado Lodge at Vail, Vail Proposed Village Hotel, Boulder Ramada Inn Denver West, Golden Proposed Residence Hotel, Golden Proposed Interlocken - - Conference Resort, Broomfield Proposed Hotel, Grand Junction Hyatt Regency Beaver Creek, Avon Ramada Ltd., Northglenn Clarion Harvest House, Boulder Proposed Courtyard by Marriott, Golden Table Mountain Inn, Golden Hampton Inn, Colorado Springs Proposed Westin, Telluride Sheraton Denver West, Lakewood Proposed Comfort Suites, Westminster Florida Proposed Residence Inn, Naples Georgia Holiday Inn West, Augusta Holiday Inn Gordon Highway, Augusta Days Inn Downtown, Augusta Idaho Red Lion Downtowner, Boise Shilo Inn, Idaho Falls Red Lion Riverside, Boise Shilo Inn Riverside, Boise Illinois Wyndham Garden, Naperville Holiday Inn, Itasca Holiday Inn, Glen Ellyn Indiana Proposed Residence Inn, Bloomington Proposed Full Service Hotel, Ft. Wayne HVS International, Boulder, Colorado Qualifications of Tanya J. Pierson - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Properties Appraised or Evaluated Iowa Best Western Metro, Council Bluffs Kansas Holiday Inn, Lawrence Proposed MainStay Suites, Lawrence Holiday Inn, Manhattan Louisiana Quality Inn Metairie Comfort Inn, Baton Rouge Michigan Holiday Inn, Southfield Courtyard by Marriott, Warren Courtyard by Marriott, Dearborn Courtyard by Marriott, Troy Courtyard by Marriott, Southfield Comfort Inn, Traverse City Quality Inn, Plymouth Fairfield Inn, Auburn Hills Fairfield Inn, Warren Fairfield Inn, Madison Heights Fairfield Inn, Canton Fairfield Inn, Romulus Minnesota Wyndham Garden, Bloomington Holiday Inn, St. Paul Missouri Radisson Hotel Airport, St. Louis Comfort Inn, St. Louis HVS International, Boulder, Colorado Qualifications of Tanya J. Pierson - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Properties Appraised or Evaluated (continued) Nebraska Sheraton Inn, Omaha Best Western Central, Omaha Ramada Inn, Omaha North Carolina Days Inn RTP, Raleigh Best Western, Charleston Ohio Holiday Inn Coliseum, Richfield Pennsylvania Holiday Inn, Greentree Holiday Inn, Pittsburgh Texas Courtyard by Marriott North, Austin Proposed Courtyard by Marriott, - South, Austin Comfort Inn, Amarillo Crowne Plaza, Amarillo Holiday Inn Express, Amarillo Days Inn, Amarillo Utah Hilton, Salt Lake City Olympia Park, Park City Quality Inn Midvalley, Salt Lake City University Park Hotel & Suites, Salt Lake City Comfort Inn Airport, Salt Lake City HVS International, Boulder, Colorado Qualifications of Tanya J. Pierson - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Properties Appraised or Evaluated (continued) Virginia Holiday Inn, Covington Holiday Inn, Lexington Super 8, Wayensboro Super 8, Lexington Super 8, Radford Super 8, Norton Sheraton Roanoke Airport, Roanoke Holiday Inn, Salem Super 8 Harrisonburg Super 8 Roanoke Super 8, Christiansburg Proposed MainStay Suites, Roanoke Wyoming Proposed Resort, Teton Village HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Anne R. Lloyd-Jones, CRE Employment 1982 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1981 FAIRMONT HOTEL Dallas, Texas 1979 - 1980 SAGA FOOD SERVICE SWARTHMORE COLLEGE Swarthmore, Pennsylvania 1977 - 1980 DARANNE CATERERS Swarthmore, Pennsylvania Professional Affiliations American Society of Real Estate Counselors - Member (CRE) Appraisal Institute - Candidate for Membership Cornell Society of Hotelmen Education MPS - School of Hotel Administration, Cornell University BA - Swarthmore College Appraisal Institute Course 1A1 - Real Estate Appraisal Principles Course 1A2 - Basic Valuation Procedures Course 1BA - Capitalization Theory and Techniques, Part A Course 1BB - Capitalization Theory and Techniques, Part B Course 2-1 - Case Studies in Real Estate Valuation Course 2-3 - Standards of Professional Practice Course 3-1 - Report Writing HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Corporate and Institutional Clients Served Chase Manhattan Bank, N. A. Chemical Citibank Doubletree Hotels Great Western Bank Holiday Inns, Inc. Interstate Hotels Metropolitan Life MassMutual Marriott Corporation Morgan Guaranty Trust North Carolina National Bank Paine Inc. Salomon Inc. Sheraton Hotels Union Bank Winegardner & Hammons Wyndham Hotel Company Hotel Chains and Management Companies Appraised or Evaluated Doubletree Hotels Compri Hotels Interstate Hotels Fairmont Hotels Guest Quarters Hilton Hotels Corporation Omni International Hotels Ramada Hotel Corp. Servico Hotel Corp. Winegardner & Hammons Appearance as an Expert Witness Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Jefferson City, Missouri Federal Bankruptcy Court, Columbia, South Carolina Federal Bankruptcy Court, Houston, Texas Federal Bankruptcy Court, New York, New York Federal Bankruptcy Court, San Bernardino, California Federal Bankruptcy Court, Los Angeles, California Federal Bankruptcy Court, Charlotte, North Carolina Federal Bankruptcy Court, Miami, Florida Federal District Court, Central Division, Salt Lake City, Utah Iowa District Court, Story County, Iowa Texas District Court, Harris County, Texas Federal Bankruptcy Court, Tampa, Florida Utah District Court, Salt Lake County, Utah HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated Arizona - - Wyndham Garden Hotel, Chandler - - Wyndham Garden Hotel - Airport, Phoenix - - Wyndham Garden Hotel - Union Hills, Phoenix - - Canyon Ranch Spa & Fitness Resort, Tucson Alabama - - Holiday Inn, Birmingham - - Proposed Sheraton, Gulf Shores - - Proposed Inn, Mobile - - Holiday Inn, Sheffield California - - Industry Hills Sheraton Hotel, City of Industry - - Piccadilly Inn, Fresno - - Proposed Inn at Foss Creek, Healdsburg - - Sunset Towers Hotel, Hollywood - - Proposed La Quinta, Irvine - - Wyndham Garden Hotel, La Jolla - - Days Inn, La Palma - - Proposed Marriott Courtyard, Palm Springs - - Proposed Club Hilton Hotel, Pleasanton - - Center Pointe Development, San Diego - - Holiday Inn-Embarcadero, San Diego - - Holiday Inn-Harbor View, San Diego - - Seven Seas Lodge, San Diego - - Proposed Fountaingrove Inn, Santa Rosa - - Sheraton Round Barn Inn, Santa Rosa - - Wyndham Garden Hotel, Sunnyvale - - Westlake Plaza Hotel, Thousand Oaks - - Proposed Marriott Courtyard, Torrance Colorado - - Proposed Hotel, Keystone Connecticut - - Holiday Inn, Milford - - Holiday Inn, New Britain District of Columbia - - Grand Hotel, Washington - - Wyndham Bristol Hotel, Washington Florida - - Kon Tiki Village, Kissimmee - - Sheraton Lakeside, Kissimmee - - Holiday Inn, 22nd Street, Miami Beach - - Holiday Inn, 87th Street, Miami Beach - - Holiday Inn, 180th Street, Miami Beach - - Sheraton Resort & Marina, St. Petersburg - - Hilton Hotel, Singer Island - - Royce Hotel, West Palm Beach Georgia - - Marriott Hotel, Atlanta - - Wyndham Garden Hotel, Atlanta - - Holiday Inn, Brunswick - - Holiday Inn, Jekyll Island - - Mullberry Inn, Savannah - - Royal Savannah Inn, Savannah Hawaii - - Hobron in Waikiki, Honolulu Idaho - - Holiday Inn, Boise - - Red Lion Inn, Boise - - Super 8, Boise Illinois - - Ramada Inn, Bloomington - - Proposed Marriott Courtyard, Glenview - - Wyndham Garden Hotel, Naperville Indiana - - Holiday Inn, Bloomington - - Inn at the Four Winds, Bloomington - - Ramada Inn, Bloomington - - Hilton Hotel, Fort Wayne - - Airport Hilton Inn, Indianapolis - - Hilton at the Circle, Indianapolis Iowa - - Holiday Inn, Ames - - Proposed Fairfield Inn, Des Moines HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Kentucky - - Proposed Super 8, London - - Proposed Super 8, Radcliff Louisiana - - Sheraton Inn, Kenner - - Hotel Meridien, New Orleans Maine - - Proposed Hotel, Old Orchard Beach Maryland - - Brookshire Hotel, Baltimore - - Lord Baltimore Hotel, Baltimore - - Hyatt Regency, Bethesda Massachusetts - - Proposed Marriott Courtyard, Andover - - Hyatt Regency, Cambridge - - Proposed Hotel, Franklin - - Sheraton Inn, Hyannis - - Marriott Hotel, Worcester Michigan - - Bay Valley Inn, Bay City - - Hilton Airport, Detroit - - Westin Renaissance Center, Detroit - - Hotel Pontchartrain, Detroit - - Proposed Embassy Suites, Lansing - - Hilton Inn, Northfield - - Holiday Inn, Saginaw Minnesota - - Wyndham Garden Hotel, Bloomington - - Marriott Hotel, Minnetonka Missouri - - Inn at Grand Glaize, Osage Beach - - Bel Air Hilton, St. Louis - - Holiday Inn Riverfront, St. Louis Nebraska - - Holiday Inn Airport, Lincoln - - Holiday Inn Northeast, Lincoln Nebraska (continued) - - Marriott Hotel, Omaha - - Ramada Inn, Omaha - - Red Lion Inn, Omaha Nevada - - Proposed Super 8, Las Vegas New Jersey - - Ramada Inn, Edison - - Marriott Hotel, Hanover - - Headquarters Plaza, Morristown - - Hyatt Regency, New Brunswick - - Holiday Inn, North Brunswick New York - - Hilton Hotel, Albany - - Proposed Embassy Suites, Amherst - - Holiday Inn Arena, Binghamton - - Holiday Inn SUNY, Binghamton - - Proposed Hotel, Binghamton - - Proposed Hilton, Brooklyn - - Marriott Hotel, Dewitt - - Metropole Hotel, Flushing - - Midway Hotel, Flushing - - Ramada Inn, Kingston - - Royce Hotel, La Guardia - - Holiday Inn, Latham - - Proposed Crowne Plaza, Manhattan - - Proposed Prince Street Hotel, Manhattan - - Proposed Roslyn Inn, Roslyn - - Proposed Le Richmonde, Rye Brook - - Hilton Hotel, Syracuse - - Hotel Syracuse, Syracuse - - Proposed Hotel, Watertown North Carolina - - Proposed Inn, Chapel Hill - - Proposed Indep. Center Marriott Hotel, Charlotte - - Royce Hotel, Charlotte - - Howard Johnson's North, Charlotte - - Holiday Inn West, Durham HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Ohio - - Proposed Hyatt Hotel, Cleveland - - Proposed Marriott Hotel, Cleveland Oregon - - Holiday Inn Airport, Portland - - Holiday Inn South, Portland Pennsylvania - - Quality Inn, Allentown - - Holiday Inn, Bensalem - - Proposed Marriott Courtyard, Devon - - Proposed Lafayette Inn, Easton - - Ramada Inn, Erie - - Holiday Inn, Harrisburg - - Marriott Hotel, Harrisburg - - Proposed Super 8, Harrisburg - - Proposed Super 8, Lancaster - - Holiday Inn West, Monroeville - - Days Inn Philadelphia - - Franklin Plaza Hotel, Philadelphia - - Franklin Towne EconoLodge, Philadelphia - - Guest Quarters Hotel, Philadelphia - - Hilton Inn, Northeast, Philadelphia - - Marriott Airport Hotel, Philadelphia - - Holiday Inn Greentree, Pittsburgh - - Holiday Inn Parkway East, Pittsburgh - - Holiday Inn North, Pittsburgh - - Holiday Inn Parkway West, Pittsburgh - - Proposed Hotel, Pittsburgh - - Royce Hotel, Pittsburgh - - Westin William Penn Hotel, Pittsburgh - - Hilton Hotel, Scranton - - Proposed Marriott Courtyard, Valley Forge - - Holiday Inn Meadowlands, Washington - - Ramada Inn, York - - Proposed Super 8, York Rhode Island - - Proposed Hotel, Providence - - Omni Biltmore Hotel, Providence South Carolina - - Proposed Charleston Center Hotel, Charleston - - Proposed Cooper River Inn, Charleston - - Howard Johnson's, Spartanburg - - Proposed Middleton Inn and Conference Center, Charleston - - Best Western, North Charleston - - Proposed Marriott Courtyard, Columbia - - Fairfield Inn, Florence - - Holiday Inn, Florence - - Fairfield Inn, Greenville - - Proposed Marriott Courtyard, Greenville - - Fairfield Inn, Hilton Head - - Holiday Inn, Hilton Head Tennessee - - Hampton Inn, Brentwood - - Proposed Marriott Courtyard, Brentwood - - Howard Johnson's, Chattanooga - - Sheraton Hotel, Chattanooga - - Howard Johnson's, Knoxville - - Proposed Capital Mall Convention Center Hotel, Nashville - - Clarion Maxwell House, Nashville - - Holiday Inn Briley Parkway, Nashville - - Proposed Marriott Courtyard, Nashville - - Sheraton Music City, Nashville - - Stouffer's Nashville Hotel, Nashville - - Proposed Super 8, Nashville - - Union Station Hotel, Nashville - - Wyndham Garden Hotel, Nashville - - Proposed Super 8, Union City Texas - - Proposed Marriott Courtyard, Addison - - Proposed Marriott Courtyard, Arlington - - La Mansion, Austin - - Proposed Marriott Courtyard, Bedford - - Airport Hilton, El Paso - - Hotel Meridien, Houston - - Sheraton Hotel, Houston - - Proposed Marriott Courtyard, Las Colinas - - Proposed Marriott Courtyard, North Dallas - - La Mansion Del Norte, San Antonio - - La Mansion Del Rio, San Antonio HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Texas (cont'd) - - Proposed Marriott Courtyard, San Antonio - - Proposed Marriott Courtyard - Medical Center, San Antonio Utah - - Deer Valley Resort, Park City - - Hilton Inn, Salt Lake City - - Holiday Inn, Salt Lake City - - Sheraton Hotel, Salt Lake City Virginia - - Mountain Lake Hotel, Blacksburg - - Howard Johnson's, Bristol - - Boars Head Inn, Charlottesville - - Proposed Fairfield Inn, Hampton - - Proposed Embassy Suites, Herndon - - Ramada Renaissance, Herndon - - Proposed Marriott Courtyard, Manassas - - Omni Hotel, Norfolk - - Proposed Marriott, Norfolk - - Howard Johnson's, Richmond - - Howard Johnson's, Roanoke - - Howard Johnson's, Roanoke Rapids - - Wyndham Hotel, Williamsburg Washington - - Wyndham Garden Hotel, Bothell - - Redmond Hotel, Redmond - - Wyndham Garden Hotel, SeaTac West Virginia Proposed Budget Motel, Princeton Wisconsin - - Proposed Granada Royale, Green Bay - - Holiday Inn-Downtown, Green Bay Canada - - Inn on the Park, Toronto Puerto Rico - - Carib Inn, San Juan Virgin Islands - - Virgin Grand Beach Hotel, St. Thomas Jamaica - - Holiday Inn, Montego Bay HVS International, Boulder, Colorado Qualifications of Gregory Hartmann, CHA - -------------------------------------------------------------------------------- ============= HVS International HVS 4730 Walnut Street, Suite 201 - ------------- Boulder, Colorado 80301 INTERNATIONAL 303-443-3933 ============= ================================================================================ Gregory Hartmann, CHA Employment 1993 to present HVS International (Division of H & R Valuation Services, Inc.) Managing Director Boulder, Colorado 1986-1993 HOSPITALITY VALUATION SERVICES (Division of Hotel Appraisals, Inc.) Senior Vice President Mineola, New York 1985 ISLANDSITES, LTD. Hempstead, New York 1984 GARDEN CITY HOTEL Garden City, New York 1983 SHERATON SMITHTOWN INN Smithtown, New York 1982 NORTH HILLS COUNTRY CLUB Manhasset, New York 1981 DORAL TUSCANY HOTEL Manhattan, New York Professional Affiliations Appraisal Institute - Candidate for Membership, MAI Designation Licensed Real Estate Salesperson Cornell Society of Hotelmen Certified Hotel Administrator - American Hotel & Motel Association Licensed and Certified General Appraiser National Golf Foundation Colorado Ski Country National Ski Area Association HVS International, Boulder, Colorado Qualifications of Gregory Hartmann, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Education BS - School of Hotel Administration, Cornell University Appraisal Institute Course 1A1 - Real Estate Appraisal Principles Course 1A2 - Basic Valuation Procedures Course 1BA - Capitalization Theory and Techniques, Part A Course 1BB - Capitalization Theory and Techniques, Part B Course 2-1- Case Studies in Real Estate Valuation Course 2-2 - Report Writing and Valuation Analysis Course SPP - Standards of Professional Practice Certified General Appraiser - New York State List of Teaching and Lecture Assignments Appraisal Institute of Canada/Institut Canadien des Evaluateurs Cornell University - Center for Professional Development Mortgage Bankers Association of America New York University Nassau Community College University of Colorado - International Marketing Hospitality Breakfast Series - Dallas and Denver Published Articles Lodging Hospitality Hotel Business News "How to Discourage Hotel Overbuilding," April 1987 "HVS Study on Residence Inn: Dominant Brand Sets Pace for Hot Hotel Segment," May 21-June 6, 1996 Hospitality Valuation Journal "Caribbean Treasures," April 1991 "Examining the Dynamics of the United States Ski Industry," Spring/Summer 1995 "Segmenting Latin America," June 1993 Investment Conference Issue Lodging "Red Hot Extended Stay," April 1996 National Real Estate Investor "The Value of Extended Stay," May 1996 The Real Estate Finance Journal "Economy All-Suite Hotels 'Check In' for An Extended Stay," Summer 1996 Workouts & Asset Management Review "New Options for Lenders with Hotel REO" Published Books Monograph Market Study and Demand Analysis, San Antonio, Texas HVS International, Boulder, Colorado Qualifications of Gregory Hartmann, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Example: of Corporate and Institutional Client: Served AIG Life Insurance Company AIG Real Estate Investment & Management Co., Inc. Bank of New England Bank One Bankers Trust Company Banque Indosuez Bear Stearns BT Securities Canada Life Insurance Company Canyon Ranch Citicorp Citizens Bank City of Denver Colonial Investment Management Columbia Sussex Corporation Column Financial Concord Commercial Crown Life Insurance Company CT Investments, Inc. Days Inn of America Divi Hotels and Resorts DLJ Equitable First Chicago Fleet Bank Government Development Bank of Puerto Rico Hilton Inns, Inc. Hines Interests Holiday Corporation Hong Kong - Shanghai Bank Hospitality Properties Trust Host Marriott Corporation Interlocken ITT Sheraton Corporation John Hancock J.P. Morgan Kawasaki Leasing, Intl., Inc. Korea First Bank Krisch Hotels La Quinta, Inc. Larkin, Inc. Lehman Brothers Lepercq Development Lexington Management Lincoln National Ins. Co. Management Operations, Inc. Marine Midland Marriott Corporation Massachusetts Bay Transit Authority Metropolitan Life Ins. Co. Morgan Stanley Motels of America Mutual Benefit Company National Hospitality Corporation Nippon Credit Nomura Asset Capital Corp. Nomura Securities International Northern Telecom International Ocwon Financial Omni Hotels Owensboro National Bank Palmer Group Peers & Company Perini Land Development Prime Hospitality Prospect Park Savings Bank Quorum Hotels & Resorts Red Lion Inns Residence Inn Company Richfield Hospitality Salomon Brothers, Inc. Salt Lake County Assessor San Antonio Hotel/Motel Assoc. Servico Skopbank Sanwa Bank Shaner Hotel Group SkopBank Sonesta Hotels Starwood Lodging State Bank of South Australia Stouffer Hotels & Resorts Sunway Hotel Group Super 8 Motel Developers Inc. United Bank of Kuwait Universal Hotels U.S. Department of Defense U.S. Department of Justice Village Hotels and Resorts VMS Realty Partners White Lodging Services Williams Hospitality Yakult Honsha Company, Ltd. HVS International, Boulder, Colorado Qualifications of Gregory Hartmann, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotel's Appraised or Evaluated Alabama - - Comfort Inn, Birmingham - - Residence Inn, Birmingham - - Residence Inn, Montgomery - - Radisson Hotel, Birmingham Arizona - - Lexington Hotel Suites, Mesa - - Lexington Hotel Suites, Tempe - - Lexington Hotel Suites, Tucson - - Marriott Mountain Shadows, Scottsdale - - Sheraton El Conquistador, Tucson - - Hampton Inn North, Phoenix - - Holiday Inn Airport, Phoenix - - Wyndham Garden Hotel, Phoenix - - Wyndham Garden Hotel, Chandler - - Wyndham Garden Hotel, Phoenix Airport - - Howard Johnson, Flagstaff - - Proposed Hampton Inn, Green Valley Arkansas - - Hampton Inn, Searcy California - - Days Inn, Diamond Bar - - Hilton Hotel, Sacramento - - Holiday Inn, Irvine - - Lexington Hotel Suites, Ontario - - Proposed Resort, Squaw Valley - - Residence Inn, Arcadia - - Residence Inn, Long Beach - - Residence Inn, Pleasant Hill - - Residence Inn, San Ramon - - Residence Inn, Torrance - - Stouffer Concourse Hotel, Los Angeles Colorado - - Brown Palace Hotel, Denver - - Comfort Inn, Denver - - Fairfield Inn, Denver - - Holiday Inn, Aurora - - Holiday Inn, Golden - - Hyatt Regency, Beaver Creek - - Lodge at Vail, Vail - - Marriott Downtown, Denver - - Proposed Conference Resort, Broomfield - - Proposed Courtyard, Loveland - - Proposed Homewood Suites, Glendale - - Proposed Hotel, Golden - - Proposed Mixed Use Development, Telluride - - Proposed Sleep Inn, Pueblo - - Proposed Hotel, Longmont - - Proposed Fairfield Inn, Littleton - - Proposed Comfort Suites, Littleton - - Proposed Village Hotel, Boulder - - Proposed Marriott, Boulder - - Radisson Resort, Vail - - Ramada Limited, Northglenn - - Red Lion, Colorado Springs - - Red Lion, Durango - - Residence Inn, Boulder - - Sheraton DTC, Englewood - - Sheraton Hotel, Lakewood - - Table Mountain Inn, Golden - - Vail Athletic Club, Vail - - Vintage Hotel, Winter Park - - Westin Resort, Vail - - Winter Park Ski Resort, Winter Park Connecticut - - Courtyard by Marriott, Windsor - - Residence Inn, Meriden Deleware - - Super 8, New Castle Florida - - Best Western-Eastgate, Kissimee - - Radisson, Lake Buena Vista - - Radisson Airport, Orlando - - Residence Inn, Boca Raton - - Residence Inn, Gainesville - - Marriott World Center, Orlando - - Sunspree Resort, JacksonvilleBeach - - Residence Inn, Jacksonville - - Residence Inn, Pensacola - - Residence Inn, St. Petersburg - - Holiday Inn, Pompano Beach - - Holiday Inn, Ft. Pierce - - Holiday Inn, Pensacola - - Holiday Inn Express, Pensacola - - Hampton Inn, Pensacola Georgia - - Best Inn, Dalton - - Best Inn, Marietta - - Holiday Inn, Augusta - - Landmark Hotel, Augusta - - Marriott Hotel, Savannah - - Proposed Cresthill - Perimeter Center, Atlanta - - Proposed Holiday Inn, Decatur - - Radisson Downtown, Atlanta - - Residence Inn, Airport, Atlanta - - Residence Inn - Buckhead, Atlanta - - Residence Inn - Galleria, Atlanta - - Residence Inn - Perimeter Center, Atlanta - - Holiday Inn, Jeckyll Island - - Holiday Inn, Brunswick Hawaii - - Proposed Lodging Facility, Schoefield Barracks, Oahu HVS International, Boulder, Colorado Qualifications of Gregory Hartmann, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Idaho - - Red Lion Downtowner, Boise - - Red Lion Riverside, Boise - - Shilo Inn, Boise - - Shilo Inn, Idaho Falls Illinois - - Best Inn, Bloomington - - Best Inn, Effingham - - Best Inn, Marion - - Best Inn, Mt. Vernon - - Best Inn, Waukegan - - Hampton Inn Midway, Chicago - - Holiday Inn, Freeport - - Holiday Inn, Glen Ellyn - - Holiday Inn, Itasca - - Proposed Courtyard Midway, Chicago - - Proposed Cresthill, Buffalo Grove - - Residence Inn, Deerfield - - Residence Inn, Oakbrook Indiana - - Airport Ramada Inn, Indianapolis - - Brown County Inn, Nashville - - Carlton Lodge, Goshen - - Courtyard Hotel, Valparaiso - - Fairfield Inn, Merrillville - - North Meridian Inn, Indianapolis - - Proposed Fairfield Inn, Indianapolis - - Proposed Fairfield Inn, Valparaiso - - Proposed Hampton Inn, Merrillville - - Proposed Holiday Inn Express Merrillville - - Proposed Residence Inn, Indianapolis - - Residence Inn, South Bend Iowa - - Best Western, Council Bluffs - - Courtyard Hotel, Des Moines - - Holiday Inn, Des Moines - - Holiday Inn, Iowa City - - Holiday Inn, Sioux City - - Super 8 North, Des Moines - - Super 8 West, Des Moines Kansas - - Holiday Inn, Manhattan - - Holiday Inn, Lawrence - - Park Inn, Topeka Kentucky - - Executive Tower Inn - - Holiday Inn, Louisville Louisiana - - Courtyard Hotel, Baton Rouge - - Proposed Hampton Inn, Horse Creek - - Quality Hotel & Conference Center, Metairie - - Residence Inn, Shreveport - - Westin Canal Place, New Orleans Maryland - - Comfort Inn, Rockville - - Courtyard by Marriott, BWI - - Guest Quarters, Bethesda - - Lord Baltimore - - Marriott Hotel, Gaithersburg - - Residence Inn, Hunt Valley - - Suisse Chalet Inn, Baltimore/BWI - - Suisse Chalet Inn, Golden Ring - - Suisse Chalet Inn, Jessup Massachusetts - - Airport Inn, Fall River - - Back Bay Hilton, Boston - - Boston Harbor Hotel, Boston - - Comfort Inn, Dedham - - Copley Plaza Hotel, Boston - - Days Inn, Burlington - - Days Inn, Newton - - Days Inn, Woburn - - Factory Mutual Hotel, Norwood - - Hawthorn Hotel, Salem - - Hilton, Pittsfield - - Holiday Inn - Government Center, Boston - - Holiday Inn, Taunton - - Howard Johnsson, Danvers - - Logan Airport Hilton, Boston - - Marriott Hotel, Worcester - - Monarch Place, Springfield - - Omni Parker House, Boston - - Proposed Canyon Ranch Spa, Lenox - - Proposed Commonwealth Center Hotel, Boston - - Proposed Conference Center and Hotel, Boston - - Proposed Waterfront Hotel, Boston - - Radisson Inn, Chelmsford - - Residence Inn, Danvers - - Residence Inn, Tewksbury - - Royal Sonesta Hotel, Cambridge Michigan - - Carlton Lodge, Benton Harbor - - Crowne Plaza, Detroit - - Quality Inn, Goldwater - - Residence Inn, Kalamazoo - - Residence Inn, Southfield - - Residence Inn, Warren - - Van Dyke Hotel, Warren Minnesota - - Hilton Inn, Bloomington - - Holiday Inn, St. Paul Mississippi - - Residence Inn, Jackson HVS International, Boulder, Colorado Qualifications of Gregory Hartmann, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Missouri - - Courtyard Hotel, SL Louis - - Radisson-Airport, St. Louis - - Residence Inn - Cumberland, St. Louis - - Residence Inn - Galleria, St. Louis Montana - - Holiday Inn, Billings - - Holiday Inn, Missoula Nebraska - - Holiday Inn, Omaha - - Sheraton Hotel, Omaha Nevada - - Residence Inn, Las Vegas New Hampshire - - Residence Inn, Nashua New Jersey - - Headquarters Plaza, Morristown Hotel, East Brunswick - - Hewitt Wellington Hotel, Spring Lake - - Marriott Hotel, Hanover - - Proposed Days Inn, Secaucus - - Proposed Holiday inn, Secaucus - - Proposed Ramada Renaissance - - Proposed Spray View Hotel, Ocean Grove - - Radisson-Airport, Newark New Mexico - - Best Western High Mesa Inn, Santa Fe - - Marriott Hotel, Albuquerque - - Picacho Plaza, Santa Fe - - Proposed Convention Hotel, Albuquerque - - Proposed Hotel, Santa Fe - - Residence Inn, Albuquerque - - Residence Inn, Santa Fe New York - - Hilton Hotel, Buffalo - - Hyatt Grand Central, New York - - Inn at the Campus, Rochester - - Marriott Courtyard, Tarrytown - - Marriott Marquis, New York - - Marriott Hotel, Long Island - - Midway Hotel, Flushing - - Mirror Lake Inn, Lake Placid - - Omni Park Central, New York - - Omni Hotel, Albany - - Radisson Hotel, Poughkeepsie - - Ramada Inn and Convention Ctr., Schenectady North Carolina - - Courtyard Hotel, Greensboro - - Days Inn - Airport, Raleigh - - Days Inn - RTP, Raleigh - - Residence Inn, Charlotte - - Residence Inn, Greensboro - - Residence Inn, Raleigh - - Hampton Inn, Kinston - - Holiday Inn, Jacksonville - - Holiday Inn Select, Winston-Salem - - Holiday Inn, Statesville - - Hampton Inn, Statesville North Dakota - - Holiday Inn, Bismarck - - Super 8, Bismarck - - Super 8, Grand Forks - - Super 8, Minot Ohio - - Holiday Inn, Springfield - - Residence Inn, Akron - - Holiday Inn, Dayton - - Holiday Inn, Lima - - Holiday Inn, Columbus - - Proposed Candlewood, Blue Ash - - Radisson-Airport, Cincinatti - - Residence Inn, Blue Ash - - Residence Inn, Cincinnati - - Residence Inn, Columbus - - Residence Inn, North Dayton - - Residence Inn, South Dayton Oklahoma - - Howard Johnson, Tulsa - - Lexington Suites, Oklahoma City - - Proposed Hotel, Norman Oregon - - Red Lion, Bend - - Red Lion, Eugene/Springfield Pennsylvania - - Bedford Springs Hotel, Bedford - - Days Inn, Brookyilie - - Days Inn, Meadville - - Great Valley Hilton, Malverne - - Holiday Inn-Parkway East, Pittsburgh - - Holiday Inn-Greentree, Pittsburgh - - Holiday Inn, Monroeville - - Marriott Hotel, Harrisburg - - Residence Inn, Philadelphia - - Sheraton Golf Resort, Lancaster Rhode Island - - Biltmore Plaza, Providence South Carolina - - Residence Inn, Columbia - - Residence Inn, Spartanburg HVS International, Boulder, Colorado Qualifications of Gregory Hartmann, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ South Dakota - - Holiday Inn, Sioux Falls - - Holiday Inn, Spearfish Tennessee - - Holiday Inn, Memphis - - Holiday Inn, Fayetteville - - Lexington Hotel Suites, Memphis - - Proposed Fairfield Inn, Memphis - - Residence Inn, Memphis - - Super 8, Johnson City Texas - - Courtyard Hotel, Fort Worth - - Four Seasons, Austin - - Galleria Gardens Apartments, Houston - - Guntar Hotel, San Antonio - - Harvey Hotel, Houston - - Holiday Inn - Airport, San Antonio - - Holiday Inn - Downtown, San Antonio - - Holiday Inn - Riverwalk, San Antonio - - Hyatt - Riverwalk, San Antonio - - La Mansion Del Norte, San Antonio - - La Mansion Del Rio, San Antonio - - La Quinta - Ingram Park, San Antonio - - La Quinta - Lackland, San Antonio - - La Quinta - Topperwein, San Antonio - - Lexington Hotel Suites, Arlington - - Lexington Hotel Suites, Dalla/DFW - - Lexington Hotel Suites, Fort Worth - - Lexington Hotel Suites, San Antonio - - Proposed Fairfield - Airport, San Antonio - - Proposed Fairfield, Austin - - Proposed Fairfield - Downtown, San Antonio - - Proposed Fairfield - South, Austin - - Proposed Marriott Courtyard, San Antonio - - Proposed Radisson Hotel, Amarillo - - Proposed Residence Inn - Downtown, San Antonio - - Proposed Residence Inn - South, Austin - - Proposed Courtyard by Marriott, Stafford, DC - - Residence Inn, Houston - - Residence Inn - Las Colinas, Dallas - - Residence Inn, Lubbock - - Residence Inn - Market Center Dallas Utah - - Best Western, Ogden - - Hilton Hotel, Salt Lake City - - Olympic Park Hotel, Park City - - Provo Park Hotel, Provo - - University Park Hotel, Salt Lake City - -Virginia - - Proposed Residence Inn, Herndon - - Proposed Comfort Inn, King George Washington - - Thunderbird Inn, Bellevue West Virginia - - Super 8, Dunbar - - Super 8, Elkins - - Super 8, Lewisburg - - Super 8, Summersville - - Super 8, Westin Wisconsin - - Holiday Inn, Beloit - - Olympia Resort, Oconomowoc Wyoming - - Proposed Hotel, Jackson - - Shilo Inn, Casper Caribbean and Mexico - - Caneel Bay, St. John - - Carambola Beach Resort, St. Croix - - Dawn Beach Resort, Saint Maarten - - Divi Divi, Aruba, N.A. - - Divi Tamarijn, Aruba, N.A. - - Dupont Plaza, San Juan - - El San Juan Hotel, San Juan - - Hyatt Cerromar Beach, Puerto Rico - - Hyatt Dorado Beach, Puerto Rico - - Hyatt Regency, St John - - Little Dix Bay Resort, Virgin Gorda - - Market Overview, Mexico City - - Proposed Hotel, Saint Thomas - - Proposed Marriott, San Juan - - Proposed Virgin Grand, St. Croix - - Radisson Resort, Grand Cayman - - Sands Hotel, San Juan - - Sugar Bay Plantation, Saint Thomas HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Stephen Rushmore, CRE, MAI, CHA Employment 1980 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1977 - 1980 1971 - 1974 HELMSLEY-SPEAR HOSPITALITY SERVICES, INC. New York, New York (Real Estate) 1974 - 1977 JAMES E. GIBBONS ASSOCIATES Garden City, New York (Mortgage Banking, Appraisals, Hotel Operations) Affiliated Ownership Interests HVS INTERNATIONAL (SAN FRANCISCO, CALIFORNIA) West coast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (MIAMI, FLORIDA) Southeast office for hotel/motel appraisals and counseling HVS INTERNATIONAL (VANCOUVER, CANADA) Canadian office for hotel/motel appraisals and counseling HVS INTERNATIONAL (LONDON, ENGLAND) European office for hotel/motel appraisals and counseling HVS - FINANCIAL SERVICES Investment banking for the hotel industry HVS - EXECUTIVE SEARCH Hotel-motel executive search and human resource consulting HOSPITALITY EQUITY INVESTORS, INC. Hotel and motel investment and management company HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Affiliated Ownership Interests (continued) TRUMBULL MARRIOTT HOTEL General partner of a 324-room hotel and conference center PRINCETON HOTEL ASSOCIATES General partner of a 128-unit Residence Inn in Princeton, New Jersey SEAVIEW GOLF RESORT ASSOCIATES General partner of a 298-unit, 424-acre Marriott resort in Absecon, New Jersey SHELTON HOTEL ASSOCIATES General partner of a 96-unit Residence Inn in Shelton, Connecticut DANBURY HOTEL ASSOCIATES General partner of a 243-unit Hilton Hotel in Danbury, Connecticut PRUDENTIAL - HEI JOINT VENTURE Joint venture partner with Prudential Insurance Company of America on a 234-unit Embassy Suites in Atlanta, Georgia DELAWARE HOTEL ASSOCIATES General partner of a 193-unit Hilton Hotel in Wilmington, Delaware MICROTEL FRANCHISE AND DEVELOPMENT CORPORATION Board member of a national hotel chain which has created a new sub-market concept in economy lodging HOSPITALITY VALUATION SOFTWARE, INC. Founder of software company that develops and distributes hotel financial analysis software CORPORATE AUTOMATION SYSTEMS, INC. Supplier of custom computer systems for professional offices HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Hotels Managed for Lenders Sheraton Hotel, Smithtown, New York Professional Affiliations American Society of Real Estate Counselors - Member (CRE) - Board of Governors - Vice President Appraisal Institute - Member (MAI) (SREA) - Developer and Instructor, Hotel Investment and Valuation Seminar - Developer and Instructor, Hotel Computer Valuation Seminar American Hotel and Motel Association - Certified Hotel Administrator (CHA) - Industry Real Estate Financing Advisory Council (IREFAC) International Society of Hospitality Consultants - Member (ISHC) New York University - Adjunct Assistant Professor of Nutrition, Food and Hotel Management Michigan State University - Honorary Faculty, Honorary Alumnus Certified General Appraiser - Arizona, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Illinois, Massachusetts, Michigan, Minnesota, Nebraska, New Jersey, New York, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Virginia Licensed Real Estate Broker - Michigan, New York, Pennsylvania American Arbitration Association - National Real Estate Valuation Council Cornell Society of Hotelmen New York University Masters in Hospitality Management - Advisory Board Hospitality Investment Conference - Board of Advisors Beta Gamma Sigma - National Honor Society in Business and Management HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Endowment Hospitality Valuation Services Professor of Hotel Finance and Real Estate - School of Hotel Administration, Cornell University (currently held by Professor James J. Eyster) Education BS - School of Hotel Administration, Cornell University MBA - Graduate School of Business Administration (Finance), University of Buffalo Partial List of Teaching and Lecture Assignments Cornell University - Computer Valuation Techniques Michigan State University - Hotel Management Contracts University of North Carolina - Hotel Market Studies University of Virginia - Assessing Hotels American Arbitration Association - Real Estate Arbitration American Hotel and Motel Association - Hotel Obsolescence Appraisal Institute - Hotel Valuation (over 50 seminars) International Association of Assessing Officers - Hotel Valuation Montreal Appraisal Society - Total Project Analysis Society of Real Estate Appraisers - Lease Seminar Lodging Hospitality - Lodging Summit Books and Seminars Textbooks The Valuation of Hotels and Motels, Appraisal Institute, Chicago, Illinois, 1978 Hotels, Motels and Restaurants: Valuations and Market Studies, Appraisal Institute, Chicago, Illinois, 1983 How to Perform an Economic Feasibility Study of a Proposed Hotel/Motel, American Society of Real Estate Counselors, Chicago, Illinois, 1986 Hotel Investments: A Guide for Owners and Lenders, Warren, Gorham and Lamont, Inc., New York, New York, 1990 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Books and Seminars (continued) Textbooks (continued) The Computerized Income Approach to Hotel Market Studies and Valuations, Appraisal Institute, Chicago, Illinois, 1990 Hotel Investments: A Guide for Owners and Lenders, 1992 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotel Investments: A Guide for Owners and Lenders, 1993 Supplement, Warren, Gorham and Lamont, Inc., New York, New York, 1992 Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Appraisal Institute, Chicago, Illinois, 1992 Student Manuals The Valuation of Lease Interests, Society of Real Estate Appraisers, Chicago, Illinois, 1976 Hotel-Motel Valuation Seminar, Appraisal Institute, Chicago, Illinois, 1981, 1988, 1990 The Computerized Approach to Hotel Market Studies and Valuations Seminar, Appraisal Institute, Chicago, Illinois, 1991 Demonstration Appraisal Demonstration Appraisal of a Proposed Hotel, Spring Valley, New York, Hospitality Valuation Services, Mineola, New York, 1983, 1990 Chapters The Real Estate Handbook-Second Edition, Dow Jones-Irwin, 1989, "Hotels and Motels" Arbitration of Real Estate Valuation Principles, American Arbitration Association, 1987, "Arbitration in the Hospitality Industry" Ethics in Hospitality Management: A Book of Readings, Educational Institute of the American Hotel and Motel Association, 1992, "Ethics in Hotel Appraising" The Lodging and Food Service Industry, Educational Institute of the American Hotel and Motel Association, 1993, "Insider's Insights" HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles The Appraisal Journal "Using Total Project Analysis to Compete for Investment Capital," October, 1975 "The Appraisal of Food Service Facilities," July, 1980 "Publish and Prosper," October, 1980 "Valuation of Hotels and Motels for Assessment Purposes," April, 1984 "Adjusting Comparable Sales for Hotel Assessment Appeals," July, 1986 "Hotel Business Value and Working Capital: A Clarification," January, 1987 "Ethics in Hotel Appraising," July, 1993 The Appraiser "Hotel-Motel Appraisal Misconceptions Set Straight," January, 1979 "No Conventional Financing Available for Hotels: Rushmore," December, 1979 "Estimating Hotel Land Values Using Comparable Ground Leases," April, 1980 Bulletin of the Cornell Society of Hotelmen "Employment Philosophy for a Consulting Practice," July, 1984 Business Travel News "A Snapshot of a Classic Recovery," July, 1995 The Canadian Appraiser "Hotel/Motel Market Sales Update," Summer, 1987 Capital Sources for Real Estate "Stephen Rushmore Discusses the Future of the Lodging Industry," December, 1994 Cayuga Advisor "Secrets to Success in Consulting," October, 1992 Chapter News and Notes "Quantifying a Hotel's Business Value," November, 1979 Cornell Hotel & Restaurant Administration Quarterly "A Preliminary Market Study," November, 1974 "How Much is Your Place Worth Today? A Case Study in Hotel - Motel Valuation," May, 1975 "What Can Be Done About Your Hotel's Real Estate Taxes?" May, 1977 "The Appraisal of Lodging Facilities," August, 1978 "The Appraisal of Food Service Facilities," February, 1979 "The Appraisal of Lodging Facilities - Update," November, 1984 "Hotel Sales Prices Down More Than 12%," May, 1991 "Seven Current Hotel Valuation Techniques," August, 1992 "The Valuation of Distressed Hotels," October, 1992 FCI Spec Sheet "Employment Philosophy for a Consulting Practice," September, 1984 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Published Articles Hotel and Motel Management "Average Rate vs. Project Cost," May 1, 1974 "How to Increase the Marketability of Your Motel," April, 1981 "Tougher Lending, Lower Room Rate Hikes On Way?" June, 1981 "What is That Mortgage Loan Going to Cost You?" August, 1981 "How to Perform a Study of Your Property's Market," October, 1981 "How do High Interest Rates Affect Your Motel's Value?" December, 1981 "How to Buy a Feasibility Study That Works for You," February, 1982 "Settling Lease Conflicts Quickly Through Arbitration," April, 1982 "Are Casino Hotels Really Worth $500,000 Per Room?" June, 1982 "Discount Rates and Internal Rate of Return," August, 1982 "Determining a Property's Extended Life Cycle," November, 1982 "Using Microcomputers for Forecasting," December, 1982 "Update on Hotel Development Costs," January, 1983 "Estimating a Site's Worth by Finding Its Profit Value," June, 1983 "Hotel Construction May Be Slowing Down a Little Bit," April, 1983 "The Investor's Risk Sways to Prevailing Economic Winds," August, 1983 "Is Your Property Tax at as Low a Level as it Should Be?" October, 1983 "The Ultimate Guest Room: Could it Ever Exist Anywhere?" December, 1983 Hotel-Motor Inn Journal A Preventive Maintenance System for Motels," March, 1975 Hotel Valuation Journal "Hotel Valuation Index Peaks During 1989," Fall, 1990 "Hotel Development Costs," Winter, 1991 "Hotel Valuation Index for 1990," Spring, 1991 "Bad Year for Hotel Sales Prices Confirmed," Spring, 1992 "Hotel Sales Prices on the Rise," Fall, 1994 "United States Hotel Values Climb," Spring/Summer, 1995 "It's Time for Franchise Reform," Fall, 1995 Institutions/ Volume Feeding "Greater Risk/Greater Profit Potential: Hotel Management Contract," May, 1973 Lodging Hospitality "How to Finance Renovation Projects," January, 1974 "Controlling Your Real Estate Taxes," July, 1978 "Putting Together a Sound Financial Package," December, 1978 "Favorable Outlook for Lodging Values," December, 1983 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Are Your Property Taxes Too High? (Part I and II)," May and June, 1984 "Hotel Development Costs," July, 1984 "The Right Management Contract for You," September, 1984 "Selecting the Firm to Prepare Your Feasibility Study," October, 1984 "A Quick How-To In Hotel Valuation," November, 1984 "Updating Lodging Interest Rates," December, 1984 "Is Your Guest Experience Up to Par?" January, 1985 "How to Perform a Breakeven Analysis," May, 1985 "Evaluating Operating Performance," June, 1985 "Hotel Lenders Toughen Underwriting Requirements," July, 1985 "Don't Forget the Pre-Opening Agreement," August, 1985 "Management Companies Should Participate in Financing," October, 1985 "Current Techniques for Valuing Hotel Land," November, 1985 "Hotel Development Costs," December, 1985 "Sourcing Debt Into the 1990's," January, 1986 "Hotel Valuation Thumb Rule," February, 1986 "Value in Use Versus Value in Exchange," March, 1986 "Stretching Feasibility," April, 1986 "The Management Question," May, 1986 "How to Commission a Feasibility Study," June, 1986 "Macro Trends Affecting Property Values," July, 1986 "Hotel-Motel Market Sales Update," August, 1986 "Financing Alternatives: Zero Coupon Mortgages," September, 1986 "Forecasting Lodging Energy Costs," October, 1986 "Portfolio Financing a Better Way," November, 1986 "Profit by Looking at History," December, 1986 "Why New York Isn't Overbuilt," February, 1987 "How to Discourage Hotel Overbuilding: A Case Study," April, 1987 "Structuring an Incentive Management Fee," June, 1987 "Franchising Questions and Answers," July, 1987 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Comparing Hotel Development Costs," August, 1987 "Understanding Economic Life," September, 1987 "Prices Rise for Lodging Properties," October, 1987 "Management Companies Are Key to Success," November, 1987 "Evaluating a Management Contract Fee Structure," December, 1987 "Check Profits Before Selecting Hotel Operator," January, 1988 "It's a Good Time to Review Your Taxes," February, 1988 "How to Use a Management Company Rating System," March, 1988 "Make Sure Management Contracts Contain These Terms," April, 1988 "Hotel Access and Visibility," May, 1988 "Chain Sale Strategies," July, 1988 "Evaluating a Hotel Franchise," August, 1988 "Evaluating Franchise Fees," September, 1988 "Opportunities in Economy Lodging," October, 1988 "How to Obtain a Hotel Mortgage," November, 1988 "Arbitration in the Hospitality Industry," December, 1988 "Lodging Development Cost Update," January, 1989 "Amenities as Profit Builders," February, 1989 "Hotel Values Mirror the Times," March, 1989 "Forecasting Revenue and Expenses," April, 1989 "Real Estate Jargon Made Simple," May, 1989 "Pricing a Management Contract," June, 1989 "Trends in Valuation," July, 1989 "Rescuing the Distressed Hotel," August, 1989 "Shielding Against Incompetence," September, 1989 "Hotel Valuation Revisited," October, 1989 "New Breed of Hard Budgets," November, 1989 "Figuring Cap Rates," December, 1989 "A Glance Backward," January, 1990 "Costs Creeping Up," February, 1990 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Lodging Hospitality (continued) "Valuing Distressed Properties," March, 1990 "Cap and Discount Rates," April, 1990 "An Open Letter," May, 1990 "Misconceptions About Appraisals," June, 1990 "Hotel Values Still Growing," July, 1990 "Hotel Renovation is Key to `90s," August, 1990 "Time Right for Hotel Leases," September, 1990 "Getting a Fix on Rates," October, 1990 "The Wrinkles of Class," November, 1990 "A Glance Backward," December, 1990 "The Price Dropoff," January, 1991 "The Cost Washout," February, 1991 "Survival of the Fittest," March, 1991 "Looking Out and Up," April, 1991 "The Bottom is in Sight," May, 1991 "The Pitfalls of Liquidation," June, 1991 "Extra! Extra! Hospitality News," July, 1991 "The Art of Hotel Renovation," August, 1991 "No Better Time for a Tax Review," September, 1991 "No Time for Passivity," October, 1991 "What a Franchise Really Costs," November, 1991 "In Case You Hadn't Heard," January, 1992 "Negotiation - The Name of the Game," February, 1992 "Now Could be the Time to Build," March, 1992 "The Well May Stay Dry," April, 1992 "Hotel Life Expectancy," May, 1992 "Hotel Values - What a Downer," June, 1992 "How to Make Money Now," July, 1992 "Hotel Chain Class Survey," August, 1992 "Budget Dining with Rushmore," September, 1992 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Michigan Lodging "Hotel Development Costs," January, 1988 The Mortgage and Real Estate Executives Report "Atlantic City Building Game Involves High Stakes," August, 1979 "How Interest Rates Affect Real Estate Values," June, 1982 "Update on Hotel Development Costs," May 1, 1983 Motel-Hotel Insider "The $100,000 Plus Hotel Room Has Become a Reality," November 19, 1979 "Update on Hotel Development Costs," April 4, 1983 NAIFA - The Appraisal Review "Hotel Valuation Techniques," Vol. 44, 1991 Real Estate Digest "Why Should the Management Team be Important to Hotel Lenders," Fall, 1988 Real Estate Finance Journal "What is a Typical Fee for a Hotel Management Contract?" Fall, 1988 "Hotel Franchise Fees," Winter 1989 "Why the Management Team Should be Important to Hotel Lenders," Spring, 1989 "Hotel Values and Costs," Summer, 1989 "Structuring a Hotel Investment," Fall, 1989 "A Guide for Lenders Holding Distressed Hotel Loans," Winter, 1990 "Estimating Current Interest Rates for Hotel Financing," Spring, 1990 "Hotel Valuation Techniques," Summer, 1990 "Now is the Time to Review Your Hotel's Property Taxes," Fall, 1990 "Property Tax Assessments for Hotels and Motels," Winter, 1991 "Putting Together Hotel Management Agreements - Part I," Spring 1991 "Putting Together Hotel Management Agreements - Part II," Summer, 1991 "The 1980s - The Decade of Change," Fall, 1991 "An Overview of the Hotel Industry: Past, Present, and Future," Spring, 1994 Real Estate Forum "Casino Hotels Raise Valuation Questions," November, 1981 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Real Estate Investment Ideas "How Fuel and Energy Shortages Should Affect Investment Decisions in the Hospitality Industry," March, 1974 "Upward Trend Continues for Sales Price of Hotel-Motel Properties," May, 1988 "High Prices Paid for Hotel-Motel Properties," February, 1990 Real Estate Issues "Employee Compensation for a Consulting Practice," Fall/Winter, 1985 "Hotel/Motel Market Sales Update," Spring/Summer, 1987 Real Estate Newsletter "Computers in Hotel Appraising," May 15, 1989 Real Estate Outlook "Hotel-Sales Update," Winter, 1986 Real Estate Review "Valuing Motels and Hotel in the Current Market," Fall, 1972 "Dealing With Distressed Hostelry Loans," Fall, 1975 "The Mortgage Underwriting Consultant Comes of Age," Fall, 1977 "Real Estate Compensation," Winter, 1987 Real Estate Workouts and Asset Management "Stephen Rushmore on Directions in the Hospitality Industry," September, 1992 Real Values "Hotel Construction Cost Update," April, 1986 Restaurant and Hotel Design "How Much Should the Renovation Be?" March, 1986 "14 Notable Hotel Development Firms," December, 1987 Rushmore on Hotel Valuation "Mortgage - Equity," Winter, 1979 "Atlantic City - From Bust to Boom," Winter, 1979 "Mortgage - Equity," Spring, 1979 "Developing Mortgage Data," Spring 1979 "Gasoline and Market Values, " Spring, 1979 "Mortgage - Equity," Fall, 1979 "Quantifying a Hotel's Business Value," Fall, 1979 "What Has Happened to Typical Hotel-Motel Development Costs?," Fall, 1979 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Rushmore on Hotel Valuation (continued) "Mortgage-Equity," Winter, 1980 "Extending Hotel Economic Life Through Renovation," Winter, 1980 "Estimating Hotel Land Values Using Comparable Ground Leases," Winter, 1980 "Quantifying the Value of Personal Property to a Going Hotel," Spring, 1980 "Recent Changes in New York City's Hotel Market," Spring, 1980 "Hotel-Motel Economic Lives," Fall, 1980 "Mortgage - Equity," Fall, 1980 "Mortgage - Equity," Winter, 1981 "Developing Mortgage Data," Winter, 1981 "Statistical Support for Food and Beverage Projections," Winter, 1981 "Mortgage - Equity," Spring/Summer, 1981 "Quantifying a Hotel's Demand," Spring/Summer, 1981 "A Five-Year Overview of Typical Hotel-Motel Development Costs," Spring/Summer, 1981 "Mortgage - Equity," Winter/Spring, 1982 "Update on Hotel Capitalization Rates," Winter/Spring, 1982 "Mortgage - Equity," Summer/Fall, 1982 "Are Casino Hotels Really Worth $500,000 Per Room?" Summer/Fall, 1982 "The Hotel-Motel Life Cycle, Summer/Fall, 1982 "Mortgage - Equity," Winter/Spring, 1983 "Update on Hotel Development Costs," Winter/Spring, 1983 "The Valuation of Hotels and Motels for Assessment Purposes," Winter, 1984 "Hotel Capitalization Rates," Summer, 1984 "Hotel Development Cost Survey," Summer, 1984 "Selecting a Hotel Management Company," Fall, 1984 "Hotel Capitalization Rates," Spring, 1985 "How to Perform a Breakeven Analysis," Spring, 1985 "Hotel Capitalization Rates," Winter, 1986 "Hotel Development Costs," Winter, 1986 "Hotel Valuation Survey," Winter, 1987 HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Rushmore on Hotel Valuation (continued) "Impact of New Tax Laws on Hotel Values," Winter, 1987 "Hotel-Motel Market Sales Update," Winter, 1987 "Structuring an Incentive Management Fee," Fall, 1987 "Understanding Your Hotel's Economic Life," Fall, 1987 "Hotel Development Costs," Fall, 1987 "Hotel, Motel Market Sales Update," Winter, 1988 "Amenity Creep," Winter, 1989 "Hotel Franchise Fees," Winter, 1989 "Hotel Valuation Index," Fall, 1989 "Latest Trends in Hotel Values," Fall, 1989 U.S. Real Estate Week "All-Suites Market Entering Second Phase," May 4, 1987 Valuation "Hotel-Motel Market Sales Update," February, 1987 Quarterly Newsletter Hotel Valuation Journal Professional newsletter with a circulation of 10,000 Financial Column Lodging Hospitality Real estate editor for a major monthly hospitality periodical Hospitality Column Real Estate Finance Journal Contributing hospitality editor Computer Software Hospitality Valuation Software Hotel financial software for room night analyses, income and expense forecasts, and valuation calculations - developed and distributed for the Appraisal Institute Hotel-Motel Data Hospitality Market Data Exchange National clearinghouse for information pertaining to hotel and motel transactions Hotel Valuation Index National index of hotel value trends for 24 individual market areas Hospitality Seminar Series Intensive short courses for hotel and restaurant professionals HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Published Articles (continued) Hospitality Bibliography Comprehensive literature index of hotel and restaurant books and articles Awards Robert H. Armstrong Award For the most significant contribution to The Appraisal Journal in 1975 Activities Commercial pilot, instrument, multi-engine; sailing; skiing Corporate and Institutional Clients Served Aetna Life Insurance AIG Real Estate Investment Aldrich Eastman and Waltch Allstate American Airlines America's Best Inns Arthur Anderson & Company Bankers Trust Company Bank of America Bank of Boston Bank of Montreal Bank of New York Bank of Nova Scotia Bank of Tokyo Bank One-Columbus Banque Indosuez Barclay's Bank Baybank Boston The Beacon Companies Bear, Stearns & Company, Inc. Best Inns Best Western International Boykin Management Co. Bradbury Suites C. Itoh Caesar's World California Dept. of Transportation Chase Lincoln First Bank, N.A. Chase Manhattan Bank Chemical Bank Chrysler Capital Corporation CIGNA Citibank Citicorp Real Estate City of Boston City of Detroit City of Grand Rapids City of Kalamazoo City of Orlando City of Philadelphia City of Santa Monica City of Toronto Columbia Sussex Corporation Continental Illinois National Bank Copley Real Estate Advisors Corporex Development CRI, Inc. Cushman and Wakefield Days Inns Edward J. DeBartolo Corp. Deer Valley Ski Corporation Doubletree Hotels Drury Inns Econo Lodge Economic Development Admin. EIE Regent International Embassy Suites Equitable Life Assurance Equitable Real Estate Investment European American Bank Fairmont Hotels Federal Deposit Insurance Corp. First Boston First California Savings First Interstate Bank First National Bank of Chicago Four Seasons Hotels Goldman, Sachs Greater Orlando Aviation Authority Great Western Bank Great Western Savings Guest Quarters Hampton Inns Hilton Hotels, Corp. Hilton International Holiday Corporation Holiday Inns Home Savings of America Howard Johnson's Hudson Hotels Corporation Hyatt Hotels Industrial Bank of Japan Interstate Hotels The Irvine Company ITT Commercial Finance Corp. Japan Airlines JDC (America) Corporation John Q. Hammons John Hancock Life Insurance HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness Appellate Tax Board, Boston, Massachusetts Assessment Appeals Board, Los Angeles County, Los Angeles, California Board of Equalization and Review, Washington, District of Columbia (2) Board of Taxation, Atlantic City, New Jersey Bureau de Revision Evaluation Fonciere du Quebec, Montreal, Canada Circuit Court, Orange County, Orlando, Florida Condemnation Review Board, Minneapolis, Minnesota Corporation Committee, Rhode Island State Senate Court of Common Pleas, Allegheny County, Pennsylvania Court of Common Pleas, Franklin County, Ohio Court of Common Pleas, Montgomery, Pennsylvania Court of Common Pleas, Pittsburgh, Pennsylvania Court of Common Pleas, Philadelphia, Pennsylvania Court of Queen's Bench of Alberta, Canada District Court, Arapahoe County, Colorado District Court, Dallas County, Texas District Court, Harris County, Texas District Court, Hennepin County, Minneapolis, Minnesota District Court, Knoxville, Tennessee Federal Bankruptcy Court, Oakland, California Federal Bankruptcy Court, Los Angeles, California Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Denver, Colorado Federal Bankruptcy Court, District of Columbia Federal Bankruptcy Court, Miami, Florida (2) Federal Bankruptcy Court, New Orleans, Louisiana Federal Bankruptcy Court, Baltimore, Maryland Federal Bankruptcy Court, Rockville, Maryland Federal Bankruptcy Court, Grand Rapids, Michigan HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Appearance as an Expert Witness (cont'd) Federal Bankruptcy Court, Las Vegas, Nevada Federal Bankruptcy Court, Manhattan, New York (2) Federal Bankruptcy Court, Westbury, New York Federal Bankruptcy Court, Philadelphia, Pennsylvania Federal Bankruptcy Court, Reading, Pennsylvania Federal Bankruptcy Court, Salt Lake City, Utah Federal Bankruptcy Court, Madison, Wisconsin (2) Federal District Court, Rochester, New York Michigan Tax Tribunal, Detroit, Michigan New Jersey Tax Court, Newark, New Jersey Superior Court, District of Columbia Superior Court, Clayton County, Georgia Superior Court of North Carolina Supreme Court, New York State, Buffalo, New York Supreme Court, New York State, Manhattan, New York Supreme Court, New York State, Riverhead, New York Tax Review Board, San Joaquin County, Stockton, California Tax Review Board, Bangor, Maine Tax Review Board, Schenectady, New York Tax Review Board, Yorktown, New York Tax Review Board, North Carolina Tax Review Board, Philadelphia, Pennsylvania (2) U.S. District Court, Wilmington, Delaware U.S. District Court, Madison, Wisconsin HVS International, Mineola, New York Qualifications of Stephen Rushmore, CRE, MAI, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (Cont'd) Kidder Peabody Rodeway Inns La Quinta Royce Hotels Mariner Corporation Salomon Brothers Marriott Hotels Salt Lake City Massachusetts Mutual Sanwa Bank Metropolitan Life Insurance Security Pacific Bank Meridien Hotels Servico Merrill Lynch Sheraton Hotels Microtel Smith Barney Midlantic Bank Sonnenblick-Goldman Mitsubishi Steamboat Ski Corporation Morgan Guaranty Bank & Trust Co. Stouffer Hotels Morgan Stanley Sumitomo Bank National Westminster Bank Super 8 Hotels Nippon Credit Bank Swiss Bank Corporation Northwestern Mutual Life Taco Bell Omni Hotels Taisei Pannell Kerr Forster Trans World Airlines Prime Motor Inns Travelers Insurance Prudential Life Insurance TraveLodge Quality Inns Treadway Hotels Radisson Hotels Trusthouse Forte Ramada Inns Union Bank Regent International Union Labor Life Registry Hotels Westin Hotels Residence Inns Westinghouse Credit Corporation Resolution Trust Corporation Wyndham Hotels Ritz-Carlton Hotels This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. ============= HVS - ------------- INTERNATIONAL ============= ===================================================== --------------------------------- Economic Study and Appraisal --------------------------------- Embassy Suites Palm Beach Gardens --------------------------------- Palm Beach Gardens, Florida --------------------------------- Prepared by: HVS International Division of O & R Valuation Services, Inc. 2665 S. Bayshore Drive Suite 605 Grand Bay Plaza Miami, FL 33133 305-856-7560 Submitted to: Mr. Shirish Godbole Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 ============= HVS - ------------- INTERNATIONAL ============= December 31, 1996 Mr. Shirish Godbole Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 Re: Embassy Suites Palm Beach Gardens Palm Beach Gardens, Florida Ref. #9660124 Dear Mr. Godbole: Pursuant to your request, we herewith submit our economic study and appraisal pertaining to the above-captioned property. We have inspected the site and facilities and analyzed the hostelry market conditions in the Palm Beach County area. Our report was prepared in accordance with, and is subject to, the requirements of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and the Uniform Standards of Professional Practice (USPAP), as provided by the Appraisal Institute. Based on the available data, our analysis, and our experience in the hotel industry, it is our opinion that the market of the fee simple and leased fee interest in the subject property described in this report, as of January 1, 1997, is: $21,000,000 TWENTY-ONE MILLION DOLLARS We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings and valuation. The economic study and appraisal is made part hereof, and must remain attached in order for the value opinion set forth to be considered valid. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. Very truly yours, HOSPITALITY VALUATION SERVICES A Division of Hotel Consulting Services, Inc. /s/ William L. Boatwright William L. Boatwright Vice President /s/ Anne R. Lloyd-Jones Anne R. Lloyd-Jones, CRE Senior Vice President /s/ Thomas O'Neill Thomas O'Neill, MAI, ISHC, CHA Managing Director WLB:ARL-J:TFO: msb HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Table of Contents - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table of Contents 1. Executive Summary..................................................1 2. Nature of the Assignment...........................................3 3. Description of the Land, Improvements, Zoning, Taxes, and Neighborhood.......................................................7 4. Market Area Analysis..............................................22 5. Overview of External Forces Affecting the U.S. Lodging Industry...30 6. Lodging Market Supply and Demand Analysis.........................46 7. Projection of Occupancy and Average Rate..........................63 8. Highest and Best Use..............................................77 9. Approaches to Value...............................................79 10. Income Capitalization Approach ..................................82 11. Sales Comparison Approach .......................................134 12. Cost Approach ..................................................142 13. Reconciliation of Value Indications..............................148 14. Statement of Assumptions and Limiting Conditions.................152 15. Certification....................................................156 Addenda Qualifications William L. Boatwright, MAI Anne R. Lloyd-Jones, CRE Thomas O'Neill, MAI, ISHC, CHA HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Executive Summary 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 1. Executive Summary Property: Embassy Suites Palm Beach Gardens and Admiralty I Office Tower Location: 4350-4400 PGA Boulevard, Palm Beach Gardens, Florida 33410 Date of Inspection: October 21,1996 Interest Appraised: fee simple and leased fee interest Date of Value: January 1, 1997 Special Considerations: None Land Description Area: +/-12.497 acres, or +/-544,369 square feet Zoning: PUD-CG1 Assessor's Parcel Number: 52-42-42-12-00-000-1050; 52-42-42-01-00-000-5060; 52-42-42-01-00-000-5080; 52-42-42-12-00-000-1210 Improvements Description Age: Constructed in February, 1989 Property Type: all-suite Guestrooms: 160 Number of Stories: ten stories Food and Beverage Facilities: 2 restaurants and 1 lounge Meeting Space: Four rooms, 5,110 square feet Parking: 563 spaces, covered and surface HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Executive Summary 2 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Summary of Value Parameters Highest and Best Use (as vacant): Mixed-use commercial PUD Highest and Best Use (as improved): Continue hotel and office utilization and to development excess land with either office or hotel expansion Marketing Period: six to nine months Number of Years to Stabilize: One Stabilized Year: 1997 Valuation Assumptions Mortgage Interest Rate: 9.5% Amortization Period: 25 Debt Service Constant: .104844 Loan-to-Value Ratio: 70% Stabilized Inflation Rate: 3.5% Equity Yield Rate: 20% Terminal Capitalization Rate: .11.0% Brokerage and Legal Fees: 3.0% Holding Period: ten years Calculated Discount Rate: 13.5% Estimates of Value Income Capitalization Approach: $21,000,000 Sales Comparison Approach: $19,530,000 - $21,356,000 Cost Approach (Replacement Cost): $36,000,000 Market Value Conclusion: $21,000,000 Market Value Conclusion per Room: Not applicable HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Nature of the Assignment 3 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 2. Nature of the Assignment Subject of the Economic Study and Appraisal The subject of the economic study and appraisal is the fee simple and leased fee interest in a +/-544,369-square-foot (+/-12.497-acre) parcel improved with a 160 - -room, all-suite lodging facility known as the Embassy Suites Palm Beach Gardens, which opened in February, 1989 and the Admiralty I Office Tower, which contains 80,125 square feet of net rentable area and also opened in 1989. The hotel is located at the southwest corner of I-95 and PGA Boulevard. Municipal jurisdictions governing the property include the City of Palm Beach Gardens, Palm Beach County, and the State of Florida. The hotel's civic address is 4350-4400 PGA Boulevard, Palm Beach Gardens, Florida, 33410. Objective of the Economic Study and Appraisal The objective of the economic study and appraisal is to evaluate the supply and demand factors affecting the market for transient accommodations in the Palm Beach Gardens/West Palm Beach area for the purpose of estimating the market value of the subject property. Market value is defined by the Office of the Comptroller of the Currency (OCC), 12 CFR, Part 34, 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 and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. buyer and seller are typically motivated; 2. both parties are well informed or well advised, and acting in what they consider their own best interests; 3. a reasonable time is allowed for exposure in the open market; HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Nature of the Assignment 4 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) Use of the Appraisal This appraisal is being prepared for use by Morgan Stanley Mortgage Capital, Inc. in connection with their proposed financing of a package of 17 hotels, including the subject property, which are owned by Ashford Financial Corporation or related entities. The information presented in this report should not be disseminated to the public or third parties without the express written consent of HVS International. Scope of the Appraisal All information was collected and analyzed by the staff of HVS International. Data such as historical operating statements, site plans, floor plans, and so forth were supplied by Ashford Financial Corporation and Remington Hotel Company. Unless noted otherwise, we have inspected the competitive lodging facilities and analyzed the sales summarized in this report, and our value conclusion is based on this investigation and analysis. Property Rights Appraised The property rights appraised are the fee simple ownership of the land and improvements, including the furniture, fixtures, and equipment. The fee simple interest is defined as "absolute ownership unencumbered by any other interest or estate subject only to the four powers of government."(2) The property rights analyzed of the leased fee ownership of the land and improvements is an ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others; the rights of the lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease. (3) The subject property is appraised as a going concern (i.e., an open and operating facility). (1) Federal Register, Vol. 55, No. 165, August 24, 1990; p. 34696. (2) The Dictionary of Real Estate Appraisal - Second Edition, American Institute of Real Estate Appraisers, Chicago, IL, 1989, p. 120. (3) The Appraisal of Real Estate - Tenth Edition, American Institute of Real Estate Appraisers, Chicago, IL, 1992, p. 7. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Nature of the Assignment 5 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Method of Study The methodology used to develop this economic study and appraisal is based on the market research and valuation techniques set forth in the textbooks authored by HVS International for the American Institute of Real Estate Appraisers and the Appraisal Institute, entitled The Valuation of Hotels and Motels,(1) Hotels, Motels and Restaurants: Valuations and Market Studies,(2) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations,(3) and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations.(4) The appraisal will consider the three standard approaches to value: income capitalization, sales comparison, and cost. Because lodging facilities are income-producing properties that are normally bought and sold on the basis of capitalization of their anticipated stabilized earning power, the greatest weight is given to the value indicated by the income capitalization approach. We find that most hotel investors employ a similar procedure in formulating their purchase decisions, and thus the income capitalization approach most closely reflects the rationale of typical buyers. When appropriate, the sales comparison and cost approaches are used to test the reasonableness of the results indicated by the income capitalization approach. Ownership, Franchise, and Management History and Assumptions A photocopy of the subject property's legal description, which was provided by a representative of the ownership is presented in the Addenda to this report; the appraisers assume no responsibility regarding the accuracy of this legal description. The ten-story hotel opened in February, 1989, and is seven years old as of the date of this appraisal. The hotel was acquired by Ashford Financial Corporation in April 1995. At the time of this acquisition, the hotel was known as the Radisson Suites PGA, and was generally in good condition. (1) The Valuation of Hotels and Motels, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1978. (2) Hotels, Motels and Restaurants: Valuations and Market Studies, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1983. (3) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1990. (4) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Nature of the Assignment 6 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Subsequent to the acquisition, the subject hotel franchise affiliation was changed to an Embassy Suites, beginning October 2, 1995. The subject property is operated under a franchise agreement with Embassy SuitesEmbassy Suites; this agreement expires in October, 2015. The hotel is also subject to a management agreement with Remington Ashford; an abstract of this contract is presented in the Addenda to this report. Marketing Period In light of the renewed interest in hotel investments and the increasing availability of debt and equity capital, we believe that it will take six to nine months to sell the subject property assuming it is placed on the market at the concluded value. Effective Date of the Appraisal The effective date of the appraisal is January 1, 1997. All projections are expressed in inflated dollars, and the value estimate represents January 1,1997 dollars. Date of Inspection The subject property was inspected by William L. Boatwright on October 21,1996. HVS International, Miami, Florida Description of the Land, Improvements, 7 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 3. Description of the Land, Improvements, Zoning, Taxes, and Neighborhood LAND The suitability of the land for the operation of a lodging facility is an important consideration affecting the economic viability of a property and its overall value. Factors such as size, topography, access, visibility, and the availability of utilities have a direct impact on the desirability of a particular site. Size and Topography The subject site is located on the southwest corner of PGA Boulevard and I-95, located just east of Military Trail. Municipal jurisdictions governing the property include the City of Palm Beach Gardens, Palm Beach County, and the State of Florida. According to an April 1995 survey prepared by REO Engineers & Planners, Inc., the subject parcel contains approximately +/-544,369 square feet, or +/-12.497 acres. The parcel is irregular in shape. Vehicular access to the subject property is provided by a paved driveway from PGA Boulevard and via a paved ingress and egress easement from Military Trail. The topography of the subject is level and at grade level with the surrounding roads and property, except for I-95, which is elevated at the location of the subject. In conclusion, the size and topography of the subject parcel appears highly conducive for commercial/retail use. Easements The subject parcel is encumbered by a number of utility and ingress and egress easements, which either extend along the perimeter property lines or traverse the subject site. The appraisers were not provided with any information concerning easements affecting the subject property. For the purposes of this report, we have assumed that the subject is not encumbered by any unusual or onerous easements which would affect its use or marketability. Based on the existing improvements and the approved development rights of the excess land, we believe that these easements do not restrict optimum utilization of the site. HVS International, Miami, Florida Description of the Land, Improvements, 8 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Regional Access It is important to analyze a lodging facility's ease of access with respect to regional and local transportation routes and demand generators. The subject site is accessible to a variety of local, county, state, and interstate highways via I-95, Florida's Turnpike, and the surrounding local road network. I-95 and Florida's Turnpike are limited-access highways, while PGA Boulevard is a divided six-lane thoroughfare with an average daily traffic count of 44,802 vehicles at the intersection of I-95 and PGA Boulevard. Overall, regional access to the Embassy Suites Palm Beach Gardensoffice building is considered good. Local Access and Visibility The visibility of the subject property is considered to be excellent, given its frontage and exposure to I-95, and the close proximity of a Florida Turnpike exit at PGA Boulevard, situated approximately one mile west of the subject. For vehicular traffic traveling in both a northerly and southerly direction along I-95, after exiting I-95, traffic is best served by making a U-turn at a traffic light at the PGA Boulevard and Military Trail intersection. This provides direct access to the subject situated a short distance to the west. Alternatively, vehicular traffic exiting Florida's Turnpike at PGA Boulevard travels easterly approximately one mile to the subject site. Overall, the subject site is considered to have excellent visibility from I-95 and good access from both I-95 and Florida's Turnpike. Airport Access The subject is located approximately 12 miles north of the West Palm Beach International Airport. Access to the airport for vehicular traffic traveling along I-95 is provided via Belvedere Road and Southern Boulevard. There is not an exit from Florida's Turnpike to the West Palm Beach International Airport. Access to Local Demand Generators The Embassy Suites Palm Beach Gardens and the Admiralty I Office Building are easily accessible to the local demand generators because of their location along I-95, and near Florida's Turnpike. The subject's area demand generators are generally located along and near I-95, located within and north of the City of West Palm Beach. The following table outlines some of these local demand generators and their distance from the subject site. HVS International, Miami, Florida Description of the Land, Improvements, 9 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 3-1 Local Demand Generators - -------------------------------------------------------------------------------- Approximate Distance Approximate Driving Demand Generator from Subject Site (in Miles) Time (in Minutes) ---------------- ---------------------------- ----------------- PGA National Golf Resort 1.0 5 Jupiter Lighthouse 8.0 15 Burt Reynolds Ranch 6.0 10 Loggerhead Park 5.0 15 Ocean Science Center 8.0 15 Jai-Alai Fronton 6.0 10 West Palm Beach Auditorium 8.0 15 Royal Poinciana Playhouse 10.0 25 Flagler Museum 10.0 25 Worth Avenue 12.0 30 - -------------------------------------------------------------------------------- In summary, the subject site is located a comparatively short distance from a number of local attractions, which are within an acceptable driving time. Utilities The subject site is served by all necessary utilities, which are provided as follows. ================================================================================ Table 3-2 Available Utilities - -------------------------------------------------------------------------------- Utility Provider ------- -------- Water Seacoast Electricity Florida Power & Light Telephone Southern Bell Sewer Seacoast Oil Not Available Garbage and Trash Solid Waste Authority Storm Drainage Palm Beach Gardens - -------------------------------------------------------------------------------- Soil and Subsoil Conditions Geological and soil reports were not provided to the appraisers or made available for review during the preparation of this report. The appraisers are not qualified to evaluate soil conditions other than by a visual inspection of the surface. Nuisances and Hazards A Phase I Environmental Site Assessment Update was performed at the subject property by Dames & Moore on April 10, 1995. Based on our review of this Phase I study, it is our understanding that available historical information does not indicate that hazardous substances and/or wastes have been dumped or illegally placed on the subject property. Also, HVS International, Miami, Florida Description of the Land, Improvements, 10 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= regulatory research for the subject property did not reveal any notices of violation or environmental enforcement actions or reports of contamination. Consequently, it is Dames & Moore's opinion that no recognized environmental conditions were found to be associated with current or historical activities on the subject property. Because the appraisers are not experts in this field, we do not warrant the absence of hazardous waste, and we urge the reader to obtain further independent analysis of these factors. Excess Land Based on our investigation, the subject site includes approximately 4.5 acres of excess land, which as part of the approved PUD of the subject site, permits only the construction of a ten-story office building, containing 82,265 square feet of gross floor area and a two-story parking garage. The approval requires that this potential development include an exterior building design similar to the Admiralty I Office Building, which is included as part of the subject in this report. It is our understanding that the utility capacity for this development is currently vested from the approval vested rights determination of the subject's PUD. The excess land includes a small retention pond which is located on the most easterly portion of the land. Flood Zone Possible locational hazards include flood potential. According to our review of the National Flood Insurance maps, the subject is located on Community Panel Number 120221-0002 B, last revised on January 17, 1979. Based on our review, the subject site is located in Zone B. Zone B is a district located within a 100- to 500-year special flood hazard area. Seismicity According to a representative of the Palm Beach Gardens Planning and Zoning Department, the subject site is not located in a seismic zone. Therefore, we have assumed that the subject is not located in an area of seismic danger. Legal Description As noted earlier, a copy of the subject property's legal description, as provided by a representative of the ownership, is presented in the Addenda to this report. Land - Conclusion The subject parcel appears well suited for commercial/retail utilization. We have analyzed the issues of size, topography, easements, access, visibility, and the availability of utilities, and note the following advantages and disadvantages. HVS International, Miami, Florida Description of the Land, Improvements, 11 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Advantages Located on the southwest corner of PGA Boulevard and I-95, approximately one mile east from a Florida Turnpike exit at PGA Boulevard. The I-95 frontage of the subject site provides excellent visibility and good access for vehicular traffic along I-95. There is sufficient excess land, with vested trips along PGA Boulevard for an additional ten-story, 82,265-square-foot office tower. The advantages noted previously are important locational characteristics and are positive factors for alternative commercial/retail uses. Disadvantages None. IMPROVEMENTS The quality of the physical improvements of a lodging facility and office tower has a direct influence on its marketability and attainable occupancy and rental rate. The design and functionality of the structure can also affect operating efficiency and overall profitability. This section investigates the subject property's physical improvements and personal property in an effort to determine how they contribute to total value. The following description of the improvements is based on our inspection of the hotel and office tower and information provided by ownership. Hotel Embassy Suites Palm Beach Gardens is an all-suite lodging facility, containing 160 rentable units, 5,110 square feet, and appropriate back-of-the-house facilities. The ten-story hotel opened in February, 1989, and is seven years old as of the date of this appraisal. The hotel was acquired by Ashford Financial Corporation in April 1995. At the time of this acquisition, the hotel was known as the Radisson Suites PGA, and was generally in good condition. Subsequent to the acquisition, the subject hotel franchise affiliation was changed to an Embassy Suites, beginning October 2, 1995. It was extensively renovated during the summer of 1995, at an estimated cost of $1,000,000, and again in 1996 at a cost of approximately $200,000. In scope, this renovation included painting the exterior of the building, and updating the guestrooms. The hotel is considered to be of good-to-excellent construction quality and is currently HVS International, Miami, Florida Description of the Land, Improvements, 12 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= judged to be in good condition. The hotel is operated under a license agreement with Embassy Suites and because of the renovation in 1995 and 1996 meets the standards for lodging facilities of that brand. Office Building The Admiralty I is a class A, ten-story, multiple-tenant office building, which contains approximately 82,810 square feet of gross floor area, and 80,125 square feet of net rentable floor area. The office building opened in February, 1989 in conjunction with the hotel and is seven years of age as of the date of this appraisal. This office component was purchased with the hotel in April, 1995. The lobby of the office tower is comparatively small, and may be accessed via the lobby of the hotel or from the exterior of the building. Floors three through ten include approximately 8,200 square feet of office space, while the first and second floors are comparatively smaller due the presence of a two-story lobby and a 1,007-square-foot conference room. The conference room is part of the space leased by the tenant of the food and beverage outlets at the subject hotel. There are three office building elevators. The HVAC system consists of two rooftop chillers with computerized energy management controls. Life safety systems include sprinklers in all areas and hard-wired smoke alarms. Tenant improvements generally include carpeted flooring, painted drywall, and acoustical tile ceiling panels. The common area finish and tenant improvements of the office building are considered to be of good construction quality and are in good condition. Based on our inspection and information provided by Mr. Oscar Barrera, hotel general manager, the following table summarizes the hotel facilities available at the subject property. HVS International, Miami, Florida Description of the Land, Improvements, 13 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 3-3 Hotel Facilities Summary - -------------------------------------------------------------------------------- Rooms: King Beds 107 Units Double/Doubles 48 Suites 5 --------------- Total 160 Units Food and Beverage Outlets: Old Boston's 110 Seats Beacon Street Pub 90 Atrium Cafe 75 Meeting Space: Ballroom 3,600 Square Feet Admirals Room 800 Boardroom A 355 Boardroom B 355 --------------- Total 5,110 Square Feet Amenities: Heated Outdoor Swimming Pool Jogging Trail Whirlpool Arcade Sauna One Tennis Court Exercise Room Coin-Operated Laundry Complimentary Transportation Business Center Parking: Garage 477 Spaces Surface 86 --------------- Total 563 Spaces Elevators: Passenger 2 Glass Enclosed Freight 1 Enclosed Life Safety Wet Sprinklers Hard-Wired Smoke Detectors Hotel Laundry Self-Contained - -------------------------------------------------------------------------------- Property Exterior The hotel structure is centrally situated on the subject parcel, with the office tower abutting the hotel to the west. A three-level parking garage is located at the rear (south) of the hotel and office tower, while surface parking spaces are located primarily in the vicinity of the subject hotel. An elevated, enclosed, air-conditioned breezeway extends from the third level HVS International, Miami, Florida Description of the Land, Improvements, 14 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= of the parking garage to the second floor of the hotel as the lower level of the garage is situated partly below the grade level of the site. The office building includes a drive-through bank facility on the ground level. Vehicular access to the subject site is typically via PGA Boulevard. After entering the site, vehicular traffic proceeds to the hotel's main entrance via a circular driveway, which is located to the east of the primary entrance driveway, or to the parking garage to the south. Service vehicular traffic gains access to the loading dock via the previously noted ingress and egress easement from Military Trail, which extends along the rear of the hotel and office building, between the hotel and office building and the parking garage. The loading dock is located on the eastern side of the hotel lobby atrium building section. Construction and Design The exterior of both the hotel and office tower consist of stucco over concrete and aluminum framed, tinted, fixed-pane, plate-glass exterior walls. The front entrance to the hotel lobby and the temporary registration parking area for hotel guests is covered. The subject hotel and office tower are of poured concrete construction. The hotel has an open four-story atrium lobby and includes a number of rooftop skylights and windows, which together provide natural lighting to the lobby. The attached office lobby is an open two-story area. Lobby The hotel lobby is decorated with tropical plantings, and a small lake with swans, fish and a water fountain. The hotel lobby is accessed from either the front entrance to the hotel, via lobby doors, from the enclosed breezeway extending from the parking garage, or from the office building lobby. Upon entering the hotel, the food and beverage outlets and retail space are situated on the left of the first floor lobby. The open atrium of the hotel is generous in size and provides an attractive and scenic entrance to the hotel. Although the office lobby is standard in size, it is also attractive to guests. Food and Beverage Outlets As previously noted the subject hotel includes three food and beverage outlets. These outlets include Old Boston's Steak and Seafood, Beacon Street Pub, and the Atrium Cafe. Each food and beverage outlet is open daily. Old Boston's Steak and Seafood outlet has an exterior entrance, located along the PGA Boulevard street frontage, or may be accessed from the hotel lobby. This restaurant features steak and seafood with a relaxing New England atmosphere. This restaurant is open from 5:00 PM to closing HVS International, Miami, Florida Description of the Land, Improvements, 15 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= and provides nightly room service. The Atrium Cafe is located in the lobby. It features a complimentary, full American breakfast in the morning, a complimentary manager's reception each evening, and serves lunch in the afternoon. The Beacon Street Pub is open from 5:00 PM to closing during the weekday evenings and from 11:00 AM to closing on Saturday and Sunday. This outlet includes sports games and sports memorabilia. All kitchen equipment and furniture in the restaurants is owned by the hotel. It is our understanding that Embassy Suites will require that these food and beverage outlets be updated in the near future. Meeting and Banquet Space The subject property's meeting and banquet space is located on the second-floor level, above the first-floor level retail space and food and beverage outlets, overlooking the hotel lobby below. The ballroom is divisible into four separate meeting rooms, each containing 900 square feet. The ballroom accommodates 300 persons, banquet-style seating, and 400 persons, theater-style seating. The Admiral's Room seats 85 persons theater style, and 60 persons banquet style. Boardrooms A and B each seat 16 persons conference style. The banquet and meeting space is generally in good condition. However, it is our understanding that meeting room chairs will be replaced in 1997 and the 1,500 square feet of pre-function space and other second floor access areas need new carpeting. Guestrooms The guestrooms consist of 155 one-bedroom suites and five two-bedroom suites with thermostat climate controls. The one-bedroom suites contain approximately 482 square feet of living area, while the two-bedroom suites comprise approximately 645 square feet. Each two- and three-room suite provides a separate living room and bedroom, a living room with sofa sleeper, dining area, coffee maker, wet bar, minibar, microwave, radio, two telephones, one with voice mail, two remote-control color cable televisions, pay-per-view movies, iron/ironing board, and hair dryer. At the time of our inspection, the subject property's guestrooms appeared to be generally in good condition. However, it is our understanding that the updating of the guestrooms in 1997 will include 30 new sofa sleepers for 30 suites, king and double-bed box springs and mattresses for 95 suites, and bedspreads for the remaining 20 suites which were not previously replaced. Guestroom Corridors Guestroom corridors are wide enough to permit the easy passage of housekeeping and room service carts. In 1996 the carpeting and wall treatments for the hotel corridors on floor levels one through ten were replaced. HVS International, Miami, Florida Description of the Land, Improvements, 16 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Heating, Ventilation, and Air Conditioning The subject hotel has a climate control HVAC unit for each suite, and rooftop HVAC chillers for the public areas of the hotel and for the office tower. It is our understanding that all HVAC equipment at the subject is currently in good condition as substantial repairs were recently made to the HVAC system at the subject hotel. Asbestos According to information provided by management representatives, there is no asbestos present in the subject property's improvements; however, we have not been provided with an asbestos report to confirm this assertion. The reader should be advised that any costs associated with asbestos removal or containment may have an unfavorable impact on the hotel's market value, and the estimate set forth in this appraisal reflects our value conclusions prior to the deduction of any such costs. We suggest that interested parties initiate an independent analysis regarding current asbestos levels and the capital expenditures necessary to remove any asbestos that is present. ADA Conformance Following the January 26, 1992 passage of the Americans with Disabilities Act (ADA), buildings for public use are subject to new physical standards. The appraisers are not experts on ADA compliance, and we render no opinion regarding the subject property's conformance to ADA standards. Capital expenditures that may be necessary to bring the property into accordance with the ADA will reduce our estimate of market value. Any ongoing costs related to ADA regulations are expected to be funded by normal replacement reserves. Improvements - Conclusion Overall, the subject property's improvements appear appropriate for hotel and office use. Although the hotel exhibits adequate functional utility for the purpose to which the improvements were designed and built, we believe that the subject hotel exhibits functional obsolescence relative to a comparatively large hotel atrium, and a parking garage which does not generate sufficient revenue to support its cost to construct in the local market area. For the purposes of this appraisal, we have assumed that the subject will be maintained in its present condition throughout the assumed projection period. Specifically, it is assumed that hotel management will employ standard preventive maintenance measures, and that a reserve for replacement will continue to be funded, which will defray the future cost of any capital expenditures. HVS International, Miami, Florida Description of the Land, Improvements, 17 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ZONING According to a representative of the City of Palm Beach Gardens, and our review of the current zoning map of Palm Beach Gardens, the subject property is zoned as follows. PUD CG -1 Based of our review of the CG - 1 (General Commercial District) zoning district, retail sales and consumer service establishments are permitted uses. More specifically, because the subject is part of a PUD (Planned Unit Development), the unimproved subject land can only be improved with a ten-story, 82,265-square-foot office building with a two-story parking garage. We were informed that the office building development rights are vested from the PUD approval. In addition, according to our review of the Future Land Use Map of Palm Beach Gardens for 2010, the subject property is classified Commercial, which is judged as compatible with the subject CG - 1 zoning district. As a result, we have assumed that the subject conforms to local zoning regulations, and is a legal conforming use property. We further assume that all necessary permits and approvals have been secured (including an appropriate liquor license), and that the subject property was constructed in accordance with local zoning ordinances, building codes, and all other applicable regulations. Our zoning analysis should be verified before any physical changes are made to the existing hotel or office building or to the unimproved land. ASSESSED VALUE AND TAXES Property (or ad valorem) tax is one of the primary revenue sources of municipalities. Based on the concept that the tax burden should be distributed in proportion to the value of all properties within a taxing jurisdiction, a system of assessments is established. Theoretically, the assessed value placed on each parcel bears a definite relationship to market value, so properties with equal market values will have similar assessments and properties with higher and lower values will have proportionately larger and smaller assessments. Depending on the taxing policy of the municipality, property taxes can be based on the value of the real property or the value of the personal property and the real property. Because the objective of assessed value is to maintain a specific value relationship among all properties in a taxing jurisdiction, comparable hotel and office property assessments should be evaluated to determine whether the subject property's assessed value is equitable. HVS International, Miami, Florida Description of the Land, Improvements, 18 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The taxing jurisdiction governing the subject property (Palm Beach County) assesses both real and personal property. The assessed value to market value ratio in Palm Beach County for commercial property has traditionally ranged between 65.0% and 95.0% of market value. The current year millage rate for the subject is $21.0071 per $1,000 of assessed value, which is slightly below the millage rate of $21.3283 per $1,000 in 1995. Based on the current year (1996) property assessment for the subject of $14,951,283, a current year tax burden of $314,083 is indicated, rounded to $314,000. Our review of the assessed values of the subject, three comparable hotels and five comparable office buildings located in the Palm Beach County taxing jurisdiction are as follows. HVS International, Miami, Florida Description of the Land, Improvements, 19 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 3-4 Assessed Values of the Subject, Comparable Hotels and Office Buildings - -------------------------------------------------------------------------------- SUMMARY OF SUBJECT ASSESSMENTS
Tax Identification Personal Property Real Property Assessments Total Property ----------------- -------------------------------- -------------- Numbers Assessments Land Improvements Assessments - ---------------------------- ------------------------------------------------------------------- 52-42-42-12-00-000-1050 0 $ 5,796,960 $ 7,869,840 $ 13,666,800 52-42-42-01-00-000-5060 0 611,580 0 611,580 52-42-42-01-00-000-5080 0 300 11,713 12,013 52-42-42-12-00-000-1210 0 300 0 300 52-079321 $ 627,757 0 0 627,757 52-077252 32,833 0 0 32,833 52-101957 Inactive 0 0 0 --------------- ------------- ---------------- ------------ Totals $ 660,590 $ 6,409,140 $ 7,881,553 $ 14,951,283
SUMMARY OF COMPARABLE ASSESSMENTS
Total Assessment Assessment Number ------------------------------------- ---------------------------------- Hotel Property of Rooms Land Improvements Total per Room - ------------------------------------------------------------------------------------------------------------------------------ Palm Beach Gardens Marriott 279 $2,870,610 $11,789,249 $14,659,859 $52,544 Omni West Palm Beach Hotel 220 3,436,880 11,854,911 15,291,791 69,508 Radisson Suites Hotel 175 908,882 5,283,250 6,192,132 35,384
Total Assessment Assessment GFA ------------------------------------- ---------------- Office Address (Sq Ft) Land Improvements Total per Sq Ft' - ------------------------------------------------------------------------------------------------------------------------------ 3300 PGA Boulevard 91,111 $2,352,000 $6,398,000 $8,750,000 $96 4440 PGA Boulevard 51,595 1,120,488 1,479,512 2,600,000 50 4500 PGA Boulevard 53,553 1,097,712 2,302,288 3,400,000 63 1700 Palm Beach Lakes Boulevard 82,973 752,712 5,047,288 5,800,000 70 500 Australian Avenue 97,345 716,124 6,783,876 7,500,000 77
Source: Palm Beach County Property Appraiser's Office - -------------------------------------------------------------------------------- Based on our review, the comparable hotel and office building assessments ranged from $35,384 to $69,508 per room, and from $50.00 to $96.00 per square foot, respectively. In multiplying the average assessment per room of $52,479 by the number of rooms at the subject of 160, an assessment of approximately $8,397,000 is indicated. In multiplying the average assessment per square foot of $71.20 by the gross floor area at the subject of 82,125 square feet, an assessment of approximately $5,704,900 is indicated. HVS International, Miami, Florida Description of the Land, Improvements, 20 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The summation of the two calculated assessments equal $14,101,487, which is slightly below the current assessment of the subject at $14,951,283. However, the subject includes excess land not found at the compared properties. Therefore, we believe this analysis supports the 1996 tax burden for the subject of $314,000. In applying projected inflationary increases of 3.5% per year to the current year assessment, the future tax burden for the subject property is as follows. ================================================================================ Table 3-5 Forecast of Property Tax Expense (+000) - -------------------------------------------------------------------------------- Stabilized 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Forecast Property Taxes $314 $325 $336 $348 $360 - -------------------------------------------------------------------------------- NEIGHBORHOOD The neighborhood surrounding a lodging facility often has an impact on a hotel's status, image, class, style of operation, and sometimes its ability to attract and properly serve a particular market segment. This section investigates the subject property's neighborhood and evaluates any pertinent locational factors that could affect its occupancy, average rate, food and beverage revenues, and overall profitability. The neighborhood surrounding the subject property is characterized by commercial/retail development along the major arteries and various forms of residential development located along the secondary roads. The properties located along PGA Boulevard, west of I-95, consist primarily of hotels, shopping centers, and bank office buildings which benefit from the visibility and proximity of I-95. A Holiday Inn and the Gardens Square Shops Shopping Center are located along the north line of PGA Boulevard, opposite the subject, while the First Union Center Office Building and the SunTrust Bank Building are located at the intersection of PGA Boulevard and Military Trail, west of I-95 and the subject. The commercial/retail development situated along Military Trail to the north and south of PGA Boulevard, to the west of the subject, consists generally of neighborhood commercial/retail development. The Tanglewood Apartments are located south of the subject and west of I-95. Located to the south of PGA Boulevard, east of I-95, and along or near RCA Boulevard is Loehmanns Plaza, which includes six General Cinema Theaters, the Palm Beach Gardens Marriott, the Florida Atlantic University North Campus, a Palm Beach Community College campus, and United NEIGHBORHOOD MAP [GRAPHIC OMITTED] HVS International, Miami, Florida Description of the Land, Improvements, 21 Zoning, Taxes, and Neighborhood - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Tech Optical Systems, Inc. facility. The PGA Boulevard corridor, located to the east and west of I-95, is only approximately 50% developed. It is our understanding from our conversations with Palm Beach Gardens city officials that the relatively large amount of vacant land in the subject neighborhood, located along PGA Boulevard near I-95, is not currently developable due to concurrency regulations. Concurrency limits development in the State of Florida when the vehicular traffic along local arterials are at capacity. Neighborhood - Conclusion The neighborhood surrounding the Embassy Suites Palm Beach Gardens is considered to be consistent with development located at other intersections along I-95. We believe that the location of the subject is appropriate for a hotel and office development, similar in scope to the existing upscale subject development. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Market Area Analysis 22 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 4. Market Area Analysis The economic vitality of the market surrounding the subject property is an important consideration in forecasting lodging demand and income potential. Economic and demographic trends that reflect the amount of visitation provide a basis from which to project hostelry demand. The purpose of the area analysis is to review available economic and demographic data to determine whether the local market will undergo economic growth, stability, or decline. In addition to predicting the direction of the economy, the rate of change must be quantified. These trends are then correlated based on their propensity to reflect variations in lodging demand with the objective of forecasting the growth or decline in visitation by individual market segment. Market Area Definition The CMSA generally includes Palm Beach County, while the MSA includes the West Palm Beach-Boca Raton market area. The subject property is situated in the City of Palm Beach Gardens in Palm Beach County, Florida. The West Palm Beach/Boca Raton Metropolitan Statistical Area (MSA) incorporates the majority of Palm Beach County. This area includes the cities of Boca Raton, Boynton Beach, Lake Worth, West Palm Beach, Palm Beach Gardens and Riviera Beach. The county, in the past decade, has expanded to become one large economic center, with I-95 and Florida's Turnpike serving as the primary north/south arteries between the previously mentioned cities. Economic and Demographic Data Based on fieldwork conducted in the area and our in-house sources, we have evaluated various economic and demographic statistics to determine trends in lodging demand. A primary source of economic and demographic statistics used in this analysis is the Complete Economic and Demographic Data Source published by Woods & Poole Economics, Inc., a well-regarded forecasting service based in Washington, DC. Using a data base containing more than 300 variables for each county in the nation, Woods & Poole employs a sophisticated regional model to forecast economic and demographic trends. Historical statistics are based on census HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Market Area Analysis 23 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= data and information published by the Bureau of Economic Analysis. Projections are formulated by Woods and Poole. All dollar amounts have been adjusted for inflation, and thus growth or decline represents real change in constant dollars. Population Palm Beach County has undergone gradual growth over the past several years in population. Between 1980 and 1995, the population in the county increased at an average annual compound rate of 3.5%, while population totals increased between 1990 and 1995 at an average annual compound rate of 2.5%. Population is projected to increase at an average annual compound rate of 2.7% between 1995 and 2000. We find that the rate of population growth generally establishes an approximate rate of increase for commercial hotel demand. This observation also holds true for the meeting and convention segment if a majority of the meetings are business-oriented. Retail Sales Palm Beach County has undergone rapid growth over the past several years in retail sales. Between 1980 and 1995, the retail sales in the county increased at an average annual compound rate of 4.7%, while the retail sites increased between 1990 and 1995 at an average annual compound rate of 3.8%. Retail sales are projected to increase at an average annual compound rate of 2.7% between 1995 and 2000. Personal Income Palm Beach County has undergone rapid growth over the past several years in personal income. Between 1980 and 1995, the population in the county has increased at an average annual compound rate of 6.2%, while personal income increased between 1990 and 1995 at an average annual compound rate of 3.3%. Personal income is projected to increase at an average annual compound rate of 4.0% between 1995 and 2000. Work Force Characteristics Palm Beach County has become the headquarters to many corporations, including Pratt & Whitney, W.R. Grace and Company, Motorola Inc., Florida Power & Light, Southern Bell and Siemens Companies. Banking institutions have established large offices in both Boca Raton and West Palm Beach, including NationsBank, First Union National Bank, and Barnett Bank of Palm Beach County. The major employers in Palm Beach County represent a cross section of hotel demand potential. Some are national in scope, while others operate on a more local basis. Some are engaged in manufacturing, and others are HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Market Area Analysis 24 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= active in service businesses. The following table outlines the major goods-producing employers in Palm Beach County. ================================================================================ Table 4-1 Major Employers - -------------------------------------------------------------------------------- Number of Firm Product Employees - -------------------------------------------------------------------------------- Pratt & Whitney Jet Engines 5,000 IBM Personal Computers 3,300 Flo Sun, Inc. Agriculture 2,534 Motorola, Inc. Electronic Pagers 2,800 Siemens Companies PBX Systems 2,000 Osceola Farms Agriculture 1,500 Palm Beach Newspapers, Inc. Newspaper Publishing 1,330 U.S. Sugar Corporation Agriculture 1,000 Sikorsky Aircraft Helicopters 550 United Tech. Optical Systems, Inc. Laser Optical Systems 550 W.R. Grace & Company Specialty Chemicals 500 Rinker Materials Corp. Cement 500 Hardrives, Inc. Construction 420 C.M.A.C. Printed Circuit Boards 400 LDDS Communications Specialty Chemicals 300 Solitron Devices, Inc. Power Hybrids 300 Sensormatic Anti-theft Devices 300 Photo Electronics Corp. Photographic Equipment 290 The Pepsi Cola Bottling Co. Bottled Soft Drinks 275 National Enquirer, Inc. Newspapers 250 Sony Professional Products Audio Visual Equip 250 - -------------------------------------------------------------------------------- Airport Traffic Palm Beach International Airport is located just west of I-95, west of the West Palm Beach CBD. The West Palm Beach International Airport was expanded with a $59-million new terminal that was completed in October 1989. The new facility added some 560,000 square feet of space, increasing the number of gates by 24. The West Palm Beach International Airport is currently serviced by 30 airlines and offers regional, domestic and international flights. The airport facilities are currently under-utilized, but as Palm Beach County continues to grow and mature, the airport will be well positioned to provide additional capacity in the future. From 1991 to 1995 passenger traffic at the West Palm Beach International Airport has increased at an average annual compound rate of only 0.9%. However, the passenger traffic has increased by 7.6% through August 1996 after comparison to August 1995 totals. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Market Area Analysis 25 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Local Attractions Palm Beach offers a number of popular attractions, including the Atlantic Ocean beaches, the Kravis Center for the Performing Arts, the Worth Avenue shopping district and several regional malls. However, Palm Beach County does not have a convention center. The North Palm Beach County market area provides spring training facilities for the Montreal Expos and the Atlanta Braves. The area's excellent golf, tennis and proximity to Orlando and Walt Disney World further underscore Palm Beach's viability as a leisure destination. Our review of various economic and demographic data indicates that the subject property's market area remains in a growth stage, and should continue to grow into the future. Economic and Demographic Data The following tables summarize the economic and demographic trends discussed throughout this section. All figures that reflect dollar amounts have been adjusted for inflation, and thus reflect real change. It should be noted that the percent changes indicated in the following tables are based on unrounded figures, and thus may not calculate exactly. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Market Area Analysis 26 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-1 Economic and Demographic Data for the Subject Property's Market Area - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ----------------------------------------------------------------------------------------------------------------------------------- Long-Term Historical Population Palm Beach County 1980-1995 585.8 983.1 3.5% West Palm Beach-Boca Raton, FL MSA 1980-1995 585.8 983.1 3.5 State of Florida 1980-1995 9,841.1 14,230.4 2.5 United States 1980-1995 227,225.6 262,791.0 1.0 Short-Term Historical Population Palm Beach County 1990-1995 870.0 983.1 2.5 West Palm Beach-Boca Raton, FL MSA 1990-1995 870.0 983.1 2.5 State of Florida 1990-1995 13,019.1 14,230.4 1.8 United States 1990-1995 249,401.4 262,791.0 1.1 Projected Population Palm Beach County 1995-2000 983.1 1,123.6 2.7 West Palm Beach-Boca Raton, FL MSA 1995-2000 983.1 1,123.6 2.7 State of Florida 1995-2000 14,230.4 15,606.5 1.9 United States 1995-2000 262,791.0 274,758.4 0.9 Long-Term Historical Retail Sales Palm Beach County 1980-1995 4,456.9 8,882.5 4.7 West Palm Beach-Boca Raton, FL MSA 1980-1995 4,456.9 8,882.5 4.7 State of Florida 1980-1995 66,181.6 113,048.9 3.6 United States 1980-1995 1,340,768.9 1,765,826.1 1.9 Short-Term Historical Retail Sales Palm Beach County 1990-1995 7,354.5 8,882.5 3.8 West Palm Beach-Boca Raton, FL MSA 1990-1995 7,354.5 8,882.5 3.8 State of Florida 1990-1995 96,339.3 113,048.9 3.3 United States 1990-1995 1,557,380.2 1,765,826.1 2.5 Projected Retail Sales Palm Beach County 1995-2000 8,882.5 10,151.8 2.7 West Palm Beach-Boca Raton, FL MSA 1995-2000 8,882.5 10,151.8 2.7 State of Florida 1995-2000 113,048.9 123,900.1 1.9 United States 1995-2000 1,765,826.1 1,846,830.4 0.9 Long-Term Historical Retail Sales Per Capita Palm Beach County 1980-1995 7,607.8 9,035.2 1.2 West Palm Beach-Boca Raton, FL MSA 1980-1995 7,607.8 9,035.2 1.2 State of Florida 1980-1995 6,725.0 7,944.2 1.1 United States 1980-1995 5,900.6 6,719.5 0.9 Short-Term Historical Retail Sales Per Capita Palm Beach County 1990-1995 8,453.3 9,035.2 1.3 West Palm Beach-Boca Raton, FL MSA 1990-1995 8,453.3 9,035.2 1.3 State of Florida 1990-1995 7,399.9 7,944.2 1.4 United States 1990-1995 6,244.5 6,719.5 1.5
- -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Market Area Analysis 27 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 44-1 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ----------------------------------------------------------------------------------------------------------------------------------- Projected Personal Retail Sales Per Capita Palm Beach County 1995-2000 9,035.2 9,035.0 (0.0) West Palm Beach-Boca Raton, EL MSA 1995-2000 9,035.2 9,035.0 (0.0) State of Florida 1995-2000 7,944.2 7,939.0 (0.0) United States 1995-2000 6,719.5 6,721.7 0.0 Long-Term Historical Eating and Drinking Place Sales Palm Beach County 1980-1995 434.1 917.1 5.1 West Palm Beach-Boca Raton, FL MSA 1980-1995 434.1 917.1 5.1 State of Florida 1980-1995 6,553.9 11,648.0 3.9 United States 1980-1995 126,131.6 185,035.4 2.6 Short-Term Historical Eating and Drinking Place Sales Palm Beach County 1990-1995 770.2 917.1 3.6 West Palm Beach-Boca Raton, FL MSA 1990-1995 770.2 917.1 3.6 State of Florida 1990-1995 10,065.3 11,648.0 3.0 United States 1990-1995 161,197.4 185,035.4 2.8 Projected Eating and Drinking Place Sales Palm Beach County 1995-2000 917.1 1,075.5 3.2 West Palm Beach-Boca Raton, FL MSA 1995-2000 917.1 1,075.5 3.2 State of Florida 1995-2000 11,648.0 13,142.8 2.4 United States 1995-2000 185,035.4 199,127.3 1.5 Long-Term Historical Eating and Drinking Place Sales Per Capita Palm Beach County 1980-1995 741.1 932.8 1.5 West Palm Beach-Boca Raton, FL MSA 1980-1995 741.1 932.8 1.5 State of Florida 1980-1995 666.0 818.5 1.4 United States 1980-1995 555.1 704.1 1.6 Short-Term Historical Eating and Drinking Place Sales Per Capita Palm Beach County 1990-1995 885.2 932.8 1.1 West Palm Beach-Boca Raton, FL MSA 1990-1995 885.2 932.8 1.1 State of Florida 1990-1995 773.1 818.5 1.1 United States 1990-1995 646.3 704.1 1.7 Projected Eating and Drinking Place Sales Per Capita Palm Beach County 1995-2000 932.8 957.2 0.5 West Palm Beach-Boca Raton, FL MSA 1995-2000 932.8 957.2 0.5 State of Florida 1995-2000 818.5 842.1 0.6 United States 1995-2000 704.1 724.7 0.6 Long-Term Historical Personal Income Palm Beach County 1980-1995 10,517.3 25,896.3 6.2 West Palm Beach-Boca Raton, FL MSA 1980-1995 10,517.3 25,896.3 6.2 State of Florida 1980-1995 135,546.7 242,033.9 3.9 United States 1980-1995 3,163,874.0 4,443,243.2 2.3
- -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Market Area Analysis 28 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-1 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ----------------------------------------------------------------------------------------------------------------------------------- Short-Term Historical Personal Income Palm Beach County 1990-1995 22,036.1 25,896.3 3.3 West Palm Beach-Boca Raton, FL MSA 1990-1995 22,036.1 25,896.3 3.3 State of Florida 1990-1995 212,884.6 242,033.9 2.6 United States 1990-1995 4,051,714.6 4,443,243.2 1.9 Projected Personal Income Palm Beach County 1995-2000 25,896.3 31,516.8 4.0 West Palm Beach-Boca Raton, FL MSA 1995-2000 25,896.3 31,516.8 4.0 State of Florida 1995-2000 242,033.9 286,366.1 3.4 United States 1995-2000 4,443,243.2 4,972,219.5 2.3 Long-Term Personal Income per Capita Palm Beach County 1980-1995 17,953.0 26,341.0 2.6 West Palm Beach-Boca Raton, FL MSA 1980-1995 17,953.0 26,341.0 2.6 State of Florida 1980-1995 13,773.0 17,008.0 1.4 United States 1980-1995 13,924.0 16,908.0 1.3 Short-Term Historical Personal Income per Capita Palm Beach County 1990-1995 25,329.0 26,341.0 0.8 West Palm Beach-Boca Raton, FL MSA 1990-1995 25,329.0 26,341.0 0.8 State of Florida 1990-1995 16,352.0 17,008.0 0.8 United States 1990-1995 16,246.0 16,908.0 0.8 Projected Personal Income per Capita Palm Beach County 1995-2000 26,341.0 28,050.0 1.3 West Palm Beach-Boca Raton, FL MSA 1995-2000 26,341.0 28,050.0 1.3 State of Florida 1995-2000 17,008.0 18,349.0 1.5 United States 1995-2000 16,908.0 18,097.0 1.4 Long-Term Historical Employment - West Palm Beach-Boca Raton, FL MSA Farm 1980-1995 16.3 11.3 (2.4) Agriculture Services, Other 1980-1995 8.0 19.7 6.2 Mining 1980-1995 0.6 1.2 4.6 Construction 1980-1995 25.2 32.6 1.7 Manufacturing 1980-1995 29.1 33.4 0.9 Trans., Comm. & Public Utils. 1980-1995 9.8 18.0 4.1 Total Trade 1980-1995 63.6 122.4 4.5 Wholesale Trade 1980-1995 10.3 20.2 4.6 Retail Trade 1980-1995 53.3 102.2 4.4 Finance, Insurance, & Real Estate 1980-1995 34.7 48.7 2.3 Services 1980-1995 74.6 193.5 6.6 Total Government 1980-1995 32.1 52.4 3.3 Federal Civilian Govt. 1980-1995 2.2 4.3 4.5 Federal Military Govt. 1980-1995 1.5 2.5 3.2 State & Local Govt. 1980-1995 28.4 45.7 3.2 TOTAL 1980-1995 293.9 533.3 4.1
- -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Market Area Analysis 29 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 4-1 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ----------------------------------------------------------------------------------------------------------------------------------- Short-Term Historical Employment - West Palm Beach-Boca Raton, FL MSA Farm 1990-1995 9.3 11.3 4.1 Agriculture Services, Other 1990-1995 16.0 19.7 4.3 Mining 1990-1995 0.8 1.2 8.0 Construction 1990-1995 33.3 32.6 (0.4) Manufacturing 1990-1995 34.4 33.4 (0.6) Trans., Comm. & Public Utils. 1990-1995 16.4 18.0 1.8 Total Trade 1990-1995 106.3 122.4 2.9 Wholesale Trade 1990-1995 16.3 20.2 4.4 Retail Trade 1990-1995 90.0 102.2 2.6 Finance, Insurance, & Real Estate 1990-1995 48.8 48.7 (0.0) Services 1990-1995 157.9 193.5 4.1 Total Government 1990-1995 48.1 52.4 1.7 Federal Civilian Govt. 1990-1995 4.2 4.3 0.1 Federal Military Govt. 1990-1995 2.6 2.5 (1.3) State & Local Govt 1990-1995 41.2 45.7 2.1 TOTAL 1990-1995 471.3 533.3 2.5 Projected Employment - West Palm Beach-Boca Raton, FL MSA Farm 1995-2000 11.3 11.2 (0.2) Agriculture Services, Other 1995-2000 19.7 21.8 2.0 Mining 1995-2000 1.2 1.4 3.3 Construction 1995-2000 32.6 33.6 0.6 Manufacturing 1995-2000 33.4 35.4 1.2 Trans., Comm, & Public Utils. 1995-2000 18.0 19.6 1.7 Total Trade 1995-2000 122.4 138.1 2.4 Wholesale Trade 1995-2000 20.2 22.5 2.1 Retail Trade 1995-2000 102.2 115.7 2.5 Finance, Insurance, & Real Estate 1995-2000 48.7 53.5 1.9 Services 1995-2000 193.5 221.1 2.7 Total Government 1995-2000 52.4 54.6 0.8 Federal Civilian Govt. 1995-2000 4.3 4.6 1.7 Federal Military Govt. 1995-2000 2.5 2.5 0.2 State & Local Govt. 1995-2000 45.7 47.5 0.8 TOTAL 1995-2000 533.3 590.3 2.1
Source: Woods & Poole Economics, Inc. - -------------------------------------------------------------------------------- The Market for Transient Accommodations section of this economic study and appraisal will relate these historical and projected growth trends to specific market segments based on their propensity to reflect visitation. This analysis will provide a basis for forecasting changes in room night demand in the subject property's area. HVS International, Miami, Florida Overview of External Forces Affecting the 30 U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 5. Overview of External Forces Affecting the U.S. Lodging Industry Introduction Hotel ownership is ultimately the business of creating and enhancing value. To understand the investment potential of lodging facilities, investors must be thoroughly aware of the many forces that can cause changes in the value of their properties. Although some of these forces are internal (such as the layout and design of the facilities, the quality of management, and the condition of the property), others are external (such as the local economic environment and the competitive nature of the market). The risk associated with hotel investment lies largely with the external forces that are beyond the control of ownership and contribute to the variability of future income flows. Investors and appraisers can project financial results by evaluating the historical impact of external forces on hotel values. Successful hotel investors seek opportunities where the risk of external forces can be minimized, thus reducing the uncertainty associated with income expectations. When investors engage in due diligence prior to acquiring a lodging facility, they are primarily interested in trends affecting a limited geographic market area, such as a town, city, or county. A broader overview takes into account national and international travel patterns and trends. An understanding of the general characteristics of the United States hotel market is important because these trends often foreshadow economic and demographic changes in smaller areas. This section of the appraisal will present an overview of the U.S. lodging industry by tracing many of the forces that influence hotel values. Historical economic and demographic data, and industry statistics will be analyzed to provide a basis for projections. Forecasts will be evaluated to determine their reasonableness. The conclusions represent another set of criteria that hotel investors consider in making their acquisition decisions. HVS International, Miami, Florida Overview of External Forces Affecting the 31 U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The Supply and Demand Relationship Most business ventures are influenced by the relationship between supply and demand. In the hotel industry, supply refers to the number of units. A unit consists of one or more rooms and represents the smallest accommodation that can be rented to a guest. Each unit must have a full bath and its own entrance to a public hallway or the building exterior. Demand refers to a room night, which is one unit that is occupied for one night. The supply and demand relationship has a significant influence on a hotel's occupancy and/or average room rate. Occupancy is calculated by dividing the number of rooms that are occupied for a specific period by the total number of rooms that are available during the same period. Average room rate is determined by dividing the total rooms revenue achieved during a specific period by the number of rooms occupied during that period; it also represents the weighted average of all the room rates charged during that period. In a market where demand is increasing faster than supply, occupancies rise and average rate growth generally exceeds inflation. When supply is increasing faster than demand, occupancies fall and average rates typically remain level or decline. Hotels generate revenue based on occupancy and average rate, and thus the supply and demand relationship is an important factor in analyzing profits and value. Hotel occupancy levels have shown definite cycles that reflect the balance between supply and demand. The early 1970s marked the beginning of a hotel building boom reminiscent of the 1920s. Many factors contributed to this expansion, but the two main elements were readily available financing and aggressive chains that were eager to sell franchises. The new construction during the 1970s was made possible by the enormous amount of financing generated by all lenders, particularly real estate investment trusts (REITs). These high-leverage finance companies were created to allow small investors to participate in real estate mortgages and equities. The concept was quickly accepted by Wall Street, and soon billions of dollars were available to finance real estate projects. Many lenders became so overwhelmed with new money that their underwriting procedures broke down and some marginal developments were approved. During the late 1960s and early 1970s, hotel companies actively expanded their chains through franchising. Franchising was a source of new capital, allowing hotel companies to grow and achieve national recognition using the franchisee's financial investment in individual properties. Some franchisors, eager to demonstrate sustained growth and establish a national HVS International, Miami, Florida Overview of External Forces Affecting the 32 U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= presence, employed questionable marketing tactics to sell new franchises. Salespeople were often compensated based on the number of franchises sold, so there was little incentive to discourage developers from investing in poor locations and overbuilt markets. Many lenders and hostelry developers were led to believe that a national franchise would guarantee a successful operation. The combination of readily available financing and aggressive hotel chains eager to sell franchises resulted in overbuilding and development of many poorly located, undercapitalized hostelries managed by inexperienced owners. The bubble burst on the lodging industry when inflation caused construction costs and interest rates to escalate. The 1974 energy crisis drastically reduced travel, and the accompanying recession curtailed business trips, conferences, and conventions. Operators of marginal properties quickly fell behind in their mortgage payments, and lenders were forced to foreclose. As lenders became hostelry owners, they either organized work-out departments headed by experienced hoteliers or engaged professional hotel management companies to assume operational responsibilities. Sales data indicate that lenders who were looking for quick sales to remove nonperforming hotel assets from their books had to lower their prices substantially to attract all-cash buyers. Lenders who were willing to hold on to foreclosed hotels and employ professional management to reposition and improve the properties' operation were generally able to recoup their original investments in three to five years, once the industry began to recover. However, even lenders who repositioned their hotels had to take back favorable purchase-money financing to sell the properties because money from other sources was not available. History has shown that during economic downturns, hotel values generally do not fall in proportion to the properties' declining incomes. Sellers, and particularly lenders who take back hotels through foreclosure, are often unwilling to sell at substantially reduced prices. They are more likely to wait out the downward cycle and dispose of their assets when the market begins to rebound. Thus, appraisers can best reflect market behavior by projecting a facility's net income to a point of recovery and applying the proper discounted cash flow procedure over that time period. The late 1970s was a period of relative calm for the lodging industry. Because most lenders were recovering from the financial wounds inflicted HVS International, Miami, Florida Overview of External Forces Affecting the 33 U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= by the 1975 recession, they had little interest in making hotel mortgages. New construction was restrained, and primarily consisted of additions to existing properties and the development of some large, downtown hotels oriented toward the commercial and convention markets. The rebirth of center-city hostelries was a direct result of fuel shortages and the availability of government financing for inner-city redevelopment projects. Highway-oriented properties, on the other hand, were adversely affected by escalating gasoline prices and decreased automobile travel, and these lodging facilities lost some of their appeal among investors and hotel companies. Decreased building activity, the normal retirement of older hostelries from the market, and an improving economy created a favorable supply and demand relationship and record-high occupancy levels from 1979 to 1980. Average room rates increased rapidly as operators took advantage of the excess demand to recoup earlier losses and keep up with inflation. After the decline in hotel development during the late 1970s, the environment appeared suitable for a period of renewed expansion. However, the Federal Reserve tightened the money supply in the early 1980s, sending the prime interest rate up to double-digit levels. Most of the projects that were in the preliminary planning stages but lacked sensible financing were put on hold. Fiscal policy and declining energy prices eventually reduced the national inflation rate. This caused a decline in hotel interest rates beginning in 1983, and suddenly massive amounts of capital were available for real estate investments. Hotel developers who had been out of the market since the mid-1970s rushed to initiate new projects. They were aided by several major real estate development incentives: high occupancies and escalating room rates, readily available debt and equity financing, and unique income tax benefits designed to stimulate the national economy out of a recession. During the early 1980s, trends were generally favorable for new hotel development. Although the recession caused a decline in lodging demand, many markets showed relatively high occupancy levels. Room rates were usually able to keep up with inflation, and the travel industry was expected to boom as a result of a recovering economy. Franchise sellers signed up new prospects aggressively, using product segmentation to justify the saturation of a market with a common brand. HVS International, Miami, Florida Overview of External Forces Affecting the 34 U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Financing was readily available from the savings and loan industry. Following deregulation, these banks were permitted to lend on commercial real estate, such as hotels. Although savings and loans had experience in making loans on single-family homes, few had expertise with commercial properties, and fewer still with hotels. The result was almost identical to the real estate investment trust fiasco the decade before: loan underwriting and administration were inept and sometimes nonexistent, the number of loans made seemed more important than the quality of the real estate and the integrity of the borrower, and short-term funds were often used to finance long-term mortgages. In the early 1990s, the industry suffered the consequences of this lending spree: most major hotel markets became severely overbuilt and many savings and loans went out of business. Another factor contributing to hotel development in the 1980s was the very favorable treatment provided by income tax regulations. By carefully structuring hotel syndications to take advantage of all available tax benefits, investors could virtually recoup their total cash outlay in the first year and reap additional benefits in the future regardless of the economic success of the underlying asset. Because there was little incentive to justify a transaction's economics (i.e., cash flow and reversionary benefits), a number of syndicators overpaid for hotel properties, took out usurious fees, and overloaded their hotels with debt. A change in the tax law in the mid-1980s eliminated many of the benefits associated with hotels, but the overbuilding in most markets was either in progress or had already taken place. By the end of the 1980s, the abuses of the savings and loans had become apparent, but it was too late to reverse the overbuilding. Between 1985 and 1990, approximately 556,000 rooms were added to the U.S. hotel supply. The national economy entered another recession in 1990, and this factor (coupled with overbuilding and the Persian Gulf War in 1991) caused the national hotel occupancy rate to bottom out at 60.9%. In some markets, hotel occupancies were as low as 35%. This supply and demand imbalance was almost identical to the situation in the 1970s that led to numerous hotel failures. As in the REIT days, the number of non-performing loans reached record levels, and lenders moved to a work-out mode of operation in order to foreclose and restructure their hotel investments. Many of the savings and loans were taken over by the government and their hotel assets were sold at auction. HVS International, Miami, Florida Overview of External Forces Affecting the 35 U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= According to the American Council of Life Insurance, which represents major life insurance companies, the number of delinquent hotel loans and the number of hotel loans in foreclosure peaked in 1991. This trend is undergoing a reversal as the U.S. lodging industry begins to recover. Loan restructuring was an attractive alternative to foreclosure during this period, and the number of loans in good standing with restructured terms almost doubled. By 1993, new hotel construction had declined significantly. Lenders, trying to get out from under problematic hotel portfolios, curtailed all real estate lending and would not even consider hotels. The tax benefits associated with lodging facilities had been reduced significantly, and passive investors left the hospitality market entirely. The slowdown in the growth of supply had a beneficial impact on occupancy levels, which started to recover in 1992. Improved occupancies are expected to continue through the late 1990s as increases in lodging demand outpace growth in supply. Beginning in 1991, many lenders and the Resolution Trust Corporation (RTC) sold their oldest and least desirable hotels at liquidation prices. Because virtually no third-party financing was available, most lenders were forced to take back purchase-money mortgages at favorable terms in order to sell these properties without suffering massive write-downs. The newer and more desirable hotels were not put on the market, because their lenders/owners were waiting for values to recover. This course of action significantly reduced the number of transactions involving good-quality lodging facilities. The following table shows the volume of hotel transactions exceeding $10,000,000 between 1990 and 1995. ================================================================================ Table 5-1 Summary of Major Hotel Transactions - -------------------------------------------------------------------------------- Year 1990 1991 1992 1993 1994 1995 - -------------------------------------------------------------------------------- Number of Transactions 130 54 67 52 92 104 Number of Rooms 40,543 16,427 25,187 19,935 33,503 36,951 Average Price Per Room $136,000 $91,000 $85,000 $79,000 $80,000 $83,000 Source: HVS International - -------------------------------------------------------------------------------- In 1991, there were only 54 major hotel sales recorded. This number increased to 67 in 1992 and declined to 52 in 1993, then rose dramatically in HVS International, Miami, Florida Overview of External Forces Affecting the 36 U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 1994 and 1995. During the low-volume years, many sellers remained on the sidelines waiting for values to increase before placing their properties on the market. The jump in 1994 is attributable to a number of factors, including the greater availability of mortgage funds, a return of institutional investors to the market, and a resurgence of investor interest in lodging facilities. The profile of typical hotel buyers has changed somewhat. During the mid-1980s, when tax-driven syndication's were popular, many hotels were purchased by passive investors who hired management companies to operate their properties. These owners had little involvement in day-to-day management decisions, which occasionally led to poor management and financial losses. Today, most buyers of major hotels are owner-operators who bring with them both the acquisition funds (usually from a joint venture partner) and management expertise. We also note that real estate investment trusts (REITs) and public hotel companies (C-Corps) are actively acquiring hotels using funds from public equity stock offerings. The supply of new hotel rooms is expected to increase slowly during the next several years. Lenders are beginning to return to the market, and are making some hotel loans based on conservative criteria. Initially, mortgage funds were available mainly to the budget and economy lodging sectors, for the purpose of refinancing existing properties or assisting buyers in acquisitions. Now, a number of lenders are willing to finance new construction for these small, low-end properties. Although financing is also becoming available for the acquisition of large, full-service hotels, very little has been allocated for new construction. At present, active hotel lenders are not necessarily traditional banks and insurance companies, but may include credit companies and Wall Street securities firms. A number of hotel owners and developers are now constructing budget and economy hotels; a few are planning more upscale, full-service properties. Most lenders are taking a conservative approach to new hotel loans, which should limit new development to those projects that demonstrate true economic feasibility. As a result, severe short-term overbuilding is unlikely. HVS International, Miami, Florida Overview of External Forces Affecting the 37 U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Room Rates The supply and demand relationship has a direct impact on hotel occupancies and an indirect influence on room rate growth. Between 1978 and 1995, hotel room rates increased at an average annual compounded rate of almost 6%. Significant rate growth was recorded during the late 1970s and early 1980s as a result of strong occupancies (70%'s) coupled with a high monetary inflation rate (14%). In recent years, room rate growth slowed as a result of low occupancies and a drop in inflation. Hotel room rates generally increase faster than the Consumer Price Index (CPI) when occupancies are strong or moving upward. When occupancies are low or declining, room rate growth tends to lag behind the CPI; in some cases, rates may remain flat or actually drop. The following table compares the historical and projected annual increase in hotel room rates in the United States to the change in the national CPI. HVS International, Miami, Florida Overview of External Forces Affecting the 38 U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-2 Percent Change in Average Room Rates Versus CPI - U.S. Hotels - -------------------------------------------------------------------------------- Consumer Price Hotel Room Rate Index Hotel Year Percent Change Percent Change Occupancy - ------------------------------------------------------------------ 1973 4.2% 6.2% 70.2% 1974 7.6 11.0 64.0 1975 7.3 9.1 63.7 1976 8.2 5.7 65.8 1977 8.1 6.5 67.3 1978 14.0 7.7 69.2 1979 17.0 11.3 71.9 1980 15.2 13.5 70.6 1981 10.0 10.3 67.9 1982 6.5 6.2 66.7 1983 5.1 3.2 64.4 1984 6.9 4.3 64.0 1985 4.6 3.6 63.1 1986 3.2 1.9 62.5 1987 3.6 3.6 61.9 1988 3.6 4.1 62.3 1989 3.5 4.8 63.2 1990 3.0 5.4 62.4 1991 0.6 4.2 60.9 1992 1.4 3.0 62.1 1993 2.8 3.0 63.1 1994 5.2 2.6 64.7 1995 4.8 2.8 65.5 1996* 5.0 3.0 66.0 1997* 5.5 3.5 67.0 1998* 6.0 4.0 68.0 1999* 5.5 4.0 68.0 Sources: Smith Travel Research & HVS International * Projected - -------------------------------------------------------------------------------- This table shows two periods when hotel room rate growth failed to keep pace with the CPI. From 1973 to 1975, the hotel industry was suffering from overbuilding related to real estate investment trusts, a recession, and a downturn in travel caused by the oil embargo. The second period of slow room rate growth occurred between 1988 and 1993, when the industry was again affected by overbuilding and a weak economy. The table illustrates that during periods of prosperity, room rates are a good hedge against inflation; this was true even when the CPI increased at double-digit levels. HVS International, Miami, Florida Overview of External Forces Affecting the 39 U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The projections indicate a strong recovery of room rates as the relationship between supply and demand becomes more favorable. Growth is expected to peak in 1998 at 6%, which is significantly higher than the projected gain in the CPI. This may appear high, but a similar trend occurred in 1978, when room rates rose 14.0% and the CPI increased by only 7.7%. Hotels are unique because their room rates can be adjusted at any time. Unlike office space, where rents are typically negotiated for a five-year period, hotel operators are free to base rates on occupancy trends. Using sophisticated yield management programs, modern lodging facilities can ride the demand curve and maximize room rates whenever the market permits. As a result, hotels generally offer significant upside potential during periods of economic prosperity. If lodging facilities can increase room rates faster than the CPI and still maintain occupancies, bottom-line profits usually escalate. If they can raise room rates and occupancy at the same time, profits will grow significantly. The opposite occurs when room rates fail to keep pace with inflation. Because market value is basically a multiple of bottom-line profits, changes caused by fluctuations in occupancy and average rate have a direct impact on value. Rooms Revenue per Available Room (RevPAR) The ability of a hotel to maximize its occupancy and room rate is measured in terms of rooms revenue per available room (RevPAR), which is the product of occupancy and average rate. Between 1978 and 1995, RevPAR in the U.S. lodging industry increased at an average annual compounded rate of approximately 5%. As in the case of average rate, most of the increase occurred during the late 1970s, when occupancies escalated rapidly. The only decline in RevPAR occurred in 1991. Trends in Hotel Sales HVS International constantly monitors hotel markets in order to collect information on sales of lodging facilities. This comprehensive database is known as the Hospitality Market Data Exchange (HMDE). The HMDE includes more than 90% of all hotel sales that took place during this period. The HMDE data shows that the number of transactions peaked at 726 in 1986. This strong activity is largely attributable to pending changes in the tax laws, which made it less favorable to own hotels. It is also possible that forward-thinking investors noted the substantial overbuilding and declining economy and decided to bail out at that time. In 1987 and 1990, HVS International, Miami, Florida Overview of External Forces Affecting the 40 U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the average sales price per room peaked at $75,000. This was more than twice the 1981 average of $36,000. Following the 1990 peak, hotel prices fell rapidly as occupancies and profits were eroded by the massive number of hotel rooms entering the market. By 1991, the year of the Persian Gulf War, sales prices had fallen to $38,000 per room. Even the highest price per room declined from the record $1,195,652 (for the sale of the Bel Aire Hotel) to $251,816 in 1992. The market hit bottom in 1993 when the average sales price dropped to $36,000 per room. Prices recovered rapidly in 1994 and 1995 as investors became interested in hotels again and more full-service properties were put on the market. In 1995, the average sales price was $61,000 per room. The figures presented in the HMDE represent actual sales prices; no attempt was made to adjust for factors such as favorable or unfavorable financing, forced or liquidation sales, bankruptcy sales, foreclosures, and so forth. As a result, the average price per room does not necessarily reflect market value, which assumes a willing buyer and a willing seller. Many of the transactions that took place during the early 1990s involved unwilling sellers - usually lenders who were forced to liquidate hotel portfolios quickly at prices that were below market levels. Most hotel experts agree that a recovery is underway, and they recommend that owners hold their properties until more favorable conditions prevail. Trends in Hotel Values A more meaningful indicator of trends in hotel value is the Hotel Valuation Index (HVI), developed by HVS International. This index tracks changes in hotel values in 23 major markets and the nation as a whole. It is developed through an income approach, using market area data provided by Smith Travel Research and operational and capitalization rate information from HVS International, and is indexed to the 1986 U.S.A. value (1.0000). The following table sets forth the HVI from 1986 to 1995. HVS International, Miami, Florida Overview of External Forces Affecting the 41 U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-3 Hotel Valuation Index per Room - -------------------------------------------------------------------------------- Valuation Index Per Room
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 ------------------------------------------------------------------------------------------------------- Honolulu 3.3571 4.0357 4.6964 5.2857 5.3214 4.7857 4.9286 4.2857 4.3929 5.6071 New Orleans 1.5357 1.7500 2.2857 2.3929 2.5000 2.6071 3.2857 3.2500 3.8929 4.4286 New York 3.5714 4.1071 4.6429 4.5357 3.9286 3.0357 2.5714 2.5714 3.1429 4.1071 San Francisco 2.5000 3.0893 3.2500 3.0714 2.9286 2.5714 2.5714 2.9643 3.2143 4.0000 Phoenix 1.2143 1.0714 1.1786 1.5357 1.4286 1.2500 1.5000 1.9643 2.3571 3.2143 San Diego 2.8571 2.3571 2.5714 2.6786 2.3929 2.5357 2.5357 2.2143 2.3571 3.0357 Miami 1.4286 1.6071 1.7321 2.1429 2.1786 2.2500 2.5714 2.7857 2.3214 2.9286 Washington, DC 2.1786 2.1786 2.4464 2.6071 2.2500 1.8571 2.0357 2.5000 2.3929 2.8929 Atlanta 1.0714 1.0179 1.0536 1.0357 1.1429 1.1250 1.2857 1.7857 2.1429 2.6786 Minneapolis 0.7321 0.6964 0.7143 0.7143 0.7857 1.0000 1.2857 1.5714 1.8214 2.1786 Chicago 1.4643 1.5000 1.5714 1.5000 1.4286 1.2143 1.2500 1.5000 1.8571 2.1786 Boston 2.3571 2.7143 2.6071 2.1429 1.8214 1.2500 1.3036 1.3214 1.6071 2.1071 Fort Lauderdale 1.4643 1.2679 1.3214 1.4286 1.4821 1.3571 1.7143 1.8929 1.6071 1.9286 Orlando 1.5000 1.6429 1.9286 2.5000 2.5357 1.8929 2.0714 1.7857 1.6071 1.8929 Denver 0.5357 0.4464 0.4643 0.4821 0.7857 0.9268 1.0357 1.3214 1.5000 1.8571 Dallas 0.5536 0.6250 0.6607 0.7321 0.7857 0.7143 0.9643 1.0357 1.3214 1.7143 USA 1.0000 0.9464 1.0536 1.1250 1.0714 0.9214 0.9929 1.1429 1.3214 1.6071 Los Angeles 2.1071 2.2857 2.3929 2.4643 2.1786 1.5714 1.0714 0.9643 1.1964 1.5000 Tampa 0.8393 0.7679 0.8571 1.1429 1.2857 1.0357 1.0714 1.0357 1.1071 1.3214 Anaheim 1.7679 1.7321 1.7500 1.8571 1.6071 1.2857 0.9642 0.9464 0.8393 1.2500 Houston 0.3571 0.4286 0.6964 0.7857 1.1071 1.1607 1.1429 1.0357 1.0000 1.1786 Philadelphia 1.4643 1.5357 1.4286 1.3214 1.0714 0.6786 0.5714 0.6071 0.7500 1.0714 Norfolk 1.1786 1.0536 0.9286 0.7857 0.6429 0.5357 0.6071 0.6429 0.7500 0.9643 Riverside 0.9643 1.2143 1.5714 1.7143 1.4643 1.2500 0.7857 0.5357 0.4286 0.5357
Source: HVS International - -------------------------------------------------------------------------------- The HVI can be used to show the value change in a particular market over time or to show the relative difference in hotel values in various cities. The following table shows the annual change in hotel values in 23 major markets and the United States as a whole. HVS International, Miami, Florida Overview of External Forces Affecting the 42 U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-4 Percent Change in the Hotel Valuation Index - -------------------------------------------------------------------------------- Annual Percent Change
'86-87 '87-88 '88-'89 '89-'90 '90-'91 '91-'92 '92-'93 93-'94 '94-'95 '86-'95 - ----------------------------------------------------------------------------------------------------------- Honolulu 20 % 16 % 13 % 1 % -10 % 3 % -13 % 3 % 28 % 67 % New Orleans 14 31 5 4 4 26 -1 20 14 188 New York 15 13 -2 -13 -23 -15 0 22 31 15 San Francisco 24 5 -5 -5 -12 0 15 8 24 60 Phoenix -12 10 30 -7 -13 20 31 20 36 165 San Diego -18 9 4 -11 6 0 -13 6 29 6 Miami 12 8 24 2 3 14 8 -17 26 105 Washington, DC 0 12 7 -14 -17 10 23 -4 21 33 Atlanta -5 4 -2 10 -2 14 39 20 25 150 Minneapolis -5 3 0 10 27 29 22 16 20 198 Chicago 2 5 -5 -5 -15 3 20 24 17 49 Boston 15 -4 -18 -15 -31 4 1 22 31 -11 Fort Lauderdale -13 4 8 4 -8 26 10 -15 20 32 Orlando 10 17 30 1 -25 9 -14 -10 18 26 Denver -17 4 4 63 18 12 28 14 24 247 Dallas 13 6 11 7 -9 35 7 28 30 210 USA -5 11 7 -5 -14 8 15 16 22 61 Los Angeles 8 5 3 -12 -28 -32 -10 24 25 -29 Tampa -9 12 33 12 -19 3 -3 7 19 57 Anaheim -2 1 6 -13 -20 -25 -2 -11 49 -29 Houston 20 62 13 41 5 -2 -9 -3 18 230 Philadelphia 5 -7 -8 -19 -37 -16 6 24 43 -27 Norfolk -11 -12 -15 -18 -17 13 6 17 29 -18 Riverside 26 29 9 -15 -15 -37 -32 -20 25 -44
Source: HVS International - -------------------------------------------------------------------------------- On a national basis, hotel values rose in 1988 and 1989, then declined in 1990 and dropped by 14% in 1991. A turnaround commenced in 1992, when values increased by 8%; still greater increases of 15% in 1993, 16% in 1994, and 22% in 1995 signaled that a recovery was well underway. In the case of the individual cities, it is obvious that the movement in national hotel values has been offset somewhat by trends in local markets. Between 1986 and 1995, Riverside hotels lost more than 40% of their value, while San Francisco showed a 60% increase. Anaheim, Los Angeles, and Philadelphia also suffered significant drops. Future Trends Most hotel owners, operators and lenders agree that the U.S. lodging industry has emerged from one of the worst periods since the Depression of 1929. Today, there are many indications that signal a strong recovery is underway, and most hotels have experienced a dramatic rise in profitability. Conversely, the hotel industry remains cyclical, and there are long-term trends and risk factors that could have an unfavorable impact on the operating results and investment potential of lodging facilities. The HVS International, Miami, Florida Overview of External Forces Affecting the 43 U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= following list summarizes the positive and negative factors that are likely to influence the U.S. lodging industry in coming years. o No significant amount of new hotel development is likely to occur during the next three to five years. Lenders stopped financing new hotels in the early 1990s because of the high rate of loan defaults, and they are only now starting to make construction loans. Although mortgage funds are available to refinance existing properties and construction loans are being made for economy hotels, mortgages for new hotels in the mid-rate, first-class, and luxury categories are still difficult to secure. This lack of financing is major barrier to entry, and will prevent a number of proposed projects from moving forward. With only a slow increase in supply, hotel occupancies should rebound as fast as the growth in demand permits. o An additional barrier to entry is the current discrepancy between market values and replacement costs for first-class and luxury hotels. In today's market, many upscale hotels are still selling for prices that are below what it would cost to develop a comparable hotel. As a result, there is little justification for building a new hotel when a similar, existing facility is available for sale at some fraction of the cost. Until the gap between market value and replacement cost narrows, there will be minimal new hotel construction in the upper-tier segments. The market values and replacement costs of budget and economy hotels have been in equilibrium for several years which is another reason why new development is proceeding in these segments. o The U.S. economy continues to improve, which suggests that more people are traveling. Many people curtailed their travel plans during the recent recession, and there is likely to be pent-up demand that will be released as consumer confidence escalates. o Minimal additions to the hotel supply coupled with growth in demand should result in further improvement in occupancies during the next several years. o As shown by the historical data, hotel room rates rise rapidly as occupancies escalate. The most frequent complaint that owners and operators had during the recent recession was their inability to achieve average rate gains. Starting in 1994, gains in hotel room rates returned to levels in excess of inflation, foreshadowing enhanced profitability. In real dollars, hotel room rates are expected to return to 1988 levels by HVS International, Miami, Florida Overview of External Forces Affecting the 44 U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 1998. This is a good indication that hotel values will return to record levels in the next two to four years. o The low cost of capital is another factor that tends to enhance value. Because capitalization rates are tied directly to the price of capital, the lower the cost, the lower the cap rate and the higher the value. The cost of hotel debt capital averaged 10.5% in 1990. Today, similar financing is available at 8.5% to 9.5%. Recent hotel sales support the downward trend in capitalization rates. o Government regulations are becoming increasingly expensive for the U.S. hotel industry. A national health care policy could force small operators to provide better benefits for many more employees, particularly the part-time workers who are used extensively by hotels and restaurants. Environmental laws are becoming stricter and will require hotels to implement recycling, reuse, and conservation procedures. Congress has limited deductions for meals and entertainment expenses, which increases the cost of doing business in hotels and restaurants. Local municipalities use hotel rooms taxes as a source of revenue for general use, and the hotel rooms tax is so high in some areas that it has driven away demand. This is particularly true with respect to meetings and conventions, which can be held in cities that tax accommodations at a lower rate. o Improved technology is rapidly changing the way business is conducted. During the next decade, advances such as video communication, enhanced data transfer, and faster transportation are expected to limit the need for face-to-face meetings and shorten the time that executives are away from their offices. Commercial hotels are bound to be influenced by this trend. Conclusion Interest in hotel acquisition has increased significantly during the past several years. Buyers have concluded that future earnings trends are likely to be favorable, and the risks posed by overbuilding or an economic downturn are small. Some sellers are holding their properties until prices reach a higher level. Consequently, we believe there is pent-up desire to sell once prices begin to approach levels that allow the existing (or restructured) debt to be paid off. The fact that numerous buyers are chasing very few acquisition opportunities has had a favorable impact on recent sales prices. For buyers to be successful in this highly competitive market, their projected operating HVS International, Miami, Florida Overview of External Forces Affecting the 45 U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= results must take into account at least a portion of any upside created from improved performance, particularly if the improvement can be readily achieved through management efficiencies. Capitalization rates based on historical operating income have fallen during the past several years. Hotel buyers in today's market must be aggressive in all of their acquisition assumptions. As a result, hotel values in some parts of the country are approaching the levels registered during the mid-1980s, and a full recovery is expected to occur in the next two to four years. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Lodging Market Supply and Demand Analysis 46 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 6. Lodging Market Supply and Demand Analysis MARKET FOR TRANSIENT ACCOMMODATIONS The market for transient accommodations is an all-encompassing term referring to the many types of travelers who use lodging facilities in a given area. These travelers represent the market's accommodated room night demand. This section will begin with an analysis of historical demand trends to determine what changes have occurred; the historical number of competitive hotel rooms will then be estimated to evaluate local supply trends. Areawide occupancy levels can be calculated based on the number of hotel rooms available in the market and the demand for lodging accommodations. The total hotel room night demand will be divided into individual market segments to allow us to forecast growth rates based on the economic and demographic data set forth earlier in this report. Historical Supply and Demand Data Smith Travel Research (STR) has compiled historical supply and demand data for the subject property and its competitors. This information is presented in the following table, along with the marketwide occupancy, average rate, and rooms revenue per available room (RevPAR). RevPAR is calculated by multiplying occupancy by average rate, and provides an indication of how well rooms revenue is being maximized. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Lodging Market Supply and Demand Analysis 47 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-1 Historical Room Supply and Demand Trends (STR) - --------------------------------------------------------------------------------
Year to Date Average Annual ----------------- Compounded Growth 1989 1990 1991 1992 1993 1994 1995 1995 1996 1989 - 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Number of Rooms 974 1,375 1,413 1,413 1,413 1,413 1,413 1,413 1,413 Annual Guestroom Supply 355,510 501,875 515,745 515,745 515,745 515,745 515,745 385,749 387,162 Percent Change ---% 41.2% 2.8% 0.0% 0.0% 0.0% 0.0% --- 0.4% 6.4% Room Night Demand 225,038 299,619 292,943 325,435 340,907 352,770 363,600 278,511 272,175 Percent Change ---% 33.1% -2.2% 11.1% 4.8% 3.5% 3.1% --- -2.3% 8.3% Occupancy 63.3% 59.7% 56.8% 63.1% 66.1% 68.4% 70.5% 72.2 70.3% Percent Change ---% -5.7% -4.9% 11.0% 4.8% 3.5% 3.1% --- -2.6% 1.8% Average Rate $83.76 $79.23 $67.07 $76.76 $79.97 $82.99 $87.75 $89.68 $94.13 Percent Change ---% -5.4% -15.3% 14.4% 4.2% 3.8% 5.7% --- 5.0% 0.8% RevPAR $53.02 $47.30 $38.10 $48.44 $52.86 $56.77 $61.86 $64.75 $66.17 Percent Change ---% -10.8% -19.5% 27.1% 9.1% 7.4% 9.0% --- 2.2% 2.6%
- -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Lodging Market Supply and Demand Analysis 48 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= It is important to note some limitations of the STR data. Hotels are occasionally added to or removed from the sample, and not every property reports data in a consistent and timely manner; these factors can influence the overall quality of the information by skewing the results. These inconsistencies may also cause the STR data to differ from the results of our competitive survey. Nonetheless, we find that hotel buyers often rely on STR statistics, and thus they are considered relevant to this study. The preceding table illustrates that the room supply of the defined competitive market has not changed in the past five years. With the opening of the 160-unit subject property in late 1989 and the 279-unit Palm Beach Gardens Marriott in 1990, the area room supply increased from the historical level of 974 to the current 1,413. Overall, this reflects a 45% increase in supply. Room night demand showed strong gains in 1990 with an increase of 33.2%, which suggests that, prior to the opening of these properties, some inherent demand had not been accommodated by the primarily competitive hotels. Although the somewhat low areawide occupancy of 63.3% registered in 1989 would typically indicate minimal unaccommodated demand, the seasonal pattern of the market results in periods of surplus occupancy in the market area during which unaccommodated demand can occur. Despite the strong increase in demand, the opening of these two new properties did dilute the market, and overall occupancy fell by 5.7%, to 59.7% in 1990. A further decline in occupancy was recorded in 1991; this downturn was a result of a decrease in demand, which can be attributed to the Persian Gulf War which occurred in early 1991, and caused a nationwide decline in travel. Subsequently, from 1992 through the year-to-date 1996 occupancy and room night demand have both grown steadily. Demand rebounded in 1992, increasing 11.1% in that year. Subsequent years reflect moderating growth, as the areawide occupancy gradually climbed to the 70% level achieved in 1995. This pattern of growth is generally reflective of the recovery from the recent economic recession, and mirrors national hotel demand and occupancy trends. The opening of the new hotels and the Persian Gulf War also had an adverse impact on the areawide average rate, which fell by 5.4% in 1990 and a dramatic 15.3% in 1991. These declines can be attributed to the softening of occupancy in the area, which in turn caused hotel management to pursue aggressive marketing through price discounts in an effort to forestall occupancy declines. With the return to positive demand HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Lodging Market Supply and Demand Analysis 49 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= and occupancy growth, the area also recovered average rate, which grew by 14.4% in 1992. Average rate has continued to rise since that point in time, surpassing inflation levels in each of the past three years as well as in the year to date. As the areawide occupancy has reached the 70% level, hotels in the market area have begun to pursue more aggressive rate increases, in an effort to maximize RevPAR and thus yield. This strategy is evident in the year to data, where an occupancy decrease of 2.6% has been accompanied by an average rate has increased by 5.0%, resulting in a net increase of 2.2% in RevPAR. Given the seasonal nature of this area, it is unlikely that the market can sustain occupancy levels significantly in excess of 70.0%. We therefore expect areawide occupancy to remain relatively flat, while average rate growth continues to exceed inflation. This dynamic should continue until the next downturn in the regional or national economy or until new supply enters the market and alters the existing balance in the supply and demand equation. Demand Analysis Using Market Segmentation For the purpose of demand analysis, the overall market is divided into individual segments based on the nature of travel. Although a market may have various segments, the three primary classifications occurring in most areas are commercial, meeting and group, and leisure. Market segmentation is a useful procedure because individual classifications often exhibit unique characteristics in terms of growth potential, seasonality of demand, average length of stay, double occupancy, facility requirements, price sensitivity, and so forth. By quantifying the room night demand by market segment and analyzing the characteristics of each segment, the overall demand for transient accommodations can be projected. Lodging demand for the competitive hotel market is generated primarily by the following three market segments. Segment 1 Commercialleisure Segment 2 Meeting & Group Segment 3 Leisure Based on our fieldwork, area analysis, and knowledge of the local lodging market, we estimate the 1995 distribution of accommodated hotel room night demand as follows. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Lodging Market Supply and Demand Analysis 50 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-2 1995 Accommodated Room Night Demand - -------------------------------------------------------------------------------- 1996 Annual Room Night Demand (Rounded) ---------------------------------------------------------- Percentage Percentage Market Segment Market Wide of Total Subject Property of Total - ------------------------------------------------------------------------------- Commercial 145,000 34% 14,000 31% Meeting and Group 146,000 34 11,000 24 Leisure 139,000 32 20,000 44 ------------ --------- -------------- --------- Total 430,000 100% 45,000 100% - -------------------------------------------------------------------------------- Based on our review of the preceding table, the room night demand of the competitive supply is nearly equally distributed between the commercial (34%), meeting and group (34%), and leisure (32%) segments. Room night demand accommodate at the subject property is more heavily weighted toward the leisure market segment (44%), than the commercial (31%), or meeting and group segments (24%). This is attributable to both the all suite concept and the limited inventory of meeting space available at the Embassy Suites. Using the distribution of accommodated hotel demand as a starting point, we will analyze the characteristics of each market segment in an effort to determine future trends in room night demand. Commercial Segment The commercial segment consists of individual businesspeople who are visiting various firms in the subject property's market. Commercial demand is strongest Monday through Thursday nights, declines significantly on Friday and Saturday, and increases somewhat on Sunday. The typical length of stay ranges from one to three days, and the rate of double occupancy is a low 1.2 to 1.3 people per room. Commercial demand is relatively constant throughout the year, although some declines are noticeable in late December and during other holiday periods. In general, commercial travelers are not overly rate-sensitive, and will make use of a hotel's food and beverage outlets and recreational facilities. The commercial segment represents a highly desirable and lucrative market that provides a consistent level of demand at relatively high room rates. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Lodging Market Supply and Demand Analysis 51 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Commercial demand in the subject property's market is generated by area companies. Area corporate demand is generated by a variety of corporations with offices and headquarters generally situated within a 10-mile radius of the subject. These businesses include United Tech, Optical Systems Inc., Pratt & Whitney, Marquette Electronics, RCA, and Florida Power & Light. A number of small industrial plants, low to mid-rise office buildings, and office/warehouses which generate commercial demand are also located in the subject market area. We generally find a multiplier effect between employment growth in certain sectors and the increase in commercial lodging demand (i.e., one new F.I.R.E. employee will correspond to more than one new visitor). In conjunction with the recent trend of slower growth in the local economy, commercial demand increases have become more moderate. As the national and international economy improves and prominent local businesses increase their production and employment levels, commercial hotel demand should rebound. Smith Travel Research estimates that total hotel demand in the competitive market increased by 3.1% in 1995, and has decreased by 2.3% through year-to-date September 1996. We project that commercial demand (which comprises approximately 34.0% of the total market) will increase by 1.5% annually from 1997 through the end of our projection period. Meeting and Group Segment The meeting and group market includes meetings, seminars, conventions, trade association shows, and similar gatherings of ten or more people. Peak convention demand typically occurs in the spring and fall. Because of vacations, the summer months represent the slowest period for this market segment; winter demand varies. The average length of stay for typical meetings and groups ranges from three to five days. Most commercial groups meet during the weekday period of Monday through Thursday, but associations and social groups will sometimes gather on weekends. Commercial groups tend to have a low double occupancy of 1.3 to 1.5 people per room, while social groups are likely to have double occupancy rates ranging from 1.5 to 1.9. The meeting and group segment at the subject hotel primarily consists of two local major accounts. It is our understanding that United Tech, Optical Systems, Inc., Pratt & Whitney and Marquette Electronics require from 20 to 40 suites per night for approximately 45 weeks during the year. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Lodging Market Supply and Demand Analysis 52 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Meeting and group patronage is quite profitable for hotels. Although room rates are discounted for large groups, the property benefits from the use of meeting space and the revenues generated by in-house banquets and cocktail receptions. Facilities that are necessary to attract meetings and groups include function areas with adequate space for breakout, meals, and receptions; recreational amenities; and a sufficient number of guestrooms to house the attendees. Adequate facilities are needed as there is no convention center located in Palm Beach County. Future meeting and group demand is closely related to growth in the commercial segment. Because most meetings have either a direct or an indirect business purpose, the economic considerations that have an impact on commercial travel also affect meeting and group demand. The exception is non-commercial meetings, which are tied to the economic factors that influence leisure travel. It should be noted that meetings and similar events are booked in advance, and thus growth in this segment tends to lag slightly behind increases in commercial demand. Historically, meeting and group demand in the competitive supply of the subject hotel is estimated to have increased at a rate slower than the overall average annual compound rate achieved by the market. In light of this information and the relevant economic and demographic trends, we estimate that meeting and group demand in the subject property's market area will increase by 1.0% annually throughout the end of our projection period. Leisure Segment The leisure market segment consists of individuals and families who are spending time in the area or passing through en route to other destinations. Their travel purposes may include sightseeing, recreation, visiting friends and relatives, or numerous other non-business activities. Leisure demand is strongest Friday and Saturday nights and all week during holiday periods and the summer months. These peak periods are negatively correlated with commercial visitation, underscoring the stabilizing effect of capturing weekend and summer tourist travel. The typical length of stay ranges from one to four days, depending on the destination and travel purpose, and the rate of double occupancy generally ranges from 1.8 to 2.5 people per room. Leisure travelers tend to be the most price-sensitive segment in the lodging market. They often prefer low-rise accommodations where parking is convenient to the rooms, and they typically demand extensive recreational HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Lodging Market Supply and Demand Analysis 53 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= facilities and amenities. Ease of highway access and proximity to tourist attractions are important locational considerations. Leisure demand in the subject property's market is generated by a number of local attractions and events as discussed previously in this report. Future leisure demand is related to the overall economic health of the nation. Trends showing changes in state and regional unemployment and disposable personal income often have a strong impact on non-commercial visitation. Traffic counts on nearby highways and attendance at local attractions can also form a basis for projections. Based on the previous analysis, we estimate that leisure demand in the subject property's market area will increase by 1.5% annually throughout the end of our projection period. Conclusion The purpose of segmenting the lodging market is to define each major type of demand, identify customer characteristics, and estimate future growth trends. Starting with an analysis of the local area, three segments were defined as representing the subject property's lodging market. Various types of economic and demographic data were then evaluated to determine their propensity to reflect changes in hotel demand. Based on this procedure, we forecast the following average annual compounded market segment growth rates. ================================================================================ Table 6-3 Average Annual Compounded Market Segment Growth Rates - --------------------------------------------------------------------------------
Annual Compounded Growth Rate ---------------------------------------------------------------------- 1997 1998 1999 2000 2001 2002 - ------------------------------------------------------------------------------------------------- Commercial 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% Meeting and Group 1.0 1.0 1.0 1.0 1.0 1.0 Leisure 1.5 1.5 1.5 1.5 1.5 1.5 Annual Average Growth 1.3% 1.3% 1.3% 1.3% 1.3% 1.3%
- -------------------------------------------------------------------------------- These growth rates will be used in subsequent sections of this study to forecast changes in lodging demand. COMPETITION An integral component of the supply and demand relationship that has a direct impact on the availability of lodging demand is the current and anticipated supply of competitive lodging facilities. The subject property's competitive market is characterized as those full service hotels located HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Lodging Market Supply and Demand Analysis 54 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= along or near the I-95 corridor and by the West Palm Beach International Airport. We have identified five properties that are considered primarily competitive with the Embassy Suites Palm Beach Gardens. Including the subject property, these primary competitors total 1,415 rooms. Additional lodging facilities are judged to be only secondary competition; although the facilities, rate structures, or market orientations of these hotels prevent their inclusion among the primary competitive supply, they do compete with the subject property to some extent. The room count of each secondary competitor has been weighted to reflect the degree to which it competes with the Embassy Suites Palm Beach Gardens The aggregate weighted room count of the secondary competitors totals 315. Primary Competitors The following table summarizes the important operating characteristics of the primary competitors and the aggregate secondary competitors. This information was compiled from personal interviews, inspections, lodging directories, and our in-house library of operating data. The table also sets forth each property's penetration factors; penetration is the ratio between a specific hotel's operating results and the corresponding data for the market. If the penetration factor is greater than 100%, the property is performing better than the market as a whole; conversely, if the penetration is less than 100%, the hotel is performing at a level below the marketwide average. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Lodging Market Supply and Demand Analysis 55 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-4 Primary Competitors and Aggregate Secondary Competitors - --------------------------------------------------------------------------------
Estimated 1996 Market Segmentation Estimated 1995 ----------------------- ----------------------------- Year Number Meeting Size of Meeting Mtg. & Average Property/Location Opened of Rooms Space Ballroom Space/Room Comm. Group Leisure Occupancy Rate RevPAR - ----------------------------------------------------------------------------------------------------------------------------------- Embassy Suites (Subject) 4400 PGA Boulevard 1989 160 5,110 3,600 32 31 25 44% 78.0% $83.00 $64.74 Palm Beach Gardens Marriott 4000 RCA Boulevard 1990 279 9,016 6,939 32 50 20 30 69.0 88.00 60.72 Omni West Palm Beach Hotel 1601 Belvedere Road 1983 220 10,882 5,000 49 35 35 30 73.0 66.00 48.18 Radisson Suite Inn Palm Beach Airport 1808 Australian Avenue 1987 175 2,693 None 15 31 21 48 70.0 66.00 46.20 Palm Beach Airport Hilton 150 Australian Avenue 1984 247 10,176 4,416 41 69 23 8 64.0 64.00 40.96 PGA National Resort & Spa 400 Avenue of the Champions 1981 334 30,150 6,000 90 0 75 25 70.0 129.00 90.30 - ----------------------------------------------------------------------------------------------------------------------------------- Sub-Totals and Averages 1,415 11,338 5,191 43 34 37 30% 70.1% $86.93 $60.96 Secondary Competition 315 35 20 45% 65.0% $49.44 $32.13 Totals/Averages 1,730 34 34 32% 69.2% $80.53 $55.71 Estimated 1996 -------------------------------------------------------- Average Occupancy Yield Property/Location Occupancy Rate RevPAR Penetration Penetration - ------------------------------------------------------------------------------------------ Embassy Suites (Subject) 4400 PGA Boulevard 77.0% $96.00 $73.92 113.1% 126.8% Palm Beach Gardens Marriott 4000 RCA Boulevard 69.0 92.00 63.48 101.3 108.9 Omni West Palm Beach Hotel 1601 Belvedere Road 72.0 67.00 48.24 105.7 82.8 Radisson Suite Inn Palm Beach Airport 1808 Australian Avenue 71.0 67.00 47.57 104.3 81.6 Palm Beach Airport Hilton 150 Australian Avenue 59.0 71.00 41.89 86.6 71.9 PGA National Resort & Spa 400 Avenue of the Champions 70.0 135.00 94.50 102.8 162.1 - ------------------------------------------------------------------------------------------ Sub-Totals and Averages 69.1% $92.43 $63.88 101.5% 109.6% Secondary Competition 64.0% $52.10 $33.34 94.0% 57.2% Totals/Averages 68.1% $85.58 $58.28 100.0% 100.0%
- -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Lodging Market Supply and Demand Analysis 56 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Our survey of the primarily competitive hotels in the subject hotel market shows that five of the six competitors are affiliated with a major national lodging chain; the exception is the PGA National Resort and Spa. These properties range in size from 160 to 334 rooms. Each of these hotels have AAA quality ratings of three diamonds, except for PGA National Resort & Spa which has a four diamond rating. The competitive hotels were built between 1981 and 1990. The market demand is almost evenly distributed among three market segments. In 1996, the meeting and group market segment comprised 37.0% of the total, followed by the commercial segment at 34.0%, and the leisure segment at 30.0%. In 1996, the primary competitors achieved an overall occupancy of 70.1% at an average rate of $86.93, yielding RevPAR of $60.96. Based on our review of 1996 operating results, the occupancy rate decreased 1.4% to 69.1%, while the average rate increased 6.3% to $92.43. In 1996, the RevPAR of the primary competitors increased by 4.8%. The occupancy penetration and yield penetration for the subject equated to 113.1% and 126.8%, respectively, in 1996. After deducting the cost of the complimentary breakfast and cocktail hour of $6.37 per occupied room, the average rate for the subject in 1996 was $89.63. This reduces the yield penetration 6.6%. We believe that the comparatively high penetration rates are indicative of the superior quality, condition, location, and amenities at the subject hotel. Each primary competitor was inspected and evaluated. Descriptions of our findings are presented as follows. Palm Beach Gardens Marriott The Palm Beach Gardens Marriott is a contemporary high-rise which was built in 1990, and is the newest hotel in the competitive supply. The property is now owned by Host Marriott and is managed by Durbin Management. Accommodations include 279 units, which consist of a concierge level of six suites and 274 standard hotel rooms. It is located in the southeast quadrant formed by I-95 and PGA Boulevard, opposite the subject across I-95. This hotel is situated approximately 12 miles north of the West Palm Beach International Airport, 11 miles north of the City of West Palm Beach, and one mile east of the PGA National Resort & Spa. The guestrooms were renovated in 1995 and the property is considered to be particularly attractive to commercial travelers because of the Marriott franchise affiliation, the updated condition, and the facilities and amenities at the hotel. This hotel competes with the subject property primarily due HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Lodging Market Supply and Demand Analysis 57 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= to its close proximity to the subject, and because the hotels both benefit from excellent visibility and good access from I-95. The Marriott hotel captures the third highest RevPAR ($63.48) within the competitive market, which is considered to be appropriate given its North Palm Beach County location. Omni West Palm Beach Hotel The Omni West Palm Beach Hotel, formerly the Royce Hotel, is located on Belvedere Road opposite the entrance to the West Palm Beach International Airport. The hotel is owned and operated by Servico Hotels. It is a modern 15-story executive high-rise, which features a skylight above a five-story open atrium lobby, accentuated by tropical foliage and reflective glass. The hotel is connected by the atrium to the Servico Centre Office complex. Accommodations are split evenly between rooms and suites. The suites have separate sitting rooms, sofa beds, and refrigerators and wet bars. The hotel was modernized in 1994 and is considered to be equally attractive to all three market segments, because of the presence of 110 suites, the Omni franchise affiliation, the updated condition, and the facilities and amenities at the hotel. This hotel competes with the subject hotel primarily due to its suites, and because the hotels both have good access from I-95. The Omni captures the fourth highest RevPAR ($48.24) within the competitive market, which is considered to be appropriate, given its airport location. Radisson Suite Inn Palm Beach Airport The Radisson Suite Inn Palm Beach Airport is a modern six-story mid-rise hotel located on Australian Avenue. The hotel is owned by Cedarwood Company, Inc. and is managed by Winegardner & Hammonds, Inc. Some units have separate sitting rooms, while other units consist of one-bedroom suites. All units are equipped with refrigerators and coffee makers. This hotel is located approximately 0.5 miles from the West Palm Beach International Airport. The hotel was modernized in 1994 and is considered to be primarily attractive to the leisure market segment, because of its all-suite product, the Radisson franchise affiliation, the updated condition, and the facilities and amenities at the hotel. This hotel competes with the subject hotel primarily due its suites, and because the hotels both have good access from I-95. The Radisson captures the fifth highest RevPAR ($47.57) within the competitive market, which is considered to be appropriate, given its airport location. Palm Beach Airport Hilton The Palm Beach Airport Hilton is located on Australian Avenue approximately 0.5 miles from the entrance to the West Palm Beach International Airport. The hotel is managed by Durbin Management. It is HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Lodging Market Supply and Demand Analysis 58 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= a modern 10-story resort-style airport hotel, which features a lakeside location, offering lake views from the hotel lobby and from most of the rooms. Accommodations include an executive level, consisting mostly of spacious rooms and three suites. The hotel was last modernized in 1992 and is considered to be particularly attractive to the commercial segment, because of the Hilton franchise affiliation, and the facilities and amenities at the hotel. This hotel competes with the subject hotel primarily because the hotels both have good access from I-95. The Hilton captures the sixth highest RevPAR ($41.89) within the competitive market, which is considered to be appropriate, given its airport location. PGA National Resort and Spa The PGA National Resort and Spa, built in 1981, is a world-class golf resort and spa containing 334 units. This hotel is a stylish Mediterranean resort, which is part of a 2,340-acre PGA National Community, headquarters of the PGA of America. Accommodations consist of 59 suites, 80 cottages, with the remaining units comprising standard rooms. It is located near the Florida Turnpike exit on PGA Boulevard, approximately one mile west of I-95 and the subject. This hotel is located approximately 12 miles north of the West Palm Beach International Airport, and 11 miles north of West Palm Beach. The property includes five 18-hole championship golf courses, 19 tennis courts, a full-service spa, and several outdoor pools and a fitness center. As a result, it is heavily marketed to convention and incentive groups, and leisure travelers. This hotel competes with the subject hotel primarily due to its close proximity, and because of the meeting & group and leisure orientation of both properties. This property captures the highest RevPAR ($94.50) within the competitive market, which is considered to be appropriate given its resort ambiance, facilities and amenities. Secondary Competitors The secondary competitors consist of the Sheraton Palm Beach Hotel located in the City of West Palm Beach and MacArthur's Holiday Inn Palm Beach Gardens. The Sheraton Palm Beach Hotel was formerly a Ramada Hotel, which was considered to be in fair condition prior to its conversion to a Sheraton Hotel in August 1995. However, the hotel was not included in the Sheraton reservation directory until recently. The public areas and guestrooms were renovated in 1995/96 at a cost of $3.0 million. The hotel requires further guestroom renovation on two remaining floors and the corridors throughout the hotel which is proposed for completion in 1997. The hotel is located approximately 2 miles from the airport and because of its location HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Lodging Market Supply and Demand Analysis 59 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= near the CBD of West Palm Beach, it is attractive to leisure, corporate and meeting and group business. This hotel is owned by John Hancock Insurance and is managed by Lane Hospitality. The hotel includes a skylighted lobby and guestrooms have views of either the downtown or of a surrounding lake. The hotel offers a total of 10,469 square feet of meeting space, including a 6,615-square-foot ballroom. This equates to 30 square feet of meeting space per unit, which is considered adequate. Although this hotel was not considered as a primary competitor to the subject in 1996 because of the weak operating performance of the hotel, we have included this hotel as part of our primary competitive supply in 1997. As the MacArthurs Holiday Inn Palm Beach Gardens is currently considered to be in only fair condition, with low operating results in 1996, we did not include this hotel in our competitive supply. It is our understanding that this property will be closed during the summer of 1997 and renovated for a conversion to either a Holiday Inn Crown, a Westin Hotel, or a Doubletree Hotel. The renovation is proposed for up to $7.0 million with the hotel re-opening in 1998. This hotel is currently owned by Sage. The hotel includes 4,362 square feet of meeting space, which equates to 16 square feet of meeting space per unit. This is comparatively low when compared to all but one of the other hotels included in our competitive supply. The ballroom contains 2,618 square feet of floor area. For the purposes of our analysis, we have assumed that this hotel will re-enter the market in 1998, and as a result, we have included this hotel as part of our primary competitive supply as of 1998. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Lodging Market Supply and Demand Analysis 60 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 6-5 Secondary Competitors - --------------------------------------------------------------------------------
Estimated 1996 Market Segmentation Estimated 1995 ----------------------- ------------------------------ Number Percentage Competitive Mtg. & Average Property of Rooms Competitive Rooms Comm. Conv. Leisure Occupancy Rate Rev PAR - ------------------------------------------------------------------------------------------------------------------------------- Holiday Inn Palm Beach Gardens 280 50 % 140 40 % 20 % 40 % 71 % $52.00 $36.92 Sheraton Palm Beach Hotel 349 50 175 30 20 50 60 47.00 28.20 - ------------------------------------------------------------------------------------------------------------------------------- Totals/Averages 629 315 35 % 20 % 45 % 65 % $49.44 $32.13
Estimated 1996 ---------------------------- Average Property Occupancy Rate Rev PAR - -------------------------------------------------------------- Holiday Inn Palm Beach Gardens 68 % $50.00 $34.00 Sheraton Palm Beach Hotel 60 54.00 32.40 - ------------------------------------------------------------- Totals/Averages 64 % $52.10 $33.34 - -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Lodging Market Supply and Demand Analysis 61 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Proposed Competitors It is important to consider any new hotels that may have an impact on the subject property's operating performance. Based on our fieldwork in the market and our discussions with local hotel operators, developers, and government officials, we have identified one hotel that is proposed for construction in the subject market area. This proposed development consists of a 78-suite Residence Inn to be located on the southwest corner of 45th Street and I-95. However, we believe that this all-suite property would only be somewhat competitive with the subject due to its extended-stay orientation, and limited facilities and amenities. Conclusion A review of historical demand trends in the subject property's area indicates that the market has shown signs of recovery from 1992 onwards, corresponding to the economic recovery nationwide. According to Smith Travel Research, these growth patterns have stabilized in 1996. While supply has remained constant over recent years, growth in demand has driven occupancy upward, allowing the hotels in the market to follow with average rate increases. Based on our review of the local area, three market segments were defined within the subject property's lodging market. Growth rates for each market segment were forecasted based upon an analysis of the economic and demographic trends that appeared to significantly impact lodging demand. In general, demand is anticipated to increase at moderate rates throughout the projection period. We have identified five properties that are considered competitive with the subject hotel. The subject property has outperformed the overall market in the past in terms of occupancy, average rate, and RevPAR. We anticipate that the subject property will remain highly competitive in the market. We have also identified one recently renovated property and one to-be renovated property in the area. The redeveloped hotels should again be primarily competitive with the Embassy Suites. However, due to the nature of the proposed Residence Inn, we have considered it to be only moderately competitive with the subject property. In summary, we believe that the strength of the subject hotel sub-market, situated in Palm Beach Gardens, is somewhat superior to the sub-markets located in the City of West Palm Beach and in West Palm Beach International Airport area. Although each submarket is linked by I-95, the City of West Palm Beach submarket is located east of I-95 and generally west of the West Palm Beach CBD, while the West Palm Beach HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Lodging Market Supply and Demand Analysis 62 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= International Airport submarket is generally located east of I-95 in close proximity of the airport. Both of these submarkets are generally located slightly in excess of ten miles south from the subject. We believe that the subject submarket is somewhat superior to the competitive submarkets as the subject submarket is generally attractive to a more diversified clientele than the West Palm Beach International Airport submarkets and because the subject submarket was never overbuilt. long form boiler 2/95 edited 12/95 by Pegeen Higgins & Nancy Wareham HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Projection of Occupancy and Average Rate 63 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 7. Projection of Occupancy and Average Rate Historical Operating Performance The following table sets forth the subject property's historical occupancy, average rate, and RevPAR. For the purpose of comparison, we have also presented corresponding data (as provided by Smith Travel Research) for the competitive hotels described in the previous section. In addition to the annual percent change calculations, we have determined the subject property's occupancy, average rate, and RevPAR penetration factors. ================================================================================ Table 7-1 Historical Trends - --------------------------------------------------------------------------------
Year to Date ------------------- 1992 1993 1994 1995 1995 1996 - -------------------------------------------------------------------------------------- Subject Property Occupancy 68.3% 72.2% 79.0% 80.8% 83.9% 77.6% Percent Change --% 5.7% 9.4% 2.3% -- (7.5)% Occupancy Penetration 108.2% 109.2% 115.5% 114.6% 116.2% 110.4% Average Rate $ 79.56 $ 81.36 $ 79.73 $ 85.93 $ 86.40 $ 97.20 Percent Change --% 2.3% (2.0)% 7.8% -- 12.5% Average Rate Penetration 103.6% 101.7% 96.1% 97.9% 96.3% 103.3% RevPAR $ 54.34 $ 58.74 $ 62.99 $ 69.43 $ 72.49 $ 75.43 Percent Change --% 8.1% 7.2% 10.2% -- 4.1% RevPAR Penetration 112.2% 111.1% 111.0% 112.2% 112.0% 114.0% Areawide (STR) Occupancy 63.1% 66.1% 68.4% 70.5% 72.2% 70.3% Percent Change --% 4.8% 3.5% 3.1% -- (2.6)% Average Rate $ 76.76 $ 79.97 $ 82.99 $ 87.75 $ 89.68 $ 94.13 Percent Change --% 4.2% 3.8% 5.7% -- 5.0% RevPAR $ 48.44 $ 52.86 $ 56.77 $ 61.86 $ 64.75 $ 66.17 Percent Change --% 9.1% 7.4% 9.0% -- 2.2%
- -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Projection of Occupancy and Average Rate 64 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The STR competitive set included the same six hotels that we included in our competitive supply. Based on our review of the STR data for the competitive supply and the subject from 1992 through YTD September 1996, the annual increase in RevPAR totals have increased at a similar annual rate. A hotel's occupancy should also be evaluated on a monthly basis to identify seasonality trends. The following table sets forth the subject property's monthly occupancy from 1992 through September 1996. ================================================================================ Table 7-2 Subject Property's Monthly Occupancy History - --------------------------------------------------------------------------------
1992 1993 1994 1995 1996 ---- ---- ---- ---- ---- Occupancy Occupancy % Change Occupancy % Change Occupancy % Change Occupancy % Change ----------- --------------------- --------------------- --------------------- --------------------- January 80.3% 73.3 (8.7)% 86.1% 17.5% 86.9 0.9% 78.5% (9.7)% February 86.9 87.0 0.1 90.4 3.9 93.7 3.7 90.7 (3.2) March 79.3 92.1 16.1 93.1 1.1 91.1 (2.1) 85.4 (6.3) April 65.1 82.8 27.2 84.1 1.6 82.4 (2.0) 80.3 (2.5) May 65.1 69.3 6.5 77.4 11.7 81.6 5.4 73.6 (9.8) June 63.2 54.7 (13.4) 66.6 21.8 85.4 28.2 70.7 (17.2) July 52.7 62.7 19.0 62.4 (0.5) 77.2 23.7 66.4 (14.0) August 55.8 54.4 (2.5) 72.5 33.3 82.4 13.7 77.1 (6.4) September 60.9 63.0 3.4 73.3 16.3 74.3 1.4 75.0 0.9 October 76.2 75.9 (0.4) 77.7 2.4 77.7 0.0 0.0 0.0 November 66.4 77.3 16.4 83.5 8.0 68.8 (17.6) 0.0 0.0 December 66.5 75.2 13.1 81.6 8.5 68.4 (16.2) 0.0 0.0 ---- ---- ---- ---- --- ---- ------ --- --- Full Year 68.1% 72.2 6.1% 79.0% 9.4% 80.8 2.2% 77.4% (4.2)%
- -------------------------------------------------------------------------------- Based on our review of the preceding monthly occupancy rates, the peak season months include January, February, March, and April. The shoulder season months comprise May, October, November, and December. The summer season months include June, July, August, and September. Premise of the Projections To a certain degree, occupancy and rate attainment can be manipulated by management. For example, hotel operators may choose to lower rates in an effort to maximize occupancy. Our forecasts reflect an operating strategy that we believe would be implemented by competent hotel management to achieve an optimal mix of occupancy and average rate. Projected Room Night Demand Lodging demand and occupancy can be projected through a process known as room night analysis. A room night is a unit of hotel demand that equals one room that is occupied for one night. After estimating the HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Projection of Occupancy and Average Rate 65 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= number of room nights a hotel can be expected to attract during a 12-month period, we can determine occupancy by dividing the number of room nights of demand captured by the number of room nights available (calculated as the room count x 365). The total annual number of room nights occupied in the competitive hotels equates to the market's accommodated room night demand, as shown in the following table. ================================================================================ Table 7-3 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- 1996 Annual Room Night Demand (Rounded) ---------------------------------------------------------- Percentage Percentage Market Segment Market Wide of Total Subject Property of Total - ------------------------------------------------------------------------------- Commercial 145,000 34% 14,000 31% Meeting and Group 146,000 34 11,000 25 Leisure 139,000 32 20,000 44 ------------ --------- -------------- --------- Total 430,000 100% 45,000 100% - -------------------------------------------------------------------------------- Latent Demand The previous table illustrates the accommodated room night demand of the subject and the subject property's competitive market. Because this estimate is based on occupied roomnights, it includes only those hotel rooms that were used by guests. Latent demand considers guests who could not be accommodated by the existing competitive supply, and can be divided into unaccommodated demand and induced demand. We have not identified any latent demand in the subject market area. Total Usable Room Night Demand Total usable room night demand is estimated by combining accommodated demand and usable latent demand. Usable latent demand is that portion of latent demand that can be absorbed based on the number of existing and proposed hotel rooms in the market. The total usable room night demand is comprised of three market segments. These market segments include commercial, meeting and group, and leisure. The following table shows the projected annual change in accommodated and usable room night demand in the subject property's competitive market. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Projection of Occupancy and Average Rate 66 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-4 Total Usable Room Night Demand - --------------------------------------------------------------------------------
Historical 1997 1998 1999 2000 2001 2002 2003 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Growth Rate ----- 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% Accommodated Demand 145,440 147,622 149,836 152,084 154,365 156,680 159,030 161,415 Meeting and Group Growth Rate ----- 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% Accommodated Demand 145,888 147,347 148,820 150,308 151,811 153,329 154,862 156,411 Leisure Growth Rate ----- 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% Accommodated Demand 138,581 140,660 142,770 144,912 147,086 149,292 151,531 153,804 Totals Commercial 145,440 147,622 149,836 152,084 154,365 156,680 159,030 161,415 Meeting and Group 145,888 147,347 148,820 150,308 151,811 153,329 154,862 156,411 Leisure 138,581 140,660 142,770 144,912 147,086 149,292 151,531 153,804 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- TOTAL DEMAND 429,909 435,629 441,426 447,304 453,262 459,301 465,423 471,630 Annual Forecasted Growth 1.3% 1.3% 1.3% 1.3% 1.3% 1.3% 1.3%
- -------------------------------------------------------------------------------- Guestroom Supply In 1996, the competitive properties provided a weighted total of 1,730 rooms. The following table shows the projected available room night demand and available room nights. To calculate the annual number of available room nights, the number of available rooms is multiplied by 365. ================================================================================ Table 7-5 Available Rooms and Room Nights - -------------------------------------------------------------------------------- Night Room Nights Competitive Year Demand Available Occupancy - -------------------------------------------------------- Historical 429,909 631,268 68% 1997 435,629 712,115 61 1998 441,426 746,060 59 1999 447,304 746,060 60 2000 453,262 746,060 61 2001 459,301 746,060 62 2002 465,423 746,060 62 2003 471,630 746,060 63 - -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Projection of Occupancy and Average Rate 67 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Overall Competitive Occupancy The number of available rooms were increased in 1997 and 1998 by adding the previously determined secondary supply to the primary competitive supply. With no assumed existing business at the recycled Sheraton and Holiday Inn hotels, the overall competitive occupancy decreased from 68% in 1996 to 61% in 1997 and 5% in 1998. However, because these hotels both previously operated under different franchise affiliations with only the Holiday Inn proposing to close for renovation, these overall competitive occupancy supply rates are considered to be comparatively lower than actual roomnight demand. Competitive Index Analysis Competitive indexes are used to analyze the relative market position of each property on the basis of a particular demand segment. The index represents the number of times each year that one room is occupied by one type of traveler (e.g., commercial, meeting and group, leisure, or airline), or the number of room nights actually accommodated per year, per room, per market segment. For example, if a hotel has a commercial competitive index of 190, each room in the property is occupied 190 times a year by a commercial traveler. The competitive index is calculated by dividing a hotel's annual accommodated room night demand in a particular market segment by that property's room count. Competitive indexes will be used to illustrate each property's position in the market based on its ability to compete with other local lodging facilities. Commercial Segment The historical commercial segment competitive indexes in the subject property's market ranged from 80% to 149%. The Palm Beach Airport Hilton was the most competitive property in the commercial market in 1996, with an index of 149%. The Palm Beach Gardens Marriott was the second most competitive hotel at 126%. The following table shows the projected commercial segment competitive indexes of the area's hotels. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Projection of Occupancy and Average Rate 68 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-6 Commercial Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 - -------------------------------------------------------------------------------- Embassy Suites (Subject) 87 100 100 Palm Beach Gardens Marriott 126 126 126 Omni West Palm Beach Hotel 92 92 92 Radisson Suite Inn Palm Beach Airport 80 80 80 Palm Beach Airport Hilton 149 149 149 PGA National Resort & Spa 0 0 0 Secondary 81 81 0 Holiday Inn Palm Beach Gardens 0 85 85 Sheraton West Palm Beach 0 92 92 - -------------------------------------------------------------------------------- The commercial competitive index from the MacArthur's Holiday Inn Palm Beach Gardens and Sheraton West Palm Beach were increased from the combined secondary indicators as these properties either were or are assumed to have been renovated, as previously noted in this report. The index of the subject's commercial market was increased to 100% as we believe that the subject should further improve its penetration of this market segment to a level slightly in excess of the Omni West Palm Beach Hotel and the other competitive hotels, but below the two highest hotel indicators. Meeting and Group Segment The historical meeting and group market segment competitive indexes in the subject property's market ranged from 46% to 192%. The PGA National Resort & Spa was the most competitive property in the meeting and group market in 1996, with an index of 192%. The Omni West Palm Beach Hotel was the second most competitive hotel at 92%. The following table illustrates the competitive indexes in the meeting and group segment. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Projection of Occupancy and Average Rate 69 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-7 Meeting and Group Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 - -------------------------------------------------------------------------------- Embassy Suites (Subject) 70 90 90 Palm Beach Gardens Marriott 50 50 50 Omni West Palm Beach Hotel 92 92 92 Radisson Suite Inn Palm Beach Airport 54 54 54 Palm Beach Airport Hilton 50 50 50 PGA National Resort & Spa 192 192 192 Secondary 46 46 0 Holiday Inn Palm Beach Gardens 0 75 75 Sheraton West Palm Beach 0 75 75 - -------------------------------------------------------------------------------- The meeting and group competitive index from the MacArthur's Holiday Inn Palm Beach Gardens and Sheraton West Palm Beach were increased from the combined secondary indicators as these properties either were or are assumed to have been renovated as previously noted in this report. The index of the subject's meeting and group market was increased to 90% as we believe that the property should further improve its penetration of this market segment to a level slightly below the Omni West Palm Beach Hotel. Leisure Segment The historical leisure segment competitive indexes in the subject property's market ranged from 17% to 124%. The subject and the Radisson Suite Inn Palm Beach Airport were the most competitive properties in the leisure market in 1996, both with an index of 124%. The following table illustrates the competitive indexes in the leisure segment. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Projection of Occupancy and Average Rate 70 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-8 Leisure Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 - -------------------------------------------------------------------------------- Embassy Suites (Subject) 124 140 145 Palm Beach Gardens Marriott 76 76 76 Omni West Palm Beach Hotel 79 79 79 Radisson Suite Inn Palm Beach Airport 124 124 124 Palm Beach Airport Hilton 17 17 17 PGA National Resort & Spa 64 64 64 Secondary 105 105 0 Holiday Inn Palm Beach Gardens 0 75 75 Sheraton West Palm Beach 0 75 75 - -------------------------------------------------------------------------------- The leisure competitive index from the MacArthur's Holiday Inn Palm Beach Gardens and Sheraton West Palm Beach were decreased from the combined secondary indicators as the type of leisure business previously attracted to these properties were mostly budget travelers. The index of the subject's leisure market was increased from 124% to 140% in 1997, and again to 145%in 1998, as we believe that the subject should further improve its penetration of this market segment to a level greater than the Radisson Suite Inn Palm Beach Airport and other competitive hotels. Airline Segment As a hotel's occupancy improves, its reliance on airline demand generally diminishes. Because this segment commands deeply discounted rates, operators prefer to accommodate more lucrative types of demand whenever possible. Given the comparatively upscale rate structure of the competitive supply of the subject, this market segment was not considered to be prevalent in the competitive hotels. Subject Property's Room Night Capture and Occupancy After the competitive index is calculated, it is adjusted to reflect the property's room count, yielding a figure referred to as the market share adjuster. The market share adjuster of each property is then divided by the total market share adjuster for all of the competitors, resulting in each hotel's market share. By multiplying the projected market share by the area's usable room night demand, we can determine the total number of room nights captured by a specific hotel. Occupancy is then calculated by dividing the projected number of room nights captured by the property's total number of available room nights. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Projection of Occupancy and Average Rate 71 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Multiplying the subject property's projected market share by the estimated room night demand in each segment results in the following estimate of room nights captured by the hotel. ================================================================================ Table 7-9 Room Nights Captured by the Subject Property - --------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002 ----------------------------------------------------------------------------------------------- Commercial Demand 147,622 149,836 152,084 154,365 156,680 159,030 Market Share 0.0943 0.0898 0.0898 0.0898 0.0898 0.0898 Capture 13,923 13,460 13,662 13,867 14,075 14,286 Meeting and Group Demand 147,347 148,820 150,308 151,811 153,329 154,862 Market Share 0.0844 0.0793 0.0793 0.0793 0.0793 0.0793 Capture 12,433 11,795 11,913 12,032 12,152 12,274 Leisure Demand 140,660 142,770 144,912 147,086 149,292 151,531 Market Share 0.1467 0.1485 0.1485 0.1485 0.1485 0.1485 Capture 20,639 21,201 21,519 21,842 22,169 22,502 ------------ ------------ ------------ ------------- ------------- ---------------- Total Capture 46,995 46,456 47,094 47,741 48,396 49,062
- -------------------------------------------------------------------------------- Dividing the total number of room nights captured by the subject property's number of available room nights per year (calculated as 160 x 365) produces the projected occupancy percentage. ================================================================================ Table 7-10 Calculation of the Subject Property's Projected Occupancy - --------------------------------------------------------------------------------
Stabilized 1998 1999 2000 2001 2002 ----------------------------------------------------------------------------------------------- Total Room Nights Captured/Year 46,995 46,456 47,094 47,741 48,396 49,062 Available Room Nights 58,400 58,400 58,400 58,400 58,400 58,400 Occupancy 80.47 % 79.55 % 80.64 % 81.75 % 82.87 % 84.01 % Rounded 80 % 80 % 81 % 82 % 83 % 84 %
- -------------------------------------------------------------------------------- For the purpose of forecasting income and expense, we will use the following occupancy levels. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Projection of Occupancy and Average Rate 72 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-11 Occupancy Forecast - -------------------------------------------------------------------------------- Year Occupancy - --------------------------------------------- Stabilized 80% 1998 80 1999 80 2000 80 2001 80 2002 80 - -------------------------------------------------------------------------------- Although the preceding room night analysis shows the subject property achieving a 77.6% occupancy in YTD 1996, the 1995 occupancy rate was 80.8%. The occupancy rate was comparatively low in 1996 as the average rate increased by $10.80 per occupied room ($97.20 - $86.40) to a projected year-end average rate of $96.73 ($85.93 + $10.80). Because the subject contains the smallest number of rooms in the competitive supply, together with the fact that the subject room inventory includes one- and two-bedroom suites, we have selected a stabilized occupancy rate of 80.0% as appropriate for the subject. The stabilized occupancy is intended to reflect the anticipated results of the property over its remaining economic life, given any and all changes in the life cycle of the hotel. Thus, the stabilized occupancy excludes from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusually high or low occupancies. Although the subject property may operate at occupancies above this stabilized level, we believe it equally possible for new competition and temporary economic downturns to force the occupancy below this selected point of stability. AVERAGE RATE ANALYSIS One of the most important considerations in estimating the value of a lodging facility is a supportable forecast of its attainable average rate, which is more formally defined as the average rate per occupied room. Average rate can be calculated by dividing the total rooms revenue achieved during a specified period by the number of rooms sold during the same period. The projected average rate and the anticipated occupancy percentage are used to forecast rooms revenue, which in turn provides the basis for estimating most other income and expense categories. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Projection of Occupancy and Average Rate 73 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Average Rate by Month The following table shows the subject property's monthly occupancy and average rate from 1993 through September 1996. ================================================================================ Table 7-12 Subject Property's Occupancy and Average Rate by Month - --------------------------------------------------------------------------------
1993 1994 1995 ---- ---- ---- Average Average Average Occupancy Rate Occupancy % Chg Rate % Chg Occupancy % Chg Rate % Chg ---------------------- -------------------------------------- -------------------------------------- January 73.3% $95.78 86.1% 17.5% $96.44 0.7% 86.9 % 0.9% $108.46 12.5% February 87.0 109.07 90.4 3.9 108.05 (0.9) 93.7 3.7 111.17 2.9 March 92.1 96.13 93.1 1.1 103.25 7.4 91.1 (2.1) 105.38 2.1 April 82.8 87.72 84.1 1.6 84.96 (3.1) 82.4 (2.0) 88.86 4.6 May 69.3 69.45 77.4 11.7 65.68 (5.4) 81.6 5.4 71.10 8.3 June 54.7 68.38 66.6 21.8 65.79 (3.8) 85.4 28.2 67.95 3.3 July 62.7 68.57 62.4 (0.5) 65.36 (4.7) 77.2 23.7 66.95 2.4 August 54.4 67.35 72.5 33.3 64.26 (4.6) 82.4 13.7 68.62 6.8 September 63.0 67.84 73.3 16.3 66.43 (2.1) 74.3 1.4 73.24 10.3 October 75.9 71.82 77.7 2.4 68.47 (4.7) 77.7 0.0 76.58 11.8 November 77.3 71.66 83.5 8.0 70.31 (1.9) 68.8 (17.6) 82.14 16.8 December 75.2 82.19 81.6 8.5 82.37 0.2 68.4 (16.2) 94.61 14.9 ---- ----- ---- --- ----- --- ---- ------ ----- ---- Weighted Average 72.2% $81.14 79.0% 9.4% $79.73 (1.7)% 80.8 % 2.2% $85.10 6.7%
1996 YTD -------- Average Occupancy % Chg Rate % Chg ------------------------------------ January 78.5% (9.7)% $118.92 9.6% February 90.7 (3.2) 126.07 13.4 March 85.4 (6.3) 121.46 15.3 April 80.3 (2.5) 99.08 11.5 May 73.6 (9.8) 82.18 15.6 June 70.7 (17.2) 78.76 15.9 July 66.4 (14.0) 80.87 20.8 August 77.1 (6.4) 76.63 11.7 September 75.0 0.9 80.24 9.6 October 0.0 0.0 0.00 0.0 November 0.0 0.0 0.00 0.0 December 0.0 0.0 0.00 0.0 --- --- ---- --- Weighted Average 77.4% (4.2)% 97.23 14.2% - -------------------------------------------------------------------------------- The previous table underscores the correlation between a hotel's occupancy and its average rate: as occupancy increases, rates tend to follow. On a monthly basis, the subject achieves its highest average rate during February, followed closely by January, March, and April. The shoulder season months include May, October, November, and December, while the off-season months include June, July, August, and September. Regarding seasonality, during the peak season months the combined average rate was $103.75 in 1995 and $116.64 in 1996, while the combined occupancy rate was 88.4% in 1995 and 83.6% in 1996. This indicates an emphasis on average rate at the subject during the peak season in 1996. During the shoulder season months the combined average rate was $80.51 in 1995 but unavailable in 1996, while the occupancy rate was 74.2% in 1995 and unavailable in 1996. During the off-season months the average rate was $69.09 in 1995 and $79.05 in 1996, while the occupancy rate was 79.8% in 1995 and 72.3% in 1996. This again indicates an emphasis on average rate at the subject. We believe that the seasonal occupancy and average rates should continue gradually into the foreseeable future. Competitive Positioning The subject's average rate will be projected using a competitive positioning method. This technique begins with an analysis of the average rates achieved by the subject property and its competitors. These rates establish HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Projection of Occupancy and Average Rate 74 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= a range that reflect certain characteristics of the specific market, such as price sensitivity, demand orientation, and occupancy. The subject property's average rate is then compared to those of the hotels to which it is most similar in terms of size, quality, facilities, amenities, market orientation, location, management, image, and affiliation. Adjustments are made to reflect any relevant differences. Although the average rate analysis presented here follows the occupancy projections, these two statistics are highly correlated; in reality, one cannot project occupancy without making specific assumptions regarding average rate. This relationship is best illustrated by rooms revenue per available room (RevPAR), which reflects a property's ability to maximize rooms revenue. The following table summarizes the 1996 average rate and RevPAR of the subject property and its competitors. ================================================================================ Table 7-13 1996 Average Rate and RevPAR of the Primary Competitors - -------------------------------------------------------------------------------- 1996 1996 Average Rooms Revenue Property Room Rate Per Available Room - ------------------------------------------------------------------------ Embassy Suites (Subject) $96.00 $73.92 Palm Beach Gardens Marriott 92.00 63.48 Omni West Palm Beach Hotel 67.00 48.24 Radisson Suite Inn Palm Beach Airport 67.00 47.57 Palm Beach Airport Hilton 71.00 41.89 PGA National Resort & Spa 135.00 94.50 ------ ----- Average $92.43 $63.88 - -------------------------------------------------------------------------------- After adjusting the subject's average rate by the cost to provide the complimentary breakfast and cocktail hour at the subject hotel, the average rate of the subject approximates $90.00, which is slightly below the average rate of $92.00 at the Palm Beach Gardens Marriott. This results in an adjusted RevPAR of $69.30 for the subject, which is considered to be appropriate relative to the competition. Average Rate Increases It is important to note that hotel room rate increases do not necessarily conform to the underlying monetary inflation rate, because lodging facilities are influenced by market conditions such as the relationship HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Projection of Occupancy and Average Rate 75 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= between supply and demand. A hotel's ability to raise room rates is affected by a number of factors, including the following. o Supply and Demand Relationships - The relationship between supply and demand is one of the factors that determine hotel occupancies and average rates. Strong markets where lodging demand is increasing faster than supply are often characterized by rate growth that exceeds inflation. Markets that are overbuilt or suffering from declining demand are unlikely to exhibit any significant increases in average rates. o Inflationary Pressures - Price increases caused by inflation affect hotel room rates by eroding profit margins and encouraging operators to raise prices. This strategy is effective only in markets that are characterized by a healthy supply and demand relationship. o Improving the Competitive Standard - When a new lodging facility enters a mature market, its rates may be set higher than the marketwide average in an effort to justify the development costs. This may allow other competitors to achieve corresponding gains by effectively raising the amount the market will bear. However, if the addition to supply has a severe impact on the occupancy levels of other hotels, price competition may ensue. o Property-Specific Improvements - Changes that make a hotel more or less attractive to guests can have an impact on average rate. An expansion, renovation, upgrading, or the introduction of additional facilities and amenities may enable greater-than-inflationary room rate increases. Likewise, deferred maintenance may make a property less competitive, engendering a decline in room rates. In determining average rate projections, changes that occur prior to occupancy stabilization are generally attributable to factors that are specific to the property and the market. After a hotel achieves a stabilized occupancy, room rates are generally expected to continue to increase at the underlying inflation rate throughout the remainder of the projection period. Inflation rates are frequently cited by various sources as ranging from 3.0% to 4.0% annually. Since we believe that the supply and demand factors in the subject hotel market are in balance, indicating little or no real growth during our projection period, we anticipate an increase in the average rate to approximate inflationary trends. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Projection of Occupancy and Average Rate 76 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Based on historic average rates at the subject from 1992 through 1995, an average annual compound rate increase of 1.9% was indicated. After including the combined actual and projected 1996 average rate of $96.73, an average annual compound rate increase of 4.0% was indicated. Consequently, we estimated an annual inflationary increase in the average rate of 3.5%. Based on these considerations, the following table shows our projection of average rate increases. ================================================================================ Table 7-14 Average Rate Forecast - -------------------------------------------------------------------------------- Areawide Subject Property's Subject Property's Areawide Rate Rate Projected Year Occupancy Increase Increase Average Rate - -------------------------------------------------------------------------------- Positioned Base --- --- --- $96.73 1997 61% 3% to 4% 3.5% 100.12 1998 59 3 to 4 3.5 103.63 1999 60 3 to 4 3.5 107.26 2000 61 3 to 4 3.5 111.01 2001 62 3 to 4 3.5 114.90 2002 62 3 to 4 3.5 118.92 - -------------------------------------------------------------------------------- The following average rates and occupancy rates will be used to project the subject property's rooms revenue. ================================================================================ Table 7-15 Forecast of Occupancy and Average Rate - -------------------------------------------------------------------------------- Year Occupancy Average Rate - -------------------------------------------------------------------- Stabilized 80.00% $100.12 1998 80.00 $103.63 1999 80.00 $107.26 2000 80.00 $111.01 2001 80.00 $114.90 2002 80.00 $118.92 - -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Highest and Best Use 77 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 8. Highest and Best Use The concept of highest and best use recognized by the Appraisal Institute distinguishes between the highest and best use of the land (as though vacant) and that of the property (as improved). Highest and best use is defined as: The reasonably probable and legal use of vacant land or improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.(8) The concept of highest and best use is the premise upon which value is based, and is a product of competitive forces in the marketplace. The principle of balance holds that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium. This principle applies to relationships among various property components as well as the relationship between the costs of production and the property's productivity. The point of economic balance is achieved when the combination of land and building is optimal (i.e., when no marginal benefit or utility is achieved by adding another unit of capital). The law of increasing returns holds that larger amounts of the agents of production produce greater net income up to a certain point, after which the law of diminishing returns is applied.(9) It is important to recognize that the highest and best use of the land (as though vacant) may differ from the highest and best use of the property (as improved). This may occur when a site has existing improvements and the highest and best use of the land differs from the current use. Nonetheless, the current property use will continue until the value of the land under its highest and best use exceeds the value of the property in its current use, plus the cost to remove the existing improvements. (8) The Appraisal of Real Estate - Tenth Edition, Appraisal Institute, Chicago, IL, 1992, p. 45. (9) Ibid., p. 40. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Highest and Best Use 78 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= In consideration of the locational and physical factors influencing development in the immediate area of the subject site, it is the appraisers' opinion that the highest and best use of the subject site, as vacant, would be to develop the subject site as a mixed-use commercial PUD (Planned Unit Development) development. This would allow for controlling the development of the site with compatible uses of a similar quality, which would maximize the value of the property. However, it is our opinion that it is not economically feasible at today's costs to develop the site with a development similar in quality to the existing subject development, but rather with a mixed-use commercial development of less quality. Conclusion Based on our analysis, the value of the subject land, less the cost of demolition of the subject improvements, does not exceed the value of the hotel and office building as improved. In consideration of the existing subject development, and the vested development rights and approvals associated with the undeveloped portion of the subject site, we believe that appropriate uses of the unimproved land would include either the approved 82,265 square foot office building or alternatively hotel utilization. Given the existing occupancy rate and average rate of the subject hotel, and the rooms demand of the competitive supply within close proximity of the subject, together with the excellent exposure of the subject site to vehicular traffic along I-95, we believe that the approved use of the vacant subject site, as an office building, should be amended to allow for a greater economic opportunity as a hotel. However, given the fact that there is no guarantee that this use change would be approved by the City of Palm Beach Gardens, we believe that the highest and best use of the subject property, as improved, is to continue the existing use as a 160-suite Embassy Suites hotel and 80,125-square-foot office building, and for the future construction of a 82,26-square-foot office building. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Approaches to Value 79 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 9. Approaches to Value In appraising real estate for market value, the appraiser has three approaches from which to select: the income capitalization, sales comparison, and cost approaches. Although all three valuation procedures are given consideration, the inherent strengths of each approach and the nature of the subject property must be evaluated to determine which will provide supportable estimates of market value. The appraiser is then free to select one or more of the appropriate approaches in arriving at a final value estimate. The Income Capitalization Approach The income capitalization approach takes a property's projected net income before debt service and allocates this future benefit to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component is calculated. The total of the mortgage component and the equity component equals the value of the property. This approach is often selected as the preferred valuation method for income-producing properties, because it most closely reflects the investment rationale of knowledgeable buyers. The Sales Comparison Approach The sales comparison approach estimates the value of a property by comparing it to similar properties that have been sold on the open market. To obtain a supportable estimate of value, the sales price of a comparable property must be adjusted to reflect any dissimilarities between it and the property being appraised. The sales comparison approach may provide a useful value estimate in the case of simple forms of real estate, such as vacant land and single-family homes, where the properties are homogeneous and the adjustments are few and relatively simple to compute. In the case of complex investments such as shopping centers, office buildings, restaurants, and lodging facilities, where the adjustments are numerous and more difficult to quantify, the sales comparison approach loses much of its reliability. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Approaches to Value 80 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Hotel and office building investors typically do not employ the sales comparison approach in reaching their final purchase decisions. Factors such as the lack of recent sales data, the numerous insupportable adjustments that are necessary, and the general inability to determine the true financial terms and human motivations of comparable transactions often make the results of this technique questionable. Although the sales comparison approach may provide a range of values that supports the final estimate, reliance on this method beyond the establishment of broad parameters is rarely justified by the quality of the sales data. The market-derived capitalization rates sometimes used by appraisers are susceptible to the same shortcomings inherent in the sales comparison approach. To substantially reduce the reliability of the income capitalization approach by employing capitalization rates obtained from unsupported market data weakens the final value estimate and ignores the typical investment analysis procedures employed by hotel purchasers. Because appraisers are obligated to mirror the actions of the marketplace, we generally give the sales comparison approach minimal weight in the hotel and office building appraisal process beyond bracketing the final estimate.(10) The Cost Approach The cost approach estimates market value by computing the current cost to replace the property and subtracting any depreciation resulting from physical deterioration, functional obsolescence, and external (or economic) obsolescence. The value of the land, as if vacant and available, is then added to the depreciated value of the improvements to produce a total value estimate. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements grow older and begin to deteriorate, the resultant loss in value becomes increasingly difficult to quantify accurately. We find that knowledgeable hotel and office building buyers base their purchase decisions on economic factors such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, this approach is given minimal weight in the hotel and office building valuation process. As (10) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 209. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Approaches to Value 81 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= noted in Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, "the cost approach is seldom used to value existing hotels and motels."(10) Reconciliation The final step in the valuation process is the reconciliation and correlation of the value indications. Factors that are considered in assessing the reliability of each approach include the purpose of the appraisal, the nature of the subject property, and the reliability of the data used. In reconciliation, the applicability and supportability of each approach is considered and the range of value indications is examined. The most significant weight is given to the approach that produces the most reliable solution and most closely reflects the criteria used by typical investors. Our nationwide experience with numerous hostelry and office building buyers and sellers indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the investors who constitute the marketplace. For this reason, the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in the hotel and office building valuation process. (10) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 208. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 82 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 10. Income Capitalization Approach The income capitalization approach is based on the principle that the value of a property is indicated by its net return, or what is known as the present worth of future benefits. The future benefits of income-producing properties, such as hotels, are net income before debt service and depreciation (as estimated by a forecast of income and expense) and any anticipated reversionary proceeds from a sale. These future benefits can be converted into an indication of market value through a capitalization process and discounted cash flow analysis. Using the income capitalization approach, the subject property has been valued by analyzing the local market for transient accommodations, examining existing and proposed competition, and developing a forecast of income and expense that reflects current and anticipated income trends and cost components through a stabilized year of operation. The forecast of income and expense is expressed in current dollars for each year. The stabilized year is intended to reflect the anticipated operating results of the property over its remaining economic life, given any or all applicable stages of build-up, plateau, and decline in the life cycle of the hotel. Thus, income and expense estimates from the stabilized year forward exclude from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusual revenues or expenses. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, published by the Appraisal Institute, "of the three valuation approaches available to the appraiser, the income capitalization approach generally provides the most persuasive and supportable conclusions when valuing a lodging facility."(12) This text recommends that using a ten-year forecast and an equity yield rate "most accurately reflects the actions of typical hotel buyers, who purchase properties based on their leveraged discounted cash flow."(13) The simpler (12) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 83 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= procedure of using a ten-year forecast and a discount rate is "less reliable because the derivation of the discount rate has little support. Moreover, it is difficult to adjust the discount rate for changes in the cost of capital."(13) We have used both methods to discount the subject property's projected net income into an estimate of value. Method One is a ten-year discounted cash flow analysis in which the cash flow to equity and the equity reversion are discounted to the present value at the equity yield rate, and the income to the mortgagee is discounted at a mortgage interest rate. The sum of the equity and mortgage values is the total property value. Method Two is a simple ten-year discounted cash flow analysis in which the annual net income before debt service and the reversionary proceeds following a sale at the end of the tenth year are discounted back to the date of the appraisal at an overall discount rate, and then totaled to produce an indication of the present worth of future benefits. To convert the projected income stream into an estimate of value through Method One, the anticipated net income (before debt service and depreciation) is allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. The total of the mortgage component and the equity component equals the value of the property. The process is described as follows. 1. The terms of typical hotel and office building financing are set forth, including interest rate, amortization term, and loan-to-value ratio. 2. An equity yield rate of return is established. Numerous hotel and office building buyers base their equity investments on a ten-year equity yield rate projection that takes into account ownership benefits such as periodic cash flow distributions, residual sale or refinancing distributions that return any property appreciation and mortgage amortization, income tax benefits, and various non-financial considerations such as status and prestige. The equity yield rate is also known as the internal rate of return on equity. (12) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236 (13) Ibid. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 84 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 3. The value of the equity component is calculated by first deducting the annual debt service from the projected net income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value. After deducting the mortgage balance at the end of the tenth year and the typical brokerage and legal costs, the equity residual is discounted back to the date of value at the equity yield rate. The net income to equity for each of the ten projection years is also discounted to the present value. The sum of these discounted values equates to the value of the equity component. Adding the equity component to the initial mortgage balance yields the overall property value. Because the mortgage and the debt service amounts are unknown but the loan-to-value ratio was determined in Step #1, the preceding calculation can be solved through an iterative process or by use of a linear algebraic equation that computes the total property value. The algebraic equation that solves for the total property value using a ten-year mortgage and equity technique was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(12) 4. The value is proven by allocating the total property value between the mortgage and equity components and verifying that the rates of return set forth in Steps #1 and #2 can be met from the projected net income. The process of converting the projected income stream into an estimate of value through Method Two is described as follows. 1. A discount rate is established by evaluating the total property yield derived by Method One. Occasionally, the discount rate may be adjusted slightly based on the total property yields indicated by recent transactions involving hotels similar to the subject property. 2. The reversionary value is calculated by capitalizing the 11th-year net income by the terminal capitalization rate and deducting typical brokerage and legal fees. (12) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 85 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 3. The ten-year forecast of net income (before debt service and depreciation) and the reversionary value are discounted to the date of value at the rate derived above. Review of Operating History Because the Embassy Suites Palm Beach Gardens and the Admiralty I office building of the subject have an established operating performance, their historical income and expense experience can serve as a basis for projections. Our analysis of the subject hotel will be developed first, with an analysis of the office building developed later in this section of the report. The subject hotel opened in February, 1989, and later achieved occupancy levels of 79.0% in 1994 and 80.8% in 1995. The following income and expense statements were provided by either a representative of the past or current ownership of the property, and are unaudited. Where applicable, we have reorganized the statements in accordance with the Uniform System of Accounts for Hotels. As the subject was purchased in 1995 we were not provided with a calendar year 1994 or 1995 operating statement from current ownership. Rather, we had in our files a 1994 operating statement of the subject hotel, and we were provided with a combined actual (8 month) and projected (4 month) 1996 operating statement, a YTD through August 1996 operating statement, and a 1997 budget. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 86 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-1 Historical Operating Performance - --------------------------------------------------------------------------------
Calendar Year Ending: 1996 1996 Total Rooms: 160 160 Occupied Rooms: 45,278 29,955 Complimentary Rooms: 563 0 Days Open: 366 Amount per Amount per 243 Amount per Amount per Occupancy: 77.3% Percentage Available Occupied 77.0% Percentage Available Occupied Average Rate: $96.73 of Revenue Room Room $100.22 of Revenue Room Room - ----------------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $4,354 94.0% $27,213 $96.16 $3,002 94.1% $18,763 $100.22 Food 43 0.9 269 0.95 27 0.8 169 0.90 Telephone 79 1.7 494 1.74 57 1.8 356 1.90 Restaurant Rent 115 2.5 719 2.54 72 2.3 450 2.40 Other Income 39 0.8 244 16.30 31 1.0 194 1.03 Total 4,630 99.9 28,938 102.26 3,189 100.0 19,931 106.46 - ----------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES Rooms 738 16.9 4,613 16.30 484 16.1 3,025 16.16 Food & Beverage 29 67.4 181 0.64 20 74.1 125 0.67 Telephone 0 0.0 0 0.00 0 0.0 0 0.00 Total 767 16.6 4,794 16.94 504 15.8 3,150 16.83 - ----------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 3,863 83.3 24,144 85.32 2,685 84.2 16,781 89.63 - ----------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 418 9.0 2,613 9.23 282 8.8 1,763 9.41 Management Fee 140 3.0 875 3.09 97 3.0 606 3.24 Marketing 170 3.7 1,063 3.75 105 3.3 656 3.51 Franchise Fees 283 6.1 1,769 6.25 195 6.1 1,219 6.51 Property Oper. & Maint. 186 4.0 1,163 4.11 121 3.8 756 4.04 Energy 233 5.0 1,456 5.15 149 4.7 931 4.97 Hospitality Department 286 6.2 1,788 6.32 191 6.0 1,194 6.38 Total 1,716 37.0 10,725 37.90 1,140 35.7 7,125 38.06 - ----------------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 2,147 46.3 13,419 47.42 1,545 48.5 9,656 51.57 - ----------------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 196 4.2 1,225 4.33 131 4.1 819 4.37 Insurance 75 1.6 469 1.66 52 1.6 325 1.74 Reserve for Replacement 188 4.1 1,175 4.15 130 4.1 813 4.34 Common Area 183 4.0 1,144 4.04 124 3.9 775 4.14 Rent 20 0.4 125 0.44 14 0.4 88 0.47 Total 662 14.3 4,138 14.62 451 14.1 2,819 15.06 - ----------------------------------------------------------------------------------------------------------------------------------- NET INCOME $1,485 32.0% $9,281 $32.80 $1,094 34.4% $6,837 $36.51 ===================================================================================================================================
- -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 87 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-2 Historical Operating Performance - --------------------------------------------------------------------------------
Calendar Year Ending: 1997 1994 Total Rooms: 160 160 Occupied Rooms: 47,187 46,134 Complimentary Rooms: 0 0 Days Open: 365 Amount per Amount per 365 Amount per Amount per Occupancy: 80.8% Percentage Available Occupied 79.0% Percentage Available Occupied Average Rate: $99.96 of Revenue Room Room $79.72 of Revenue Room Room - ----------------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $4,717 95.1% $29,481 $99.96 $3,678 93.4% $22,988 $79.72 Food 0 0.0 0 0.00 0 0.0 0 0.00 Telephone 91 1.8 569 1.93 149 3.8 931 3.23 Restaurant Rent 144 2.9 900 3.05 0 0.0 0 0.00 Other Income 7 0.1 44 0.15 112 2.8 700 2.43 Total 4,959 99.9 30,994 105.09 3,939 100.0 24,619 85.38 - ----------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES Rooms 791 16.8 4,944 16.76 1,131 30.8 7,069 24.52 Food & Beverage 0 0.0 0 0.00 0 0.0 0 0.00 Telephone 0 0.0 0 0.00 118 79.2 738 2.56 Total 791 16.0 4,944 16.76 1,465 37.2 9,156 31.76 - ----------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 4,168 83.9 26,050 88.33 2,474 62.8 15,463 53.63 - ----------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 511 10.3 3,194 10.83 427 10.8 2,669 9.26 Management Fee 152 3.1 950 3.22 116 2.9 725 2.51 Marketing 237 4.8 1,481 5.02 406 10.3 2,538 8.80 Franchise Fees 307 6.2 1,919 6.51 103 2.6 644 2.23 Property Oper. & Maint. 183 3.7 1,144 3.88 400 10.2 2,500 8.67 Energy 243 4.9 1,519 5.15 214 5.4 1,338 4.64 Hospitality Department 295 5.9 1,844 6.25 0 0.0 0 0.00 Total 1,928 38.9 12,050 40.86 1,666 42.2 10,413 36.11 - ----------------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 2,240 45.0 14,000 47.47 808 20.6 5,050 17.52 - ----------------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 208 4.2 1,300 4.41 201 5.1 1,256 4.36 Insurance 99 2.0 619 2.10 61 1.5 381 1.32 Reserve for Replacement 253 5.1 1,581 5.36 0 0.0 0 0.00 Common Area 196 4.0 1,225 4.15 0 0.0 0 0.00 Rent 0 0.0 0 0.00 0 0.0 0 0.00 Total 756 15.3 4,725 16.02 262 6.6 1,638 5.68 - ----------------------------------------------------------------------------------------------------------------------------------- NET INCOME $1,484 29.7% $9,275 $31.45 $546 14.0% $3,412 $11.84 ===================================================================================================================================
- -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 88 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Comparable Operating Statements The historical income and expense statement from calendar year 1994, a calendar year 1996 statement of both actual and budgeted totals, and a budget for 1997 show that expenses and revenues have increased proportionately since 1994. Based on our knowledge and experience, it is our opinion that the subject hotel will stabilize in 1997. Forecast of Income and Expense The forecast of income and expense is intended to reflect the appraiser's subjective estimate of how a typical buyer would project the subject property's future operating results. Depending on the dynamics of the local market, a typical buyer's projection may be adjusted upward or downward. We have attempted to consider these factors in formulating this forecast. HVS International uses a fixed and variable component model to project a lodging facility's revenue and expense levels. This model is based on the premise that hotel revenues and expenses have one component that is fixed and another that varies directly with occupancy and facility usage. A projection can be made by taking a known level of revenue or expense and calculating its fixed and variable components. The fixed component is then held constant, while the variable component is adjusted for the percent change between the projected occupancy and facility usage and that which produced the known level of revenue or expense. Base-Year Statement of Income and Expense Based on our review of the operating histories of the subject property and comparable hotels, we have derived a base-year statement of income and expense expressed in 1996 dollars. The units of comparison include a percentage of departmental and total revenue, amounts per available room, and amounts per occupied room. The income and expense ratios of actual and projected revenues reflect an occupancy level of 77.3% and an average rate of $96.73. The base-year profit and loss statement will be used to determine the relationship between the fixed and variable components. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 89 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-4 Base-Year Statement of Income and Expense - -------------------------------------------------------------------------------- Calendar Year Ending: 1996 Number of Rooms: 160 Occupancy: 77.3% Percent of Amount per Amount per Average Rate: $96.73 Total Available Occupied Occupied Rooms: 45,278 Revenue Room Room - ----------------------------------------------------------------------- Revenue: Rooms $4,380 96.5% $27,373 $96.73 Food 43 0.9 269 0.95 Telephone 79 1.7 494 1.74 Other Income 39 0.9 244 0.86 Total Revenue $4,541 100.0 $28,380 $100.29 - ----------------------------------------------------------------------- Expenses: Rooms* $1,019 23.3% $6,367 $22.50 Food & Beverage* 29 67.4 181 0.64 Telephone* 0 0.0 0 0.00 Administrative & General 440 9.7 2,750 9.72 Management Fee 136 3.0 851 3.01 Marketing 208 4.6 1,300 4.59 Franchise Fees 0 0.0 0 0.00 Property Oper. & Maint. 164 3.6 1,025 3.62 Energy 224 4.9 1,400 4.95 Property Taxes 314 6.9 1,963 6.93 Insurance 95 2.1 595 2.10 Reserve for Replacement 182 4.0 1,135 4.01 Common Area 330 7.3 2,063 7.29 Rent 19 0.4 119 0.42 Total Expenses $3,160 69.6% $19,749 $69.79 - ----------------------------------------------------------------------- Net Income $1,381 30.4% $8,631 $30.50 ======================================================================= * Departmental expense ratios are expressed as a percentage of departmental revenues - -------------------------------------------------------------------------------- Inflation Assumptions The base revenue and expense amounts are inflated to reflect current dollars for each projection year. Line items can be affected by different factors. We must establish a general rate of inflation that will be applied to most revenue and expense categories. The following table shows inflation estimates made by economists at some noted institutions and corporations. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 90 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-5 Inflation Estimates - -------------------------------------------------------------------------------- Projected Increase in Consumer Price Index (Annualized Rate Versus 12 Months Earlier) ------------------------------------------ November May Source of 1996 of 1997 - -------------------------------------------------------------------------------- Maureen Allyn, Scudder Stevens Clark 3.1% 2.3% Wayne Angell, Bear Stearns 3.0 3.2 Richard Berner, Mellon Bank 2.9 2.8 David Berson, Fannie Mae 2.9 2.8 David Blitzer, S&P 3.0 2.7 Paul Boltz, T. Rowe Price 3.2 3.5 David Bostian, Herzog, Heine, Geduld 2.9 2.5 Philip Braverman, DKB Securities 3.0 2.8 William Brown, J.P. Morgan 3.3 3.2 Rosanne Cahn, CS First Boston 3.1 2.6 James Coons, Huntington National Bank 3.2 3.0 Michael Cosgrove, The Econoclast 3.2 3.3 Dewey Daane, Vanderbilt University 3.4 3.6 Robert Dederick, Northern Trust 3.1 3.4 W.Dudley, Goldman Sachs 3.4 3.2 Michael Englund, MMS Intl. 3.2 3.3 Michael Evans, Evans Group 3.0 3.0 Gail Fosler, Conference Board 3.5 3.6 Maury Harris, Paine Weber, Inc. 2.8 2.8 Tracy Herrick, Jefferies & Co. 3.2 3.6 Stuart Hoffman, PNC Bank 3.1 2.8 William Hummer, Wayne Hummer 2.9 3.0 Edward Hyman, ISI Group 2.8 2.1 Saul Hymans, University of Michigan 2.7 1.7 Mieczyslaw Karczmar, Deutsche Bank 2.8 3.2 Kurt Karl, WEFA Group 2.6 2.3 Irwin Kellner, Chase Manhattan Bank 2.6 2.3 D. Laufenberg, American Express Financial Advisors 3.2 3.4 Michelle Laughlin, Sanwa Securities 3.0 3.2 Carol Leisenring, CoreStates Financial 2.7 2.5 Richard Lemmon, General Motors 3.0 3.0 Mickey Levy, NationsBank Capital Markets 2.6 2.4 David Littmann, Comerica 3.1 3.0 John Lonski, Moody's Investors Service 3.3 3.2 Paul McCulley, UBS Securities 3.0 2.8 John McDevitt, 3M 2.6 2.5 Arnold Moskowitz, Moskowitz Capital 3.1 3.5 John Mueller, LBMC, Inc. 3.2 2.5 David Munro, High Frequency Econ. 3.0 2.5 Carl Palash, MCM MoneyWatch 3.0 3.0 Nicholas Perna, Fleet Financial Group 3.3 3.3 Elliott Platt, Donaldson Lufkin 2.8 2.0 Maria F. Ramirez, MF Ramirez 3.0 3.0 Donald Ratajczak, Georgia State University 3.0 3.3 David Resler, Nomura Securities International 2.9 2.6 Allan Reynolds, Hudson Institute 3.3 3.6 Richard Rippe, Prudential Securities 3.1 3.3 A. Gary Schilling, Schilling & Co. 3.0 3.0 Allen Sinai, Lehman Brothers 3.2 3.4 James Smith, University of North Carolina 2.1 1.9 Susan Sterne, Economic Analysis 2.5 2.5 Donald Straszheim, Merrill Lynch 2.7 2.3 Thomas Synott III, U.S. Trust Company 3.3 3.4 John Williams, Bankers Trust 3.0 3.1 Raymond Worseck, A.G. Edwards 3.6 3.3 David Wyss, DRI/McGraw-Hill 3.0 2.5 Edward Yardeni, Deutsche Morgan Grenfell 2.2 2.0 Mark Zandi, Regional Financial Associates 3.0 3.2 ---- ---- Average 3.0% 2.9% Source: Wall Street Journal, July 1, 1996 - -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 91 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The preceding table shows inflation forecasts averaging 3.0% through November of 1996 and 2.9% through May of 1997. Most of the economists in the sample estimate inflation rates ranging from 2.5% to 3.4% for the 12-month period, although several anticipate levels of slightly greater than 3.4%. As a further check on these inflation projections, we have reviewed historical increases in the Consumer Price Index. Because the value of real estate is predicated on cash flows over a relatively long period, inflation should be considered from a long-term perspective. Between 1986 and 1994, the national CPI increased at an average annual compounded rate of 3.8%. In consideration of these historical trends, the projections set forth previously, and our assessment of probable property appreciation levels, we have selected an annual inflation rate of 3.5% for 1997, increasing at this inflation rate thereafter. One of the exceptions to this general inflation assumption is the projected growth in average rate. As noted earlier, increases in the subject property's room rate are projected as follows. ================================================================================ Table 10-6 Projected Growth in Average Rate - -------------------------------------------------------------------------------- Increase From Year Previous Year - -------------------------------------------- 1997 3.5% 1998 3.5 1999 3.5 2000 3.5 Thereafter 3.5 - -------------------------------------------------------------------------------- Each of the revenue and expense line items in our projections uses the above referenced percentage of 3.5%. Using this inflation assumption, the base-year income and expense statement (which is expressed in 1996 dollars) is inflated to arrive at projections. Each revenue and expense category will be projected using the inflated base statement to determine the fixed and variable component relationships. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 92 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Rooms Revenue Rooms revenue is determined by two variables: occupancy and average rate. Earlier in this report, we estimated the subject property's occupancy and average rate as follows. ================================================================================ Table 10-7 Projected Occupancy and Average Rate - -------------------------------------------------------------------------------- Stabilized 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Forecast Occupancy Percentage 80.0% 80.0% 80.0% 80.0% 80.0% Forecast Average Rate $100.12 $103.62 $107.25 $111.00 $114.88 - -------------------------------------------------------------------------------- Rooms revenue is calculated as follows. ================================================================================ Table 10-8 Forecast of Rooms Revenue - --------------------------------------------------------------------------------
Number of Forecast Calendar Years Projected Average Number Days in Rooms Ending: Occupancy Room Rate of Units in Year Revenue - --------------------------------------------------------------------------------------------- Stabilized 80.0 X $100.12 X 160 X 365 = $ 4,677 1998 80.0 X 103.62 X 160 X 365 = 4,841 1999 80.0 X 107.25 X 160 X 365 = 5,011 2000 80.0 X 111.00 X 160 X 365 = 5,186 2001 80.0 X 114.88 X 160 X 365 = 5,367
- -------------------------------------------------------------------------------- Food and Beverage Revenue Food and beverage revenue is generated by a hotel's restaurants, lounges, coffee shops, snack bars, banquet rooms, and room service. In addition to providing a source of revenue, these outlets serve as an amenity that assists in the sale of guestrooms. With the exception of properties with active lounges or banquet facilities that draw local residents, in-house guests generally represent a substantial percentage of a hotel's food and beverage patrons. The Uniform System of Accounts for Hotels/Eighth Revised Edition defines food revenue as "revenue derived from the sale of food, including coffee, milk, tea and soft drinks. Food sales do not include meals charged on employees' (staff) checks." Beverage revenues are "derived from the sale of beverages." In addition to the revenue generated by the sale of food and beverages, hotels often produce other income that is related to this department, such as meeting room rentals, cover charges, service charges, and miscellaneous banquet revenue. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 93 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Although the three food and beverage outlets at the subject are leased, the relatively small portion generated by banquet sales is included in our analysis and is relatively fixed. Food revenue was projected based on this relationship between the fixed and variable components. The following table shows the projected food revenue and several units of comparison. ================================================================================ Table 10-9 Forecast of Food Revenue - -------------------------------------------------------------------------------- Stabilized 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Total Food Revenue $ 45 $ 47 $ 48 $ 50 $ 52 Percent of Total Revenue 0.7% 0.7% 0.7% 0.7% 0.7% Per Available Room $ 283 $ 292 $ 303 $ 313 $ 324 Per Occupied Room $ 0.96 $ 1.01 $ 1.03 $ 1.07 $ 1.11 - -------------------------------------------------------------------------------- Beverage Revenue Beverage revenue is generated by the sale of alcoholic beverages in a hotel's restaurants and banquet rooms and the sale of alcoholic and nonalcoholic beverages in the bars and lounges. Since revenues from all food and beverage outlets are leased, we have not estimated beverage revenue for the subject. Telephone Revenue Telephone revenue is generated by hotel guests who charge local and long-distance calls to their rooms, and by individuals who use the property's public telephones. Prior to the deregulation of the telephone industry in the early 1980s, hotels were limited to a 15% commission on long-distance calls, a mark-up that allowed few profits. Deregulation and the development of sophisticated call-accounting equipment have resulted in profitable telephone departments. State-of-the-art equipment is capable of least-cost routing, automatic price billing, and posting telephone charges to guest folios. Hotels can select among various long-distance services, and can also work with any one of a number of Alternative Operator Services (AOS). These systems route and price calls, and may provide additional services. In recent years, the hospitality industry has experienced diverging trends with respect to telephone revenue. Prices per call have increased, in some cases dramatically, yielding departmental profits as high as 50% to 55%. However, the number of long-distance calls billed per occupied room has declined as a result of the extensive use of long-distance carrier services that can be accessed locally or through a toll-free number. When guests charge HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 94 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= long-distance calls to their personal or business accounts in this manner, the hotel loses the revenue associated with long-distance tariffs and mark-ups, and only receives an access fee. Most telephone revenue varies directly with changes in occupancy. However, there is a small fixed component consisting of public telephone revenue, which is primarily generated by individuals using the hotel's food, beverage, and meeting facilities. Because the subject telephone revenue was provided net of expenses our telephone revenue estimate was also estimated net of expenses. Using this fixed and variable relationship, the subject property's telephone revenue is projected as follows. ================================================================================ Table 10-10 Forecast of Telephone Revenue - -------------------------------------------------------------------------------- Stabilized 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Total Telephone Revenue $ 84 $ 87 $ 90 $ 93 $ 97 Percent of Total Revenue 1.3% 1.3% 1.3% 1.3% 1.3% Amount Per Available Room $ 527 $ 545 $ 565 $ 584 $ 605 Amount Per Occupied Room $ 1.80 $ 1.86 $ 1.93 $ 1.99 $ 2.08 - -------------------------------------------------------------------------------- Other Income Other income is derived from sources other than guestrooms, food and beverages, and telephone services. Depending on the type of hotel and the facilities and amenities offered, other income may include the following items. o Rentals - stores, office space, concession space, showcases, clubs, and storage. o Commissions from auto rentals, photography, telegrams, and vending services. o Concessions - revenue derived from charges for the privilege of operating departments that could be operated by the hotel. Gift shops, barber shops, and beauty salons are often operated as concessions. o Laundry, dry cleaning, and fax services. o Cash discounts earned - discounts from creditors' accounts for payment within the discount period. This item does not include trade discounts, which are a deduction from the cost of goods sold. o Electronic games and pinball machines. o Forfeited advance deposits and guaranteed no-shows. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 95 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= o Service charges - service charges that are added to a customer's account but are not paid to service personnel. o Interest income - interest from house accounts. o Salvage - revenue from the sale of old or obsolete items. Other income is typically highly sensitive to changes in occupancy and slightly correlated to food and beverage volume. Using this fixed and variable relationship, the subject property's other income is projected as follows. ================================================================================ Table 10-11 Forecast of Other Income - -------------------------------------------------------------------------------- Stabilized 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Total Other Income $ 41 $ 42 $ 44 $ 45 $ 47 Percent of Total Revenue 0.6% 0.6% 0.6% 0.6% 0.6% Amount Per Available Room $ 255 $ 264 $ 273 $ 283 $ 293 Amount Per Occupied Room $ 0.88 $ 0.90 $ 0.94 $ 0.96 $ 1.01 - -------------------------------------------------------------------------------- Rooms Expense Rooms expense consists of items related to the sale and upkeep of guestrooms and public space. Salaries, wages, and employee benefits account for a substantial portion of this category. Although payroll varies somewhat with occupancy (because managers can schedule maids, bell personnel, and house cleaners to work when demand requires), much of a hotel's payroll is fixed. Front desk personnel, public area cleaners, the housekeeper, and other supervisors must be maintained at all times. As a result, salaries, wages, and employee benefits are only moderately sensitive to changes in occupancy. Commissions represent remuneration to travel agents for booking rooms. Because these fees are based on a percentage of rooms revenue, they are highly dependent on occupancy and rate. Reservations is a similar expense that reflects the cost of a franchise reservation system that typically bills as a percentage of rooms revenue. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are only slightly affected by changes in volume. In light of these considerations, and the fact that the hospitality department expense line item is the cost of the complimentary breakfast and cocktail hour we project the subject property's rooms expense as follows. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 96 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-12 Forecast of Rooms Expense - -------------------------------------------------------------------------------- Stabilized 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Total Rooms Expense $ 1,068 $ 1,105 $ 1,144 $ 1,184 $ 1,225 Percent of Rooms Revenue 22.9% 22.9% 22.9% 22.9% 22.9% Amount per Available Room $ 6,682 $ 6,916 $ 7,158 $ 7,409 $ 7,668 Amount per Occupied Room $ 22.86 $ 23.65 $ 24.49 $ 25.34 $ 26.22 - -------------------------------------------------------------------------------- Administrative and General Expense Administrative and general expense includes the salaries and wages of all administrative personnel who are not directly associated with a particular department. Expense items related to the management and operation of the property are also allocated to this category. Most administrative and general expenses are relatively fixed. The exceptions are cash overages and shortages; commissions on credit card charges; provision for doubtful accounts, which are moderately affected by the number of transactions or total revenue; and salaries, wages, and benefits, which are very slightly influenced by volume. In recent years, several new items have been added to the administrative and general expense category. Human resources includes the cost of recruiting, relocating, and training personnel. Security consists of the cost of contract security for the property and related expenses. The general insurance category includes premiums for liability, fidelity, life, theft coverage, and business interruption insurance. Fire and extended-coverage insurance on the building and contents is a separate insurance expense category. Liability insurance covers third-party actions involving bodily injury and personal property, and is typically based on rooms receipts, meeting and banquet income, and food and beverage revenue. Factors that may have an impact on a hotel's liability expense include the size of the meeting, banquet, and restaurant facilities; the ratio between the amount of alcohol served and total food and beverage sales; the presence of a dance floor; a high-rise structure; a swimming pool; life safety support systems; and the guest transportation services provided by the hotel. The following table illustrates our forecast of administrative and general expense. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 97 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-13 Forecast of Administrative and General Expense - --------------------------------------------------------------------------------
Stabilized 1998 1999 2000 2001 - -------------------------------------------------------------------------------------------------- Total Administrative & General Expense $ 511 $ 529 $ 547 $ 566 $ 586 Percentage of Total Revenue 7.7% 7.7% 7.7% 7.7% 7.7% Amount per Available Room $ 3,194 $ 3,306 $ 3,419 $ 3,538 $ 3,663 Amount per Occupied Room $ 10.93 $ 11.32 $ 11.71 $ 12.12 $ 12.55
- -------------------------------------------------------------------------------- Management Fee Management expense consists of the basic fee paid to the type of company that is anticipated to operate the subject property. Some companies provide management services alone, while others also provide a brand name affiliation. When a management company has no brand identification, the property owner often acquires a franchise that provides the necessary image and recognition. Although most hotel management companies employ a fee schedule that includes a basic fee (usually a percentage of total revenue) and an incentive fee (usually a percentage of defined profit), the incentive portion is often subordinated to debt service and does not appear in a forecast of net income before debt service. Basic hotel management fees are almost always based on a percentage of total revenue, which means they have no fixed component. Although the incentive fee does not decrease the cash flow available for debt service, it does reduce the potential cash flow to equity, and must be accounted for in the valuation process. Generally, the most appropriate procedure for handling the impact of the incentive fee on the equity component is to use the projected net income before debt service and incentive fee, but adjust the equity dividend or yield rate upward to reflect this added management cost. The adjusted equity dividend and yield rates will be described later in this section. The subject property is owned and operated by Remington Ashford. Based on our review of the current market for management contracts, a 3.0% management fee is consistent with prevailing market terms. Applying this management fee structure to the projection of total revenue yields the following forecast of the subject property's management fee. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 98 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-14 Forecast of Management Fee - -------------------------------------------------------------------------------- Stabilized 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Management Fee Expense $ 198 $ 205 $ 212 $ 220 $ 227 - -------------------------------------------------------------------------------- Marketing Expense Marketing expense consists of all costs associated with advertising, sales, and promotion; these activities are intended to attract and retain customers. Marketing can be used to create an image, develop customer awareness, and stimulate patronage of a property's various facilities. The marketing category is unique in that all expense items, with the exception of fees and commissions, are totally controlled by management. Most hotel operators establish an annual marketing budget that sets forth all planned expenditures. If the budget is followed, total marketing expenses can be projected accurately. Marketing expenditures are unusual because although there is a lag period before results are realized, the benefits are often extended over a long period. Depending on the type and scope of the advertising and promotion program implemented, the lag time can be as short as a few weeks or as long as several years. However, the favorable results of an effective marketing campaign tend to linger, and a property often enjoys the benefits of concentrated sales efforts for many months. Marketing expense can be divided into five categories: sales, reservations, advertising and merchandising, other marketing activities, and fees and commissions. Together, these categories include all marketing efforts made by hotel personnel and outside parties. Marketing expenses are fixed with the exception of reservations, fees, and commissions, which are calculated as a percentage of rooms revenue. Based on the location of the subject property, the local market for transient accommodations, the competitive environment, and the hotel's anticipated market segmentation, we have developed the following marketing forecast using a fixed and variable component model. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 99 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-15 Forecast of Marketing Expense - -------------------------------------------------------------------------------- Stabilized 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Total Marketing Expense $ 241 $ 250 $ 259 $ 268 $ 277 Percentage of Total Revenue 3.7% 3.7% 3.7% 3.7% 3.7% Amount per Available Room $ 1,509 $ 1,562 $ 1,617 $ 1,673 $ 1,732 Amount per Occupied Room $ 5.17 $ 5.35 $ 5.54 $ 5.73 $ 5.93 - -------------------------------------------------------------------------------- Franchise Fee Franchise expense represents the fees paid to Embassy Suites for the use of the company's name, trade marks, and service marks. The following table illustrates the projection of the subject property's franchise fee. ================================================================================ Table 10-16 Forecast of Franchise Fee - -------------------------------------------------------------------------------- Stabilized 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Franchise Fees Expense $ 351 $ 363 $ 376 $ 389 $ 403 - -------------------------------------------------------------------------------- Property Operations and Maintenance Property operations and maintenance expense is another expense category that is largely controlled by management. Except for repairs that are necessary to keep the facility open and prevent damage (e.g., plumbing, heating, and electrical items), most maintenance can be deferred for varying lengths of time. Maintenance is an accumulating expense. If management elects to postpone performing a required repair, they have not eliminated or saved the expenditure; they have only deferred payment until a later date. A lodging facility that operates with a lower-than-normal maintenance budget is likely to accumulate a considerable amount of deferred maintenance. The age of a lodging facility has a strong influence on the required level of maintenance. A new or thoroughly renovated property is protected for several years by modern equipment and manufacturers' warranties. However, as a hostelry grows older, maintenance expenses escalate. A well-organized preventive maintenance system often helps delay deterioration, but most facilities face higher property operations and maintenance costs each year, regardless of the occupancy trend. The quality of initial construction can also have a direct impact on future maintenance requirements. The use of HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 100 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= high-quality building materials and construction methods generally reduces the need for maintenance expenditures over the long term. Property operations and maintenance is considered an operating expense; as such, it includes only those components that can be expensed, rather than capitalized, under Internal Revenue Service regulations. For example, if a table leg is broken, the repair of that leg is considered an expense and is chargeable to property operations and maintenance. If the table is replaced, it becomes a capital expenditure and does not appear under the property operations and maintenance category. Appraisers account for capital replacement of items such as furniture and equipment in the reserve for replacement account, which is discussed later in this section. Property operations and maintenance costs are relatively fixed, and are projected as follows. ================================================================================ Table 10-17 Forecast of Property Operations and Maintenance Expense - --------------------------------------------------------------------------------
Stabilized 1998 1999 2000 2001 - -------------------------------------------------------------------------------------------------- Total Property Oper. & Maint. Expense $ 190 $ 197 $ 204 $ 211 $ 218 Percentage of Total Revenue 2.9% 2.9% 2.9% 2.9% 2.9% Amount per Available Room $ 1,190 $ 1,232 $ 1,275 $ 1,319 $ 1,365 Amount per Occupied Room $ 4.07 $ 4.22 $ 4.37 $ 4.52 $ 4.68
- -------------------------------------------------------------------------------- Energy Expense The energy consumption of a lodging facility takes several forms, including water and space heating, air conditioning, lighting, cooking fuel, and other miscellaneous power requirements. The most common sources of hotel energy are electricity, natural gas, fuel oil, and steam. This category also includes the cost of water service. Total energy cost depends on the source and quantity of fuel used. Electricity tends to be the most expensive source, followed by oil and gas. Although all hotels consume a sizable amount of electricity, many properties supplement their energy requirements with less expensive sources, such as gas and oil, for heating and cooking. A large portion of a hostelry's energy consumption is relatively fixed. Restaurants, kitchens, public areas, and corridors must be continually lighted and climate-controlled, regardless of occupancy. The energy cost of an additional occupied room (i.e., a few hours of light, television, heat, or air conditioning) is minimal. The following table presents our forecast of the subject property's energy expense. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 101 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-17 Forecast of Energy Expense - -------------------------------------------------------------------------------- Stabilized 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Total Energy Expense $ 241 $ 250 $ 258 $ 267 $ 277 Percentage of Total Revenue 3.7% 3.7% 3.7% 3.7% 3.7% Amount per Available Room $ 1,508 $ 1,561 $ 1,615 $ 1,672 $ 1,730 Amount per Occupied Room $ 5.16 $ 5.34 $ 5.53 $ 5.73 $ 5.93 - -------------------------------------------------------------------------------- Property Taxes The estimate of property taxes was detailed in a previous section of this report. The following table summarizes these projections. ================================================================================ Table 10-18 Forecast of Property Taxes - -------------------------------------------------------------------------------- Stabilized 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Forecast Property Taxes $314 $325 $336 $348 $360 - -------------------------------------------------------------------------------- Insurance Expense The insurance expense category consists of the cost of insuring the hotel and its contents against damage or destruction by fire, weather, sprinkler leakage, boiler explosion, plate glass breakage, and so forth. It does not include liability coverage, which is a component of administrative and general expense. Insurance rates are based on many factors, including building design and construction, fire detection and extinguishing equipment, fire district, distance from the firehouse, and the area's fire experience. Insurance expenses do not vary with occupancy. Based on historical levels, we project the subject property's insurance expense at approximately $99,000 in 1997 (the first projection period). In subsequent years, this amount is assumed to increase in tandem with inflation. The following table outlines our projection of insurance expense. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 102 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-20 Forecast of Insurance Expense - -------------------------------------------------------------------------------- Stabilized 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Forecast Insurance Expense $99 $102 $106 $109 $113 - -------------------------------------------------------------------------------- Reserve for Replacement Furniture, fixtures, and equipment are essential to the operation of a lodging facility, and their quality often influences a property's class. This category includes all non-real estate items that are capitalized, rather than expensed. The furniture, fixtures, and equipment of a hotel are exposed to heavy use and must be replaced at regular intervals. The useful life of these items is determined by their quality, durability, and the amount of guest traffic and use. Periodic replacement of furniture, fixtures, and equipment is essential to maintain the quality, image, and income-producing potential of a lodging facility. Because capitalized expenditures are not included in the operating statement but nevertheless affect an owner's cash flow, an appraisal should reflect these expenses in the form of an appropriate reserve for replacement. Our industry experience indicates that a reserve for replacement of 3% to 5% of total revenue is generally sufficient to provide for the timely replacement of furniture, fixtures, and equipment. Because the reserve for replacement is based on a percentage of total revenue, it has no fixed component. Based on an analysis of comparable lodging facilities, we believe that a reserve for replacement of 4% of total revenue is sufficient to provide for the periodic replacement of the subject property's furniture, fixtures, and equipment. This amount is consistent with the reserve account contributions currently made by the hotel. The following table summarizes the projected reserve for replacement. ================================================================================ Table 10-21 Forecast of Reserve for Replacement - -------------------------------------------------------------------------------- Stabilized 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Reserve for Replacement Expense $ 264 $ 273 $ 283 $ 293 $ 303 - -------------------------------------------------------------------------------- In addition to the previously estimated fixed expenses, the subject hotel and office component incurs an annual cost of $342,258 to maintain the lobby. The remaining $18,911 in cost is prorated and invoiced to the retail tenants in the lobby of the hotel. For the purposes of this analysis, we included this HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 103 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= annual cost of $342,258, rounded to $342,000, in the hotel operation, as the lobby is located in the hotel and the parking garage is attached to the hotel. Also, the hotel leases 160 minibars at $20,000 per year. We expect this annual cost to continue, unless the hotel elects to purchase minibars at some future date. OFFICE COMPONENT - Potential Gross Income The employed valuation method requires an estimate of potential gross income. Our estimate of potential gross income was based on our estimate of market (economic) rent. To estimate market rent for the subject, we considered existing contract rents, as well as rents being obtained by similar office buildings located along PGA Boulevard in Palm Beach Gardens. Contract Rent - Office The office component of the subject is currently 77.5% occupied by 18 tenants. We were provided with a rent roll, which is summarized in the following table. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 104 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-22 Current Rent Roll - --------------------------------------------------------------------------------
Net Rentable Annual Rent Suite Office Tenants (Sq Ft) Lease Expires Rent Per Sq Ft ----- -------------- ------- ------------- ---- --------- 100 Admiralty Bank 4,556 31-Oct-98 $ 153,358 $ 19.34 101 Admirals Room(Part of Old Boston Rest) 1,007 0 0.00 102 Tom Silverman 1,685 28-Feb-97 35,183 20.88 200 Admiralty Bank (See Above) 3,374 31-Oct-98 0 0.00 201 Jack Schramm Cox 1,039 30-Nov-97 19,502 18.77 202 Raymar Recoveries 547 28-Feb-98 10,559 19.30 203 Aonrisk Services, Inc. of Florida 2,493 30-Apr-00 48,170 19.32 301 Performance Training Sys, Inc. 883 28-Feb-98 17,046 19.30 303 Cameron Investments, Inc. 1,044 30-Nov-97 19,836 19.00 302 Gateway USA 2,918 0 0.00 305 Christopher Kent & Assoc. Inc. 1,098 28-Feb-98 21,197 19.31 306 Ocurest Laboratories, Inc. 1,276 30-Jun-97 25,737 20.17 307 Gateway USA 1,007 0 0.00 400 Moore & Ellrich, PA 4,930 31-Oct-97 119,230 24.18 401 The Lancaster Group, Inc. 1,264 30-Apr-97 24,016 19.00 402 Vacant 1,841 0 0.00 500 Vacant 2,547 0 0.00 501 William R. Hough and Company 3,105 14-Feb-99 55,890 18.00 502 Vacant 1,453 0 0.00 503 Vacant 1,121 0 0.00 600 Loomis, Sayles & Company, Inc. 2,924 30-Nov-97 69,822 23.88 601 Vacant 2,281 0 0.00 602 Firts Data Resources, Inc. 2,864 31-Aug-97 57,280 20.00 700 (Executive Suites) CEO Corp Services 4,363 Vary Common Area 3,863 187,680 22.82 800 Scott, Royce, Harris, Bryan, Barra 8,234 31-Aug-99 159,178 19.33 900 MacArthur Foundation 8,226 31-Jul-99 287,025 17.49 1000 MacArthur Foundation 8,182 31-Jul-99 0 0.00 ----------- --------- See Below Retail Tenants Old Bostons Steak and Seafood 10,360 31-Aug-97 135,000 13.03 Coastline Building Specialists 870 31-Dec-98 14,400 16.55 Marana Enterprises 488 28-Feb-00 4,053 8.31 Sensations Too, Inc. 1,710 31-Aug-98 28,800 16.84 Dolphin Games Inc. 220 31-Dec-98 0 0.00 ----------- --------- See Below 25 Garage Spaces 7,500 0.00 ----------- ----------- ----------- Total Office Space 80,125 Total Occupied Space 62,087 77.5% $1,310,709 $ 21.11 Total Vacancy & Non-Paying Tenants 18,038 22.5% Total Retail Space 13,648 $ 182,273 $ 13.35 Total Occupied Space 13,648 100.0% ----------- Total Vacancy & Non-Paying Tenants 0 0.0% Total Rent $1,492,982
- -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 105 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= According to our review of the rent roll, the total annual contract office rent, as of September 1, 1996, was $1,310,709, which equated to a weighted average rental rate of $21.11 per square foot. The subject office tower is leased essentially as a full-service office building with few expense recoveries (common area maintenance charges) due from the tenants. The reported contract rents for all office space ranged from $17.49 to $24.18 per square foot. Although some of these rental rates have not yet been implemented, due to step-up lease provisions, the amounts used were within months of being increased to the indicated rental rates. As a result, we used the higher rental rates for the purposes of our analysis. Based on our review, eight tenants signed a lease during 1994 and 1995. Each lease was reported to have a lease term between three and five years. For these rental units, ranging in size from 547 to 16,408 square feet, the rental rates ranged from $17.49 to $20.17 per square foot. It is our understanding that most of these tenants renewed their prior lease. According to our review of the rent roll, the total annual contract retail rent, as of September 1, 1996, was $182,273, which equated to a weighted average rental rate of $13.35 per square foot. The subject retail space is leased net of pro-rated real estate taxes and insurance, as the retail space is separated metered for electricity. The reported contract rent for all retail space ranged from $8.31 to $16.84 per square foot. We used these rental rates for the purposes of our analysis. Market Rent Based on a survey prepared by Cushman and Wakefield, for the second quarter of 1996, the average asking rental rate in North Palm Beach County office space was $15.25 per square foot, an increase of $1.54 per square foot since the beginning of 1995, and an increase of $0.10 per square foot since the beginning of 1996. However, during this time, the class A rental rate increased by $0.77 to $18.42 per square foot. Through the second quarter of 1996, the North Palm Beach submarket ended with a 10.4% vacancy rate. This is the second lowest vacancy rate in the county and is 3.8 percentage points lower than the year-end 1995 rate. There has been a large reduction is the amount of sublet space which has been a key factor in the lower vacancy rate. The North Palm Beach submarket includes Riviera Beach, Palm Beach Gardens, North Palm Beach/Juno and Jupiter/Tequesta. North Palm Beach is bound on the south by Palm Beach Lakes Boulevard, on the north by the Palm Beach/Martin County line, and on the east by the Atlantic Ocean. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 106 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= There is approximately 2.3 million square feet of office space in the North Palm Beach submarket. Palm Beach Gardens contains approximately 951,665 square feet, and 52 buildings, of which nine are class A, 42 class B, and only one class C. The economic base of this submarket consists of tourism, construction, and high-tech business. Leasing activity through the second quarter of 1996 totaled 137,023 square feet which represents a 30% increase over the same period last year. Net absorption through the first half of 1996 was 34,782 square feet, which compares favorably with the 13,136 square feet of absorbed space through the first half of 1995, and 44,350 square feet of absorbed space through year-end 1995. The only suburban office building under construction in Palm Beach County, which is not a built-to-suit office building, is located in Boca Raton. This is the first multiple-tenant suburban office building constructed in Palm Beach County in several years. The only suburban office structure built in the North Palm Beach market area in recent years contained 80,000 square feet and is occupied by the Wackenhut Corporation. This developed site is the fourth land sale analyzed in the Cost Approach section of this report. We researched the subject market area to locate and confirm current rental rates from comparable mid-rise office buildings. The rent comparables believed most similar, including the subject are shown in the following table. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 107 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-23 Summary of Rent Comparables and Subject - --------------------------------------------------------------------------------
Property Name Year Leaseable Building Average Tenant & Address Built Floor Area (sq.ft.) Occupancy Rent Per Sq Ft Responsibility Parking - ---------------------------------------------------------------------------------------------------------------- Admiralty I (Subject) 1989 80,125 77.5% $ 21.00 Tenant Finish Included in Rent 4400 PGA Boulevard Covered First Union Center 1994 49,316 97.8% $ 19.50 Tenant Finish Included in Rent 4440 PGA Boulevard Covered SunTrust Bank Building 1991 48,016 93.8% $ 20.00 Tenant Finish Included in Rent 4500 PGA Boulevard Surface Gardens Plaza 1987 88,150 67.0% $ 19.00 Tenant Finish Included in Rent 3300 PGA Boulevard ------ ---- Surface Totals/Average 265,607 80.7%
- -------------------------------------------------------------------------------- Table 10-23 lists the three most competitive office buildings and the subject. Each of these office buildings is a mid-rise building and includes a full-service rental facility. Reported asking rental rates ranged from $19.00 to $21.00 per square foot, with the highest rental rate being the subject. Unlike the compared properties, the subject benefits from excellent vehicular exposure in addition to good access from I-95. At present, First Data Resources, an office tenant at the subject, is negotiating to expand into Suite 601. The preliminary agreed rental rate is $25.00 per square foot, terminating October 31, 2000, which will be consistent with the extended lease expiration date for Suite 602. The rental rate is comparatively high because of the need for abutting space. The tenant improvements to be paid by the lessor are at $3.00 per square foot for 2,281 square feet. While the tenant is responsible for the remaining tenant improvements estimated by the leasing agent, between $5.00 and $6.00 per square foot. The leasing agent at the First Union Center indicated that the two most recent leases commencing in early and mid-year 1996 were for $19.70 per square foot on a gross lease basis. Both leases were for five years and contained 1,888 and 2,800 square feet. Tenant improvement costs for the smaller and larger suites were $17.00 and $8.00 per square foot, respectively. The higher tenant improvement cost was for a AAA-rated tenant. The leasing agent at the Sun HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 108 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Trust Bank Building indicated that their most recent leases in 1996 were for $20.00 per square foot. These suites contained 1,500 and 1,600 square feet and were for a three-year lease term. The previously improved space was leased in as-is condition. The leasing agent was not at the Gardens Plaza and, as a result, she had no historical rental information available for analysis. Market Rental Estimates Although the subject office space is currently being offered at $21.00 per square foot, based on the fact that contract rents of the subject average $21.11 per square foot, we believe that market rent for the subject office space is $21.50, except for vacant space which overlooks a building section rooftop, which we estimated at $19.00 per square foot. These rental rates include a negotiated number of garage parking spaces. Given our discussions with the subject office building leasing agent, and our experience with retail space in hotel lobbies, retail rental rates for the subject hotel lobby space should approximate $15.00 per square foot, net of real estate taxes and insurance. This rental rate recognizes that the retail tenants pay for all janitorial cleaning and all interior maintenance costs. A summary of our market rent calculation is revealed as follows. ================================================================================ Table 10-24 Estimate of Market Rent - -------------------------------------------------------------------------------- NRA Rent Annual (Sq Ft) Per Sq Ft Rent ---------------------------------------- Market Office Rent Estimate 77,725 $21.50 $1,671,088 Market Office Rent Estimate 2,400 19.00 45,600 Market Retail Rent Estimate 13,648 15.00 204,720 ---------------------------------------- Total Rent Estimate 93,773 $20.55 $1,921,408 - -------------------------------------------------------------------------------- Vacancy and Collection Losses Typically it is important to consider both vacancy losses and collection, or credit losses. In the stabilized Pro-Forma of the subject, vacancy and collection losses are treated collectively. Historically, based on our discussion with the office building leasing agent, occupancy rates for the subject have been in the vicinity of 85%. Because real estate is a long-lived asset, and generally held for fairly long (7 - - 10 years) terms of ownership, valuation models, whether Traditional (static) Models or Discounted Cash Flow (dynamic) Models, are also long- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 109 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= term in nature. To utilize current (short-term) levels of occupancy in long- term models would tend to overstate vacancy, and hence understate value, as long as there is a perceived long-term recovery (capital appreciation) potential. A vacancy rate summary of the subject space is revealed as follows. ================================================================================ Table 10-25 Vacancy Summary - -------------------------------------------------------------------------------- Square Feet Percentage ------------------------- Office NRA 80,125 100.00% Occupied NRA 62,087 77.49 ------ ----- Vacant NRA 18,038 22.51 Retail NRA 13,648 100.00 Occupied NRA 13,648 100.00 ------ ------ Vacant NRA 0 0.00 Total NRA 93,773 100.00 Occupied NRA 75,735 80.76 ------ ----- Vacant NRA 18,038 19.24% - -------------------------------------------------------------------------------- Based on the previous table, the subject is currently 82.4% occupied, and 77.5% occupied with tenants that pay rent. Gateway USA is currently behind in rental payments and it is our understanding from the leasing agent that they are not expected to remain at the subject. Although the subject's occupancy rate of 77.5% compares favorably with the overall occupancy rate of the compared office buildings, including the subject at 80.7%, these occupancy rates are comparatively lower than the overall North Palm Beach sub-market occupancy rate of 89.6%. The three rent comparables reported occupancy rates ranging from 67.0% to 97.8%, with the two buildings located near the subject and I-95 ranging from 93.8% to 97.8%. The subject is a multiple-tenant office building that can realize varying degrees of occupancy, depending on the number of tenants, the size of their space, and the terms of their leases. We believe that this occupancy rate should increase in the future as we believe that there is sufficient demand for office space in the North Palm Beach sub-market, as indicated by two of the three rent comparables and the Cushman & Wakefield office survey. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 110 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= To estimate vacancy and collection losses for the office component we considered typical lease terms, renewal probabilities, and anticipated vacancy at expiration of leases. To estimate these factors we considered the typical leases being negotiated in the subject neighborhood. We estimated that the typical lease term for office space was 3 years. We estimated that the typical office suite would require 6 months to re-lease. The total term of analysis was 42 months for the office. This estimate assumes market rents. We estimated that the typical renewal probability for the subject office space would be 50%. This estimate resulted in a vacancy factor of 7.14% ( 6 mos/42mos x 50%) for the subject. To estimate collection loss, we considered the history of the subject and information obtained from several leasing agents active in the market area. As previously noted, collection loss is currently occurring at the subject. Therefore, we estimated collection loss at approximately 3.0% for the office and retail space. This results in a combined vacancy and collection loss for the subject space of 10.0%. As the subject is below market occupancy levels, an estimate of absorption is necessary. Based on prevailing market conditions, we believe that is reasonable to project absorption of 8,661 (80,125 + 13,648 = 93,773 x 90% = 84,396 - 75,735 = 8,661) square feet of space over a one year period. Consequently, we believe that the subject should be capable of attaining a 90% stabilized occupancy rate within one year. Other Income The Other Income category for the subject includes miscellaneous income from garage parking and expense recoveries. This estimate is consistent with the most recent trailing 12-month operating statement of the subject through August 31, 1996, which totaled $33,706. However, because our rental rate estimate includes some free parking, we estimated this income source at $30,000. Effective Gross Income In the Stabilized Pro-Forma shown in Table 10-27 this report, our combined estimate of rental income and other income was $1,951,400 ($1,921,400 + $30,000). After deducting for vacancy and collection loss our Effective Gross Income estimate for the subject office and retail space is $1,756,300 ($1,951,400 x 90%). Operating Expenses - Office Complex We were provided with a 12-month operating statement ending August 31, 1996, and a calendar year 1996 statement, including eight months of actual and four months of projected income and expenses. This information is summarized in the following table. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 111 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-26 Subject Historicals - Office Complex - --------------------------------------------------------------------------------
8 Mos Actual & 4 Mos Budget Trailing 12 Months Ending August 31, 1996 Ending Dec 31, 1996 -------------------------------------------- ------------------------------------------ Square Feet of NRA 80,125 Square Feet of NRA 80,125 Avg. Rent / Sq. Ft. $16.69 Avg. Rent / Sq. Ft. $17.22 Total Exp. Per Sq. Ft. $6.76 Total Exp. Per Sq. Ft. $7.20 Expenses as % of EGI 39.5% Expenses as % of EGI 40.9% Amount Ratio Per Sq. Ft. Amount Ratio Per Sq. Ft. ---------------------------------------------------------------------------------------- INCOME Rental $ 1,337,141 97.5% $ 16.69 $ 1,379,366 97.8% $ 17.22 Recovery of Expenses 17,278 1.3 0.22 17,488 1.2 0.22 Interest Income 16,428 1.2 0.21 13,074 0.9 0.16 ------ --- ---- ------ --- ---- TOTAL INCOME 1,370,847 100.0 17.11 1,409,928 100.0 17.60 VARIABLE EXPENSES Management (includes Leasing Costs) 47,082 3.4 0.59 46,449 3.3 0.58 Administrative & General 31,849 2.3 0.40 36,977 2.6 0.46 Repairs & Maintenance 53,167 3.9 0.66 63,939 4.5 0.80 Contract Services 56,110 4.1 0.70 54,879 3.9 0.68 Wages & Employee Benefits 78,532 5.7 0.98 85,802 6.1 1.07 Security 26,849 2.0 0.34 28,323 2.0 0.35 Tenant Alterations & Capital Expenditures 19,182 1.4 0.24 18,669 1.3 0.23 Utilities 145,646 10.6 1.82 165,273 11.7 2.06 Miscellaneous Operating 17,340 1.3 0.22 20,212 1.4 0.25 ------ --- ---- ------ --- ---- TOTAL VARIABLE EXPENSES 475,757 34.7 5.94 520,523 36.9 6.50 FIXED EXPENSES Property Taxes 0 0.0 0.00 0 0.0 0.00 Insurance 66,252 4.8 0.83 56,459 4.0 0.70 ------ ------ TOTAL FIXED EXPENSES 66,252 4.8 0.83 56,459 4.0 0.70 TOTAL EXPENSES 542,009 39.5 6.76 576,982 40.9 7.20 NET OPERATING INCOME $ 828,838 60.5% $ 10.34 $ 832,946 59.1% $ 10.40
- -------------------------------------------------------------------------------- Based on our survey of mid-rise office buildings, expenses ranged from $6.13 to $8.49 per square foot of net rentable area, including real estate taxes, averaging $7.05 per square foot. Most of these expenses did not include a parking garage. The historic subject office tower expenses, excluding real estate taxes, ranged from $6.76 to $7.20 per square foot. Since the property assessment of the subject did not provide a breakdown between the office, hotel and parking garage, for the purposes of this assignment we did not allocate a tax burden to the subject office component. Based on the most recent negotiated leases at the subject, any increase in expenses in excess of the base year amount of $8.13 per square foot is pro-rated and passed through to the tenants. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 112 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= OFFICE COMPONENT - Variable Expenses Variable expenses include those expenses that vary with occupancy or rent levels. In this instance, they include each of the expense line items, except for real estate taxes and insurance. Management & Leasing Management and leasing was estimated at 4.0% of effective gross income, or $70,300, which is the market related percentage for this expense. This expense is associated with the continual leasing and management of the subject office building and retail space. Administrative and General This expense category accounts for management and related expenses such as legal and accounting fees, and office supplies. It was estimated at $0.45 per square foot for the combined office and retail space, or $42,200. This estimate is consistent with the most recent administrative and general expenses at the subject, which ranged from $0.40 to $0.46 per square foot. Repairs and Maintenance This expense category includes supplies, electrical, HVAC, and plumbing repairs. We estimated this expense at $0.65 per square foot for both the retail and office space, or $61,000. This estimate is somewhat lower than the historical expenses at the subject, which ranged from $0.66 to $0.80 per square foot, given our estimate of a Reserve for Replacement of $0.25 per square foot. Contract Services All janitorial costs of the subject office space is the responsibility of the landlord, while the janitorial costs for the subject retail space is the responsibility of the tenants. Therefore, we estimated this cost at $0.70 per square foot for the office space, or $56,100. This is consistent with the historical costs ranging from $0.68 to $0.70 per square foot. Security This expense category was estimated at $0.35 per square foot for the office space, or $28,000. This estimate is consistent with historical expenses, which ranged from $0.34 to $0.35 per square foot. Tenant Alterations This expense is for tenant improvements which are paid for by the landlord. We estimated this expense at $0.25 per square foot of office space, or $20,000. This estimate is consistent with historical expenses, which ranged from $0.23 to $0.24 per square foot. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 113 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Utilities These charges include costs for water, sewer, electricity, and garbage collection. This expense was estimated at $2.10 per square foot for the office space, or $168,300. This expense is somewhat higher than the historical expenses of the subject, which ranged from $1.82 to $2.06 per square foot, because of historically increasing utility costs. Miscellaneous Expenses This cost covers those expenses which are not included in the other expense categories. We estimated this expense at $0.25 per square foot of both office and retail space, or $23,400. This estimate is consistent with historical miscellaneous expenses that ranged from $0.22 to $0.25 per square foot. Reserve for Replacement This expense category is an annual provision for the eventual replacement of components representing capital expenditures which will be required before the end of the economic life of the improvements. The reserves are calculated based on the replacement cost of the items. We estimated reserves for replacement at $0.25 per square foot for both the office and retail space, or $23,400. Total Variable Expenses The sum of the variable expenses discussed previously was $492,700, which equates to 28.1% of Effective Gross Income, or $6.15 per square foot of office space. We did not include a wages and employee expense for the subject, as this is not a typical office expense for the operation of an office building. Total Fixed Expenses - Office Component Fixed expenses include those expenses that do not typically vary with occupancy or rent levels. In this instance they include Real Estate Taxes and Insurance. Real Estate Taxes As discussed previously in this report, we were unable to extract the tax burden associated with the office building from the hotel. Therefore, this expense was included with the hotel, which was analyzed earlier in this report. Insurance Insurance for the office building was estimated at $0.80 per square foot of office space, or approximately $64,100. This expense estimate is consistent with historical insurance costs which ranged from $0.70 to $0.83 per square foot. Total Fixed Expenses The sum of the fixed expenses analyzed previously is $64,100, which equates to 3.6% of Effective Gross Income, or $0.80 per square foot. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 114 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Total Expenses - Office Component The total Variable and Fixed expenses were estimated at $556,800, which equates to $6.95 per square foot of office space, or 31.7% of Effective Gross Income. Stabilized Pro-Forma Office Component The results of our estimates of income and expenses for the office tower are presented in the following Stabilized Pro-Forma. ================================================================================ Table 10-27 Stabilized ProForma - --------------------------------------------------------------------------------
Stabilized Percentage of Per Square Income & Expenses Total Income Foot Indicators -------------------------------------------------------------- RENTAL INCOME Market Rent (Office Space) $1,716,700 88.0% $21.43 Market Rent (Retail Space) 204,700 10.5 15.00 Other Income 30,000 1.5 0.37 ------ --- ---- TOTAL RENTAL INCOME 1,951,400 100.0 20.87 Less: Vacancy & Collection Loss (10.0 %) 195,100 10.0 2.09 ------- ---- ---- EFFECTIVE GROSS INCOME 1,756,300 90.0 18.78 VARIABLE EXPENSES Management & Leasing (4% of EGI) 70,300 4.0 0.75 Administrative & General 42,200 2.4 0.45 Repairs & Maintenance 61,000 3.5 0.65 Contract Services 56,100 3.2 0.70 Security 28,000 1.6 0.35 Tenant Alterations 20,000 1.1 0.25 Utilities 168,300 9.6 2.10 Miscellaneous Expenses 23,400 1.3 0.25 Replacement Reserves 23,400 1.3 0.25 ------ --- ---- TOTAL VARIABLE EXPENSES 492,700 28.1 6.15 FIXED EXPENSES Real Estate Taxes 0 0.0 0.00 Insurance 64,100 3.6 0.80 ------ --- ---- TOTAL FIXED EXPENSES 64,100 3.6 0.80 TOTAL EXPENSES 556,800 31.7 6.95 NET OPERATING INCOME $1,199,500 68.3% $14.97
- -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 115 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Present Worth of Rent Loss & Costs of Occupancy We estimated the present worth of rent loss and costs of occupancy prior to stabilization for the subject The rent loss calculation included lost rent during the lease-up period, while the costs associated with the lease-up include the cost of tenant improvements for shell space totaling 1,453 square feet, and the costs associated with leasing commissions for 8,661 square feet to a 90.0% occupancy level. The present worth of rent loss and costs of occupancy must later be deducted from our fee simple value estimate. Our rent loss and costs of occupancy calculations, using a risk adjusted safe rate of 6.0%, are summarized as follows. ================================================================================ Table 10-28 Rent Loss & Costs of Occupancy - -------------------------------------------------------------------------------- Total Rent Loss and Costs Associated with Lease-up for Subject to Stabilization Potential Gross Income (100%) $ 1,951,400 Actual Vacancy at Time of Valuation 458,418 (Actual) Effective Gross Income 1,492,982 Stabilized Expenses 556,800 (Stabilized) NOI at Time of Valuation 936,182 Proforma NOI at 90% Occupancy 1,199,500 (Stabilized) Less NOI at Time of Valuation 936,182 Difference 263,318 Divided by Lease-up Period 1 Average Annual Rent Loss 263,318 P.W. of $1 P.W. @ 6% of Rent Loss During Lease-up Safe Rate Rent Loss ---------- --------- Year One 263,318 X 0.94339623 $248,413 Total Rent Loss During Lease-up 263,318 $248,413 Costs Associated with Lease-up Tenant Improvements (retro-fit) 1,453 X $15.00 = $21,795 Leasing Commissions ( 1 Yr @ 4%) 8,661 X $0.86 = 7,448 Total Cost of Tenant Improvements & Lease-up $29,243 Total Rent Loss and Costs Associated with Lease-up for Subject to Stabilization $277,657
- -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 116 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Valuation of Leasehold Interest A leasehold interest is normally created when the existing leases are below market rents, and the landlord realizes a loss due to those below-market rents. A negative leasehold interest results when the leasehold interest favors the landlord rather than the tenant. In other words, the landlord is anticipated to realize a premium due to above-market rents. We calculated the present worth of the Leasehold Interest for the leases, based on the difference between contract rent and market rent, until lease termination. The resulting leasehold difference was discounted to present worth at the selected safe rate of 6.0% for below market lease rates and at a 13.5% for above market lease rates. The valuation of leasehold interest must later be deducted from our fee simple value estimate. A summary of our leasehold interest calculations, resulting in a positive leasehold interest value, is as follows. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 117 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-29 Valuation of Leasehold l - --------------------------------------------------------------------------------
Lease Market Lease Leasehold Monthly NRA Monthly Annuity Tenant Ends Months Rent Rent Margin / Sq Ft Leasehold (Sq Ft) Margin Factor - ---------------------------------------------------------------------------------------------------------------------------- ------ Admiralty Bank 31-Oct-98 24 $21.50 - $19.34 = $2.16 / 12 = $0.18 X 4,556 = $820 X 22.562866 Admirals Room(Part of Old Boston Rest) 0.00 - 0.00 = 0.00 / 12 = 0.00 X 1,007 = 0 X 0.000000 Tom Silverman 28-Feb-97 3 21.50 - 20.88 = 0.62 / 12 = 0.05 X 1,685 = 87 X 2.970248 Admiralty Bank (See Above) 31-Oct-98 24 21.50 - 0.00 = 21.50 / 12 = 1.79 X 3,374 = 6,045 X 22.562866 Jack Schramm Cox 30-Nov-97 13 21.50 - 18.77 = 2.73 / 12 = 0.23 X 1,039 = 236 X 12.556151 Raymar Recoveries 28-Feb-98 16 21.50 - 19.30 = 2.20 / 12 = 0.18 X 547 = 100 X 15.339925 Aonrisk Services, Inc. of Florida 30-Apr-00 42 21.50 - 19.32 = 2.18 / 12 = 0.18 X 2,493 = 452 X 37.798300 Performance Training Sys, Inc. 28-Feb-98 16 21.50 - 19.30 = 2.20 / 12 = 0.18 X 883 = 162 X 15.339925 Cameron Investments, Inc. 30-Nov-97 13 21.50 - 19.00 = 2.50 / 12 = 0.21 X 1,044 = 218 X 12.556151 Gateway USA 0 0.00 - 0.00 = 0.00 / 12 = 0.00 X 2,918 = 0 X 0.000000 Christopher Kent & Assoc. Inc. 28-Feb-98 16 21.50 - 19.31 = 2.19 / 12 = 0.18 X 1,098 = 201 X 15.339925 Ocurest Laboratories, Inc. 30-Jun-97 8 21.50 - 20.17 = 1.33 / 12 = 0.11 X 1,276 = 141 X 7.822959 Gateway USA 0 0.00 - 0.00 = 0.00 / 12 = 0.00 X 1,007 = 0 X 0.000000 Moore & Ellrich, PA 31-Oct-97 12 21.50 - 24.18 = -2.68 / 12 = -0.22 X 4,930 = (1,103)X 11.196042 The Lancaster Group, Inc. 30-Apr-97 6 21.50 - 19.00 = 2.50 / 12 = 0.21 X 1,264 = 263 X 5.896384 Vacant 0 0.00 - 0.00 = 0.00 / 12 = 0.00 X 1,841 = 0 X 0.000000 Vacant 0 0.00 - 0.00 = 0.00 / 12 = 0.00 X 2,547 = 0 X 0.000000 William R. Hough and Company 14-Feb-99 27 21.50 - 18.00 = 3.50 / 12 = 0.29 X 3,105 = 906 X 25.198028 Vacant 0 0.00 - 0.00 = 0.00 / 12 = 0.00 X 1,453 = 0 X 0.000000 Vacant 0 0.00 - 0.00 = 0.00 / 12 = 0.00 X 1,121 = 0 X 0.000000 Loomis, Sayles & Company, Inc. 30-Nov-97 13 21.50 - 23.88 = -2.38 / 12 = -0.20 X 2,924 = (580)X 12.065335 Vacant 0 0.00 - 0.00 = 0.00 / 12 = 0.00 X 2,281 = 0 X 0.000000 Firts Data Resources, Inc. 31-Aug-97 10 21.50 - 20.00 = 1.50 / 12 = 0.13 X 2,864 = 358 X 9.730412 (Executive Suites) CEO Corp Services Vary 0 - = 0.00 / 12 = 0.00 X 4,363 = 0 X 0.000000 Common Area 0 22.82 - 22.82 = 0.00 / 12 = 0.00 X 3,863 = 1 X 0.000000 Scott, Royce, Harris, Bryan, Barra 31-Aug-99 34 21.50 - 19.33 = 2.17 / 12 = 0.18 X 8,234 = 1,488 X 31.195548 MacArthur Foundation 31-Jul-99 33 21.50 - 17.49 = 4.01 / 12 = 0.33 X 8,226 = 2,747 X 30.351526 MacArthur Foundation 31-Jul-99 33 21.50 - 17.49 = 4.01 / 12 = 0.33 X 8,182 2,732 X 30.351526 Retail Tenants Old Bostons Steak and Seafood 31-Aug-97 10 15.00 13.03 = 1.97 / 12 = 0.16 X 10,360 = 1,700 X 9.730412 Coastline Building Specialists 31-Dec-98 26 15.00 16.55 = -1.55 / 12 = -0.13 X 870 = (112)X 22.553636 Marana Enterprises 28-Feb-00 40 15.00 8.31 = 6.69 / 12 = 0.56 X 488 = 272 X 36.172228 Sensations Too, Inc. 31-Aug-98 22 15.00 16.84 = -1.84 / 12 = -0.15 X 1,710 = (263)X 19.481486 Dolphin Games Inc. 31-Dec-98 26 15.00 0.00 = 15.00 / 12 = 1.25 X 220 = 275 X 24.324018
Present Tenant Worth - ------------------------------------------------ Admiralty Bank = $18,512 Admirals Room(Part of Old Boston Rest) = 0 Tom Silverman = 259 Admiralty Bank (See Above) = 136,394 Jack Schramm Cox = 2,968 Raymar Recoveries = 1,536 Aonrisk Services, Inc. of Florida = 17,102 Performance Training Sys, Inc. = 2,478 Cameron Investments, Inc. = 2,731 Gateway USA = 0 Christopher Kent & Assoc. Inc. = 3,081 Ocurest Laboratories, Inc. = 1,106 Gateway USA = 0 Moore & Ellrich, PA = (12,348) The Lancaster Group, Inc. = 1,553 Vacant = 0 Vacant = 0 William R. Hough and Company = 22,820 Vacant = 0 Vacant = 0 Loomis, Sayles & Company, Inc. = (6,994) Vacant = 0 Firts Data Resources, Inc. = 3,483 (Executive Suites) CEO Corp Services = 0 Common Area = 0 Scott, Royce, Harris, Bryan, Barra = 46,411 MacArthur Foundation = 83,370 MacArthur Foundation = 82,924 Retail Tenants = 16,542 Old Bostons Steak and Seafood = (2,537) Coastline Building Specialists = 9,848 Marana Enterprises = (5,114) Sensations Too, Inc. = 6,689 Dolphin Games Inc. -------- Total Leasehold $432,813 -------- SAY $433,000 -------- - -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 118 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Summary of Projections Based on the preceding analysis of the subject hotel and office building, we have formulated a forecast of income and expenses. The table on the following page presents a detailed forecast through the stabilized year, including amounts per available room (PAR) and per occupied room (POR). For the purpose of comparison, this table also presents the subject property's most recent full year of operating history. The second table illustrates our ten-year forecast of income and expense in less detail. The forecasts pertain to Calendar operating years beginning January 1, 1997, and are expressed in inflated dollars for each year. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 119 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-30 Detailed Forecast of Income and Expense through the Stabilized Year and Most Recent Operating History, Embassy Suites Palm Beach Gardens, Palm Beach Gardens, Florida - --------------------------------------------------------------------------------
Historical Operating Results ------------------------------------- Calendar Years Ending: 1996 Stabilized 1998 Number of Rooms: 160 160 160 Occupancy: 77.3% 80.0% 80.0% Average Rate: $96.73 $100.12 $103.62 Days Open: 366 365 365 Occupied Rooms: 45,278 %Gross PAR POR 46,720 %Gross PAR POR 46,720 %Gross PAR POR - ----------------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $4,354 94.0% $27,213 $96.16 $4,677 70.8% $29,231 $100.11 $4,841 70.8% $30,256 $103.62 Food 43 0.9 269 0.95 45 0.7 281 0.96 47 0.7 294 1.01 Telephone 79 1.7 494 1.74 84 1.3 525 1.80 87 1.3 544 1.86 Restaurant Rental 115 2.5 719 2.54 0 0.0 0 0.00 0 0.0 0 0.00 Office Rental 0 0.0 0 0.00 1,756 26.6 10,975 37.59 1,817 26.6 11,359 38.90 Other Income 39 0.8 244 0.86 41 0.6 256 0.88 42 0.6 263 0.90 Total Revenues 4,630 99.9 28,938 102.26 6,603 100.0 41,269 141.33 6,834 100.0 42,715 146.29 - ----------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES* Rooms 738 16.9 4,613 16.30 1,068 22.8 6,675 22.86 1,105 22.8 6,906 23.65 Food & Beverage 29 67.4 181 0.64 30 66.7 188 0.64 31 66.0 194 0.66 Office Expenses 0 0.0 0 0.00 557 31.7 3,481 11.92 576 31.7 3,603 12.34 Total Dept. Expenses 767 16.6 4,794 16.94 1,655 25.1 10,344 35.42 1,712 25.1 10,703 36.65 - ----------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 3,863 83.3 24,144 85.32 4,948 74.9 30,925 105.91 5,122 74.9 32,012 109.63 - ----------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 418 9.0 2,613 9.23 511 7.7 3,194 10.94 529 7.7 3,306 11.32 Management Fee 140 3.0 875 3.09 198 3.0 1,238 4.24 205 3.0 1,281 4.39 Marketing 170 3.7 1,063 3.75 241 3.6 1,506 5.16 250 3.7 1,563 5.35 Franchise Fees 283 6.1 1,769 6.25 351 5.3 2,194 7.51 363 5.3 2,269 7.77 Property Oper. & Maint. 186 4.0 1,163 4.11 190 2.9 1,188 4.07 197 2.9 1,231 4.22 Energy 233 5.0 1,456 5.15 241 3.6 1,506 5.16 250 3.7 1,563 5.35 Hospitality Department 286 6.2 1,788 6.32 0 0.0 0 0.00 0 0.0 0 0.00 Total Operating Expenses 1,716 37.0 10,725 37.90 1,732 26.1 10,825 37.07 1,794 26.3 11,213 38.40 - ----------------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 2,147 46.3 13,419 47.42 3,216 48.8 20,100 68.84 3,328 48.6 20,800 71.23 - ----------------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 196 4.2 1,225 4.33 314 4.8 1,963 6.72 325 4.8 2,031 6.96 Insurance 75 1.6 469 1.66 99 1.5 619 2.12 102 1.5 638 2.18 Reserve for Replacement 188 4.1 1,175 4.15 264 4.0 1,650 5.65 273 4.0 1,706 5.84 Common Area 183 4.0 1,144 4.04 342 5.2 2,138 7.32 354 5.2 2,213 7.58 Rent 20 0.4 125 0.44 20 0.3 125 0.43 20 0.3 125 0.43 Total 662 14.3 4,138 14.62 1,039 15.8 6,494 22.24 1,074 15.8 6,712 22.99 - ----------------------------------------------------------------------------------------------------------------------------------- NET INCOME $1,485 32.0 9,281 $32.80 $2,177 33.0 $13,606 $46.60 $2,254 32.8 $14,087 $48.24 =================================================================================================================================== Calendar Years Ending: 1999 2000 2001 Number of Rooms: 160 160 160 Occupancy: 80.0% 80.0% 80.0% Average Rate: $107.25 $111.00 $114.88 Days Open: 365 365 365 Occupied Rooms: 46,720 %Gross PAR POR 46,720 %Gross PAR POR 46,720 %Gross PAR POR - --------------------------------------------------------------------------------------------------------------------------------- REVENUE Rooms $5,011 70.8% $31,319 $107.26 $5,186 70.8% $32,413 $111.00 5,367 70.8% $33,544 $114.88 Food 48 0.7 300 1.03 50 0.7 313 1.07 52 0.7 325 1.11 Telephone 90 1.3 563 1.93 93 1.3 581 1.99 97 1.3 606 2.08 Restaurant Rental 0 0.0 0 0.00 0 0.0 0 0.00 0 0.0 0 0.00 Office Rental 1,881 26.6 11,757 40.26 1,947 26.6 12,168 41.67 2,015 26.6 12,594 43.13 Other Income 44 0.6 275 0.94 45 0.6 281 0.96 47 0.6 294 1.01 Total Revenues 7,074 100.0 44,213 151.41 7,321 100.0 45,756 156.70 7,578 100.0 47,363 162.20 - --------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL EXPENSES* Rooms 1,144 22.8 7,150 24.49 1,184 22.8 7,400 25.34 1,225 22.8 7,656 26.22 Food & Beverage 32 66.7 200 0.68 33 66.0 206 0.71 35 67.3 219 0.75 Office Expenses 597 31.7 3,729 12.77 618 31.7 3,860 13.22 639 31.7 3,995 13.68 Total Dept. Expenses 1,773 25.1 11,079 37.94 1,835 25.1 11,466 39.27 1,899 25.1 11,870 40.65 - --------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL INCOME 5,301 74.9 33,134 113.47 5,486 74.9 34,290 117.43 5,679 74.9 35,493 121.55 - --------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Administrative & General 547 7.7 3,419 11.71 566 7.7 3,538 12.11 586 7.7 3,663 12.54 Management Fee 212 3.0 1,325 4.54 220 3.0 1,375 4.71 227 3.0 1,419 4.86 Marketing 259 3.7 1,619 5.54 268 3.7 1,675 5.74 277 3.7 1,731 5.93 Franchise Fees 376 5.3 2,350 8.05 389 5.3 2,431 8.33 403 5.3 2,519 8.63 Property Oper. & Maint. 204 2.9 1,275 4.37 211 2.9 1,319 4.52 218 2.9 1,363 4.67 Energy 258 3.6 1,613 5.52 267 3.6 1,669 5.71 277 3.7 1,731 5.93 Hospitality Department 0 0.0 0 0.00 0 0.0 0 0.00 0 0.0 0 0.00 Total Operating Expenses 1,856 26.2 11,600 39.73 1,921 26.2 12,006 41.12 1,988 26.3 12,425 42.55 - --------------------------------------------------------------------------------------------------------------------------------- HOUSE PROFIT 3,445 48.7 21,534 73.75 3,565 48.7 22,283 76.31 3,691 48.6 23,068 79.00 - --------------------------------------------------------------------------------------------------------------------------------- FIXED EXPENSES Property Taxes 336 4.8 2,102 7.20 348 4.8 2,176 7.45 360 4.8 2,252 7.71 Insurance 106 1.5 663 2.27 109 1.5 681 2.33 113 1.5 706 2.42 Reserve for Replacement 283 4.0 1,769 6.06 293 4.0 1,831 6.27 303 4.0 1,894 6.49 Common Area 366 5.2 2,288 7.83 379 5.2 2,369 8.11 392 5.2 2,450 8.39 Rent 21 0.3 131 0.45 22 0.3 138 0.47 23 0.3 144 0.49 Total 1,112 15.8 6,952 23.81 1,151 15.8 7,195 24.64 1,191 15.8 7,446 25.50 - --------------------------------------------------------------------------------------------------------------------------------- NET INCOME $2,333 32.9 $14,581 $49.94 $2,414 32.9 $15,089 $51.67 $2,500 32.8 $15,622 $53.50 =================================================================================================================================
- -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 120 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-31 Ten-Year Forecast of Income and Expense, Embassy Suites Palm Beach Gardens, Palm Beach Gardens, Florida - --------------------------------------------------------------------------------
Calendar Years Ending: 1997 1998 1999 2000 2001 ------------------- ------------------ ------------------- ------------------- ------------------- Number of Rooms: 160 160 160 160 160 Occupied Rooms: 46,720 46,720 46,720 46,720 46,720 Occupancy: 80.0% % of 80.0% % of 80.0% % of 80.0% % of 80.0% % of Average Rate: $100.12 Gross $103.62 Gross $107.25 Gross $111.00 Gross $114.88 Gross - ---------------------------- ------------------- ------------------- ------------------- ------------------- ------------------- REVENUE Rooms $4,677 70.8% $4,841 70.8% $5,011 70.8% $5,186 70.8% $5,367 70.8% Food 45 0.7 47 0.7 48 0.7 50 0.7 52 0.7 Telephone 84 1.3 87 1.3 90 1.3 93 1.3 97 1.3 Office Rental 1,756 26.6 1,817 26.6 1,881 26.6 1,947 26.6 2,015 26.6 Other Income 41 0.6 42 0.6 44 0.6 45 0.6 47 0.6 Total 6,603 100.0 6,834 100.0 7,074 100.0 7,321 100.0 7,578 100.0 - ---------------------------- ------------------- ------------------- ------------------- ------------------- ------------------- DEPARTMENTAL EXPENSES Rooms 1,068 22.8 1,105 22.8 1,144 22.8 1,184 22.8 1,225 22.8 Food & Beverage 30 66.7 31 66.0 32 66.7 33 66.0 35 67.3 Office Expenses 557 31.7 576 31.7 597 31.7 618 31.7 639 31.7 Total 1,655 25.1 1,712 25.1 1,773 25.1 1,835 25.1 1,899 25.1 - ------------------------------------------------- ------------------- ------------------- ------------------- ------------------- DEPARTMENTAL INCOME 4,948 74.9 5,122 74.9 5,301 74.9 5,486 74.9 5,679 74.9 - ------------------------------------------------- ------------------- ------------------- ------------------- ------------------- OPERATING EXPENSES Administrative & General 511 7.7 529 7.7 547 7.7 566 7.7 586 7.7 Management Fee 198 3.0 205 3.0 212 3.0 220 3.0 227 3.0 Marketing 241 3.6 250 3.7 259 3.7 268 3.7 277 3.7 Franchise Fees 351 5.3 363 5.3 376 5.3 389 5.3 403 5.3 Property Oper. & Maint. 190 2.9 197 2.9 204 2.9 211 2.9 218 2.9 Energy 241 3.6 250 3.7 258 3.6 267 3.6 277 3.7 Total 1,732 26.1 1,794 26.3 1,856 26.2 1,921 26.2 1,988 26.3 - ---------------------------- ------------------- ------------------- ------------------- ------------------- ------------------- HOUSE PROFIT 3,216 48.8 3,328 48.6 3,445 48.7 3,565 48.7 3,691 48.6 - ---------------------------- ------------------- ------------------- ------------------- ------------------- ------------------- FIXED EXPENSES Property Taxes 314 4.8 325 4.8 336 4.8 348 4.8 360 4.8 Insurance 99 1.5 102 1.5 106 1.5 109 1.5 113 1.5 Reserve for Replacement 264 4.0 273 4.0 283 4.0 293 4.0 303 4.0 Common Area 342 5.2 354 5.2 366 5.2 379 5.2 392 5.2 Rent 20 0.3 20 0.3 21 0.3 22 0.3 23 0.3 Total 1,039 15.8 1,074 15.8 1,112 15.8 1,151 15.8 1,191 15.8 - ---------------------------- ------------------- ------------------- ------------------- ------------------- ------------------- NET INCOME $2,177 33.0% $2,254 32.8% $2,333 32.9% $2,414 32.9% $2,500 32.8% ============================ =================== =================== =================== =================== =================== Calendar Years Ending: 2002 2003 2004 2005 ------------------- ------------------ ------------------- ------------------- Number of Rooms: 160 160 160 160 Occupied Rooms: 46,720 46,720 46,720 46,720 Occupancy: 80.0% % of 80.0% % of 80.0% % of 80.0% % of Average Rate: $118.91 Gross $123.07 Gross $127.37 Gross $131.83 Gross - --------------------------- ------------------- ------------------- ------------------- ------------------- REVENUE Rooms $5,555 70.8% $5,750 70.8% $5,951 70.8% $6,159 70.8% Food 54 0.7 56 0.7 58 0.7 60 0.7 Telephone 100 1.3 104 1.3 107 1.3 111 1.3 Office Rental 2,086 26.6 2,159 26.6 2,234 26.6 2,312 26.6 Other Income 48 0.6 50 0.6 52 0.6 54 0.6 Total 7,843 100.0 8,119 100.0 8,402 100.0 8,696 100.0 - --------------------------- ------------------- ------------------- ------------------- ------------------- DEPARTMENTAL EXPENSES Rooms 1,268 22.8 1,313 22.8 1,359 22.8 1,406 22.8 Food & Beverage 36 66.7 37 66.1 39 67.2 40 66.7 Office Expenses 662 31.7 685 31.7 709 31.7 733 31.7 Total 1,966 25.1 2,035 25.1 2,107 25.1 2,179 25.1 - --------------------------- ------------------- ------------------- ------------------- ------------------- DEPARTMENTAL INCOME 5,877 74.9 6,084 74.9 6,295 74.9 6,517 74.9 - --------------------------- ------------------- ------------------- ------------------- ------------------- OPERATING EXPENSES Administrative & General 607 7.7 628 7.7 650 7.7 673 7.7 Management Fee 235 3.0 244 3.0 252 3.0 261 3.0 Marketing 287 3.7 297 3.7 307 3.7 318 3.7 Franchise Fees 417 5.3 431 5.3 446 5.3 462 5.3 Property Oper. & Maint. 226 2.9 234 2.9 242 2.9 251 2.9 Energy 287 3.7 297 3.7 307 3.7 318 3.7 Total 2,059 26.3 2,131 26.3 2,204 26.3 2,283 26.3 - --------------------------- ------------------- ------------------- ------------------- ------------------- HOUSE PROFIT 3,818 48.6 3,953 48.6 4,091 48.6 4,234 48.6 - --------------------------- ------------------- ------------------- ------------------- ------------------- FIXED EXPENSES Property Taxes 373 4.8 386 4.8 399 4.8 413 4.8 Insurance 117 1.5 121 1.5 125 1.5 130 1.5 Reserve for Replacement 314 4.0 325 4.0 336 4.0 348 4.0 Common Area 406 5.2 420 5.2 435 5.2 450 5.2 Rent 23 0.3 24 0.3 25 0.3 26 0.3 Total 1,233 15.8 1,276 15.8 1,320 15.8 1,367 15.8 - --------------------------- ------------------- ------------------- ------------------- ------------------- NET INCOME $2,585 32.8% $2,677 32.8% $2,771 32.8% $2,866 32.8% =========================== =================== =================== =================== ===================
- -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 121 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The conversion of a property's projected net income into an estimate of value is based on the premise that investors typically purchase real estate with a small amount of equity cash (25% to 40%) and a large amount of mortgage financing (60% to 75%). The amounts and terms of available mortgage financing and the rates of return that are required to attract sufficient equity capital form the basis for allocating the net income between the mortgage and equity components and deriving a value estimate. Mortgage Component Data for the mortgage component may be developed from statistics of actual hotel mortgages made by long-term lenders. The American Council of Life Insurance, which represents 20 large life insurance companies, publishes quarterly information pertaining to the hotel mortgages issued by its member companies. The following table summarizes the average mortgage interest rates of the hotel loans made by these lenders. In addition, the A corporate bond yield (as reported by Moody's Bond Record) is shown for the purpose of comparison. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 122 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-32 Average Mortgage Interest Rates and Average A Corporate Bond Yields - -------------------------------------------------------------------------------- Average A Average Corporate Period Interest Rate Bond Yield - -------------------------------------------------------------------------------- 1st Quarter 1996 7.79 % 7.37 % 4th Quarter 1995 8.44 7.28 3rd Quarter 1995 8.61 7.67 2nd Quarter 1995 9.25 7.87 1st Quarter 1995 9.14 8.50 3rd Quarter 1994 9.64 8.48 2nd Quarter 1994 9.38 8.28 4th Quarter 1993 9.38 7.80 3rd Quarter 1993 8.41 7.28 2nd Quarter 1993 10.53 9.65 4th Quarter 1992 9.43 8.48 3rd Quarter 1992 9.99 8.38 2nd Quarter 1992 9.47 8.79 1st Quarter 1992 10.02 8.81 4th Quarter 1991 10.49 8.97 3rd Quarter 1991 10.03 9.29 2nd Quarter 1991 10.75 9.45 3rd Quarter 1990 10.47 9.89 2nd Quarter 1990 10.58 9.83 4th Quarter 1989 9.96 9.42 3rd Quarter 1989 9.55 9.46 2nd Quarter 1989 10.54 9.93 1st Quarter 1989 10.39 10.16 4th Quarter 1988 10.07 10.03 3rd Quarter 1988 10.66 10.51 2nd Quarter 1988 10.09 10.33 4th Quarter 1987 10.41 10.45 3rd Quarter 1987 10.00 9.95 2nd Quarter 1987 9.81 9.46 1st Quarter 1987 9.43 9.19 4th Quarter 1986 9.44 9.55 3rd Quarter 1986 9.56 9.71 2nd Quarter 1986 9.80 9.91 1st Quarter 1986 10.99 10.62 Source: American Council of Life Insurance; Moody's Bond Record - -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 123 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Because of the six- to nine-month lag time in reporting and publishing hotel mortgage statistics, it is necessary to update this information to reflect current lending practices. Research by HVS International indicates that there is a close mathematical relationship between the average interest rate of a hotel mortgage and the concurrent yield on an average A corporate bond. Through a regression analysis, this relationship is expressed as follows. Y = 2.76078 + 0.782280 X Where: Y = Estimated Hotel/Motel Mortgage Interest Rate X = Current Average A Corporate Bond Yield (Coefficient of correlation is 96.4%) The yield on A corporate bonds for the third quarter of 1996, as reported by Moody's Bond Record, was 7.91%. Using a factor of 7.91% in the equation presented above produces an estimated hotel/office interest rate of 8.95%. In addition to the mortgage interest rate estimate derived from this regression analysis, HVS International constantly monitors the terms of hotel mortgage loans made by our institutional lending clients. In the past year, we have noted an increase in the availability of debt financing, and many lenders have returned to the market. The current level of lending activity represents a significant increase from the restricted environment of the early 1990s. Nonetheless, the market for hotel mortgage loans remains somewhat tight, particularly when compared to the conditions that prevailed in the mid-to late 1980s. In the current lending climate, strong hotel projects that are structured on an economic basis can secure mortgage financing at interest rates ranging from 8.0% to 11.0%, depending on the property, location, affiliation, and operator. In the 1980s, when hotel mortgages were widely available, loan-to-value ratios typically ranged from 75% to 80%. Amortization schedules were generally based on 30 years, although the term of the loan was more likely to be seven to ten years. The few loans that were underwritten in the early 1990s were based on far more stringent parameters: loan-to-value ratios declined to a range of 50% to 65%, and amortization periods of 20 to 25 years were most common. With the recent re-emergence of hotel financing, loan-to-value requirements and amortization schedules have loosened somewhat. At present, we find that lenders who are active in the market are using loan-to-value ratios of HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 124 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 65% to 75%, and amortization periods of 25 to 30 years. The exact terms offered depend on specific factors such as the property's location, the age and quality of the physical facility, local hostelry market conditions, and (perhaps more significantly) the profile of the borrower. The strongest projects typically command the highest loan-to-value ratios. Based on the preceding analysis of the current lodging industry mortgage market and adjustments for specific factors such as the property's location and conditions in the local hotel market, it is our opinion that a 9.5% interest, 25 - -year amortization mortgage with a .104844 constant is appropriate for the subject property. We believe that a mortgage lender will lend up to 70% of the hotel's market value as determined by this appraisal. Equity Component The remaining capital required for a hotel investment generally comes from the equity investor. The rate of return that an equity investor expects over a ten-year holding period is known as the equity yield. Unlike the equity dividend, which is a short-term rate of return, the equity yield specifically considers a long-term holding period (generally ten years), annual inflation- adjusted cash flows, property appreciation, mortgage amortization, and proceeds from a sale at the end of the holding period. It is difficult to quantify the rate of return required by equity investors who are seeking to purchase hotel properties. To establish an appropriate equity yield rate, HVS International uses two sources of data: past appraisals and investor interviews. Past Appraisals - During the past 12 months, HVS International has appraised more than 400 hotels, including properties located in most major national markets. Each appraisal used a similar mortgage-equity approach in which income is projected and then discounted to a current value at rates reflecting the cost of debt and equity capital. In the case of hotels that were sold subsequent to our valuations, we are able to determine an appropriate equity yield rate by excluding incentive management fees from the projection of income and expense, inserting the projection into a valuation model, and adjusting the appraised value to reflect the actual sales price by modifying the return assumptions. The following table shows a representative sample of hotels that were sold shortly after we appraised them, along with the imputed equity return based on our valuation approach. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 125 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-33 Sample of Hotels Sold - --------------------------------------------------------------------------------
No. of Date of Overall Total Property Equity Hotel City and State Rooms Sale Sales Price Rate Yield Yield - ---------------------------------------------------------------------------------------------------------------------------------- Ritz-Carlton Phoenix, AZ 281 2/94 $23,000,000 11.0% 14.6% 21.7% Marriott Marina Fort Lauderdale, FL 580 2/94 40,000,000 12.2 16.4 26.7 Holiday Inn Edison, NJ 274 3/94 11,803,000 7.8 17.0 26.3 Crescent Hotel Phoenix, AZ 342 3/94 26,000,000 6.5 7.2 2.2 Checkers Hotel Kempinski Los Angeles, CA 173 4/94 12,750,000 3.0 18.3 27.0 Best Western Fireside Inn Cambria, CA 46 4/94 3,377,000 11.7 15.8 24.3 Phoenician Resort Phoenix, AZ 580 4/94 224,000,000 6.6 9.3 8.9 Newark-Fremont Hilton Newark, CA 300 5/94 8,950,000 8.8 14.9 20.7 Radisson Inn Orlando, FL 299 5/94 11,150,000 12.9 18.0 28.2 Westin Kauai Lihue, Kauai, HI 840 6/94 97,400,000 (1.9) 8.1 7.2 Residence Inn Binghamton, NY 72 6/94 6,325,000 10.8 13.9 21.9 Hotel Millenium New York, NY 561 6/94 75,000,000 9.5 14.1 23.0 Best Western Otay Valley Chula Vista, CA 120 7/94 2,350,000 13.2 21.1 31.8 Hampton Inn Islandia, NY 121 7/94 6,572,000 12.6 16.6 28.2 Hampton Inn Willow Grove, PA 150 7/94 10,220,000 11.0 14.3 23.0 Hampton Inn West Palm Beach, FL 136 7/94 4,220,000 10.8 10.8 14.3 Hampton Inn Naples, FL 107 7/94 5,700,000 11.4 11.5 24.9 Hampton Inn Albany, NY 126 7/94 9,204,000 9.3 11.5 15.8 Marriott Hotel South Bend, IN 299 7/94 11,500,000 10.5 13.2 18.9 Marriott SFO Burlingame, CA 684 8/94 61,700,000 10.2 13.2 19.0 Westfields Conference Center Chantilly, VA 340 8/94 46,000,000 12.3 15.9 25.3 Radisson Mark Resort Vail, CO 349 9/94 25,200,000 8.9 15.8 24.1 Marriott East Side New York, NY 664 10/94 55,000,000 8.5 9.7 11.1 Marriott Resort Vail, CO 349 10/94 25,200,000 14.2 18.9 30.5 Marriott Quorum Addison, TX 547 10/94 29,815,000 13.5 18.2 31.8 Sheraton Hotel Hasbrouck Heights, N 338 11/94 10,450,000 18.3 21.1 30.7 Sheraton Inn Napa, CA 191 12/94 9,968,000 8.9 13.7 19.8 Marriott Fisherman's Wharf San Francisco, CA 255 12/94 27,755,000 10.8 13.4 19.4 Marriott Hotel Portland, OR 503 12/94 45,000,000 12.9 17.4 30.0 Radisson Inn Springfield, MO 199 12/94 5,800,000 8.2 10.1 11.3 Williamsburg Hilton Williamsburg, VA 291 12/94 15,000,000 15.4 19.0 32.0 Marriott Tech Center Denver, CO 625 12/94 36,000,000 13.7 16.4 27.1 Holiday Inn Sunspree Singer Island, FL 222 12/94 11,900,000 8.6 10.6 12.4 The Plaza New York, NY 805 6/95 325,000,000 7.0 11.0 14.0 Fullerton Suites Fullerton, CA 96 5/95 5,000,000 12.9 18.7 28.5 Residence Inn Baton Rouge, LA 80 6/95 6,518,000 12.7 14.8 21.2 Residence Inn Overland Park, KS 112 6/95 8,500,000 8.9 14.7 20.8 Residence Inn Des Moines, IA 112 6/95 7,660,000 9.8 14.1 19.6 Residence Inn Hunt Valley, MD 96 6/95 6,580,000 12.3 13.6 18.3 Residence Inn Kansas City, MO 112 6/95 6,560,000 10.4 13.2 19.8 Residence Inn Lincoln, NE 120 6/95 7,100,000 10.0 13.7 18.5 Embassy Suites Schaurmburg, IL 209 12/95 17,800,000 10.0 13.5 18.9 Marriott Hotel Andover, MA 293 12/95 24,000,000 9.7 13.5 19.2 Doubletree Suites Valley Forge, PA 229 12/95 28,500,000 10.7 14.2 15.5 Marriott Hotel Tysons Corner, VA 390 12/95 41,100,000 10.7 13.1 18.0 Marriott Hotel Warner Center, CA 461 12/95 57,900,000 6.2 11.6 14.2 Hilton at the Club Pleasanton, CA 294 12/95 22,000,000 10.5 13.4 17.0
Source: HVS International - -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 126 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Investor Interviews - HVS International is in constant contact with numerous institutional and individual hotel investors. This source of equity funds has definite return requirements that can be expressed as an equity yield rate based on a ten-year projection of net income before incentive management fees but after debt service. Based on our surveys and investor interviews, the following table illustrates the range of equity yields generally required by individual and institutional investors. ================================================================================ Table 10-34 Equity Yield Requirements - -------------------------------------------------------------------------------- Source Equity Yield Requirement ------ ------------------------ Individual 20% - 24% Institution 18% - 22% - -------------------------------------------------------------------------------- Based on the assumed 70% loan-to-value ratio, the risk inherent in achieving the projected income stream, and the age, condition, and anticipated market position of the subject hotel and office building, it is our opinion that an equity investor is likely to require an equity yield rate of 20% before payment of incentive management fees. This estimate is well supported by the equity yield requirements presented previously. Terminal Capitalization Rate Inherent in this valuation process is the assumption of a sale at the end of the ten-year holding period. The estimated reversionary sales price as of that date is calculated by capitalizing the projected 11th-year net income by an overall terminal capitalization rate. A percentage for the seller's brokerage and legal fees is deducted from this sales price, and the net proceeds to the equity interest (also known as the equity residual) are calculated by deducting the outstanding mortgage balance from the reversion. To estimate a property's reversionary value, the appraiser must select a terminal capitalization rate and an allocation for brokerage and legal fees. The terminal capitalization rate is an overall rate that is applied to one stabilized year, and thus it inherently incorporates the cost of debt and equity capital. The terminal capitalization rate can be derived through a mortgage and equity band of investment technique which calculates the weighted average cost of the capital used in a hotel investment. Combining the mortgage financing terms derived previously (namely, a 70% loan-to-value ratio and a .104844 debt service constant) with a cash-on-cash equity dividend rate of 12.0% produces the following overall capitalization rate. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 127 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Percent of Rate of Weighted Value Return Average ---------- ----------- ---------- Mortgage 0.7 X 0.10484 = 0.07339 Equity 0.3 X 0.12000 = 0.03600 ---------- Overall Capitalization Rate 0.10939 Because this overall rate will be used to capitalize net income ten years from the date of value, an upward adjustment is appropriate to reflect the uncertainty inherent in this extended period. For the purpose of this valuation, we will use a terminal capitalization rate of .11.0%. As a point of reference, the terminal capitalization rate can be compared to the going-in rate implied by the subject property's estimated value. The going-in rate reflects the capitalization rate that would be applicable if the hotel were operating at a stabilized level as of the date of value. This rate is calculated by dividing the stabilized net income (expressed in current dollars as of the date of value) by the value indicated by the income capitalization approach. Generally, the terminal capitalization rate is approximately 50 to 200 basis points above the going-in rate. Summary of Valuation Variables The following table summarizes the valuation variables that have been used to estimate the subject property's value via the income capitalization approach. ================================================================================ Table 10-35 Summary of Valuation Variables - -------------------------------------------------------------------------------- Annual Net Income NI See Ten-Year Forecast Loan-To-Value Ratio M 70.0% Interest Rate i 9.5% Debt Service Constant f 0.104844 Equity Yield Ye 20.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in Ten Years fp 0.155277 Terminal Capitalization Rate Rr 11.0% - -------------------------------------------------------------------------------- Valuation of the Mortgage and Equity Components The valuation of the mortgage and equity components is accomplished through use of an algebraic equation that calculates the exact amount of debt and equity that the hotel will be able to support based on the anticipated cash flow (derived from the forecast of income and expense) and the specific return requirements demanded by the mortgage lender (interest) HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 128 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= and the equity investor (equity yield). The equation and the calculations associated with this simultaneous valuation formula are set forth in the Addenda to this report. Using the variables summarized previously, we estimate the market value of the subject property via the income capitalization approach, prior to recognizing the estimated present worth of rent loss and costs associated with the lease-up of the subject office tower to stabilization, the estimated leasehold interest value, and the contributory value of the excess land at $21,000,000. Proof of Value The value is proven by calculating the yields to the mortgage and equity components during the projection period. If the mortgagee achieves a 9.5% yield and the equity yield is 20%, then $21,000,000 is the correct value by the income capitalization approach, prior to recognizing the estimated present worth of rent loss and costs associated with the lease-up of the subject office tower to stabilization, the leasehold interest value, and the contributory value of the excess land. Using the assumed financial structure set forth in the previous calculations, market value can be allocated between the debt and equity as follows. Mortgage Component (70%) $14,521,000 Equity Component (30%) 6,223,000 --------------------- Total $20,745,000 The annual debt service is calculated by multiplying the mortgage component by the mortgage constant. Mortgage Component $14,521,000 Mortgage Constant 0.104844 --------------------- Annual Debt Service $1,522,434 The cash flow to equity is calculated by deducting the debt service from the projected net income before debt service. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 129 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-36 Forecast of Net Income to Equity - -------------------------------------------------------------------------------- Net Income Available for Total Annual Year Debt Service Debt Service - -------------------------------------------------------------------------------- 1997 $ 2,177,000 - $ 1,522,000 1998 2,254,000 - 1,522,000 1999 2,333,000 - 1,522,000 2000 2,414,000 - 1,522,000 2001 2,500,000 - 1,522,000 2002 2,585,000 - 1,522,000 2003 2,677,000 - 1,522,000 2004 2,771,000 - 1,522,000 2005 2,866,000 - 1,522,000 2006 2,970,000 - 1,522,000 - -------------------------------------------------------------------------------- The equity residual at the end of the tenth year is calculated as follows. Reversionary Value ( $3,074,000 /0.110 ) $27,945,000 Less: Brokerage and Legal Fees 838,000 Mortgage Balance 12,150,000 ----------------- Net Sale Proceeds to Equity $14,957,000 The overall property yield (before debt service), the yield to the lender, and the yield to the equity position have been calculated by computer with the following results. ================================================================================ Table 10-37 Overall Property Yields - -------------------------------------------------------------------------------- Projected Yield (Internal Rate of Return) Position Value Over 10-Year Holding Period - -------------------------------------------------------------------- Total Property $20,745,000 13.5% Mortgage 14,521,000 9.4 Equity 6,223,000 20.0 Note: Whereas the mortgage constant and value are calculated on the basis of monthly mortgage payments, the mortgage yield in this proof assumes single annual payments. As a result, the proof's derived yield may be slightly less than that actually input. - -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 130 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The following tables demonstrate that the property receives its anticipated yields, proving that the $21,000,000 value is correct based on the assumptions used in this approach. In addition, the following table indicates the total market value indicated after adding $20,700,000 to the estimated present worth of rent loss and costs associated with the lease-up of the subject office tower to stabilization, the leasehold interest value, and the contributory value of the excess land. ================================================================================ Table 10-38 Total Property Yield - --------------------------------------------------------------------------------
Net Income before Present Worth of $1 Discounted Year Debt Service Factor @ 13.5% Cash Flow - ------------------------------------------------------------------------------------------------------------------------------------ 1997 $ 2,177,000 x 0.880972 = $ 1,918,000 1998 2,254,000 x 0.776111 = 1,749,000 1999 2,333,000 x 0.683732 = 1,595,000 2000 2,414,000 x 0.602348 = 1,454,000 2001 2,500,000 x 0.530652 = 1,327,000 2002 2,585,000 x 0.467489 = 1,208,000 2003 2,677,000 x 0.411844 = 1,103,000 2004 2,771,000 x 0.362823 = 1,005,000 2005 2,866,000 x 0.319637 = 916,000 2006 30,077,000 * x 0.281591 = 8,469,000 ------------------ Estimated Market Value Prior to Adjustments $ 20,744,000 (Say:) $20,700,000 Less: PW of Rent Loss & Costs Assocaited with Lease-Up 278,000 Less: PW of Leasehold Interests 433,000 Plus: Contributory Value of Excess Land 1,230,000 ------------------ Estimated Market Value: $21,219,000 (Say:) $21,200,000 Reversion Analysis 11th Year's Net Income $3,074,000 Divided By Capitalization Rate @ 11.0% 11.0% ---------------------- Total Sales Proceeds $27,945,455 Less: Broker & Legal 3.0% 838,364 ---------------------- Net Sales Proceeds $27,107,091 10th Year's Net Income of $2,970,000 ---------------------- *10th Year's Net Proceeds & Net Income $30,077,091
- -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 131 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-39 Mortgage Component Yield - -------------------------------------------------------------------------------- Total Annual Present Worth of $1 Discounted Year Debt Service Factor @ 9.4% Cash Flow - -------------------------------------------------------------------------------- 1997 $ 1,522,000 x 0.913844 = $ 1,391,000 1998 1,522,000 x 0.835110 = 1,271,000 1999 1,522,000 x 0.763160 = 1,162,000 2000 1,522,000 x 0.697409 = 1,061,000 2001 1,522,000 x 0.637323 = 970,000 2002 1,522,000 x 0.582414 = 886,000 2003 1,522,000 x 0.532235 = 810,000 2004 1,522,000 x 0.486380 = 740,000 2005 1,522,000 x 0.444475 = 676,000 2006 13,672,000 * x 0.406181 = 5,553,000 --------------------- Value Of Mortgage Component $ 14,520,000 * 10th year debt service of $1,522,000 plus outstanding mortgage balance of $ 12,500,000 - -------------------------------------------------------------------------------- ================================================================================ Table 10-40 Equity Component Yield - -------------------------------------------------------------------------------- Net Income Present Worth of $1 Discounted Year to Equity Factor @ 20.0% Cash Flow - -------------------------------------------------------------------------------- 1997 $ 655,000 x 0.833293 = $ 546,000 1998 732,000 x 0.694378 = 508,000 1999 811,000 x 0.578620 = 469,000 2000 892,000 x 0.482161 = 430,000 2001 978,000 x 0.401781 = 393,000 2002 1,063,000 x 0.334802 = 356,000 2003 1,155,000 x 0.278988 = 322,000 2004 1,249,000 x 0.232479 = 290,000 2005 1,344,000 x 0.193723 = 260,000 2006 16,405,000 * x 0.161428 = 2,648,000 -------------- Value of Equity Component $ 6,222,000 * 10th year net income to equity of $1,488,000 plus sales proceeds of $ 14,957,000 - -------------------------------------------------------------------------------- Valuation Method Two: Discounted Cash Flow The total property yield derived from the previous valuation method was 13.5%. After reviewing the total property yields indicated by recent hotel sales, which ranged from 7.2% to 21.1%, it is our opinion that a 13.5% discount factor would be appropriate for the Embassy Suites Palm Beach Gardens and Admiralty I Office Tower using a 13.5% discount factor. The HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 132 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= following table illustrates the discounted cash flow analysis, recognizing the estimated present worth of rent loss and costs associated with the lease-up of the subject office tower to stabilization, the estimated leasehold interest value, and the contributory value of the excess land. ================================================================================ Table 10-41 Discounted Cash Flow Analysis - --------------------------------------------------------------------------------
Net Income before Present Worth of $1 Discounted Year Debt Service Factor @ 13.5% Cash Flow - ------------------------------------------------------------------------------------------------------------------------ 1997 $2,177,000 x 0.880972 = $1,918,000 1998 2,254,000 x 0.776111 = 1,749,000 1999 2,333,000 x 0.683732 = 1,595,000 2000 2,414,000 x 0.602348 = 1,454,000 2001 2,500,000 x 0.530652 = 1,327,000 2002 2,585,000 x 0.467489 = 1,208,000 2003 2,677,000 x 0.411844 = 1,103,000 2004 2,771,000 x 0.362823 = 1,005,000 2005 2,866,000 x 0.319637 = 916,000 2006 30,077,000 * x 0.281591 = 8,469,000 -------------------------- Estimated Market Value Prior to Adjustments: $20,744,000 (Say:) $20,700,000 Less: PW of Rent Loss & Costs Assocaited with Lease-Up 278,000 Less: PW of Leasehold Interests 433,000 Plus: Contributory Value of Excess Land 1,230,000 -------------------------- Estimated Market Value: $21,219,000 (Say:) $21,200,000 Reversion Analysis 11th Year's Net Income $3,074,000 Divided By Capitalization Rate @ 11.0% 11.0% -------------- Total Sales Proceeds $27,945,455 Less: Broker & Legal @ 3.0% 838,364 -------------- Net Sales Proceeds $27,107,091 10th Year's Net Income of 2,970,000 -------------- *10th Year's Net Proceeds & Net Income $30,077,091
- -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Income Capitalization Approach 133 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Conclusion Based on our extensive experience in the hotel industry and comprehensive support provided by literature published by the Appraisal Institute, it is our opinion that the valuation procedure embodied by Method One most closely reflects the investment rationale of typical hotel buyers at $21,300,000. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis and Valuations,(12) Method Two (which discounts the projected net income and reversion using an overall discount rate, or total property yield) "does not consider the impact of mortgage debt, leverage and the specific equity demands of typical hotel investors at $21,200,000. In light of these considerations, we have estimated market value at $21,000,000, rounded. (12) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Sales Comparison Approach 134 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 11. Sales Comparison Approach The sales comparison approach is based on the assumption that an informed purchaser will pay no more for a property than the cost to acquire an existing property with equal utility. This approach estimates market value by considering the sales prices indicated by recent transactions involving properties that are similar to the property being appraised. Dissimilarities are resolved with appropriate adjustments; these differences may pertain to the date of sale, the age of the property, location, construction, condition, layout, equipment, size, or external economic factors. The reliability of the sales comparison approach depends on three factors: 1. the availability of timely, comparable sales data; 2. an understanding of the true terms of the sales and the motivation of the buyer and seller; 3. the degree of comparability, or the extent of the adjustments needed to reflect differences between the subject property and the comparable property. In appraising lodging facilities and office buildings, it is often difficult to find an adequate number of recent sales that are truly comparable to the subject hotel and office building. Consequently, it may be necessary to consider transactions involving properties in different market areas, and the required adjustments greatly diminish the reliability of the conclusions. Moreover, it is virtually impossible for an observer to determine the true motivations of the buyers and sellers involved in transactions. Hotel and office acquisitions often represent a highly ego-driven process in which a number of external, non-market factors influence the purchase price. Unless the appraiser can quantify these influences, there is no way of knowing whether the purchase price paid actually reflects market value. A final consideration is the degree of similarity between the subject property and the comparable; in most cases, the differences are significant enough to HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Sales Comparison Approach 135 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= require numerous subjective and unsubstantiated adjustments. Each adjustment represents a potential for error, and thus diminishes the reliability of this approach. As a result of these shortcomings, the use of the sales comparison approach in valuing hotels and office buildings are primarily as a check against the value indicated by the income capitalization approach. Hotel and office values declined in many areas of the country during the late 1980s and early 1990s, although a rebound began in 1994 and 1995. The downturn, which began in most markets in 1988, was largely attributable to lower operating incomes caused by an oversupply of new hotel rooms constructed during the mid-1980s. Overbuilding resulted in flat or declining average rates and occupancies, which caused revenues to fall. A number of other factors exacerbated the situation. The national recession caused a drop in demand in many markets during the early 1990s, and the Persian Gulf War created a virtual freeze on travel in the beginning of 1991, further limiting hotel and office demand. Operating costs continued to rise despite poor market conditions, resulting in a decline in the net operating income of hotels and office buildings throughout the nation. Because operating costs have a large fixed component, many lodging facilities and office properties experienced precipitous drops in net income. As bottom-line profits eroded, many hotels and office buildings were unable to meet debt service, and hundreds of properties entered foreclosure or bankruptcy. Lenders and government agencies soon became hotel and office building owners. Because most financial institutions were preoccupied with their distressed real estate, very little mortgage capital was available and the nation suffered from a well-publicized credit crunch. Most hotel and office building transactions that occurred during the early 1990s were financed by the property owners, who, in most cases, were lenders. In the early 1990s, the primary market participants were owner-operators with the expertise to turn around under-performing properties. Hotels and office buildings were out of favor with passive investors as a result of the industry's poor operating performance and the uncertainty of future appreciation. The wide disparity in buyer and seller expectations also limited the number of transactions. Many sellers were unwilling to accept the fact that the market value of their hotel and office investments had declined below the cost of the project or the original investment. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Sales Comparison Approach 136 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Moreover, many owners were faced with a significant tax burden upon sale, further reducing their willingness to settle for a price that was below the original acquisition cost. As a result of these market forces, there was very little sales activity involving large, high-quality hotels and office buildings. The primary difficulty was the lack of properties available for sale; owners who were not forced to sell opted to wait for prices to recover. The few hotels and office buildings that did enter the market generally attracted 15 to 20 interested bidders, mostly consisting of owner-operators. As a result of the competition for these few assets, the prices of better-quality hotels and office buildings began to escalate rapidly. In response, more sellers have been encouraged to place their products on the market. An indicator of this market trend is the number of hotel and office sales that have occurred during the past few years. HVS International tracks major hotel transactions of more than $10,000,000 on an annual basis. In 1992, the number of major transactions was 67; a slightly lower level of 52 was registered in 1993. This total increased significantly (to 92) in 1994, and the 1995 total is estimated to have been 104. We are unaware of any national office building sale surveys. In tandem with escalating prices, hotels and office buildings are again being considered by traditional financing sources, which had virtually abandoned the hospitality industry and office industry by the early 1990s. Although many lenders are still approaching the market with a high degree of caution, it is now possible to obtain third-party financing for both hotel and office transactions. The mortgage loans that are now being made are subject to fairly stringent requirements: loan-to-value ratios remain in the 65% to 75% range. The qualification of the borrower is also a crucial consideration for most lenders. We believe that the upward trend in both pricing and sales activity will continue as financing becomes more available and additional buyers (particularly passive investors) enter the market. Consequently, it is important to consider the date of the transactions used in the sales comparison approach. When the comparable sales are not recent enough to provide an accurate picture of the current market, it may be necessary to make upward adjustments to the values indicated by the sales comparison and income capitalization approaches in recognition of the recent escalation. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Sales Comparison Approach 137 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Comparable Sales Based on information provided by the Hospitality Market Data Exchange and compiled by the six offices of HVS International, and our research of mid-rise office building sales in the North Palm Beach market, the following transactions involved hotels and office buildings that appear to have some degree of comparability to the subject hotel and office building. Sale #1 (Hotel): ---------------- Property: Palm Beach Gardens Marriott Location: 4000 RCA Boulevard Palm Beach Gardens, Florida Date of Sale: September 1996 Sales Price: 25,500,000 Grantor: Marpalm of Florida, Inc. Grantee: Host Marriott Year Opened: 1990 Number of Rooms: 279 Price per Room: $91,398 Confirmed By: WLB, HVS-Miami Comments: The purchaser was also the franchisor of the hotel. Sale #2 (Hotel): ---------------- Property: Embassy Suites Location: 4350 PGA Boulevard Boca Raton, Florida Date of Sale: February 1996 Sales Price: $18,500,000 Grantor: Park Properties of Tampa, Inc. Grantee: Felcor Suites Limited Partnership Year Opened: 1985 Number of Rooms: 263 Price per Room: $70,342 Confirmed By: HVS-Miami Comments: The purchaser is currently renovating the property at a reported cost of $3.1 million, which equates to a total price of $82,129 per HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Sales Comparison Approach 138 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= unit. The hotel shares the use of an adjacent parking garage. Sale #3 (Hotel): ---------------- Property: MacArthurs' Holiday Inn Location: 4431 PGA Boulevard Palm Beach Gardens, Florida Date of Sale: August 1996 Sales Price: $7,700, 000 Grantor: MacArthur Corp. Grantee: Amstar Texas Pool Limited Year Opened: 1970 Number of Rooms: 280 Price per Room: $27,500 Confirmed By: WLB, HVS-Miami Comments: The purchaser is planning to change the franchise affiliation and renovate the property at a cost of approximately $7.0 million, which equates to a total price of approximately $52,500 per unit. Sale #4 (Office): ----------------- Property: Flagler Federal Tower Location: 1700 Palm Beach Lakes West Palm Beach, Florida Date of Sale: December 1995 Sales Price: $6,250,000 Grantor: First Land Sales, Inc. Grantee: Meridian Flagler Limited Partnership Year Opened: 1988 Net Rentable Area 109,109 Sq Ft Price per Sq Ft: $57.28 Confirmed By: WLB, HVS-Miami Comments: The purchaser spent $775,000 to finish shell space, which equates to a total cost of $7.025 million, or $64.39 per square foot of net HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Sales Comparison Approach 139 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= rentable area. The property was 37.0% occupied as of the sale date. Sale #5 (Office): ----------------- Property: Five Hundred Clearlake Location: 500 Australian Avenue West Palm Beach, Florida Date of Sale: January 1995 Sales Price: $6,590,000 Grantor: MBL Life Assurance Corporation Grantee: Unum Life Insurance Company of America Year Opened: 1985 Net Rentable Area: 106,301 Sq Ft Price per Sq Ft: $61.99 Confirmed By: WLB, HVS-Miami Comments: The purchaser spent $725,000 to finish shell space, which equates to a total cost of $7.315 million, or $68.81 per square foot of net rentable area. The property was 66.0% occupied as of the sale date. In addition to considering the above recent transactions, we have also reviewed the sale of the subject property, which occurred in May 1995. The details of this transaction are summarized as follows: Subject Property: ----------------- Property: Embassy Suites Palm Beach Gardens, and Admiralty I Office Tower Location: 4400 PGA Boulevard Palm Beach Gardens, Florida Date of Sale: May 1995 Sales Price: $17,405,000 Grantor: RIMCO XII, Inc. Grantee: Palm Beach Florida Hotel and Office Year Opened: 1989 Number of Rooms: 160 Net Rentable Area 80,125 Sq Ft HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Sales Comparison Approach 140 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Price per Room: Not Applicable Confirmed By: Owner Comments: The purchaser spent approximately $1.0 million in modernizing the hotel. None of the office tenants have vacated the building since the date of sale. Traditionally, the office building has experienced an occupancy rate of approximately 85.0%. In analyzing the sale of the subject property, it is important to consider the terms and conditions pertaining to the transaction. The subject was purchased from Michigan National Bank who had previously foreclosed on the property. As the operating performance of the subject hotel and office building was satisfactory, the bank was not compelled to sell the property at a price below prevailing value levels. Based on our understanding of the terms of this transaction, we believe that this sale was reflective of market value at the time of purchase. The relevance of the previous transaction involving the subject property is undermined by the material change in market conditions which occurred between the date of this sale and the present date of value. Areawide occupancy and average rates have improved in the intervening months, and are forecast to continue this positive trend. As previously discussed, the market for hotel and office building investments has improved measurably, due to changes in lender and investor attitudes. Finally, the property itself has undergone a modernization program, with a total of $1,000,000 spent on upgrading the facilities and amenities. For these reasons, we are of the opinion that the May 1995 sale, involving the subject property, was a reliable indicator of value as of the date of sale for the hotel and office building, but not as of the valuation date. Conclusion Although the sales comparison approach may be useful in providing a value range and reflecting certain market characteristics, its applicability is limited by the numerous possible points of difference between the subject property and other hotels and office buildings that have sold in recent years. These factors may include location, access, size, services and facilities offered, market conditions, chain affiliation, market orientation, management, rate structure, age, physical condition, date of sale, the highest and best use of the land, and the anticipated profitability of the operation. Circumstances surrounding a sale, such as financing terms, tax HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Sales Comparison Approach 141 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= considerations, income guarantees, sales of partial interests, duress on the part of the buyer or seller, or a particular deal structure can also cause a disparity between the sales price and market value. Moreover, it is often difficult to determine the marketing periods that were necessary to consummate the transactions. It is extremely difficult to quantify the appropriate adjustment factors accurately because of their number and complexity, as well as the difficulty in obtaining specific, detailed information. Any attempt to manipulate the necessary adjustments is insupportable and purely speculative. Because appraisers are expected to reflect the analytical processes and actions of typical buyers and sellers rather than to create a highly subjective valuation approach, the investment rationale of hotel and office building owners is an essential consideration. As specialists in the valuation of hotels, we find that typical buyers purchase properties based on a thorough analysis of the anticipated economic benefits of property ownership, rather than on historical sales data. In light of these factors, it is our opinion that the sales comparison approach is unsuitable for indicating a specific estimate of the subject property's market value; however, this approach may indicate a range of values that can be used to test the reasonableness of the value indicated by the income capitalization approach. After considering and analyzing the prior sale of the subject property and of the other hotel sale properties, the sales prices range from approximately $52,500 to $91,328 per room, or with the best indicators ranging from $82,129 to $91,398 per room. This reveals a range in value from $13,140,640 to $14,612,480 for the 160-unit subject hotel. After considering and analyzing the prior sale of the subject property and of the other office building sales, the sales prices range from approximately $64.39 to $68.81 per square foot, or from $5,159,249 to $5,513,401 for the 80,125-square-foot subject office building. This results in a combined value range between $18,299,889 and $20,125,881, prior to adding the market value of the excess land estimated at $1,230,000, and a value between approximately $19,530,000 and $21,356,000 after adding the contributory value of the excess land. The income capitalization approach indicates a value of $21,000,000, which falls within this range. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Cost Approach 142 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 12. Cost Approach The cost approach is founded on the principle of substitution, which implies that no prudent person will pay more for a property than the amount to acquire a site and construct a building of equal desirability and utility without undue delay. This approach estimates market value by first calculating the current cost of replacing the improvements. Appropriate deductions are made for depreciation resulting from physical deterioration, functional obsolescence, and external (economic) obsolescence, and the land value is added to the depreciated replacement cost to provide an estimate of market value. The cost approach employs the following steps. 1. The current replacement or reproduction cost is estimated. 2. Land value is estimated using techniques such as allocation, extraction, ground rent capitalization, or by analyzing land sales. 3. Accrued depreciation, which can be divided into physical deterioration, functional obsolescence, and external obsolescence, is estimated. 4. Total depreciation is deducted from the subject property's replacement cost, and the land value is added to arrive at an estimate of value via the cost approach. When forming their purchase decisions regarding existing properties, market participants tend to consider the cost of developing a new hotel with optimal physical and functional utility. External conditions, such as the depressed market for real estate (and hotels in particular), can cause a property to be worth less than its replacement cost as new. The task of estimating the loss in value resulting from incurable functional and external obsolescence is highly subjective. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements age and begin to deteriorate, the loss in value resulting from physical obsolescence becomes increasingly difficult to quantify accurately. Loss in value HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Cost Approach 143 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= attributable to functional obsolescence can be even more difficult to determine. The subject property was constructed in 1989, and will be approximately seven years old as of the date of this appraisal. The subject improvements are considered to be in good to excellent condition, however we believe that functional obsolescence is considered to be present with respect to the comparatively large and luxurious hotel lobby. The depressed hotel market conditions that prevailed in the late 1980s and the early 1990s have also led to a degree of external obsolescence. In our opinion, it is impossible to identify and quantify the impact of these factors on the property's value with any accuracy, so we will only estimate the value of the land, as vacant, and the replacement cost new of the subject property. Land Value We have considered and analyzed land sales to estimate the market value of the subject land, as vacant. The land sales and our estimates of the land currently improved with both the existing office tower and hotel, and of the land which is currently vacant is as follows. ================================================================================ Table 12-1 LAND ANALYSIS - --------------------------------------------------------------------------------
Land Area Sale Permitted Sale Permitted Sale Price Location Sale Date Zoning Sale Price (Sq Ft) Price/Sq Ft Rooms Price/Room GFA (Sq Ft) GFA (Sq Ft) - -------- --------- ------ ---------- ------- ----------- ---------------- ----------- ----------- SWQ I-95 & 45th Street, West Palm Beach Contract (CPD) $636,847 88,427 $7.20 78 $8,165 51,642 $12.33 SWC of Fairway Drive and PGA Blvd., Palm Beach Garde 5-96 (PCD) 1,875,386 305,772 6.13 N/A N/A N/A N/A ES I-95, WS Northcorp Parkway, Palm Beach Gardens 4-95 (PCD)/(PUD) 1,773,493 335,412 5.29 N/A N/A 120,000 14.78 SWQ I-95 & 45th Street, West Palm Beach 6-95 (CPD) 861,021 121,101 7.11 129 $6,675 N/A N/A Land Improved with the Office Tower Say $15.00/Sq Ft X 82,810 Sq Ft = $1,240,000 Land Improved with the Hotel Say $8,000/Rm X 160 Rooms = $1,280,000 Unimproved Land Proposed for Office Tower Say $15.00/Sq Ft X 82,265 Sq Ft = $1,230,000 ---------- Total Land Value $3,750,000 ==========
- -------------------------------------------------------------------------------- Replacement Cost Replacement cost is the current construction cost of a building with the same utility as the subject property, but built with modern materials and according to current construction and design standards. For the purpose of estimating the replacement cost of the subject property, we have used a hotel development cost survey conducted by HVS International. This HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Cost Approach 144 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= survey is published annually in a newsletter entitled The Hotel Valuation Journal, and appeared in the May, 1995, issue of Lodging Hospitality. The survey presents the range of per-room costs associated with various components of hotel development, including the improvements, the furniture, fixtures, and equipment, pre-opening expenses, and operating capital. Statistics are compiled for three broad categories of hotels: luxury, standard, and economy. The results of this survey are presented in the following table. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Cost Approach 145 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 12-2 Hotel Development Cost Survey (Amounts per Room) - --------------------------------------------------------------------------------
Improvements Furniture & Equipment Pre-Opening Operating Capital Total Percent Change - ------------------------------------------------------------------------------------------------------------------------------------ 1976 Luxury $32,000 - $55,000 $5,000 - $10,000 $1,000 - $2,000 $1,000 - $1,500 $39,000 - $68,500 --- - --- Standard 20,000 - 32,000 3,000 - 6,000 750 - 1,000 750 - 1,000 24,500 - 40,000 --- --- Economy 8,000 - 15,000 2,000 - 4,000 500 - 1,000 500 - 750 11,000 - 20,750 --- - --- 1979 Luxury 36,000 - 65,000 8,000 - 15,000 1,500 - 3,000 1,500 - 2,000 47,000 - 85,000 6.8 - 8.0 Standard 25,000 - 36,000 5,000 - 10,000 1,000 - 2,000 1,000 - 1,500 32,000 - 49,500 10.2 - 7.9 Economy 10,000 - 20,000 3,000 - 5,000 750 - 1,000 750 - 1,000 14,500 - 27,000 10.6 - 10.0 1981 Luxury 45,000 - 80,000 10,000 - 20,000 2,000 - 3,500 2,000 - 2,500 59,000 - 106,000 12.8 - 12.4 Standard 25,000 - 40,000 7,000 - 13,000 1,200 - 2,500 1,200 - 2,000 34,400 - 57,500 3.8 - 8.1 Economy 13,000 - 25,000 4,000 - 7,000 700 - 1,200 900 - 1,200 18,600 - 34,400 14.1 - 13.7 1983 Luxury 55,000 - 100,000 12,500 - 20,000 2,300 - 4,000 2,000 - 2,800 71,800 - 126,800 10.8 - 9.8 Standard 35,000 - 50,000 9,000 - 15,000 1,400 - 3,000 1,300 - 2,200 46,700 - 70,200 17.9 - 11.0 Economy 18,000 - 32,000 5,000 - 8,000 800 - 1,500 900 - 1,300 24,700 - 42,800 16.4 - 12.2 1985 Luxury 60,000 - 115,000 13,400 - 30,000 3,000 - 5,000 2,100 - 3,100 78,500 - 153,100 4.7 - 10.4 Standard 38,000 - 57,000 9,500 - 16,500 1,900 - 3,600 1,500 - 2,500 50,900 - 79,600 4.5 - 6.7 Economy 20,000 - 36,000 5,000 - 8,800 1,000 - 1,700 1,000 - 1,500 27,000 - 48,000 4.7 - 6.1 1986 Luxury 62,000 - 120,000 13,700 - 30,600 3,100 - 5,200 2,300 - 3,100 81,100 - 158,900 3.3 - 3.8 Standard 39,000 - 60,000 9,700 - 16,800 2,000 - 3,800 1,500 - 2,600 52,200 - 83,200 2.6 - 4.5 Economy 21,000 - 37,000 5,100 - 9,000 1,000 - 1,800 1,100 - 1,500 28,200 - 49,300 4.4 - 2.7 1987 Luxury 63,000 - 122,000 13,800 - 30,900 3,300 - 5,500 2,300 - 3,200 82,400 - 161,600 1.6 - 1.7 Standard 40,000 - 61,000 9,800 - 16,800 2,100 - 3,900 1,500 - 2,600 53,400 - 84,300 2.3 - 1.3 Economy 21,000 - 39,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 28,400 - 51,400 0.7 - 4.3 1988 Luxury 65,000 - 125,000 14,000 - 31,000 3,300 - 5,500 2,300 - 3,200 84,600 - 164,700 2.7 - 1.9 Standard 41,000 - 63,000 10,000 - 17,100 2,100 - 3,900 1,500 - 2,600 54,600 - 86,600 2.2 - 2.7 Economy 22,000 - 40,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 29,400 - 52,400 3.5 - 1.9 1989 Luxury 66,000 - 126,000 15,000 - 32,000 3,300 - 5,500 2,300 - 3,200 86,600 - 166,700 2.4 - 1.2 Standard 41,000 - 64,000 10,500 - 18,000 2,100 - 3,900 1,500 - 2,600 55,100 - 88,500 0.9 - 2.2 Economy 22,000 - 40,000 5,500 - 9,700 1,100 - 1,800 1,100 - 1,500 29,700 - 53,000 1.0 - 1.1 1990 Luxury 67,000 - 128,000 15,400 - 33,000 3,500 - 5,700 2,500 - 3,500 88,400 - 170,200 2.1 - 2.1 Standard 42,000 - 65,000 10,800 - 18,500 2,200 - 4,000 1,600 - 2,800 56,600 - 90,300 2.7 - 2.0 Economy 22,500 - 41,000 5,600 - 10,000 1,200 - 1,800 1,200 - 1,600 30,500 - 54,400 2.7 - 2.6 1991 Luxury 65,000 - 122,000 14,500 - 31,500 3,700 - 5,900 2,600 - 3,600 85,800 - 163,000 (2.9) - (4.2) Standard 40,000 - 63,000 10,000 - 17,800 2,300 - 4,200 1,700 - 2,900 54,000 - 87,900 (4.6) - (2.7) Economy 21,000 - 39,000 5,000 - 9,500 1,300 - 2,000 1,300 - 1,700 28,600 - 52,200 (6.2) - (4.0) 1992 Luxury 64,000 - 120,000 14,200 - 30,900 3,800 - 6,100 2,700 - 3,700 84,700 - 160,700 (1.3) - (1.4) Standard 39,000 - 62,000 9,800 - 17,400 2,300 - 4,400 1,800 - 3,000 52,900 - 86,800 (2.0) - (1.3) Economy 21,000 - 38,000 4,900 - 9,300 1,400 - 2,100 1,300 - 1,800 28,600 - 51,200 0.0 - (1.9) 1993 Luxury 63,000 - 119,000 14,000 - 30,500 3,900 - 6,200 2,800 - 3,800 83,700 - 159,500 (1.2) - (0.7) Standard 39,000 - 61,000 9,700 - 17,200 2,300 - 4,500 1,800 - 3,000 52,800 - 85,700 (0.2) - (1.3) Economy 21,000 - 38,000 4,900 - 9,200 1,400 - 2,100 1,300 - 1,800 28,600 - 51,100 0.0 - (0.2) 1994 Luxury 64,000 - 121,000 14,300 - 31,100 3,900 - 6,200 2,800 - 3,800 85,000 - 162,100 1.6 - 1.6 Standard 40,000 - 63,000 10,000 - 17,600 2,400 - 4,600 1,800 - 3,000 54,200 - 88,200 2.7 - 2.9 Economy 22,000 - 40,000 5,100 - 9,500 1,500 - 2,200 1,300 - 1,800 29,900 - 53,500 4.5 - 4.7 1995 Luxury 65,000 - 124,000 14,800 - 32,300 4,100 - 6,400 2,900 - 4,000 86,800 - 166,700 2.1 - 2.8 Standard 41,000 - 65,000 10,400 - 18,300 2,500 - 4,800 1,900 - 3,100 55,800 - 91,200 3.0 - 3.4 Economy 23,000 - 42,000 5,400 - 9,900 1,600 - 2,300 1,300 - 1,800 31,300 - 56,000 4.7 - 4.7
Average Annual Compounded Percent Change: 1976 - 1995: Luxury 4.3% - 4.8% 1986 - 1995: Luxury 0.8% - 0.5% Standard 4.4% - 4.4% Standard 0.7% - 1.0% Economy 5.7% - 5.4% Economy 1.2% - 1.4% - -------------------------------------------------------------------------------- HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Cost Approach 146 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= As illustrated by the previous table, hotel development costs rose significantly during the late 1970s and the early 1980s; however, the rate of increase slowed substantially in 1987. In 1991, hotel development costs declined for the first time since 1976. Further drops of as much as 2.0% were registered in 1992. Between 1986 and 1990, average annual compounded increases ranged from 1.7% to 2.5%. Costs rose slowly (at average annual compounded rates ranging from 0.5% to 1.4%) between 1986 and 1995, largely as a result of the declines in 1991, 1992, and 1993. In 1995, hotel development costs started to escalate more rapidly, reaching 4.7% in the economy segment. As more hotels are developed, we expect costs to continue to rise. We have also used the Marshall Valuation Service, a trade association cost manual, to estimate the replacement cost new of the office tower and parking garage on a per-square foot basis. Because the replacement cost tends to set the upper limit of a particular hotel's value, this figure is relevant to our analysis. We estimate the market value of the land and the replacement cost new of the subject improvements as follows, based on the development cost survey and the association cost manual discussed earlier. ================================================================================ Table 12-3 Total Land Value and Replacement Cost New of Subject Property - -------------------------------------------------------------------------------- Total Development Hotel Cost New Cost Per Room --------------------------------- Office Tower $8,661,330 Hotel 11,200,000 70,000 Parking Garage 4,700,000 Opening Costs 1,120,000 7,000 Furniture, Fixtures and Equipment 2,400,000 15,000 Land Value 3,750,000 Developer's Profit 4,212,199 --------- ------------- Total Development Costs $36,043,529 $92,000 - -------------------------------------------------------------------------------- If a property's replacement cost is significantly higher than the values indicated by the income capitalization and sales comparison approaches, this would also reduce the probability of new hotel development, which is not likely to be feasible under such conditions. This creates an effective HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Cost Approach 147 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= barrier to entry for new competition, thus reducing the risk associated with the subject property's income-generating potential. Conclusion We find that knowledgeable hotel and office building buyers generally base their purchase decisions on economic factors, such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, it is our opinion that the cost approach is inapplicable in estimating the market value of the Embassy Suites Palm Beach Gardens. However, we have estimated the subject property's replacement cost as new, which sets the upper limit of the property's value. Land Value HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Reconciliation of Value Indications 148 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 13. Reconciliation of Value Indications The reconciliation, which is the last step in the appraisal process, involves summarizing and correlating the data and procedures employed throughout the analysis. The final conclusion of value is arrived at after reviewing the estimates indicated by the income capitalization, sales comparison, and cost approaches. The relative significance, applicability, and defensibility of each indicated value is considered, and the greatest weight is given to that approach deemed most appropriate for the property being appraised. The purpose of this report is to estimate the market value of the fee simple interest in the subject property. Our appraisal involves a careful analysis of the property itself and the economic, demographic, political, physical, and environmental factors that influence real estate values. Based on the data set forth in this report, the following value indications were developed. Approach Value Indication -------- ---------------- Income Capitalization $21,000,000 Sales Comparison $19,530,000 - $21,356,000 Cost (Replacement Cost) $36,000,000 Income Capitalization Approach To estimate the subject property's value via the income capitalization approach, we analyzed the local market for transient accommodations, examined the competitive environment, projected occupancy and average rate levels, and developed a forecast of income and expense that reflects anticipated income trends and cost components through a stabilized year of operation. The subject property's projected net income before debt service was then allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component was calculated; the total of the mortgage and equity components equates to the value of the property. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Reconciliation of Value Indications 149 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Our nationwide experience indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the hotel investors who constitute the marketplace. For this reason, we believe that the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in our final estimate of the subject property's market value. Sales Comparison Approach The sales comparison approach uses actual sales of similar properties to provide an indication of the subject property's value. The strength of this approach is that it measures value based on the investment decisions made by actual buyers and sellers. Although we have investigated a number of sales in an attempt to develop a range of value indications, several adjustments are necessary to render the sales prices applicable to the subject property. These adjustments, which are numerous and highly subjective, diminish the reliability of the sales comparison approach. Furthermore, we find that typical hotel investors employ a sales comparison procedure only to establish broad value parameters. The sales outlined earlier in this report indicate an adjusted value range between $19,530,000 and $21,356,000. The income capitalization approach indicates a value of approximately $21,000,000. This information suggests that little or no adjustment of the value indicated by the income capitalization approach is warranted. Cost Approach To estimate the subject property's value via the cost approach, we estimated the current replacement cost of the property and added the land value. We give the cost approach limited weight in arriving at a final value estimate, because knowledgeable buyers of lodging facilities generally base their purchase decisions on economic factors (such as projected net income and return on investment) rather than on a property's depreciated replacement cost. The replacement cost estimate developed via the cost approach can help to corroborate the results of the income capitalization and sales comparison approaches to value. If the replacement cost is substantially higher or lower than the value indicated by the income capitalization approach, an upward or downward adjustment of the income capitalization approach value may be necessary. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Reconciliation of Value Indications 150 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Value Conclusion Careful consideration has been given to the strengths and weaknesses of the three approaches to value discussed above. In recognition of the purpose of this appraisal, we have given primary weight to the value indicated by the income capitalization approach and our extensive experience in the hospitality industry. It is our opinion that the market of the fee simple and leased fee interest in the Embassy Suites Palm Beach Gardens and the Admiralty I Office Tower- Palm Beach Gardens, as of January 1, 1997, is: $21,000,000 TWENTY-ONE MILLION DOLLARS The estimate of market value includes the land, the improvements, and the furniture, fixtures, and equipment. The appraisal assumes that the hotel and office building is open and operational. The estimate of value assumes either the availability of third-party financing or the willingness and capability of the seller to take back purchase-money financing so that a buyer can obtain the level of debt set forth in the Income Capitalization Approach section of this appraisal. Marketing Period Our estimate of market value assumes a marketing period of six to nine months. Under normal economic conditions, hotels are transferred within this time frame. Personal Property In accordance with the appraisal standards set forth by the Office of the Comptroller of the Currency, it is necessary for bank appraisals to identify and value any personal property, fixtures, or intangible items that are included in the appraisal and discuss their impact on the overall estimate of market value. A hotel's income-generating ability depends on a suitable inventory of furniture, fixtures, and equipment. Removal of these items can decrease the property value by as much as the cost to replace the inventory plus the loss of income incurred while the hotel cannot function. A hotel's personal property consists of a wide variety of components, including bedroom furnishings, bathroom fixtures, restaurant and kitchen equipment, front office and accounting computers, exterior signs, and similar items. Our inspection of the Embassy Suites Palm Beach Gardens indicates that the personal property and fixtures are in good condition. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Reconciliation of Value Indications 151 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Based on an annual construction cost survey conducted by HVS International, we estimate the total replacement cost of the subject property's furniture, fixtures, and equipment at $15,000 per available room. Assuming an average useful life of ten years and an effective age of three years, the value of the furniture, fixtures, and equipment currently in place is approximately $10,500 per room, or a total of 1,680,000. The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) stipulates that "...any business interest or other intangible item should be valued separately within the appraisal."(17) Hotels have both business and real estate components; without the business expertise necessary to operate the facility, a hostelry would have little real estate value. Because furniture, fixtures, and equipment are essential to a hotel's income-generating ability and are seldom removed from the property or sold separately, the separation of the personal property component from the real property is not particularly meaningful. (17) Federal Register, Vol. 55, No. 143, July 25, 1990, p. 30205. HVS International, Miami, Florida Statement of Assumptions Embassy Suites Palm Beach Gardens and Limiting Conditions 152 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 14. Statement of Assumptions and Limiting Conditions 1. This report is to be used in whole and not in part. 2. No responsibility is assumed for matters of a legal nature, nor do we render any opinion as to title, which is assumed to be marketable and free of any deed restrictions and easements. The property is valued as though free and clear unless otherwise stated. 3. We assume that there are no hidden or unapparent conditions of the sub-soil or structures, such as underground storage tanks, that would render the property more or less valuable. No responsibility is assumed for these conditions or for any engineering that may be required to discover them. 4. We have not considered the presence of potentially hazardous materials such as asbestos, urea formaldehyde foam insulation, PCBs, any form of toxic waste, polychlorinated biphengyls, pesticides, or lead-based paints. The appraisers are not qualified to detect hazardous substances, and we urge the client to retain an expert in this field if desired. 5. The Americans with Disabilities Act (ADA) became effective on January 26, 1992. We have conducted no specific compliance survey to determine whether the subject property is operating in accordance with the various detailed requirements of the ADA. It is possible that the property does not conform to the requirements of the act, and this could have an unfavorable effect on value. Because we have no direct evidence regarding this issue, our estimate of value does not consider possible non-compliance with the ADA. 6. We have made no survey of the property, and we assume no responsibility in connection with such matters. Sketches, photographs, maps, and other exhibits are included to assist the reader in visualizing the property. It is assumed that the use of the land and improvements is HVS International, Miami, Florida Statement of Assumptions Embassy Suites Palm Beach Gardens and Limiting Conditions 153 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= within the boundaries of the property described, and that there is no encroachment or trespass unless noted. 7. All information, financial operating statements, estimates, and opinions obtained from parties not employed by HVS International are assumed to be true and correct. We can assume no liability resulting from misinformation. 8. Unless noted, we assume that there are no encroachments, zoning violations, or building violations encumbering the subject property. 9. The property is assumed to be in full compliance with all applicable federal, state, local, and private codes, laws, consents, licenses, and regulations (including a liquor license where appropriate), and that all licenses, permits, certificates, franchises, and so forth can be freely renewed or transferred to a purchaser. 10. All mortgages, liens, encumbrances, leases, and servitudes have been disregarded unless specified otherwise. 11. None of this material may be reproduced in any form without our written permission, and the report cannot be disseminated to the public through advertising, public relations, news, sales, or other media. 12. We are not required to testify or appear in court by reason of this analysis without previous arrangements, and only when our standard per diem fees and travel costs are paid prior to the appearance. 13. If the reader is making a fiduciary or individual investment decision and has any questions concerning the material presented in this report, it is recommended that the reader contact us. 14. We take no responsibility for any events or circumstances that take place subsequent to either the date of value or the date of our field inspection, whichever occurs first. 15. The quality of a lodging facility's on-site management has a direct effect on a property's economic viability and value. The financial forecasts presented in this analysis assume responsible ownership and competent management. Any departure from this assumption may have a significant impact on the projected operating results and the value estimate. HVS International, Miami, Florida Statement of Assumptions Embassy Suites Palm Beach Gardens and Limiting Conditions 154 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 16. The estimated operating results presented in this report are based on an evaluation of the overall economy, and neither take into account nor make provision for the effect of any sharp rise or decline in local or national economic conditions. To the extent that wages and other operating expenses may advance during the economic life of the property, we expect that the prices of rooms, food, beverages, and services will be adjusted to at least offset those advances. We do not warrant that the estimates will be attained, but they have been prepared on the basis of information obtained during the course of this study and are intended to reflect the expectations of a typical hotel buyer. 17. This analysis assumes continuation of all Internal Revenue Service tax code provisions as stated or interpreted on either the date of value or the date of our field inspection, whichever occurs first. 18. Many of the figures presented in this report were generated using sophisticated computer models that make calculations based on numbers carried out to three or more decimal places. In the interest of simplicity, most numbers have been rounded to the nearest tenth of a percent. Thus, these figures may be subject to small rounding errors. 19. It is agreed that our liability to the client is limited to the amount of the fee paid as liquidated damages. Our responsibility is limited to the client, and use of this report by third parties shall be solely at the risk of the client and/or third parties. The use of this report is also subject to the terms and conditions set forth in our engagement letter with the client. 20. Appraising hotels is both a science and an art. Although this analysis employs various mathematical calculations to provide value indications, the final estimate is subjective and may be influenced by our experience and other factors not specifically set forth in this report. 21. Any distribution of the total value between the land and improvements or between partial ownership interests applies only under the stated use. Moreover, separate allocations between components are not valid if this report is used in conjunction with any other analysis. HVS International, Miami, Florida Statement of Assumptions Embassy Suites Palm Beach Gardens and Limiting Conditions 155 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 22. This study was prepared by Hospitality Valuation Services, a division of Hotel Consulting Services, Inc. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of Hotel Consulting Services, Inc. as employees, rather than as individuals. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Certification 156 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 15. Certification We, the undersigned appraisers, hereby certify: 1. that the statements and opinions presented in this report, subject to the limiting conditions set forth, are correct to the best of our knowledge and belief; 2. that William L. Boatwright, MAI, personally inspected the property described in this report; Anne R. Lloyd-Jones, CRE, did not inspect the property, but participated in the analysis; Thomas O'Neill, MAI, ISHC, CHA, participated in the analysis and reviewed the findings, but did not personally inspect the property; 3. that we have no current or contemplated interests in the real estate that is the subject of this report; 4. that we have no personal interest or bias with respect to the subject matter of this report or the parties involved; 5. that this report sets forth all of the limiting conditions (imposed by the terms of this assignment) affecting the analyses, opinions, and conclusions presented herein; 6. that the fee paid for the preparation of this report is not contingent upon our conclusions; 7. that this report has been prepared in accordance with, and is subject to, the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute; 8. that the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives; HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Certification 157 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 9. that this report has been prepared in accordance with the Uniform Standards of Professional Appraisal Practice (as adopted by the Appraisal Foundation); 10. that no one other than the undersigned prepared the analyses, conclusions, and opinions concerning real estate that are set forth in this appraisal report; 11. that as of the date of this report, Thomas O'Neill has completed the requirements of the continuing education program of the Appraisal Institute; 12. that this appraisal is not based on a requested minimum value, a specific value, or the approval of a loan. /s/ William L. Boatwright -------------------------------- William L. Boatwright, MAI Vice President /s/ Anne R. Lloyd-Jones -------------------------------- Anne R. Lloyd-Jones, CRE Senior Vice President /s/ Thomas O'Neill -------------------------------- Thomas O'Neill, MAI, ISHC, CHA Managing Director HVS International (Miami) BLB:TFO: msb HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Addenda - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] View of hotel and office tower [GRAPHIC OMITTED] View of hotel building HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Addenda - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] View of hotel lobby entrance [GRAPHIC OMITTED] View of office tower from hotel lobby HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Addenda - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] View of hotel lobby from meeting rooms on second floor [GRAPHIC OMITTED] View of hotel ballroom HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Addenda - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] View of office tower lobby [GRAPHIC OMITTED] View of two-bedroom suite living room HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Addenda - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] View of two-bedroom suite master bedroom [GRAPHIC OMITTED] View of one-bedroom suite living area HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Addenda - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] View of one-bedroom suite living area [GRAPHIC OMITTED] View of typical one-bedroom suite HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Addenda - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Palm Beach Gardens Marriott [GRAPHIC OMITTED] Omni West Palm Beach Hotel HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Addenda - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] Radisson Suite Inn Palm Beach Airport [GRAPHIC OMITTED] Palm Beach Airport Hilton HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Addenda - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= [GRAPHIC OMITTED] PGA National Resort and Spa PARCEL I: All of that certain parcel of land in the Southwest 1/4 of the Southeast 1/4 of Section 1, Township 42 South, Range 42 East, Palm Beach County, Florida, lying Southwesterly, Southerly and Southeasterly of the Rights-of-Way of State Road 9 and State Road 786 as described in deeds to the State of Florida recorded in Official Records Book 1530, Page 447 and Official Records Book 1676, Page 1738, of the Public Records of Palm Beach County, Florida PARCEL II: All of that certain parcel of land in the Northeast 1/4 of Section 12, Township 42 South, Range 42 East, Palm Beach County, Florida, lying Northerly of a line 825 feet North of the South line of the North 1/2 of the Northeast 1/4 of said Section 12, and lying Southwesterly of the Southwesterly right-of-Way line of State Road 9 as described in deeds to the State of Florida recorded in Official Records Book 1291, Page 159 of the Public Records of Palm Beach County, Florida; less and excepting therefrom that portion thereof lying Westerly of the Easterly line of the land described in the warrant deed recorded December 8, 1977, in Official Records Book 2777, at Page 715, of the Public Records of Palm Beach, County; and also less and excepting therefrom the Right-of-Way for State Road 786 as described in deeds to the State of Florida recorded in Official Records Book 1530, Page 448 and Official Records Book 1676, Page 1738 of the Public Records of Palm Beach County, Florida. HVS International, Miami, Florida Embassy Suites Palm Beach Gardens Qualifications - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Qualifications HVS International, Miami, Florida Qualifications of William L. Boatwright, MAI - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ William L. Boatwright, MAI Employment August 1996 to present HVS INTERNATIONAL - Miami (Division of O & R Valuation Services, Inc.) Vice President Miami, Florida 1994 - 1996 BAS CONSULTING, INC. President Plantation, Florida 1991 - 1994 BOATWRIGHT APPRAISAL SERVICES, INC. President Hollywood, Florida 1989 - 1991 PANNELL KERR FORSTER Senior Manager Miami, Florida 1983 - 1989 REAL PROPERTY ANALYSTS, INC. Senior Appraiser Ft. Lauderdale, Florida Houston, Texas 1979-1983 R.M. BRADLEY CO., INC. Staff Appraiser Boston, Massachusetts Professional Affiliations Appraisal Institute - Member (MAI) Certified General Appraiser - Florida Certified General Appraiser - Georgia Certified General Appraiser - Commonwealth of Pennsylvania Licensed Real Estate Broker - Florida Licensed Mortgage Broker - Florida Real Estate Broker - Commonwealth of Massachusetts HVS International, Miami, Florida Qualifications of William L. Boatwright, MAI - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Education Appraisal Institute Course 101 - Principles, Method & Techniques Course 1B - Capitalization Theory and Techniques, Part A Course 2 - Urban Properties Course 6 - Real Estate Investment Analysis Eastern Michigan University Bachelor of Science Degree Litigation Support Qualified and experienced as an expert witness in all courts including Condemnation, Bankruptcy, Ad Valorem and other real estate-related matters. Examples of Corporate and Institutional Clients Served Patriot American Hospitality HVS International, Miami, Florida Qualifications of William L. Boatwright, MAI - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated Alabama - - The Tutwiler Hotel, Birmingham Colorado - - Inverness Hotel & Golf Club, Denver Connecticut - - Marriott, Stamford District of Colombia - - The Grand Hotel, Washington Florida - - Residence Inn, Altamonte Springs - - Days Inn, Altamonte Springs - - Embassy Suites Hotel, Boca Raton, - - Ramada Inn, Boynton Beach, - - Embassy Suites Hotel, Cypress Creek, - - Budget Inn, Davenport - - Sheraton Hotel, Daytona Beach, - - Days Inn Central, Daytona Beach, - - Rolling Hills Hotel, Davie - - Tops'l Beach and Racquet Club, Destin - - Hampton Inn, Florida City - - Crown Sterling Suites, Ft. Lauderdale - - Irelands' Inn, Ft. Lauderdale - - Best Western Oceanside Inn, Ft. Lauderdale - - Lauderdale Surf & Marina Hotel, Ft. Lauderdale - - Days Inn, Ft. Myers Beach - - Proposed Diamondhead Resort, Ft. Myers Beach - - Eventide Ramada, Ft. Myers Beach - - Edgewater, Ft. Myers Beach - - Days Inn Ft Walton Beach, Ft. Walton Beach - - Leeside Inn, Ft. Walton Beach - - Comfort Inn, Hollywood - - Radisson Suite Hotel, Hialeah - - Quality Suites, Indialantic - - Pelican Cove Resort, Islamorada - - Ramada Inn-West, Jacksonville - - Park Suite Hotel, Jacksonville - - Comfort Inn, Jupiter - - Hyatt Key West, Key West - - Days Inn, Key West - - Quality Suites Hotel, Kissimmee - - Hotel Royal Plaza, Lake Buena Vista - - Village Days Inn, Lake Buena Vista - - Days Inn Resort, Lake Buena Vista - - Days Inn Hotel, Lake Buena Vista - - Holiday Inn, Maderia Beach - - Days Inn, Marathon Key - - Radisson Suite Beach Resort, Marco Island - - Quality Suites, Melbourne - - Miami Airport Hilton and Marina, Miami - - Ana Hotel, Miami Beach - - Nautilus Hotel, Miami Beach - - Registry Resort Hotel, Naples - - Days Inn Ocala, Ocala - - Sheraton World Resort, Orlando - - Sonesta Villa Resort, Orlando - - Quality Inn, Orlando - - Days Inn Airport, Orlando - - Days Inn International Drive, Orlando - - Days Inn Civic Center, Orlando - - Royal Plaza Hotel, Orlando - - Days Inn Ormond Beach, Ormond Beach - - Comfort Inn, Palm Beach Gardens - - Express Inn, Panama City - - Comfort Inn, Pensacola - - Pensacola Hilton, Pensacola - - Ted Williams Best Western, Polk County - - Palm Aire Resort and Spa, Pompano - - Embassy Suites Hotel, Singer Island - - Days Inn, St. Petersburg Beach - - Don CeSar, St. Petersburg - - Vinoy Stouffer Resort, St. Petersburg HVS International, Miami, Florida Qualifications of William L. Boatwright, MAI - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (Cont'd) Florida - - Days Inn North, Tallahassee - - Embassy Suites Hotel, Tampa - - Holiday Inn, Tampa - - Hyatt Westshore Hotel, Tampa - - Omni Hotel, Tampa - - USA Inn, Winter Haven - - Days Inn, Winter Haven Indiana - - Quality Inn, Richmond Maryland - - Residence Inn, Cockeysville - - Susse Chalet, Linthicum Massachusetts - - Back Shore Motor Lodge, Gloucester - - Carlton House Motor Inn, Brockton - - Days Inn, New Bedford - - Days Inn Boston/Salem, Danvers - - East Coast Motor Inn, Salisbury - - East Hotel, Waltham - - East Bay Lodge, Osterville - - Econo Motor Inn, Peabody - - Radison Park West, Marlboro - - Rowes Wharf, Boston - - Royal Plaza Best Western, Fitchburg - - Royal Plaza Best Western, Marlboro - - Sheraton Tara Resort, Danvers Tennessee - - Union Station Hotel LATIN AMERICA & THE CARIBBEAN - - Ritz Carlton, Warwick Parrish, Bermuda - - Villa Rio Chico, Ocho Rios, Jamaica - - Fiesta Americana Villas Plaza, Cancun, Mexico - - Holiday Inn Horseshoe Reef, Antigua, West Indies HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Anne R. Lloyd-Jones, CRE Employment 1982 to present HVS INTERNATIONAL Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1981 FAIRMONT HOTEL Dallas, Texas 1979 - 1980 SAGA FOOD SERVICE SWARTHMORE COLLEGE Swarthmore, Pennsylvania 1977 - 1980 DARANNE CATERERS Swarthmore, Pennsylvania Professional Affiliations American Society of Real Estate Counselors - Member (CRE) Appraisal Institute - Candidate for Membership Cornell Society of Hotelmen Education MPS - School of Hotel Administration, Cornell University BA - Swarthmore College Appraisal Institute Course 1A1 - Real Estate Appraisal Principles Course 1A2 - Basic Valuation Procedures Course 1BA - Capitalization Theory and Techniques, Part A Course 1BB - Capitalization Theory and Techniques, Part B Course 2-1 - Case Studies in Real Estate Valuation Course 2-3 - Standards of Professional Practice Course 3-1 - Report Writing HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Corporate and Institutional Clients Served Ashford Financial Corporation Chase Manhattan Bank, N. A. Citibank / Citicorp NA Credit Lyonnais Doubletree Hotels Grand Heritage Hotels Great Western Bank Goldman Sachs Holiday Inns, Inc. Interstate Hotels MassMutual Marriott International / Host Marriott Morgan Stanley OCWEN Financial Services Remington Hotels Sheraton Hotels Starwood Capital Group Starwood Lodging Trust Winegardner & Hammons Wyndham Hotel Company Hotel Chains and Management Companies Appraised or Evaluated Doubletree Hotels Compri Hotels Interstate Hotels Fairmont Hotels Guest Quarters Hilton Hotels Corporation Omni International Hotels Ramada Hotel Corp. Servico Hotel Corp. Winegardner & Hammons Appearance as an Expert Witness Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Jefferson City, Missouri Federal Bankruptcy Court, Columbia, South Carolina Federal Bankruptcy Court, Houston, Texas Federal Bankruptcy Court, New York, New York Federal Bankruptcy Court, San Bernardino, California Federal Bankruptcy Court, Los Angeles, California Federal Bankruptcy Court, Charlotte, North Carolina Federal Bankruptcy Court, Miami, Florida Federal District Court, Central Division, Salt Lake City, Utah Iowa District Court, Story County, Iowa Texas District Court, Harris County, Texas Federal Bankruptcy Court, Tampa, Florida Utah District Court, Salt Lake County, Utah Federal Bankruptcy Court, Newark, New Jersey HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated Arizona - - Wyndham Garden Hotel, Chandler - - Wyndham Garden Hotel - Airport, Phoenix - - Wyndham Garden Hotel - Union Hills, Phoenix - - Canyon Ranch Spa & Fitness Resort, Tucson Alabama - - Holiday Inn, Birmingham - - Proposed Sheraton, Gulf Shores - - Proposed Inn, Mobile - - Holiday Inn, Sheffield California - - Industry Hills Sheraton Hotel, City of Industry - - Piccadilly Inn, Fresno - - Proposed Inn at Foss Creek, Healdsburg - - Sunset Towers Hotel, Hollywood - - Proposed La Quinta, Irvine - - Wyndham Garden Hotel, La Jolla - - Days Inn, La Palma - - Proposed Marriott Courtyard, Palm Springs - - Proposed Club Hilton Hotel, Pleasanton - - Center Pointe Development, San Diego - - Holiday Inn-Embarcadero, San Diego - - Holiday Inn-Harbor View, San Diego - - Seven Seas Lodge, San Diego - - Proposed Fountaingrove Inn, Santa Rosa - - Sheraton Round Barn Inn, Santa Rosa - - Wyndham Garden Hotel, Sunnyvale - - Westlake Plaza Hotel, Thousand Oaks - - Proposed Marriott Courtyard, Torrance Colorado - - Proposed Hotel, Keystone Connecticut - - Holiday Inn, Milford - - Holiday Inn, New Britain District of Columbia - - Grand Hotel, Washington - - Wyndham Bristol Hotel, Washington Florida - - Kon Tiki Village, Kissimmee - - Sheraton Lakeside, Kissimmee - - Holiday Inn, 22nd Street, Miami Beach - - Holiday Inn, 87th Street, Miami Beach - - Holiday Inn, 180th Street, Miami Beach - - Sheraton Resort & Marina, St. Petersburg - - Hilton Hotel, Singer Island - - Royce Hotel, West Palm Beach Georgia - - Marriott Hotel, Atlanta - - Wyndham Garden Hotel, Atlanta - - Holiday Inn, Brunswick - - Holiday Inn, Jekyll Island - - Mullberry Inn, Savannah - - Royal Savannah Inn, Savannah Hawaii - - Hobron in Waikiki, Honolulu Idaho - - Holiday Inn, Boise - - Red Lion Inn, Boise - - Super 8, Boise Illinois - - Ramada Inn, Bloomington - - Proposed Marriott Courtyard, Glenview - - Wyndham Garden Hotel, Naperville Indiana - - Holiday Inn, Bloomington - - Inn at the Four Winds, Bloomington - - Ramada Inn, Bloomington - - Hilton Hotel, Fort Wayne - - Airport Hilton Inn, Indianapolis - - Hilton at the Circle, Indianapolis Iowa - - Holiday Inn, Ames - - Proposed Fairfield Inn, Des Moines HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Kentucky - - Proposed Super 8, London - - Proposed Super 8, Radcliff Louisiana - - Sheraton Inn, Kenner - - Hotel Meridien, New Orleans Maine - - Proposed Hotel, Old Orchard Beach Maryland - - Brookshire Hotel, Baltimore - - Lord Baltimore Hotel, Baltimore - - Hyatt Regency, Bethesda Massachusetts - - Proposed Marriott Courtyard, Andover - - Hyatt Regency, Cambridge - - Proposed Hotel, Franklin - - Sheraton Inn, Hyannis - - Marriott Hotel, Worcester Michigan - - Bay Valley Inn, Bay City - - Hilton Airport, Detroit - - Westin Renaissance Center, Detroit - - Hotel Pontchartrain, Detroit - - Proposed Embassy Suites, Lansing - - Hilton Inn, Northfield - - Holiday Inn, Saginaw Minnesota - - Wyndham Garden Hotel, Bloomington - - Marriott Hotel, Minnetonka Missouri - - Inn at Grand Glaize, Osage Beach - - Bel Air Hilton, St. Louis - - Holiday Inn Riverfront, St. Louis Nebraska - - Holiday Inn Airport, Lincoln - - Holiday Inn Northeast, Lincoln Nebraska (continued) - - Marriott Hotel, Omaha - - Ramada Inn, Omaha - - Red Lion Inn, Omaha Nevada - - Proposed Super 8, Las Vegas New Jersey - - Ramada Inn, Edison - - Marriott Hotel, Hanover - - Headquarters Plaza, Morristown - - Hyatt Regency, New Brunswick - - Holiday Inn, North Brunswick New York - - Hilton Hotel, Albany - - Proposed Embassy Suites, Amherst - - Holiday Inn Arena, Binghamton - - Holiday Inn SUNY, Binghamton - - Proposed Hotel, Binghamton - - Proposed Hilton, Brooklyn - - Marriott Hotel, Dewitt - - Metropole Hotel, Flushing - - Midway Hotel, Flushing - - Ramada Inn, Kingston - - Royce Hotel, La Guardia - - Holiday Inn, Latham - - Proposed Crowne Plaza, Manhattan - - Proposed Prince Street Hotel, Manhattan - - Proposed Roslyn Inn, Roslyn - - Proposed Le Richmonde, Rye Brook - - Hilton Hotel, Syracuse - - Hotel Syracuse, Syracuse - - Proposed Hotel, Watertown North Carolina - - Proposed Inn, Chapel Hill - - Proposed Indep. Center Marriott Hotel, Charlotte - - Royce Hotel, Charlotte - - Howard Johnson's North, Charlotte HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) North Carolina (continued) - - Holiday Inn West, Durham - - Sheraton University Inn, Durham - - Holiday Inn, Fayetteville - - Holiday Inn Downtown, Raleigh Ohio - - Proposed Hyatt Hotel, Cleveland - - Proposed Marriott Hotel, Cleveland Oregon - - Holiday Inn Airport, Portland - - Holiday Inn South, Portland Pennsylvania - - Quality Inn, Allentown - - Holiday Inn, Bensalem - - Proposed Marriott Courtyard, Devon - - Proposed Lafayette Inn, Easton - - Ramada Inn, Erie - - Holiday Inn, Harrisburg - - Marriott Hotel, Harrisburg - - Proposed Super 8, Harrisburg - - Proposed Super 8, Lancaster - - Holiday Inn West, Monroeville - - Days Inn Philadelphia - - Franklin Plaza Hotel, Philadelphia - - Franklin Towne EconoLodge, Philadelphia - - Guest Quarters Hotel, Philadelphia - - Hilton Inn, Northeast, Philadelphia - - Marriott Airport Hotel, Philadelphia - - Holiday Inn Greentree, Pittsburgh - - Holiday Inn Parkway East, Pittsburgh - - Holiday Inn North, Pittsburgh - - Holiday Inn Parkway West, Pittsburgh - - Proposed Hotel, Pittsburgh - - Royce Hotel, Pittsburgh - - Westin William Penn Hotel, Pittsburgh - - Hilton Hotel, Scranton - - Proposed Marriott Courtyard, Valley Forge - - Holiday Inn Meadowlands, Washington - - Ramada Inn, York - - Proposed Super 8, York Rhode Island - - Proposed Hotel, Providence - - Omni Biltmore Hotel, Providence South Carolina - - Proposed Charleston Center Hotel, Charleston - - Proposed Cooper River Inn, Charleston - - Howard Johnson's, Spartanburg - - Proposed Middleton Inn and Conference Center, Charleston - - Best Western, North Charleston - - Proposed Marriott Courtyard, Columbia - - Fairfield Inn, Florence - - Holiday Inn, Florence - - Fairfield Inn, Greenville - - Proposed Marriott Courtyard, Greenville - - Fairfield Inn, Hilton Head - - Holiday Inn, Hilton Head Tennessee - - Hampton Inn, Brentwood - - Proposed Marriott Courtyard, Brentwood - - Howard Johnson's, Chattanooga - - Sheraton Hotel, Chattanooga - - Howard Johnson's, Knoxville - - Proposed Capital Mall Convention Center Hotel, Nashville - - Clarion Maxwell House, Nashville - - Holiday Inn Briley Parkway, Nashville - - Proposed Marriott Courtyard, Nashville - - Sheraton Music City, Nashville - - Stouffer's Nashville Hotel, Nashville - - Proposed Super 8, Nashville - - Union Station Hotel, Nashville - - Wyndham Garden Hotel, Nashville - - Proposed Super 8, Union City HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Texas - - Proposed Marriott Courtyard, Addison - - Proposed Marriott Courtyard, Arlington - - La Mansion, Austin - - Proposed Marriott Courtyard, Bedford - - Airport Hilton, El Paso - - Hotel Meridien, Houston - - Sheraton Hotel, Houston - - Proposed Marriott Courtyard, Las Colinas - - Proposed Marriott Courtyard, North Dallas - - La Mansion Del Norte, San Antonio - - La Mansion Del Rio, San Antonio - - Proposed Marriott Courtyard, San Antonio - - Proposed Marriott Courtyard - Medical Center, San Antonio Utah - - Deer Valley Resort, Park City - - Hilton Inn, Salt Lake City - - Holiday Inn, Salt Lake City - - Sheraton Hotel, Salt Lake City Virginia - - Mountain Lake Hotel, Blacksburg - - Howard Johnson's, Bristol - - Boars Head Inn, Charlottesville - - Proposed Fairfield Inn, Hampton - - Proposed Embassy Suites, Herndon - - Ramada Renaissance, Herndon - - Proposed Marriott Courtyard, Manassas - - Omni Hotel, Norfolk Virginia (continued) - - Proposed Marriott, Norfolk - - Howard Johnson's, Richmond - - Howard Johnson's, Roanoke - - Howard Johnson's, Roanoke Rapids - - Wyndham Hotel, Williamsburg Washington - - Wyndham Garden Hotel, Bothell - - Redmond Hotel, Redmond - - Wyndham Garden Hotel, SeaTac West Virginia Proposed Budget Motel, Princeton Wisconsin - - Proposed Granada Royale, Green Bay - - Holiday Inn-Downtown, Green Bay Canada - - Inn on the Park, Toronto Puerto Rico - - Carib Inn, San Juan Virgin Islands - - Virgin Grand Beach Hotel, St. Thomas Jamaica - - Holiday Inn, Montego Bay HVS International, Miami, Florida Qualifications of Thomas F. O'Neill, MAI, ISHC, CHA - -------------------------------------------------------------------------------- ============= HVS International (Miami) HVS Suite 600, Grand Bay Plaza - ------------- 2665 South Bayshore Drive INTERNATIONAL Miami, Florida 33133 ============= 305-856-7560 ================================================================================ Thomas F. O'Neill, MAI, ISHC, CHA Employment June 1992 to present HVS INTERNATIONAL (MIAMI) (Division of O & R Valuation Services, Inc.) Managing Director Miami, Florida 1986-1992 HOSPITALITY VALUATION SERVICES (Division of Hotel Appraisals, Inc.) Senior Vice President Mineola, NY 1975 - 1985 ROSE HILL HOTEL, LTD. Managing Director Kilkenny City, Ireland (Owned, Developed and Operated Hotel and Restaurants) 1974 GRAND HOTEL Restaurants Manager Anaheim, California 1973 GROSSINGER'S HOTEL Liberty, New York 1971-1972 BAHNHOF BUFFETS Basel, Switzerland Professional Affiliations Appraisal Institute - Member (MAI) International Society of Hospitality Consultants (ISHC) American Hotel & Motel Association - Certified Hotel Administrator (CHA) Licensed Real Estate Salesperson - New York Licensed Real Estate Appraiser - Florida Licensed Real Estate Appraiser - Georgia Licensed Real Estate Broker - Florida Licensed Mortgage Broker - Florida HVS International, Miami, Florida Qualifications of Thomas F. O'Neill, MAI, ISHC, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Education Appraisal Institute Course 1A1 Real Estate Appraisal Principles Course 1A2 Basic Valuation Procedures Course 2-3/8/3 - Standards of Professional Practice Course 1BA - Capitalization Theory and Techniques, Part A Course 1BB - Capitalization Theory and Techniques, Part B Course 2-1 - Case Studies in Real Estate Valuation Course 2-2- Report Writing and Valuation Analysis Demonstration Appraisal Report New York University Master of Science Degree - Real Estate Development and Investment BS Equivalent - Shannon International College of Hotel Management AAS - Sullivan County Community College Hotel Administration - Cornell University Hotel Management Training Program Honors Certificate - Switzerland New York University, School of Continuing Education, Real Estate Division - Department of Graduate Studies Conferences & Lectures U.S./Latin American Resort Development Conference, San Jose, Costa Rica, 1995, 1996 - Speaker on Feasibility of Resort Development Preferred(R) Hotels & Resorts Worldwide Mid-Year Meeting, Orlando, Florida, 1996 - Speaker on the State of the Hotel Industry HVS International, Miami, Florida Qualifications of Thomas F. O'Neill, MAI, ISHC, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Litigation Support Lake Park Inn, Lake Park, Florida Balhalla Hotel, Toledo, Ohio Lord Baltimore, Baltimore, Maryland Proposed Hotel, Ft. Myers, Florida Radisson on the Lake, Ypsilanti, Michigan Hyatt Regency, Miami, Florida Days Inn, Miami, Florida La Concha Hotel, Key West, Florida Embassy Suites Jamaican Court, Orlando Appearance as an Expert Witness U.S. Bankruptcy Court, Eastern District of Michigan, Southern Division 1993 U.S. Bankruptcy Court, Southern District of Florida, 1993 - 1994 U.S. Bankruptcy Court, Southern District of Florida, 1996 U.S. Bankruptcy Court for the Middle District of Florida, Orlando Division, 1996 Examples of Corporate and Institutional Clients Served Aetna Real Estate Investments AIRCOA Alfa Insurance Companies American Savings Bank FSB American Bankers Insurance America's Best Inns, Inc. Amway Hotel Corporation Antunez and Associates, Inc. Avista Properties Bank of Nova Scotia Bank of Scotland Bank of Tokyo Trust Company Bank One Banker's Trust Company Barcelo Hotels Barnett Banks, Inc. Belize Hotel Developments Ltd. Ben Franklin Properties Best Inns, Inc. Best Western Boston Copley Plaza Hotel Brandon Financial Corporation The Broadstone Group Buckhead America Corporation Buena Vista Hospitality Group Carlisle Capital Markets Carlyle Construction Chartwel] Leisure Cheeca Associates Chemical Real Estate Finance Group Cbippewa Indians Choice Hotels Chrysler Capital Corporation CIGNA Corporation Citibank, N.A. Collateral Mortgage Ltd. Column Financial Inc. Connor/Jacobsen Hotels Corporacion Financiera del Norte, Colombia CreditVest, Inc. Dahlawi Holding Corporation Daiwa Bank, Ltd. Dan Hotels Corporation, Inc. DBS Bank Delta Associates Desarrolllos Inmobiliarios S.A. HVS International, Miami, Florida Qualifications of Thomas F. O'Neill, MAI, ISHC, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Corporate and Institutional Clients Served (contd) The Development Bank of Singapore, Ltd Doubletree Embassy Suites Ernst & Young Euram Management, Inc. FDIC Fiduciaria Carceres y Ferro S.A. Fiducoldex First Capital Decisions First National Bank - Bartlesville First Noble Capital, Inc. First Union National Bank of Florida First Toronto - Canada Corporation The Flatley Company City of Gadsden, Alabama Gate Petroleum Company GATX Realty Corporation Ginsburg, Feldman & Bress Goldman Sachs Granite Development Corporation Greater Capital Corporation Greenberg, Traurig, Attorneys at Law Grupo Roble International Harkins Associates, Inc. HAMDA as contractor for RTC The Hampstead Group Hart Advisers, Inc. The Hayman Company HCF Group, Inc. Heartland Federal Savings & Loan Hebb & Gitlin Heller Real Estate Financial Services Hill, Ward & Henderson, P.A. Hilton Hotels Corp. Hilton International Hobb & Gitlin Hodges Ward Elliott Holguines, S.A. Holiday Inns, Inc. Hospitality 1st Host Marriott Corporation Hotel Asset Management Disposition Associates (HAMDA) Hotel Cabanas Tikal Hotel El Olivar de San Isidro Hoteles Barcelo, S.A. Hoteles Estelar Howard Savings Bank Hudson Hotels Corporation Innkeepers USA Trust Inmobiliaria El Punte Inteconsa Inter-Continental Global Partner Hotels & Resorts Inter-Continental Hotels Interstate Hotel Corporation Interstate Management and Investment Corporation International Bank of Commerce International Hotel -Management Corp. International Union of Bricklayers/Craftworkers Inversiones Turistione El Mirador S.A. Kimberley Development The Jockey Club The John Drew Company John Hancock Properties, Inc. Karena/Samoth USA Kennedy Wilson, Inc. Kimberley Development Khouri International Construction Kozyak, Tropin, Throckmorton KPMG Peat Marwick Larco Mar S.A. Larken, Inc. Lee County Attorney's Office Lehman Brothers Lehndorff Toronto LET SA Lexington Mortgage Company Lowe Enterprises, Inc. MAC, N.A. HVS International, Miami, Florida Qualifications of Thomas F. O'Neill, MAI, ISHC, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Corporate and Institutional Clients Served (contd) Majestic Towers Marine Midland Bank Market View International Marriott Corporation Marriott International Marriott Ownership Resorts, Inc. Massachusetts Financial Services Mellon Bank Metro Hotels, Inc. Metro U.S., Inc. Metropolitan Life Michigan Department of Treasury Mills Corporation Morgan Stanley Mortgage Capital, Inc. Morgan Stanley Realty Morgans Hotel Group Motels of America National Westminster Bank PLC NationsBank NCNB National Bank of Florida Niagara Asset Corporation Nomura Asset Capital Corporation Ocean Bank OPIC Orlando Plaza Partners Paramount, Inc. Patriot American Hospitality PB Surf Limited P&T Investment Advisors Inc. Pension Fund Advisors, Inc. Peoples Security Insurance/Providian Pepper, Hamilton, Sheetz Perpetual Real Estate Services POSADAS de Mexico Price Waterhouse, Belize Prime American Realty Corp. Prime Hospitality Corporation Promotora Arkus Promotora El Faro de Cartagena Putnam Management Company Rafael Hotels Limited USA Raffles Hotels and Inns Rahn Properties, Inc. Red Roof Inns, Inc. Residence Inns Resort Advisors International, Inc. RHW Companies, Inc. River Drive Development Corp. Royce Blackstone Development Corp. RTV Raleigh, Inc. Salomon Brothers Inc Sanwa Bank Seaport Hotel Venture Seaway Hotels Corporation Selecta/Hilton International Servico, Inc. Sidetur Lrda. Smith Barney Harris Upham & Co., Inc. Sportsman Marina and Lodge Starwood Capital Group, LLC Starwood Lodging Corporation Sumitomo Bank, Ltd. SunBank/Miami, N.A. Sunil Patel Super 8, Inc. Thomas Edison Inns, Inc. Thurcon Properties, Ltd. Tonosal S.A. Unibolsa, SA United Capital Holdings Urbanas, S.A. Vista Host, Inc. Weichert New Homes and Land White Lodging Services Corp. Wilmington Savings Fund Society Winston Hotels Wolfson & Tsarkman Zalkin, Rodin and Goodman HVS International, Miami, Florida Qualifications of Thomas F. O'Neill, MAI, ISHC, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated Alabama - - Holiday Inn, Birmingham - - Knights Inn, Birmingham - - Marriott Courtyard - Homewood, Birmingham - - Marriott Courtyard - Hoover, Birmingham - - Proposed Convention Center Hotel, Gadsden - - Holiday Inn Express, Gadsden - - Holiday Inn, Dothan - - Hampton Inn, Dothan - - Holiday Inn, Sheffield - - Residence Inn, Birmingham - - The Tutwiler Hotel, Birmingham Arizona - - Embassy Suites, Phoenix - - The Lodge & Club at Ventana Canyon, Tucson - - The Boulders, Carefree Arkansas - - Marriott Courtyard, Little Rock - - Holiday Inn, Texarkana - - Hampton Inn, Searcy California - - Hyatt Newporter Hotel, Newport Beach - - Residence Inn, Pleasant Hill - - Residence Inn, San Ramon - - Residence Inn, Torrance - - Fullerton Suites, Fullerton - - Del Mar Hilton, Del Mar - - Pickwick Hotel, San Francisco - - Carmel Valley Ranch Resort, Carmel Colorado - - Raffles Hotel, Aurora - - Proposed AmeriSuites, Colorado Springs - - Inverness Hotel & Golf Club, Denver - - AmeriSuites, Colorado Springs - - The Peaks at Telluride, Telluride Connecticut - - Holiday Inn, East Hartford - - Holiday Inn, New Haven - - Radisson Hotel, New London - - Stratford Motor Lodge, Stratford - - Stamford Hilton, Stamford Florida - - Amelia Island Plantation, Amelia Island - - Boca Raton Resort and Hotel, Boca Raton - - Residence Inn, Boca Raton - - Proposed AmeriSuites, Boca Raton - - Deerfield Beach/Boca Raton Hilton - - Holiday Inn, Boynton Beach - - Boynton Marina Place, Boynton Beach - - Hampton Inn - Clearwater - - Holiday Inn - Clearwater - - Biltmore Hotel, Coral Gables - - Holiday Inn - Coral Gables - - David William Hotel, Coral Gables - - Howard Johnsons Pirates Cove - Daytona - - Holiday Inn-Sunspree, Daytona Beach - - Knights Inn, Florida City - - Comfort Suites, Fort Lauderdale - - Proposed Wellesley Inn, Sawgrass, Ft. Lauderdale - - Marriott's Harbor Beach, Ft. Lauderdale - - Marriott Hotel & Marina, Fort Lauderdale - - Bonaventure Spa & Resort, Fort Lauderdale - - Bonaventure Golf Course, Ft. Lauderdale HVS International, Miami, Florida Qualifications of Thomas F. O'Neill, MAI, ISHC, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (Cont'd) Florida - - Sheraton Execuport, Fort Lauderdale - - Sheraton Ft. Lauderdale Airport Hilton, Ft. Lauderdale - - Cypress Creek Inn, Ft. Lauderdale - - Holiday Inn, Ft. Lauderdale by the Sea - - Hilton Hotel/Retail Development, Ft. Lauderdale - - Holiday Inn, Plantation - - The Sheraton Suites, Plantation - - Wellesley Inn - Plantation - - Proposed Residence Inn, Plantation - - Holiday Inn, Pompano Beach - - Proposed Hotel and Convention Center, Fort Myers - - Holiday Inn, Fort Myers - - Wellesley Inn, Fort Myers - - Holiday Inn, Fort Walton Beach - - Fairfield Inn, Gainesville - - Quality Suites Oceanside, Indialantic - - Cheeca Lodge, Islamorada - - Best Inn, Jacksonville - - Proposed Compri, Jacksonville - - Courtyard by Marriott, Jacksonville - - Hampton Inn, Jacksonville - - Residence Inn, Jacksonville - - Ponte Vedra Inn & Convention Center - - Holiday Inn Sunspree, Jacksonville Beach - - Red Roof Inn - Jacksonville - - Sheraton Beach Hotel, Jensen Beach - - Wellesley Inn - Jupiter - - Hyatt Hotel, Key West - - Holiday Inn - La Concha, Key West - - The Reach Hotel, Key West - - Fairfield Inn by Marriott, Key West - - Marriott Casa Marina, Key West - - Flagship Inn, Lake County - - Proposed Hampton Inn, Lakeland - - Lake Park Inn, Lake Park - - Proposed Sheraton Suites, Marco Island - - Melbourne Beach Hilton Oceanfront, Melbourne - - Courtyard by Mariott, Melbourne - - Days Inn - Miami Airport, Miami - - Wellesley Inn - Miami Airport - - Ramada MIA Hotel, Miami - - Proposed Hampton Inn, Miami - - Holiday Inn - Civic Center, Miami - - Hotel Inter-Continental, Miami - - Hyatt Regency Hotel, Miami - - Proposed Amerisuites, Miami - - Days Inn - Civic Center, Miami - - Hotel Sofitel, Miami - - Doral Golf Resort & Spa, Miami - - Proposed Jockey Club Hotel, Miami - - Proposed AmeriSuites, Kendall, Miami - - Holiday Inn Golden Glades, Miami - - Holiday Inn, MIA, Miami - - Courtyard by Marriott, Miami - - Fairfield Inn, Miami - - Proposed Suite Hotel, Miami - - Proposed Hampton Inn- Coconut Grove HVS International, Miami, Florida Qualifications of Thomas F. O'Neill, MAI, ISHC, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (Cont'd) Florida - - Don Shula's Hotel & Club, Miami Lakes - - Turnberry Isle Resort & Club, North Miami - - Days Inn, Surfside Beach - - Palms Resort on the Ocean, Surfside - - Delano Hotel, Miami Beach - - Doral Ocean Beach Resort, Miami Beach - - Shelborne Beach Hotel, Miami Beach - - Crescent Timeshare, Miami Beach - - Proposed Sheraton Suites, Miami Beach - - The Alexander Hotel, Miami Beach - - Proposed Westin, Miami Beach - - Royal Palm Hotel, Miami Beach - - Quality Inn, Naples - - Wellesley Inn - Naples - - Hampton Inn, Naples - - Hilton Hotel, N. Redington Beach - - Orlando Hampton Inn, Kissimmee - - Quality Suites - Maingate East, Kissimmee - - Comfort Inn, Kissimmee - - Comfort Suites, Kissimmee - - Buena Vista Palace, Lake Buena Vista - - Courtyard by Marriott, Orlando Airport - - Courtyard by Marriott, Orlando International - - Days Inn - International Drive, Orlando - - Proposed Wellesley Inn, Orlando - - Marriott's World Center, Orlando - - Heritage Inn, Orlando - - Sheraton Maitland Hotel, Orlando - - Holiday Inn Sunspree, Orlando - - Melia Suites, Orlando - - Proposed Doubletree, Orlando - - Embassy Suites, Orlando - - Ramada Resort, Orlando - - Holiday Inn Maingate, Orlando - - Econolodge Maingate East, Orlando - - Econolodge Hawaiian Resort, Orlando - - Ramada Westgate, Orlando - - Holiday Inn Express (I Drive), Orlando - - Comfort Inn - Orlando - - Embassy Suites Jamaican Court, Orlando - - Doubletree Hotel, Orlando - - Days Inn, Orlando - - Proposed Hampton Inn Maingate West, Orlando - - Howard Johnson Maingate, Orlando - - Fairfield Inn, Orlando - - Fairfield Inn Orlando/South, Orlando - - Proposed Convention Hotel, Orlando - - Embassy Suites, Palm Beach Gardens - - Marriott's Bay Point, Panama City - - Residence Inn, Pensacola - - Hampton Inn, Pensacola - - Holiday Inn Express, Pensacola - - Holiday Inn - Gulf Breeze, Pensacola - - Holiday Inn, Pensacola - - Proposed Hampton Inn, Pensacola Beach - - Holiday Inn Express, Pensacola - - Wellesley Inn - Sarasota - - Proposed Sheraton Hotel, Sarasota - - Proposed Hotel, Sebastian - - Holiday Inn, Sebring - - Masters Economy Inn, Seffner - - Vacant Land, Singer Island - - Holiday Inn, Singer Island - - Radisson Resort, Singer Island - - Holiday Inn, St. Augustine - - Days Inn - Starke HVS International, Miami, Florida Qualifications of Thomas F. O'Neill, MAI, ISHC, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (Cont'd) Florida - - Majestic Towers ACLF, St. Petersburg - - Residence Inn, St. Petersburg - - Indian River Plantation, Stuart - - Holiday Inn Sabal Park, Tampa - - Omni Tampa at Westshore, Tampa - - Proposed Courtyard, Tampa - - Proposed Holiday Inn, Tampa - - Proposed Fairfield Inn, Tampa - - Proposed Holiday Inn Express, Tampa - - Safety Harbor Spa, Safety Harbor - - Doubletree Hotel, Tampa - - Best Inn, Tallahassee - - Sheraton, Tallahassee - - Red Roof Inn - Tallahassee - - Holiday Inn Capitol Plaza, Tallahassee - - Courtyard by Marriott, Tallahassee - - Holiday Inn - Countryside, Vero Beach - - Holiday Inn - Oceanside, Vero Beach - - Wellesley Inn - West Palm Beach - - Palm Beach Hilton and Resort, West Palm Beach - - Hampton Inn, West Palm Beach - - Proposed Best Western, Yulee - - Masters Economy Inn, Zephyrhills Georgia - - Castlegate Hotel and Conference Center, Atlanta - - Fairfield, Atlanta Airport - - Hyatt Hotel, Atlanta Airport - - Fairfield, Atlanta Northlake - - Fairfield, Atlanta Northwest - - Fairfield, Atlanta Gwinnett - - Fairfield, Atlanta Peachtree - - Fairfield, Atlanta Southlake - - Proposed Hampton Inn, Buckhead - - Residence Inn, Buckhead - - Holiday Inn, Brunswick - - Residence Inn, Cumberland - - Residence Inn, Dunwoody - - Holiday Inn, Jekyll Island - - Jekyll Inn, Jekyll Island - - Masters Economy Inn, Macon - - Masters Economy Inn, McDonough - - Masters Economy Inn, Six Flags - - Masters Economy Inn, Tiffon - - Masters Economy Inn, Warner-Robins - - Proposed AmeriSuites, Atlanta - - Peachtree Conference Center, Atlanta - - Proposed AmeriSuites, Buckhead - - Holiday Inn - Conference Center, Decatur - - Holiday Inn Lenox, Atlanta - - Hampton Inn & Suites, Atlanta - - Hampton Inn Perimeter Mall, Atlanta - - Red Roof Inn - Atlanta Illinois - - Holiday Inn-Champaign, Champaign - - Lenox House, Chicago - - Orrington Hotel, Evanston - - Red Roof Inn - Rockford - - AmeriSuites - Hoffman - - Holiday Inn, Des Plaines - - Radisson Northbrook - - Holiday Inn, Matteson - - The Tremont House, Chicago Indiana - - Knights Inn, Indianapolis - - Knights Inn, Richmond - - Omni Severin Hotel, Indianapolis HVS International, Miami, Florida Qualifications of Thomas F. O'Neill, MAI, ISHC, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (Cont'd) Iowa - - Residence Inn, Clive Kansas - - Marriott Courtyard, Overland Park - - Former Sheraton Hotel, Wichita - - Residence Inn, Overland Park Kansas - - AmeriSuites, Topeka - - Radisson, Overland Park Kentucky - - Proposed Thomas Moore Hotel and Conference Center, Crestview Hills - - Holiday Inn, Corbin - - Hilton Hotel, Florence - - Hyatt Regency, Lexington Louisiana - - Residence Inn, Baton Rouge - - Holiday Inn, Alexandria - - Best Western Hotel, Lafayette - - AmeriSuites, Baton Rouge Maine - - Hampton Inn, South Portland - - Sheraton Tara, South Portland Maryland - - Holiday Inn - Belmont Boulevard, Baltimore - - Holiday Inn - Cromwell Bridge Road, Baltimore - - Holiday Inn - Glen Burnie, Baltimore - - Holiday Inn - Inner Harbor Downtown, Baltimore - - Holiday Inn - International Airport, Baltimore - - Holiday Inn - Moravia Road, Baltimore - - Proposed AmeriSuites, Baltimore - - Days Inn, Easton - - Residence Inn, Cockeysville Maryland - - Red Roof Inn - Chesapeake Massachusetts - - Back Bay Hilton, Boston - - Copley Plaza Hotel, Boston - - Tremont House Hotel, Boston - - Marriott Hotel, Worcester - - Proposed World Trade Center Hotel, Boston Michigan - - Knights Inn, Battle Creek - - Knights Inn, Flint - - Quality Suites, Lansing - - Knights Inn, Monroe - - Radisson Resort & Conference Center, Ypsilanti - - Residence Inn, Ann Arbor - - Proposed AmeriSuites, Detroit - - Thomas Edison Inns, various locations - - Wyndham, Wood Dale - - Wyndham, Novi - - Proposed Hampton Inn, Port Huron Minnesota - - Embassy Suites, Bloomington - - Northland Inn & Exec. Conf. Ctr., Minneapolis Missouri - - Super 8, Independence - - Super 8, Liberty - - Super 8, North Kansas City - - Super 8, St. Joseph - - St. Louis Airport Hilton, St. Louis - - Elms Hotel, Excelsior Springs - - Residence Inn, Kansas City - - Red Roof Inn - Springfield - - Red Roof Inn - Kansas City - - Mayfair Suites, St. Louis HVS International, Miami, Florida Qualifications of Thomas F. O'Neill, MAI, ISHC, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (Cont'd) Mississippi - - Residence Inn, Jackson - - Red Roof Inn - Jackson Nebraska - - Residence Inn, Lincoln - - Famingo Inn, South Sioux City New Jersey - - Best Western Whittier, Egg Harbor - - Proposed Marriott Suite Hotel, Elmwood Park - - Envoy Inn, Tinton Falls - - Sunrise Suite Hotel, Tinton Falls - - Red Roof Inn - Seacaucus (Meadowlands) - - Princeton Marriott, Princeton - - Proposed AmeriSuites, Secaucus Nevada - - Proposed AmeriSuites, Las Vegas New York - - Hilton Hotel, Albany - - Marriott Hotel, Albany - - Marriott Hotel - LaGuardia Airport, Flushing - - Howard Johnson, Latham - - Proposed Courtyard by Marriott, Manhattan - - Proposed Econo Lodge, Manhattan - - Proposed Greenwich Street Hotel, Manhattan - - Proposed Journey's End, Manhattan - - Proposed Ramada Hotel & owers, Manhattan North Carolina - - Sheraton Motor Inn, Asheville - - Days Inn - Asheville - - Radisson Plaza Hotel, Raleigh - - Proposed AmeriSuites, Greensboro - - Doubletree Hotel, Raleigh/Durham - - Holiday Inn, Fayetteville - - Homewood Suites, Cary - - Courtyard - Wilmington - - Red Roof Inn - Greensboro North Dakota - - Proposed Ramada Inn, Fargo - - Ramada Hotel, Fargo Ohio - - Aurora Inn, Aurora - - Pine Lake Trout Club, Aurora - - Sheraton Inn, Aurora - - Knights Inn Columbus - - Hilton South Resort, Cleveland - - Proposed AmeriSuites, Cleveland - - Knights Inn, Dayton - - Knights Inn, Sharonville - - Balhalla Hotel, Toledo - - Holiday Inn - Southwest, Toledo - - Marriott Portside, Toledo Oklahoma - - Residence at the Trails Inn, Norman - - Proposed AmeriSuites, Oklahoma City - - Tulsa Doubletree, Tulsa Oregon - - Holiday Inn - Crowne Plaza, Portland Pennsylvania - - Holiday Inn - Hazelton - - Holiday Inn - Rt. 30E, Lancaster - - Holiday Inn - Rt. 501, Lancaster - - Bellevue Stratford, Philadelphia - - Philadelphia Airport Marriott, Philadelphia - - Holiday Inn - Market Street, York - - Holiday Inn - I - 83 & Rt. 30, York - - Residence Inn, Philadelphia - - Howard Johnson Lodge, Erie - - Red Roof Inn - Philadelphia - - Red Roof Inn - Monroeville HVS International, Miami, Florida Qualifications of Thomas F. O'Neill, MAI, ISHC, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (Cont'd) South Carolina - - Holiday Inn, Florence - - Holiday Inn, Hilton Head - - Proposed Residence Inn, Hilton Head - - Coral Beach Resort, Myrtle Beach South Dakota - - Foothills Inn, Rapid City - - Ramada Inn, Rapid City - - Quality Inn, Rapid City Tennessee - - Holiday Inn - East, Memphis - - Holiday Inn - Nashville - - Holiday Inn - Knoxville - - Holiday Inn - I-40/Sycamore View, Memphis - - Residence Inn - Memphis East - - Red Roof Inn - Knoxville - - Red Roof Inn - Memphis - - Proposed Microtel, Knoxville - - Union Station Hotel, Nashville Texas - - Proposed Marriott Courtyard, Arlington - - Proposed Marriott Courtyard, Bedford - - Proposed Marriott Courtyard, Irving - - Holiday Inn - Orange, Orange - - Proposed Marriott - River Center, San Antonio - - Holiday Inn, San Marcos - - Holiday Inn - Austin - - Holiday Inn - San Antonio - - Hilton Executive Conference Ctr, Dallas - - Hampton Inn - Austin - - Hampton Inn - Arlington - - Hampton Inn - Garland - - Red Roof Inn - Dallas (East) - - Red Roof Inn - Dallas (Market Center) - - Hampton Inn - DFW Airport - - Arlington Hilton, Arlington - - Microtel Hotel, Arlington - - Microtel Hotel, Irving - - Microtel Hotel, Plano - - Doubletree Allen Center-Houston - - Proposed AmeriSuites-Hulen Mall, Ft. Worth - - Proposed AmeriSuites-Fossil Creek, Ft. Worth - - Proposed Country Inn and Suites, McAllen Virginia - - Proposed Embassy Suites, Alexandria - - Radisson Hotel, Richmond - - Embassy Suites, Tysons Corner - - Wellesley Inn, Chesapeake - - Proposed AmeriSuites, Richmond - - Radisson Hotel at Mark Center, Alexandria - - Proposed AmeriSuites, Roanoke - - Residence Inn, Herndon Washington, D.C. - - Marriott Gateway Wisconsin - - Holiday Inn, Eau Claire - - Holiday Inn Gateway, Wausau HVS International, Miami, Florida Qualifications of Thomas F. O'Neill, MAI, ISHC, CHA - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ LATIN AMERICA Examples of Hotels Appraised or Evaluated Argentina - - Proposed Limited Service Hotels, various locations Colombia - - Proposed Cosmos Hotel, Barranquilla - - Proposed Charleston Hotel, Barranquilla - - Proposed Centro Holguines Hotel, Bogota - - Park Hyatt - Bogota - - Paipa Hotel & Convention Center, Boyaca - - Proposed Resort & Timeshare, Bucaramanga - - Proposed Chipichape Hotel & Convention Center, Cali - - Cartagena Hilton Hotel, Cartagena - - Proposed Indian Sea and Sun Resort, Cartagena - - Proposed El Faro Hotel & Golf Resort, Cartagena - - Hotel El Isleno, San Andres - - Santamar Hotel & Convention Center, Santa Marta - - Proposed La Ensenaza, Bogota Costa Rica - - Camino Real, San Jose - - Proposed Airport Hotel, San Jose Ecuador - - Proposed Molly Penny, Quito - - Proposed Molly Penny, Guayaquil Guatemala - - Proposed Intercontinental Hotel, Guatemala City - - Proposed Tikal Resort, Timeshare & Ecological Park, Santa Elena, Peten Mexico - - Karmina Palace, Manzanillo - - Proposed Hotel, Los Cabos - - Proposed Hyatt Grand, Mexico City Peru - - Larco Mar Hotel, Lima - - Hotel El Mirador, Cuzco - - Hotel El Olivar de San Isidro, Lima Uruguay - - Proposed Sheraton Hotel, Montevideo - - Proposed Hotel & Timeshare, Punta del Este THE CARIBBEAN Bahamas - - Pirate's Cove Holiday Inn Sunspree, Paradise Island, Nassau - - Hotel & Casino, Grand Turk Island Belize - - Journey's End Caribbean Club, Ambergis Caye - - Ramada Royal Reef, Belize City British West Indies - -The Mariners, Anguilla British Virgin Islands - - Peter Island Resort Netherland Antilles - - Van der Valk Plaza, Curacao St. Croix, U.S. Virgin Islands - - Proposed Hotel and Condominium St. Martin - - Happy Bay Resort Hotel This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. ============= HVS - ------------- International ============= ================================================================================ ------------------------------- Economic Study and Appraisal ------------------------------- Newark/Fremont Hilton ------------------------------- Newark, California ------------------------------- Prepared by: Hospitality Valuation Services A Division of Hotel Consulting Services, Inc. 372 Willis Avenue Mineola, NY 11501 516-248-8828 Submitted to: Mr. Shirish Godbole Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, NY 10036 [LETTERHEAD OF HVS INTERNATIONAL HOSPITALITY VALUATION SERVICES] 1 December 31, 1996 Mr. Shirish Godbole Morgan Stanley Mortgage Capital, Inc. 1585 Broadway New York, New York 10036 Re: Newark/Fremont Hilton Newark, California Ref. # 964217 Dear Mr. Godbole: Pursuant to your request, we herewith submit our economic study and appraisal pertaining to the above-captioned property. We have inspected the site and facilities and analyzed the hostelry market conditions in the Alameda County area. Our report was prepared in accordance with, and is subject to, the requirements of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and the Uniform Standards of Professional Practice (USPAP), as provided by the Appraisal Institute. Based on the available data, our analysis, and our experience in the hotel industry, it is our opinion that the market value of the fee simple interest in the subject property described in this report, as of January 1, 1997, is: $21,800,000 TWENTY-ONE MILLION EIGHT HUNDRED THOUSAND DOLLARS We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings and valuation. The economic study and appraisal is made part hereof, and must remain attached in order for the value opinion set forth to be considered valid. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. Very truly yours, HVS International A Division of Hotel Consulting Services, Inc. /s/ Stephen L. Chan Stephen L. Chan Associate /s/ Anne R. Lloyd-Jones Anne R. Lloyd-Jones, CRE Senior Vice President /s/ Suzanne R. Mellen Suzanne R. Mellen, CRE, MAI Managing Director SLC:ARL-J: SRM: nkw HVS International, Mineola, New York Table of Contents - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table of Contents 1. Executive Summary ........................................ 1 2. Nature of the Assignment ................................. 3 3. Description of the Land, Improvements, Zoning, Taxes, and Neighborhood .......................... 7 4. Market Area Analysis ..................................... 24 5. Overview of External Forces Affecting the U.S. Lodging Industry .................................... 39 6. Lodging Market Supply and Demand Analysis ................ 55 7. Projection of Occupancy and Average Rate ................. 77 8. Highest and Best Use ..................................... 95 9. Approaches to Value ...................................... 97 10. Income Capitalization Approach ........................... 100 11. Sales Comparison Approach ................................ 139 12. Cost Approach ............................................ 151 13. Reconciliation of Value Indications ...................... 157 14. Statement of Assumptions and Limiting Conditions ......... 161 15. Certification ............................................ 165 Addenda Quality Assurance Photographs of the Subject Property and Competitors Legal Description Synopsis of Hotel Management Agreement Explanation of the Simultaneous Valuation Formula Qualifications Stephen L. Chan Anne R. Lloyd-Jones, CRE Suzanne R. Mellen, CRE, MAI HVS International, Mineola, New York Executive Summary 1 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 1. Executive Summary Property: Newark/Fremont Hilton Location: 39900 Balentine Drive Newark, California 94560 Date of Inspection: October 16, 1996 Interest Appraised: fee simple, including land and improvements Date of Value: January 1, 1997 Land Description - ---------------- Area: +/-7.77 acres, or +/-338,500 square feet Zoning: A - Agricultural District Assessor's Parcel Number: 901-194-5, Parcel 1, and 901-194-3, Parcel 3 Improvements Description - ------------------------ Age: Constructed in 1984 Property Type: first-class Guestrooms: 311 Number of Stories: Main Building: eight, including storage space and elevator cab housing on eighth floor Pool Courtyard: two stories Garden Courtyard: three stories on one wing, and two stories on the remaining two wings Food and Beverage Facilities: Balentine's Restaurant and Lounge Meeting Space: Nine rooms, 10,170 square feet Parking: 420 spaces (surface) Summary of Value Parameters - --------------------------- Highest and Best Use (as if vacant): Hold for future development Highest and Best Use (as improved): Transient lodgin facility Marketing Period: Six to nine months Number of Years to Stabilize: three Stabilized Year: 1999 HVS International, Mineola, New York Executive Summary 2 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Valuation Assumptions - --------------------- Mortgage Interest Rate: 9.50% Amortization Period: 20 years Debt Service Constant: .111856 Loan-to-Value Ratio: 70% Stabilized Inflation Rate: 3.5% Equity Yield Rate: 21.0% Terminal Capitalization Rate: 12.6% Brokerage and Legal Fees: 3.0% Holding Period: ten years Calculated Discount Rate: 14.02% Estimates of Value - ------------------ Income Capitalization Approach: $21,500,000 Sales Comparison Approach: $16,600,000 - $23,300,000 Cost Approach (Replacement Cost): $32,500,000 Market Value Conclusion: $21,800,000 Market Value Conclusion per Room: $70,100 HVS International, Mineola, New York Nature of the Assignment 3 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 2. Nature of the Assignment Subject of the Economic Study and Appraisal The subject of the economic study and appraisal is the fee simple interest in a 1338,500-square-foot (17.77-acre) parcel improved with a 311-room, first-class lodging facility known as the Newark/Fremont Hilton, which opened in 1984. In addition to guestrooms, the subject property contains a restaurant and lounge, an outdoor pool, a whirlpool, a gift shop, an exercise room and other facilities typically found in a first-class transient lodging facility. The hotel is located at the northwestern quadrant of the intersection formed by Stevenson Boulevard and Interstate 880, in the northeastern corner of the City of Newark. Municipal jurisdictions governing the property include the City of Newark, Alameda County, and the State of California. The hotel's civic address is 39900 Balentine Drive, Newark, California, 94560. Objective of the Economic Study and Appraisal The objective of the economic study and appraisal is to evaluate the supply and demand factors affecting the market for transient accommodations in the Newark area for the purpose of estimating the market value of the subject property. Market value is defined by the Office of the Comptroller of the Currency (OCC), 12 CFR, Part 34, 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 and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. buyer and seller are typically motivated; 2. both parties are well informed or well advised, and acting in what they consider their own best interests; [GRAPHIC OMITTED] STATE MAP HVS International, Mineola, New York Nature of the Assignment 4 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 3. a reasonable time is allowed for exposure in the open market; 4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) Use of the Appraisal This appraisal is being prepared for use by Morgan Stanley Mortgage Capital, Inc. in connection with their proposed financing of a package of 17 hotels, including the subject property, which are owned by Ashford Financial Corporation or related entities. The information presented in this report should not be disseminated to the public or third parties without the express written consent of HVS International. Scope of the Appraisal All information was collected and analyzed by the staff of HVS International. Data such as historical operating statements, site plans, floor plans, and so forth were supplied by Ashford Financial Corporation and Remington Hotel Company. Unless noted otherwise, we have inspected the competitive lodging facilities and analyzed the sales summarized in this report, and our value conclusion is based on this investigation and analysis. Property Rights Appraisal The property rights appraised are the fee simple ownership of the land and improvements, including furniture, fixtures, and equipment. The fee simple interest is defined as absolute ownership unencumbered by any other interest or estate, subject only to the four powers of government. The subject property is appraised as a going concern (i.e., an open and operating facility). Method of Study The methodology used to develop this economic study and appraisal is based on the market research and valuation techniques set forth in the text-books authored by HVS International for the American Institute of Real Estate Appraisers and the Appraisal Institute, entitled The Valuation of Hotels and Motels,(2) Hotels, Motels and Restaurants: Valuations and Market Studies,(3) The - ---------- (1) Federal Register, Vol.55, No.165, August 24, 1990; p.34696. (2) The Valuation of Hotels and Motels, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1978. (3) Hotels, Motels and Restaurants: Valuations and Market Studies, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1983. HVS International, Mineola, New York Nature of the Assignment 5 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Computerized Income Approach to Hotel/Motel Market Studies and Valuations,(4) and Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations.5 The appraisal will consider the three standard approaches to value: income capitalization, sales comparison, and cost. Because lodging facilities are income-producing properties that are normally bought and sold on the basis of capitalization of their anticipated stabilized earning power, the greatest weight is given to the value indicated by the income capitalization approach. We find that most hotel investors employ a similar procedure in formulating their purchase decisions, and thus the income capitalization approach most closely reflects the rationale of typical buyers. When appropriate, the sales comparison and cost approaches are used to test the reasonableness of the results indicated by the income capitalization approach. Ownership, Franchise, and Management History and Assumptions The following legal description appears in a preliminary title report prepared by Founder's Title Company. Parcels 1 and 3, Parcel Map 3875, filed June 10, 1983, Book 138 of Parcel Maps, Page 55, Alameda County Records. Assessor's Parcel Numbers: 901-194-5 Parcel 1 901-194-3 Parcel 3 The appraisers assume no responsibility regarding the accuracy of this legal description. On April 22, 1994, the Newark California Hotel Limited Partnership (formed by Ashford Financial Corporation) entered into a contract with Bruce S. Brickman & Associates, Inc., for the assignment of Brickman's rights under an existing Purchase and Sale Agreement between Brickman and the owner of the subject property, Bay Street No.16, Ltd. The purchase price under the contract was $8,350,000, cash. The closing occurred pursuant to the terms of the contract on May 18, 1994. - ---------- (4) The Computerized Income Approach to Hotel/Motel Market Studies and Valuations, Stephen Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1990. (5) Hotels and Motels: A Guide to Market Analysis, investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992. HVS International, Mineola, New York Nature of the Assignment 6 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The subject property is operated under a franchise agreement with Hilton; this agreement expires on March 6, 2004. The franchise affiliation of the subject property did not change, despite its acquisition by Ashford Financial Corporation. For the purposes of this appraisal, we have assumed the continued ownership of the subject property by Ashford Financial Corporation, and operation by Remington Hotel Company as a Hilton hotel. Because we have assumed continued ownership, the subject property's projected tax burden has been forecast based on historical figures, rather than upon a hypothetical sale. The hotel is also subject to a management agreement with Remington Hotel Company; an abstract of this contract is presented in the Addenda to this report. Previously, the property had been managed by Interstate Hotel Corporation. Marketing Period In light of the renewed interest in hotel investments and the increasing availability of debt and equity capital, we believe that it will take six to nine months to sell the subject property, assuming it is placed on the market at the concluded value. Effective Date of the Appraisal The effective date of the appraisal is January 1, 1997. All projections are expressed in inflated dollars, and the value estimate represents 1997 dollars. Date of Inspection The subject property was inspected by Stephen L. Chan on October 16, 1996. HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 7 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ 3. Description of the Land, Improvements, Zoning, Taxes, and Neighborhood LAND The suitability of the land for the operation of a lodging facility is an important consideration affecting the economic viability of a property and its overall value. Factors such as size, topography, access, visibility, and the availability of utilities have a direct impact on the desirability of a particular site. Size and Topography The subject site is located in the northwestern quadrant of the intersection formed by Stevenson Boulevard and Interstate 880, in the northeast corner of the City of Newark. Municipal jurisdictions governing the property include the City of Newark, Alameda County, and the State of California. According to a 1995 survey from the Alameda County Assessor's Office, the subject parcel measures approximately +/-338,500 square feet, or +/-7.77 acres. The site is in the shape of an irregular rectangle. The subject site has approximately 745 feet of frontage on its southwestern border along Balentine Drive, and approximately 313 feet of frontage on its northwestern border, along Mowry School Road. Its northeastern border, which is approximately 678 feet, abuts an adjoining parcel; the southeastern border fronting Stevenson Boulevard measures approximately 476 feet. Primary vehicular access to the property is provided by Stevenson Boulevard and Balentine Drive. The topography of the parcel is level, with no significant grading. Overall, size and topography of the subject parcel appear well suited for hotel use. The site is fully developed, with no excess land available for expansion. Easements The appraisers were not provided with any information concerning easements affecting the subject property. For the purposes of this appraisal, we have assumed that the property is not encumbered by any unusual or onerous easements which would affect its use or marketability. HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 8 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Regional Access It is important to analyze a lodging facility's ease of access with respect to regional and local transportation routes and demand generators. The subject site is readily accessible to a variety of local, county, state, and interstate highways. Interstate 880 (I-880), the primary north-south artery, provides regional access to Stevenson Boulevard. Also known as the Nimitz Freeway, I-880 runs from its northern origin at Interstate 80 in the City of Oakland, south to San Jose, along the eastern edge of Oakland Bay. Interstate 880 is accessible from the San Francisco peninsula via the San Francisco Bay Bridge, the San Mateo Bridge, and the Dumbarton Bridge. Other primary north-south routes serving the Newark-Fremont area are Interstate 680 and State Route 101. Interstate 680, which is located west of the subject property in Fremont, connects Federal Highway 101 in San Jose to Interstate 80, near the town of Fairfield to the north. Federal Highway 101 runs the length of the Pacific Coast of California, extending through San Francisco, San Jose, Gilroy, and Santa Monica before arriving at its southern terminus in Los Angeles. Interstate 80 is a transnational highway. State Highways 237 and 84 are east-west routes serving the area. Highway 237 begins in Milpitas and terminates in Sunnyvale, connecting Interstates 680 and 85. Highway 84 connects the City of Fremont to Redwood City via the Dumbarton Bridge. Local Access and Visibility Stevenson Boulevard is the primary east-west route connecting the City of Newark with the City of Fremont to the northeast. Balentine Drive, which runs in a north-south direction, connects Stevenson Boulevard to the nearby New Park Mall. While there are numerous major access routes to the Newark/Fremont Hilton, its location is a disadvantage because it is situated more than a 20-minute drive north of the major concentrations of industrial and office developments in Silicon Valley and Milpitas. Traffic congestion on southbound I-880 during the morning rush hour and similar congestion in the northbound direction during the evening rush hour is another competitive disadvantage. These traffic patterns reduce the ease of access to the subject property, and can sometimes increase travel time by up to an hour. The subject property is located in the northeastern corner of the City of Newark. In order to gain access to the subject property, motorists traveling in either direction along I-880 take the Stevenson Boulevard Exit, and travel HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 9 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= in a southwesterly direction for approximately 500 feet along Stevenson Boulevard. The subject site is both highly visible and easily accessible from Stevenson Boulevard. Motorists on Stevenson Boulevard turn right onto Balentine Drive and travel for approximately 300 feet before turning right into the subject property's driveway. Visibility of the subject property is considered to be good from both Interstate 880 and Stevenson Boulevard because of the lack of high buildings in the vicinity and the proximity of the subject property to these routes. Furthermore, the distinctive H logo on the roof, which is characteristic of Hilton properties, enhances the visibility of the subject property from the access routes. Overall, access to the Newark/Fremont Hilton is considered to be good, as is the subject property's visibility. Airport Access The Newark/Fremont Hilton is located approximately 15 miles northwest of San Jose International Airport, from which the subject property is readily accessible via Interstate 880 northbound. The subject property is also proximate to Oakland International Airport, which is located approximately 19 miles northwest of the subject property. Primary vehicular access from Oakland International Airport is provided by southbound I-880. San Francisco International Airport is approximately 27 miles from the subject property via the Dumbarton Bridge and I-880. Another means of access is provided by the Bay Area Rapid Transit (BART); the southern terminus of the BART is located in neighboring Fremont, approximately four miles away. In addition, the ports of Oakland and Redwood City are located within a 25-mile radius of the city limits, providing shipping links to ports along the Pacific Rim. HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 10 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Access to Local Demand Generators The area's primary generators of lodging demand are situated three to ten miles north of theNewark/Fremont Hilton. The following table outlines some of these major demand generators and their distance from the subject site. Table 3-1 Local Demand Generators
=========================================================================================== Approximate Distance Approx. DrivingTime Demand Generator from Subject Site (in Miles) (in Min, non-rush/rush hr) - ------------------------------------------------------------------------------------------- New United Motors Manufacturing 3.0 5/10-30 Solectron California 7.0 10/15-60 LSI Logic 7.0 10/15-60 Quantun 7.0 10/15-60 Lam Research 4.0 5/10-30 Sun Microsystems 5.0 7/10-30 Cirrus Logic 4.0 5/10-30 Komag 5.0 7/10-30 Seagate Magnetics 5.0 7/10-30 - -------------------------------------------------------------------------------------------
The subject property is located further north from the primary demand generators than from most of the other competitive properties. Additionally, traffic congestion on the primary access routes during peak rush hours compounds this disadvantage. The state's current project to widen local accessways on I-880 near the subject property will partially offset this disadvantage. This roadwork is scheduled for completion by the spring of 1998. Utilities The subject site is served by all necessary utilities, which are provided as follows. ================================================================================ Table 3-2 Available Utilities - -------------------------------------------------------------------------------- Utility Provider ------- -------- Electricity and Gas Pacific Gas and Electric Water and Sewer Alameda County Water District Garbage Collection East Bay Disposal Local Telephone Pacific Bell Long Distance Telephone MCI - Shared Telecom Source: Remington Hotel Company - -------------------------------------------------------------------------------- HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 11 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Soil and Subsoil Conditions Geological and soil reports were not provided to the appraisers or made available for review during the preparation of this report. The appraisers are not qualified to evaluate soil conditions other than by a visual inspection of the surface. Nuisances and Hazards The appraisers have not been informed of any site-specific nuisances or hazards, and there were no visible signs of toxic ground contaminants at the time of our inspection. Because the appraisers are not experts in this field, we do not warrant the absence of hazardous waste, and we urge the reader to obtain an independent analysis of these factors. Flood Zone According to the Federal Emergency Management Agency (FEMA), the subject property is located within Flood Zone C according to FEMA panel number 060009-0005e dated September 30, 1988. This designation denotes areas of minimal flooding risk. Seismicity According to the Environmental Site Assessment performed on March 30, 1993 by Allwest Environmental, Inc., the nearest seismically active fault is the Hayward Fault Zone, which is located approximately three miles east of the subject site. The subject site does not lie within the Alquist-Priolo Special Studies Zone. Legal Description A copy of the subject property's legal description, as prepared by Founder's Title Company, is described in the section of this report entitled "Nature of the Assignment." Conclusion The subject parcel appears to be well suited to its current use as the site of a lodging facility. We have analyzed the issues of size, topography, access, visibility, and the availability of utilities, and have noted the following advantages and disadvantages. Advantages o The subject property enjoys good visibility and access from both I-880 and Stevenson Boulevard. o The subject property is served by all of the necessary utilities, in sufficient capacity. o The topography and shape of the subject site are well suited to its current use. HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 12 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Disadvantages o The primary demand generators are located further from the subject property than from other competitive properties. o Traffic congestion on the primary access routes detracts from the accessibility of the subject property. The advantages exhibited by the subject site are all important characteristics of a hotel location. However, because of the frequent traffic delays on I-880 and the subject property's distance from major demand generators, the subject property's competitiveness is significantly reduced. IMPROVEMENTS The quality of a lodging facility's physical improvements has a direct influence on its marketability and attainable occupancy and average rate. The design and functionality of the structure can also affect operating efficiency and overall profitability. This section investigates the subject property's physical improvements and personal property in an effort to determine how they contribute to total value. The following description of the improvements is based on our inspection of the hotel and information provided by the Remington Hotel Company. The Newark/Fremont Hilton is a first-class lodging facility containing 311 rentable units in two wings and one eight-story tower, +/-10,170 square feet of meeting space, a restaurant and lounge, an outdoor pool, a beauty salon, a gift shop, and appropriate back-of-the-house facilities. The property opened in October 1984, and is currently operated under a management agreement with Remington Hotel Company. Overall, the hotel appears to be in good condition; management representatives informed the appraisers that the building systems are in working condition. The hotel is franchised under a license agreement with Hilton and reportedly meets the standards for lodging facilities of that brand. Based on our inspection and information provided by property management, the following table summarizes the facilities available at the subject property. Property Layout [Graphic Ommitted] Floor Plan HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 13 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 3-3 Facilities Summary - -------------------------------------------------------------------------------- Guestroom Configuration: King Beds 105 Units Double/Doubles 197 Suites 3 Junior Suites 3 Pivot (Convertible sofa beds) 3 -------- Total 311 Units Corridors Double-loaded, interior Food and Beverage Outlets: Balentine's Restaurant 150 Seats Balentine's Lounge 60 Seats Meeting and Banquet Rooms: Grand Ballroom 5,000 Square Feet Ballroom I 1,250 Ballroom II 1,250 Ballroom III 1,250 Ballroom IV 1,250 Board Room 2,000 Fremont 500 Cedar 500 Newark 500 Balentine 500 Seminar I 252 Seminar II 432 Seminar III 432 Courtside A 600 Courtside B 600 Clubroom 270 VIP 585 -------- Total 10,171 Square Feet Recreational Amenities Outdoor pool, sauna, spa, exercise room Other Amenities gift shop, skin care salon Parking 420 All-surface spaces Elevators Guest 3 Service 1 Life Safety Systems Sprinklers, smoke detectors Laundry Ironer 1 Washer 4 90 lbs. Dryer 4 75/115/115/90 lbs. Building Structure Steel-and-concrete; wood-frame and stucco Exterior Facade Beige stucco finish, with teal blue accents Entrance Porte cochere Source: Newark/Fremont Hilton - -------------------------------------------------------------------------------- HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 14 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Property Layout and Exterior The hotel structure is situated at the center of the site, with the axis of the hotel aligned north-south. Paved parking areas accommodating 420 vehicles are located around the hotel structure. Vehicular access to the subject site is provided by Balentine Drive. After entering the site, guests proceed to the hotel's main entrance, which faces Balentine Drive. The loading dock is located on the eastern side, or rear, of the subject property. The subject property's exterior is composed of a beige-colored stucco finish with off-white vertical accents, and teal-blue roofline finishes. Construction and Design The subject property consists of three buildings. The Main Tower, constructed in 1984, is an eight-story steel-and-concrete structure, with elevator cab housing and storage space in the eighth story. Adjoining the Main Tower is the "U"-shaped Pool Courtyard, built around the pool and whirlpool. The Pool Courtyard was also constructed in 1984, and contains approximately 100 guestrooms within its two stories. In 1985, the adjoining Garden Courtyard building was constructed, adding another 98 guestrooms to the subject property's total room count. This structure surrounds a pond and a gazebo. Of the four wings in the Garden Courtyard, three are two stories high, while the remaining wing is three stories in height. The Garden Courtyard was constructed on a wooden frame with a stucco finish. A building layout of the subject property is presented in the Addenda to this report. Lobby The art-deco theme lobby was completely renovated in 1995 and features a two-story atrium over the seating area and neon highlighted wall sconces. The tan, teal, and maroon color-schemed lobby area is attractively decorated and in very good condition. Guests entering from the port cochere will find the guest registration desk to their immediate right, and a car rental desk and stairway leading to the second floor to their immediate left. Further to the right are corridors leading to the pool and garden courtyards, while to the left is the entrance to Balentine's Bar & Grill and meeting spaces. Directly ahead is a guest seating area, elevator banks for the tower, and a gift shop, as well as rest rooms. Food and Beverage Outlets Balentine's Bar and Grill is the subject property's multi-purpose restaurant, serving Continental cuisine for breakfast, lunch, and dinner seven days a week. Located immediately to the north of the lobby, this area was renovated in 1995 and is in very good condition. The restaurant space is HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 15 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= attractively decorated with a raised dining area and appealing two-story-high ceilings, with side windows providing natural illumination during lunch hours. At the time of the renovation, new carpet, wall covering, and artwork was installed and new chairs and tables purchased. Meeting and Banquet Space The subject property's function space is located in two areas. The bulk of the meeting space is located just north of the restaurant; smaller seminar rooms are also located just east of the lobby area. The meeting space, like much of the rest of the subject property, underwent extensive renovations in 1995. The 5,000-square-foot main ballroom features 15-foot-high ceilings and new carpeting. The boardroom features appealing high quality furnishings and finishes that were completely redone in 1995 and are in excellent condition. Guestrooms The subject property's 311 guestrooms are of a fairly typical layout and configuration, averaging approximately 325 square feet in size. Typical guestroom furniture and fixtures include the following items. o One king or two double beds with wall-mounted headboards and quilted bedspreads o Night table with a lamp and a touch-tone telephone o Dresser with a lamp and a wall-mounted mirror o Closet with mirrored doors o Wall-to-wall carpeting o Card table with two chairs and a floor lamp o Draperies with black-out lining and sheers o Vinyl wallcovering o Bathroom with tiled floor, commode, sink, tub/shower combination and wall-mounted hairdryer o Smoke detector and sprinklers o Central heating and ventilation system with individual controls At the time of our inspection, the subject property's guestrooms appeared to be in good condition. According to property management, the guestrooms feature new bedspreads and drapes for approximately 75% of the hotel rooms, with the remainder to be replaced by year-end 1996. HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 16 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Additionally, all case goods were revarnished in 1995. In November 1996, all guestroom chairs will be reupholstered. By year-end 1996, all the guestrooms will have a second phone located by the work desk. Guestroom Corridors Guestroom corridors are wide enough to permit the easy passage of housekeeping and room service carts. The corridors are finished with vinyl wall covering and attractive wall sconces. Recreational Amenities Recreational amenities include an outdoor pool, a spa, a sauna, an exercise room, and an extensively landscaped courtyard. Back-of-the- House Space The subject property's back-of-the-house space is conveniently and logically located. Front office and reservations areas are located directly behind the front desk. Administrative and sales offices are located along the western wing of the pool courtyard. The kitchen, storage, receiving, employee cafeteria, and employee lockers are located to the east of the main ballroom and restaurant. Laundry and the property's HVAC system are located just north of the Tower's elevator banks. Based on information provided by property management, all of the subject property's operating systems are in good working order. Vertical Transportation Vertical transportation is provided by five elevators. Two guest elevators and one service elevator provide access to the Tower and Pool Courtyard. The remaining elevator provides both guest and house service to the Garden Courtyard. Heating, Ventilation, and Air Conditioning The hotel employs a four-pipe system to meet heating and cooling needs for the 311 guestrooms. Property heating is provided by six boilers with a total capacity of 1,000 gallons. Two boilers are used for circulated space heating, another two provide hot water to the public areas, a fifth is for the restaurant dishwashing machine, and one is used for guestroom hot water. Cooling is provided by two 10,000-ton chillers for the Tower, and one chiller for the Garden Courtyard. Air ventilation is provided by a second-floor air handling unit package. Property management indicates that all HVAC equipment is in good condition. HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 17 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= Fire Protection All guestroom and public areas feature sprinklers. All areas are covered by smoke detectors, which are linked to a central panel located at the front office. The property also features six stairwells for guest evacuation and exit. Security All of the subject property guestrooms employ electronic door locks. Additionally, all employees are trained in security protocols. Asbestos According to information provided by management representatives, there is no asbestos present in the subject property's improvements; however, we have not been provided with an asbestos report to confirm this assertion. The reader should be advised that any costs associated with asbestos removal or containment may have an unfavorable impact on the hotel's market value, and the estimate set forth in this appraisal reflects our value conclusions prior to the deduction of any such costs. We suggest that interested parties initiate an independent analysis regarding current asbestos levels and the capital expenditures necessary to remove any asbestos that is present. ADA Conformance Following the January 26, 1992 passage of the Americans with Disabilities Act (ADA), hotels are subject to new physical standards. The appraisers are not experts on ADA compliance, and we render no opinion regarding the subject property's conformance to ADA standards. Capital expenditures that may be necessary to bring the property into accordance with the ADA will reduce our estimate of market value. Any ongoing costs related to ADA regulations are expected to be funded by normal replacement reserves. Conclusion Overall, the subject property's improvements appear appropriate for hotel use. With the subject property's recent extensive renovations and ongoing refurbishments, the Newark/Fremont Hilton is considered to be in very good condition and features high quality facilities and a guestroom product that will continue to keep it competitive with area lodging facilities. For the purposes of this appraisal, we have assumed that the subject property will be maintained in its present condition throughout the assumed ten-year holding period. Specifically, it is assumed that hotel management will employ standard preventive maintenance measures, and that a reserve for replacement fund will be established which will fund the cost of any future necessary capital expenditures. ZONING According to the City of Newark zoning regulations and map dated May 1991, the subject property is zoned as follows: HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 18 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= A - Agricultural District According to the City of Newark Planning and Zoning Office, the subject property is located in an area originally zoned for agricultural purposes. However, a conditional use permit and planned unit development were filed by Duffel Financial and Construction Company, and granted by Resolution 951 on November 23, 1982. The conditional use permit designated the area appropriate for uses permitted by the CC - Community Commercial District, which expressly includes hotels and motels. The subject property is reportedly in compliance with the conditional use permit as granted by Resolution 951, as of the date of our inspection. We assume that all necessary permits and approvals have been secured (including an appropriate liquor license), and that the subject property was constructed in accordance with local zoning ordinances, building codes, and all other applicable regulations. Our zoning analysis should be verified before any physical changes are made to the hotel. ASSESSED VALUE AND TAXES Property (or ad valorem) tax is one of the primary revenue sources of municipalities. Based on the concept that the tax burden should be distributed in proportion to the value of all properties within a taxing jurisdiction, a system of assessments is established. Theoretically, the assessed value placed on each parcel bears a definite relationship to market value, so properties with equal market values will have similar assessments and properties with higher and lower values will have proportionately larger and smaller assessments. Depending on the taxing policy of the municipality, property taxes can be based on the value of the real property or the value of the personal property and the real property. Because the objective of assessed value is to maintain a specific value relationship among all properties in a taxing jurisdiction, comparable hotel assessments should be evaluated to determine whether the subject property's assessed value is equitable. Property taxes in California are assessed and collected by a county government on behalf of local taxing districts. The property tax information pertaining to the subject properties is provided by the Alameda County Assessor's Office. The taxing jurisdiction governing the subject property assesses real and personal property. Under the provisions of the Jarvis-Gann Amendment (also known as Proposition 13, and enacted in June, 1978, by California voters), the assessed value of a property may increase no more than 2.0% annually, and the property taxes are limited to 1.0% of market HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 19 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= value of business property. Added to the property taxes are amounts needed to pay off bonds approved by the voters prior to July 1, 1978, which raises the average tax rate to about 1.1%. Under the terms of Proposition 13, a sale of the subject property triggers a reassessment of the hotel, with the sale price forming the basis of the new assessment. The purpose of this appraisal is to estimate market value; market value inherently assumes the sale of the property as of the date of value. If such a sale were to occur, the hotel's assessed value would be adjusted to be in line with the sales price. However, this appraisal is being prepared for the use of Morgan Stanley in connection with their financing of this hotel, and the property will continue to be owned by Ashford Financial Corporation. As no sale will occur as of the date of value, we have assumed that the assessed value will remain at the historical levels, increasing by 2% per year as provided by Proposition 13. The resultant tax burden will be utilized in our forecast of income and expense. According to the Alameda County Tax Assessor, the subject property's parcel numbers are as follows. Parcel 1 901-194-5 Parcel 3 901-194-3 The subject property's assessed value and taxes for the 1995/96 tax year are set forth as follows. ================================================================================ Table 3-4 Historical 1995/96 Assessed Value and Taxes - -------------------------------------------------------------------------------- Land $2,911,237 Improvements 4,624,383 Personal Property 1,010,585 ---------- Total Assessed Value $8,546,205 Applied Tax Rate 1.1556% ---------- Gross Taxes $98,760 Bond and Flood Tax 121 Special Assessments 64,693 ---------- Total Taxes $163,574 - -------------------------------------------------------------------------------- The following table shows how the tax rates for the subject property's taxing jurisdiction have changed since 1987/88. HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 20 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 3-5 Historical Tax Rates: 1987/88 - 1995/96 - -------------------------------------------------------------------------------- Tax Rate per $100 Percent Change From Fiscal Year of Assessment Previous Year ----------------------------------------------------------------------- 1987/88 1.4035 % --- 1988/89 1.3356 (4.84)% 1998/90 1.3343 (0.10) 1990/91 1.1907 (10.76) 1991/92 1.1809 (0.82) 1992/93 1.0631 (9.98) 1993/94 1.1746 10.49) 1994/95 1.1675 (0.60) 1995/96 1.1556 (1.02) Average Annual Compounded Change (2.40)% Source: Alameda County Tax Assessor's Office - -------------------------------------------------------------------------------- Between 1987/88 and 1995/96, the tax rate for the subject parcel decreased at an average annual compounded rate of 2.4%. While decreases in real property value generated by the national recession resulted in increased tax rates in 1993/94, as local governments attempted to maintain revenue levels, these increases are anticipated to level off during the remainder of our projection period. For the purposes of this appraisal, we have utilized the tax amount indicated in the subject property's 1995/96 tax bill as a basis for our projection. Assuming current management and ownership, the subject property's 1995/96 assessments reflect current assessed values. Real estate taxes have been forecasted to increase by the maximum 2.0% assessed value increase per year, assuming a stable tax rate, as stipulated by Proposition 13. The following table presents our forecast of property taxes through the 2000, which is expected to be the stabilized year of operations for the subject property. Applying the projected increases to the historical base year tax burden yields the following forecast of property taxes for the subject property. ================================================================================ Table 3-6 Forecast of Property Tax Expense (+000) - -------------------------------------------------------------------------------- 1997 1998 Stabilized --------------------------------------------------------------------- Total Taxes $164 $167 $170 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 21 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= NEIGHBORHOOD The neighborhood surrounding a lodging facility often has an impact on a hotel's status, image, class, style of operation, and sometimes its ability to attract and properly serve a particular market segment. This section investigates the subject property's neighborhood and evaluates any pertinent locational factors that could affect its occupancy, average rate, food and beverage revenues, and overall profitability. The subject property is located in the northwestern quadrant of the intersection formed by Stevenson Boulevard and Interstate 880, in the northeastern corner of the City of Newark. The City of Newark, which was incorporated in 1955, encompasses an area of approximately 13 square miles. The smaller Newark is eclipsed by neighboring Fremont, which is California's third-largest city in terms of land area. This factor, along with the possibility of confusing the city with Newark, New Jersey, have resulted in businesses overlooking the city as a potential home. According to the California Department of Finance, Demographic Research Unit, the population of Newark as of January 1, 1995 was estimated at approximately 40,300 residents. Newark is adjacent to the City of Fremont, and is located approximately 35 miles from the major Bay City cities of San Francisco, Oakland, and San Jose. The subject property's immediate neighborhood is made up primarily of commercial developments, including retail establishments and office space. Several automobile dealerships, including Ford, Nissan, and Pontiac, are located northwest of the subject property, along the mile-long section of Balentine Drive between Stevenson Boulevard and Cedar Boulevard. Duffel Center, which encompasses the subject property, as well as much of the surrounding area, is a master-planned community. Existing developments within Duffel Center include the subject property, an office building known as One Duffel Center, and Duffel Plaza, a +/-165,000-square-foot retail center. Various restaurants are located within a block of the subject property, including a Japanese restaurant, Nijo Castle, Sizzler, and Carl's Junior. The blocks across Stevenson Boulevard to the southeast of the subject property are occupied by the retail outlets of Fremont Home Furniture Center, Home Depot, and The Saw Mill. HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 22 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= The major retail mall in the vicinity of the subject property is New Park Plaza, which is located approximately one mile northwest of the subject property along Balentine Drive. The mall contains over 150 stores, and is anchored by major department stores, including J. C. Penney, Emporium, Sears, Mervyn's, and Macy's, which collectively employ more than 1,000 people. In general, the subject property's neighborhood is considered to be in a stable phase of development. The commercial and industrial developments immediately surrounding the Newark/Fremont Hilton are limited, and of a less sophisticated nature; the subject property's first-class improvements represent a superadequacy in relation to the requirements of the local market. In addition, the surrounding developments provide little demand for hotel accommodations. Despite these locational deficiencies, current market dynamics, such as a boom in Silicon Valley and a significant shortage of lodging facilities resulting from several years of no new increases to supply, as well as the hotel's recent renovation and current effective management, have been beneficial for the subject property. According to the Newark Chamber of Commerce, approximately 45 manufacturing plants are located in the Newark area, with primary products including processed salt, chemicals, corrugated containers, vinyl, plastics, and glass. New additions to the city's major businesses include Nancy Specialty Foods, the world's largest quiche maker, which is located in the western quadrant of the city, and employs more than 250 people. Although the Newark/Fremont Hilton is located in the City of Newark, the subject property's primary demand generators are dispersed throughout a larger geographical area, which is generally described as the East Bay. The economies of neighboring Silicon Valley in Santa Clara County and the City of Milpitas also play a vital role in the economic growth of southern Alameda County. Despite the availability of various types of transportation to the area, the Newark/Fremont Hilton has a locational disadvantage, as it is situated more than a 20-minute drive north of most of the demand generators in Silicon Valley and Milpitas. Traffic congestion on southbound I-880 during the morning rush hour and similar congestion in the northbound direction during the evening rush hour constitute a significant competitive disadvantage. These traffic patterns reduce the ease of access to the subject property from the demand generators, increasing effective travel time up to HVS International, Mineola, New York Description of the Land, Improvements, Zoning, Taxes, and Neighborhood 23 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= an hour. Furthermore, in comparison to the competitive properties, the subject property is less proximate to the major concentrations of industrial and office developments, which are located further south along I-880, such as Bayside Technology Park and Ardenwood Industrial Park. Conclusion The Newark/Fremont Hilton's distance from the center of growth in Silicon Valley, coupled with limited local demand, and traffic congestion render the subject property's location inferior to the locations of its competitors. However, despite these disadvantages, the subject property and the market area have experienced a considerable turnaround from the nadir reached in the early 1990s. Continued strength in Silicon Valley and effective and efficient subject property management, as well as an adequate reserve for replacement program, will help ensure future prosperity for the Newark/Fremont Hilton. HVS International, Mineola, New York Market Area Analysis 24 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 4. Market Area Analysis The economic vitality of the market surrounding the subject property is an important consideration in forecasting lodging demand and income potential. Economic and demographic trends that reflect the amount of visitation provide a basis from which to project hostelry demand. The purpose of the area analysis is to review available economic and demographic data to determine whether the local market will undergo economic growth, stability, or decline. In addition to predicting the direction of the economy, the rate of change must be quantified. These trends are then correlated based on their propensity to reflect variations in lodging demand with the objective of forecasting the growth or decline in visitation by individual market segment. Market Area Definition The Newark/Fremont Hilton is located in the City of Newark, the County of Alameda County, and the State of California. The economies of the Cities of Newark and Fremont in southern Alameda County are closely linked to the high-technology industries of neighboring Santa Clara County. The economic welfare of Silicon Valley, with a boundary approximately 15 miles south of the Newark/Fremont Hilton, is particularly influential on the subject property. Silicon Valley encompasses most of northwestern Santa Clara County, the southern end of San Mateo County, and southern Alameda County. More than 3,600 high-technology firms are located in the Valley, and more than half of the 2,500 largest electronics firms in the nation are located within a 30-mile radius of downtown San Jose. Silicon Valley currently produces more semiconductors, computers, and electronic components than any other single area in the nation. Employment in the San Jose Metropolitan Statistical Area (MSA), which encompasses Silicon Valley, is concentrated in the computer industry. This focus has limited the diversity of the area's employment profile, and has also made the region vulnerable to fluctuations within a single economic sector. From 1989 to 1991, the San Jose MSA suffered a downturn caused by the national and local recessions and by the Persian Gulf War, which HVS International, Mineola, New York Market Area Analysis 25 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= limited travel from the Pacific Rim. Numerous layoffs occurred in the computer manufacturing and related fields in 1991 and 1992, as firms reorganized or relocated to less expensive areas of the country, such as Austin, Texas and Denver, Colorado. Since mid-1994, Silicon Valley has been on a steady upward expansion. Spurred by significant corporate capital outlays for computer hardware, software, and networks targeted to improve productivity, as well as the recent home computer boom caused by the dramatic impact of the Internet, Silicon Valley's expansion, according to most market watchers, is considered to be steady and long term. Economic and Demographic Data Based on fieldwork conducted in the area and our in-house sources, we have evaluated various economic and demographic statistics to determine trends in lodging demand. A primary source of economic and demographic statistics used in this analysis is the Complete Economic and Demographic Data Source published by Woods & Poole Economics, Inc., a well-regarded forecasting service based in Washington, DC. Using a database containing more than 300 variables for each county in the nation, Woods & Poole employs a sophisticated regional model to forecast economic and demographic trends. Historical statistics are based on census data and information published by the Bureau of Economic Analysis. Projections are formulated by Woods and Poole. All dollar amounts have been adjusted for inflation, and thus growth or decline represents real change in constant dollars. Population Between 1980 and 1995, the population growth rates in both Alameda County and the San Francisco-Oakland-San Jose CMSA were moderately higher than that registered by the nation as a whole. In response to migration to the Sunbelt and the western United States, the state also achieved above-average population growth during the 1980s. Between 1990 and 1995, the trend changed, and Alameda County's population grew by only 0.8% - a growth rate which was lower than those achieved by the state and the nation. The change in trends was related to increasing efficiency in local industries, which reduced the demand for workers, as well as reducing the number of migrants to the Sunbelt. Population growth rates in both Alameda County and the San Francisco-Oakland-San Jose CMSA are expected to remain at, or lower than, those of the state and the nation through the year 2000. We find that the rate of population growth generally establishes a minimum rate of increase for commercial segment hotel demand; this observation also holds true for the group segment if a majority of the groups are business-oriented. HVS International, Mineola, New York Market Area Analysis 26 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= We find that the rate of population growth generally establishes a minimum rate of increase for commercial hotel demand; this observation also holds true for the meeting and convention segment if a majority of the meetings are business-oriented. Retail Sales Alameda County's 1.5% average annual compounded increase in retail sales between 1980 and 1995 correlates with the moderate population gains during the same period. Despite lower population increases and recessionary economic conditions, retail sales in the area increased to 1.6% annually between 1990 and 1995. However, retail sales levels in Alameda County are projected to grow at just 0.6% annually throughout the remainder of the decade, significantly lower than the averages for the CMSA, the state, and the nation. Personal Income The effects of the national economic recession on the State of California are reflected in the per-capita personal income figures. Personal incomes in the CMSA grew at a rate of 2.5% between 1980 and 1995 as a result of the economic vitality of Silicon Valley. However, the defense cutbacks and the slowdown in growth of Silicon Valley greatly diminished increases in personal income, which increased by 1.4%, compared to the national average of 1.9% between 1990 and 1995. Projections for 1995 through 2000 indicate a gradual recovery for the area with a healthy regional, state, and national economy. HVS International, Mineola, New York Market Area Analysis 27 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Work Force Characteristics The characteristics of an area's work force provide an indication of the type and amount of visitation generated by local businesses. Sectors such as finance, insurance, and real estate (FIRE), wholesale trade, and services produce a considerable number of visitors who are not particularly rate sensitive. The government sector often generates room night demand, but per-diem reimbursement allowances often limit the accommodations selection to budget and mid-priced lodging facilities. Manufacturing, construction, and the transportation, communications, and public utilities (TCPU) sectors are least likely to generate a significant number of hotel guests. Total wage and salary employment in Alameda County increased at an average annual compounded rate of 1.6% between 1980 and 1995. The effects of the regional and national recession, as well as defense cutbacks during the early 1990s, resulted in a decline in the growth rate by 0.2% annually from 1990 to 1995. Services, trade, and government are the dominant employment sectors in the Alameda County economy, contributing roundly 32%, 22%, and 17% of the 1995 labor force, respectively. Of these three major categories, services posted the largest increase between 1990 and 1995, at 1.9% annually. Employment in the services sector is projected to increase at an average annual compounded rate of 0.5% throughout the remainder of the decade. Although trade employment increased by 1.7% annually between 1980 and 1995, this growth rate declined by 0.1% from 1990 to 1995, primarily as a result of the national recession. Employment in this sector is projected to decrease at an average annual compounded rate of 0.2% between 1995 and 2000. Growth in Alameda County's government sector declined by 2.6% annually between 1990 and 1995, due to military base closings and lower federal payrolls. Government employment is projected to continue to decline, by 7.8% annually throughout the remainder of the decade, based on continued consolidation and downsizings planned by the military. The majority of the major employers in Milpitas and Fremont produce computer and electronic-related goods, although New United Motor Manufacturing (NUMMI), an automobile manufacturing plant, is the area's second-largest single employer, with over 4,250 employees. The following table presents a listing of manufacturing companies employing more than 500 people within the communities of Fremont and Milpitas. HVS International, Mineola, New York Market Area Analysis 28 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL =============
====================================================================================================== Table 4.1 Major Employers - ------------------------------------------------------------------------------------------------------ Number of Firm Service/Product Location Employees - ------------------------------------------------------------------------------------------------------ New United Motors Manufacturing, Inc. Automobiles Fremont 5,169 Solectron California Contract Manufacturing Services Milpitas 4,000 LSI Logic Semiconductors Milpitas 3,000 Quantun Disk Drives Milpitas 2,700 Lam Research Semiconductor Equipment Fremont 2,550 Sun Microsystems Computer Work Stations Milpitas 2,250 Lifescan, Inc. Medical Blood Monitoring Systems Milpitas 1,700 Octel Communications Corp. Voice Processing Milpitas 1,600 Komag Magnetic Disks Milpitas 1,600 Read-Rite Magnetic Components Milpitas 1,480 Cirrus Logic, Inc. Semiconductors Fremont 1,383 Seagate Magnetics Disk Drives Fremont 1,306 Adaptec, Inc. Controller for Disk Drives Milpitas 1,145 Linear Technology Semiconductors Milpitas 900 Allied Sysco Food Service, Inc. Food Distribution Fremont 725 Xicor Electronics Milpitas 700 LSI Logic Corporation Semiconductors Fremont 645 HMT Technology Corporation Electronics Fremont 605 Safeway Stores Supermarket Fremont 600 Source: Fremont and Milpitas Chambers of Commerce - ------------------------------------------------------------------------------------------------------
We note that employers in Newark are not included in the above table because their employment figures are relatively small. The four major employers in Newark are Ross Stores, Mervyn's, Macy's, and Sears. Other major employers in Newark include automobile dealerships, salt processing plants, hotels, and restaurants. However, these businesses do not generate a significant amount of demand for the subject property's rooms. Office and Industrial Space Of particular importance to hotel demand in the subject market area are trends tied to office and industrial space. The major office and industrial parks proximate to the area are located within the cities of Fremont and Milpitas. The subject market area is located within the Santa Clara/Silicon Valley office and industrial market according to Grubb & Ellis. Of the two market types, industrial space predominates in the subject market area, with a ratio of approximately 17 square feet of industrial space to one square foot of office space. The following table presents office space statistics for the cities of Fremont and Milpitas, contained within the subject market area as provided by Grubb & Ellis. HVS International, Mineola, New York Market Area Analysis 29 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Office Space ================================================================================ Fremont and Milpitas Office Space Statistics - -------------------------------------------------------------------------------- Rentable Percent Occupied Percent Vacancy Year Space (Sq. Ft.) Change Space (Sq. Ft.) Change Rate - -------------------------------------------------------------------------------- 1993 1,984,448 --- 1,755,236 --- 11.6% 1994 2,133,500 7.5% 1,835,700 4.6% 14.0 1995 2,425,800 13.7 2,062,800 12.4 15.0 Avg. Annual Comp. % Change: 1993-1995 10.6% 8.4% - -------------------------------------------------------------------------------- Historically, the Fremont and Milpitas office markets have been overshadowed by the predominantly industrial and manufacturing orientation of the area. Furthermore, recognized concentrations of office space are primarily located in the areas of downtown San Jose and in the Peninsula communities of Mountain View and Palo Alto. The subject market area experienced a double digit increase in the supply of rentable space in 1995. However, demand did not match supply, as vacancy rates increased over the period. One factor which contributed to this dynamic is the competitive nature of the market. San Jose's Downtown Redevelopment Agency has actively promoted the downtown area for business on a large scale through incentives and major redevelopment. This project, estimated to be one of the most costly projects in U.S. history relative to the area involved, has been ongoing during the past 15 years, at a cost of approximately $1 billion. The redevelopment of the San Jose CBD is nearing completion, with the relocation of Adobe Systems to over 400,000 square feet of space in the downtown area in 1996. Industrial Space The Silicon Valley Industrial/R&D market is the strongest it has been in more than 15 years according to Grubb & Ellis. Industrial space represents manufacturing, warehouse, and research and development (R&D). For the Santa Clara/Silicon Valley market, as well as the subject market area, research and development represents over 60% of total inventory, indicating a strong presence of extended-stay and commercial demand generators for area hotels. Overall, the R&D inventory is the largest concentration of its type in the United States and is made up of many Fortune 500 "high tech" company headquarters. HVS International, Mineola, New York Market Area Analysis 30 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= In response to surging sales and large scale hiring, expanding high-tech companies are acquiring record amounts of land in Silicon Valley. According to Grubb & Ellis, "in 1995, R&D product demand was the driving force behind the recent level of user land acquisitions which is unequaled in Silicon Valley history. Large parcels were acquired by Cisco Systems, Applied Materials, Octel, Hyundai and Altera in 1995." New construction in the way of build-to-suit and some speculative construction has begun and is expected to continue on a large scale into 1997, according to Grubb & Ellis. While Silicon Valley has grown considerably from the recessionary period of the early 1990s, the high rates of growth exhibited between 1995 and mid-1996 are considered to be unsustainable over the long term, and are not necessarily indicative of rates of growth over the near term. Although projected rates of growth will not match historical levels, they are nonetheless projected to increase at a healthy, sustainable pace. Current economic data indicate continued improvement in the area's core strength of semiconductors, personal computers, hardware, and software development industries. Supporting these industries, nationwide corporate capital spending continues to increase as companies expand in a buoyant economy. In search of greater operating efficiencies and productivity levels, large and small companies are targeting their reinvestment outlays toward the next generation of technology. In conjunction with this trend, Silicon Valley is evolving into a more diverse and, therefore, better insulated, market, evidenced by its growth in the following industries: telecommunication, computer software, computer hardware, electronic components, biotechnology, workstations, networking, and consulting. On a more local level, the availability of the subject market area's industrial space continues to expand at a healthy pace. The following table presents industrial space statistics for the cities of Fremont and Milpitas, contained within the subject market area as provided by Grubb & Ellis. Please note that 1994 data were not broken out by geographical areas by Grubb & Ellis. HVS International, Mineola, New York Market Area Analysis 31 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Fremont and Milpitas Industrial Space Statistics - -------------------------------------------------------------------------------- Rentable Occupied Vacancy Year Space (Sq. Ft.) Space (Sq. Ft.) Rate - -------------------------------------------------------------------------------- 1993 33,441,461 30,227,792 9.6 % 1994 N/A N/A N/A 1995 41,836,700 40,687,100 2.7 Avg. Annual Comp. % Change: 1993-1995 11.% 16.% Source: Grubb & Ellis - -------------------------------------------------------------------------------- The Fremont and Milpitas industrial submarket, which is part of the subject market area, is considered to be the second largest submarket in terms of total square feet, after San Jose in the Santa Clara/Silicon Valley market. Since 1993, the subject market area's demand for industrial space has outpaced supply, resulting in a decline in the area's vacancy rate from a recessionary level of 9.6% to a record level of 2.7%. The subject market area's level of vacancy is among Silicon Valley's lowest, with only the significantly smaller, booming submarkets of Mountain View and Cupertino recording even lower levels. With these levels of vacancy, area companies that require 100,000 square feet or more have few, if any, expansion options. As such, pressure for new R&D space to accommodate these large-block users is building. Although current rent levels for R&D buildings are between 10% to 15% below what is needed to stimulate and justify speculative construction lending and subsequent building, it is believed that a new wave of R&D and light industrial construction in the subject market area is impending. The significant development potential of the area, along with the pressing need for large R&D space, portend continued positive prospects in the area's ability to attract high quality corporate demand generators over the long term, ensuring that the subject market area will remain a dynamic and successful market. Airport Traffic Three major airports are located within a 30-mile-radius of the Newark/Fremont Hilton. The Newark/Fremont Hilton is located approximately 15 miles northwest of San Jose International Airport, from which the subject property is readily accessible via Interstate 880 northbound. The subject property is also proximate to Oakland International Airport, which is located approximately 19 miles northwest of the subject property. Primary vehicular access from Oakland International Airport is provided by HVS International, Mineola, New York Market Area Analysis 32 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= I-880 southbound. San Francisco International Airport is approximately 27 miles northwest of the subject property via the Dumbarton Bridge and I-880. Historical passenger activity at the area's airports is a fairly reliable indicator of visitor trends, and these data are set forth in the following table.
============================================================================================== Airport Statistics - ---------------------------------------------------------------------------------------------- Oakland Percent San Jose Percent San Francisco Percent Year International Change International Change International Change - ---------------------------------------------------------------------------------------------- 1990 5,512,333 --- 6,774,567 --- 31,059,820 --- 1991 6,181,251 12.1% 7,044,942 4.0% 31,774,845 2.3% 1992 6,542,120 5.8 7,084,942 0.6 32,608,857 2.6 1993 7,493,782 14.5 7,005,656 (1.1) 32,768,590 0.5 1994 8,345,792 11.4 8,086,453 15.4 34,643,100 5.7 1995 9,834,869 17.8 8,948,747 10.7 35,898,951 3.6 Average Annual Compounded % Change 12.3% 5.7% 2.9% Source: Oakland, San Jose, San Francisco International Airport Operations - ---------------------------------------------------------------------------------------------
Of the three airports serving the area, San Francisco International (SFO) has by far the highest volume. All three airports in the area have generally registered steady increases in passenger volume since 1990, with Oakland International (OAK) registering the highest growth rate of 12.3% between 1990 and 1995. Between 1990 and 1995, San Jose International (SJC) registered a moderate average annual compounded growth rate of 5.7%, while SFO grew at 2.9%. Since 1988, passenger enplanement increases at SFO have been sporadic, and this facility's moderate growth in comparison to OAK and SJC can be attributed to the larger overall volume of traffic through this facility. The moderate decline noted at SJC in 1993 is related to construction of a runway extension to accommodate larger aircraft. The opening of this runway extension in 1994, as well to the recovering economy, are the chief reasons for the surge in passenger activity in 1994 and 1995. Conclusion Our review of various economic and demographic data indicates that the subject property's market area exhibits favorable conditions of growth and development. However, this near-term prospect is contingent upon the continued health of the economy, and the expansion and migration of high-technology Silicon Valley firms to outlying areas such as Fremont. HVS International, Mineola, New York Market Area Analysis 33 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= While the near-term prospects for Fremont may be constrained by these factors, long-term prospects are clear. With its pro-growth orientation, lower cost of living, developable sites, BART access, and strategic location between two interstate freeways, Fremont is poised for continued long-term growth. The following table summarizes the economic and demographic trends discussed throughout this section. All figures that reflect dollar amounts have been adjusted for inflation, and thus reflect real change. It should be noted that the percent changes indicated in the following tables are based on unrounded figures, and thus may not calculate exactly. HVS International, Mineola, New York Market Area Analysis 34 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-1 Economic and Demographic Data for the Subject Property's Market Area - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------------------------ Long-Term Historical Population Alameda County 1980-1995 1,108.8 1,327.5 1.2 % San Francisco-Oakland-San Jose, CA CMSA 1980-1995 5,386.1 6,591.2 1.4 State of California 1980-1995 23,792.8 31,809.5 2.0 United States 1980-1995 227,225.6 262,791.0 1.0 Short-Term Historical Population Alameda County 1990-1995 1,278.4 1,327.5 0.8 San Francisco-Oakland-San Jose, CA CMSA 1990-1995 6,263.2 6,591.2 1.0 State of California 1990-1995 29,905.4 31,809.5 1.2 United States 1990-1995 249,401.4 262,791.0 1.1 Projected Population Alameda County 1995-2000 1,327.5 1,366.6 0.6 San Francisco-Oakland-San Jose, CA CMSA 1995-2000 6,591.2 6,975.3 1.1 State of California 1995-2000 31,809.5 33,677.8 1.1 United States 1995-2000 262,791.0 274,758.4 0.9 Long-Term Historical Retail Sales Alameda County 1980-1995 7,053.5 8,883.0 1.5 San Francisco-Oakland-San Jose, CA CMSA 1980-1995 37,158.6 48,998.6 1.9 State of California 1980-1995 154,157.0 208,913.4 2.0 United States 1980-1995 1,340,768.9 1,765,826.1 1.9 Short-Term Historical Retail Sales Alameda County 1990-1995 8,209.1 8,883.0 1.6 San Francisco-Oakland-San Jose, CA CMSA 1990-1995 43,688.6 48,998.6 2.3 State of California 1990-1995 187,935.6 208,913.4 2.1 United States 1990-1995 1,557,380.2 1,765,826.1 2.5 Projected Retail Sales Alameda County 1995-2000 8,883.0 9,133.6 0.6 San Francisco-Oakland-San Jose, CA CMSA 1995-2000 48,998.6 51,729.5 1.1 State of California 1995-2000 208,913.4 221,038.5 1.1 United States 1995-2000 1,765,826.1 1,846,830.4 0.9 Long-Term Historical Retail Sales Per Capita Alameda County 1980-1995 6,361.4 6,691.5 0.3 San Francisco-Oakland-San Jose, CA CMSA 1980-1995 6,899.0 7,434.0 0.5 State of California 1980-1995 6,479.1 6,567.6 0.1 United States 1980-1995 5,900.6 6,719.5 0.9 Short-Term Historical Retail Sales Per Capita Alameda County 1990-1995 6,421.2 6,691.5 0.8 San Francisco-Oakland-San Jose, CA CMSA 1990-1995 6,975.5 7,434.0 1.3 State of California 1990-1995 6,284.3 6,567.6 0.9 United States 1990-1995 6,244.5 6,719.5 1.5 - ------------------------------------------------------------------------------------------------------------------------------
HVS International, Mineola, New York Market Area Analysis 35 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-1 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------------------------ Projected Personal Retail Sales Per Capita Alameda County 1995-2000 6,691.5 6,683.4 (0.0) San Francisco-Oakland-San Jose, CA CMSA 1995-2000 7,434.0 7,416.1 (0.0) State of California 1995-2000 6,567.6 6,563.3 (0.0) United States 1995-2000 6,719.5 6,721.7 0.0 Long-Term Historical Eating and Drinking Place Sales Alameda County 1980-1995 725.5 1,024.7 2.3 San Francisco-Oakland-San Jose, CA CMSA 1980-1995 4,183.3 5,929.6 2.4 State of California 1980-1995 16,496.4 24,107.7 2.6 United States 1980-1995 126,131.6 185,035.4 2.6 Short-Term Historical Eating and Drinking Place Sales Alameda County 1990-1995 924.7 1,024.7 2.1 San Francisco-Oakland-San Jose, CA CMSA 1990-1995 5,268.7 5,929.6 2.4 State of California 1990-1995 21,487.0 24,107.7 2.3 United States 1990-1995 161,197.4 185,035.4 2.8 Projected Eating and Drinking Place Sales Alameda County 1995-2000 1,024.7 1,087.5 1.2 San Francisco-Oakland-San Jose, CA CMSA 1995-2000 5,929.6 6,400.5 1.5 State of California 1995-2000 24,107.7 26,276.2 1.7 United States 1995-2000 185,035.4 199,127.3 1.5 Long-Term Historical Eating and Drinking Place Sales Per Capita Alameda County 1980-1995 654.3 771.9 1.1 San Francisco-Oakland-San Jose, CA CMSA 1980-1995 776.7 899.6 1.0 State of California 1980-1995 693.3 757.9 0.6 United States 1980-1995 555.1 704.1 1.6 Short-Term Historical Eating and Drinking Place Sales Per Capita Alameda County 1990-1995 723.3 771.9 1.3 San Francisco-Oakland-San Jose, CA CMSA 1990-1995 841.2 899.6 1.4 State of California 1990-1995 718.5 757.9 1.1 United States 1990-1995 646.3 704.1 1.7 Projected Eating and Drinking Place Sales Per Capita Alameda County 1995-2000 771.9 795.8 0.6 San Francisco-Oakland-San Jose, CA CMSA 1995-2000 899.6 917.6 0.4 State of California 1995-2000 757.9 780.2 0.6 United States 1995-2000 704.1 724.7 0.6 Long-Term Historical Personal Income Alameda County 1980-1995 18,403.1 25,809.5 2.3 San Francisco-Oakland-San Jose, CA CMSA 1980-1995 99,121.5 144,444.3 2.5 State of California 1980-1995 389,309.0 568,838.9 2.6 United States 1980-1995 3,163,874.0 4,443,243.2 2.3 - ------------------------------------------------------------------------------------------------------------------------------
HVS International, Mineola, New York Market Area Analysis 36 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-1 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------------------------ Short-Term Historical Personal Income Alameda County 1990-1995 24,511.5 25,809.5 1.0 San Francisco-Oakland-San Jose, CA CMSA 1990-1995 135,003.3 144,444.3 1.4 State of California 1990-1995 537,579.6 568,838.9 1.1 United States 1990-1995 4,051,714.6 4,443,243.2 1.9 Projected Personal Income Alameda County 1995-2000 25,809.5 27,411.8 1.2 San Francisco-Oakland-San Jose, CA CMSA 1995-2000 144,444.3 161,733.4 2.3 State of California 1995-2000 568,838.9 641,646.6 2.4 United States 1995-2000 4,443,243.2 4,972,219.5 2.3 Long-Term Personal Income per Capita Alameda County 1980-1995 16,597.0 19,442.0 1.1 Oakland, CA MSA 1980-1995 17,401.0 20,607.0 1.1 San Francisco-Oakland-San Jose, CA CMSA 1980-1995 18,403.0 21,915.0 1.2 State of California 1980-1995 16,362.0 17,883.0 0.6 United States 1980-1995 13,924.0 16,908.0 1.3 Short-Term Historical Personal Income per Capita Alameda County 1990-1995 19,173.0 19,442.0 0.3 Oakland, CA MSA 1990-1995 20,330.0 20,607.0 0.3 San Francisco-Oakland-San Jose, CA CMSA 1990-1995 21,555.0 21,915.0 0.3 State of California 1990-1995 17,976.0 17,883.0 (0.1) United States 1990-1995 16,246.0 16,908.0 0.8 Projected Personal Income per Capita Alameda County 1995-2000 19,442.0 20,058.0 0.6 Oakland, CA MSA 1995-2000 20,607.0 21,450.0 0.8 San Francisco-Oakland-San Jose, CA CMSA 1995-2000 21,915.0 23,187.0 1.1 State of California 1995-2000 17,883.0 19,053.0 1.3 United States 1995-2000 16,908.0 18,097.0 1.4 Long-Term Historical Employment - Alameda County Farm 1980-1995 2.1 1.7 (1.5) Agriculture Services, Other 1980-1995 3.9 5.0 1.7 Mining 1980-1995 1.0 0.7 (2.1) Construction 1980-1995 29.1 36.3 1.5 Manufacturing 1980-1995 87.2 82.4 (0.4) Trans., Comm. & Public Utils. 1980-1995 34.2 41.8 1.4 Total Trade 1980-1995 128.5 166.0 1.7 Wholesale Trade 1980-1995 31.2 45.4 2.5 Retail Trade 1980-1995 97.3 120.6 1.4 Finance, Insurance, & Real Estate 1980-1995 45.6 49.9 0.6 Services 1980-1995 141.2 244.0 3.7 Total Government 1980-1995 124.7 126.3 0.1 Federal Civilian Govt. 1980-1995 22.1 18.9 (1.1) Federal Military Govt. 1980-1995 11.8 9.9 (1.1) State & Local Govt. 1980-1995 90.8 97.4 0.5 TOTAL 1980-1995 597.4 754.1 1.6 - ------------------------------------------------------------------------------------------------------------------------------
HVS International, Mineola, New York Market Area Analysis 37 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-1 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------------------------ Short-Term Historical Employment - Alameda County Farm 1990-1995 1.6 1.7 1.7 Agriculture Services, Other 1990-1995 4.6 5.0 1.6 Mining 1990-1995 1.0 0.7 (7.3) Construction 1990-1995 39.3 36.3 (1.6) Manufacturing 1990-1995 86.9 82.4 (1.1) Trans., Comm. & Public Utils. 1990-1995 45.1 41.8 (1.5) Total Trade 1990-1995 166.5 166.0 (0.1) Wholesale Trade 1990-1995 43.6 45.4 0.8 Retail Trade 1990-1995 122.8 120.6 (0.4) Finance, Insurance, & Real Estate 1990-1995 51.6 49.9 (0.7) Services 1990-1995 222.6 244.0 1.9 Total Government 1990-1995 143.7 126.3 (2.6) Federal Civilian Govt. 1990-1995 23.4 18.9 (4.2) Federal Military Govt. 1990-1995 17.7 9.9 (10.9) State & Local Govt. 1990-1995 102.5 97.4 (1.0) TOTAL 1990-1995 762.9 754.1 (0.2) Projected Employment - Alameda County Farm 1995-2000 1.7 1.6 (1.5) Agriculture Services, Other 1995-2000 5.0 5.0 (0.3) Mining 1995-2000 0.7 0.8 1.5 Construction 1995-2000 36.3 33.9 (1.4) Manufacturing 1995-2000 82.4 84.5 0.5 Trans., Comm. & Public Utils. 1995-2000 41.8 41.0 (0.4) Total Trade 1995-2000 166.0 164.3 (0.2) Wholesale Trade 1995-2000 45.4 45.2 (0.1) Retail Trade 1995-2000 120.6 119.1 (0.3) Finance, Insurance, & Real Estate 1995-2000 49.9 48.2 (0.7) Services 1995-2000 244.0 250.1 0.5 Total Government 1995-2000 126.3 111.7 (2.4) Federal Civilian Govt. 1995-2000 18.9 12.6 (7.8) Federal Military Govt. 1995-2000 9.9 1.4 (32.1) State & Local Govt. 1995-2000 97.4 97.7 0.1 TOTAL 1995-2000 754.1 741.0 (0.3) - ------------------------------------------------------------------------------------------------------------------------------
HVS International, Mineola, New York Market Area Analysis 38 - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Table 4-1 Economic and Demographic Data for the Subject Property's Market Area (continued) - --------------------------------------------------------------------------------
Avg. Annual Data Type Period Data Point Data Point Comp. Change - ------------------------------------------------------------------------------------------------------------------------------ Office Space - Fremont and Milpitas Available 1993-1995 1,984,448 2,425,800 10.6 % Occupied 1993-1995 1,755,236 2,062,800 8.4 Industrial Space - Fremont and Milpitas Available 1993-1995 33,441,461 41,836,700 11.9 Occupied 1993-1995 30,227,792 40,687,100 16.0 Airport Statistics Oakland International Airport Historical Passenger Totals 1990-1995 5,512,333 9,834,869 12.3 San Jose International Airport Historical Passenger Totals 1990-1995 6,774,567 8,948,747 5.7 San Francisco International Airport Historical Passenger Totals 1990-1995 31,059,820 35,898,951 2.9 - ------------------------------------------------------------------------------------------------------------------------------
The "Market for Transient Accommodations" section of this economic study and appraisal will relate these historical and projected growth trends to specific market segments based on their propensity to reflect visitation. This analysis will provide a basis for forecasting changes in room night demand in the subject property's area. Overview of External Forces HVS International, Mineola, New York Affecting the U.S. Lodging Industry 39 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 5. Overview of External Forces Affecting the U.S. Lodging Industry Introduction Hotel ownership is ultimately the business of creating and enhancing value. To understand the investment potential of lodging facilities, investors must be thoroughly aware of the many forces that can cause changes in the value of their properties. Although some of these forces are internal (such as the layout and design of the facilities, the quality of management, and the condition of the property), others are external (such as the local economic environment and the competitive nature of the market). The risk associated with hotel investment lies largely with the external forces that are beyond the control of ownership and contribute to the variability of future income flows. Investors and appraisers can project financial results by evaluating the historical impact of external forces on hotel values. Successful hotel investors seek opportunities where the risk of external forces can be minimized, thus reducing the uncertainty associated with income expectations. When investors engage in due diligence prior to acquiring a lodging facility, they are primarily interested in trends affecting a limited geographic market area, such as a town, city, or county. A broader overview takes into account national and international travel patterns and trends. An understanding of the general characteristics of the United States hotel market is important because these trends often foreshadow economic and demographic changes in smaller areas. This section of the appraisal will present an overview of the U.S. lodging industry by tracing many of the forces that influence hotel values. Historical economic and demographic data, and industry statistics will be analyzed to provide a basis for projections. Forecasts will be evaluated to determine their reasonableness. The conclusions represent another set of criteria that hotel investors consider in making their acquisition decisions. Overview of External Forces HVS International, Mineola, New York Affecting the U.S. Lodging Industry 40 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The Supply and Demand Relationship Most business ventures are influenced by the relationship between supply and demand. In the hotel industry, supply refers to the number of units. A unit consists of one or more rooms and represents the smallest accommodation that can be rented to a guest. Each unit must have a full bath and its own entrance to a public hallway or the building exterior. Demand refers to a room night, which is one unit that is occupied for one night. The supply and demand relationship has a significant influence on a hotel's occupancy and/or average room rate. Occupancy is calculated by dividing the number of rooms that are occupied for a specific period by the total number of rooms that are available during the same period. Average room rate is determined by dividing the total rooms revenue achieved during a specific period by the number of rooms occupied during that period; it also represents the weighted average of all the room rates charged during that period. In a market where demand is increasing faster than supply, occupancies rise and average rate growth generally exceeds inflation. When supply is increasing faster than demand, occupancies fall and average rates typically remain level or decline. Hotels generate revenue based on occupancy and average rate, and thus the supply and demand relationship is an important factor in analyzing profits and value. Hotel occupancy levels have shown definite cycles that reflect the balance between supply and demand. The early 1970s marked the beginning of a hotel building boom reminiscent of the 1920s. Many factors contributed to this expansion, but the two main elements were readily available financing and aggressive chains that were eager to sell franchises. The new construction during the 1970s was made possible by the enormous amount of financing generated by all lenders, particularly real estate investment trusts (REITs). These high-leverage finance companies were created to allow small investors to participate in real estate mortgages and equities. The concept was quickly accepted by Wall Street, and soon billions of dollars were available to finance real estate projects. Many lenders became so overwhelmed with new money that their underwriting procedures broke down and some marginal developments were approved. During the late 1960s and early 1970s, hotel companies actively expanded their chains through franchising. Franchising was a source of new capital, allowing hotel companies to grow and achieve national recognition using the franchisee's financial investment in individual properties. Some franchisors, eager to demonstrate sustained growth and establish a national Overview of External Forces HVS International, Mineola, New York Affecting the U.S. Lodging Industry 41 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= presence, employed questionable marketing tactics to sell new franchises. Salespeople were often compensated based on the number of franchises sold, so there was little incentive to discourage developers from investing in poor locations and overbuilt markets. Many lenders and hostelry developers were led to believe that a national franchise would guarantee a successful operation. The combination of readily available financing and aggressive hotel chains eager to sell franchises resulted in overbuilding and development of many poorly located, undercapitalized hostelries managed by inexperienced owners. The bubble burst on the lodging industry when inflation caused construction costs and interest rates to escalate. The 1974 energy crisis drastically reduced travel, and the accompanying recession curtailed business trips, conferences, and conventions. Operators of marginal properties quickly fell behind in their mortgage payments, and lenders were forced to foreclose. As lenders became hostelry owners, they either organized work-out departments headed by experienced hoteliers or engaged professional hotel management companies to assume operational responsibilities. Sales data indicate that lenders who were looking for quick sales to remove nonperforming hotel assets from their books had to lower their prices substantially to attract all-cash buyers. Lenders who were willing to hold on to foreclosed hotels and employ professional management to reposition and improve the properties' operation were generally able to recoup their original investments in three to five years, once the industry began to recover. However, even lenders who repositioned their hotels had to take back favorable purchase-money financing to sell the properties because money from other sources was not available. History has shown that during economic downturns, hotel values generally do not fall in proportion to the properties' declining incomes. Sellers, and particularly lenders who take back hotels through foreclosure, are often unwilling to sell at substantially reduced prices. They are more likely to wait out the downward cycle and dispose of their assets when the market begins to rebound. Thus, appraisers can best reflect market behavior by projecting a facility's net income to a point of recovery and applying the proper discounted cash flow procedure over that time period. The late 1970s was a period of relative calm for the lodging industry. Because most lenders were recovering from the financial wounds inflicted by Overview of External Forces HVS International, Mineola, New York Affecting the U.S. Lodging Industry 42 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the 1975 recession, they had little interest in making hotel mortgages. New construction was restrained, and primarily consisted of additions to existing properties and the development of some large, downtown hotels oriented toward the commercial and convention markets. The rebirth of center-city hostelries was a direct result of fuel shortages and the availability of government financing for inner-city redevelopment projects. Highway-oriented properties, on the other hand, were adversely affected by escalating gasoline prices and decreased automobile travel, and these lodging facilities lost some of their appeal among investors and hotel companies. Decreased building activity, the normal retirement of older hostelries from the market, and an improving economy created a favorable supply and demand relationship and record-high occupancy levels from 1979 to 1980. Average room rates increased rapidly as operators took advantage of the excess demand to recoup earlier losses and keep up with inflation. After the decline in hotel development during the late 1970s, the environment appeared suitable for a period of renewed expansion. However, the Federal Reserve tightened the money supply in the early 1980s, sending the prime interest rate up to double-digit levels. Most of the projects that were in the preliminary planning stages but lacked sensible financing were put on hold. Fiscal policy and declining energy prices eventually reduced the national inflation rate. This caused a decline in hotel interest rates beginning in 1983, and suddenly massive amounts of capital were available for real estate investments. Hotel developers who had been out of the market since the mid-1970s rushed to initiate new projects. They were aided by several major real estate development incentives: high occupancies and escalating room rates, readily available debt and equity financing, and unique income tax benefits designed to stimulate the national economy out of a recession. During the early 1980s, trends were generally favorable for new hotel development. Although the recession caused a decline in lodging demand, many markets showed relatively high occupancy levels. Room rates were usually able to keep up with inflation, and the travel industry was expected to boom as a result of a recovering economy. Franchise sellers signed up new prospects aggressively, using product segmentation to justify the saturation of a market with a common brand. Overview of External Forces HVS International, Mineola, New York Affecting the U.S. Lodging Industry 43 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Financing was readily available from the savings and loan industry. Following deregulation, these banks were permitted to lend on commercial real estate, such as hotels. Although savings and loans had experience in making loans on single-family homes, few had expertise with commercial properties, and fewer still with hotels. The result was almost identical to the real estate investment trust fiasco the decade before: loan underwriting and administration were inept and sometimes nonexistent, the number of loans made seemed more important than the quality of the real estate and the integrity of the borrower, and short-term funds were often used to finance long-term mortgages. In the early 1990s, the industry suffered the consequences of this lending spree: most major hotel markets became severely overbuilt and many savings and loans went out of business. Another factor contributing to hotel development in the 1980s was the very favorable treatment provided by income tax regulations. By carefully structuring hotel syndications to take advantage of all available tax benefits, investors could virtually recoup their total cash outlay in the first year and reap additional benefits in the future regardless of the economic success of the underlying asset. Because there was little incentive to justify a transaction's economics (i.e., cash flow and reversionary benefits), a number of syndicators overpaid for hotel properties, took out usurious fees, and overloaded their hotels with debt. A change in the tax law in the mid-1980s eliminated many of the benefits associated with hotels, but the overbuilding in most markets was either in progress or had already taken place. By the end of the 1980s, the abuses of the savings and loans had become apparent, but it was too late to reverse the overbuilding. Between 1985 and 1990, approximately 556,000 rooms were added to the U.S. hotel supply. The national economy entered another recession in 1990, and this factor (coupled with overbuilding and the Persian Gulf War in 1991) caused the national hotel occupancy rate to bottom out at 60.9%. In some markets, hotel occupancies were as low as 35%. This supply and demand imbalance was almost identical to the situation in the 1970s that led to numerous hotel failures. As in the REIT days, the number of non-performing loans reached record levels, and lenders moved to a work-out mode of operation in order to foreclose and restructure their hotel investments. Many of the savings and loans were taken over by the government and their hotel assets were sold at auction. Overview of External Forces HVS International, Mineola, New York Affecting the U.S. Lodging Industry 44 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= According to the American Council of Life Insurance, which represents major life insurance companies, the number of delinquent hotel loans and the number of hotel loans in foreclosure peaked in 1991. This trend is undergoing a reversal as the U.S. lodging industry begins to recover. Loan restructuring was an attractive alternative to foreclosure during this period, and the number of loans in good standing with restructured terms almost doubled. By 1993, new hotel construction had declined significantly. Lenders, trying to get out from under problematic hotel portfolios, curtailed all real estate lending and would not even consider hotels. The tax benefits associated with lodging facilities had been reduced significantly, and passive investors left the hospitality market entirely. The slowdown in the growth of supply had a beneficial impact on occupancy levels, which started to recover in 1992. Improved occupancies are expected to continue through the late 1990s as increases in lodging demand outpace growth in supply. Beginning in 1991, many lenders and the Resolution Trust Corporation (RTC) sold their oldest and least desirable hotels at liquidation prices. Because virtually no third-party financing was available, most lenders were forced to take back purchase-money mortgages at favorable terms in order to sell these properties without suffering massive write-downs. The newer and more desirable hotels were not put on the market, because their lenders/owners were waiting for values to recover. This course of action significantly reduced the number of transactions involving good-quality lodging facilities. The following table shows the volume of hotel transactions exceeding $10,000,000 between 1990 and 1995. ================================================================================ Table 5-1 Summary of Major Hotel Transactions - -------------------------------------------------------------------------------- Year 1990 1991 1992 1993 1994 1995 - -------------------------------------------------------------------------------- Number of Transactions 130 54 67 52 92 104 Number of Rooms 40,543 16,427 25,187 19,935 33,503 36,951 Average Price Per Room $136,000 $91,000 $85,000 $79,000 $80,000 $83,000 Source: HVS International - -------------------------------------------------------------------------------- In 1991, there were only 54 major hotel sales recorded. This number increased to 67 in 1992 and declined to 52 in 1993, then rose dramatically in Overview of External Forces HVS International, Mineola, New York Affecting the U.S. Lodging Industry 45 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 1994 and 1995. During the low-volume years, many sellers remained on the sidelines waiting for values to increase before placing their properties on the market. The jump in 1994 is attributable to a number of factors, including the greater availability of mortgage funds, a return of institutional investors to the market, and a resurgence of investor interest in lodging facilities. The profile of typical hotel buyers has changed somewhat. During the mid-1980s, when tax-driven syndication's were popular, many hotels were purchased by passive investors who hired management companies to operate their properties. These owners had little involvement in day-to-day management decisions, which occasionally led to poor management and financial losses. Today, most buyers of major hotels are owner-operators who bring with them both the acquisition funds (usually from a joint venture partner) and management expertise. We also note that real estate investment trusts (REITs) and public hotel companies (C-Corps) are actively acquiring hotels using funds from public equity stock offerings. The supply of new hotel rooms is expected to increase slowly during the next several years. Lenders are beginning to return to the market, and are making some hotel loans based on conservative criteria. Initially, mortgage funds were available mainly to the budget and economy lodging sectors, for the purpose of refinancing existing properties or assisting buyers in acquisitions. Now, a number of lenders are willing to finance new construction for these small, low-end properties. Although financing is also becoming available for the acquisition of large, full-service hotels, very little has been allocated for new construction. At present, active hotel lenders are not necessarily traditional banks and insurance companies, but may include credit companies and Wall Street securities firms. A number of hotel owners and developers are now constructing budget and economy hotels; a few are planning more upscale, full-service properties. Most lenders are taking a conservative approach to new hotel loans, which should limit new development to those projects that demonstrate true economic feasibility. As a result, severe short-term overbuilding is unlikely. Overview of External Forces HVS International, Mineola, New York Affecting the U.S. Lodging Industry 46 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Room Rates The supply and demand relationship has a direct impact on hotel occupancies and an indirect influence on room rate growth. Between 1978 and 1995, hotel room rates increased at an average annual compounded rate of almost 6%. Significant rate growth was recorded during the late 1970s and early 1980s as a result of strong occupancies (70%'s) coupled with a high monetary inflation rate (14%). In recent years, room rate growth slowed as a result of low occupancies and a drop in inflation. Hotel room rates generally increase faster than the Consumer Price Index (CPI) when occupancies are strong or moving upward. When occupancies are low or declining, room rate growth tends to lag behind the CPI; in some cases, rates may remain flat or actually drop. The following table compares the historical and projected annual increase in hotel room rates in the United States to the change in the national CPI. Overview of External Forces HVS International, Mineola, New York Affecting the U.S. Lodging Industry 47 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-2 Percent Change in Average Room Rates Versus CPI - U.S. Hotels - -------------------------------------------------------------------------------- Consumer Price Hotel Room Rate Index Hotel Year Percent Change Percent Change Occupancy - ------------------------------------------------------------------ 1973 4.2% 6.2% 70.2% 1974 7.6 11.0 64.0 1975 7.3 9.1 63.7 1976 8.2 5.7 65.8 1977 8.1 6.5 67.3 1978 14.0 7.7 69.2 1979 17.0 11.3 71.9 1980 15.2 13.5 70.6 1981 10.0 10.3 67.9 1982 6.5 6.2 66.7 1983 5.1 3.2 64.4 1984 6.9 4.3 64.0 1985 4.6 3.6 63.1 1986 3.2 1.9 62.5 1987 3.6 3.6 61.9 1988 3.6 4.1 62.3 1989 3.5 4.8 63.2 1990 3.0 5.4 62.4 1991 0.6 4.2 60.9 1992 1.4 3.0 62.1 1993 2.8 3.0 63.1 1994 4.8 2.6 64.7 1995 4.8 2.8 65.5 1996 5.0 3.0 66.0 1997 5.5 3.5 67.0 1998 6.0 4.0 68.0 1999 5.5 4.0 68.0 Sources: Smith Travel Research & HVS International - -------------------------------------------------------------------------------- This table shows two periods when hotel room rate growth failed to keep pace with the CPI. From 1973 to 1975, the hotel industry was suffering from overbuilding related to real estate investment trusts, a recession, and a downturn in travel caused by the oil embargo. The second period of slow room rate growth occurred between 1988 and 1993, when the industry was again affected by overbuilding and a weak economy. The table illustrates that during periods of prosperity, room rates are a good hedge against inflation; this was true even when the CPI increased at double-digit levels. Overview of External Forces HVS International, Mineola, New York Affecting the U.S. Lodging Industry 48 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The projections indicate a strong recovery of room rates as the relationship between supply and demand becomes more favorable. Growth is expected to peak in 1998 at 6%, which is significantly higher than the projected gain in the CPI. This may appear high, but a similar trend occurred in 1978, when room rates rose 14.0% and the CPI increased by only 7.7%. Hotels are unique because their room rates can be adjusted at any time. Unlike office space, where rents are typically negotiated for a five-year period, hotel operators are free to base rates on occupancy trends. Using sophisticated yield management programs, modern lodging facilities can ride the demand curve and maximize room rates whenever the market permits. As a result, hotels generally offer significant upside potential during periods of economic prosperity. If lodging facilities can increase room rates faster than the CPI and still maintain occupancies, bottom-line profits usually escalate. If they can raise room rates and occupancy at the same time, profits will grow significantly. The opposite occurs when room rates fail to keep pace with inflation. Because market value is basically a multiple of bottom-line profits, changes caused by fluctuations in occupancy and average rate have a direct impact on value. Rooms Revenue per Available Room (RevPAR) The ability of a hotel to maximize its occupancy and room rate is measured in terms of rooms revenue per available room (RevPAR), which is the product of occupancy and average rate. Between 1978 and 1995, RevPAR in the U.S. lodging industry increased at an average annual compounded rate of approximately 5%. As in the case of average rate, most of the increase occurred during the late 1970s, when occupancies escalated rapidly. The only decline in RevPAR occurred in 1991. Trends in Hotel Sales HVS International constantly monitors hotel markets in order to collect information on sales of lodging facilities. This comprehensive database is known as the Hospitality Market Data Exchange (HMDE). The HMDE includes more than 90% of all hotel sales that took place during this period. The HMDE data shows that the number of transactions peaked at 726 in 1986. This strong activity is largely attributable to pending changes in the tax laws, which made it less favorable to own hotels. It is also possible that forward-thinking investors noted the substantial overbuilding and declining economy and decided to bail out at that time. In 1987 and 1990, the Overview of External Forces HVS International, Mineola, New York Affecting the U.S. Lodging Industry 49 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= average sales price per room peaked at $75,000. This was more than twice the 1981 average of $36,000. Following the 1990 peak, hotel prices fell rapidly as occupancies and profits were eroded by the massive number of hotel rooms entering the market. By 1991, the year of the Persian Gulf War, sales prices had fallen to $38,000 per room. Even the highest price per room declined from the record $1,195,652 (for the sale of the Bel Aire Hotel) to $251,816 in 1992. The market hit bottom in 1993 when the average sales price dropped to $36,000 per room. Prices recovered rapidly in 1994 and 1995 as investors became interested in hotels again and more full-service properties were put on the market. In 1995, the average sales price was $61,000 per room. The figures presented in the HMDE represent actual sales prices; no attempt was made to adjust for factors such as favorable or unfavorable financing, forced or liquidation sales, bankruptcy sales, foreclosures, and so forth. As a result, the average price per room does not necessarily reflect market value, which assumes a willing buyer and a willing seller. Many of the transactions that took place during the early 1990s involved unwilling sellers - usually lenders who were forced to liquidate hotel portfolios quickly at prices that were below market levels. Most hotel experts agree that a recovery is underway, and they recommend that owners hold their properties until more favorable conditions prevail. Trends in Hotel Values A more meaningful indicator of trends in hotel value is the Hotel Valuation Index (HVI), developed by HVS International. This index tracks changes in hotel values in 23 major markets and the nation as a whole. It is developed through an income approach, using market area data provided by Smith Travel Research and operational and capitalization rate information from HVS International, and is indexed to the 1986 U.S.A. value (1.0000). The following table sets forth the HVI from 1986 to 1995. Overview of External Forces HVS International, Mineola, New York Affecting the U.S. Lodging Industry - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-3 Hotel Valuation Index per Room - -------------------------------------------------------------------------------- Valuation Index Per Room
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 ------------------------------------------------------------------------------------------------------- Honolulu 3.3571 4.0357 4.6964 5.2857 5.3214 4.7857 4.9286 4.2857 4.3929 5.6071 New Orleans 1.5357 1.7500 2.2857 2.3929 2.5000 2.6071 3.2857 3.2500 3.8929 4.4286 New York 3.5714 4.1071 4.6429 4.5357 3.9286 3.0357 2.5714 2.5714 3.1429 4.1071 San Francisco 2.5000 3.0893 3.2500 3.0714 2.9286 2.5714 2.5714 2.9643 3.2143 4.0000 Phoenix 1.2143 1.0714 1.1786 1.5357 1.4286 1.2500 1.5000 1.9643 2.3571 3.2143 San Diego 2.8571 2.3571 2.5714 2.6786 2.3929 2.5357 2.5357 2.2143 2.3571 3.0357 Miami 1.4286 1.6071 1.7321 2.1429 2.1786 2.2500 2.5714 2.7857 2.3214 2.9286 Washington, DC 2.1786 2.1786 2.4464 2.6071 2.2500 1.8571 2.0357 2.5000 2.3929 2.8929 Atlanta 1.0714 1.0179 1.0536 1.0357 1.1429 1.1250 1.2857 1.7857 2.1429 2.6786 Minneapolis 0.7321 0.6964 0.7143 0.7143 0.7857 1.0000 1.2857 1.5714 1.8214 2.1786 Chicago 1.4643 1.5000 1.5714 1.5000 1.4286 1.2143 1.2500 1.5000 1.8571 2.1786 Boston 2.3571 2.7143 2.6071 2.1429 1.8214 1.2500 1.3036 1.3214 1.6071 2.1071 Fort Lauderdale 1.4643 1.2679 1.3214 1.4286 1.4821 1.3571 1.7143 1.8929 1.6071 1.9286 Orlando 1.5000 1.6429 1.9286 2.5000 2.5357 1.8929 2.0714 1.7857 1.6071 1.8929 Denver 0.5357 0.4464 0.4643 0.4821 0.7857 0.9268 1.0357 1.3214 1.5000 1.8571 Dallas 0.5536 0.6250 0.6607 0.7321 0.7857 0.7143 0.9643 1.0357 1.3214 1.7143 USA 1.0000 0.9464 1.0536 1.1250 1.0714 0.9214 0.9929 1.1429 1.3214 1.6071 Los Angeles 2.1071 2.2857 2.3929 2.4643 2.1786 1.5714 1.0714 0.9643 1.1964 1.5000 Tampa 0.8393 0.7679 0.8571 1.1429 1.2857 1.0357 1.0714 1.0357 1.1071 1.3214 Anaheim 1.7679 1.7321 1.7500 1.8571 1.6071 1.2857 0.9642 0.9464 0.8393 1.2500 Houston 0.3571 0.4286 0.6964 0.7857 1.1071 1.1607 1.1429 1.0357 1.0000 1.1786 Philadelphia 1.4643 1.5357 1.4286 1.3214 1.0714 0.6786 0.5714 0.6071 0.7500 1.0714 Norfolk 1.1786 1.0536 0.9286 0.7857 0.6429 0.5357 0.6071 0.6429 0.7500 0.9643 Riverside 0.9643 1.2143 1.5714 1.7143 1.4643 1.2500 0.7857 0.5357 0.4286 0.5357
Source: HVS International - -------------------------------------------------------------------------------- The HVI can be used to show the value change in a particular market over time or to show the relative difference in hotel values in various cities. The following table shows the annual change in hotel values in 23 major markets and the United States as a whole. Overview of External Forces HVS International, Mineola, New York Affecting the U.S. Lodging Industry 51 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 5-4 Percent Change in the Hotel Valuation Index - -------------------------------------------------------------------------------- Annual Percent Change
'86-87 '87-88 '88-'89 '89-'90 '90-'91 '91-'92 '92-'93 93-'94 '94-'95 '86-'95 - ----------------------------------------------------------------------------------------------------------- Honolulu 20 % 16 % 13 % 1 % -10 % 3 % -13 % 3 % 28 % 67 % New Orleans 14 31 5 4 4 26 -1 20 14 188 New York 15 13 -2 -13 -23 -15 0 22 31 15 San Francisco 24 5 -5 -5 -12 0 15 8 24 60 Phoenix -12 10 30 -7 -13 20 31 20 36 165 San Diego -18 9 4 -11 6 0 -13 6 29 6 Miami 12 8 24 2 3 14 8 -17 26 105 Washington, DC 0 12 7 -14 -17 10 23 -4 21 33 Atlanta -5 4 -2 10 -2 14 39 20 25 150 Minneapolis -5 3 0 10 27 29 22 16 20 198 Chicago 2 5 -5 -5 -15 3 20 24 17 49 Boston 15 -4 -18 -15 -31 4 1 22 31 -11 Fort Lauderdale -13 4 8 4 -8 26 10 -15 20 32 Orlando 10 17 30 1 -25 9 -14 -10 18 26 Denver -17 4 4 63 18 12 28 14 24 247 Dallas 13 6 11 7 -9 35 7 28 30 210 USA -5 11 7 -5 -14 8 15 16 22 61 Los Angeles 8 5 3 -12 -28 -32 -10 24 25 -29 Tampa -9 12 33 12 -19 3 -3 7 19 57 Anaheim -2 1 6 -13 -20 -25 -2 -11 49 -29 Houston 20 62 13 41 5 -2 -9 -3 18 230 Philadelphia 5 -7 -8 -19 -37 -16 6 24 43 -27 Norfolk -11 -12 -15 -18 -17 13 6 17 29 -18 Riverside 26 29 9 -15 -15 -37 -32 -20 25 -44
Source: HVS International - -------------------------------------------------------------------------------- On a national basis, hotel values rose in 1988 and 1989, then declined in 1990 and dropped by 14% in 1991. A turnaround commenced in 1992, when values increased by 8%; still greater increases of 15% in 1993, 16% in 1994, and 22% in 1995 signaled that a recovery was well underway. In the case of the individual cities, it is obvious that the movement in national hotel values has been offset somewhat by trends in local markets. Between 1986 and 1995, Riverside hotels lost more than 40% of their value, while San Francisco showed a 60% increase. Anaheim, Los Angeles, and Philadelphia also suffered significant drops. Future Trends Most hotel owners, operators and lenders agree that the U.S. lodging industry has emerged from one of the worst periods since the Depression of 1929. Today, there are many indications that signal a strong recovery is underway, and most hotels have experienced a dramatic rise in profitability. Conversely, the hotel industry remains cyclical, and there are long-term trends and risk factors that could have an unfavorable impact on the operating results and investment potential of lodging facilities. The following Overview of External Forces HVS International, Mineola, New York Affecting the U.S. Lodging Industry 52 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= list summarizes the positive and negative factors that are likely to influence the U.S. lodging industry in coming years. o No significant amount of new hotel development is likely to occur during the next three to five years. Lenders stopped financing new hotels in the early 1990s because of the high rate of loan defaults, and they are only now starting to make construction loans. Although mortgage funds are available to refinance existing properties and construction loans are being made for economy hotels, mortgages for new hotels in the mid-rate, first-class, and luxury categories are still difficult to secure. This lack of financing is major barrier to entry, and will prevent a number of proposed projects from moving forward. With only a slow increase in supply, hotel occupancies should rebound as fast as the growth in demand permits. o An additional barrier to entry is the current discrepancy between market values and replacement costs for first-class and luxury hotels. In today's market, many upscale hotels are still selling for prices that are below what it would cost to develop a comparable hotel. As a result, there is little justification for building a new hotel when a similar, existing facility is available for sale at some fraction of the cost. Until the gap between market value and replacement cost narrows, there will be minimal new hotel construction in the upper-tier segments. The market values and replacement costs of budget and economy hotels have been in equilibrium for several years which is another reason why new development is proceeding in these segments. o The U.S. economy continues to improve, which suggests that more people are traveling. Many people curtailed their travel plans during the recent recession, and there is likely to be pent-up demand that will be released as consumer confidence escalates. o Minimal additions to the hotel supply coupled with growth in demand should result in further improvement in occupancies during the next several years. o As shown by the historical data, hotel room rates rise rapidly as occupancies escalate. The most frequent complaint that owners and operators had during the recent recession was their inability to achieve average rate gains. Starting in 1994, gains in hotel room rates returned to levels in excess of inflation, foreshadowing enhanced profitability. In real dollars, hotel room rates are expected to return to 1988 levels by Overview of External Forces HVS International, Mineola, New York Affecting the U.S. Lodging Industry 53 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 1998. This is a good indication that hotel values will return to record levels in the next two to four years. o The low cost of capital is another factor that tends to enhance value. Because capitalization rates are tied directly to the price of capital, the lower the cost, the lower the cap rate and the higher the value. The cost of hotel debt capital averaged 10.5% in 1990. Today, similar financing is available at 8.5% to 9.5%. Recent hotel sales support the downward trend in capitalization rates. o Government regulations are becoming increasingly expensive for the U.S. hotel industry. A national health care policy could force small operators to provide better benefits for many more employees, particularly the part-time workers who are used extensively by hotels and restaurants. Environmental laws are becoming stricter and will require hotels to implement recycling, reuse, and conservation procedures. Congress has limited deductions for meals and entertainment expenses, which increases the cost of doing business in hotels and restaurants. Local municipalities use hotel rooms taxes as a source of revenue for general use, and the hotel rooms tax is so high in some areas that it has driven away demand. This is particularly true with respect to meetings and conventions, which can be held in cities that tax accommodations at a lower rate. o Improved technology is rapidly changing the way business is conducted. During the next decade, advances such as video communication, enhanced data transfer, and faster transportation are expected to limit the need for face-to-face meetings and shorten the time that executives are away from their offices. Commercial hotels are bound to be influenced by this trend. Conclusion Interest in hotel acquisition has increased significantly during the past several years. Buyers have concluded that future earnings trends are likely to be favorable, and the risks posed by overbuilding or an economic downturn are small. Some sellers are holding their properties until prices reach a higher level. Consequently, we believe there is pent-up desire to sell once prices begin to approach levels that allow the existing (or restructured) debt to be paid off. The fact that numerous buyers are chasing very few acquisition opportunities has had a favorable impact on recent sales prices. For buyers to be successful in this highly competitive market, their projected operating results Overview of External Forces HVS International, Mineola, New York Affecting the U.S. Lodging Industry 54 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= must take into account at least a portion of any upside created from improved performance, particularly if the improvement can be readily achieved through management efficiencies. Capitalization rates based on historical operating income have fallen during the past several years. Hotel buyers in today's market must be aggressive in all of their acquisition assumptions. As a result, hotel values in some parts of the country are approaching the levels registered during the mid-1980s, and a full recovery is expected to occur in the next two to four years. Lodging Market HVS International, Mineola, New York Supply and Demand Analysis 55 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 6. Lodging Market Supply and Demand Analysis MARKET FOR TRANSIENT ACCOMMODATIONS The market for transient accommodations is an all-encompassing term referring to the many types of travelers who use lodging facilities in a given area. These travelers represent the market's accommodated room night demand. This section will begin with an analysis of historical demand trends to determine what changes have occurred; the historical number of competitive hotel rooms will then be estimated to evaluate local supply trends. Areawide occupancy levels can be calculated based on the number of hotel rooms available in the market and the demand for lodging accommodations. The total hotel room night demand will be divided into individual market segments to allow us to forecast growth rates based on the economic and demographic data set forth earlier in this report. Historical Supply and Demand Data Smith Travel Research (STR) has compiled historical supply and demand data for the subject property and its competitors. This information is presented in the following table, along with the marketwide occupancy, average rate, and rooms revenue per available room (RevPAR). RevPAR is calculated by multiplying occupancy by average rate, and provides an indication of how well rooms revenue is being maximized. Lodging Market HVS International, Mineola, New York Supply and Demand Analysis 56 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL =============
=================================================================================================================================== Table 6-1 Historical Room Supply and Demand Trends (STR) - ----------------------------------------------------------------------------------------------------------------------------------- Year to Date Average Annual ----------------- Compounded Growth 1989 1990 1991 1992 1993 1994 1995 1995 1996 1989 - 1995 - ----------------------------------------------------------------------------------------------------------------------------------- Number of Rooms 1,873 1,873 1,873 1,873 1,873 1,873 1,873 1,873 1,873 Annual Guestroom Supply 683,645 683,645 683,645 683,645 683,645 683,645 683,645 455,139 455,139 Percent Change -- 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -- 0.0% 0.0% Room Night Demand 431,325 450,325 425,523 440,404 443,749 492,180 518,903 346,449 371,693 Percent Change -- 4.4% (5.5%) 3.5% 0.8% 10.9% 5.4% -- 7.3% 3.1% Occupancy 63.1% 65.9% 62.2% 64.4% 64.9% 72.0% 75.9% 76.1% 81.7% Percent Change -- 4.4% (5.6%) 3.5% 0.8% 10.9% 5.4% -- 7.4% 3.1% Average Rate $68.68 $71.51 $71.38 $69.61 $70.08 $70.74 $75.60 $75.42 $85.33 Percent Change -- 4.1% (0.2%) (2.5%) 0.7% 0.9% 6.9% -- 13.1% 1.6% RevPAR $43.34 $47.13 $44.40 $44.83 $45.48 $50.93 $57.38 $57.39 $69.71 Percent Change -- 8.7% (5.8%) 1.0% 1.5% 12.0% 12.7% -- 21.5% 4.8% - -----------------------------------------------------------------------------------------------------------------------------------
Lodging Market HVS International, Mineola, New York Supply and Demand Analysis 57 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= It is important to note some limitations of the STR data. The hotels utilized in the STR data represent properties that are competitive with the subject property. Hotels are occasionally added to or removed from the sample, and not every property reports data in a consistent and timely manner; these factors can influence the overall quality of the information by skewing the results. These inconsistencies may also cause the STR data to differ from the results of our competitive survey. Nonetheless, we find that hotel buyers often rely on STR statistics, and thus they are considered relevant to this study. The preceding table presents the subject property's competitive market from 1989 through year-to-date August 1996. Marketwide annual guestroom supply has remained unchanged over the period. Although the national economic recession's effect upon the Northern California economy during the early 1990s was more delayed and less severe than the rest of the nation, the Persian Gulf War in 1991 punctuated the market's weakest period, resulting in declines in marketwide occupancy and average rate in that year. Following 1991, room night demand rebounded, albeit at lower rates of growth, while average rate declined in 1992. Overall marketwide RevPAR increased moderately in 1992 and 1993. In 1994, with the national economy gaining strength and a boom in Silicon Valley, marketwide room night demand increased at double digit rates, resulting in a RevPAR gain of 12.0%. With resurgent occupancy levels, marketwide average rate increased alongside strong occupancy gains in 1995, resulting in a second year of double-digit RevPAR gains. Year-to-date August 1996 data indicate a continuation of this trend at even greater levels, as marketwide RevPAR has increased by 21.5% over the prior-year period. The recent dynamic of increasing RevPAR levels has resulted from strong demand coupled with a lack of new room supply. It is important to note that this performance is not likely to be sustainable over the long term, as demand will eventually slacken and new supply will enter the market. However, the current high occupancy levels (81.7% for the year-to-date 1996) suggests that this market is probably turning away demand due to lack of available room nights. The presence of such unaccommodated demand should somewhat cushion the impact of any new supply in the market area. Overall, average annual compounded growth indicates lack of new supply, moderate general growth in room night demand, and sub-inflationary Lodging Market HVS International, Mineola, New York Supply and Demand Analysis 58 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= gains in average rate. However, these rates of growth do not reflect the dramatic increase in year-to-date performance levels. Demand Analysis Using Market Segmentation For the purpose of demand analysis, the overall market is divided into individual segments based on the nature of travel. Although a market may have various segments, the three primary classifications occurring in most areas are commercial, meeting and group, and leisure. Market segmentation is a useful procedure because individual classifications often exhibit unique characteristics in terms of growth potential, seasonality of demand, average length of stay, double occupancy, facility requirements, price sensitivity, and so forth. By quantifying the room night demand by market segment and analyzing the characteristics of each segment, the overall demand for transient accommodations can be projected. Lodging demand in Union City, Newark, Fremont, and Milpitas, hereafter known as the East Bay, is generated primarily by the following four market segments. Segment 1 Commercial Segment 2 Meeting and Group Segment 3 Leisure Segment 4 Airline Based on our fieldwork, area analysis, and knowledge of the local lodging market, we estimate the 1996 distribution of accommodated hotel room night demand as follows. ================================================================================ Table 6-2 1996 Accommodated Room Night Demand - -------------------------------------------------------------------------------- 1996 Annual Room Night Demand (Rounded) ----------------------------------------------------------- Percentage Percentage Market Segment Market Wide of Total Subject Property of Total - ------------------------------------------------------------------------------- Commercial 322,000 60% 47,000 51% Meeting and Group 117,000 22 14,000 15 Leisure 83,000 15 25,000 27 Airline 18,000 4 7,000 8 -------- ---- ------ ---- Total 540,000 100% 93,000 100% - ------------------------------------------------------------------------------- The commercial demand segment dominates the market at 60%. This is followed by the meeting and group segment at 22%. Leisure demand Lodging Market HVS International, Mineola, New York Supply and Demand Analysis 59 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= represents 15% of overall demand in the market, followed by 4% for airline. The subject property's market demand mix contains a higher share of leisure and airline demand as a result of contracts made in 1995, prior to the significant rise in occupancy and average rate levels exhibited by the market. Using the distribution of accommodated hotel demand as a starting point, we will analyze the characteristics of each market segment in an effort to determine future trends in room night demand. Commercial Segment The commercial segment consists of individual businesspeople who are visiting various firms in the subject property's market. In the subject market area, high-technology computer hardware and software firms, automobile manufacturing, and transportation and distribution companies predominate. Commercial demand is strongest Monday through Thursday nights, declines significantly on Friday and Saturday, and increases somewhat on Sunday. The typical length of stay ranges from one to three days, and the rate of double occupancy is a low 1.2 to 1.3 people per room. Commercial demand is relatively constant throughout the year, although some declines are noticeable in late December and during other holiday periods. In general, commercial travelers are not overly rate sensitive, and will use a hotel's food and beverage outlets and recreational facilities. The commercial segment represents a highly desirable and lucrative market that provides a consistent level of demand at relatively high room rates. Commercial demand in the subject property's market is generated by high-technology corporations located along the Interstate 880 north-south corridor between Newark and Silicon Valley. Major corporations located along this area include Sun Microsystems, Lam Research, Cirrus Logic, Octel, Tencor, and the New United Motor Manufacturing Incorporated (NUMMI) assembly plant. In addition to these local demand generators, demand overflow from nearby Silicon Valley is also a significant portion of commercial demand. Based on the economic and demographic data presented earlier, we estimate that commercial hotel demand in the subject market rose at rates ranging from 0.6% to 3.7% annually during the 1980s. We generally find a multiplier effect between employment growth in certain sectors and the increase in commercial lodging demand (i.e., one new FIRE employee will correspond to more than one new visitor). In conjunction with the recent Lodging Market HVS International, Mineola, New York Supply and Demand Analysis 60 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= trend of slower growth in the local economy, commercial demand increases have become more moderate. As the national and international economy improves and prominent local businesses increase their production and employment levels, commercial hotel demand is expected to rebound quickly. Smith Travel Research estimates that total hotel demand in the competitive market rose by 5.4% in 1995. We project that commercial demand (which makes up 60% of the total market) will increase by 2.5% in 1997. Thereafter, we project commercial demand growth at 3.0% during 1998 and 2.5% in 1999, before stabilizing at 2.0% annually in subsequent years. In addition to these forecast rates of growth, as mentioned previously, a portion of commercial demand is currently being unaccommodated by the existing supply. With marketwide occupancies at 81.7% for the year-to-date 1996, area hotel managers reported significant turn-away demand during the weekday period between Monday and Thursday. As such, we project approximately 32,000 commercial room nights are currently being turned away and displaced outside of the subject market in 1996 due to lack of sufficient hotel rooms within the market. With several proposed hotels scheduled to open in the subject market area in 1998 and 1999, we project this demand to be newly accommodated as marketwide room supply increases as scheduled. Meeting and Group Segment The meeting and group market includes meetings, seminars, conventions, trade association shows, and similar gatherings of ten or more people. Peak convention demand typically occurs in the spring and fall. Because of vacations, the summer months represent the slowest period for this market segment; winter demand varies. The average length of stay for typical meetings and groups ranges from three to five days. Most commercial groups meet during the weekday period of Monday through Thursday, but associations and social groups will sometimes gather on weekends. Commercial groups tend to have a low double occupancy of 1.3 to 1.5 people per room, while social groups are likely to have double occupancy rates ranging from 1.5 to 1.9. The meeting and group segment in the subject property market represents small group meetings, trade shows, seminars, and product demonstrations related to the high-technology and manufacturing firms in the area. Additionally, the subject property market also benefits from large exhibitions and trade shows held at the 400,000-square-foot San Jose McEnery Convention Center located approximately 12 miles to the south in downtown San Jose. Lodging Market HVS International, Mineola, New York Supply and Demand Analysis 61 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Meeting and group patronage is quite profitable for hotels. Although room rates are discounted for large groups, the property benefits from the use of meeting space and the revenues generated by in-house banquets and cocktail receptions. Facilities that are necessary to attract meetings and groups include function areas with adequate space for breakout, meals, and receptions; recreational amenities; and a sufficient number of guestrooms to house the attendees. Future meeting and group demand is closely related to growth in the commercial segment. Because most meetings have either a direct or an indirect business purpose, the economic considerations that have an impact on commercial travel also affect meeting and group demand. The exception is non-commercial meetings, which are tied to the economic factors that influence leisure travel. It should be noted that meetings and similar events are booked in advance, and thus growth in this segment tends to lag slightly behind increases in commercial demand. Historically, meeting and group demand in the Lower East Bay area is estimated to have increased at a rate similar to the overall average annual compounded rate of 3.1% achieved by the market. In light of this information and the relevant economic and demographic trends, we estimate that meeting and group demand in the subject property's market area will increase by 2.5% in 1997, 3.0% in 1998, and 2.5% in 1999 and thereafter. In addition to these forecast rates of growth, as mentioned previously, a portion of meeting and group demand is currently being unaccommodated by the existing supply. Area hotel managers reported significant turn-away demand during the weekday period between Monday and Thursday. As such, we project approximately 10,000 meeting and group room nights are currently being turned away in 1996 due to lack of sufficient hotel rooms within the market. With several proposed hotels scheduled to open in the subject market area in 1998 and 1999, we project this demand to be newly accommodated as marketwide room supply increases as scheduled. Leisure Segment The leisure market segment consists of individuals and families who are spending time in the area or passing through en route to other destinations. Their travel purposes may include sightseeing, recreation, visiting friends and relatives, or numerous other non-business activities. Leisure demand is strongest Friday and Saturday nights and all week during holiday periods and the summer months. These peak periods are negatively correlated with commercial visitation, underscoring the stabilizing effect of capturing weekend and summer tourist travel. The typical length of stay Lodging Market HVS International, Mineola, New York Supply and Demand Analysis 62 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ranges from one to four days, depending on the destination and travel purpose, and the rate of double occupancy generally ranges from 1.8 to 2.5 people per room. Leisure travelers tend to be the most price-sensitive segment in the lodging market. They often prefer low-rise accommodations where parking is convenient to the rooms, and they typically demand extensive recreational facilities and amenities. Ease of highway access and proximity to tourist attractions are important locational considerations. Leisure demand in the subject property's market is generated by the attractions of Fisherman's Wharf, Chinatown, and Golden Gate Bridge, located in San Francisco approximately 30 miles to the northwest of the subject property. Additionally, events held at the 20,000-seat San Jose Arena entertainment complex located in downtown San Jose also support areawide leisure demand. Furthermore, according to subject property management, owing to the subject area's location in the southeasternmost portion in the Bay Area, package tours arriving from San Francisco patronize area hotels as a starting point for extended excursions to Yosemite National Park located approximately 160 miles to the east. Future leisure demand is related to the overall economic health of the nation. Trends showing changes in state and regional unemployment and disposable personal income often have a strong impact on non-commercial visitation. Airport passenger statistics, traffic counts on nearby highways, and attendance at local attractions can also form a basis for projections. Historical passenger growth rates for San Jose and Oakland International Airports indicate average annual compounded growth of 5.7% and 9.0%, respectively. Overall leisure visitation to the San Francisco area has averaged 4.0% growth between 1985 to 1995. Based on this context of historical leisure demand levels, we estimate that leisure demand in the subject property's market area will increase by 2.0% in 1997 and 1998, before stabilizing at 1.5% annually thereafter. Airline Segment Airline demand is generated by flight crews and delayed passengers. The airlines typically contract rooms in nearby lodging facilities for extended periods to ensure the availability of accommodations. Because they are able to guarantee a specific level of usage on a daily basis, airlines can usually negotiate deeply discounted room rates. This type of demand is advantageous because it provides a base level of occupancy over a long period that normally includes weekends and slow seasons. The occupancy Lodging Market HVS International, Mineola, New York Supply and Demand Analysis 63 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= benefit is offset by low contract room rates, which have an adverse impact on average rate. Skilled hotel operators use airline patronage to fill in during periods of low occupancy, and quickly displace this demand when higher-rated market segments offer better potential. Airline demand in the subject property area is generated by San Jose and Oakland International Airports located approximately 12 miles to the south, and 18 miles to the northwest, respectively. As mentioned previously, historical passenger growth rates for San Jose and Oakland International Airports indicate average annual compounded growth of 5.7% and 9.0%, respectively. This historical period represents a boom for both airports; however, future growth for San Jose Airport is projected at more moderate levels. As for Oakland, airport planners are currently producing a master plan that includes a new 10,000-foot runway, new parking facilities, 20 new gates, and, possibly, a new terminal to accommodate (a conservative forecast of) 11 million annual passengers by the year 2007. Based on these historical rates of growth, we estimate that airline demand in the subject property's market area will increase by 1.5% in 1997 and thereafter. Conclusion The purpose of segmenting the lodging market is to define each major type of demand, identify customer characteristics, and estimate future growth trends. Starting with an analysis of the local area, four segments were defined as representing the subject property's lodging market. Various types of economic and demographic data were then evaluated to determine their propensity to reflect changes in hotel demand. Based on this procedure, we forecast the following average annual compounded market segment growth rates. ================================================================================ Table 6-3 Average Annual Compounded Market Segment Growth Rates - -------------------------------------------------------------------------------- Annual Compounded Growth Rate -------------------------------------------- 1997 1998 1999 2000 2001 2002 - -------------------------------------------------------------------------------- Commercial 2.5% 3.0% 2.5% 2.0% 2.0% 2.0% Meeting and Group 2.5 3.0 2.5 2.5 2.5 2.5 Leisure 2.0 2.0 1.5 1.5 1.5 1.5 Airline 1.5 1.5 1.5 1.5 1.5 1.5 Annual Average Growth 2.4% 6.5% 3.0% 2.5% 2.0% 2.0% - -------------------------------------------------------------------------------- These growth rates will be used in subsequent sections of this study to forecast changes in lodging demand. Lodging Market HVS International, Mineola, New York Supply and Demand Analysis 64 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= COMPETITION An integral component of the supply and demand relationship that has a direct impact on the availability of lodging demand is the current and anticipated supply of competitive lodging facilities. The San Francisco Bay Area is served by numerous hotels and motels, which are located throughout the region. The subject property is located in the Lower East Bay market area, which is characterized by commercial, industrial, and residential development located along the Interstate 880 corridor. We have identified six properties that are considered primarily competitive with the Newark/Fremont Hilton. Including the subject property, these primary competitors total 1,641 rooms. Two additional lodging facilities, totaling 228 rooms, are judged to be only secondarily competitive; although the facilities, rate structures, and market orientations of these hotels prevent their inclusion among the primarily competitive supply, they do compete with the subject property to some extent. The room count of each secondary competitor has been weighted to reflect the degree to which it competes with the Newark/Fremont Hilton; the aggregate weighted room count of the secondary competitors is 171. Primary Competitors The following table summarizes the important operating characteristics of the primary competitors and the aggregate secondary competitors. This information was compiled from personal interviews, inspections, lodging directories, and our in-house library of operating data. The table also sets forth each property's penetration factors; penetration is the ratio between a specific hotel's operating results and the corresponding data for the market. If the penetration factor is greater than 100%, the property is performing better than the market as a whole; conversely, if the penetration is less than 100%, the hotel is performing at a level below the marketwide average. Lodging Market HVS International, Mineola, New York Supply and Demand Analysis 65 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL =============
================================================================================================================== Table 6-4 Primary Competitors and Aggregate Secondary Competitors - ------------------------------------------------------------------------------------------------------------------ Estimated 1996 Market Segmentation ---------------------------------- Year Number Meeting Meeting Group & Property/Location Opened of Rooms Space Space/Rm Comm. Meet. Leisure Airline - ------------------------------------------------------------------------------------------------------------------ Newark/Fremont Hilton 39900 Balentine Drive 1984 311 10,171 33 50 15 27 8 Holiday Inn Milpitas 777 Bellew Drive 1987 305 7,500 25 55 35 10 0 Sheraton Hotel San Jose 1801 Barber Lane 1988 229 6,500 28 65 25 10 0 Embassy Suites Milpitas 901 Calaveras Boulevard 1987 266 7,200 27 65 25 10 0 Radisson Hotel Union City 32083 Alvarado/Niles Road 1981/86 262 9,500 36 50 25 10 15 Best Western Garden Court Inn 5400 Mowry Avenue 1974 122 1,278 10 65 10 25 0 Courtyard by Marriott 47000 Lakeview Boulevard 1987 146 1,250 9 75 5 20 0 - ------------------------------------------------------------------------------------------------------------------ Sub-Totals and Averages 1641 6,200 24 59 22 15 4 Secondary Competition 228 65 19 15 0 Totals/Averages 1,869 60 22 15 3 - ------------------------------------------------------------------------------------------------------------------ Estimated 1995 Estimated 1996 ---------------------------- ------------------------------------------------ Average Average Occ. Yield Property/Location Occupancy Rate Rev PAR Occupancy Rate Rev PAR Penet. Penetration - ------------------------------------------------------------------------------------------------------------------ Newark/Fremont Hilton 39900 Balentine Drive 78.6 $64.07 $50.36 82.0 $76.0 $62.32 100.4 89.6 Holiday Inn Milpitas 777 Bellew Drive 78.0 76.00 59.28 82.0 82.0 67.24 100.4 96.7 Sheraton Hotel San Jose 1801 Barber Lane 73.0 90.00 65.70 81.0 105.0 85.05 99.2 122.3 Embassy Suites Milpitas 901 Calaveras Boulevard 80.0 90.00 72.00 80.0 104.0 83.20 97.9 119.6 Radisson Hotel Union City 32083 Alvarado/Niles Road 63.0 57.00 35.91 77.0 64.0 49.28 94.3 70.8 Best Western Garden Court Inn 5400 Mowry Avenue 69.0 57.00 39.33 80.0 60.0 48.00 97.9 69.0 Courtyard by Marriott 47000 Lakeview Boulevard 85.6 76.00 65.06 86.0 88.0 75.68 105.3 108.8 - ------------------------------------------------------------------------------------------------------------------ Sub-Totals and Averages 75.4 $74.11 $55.85 80.9 $83.80 $67.83 99.1 97.5 Secondary Competition 83.0 $83.17 $69.03 89.0 $97.20 $86.51 109.0 124.4 Totals/Averages 76.1 $75.05 $57.12 81.7 $85.17 $69.57 100.0 100.0 - ------------------------------------------------------------------------------------------------------------------
COMPETITION MAP [GRAPHIC OMITTED] Lodging Market HVS International, Mineola, New York Supply and Demand Analysis 66 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Our survey of the primarily competitive hotels in the Lower East Bay market shows full-service lodging properties located along the Interstate 880 corridor between the communities of Union City and Milpitas. These properties range in size from 122 to 311 rooms. Their Mobil quality ratings range from two to three stars, and their opening dates range from 1974 to 1988. The market demand has a commercial orientation; in 1996, this segment contributed 60% of the overall occupancy. The meeting and group segment made up 22% of the total, followed by the leisure segment at 15%, and the airline segment at 4%. In 1995, the primary competitors are expected to achieve an annual overall occupancy of 80.9% at an average rate of $83.80, yielding a RevPAR of roundly $68. Among the primary competition, the Courtyard by Marriott led the market in occupancy penetration at approximately 105%, while the Sheraton Hotel San Jose and the Embassy Suites (formerly the Crown Sterling Suites) garnered the highest levels of yield penetration, owing to their proximity to Silicon Valley firms and their strong presence with corporate clientele. Conversely, the Radisson Hotel Union City and the Best Western Garden Court Inn (formerly Thunderbird Inn) trail the market in terms of occupancy and yield penetration, due to their distance from primary sources of demand relative to the competitive set and their lack of a strong corporate presence in the market. As mentioned previously, overflow demand, which radiates outward from Silicon Valley south of the subject property, represents a significant portion of the overall market demand. Properties located near Silicon Valley, such as those in Milpitas and Fremont, have a significant share of overflow demand, while the properties farther to the north tend to have lower levels due to their greater distance from Silicon Valley and the general perception that this area is heavily industrial. Overall, the Lower East Bay market shows a significant surge in marketwide occupancy and average rate reported through estimated year-end 1996, based on year-to-date October 1996 data. Marketwide RevPAR has increased from $57.12 in 1995 to $69.57 for estimated year-end 1996. The subject property continues to outperform the market in occupancy, a considerable turnaround from the levels achieved in 1992, when occupancy declined to 57%. Average rate has increased as well; however, the performance level in this area still trails the market. In part, this is attributable to the Hilton's accommodation of the lower, airline contract demand. RevPAR has increased, and the gap between the subject property and the market has narrowed recently. Lodging Market HVS International, Mineola, New York Supply and Demand Analysis 67 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Each primary competitor was inspected and evaluated. Descriptions of our findings are presented below. Holiday Inn Milpitas The Holiday Inn Milpitas is located in the southwest quadrant of the intersection of State Highway 237 and Interstate Freeway 880 in Milpitas, approximately eight miles southeast of the subject property. This 305-unit property was constructed in June 1987 and features high-rise glass and concrete construction, which makes it highly visible from surrounding roadways. The property is located within Milpitas Business Park, whose 200 vacant acres are among the hottest real estate in Silicon Valley. The property is one-quarter of a mile from high-technology companies such as Octel, Quantum, and Tencor Instruments located along McCarthy Boulevard. In addition to its 305 guestrooms, the Holiday Inn Milpitas features two food and beverage outlets, Pasta's Ristorante and Salute Lounge, approximately 7,500 square feet of meeting space, an executive floor, outdoor heated pool, spa, sauna, and fitness center. The Holiday Inn Milpitas is considered to be comparable to the subject property in terms of guestroom furnishings and overall condition. The Holiday Inn Milpitas is managed and owned by the Bass Corporation of the United Kingdom through Holiday Inn Worldwide. Sheraton Hotel San Jose The Sheraton Hotel San Jose is located ten miles southeast of the subject property near the northwest quadrant of the intersection of Montague Expressway and Interstate Freeway 880. This nine-story 266-unit property was constructed in April 1988 and features Spanish-style architecture. Like the Holiday Inn, the Sheraton Hotel is located within Milpitas Business Park. Owing to its location near the interchange, as well as its high-rise construction, the property is highly visible from surrounding roadways. Access to the property is provided by Barber Lane, which forms the general perimeter of the business park, and is considered to be comparable to the subject property. The property features 196 standard guestrooms, 60 guestroom suites, one restaurant, two lounges, a gift shop, an outdoor heated pool, spa, fitness room with Universal weight stations, and 12 meeting rooms comprising 6,500 square feet of meeting space. Amenities include complimentary airport shuttle and in-room coffee machine. The 60 guestroom suites feature bathroom phones, refrigerator, and wet bar. The property features a concierge floor with 25 guestrooms and three suites. These units are distinguished by a private lounge, wet bar, bathroom phone, and complimentary continental breakfast. Overall, the Sheraton Hotel San Jose is considered to be slightly superior to the subject property due to its more recent construction and facilities; its chief disadvantage is its relatively modest meeting space (6,500 square feet). Lodging Market HVS International, Mineola, New York Supply and Demand Analysis 68 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Embassy Suites Milpitas The Embassy Suites Milpitas is located at the northwest intersection of Calaveras Boulevard (State Highway 237) and Interstate 680 in Milpitas, approximately eight miles southeast of the subject property. This 266-unit property, constructed in November 1987, features Spanish-style architecture, and is highly visible from surrounding roadways. Access to the subject property is good, with easy approaches from either direction from Calaveras Boulevard. The nine-story property features the typical Embassy Suites atrium with a complimentary breakfast and evening cocktail area, an indoor pool, spa, sauna, a small shopping arcade, and approximately 7,200 square feet of meeting space, private patios and balconies. Overall, the guestroom furnishings and general facilities are considered to be comparable to the Newark/Fremont Hilton. Amenities include health club privileges and airport shuttle. The property was formerly a Crown Sterling Suites brand, until Felcor Suites took control and installed the Embassy Suites franchise in July 1996. With conversion of its affiliation to Promus Corporation's Embassy Suites brand, the hotel is considered to be comparable to the subject property. Radisson Hotel Union City The Radisson Hotel Union City is located approximately six miles northwest of the subject property at the southeast quadrant of the intersection of Alvarado Niles Road and Interstate Freeway 880 in Union City. Access to the Radisson Hotel is comparable to the subject property, while visibility is inferior due to obstruction by a freeway overpass from southbound I-880 motorists. This 265-unit property was constructed in 1981 and was renovated in 1986, and is currently undergoing a renovation of an undisclosed amount of its guestrooms and meeting space which will be completed by March 1997, according to management representatives. In addition to its 266 guestroom units, the Radisson Hotel features a three-meal-a-day cafe, 9,500 square feet of meeting space, a fitness center with outdoor heated pool, spa, sauna, racquetball, and tennis courts. The property was formerly operated as a Holiday Inn and was converted to a Radisson franchise in late 1995. Although this property features the largest amount of meeting space among the competition, it suffers from a number of deficiencies which result in its subpar occupancy and average rate levels. Located in Union City, the property is farthest from the center of corporate demand, Silicon Valley. Furthermore, the Hayward and Union City area is industrial, with trucking distribution and warehousing predominating. Thus, the area is perceived to be of lower quality than cities located further south. With the renovation, the property is expected to improve its average rate levels. At its current state, the Radisson Hotel is considered to be inferior to Lodging Market HVS International, Mineola, New York Supply and Demand Analysis 69 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the subject property in terms of location, guest furnishings, and general condition. With the renovation, the latter two items will likely be remedied, bringing this property to a level comparable to the subject property's. Best Western Garden Court Inn The Best Western Garden Court Inn is located one mile northwest of the subject property at the southeast quadrant of the intersection of Mowry Avenue and Interstate Freeway 880 in Fremont. The property is not visible from I-880 motorists, but enjoys good frontage along Mowry Avenue. Access to the property is difficult owing to a divider which requires westbound motorists to make a left turn at the intersection before the property. This low-rise 122-unit property was constructed in 1974 and features a product which is inferior to the subject property. In addition to the 122 guestrooms, the property contains a full-service Korean restaurant, 1,278 square feet of meeting space, three acres of landscaped gardens, an outdoor pool, spa, and sauna. Guest amenities include complimentary morning paper, breakfast, and access to a nearby athletic club. In October 1996, the property changed its name from the Best Western Thunderbird Inn. Although this property is dated and significantly inferior to the subject property in terms of facilities, guestroom furnishings, and condition, its proximity to the subject property warranted its conclusion in the primary competitive set. Courtyard by Marriott The Courtyard by Marriott is located within Sutter Hill Landing Business Park on Lakeview Boulevard off Interstate Freeway 880 in Fremont, approximately four miles southeast of the subject property. This 146-unit Marriott property was constructed in April 1987 and features typical Courtyard three-story, low-rise construction. The property is not highly visible from surrounding roadways; however, according to management representatives, most of its commercial demand is generated within the business park. The property is one-half of a mile from high-technology companies such as Cirrus Logic and Lam Research. The Courtyard features a restaurant and lounge with service for breakfast, lunch, and dinner, 1,250 square feet of meeting space, exercise room, indoor pool and spa, guest laundry, and gazebo. One disadvantage of the Courtyard is the location's lack of commercial retail services such as retail shops and restaurants. However, according to area developers, this is being remedied by the opening of a retail strip mall located just north of the property, scheduled to open in the spring of 1997. The property is owned and managed by Marriott International. This property is considered to be inferior to the subject property in terms of facilities; however, the Marriott brand, and its location near Lodging Market HVS International, Mineola, New York Supply and Demand Analysis 70 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= significant commercial demand generators make this property competitive with the subject property. Secondary Competitors The secondary competition consists of the Residence Inn Fremont and the Woodfin Suites Newark. These properties are considered to be less competitive with the subject property owing to their location, facilities, and orientation toward extended-stay demand. With a lack of extended-stay lodging properties in the area, the secondary competitors have been successful in attaining high levels of occupancy and average rate. However, new supply, specifically in the extended-stay segment of the market, is currently under construction. This will likely impact the secondary competition directly, while only slightly affecting the subject property. The extended-stay segment generally consists of commercial business travelers engaged in special or temporary assignments, training, or relocation. Unlike other demand segments, extended-stay demand does not exhibit the intra-weekly peaks and valleys of business and leisure demand. Representing stays of five days or more, this segment is relatively stable. Like the commercial segment, extended-stay business travelers are not particularly rate sensitive, though it is not as prone to the seasonal swings in demand and is more likely to provide significant weekend demand as a result of the long-term nature of the stays. Residence Inn Fremont The Residence Inn Fremont is located one mile northwest of the subject property at the northeast quadrant of the intersection of Mowry Avenue and Interstate Freeway 880 in Fremont, across from the Best Western Garden Court Inn. The 80-unit property was constructed in May 1985, and features a layout typical of a first-generation Residence Inn with a main gatehouse, ten two-story guestroom buildings, approximately 1,000 square feet of meeting space, a sports court, guest laundry, outdoor swimming pool, and spa. The Residence Inn completed a renovation of its guestrooms and gatehouse in 1995 as part of its ten-year refurbishment program. The property is located adjacent to a full-service Hungry Hunter restaurant, and is proximate to restaurants and retail establishments convenient for an extended-stay guest. The property is not visible from Interstate Highway 880 and access is limited to westbound Mowry Avenue motorists; however extended-stay facilities generally do not rely heavily upon access and visibility issues. Overall, this property is considered to be in good condition. Woodfin Suites - Newark The Woodfin Suites is located three-quarters of a mile west of the subject property at the east quadrant of the intersection of Mowry Avenue and Lodging Market HVS International, Mineola, New York Supply and Demand Analysis 71 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Cedar Boulevard in Newark. The property enjoys good frontage along Cedar Boulevard; however, traffic along this roadway is considered to be moderate compared to the subject property's site along Stevenson Boulevard and I-880. Access to the Woodfin Suites is considered to be comparable to the subject property's. Part of Hardage Suites, the Woodfin Suites brand is a small, six-property chain and features all-suite furnishings targeted toward the extended-stay business traveler. The 148-unit property was constructed in January 1986, and features an exterior guestroom building layout similar to a typical first-generation Residence Inn. The property does not contain a restaurant; however, it is located adjacent to several full-service chain restaurants, as well as the NewPark Mall, a regional indoor shopping mall. According to management representatives the property underwent a renovation of its guestrooms in 1995 and public areas in 1996. Despite the relatively modest presence of the Woodfin Suites brand, the property has been successful in achieving strong operating results due to their extended stay orientation, good general condition, and high-quality guest furnishings. Lodging Market HVS International, Mineola, New York Supply and Demand Analysis 72 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL =============
================================================================================================================================= Table 6-5 Secondary Competitors - --------------------------------------------------------------------------------------------------------------------------------- Estimated 1996 Market Segmentation Estimated 1995 ------------------------------- --------------------------- Year Number Percentage Competitve Mtg. & Average Property Opened of Rooms Competitive Rooms Comm. Conv. Leisure Airline Occupancy Rate Rev PAR - --------------------------------------------------------------------------------------------------------------------------------- Residence Inn Fremont 1985 80 75% 60 75% 0% 25% 0% 86% $87.00 $74.82 Woodfin Suites - Newark 1986 148 75 111 60 30 10 0 82 81.00 66.42 - --------------------------------------------------------------------------------------------------------------------------------- Totals/Averages 228 171 65% 19% 15% 0% 83% %83.17 $69.03 - ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------- Estimated 1996 --------------------------- Average Property Occupancy Rate Rev PAR - ---------------------------------------------------- Residence Inn Fremont 90% $103.00 $92.70 Woodfin Suites - Newark 88 94.00 82.72 - ---------------------------------------------------- Totals/Averages 89% $97.20 $86.51 - ---------------------------------------------------- Lodging Market HVS International, Mineola, New York Supply and Demand Analysis 73 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Proposed Competitors It is important to consider any new hotels that may have an impact on the subject property's operating performance. Based on our fieldwork in the market and our discussions with local hotel operators, developers, and government officials, we have identified four properties that are proposed or under development in the Lower East Bay area. The following table describes the additions to supply with respect to their projected number of units, location, market orientation, distance from the proposed subject property, and projected opening date. In addition, the weighted competitiveness factor that has been applied is also identified. This table is based on information compiled through discussions with planners in Fremont, Milpitas, and Newark. Lodging Market HVS International, Mineola, New York Supply and Demand Analysis 74 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL =============
==================================================================================================================================== Additions to Supply - ------------------------------------------------------------------------------------------------------------------------------------ Number Distance Property of Rooms Location Orientation From SP - ------------------------------------------------------------------------------------------------------------------------------------ Primarily Competitive: Residence Inn - Milpitas 120 California Circle and Dixon Landing, Milpitas Premium-Extended Stay 6.5 mi. SE Courtyard by Marriott - Milpitas 154 Montague Avenue and Falcon Drive, Milpitas Mid-rate Commercial 9 mi. SE Noncompetitive: TownePlace Suites 142 Montague Avenue and Falcon Drive, Milpitas Mid-rate-Extended Stay 9 mi. SE Homestead Village 118 State Highway 237 and Interstate 280, Milpitas Econ-Extended Stay 8 mi. SE Extended Stay America I 122 Farwell Drive and Mowry Avenue, Fremont Econ-Extended Stay 1 mi. NW Extended Stay America II 146 Calaveras Road and Interstate 680, Milpitas Econ-Extended Stay 8 mi. SE --- Total 802 - ------------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------- Percentage Weighted Property Opening Competitive No. of Rooms - -------------------------------------------------------------------------- Primarily Competitive: Residence Inn - Milpitas 09/01/97 75 % 90 Courtyard by Marriott - Milpitas 06/01/98 75 116 Noncompetitive: TownePlace Suites 06/01/98 75 107 Homestead Village 01/01/98 15 18 Extended Stay America I 06/01/98 15 18 Extended Stay America II 09/01/98 15 22 --- Total 371 - -------------------------------------------------------------------------- Lodging Market HVS International, Mineola, New York Supply and Demand Analysis 75 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= At the time of our fieldwork, Marriott International had a 120-unit Residence Inn under construction at 1501 California Circle, located approximately 6.5 miles southeast of the subject property near the intersection of Dixon Landing and California Circle. The site is an obvious choice for an extended-stay property such as a Residence Inn, owing to its proximity (less than one-quarter of a mile) from corporate demand generators such as Sun Microsystems and other high-technology firms. We project this property to open in October 1997 and be 75% competitive with the subject property due to its extended-stay orientation and Marriott brand. Marriott also plans to develop two hotels located within the Great Mall of Milpitas along Montague Avenue near Falcon Drive, approximately nine miles southeast of the subject property. At the time of our fieldwork, Marriott representatives were evaluating the site for a proposed 154-unit Courtyard and a 142-unit TownePlace Suites. Although this project is currently being studied by Marriott's development committee, we believe that this project will likely be approved. As such, we anticipate the two properties will open by July 1998. The Courtyard will be directly competitive with the subject property, while the TownePlace Suites is an economy extended-stay brand, which is considered to be secondarily competitive. Overall, the two properties are considered to be 75% competitive with the subject property. A 118-unit economy extended-stay facility known as Homestead Village is nearing completion at the intersection of State Highway 237 and Interstate 880. The property is adjacent to the Holiday Inn Milpitas and approximately eight miles southeast of the subject property. According to Homestead Village representatives, the property will feature studio efficiency units sold by the week at rates ranging from $300 to $375 per week. Owing to its location, economy orientation, and pricing, this property is considered to be 15% competitive with the subject property. We project a January 1997 opening of this property. Extended Stay America (ESA) is currently working on two projects in the subject market area. ESA has gotten approval for construction of a three-story 122-unit property on Farwell Drive between Mowry Avenue and Brophy Place approximately one mile northwest of the subject property, near the Residence Inn in Fremont. We project this property to open in January 1998. The second ESA project is a 146-unit property located on Hillview Court, near the northwest quadrant of the intersection of Calaveras Road and Interstate 680, approximately eight miles southeast of the subject Lodging Market HVS International, Mineola, New York Supply and Demand Analysis 76 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= property, behind the Embassy Suites Milpitas. The project is currently under review by the planning commission. Assuming approval, we anticipate this property will open in April 1998. Due to their economy orientation, lack of amenities, and pricing, we view these proposed properties to be 15% competitive with the subject property. Although the new supply represents a concern for the subject property and the market, bringing an increase of approximately 44% to the existing marketwide supply, the level of demand that is currently being unaccommodated during the weekday periods will be absorbed by this increase in supply, thereby offsetting deterioration in marketwide occupancy and average rate. Furthermore, nearly all of the proposed properties are extended-stay hotels targeted at the extended-stay traveler, a segment which has enjoyed much success in terms of occupancy and average rate in the subject market. Additionally, unlike premium extended-stay hotels, the extended-stay hotels in the economy segment tend to capture a greater share of their business from short-term corporate apartment housing units rather than transient lodging business. As such, these properties are not considered to be directly competitive with the subject property. Conclusion The subject property market has exhibited considerable improvement in terms of occupancy and average rate from the nadir reached in the early 1990s. With the rising fortunes of Silicon Valley firms, expansion and development northward along the Interstate 880 corridor, and manageable increases in marketwide supply, positive prospects are foreseen for continued average rate growth, with occupancy likely to stabilize at current levels. Projection of HVS International, Mineola, New York Occupancy and Average Rate 77 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 7. Projection of Occupancy and Average Rate Historical Operating Performance The following table sets forth the subject property's historical occupancy, average rate, and RevPAR. For the purpose of comparison, we have also presented corresponding data (as provided by Smith Travel Research) for the competitive hotels described in the previous section. In addition to the annual percent change calculations, we have determined the subject property's occupancy, average rate, and RevPAR penetration factors. Projection of HVS International, Mineola, New York Occupancy and Average Rate 78 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL =============
================================================================================================================= Table 7-1 Historical Trends - ----------------------------------------------------------------------------------------------------------------- Year to Date ---------------- 1989 1990 1991 1992 1993 1994 1995 1995 1996 - ----------------------------------------------------------------------------------------------------------------- Subject Property Occupancy 55.0% 64.6% 60.2% 57.3% 60.8% 68.0% 76.5% 77.9% 84.2% Percent Change -- 17.5% (6.8)% (4.8)% 6.1% 11.8% 12.5% -- 8.1% Occupancy Penetration 87.2% 98.0% 96.8% 89.0% 93.7% 94.4% 100.8% 102.4% 103.1% Average Rate $63.07 $61.41 $62.99 $63.74 $62.95 $60.45 $65.86 $65.89 $77.53 Percent Change -- (2.6)% 2.6% 1.2% (1.2%) (4.0%) 8.9% -- 17.7% Average Rate Penetration 91.8% 85.9% 88.2% 91.6% 89.8% 85.5% 87.1% 87.4% 90.9% RevPAR $34.69 $39.67 $37.92 $36.52 $38.27 $41.11 $50.38 $51.33 $65.28 Percent Change -- 14.4% (4.4)% (3.7)% 4.8% 7.4% 22.6% -- 27.2% RevPAR Penetration 80.0% 84.2% 85.4% 81.5% 84.2% 80.7% 87.8% 89.4% 93.6% Areawide (STR) Occupancy 63.1% 65.9% 62.2% 64.4% 64.9% 72.0% 75.9% 76.1% 81.7% Percent Change -- 4.4% (5.6)% 3.5% 0.8% 10.9% 5.4% -- 7.4% Average Rate $68.68 $71.51 $71.38 $69.61 $70.08 $70.74 $75.60 $75.42 $85.33 Percent Change -- 4.1% (0.2)% (2.5)% 0.7% 0.9% 6.9% -- 13.1% RevPAR $43.34 $47.13 $44.40 $44.83 $45.48 $50.93 $57.38 $57.39 $69.71 Percent Change -- 8.7% (5.8)% 1.0% 1.5% 12.0% 12.7% -- 21.5% - -----------------------------------------------------------------------------------------------------------------
As discussed in the previous section of this report, the subject property's market has steadily strengthened. Occupancy surged in 1994, while average rates increased moderately. In 1995, occupancy and average rates increased in tandem. Year-to-date October 1996 results indicate further strengthening in both occupancy and average rate. Overall, RevPAR has increased by double digits in each period since 1994. The chart above shows that the subject property has underperformed the market in terms of average rate. While occupancy had trailed the market prior to 1995, most recently, new management installed in 1994 and the renovations in 1995 have raised the occupancy level to a slight premium over its fair share of the market. Projection of HVS International, Mineola, New York Occupancy and Average Rate 79 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Prior to 1994, the penetration rates were reflective of a number of factors which hampered the subject property's competitiveness, including its location and frequent changes in sales staff at that time, which reduced the ability of the subject property to market to surrounding demand generators. 1991 and 1992 were particularly bad years for the subject property, although the area as a whole also suffered during these periods of economic downturns. In those years, the subject property recorded declines in occupancy without sufficient offsetting increases in average rate, resulting in RevPAR which declined by 4.4% in 1991, and a further 3.7% in 1992. In comparison, RevPAR for the area declined by 5.8% in 1991, and then grew by 1.0% in 1992. In 1993, the reverse occurred, when the subject property's average rate declined for two consecutive years. Because of the reduction in average rate, occupancy increased by 6.1% in 1993, which was well above the areawide average increase of only 0.8%. Despite the increase in occupancy for that year, however, the subject property's occupancy of 60.8% remained below the areawide average of 64.9%. Similarly, although the subject property's RevPAR increased by 4.8% while the areawide average increased by only 1.5%, its RevPAR of $38.27 remained below the marketwide average of $45.48. In 1994, average rate and occupancy at the subject property remained below market levels. As was mentioned previously, new management was installed following the purchase of the subject property by Ashford Financial Corporation in June 1994. Since this period, new management has implemented a radical change involving a successful and extensive renovation of the hotel's public areas, guestrooms, and exterior, as well as strong marketing and sales departments. These changes coincided with the recovery of the economy in 1994, and the resurgence of high technology companies in Silicon Valley in 1995. As a result, the subject property's operating performance, which suffered during the early 1990s from the recession, as well as an oversupply of lodging facilities as a result of overly optimistic growth projections in the mid 1980s, rebounded strongly with renewed demand from Silicon Valley. In 1995, the subject property's occupancy penetration level surpassed its fair share for the first time. Additionally, the gap in average rates narrowed, resulting in a significant surge in RevPAR growth. Year-to-date statistics indicate a continuation of this upward trend. While average rates continue to trail the market, occupancy continues to surpass Projection of HVS International, Mineola, New York Occupancy and Average Rate 80 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= market levels. It is most likely that the subject property's occupancy will stabilize at current levels, while future gains in rooms revenue will be accomplished through increases in average rate. Overall, the subject property has undergone a significant turnaround driven by both external and internal forces. Although the subject property continues to be challenged by locational disadvantages, the management and ownership change, its recent renovation and renewed marketing efforts, as well as the resurgence in Silicon Valley, are key elements in this property's turnaround. A hotel's occupancy should also be evaluated on a monthly basis to identify seasonality trends. The following table sets forth the subject property's monthly occupancy from May 1994 through October 1995. ================================================================================ Table 7-2 Subject Property's Monthly Occupancy History - -------------------------------------------------------------------------------- 1994 1995 1996 ---- ---- ---- Occupancy % Change Occupancy % Change Occupancy % Change ------------------- ------------------- ------------------- January N/A% N/A% 64.2% N/A% 68.3% 6.4% February N/A N/A 73.5 N/A 85.3 16.1 March N/A N/A 75.3 N/A 84.4 12.1 April N/A N/A 69.6 N/A 80.1 15.1 May 82.7 N/A 80.2 (3.0) 83.0 3.5 June 85.3 N/A 77.7 (8.9) 90.8 16.9 July 79.4 N/A 86.9 9.4 93.1 7.1 August 83.3 N/A 85.9 3.1 89.9 4.7 September 71.1 N/A 82.4 15.9 79.4 (3.6) October 67.2 N/A 82.8 23.2 87.7 5.9 November 54.0 N/A 75.5 39.8 N/A N/A December 58.8 N/A 64.2 9.2 N/A N/A ---- --- ---- ---- ---- ---- Full Year 0.0% N/A% 77.6% N/A% N/A% N/A% - -------------------------------------------------------------------------------- Due to the brief operating history under current ownership, only the most recent period is presented. Of particular interest is the significant surge in occupancy noted in the fall of 1995, which coincides with the boom in Silicon Valley and the full recovery of the regional economy. Premise of the Projections To a certain degree, occupancy and rate attainment can be manipulated by management. For example, hotel operators may choose to lower rates in an effort to maximize occupancy. Our forecasts reflect an operating strategy Projection of HVS International, Mineola, New York Occupancy and Average Rate 81 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= that we believe would be implemented by competent hotel management to achieve an optimal mix of occupancy and average rate. Projected Room Night Demand Lodging demand and occupancy can be projected through a process known as room night analysis. A room night is a unit of hotel demand that equals one room that is occupied for one night. After estimating the number of room nights a hotel can be expected to attract during a 12-month period, we can determine occupancy by dividing the number of room nights of demand captured by the number of room nights available (calculated as the room count x 365). The total annual number of room nights occupied in the competitive hotels equates to the market's accommodated room night demand, as shown in the following table. ================================================================================ Table 7-3 1995 Accommodated Room Night Demand - -------------------------------------------------------------------------------- 1996 Annual Room Night Demand (Rounded) ----------------------------------------------------- Percentage Percentage Market Segment Market Wide of Total Subject Property of Total - -------------------------------------------------------------------------------- Commercial 322,000 60% 47,000 51% Meeting and Group 117,000 22 14,000 15 Leisure 83,000 15 25,000 27 Airline 18,000 4 7,000 8 ------- --- ------ --- Total 540,000 100% 93,000 100% - -------------------------------------------------------------------------------- Latent Demand The previous table illustrates the accommodated room night demand in the subject property's competitive market. Because this estimate is based on occupancies, it includes only those hotel rooms that were used by guests. Latent demand considers guests who could not be accommodated by the existing competitive supply, and can be divided into unaccommodated demand and induced demand. Unaccommodated Demand Unaccommodated demand refers to individuals who are unable to secure accommodations in the market because all of the local hotels are filled. These travelers must defer their trips, settle for less desirable accommodations, or stay in properties located outside the market area. Because this demand did not yield occupied room nights, it is not included in the estimate of historical accommodated room night demand. Projection of HVS International, Mineola, New York Occupancy and Average Rate 82 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Of particular interest to the subject market area is the source of overflow demand. Overflow demand results from unaccommodated demand being displaced into secondary markets (generally outlying areas), in this case, the subject market area. Currently, the subject market area enjoys significant overflow demand from Silicon Valley to the south. This turn-away demand has been difficult to measure and quantify, as there are no existing systems in place to measure overflow demand into a particular market from another. However, according to discussions with local hotel operators, as well as Smith Travel Research data, it is estimated that approximately 10% of the subject market area's overall demand represents overflow demand being displaced from Silicon Valley into the subject area. With this overflow demand, the subject market area has also experienced unaccommodated demand of its own, which is estimated to be approximately 8%. This unaccommodated demand is forcing lodging seekers to forgo travel plans or is pushing them further north to hotels in the secondary markets of Union City and Hayward. ================================================================================ Table 7-4 1995 Accommodated and Unaccommodated Demand - -------------------------------------------------------------------------------- Accommodated Room Night Unaccommodated Unaccommodated Market Segment Demand Demand Percentage Room Night Demand - -------------------------------------------------------------------------------- Commercial 322,000 8.0 % 25,743 Meeting and Group 117,000 0.0 0 Leisure 83,000 0.0 0 Airline 18,000 0.0 0 ------- ------ Total 540,000 25,743 - -------------------------------------------------------------------------------- Total Usable Room Night Demand Total usable room night demand is estimated by combining accommodated demand and usable latent demand. Usable latent demand is that portion of latent demand that can be absorbed based on the number of existing and proposed hotel rooms in the market. With the projected increase in room supply, approximately 2.3% in 1997, 11.5% in 1998, and 5.6% in 1998, these new rooms will allow existing unaccommodated demand to be absorbed into the market. The following table shows the projected annual change in accommodated and usable room night demand in the subject property's competitive market. Projection of HVS International, Mineola, New York Occupancy and Average Rate 83 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL =============
============================================================================================================ Table 7-5 Total Usable Room Night Demand - ------------------------------------------------------------------------------------------------------------ Historical 1997 1998 1999 2000 2001 2002 2003 - ------------------------------------------------------------------------------------------------------------ Commercial Growth Rate -- 2.5% 3.0% 2.5% 2.0% 2.0% 2.0% 2.0% Accommodated Demand 321,785 329,830 339,725 348,218 355,182 362,286 369,532 376,923 Usable Latent -- 0 23,101 25,072 28,415 28,983 29,563 30,154 Meeting and Group Growth Rate -- 2.5% 3.0% 2.5% 2.5% 2.5% 2.5% 2.5% Accommodated Demand 117,223 120,154 123,759 126,853 130,024 133,275 136,607 140,022 Usable Latent -- 0 0 0 0 0 0 Leisure Growth Rate -- 2.0% 2.0% 1.5% 1.5% 1.5% 1.5% 1.5% Accommodated Demand 82,731 84,386 86,074 87,365 88,675 90,005 91,355 92,725 Usable Latent -- 0 0 0 0 0 0 0 Airline Growth Rate -- 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% Accommodated Demand 18,493 18,770 19,052 19,338 19,628 19,922 20,221 20,524 Usable Latent -- 0 0 0 0 0 0 0 Totals Commercial 321,785 329,830 362,826 373,290 383,597 391,269 399,095 407,077 Meeting and Group 117,223 120,154 123,759 126,853 130,024 133,275 136,607 140,022 Leisure 82,731 84,386 86,074 87,365 88,675 90,005 91,355 92,725 Airline 18,493 18,770 19,052 19,338 19,628 19,922 20,221 20,524 ------- ------- ------- ------- ------- ------- ------- ------- TOTAL DEMAND 540,232 553,140 591,711 606,846 621,924 634,471 647,278 660,348 Annual Forecasted Growth 2.4% 7.0% 2.6% 2.5% 2.0% 2.0% 2.0% - ------------------------------------------------------------------------------------------------------------
Projection of HVS International, Mineola, New York Occupancy and Average Rate 84 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Guestroom Supply In 1995, the competitive properties provided a weighted total of 1,869 guestrooms. Over the next three years, a total of 370 new guestrooms represented by six properties will enter the subject market. The following table shows the projected competitive supply of available rooms and available room nights. To calculate the annual number of available room nights, the number of available rooms is multiplied by 365. ================================================================================ Table 7-6 Available Rooms and Room Nights - -------------------------------------------------------------------------------- Total Room Overall Night Room Nights Competitive Year Demand Available Occupancy - -------------------------------------------------------------------------------- Historical 540,232 661,380 82% 1997 553,140 678,900 81 1998 591,711 761,390 78 1999 606,846 796,430 76 2000 621,924 796,430 78 2001 634,471 796,430 80 2002 647,278 796,430 81 2003 660,348 796,430 83 - -------------------------------------------------------------------------------- Overall Competitive Occupancy Although the subject market area currently enjoys occupancies in the low-80% range, new supply representing roundly 20% of existing room supply will enter the market in 1997, 1998, and 1999. This will result in a general decline in overall competitive occupancy levels to the mid-70% range, followed by a moderate rebound. Competitive Index Analysis Competitive indexes are used to analyze the relative market position of each property on the basis of a particular demand segment. The index represents the number of times each year that one room is occupied by one type of traveler (e.g., commercial, meeting and group, leisure, or airline), or the number of room nights actually accommodated per year, per room, per market segment. For example, if a hotel has a commercial competitive index of 190, each room in the property is occupied 190 times a year by a commercial traveler. The competitive index is calculated by dividing a hotel's annual accommodated room night demand in a particular market segment by that property's room count. Competitive indexes will be used to illustrate each property's position in the market based on its ability to compete with other local lodging facilities. Commercial Segment The historical commercial segment competitive indexes in the subject property's market ranged from 141 to 235. The Courtyard by Marriott in Projection of HVS International, Mineola, New York Occupancy and Average Rate 85 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Fremont was the most competitive property in the commercial market in 1995, with an index of 235. Following the Courtyard is the Sheraton Milpitas with 192, and the Embassy Suites Milpitas with 190. The subject property is forecast to increase its level of competitiveness in the commercial segment from 150 to 160 by 1999, reflecting growth in this category to market levels. The proposed hotels are projected to enter the market in 1997 and 1998. The following table shows the projected commercial segment competitive indexes of the area's hotels. ================================================================================ Table 7-7 Commercial Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Newark/Fremont Hilton 150 150 155 160 160 160 Holiday Inn Milpitas 165 165 165 165 165 165 Sheraton Milpitas 192 192 192 192 192 192 Embassy Suites Milpitas 190 190 190 190 190 190 Radisson Hotel Union City 141 141 141 141 141 141 Best Western Garden Court Inn 190 190 190 190 190 190 Courtyard by Marriott 235 235 235 235 235 235 Secondary 212 212 212 212 212 212 Residence Inn - Milpitas 0 260 260 260 260 260 Homestead Village - Milpitas 0 245 245 245 245 245 Extended Stay America - Fremont 0 0 245 245 245 245 Extended Stay America - Milpitas 0 0 245 245 245 245 TownePlace Suites/Courtyard 0 0 250 250 250 250 - -------------------------------------------------------------------------------- Meeting and Group Segment Reflecting its sizable and high-quality meeting space, the subject property is projected to increase its level of competitiveness in the meeting and group segment from 45 to 57 by 1999. Additionally, the Newark/Fremont Hilton is currently underserving its fair share of group meeting business; however, current management reports that significant progress is being made in this area with future advance bookings. The proposed Residence Inn in Milpitas is projected to have a minimal level of meeting and group business. The following table illustrates the competitive indexes in the meeting and group segment. Projection of HVS International, Mineola, New York Occupancy and Average Rate 86 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-8 Meeting and Group Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Newark/Fremont Hilton 45 45 50 57 57 57 Holiday Inn Milpitas 105 105 105 105 105 105 Sheraton Milpitas 74 74 74 74 74 74 Embassy Suites Milpitas 73 73 73 73 73 73 Radisson Hotel Union City 70 70 70 70 70 70 Best Western Garden Court Inn 29 29 29 29 29 29 Courtyard by Marriott 16 16 16 16 16 16 Secondary 63 63 63 63 63 63 Residence Inn - Milpitas 0 25 25 25 25 25 Homestead Village - Milpitas 0 0 0 0 0 0 Extended Stay America - Fremont 0 0 0 0 0 0 Extended Stay America - Milpitas 0 0 0 0 0 0 TownePlace Suites/Courtyard 0 0 50 50 50 50 - -------------------------------------------------------------------------------- Leisure Segment The subject property is projected to decrease its level of competitiveness in the lower-rated leisure segment, which will be displaced by higher corporate and group demand. The proposed hotels are projected to capture a sizable portion of this demand as they begin to penetrate the market. The following table illustrates the competitive indexes in the leisure segment. ================================================================================ Table 7-9 Leisure Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Newark/Fremont Hilton 81 74 74 70 70 70 Holiday Inn Milpitas 30 30 30 30 30 30 Sheraton Milpitas 30 30 30 30 30 30 Embassy Suites Milpitas 29 29 29 29 29 29 Radisson Hotel Union City 28 28 28 28 28 28 Best Western Garden Court Inn 73 73 73 73 73 73 Courtyard by Marriott 63 63 63 63 63 63 Secondary 50 50 50 50 50 50 Residence Inn - Milpitas 0 42 42 42 42 42 Homestead Village - Milpitas 0 65 65 65 65 65 Extended Stay America - Fremont 0 0 65 65 65 65 Extended Stay America - Milpitas 0 0 65 65 65 65 TownePlace Suites/Courtyard 0 0 40 40 40 40 - -------------------------------------------------------------------------------- Airline Segment As a hotel's occupancy improves, its reliance on airline demand generally diminishes. Because this segment commands deeply discounted rates, Projection of HVS International, Mineola, New York Occupancy and Average Rate 87 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= operators prefer to accommodate more lucrative types of demand whenever possible. Currently, only the subject property and the Radisson Hotel Union City accommodate airline demand. According to our discussions with subject management, despite the current high levels of occupancy and average rates enjoyed by the subject property, there is a resistance to eliminate this demand segment entirely. As such, we project this demand segment to decline over time. Conversely, we project the Radisson Hotel in Union City to increase its share of this demand segment due to increased competitive pressures. ================================================================================ Table 7-10 Airline Segment Competitive Indexes - -------------------------------------------------------------------------------- Property Historical 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Newark/Fremont Hilton 24 20 20 15 10 10 Holiday Inn Milpitas 0 0 0 0 0 0 Sheraton Milpitas 0 0 0 0 0 0 Embassy Suites Milpitas 0 0 0 0 0 0 Radisson Hotel Union City 42 45 50 50 50 50 Best Western Garden Court Inn 0 0 0 0 0 0 Courtyard by Marriott 0 0 0 0 0 0 Secondary 0 0 0 0 0 0 Residence Inn - Milpitas 0 0 0 0 0 0 Homestead Village - Milpitas 0 0 0 0 0 0 Extended Stay America - Fremont 0 0 0 0 0 0 Extended Stay America - Milpitas 0 0 0 0 0 0 TownePlace Suites/Courtyard 0 0 0 0 0 0 - -------------------------------------------------------------------------------- Subject Property's Room Night Capture and Occupancy After the competitive index is calculated, it is adjusted to reflect the property's room count, yielding a figure referred to as the market share adjuster. The market share adjuster of each property is then divided by the total market share adjuster for all of the competitors, resulting in each hotel's market share. By multiplying the projected market share by the area's usable room night demand, we can determine the total number of room nights captured by a specific hotel. Occupancy is then calculated by dividing the projected number of room nights captured by the property's total number of available room nights. Multiplying the subject property's projected market share by the estimated room night demand in each segment results in the following estimate of room nights captured by the hotel. Projection of HVS International, Mineola, New York Occupancy and Average Rate 88 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Table 7-11 Room Nights Captured by the Subject Property ================================================================================ Room Nights Captured by Subject - Existing - -------------------------------------------------------------------------------- 1997 1998 1999 2000 2001 2002 ---------------------------------------------------- Commercial Demand 329,830 362,826 373,290 383,597 391,269 399,095 Market Share 0.1395 0.1227 0.1189 0.1189 0.1189 0.1189 Capture 46,016 44,521 44,396 45,622 46,535 47,465 Meeting and Group Demand 120,154 123,759 126,853 130,024 133,275 136,607 Market Share 0.1185 0.1218 0.1318 0.1318 0.1318 0.1318 Capture 14,236 15,073 16,725 17,143 17,572 18,011 Leisure Demand 84,386 86,074 87,365 88,675 90,005 91,355 Market Share 0.2767 0.2469 0.2270 0.2270 0.2270 0.2270 Capture 23,351 21,248 19,828 20,125 20,427 20,733 Airline Demand 18,770 19,052 19,338 19,628 19,922 20,221 Market Share 0.3454 0.3219 0.2626 0.1919 0.1919 0.1919 Capture 6,482 6,134 5,078 3,766 3,822 3,880 ------- ------- ------- ------- ------- ------- Total Capture 90,085 86,976 86,027 86,656 88,355 90,090 - -------------------------------------------------------------------------------- Dividing the total number of room nights captured by the subject property's number of available room nights per year (calculated as 311 x 365) produces the projected occupancy percentage. ================================================================================ Table 7-12 Calculation of the Subject Property's Projected Occupancy - -------------------------------------------------------------------------------- 1997 1998 1999 2000 2001 2002 ----------------------------------------------------- Total Room Nights Captured/Year 90,085 86,976 86,027 86,656 88,356 90,089 Available Room Nights 113,515 113,515 113,515 113,515 113,515 113,515 Occupancy 79.36% 76.62% 75.78% 76.34% 77.84% 79.36% Rounded 79% 77% 76% 76% 78% 79% - -------------------------------------------------------------------------------- Projection of HVS International, Mineola, New York Occupancy and Average Rate 89 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= For the purpose of forecasting income and expense, we will use the following occupancy levels. ================================================================================ Table 7-13 Occupancy Forecast - -------------------------------------------------------------------------------- Year Occupancy 1997 79% 1998 77 Stabilized 76 - -------------------------------------------------------------------------------- Although the preceding room night analysis shows the subject property achieving a 79% occupancy in 2002, we have chosen to use a stabilized level of 76.0%. The stabilized occupancy is intended to reflect the anticipated results of the property over its remaining economic life, given any and all changes in the life cycle of the hotel. Thus, the stabilized occupancy excludes from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusually high or low occupancies. Although the subject property may operate at occupancies above this stabilized level, we believe it equally possible for new competition and temporary economic downturns to force the occupancy below this selected point of stability. AVERAGE RATE ANALYSIS One of the most important considerations in estimating the value of a lodging facility is a supportable forecast of its attainable average rate, which is more formally defined as the average rate per occupied room. Average rate can be calculated by dividing the total rooms revenue achieved during a specified period by the number of rooms sold during the same period. The projected average rate and the anticipated occupancy percentage are used to forecast rooms revenue, which in turn provides the basis for estimating most other income and expense categories. Average Rate by Month The following table shows the subject property's monthly occupancy and average rate from May 1994 through October 1996. Projection of HVS International, Mineola, New York Occupancy and Average Rate 90 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-14 Subject Property's Occupancy and Average Rate by Month - -------------------------------------------------------------------------------- 1994 1995 1996 --------------------- -------------------- ------------------- Average Average Average Month Occupancy Rate Occupancy Rate Occupancy Rate - -------------------------------------------------------------------------------- January N/A N/A 64.2% $66.08 68.3% $78.84 February N/A N/A 73.5 65.13 85.3 75.54 March N/A N/A 75.3 67.49 84.4 75.48 April N/A N/A 69.6 67.26 80.1 79.76 May 82.7% $52.60 80.2 64.70 83.0 76.24 June 85.3 58.95 77.7 63.90 90.8 78.29 July 79.4 57.17 86.9 62.53 93.1 73.46 August 83.3 62.27 85.9 67.67 89.9 76.30 September 71.1 60.47 82.4 66.59 79.4 78.71 October 67.2 62.42 82.8 67.51 87.7 82.63 November 54.0 66.35 75.5 65.43 N/A N/A December 58.8 58.83 64.2 66.08 N/A N/A ---- ----- ---- ----- ---- ----- Annual Avg N/A N/A 76.5% $65.86 N/A N/A Year-to-Date N/A N/A 77.9 65.89 84.2% $77.53 - -------------------------------------------------------------------------------- The previous table underscores the correlation between a hotel's occupancy and its average rate: as occupancy increases, rates tend to follow. On a monthly basis, the Newark/Fremont Hilton achieves its highest average rate during the spring and fall months, and the lowest rate during the winter months, following the cycle of business. The subject property experienced a surge in occupancy and average rate during the fall of 1995, which corresponds with the rising fortunes of Silicon Valley firms. In January 1996, with the bulk of the renovations complete, subject management increased average rates significantly, while occupancy continued to increase as a result of significant overflow demand from Silicon Valley. Market Segmentation Method The subject property's average rate will be projected using the market segmentation method. The advantage of this method is its ability to reflect anticipated changes in the subject property's market mix and their impact on average rate. This technique begins with an analysis of the room rates commanded by local hotels in each market segment. Using this information, we can forecast the subject property's rate on a segment-by-segment basis. The projected rate in each segment is then multiplied by the number of room nights the hotel is expected to capture in that segment (as determined earlier in this analysis). These amounts are totaled, yielding the overall Projection of HVS International, Mineola, New York Occupancy and Average Rate 91 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= rooms revenue. Average rate is then calculated by dividing the property's total rooms revenue by the estimated number of occupied rooms. Although the average rate analysis presented here follows the occupancy projections, these two statistics are highly correlated; in reality, one can not project occupancy without making specific assumptions regarding average rate. This relationship is best illustrated by rooms revenue per available room (RevPAR), which reflects a property's ability to maximize rooms revenue. The following table summarizes the 1995 average rate and RevPAR of the subject property and its competitors. ================================================================================ Table 7-15 1995 Average Rate and RevPAR of the Primary Competitors - -------------------------------------------------------------------------------- 1966 1996 Average Rooms Revenue Property Room Rate Per Available Room - -------------------------------------------------------------------------------- Newark/Fremont Hilton $76.00 $62.32 Holiday Inn Milpitas 82.00 67.24 Sheraton Milpitas 105.00 85.05 Embassy Suites Milpitas 104.00 83.20 Radisson Hotel Union City 64.00 49.28 Best Western Garden Court Inn 60.00 48.00 Courtyard by Marriott 88.00 75.68 ----- ----- Average $83.80 $67.83 - -------------------------------------------------------------------------------- As the subject property is considered to be locationally inferior to the majority of its competitors in terms of proximity to the key sources of demand located to the south, the subject property is vulnerable to a future decline in overflow demand. Additionally, new supply located closer to these demand generators will further erode the subject property's position in the market. However, this is likely to be mitigated by the recent upgrade of the subject property's facilities, and continued effective management and marketing of the property. Average Rate Increases It is important to note that hotel room rate increases do not necessarily conform to the underlying monetary inflation rate, because lodging facilities are influenced by market conditions such as the relationship between supply and demand. A hotel's ability to raise room rates is affected by a number of factors, including the following. o Supply and Demand Relationships - The relationship between supply and demand is one of the factors that determine hotel occupancies and Projection of HVS International, Mineola, New York Occupancy and Average Rate 92 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= average rates. Strong markets where lodging demand is increasing faster than supply are often characterized by rate growth that exceeds inflation. Markets that are overbuilt or suffering from declining demand are unlikely to exhibit any significant increases in average rates. o Inflationary Pressures - Price increases caused by inflation affect hotel room rates by eroding profit margins and encouraging operators to raise prices. This strategy is effective only in markets that are characterized by a healthy supply and demand relationship. o Improving the Competitive Standard - When a new lodging facility enters a mature market, its rates may be set higher than the marketwide average in an effort to justify the development costs. This may allow other competitors to achieve corresponding gains by effectively raising the amount the market will bear. However, if the addition to supply has a severe impact on the occupancy levels of other hotels, price competition may ensue. o Property-Specific Improvements - Changes that make a hotel more or less attractive to guests can have an impact on average rate. An expansion, renovation, upgrading, or the introduction of additional facilities and amenities may enable greater-than-inflationary room rate increases. Likewise, deferred maintenance may make a property less competitive, engendering a decline in room rates. In determining average rate projections, changes that occur prior to occupancy stabilization are generally attributable to factors that are specific to the property and the market. After a hotel achieves a stabilized occupancy, room rates are generally expected to continue to increase at the underlying inflation rate throughout the remainder of the projection period. Average Rates by Market Segment Average rate can be projected by considering anticipated changes in the subject property's demand mix and the rates that can be commanded in each market segment. The Newark/Fremont Hilton's historical average rates are set forth in the following table. To project average rate, we have applied growth factors to the hotel's 1995 rates in each market segment. The following table outlines these growth factors. Projection of HVS International, Mineola, New York Occupancy and Average Rate 93 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-16 1995 Average Rate by Market Segment and Assumed Growth Factors - -------------------------------------------------------------------------------- Projected Growth Rate 1996 --------------------------------------------- Market Segment Average Rate 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- Commercial $88.00 6.0% 4.0% 3.0% 3.0% 3.0% Meeting and Group $75.00 5.0% 4.0% 3.0% 3.0% 3.0% Leisure $65.25 4.0% 3.0% 3.0% 3.0% 3.0% Airline $39.00 4.0% 3.0% 3.0% 3.0% 3.0% - -------------------------------------------------------------------------------- To arrive at projections, the growth factors are applied to the subject property's historical average rate in each market segment. These calculations are summarized in the following table.
===================================================================================================================== Table 7-17 Forecast of Average Rate by Market Segment - --------------------------------------------------------------------------------------------------------------------- Group/ Weighted Percent Commercial Meeting Leisure Contract Total Average Rage Change - --------------------------------------------------------------------------------------------------------------------- Historical Demand 46,541 13,962 25,132 7,447 93,082 Segment Rate $88.00 $75.00 $65.25 $39.00 Revenue $4,095,621 $1,047,176 $1,639,877 $290,417 $7,073,091 $75.99 --- 1997 Demand 46,016 14,236 23,351 6,482 90,085 Segment Rate $93.29 $78.76 $67.87 $40.56 Revenue $4,293,038 $1,121,231 $1,584,766 $262,938 $7,261,973 $80.61 6.1% 1998 Demand 44,521 15,073 21,248 6,134 86,976 Segment Rate $97.03 $81.91 $70.24 $41.98 Revenue $4,319,705 $1,234,640 $1,492,513 $257,530 $7,304,388 $83.98 4.2% 1999 Demand 44,396 16,725 19,828 5,078 86,027 Segment Rate $99.94 $84.37 $72.35 $43.24 Revenue $4,436,804 $1,411,055 $1,434,551 $219,591 $7,502,001 $87.21 3.8% - ---------------------------------------------------------------------------------------------------------------------
The following average rates will be used to project the subject property's rooms revenue. Projection of HVS International, Mineola, New York Occupancy and Average Rate 94 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 7-18 Forecast of Occupancy and Average Rate - -------------------------------------------------------------------------------- Year Occupancy Average Rate 1997 79% $80.61 1998 77 $83.98 Stabilized 76 $87.21 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Highest and Best Use 95 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 8. Highest and Best Use The concept of highest and best use recognized by the Appraisal Institute distinguishes between the highest and best use of the land (as though vacant) and that of the property (as improved). Highest and best use is defined as: The reasonably probable and legal use of vacant land or improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.(6) The concept of highest and best use is the premise upon which value is based, and is a product of competitive forces in the marketplace. The principle of balance holds that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium. This principle applies to relationships among various property components as well as the relationship between the costs of production and the property's productivity. The point of economic balance is achieved when the combination of land and building is optimal (i.e., when no marginal benefit or utility is achieved by adding another unit of capital). The law of increasing returns holds that larger amounts of the agents of production produce greater net income up to a certain point, after which the law of diminishing returns is applied.(7) It is important to recognize that the highest and best use of the land (as though vacant) may differ from the highest and best use of the property (as improved). This may occur when a site has existing improvements and the highest and best use of the land differs from the current use. Nonetheless, the current property use will continue until the value of the land under its highest and best use exceeds the value of the property in its current use, plus the cost to remove the existing improvements. - ---------- (6) The Appraisal of Real Estate - Tenth Edition, Appraisal Institute, Chicago, IL, 1992, p. 45. (7) Ibid., p. 40. HVS International, Mineola, New York Highest and Best Use 96 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= In consideration of the factors influencing development in the immediate area, it is the appraisers' opinion that the highest and best use of the subject site, as vacant, would be to hold for future development. Based on the fact that the value of the land does not exceed the value of the hotel plus the cost of demolition, it is our opinion that the subject property's highest and best use, as improved, is its current use as a lodging facility. HVS International, Mineola, New York Approaches to Value 97 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 9. Approaches to Value In appraising real estate for market value, the appraiser has three approaches from which to select: the income capitalization, sales comparison, and cost approaches. Although all three valuation procedures are given consideration, the inherent strengths of each approach and the nature of the subject property must be evaluated to determine which will provide supportable estimates of market value. The appraiser is then free to select one or more of the appropriate approaches in arriving at a final value estimate. The Income Capitalization Approach The income capitalization approach takes a property's projected net income before debt service and allocates this future benefit to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component is calculated. The total of the mortgage component and the equity component equals the value of the property. This approach is often selected as the preferred valuation method for income-producing properties, because it most closely reflects the investment rationale of knowledgeable buyers. The Sales Comparison Approach The sales comparison approach estimates the value of a property by comparing it to similar properties that have been sold on the open market. To obtain a supportable estimate of value, the sales price of a comparable property must be adjusted to reflect any dissimilarities between it and the property being appraised. The sales comparison approach may provide a useful value estimate in the case of simple forms of real estate, such as vacant land and single-family homes, where the properties are homogeneous and the adjustments are few and relatively simple to compute. In the case of complex investments such as shopping centers, office buildings, restaurants, and lodging facilities, where the adjustments are numerous and more difficult to quantify, the sales comparison approach loses much of its reliability. HVS International, Mineola, New York Approaches to Value 98 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Hotel investors typically do not employ the sales comparison approach in reaching their final purchase decisions. Factors such as the lack of recent sales data, the numerous insupportable adjustments that are necessary, and the general inability to determine the true financial terms and human motivations of comparable transactions often make the results of this technique questionable. Although the sales comparison approach may provide a range of values that supports the final estimate, reliance on this method beyond the establishment of broad parameters is rarely justified by the quality of the sales data. The market-derived capitalization rates sometimes used by appraisers are susceptible to the same shortcomings inherent in the sales comparison approach. To substantially reduce the reliability of the income capitalization approach by employing capitalization rates obtained from unsupported market data weakens the final value estimate and ignores the typical investment analysis procedures employed by hotel purchasers. Because appraisers are obligated to mirror the actions of the marketplace, we generally give the sales comparison approach minimal weight in the hotel appraisal process beyond bracketing the final estimate.(8) The Cost Approach The cost approach estimates market value by computing the current cost to replace the property and subtracting any depreciation resulting from physical deterioration, functional obsolescence, and external (or economic) obsolescence. The value of the land, as if vacant and available, is then added to the depreciated value of the improvements to produce a total value estimate. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements grow older and begin to deteriorate, the resultant loss in value becomes increasingly difficult to quantify accurately. We find that knowledgeable hotel buyers base their purchase decisions on economic factors such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, this approach is given minimal weight in the hotel valuation process. As noted in Hotels and Motels: A Guide to Market - ---------- (8) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 209. HVS International, Mineola, New York Approaches to Value 99 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Analysis, Investment Analysis, and Valuations, "the cost approach is seldom used to value existing hotels and motels."(9) Reconciliation The final step in the valuation process is the reconciliation and correlation of the value indications. Factors that are considered in assessing the reliability of each approach include the purpose of the appraisal, the nature of the subject property, and the reliability of the data used. In reconciliation, the applicability and supportability of each approach is considered and the range of value indications is examined. The most significant weight is given to the approach that produces the most reliable solution and most closely reflects the criteria used by typical investors. Our nationwide experience with numerous hostelry buyers and sellers indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the investors who constitute the marketplace. For this reason, the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in the hotel valuation process. - ---------- (9) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 208. HVS International, Mineola, New York Income Capitalization Approach 100 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ============================================================================== 10. Income Capitalization Approach The income capitalization approach is based on the principle that the value of a property is indicated by its net return, or what is known as the present worth of future benefits. The future benefits of income-producing properties, such as hotels, are net income before debt service and depreciation (as estimated by a forecast of income and expense) and any anticipated reversionary proceeds from a sale. These future benefits can be converted into an indication of market value through a capitalization process and discounted cash flow analysis. Using the income capitalization approach, the subject property has been valued by analyzing the local market for transient accommodations, examining existing and proposed competition, and developing a forecast of income and expense that reflects current and anticipated income trends and cost components through a stabilized year of operation. The forecast of income and expense is expressed in current dollars for each year. The stabilized year is intended to reflect the anticipated operating results of the property over its remaining economic life, given any or all applicable stages of build-up, plateau, and decline in the life cycle of the hotel. Thus, income and expense estimates from the stabilized year forward exclude from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusual revenues or expenses. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, published by the Appraisal Institute, "of the three valuation approaches available to the appraiser, the income capitalization approach generally provides the most persuasive and supportable conclusions when valuing a lodging facility."(10) This text recommends that using a ten-year forecast and an equity yield rate "most accurately reflects the actions of typical hotel buyers, who purchase - ---------- (10) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236. HVS International, Mineola, New York Income Capitalization Approach 101 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= properties based on their leveraged discounted cash flow."(11) The simpler procedure of using a ten-year forecast and a discount rate is "less reliable because the derivation of the discount rate has little support. Moreover, it is difficult to adjust the discount rate for changes in the cost of capital."(12) We have used both methods to discount the subject property's projected net income into an estimate of value. Method One is a ten-year discounted cash flow analysis in which the cash flow to equity and the equity reversion are discounted to the present value at the equity yield rate, and the income to the mortgagee is discounted at a mortgage interest rate. The sum of the equity and mortgage values is the total property value. Method Two is a simple ten-year discounted cash flow analysis in which the annual net income before debt service and the reversionary proceeds following a sale at the end of the tenth year are discounted back to the date of the appraisal at an overall discount rate, and then totaled to produce an indication of the present worth of future benefits. To convert the projected income stream into an estimate of value through Method One, the anticipated net income (before debt service and depreciation) is allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. The total of the mortgage component and the equity component equals the value of the property. The process is described as follows. 1. The terms of typical hotel financing are set forth, including interest rate, amortization term, and loan-to-value ratio. 2. An equity yield rate of return is established. Numerous hotel buyers base their equity investments on a ten-year equity yield rate projection that takes into account ownership benefits such as periodic cash flow distributions, residual sale or refinancing distributions that return any property appreciation and mortgage amortization, income tax benefits, and various non-financial considerations such as status and prestige. The equity yield rate is also known as the internal rate of return on equity. - ---------- (11) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236 (12) Ibid. HVS International, Mineola, New York Income Capitalization Approach 102 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 3. The value of the equity component is calculated by first deducting the annual debt service from the projected net income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value. After deducting the mortgage balance at the end of the tenth year and the typical brokerage and legal costs, the equity residual is discounted back to the date of value at the equity yield rate. The net income to equity for each of the ten projection years is also discounted to the present value. The sum of these discounted values equates to the value of the equity component. Adding the equity component to the initial mortgage balance yields the overall property value. Because the mortgage and the debt service amounts are unknown but the loan-to-value ratio was determined in Step #1, the preceding calculation can be solved through an iterative process or by use of a linear algebraic equation that computes the total property value. The algebraic equation that solves for the total property value using a ten-year mortgage and equity technique was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(13) 4. The value is proven by allocating the total property value between the mortgage and equity components and verifying that the rates of return set forth in Steps #1 and #2 can be met from the projected net income. The process of converting the projected income stream into an estimate of value through Method Two is described as follows. 1. A discount rate is established by evaluating the total property yield derived by Method One. Occasionally, the discount rate may be adjusted slightly based on the total property yields indicated by recent transactions involving hotels similar to the subject property. 2. The reversionary value is calculated by capitalizing the 11th-year net income by the terminal capitalization rate and deducting typical brokerage and legal fees. - ---------- (13) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Income Capitalization Approach 103 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 3. The ten-year forecast of net income (before debt service and depreciation) and the reversionary value are discounted to the date of value at the rate derived above. Review of Operating History Because the Newark/Fremont Hilton is an existing hotel with an established operating performance, its historical income and expense experience can serve as a basis for projections. The subject property opened in 1984, and achieved occupancy levels of 57.3% in 1992, 60.8% in 1993, 68.0% in 1994 and 76.5% in 1995. The following income and expense statements were provided by subject property management, and are unaudited. Where applicable, we have reorganized the statements in accordance with the Uniform System of Accounts for Hotels. Please note that 1994 represented a partial year of operation by current management. HVS International, Mineola, New York Income Capitalization Approach 104 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL =============
================================================================================================================================ Table 10-1 Historical Operating Performance - -------------------------------------------------------------------------------------------------------------------------------- Year: 1995 1994 Total Rooms: 311 194 Occupied Rooms: 87,115 49,696 Occupancy: 78.6% 73.0% Average Rate: $64.07 $57.95 $(000s) % of Gross PAR(1) POR(2) $(000s) % of Gross PAR(1) POR(2) - -------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL REVENUE Rooms $ 5,716 67.1% $18,379 $65.61 $ 2,999 64.4% $15,461 $60.36 Food 1,970 23.1 6,334 22.61 1,137 24.4 5,863 22.89 Beverage 422 5.0 1,356 4.84 287 6.2 1,480 5.78 Telephone 297 3.5 957 3.41 179 3.8 921 3.59 Guest Laundry 27 0.3 88 0.31 13 0.3 65 0.25 Other Income 80 0.9 257 0.92 39 0.8 200 0.78 ------- ---- ------- ------ ------- ---- ------- ------ Total 8,512 99.9 27,371 97.71 4,654 99.9 23,990 93.65 DEPARTMENTAL EXPENSES* Rooms 1,310 22.9 4,212 15.04 713 23.8 3,674 14.34 Food & Beverage 1,729 72.3 5,560 19.85 1,178 82.7 6,074 23.71 Telephone 96 32.4 310 1.11 76 42.3 390 1.52 Guest Laundry 20 71.5 63 0.22 9 73.7 48 0.19 ------- ---- ------- ------ ------- ---- ------- ------ Total 3,155 37.1 10,145 36.22 1,976 42.5 10,186 39.76 DEPARTMENTAL INCOME 5,357 62.8 17,226 61.50 2,678 57.4 13,805 53.89 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 772 9.1 2,481 8.86 471 10.1 2,427 9.48 Management Fee 257 3.0 825 2.95 140 3.0 722 2.82 Marketing 493 5.8 1,587 5.66 241 5.2 1,244 4.86 Franchise Fees 286 3.4 919 3.28 150 3.2 773 3.02 Property Oper. & Maint. 399 4.7 1,283 4.58 253 5.4 1,305 5.09 Energy 412 4.8 1,324 4.73 259 5.6 1,337 5.22 ------- ---- ------- ------ ------- ---- ------- ------ Total 2,618 30.8 8,419 30.05 1,515 32.5 7,809 30.48 HOUSE PROFIT 2,739 32.0 8,807 31.45 1,163 24.9 5,996 23.41 FIXED EXPENSES Property Taxes 157 1.8 506 1.81 102 2.2 528 2.06 Insurance 131 1.5 422 1.51 159 3.4 819 3.20 Reserve for Replacement 342 4.0 1,101 3.93 2 0.0 8 0.03 Equipment Rent 52 0.6 168 0.60 6 0.1 32 0.12 ------- ---- ------- ------ ------- ---- ------- ------ Total 683 7.9 2,197 7.84 269 5.7 1,386 5.41 NET INCOME $ 2,056 24.1% $ 6,610 $23.61 $ 894 19.2% $ 4,610 $18.00 ======= ==== ======= ====== ======= ==== ======= ====== Food to Rooms 34.5% 37.9% Beverage to Food 21.4 25.2 Food & Bev to Rooms 41.8 47.5 Telephone to Rooms 5.2 6.0 Guest Laundry to Rooms 0.5 0.4 Other Income to Rooms 1.4 1.3 * Departmental expenses expressed as a percentage of departmental revenues (1) Per Available Room (2) Per Occupied Room - --------------------------------------------------------------------------------------------------------------------------------
HVS International, Mineola, New York Income Capitalization Approach 105 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL =============
================================================================================================================================ Table 10-2 Historical Operating Performance - -------------------------------------------------------------------------------------------------------------------------------- Period: YTD September 1996 YTD September 1995 Total Rooms: 312 311 Occupied Rooms: 71,649 65,460 Occupancy: 85.0% 79.1% Average Rate: $75.72 $63.94 $(000s) % of Gross PAR(1) POR(2) $(000s) % of Gross PAR(1) POR(2) - -------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL REVENUE Rooms $ 5,505 70.1% $17,645 $76.84 $ 4,298 69.5% $13,821 $65.66 Food 1,689 21.5 5,414 23.57 1,300 21.0 4,182 19.87 Beverage 301 3.8 965 4.20 285 4.6 917 4.36 Telephone 251 3.2 803 3.50 230 3.7 740 3.52 Guest Laundry 25 0.3 80 0.35 22 0.4 72 0.34 Other Income 81 1.0 260 1.13 52 0.8 166 0.79 ------- ---- ------- ------ ------- ---- ------- ------ Total 7,852 99.9 25,168 109.59 6,188 100.0 19,897 94.53 DEPARTMENTAL EXPENSES* Rooms 1,135 20.6 3,639 15.84 962 22.4 3,094 14.70 Food & Beverage 1,634 82.1 5,237 22.80 1,448 91.3 4,656 22.12 Telephone 80 32.1 258 1.12 71 30.8 228 1.08 Guest Laundry 18 71.4 57 0.25 16 71.0 51 0.24 ------- ---- ------- ------ ------- ---- ------- ------ Total 2,867 36.5 9,190 40.02 2,497 40.3 8,028 38.14 DEPARTMENTAL INCOME 4,985 63.4 15,977 69.57 3,691 59.7 11,869 56.39 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 657 8.4 2,106 9.17 564 9.1 1,814 8.62 Management Fee 237 3.0 760 3.31 187 3.0 600 2.85 Marketing 338 4.3 1,083 4.72 370 6.0 1,189 5.65 Franchise Fees 273 3.5 875 3.81 215 3.5 691 3.28 Property Oper. & Maint. 379 4.8 1,214 5.29 300 4.9 965 4.59 Energy 267 3.4 856 3.73 310 5.0 996 4.73 ------- ---- ------- ------ ------- ---- ------- ------ Total 2,151 27.4 6,894 30.02 1,945 31.5 6,254 29.71 HOUSE PROFIT 2,834 36.0 9,083 39.55 1,746 28.2 5,615 26.68 FIXED EXPENSES Property Taxes 135 1.7 433 1.88 114 1.8 366 1.74 Insurance 138 1.8 442 1.92 120 1.9 385 1.83 Reserve for Replacement 659 8.4 2,112 9.20 526 8.5 1,692 8.04 Equipment Rent 35 0.4 113 0.49 40 0.6 127 0.60 ------- ---- ------- ------ ------- ---- ------- ------ Total 967 12.3 3,099 13.50 799 12.8 2,570 12.21 NET INCOME $1,867 23.7% $ 5,984 $26.05 $947 15.4% $3,045 $14.47 ====== ==== ======= ====== ==== ==== ====== ====== Food to Rooms 30.7% 30.3% Beverage to Food 17.8 21.9 Food & Bev to Rooms 36.1 36.9 Telephone to Rooms 4.6 5.4 Guest Laundry to Rooms 0.5 0.5 Other Income to Rooms 1.5 1.2 * Departmental expenses expressed as a percentage of departmental revenues (1) Per Available Room (2) Per Occupied Room - --------------------------------------------------------------------------------------------------------------------------------
HVS International, Mineola, New York Income Capitalization Approach 106 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Comparable Operating Statements These historical income and expense statements show that over the past two calendar years and for the latest year-to-date periods, the Newark-Fremont Hilton's net income has increased steadily, from 19.9% of total in 1994, to 24.9% in 1995. Year-to-date figures indicate a similar trend, with net income increasing from 16.2% in year-to-date September 1995 to 24.6% in year-to-date September 1996. Total revenues have increased in each of the past three years, driven mostly by gains in rooms revenue, which resulted from strong occupancy and average rate performance. Departmental expenses at the subject property, in terms of a percentage to total sales, have declined from 42.1% in 1994 to 36.7% in 1995, indicating improved operating efficiency. Year-to-date 1995, departmental expenses were 36.1% of total revenue, compared to 40.0% in the prior-year period. These departmental ratios are generally lower than comparable full-service properties, which is attributed to strong revenue generation and the efficiency of current management. As a ratio to total sales, undistributed operating expenses have declined steadily with the increase in total revenues. As a result of reserves for replacement funding, fixed expenses increased as a ratio to total revenues in 1995. Overall, the subject property has exhibited strong growth in revenues while containing expenses, resulting in high levels of profitability. These profitability ratios are considered to be generally superior to comparable properties. Forecast of Income and Expense The forecast of income and expense is intended to reflect the appraiser's subjective estimate of how a typical buyer would project the subject property's future operating results. Depending on the dynamics of the local market, a typical buyer's projection may be adjusted upward or downward. We have attempted to consider these factors in formulating this forecast. HVS International uses a fixed and variable component model to project a lodging facility's revenue and expense levels. This model is based on the premise that hotel revenues and expenses have one component that is fixed and another that varies directly with occupancy and facility usage. A projection can be made by taking a known level of revenue or expense and calculating its fixed and variable components. The fixed component is then held constant, while the variable component is adjusted for the percent change between the projected occupancy and facility usage and that which produced the known level of revenue or expense. HVS International, Mineola, New York Income Capitalization Approach 107 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Base-Year Statement of Income and Expense Based on our review of the operating histories of the subject property and comparable hotels, we have derived a base-year statement of income and expense expressed in 1995 dollars. The units of comparison include a percentage of departmental and total revenue, amounts per available room, and amounts per occupied room. The income and expense ratios reflect an occupancy level of 78.6%. The base-year profit and loss statement will be used to determine the relationship between the fixed and variable components.
====================================================================================================== Table 10-4 Base-Year Statement of Income and Expense - ------------------------------------------------------------------------------------------------------ Year: 1995 Number of Rooms: 311 Occupancy: 78.6% Percent of Amount per Amount per Average Rate: $64.07 Total Available Occupied Occupied Rooms: 89,210 Revenue Room Room - ------------------------------------------------------------------------------------------------------ Revenue: Rooms $5,716 70.0% $18,379 $64.07 Food 1,606 19.7 5,163 18.00 Beverage 410 5.0 1,320 4.60 Telephone 303 3.7 975 3.40 Guest Laundry 27 0.3 86 0.30 Other Income 103 1.3 330 1.15 Total Revenue $8,165 100.0 $26,253 $91.52 - ------------------------------------------------------------------------------------------------------ Expenses: Rooms* $1,515 26.5% $4,870 $16.98 Food & Beverage* 1,653 82.0 5,316 18.53 Telephone* 121 40.0 390 1.36 Guest Laundry* 20 73.0 63 0.22 Administrative & General 778 9.5 2,500 8.72 Management Fee 245 3.0 788 2.75 Marketing 482 5.9 1,550 5.40 Franchise Fees 286 3.5 919 3.20 Property Oper. & Maint. 500 6.1 1,608 5.60 Energy 450 5.5 1,447 5.04 Property Taxes 157 1.9 506 1.76 Insurance 109 1.3 350 1.22 Reserve for Replacement 327 4.0 1,050 3.66 Equipment Rent 60 0.7 193 0.67 Total Expenses $6,702 82.1% $21,549 $75.12 - ------------------------------------------------------------------------------------------------------ Net Income $1,463 17.9% $4,704 $16.40 ======================================================================================================
Inflation Assumptions The base revenue and expense amounts are inflated to reflect current dollars for each projection year. Line items can be affected by different factors. HVS International, Mineola, New York Income Capitalization Approach 108 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= We must establish a general rate of inflation that will be applied to most revenue and expense categories. The following table shows inflation estimates made by economists at some noted institutions and corporations. HVS International, Mineola, New York Income Capitalization Approach 109 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-5 Inflation Estimates - -------------------------------------------------------------------------------- Projected Increase in Consumer Price Index (Annualized Rate Versus 12 Months Earlier) ------------------------------------------ November May Source of 1996 of 1997 - -------------------------------------------------------------------------------- Maureen Allyn, Scudder Stevens Clark 3.1% 2.3% Wayne Angell, Bear Stearns 3.0 3.2 Richard Berner, Mellon Bank 2.9 2.8 David Berson, Fannie Mae 2.9 2.8 David Blitzer, S&P 3.0 2.7 Paul Boltz, T. Rowe Price 3.2 3.5 David Bostian, Herzog, Heine, Geduld 2.9 2.5 Philip Braverman, DKB Securities 3.0 2.8 William Brown, J.P. Morgan 3.3 3.2 Rosanne Cahn, CS First Boston 3.1 2.6 James Coons, Huntington National Bank 3.2 3.0 Michael Cosgrove, The Econoclast 3.2 3.3 Dewey Daane, Vanderbilt University 3.4 3.6 Robert Dederick, Northern Trust 3.1 3.4 W.Dudley, Goldman Sachs 3.4 3.2 Michael Englund, MMS Intl. 3.2 3.3 Michael Evans, Evans Group 3.0 3.0 Gail Fosler, Conference Board 3.5 3.6 Maury Harris, Paine Weber, Inc. 2.8 2.8 Tracy Herrick, Jefferies & Co. 3.2 3.6 Stuart Hoffman, PNC Bank 3.1 2.8 William Hummer, Wayne Hummer 2.9 3.0 Edward Hyman, ISI Group 2.8 2.1 Saul Hymans, University of Michigan 2.7 1.7 Mieczyslaw Karczmar, Deutsche Bank 2.8 3.2 Kurt Karl, WEFA Group 2.6 2.3 Irwin Kellner, Chase Manhattan Bank 2.6 2.3 D. Laufenberg, American Express Financial Advisors 3.2 3.4 Michelle Laughlin, Sanwa Securities 3.0 3.2 Carol Leisenring, CoreStates Financial 2.7 2.5 Richard Lemmon, General Motors 3.0 3.0 Mickey Levy, NationsBank Capital Markets 2.6 2.4 David Littmann, Comerica 3.1 3.0 John Lonski, Moody's Investors Service 3.3 3.2 Paul McCulley, UBS Securities 3.0 2.8 John McDevitt, 3M 2.6 2.5 Arnold Moskowitz, Moskowitz Capital 3.1 3.5 John Mueller, LBMC, Inc. 3.2 2.5 David Munro, High Frequency Econ. 3.0 2.5 Carl Palash, MCM MoneyWatch 3.0 3.0 Nicholas Perna, Fleet Financial Group 3.3 3.3 Elliott Platt, Donaldson Lufkin 2.8 2.0 Maria F. Ramirez, MF Ramirez 3.0 3.0 Donald Ratajczak, Georgia State University 3.0 3.3 David Resler, Nomura Securities International 2.9 2.6 Allan Reynolds, Hudson Institute 3.3 3.6 Richard Rippe, Prudential Securities 3.1 3.3 A. Gary Schilling, Schilling & Co. 3.0 3.0 Allen Sinai, Lehman Brothers 3.2 3.4 James Smith, University of North Carolina 2.1 1.9 Susan Sterne, Economic Analysis 2.5 2.5 Donald Straszheim, Merrill Lynch 2.7 2.3 Thomas Synott III, U.S. Trust Company 3.3 3.4 John Williams, Bankers Trust 3.0 3.1 Raymond Worseck, A.G. Edwards 3.6 3.3 David Wyss, DRI/McGraw-Hill 3.0 2.5 Edward Yardeni, Deutsche Morgan Grenfell 2.2 2.0 Mark Zandi, Regional Financial Associates 3.0 3.2 ---- ---- Average 3.0% 2.9% Source: Wall Street Journal, July 1, 1996 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 110 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The preceding table shows inflation forecasts averaging 3.0% through November of 1996 and 2.9% through May of 1997. Most of the economists in the sample estimate inflation rates ranging from 2.5% to 3.4% for the 12-month period, although several anticipate levels of slightly greater than 3.4%. As a further check on these inflation projections, we have reviewed historical increases in the Consumer Price Index. Because the value of real estate is predicated on cash flows over a relatively long period, inflation should be considered from a long-term perspective. Between 1986 and 1994, the national CPI increased at an average annual compounded rate of 3.8%. In consideration of these historical trends, the projections set forth above, and our assessment of probable property appreciation levels, we have selected an annual stabilized inflation rate of 3.0% in 1997 and 1998, increasing to 3.5% annually thereafter. One of the exceptions to this general inflation assumption is the projected growth in average rate. As noted earlier, increases in the subject property's room rate are projected as follows. ================================================================================ Table 10-6 Projected Growth in Average Rate - -------------------------------------------------------------------------------- Increase from Year Previous Year -------------------------------- 1997 6.1% 1998 4.2% Thereafter 3.8% - -------------------------------------------------------------------------------- Using these inflation assumptions, the base-year income and expense statement (which is expressed in 1995 dollars) is inflated to arrive at projections. Each revenue and expense category will be projected using the inflated base statement to determine the fixed and variable component relationships. HVS International, Mineola, New York Income Capitalization Approach 111 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Rooms Revenue Rooms revenue is determined by two variables: occupancy and average rate. Earlier in this report, we estimated the subject property's occupancy and average rate as follows. ================================================================================ Table 10-7 Projected Occupancy and Average Rate - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Forecast Occupancy Percentage 79.0% 77.0% 76.0% Forecast Average Rate $80.61 $83.98 $87.21 - -------------------------------------------------------------------------------- Rooms revenue is calculated as follows.
====================================================================================================== Table 10-8 Forecast of Rooms Revenue - ------------------------------------------------------------------------------------------------------ Number of Forecast Year: Projected Average Number Days in Rooms Ending: Occupancy Room Rate of Units in Year Revenue - ------------------------------------------------------------------------------------------------------ 1997 79.0 X $ 80.61 X 311 X 365 = $ 7,229 1998 77.0 X 83.98 X 311 X 365 = 7,340 Stabilized 76.0 X 87.21 X 311 X 365 = 7,524 - ------------------------------------------------------------------------------------------------------
Food and Beverage Revenue Food and beverage revenue is generated by a hotel's restaurants, lounges, coffee shops, snack bars, banquet rooms, and room service. In addition to providing a source of revenue, these outlets serve as an amenity that assists in the sale of guestrooms. With the exception of properties with active lounges or banquet facilities that draw local residents, in-house guests generally represent a substantial percentage of a hotel's food and beverage patrons. The Uniform System of Accounts for Hotels/Eighth Revised Edition defines food revenue as "revenue derived from the sale of food, including coffee, milk, tea and soft drinks. Food sales do not include meals charged on employees' (staff) checks." Beverage revenues are "derived from the sale of beverages." In addition to the revenue generated by the sale of food and beverages, hotels often produce other income that is related to this department, such as meeting room rentals, cover charges, service charges, and miscellaneous banquet revenue. HVS International, Mineola, New York Income Capitalization Approach 112 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Although food revenue varies directly with changes in occupancy, the small portion generated by banquet sales and outside capture is relatively fixed. Food revenue was projected based on this relationship between the fixed and variable components. The following table shows the projected food revenue and several units of comparison that can be used to check the reasonableness of the forecast. ================================================================================ Table 10-9 Forecast of Food Revenue - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total Food Revenue $ 1,710 $ 1,737 $ 1,780 Percent of Total Revenue 17.4% 17.4% 17.4% Per Available Room $ 5,500 $ 5,584 $ 5,723 Per Occupied Room $ 19.07 $ 19.87 $ 20.63 - -------------------------------------------------------------------------------- Based on these units of comparison, the projected food revenue appears reasonable when compared with industry standards. Beverage Revenue Beverage revenue is generated by the sale of alcoholic beverages in a hotel's restaurants and banquet rooms and the sale of alcoholic and nonalcoholic beverages in the bars and lounges. Based on an analysis of comparable lodging facilities, beverage revenue is estimated to average approximately 25.6% of food revenue. Thus, beverage revenue is projected by multiplying the projected food revenue by 25.6%. The following table illustrates the forecast of beverage revenue. ================================================================================ Table 10-10 Forecast of Beverage Revenue - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total Beverage Revenue $ 437 $ 444 $ 455 - -------------------------------------------------------------------------------- Telephone Revenue Telephone revenue is generated by hotel guests who charge local and long-distance calls to their rooms, and by individuals who use the property's public telephones. Prior to the deregulation of the telephone industry in the early 1980s, hotels were limited to a 15% commission on long-distance calls, a mark-up that allowed few profits. Deregulation and the HVS International, Mineola, New York Income Capitalization Approach 103 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= development of sophisticated call-accounting equipment have resulted in profitable telephone departments. State-of-the-art equipment is capable of least-cost routing, automatic price billing, and posting telephone charges to guest folios. Hotels can select among various long-distance services, and can also work with any one of a number of Alternative Operator Services (AOS). These systems route and price calls, and may provide additional services. In recent years, the hospitality industry has experienced diverging trends with respect to telephone revenue. Prices per call have increased, in some cases dramatically, yielding departmental profits as high as 50% to 55%. However, the number of long-distance calls billed per occupied room has declined as a result of the extensive use of long-distance carrier services that can be accessed locally or through a toll-free number. When guests charge long-distance calls to their personal or business accounts in this manner, the hotel loses the revenue associated with long-distance tariffs and mark-ups, and only receives an access fee. Most telephone revenue varies directly with changes in occupancy. However, there is a small fixed component consisting of public telephone revenue, which is primarily generated by individuals using the hotel's food, beverage, and meeting facilities. Using this fixed and variable relationship, the subject property's telephone revenue is projected as follows. ================================================================================ Table 10-11 Forecast of Telephone Revenue - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total Telephone Revenue $ 322 $ 331 $ 341 Percent of Total Revenue 3.3% 3.3% 3.3% Amount Per Available Room $ 1,036 $ 1,065 $ 1,098 Amount Per Occupied Room $ 3.59 $ 3.79 $ 3.95 - -------------------------------------------------------------------------------- Guest Laundry Revenue Guest laundry revenue is generated by hotel guests who bill laundry and dry-cleaning services to their rooms. Guest laundry is highly sensitive to changes in occupancy. Using this fixed and variable relationship, the subject property's guest laundry is projected as follows. HVS International, Mineola, New York Income Capitalization Approach 114 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-12 Forecast of Guest Laundry Revenue - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Guest Laundry Revenue $ 28 $ 29 $ 30 Percent of Total Revenue 0.3% 0.3% 0.3% Amount Per Available Room $ 92 $ 94 $ 96 Amount Per Occupied Room $ 0.31 $ 0.33 $ 0.35 - -------------------------------------------------------------------------------- Other Income Other income is derived from sources other than guestrooms, food and beverages, and telephone services. Depending on the type of hotel and the facilities and amenities offered, other income may include the following items. o Rentals - stores, office space, concession space, showcases, clubs, and storage. o Commissions from auto rentals, photography, telegrams, and vending services. o Concessions - revenue derived from charges for the privilege of operating departments that could be operated by the hotel. Gift shops, barber shops, and beauty salons are often operated as concessions. o Copying and fax services. o Cash discounts earned - discounts from creditors' accounts for payment within the discount period. This item does not include trade discounts, which are a deduction from the cost of goods sold. o Electronic games and pinball machines. o Forfeited advance deposits and guaranteed no-shows. o Service charges - service charges that are added to a customer's account but are not paid to service personnel. o Interest income - interest from house accounts. o Salvage - revenue from the sale of old or obsolete items. Other income is highly sensitive to changes in occupancy and slightly correlated to food and beverage volume. Using this fixed and variable relationship, the subject property's other income is projected as follows. HVS International, Mineola, New York Income Capitalization Approach 115 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-13 Forecast of Other Income - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total Other Income $ 109 $ 112 $ 115 Percent of Total Revenue 1.1% 1.1% 1.1% Amount Per Available Room $ 351 $ 359 $ 369 Amount Per Occupied Room $ 1.22 $ 1.28 $ 1.33 - -------------------------------------------------------------------------------- Rooms Expense Rooms expense consists of items related to the sale and upkeep of guestrooms and public space. Salaries, wages, and employee benefits account for a substantial portion of this category. Although payroll varies somewhat with occupancy (because managers can schedule maids, bell personnel, and house cleaners to work when demand requires), much of a hotel's payroll is fixed. Front desk personnel, public area cleaners, the housekeeper, and other supervisors must be maintained at all times. As a result, salaries, wages, and employee benefits are only moderately sensitive to changes in occupancy. Commissions represent remuneration to travel agents for booking rooms. Because these fees are based on a percentage of rooms revenue, they are highly dependent on occupancy and rate. Reservations is a similar expense that reflects the cost of a franchise reservation system that typically bills as a percentage of rooms revenue. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are only slightly affected by changes in volume. In light of these considerations, we project the subject property's rooms expense as follows. ================================================================================ Table 10-14 Forecast of Rooms Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total Rooms Expense $ 1,641 $ 1,681 $ 1,731 Percent of Rooms Revenue 22.3% 22.5% 22.8% Amount per Available Room $ 5,178 $ 5,305 $ 5,463 Amount per Occupied Room $ 17.95 $ 18.88 $ 19.69 - -------------------------------------------------------------------------------- Food and Beverage Expense Food and beverage expenses consist of items necessary for the operation of a hotel's food, beverage, and banquet facilities. Although food and beverage revenues are projected separately and occupy separate categories on a hotel's income and expense statement, the corresponding expenses are combined into a single category. HVS International, Mineola, New York Income Capitalization Approach 116 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The costs associated with food and beverage sales and payroll are moderately to highly correlated to food and beverage revenues, and comprise a substantial portion of this category. China, glassware, and linen; operating supplies; other operating expenses; and uniforms are very slightly dependent on volume. Although the other expense items are basically fixed, they represent a relatively insignificant factor. After considering the fixed and variable components, we forecast the subject property's food and beverage expense as follows. ================================================================================ Table 10-15 Forecast of Food and Beverage Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total F&B Expense $ 1,757 $ 1,803 $ 1,858 Percent of Food and Beverage Revenue 81.8% 82.7% 83.1% Amount per Available Room $ 5,650 $ 5,798 $ 5,975 Amount per Occupied Room $ 19.59 $ 20.63 $ 21.54 - -------------------------------------------------------------------------------- Telephone Expense Telephone expense consists of all costs associated with this department. In the case of small hotels with automated systems, the operation of telephones may be an additional responsibility of front desk personnel; however, most large properties employ full-time operators. The bulk of the telephone expense consists of the cost of local and long-distance calls billed by the telephone companies that provide these services. Because most calls are made by in-house guests, these costs are moderately correlated to occupancy. Unless a particular hotel department incurs high expenses, use of telephone services by hotel employees is charged to this account. The remaining costs, which include salaries, wages, printing, and other expenses, are moderately fixed. The following table illustrates our forecast of telephone expense. ================================================================================ Table 10-16 Forecast of Telephone Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total Telephone Expense $ 161 $ 166 $ 172 Percent of Telephone Revenue 40.0% 40.2% 40.3% Amount per Available Room $ 414 $ 427 $ 441 Amount per Occupied Room $ 1.44 $ 1.52 $ 1.59 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 117 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Guest Laundry Expense Guest laundry expense includes labor, packaging, equipment, maintenance and administrative costs. Using a fixed and variable forecasting model, we project the subject property's guest laundry expense as follows. ================================================================================ Table 10-17 Forecast of Guest Laundry Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total Guest Laundry Expense $ 21 $ 21 $ 22 Percent of Guest Laundry Revenue 73.5% 73.5% 73.5% Amount per Available Room $ 66 $ 69 $ 71 Amount per Occupied Room $ 0.23 $ 0.24 $ 0.26 - -------------------------------------------------------------------------------- Administrative and General Expense Administrative and general expense includes the salaries and wages of all administrative personnel who are not directly associated with a particular department. Expense items related to the management and operation of the property are also allocated to this category. Most administrative and general expenses are relatively fixed. The exceptions are cash overages and shortages; commissions on credit card charges; provision for doubtful accounts, which are moderately affected by the number of transactions or total revenue; and salaries, wages, and benefits, which are very slightly influenced by volume. In recent years, several new items have been added to the administrative and general expense category. Human resources includes the cost of recruiting, relocating, and training personnel. Security consists of the cost of contract security for the property and related expenses. The general insurance category includes premiums for liability, fidelity, life, theft coverage, and business interruption insurance. Fire and extended-coverage insurance on the building and contents is a separate insurance expense category. Liability insurance covers third-party actions involving bodily injury and personal property, and is typically based on rooms receipts, meeting and banquet income, and food and beverage revenue. Factors that may have an impact on a hotel's liability expense include the size of the meeting, banquet, and restaurant facilities; the ratio between the amount of alcohol served and total food and beverage sales; the presence of a dance floor; a high-rise structure; a swimming pool; life safety support systems; and the guest transportation services provided by the hotel. The HVS International, Mineola, New York Income Capitalization Approach 118 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= following table illustrates our forecast of administrative and general expense. ================================================================================ Table 10-18 Forecast of Administrative and General Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total Administrative & General Expense $ 858 $ 883 $ 911 Percentage of Total Revenue 8.7% 8.8% 8.9% Amount per Available Room $ 2,759 $ 2,839 $ 2,929 Amount per Occupied Room $ 9.57 $ 10.10 $ 10.56 - -------------------------------------------------------------------------------- Management Fee Management expense consists of the basic fee paid to the type of company that is anticipated to operate the subject property. Some companies provide management services alone, while others also provide a brand name affiliation. When a management company has no brand identification, the property owner often acquires a franchise that provides the necessary image and recognition. Although most hotel management companies employ a fee schedule that includes a basic fee (usually a percentage of total revenue) and an incentive fee (usually a percentage of defined profit), the incentive portion is often subordinated to debt service and does not appear in a forecast of net income before debt service. Basic hotel management fees are almost always based on a percentage of total revenue, which means they have no fixed component. Although the incentive fee does not decrease the cash flow available for debt service, it does reduce the potential cash flow to equity, and must be accounted for in the valuation process. Generally, the most appropriate procedure for handling the impact of the incentive fee on the equity component is to use the projected net income before debt service and incentive fee, but adjust the equity dividend or yield rate upward to reflect this added management cost. The adjusted equity dividend and yield rates will be described later in this section. The subject property is operated by Remington Hotel Company. The subject property pays a management fee of 3.0% of total revenues. Based on our review of the current market for management contracts, we are of the opinion that this fee is consistent with prevailing market terms. Applying this management fee structure to the projection of total revenue yields the following forecast of the subject property's management fee. HVS International, Mineola, New York Income Capitalization Approach 119 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-19 Forecast of Management Fee - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Total Revenue $ 9,835 $ 9,993 $ 10,245 Management Fee Percentage 3.0% 3.0% 3.0% --------- -------- --------- Management Fee Expense $ 295 $ 300 $ 307 - -------------------------------------------------------------------------------- Marketing Expense Marketing expense consists of all costs associated with advertising, sales, and promotion; these activities are intended to attract and retain customers. Marketing can be used to create an image, develop customer awareness, and stimulate patronage of a property's various facilities. The marketing category is unique in that all expense items, with the exception of fees and commissions, are totally controlled by management. Most hotel operators establish an annual marketing budget that sets forth all planned expenditures. If the budget is followed, total marketing expenses can be projected accurately. Marketing expenditures are unusual because although there is a lag period before results are realized, the benefits are often extended over a long period. Depending on the type and scope of the advertising and promotion program implemented, the lag time can be as short as a few weeks or as long as several years. However, the favorable results of an effective marketing campaign tend to linger, and a property often enjoys the benefits of concentrated sales efforts for many months. Marketing expense can be divided into five categories: sales, reservations, advertising and merchandising, other marketing activities, and fees and commissions. Together, these categories include all marketing efforts made by hotel personnel and outside parties. Marketing expenses are fixed with the exception of reservations, fees, and commissions, which are calculated as a percentage of rooms revenue. Based on the location of the subject property, the local market for transient accommodations, the competitive environment, and the hotel's anticipated market segmentation, we have developed the following marketing forecast using a fixed and variable component model. HVS International, Mineola, New York Income Capitalization Approach 120 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-20 Forecast of Marketing Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total Marketing Expense $ 532 $ 548 $ 565 Percentage of Total Revenue 5.4% 5.5% 5.5% Amount per Available Room $ 1,711 $ 1,761 $ 1,817 $ Amount per Occupied Room $ 5.93 $ 6.26 $ 6.55 $ - -------------------------------------------------------------------------------- Franchise Fee Franchise expense represents the fees paid to Hilton Corporation for the use of the company's name, trade marks, and service marks. The following table illustrates the projection of the subject property's franchise fee. ================================================================================ Table 10-21 Forecast of Franchise Fee - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Projected Rooms Revenue $ 7,229 $ 7,340 $ 7,524 Franchise Fee Percentage 5.0% 5.0% 5.0% --------- -------- --------- Franchise Fees Expense $ 361 $ 367 $ 376 - -------------------------------------------------------------------------------- Property Operations and Maintenance Property operations and maintenance expense is another expense category that is largely controlled by management. Except for repairs that are necessary to keep the facility open and prevent damage (e.g., plumbing, heating, and electrical items), most maintenance can be deferred for varying lengths of time. Maintenance is an accumulating expense. If management elects to postpone performing a required repair, they have not eliminated or saved the expenditure; they have only deferred payment until a later date. A lodging facility that operates with a lower-than-normal maintenance budget is likely to accumulate a considerable amount of deferred maintenance. The age of a lodging facility has a strong influence on the required level of maintenance. A new or thoroughly renovated property is protected for several years by modern equipment and manufacturers' warranties. However, as a hostelry grows older, maintenance expenses escalate. A well-organized preventive maintenance system often helps delay deterioration, but most facilities face higher property operations and maintenance costs each year, regardless of the occupancy trend. The quality of initial construction can also have a direct impact on future maintenance requirements. The use of high-quality building materials and construction HVS International, Mineola, New York Income Capitalization Approach 121 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= methods generally reduces the need for maintenance expenditures over the long term. Property operations and maintenance is considered an operating expense; as such, it includes only those components that can be expensed, rather than capitalized, under Internal Revenue Service regulations. For example, if a table leg is broken, the repair of that leg is considered an expense and is chargeable to property operations and maintenance. If the table is replaced, it becomes a capital expenditure and does not appear under the property operations and maintenance category. Appraisers account for capital replacement of items such as furniture and equipment in the reserve for replacement account, which is discussed later in this section. Property operations and maintenance costs are relatively fixed, and are projected as follows. ================================================================================ Table 10-22 Forecast of Property Operations and Maintenance Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total Property Oper. & Maint. Expense $ 552 $ 568 $ 586 Percentage of Total Revenue 5.6% 5.7% 5.7% Amount per Available Room $ 1,775 $ 1,826 $ 1,884 Amount per Occupied Room $ 6.16 $ 6.50 $ 6.79 - -------------------------------------------------------------------------------- Energy Expense The energy consumption of a lodging facility takes several forms, including water and space heating, air conditioning, lighting, cooking fuel, and other miscellaneous power requirements. The most common sources of hotel energy are electricity, natural gas, fuel oil, and steam. This category also includes the cost of water service. Total energy cost depends on the source and quantity of fuel used. Electricity tends to be the most expensive source, followed by oil and gas. Although all hotels consume a sizable amount of electricity, many properties supplement their energy requirements with less expensive sources, such as gas and oil, for heating and cooking. A large portion of a hostelry's energy consumption is relatively fixed. Restaurants, kitchens, public areas, and corridors must be continually lighted and climate-controlled, regardless of occupancy. The energy cost of an additional occupied room (i.e., a few hours of light, television, heat, or air conditioning) is minimal. The following table presents our forecast of the subject property's energy expense. HVS International, Mineola, New York Income Capitalization Approach 122 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-23 Forecast of Energy Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total Energy Expense $ 484 $ 500 $ 517 Percentage of Total Revenue 4.9% 5.0% 5.0% Amount per Available Room $ 1,556 $ 1,607 $ 1,662 Amount per Occupied Room $ 5.40 $ 5.72 $ 5.99 - -------------------------------------------------------------------------------- Property Taxes The estimate of property taxes was detailed in a previous section of this report. The following table summarizes these projections. ================================================================================ Table 10-24 Forecast of Property Taxes - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total Taxes $ 164 $ 167 $ 170 - -------------------------------------------------------------------------------- Insurance Expense The insurance expense category consists of the cost of insuring the hotel and its contents against damage or destruction by fire, weather, sprinkler leakage, boiler explosion, plate glass breakage, and so forth. It does not include liability coverage, which is a component of administrative and general expense. Insurance rates are based on many factors, including building design and construction, fire detection and extinguishing equipment, fire district, distance from the firehouse, and the area's fire experience. Insurance expenses do not vary with occupancy. Based on historical levels, we project the subject property's insurance expense at approximately $370 per available room in 1997 (the first projection period). In subsequent years, this amount is assumed to increase in tandem with inflation. The following table outlines our projection of insurance expense. ================================================================================ Table 10-25 Forecast of Insurance Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Forecast Insurance Expense $ 115 $ 120 $ 124 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 123 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Reserve for Replacement Furniture, fixtures, and equipment are essential to the operation of a lodging facility, and their quality often influences a property's class. This category includes all non-real estate items that are capitalized, rather than expensed. The furniture, fixtures, and equipment of a hotel are exposed to heavy use and must be replaced at regular intervals. The useful life of these items is determined by their quality, durability, and the amount of guest traffic and use. Periodic replacement of furniture, fixtures, and equipment is essential to maintain the quality, image, and income-producing potential of a lodging facility. Because capitalized expenditures are not included in the operating statement but nevertheless affect an owner's cash flow, an appraisal should reflect these expenses in the form of an appropriate reserve for replacement. Our industry experience indicates that a reserve for replacement of 3% to 5% of total revenue is generally sufficient to provide for the timely replacement of furniture, fixtures, and equipment. Because the reserve for replacement is based on a percentage of total revenue, it has no fixed component. Based on an analysis of comparable lodging facilities, we believe that a reserve for replacement of 4% of total revenue is sufficient to provide for the periodic replacement of the subject property's furniture, fixtures, and equipment. This amount is consistent with the reserve account contributions currently made by the hotel. The following table summarizes the projected reserve for replacement. ================================================================================ Table 10-26 Forecast of Reserve for Replacement - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Total Revenue $ 9,835 $ 9,993 $ 10,245 $ Reserve Percentage 4.0% 4.0% 4.0% --------- -------- --------- Reserve for Replacement Expense $ 393 $ 400 $ 410 $ - -------------------------------------------------------------------------------- Equipment Rent Equipment rent are long term contracts for items essential to the operation of a lodging facility. This category includes all large capital items such as elevators, vans, computers, office and fitness equipment. The following table presents a forecast of equipment rent. HVS International, Mineola, New York Income Capitalization Approach 124 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-27 Forecast of Equipment Rent Expense - -------------------------------------------------------------------------------- 1997 1998 Stabilized - -------------------------------------------------------------------------------- Forecast Equipment Rent Expense $ 393 $ 400 $ 410 - -------------------------------------------------------------------------------- Summary of Projections Based on the preceding analysis, we have formulated a forecast of income and expense. The table on the following page presents a detailed forecast through the stabilized year, including amounts per available room (PAR) and per occupied room (POR). For the purpose of comparison, this table also presents the subject property's most recent full year of operating history. The second table illustrates our ten-year forecast of income and expense in less detail. The forecasts pertain to Calendar operating years beginning January 1, 1997, and are expressed in inflated dollars for each year. HVS International, Mineola, New York Income Capitalization Approach 125 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL =============
================================================================================================================================ Table 10-28 Detailed Forecast of Income and Expense through the Stabilized Year and Most Recent Operating History, Newark/Fremont Hilton, Newark, California - -------------------------------------------------------------------------------------------------------------------------------- Year: 1997 1998 Number of Rooms: 311 311 Occupancy: 79.0% 77.0% Average Rate: $80.61 $83.98 Occupied Rooms: 89,677 87,407 $(000s) % of Gross PAR(1) POR(2) $(000s) % of Gross PAR(1) POR(2) - -------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL REVENUE Rooms $ 7,229 73.5% $23,244 $80.61 $ 7,340 73.5% $23,601 $83.98 Food 1,710 17.4 5,498 19.07 1,737 17.4 5,585 19.87 Beverage 437 4.4 1,405 4.87 444 4.4 1,428 5.08 Telephone 322 3.3 1,035 3.59 331 3.3 1,064 3.79 Guest Laundry 28 0.3 90 0.31 29 0.3 93 0.33 Other Income 109 1.1 350 1.22 112 1.1 360 1.28 ------- ---- ------- ------ ------- ---- ------- ------ Total Revenues 9,835 100.0 31,624 109.67 9,993 100.0 32,132 114.33 DEPARTMENTAL EXPENSES * Rooms 1,610 22.3 5,177 17.95 1,650 22.5 5,305 18.88 Food & Beverage 1,757 81.8 5,650 19.59 1,803 82.7 5,797 20.63 Telephone 129 40.1 415 1.44 133 40.2 428 1.52 Guest Laundry 21 75.0 68 0.23 21 72.4 68 0.24 ------- ---- ------- ------ ------- ---- ------- ------ Total Dept. Expenses 3,517 35.8 11,309 39.22 3,607 36.1 11,598 41.27 DEPARTMENTAL INCOME 6,318 64.2 20,315 70.45 6,386 63.9 20,534 73.06 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 858 8.7 2,759 9.57 883 8.8 2,839 10.10 Management Fee 295 3.0 949 3.29 300 3.0 965 3.43 Marketing 532 5.4 1,711 5.93 548 5.5 1,762 6.27 Franchise Fees 361 3.7 1,161 4.03 367 3.7 1,180 4.20 Property Oper. & Maint. 552 5.6 1,775 6.16 568 5.7 1,826 6.50 Energy 484 4.9 1,556 5.40 500 5.0 1,608 5.72 ------- ---- ------- ------ ------- ---- ------- ------ Total Operating Expenses 3,082 31.3 9,910 34.37 3,166 31.7 10,180 36.22 HOUSE PROFIT 3,236 32.9 10,405 36.09 3,220 32.2 10,354 36.84 FIXED EXPENSES Property Taxes 164 1.7 527 1.83 167 1.7 537 1.91 Insurance 115 1.2 370 1.28 120 1.2 386 1.37 Reserve for Replacement 393 4.0 1,264 4.38 400 4.0 1,286 4.58 Equipment Rent 64 0.7 206 0.71 66 0.7 212 0.76 ------- ---- ------- ------ ------- ---- ------- ------ Total 736 7.6 2,367 8.21 753 7.6 2,421 8.61 NET INCOME $ 2,500 25.3% $ 8,039 $27.88 $ 2,467 24.6% $ 7,932 $28.22 ======= ==== ======= ====== ======= ==== ======= ======
- ------------------------------------------------------------------------ Year: 1999 Number of Rooms: 311 Occupancy: 76.0% Average Rate: $87.21 Occupied Rooms: 86,271 $(000s) % of Gross PAR(1) - ------------------------------------------------------------------------ DEPARTMENTAL REVENUE Rooms $7,524 73.5% $24,193 Food 1,780 17.4 5,723 Beverage 455 4.4 1,463 Telephone 341 3.3 1,096 Guest Laundry 30 0.3 96 Other Income 115 1.1 370 ------ ----- ------ Total Revenues 10,245 100.0 32,942 DEPARTMENTAL EXPENSES * Rooms 1,699 22.6 5,463 Food & Beverage 1,858 83.1 5,974 Telephone 137 40.2 441 Guest Laundry 22 73.3 71 ------ ----- ------ Total Dept. Expenses 3,716 36.3 11,949 DEPARTMENTAL INCOME 6,529 63.7 20,994 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 911 8.9 2,929 Management Fee 307 3.0 987 Marketing 565 5.5 1,817 Franchise Fees 376 3.7 1,209 Property Oper. & Maint. 586 5.7 1,884 Energy 517 5.0 1,662 ------ ----- ------ Total Operating Expenses 3,262 31.8 10,489 HOUSE PROFIT 3,267 31.9 10,505 FIXED EXPENSES Property Taxes 170 1.7 547 Insurance 124 1.2 399 Reserve for Replacement 410 4.0 1,318 Equipment Rent 68 0.7 219 ------ ----- ------ Total 772 7.6 2,482 NET INCOME $2,495 24.3% $8,023 ====== ===== ====== * Departmental expenses expressed as a percentage of departmental revenues (1) Per Available Room (2) Per Occupied Room - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 126 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL =============
================================================================================================================================= Table 10-29 Ten-Year Forecast of Income and Expense, Newark/Fremont Hilton, Newark, California - --------------------------------------------------------------------------------------------------------------------------------- Year: 1997 1998 1999 2000 2001 --------------- --------------- --------------- --------------- --------------- Number of Rooms: 311 311 311 311 311 Occupied Rooms: 89,677 87,407 86,271 86,271 86,271 Occupancy: 79.0% 77.0% 76.0% 76.0% 76.0% Average Rate: $80.61 $83.98 $87.21 $90.26 $93.42 % of % of % of % of % of $(000s) Gross $(000s) Gross $(000s) Gross $(000s) Gross $(000s) Gross - --------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL REVENUE Rooms $7,229 73.5% $7,340 73.5% $7,524 73.5% $7,787 73.5% $8,060 73.5% Food 1,710 17.4 1,737 17.4 1,780 17.4 1,842 17.4 1,907 17.4 Beverage 437 4.4 444 4.4 455 4.4 471 4.4 487 4.4 Telephone 322 3.3 331 3.3 341 3.3 353 3.3 366 3.3 Guest Laundry 28 0.3 29 0.3 30 0.3 31 0.3 32 0.3 Other Income 109 1.1 112 1.1 115 1.1 119 1.1 123 1.1 --------------- --------------- --------------- --------------- --------------- Total 9,835 100.0 9,993 100.0 10,245 100.0 10,603 100.0 10,975 100.0 DEPT. EXPENSES* Rooms 1,610 22.3 1,650 22.5 1,699 22.6 1,758 22.6 1,820 22.6 Food & Beverage 1,757 81.8 1,803 82.7 1,858 83.1 1,923 83.1 1,990 83.1 Telephone 129 40.1 133 40.2 137 40.2 142 40.2 147 40.2 Guest Laundry 21 75.0 21 72.4 22 73.3 23 74.2 24 75.0 --------------- --------------- --------------- --------------- --------------- Total 3,517 35.8 3,607 36.1 3,716 36.3 3,846 36.3 3,981 36.3 DEPT. INCOME 6,318 64.2 6,386 63.9 6,529 63.7 6,757 63.7 6,994 63.7 UNDISTRIBUTED OPER. EXPENSES Admin. & General 858 8.7 883 8.8 911 8.9 943 8.9 976 8.9 Management Fee 295 3.0 300 3.0 307 3.0 318 3.0 329 3.0 Marketing 532 5.4 548 5.5 565 5.5 585 5.5 605 5.5 Franchise Fees 361 3.7 367 3.7 376 3.7 389 3.7 403 3.7 PO&M 552 5.6 568 5.7 586 5.7 607 5.7 628 5.7 Energy 484 4.9 500 5.0 517 5.0 535 5.0 554 5.0 --------------- --------------- --------------- --------------- --------------- Total 3,082 31.3 3,166 31.7 3,262 31.8 3,377 31.8 3,495 31.8 HOUSE PROFIT 3,236 32.9 3,220 32.2 3,267 31.9 3,380 31.9 3,499 31.9 FIXED EXPENSES Property Taxes 164 1.7 167 1.7 170 1.7 174 1.6 177 1.6 Insurance 115 1.2 120 1.2 124 1.2 128 1.2 133 1.2 Reserve for Repl. 393 4.0 400 4.0 410 4.0 424 4.0 439 4.0 Equipment Rent 64 0.7 66 0.7 68 0.7 71 0.7 73 0.7 --------------- --------------- --------------- --------------- --------------- Total 736 7.6 753 7.6 772 7.6 797 7.5 822 7.5 NET INCOME $2,500 25.3% $2,467 24.6% $2,495 24.3% $2,583 24.4% $2,677 24.4% =============== =============== =============== =============== =============== - --------------------------------------------------------------------------------------------------------------------------------- Year: 2002 2003 2004 2005 2006 --------------- --------------- --------------- --------------- --------------- Number of Rooms: 311 311 311 311 311 Occupied Rooms: 86,271 86,271 86,271 86,271 86,271 Occupancy: 76.0% 76.0% 76.0% 76.0% 76.0% Average Rate: $96.69 $100.08 $103.58 $107.20 $110.96 % of % of % of % of % of $(000s) Gross $(000s) Gross $(000s) Gross $(000s) Gross $(000s) Gross - --------------------------------------------------------------------------------------------------------------------------------- DEPARTMENTAL REVENUE Rooms $8,342 73.5% $8,634 73.5% $8,936 73.5% $9,249 73.5% $9,572 73.5% Food 1,973 17.4 2,043 17.4 2,114 17.4 2,188 17.4 2,265 17.4 Beverage 504 4.4 522 4.4 540 4.4 559 4.4 579 4.4 Telephone 378 3.3 392 3.3 405 3.3 420 3.3 434 3.3 Guest Laundry 33 0.3 34 0.3 36 0.3 37 0.3 38 0.3 Other Income 127 1.1 132 1.1 136 1.1 141 1.1 146 1.1 --------------- --------------- --------------- --------------- --------------- Total 11,357 100.0 11,757 100.0 12,167 100.0 12,594 100.0 13,034 100.0 DEPT. EXPENSES* Rooms 1,884 22.6 1,950 22.6 2,018 22.6 2,088 22.6 2,161 22.6 Food & Beverage 2,060 83.2 2,132 83.1 2,207 83.2 2,284 83.1 2,364 83.1 Telephone 152 40.2 158 40.3 163 40.2 169 40.2 175 40.3 Guest Laundry 24 72.7 25 73.5 26 72.2 27 73.0 28 73.7 --------------- --------------- --------------- --------------- --------------- Total 4,120 36.3 4,265 36.3 4,414 36.3 4,568 36.3 4,728 36.3 DEPT. INCOME 7,237 63.7 7,492 63.7 7,753 63.7 8,026 63.7 8,306 63.7 UNDISTRIBUTED OPER. EXPENSES Admin. & General 1,010 8.9 1,046 8.9 1,082 8.9 1,120 8.9 1,159 8.9 Management Fee 341 3.0 353 3.0 365 3.0 378 3.0 391 3.0 Marketing 626 5.5 648 5.5 671 5.5 695 5.5 719 5.5 Franchise Fees 417 3.7 432 3.7 447 3.7 462 3.7 479 3.7 PO&M 650 5.7 672 5.7 696 5.7 720 5.7 746 5.7 Energy 573 5.0 593 5.0 614 5.0 635 5.0 657 5.0 --------------- --------------- --------------- --------------- --------------- Total 3,617 31.8 3,744 31.8 3,875 31.8 4,010 31.8 4,151 31.8 HOUSE PROFIT 3,620 31.9 3,748 31.9 3,878 31.9 4,016 31.9 4,155 31.9 FIXED EXPENSES Property Taxes 181 1.6 184 1.6 188 1.5 192 1.5 196 1.5 Insurance 137 1.2 142 1.2 147 1.2 152 1.2 157 1.2 Reserve for Repl. 454 4.0 470 4.0 487 4.0 504 4.0 521 4.0 Equipment Rent 76 0.7 78 0.7 81 0.7 84 0.7 87 0.7 --------------- --------------- --------------- --------------- --------------- Total 848 7.5 874 7.5 903 7.4 932 7.4 961 7.4 NET INCOME $2,772 24.4% $2,874 24.4% $2,975 24.5% $3,084 24.5% $3,194 24.5% =============== =============== =============== =============== ===============
* Departmental expenses expressed as a percentage of departmental revenues HVS International, Mineola, New York Income Capitalization Approach 127 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The conversion of a property's projected net income into an estimate of value is based on the premise that investors typically purchase real estate with a small amount of equity cash (25% to 40%) and a large amount of mortgage financing (60% to 75%). The amounts and terms of available mortgage financing and the rates of return that are required to attract sufficient equity capital form the basis for allocating the net income between the mortgage and equity components and deriving a value estimate. Mortgage Component Data for the mortgage component may be developed from statistics of actual hotel mortgages made by long-term lenders. The American Council of Life Insurance, which represents 20 large life insurance companies, publishes quarterly information pertaining to the hotel mortgages issued by its member companies. The following table summarizes the average mortgage interest rates of the hotel loans made by these lenders. In addition, the A corporate bond yield (as reported by Moody's Bond Record) is shown for the purpose of comparison. HVS International, Mineola, New York Income Capitalization Approach 128 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-30 Average Mortgage Interest Rates and Average A Corporate Bond Yields - -------------------------------------------------------------------------------- Average A Average Corporate Period Interest Rate Bond Yield - -------------------------------------------------------------------------------- 1st Quarter 1996 7.79 % 7.37 % 4th Quarter 1995 8.44 7.28 3rd Quarter 1995 8.61 7.67 2nd Quarter 1995 9.25 7.87 1st Quarter 1995 9.14 8.50 3rd Quarter 1994 9.64 8.48 2nd Quarter 1994 9.38 8.28 4th Quarter 1993 9.38 7.80 3rd Quarter 1993 8.41 7.28 2nd Quarter 1993 10.53 9.65 4th Quarter 1992 9.43 8.48 3rd Quarter 1992 9.99 8.38 2nd Quarter 1992 9.47 8.79 1st Quarter 1992 10.02 8.81 4th Quarter 1991 10.49 8.97 3rd Quarter 1991 10.03 9.29 2nd Quarter 1991 10.75 9.45 3rd Quarter 1990 10.47 9.89 2nd Quarter 1990 10.58 9.83 4th Quarter 1989 9.96 9.42 3rd Quarter 1989 9.55 9.46 2nd Quarter 1989 10.54 9.93 1st Quarter 1989 10.39 10.16 4th Quarter 1988 10.07 10.03 3rd Quarter 1988 10.66 10.51 2nd Quarter 1988 10.09 10.33 4th Quarter 1987 10.41 10.45 3rd Quarter 1987 10.00 9.95 2nd Quarter 1987 9.81 9.46 1st Quarter 1987 9.43 9.19 4th Quarter 1986 9.44 9.55 3rd Quarter 1986 9.56 9.71 2nd Quarter 1986 9.80 9.91 1st Quarter 1986 10.99 10.62 Sources: American Council of Life Insurance; Moody's Bond Record - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 129 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Because of the six- to nine-month lag time in reporting and publishing hotel mortgage statistics, it is necessary to update this information to reflect current lending practices. Research by HVS International indicates that there is a close mathematical relationship between the average interest rate of a hotel mortgage and the concurrent yield on an average A corporate bond. Through a regression analysis, this relationship is expressed as follows. Y = 2.76078 + 0.782280 X Where: Y = Estimated Hotel/Motel Mortgage Interest Rate X = Current Average A Corporate Bond Yield (Coefficient of correlation is 96.4%) The yield on A corporate bonds for the third quarter of 1996, as reported by Moody's Bond Record, was 7.91%. Using a factor of 7.91% in the equation presented above produces an estimated hotel/motel interest rate of 8.95%. In addition to the mortgage interest rate estimate derived from this regression analysis, HVS International constantly monitors the terms of hotel mortgage loans made by our institutional lending clients. In the past year, we have noted an increase in the availability of debt financing, and many lenders have returned to the market. The current level of lending activity represents a significant increase from the restricted environment of the early 1990s. Nonetheless, the market for hotel mortgage loans remains somewhat tight, particularly when compared to the conditions that prevailed in the mid-to late 1980s. In the current lending climate, strong hotel projects that are structured on an economic basis can secure mortgage financing at interest rates ranging from 8% to 11%, depending on the property, location, affiliation, and operator. In the 1980s, when hotel mortgages were widely available, loan-to-value ratios typically ranged from 75% to 80%. Amortization schedules were generally based on 30 years, although the term of the loan was more likely to be seven to ten years. The few loans that were underwritten in the early 1990s were based on far more stringent parameters: loan-to-value ratios declined to a range of 50% to 65%, and amortization periods of 20 to 25 years were most common. With the recent reemergence of hotel financing, loan-to-value requirements and amortization schedules have loosened somewhat. At present, we find HVS International, Mineola, New York Income Capitalization Approach 130 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= that lenders who are active in the market are using loan-to-value ratios of 65% to 75%, and amortization periods of 25 to 30 years. The exact terms offered depend on specific factors such as the property's location, the age and quality of the physical facility, local hostelry market conditions, and (perhaps more significantly) the profile of the borrower. The strongest projects typically command the highest loan-to-value ratios. Based on the preceding analysis of the current lodging industry mortgage market and adjustments for specific factors such as the property's location and conditions in the local hotel market, it is our opinion that a 9.50% interest, 20-year amortization mortgage with a 0.111856 constant is appropriate for the subject property. We believe that a mortgage lender will lend up to 70% of the hotel's market value as determined by this appraisal. Equity Component The remaining capital required for a hotel investment generally comes from the equity investor. The rate of return that an equity investor expects over a ten-year holding period is known as the equity yield. Unlike the equity dividend, which is a short-term rate of return, the equity yield specifically considers a long-term holding period (generally ten years), annual inflation- adjusted cash flows, property appreciation, mortgage amortization, and proceeds from a sale at the end of the holding period. It is difficult to quantify the rate of return required by equity investors who are seeking to purchase hotel properties. To establish an appropriate equity yield rate, HVS International uses two sources of data: past appraisals and investor interviews. Past Appraisals - During the past 12 months, HVS International has appraised more than 400 hotels, including properties located in most major national markets. Each appraisal used a similar mortgage-equity approach in which income is projected and then discounted to a current value at rates reflecting the cost of debt and equity capital. In the case of hotels that were sold subsequent to our valuations, we are able to determine an appropriate equity yield rate by excluding incentive management fees from the projection of income and expense, inserting the projection into a valuation model, and adjusting the appraised value to reflect the actual sales price by modifying the return assumptions. The following table shows a representative sample of hotels that were sold shortly after we appraised them, along with the imputed equity return based on our valuation approach. HVS International, Mineola, New York Income Capitalization Approach 131 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-31 Sample of Hotels Sold - --------------------------------------------------------------------------------
No. of Date of Overall Total Property Equity Hotel City and State Rooms Sale Sales Price Rate Yield Yield - ---------------------------------------------------------------------------------------------------------------------------------- Ritz-Carlton Phoenix, AZ 281 2/94 $23,000,000 11.0% 14.6% 21.7% Marriott Marina Fort Lauderdale, FL 580 2/94 40,000,000 12.2 16.4 26.7 Holiday Inn Edison, NJ 274 3/94 11,803,000 7.8 17.0 26.3 Crescent Hotel Phoenix, AZ 342 3/94 26,000,000 6.5 7.2 2.2 Checkers Hotel Kempinski Los Angeles, CA 173 4/94 12,750,000 3.0 18.3 27.0 Best Western Fireside Inn Cambria, CA 46 4/94 3,377,000 11.7 15.8 24.3 Phoenician Resort Phoenix, AZ 580 4/94 224,000,000 6.6 9.3 8.9 Newark-Fremont Hilton Newark, CA 300 5/94 8,950,000 8.8 14.9 20.7 Radisson Inn Orlando, FL 299 5/94 11,150,000 12.9 18.0 28.2 Westin Kauai Lihue, Kauai, HI 840 6/94 97,400,000 (1.9) 8.1 7.2 Residence Inn Binghamton, NY 72 6/94 6,325,000 10.8 13.9 21.9 Hotel Millenium New York, NY 561 6/94 75,000,000 9.5 14.1 23.0 Best Western Otay Valley Chula Vista, CA 120 7/94 2,350,000 13.2 21.1 31.8 Hampton Inn Islandia, NY 121 7/94 6,572,000 12.6 16.6 28.2 Hampton Inn Willow Grove, PA 150 7/94 10,220,000 11.0 14.3 23.0 Hampton Inn West Palm Beach, FL 136 7/94 4,220,000 10.8 10.8 14.3 Hampton Inn Naples, FL 107 7/94 5,700,000 11.4 11.5 24.9 Hampton Inn Albany, NY 126 7/94 9,204,000 9.3 11.5 15.8 Marriott Hotel South Bend, IN 299 7/94 11,500,000 10.5 13.2 18.9 Marriott SFO Burlingame, CA 684 8/94 61,700,000 10.2 13.2 19.0 Westfields Conference Center Chantilly, VA 340 8/94 46,000,000 12.3 15.9 25.3 Radisson Mark Resort Vail, CO 349 9/94 25,200,000 8.9 15.8 24.1 Marriott East Side New York, NY 664 10/94 55,000,000 8.5 9.7 11.1 Marriott Resort Vail, CO 349 10/94 25,200,000 14.2 18.9 30.5 Marriott Quorum Addison, TX 547 10/94 29,815,000 13.5 18.2 31.8 Sheraton Hotel Hasbrouck Heights, NJ 338 11/94 10,450,000 18.3 21.1 30.7 Sheraton Inn Napa, CA 191 12/94 9,968,000 8.9 13.7 19.8 Marriott Fisherman's Wharf San Francisco, CA 255 12/94 27,755,000 10.8 13.4 19.4 Marriott Hotel Portland, OR 503 12/94 45,000,000 12.9 17.4 30.0 Radisson Inn Springfield, MO 199 12/94 5,800,000 8.2 10.1 11.3 Williamsburg Hilton Williamsburg, VA 291 12/94 15,000,000 15.4 19.0 32.0 Marriott Tech Center Denver, CO 625 12/94 36,000,000 13.7 16.4 27.1 Holiday Inn Sunspree Singer Island, FL 222 12/94 11,900,000 8.6 10.6 12.4 The Plaza New York, NY 805 6/95 325,000,000 7.0 11.0 14.0 Fullerton Suites Fullerton, CA 96 5/95 5,000,000 12.9 18.7 28.5 Residence Inn Baton Rouge, LA 80 6/95 6,518,000 12.7 14.8 21.2 Residence Inn Overland Park, KS 112 6/95 8,500,000 8.9 14.7 20.8 Residence Inn Des Moines, IA 112 6/95 7,660,000 9.8 14.1 19.6 Residence Inn Hunt Valley, MD 96 6/95 6,580,000 12.3 13.6 18.3 Residence Inn Kansas City, MO 112 6/95 6,560,000 10.4 13.2 19.8 Residence Inn Lincoln, NE 120 6/95 7,100,000 10.0 13.7 18.5 Embassy Suites Schaurmburg, IL 209 12/95 17,800,000 10.0 13.5 18.9 Marriott Hotel Andover, MA 293 12/95 24,000,000 9.7 13.5 19.2 Doubletree Suites Valley Forge, PA 229 12/95 28,500,000 10.7 14.2 15.5 Marriott Hotel Tysons Corner, VA 390 12/95 41,100,000 10.7 13.1 18.0 Marriott Hotel Warner Center, CA 461 12/95 57,900,000 6.2 11.6 14.2 Hilton at the Club Pleasanton, CA 294 12/95 22,000,000 10.5 13.4 17.0
Source: HVS International - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 132 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Investor Interviews - HVS International is in constant contact with numerous institutional and individual hotel investors. This source of equity funds has definite return requirements that can be expressed as an equity yield rate based on a ten-year projection of net income before incentive management fees but after debt service. Based on our surveys and investor interviews, the following table illustrates the range of equity yields generally required by individual and institutional investors. ================================================================================ Table 10-32 Equity Yield Requirements - -------------------------------------------------------------------------------- Source Equity Yield Requirement - -------------------------------------------------------------------------------- Individual 20% - 24% Institution 18% - 22% - -------------------------------------------------------------------------------- Based on the assumed 70% loan-to-value ratio, the risk inherent in achieving the projected income stream, and the age, condition, and anticipated market position of the subject property, it is our opinion that an equity investor is likely to require an equity yield rate of 21.0% before payment of incentive management fees. This estimate is well supported by the equity yield requirements presented previously. Terminal Capitalization Rate Inherent in this valuation process is the assumption of a sale at the end of the ten-year holding period. The estimated reversionary sales price as of that date is calculated by capitalizing the projected 11th-year net income by an overall terminal capitalization rate. A percentage for the seller's brokerage and legal fees is deducted from this sales price, and the net proceeds to the equity interest (also known as the equity residual) are calculated by deducting the outstanding mortgage balance from the reversion. To estimate a property's reversionary value, the appraiser must select a terminal capitalization rate and an allocation for brokerage and legal fees. The terminal capitalization rate is an overall rate that is applied to one stabilized year, and thus it inherently incorporates the cost of debt and equity capital. The terminal capitalization rate can be derived through a mortgage and equity band of investment technique which calculates the weighted average cost of the capital used in a hotel investment. Combining the mortgage financing terms derived previously (namely, a 70% loan-to-value ratio and a 0.111856 debt service constant) with a cash-on-cash equity dividend rate of 12% produces the following overall capitalization rate. HVS International, Mineola, New York Income Capitalization Approach 133 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Percent of Rate of Weighted Value Return Average ------------ ------------ ------------ Mortgage 0.75 X 0.11186 = 0.08389 Equity 0.25 X 0.12000 = 0.03000 ------------ Overall Capitalization Rate 0.11389 Because this overall rate will be used to capitalize net income ten years from the date of value, an upward adjustment is appropriate to reflect the uncertainty inherent in this extended period. As previously discussed, a sale of the property triggers a reassessment of the hotel. In order to recognize the impact of the change in the assessment which would result from the assumed sale at the end of the tenth year, we have added the tax rate to the calculated terminal cap rate. The resulting "loaded" tax rate will be applied to the eleventh year net income before property taxes. For the purpose of this valuation, we will use a terminal capitalization rate of 12.16%. As a point of reference, the terminal capitalization rate can be compared to the going-in rate implied by the subject property's estimated value. The going-in rate reflects the capitalization rate that would be applicable if the hotel were operating at a stabilized level as of the date of value. This rate is calculated by dividing the stabilized net income (expressed in current dollars as of the date of value) by the value indicated by the income capitalization approach. Generally, the terminal capitalization rate is approximately 100 to 200 basis points above the going-in rate. Summary of Valuation Variables The following table summarizes the valuation variables that have been used to estimate the subject property's value via the income capitalization approach. HVS International, Mineola, New York Income Capitalization Approach 134 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-33 Summary of Valuation Variables - -------------------------------------------------------------------------------- Loan-To-Value Ratio M 70.0% Debt Service Constant f 0.111856 Equity Yield 1/Sn 21.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in 10 Years fp 0.155277 Terminal Capitalization Rate Rr 12.16% - -------------------------------------------------------------------------------- Valuation of the Mortgage and Equity Components The valuation of the mortgage and equity components is accomplished through use of an algebraic equation that calculates the exact amount of debt and equity that the hotel will be able to support based on the anticipated cash flow (derived from the forecast of income and expense) and the specific return requirements demanded by the mortgage lender (interest) and the equity investor (equity yield). The equation and the calculations associated with this simultaneous valuation formula are set forth in the Addenda to this report. Using the variables summarized above, we estimate the value of the subject property via the income capitalization approach at $21,500,000. Proof of Value The value is proven by calculating the yields to the mortgage and equity components during the projection period. If the mortgagee achieves a 9.50%yield and the equity yield is 21.0%, then $21,500,000 is the correct value by the income capitalization approach. Using the assumed financial structure set forth in the previous calculations, market value can be allocated between the debt and equity as follows. Mortgage Component(70%) $15,036,000 Equity Component(30%) 6,444,000 ----------- Total $21,479,000 The annual debt service is calculated by multiplying the mortgage component by the mortgage constant. Mortgage Component $15,036,000 Mortgage Constant 0.111856 ----------- Annual Debt Service $1,681,863 HVS International, Mineola, New York Income Capitalization Approach 135 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= The cash flow to equity is calculated by deducting the debt service from the projected net income before debt service. ================================================================================ Table 10-34 Forecast of Net Income to Equity - -------------------------------------------------------------------------------- Net Income Available for Total Annual Net Income Year Debt Service Debt Service to Equity - -------------------------------------------------------------------------------- 1997 $ 2,500,000 - $ 1,682,000 = $ 818,000 1998 2,467,000 - 1,682,000 = 785,000 1999 2,495,000 - 1,682,000 = 813,000 2000 2,583,000 - 1,682,000 = 901,000 2001 2,677,000 - 1,682,000 = 995,000 2002 2,772,000 - 1,682,000 = 1,090,000 2003 2,874,000 - 1,682,000 = 1,192,000 2004 2,975,000 - 1,682,000 = 1,293,000 2005 3,084,000 - 1,682,000 = 1,402,000 2006 3,194,000 - 1,682,000 = 1,512,000 - -------------------------------------------------------------------------------- The equity residual at the end of the tenth year is calculated as follows. Reversionary Value ($3,506,000 /0.1216) $28,842,000 Less: Brokerage and Legal Fees 865,000 Mortgage Balance 10,831,000 ----------- Net Sale Proceeds to Equity $17,146,000 The overall property yield (before debt service), the yield to the lender, and the yield to the equity position have been calculated by computer with the following results. HVS International, Mineola, New York Income Capitalization Approach 136 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-35 Overall Property Yields - -------------------------------------------------------------------------------- Projected Yield (Internal Rate of Return) Position Value Over 10-Year Holding Period - -------------------------------------------------------------------------------- Total Property $21,479,000 14.0% Mortgage 15,036,000 9.4* Equity 6,444,000 21.0 *Whereas the mortgage constant and value are calculated on the basis of monthly mortgage payments, the yield in this proof assumes single annual payments. As a result, the proof's derived yield is slightly less than that actually input. - -------------------------------------------------------------------------------- The following tables demonstrate that the property receives its anticipated yields, proving that the $21,500,000 value is correct based on the assumptions used in this approach. ================================================================================ Table 10-36 Total Property Yield - -------------------------------------------------------------------------------- Net Income before Present Worth of $1 Discounted Year Debt Service Factor @ 14.0% Cash Flow - -------------------------------------------------------------------------------- 1997 $ 2,500,000 x 0.877029 = $ 2,193,000 1998 2,467,000 x 0.769180 = 1,898,000 1999 2,495,000 x 0.674593 = 1,683,000 2000 2,583,000 x 0.591637 = 1,528,000 2001 2,677,000 x 0.518883 = 1,389,000 2002 2,772,000 x 0.455075 = 1,261,000 2003 2,874,000 x 0.399114 = 1,147,000 2004 2,975,000 x 0.350035 = 1,041,000 2005 3,084,000 x 0.306991 = 947,000 2006 31,170,00* x 0.269240 = 8,392,000 ------------ Total Property Value $ 21,479,000 *10th year net income of $3,194,000 plus sales proceeds of $ 27,976,000 - -------------------------------------------------------------------------------- HVS International, Mineola, New York Income Capitalization Approach 137 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-37 Mortgage Component Yield - -------------------------------------------------------------------------------- Total Annual Present Worth of $1 Discounted Year Debt Service Factor @ 9.4% Cash Flow - -------------------------------------------------------------------------------- 1997 $ 1,682,000 x 0.914251 = $ 1,538,000 1998 1,682,000 x 0.835854 = 1,406,000 1999 1,682,000 x 0.764180 = 1,285,000 2000 1,682,000 x 0.698652 = 1,175,000 2001 1,682,000 x 0.638744 = 1,074,000 2002 1,682,000 x 0.583972 = 982,000 2003 1,682,000 x 0.533897 = 898,000 2004 1,682,000 x 0.488115 = 821,000 2005 1,682,000 x 0.446260 = 751,000 2006 12,513,00* x 0.407993 = 5,105,000 ------------ Value Of Mortgage Component $ 15,035,000 *10th year debt service of $1,682,000 plus outstanding mortgage balance of $ 10,831,000 - -------------------------------------------------------------------------------- ================================================================================ Table 10-38 Equity Component Yield - -------------------------------------------------------------------------------- Net Income Present Worth of $1 Discounted Year to Equity Factor @ 21.0% Cash Flow - -------------------------------------------------------------------------------- 1997 $ 818,000 x 0.826460 = $ 676,000 1998 785,000 x 0.683036 = 536,000 1999 813,000 x 0.564502 = 459,000 2000 901,000 x 0.466538 = 420,000 2001 995,000 x 0.385575 = 384,000 2002 1,090,000 x 0.318662 = 347,000 2003 1,192,000 x 0.263362 = 314,000 2004 1,293,000 x 0.217658 = 281,000 2005 1,402,000 x 0.179885 = 252,000 2006 18,657,00* x 0.148668 = 2,774,000 ----------- Value of Equity Component $ 6,443,000 *10th year net income to equity of $1,512,000 plus sales proceeds of $17,145,000 - -------------------------------------------------------------------------------- Valuation Method Two: Discounted Cash Flow The total property yield derived from the previous valuation method was 14.2%. After reviewing the total property yields indicated by recent hotel sales, which ranged from 7.2% to 21.1%, it is our opinion that a 14.2% discount factor would be appropriate for the Newark/Fremont Hilton. The following table illustrates the discounted cash flow analysis using a 14.2% discount factor. HVS International, Mineola, New York Income Capitalization Approach 138 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 10-39 Discounted Cash Flow Analysis - -------------------------------------------------------------------------------- Discount Net Factor Discounted Calendar Year Income @ 14.0% Cash Flow - -------------------------------------------------------------------------------- 1997 $2,500,000 0.87703 $2,192,572 1998 2,467,000 0.76918 1,897,566 1999 2,495,000 0.67459 1,683,109 2000 2,583,000 0.59164 1,528,199 2001 2,677,000 0.51888 1,389,050 2002 2,772,000 0.45508 1,261,469 2003 2,874,000 0.39911 1,147,054 2004 2,975,000 0.35003 1,041,353 2005 3,084,000 0.30699 946,759 2006 31,170,473 * 0.26924 8,392,326 Estimated Market Value: $21,479,458 (Say:) $21,500,000 Reversion Analysis 11th Year's Net Income $3,506,000 Capitalization Rate 12.2% Total Sales Proceeds $28,841,724 Less: Broker & Legal @ 3.0% 865,252 * 10th year net income of $3,194,000 plus sales proceeds of $27,976,473 - -------------------------------------------------------------------------------- Conclusion Based on our extensive experience in the hotel industry and comprehensive support provided by literature published by the Appraisal Institute, it is our opinion that the valuation procedure embodied by Method One most closely reflects the investment rationale of typical hotel buyers. As stated in the textbook entitled Hotels and Motels: A Guide to Market Analysis, Investment Analysis and Valuations,(14) Method Two (which discounts the projected net income and reversion using an overall discount rate, or total property yield) "does not consider the impact of mortgage debt, leverage and the specific equity demands of typical hotel investors. . . This technique is simple but less reliable because the derivation of the discount rate has little support." In light of this consideration, we have relied on the $21,500,000 value conclusion indicated by Method One. - ---------- (14) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992, p. 236 HVS International, Mineola, New York Sales Comparison Approach 139 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 11. Sales Comparison Approach The sales comparison approach is based on the assumption that an informed purchaser will pay no more for a property than the cost to acquire an existing property with equal utility. This approach estimates market value by considering the sales prices indicated by recent transactions involving properties that are similar to the property being appraised. Dissimilarities are resolved with appropriate adjustments; these differences may pertain to the date of sale, the age of the property, location, construction, condition, layout, equipment, size, or external economic factors. The reliability of the sales comparison approach depends on three factors: 1. the availability of timely, comparable sales data; 2. an understanding of the true terms of the sales and the motivation of the buyer and seller; 3. the degree of comparability, or the extent of the adjustments needed to reflect differences between the subject property and the comparable property. In appraising lodging facilities, it is often difficult to find an adequate number of recent sales involving hotels that are truly comparable to the subject property. Consequently, it may be necessary to consider transactions involving properties in different market areas, and the required adjustments greatly diminish the reliability of the conclusions. Moreover, it is virtually impossible for an observer to determine the true motivations of the buyers and sellers involved in transactions. Hotel acquisition often represents a highly ego-driven process in which a number of external, non-market factors influence the purchase price. Unless the appraiser can quantify these influences, there is no way of knowing whether the purchase price paid actually reflects market value. A final consideration is the degree of similarity between the subject property and the comparable; in most cases, the differences are significant enough to require numerous subjective and unsubstantiated adjustments. Each adjustment represents a potential for error, HVS International, Mineola, New York Sales Comparison Approach 140 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= and thus diminishes the reliability of this approach. As a result of these shortcomings, the use of the sales comparison approach in valuing hotels is primarily as a check against the value indicated by the income capitalization approach. Hotel values declined in many areas of the country during the late 1980s and early 1990s, although a rebound began in 1994 and 1995. The downturn, which began in most markets in 1988, was largely attributable to lower operating incomes caused by an oversupply of new hotel rooms constructed during the mid-1980s. Overbuilding resulted in flat or declining average rates and occupancies, which caused revenues to fall. A number of other factors exacerbated the situation. The national recession caused a drop in demand in many markets during the early 1990s, and the Persian Gulf War created a virtual freeze on travel in the beginning of 1991, further limiting hotel demand. Operating costs continued to rise despite poor market conditions, resulting in a decline in the net operating income of hotels throughout the nation. Because operating costs have a large fixed component, many lodging facilities experienced precipitous drops in net income. As bottom-line profits eroded, many hotels were unable to meet debt service, and hundreds of properties entered foreclosure or bankruptcy. Lenders and government agencies soon became hotel owners. Because most financial institutions were preoccupied with their distressed real estate, very little mortgage capital was available and the nation suffered from a well-publicized credit crunch. Most hotel transactions that occurred during the early 1990s were financed by the property owners, who, in most cases, were lenders. In the early 1990s, the primary market participants were owner-operators with the expertise to turn around under-performing properties. Hotels were out of favor with passive investors as a result of the industry's poor operating performance and the uncertainty of future appreciation. The wide disparity in buyer and seller expectations also limited the number of transactions. Many sellers were unwilling to accept the fact that the market value of their hotel investments had declined below the cost of the project or the original investment. Moreover, many owners were faced with a significant tax burden upon sale, further reducing their willingness to settle for a price that was below the original acquisition cost. As a result of these market forces, there was very little sales activity involving large, high-quality hotels. The primary difficulty was the lack of HVS International, Mineola, New York Sales Comparison Approach 141 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= properties available for sale; owners who were not forced to sell opted to wait for prices to recover. The few hotels that did enter the market generally attracted 15 to 20 interested bidders, mostly consisting of owner-operators. As a result of the competition for these few assets, the prices of better-quality hotels began to escalate rapidly. In response, more sellers have been encouraged to place their products on the market. An indicator of this market trend is the number of hotel sales that have occurred during the past few years. HVS International tracks major hotel transactions of more than $10,000,000 on an annual basis. In 1992, the number of major transactions was 67; a slightly lower level of 52 was registered in 1993. This total increased significantly (to 92) in 1994, and the 1995 total is estimated to have been 104. In tandem with escalating prices, hotels are again being considered by traditional financing sources, which had virtually abandoned the hospitality industry by the early 1990s. Although many lenders are still approaching the market with a high degree of caution, it is now possible to obtain third-party financing for hotel transactions. The mortgage loans that are now being made are subject to fairly stringent requirements: loan-to-value ratios remain in the 65% to 75% range. The qualification of the borrower is also a crucial consideration for most lenders. We believe that the upward trend in both pricing and sales activity will continue as financing becomes more available and additional buyers (particularly passive investors) enter the market. Consequently, it is important to consider the date of the transactions used in the sales comparison approach. When the comparable sales are not recent enough to provide an accurate picture of the current market, it may be necessary to make upward adjustments to the values indicated by the sales comparison and income capitalization approaches in recognition of the recent escalation. Comparable Sales Based on information provided by the Hospitality Market Data Exchange and compiled by the six offices of HVS International, the following transactions involved hotels that appear to have some degree of comparability to the subject property. HVS International, Mineola, New York Sales Comparison Approach 142 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #1: Property: Hilton Ontario Airport Location: 700 North Haven Avenue Ontario, California Date of Sale: November 1996 Grantor: MF II Vickers LP Grantee: HEI Hotels Number of Rooms: 308 Sales Price: $18,500,000 Terms: All cash Price per Room: $60,065 Interest Conveyed: Fee simple Source: Mark Rosinsky, HEI Hotels Comments: The 10-story property was originally constructed in 1985 and was in good condition at the time of sale. HVS International, Mineola, New York Sales Comparison Approach 143 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #2: Property: Doubletree Hotel Location: 3555 Round Barn Boulevard Santa Rosa, California Date of Sale: October 1996 Grantor: Santa Rosco Grantee: HEI Hotels Number of Rooms: 245 Sales Price: $15,500,000 Terms: All cash Price per Room: $63,265 Interest Conveyed: Fee simple Source: Mark Rosinsky, HEI Hotels Comments: The 3-story property originally opened as a Sheraton in 1984 and was in good condition at the time of sale. Following an extended period of operation as distressed real estate, the hotel was sold in February 1990 for roughly $30,000 per room and converted to a Doubletree. HVS International, Mineola, New York Sales Comparison Approach 144 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #3: Property: Radisson San Jose Location: 1471 N. Fourth Street San Jose, California Date of Sale: September 1996 Grantor: Hospitality Assets Investors II Grantee: Interstate Hotels Co. Number of Rooms: 185 Sales Price: $17,300,000 Terms: All cash Price per Room: $93,514 Interest Conveyed: Fee simple Source: Rick Swig, RSBA & Associates Comments: The property was originally constructed in 1985 and was in good condition at the time of sale. Interstate has been managing the property since December 1995. HVS International, Mineola, New York Sales Comparison Approach 145 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #4: Property: Radisson Hotel Union City Location: 32083-32085 Alvarado Niles Road Union City, California Date of Sale: June 27, 1996 Grantor: Hospitality Assets Investors V Grantee: Interstate Hotels Co. Number of Rooms: 272 Sales Price: $8,000,000 Terms: $5,000,000 institutionally financed Price per Room: $29,412 Interest Transferred: Fee simple Capitalization Rate: 8.1% (based on trailing NOI of $650,000) Source: Rick Swig, RSBA & Associates Comments: The Radisson Hotel Union City is a primary competitor of the subject property. The six-story property was originally opened in 1983 and was in good condition at the time of sale. The property features 272 guestrooms, of which 81 were added in 1996. The property has historically underperformed due to its weak location and lack of reinvestment in the property. However, this will be remedied by a renovation of an undisclosed amount of its guestrooms and meeting space which will be completed by March 1997, according to management representatives. HVS International, Mineola, New York Sales Comparison Approach 146 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #5: Property: Pleasanton Hilton at the Club Location: 7050 Johnson Road Pleasanton, California Date of Sale: December 15, 1995 Grantor: The Travelers Cos. Grantee: American Hospitality Number of Rooms: 294 Sales Price: $22,000,000 Terms: Not available Price per Room: $74,830 Interest Transferred: Fee simple Source: Guy McComb, Travelers Cos. Comments: The property is physically connected to a health club known as Club Sport, with which it shares a common wall. However, the health club is located on a separate parcel and ownership is distinct from the hotel. The five-story property was originally opened in 1985 and was in good condition at the time of sale. HVS International, Mineola, New York Sales Comparison Approach 147 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Sale #6: Property: Doubletree Club Location: 5990 Stoneridge Mall Road Pleasanton, California Date of Sale: October 15, 1995 Grantor: Pleasantwood Ltd. Partnership Grantee: Wyndham Hotels & Resorts Number of Rooms: 171 Sales Price: $9,125,000 Terms: Not available Price per Room: $53,362 Interest Conveyed: Fee simple Source: Bob Eaton, Colliers International Comments: The six-story property was originally constructed in 1986 and was in good condition at the time of sale. The property currently operates under the Garden Hotel brand. HVS International, Mineola, New York Sales Comparison Approach 148 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= In addition to considering the above recent transactions, we have also reviewed the sale of the subject property, which occurred in 1994. The details of this transaction are summarized as follows: Subject Property: Property: Newark-Fremont Hilton Location: 39900 Balentine Drive Newark, California Date of Sale: May 18, 1994 Sales Price: $8,350,000 Grantor: Bruce S. Brickman & Associates Grantee: Newark California Hotel Limited Partnership Year Opened: 1984 Number of Rooms: 311 Price per Room: $26,848 Estimated RevPAR: $38.27 Confirmed by: Bruce S. Brickman & Associates Comments: This transaction represents the assignment of the grantor's rights pursuant to an existing purchase and sale agreement between the grantor and the previous owner of the subject property, Bay Street No. 16, Ltd., following a foreclosure by the lender, The Bank of Montreal. The property was previously operated by Interstate. The hotel is currently operated by Remington Employers Corporation. At the time of sale, approximately one third of the guestrooms had undergone a soft goods refurbishment. Subsequent to the transaction, a $1.5-million renovation of the property was undertaken, which equates to roundly $4,820 per room. Based on our understanding of the terms of this transaction, we do not believe that this sale was reflective of market value. The relevance of the previous transaction involving the subject property is also undermined by the material change in market conditions which occurred between the date of this sale and the present date of value. HVS International, Mineola, New York Sales Comparison Approach 149 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Areawide occupancy and average rate have improved dramatically in the intervening months, and are forecast to continue this positive trend. As previously discussed, the market for hotel investments has also improved significantly, due to changes in lender and investor attitudes. Finally, the property itself has undergone a significant renovation, with a total of $2.2 million spent on upgrading the facilities and amenities. For these reasons, we are of the opinion that the May 1994 sale involving the subject property is not a reliable indicator of the current value of the hotel. Conclusion Although the sales comparison approach may be useful in providing a value range and reflecting certain market characteristics, its applicability is limited by the numerous possible points of difference between the subject property and other hotels that have sold in recent years. These factors may include location, access, size, services and facilities offered, market conditions, chain affiliation, market orientation, management, rate structure, age, physical condition, date of sale, the highest and best use of the land, and the anticipated profitability of the operation. Circumstances surrounding a sale, such as financing terms, tax considerations, income guarantees, sales of partial interests, duress on the part of the buyer or seller, or a particular deal structure can also cause a disparity between the sales price and pure market value. Moreover, it is often difficult to determine the marketing periods that were necessary to consummate the transactions. It is extremely difficult to quantify the appropriate adjustment factors accurately because of their number and complexity, as well as the difficulty in obtaining specific, detailed information. Any attempt to manipulate the necessary adjustments is insupportable and purely speculative. Because appraisers are expected to reflect the analytical processes and actions of typical buyers and sellers rather than to create a highly subjective valuation approach, the investment rationale of hotel owners is an essential consideration. As specialists in the valuation of hotels, we find that typical buyers purchase properties based on a thorough analysis of the anticipated economic benefits of property ownership, rather than on historical sales data. In light of these factors, it is our opinion that the sales comparison approach is unsuitable for indicating a specific estimate of the subject property's market value; however, this approach may indicate a range of values that can be used to test the reasonableness of the value indicated by the income capitalization approach. Excluding the highest and lowest sales in the range, as well as the prior sale of the subject property, the sales prices HVS International, Mineola, New York Sales Comparison Approach 150 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= range from approximately $53,400 to $74,800 per room, or $16,600,000 to $23,300,000, for the 311-unit subject property. The income capitalization approach indicates a value of $21,500,000, which falls within this range. HVS International, Mineola, New York Cost Approach 151 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 12. Cost Approach The cost approach is founded on the principle of substitution, which implies that no prudent person will pay more for a property than the amount to acquire a site and construct a building of equal desirability and utility without undue delay. This approach estimates market value by first calculating the current cost of replacing the improvements. Appropriate deductions are made for depreciation resulting from physical deterioration, functional obsolescence, and external (economic) obsolescence, and the land value is added to the depreciated replacement cost to provide an estimate of market value. The cost approach employs the following steps. 1. The current replacement or reproduction cost is estimated. 2. Land value is estimated using techniques such as allocation, extraction, or ground rent capitalization. 3. Accrued depreciation, which can be divided into physical deterioration, functional obsolescence, and external obsolescence, is estimated. 4. Total depreciation is deducted from the subject property's replacement cost, and the land value is added to arrive at an estimate of value via the cost approach. When forming their purchase decisions regarding existing properties, market participants tend to consider the cost of developing a new hotel with optimal physical and functional utility. External conditions, such as the depressed market for real estate (and hotels in particular), can cause a property to be worth less than its replacement cost as new. The task of estimating the loss in value resulting from incurable functional and external obsolescence is highly subjective. The cost approach may provide a reliable estimate of value in the case of new properties; however, as buildings and other improvements age and begin to deteriorate, the loss in value resulting from physical obsolescence becomes increasingly difficult to quantify accurately. Loss in value HVS International, Mineola, New York Cost Approach 152 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= attributable to functional obsolescence can be even more difficult to determine. The subject property was constructed in 1984, and will be approximately 13 years old as of the date of this appraisal. An extensive renovation amounting to approximately $2.2 million dollars was executed in 1995. According to subject property management, this upgrade involved the guestroom furnishings, publics areas, and the property's exterior. The subject property is considered to be in good condition and fully functional. The depressed hotel market conditions that prevailed in the late 1980s and the early 1990s have also led to a degree of external obsolescence. In our opinion, it is impossible to identify and quantify the impact of these factors on the property's value with any accuracy, so we will only estimate the replacement cost of the subject property. Replacement Cost Replacement cost is the current construction cost of a building with the same utility as the subject property, but built with modern materials and according to current construction and design standards. For the purpose of estimating the replacement cost of the subject property, we have used a hotel development cost survey conducted by HVS International. This survey is published annually in a newsletter entitled The Hotel Valuation Journal, and appeared in the May, 1995, issue of Lodging Hospitality. The survey presents the range of per-room costs associated with various components of hotel development, including the improvements, the furniture, fixtures, and equipment, pre-opening expenses, and operating capital. Statistics are compiled for three broad categories of hotels: luxury, standard, and economy. The results of this survey are presented in the following table. HVS International, Mineola, New York Cost Approach 153 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 12-1 Hotel Development Cost Survey (Amounts per Room) - --------------------------------------------------------------------------------
Improvements Furniture & Equipment Pre-Opening Operating Capital Total Percent Change - ------------------------------------------------------------------------------------------------------------------------------------ 1976 Luxury $32,000 - $55,000 $5,000 - $10,000 $1,000 - $2,000 $1,000 - $1,500 $39,000 - $68,500 --- - --- Standard 20,000 - 32,000 3,000 - 6,000 750 - 1,000 750 - 1,000 24,500 - 40,000 --- --- Economy 8,000 - 15,000 2,000 - 4,000 500 - 1,000 500 - 750 11,000 - 20,750 --- - --- 1979 Luxury 36,000 - 65,000 8,000 - 15,000 1,500 - 3,000 1,500 - 2,000 47,000 - 85,000 6.8 - 8.0 Standard 25,000 - 36,000 5,000 - 10,000 1,000 - 2,000 1,000 - 1,500 32,000 - 49,500 10.2 - 7.9 Economy 10,000 - 20,000 3,000 - 5,000 750 - 1,000 750 - 1,000 14,500 - 27,000 10.6 - 10.0 1981 Luxury 45,000 - 80,000 10,000 - 20,000 2,000 - 3,500 2,000 - 2,500 59,000 - 106,000 12.8 - 12.4 Standard 25,000 - 40,000 7,000 - 13,000 1,200 - 2,500 1,200 - 2,000 34,400 - 57,500 3.8 - 8.1 Economy 13,000 - 25,000 4,000 - 7,000 700 - 1,200 900 - 1,200 18,600 - 34,400 14.1 - 13.7 1983 Luxury 55,000 - 100,000 12,500 - 20,000 2,300 - 4,000 2,000 - 2,800 71,800 - 126,800 10.8 - 9.8 Standard 35,000 - 50,000 9,000 - 15,000 1,400 - 3,000 1,300 - 2,200 46,700 - 70,200 17.9 - 11.0 Economy 18,000 - 32,000 5,000 - 8,000 800 - 1,500 900 - 1,300 24,700 - 42,800 16.4 - 12.2 1985 Luxury 60,000 - 115,000 13,400 - 30,000 3,000 - 5,000 2,100 - 3,100 78,500 - 153,100 4.7 - 10.4 Standard 38,000 - 57,000 9,500 - 16,500 1,900 - 3,600 1,500 - 2,500 50,900 - 79,600 4.5 - 6.7 Economy 20,000 - 36,000 5,000 - 8,800 1,000 - 1,700 1,000 - 1,500 27,000 - 48,000 4.7 - 6.1 1986 Luxury 62,000 - 120,000 13,700 - 30,600 3,100 - 5,200 2,300 - 3,100 81,100 - 158,900 3.3 - 3.8 Standard 39,000 - 60,000 9,700 - 16,800 2,000 - 3,800 1,500 - 2,600 52,200 - 83,200 2.6 - 4.5 Economy 21,000 - 37,000 5,100 - 9,000 1,000 - 1,800 1,100 - 1,500 28,200 - 49,300 4.4 - 2.7 1987 Luxury 63,000 - 122,000 13,800 - 30,900 3,300 - 5,500 2,300 - 3,200 82,400 - 161,600 1.6 - 1.7 Standard 40,000 - 61,000 9,800 - 16,800 2,100 - 3,900 1,500 - 2,600 53,400 - 84,300 2.3 - 1.3 Economy 21,000 - 39,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 28,400 - 51,400 0.7 - 4.3 1988 Luxury 65,000 - 125,000 14,000 - 31,000 3,300 - 5,500 2,300 - 3,200 84,600 - 164,700 2.7 - 1.9 Standard 41,000 - 63,000 10,000 - 17,100 2,100 - 3,900 1,500 - 2,600 54,600 - 86,600 2.2 - 2.7 Economy 22,000 - 40,000 5,200 - 9,100 1,100 - 1,800 1,100 - 1,500 29,400 - 52,400 3.5 - 1.9 1989 Luxury 66,000 - 126,000 15,000 - 32,000 3,300 - 5,500 2,300 - 3,200 86,600 - 166,700 2.4 - 1.2 Standard 41,000 - 64,000 10,500 - 18,000 2,100 - 3,900 1,500 - 2,600 55,100 - 88,500 0.9 - 2.2 Economy 22,000 - 40,000 5,500 - 9,700 1,100 - 1,800 1,100 - 1,500 29,700 - 53,000 1.0 - 1.1 1990 Luxury 67,000 - 128,000 15,400 - 33,000 3,500 - 5,700 2,500 - 3,500 88,400 - 170,200 2.1 - 2.1 Standard 42,000 - 65,000 10,800 - 18,500 2,200 - 4,000 1,600 - 2,800 56,600 - 90,300 2.7 - 2.0 Economy 22,500 - 41,000 5,600 - 10,000 1,200 - 1,800 1,200 - 1,600 30,500 - 54,400 2.7 - 2.6 1991 Luxury 65,000 - 122,000 14,500 - 31,500 3,700 - 5,900 2,600 - 3,600 85,800 - 163,000 (2.9) - (4.2) Standard 40,000 - 63,000 10,000 - 17,800 2,300 - 4,200 1,700 - 2,900 54,000 - 87,900 (4.6) - (2.7) Economy 21,000 - 39,000 5,000 - 9,500 1,300 - 2,000 1,300 - 1,700 28,600 - 52,200 (6.2) - (4.0) 1992 Luxury 64,000 - 120,000 14,200 - 30,900 3,800 - 6,100 2,700 - 3,700 84,700 - 160,700 (1.3) - (1.4) Standard 39,000 - 62,000 9,800 - 17,400 2,300 - 4,400 1,800 - 3,000 52,900 - 86,800 (2.0) - (1.3) Economy 21,000 - 38,000 4,900 - 9,300 1,400 - 2,100 1,300 - 1,800 28,600 - 51,200 0.0 - (1.9) 1993 Luxury 63,000 - 119,000 14,000 - 30,500 3,900 - 6,200 2,800 - 3,800 83,700 - 159,500 (1.2) - (0.7) Standard 39,000 - 61,000 9,700 - 17,200 2,300 - 4,500 1,800 - 3,000 52,800 - 85,700 (0.2) - (1.3) Economy 21,000 - 38,000 4,900 - 9,200 1,400 - 2,100 1,300 - 1,800 28,600 - 51,100 0.0 - (0.2) 1994 Luxury 64,000 - 121,000 14,300 - 31,100 3,900 - 6,200 2,800 - 3,800 85,000 - 162,100 1.6 - 1.6 Standard 40,000 - 63,000 10,000 - 17,600 2,400 - 4,600 1,800 - 3,000 54,200 - 88,200 2.7 - 2.9 Economy 22,000 - 40,000 5,100 - 9,500 1,500 - 2,200 1,300 - 1,800 29,900 - 53,500 4.5 - 4.7 1995 Luxury 65,000 - 124,000 14,800 - 32,300 4,100 - 6,400 2,900 - 4,000 86,800 - 166,700 2.1 - 2.8 Standard 41,000 - 65,000 10,400 - 18,300 2,500 - 4,800 1,900 - 3,100 55,800 - 91,200 3.0 - 3.4 Economy 23,000 - 42,000 5,400 - 9,900 1,600 - 2,300 1,300 - 1,800 31,300 - 56,000 4.7 - 4.7
Average Annual Compounded Percent Change: 1976 - 1995: Luxury 4.3% - 4.8% 1986 - 1995: Luxury 0.8% - 0.5% Standard 4.4% - 4.4% Standard 0.7% - 1.0% Economy 5.7% - 5.4% Economy 1.2% - 1.4% - -------------------------------------------------------------------------------- HVS International, Mineola, New York Cost Approach 154 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= As illustrated by the previous table, hotel development costs rose significantly during the late 1970s and the early 1980s; however, the rate of increase slowed substantially in 1987. In 1991, hotel development costs declined for the first time since 1976. Further drops of as much as 2.0% were registered in 1992. Between 1986 and 1990, average annual compounded increases ranged from 1.7% to 2.5%. Costs rose slowly (at average annual compounded rates ranging from 0.5% to 1.4%) between 1986 and 1995, largely as a result of the declines in 1991, 1992, and 1993. In 1995, hotel development costs started to escalate more rapidly, reaching 4.7% in the economy segment. As more hotels are developed, we expect costs to continue to rise. Because the replacement cost tends to set the upper limit of a particular hotel's value, this figure is relevant to our analysis. We estimate the replacement cost of the subject property as follows, based on the development cost survey discussed earlier. ================================================================================ Table 12-2 Subject Property's Replacement Cost - -------------------------------------------------------------------------------- Hotel Cost Per Room Rooms Total Cost - -------------------------------------------------------------------------------- Building $64,410 311 $23,031,360 FF&E 12,000 311 3,732,000 Pre-opening 4,500 311 1,399,500 ------- ----------- Total $80,910 $25,162,860 - -------------------------------------------------------------------------------- Ground Lease Approach to Land Valuation Land value may be estimated either by the sales comparison approach, using comparable land sales, or by the ground lease approach, which is based on the economic value generated by an improvement that represents the property's highest and best use. Because it is unusual to find recent sales of comparable vacant land that is slated for imminent hotel development, we have used the ground lease approach to determine the subject property's land value. Hotels are often constructed on leased land, and although lease terms differ somewhat, the basis for the rental calculation is frequently tied to a percentage of revenue. By applying a typical ground lease rental formula to the subject property's stabilized revenues, the appraiser can determine the hotel's economic rent, or what is also known as the income attributable to HVS International, Mineola, New York Cost Approach 155 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= the land. Land value is then calculated by dividing the economic rent by an appropriate capitalization rate. The self-adjusting aspect of this approach is key to its reliability. Because the rental formula is tied to a percentage of revenue that inherently reflects both the locational attributes of the site (occupancy and rate) and the allowable density of development, the resulting economic ground rent justly represents the greatest net return to the land over a given period. Because the Newark/Fremont Hilton appears to represent the highest and best use of the property, the ground lease approach is an appropriate method of determining land value. We have researched long-term hotel ground leases in search of rental formulas that are based on a percentage of rooms revenue or on a combination of rooms, food, and beverage revenue. This analysis indicates that economic ground rents for hotels similar to the subject property typically range from 2.7% to 7.8% of rooms revenue. Although this range is quite broad, most of the formulas yield rental percentages of between 3.5% and 4.5 %of rooms revenue. After considering these comparable ground leases and the locational attributes of the subject property, we believe the appropriate economic ground rental percentage is 4.0% of stabilized rooms revenue. The subject property's stabilized rooms revenue has been deflated to reflect 1997 dollars. The following calculation shows the derivation of the subject property's economic ground rent. Stabilized Rooms Revenue (1999) $7,023,735 Rental Percentage 0.04 ---------- Economic Ground Rent $280,949 Rent generated by a ground lease represents a fairly low-risk income flow. Because the tenant improvements typically amount to more than eight times the value of the land, the risk of default is low. When the ground lease terms are tied to rooms revenue, the landlord is also protected from the adverse effects of inflation. Based on these risk factors and the current cost of long-term capital, we estimate the appropriate ground rental overall capitalization rate at 9%. Applying this indicated capitalization rate to the subject property's economic ground rent yields the following estimate of land value. HVS International, Mineola, New York Cost Approach 156 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Economic Ground Rent $280,949 $3,121,660 -------------------- = -------- = Capitalization Rate 0.09 Estimated Land Value (Say) $3,100,000 A new hotel's land value typically ranges from 10% to 20% of the overall value. The estimate of land value presented above is approximately 14.8% of the subject property's total value as indicated by the income capitalization approach. Replacement Cost Combining the replacement cost of the property with the land value yields the subject property's total replacement cost. ================================================================================ Table 12-3 Total Replacement Cost - -------------------------------------------------------------------------------- Cost of Improvements $25,162,860 Land Value 3,100,000 ----------- Plus: Developer's Profit 15% Total Replacement Cost (SAY) $32,500,000 - -------------------------------------------------------------------------------- If a property's replacement cost is significantly higher than the values indicated by the income capitalization and sales comparison approaches, it may indicate that an upward adjustment of these values is appropriate. This would also reduce the probability of new hotel development, which is not likely to be feasible under those conditions. This creates an effective barrier to entry for new competition, thus reducing the risk associated with the subject property's income-generating potential. An upward adjustment of the value indicated by the income capitalization approach is also justified by this barrier to entry. We find that knowledgeable hotel buyers generally base their purchase decisions on economic factors, such as projected net income and return on investment. Because the cost approach does not reflect these income-related considerations and requires a number of highly subjective depreciation estimates, it is our opinion that the cost approach is inapplicable in estimating the market value of the Newark/Fremont Hilton. However, we have estimated the subject property's replacement cost as new, which may set the upper limit of the hotel's value. HVS International, Mineola, New York Reconciliation of Value Indications 157 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 13. Reconciliation of Value Indications The reconciliation, which is the last step in the appraisal process, involves summarizing and correlating the data and procedures employed throughout the analysis. The final conclusion of value is arrived at after reviewing the estimates indicated by the income capitalization, sales comparison, and cost approaches. The relative significance, applicability, and defensibility of each indicated value is considered, and the greatest weight is given to that approach deemed most appropriate for the property being appraised. The purpose of this report is to estimate the market value of the fee simple interest in the subject property. Our appraisal involves a careful analysis of the property itself and the economic, demographic, political, physical, and environmental factors that influence real estate values. Based on the data set forth in this report, the following value indications were developed. Approach Value Indication -------- ---------------- Income Capitalization $21,500,000 Sales Comparison $16,600,000 - $23,300,000 Cost (Replacement Cost) $32,500,000 Income Capitalization Approach To estimate the subject property's value via the income capitalization approach, we analyzed the local market for transient accommodations, examined the competitive environment, projected occupancy and average rate levels, and developed a forecast of income and expense that reflects anticipated income trends and cost components through a stabilized year of operation. The subject property's projected net income before debt service was then allocated to the mortgage and equity components based on market rates of return and loan-to-value ratios. Through a discounted cash flow and income capitalization procedure, the value of each component was calculated; the total of the mortgage and equity components equates to the value of the property. HVS International, Mineola, New York Reconciliation of Value Indications 158 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Our nationwide experience indicates that the procedures used in estimating market value by the income capitalization approach are comparable to those employed by the hotel investors who constitute the marketplace. For this reason, we believe that the income capitalization approach produces the most supportable value estimate, and it is given the greatest weight in our final estimate of the subject property's market value. Sales Comparison Approach The sales comparison approach uses actual sales of similar properties to provide an indication of the subject property's value. The strength of this approach is that it measures value based on the investment decisions made by actual buyers and sellers. Although we have investigated a number of sales in an attempt to develop a range of value indications, several adjustments are necessary to render the sales prices applicable to the subject property. These adjustments, which are numerous and highly subjective, diminish the reliability of the sales comparison approach. Furthermore, we find that typical hotel investors employ a sales comparison procedure only to establish broad value parameters. The hotel sales outlined earlier in this report indicate a value range of $53,400 to $74,800 per available room. The income capitalization approach indicates a per-room value of approximately $70,100. This information suggests that the value indicated by the income capitalization approach is appropriate. Cost Approach To estimate the subject property's value via the cost approach, we estimated the current replacement cost of the property and added the land value. We give the cost approach limited weight in arriving at a final value estimate, because knowledgeable buyers of lodging facilities generally base their purchase decisions on economic factors (such as projected net income and return on investment) rather than on a property's depreciated replacement cost. The replacement cost estimate developed via the cost approach can help to corroborate the results of the income capitalization and sales comparison approaches to value. If the replacement cost is substantially higher or lower than the value indicated by the income capitalization approach, an upward or downward adjustment of the income capitalization approach value may be necessary. The subject property features above average construction for a full-service hotel,; furthermore, the recent renovation made to the property in 1995 further enhances the value of the property. HVS International, Mineola, New York Reconciliation of Value Indications 159 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Value Conclusion Careful consideration has been given to the strengths and weaknesses of the three approaches to value discussed above. In recognition of the purpose of this appraisal, we have given primary weight to the value indicated by the income capitalization approach and made some subjective adjustments based on the replacement cost estimate, the sales comparison approach, and our extensive experience in the hospitality industry. It is our opinion that the market of the fee simple interest in the Newark/Fremont Hilton - Newark, as of January 1, 1997, is: $21,800,000 TWENTY-ONE MILLION EIGHT HUNDRED THOUSAND DOLLARS The estimate of market value includes the land, the improvements, and the furniture, fixtures, and equipment. The appraisal assumes that the hotel is open and operational. This value estimate equates to roundly $70,100 per room, which is well supported by market sales and is the value indicated by the income capitalization approach. The estimate of value assumes either the availability of third-party financing or the willingness and capability of the seller to take back purchase-money financing so that a buyer can obtain the level of debt set forth in the Income Capitalization Approach section of this appraisal. Marketing Period Our estimate of market value assumes a marketing period of six to nine months. Under normal economic conditions, hotels are transferred within this time frame. Personal Property In accordance with the appraisal standards set forth by the Office of the Comptroller of the Currency, it is necessary for bank appraisals to identify and value any personal property, fixtures, or intangible items that are included in the appraisal and discuss their impact on the overall estimate of market value. A hotel's income-generating ability depends on a suitable inventory of furniture, fixtures, and equipment. Removal of these items can decrease the property value by as much as the cost to replace the inventory plus the loss of income incurred while the hotel cannot function. A hotel's personal property consists of a wide variety of components, including bedroom furnishings, bathroom fixtures, restaurant and kitchen equipment, front office and accounting computers, exterior signs, and similar items. Our inspection of the Newark/Fremont Hilton indicates that the personal property and fixtures are in very good condition. HVS International, Mineola, New York Reconciliation of Value Indications 160 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Based on an annual construction cost survey conducted by HVS International, we estimate the total replacement cost of the subject property's furniture, fixtures, and equipment at $12,000 per available room. Assuming an average useful life of ten years and an effective age of three years, the value of the furniture, fixtures, and equipment currently in place is approximately $3,600 per room, or a total of $1,120,000. The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) stipulates that ". . . any business interest or other intangible item should be valued separately within the appraisal."(15) Hotels have both business and real estate components; without the business expertise necessary to operate the facility, a hostelry would have little real estate value. Because furniture, fixtures, and equipment are essential to a hotel's income-generating ability and are seldom removed from the property or sold separately, the separation of the personal property component from the real property is not particularly meaningful. - ---------- (15) Federal Register, Vol. 55, No. 143, July 25, 1990, p. 30205. Statement of Assumptions HVS International, Mineola, New York and Limiting Conditions 161 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 14. Statement of Assumptions and Limiting Conditions 1. This report is to be used in whole and not in part. 2. No responsibility is assumed for matters of a legal nature, nor do we render any opinion as to title, which is assumed to be marketable and free of any deed restrictions and easements. The property is valued as though free and clear unless otherwise stated. 3. We assume that there are no hidden or unapparent conditions of the sub-soil or structures, such as underground storage tanks, that would render the property more or less valuable. No responsibility is assumed for these conditions or for any engineering that may be required to discover them. 4. We have not considered the presence of potentially hazardous materials such as asbestos, urea formaldehyde foam insulation, PCBs, any form of toxic waste, polychlorinated biphengyls, pesticides, or lead-based paints. The appraisers are not qualified to detect hazardous substances, and we urge the client to retain an expert in this field if desired. 5. The Americans with Disabilities Act (ADA) became effective on January 26, 1992. We have conducted no specific compliance survey to determine whether the subject property is operating in accordance with the various detailed requirements of the ADA. It is possible that the property does not conform to the requirements of the act, and this could have an unfavorable effect on value. Because we have no direct evidence regarding this issue, our estimate of value does not consider possible non-compliance with the ADA. 6. We have made no survey of the property, and we assume no responsibility in connection with such matters. Sketches, photographs, maps, and other exhibits are included to assist the reader in visualizing the property. It is assumed that the use of the land and improvements is Statement of Assumptions HVS International, Mineola, New York and Limiting Conditions 162 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= within the boundaries of the property described, and that there is no encroachment or trespass unless noted. 7. All information, financial operating statements, estimates, and opinions obtained from parties not employed by HVS International are assumed to be true and correct. We can assume no liability resulting from misinformation. 8. Unless noted, we assume that there are no encroachments, zoning violations, or building violations encumbering the subject property. 9. The property is assumed to be in full compliance with all applicable federal, state, local, and private codes, laws, consents, licenses, and regulations (including a liquor license where appropriate), and that all licenses, permits, certificates, franchises, and so forth can be freely renewed or transferred to a purchaser. 10. All mortgages, liens, encumbrances, leases, and servitudes have been disregarded unless specified otherwise. 11. None of this material may be reproduced in any form without our written permission, and the report cannot be disseminated to the public through advertising, public relations, news, sales, or other media. 12. We are not required to testify or appear in court by reason of this analysis without previous arrangements, and only when our standard per diem fees and travel costs are paid prior to the appearance. 13. If the reader is making a fiduciary or individual investment decision and has any questions concerning the material presented in this report, it is recommended that the reader contact us. 14. We take no responsibility for any events or circumstances that take place subsequent to either the date of value or the date of our field inspection, whichever occurs first. 15. The quality of a lodging facility's on-site management has a direct effect on a property's economic viability and value. The financial forecasts presented in this analysis assume responsible ownership and competent management. Any departure from this assumption may have a significant impact on the projected operating results and the value estimate. Statement of Assumptions HVS International, Mineola, New York and Limiting Conditions 163 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 16. The estimated operating results presented in this report are based on an evaluation of the overall economy, and neither take into account nor make provision for the effect of any sharp rise or decline in local or national economic conditions. To the extent that wages and other operating expenses may advance during the economic life of the property, we expect that the prices of rooms, food, beverages, and services will be adjusted to at least offset those advances. We do not warrant that the estimates will be attained, but they have been prepared on the basis of information obtained during the course of this study and are intended to reflect the expectations of a typical hotel buyer. 17. This analysis assumes continuation of all Internal Revenue Service tax code provisions as stated or interpreted on either the date of value or the date of our field inspection, whichever occurs first. 18. Many of the figures presented in this report were generated using sophisticated computer models that make calculations based on numbers carried out to three or more decimal places. In the interest of simplicity, most numbers have been rounded to the nearest tenth of a percent. Thus, these figures may be subject to small rounding errors. 19. It is agreed that our liability to the client is limited to the amount of the fee paid as liquidated damages. Our responsibility is limited to the client, and use of this report by third parties shall be solely at the risk of the client and/or third parties. The use of this report is also subject to the terms and conditions set forth in our engagement letter with the client. 20. Appraising hotels is both a science and an art. Although this analysis employs various mathematical calculations to provide value indications, the final estimate is subjective and may be influenced by our experience and other factors not specifically set forth in this report. 21. Any distribution of the total value between the land and improvements or between partial ownership interests applies only under the stated use. Moreover, separate allocations between components are not valid if this report is used in conjunction with any other analysis. 22. This study was prepared by HVS International, a division of Hotel Consulting Services, Inc., and M&R Valuation Services. All opinions, recommendations, and conclusions expressed during the course of this Statement of Assumptions HVS International, Mineola, New York and Limiting Conditions 164 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= assignment are rendered by the staff of Hotel Consulting Services, Inc. and M&R Valuation Services as employees, rather than as individuals. 23. For the purposes of this appraisal, we have assumed the continued ownership of the subject property by Ashford Financial Corporation, and operation by Remington Hotel Company as a Hilton hotel. Because we have assumed continued ownership, the subject property's projected tax burden has been forecast based on historical figures, rather than upon a hypothetical sale. HVS International, Mineola, New York Certification 165 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ 15. Certification We, the undersigned appraisers, hereby certify: 1. that the statements and opinions presented in this report, subject to the limiting conditions set forth, are correct to the best of our knowledge and belief; 2. that Stephen Chan personally inspected the property described in this report; 3. that we have no current or contemplated interests in the real estate that is the subject of this report; 4. that we have no personal interest or bias with respect to the subject matter of this report or the parties involved; 5. that this report sets forth all of the limiting conditions (imposed by the terms of this assignment) affecting the analyses, opinions, and conclusions presented herein; 6. that the fee paid for the preparation of this report is not contingent upon our conclusions; 7. that this report has been prepared in accordance with, and is subject to, the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute; 8. that the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives; 9. that this report has been prepared in accordance with the Uniform Standards of Professional Appraisal Practice (as adopted by the Appraisal Foundation); HVS International, Mineola, New York Certification 166 - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= 10. that no one other than the undersigned prepared the analyses, conclusions, and opinions concerning real estate that are set forth in this appraisal report; 11. that as of the date of this report, Stephen Rushmore has completed the requirements of the continuing education program of the Appraisal Institute; 12. that this appraisal is not based on a requested minimum value, a specific value, or the approval of a loan. /s/ Stephen Chan ------------------------------- Stephen Chan Associate M&R Valuation Services /s/ Anne Lloyd-Jones ------------------------------- Anne Lloyd-Jones, CRE Senior Vice President Hotel Consulting Services, Inc. /s/ Suzanne R. Mellen ------------------------------- Suzanne R. Mellen, CRE, MAI Managing Director M&R Valuation Services SLC:ALJ:SRM:nkw [GRAPHIC OMITTED] View of subject property from parking area, facing northeast [GRAPHIC OMITTED] View of subject property from parking area, facing west [GRAPHIC OMITTED] Front entrance [GRAPHIC OMITTED] Guest registration desk [GRAPHIC OMITTED] Lobby area [GRAPHIC OMITTED] Balentine's Restaurant [GRAPHIC OMITTED] Balantine's Bar [GRAPHIC OMITTED] Meeting rooms [GRAPHIC OMITTED] Grand Ballroom [GRAPHIC OMITTED] Pool courtyard [GRAPHIC OMITTED] Typical guestroom [GRAPHIC OMITTED] Typical guest bathroom Primary Competitors [GRAPHIC OMITTED] Holiday Inn--Milpitas [GRAPHIC OMITTED] Sheraton Hotel--San Jose Primary Competitors [GRAPHIC OMITTED] Best Western Garden Court Inn [GRAPHIC OMITTED] Courtyard by Marriot Primary Competitors [GRAPHIC OMITTED] Embassy Suites [GRAPHIC OMITTED] Radisson Hotel--Union City Secondary Competitors [GRAPHIC OMITTED] Residence Inn--Fremont [GRAPHIC OMITTED] Woodfin Suites Newark/Fremont Hilton--Newark, CA SCHEDULE A Your Ref: Newark Hilton ================================================================================ Policy No. 05-0047-106-00060 Order No. 341965 Premium: 7,348.00 Amount of Insurance: $8,350,000.00 Date of Policy: May 23, 1994 at 8:30 AM 1. Name of Insured: NEWARK CALIFORNIA HOTEL LIMITED PARTNERSHIP, A DELAWARE LIMITED PARTNERSHIP 2. The estate or interest in the land which is covered by this policy is: A FEE 3. Title to the estate or interest in the land is vested in: NEWARK CALIFORNIA HOTEL LIMITED PARTNERSHIP, A DELAWARE LIMITED PARTERSHIP 4. The land referred to in this policy is situated in the State of California, County of Alameda CITY OF NEWARK PARCELS 1 AND 3, PARCEL MAP 3875, FILED JUNE 10, 1983, BOOK 138 OF PARCEL MAPS, PAGE 55, ALAMEDA COUNTY RECORDS. This Policy valid only if Schedule B is attached. ================================================================================ HVS International, Mineola, New York Addendum - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Synopsis of Hotel Management Agreement Date: May, 1994 Owner: Newark California Hotel Limited Partnership (Ashford Financial Corporation) Manager: Remington Employers Corporation Premises: Newark/Fremont Hilton, Newark, California Term: 15 years Renewal: Operator option for two successive periods of five years Management Fee: 3% of Gross Revenues Reserve for Replacement: 3% of Gross Revenues Termination: 1) Upon default by owner or manager 2) Upon death or incapacitation of Archie Bennett, Jr., President of Remington Employers Corporation 3) Upon sale of property (owner's option) HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Explanation of the Simultaneous Valuation Formula The algebraic equation known as the simultaneous valuation formula, which solves for the total property value using a ten-year mortgage and equity technique, was developed by Suzanne R. Mellen, MAI, Managing Director of the San Francisco office of HVS International. A complete discussion of the technique is presented in her article entitled, "Simultaneous Valuation: A New Technique."(17) The process of solving for the value of the mortgage and equity components begins by deducting the annual debt service from the projected income before debt service, leaving the net income to equity for each year. The net income as of the 11th year is capitalized into a reversionary value using the terminal capitalization rate. The equity residual, which is the total reversionary value less the mortgage balance at that point in time and less any brokerage and legal costs associated with the sale, is discounted to the date of value at the equity yield rate. The net income to equity for each projection year is also discounted back to the date of value. The sum of these discounted values equals the value of the equity component. Because the equity component comprises a specific percentage of the total value, the value of the mortgage and the total property can be computed easily. This process can be expressed in two algebraic equations that set forth the mathematical relationships between the known and unknown variables using the following symbols. - ---------- (17) Suzanne R. Mellen, MAI, "Simultaneous Valuation: A New Technique," Appraisal Journal, April, 1983. HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= NI = Net income available for debt service V = Value M = Loan-to-value ratio f = Annual debt service constant n = Number of years in the projection period de = Annual cash available to equity dr = Residual equity value b = Brokerage and legal cost percentage P = Fraction of the loan paid off during the projection period fp = Annual constant required to amortize the entire loan during the projection period Rr = Overall terminal capitalization rate that is applied to net income to calculate the total property reversion (sales price at the end of the projection period) 1/Sn = Present worth of $1 factor (discount factor) at the equity yield rate Using these symbols, the following formulas can be used to express some of the components of this mortgage and equity valuation process. Debt Service - A property's debt service is calculated by first determining the mortgage amount that equals the total value (V) multiplied by the loan-to-value ratio (M). Debt service is derived by multiplying the mortgage amount by the annual debt service constant (f). The following formula represents debt service. f x M x V = Debt Service Net Income to Equity (Equity Dividend) - The net income to equity (de) is the property's net income before debt service (NI) less debt service. The following formula represents the net income to equity. NI - (f x M x V) = d(e) Reversionary Value - The value of the hotel at the end of the tenth year is calculated by dividing the 11th-year net income before debt service (NI^11) HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= by the terminal capitalization rate (R(r)). The following formula represents the property's tenth-year reversionary value. (NI^11/R(r)) = Reversionary Value Brokerage and Legal Costs - When a hotel is sold, certain costs are associated with the transaction. Normally, the broker is paid a commission and the attorney collects legal fees. In the case of hotel transactions, brokerage and legal costs typically range from 1% to 4% of the sales price. Because these expenses reduce the proceeds to the seller, they are usually deducted from the reversionary value in the mortgage and equity valuation process. Brokerage and legal costs (b), expressed as a percentage of reversionary value (NI^11/Rr), are calculated by application of the following formula. b(NI^11/R(r)) = Brokerage and Legal Costs Ending Mortgage Balance - The mortgage balance at the end of the tenth year must be deducted from the total reversionary value (debt and equity) in order to determine the equity residual. The formula used to determine the fraction of the loan remaining (expressed as a percentage of the original loan balance) at any point in time (P) takes the annual debt service constant of the loan over the entire amortization period (f) less the mortgage interest rate (i), and divides it by the annual constant required to amortize the entire loan during the ten-year projection period (fp) less the mortgage interest rate. The following formula represents the fraction of the loan paid off (P). (f - i)/(f(p) - i) = P If the fraction of the loan paid off (expressed as a percentage of the initial loan balance) is P, then the remaining loan percentage is expressed as 1 - P. The ending mortgage balance is the fraction of the remaining loan (1 - P) multiplied by the initial loan amount (M x V). The following formula represents the ending mortgage balance. (1 - P) x M x V Equity Residual Value - The value of the equity upon the sale at the end of the projection period (d(r)) is the reversionary value less the brokerage and legal costs and the ending mortgage balance. The following formula represents the equity residual value. HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= (NI^11/R(r)) - (b(NI^11/R(r)) - ((1 - P) x M x V) = d(r) Annual Cash Flow to Equity - The annual cash flow to equity consists of the equity dividend for each projection year plus the equity residual at the end of the tenth year. The following formula represents the annual cash flow to equity. NI^1 - (f x M x V) = d(e)^1 NI^2 - (f x M x V) = d(e)^2 NI^10 - (f x M x V) = de^10 (NI^11/R(r)) - (b (NI^11/R(r)) - ((1 - P) x M x V) = d(r) Value of the Equity - If the initial mortgage amount is calculated by multiplying the loan-to-value ratio (M) by the property value (V), then the equity value is one minus the loan-to-value ratio multiplied by the property value. The following formula represents the value of the equity. (1 - M) V Discounting the Cash Flow to Equity to the Present Value - The cash flow to equity in each projection year is discounted to the present value at the equity yield rate (1/S^n). The sum of these cash flows is the value of the equity (1 - M) V. The following formula represents the calculation of equity as the sum of the discounted cash flows. (d(e)^1 x 1/S^1) + (d(e)^2 x 1/S^2) + . . . + (d(e)^10 x 1/S^10) + (d(r) x 1/S^10) = (1 - M)V Combining the Equations: Annual Cash Flow to Equity and Discounting the Cash Flow to Equity to the Present Value - The last step is to arrive at one overall equation that shows that the annual cash flow to equity plus the yearly discounting to the present value equals the value of the equity. ((NI^1 - (f x M x V)) 1/S^1) + ((NI^2 - (f x M x V)) 1/S^2) + . . . ((NI^10 - (f x M x V)) 1/S^10) + (((NI^11/R(r)) - (b (NI^11/R(r)) - ((1 - P) x M x V)) 1/S^10) = (1 -M) V Because the only unknown in this equation is the property's value (V), it can be solved readily. HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Ten-Year Projection of Income and Expense - Because the fixed and variable forecast of income and expense is carried out only to the stabilized year, it is necessary to continue the projection to the 11th year. In most cases, net income before debt service beyond the stabilized year is projected at an assumed inflation rate. By increasing a property's revenue and expenses at the same rate of inflation, net income remains constant as a percentage of total revenue, and the dollar amount escalates at the annual inflation rate. Hotel investors are currently using inflation rates of approximately 3.5% annually. The ten-year forecast of income and expense illustrates the subject property's net income, which is assumed to increase by 3.5% annually subsequent to the hotel's stabilized year of operation. Solving for Value Using the Simultaneous Valuation Formula - In the case of the subject property, the following known variables have been determined. ================================================================================ Table 1: Summary of Known Variables - -------------------------------------------------------------------------------- Loan-To-Value Ratio M 70.0% Debt Service Constant f 0.111856 Equity Yield 1/Sn 21.0% Brokerage and Legal Fees b 3.0% Annual Constant Required to Amortize the Loan in 10 Years fp 0.155277 Terminal Capitalization Rate Rr 12.16% - -------------------------------------------------------------------------------- The following table illustrates the present worth of a $1 factor at the 21.0% equity yield rate. HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Table 2: Present Worth of $1 Factor at the Equity Yield Rate - -------------------------------------------------------------------------------- Calendar Year Ending Present Worth of $1 Factor @21.0% - -------------------------------------------------------------------------------- 1997 0.826460 1998 0.683036 1999 0.564502 2000 0.466538 2001 0.385575 2002 0.318662 2003 0.263362 2004 0.217658 2005 0.179885 2006 0.148668 - -------------------------------------------------------------------------------- Using these known variables, the following intermediary calculations must be made before applying the simultaneous valuation formula. The fraction of the loan paid off during the projection period is calculated as follows. P = ( 0.111856 - 0.095 )/( 0.155277 - 0.095 ) = 0.279638 The annual debt service is calculated as f x M x V. (f x M x V) = 0.111856 x 0.70 x V = 0.078299 V Inserting the known variables into the hotel valuation formula produces the following. ( 2,500,000 - 0.078299 V ) x 0.0826446 + ( 2,467,000 - 0.078299 V ) x 0.0683013 + ( 2,495,000 - 0.078299 V ) x 0.0564474 + ( 2,583,000 - 0.078299 V ) x 0.0466507 + ( 2,677,000 - 0.078299 V ) x 0.0385543 + ( 2,772,000 - 0.078299 V ) x 0.0318631 + ( 2,874,000 - 0.078299 V ) x 0.0263331 + ( 2,975,000 - 0.078299 V ) x 0.0217629 + ( 3,084,000 - 0.078299 V ) x 0.0179859 + ( 3,194,000 - 0.078299 V ) x 0.0148644 + (((3,506,000 / 0.122) - (0.03 x (3,506,000 / 0.122)) - ((1 - 0.279638) x 0.70 x V)) x 0.148644) = (1 - 0.070) V HVS International, Mineola, New York Simultaneous Valuation Formula - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= Like terms are combined as follows. $14,872,042 - 0.392384V = (1 - 0.70)V $14,872,042 = 0.69238 V V = $14,872,042 / 0.6923 V = $21,479,458 Total Property Value as Indicated by the Income Capitalization Approach (Say) = $21,500,000 HVS International, Mineola, New York Qualifications of Stephen L. Chan - -------------------------------------------------------------------------------- ============= HVS - ------------- International ============= ================================================================================ Stephen L. Chan Employment 1995 to present HOSPITALITY VALUATION SERVICES San Francisco, California Associate (Hotel/Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1994 Statler Hotel Ithaca, New York Front Office Clerk 1993 Hotel Hyakumangoku Kaga-shi, Ishikawa-ken, Japan Front Office Intern 1992 Hong Kong Hyatt Regency Tsim Sha Tsui, Hong Kong Front Office Intern Professional Affiliations Cornell Society of Hotelmen Education BS - School of Hotel Administration, Cornell University Corporate and Institutional Aetna Clients Served Angeles Mortgage Investment Trust Bank of the West Canadian Imperial Bank of Commerce Host Marriott International Bank of Singapore KeneVentures Local Federal Bank of South Dakota Long Term Credit Bank of Japan Mitsui Trust Nomura Securities ORIX USA US Bancorp West LB Yasuda Trust HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Anne R. Lloyd-Jones, CRE Employment 1982 to present HOSPITALITY VALUATION SERVICES (Division of Hotel Appraisals, Inc.) Mineola, New York (Hotel/Motel Valuations, Market Studies, Feasibility Reports and Investment Counseling) 1981 FAIRMONT HOTEL Dallas, Texas 1979 - 1980 SAGA FOOD SERVICE SWARTHMORE COLLEGE Swarthmore, Pennsylvania 1977 - 1980 DARANNE CATERERS Swarthmore, Pennsylvania Professional Affiliations American Society of Real Estate Counselors - Member (CRE) Appraisal Institute - Candidate for Membership Cornell Society of Hotelmen Education MPS School of Hotel Administration, Cornell University BA Swarthmore College Appraisal Institute Course 1A1 Real Estate Appraisal Principles Course 1A2 Basic Valuation Procedures Course 1BA Capitalization Theory and Techniques, Part A Course 1BB Capitalization Theory and Techniques, Part B Course 2-1 Case Studies in Real Estate Valuation Course 2-3 Standards of Professional Practice Course 3-1 Report Writing HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Corporate and Institutional Clients Served Chase Manhattan Bank, N. A. Chemical Citibank Doubletree Hotels Federal Home Loan Bank Board Great Western Bank Holiday Inns, Inc. Interstate Hotels Metropolitan Life MassMutual Marriott Corporation Morgan Guaranty Trust North Carolina National Bank Paine Inc. Salomon Inc. Sheraton Hotels Union Bank U. S. Economic Development Authority Winegardner & Hammons Wyndham Hotel Company Hotel Chains and Management Companies Appraised or Evaluated Doubletree Hotels Compri Hotels Interstate Hotels Fairmont Hotels Guest Quarters Hilton Hotels Corporation Omni International Hotels Ramada Hotel Corp. Servico Hotel Corp. Winegardner & Hammons Appearance as an Expert Witness Federal Bankruptcy Court, San Diego, California Federal Bankruptcy Court, Jefferson City, Missouri Federal Bankruptcy Court, Columbia, South Carolina Federal Bankruptcy Court, Houston, Texas Federal Bankruptcy Court, New York, New York Federal Bankruptcy Court, San Bernardino, California Federal Bankruptcy Court, Los Angeles, California Federal Bankruptcy Court, Charlotte, North Carolina Federal Bankruptcy Court, Miami, Florida Federal District Court, Central Division, Salt Lake City, Utah Iowa District Court, Story County, Iowa Texas District Court, Harris County, Texas Federal Bankruptcy Court, Tampa, Florida Utah District Court, Salt Lake County, Utah HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated Arizona - - Wyndham Garden Hotel, Chandler - - Wyndham Garden Hotel - Airport, Phoenix - - Wyndham Garden Hotel - Union Hills, Phoenix - - Canyon Ranch Spa & Fitness Resort, Tucson Alabama - - Holiday Inn, Birmingham - - Proposed Sheraton, Gulf Shores - - Proposed Inn, Mobile - - Holiday Inn, Sheffield California - - Industry Hills Sheraton Hotel, City of Industry - - Piccadilly Inn, Fresno - - Proposed Inn at Foss Creek, Healdsburg - - Sunset Towers Hotel, Hollywood - - Proposed La Quinta, Irvine - - Wyndham Garden Hotel, La Jolla - - Days Inn, La Palma - - Proposed Marriott Courtyard, Palm Springs - - Proposed Club Hilton Hotel, Pleasanton - - Center Pointe Development, San Diego - - Holiday Inn-Embarcadero, San Diego - - Holiday Inn-Harbor View, San Diego - - Seven Seas Lodge, San Diego - - Proposed Fountaingrove Inn, Santa Rosa - - Sheraton Round Barn Inn, Santa Rosa - - Wyndham Garden Hotel, Sunnyvale - - Westlake Plaza Hotel, Thousand Oaks - - Proposed Marriott Courtyard, Torrance Colorado - - Proposed Hotel, Keystone Connecticut - - Holiday Inn, Milford - - Holiday Inn, New Britain District of Columbia - - Grand Hotel, Washington - - Wyndham Bristol Hotel, Washington Florida - - Kon Tiki Village, Kissimmee - - Sheraton Lakeside, Kissimmee - - Holiday Inn, 22nd Street, Miami Beach - - Holiday Inn, 87th Street, Miami Beach - - Holiday Inn, 180th Street, Miami Beach - - Sheraton Resort & Marina, St. Petersburg - - Hilton Hotel, Singer Island - - Royce Hotel, West Palm Beach Georgia - - Marriott Hotel, Atlanta - - Wyndham Garden Hotel, Atlanta - - Holiday Inn, Brunswick - - Holiday Inn, Jekyll Island - - Mullberry Inn, Savannah - - Royal Savannah Inn, Savannah Hawaii - - Hobron in Waikiki, Honolulu Idaho - - Holiday Inn, Boise - - Red Lion Inn, Boise - - Super 8, Boise Illinois - - Ramada Inn, Bloomington - - Proposed Marriott Courtyard, Glenview - - Wyndham Garden Hotel, Naperville Indiana - - Holiday Inn, Bloomington - - Inn at the Four Winds, Bloomington - - Ramada Inn, Bloomington - - Hilton Hotel, Fort Wayne - - Airport Hilton Inn, Indianapolis - - Hilton at the Circle, Indianapolis Iowa - - Holiday Inn, Ames - - Proposed Fairfield Inn, Des Moines HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Kentucky - - Proposed Super 8, London - - Proposed Super 8, Radcliff Louisiana - - Sheraton Inn, Kenner - - Hotel Meridien, New Orleans Maine - - Proposed Hotel, Old Orchard Beach Maryland - - Brookshire Hotel, Baltimore - - Lord Baltimore Hotel, Baltimore - - Hyatt Regency, Bethesda Massachusetts - - Proposed Marriott Courtyard, Andover - - Hyatt Regency, Cambridge - - Proposed Hotel, Franklin - - Sheraton Inn, Hyannis - - Marriott Hotel, Worcester Michigan - - Bay Valley Inn, Bay City - - Hilton Airport, Detroit - - Westin Renaissance Center, Detroit - - Hotel Pontchartrain, Detroit - - Proposed Embassy Suites, Lansing - - Hilton Inn, Northfield - - Holiday Inn, Saginaw Minnesota - - Wyndham Garden Hotel, Bloomington - - Marriott Hotel, Minnetonka Missouri - - Inn at Grand Glaize, Osage Beach - - Bel Air Hilton, St. Louis - - Holiday Inn Riverfront, St. Louis Nebraska - - Holiday Inn Airport, Lincoln - - Holiday Inn Northeast, Lincoln Nebraska (continued) - - Marriott Hotel, Omaha - - Ramada Inn, Omaha - - Red Lion Inn, Omaha Nevada - - Proposed Super 8, Las Vegas New Jersey - - Ramada Inn, Edison - - Marriott Hotel, Hanover - - Headquarters Plaza, Morristown - - Hyatt Regency, New Brunswick - - Holiday Inn, North Brunswick New York - - Hilton Hotel, Albany - - Proposed Embassy Suites, Amherst - - Holiday Inn Arena, Binghamton - - Holiday Inn SUNY, Binghamton - - Proposed Hotel, Binghamton - - Proposed Hilton, Brooklyn - - Marriott Hotel, Dewitt - - Metropole Hotel, Flushing - - Midway Hotel, Flushing - - Ramada Inn, Kingston - - Royce Hotel, La Guardia - - Holiday Inn, Latham - - Proposed Crowne Plaza, Manhattan - - Proposed Prince Street Hotel, Manhattan - - Proposed Roslyn Inn, Roslyn - - Proposed Le Richmonde, Rye Brook - - Hilton Hotel, Syracuse - - Hotel Syracuse, Syracuse - - Proposed Hotel, Watertown North Carolina - - Proposed Inn, Chapel Hill - - Proposed Indep. Center Marriott Hotel, Charlotte - - Royce Hotel, Charlotte - - Howard Johnson's North, Charlotte - - Holiday Inn West, Durham - - Sheraton University Inn, Durham - - Holiday Inn, Fayetteville - - Holiday Inn Downtown, Raleigh HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Ohio - - Proposed Hyatt Hotel, Cleveland - - Proposed Marriott Hotel, Cleveland Oregon - - Holiday Inn Airport, Portland - - Holiday Inn South, Portland Pennsylvania - - Quality Inn, Allentown - - Holiday Inn, Bensalem - - Proposed Marriott Courtyard, Devon - - Proposed Lafayette Inn, Easton - - Ramada Inn, Erie - - Holiday Inn, Harrisburg - - Marriott Hotel, Harrisburg - - Proposed Super 8, Harrisburg - - Proposed Super 8, Lancaster - - Holiday Inn West, Monroeville - - Days Inn Philadelphia - - Franklin Plaza Hotel, Philadelphia - - Franklin Towne EconoLodge, Philadelphia - - Guest Quarters Hotel, Philadelphia - - Hilton Inn, Northeast, Philadelphia - - Marriott Airport Hotel, Philadelphia - - Holiday Inn Greentree, Pittsburgh - - Holiday Inn Parkway East, Pittsburgh - - Holiday Inn North, Pittsburgh - - Holiday Inn Parkway West, Pittsburgh - - Proposed Hotel, Pittsburgh - - Royce Hotel, Pittsburgh - - Westin William Penn Hotel, Pittsburgh - - Hilton Hotel, Scranton - - Proposed Marriott Courtyard, Valley Forge - - Holiday Inn Meadowlands, Washington - - Ramada Inn, York - - Proposed Super 8, York Rhode Island - - Proposed Hotel, Providence - - Omni Biltmore Hotel, Providence South Carolina - - Proposed Charleston Center Hotel, Charleston - - Proposed Cooper River Inn, Charleston - - Howard Johnson's, Spartanburg - - Proposed Middleton Inn and Conference Center, Charleston - - Best Western, North Charleston - - Proposed Marriott Courtyard, Columbia - - Fairfield Inn, Florence - - Holiday Inn, Florence - - Fairfield Inn, Greenville - - Proposed Marriott Courtyard, Greenville - - Fairfield Inn, Hilton Head - - Holiday Inn, Hilton Head Tennessee - - Hampton Inn, Brentwood - - Proposed Marriott Courtyard, Brentwood - - Howard Johnson's, Chattanooga - - Sheraton Hotel, Chattanooga - - Howard Johnson's, Knoxville - - Proposed Capital Mall Convention Center Hotel, Nashville - - Clarion Maxwell House, Nashville - - Holiday Inn Briley Parkway, Nashville - - Proposed Marriott Courtyard, Nashville - - Sheraton Music City, Nashville - - Stouffer's Nashville Hotel, Nashville - - Proposed Super 8, Nashville - - Union Station Hotel, Nashville - - Wyndham Garden Hotel, Nashville - - Proposed Super 8, Union City - - Proposed Marriott Courtyard, Addison - - Proposed Marriott Courtyard, Arlington - - La Mansion, Austin - - Proposed Marriott Courtyard, Bedford - - Airport Hilton, El Paso - - Hotel Meridien, Houston - - Sheraton Hotel, Houston - - Proposed Marriott Courtyard, Las Colinas - - Proposed Marriott Courtyard, North Dallas - - La Mansion Del Norte, San Antonio - - La Mansion Del Rio, San Antonio HVS International, Mineola, New York Qualifications of Anne R. Lloyd-Jones, CRE - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Examples of Hotels Appraised or Evaluated (continued) Texas (cont'd) - - Proposed Marriott Courtyard, San Antonio - - Proposed Marriott Courtyard - Medical Center, San Antonio Utah - - Deer Valley Resort, Park City - - Hilton Inn, Salt Lake City - - Holiday Inn, Salt Lake City - - Sheraton Hotel, Salt Lake City Virginia - - Mountain Lake Hotel, Blacksburg - - Howard Johnson's, Bristol - - Boars Head Inn, Charlottesville - - Proposed Fairfield Inn, Hampton - - Proposed Embassy Suites, Herndon - - Ramada Renaissance, Herndon - - Proposed Marriott Courtyard, Manassas - - Omni Hotel, Norfolk - - Proposed Marriott, Norfolk - - Howard Johnson's, Richmond - - Howard Johnson's, Roanoke - - Howard Johnson's, Roanoke Rapids - - Wyndham Hotel, Williamsburg Washington - - Wyndham Garden Hotel, Bothell - - Redmond Hotel, Redmond - - Wyndham Garden Hotel, SeaTac West Virginia Proposed Budget Motel, Princeton Wisconsin - - Proposed Granada Royale, Green Bay - - Holiday Inn-Downtown, Green Bay Canada - - Inn on the Park, Toronto Puerto Rico - - Carib Inn, San Juan Virgin Islands - - Virgin Grand Beach Hotel, St. Thomas Jamaica - - Holiday Inn, Montego Bay Hospitality Valuation Services Qualifications of Suzanne R. Mellen, San Francisco, California CRE, MAI - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Suzanne R. Mellen, CRE, MAI Employment HVS INTERNATIONAL 1985 to present San Francisco, California Managing Director (Hotel-Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1981 to 1985 HOSPITALITY VALUATION SERVICES Mineola, New York Director of Consulting and Valuation Services (Hotel-Motel Valuations, Market Studies, Feasibility Reports, and Investment Counseling) 1980 to 1981 MORGAN GUARANTY TRUST COMPANY New York, New York Real Estate Appraiser and Consultant (Real Estate Investment Valuation and Analysis) 1980 LAVENTHOL & HORWATH New York, New York Senior Consultant (Management Advising Services - Market and Feasibility Studies) 1978 to 1980 HELMSLEY-SPEAR HOSPITALITY SERVICES New York, New York Senior Consultant (Management Advising Services - Market and Feasibility Studies) 1976 to 1978 WESTERN INTERNATIONAL HOTELS The Plaza, New York City Management Trainee (Rooms Operations and Accounting) 1976 HARLEY, LITTLE ASSOCIATES Toronto, Canada Junior Consultant (Food Facilities Design, Market Studies) Hospitality Valuation Services Qualifications of Suzanne R. Mellen, San Francisco, California CRE, MAI - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Professional Affiliations Appraisal Institute - Member (MAI) o Board of Directors - San Francisco Bay Area Chapter (1994, 1995) o Education Committee Chairperson - Northern California Chapter 11 o Workshop Committee Chairperson - Northern California Chapter 11 o Division of Courses - National Committee o Continuing Education Committee - New York Committee o Director, Real Estate Computer Show - New York Chapter American Society of Real Estate Counselors - Member (CRE) o Vice Chair - Northern California Chapter (1994, 1995) o Chair - Northern California Chapter (1996) National Association of Review Appraisers & Mortgage Underwriters (CRA) International Society of Hotel Consultants - Member (ISHC) Cornell Society of Hotelmen San Francisco Board of Realtors American Hotel and Motel Association California Hotel and Motel Association National Trust for Historic Preservation Urban Land Institute Education BS - School of Hotel Administration, Cornell University Liberal Arts Undergraduate Study - Carnegie Mellen University Completion of MAI course work - Appraisal Institute New York University - School of Continuing Education - Real Estate Division State Certification Arizona, California, Colorado, Hawaii, Michigan, Nevada Teaching and Lecture Assignmments American Institute of Real Estate Appraisers - - Approved Instructor - Hotel/Motel Valuations California Hotel and Motel Association, 1985 Annual Convention - Development Overview 1995 - Annual Meeting - The Capital Expenditure Requirements Citibank, N.A. - Hotel/Motel Valuations Cornell University - Real Estate Finance Hospitality Valuation Services Qualifications of Suzanne R. Mellen, San Francisco, California CRE, MAI - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Teaching and Lecture Assignmments (cont'd) Cornell Center for Professional Development - Hotel Workouts Country Hospitality Conference - Hotel Development Challenges in the Nineties Econo-Travel Motor Hotel Corp., Annual Financial Seminar - Hotel Valuation Institute of Property Taxation, 1984 Real Estate Symposium - Simultaneous Valuation National Association of Review Appraisers and Mortgage Underwriters - Reviewing a Hotel Appraisal Report 1990 National Conference of State Tax Judges - Valuation and the Hospitality Industry Northwest Center for Professional Development - 1986-87 Hotel Development Seminars Southhampton College - Feasibility Studies and Appraisals University of Denver - Hotel/Motel Valuation American Bar Association - Property Tax '92 - Income Approach UCLA Hotel Industry Investment Conference, 1995, 1996 NYU Hospitality Industry Investment Conference, 1991, 1992, 1993, 1994, 1995 Jeffer, Mangels, Butler & Marmaro Forum - Answers to Three of the Most Provocative Questions in Hotel Valuation Today Published Articles The Appraisal Journal "Simultaneous Valuation: A New Technique," April 1983 Appraisal Review & Mortgage "How to Review a Hotel Appraisal," November 1989 Underwriting Journal California Inntouch Magazine "Value and Proper Use of Feasibility Studies," December 1990 The Hotel Valuation Journal "The Future of Full-Service Hotel Development" Computer Software "Simultaneous Capitalization Software for the capitalization of a variable Software" income stream Appearance as an Expert Witness Superior Court of the State of Arizona, County of Maricopa Superior Court of the State of California, City and County of San Francisco Superior Court of the State of California, County of Los Angeles (Deposition) Superior Court of the State of California, County of San Diego, North County Branch Federal Tax Court, New York, New York U.S. District Court, Eastern District of Arkansas, Little Rock, Arkansas U.S. District Court, Central District of California (Deposition) U.S. District Court, Southern District of California Federal Bureau of Investigation, New York, New York (Deposition) U.S. Bankruptcy Court, Northern District of California U.S. Bankruptcy Court, Eastern District of California U.S. Bankruptcy Court, Colorado (Deposition) Hospitality Valuation Services Qualifications of Suzanne R. Mellen, San Francisco, California CRE, MAI - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ U.S. Bankruptcy Court, Southern District of Texas, Houston Division U.S. Bankruptcy Court, Utah, Salt Lake City U.S. Bankruptcy Court, Southern District of California American Arbitration Association, Los Angeles American Arbitration Association, San Francisco Tax Appeal Board Los Angeles County, California Contra Costa County, California Orange County, California San Francisco County, California San Mateo County, California Corporate and Institutional Clients Served Aegon USA Realty Advisors, Inc. Aetna Life Insurance Co. American Realcorp American Savings and Loan Bank of America Bank of Boston The Bank of New York Bank of San Francisco Bank of the West Bankers Trust Company Banque Nationale de Paris Barclay's Bank The Beacon Companies Boykin Management Co. Broad, Schultz, Larson & Wineberg Burlingame Bank and Trust Comp. Caesars World Gaming California Federal Bank California Department of Transportation Canadian Imperial Bank of Commerce Carpenters Pension Trust for Southern California CASC Corp. Case, Knowlson, Mobley, Burnett and Luber Chase Manhattan Bank Chemical Bank CIGNA Capital Advisors, Inc. Citibank Citicorp Real Estate, Inc. City and County of San Francisco City of Boulder, Colorado Column Financial, Inc. Comerica Bank - California Commercial Bank of Korea, Ltd. Coudert Brothers Credit Lyonnais Dai-Ichi Kangyo Bank, Ltd. Daiwa Bank Days Inns Disney Development Company Dollar Savings and Loan Doubletree Inns Drury Inns EDA, U.S. Government Duckor & Spradling EPAM Corporation Equitable Life Assurance Society Equitable Real Estate Investment Management Estate of James Campbell Farmers National Bank Fidelity Federal Savings & Loan First Boston First Federal Savings and Loan First Interstate Bank Fox Hotel Investors Fuji Bank Gibraltar Savings and Loan Gibson, Dunn & Crutcher Graham Taylor Hospitality Group Gray, Cary, Ames & Frye Hospitality Valuation Services Qualifications of Suzanne R. Mellen, San Francisco, California CRE, MAI - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Corporate and Institutional Clients Served (cont'd) Hare, Brewer & Kelley, Inc. Haruyoshi Kanko K.K. Heller, Ehrman, White & McAuliffe Heller Real Estate Financial Services Hibernia Bank Holiday Inns Hong Kong Bank Hongkong Bank Alliance Host Marriott Hotel Investors Trust Howard Johnson's Huntington Bank Hyatt Development Corporation Inter-Continental ITT Sheraton Corporation Japan Airlines J.E. Robert Company, Inc. John B. Coleman & Co. John Q. Hammons John Hancock Life Insurance Key Bank of New York Lake County Business Outreach and Response Team Latham & Watkins Local Federal Bank, F.S.B. Long-Term Credit Bank of Japan, Ltd. Lovitt & Hannan, Inc. The Maher Company Marriott Hotels Mercury Savings and Loan Miramar Asset Management, Inc. Mitsui Trust & Banking Co., Ltd. The Money Store Commercial Mortgage, Inc. Morgan Guaranty Trust Morgan Stanley & Co. Morrison & Foerster Nations Financial Capital Corp. Network Mortgage Services Nomura Securities International, Inc. Northwinds N.V. Ny-West Development Octavian, Inc. Orrick, Herrington & Sutcliffe OZ Resorts and Entertainment The Pacific Bank Pannell Kerr Forster Parabas Bank Patrick M. Nesbitt Associates, Inc. Paul, Hastings, Janofsky & Walker Presideo Group Property Capital Trust Prudential Realty Group Punjab National Bank Ramada Inns Red Lion Hotels & Inns RT Capital Corporation San Francisco International Airport San Leandro Development Services Department Seafirst Bank Security Pacific National Bank Salomon Brothers Shearman & Sterling Societe General Southern California Savings Ssang Yong Engineering and Construction Company, Limited Stephen W. Noey & Associates Strategic Realty Advisors, Inc. Streich Lang Sumitomo Bank Sunriver Resort TCF Bank Teachers Insurance and Annuity Association Transamerica Realty Services, Inc. The Travelers Companies Treadway Hotels Tully & Wezelman, P.C. Union Bank U.S. Bancorp U.S. Trust Company VMS Realty, Inc. Wells Fargo Bank West LB Windsor Capital Group Wolf, Rifkin & Shapiro Wrather Corporation Yasuda Trust and Banking Co., Ltd. Hospitality Valuation Services Qualifications of Suzanne R. Mellen, San Francisco, California CRE, MAI - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ PARTIAL LIST OF HOTELS AND MOTELS APPRAISED OR EVALUATED BY SUZANNE R. MELLEN, CRE, MAI ALABAMA Ramada Inn, Gadsden Proposed Hotel, Mobile Holiday Inn, Montgomery Howard Johnson's, Montgomery ALASKA Best Western Barratt Inn, Anchorage Hotel Captain Cook, Anchorage Sheraton Anchorage Hotel, Anchorage ARIZONA Motel 6, Flagstaff Rodeway Inn, Flagstaff Woodlands Plaza Hotel, Flagstaff Bright Angel Lodge, Grand Canyon El Tovar Hotel, Grand Canyon Kachina Lodge, Grand Canyon Maswik Lodge, Grand Canyon Moqui Lodge, Grand Canyon Phantom Ranch, Grand Canyon Thunderbird Lodge, Grand Canyon Yavapai Lodge, Grand Canyon Hampton Inn-Proposed, Holbrook Rodeway Inn, Kingman Nautical Inn, Lake Havasu Bobby McGee's Conglomeration, Phoenix Caravan Inn, Phoenix Crescent Hotel, Phoenix Doubletree Inn, Phoenix Embassy Suites-Camelback, Phoenix Embassy Suites-Camelhead, Phoenix Fountain Suites Hotel, Phoenix Granada Royale Camelhead, Phoenix Holiday Inn, Phoenix Holiday Inn Crowne Plaza, Phoenix Hyatt Regency, Phoenix Knights Inn, Phoenix Omni Adams Hotel, Phoenix Ouality Inn, Phoenix Doubletree Inn, Scottsdale Marriott Camelback Inn, Scottsdale Phoenician Resort, Scottsdale Red Lion-La Posada, Scottsdale Rodeway Inn, Scottsdale Scottsdale Conference Resort, Scottsdale Scottsdale Princess, Scottsdale Sunburst Resort Hotel & Conference Center, Scottsdale L'Auberge de Sedona, Sedona Los Abrigados, Sedona Orchard's Inn & Grill, Sedona Motel 6, Sierra Vista Doubletree Inn, Tucson Loews Ventana Canyon Resort, Tucson Radisson Suite Hotel, Tucson Rodeway Inn, Tucson Shilor Inn, Yuma ARKANSAS Hilton, Hot Springs Holiday Inn, Little Rock Red Carpet Inn, Little Rock CALIFORNIA Radisson Hotel, Agoura Hills Ramada Inn, Agoura Hills Anaheim Marriott, Anaheim Anaheim Park Motor Inn, Anaheim Best Western Anaheim Inn, Anaheim Best Western Stovall's Inn, Anaheim Best Western Pavillions Inn, Anaheim Boulevard Inn, Anaheim Carousel Inn, Anaheim Disneyland Hotel, Anaheim Golden Forest Motel, Anaheim Hilton Hotel, Anaheim Holiday Inn, Anaheim Howard Johnson Hotel, Anaheim Marriott Courtyard, Anaheim Pan Pacific Hotel, Anaheim Pitcairn Inn, Anaheim Ramada Maingate Hotel, Anaheim Raffles Inn & Suites, Anaheim Station Inn, Anaheim TraveLodge Inn at the Park, Anaheim Auburn Inn, Auburn Sleep Inn, Auburn Ramada, Augora Hills Allstar Inn, Bakersfield Clarion Suites, Bakersfield Economy Inn, Bakersfield (2) Marriott Courtyard, Bakersfield Red Lion Hotel, Bakersfield Sheraton Hotel, Bakersfield Hilton Hotel, Baldwin Park Allstar Inn, Barstow Economy Inn, Barstow Summerfield Suites-Proposed, Belmont Berkeley Marina Marriott, Berkeley Shattuck Hotel, Berkeley Beverly Hills Country Club, Beverly Hills Beverly Hilton, Beverly Hills Beverly Wilshire, Beverly Hills L'Ermitage, Beverly Hills Peninsula Beverly Hills, Beverly Hills Best Western, Big Bear Lake Motel 6, Big Bear Lake Proposed hotel, Big Bear Lake Post Ranch Inn, Big Sur Ventana Inn, Big Sur Rodeway Inn, Blythe Holiday Inn, Brentwood Fairfield Inn, Buena Park Hampton Inn, Buena Park Marriott Courtyard, Buena Park Hyatt Regency, Burlingame Airport Marriott, Burlingame Radisson Plaza-Proposed, Burlingame Good Nite Inn, Buttonwillow Country Inn, Calabassas Good Nite Inn, Calabassas Del Norte Inn, Camarillo Good Nite Inn, Camarillo Cambria Pines Lodge, Cambria Best Western Fireside Inn, Cambria Proposed Pruneyard Inn, Campbell Proposed Hotel, Capitola Allstar Inn, Carlsbad Carlsbad Inn, Carlsbad Inn of America, Carlsbad La Costa Resort and Spa, Carlsbad Olympic Resort, Carlsbad Royce Hotel, Cathedral City Sheraton Cerritos Towne Center, Cerritos Neighborhood Inn-Proposed, Chatsworth Holiday Inn, Chico Red Lion Hotel, Chico Otay Valley Travel Lodge, Chula Vista Howard Johnson's, Colton Concord Hilton, Concord Trees Inn, Concord Motel 6, Corona Loews Coronado Bay Resort, Coronado Ha' Penny Inn, Costa Mesa Red Lion Hotel, Costa Mesa Residence Inn, Costa Mesa Pacifica Hotel & Conference Center, Culver City Hospitality Valuation Services Qualifications of Suzanne R. Mellen, San Francisco, California CRE, MAI - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Ramada Inn, Culver City Marriott Courtyard, Cupertino Proposed Spa, Danville Furnace Creek Inn, Death Valley Furnace Creek Resort, Death Valley Stove Pipe Wells Village, Death Valley Hilton Hotel-Proposed, Del Mar Marriott Resort & Spa, Desert Springs Days Inn Diamond Bar, Diamond Bar Carlos Murphy's Restaurant, Emeryville Days Inn, Emeryville Lyon's Restaurant, Emeryville Proposed Woodfin Suites, Emeryville Budget Motel, Encinitas Marriott Tenaya Lodge, Fish Camp All-Suites-Proposed, Foster City Clubtel-Proposed, Foster City Holiday Inn, Foster City Marriott Courtyard, Foster City Hilton, Fremont Marriott Courtyard, Fremont Motel 6, Fremont Quality Inn, Fremont Allstar Inn, Fresno (2) Chateau Inn, Fresno Economy Inn, Fresno (2) Hacienda Resort and Conference Center, Fresno Holiday Inn, Fresno Marriott Courtyard, Fresno Picadilly Inn Airport, Fresno Travelers Inn, Fresno (3) Sierra Sport and Racquet Club, Fresno Griswold's Hotel, Fullerton Marriott Hotel, Fullerton Hyatt Regency-Proposed, Goleta Motel 6, Gilroy Red Lion Hotel, Glendale Hollywood Palm Hotel, Hollywood Waterfront Hilton, Huntington Beach Grand Champions Resort, Indian Wells Marriott Courtyard, Irvine Registry Hotel, Irvine Amador Inn, Jackson Proposed Hotel, Kern Co. Lafeyette Park Hotel, Lafeyette Residence Inn, La Jolla Hilton Lodge, Lake Arrowhead Squaw Creek Resort, Lake Tahoe Marriott Courtyard, Larkspur Proposed 50-Unit Motel, Little Lake Residence Inn, Livermore Breakers Hotel, Long Beach Holiday Inn, Long Beach Marriott Hotel, Long Beach Residence Inn, Long Beach Airport Park Hotel, Los Angeles Biltmore Hotel, Los Angeles Checkers Hotel, Los Angeles Econolodge-Proposed, Los Angeles Embassy Suites, Los Angeles Four Seasons, Los Angeles Hilton Hotel & Towers, Los Angeles Hilton LAX, Los Angeles Holiday Inn-LAX, Los Angeles Holiday Inn Crowne Plaza-LAX, Los Angeles Holiday Inn Express-Van Nuys, Los Angeles Hotel Inter-Continental, Los Angeles Hotel Sofitel Ma Maison, Los Angeles Marriott Courtyard-LAX, Los Angeles Playa Vista Development, Los Angeles Sofitel Ma Malson, Los Angeles Westin Bonaventure, Los Angeles Los Gatos Lodge, Los Gatos Economy Inns of America Motel, Madera Marriott Courtyard, Mira Mesa Barnabey's Hotel, Manhattan Beach Doubletree Hotel, Marina del Rey Holiday Inn Express, Marina del Rey Marina Suites Hotel, Marina del Rey Marina Beach Hotel, Marina del Rey Marriott Hotel, Marina del Rey Holiday Inn, Milpitas Motel Orleans, Modesto Red Lion Hotel, Modesto Doubletree Fisherman's Wharf, Monterey Doubletree Inn, Monterey Monterey Plaza Hotel, Monterey Sheraton Hotel, Monterey Inn at Morro Bay, Morro Bay Best Western Inn, Napa Valley Clarion Inn, Napa Valley Inn at Napa Valley, Napa Valley Sheraton Inn Napa Valley, Napa Proposed Windmill Inn, Napa Valley Silverado, Napa Valley Newark/Fremont Hilton, Newark Marriott Suites, Newport Beach Proposed Newport Coast Development, Newport Beach Newporter Resort Hotel, Newport Beach Sheraton Hotel, Newport Beach Shilo Inn, Oakhurst Holiday Inn Oakland Airport, Oakland Parc Oakland Hotel, Oakland Resort at Squaw Creek, Olympic Valley Clarion Hotel, Ontario Holiday Inn, Ontario Red Lion Hotel,Ontario Woodfin Suites, Orange Holiday Inn, Oxnard Super 8 Motel, Palmdale Embassy Suite, Palm Desert Canyon Resort Hotel, Palm Springs Desert Princess, Palm Springs Palm Canyon, Palm Springs Palm Springs Spa Hotel, Palm Springs Spa Hotel & Mineral Springs, Palm Springs Holiday Inn, Palo Alto Cascade Ranch Lodge, Pescadero Elks Lodge, Petaluma Best Western Grande Arroyo, Pismo Beach Proposed Hilton, Pismo Beach Fairfield Inn, Placentia Pleasant Hill Inn, Pleasant Hill Black Angus Restaurant, Pleasant Hill Savoy Restaurant, Pleasant Hill Hilton Hotel, Pleasanton Holiday Inn, Pleasanton Marriott Courtyard, Pleasanton Shilo Inn, Pomona Country Inn, Port Hueneme Economy Inn, Rancho Cordova Marriott Courtyard, Rancho Cordova Quality Suites, Rancho Cordova Marriott's Rancho Las Palmas, Rancho Mirage Grand Manor Inn, Redding Motel Orleans East, Redding Motel 6, Redding Park Terrace, Redding Red Lion Inn, Redding Shasta Inn, Redding Good Nite Inn, Redlands Sheraton Redondo Beach, Redondo Beach Hotel Sofitel at Redwood Shores, Redwood City Carriage Inn, Ridgecrest Good Nite Inn, Rohnert Park Red Lion Hotel, Rohnert Park Mission Inn, Riverside Allstar Inn, Sacramento (4) Arco Arena, Sacramento Clarion Hotel, Sacramento Hospitality Valuation Services Qualifications of Suzanne R. Mellen, San Francisco, California CRE, MAI - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Hilton Inn, Sacramento Holiday Inn, Sacramento Hyatt Regency, Sacramento Marriott Courtyard, Sacramento Motel Orleans, Sacramento Peregrine Real Estate Trust, Sacramento Radisson Hotel, Sacramento Red Lion Hotel-Sacramento, Sacramento Red Lion-Sacramento Inn, Sacramento Sacramento Hilton, Sacramento Sacramento Inn, Sacramento Sierra Inn, Sacramento Sterling Hotel, Sacramento Travelers Inn, Sacramento Proposed Vizcaya Catering Hall, Sacramento Woodlake Inn, Sacramento Proposed 60-Unit Hotel, Sacramento Marriott Courtyard, San Bruno Clarion Bay View, San Diego Comfort Inn Old Town, San Diego Embassy Suites-La Jolla, San Diego Executive Lodge, San Diego Hanalei Hotel, San Diego Holiday Inn, San Diego Howard Johnson, San Diego Hyatt Islandia, San Diego Hyatt Regency, San Diego Intercontinental Hotel, San Diego Kings Inn, San Diego La Jolla Village Inn, San Diego Marriott Hotel, San Diego Marriott Mission Valley, San Diego Mission Valley Inn, San Diego Proposed Hotel, San Diego Radisson Hotel, San Diego Ramada Limited Suites, San Diego Red Lion Hotel, San Diego Sheraton Harbor Island East, San Diego Sheraton Grand, San Diego Super 8 Motel-Point Loma, San Diego Symphony Towers, San Diego Town and Country Hotel, San Diego U.S. Grant Hotel, San Diego Bellevue Hotel, San Francisco Campton Place, San Francisco Cartwright Hotel, San Francisco Chancellor Hotel, San Francisco Comfort Inn by the Bay, San Francisco Donatello Hotel, San Francisco Embarcadero Inn, San Francisco Fairmont Hotel, San Francisco Four Seasons Clift, San Francisco Grand Hyatt, San Francisco Harbor Court Hotel, San Francisco Holiday Inn-Civic Center, San Francisco Holiday Inn-Fisherman's Wharf, San Francisco Holiday Inn-Golden Gateway, San Francisco Holiday Lodge, San Francisco Hotel Diva, San Francisco Hotel Nikko Hotel Union Square, San Francisco Howard Johnson's Pickwick Hotel, San Francisco Hyatt at Fisherman's Wharf, San Francisco Hyatt Regency Embarcadero, San Francisco Proposed Inn at Fisherman's Wharf, San Francisco Inn at the Opera, San Francisco King George Hotel, San Francisco Lambourne Hotel, San Francisco Le Meridien Hotel, San Francisco The Majestic, San Francisco Mark Twain Hotel, San Francisco Marriott Fisherman's Wharf, San Francisco Orchard Hotel, San Francisco Parc Fifty-Five, San Francisco Park Hyatt, San Francisco Portman Hotel, San Francisco Prescott Hotel, San Francisco Queen Anne Hotel, San Francisco Ramada Hotel, San Francisco Regis Hotel, San Francisco Ritz Carlton-Proposed, San Francisco San Francisco Airport Hilton, San Francisco San Francisco Hilton, San Francisco San Francisco Hotel, San Francisco San Francisco Marriott, San Francisco Savoy Hotel, San Francisco Sheraton Fisherman's Wharf, San Francisco Sir Francis Drake Hotel, San Francisco Stanford Court, San Francisco Super 8 Motel at Fisherman's Wharf Proposed Inn at 2961 Pacific Avenue, San Francisco Tuscan Inn, San Francisco Marriott Courtyard, San Francisco Airport Fairmont Hotel, San Jose Holiday Inn, San Jose Ramada Renaissance Hotel, San Jose Red Lion-San Jose, San Jose Islander Lodge Motel, San Leandro Apple Farm Inn, San Luis Obispo Pacific Suites Hotel, San Luis Obispo Benlamin Franklin Hotel, San Mateo Dunfey Hotel, San Mateo Holiday Inn, San Mateo Holiday Inn Express, San Mateo Embassy Suites, San Rafael Marriott Hotel, San Ramon California Palms, Santa Ana Compri Hotel, Santa Ana Executive Inn, Santa Ana Executive Lodge, Santa Ana Orange County Ramada Hotel, Santa Ana El Encanto Hotel, Santa Barbara Fess Parker's Red Lion Resort, Santa Barbara Santa Barbara Inn, Santa Barbara San Ysidro Ranch, Santa Barbara Budget Inn, Santa Clara Embassy Suites-Santa Clara, Santa Clara Marriott Hotel, Santa Clara Quality Suites, Santa Clara Inn at Pasatiempo, Santa Cruz Dream Inn, Santa Cruz Motel 6, Santa Maria Santa Maria Airport Hilton, Santa Maria Holiday Inn at the Pier, Santa Monica Ocean Avenue Hotel, Santa Monica Proposed EconoLodge, Santa Monica Park Hyatt Hotel, Santa Monica Santa Monica Beach Hotel, Santa Monica Holiday Inn, Santa Nella Fountain Grove Inn, Santa Rosa Holiday Inn, Santa Rosa Days Inn Seaside, Seaside Embassy Suites, Seaside Seaside 8, Seaside Radisson Valley Center Hotel, Sherman Oaks Ramada Inn, Solana Beach Danish Country Inn, Solvang Red Lion Inn, Sonoma Timberwolf Lodge, South Lake Tahoe Crown Sterling Suites, South San Francisco Holiday Inn, South San Francisco La Quinta Inn, South San Francisco Proposed 390-Room Hotel, South San Francisco Harvest Inn, St. Helena Motel Orleans, Stockton Sheraton Hotel-Proposed, Stockton Stockton Hilton, Stockton Hospitality Valuation Services Qualifications of Suzanne R. Mellen, San Francisco, California CRE, MAI - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Holiday Inn, Sunnyvale Neighborhood Suites Hotel, Sunnyvale Residence Inn Silicon Valley II, Sunnyvale Sunnyvale Hilton, Sunnyvale Super 8, Sunnyvale Good Nite Inn, Sylmar Embassy Suites-Temecula, Temecula Holiday Inn - Torrance, Torrance MCA Hotel-Proposed, Universal City Holiday Inn, Van Nuys Habortown Marina Resort, Ventura Ocean Resorts/Harbortown Hotel, Ventura Sheraton Hotel, Ventura Holiday Inn, Walnut Creek Parkside Hotel, Walnut Creek Royce Hotel-Proposed, Walnut Creek Walnut Creek Marriott, Walnut Creek Le Bel Age, West Hollywood Le Dufy, West Hollywood Le Mondrian, West Hollywood Le Montrose, West Hollywood Whittier Hilton, Whittier Woodland Hotel & Conference Center- Proposed, Woodland Warner Center Marriott, Woodland Hills Skylonda Retreat, Woodside Marriott Tenaya Lodge-Proposed, Yosemite Motel Orleans, Yuba City COLORADO Hampton Inn, Aurora Holiday Inn Southeast, Aurora Downtown Boulder Hotel, Boulder Hilton Harvest House, Boulder Holiday Inn, Boulder Embassy Suites, Colorado Springs Hilton, Colorado Springs Proposed Double Eagle Casino Hotel, Cripple Creek Le Baron Hotel, Denver Brown Palace, Denver Days lnn-Arapahoe, Denver Days lnn-CoIfax, Denver Embassy Suites, Denver Radisson, Denver Denver Hilton, Englewood Proposed Hampton Inn, Lakewood Westin Hotel, Vail CONNECTICUT Holiday Inn, Darien Proposed Days Inn, Enfield Hartford Hilton, Hartford Motel 6, Hartford Executive Hotel, Stamford Harley Hotel, Stamford Holiday lnn-Crowne Plaza, Stamford DISTRICT OF COLUMBIA Fairmont Hotel, Washington Harambee House, Washington Hyatt Regency, Washington Ritz-Carlton, Washington River Inn, Washington St. James, Washington FLORIDA Holiday Inn, Altamonte Springs Embassy Suites, Boca Raton Petite Suites, Boca Raton Holiday Inn, Clearwater Holiday Inn Gulfview, Clearwater Holiday Inn Surfside, Clearwater Beach Holiday Inn-Airport, Ft. Lauderdale Holiday Inn-Beach, R. Lauderdale Holiday Inn-North, R. Lauderdale Holiday lnn-Madeira, Madeira Beach Holiday lnn-Calder, Miami Holiday Inn-International Drive, Orlando Holiday Inn-Lee Road, Orlando Peabody Hotel, Orlando Sheraton Jetport Inn, Orlando Sheraton Lakeside, Orlando Holiday Inn, Palm Beach Gardens Holiday lnn-Lido Beach, Sarasota Holiday Inn-Airport, Tampa Ramada Inn, Tampa GEORGIA Proposed Hyatt-Airport, Atlanta Motel 6, Atlanta Neighborhood Inn, Atlanta Stouffer's Hotel-Proposed, Atlanta Holiday lnn-Crowne Plaza College Park Howard Johnson's Forsyth Motel 6, Norcross HAWAII Ritz-Carlton Mauna Lani Royal Sea Cliff Resort, Hawaii Coco Palms Resort, Kauai Westin Kauai at Kauai Lagoons Resort, Kauai Grand Wailea Resort, Maui Maui Lu Resort, Maui Royal Hawaiian Hotel, Oahu Walkiki Gateway Hotel, Oahu Walkiki Sand Villa Hotel, Oahu IDAHO Motel 6, Coeur dAlene Cotton Tree Inn, Pocatello ILLINOIS Indian Lakes Resort, Bloomingdale Super 8 Motel, Bloomington Super 8 Motel, Champagne Mayfair Regent, Chicago, Super 8 Motel, Crystal Lake Super 8 Motel, Decatur Proposed Hotel, Des Plaines Radisson Suites, Downers Grove Hampton Inn, Elk Grove Holiday Inn, Elmhurst Orrington Hotel, Evanston Drury Inn, Fairview Heights Nordic Hills Resort, ltasca Holiday Inn, Joliet Super 8 Motel, Peru Super 8 Motel, Waukegan INDIANA Super 8 Motel, Columbus Sheraton Hotel, Gary Caesars Riverboat Casino Complex-Proposed, Harrison County Motel 6, Indianapolis Wyndham Garden Hotel, Indianapolis Hilton Inn, Jeflersonville Brown County Inn, Nashville IOWA Holiday Inn, Cedar Falls Collins Plaza, Cedar Rapids Hospitality Valuation Services Qualifications of Suzanne R. Mellen, San Francisco, California CRE, MAI - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ KANSAS Proposed Emerald City Resort, Kansas City Canterbury Inn/Knights Inn, Wichita KENTUCKY Holiday Inn-Central, Louisville Holiday Inn-Northeast, Louisville Ramada Inn East, Louisville LOUISIANA Howard Johnson's, Alexandria Embassy Suites, Baton Rouge Hilton Hotel, Baton Rouge Sheraton At New Orleans Airport, Kenner The Iberville Hotel, New Orleans Ramada Inn St. Charles, New Orleans MAINE Inn by the Sea, Cape Elizabeth MARYLAND Holiday Inn, Aberdeen Maryland Inn, Annapolis Best Western Motor Lodge, Chicopee Abbey, College Park Holiday Inn, Laurel Days Inn, Rockville Holiday Inn Crowne Plaza, Rockville Ramada Inn, Rockville MASSACHUSETTS Marriott Copley Place, Boston Meridien Hotel, Boston Federal House Inn, South Lee Holiday Inn, Springfield Sheraton, Sturbridge MICHIGAN Super 8 Motel, Battle Creek Howard Johnson's, Belleville Holiday Inn, Detroit Golden Harp-Proposed, Detroit Super 8 Motel, Kalamazoo Embassy Suites-Proposed, Livonia Embassy Suites, Uvonia Super 8 Motel, Muskegon Inn at the Bridge, Port Huron Super 8 Motel, Saginaw Comfort Suites, Sterling Heights Holiday Inn, Troy Holiday Inn, Warren Motel 6, Warren Super 8 Motel, Wyoming MINNESOTA Motel 6, Minneapolis Proposed Motel, Montevideo Motel 6, Rochester Radisson Plaza Hotel, Rochester MISSISSIPPI Motel 6, Hattiesburg Howard Johnson's, Jackson Quality Inn, Oxford MISSOURI Holiday Inn, Kansas City Holiday Inn, Springfield Clarion Hotel, St. Louis Executive Inn, St. Louis Holiday Inn Sports Complex, St. Louis Sheraton Airport, St. Louis Proposed Hotel, Unity Village MONTANA Holiday Inn, Missoula Red Lion Hotel, Missoula NEBRASKA Marriott Hotel, Omaha Red Lion Inn, Omaha NEVADA Ormsby House Hotel and Casino, Carson City Airport Inn, Las Vegas Aladdin Hotel & Casino. Las Vegas Alexis Park Hotel, Las Vegas Proposed Homewood Suites, Las Vegas Hotel & Casino El Rancho, Las Vegas Howard Johnson Hotel & Casino, Las Vegas Jockey Club, Las Vegas Paradise Resort Hotel, Las Vegas NEW JERSEY Deauville Hotel, Atlantic City Harrah's Marina Hotel Casino, Atlantic City Sands Hotel & Casino, Atlantic City Tropicana Hotel & Casino, Atlantic City Cherry Hill Inn, Cherry Hill Proposed Ramada Inn, Elizabeth Proposed Ramada Inn, Franklin Township Proposed Summerfield Suites Morristown, Hanover Proposed Summerfield Suites Parsippany, Hanover Holiday Inn, Jamesburg Headquarters Plaza, Morristown Howard Johnson's Mount Holly Mt. Laurel Hilton, Mt. Laurel Holiday Inn, Newark Howard Johnson's, Saddle Brook Marriott Hotel, Somerset Motel, Wrightstown Five Churches Chicken Restaurants, Various Locations NEW MEXICO Hampton Inn, Albuquerque Ramada Hotel Classic, Albuquerque Las Cruces Hilton, Las Cruces Homewood Suites, Santa Fe Inn at Loretto, Santa Fe Sheraton de Santa Fe, Santa Fe Rancho Ramada Inn de Taos, Taos NEW YORK Hilton Hotel, Albany Buffalo Hotel, Buffalo Proposed Airport Hotel, Buffalo Nevele Hotel, Ellenville Howard Johnson's, Elmsford Ramada Inn, Hauppauge Hilton Hotel, Lake Placid Proposed Hotel, New Rochelle Hospitality Valuation Services Qualifications of Suzanne R. Mellen, San Francisco, California CRE, MAI - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ Ramada Plaza, New Rochelle Sheraton Inn, New Rochelle Barbizon Plaza Hotel, New York Berkshire Place, New York Century Paramount Hotel, New York Executive Hotel, New York Halloran House, New York Hampton House, New York Holland Hotel, New York Howard Hotel, New York Mayfair Regent, New York Nova-Park Gotham, New York Parker Meridien Hotel, New York Proposed Soho Hotel, New York Tudor Hotel, New York York Club, New York Sheraton Inn, Ossining Proposed Hotel, Saratoga Howard Johnson's, Smithtown Hampton Inn, Syracuse Sheraton Nassau Hotel, Uniondale Turning Stone Casino, Verona Roger Smith Hotel, White Plains NORTH CAROLINA Motel 6, Durham Embassy Suites, Greensboro Hilton Inn, Greensboro Hilton Inn, Raleigh Motel 6, Rocky Mount Hilton Inn, Winston-Salem OHIO Holiday Inn Cascade, Akron Embassy Suites, Blue Ash Proposed Embassy Suites, Cincinnati Howard Johnson's, Cincinnati Marriott Inn, Cincinnati Radisson Inn, Cincinnati Vernon Manor, Cincinnati Holiday Inn Lakeside, Cleveland Sheraton Hopkins, Cleveland Holiday Inn, Columbus Woodfin Hotel, Columbus Daytonian Hilton, Dayton Motel 6, Dayton Holiday Inn, Toledo OKLAHOMA Fountainhead Resort, McIntosh County Arrowhead Resort, Pittsburgh County OREGON Red Lion Inn, Astoria Inn at Face Rock, Bandon Shilo Inn, Beaverton Red Lion Inn - North, Bend Red Lion Inn - Coos Bay, Coos Bay Econolodge, Eugene Execulodge, Eugene Red Lion Inn, Eugene Big Creek Resort, Fiorence Salishan Lodge, Gleneden Beach Shilo Inn, Grants Pass Proposed Courtyard Hotel, Hillsboro Proposed Residence Inn, Hillsboro Red Lion Inn, Medford Red Lion Hotel, Pendleton Columbia River Red Lion, Portland Embassy Suites, Portland Holiday Inn, Portland Proposed Sheraton Suites, Portland Red Lion Hotel-Portland Downtown, Portland Red Lion Inn-Lloyd Center, Portland Residence Inn-Lloyd Center, Portland Vintage Plaza Hotel, Portland Wells Building, Portland Capitol Inn, Salem Execulodge, Salem Red Lion Inn, Seaside Red Lion Inn, Springfield Sunriver Resort, Sunriver Red Lion Inn, Tigard PENNSYLVANIA Embassy Suites - Pittsburgh, Coraopolis Days Inn, Danville Rittenhouse Towers, Philadelphia Motel 6, Pittsburgh Hilton At Lackawanna Station, Scranton SOUTH CAROLINA Holiday Inn, Charleston Holiday Inn, Charleston-Riverview Embassy Suites, Columbia Motel 6, Columbia Ramada Inn, Greenville Hilton Head Inn, Hilton Head Save Inn, Lake Hartwell TENNESSEE Motel 6, Chattanooga Holiday Inn, Jackson Holiday Inn, Memphis Motel 6, Memphis Days Inn, Nashville Hampton Inn, Nashville TEXAS Proposed Summerfield Suites Hotel, Addison Days Inn, Amarillo Motel 6, Amarillo Super 8 Motel, Amarillo Holiday Inn, Austin Days Inn, Corpus Christi Doubletree Inn, Dallas Fairmont Hotel, Dallas Marriott Park Central, Dallas Marriott Quorum, Dallas Melrose Hotel, Dallas Motel 6, Dallas Park Plaza, Dallas Ramada Inn Convention Center, Dallas Summit Hotel, Dallas Howard Johnson's, East Dallas Allstar Inn, El Paso Embassy Suites, El Paso Travelers Inn, El Paso Metro Center Hotel, Fort Worth Embassy Suites, Houston Holiday Inn-Hobby, Houston Houston House, Houston Houstonian Hotel, Houston Motel 6, Houston Stoufler Rennaisance, Houston Proposed Hampton Inn, Irving Holiday Inn, Lubbock Crockett Hotel, San Antonio UTAH Utah Trails Resort, Kanab Seven Peaks Resort Hotel, Provo Red Lion Hotel, Salt Lake City Hospitality Valuation Services Qualifications of Suzanne R. Mellen, San Francisco, California CRE, MAI - -------------------------------------------------------------------------------- ============= HVS - ------------- INTERNATIONAL ============= ================================================================================ VIRGINIA Howard Johnson's, Alexandria Hyatt Arlington, Arlington Holiday Inn Crowne Plaza, Crystal City Motel 6, Fredericksburg Omni International Hotel, Norfolk Holiday Inn West End, Richmond WASHINGTON Embassy Suites, Bellevue Hampton Inn, Bellevue Red Lion Inn Bellevue Center, Bellevue Motel 6, Issaquah Red Lion Inn, Kelso Embassy Suites, Lynwood Red Lion Inn, Pasco Red Lion Inn, Richland Hampton Inn, Sea-Tac Holiday Inn Sea-Tac, Sea-Tac Red Lion Hotel, Sea-Tac Doubletree Inn, Seattle Hampton Inn, Seattle Holiday Inn Crowne Plaza, Seattle Red Lion Hotel, Seattle Red Lion Inn, Spokane Skamania Lodge, Stevenson Park Shore Inn, Tacoma Red Lion Inn, Tacoma Sheraton Hotel, Tacoma Doubletree Suites, Tukwila Hampton Inn, Tukwila Red Lion Inn at the Quay, Vancouver Red Lion Inn, Wenatchee Red Lion Inn, Yakima WEST VIRGINIA Holiday Inn Charleston House, Charleston Holiday Inn, Huntington Howard Johnson's, Wheeling WISCONSIN Wyndham Garden Hotel, Brookfield Super 8 Motel, Jamesville Super 8 Motel, Kenosha Holiday Inn-Airport, Milwaukee Holiday Inn-West, Milwaukee WYOMING Days Inn, Casper Flying L Skytel, Cody CANADA EconoLodge, Hull, Quebec Sutton Place Hotel & Apartments,Toronto GUAM Proposed Hotel, Tamuning MEXICO Omni Hotel, Ixtapa La Jolla de Mismaloya, Puerto Vallarta PUERTO RICO Carib Inn, San Juan This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. MANSION GROVE APARTMENTS 502 MANSION PARK DRIVE SANTA CLARA, CALIFORNIA LANDAUER REAL ESTATE COUNSELORS TABLE OF CONTENTS CERTIFICATION................................................................i LIMITING CONDITIONS........................................................iii SPECIAL ASSUMPTION/LIMITING CONDITIONS......................................vi EXECUTIVE SUMMARY..........................................................vii IDENTIFICATION OF THE SUBJECT PROPERTY.......................................1 HISTORY OF THE SUBJECT PROPERTY..............................................1 PURPOSE OF THE APPRAISAL.....................................................1 SCOPE OF THE APPRAISAL.......................................................1 DEFINITION OF MARKET VALUE ..................................................2 PROPERTY RIGHTS APPRAISED....................................................2 DATE OF VALUE................................................................3 LEGAL DESCRIPTION............................................................3 OVERVIEW OF THE SANTA CLARA COUNTY REGION....................................4 NEIGHBORHOOD DESCRIPTION....................................................11 SITE DESCRIPTION............................................................13 IMPROVEMENT DESCRIPTION.....................................................18 MARKET ANALYSIS.............................................................22 HIGHEST AND BEST USE........................................................24 VALUATION METHODOLOGY.......................................................28 SALES COMPARISON APPROACH...................................................29 INCOME APPROACH.............................................................36 RECONCILIATION..............................................................53 ADDENDA.....................................................................55 LANDAUER i REAL ESTATE COUNSELORS CERTIFICATION CERTIFICATION We certify that, to the best of my knowledge and belief; 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions and conclusions, are limited only by the reported assumptions and limiting conditions, and are our personal, unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in the property that is the subject of this report, and we have no personal interest or bias with respect to the parties involved. 4. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event. 5. Our analyses, opinions, and conclusions were developed, and this report has been prepared in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Practice of the Appraisal Institute and the Uniform Standards of Professional Appraisal Practice promulgated by the Appraisal Standard Board of the Appraisal Foundation. 6. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 7. Rodney A. Wycoff Jr., MAI, CRE and James C. Kafes MAI, CRE, have completed the requirements for certification under the continuing education program of the Appraisal Institute. 8. Rodney A. Wycoff Jr., MAI, CRE and John P. Ackerman are currently certified with the State of California Office of Real Estate Appraisers and are licensed as Certified General Real Estate Appraisers. Mr. Wycoff's certification is valid through October 3, 2000. Mr. Ackerman's certification is valid through March 3, 2001. 9. John P. Ackerman has made a personal inspection of the property that is the subject of this report. 10. Rodney A. Wycoff, James C. Kafes and Kevin D. Gray did not inspect the property that is the subject of this report. 11. No one other that the undersigned provided significant professional assistance in the preparation of this report. LANDAUER ii REAL ESTATE COUNSELORS CERTIFICATION 12. The undersigned has the knowledge and experience to complete this appraisal assignment and has appraised this property type previously. Please see the Professional Qualifications included in the Addenda to this report for additional information about the appraiser's education and work experience. /s/ John P. Ackerman ------------------------------ John P. Ackerman Manager /s/ Rodney A. Wycoff ------------------------------ Rodney A. Wycoff Jr., MAI, CRE Senior Managing Director /s/ James C. Kafes ------------------------------ James C. Kafes, MAI, CRE Executive Managing Director /s/ Kevin D. Gray ------------------------------ Kevin D. Gray, CRE Managing Director LANDAUER iii REAL ESTATE COUNSELORS LIMITING CONDITIONS LIMITING CONDITIONS This report is made expressly subject to the conditions and stipulations following: 1. Date and definitions of value, together with other definitions and assumptions on which our analyses are based, are set forth in appropriate sections of this report. These are to be considered part of these limiting conditions as if included here in their entirety. 2. The conclusions stated herein, including values which are expressed in terms of the U. S. Dollar, apply only as of the date of value and are based on prevailing physical and economic conditions and available information at that time. Economic projections do not represent forecasting of future events. Rather, they reflect a method commonly used by investors to gauge the effect of anticipated trends on investment yields. No representation is made as to the effect of subsequent events which may significantly alter the conclusions reported herein. 3. Title to the property is assumed to be marketable. The property is considered as being under responsible ownership and free of all encumbrances except as specifically discussed herein. 4. Information reported herein has been obtained from reliable sources and, where feasible, has been verified. The appraisers reserve the right to make appropriate revisions in the event of discovery of additional or more accurate data. 5. No responsibility is accepted by Landauer for considerations requiring expertise in other fields. Included in this category are ownership, legal description and other legal matters, survey of property boundaries, geologic considerations including soils and seismic stability, civil, structural or other engineering, and identification of hazardous or toxic substances. Data furnished or obtained from public sources relative to these matters has been adopted and is assumed to be correct. 6. Except where specifically noted, we have no cause to expect the existence of undisclosed easements, encroachments or defects in title, access, geology (the California coastal region is prone to earthquakes), structural integrity or mechanical systems. Any need for further study indicated by our investigation has been disclosed to the client and/or noted in the report; results of any such studies furnished have been accepted and the source identified. Maps and other graphic materials reproduced herein are for illustrative purposes only, and are not to be relied on for factual information. LANDAUER iv REAL ESTATE COUNSELORS LIMITING CONDITIONS 7. The appraiser has inspected the subject property with due diligence expected of a professional real estate appraiser. The appraisers are not qualified to detect hazardous waste and/or toxic materials. Any comment by the appraisers that might suggest the possibility of the presence of such substances should not be taken as confirmation of the presence of hazardous waste and/or toxic material. Such determination would require investigation by a qualified expert in the field of environmental assessment. The presence of substances such as asbestos, urea-formaldehyde foam insulation or other potentially hazardous material may affect the value of the property. The appraisers' value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any environmental conditions, or for any expertise or engineering knowledge required to discover them. The appraisers' descriptions and resulting comments are the result of the routine observations made during the appraisal. 8. This appraisal covers only the real property described herein. Unless specifically stated to the contrary, it does not include consideration of mineral rights or related right of entry, nor personal property or the removal thereof. Values reported herein are not intended to be valid in any other context, nor are any conclusions as to unit values applicable to any other property or utilization than that specifically identified herein. 9. By reason of this assignment, testimony or attendance in court or at any government or other hearing with reference to the property is not required without prior arrangements having been made relative to such additional employment. 10. Use and disclosure of the contents of this report is governed by the Bylaws and Regulations of the Appraisal Institute. The Appraisal Institute reserves the right to authorize its representatives to review this report and its supporting documentation. Confidential distribution of copies of this report in its entirety may be made subject to the sole control of the addressee, however, excerpts may not be given to any third party without prior written consent. 11. Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraisers, or the firm with which they are connected, or any reference to the Appraisal Institute or to the MAI or SRA designation) shall be disseminated to the general public through advertising or sales media, public relations media, news media, or any other public means of communication without prior written consent. LANDAUER v REAL ESTATE COUNSELORS LIMITING CONDITIONS 12. The Americans with Disabilities Act ("ADA") became effective January 26, 1992. Landauer has not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the property. Since we have no direct evidence relating to this issue, we did not consider possible non-compliance with the requirements of ADA in estimating the value of the property. LANDAUER vi REAL ESTATE COUNSELORS LIMITING CONDITIONS SPECIAL ASSUMPTION/LIMITING CONDITIONS 1. According to client provided information reviewed in the course of our research, the subject site has contaminated soils and ground water. The subject is on the California Department of Health Services as being part of the Hazardous Substances Cleanup Bond Expenditure Plan (State Superfund List). We have assumed that the subject site is not impacted by the noted soil conditions beyond the current cost of monitoring. Any remediation expense incurred could have a material impact on the value reported herein. LANDAUER vii REAL ESTATE COUNSELORS EXECUTIVE SUMMARY THE MANSION GROVE APARTMENTS EXECUTIVE SUMMARY Property Name: Mansion Grove Apartments Project Location: 502 Mansion Park Drive Santa Clara, California Project Description Site: The site contains an area of 28.77 gross acres and its shape is irregular. It is situated on the east side of Lick Mill Boulevard just north of Montague Expressway, in the City and County of Santa Clara, California. Improvements: Improvements consist of a 877-unit apartment complex, completed in June of 1989. The project is comprised in 24, 3-story multi-family residential buildings, a 1-story cottage, and a clubhouse. There is parking for a total of 1,625 cars of which 1,124 spaces are within garages and 501 spaces are open parking. Common area amenities include three pools and saunas, three tennis courts, exercise and aerobics rooms, and a clubhouse with a kitchen and fireplace. The complex also includes the historic Lick Mansion grounds as an amenity. Assessor's Parcel No.: 097-08-024, 025, 026, 028, 035 and 036 Zoning: Site is zoned PD-HT (Planned Development - Historic Combining) by the city of Santa Clara. Highest and Best Use As If Vacant: Development of an apartment project. As Improved: A 877-unit apartment project. Market Value Conclusions Date of Value: April 9, 1997 Cost Approach: Not Used Sales Comparison: $120,000,000 Income Approach: $118,000,000 Concluded Value: $118,000,000 [Letterhead of Landauer Associates, Inc.] May 7, 1997 MORGAN STANLEY MORTGAGE CAPITAL 1585 Broadway New York, NY 10036-C017 Re: Mansion Grove Apartments 502 Mansion Park Drive Santa Clara, California Landauer File No.: L123-97 Dear Sirs: At your request, we have completed an appraisal of the market value of the leased fee interest in the 877-unit Mansion Grove apartment complex located in Santa Clara, California. Our conclusions and documentation are contained in the following report. The project consists of 24, three-story multi-family residential buildings with a total of 725,350 net leasable square feet and a recreation building with 5,800 square feet. Each of the residential buildings has a partial subterranean parking garage and the garage area totals 353,984 square feet. Construction of the improvements were started in 1987 and were completed in June of 1989. There are a total of 1,625 spaces in the complex of which 1,124 are within parking garages and another 501 spaces are surface parking spaces. The current occupancy is approximately 93 percent. The date of our last inspection is April 9, 1997. The date of value is April 9, 1997. The date of the report is May 7, 1997. Based on the research and analysis contained in the following report, it is our opinion that the estimated market value of the leased fee estate of the subject property as of April 9, 1997 is: ONE HUNDRED EIGHTEEN MILLION DOLLARS ($118,000,000) LANDAUER REAL ESTATE COUNSELORS MORGAN STANLEY MORTGAGE CAPITAL May 7, 1997 Page 2 This report is written in conformance with the Code of Professional Ethics and Uniform Standards of Professional Appraisal Practice of the Appraisal Institute and FIRREA. Certification, Assumptions and Limiting Conditions included herein, are part of that process. The report also sets forth, in part, the data upon which our opinions are predicated. Additional detailed information upon which these findings are based will be retained in our files and made available upon request. The subject has been identified by the California Department of Health Services as being part of the Hazardous Substances Cleanup Bond Expenditure Plan (Superfund List) because of soil and water contamination. A special assumption of this report is that the subject is not impacted by contamination beyond the costs of the current monitoring program. Please refer to Pages vi and 13 for further explanation. Respectfully submitted, LANDAUER ASSOCIATES, INC. /s/ Rodney A. Wycoff Jr. /s/ James C. Kafes - ------------------------------ ------------------------------ Rodney A. Wycoff Jr., MAI, CRE James C. Kafes, MAI Senior Managing Director Executive Managing Director /s/ John P. Ackerman /s/ Kevin D. Gray - ------------------------------ ------------------------------ John P. Ackerman Kevin D. Gray Manager Managing Director LANDAUER 1 REAL ESTATE COUNSELORS INTRODUCTION IDENTIFICATION OF THE SUBJECT PROPERTY The subject property consists of a 877-unit apartment complex commonly known as Mansion Grove Apartments. The street address is 502 Mansion Park Drive, Santa Clara, California. The Santa Clara County Assessor's Office identifies the subject as Parcel Nos. 097-08-024, 025, 026, 028, 035 and 036. The subject is physically located on the east side of Lick Mill Boulevard, 560 feet north of Montague Expressway, in the City and County of Santa Clara. HISTORY OF THE SUBJECT PROPERTY The subject property is vested in Morgan Stanley Mortgage Capital Incorporated. The property was acquired from Teachers Insurance and Annuity Association of America and the deed recorded on October 28, 1996. The property was purchased as part of a portfolio which included mortgages and real estate. The purchase price allocation of the Mansion Grove Apartments was not available. PURPOSE OF THE APPRAISAL The purpose of this appraisal is to estimate the market value of the leased fee interest in the subject property, as of the date of value. The appraisal report is for internal purposes by our client, Morgan Stanley Mortgage Capital. SCOPE OF THE APPRAISAL According to the Appraisal Institute's Code of Professional Ethics and Uniform Standards of Professional Practice, the scope of the appraisal is cited as "the extent of the process of collecting, confirming, and reporting data" included in an appraisal report. The procedures for this narrative report includes an analysis of the property's physical, locational, and investment characteristics; and investigation and evaluation of the market, competitive environment, and supply-demand factors; consideration of investment criteria for and the marketability of apartment properties; and the formulation of the Cost, Sales Comparison and Income Approaches to valuation. In preparing this appraisal report we have evaluated and analyzed building and comparable rental data, and historical and budgeted operating statistics. Additionally, we have conducted interviews with apartment building property managers and brokers, and public officials and their staffs. Lastly, we have physically inspected the subject property, the sales comparables and the rental comparables. LANDAUER 2 REAL ESTATE COUNSELORS INTRODUCTION For the purposes of this analysis, the income approach involves the direct capitalization and discounted cash flow techniques. These techniques are considered reflective of investor behavior and appropriate in consideration of the subject's stabilized occupancy. The sales comparison approach involved analyzing sales data on the basis of price per unit (DU), price per square foot of rentable building area and the gross income multiplier (GIM). The cost approach was not used. DEFINITION OF MARKET VALUE "Market value" means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeable, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and acting in what they consider their own best interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale."(1) PROPERTY RIGHTS APPRAISED Leased fee estate is defined as follows: "An ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others; the rights of lessor or the leased fee owner and leased fee are specified by contract terms contained within the lease."(2) - ---------- (1) Office of the Comptroller of the Currency under 12 CRF, part 34, Subpart C-Appraisals, 34.42 Definition [f]. Subpart C-Appraisals, 34.42 Definition [f]. (2) American Institute of Real Estate Appraisers, The Dictionary of Real Estate Appraisal, 3rd Edition, page 140 (Chicago: American Institute of Real Estate Appraisers, 1993). LANDAUER 3 REAL ESTATE COUNSELORS INTRODUCTION DATE OF VALUE The analyses, opinions and conclusions set forth apply only to the date of value, April 9, 1997. The property was inspected on April 9, 1997. LEGAL DESCRIPTION The land referred to in this report is situated in the State of California, County of Santa Clara and is described as follows: All of Lots 1, 2, and 3, Tract No. 8066, as shown on that certain Map entitled Mansion Grove, which Map was filed for record in the Office of the Recorder of the County of Santa Clara, State of California on July 28, 1988, in Book 589 of Maps pages 22 and 23; and as Amended by that certain Map entitled, " Amending Map of Mansion Grove Tract No. 8060", which map was filed for record January 23, 1991 in Book 623 of Maps, pages 27 and 28 in the office of the Recorder of the County of Santa Clara, State of California [GRAPHIC OMITTED] Location Map LANDAUER 4 REAL ESTATE COUNSELORS OVERVIEW OF THE SANTA CLARA COUNTY REGION OVERVIEW OF THE SANTA CLARA COUNTY REGION GEOGRAPHY Santa Clara County is located at the southern end of the San Francisco Bay in northern California. To the north of the County are Alameda County and the San Francisco Bay; Stanlislaus County forms its eastern border; San Benito County forms its southern border; and to the west are Santa Cruz and San Mateo counties. A maritime climate combined with fog throughout much of the day provides comfortable temperatures for the majority of the year. The larger Bay Area is formed by nine counties within six Primary Metropolitan Statistical Areas (PMSAs). The six PMSAs and the counties that comprise each are: o The San Francisco PMSA: San Francisco County, San Mateo County, and Marin County. o The Oakland PMSA: Alameda County and Contra Costa County. o The San Jose PMSA: Santa Clara County. o The Santa Rosa-Petaluma PMSA: Sonoma County. o Vallejo-Fairfield Napa PMSA: Napa County and Solano County. o Santa Cruz PMSA: Santa Cruz County. Residents of the Bay Area describe the counties within each PMSA differently. They call San Francisco, Marin, Sonoma, Napa and Solano Counties the North Bay. San Mateo County is called the Peninsula. The East Bay refers to Alameda and Contra Costa Counties. Santa Clara County is commonly known as the Silicon Valley due to its large concentration of computer manufacturers. Santa Cruz has not yet acquired a name different from its own and has only recently been added to the nine Primary Metropolitan Statistical Areas by the conductors of the 1990 Census. TRANSPORTATION The Bay Area has a comprehensive infrastructure that is strategically situated for international communication and trade. The Bay attracts many corporations from Pacific Rim countries and Asia interested in trade via shipping, and it has become an increasingly strong economic center providing many foreign goods to virtually every state east of California. Santa Clara County is located south of the San Francisco Bay and contains no major bodies of water aside from a small portion of the lower tip of the Bay, although several small reservoirs and lakes are scattered throughout the area. As a result, bridges are not a major facet of this area unlike many of the other bay area counties. [GRAPHIC OMITTED] Area Map LANDAUER 5 REAL ESTATE COUNSELORS OVERVIEW OF THE SANTA CLARA COUNTY REGION Urban and suburban transportation is furnished by Santa Clara County Transit. Interstate passenger service is provided by Greyhound Bus Lines and Amtrak. CalTrain provides additional passenger and freight rail service. Three primary airports provide regularly scheduled commercial flights: the San Francisco International Airport, the San Jose International Airport and the Oakland Airport. The San Francisco International Airport is the nation's third busiest airport with approximately 31 million passengers departing and arriving annually. A planned expansion of the airport is underway which has and will continue to provide a boost to the entire Bay Area economy. The San Jose International Airport, which has a number of major airline carriers, is also rapidly expanding to serve the Silicon Valley region. Presented in the following table are statistics on the rate of growth in passenger travel through San Jose International Airport. PASSENGER ACTIVITY AT SAN JOSE INTERNATIONAL AIRPORT 1990 TO 1996 Year Enplanements Percent Change ---- ------------ -------------- 1990 3,389,239 -- 1991 3,535,355 4.3% 1992 3,596,278 1.7% 1993 3,500,736 (2.7%) 1994 4,030,625 15.1% 1995 4,415,791 9.6% 1996 4,958,966 12.3% Compound Annual Growth 1990-1996 5.6% Source: San Jose International Airport Several major highways are available to the county. The US-101 Highway runs from the northwest to the south of the county providing access to San Francisco and Los Angeles. Interstate 880 extends in a north/south direction connecting San Jose to Oakland and becomes State Highway 17 just south of Interstate 280 continuing into Santa Cruz County. Interstate 280 begins at US-101 and then loops around to the northwest continuing on to San Francisco. LANDAUER 6 REAL ESTATE COUNSELORS OVERVIEW OF THE SANTA CLARA COUNTY REGION SOCIOECONOMIC TRENDS Population Based upon DRI estimates, the San Jose PMSA had a population of 1,578,000 in the fourth quarter of 1996. This is a population increase of 282,929 since 1980, which equates to an annual growth rate of 1.24 percent. The state of California had a population of 31,900,000 in the fourth quarter of 1996. Since 1980, the state population has increased by 8,232,098, or 1.88 percent annually. Population in 1996 increased at a slightly greater rate in the state than increases over the previous two years, whereas the county had a greater increase in 1995 than in 1996. Santa Clara is the most populous county in the San Francisco Bay region, and San Jose is by far the most populous jurisdiction within the county. San Jose is the 32nd largest metro area in the nation and the seventh largest in California. As of the fourth quarter of 1996, 4.95 percent of the state's total population, approximately 32 million people, had residence within the San Jose PMSA. By the year 2000, approximately 1,613,000 people are forecasted to live in the PMSA, an increase of 35,000 residents from the fourth quarter of 1996. ABAG forecasts population will increase to 1,880,000 by the year 2015, which equates to a compound annual rate of growth of 0.9 percent per year between 1996 and 2015. The average age of Santa Clara County's residents is slowly increasing. Almost 22 percent of the county's population is projected to be over 60 years of age by the year 2015. In contrast, the population over 60 in 1980 represented only 11 percent, but by 1995 it had grown to 14 percent. Rapid aging of the county's population will have broad public policy implications for the provision of public and private services and, due to Proposition 13, upon the revenue of local governments as well. LANDAUER 7 REAL ESTATE COUNSELORS OVERVIEW OF THE SANTA CLARA COUNTY REGION The following is a summary of population for the San Jose PMSA compared with the State of California: POPULATION HISTORY AND PROJECTION FOR THE SAN JOSE PMSA AND STATE OF CALIFORNIA San Jose Annual State of Annual San Jose Year PMSA Growth % California Growth % % of State ---- ---- -------- ---------- -------- ---------- 1980 1,295,073 N/A 23,667,902 N/A 5.47% 1990 1,503,200 1.67 29,279,015 2.39 5.13% 1991 1,513,500 0.69 30,465,000 4.05 4.97% 1992 1,529,500 1.06 30,940,000 1.56 4.94% 1993 1,541,500 0.78 31,240,000 0.97 4.93% 1994 1,554,000 0.81 31,470,000 0.74 4.94% 1995 1,566,000 0.77 31,600,000 0.41 4.96% 1996 1,575,000 0.57 31,900,000 0.95 4.94% Est. 1,613,000 0.80 33,179,000 1.32 4.86% 2000 Source: ABAG (Association of Bay Area Governments) 1980; DRI/McGraw-Hill, U.S. Markets Review for the years 1990 through projected 2000. Income Even though the income growth rate is presently down from earlier periods, the San Jose MSA households are still considered wealthier than their national counterparts. In the 1990 Census, households recorded per capita incomes approximately 30 percent higher than that of the nation and approximately 10 percent greater than the state of California, with the average household income in 1990 at approximately $58,000. In 1996, the average county-wide household income was estimated to be over $71,000 compared to San Francisco County at $59,000 and the State of California at slightly more than $55,800. LANDAUER 8 REAL ESTATE COUNSELORS OVERVIEW OF THE SANTA CLARA COUNTY REGION Infrastructure Constraints Sewerage treatment capacity and sewerage outflow capacity are critical problems in both the past and the present. The sewage treatment plan serving Morgan Hill and Gilroy is virtually at capacity. Bond issues are expected to finance needed improvements. Schools, roads, water supply distribution and solid waste were identified as secondary concerns. Occupation Santa Clara County area residents work at more occupations classified as white collar than the nation's residents as a whole. While 93 percent were employed in white collar occupations in 1990, only 61.4 percent of U.S. residents were so employed. Between 1980 and 1990, white collar occupations grew from 53 percent to 61 percent of all jobs in the nation. Between 1990 and 1995, Santa Clara County white collar jobs remained stable due to the fact that the region had a significant number of existing white collar jobs. The strong concentration of white collar jobs is reflective of both a highly educated work force and the nature of the region's economic base, as discussed below. ECONOMY Unemployment The average San Jose PMSA unemployment rate for 1996 was estimated at 3.7 percent. This rate is a significant improvement upon the 4.9 percent average of 1995. Compared with the average rate for the state of California at 7.3 percent for 1996, Santa Clara County's economy is performing much more efficiently. Until recently, unemployment rates in California and the nation tracked reasonably well. But in 1990, U.S. rates began to rise as the country entered its most recent recession. California entered the recession about one year later than the nation, but its toll on employment has been more pronounced. Over the past year, the United States unemployment rate has declined marginally, while the California unemployment rate has declined more quickly. LANDAUER 9 REAL ESTATE COUNSELORS OVERVIEW OF THE SANTA CLARA COUNTY REGION The following table is a list of average annual unemployment rates for the San Jose PMSA since 1990. HISTORICAL UNEMPLOYMENT SAN JOSE PMSA Year 1990 1991 1992 1993 1994 1995 1996 ---- ---- ---- ---- ---- ---- ---- ---- Rate 4.1% 5.6% 6.8% 6.8% 6.2% 4.9% 3.7% Source: DRI/McGraw-Hill, U.S. Markets Review. Employment In 1990, Santa Clara County ranked fourth in the state in total jobs. That is because the Santa Clara County economy has been so dynamic. As early as the 1950's, the county began attracting fast growth industries and continues to do so today. Not surprisingly, Santa Clara County has captured more jobs than any other Bay Area county. In 1969, the county had 23 percent of the region's private-sector payroll; by 1982, its share had increased to 31 percent, but by 1995, that share declined to 28 percent. From 1980 to 1985, Santa Clara County added about 98,100 new jobs. This translates to 44 percent of total regional growth for that period. Santa Clara had been hit hard by the economic recession. Between July 1990 and August 1993, the county had lost about 54,000 jobs. This is historically unprecedented, and reflects major changes in the employment structure of the economy. Overall job losses reached their lowest in the later part of 1993. However, the county will recover slowly, and it is not likely job growth will reach the level achieved in 1990 until 1997. Between 1995 and 2000, the county is expected to add about 12,000 jobs annually. The labor force in the San Jose PMSA increased by 22,000 jobs in 1996 from 1995. The services sector generated the largest number of new jobs, or approximately 15,000. The services group includes protective services, food and beverage preparation, health services, cleaning and building services and miscellaneous services. Business-related services are responsible for two-thirds, about 10,000, of the total job gain in this sector. Services will be one of the fastest growing occupational groups with an anticipated growth rate of over 13 percent. By 1999, about 13,000 new service jobs will be created with the number of total service workers expected to approach 107,000. In addition, more than 21,000 new job openings will result from the need to replace workers who leave the labor force or change occupations. It is anticipated that the number of service-related jobs will equal 12.2 percent of the total number of jobs in the San Jose PMSA. LANDAUER 10 REAL ESTATE COUNSELORS OVERVIEW OF THE SANTA CLARA COUNTY REGION Santa Clara County is often known as the home of the silicon chip and has been dubbed "Silicon Valley." The area hosts some of the world's most prominent computer and electronics manufacturers including Apple Computer, Hewlett-Packard, Intel Corp., Sun Microsystems and many others. In fact, nine of the ten largest public companies ranked by revenue in the PMSA are high-tech firms. The PMSA has 28 percent of its total employment concentrated in the manufacturing of computing equipment, electronics and instruments. This concentration makes the PMSA's employment base less diverse and more volatile to changes in the economy. In addition to the high-tech industry, a large number of R&D facilities exist with a high level of mechanical expertise and entrepreneurial talent supporting a large sector of the economy. Many international investors look to this sector of the San Jose economy for the resources and skills necessary to achieve their investment objectives. The U.S. national defense program employs 500 contractors and 350 subcontractors throughout the county and supports a large sector of the economy. Several significant weapon programs have been located in the PMSA, most notably the Trident missile and Bradley Fighting Vehicle. Employment Outlook While high technology industries have led the way and will continue to drive the county's economy, they have not added jobs as quickly as previously expected. Implicit is the assumption that the long-term growth path for the county, region and state has been altered by the recession, economic restructuring and the fiscal and political changes occurring within the state. These changes will bring slower job growth over the long-term forecast period than that observed during the 1970-1990 period. This does not imply that the county's economy will not be healthy. Rather, it suggests the realty of new market conditions. The older portions of the technology industry will add fewer jobs and may choose to locate new manufacturing facilities in locations with lower costs. Newer high technology markets will increasingly be the source of additional jobs. Multimedia, networking and other types of new technology companies will locate in the valley to have access to the technological and business community that has nurtured technological businesses in the past. Santa Clara County's future will continue to be linked to technological innovation. [GRAPHIC OMITTED] Neighborhood Map LANDAUER 11 REAL ESTATE COUNSELORS NEIGHBORHOOD DESCRIPTION NEIGHBORHOOD DESCRIPTION Mansion Grove Apartments is located in the northern portion of Santa Clara County in the City of Santa Clara. This area, just north of the City of San Jose, has been developed over the past three decades and still has a significant amount of vacant land. The neighborhood's central location and excellent freeway access make the land suitable for a wide variety of uses. Highways 237 and 101 as well as Interstate 880 provide easy access to the major bay area metropolitan centers of San Jose, San Francisco, and Oakland. These routes, along with the Lawrence Expressway, serve as the subject's neighborhood boundaries. Immediately north and east of the subject site along Lick Mill Boulevard is the Guadalupe River. Development to the northwest of the subject consists of Bella Vista Luxury Apartments, a competitive complex with the subject, Lick Mill Park, and then Nantucket Apartments which are current under construction and more vacant land extending to Tasman Avenue. Across Tasman Avenue is a small industrial park then the Santa Clara Golf and Tennis Club. To the west beyond Bella Vista Apartments and Nantucket is an area of single family and town homes plus the Kathryn Hughes Elementary School. Immediately west of the subject is still more vacant land known as the AGNEWS site. This 331 acre site boundaries include Lick Mill Boulevard on the east, Lafayette Street on the west, Hope Drive on the north, and Montague on the south. This property has been used by the Department of Development Services for the developmentally disabled. The State of California is in the process of closing this facility and the site is proposed for redevelopment. According to the Santa Clara Planning Department, an Environmental Impact Report (EIR) identifies the proposed uses as 1,271 single family residences, 1,348 multi-family units, 150,000 square feet of retail, 1,000,000 square feet of office space, and additional public facilities. Generally, the proposed land use will have the retail along Montague Expressway, multi-family along Lick Mill Boulevard, office and R&D along Lafayette Street, and single family housing along Hope Drive. Reportedly, Sun Micro Systems has submitted a letter of intent to occupy an 82.5 acre portion of the site near the corner of Montague Expressway and Lafayette Street. Further to the west are older single family residences and small apartments buildings. The Great America Theme Park lies adjacent to this development. Immediately south of the subject is a vacant 5.43 acre site which the EIR noted as being proposed for retail use because of its frontage along Montague Expressway. Across the Montague Expressway is an area of single family homes which surround Montague Park, Montague Swim Center and Montague Elementary School. Farther south is an industrial area which extends to Highway 101. In summary the subject is situated in a neighborhood with room for more development. Thus far the area is improved with residential and commercial buildings. The subject itself surrounds one of the city's two historical landmarks, the James Lick Mansion and Park. The neighborhood also has LANDAUER 12 REAL ESTATE COUNSELORS NEIGHBORHOOD DESCRIPTION schools, public transportation, and excellent freeway access. While there are no substantial retail developments in the immediate area, shopping is available in the nearby cities of Sunnyvale, Santa Clara, San Jose, and Milpitas. Future retail development will be concentrated along Montague Expressway, nearly adjacent to the subject. Overall, the subject is considered to have very good characteristics for a luxury apartment complex. LANDAUER 13 REAL ESTATE COUNSELORS SITE DESCRIPTION SITE DESCRIPTION Shape, Dimensions and Area The subject land is comprised of six parcels with a gross area of 28.77 acres, based on information from the Santa Clara County Assessor's Office. The subject site is irregular as shown on the following parcel map. Ingress/egress access to the site is provided along the east side of Lick Mill Boulevard. The frontage along Lick Mill Boulevard is approximately 1,640 feet and there are four access points along this street frontage. The eastern boundary of the site is the Guadalupe River. Topography The subject site is generally level and at grade with Lick Mill Boulevard. It appears that the southeast portion of the site was raised several feet to bring it up to grade with the balance of the site. Flood Hazard No particular drainage problems were observed nor disclosed at the time of filed inspection. This appraisal assumes that the surface water collection on-site and in the city streets in the vicinity of the subject is adequate. The adjacent Guadalupe River is separated from the subject by an earthen berm. The river was nearly dry at the time the subject was inspected. Soil Condition Visual observation does not indicate any surface or subsurface soil conditions that are unusual for the area. However, no soil tests nor environmental hazard tests were provided to us, so the soil conditions stated are assumed by visual observation only and are not warranted. Based upon our inspection, it appears that the soil is of adequate loadbearing capacity to support the subject improvements. No major foundation cracks were visible upon physical inspection of the subject improvements. Although we have not been provided with any environmental reports for the subject site, the client has provided us with an appraisal report which identifies some issues regarding the subject's soil condition. The appraisal is dated June 29, 1994 and was produced by Kleczewski & Associates for Teachers Insurance and Annuity Association. The appraisal report states the following: [GRAPHIC OMITTED] Plat Map LANDAUER 14 REAL ESTATE COUNSELORS SITE DESCRIPTION "Portions of the Mansion Grove Apartments site have been identified to have elevated concentrations of organic and inorganic chemicals in the soil and groundwater. These findings are documented in the Remedial Investigation Report, Mansion Grove Site, December 31, 1990, prepared by Levine-Fricke of Emeryville." "As recounted in the Remedial Investigation (RI) report, toxic contamination on the subject was first identified by the prior owners in April, 1978, leading to soil remediation program in 1981 that included removal of 6,500 cubic yards of chemically affected soils and 30,000 gallons of sludge and wastewater. Lick Mill Creek Apartments (Prometheus), the current subject owners, purchased the Mansion Grove site in December, 1986. In January, 1988, during excavation work for Phase II, soils containing organic compounds were discovered, resulting in suspension of construction work for approximately five months while interim remedial measures were conducted which included removal of approximately 8,000 cubic yards of chemically affected soils. Since 1988, numerous soils and groundwater remedial investigations have been conducted at the subject site." "On March 1, 1989, the California Department of Health Services (DHS) issued a Remedial Action Order (RAO) (Docket No. 88/89-019) to the subject owners, and listed the subject site in the DHS Hazardous Substances Cleanup Bond Expenditure Plan (State Superfund List). Pursuant to the RAO, the subject owners have conducted various remedial investigations, including installation of 16 groundwater monitoring wells, which are monitored quarterly for groundwater quality and monthly for water-level data, collection and analysis of over 300 soil samples for presence of chemicals, and collection and analysis of six ambient air samples and two indoor air samples. "Also pursuant to the RAO, Levine-Fricke prepared a Draft Health Risk Assessment, Mansion Grove Site, February 22, 1991, which provided an analysis of the magnitude of potential human health and environmental hazards posed by the presence of chemicals in the groundwater and residual chemicals in the subsurface soils at the subject site. Levine-Fricke concludes in their Executive Summary that potential health risks to current residents, or the occasional maintenance worker, due to the presence of chemicals of potential concern on the subject site are not expected to occur. However, reference is made to the full report for technical findings and their complete analysis and conclusions." "Remedial investigations and monthly/quarterly monitoring at the subject site are ongoing as required by the DHS." LANDAUER 15 REAL ESTATE COUNSELORS SITE DESCRIPTION Utilities and Services Utilities in the subject area are provided by the agencies listed below: Electricity Pacific Gas & Electric Gas Pacific Gas & Electric Water City of Santa Clara Sewer City of Santa Clara Telephone Pacific Bell Police and fire protection is provided by the City of Santa Clara. Zoning The site is designated by the City of Santa Clara as PD-HT (Planned Development - - Historic Combining). This zoning allows for the development of 876 apartment units (30.50 units/acre) approved by the City in March 1996. The cottage that was converted to a rental apartment was pre-existing and is legally permissible. The Lick Mansion improvements which sit on approximately 3.848 acres of Lot 1 are of historical significance and have been preserved as part of the development of the subject. Based upon our review of local zoning ordinances and conversations with planning personnel, the subject appears to be a legal and conforming use. Real Property Assessment and Taxes According to the Santa Clara County Assessor Office, the assessed 1996/97 value of the subject property, is as follows: Parcel Number Tax Amount Land Value Improvement Total Value Value 097-08-024 $172,151 $ 3,399,591 $13,085,209 $16,484,800 097-08-025 95,948 1,340,432 7,847,316 9,187,748 097-08-026 139,694 1,659,827 11,717,022 13,376,849 097-08-028 60,047 1,243,418 4,506,546 5,749,964 097-08-035 47,530 2,344,392 12,206,937 14,551,329 097-08-036 240,963 6,422,058 16,652,013 23,074,071 -------- ----------- ----------- ----------- Totals $756,333 $16,409,718 $66,015,043 $82,424,761 LANDAUER 16 REAL ESTATE COUNSELORS SITE DESCRIPTION The current method of taxation of real property in California is mandated by the Jarvis-Gann Property Initiative (Proposition 13) under which real estate taxes were reduced to one percent of the property's full market value as of the 1975-1976 fiscal year, plus any voter approved bond indebtedness. The tax rate applicable for the subject property is 1.0443 per $100 of assessed value. The general tax for the subject property based upon this method is $756,333 for the 1996/97 tax year. The assessed value is not necessarily an accurate reflection of market value, as it is not sensitive to fluctuations in the market value, unless reappraised. The property taxes reflected in the valuation section of the report are based upon the value concluded in this report utilizing the above applicable tax rate and direct assessments. In addition to this amount, there are direct assessments levied on the property for flood control, vector control, open space, and the Mill Creek Improvement District #185. The first three of these direct assessments for the 1996/97 tax year are outlined in the following table. Open Space $1,628.40 Flood Control $6,341.30 Vector Control $ 127 --------- Total $8,096.70 The total property tax levied to the subject for the 1996/97 tax year, excluding the Mill Creek Improvement District taxes, is $764,429.70. The resulting effective tax rate is 1.0555 percent. The assessed value is limited to a 2 percent annual increase, unless the property is transferred or there is substantial new construction. In either of these two events, the property is reappraised to the current market value, usually as evidenced by the sale price or the construction cost. LANDAUER 17 REAL ESTATE COUNSELORS SITE DESCRIPTION The Mill Creek Improvement District financed the construction of Mill Creek Boulevard and related offsite improvements including storm drain and sanitary sewer systems, utility lines and traffic signalization. The bonds were issued on December 17, 1986 and they are amortized over a 25-year term. The remaining payment schedule is as follows:
PARCEL # PARCEL # PARCEL # PARCEL # PARCEL # PARCEL # YEAR 097-08-024 097-08-025 097-08-026 097-08-028 097-08-035 097-08-036 TOTALS - ---- ---------- ---------- ---------- ---------- ---------- ---------- ------ 1997 $ 82,810.42 $ 32,657.42 $ 40,450.12 $ 30,299.62 $ 62,829.14 $ 150,626.88 $ 399,673.60 1998 82,969.94 32,720.32 40,528.02 30,357.98 62,950.16 150,917.04 $ 400,443.46 1999 82,952.26 32,713.34 40,519.40 30,351.52 62,936.76 150,884.92 $ 400,358.20 2000 82,728.58 32,625.14 40,410.14 30,269.68 62,767.04 150,478.00 $ 399,278.58 2001 82,289.46 32,451.98 40,195.66 30,109.04 62,433.90 149,679.26 $ 397,159.30 2002 82,661.58 32,589.72 40,377.42 30,245.16 62,716.22 150,356.14 $ 398,946.24 2003 82,782.02 32,646.20 40,436.24 30,289.22 62,807.58 150,575.20 $ 399,536.46 2004 81,607.70 32,183.18 39,862.70 29,859.62 61,916.66 148,439.14 $ 393,869.00 2005 82,309.92 32,460.06 40,205.66 30,116.52 62,449.42 149,716.46 $ 397,258.04 2006 81,633.10 32,193.20 39,875.10 29,868.92 61,935.94 148,485.32 $ 393,991.58 2007 81,712.50 32,224.50 39,913.88 29,897.98 61,996.18 148,629.76 $ 394,374.80 2008 81,431.34 32,113.64 39,776.54 29,795.12 61,782.84 148,118.30 $ 393,017.78 2009 80,855.14 31,886.44 39,495.12 29,584.32 61,345.70 147,070.22 $ 390,236.94 2010 81,019.96 31,951.42 39,575.62 29,644.62 61,470.74 147,370.00 $ 391,032.36 ------------ ---------- ---------- ---------- ---------- ------------ ------------- TOTALS 1,149,763.92 453,416.56 561,621.62 420,689.32 872,338.28 2,091,346.64 $5,549,176.34
In the valuation section of this report, we have applied the 1.00555 percent effective tax rate to the estimated market value. We have identified the payments of the Mill Creek Assessment District as a separate line item expense Site Conclusion The site, location, zoning and physical characteristics of the site deemed it suitable for development of multi-family residential apartments. LANDAUER 18 REAL ESTATE COUNSELORS IMPROVEMENT DESCRIPTION IMPROVEMENT DESCRIPTION Mansion Grove is a luxury, garden-style apartment complex consisting of 877 apartment units. The units are contained in 24 3-story buildings plus one single-unit converted cottage. The complex is located on a 28.77 acre site which was developed in three phases between 1987 and 1989. Phase one contained 384 units, phase two contained 276 units, and phase three contained 216 units. The cottage was built over 50-years ago as part of the original Lick Mansion and was converted in 1992. The property has extensive landscaping, water fountains, three pools, three spas, three tennis courts, and a 5,800 square foot recreational facility. The recreation facility incorporates a 1,296 square foot convenience store, weight and aerobics rooms, clubhouse area and leasing offices. There are six primary floor plans within the complex consisting of one bedroom one/bathroom units and two bedroom two/bathroom units. The one bedroom units range in size from 683 to 716 square feet and the average size is 700 square feet. The two bedroom units range in size from 936 to 961 square feet and the average size is 954 square feet. The converted cottage is a two bedroom one bathroom unit with 1,000 square feet. The average unit size of the 877 units is 827 square feet. A site plan and floor plans are included in the Addenda. Mansion Grove has three basic floor plans: Plans A, B, and C. However, due to minor variation in the layout of some of the Plan A and Plan C units, there are six difference floor plans. The unit mix is outlined below: Plan Unit Type No. of Units Average Unit Total Sq. Ft. Size A/A2/A3 1 Br/1 Ba 438 700 306,600 B 2 Br/2 Ba 150 961 144,150 C/C2 2 Br/2 Ba 288 950 273,600 D (Cottage) 2 Br/1 Ba 1 1,000 1,000 --- ------- Totals 877 725,350 The Mansion Grove apartments have a total of 1,625 parking spaces with a resulting parking ratio is 1.85 spaces per unit. The parking is comprised of 1,124 subterranean parking spaces and 501 surface spaces. The each of the 24 apartment buildings has a subterranean parking garage. The table on the following page outlines the garage areas: LANDAUER 19 REAL ESTATE COUNSELORS IMPROVEMENT DESCRIPTION No. of Apartment GBA Sq. Ft. Total Garage Area Garages Building Type 7 1 10,100 70,700 9 2 14,700 132,300 8 3 18,873 150,984 -- ------- 24 353,984 Apartment fixtures include range/oven; dishwasher; refrigerator; smoke detectors; washers and dryers; garbage disposals; cable TV hook-ups; vertical blinds; individually controlled heating and air-conditioning. Construction details for the apartment building are as follows: Age/Condition The project was developed in three phases. Construction of the first phase commenced in 1987 and the final phase was completed in June of 1989. The cottage was built over 50-years ago and was converted in 1992. The entire complex is in good condition with no deferred maintenance or abnormal depreciation noted. Type Construction The 24 recently constructed apartment buildings are 3-story wood frame structures with wood siding. The buildings are all walk-up structures. Foundation and Subfloor The foundations are reinforced concrete and masonry basement retaining walls with columns and concrete slab. The floors are post-tensioned concrete slab on ground floor; plywood with gypcrete on second and third floors. Exterior Wall Structure The exterior wall structure is painted wood siding constructed of hardboard and applied as horizontal planks. Windows and sliding doors are double glazed with aluminum framing. LANDAUER 20 REAL ESTATE COUNSELORS IMPROVEMENT DESCRIPTION Roof Structure/Cover Panelized system with plywood and supported by trusses on 24" centers. The roof cover is fiberglass composition shingles. Fire Protection Smoke alarms are provided in each unit and each building has fire extinguishers on each floor and within the garage. Heating, Ventilation and Air-Conditioning Each unit is equipped with an electric baseboard with localized thermostatic control. Individual wall-mounted air conditioning units. A heat-pump system in the recreational building. Appliances Each unit is provided with the following appliances: refrigerator, range/oven, dishwasher, garbage disposal, and washer/dryer. Lighting Site lighting is provided throughout the complex including grounds and recreational lighting. Parking garages have exposed 8 foot fluorescent light fixtures and open parking areas have pole mounted light fixtures. Electrical The complex is provided with a 120/240 volt electrical system and each unit is provided with a minimum of 60 amp 120/240 volt distribution panel with circuit breakers. Recreation Building The recreation building is a single story wood frame structure of approximately 5,800 square feet. Exterior walls consist of painted hardboard siding (same as the residential buildings). The building contains a leasing office, fireplace, lounge, kitchen, a 1,296 square foot convenience store, men's and women's restrooms, weight and aerobics rooms. LANDAUER 21 REAL ESTATE COUNSELORS IMPROVEMENT DESCRIPTION Laundry Room Laundry rooms are located within each of the subterranean parking garages. Each laundry room includes coin-operated washers/dryers, a sink and a folding table. Interior Finishes, Features and Materials Floors Kitchen and bathrooms have vinyl sheet flooring. Living areas and bedrooms contain wall to wall carpeting. Walls Interior walls are textured painted drywall. Kitchens have painted smooth finish drywall. Ceilings All units contained textured painted drywall ceilings. Kitchen have smooth painted drywall ceilings. Kitchens Kitchens contain formica countertops, stainless steel sink and wood grain vinyl covered cabinets. Bathrooms Bathrooms contained a fiberglass tub and shower unit, toilet, sink, wood grain vinyl covered cabinets and separate overhead fan. Site Improvements Site improvements contain a wide variety of mature trees, shrubs and grass areas which are irrigated via an automatic underground sprinkler system. The site also contains four fountains, a pond, three pools, three spas, three tennis courts, a basketball court, a golf cage, and a playground. Driveways and parking consist of asphalt paving. Conclusion The overall project layout appears to be adequate and functional. The unit mix and floor plans are considered to be functional and competitive with the market. The extensive landscaping and exterior amenity package of the subject creates a park like setting. The project includes a full amenity package equal to or slightly superior to most of the competing projects. We found no functional obsolescence impacting the subject property. LANDAUER 22 REAL ESTATE COUNSELORS IMPROVEMENT DESCRIPTION MARKET ANALYSIS As a component of the Bay Area's most populous county, the Santa Clara multi-family housing market has been a deep and stable one over the years. The high price and scarcity of land makes home ownership in the county expensive (over $260,000 median home price). This, coupled with lengthy commutes to more affordable housing creates strong demand for upper end infill apartments. As the chart below shows, after a flurry of development in the mid-1980's and the completion of some major projects in 1991, multi-family development in the county has been inordinately low. And what has been built has been primarily for-sale condominiums and subsidized rental housing. SANTA CLARA COUNTY INVENTORY/PERMITS (2+ UNIT PROJECTS) Inventory Year* Inventory Permits Increase Vacancy Rate ----- --------- ------- -------- ------------ 1987 161,266 4,784 5,150 3.7% 1988 164,723 4,558 3,457 3.6% 1989 167,132 2,789 2,409 2.6% 1990 168,434 2,311 1,302 2.2% 1991 170,348 3,646 1,914 2.6% 1992 173,405 2,102 3,057 2.7% 1993 175,298 1,143 1,893 3.4% 1994 177,339 1,617 2,041 3.7% 1995 178,726 1,285 1,387 3.7% Source: State of Calif./CIRB *As of January 1. In the past three years (ending 1995) only three new larger garden style apartment projects opened in the county. This dearth of new construction combined with the rebounding economy led to a significant (10% plus) increase in 1995 as supply has not met the current demand. Vacancy has consistently been less than 5 percent. Rental rates have increased substantially in the last two years due to the lack of adequate supply, ranging from 16% or more per year increases for those projects surveyed. Future rent increases are not expected to be as dramatic due to increased supply. Bella Vista, the competing project just north of the subject on Lick Mill Boulevard is expanding with the 252 unit Nantucket which is under construction and scheduled to open in July 1997. Bella Vista is planning to build another 400 units across Lick Mill Boulevard just north of the subject in the next one to two years. The only other project under construction in the immediate area is the Tosana, a 700 unit project which is also scheduled to open this July. At present, the small supply of new apartments is not meeting demand, and rents continue to increase as projects report occupancy of 95 percent and above. LANDAUER 23 REAL ESTATE COUNSELORS IMPROVEMENT DESCRIPTION Submarket There are several apartment submarkets in Santa Clara County. We have focused on the submarket where the subject is located. This submarket is known as the "Golden Triangle" and it is bordered by I-880 on the east, U.S. 101 on the west and Highway 237 on the north. The area includes portions of Santa Clara, Sunnyvale, and San Jose. There are nine projects including the subject in the general area that comprise the competitive supply of existing units. The eight projects have a total of 4,775 units. All of the projects were constructed between 1988 and 1995. Current occupancy in the submarket is in excess of 95 percent and occupancy rates have ranged between 95 percent and 100 percent for many years. Units under construction include the Nantucket with 252 units and the Tosana with 700 units, both of which are scheduled to be completed in July 1997. The Willow Lake complex which just outside of the immediate submarket is currently constructing approximately 40 units. Bella Vista plans to open another 400 units across Lick Mill Boulevard just north of the subject sometime during 1998. In addition to the 992 units under construction and the 400 planned for 1998, Bella Vista has approvals which will allow 816 more units. The AGNEWS site, located across the street from the subject, could add 1,348 additional multi-family units as noted in the EIR report. In summary, the apartment market has been very strong for several years as the result of a strong job market and limited development during the past few years. Rental rates have increased significantly during this period and development has become feasible. In the immediate area surrounding the subject, there is only one project under construction and it will introduce 272 units. There is a significant amount of vacant land immediately surrounding the subject and there are approvals for another 1,216 units and the potential for 1,348 units on the AGNEWS site. We anticipate the supply of new units in the immediate and surrounding area will increase until the market becomes balanced. Rental rate increases are expected to become less dramatic as the supply is expanded to meet market demands. LANDAUER 24 REAL ESTATE COUNSELORS HIGHEST AND BEST USE HIGHEST AND BEST USE Highest and best use is defined as follows: The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum profitability.(3) In developed residential neighborhoods like the subject, the highest and best use is typically that use which is permitted by zoning, specific plan, general plan and/or private deed restrictions. Determination of the highest and best use of a site depends upon the quantity, quality and durability of the income stream of the development anticipated. The determination of highest and best use includes an analysis of the subject property as though it were vacant and an analysis as it is currently improved. The definition of each analysis is as follows: Highest and Best Use of land or a site as though vacant - Among all reasonable, alternative uses, the use that yields the highest present land value, after payments are made for labor, capital, and coordination. The use of a property based on the assumption that the parcel of land is vacant or can be made vacant by demolishing any improvements.(4) Highest and Best Use of property as improved - The use that should be made of a property as it exists. An existing property should be renovated or retained as is so long as it continues to contribute to the total market value of the property, or until the return from a new improvement would more than offset the cost of demolishing the existing building and constructing a new one.(5) - ---------- (3) The Dictionary of Real Estate Appraisal, Third Edition, Chicago: Appraisal Institute, 1993 (pp. 171). (4) Ibid pp. 171. (5) Ibid pp. 171. LANDAUER 25 REAL ESTATE COUNSELORS HIGHEST AND BEST USE AS IF VACANT Possible Use The size, shape, location, utility, availability and terrain imposed physical constraints upon the type of uses possible for the development of any lot. Any use incompatible with the utility capacity or constraints imposed by the size, shape or terrain would not be considered physically possible. In the "Site Description" portion of this report it was determined that the subject site is suitable for most types of construction. The subject site is at grade with the fronting street and drainage appears to be adequate. A geology report has not been reviewed, however there does not appear to be any detrimental soil conditions which would prohibit construction. No signs of foundation cracks were observed upon visual inspection of the subject improvements and surrounding structures. Although an environmental hazards report has not been provided for review, the client has provided us with information concerning existing contamination of soils and groundwater. This information is identified in the "Site Description" section of this report. According to the information provided, the contamination was first identified in 1978 and a remedial action plan was conducted in 1981. However, during the construction of the second phase of the subject, additional contamination was identified and development stopped for five months. The second and third phases of construction were completed by June of 1989. Remedial investigations and monthly/quarterly monitoring at the subject site are ongoing as required by the Department of Health Services (DHS). The subject site is listed by the DHS as being part of the Hazardous Substances Cleanup Bond Expenditure Plan (Superfund List). A special assumption of this report is that the subject site is not impacted by contaminated soil. Therefore, the physical aspects of the subject site do not impose constraints on its development to its highest and best use. Legal Use The subject property is regulated by the PD-HT (Planned Development Historic Combining) zoning of the City of Santa Clara. Under the PD-HT land use designation/agreement, development at the subject is limited to of 876 apartment units (30.50 units/acre) which must include the preservation of the Lick Mansion which is situated on a 3.848 acre portion of the subject site. The cottage that was converted to a rental apartment was pre-existing and is legally permissible. If the Lick Mansion was not on the subject site, the HT (Historic Combining) component of the existing zoning would likely be modified and additional units might be possible. Typical utility easements on the site are not felt to adversely affect its development. Given the surrounding land area includes vacant land and multi-family housing, it is the appraiser's opinion that a significant change in the zoning by the city of Santa LANDAUER 26 REAL ESTATE COUNSELORS HIGHEST AND BEST USE Clara would be unlikely. The status as a legal use would be contingent upon compliance with planning procedures and development standards set forth by current zoning. Feasible Use After determining the uses which are physically possible and legally permissible, the next step is to determine which uses are the most financially feasible. In view of the qualities of the subject site and the residential nature of the surrounding area, a use which would provide a positive rate of return would be multi-family residential development. The apartment market appears viable evidenced by high occupancy rate in the subject as well as competitive projects. Effective rental income in place for existing tenants at the subject property have increased significantly during the past two years and management projects additional increases for 1997. Expenses continue to increase moderately. Maximally Productive Among the uses considered financially feasible, the use that provides the highest rate of return is the highest and best use. Given the site characteristics, the current zoning, and the nature of the area, an apartment development would be maximally productive. CONCLUSION - AS VACANT The subject apartment market is considered to be healthy, and has come to the point where development of new product is feasible. There are several apartment projects currently under construction within the subject's market area. Therefore, it is our opinion that an apartment complex of modern design maximizing the use of the site would provide the highest and best use of the site. AS IMPROVED In this analysis, it is determined whether the existing improvements reflect the site's highest, best and most productive use. If not, then the question is whether it is financially feasible to demolish, convert or add to the existing improvements to meet the test of highest and best use. Our analysis of the subject property, as improved, focuses on the existing rental apartments. The existing improvements represent an intensive and substantial use of the property in light of the subject zoning designation and current market conditions. Although the concluded highest and best use of the site as vacant is for immediate development, it is not practical to demolish the existing improvements. The existing improvements provide a substantial contributory amount to the total property value. LANDAUER 27 REAL ESTATE COUNSELORS HIGHEST AND BEST USE CONCLUSION - AS IMPROVED The property was developed in 1987 through 1989 with 876 apartment units. The existing cottage was constructed over 50 years ago and was converted to a rental unit in 1992. The subject has been developed with a modern multi-family apartment project which appears to meet current zoning requirements as discussed in the zoning section. The improvements have been well accepted in the market. Thus, the highest and best use of the subject is as improved. LANDAUER 28 REAL ESTATE COUNSELORS VALUATION METHODOLOGY VALUATION METHODOLOGY The value of most improved parcels of real estate is derived principally using three approaches to market value: (1) estimated replacement cost less depreciation, (2) sales comparison, and (3) income approach. From the deductions of these analyses and the weight accorded to each, an opinion of value is reached. 1) Replacement Cost Approach This approach to value embodies estimates of the worth of the land, as if vacant, and the replacement cost of the improvements. From these are deducted the estimates of physical deterioration, functional obsolescence, and economic obsolescence, as observed during inspection of the property and its environs. The replacement cost approach is based on the premise that the value of the property cannot be greater than the cost of constructing a building of similar utility on a comparable site. This approach is most reliable for new properties and/or those suffering little accrued depreciation or external obsolescence and where land value is easily estimated. The methodology of this approach does not adequately reflect current market conditions, such as recognizing the income potential of a property, or reflecting buyers' and sellers' motivations involving and income producing property. Furthermore, this approach is less reliable when a significant amount of physical depreciation exists. Therefore, this approach will not be utilized in this analysis. 2) Sales Comparison This approach is based on the principal of substitution, i.e., that the value of a property is governed by the prices generally obtained for similar properties. In analyzing market data, the sales prices of similar properties are reduced to common denominators to relate to the degree of comparability to the property under appraisal. Comparisons are made based on location, size, sale, date, age and condition of improvements, sales terms and financing, and other factors. 3) Income Approach An investment property is normally valued in proportion to its ability to produce income. Hence, the income approach involves an analysis of the property in terms of its ability to provide a net annual income in dollars. The estimated net annual income is then capitalized into value via a market-determined rate commensurate with the risks inherent in the ownership of the property. The following sections present the sales comparison and the income approaches, the market data selected, and the analysis of all data as well as our conclusion of value. LANDAUER 29 REAL ESTATE COUNSELORS SALES COMPARISON APPROACH SALES COMPARISON APPROACH The sales comparison approach is based upon the principle that the value of a property tends to be set at the price at which comparable properties have recently been sold or the price for which comparable properties can be acquired. The principle is based on the premise that knowledgeable investors will pay no more for a specific property than it would cost to acquire a comparable property within a reasonable period of time. The reliability of this approach depends on the degree of comparability of the data to the subject property. Elements of comparison include property rights conveyed, financing terms, conditions of sale, changes in market conditions between the time of sale and the appraisal date, location, physical characteristics and income characteristics. Units of comparison are used to compare the comparable properties to the subject property. In our analysis, we have used price per unit, price per square foot, and the gross income multiplier (GIM). From the data gathered in this approach, we extracted market derived capitalization rates to be used in our Income Approach section. A summary of the sales used in this analysis are presented on the following page which are keyed to the location map on the following facing page. Data sheets providing greater detail and photographs are provided in the Addenda. Description of Sales Data Sale No. 1 is the Promenade apartment complex which is located at 502 Kingfisher Way in Sunnyvale. The Promenade is a 220-unit complex which was built in 1987 and it has a net rentable area of 159,726 square feet and the average unit size in the complex is 748 square feet. The unit mix includes 44 (20%) studio units, 112 (51%) one bedroom one bathroom units, 54 (25%) two bedroom one bathroom units and 39 (34%) two bedroom two bathroom units. This property sold in October 1995 for $18,200,000, or $82,727 per unit, or $113.95 per square foot. The gross income multiplier is 7.8, with an overall capitalization rate of 8.0 percent. This complex features a pool, spa, recreation room and secured parking. This was an arm's length transaction with conventional financing. Sale No. 2 is Bristol Commons apartment complex which is located at 730 Evelyn Avenue in Sunnyvale. This is an 188-unit complex which was built in 1988. It has a net rentable area of 152,844 square feet and an average unit size of 813 square feet. The unit mix includes 92 (49%) one bedroom one bathroom units and 60 (32%) two bedroom two bathroom units. This property sold in June 1995 for $16,850,000, or $89,628 per unit, or $110.24 per square foot. The gross income multiplier is 7.5, with an overall capitalization rate of 8.6 percent. This complex features a pool, spa, recreation room and secured parking. This was an arm's length transaction and an all cash sale. [GRAPHIC OMITTED] Comparable Sales Map COMPARABLE APARTMENT BUILDING SALES Mansion Grove
Sale No. Year Total Average Site Density Sale Sale Price Price No. Project Name \ Location Units Built Size Unit Size Acreage DUs/AC Date Price Per DU Per SF GIM - ---- ----------------------- ----- ----- ---- --------- ------- ------ ---- ----- ------ ------ --- 1 The Promenade 220 1987 159,726 726 5.62 39.1 10/95 $18,200,000 $82,727 $113.95 7.8 520 Kingfisher Way Sunnyvale 2 Bristol Commons 188 1988 152,844 813 6.83 27.5 6/95 $16,850,000 $89,628 $110.24 7.5 730 Evelyn Avenue Sunnyvale 3 The Fountains 226 1991 184,944 818 8.93 25.3 7/96 $27,750,000 $122,788 $150.05 9.7 373 River Oaks Circle San Jose 4 Via Reggio 116 1986 96,930 836 2.47 47.0 4/96 $10,610,000 $91,466 $109.46 7.8 1277 San Tomas Aquino Road San Jose 5 Parkside Commons 192 1991 199,251 1,038 6.89 27.9 5/96 $25,500,000 $132,813 $127.98 7.3 355 N. Wolf Road Sunnyvale Subj. Mansion Grove 877 1987-89 725,350 827 28.77 30.5 N/A N/A N/A N/A N/A 502 Mansion Park Drive Santa Clara
Sale Expenses No. Project Name \ Location OAR Per DU - ---- ----------------------- --- ------ 1 The Promenade 8.0% $3,400 520 Kingfisher Way Sunnyvale 2 Bristol Commons 8.6% $3,728 730 Evelyn Avenue Sunnyvale 3 The Fountains 7.2% $3,428 373 River Oaks Circle San Jose 4 Via Reggio 7.9% $4,233 1277 San Tomas Aquino Road San Jose 5 Parkside Commons 9.0% $5,625 355 N. Wolf Road Sunnyvale Subj. Mansion Grove N/A $4,543 502 Mansion Park Drive Santa Clara Source: Landauer Associates, Inc., April 1997. LANDAUER 30 REAL ESTATE COUNSELORS SALES COMPARISON APPROACH Sale No. 3 is the Fountains apartment complex which is located at 373 River Oaks Circle in San Jose. This is a 226-unit complex which was built in 1991. It has a net rentable area of 184,944 square feet and an average unit size of 818 square feet. The unit mix includes 100 (44%) one bedroom one bathroom units and 126 (56%) two bedroom two bathroom units. This property sold in July 1996 for $27,750,000, or $122,788 per unit, or $150.05 per square foot. The gross income multiplier is 9.7, with an overall capitalization rate of 7.2 percent. This complex features a clubhouse/recreation room and secured parking. This was an arm's length transaction and an all cash sale. This property was previously sold on December 29, 1993 for $20,075,000. Based upon the two sales of this property, the property appreciated at 12.6 percent per year or approximately 1.0 percent per month. Sale No. 4 is the Via Reggio apartment complex which is located at 1277 San Tomas Aquino Road in San Jose. This is a 116-unit complex which was built in 1986. It has a net rentable area of 96,930 square feet and an average unit size of 836 square feet. The unit mix includes 6 (5%) studio units, 41 (35%) one bedroom one bathroom units, 30 (26%) two bedroom one bathroom units and 39 (34%) two bedroom two bathroom units. This property sold in April 1996 for $10,610,000, or $91,466 per unit, or $109.46 per square foot. The gross income multiplier is 7.8, with an overall capitalization rate of 7.9 percent. This complex features a pool, spa, fireplace in each unit, recreation room and secured parking. This was an arm's length transaction and an all cash sale. Sale No. 5 is the Parkside Commons apartment complex which is located at 355 North Wolf Road in Sunnyvale. This is an 192-unit complex which was built in 1991. It has a net rentable area of 199,251 square feet and an average unit size of 1,038 square feet. The unit mix includes 60 (31%) one bedroom one bathroom units, 96 (50%) two bedroom two bathroom units and 36 (19%) three bedroom two bathroom units. This property sold in May 1996 for $25,500,000, or $132,813 per unit, or $127.98 per square foot. The gross income multiplier is 7.3, with an overall capitalization rate of 9.0 percent. This complex features a pool, spa, fireplace in each unit, recreation room and secured parking. This was an arm's length transaction with conventional financing. Discussion - Price Per Unit The sale dates range from October 1995 to July 1996. These sales range on a per unit basis from $82,727 to $132,813. We estimated the degrees of similarity and differences between the subject property and each comparable sale on the basis of five elements of comparison: o Property rights conveyed; o Financing terms; o Conditions of sale; o Market conditions; o Physical characteristics; LANDAUER 31 REAL ESTATE COUNSELORS SALES COMPARISON APPROACH Percentage adjustments, representing the amount of similarity, are then made to the sale price of each comparable sale. Positive (upward) adjustments are made to the comparable considered inferior to the subject, and negative (downward) adjustments are made when the comparable is considered superior to the subject property. Through this procedure, we derived a logical estimate of the probable price for which the subject property could be sold on the date of the appraisal. An Adjustment grid is located on the facing page. All of the sales involved the transfer of the leased fee interest, requiring no adjustments for property rights conveyed. All of the comparables reflected all cash transactions or cash equivalent transactions requiring no adjustments. No adjustments were made for conditions of sale since all transactions were arms length without any undue influence from the seller or buyer. Adjustments for market conditions were made because of increasing demand for apartment properties in Santa Clara market. Our market conditions adjustments were made at a rate of 1.0% per month. This growth rate is based upon conversations with local market participants plus the sale and resale of the Fountains, Sale No. 3. Further adjustments for physical and locational differences are discussed below. Price Per Unit Analysis Adjustments have been made for the date of sale, location, amenities, age and condition, construction quality and density. The five sales have been adjusted to the subject on a price per unit basis. Sale No. 1 was adjusted upward for location, size and appeal and downward for age. This comparable has an inferior location as indicated by its significantly lower rents than a comparable unit within the subject. An upward size adjustment was made because this comparable has an average unit size of 726 square feet as compared to the subject at 821 square feet. Typically, smaller units sell for lower prices than larger units because of the differences in rent potential. An upward appeal adjustment was made due to this property having a higher density (39.1) than the subject (30.5). This property was also adjusted downward for age because this property was 8 years old at the time of sale as compared to the subject which has an average age of 9 years when considering the construction period of 1987 through 1989. Overall, the Promenade apartment complex is considered strongly inferior to the subject, primarily due to location and unit size. Sale No. 2 was adjusted upward for location and appeal and downward for age. This comparable has an inferior location as indicated by its significantly lower rents than a comparable unit within the subject. An upward quality/appeal adjustment was made due to this property having inferior parking consisting mostly of open spaces. This property was also adjusted downward for age because it was 7 years old at the time of sale as compared to the subject which has an average age of 9 years. Overall, the Bristol Commons apartment complex is considered moderately inferior to the subject, primarily due to location. LANDAUER 32 REAL ESTATE COUNSELORS SALES COMPARISON APPROACH Sale No. 3 is considered to be the most similar sale property identified in our search for comparable sales. This property is located in the same market area and the improvements are generally similar and required the smallest net adjustment. This sale was adjusted upward for appeal because of its overall appearance of being a high density project with limited open space. With the exception of the small playground, pool/spa area and the accompanying recreation room, the balance of the site is improved with pavement and buildings. This property was also adjusted downward for age because this property was 5 years old at the time of sale as compared to the subject which has an average age of 9 years. Overall, the Fountains are considered slightly inferior to the subject. Sale No. 4 was adjusted upward for location, appeal and age. This comparable has an inferior location as indicated by its significantly lower rents than a comparable unit within the subject. An upward appeal adjustment was made due to this property having a higher density (47.0) than the subject (30.5). This property was also adjusted upward for age because this property was 10 years old at the time of sale as compared to the subject which has an average age of 9 years. Overall, the Via Reggio apartment complex is considered moderately inferior to the subject, primarily due to location. Sale No. 5 was adjusted upward for appeal and downward for size and age. A downward size adjustment was made because this comparable has an average unit size of 1,038 square feet as compared to the subject at 827 square feet. Typically, larger units sell for higher prices than smaller units because of the differences in rent potential. An upward quality/appeal adjustment was made due to this property having inferior parking consisting mostly of open spaces. This property was also adjusted downward for age because this property was 8 years old at the time of sale as compared to the subject which has an average age of 9. Overall, the Parkside Commons apartment complex is considered slightly superior to the subject, primarily due to unit size. The most significant differences between the comparables and the subject are location and average unit size. All of the comparables, except Sale Nos. 3 and 5 are located in moderately to strongly inferior areas. Sale No. 3 is located in the same area as the subject and directly competes for the same tenants. Average unit size has also influenced per unit prices as can be noted in Sale Nos. 1 and 5 which have generally similar locations to each other but are at the extremes with respect to average unit size. Sale No. 1 had an average unit size of 726 square feet and sold for $82,727 per unit and Sale No. 5 had an average unit size of 1,038 square feet and sold for $132,813 per unit. The comparables range from $82,727 to $132,813 and an average of $103,884 per unit. Sale Nos. 3 and 5 are the most comparable to the subject on an overall basis and required the smallest net adjustments. Sale Nos. 3 and 5 are also the most recent sale transactions identified. Additionally, Sale No. 3 competes in the same neighborhood as the subject on a rental basis. Sale Nos. 1, 2, and 4 provide additional support for the value conclusion but have been relied upon secondarily because of significant differences in locations. As such, we have given most weight to Sale Nos. 3 and 5. Less LANDAUER 33 REAL ESTATE COUNSELORS SALES COMPARISON APPROACH weight has been given to the other sales. Therefore, our conclusion under this method is $135,000 per unit. The overall value is therefore as follows: 877 units x $135,000 = $118,395,000 Rounded: $118,400,000 ============ Price Per Square Foot Analysis The sales data indicate a price per square foot range from a low of $109.46 to a high of $150.05 and an average of $122.32. The average unit sizes range from a low of 726 square feet to a high of 1,038 square feet and the aggregate average unit size of all five comparables is 846 square feet. The subject has an average unit size of 821 square feet which is very similar to Sale Nos. 2, 3 and 4 which are in the 813 to 836 square foot range. There appears to be little consistency in the correlation between the price per square foot and the average unit size, as Sale Nos. 2, 3 and 4 have similar unit sizes but also comprise the high and low of the price range. Additionally, Sale No. 1 with an average unit size of 726 square feet sold for $113.95 per square foot which is near the low end of the range. Conversely, Sale No. 5 with an average unit size of 1,038 square feet sold for $127.985 per square foot which is near the high end of the range. The difference in the comparables locations is the primary reason the data is not providing a more identifiable pattern of per square foot price and average unit size. For example, Sale Nos. 1, 2, and 4 have generally similar locations to each other and their per square foot sale prices were reasonably similar at $109.46 to $113.95 per square foot. Sale No. 5 which sold for $127.98 per square foot has a location similar to the subject and a significantly larger average unit size. Sale Nos. 3 also has a location very similar to the subject and sold for $150.05 per square foot which is the high end of the range. Sale Nos. 3 and 5 show a pattern of higher per square foot prices for smaller units than larger units with similar locations. Concluding from these facts that price per square foot correlate with average unit size, Sale No. 3 is the most comparable sale and is considered to be the best indicator of value. Based upon these considerations, we have estimated the value on a price per square foot basis to be approximately $150.00. This reflects a total estimated value as follows: 725,350 square feet x $150.00/SF = $108,802,500 Rounded: $108,800,000 ============ LANDAUER 34 REAL ESTATE COUNSELORS SALES COMPARISON APPROACH Gross Income Multiplier Analysis The use of the GIM offers some advantages to the analysis, mainly: 1. The GIM can be used to determine data comparability. Once the prevailing GIM can be estimated from the market, a sale may easily be judged comparable or not comparable. Consequently, a non-conforming GIM will mean further analysis of the sale is needed. 2. The GIM is an income capitalization tool used by market participants that analyzes multiples paid by purchasers for certain income streams generated by income properties. In analyzing the GIMs of several comparable sales, patterns can be identified from the data that enable the appraiser to select a reasonable GIM to be applied to the subject. 3. The GIM omits consideration of vacancy, free rent and operating expenses, rendering another approach which may be applied and understood readily by the investor. The sales data indicate a GIM range from 7.3 to 9.7 with an average of 8.02. Except for Sale No. 3 which sold with a 9.7 GIM, the balance of the sales were in the 7.3 to 7.8 range. Although Sale No. 3 is located in the same neighborhood as the subject and would generally be though to have similar upside potential, the property had a significant amount of below market leases and there was strong potential for large increases upon releasing. Thus, the 9.7 GIM is not reflective of market or the subject. The balance of the sales are considered to be the most appropriate for comparison purposes, although some consideration has been given Sale No 3. Based upon this consideration, our estimate is correlated at a GIM of 8.0. This reflects a value based upon the estimate of stabilized income for the property in the income approach section of this report as follows: $15,223,400 x 8.0 = $121,787,200 Rounded: $121,800,000 ============ LANDAUER 35 REAL ESTATE COUNSELORS SALES COMPARISON APPROACH CONCLUSION In reconciling a conclusion by way of these three separate market approach techniques, we have considered the appropriateness of each with respect to the subject property, the sales data and the reasonableness of the indications. The value conclusions from each analysis are summarized as follows: Price Per Unit $118,400,000 Price Per Square Foot $108,800,000 GIM $121,800,000 Of the three techniques as applied to this analysis, the price per unit and the GIM are more valid techniques. In light of the limited correlation of price per square foot to average unit size in the sales data, the price per square foot technique is considered less valid and is given least weight in the reconciled value of the sales comparison approach. The price per unit and gross income multiplier techniques are considered the most reflective of how a typical purchase would use the sales comparison approach, considering the data available. Therefore, with primary emphasis on the indicated value from the price per unit technique and secondary emphasis on the GIM method, the concluded value using the Sales Comparison Approach is $120,000,000. LANDAUER 36 REAL ESTATE COUNSELORS INCOME APPROACH INCOME APPROACH The income approach is based upon the economic principle of anticipation. Income producing properties are typically valued based on their ability to produce a cash flow plus reversion to the investor. Several factors are considered in evaluating the income producing potential of an apartment complex. These factors include the economic strength and future outlook for the region, specific market conditions for apartments including new developments, and the location and design of the subject. Two income valuation techniques are typically used in the analysis of investment properties. As discussed in the Appraisal Problem and Valuation Methodology section, these techniques are the Direct Capitalization method and the Discounted Cash Flow (DCF) method. Direct capitalization generally applies a market derived overall capitalization rate to a projected first year stabilized net income estimate to indicate the subject's market value. This approach is particularly valid when the subject is stabilized and overall capitalization rates are readily available from the market. We have also included a DCF analysis of the subject because our research indicates that buyers of apartment projects typically use long-term DCF analysis to reflect growth in rents and expense and the impact of capital reserves. The following sections address the analysis used in estimating revenues and expenses for the subject property. MARKET RENT Market rent is defined as the reasonable expectancy of rent if the property were available to be rented at the time of analysis. It is the rental warranted to be paid in the open real estate market based upon current rentals being paid for comparable space, in this case, apartment units. Market rent is distinguished from contract rent, which is rent expected to be generated under the terms of an existing lease. Actual rent, or contract rent, may differ from market rent. The discussion presented immediately below addresses market rent. In determining the market rent applicable to the subject property, the appraiser has made a thorough search of the subject's competitive apartment market. Interviews with leasing agents and property managers were conducted to determine current market rental levels of competing projects. This data was then used in making a market rent estimate for the subject property through the comparison process. A summary of this data is shown in the following table and is keyed to a location map on the facing page. Detailed data sheets with photographs and descriptions are complied in the Addenda of this report. [GRAPHIC OMITTTED] Comparable Rentals Map COMPARABLE RENTAL SUMMARY Mansion Grove Apartments
YR. Unit Mix No. Name/Location Occ. # Units BLT. BR/BA Sq. Ft. Rent/Mo Rent/SF/Mo - ------------------------------------------------------------------------------------------------------------------------------------ 1. BELLA VISTA 95% +/- 634 1991 1BR/1BA 509 $1,165 $2.29 1500 Vista Club Drive 1BR/1BA 619 $1,315 $2.12 Santa Clara 2BR/2BA 735 $1,475 To $1,625 $2.01 To $2.21 2BR/2BA 889 $1,735 $1.95 2BR/2BA 1175 $2,155 $1.83 2. NANTUCKET 0% 252 1997 1BR/1BA 735 $1,495 To $1,695 $2.03 To $2.31 1600 Nantucket Circle 1BR/1BA 830 $1,595 To $1,775 $1.92 To $2.14 Santa Clara 1BR/1BA 856 $1,595 To $1,775 $1.86 To $2.07 1BR/1BA 796 $1,495 To $1,625 $1.88 To $2.04 2BR/2BA 975 $1,785 To $1,945 $1.83 To $1.99 2BR/2BA 1000 $1,785 To $1,945 $1.79 To $1.95 2BR/2BA 1051 $1,875 To $2,095 $1.78 To $1.99 3. ELAN 95% +/- 941 1991 1BR/1BA 532 $1,129 $2.12 345 Village Center Drive 1BR/1BA 597 $1,300 $2.18 Santa Clara 1BR/1BA 700 $1,155 $1.65 1BR/1BA 780 $1,455 $1.87 2BR/2BA 760 $1,410 $1.86 2BR/2BA 809 $1,625 $2.01 2BR/2BA 1062 $1,815 $1.71 2BR/2BA 1082 $1,730 $1.60 2BR/2BA 1230 $1,895 $1.54 4. WOODLAND MEADOWS 95% +/- 366 1992 1BR/1BA 836 $1,265 To $1,445 $1.51 To $1.73 2544 Vista Wood Circle 2BR/2BA 1,104 $1,525 $1.38 San Jose 2BR/2BA 1,119 $1,925 $1.72 3BR/3BA 1,438 $2,150 To $2,250 $1.50 To $1.56 5. WILLOW LAKE 95% +/- 408 1989 1BR/1BA 732 $1,275 To $1,475 $1.74 To $2.02 1331 Lakeshore Circle 2BR/2BA 1,015 $1,595 To $1,895 $1.57 To $1.87 San Jose 3BR/3BA 1,303 $1,985 To $2,185 $1.52 To $1.68 6. THE FOUNTAINS 95% +/- 226 1991 1BR/1BA 725 $1,210 To $1,265 $1.67 To $1.74 373 River Oaks Circle 2BR/2BA 825 $1,355 To $1,380 $1.64 To $1.67 San Jose 2BR/2BA 875 $1,385 To $1,410 $1.58 To $1.61 2BR/2BA 1,025 $1,590 To $1,605 $1.55 To $1.57 2BR/2BA 1,050 $1,645 To $1,720 $1.57 To $1.64 2BR/2BA 1,075 $1,770 To $1,775 $1.65 To $1.65 Subj. MANSION GROVE 93% 877 1988 1BR/1BA 700 $1,150 To $1,215 $1.64 To $1.74 502 Mansion Park Drive 2BR/2BA 961 $1,550 To $1,610 $1.61 To $1.68 Santa Clara 2BR/2BA 950 $1,500 To $1,570 $1.58 To $1.65
Source: Landauer Associates, Inc., April 1997 Comments - -------------------------------------------------------------------------------- This project is the subject's primary competition. Amenities include clubhouse, fitness center, aerpbocs studio, swimming and lap pools, jacuzzi, sauna, covered parking and garages. This project is nearly adjacent to Bella Vista and essentially represents its expansion. Amenities will include fitness center, aerobics studio, billiard room, business center, swimming pool and spa. This project is approx. 1-mile east of the subject and represents the largest and offers a sumilar amenity package. Amenities include lap and swimming pools, spas, fitness centers, aerobics room, saunas, and tennis courts. LANDAUER 37 REAL ESTATE COUNSELORS INCOME APPROACH Comparable No. 1 is the Bella Vista apartment complex. This apartment project is located approximately 0.25 miles north of the subject and is its closest existing competitor. Like the subject, access to this property is from Lick Mill Boulevard. This 634-unit complex was constructed in 1991 and its quality of construction is considered similar to the subject. Interior unit finishes are considered similar and comparable to the subject. The location of this project and its amenities are similar to the subject. One bedroom units range in price from $1,165 to $1,315 per month. Two bedroom units range in price from $1,475 to $2,155 per month. Overall, this project is highly similar to the subject. Comparable No. 2 is the Nantucket which is essentially an extension of the Bella Vista apartments. These two projects are separated by a community park. The Nantucket is currently under construction and its 252 units are projected to be available for occupancy in July 1997. Upon the completion of development, this project and Bella Vista will be the subject's nearest and most direct competition. Following a review of the site plan and architectural renderings and viewing of the current construction, the quality of the Nantucket is considered similar to the subject. Additionally, we anticipate that its interior unit finishes will be similar and comparable to the subject. The location of this project is similar to the subject. The amenities package will be similar to the subject. One bedroom units range in price from $1,495 to $1,775 per month. Two bedroom units range in price from $1,785 to $2,095 per month. Upon completion of the improvements, this project will be somewhat superior to the subject because it will be new. Comparable No. 3 is the Elan which is located approximately 1.0 mile east of the subject. This is a 941-unit complex constructed in 1991 and is the largest and most prominent project in the competitive market area. Its prominence is mainly due to its five story height which is two stories higher than most of its competition plus its large unit count and frontage along Montague Expressway. The quality of this project is considered similar to slightly superior to the subject. Its interior unit finishes are considered similar and comparable to the subject. The location of this project is similar to the subject. One bedroom units range in price from $1,129 to $1,455 per month. Two bedroom units range in price from $1,410 to $1,895 per month. Overall, this project is considered highly similar to the subject. Comparable No. 4 is the Woodland Meadows apartment complex which is located approximately 3.0 miles southeast of the subject. This 366-unit complex was constructed in 1992. Quality of construction and interior unit finishes are considered similar and comparable to the subject. The location of this project and its common area amenities are slightly inferior to the subject. One bedroom units range in price from $1,265 to $1,445 per month. Two bedroom units range in price from $1,525 to $1,925 per month. And three bedroom units range in price from $2,150 to $2,250 per month. Overall, this project is considered similar to the subject. LANDAUER 38 REAL ESTATE COUNSELORS INCOME APPROACH Comparable No. 5 is the Willow Lake apartment complex which is located approximately 3.0 miles southeast of the subject. This project is situated across the street from Woodland Meadows. This 408-unit complex was constructed in 1989. The project is currently being expanded with a neighborhood retail development and approximately 40 additional residential units. Quality of construction and interior unit finishes are considered similar and comparable to the subject. The location of this project and its common area amenities are slightly inferior to the subject. One bedroom units range in price from $1,275 to $1,475 per month. Two bedroom units range in price from $1,595 to $1,895 per month. And three bedroom units range in price from $1,985 to $2,185 per month. Overall, this project is considered similar to the subject. Comparable No. 6 is the Fountains which is located approximately 1.0 miles east of the subject. This project is situated in the same residential area as the Elan. This 226-unit complex was constructed in 1990. Quality of construction and interior unit finishes are considered similar and comparable to the subject. The location of this project and its units have amenities similar to the subject. One bedroom units range in price from $1,210 to $1,265 per month. Two bedroom unit range in price from $1,355 to $1,775 per month. Overall, this project is considered similar to the subject. Rental Premiums: The rental rates noted above and on the rent summary table include both base rates and base plus premiums. The low end of the rental range reflects a standard rental unit which is a ground floor interior unit with no view and the high end of the range is for most desirable unit which would be a top floor end unit with a view. Rent premiums are typically charged for the following: all units above the ground floor with the top floor having the highest premium, end units, fireplaces, views, additional parking, and lease terms less than one year. Although the specific breakdown of the premiums for each of the commutative projects was not available, project managers generally reported that monthly premiums of $100 to $200 are applied to the most desirable units. These premiums do not include additional charges for excess parking. Rent premiums within the subject include $30 for second floor units, $40 for third floor units, $10 for a courtyard/private view, $25 for a pool/waterscape view, and $5 for an end unit. The charge for additional parking at the subject is $30 per month. RENTAL MARKET TRENDS As a result of interviews with property managers of the rental comparables, as well as brokers active in the area, several significant trends are occurring in the marketplace. Occupancy rates have remained in excess of 95 percent for several years and are projected to remain at this level. Rents in the competitive properties have increased from 16 to 22 percent annually since 1994. LANDAUER 39 REAL ESTATE COUNSELORS INCOME APPROACH These increases have occurred because of limited new construction in the area and the increased demand from the expanding employment in the high technology industry. Future rent increases are projected to become smaller because of the additional supply of units currently under construction and projected for the future. Although concessions are essentially not used in the market because of its overall strength, management occasionally uses short term rent incentives designed to increase the occupancy of specific unit types. For example: A corporate tenant recently vacated 60 one bedroom units at the subject and management implemented a $300 rent abatement on the first month for 6-month lease commitment. Typically, when the occupancy rate increases to an acceptable level concessions are phased out. MARKET RENT CONCLUSIONS The one bedroom/one bathroom units in the subject are currently being leased for $1,150 to $1,215 per month. These units include the type A, A2 and A3 apartments and average 700 square feet. The low end of the range is for a ground floor interior unit and the high end of the range is for a premium unit on the third floor with a view. These rates exclude charges for excess parking. We have estimated the average market rent for the A, A2 and A3 units at $1,250 per month. Although this is $85 to $100 above the asking rate for the subject units, the estimated market rent is well supported by the projects surveyed, especially Bella Vista which is nearest and most similar to the subject. There are three types of two bedroom/two bathroom units in the subject. The type B is unit is 961 square feet and it is currently being leased for $1,550 to $1,610 per month. The type C and C2 have an average size of 950 square feet and they are currently being leased for $1,500 to $1,570 per month. Like the one bedroom units, the low end of the range is for a ground floor interior unit and the high end of the range is for a premium unit on the third floor with a view, excluding charges for excess parking. We have estimated the average market rent for the type B units at $1,600 per month and the type C units at $1,550 per month which are within the ranges currently being charged for these units and is well supported by the projects surveyed. There is only one two bedroom/one bathroom unit in the subject and it is a cottage unit identified as type D. This unit is currently leased for $1,800 per month. We have concluded that the current rent being paid for this unit is market. Again, this single unit was constructed over 50 years ago and was converted to a rental unit in 1992. Although there were no directly competitive units identified in the market, the estimated market rent is well supported by the projects surveyed. LANDAUER 40 REAL ESTATE COUNSELORS INCOME APPROACH POTENTIAL GROSS INCOME Rental Income As discussed above, our estimate of market rental rates for the subject units is based upon our survey of six apartment complexes in the subject's market area. In addition to the rent comparables analyzed, consideration has been given to the existing rents at the subject property. As indicated by the rent comparables analyzed, the rental rates in place at the subject property are well supported and there is strong upside potential for increasing the rents for the one bedroom/one bathroom units. The rental premiums charged are also well supported by the rent comparables analyzed. Based upon our analysis, our estimate of potential gross rental revenue for the subject is as follows: Plan Unit Type No. of Units Monthly Rent Annual Rent. A/A2/A3 1 Br/1 Ba 438 1,250 6,570,000 B 2 Br/2 Ba 150 1,600 2,880,000 C/C2 2 Br/2 Ba 288 1,550 5,356,800 D (Cottage) 2 Br/1 Ba 1 1,800 21,600 --- ----------- Totals 877 $14,828,400 Additional Income The subject property also generates income from various miscellaneous sources including parking revenues, rental income from the convince store, vending income, key fees, interest income and other miscellaneous items. Included in other income are tenant items such as lease breaks, collections, and late charges. Total other income is estimated, based on the 1997 budget and historical performance, to be $395,000 per year.
OPERATING HISTORY MANSION GROVE APARTMENTS DESCRIPTION Actual Actual Actual Operating Year: CY 1994 Per Unit CY 1995 Per Unit CY 1996 Per Unit ------------ ------------ ------------ ------------ ------------ ------------ Gross Potential Rent $ 9,921,854 $ 11,313 $ 10,498,506 $ 11,971 $ 12,333,285 $ 14,063 Vacancy/Models/Staff (547,216) (624) (394,407) (450) (575,787) (657) Concessions (55,953) (64) (5,545) (6) (1,810) (2) Corporate Lifing Program 151,682 173 217,188 248 86,644 99 Retained Dep/Write-offs (75,126) (86) (3,538) (4) (27,134) (31) Other Income 262,833 300 237,293 271 316,032 360 ------------ ------------ ------------ ------------ ------------ ------------ Total Income $ 9,658,074 $ 11,013 $ 10,549,497 $ 12,029 $ 12,131,230 $ 13,833 EXPENSES Payroll, Benefits, & Taxes $ 559,276 $ 638 $ 601,036 $ 685 $ 644,679 $ 735 On-Site Administration 52,616 60 68,741 78 65,894 75 Repairs & Maintenance 69,710 79 83,871 96 100,655 115 Turnover Costs 41,966 48 66,188 75 88,933 101 Landscape & Grounds 134,422 153 151,162 172 130,899 149 Utilities 421,382 480 456,489 521 407,841 465 Marketing 122,188 139 92,207 105 89,833 102 Management Fees 306,289 349 337,848 385 383,704 438 Professional Fees 45,511 52 43,443 50 49,709 57 Real Estate Taxes 860,854 982 874,160 997 316,958 361 Insurnace & Licenses 152,618 174 139,408 159 155,270 177 Assessments-Interest / Bonds 0 0 0 0 0 0 ------------ ------------ ------------ ------------ ------------ ------------ Total Expenses $ 2,766,832 $ 3,155 $ 2,914,553 $ 3,323 $ 2,434,375 $ 2,776 Expense Ratio 28.6% 28.6% 27.6% 27.6% 20.1% 20.1% Net Operating Income $ 6,891,242 $ 7,858 $ 7,634,944 $ 8,706 $ 9,696,855 $ 11,057 DESCRIPTION Budget Landauer Operating Year: CY 1997 Per Unit FY 1997 Per Unit ------------ ------------ ------------ ------------ Gross Potential Rent $ 13,492,750 $ 15,385 $ 14,828,400 $ 16,908 Vacancy/Models/Staff (710,100) (810) (761,170) (868) Concessions (8,400) (10) 0 0 Corporate Lifing Program 0 0 0 0 Retained Dep/Write-offs 25,615 29 0 0 Other Income 378,192 431 395,000 450 ------------ ------------ ------------ ------------ Total Income $ 13,178,057 $ 15,026 $ 14,462,230 $ 16,491 EXPENSES Payroll, Benefits, & Taxes $ 674,237 $ 769 $ 675,000 $ 770 On-Site Administration 68,512 78 68,500 78 Repairs & Maintenance 98,221 112 98,200 112 Turnover Costs 90,686 103 90,700 103 Landscape & Grounds 141,868 162 142,000 162 Utilities 452,612 516 453,000 517 Marketing 103,630 118 104,000 119 Management Fees 397,844 454 433,867 495 Professional Fees 53,784 61 53,800 61 Real Estate Taxes 1,272,000 1,450 1,245,490 1,420 Insurnace & Licenses 219,976 251 220,000 251 Assessments-Interest / Bonds 0 0 399,674 456 ------------ ------------ ------------ ------------ Total Expenses $ 3,573,370 $ 4,075 $ 3,984,231 $ 4,543 Expense Ratio 27.1% 27.1% 27.5% 27.5% Net Operating Income $ 9,604,687 $ 10,952 $ 10,477,999 $ 11,948
Source: Maxim Property Management, Landauer Associates, Inc., April 1997. LANDAUER 41 REAL ESTATE COUNSELORS INCOME APPROACH Based upon the foregoing discussion of the rental comparables and the market conditions, the input of the subject's property manager, and the discussions of additional income, the potential gross income from unit rentals and other income is calculated on the following table: POTENTIAL GROSS INCOME Rental Income $14,828,400 Other Income 395,000 ----------- Total Gross Income $15,223,400 Vacancy and Collection Loss The subject's vacancy and collection loss was 5.5 percent in 1994, 5.7 percent in 1995, and 4.7 percent in 1996. Property management has budgeted 5.3 percent for 1997. We have estimated stabilized vacancy and collection loss for the subject property of 5.0 percent with no concessions. This rate has been applied to the rental revenues. We believe market factors indicate that comparable properties will continue to lease-up units without any significant concessions for several years. Supporting this vacancy estimate is the subject property which is currently 93.2 percent leased and the rent comparables which report vacancy rates of 5 percent and less. Effective Gross Income Application of the 5.0 percent vacancy and collection loss rate results in a vacancy and collection loss of $761,170 dollars and an effective gross income of $14,462,230. EXPENSE PROJECTION The subject expenses for 1994-1996 and budgeted 1997 are summarized on the facing table. The following is a discussion of these items as well as our forecast for stabilized operating expenses. These items have been itemized on the basis of cost per unit and total amounts. LANDAUER 42 REAL ESTATE COUNSELORS INCOME APPROACH Payroll, Benefits, Taxes This category includes the costs of on-site office staff and maintenance employees at the subject employed by the management company, but charged as an expense against the income of the property in addition to the management fee. Also included are the costs employee benefits programs, payroll taxes, and worker compensation. The per unit payroll expense was $638 1994, $685 in 1995, $735 in 1996. The 1997 budget is $674,237 which is $769 per unit. We have concluded that a reasonable charge for this category is $675,000 ($770 per unit) per year based upon historical performance and the 1997 budget. On-Site Administration This category includes telephone, answering service, office supplies, postage, credit information services and uniforms. This expense has was $60 per unit in 1994, $78 in 1995 and $75 per unit in 1996. The 1997 budget for on-site administration is $68,512 per year which is $78 per unit. We have concluded that a reasonable charge for this category is $68,500 ($78 per unit) per year based upon historical performance and the 1997 budget. Repairs and Maintenance This category is generally influenced by age, condition and style of building, building size, type of tenancy, building quality, amenities, management style, and reserve expense. The property experienced a per unit repairs and maintenance cost of $79 in 1994, $96 in 1995, and $115 in 1996. This expense includes the cost of maintenance contracts, plumbing and electrical repairs, supplies, pest control, rubbish removal, janitorial supplies, fire protection and miscellaneous items. The 1997 budgeted amount for maintenance and repairs is $98,221 which is $112 per unit. We have concluded that a reasonable charge for this category is $98,200 ($112 per unit) per year based upon historical performance and the 1997 budget. Turnover Costs This category is primarily influenced by age and condition of building, and type of tenancy. The property experienced a per unit turnover costs of $48 in 1994, $75 in 1995, and $101 in 1996. This expense includes the cost of cleaning carpeting, window covers, interior painting, and general cleaning. The 1997 budgeted amount for maintenance and repairs is $90,686 per year which is $103 per unit. We have concluded that a reasonable charge for this category is $90,700 ($103 per unit) per year based upon historical performance and the 1997 budget. LANDAUER 43 REAL ESTATE COUNSELORS INCOME APPROACH Landscaping & Grounds This category includes contract landscaping, pool, lake (pond) supplies, and pest control. This expense has was $153 per unit in 1994, $172 in 1995 and $149 per unit in 1996. The 1997 budget for landscaping is $141,868 which is $162 per unit. We have concluded that a reasonable charge for this category is $142,000 ($162 per unit) per year based upon historical performance and the 1997 budget. Utilities This category covers the landlord's responsibility for the cost of all sewer and water usage, both tenant and common area, as well as the cost of all common area utility expenses. Each unit is separately metered with the tenant responsible for electricity. The per unit utilities expense for the subject property was $480 in 1994, $521 in 1995 and $465 per unit in 1996. The 1997 budgeted amount for utilities is $452,612 per year which is $516 per unit. We have concluded that a reasonable charge for this category is $453,000 ($517 per unit) per year based upon historical performance and the 1997 budget. Marketing This category includes the costs of brochure/stationary, media advertising, model apartment, promotions, referrals/retention, resident activities and signs. The per unit marketing expense for the subject property was $139 in 1994, $105 in 1995 and $102 per unit in 1996.. The 1997 budgeted amount is $103,630 which is $118 per unit. We have concluded that a reasonable charge for this category is $104,000 ($119 per unit) per calendar year based upon historical performance and the 1997 budget. Management Fee Management fees typically range from 2.0 percent to 4.0 percent of effective gross income for the comparable apartment buildings. The current management fee for the subject is 3.0 percent which is typical for a project like the subject. The resulting management fee is $433,867. Professional Fees Professional fees at the subject include real estate tax consulting, legal services for unlawful detainers, and security patrol service. The per unit professional fees for the subject property was $52 in 1994, $50 in 1995 and $57 per unit in 1996.. The 1997 budgeted amount is $53,784 which is $61 per unit. LANDAUER 44 REAL ESTATE COUNSELORS INCOME APPROACH We have concluded that a reasonable charge for this category is $53,800 ($61 per unit) per year based upon historical performance and the 1997 budget. Real Estate Taxes The current total property tax liability for the 1996/1997 tax year is $764,429.70, which includes direct assessments for flood control, open space, and vector control. A market value estimate for the subject property, however, assumes a transfer of the property on the appraisal date, which under Proposition 13 triggers reassessment to reflect the market value (adjusted sales price). In the case of the subject, this will result in a higher assessed value and tax liability. The stabilized real property taxes for the subject have been estimated based upon the appraised value concluded in this report at the effective tax rate of 1.0555 percent, which results in an annual tax liability of $1,245,490. Property Insurance The per unit annual premium for general insurance coverage was $174 in 1994, $159 in 1995 and $177 in 1996. The budgeted 1997 insurance expense is $219,976 which is $251 per unit. In the 1994 through 1995 period, the insurance premium covered general liability and fire. The significant increase in the 1997 budget is due to the inclusion of earthquake coverage. We have concluded that a reasonable charge for this category is $220,000 ($251 per unit) per year based upon historical performance and the 1997 budget. Assessment-Interest & Bonds As noted previously, the subject property is part of the Mill Creek Assessment District which was created to provided necessary infrastructure to the subject and some surrounding properties. We have outlined the payment requirements within the "Site Description" section of this report and have incorporated these required payments into our cash flow. Reserves for Replacement This category reflects normal reserves for the replacement of roof, appliances, floor covering, mini-blinds and other replaceable items. The roof is estimated to cover 241,450 square feet of apartment building area (724,350 sq.ft. divided by three stories) plus the 1,000 square foot cottage and the single story clubhouse of 5,800 square feet, for a total area under roof of 248,250 square feet. The replacement cost is estimated at $1.50 LANDAUER 45 REAL ESTATE COUNSELORS INCOME APPROACH per square foot, for a total of $372,375. Assuming a remaining economic life for the roof of 15 years, this equals a required annual reserve for the roof of $24,825. Appliances in each unit include a refrigerator, dishwasher, disposal, washer, dryer and oven/range. The estimated package cost is $2,725 per Marshall Valuation Service. This equals $2,389,825. Assuming a life of 15 years, the required annual reserve for appliance replacement equals $159,322. Replacement of floor covering is estimated every 7 years. Based on a cost estimate of $1.00 per square foot and total floor area of 731,150 square feet, this indicates a total cost of $731,150. The annual required reserve is therefore $104,450. The total replacement reserve expense estimated above is $288,597 which equals $329 per unit. The actual replacement reserves for the subject have fluctuated significantly during the past three years. Replacement reserves were $47,951 in 1995 and $936,800 in 1996. The 1997 budgeted amount is $680,030 which is $775 per unit. We believe this wide variance is the result of several years were limited replacements occurred, such as in 1994, and other years when a significant bulk of replacements were required. These fluctuations are common for residential buildings which have moved from being a new structure with limited needs for replacements to a slightly older property which requires new flooring and some appliance replacements. We have concluded that a reasonable stabilized charge for this category is $289,000 per year ($330 per unit) based upon Marshall Valuation Service information and consideration to the history and 1997 budget for the subject. All of the comparable sales reported overall rates prior to any deduction for capital reserves. Therefore, a deduction for reserves is only made in our DCF analysis. LANDAUER 46 REAL ESTATE COUNSELORS INCOME APPROACH DERIVATION OF THE OVERALL RATE The improved sales documented within the Sales Comparison Approach section of this report produced the following overall capitalization rates upon sale: SUMMARY OF OVERALL CAP RATES Sale Date of No. of Sale No. Project/Location Sale Units Price OAR ---- ---------------- ------- ------ ----- --- 1. The Promenade 10/95 220 $18,200,000 8.0% Sunnyvale 2. Bristol Commons 6/95 188 $16,850,000 8.6% Sunnyvale 3. The Fountains 7/96 226 $27,750,000 7.2% San Jose 4. Via Reggio 4/96 116 $10,610,000 7.9% San Jose 5. Parkside Commons 5/96 192 $25,500,000 9.0% Sunnyvale The above sales show overall capitalization rates ranging from 7.2 to 9.0 percent. As previously stated, all of the sales reported overall rates prior to any deduction for capital reserves. A review of the overall capitalization rates indicated by the Peter F. Korpacz & Associates Inc. Real Estate Investor Survey (First Quarter 1997) indicates capitalization rates range from 8.0 to 10.0 percent with a national average of 8.92 percent. It should be noted that these data represent national trends as opposed to regional tendencies. We have considered it only as a general guideline. The five sale comparables above have an average overall capitalization rate (OAR) of 8.14 percent. As outlined in the Sales Comparison Approach section of this report, the income potential of Sale Nos. 1, 2, 4 and 5 are considered most similar and comparable to the subject. Based on the comparability of these sales, and the rates achieved by the other sales, we have concluded an overall capitalization rate for the subject of 8.75 percent. This overall capitalization rate gives consideration to our projection of rental income in excess of the budgeted amount. LANDAUER 47 REAL ESTATE COUNSELORS INCOME APPROACH Applying this OAR to the subject's fiscal year estimated stabilized NOI (excluding reserves) results in $119,750,000 by the income approach as shown below. Stabilized Net Operating Income $ 10,478,000 Overall Rate 8.75% Indicated Value $119,748,572 Rounded: $119,750,000 ============ Price Per Unit: $ 136,545 ============ GIM: 7.87 ============ DISCOUNTED CASH FLOW ANALYSIS Cash Flow Projections A cash flow has been prepared to consider potential revenue and expense increases over a given holding period and capital recovery at the end of this period. This income stream, as well as the capital recovery or reversionary value, will be discounted to the present at a rate (discount rate) of return that is required or reflected by current investor demands. The following is a brief synopsis of our cash flow assumptions: Projection Period: Ten years, the typical holding period assumed by most investors. Projection period starts April 1, 1997. Rental Growth Rate: Rents for the market units are projected to increase 3.5% during the holding period. Over the last two years, actual contract rents at the subject have increased over 16%. Property management projects an overall rental growth rate of 9.4% rent increase over 1996. Base Rent: First year rental rates are based on the market rental rates estimated previously in this section. Rental Allowance: Considering the historical track record of the subject and comparable apartment properties, we have made no adjustment for a rental allowance. LANDAUER 48 REAL ESTATE COUNSELORS INCOME APPROACH Other Income: Revenue from other sources has been estimated at $395,000 per year, increasing at the annual growth rate of 3.5% each year thereafter. Vacancy/Uncollected Rents: Annual average vacancy and collection loss of 5.0% of gross potential income, based on the subject's historical occupancy along with projections of a strong local market. Expense Growth Rate: Expenses are projected to increase at an annual rate of 3.5%. The average annual inflation rate of 3.5% was selected based upon forecasts by the U.S. Congressional Budget Office, The Korpacz Investors Survey, and local economic conditions. The annual expense growth rate applied to real estate taxes is 2% per state law. Over the last year, actual expenses at the subject, excluding real estate taxes, are projected to increase by 8.7 percent as noted in the 1997 budget. The majority of the increase in operating expenses is due the addition of earthquake insurance. Expenses: First year expenses are the same as those projected in the pro forma, increasing at the annual expense growth rate each year thereafter. Annual management fee is calculated at the rate of 3.0% of effective gross income, a rate typical in the market for outside, independent management of apartment complexes. Replacement Reserve: The first year amount is $330 per unit increasing at the expense growth rate of 3.5%. Discounting Process: Annual cash flows are discounted and a calculation of reversion is made utilizing the cash flow schedule. The following definitions and assumptions were employed in our analysis. Net Operating Income: Net income remaining after all expenses (excluding reserves), but before capital items. Overall Rate: A rate which reflects the relationship of the first year's net income to total value, derived by dividing the net income by the indicated value. Discount Rate: A rate of return used to estimate the present value of future cash flows including the reversion (sales proceeds) of the property at the end of the holding period. The discount rate is LANDAUER 49 REAL ESTATE COUNSELORS INCOME APPROACH alternately called the Internal Rate of Return (IRR), when pre-debt analysis is performed. Terminal Capitalization Rate: An overall rate applied to the projected net operating income at the end of the holding period to determine the amount of the reversion. A disposition fee is usually deducted from the reversion. RATE SELECTION In this section, we have estimated various rates used in analysis including the discount rate, going-in capitalization rates, terminal capitalization rates and inflation rates. Discount Rates Competition with many other investment vehicles has an influence on rates of return required by investors. One method used to estimate an appropriate discount rate to apply in the discounted cash flow model is to analyze the investment parameters of institutional investment managers and advisors of real estate pension and portfolio funds. We have analyzed the investment parameters of various institutional real estate investors for their investment criteria when purchasing institutional real estate such as the subject. The table on the following page presents the first quarter 1997 National Apartment Market Survey, prepared by Peter F. Korpacz & Associates, Inc. This survey measures investors' assumptions and return requirements (including inflation rates for income and expenses and initial and terminal capitalization rates), which provide a national basis for rate comparison. LANDAUER 50 REAL ESTATE COUNSELORS INCOME APPROACH SUMMARY OF INVESTMENT VARIABLES National Apartment Market First Quarter 1997 Current Last Year Ago Key Indicators Quarter Quarter Quarter - -------------- ------- ------- ------- Equity Yield (IRR) Range 10.00%-12.50% 10.00%-12.50% 10.00%-13.00% Average 11.23% 11.26% 11.38% Equity Cap Rate Range 8.00%-10.00% 8.00%-10.00% 7.50%-10.50% Average 8.92% 8.94% 8.97% Market Rent Increase Range 0.00%-5.00% 0.00%-5.00% 0.00%-5.00% Average 3.07% 3.16% 2.74% Expense Rate Increase Range 3.00%-5.00% 2.50%-5.00% 2.50%-5.00% Average 3.56% 3.62% 3.79% Residual Cap Rate Range 8.50%-10.25% 8.50%-10.25% 8.00%-11.00% Average 9.32% 9.29% 9.29% Source: Peter F. Korpacz & Associates, Inc., First Quarter 1997. The 1997 first quarter survey reveals a competitive national apartment market that has reported more and better investment opportunities than has been the case. New apartment projects are continuing to be built at a rate equivalent to last year, but with an increase in the costs of materials, capital, labor and land. The volume of new construction is not expected to reach that of the 1980's. The majority of new units and those under construction have been high-end luxury apartments concentrated in small geographic areas. Investors are concerned regarding the ability of markets to absorb an LANDAUER 51 REAL ESTATE COUNSELORS INCOME APPROACH increasing inventory of similar apartment units. Consumer demand is expected to continue, due to the forecasted flat to low levels of new home construction. Investors have reported concentration on development projects over the past several quarters. Realistic assumptions within the DCF analysis are the trend, with emphasis weighted toward cash flow rather than reversion value. The average going-in capitalization rate is presently 8.92 percent, based on a range of 8.0 percent to 10.0 percent. This is down from 8.94 reported last quarter and the 8.97 percent reported one year ago. However, the range is narrow, indicating a stabilized national apartment market. As shown, the internal rates of return now range from 10.00 percent to 12.50 percent which was slightly lower than last quarter and a year ago, and the average rate has decreased slightly from 11.38 percent last year to 11.23 percent this quarter. Expectations for income growth rates have increased from a year ago, ranging from 0.0 percent to 5.0 percent, with an average of 3.07 percent. Expense growth rates were predominantly 3.0 to 5.0 percent with an average of 3.56 percent, down slightly over last year's average of 3.79 percent. Recent trend analyses have forecasted that inflation over the next several years will be at much lower rates than previously experienced. Most investors are tempering their cash flow assumptions with lower income and expense growth rates. According to the surveys, residual (or terminal) capitalization rates for institutional grade apartments range from 8.50 percent to 10.25 percent and average 9.32 percent. The subject property is located in a highly desirable area with a an increasing population and job base. Based upon the overall rates extracted from the sales, a going-in rate of 8.50 percent was utilized for the subject. Considering all of the above factors, we have selected a residual capitalization rate of 9.00 percent. A 1.0 percent sales expense has been deducted from the reversionary value to account for brokerage commissions and other miscellaneous closing costs. The market value of the subject property is indicated by the discounted cash flow and direct capitalization located on the following page. A rate of return of 12.0 percent has been selected as most representative of the subject. The resulting market value of the subject property, as of April 9, 1997, is $117,817,330 which is rounded to $118,000,000. RECONSTRUCTED INCOME AND EXPENSE ANALYSIS MANSION GROVE APARTMENTS
GROSS INCOME ESTIMATE # $/Unit Annual Gross Potential Income Unit $/Mo. SF $/SF/Mo. /Year Rent ----------------------------------------------------------------------- Cottage 1 $1,800 1,000 $1.80 $21,600 $21,600 Plan A 1 Br, 1Ba 438 1,250 700 $1.79 15,000 6,570,000 Plan B 2 Br, 2Ba 150 1,600 961 $1.66 19,200 2,880,000 Plan C 2 Br, 2Ba 288 1,550 950 $1.63 18,600 5,356,800 ----------------------------------------------------------------------- 877 $1,409 827 $1.70 (Wtd Avg.) (Wtd Avg.) (Wtd Avg.) Other Income GROSS POTENTIAL INCOME VACANCY & CREDIT LOSS 5.0% Of Gross Potential Income TOTAL EFFECTIVE GROSS POTENTIAL INCOME EXPENSES % EGI Per Unit Per Sq. Ft. Annual ------------------------------------------------ Payroll, Benefits, & Taxes 4.67% $770 $0.93 675,000 On-Site Administration 0.47% $78 $0.09 68,500 Repairs & Maintenance 0.68% $112 $0.14 98,200 Turnover Costs 0.63% $103 $0.13 90,700 Landscape & Grounds 0.98% $162 $0.20 142,000 Utilities 3.13% $517 $0.62 453,000 Marketing 0.72% $119 $0.14 104,000 Management Fees 3.00% of EGI 3.00% $495 $0.60 433,867 Professional Fees 0.37% $61 $0.07 53,800 Real Estate Taxes 8.61% $1,420 $1.72 1,245,490 Insurnace & Licenses 1.52% $251 $0.30 220,000 Assessments-Interest / Bonds 2.76% $456 $0.55 399,674 --------- TOTAL OPERATING EXPENSES 27.55% $4,543 $5.49 NET OPERATING INCOME (NOI) RESERVES FOR REPLACEMENTS $330 $0.40 289,000 TOTAL EXPENSES WITH REPLACEMENTS CASH FLOW CAPITALIZATION Cash Flow NOI Cash Flow / Net Income $ 10,189,000 $ 10,478,000 Overal Rates 8.51% 8.75% Capitalized Market Value $119,748,572 $119,748,572 Value Per Unit $136,543 $136,543 Year Year Year Year Year Year Year Year Year 1 2 3 4 5 6 7 8 9 $ 14,828,400 $ 15,347,394 $ 15,884,553 $ 16,440,512 $ 17,015,930 $ 17,611,488 $ 18,227,890 $ 18,865,866 $ 19,526,171 395,000 $ 408,825 $ 423,134 $ 437,944 $ 453,272 $ 469,137 $ 485,557 $ 502,551 $ 520,140 - ------------------------------------------------------------------------------------------------------------------------------------ $ 15,223,401 $ 15,756,219 $ 16,307,687 $ 16,878,456 $ 17,469,202 $ 18,080,625 $ 18,713,447 $ 19,368,417 $ 20,046,311 (761,170) (787,811) (815,384) (843,923) (873,460) (904,031) (935,672) (968,421) (1,002,316) - ------------------------------------------------------------------------------------------------------------------------------------ $ 14,462,231 $ 14,968,408 $ 15,492,303 $ 16,034,533 $ 16,595,742 $ 17,176,594 $ 17,777,775 $ 18,399,996 $ 19,043,995 $ 698,625 $ 723,077 $ 748,385 $ 774,578 $ 801,688 $ 829,747 $ 858,788 $ 888,846 $ 70,898 $ 73,379 $ 75,947 $ 78,605 $ 81,356 $ 84,203 $ 87,150 $ 90,200 $ 101,637 $ 105,194 $ 108,876 $ 112,687 $ 116,631 $ 120,713 $ 124,938 $ 129,311 $ 93,875 $ 97,161 $ 100,562 $ 104,082 $ 107,725 $ 111,495 $ 115,397 $ 119,436 $ 146,970 $ 152,114 $ 157,438 $ 162,948 $ 168,651 $ 174,554 $ 180,663 $ 186,986 $ 468,855 $ 485,265 $ 502,249 $ 519,828 $ 538,022 $ 556,853 $ 576,343 $ 596,515 $ 107,640 $ 111,407 $ 115,306 $ 119,342 $ 123,519 $ 127,842 $ 132,316 $ 136,947 $ 449,052 $ 464,769 $ 481,036 $ 497,872 $ 515,298 $ 533,333 $ 552,000 $ 571,320 $ 55,683 $ 57,632 $ 59,649 $ 61,737 $ 63,898 $ 66,134 $ 68,449 $ 70,845 $ 1,270,400 $ 1,295,808 $ 1,321,724 $ 1,348,158 $ 1,375,121 $ 1,402,623 $ 1,430,675 $ 1,459,289 $ 227,700 $ 235,670 $ 243,918 $ 252,455 $ 261,291 $ 270,436 $ 279,901 $ 289,698 $ 400,443 $ 400,358 $ 399,279 $ 397,159 $ 398,946 $ 399,536 $ 393,869 $ 397,258 --------------------------------------------------------------------------------------------------------------------- (3,984,231) (4,091,778) (4,201,834) (4,314,369) (4,429,451) (4,552,146) (4,677,469) (4,800,489) (4,936,651) - ------------------------------------------------------------------------------------------------------------------------------------ $ 10,478,000 $ 10,876,630 $ 11,290,469 $ 11,720,164 $ 12,166,291 $ 12,624,448 $ 13,100,305 $ 13,599,507 $ 14,107,345 $ 299,115 $ 309,584 $ 320,419 $ 331,634 $ 343,241 $ 355,254 $ 367,688 $ 380,557 (4,273,231) (4,390,893) (4,511,418) (4,634,788) (4,761,085) (4,895,387) (5,032,723) (5,168,177) (5,317,208) - ------------------------------------------------------------------------------------------------------------------------------------ $ 10,189,000 $ 10,577,515 $ 10,980,885 $ 11,399,745 $ 11,834,657 $ 12,281,207 $ 12,745,051 $ 13,231,819 $ 13,726,788 ==================================================================================================================================== 0.892857 0.797194 0.711780 0.635518 0.567427 0.506631 0.452349 0.403883 0.360610 $ 9,097,320 $ 8,432,331 $ 7,815,974 $ 7,244,743 $ 6,715,304 $ 6,222,040 $ 5,765,211 $ 5,344,107 $ 4,950,017 ==================================================================================================================================== Discounted Cash Flow Assumptions Discount Rate: 12.00% Present Value of Cash Flow $ 66,173,966 56.17% Capitalization Rate: 9.00% Present Value of Reversion $ 51,643,364 43.83% Tax Rate: 1.06% Total Present Value $117,817,330 100.00% Overall Capitalization rate: 10.06% Rounded To: $118,000,000 Cost of Sale: 1.00% 3.50% 2.00%
Year Year 10 11 $ 20,209,587 $ 20,916,923 $ 538,345 $ 557,187 - ----------------------------- $ 20,747,932 $ 21,474,110 (1,037,397) (1,073,706) - ----------------------------- $ 19,710,535 $ 20,400,405 $ 919,956 $ 952,154 $ 93,357 $ 96,624 $ 133,837 $ 138,521 $ 123,616 $ 127,943 $ 193,531 $ 200,305 $ 617,393 $ 639,002 $ 141,740 $ 146,701 $ 591,316 $ 612,012 $ 73,325 $ 75,891 $ 1,488,475 $ 0 $ 299,837 $ 310,331 $ 393,991 $ 394,375 - ----------------------------- (5,070,374) (3,693,859) - ----------------------------- $ 14,640,161 $ 16,706,545 $ 393,876 $ 407,662 (5,464,250) (4,101,521) - ----------------------------- $ 14,246,285 $ 16,298,883 ============================= 0.321973 $ 4,586,919 ============== LANDAUER 52 REAL ESTATE COUNSELORS INCOME APPROACH Summary of Income Approach The Income Approach provides a market value range as follows: Technique Indicated Value --------------------------- --------------- Direct Capitalization $119,750,000 Discounted Cash Flow $118,000,000 Each income method was based upon sound logic, provides valid indicators of value, and are equally appropriate for this valuation assignment. In recent years, the discounted cash flow analysis has become an increasingly popular valuation method in that the investor can see the changing income stream over the course of a holding period. However, this technique can be suspect since numerous assumptions are made and extended well into the future. An initial premise which is slightly inaccurate can potentially result in an incorrect result since the premise/assumption due to rigid mathematical process is compounded in subsequent years of analysis. All of the assumptions for the discounted cash flow analysis are included in the direct capitalization method, but are primarily built into the overall capitalization rate. This results in a major benefit since assumptions are limited and the measurement of value is a direct reflection of the market's actions. Further, the direct capitalization technique is simple in application with the necessary components, i.e., one year's net operating income and overall rate, and is more easily quantified from market data than the numerous assumptions of the discounted cash flow analysis. For purposes of this appraisal, we have placed primary emphasis on the value indicated by Discounted Cash Flow and secondary emphasis on the value indicated value from Direct Capitalization supports this value. Therefore, our estimate of the Market Value of the Leased Fee Estate, via the Income Approach is $118,000,000. LANDAUER 53 REAL ESTATE COUNSELORS RECONCILIATION RECONCILIATION Application of the indicated proper approaches to value has produced the following value upon stabilized occupancy: Cost Approach Not Applied Sales Comparison Approach $120,000,000 Income Approach $118,000,000 In each of the three approaches, the appraiser must thoroughly document all of the input data and briefly explain methodology in processing and/or analyzing this data. Insofar as can be determined, the data furnished is from reliable sources and has been accepted as being accurate. Also, the appraiser has attempted to give full recognition to the inherent weaknesses in each of the approaches. Because the appraisal of real property is not by any means an exact science, a great deal of subjective judgment on the part of the appraiser becomes a part of each of the recognized approaches. The cost approach was not utilized in the analysis of the subject because of the age of the improvements and a typical investor would not use this technique. This approach is most reliable for new properties and/or those suffering little accrued depreciation or external obsolescence and where land value is easily estimated. The methodology of this approach does not adequately reflect current market conditions, such as recognizing the income potential of a property, or reflecting buyers' and sellers' motivations involving and income producing property. Furthermore, this approach is less reliable when a significant amount of physical depreciation exists. Therefore, this approach was not utilized in this analysis. In the sales comparison approach, sales of comparable properties were analyzed. Salient features of each sale were addressed and adjusted to the subject property, if necessary. The concluded value via the sales comparison approach lends solid support to the value conclusion in the income approach. The Income Approach has been given the primary weight in arriving at the subject's final estimate of value. The Sales Comparison Approach provides strong support to the final value conclusion. The income approach is most sensitive to the unique characteristics of an individual income producing property. It incorporates methodologies and assumptions employed by investors. Apartment projects such as the subject are typically sold based on their income producing characteristics. Our analysis by the income approach utilized the direct capitalization and discounted cash flow. LANDAUER 54 REAL ESTATE COUNSELORS RECONCILIATION Based on the above conclusion, it is our opinion that a reasonable market value of the subject property, as of April 9, 1997, is: ONE HUNDRED EIGHTEEN MILLION DOLLARS ($118,000,000) LANDAUER 55 REAL ESTATE COUNSELORS ADDENDA ADDENDA o Subject Photographs....................... A o Site Plan................................. B o Floor Plans............................... C o Comparable Improved Sales................. D o Comparable Rentals........................ E o Professional Qualifications............... F EXHIBIT "A" Subject Photographs [GRAPHIC OMITTED] View of the main entrance to the Mansion Grove Apartments. [GRAPHIC OMITTED] View from a turn-around area looking toward two typical buildings separated by waterscape. [GRAPHIC OMITTED] View from a third floor unit across an open parking area toward several apartment buildings. [GRAPHIC OMITTED] View of one of the two pools at the subject. [GRAPHIC OMITTED] View of the weight room. [GRAPHIC OMITTED] View of a typical apartment kitchen. [GRAPHIC OMITTED] View of a typical living room. [GRAPHIC OMITTED] View of a typical bedroom. [GRAPHIC OMITTED] View of the Lick Mill Mansion. [GRAPHIC OMITTED] View looking north along Lick Mill Boulevard from near the northwestern corner of the subject site. [GRAPHIC OMITTED] View from the southwestern corner of the subject site looking north along Lick Mill Boulevard. [GRAPHIC OMITTED] View looking north along Lick Mill Boulevard from its intersection with Montague Expressway. The subject is in the right center portion of the photograph EXHIBIT "B" Site Plan [GRAPHIC OMITTED] Site Plan EXHIBIT "C" Floor Plans [GRAPHIC OMITTED] CATALINA 2 Bedroom/2 Bath Floor Plan [GRAPHIC OMITTED] AVALON 1 Bedroom/1 Bath BALBOA 2 Bedroom/2 Bath Floor Plan EXHIBIT "D" Comparable Improved Sales [GRAPHIC OMITTED] COMPARABLE IMPROVED SALE NO. 1 IDENTIFICATION Building Name: The Promenade Street Address: 1320 Kingfisher Way City, State: Sunnyvale, California 94087 TRANSACTION DATA Sale Date: October 25, 1995 Sale Price: $18,200,000 Terms: All cash Cash Equivalent: $18,200,000 Grantor: Sunnyvale Promenade Limited Partnership Grantee: Bay Apartment Communities, Inc. Document No.: 13068154 COMPARABLE IMPROVED SALE NO. 1 (Continued) SITE DESCRIPTION Land Area: 244,807 Sq.Ft. (5.62 acres) Parking: 346 spaces (1.57 per unit) Zoning: PD, Sunnyvale IMPROVEMENT DESCRIPTION No. of Units 220 Year Built: 1987 Building Area: 159,726 Net Stories: 20 3-story buildings Overall Condition: Good Unit Mix: Studio 44/20% 1BR/1BA 112/51% 2BR/2BA 54/25% 2BR/1BA 10/5% INFORMATION AND EXPENSE INFORMATION Annual Rental Income: $2,328,000 Vacancy and Collection Loss (5%) ($ 116,400) ----------- Effective Gross Income: $2,211,600 Operating Expenses: ($ 748,000) ----------- Net Operating Income: $1,463,000 VALUE INDICATOR Price Per Unit: $82,727 Price Per Square Foot: $113.95 Overall Rate: 8.04% GRM: 7.82 IRR (Seller): N/A Terminal Cap Rate (Seller): N/A COMMENTS: The broker reported gross scheduled income of $2,328,000. Projected expenses were reported at $748,000 including new taxes. [GRAPHIC OMITTED] COMPARABLE IMPROVED SALE NO. 2 IDENTIFICATION Building Name: Bristol Commons Street Address: 730 E. Evelyn Avenue City, State: Sunnyvale, California 94086 TRANSACTION DATA Sale Date: June 27, 1995 Sale Price: $16,850,000 Terms: $4,552,000 (27%) down payment; $12,298,000 1st TD with Bank of America Cash Equivalent: $16,850,000 Grantor: Mutual Benefit Mortgage Investors III Ltd. Grantee: Essex Bristol Partners, Ltd. Document No.: 12928992 COMPARABLE IMPROVED SALE NO. 2 (Continued) SITE DESCRIPTION Land Area: 297,515 Sq.Ft. (6.83 acres) Parking: 388 spaces (2.06 per unit) Zoning: MS, Sunnyvale IMPROVEMENT DESCRIPTION No. of Units 188 Year Built: 1988 Building Area: 152,880 Sq.Ft. (Net) Stories: 8 3-story buildings Overall Condition: Good Unit Mix: 1BR/1BA 92/49% 2BR/2BA 60/32% 2BR/1BA 36/19% INFORMATION AND EXPENSE INFORMATION Annual Rental Income: $2,246,148 Vacancy and Collection Loss (4%) $ (89,846) ---------- Effective Gross Income: $2,156,302 Operating Expenses: $ (700,781) ---------- Net Operating Income: $1,455,521 VALUE INDICATOR Price Per Unit: $89,627 Price Per Square Foot: $110.22 Overall Rate: 8.64% GRM: 7.70 IRR (Seller): N/A Terminal Cap Rate (Seller): N/A COMMENTS: Gross scheduled income at the time of sale was reported at $2,246,148. Projected expenses were reported at $700,781 including new taxes. Market vacancy was reported at 4%. [GRAPHIC OMITTED] COMPARABLE IMPROVED SALE NO. 3 IDENTIFICATION Building Name: The Fountains Street Address: 373 River Oaks Circle City, State: San Jose, California 95134 TRANSACTION DATA Sale Date: July 26, 1996 Sale Price: $27,750,000 Terms: All cash Cash Equivalent: $27,750,000 Grantor: Keystone California Corp. Grantee: Bay Apartment Communities, Inc. Document No.: 13384541 COMPARABLE IMPROVED SALE NO. 3 (Continued) SITE DESCRIPTION Land Area: 388,991 Sq.Ft. (8.93 acres) Parking: 354 spaces (1.57 per unit) Zoning: R4/I, San Jose IMPROVEMENT DESCRIPTION No. of Units 226 Year Built: 1991 Building Area: 184,944 square feet (Net) Stories: 22 2-story buildings & 2 3-story buildings Overall Condition: Good Unit Mix: 1BR/1BA 100/44% 2BR/2BA 126/56% INFORMATION AND EXPENSE INFORMATION Annual Rental Income: $2,850,000 Vacancy and Collection Loss (3%) $ (85,500) ------------ Effective Gross Income: $2,764,500 Operating Expenses: $ (774,825) ---------- Net Operating Income: $1,989,675 VALUE INDICATOR Price Per Unit: $122,787 Price Per Square Foot: $150.05 Overall Rate: 7.17% GRM: 9.74 IRR (Seller): N/A Terminal Cap Rate (Seller): N/A COMMENTS: Net operating income was reported at time of sale to be $1,989,675. Market vacancy and expenses were estimated. [GRAPHIC OMITTED] COMPARABLE IMPROVED SALE NO. 4 IDENTIFICATION Building Name: Via Reggio Street Address: 1277 San Tomas Aquino Road City, State: San Jose, California 95117 TRANSACTION DATA Sale Date: April 30, 1996 Sale Price: $10,610,000 Terms: $3,210,000 (30%) down payment; $7,400,000 1st TD with Prudential Insurance Co. Cash Equivalent: $10,610,000 Grantor: Essex Portfolio L.P. Grantee: Fremont Investors Document No.: 13279652 COMPARABLE IMPROVED SALE NO. 4 (Continued) SITE DESCRIPTION Land Area: 107,593 Sq.Ft. (2.47 acres) Parking: 178 spaces (1.02 per unit) Zoning: R3/R18, San Jose IMPROVEMENT DESCRIPTION No. of Units 116 Year Built: 1986 Building Area: 96,930 square feet (Approximate) Stories: 1 1-story buildings & 2 3-story buildings Overall Condition: Good Unit Mix: Studio 6/5% 1BR/1BA 41/35% 2BR/1BA 30/26% 2BR/2BA 39/34% INFORMATION AND EXPENSE INFORMATION Annual Rental Income: $1,366,380 Vacancy and Collection Loss (3%) $ (40,991) ---------- Effective Gross Income: $1,325,389 Operating Expenses: $ (491,011) ---------- Net Operating Income: $ 834,378 VALUE INDICATOR Price Per Unit: $91,465 Price Per Square Foot: $109.46 Overall Rate: 7.86% GRM: 7.77 IRR (Seller): N/A Terminal Cap Rate (Seller): N/A COMMENTS: The listing broker reported gross scheduled income at time of sale to be $1,366,380. Market vacancy and expenses were estimated. [GRAPHIC OMITTED] COMPARABLE IMPROVED SALE NO. 5 IDENTIFICATION Building Name: Parkside Commons Street Address: 355 N. Wolfe Road City, State: Sunnyvale, California 94086 TRANSACTION DATA Sale Date: May 15, 1996 Sale Price: $25,500,000 Terms: All cash Cash Equivalent: $25,500,000 Grantor: TO South Bay Residential Assoc. Grantee: Bay Apartment Communities, Inc. Document No.: 13294719 COMPARABLE IMPROVED SALE NO. 5 (Continued) SITE DESCRIPTION Land Area: 300,128 Sq.Ft. (6.89 acres) Parking: 300 spaces (1.56 per unit) Zoning: MS, Sunnyvale IMPROVEMENT DESCRIPTION No. of Units 192 Year Built: 1991 Building Area: 199,251 square feet (Net) Stories: 8 2-story buildings Overall Condition: Good Unit Mix: 1BR/1BA 60/31% 2BR/2BA 96/50% 3BR/2BA 36/19% INFORMATION AND EXPENSE INFORMATION Annual Rental Income: $ 3,509,784 Vacancy and Collection Loss (4%) $ (140,391) ----------- Effective Gross Income: $ 3,369,393 Operating Expenses: $(1,080,000) ----------- Net Operating Income: $ 2,289,393 VALUE INDICATOR Price Per Unit: $132,812 Price Per Square Foot: $127.98 Overall Rate: 8.98 GRM: 7.27 IRR (Seller): N/A Terminal Cap Rate (Seller): N/A COMMENTS: The buyer reported the monthly income at time of sale to be $292,482. Market vacancy and expenses were estimated. EXHIBIT "E" Comparable Rentals [GRAPHIC OMITTED] COMPARABLE RENT NO. 1 IDENTIFICATION Building Name: Bella Vista Street Address: 1500 Vista Club Drive City, State: Santa Clara, California IMPROVEMENT DESCRIPTION No. of Units 634 Year Built: 1991 Stories: 3 Parking secured and open Overall Condition: Good RENTAL RATES Unit Size Rent/Mo. Rent/SF 1BR/1BA 509 $1,165 $2.29 1BR/1BA 619 $1,315 $2.12 2BR/2BA 735 $1,475 to $1,625 $2.01 to $2.21 2BR/2BA 889 $1,735 $1.95 2BR/2BA 1175 $2,155 $1.83 [GRAPHIC OMITTED] COMPARABLE RENT NO. 2 IDENTIFICATION Building Name: Nantucket Street Address: 1600 Nantucket Circle City, State: Santa Clara, California IMPROVEMENT DESCRIPTION No. of Units 252 Year Built: 1997 Stories: 3 Parking secured and open Overall Condition: Good RENTAL RATES Unit Size Rent/Mo. Rent/SF 1BR/1BA 735 $1,495 to $1,695 $2.03 to $2.31 1BR/1BA 830 $1,595 to $1,775 $1.92 to $2.14 1BR/1BA 856 $1,595 to $1,775 $1.86 to $2.07 1BR/1BA 796 $1,495 to $1,625 $1.88 to $2.04 2BR/2BA 975 $1,785 to $1,945 $1.83 to $1.99 2BR/2BA 1000 $1,785 to $1,945 $1.79 to $1.95 2BR/2BA 1051 $1,875 to $2,095 $1.78 to $1.99 [GRAPHIC OMITTED] COMPARABLE RENT NO. 3 IDENTIFICATION Building Name: Elan Street Address: 345 Village Center Drive City, State: Santa Clara, California IMPROVEMENT DESCRIPTION No. of Units 941 Year Built: 1991 Stories: 3 Parking secured and open Overall Condition: Good RENTAL RATES Unit Size Rent/Mo. Rent/SF 1BR/1BA 532 $1,129 $2.12 1BR/1BA 597 $1,300 $2.18 1BR/1BA 700 $1,155 $1.65 1BR/1BA 780 $1,455 $1.87 2BR/2BA 760 $1,410 $1.86 2BR/2BA 809 $1,625 $2.01 2BR/2BA 1,062 $1,815 $1.71 2BR/2BA 1,082 $1,730 $1.60 2BR/2BA 1,230 $1,895 $1.54 [GRAPHIC OMITTED] COMPARABLE RENT NO. 4 IDENTIFICATION Building Name: Woodland Meadows Street Address: 2544 Vista Wood Circle City, State: San Jose, California IMPROVEMENT DESCRIPTION No. of Units 366 Year Built: 1992 Stories: 2 Parking secured and open Overall Condition: Good RENTAL RATES Unit Size Rent/Mo. Rent/SF 1BR/1BA 836 $1,265 to $1,445 $1.51 to $1.73 2BR/2BA 1,104 $1,525 $1.38 2BR/2BA 1,119 $1,925 $1.72 3BR/3BA 1,438 $2,150 to $2,250 $1.50 to $1.56 [GRAPHIC OMITTED] COMPARABLE RENT NO. 5 IDENTIFICATION Building Name: Willow Lake Street Address: 1331 Lakeshore Circle City, State: San Jose, California IMPROVEMENT DESCRIPTION No. of Units 408 Year Built: 1989 Stories: 2 Parking secured and open Overall Condition: Good RENTAL RATES Unit Size Rent/Mo. Rent/SF 1BR/1BA 732 $1,275 to $1,445 $1.51 to $1.73 2BR/2BA 1,015 $1,595 to $1,895 $1.57 to $1.87 3BR/3BA 1,303 $1,985 to $2,185 $1.562 to $1.68 [GRAPHIC OMITTED] COMPARABLE RENT NO. 6 IDENTIFICATION Building Name: The Fountains Street Address: 373 River Oaks Circle City, State: San Jose, California IMPROVEMENT DESCRIPTION No. of Units 226 Year Built: 1991 Stories: 2 Parking garages and open Overall Condition: good RENTAL RATES Unit Size Rent/Mo. Rent/SF 1BR/1BA 725 $1,210 to $1,265 $1.67 to $1.74 2BR/2BA 825 $1,355 to $1,380 $1.64 to $1.67 2BR/2BA 875 $1,385 to $1,410 $1.58 to $1.61 2BR/2BA 1,025 $1,590 to $1,605 $1.55 to $1.57 2BR/2BA 1,050 $1,645 to $1,720 $1.57 to $0.64 2BR/2BA 1,075 $1,770 to $1,775 $1.65 to $1.65 [GRAPHIC OMITTED] EXHIBIT "F" Professional Qualifications LANDAUER REAL ESTATE COUNSELORS - -------------------------------------------------------------------------------- Professional Qualifications JAMES C. KAFES, MAI, CRE EXPERIENCE: Landauer Associates, Inc. (since 1986) Managing Director in Charge of National Valuation and Technical Services, Member of the Board of Directors, Member of the Management Committee, and General Manager of the New York Valuation and Technical Services Division. Valuation and real estate counseling on major urban properties and portfolios, including financial and feasibility analyses, appraisal reviews and independent fiduciary services. Miller & Kafes Associates, Inc. (1972-1986) Principal. Valuations, market studies, investment analyses and counseling services on major commercial developments nationwide and in the Caribbean. James E. Gibbons Associates (1970-1972) Assistant Director. Real estate valuations and counseling services. National Bank of North America (1969-1970) Chief Appraiser. Market valuations and analysis of investment opportunities. General Services Administration (1962-1968) Economic analyses, highest and best use studies, market valuations. PROFESSIONAL ACTIVITIES: MAI: Appraisal Institute CRE: American Society of Real Estate Counselors Has served on national committees of the Appraisal Institute and ASREC since 1971, including current service as a board member and past service as Editor-in-Chief and Chairman of the Editorial Board of The Appraisal Journal, published quarterly by the Appraisal Institute. Member: Board of Directors, Cedar Income Fund Board of Advisors, Journal of RTC Real Estate Roundtable of Advisors, Murray H. Goodman Center for Real Estate Studies, Lehigh University The Real Estate Board of New York, Inc. International Council of Shopping Centers CERTIFICATION: Currently certified in the Appraisal Institute's voluntary program of continuing education for its designated members. EDUCATION: BS, MBA, Lehigh University LANDAUER REAL ESTATE COUNSELORS - -------------------------------------------------------------------------------- Professional Qualifications RODNEY A. WYCOFF, CRE, MAI EXPERIENCE: Landauer Associates, Inc., Los Angeles, California (since June 1996) Senior Managing Director. His responsibilities include coordination of the firm's valuation activities throughout the western United States and the Pacific Rim. Mr. Wycoff has over 20 years experience in the real estate industry as an appraiser, consultant, lender, and manager. A specialist in major investment real estate projects, his professional background is briefly summarized as follows. SMS Appraisals (1994-1996) President. As President of SMS, Mr. Wycoff was responsible for the general management of this $30M national organization. He also directed facility management and developed new business opportunities for Strategic Mortgage Services, the parent company. Wycoff & Company (1993-1994) Mr. Wycoff established an Irvine based consulting practice specializing in valuation and litigation support services throughout Southern California. Typical engagements consisted of valuation, consulting and asset management. The practice was merged into SMS Appraisals in 1994. Equitable Real Estate (1989-1993) Vice President. In his capacities as first Regional Appraiser and then Vice President of Asset Management for Equitable Real Estate, Mr. Wycoff was responsible for the valuation and management of a billion-dollar multi-state real property portfolio. Typical assignments included all phases of valuation and asset management including major renovation projects. Laventhol & Horwath (1985-1989) Senior Principal. As director of the San Francisco based valuation practice, Mr. Wycoff was involved in complex consulting and valuation assignments involving major hospitality and real estate projects throughout the western United States, Hawaii, and the Pacific Rim. Ginther Wycoff Group (1979-1985) Principal. Mr. Wycoff was co-owner of this Denver-based appraisal and consulting practice and specialized in the valuation of major hotels, office buildings, industrial developments, and recreational properties. The Ginther Wycoff Group was purchased by Laventhol & Horwath in 1985. New York Life Insurance Company (1974-1979) Assistant Vice President. While employed by New York Life, Mr. Wycoff served in several capacities in real estate lending, management and investment, ultimately as Rocky Mountain Regional Manager based in Denver, Colorado. PROFESSIONAL ACTIVITIES: MAI: Member, Appraisal Institute CRE: American Society of Real Estate Counselors LICENSE: Certified General Real Estate Appraiser State of California No. AG007074 CERTIFICATION: Currently certified in the voluntary programs of continuing education for the designated members of the Appraisal Institute. EDUCATION: AB Degree, California State University, San Francisco LANDAUER REAL ESTATE COUNSELORS - -------------------------------------------------------------------------------- Professional Qualifications KEVIN D. GRAY, CRE EXPERIENCE: Landauer Associates, Inc., (since 1985) Senior Vice President, Valuation and Technical Services Division. Real estate consulting emphasizing appraisals, market and feasibility studies, cash flow analyses and portfolio valuation. All property types, national assignments. Price Waterhouse (1985) Senior Associate. General management and real estate consulting; strategic planning and expansion into new markets and new operations, and incorporation of real estate investment into overall corporate strategic goals. Becker, Becker and Lamont, Inc. Senior Associate (1983-1984), Associate (1981-1983). Real estate programming and feasibility studies; special emphasis on retail planning, new product development and reorganization strategies to increase effectiveness of client operations. Supreme Court, State of Connecticut (1978-1981) Consultant on Court Facilities. Management of real estate planning during reorganization of the Connecticut court system. PROFESSIONAL ACTIVITIES: Member: American Society of Real Estate Counselors (CRE) Member: International Council of Shopping Centers Registered Architect, Connecticut Commissioner of Planning and Zoning, Town of Darien, Connecticut, 1989-1993 EDUCATION: MPPM, Finance and Accounting, Yale University, 1985 M, Architecture, University of Pennsylvania, 1977 BA, Architecture, University of Pennsylvania, 1973 STATE CERTIFICATION: State of New York General Appraiser State of California General Appraiser State of Texas General Appraiser LANDAUER REAL ESTATE COUNSELORS - -------------------------------------------------------------------------------- Professional Qualifications JOHN P. ACKERMAN EXPERIENCE Landauer Associates, Inc., Los Angeles, California (effective December 1996) Senior Appraiser. Mr. Ackerman's responsibilities include production of appraisal reports for properties located throughout the western United States. Mr. Ackerman has over 15 years experience in the real estate industry as an appraiser. His professional background is briefly summarized as follows. First Interstate Bank, Los Angeles, California (1994-1996) Senior Appraiser. While at First Interstate Bank, Mr. Ackerman produced appraisal reports estimating the value of retail, industrial, office, apartments and residential subdivison properties. Mr. Ackerman also appraised special purpose and multi-use properties. Wells Fargo Bank, Los Angeles, California (1993-1994) Senior Review Appraiser. Mr. Ackerman was responsible for reviewing appraisals of bank owned assets located throughout the western United States. Additionally, Mr. Ackerman was responsible for contracting with fee appraisers for the appraisal assignments. Arthur Andersen, Los Angeles, California (1991-1993) Senior Appraiser/Project Manager. In his capacities as a senior appraiser/project manager, Mr. Ackerman was responsible for complex valuation assignments of commercial real estate located throughout the United States. Mr. Ackerman also managed staff appraisers in the analysis of multiple assets within a single portfolio. Ackerman & Associates, Los Angeles, California (1990-1991) Principal. Mr. Ackerman was involved in consulting and valuation assignments involving real estate projects throughout California and Oregon. The assignments were primarily related to estate planning and tax related issues. Mercury Savings and Loan, Huntington Beach, California (1986-1990) Senior Appraiser. In his position as a senior appraiser, Mr. Ackerman was responsible for the valuation of complex residential subdivisions and other income properties. Mr. Ackerman was also required to review staff and fee appraisals over a threshold amount. EDUCATION: University of Southern California BS Degree, Business Administration, Real Estate Finance PROFESSIONAL ACTIVITIES: Candidate for the MAI designation of the Appraisal Institute LICENSE: Certified General Real Estate Appraiser State of California No. AG005277 CERTIFICATION Currently certified in the voluntary programs of continuing education for the designated members of the Appraisal Institute. This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO] CB COMMERCIAL Delivering Solutiuons Through Local Knowledge Worldwide COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE MONROE PLAZA Third and McConnell Streets Stroudsburg, Pennsylvania CB File No. 96-093-H DATE OF VALUE June 1, 1996 PREPARED FOR MORGAN STANLEY MORTGAGE CAPITAL, INC. 1585 Broadway New York, NY 10036 PREPARED BY CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES 560 Lexington Avenue, 16th Floor New York, New York 10022 [Letterhead of CB Commercial Real Estate Group, Inc.] June 17 1996 MORGAN STANLEY MORTGAGE CAPITAL, INC. 1585 Broadway New York, NY 10036 RE: MONROE PLAZA Third and McConnell Streets Stroudsburg, Pennsylvania CB File No. 96-093-H Dear Ladies and Gentleman: At your request and authorization, CB Commercial Real Estate Group, Inc. has prepared a Complete Appraisal presented in a self-contained appraisal report of the current market value of the leased fee-interest. The subject property is a single-story community shopping center featuring 130,569 square feet of gross leasable area. The shopping center, which is anchored by a Ames Department Store, Fay's Drugs, and Shop Rite supermarket, is currently 100% occupied. Data, information, and calculations leading to the value conclusion are incorporated in the report following this letter. The report, in its entirety, including all assumptions and limiting conditions, is an integral part of and inseparable from this letter. Based on research and analysis contained in this report, it is estimated that the current market value of the leased fee estate in the subject property as of June 1, 1996, is: FIVE MILLION SEVEN HUNDRED THOUSAND DOLLARS ($5,700,000) The following appraisal sets forth the most pertinent data gathered, the techniques employed, and the reasoning leading to the opinion of value. The analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP), the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, and The Financial Institution Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Furthermore, this report has been prepared in conformance with our interpretation of the appropriate regulations and guidelines set forth by Morgan Stanely. MORGAN STANLEY June 17, 1996 Page 2 It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CB Commercial Real Estate Group, Inc. can be of further service, please do not hesitate to contact us. Respectfully Submitted, CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES by: /s/ Maggie Argyros - ------------------------------- ------------------------------- Maggie Argyros Michael R. Pecorino, MAI Real Estate Analysis Senior Vice President & Northeast Regional Manager Pennsylvania Certification No. GA-001096-R ================================================================================ CERTIFICATION OF THE APPRAISERS - -------------------------------------------------------------------------------- CERTIFICATION OF THE APPRAISERS We certify that to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. 4. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event, such as the approval of a loan. 5. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation and the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. In addition, this report conforms to the requirements of the Financial Institution Reform, Recovery, and Enforcement Act (FIRREA). 6. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 7. Michael R. Pecorino has completed the requirements of the continuing education program of the Appraisal Institute. 8. Maggie Argyros has made a personal inspection of the property that is a subject of this report. Michael R. Pecorino did not make a personal inspection of the appraised property. 9. No one provided professional assistance to the persons signing this report. 10. Maggie Argyros and Michael R. Pecorino have extensive experience in the appraisal/review of similar property types. 11. Michael Pecorino is certified in the state where the subject is located. /s/ Maggie Argyros - ------------------------------- ------------------------------- Maggie Argyros Michael R. Pecorino, MAI Real Estate Analyst Senior Vice President Regional Manager - -------------------------------------------------------------------------------- i ================================================================================ SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- SUBJECT PHOTOGRAPHS [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF SHOPPING CENTER - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF SHOP RITE SUPERMARKET - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ii ================================================================================ SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- SUBJECT PHOTOGRAPHS [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF AMES - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF FAY'S DRUGS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- iii ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- SUMMARY OF SALIENT FACTS Property Name: Monroe Plaza NWC Third & McConnell Location: Stroudsburg, Pennsylvania Assessor's Parcel Number: 18-7301-19-60-2658 18-7301-19-60-7249 18-7301-19-60-6275 18-7301-19-60-5429 18-7301-19-60-4252 18-7301-19-60-2212 18-7301-19-60-1372 Property Description: The subject property is a single-story community shopping center containing a total gross leaseable area of 130,569 square feet. The center is anchored by Ames, Fay's, and Shop Rite supermarket. Highest and Best Use As Vacant: Land banking until such time that retail development becomes financially feasible. As Improved: As a presently utilized - a community shopping center Property Rights Appraised: Leased fee Interest Date of Value: June 1, 1996 Land Area 322,344 square feet, or 7.40 acres Improvements Building Area: Gross Leaseable Area: 130,569 square feet Year Built: 1974 Overall Condition: Average to good. Estimated Marketing Time: Based on the size of the subject property and the number of different uses that exist, we have estimated the marketing time to be less than 12 months. Financial Indicators Current Occupancy: 100% - -------------------------------------------------------------------------------- iv ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- $ 5.00 psf Anchor Market Rental Rate: $12.00 psf 1,000 - 1,440 sf $ 7.00 psf 13,700 sf Income Growth Rate: 3.0% Estimated Stabilized Expenses: $1.24 psf Expense Growth Rate: 3.0% Going-In Overall Capitalization 10.5% Rate Selected: Going-In Overall Capitalization 10.2% Rate Implied: Terminal Overall Capitalization 11.0% Rate: Discount Rate: 12.5% Valuation Income Capitalization Approach: $5,700,000 Sales Comparison Approach: $5,400,000 Final Value $5,700,000 Unit value (per square foot): $43.90/SF - -------------------------------------------------------------------------------- v ================================================================================ TABLE OF CONTENTS - -------------------------------------------------------------------------------- TABLE OF CONTENTS CERTIFICATION OF THE APPRAISERS...............................................i SUBJECT PHOTOGRAPHS..........................................................ii SUMMARY OF SALIENT FACTS.....................................................iv TABLE OF CONTENTS............................................................vi AREA ANALYSIS.................................................................8 MARKET ANALYSIS..............................................................15 SITE ANALYSIS................................................................20 IMPROVEMENT ANALYSIS.........................................................22 ZONING.......................................................................25 TAX AND ASSESSMENT DATA......................................................26 HIGHEST AND BEST USE.........................................................27 APPRAISAL METHODOLOGY........................................................30 SALES COMPARISON APPROACH....................................................32 INCOME CAPITALIZATION APPROACH...............................................37 RECONCILIATION OF VALUE......................................................60 ASSUMPTIONS AND LIMITING CONDITIONS..........................................62 ADDENDA......................................................................66 A. Glossary of Terms B. Legal Description C. Improved Comparable Sales D. Rental Comparables E. Strategic Mapping, Inc. Reports F. Rent Roll G. PRO-JECT Assumptions H. Engagement Letter I. Qualifications - -------------------------------------------------------------------------------- vi INTRODUCTION INTRODUCTION ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- INTRODUCTION PROPERTY IDENTIFICATION The subject is known as Monroe Plaza, is located at the northwestern corner of Third and McConnell Streets in Stroudsburg, Monroe County, Pennsylvania. The subject site consists of seven parcels, of which, two are leased (see Addenda for Ground Lease Abstracts). The county assessor's tax identification numbers are: 18-7301-19-60-2658 18-7301-19-60-7249 18-7301-19-60-6275 18-7301-19-60-5429 18-7301-19-60-4252 18-7301-19-60-2212 18-7301-19-60-1372 A full metes and bounds legal description is included in the Addenda OWNERSHIP AND PROPERTY HISTORY The subject is currently owned by Mark Centers Limited Partnership. The subject was last transferred May 28, 1993 for $11,400,000, or $87.31 per square foot. The property was purchased from NAP Associates. DATES OF INSPECTION AND VALUATION The site was inspected by Maggie Argyros on June 4, 1996. Michael R. Pecorino, MAI did no inspect the subject or the comparables, but reviewed this report and concurs with the conclusions. The date of valuation is June 1, 1996. PURPOSE OF THE APPRAISAL The purpose of this appraisal is to estimate the market value of the leased fee interest in the subject property as of the date of the appraisal. Market value is defined as follows: Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, - -------------------------------------------------------------------------------- 1 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised, and acting in what they consider their own best interests; 3. A reasonable time is allowed for exposure in the open market; 4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) TERMS AND DEFINITIONS Please refer to the Addenda for a Glossary of the Terms and Definitions that are, and may be used in this appraisal. INTENDED USE OF REPORT This appraisal is for mortgage underwriting purposes. PROPERTY RIGHTS APPRAISED The value estimated represents the leased fee interest. DEFINITION OF THE LEASED FEE INTEREST The term "leased fee interest" as used in this report, is defined as: An ownership interest held by a landlord with the right of use and occupancy conveyed to other; usually consists of the right to receive rent and the right to repossession at the termination of the lease. (The Dictionary of Real Estate Appraisal, The Appraisal Institute, Chicago, Illinois, 1984, p. 179). - ---------- (1) The definition of market value is taken from : The Office of the Comptroller of the Currency under 12 CFR, Part 34, Subpart C-Appraisals, 34.42(f), August 24, 1990. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. - -------------------------------------------------------------------------------- 2 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- APPRAISAL DEVELOPMENT AND REPORTING PROCESS The following steps were completed by CB Commercial for this assignment: 1. Analyzed regional, neighborhood, site, and improvement data. 2. Inspected the subject and the neighborhood. 3. Reviewed data regarding taxes, zoning, utilities, easements, and city services. 4. Considered comparable improved sales and comparable improved building rental information. Confirmed data with principals, managers, or real estate agents representing principals, unless otherwise noted. 5. Analyzed the data to arrive at conclusions via each approach to value used in this report. 6. Reconciled the results of each approach to value employed into a probable range of market data and finally an estimate of value for the subject, as defined herein. 7. Estimated a reasonable exposure time associated with the value estimate. The subject site and improvement descriptions are based on a personal inspection of the property, discussions with management, and a review of the provided information. The inspection is not a substitute for thorough engineering studies. To develop the opinion of value, CB Commercial performed a complete appraisal process, as defined by the Uniform Standards of Professional Appraisal Practice. This means that no departures from Standard 1 were invoked. This is a complete appraisal, in the form of a Self-Contained Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Standards of Professional Appraisal Practice. In a complete appraisal, CB Commercial uses all known applicable approaches to value. The value conclusion reflects all known information about the subject property, market conditions, and available data. The Self-Contained Report incorporates to the fullest extent possible, practical explanation of the data, reasoning and analysis that were used to develop the opinion of value. It also includes thorough descriptions of the subject property and the market for the subject property type. SPECIAL APPRAISAL INSTRUCTIONS The client did not give us special appraisal instructions. MARKETING PERIOD The marketing period section is divided into reasonable exposure time and reasonable marketing time. Exposure time differs from marketing time. Marketing time is the period required to sell a real property interest at market value during the period immediately after the - -------------------------------------------------------------------------------- 3 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- effective date of the appraisal. Exposure time is always presumed to precede the effective date of the appraisal. Exposure time is not intended to be a prediction of a date of sale or a one-line statement. Instead, it is an integral part of the appraisal analysis and is based on one or more of the following: o statistical information about days on the market o interviews of market participants. The reasonable exposure period is a function of price, time, and use. It is not an isolated estimate of time alone. Exposure time is different for various types of real estate and under various market conditions. Reasonable Exposure Time Exposure time is always presumed to precede the effective date of the appraisal. It is the estimated length of time the property would have been offered prior to a hypothetical market value sale on the effective date of appraisal. It is a retrospective estimate based on an analysis of recent past events, assuming a competitive and open market. It assumes not only adequate, sufficient, and reasonable time but adequate, sufficient, and reasonable marketing effort. Exposure time and appraisal conclusion of value are therefore interrelated. Exposure time is often expressed as a range and is based on direct and indirect market data gathered during the market analysis, sales verifications, interviews with market participants, and other appropriate sources. The amount of time which a property will require to be marketed varies greatly depending on a number of factors including market conditions, listing price, terms of sale offered, and competitive listing inventory. In addition to considering each of the factors noted above, CB Commercial considered: o the most recent CB Commercial National Investor Survey, and the o opinions of local knowledgeable real estate brokers and investors. Market Conditions Throughout the country, market conditions for most property types, especially those considered Class A and B, have improved over the last year. The market conditions that directly impact the subject are described in this report and illustrate how exposure time is correlated with listing inventory, competitive pricing structures, and marketing efforts. - -------------------------------------------------------------------------------- 4 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- CB Commercial National Investor Survey In the most recent issue of the CB Commercial National Investor Survey, published in the first quarter 1996, CB Commercial surveyed a wide range of investors for property type preferences and specific marketing times. Investors indicated that exposure requirements for investment property generally decreased by 0.4 months from first quarter 1995. The average marketing time for all responses has decreased 3.5 months since second quarter 1993. Currently, the marketing period is 6.7 months for a Class A Power retail center. For all types of retail properties, the marketing period ranges from 1 to 12 months with an average of 11 months. Real Estate Broker Surveys As another information source, appraisers solicited the opinions of real estate brokers knowledgeable in the subject property type. The majority estimated that the property could likely be sold within a 12 month time span. All assumed that property would be appropriately priced and marketed. Exposure Time Conclusion In conclusion, based on the foregoing analysis, an exposure time of less than 12 months is reasonable, defensible, and appropriate. Like the brokers surveyed, CB Commercial assumes that the subject property would have been competitively priced and aggressively promoted on a national basis. Reasonable Marketing Time Reasonable marketing time is the period a prospective investor would forecast to sell the subject property immediately after the date of value, at the value estimated. Anticipated marketing time is essentially a measure of the perceived level of risk associated with the marketability, or liquidity, of the subject as an investment grade property. The sources for this information include those used in estimating the reasonable exposure time, but also an analysis of the anticipated changes in market conditions following the date of appraisal. In other words, the reasonable marketing time is the number of months it will require to sell the subject property from the date of value, into the future. The reader must understand, however, that the future price for the subject property (at the end of the marketing time) may or may not equal the appraisal estimate. The future price depends on unpredictable changes in the physical real estate, demographic and economic trends, real estate markets in general, supply/demand characteristics for the property type, and many other factors. - -------------------------------------------------------------------------------- 5 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- Based on the premise that present market conditions are the best indicators of future performance, a prudent investor will forecast that, under the conditions described above, the subject property will require a marketing time of less than 12 months. - -------------------------------------------------------------------------------- 6 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- REGIONAL AREA MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 7 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- AREA ANALYSIS The dynamic nature of economic relationships within a market area have a direct bearing on real estate values and the long-term quality of a real estate investment. In the market, the value of a property is not based on the price paid for it in the past or the cost of its creation, but on what buyers and sellers perceive it will provide in the future. Consequently, the attitude of the market toward a property within a specific neighborhood or market area reflects the probable future trend of that area. Since real estate is an immobile asset, economic trends affecting its locational quality in relation to other competing properties within its market area will also have a direct effect on its value as an investment. To accurately reflect such influences, it is necessary to examine the past and probable future trends which may affect the economic structure of the market and evaluate their impact on the market potential of the subject. This section of the report is designed to isolate and examine the discernible economic trends in the region and neighborhood which influence and create value for the subject property. A regional map indicating the location of the subject is presented on the previous page. REGIONAL INFLUENCES Location The subject is located in the Borough of Stroudsburg within Monroe County, located in the northeastern portion of the state of Pennsylvania. Monroe County, which includes the Pocono Mountains) is bounded by Warren County, New Jersey to the east, Northampton County to the south, Carbon and Luzerne Counties to the west, and Pike, Wayne, and Lakawanna Counties to the north. A regional map indicating the location of the subject is presented on the following page. Population The 1995 population within the Monroe County was estimated by Strategic Mapping, Inc. to be 116,250. This indicates an increase of 20,541, or 21.5% from the 1990 figure. The county's population is projected to increase to approximately 134,535 by the year 2000, or 15.7%. Demographic statistics for Monroe County are summarized in the following table. - -------------------------------------------------------------------------------- 8 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ==================================================== SELECTED AREA DEMOGRAPHICS MONROE COUNTY ---------------------------------------------------- Population 1995 Estimate 116,250 1990 Census 95,709 1990-1995 % Change 21.5% Households 1995 Estimate 41,352 1990 Census 34,206 1990-1995 % Change 20.9% 1995 Median Household Income $36,827 1995 Average Household Income $43,152 1990 Average Home Value $117,924 1990 % College Graduates 11.7% ---------------------------------------------------- Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ==================================================== Households Similar to the population level within Monroe County, the number of households has grown in recent years and is projected to increase over the next five years. Between 1990 and 1995, household growth in Monroe County was 20.9%. Projections for the year 2000 indicate a growing area with the number of households increasing by 14.8%. While experiencing a slight decline between 1980 and 1990, the average household size increased in 1995 (2.72) and is expected to increase further over the next five years. In Monroe County, the average household size increased from 2.67 in 1980 to 2.69 in 1990. It is projected to decline slightly to 2.76 in the year 2000. Income As per data compiled by the Strategic Mapping, Inc., the 1995 median household income in Monroe County was $36,827. The median household income increased considerably between the 1980 and 1990 census by approximately 7.19% annually. In 1980, the median household income was $16,212, which increased by 100.25% to $32,465 in 1990. The 1995 estimate indicates that growth in the median household income has slowed to only 2.6% per annum from 1990 to 1995. Income growth is projected to increase at an average annual rate of 2.5% between 1995 and the year 2000. - -------------------------------------------------------------------------------- 9 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Employment The total civilian labor force for Monroe County was 56,922 in March 1996 with corresponding employment of 52,361 indicating an March 1996 unemployment rate of 8.0%. The following table compares the unemployment rate for the area to that of the state and national average. ================================================================================ UNEMPLOYMENT RATES COMPARISON BY COUNTY, STATE, AND U.S. - -------------------------------------------------------------------------------- Year Monroe County Pennsylvania U.S. 3/1996 8.0% 6.1% 5.8% 1995 8.3% 5.9% 5.7% 1994 7.3% 6.2% 6.1% 1993 8.4% 7.1% 6.8% 1992 9.5% 7.6% 7.4% - -------------------------------------------------------------------------------- Source: Pennsylvania Department of Labor and Employment Security, Bureau of Labor Market Information Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ Most of the employment is in the services (35%) and trade (30%), followed by construction (16%), similar to the State of Pennsylvania averages. The major employers in the area are as follows: ========================================================================= MONROE COUNTY MAJOR AREA EMPLOYERS ------------------------------------------------------------------------- Company Business No. Employees ------------------------------------------------------------------------- United States Military Reservation 3,392 Government Outdoor World Amusement/Recreational 950 Mt. Airy Lodge Recreational 750 Cannaught Laboratory Laboratory - Vaccines 600 E. Stroudsburg School Public School 525 District Stroudsburg School Public School 510 District Monroe County Government 450 Instrument Specialties Manufacturing 350 ------------------------------------------------------------------------- Source: Monroe County Department of Planning and Development Compiled by: CB Commercial Real Estate Group, Inc. ========================================================================= - -------------------------------------------------------------------------------- 10 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Transportation Some of the major routes serving Monroe County include Routes 33, 209, 380, 611, 191, as well as several others. In addition, Interstate 80, which transverses east/west the through the U.S., runs through Stroudsburg. The major airport serving the Monroe County is the Mount Pocono Airport, northwest of the subject property. In addition, the Birchwood-Pocono airport provides private and charter service. Conclusion and Relevance to the Subject Property The long-term outlook for Monroe County is considered good. Monroe County is generally a bedroom community for commuters to New York City, as well as other business centers in the region. According to the Monroe County Planning and Development Department, nearly 30% of the county's population commutes to workplaces out of the county. The strategic location between major cities in all directions combined with the availability of major arterial are primary factors in the anticipated favorable future of the area. Population projections indicate growth for Monroe County in the short and long-term. The affordability of housing and the recreational locations in Monroe County are key factors for future growth. Due to the topography of the county, vacant land is scarce; thus, new development is limited. The overall projection for the Monroe County appears stable. NEIGHBORHOOD INFLUENCES Location The subject is located on the northwestern corner of Third Street and McConnell Streets in the Borough of Stroudsburg, Monroe County, Pennsylvania. The boundaries for the subject neighborhood are considered to be: North: Stroud South: Northampton County West: E. Stroudsburg/Delaware Water Gap East: Bartonsville A neighborhood map indicating the location of the subject is presented no the following page. Land Use Land use in the neighborhood consists of a mixture of commercial, industrial, and residential development. Development in the immediate vicinity of the subject consists of single-family - -------------------------------------------------------------------------------- 11 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- residential uses, as well as industrial uses. Within the subject's immediate area, there is residential development to the north and east, with industrial and commercial development to the south and west. There is an Exxon directly across from the subject at the southwest corner of Third and McConnell Streets. Further, a McDonald's restaurant is situated directly north of the subject. The immediate area is approximately 95+ percent developed. Access Accessibility to the neighborhood in general, and to the subject property in particular, is considered to be average to good. Access to the Interstate 80 is excellent, as it is located approximately one-half mile from the subject. However, Third Street is a one-way artery (north-bound), thus, limiting access. Demographics Selected Neighborhood demographics in a one, three, and five mile radius from the subject are shown in the following table: ======================================================================== SELECTED NEIGHBORHOOD DEMOGRAPHICS STROUDSBURG ------------------------------------------------------------------------ 1 mile 3 mile 5 mile ------------------------------------------------------------------------ Population 1995 Estimate 11,725 27,166 36,565 1990 Census 10,216 23,778 31,753 1990-1995 % Change 14.8% 14.2% 15.2% Households 1995 Estimate 4,101 10,044 13,225 1990 Census 3,495 8,742 11,452 1990-1995 % Change 17.3% 14.9% 15.5% 1995 Median Household Income $29,874 $33,757 $36,465 1995 Average Household Income $36,199 $40,938 $43,553 1990 Average Home Value $105,720 $114,666 $119,663 Median Age Total Population 31.0 35.3 35.8 1990 % College Graduates 12.4% 13.0% 13.1% ------------------------------------------------------------------------ Source: Conquest Market Data Compiled by: CB Commercial Real Estate Group, Inc. ======================================================================== The population and households have increased within the one, three, and five mile radii. Projections for the year 2000 indicate similar patterns. While the population and households have been increasing, income levels have also increased by approximately 2.4 percent per annum since 1990 within all three radii. Demographic characteristics appear to be strongest within a five-mile radius. General characteristics are fairly similar throughout all three radii. - -------------------------------------------------------------------------------- 12 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ================================================================================ NEIGHBORHOOD MAP ================================================================================ [GRAPHIC OMITTED] ================================================================================ Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 13 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Growth and Trends There has been little new development over the past five years. The most recent development was located at Routes 209 and 402, northeast of the subject property. A 60,000-square-foot shopping center was constructed in 1990, known as Village Center. The anchors included IGA supermarket and Rite Aid Pharmacy. Currently under construction in East Stroudsburg is a WalMart on Brown Street, across the street from the Pocono Plaza, which is anchored by K-Mart. The WalMart, which is scheduled to open fall 1996, had been on hold due to the planning for a Lincoln Avenue extension providing access to Interstate 80, bypassing downtown East Stroudsburg. We are not aware of any proposed shopping centers within the Borough of Stroudsburg in upcoming years. The immediate neighborhood has not experienced significant retail development in the recent past. Conclusion and Relevance to the Subject Property The subject property is situated in an area consisting a mixture of retail, industrial, and residential uses. The area features relatively good accessibility to the local transportation system and throughout the city and metropolitan area. Currently, the subject's neighborhood is in the stabilization stage of its life cycle, a period of neither significant growth nor decline. While the area is highly developed, some potential exists for future development whether through construction on the few remaining vacant lots or renovation of existing improvements. We do not expect the character of the neighborhood to change in the near future. - -------------------------------------------------------------------------------- 14 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- MARKET ANALYSIS Retail Overview The retail market in Stroudsburg has witnessed limited growth over the past few years despite the economic troubles the region has experienced. As noted in the previous section, a WalMart is currently under construction in East Stroudsburg, less than one mile east of the subject. The WalMart is scheduled for completion in fall 1996. We are not aware of any proposed shopping centers within the Borough of Stroudsburg in upcoming years. The immediate neighborhood has not experienced significant retail development in the recent past. According to Strategic Mapping, Inc., total retail development within a three mile radius of the subject property consists of less than 500,000 square feet. Furthermore, retail development within the five and seven mile radii account for approximately 800,000 and 1.0 million square feet, respectively. Local Retail Market In order to project future performance of the retail space in the subject property consideration has been given to various market components that affect the supply and demand for this type of real estate property. Specifically we have: o Inspected the site and surrounding areas for the purpose of familiarizing ourselves with all the locational and environmental factors. In this regard, we have directed our attention to the physical qualities of the site, access and circulation, surrounding uses, and relationship to sources of market support. o Reviewed the principal economic growth trends in the area in industry, population and employment. Our intention was to identify the degree of underlying support for existing improvements and future growth. o Analyzed existing and foreseeable market conditions for retail properties in the area. o Analyzed demographics of the subject property's trade area as well identified competition in order to assess, the subject property's current as well as future position in the market. Trade Area The trade area of a shopping center is defined as the geographic area from which the sustaining patronage for steady support of a center is obtained. Determination of the boundaries is contingent upon various factors including but not limited to the nature of the center, accessibility, physical barriers, location of competing facilities, and limitations of driving time and distance. - -------------------------------------------------------------------------------- 15 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- The subject's general trade area is considered to be that which encompasses a five mile radius of the subject center. We broke this down further to include a three-mile ring (primary), a five-mile ring (secondary), and a seven-mile ring (tertiary). Definition Of The Trade Area The primary ingredients for success in these types of projects include the nature of the competition, population density, income levels, and disposable income. The actual size of the population needed to support this type of project cannot be fixed due to the complexities of the above factors, as well as changing methods of merchandising. Local conditions, such as number of households, income levels, and existing centers within the trade area can have the most dramatic impact upon any given project since these factors are what determine the purchasing power in an area. An additional ingredient leading to the success of a shopping center would be the tenant mix and characteristics of the leading tenants which attract shoppers to the project. We have analyzed demographic data, competition, income levels for the subject trade area in the following sections. The demographic profiles of the primary, secondary and tertiary trade areas are presented in the Neighborhood Influences section of the report. Additional demographic information is contained within the Strategic Mapping, Inc. Profile Report located within the Addenda. Population The sales potential of a center is directly related to its proximity to the number of potential patrons. The historical and projected trends for population are important to examine when analyzing the trade area of a shopping center. The historical population trends for the subject's trade areas indicate a increase in population between 1980 and 1995 followed by a further increase projected from 1995 to the year 2000. In the primary trade area the population increased by 6.2% between 1980 and 1990 to 23,778 and then witnessed an increase to 27,166 in 1995. Population projections indicate a further increase to 30,030 between 1995 and the year 2000. Both the secondary and tertiary trade areas witnessed a similar pattern and future trend in population in these areas. In order to further analyze the population change, we have examined the distribution of the population by age. When analyzing the population distribution by age, it should indicate in what age groups the population shifts are projected to take place. This is important to distinguish if it will have a great impact on the retail sales of the subject center. Shifts in the age groups under - -------------------------------------------------------------------------------- 16 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- 24 years of age will affect the subject; however, less drastically than changes in the subject's core market approximately between the ages of 25 and 54. As illustrated in the Profile Report located in the Addenda, a large percentage of the population in all three trade areas are in the age groups from 25 - 54. Estimated figures for 1995 indicated that the median age was slightly higher than the 1990 census in all three trade areas ranging from 35.3 to 35.8. Overall, the diversification among age groups is very common among other retail trade areas. Household Trends When analyzing the demographics for a retail center, it is most important to focus on the trends in the household population. A household consists of one or more persons occupying a dwelling unit. A family would be considered a household unit; however single persons living alone or two or more unmarried persons sharing a dwelling are also considered a household unit. The household unit is perhaps the best indicator in determining the economic health of a trade area. One of the important components which bonds a household together is it's economic strength as a unit as compared to the economic viability of an individual; single person households not withstanding. If the population is slightly decreasing and yet the number of households is increasing, this would not necessarily be a negative indicator. This would imply that the average household size was shrinking. Each household has demand for goods that likely is not duplicated with a larger household size. This demand is duplicated however in the number of households. Similar to population figures, the number of households in the trade area increased between 1980 and 1990. Subsequently, the number of households increased between 1990 and 1995 though at an accelerated pace in comparison to the decline witnessed in the previous decade. The number of households are projected to increase further in all three trade areas in upcoming years. Household Income The median household income in the subject's trade areas increased annually at an average rate of 2.4% from 1990 to 1995. Thus, the household incomes in the area grew at a pace slightly below inflation during this period. The projected annual income growth rates between 1995 and the year 2000 are approximately 2.5%, again below the projected rate of inflation. Overall, household income levels varied slightly between the three trade areas. The median household income levels ranged from $33,757 to $37,599 in 1995 with the tertiary trade area representing the upper end of the range. - -------------------------------------------------------------------------------- 17 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- Employment The income characteristics of the trade areas for the subject property indicate that this is a predominately white-collar market. The primary trade area had the highest percent in white- collar employment at 58.0%, while the tertiary trade area had the lowest at 55.2%. Blue-collar employment percentages in the primary, secondary, and tertiary trade areas were 24.5%, 26.5% and 29.3%, respectively. The remaining percentages were in special services categories. The 1990 Census information indicates that the unemployment rates ranged from a low of 5.6% in the tertiary trade area to a high of 6.2% in the primary trade area. As discussed in the Location Analysis, the most recent unemployment rate in Monroe County was 8.0% which indicates an overall increase in employment from the 1990 Census. We feel the subject market will witness modest employment growth in upcoming years and a declining unemployment rate. Expenditure Potential The Expenditure Potential charts located in the Addenda outline Strategic Mapping, Inc. retail sales projections for the subject trade area. The highest sales growth in the primary trade area appears to be for electronics, drug, and video stores. These three categories also represent high growth in the secondary and tertiary trade areas. The average growth rate for retail sales in the primary trade area is projected at 3.46% in the primary trade area, 3.52% in the secondary trade area and 3.61% in the tertiary trade area. Strategic Mapping, Inc. examines the product potential for various store types for each portion of the subject trade area. Based on statistical sampling, Strategic Mapping has derived a benchmark per household expenditures for each store type. Comparing the figures in the trade area to the benchmark figure, it is apparent that those individuals in the subject trade area are much more likely to spend on items in drugs, groceries, and convenience stores. The Strategic Mapping Expenditure Potential Index is defined as follows, 'An index which shows the amount by which an area per household expenditures, differed from that of the benchmark.' The benchmark is defined as the average or common expenditure among households for a larger region. Values below 100 signify that this area is below the benchmark per household expenditures and correspondingly values above 100 indicate a higher than average expenditure per household. The overall Expenditure Index for the primary area is 97.3, while the benchmark indices for the secondary and tertiary trade areas are 101.0 and 102.9, respectively. In conclusion, the expenditure indices for the subject primary trade area indicates that the trade area populations spend less than the benchmark household on retail goods, while the expenditure indices for the secondary and tertiary trade areas indicate that the trade area - -------------------------------------------------------------------------------- 18 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- populations spend more than the benchmark. The area generates retail sales based on the existing population, as well as the increasing income potential. Market Indicators The subject center contains 5 tenant suites ranging in size from approximately 1,000 to 61,489 square feet. Discussions with local leasing agents reveal that typical ground level satellite space rents in the area generally range from $5.50/SF to $16.00/SF, depending upon the physical and locational characteristics of the space and $5.50/SF to $10.50/SF for anchor space depending upon the same criteria. Percentage rent clauses tend to be uncommon for satellite tenants. Retail leases are typically structured on an absolute net basis with flat rents over the term. Based upon discussions with brokers and managing agents in the area as well as our observations during our inspection, competing centers in the subject's market area have vacancy rates which generally fall within the 0.0% to 7.0% range with an average vacancy rate of approximately 4.0%. The subject center is currently 100% occupied. Summary Future projections indicate continued increases in the population and households in all three trade areas from 1980 through 1995. Further, the trade areas exhibit increased spending potential over the same period. However, income levels appear to be increasing at rates slightly below projected inflationary rates which is common during periods of economic recovery. Overall, the subject trade areas reflect average retail characteristics. Due in part to a lack of competition in the immediate area, we conclude that the trade area represents a viable retail market. - -------------------------------------------------------------------------------- 19 PROPERTY DESCRIPTION PROPERTY DESCRIPTION ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- SITE ANALYSIS The description of the site can be detailed as follows: Location: The subject is located at the northwestern corner of Third Street and McConnell Streets in Stroudsburg, Monroe County, Pennsylvania. Assessor's Parcel Number: 18-7301-19-60-2658 18-7301-19-60-7249 18-7301-19-60-6275 18-7301-19-60-5429 18-7301-19-60-4252 Land Area(2) The subject sites contain a total of 7.40 acres, or 322,344 square feet. Shape and Frontage: The site is irregular in shape and has over 500 feet of frontage along Third Street. Topography and The site is generally level. Our investigation did Drainage: not reveal any significant drainage problems. Soils: No soil report was provided and it is assumed that the soil is adequate for the existing use. Easements: No title report was provided in connection with this appraisal. No survey showing the location of easements was available. Thus, it is not possible to make a definitive conclusion regarding any potential impacts on value of the location of any such easements or encroachments. It is specifically assumed that any easements, restrictions, or encroachments that might appear against the title would have no adverse impact on marketability or value. Covenants, Conditions, No private deeds or restricting covenants affecting and Restrictions: development, other than zoning, were found to affect the site. Utilities: All public utilities including gas, electricity and telephone as well as water, storm and sanitary sewer systems are available to the - ---------- (2) Source: Monroe County Tax Assessor's Office - -------------------------------------------------------------------------------- 20 ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- site. Flood Zone: According to maps published by the Federal Emergency Management Agency (FEMA), the subject lies within Zone C as indicated on FEMA Community Map Panel No. 420694-001 B, dated December 31, 1976. This zone is described as follows: FEMA Zone C: "This area is identified in the community flood insurance study as an area of moderate or minimal hazard from the principal source of flood in the area. Buildings in this zone could be flooded by severe, concentrated rainfall coupled with inadequate local drainage systems. Local storm water drainage systems are not normally considered in the community's Flood Insurance Study. The failure of a local drainage system creates areas of high flood risk within this rate zone." Environmental Issues: The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the property causing a loss in value. No evidence of hazardous waste or toxic materials was visible and CB Commercial has no knowledge of the existence of these substances on or in the subject property. However, CB Commercial is not qualified to detect hazardous waste or toxic materials. Adjacent Properties North: Residential uses. South: Industrial and retail uses. East: Industrial uses. West: Residential uses. Conclusion: The subject is a 7.40-acre site on a paved street served by necessary utilities. Access and visibility are considered to be good. There are no adverse soil conditions of which CB Commercial Real Estate Group, Inc. is aware. The shape of the parcel is irregular and results in no specific limitation. The topography is sloping though possesses no specific development limitation. There is no excess land and the unimproved portions of the site are fully utilized by a macadam parking lot. From a physical standpoint, the site is considered to be adequate for many types of development. - -------------------------------------------------------------------------------- 21 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS The subject improvements were constructed in 1974. The improvements consist of two single-story buildings containing a total of 130,569 square feet of gross leasable area. The shopping center contains 5 tenant suites. The following is a description of the improvements based on our physical inspection, municipal records and from discussions with and materials provided by the client. The basic construction features are summarized as follows. Construction Class The class of construction is the basic subdivision in Marshall Valuation Service which divides all buildings into five basic groups by type of framing (supporting columns and beams), walls, floors, roof structure, and fireproofing. The subject is considered to be of construction Class B(3). Competitive Rating The subject is considered a Class B building in terms of quality as it is perceived in the marketplace. Foundation Poured concrete Frame Concrete block over a steel frame Floor Construction Concrete slab Exterior Walls Load-bearing concrete block over a steel frame with split-faced block. Fenestration Aluminum framed glass windows and double-paned glass front doorways. Roof Structure & Covering Flat, presumably built-up composition covering over steel deck with steel bar joist supports. We were unable to inspect the roof and assume the roof is in average overall condition. Exterior Condition Average Interior Partition System Metal studs with gypsum board cover. - ---------- (3) The primary characteristic of Class B Buildings is the reinforced concrete frame in which the columns and beams can be either formed or precast concrete. They may be mechanically stressed, and the structure is fire resistant. (Source: Marshall Valuation Service) - -------------------------------------------------------------------------------- 22 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Interior Finishes - Tenant Space Floors: Combination of vinyl tile and carpet. Walls: Painted or covered gypsum board. Ceilings: Suspended acoustic tiles. Lighting: Recessed florescent lighting. Summary: The interiors of the subject are considered to be of average to good quality and similar to competitors. HVAC Heating and ventilation is provided to the majority of the tenant suites by roof-mounted HVAC units. Each of these units pump the hot air throughout its suite via sheet metal air duct work hidden above the dropped ceiling. Air conditioning is supplied by the same system utilizing the duct work and supplying cool air during the summer months. The HVAC system is a gas-fired forced air system. Electrical The electrical system is assumed to be in good working order and adequate for the building. Fire Protection It is assumed that the subject has adequate fire alarm systems, fire exits, fire extinguishers, fire escapes and/or other fire protection measures to meet local fire marshal requirements. Plumbing The plumbing system is assumed to be in good operating condition. Parking Surface parking is provided for 208+/- vehicles. Landscaping Landscaping on the subject property is minimal which is typical within the subject neighborhood. ADA Compliance Handicap access appears to be available to all areas of the center. However, we are not qualified to determine compliance with the requirements. Please refer to the specific limiting condition regarding ADA compliance. Environmental Issues The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the - -------------------------------------------------------------------------------- 23 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- improvements which would cause a loss in value. Functional Quality The interior floor plans are flexible and will of Space accommodate a variety of tenant layouts. There are no observed design problems and none are reported by management. Access to the tenant suites is available at the front and rear of the center. There are no elevators within the center. Deferred Maintenance No deferred maintenance was observed or reported. The improvements have been adequately maintained since it was constructed in 1974. Economic Age and Life Based on the current condition, we estimate the effective age to be approximately 20 years. According to the Marshall Valuation Service cost guide, buildings of this type and quality have an expected life of approximately 45 years. Therefore, the remaining economic life (expected life minus effective age) is estimated at 25 years. While we observed nothing to suggest a different economic life, a capital improvement program could extend life beyond that stated above. Quality/General Condition The subject property conforms well with competitors and substitutes in the area. The quality of construction is typical of the area. Interior amenities are similar to competing properties of the same approximate age. The general condition of the improvements is average. We observed no evidence of structural fatigue and the improvements appear sound. We are not qualified to determine structural integrity, however, and recommend that the reader rely upon an expert in this field for further determination. Conclusion/Comments The subject property is an average quality shopping center located in a relatively stable area. The improvements generally conform with competitors and substitutes in the neighborhood. - -------------------------------------------------------------------------------- 24 ================================================================================ ZONING - -------------------------------------------------------------------------------- ZONING The subject's zoning requirements are detailed below. ================================================================================ ZONING SUMMARY - -------------------------------------------------------------------------------- Current zoning: C3, Heavy Commercial Legally conforming?: Yes Uses permitted: Retail, Commercial Services, Nursing Home, Parking Garage, Shopping Center. Zoning change Not Likely - -------------------------------------------------------------------------------- Category Zoning Requirement - -------------------------------------------------------------------------------- Maximum Lot Size 2 acres. Maximum Site Coverage 30% Front Setback 10 feet Rear Setback 30 feet Side Yard Setbacks 10 feet Height Limit 40 feet Parking 1 spaces per every 100 sq. ft. of area used to serve customers - -------------------------------------------------------------------------------- Source: Borough of Stroudsburg Zoning Ordinance Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ ZONING ANALYSIS AND CONCLUSIONS According to the Borough of Stroudsburg ordinance, the subject property is a legal and conforming use under current guidelines. In addition, the property appears to conform to bulk and setback requirements as well as to parking requirements. - -------------------------------------------------------------------------------- 25 ================================================================================ TAX ANALYSIS - -------------------------------------------------------------------------------- TAX AND ASSESSMENT DATA The subject property is assessed by Monroe County, Pennsylvania, at approximately 25% of the assessor's estimated market value. The last general assessment of properties in Monroe County was in 1989. A re-valuation has not been rescheduled. School taxes are collected on a fiscal year and town/county taxes are collected on a calendar year. The subject's assessed value and current taxes are summarized below. ======================================================================= CURRENT ASSESSMENT AND TAX INFORMATION (1995) ----------------------------------------------------------------------- Land Building Total Tax ID Assessment Assessment Assessed Value ----------------------------------------------------------------------- 18-7301-19-60-2658 $ 90,770 $278,900 $369,670 18-7301-19-60-7249 $ 22,380 $ 2,140 $ 24,520 18-7301-19-60-6275 $ 6,250 $ 0 $ 6,250 18-7301-19-60-5429 $109,980 $326,800 $436,780 18-7301-19-60-4252 $ 21,630 $ 0 $ 21,360 18-7301-19-60-2212 $ 4,102 $ 20,825 $ 24,927 18-7301-19-60-1372 $ 4,119 $ 14,777 $ 18,896 ------- -------- -------- TOTALS: $259,231 $643,442 $902,403 ----------------------------------------------------------------------- Source: Monroe County Assessor's Office Compiled by: CB Commercial Real Estate Group, Inc. ======================================================================= Based on the current tax rate of $100.25 per $1,000 assessed value, the estimated taxes for the subject amount to $90,465, or $0.69 per square foot based on the rentable square footage of the center. The real estate taxes include two parcels which are under a ground lease. Tax and Assessment Conclusion We have estimated the taxes for the shopping center at $90,465 for calendar year 1996 in our cash flow. Our discussions with the assessor indicated that the subject's taxes have increased in-line with the area's inflation rate, or approximately 3.0% per annum. We have therefore projected a long-term tax growth for all taxes equal to 3.0% per year. - -------------------------------------------------------------------------------- 26 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- HIGHEST AND BEST USE In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The four criteria that the highest and best use must meet are: o legal permissibility; o physical possibility; o financial feasibility; and o maximum profitability. Highest and best use is applied specifically to the use of a site as vacant. It is recognized that in cases where a site has existing improvements, the concluded highest and best use as if vacant may be different from the highest and best use given the existing improvements (as improved). The existing use will continue, however, until the land value, in its highest and best use, exceeds that total value of the property under its existing use plus the cost of removing or altering the existing structure. Implied in the highest and best use is a recognition of the contribution of a specific use to the community environment or to the community's development goals, in addition to wealth maximization of individual property owners. Also implied is that the conclusion of highest and best use that results from the appraiser's judgment and analytical skill, i.e., that the use determined from the analysis represents an opinion, not a fact to be found. Highest and best use analysis involves assessing the subject both as if vacant and as improved. HIGHEST AND BEST USE AS THOUGH VACANT Legal Permissibility The legally permissible uses were discussed in detail in the site analysis and zoning sections of this report. Based on our review of the zoning restrictions, the site can be developed with several different uses, including retail and commercial office uses. Physical Possibility The physical characteristics of the subject site were discussed in detail in the site analysis. Overall, a wide range of legally permissible uses would be physically possible, including a variety of commercial uses. - -------------------------------------------------------------------------------- 27 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- Financial Feasibility The test of financial feasibility is put only to those uses which are legally permissible and physically possible. If the property is capable of generating a sufficient net income to cover the required rate of return on investment and provide a return to the land, then the usage is financially feasible within a defined price limit. In our determination of financial feasibility we have analyzed current market rental rates for several different property types. The net income produced by the proposed or new improvements must provide a return above the cost to develop the property, including acquisition of the land. Through a cost/income analysis we have determined that development of the subject site is not financially feasible at this time. Based on the analysis of supply and demand factors at the present time, rents achieved for retail and/or office uses would not support the cost of construction. Based on the aforementioned, we have determined that development of the subject site at the present time with a retail center is not currently feasible. Maximum Profitability The final test of highest and best use of the site as though vacant is the use be maximally productive, yielding the highest land value. Based on our feasibility analysis we have determined that land banking the subject site is the maximally productive use at the present time. Conclusion: Highest and Best Use As Vacant The concluded highest and best use of the subject as though vacant is land banking until such time that development of the site with a retail/commercial facility is financially feasible. HIGHEST AND BEST USE AS IMPROVED Legal Permissibility As discussed, the subject site's zoning and legal restrictions permit a variety of land uses. Regardless, the site has been improved with a neighborhood shopping center. Based upon review of the Borough of Stroudsburg's Zoning Ordinance, it is our opinion that the improvements are within the established guidelines. - -------------------------------------------------------------------------------- 28 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- Physical Possibility The physical characteristics of the subject improvements were discussed in detail in the improvement analysis section of this report. Overall, the layout and positioning of the improvements is considered functional for shopping center use, and the floor plan is considered to be reasonable in comparison to other shopping centers in the area. The improvements have good retail features, have been adequately maintained, and are physically capable of sustaining their current use over the extended future. Financial Feasibility As with the highest and best use of the site as though vacant, the financial feasibility of the site as improved is market derived. Typically, for retail properties similar to the subject, the test of feasibility is based on the amount of rent that can be generated less operating expenses. If a residual amount exists after paying the various expenses, then the land is being put to a productive use. At present, the subject is 100% occupied. CB Commercial estimates that the appropriate stabilized market occupancy approximates 95%. Based on the historical and current operating status of the subject property, CB Commercial anticipates that the improvements are capable of providing an adequate return on the investment before any debt service requirements. Therefore, we conclude that the current use of the improvements is a financially feasible use of the property as improved. Maximum Profitability Similar to the highest and best use of the site as though vacant, the maximum profitable use of the subject as improved should conform to neighborhood trends and be consistent with existing land uses. Although several uses may generate sufficient revenue to satisfy the required rate of return on investment and provide a return on the land, the single use that produces the highest price or value is typically the highest and best use. Conclusion: Highest and Best Use as Improved Based on the foregoing discussions, CB Commercial concludes that the highest and best use of the property, as improved, is consistent with the existing use as a shopping center. There are no apparent alternative uses of the existing improvements that would produce a higher net income and/or value over time than the current use. The current use is a legally permissible use and appears to represent the highest and best use as improved. Furthermore, CB Commercial does not believe that conversion of the improvements or demolition is warranted or financially feasible. - -------------------------------------------------------------------------------- 29 VALUATION VALUATION ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- APPRAISAL METHODOLOGY The appraisal process is defined as an orderly program by which the problem is planned and the data involved is acquired, classified, analyzed and interpreted into an estimate of value. In this process three basic approaches to value are considered: Cost Approach, Sales Comparison Approach, and Income Capitalization Approach. In appraisal practice, an approach to value is included or omitted based on its applicability to the property type being valued and the quality and quantity of information available. The final step in the appraisal process is reconciliation -- a process by which CB Commercial analyzes alternative conclusions and selects a final value estimate from among two or more indications of value. CB Commercial weighs the relative significance, applicability and defensibility of each approach as it relates to the type of property being appraised. THE COST APPROACH The Cost Approach is based upon the proposition that the informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements which represent the highest and best use of the land or when relatively unique or specialized improvements are located on the site and for which there exist few sales or leases of comparable properties. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. SALES COMPARISON APPROACH The Sales Comparison Approach utilizes sales of comparable properties, adjusted for differences, to indicate a value for the subject property. Valuation is typically accomplished using physical units of comparison such as price per square foot, price per unit, price per floor, etc., or economic units of comparison such as gross rent multiplier. Adjustments are applied to the physical units of comparison derived from the comparable sale. The unit of comparison chosen for the subject is then used to yield a total value. Economic units of comparison are not adjusted, but rather analyzed as to relevant differences with the final estimate derived based on the general comparisons. - -------------------------------------------------------------------------------- 30 ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- The reliability of this approach is dependent upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c) the degree of comparability; (d) the absence of atypical conditions affecting the sales price. Although there have been few sales in the region, the sales that were gathered were utilized to form an opinion of value. However, given the lack of relevant sales data, we have not placed minimal reliance upon this approach and have used it to provide additional support to the Income Approach. INCOME CAPITALIZATION APPROACH The methodology of the Income Capitalization Approach is to determine the income-producing capacity of the property on a stabilized basis by estimating market rent from comparable rentals, making deductions for vacancy and collection losses and building expenses, then capitalizing the net income at a market-derived rate to yield an indication of value. The capitalization rate represents the relationship between net income and value. Related to the direct capitalization method is the discounted cash flow method. In this method of capitalizing future income to a present value, periodic cash flows (which consist of a net income less capital costs, per period) and a reversion (if any) are estimated and discounted to a present value. The discount rate is determined by analyzing current investor yield requirements for similar investments. Since investors are active in the marketplace for properties similar to the subject, the Income Capitalization Approach is particularly applicable to the appraisal problem at hand. There is an adequate quality and quantity of income and expense data available to render a reliable and defensible value conclusion. For income producing properties similar to the subject, the Income Capitalization Approach is considered to be the most reliable. Therefore, this approach has been employed as the primary methodology for this assignment. - -------------------------------------------------------------------------------- 31 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH The Sales Comparison Approach provides an estimate of market value based on analyzing transactions of similar properties in the market area. The method is based on the proposition that an informed purchaser would pay no more for a property than the cost of acquiring an existing one with the same utility. When there is an adequate number of sales of truly similar properties with sufficient information for comparison, a range of values for the subject property can be developed. There are various units of comparison available in the evaluation of sales data in this approach. The sale price per square foot is the most commonly used in this approach. The effective gross income multiplier (EGIM) is rarely used by market participants because of the inconsistencies in estimating effective or gross income, vacancy, and expense differences. We conducted a thorough sales search for comparable shopping centers in the subject's market area. Through our sales search, we were able to identify a limited number of sales with similar characteristics to the subject. The following table summarizes what are considered to be the most recent and proximate comparable sales. Detailed write-ups of each comparable are included in the addendum.
================================================================================================================== SUMMARY OF COMPARABLE RETAIL SALES ================================================================================================================== Gross No. Property Name/ Location Sale Leasable NOI OAR Sale Price Date Area (SF) Sale Price Per S.F. Per S.F. - ------------------------------------------------------------------------------------------------------------------ 1 15th & Allen St. Center 1/96 46,503 $4,242,000 $ 9.94 10.89% $ 91.22 1401-1451 Allen Street Allentown Lehigh County, PA 2 Stefko Shopping Center 1/96 134,446 $5,618,000 $ 4.59 10.99% $ 41.79 Stefko Boulevard Bethlehem Northampton County, PA 3 Town Center Shpg. Ctr. 11/95 118,776 $5,714,998 $ 5.49 11.40% $ 48.12 Route 202 & Lenape Dr New Britain, Bucks Co PA 4 Hamburg Shopping Ctr. 3/94 42,000 $2,705,000 $ 7.49 11.64% $ 64.40 S. 4th St. & Valley Road Hamburg, Berks Co., PA - ------------------------------------------------------------------------------------------------------------------ Compiled by: CB Commercial Real Estate Group, Inc. ==================================================================================================================
- -------------------------------------------------------------------------------- 32 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMPARABLE SALES MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 33 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF IMPROVED SALES The sales reflect unit prices ranging from a low of about $41.79 to a high of approximately $91.22/SF with the significant difference reflecting the economics of the various centers. The sales all had high levels of occupancy and were in generally good condition. The difference in unit prices then were more directly tied to net operating income and investor yield rates. The comparable sales presented offer a simplistic view of the market. Since only general details of existing income and expenses were available, specific analysis is nearly impossible. Accordingly, this method acts as a general gauge of the market and therefore will be utilized as support to our findings in the Income Approach. Analysis The following discussion analyzes the aforementioned comparables relative to the subject property. Sale 1 Sale number one, located at the intersection of 15th Street and Allen Street in Allentown, is a 46,503 square foot shopping center which sold in January of 1996 for $4,242,000, or $91.22/SF. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed circa 1950 and was in very good overall condition at the time of sale since it was recently renovated. Access, exposure, visibility, and general locational attributes of the center are superior to the subject; however, the center is similar in size to the subject. Market conditions at the time of sale were similar to current market conditions. This sale's NOI is reportedly $462,049, or $9.94/SF indicating an overall rate of 10.89%. The economics of this property, at least in terms of NOI per square foot, are superior to the subject. Sale 2 Sale number two, located in the City of Bethlehem, consists of a single-story community center which contains an aggregate 134,446 square feet. This center, known as the Stefko Shopping Center, sold in January of 1995 for $5,618,000 or $41.79/SF of gross leasable area (GLA). Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed in 1965 and appeared to be in average condition. The property's location with regard to access and visibility are considered superior to the subject. Furthermore, the center is significantly larger than the subject. Market conditions at the time of sale - -------------------------------------------------------------------------------- 34 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- were similar to current market conditions. The NOI was reportedly $617,577 ($4.59/SF) indicating an overall rate of 10.99%. This property operates at a level of net income that is similar to the subject. Sale 3 Sale number three, Town Center Shopping Center, is located in New Britain, Bucks County. It is a 118,776 square foot shopping center which transferred in November 1995 for $5,714,998, or $48.12 per square foot. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed circa 1967 and was in good overall condition at the time of sale. Access, exposure, visibility, and general locational attributes of the center are superior to the subject. Market conditions at the time of sale were similar to current market conditions. This sale's NOI is reportedly $652,080, or $5.49 per square foot, indicating an overall rate of 11.4%. The economics of this property in terms of NOI per square foot are relatively similar to the subject. Sale 4 Sale number four is located on Valley Road off of South Fourth Street in Hamburg, Berks County, Pennsylvania and consists of a single-story neighborhood center which contains 42,000 gross leaseable area. This center, known as the Hamburg Shopping Center, sold in March 1994 for $2,705,000, or $64.40/SF. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed in circa 1980 and appeared to be in good overall condition. The property's location with regard to access and visibility are considered superior to the subject. Furthermore, the center is significantly larger than the subject. Market conditions at the time of sale were similar to current market conditions. The NOI was reportedly $314,580 ($7.49/SF) indicating an overall rate of 11.64%. This property operates at a level of net income that is superior to the subject. Net Operating Income Analysis The net operating income level for the comparables ranged from $4.59 to $9.94 per square foot, per year. The subject has a projected NOI for the coming year of $582,724 or $4.46 per square foot reflecting full and stable occupancy. Given the correlation between price paid per square foot and NOI per square foot it would seem reasonable to conclude that the subject would sell within the range established by the comparable properties. - -------------------------------------------------------------------------------- 35 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- The following chart depicts the calculations involved in developing adjustment factors to be applied to the respective price per square foot units of comparison developed from the comparables employed. ================================================================================ NET OPERATING INCOME (NOI) ANALYSIS - -------------------------------------------------------------------------------- Sale Subject's NOI/SF Sale Price Adjustment Adjusted $/SF No. Sale's NOI/SF Multiplier $/SF for Subject - -------------------------------------------------------------------------------- 1 $4.46 0.45 $91.22 -$50.17 $41.05 ----- $9.94 2 $4.46 0.98 $41.79 -$0.83 $40.96 ----- $4.59 3 $4.46 0.81 $48.12 -$ 8.66 $39.46 ----- $5.49 4 $4.46 0.60 $64.40 -$25.76 $38.64 ----- $7.49 ================================================================================ For the most part, there is a direct correlation between the NOI/SF and sale price per square foot. As the net income level increases, so does the price paid per square foot. After adjusting the four sales, they support a range of value for the subject between approximately $38.64/SF to $41.05/SF. Based on our analysis, the subject's value would be approximately $41.00/SF. The subject has a total building area of 130,569 square feet. The value estimate via the Sales Comparison Approach is calculated as follows: ====================================================== Net Rentable Area of 130,569 square feet Subject Value per square foot $41.00 per square foot Indicated Value: $5,353,329 ROUNDED: $5,400,000 ====================================================== Overall, very little emphasis has been placed on this approach because of the quality of the data. It is used primarily as a check of the value derived via the Income Approach. We estimate the as is market value of the leased fee interest in the subject property, via the sales comparison approach, as of June 1, 1996, is: --- FIVE MILLION FOUR HUNDRED THOUSAND DOLLARS --- ($5,400,000) - -------------------------------------------------------------------------------- 36 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH The Income Capitalization Approach reflects the subject's income-producing capabilities. This approach is based on the assumption that value is created by the expectation of benefits to be derived in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over period of time. The two common valuation techniques associated with the Income Capitalization Approach are direct capitalization and the discounted cash flow (DCF) analysis. DIRECT CAPITALIZATION Direct capitalization is the method used to convert a single year's estimate of income into a value indication. In direct capitalization, a precise allocation between return on and return of capital is not made because investor assumptions or forecasts concerning the holding period, pattern of income, or changes in value of the original investment are not simulated in the method. Direct capitalization is most appropriate when analyzing a stable income stream and in estimating the reversion at the end of a holding period. Using this method, the following sets forth the process: 1. Estimate the Potential Gross Income (PGI) from all sources that a competent owner should be able to generate from a property based on existing and/or market rents. 2. Deduct an estimate of Vacancy and Collection Loss (VCL) to arrive at an Effective Gross Income (EGI) estimate. 3. Deduct operating expenses from the estimate of EGI. The result is an estimate of the stabilized Net Operating Income (NOI). 4. Estimate an Overall capitalization rate (Ro, or OAR). 5. Divide the NOI by Ro, resulting in a value estimate at stabilized occupancy. 6. Adjust the stabilized value to account for "As Is" condition, if applicable. DISCOUNTED CASH FLOW ANALYSIS The discounted cash flow (DCF) analysis is a detailed analysis used when the future income is expected to be variant, usually as a result of numerous lease obligations and/or anticipated changes in income and expenses. It is also particularly relevant when institutional buyers are the most likely purchasers of the subject because institutional buyers often place great weight on this analysis. The DCF analysis specifies the quantity, variability, timing, and duration of NOIs and cash flows. Selecting the proper yield rate (discount rate) is essential. CB Commercial must consider the target yield sought by investors as well as yields derived from comparable sales and/or market information. The methodology is: 1. Estimate the before-tax cash flows for each period of a projected holding period net of any capital expenditures such as leasing expenses and tenant improvements. - -------------------------------------------------------------------------------- 37 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- 2. Estimate a discount rate and a terminal overall capitalization rate. 3. Estimate a selling price, known as the reversion, for the end of the projected holding period. 4. The cash flows and the reversion are then discounted to a present value estimate. APPROPRIATE CAPITALIZATION METHOD A number of factors were considered in evaluating the appropriateness of using the direct capitalization method and/or the DCF technique including the occupancy status, lease structures, above/below market rents and typical buyer behavior. As a result of considering the foregoing factors, both the DCF technique and the income capitalization technique are employed in this appraisal. ESTIMATE OF MARKET RENT Rent analysis involves both a study of market (comparable) rentals and the subject's existing rents (if any). Market rent is the rent that a property would most probably command in the open market; indicated by the current rents paid and asked for comparable space. SUMMARY OF COMPARABLE RENTALS CB Commercial surveyed competitive properties and lease transactions for comparison to the subject. The selected comparable rentals are summarized in the following chart with a map and discussions of each comparable provided on the following pages. - -------------------------------------------------------------------------------- 38 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
============================================================================================================================ SUMMARY OF COMPARABLE SATELLITE SPACE RENTALS - ---------------------------------------------------------------------------------------------------------------------------- Center Name & Term Start No. Location Tenant (Yrs) Date Size Rent/SF Escalation Comments - ---------------------------------------------------------------------------------------------------------------------------- 1 Kingston Plaza Everything 1 yr 9/95 6,500 $5.50 $950 Step No Option Third Avenue $0.99 Store 3 mos in Year 2 % Rent = 3% over $1,191,660 East of Pierce Street, Kingston, PA - ---------------------------------------------------------------------------------------------------------------------------- 2 Mark Plaza Spectrum Rents 5 yrs 10/95 3,600 $8.00 Flat for 1 5-yr Option @ $9.00/SF N/S Route 11, term Edwardsville, PA Keens Floral 5 yrs 8/95 7,000 $8.00 Annual 1 5-yr Option @ $8.83/SF Factory step-up % Rent = 3% over Natural Breakpoint Mattress Man 5 yrs 7/95 3,600 $11.50 Flat for No Option (Pad Site) term % Rent = 4% over Natural Breakpoint - ---------------------------------------------------------------------------------------------------------------------------- 3 Birney Plaza Everything 3 yrs 09/95 4,000 $7.00 Flat for 1 3 yr Option @ $7.50/SF N/S Route 11, $0.99 Store term % Rent = 3% over $933,000 Moosic, PA - ---------------------------------------------------------------------------------------------------------------------------- 4 Triangle Plaza Electronic 5 yrs 06/95 2,400 $11.50 Annual No Option Route 115 Systems Percentage No % Rent Wilkes-Barre, PA increase TCBY 5 yrs 03/95 2,200 $11.00 Annual 1 5 yr Option Percentage No % Rent increase Party City 10 yrs 05/94 9,910 $11.00 $1.65/SF No Option Step-up No % Rent - ---------------------------------------------------------------------------------------------------------------------------- 5 Gateway Plaza Holiday Hair 3 yrs 06/94 950 $15.48 Annual No Option N/S Route 11, Fashions Percentage No % Rent Edwardsville, PA (Renewal) increase McKenzie 3 yrs 06/94 3,080 $ 8.50 Annual No Option Percentage No % Rent increase ============================================================================================================================ SUMMARY OF COMPARABLE ANCHOR SPACE RENTALS ============================================================================================================================ 6 Pottstown Center Wal-Mart 20 yrs 07/95 121,267 $6.99 Flat for 6, 5-yr Options Montgomery Cty. term No % Rent Pottstown, PA 7 Route 6 Mall K-Mart 25 yrs 03/95 119,229 $5.77 Flat for 10, 5-yr Options N/S Route 6, term % Rent = 1% over $20,000,000 Wayne County Honesdale, PA 8 Bradford Towne K-Mart 25 yrs 07/94 94,481 $5.00 Flat for 10, 5-yr Options Centre, term % Rent = 1% over $16,875,000 Bradford County Wysox, PA 9 Builder's Square Builder's 25 yrs 03/94 106,400 $10.05 Flat for 10, 5-yr Options Center Square term No % Rent Cetronia Road Lehigh County Whitehall, PA - ---------------------------------------------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ===========================================================================================================================
- -------------------------------------------------------------------------------- 39 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMPARABLE RENTALS MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 40 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF COMPARABLE RENTALS We have obtained comparable leases from shopping centers situated within the subject's regional market area which are summarized above. In terms of satellite space, comparables #1 through #5 indicate that the leased spaces range in size from 950 to 9,910 square feet which adequately represents the subject's square footage range. All the leases cited were signed between 1994 and 1995 and represent the most recent leasing activity in the competitive marketplace. The leases include a variety of uses and represent a similar tenant mix to the subject center. The above leases are considered to be generally similar to the subject in terms of condition, quality and location. We have examined the average effective rental rates of these comparables and determined that the effective rent is similar to the face rent, since their was no tenant improvements or free and escalation's were similar. These comparable centers are located throughout the metropolitan region in competitive areas to the subject property. Furthermore, they are all similar in age to the subject and considered to be of a similar functional design. All of the retail leases were written on a triple net basis, whereby the tenants assume their proportionate share of operating expenses, real estate taxes, and insurance. The higher rates typically reflect smaller satellite spaces, while lower rental rates are typically negotiated for anchor sized spaces. We have also considered asking rental rates in our analysis; however, they were deemed to be less reliable than the leases presented. As a result, we have not included asking rentals. The satellite space face rental rates ranged from $5.50/SF to $15.48/SF with a central tendency of $9.75/SF. However, the majority fell between $8.00/SF and $11.50/SF. The rents at the upper end of the range, or those in the $11.50/SF range best reflect the subject property's achievable rents. As a result, we have concluded to a rental rate for the subject's satellite space of $12.00/SF for spaces ranging from 1,000 to 1,400 square feet. Based upon our analysis, we feel that a "net" rental rate of $12.00/SF is adequately supported. For larger spaces, greater than 5,000 square feet, we have applied a rental rate of $7.00 per square foot. The anchor leases, or comparables #6 through #9, ranged from $5.00/SF to $10.05/SF with an average lease rate of $6.95/SF. The anchor rents reflect a close range for a variety of locations with the exception of comparable #9. However, this lease to builder's Square has no percentage rent clause and, as a result, agreed to pay a higher base rent. As a result, we have concluded to a rental rate within for the subject's anchor space of $5.00/SF. Based upon our analysis, we feel that a "net" rental rate of $5.00/SF is adequately supported. - -------------------------------------------------------------------------------- 41 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- In addition to surveying comparable centers, we have also analyzed the most recent lease transactions at the subject center. Since there have been several recent leases at the subject property, these leases have been given substantial weight in our analysis of the subject's market rental rates. These leases are detailed below. ANALYSIS OF SUBJECT LEASES The following table summarizes the subject property's recent lease history. =============================================================================== SUMMARY OF RECENT SUBJECT LEASES =============================================================================== New / Term Contract TI's/ Free Tenant Renew (Years) Date Size Rent Escalation SF Rent - -------------------------------------------------------------------------------- Holiday Hair Renew 5 7/96 1,000 $ 12.50 $500 Step in None None Fashions Year 4 - -------------------------------------------------------------------------------- Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. =============================================================================== The typical lease at the subject property is triple net whereby the tenant is responsible for reimbursing the landlord for such expenses as real estate taxes, insurance, and common area maintenance (CAM). There has been only one recent lease at the subject property. This new lease represented a lease renewal for $12.50 per square foot with a five-year term, which is which is similar to quoted market terms. Based on our survey of local leasing agents and owners, five year terms are most common with satellite tenants such as those found in the subject center. Therefore, for the purpose of our analysis, we have utilized a lease term of five years for all tenant suites for speculative renewals. In our interviews with competing leasing agents and owners, we also inquired as to the market norm for rent escalations. Most of the agents agreed that one to three year leases are typically flat, with some sort of escalation or bump in five to 10 year leases. Regardless of the method of escalations, most of the subject and comparable leases have escalations which are intended to be similar to anticipated increases in the CPI. We have assumed that the rents will remain flat through the term of the lease (i.e., 5 years). According to the subject leasing agent, TI's are typically not given, with the owner generally providing a " vanilla box" for new tenants and nothing for renewals. Retail space is typically taken "as-is" with the tenant fitting out their space to their own specifications. We project that no tenant alteration allowance would be provided for new or renewal leases. All of the leasing agents surveyed reported minimal if any free rent. A review of the subject lease abstracts indicated that no free rent was typically offered to tenants that leased space in the subject center over the past three to four years. Therefore, based upon the most recent leases - -------------------------------------------------------------------------------- 42 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- written at the subject center as well as conversations with local leasing agents, we have projected that no free rent will be offered to prospective tenants. CONCLUSIONS: MARKET RENT ESTIMATE FOR THE SUBJECT PROPERTY Based on the previous analysis, the current market lease parameters for the subject property are estimated as follows: ====================================================================== CONCLUDED MARKET LEASE TERMS (PER SQUARE FOOT / YEAR) ---------------------------------------------------------------------- Category Satellite Space Anchor Space ---------------------------------------------------------------------- Market Rent $12.00 & $7.00 (NNN) $5.00 (NNN) Lease Term 5 Years 20 Years Annual Escalation 0.0% 0.0% Tenant Improvements $0.00 $0.00 Free Rent (Months) 0 Months 0 Months ---------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ====================================================================== CONTRACT RENT As discussed, the subject consists of five tenant suites within two buildings. Currently, the subject is 100% occupied. Through our research of the subject property, which included a complete review of lease abstracts, rent rolls (both current and historical), and detailed discussions with the on-site property manager, the following rent roll summary was utilized to detail currently leased suites and general information employed for this approach. Additionally, within the Addenda are copies of the tenant lease assumptions, generated by Pro-ject+ Plus, a computerized lease-by-lease analysis program. Information submitted to us and contained in the Addenda provide additional support to the data and assumptions inputted for this method and is assumed to be correct and reliable. CB Commercial reserves the right to amend our input assumptions if any documentation is subsequently available which contradicts that assumed for this method. Located on the following page is the subject rent roll summary. - -------------------------------------------------------------------------------- 43 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ MONROE PLAZA - STROUDSBURG, PA RENT ROLL - -------------------------------------------------------------------------------- Square Rent Annual Suite Tenant Feet Begin End / SF Rent - -------------------------------------------------------------------------------- 1 Ames Department Store 61,489 04/90 01/99 $ 1.54 $ 94,693 2 Fay's Drug Store 13,716 10/82 10/02 $ 3.50 $ 48,006 3 Shop Rite Supermarket 52,924 10/80 10/05 $ 4.58 $242,392 4 Palumbo's Restaurant 1,440 07/81 05/01 $ 8.00 $ 11,520 5 Holiday Hair Fashions 1,000 06/81 06/96 $12.00 $ 12,000 ------- ------ -------- Total Leasable Area: 130,569 Average: $ 3.13 $408,611 Vacant Space 0 Occupancy-Overall 100% ================================================================================ Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ ANALYSIS OF TENANCY The subject is comprised of regional and local tenants including Ames Department Store, Fay's Drug Store, and Shop Rite Supermarket. Overall, the quality of the tenancy is considered to be good for the area. Current rental rates range from $1.54/SF to $12.00/SF. SPECIAL LEASE PROVISIONS AND ASSUMPTIONS The following discussion summarizes any lease provisions and assumptions of special note. Pending Leases Shop Rite is currently expanding its space from 45,000 square feet to 52,924 square feet. The lease is currently out for signature. We have, however, assumed that Shop Rite's expansion lease will commence November 1996. Renewal Options Options to renew at below or above market rent may have an impact on the valuation analysis. For example, if below market renewals are exercised, they may result in a downward impact on value. However, to the extent that re-tenanting costs are saved (rent loss during downtime, tenant improvements, leasing commissions, etc.), there may be an advantage in having the tenant renew at some rate below market rent in order to avoid these costs. The majority of recent leases at the subject have renewal options. Where applicable, if a tenants' option rent is below market, we have assumed that the tenant would exercise its renewal option. Conversely, if a tenants' option rent is above market, we have assumed that the tenant would not exercise its renewal option and terminate the lease. - -------------------------------------------------------------------------------- 44 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- EXPENSE REIMBURSEMENTS Current and future hypothetical retail leases which will encumber the subject property will be based upon triple net lease structures and are consistent with recent leases written at the subject property and the market in general. The tenants will be responsible for reimbursing the landlord for their pro rata share of operating expenses including their pro rata share of CAM, real estate taxes and insurance. The pro rata share calculations for future tenants are calculated by dividing the tenant's occupied rentable area by the gross leasable area of the center. The following is a breakdown of the subject's historical recoveries and CB Commercial's projections for the proforma. It should be noted that the subject's operating statements are based on a fiscal year basis, beginning June 1 and continuing through May 31. Expense Reimbursements Expense reimbursements for the subject property consist of real estate taxes, insurance, and common area maintenance. Common area maintenance expenses consist utilities, management fees, general and administrative, cleaning and repairs and maintenance expenses. The subject's historical expense reimbursements are as follows: =============================== EXPENSE REIMBURSEMENT ------------------------------- Year Total $ Amount ------------------------------- 1993 $84,017 1994 $95,827 1995 $89,711 1996 Budget $91,085 Year 1 Pro $95,058 Forma ------------------------------- Source: Mark Centers Trust =============================== The first year of our DCF model indicates reimbursements of $95,058. Historical expense reimbursements have fallen in recent years due in part to a drop in expenses as management has attempted to cut costs in recent years. The budgeted amount appears to be unreasonably low based upon projected expenses and reimbursement clauses for existing tenants. OTHER INCOME This income category can be derived from several different sources including tenant service income, merchants association fees, late fee income, short-term storage income, professional services provided for the tenants by the landlord/management, ground rent as well as other miscellaneous sources. There is no other income associated with the subject property. - -------------------------------------------------------------------------------- 45 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- PERCENTAGE RENT INCOME In addition to the basic rental charges, the tenants are sometimes responsible for paying the landlord additional rent equal to a specified percentage of the tenant's gross sales made in, upon, or from the premises, over a breakpoint factor or according to a specific schedule. Three of the subject tenants have percentage rent clauses contained within their leases.
============================================================================================== PERCENTAGE RENT CLAUSES - ---------------------------------------------------------------------------------------------- CBC's FY97 Tenant Breakpoint Percent Year Gross Sales % Rent Paid Projection - ---------------------------------------------------------------------------------------------- Ames $3,650,000 2.00% 1994 $9,443,677 $111,149 $9,255,000 1995 $9,265,138 $ 0 $2,800,000 2.00% Fay's Drugs $3,000,000 1.50% 1994 $2,358,796 $ 0 $2,360,000 $3,200,000 1.00% 1995 $2,649,126 $ 0 Shop Rite $15,000,000 1.25% 1994 $29,126,502 $145,811 $28,720,000 $20,000,000 1.00% 1995 $28,723,840 $143,765 Palumbo's Rest. $288,000 5.0% 1994 $102,798 $ 0 $115,000 1995 $115,214 $ 0 Holiday Hair $200,000 6.00% 1994 $213,371 $ 0 $185,000 1995 $185,157 $ 0 - ---------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------- Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ==============================================================================================
Given the aforementioned sales histories, we have projected the gross sales for each tenant as illustrated in the right column of the table. We have also projected that the gross sales figures will grow by 3.0% per annum over the course of the cash flow projection. POTENTIAL GROSS INCOME The potential gross income for the subject property is summarized as follows. - -------------------------------------------------------------------------------- 46 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- =================================================== STABILIZED POTENTIAL GROSS INCOME (FY 1997) --------------------------------------------------- Totals --------------------------------------------------- Total Minimum Rent $434,362 Expense Reimbursement - Common Area Maintenance Recovery (Includes Insurance Recovery) $ 44,696 - Real Estate Tax Recovery $503629 - Percentage Rent $267,946 Potential Gross Income $797,366 --------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. =================================================== VACANCY AND COLLECTION LOSS This is an allowance for reductions in potential income attributable to vacancies, tenant turnover, and non-payment of effective rent. In the direct capitalization process, a market-derived, stabilized vacancy and collection loss estimate is subtracted from potential gross income in order to arrive at effective gross income. The subject property is currently 100% leased. Furthermore, the subject's competitive market exhibits a vacancy level of approximately 4.0%. Due to the long-term leases at the subject property, the average vacancy rate over the projected holding period, which is attributed to downtime between leases, approximates a minimal 1.0%. In addition to vacancy, we estimated a blended credit loss factor of 2.0% which takes into account both national and local tenants at the subject center. Therefore, the combined long-term vacancy and credit loss factor for the subject property amounts to approximately 3.0%. In the first year of our discounted cash flow analysis, the combined credit loss amounts to $23,921. EFFECTIVE GROSS INCOME Given our estimate of potential gross income, other income, and a vacancy and collection loss, the estimated effective gross income is derived as follows: =========================================================== EFFECTIVE GROSS INCOME (FY 1997) ----------------------------------------------------------- Potential Gross Income: $ 797,366 Less: Collection Loss $ 23,921 --------- Effective Gross Income: $ 773,445 =========================================================== Our estimate of effective gross income used in direct capitalization is $773,445. This figure is the same as the EGI in the first year of our cash flow in the discounted cash flow method. - -------------------------------------------------------------------------------- 47 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- OPERATING EXPENSE ANALYSIS In projecting the revenues and expenses for the subject property, we have analyzed the historical figures for fiscal years 1993 through 1995 as well as management's forecast of revenues and expenses for fiscal year 1996. In addition, we have utilized the Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers publication to assist in our analysis. We have considered the category " Regions 1, 2 & 3 (East): Open Shopping Centers" as the most representative of the subject property. A summary of the average expenses taken from this publication increased at an inflationary rate to reflect our fiscal year 1997 analysis are presented as follows: ====================================== COMPARABLE EXPENSE ANALYSIS -------------------------------------- Expense Category P.S.F. -------------------------------------- General & Administrative $ 0.08 Repairs & Maintenance $ 0.36 Services $ 0.46 Utilities $ 0.18 ------ Total CAM $ 1.08 Real Estate Taxes $ 1.26 Insurance $ 0.15 Management Fees $ 0.41 Total Operating Expenses $ 2.90 -------------------------------------- Source: Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers ====================================== Our estimate of the subject's stabilized expenses are detailed as follows. Common Area Maintenance The subject's historical and projected common area maintenance (CAM) expenses are as follows: ======================================== COMMON AREA MAINTENANCE EXPENSE ---------------------------------------- Year Total $ Amount ---------------------------------------- 1993 $41,039 1994 $48,696 1995 $43,858 1996 Budget $55,291 CB 1996 Projection $60,000 ---------------------------------------- Source: Mark Centers Trust ======================================== - -------------------------------------------------------------------------------- 48 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Common area maintenance (CAM) charges generally includes various items such as general and administrative expenses, repair and maintenance expenses, utilities, and general services such as cleaning, landscaping, security, and common area insurance expenses. We project the total CAM expense in 1996, before management fees, at $60,000 or $0.46/SF. This is slightly lower than the average CAM expenses for the properties surveyed by IREM of $1.23/SF for open shopping centers in the east. However, the subject's historical expenses have ranged from $0.31/SF to $0.42/SF. Given the subject's historical CAM expense structure coupled with its effective age, occupancy and the services provided, the subject's projected CAM figure is considered reasonable. Property Taxes Historical and budgeted property tax expenses are as follows: ======================================= PROPERTY TAX EXPENSE --------------------------------------- Year Total $ Amount --------------------------------------- 1993 $ 86,003 1994 $ 88,147 1995 $ 87,574 1996 Budget $ 92,040 Year 1 Pro Forma $ 91,596 --------------------------------------- Source: Mark Centers Trust ======================================= As discussed fully within the tax and assessment data section of the report, estimated taxes for fiscal year 1997 are projected to be $91,596. Insurance Historical and budgeted insurance expenses are as follows: ======================================= INSURANCE EXPENSE --------------------------------------- Year Total $ Amount --------------------------------------- 1993 $15,743 1994 $12,498 1995 $16,278 1996 Budget $14,700 CB 1996 Projection $15,500 --------------------------------------- Source: Mark Centers Trust ======================================= - -------------------------------------------------------------------------------- 49 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Insurance at the subject property includes both liability insurance and fire insurance. This expense has decreased from 1993 to 1995 to a level of $0.11/SF. We have placed primary emphasis on the subject's historical and 1996 budgeted insurance expenses and have estimated the insurance expense at $15,500, or $0.12/SF. Ground Lease Payments There is a ground lease for two sites, consisting of approximately 0.3851 acres, of which the subject is situated upon. Abstracts of the ground leases are provided in the Addendum of this report. Currently, the total ground lease payment is $7,206 per annum. This cost is reimbursed by the two largest tenant, Ames and Shop Rite. Professional Management Fee In order to maintain the control of the property and subsequently ensure the stream of income that it generates, it is necessary to employ either internal or outside management. In the case of the subject property, the property is managed internally and no management expense has been reflected in historical statements. Typical professional management fees in the local market range from 1.0% to 5.0% of effective gross income. Based upon the size and nature of the subject improvements, we have applied a management expense of 2.5% of effective gross income. Because management is calculated based on a percentage of effective gross income, this expense will vary each year because of fluctuations in the income stream. In the first year of our analysis, this expense equates to $15,469 or $0.12/SF. Replacement Reserves This expense typically represents a reserve for future replacement of long-lived items. The amount of reserve and whether it is included or not in the direct capitalization and DCF analyses depends on the actions reflected by buyers and sellers in the local market. Based on the available comparable data and discussions with brokers and investors, replacement reserves generally range from $0.10/SF to $0.20/SF for retail properties of similar quality and condition as the subject. Given the subject's average condition, we have estimated this expense at $0.10/SF or $13,057 in 1996 increasing at our projected annual expense growth rate of 3.0%. Based on discussions with local market participants, replacement reserves are typically subtracted in calculating NOI when determining the cash flow in the DCF analysis. Total Concluded Operating Expenses The concluded stabilized operating expenses for the subject total an estimated $203,778, or $1.56 per rentable square foot. This total expense estimate is for the first year of our proforma and incorporates fiscal year conversions not reflected in the previous 1996 calendar year - -------------------------------------------------------------------------------- 50 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- estimates. The expense is somewhat lower than the average indicated by IREM ($2.90/SF) but judged reasonable given the historical and budgeted operations of the subject. CAPITALIZATION RATE There are several methods for deriving an overall capitalization rate for direct capitalization. A common method for establishing an overall capitalization rate for properties similar to the subject is to review the criteria of major investors in the marketplace. This may serve as a check against other techniques or may be a primary source when ample data exists. While derivation of capitalization rates from comparable sales is preferable, we were unable to obtain adequate income and expense data to employ this method from the sales used within the Sales Comparison Approach. Therefore, the investor survey method is used as the primary approach in deriving our overall capitalization rate. The subject property is a retail shopping center that would be attractive to either a local or a national investor. The category in the published investor survey most comparable to the subject is class B neighborhood shopping center. The investors typically interviewed for the survey are regional or national investors associated with pension funds, REIT's, insurance companies, financial institutions, etc. The information below is taken from CB Commercial most recent National Investor Survey (first quarter 1996). ===================================================================== SUMMARY OF INVESTOR SURVEY OVERALL CAPITALIZATION RATES NEIGHBORHOOD SHOPPING CENTERS - CLASS B --------------------------------------------------------------------- Investor Survey R(o) Range Average Date of Survey --------------------------------------------------------------------- CB Commercial National 9.0% - 11.5% 10.3% First Quarter, Investor Survey 1996 --------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ===================================================================== The previous survey indicates an overall range of 9.0% to 11.5% for neighborhood shopping centers with an average of approximately 10.3%. The capitalization rate reflects the quality and duration of the income stream as well as the physical characteristics of the property. The tenant mix at the subject center is considered to be good for the area with mostly regional tenants. The largest tenant at the subject, Ames, is a regional tenant. The Ames lease expires in 1999. The tenant also has four, five-year options to renew. Shop Rite supermarket expires in 2005 and also has a number of options. Fay's Drug Store expires in 2002 and has two, five-year options. Lease expiration is fairly even throughout the holding period which reduces risk. The center is currently 100% occupied. Overall, the quality, quantity and duration of the cash flow is considered to be good. With respect to physical characteristics, the subject is a functional - -------------------------------------------------------------------------------- 51 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- neighborhood center of average quality and in average overall condition. In addition, the subject is situated in an average retail location with relatively low volumes of traffic. Based upon this survey and the factors discussed above, an 10.5% overall capitalization rate (towards the middle of the range) appears to be appropriate for the subject property. Direct Capitalization Summary A summary of the direct capitalization method as applied to the subject property is illustrated in the following table: =================================================================== MONROE PLAZA DIRECT CAPITALIZATION SUMMARY ------------------------------------------------------------------- Category Total P.S.F. ------------------------------------------------------------------- Income Total Market Rent $ 434,362 $ 3.33 Recovery Income 95,058 0.73 Gross Rental Income $ 529,420 $ 4.05 Less: Vacancy and Credit Loss (23,921) (0.18) Plus: Other Income 0 0.00 Plus: Percentage Rents $ 267,946 2.05 Effective Gross Income $ 773,445 $ 5.92 Expenses Common Area Maintenance (CAM) (60,750) (0.47) Real Estate Taxes (91,596) (0.70) Insurance (15,694) (0.12) Management Fees (15,469) (0.20) Ground Lease Payment (7,212) Replacement Reserves (13,057) (0.12) Total Expenses $ (203,778) $(1.56) OER 26% Net Operating Income $ 569,667 $ 4.36 CAPITALIZATION OF NOI: @10.5% $5,425,400 $41.55 Reconciled Value $5,400,000 $41.35 ------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. =================================================================== The concluded market value of the subject property, based on the direct capitalization method, is $5,400,000. - -------------------------------------------------------------------------------- 52 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW ANALYSIS Our DCF assumptions are summarized as follows. Most of the following assumptions have been discussed and supported within prior sections of the report. A discussion of the discount rate, terminal capitalization rate and holding period follow the assumptions summarized below. ================================================================================ SUMMARY OF DISCOUNTED CASH FLOW ASSUMPTIONS MONROE PLAZA - -------------------------------------------------------------------------------- General Assumptions Start Date June 1, 1996 Terms of Analysis 10 years Basis (Calendar / Fiscal) Fiscal Software Project + Plus Growth Rate Assumptions Expenses 3.0% Market Rent 3.0% Real Estate Taxes 3.0% Inflation (CPI) 0.0% Market Rent Assumptions Anchor $ 5.00 (NNN) Satellite $12.00 & $7.00 (NNN) Leasing Assumptions Lease Term 5 Years Renewal Probability 50% Weighted Average of: Tenant Improvements $0.00 Months of Free Rent 0 Leasing Commissions 4.5% (Cashed-Out) Down Time Between Leases 6 Months Tenant Assumptions Existing tenant leases were entered at contract rent and terms. Speculative renewals assume tenants will pay base rent plus their pro rata share of CAM, real estate taxes and insurance. Contractual recoveries were input into the model per their respective leases. Miscellaneous Assumptions Credit Loss 2.0% Avg. Occupancy Over 99% Projection Period Structural Maintenance/ $ 0.10 Reserves ($/SF) Financial Assumptions Discount Rate (IRR) 12.50% Terminal Overall 11.00% Capitalization Rate (RO) Costs of Sale 2.00% - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 53 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNT RATE ANALYSIS A discount rate is a rate of return on capital utilized to capitalize future payments or receipts to present value. It is based on the time value of money concept. For appraisal purposes, the rate used to convert income to property value should represent the annual rate of return necessary to attract investment capital. The rate is influenced by many considerations, including the degree of apparent risk, market attitudes with respect to future inflation, the prospective rates of return for alternative investment opportunities, supply of and demand for mortgage funds, and the availability of tax shelters. Because rates of return used in income capitalization represent prospective rates, as distinguished from historical rates, special consideration is given to market perceptions of risk and changes in purchasing power. Although it is not possible to prove conclusively the suitability of a particular rate of return on the basis of market evidence, the chosen rate should be consistent with the available evidence. Rate selection requires judgment and knowledge concerning prevailing market attitudes and economic indicators. Both the discount rate and the reversionary capitalization rate must reflect the relative risk perceived by investors for the specific market being studied. Generalities must be avoided. To determine such rates, we have used surveys of real estate investors analyzed and adjusted for comparative returns found in the capital markets. National investor surveys include data on investors operating regionally and nationally, such as representatives of insurance companies, commercial banks, pension funds, investment banking firms, syndication firms, and investment advisory firms. Such companies invest in all types of properties, including office buildings, retail shopping centers, hotels, apartment complexes, and industrial facilities. These surveys are valuable for determining general parameters but must be honed to the local market. Based on surveys from CB Commercial Real Estate Group Inc. for the first quarter 1996, investment criteria for numerous market participants including investors that would be in competition for acquiring a property such as the subject are illustrated below. ================================================================================ FIRST QUARTER 1996 NATIONAL INVESTOR SURVEY CLASS B NEIGHBORHOOD SHOPPING CENTERS ================================================================================ TYPE OF FIRM OVERALL CAP. RATES GENERAL DISCOUNT REAL RATE INFLATION RATE OF RETURN ------------------------- GOING-IN TERMINAL (IRR) (RRR) ================================================================================ Range: 9-11.5 10-12 2-4 12-14.5 9.5-11 Average 10.3 10.8 3.1 13.1 10.1 ================================================================================ Change from -20 +10 -40 +50 +190 3rd Qtr Survey =============================================================================== Source: CB Commercial Real Estate Group Inc. - 1st Quarter 1996 - -------------------------------------------------------------------------------- 54 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- We have surveyed national real estate investors for their investment criteria when purchasing real estate such as the subject. Investor expectations for inflation range from 2% to 4%, with an average of 3.1%. We have selected an inflation rate for our analysis of 3.0%. The discount rate reflects the quality and duration of the income stream as well as the physical and locational characteristics of the property. As discussed within the overall rate section, the tenant mix at the subject center is considered to be good for the area with mostly regional tenants. Moreover, lease expiration is fairly even throughout the holding period which reduces risk. The center is currently 100% occupied. Overall, the quality, quantity and duration of the cash flow is considered to be good. With respect to physical characteristics, the subject is a functional neighborhood center of average quality and in average overall condition. In addition, the subject is situated in an average retail location with relatively low volumes of traffic. In general, the discount rate (IRR) is comprised on a safe rate (usually Treasuries) and a risk premium. The risk premium is difficult to quantify but with sound logic a reasonable rate can be ascertained. The chart presented below graphically depicts real estates position within the risk/reward graph. - -------------------------------------------------------------------------------- INVESTOR RISK VERSUS RETURN REQUIREMENTS Anticipated Return _ Real Estate _ Common Stocks - Corporate Bonds _ Mortgage Backed Securities _ Municipal Bonds _ T - Bills Riskless Rate - -------------------------------------------------------------------------------- Perceived Level of Risk US Treasury notes and bonds are considered risk free since they are backed by the United States government. Their rates only fluctuate with perceived inflation. The use of this, or any short term investment including the prime rate or LIBOR is meaningless when compared to an investment with a 10 year holding period. Accordingly, as a starting point, we only considered - -------------------------------------------------------------------------------- 55 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- risk free or nearly risk free investments with a maturity of 10 years. These include Treasuries, corporate bonds and municipal bonds. Adjusted for daily fluctuations, these debt offerings are yielding 5.59% to 8.25%. Mortgaged backed securities generally tend to fall above these instruments. The next layer of risk would include debt rated as low as BBB. These notes are yielding as much as 10%. Long-term mortgages are also yielding over 10% considering the mortgage constant on a note priced at 250 to 300 basis points over comparable Treasuries. Riskier investments such as junk bonds vary widely from 12% to 22% on an unleveraged basis. Real estate, as indicated on the chart above falls between common stock (10%) and junk bonds (16%). To eliminate the burden of illiquidity, REIT's and similar investments are being created. They represent a quasi-real estate opportunity. REIT's are currently providing dividends ranging from 6% to 8% but offer potential yields of 15% to 20% Various financial instruments are yielding between 5.59% and 8.25% depending upon the type of investment as indicated on the chart below based on data obtained from the Federal Reserve Statistical Release for the week ending May 17, 1996. It should be noted that over the past year we have witnessed an increase in the interest rate of all of the following instruments. =========================================================== INSTRUMENT RATE ----------------------------------------------------------- Prime Rate 8.25% ----------------------------------------------------------- Municipal Bonds 5.96% ----------------------------------------------------------- Short-Term Treasury Securities (1 year) 5.59% ----------------------------------------------------------- Long Term Treasury Securities (10 years) 6.68% ----------------------------------------------------------- Corporate Aaa Bonds (10+ years) 7.57% ----------------------------------------------------------- Corporate Baa Bonds (10 + years) 8.25% =========================================================== The risk premium is the rate added to Treasuries to account for illiquidity, the capital markets and the economy. Whether the risk premium decreases in the near term is dependent solely on inflation, the growth of the economy and capital markets. During 1995, the Federal Reserve decreased interest rates in order to stimulate a sluggish economy. The low rates have continued during the early portion of 1996, however, have recently begun to ascend. Over the longer term, as the existing supply of space is absorbed, the risk premium will decrease. Based on the above, we feel that the current required rate of return (IRR) for the subject would fall slightly below the middle of the range at 12.5%. This reflects the quality, quantity and cash flow risk associated with the subject property. As such, we have utilized a discount rate of 12.5% in our analysis. - -------------------------------------------------------------------------------- 56 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- TERMINAL RATE To estimate the appropriate terminal capitalization rate, we have considered the rates reflected in the investment criteria outlined above for both going-in and terminal capitalization. Typically, under stable market conditions, the terminal capitalization rate will be greater than the going-in rate to reflect the risk associated with the holding period. Typically 50 to 100 basis points are added on to the going-in cap rate under stable market conditions to account for the additional risk. Furthermore, our national investor survey also indicated an average terminal capitalization 50 basis points greater than the going-in rate. It is evident by historical and current performance of the center and it is our opinion that the subject property will encounter average-to-good market acceptance in the future. It is our opinion that a terminal capitalization rate of 11.0% is the most appropriate for the subject property. A 2% deduction for costs of sale has been utilized to reflect the net reversionary value. HOLDING PERIOD To apply the discounted cash flow analysis, an estimate must be made of the appraised property's holding period based on typical investors' motives in the local market. Historical investment holding periods of similar shopping centers typically have ranged from 10 to 15 years. A 10- to 15- year holding period was analyzed to test the property's sensitivity to roll-overs. A 10-year holding period was selected. Our discounted cash flow analysis is presented on the following page. - -------------------------------------------------------------------------------- 57
------------------------------------ ------------------------------------ Building Size 130,569 Monroe Plaza, Strodsburg, PA Reconciled Value $ 5,710 Cost of Sales 2.000% Cash Flow Report Value per SF $ 43.73 Hold Period (Years) 10 % Residual of Recon. V 37.0% Reduce Residual by Cap EX Yes Direct Cap Rate 10.50% Residual Discount Rate 12.50% Direct Cap Value $ 5,550 ------------------------------------ ------------------------------------ Compounded Ann. ---------------------------------------------------------------------------------------- Avg. Growth 1996 1997 1998 1999 2000 2001 2002 2003 ---------------------------------------------------------------------------------------- 1.15% BASE RENT 434,362 465,770 469,360 476,415 476,415 472,529 487,494 491,780 N/A Free Rent 0 0 0 0 0 0 0 0 3.28% Expense Recoveries 95,058 102,795 105,716 108,741 111,771 113,950 118,302 121,708 5.08% Percentage Rent 267,946 282,295 297,075 312,298 327,978 344,285 361,845 380,689 - ---------- ---------------------------------------------------------------------------------------- 2.87% GROSS INCOME 797,366 850,860 872,151 897,454 916,164 930,764 967,641 994,177 2.87% Credit/Vacancy Loss (23,921) (25,526) (26,165) (26,924) (27,485) (27,923) (29,029) (29,825) N/A Miscellaneous Incomes 0 0 0 0 0 0 0 0 - ---------- ---------------------------------------------------------------------------------------- 2.87% EFFECTIVE GROSS INCOME 773,445 825,334 845,986 870,530 888,679 902,841 938,612 964,352 - ---------- TOTAL EXPENSES 190,721 196,801 202,405 208,244 214,116 220,073 226,632 233,166 2.89% ---------------------------------------------------------------------------------------- - ---------- NET OPERATING INCOME 582,724 628,533 643,581 662,286 674,563 682,768 711,980 731,186 2.86% Commissions 0 0 0 0 0 5,966 0 0 N/A Tenant Improvements 0 0 0 0 0 0 0 0 N/A Capital Additions 13,057 13,449 13,852 14,268 14,696 15,137 15,591 16,058 N/A ---------------------------------------------------------------------------------------- - ---------- TOTAL DEDUCTIONS 13,057 13,449 13,852 14,268 14,696 21,103 15,591 16,058 N/A ---------------------------------------------------------------------------------------- - ---------- CASH FLOW 569,667 615,084 629,729 648,018 659,867 661,665 696,389 715,128 2.76% - ---------- TOTAL CASH FLOW 569,667 615,084 629,729 648,018 659,867 661,665 696,389 715,128 ---------------------------------------------------------------------------------------- Debt Service N/A N/A N/A N/A N/A N/A N/A N/A ---------------------------------------------------------------------------------------- CASH FLOW AFTER DEBT 569,667 615,084 629,729 648,018 659,867 661,665 696,389 715,128 ---------------------------------------------------------------------------------------- CUMULATIVE SURPLUS N/A N/A N/A N/A N/A N/A N/A N/A ======================================================================================== -------------------------------------------------------------------------------------------------------------------- Implied Overall Rate 10.21% 11.01% 11.27% 11.60% 11.81% 11.96% 12.47% 12.81% Cash on Cash Return 9.98% 10.77% 11.03% 11.35% 11.56% 11.59% 12.20% 12.52% ====================================================================================================================
--------------------------------------- 2004 2005 2006 --------------------------------------- BASE RENT 491,780 491,780 486,930 Free Rent 0 0 0 Expense Recoveries 125,160 128,673 131,215 Percentage Rent 399,945 419,706 439,650 --------------------------------------- GROSS INCOME 1,016,885 1,040,159 1,057,795 Credit/Vacancy Loss (30,507) (31,205) (31,734) Miscellaneous Incomes 0 0 0 --------------------------------------- EFFECTIVE GROSS INCOME 986,378 1,008,954 1,026,061 TOTAL EXPENSES 239,807 246,645 253,564 --------------------------------------- NET OPERATING INCOME 746,571 762,309 772,497 Commissions 0 0 7,002 Tenant Improvements 0 0 0 Capital Additions 16,540 17,036 17,548 --------------------------------------- TOTAL DEDUCTIONS 16,540 17,036 24,550 --------------------------------------- CASH FLOW 730,031 745,273 747,947 TOTAL CASH FLOW 730,031 745,273 747,947 --------------------------------------- Debt Service N/A N/A N/A --------------------------------------- CASH FLOW AFTER DEBT 730,031 745,273 747,947 --------------------------------------- CUMULATIVE SURPLUS N/A N/A N/A ======================================= - ------------------------------------------------------------------- Implied Overall Rate 13.07% 13.35% 13.53% Cash on Cash Return 12.79% 13.05% 13.10% =================================================================== ------------------------------------------------ [GRAPHIC OMITTED] Sale/Yield Matrix (000's) Terminal Cap Rate -------------------------------- Disc Rate 10.75% 11.00% 11.25% 11.50% -------------------------------- 12.00% 5,935 5,884 5,834 5,787 -------------------------------- 12.25% 5,846 5,796 5,748 5,702 -------------------------------- 12.50% 5,759 5,710 5,663 5,618 -------------------------------- 12.75% 5,674 5,626 5,580 5,536 -------------------------------- 13.00% 5,591 5,543 5,498 5,455 -------------------------------- 13.25% 5,509 5,463 5,419 5,376 -------------------------------- ============================================= ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW CONCLUSION We used "PRO-JECT +plus" computer software to create a cash flow model for a long term hold. Reference is made to the "Annual Cash Flow Report", generated by the Pro-ject software, on the previous page which provides a summary of cash flow from all sources. We utilized a 10-year holding period and have discounted the cash flow on a fiscal year basis from 1997 to 2006. The cash flow incorporates the terms of existing leases during the analysis period and our assumptions regarding the lease-up of vacant space. It also calculates renewal rentals when leases expire based on current market rent escalated at a growth factor. In addition, a forecast was made for 15 years to check for any irregularities in the income stream which may artificially affect the reversionary sale price. It should be noted that based on our analysis of the extended holding period indicated that there was no irregularities. We capitalized the 11th year net operating income to determine the reversionary value at the end of year 10. CONCLUSION OF INCOME CAPITALIZATION APPROACH The preceding analysis indicates the following conclusions: ======================================== INCOME CAPITALIZATION APPROACH VALUES ---------------------------------------- Method Indicated Value ---------------------------------------- Direct Capitalization $5,400,000 Discounted Cash Flow $5,700,000 ---------------------------------------- Source: CB Commercial Real Estate ======================================== Greater emphasis is placed on the DCF analysis because it is the method likely to be used by a typical investor. As a result, based on the Income Capitalization Approach, CB Commercial concludes a value estimate for the subject property of $5,700,000. This equates to $43.66 per rentable square foot. - -------------------------------------------------------------------------------- 59 CONCLUSION CONCLUSION ================================================================================ RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- RECONCILIATION OF VALUE CB Commercial was instructed to estimate the market value of the leased fee interest in the subject property. The value conclusions for each applicable approach are summarized below. =============================================== SUMMARY OF VALUE CONCLUSIONS ----------------------------------------------- Cost Approach N/A Sales Comparison $ 5,400,000 Approach Income Capitalization $ 5,700,000 Approach ----------------------------------------------- Source: CB Commercial Real Estate Group, Inc. =============================================== The Income Capitalization Approach is considered the most persuasive method for valuing the subject property. This approach is predicated on the principle of anticipated economic benefits and, therefore, best reflects the investment characteristics of the subject. Properties such as the subject are typically purchased by investors; thus, this approach must closely parallels the anticipated analysis that would be employed by the most typical purchaser. Since the subject property has a number of existing leases with a variety of terms, the DCF technique best models the future cash flow stream to a prospective buyer. The Sales Comparison Approach is predicated on the principle that an investor would pay no more for an existing property than for a comparable property with similar utility. This approach is contingent on the reliability and comparability of available data. The data developed was considered sufficiently reliable to reach a value conclusion by the Sales Comparison Approach. However, due to the lack of truly comparables sales in recent years, this method is given secondary consideration in the reconciliation. The Cost Approach is predicated on the principle that an investor would pay no more for an existing property than it would cost to acquire land and construct a building with similar utility. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Furthermore, due to the age of the subject and current market conditions, accrued depreciation would be substantial and difficult to estimate. An investor would not use the Cost Approach due to the imprecise nature of estimating the accrued physical, functional, or external depreciation affecting the improvements. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. - -------------------------------------------------------------------------------- 60 ================================================================================ RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- The final value conclusion and the approaches relied upon give strong consideration to the market behavior of the typical buyer and current market environment for the property appraised. Based on the foregoing analysis, it is concluded that the market value of the leased fee interest in the subject property, subject to the assumptions and limiting conditions, as of June 1, 1996, is: FIVE MILLION SEVEN HUNDRED THOUSAND DOLLARS ($5,700,000) This value is subject to all of the assumptions and limiting conditions stated throughout the report, including specific assumptions and limiting conditions. - -------------------------------------------------------------------------------- 61 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS 1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to total that would adversely affect marketability or value. CB Commercial is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CB Commercial, however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject property's title should be sought from a qualified title company that issues or insures title to real property. 2. It is assumed that improvements have been constructed or will be constructed according to approved architectural plans and specifications and in conformance with recommendations contained in or based upon any soils report(s). Unless otherwise specifically noted in the body of this report, it is assumed: that any existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are, or will be upon completion, in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that it or they will withstand any known elements such as windstorm, hurricane, tornado, flooding, earthquake, or similar natural occurrences; and, that the improvements, as currently constituted, conform to all applicable local, state, and federal building codes and ordinances. CB Commercial professionals are not engineers and are not competent to judge matters of an engineering nature. CB Commercial has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CB Commercial by ownership or management; CB Commercial inspected less than 100% of the entire interior and exterior portions of the improvements; and CB Commercial was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CB Commercial reserves the right to amend the appraisal conclusions reported herein. 3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property was not observed by the appraisers. CB Commercial has no knowledge of the existence of such materials on or in the property. CB Commercial, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the appraisal. 4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CB Commercial. This report may be subject to amendment upon re-inspection of the subject property subsequent to repairs, modifications, alterations and completed new construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels of operation. - -------------------------------------------------------------------------------- 62 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 5. It is assumed that all factual data furnished by the client, property owner, owner's representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CB Commercial has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, Assessor's Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CB Commercial reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CB Commercial of any questions or errors. 6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CB Commercial will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject. 7. CB Commercial assumes no private deed restrictions, limiting the use of the subject property in any way. 8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposit or subsurface rights of value involved in this appraisal, whether they be gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred. 9. CB Commercial is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject. 10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market. 11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CB Commercial does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CB Commercial. 12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CB Commercial to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form. 13. Unless otherwise noted in this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated. 14. This study may not be duplicated in whole or in part without the specific written consent of CB Commercial nor may this report or copies hereof be transmitted to third parties without said consent, which consent CB Commercial reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or - -------------------------------------------------------------------------------- 63 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- its contents shall not be published, in whole or in part, in any public document without the express written consent of CB Commercial which consent CB Commercial reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a "sale" or "offer for sale" of any "security", as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CB Commercial shall have no accountability or responsibility to any such third party. 15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report. 16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used. 17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area have been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report. 18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CB Commercial unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CB Commercial assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance. 19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or client's designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CB Commercial assumes responsibility for any situation arising out of the Client's failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired. 20. CB Commercial assumes that the subject property analyzed herein will be under prudent and competent management and ownership; neither inefficient or super-efficient. 21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the appraisal report. 22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist. 23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Not withstanding any discussion of possible readily achievable barrier removal construction items in this report, CB Commercial has not made a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect on the value estimated herein. Since CB Commercial has no specific information relating to this issue, nor is CB Commercial qualified to make such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject property. - -------------------------------------------------------------------------------- 64 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 24. For our analysis, we have relied on the information provided by the detailed rent roll and information provided by the subject leasing agent. We have assumed all information is correct. Furthermore, we have assumed all leases out for signature will be returned signed, and executed as of the date indicated to us by the leasing agent. We reserve the right to amend this appraisal should any of this information be later found to be incorrect. - -------------------------------------------------------------------------------- 65 ADDENDA ADDENDA ================================================================================ ADDENDA - -------------------------------------------------------------------------------- ADDENDA - -------------------------------------------------------------------------------- 66 ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- ADDENDUM A - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- GLOSSARY OF TERMS assessed value Assessed value applies in ad valorem taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to market value, but it is usually calculated in relation to a market value base. + cash equivalency The procedure in which the sale prices of comparable properties sold with atypical financing are adjusted to reflect typical market terms. contract, coupon, face, or nominal rent The nominal rent payment specified in the lease contract. It does not reflect any offsets for free rent, unusual tenant improvement conditions, or other factors that may modify the effective rent payment. coupon rent See Contract, Coupon, Face, or Nominal Rent effective rent 1) The rental rate net of financial concessions such as periods of no rent during a lease term; may be calculated on a discounted basis, reflecting the time value of money, or on a simple, straight-line basis. ++ 2) The economic rent paid by the lessee when normalized to account for financial concessions, such as escalation clauses, and other factors. Contract, or normal, rents must be converted to effective rents to form a consistent basis of comparison between comparables. face rent See Contract, Coupon, Face, or Nominal Rent fee simple estate Absolute ownership unen-cumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. ++ floor area ratio (FAR) The relationship between the above-ground floor area of a building, as described by the building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area; also called building-to-land ratio. ++ full service lease A lease in which rent covers all operating expenses. Typically, full service leases are combined with an expense stop, the expense level covered by the contract lease payment. Increases in expenses above the expense stop level are passed through to the tenant and are known as expense pass-throughs. going concern value Going concern value is the value of a proven property operation. It includes the incremental value associated with the business concern, which is distinct from the value of the real estate only. Going concern value includes an intangible enhancement of the value of an operating business enterprise which is produced by the assemblage of the land, building, labor, equipment, and marketing operation. This process creates an economically viable business that is expected to continue. Going concern value refers to the total value of a property, including both real property and intangible personal property attributed to the business value. + gross building area (GBA) The sum of all areas at each floor as measured to the exterior walls. insurable value Insurable Value is based on the replacement and/or reproduction cost of physical items that are subject to loss from hazards. Insurable value is that portion of the value of an asset or asset group that is acknowledged or recognized under the provisions of an applicable loss insurance policy. This value is often controlled by state law and varies from state to state. + investment value Investment value is the value of an investment to a particular investor based on his or her investment requirements. In contrast to market value, investment value is value to an individual, not value in the marketplace. Investment value reflects the subjective relationship between a particular investor and a given investment. When measured in dollars, investment value is the price an investor would pay for an investment in light of its perceived capacity to satisfy his or her desires, needs, or investment goals. To estimate investment value, specific investment criteria must be known. Criteria to evaluate a real estate investment are not necessarily set down by the individual investor; they may be established by an expert on real estate and its value, that is, an appraiser. + leased fee See leased fee estate - -------------------------------------------------------------------------------- ================================================================================ GLOSSARY OF TERMS - -------------------------------------------------------------------------------- leased fee estate An ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.++ leasehold See leasehold estate leasehold estate The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.++ load factor The amount added to usable area to calculate the rentable area. It is also referred to as a "rentable add-on factor" which, according to BOMA, "is computed by dividing the difference between the usable square footage and rentable square footage by the amount of the usable area. Convert the figure into a percentage by multiplying by 100. market value "as if complete" on the appraisal date Market value as if complete on the appraisal date is an estimate of the market value of a property with all construction, conversion, or rehabilitation hypothetically completed, or under other specified hypothetical conditions as of the date of the appraisal. With regard to properties wherein anticipated market conditions indicate that stabilized occupancy is not likely as of the date of completion, this estimate of value should reflect the market value of the property as if complete and prepared for occupancy by tenants. market value "as is" on the appraisal date Market value "as is" on the appraisal date is an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date of appraisal. market value Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1) A reasonable time is allowed for exposure in the open market; 2) Both parties are well informed or well advised, and acting in what they consider their own best interests; 3) Buyer and seller are typically motivated; 4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.+++ marketing period The time it takes an interest in real property to sell on the market subsequent to the date of an appraisal.++ net lease Lease in which all or some of the operating expenses are paid directly by the tenant. The landlord never takes possession of the expense payment. In a Triple Net Lease all operating expenses are the responsibility of the tenant, including property taxes, insurance, interior maintenance, and other miscellaneous expenses. However, management fees and exterior maintenance are often the responsibility of the lessor in a triple net lease. A modified net lease is one in which some expenses are paid separately by the tenant and some are included in the rent. net rentable area (NRA) 1) The area on which rent is computed. 2) The Rentable Area of a floor shall be computed by measuring to the inside finished surface of the dominant portion of the permanent outer building walls, excluding any major vertical penetrations of the floor. No deductions shall be made for columns and projections necessary to the building. Include space such as mechanical room, janitorial room, restrooms, and lobby of the floor.* nominal rent See Contract, Coupon, Face, or Nominal Rent prospective future value "upon completion of construction" Prospective future value "upon completion of construction" is the prospective value of a property on the future date that construction is completed, based upon market conditions forecast to exist, as of that completion date. The value estimate at this stage is stated in current dollars unless otherwise indicated. prospective future value "upon reaching stabilized occupancy" Prospective future value "upon reaching stabilized occupancy" is the prospective value of a property at a future point in time when all improvements have been physically constructed - -------------------------------------------------------------------------------- ================================================================================ GLOSSARY OF TERMS - -------------------------------------------------------------------------------- and the property has been leased to its optimum level of long-term occupancy. The value estimate at this stage is stated in current dollars unless otherwise indicated. reasonable exposure time The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market.** rent see full service lease net lease contract, coupon, face, or nominal rent effective rent shell space Space which has not had any interior finishing installed, including even basic improvements such as ceilings and interior walls, as well as partitions, floor coverings, wall coverings, etc. Usable Area 1) The area actually used by individual tenants. 2) The Usable Area of an office is computed by measuring to the finished surface of the office side of corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished surface of the dominant portion of the permanent outer building walls. Excludes areas such as mechanical rooms, janitorial room, restrooms, lobby, and any major vertical penetrations of a multi-tenant floor.* use value Use value is a concept based on the productivity of an economic good. Use value is the value a specific property has for a specific use. Use value focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to the property's highest and best use or the monetary amount that might be realized upon its sale.+ value appraised During the real estate development process, a property typically progresses from a state of unimproved land to construction of improvements to stabilized occupancy. In general, the market value associated with the property increases during these stages of development. After reaching stabilized occupancy, ongoing forces affect the property during its life, including a physical wear and tear, changing market conditions, etc. These factors continually influence the property's market value at any given point in time. See also market value "as is" on the appraisal date market value "as if complete" on the appraisal date prospective future value "upon completion of construction" prospective future value "upon reaching stabilized occupancy" - ---------- + The Appraisal of Real Estate, Tenth Edition, Appraisal Institute, 1992. ++ The Dictionary of Real Estate Appraisal, Third Edition, 1993. *** The office of the Comptroller of the Currency, 12 CFR Part 34, Subpart C, ss.34.42(f), August 24, 1966. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. * 1966 BOMA Experience Exchange Report, Income/Expense Analysis for Office Buildings (Building Owners and Managers Association, 1966) ** Statement on Appraisal Standard No. 6, Appraisal Standards Board of The Appraisal Foundation, September 19, 1992. - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B LEGAL DESCRIPTION - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ADDENDUM B LEGAL DESCRIPTION - -------------------------------------------------------------------------------- SCHEDULE A OFFICE FILE NUMBER POLICY NUMBER DATE OF POLICY AMOUNT OF INSURANCE - -------------------------------------------------------------------------------- 93-31914 39 6017 106 00000018 June 15, 1993 $5,000,000 - -------------------------------------------------------------------------------- 1. Name of Insured: MARK CENTERS LIMITED PARTNERSHIP 2. The estate or interest in the land which is covered by this Policy is: Fee Simple - Parcels A and B Leasehold Interest - Parcels C and D 3. Title to the estate or interest in the land is vested in the Insured. 4. The land herein described is encumbered by the following mortgage or trust deed, and assignments: and the mortgages or trust deeds, if any, shown in Schedule B hereof. 5. The land referred to in this Policy is described as follows: BEING THE SAME premises as described in the following documents: DEED from NAP Associates, formerly a Pennsylvania limited partnership, now by its successor upon dissolution Marvin L. Slomowitz, and Isobel C. Slomowitz, his wife to Mark Centers Limited Partnership dated May 28, 1993 and recorded June 9, 1993 in Record Book Volume 1891 page 644; ASSIGNMENT OF LEASEHOLD INTEREST AND ASSUMPTION AGREEMENT from Sybil Realty Co., now following dissolution, Marvin L. Slomowitz, as successor in interest, and Isobel C. Slomowitz to Mark Centers Limited Partnership dated May 26, 1993 and recorded June 9, 1993 in Record Book Volume 1891 page 652; ASSIGNMENT OF LEASEHOLD INTEREST AND ASSUMPTION AGREEMENT from Sybil Realty Co., now following dissolution, Marvin L. Slomowitz, as successor in interest, and Isobel C.Slomowitz to Mark Centers Limited Partnership dated May 26, 1993 and recorded June 9, 1993 in Record Book Volume 1891 page 657 and DEED from Monroe County Industrial Development Authority and Marvin L. Slomowitz and Isobel C. Slomowitz, his wife to Mark Centers Limited Partnership dated May 19, 1993 and recorded June 15, 1993 in Record Book Volume 1891 page 1764. SCHEDULE A Owners Form This Policy valid only if Schedule B is attached. Reorder Form No. 3529 (Rev. 1/89) ================================================================================ ADDENDUM C IMPROVED COMPARABLE SALES ================================================================================ ADDENDUM C IMPROVED COMPARABLE SALES - -------------------------------------------------------------------------------- RETAIL SALE ================================================================================ Location Data Property Name: 15th & Allen Street Shopping Center Location: 1401-1451 Allen Street City: Allentown County: Lehigh State/Zip: Pennsylvania Assessor's Parcel No(s): G9SW3A-14-4 Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 4.12 Acres Excess Land: None Gross Leasable Area: Anchors: Laneco Supermarket 25,000 SF Local Tenant GLA: 21,503 SF Anchor Tenant GLA: 25,000 SF Total GLA: 46,503 SF GLA Purchased: 46,503 SF Year Built: 1950 Parking: Adequate Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 01/96 Marketing Time: N/A Grantor: Carriage Associates L.P. Grantee: Allenbeth Associates L.P. Document No.: 1558/220 Sale Price: $4,242,000 Financing: Market Terms Cash Equivalent Price: $4,242,000 Required Capital Cost: $0 Adjusted Sales Price: $4,242,000 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100 Existing or Pro Forma Income: N/A TOTAL P.S.F. -------- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $462,049 $9.94 ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.89% Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A% Price Per Square Foot: $91.22 Comments The 15th and Allen Street shopping center is a one-story neighborhood retail center located on the corner of 15th and Allen Streets in Downtown Allentown. This property is anchored by a Laneco Supermarket which occupies an estimated 25,000 square feet with the balance of the rentable area, 21,503 square feet allocated to 12 other satellite tenants. This center was built in the 1950's, however, it has undergone significant renovations since that time. Currently, the property is in average condition. At the time of sale, the property was 100% occupied. ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Stefko Shopping Center Location: Stefko Boulevard City: Bethlehem County: Northampton State/Zip: Pennsylvania Assessor's Parcel No(s): N7SW1B-3-1 Atlas Reference: N/A Physical Data Type: Community Land Area: 10.27 Acres Excess Land: None Gross Leasable Area: Anchors: Laneco Supermarket 65,000 SF Local Tenant GLA: 69,446 SF Anchor Tenant GLA: 65,000 SF Total GLA: 134,446 SF GLA Purchased: 134,446 SF Year Built: 1965 Parking: Adequate Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 01/96 Marketing Time: N/A Grantor: Carriage Associates L.P. Grantee: Allenbeth Associates L.P. Document No.: 1996-1/4082 Sale Price: $5,618,000 Financing: Market Terms Cash Equivalent Price: $5,618,000 Required Capital Cost: $0 Adjusted Sales Price: $5,618,000 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 95.2% Existing or Pro Forma Income: N/A TOTAL P.S.F -------- ----- Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $617,577 $4.59 ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.9% Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A% Price Per Square Foot: $41.79 Comments The Stefco shopping center is a one-story community retail center located on Stefco Boulevard in Bethlehem. This property is anchored by a Laneco Supermarket which occupies an estimated 65,000 square feet with the balance of the rentable area, 69,446 square feet allocated to 21 other satellite tenants. This center was built in 1965. however, it has undergone significant renovations in 1988. Currently, the property is in average condition. At the time of sale. the property was 95.2% occupied. ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Town Center Shopping Center Location: Route 202 & Lenape Drive City: New Britain County: Bucks State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Strip Center Land Area: 16.98 Acres Excess Land: N/A Gross Leasable Area: Anchors: Clemens Market 35,201 SF Rite Aid 7,076 SF Local Tenant GLA: 76,499 SF Anchor Tenant GLA: 42,277 SF Total GLA: 118,776 SF GLA Purchased: 118,776 SF Year Built: 1987 Parking: N/A Condition: Average Exterior Walls: Cement Block Sale Data Transaction Type: Sale Date of Transaction: 11/95 Marketing Time: N/A Grantor: ChalBrit Plaza & ChalBrit Plaza II Grantee: Philbern Assoc. & Jarbritt Assoc. Document No.: 1003708,715,723,730 Sale Price: $5,714,998 Financing: Cash to Seller Cash Equivalent Price: N/A Required Capital Cost: $0 Adjusted Sales Price: $0 Verification: N/A Financial Data Assumptions & Forecast: Seller Occupancy at Sale: 75 Existing or Pro Forma Income: N/A TOTAL P.S.F. -------- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $651,818 $5.49 ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria. Overall Capitalization Rate (OAR): N/A % Projected IRR: 11.41% Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: N/A Comments According to Larry Wygant, the managing agent for the grantor, the transaction included the transfer of the land parcels to Phibern Associates for $1,999,999. The buildings were purchased by Jarbrit Associates fo $3,714,999. Jarbrit, in turn, leased the land for 30 years with 2, 5-year options. The total purchase price for the land and buildings was $5,714,998. Also included in the purchase was nin office condos for $810,000, which was not included in the above sales price. At the time of sale, the proforma effective gross income for the shopping center was $1,300,000 and the NOI was $651,818. ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name. Hamburg Shopping Center Location: South 4th Street & Valley Road City: Borough Of Hamburg County: Berks State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 6.40 Acres Excess Land: N/A Gross Leasable Area: Anchors: Food Lion Supermarke Rite Aid Pharmacy Local Tenant GLA: N/A Anchor Tenant GLA: N/A Total GLA: N/A GLA Purchased: 42.000 SF Year Built: 1980 Parking: N/A Condition: Good Exterior Walls: Sale Data Transaction Type: Sale Date of Transaction: 3/94 Marketing Time: N/A Grantor: Wagman Equities, Inc. Grantee: Lion Realty I Document No.: 2523/1607 Sale Price: $2,705,000 Financing: Cash to Seller Cash Equivalent Price: N/A Required Capital Cost: $0 Adjusted Sales Price: $0 Verification: N/A Financial Data Assumptions & Forecast: N/A Occupancy at Sale: N/A Existing or Pro Forma Income: N/A TOTAL P.S.F. -------- ----- Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses:. N/A N/A Net Operating Income: $314,728 $7.49 ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): N/A % Projected IRR: 11.64% Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: N/A Comments In-line tenants include a Chinese restaurant, Subway sandwich shop, and Randy Rick Hair Salon. There were two vacant stores at the time of sale. ================================================================================ CB COMMERCIAL ================================================================================ ADDENDUM D RENTAL COMPARABLES ================================================================================ ADDENDUM D RENTAL COMPARABLES - -------------------------------------------------------------------------------- RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Kingston Plaza Location: S/S Third Avenue East Of Pierce Street City: Kingston County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 64,824 SF Year Built: 1982 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Price Chopper Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$10.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement Minimal Leasing Agent Mark Centers Trust Phone No.: ( ) - Survey Date N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (YRS) ================================================================================ 09/95 6,500 The Everything $5.50 N/A None $950 step in ye 1.30 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent lease includes a term for 1 year and 3 months. Additionally, the tenant has a percentage rent clause of 3.0% over a breakpoint of $1,191 660. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE Location Data Property Name: Mark Plaza Location: N/S Route 11 City: Edwardsville County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 176,756 SF Year Built: 1967 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 91.7% Overall: 91.7% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $1.95-$11.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM Tax Insur Free Rent (months) Minimal Tenant Improvement Minimal Leasing Agent Mark Centers Trust Phone No.: ( ) Survey Date N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (YRS) ================================================================================ 10/95 3,600 Spectrum Rents $8.00 N/A None Flat 5.00 - -------------------------------------------------------------------------------- 08/95 7,000 Keens Floral Fa $8.00 N/A Annual Step-up 5.00 - -------------------------------------------------------------------------------- 07/95 3,600 Mattress Man $11.50 N/A Flat 5.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 91.7% leased. The most recent leases all include terms for 5 years. Construction quality is average and typical of other retail centers in the area. ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Birney Plaza Location: N/S Route 11 City: Moosic County: Lackawanna State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 212,057 SF Year Built: 1972 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $3.00-$10.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (YRS) ================================================================================ 9/95 4,000 Everything $0.9 $7.00 N/A None flat 3.00 - -------------------------------------------------------------------------------- 7/93 4,000 Mattress Man $9.00 N/A None Step-up to $10/ 5.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 3 and 5 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Dunmore Plaza Location: 1400 Monroe Avenue City: Dunmore County: Lackawanna State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 45,380 SF Year Built: 1967 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Price Chopper Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $6.75-$11.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months) Minimal Tenant Improvement Minimal Leasing Agent Mark Centers Trust Phone No.: ( ) Survey Date N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (YRS) ================================================================================ 4/95 1,900 Malcom's $11.50 N/A None $950 Step-up in 5.00 - -------------------------------------------------------------------------------- 1/95 1,900 Great Wall Chin $11.35 N/A 3.0% per year 10.00 - -------------------------------------------------------------------------------- 4/94 1,900 Little Caeser's $9.25 N/A Periodic Step-up 5.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 5 and 10 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Triangle Plaza Location: Route 115 City: Wilkes-Barre County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 125,000 SF Year Built: 1971 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years (Estimate) Base Rent Per Square Foot: $9.00-$12.50 (Estimate) Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax Insur Free Rent (months) Minimal Tenant Improvement Minimal Leasing Agent N/A Phone No ( ) Survey Date N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (YRS) ================================================================================ 6/95 2,400 Electronic Syst $11.50 N/A None Annual %age inc 5.00 - -------------------------------------------------------------------------------- 3/95 2,200 TCBY $11.00 N/A None Annual %age inc 5.00 - -------------------------------------------------------------------------------- 5/94 9,910 Party City $11.00 N/A None $1.65/SF step-up 10.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 5 and 10 years. Construction quality is average and typical of other retail centers in the area. ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Gateway Plaza Location: N/S Route 11 City: Edwardsville County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 150,000 SF Year Built: 1969 Exterior Walls: Brick Veneer Condition: Fair Anchor Tenant: Parking: Adequate Lease Data Occupancy: Local: 65.0% Overall: 65.0 Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $8.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (YRS) ================================================================================ 6/94 950 Holiday Hair $15.48 N/A None Annual %age inc 3.00 - -------------------------------------------------------------------------------- 6/94 3,080 McKenzie $8.50 N/A None Annual %age inc 3.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 65% leased. The most recent leases all include terms for 3 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Pottstown Center Location: Route 663 City: Pottstown County: Montgomery State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 171,267 SF Year Built: 1976 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Wal-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $8.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months) Minimal Tenant Improvement Minimal Leasing Agent N/A Phone No ( ) - Survey Date N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (YRS) ================================================================================ 7/95 121,267 Wal-Mart $6.99 N/A None Flat 20.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 20 years. Construction quality is average and typical of other retail centers in the area. ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Route 6 Mall Location: N/S Route 6 City: Honesdale County: Wayne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 144,229 SF Year Built: 1978 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.5-$1 5.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (YRS) ================================================================================ 3/95 119,229 K-Mart $5.77 N/A None Flat 25.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 20 years and includes a percentage rent clause on 1.0% over $20.0 million. Construction quality is average and typical of other retail centers in the area. ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Bradford Towne Centre Location: N/S Route 6 City: Wysox County: Bradford State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 119,481 SF Year Built: 1972 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM. Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (YRS) ================================================================================ 7/94 94,481 K-Mart $5.00 N/A None Flat 25.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 25 years and includes a percentage rent clause on 1.0% over $16.875 million. Construction quality is average and typical of other retail centers in the area. ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Builder's Square Shopping Center Location: Cetronia Road City: Whitehall County: Lehigh State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 106,400 SF Year Built: 1994 Exterior Walls: Brick Veneer Condition: Good Anchor Tenant: Builder's Square Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-S years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (YRS) ================================================================================ 3/94 106,400 Builder's Squar $10.05 N/A None Flat 25.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 25 years. Construction quality is good and typical of other retail centers in the area. ================================================================================ CB COMMERCIAL ================================================================================ ADDENDUM E STRATEGIC MAPPING, INC. REPORTS ================================================================================ ADDENDUM E STRATEGIC MAPPING, INC. REPORTS - -------------------------------------------------------------------------------- Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 PA/89 Monroe County 5/20/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 69,409 95,709 116,250 134,535 White 97.9 % 96.9 % 96.3 % 95.7 % Black 1.4 % 1.8 % 2.0 % 2.3 % American Indian 0.1 % 0.1 % 0.2 % 0.2 % Asian 0.4 % 0.7 % 1.0 % 1.3 % Other 0.3 % 0.4 % 0.5 % 0.6 % Hispanic 0.8 % 2.1 % 2.9 % 3.7 % Total Households 25,170 34,206 41,352 47,467 Household Population 67,156 91,957 112,498 130,783 Average Household Size 2.67 2.69 2.72 2.76 Household Income $ 0 - 9,999 28.6 % 10.3 % 8.6 % 7.3 % $ 10,000 - 14,999 17.7 % 8.4 % 7.5 % 6.3 % $ 15,000 - 24,999 30.4 % 17.9 % 15.7 % 13.4 % $ 25,000 - 34,999 15.2 % 17.1 % 14.9 % 13.9 % $ 35,000 - 49,999 5.9 % 22.6 % 22.4 % 20.4 % $ 50,000 - 74,999 1.7 % 16.6 % 19.5 % 22.4 % $ 75,000 - 99,999 0.6 % 4.3 % 6.6 % 8.7 % $ 100,000 - 149,999 -- 2.0 % 3.5 % 5.8 % $ 150,000 + -- 0.8 % 1.2 % 1.8 % Total 100.0 % 100.0 % 100.0 % 100.0 % Median Household Income ($) 16,212 32,465 36,827 41,595 Aggregate HH Inc ($000) 463,584 1,286,440 1,784,439 2,328,517 Median Family Income ($) 18,919 36,807 41,752 47,158 Per Capita Income ($) 6,903 13,990 15,862 17,804 Median Age Total Population 32.6 34.0 35.8 37.0 Median Age Adult Population 42.9 41.5 43.5 45.2 Median Age Female Population 33.4 34.6 36.6 38.2 Median Age Adult Female Population 43.7 42.0 44.1 45.9 Median Age Male Population 31.7 33.4 34.9 35.6 Median Age Adult Male Population 42.2 40.9 42.9 44.5
Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 PA/89 Monroe County 5/20/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 69,409 95,709 116,250 134,535 0 - 5 7.4 % 8.9 % 8.7 % 8.3 % 6 - 13 11.5 % 11.1 % 11.5 % 11.4 % 14 - 17 6.8 % 4.9 % 5.6 % 5.7 % 18 - 24 12.5 % 10.3 % 10.0 % 10.6 % 25 - 34 15.6 % 16.6 % 13.1 % 11.2 % 35 - 44 11.5 % 16.0 % 16.6 % 15.2 % 45 - 54 10.8 % 10.1 % 12.4 % 14.4 % 55 - 64 10.9 % 9.2 % 8.1 % 8.8 % 65 - 74 13.1 % 8.1 % 8.4 % 7.6 % 75 - 84 -- 3.9 % 4.5 % 5.1 % 85 + -- 1.1 % 1.3 % 1.6 % Female Population by Age 35,668 48,612 59,133 68,592 0 - 5 7.0 % 8.4 % 8.3 % 7.9 % 6 - 13 10.8 % 10.5 % 10.9 % 10.9 % 14 - 17 6.3 % 4.7 % 5.4 % 5.5 % 18 - 24 13.0 % 10.2 % 9.6 % 10.2 % 25 - 34 15.2 % 16.8 % 13.1 % 10.8 % 35 - 44 11.2 % 15.4 % 16.5 % 15.5 % 45 - 54 10.8 % 9.8 % 12.2 % 14.1 % 55 - 64 11.0 % 9.5 % 8.0 % 8.8 % 65 - 74 14.7 % 8.4 % 9.0 % 8.2 % 75 - 84 -- 4.5 % 5.2 % 5.9 % 85 + -- 1.6 % 1.8 % 2.2 % Male Population by Age 33,741 47,097 57,117 65,943 0 - 5 7.7 % 9.3 % 9.1 % 8.6 % 6 - 13 12.3 % 11.6 % 12.0 % 11.9 % 14 - 17 7.3 % 5.2 % 5.8 % 5.9 % 18 - 24 11.9 % 10.3 % 10.4 % 11.0 % 25 - 34 15.9 % 16.4 % 13.0 % 11.6 % 35 - 44 11.8 % 16.6 % 16.7 % 14.9 % 45 - 54 10.9 % 10.3 % 12.7 % 14.8 % 55 - 64 10.8 % 8.8 % 8.1 % 8.9 % 65 - 74 11.4 % 7.7 % 7.8 % 7.0 % 75 - 84 -- 3.2 % 3.8 % 4.3 % 85 + -- 0.6 % 0.8 % 1.0 %
Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Economic Report CBC - C1750-41 Page 1 of 1 PA/89 Monroe County 5/20/96 Sales Volume Number of Employees # of Firms Total Sales Primary SIC Firms in Area Reporting $(00000) Agr/For/Fish 103 362 101 152 Mining 3 15 2 6 Construction 821 2,965 776 3,033 Manufacturing 219 4,877 170 3,927 Transp/Comm/Util 181 3,894 108 413 Wholesale Trade 226 1,733 187 2,379 Retail Trade 1,272 9,165 964 5,350 Fin/Insur/Real Est 436 2,227 328 2,184 Services 1,736 15,068 1,479 8,425 Total 4,997 40,306 4,115 25,869 Financial Institution Deposit Data ($0000) Commercial Savings Banks & Credit Banks Savings & Loans Unions IPC Deposits 79,172 26,208 N/A All Other Deposits 5,604 542 N/A Total Deposits 84,776 26,750 7,613 Number of Offices 33 9 7 Number of Offices by Deposits % Under $50 Million 87.9 % 77.8 % 100.0 % % $50 - $100 Million 12.1 % 22.2 % 0.0 % % $100 - $500 Million 0.0 % 0.0 % 0.0 % % $500 - $l Billion 0.0 % 0.0 % 0.0 % % Over $1 Billion 0.0 % 0.0 % 0.0 % N/A - Data not reported Area defined by County Source: Sheshunoff Information Services Inc. & Dun & Bradstreet Inc. Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 PA/89 Monroe County 5/20/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 103.1 - ----------------------------------Demographics---------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 116,250 41,352 112,498 2.72 $36,827 2000 134,535 47,467 130,783 2.76 $41,595 - ------------------------------Expenditure Potential----------------------------- 1995 Area Yearly Growth Rate Per Household 1.45 % Total 4.29 % - -------------------------Retail Support Potential (000)------------------------- 1995: 4,574 sq. ft.
Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 36,418 45,668 881 962 4.63 % 97.3 Appliance Store 3,860 3,769 93 79 -0.47 % 95.3 Auto-Aftermarket Store 84,591 99,347 2,046 2,093 3.27 % 103.3 Convenience Store 44,179 51,484 1,068 1,085 3.11 % 104.3 Dept. Store 38,997 47,585 943 1,002 4.06 % 97.8 Drug Store 40,093 57,325 970 1,208 7.41 % 107.5 Electronics Store 15,215 22,739 368 479 8.37 % 98.5 Fast Food Restaurant Store 32,431 32,266 784 680 -0.10 % 102.7 Full Serv Restaurant Store 31,382 30,765 759 648 -0.40 % 101.2 Furniture Store 13,411 14,021 324 295 0.89 % 94.1 Grocery Store 163,501 210,049 3,954 4,425 5.14 % 104.9 Hardware Store 9,018 10,977 218 231 4.01 % 108.7 Home Centers Store 47,813 63,604 1,156 1,340 5.87 % 115.1 Jewelry Store 5,406 6,400 131 135 3.43 % 91.5 Liquor Store 6,960 6,925 168 146 -0.10 % 100.3 Mass Merchandiser Store 57,193 72,109 1,383 1,519 4.74 % 100.3 Photo Store 970 1,084 23 23 2.24 % 104.9 Shoe Store 7,784 10,472 188 221 6.11 % 98.8 Sporting Goods Store 9,589 12,475 232 263 5.40 % 99.3 Toy Store 4,551 4,751 110 100 0.86 % 101.3 Variety Store 3,136 4,000 76 84 4.98 % 99.5
Area defined by County Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 PA/89 Monroe County 5/20/96 Benchmark = Regional Area Definition Detailed Report
Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 3,137 5,957 76 126 13.68% 105.8 --------- --------- ------ ------ Total Shopping Center 659,634 813,771 15,952 17,144 All Other Stores 505,940 624,162 12,235 13,149 Total Retail 1,165,574 1,437,933 28,187 30,293
Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by County Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - Cl750-41 Page 1 of 4 Area 1 = PA/89 Monroe County 5/20/96 Description Area 1 Population: 2000 Projection 134,535 1995 Estimate 116,250 1990 Census 95,709 1980 Census 69,409 Percent Change, 1980 - 1990 37.9 Percent Change, 1990 - 1995 21.5 1995 Population by Race: % White 96.3 % Black 2.0 % American Indian 0.2 % Asian 1.0 % Other 0.5 % Hispanic 2.9 1995 Population by Age: % 0 - 5 8.7 % 6 - 13 11.5 % l4 - 17 5.6 % 18 - 20 4.7 % 21 - 24 5.3 % 25 - 34 13.1 % 35 - 44 16.6 % 45 - 54 12.4 % 55 - 64 8.1 % 65 - 74 8.4 % 75 - 84 4.5 % 85 + 1.3 Median Age Total Population 35.8 Median Age Adult Population 43.5 Households: 2000 Projection 47,467 1995 Estimate 41,352 1990 Census 34,206 1980 Census 25,170 Percent Change, 1980 - 1990 35.9 Percent Change, 1990 - 1995 20.9 1990 Household Population 91,957 1990 Households w/Children under 18 12,903 1990 Households w/ Persons over 65 8,573 Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 2 of 4 Area 1 = PA/89 Monroe County 5/20/96 Description Area 1 1990 Family Population 80,948 1990 Nonfamily Population 11,009 1990 Group Quarters Population 3,752 1990 Average Household Size 2.69 1990 Average Family Size 3.09 1990 Family Households 25,751 1990 Nonfamily Households 8,455 1995 Household Income: % $ 0 - $9,999 8.6 % $ l0,000 - $ 14,999 7.5 % $ 15,000 - $ 24,999 15.7 % $ 25,000 - $ 34,999 14.9 % $ 35,000 - $ 49,999 22.4 % $ 50,000 - $ 74,999 19.5 % $ 75.000 - $ 99,999 6.6 % $100,000 - $149,999 3.5 % $150,000 + 1.2 2000 Median Household Income $41,595 1995 Median Household Income $36,827 1990 Median Household Income $32,465 2000 Average Household Income $49,055 1995 Average Household Income $43,152 1990 Average Household Income $37,459 2000 Per Capita Income $17,804 1995 Per Capita Income $15,862 1990 Per Capita Income $13,990 2000 Median Family Income $47,158 1995 Median Family Income $41,752 1990 Median Family Income $36,807 1990 Average Family Income $41,062 Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-4l Page 3 of 4 Area 1 = PA/89 Monroe County 5/20/96 Description Area 1 1990 Housing Unit Counts: Total Units 54,823 Occupied Units 34,206 Owner Occupied 25,905 Renter Occupied 8,301 Vacant Units 20,617 Year Round 5,681 Seasonal 14,936 1990 Housing Unit Percents: % Occupied of Total Units 62.4 % Owner Units of Occupied Units 75.7 % Renter Units of Occupied Units 24.3 % Vacant of Total Units 37.6 % Year Round of Vacant Units 27.6 % Seasonal of Vacant Units 72.4 % Condominiums of Total Units 1.7 1990 Condominiums: Total Condominium Units 907 % Owner Occupied 7.6 % Renter Occupied 19.8 % Vacant 72.5 1990 Units in Structure: % 1, Detached 79.1 % 1, Attached 4.2 % 2 3.2 % 3 - 9 4.7 % 10 - 49 1.2 % 50+ 0.4 % Mobile Homes 5.3 % Other 1.9 1990 Median Home Value $117,924 1990 Median Contract Rent $435 Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 4 of 4 Area 1 = PA/89 Monroe County 5/20/96 Description Area 1 1995 Total Employed 38,949 1995 Socio-Economic Measure 53 1990 Occupation: Total Civil Labor Force 47,702 % Unemployed 5.6 Total Employed 45,021 % White Collar 52.4 % Executive & Managerial 10.8 % Professional Specialty 10.7 % Technical Support 3.1 % Administrative Support 15.5 % Sales 12.2 % Blue Collar 31.8 % Precision Production, Craft & Repair 14.3 % Machine Operators 7.0 % Transportation & Material Moving 5.5 % Laborers 5.1 % Fanning, Forestry & Fishing 1.4 % Service: Private Household 0.4 % Service: Protective 1.6 % Service: Other 12.4 1990 Educational Attainment (Age 25 & Over): % Less than Grade 9 6.8 % Grade 9-12 (No Diploma) 15.2 % High School Graduate or Equivalency 40.7 % Some College (No Degree) 14.5 % Associate Degree 5.2 % Bachelor Degree 11.7 % Graduate or Professional Degree 5.9 Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 1 of 9 Area 1 = PA/89 Monroe County 5/20/96 Description Area 1 1995 Socio-Economic Measure: 53 1995 Employment: 38,949 Population: 2000 Projection 134,535 1995 Estimate 116,250 1990 Census 95,709 1990 - 1995 % Change (Growth) 21.5% 1990 Group Quarters Population 3,752 1995 % Population by Race: White 96.3% Black 2.0% American Indian, Eskimo & Aleut 0.2% Asian or Pacific Islander 1.0% Other 0.5% Hispanic 2.9% 1990 % Population by Race: White 96.9% Black 1.8% American Indian, Eskimo & Aleut 0.1% Asian or Pacific Islander 0.7% Other 0.4% Hispanic 2.1% 1995 % Population by Sex: Male 49.1% Female 50.9% 1990 % Population by Sex: Male 49.2% Female 50.8% 2000 Pop per Square Mile (Pop Density) 221.5 1995 Pop per Square Mile (Pop Density) 191.4 1990 Pop per Square Mile (Pop Density) 157.6 Area (Square Miles) 607.3 Area (Square Kilometers) 1,573.0 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 2 of 9 Area 1 = PA/89 Monroe County 5/20/96 Description Area 1 Households: 2000 Projection 47,467 1995 Estimate 41,352 1990 Census 34,206 1990 - 1995 % Change (Growth) 20.9% 2000 Average Household Size 2.76 1995 Average Household Size 2.72 1990 Average Household Size 2.69 2000 Per Capita Income $ 17,804 1995 Per Capita Income $ 15,862 1990 Per Capita Income $ 13,990 2000 Median Family Income $ 47,158 1995 Median Family Income $ 41,752 1990 Median Family Income $ 36,807 2000 Median Household Income $ 41,595 1995 Median Household Income $ 36,827 1990 Median Household Income $ 32,465 2000 Average Household Income $ 49,055 1995 Average Household Income $ 43,152 1990 Average Household Income $ 37,459 1995 % Household Income: $ 0 - $ 9,999 8.6% $ 10,000 - $ 14,999 7.5% $ 15,000 - $24,999 15.7% $ 25,000 - $ 34,999 14.9% $ 35,000 - $ 49,999 22.4% $ 50,000 - $ 74,999 19.5% $ 75,000 - $ 99,999 6.6% $ 100,000 - $ 149,999 3.5% $ 150,000+ 1.2% Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 3 of 9 Area 1 = PA/89 Monroe County 5/20/96 Description Area 1 1990 % Household Income: $ 0 - $ 9,999 10.3% $ 10,000 - $ 14,999 8.4% $ 15,000 - $ 24,999 17.9% $ 25,000 - $ 34,999 17.1% $ 35,000 - $ 49,999 22.6% $ 50,000 - $ 74,999 16.6% $ 75,000 - $ 99,999 4.3% $ 100,000 - $ 149,999 2.0% $ 150,000 + 0.8% 1995 % Population by Age: 0 - 5 8.7% 6 - 13 11.5% 14 - 17 5.6% 18 - 20 4.7% 21 - 24 5.3% 25 - 34 13.1% 35 - 44 16.6% 45 - 54 12.4% 55 - 64 8.1% 65 - 74 8.4% 75 - 84 4.5% 85 + 1.3% Median Age Total Population 35.8 Median Age Adult Population 43.5 1990 % Population by Age: 0 - 5 8.9% 6 - 13 11.1% 14 - 17 4.9% 18 - 20 5.0% 21 - 24 5.3% 25 - 34 16.6% 35 - 44 16.0% 45 - 54 10.1% 55 - 64 9.2% 65 - 74 8.1% 75 - 84 3.9% 85 + 1.1% Median Age Total Population 34.0 Median Age Adult Population 41.5 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 4 of 9 Area 1 = PA/89 Monroe County 5/20/96 Description Area 1 1995 % Female Population by Age: 0 - 5 8.3% 6 - 13 10.9% 14 - 17 5.4% 18 - 20 4.5% 21 - 24 5.1% 25 - 34 13.1% 35 - 44 16.5% 45 - 54 12.2% 55 - 64 8.0% 65 - 74 9.0% 75 - 84 5.2% 85 + 1.8% Female Median Age Total Population 36.6 Female Median Age Adult Population 44.1 1990 % Female Population by Age: 0 - 5 8.4% 6 - 13 10.5% 14 - 17 4.7% 18 - 20 5.0% 21 - 24 5.3% 25 - 34 16.8% 35 - 44 15.4% 45 - 54 9.8% 55 - 64 9.5% 65 - 74 8.4% 75 - 84 4.5% 85 + 1.6% Female Median Age Total Population 34.6 Female Median Age Adult Population 42.0 1990 % Hispanic Population by Type: Not of Hispanic Origin 97.9% Mexican 0.2% Puerto Rican 1.0% Cuban 0.1% Other Hispanic 0.8% Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 5 of 9 Area 1 = PA/89 Monroe County 5/20/96 Description Area 1 1990 % Population Enrolled in School (Age 3 & Over): Preprimary School 7.4% Elementary and High School 65.7% College 26.9% Total School Enrollment 23,230 1990 % Educational Attainment (Age 25 & Over): Less than Grade 9 6.8% Grade 9-12 (No Diploma) 15.2% High School Graduate or Equivalency 40.7% Some College (No Degree) 14.5% Associate Degree 5.2% Bachelor Degree 11.7% Graduate or Professional Degree 5.9% 1990 % Employment Status: Total Labor Force: Armed Forces 0.2% Civilian: Employed 60.6% Unemployed 3.6% Not In Labor Force 35.6% Female Labor Force: Armed Forces 0.1% Civilian: Employed 51.0% Unemployed 3.0% Not In Labor Force 45.9% 1990 % Working Mothers: Child <6 Only 15.7% Child 6-17 Only 35.9% Child <6 & 6-17 9.9% Nonworking Mothers 38.6% Total Mothers 11,996 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 6 of 9 Area 1 = PA/89 Monroe County 5/20/96 Description Area 1 1990 % Industry Employment: Agriculture/Forestry/Fishing 1.2% Mining 0.3% Construction 10.1% Manufacturing: Nondurable Goods 8.2% Durable Goods 7.8% Transportation 5.3% Communications & Public Utilities 2.6% Wholesale Trade 2.8% Retail Trade 18.9% Finance/Insurance/Real Estate 6.6% Services: Business & Repair 4.1% Personal 8.1% Entertainment & Recreation 1.6% Health 5.9% Educational 7.3% Other Professional & Related 5.0% Public Administration 4.3% Total 45,021 1990 % Occupation: Executive & Managerial 10.8% Professional Specialty 10.7% Technical Support 3.1% Sales 12.2% Administrative Support 15.5% Service: Private Household 0.4% Service: Protective 1.6% Service: Other 12.4% Farming, Forestry & Fishing 1.4% Precision Production, Craft & Repair 14.3% Machine Operator, Assemblers & Inspectors 7.0% Transportation & Material Moving 5.5% Laborers 5.1% White Collar Total 52.4% Blue Collar Total 31.8% Total Employed 45,021 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 7 of 9 Area 1 = PA/89 Monroe County 5/20/96 Description Area 1 1990 % Marital Status: Total Male: 36,646 Never Married 26.5% Married 62.9% Separated 1.8% Widowed 2.7% Divorced 6.1% Total Female: 38,792 Never Married 20.8% Married 59.3% Separated 2.1% Widowed 10.8% Divorced 7.0% 1990 Households by Type: One Person Households 6,566 Two or more Person Households: Family Households: Married Couple 22,143 Male Householder 1,032 Female Householder 2,576 Nonfamily Households 1,889 1990 Family Households With Children Married Couple Family 10,656 Male Householder 571 Female Householder 1,508 1990 Population by Household Type: Family Households 80,948 Nonfamily Households 11,009 1990 Households With: Children Under 18 12,903 Persons Over 65 8,573 Householder Over 65 7,486 1990 Average Family Size 3.09 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 8 of 9 Area 1 = PA/89 Monroe County 5/20/96 Description Area 1 1990 Median Home Value $ 117,924 1990 Average Home Value $ 128,301 1990 Median Contract Rent $435 1990 Average Contract Rent $436 1990 Persons In Unit: 1 Person Units 6,566 2 Person Units 12,033 3 Person Units 6,227 4+ Person Units 9,380 1990 Housing Unit Counts: Total Units 54,823 % Occupied 62.4% % Vacant 37.6% % Year Round 10.4% % Seasonal 27.2% Occupied Units 34,206 % Owner Occupied 75.7% % Renter Occupied 24.3% Vacant Units 20,617 % Year Round of Vacant Units 27.6% % Seasonal of Vacant Units 72.4% 1990 Total Housing Units in Structure 54,823 1, Detached 79.1% 1, Attached 4.2% 2, 3.2% 3 - 9 4.7% 10 - 49 1.2% 50 + 0.4% Mobile Home or Trailer 5.3% Other 1.9% 1990 Housing Units by Year Built 25,905 Built 1985 to March, 1990 26.8% Built 1980 to 1984 9.6% Built 1970 to 1979 24.2% Built 1960 to 1969 12.6% Built 1950 to 1959 8.7% Built 1949 or Earlier 18.0% Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 9 of 9 Area 1 = PA/89 Monroe County 5/20/96 Description Area 1 1990 % Means of Transportation to Work: Car, Truck or Van: Drove Alone 76.1% Carpooled 14.1% Public Transportation 1.7% Other Means 4.9% Worked at Home 3.2% 1990 % Travel Time to Work: 0 - 14 Minutes 38.3% 15 - 29 Minutes 30.7% 30 - 59 Minutes 19.8% 60 - 89 Minutes 7.3% 90 + Minutes 3.9% 1990 Households by Number of Vehicles: 1 Vehicle 10,259 2 Vehicles 15,406 3 Vehicles 4,793 4 Vehicles 1,410 5 or More Vehicles 467 Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 1 of 4 Area 1 = strouds 3 Mile Radius 6/11/96 Area 2 = strouds 5 Mile Radius Area 3 = strouds 7 Mile Radius Description Area 1 Area 2 Area 3 Population: 2000 Projection 30,030 40,651 58,061 1995 Estimate 27,166 36,565 51,968 1990 Census 23,778 31,753 44,920 1980 Census 22,381 27,437 36,310 Percent Change, 1980 - 1990 6.2 15.7 23.7 Percent Change, 1990 - 1995 14.2 15.2 15.7 1995 Population by Race: % White 94.7 95.2 95.8 % Black 3.2 3.0 2.5 % American Indian 0.1 0.1 0.1 % Asian 1.4 1.3 1.1 % Other 0.6 0.5 0.5 % Hispanic 2.4 2.4 2.4 1995 Population by Age: % 0 - 5 6.3 7.0 7.7 % 6 - 13 8.8 9.6 10.4 % 14 - 17 6.4 6.1 5.8 % 18 - 20 6.1 5.6 5.2 % 21 -24 7.5 6.9 6.3 % 25 - 34 14.5 13.7 13.4 % 35 - 44 13.7 14.7 15.8 % 45 - 54 11.0 11.7 12.1 % 55 - 64 8.4 8.5 8.3 % 65 - 74 9.4 8.9 8.4 % 75 - 84 6.0 5.5 5.0 % 85 + 2.0 1.9 1.7 Median Age Total Population 35.3 35.8 35.8 Median Age Adult Population 43.2 43.5 43.3 Households: 2000 Projection 11,093 14,656 20,689 1995 Estimate 10,044 13,225 18,605 1990 Census 8,742 11,452 16,085 1980 Census 8,186 9,958 13,105 Percent Change, 1980 - 1990 6.8 15.0 22.7 Percent Change, 1990 - 1995 14.9 15.5 15.7 1990 Household Population 21,199 28,857 41,786 1990 Households w/ Children under 18 2,574 3,690 5,580 1990 Households w/ Persons over 65 2,767 3,356 4,362 Area defined by Circle: (40.991816,75.18742): 3 mile(s) Area defined by Circle: (40.991816,75.18742): 5 mile(s) Area defined by Circle: (40.991816,75.18742): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 2 of 4 Area 1 = strouds 3 Mile Radius 6/11/96 Area 2 = strouds 5 Mile Radius Area 3 = strouds 7 Mile Radius Description Area 1 Area 2 Area 3 1990 Family Population 17,171 24,096 35,768 1990 Nonfamily Population 4,028 4,761 6,018 1990 Group Quarters Population 2,579 2,897 3,137 1990 Average Household Size 2.42 2.52 2.60 1990 Average Family Size 2.97 3.02 3.06 1990 Family Households 5,674 7,831 11,473 1990 Nonfamily Households 3,066 3,623 4,612 1995 Household Income: % $ 0 - $9,999 11.4 10.2 9.5 % $ 10,000 - $ 14,999 8.9 8.1 7.3 % $ l5,000 - $ 24,999 16.4 15.2 14.6 % $ 25,000 - $ 34,999 14.9 14.3 14.3 % $ 35,000 - $ 49,999 20.0 20.0 21.0 % $ 50,000 - $ 74,999 17.0 19.4 20.2 % $ 75,000 - $ 99,999 6.4 7.3 7.5 % $l00,000 - $149,999 3.8 4.3 4.1 % $150,000+ 1.0 1.2 1.3 2000 Median Household Income $37,996 $41,205 $42,563 1995 Median Household Income $33,757 $36,465 $37,599 1990 Median Household Income $30,172 $32,220 $33,323 2000 Average Household Income $46,596 $49,601 $50,559 1995 Average Household Income $40,938 $43,553 $44,312 1990 Average Household Income $35,634 $37,894 $38,400 2000 Per Capita Income $18,830 $19,255 $19,044 1995 Per Capita Income $16,724 $17,108 $16,883 1990 Per Capita Income $14,639 $15,029 $14,834 2000 Median Family Income $46,746 $49,954 $49,806 1995 Median Family Income $41,531 $44,207 $43,998 1990 Median Family Income $37,120 $39,061 $38,994 1990 Average Family Income $42,074 $44,059 $43,752 Area defined by Circle: (40.991816,75.18742): 3 mile(s) Area defined by Circle: (40.991816,75.18742): 5 mile(s) Area defined by Circle: (40.991816,75.18742): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 3 of 4 Area 1 = strouds 3 Mile Radius 6/11/96 Area 2 = strouds 5 Mile Radius Area 3 = strouds 7 Mile Radius Description Area 1 Area 2 Area 3 1990 Housing Unit Counts: Total Units 10,024 13,603 19,695 Occupied Units 8,742 11,452 16,085 Owner Occupied 5,246 7,462 11,270 Renter Occupied 3,499 3,993 4,817 Vacant Units 1,282 2,151 3,610 Year Round 799 1,079 1,716 Seasonal 482 1,072 1,893 1990 Housing Unit Percents: % Occupied of Total Units 87.2 84.2 81.7 % Owner Units of Occupied Units 60.0 65.2 70.1 % Renter Units of Occupied Units 40.0 34.9 29.9 % Vacant of Total Units 12.8 15.8 18.3 % Year Round of Vacant Units 62.3 50.2 47.5 % Seasonal of Vacant Units 37.6 49.8 52.4 % Condominiums of Total Units 1.8 1.8 1.5 1990 Condominiums: Total Condominium Units 184 247 303 % Owner Occupied 12.5 9.3 7.6 % Renter Occupied 47.8 35.6 29.0 % Vacant 39.7 55.1 63.4 1990 Units in Structure: % 1, Detached 54.9 62.9 67.6 % 1, Attached 10.2 7.7 6.3 % 2 8.6 7.1 5.7 % 3-9 12.4 10.0 8.2 % 10 - 49 4.8 3.6 2.5 % 50 + 1.9 1.4 1.0 % Mobile Homes 3.5 4.2 5.7 % Other 3.8 3.2 2.9 1990 Median Home Value $114,666 $119,663 $121,124 1990 Median Contract Rent $434 $436 $433 Area defined by Circle: (40.991816,75.18742): 3 mile(s) Area defined by Circle: (40.991816,75.18742): 5 mile(s) Area defined by Circle: (40.991816,75.18742): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-4l Page 4 of 4 Area 1 = strouds 3 Mile Radius 6/11/96 Area 2 = strouds 5 Mile Radius Area 3 = strouds 7 Mile Radius Description Area 1 Area 2 Area 3 1995 Total Employed 12,311 14,691 17,412 1995 Socio-Economic Measure 50 54 55 1990 Occupation: Total Civil Labor Force 12,218 16,264 22,998 % Unemployed 6.2 6.1 5.6 Total Employed 11,462 15,280 21,714 % White Collar 58.0 56.9 55.2 % Executive & Managerial 10.6 10.8 10.5 % Professional Specialty 13.4 12.8 12.8 % Technical Support 3.2 3.1 3.3 % Administrative Support 17.2 16.7 15.9 % Sales 13.7 13.5 12.7 % Blue Collar 24.5 26.5 29.3 % Precision Production, Craft & Repair 10.0 11.0 12.6 % Machine Operators 7.4 7.7 7.9 % Transportation & Material Moving 2.6 3.3 3.9 % Laborers 4.5 4.4 4.9 % Farming, Forestry & Fishing 1.1 1.2 1.2 % Service: Private Household 0.5 0.5 0.4 % Service: Protective 1.6 1.6 1.5 % Service: Other 14.3 13.3 12.4 1990 Educational Attainment (Age 25 & Over): % Less than Grade 9 8.7 7.9 7.9 % Grade 9-12 (No Diploma) 14.9 14.5 14.5 % High School Graduate or Equivalency 37.9 39.0 39.1 % Some College (No Degree) 12.6 13.1 13.7 % Associate Degree 4.7 4.9 5.1 % Bachelor Degree 13.0 13.1 12.7 % Graduate or Professional Degree 8.2 7.6 7.1 Area defined by Circle: (40.991816,75.18742): 3 mile(s) Area defined by Circle: (40.991816,75.18742): 5 mile(s) Area defined by Circle: (40.991816,75.18742): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 stroudsburg 1 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 9,703 10,216 11,725 13,040 White 96.1% 94.6% 93.7% 92.8% Black 3.1% 3.9% 4.2% 4.5% American Indian 0.1% 0.1% 0.1% 0.1% Asian 0.4% 0.9% 1.3% 1.7% Other 0.4% 0.6% 0.7% 0.8% Hispanic 0.8% 1.8% 2.5% 3.1% Total Households 3,391 3,495 4,101 4,608 Household Population 7,982 8,138 9,643 10,958 Average Household Size 2.35 2.33 2.35 2.38 Household Income $0 - 9,999 38.4% 14.7% 12.3% 10.2% $10,000 - 14,999 18.0% 11.3% 10.3% 8.7% $ 15,000 - 24,999 26.6% 20.6% 19.0% 16.4% $ 25,000 - 34,999 11.2% 15.7% 16.0% 16.5% $ 35,000 - 49,999 4.1% 19.8% 19.9% 18.1% $ 50,000 - 74,999 1.1% 13.4% 14.4% 17.7% $ 75,000 - 99,999 0.7% 3.0% 5.3% 6.9% $ 100,000 - 149,999 -- 1.5% 2.6% 4.6% $ 150.000 + -- 0.1% 0.2% 0.8% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 13,229 26,518 29,874 33,834 Aggregate HH Inc ($000) 53,905 108,152 148,453 190,295 Median Family Income ($) 17,447 36,248 40,835 46,248 Per Capita Income ($) 6,753 13,290 15,395 17,366 Median Age Total Population 28.4 28.4 31.0 33.3 Median Age Adult Population 36.7 34.5 38.9 40.7 Median Age Female Population 29.6 29.7 32.4 34.5 Median Age Adult Female Population 38.4 36.5 41.0 42.5 Median Age Male Population 27.1 27.1 29.7 32.2 Median Age Adult Male Population 34.9 32.8 36.9 39.0
Area defined by Circle: (40.991816,75.18742): 1 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 stroudsburg 1 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 9,703 10,216 11,725 13,040 0 - 5 5.1% 5.7% 5.8% 5.8% 6 - 13 7.8% 6.8% 7.6% 7.9% 14 - 17 5.2% 3.5% 8.3% 8.1% 18 - 24 27.2% 28.9% 17.9% 16.8% 25 - 34 12.4% 13.6% 16.4% 14.4% 35 - 44 7.6% 10.7% 11.7% 13.1% 45 - 54 8.5% 7.3% 9.0% 10.3% 55 - 64 10.1% 7.4% 6.6% 7.2% 65 - 74 16.1% 8.4% 8.3% 7.8% 75 - 84 -- 5.7% 6.3% 6.2% 85 + -- 1.9% 2.2% 2.4% Female Population by Age 5,414 5,586 6,380 7,069 0 - 5 4.5% 5.2% 5.2% 5.2% 6 - 13 6.7% 6.5% 7.1% 7.2% 14 - 17 4.8% 3.4% 8.3% 8.2% 18 - 24 28.2% 28.5% 17.9% 16.8% 25 - 34 11.3% 12.3% 15.1% 13.5% 35 - 44 7.1% 10.3% 11.0% 12.3% 45 - 54 8.2% 7.1% 9.1% 10.1% 55 - 64 9.8% 7.5% 6.5% 7.2% 65 - 74 19.3% 9.2% 9.0% 8.5% 75 - 84 -- 7.0% 7.7% 7.6% 85 + -- 2.8% 3.1% 3.3% Male Population by Age 4,284 4,634 5,347 5,974 0 - 5 5.9% 6.3% 6.5% 6.4% 6 - 13 9.2% 7.1% 8.3% 8.7% 14 - 17 5.7% 3.6% 8.3% 8.1% 18 - 24 26.0% 29.3% 18.0% 16.8% 25 - 34 13.7% 15.2% 18.0% 15.4% 35 - 44 8.1% 11.1% 12.5% 14.0% 45 - 54 8.9% 7.4% 8.9% 10.7% 55 - 64 10.5% 7.3% 6.7% 7.1% 65 - 74 12.0% 7.4% 7.4% 7.0% 75 - 84 -- 4.2% 4.5% 4.5% 85 + -- 0.9% 1.1% 1.3%
Area defined by Circle: (40.991816,75.18742): 1 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 stroudsburg 3 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 22,381 23,778 27,166 30,030 White 96.9% 95.6% 94.7% 93.9% Black 2.2% 2.9% 3.2% 3.6% American Indian 0.1% 0.1% 0.1% 0.1% Asian 0.5% 1.0% 1.4% 1.7% Other 0.3% 0.5% 0.6% 0.7% Hispanic 0.8% 1.8% 2.4% 3.0% Total Households 8.186 8,742 10,044 11,093 Household Population 20,505 21,199 24,586 27,450 Average Household Size 2.50 2.42 2.45 2.47 Household Income $ 0 - 9,999 32.8% 13.7% 11.4% 9.5% $ 10.000 - 14,999 16.9% 9.6% 8.9% 7.8% $ 15,000 - 24,999 28.2% 17.6% 16.4% 14.7% $ 25,000 - 34,999 13.9% 16.6% 14.9% 14.0% $ 35,000 - 49,999 5.6% 20.2% 20.0% 18.5% $ 50,000 - 74,999 1.6% 14.9% 17.0% 19.7% $ 75,000 - 99,999 1.0% 4.5% 6.4% 7.9% $100,000 - 149,999 -- 2.1% 3.8% 6.0% $150,000 + -- 0.8% 1.0% 1.8% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 15,104 30,172 33,757 37,996 Aggregate HH Inc ($000) 151,266 310,333 411,183 516,893 Median Family Income(S) 19,064 37,120 41,531 46,746 Per Capita Income(S) 7,377 14,639 16,724 18,830 Median Age Total Population 32.2 33.8 35.3 36.6 Median Age Adult Population 42.6 40.8 43.2 44.4 Median Age Female Population 33.7 35.1 36.9 38.3 Median Age Adult Female Population 43.8 42.1 44.5 45.7 Median Age Male Population 30.7 32.3 33.7 34.9 Median Age Adult Male Population 41.3 39.5 41.8 43.0
Area defined by Circle: (40.991816,75.18742): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 stroudsburg 3 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 22,381 23,778 27,166 30,030 0 - 5 5.9% 6.5% 6.3% 6.2% 6 - 13 9.7% 8.4% 8.8% 8.8% 14 - 17 6.1% 4.4% 6.4% 6.4% 18 - 24 18.3% 18.3% 13.6% 13.1% 25 - 34 13.6% 14.2% 14.5% 13.3% 35 - 44 9.6% 13.2% 13.7% 13.7% 45 - 54 10.5% 9.4% 11.0% 12.2% 55 - 64 11.2% 9.2% 8.4% 8.8% 65 - 74 15.1% 9.3% 9.4% 9.1% 75 - 84 -- 5.5% 6.0% 6.2% 85 + -- 1.8% 2.0% 2.2% Female Population by Age 11,986 12,668 14,469 15,992 0 - 5 5.4% 5.8% 5.7% 5.6% 6 - 13 8.7% 7.7% 8.1% 8.1% 14 - 17 5.6% 4.3% 6.2% 6.2% 18 - 24 19.0% 18.3% 13.4% 12.7% 25 - 34 12.8% 13.7% 13.9% 12.9% 35 - 44 9.4% 12.7% 13.3% 13.5% 45 - 54 10.4% 9.2% 10.8% 11.9% 55 - 64 11.0% 9.3% 8.3% 8.8% 65 - 74 17.6% 10.0% 10.3% 9.9% 75 - 84 -- 6.4% 7.2% 7.4% 85 + -- 2.5% 2.8% 3.1% Male Population by Age 10,394 11,111 12,694 14,039 0 - 5 6.5% 7.1% 7.0% 6.9% 6 - 13 10.9% 9.2% 9.6% 9.6% 14 - 17 6.7% 4.5% 6.5% 6.6% 18 - 24 17.4% 18.4% 13.8% 13.4% 25 - 34 14.4% 14.7% 15.1% 13.8% 35 - 44 9.7% 13.8% 14.1% 14.0% 45 - 54 10.7% 9.5% 11.2% 12.6% 55 - 64 11.4% 9.0% 8.5% 8.8% 65 - 74 12.2% 8.4% 8.4% 8.2% 75 - 84 -- 4.3% 4.7% 4.9% 85 + -- 1.0% 1.1% 1.2%
Area defined by Circle: (40.991816,75.18742): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 stroudsburg 5 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 27,437 31,753 36,565 40,651 White 97.3% 96.0% 95.2% 94.4% Black 1.9% 2.6% 3.0% 3.3% American Indian 0.1% 0.1% 0.1% 0.1% Asian 0.4% 0.9% 1.3% 1.6% Other 0.3% 0.4% 0.5% 0.6% Hispanic 0.8% 1.8% 2.4% 3.0% Total Households 9,958 11,452 13,225 14,656 Household Population 25,475 28,857 33,668 37,754 Average Household Size 2.56 2.52 2.55 2.58 Household Income $ 0 - 9,999 31.2% 12.2% 10.2% 8.5% $ 10,000 - 14,999 16.8% 8.8% 8.1% 7.0% $ 15,000 - 24,999 29.0% 16.6% 15.2% 13.6% $ 25,000 - 34,999 14.7% 16.0% 14.3% 13.0% $ 35,000 - 49,999 5.9% 21.9% 20.0% 18.3% $ 50,000 - 74.999 1.6% 16.1% 19.4% 21.9% $ 75,000 - 99,999 0.9% 5.2% 7.3% 8.7% $ 100,000 - 149,999 -- 2.4% 4.3% 6.8% $ 150,000 + -- 0.9% 1.2% 2.1% Total 100.0% 100.0% 100.0% 100.0% Median Household Income($) 15,700 32,220 36,465 41,205 Aggregate HH Inc ($000) 185,386 433,699 575,992 726,951 Median Family Income ($) 19,284 39,061 44,207 49,954 Per Capita Income($) 7,277 15,029 17,108 19,255 Median Age Total Population 32.4 34.1 35.8 37.0 Median Age Adult Population 42.8 41.2 43.5 45.0 Median Age Female Population 33.7 35.2 37.1 38.6 Median Age Adult Female Population 43.8 42.2 44.6 46.1 Median Age Male Population 31.2 33.0 34.2 35.2 Median Age Adult Male Population 41.6 40.1 42.4 43.8
Area defined by Circle: (40.991816,75.18742): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 stroudsburg 5 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 27,437 31,753 36,565 40,651 0 - 5 6.3% 7.2% 7.0% 6.8% 6 - 13 10.3% 9.2% 9.6% 9.5% 14 - 17 6.3% 4.6% 6.1% 6.2% 18 - 24 16.7% 15.7% 12.5% 12.2% 25 - 34 14.0% 14.6% 13.7% 12.7% 35 - 44 10.2% 14.5% 14.7% 13.9% 45 - 54 10.7% 9.7% 11.7% 13.2% 55 - 64 11.0% 9.2% 8.5% 9.0% 65 - 74 14.6% 8.7% 8.9% 8.6% 75 - 84 -- 5.0% 5.5% 5.8% 85 + -- 1.7% 1.9% 2.1% Female Population by Age 14,562 16,652 19,172 21,330 0 - 5 5.9% 6.6% 6.5% 6.3% 6 - 13 9.3% 8.6% 8.9% 8.9% 14 - 17 5.8% 4.6% 6.0% 6.0% 18 - 24 17.4% 15.6% 12.3% 11.9% 25 - 34 13.3% 14.4% 13.1% 12.1% 35 - 44 10.0% 13.9% 14.5% 13.9% 45 - 54 10.5% 9.5% 11.4% 12.9% 55 - 64 10.9% 9.3% 8.3% 8.9% 65 - 74 17.0% 9.4% 9.7% 9.3% 75 - 84 -- 5.9% 6.6% 6.9% 85 + -- 2.4% 2.7% 2.9% Male Population by Age 12,874 15,103 17,382 19,312 0 - 5 6.7% 7.8% 7.6% 7.3% 6 - 13 11.4% 9.9% 10.4% 10.2% 14 - 17 6.9% 4.6% 6.2% 6.4% 18 - 24 15.9% 15.9% 12.7% 12.5% 25 - 34 14.7% 14.9% 14.3% 13.3% 35 - 44 10.4% 15.1% 14.9% 14.0% 45 - 54 11.0% 10.0% 12.0% 13.6% 55 - 64 11.1% 9.0% 8.6% 9.0% 65 - 74 12.0% 7.9% 8.1% 7.8% 75 - 84 -- 4.0% 4.3% 4.7% 85 + -- 0.9% 1.1% 1.2%
Area defined by Circle: (40.991816,75.18742): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 1 of 4 Area 1 = stroudsburg 1 Mile Radius 5/23/96 Area 2 = stroudsburg 3 Mile Radius Area 3 = stroudsburg 5 Mile Radius Description Area 1 Area 2 Area 3 Population: 2000 Projection 13,040 30,030 40,651 1995 Estimate 11,725 27,166 36,565 1990 Census 10,216 23,778 31,753 1980 Census 9,703 22,381 27,437 Percent Change, 1980 - 1990 5.3 6.2 15.7 Percent Change, 1990 - 1995 14.8 14.2 15.2 1995 Population by Race: % White 93.7 94.7 95.2 % Black 4.2 3.2 3.0 % American Indian 0.1 0.1 0.1 % Asian 1.3 1.4 1.3 % Other 0.7 0.6 0.5 % Hispanic 2.5 2.4 2.4 1995 Population by Age: % 0 - 5 5.8 6.3 7.0 % 6 - 13 7.6 8.8 9.6 % 14 - 17 8.3 6.4 6.1 % 18 - 20 8.3 6.1 5.6 % 21 - 24 9.6 7.5 6.9 % 25 - 34 16.4 14.5 13.7 % 35 - 44 11.7 13.7 14.7 % 45 - 54 9.0 11.0 11.7 % 55 - 64 6.6 8.4 8.5 % 65 - 74 8.3 9.4 8.9 % 75 - 84 6.3 6.0 5.5 % 85 + 2.2 2.0 1.9 Median Age Total Population 31.0 35.3 35.8 Median Age Adult Population 38.9 43.2 43.5 Households: 2000 Projection 4,608 11,093 14,656 1995 Estimate 4,101 10,044 13,225 1990 Census 3,495 8,742 11,452 1980 Census 3,391 8,186 9,958 Percent Change, 1980 - 1990 3.1 6.8 15.0 Percent Change, 1990 - 1995 17.3 14.9 15.5 1990 Household Population 8,138 21,199 28,857 1990 Households w/ Children under 18 929 2,574 3,690 1990 Households w/ Persons over 65 1,160 2,767 3,356 Area defined by Circle: (40.991816,75.18742): 1 mile(s) Area defined by Circle: (40.991816,75.18742): 3 mile(s) Area defined by Circle: (40.991816,75.18742): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 2 of 4 Area 1 = stroudsburg 1 Mile Radius 5/23/96 Area 2 = stroudsburg 3 Mile Radius Area 3 = stroudsburg 5 Mile Radius Description Area 1 Area 2 Area 3 1990 Family Population 6,117 17.171 24,096 1990 Nonfamily Population 2,021 4,028 4,761 1990 Group Quarters Population 2,083 2,579 2,897 1990 Average Household Size 2.33 2.42 2.52 1990 Average Family Size 2.95 2.97 3.02 1990 Family Households 2,020 5,674 7,831 1990 Nonfamily Households 1,471 3,066 3,623 1995 Household Income: % $ 0 - 59,999 12.3 11.4 10.2 % $ 10,000 - $ 14,999 10.3 8.9 8.1 % $ 15,000 - S 24,999 19.0 16.4 15.2 % $ 25,000 - $ 34,999 16.0 14.9 14.3 % $ 35,000 - $ 49,999 19.9 20.0 20.0 % $ 50,000 - $ 74,999 14.4 17.0 19.4 % $ 75,000 - $ 99,999 5.3 6.4 7.3 % $100,000 - $149,999 2.6 3.8 4.3 % $150,000 + 0.2 1.0 1.2 2000 Median Household Income $ 33,834 $ 37,996 $ 41,205 1995 Median Household Income $ 29,874 $ 33,757 $ 36,465 1990 Median Household Income $ 26,518 $ 30,172 $ 32,220 2000 Average Household Income $ 41,297 $ 46,596 $ 49,601 1995 Average Household income $ 36,199 $ 40,938 $ 43,553 1990 Average Household Income $ 31,504 $ 35,634 $ 37,894 2000 Per Capita Income $ 17,366 $ 18,830 $ 19,255 1995 Per Capita Income $ 15,395 $ 16,724 $ 17,108 1990 Per Capita Income $ 13,290 $ 14,639 $ 15,029 2000 Median Family Income $ 46,248 $ 46,746 $ 49,954 1995 Median Family Income $ 40,835 $ 41,531 $ 44,207 1990 Median Family Income $ 36,248 $ 37,120 $ 39,061 1990 Average Family Income $ 38,219 $ 42,074 $ 44,059 Area defined by Circle: (40.991816,75.18742): 1 mile(s) Area defined by Circle: (40.991816,75.18742): 3 mile(s) Area defined by Circle: (40.991816,75.18742): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 3 of 4 Area 1 = stroudsburg 1 Mile Radius 5/23/96 Area 2 = stroudsburg 3 Mile Radius Area 3 = stroudsburg 5 Mile Radius Description Area 1 Area 2 Area 3 1990 Housing Unit Counts: Total Units 3,824 10,024 13,603 Occupied Units 3,495 8,742 11,452 Owner Occupied 1,682 5,246 7,462 Renter Occupied 1,815 3,499 3,993 Vacant Units 329 1,282 2,151 Year Round 306 799 1,079 Seasonal 23 482 1,072 1990 Housing Unit Percents: % Occupied of Total Units 91.4 87.2 84.2 % Owner Units of Occupied Units 48.1 60.0 65.2 % Renter Units of Occupied Units 51.9 40.0 34.9 % Vacant of Total Units 8.6 12.8 15.8 % Year Round of Vacant Units 93.0 62.3 50.2 % Seasonal of Vacant Units 7.0 37.6 49.8 % Condominiums of Total Units 1.9 1.8 1.8 1990 Condominiums: Total Condominium Units 73 184 247 % Owner Occupied 20.5 12.5 9.3 % Renter Occupied 49.3 47.8 35.6 % Vacant 30.1 39.7 55.1 1990 Units in Structure: % 1, Detached 41.5 54.9 62.9 % 1, Attached 14.9 10.2 7.7 % 2 13.1 8.6 7.1 % 3 - 9 16.8 12.4 10.0 % 10 - 49 7.5 4.8 3.6 % 50 + 2.5 1.9 1.4 % Mobile Homes 1.5 3.5 4.2 % Other 2.1 3.8 3.2 1990 Median Home Value $ 105,720 $ 114,666 $ 19,663 1990 Median Contract Rent $ 439 $ 434 $ 436 Area defined by Circle: (40.991816,75.18742): 1 mile(s) Area defined by Circle: (40.991816,75.18742): 3 mile(s) Area defined by Circle: (40.991816,75.18742): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 4 of 4 Area 1 = stroudsburg 1 Mile Radius 5/23/96 Area 2 = stroudsburg 3 Mile Radius Area 3 = stroudsburg 5 Mile Radius Description Area 1 Area 2 Area 3 1995 Total Employed 6,424 12,311 14,691 1995 Socio-Economic Measure 43 50 54 1990 Occupation: Total Civil Labor Force 5,055 12,218 16,264 % Unemployed 6.1 6.2 6.1 Total Employed 4,745 11,462 15,280 % White Collar 59.1 58.0 56.9 % Executive & Managerial 9.1 10.6 10.8 % Professional Specialty 14.4 13.4 12.8 % Technical Support 3.5 3.2 3.1 % Administrative Support 18.7 17.2 16.7 % Sales 13.4 13.7 13.5 % Blue Collar 21.4 24.5 26.5 % Precision Production, Craft & Repair 8.3 10.0 11.0 % Machine Operators 6.7 7.4 7.7 % Transportation & Material Moving 2.3 2.6 3.3 % Laborers 4.1 4.5 4.4 % Farming, Forestry & Fishing 0.8 1.1 1.2 % Service: Private Household 0.6 0.5 0.5 % Service: Protective 1.9 1.6 1.6 % Service: Other 16.3 14.3 13.3 1990 Educational Attainment (Age 25 & Over): % Less than Grade 9 8.5 8.7 7.9 % Grade 9-12 (No Diploma) 16.5 14.9 14.5 % High School Graduate or Equivalency 38.0 37.9 39.0 % Some College (No Degree) 10.9 12.6 13.1 % Associate Degree 4.1 4.7 4.9 % Bachelor Degree 12.4 13.0 13.1 % Graduate or Professional Degree 9.5 8.2 7.6 Area defined by Circle: (40.991816,75.18742): 1 mile(s) Area defined by Circle: (40.991816,75.18742): 3 mile(s) Area defined by Circle: (40.991816,75.18742): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 stroudsburg shopping center 3 Mile Radiu 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 22,381 23,778 27,166 30,030 White 96.9% 95.6% 94.7% 93.9% Black 2.2% 2.9% 3.2% 3.6% American Indian 0.1% 0.1% 0.1% 0.1% Asian 0.5% 1.0% 1.4% 1.7% Other 0.3% 0.5% 0.6% 0.7% Hispanic 0.8% 1.8% 2.4% 3.0% Total Households 8,186 8,742 10,044 11,093 Household Population 20,505 21,199 24,586 27,450 Average Household Size 2.50 2.42 2.45 2.47 Household Income $ 0 - 9,999 32.8% 13.7% 11.4% 9.5% $ 10,000 - 14,999 16.9% 9.6% 8.9% 7.8% $ 15,000 - 24,999 28.2% 17.6% 16.4% 14.7% $ 25,000 - 34,999 13.9% 16.6% 14.9% 14.0% $ 35,000 - 49,999 5.6% 20.2% 20.0% 18.5% $ 50,000 - 74,999 1.6% 14.9% 17.0% 19.7% $ 75,000 - 99,999 1.0% 4.5% 6.4% 7.9% $100,000 - 149,999 -- 2.1% 3.8% 6.0% $150,000 + -- 0.8% 1.0% 1.8% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 15,104 30,172 33,757 37,996 Aggregate HH Inc ($000) 151,266 310,333 411,183 516,893 Median Family Income($) 19,064 37,120 41,531 46,746 Per Capita Income($S) 7,377 14,639 16,724 18,830 Median Age Total Population 32.2 33.8 35.3 36.6 Median Age Adult Population 42.6 40.8 43.2 44.4 Median Age Female Population 33.7 35.1 36.9 38.3 Median Age Adult Female Population 43.8 42.1 44.5 45.7 Median Age Male Population 30.7 32.3 33.7 34.9 Median Age Adult Male Population 41.3 39.5 41.8 43.0
Area defined by Circle: (40.991816,75.18742): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-4l Page 2 of 2 stroudsburg shopping center 3 Mile Radiu 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 22,381 23,778 27,166 30,030 0 - 5 5.9% 6.5% 6.3% 6.2% 6 - 13 9.7% 8.4% 8.8% 8.8% 14 - 17 6.1% 4.4% 6.4% 6.4% 18 - 24 18.3% 18.3% 13.6% 13.1% 25 - 34 13.6% 14.2% 14.5% 13.3% 35 - 44 9.6% 13.2% 13.7% 13.7% 45 - 54 10.5% 9.4% 11.0% 12.2% 55 - 64 11.2% 9.2% 8.4% 8.8% 65 - 74 15.1% 9.3% 9.4% 9.1% 75 - 84 - 5.5% 6.0% 6.2% 85 + - 1.8% 2.0% 2.2% Female Population by Age 11,986 12,668 14,469 15,992 0 - 5 5.4% 5.8% 5.7% 5.6% 6 - 13 8.7% 7.7% 8.1% 8.1% 14 - 17 5.6% 4.3% 6.2% 6.2% 18 - 24 19.0% 18.3% 13.4% 12.7% 25 - 34 12.8% 13.7% 13.9% 12.9% 35 - 44 9.4% 12.7% 13.3% 13.5% 45 - 54 10.4% 9.2% 10.8% 11.9% 55 - 64 11.0% 9.3% 8.3% 8.8% 65 - 74 17.6% 10.0% 10.3% 9.9% 75 - 84 - 6.4% 7.2% 7.4% 85 + - 2.5% 2.8% 3.1% Male Population by Age 10,394 11,111 12,694 14,039 0 - 5 6.5% 7.1% 7.0% 6.9% 6 - 13 10.9% 9.2% 9.6% 9.6% 14 - 17 6.7% 4.5% 6.5% 6.6% 18 - 24 17.4% 18.4% 13.8% 13.4% 25 - 34 14.4% 14.7% 15.1% 13.8% 35 - 44 9.7% 13.8% 14.1% 14.0% 45 - 54 10.7% 9.5% 11.2% 12.6% 55 - 64 11.4% 9.0% 8.5% 8.8% 65 - 74 12.2% 8.4% 8.4% 8.2% 75 - 84 - 4.3% 4.7% 4.9% 85 + - 1.0% 1.1% 1.2%
Area defined by Circle: (40.991816,75.18742): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 stroudsburg shopping center 3 Mile Radiu 5/23/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 97.3 - ----------------------------------Demographics---------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 27,166 10,044 24,586 2.45 $ 33,757 2000 30,030 11,093 27,450 2.47 % 37,996 - ------------------------------Expenditure Potential----------------------------- 1995 Area Yearly Growth Rate Per Household 1.43% Total 3.46% - -------------------------Retail Support Potential (000)------------------------- 1995: 1,049 sq. ft.
Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 8,660 10,413 862 939 3.76% 95.2 Appliance Store 913 859 91 77 -1.23% 92.9 Auto-Aftermarket Store 18,894 21,328 1,881 1,923 2.45% 95.0 Convenience Store 9,954 11,168 991 1,007 2.33% 96.7 Dept. Store 9,135 10,702 909 965 3.22% 94.3 Drug Store 9,371 12,777 933 1,152 6.39% 103.4 Electronics Store 3,492 5,061 348 456 7.71% 93.0 Fast Food Restaurant Store 7,442 7,134 741 643 -0.84% 97.0 Full Serv Restaurant Store 7,250 6,869 722 619 -1.07% 96.2 Furniture Store 3,094 3,091 308 279 -0.01% 89.4 Grocery Store 37,992 46,821 3,783 4,221 4.27% 100.3 Hardware Store 1,878 2,226 187 201 3.46% 93.2 Home Centers Store 10,318 13,190 1,027 1,189 5.03% 102.2 Jewelry Store 1,356 1,528 135 138 2.42% 94.5 Liquor Store 1,587 1,557 158 140 -0.39% 94.2 Mass Merchandiser Store 13,293 16,096 1,323 1,451 3.90% 96.0 Photo Store 218 235 22 21 1.49% 97.0 Shoe Store 1,824 2,339 182 211 5.10% 95.3 Sporting Goods Store 2,209 2,771 220 250 4.64% 94.2 Toy Store 971 988 97 89 0.34% 89.0 Variety Store 739 905 74 82 4.13% 96.6
Area defined by Circle: (40.991816,75.18742): 3 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC -C1750-41 Page 2 of 2 stroudsburg shopping center 3 Mile Radiu 5/23/96 Benchmark = Regional Area Definition Detailed Report
Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 697 1,281 69 115 12.94% 96.8 Total Shopping Center 151,284 179,338 15,062 16,167 All Other Stores 116,035 137,551 11,553 12,400 Total Retail 267,319 316,889 26,615 28,567
Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (40.991816,75.18742): 3 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 stroudsburg shopping center 5 Mile Radiu 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 27,437 31,753 36,565 40,651 White 97.3% 96.0% 95.2% 94.4% Black 1.9% 2.6% 3.0% 3.3% American Indian 0.1% 0.1% 0.1 0.1 Asian 0.4% 0.9% 1.3% 1.6% Other 0.3% 0.4% 0.5% 0.6% Hispanic 0.8% 1.8% 2.4% 3.0% Total Households 9,958 11,452 13,225 14,656 Household Population 25,475 28,857 33,668 37,754 Average Household Size 2.56 2.52 2.55 2.58 Household Income $ 0 - 9,999 31.2% 12.2% 10.2% 8.5% S 10,000 - 14.999 16.8% 8.8% 8.1% 7.0% $ 15,000 - 24,999 29.0% 16.6% 15.2% 13.6% $ 25,000 - 34,999 14.7% 16.0% 14.3% 13.0% $ 35,000 - 49,999 5.9% 21.9% 20.0% 18.3% $ 50,000 - 74,999 1.6% 16.1% 19.4% 21.9% $ 75,000 - 99,999 0.9% 5.2% 7.3% 8.7% $ 100,000 - 149,999 -- 2.4% 4.3% 6.8% $ 150,000 + -- 0.9% 1.2% 2.1% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 15,700 32,220 36,465 41,205 Aggregate HH Inc ($000) 185,386 433,699 575,992 726,951 Median Family Income ($) 19,284 39,061 44,207 49,954 Per Capita Income ($) 7,277 15,029 17,108 19,255 Median Age Total Population 32.4 34.1 35.8 37.0 Median Age Adult Population 42.8 41.2 43.5 45.0 Median Age Female Population 33.7 35.2 37.1 38.6 Median Age Adult Female Population 43.8 42.2 44.6 46.1 Median Age Male Population 31.2 33.0 34.2 35.2 Median Age Adult Male Population 41.6 40.1 42.4 43.8
Area defined by Circle: (40.991816,75.18742): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 stroudsburg shopping center 5 Mile Radiu 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 27,437 31,753 36,565 40,651 0 - 5 6.3% 7.2% 7.0% 6.8% 6 - 13 10.3% 9.2% 9.6% 9.5% 14 - 17 6.3% 4.6% 6.1% 6.2% 18 - 24 16.7% 15.7% 12.5% 12.2% 25 - 34 14.0% 14.6% 13.7% 12.7% 35 - 44 10.2% 14.5% 14.7% 13.9% 45 - 54 10.7% 9.7% 11.7% 13.2% 55 - 64 11.0% 9.2% 8.5% 9.0% 65 - 74 14.6% 8.7% 8.9% 8.6% 75 - 84 -- 5.0% 5.5% 5.8% 85 + -- 1.7% 1.9% 2.1% Female Population by Age 14,562 16,652 19,172 21,330 0 - 5 5.9% 6.6% 6.5% 6.3% 6 - 13 9.3% 8.6% 8.9% 8.9% 14 - 17 5.8% 4.6% 6.0% 6.0% 18 - 24 17.4% 15.6% 12.3% 11.9% 25 - 34 13.3% 14.4% 13.1% 12.1% 35 - 44 10.0% 13.9% 14.5% 13.9% 45 - 54 10.5% 9.5% 11.4% 12.9% 55 - 64 10.9% 9.3% 8.3% 8.9% 65 - 74 17.0% 9.4% 9.7% 9.3% 75 - 84 -- 5.9% 6.6% 6.9% 85 + -- 2.4% 2.7% 2.9% Male Population by Age 12,874 15,103 17,382 19,312 0 - 5 6.7% 7.8% 7.6% 7.3% 6 - 13 11.4% 9.9% 10.4% 10.2% 14 - 17 6.9% 4.6% 6.2% 6.4% 18 - 24 15.9% 15.9% 12.7% 12.5% 25 - 34 14.7% 14.9% 14.3% 13.3% 35 - 44 10.4% 15.1% 14.9% 14.0% 45 - 54 11.0% 10.0% 12.0% 13.6% 55 - 64 11.1% 9.0% 8.6% 9.0% 65 - 74 12.0% 7.9% 8.1% 7.8% 75 - 84 -- 4.0% 4.3% 4.7% 85 + -- 0.9% 1.1% 1.2%
Area defined by Circle: (40.991816,75.18742): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 stroudsburg shopping center 5 Mile Radiu 5/23/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 101.0 - ----------------------------------Demographics---------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 36,565 13,225 33,668 2.55 $ 36,465 2000 40,651 14,656 37,754 2.58 $41,205 - ------------------------------Expenditure Potential----------------------------- 1995 Area Yearly Growth Rate Per Household 1.42% Total 3.52% - -------------------------Retail Support Potential (000)------------------------- 1995: 1,433 sq. ft.
Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 11,865 14,328 897 978 3.85% 99.0 Appliance Store 1,227 1,156 93 79 -1.17% 94.8 Auto-Aftermarket Store 25,931 29,379 1,961 2,005 2.53% 99.2 Convenience Store 13,564 15,260 1,026 1,041 2.38% 100.2 Dept. Store 12,536 14,743 948 1,006 3.30% 98.2 Drug Store 12,563 17,235 950 1,176 6.53% 105.4 Electronics Store 4,783 6,921 362 472 7.67% 96.8 Fast Food Restaurant Store 10,285 9,883 778 674 -0.80% 101.6 Full Serv Restaurant Store 9,999 9,488 756 647 -1.04% 100.5 Furniture Store 4,297 4,321 325 295 0.11% 94.2 Grocery Store 51,217 63,372 3,873 4,324 4.35% 102.6 Hardware Store 2,634 3,114 199 212 3.40% 99.4 Home Centers Store 14,433 18,505 1,091 1,263 5.10% 108.7 Jewelry Store 1,817 2,059 137 140 2.53% 96.0 Liquor Store 2,184 2,129 165 145 -0.51% 98.0 Mass Merchandiser Store 18,180 22,092 1,375 1,507 3.98% 99.6 Photo Store 302 326 23 22 1.52% 102.2 Shoe Store 2,499 3,222 189 220 5.21% 99.1 Sporting Goods Store 3,036 3,817 230 260 4.68% 98.6 Toy Store 1,374 1,397 104 95 0.32% 95.5 Variety Store 1,007 1,237 76 84 4.21% 99.9
Area defined by Circle: (40.991816,75.18742): 5 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 stroudsburg shopping center 5 Mile Radiu 5/23/96 Benchmark = Regional Area Definition Detailed Report
Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 965 1,774 73 121 12.96% l01.9 Total Shopping Center 206,697 245,759 15,629 16,769 All Other Stores 158,537 188,497 11,988 12,861 Total Retail 365,234 434,256 27,617 29,630
Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (40.991816,75.18742): 5 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC -C1750-41 Page 1 of 2 stroudsburg shopping center 7 Mile Radiu 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 36,310 44,920 51,968 58,061 White 97.7% 96.6% 95.8% 95.0% Black 1.5% 2.1% 2.5% 2.9% American Indian 0.1% 0.1% 0.1% 0.1% Asian 0.4% 0.8% 1.1% 1.4% Other 0.2% 0.4% 0.5% 0.6% Hispanic 0.7% 1.8% 2.4% 3.0% Total Households 13,105 16,085 18,605 20,689 Household Population 34,283 41,786 48,832 54,925 Average Household Size 2.62 2.60 2.62 2.65 Household Income $ 0 - 9,999 29.4% 11.4% 9.5% 8.0% $ 10,000 - 14,999 16.8% 7.9% 7.3% 6.4% $ 15,000 - 24.999 30.0% 16.7% 14.6% 12.5% $ 25,000 - 34,999 15.1% 16.2% 14.3% 13.2% $ 35,000 - 49,999 6.1% 22.5% 21.0% 19.0% $ 50,000 - 74,999 1.7% 17.2% 20.2% 22.8% $ 75,000 - 99,999 0.7% 4.9% 7.5% 9.2% $ 100,000 - 149,999 -- 2.2% 4.1% 6.8% $ 150,000+ -- 0.9% 1.3% 2.0% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 16,244 33,323 37,599 42,563 Aggregate HH Inc ($000) 246,135 619,850 824,427 1,046,009 Median Family Income($) 19,313 38,994 43,998 49,806 Per Capita Income($) 7,180 14,834 16,883 19,044 Median Age Total Population 32.3 34.1 35.8 37.0 Median Age Adult Population 42.5 41.1 43.3 45.0 Median Age Female Population 33.3 34.9 36.9 38.5 Median Age Adult Female Population 43.5 42.0 44.2 45.9 Median Age Male Population 31.3 33.2 34.5 35.4 Median Age Adult Male Population 41.5 40.3 42.5 44.1
Area defined by Circle: (40.991816,75.18742): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 stroudsburg shopping center 7 Mile Radiu 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 36,310 44,920 51,968 58,061 0 - 5 6.7% 7.9% 7.7% 7.4% 6 - 13 10.8% 10.0% 10.4% 10.3% 14 - 17 6.5% 4.8% 5.8% 5.9% 18 - 24 15.0% 13.4% 11.5% 11.5% 25 - 34 14.9% 15.6% 13.4% 12.1% 35 - 44 10.7% 15.4% 15.8% 14.6% 45 - 54 10.7% 9.8% 12.1% 14.0% 55 - 64 10.8% 9.0% 8.3% 8.9% 65 - 74 13.8% 8.2% 8.4% 8.0% 75 - 84 -- 4.5% 5.0% 5.4% 85 + -- 1.5% 1.7% 1.9% Female Population by Age 19,052 23,237 26,919 30,099 0 - 5 6.4% 7.3% 7.2% 6.9% 6 - 13 10.0% 9.4% 9.7% 9.7% 14 - 17 6.0% 4.7% 5.7% 5.7% 18 - 24 15.7% 13.3% 11.3% 11.3% 25 - 34 14.3% 15.5% 13.0% 11.6% 35 - 44 10.4% 14.8% 15.6% 14.7% 45 - 54 10.6% 9.6% 11.9% 13.6% 55 - 64 10.7% 9.2% 8.2% 8.9% 65 - 74 15.9% 8.8% 9.1% 8.6% 75 - 84 -- 5.3% 5.9% 6.3% 85 + -- 2.2% 2.4% 2.6% Male Population by Age 17,264 21,682 25,058 27,969 0 - 5 7.1% 8.5% 8.2% 7.8% 6 - 13 11.8% 10.6% 11.1% 11.0% 14 - 17 7.0% 4.8% 6.0% 6.2% 18 - 24 14.3% 13.4% 11.7% 11.8% 25 - 34 15.5% 15.7% 13.7% 12.6% 35 - 44 11.1% 16.1% 16.0% 14.5% 45 - 54 11.0% 10.1% 12.5% 14.4% 55 - 64 10.8% 8.8% 8.4% 9.0% 65 - 74 11.5% 7.5% 7.6% 7.2% 75 - 84 -- 3.6% 3.9% 4.3% 85 + -- 0.8% 1.0% 1.1%
Area defined by Circle: (40.991816,75.18742): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 stroudsburg shopping center 7 Mile Radiu 5/23/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 102.9 - ----------------------------------Demographics---------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 51,968 18,605 48,832 2.62 $ 37,599 2000 58,061 20,689 54,925 2.65 $ 42,563 - ------------------------------Expenditure Potential----------------------------- 1995 Area Yearly Growth Rate Per Household 1.43% Total 3.61% - -------------------------Retail Support Potential (000)------------------------- 1995: 2,059 sq. ft.
Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 16,977 20,619 913 997 3.96% 99.7 Appliance Store 1,735 1,640 93 79 -1.12% 96.2 Auto-Aftermarket Store 37,090 42,210 1,994 2,040 2.62% 102.0 Convenience Store 19,390 21,901 1,042 1,059 2.47% 102.7 Dept. Store 17,996 21,274 967 1,028 3.40% 99.5 Drug Store 17,711 24,449 952 1,182 6.66% 106.7 Electronics Store 6,905 10,004 371 484 7.70% 99.0 Fast Food Restaurant Store 14,958 14,438 804 698 -0.71% 103.2 Full Serv Restaurant Store 14,548 13,862 782 670 -0.96% 102.2 Furniture Store 6,207 6,288 334 304 0.26% 96.2 Grocery Store 73,475 91,323 3,949 4,414 4.45% 104.0 Hardware Store 3,884 4,589 209 222 3.40% 104.8 Home Centers Store 20,983 26,991 1,128 1,305 5.17% 113.4 Jewelry Store 2,585 2,947 139 142 2.65% 95.9 Liquor Store 3,268 3,178 176 154 -0.55% 100.5 Mass Merchandiser Store 26,020 31,773 1,399 1,536 4.08% 101.2 Photo Store 433 468 23 23 1.59% 105.2 Shoe Store 3,568 4,629 192 224 5.35% 100.3 Sporting Goods Store 4,285 5,411 230 262 4.78% 100.6 Toy Store 2,043 2,079 110 100 0.35% 99.6 Variety Store 1,437 1,775 77 86 4.32% 100.9
Area defined by Circle: (40.991816,75.18742): 7 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center Total Retail CBC - C1750-41 Page 2 of 2 stroudsburg shopping center 7 Mile Radiu 5/23/96 Benchmark = Regional Area Definition Detailed Report
Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 1,378 2,542 74 123 13.03% 104.9 Total Shopping Center 296,876 354,391 15,957 17,130 All Other Stores 227,703 271,817 12,239 13,138 Total Retail 524,579 626,208 28,196 30,268
Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this Area 1s below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (40.991816,75.18742): 7 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. ================================================================================ ADDENDUM F RENT ROLL - -------------------------------------------------------------------------------- ADDENDUM F RENT ROLL - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------- Detail Rent Roll Page: 50 STROUDSBURG Date: 05/14/96 Report Date: 05/14/96 Time: 14:12:51 - ------------------------------------------------------------------------------------------------------------------- -- Rent Date -- Suite Commence Expire Square Monthly Annual ---- Cost Recovery ----- No. Tenant Name Start Footage Base Rent Rate/SF Description Monthly - ------------------------------------------------------------------------------------------------------------------- 001* AMES DEPARTMENT STORE #0312 04/26/90 01/29/99 61,489 7,869.50 1.54 04/26/90 0020 FAY'S DRUG STORE 10/22/82 10/31/02 13,716 4,000.50 3.50 10/22/82 0030 SHOPRITE SUPERMARKET 10/22/80 10/31/05 45,000 17,166.67 4.58 10/22/80 0040 PALUMBO'S RESTURANT 07/08/81 05/31/01 1,440 960.00 8.00 06/01/81 0050 HOLIDAY HAIR FASHIONS 06/01/81 06/30/96 1,000 1,000.00 12.00 06/01/81 0060 MAIN STREET VIDEO 03/15/86 05/31/96 1,420 1,360.84 11.50 01/01/87 0090 STROUDSBURG LAUNDERETTE 02/01/88 05/20/96 3,446 0.00 0.00 07/01/81 000N PNC BANK 07/20/81 07/19/96 0 1,200.00 0.00 07/20/81 0070 THE EVERYTHING $.99 STORE 11/10/95 05/20/96 3,058 0.00 0.00 11/10/95 - ------------------------------------------------------------------------------------------------------------------- Total Building Occupied Sqft: 100% 130,569 33,557.51 0.00 Available Sqft: 0% 0 Total Sqft: 130,569 =================================================================================================================== - ------------------------------------------------------------------------------------------- Suite ----- Other Income ---- --- Future Rent Increases --- No. Tenant Name Description Monthly Date Monthly Amt. Per Sf - ------------------------------------------------------------------------------------------- 001* AMES DEPARTMENT STORE #0312 GROUND REN 858.49 0020 FAY'S DRUG STORE 0030 SHOPRITE SUPERMARKET MAINTENANC 334.97 GROUND REN 166.67 --------- 501.64 0040 PALUMBO'S RESTURANT MAINTENANC 90.00 6/01/96 1,440.00 12.00 REAL ESTAT 82.13 06/01/01 1,560.00 13.00 --------- 172.13 0050 HOLIDAY HAIR FASHIONS MAINTENANC 26.67 REAL ESTAT 57.03 --------- 83.70 0060 MAIN STREET VIDEO MAINTENANC 61.05 REAL ESTAT 80.99 --------- 142.04 0090 STROUDSBURG LAUNDERETTE 000N PNC BANK MAINTENANC 39.06 0070 THE EVERYTHING $.99 STORE 04/01/96 0.00 0.00 - --------------------------------------------- Total Building 1,797.06 =============================================
================================================================================ ADDENDUM G - PRO-JECT REPORTS - -------------------------------------------------------------------------------- ADDENDUM G PRO-JECT REPORTS - -------------------------------------------------------------------------------- MONROE PLAZA, STROUDSBURG, PA PROJECT DESIGNATOR: 693H REVISION:6/18/96 @ 9:32 PROJECT ASSUMPTIONS REPORT INCLUDING ALL TENANTS 6/19/96 @ 15:56 BUILDING PROLOGUE - ----------- LEASEHOLD ANALYSIS OF MONROE PLAZA, STROUDSBURG, PA BEGINNING 6/1996 FOR 16 YEARS ON A FISCAL YEAR BASIS AREA MEASURES - ------------- GLA 1996 VALUE -130,569 THEREAFTER - CONSTANT GROWTH RATES - ------------ MRKT 1996 VALUE - 3.00 HEREAFTER - CONSTANT OPEX 1996 VALUE - 3.00 THEREAFTER - CONSTANT RETG 1996 VALUE - 3.00 THEREAFTER - CONSTANT RENT 1996 VALUE - 3.00 THEREAFTER - CONSTANT MISC 1996 VALUE - 3.00 THEREAFTER - CONSTANT SALE 1996 VALUE - 3.00 THEREAFTER - CONSTANT LCNW 1996 VALUE - 4.50 THEREAFTER - CONSTANT LCRN 1996 VALUE - 2.25 THEREAFTER - CONSTANT LCBL + 50.0% OF LCNW +50.0% OF LCRN MARKET RATES - ------------ ANCH 1996 VALUE - 5.00 THEREAFTER - GROWING AT GROWTH RATE MRKT MK12 1996 VALUE -12.50 PAGE 2 THEREAFTER - GROWING AT GROWTH RATE MRKT MK07 1996 VALUE - 7.00 THEREAFTER - GROWING AT GROWTH RATE MRKT MISCELLANEOUS INCOMES - --------------------- NONE EXPENSES - -------- COMMON AREA MAINT. , REFERRED TO AS CAME CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 60,000 THEREAFTER - GROWING AT GROWTH RATE OPEX INSURANCE , REFERRED TO AS INSE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 15,500 THEREAFTER - GROWING AT GROWTH RATE OPEX REAL ESTATE TAXES , REFERRED TO AS RETE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 90,465 THEREAFTER - GROWING AT GROWTH RATE RETG GROUND RENT , REFERRED TO AS GRND CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 7,212 THEREAFTER - CONSTANT CAM - RECOVERY , REFERRED TO AS CAM1 AN INFORMATIONAL EXPENSE +100.0% OF CAME+100.0% OF INSE +100.0% OF MGMT MANAGEMENT FEE , REFERRED TO AS MGMT AN INFORMATIONAL EXPENSE 1996 VALUE - 14,828 1997 VALUE - 16,366 1998 VALUE - 16,704 1999 VALUE - 17,245 2000 VALUE - 17,620 2001 VALUE - 17,853 2002 VALUE - 18,511 2003 VALUE - 19,104 2004 VALUE - 19,543 2005 VALUE - 19,987 2006 VALUE - 20,265 2007 VALUE - 21,064 2008 VALUE - 21,538 2009 VALUE - 22,026 2010 VALUE - 22,529 2011 VALUE - 22,694 THEREAFTER - CONSTANT CAM - REVY -NO INS, REFERRED TO AS CAM2 AN INFORMATIONAL EXPENSE +100.0% OF CAME+100.0% OF MGMT R.E.TAX -RECVY , REFERRED TO AS RETR AN INFORMATIONAL EXPENSE +100.0% OF RETE PAGE 3 VACANCY ALLOWANCE - ----------------- PERCENTAGE OF POTENTIAL GROSS INCOME FOR ALL TENANTS SUBJECT TO VACANCY 1996 VALUE - 3.00 THEREAFTER - CONSTANT MANAGEMENT FEE - -------------- PERCENTAGE OF EFFECTIVE GROSS INCOME FOR ALL TENANTS PASSED THROUGH TO TENANTS USING EXPENSE MGMT 1996 VALUE - 2.00 THEREAFTER - CONSTANT COMMISSION CALCULATIONS - ----------------------- STANDARD METHOD #1 - 0.000% OF TOTAL RENT STANDARD METHOD #2 - 0.000% OF TOTAL RENT STANDARD METHOD #3 - 0.000% OF TOTAL RENT STANDARD METHOD #4 - 0.000% OF TOTAL RENT STANDARD METHOD #5 - 0.000% OF TOTAL RENT COMMISSION PAYOUTS - ------------------ STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT ALTERATION CALCULATION - ---------------------- NONE ALTERATION PAYOUTS - ------------------ STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT PAGE 4 COMMON AREA MAINTENANCE POOL - ---------------------------- NONE CAPITAL EXPENDITURES - -------------------- RESERVES 1996 VALUE -13,057 THEREAFTER - GROWING AT GROWTH RATE OPEX PRIMARY CLASSIFICATION CODES - ---------------------------- NONE SECONDARY CLASSIFICATION CODES - ------------------------------ NONE COST CENTERS - ------------ 1 - CAM 2 - RET SALES VOLUME PROFILE - -------------------- PERCENT OF RELATIVE MONTH ANNUAL SALES VOLUME - ----- ------------ ------ JAN 8.33% 1.00 FEB 8.33% 1.00 MAR 8.33% 1.00 APR 8.33% 1.00 MAY 8.33% 1.00 JUN 8.33% 1.00 JUL 8.33% 1.00 AUG 8.33% 1.00 SEP 8.33% 1.00 OCT 8.33% 1.00 NOV 8.33% 1.00 DEC 8.33% 1.00 TOTALS 100.00% 12.00 GLOBAL RECOVERIES - ----------------- CAM - RECOVERY , REFERRED TO AS CAM1 ASSIGNED TO COST CENTER 1 - CAM PRO RATA SHARE RECOVERY OF EXPENSE CAM1 PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH R.E.TAX -RECVY , REFERRED TO AS RET ASSIGNED TO COST CENTER 2 - RET PAGE 5 PRO RATA SHARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH CAM - REVY -NO INS, REFERRED TO AS CAM2 ASSIGNED TO COST CENTER 1 - CAM PRO RATA SHARE RECOVERY OF EXPENSE CAM2 PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH TENANT PROLOGUE - --------------- MINIMUM RENTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR SALES VOLUMES AND BREAKPOINTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR RENEWAL RENTS ARE COMPOUNDED ANNUALLY RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET REFERENCE TENANTS - ----------------- NONE TENANTS - ------- THERE ARE A TOTAL OF 6 LEASEHOLD TENANT(S): - -------------------------------------------------------------------------------- # 1 - SUITE #0001 , AMES DEPT. STORE BASE LEASE DATES: 4/1990 TO 1/1999 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 61,489 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 1.70/SF/YR PERCENTAGE RENT: INITIAL SALES - 150.68/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 59.36/SF/YR 2.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: R.E.TAX -RECVY ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 4,189/YEAR PAGE 6 AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 2/1999 TO 1/2004 SQUARE FOOTAGE: 61,489 MINIMUM RENT: INITIAL RENT - 1.87/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 59.36/SF/YR 2.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: R.E.TAX -RECVY ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 4,189/YEAR AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 2 DATES: 2/2004 TO 1/2014 SQUARE FOOTAGE: 61,489 MINIMUM RENT: INITIAL RENT - 1.87/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 59.36/SF/YR 2.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: R.E.TAX - RECVY ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 4,189/YEAR AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE PAGE 7 # 2 - SUITE #00020 , FAY'S DRUG STORE BASE LEASE DATES: 10/1982 TO 10/2002 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 13,716 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 3.50/SF/YR PERCENTAGE RENT: INITIAL SALES - 172.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 204.00/SF/YR 2.00% OF OVERAGE TO A CEILING OF 219.00/SF/YR 1.50% OF OVERAGE TO A CEILING OF 233.00/SF/YR 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RET GLOBAL GROUPING GLOBAL RECOVERY CAM2 COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 11/2002 TO 10/2007 SQUARE FOOTAGE: 13,716 MINIMUM RENT: INITIAL RENT - 4.25/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 204.00/SF/YR 2.00% OF OVERAGE TO A CEILING OF 219.00/SF/YR 1.50% OF OVERAGE TO A CEILING OF 233.00/SF/YR 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RET GLOBAL GROUPING GLOBAL RECOVERY CAM2 COMMISSIONS: NONE ALTERATIONS: NONE OPTION 2 DATES: 11/2007 TO 10/2012 SQUARE FOOTAGE: 13,716 MINIMUM RENT: PAGE 8 INITIAL RENT - 4.25/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER- GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 204.00/SF/YR 2.00% OF OVERAGE TO A CEILING OF 219.00/SF/YR 1.50% OF OVERAGE TO A CEILING OF 233.00/SF/YR 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RET GLOBAL GROUPING GLOBAL RECOVERY CAM2 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- RENEWAL MINIMUM RENT: MARKET RATE MK07 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RET GLOBAL GROUPING GLOBAL RECOVERY CAM1 RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 3 - SUITE #00030 , SHOPRITE SUPERMRKT BASE LEASE DATES: 10/1980 TO 10/2020 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 45,000 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 4.62/SF/YR PERCENTAGE RENT: INITIAL SALES - 638.00/SF/YR THEREAFTER- GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 333.00/SF/YR 1.25% OF OVERAGE TO A CEILING OF 444.00/SF/YR 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE PAGE 9 RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RET COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 4 - SUITE #00040 , PALUMBO'S RESTRANT BASE LEASE DATES: 6/1981 TO 5/2001 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,440 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 12.00/SF/YR PERCENTAGE RENT: INITIAL SALES - 79.86/SF/YR THEREAFTER- GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 200.00/SF/YR 5.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RET COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS MONTNS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK12 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE (S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RET PAGE 10 RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 5 - SUITE #00050 , HOLIDAY HAIR FASHN BASE LEASE DATES: 6/1981 TO 6/1996 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,000 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 12.00/SF/YR PERCENTAGE RENT: INITIAL SALES - 185.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 6.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RET COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 7/1996 TO 6/2001 SQUARE FOOTAGE: 1,000 MINIMUM RENT: INITIAL RENT - 12.50/SF/YR CHANGING TO - 13.00/SF/YR ON 1/1999 PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER- GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 6.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RET COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: PAGE 11 LENGTH VACANT SQ FT MONTHS OF TERM YEARS MONTNS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK12 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RET RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 6 - SHOP RITE BASE LEASE DATES: 11/1996 TO 10/2011 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 7,924 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 9.50/SF/YR CHANGING TO - 9.75/SF/YR ON 11/2006 PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RET COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS MONTNS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK07 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE (S) WILL CONTINUE FROM BASE LEASE PAGE 12 RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RET RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE ================================================================================ ADDENDUM H - ENGAGEMENT LETTER - -------------------------------------------------------------------------------- ADDENDUM H ENGAGEMENT LETTER - -------------------------------------------------------------------------------- [LOGO] [Letterhead of CB Commercial] May 8, 1996 Mr. Josh Kane Chief Financial Officer MARK CENTERS TRUST, 660 Third Avenue Kingston, PA 18704 Re: 17 Shopping Centers Nationwide Dear Mr. Kane: At your request, we are pleased to submit the following proposal to appraise the above referenced properties. The purpose of this assignment is to estimate the market value of the leased fee interest. We understand the appraisal reports are to be used for mortgage underwriting purposes. We also understand that the reports will be used by Mark Centers Trust and Morgan Stanley. The properties are briefly described on attachment "A". Our complete valuation will be presented in a self contained (narrative) format and will contain a complete description of the property along with pertinent exhibits and photographs together with supporting factual data and analysis necessary to convey our opinion of value. We will value the property based upon the cost, income and market approaches to value, where applicable, correlating our findings into a final value conclusion. The report will be prepared in conformity with and will be subject to the requirements of the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. Each report will also conform to the Uniform Standards of Professional Appraisal Practice ("USPAP") and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") and the Morgan Stanley Capital Appraisal Standards described in Attachment "B". We assume that there are no major or significant items of deferred maintenance beyond normal wear and tear for properties of their age as of the date of the appraisal which would require the expertise of a professional contractor to estimate the cost of such repairs. If such repairs need to be considered in this appraisal, such estimates are to be provided by a qualified firm hired by you and at no cost to us. The total fee for the assignment is $68,000 ($4,000 per property) including all travel and related expenses which is due and payable upon delivery of the reports. If we are asked to cancel the assignment within two weeks of our engagement an upset fee equal to 50% will be due and payable. If cancellation occurs between two and three weeks, the upset fee will be equal to 75% and any time after three weeks the full fee will be due and payable. We will furnish you with three copies of our final report within four to five weeks of our authorization. Authorization occurs upon our receipt of an executed copy of this proposal and our delivery date is contingent upon the timely receipt of all necessary property information, financial statements and detailed lease information. If all requested data and information is not available as of the authorized date, we reserve the right to extend the delivery date by the amount of time it takes to receive the requested information. May 8, 1996 Mr. Kane Page 2 In order to complete this assignment in a timely manner, we will require the following specific information, if available: o Copy of Ground Lease, if Leasehold o Legal descriptions. o Current rent roll. o Copy of Leases or abstracts o Expense reimbursements on a tenant by tenant basis o Building area calculations and surveys. o Operating statements for the past three full years. o Current year expenses to date. o A copy of the current budget. o Copies of any toxic engineering reports dealing with underground tanks, PCB's, asbestos or chemical spills, if available. o A copy of the next fiscal year's budget, if available. o A list of major repairs which have recently been made, or are scheduled to be made in the next 18 months. o Name and phone number(s) of on-site superintendent(s), or local management firm or trustee for physical inspection. o Notice of any pending changes to the rent roll or pertinent information regarding the current status of the tenants. If we are requested to give court testimony an additional fee will be charged on an hourly basis at $300 per hour for designated MAI-appraisers and $175 for non-designated appraisers. Said hourly billings pertain to court preparation, waiting and travel time, document review and preparation (excludes narrative appraisal report) and all meetings related to court testimony. The client may provide only complete, final copies of the appraisal report to third parties who shall rely on such reports in connection with loan underwriting or securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the client for routine and customary questions. Please note that our consent to allow an appraisal report prepared by CB Commercial, or portions of such report, to become part of or be referenced in any public offering, the granting of such consent will be at our sole discretion and, if given, will be on condition that we will be provided with an Indemnification Agreement and/or Non-Reliance letter, in a form and content satisfactory to us, by a party satisfactory to us. We do consent to your submission of the reports to rating agencies, loan participants or your auditors without the need to provide us with an Indemnification Agreement and/or Non-Reliance letter. In addition to the fee for this assignment, you agree to compensate us at a rate to be mutually agreed to, for any time expended by us should we be required (by subpoena or otherwise) or requested by you, your representatives or other entity to become involved in any litigation or May 8, 1996 Mr. Kane Page 3 legal proceeding in any way involving this engagement to which we are not a party, the appraisal work we produce or the property which is the subject of this assignment. You also agree to pay, on demand, all reasonable expenses which we incur in connection with any litigation or proceedings including the fees of our attorneys. You acknowledge that we are being retained hereunder as an independent contractor to perform the services described herein and nothing in this agreement shall be deemed to create any other relationship between us. This assignment will be deemed concluded and the services hereunder completed upon delivery to you of the appraisal report discussed herein. If these terms are acceptable, please authorize us to proceed by having an officer of the corporation, managing general partner, principal, owner, or a contractually responsible party sign the enclosed copy of this proposal with "Terms and Conditions" and return it to us for our permanent file. Upon receipt of your authorization, we will schedule the necessary personnel to complete the project in a timely manner. We appreciate this opportunity to be of service to you on this assignment. If you have additional questions, please do not hesitate to give me a call. Sincerely, CB COMMERCIAL REAL ESTATE GROUP, INC. Appraisal /s/ Michael R. Pecorino Michael R. Pecorino, MAI MRP:jf cc: Douglas W. Haney Enclosure AGREED & ACCEPTED _____________________________________ ______________________________________ Signature Title _____________________________________ ______________________________________ Name (type or print) Date Office #: ___________________________ Fax #: _______________________________ ADDENDUM I QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF MAGGIE ARGYROS Real Estate Analyst CB Commercial Real Estate Group, Inc. 560 Lexington Avenue, 16th Floor New York, New York 10022 (212) 207-6128 EDUCATION Master of Science in Real Estate, Penn State University, State College, Pennsylvania Appraisal Institute Courses 110, 120, 310, 410, 420 PROFESSIONAL Appraisal Institute Candidate for MAI designation EXPERIENCE Five years of Real Estate Appraisal and Consulting experience throughout the United States, specializing in the New York Metropolitan area. 1991 - 1993 J. Blake and Associates, Inc. New York, New York 1993 - 1996 The Weitzman Group, Inc. New York, New York 1996 - Present CB Commercial Real Estate Group, Inc. New York, New York Assignments include full and partial interest appraisals of all types of real estate including office buildings, shopping centers, industrial facilities, apartment buildings, market studies, and cooperatives and condominiums. - -------------------------------------------------------------------------------- QUALIFICATIONS OF MICHAEL R. PECORINO, MAI Senior Vice President, Regional Manager CB Commercial Real Estate Group, Inc. 560 Lexington Avenue, 20th Floor New York, New York 10022 (212)207-6102 EDUCATIONAL Real Estate Appraisal and Analysis, New York University, the Real Estate Institute Bachelor of Arts, Geography, Planning, Urban Studies, State University College of New York at Oneonta Successfully completed all the necessary courses to qualify for the MAI designation. LICENSES/CERTIFICATIONS Certified General Real Estate Appraiser: State of New York (46000002055) Certified General Real Estate Appraiser: State of New Jersey (RG-01667) Certified General Real Estate Appraiser: State of Pennsylvania (GA-001096-R) Certified General Real Estate Appraiser: State of Connecticut (0000489) Certified General Real Estate Appraiser: State of Maryland (10569) Certified General Real Estate Appraiser: State of New Jersey (3793) Certified General Real Estate Appraiser: State of Delaware (X10000223) Certified General Real Estate Appraiser: State of Maine (CG00001192) Certified General Real Estate Appraiser: State of Vermont (080-0000168) Certified General Real Estate Appraiser: State of District of Columbia (GA00010315) Licensed Real Estate Broker: State of New York PROFESSIONAL Appraisal Institute Designated Member of the Appraisal Institute (MAI), Certificate No. 7944 Member of the Real Estate Board of New York EXPERIENCE Fifteen years of Real Estate Appraisal and Consulting experience throughout the United States specializing in the New York metropolitan area. 1993 - Present CB Commercial Real Estate Group, Inc., Appraisal New York, New York 1983 - 1993 Cushman & Wakefield, Inc. New York, New York 1982 - 1983 Joseph J. Blake & Associates, Inc. New York, New York 1981 - 1982 City of New York - Office of Manhattan Planning New York, New York 1980 - 1981 City of Jersey City - Office of the Mayor Jersey City, New Jersey Assignments include full and partial interest appraisals of office buildings, air rights, commercial lofts, garden apartments, cooperatives, condominiums, townhouses, shopping centers, industrial facilities, residential and office market studies, portfolio valuations and multi-property assignments. - -------------------------------------------------------------------------------- This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE 25TH STREET SHOPPING CENTER Located at At Routes 248 & 22 Easton, Pennsylvania CB File No. 96-093-L DATE OF VALUE June 1, 1996 PREPARED FOR MORGAN STANLEY MORTGAGE CAPITAL, INC. 1585 Broadway New York, NY 10036 PREPARED BY CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES 560 Lexington Avenue - 16th Floor New York, New York 10022 {letterhead of CB Commercial Real Estate Group] June 17, 1996 MORGAN STANLEY MORTGAGE CAPITAL, INC. 1585 Broadway New York, NY 10036 RE: 25th Street Shopping Center Routes 248 & 22 Easton, Pennsylvania CB File No. #95-093-L Dear Ladies and Gentlemen: At your request, CB Commercial Real Estate Group, Inc. has prepared a Complete Appraisal presented in a self-contained appraisal report of the market value of the leased fee interest. The subject property is a one-story community strip center known as 25th Street Shopping Center containing a gross leasable area of 131,477 square feet. The subject is anchored by Woolworth's, CVS, and AMC Theater. The improvements were constructed in 1955 and were renovated in 1987. The improvements were in average condition as of the date of our analysis. Data, information, and calculations leading to the value conclusion are incorporated in the report following this letter. The entire report, including all assumptions and limiting conditions, is an integral part of and inseparable from this letter. Based on research and analysis contained in this report, it is estimated that the market value of the leased fee interest in 25th Street Shopping Center, subject to the Certification, Assumptions, and Limiting Conditions in this appraisal report, as of June 1, 1996, is --- ELEVEN MILLION NINE HUNDRED THOUSAND DOLLARS --- ($11,900,000) The following appraisal sets forth the most pertinent data gathered, methodology, and reasoning leading to our opinion of value. The analyses, opinions, and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP) and the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. Furthermore, this report has been prepared in conformance with our interpretation of the appropriate regulations and guidelines set forth by Morgan Stanley. It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CB Commercial Real Estate Group, Inc. can be of further service, please do not hesitate to contact us. MORGAN STANLEY June 17, 1996 Page 2 Respectfully Submitted, CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES by: /s/ Maggie Argyros /s/ Michael R. Pecorino, MAI - ------------------------------- ------------------------------- Maggie Argyros Michael R. Pecorino, MAI Real Estate Analyst Senior Vice President & Northeast Regional Manager PA State Certification No. GA ================================================================================ CERTIFICATION OF THE APPRAISERS - ------------------------------------------------------------------------------ CERTIFICATION OF THE APPRAISERS We certify that to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. 4. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event, such as the approval of a loan. 5. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation and the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. In addition, this report conforms to the requirements of the Financial Institution Reform, Recovery, and Enforcement Act (FIRREA). 6. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 7. Michael R. Pecorino has completed the requirements of the continuing education program of the Appraisal Institute. 8. Maggie Argyros has made a personal inspection of the property that is a subject of this report. Michael R. Pecorino did not make a personal inspection of the appraised property. 9. No one provided professional assistance to the persons signing this report. 10. Maggie Argyros and Michael R. Pecorino have extensive experience in the appraisal/review of similar property types. 11. Michael Pecorino is certified in the state where the subject is located. /s/ Maggie Argyros /s/ Michael R. Pecorino, MAI - ------------------------------- ------------------------------- Maggie Argyros Michael R. Pecorino, MAI Real Estate Analyst Senior Vice President Northeast Regional Manager - -------------------------------------------------------------------------------- i ================================================================================ SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- EXTERIOR VIEW OF SHOPPING CENTER - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF SHOPPING CENTER - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ii ================================================================================ SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF SHOPPING CENTER - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- INTERIOR VIEW OF MCDONALD'S & BANK - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- iii ================================================================================ SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF LONG JOHN SILVERS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- INTERIOR VIEW OF PIZZA HUT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- iv ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- SUMMARY OF SALIENT FACTS Property Name: 25th Street Shopping Center Location: Intersection of Routes 248 & 22 Easton, Pennsylvania Assessor's Parcel Number: Map L9 / Block 32 / Lot 1A Property Description: The subject property consists of a one-story community shopping center containing a total gross leaseable area of 131,477 square feet. The center is anchored by Woolworth's, CVS, and AMC Theater. Outparcels include McDonald's, Long John Silver's, Pizza Hut, and Second National Bank. Highest and Best Use As Vacant: A community shopping center As Improved: As a presently utilized - a community shopping center Property Rights Appraised: Leased fee Interest Date of Value: June 1, 1996 Land Area 16.1943 acres, or 705,424 square feet Improvements Building Area: Gross Leaseable Area: 131,477 square feet Year Built: 1955 (renovated 1987) Overall Condition: Average to good. Estimated Marketing Time: Based on the size of the subject property and the number of different uses that exist, we have estimated the marketing time to be less than 12 months. Financial Indicators Current Occupancy: 99% $16.00 700 - 1,500 sq. ft. Market Rental Rate: $13.00 1,501 - 3,000 sq. ft. $11.00 3,001 - 6,000 sq. ft. $ 8.50 9,000 - 15,000 sq. ft. $35,000/yr Pad site - -------------------------------------------------------------------------------- v ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- Income Growth Rate: 3% Estimated Stabilized Expenses: $2.49\SF Expense Growth Rate: 3% Tax Growth Rate: 3% Going-In Overall Capitalization Rate Selected: 10.5% Going-In Overall Capitalization Rate Implied: 10.0% Terminal Overall Capitalization Rate: 11.0% Discount Rate: 12.5% Valuation Income Capitalization Approach: $11,900,000 Sales Comparison Approach: $11,800,000 Final Value $11,900,000 Unit value (per square foot): $90.21/RSF - -------------------------------------------------------------------------------- vi ================================================================================ TABLE OF CONTENTS - -------------------------------------------------------------------------------- TABLE OF CONTENTS CERTIFICATION OF THE APPRAISERS i SUBJECT PHOTOGRAPHS ii SUMMARY OF SALIENT FACTS v TABLE OF CONTENTS vii INTRODUCTION 1 AREA ANALYSIS 7 MARKET ANALYSIS 18 SITE ANALYSIS 23 IMPROVEMENT ANALYSIS 25 ZONING 28 TAX AND ASSESSMENT DATA 29 HIGHEST AND BEST USE 30 APPRAISAL METHODOLOGY 33 SALES COMPARISON APPROACH 35 INCOME CAPITALIZATION APPROACH 40 RECONCILIATION OF VALUE 64 ASSUMPTIONS AND LIMITING CONDITIONS 66 ADDENDA 70 - -------------------------------------------------------------------------------- vii ================================================================================ TABLE OF CONTENTS - -------------------------------------------------------------------------------- A. Glossary of Terms B. Legal Description C. Improved Comparable Sales D. Rental Comparables E. Strategic Mapping, Inc. F. Rent Roll G. PRO-JECT Assumptions H. Engagement Letter I. Qualifications - -------------------------------------------------------------------------------- viii INTRODUCTION ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- INTRODUCTION PROPERTY IDENTIFICATION The subject is known as 25th Street Shopping Center and is located at the intersection of Routes 248 and 22 in Palmer Township (Easton), Northampton County, Pennsylvania. The city's assessor's tax identification number is Map L9, Block 32, Lot 1A. A full metes and bounds legal description is included in the Addenda. OWNERSHIP AND PROPERTY HISTORY The subject is currently owned by Mark 25th Street Limited Partnership. The subject last transferred in December 1993 for $11,400,000, or $86.71 per square foot. The property was purchased from Twenty-fifth Associates. DATES OF INSPECTION AND VALUATION The site was inspected by Maggie Argyros on June 4, 1996. Michael R. Pecorino, MAI did not inspect the subject or the comparables, but reviewed this report and concurs with the conclusions. The date of valuation is June 1, 1996. PURPOSE OF THE APPRAISAL The purpose of this appraisal is to estimate the market value of the leased fee interest in the subject property as of the date of the appraisal. Market value is defined as follows: Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised, and acting in what they consider their own best interests; 3. A reasonable time is allowed for exposure in the open market; 4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and - -------------------------------------------------------------------------------- 1 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- 5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) INTENDED USE OF REPORT This appraisal has been prepared for the Mark Centers Trust for mortgage underwriting purposes. PROPERTY RIGHTS APPRAISED The value estimated represents the leased fee interest. DEFINITION OF THE LEASED FEE INTEREST The term "leased fee interest" as used in this report, is defined as: An ownership interest held by a landlord with the right of use and occupancy conveyed to other; usually consists of the right to receive rent and the right to repossession at the termination of the lease. (The Dictionary of Real Estate Appraisal, The Appraisal Institute, Chicago, Illinois, 1984, p. 179). APPRAISAL DEVELOPMENT AND REPORTING PROCESS The following steps were completed by CB Commercial for this assignment: 1. Analyzed regional, neighborhood, site, and improvement data. 2. Inspected the subject and the neighborhood. 3. Reviewed data regarding taxes, zoning, utilities, easements, and city services. 4. Considered comparable improved sales and comparable improved building rental information. Confirmed data with principals, managers, or real estate agents representing principals, unless otherwise noted. 5. Analyzed the data to arrive at conclusions via each approach to value used in this report. 6. Reconciled the results of each approach to value employed into a probable range of market data and finally an estimate of value for the subject, as defined herein. 7. Estimated a reasonable exposure time associated with the value estimate. - ---------- (1) The definition of market value is taken from : The Office of the Comptroller of the Currency under 12 CFR, Part 34, Subpart C-Appraisals, 34.42(f), August 24, 1990. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. - -------------------------------------------------------------------------------- 2 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- The subject site and improvement descriptions are based on a personal inspection of the property, discussions with management, and a review of the provided information. The inspection is not a substitute for thorough engineering studies. To develop the opinion of value, CB Commercial performed a complete appraisal process, as defined by the Uniform Standards of Professional Appraisal Practice. This means that no departures from Standard 1 were invoked. This is a complete appraisal, in the form of a Self-Contained Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Standards of Professional Appraisal Practice. In a complete appraisal, CB Commercial uses all known applicable approaches to value. The value conclusion reflects all known information about the subject property, market conditions, and available data. The Self-Contained Report incorporates to the fullest extent possible, practical explanation of the data, reasoning and analysis that were used to develop the opinion of value. It also includes thorough descriptions of the subject property and the market for the subject property type. SPECIAL APPRAISAL INSTRUCTIONS The client did not give us special appraisal instructions. MARKETING PERIOD The marketing period section is divided into reasonable exposure time and reasonable marketing time. Exposure time differs from marketing time. Marketing time is the period required to sell a real property interest at market value during the period immediately after the effective date of the appraisal. Exposure time is always presumed to precede the effective date of the appraisal. Exposure time is not intended to be a prediction of a date of sale or a one-line statement. Instead, it is an integral part of the appraisal analysis and is based on one or more of the following: o statistical information about days on the market o interviews of market participants. The reasonable exposure period is a function of price, time, and use. It is not an isolated estimate of time alone. Exposure time is different for various types of real estate and under various market conditions. - -------------------------------------------------------------------------------- 3 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- Reasonable Exposure Time Exposure time is always presumed to precede the effective date of the appraisal. It is the estimated length of time the property would have been offered prior to a hypothetical market value sale on the effective date of appraisal. It is a retrospective estimate based on an analysis of recent past events, assuming a competitive and open market. It assumes not only adequate, sufficient, and reasonable time but adequate, sufficient, and reasonable marketing effort. Exposure time and appraisal conclusion of value are therefore interrelated. Exposure time is often expressed as a range and is based on direct and indirect market data gathered during the market analysis, sales verifications, interviews with market participants, and other appropriate sources. The amount of time which a property will require to be marketed varies greatly depending on a number of factors including market conditions, listing price, terms of sale offered, and competitive listing inventory. In addition to considering each of the factors noted above, CB Commercial considered: o the most recent CB Commercial National Investor Survey, and o the opinions of local knowledgeable real estate brokers and investors. Market Conditions Throughout the country, market conditions for most property types, especially those considered Class A and B, have improved over the last year. The market conditions that directly impact the subject are described in this report and illustrate how exposure time is correlated with listing inventory, competitive pricing structures, and marketing efforts. CB Commercial National Investor Survey In the most recent issue of the CB Commercial National Investor Survey, published in the first quarter 1996, CB Commercial surveyed a wide range of investors for property type preferences and specific marketing times. Investors indicated that exposure requirements for investment property generally decreased by 0.4 months from first quarter 1995. The average marketing time for all responses has decreased 3.5 months since second quarter 1993. Currently, the marketing period is 6.4 months for a Class A Power retail center. For all types of retail properties, the marketing period ranges from 0 to 18 months with an average of 11 months. Real Estate Broker Surveys As another information source, appraisers solicited the opinions of real estate brokers knowledgeable in the subject property type. The majority estimated that the property could likely be sold within a 12 month time span. All assumed that property would be appropriately priced and marketed. - -------------------------------------------------------------------------------- 4 INTRODUCTION - -------------------------------------------------------------------------------- Exposure Time Conclusion In conclusion, based on the foregoing analysis, an exposure time of less than 12 months is reasonable, defensible, and appropriate. Like the brokers surveyed, CB Commercial assumes that the subject property would have been competitively priced and aggressively promoted on a national basis. Reasonable Marketing Time Reasonable marketing time is the period a prospective investor would forecast to sell the subject property immediately after the date of value, at the value estimated. Anticipated marketing time is essentially a measure of the perceived level of risk associated with the marketability, or liquidity, of the subject as an investment grade property. The sources for this information include those used in estimating the reasonable exposure time, but also an analysis of the anticipated changes in market conditions following the date of appraisal. In other words, the reasonable marketing time is the number of months it will require to sell the subject property from the date of value, into the future. The reader must understand, however, that the future price for the subject property (at the end of the marketing time) may or may not equal the appraisal estimate. The future price depends on unpredictable changes in the physical real estate, demographic and economic trends, real estate markets in general, supply/demand characteristics for the property type, and many other factors. Based on the premise that present market conditions are the best indicators of future performance, a prudent investor will forecast that, under the conditions described above, the subject property will require a marketing time of less than 12 months. - -------------------------------------------------------------------------------- 5 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- REGIONAL AREA MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commecial Real Estate Group, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 6 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- AREA ANALYSIS The dynamic nature of economic relationships within a market area have a direct bearing on real estate values and the long-term quality of a real estate investment. In the market, the value of a property is not based on the price paid for it in the past or the cost of its creation, but on what buyers and sellers perceive it will provide in the future. Consequently, the attitude of the market toward a property within a specific neighborhood or market area reflects the probable future trend of that area. Since real estate is an immobile asset, economic trends affecting its locational quality in relation to other competing properties within its market area will also have a direct effect on its value as an investment. To accurately reflect such influences, it is necessary to examine the past and probable future trends which may affect the economic structure of the market and evaluate their impact on the market potential of the subject. This section of the report is designed to isolate and examine the discernible economic trends in the region and neighborhood which influence and create value for the subject property. A regional map indicating the location of the subject is presented on the previous page. REGIONAL INFLUENCES Location The subject is located within Lehigh Valley which is part of the Allentown-Bethlehem-Easton MSA. Lehigh Valley is comprised of two counties: Lehigh and Northampton. These two counties form the core of the MSA. Other counties in the MSA include Carbon County, Pennsylvania, and Warren County, New Jersey. The Lehigh Valley region is bound to the north by the Blue Mountain, to the east by the Delaware River, to the west by Schuylkill, and to the south by Berks, Montgomery, and Bucks Counties. The Lehigh Valley region (Lehigh and Northampton Counties) is located in the central-eastern portion of the Pennsylvania, within 300 miles of the major metropolitan areas of eastern Unites States including New York, Philadelphia, Baltimore, Washington D.C., and Boston. It is particularly accessible to New York City and Philadelphia. The Lehigh Valley region contains three cities (Allentown, Bethlehem, and Easton), 27 boroughs, and 32 townships. Population The Allentown-Bethlehem-Easton MSA, like Lehigh and Northampton Counties, has experienced slow, relatively steady growth over the past 20 years. During the early 1980s, when other parts of Pennsylvania and the northeast experienced net declines in population - -------------------------------------------------------------------------------- 7 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- growth, the region experienced moderate growth. This population growth continued in the later part of the 1980s and into the 1990s. According to Strategic Mapping, Inc., annual population growth over the past decade in the MSA was 0.80%, which is very similar to the Lehigh Valley Region. Shown on the following page is a breakdown of the population and population growth in the two counties in the Lehigh Valley Region and the MSA total. Lehigh County is the largest county in the Lehigh Valley Region and the MSA with a total population estimate of 299,269 in 1995. The city of Allentown is situated in Lehigh County. Northampton County closely follows behind with a population of 256,899. Northampton County experienced greater population growth compared to Lehigh County over the past decade. Continued population growth is forecasted for the Lehigh Valley Region and the Allentown-Bethlehem-Easton MSA. In Northampton County, where the subject property is situated, population growth is expected to be slightly lower than the previous decade with a projected annual growth rate of 0.67% between 1990 and 2000. The MSA is expected to witness slightly greater population growth over the next decade, while Lehigh County is expected to be slightly lower than the previous decade. On the basis of these population trends and forecasts, the Lehigh Valley Region appears to be in a period of relatively moderate growth that is expected to last for the next few years. The following table illustrates the population trends in the two counties, in the Lehigh Valley Region, and the MSA total. ================================================================================ POPULATION TRENDS LEHIGH VALLEY AND ALLENTOWN-BETHLEHEM-EASTON MSA ================================================================================ 1980 1990 Annual% 1995 2000 Change Estimate Projection ================================================================================ Lehigh County 272,349 291,130 0.69% 299,269 304,142 Northampton County 225,418 247,105 0.96% 256,899 264,190 Lehigh Valley Region 497,767 538,235 0.81% 556,168 568,332 Allentown-Bethlehem-Easton MSA 551,002 595,081 0.80% 615,654 630,260 ================================================================================ Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 8 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ============================================================= SELECTED AREA DEMOGRAPHICS LEHIGH VALLEY AND ALLENTOWN-BETHLEHEM-EASTON MSA ============================================================= Lehigh Northampton A-B-E County County MSA ============================================================= Population 1995 Estimate 299,269 256,899 615,654 1990 Census 291,130 247,105 595,081 1990-1995% Change 2.8% 4.0% 3.5% Households 1995 Estimate 116,004 94,376 233,458 1990 Census 112,887 90,955 225,831 1990-1995% Change 2.8% 3.8% 3.4% 1995 Median Household Income $ 37,738 $ 38,659 $ 37,136 1995 Average Household Income $ 46,878 $ 47,061 $ 45,807 1990 Average Home Value $113,429 $117,969 $111,218 1990% College Graduates 12.6% 10.7% 11.1% ============================================================= Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ============================================================= Households Similar to most areas of Pennsylvania, the Lehigh Valley Region, the MSA and Lehigh County have witnessed an increase in the number of total households, however, a decrease in the total household size. The number of households in the MSA total approximately 233,458 in 1995 indicating an average household size of 2.56. Lehigh County had the smaller household size of 2.51 in 1995 which can be primarily attributed to the fact that it includes Allentown which is a city. Typically, cities tend to have a smaller household size than a suburban area. As shown above, the number of households in the Lehigh Valley Region has increased annually by approximately 1.24% since 1980, while population growth was only 0.81% for the same time period. This can be attributed to the declining average household size. - -------------------------------------------------------------------------------- 9 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- The projected growth in households over the next five years in the Lehigh Valley region and the MSA is expected to be even greater than the population growth. This indicates a continuing declining number of persons per household. Lehigh County, where the subject property is located, is expected to continue to witness household growth over the next five years, albeit a slower a rate. Income The Lehigh Valley Region and the Allentown-Bethlehem-Easton MSA are considered to be relatively middle class areas. The median household income in the Lehigh Valley Region and MSA of $37,136 and $38,199 is slightly greater than the state average. Northampton County has the highest median household income of in the region. Shown below is a breakdown of the median household income for the Lehigh Valley Region as well as the MSA. ====================================================================== MEDIAN HOUSEHOLD INCOME LEHIGH VALLEY REGION & ALLENTOWN-BETHLEHEM-EASTON MSA ====================================================================== 1995 2000 ANNUAL ESTIMATE PROJECTION % CHANGE ====================================================================== Lehigh County $37,738 $43,759 3.19% Northampton Country $38,659 $45,281 3.43% Lehigh Valley Region $38,190 $44,520 3.32% A-E-B MSA $37,136 $43,221 3.28% ====================================================================== Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ====================================================================== The Lehigh Valley Region is expected to outperform the state of Pennsylvania with regards to median household income growth. Northampton County, where the subject property is located, is expected to witness similar income growth to the region of over 3.43 percent over the next five years. Based on the above, the Lehigh Valley Region and the MSA are both expected to experience modest income growth over the next five years. Employment The Lehigh Valley Region has a predominant industrial and manufacturing base in addition to a service producing economy. Consistent with national trends, one of the most significant changes in the area's economy over the last decade has been the decline in manufacturing employment. In 1980, the manufacturing sector employed approximately 34.5% of the total non-farm employment in the region. By 1996, manufacturing employment dropped to 22.4% of total - -------------------------------------------------------------------------------- 10 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- employment. Although the manufacturing industry has declined, it still represents a significant portion of the employment base in the region. During the same period, the service sector, which includes the accounting, legal, advertising, entertainment, health care, education, business, and publishing industries, increased substantially from 19.3% to 30.2% of total non-farm employment. This large increase in service jobs more than made up for the jobs lost in the manufacturing sector. Other key economic sectors include the trade sector representing 20.9% of total non-farm employment. Major employers in the Lehigh Valley Region include Bethlehem Steel Corporation, AT&T Technologies/Bell Labs, Air Products & Chemicals, Inc., Mack Trucks Inc., Day-Timers Inc, Binney & Smith Inc., Burron Medical Inc., and Victaulic Co, of America. In the Allentown-Bethlehem-Easton MSA the following is the ranking of the ten largest employers. ====================================================================== LEHIGH VALLEY REGION LARGEST EMPLOYERS - ---------------------------------------------------------------------- Rank Employer Type of Business # of Employees ====================================================================== 1 Lehigh Valley Hospital Acute-care Hospital 5,100 2 Pennsylvania Power & Electric Utility 4,268 Light Co. 3 Air Products & Gas and Chemical 4,000 Chemicals, Inc. Products 4 AT&T Microelectronics Electronics 3,800 5 Bethlehem Steel Corp. Steel Manufacturing 3,600 6 Saint Luke's Hospital Acute Care Hospital 2,397 7 Wood Co. Food Service 2,000 8 Allentown School Public Schools 1,800 District Mack Trucks, Inc Vehicle Manufacturer 1,800 9 Bethlehem Area School Public Schools 1,500 District Day-Timers, Inc. Stationary Products 1,500 - ---------------------------------------------------------------------- 10 Easton Hospital Acute-care Hospital 1,470 - ---------------------------------------------------------------------- Source: Lehigh-Valley Profile and Trends, 1996 ====================================================================== A number of Fortune 100 Companies have recognized this area's good transportation network and good location. As a result Kraft General Foods, K-Mart, Bell Telephone, AT&T, Daytimers and other large firms have built large distribution facilities in the area. In addition, trucking companies such as Roadway Express, Carolina Freight Corporation, and others have also been attracted by the Lehigh Valley's market accessibility. Shown on the following page is a chart which outlines total employment and the composition of the different employment industries in the Allentown-Bethlehem-Easton MSA. The figures shown on the following page reflect the most recently published employment totals for January - -------------------------------------------------------------------------------- 11 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- 1996. (It should be noted that the Bureau of Labor Statistics does not break out this information for the counties within the MSA). ========================================================================== ALLENTOWN-BETHLEHEM-EASTON MSA NON-AGRICULTURAL INSURED EMPLOYMENT BY MAJOR INDUSTRY DIVISION 1995 AND 1995 COMPARISON - NOT SEASONALLY ADJUSTED ========================================================================== Employment Employment Change Industry 1/95 Share 1/96 Share 1995-1996 (000s) (000s) ========================================================================== Manufacturing 60.4 23.9% 56.5 22.4% -6.5% Construction/ 9.3 3.7% 9.1 3.6% -2.2% Mining TCPU 13.5 5.3% 14.0 5.6% 3.7% Trade 53.1 21.0% 52.7 20.9% -0.8% FIRE 13.4 5.3% 13.6 5.4% 1.5% Services 73.8 29.2% 76.1 30.2% 3.1% Government 29.5 11.7% 30.0 11.9% 1.7% - -------------------------------------------------------------------------- TOTALS 253.0 100% 252.0 100% -0.4% - -------------------------------------------------------------------------- Source: Bureau of Labor Statistics Compiled by: CB Commercial Real Estate Group, Inc. ========================================================================== In January 1996, the total non-farm employment in the Allentown-Bethlehem-Easton MSA totaled 252,000 jobs. Over the past year, total employment in the MSA declined by less than one percent, compared to the previous year which witnessed an increase of 3.6%. The majority of the employment industries witnessed an increase over the past year, however, manufacturing witnessed a decline of 6.5% which resulted in overall decline in total employment. Construction and mining also witnessed a declined of 2.2%, while trade witnessed a decline of less than one percent. Services added 2,300 jobs, while TCPU added 1,500 jobs. Overall, the Lehigh Valley Regional economy witnessed a slight decline in 1995 given the significant decline in the manufacturing industry. Over the next decade, it is projected that manufacturing jobs will continue to decline, however, these job losses will be offset with increases in the service industry, which is projected to increase by 3.6% annually over the next decade (compared to a 1.0% annually decline in the manufacturing industry). The Joint Planning Commission for the Lehigh Valley Region project annual average employment growth of 2.7% over the next decade. The unemployment rate in the Lehigh Valley Region has continued to decline since 1992. In 1992 the unemployment rate was 7.2% compared to 1995 with an average unemployment rate of 5.9% in Lehigh County. Unemployment followed a similar pattern in Northampton County. Shown below is the average unemployment rate for the area. - -------------------------------------------------------------------------------- 12 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- =================================================== AVERAGE UNEMPLOYMENT RATES =================================================== YEAR LEHIGH COUNTY NORTHAMPTON COUNTY --------------------------------------------------- 1992 7.2% 8.0% 1993 6.7% 6.9% 1994 6.0% 6.5% 1995 5.9% 5.9% --------------------------------------------------- Source: Bureau of Labor Statistics =================================================== ============================================================= CIVILIAN LABOR FORCE & EMPLOYMENT ESTIMATES LEHIGH VALLEY REGION ============================================================= LEHIGH COUNTY NORTHAMPTON COUNTY ------------------------------------------------------------- PERIOD 1/95 1/96 1/95 1/96 Labor Force 133,531 132,779 110,503 110,704 Employment 125,524 123,468 103,111 101,425 Unemployment 8,007 9,311 7,392 9,279 Unemployment 6.0% 7.0% 6.7% 8.4% Rate ------------------------------------------------------------- Source: Bureau of Labor Statistics ============================================================= As shown above, the labor force base in Lehigh County declined over the past year, while unemployment increased, resulting in a higher unemployment rate. As of January 1996 the unemployment rate was 7.0%, approximately 1.0% higher than the previous year. The decline in employment, however, can be partially attributed to the weather conditions during the first month of 1996, otherwise referred to as the "Blizzard of 1996". We do not expect the higher unemployment rate to continue throughout the year in 1996. In fact, labor projections indicate a decline in the unemployment rate in the first quarter 1996. In Northampton County, although the labor force slightly increased, the number of employed persons declined, resulting in an increase in the unemployment rate from 6.7% in 1995 to 8.4% in 1996. Transportation The Lehigh Valley region contains excellent transportation routes. Some of the major routes that are in and around the county include Interstate 78, Routes 22, 145, 29, 33, and several others. In addition, the Pennsylvania Turnpike Northeast Extension (a.k.a. Route 9) extends through the western portion of the county. Overall, the transportation routes servicing the area are considered to be adequate. - -------------------------------------------------------------------------------- 13 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NEIGHBORHOOD AREA MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 14 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Conclusion and Relevance to the Subject Property The Allentown-Bethlehem-Easton MSA has a diverse and stable economy which is primarily fueled by manufacturing and services. Despite the downturn in Pennsylvania's economy over the past several years, the Lehigh Valley Region has shown signs of strength. Over the past several years, the Lehigh Valley Region has witnessed increases in population, income characteristics, and employment. However, given the hefty manufacturing losses, total employment in the MSA declined over the past year. It is projected that in the future, while manufacturing losses will continue, it will be offset by increases in the service industries. Based on the aforementioned, we expect continued growth, albeit at a slower pace, for the foreseeable future. Further, as continued growth occurs, the Lehigh Valley Region should continue to be a desirable location for real estate investment and commercial development over the long term. NEIGHBORHOOD INFLUENCES Location The subject property is located on the north side of Route 248 in Palmer Township, Pennsylvania. The geographic boundaries of the subject are not exact, but the immediate neighborhood is generally considered to be: North: Tatamy South: Glendon East: Easton West: Bethlehem Land Use The subject is generally located in a suburban neighborhood. Developments in the immediate vicinity of the subject consist of a mixture of commercial, industrial, and residential uses. Within the subject's immediate area, at the rear of the subject property there is a Day's Inn Hotel and residential development, while development along Route 248 is primarily commercial in nature with a number of pad sites and a K-Mart & Weiss shopping center southeast of the subject. Overall, the neighborhood appears to be approximately 95 percent developed. Access Accessibility to the neighborhood in general, and to the subject property, is considered adequate. Routes 248, 33, 115, as well as several others provide the primary access to the site. Interstate 78 is located to the south of the subject and U.S. Route 22 is located north of the subject. These Interstates provide good high-speed east/west transportation routes to and from - -------------------------------------------------------------------------------- 15 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- the county. The aforementioned roadways provide adequate accessibility throughout the neighborhood and other locations. In addition, the neighborhood has an adequate level of secondary roadways which further enhance accessibility. Allentown-Bethlehem-Easton Municipal Airport is situated west of the subject property in Allentown. Demographics Selected Neighborhood demographics in a one, three, and five mile radius from the subject are shown in the following table: ============================================================== NEIGHBORHOOD DEMOGRAPHICS EASTON, PA ============================================================== 1 mile 3 mile 5 mile -------------------------------------------------------------- Population 1995 Estimate 6,532 54,808 113,581 1990 Census 6,522 52,286 107,104 1990-1995% Change 0.2% 4.8% 6.0% Households 1995 Estimate 2,510 20,340 42,029 1990 Census 2,501 19,426 39,692 1990-1995% Change 0.4% 4.7% 5.9% 1995 Median Household Income $ 43,820 $ 36,479 $ 38,795 1995 Average Household Income $ 50,382 $ 43,688 $ 45,872 1990 Average Home Value $123,933 $ 99,367 $108,681 1990% College Graduates 12.2% 9.8% 10.7% ============================================================== Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ============================================================== As indicated by the above information, the demographic profile becomes less favorable inside a three-mile radius. Income levels, as well as home values are significantly higher in a one-mile and five-mile radius. However, the population and households within a three-mile radius have continued to increase which is positive. Growth and Trends Due to the mature nature of the area, there has been little new development within the subject's immediate area. The majority of the new development is concentrated further north along Route 248 at the intersection of Route 33. The newest development is Northampton Crossing which consists of 500,000 square feet and is anchored by WalMart, Sam's Club, Sears Hardware, and - -------------------------------------------------------------------------------- 16 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Redner's Warehouse. This shopping center opened in 1995. Other than Northampton Crossing, there has been little other new development within the market. Conclusion and Relevance to the Subject Property The subject is situated in a suburban neighborhood that features a mixture of commercial, industrial and residential developments. However, Route 248 is predominantly commercial in nature. The area has adequate accessibility to the local transportation system since Interstate highways are located to the north and south. The general character and uses in the area are not anticipated to change in the near future. In summary, we expect development and population to increase modestly over the foreseeable future. - -------------------------------------------------------------------------------- 17 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- MARKET ANALYSIS Retail Overview Allentown has witnessed limited growth over the past few years despite the economic troubles the region has experienced. As noted in the previous section, there has been only one significant new development within the past five years. Northampton Crossing, which is located at the intersection of Routes 33 and 248, opened in 1995. This shopping center, which consists of approximately 500,000 square feet, has a number of anchor tenants including WalMart, Sam's Club, Sears Hardware, and Redner's Warehouse. The center has four vacant units out of twenty-five suites. We are not aware of any proposed shopping centers within the city of Reading in upcoming years. According to Strategic Mapping, Inc., total retail development within a three mile radius of the subject property consists of approximately 1.4 million square feet. Furthermore, retail development within the five and seven mile radii account for 1.4 and 3.9 million square feet, respectively. Local Retail Market In order to project future performance of the retail space in the subject property consideration has been given to various market components that affect the supply and demand for this type of real estate property. Specifically we have: o Inspected the site and surrounding areas for the purpose of familiarizing ourselves with all the locational and environmental factors. In this regard, we have directed our attention to the physical qualities of the site, access and circulation, surrounding uses, and relationship to sources of market support. o Reviewed the principal economic growth trends in the area in industry, population and employment. Our intention was to identify the degree of underlying support for existing improvements and future growth. o Analyzed existing and foreseeable market conditions for retail properties in the area. o Analyzed demographics of the subject property's trade area as well identified competition in order to assess, the subject property's current as well as future position in the market. Trade Area The trade area of a shopping center is defined as the geographic area from which the sustaining patronage for steady support of a center is obtained. Determination of the boundaries is contingent upon various factors including but not limited to the nature of the center, accessibility, physical barriers, location of competing facilities, and limitations of driving time and distance. - -------------------------------------------------------------------------------- 18 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- The subject's general trade area is considered to be that which encompasses a seven-mile radius of the subject center. We broke this down further to include a three-mile ring (primary), a five-mile ring (secondary) and a seven-mile ring (tertiary). Definition Of The Trade Area The primary ingredients for success in these types of projects include the nature of the competition, population density, income levels, and disposable income. The actual size of the population needed to support this type of project cannot be fixed due to the complexities of the above factors, as well as changing methods of merchandising. Local conditions, such as number of households, income levels, and existing centers within the trade area can have the most dramatic impact upon any given project since these factors are what determine the purchasing power in an area. An additional ingredient leading to the success of a shopping center would be the tenant mix and characteristics of the leading tenants which attract shoppers to the project. We have analyzed demographic data, competition, income levels for the subject trade area in the following sections. The demographic profiles of the primary, secondary and tertiary trade areas are presented in the Neighborhood Influences section of the report. Additional demographic information is contained within the Strategic Mapping, Inc. Profile Report located within the Addenda. Population The sales potential of a center is directly related to its proximity to the number of potential patrons. The historical and projected trends for population are important to examine when analyzing the trade area of a shopping center. The historical population trends for the subject's trade areas indicate an increase in population between 1980 and 1995 followed by a further increase projected from 1995 to the year 2000. In the primary trade area the population increased by 4.7% between 1980 and 1990 to 63,766 and then witnessed an increase to 66,930 in 1995. Population projections indicate a further increase to 69,519 between 1995 and the year 2000. Both the secondary and tertiary trade areas witnessed a similar pattern and future trend in population in these areas. In order to further analyze the population change, we have examined the distribution of the population by age. When analyzing the population distribution by age, it should indicate in what age groups the population shifts are projected to take place. This is important to distinguish if it will have a great impact on the retail sales of the subject center. Shifts in the age groups under 24 years of age will affect the subject; however, less drastically than changes in the subject's core market approximately between the ages of 25 and 54. - -------------------------------------------------------------------------------- 19 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- As illustrated in the Profile Report located in the Addenda, a large percentage of the population in all three trade areas are in the age groups from 25 - 54. Estimated figures for 1995 indicated that the median age was slightly higher than the 1990 census in all three trade areas ranging from 35.6 to 37.0. Overall, the diversification among age groups is very common among other retail trade areas. Household Trends When analyzing the demographics for a retail center, it is most important to focus on the trends in the household population. A household consists of one or more persons occupying a dwelling unit. A family would be considered a household unit; however single persons living alone or two or more unmarried persons sharing a dwelling are also considered a household unit. The household unit is perhaps the best indicator in determining the economic health of a trade area. One of the important components which bonds a household together is it's economic strength as a unit as compared to the economic viability of an individual; single person households not withstanding. If the population is slightly decreasing and yet the number of households is increasing, this would not necessarily be a negative indicator. This would imply that the average household size was shrinking. Each household has demand for goods that likely is not duplicated with a larger household size. This demand is duplicated however in the number of households. Similar to population figures, the number of households in the trade area increased between 1980 and 1990. Subsequently, the number of households increased between 1990 and 1995 though at an accelerated pace in comparison to the increase witnessed in the previous decade. The number of households are projected to increase further in all three trade areas in upcoming years. Household Income The median household income in the subject's trade areas increased annually at an average rate of 3.0% from 1990 to 1995. Thus, the household incomes in the area grew at a pace slightly below inflation during this period. The projected annual income growth rates between 1995 and the year 2000 are approximately 3.0%, again below the projected rate of inflation. Overall, household income levels varied slightly between the three trade areas. The median household income levels ranged from $36,054 to $38,900 in 1995 with the primary trade area representing the low end of the range. Employment The income characteristics of the trade areas for the subject property indicate that this is a predominately white-collar market. The tertiary trade area had the highest percent in white-collar employment at 55.7%, while the primary trade area had the lowest at 55.0%. Blue-collar - -------------------------------------------------------------------------------- 20 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- employment percentages in the primary, secondary and tertiary trade areas were 30.6%, 30.5% and 30.6%, respectively. The remaining percentages were in special services categories. The 1990 Census information indicates that the unemployment rates ranged from a high of 5.1% in the primary trade area to a low of 4.4% in the tertiary trade area. As discussed in the Location Analysis, the most recent unemployment rate in was 8.4%, which indicates an overall increase in employment from the 1990 Census. We feel the subject market will witness modest employment growth in upcoming years and a declining unemployment rate. Expenditure Potential The Expenditure Potential charts located in the Addenda outline Strategic Mapping, Inc. retail sales projections for the subject trade area. The highest sales growth in the primary trade area appears to be for electronics, drug, and video stores. These three categories also represent high growth in the secondary and tertiary trade areas. The average growth rate for retail sales in the primary trade area is projected at 2.21% in the primary trade area, 2.34% in the secondary trade area, and 2.26% in the tertiary trade area. Strategic Mapping, Inc. examines the product potential for various store types for each portion of the subject trade area. Based on statistical sampling, Strategic Mapping has derived a benchmark per household expenditures for each store type. Comparing the figures in the trade area to the benchmark figure, it is apparent that those individuals in the subject trade area are much more likely to spend on items in drugs, groceries, and convenience stores. The Strategic Mapping Expenditure Potential Index is defined as follows, 'An index which shows the amount by which an area per household expenditures, differed from that of the benchmark.' The benchmark is defined as the average or common expenditure among households for a larger region. Values below 100 signify that this area is below the benchmark per household expenditures and correspondingly values above 100 indicate a higher than average expenditure per household. The overall Expenditure Index for the primary area is 99.3, while the benchmark indices for the secondary and tertiary trade areas are 101.1 and 101.7, respectively. In conclusion, the expenditure indices for the subject trade areas indicate that the secondary and tertiary area populations spend more than the benchmark household on retail, while the primary area populations spend less than the benchmark. The area generates retail sales based on the existing population, as well as the increasing income potential. Market Indicators Market Indicators The subject center contains 33 tenant suites ranging in size from approximately 720 to 15,400 square feet and four outparcels ranging in size from 1,800 to 3,450 square feet. Discussions with local leasing agents reveal that typical ground level satellite space rents in the area - -------------------------------------------------------------------------------- 21 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- generally range from $8.00/SF to $17.00/SF depending upon the physical and locational characteristics of the space and $5.50/SF to $10.50/SF for anchor space depending upon the same criteria. Percentage rent clauses tend to be uncommon for satellite tenants. Retail leases are typically structured on an absolute net basis with flat rents over the term. Based upon discussions with brokers and managing agents in the area as well as our observations during our inspection, competing centers in the subject's market area have vacancy rates which generally fall within the 0.0% to 10.0% range with an average vacancy rate of approximately 5.0%. The subject center is currently 99% occupied. Summary The outlook for the subject's market is good. Future projections indicate an increase in population and households in all three trade areas from 1980 through 1995. Further, the trade areas exhibit increased spending potential over the same period, while income levels appear to be increasing at rates slightly below projected inflationary rates which is common during periods of economic recovery. Overall, the subject trade areas reflect relatively strong retail characteristics; thus, we conclude that the trade area represents a viable retail market. - -------------------------------------------------------------------------------- 22 PROPERTY DESCRIPTION ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- SITE ANALYSIS Location: The subject is located on the east side of Nazareth Pike (a.k.a. Route 248) in Palmer Township, Northampton County, Pennsylvania. Parcel Number: Map L9, Block 32, Lot 1A Land Area: 16.1943 acres, or 705,424 square feet Shape and Frontage: The subject consists of an irregularly shaped parcel with a total of 705,424 square feet, or 16.1943 acres. The site has approximately 367 feet of frontage along Route 248. Exterior Parking: There are 847 parking spaces on site. Topography and The site is generally level. Drainage: Soils: No soil report was provided and it is assumed that the soils is adequate for the existing use. Easements: No title report was provided in connection with this appraisal. No survey showing the location of any easements was available. Thus, it is not possible to make a definite conclusion regarding any potential impacts on value of the location of any such easements or encroachments. It is specifically assumed that any easements, restrictions, or encroachments that might appear against the title would have no adverse impact on marketability or value. Covenants, No private deeds or restricting convenants affecting Conditions, and the development, other than zoning, were found to Restrictions: affect the site. Utilities All public utilities including gas, electricity, and telephone, as well as water, storm, and sanitary sewer systems are available to the site. Flood Zone: According to maps published by the Federal Emergency Management Agency (FEMA), the subject lies within Zone C as indicated on FEMA Community Map Panel No. 420728-001 B, dated March 10, 1978. This panel is not printed. This zone is described as follows: FEMA Zone C: "This area is identified in the community flood insurance study as an area of moderate or minimal hazard from the principal source of flood in the area. Buildings in this zone could be flooded by severe, concentrated rainfall coupled with inadequate local drainage systems. Local storm water drainage systems are not normally considered in the community's Flood Insurance Study. The failure of a local - -------------------------------------------------------------------------------- 23 ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- drainage system creates areas of high flood risk within this rate zone." Environmental Issues: The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the property that would cause a loss in value. No evidence of hazardous waster or toxic materials was visible. CB Commercial has no knowledge of the existence of these substances on or in the subject property. However, CB Commercial is not qualified to detect hazardous waster or toxic materials. Adjacent Properties: North: Residential uses. South: Retail and industrial uses. East: Residential uses. West: Industrial uses. Comments/Conclusions: The subject is a 16.1943-acre site on a paved street served by necessary utilities. Access and visibility are considered be good. There are no adverse soil conditions of which CB Commercial Real Estate Group, Inc. is aware. The shape of the parcel is irregular and results in no specific limitation. The topography is sloping though possesses no specific development limitation. There is no excess land and the unimproved portions of the site are fully utilized by a macadam parking lot. From a physical standpoint, the site is considered to be adequate for many types of development. - -------------------------------------------------------------------------------- 24 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS The subject improvements were constructed in 1955 and were renovated in 1987. The improvements consist of a single-story community shopping center containing 131,477 square feet of gross leaseable area. The leaseable area includes five pad sites including McDonald's, Second National Bank, Long John Silver's, Pizza Hut, AMC Theater, and twenty-eight suites. The following is a description of the improvements based on our physical inspection, municipal records, and from discussions with and materials provided by the client. The basic construction features are summarized as follows: Construction Class The class of construction is the basic subdivision in Marshall Valuation Service which divides all buildings into five basic groups by type of framing (supporting columns and beams), walls, floors, roof structure, and fireproofing. The subject is considered to be of construction Class B(1). Competitive Rating The subject is considered a Class B building in terms of quality as it is perceived in the marketplace. Foundation Poured concrete Frame Concrete block over a steel frame Floor Construction Concrete slab Exterior Walls Load-bearing concrete block over a steel frame with split-faced block. Fenestration Aluminum framed glass windows and double-paned glass front doorways. Roof Structure & Covering Flat, presumably built-up composition covering over steel deck with steel bar joist supports. We were unable to inspect the roof and assume the roof is in average overall condition. Exterior Condition Average - ---------- (1) The primary characteristic of Class B Buildings is the reinforced concrete frame in which the columns and beams can be either formed or precast concrete. They may be mechanically stressed, and the structure is fire resistant. (Source: Marshall Valuation Service) - -------------------------------------------------------------------------------- 25 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Interior Partition System Metal studs with gypsum board cover. Interior Finishes - Tenant Space Floors: Combination of vinyl tile and carpet. Walls: Painted or covered gypsum board. Ceilings: Suspended acoustic tiles. Lighting: Recessed florescent lighting. Summary: The interiors of the subject are considered to be of average to good quality and similar to competitors. HVAC Heating and ventilation is provided to the majority of the tenant suites by roof-mounted HVAC units. Each of these units pump the hot air throughout its suite via sheet metal air duct work hidden above the dropped ceiling. Air conditioning is supplied by the same system utilizing the duct work and supplying cool air during the summer months. The HVAC system is a gas-fired forced air system. Electrical The electrical system is assumed to be in good working order and adequate for the building. Fire Protection It is assumed that the subject has adequate fire alarm systems, fire exits, fire extinguishers, fire escapes and/or other fire protection measures to meet local fire marshal requirements. Plumbing The plumbing system is assumed to be in good operating condition. Parking Surface parking is provided for 847+ vehicles. Landscaping Landscaping on the subject property is adequate. ADA Compliance Handicap access appears to be available to all areas of the center. However, we are not qualified to determine compliance with the requirements. Please refer to the specific limiting condition regarding ADA compliance. Environmental Issues The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the improvements which would cause a loss in value. - -------------------------------------------------------------------------------- 26 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Functional Quality of Space The interior floor plans are flexible and will accommodate a variety of tenant layouts. There are no observed design problems and none are reported by management. Access to the tenant suites is available at the front and rear of the center. There are no elevators within the center. Deferred Maintenance No deferred maintenance was observed or reported. The improvements have been adequately maintained since it was constructed in 1955. Economic Age and Life Based on the current condition, we estimate the effective age to be approximately 30 years. According to the Marshall Valuation Service cost guide, buildings of this type and quality have an expected life of approximately 45 years. Therefore, the remaining economic life (expected life minus effective age) is estimated at 15 years. While we observed nothing to suggest a different economic life, a capital improvement program could extend life beyond that stated above. Quality/General Condition The subject property conforms well with competitors and substitutes in the area. The quality of construction is typical of the area. Interior amenities are similar to competing properties of the same approximate age. The general condition of the improvements is average. We observed no evidence of structural fatigue and the improvements appear sound. We are not qualified to determine structural integrity, however, and recommend that the reader rely upon an expert in this field for further determination. Conclusion/Comments The subject property is an average quality shopping center located in a relatively stable area. The improvements generally conform with competitors and substitutes in the neighborhood. - -------------------------------------------------------------------------------- 27 ================================================================================ ZONING - -------------------------------------------------------------------------------- ZONING The subject's zoning requirements are detailed below. ====================================================================== ZONING SUMMARY ====================================================================== Current Zoning: GC; General Commercial Legally Conforming: Yes Uses Permitted: Retail,Service Establishments, Office, Place of Worship, Cultural or Community Center, Publicly-owned Recreation or Township-owned use. Zoning Change: Not likely ====================================================================== Category Zoning Requirement ====================================================================== Minimum lot size:: 10,000 square feet Site coverage: 40% Front setback: 60 feet Rear setback: 15 feet (25 feet of an existing residential use) Side yard setbacks: 10 feet (25 feet of an existing residential use) Height limit: 35 feet Parking: 1 space per 400 sq. ft. of gross floor area. ====================================================================== Source: City of Allentown Zoning Ordinance Compiled by: CB Commercial Real Estate Group, Inc. ====================================================================== ZONING ANALYSIS AND CONCLUSIONS Based upon our review of the bulk requirements and allowable uses, the subject property appears to represent a legal existing and conforming use. - -------------------------------------------------------------------------------- 28 ================================================================================ TAX ANALYSIS - -------------------------------------------------------------------------------- TAX AND ASSESSMENT DATA The subject property is assessed by Northampton County, Pennsylvania. According to the assessor's office, properties within Northampton County are assessed at 50% of market value. The last general assessment of properties in Northampton County was 1994. No re-valuation is schedule for the near future. The tax assessment for the subject property is presented below. =================================================== 1996 ASSESSMENT =================================================== Map/Block/Lot: L9/32/1A Land: $1,299,200 Improvement: $3,281,600 ------------ ---------- Total Assessment $4,580,800 Estimated Taxes $ 162,298 =================================================== Source: Northampton County Assessor's Office Compiled by: CB Commercial Real Estate Group, Inc. =================================================== Based on the current tax rate of $35.42 per $1,000 assessed value, the estimated taxes for the subject is shown in the previous table. The total taxes for the subject are $162,298, or $1.23 per square foot based on the rentable square footage of the center. Tax and Assessment Conclusion As indicated in the table above, school taxes are collected on a fiscal year and town/county taxes are collected on a calendar year. We have estimated the taxes for the shopping center at $162,298 calendar year 1996 in our cash flow. Our discussions with the assessor indicated that the subject's taxes have increased inline with the area's inflation rate, or approximately 3.0% per annum. We have, therefore, projected a long-term tax growth for all taxes equal to 3.0% per year. - -------------------------------------------------------------------------------- 29 ================================================================================ HIGHEST & BEST USE ANALYSIS - -------------------------------------------------------------------------------- HIGHEST AND BEST USE In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The four criteria that the highest and best use must meet are: o legal permissibility; o physical possibility; o financial feasibility; and o maximum profitability. Highest and best use is applied specifically to the use of a site as vacant. It is recognized that in cases where a site has existing improvements, the concluded highest and best use as if vacant may be different from the highest and best use given the existing improvements (as improved). The existing use will continue, however, until the land value, in its highest and best use, exceeds that total value of the property under its existing use plus the cost of removing or altering the existing structure. Implied in the highest and best use is a recognition of the contribution of a specific use to the community environment or to the community's development goals, in addition to wealth maximization of individual property owners. Also implied is that the conclusion of highest and best use that results from the appraiser's judgment and analytical skill, i.e., that the use determined from the analysis represents an opinion, not a fact to be found. Highest and best use analysis involves assessing the subject both as if vacant and as improved. HIGHEST AND BEST USE AS THOUGH VACANT Legal Permissibility The legally permissible uses were discussed in detail in the site analysis and zoning sections of this report. Based on our review of the zoning restrictions, the site can be developed with several different uses, including retail and commercial office uses. Physical Possibility The physical characteristics of the subject site were discussed in detail in the site analysis. Overall, a wide range of legally permissible uses would be physically possible, including a variety of commercial uses. Financial Feasibility The test of financial feasibility is put only to those uses which are legally permissible and physically possible. If the property is capable of generating a sufficient net income to cover the required rate of return on investment and provide a return to the land, then the usage is financially feasible within a defined price limit. - -------------------------------------------------------------------------------- 30 ================================================================================ HIGHEST & BEST USE ANALYSIS - -------------------------------------------------------------------------------- In our determination of financial feasibility we have analyzed current market rental rates for several different property types. The net income produced by the proposed or new improvements must provide a return above the cost to develop the property, including acquisition of the land. Through a cost/income analysis we have determined that development of the subject site is not financially feasible at this time. Based on the analysis of supply and demand factors at the present time, rents achieved for retail and/or office uses would not support the cost of construction. Based on the aforementioned, we have determined that development of the subject site at the present time with a retail center is not currently feasible. Maximum Profitability The final test of highest and best use of the site as though vacant is the use be maximally productive, yielding the highest land value. Based on our feasibility analysis we have determined that land banking the subject site is the maximally productive use at the present time. Conclusion: Highest and Best Use As Vacant The concluded highest and best use of the subject as though vacant is land banking until such time that development of the site with a retail/commercial facility is financially feasible. HIGHEST AND BEST USE AS IMPROVED Legal Permissibility As discussed, the subject site's zoning and legal restrictions permit a variety of land uses. Regardless, the site has been improved with a neighborhood shopping center. Based upon review of the Palmer Township's Zoning Ordinance, it is our opinion that the improvements are within the established guidelines. Physical Possibility The physical characteristics of the subject improvements were discussed in detail in the improvement analysis section of this report. Overall, the layout and positioning of the improvements is considered functional for shopping center use, and the floor plan is considered to be reasonable in comparison to other shopping centers in the area. The improvements have good retail features, have been adequately maintained, and are physically capable of sustaining their current use over the extended future. Financial Feasibility As with the highest and best use of the site as though vacant, the financial feasibility of the site as improved is market derived. Typically, for retail properties similar to the subject, the test of feasibility is based on the amount of rent that can be generated less operating expenses. If a - -------------------------------------------------------------------------------- 31 ================================================================================ HIGHEST & BEST USE ANALYSIS - -------------------------------------------------------------------------------- residual amount exists after paying the various expenses, then the land is being put to a productive use. At present, the subject is 100% occupied. CB Commercial estimates that the appropriate stabilized market occupancy approximates 95%. Based on the historical and current operating status of the subject property, CB Commercial anticipates that the improvements are capable of providing an adequate return on the investment before any debt service requirements. Therefore, we conclude that the current use of the improvements is a financially feasible use of the property as improved. Maximum Profitability Similar to the highest and best use of the site as though vacant, the maximum profitable use of the subject as improved should conform to neighborhood trends and be consistent with existing land uses. Although several uses may generate sufficient revenue to satisfy the required rate of return on investment and provide a return on the land, the single use that produces the highest price or value is typically the highest and best use. Conclusion: Highest and Best Use as Improved Based on the foregoing discussions, CB Commercial concludes that the highest and best use of the property, as improved, is consistent with the existing use as a shopping center. There are no apparent alternative uses of the existing improvements that would produce a higher net income and/or value over time than the current use. The current use is a legally permissible use and appears to represent the highest and best use as improved. Furthermore, CB Commercial does not believe that conversion of the improvements or demolition is warranted or financially feasible. - -------------------------------------------------------------------------------- 32 VALUATION ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- APPRAISAL METHODOLOGY The appraisal process is defined as an orderly program by which the problem is planned and the data involved is acquired, classified, analyzed and interpreted into an estimate of value. In this process three basic approaches to value are considered: Cost Approach, Sales Comparison Approach, and Income Capitalization Approach. In appraisal practice, an approach to value is included or omitted based on its applicability to the property type being valued and the quality and quantity of information available. The final step in the appraisal process is reconciliation -- a process by which CB Commercial analyzes alternative conclusions and selects a final value estimate from among two or more indications of value. CB Commercial weighs the relative significance, applicability and defensibility of each approach as it relates to the type of property being appraised. THE COST APPROACH The Cost Approach is based upon the proposition that the informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements which represent the highest and best use of the land or when relatively unique or specialized improvements are located on the site and for which there exist few sales or leases of comparable properties. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. SALES COMPARISON APPROACH The Sales Comparison Approach utilizes sales of comparable properties, adjusted for differences, to indicate a value for the subject property. Valuation is typically accomplished using physical units of comparison such as price per square foot, price per unit, price per floor, etc., or economic units of comparison such as gross rent multiplier. Adjustments are applied to the physical units of comparison derived from the comparable sale. The unit of comparison chosen for the subject is then used to yield a total value. Economic units of comparison are not adjusted, but rather analyzed as to relevant differences with the final estimate derived based on the general comparisons. - -------------------------------------------------------------------------------- 33 ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- The reliability of this approach is dependent upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c) the degree of comparability; (d) the absence of atypical conditions affecting the sales price. Although there have been few sales in the region, the sales that were gathered were utilized to form an opinion of value. However, given the lack of relevant sales data, we have not placed minimal reliance upon this approach and have used it to provide additional support to the Income Approach. INCOME CAPITALIZATION APPROACH The methodology of the Income Capitalization Approach is to determine the income-producing capacity of the property on a stabilized basis by estimating market rent from comparable rentals, making deductions for vacancy and collection losses and building expenses, then capitalizing the net income at a market-derived rate to yield an indication of value. The capitalization rate represents the relationship between net income and value. Related to the direct capitalization method is the discounted cash flow method. In this method of capitalizing future income to a present value, periodic cash flows (which consist of a net income less capital costs, per period) and a reversion (if any) are estimated and discounted to a present value. The discount rate is determined by analyzing current investor yield requirements for similar investments. Since investors are active in the marketplace for properties similar to the subject, the Income Capitalization Approach is particularly applicable to the appraisal problem at hand. There is an adequate quality and quantity of income and expense data available to render a reliable and defensible value conclusion. For income producing properties similar to the subject, the Income Capitalization Approach is considered to be the most reliable. Therefore, this approach has been employed as the primary methodology for this assignment. - -------------------------------------------------------------------------------- 34 - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH The Sales Comparison Approach provides an estimate of market value based on analyzing transactions of similar properties in the market area. The method is based on the proposition that an informed purchaser would pay no more for a property than the cost of acquiring an existing one with the same utility. When there is an adequate number of sales of truly similar properties with sufficient information for comparison, a range of values for the subject property can be developed. There are various units of comparison available in the evaluation of sales data in this approach. The sale price per square foot is the most commonly used in this approach. The effective gross income multiplier (EGIM) is rarely used by market participants because of the inconsistencies in estimating effective or gross income, vacancy, and expense differences. We conducted a thorough sales search for comparable shopping centers in the subject's market area. Through our sales search, we were able to identify a limited number of sales with similar characteristics to the subject. The following table summarizes what are considered to be the most recent and proximate comparable sales. Detailed write-ups of each comparable are included in the addendum.
============================================================================================ SUMMARY OF COMPARABLE SALES ============================================================================================ Gross No. Property Name/ Sale Leasable NOI OAR Sale Price Location Date Area (SF) Sale Price Per S.F. Per S.F. - -------------------------------------------------------------------------------------------- 1 15th & Allen St. 1/96 46,503 $4,242,000 $9.94 10.89% $ 91.22 Center 1401-1451 Allen Street Allentown Lehigh County, PA 2 Stefko Shopping Center 1/96 134,446 $5,618,000 $4.59 10.99% $ 41.79 Stefko Boulevard Bethlehem Northampton County, PA 3 Airport Square 03/95 258,466 $19,275,000 $6.96 9.34% $ 74.57 Shopping Ctr. Route 309 @ Rte. 202 Montgomery Twp. Montgomery County, PA 4 Kenhorst Plaza Shpg. 8/95 136,087 $11,000,000 $8.10 10.02% $ 80.83 Ctr. New Holland Rd. & Philadelphia Ave. Reading, Berks Cty., PA ============================================================================================ Compiled by: CB Commercial Real Estate Group, Inc. ============================================================================================
- -------------------------------------------------------------------------------- 35 - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF IMPROVED SALES The sales reflect unit prices ranging from a low of about $41.79 to a high of approximately $91.23/SF with the significant difference reflecting the economics of the various centers. The sales all had high levels of occupancy and were in generally good condition. The difference in unit prices then were more directly tied to net operating income and investor yield rates. The comparable sales presented offer a simplistic view of the market. Since only general details of existing income and expenses were available, specific analysis is nearly impossible. Accordingly, this method acts as a general gauge of the market and therefore will be utilized as support to our findings in the Income Approach. Analysis The following discussion analyzes the aforementioned comparables relative to the subject property. Sale 1 Sale number one, located at the intersection of 15th Street and Allen Street in Allentown, is a 46,503 square foot shopping center which sold in January of 1996 for $4,242,000 or $91.22/SF. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed circa 1950 and was in very good overall condition at the time of sale since it was recently renovated. Access, exposure, visibility and general locational attributes of the center are superior to the subject, however, the center is similar in size to the subject. Market conditions at the time of sale were similar to current market conditions. This sale's NOI is reportedly $462,049 or $9.94/SF indicating an overall rate of 10.89%. The economics of this property, at least in terms of NOI per square foot, are slightly superior to the subject. Sale 2 Sale number two, located in the City of Bethlehem, consists of a single-story community center which contains an aggregate 134,446 square feet. This center, known as the Stefko Shopping Center, sold in January of 1995 for $5,618,000, or $41.79/SF of gross leasable area (GLA). Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed in 1965 and appeared to be in average condition. The property's location with regard to access and visibility are considered superior to the subject. Furthermore, the center is significantly larger than the subject. Market conditions at the time of sale were similar to current market conditions. The NOI was reportedly $617,577 ($4.59/SF) indicating an overall rate of 10.99%. This property operates at a level of net income that are inferior to the subject. - -------------------------------------------------------------------------------- 36 - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- COMPARABLE SALES MAP - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 37 - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- Sale 3 Sale number three, Airport Square Shopping Center, is located on Route 309 in Montgomery Township, Montgomery County, Pennsylvania. This sale, consists of a single-story shopping center containing 258,466 gross leasable area. The property sold in March 1995 for $19,275,000, or $74.57/SF. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed in circa 1980 and appeared to be in good overall condition. The property's location with regard to access and visibility are considered superior to the subject. Furthermore, the center is somewhat larger than the subject. Market conditions at the time of sale were similar to current market conditions. The NOI was reportedly $1,798,923 ($6.96/SF), indicating an overall rate of 9.34%. This property operates at a level of net income that is inferior to the subject. Sale 4 Sale number four, Kenhorst Plaza, is located in Reading in Berks County, Pennsylvania. Kenhorst Plaza is located approximately three miles east of the subject property. It is a 137,000 square foot shopping center which sold in August 1995 for $11,000,000, or $80.00/SF. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed circa 1990 and was in good overall condition at the time of sale. Access, exposure, visibility and general locational attributes of the center are superior to the subject. Market conditions at the time of sale were similar to current market conditions. This sale's NOI is reportedly $1,102,305, or $8.10/SF indicating an overall rate of 9.34%. The economics of this property in terms of NOI per square foot are comparable to the subject's. Net Operating Income Analysis The net operating income level for the comparables ranged from $4.59 to $9.94 per square foot, per year. As noted, the subject's first-year NOI is $8.96 per square foot, representing the low end of the comparable range. Given the correlation between price paid per square foot and NOI per square foot it would seem reasonable to conclude that the subject would sell within the range established by the comparable properties. The following chart depicts the calculations involved in developing adjustment factors to be applied to the respective price per square foot units of comparison developed from the comparables employed. - -------------------------------------------------------------------------------- 38 - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- ================================================================================ NET OPERATING INCOME (NOI) ANALYSIS - -------------------------------------------------------------------------------- Sale Subject's NOI/SF Sale Price Adjustment Adjusted $/SF No. Sale's NOI/SF Multiplier $/SF for Subject - -------------------------------------------------------------------------------- 1 $8.96 0.90 $91.22 -$9.12 $82.10 ----- $9.94 2 $8.96 1.95 $41.79 +$39.70 $81.49 ----- $4.59 3 $8.96 1.29 $74.57 +$21.86 $96.43 ----- $6.96 4 $8.96 1.10 $80.83 +$8.08 $88.91 ----- $8.10 ================================================================================ For the most part, there is a direct correlation between the NOI/SF and sale price per square foot. As the net income level increases, so does the price paid per square foot. After adjusting the four sales, they support a range of value for the subject between approximately $81.50/SF to $96.00/SF. Based on our analysis, the subject's value would be approximately $90.00/SF. The subject has a total building area of 131,477 square feet. The value estimate via the Sales Comparison Approach is calculated as follows: ====================================================== Net Rentable Area of 131,477 square feet Subject Value per square foot $90.00 per square foot Indicated Value: $11,832,930 ROUNDED: $11,800,000 ====================================================== Overall, very little emphasis has been placed on this approach because of the quality of the data. It is used primarily as a check of the value derived via the Income Approach. We estimate the as is market value of the leased fee interest in the subject property, via the sales comparison approach, as of June 1, 1996, is: --- ELEVEN MILLION EIGHT HUNDRED THOUSAND DOLLARS --- ($11,800,000) - -------------------------------------------------------------------------------- 39 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH The Income Capitalization Approach reflects the subject's income-producing capabilities. This approach is based on the assumption that value is created by the expectation of benefits to be derived in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over period of time. The two common valuation techniques associated with the Income Capitalization Approach are direct capitalization and the discounted cash flow (DCF) analysis. DIRECT CAPITALIZATION Direct capitalization is the method used to convert a single year's estimate of income into a value indication. In direct capitalization, a precise allocation between return on and return of capital is not made because investor assumptions or forecasts concerning the holding period, pattern of income, or changes in value of the original investment are not simulated in the method. Direct capitalization is most appropriate when analyzing a stable income stream and in estimating the reversion at the end of a holding period. Using this method, the following sets forth the process: 1. Estimate the Potential Gross Income (PGI) from all sources that a competent owner should be able to generate from a property based on existing and/or market rents. 2. Deduct an estimate of Vacancy and Collection Loss (VCL) to arrive at an Effective Gross Income (EGI) estimate. 3. Deduct operating expenses from the estimate of EGI. The result is an estimate of the stabilized Net Operating Income (NOI). 4. Estimate an Overall capitalization rate (Ro, or OAR). 5. Divide the NOI by Ro, resulting in a value estimate at stabilized occupancy. 6. Adjust the stabilized value to account for "As Is" condition, if applicable. DISCOUNTED CASH FLOW ANALYSIS The discounted cash flow (DCF) analysis is a detailed analysis used when the future income is expected to be variant, usually as a result of numerous lease obligations and/or anticipated changes in income and expenses. It is also particularly relevant when institutional buyers are the most likely purchasers of the subject because institutional buyers often place great weight on this analysis. The DCF analysis specifies the quantity, variability, timing, and duration of NOIs and cash flows. Selecting the proper yield rate (discount rate) is essential. CB Commercial must consider the target yield sought by investors as well as yields derived from comparable sales and/or market information. The methodology is: - -------------------------------------------------------------------------------- 40 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- 1. Estimate the before-tax cash flows for each period of a projected holding period net of any capital expenditures such as leasing expenses and tenant improvements. 2. Estimate a discount rate and a terminal overall capitalization rate. 3. Estimate a selling price, known as the reversion, for the end of the projected holding period. 4. The cash flows and the reversion are then discounted to a present value estimate. APPROPRIATE CAPITALIZATION METHOD A number of factors were considered in evaluating the appropriateness of using the direct capitalization method and/or the DCF technique including the occupancy status, lease structures, above/below market rents and typical buyer behavior. As a result of considering the foregoing factors, both the DCF technique and the income capitalization technique are employed in this appraisal. ESTIMATE OF MARKET RENT Rent analysis involves both a study of market (comparable) rentals and the subject's existing rents (if any). Market rent is the rent that a property would most probably command in the open market; indicated by the current rents paid and asked for comparable space. SUMMARY OF COMPARABLE RENTALS CB Commercial surveyed competitive properties and lease transactions for comparison to the subject. The selected comparable rentals are summarized in the following chart with a map and discussions of each comparable provided on the following pages. ANALYSIS OF COMPARABLE RENTALS We have obtained comparable leases from shopping centers situated within the subject's regional market area which are summarized in the following table. In terms of satellite space, comparables #1 through #5 indicate that the leased spaces range in size from 950 to 9,910 square feet which adequately represents the subject's square footage range. All the leases cited were signed between 1994 and 1995 and represent the most recent leasing activity in the competitive marketplace. The leases include a variety of uses and represent a similar tenant mix to the subject center. The above leases are considered to be generally similar to the subject in terms of condition, quality and location. We have examined the average effective rental rates of these comparables and determined that the effective rent is similar to the face rent, since their was no tenant improvements or free and escalation's were similar. - -------------------------------------------------------------------------------- 41 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
========================================================================================================================== Center Name & Term Start No. Location Tenant (Yrs) Date Size Rent/SF Escalation Comments - ------------------------------------------------------------------------------------------------------------------------- 1 Kingston Plaza Everything 1 yr 9/95 6,500 $ 5.50 $950 Step No Option Third Avenue $0.99 Store 3 mos in Year 2 % Rent = 3% over East of Pierce $1,191,660 St, Kingston, PA - ------------------------------------------------------------------------------------------------------------------------- 2 Mark Plaza Spectrum Rents 5 yrs 10/95 3,600 $ 8.00 Flat for 1 5-yr Option @ N/S Route 11, term $9.00/SF Edwardsville, PA Keens Floral 5 yrs 8/95 7,000 $ 8.00 Annual 1 5-yr Option @ Factory step-up $8.83/SF % Rent = 3% over Natural Breakpoint Mattress Man 5 yrs 7/95 3,600 $11.50 Flat for No Option (Pad Site) term % Rent = 4% over Natural Breakpoint - ------------------------------------------------------------------------------------------------------------------------- 3 Birney Plaza Everything 3 yrs 09/95 4,000 $ 7.00 Flat for 1 3 yr Option @ N/S Route 11, $0.99 Store term $7.50/SF Moosic, PA % Rent = 3% over $933,000 - ------------------------------------------------------------------------------------------------------------------------- 4 Triangle Plaza Electronic 5 yrs 06/95 2,400 $11.50 Annual No Option Route 115 Systems Percentage No% Rent Wilkes-Barre, PA increase TCBY 5 yrs 03/95 2,200 $11.00 Annual 1 5 yr Option Prctge. No% Rent Inc. Party City 10 yrs 05/94 9,910 $11.00 $1.65/SF No Option Step-up No% Rent - ------------------------------------------------------------------------------------------------------------------------- 5 Gateway Plaza Holiday Hair 3 yrs 06/94 950 $15.48 Annual No Option N/S Route 11, Fashions Percentage No% Rent Edwardsville, PA (Renewal) increase McKenzie 3 yrs 06/94 3,080 $ 8.50 Annual No Option Prctge Inc. No% Rent ========================================================================================================================= SUMMARY OF COMPARABLE ANCHOR SPACE RENTALS ========================================================================================================================= 6 Pottstown Center Wal-Mart 20 yrs 07/95 121,267 $ 6.99 Flat for 6, 5-yr Options Montgomery Cty. term No% Rent Pottstown, PA 7 Route 6 Mall K-Mart 25 yrs 03/95 119,229 $5.77 Flat for 10, 5-yr Options N/S Route 6, term % Rent = 1% over Wayne County $20,000,000 Honesdale, PA 8 Bradford Towne K-Mart 25 yrs 07/94 94,481 $5.00 Flat for 10, 5-yr Options Centre, term % Rent = 1% over Bradford County $16,875,000 Wysox, PA 9 Builder's Square Builder's 25 yrs 03/94 106,400 $10.05 Flat for 10, 5-yr Options Center Square term No% Rent Cetronia Road Lehigh County Whitehall, PA - ------------------------------------------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. =========================================================================================================================
- -------------------------------------------------------------------------------- 42 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- COMPARABLE RENTALS MAP - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- These comparable centers are located throughout the metropolitan region in competitive areas to the subject property. Furthermore, they are all similar in age to the subject and considered to be of a similar functional design. All of the retail leases were written on a triple net basis, whereby the tenants assume their proportionate share of operating expenses, real estate taxes, and insurance. The higher rates typically reflect smaller satellite spaces, while lower rental rates are typically negotiated for anchor sized spaces. We have also considered asking rental rates in our analysis, however, they were deemed to be less reliable than the leases presented. As a result, we have not included asking rentals. The satellite space face rental rates ranged from $5.50/SF to $15.48/SF with a central tendency of $9.75/SF. However, the majority fell between $8.00/SF and $11.50/SF. The rents at the upper end of the range (i.e., $15.00) reflect rental rates for smaller spaces. In consideration of the number of small spaces at the subject property, we have applied a "net" rental rate of $16.00 per square foot for spaces between 700 to 1,500 square feet, while for spaces ranging from 1,501 to 3,000 square feet, we have applied a market rental rate of $13.00 per square foot. Further, for spaces between 3,000 to 5,000 square feet, we have applied a market rental rate of $11.00 per square foot. The anchor leases, or comparables #6 through #9, ranged from $5.00/SF to $10.05/SF with an average lease rate of $6.95/SF. The anchor rents reflect a close range for a variety of locations with the exception of comparable #9. This lease to Builder's Square has, however, no percentage rent clause and, as a result, agreed to pay a higher base rent. The subject property's larger spaces range from 9,000 to 15,000 square feet. Thus, based on size, they are not true anchor spaces. Considering that these spaces are not typical satellite units and are not anchor units, we have applied a market rent of $8.50 per square foot. As noted, the subject property has four outparcels. Pad sites generally rent from $35,000 to $40,000 per annum. The subject's pad leases, which range from $19,200 to $55,000 per annum, are all over ten years old. Considering the subject's location and visibility, we consider market rent for the pad sites at $35,000 per annum. - -------------------------------------------------------------------------------- 44 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- In addition to surveying comparable centers, we have also analyzed the most recent lease transactions at the subject center. Since there have been several recent leases at the subject property, these leases have been given substantial weight in our analysis of the subject's market rental rates. These leases are detailed below. ANALYSIS OF SUBJECT LEASES The following table summarizes the subject property's recent lease history.
==================================================================================== SUMMARY OF RECENT SUBJECT LEASES ==================================================================================== New / Term Contract TI's/ Free Tenant Renew (Years) Date Size Rent Escalation SF Rent - ------------------------------------------------------------------------------------ TSR Paging New 5 6/96 1,080 $15.00 $90 Step in None None Year 4 Sally Beauty Supply Renew 2 6/96 1,200 $16.50 None None None 99 Cent Store New 5 7/96 2,800 $10.00 None None None Western Auto New 5 9/96 9,000 $ 8.50 None None None - ------------------------------------------------------------------------------------ Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ====================================================================================
The typical lease at the subject property is triple net whereby the tenant is responsible for reimbursing the landlord for such expenses as real estate taxes, insurance, and common area maintenance (CAM). Recent retail leases at the subject ranged from $16.50 to $8.50 per square foot, depending on the size of the space. The terms of the recent leases have typically been between two and five years which is similar to quoted market terms. Based on our survey of local leasing agents and owners, five-year terms are most common with satellite tenants such as those found in the subject center. Therefore, for the purpose of our analysis, we have utilized a lease term of five years for all tenant suites for speculative renewals. In our interviews with competing leasing agents and owners, we also inquired as to the market norm for rent escalations. Most of the agents agreed that three- to five-year leases are typically flat, with some sort of escalation or bump in 10-year leases. Regardless of the method of escalations, most of the subject and comparable leases have escalations which are intended to be similar to anticipated increases in the CPI. Thus, we have assumed that all five-year leases will remain flat throughout the term. According to the subject leasing agent, TI's are typically not given, with the owner generally providing a " vanilla box" for new tenants and nothing for renewals. Retail space is typically taken "as-is" with the tenant fitting out their space to their own specifications. We project that no tenant alteration allowance would be provided for new or renewal leases. - -------------------------------------------------------------------------------- 45 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- All of the leasing agents surveyed reported minimal if any free rent. A review of the immediate market indicated that no free rent was typically offered to tenants that leased space in the subject center over the past three to four years. Therefore, based upon the most recent leases within the market, as well as conversations with local leasing agents, we have projected that no free rent will be offered to prospective tenants. CONCLUSIONS: MARKET RENT ESTIMATE FOR THE SUBJECT PROPERTY Based on the previous analysis, the current market lease parameters for the subject property are estimated as follows: ============================================================= CONCLUDED MARKET LEASE TERMS (PER SQUARE FOOT / YEAR) ------------------------------------------------------------- Category Satellite Space Anchor & Pad Sites ------------------------------------------------------------- Market Rent $16.00 & $13.00 & $8.50 (NNN) & $11.00 (NNN) $35,000/YR Lease Term 5 Years 20 Years Annual Escalation 0.0% 0.0% Tenant Improvements $0.00 $0.00 Free Rent (Months) 0 Months 0 Months ------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ============================================================= CONTRACT RENT As discussed, the subject's leasable area is divided into twenty-eight suites within one building and four outparcels. Currently, the subject is 99% occupied. Through our research of the subject property, which included a complete review of lease abstracts, rent rolls (both current and historical), and detailed discussions with the property manager and leasing agent, the following rent roll summary was utilized to detail currently leased suites and general information employed for this approach. Additionally, within the Addenda are copies of the tenant lease assumptions, generated by Pro-ject+ Plus, a computerized lease-by-lease analysis program. Information submitted to us and contained in the Addenda provide additional support to the data and assumptions inputted for this method and is assumed to be correct and reliable. CB Commercial reserves the right to amend our input assumptions if any documentation is subsequently available which contradicts that assumed for this method. Located on the following page is the subject rent roll summary. - -------------------------------------------------------------------------------- 46 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ 25TH STREET SHOPPING CENTER, EASTON, PA RENT ROLL - -------------------------------------------------------------------------------- Square Rent/ Suite Tenant Feet Begin End SF Annual Rent - -------------------------------------------------------------------------------- 1 MJM Inc., Maryland 2,000 10/91 09/96 $23.00 $46,000 Fried Chick. 2 TSR Paging 1,080 06/89 05/96 $15.00 $16,200 3 Dreamscape Comics, Inc. 1,200 06/96 05/01 $15.00 $18,000 4 CVS Store 13,400 01/91 12/05 $9.50 $127,300 5 PA State Liquor Store 5,907 11/88 10/99 $13.00 $76,791 6 Emergency Adm. 4,706 10/93 10/03 $15.00 $70,590 Consultants 7 Paoli Bike & Sports 3,395 10/94 10/99 $8.50 $28,858 8 Radio Shack 2,510 03/93 02/03 $9.50 $23,845 9 One Price Clothing 3,810 05/92 07/97 $7.00 $26,670 Store 10 Sherwin-Williams Co. 4,370 04/59 04/01 $12.00 $52,440 11 Supercuts 1,500 02/94 02/99 $15.00 $22,500 12 National Auto Store 3,900 03/84 02/98 $8.00 $31,200 13 Jenny Craig 2,280 05/96 04/01 $18.75 $42,750 14 Antonio's Pizza & Deli 2,280 10/89 09/98 $15.50 $35,340 15 F.W. Woolworth Co. 15,400 05/57 01/98 $1.17 $18,018 16 Bounoutas & 720 04/91 04/97 $18.50 $13,320 Apostolopoulis 17 Holiday Hair Fashions 900 01/88 12/98 $17.50 $15,750 18 Vacant 1,200 19 Sally Beauty Supply 1,200 06/96 05/98 $16.50 $19,800 20 McDonald's 3,450 11/72 11/98 $15.94 $54,993 21 TCBY 1,200 04/90 04/98 $18.52 $22,224 22 Fire and Shine Jewelry 1,200 09/90 03/97 $16.50 $19,800 23 AMC Theater 11,980 07/72 12/92 $2.65 $31,747 24 Mandarin Chef, Inc. 3,300 12/90 11/97 $13.00 $42,900 25 Pizza Hut 3,025 03/84 04/01 $7.93 $23,988 26 99 Cent Store 2,800 10/84 01/96 $10.00 $28,000 27 Second National Bank 1,800 10/71 12/97 $10.67 $19,206 28 Long John Silvers 1,728 11/75 04/96 $12.50 $21,600 29 Golden Bagel 1,500 03/95 03/00 $12.75 $19,125 30 Workout Plus Easton 11,766 02/95 02/00 $6.50 $76,479 31 H&R Block 3,100 09/05 04/00 $8.65 $26,815 32 Western Auto 9,000 09/96 08/01 $8.50 $76,500 33 Rockaway Bedding 3,870 10/92 10/97 $12.50 $49,375 Total Leased Square 131,477 Average Feet Rent: $ 9.11 $1,198,124 Vacant Space 1,200 Occupancy-Overall 99% ================================================================================ Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The subject's tenancy is comprised of regional and local tenants including Rockaway Bedding, National Auto Store, and Second National Bank. The subject also has a number of national tenants including McDonalds, Long John Silvers, Pizza Hut, Woolworth, CVS, Sherwin-Williams, Radio Shack, and TCBY. Current rental rates range from $1.17/SF to $19.00/SF. - -------------------------------------------------------------------------------- 47 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- SPECIAL LEASE PROVISIONS AND ASSUMPTIONS The following discussion summarizes any lease provisions and assumptions of special note. Pending Leases According the subject's leasing agent, they are currently in negotiations for the vacant 1,200 square feet. The terms were of this lease were not provided. However, a lease has not been signed as of the date of our appraisal. Renewal Options Options to renew at below or above market rent may have an impact on the valuation analysis. For example, if below market renewals are exercised, they may result in a downward impact on value. However, to the extent that re-tenanting costs are saved (rent loss during downtime, tenant improvements, leasing commissions, etc.), there may be an advantage in having the tenant renew at some rate below market rent in order to avoid these costs. Some of the subject leases have renewal options. Where applicable, if a tenants' option rent is below market, we have assumed that the tenant would exercise its renewal option. Conversely, if a tenants' option rent is above market, we have assumed that the tenant would not exercise its renewal option and terminate the lease. EXPENSE REIMBURSEMENTS Current and future hypothetical retail leases which will encumber the subject property will be based upon triple net lease structures and are consistent with recent leases written at the subject property and the market in general. The tenants will be responsible for reimbursing the landlord for their pro rata share of operating expenses including their pro rata share of CAM, real estate taxes, and insurance. The pro rata share calculations for future tenants are calculated by dividing the tenant's occupied rentable area by the gross leasable area of the center. The following is a breakdown of the subject's historical recoveries and CB Commercial's projections for the proforma. It should be noted that the subject's operating statements are based on a fiscal year basis, beginning June 1 and continuing through May 31. Expense Reimbursements Expense reimbursements for the subject property consist of real estate taxes, insurance, and common area maintenance. Common area maintenance expenses consist utilities, management fees, general and administrative, cleaning and repairs, and maintenance expenses. The subject's historical expense reimbursements are as follows: - -------------------------------------------------------------------------------- 48 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================ EXPENSE REIMBURSEMENT -------------------------------- Year Total $ Amount -------------------------------- 1993 NA 1994 $180,885 1995 $241,600 1996 Budget $227,021 Year 1 Pro Forma $232,702 -------------------------------- Source: Mark Centers Trust ================================ The first year of our DCF model indicates reimbursements of $232,702. Historical expense reimbursements have fallen in recent years due in part to a drop in expenses as management has attempted to cut costs in recent years. The budgeted amount appears to be unreasonably low based upon projected expenses and reimbursement clauses for existing tenants. OTHER INCOME This income category can be derived from several different sources including tenant service income, merchants association fees, late fee income, short-term storage income, professional services provided for the tenants by the landlord/management, ground rent as well as other miscellaneous sources. The subject has no other income. PERCENTAGE RENT INCOME In addition to the basic rental charges, the tenants are sometimes responsible for paying the landlord additional rent equal to a specified percentage of the tenant's gross sales made in, upon, or from the premises, over a breakpoint factor or according to a specific schedule. Three of the subject tenants have percentage rent clauses contained within their leases. - -------------------------------------------------------------------------------- 49 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
==================================================================================================================== PERCENTAGE RENT CLAUSES - --------------------------------------------------------------------------------------------------------------------- Tenant Breakpoint Percent Year Gross Sales % Rent Paid CBC's FY97 Projection - --------------------------------------------------------------------------------------------------------------------- MJM, Inc. $522,727 8.00% 1994 $485,983 $ 2,449 $545,000 1995 $547,194 $ 2,866 Dreamscape Comics $390,000 6.00% 1994 $338,638 $ 0 $325,000 1995 $325,638 $ 0 CVS $4,243,333 3.0% 1994 $3,208,892 $ 0 $3,425,000 1995 $3,427,181 $ 0 Paoli Bike $650,000 5.0% 1994 NA $ 0 $300,000 $725,000 (11.96) 1995 $302,922 $ 0 Radio Shack $794,833 3.0% 1994 $443,831 $ 0 $560,000 1995 $557,885 $ 0 One Price Clothing $762,000 4.0% 1994 $441,824 $ 0 $365,000 1995 $365,834 $ 0 Sherwin-Williams $1,092,500 (retail) 5.0% 1995 $194,325 $ 0 $201,000 $2,185,000 (whlesl) 2.5% 1995 $602,045 $ 0 $600,000 National Auto Store $789,000 2.0% 1994 $1,063,545 $ 3,838 $1,000,000 1995 $1,002,958 $ 6,292 Antonio's Pizza $417,918 7.0% 1994 $215,939 $ 0 $265,000 $364,800 (10/96) 1995 $267,660 $ 0 Woolworth $450,000 4.0% 1994 $1,257,576 $32,303 $1,100,000 1995 $1,109,294 $26,372 Bounoutos $222,000 6.0% 1994 $217,965 $ 838 $237,000 1995 $236,853 $ 1,971 Holiday Hair $262,500 6.0% 1994 $200,527 $ 0 $200,000 1995 $181.832 $ 0 Sally Beauty $450,000 4.0% 1994 $557,582 $ 0 $580,000 1995 $581,356 $ 6,912 TCBY $270,750 8.0% 1994 $232,108 $ 0 $100,000 1995 $ 68,922 $ 0 Fire & Shine $282,857 7.0% 1994 $147,434 $ 0 $147,000 1995 $147,181 $ 0 AMC Theater $300,000 10.0% 1994 $635,069 $33,507 $740,000 1995 $740,295 $28,413 Mandarin $612,875 7.0% 1994 $135,228 $ 0 $137,000 1995 $137,858 $ 0 Long John Silver $432,000 5.0% 1994 $1,018,965 NA $1,000,000 1995 $1,022,040 $32,454 Golden Bagel $200,000 6.0% 1994 $12,732 $ 0 $150,000 1995 $162,371 $ 0 Pizza Hut $400,000 6.0% 1994 $318,629 $ 3,770 $700,000 1995 $620,845 $26,462 - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. =====================================================================================================================
Given the aforementioned sales histories, we have projected the gross sales for each tenant as illustrated in the right column of the table. We have also projected that the gross sales figures will grow by 3.0% per annum over the course of the cash flow projection. POTENTIAL GROSS INCOME - -------------------------------------------------------------------------------- 50 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- The potential gross income for the subject property is summarized as follows. ===================================================== STABILIZED POTENTIAL GROSS INCOME (FY 1997) ----------------------------------------------------- Totals ----------------------------------------------------- Total Minimum Rent $1,177,171 Expense Reimbursement - Common Area Maintenance Recovery $ 106,971 (Including Insurance Recovery) - Real Estate Tax Recovery $ 125,736 - Percentage Rent $ 141,343 Potential Gross Income $1,551,221 ----------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ===================================================== VACANCY AND COLLECTION LOSS This is an allowance for reductions in potential income attributable to vacancies, tenant turnover, and non-payment of effective rent. In the direct capitalization process, a market-derived, stabilized vacancy and collection loss estimate is subtracted from potential gross income in order to arrive at effective gross income. The subject property is currently 100% leased. Furthermore, the subject's competitive market exhibits a vacancy level of approximately 4.0%. Due to the long-term leases at the subject property, the average vacancy rate over the projected holding period, which is attributed to downtime between leases, approximates a minimal 1.0%. In addition to vacancy, we estimated a blended credit loss factor of 2.0% which takes into account both national and local tenants at the subject center. Therefore, the combined long-term vacancy and credit loss factor for the subject property amounts to approximately 3.0%. In the first year of our discounted cash flow analysis, the combined credit loss amounts to $46,536 EFFECTIVE GROSS INCOME Given our estimate of potential gross income, other income, and a vacancy and collection loss, the estimated effective gross income is derived as follows: =========================================================== EFFECTIVE GROSS INCOME (FY 1997) ----------------------------------------------------------- Potential Gross Income: $1,551,221 Less: Collection Loss $ 46,536 Effective Gross Income: $1,504,685 =========================================================== Our estimate of effective gross income used in direct capitalization is $1,504,685. This figure is the same as the EGI in the first year of our cash flow in the discounted cash flow method. - -------------------------------------------------------------------------------- 51 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- OPERATING EXPENSE ANALYSIS In projecting the revenues and expenses for the subject property, we have analyzed the historical figures for fiscal years 1993 through 1995 as well as management's forecast of revenues and expenses for fiscal year 1996. In addition, we have utilized the Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers publication to assist in our analysis. We have considered the category " Regions 1, 2 & 3 (East): Open Shopping Centers" as the most representative of the subject property. A summary of the average expenses taken from this publication increased at an inflationary rate to reflect our fiscal year 1997 analysis are presented as follows: ====================================== COMPARABLE EXPENSE ANALYSIS -------------------------------------- Expense Category P.S.F. -------------------------------------- General & $ 0.08 Administrative Repairs & Maintenance $ 0.36 Services $ 0.46 Utilities $ 0.18 ------ Total CAM $ 1.08 Real Estate Taxes $ 1.26 Insurance $ 0.15 Management Fees $ 0.41 Total Operating Expenses $ 2.90 -------------------------------------- Source: Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers ====================================== Our estimate of the subject's stabilized expenses are detailed as follows. Common Area Maintenance The subject's historical and projected common area maintenance (CAM) expenses are as follows: ======================================== COMMON AREA MAINTENANCE EXPENSE ---------------------------------------- Year Total $ Amount ---------------------------------------- 1993 NA 1994 $104,258 1995 $ 97,249 1996 Budget $ 99,748 ---------------------------------------- CB 1996 Projection $105,000 Source: Mark Centers Trust ======================================== - -------------------------------------------------------------------------------- 52 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Common area maintenance (CAM) charges generally includes various items such as general and administrative expenses, repair and maintenance expenses, utilities, and general services such as cleaning, landscaping, security, and common area insurance expenses. We project the total CAM expense in 1996, before management fees, at $105,000 or $0.80/SF. This is somewhat lower than the average CAM expenses for the properties surveyed by IREM of $1.23/SF for open shopping centers in the east. However, the subject's historical expenses have ranged from $0.74/SF to $0.79/SF. Given the subject's historical CAM expense structure coupled with its effective age, occupancy and the services provided, the subject's projected CAM figure is considered reasonable. Property Taxes Historical and budgeted property tax expenses are as follows: ======================================= PROPERTY TAX EXPENSE --------------------------------------- Year Total $ Amount --------------------------------------- 1993 NA 1994 $110,116 1995 $140,734 1996 Budget $132,000 --------------------------------------- Year 1 Pro Forma $162,298 Source: Mark Centers Trust ======================================= As discussed fully within the tax and assessment data section of the report, estimated taxes for fiscal year 1997 are projected to be $162,298. Insurance Historical and budgeted insurance expenses are as follows: ======================================= INSURANCE EXPENSE --------------------------------------- Year Total $ Amount --------------------------------------- 1993 NA 1994 $20,420 1995 $33,880 1996 Budget $12,084 CB 1996 Projection $13,000 --------------------------------------- Source: Mark Centers Trust ======================================= Insurance at the subject property includes both liability insurance and fire insurance. This expense has decreased from 1994 to 1996 to a level of $0.09/SF. We have placed primary - -------------------------------------------------------------------------------- 53 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- emphasis on the subject's historical and 1996 budgeted insurance expenses and have estimated the insurance expense at $13,000, or $0.10/SF. Professional Management Fee In order to maintain the control of the property and subsequently ensure the stream of income that it generates, it is necessary to employ either internal or outside management. In the case of the subject property, the property is managed internally and no management expense has been reflected in historical statements. Typical professional management fees in the local market range from 1.0% to 5.0% of effective gross income. Based upon the size and nature of the subject improvements, we have applied a management expense of 2.0% of effective gross income. Because management is calculated based on a percentage of effective gross income, this expense will vary each year because of fluctuations in the income stream. In the first year of our analysis, this expense equates to $30,094 or $0.23/SF. Replacement Reserves This expense typically represents a reserve for future replacement of long-lived items. The amount of reserve and whether it is included or not in the direct capitalization and DCF analyses depends on the actions reflected by buyers and sellers in the local market. Based on the available comparable data and discussions with brokers and investors, replacement reserves generally range from $0.10/SF to $0.20/SF for retail properties of similar quality and condition as the subject. Given the subject's average condition, we have estimated this expense at $0.10/SF or $13,148 in 1996 increasing at our projected annual expense growth rate of 3.0%. Based on discussions with local market participants, replacement reserves are typically subtracted in calculating NOI when determining the cash flow in the DCF analysis. Total Concluded Operating Expenses The concluded stabilized operating expenses for the subject total an estimated $327,045, or $2.49 per rentable square foot. This total expense estimate is for the first year of our proforma and incorporates fiscal year conversions not reflected in the previous 1996 calendar year estimates. The expense is slightly lower than the average indicated by IREM ($2.90/SF) but judged reasonable given the historical and budgeted operations of the subject. CAPITALIZATION RATE There are several methods for deriving an overall capitalization rate for direct capitalization. A common method for establishing an overall capitalization rate for properties similar to the subject is to review the criteria of major investors in the marketplace. This may serve as a check against other techniques or may be a primary source when ample data exists. While derivation of capitalization rates from comparable sales is preferable, we were unable to obtain adequate income and expense data to employ this method from the sales used within the Sales - -------------------------------------------------------------------------------- 54 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Comparison Approach. Therefore, the investor survey method is used as the primary approach in deriving our overall capitalization rate. The subject property is a retail shopping center that would be attractive to either a local or a national investor. The category in the published investor survey most comparable to the subject is class B neighborhood shopping center. The investors typically interviewed for the survey are regional or national investors associated with pension funds, REIT's, insurance companies, financial institutions, etc. The information below is taken from CB Commercial most recent National Investor Survey (first quarter 1996). ======================================================================== SUMMARY OF INVESTOR SURVEY OVERALL CAPITALIZATION RATES NEIGHBORHOOD SHOPPING CENTERS - CLASS B ------------------------------------------------------------------------ Investor Survey R(o) Range Average Date of Survey ------------------------------------------------------------------------ CB Commercial National 9.0% - 11.5% 10.3% First Quarter, 1996 Investor Survey ------------------------------------------------------------------------ Compiled by: CB Commercial Real Estate Group, Inc. ======================================================================== The previous survey indicates an overall range of 9.0% to 11.5% for neighborhood shopping centers with an average of approximately 10.3%. The capitalization rate reflects the quality and duration of the income stream as well as the physical characteristics of the property. The tenant mix at the subject center is considered to be good for the area with a mixture of national, regional, and local tenants. The largest tenant at the subject is Woolworth, is a regional tenant. The Woolworth lease expires 1998. There are no options remaining. CVS, is also a regional tenant. CVS's lease expires in 2005 with one, five-year option. Lease expiration is fairly even throughout the holding period which reduces risk. The center is currently 99% occupied. Overall, the quality, quantity and duration of the cash flow is considered to be good. With respect to physical characteristics, the subject is a functional neighborhood center of average quality and in average overall condition. In addition, the subject is situated in a good retail location with moderate volumes of traffic. Based upon this survey and the factors discussed above, an 10.5% overall capitalization rate (towards the middle of the range) appears to be appropriate for the subject property. Direct Capitalization Summary A summary of the direct capitalization method as applied to the subject property is illustrated in the following table: - -------------------------------------------------------------------------------- 55 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- =============================================================== 25TH STREET SHOPPING CENTER DIRECT CAPITALIZATION SUMMARY --------------------------------------------------------------- Category Total P.S.F. --------------------------------------------------------------- Income Total Market Rent $ 1,177,171 $ 8.95 Recovery Income 232,707 1.78 Gross Rental Income $ 1,409,878 $ 10.72 Less: Vacancy and Credit Loss (46,536) (0.36) Plus: Other Income 0 0.00 Plus: Percentage Rents $ 141,343 1.08 Effective Gross Income $ 1,504,685 $ 6.65 Expenses Common Area Maintenance (CAM) (106,313) (0.81) Real Estate Taxes (164,327) (1.25) Insurance (13,163) (0.10) Management Fees (30,094) (0.22) Replacement Reserves (13,148) (0.10) Total Expenses $ (327,045) $ (2.49) OER 22% Net Operating Income $ 1,177,640 $ 8.96 CAPITALIZATION OF NOI: @10.5% $ 11,215,619 $ 85.30 Reconciled Value $ 11,200,000 $ 85.19 --------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. =============================================================== The concluded market value of the subject property, based on the direct capitalization method, is $11,200,000. - -------------------------------------------------------------------------------- 56 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW ANALYSIS Our DCF assumptions are summarized as follows. Most of the following assumptions have been discussed and supported within prior sections of the report. A discussion of the discount rate, terminal capitalization rate and holding period follow the assumptions summarized below. =============================================================================== SUMMARY OF DISCOUNTED CASH FLOW ASSUMPTIONS 25TH STREET SHOPPING CENTER - -------------------------------------------------------------------------------- General Assumptions Start Date June 1, 1996 Terms of Analysis 10 years Basis (Calendar / Fiscal) Fiscal Software Project + Plus Growth Rate Assumptions Expenses 3.0% Market Rent 3.0% Real Estate Taxes 3.0% Inflation (CPI) 3.0% Market Rent Assumptions Anchor $ 8.50 (NNN) Satellite $16.00 (700 - 1,500 sf) $13.00 (1,501 - 3,000 sf) $11.00 (3,001 - 6,000 sf) Pad Site $35,000/yr Leasing Assumptions Lease Term 5 Years Renewal Probability 50% Weighted Average of: Tenant Improvements $0.00 Months of Free Rent 0 Leasing Commissions 4.5% (Cashed-Out) Down Time Between Leases 6 Months Tenant Assumptions Existing tenant leases were entered at contract rent and terms. Speculative renewals assume tenants will pay base rent plus their pro rata share of CAM, real estate taxes and insurance. Contractual recoveries were input into the model per their respective leases. Miscellaneous Assumptions Credit Loss 3.0% Avg. Occupancy Over 99% Projection Period Structural Maintenance/ $ 0.10 Reserves ($/SF) Financial Assumptions Discount Rate (IRR) 12.50% Terminal Overall 11.00% Capitalization Rate (R(o)) Costs of Sale 2.00% - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. =============================================================================== - -------------------------------------------------------------------------------- 57 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNT RATE ANALYSIS A discount rate is a rate of return on capital utilized to capitalize future payments or receipts to present value. It is based on the time value of money concept. For appraisal purposes, the rate used to convert income to property value should represent the annual rate of return necessary to attract investment capital. The rate is influenced by many considerations, including the degree of apparent risk, market attitudes with respect to future inflation, the prospective rates of return for alternative investment opportunities, supply of and demand for mortgage funds, and the availability of tax shelters. Because rates of return used in income capitalization represent prospective rates, as distinguished from historical rates, special consideration is given to market perceptions of risk and changes in purchasing power. Although it is not possible to prove conclusively the suitability of a particular rate of return on the basis of market evidence, the chosen rate should be consistent with the available evidence. Rate selection requires judgment and knowledge concerning prevailing market attitudes and economic indicators. Both the discount rate and the reversionary capitalization rate must reflect the relative risk perceived by investors for the specific market being studied. Generalities must be avoided. To determine such rates, we have used surveys of real estate investors analyzed and adjusted for comparative returns found in the capital markets. National investor surveys include data on investors operating regionally and nationally, such as representatives of insurance companies, commercial banks, pension funds, investment banking firms, syndication firms, and investment advisory firms. Such companies invest in all types of properties, including office buildings, retail shopping centers, hotels, apartment complexes, and industrial facilities. These surveys are valuable for determining general parameters but must be honed to the local market. Based on surveys from CB Commercial Real Estate Group Inc. for the first quarter 1996, investment criteria for numerous market participants including investors that would be in competition for acquiring a property such as the subject are illustrated below. - -------------------------------------------------------------------------------- 58 =============================================================================== FIRST QUARTER 1996 NATIONAL INVESTOR SURVEY CLASS B NEIGHBORHOOD SHOPPING CENTERS =============================================================================== TYPE OF FIRM OVERALL CAP. RATES GENERAL DISCOUNT REAL RATE INFLATION RATE OF RETURN --------------------- GOING-IN TERMINAL (IRR) (RRR) =============================================================================== Range: 9-11.5 10-12 2-4 12-14.5 9.5-11 Average 10.3 10.8 3.1 13.1 10.1 =============================================================================== Change from -20 +10 -40 +50 +190 3rd Qtr Survey =============================================================================== Source: CB Commercial Real Estate Group Inc. - 1st Quarter 1996 We have surveyed national real estate investors for their investment criteria when purchasing real estate such as the subject. Investor expectations for inflation range from 2% to 4%, with an average of 3.1%. We have selected an inflation rate for our analysis of 3.0%. The discount rate reflects the quality and duration of the income stream as well as the physical and locational characteristics of the property. As discussed within the overall rate section, the tenant mix at the subject center is considered to be good for the area with mostly regional tenants. Moreover, lease expiration is fairly even throughout the holding period which reduces risk. The center is currently 100% occupied. Overall, the quality, quantity and duration of the cash flow is considered to be good. With respect to physical characteristics, the subject is a functional neighborhood center of average quality and in average overall condition. In addition, the subject is situated in an average retail location with relatively low volumes of traffic. In general, the discount rate (IRR) is comprised on a safe rate (usually Treasuries) and a risk premium. The risk premium is difficult to quantify but with sound logic a reasonable rate can be ascertained. The chart presented below graphically depicts real estates position within the risk/reward graph. - -------------------------------------------------------------------------------- 59 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INVESTOR RISK VERSUS RETURN REQUIREMENTS Anticipated Return _ Real Estate _ Common Stocks _ Corporate Bonds _ Mortgage Backed Securities _ Municipal Bonds _ T - Bills Riskless Rate - -------------------------------------------------------------------------------- Perceived Level of Risk US Treasury notes and bonds are considered risk free since they are backed by the United States government. Their rates only fluctuate with perceived inflation. The use of this, or any short term investment including the prime rate or LIBOR is meaningless when compared to an investment with a 10-year holding period. Accordingly, as a starting point, we only considered risk free or nearly risk free investments with a maturity of 10 years. These include Treasuries, corporate bonds and municipal bonds. Adjusted for daily fluctuations, these debt offerings are yielding 5.59% to 8.25%. Mortgaged backed securities generally tend to fall above these instruments. The next layer of risk would include debt rated as low as BBB. These notes are yielding as much as 10%. Long-term mortgages are also yielding over 10% considering the mortgage constant on a note priced at 250 to 300 basis points over comparable Treasuries. Riskier investments such as junk bonds vary widely from 12% to 22% on an unleveraged basis. Real estate, as indicated on the chart above falls between common stock (10%) and junk bonds (16%). To eliminate the burden of illiquidity, REIT's and similar investments are being created. They represent a quasi-real estate opportunity. REIT's are currently providing dividends ranging from 6% to 8% but offer potential yields of 15% to 20% Various financial instruments are yielding between 5.59% and 8.25% depending upon the type of investment as indicated on the chart below based on data obtained from the Federal Reserve - -------------------------------------------------------------------------------- 60 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Statistical Release for the week ending May 17, 1996. It should be noted that over the past year we have witnessed an increase in the interest rate of all of the following instruments. ============================================================== INSTRUMENT RATE -------------------------------------------------------------- Prime Rate 8.25% -------------------------------------------------------------- Municipal Bonds 5.96% -------------------------------------------------------------- Short-Term Treasury Securities (1 year) 5.59% -------------------------------------------------------------- Long Term Treasury Securities (10 years) 6.68% -------------------------------------------------------------- Corporate Aaa Bonds (10+ years) 7.57% -------------------------------------------------------------- Corporate Baa Bonds (10 + years) 8.25% ============================================================== The risk premium is the rate added to Treasuries to account for illiquidity, the capital markets and the economy. Whether the risk premium decreases in the near term is dependent solely on inflation, the growth of the economy and capital markets. During 1995, the Federal Reserve decreased interest rates in order to stimulate a sluggish economy. The low rates have continued during the early portion of 1996, however, have recently begun to ascend. Over the longer term, as the existing supply of space is absorbed, the risk premium will decrease. Based on the above, we feel that the current required rate of return (IRR) for the subject would fall slightly below the middle of the range at 12.5%. This reflects the quality, quantity and cash flow risk associated with the subject property. As such, we have utilized a discount rate of 12.5% in our analysis. TERMINAL RATE To estimate the appropriate terminal capitalization rate, we have considered the rates reflected in the investment criteria outlined above for both going-in and terminal capitalization. Typically, under stable market conditions, the terminal capitalization rate will be greater than the going-in rate to reflect the risk associated with the holding period. Typically 50 to 100 basis points are added on to the going-in cap rate under stable market conditions to account for the additional risk. Furthermore, our national investor survey also indicated an average terminal capitalization 50 basis points greater than the going-in rate. It is evident by historical and current performance of the center and it is our opinion that the subject property will encounter average-to-good market acceptance in the future. It is our opinion that a terminal capitalization rate of 11.0% is the most appropriate for the subject property. A 2% deduction for costs of sale has been utilized to reflect the net reversionary value. - -------------------------------------------------------------------------------- 61 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- HOLDING PERIOD To apply the discounted cash flow analysis, an estimate must be made of the appraised property's holding period based on typical investors' motives in the local market. Historical investment holding periods of similar shopping centers typically have ranged from 10 to 15 years. A 10- to 15- year holding period was analyzed to test the property's sensitivity to roll-overs. A 10-year holding period was selected. Our discounted cash flow analysis is presented on the following page. - -------------------------------------------------------------------------------- 62
------------------------------------ ------------------------------------ Building Size 131,477 25TH ST. EASTON, PA Reconciled Value $11,860 Cost of Sales 2.000% Cash Flow Report Value per SF $ 90.21 Hold Period (Years) 10 % Residual of Recon. V 37.5% Reduce Residual by Cap EX Yes Direct Cap Rate 10.50% Residual Discount Rate 12.50% Direct Cap Value $11,341 ------------------------------------ ------------------------------------ Compounded Ann. ---------------------------------------------------------------------------------------- Avg. Growth 1997 1998 1999 2000 2001 2002 2003 2004 ---------------------------------------------------------------------------------------- 3.07% BASE RENT 1,177,171 1,213,679 1,338,084 1,324,628 1,385,530 1,381,618 1,420,635 1,503,032 N/A Free Rent 0 0 0 0 0 0 0 0 5.26% Expense Recoveries 232,707 253,648 299,265 309,310 334,938 329,650 337,547 351,132 -0.42% Percentage Rent 141,343 151,666 136,018 145,831 150,092 118,016 130,652 130,863 - ---------- ---------------------------------------------------------------------------------------- 3.15% GROSS INCOME 1,551,221 1,618,993 1,773,367 1,779,769 1,870,560 1,829,284 1,888,834 1,985,027 3.15% Credit/Vacancy Loss (46,536) (48,570) (53,201) (53,393) (56,117) (54,878) (56,665) (59,551) N/A Miscellaneous Incomes 0 0 0 0 0 0 0 0 - ---------- ---------------------------------------------------------------------------------------- 3.15% EFFECTIVE GROSS INCOME 1,504,685 1,570,423 1,720,166 1,726,376 1,814,443 1,774,406 1,832,169 1,925,476 - ---------- 3.01% TOTAL EXPENSES 313,897 323,724 335,488 344,645 355,711 364,492 375,518 387,549 - ---------- ---------------------------------------------------------------------------------------- 3.19% NET OPERATING INCOME 1,190,788 1,246,699 1,384,678 1,381,731 1,458,732 1,409,914 1,456,651 1,537,927 N/A Commissions 8,969 42,894 14,995 20,414 18,995 63,469 23,470 75,749 N/A Tenant Improvements 0 0 0 0 0 0 0 0 N/A Capital Additions 13,148 13,542 13,949 14,367 14,798 15,242 15,699 16,170 - ---------- ---------------------------------------------------------------------------------------- N/A TOTAL DEDUCTIONS 22,117 56,436 28,944 34,781 33,793 78,711 39,169 91,919 - ---------- ---------------------------------------------------------------------------------------- 2.86% CASH FLOW 1,168,671 1,190,263 1,355,734 1,346,950 1,424,939 1,331,203 1,417,482 1,446,008 - ---------- TOTAL CASH FLOW 1,168,671 1,190,263 1,355,734 1,346,950 1,424,939 1,331,203 1,417,482 1,446,008 ---------------------------------------------------------------------------------------- Debt Service N/A N/A N/A N/A N/A N/A N/A N/A ---------------------------------------------------------------------------------------- CASH FLOW AFTER DEBT 1,168,671 1,190,263 1,355,734 1,346,950 1,424,939 1,331,203 1,417,482 1,446,008 ---------------------------------------------------------------------------------------- CUMULATIVE SURPLUS N/A N/A N/A N/A N/A N/A N/A N/A ======================================================================================== -------------------------------------------------------------------------------------------------------------------- Implied Overall Rate 10.04% 10.51% 11.67% 11.65% 12.30% 11.89% 12.28% 12.97% Cash on Cash Return 9.85% 10.04% 11.43% 11.36% 12.01% 11.22% 11.95% 12.19% ==================================================================================================================== --------------------------------------------- [GRAPHIC OMITTED] Sale/Yield Matrix (000's) Terminal Cap Rate -------------------------------- Disc Rate 10.75% 11.00% 11.25% 11.50% --------------------------------------------- 12.00% 12,332 12,223 12,119 12,020 12.25% 12,146 12,040 11,938 11,841 12.50% 11,964 11,860 11,761 11,666 12.75% 11,786 11,685 11,587 11,494 13.00% 11,612 11,513 11,417 11,327 13.25% 11,441 11,344 11,251 11,162 --------------------------------------------- ============================================= ---------------------------------- 2005 2006 2007 ---------------------------------- BASE RENT 1,543,019 1,572,373 1,592,287 Free Rent 0 0 0 Expense Recoveries 367,234 375,110 388,367 Percentage Rent 139,717 148,078 135,514 ---------------------------------- GROSS INCOME 2,049,970 2,095,561 2,116,168 Credit/Vacancy Loss (61,499) (62,867) (63,485) Miscellaneous Incomes 0 0 0 ---------------------------------- EFFECTIVE GROSS INCOME 1,988,471 2,032,694 2,052,683 TOTAL EXPENSES 399,280 410,951 422,459 ---------------------------------- NET OPERATING INCOME 1,589,191 1,621,743 1,630,224 Commissions 34,965 60,643 63,789 Tenant Improvements 0 0 0 Capital Additions 16,655 17,155 17,670 ---------------------------------- TOTAL DEDUCTIONS 51,620 77,798 81,459 ---------------------------------- CASH FLOW 1,537,571 1,543,945 1,548,765 TOTAL CASH FLOW 1,537,571 1,543,945 1,548,765 ---------------------------------- Debt Service N/A N/A N/A ---------------------------------- CASH FLOW AFTER DEBT 1,537,571 1,543,945 1,548,765 ---------------------------------- CUMULATIVE SURPLUS N/A N/A N/A ================================== - -------------------------------------------------------------- Implied Overall Rate 13.40% 13.67% 13.75% Cash on Cash Return 12.96% 13.02% 13.06% ==============================================================
================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW CONCLUSION We used "PRO-JECT +plus" computer software to create a cash flow model for a long term hold. Reference is made to the "Annual Cash Flow Report", generated by the Pro-ject software, on the previous page which provides a summary of cash flow from all sources. We utilized a 10-year holding period and have discounted the cash flow on a fiscal year basis from 1997 to 2006. The cash flow incorporates the terms of existing leases during the analysis period and our assumptions regarding the lease-up of vacant space. It also calculates renewal rentals when leases expire based on current market rent escalated at a growth factor. In addition, a forecast was made for 15 years to check for any irregularities in the income stream which may artificially affect the reversionary sale price. It should be noted that based on our analysis of the extended holding period indicated that there was no irregularities. We capitalized the 11th year net operating income to determine the reversionary value at the end of year 10. CONCLUSION OF INCOME CAPITALIZATION APPROACH The preceding analysis indicates the following conclusions: ======================================== INCOME CAPITALIZATION APPROACH VALUES ---------------------------------------- Method Indicated Value ---------------------------------------- Direct Capitalization $11,200,000 Discounted Cash Flow $11,900,000 ---------------------------------------- Source: CB Commercial Real Estate ======================================== Greater emphasis is placed on the DCF analysis because it is the method likely to be used by a typical investor. As a result, based on the Income Capitalization Approach, CB Commercial concludes a value estimate for the subject property of $11,900,000. This equates to $90.51 per rentable square foot. - -------------------------------------------------------------------------------- 63 CONCLUSION ================================================================================ RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- RECONCILIATION OF VALUE CB Commercial was instructed to estimate the market value of the leased fee interest in the subject property. The value conclusions for each applicable approach are summarized below. ==================================================== SUMMARY OF VALUE CONCLUSIONS ---------------------------------------------------- Cost Approach N/A Sales Comparison $11,800,000 Approach Income Capitalization $11,900,000 Approach ---------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ==================================================== The Income Capitalization Approach is considered the most persuasive method for valuing the subject property. This approach is predicated on the principle of anticipated economic benefits and, therefore, best reflects the investment characteristics of the subject. Properties such as the subject are typically purchased by investors; thus, this approach must closely parallels the anticipated analysis that would be employed by the most typical purchaser. Since the subject property has a number of existing leases with a variety of terms, the DCF technique best models the future cash flow stream to a prospective buyer. The Sales Comparison Approach is predicated on the principle that an investor would pay no more for an existing property than for a comparable property with similar utility. This approach is contingent on the reliability and comparability of available data. The data developed was considered sufficiently reliable to reach a value conclusion by the Sales Comparison Approach. However, due to the lack of truly comparables sales in recent years, this method is given secondary consideration in the reconciliation. The Cost Approach is predicated on the principle that an investor would pay no more for an existing property than it would cost to acquire land and construct a building with similar utility. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Furthermore, due to the age of the subject and current market conditions, accrued depreciation would be substantial and difficult to estimate. An investor would not use the Cost Approach due to the imprecise nature of estimating the accrued physical, functional, or external depreciation affecting the improvements. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. - -------------------------------------------------------------------------------- 64 ================================================================================ RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- The final value conclusion and the approaches relied upon give strong consideration to the market behavior of the typical buyer and current market environment for the property appraised. Based on the foregoing analysis, it is concluded that the market value of the leased fee interest in the subject property, subject to the assumptions and limiting conditions, as of June 1, 1996, is: ELEVEN MILLION NINE HUNDRED THOUSAND DOLLARS ($11,900,000) This value is subject to all of the assumptions and limiting conditions stated throughout the report, including specific assumptions and limiting conditions. - -------------------------------------------------------------------------------- 65 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS 1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to total that would adversely affect marketability or value. CB Commercial is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CB Commercial, however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject property's title should be sought from a qualified title company that issues or insures title to real property. 2. It is assumed that improvements have been constructed or will be constructed according to approved architectural plans and specifications and in conformance with recommendations contained in or based upon any soils report(s). Unless otherwise specifically noted in the body of this report, it is assumed: that any existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are, or will be upon completion, in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that it or they will withstand any known elements such as windstorm, hurricane, tornado, flooding, earthquake, or similar natural occurrences; and, that the improvements, as currently constituted, conform to all applicable local, state, and federal building codes and ordinances. CB Commercial professionals are not engineers and are not competent to judge matters of an engineering nature. CB Commercial has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CB Commercial by ownership or management; CB Commercial inspected less than 100% of the entire interior and exterior portions of the improvements; and CB Commercial was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CB Commercial reserves the right to amend the appraisal conclusions reported herein. 3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property was not observed by the appraisers. CB Commercial has no knowledge of the existence of such materials on or in the property. CB Commercial, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the appraisal. 4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CB Commercial. This report may be subject to amendment upon re-inspection of the subject property subsequent to repairs, modifications, alterations and completed new construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels of operation. - -------------------------------------------------------------------------------- 66 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 5. It is assumed that all factual data furnished by the client, property owner, owner's representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CB Commercial has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, Assessor's Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CB Commercial reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CB Commercial of any questions or errors. 6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CB Commercial will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject. 7. CB Commercial assumes no private deed restrictions, limiting the use of the subject property in any way. 8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposit or subsurface rights of value involved in this appraisal, whether they be gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred. 9. CB Commercial is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject. 10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market. 11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CB Commercial does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CB Commercial. 12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CB Commercial to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form. 13. Unless otherwise noted in this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated. 14. This study may not be duplicated in whole or in part without the specific written consent of CB Commercial nor may this report or copies hereof be transmitted to third parties without said consent, which consent CB Commercial reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or - -------------------------------------------------------------------------------- 67 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- its contents shall not be published, in whole or in part, in any public document without the express written consent of CB Commercial which consent CB Commercial reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a "sale" or "offer for sale" of any "security", as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CB Commercial shall have no accountability or responsibility to any such third party. 15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report. 16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used. 17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area have been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report. 18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CB Commercial unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CB Commercial assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance. 19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or client's designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CB Commercial assumes responsibility for any situation arising out of the Client's failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired. 20. CB Commercial assumes that the subject property analyzed herein will be under prudent and competent management and ownership; neither inefficient or super-efficient. 21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the appraisal report. 22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist. 23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Not withstanding any discussion of possible readily achievable barrier removal construction items in this report, CB Commercial has not made a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect on the value estimated herein. Since CB Commercial has no specific information relating to this issue, nor is CB Commercial qualified to make such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject property. - -------------------------------------------------------------------------------- 68 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 24. For our analysis, we have relied on the information provided by the detailed rent roll and information provided by the subject leasing agent. We have assumed all information is correct. Furthermore, we have assumed all leases out for signature will be returned signed, and executed as of the date indicated to us by the leasing agent. We reserve the right to amend this appraisal should any of this information be later found to be incorrect. - -------------------------------------------------------------------------------- 69 ADDENDA ================================================================================ ADDENDA - -------------------------------------------------------------------------------- ADDENDA - -------------------------------------------------------------------------------- 70 ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- ADDENDUM A GLOSSARY OF TERMS assessed value Assessed value applies in ad valorem taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to market value, but it is usually calculated in relation to a market value base. + cash equivalency The procedure in which the sale prices of comparable properties sold with atypical financing are adjusted to reflect typical market terms. contract, coupon, face, or nominal rent The nominal rent payment specified in the lease contract. It does not reflect any offsets for free rent, unusual tenant improvement conditions, or other factors that may modify the effective rent payment. coupon rent See Contract, Coupon, Face, or Nominal Rent effective rent 1) The rental rate net of financial concessions such as periods of no rent during a lease term; may be calculated on a discounted basis, reflecting the time value of money, or on a simple, straight-line basis. ++ 2) The economic rent paid by the lessee when normalized to account for financial concessions, such as escalation clauses, and other factors. Contract, or normal, rents must be converted to effective rents to form a consistent basis of comparison between comparables. face rent See Contract, Coupon, Face, or Nominal Rent fee simple estate Absolute ownership unen-cumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. ++ floor area ratio (FAR) The relationship between the above-ground floor area of a building, as described by the building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area; also called building-to-land ratio. ++ full service lease A lease in which rent covers all operating expenses. Typically, full service leases are combined with an expense stop, the expense level covered by the contract lease payment. Increases in expenses above the expense stop level are passed through to the tenant and are known as expense pass-throughs. going concern value Going concern value is the value of a proven property operation. It includes the incremental value associated with the business concern, which is distinct from the value of the real estate only. Going concern value includes an intangible enhancement of the value of an operating business enterprise which is produced by the assemblage of the land, building, labor, equipment, and marketing operation. This process creates an economically viable business that is expected to continue. Going concern value refers to the total value of a property, including both real property and intangible personal property attributed to the business value. + gross building area (GBA) The sum of all areas at each floor as measured to the exterior walls. insurable value Insurable Value is based on the replacement and/or reproduction cost of physical items that are subject to loss from hazards. Insurable value is that portion of the value of an asset or asset group that is acknowledged or recognized under the provisions of an applicable loss insurance policy. This value is often controlled by state law and varies from state to state. + investment value Investment value is the value of an investment to a particular investor based on his or her investment requirements. In contrast to market value, investment value is value to an individual, not value in the marketplace. Investment value reflects the subjective relationship between a particular investor and a given investment. When measured in dollars, investment value is the price an investor would pay for an investment in light of its perceived capacity to satisfy his or her desires, needs, or investment goals. To estimate investment value, specific investment criteria must be known. Criteria to evaluate a real estate investment are not necessarily set down by the individual investor; they - -------------------------------------------------------------------------------- ================================================================================ GLOSSARY OF TERMS - -------------------------------------------------------------------------------- may be established by an expert on real estate and its value, that is, an appraiser. + leased fee See leased fee estate leased fee estate An ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.++ leasehold See leasehold estate leasehold estate The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.++ load factor The amount added to usable area to calculate the rentable area. It is also referred to as a "rentable add-on factor" which, according to BOMA, "is computed by dividing the difference between the usable square footage and rentable square footage by the amount of the usable area. Convert the figure into a percentage by multiplying by 100. market value "as if complete" on the appraisal date Market value as if complete on the appraisal date is an estimate of the market value of a property with all construction, conversion, or rehabilitation hypothetically completed, or under other specified hypothetical conditions as of the date of the appraisal. With regard to properties wherein anticipated market conditions indicate that stabilized occupancy is not likely as of the date of completion, this estimate of value should reflect the market value of the property as if complete and prepared for occupancy by tenants. market value "as is" on the appraisal date Market value "as is" on the appraisal date is an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date of appraisal. market value Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1) A reasonable time is allowed for exposure in the open market; 2) Both parties are well informed or well advised, and acting in what they consider their own best interests; 3) Buyer and seller are typically motivated; 4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.*** marketing period The time it takes an interest in real property to sell on the market subsequent to the date of an appraisal. ++ net lease Lease in which all or some of the operating expenses are paid directly by the tenant. The landlord never takes possession of the expense payment. In a Triple Net Lease all operating expenses are the responsibility of the tenant, including property taxes, insurance, interior maintenance, and other miscellaneous expenses. However, management fees and exterior maintenance are often the responsibility of the lessor in a triple net lease. A modified net lease is one in which some expenses are paid separately by the tenant and some are included in the rent. net rentable area (NRA) 1) The area on which rent is computed. 2) The Rentable Area of a floor shall be computed by measuring to the inside finished surface of the dominant portion of the permanent outer building walls, excluding any major vertical penetrations of the floor. No deductions shall be made for columns and projections necessary to the building. Include space such as mechanical room, janitorial room, restrooms, and lobby of the floor.* nominal rent See Contract, Coupon, Face, or Nominal Rent prospective future value "upon completion of construction" Prospective future value "upon completion of construction" is the prospective value of a property on the future date that construction is completed, based upon market conditions forecast to exist, as of that completion date. The value estimate at this stage is stated in current dollars unless otherwise indicated. - -------------------------------------------------------------------------------- ================================================================================ GLOSSARY OF TERMS - -------------------------------------------------------------------------------- prospective future value "upon reaching stabilized occupancy" Prospective future value "upon reaching stabilized occupancy" is the prospective value of a property at a future point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. The value estimate at this stage is stated in current dollars unless otherwise indicated. reasonable exposure time The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market. ** rent see full service lease net lease contract, coupon, face, or nominal rent effective rent shell space Space which has not had any interior finishing installed, including even basic improvements such as ceilings and interior walls, as well as partitions, floor coverings, wall coverings, etc.. Usable Area 1) The area actually used by individual tenants. 2) The Usable Area of an office is computed by measuring to the finished surface of the office side of corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished surface of the dominant portion of the permanent outer building walls. Excludes areas such as mechanical rooms, janitorial room, restrooms, lobby, and any major vertical penetrations of a multi-tenant floor. * use value Use value is a concept based on the productivity of an economic good. Use value is the value a specific property has for a specific use. Use value focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to the property's highest and best use or the monetary amount that might be realized upon its sale. + value appraised During the real estate development process, a property typically progresses from a state of unimproved land to construction of improvements to stabilized occupancy. In general, the market value associated with the property increases during these stages of development. After reaching stabilized occupancy, ongoing forces affect the property during its life, including a physical wear and tear, changing market conditions, etc. These factors continually influence the property's market value at any given point in time. See also market value "as is" on the appraisal date market value "as if complete" on the appraisal date prospective future value "upon completion of construction" prospective future value "upon reaching stabilized occupancy" - ---------- + The Appraisal of Real Estate, Tenth Edition, Appraisal Institute, 1992. ++ The Dictionary of Real Estate Appraisal, Third Edition, 1993. *** The office of the Comptroller of the Currency, 12 CFR Part 34, Subpart C, |_|34.42(f), August 24, 1966. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. * 1966 BOMA Experience Exchange Report, Income/Expense Analysis for Office Buildings (Building Owners and Managers Association, 1966) ** Statement on Appraisal Standard No. 6, Appraisal Standards Board of The Appraisal Foundation, September 19, 1992. ================================================================================ ADDENDUM B LEGAL DESCRIPTION - -------------------------------------------------------------------------------- ADDENDUM B LEGAL DESCRIPTION - -------------------------------------------------------------------------------- SCHEDULE A DESCRIPTION FOR LOT NUMBER 1: 25TH STREET SHOPPING CENTRE MINOR SUBDIVISON All that certain parcel of land situate in Palmer Township, Northampton County, Pennsylvania, and being more particularly bounded and described as follows, to wit: Beginning at a point in the eastern right of way line of S.R. 248 and being the southern line of the Lawnherst Subdivision, thence 1) easterly along the southern line of said Lawnherst Subdivision, north 49 degrees, 52 minutes, 00 seconds east 124.00 feet to a point; thence 2) northerly along the same, north 40 degrees 08 minutes, OO seconds west 120.00 feet to a point; thence 3) easterly still along the same, north 49 degrees 52 minutes 0O seconds east 140.00 feet to a point in the western. right of way line of Woodlawn Avenue, thence 4) southerly along the western right of way line of said Woodlawn Avenue, south 40 degrees 08 minutes 00 seconds east 120.00 feet to a point in the southern end of Woodlawn Avenue, thence 5) easterly along the southern end of Woodlawn Avenue, north 49 degrees 52 minutes 00 seconds east 60.00 feet to a point in the eastern right of way line of said Woodlawn Avenue, thence 6) northerly along the eastern right of way line of said Woodlawn Avenue, north 40 degrees 08 minutes 00 seconds West 174.01 feet to a point in the southern line of aforementioned Lawnherst Subdivision, thence 7) easterly along the southern line of said Lawnherst Subdivision, south 88 degrees 50 minutes, 40 seconds east 495.08 feet to a point; thence 8) northerly along the same, north Ol degrees 09 minutes 20 seconds east 130.00 feet to a point in the southern right of way line of Lawnherst Avenue, thence 9) easterly along the southern right of way line of said Lawnherst Avenue, south 88 degrees, 50 minutes, 40 seconds east 603.00 feet to a point in line of lot number 2, thence 10) southerly along lot number 2, south Ol degrees 09 minutes 20 seconds west 193.33 feet to a point, thence 11) easterly along the same, south 88 degrees 50 minutes 40 seconds east 118.00 feet to a point, thence 12) southerly still along the same, south Ol degrees, 09 minutes, 20 seconds west 40.00 feet to a point, VOL 1993-1 PAGE: 004659 thence 13) easterly still along the same, south 88 degrees 50 minutes 40 seconds east 137.17 feet to a point in the northern right of way line of S.R. 0022, thence 14) southerly along the northern right of way line of S.R. 0022 on a curve to the left, said curve having a radius of 3879.83 feet and an arc length of 100.50 feet to a point, thence 15) southerly along the same on a curve to the right, said curve having a radius of 905.37 feet and an arc length of 330.18 feet to a point in the northern right of way line of Ramp "D" of S.R. 0022, thence 16) westerly along the northern right of way line of said Ramp "D" of S.R. 0022, south 66 degrees 39 minutes, 00 seconds west 328.89 feet to a point, thence 17) westerly along the same on a curve to the right, said curve having a radius of 428.37 feet and an arc length of 105.42 feet to a point in line of Ramp "C", thence 18) southerly along the line of Ramp "C" of S.R. 0022, south 09 degrees 15 minutes 00 seconds east 25.00 feet to a point, thence 19) westerly along the same, south 80 degrees, 45 minutes 0O seconds west 408.68 feet to a point, thence 20) westerly still along the same on a curve to the right, said curve having a radius of 200.00 feet and an arc length of 103.24 feet to a point in the eastern right of way line of aforementioned S.R. 248. thence 21) northerly along the eastern right of way line of said S.R. 248, north 40 degrees 08 minutes 00 seconds west 367.45 feet to a point, the place of beginning. Being all of lot number 1, 25th Street Shopping Centre Minor Subdivision as recorded at the Northampton County Recorder of Deeds Office in Plan Book 92, Page 126, and subject to easements, covenants, and right of ways as shown on plan and of record, containing 16.1943 acres of land. PIN: L9 32-1A VOL: 1993-1 PAGE: 004660 ================================================================================ ADDENDUM C IMPROVED COMPARABLE SALES - -------------------------------------------------------------------------------- ADDENDUM C IMPROVED COMPARABLE SALES - -------------------------------------------------------------------------------- RETAIL SALE ================================================================================ Location Data Property Name: 15th & Allen Street Shopping Center Location: 1401-1451 Allen Street City: Allentown County: Lehigh State/Zip: Pennsylvania Assessor's Parcel No(s): G9SW3A-14-4 Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 4.12 Acres Excess Land: None Gross Leasable Area: Anchors: Laneco Supermarket 25,000 SF Local Tenant GLA: 21,503 SF Anchor Tenant GLA: 25,000 SF Total GLA: 46,503 SF GLA Purchased: 46,503 SF Year Built: 1950 Parking: Adequate Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 01/96 Marketing Time: N/A Grantor: Carriage Associates L.P. Grantee: Allenbeth Associates L.P. Document No.: 1558/220 Sale Price: $4,242,000 Financing: Market Terms Cash Equivalent Price: $4,242,000 Required Capital Cost: $0 Adjusted Sales Price: $4,242,000 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100 Existing or Pro Forma Income: N/A TOTAL P.S.F. -------- ----- Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $462,049 $9.94 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.89% Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A% Price Per Square Foot: $91.22 Comments The 15th and Allen Street shopping center is a one-story neighborhood retail center located on the corner of 15th and Allen Streets in Downtown Allentown. This property is anchored by a Laneco Supermarket which occupies an estimated 25,000 square feet with the balance of the rentable area, 21,503 square feet allocated to 12 other satellite tenants. This center was built in the 1950's, however, it has undergone significant renovations since that time. Currently, the property is in average condition. At the time of sale, the property was 100% occupied. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Stefko Shopping Center Location: Stefko Boulevard City: Bethlehem County: Northampton State/Zip: Pennsylvania Assessor's Parcel No(s): N7SW1B-3-1 Atlas Reference: N/A Physical Data Type: Community Land Area: 10.27 Acres Excess Land: None Gross Leasable Area: Anchors: Laneco Supermarket 65,000 SF Local Tenant GLA: 69,446 SF Anchor Tenant GLA: 65,000 SF Total GLA: 134,446 SF GLA Purchased: 134,446 SF Year Built: 1965 Parking: Adequate Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 01/96 Marketing Time: N/A Grantor: Carriage Associates L.P. Grantee: Allenbeth Associates L.P. Document No.: 1996-1/4082 Sale Price: $5,618,000 Financing: Market Terms Cash Equivalent Price: $5,618,000 Required Capital Cost: $0 Adjusted Sales Price: $5,618,000 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 95.2% Existing or Pro Forma Income: N/A TOTAL P.S.F. -------- ----- Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $617,577 $4.59 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.99% Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A% Price Per Square Foot: $41.79 Comments The Stefco shopping center is a one-story community retail center located on Stefco Boulevard in Bethlehem. This property is anchored by a Laneco Supermarket which occupies an estimated 65,000 square feet with the balance of the rentable area, 69,446 square feet allocated to 21 other satellite tenants. This center was built in 1965, however, it has undergone significant renovations in 1988. Currently, the property is in average condition. At the time of sale, the property was 95.2% occupied. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Airport Square Shopping Center Location: PA Route 309 @ Route 202 City: Montgomery Township County: Montgomery State/Zip: Pennsylvania Assessor's Parcel No(s): 46-00-00142-00-1 Atlas Reference: N/A Physical Data Type: Strip Center Land Area: 41.90 Acres Excess Land: NA Gross Leasable Area: Anchors: K-Mart 83,153 SF Marshall's 32,830 SF Best Products 33,523 SF Toys 'R Us 37,358 SF Local Tenant GLA: 71,602 SF Anchor Tenant GLA: 186,864 SF Total GLA: 258,466 SF GLA Purchased: 258,466 SF Year Built: 1980 Parking: N/A Condition: Good Exterior Walls: Cement Block Sale Data Transaction Type: Sale Date of Transaction: 3 /95 Marketing Time: N/A Grantor: Prudential Insurance Co. of America Grantee: Gateway D.C. Properties, Inc. Document No.: 5109/158 Sale Price: $19,275,000 Financing: Cash to Seller Cash Equivalent Price: N/A Required Capital Cost: $0 Adjusted Sales Price: $0 Verification: N/A Financial Data Assumptions & Forecast: N/A Occupancy at Sale: 99 Existing or Pro Forma Income: N/A TOTAL P.S.F. -------- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $1,798,923 $6.96 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): N/A% Projected IRR: 9.34% Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A% Price Per Square Foot: N/A Comments - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Kenhorst Plaza Location: N/E/C New Holland Rd. & Philadelphia Ave. Kenhorst Borough City: Reading County: Berks State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Strip Center Land Area: 19.19 Acres Excess Land: N/A Gross Leasable Area: Anchors: Redner's Food Mrkt. 44,000 SF U.S. Post Office 11,000 SF Local Tenant GLA: N/A Anchor Tenant GLA: 55,000 SF Total GLA: 55,000 SF GLA Purchased: 136,087 SF Year Built: 1990 Parking: NA Condition: Good Exterior Walls: Cement Block Sale Data Transaction Type: Sale Date of Transaction: 8/95 Marketing Time: N/A Grantor: Kenhorst Plaza Associates, L.P. Grantee: First Washington Realty Partnership Document No.: 2674/1606 Sale Price: $11,000,000 Financing: Cash to Seller Cash Equivalent Price: N/A Required Capital Cost: $0 Adjusted Sales Price: $0 Verification: N/A Financial Data Assumptions & Forecast: N/A Occupancy at Sale: 94 Existing or Pro Forma Income: N/A TOTAL P.S.F. ---------- ----- Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $1,102,305 $8.10 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria:Other Overall Capitalization Rate (OAR): N/A% Projected IRR: 9.40% Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A% Price Per Square Foot: N/A Comments - -------------------------------------------------------------------------------- CB COMMERCIAL ADDENDUM D RENTAL COMPARABLES ================================================================================ ADDENDUM D RENTAL COMPARABLES - -------------------------------------------------------------------------------- RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Kingston Plaza Location: S/S Third Avenue East Of Pierce Street City: Kingston County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 64,824 SF Year Built: 1982 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Price Chopper Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$10.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM. Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 09/95 6,500 The Everything $5.50 N/A None $950 step in ye 1.30 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent lease includes a term for 1 year and 3 months. Additionally, the tenant has a percentage rent clause of 3.0% over a breakpoint of $1,191,660. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Mark Plaza Location: N/S Route 11 City: Edwardsville County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 176,786 SF Year Built: 1967 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 91.7% Overall: 91.7% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $1.95-$11.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 10/95 3,600 Spectrum Rents $8.00 N/A None Flat 5.00 - -------------------------------------------------------------------------------- 08/95 7,000 Keens Floral Fa $8.00 N/A Annual Step-up 5.00 - -------------------------------------------------------------------------------- 07/95 3,600 Mattress Man $11.50 N/A Flat 5.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 91.7% leased. The most recent leases all include terms for 5 years. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Birney Plaza Location: N/S Route 11 City: Moosic County: Lackawanna State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 212,057 SF Year Built: 1972 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $3.00-$10.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 9/95 4,000 Everything $0.9 $7.00 N/A None flat 3.00 - -------------------------------------------------------------------------------- 7/93 4,000 Mattress Man $9.00 N/A None Step-up to $10/ 5.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 3 and 5 years Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Dunmore Plaza Location: 1400 Monroe Avenue City: Dunmore County: Lackawanna State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 45,380 SF YearBuilt: 1967 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Price Chopper Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $6.75-$11.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 4/95 1,900 Malcom's $11.50 N/A None $950 Step-up in 5.00 - -------------------------------------------------------------------------------- 1/95 1,900 Great Wall Chin $11.35 N/A 3.0% per year 10.00 - -------------------------------------------------------------------------------- 4/94 1,900 Little Caeser's $9.25 N/A Periodic Step-u 5.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 5 and 10 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Triangle Plaza Location: Route 115 City: Wilkes-Barre County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 125,000 SF Year Built: 1971 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years (Estimate) Base Rent Per Square Foot: $9.00-$12.50 (Estimate) Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 6/95 2,400 Electronic Syst $11.50 N/A None Annual %age inc 5 00 - -------------------------------------------------------------------------------- 3/95 2,200 TCBY $11.00 N/A None Annual %age inc 5.00 - -------------------------------------------------------------------------------- 5/94 9,910 Party City $11.00 N/A None $1.65/SF step-u 10.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 5 and 10 years. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Gateway Plaza Location: N/S Route 11 City: Edwardsville County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 150,000 SF Year Built: 1969 Exterior Walls: Brick Veneer Condition: Fair Anchor Tenant: Parking: Adequate Lease Data Occupancy: Local: 65.0% Overall: 65.0 Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $8.50 - $15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 6/94 950 Holiday Hair $15.48 N/A None Annual %age inc 3.00 - -------------------------------------------------------------------------------- 6/94 3,080 McKenzie $8.50 N/A None Annual %age inc 3.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 65% leased. The most recent leases all include terms for 3 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Pottstown Center Location: Route 663 City: Pottstown County: Montgomery State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 171,267 SF Year Built: 1976 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Wal-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $8.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 7/95 121,267 Wal-Mart $6.99 N/A None Flat 20.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes terms for 20 years. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Route 6 Mall Location: N/S Route 6 City: Honesdale County: Wayne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 144,229 SF Year Built: 1978 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 3/95 119,229 K-Mart $5.77 N/A None Flat 25.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 20 years and includes a percentage rent clause on 1.0% over $20.0 million. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Bradford Towne Centre Location: N/S Route 6 City: Wysox County: Bradford State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 119,481 SF Year Built: 1972 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 7/94 94,481 K Mart $5.00 N/A None Flat 25.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 25 years and includes a percentage rent clause on 1.0% over $16.875 million. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Builder's Square Shopping Center Location: Cetronia Road City: Whitehall County: Lehigh State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 106,400 SF Year Built: 1994 Exterior Walls: Brick Veneer Condition: Good Anchor Tenant: Builder's Square Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 3/94 106,400 Builder's Squar $10.05 N/A None Flat 25.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 25 years. Construction quality is good and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ ADDENDUM E STRATEGIC MAPPING, INC. REPORTS - -------------------------------------------------------------------------------- ADDENDUM E STRATEGIC MAPPING, INC. REPORTS - -------------------------------------------------------------------------------- Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 PA/95 Northampton County 5/20/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 225,418 247,105 256,899 264,190 White 96.4% 94.2% 93.2% 92.2% Black 1.8% 2.1% 2.4% 2.7% American Indian 0.0% 0.1% 0.1% 0.1% Asian 0.5% 1.1% 1.4% 1.6% Other 1.3% 2.5% 2.9% 3.4% Hispanic 3.1% 4.7% 5.6% 6.5% Total Households 80,032 90,955 94,376 96,864 Household Population 218,183 238,251 248,045 255,336 Average Household Size 2.73 2.62 2.63 2.64 Household Income $ 0-9.999 25.1% 11.4% 9.2% 7.5% $ 10,000-14,999 14.5% 8.0% 6.9% 5.6% $ 15,000-24,999 29.7% 16.8% 13.9% 11.8% $ 25,000-34,999 18.6% 17.2% 14.3% 12.1% $ 35,000-49,999 8.5% 21.4% 20.9% 18.7% $ 50,000-74,999 2.8% 17.5% 20.8% 22.7% $ 75,000-99,999 0.8% 4.6% 7.8% 10.7% $ 100,000-149,999 -- 2.2% 4.4% 8.0% $ 150,000 -- 1.1% 1.7% 2.9% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 18,506 32,890 38,659 45.281 Aggregate HH Inc ($000) 1,647,310 3,551,306 4,441,446 5,402,753 Median Family Income ($) 21,333 38,666 45,448 53,233 Per Capita Income ($) 7,550 14,906 17,906 21,159 Median Age Total Population 32.9 34.9 36.6 37.8 Median Age Adult Population 43.7 42.5 44.2 45.6 Median Age Female Population 34.7 36.4 38.2 39.8 Median Age Adult Female Population 45.5 43.9 45.6 47.1 Median Age Male Population 31.1 33.6 35.0 35.8 Median Age Adult Male Population 41.7 41.1 42.8 44.1
Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 PA/95 Northampton County 5/20/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 225,418 247,105 256,899 264,190 0-5 7.2% 8.0% 7.8% 7.5% 6-13 11.4% 10.4% 10.4% 10.2% 14-17 6.7% 4.8% 5.3% 5.4% 18-24 12.8% 11.1% 10.4% 10.6% 25-34 15.0% 15.8% 13.5% 12.4% 35-44 11.0% 15.2% 15.6% 14.6% 45-54 11.2% 10.2% 12.2% 13.6% 55-64 12.1% 9.5% 8.9% 9.7% 65-74 12.6% 9.0% 9.0% 8.5% 75-84 -- 4.7% 5.4% 5.8% 85+ -- 1.3% 1.5% 1.8% Female Population by Age 115,885 126,915 132,045 135,839 0-5 6.9% 7.6% 7.4% 7.1% 6-13 10.8% 9.9% 9.8% 9.7% 14-17 6.3% 4.6% 5.0% 5.0% 18-24 11.7% 10.2% 9.5% 9.8% 25-34 14.8% 15.5% 13.3% 11.9% 35-44 11.0% 14.8% 15.4% 14.5% 45-54 11.3% 10.1% 12.1% 13.5% 55-64 12.6% 9.8% 9.1% 9.8% 65-74 14.6% 9.9% 9.8% 9.2% 75-84 -- 5.7% 6.6% 7.0% 85+ -- 1.8% 2.1% 2.6% Male Population by Age 109,533 120,190 124,854 128,351 0-5 7.6% 8.4% 8.2% 7.8% 6-13 12.0% 10.9% 11.0% 10.7% 14-17 7.2% 5.1% 5.7% 5.8% 18-24 14.0% 12.0% 11.3% 11.5% 25-34 15.2% 16.1% 13.8% 13.0% 35-44 11.0% 15.5% 15.8% 14.6% 45-54 11.1% 10.4% 12.4% 13.6% 55-64 11.5% 9.2% 8.8% 9.5% 65-74 10.4% 8.0% 8.1% 7.8% 75-84 -- 3.7% 4.2% 4.5% 85+ -- 0.7% 0.8% 1.0%
Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Economic Report CBC - C1750-41 Page 1 of 1 PA/95 Northampton County 5/20/96 Sales Volume Number of Employees # of Firms Total Sales Primary SIC Firms in Area Reporting $(00000) Agr/For/Fish 233 850 224 377 Mining 12 147 9 2,602 Construction 1,167 4,889 1,095 4,301 Manufacturing 589 19,480 464 20,758 Transp/Comm/Util 312 4,394 191 2,162 Wholesale Trade 457 3,906 368 6,591 Retail Trade 1,929 13,470 1,469 9,357 Fin/Insur/Real Est 607 6,008 426 5,741 Services 3,370 28,707 2,843 14,638 Total 8,676 81,851 7,089 66,527 Financial Institution Deposit Data ($0000) Commercial Savings Banks & Credit Banks Savings & Loans Unions IPC Deposits 256,573 49,883 N/A All Other Deposits 16,812 1,427 N/A Total Deposits 273,385 51,310 10,821 Number of Offices 88 14 22 Number of Offices by Deposits % Under $50 Million 85.2% 78.6% 100.0% % $50 - $100 Million 12.5% 21.4% 0.0% % $100 - $500 Million 2.3% 0.0% 0.0% % $500 - $1 Billion 0.0% 0.0% 0.0% % Over $1 Billion 0.0% 0.0% 0.0% N/A - Data not reported Area defined by County Source: Sheshunoff Information Services Inc. & Dun & Bradstreet Inc. Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center Total Retail CBC - C1750-41 Page 1 of 2 PA/95 Northampton County 5/20/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 102.4 - ----------------------------------Demographics---------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 256,899 94,376 248,045 2.63 $38,659 2000 264,190 96,864 255,336 2.64 $45,281 - ------------------------------Expenditure Potential----------------------------- 1995 Area Yearly Growth Rate Per Household 1.45% Total 1.98% - -------------------------Retail Support Potential (000)------------------------- 1995: 10,606 sq. ft. - --------------------------------------------------------------------------------
Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 96,448 109,578 1,022 1,131 2.59% 99.8 Appliance Store 8,110 7,050 86 73 -2.76% 100.7 Auto-Aftermarket Store 162,957 172,434 1,727 1,780 1.14% 103.3 Convenience Store 88,171 92,421 934 954 0.95% 103.2 Dept. Store 100,044 110,437 1,060 1,140 2.00% 100.3 Drug Store 79,970 102,110 847 1,054 5.01% 107.8 Electronics Store 36,933 49,188 391 508 5.90% 100.7 Fast Food Restaurant Store 91,217 82,399 967 851 -2.01% 101.2 Full Serv Restaurant Store 89,702 80,321 950 829 -2.19% 101.6 Furniture Store 34,495 32,934 366 340 -0.92% 98.5 Grocery Store 396,111 454,958 4,197 4,697 2.81% 102.7 Hardware Store 18,080 19,936 192 206 1.97% 104.1 Home Centers Store 89,037 105,909 943 1,093 3.53% 107.9 Jewelry Store 16,391 17,227 174 178 1.00% 102.7 Liquor Store 23,917 21,913 253 226 -1.74% 99.7 Mass Merchandiser Store 135,118 153,705 1,432 1,587 2.61% 101.1 Photo Store 1,868 1,878 20 19 0.11% 102.8 Shoe Store 18,774 22,575 199 233 3.76% 99.9 Sporting Goods Store 16,761 19,770 178 204 3.36% 99.2 Toy Store 12,195 11,722 129 121 -0.79% 101.2 Variety Store 7,753 8,939 82 92 2.89% 101.3
Area defined by County Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center Total Retail CBC - C1750-41 Page 2 of 2 PA/95 Northampton County 5/20/96 Benchmark = Regional Area Definition Detailed Report Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 5,530 9,491 59 98 11.41% 101.6 Total Shopping Center 1,529,582 1,686,894 16,207 17,415 All Other Stores 1,173,189 1,293,848 12,431 13,357 Total Retail 2,702,771 2,980,742 28,638 30,772 Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by County Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 1 of 4 Area 1 = PA/95 Northampton County 5/20/96 Description Area 1 Population: 2000 Projection 264,190 1995 Estimate 256,899 1990 Census 247,105 1980 Census 225,418 Percent Change. 1980 - 1990 9.6 Percent Change. 1990 - 1995 4.0 1995 Population by Race: % White 93.2 % Black 2.4 % American Indian 0.1 % Asian 1.4 % Other 2.9 % Hispanic 5.6 1995 Population by Age: % 0 - 5 7.8 % 6 - 13 10.4 % 14 - 17 5.3 % 18 - 20 4.7 % 21 - 24 5.7 % 25 - 34 13.5 % 35 - 44 15.6 % 45 - 54 12.2 % 55 - 64 8.9 % 65 - 74 9.0 % 75 - 84 5.4 % 85 + 1.5 Median Age Total Population 36.6 Median Age Adult Population 44.2 Households: 2000 Projection 96,864 1995 Estimate 94,376 1990 Census 90,955 1980 Census 80,032 Percent Change, 1980 - 1990 13.6 Percent Change, 1990 - 1995 3.8 1990 Household Population 238,251 1990 Households w/ Children under 18 31,757 1990 Households w/ Persons over 65 25,766 Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 2 of 4 Area 1 = PA/95 Northampton County 5/20/96 Description Area 1 1990 Family Population 208,904 1990 Nonfamily Population 29,347 1990 Group Quarters Population 8,854 1990 Average Household Size 2.62 1990 Average Family Size 3.06 1990 Family Households 67,185 1990 Nonfamily Households 23,770 1995 Household Income: % $ 0 - $ 9,999 9.2 % $ l0,000 - $ 14,999 6.9 % $ 15,000 - $ 24,999 13.9 % $ 25,000 - $ 34,999 14.3 % $ 35,000 - $ 49,999 20.9 % $ 50,000 - $ 74,999 20.8 % $ 75,000 - $ 99,999 7.8 % $100,000 - $149,999 4.4 % $150,000 + 1.7 2000 Median Household Income $45,281 1995 Median Household Income $38,659 1990 Median Household Income $32,890 2000 Average Household Income $55,777 1995 Average Household Income $47,061 1990 Average Household Income $39,189 2000 Per Capita Income $21,159 1995 Per Capita Income $17,906 1990 Per Capita Income $14,906 2000 Median Family Income $53,233 1995 Median Family Income $45,448 1990 Median Family Income $38,666 1990 Average Family Income $44,827 Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 3 of 4 Area 1 = PA/95 Northampton County 5/20/96 Description Area 1 1990 Housing Unit Counts: Total Units 95,345 Occupied Units 90,955 Owner Occupied 66,907 Renter Occupied 24,048 Vacant Units 4,390 Year Round 3,980 Seasonal 410 1990 Housing Unit Percents: % Occupied of Total Units 95.4 % Owner Units of Occupied Units 73.6 % Renter Units of Occupied Units 26.4 % Vacant of Total Units 4.6 % Year Round of Vacant Units 90.7 % Seasonal of Vacant Units 9.3 % Condominiums of Total Units 1.3 1990 Condominiums: Total Condominium Units 1,212 % Owner Occupied 56.8 % Renter Occupied 32.3 % Vacant 10.8 1990 Units in Structure: % 1, Detached 56.3 % 1, Attached 19.9 % 2 5.7 % 3 - 9 8.4 % 10 - 49 3.4 % 50 + 1.4 % Mobile Homes 3.6 % Other 1.2 1990 Median Home Value $105,995 1990 Median Contract Rent $379 Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 4 of 4 Area 1 = PA/95 Northampton County 5/20/96 Description Area 1 1995 Total Employed 80,598 1995 Socio-Economic Measure 53 1990 Occupation: Total Civil Labor Force 123,211 % Unemployed 4.3 Total Employed 117,962 % White Collar 54.5 % Executive & Managerial 10.1 % Professional Specialty 13.4 % Technical Support 3.9 % Administrative Support 16.4 % Sales 10.6 % Blue Collar 32.4 % Precision Production, Craft & Repair 12.4 % Machine Operators 10.3 % Transportation & Material Moving 4.1 % Laborers 5.5 % Farming, Forestry & Fishing 1.1 % Service: Private Household 0.2 % Service: Protective 1.5 % Service: Other 10.4 1990 Educational Attainment (Age 25 & Over): % Less than Grade 9 10.6 % Grade 9-12 (No Diploma) 16.3 % High School Graduate or Equivalency 37.6 % Some College (No Degree) 12.8 % Associate Degree 6.0 % Bachelor Degree 10.7 % Graduate or Professional Degree 6.1 Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 1 of 9 Area 1 = PA/95 Northampton County 5/20/96 Description Area 1 1995 Socio-Economic Measure: 53 1995 Employment: 80,598 Population: 2000 Projection 264,190 1995 Estimate 256,899 1990 Census 247,105 1990 - 1995% Change (Growth) 4.0% 1990 Group Quarters Population 8,854 1995 % Population by Race: White 93.2% Black 2.4% American Indian, Eskimo & Aleut 0.1% Asian or Pacific Islander 1.4% Other 2.9% Hispanic 5.6% 1990 % Population by Race: White 94.2% Black 2.1% American Indian, Eskimo & Aleut 0.1% Asian or Pacific Islander 1.1% Other 2.5% Hispanic 4.7% 1995 % Population by Sex: Male 48.6% Female 51.4% 1990 % Population by Sex: Male 48.6% Female 51.4% 2000 Pop per Square Mile (Pop Density) 706.7 1995 Pop per Square Mile (Pop Density) 687.2 1990 Pop per Square Mile (Pop Density) 661.0 Area (Square Miles) 373.9 Area (Square Kilometers) 968.3 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 2 of 9 Area 1 = PA/95 Northampton County 5/20/96 Description Area 1 Households: 2000 Projection 96,864 1995 Estimate 94,376 1990 Census 90,955 1990 - 1995 % Change (Growth) 3.8% 2000 Average Household Size 2.64 1995 Average Household Size 2.63 1990 Average Household Size 2.62 2000 Per Capita Income $21,159 1995 Per Capita Income $17,906 1990 Per Capita Income $14,906 2000 Median Family Income $53,233 1995 Median Family Income $45,448 1990 Median Family Income $38,666 2000 Median Household Income $45,281 1995 Median Household Income $38,659 1990 Median Household Income $32,890 2000 Average Household Income $55,777 1995 Average Household Income $47,061 1990 Average Household Income $39,189 1995 % Household Income: $ 0 - $ 9,999 9.2% $ 10,000 - $ 14,999 6.9% $ 15,000 - $ 24,999 13.9% $ 25,000 - $ 34,999 14.3% $ 35,000 - $ 49,999 20.9% $ 50,000 - $ 74,999 20.8% $ 75,000 - $ 99,999 7.8% $ 100,000 - $ 149,999 4.4% $ 150,000 + 1.7% Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 3 of 9 Area 1 = PA/95 Northampton County 5/20/96 Description Area 1 1990 % Household Income: $ 0 - $ 9,999 11.4% $ 10,000 - $ 14,999 8.0% $ 15,000 - $ 24,999 16.8% $ 25,000 - $ 34,999 17.2% $ 35,000 - $ 49,999 21.4% $ 50,000 - $ 74,999 17.5% $ 75,000 - $ 99,999 4.6% $ l00,000 - $ 149,999 2.2% $ 150,000 + 1.1% 1995 % Population by Age: 0 - 5 7.8% 6 - 13 10.4% 14 - 17 5.3% 18 - 20 4.7% 21 - 24 5.7% 25 - 34 13.5% 35 - 44 15.6% 45 - 54 12.2% 55 - 64 8.9% 65 - 74 9.0% 75 - 84 5.4% 85 + 1.5% Median Age Total Population 36.6 Median Age Adult Population 44.2 1990 % Population by Age: 0 - 5 8.0% 6 - 13 10.4% 14 - 17 4.8% 18 - 20 5.3% 21 - 24 5.8% 25 - 34 15.8% 35 - 44 15.2% 45 - 54 10.2% 55 - 64 9.5% 65 - 74 9.0% 75 - 84 4.7% 85 + 1.3% Median Age Total Population 34.9 Median Age Adult Population 42.5 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 4 of 9 Area 1 = PA/95 Northampton County 5/20/96 Description Area 1 1995 % Female Population by Age: 0 - 5 7.4% 6 - 13 9.8% 14 - 17 5.0% 18 - 20 4.3% 21 - 24 5.2% 25 - 34 13.3% 35 - 44 15.4% 45 - 54 12.1% 55 - 64 9.1% 65 - 74 9.8% 75 - 84 6.6% 85+ 2.1% Female Median Age Total Population 38.2 Female Median Age Adult Population 45.6 1990 % Female Population by Age: 0 - 5 7.6% 6 - 13 9.9% 14 - 17 4.6% 18 - 20 4.7% 21 - 24 5.5% 25 - 34 15.5% 35 - 44 14.8% 45 - 54 10.1% 55 - 64 9.8% 65 - 74 9.9% 75 - 84 5.7% 85 + 1.8% Female Median Age Total Population 36.4 Female Median Age Adult Population 43.9 1990 % Hispanic Population by Type: Not of Hispanic Origin 95.3% Mexican 0.3% Puerto Rican 3.5% Cuban 0.1% Other Hispanic 0.8% Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC C1750-41 Page 5 of 9 Area 1 = PA/95 Northampton County 5/20/96 Description Area 1 1990 % Population Enrolled in School (Age 3 & Over): Preprimary School 7.2% Elementary and High School 62.4% College 30.3% Total School Enrollment 61,028 1990 % Educational Attainment (Age 25 & Over): Less than Grade 9 10.6% Grade 9-12 (No Diploma) 16.3% High School Graduate or Equivalency 37.6% Some College (No Degree) 12.8% Associate Degree 6.0% Bachelor Degree 10.7% Graduate or Professional Degree 6.1% 1990 % Employment Status: Total Labor Force: Armed Forces 0.1% Civilian: Employed 60.4% Unemployed 2.7% Not In Labor Force 36.9% Female Labor Force: Armed Forces 0.0% Civilian: Employed 52.4% Unemployed 2.2% Not In Labor Force 45.5% 1990 % Working Mothers: Child <6 Only 15.6% Child 6-17 Only 42.8% Child <6 & 6-17 9.8% Nonworking Mothers 31.8% Total Mothers 29,944 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1.5041 Page 6 of 9 Area 1 = PA/95 Northampton County 5/20/96 Description Area 1 1990 % Industry Employment: Agriculture Forestry/Fishing 1.2% Mining 0.3% Construction 6.2% Manufacturing: Nondurable Goods 12.5% Durable Goods 14.6% Transportation 4.0% Communications & Public Utilities 2.8% Wholesale Trade 3.6% Retail Trade 16.1% Finance/Insurance/Real Estate 5.5% Services: Business & Repair 4.2% Personal 2.3% Entertainment & Recreation 1.0% Health 8.5% Educational 9.5% Other Professional & Related 5.2% Public Administration 2.3% Total 117,962 1990 % Occupation: Executive & Managerial 10.1% Professional Specialty 13.4% Technical Support 3.9% Sales 10.6% Administrative Support 16.4% Service: Private Household 0.2% Service: Protective 1.5% Service: Other 10.4% Farming, Forestry & Fishing 1.1% Precision Production, Craft & Repair 12.4% Machine Operator, Assemblers & Inspectors 10.3% Transportation & Material Moving 4.1% Laborers 5.5% White Collar Total 54.5% Blue Collar Total 32.4% Total Employed 117,962 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 7 of 9 Area 1 = PA/95 Northampton County 5/20/96 Description Area 1 1990 % Marital Status: Total Male: 95,533 Never Married 29.0% Married 60.7% Separated 1.7% Widowed 3.0% Divorced 5.6% Total Female: 103,250 Never Married 22.1% Married 55.9% Separated 2.1% Widowed 13.0% Divorced 6.8% 1990 Households by Type: One Person Households 19,867 Two or more Person Households: Family Households: Married Couple 55,981 Male Householder 2,888 Female Householder 8,316 Nonfamily Households 3,903 1990 Family Households With Children Married Couple Family 25,334 Male Householder 1,362 Female Householder 4,732 1990 Population by Household Type: Family Households 208,904 Nonfamily Households 29,347 1990 Households With: Children Under 18 31,757 Persons Over 65 25,766 Householder Over 65 23,090 1990 Average Family Size 3.06 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 8 of 9 Area 1 = PA/95 Northampton County. 5/20/96 Description Area 1 1990 Median Home Value $ 105,995 1990 Average Home Value $ 117,969 1990 Median Contract Rent $379 1990 Average Contract Rent $385 1990 Persons In Unit: 1 Person Units 19,867 2 Person Units 30,542 3 Person Units 16,991 4 + Person Units 23,555 1990 Housing Unit Counts: Total Units 95,345 % Occupied 95.4% % Vacant 4.6% % Year Round 4.2% % Seasonal 0.4% Occupied Units 90,955 % Owner Occupied 73.6% % Renter Occupied 26.4% Vacant Units 4,390 % Year Round of Vacant Units 90.7% % Seasonal of Vacant Units 9.3% 1990 Total Housing Units in Structure 95,345 1, Detached 56.3% 1, Attached 19.9% 2, 5.7% 3 - 9 8.4% 10 - 49 3.4% 50 + 1.4% Mobile Home or Trailer 3.6% Other 1.2% 1990 Housing Units by Year Built 67,003 Built 1985 to March, 1990 10.6% Built 1980 to 1984 4.4% Built 1970 to 1979 16.2% Built 1960 to 1969 12.3% Built 1950 to 1959 15.3% Built 1949 or Earlier 41.2% Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 9 of 9 Area 1 = PA/95 Northampton County 5/20/96 Description Area 1 1990 % Means of Transportation to Work: Car, Truck or Van: Drove Alone 78.4% Carpooled 12.2% Public Transportation 1.2% Other Means 5.9% Worked at Home 2.3% 1990 % Travel Time to Work: 0 - 14 Minutes 36.6% 15 - 29 Minutes 39.5% 30 - 59 Minutes 18.6% 60 - 89 Minutes 4.1% 90 + Minutes 1.1% 1990 Households by Number of Vehicles: 1 Vehicle 28,203 2 Vehicles 36,919 3 Vehicles 11,950 4 Vehicles 3,585 5 or More Vehicles 1,312 Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 1 of 4 Area 1 = 25TH STREET 3 Mile Radius 6/11/96 Area 2 = 25TH STREET 5 Mile Radius Area 3 = 25TH STREET 7 Mile Radius Description Area 1 Area 2 Area 3 Population: 2000 Projection 69,519 113,224 159,563 1995 Estimate 66,930 108,129 152,971 1990 Census 63,766 102,263 145,214 1980 Census 60,892 96,001 136,494 Percent Change, 1980 - 1990 4.7 6.5 6.4 Percent Change, 1990 - 1995 5.0 5.7 5.3 1995 Population by Race: % White 91.8 93.8 93.2 % Black 5.3 3.8 3.2 % American Indian 0.1 0.1 0.1 % Asian 1.5 1.4 1.3 % Other 1.3 1.0 2.1 % Hispanic 3.4 2.9 4.6 1995 Population by Age: % 0 - 5 8.3 8.3 8.1 % 6 - 13 10.6 10.9 10.7 % 14 - 17 5.1 5.0 5.0 % 18 - 20 4.6 4.4 4.3 % 21 - 24 5.9 5.4 5.2 % 25 - 34 14.5 13.8 13.4 % 35 - 44 15.2 15.8 15.6 % 45 - 54 10.9 11.8 12.1 % 55 - 64 8.5 8.5 8.9 % 65 - 74 8.9 8.8 9.1 % 75 - 84 5.7 5.6 5.8 % 85 + 1.8 1.7 1.8 Median Age Total Population 35.6 36.3 37.0 Median Age Adult Population 43.4 44.0 44.7 Households: 2000 Projection 25,796 42,068 59,197 1995 Estimate 24,836 40,218 56,832 1990 Census 23,666 38,093 54,060 1980 Census 21,990 34,642 48,754 Percent Change, 1980 - 1990 7.6 10.0 10.9 Percent Change, 1990 - 1995 4.9 5.6 5.1 1990 Household Population 60,660 98,733 140,726 1990 Households w/ Children under 18 8,067 13,323 19,036 1990 Households w/ Persons over 65 6,986 11,027 15,686 Area defined by Circle: (40.6900,75.248715): 3 mile(s) Area defined by Circle: (40.6900,75.248715): 5 mile(s) Area defined by Circle: (40.6900,75.248715): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 2 of 4 Area 1 = 25TH STREET 3 Mile Radius 6/11/96 Area 2 = 25TH STREET 5 Mile Radius Area 3 = 25TH STREET 7 Mile Radius Description Area 1 Area 2 Area 3 1990 Family Population 52,332 86,237 123,896 1990 Nonfamily Population 8,328 12,496 16,830 1990 Group Quarters Population 3,105 3,530 4,493 1990 Average Household Size 2.56 2.59 2.60 1990 Average Family Size 3.07 3.08 3.06 1990 Family Households 16,739 27,571 39,840 1990 Nonfamily Households 6,926 10,521 14,212 1995 Household Income: % $ 0 - $ 9,999 10.4 9.8 9.6 % $ 10,000 - $ 14,999 7.7 7.4 7.0 % $ 15,000 - $ 24,999 14.8 13.9 13.6 % $ 25,000 - $ 34,999 15.3 14.1 13.8 % $ 35,000 - $ 49,999 20.9 20.7 20.5 % $ 50,000 - $ 74,999 19.2 21.1 21.5 % $ 75,000 - $ 99,999 7.1 8.1 8.3 % $100,000 - $149,999 3.6 3.9 4.3 % $150,000 + 1.1 1.1 1.4 2000 Median Household Income $41,688 $44,134 $45,195 1995 Median Household Income $36,054 $38,067 $38,900 1990 Median Household Income $31,092 $32,779 $33,371 2000 Average Household Income $50,266 $52,902 $54,641 1995 Average Household Income $42,825 $45,125 $46,394 1990 Average Household Income $36,072 $38,052 $38,897 2000 Per Capita Income $19,524 $20,288 $20,859 1995 Per Capita Income $16,664 $17,350 $17,758 1990 Per Capita Income $13,971 $14,639 $14,893 2000 Median Family Income $49,764 $52,758 $53,249 1995 Median Family Income $43,038 $45,505 $45,832 1990 Median Family Income $37,115 $39,184 $39,318 1990 Average Family Income $41,833 $44,074 $44,574 Area defined by Circle: (40.6900,75.248715): 3 mile(s) Area defined by Circle: (40.6900,75.248715): 5 mile(s) Area defined by Circle: (40.6900,75.248715): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 3 of 4 Area 1 = 25TH STREET 3 Mile Radius 6/11/96 Area 2 = 25TH STREET 5 Mile Radius Area 3 = 25TH STREET 7 Mile Radius Description Area 1 Area 2 Area 3 1990 Housing Unit Counts: Total Units 25,243 40,270 56,777 Occupied Units 23,666 38,093 54,060 Owner Occupied 15,776 26,353 38,119 Renter Occupied 7,891 11,742 15,937 Vacant Units 1,577 2,177 2,717 Year Round 1,526 2,099 2,584 Seasonal 51 80 134 1990 Housing Unit Percents: % Occupied of Total Units 93.8 94.6 95.2 % Owner Units of Occupied Units 66.7 69.2 70.5 % Renter Units of Occupied Units 33.3 30.8 29.5 % Vacant of Total Units 6.2 5.4 4.8 % Year Round of Vacant Units 96.8 96.4 95.1 % Seasonal of Vacant Units 3.2 3.7 4.9 % Condominiums of Total Units 1.0 1.5 1.5 1990 Condominiums: Total Condominium Units 246 597 838 % Owner Occupied 55.3 60.3 55.5 % Renter Occupied 44.7 30.3 35.9 % Vacant 0.0 9.4 8.6 1990 Units in Structure: % 1, Detached 44.4 51.9 56.2 % 1, Attached 26.8 22.0 19.6 % 2 9.9 8.1 6.5 % 3 - 9 11.4 9.5 9.2 % 10 - 49 4.9 5.4 5.0 % 50 + 1.5 1.4 1.6 % Mobile Homes 0.2 0.6 0.8 % Other 0.9 1.0 1.0 1990 Median Home Value $97,988 $108,487 $112,047 1990 Median Contract Rent $417 $417 $412 Area defined by Circle: (40.6900,75.248715): 3 mile(s) Area defined by Circle: (40.6900,75.248715): 5 mile(s) Area defined by Circle: (40.6900,75.248715): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 4 of 4 Area 1 = 25TH STREET 3 Mile Radius 6/11/96 Area 2 = 25TH STREET 5 Mile Radius Area 3 = 25TH STREET 7 Mile Radius Description Area 1 Area 2 Area 3 1995 Total Employed 19,736 35,244 43,652 995 Socio-Economic Measure 49 53 54 1990 Occupation: Total Civil Labor Force 31,194 50,947 71,818 % Unemployed 5.1 4.5 4.4 Total Employed 29,600 48,644 68,636 % White Collar 55.0 55.4 55.7 % Executive & Managerial 10.0 10.7 10.7 % Professional Specialty 12.4 12.3 13.0 % Technical Support 3.8 4.0 3.9 % Administrative Support 17.0 16.7 16.8 % Sales 11.9 11.7 11.4 % Blue Collar 30.6 30.5 30.6 % Precision Production, Craft & Repair 11.6 12.3 12.4 % Machine Operators 9.6 9.2 9.2 % Transportation & Material Moving 3.6 3.6 3.7 % Laborers 5.9 5.4 5.3 % Farming, Forestry & Fishing 0.8 0.9 0.9 % Service: Private Household 0.1 0.2 0.2 % Service: Protective 2.1 2.1 1.9 % Service: Other 11.3 10.9 10.7 1990 Educational Attainment (Age 25 & Over): % Less than Grade 9 9.5 9.5 10.1 % Grade 9-12 (No Diploma) 16.7 16.0 15.9 % High School Graduate or Equivalency 40.1 39.3 38.2 % Some College (No Degree) 13.1 13.4 13.0 % Associate Degree 5.8 5.9 6.1 % Bachelor Degree 9.8 10.6 11.0 % Graduate or Professional Degree 5.2 5.1 5.5 Area defined by Circle: (40.6900,75.248715): 3 mile(s) Area defined by Circle: (40.6900,75.248715): 5 mile(s) Area defined by Circle: (40.6900,75.248715): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 25th Street SC 1 Mile Radius 5/21/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 6,353 6,522 6,532 6,513 White 98.6% 97.9% 97.4% 97.0% Black 0.4% 0.8% 1.0% 1.1% American Indian 0.0% 0.1% 0.1% 0.2% Asian 0.7% 0.9% 1.1% 1.2% Other 0.3% 0.4% 0.4% 0.5% Hispanic 0.7% 1.1% 1.4% 1.6% Total Households 2,260 2,501 2,510 2,506 Household Population 6,335 6,416 6,427 6,408 Average Household Size 2.80 2.57 2.56 2.56 Household Income $ 0 - 9,999 14.7% 8.1% 6.2% 5.0% $ 10,000 - 14,999 12.9% 6.4% 4.8% 4.1% $ 15,000 - 24,999 33.3% 14.8% 12.0% 9.9% $ 25,000 - 34,999 22.3% 16.7% 15.1% 10.9% $ 35,000 - 49,999 10.6% 21.9% 21.0% 18.2% $ 50,000 - 74,999 4.4% 23.0% 22.9% 24.3% $ 75,000 - 99,999 1.9% 6.0% 11.3% 14.0% $ 100,000 - 149,999 -- 2.6% 5.8% 11.2% $ 150,000 + -- 0.5% 1.0% 2.4% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 21,748 37,141 43,820 51,667 Aggregate HH Inc ($000) 61,519 103,510 126,460 149,563 Median Family Income ($) 23,610 43,020 50,756 59,845 Per Capita Income ($) 9,711 16,133 19,676 23,340 Median Age Total Population 37.4 41.4 42.7 43.5 Median Age Adult Population 47.4 49.1 49.9 50.6 Median Age Female Population 39.3 42.8 44.1 45.1 Median Age Adult Female Population 48.3 50.5 51.3 51.9 Median Age Male Population 35.4 40.1 41.2 42.0 Median Age Adult Male Population 46.5 47.6 48.4 49.1
Area defined by Circle: (40.689996,75.263031): 1 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-4l Page 2 of 2 25th Street SC 1 Mile Radius 5/21/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 6,353 6,522 6,532 6,513 0 - 5 6.4% 6.3% 6.1% 6.0% 6 - 13 11.9% 9.5% 8.8% 8.4% 14 - 17 7.1% 4.3% 4.3% 4.3% 18 - 24 8.2% 7.3% 8.0% 8.0% 25 - 34 13.5% 12.7% 11.5% 11.7% 35 - 44 12.4% 15.0% 14.9% 13.9% 45 - 54 13.2% 11.5% 12.5% 12.9% 55 - 64 14.5% 11.9% 11.2% 11.5% 65 - 74 12.8% 12.6% 12.6% 12.3% 75 - 84 -- 7.1% 8.1% 8.6% 85 + -- 1.9% 2.1% 2.5% Female Population by Age 3,288 3,453 3,460 3,451 0 - 5 5.7% 5.6% 5.7% 5.6% 6 - 13 11.3% 9.0% 8.0% 7.6% 14 - 17 6.1% 4.2% 4.1% 4.0% 18 - 24 8.1% 7.0% 7.9% 7.8% 25 - 34 13.5% 12.6% 11.1% 11.4% 35 - 44 12.4% 14.5% 14.6% 13.6% 45 - 54 13.7% 11.3% 12.0% 12.6% 55 - 64 14.8% 12.2% 11.5% 11.7% 65 - 74 14.5% 13.1% 13.0% 12.7% 75 - 84 -- 7.7% 9.0% 9.6% 85 + -- 2.8% 3.0% 3.4% Male Population by Age 3,067 3,068 3,074 3,064 0 - 5 7.0% 7.0% 6.5% 6.3% 6 - 13 12.5% 10.0% 9.8% 9.3% 14 - 17 8.2% 4.4% 4.5% 4.6% 18 - 24 8.2% 7.6% 8.0% 8.2% 25 - 34 13.5% 12.8% 11.9% 12.1% 35 - 44 12.5% 15.5% 15.3% 14.2% 45 - 54 12.8% 11.7% 12.9% 13.3% 55 - 64 14.2% 11.6% 10.8% 11.2% 65 - 74 11.1% 12.1% 12.1% 11.8% 75 - 84 -- 6.4% 7.1% 7.4% 85 + -- 0.8% 1.1% 1.4%
Area defined by Circle: (40.689996,75.263031): 1 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 25th Street SC 3 Mile Radius 5/21/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 48,892 52,286 54,808 56,797 White 94.8% 92.8% 91.7% 90.7% Black 3.8% 4.7% 5.3% 5.8% American Indian 0.0% 0.1% 0.1% 0.1% Asian 0.8% 1.4% 1.7% 1.9% Other 0.6% 1.0% 1.2% 1.4% Hispanic 1.3% 2.6% 3.2% 3.8% Total Households 17,728 19,426 20,340 21,056 Household Population 47,048 49,712 52,233 54,222 Average Household Size 2.65 2.56 2.57 2.58 Household income $ 0 - 9,999 28.9% 12.3% 9.6% 7.7% $ 10,000 - 14,999 16.4% 8.1% 7.4% 6.4% $ 15,000 - 24,999 28.8% 17.9% 14.9% 12.9% $ 25,000 - 34,999 15.9% 17.9% 15.6% 12.7% $ 35,000 - 49,999 6.9% 21.2% 21.0% 19.7% $ 50,000 - 74,999 2.3% 16.1% 19.6% 21.8% $ 75,000 - 99,999 0.8% 4.1% 7.1% 9.8% $ 100,000 - 149,999 -- 1.7% 3.7% 7.1% $ 150,000 + -- 0.7% 1.1% 2.0% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 16,623 31,263 36,479 42,487 Aggregate HH Inc ($000) 341,494 708,337 888,604 1,084,829 Median Family Income ($) 20,028 37,378 43,614 50,797 Per Capita Income ($) 7,258 14,249 17,012 20,007 Median Age Total Population 33.7 34.7 36.2 37.4 Median Age Adult Population 45.5 42.7 44.0 45.1 Median Age Female Population 36.2 36.8 38.1 39.5 Median Age Adult Female Population 47.3 44.7 45.9 47.0 Median Age Male Population 31.4 32.9 34.2 35.3 Median Age Adult Male Population 43.3 40.6 42.1 43.4
Area defined by Circle: (40.689996,75.263031): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 25th Street SC 3 Mile Radius 5/21/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 48,892 52,286 54,808 56,797 0 - 5 7.1% 8.2% 8.2% 7.9% 6 - 13 11.0% 9.8% 10.4% 10.6% 14 - 17 6.9% 4.6% 5.0% 5.1% 18 - 24 12.5% 11.2% 10.1% 10.1% 25 - 34 14.2% 16.6% 14.5% 12.5% 35 - 44 10.3% 13.8% 15.2% 15.4% 45 - 54 11.4% 9.5% 10.9% 12.3% 55 - 64 12.2% 9.7% 8.7% 9.0% 65 - 74 14.4% 9.4% 9.3% 8.6% 75 - 84 -- 5.5% 6.0% 6.2% 85 + -- 1.6% 1.9% 2.2% Female Population by Age 25,531 26,953 28,258 29,234 0 - 5 6.6% 7.6% 7.7% 7.5% 6 - 13 10.2% 9.4% 9.6% 9.9% 14 - 17 6.1% 4.3% 4.7% 4.7% 18 - 24 11.9% 10.2% 9.2% 9.3% 25 - 34 14.0% 16.0% 13.9% 11.9% 35 - 44 10.1% 13.6% 14.9% 15.1% 45 - 54 11.4% 9.5% 10.9% 12.4% 55 - 64 12.7% 10.0% 8.9% 9.2% 65 - 74 17.0% 10.3% 10.1% 9.3% 75 - 84 -- 6.8% 7.4% 7.5% 85 + -- 2.5% 2.8% 3.3% Male Population by Age 23,350 25,332 26,540 27,554 0 - 5 7.7% 9.0% 8.6% 8.3% 6 - 13 12.0% 10.3% 11.2% 11.4% 14 - 17 7.7% 4.9% 5.3% 5.6% 18 - 24 13.2% 12.2% 11.1% 11.1% 25 - 34 14.4% 17.3% 15.1% 13.2% 35 - 44 10.5% 14.0% 15.5% 15.7% 45 - 54 11.3% 9.6% 10.9% 12.3% 55 - 64 11.8% 9.4% 8.5% 8.8% 65 - 74 11.5% 8.4% 8.4% 7.9% 75 - 84 -- 4.2% 4.5% 4.8% 85 + -- 0.8% 1.0% 1.1%
Area defined by Circle: (40.689996,75.263031): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 25th Street SC 5 Mile Radius 5/21/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 99,558 107,104 113,581 119,102 White 96.2% 94.7% 93.8% 93.0% Black 2.6% 3.2% 3.7% 4.0% American Indian 0.0% 0.1% 0.1% 0.1% Asian 0.6% 1.1% 1.4% 1.7% Other 0.5% 0.8% 1.0% 1.1% Hispanic 1.2% 2.3% 2.9% 3.5% Total Households 35,897 39,692 42,029 44,021 Household Population 96,850 103,372 109,853 115,374 Average Household Size 2.70 2.60 2.61 2.62 Household Income $ 0 - 9,999 26.3% 11.4% 9.2% 7.6% $ 10.000 - 14,999 15.0% 7.9% 7.1% 6.0% $ 15,000 - 24.999 30.4% 16.1% 13.6% 11.8% $ 25,000 - 34,999 17.4% 17.1% 14.2% 11.8% $ 35,000 - 49.999 7.9% 21.9% 20.8% 18.8% $ 50,000 - 74,999 2.4% 18.3% 21.5% 23.1% $ 75.000 - 99,999 0.7% 4.7% 8.3% 11.0% $ 100,000 - 149,999 -- 1.6% 4.1% 8.0% $ 150,000 + -- 0.8% 1.1% 2.0% Total 100.0% 100.0% 100.0% 100.0% Median Household Income($) 17,877 33,304 38,795 45,079 Aggregate HR Inc ($000) 715,663 1,519,907 1,927,942 2,373,866 Median Family Income ($) 20,801 39,279 45,755 53,167 Per Capita Income ($) 7,389 14,703 17,550 20,575 Median Age Total Population 33.2 34.7 36.4 37.6 Median Age Adult Population 44.5 42.5 44.1 45.5 Median Age Female Population 35.0 36.3 38.0 39.5 Median Age Adult Female Population 46.2 43.9 45.5 46.9 Median Age Male Population 31.3 33.3 34.8 35.7 Median Age Adult Male Population 42.6 41.0 42.6 44.0
Area defined by Circle: (40.689996,75.263031): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 25th Street SC 5 Mile Radius 5/21/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 99,558 107,104 113,581 119,102 0 - 5 7.4% 8.5% 8.3% 7.9% 6 - 13 11.4% 10.3% 10.8% 10.8% 14 - 17 6.9% 4.8% 5.1% 5.3% 18 - 24 12.1% 10.3% 9.7% 9.9% 25 - 34 14.8% 16.5% 13.7% 12.2% 35 - 44 10.8% 14.8% 15.8% 15.2% 45 - 54 11.4% 9.9% 11.9% 13.5% 55 - 64 12.0% 9.5% 8.6% 9.2% 65 - 74 13.3% 8.9% 8.8% 8.2% 75 - 84 -- 4.9% 5.6% 5.8% 85 + -- 1.5% 1.7% 2.0% Female Population by Age 51,992 55,441 58,778 61,556 0 - 5 6.8% 8.1% 7.9% 7.5% 6 - 13 10.7% 9.8% 10.2% 10.2% 14 - 17 6.3% 4.5% 4.7% 4.9% 18 - 24 11.6% 9.6% 8.9% 9.2% 25 - 34 14.6% 16.1% 13.5% 11.7% 35 - 44 10.5% 14.6% 15.6% 15.0% 45 - 54 11.4% 9.7% 11.8% 13.5% 55 - 64 12.4% 9.7% 8.7% 9.2% 65 - 74 15.7% 9.8% 9.5% 8.8% 75 - 84 -- 6.0% 6.8% 7.0% 85 + -- 2.1% 2.5% 2.9% Male Population by Age 47,563 51,659 54,797 57,546 0 - 5 7.9% 9.0% 8.7% 8.3% 6 - 13 12.2% 11.0% 11.5% 11.5% 14 - 17 7.6% 5.2% 5.4% 5.6% 18 - 24 12.7% 11.0% 10.7% 10.8% 25 - 34 15.1% 16.9% 14.0% 12.7% 35 - 44 11.0% 15.1% 16.1% 15.4% 45 - 54 11.4% 10.0% 12.1% 13.5% 55 - 64 11.5% 9.3% 8.4% 9.1% 65 - 74 10.6% 8.0% 8.0% 7.5% 75 - 84 -- 3.8% 4.3% 4.5% 85 + -- 0.7% 0.9% 1.1%
Area defined by Circle: (40.689996,75.263031): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 1 of 4 Area 1 = 25th Street SC 1 Mile Radius 5/21/96 Area 2 = 25th Street SC 3 Mile Radius Area 3 = 25th Street SC 5 Mile Radius Description Area 1 Area 2 Area 3 Population: 2000 Projection 6,513 56,797 119,102 1995 Estimate 6,532 54,808 113,581 1990 Census 6,522 52,286 107,104 1980 Census 6,353 48,892 99,558 Percent Change, 1980 - 1990 2.7 6.9 7.6 Percent Change, 1990 - 1995 0.2 4.8 6.0 1995 Population by Race: % White 97.4 91.7 93.8 % Black 1.0 5.3 3.7 % American Indian 0.1 0.1 0.1 % Asian 1.1 1.7 1.4 % Other 0.4 1.2 1.0 % Hispanic 1.4 3.2 2.9 1995 Population by Age: % 0 - 5 6.1 8.2 8.3 % 6 - 13 8.8 10.4 10.8 % 14 - 17 4.3 5.0 5.1 % 18 - 20 3.6 4.4 4.4 % 21 - 24 4.3 5.7 5.4 % 25 - 34 11.5 14.5 13.7 % 35 - 44 14.9 15.2 15.8 % 45 - 54 12.5 10.9 11.9 % 55 - 64 11.2 8.7 8.6 % 65 - 74 12.6 9.3 8.8 % 75 - 84 8.1 6.0 5.6 % 85 + 2.1 1.9 1.7 Median Age Total Population 42.7 36.2 36.4 Median Age Adult Population 49.9 44.0 44.1 Households: 2000 Projection 2,506 21,056 44,021 1995 Estimate 2,510 20,340 42,029 1990 Census 2,501 19,426 39,692 1980 Census 2,260 17,728 35,897 Percent Change, 1980 - 1990 10.7 9.6 10.6 Percent Change, 1990 - 1995 0.4 4.7 5.9 1990 Household Population 6,416 49,712 103,372 1990 Households w/ Children under 18 747 6,520 14,023 1990 Households w/ Persons over 65 909 5,897 11,282 Area defined by Circle: (40.689996,75.263031): 1 mile(s) Area defined by Circle: (40.689996,75.263031): 3 mile(s) Area defined by Circle: (40.689996,75.263031): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 2 of 4 Area 1 = 25th Street SC 1 Mile Radius 5/21/96 Area 2 = 25th Street SC 3 Mile Radius Area 3 = 25th Street SC 5 Mile Radius Description Area 1 Area 2 Area 3 1990 Family Population 5,796 43,002 90,681 1990 Nonfamily Population 620 6,710 12,691 1990 Group Quarters Population 105 2,575 3,728 1990 Average Household Size 2.57 2.56 2.60 1990 Average Familv Size 2.95 3.05 3.07 1990 Family Households 1,950 13,815 29,041 1990 Nonfamily Households 550 5,609 10,647 1995 Household Income: % $ 0 - $ 9,999 6.2 9.6 9.2 % $ 10,000 - $ 14,999 4.8 7.4 7.1 % $ 15,000 - $ 24,999 12.0 14.9 13.6 % $ 25,000 - $ 34,999 15.1 15.6 14.2 % $ 35,000 - $ 49,999 21.0 21.0 20.8 % $ 50,000 - $ 74,999 22.9 19.6 21.5 % $ 75,000 - $ 99,999 11.3 7.1 8.3 % $ 100,000 - $149,999 5.8 3.7 4.1 % $ l50,000 + 1.0 1.1 1.1 2000 Median Household Income $51,667 $42,487 $45,079 1995 Median Household Income $43,820 $36,479 $38,795 1990 Median Household Income $37,141 $31,263 $33,304 2000 Average Household Income $59,682 $51,521 $53,926 1995 Average Household Income $50,382 $43,688 $45,872 1990 Average Household Income $41,924 $36,680 $38,534 2000 Per Capita Income $23,340 $20,007 $20,575 1995 Per Capita Income $19,676 $17,012 $17,550 1990 Per Capita Income $16,133 $14,249 $14,703 2000 Median Family Income $59,845 $50,797 $53,167 1995 Median Family Income $50,756 $43,614 $45,755 1990 Median Family Income $43,020 $37,378 $39,279 1990 Average Family Income $46,831 $42,621 $44,268 Area defined by Circle: (40.689996,75.263031): 1 mile(s) Area defined by Circle: (40.689996,75.263031): 3 mile(s) Area defined by Circle: (40.689996,75.263031): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 3 of 4 Area 1 = 25th Street SC 1 Mile Radius 5/21/96 Area 2 = 25th Street SC 3 Mile Radius Area 3 = 25th Street SC 5 Mile Radius Description Area 1 Area 2 Area 3 1990 Housing Unit Counts: Total Units 2,561 20,662 41,922 Occupied Units 2,501 19,426 39,692 Owner Occupied 2,120 13,272 27,929 Renter Occupied 381 6,156 11,761 Vacant Units 60 1,236 2,230 Year Round 58 1,196 2,157 Seasonal 3 41 71 1990 Housing Unit Percents: % Occupied of Total Units 97.7 94.0 94.7 % Owner Units of Occupied Units 84.8 68.3 70.4 % Renter Units of Occupied Units 15.2 31.7 29.6 % Vacant of Total Units 2.3 6.0 5.3 % Year Round of Vacant Units 96.7 96.8 96.7 % Seasonal of Vacant Units 5.0 3.3 3.2 % Condominiums of Total Units 0.7 1.0 1.6 1990 Condominiums: Total Condominium Units 17 202 677 % Owner Occupied 88.2 62.9 61.3 % Renter Occupied 11.8 35.6 29.2 % Vacant 0.0 1.5 9.5 1990 Units in Structure: % 1, Detached 80.7 45.7 53.0 % 1, Attached 6.1 26.6 22.0 % 2 2.4 9.2 7.9 % 3 - 9 5.7 11.1 9.7 % 10 - 49 4.1 4.9 4.4 % 50 + 0.6 1.3 1.4 % Mobile Homes 0.0 0.2 0.6 % Other 0.5 1.0 1.0 1990 Median Home Value $123,933 $99,367 $108,681 1990 Median Contract Rent $509 $416 $415 Area defined by Circle: (40.689996,75.263031): 1 mile(s) Area defined by Circle: (40.689996,75.263031): 3 mile(s) Area defined by Circle: (40.689996,75.263031): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-4l Page 4 of 4 Area 1 = 25th Street SC 1 Mile Radius 5/21/96 Area 2 = 25th Street SC 3 Mile Radius Area 3 = 25th Street SC 5 Mile Radius Description Area 1 Area 2 Area 3 1995 Total Employed 2,605 18,147 36,732 1995 Socio-Economic Measure 73 50 54 1990 Occupation: Total Civil Labor Force 3,l74 25,442 53,462 % Unemployed 2.4 4.8 4.4 Total Employed 3,099 24,219 51,087 % White Collar 65.7 55.7 55.6 % Executive & Managerial 13.4 10.6 10.6 % Professional Specialty 17.6 12.5 12.5 % Technical Support 3.2 3.8 3.9 % Administrative Support 18.8 16.8 16.8 % Sales 12.7 12.0 11.8 % Blue Collar 24.2 30.4 30.6 % Precision Production, Craft & Repair 10.5 11.5 12.2 % Machine Operators 6.4 9.4 9.3 % Transportation & Material Moving 2.6 3.7 3.5 % Laborers 4.6 5.9 5.5 % Farming, Forestry & Fishing 0.2 0.6 0.7 % Service: Private Household 0.0 0.1 0.2 % Service: Protective 1.5 1.9 2.0 % Service: Other 8.4 11.3 10.9 1990 Educational Attainment (Age 25 & Over): % Less than Grade 9 5.9 9.2 9.4 % Grade 9-12 (No Diploma) 15.0 16.5 15.9 % High School Graduate or Equivalency 40.0 40.0 39.0 % Some College (No Degree) 13.4 13.3 13.3 % Associate Degree 5.9 5.9 6.2 % Bachelor Degree 12.2 9.8 10.7 % Graduate or Professional Degree 7.6 5.2 5.4 Area defined by Circle: (40.689996,75.263031): 1 mile(s) Area defined by Circle: (40.689996,75.263031): 3 mile(s) Area defined by Circle: (40.689996,75.263031): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 25th street 3 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 60,892 63,766 66,930 69,519 White 94.7% 92.9% 91.8% 90.8% Black 3.9% 4.7% 5.3% 5.8% American Indian 0.1% 0.1% 0.1% 0.2% Asian 0.7% 1.3% 1.5% 1.8% Other 0.6% 1.0% 1.3% 1.5% Hispanic 1.3% 2.7% 3.4% 4.1% Total Households 21,990 23,666 24,836 25,796 Household Population 58,490 60,660 63,825 66,414 Average Household Size 2.66 2.56 2.57 2.57 Household Income $ 0 - 9,999 29.4% 12.9% 10.4% 8.4% $ 10,000 - 14,999 15.9% 8.4% 7.7% 6.7% $ 15,000 - 24,999 29.5% 17.5% 14.8% 13.0% $ 25,000 - 34,999 15.3% 17.7% 15.3% 12.7% $ 35,000 - 49,999 7.0% 21.3% 20.9% 19.4% $ 50,000 - 74,999 2.1% 15.9% 19.2% 21.6% $ 75,000 - 99,999 0.8% 4.0% 7.1% 9.4% $ 100,000 - 149,999 -- 1.6% 3.6% 6.9% $150,000 -- 0.6% 1.1% 1.9% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 16,598 31,092 36,054 41,688 Aggregate HH Inc ($000) 420,481 847,501 1,063,595 1,296,664 Median Family Income($) 19,874 37,115 43,038 49,764 Per Capita Income ($) 7,189 13,971 16,664 19,524 Median Age Total Population 32.9 34.1 35.6 36.9 Median Age Adult Population 44.6 42.0 43.4 44.7 Median Age Female Population 35.1 36.0 37.5 38.9 Median Age Adult Female Population 46.6 44.0 45.2 46.5 Median Age Male Population 30.5 32.4 33.7 34.8 Median Age Adult Male Population 42.3 40.0 41.6 43.1
Area defined by Circle: (40.689999,75.248715): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 25th Street 3 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 60,892 63,766 66,930 69,519 0 - 5 7.3% 8.4% 8.3% 8.0% 6 - 13 11.2% 10.0% 10.6% 10.8% 14 - 17 6.8% 4.7% 5.l% 5.3% 18 - 24 13.3% 11.8% 10.5% 10.4% 25 - 34 14.3% 16.7% 14.5% 12.6% 35 - 44 10.2% 13.8% 15.2% 15.4% 45 - 54 11.0% 9.4% 10.9% 12.4% 55 - 64 11.9% 9.5% 8.5% 8.8% 65 - 74 14.0% 9.0% 8.9% 8.2% 75 - 84 - 5.2% 5.7% 5.9% 85 + - 1.5% 1.8% 2.1% Female Population by Age 31,790 32,871 34,511 35,794 0 - 5 6.8% 7.8% 7.9% 7.6% 6 - 13 10.4% 9.5% 9.8% 10.2% 14 - 17 6.2% 4.3% 4.8% 4.9% 18 - 24 12.5% 10.8% 9.5% 9.5% 25 - 34 14.0% 16.1% 14.1% 12.1% 35 - 44 10.0% 13.5% 15.0% 15.1% 45 - 54 11.1% 9.5% 10.9% 12.4% 55 - 64 12.3% 9.8% 8.8% 9.0% 65 - 74 16.7% 9.9% 9.7% 8.9% 75 - 84 -- 6.4% 7.1% 7.2% 85 + -- 2.3% 2.6% 3.1% Male Population by Age 29,096 30,894 32,424 33,720 0 - 5 7.9% 9.0% 8.8% 8.4% 6 - 13 12.1% 10.5% 11.3% 11.6% 14 - 17 7.6% 5.1% 5.4% 5.7% 18 - 24 14.1% 12.8% 11.5% 11.4% 25 - 34 14.6% 17.4% 15.0% 13.2% 35 - 44 10.3% 14.0% 15.5% 15.6% 45 - 54 10.9% 9.4% 10.9% 12.3% 55 - 64 11.5% 9.2% 8.2% 8.5% 65 - 74 11.0% 8.1% 8.1% 7.5% 75 - 84 -- 3.9% 4.3% 4.6% 85 + -- 0.8% 0.9% 1.1%
Area defined by Circle: (40.689999,75.248715): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 25th Street 3 Mile Radius 5/23/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 99.3 Demographics Total Total Household Average Median HH Population Households Population HH Size Income 1995 66,930 24,836 63,825 2.57 $36,054 2000 69,519 25,796 66,414 2.57 $41.688 Expenditure Potential 1995 Area Yearly Growth Rate Per Household 1.44% Total 2.21% Retail Support Potential (000) 1995: 2,705 sq. ft.
Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 24,364 27,956 981 1,084 2.79% 95.8 Appliance Store 2,045 1,792 82 69 -2.61% 96.5 Auto-Aftermarket Store 41,075 43,897 1,654 1,702 1.34% 98.9 Convenience Store 22,657 24,016 912 931 1.17% 100.7 Dept. Store 25,232 28,156 1,016 1,091 2.22% 96.1 Drug Store 20,738 26,595 835 1,031 5.10% 106.3 Electronics Store 9,364 12,694 377 492 6.28% 97.0 Fast Food Restaurant Store 23,325 21,327 939 827 -1.78% 98.3 Full Serv Restaurant Store 23,011 20,846 926 808 -1.96% 99.0 Furniture Store 8,518 8,219 343 319 -0.71% 92.4 Grocery Store 102,797 119,497 4,139 4,632 3.06% 101.3 Hardware Store 4,464 4,957 180 192 2.12% 97.7 Home Centers Store 21,995 26,483 886 1,027 3.78% 101.3 Jewelry Store 4,066 4,319 164 167 1.21% 96.8 Liquor Store 6,161 5,730 248 222 -1.44% 97.6 Mass Merchandiser Store 34,367 39,543 1,384 1,533 2.85% 97.8 Photo Store 473 483 19 19 0.42% 98.9 Shoe Store 4,775 5,797 192 225 3.96% 96.6 Sporting Goods Store 4,239 5,073 171 197 3.66% 95.4 Toy Store 3,089 2,992 124 116 -0.64% 97.4 Variety Store 1,970 2,295 79 89 3.10% 97.8
Area defined by Circle: (40.689999,75.248715): 3 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-4l Page 2 of 2 25th street 3 Mile Radius 5/23/96 Benchmark = Regional Area Definition Detailed Report Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 1,428 2,493 57 97 11.79% 99.7 Total Shopping Center 390,152 435,158 15,709 16,869 All Other Stores 299,246 333,766 12,049 12,939 Total Retail 689,398 768,924 27,758 29,808 Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (40.689999,75.248715): 3 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 25th street 5 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 96,001 102,263 108,129 113,224 White 96.1% 94.7% 93.8% 92.9% Black 2.7% 3.3% 3.8% 4.2% American Indian 0.0% 0.1% 0.1% 0.1% Asian 0.6% 1.1% 1.4% 1.6% Other 0.5% 0.8% 1.0% 1.1% Hispanic 1.2% 2.3% 2.9% 3.4% Total Households 34,642 38,093 40,218 42,068 Household Population 93,417 98,733 104,599 109,694 Average Household Size 2.70 2.59 2.60 2.61 Household Income $ 0 - 9,999 26.8% 12.1% 9.8% 8.0% $ 10,000 - 14,999 15.3% 8.1% 7.4% 6.3% $ 15,000 - 24,999 30.5% 16.2% 13.9% 12.0% $ 25,000 - 34,999 17.0% 16.9% 14.1% 11.9% $ 35,000 - 49,999 7.6% 21.7% 20.7% 18.6% $ 50,000 - 74,999 2.2% 18.0% 21.1% 22.8% $ 75,000 - 99,999 0.7% 4.6% 8.1% 10.7% $ l00,000 - 149,999 - 1.6% 3.9% 7.7% $ 150,000 + - 0.8% 1.1% 1.9% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 17,590 32,779 38,067 44,134 Aggregate HH Inc ($000) 679,880 1,445,366 1,814,827 2,225,494 Median Family Income ($) 20,505 39,184 45,505 52,758 Per Capita Income ($) 7,278 14,639 17,350 20,288 Median Age Total Population 33.1 34.7 36.3 37.5 Median Age Adult Population 44.4 42.5 44.0 45.4 Median Age Female Population 34.9 36.3 37.9 39.4 Median Age Adult Female Population 46.2 44.0 45.5 46.9 Median Age Male Population 31.2 33.2 34.6 35.5 Median Age Adult Male Population 42.5 40.9 42.5 43.9
Area defined by Circle: (40.689999,75.248715): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-4l Page 2 of 2 25th street 5 Mile Radius 5/23/96 1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 96,001 102,263 108,129 113,224 0 -5 7.4% 8.6% 8.3% 8.0% 6 - 13 11.5% 10.3% 10.9% 10.9% 14 - 17 6.9% 4.8% 5.0% 5.3% 18 - 24 12.2% 10.4% 9.8% 10.0% 25 - 34 14.7% 16.5% 13.8% 12.2% 35 - 44 10.8% 14.7% 15.8% 15.2% 45 - 54 11.2% 9.8% 11.8% 13.3% 55 - 64 11.8% 9.5% 8.5% 9.1% 65 - 74 13.4% 9.0% 8.8% 8.1% 75 - 84 -- 5.0% 5.6% 5.8% 85 + -- 1.5% 1.7% 2.0% Female Population by Age 50,087 53,026 56,029 58,566 0 - 5 6.9% 8.1% 7.9% 7.6% 6 - 13 10.8% 9.7% 10.2% 10.3% 14 - 17 6.3% 4.4% 4.7% 4.9% 18 - 24 11.7% 9.7% 8.9% 9.2% 25 - 34 14.5% 16.1% 13.5% 11.7% 35 - 44 10.5% 14.4% 15.5% 15.1% 45 - 54 11.3% 9.6% 11.7% 13.3% 55 - 64 12.2% 9.7% 8.7% 9.2% 65 - 74 15.8% 9.9% 9.6% 8.8% 75 - 84 -- 6.1% 6.9% 7.1% 85 + -- 2.1% 2.4% 2.9% Male Population by Age 45,906 49,235 52,070 54,631 0 - 5 8.0% 9.0% 8.8% 8.5% 6 - 13 12.3% 10.9% 11.5% 11.6% 14 - 17 7.6% 5.2% 5.4% 5.7% 18 - 24 12.8% 11.2% 10.7% 10.8% 25 - 34 15.0% 17.0% 14.1% 12.8% 35 - 44 11.0% 15.0% 16.0% 15.3% 45 - 54 11.2% 10.0% 11.9% 13.3% 55 - 64 11.4% 9.2% 8.4% 9.1% 65 - 74 10.7% 8.0% 8.0% 7.5% 75 - 84 -- 3.8% 4.2% 4.5% 85 + -- 0.7% 0.9% 1.1% Area defined by Circle: (40.689999,75.248715): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential Shopping Center/Total Retail CBC - Cl750-4l Page l of 2 25th street 5 Mile Radius 5/23/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 101.1 Demographics Total Total Household Average Median HH Population Households Population HH Size Income 1995 108,129 40,218 104,599 2.60 $38,067 2000 113,224 42,068 109,694 2.61 $44,134 Expenditure Potential 1995 Area Yearly Growth Rate Per Household 1.42% Total 2.34% Retail Support Potential (000) 1995: 4.461 sq. ft.
Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 40,394 46,656 1,004 1,109 2.92% 98.1 Appliance Store 3,369 2,976 84 71 -2.45% 98.2 Auto-Aftermarket Store 68,007 73,196 1,691 1,740 1.48% 101.1 Convenience Store 37,223 39,728 926 944 1.31% 102.2 Dept. Store 41,897 47,049 1,042 1,118 2.35% 98.6 Drug Store 33,767 43,722 840 1,039 5.30% 106.8 Electronics Store 15,555 21,163 387 503 6.35% 99.5 Fast Food Restaurant Store 38,572 35,443 959 843 -1.68% 100.4 Full Serv Restaurant Store 38,052 34,663 946 824 -1.85% 101.1 Furniture Store 14,186 13,754 353 327 -0.62% 95.0 Grocery Store 167,893 196,601 4,175 4,673 3.21% 102.2 Hardware Store 7,444 8,324 185 198 2.26% 100.6 Home Centers Store 36,830 44,593 916 1,060 3.90% 104.8 Jewelry Store 6,826 7,297 170 173 1.34% 100.4 Liquor Store 10,104 9,435 251 224 -1.36% 98.8 Mass Merchandiser Store 56,820 65,802 1,413 1,564 2.98% 99.8 Photo Store 787 806 20 19 0.48% 101.6 Shoe Store 7,871 9,618 196 229 4.09% 98.3 Sporting Goods Store 7,029 8,445 175 201 3.74% 97.7 Toy Store 5,115 5,001 127 119 -0.45% 99.6 Variety Store 3,257 3,821 81 91 3.25% 99.9
Area defined by Circle: (40.689999,75.248715): 5 mile(s) Benchmark : Definition by Region. Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 25th street 5 Mile Radius 5/23/96 Benchmark = Regional Area Definition Detailed Report Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 2,351 4,121 58 98 11.88% 101.4 Total Shopping Center 643,346 722,212 15,997 17,167 All Other Stores 493,447 553,937 12,269 13,168 Total Retail 1,136,793 1,276,149 28,266 30,335 Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (40.689999,75.248715): 5 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 25th street 7 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 136,494 145,214 152,971 159,563 White 96.0% 94.1% 93.2% 92.4% Black 2.4% 2.9% 3.2% 3.5% American Indian 0.1% 0.1% 0.1% 0.1% Asian 0.6% 1.0% 1.3% 1.6% Other 1.0% 1.8% 2.1% 2.3% Hispanic 2.3% 3.6% 4.6% 5.6% Total Households 48,754 54,060 56,832 59,197 Household Population 133,172 140,726 148,478 155,070 Average Household Size 2.73 2.60 2.61 2.62 Household Income $ 0 - 9,999 25.1% 11.9% 9.6% 7.9% $ 10,000 - 14,999 14.5% 7.9% 7.0% 6.0% $ 15,000 - 24,999 30.2% 15.8% 13.6% 11.7% $ 25,000 - 34,999 18.4% 16.7% 13.8% 11.6% $ 35,000 - 49,999 8.4% 21.7% 20.5% 18.4% $ 50,000 - 74,999 2.7% 18.3% 21.5% 23.0% $ 75,000 - 99,999 0.7% 4.9% 8.3% 11.0% $ 100,000 - 149,999 -- 1.8% 4.3% 8.1% $ 150,000 + -- 0.9% 1.4% 2.3% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 18,428 33,371 38,900 45,195 Aggregate HH Inc ($000) 996,581 2,095,785 2,636,654 3,234,561 Median Family Income ($) 21,118 39,318 45,832 53,249 Per Capita Income ($) 7,483 14,893 17,758 20,859 Median Age Total Population 33.3 35.4 37.0 38.2 Median Age Adult Population 44.6 43.3 44.7 46.1 Median Age Female Population 34.9 37.0 38.6 40.1 Median Age Adult Female Population 46.0 44.6 46.2 47.6 Median Age Male Population 31.7 33.9 35.3 36.1 Median Age Adult Male Population 43.0 41.9 43.3 44.5
Area defined by Circle: (40.689999,75.248715): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-4l Page 2 of 2 25th street 7 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 136,494 145,214 152,971 159,563 0 - 5 7.4% 8.4% 8.1% 7.8% 6 - 13 11.6% 10.4% 10.7% 10.6% 14 - 17 6.9% 4.9% 5.0% 5.2% 18 - 24 11.6% 9.7% 9.5% 9.7% 25 - 34 14.9% 16.0% 13.4% 12.2% 35 - 44 11.0% 14.9% 15.6% 14.7% 45 - 54 11.5% 10.1% 12.1% 13.5% 55 - 64 12.1% 9.7% 8.9% 9.6% 65 - 74 12.9% 9.3% 9.1% 8.6% 75 - 84 -- 5.1% 5.8% 6.0% 85 + -- 1.5% 1.8% 2.1% Female Population by Age 71,162 75,638 79,627 82,960 0 - 5 7.0% 8.0% 7.7% 7.4% 6 - 13 11.0% 9.7% 10.1% 10.0% 14 - 17 6.4% 4.5% 4.6% 4.8% 18 - 24 11.2% 9.1% 8.7% 9.0% 25 - 34 14.7% 15.7% 13.2% 11.7% 35 - 44 10.8% 14.6% 15.3% 14.6% 45 - 54 11.6% 9.9% 12.0% 13.5% 55 - 64 12.5% 9.9% 9.0% 9.6% 65 - 74 15.0% 10.2% 9.9% 9.2% 75 - 84 -- 6.2% 7.0% 7.2% 85 + -- 2.2% 2.5% 3.0% Male Population by Age 65,353 69,582 73,336 76,606 0 - 5 7.9% 8.8% 8.6% 8.3% 6 - 13 12.4% 11.2% 11.4% 11.3% 14 - 17 7.6% 5.3% 5.4% 5.6% 18 - 24 12.1% 10.3% 10.4% 10.5% 25 - 34 15.0% 16.3% 13.7% 12.8% 35 - 44 11.2% 15.3% 15.8% 14.9% 45 - 54 11.5% 10.3% 12.3% 13.5% 55 - 64 11.7% 9.5% 8.8% 9.5% 65 - 74 10.6% 8.3% 8.3% 7.9% 75 - 84 -- 3.9% 4.4% 4.7% 85 + -- 0.8% 0.9% 1.1%
Area defined by Circle: (40.689999,75.248715): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center Total Retail CBC - Cl750-41 Page 1 of 2 25th street 7 Mile Radius 5/23/96 Benchmark - Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 101.7 Demographics Total Total Household Average Median HH Population Households Population HH Size Income 1995 152,971 56,832 148,478 2.61 $38,900 2000 159,563 59,197 155,070 2.62 $45,195 Expenditure Potential 1995 Area Yearly Growth Rate Per Household 1.43% Total 2.26% Retail Support Potential (000) 1995: 6,342 sq. ft.
Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 57,667 66,385 1,015 1,121 2.86% 99.1 Appliance Store 4,818 4,244 85 72 -2.51% 99.4 Auto-Aftermarket Store 96,941 103,993 1,706 1,757 1.41% 102.0 Convenience Store 52,788 56,120 929 948 1.23% 102.6 Dept. Store 59,826 66,942 1,053 1,131 2.27% 99.6 Drug Store 48,235 62,311 849 1,053 5.25% 108.0 Electronics Store 22,045 29,825 388 504 6.23% 99.8 Fast Food Restaurant Store 54,727 50,115 963 847 -1.75% 100.8 Full Serv Restaurant Store 53,918 48,950 949 827 -1.91% 101.4 Furniture Store 20,513 19,841 361 335 -0.66% 97.2 Grocery Store 237,547 276,942 4,180 4,678 3.12% 102.3 Hardware Store 10,653 11,879 187 201 2.20% 101.8 Home Centers Store 52,383 63,150 922 1,067 3.81% 105.4 Jewelry Store 9,788 10,427 172 176 1.27% 101.8 Liquor Store 14,381 13,366 253 226 -1.45% 99.5 Mass Merchandiser Store 80,841 93,262 1,422 1,575 2.90% 100.5 Photo Store 1,117 1,139 20 19 0.39% 102.1 Shoe Store 11,209 13,654 197 231 4.02% 99.1 Sporting Goods Store 9,997 11,960 176 202 3.65% 98.3 Toy Store 7,292 7,115 128 120 -0.49% 100.5 Variety Store 4,645 5,430 82 92 3.17% 100.8
Area defined by Circle: (40.689999,75.248715): 7 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - Cl750-41 Page 2 of 2 25th street 7 Mile Radius 5/23/96 Benchmark - Regional Area Definition Detailed Report Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 3,306 5,762 58 97 ll.75% 100.9 Total Shopping Center 914,638 1,022,810 16,094 17,278 All Other Stores 701,528 784,496 12,344 13,252 Total Retail 1,616,166 1,807,306 28,438 30,530 Expenditure Index-Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (40.689999,75.248715): 7 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. ================================================================================ ADDENDUM F RENT ROLL - -------------------------------------------------------------------------------- ADDENDUM F RENT ROLL - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------- Detail Rent Roll 25TH STREET SHOPPING CENTER Report Date: 05/14/96 - ----------------------------------------------------------------------------------------- Rent Dates Suite Commence Expire Square Monthly Annual No. Tenant Name Start Footage Base Rent Rate/SF - ----------------------------------------------------------------------------------------- 00160 FIRE AND SHINE JEWELERY 09/25/90 03/31/97 1,200 1,650.00 16.50 09/25/90 00220 AMC THEATER 07/17/72 12/31/02 11,980 2,650.00 2.65 07/17/72 00170 MANDARIN CHEF INC. 12/01/90 11/30/97 3,300 3,575.00 13.00 12/01/90 00230 PIZZA HUT 03/26/84 04/30/01 3,025 2,000.00 7.93 03/26/84 00180 THOMAS & JEAN EBNETER 10/01/84 01/31/96 2,800 1,866.67 8.00 10/01/84 00190 THE SECOND NATIONAL BANK 10/20/71 12/30/97 1,800 1,600.00 10.67 10/20/71 00200 LONG JOHN SILVERS 11/25/75 04/30/96 1,728 1,800.00 12.50 05/01/76 0007A GOLDEN BAGEL 03/07/95 03/31/00 1,500 1,593.75 12.75 03/07/95 0005A WORKOUT PLUS EASTON 02/15/95 02/28/00 11,766 6,373.25 6.50 03/01/95 00250 H & R BLOCK 09/16/95 04/30/00 3,100 2,234.58 8.65 09/16/95 - ------------------------------------------------------------------------------------------ Total Building Occupied Sqft: 93% 122,477 94,132.89 Available Sqft: 7% 9,000 Total Sqft: 131,477 - ------------------------------------------------------------------------------------------ - ----------------------------------------------------------------------------------------------------------------------- Page: 32 Date: 05/14/96 Report Date: 05/14/96 Time: 14:04:31 - ----------------------------------------------------------------------------------------------------------------------- --Cost Recovery------Expense----Other Income---- -----Future Rent Increases----- No. Tenant Name Description Monthly Stop Description Monthly Date Monthly Amt. Per SF - ----------------------------------------------------------------------------------------------------------------------- 00160 FIRE AND SHINE JEWELERY MAINTENANC 101.90 REAL ESTAT 95.00 ---------- 196.90 00220 AMC THEATER MAINTENANC 149.75 00170 MANDARIN CHEF INC. MAINIENANC 280.22 REAL ESTAT 260.00 ---------- 540.22 00230 PIZZA HUT MAINTENANC 75.00 REAL ESTAT 500.00 ---------- 575.00 00180 THOMAS & JEAN EBNETER MAINTENANC 118.90 REAL ESTAT 220.00 ---------- 338.90 00190 THE SECOND NATIONAL BANK MAINTENANC 22.50 00200 LONG JOHN SILVERS MAINTENANC 80.00 0007A GOLDEN BAGEL MAINTENANC 162.50 04/01/98 1,718.75 13.25 REAL ESTAT 108.75 04/01/00 1,875.00 15.00 ---------- 04/01/03 2,062.50 16.50 271.25 0005A WORKOUT PLUS EASTON MAINTENANC 821.95 03/01/97 8,334.25 8.50 REAL ESTAT 1,460.04 ---------- 2,281.99 00250 H & R BLOCK 05/01/97 2,294.00 8.80 05/01/98 2,356.00 9.10 05/01/99 2,415.42 9.50 05/01/00 2,474.83 9.50 05/01/01 2,536.83 9.80 05/01/02 2,596.25 10.00 05/01/03 2,658.25 10.25 05/01/04 2,717.67 10.5 - ----------------------------------------------------------------------------------------- Total Building 0.00 12,838.33 - -----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------- Detail Rent Roll 25TH STREET SHOPPING CENTER Report Date: 05/14/96 - ----------------------------------------------------------------------------------------- Rent Dates Suite Commence Expire Square Monthly Annual No. Tenant Name Start Footage Base Rent Rate/SF - ----------------------------------------------------------------------------------------- 00001A MJM INC.-MARYLAND FRIED CHIC 10/01/91 09/30/96 2,000 3,833.33 23.00 10/01/91 OOO1B DELTA HOSIERY INC 06/01/89 05/07/96 1,080 850.00 9.44 06/01/89 O001C DREAMSCAPE COMICS INC 10/01/90 09/30/96 1,200 1,900.00 19.00 10/01/90 0001X CVS STORE #1305 01/01/91 12/31/05 13,400 10,608.33 9.50 01/01/91 0001Y PA STATE LIQUOR STORE 11/01/88 10/31/99 5,907 6,400.00 13.00 11/01/88 00030 EMERGENCY ADM. CONSULTANTS 10/13/93 10/31/03 4,706 5,884.02 15.00 10/13/93 00040 PAOLI BIKE & SPORTS INC 10/26/94 1O/31/99 3,395 2,404.80 8.50 10/26/94 0005B RADIO SHACK #2035 03/01/93 02/28/03 2,510 1,987.08 9.50 03/01/93 0005C ONE PRICE CLOTHING STORE #43 05/13/92 07/31/97 3,810 2,222.50 7.00 05/13/92 00050 ROCKAWAY BEDDING INC 10/28/92 10/31/97 3,870 4,031.25 12.50 10/01/92 00060 SHERWIN - WILLIAMS COMPANY 04/01/59 04/30/01 4,370 4,370.00 12.00 04/01/59 - ----------------------------------------------------------------------------------------------------------------------- Page: 32 Date: 05/14/96 Report Date: 05/14/96 Time: 14:04:31 - ----------------------------------------------------------------------------------------------------------------------- --Cost Recovery------Expense----Other Income---- -----Future Rent Increases----- No. Tenant Name Description Monthly Stop Description Monthly Date Monthly Amt. Per SF - ----------------------------------------------------------------------------------------------------------------------- 00001A MJM INC.-MARYLAND FRIED CHIC MAINTENANC 169.83 REAL ESTAT 160.00 ---------- 329.83 OOO1B DELTA HOSIERY INC O001C DREAMSCAPE COMICS INC MAINTENANC 101.90 REAL ESTAT 95.00 ---------- 196.90 0001X CVS STORE #1305 MAINTENANC 901.42 01/01/01 12,283.33 11.00 INSURANCE 277.60 REAL ESTAT 1,060.00 ---------- 2,239.02 0001Y PA STATE LIQUOR STORE 11/01/99 6,592.00 13.39 11/01/02 6,790.00 13.79 11/01/05 6,993.00 14.21 00030 EMERGENCY ADM. CONSULTANTS MAINTENANC 405.00 11/01/96 6,764.33 17.25 REAL ESTAT 245.00 11/01/00 7,779.92 19.84 ---------- 650.00 00040 PAOLI BIKE & SPORTS INC MAINTENANC 273.12 11/01/96 2,574.54 9.10 REAL ESTAT 181.07 ---------- 454.19 0005B RADIO SHACK #2035 MAINTENANC 135.67 03/01/98 2,405.42 11.50 REAL ESTAT 190.00 ---------- 325.67 0005C ONE PRICE CLOTHING STORE #43 MAINTENANC 269.08 05/01/97 2,540.00 8.00 REAL ESTAI 300.00 08/01/97 2,540.00 8.00 ---------- 08/01/99 2,698.75 8.50 569.08 00050 ROCKAWAY BEDDING INC MAINIENANC 273.32 11/01/96 4,192.50 13.00 REAL ESTAT 300.00 11/01/98 4,353,75 13.50 ---------- 11/01/00 4,515.00 14.00 573.32 11/01/02 4,676.25 14.50 11/01/04 4,837.50 15.00 11/01/06 4,998.75 15.50 00060 SHERWIN - WILLIAMS COMPANY MAINTENANCE 372.20 REAL ESIAT 345.00 ---------- 717.20
- ----------------------------------------------------------------------------------------- Detail Rent Roll 25TH STREET SHOPPING CENTER Report Date: 05/14/96 - ----------------------------------------------------------------------------------------- Rent Dates Suite Commence Expire Square Monthly Annual No. Tenant Name Start Footage Base Rent Rate/SF - ----------------------------------------------------------------------------------------- 0007B SUPERCUTS INC 02/07/94 02/28/99 1,500 1,875.00 15.00 02/07/94 00080 NATIONAL AUTO STORE #14 03/01/84 02/28/98 3,900 2,600.00 8.00 03/01/84 0009A JENNY CRAIG #2224 05/01/91 04/30/96 2,280 3,420.00 18.00 05/01/91 0009B ANTONIO'S PIZZA & DELI 10/01/89 09/30/98 2,280 2,945.00 15.50 10/01/89 00100 F.W. WOOLWORTH COMPANY 05/15/57 01/31/98 15,400 1,500.00 1.17 05/15/57 00110 F.BOUNOUTAS & J.APOSTOLOPOUL 04/11/91 04/30/97 720 1,110.00 18.50 04/11/91 00120 HOLIDAY HAIR FASHIONS 01/01/88 12/31/98 900 1,312.50 17.50 01/01/88 00130 HAISAM & OUMAYHA SANKARI 03/15/93 03/31/96 1,200 1,150.00 11.50 03/15/93 00140 SALLY BEAUTY SUPPLY 06/01/89 05/31/96 1,200 1,950.00 19.50 06/01/89 00210 MCDONALD'S #37-0168 11/03/72 11/11/98 3,450 4,583.33 15.94 11/03/72 00150 TCBY 04/02/90 04/30/98 1,200 1,852.50 18.52 04/02/90 - ----------------------------------------------------------------------------------------------------------------------- Page: 31 Date: 05/14/96 Report Date: 05/14/96 Time: 14:04:31 - ----------------------------------------------------------------------------------------------------------------------- --Cost Recovery------Expense----Other Income---- -----Future Rent Increases----- No. Tenant Name Description Monthly Stop Description Monthly Date Monthly Amt. Per SF - ----------------------------------------------------------------------------------------------------------------------- 0007B SUPERCUTS INC MAINTENANC 104.79 07/01/96 2,000.00 16.00 REAL ESTAT 101.37 03/01/99 2,125.00 17.00 ----------- 07/01/01 2,250.00 18.00 206.16 00080 NATIONAL AUTO STORE #14 MAINTENANC 227.50 INSURANCE 11.54 REAL ESTAT 310.00 ----------- 549.04 0009A JENNY CRAIG #2224 MAINTENANC 193.60 05/01/96 3,562.50 18.75 REAL ESTAT 180.00 05/01/97 3,705.00 19.50 ----------- 05/01/98 3,847.50 20.25 373.60 05/01/99 3,990.00 21.00 05/01/00 4,180.00 22.00 0009B ANTONIO'S PIZZA & DELI MAINTENANC 193.60 10/01/96 3,040.00 16.00 REAL ESTAT 180.00 ----------- 373.60 00100 F.W. WOOLWORTH COMPANY 00110 F.BOUNOUTAS & J.APOSTOLOPOUL MAINTENANC 61.14 REAL ESTAT 60.00 ----------- 121.14 00120 HOLIDAY HAIR FASHIONS MAINTENAHC 76.42 REAL ESTAT 70.00 ----------- 146.42 00130 HAISAM & OUMAYHA SANKARI MAINTENANC 84.75 REAL ESTAT 95.00 ----------- 179.75 00140 SALLY BEAUTY SUPPLY MAINTENANC 101.90 REAL ESTAT 95.00 ----------- 196.90 00210 MCDONALD'S #37~0168 00150 TCBY MAIN1ENANC 85.01 05/01/97 1,900.00 19.00 REAL ESTAT 95.00 ----------- 180.00
- ----------------------------------------------------------------------------------------- Detail Rent Roll 25TH STREET SHOPPING CENTER Report Date: 05/14/96 - ----------------------------------------------------------------------------------------- Rent Dates Suite Commence Expire Square Monthly Annual No. Tenant Name Start Footage Base Rent Rate/SF - ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- Total Building Occupied Sqft: 0% 0 0.00 Available Sqft: 100% 0 Total Sqft: 0 - ----------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Page: 33 Date: 05/14/96 Report Date: 05/14/96 Time: 14:04:56 - -------------------------------------------------------------------------------------------------------------------- --Cost Recovery------Expense----Other Income---- -----Future Rent Increases----- No. Tenant Name Description Monthly Stop Description Monthly Date Monthly Amt. Per SF - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------- Total Building 0.00 0.00 - --------------------------------------------------------------------------------------
================================================================================ ADDENDUM G - PRO-JECT REPORTS - -------------------------------------------------------------------------------- ADDENDUM G PRO-JECT REPORTS - -------------------------------------------------------------------------------- PAGE 34 OPTION 1 DATES: 4/2000 TO 3/2005 SQUARE FOOTAGE: 1,500 MINIMUM RENT: INITIAL RENT - 15.00/SF/YR CHANGING TO - 16.50/SF/YR ON 4/2003 PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 133.00/SF/YR 6.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------- ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK16 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 31 - SUITE 0005A , WORKOUT PLUS EASTN BASE LEASE DATES: 3/1995 TO 2/2000 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 11,766 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 6.50/SF/YR CHANGING TO - 8.50/SF/YR ON 3/1997 PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR 25TH STREET SHOPPING CENTER, PA PROJECT DESIGNATOR: 693L REVISION: 6/17/96 @ 16:54 PROJECT ASSUMPTIONS REPORT INCLUDING ALL TENANTS 6/19/96 @ 15:56 BUILDING PROLOGUE - ----------------- LEASEHOLD ANALYSIS OF 25TH STREET SHOPPING CENTER, PA BEGINNING 6/1996 FOR 16 YEARS ON A FISCAL YEAR BASIS AREA MEASURES - ------------- GLA 1996 VALUE - 131,477 THEREAFTER - CONSTANT GROWTH RATES - ------------ MRKT 1996 VALUE - 3.00 THEREAFTER - CONSTANT OPEX 1996 VALUE - 3.00 THEREAFTER - CONSTANT RETG 1996 VALUE - 3.00 THEREAFTER - CONSTANT RENT 1996 VALUE - 3.00 THEREAFTER - CONSTANT MISC 1996 VALUE - 3.00 THEREAFTER - CONSTANT SALE 1996 VALUE - 3.00 THEREAFTER - CONSTANT LCNW 1996 VALUE - 4.50 THEREAFTER - CONSTANT LCRN 1996 VALUE - 2.25 THEREAFTER - CONSTANT LCBL +50.0% OF LCNW +50.0% OF LCRN MARKET RATES - ------------ MK16 1996 VALUE - 16.00 THEREAFTER - GROWING AT GROWTH RATE MRKT MK13 1996 VALUE - 13.00 PAGE 2 THEREAFTER - GROWING AT GROWTH RATE MRKT MK11 1996 VALUE - 11.00 THEREAFTER - GROWING AT GROWTH RATE MRKT MK85 1996 VALUE - 8.50 THEREAFTER - GROWING AT GROWTH RATE MRKT MKPH 1996 VALUE - 11.57 THEREAFTER - GROWING AT GROWTH RATE MRKT MKBK 1996 VALUE - 19.44 THEREAFTER - GROWING AT GROWTH RATE MIRKT MKLJ 1996 VALUE - 20.25 THEREAFTER - GROWING AT GROWTH RATE MRKT MISCELLANEOUS INCOMES - --------------------- NONE EXPENSES - -------- COMMON AREA MAINT., REFERRED TO AS CAME CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 105,000 THEREAFTER - GROWING AT GROWTH RATE OPEX INSURANCE , REFERRED TO AS INSE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 13,000 THEREAFTER - GROWING AT GROWTH RATE OPEX REAL ESTATE TAXES , REFERRED TO AS RETE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 162,298 THEREAFTER - GROWING AT GROWTH RATE RETG MANAGEMENT FEE , REFERRED TO AS MGMT AN INFORMATIONAL EXPENSE 1996 VALUE - 29,194 1997 VALUE - 31,335 1998 VALUE - 33,052 1999 VALUE - 34,778 2000 VALUE - 35,448 2001 VALUE - 35,197 2002 VALUE - 37,128 2003 VALUE - 36,924 2004 VALUE - 39,832 2005 VALUE - 40,123 2006 VALUE - 40,306 2007 VALUE - 42,968 2008 VALUE - 43,174 2009 VALUE - 46,582 2010 VALUE - 46,448 2011 VALUE - 48,257 THEREAFTER - CONSTANT CAM - RECVORY , REFERRED TO AS CAM1 PAGE 3 AN INFORMATIONAL EXPENSE +100.0% OF CAME+100.0% OF INSE +100.0% OF MGMT CAM - RECY-NO INS , REFERRED TO AS CAM2 AN INFORMATIONAL EXPENSE +100.0% OF CAME+100.0% OF MGMT R.E. TAX-RECVY , REFERRED TO AS RETR AN INFORMATIONAL EXPENSE +100.0% OF RETE VACANCY ALLOWANCE - ----------------- PERCENTAGE OF POTENTIAL GROSS INCOME FOR ALL TENANTS SUBJECT TO VACANCY 1996 VALUE - 3.00 THEREAFTER - CONSTANT MANAGEMENT FEE - -------------- PERCENTAGE OF EFFECTIVE GROSS INCOME FOR ALL TENANTS PASSED THROUGH TO TENANTS USING EXPENSE MGMT 1996 VALUE - 2.00 THEREAFTER - CONSTANT COMMISSION CALCULATIONS - ----------------------- STANDARD METHOD #1 - 0.000% OF TOTAL RENT STANDARD METHOD #2 - 0.000% OF TOTAL RENT STANDARD METHOD #3 - 0.000% OF TOTAL RENT STANDARD METHOD #4 - 0.000% OF TOTAL RENT STANDARD METHOD #5 - 0.000% OF TOTAL RENT COMMISSION PAYOUTS - ------------------ STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT ALTERATION CALCULATION - ---------------------- NONE ALTERATION PAYOUTS - ------------------ PAGE 4 STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT COMMON AREA MAINTENANCE POOL - ---------------------------- NONE CAPITAL EXPENDITURES - -------------------- RESERVES 1996 VALUE - 13,148 THEREAFTER - GROWING AT GROWTH RATE OPEX PRIMARY CLASSIFICATION CODES - ---------------------------- NONE SECONDARY CLASSIFICATION CODES - ------------------------------ NONE COST CENTERS - ------------ 1 - CAM 2 - RET SALES VOLUME PROFILE - -------------------- PERCENT OF RELATIVE MONTH ANNUAL SALES VOLUME - ----- ------------ ------ JAN 8.33% 1.00 FEB 8.33% 1.00 MAR 8.33% 1.00 APR 8.33% 1.00 MAY 8.33% 1.00 JUN 8.33% 1.00 JUL 8.33% 1.00 AUG 8.33% 1.00 SEP 8.33% 1.00 OCT 8.33% 1.00 NOV 8.33% 1.00 DEC 8.33% 1.00 ------ ----- TOTALS 100.00% 12.00 GLOBAL RECOVERIES - ----------------- PAGE 5 CAM - RECVORY , REFERRED TO AS CAM1 ASSIGNED TO COST CENTER 1 - CAM PRO RATA SHARE RECOVERY OF EXPENSE CAM1 PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH CAM - RECY-NO INS , REFERRED TO AS CAM2 ASSIGNED TO COST CENTER 1 - CAM PRO RATA SHARE RECOVERY OF EXPENSE CAM2 PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH R.E. TAX-RECVY , REFERRED TO AS RETR ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH TENANT PROLOGUE - --------------- MINIMUM RENTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR SALES VOLUMES AND BREAKPOINTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR RENEWAL RENTS ARE COMPOUNDED ANNUALLY RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET REFERENCE TENANTS - ----------------- NONE TENANTS - ------- THERE ARE A TOTAL OF 33 LEASEHOLD TENANT(S) # 1 - SUITE 000lA , MJM INC. BASE LEASE DATES: 10/1991 TO 9/1996 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 2,000 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 23.00/SF/YR PERCENTAGE RENT: INITIAL SALES - 275.50/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 261.00/SF/YR 8.00% OF OVERAGE TO AN UNLIMITED CEILING PAGE 6 RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO 4 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK13 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE # 2 - SUITE 0001B , TSR PAGING BASE LEASE DATES: 6/1996 TO 5/2001 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,080 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 15.00/SF/YR CHANGING TO - 16.00/SF/YR ON 6/1989 PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR PAGE 7 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK16 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 3 - SUITE 0001C , DREAMSCAPE COMICS BASE LEASE DATES: 10/1990 TO 9/1996 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,200 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 19.00/SF/YR PERCENTAGE RENT: INITIAL SALES - 270.80/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 6.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 10/1996 TO 9/1998 SQUARE FOOTAGE: 1,200 MINIMUM RENT: PAGE 8 INITIAL RENT - 19.50/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 6.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE OPTION 2 DATES: 10/1998 TO 9/1999 SQUARE FOOTAGE: 1,200 MINIMUM RENT: INITIAL RENT - 20.00/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 6.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK16 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 PAGE 9 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOLL: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 4 - SUITE 0001X , CYS STORE #1305 BASE LEASE DATES: 1/1991 TO 12/2005 TYPE OF TENANT: RETAIL SCUARE FOOTAGE: 13,400 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 9.50/SF/YR CHANGING TO - 11.00/SF/YR ON 1/2001 PERCENTAGE RENT: INITIAL SALES - 256.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 3.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM2 GLOBAL GROUPING GLOBAL RECOVERY RETR INSURANCE ASSIGNED TO COST CENTER 1 - CAM DIRECT INPUT OF AMOUNTS OR RATES 1996 LEASE YEAR VALUE - 0.25/SF COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK85 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL PAGE 10 RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE #5 - SUITE 0001Y , PA STATE LIQUOR BASE LEASE DATES: 11/1988 TO 11/1999 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 5,907 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 13.00/SF/YR PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: NONE COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK11 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE # 6 - SUITE 00030 , EMERGENCY ADM.CONS BASE LEASE DATES: 10/1993 TO 10/2003 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 4,706 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 15.00/SF/YR PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR PAGE 11 THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MKl1 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 7 - SUITE 00040 , PAOLI BIKE & SPORT BASE LEASE DATES: 10/1994 TO 11/1999 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 3,395 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 8.50/SF/YR CHANGING TO - 9.10/SF/YR ON 11/1996 PERCENTAGE RENT: INITIAL SALES - 88.37/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 191.00/SF/YR CHANGING TO - 210.00/SF/YR ON 11/1996 5.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 PAGE 12 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 11/1999 TO 10/2004 SQUARE FOOTAGE: 3,395 MINIMUM RENT: INITIAL RENT - 10.00/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 191.00/SF/YR CHANGING TO - 210.00/SF/YR ON 11/1996 5.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK11 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 8 - SUITE 0005B , RADIO SNACK #2035 BASE LEASE DATES: 3/1993 TO 2/2003 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 2,510 PAGE 13 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 9.50/SF/YR CHANGING TO - 11.51/SF/YR ON 3/1998 PERCENTAGE RENT: INITIAL SALES - 223.10/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 3.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM2 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK13 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 9 - SUITE 0005C , ONE PRICE CLOTHING BASE LEASE DATES: 5/1992 TO 7/1997 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 3,810 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 7.00/SF/YR CHANGING TO - 8.00/SF/YR ON 5/1997 PERCENTAGE RENT: INITIAL SALES - 95.80/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE PAGE 14 INITIAL BREAKPOINT - 200.00/SF/YR 4.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 8/1997 TO 7/2002 SQUARE FOOTAGE: 3,810 MINIMUM RENT: INITIAL RENT - 8.00/SF/YR CHANGING TO - 8.50/SF/YR ON 8/1999 PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 200.00/SF/YR 4.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK11 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL PAGE 15 RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 10 - SUITE 0005D , ROCKAWAY BEDDING BASE LEASE DATES: 10/1992 TO 10/1997 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 3,870 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 12.50/SF/YR CHANGING TO - 13.00/SF/YR ON 11/1996 PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK11 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 11 - SUITE 00060 , SHERWIN-WILLIAMS BASE LEASE DATES: 4/1994 TO 4/2001 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 4,370 PAGE 16 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 12.00/SF/YR PERCENTAGE RENT: CATEGORY 1 INITIAL SALES - 46.00/SF/YR, GROWING AT GROWTH RATE SALE CATEGORY 2 INITIAL SALES - 137.00/SF/YR, GROWING AT GROWTH RATE SALE WITH A ZERO BREAKPOINT LESS MINIMUM RENT CATEGORY 1 OVERAGE % - 5.00% TO AN UNLIMITED CEILING CATEGORY 2 OVERAGE % - 2.50% TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR GLOBAL GROUPING GLOBAL RECOVERY CAM1 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MKl1 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR GLOBAL GROUPING GLOBAL RECOVERY CAM1 RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 12 - SUITE 0007B , SUPERCUTS, INC. BASE LEASE DATES: 2/1994 TO 2/1999 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,500 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 15.00/SF/YR CHANGING TO - 16.00/SF/YR ON 7/1996 PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR PAGE 17 THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS. MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS ---- ------------- ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK16 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 13 - SUITE 00080 , NAT'L AUTO STORE BASE LEASE DATES: 3/1984 TO 2/1998 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 3,900 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 8.00/SF/YR PERCENTAGE RENT: INITIAL SALES - 256.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 200.00/SF/YR 2.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR PAGE 18 GLOBAL GROUPING GLOBAL RECOVERY CAM1 COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 3/1998 TO 2/2013 SQUARE FOOTAGE: 3,900 MINIMUM RENT: INITIAL RENT - 9.00/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 200.00/SF/YR 2.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR GLOBAL GROUPING GLOBAL RECOVERY CAM1 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK11 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR GLOBAL GROUPING GLOBAL RECOVERY CAM1 RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 14 - SUITE 0009A , JENNY CRAIG #2224 BASE LEASE DATES: 5/1996 TO 4/2001 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 2,280 SUBJECT TO VACANCY ALLOWANCE PAGE 19 MINIMUM RENT: INITIAL RENT - 18.75/SF/YR CHANGING TO - 19.50/SF/YR ON 5/1997 CHANGING TO - 20.25/SF/YR ON 5/1998 CHANGING TO - 21.20/SF/YR ON 5/1999 CHANGING TO - 22.00/SP/YR ON 5/2000 PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR GLOBAL GROUPING GLOBAL RECOVERY CAM1 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MKl3 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR GLOBAL GROUPING GLOBAL RECOVERY CAM1 RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 15 - SUITE 0009B , ANTONIOS PIZZA BASE LEASE DATES: 10/1989 TO 9/1998 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 2,280 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 15.50/SF/YR CHANGING TO - 16.00/SF/YR ON 10/1996 PERCENTAGE RENT: INITIAL SALES - 116.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE PAGE 20 INITIAL BREAKPOINT - 183.10/SF/YR CHANGING TO - 160.10/SF/YR ON 10/1996 7.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR GLOBAL GROUPING GLOBAL RECOVERY CAM1 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK13 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR GLOBAL GROUPING GLOBAL RECOVERY CAM1 RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 16 - SUITE 00100 , F.W. WOOLWORTH CO. BASE LEASE DATES: 5/1994 TO 1/1998 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 15,400 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 1.17/SF/YR PERCENTAGE RENT: INITIAL SALES - 71.43/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 4.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: NONE COMMISSIONS: NONE PAGE 21 ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS ---- ------------ ------ -------- --------- ----------- ----------- 1 5.03 3 NONE NONE YES NO 2 5.03 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK85 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S} WILL CONTINCE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR GLOBAL GROUPING GLOBAL RECOVERY CAM1 RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 17 - SUITE 00110 , BOUNOUTAS & J APOS BASE LEASE DATES: 4/1991 TO 4/1997 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 720 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 18.50/SF/YR PERCENTAGE RENT: INITIAL SALES - 329.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 6.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO PAGE 22 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK16 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 18 - SUITE 00120 , HOLIDAY HAIR FASH BASE LEASE DATES: 1/1988 TO 12/1998 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 900 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 17.50/SF/YR PERCENTAGE RENT: INITIAL SALES - 200.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 6.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR GLOBAL GROUPING GLOBAL RECOVERY CAM1 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK16 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: PAGE 23 GLOBAL GROUPING GLOBAL RECOVERY RETR GLOBAL GROUPING GLOBAL RECOVERY CAM1 RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 19 - SUITE 00130 , VACANT BASE LEASE DATES: 1/1997 TO 12/2001 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,200 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - MARKET RATE MK16 PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR GLOBAL GROUPING GLOBAL RECOVERY CAM1 COMMISSIONS: GROWTH RATE LCNW PAYOUT: CASHED OUT ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK16 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR GLOBAL GROUPING GLOBAL RECOVERY CAM1 RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE PAGE 24 - -------------------------------------------------------------------------------- # 20 - SUITE 00140 , SALLY BEAUTY SUPLY BASE LEASE DATES: 6/1996 TO 5/1998 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,200 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 16.50/SF/YR PERCENTAGE RENT: INITIAL SALES - 483.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 318.00/SF/YR 4.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING OLOBAL RECOVERY RETR GLOBAL GROUPING GLOBAL RECOVERY CAM1 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK16 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR GLOBAL GROUPING GLOBAL RECOVERY CAM1 RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 21 - SUITE 00210 , MCDONALDS #37-0168 BASE LEASE DATES: 11/1972 TO 11/1998 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 3,450 SUBJECT TO VACANCY ALLOWANCE PAGE 25 MINIMUM RENT: INITIAL RENT - 15.94/SF/YR PERCENTAGE RENT: NITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 12/1998 TO 11/2003 SQUARE FOOTAGE: 3,450 MINIMUM RENT: INITIAL RENT - 18.84/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINIUED FROM PRIOR TERM THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE OPTION 2 DATES: 12/2003 TO 11/2008 SQUARE FOOTAGE: 3,450 MINIMUM RENT: INITIAL RENT - 21.74/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE OPTION 3 DATES: 12/2003 TO 11/2013 SQUARE FOOTAGE: 3,450 MINIMUM RENT: INITIAL RENT - 24.01/SF/YR PAGE 26 PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR COMIMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 22 - SUITE 00150 , TCBY BASE LEASE DATES: 4/1990 TO 4/1998 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,200 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 18.52/SF/YR CHANGING TO - 19.00/SF/YR ON 5/1997 PERCENTAGE RENT: INITIAL SALES - 83.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 226.00/SF/YR 8.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK16 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 PAGE 27 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 23 - SUITE 00160 , FIRE AND SHINE BASE LEASE DATES: 9/1990 TO 3/1997 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,200 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 16.50/SF/YR PERCENTAGE RENT: INITIAL SALES - 122.50/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATUNAL BREAKPOINT PLUS MINIMUM RENT 7.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MKl6 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE PAGE 28 - -------------------------------------------------------------------------------- # 24 - SUITE 00220 , AMC THEATER BASE LEASE DATES: 7/1972 TO 12/2012 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 11,980 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 2.65/SF/YR PERCENTAGE RENT: INITIAL SALES - 61.77/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 25.00/SF/YR 10.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 25 - SUITE 00170 , MANDARIN CHEF, INC BASE LEASE DATES: 12/1990 TO 11/1997 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 3,300 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 13.00/SF/YR PERCENTAGE RENT: INITIAL SALES - 41.50/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 7.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR GLOBAL GROUPING GLOBAL RECOVERY CAM1 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: PAGE 29 LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK11 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR GLOBAL GROUPING GLOBAL RECOVERY CAM1 RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 26 - SUITE 00230 , PIZZA HUT BASE LEASE DATES: 3/1984 TO 4/2001 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 3,025 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 7.93/SF/YR PERCENTAGE RENT: INITIAL SALES - 231.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREARPOINT PLUS MINIMUM RENT 6.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - CAM DIRECT INPUT OF AMOUNTS OR RATES 1996 LEASE YEAR VALUE - 0.30/SF GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO PAGE 30 RENEWAL MINIMUM RENT: MARKET RATE MKPH MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S): WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 27 - SUITE 00180 , 99 CENT STORE BASE LEASE DATES: 7/1996 TO 6/1997 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 2,800 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 10.00/SF/YR CHANGING TO - 9.00/SF/YR ON 7/1997 CHANGING TO - 10.00/SF/YR ON 7/1998 PERCENTAGE RENT: INITIAL SALES - 179.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 3.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: NONE COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 7/1997 TO 6/2001 SQUARE FOOTAGE: 2,800 MINIMUM RENT: INITIAL RENT - 10.00/SF/YR CHANGING TO - 9.00/SF/YR ON 7/1997 CHANGING TO - 10.00/SF/YR ON 7/1998 PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 3.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR PAGE 31 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK13 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING LOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 28 - SUITE 00190 , THE 2ND NATIONAL BASE LEASE DATES: 10/1971 TO 12/1997 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,800 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 10.67/SF/YR PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - CAM DIRECT INPUT OF AMOUNTS OR RATES 1996 LEASE YEAR VALUE - 0.15/SF GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 1/1998 TO 12/2007 SQUARE FOOTAGE: 1,800 MINIMUM RENT: PAGE 32 INITIAL RENT - 10.67/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - CAM DIRECT INPUT OF AMOUNTS OR RATES 1996 LEASE YEAR VALUE - 0.15/SF GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MKBK MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 29 - SUITE 00200 , LONG JOHN SILVERS BASE LEASE DATES: 5/1976 TO 4/2001 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,728 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 12.50/SF/YR PERCENTAGE RENT: INITIAL SALES - 579.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 5.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - CAM PAGE 33 DIRECT INPUT OF AMOUNTS OR RATES 1995 LEASE YEAR VALUE - 0.56/SF GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MKLJ MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 30 - SUITE 0007A , GOLDEN BAGEL BASE LEASE DATES: 3/1995 TO 3/2000 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,500 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 12.75/SF/YR CHANGING TO - 13.75/SF/YR ON 4/1998 PERCENTAGE RENT: INITIAL SALES - 100.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 133.00/SF/YR 6.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE PAGE 35 THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK85 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 32 - SUITE 00250 , H & R BLOCK BASE LEASE DATES: 9/1995 TO 4/2000 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 3,100 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 8.65/SF/YR CHANGING TO - 8.88/SF/YR ON 5/1997 CHANGING TO - 9.12/SF/YR ON 5/1998 CHANGING TO - 9.35/SF/YR ON 5/1999 PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: NONE COMMISSIONS: NONE PAGE 36 ALTERATIONS: NONE OPTION 1 DATES: 5/2000 TO 4/2005 SQUARE FOOTAGE: 3,100 MINIMUM RENT: INITIAL RENT - 9.58/SF/YR CHANGING TO - 9.82/SF/YR ON 5/2001 CHANGING TO - 10.05/SF/YR ON 5/2002 CHANGING TO - 10.29/SF/YR ON 5/2003 CHANGING TO - 10.52/SF/YR ON 5/2004 PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: NONE COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK11 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR GLOBAL GROUPING GLOBAL RECOVERY CAM1 RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 33 - WESTERN AUTO BASE LEASE DATES: 9/1996 TO 8/2001 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 9,000 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 8.50/SF/YR PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE PAGE 37 RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR GLOBAL GROUPING GLOBAL RECOVERY CAM1 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK85 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR GLOBAL GROUPING GLOBAL RECOVERY CAM1 RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE ================================================================================ ADDENDUM H - ENGAGEMENT LETTER - -------------------------------------------------------------------------------- ADDENDUM H ENGAGEMENT LETTER - -------------------------------------------------------------------------------- [Letterhead of CB Commercial Real Estate Group, Inc.] May 8, 1996 Mr. Josh Kane Chief Financial Officer MARK CENTERS TRUST 660 Third Avenue Kingston, PA 18704 Re: 17 Shopping Centers Nationwide Dear Mr. Kane: At your request, we are pleased to submit the following proposal to appraise the above referenced properties. The purpose of this assignment is to estimate the market value of the leased fee interest. We understand the appraisal reports are to be used for mortgage underwriting purposes. We also understand that the reports will be used by Mark Centers Trust and Morgan Stanley. The properties are briefly described on attachment "A". Our complete valuation will be presented in a self contained (narrative) format and will contain a complete description of the property along with pertinent exhibits and photographs together with supporting factual data and analysis necessary to convey our opinion of value. We will value the property based upon the cost, income and market approaches to value, where applicable, correlating our findings into a final value conclusion. The report will be prepared in conformity with and will be subject to the requirements of the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. Each report will also conform to the Uniform Standards of Professional Appraisal Practice ("USPAP') and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") and the Morgan Stanley Capital Appraisal Standards described in Attachment "B". We assume that there are no major or significant items of deferred maintenance beyond normal wear and tear for properties of their age as of the date of the appraisal which would require the expertise of a professional contractor to estimate the cost of such repairs. If such repairs need to be considered in this appraisal, such estimates are to be provided by a qualified firm hired by you and at no cost to us. The total fee for the assignment is $68,000 ($4,000 per property) including all travel and related expenses which is due and payable upon delivery of the reports. If we are asked to cancel the assignment within two weeks of our engagement an upset fee equal to 50% will be due and payable. If cancellation occurs between two and three weeks, the upset fee will be equal to 75% and any time after three weeks the full fee will be due and payable. We will furnish you with three copies of our final report within four to five weeks of our authorization. Authorization occurs upon our receipt of an executed copy of this proposal and our delivery date is contingent upon the timely receipt of all necessary property information, financial statements and detailed lease information. If all requested data and information is not available as of the authorized date, we reserve the right to extend the delivery date by the amount of time it takes to receive the requested information. May 8, 1996 Mr. Kane Page 2 In order to complete this assignment in a timely manner, we will require the following specific information, if available: o Copy of Ground Lease, if Leasehold o Legal descriptions. o Current rent roll. o Copy of Leases or abstracts o Expense reimbursements on a tenant by tenant basis o Building area calculations and surveys. o Operating statements for the past three full years. o Current year expenses to date. o A copy of the current budget. o Copies of any toxic engineering reports dealing with underground tanks, PCB's, asbestos or chemical spills, if available. o A copy of the next fiscal year's budget, if available. o A list of major repairs which have recently been made, or are scheduled to be made in the next 18 months. o Name and phone number(s) of on-site superintendent(s), or local management firm or trustee for physical inspection. o Notice of any pending changes to the rent roll or pertinent information regarding the current status of the tenants. If we are requested to give court testimony an additional fee will be charged on an hourly basis at $300 per hour for designated MAI-appraisers and $175 for non-designated appraisers. Said hourly billings pertain to court preparation, waiting and travel time, document review and preparation (excludes narrative appraisal report) and all meetings related to court testimony. The client may provide only complete, final copies of the appraisal report to third parties who shall rely on such reports in connection with loan underwriting or securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the client for routine and customary questions. Please note that our consent to allow an appraisal report prepared by CB Commercial, or portions of such report, to become part of or be referenced in any public offering, the granting of such consent will be at our sole discretion and, if given, will be on condition that we will be provided with an Indemnification Agreement and/or Non-Reliance letter, in a form and content satisfactory to us, by a party satisfactory to us. We do consent to your submission of the reports to rating agencies, loan participants or your auditors without the need to provide us with an Indemnification Agreement and/or NonReliance letter. In addition to the fee for this assignment, you agree to compensate us at a rate to be mutually agreed to, for any time expended by us should we be required (by subpoena or otherwise) or requested by you, your representatives or other entity to become involved in any litigation or May 8,1996 Mr. Kane Page 3 legal proceeding in any way involving this engagement to which we are not a party, the appraisal work we produce or the property which is the subject of this assignment. You also agree to pay, on demand, all reasonable expenses which we incur in connection with any litigation or proceedings including the fees of our attorneys. You acknowledge that we are being retained hereunder as an independent contractor to perform the services described herein and nothing in this agreement shall be deemed to create any other relationship between us. This assignment will be deemed concluded and the services hereunder completed upon delivery to you of the appraisal report discussed herein. If these terms are acceptable, please authorize us to proceed by having an officer of the corporation, managing general partner, principal, owner, or a contractually responsible party sign the enclosed copy of this proposal with "Terms and Conditions" and return it to us for our permanent file. Upon receipt of your authorization, we will schedule the necessary personnel to complete the project in a timely manner. We appreciate this opportunity to be of service to you on this assignment. If you have additional questions, please do not hesitate to give me a call. Sincerely, CB COMMERCIAL REAL ESTATE GROUP, INC. Appraisal /s/ Michael R. Pecorino Michael R. Pecorino, MAI MRP:jf cc: Douglas W. Haney Enclosure AGREED & ACCEPTED ____________________________________ ___________________________________ Signature Title ____________________________________ ___________________________________ ____________________________________ ___________________________________ Name (type or print) Date Office #: __________________________ Fax #: _____________________________ ================================================================================ ADDENDUM J - QUALIFICATIONS - -------------------------------------------------------------------------------- ADDENDUM I QUALIFICATIONS - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM J - QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF MAGGIE ARGYROS Real Estate Analyst CB Commercial Real Estate Group, Inc. 560 Lexington Avenue, 16th Floor New York, New York 10022 (212) 207-6128 EDUCATION Master of Science in Real Estate, Penn State University, State College, Pennsylvania Appraisal Institute Courses 110, 120, 310, 410, 420 PROFESSIONAL Appraisal Institute Candidate for MAI designation EXPERIENCE Five years of Real Estate Appraisal and Consulting experience throughout the United States, specializing in the New York Metropolitan area. 1991 - 1993 J. Blake and Associates, Inc. New York, New York 1993 - 1996 The Weitzman Group, Inc. New York, New York 1996 - Present CB Commercial Real Estate Group, Inc. New York, New York Assignments include full and partial interest appraisals of all types of real estate including office buildings, shopping centers, industrial facilities, apartment buildings, market studies, and cooperatives and condominiums. - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM J - QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF MICHAEL R. PECORINO, MAI Senior Vice President, Regional Manager CB Commercial Real Estate Group, Inc. 560 Lexington Avenue, 20th Floor New York, New York 10022 (212)207-6102 EDUCATIONAL Real Estate Appraisal and Analysis, New York University, the Real Estate Institute Bachelor of Arts, Geography, Planning, Urban Studies, State University College of New York at Oneonta Successfully completed all the necessary courses to qualify for the MAI designation. LICENSES/CERTIFICATIONS Certified General Real Estate Appraiser: State of New York (46000002055) Certified General Real Estate Appraiser: State of New Jersey (RG-01667) Certified General Real Estate Appraiser: State of Pennsylvania (GA-001096-R) Certified General Real Estate Appraiser: State of Connecticut (0000489) Certified General Real Estate Appraiser: State of Maryland (10569) Certified General Real Estate Appraiser: State of New Jersey (3793) Certified General Real Estate Appraiser: State of Delaware (X10000223) Certified General Real Estate Appraiser: State of Maine (CG00001192) Certified General Real Estate Appraiser: State of Vermont (080-0000168) Certified General Real Estate Appraiser: State of District of Columbia (GA00010315) Licensed Real Estate Broker: State of New York PROFESSIONAL Appraisal Institute Designated Member of the Appraisal Institute (MAI), Certificate No. 7944 Member of the Real Estate Board of New York EXPERIENCE Fifteen years of Real Estate Appraisal and Consulting experience throughout the United States specializing in the New York metropolitan area. 1993 - Present CB Commercial Real Estate Group, Inc., Appraisal New York, New York 1983 - 1993 Cushman & Wakefield, Inc. New York, New York 1982 - 1983 Joseph J. Blake & Associates, Inc. New York, New York 1981 - 1982 City of New York - Office of Manhattan Planning New York, New York 1980 - 1981 City of Jersey City - Office of the Mayor Jersey City, New Jersey Assignments include full and partial interest appraisals of office buildings, air rights, commercial lofts, garden apartments, cooperatives, condominiums, townhouses, shopping centers, industrial facilities, residential and office market studies, portfolio valuations and multi-property assignments. - -------------------------------------------------------------------------------- This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. [LOGO]CB COMMERCIAL Delivering Solutions Through Local Knowledge Worldwide COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE NORTHSIDE MALL SWC of U.S. Highway 231 and Ross Clark Circle Dothan, Houston County, Alabama CB File No. 96-134-1 DATE OF VALUE July 2, 1996 PREPARED FOR Morgan Stanley Morgan Capital Inc. 1585 Broadway New York, New York 10036 PREPARED BY W. Scott Bradford Senior Real Estate Analyst and Ronald A. Neyhart, MAI Regional Manager CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES 100 Galleria Parkway, Suite 550 Atlanta, Georgia 30339 [LETTERHEAD OF CB COMMERCIAL REAL ESTATE GROUP, INC.] July 11, 1996 Morgan Stanley Morgan Capital Inc. 1585 Broadway New York, New York 10036 RE: Appraisal of NORTHSIDE MALL SWC of U.S. Highway 231 and Ross Clark Circle Dothan, Houston County, Alabama CB File No. 96-134-1 Dear Morgan Stanley: At your request and authorization, CB Commercial Real Estate Group, Inc. has prepared a Complete Appraisal presented in a self-contained appraisal report of the Market Value "as is" of the leased fee interest in the above-referenced real property based on market conditions existing as of July 2, 1996. The subject property consists of approximately 381,677 gross leaseable square feet of retail shopping center space constructed in 1969 as Northside Mall on approximately 37.596 acres of land in Dothan, Alabama. The property is more fully described, legally and physically, within the enclosed report. Data, information, and calculations leading to the value conclusion are incorporated in the report following this letter. The report, in its entirety, including all assumptions and limiting conditions, is an integral part of and inseparable from this letter. Based on research and analysis contained in this report, it is estimated that the Market Value "as is" of the leased fee interest in the subject property, as of July 2, 1996, is: FIVE MILLION THREE HUNDRED SEVENTY-FIVE THOUSAND DOLLARS ($5,375,000) The following appraisal sets forth the most pertinent data gathered, the techniques employed, and the reasoning leading to the opinion of value. The analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP), the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, and The Financial Institution Reform, Recovery, and Enforcement Act of 1989 (FIRREA). July 11, 1996 Page 2 It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CB Commercial Real Estate Group, Inc. can be of further service, please do not hesitate to contact us. Respectfully Submitted, CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES by: /s/ W. Scott Bradford /s/ Ronald A. Neyhart - ----------------------- ------------------------- W. Scott Bradford Ronald A. Neyhart, MAI Senior Real Estate Analyst First Vice President, Regional Manager Georgia Certification No. CG001784 Georgia Certification No. CG000490 Alabama Temporary Permit Applied For ================================================================================ CERTIFICATION OF THE APPRAISERS - -------------------------------------------------------------------------------- CERTIFICATION OF THE APPRAISERS We certify that to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. 4. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event, such as the approval of a loan. 5. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation and the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. In addition, this report conforms to the requirements of the Financial Institution Reform, Recovery, and Enforcement Act (FIRREA). 6. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 7. The undersigned MAI has completed the requirements of the continuing education program of the Appraisal Institute. 8. W. Scott Bradford has made a personal inspection of the property that is a subject of this report. Ronald A. Neyhart, MAI has not made a personal inspection of the appraised property. 9. No one provided professional assistance to the persons signing this report. 10. The undersigned appraisers have extensive experience in the appraisal/review of similar property types. 11. W. Scott Bradford is currently certified in the state where the subject is located. /s/ W. Scott Bradford /s/ Ronald A. Neyhart - -------------------------------- ---------------------------------- W. Scott Bradford Ronald A. Neyhart, MAI Senior Real Estate Analyst First Vice President, Regional Manager Georgia State Certification No. Georgia State Certification No. CG000490 CG001784 Alabama Temporary Permit Applied For - -------------------------------------------------------------------------------- i [GRAPHIC OMITTED] AERIAL PHOTOGRAPH ================================================================================ EXECUTIVE SUMMARY - -------------------------------------------------------------------------------- SUMMARY OF SALIENT FACTS Property Name: Northside Mall Location: SWC of U.S. Highway 231 and Ross Clark Circle Dothan, Houston County, Alabama Assessor's Parcel Number: 9-2-10-2-0-21 & 9-2-10-3-1-4 Property Description: The subject property consists of a 381,677 gross leasable square foot enclosed mall. Highest and Best Use As Though Vacant: Commercial development. As Improved: Continued use as a neighborhood shopping center. Property Rights Appraised: Leased Fee Interest Date of Value: July 2, 1996 Land Area 37.596 Acres Improvements Building Area (GLA): 381,677 Square Feet Year Built: 1969 Condition: Average Anchor Tenants: Walmart 111,970 SF Montgomery Ward 77,140 SF Goody's 26,840 SF Troy State University 18,400 SF Books A Million 17,316 SF Bugle Boy 15,480 SF Northside Fitness Ctr 15,300 SF Estimated Marketing Time: 12 months - -------------------------------------------------------------------------------- iii Financial Indicators Current Occupancy: 88.5% Stabilized Occupancy: 88% Estimated Stabilized Expenses: $637,938, or $1.67 per square foot Going-In Overall Capitalization Rate Selected: 10.5% Terminal Overall Capitalization Rate: 11.0% Discount Rate: 13.0% Valuation Land Value: N/A Cost Approach: N/A Sales Comparison Approach: $5,350,000 Income Capitalization Approach: $5,375,000 Final Value Conclusion: $5,375,000 Per Square Foot: $14.08 - -------------------------------------------------------------------------------- iv ================================================================================ TABLE OF CONTENTS - -------------------------------------------------------------------------------- TABLE OF CONTENTS CERTIFICATION OF THE APPRAISERS...............................................i AERIAL PHOTOGRAPH............................................................ii SUMMARY OF SALIENT FACTS....................................................iii TABLE OF CONTENTS.............................................................v INTRODUCTION..................................................................1 AREA ANALYSIS.................................................................7 MARKET ANALYSIS..............................................................15 SITE ANALYSIS................................................................19 IMPROVEMENT ANALYSIS.........................................................22 ZONING.......................................................................27 TAX AND ASSESSMENT DATA......................................................28 HIGHEST AND BEST USE.........................................................29 APPRAISAL METHODOLOGY........................................................32 SALES COMPARISON APPROACH....................................................34 INCOME CAPITALIZATION APPROACH...............................................39 RECONCILIATION OF VALUE......................................................64 ASSUMPTIONS AND LIMITING CONDITIONS..........................................66 ADDENDA A Glossary Of Terms B Additional Subject Photographs C Legal Description D Rent Roll E Historical Operating Statements F Comparable Improved Sales G Rent Comparables H Pro-Ject Reports I Qualifications - -------------------------------------------------------------------------------- v INTRODUCTION ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- INTRODUCTION PROPERTY IDENTIFICATION The subject is located at the southwest corner of U.S. Highway 231 and Ross Clark Circle, in Dothan, Alabama. The county assessor's tax identification number is 9-2-10-2-0-21 & 9-2-10-3-1-4. A legal description is presented in the Addenda. OWNERSHIP AND PROPERTY HISTORY The subject is currently owned by Mark Centers Limited Partnership according to a review of Houston County property records. The subject property was transferred to Mark Centers Limited Partnership from Marvin Slomowitz on June 3, 1993, but the sale was not arms length. There is no known current listing, option, or agreement of sale of the subject. DATES OF INSPECTION AND VALUATION The effective date of valuation is July 2, 1996. The site was inspected by W. Scott Bradford on July 2, 1996. PURPOSE OF THE APPRAISAL The purpose of this appraisal is to estimate the market value "as is" of the leased fee estate in the subject property, as of the date of inspection, July 2, 1996. Market value is defined as follows: Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised, and acting in what they consider their own best interests; 3. A reasonable time is allowed for exposure in the open market; 4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and - -------------------------------------------------------------------------------- 1 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- 5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) TERMS AND DEFINITIONS Please refer to the Addenda for a Glossary of the Terms and Definitions that are, and may be used in this appraisal. INTENDED USE OF REPORT This appraisal is for mortgage underwriting purposes. PROPERTY RIGHTS APPRAISED The value estimated represents the leased fee estate. APPRAISAL DEVELOPMENT AND REPORTING PROCESS The following steps were completed by CB Commercial for this assignment: 1. Analyzed regional, city, neighborhood, site, and improvement data. 2. Inspected the subject and the neighborhood. 3. Reviewed data regarding taxes, zoning, utilities, easements, and city services. 4. Considered comparable improved sales, comparable improved building rental information, and comparable site sales. Confirmed data with principals, managers, or real estate agents representing principals, unless otherwise noted. 5. Analyzed the data to arrive at conclusions via each approach to value used in this report. 6. Reconciled the results of each approach to value employed into a probable range of market data and finally an estimate of value for the subject, as defined herein. 7. Estimated a reasonable exposure time associated with the value estimate. - ---------- (1) The definition of market value is taken from: The Office of the Comptroller of the Currency under 12 CFR, Part 34, Subpart C-Appraisals, ss.34.42(f), August 24, 1990. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. - -------------------------------------------------------------------------------- 2 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- The subject site and improvement descriptions are based on a personal inspection of the property and a review of the relevant plat maps and site plan. The inspection is not a substitute for thorough engineering studies. To develop the opinion of value, CB Commercial performed a complete appraisal process, as defined by the Uniform Standards of Professional Appraisal Practice. This means that no departures from Standard 1 were invoked. This is a complete appraisal, in the form of a Self-Contained Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Standards of Professional Appraisal Practice. The definitions of Complete Appraisal and Self-Contained Report are found in the Glossary of Terms and Definitions. In a complete appraisal, CB Commercial uses all known applicable approaches to value. The value conclusion reflects all known information about the subject property, market conditions, and available data. The Self-Contained Report incorporates to the fullest extent possible, practical explanation of the data, reasoning and analysis that were used to develop the opinion of value. It also includes thorough descriptions of the subject property and the market for the subject property type. All data considered significant that was requested for this assignment was received by CB Commercial Real Estate Group, Inc. Appraisal Services. SPECIAL APPRAISAL INSTRUCTIONS There were no special appraisal instructions. MARKETING PERIOD The marketing period section is divided into reasonable exposure time and reasonable marketing time. Exposure time differs from marketing time. Marketing time is the period required to sell a real property interest at market value during the period immediately after the effective date of the appraisal. Exposure time is always presumed to precede the effective date of the appraisal. Exposure time is not intended to be a prediction of a date of sale or a one-line statement. Instead, it is an integral part of the appraisal analysis and is based on one or more of the following: o statistical information about days on the market o information gathered through sales verification o interviews of market participants. - -------------------------------------------------------------------------------- 3 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- The reasonable exposure period is a function of price, time, and use. It is not an isolated estimate of time alone. Exposure time is different for various types of real estate and under various market conditions. Reasonable Exposure Time Exposure time is always presumed to precede the effective date of the appraisal. It is the estimated length of time the property would have been offered prior to a hypothetical market value sale on the effective date of appraisal. It is a retrospective estimate based on an analysis of recent past events, assuming a competitive and open market. It assumes not only adequate, sufficient, and reasonable time but adequate, sufficient, and reasonable marketing effort. Exposure time and appraisal conclusion of value are therefore interrelated. Exposure time is often expressed as a range and is based on direct and indirect market data gathered during the market analysis, sales verifications, interviews with market participants, and other appropriate sources. The amount of time which a property will require to be marketed varies greatly depending on a number of factors including market conditions, listing price, terms of sale offered, and competitive listing inventory. In addition to considering each of the factors noted above, CB Commercial considered: o exposure periods of comparable sales revealed during the course of this appraisal, o the most recent CB Commercial National Investor Survey, and the o opinions of local knowledgeable real estate brokers and investors. Market Conditions Throughout the Southeast, market conditions for most property types have improved significantly during the past one to two years. In fact, the value of most investment grade property types has increased due to a number of factors. During the early 1990's, the lack of demand for investment properties and the inability of owners to make mortgage payments resulted in numerous foreclosures, or properties deeded back in lieu of foreclosure. Increased listing inventory had a substantial downward influence on property values and the exposure time necessary to generate sales. However, in the last few years, due to the competitive pricing in the market and improving national economic conditions, the number of transactions and active investors increased. These market conditions describe the current market and illustrate how exposure time is correlated with listing inventory, competitive pricing structures, and marketing efforts. - -------------------------------------------------------------------------------- 4 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- CB Commercial National Investor Survey In the most recent issue of the CB Commercial National Investor Survey, published in the First Quarter 1996, CB Commercial surveyed a wide range of investors for property type preferences and specific marketing times. Respondents showed a clear preference for suburban offices, apartments, warehouse/distribution facilities, community shopping centers, neighborhood shopping centers, power centers, and business parks. The surveyed investors ranked neighborhood shopping centers fifth out of 13 property types in terms of preference, as opposed to fourth in the prior survey (Third Quarter 1995). Investors indicated that exposure requirements for investment property generally increased from the previous survey, now about 6.7 months for the subject property type. Real Estate Broker Surveys As a third information source, appraisers solicited the opinions of real estate brokers knowledgeable in the subject market and property type. While the majority of individuals surveyed were reluctant to predict an exact exposure time length, generally they estimated an approximate range between 9 and 12 months. All assumed that property would be appropriately priced and marketed. When asked about the subject property specifically, the consensus of opinion was that the subject would receive average recognition in the marketplace under a reasonable plan for pricing and promotion. Exposure Time Conclusion In conclusion, based on the foregoing analysis, an exposure time of 12 months is reasonable, defensible, and appropriate. Like the brokers surveyed, CB Commercial assumes that the subject property would have been competitively priced and aggressively promoted regionally. Reasonable Marketing Time Reasonable marketing time is the period a prospective investor would forecast to sell the subject property immediately after the date of value, at the value estimated. Anticipated marketing time is essentially a measure of the perceived level of risk associated with the marketability, or liquidity, of the subject as an investment grade property. The sources for this information include those used in estimating the reasonable exposure time, but also an analysis of the anticipated changes in market conditions following the date of appraisal. In other words, the reasonable marketing time is the number of months it will require to sell the subject property from the date of value, into the future. The reader must understand, however, that the future price for the subject property (at the end of the marketing time) may or may not equal the appraisal estimate. The future price depends - -------------------------------------------------------------------------------- 5 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- on unpredictable changes in the physical real estate, demographic and economic trends, real estate markets in general, supply/demand characteristics for the property type, and many other factors. Based on the premise that present market conditions are the best indicators of future performance, a prudent investor will forecast that, under the conditions described above, the subject property will require a marketing time of approximately 12 months. - -------------------------------------------------------------------------------- 6 [GRAPHIC OMITTED] Regional Map ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- AREA ANALYSIS The dynamic nature of economic relationships within a market area have a direct bearing on real estate values and the long-term quality of a real estate investment. In the market, the value of a property is not based on the price paid for it in the past or the cost of its creation, but on what buyers and sellers perceive it will provide in the future. Consequently, the attitude of the market toward a property within a specific neighborhood or market area reflects the probable future trend of that area. Since real estate is an immobile asset, economic trends affecting its locational quality in relation to other competing properties within its market area will also have a direct effect on its value as an investment. To accurately reflect such influences, it is necessary to examine the past and probable future trends which may affect the economic structure of the market and evaluate their impact on the market potential of the subject. This section of the report is designed to isolate and examine the discernible economic trends in the region and neighborhood which influence and create value for the subject property. REGIONAL INFLUENCES Location The subject is located within the city limits of Dothan, Houston County. Dothan is located in the extreme southeastern portion of the state, just east of the Georgia state line and just north of the Florida state line. The Dothan MSA is comprised of Houston and Dale Counties. A regional map indicating the location of the subject is presented on the facing page. Population The Dothan MSA represents approximately 3% of Alabama's population. The population of the Dothan MSA was estimated by Strategic Mapping, Inc. to be 135,755 persons as of 1995. Approximately 62% of the population lives in Houston County. This indicates an increase of 4,791 persons, or 3.7% from the April 1, 1990 federal census. The MSA's population is expected to reach approximately 141,017 by the year 2000. Demographic statistics for the Dothan MSA are summarized in the following table. - -------------------------------------------------------------------------------- 7 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- =============================================================== SELECTED AREA DEMOGRAPHICS DOTHAN MSA =============================================================== Population 1995 Estimate 135,755 1990 Census 130,964 1990-1995 % Change 3.7% Households 1995 Estimate 50,542 1990 Census 48,418 1990-1995 % Change 4.4% 1995 Median Household Income $29,007 1995 Average Household Income $36,939 1990 Average Home Value $61,429 1990 % College Graduates 21.2% =============================================================== Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. =============================================================== As indicated, the base of population and households in the Dothan MSA is moderate, as has been the growth rate over the last five years. All other demographic statistics suggest moderate income levels and home prices. The rate of growth over the next five years is projected to be consistent with the recent trend. Employment Based on the Alabama Department of Labor, the 1995 civilian labor force was 61,970 for the Dothan MSA and 41,460 for Houston County. The following table compares the unemployment rate for Houston County to that of the state and national averages. ========================================================================= UNEMPLOYMENT RATE ANNUAL AVERAGE COMPARISON BY COUNTY, STATE, AND U.S. ========================================================================= Year County State U.S. - ------------------------------------------------------------------------- 1995 5.1% 6.3% 5.6% 1994 5.8% 6.0% 6.1% 1993 7.2% 7.6% 6.8% ========================================================================= Source: U.S. Department of Labor Statistics. Compiled by: CB Commercial Real Estate Group, Inc. ========================================================================= - -------------------------------------------------------------------------------- 8 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- The Bureau of Labor Statistics reports a preliminary unemployment as of May 1996 of 3.7% for Houston County based on a labor force of 41,440 persons. The Dothan MSA has a 4.1% unemployment rate based on a labor force of 62,110 for the same period. The major employers in the Dothan area are as follows: ============================================================================ MAJOR AREA EMPLOYERS ============================================================================ Type of No. Of Company Business Employees - ---------------------------------------------------------------------------- Southeast Alabama Medical Hospital 1,800 Center Flowers Hospital Hospital 1,200 Sony Corp. Magnetic Tapes 1,125 Perdue Farms, Inc. Poultry Processing 1,100 City of Dothan Government 915 Southern Nuclear Electricity Generation 897 Michelin Tire Corp Light Truck Tires 677 Pemco World Air Services Aircraft Modification & 550 Repair Aladan Corporation Latex Products 500 ============================================================================ Source: Dothan Area Chamber of Commerce. Compiled by: CB Commercial Real Estate Group, Inc. ============================================================================ - -------------------------------------------------------------------------------- 9 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Growth and Trends Jobs in the Dothan MSA can be segmented as follows by industry sector: ================================================================ EMPLOYMENT BY INDUSTRY SECTOR ================================================================ % of Total Industry Sector Employment - ---------------------------------------------------------------- Construction 6% Agriculture 4% Manufacturing 18% --- Total Goods Producing 28% Transportation, Communication & Utilities 10% Wholesale Trade 5% Retail Trade 18% Finance, Insurance & Real Estate 4% Services 29% Government 6% --- Total Service Producing 72% ================================================================ Source: Strategic Mapping, Inc. ================================================================ As indicated, services, manufacturing, and retail make up the primary segments of the area economy, combining for 65% of total jobs. Within the services sector, health accounts for 9% of all jobs in the county. The previous table of major employers shows that two hospitals are the largest employers in the area and also account for most of the health service sector jobs. Retail jobs are spread throughout a number of employers, with Wal-Mart, Montgomery Ward, Gayfer's, Parisian, McCrae's, JC Penney and a few grocery store chains considered to be the largest retail employers. Additional evidence of the Dothan area's economic growth is an analysis of annual retail sales as shown in the following table: - -------------------------------------------------------------------------------- 10 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ======================================================= DOTHAN MSA HISTORICAL RETAIL SALES - ------------------------------------------------------- Annual Year Retail Sales Growth Rate - ------------------------------------------------------- 1986 $813,777,000 N/A 1987 $869,163,000 6.8% 1988 $909,827,000 4.7% 1989 $985,616,000 8.3% 1990 $1,045,272,000 6.1% 1991 $1,032,834,000 (1.2%) 1992 $1,093,935,000 5.9% 1993 $1,176,947,000 7.6% 1998 (Proj) $1,567,986,000 5.9% ======================================================= Source: The Survey of Buying Power ======================================================= This would suggest an annual average growth in retail sales of 5.4% from 1986 through 1993, with a 5.9% average growth rate projected from 1993 through 1998. As of 1993, the Dothan MSA ranked 246th nationwide in terms of gross retail sales. Based on the projected annual growth rate of 5.9% from 1993 through 1998, the Dothan MSA is expected to be the 245th largest by 1998. Transportation The Dothan area is the intersecting point for several state and U.S. highways which form the primary transportation network throughout the county. This includes U.S. Highways 84, 231 and 431. In addition, State Highway 210, also known as Ross Clark Circle, is a circumferential highway around Dothan. The Dothan/Houston County Airport serves the area, with flights on ASA (a Delta-affiliated commuter airlines) to Atlanta and Northwest Airlink to Memphis. The area is also served by four freight rail lines. There is no municipal bus service in the county. Conclusion and Relevance to the Subject Property The subject property is located within the northwestern portion of Houston County identified as Dothan. It enjoys excellent access within Dothan, as well as throughout the surrounding Dothan MSA. Population and employment levels are moderate, as is the rate of growth. The unemployment rate is below state and national averages. Primary employment sectors include services, manufacturing, and retail. Income and housing costs are also moderate, suggesting an affordable cost of living. Furthermore, Dothan was ranked by Money magazine as the 39th most livable city in the U.S. in 1995 out of 300 cities. This was the highest ranking for Alabama - -------------------------------------------------------------------------------- 11 [GRAPHIC OMITTED] Neighborhood Map ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- cities. All of these variables are considered to positively affect the subject property, which is dependent on the local economy and a stable work force. NEIGHBORHOOD INFLUENCES Location The subject is located at the southwest corner of U.S. Highway 231 and Ross Clark Circle, just inside of the northern city limits of Dothan. A neighborhood map is shown on the facing page. Boundaries The subject neighborhood is generally comprised of the northwestern Dothan area, with the intersection of Ross Clark Road and Highway 231 considered to be the focal point of this neighborhood. The neighborhood is roughly bounded by Highway 84 to the south and Denton Road to the east. Land Use The intersection of Ross Clark Road and Highway 231 is the focus of a substantial amount of commercial development. Located within the northeast quadrant of this intersection, Wiregrass Mall represents the core of retail development in the neighborhood. It is a 710,000 square foot regional mall built in 1986 which is anchored by Parisian, JC Penney, Gayfer's, and McCrae's. The subject is the second biggest retail development in the neighborhood, as well as the oldest, having been built in 1969. The neighborhood totals nine center shopping centers, including the subject property, which comprise approximately 1,535,000 square feet of space. Approximately 80% of this space is located at the intersection of Ross Clark Road and Highway 231, with the remaining centers located at either Ross Clark Road and Highway 85 or Ross Clark Road and Denton Road. In addition, the concentration of shopping centers has led to related uses such as retail stores, fast food restaurants, branch banks and hotels. The surrounding area is primarily residential in nature. Access Primary access to the neighborhood is provided by Ross Clark Road and Highway 231, as well as Highway 85, which bisects Dothan in an east/west direction. Average daily traffic counts as of 1994 were 32,060 vehicles along Ross Clark Road south of the intersection with Highway 231 and 32,380 vehicles along Highway 231 northwest of Ross Clark Road. There are several - -------------------------------------------------------------------------------- 12 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- collector corridors serving the neighborhood as well, including Westgate Parkway. Overall access to the neighborhood is considered good. Demographics Selected Neighborhood demographics for the subject's neighborhood is shown below. =============================================================== SELECTED NEIGHBORHOOD DEMOGRAPHICS THREE-MILE RADIUS =============================================================== Population 2000 Projection 36,321 1995 Estimate 35,056 1990 Census 33,723 1980 Census 30,857 1990-1995 % Change 4.0% Households 2000 Projection 14,567 1995 Estimate 13,979 1990 Census 13,386 1980 Census 11,335 1990-1995 % Change 4.4% 1995 Median Household Income $31,974 1995 Average Household Income $44,974 1990 Average Home Value $79,935 =============================================================== Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. =============================================================== This information suggests a reasonable population and income base in the subject neighborhood. In addition, the population and household base will grow at a rate consistent with the recent trend of modest growth. Growth and Trends In general, the subject's neighborhood is considered to be the primary retail market in the Dothan MSA. As a result, a number of ancillary retail or service uses have been developed in the neighborhood. Neighborhood demographics suggest that more than 40% of the population in Houston County lives within three miles of the subject property. The community also has above average income levels and median home values as compared to both Houston County - -------------------------------------------------------------------------------- 13 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- and the Dothan MSA. Over the past decade this area has witnessed modest growth, with this trend expected to continue over the next five year period. There are a significant number of shopping centers in the subject neighborhood, including the area's primary regional mall. As a result additional shopping center development is likely over the long term future. We are not aware of any current plans for a shopping center in the neighborhood. However, there is a piece of land adjacent to the south of the subject which has been rough graded and could accommodate additional retail space. The only plans of development at this time are for restaurant outparcels. We do not expect the character of the neighborhood to change dramatically in the immediate future. Conclusion and Relevance to the Subject Property The subject property is located in the primary retail market in the Dothan MSA. It is the second largest retail center in this neighborhood, with Wiregrass Mall, located directly across Highway 231 from the subject, being the largest. While the subject obviously can not compete directly with the newer, better anchored regional mall, other retail development in the vicinity of a regional mall traditionally benefits from such a location. Finally, the surrounding population base is considered to be large enough to support a significant level of retail development. In conclusion, the subject should continue to benefit from its location in this neighborhood. - -------------------------------------------------------------------------------- 14 ================================================================================ MARKETABILITY - -------------------------------------------------------------------------------- MARKET ANALYSIS Marketability refers to the posture of the subject property within its marketplace and its ability to be leased, sold, or marketed relative to its competition and current conditions. In this regard, the subject is very competitive relative to other shopping center developments in the submarket. OVERALL RETAIL TRENDS IN DOTHAN As discussed in the Regional Influences section, retail sales in the Dothan MSA have increased at a 5.4% rate of growth during the beginning of this decade, with this rate of growth projected to be maintained over the near future. Provided there are no substantial reductions in area employment, we expect this trend to continue. Demographic Analysis The next portion of our marketability analysis presents a demographic profile of the area. In this section we analyze the existing demographics and their changing patterns. ================================================================================ NEIGHBORHOOD DEMOGRAPHICS ================================================================================ 1 mile 3 mile 5 mile - -------------------------------------------------------------------------------- Population 1995 Estimate 4,088 35,056 57,890 1990 Census 3,993 33,723 55,711 1990-1995 % Change 2.4% 4.0% 3.9% Households 1995 Estimate 1,832 13,979 22,465 1990 Census 1,775 13,386 21,486 1990-1995 % Change 3.2% 4.4% 4.6% 1995 Median Household Income $43,302 $31,974 $30,656 1995 Average Household Income $65,653 $44,974 $40,857 1990 Average Home Value $99,326 $79,935 $70,060 1990 % College Graduates 41.9% 29.0% 25.1% ================================================================================ Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The previous table indicates that population and household formation in the area has occurred at an average rate of growth. Household incomes, average home values and the percentage of college graduates are considered to be at or above the regional median. The data generally indicates the neighborhood is a middle to upper-income area with average population and income growth. - -------------------------------------------------------------------------------- 15 ================================================================================ MARKETABILITY - -------------------------------------------------------------------------------- Trade Area Analysis The primary trade area for the subject is the northwestern portion of Dothan. The subject, as a community shopping center, generally does not compete directly with other shopping centers in the area which are typically grocery store anchored or unanchored centers. However, because the subject is a community shopping center located directly across from a regional mall, it is able to service the needs of customers from outside of the immediate neighborhood. Northwest Dothan Retail Market Community shopping centers are generally meant to serve the retail needs of a fairly broad market, usually within radius of five miles or more. Within that radius of the subject, there are five anchored shopping centers, including the subject. There are no potential competitors under construction. These five properties are summarized in the following table.
============================================================================================== SUMMARY OF NORTHWEST DOTHAN RETAIL CENTERS ============================================================================================== Building Year Overall Local Occ Anchors Base Rent No. Name & Location Size Built Occ Rate Rate Tenants Per SF - ---------------------------------------------------------------------------------------------- 1 Wiregrass Commons 710,000 1986 94% 86% Gayfer's, $10.00- Ross Clark Circle McCrae's, JC $16.00 & Highway 231 Penney, Parisian 2 Wiregrass Plaza 49,150 1986 100% 100% Winn-Dixie, $9.00 Hwy 231 & Westgate Pkwy Big B Drugs 3 Colony Square 73,825 1988 100% 100% Office Depot $7.00- R. Clark Circle & Hwy $8.00 84 4 Northside Plaza 71,348 1981 100% 100% Food World, $7.00- R. Clark Circle & Big B Drugs $8.00 Denton Rd Subj Northside Mall 381,677 1969 88% 61% Wal-Mart, M. $2.00- Ross Clark Circle Ward, $8.00 & Highway 231 Goody's, Troy St. Univ., Books A Million, Bugle Boy ============================================================================================== Compiled by: B Commercial Real Estate Group, Inc. ==============================================================================================
These five centers exhibit a variety of building quality, condition, and tenant quality. The subject is positioned near the middle of the local market. Wiregrass Commons, the regional mall, is considered superior to the subject overall. Wiregrass Plaza, Colony Square, and Northside Plaza are neighborhood shopping centers which are inferior to the subject based on anchor tenancy and size, but superior in terms of age, local tenant occupancy and local tenant mix. - -------------------------------------------------------------------------------- 16 ================================================================================ MARKETABILITY - -------------------------------------------------------------------------------- The only retail development which is currently under construction in the greater Dothan area is a Wal-Mart super store in the southern Dothan area near the intersection of Ross Clark Circle and Highway 231. Based on conversations with the local chamber of commerce, the city manager, and the general manager of the Wal-Mart located in Northside Mall, Wal-Mart feels that the Dothan area can support two stores as they are located in separate submarkets. Furthermore, our discussions with area leasing agents and owners indicate no other major renovations or new construction is planned for the area. Subject Marketability In addition to analyzing the overall, or macro, conditions influencing the subject property, it is also important to consider the specific characteristics of the subject. It is particularly important to address those factors that would be considered by a potential purchaser of the subject. From a positive standpoint, the subject is located along two primary traffic corridors through the neighborhood and has good visibility and access. Furthermore, the focus of retail development in Dothan is located at the intersection of these two roads, Ross Clark Circle and Highway 231. The construction of the subject in 1969 at this location and subsequently Wiregrass Mall in 1986 have been the primary impetus in the area's development. With respect to its condition, the exterior of the center is in average condition, while the interior has been very well maintained and the upper level in particular has a modern, well lit decor. This has enabled the subject to stay competitive from a physical standpoint as compared to other shopping centers in Dothan. However, the construction of Wiregrass Commons, while instrumental in making the subject neighborhood the primary retail market in Dothan, has adversely affected the subject's local tenant mix and occupancy. The subject has been fairly successful at reorienting the subject to discount retailers by adding mid sized tenants such as Books A Million, Goody's and Bugle Boy. In addition, most of the lower level, considered to be less desirable from a retail perspective, has been leased to two alternative users, Troy State University and a fitness club. Still, the subject has been adversely affected from a leasing standpoint as evidenced by the 58% local tenant occupancy rate. Currently, Wal-Mart's lease expires in January 1999 and Montgomery Ward's lease expires in November 1999. It has been previously noted that Wal-Mart has a new 150,000 square foot or more store under construction on the south side of Dothan. However, all indications are that Wal-Mart intends to exercise the first of three options in their existing lease. In order to gauge the likelihood of their renewal, we have discussed the situation with the Wal-Mart general - -------------------------------------------------------------------------------- 17 ================================================================================ MARKETABILITY - -------------------------------------------------------------------------------- manager, the Dothan city manager and the Dothan Chamber of Commerce president. The feeling is that the Dothan area can support two stores, with the existing store generating sales of approximately $300 per square foot, reportedly making it one of the top grossing stores in Alabama. In fact, Wal-mart is apparently considering increasing the size of their existing store in the near term future. Montgomery Ward is also expected to exercise the first of three options given the subject's location. Four junior anchors also help diversify the anchor rollover risk, with these tenants varying in size from 15,480 to 26,840 square feet. While the Troy State University lease expires in December 1996, they have recently renewed their lease for two years. Summary In summary, we believe the Dothan retail market, and the subject's position in the market, is positive. We expect the subject will continue to experience good market acceptance. However, it will be necessary to continue reorienting the center towards larger tenants as the smaller local tenant spaces can not compete for tenants with Wiregrass Commons. Furthermore, the subject must continue to be well maintained and up-graded periodically. - -------------------------------------------------------------------------------- 18 PROPERTY DESCRIPTION [GRAPHIC OMITTED] AS - BUILT SURVEY ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- SITE ANALYSIS The Description of the site can be detailed as follows: Location: The subject is located at the southwest corner of U.S. Highway 231 and Ross Clark Circle. Ingress and egress to the subject is available from three curb cuts on Ross Clark Circle and three curb cuts on Highway 231. A site plan is shown on the facing page. Assessor's Parcel Number: 9-2-10-2-0-21 & 9-2-10-3-1-4 Land Area(1) Gross Land Area: 37.596 Acres Net Land Area: 37.596 Acres Excess Land: None Outparcels: Includes three developed outparcels. Shape and Frontage: The site is irregular in shape, with actual street frontage of 609 feet along on Ross Clark Circle and 469 feet along Highway 231. Furthermore, the site has a reasonable depth relative to its width. Topography and Drainage: The site has moderately sloping topography which generally drains in a northerly direction. The site is generally at road grade with U.S. Highway 231 and Ross Clark Circle. Our investigation did not reveal any significant drainage problems. Soils: No soils report was provided and it is assumed that soils are adequate for the existing use. (1) Source: Boundary Survey - -------------------------------------------------------------------------------- 19 ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- Easements: A current title report was not provided in connection with this appraisal. Based on our on site inspection, there are only typical utility and access easements, which do not appear to adversely affect the subject. It is specifically assumed that any easements, restrictions or encroachments that might appear against the title would have no adverse impact on marketability or value. Covenants, Conditions, No private deeds or restricting covenants and Restrictions: affecting development, other than zoning and the covenants, conditions and restrictions associated with the shopping center, were found to affect the site. It is specifically assumed that there is no adverse affect on marketability or value. Utilities: All public utilities are available to the subject site. Flood Zone: According to maps published by the Federal Emergency Management Agency (FEMA), the subject lies within Zone X as indicated on FEMA Community Map Panel 010104 0023D, dated January 15, 1988. Flood insurance is available. This zone is described as follows: FEMA Zone X: "This area has been identified in the community flood insurance study as an area outside the 500-year floodplain." Environmental Issues: We were not provided with any environmental report or site assessment for the subject property. The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the property that would cause a loss in value. However, CB Commercial is not qualified to detect hazardous waste or toxic materials. Therefore, we reserve the right to review and revise our valuation conclusions if additional information to the contrary becomes available in the future. Adjacent Properties North: Multi-family residential development South: Wendy's, Comfort Inn, McDonald's, Krystal, Long John Silver East: Wiregrass Commons regional mall West: Pizza Hut, Longhorn Steaks - -------------------------------------------------------------------------------- 20 ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- Conclusion: The subject is a 37.596-acre site which is accessible via curb cuts from U.S. Highway 231 and Ross Clark Circle. Access appears to be good for the site. Visibility and exposure are also good from U.S. Highway 231 and Ross Clark Circle as the site is generally at road grade. The shape of the parcel is irregular and there is no excess land. However, there are three developed outparcels included. The CB Commercial Real Estate Group, Inc. is aware of no environmental contamination of the site. In conclusion, from a physical standpoint, the subject site has good utility and is considered adequate for many types of commercial development. - -------------------------------------------------------------------------------- 21 [GRAPHIC OMITTED] SITE PLAN - NORTHSIDE MALL ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS The subject property consists of approximately 381,677 gross leaseable square feet of retail center improvements. Built in 1969, the center is currently 88.5% occupied. The improvements consist of a two-story enclosed mall subdivided into 56 tenant bays as depicted on the facing page floorplan. The following is a description of the improvements based on our physical inspection. The building area is detailed as follows: =================================================== NORTHSIDE MALL BUILDING AREA - --------------------------------------------------- Gross % of Gross Category Leasable Leasable Area Area - --------------------------------------------------- Walmart 111,970 29.3% Montgomery Ward 77,140 20.2% Goody's 26,840 7.0% Troy State University 18,400 4.8% Books A Million 17,316 4.5% Bugle Boy 15,480 4.1% Northside Fitness 15,300 4.0% Local Tenants 99,231 26.0% -------- --------- Total 381,677 100.0% =================================================== Source: Mark Centers Trust =================================================== The subject improvements have a gross building area of 467,400 square feet according to the site plan. The basic construction features are summarized as follows. Construction Class The class of construction is the basic subdivision in Marshall Valuation Service(1), dividing all buildings into five basic groups by type of framing (supporting columns and beams), walls, floors, roof structure, and fireproofing. The subject is construction Class C. Competitive Rating The subject is considered a Class B building in terms of (1) Class C Buildings are characterized by masonry or reinforced concrete (including tilt-up) construction. The walls may be load-bearing, i.e., supporting roof and upper floor loads, or nonbearing with open concrete, steel, or wood columns, bents, or arches supporting the load. (Source: Marshall Valuation Service) - -------------------------------------------------------------------------------- 22 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- quality as it is perceived in the marketplace. Foundation Concrete slab on grade. Frame Steel frame and metal studs. Floor Construction Concrete slab on grade. Exterior Walls Combination of concrete block, brick and concrete. Entries are glass store fronts with bronze finish anodized aluminum windows. Roof Cover The roof is built up tar and gravel. No specific information about the roof was available, but we have assumed that it is in average to good condition. If additional information to the contrary is provided to the appraiser in the future, we would reserve the right to review and revise our findings and conclusions if necessary. Exterior Condition Average Elevator/Stair System The building has one set of escalators and a set of stairs which provide access between the upper and lower levels. Interior Partition System Metal studs with gypsum board cover. Interior Finishes - Tenant Space Floors: A combination of commercial grade carpet, vinyl tile and ceramic tile. Walls: Painted sheetrock. Ceilings: Acoustical tile drop ceilings. Lighting: Mostly recessed fluorescents, except for some attached fluorescents. Summary: The interior finishes are good throughout the center. None of the space is unfinished as all of the suites have been occupied at least once. Interior Finishes - Common Areas Floors: A combination of vinyl tile and ceramic tile. Walls: Painted sheetrock. Ceilings: Acoustical tile drop ceilings with skylights on the upper level. Lighting: Mostly recessed fluorescents lights. Summary: The interior finishes in the mall common areas are good throughout the center, with the upper level in particular considered to be modern and well lit. - -------------------------------------------------------------------------------- 23 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Interior Condition Good HVAC Split heating and cooling system provided by air conditioning compressors mounted on the roof and gas-fired furnaces with individual zone controls and ducted through ceiling registers. We have assumed that these units are in average condition. While tenants are responsible for maintaining the HVAC systems, the landlord is responsible for the HVAC systems in the common areas and could conceivably be required to replace a compressor unit if it fails while a suite was vacant. Electrical The electrical system is assumed to be in good working order and adequate for the building. Fire Protection The subject property is not fully fire sprinklered. Tenants which have wet sprinkler systems are Walmart, Goody's, Montgomery Ward, Books A Million, and Bugle Boy. It is assumed that the subject has adequate fire alarm systems, fire exits, fire extinguishers, fire escapes and/or other fire protection measures adequate to meet local fire marshall requirements. Life Safety and Security The subject has no special security or surveillance system. Plumbing The plumbing system is assumed to be adequate for the proposed subject improvements. Parking There are 2,042 striped surface parking, including 29 handicapped spaces. This type of parking is similar to that found in the local comparables. The number of parking spaces is believed to satisfy current zoning requirements for the existing use. Therefore, it is considered to be legally conforming. Landscaping The landscaping is average compared to competitors. Tenant Improvements Building standard tenant improvements include wall partitions, carpeting, painted walls, suspended acoustical ceilings, hollow core wood doors, etc. All of the subject space has been finished out. - -------------------------------------------------------------------------------- 24 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- ADA Compliance Handicap access appears be available to all areas of the building. While the subject does not have an elevator for access between the upper and lower levels, mall management indicates that the fact that both floors are accessible from street level satisfies ADA requirements. However, we are not qualified to determine compliance with the requirements. Please refer to the specific limiting condition regarding ADA compliance. Environmental Issues We were not provided with any environmental report or site assessment for the subject property. The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the property that would cause a loss in value. However, CB Commercial is not qualified to detect hazardous waste or toxic materials. Therefore, we reserve the right to review and revise our valuation conclusions if additional information to the contrary becomes available in the future. Functional Quality of Space The interior floor plan is flexible and will accommodate a variety of tenant layouts. Deferred Maintenance We have identified no signs of deferred maintenance during our inspection of the subject, nor have we been provided with any information by Mark Centers Trust or one of their representative indicating any items of deferred maintenance. Therefore, the subject property is assumed to have no deferred maintenance. Economic Age and Life The building was erected in 1969, suggesting a chronological age of 27 years. Based on current condition, appraisers estimate effective age to be approximately 20 years. According to the Marshall Valuation Service cost guide, buildings of this type and quality have an expected life of 55 years. Therefore, the remaining economic life (expected life minus effective age) is approximately 35 years. While we observed nothing to suggest a different economic life, a capital improvement program could extend life beyond that stated above. Quality/General Condition The subject property conforms well with other retail buildings in the neighborhood. The relative quality of construction is good and the subject improvements appear to have been soundly constructed. - -------------------------------------------------------------------------------- 25 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- ========================================================================= IMPROVEMENT RATING ========================================================================= Category Exc. Good Average Fair Poor - ------------------------------------------------------------------------- Appeal/Appearance X Construction Class X Design X Electrical X Exterior Condition X Exterior Walls X Floor Construction X Floor Cover X Floor to Ceiling X Height Foundation X Frame X Functionality/ Floor X Plan HVAC X Interior Condition X Interior Partitions X Landscaping X Lighting X Parking X Plumbing X Restrooms X Roof Cover X Sprinkler System X Tenant Improvements X ========================================================================= Compiled by: CB Commercial Real Estate Group, Inc. ========================================================================= - -------------------------------------------------------------------------------- 26 ================================================================================ ZONING - -------------------------------------------------------------------------------- ZONING The subject's zoning requirements are detailed below. ======================================================================= ZONING SUMMARY ======================================================================= Current zoning: B-3, Highway Commercial District Legally conforming?: Yes Uses permitted: A variety of commercial and service uses including shopping centers. Zoning change Not likely - ----------------------------------------------------------------------- Category Zoning Requirement - ----------------------------------------------------------------------- Site coverage 50% Front setback 35 feet Rear setback 20 feet Side yard setbacks 10 feet Height limit 3 stories or 45 feet Parking One space per 200 square feet of net floor area. - ----------------------------------------------------------------------- Source: Dothan Planning & Zoning Department Compiled by: CB Commercial Real Estate Group, Inc. ======================================================================= ZONING ANALYSIS AND CONCLUSIONS The subject improvements appear to be a legally conforming use within the current zoning. - -------------------------------------------------------------------------------- 27 ================================================================================ TAX ANALYSIS - -------------------------------------------------------------------------------- TAX AND ASSESSMENT DATA The subject is assessed at 20% of market value as estimated by the Houston County Tax Assessor's Office. The subject property's tax value summarized below.
============================================================================================ CURRENT ASSESSMENT AND TAX INFORMATION (1996) ============================================================================================ Assessed Tax Rate Annual Tax ID Land Improvements Total Value Per $1,000 Taxes - -------------------------------------------------------------------------------------------- 9-2-10-2-0-21 $540,000 $0 $540,000 $108,000 $31.00 $3,348 9-2-10-3-1-4 $2,175,000 $6,060,200 $8,235,200 $1,647,040 $31.00 $51,058 - -------------------------------------------------------------------------------------------- Totals $2,715,000 $6,060,200 $8,775,200 $1,775,040 $31.00 $54,406 ============================================================================================ Source: Houston County Tax Assessor Compiled by: CB Commercial Real Estate Group, Inc. ============================================================================================
The county records indicate that there are no delinquent property taxes. CB Commercial has concluded that the assessor has overestimated market value based on the market value conclusion of this report. Therefore, a tax appeal is recommended. - -------------------------------------------------------------------------------- 28 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- HIGHEST AND BEST USE In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The four criteria that the highest and best use must meet are: o legal permissibility; o physical possibility; o financial feasibility; and, o maximum profitability. Highest and best use is applied specifically to the use of a site as vacant. It is recognized that in cases where a site has existing improvements, the concluded highest and best use as if vacant may be different from the highest and best use given the existing improvements (as improved). The existing use will continue, however, until the land value, in its highest and best use, exceeds that total value of the property under its existing use plus the cost of removing or altering the existing structure. Implied in the highest and best use is a recognition of the contribution of a specific use to the community environment or to the community's development goals, in addition to wealth maximization of individual property owners. Also implied is that the conclusion of highest and best use results from the appraiser's judgment and analytical skill, i.e., that the use determined from the analysis represents an opinion, not a fact to be found. Highest and best use analysis involves assessing the subject both as if vacant and as improved. HIGHEST AND BEST USE AS THOUGH VACANT Legal Permissibility The legally permissible uses were discussed in detail in the site analysis and zoning sections of this report. Overall, based on our review of the zoning restrictions, the site is limited to commercial use. Physical Possibility The physical characteristics of the subject site were discussed in detail in the site analysis. Overall, a wide range of legally permissible uses would be physically possible. - -------------------------------------------------------------------------------- 29 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- Financial Feasibility An analysis of local market conditions provides an indication of the financial feasibility of a given use. The market analysis presented earlier in the report assesses the local market and indicates that there is demand. Therefore, a shopping center is financially feasible. Maximum Profitability The final test of highest and best use of the site as though vacant is that the use be maximally productive, yielding the highest land value. In the case of the subject as though vacant, the analysis thus far has indicated that commercial development would be most likely. Given the high probability that commercial use is the highest and best use, this is judged to be a reasonable indication of maximum productivity of the land. Conclusion: Highest and Best Use As Though Vacant The concluded highest and best use of the subject as though vacant is that the site be improved with commercial development. HIGHEST AND BEST USE AS IMPROVED Legal Permissibility Overall, it is our opinion that the improvements are within the established guidelines. Further, we were told by the zoning authority that the subject is a legal and conforming use under the zoning ordinance. Physical Possibility The physical characteristics of the subject improvements were discussed in detail in the improvement analysis section of this report. Overall, the layout and positioning of the improvements is considered functional for commercial use, and the floor plan is considered to be reasonable on a comparison basis. While it would be physically possible for a wide variety of uses, based on the legal restrictions and the design/layout, the improvements would be most functionally utilized for commercial use. Financial Feasibility As with the highest and best use of the site as though vacant, the financial feasibility of the site as improved is market derived. Typically, for commercial properties similar to the subject, the test of feasibility is based on the amount of rent that can be generated, less operating - -------------------------------------------------------------------------------- 30 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- expenses. If a residual amount exists after paying the various expenses, then the land is being put to a productive use. Maximum Profitability Similar to the highest and best use of the site as though vacant, the maximum profitable use of the subject as improved should conform to neighborhood trends and be consistent with existing land uses. Although several uses may generate sufficient revenue to satisfy the required rate of return on investment and provide a return on the land, the single use that produces the highest price or value is typically the highest and best use. However, the recipient of the property's productivity greatly determines what actual use maximizes profitability. Conclusion: Highest and Best Use as Improved Based on the foregoing discussions, CB Commercial concludes that the highest and best use of the property as improved is consistent with the existing use. There are no alternative uses of the existing improvements that would produce a higher net income and/or value over time than the current use. The current use is a legally permissible use and appears to represent the highest and best use as improved. Furthermore, CB Commercial does not believe that conversion of the improvements or demolition is warranted or financially feasible. - -------------------------------------------------------------------------------- 31 VALUATION VALUATION ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- APPRAISAL METHODOLOGY The appraisal process is defined as an orderly program by which the problem is planned and the data involved is acquired, classified, analyzed and interpreted into an estimate of value. In this process three basic approaches to value are considered: Cost Approach, Sales Comparison Approach, and Income Capitalization Approach. In appraisal practice, an approach to value is included or omitted based on its applicability to the property type being valued and the quality and quantity of information available. The final step in the appraisal process is reconciliation -- a process by which CB Commercial analyzes alternative conclusions and selects a final value estimate from among two or more indications of value. CB Commercial weighs the relative significance, applicability and defensibility of each approach as it relates to the type of property being appraised. INCOME CAPITALIZATION APPROACH The methodology of the Income Capitalization Approach is to determine the income-producing capacity of the property on a stabilized basis by estimating market rent from comparable rentals, making deductions for vacancy and collection losses and building expenses, then capitalizing the net income at a market-derived rate to yield an indication of value. The capitalization rate represents the relationship between net income and value. Related to the direct capitalization method is the discounted cash flow method. In this method of capitalizing future income to a present value, periodic cash flows (which consist of a net income less capital costs, per period) and a reversion (if any) are estimated and discounted to a present value. The discount rate is determined by analyzing current investor yield requirements for similar investments. Since investors are active in the marketplace for properties similar to the subject, the Income Approach is particularly applicable to the appraisal problem at hand. There is an adequate quality and quantity of income and expense data available to render a reliable and defensible value conclusion. Therefore, this approach has been employed for this assignment. SALES COMPARISON APPROACH The Sales Comparison Approach utilizes sales of comparable properties, adjusted for differences, to indicate a value for the subject property. Valuation is typically accomplished using physical units of comparison such as price per square foot, price per unit, price per floor, etc., or economic units of comparison such as gross rent multiplier. Adjustments are applied to the physical units of comparison derived from the comparable sale. The unit of comparison - -------------------------------------------------------------------------------- 32 ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- chosen for the subject is then used to yield a total value. Economic units of comparison are not adjusted, but rather analyzed as to relevant differences with the final estimate derived based on the general comparisons. The reliability of this approach is dependent upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c) the degree of comparability; (d) the absence of atypical conditions affecting the sales price. Through our search of the subject market, we were able to uncover an adequate quality and quantity of sales through which a reliable and defensible indication of value could be concluded. Therefore, this approach has been employed for this assignment. THE COST APPROACH The Cost Approach is based upon the proposition that the informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements which represent the highest and best use of the land or when relatively unique or specialized improvements are located on the site and for which there exist few sales or leases of comparable properties. The first step in the Cost Approach is to estimate the land value (at its highest and best use) applicable to the subject. This is usually done through an analysis of comparable land sales. The second step is to estimate the cost of all improvements. Improvement costs are then depreciated to reflect value loss from physical, functional and economic causes. Land value and depreciated improvement costs are then added to indicate a total value. The Cost Approach is not considered to be appropriate for this assignment given the age of the improvements and resulting subjectivity required in quantifying depreciation. In addition, at the instruction of the client, an estimate of the subject site's land value was also not prepared. - -------------------------------------------------------------------------------- 33
================================================================================================================ SUMMARY OF COMPARABLE RETAIL SALES ================================================================================================================ Sale Sale Year Building Occupancy No. Name % Location Date Built Size (GLA) at Sale Anchor Tenant ================================================================================================================ 1 Broad Street Center 08/95 1975 181,109 100% K-Mart, Big Lots NW Broad Street and W. Clark Boulevard Murfreesboro, TN 2 Spring Mill Village 7/95 1974 99,600 95% Marshalls, Old Country Buffet 6011 Memorial Drive Tucker GA 3 Village Shopping Center 5/95 1975 100,000 100% Winn-Dixie, Heilig Myers West Spring Street & Breedlove Drive Monroe, GA 4 Cross Country Plaza 2/95 1968 337,360 87% Service Merchandise, Talbot's I-85 & Macon Road Columbus, GA 5 Priest Lake Plaza 12/93 1977 100,000 78% Kroger, Super X SWC Of Murfreesboro Road At Bell Road Nashville, TN - ---------------------------------------------------------------------------------------------------------------- Compiled by: CB Commercial - ----------------------------------------------------------------------------------------------------------------
============================================================================== SUMMARY OF COMPARABLE RETAIL SALES ============================================================================== Sale Sale Price No. Name % Location Sale Price /SF OAR ============================================================================== 1 Broad Street Center $5,300,000 $29.26 11.20% NW Broad Street and W. Clark Boulevard Murfreesboro, TN 2 Spring Mill Village $3,900,000 $39.16 10.46% 6011 Memorial Drive Tucker GA 3 Village Shopping Center $2,500,000 $25.75 11.81% West Spring Street & Breedlove Drive Monroe, GA 4 Cross Country Plaza $10,000,000 $29.64 10.96% I-85 & Macon Road Columbus, GA 5 Priest Lake Plaza $2,310,000 $23.10 12.38% SWC Of Murfreesboro Road At Bell Road Nashville, TN - ----------------------------------------------------------------------------- Compiled by: CB Commercial - ----------------------------------------------------------------------------- ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH The Sales Comparison Approach provides an estimate of market value based on analyzing transactions of similar properties in the market area. The method is based on the proposition that an informed purchaser would pay no more for a property than the cost of acquiring an existing one with the same utility. When there is an adequate number of sales of truly similar properties with sufficient information for comparison, a range of values for the subject property can be developed. The applicability of this approach is based on the assemblage of similar market sales and offerings for a comparison to the subject. Factors such as changing market conditions over time, location, size, quality, age, condition, and amenities, as well as the terms of the transactions, are all significant variables relating to the relative marketability of the subject property. Any adjustments to the sale price of market sales to provide indications of market value for the subject must be market-derived; thus, the actions of typical buyers and sellers are reflected in the comparison process. There are various units of comparison available in the evaluation of sales data in this approach. The sale price per square foot is the most commonly used in this approach. We searched the market for sales that qualify as arm's length transactions between willing and knowledgeable buyers and sellers in order to identify value and price trends. There have apparently been no shopping center investment sales in the Dothan area for several years. Furthermore, while the subject is an enclosed mall, its tenant profile is more representative of a community shopping center, albeit with regional mall type expenses. Therefore, we have utilized five sales from similar communities in the Southeast. The sales utilized in this analysis are summarized on the facing page table, with their location relative to the subject identified on the following facing page map. In addition, sale summaries are included in the Addenda. Adjustment for Economic Characteristics The comparable sales generate net operating income that is slightly to substantially higher than the subject on a per square foot basis. The subject has three anchor leases which are at or below the market rental rate, and this accounts for much of the difference. The subject is an investment property and the price an investor will pay is directly related to the current or potential NOI. As our cash flow indicates, the subject's NOI is not projected to increase substantially over a 10 year holding period. We have calculated the adjustment by subtracting the subject's projected NOI ($1.44/SF) from the NOI of each comparable. We then capitalized the difference by 10.5% to yield an - -------------------------------------------------------------------------------- 34 [GRAPHIC OMITTED] Regional Location - Comparable Sales ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- appropriate adjustment. However, the degree of adjustment is mitigated somewhat because the other adjustment variables can have an affect on the property's NOI per square foot. DISCUSSION OF COMPARABLE SALES Sale Number One Broad Street Station is a community shopping center located in Murfreesboro, Tennessee. This shopping center was originally constructed in 1975 as an enclosed mall and was subsequently renovated as an open-air community center in 1992. It was 100% occupied at the time of sale with an indicated NOI of $3.28. It is anchored by K-Mart, Big Lots and Walgreens, which occupy 79% of the center. The center is similar to the subject in terms of size, age, condition, location and anchor tenancy. It is superior with respect to economic characteristics. Overall, a downward adjustment is necessary. Sale Number Two Spring Mill Village is a neighborhood shopping center located in an older retail submarket of Atlanta, Georgia. This shopping center was built in 1974 and was 95% occupied at the time of sale with an indicated NOI of $4.10. It is anchored by Marshall's and Old Country Buffet, which occupy 39% of the center. The center is similar to the subject in terms of age and condition. It is superior with respect to location and economic characteristics, but inferior based on size and anchor tenancy. Overall, a downward adjustment is necessary. Sale Number Three Village Shopping Center is a neighborhood shopping center located in Monroe, Georgia. This shopping center was built in 1975 and was 100% occupied at the time of sale with an indicated NOI of $3.04. It is anchored by a Winn-Dixie grocery store, a Heilig Myers furniture store and Eckerd Drugs, which occupy 62% of the center. The center is similar to the subject in terms of location, age, and condition. It is superior with respect to its economic characteristics, but inferior based on anchor tenancy and size. Overall, a downward adjustment is necessary. - -------------------------------------------------------------------------------- 35 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- Sale Number Four Cross Country Plaza is a community shopping center located in Columbus, Georgia, approximately 30 miles east of Opelika. This shopping center was built in 1968 and was 87% occupied at the time of sale with an indicated NOI of $3.25. It is anchored by Service Merchandise, Talbot's, Fashion Bug, and Blockbuster Video, among others, which occupy a large percentage of the center. The center is similar to the subject in terms of location, anchor tenancy, age, size, and condition. It is superior with respect to its economic characteristics. Overall, a downward adjustment is necessary. Sale Number Five Priest Lake Plaza is a neighborhood shopping center located in Nashville, Tennessee. This shopping center was built in 1977 and was 78% occupied at the time of sale with an indicated NOI of $2.86. It is anchored by Kroger, and Super X, which occupy 44% of the center. The center is similar to the subject in terms of age, and condition. It is superior based on location and economic characteristics, but inferior based on size and anchor tenancy. Overall, a downward adjustment is necessary. ANALYSIS Adjustments made to the comparable sales are summarized in the following table. - -------------------------------------------------------------------------------- 36 ================================================================================ SALES COMPARISON APPROACH - --------------------------------------------------------------------------------
======================================================================================= IMPROVED SALES ANALYSIS SUMMARY OF ADJUSTMENTS (1) ======================================================================================= Sale 1 Sale 2 Sale 3 Sale 4 Sale 6 - --------------------------------------------------------------------------------------- Unadjusted Price/ SF $29.26 $39.16 $25.75 $29.64 $23.10 Property Rights 0.00 0.00 0.00 0.00 0.00 ------ ------ ------ ------ ------ Subtotal $29.26 $39.16 $25.75 $29.64 $23.10 Financing Terms 0.00 0.00 0.00 0.00 0.00 ------ ------ ------ ------ ------ Subtotal $29.26 $39.16 $25.75 $29.64 $23.10 Conditions of Sale 0.00 0.00 4.10 0.00 0.00 ------ ------ ------ ------ ------ Subtotal $29.26 $39.16 $25.75 $29.64 $23.10 Market Conditions 0.00 0.00 0.00 0.00 0.00 ------ ------ ------ ------ ------ Subtotal $29.26 $39.16 $25.75 $29.64 $23.10 Other Adjustments Tenancy 0% +10% +10% 0% +10% Age/Quality/Condition 0% 0% 0% 0% 0% Size 0% +5% +5% 0% +5% Location 0% -10% 0% 0% -5% Economic characteristics -50% -60% -55% -55% -50% ------ ------ ------ ------ ------ Total Other Adjustments -50% -55% -40% -55% -40% Value Indication for $14.63 $17.62 $15.45 $13.34 $13.86 Subject ======================================================================================= (1) The adjustment grid summarizes the direction and magnitude of adjustments judged appropriate to the comparable sales. In some cases adjustments may be derived directly from quantifiable data. However, in many instances the adjustments involve judgment of CB Commercial Real Estate Group, Inc. Source: CB Commercial Real Estate Group, Inc. =======================================================================================
SALES COMPARISON APPROACH CONCLUSION The comparable sales indicate an unadjusted range of $23.10 to $39.16 per gross leasable square foot. In our analysis, we have considered adjustments to these comparables for property rights conveyed, financing terms, conditions of sale, date of sale, age, condition, construction quality, building size, tenancy, location, and overall economic conditions. Sale Nos. 1 and 4 are considered to be the most comparable transactions. They represent community shopping centers which are similar in terms of location, age, size and condition. After adjustments, the adjusted sale prices indicated for the subject range from $13.34 to $17.62 per square foot, although dropping the high and low end of the range generally suggests an adjusted value of $14 to $15 per square foot. Again, primary emphasis was placed on Sale Nos. 1 and 4 as they were judged to be the most similar to the subject in terms of their physical, locational and tenant characteristics. Therefore, we have estimated a value of $14 per gross leasable square foot of building area. This would suggest the following market value indication for the subject property based on the Sales Comparison Approach. - -------------------------------------------------------------------------------- 37 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- ======================================================== SALES COMPARISON APPROACH - -------------------------------------------------------- Gross Leasable SF SP per SF Indicated Value - -------------------------------------------------------- 381,677 SF x $14.00 = $5,343,478 Rounded: $5,350,000 - -------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ======================================================== - -------------------------------------------------------------------------------- 37 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH The Income Capitalization Approach reflects the subject's income-producing capabilities. This approach is based on the assumption that value is created by the expectation of benefits to be derived in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over period of time. The two common valuation techniques associated with the Income Approach are direct capitalization and the discounted cash flow (DCF) analysis. DIRECT CAPITALIZATION Direct capitalization is the method used to convert a single year's estimate of income into a value indication. In direct capitalization, a precise allocation between return on and return of capital is not made because investor assumptions or forecasts concerning the holding period, pattern of income, or changes in value of the original investment are not simulated in the method. Direct capitalization is most appropriate when analyzing a stable income stream and in estimating the reversion at the end of a holding period. Using this method, the following sets forth the process: 1. Estimate the Potential Gross Income (PGI) from all sources that a competent owner should be able to generate from a property based on existing and/or market rents. 2. Deduct an estimate of Vacancy and Collection Loss (VCL) to arrive at an Effective Gross Income (EGI) estimate. 3. Deduct operating expenses from the estimate of EGI. The result is an estimate of the stabilized Net Operating Income (NOI). 4. Estimate an Overall capitalization rate (Ro, or OAR). 5. Divide the NOI by Ro, resulting in a value estimate at stabilized occupancy. 6. Adjust the stabilized value to account for "as is" condition, if applicable. DISCOUNTED CASH FLOW ANALYSIS The discounted cash flow (DCF) analysis is a detailed analysis used when the future income is expected to be variant, usually as a result of numerous lease obligations and/or anticipated changes in income and expenses. It is also particularly relevant when institutional buyers are the most likely purchasers of the subject because institutional buyers often place great weight on this analysis. The DCF analysis specifies the quantity, variability, timing, and duration of NOI and cash flow. Selecting the proper yield rate (discount rate) is essential. CB Commercial must consider the target yield sought by investors as well as yields derived from comparable sales and/or market information. The methodology is: - -------------------------------------------------------------------------------- 39 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- 1. Estimate the before-tax cash flows for each period of a projected holding period net of any capital expenditures such as leasing expenses and tenant improvements. 2. Estimate a discount rate and a terminal overall capitalization rate. 3. Estimate a selling price, known as the reversion, for the end of the projected holding period. 4. The cash flows and the reversion are then discounted to a present value estimate. APPROPRIATE CAPITALIZATION METHOD A number of factors were considered in evaluating the appropriateness of using the direct capitalization method and/or the DCF technique. Occupancy Status If the subject is not at stabilized occupancy, the DCF method is typically the preferred method because it better models the present value impact of lease-up costs on value. If the subject is at stabilized occupancy, the direct capitalization method may be the most applicable. The subject is currently 88.5% occupied. This is considered to approximate the subject's stabilized occupancy rate. Therefore, while the direct capitalization approach may be most applicable, the DCF model may also be useful. Lease Structure Consideration is given to the subject's existing lease structure. Where the subject's lease structure generally reflects market terms, direct capitalization may be appropriate. Discounted cash flow analysis may also be relevant depending on typical buyer preferences. Conversely, the usefulness of a direct capitalization analysis may be limited in instances where the subject includes leases having a variety of rent levels, rent escalation structures, or differing expense treatments. The existing lease parameters generally reflect market terms on average for the existing tenants. Implicit investor assumptions therefore may behave as the market would expect. While the direct capitalization analysis would likely be the preferred methodology, a DCF model is still often utilized by some investors. Above-Market or Below-Market Rent If the subject's rent structure reflects general market levels, both direct capitalization and DCF analysis may be relevant. When average rent is above or below market, however, the Income Approach requires an appropriate adjustment for the present value of the market/contract difference. Reliability of the direct capitalization method becomes more limited as the average - -------------------------------------------------------------------------------- 40
================================================================================================================================= SUMMARY OF COMPARABLE RETAIL RENTALS ================================================================================================================================= Sale Building Year Local Overall Base No. Name/Location Size (GLA) Built Occupancy Occupancy Anchor Tenant TI/SF Rent/SF ================================================================================================================================= 1 Wiregrass Commons 710,000 1986 86% 94% Gayfer's, JC Penney Negotiable $10.00 - Highway 231 & Ross Clark Circle Dothan, AL 2 Wiregrass Plaza 49,150 1986 100% 100% Winn-Dixie, Big B Drugs Negotiable $9.00 Highway 231 & Westgate Parkway Dothan, AL 3 Colony Square 73,825 1988 100% 100% Office Depot Negotiable $7.00 - Ross Clark Circle and Highway 84 Dothan, AL 4 Northside Plaza 71,348 1981 100% 100% Food World, Big B Drugs Negotiable $7.00 - Ross Clark Circle and Denton Road Dothan, AL - --------------------------------------------------------------------------------------------------------------------------------- Compiled by: CB Commercial - ---------------------------------------------------------------------------------------------------------------------------------
================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- rent level becomes more complicated. Discounted cash flow methodology is favored when adjustments become overly subjective or difficult to discern. The subject's lease structure includes terms that generally reflect market conditions. Therefore, the direct capitalization analysis is the preferred method. Typical Buyer Behavior Selection of the appropriate methodology also depends upon the behavior of typical buyers of the subject's property type within the local market. Based on discussions with market participants, the direct capitalization analysis is the definite choice as the appropriate methodology. However, a discounted cash flow model can also be used to incorporate projected fluctuations in market rents, expenses, turnover, etc. Furthermore, when utilizing a DCF model, investors will often check whether the implied capitalization rate falls within an expected range by dividing the first year net operating income into the estimated value. Appraisal Instructions No specific instructions were given for this assignment. Conclusion As a result of considering the foregoing factors, both the DCF technique and the income capitalization technique are employed in this appraisal. ESTIMATE OF MARKET RENT Rent analysis typically involves both a study of market (comparable) rentals and the subject's existing rents. Market rent is the rent that a property would most probably command in the open market; indicated by the current rents paid and asked for comparable space. SUMMARY OF COMPARABLE RENTALS CB Commercial has searched the immediate subject neighborhood for competitive properties and lease transactions for comparison to the subject. We have identified four shopping centers in the immediate subject area which are comparable to the subject. The selected comparable rentals are summarized in the facing page chart, with their location relative to the subject shown on the following facing page map. In addition, photographs and detailed summary sheets of each comparable are included in the Addenda. - -------------------------------------------------------------------------------- 41 [GRAPHIC OMITTED] Comparable Rentals ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF COMPARABLE RENTALS Comparable Rental Number One Wiregrass Commons is a regional mall located directly across Highway 231 from the subject property. It is similar to the subject property based on its location, but superior in terms of age, condition, occupancy rate, size and tenant mix, which includes Gayfer's, JC Penney, McCrae's, and Parisian as anchor tenants. Recent local tenant leases signed in the building are in the range of approximately $10.00 to $16.00 per square foot on a triple net basis. The occupancy rate is currently 94% overall and 86% for local tenants. Overall, a downward rent adjustment is necessary as compared to the subject. Comparable Rental Number Two Wiregrass Plaza is a neighborhood shopping center located along the east side of Highway 231 just north of Ross Clark Circle. It is similar to the subject property based on its location and condition. It is considered to be superior based on age, and occupancy, but inferior with respect to anchor tenancy. Recent local tenant leases signed in the building are in the range of approximately $9.00 per square foot on a triple net basis. The occupancy rate is currently 100% overall and 100% for local tenants. Overall, a downward rent adjustment for local tenants is necessary as compared to the subject. Comparable Rental Number Three Colony Square is a neighborhood shopping center along the west side of Ross Clark Circle a few miles south of Highway 231. It is inferior to the subject property based on its location and anchor tenancy, but superior with respect to age, condition, and occupancy rate. Recent local tenant leases signed in the building are in the range of approximately $7.00 to $8.00 per square foot on a triple net basis. The occupancy rate is currently 100% overall and 100% for local tenants. Overall, a slight downward rent adjustment is necessary as compared to the subject. Comparable Rental Number Four Northside Plaza is a neighborhood shopping center along the north side of Ross Clark Circle a few miles east of Highway 231. It is inferior to the subject property based on its location and anchor tenancy, but superior with respect to age and occupancy rate. Recent local tenant leases signed in the building are in the range of approximately $7.00 to $8.00 per square foot on a triple net basis. The occupancy rate is currently 100% overall and 100% for local tenants. Overall, a slight downward rent adjustment is necessary as compared to the subject. - -------------------------------------------------------------------------------- 42 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- It should be noted that some of the subject bay depths are considerable deeper (100 feet) than is typical for the rent comparables (60 to 75 feet). This generally would require a downward adjustment to the rent comparables, all other factors considered equal. ANALYSIS OF RECENT SUBJECT LEASES The following table summarizes the subject property's recent lease history.
================================================================================================================= SUMMARY OF RECENT SUBJECT LEASES - ----------------------------------------------------------------------------------------------------------------- New/ Rental Lease TI Tenant Renew Term Date Size Rate Escalation Structure per SF - ----------------------------------------------------------------------------------------------------------------- CCS Computer renew 1 yr 5/96 825 SF $5.09 Flat Net of CAM as is Lowery Jewelers new 1 yr 2/96 600 SF $9.00 Flat Net of CAM as is Joker's Wild new 1 yr 1/96 785 SF $3.02 Flat Net of CAM as is Shepherds Cafeteria new 5 yrs 11/95 11,008 SF $3.00 Flat Triple Net as is Books A Million new 10 yrs 8/95 17,316 SF $5.00 5% in Yr 6 Triple Net $1.30 Southern Sampler new 5.5 yrs 7/95 3,000 SF $3.50 $0.50 per year Triple Net $1.49 Heart n Home new 2.5 yrs 6/95 1,650 SF $3.65 $1.80 in Yr 2 Triple Net $5.39 Top Gun Airbrush new 2 yrs 12/94 300 SF $8.00 Flat Net of CAM as is Troy State Univ. renew 2 yrs 12/94 18,400 SF $3.00 Flat Gross as is Country at Heart new 3 yrs 11/94 6,070 SF $4.25 $0.25 in Yr 3 Net of CAM $1.65 & taxes ================================================================================================================= Source: Mark Centers Trust. Compiled by: CB Commercial Real Estate Group, Inc. =================================================================================================================
Recent leases at the subject property requires that tenants pay expense reimbursements for one or more of CAM, real estate taxes and insurance. This is similar to the comparables, which also collect typically collect expense reimbursements. All tenants are responsible for their individual utilities and interior cleaning. Half of the recent leases were for only one or two years, with three years suggested on average. This is similar to typical market terms. Also, while tenant improvement allowances were paid by the landlord in four of the eight new leases, but neither of the two renewals, the amounts were not substantial. Free rent is generally not included in subject leases, with only three of the recent leases including such an allowance. However, in only one instance did free rent consist of more than one month for the tenant to build out their space. The rental rates for recent leases would suggest a wide range in rental rates from $3.00 to $9.00 per square foot net of CAM and real estate taxes. Of the seven leases of two years or more, four included rent escalation clauses, but three of the four had one time increases only. However, the high end of this range is established by two small local tenants (300 SF and 600 SF) on the upper level who pay $8.00 and $9.00 per square foot, respectively. The remaining leases suggest rental rates are in the range of $3.00 to $5.09 per square foot. It should be - -------------------------------------------------------------------------------- 43 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- noted that two other small local tenant leases (785 SF and 825 SF) fall within this rental range; but they are located on the lower level of the subject property. Three larger tenants are included in this analysis of recent leases which range in size from 11,008 to 18,400 square feet. Two of the tenants are located on the lower level of the property, with a rental rate of $3.00 per square foot flat over the term, one of which is triple net and one of which is gross. The third lease is on the upper level of the mall facing Ross Clark Circle with a triple net rental rate of $5.00 per square foot, with a 5% increase in Year 6 of a ten year lease. ANCHOR TENANT LEASES The initial lease terms for the two major anchors, Wal-Mart and Montgomery Ward, end in January 1999 and November 1999, respectively. The junior anchors, Goody's, Bugle Boy, Troy State University and Books A Million, have leases which expire in November 2003, December 1996, December 1998, and January 2006, respectively. Four of the five leases contain renewal options for a total of 15 (Wal-Mart), 15 (Montgomery Ward), 15 (Goody's), 10 (Bugle Boy) and 15 (Books A Million) years. These renewal options include an extension of the existing lease terms at either flat or increased rental rates. If the option rental rate is substantially below market, it is likely the tenant will either renew the lease or sublease the space. The current base rental rates for the anchor tenants at the subject are $1.96 for Wal-Mart, $1.20 for Montgomery Ward, $5.50 for Goody's, $1.00 for Bugle Boy, $3.00 for Troy State University and $5.00 for Books A Million. Sales per square foot for the anchor tenants as reported are approximately $300 for Wal-Mart, $105 for Montgomery Ward, $140 for Goody's, $80 for Bugle Boy, and $175 for Books A Million. While the Wal-Mart, Goody's, Bugle Boy and Books A Million leases call for increased rent in the first year of each option period, the projected rental rate is still considered to be at or below market rent. Therefore, it is likely that the anchor tenants will renew their leases. We typically allow the leases to expire and renew at a market rate; however, in this instance, it could lead to an inflated value, given the lease renewal terms. Therefore, we have renewed the anchor tenant leases through the projection period at the option rental rates. CONCLUSIONS: MARKET RENT ESTIMATE FOR THE SUBJECT PROPERTY Based on the previous analysis, the current market lease parameters for the subject property are estimated as follows: - -------------------------------------------------------------------------------- 44 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- =============================================================== CONCLUDED MARKET RENT (PER SQUARE FOOT PER YEAR) - --------------------------------------------------------------- Category - --------------------------------------------------------------- Local Tenants upper level - less than $8.00 800 SF $3.00 all others Anchor Tenants upper level $5.00 lower level $3.00 Lease Structure Net of CAM, Taxes & Insurance Annual escalation local tenants Flat anchor tenants 5% in Yr 6 Tenant Improvements (new tenants) $1.00 per SF Tenant Improvements (renewals) None Average lease term local tenants 3 years anchor tenants 10 years Free Rent (Months) None - --------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. =============================================================== These terms generally reflect the most recent leasing history of the subject, as well as market rent terms as discussed in the previous analysis. EXISTING CONTRACT RENT As discussed, the subject's leasable area has been subdivided into 56 individual suites, of which 39 are currently occupied and 17 are available for lease. The occupied suites total 337,880 square feet, or 88.5% of the building's leasable area. Through our research of the subject property, which included a complete review of all leased documents available, lease abstracts, rent rolls (both current and historical), and detailed discussions with the property manager, the following rent roll summary was utilized to detail currently leased suites and general information employed for this approach. Detailed abstracts of each tenant's lease and miscellaneous assumptions assumed for this assignment have been included in file memorandum. Additionally, within the Addenda are copies of a Tenant Register and Rent Roll generated by Pro-Ject, a computerized lease-by-lease analysis program. The information contained in the chart and in appropriate sections of the Addenda represent the data inputted for this method and is assumed to be correct and reliable. CB Commercial reserves the right to amend our input assumptions if any documentation is subsequently available which contradicts that assumed for this method. Shown in the following table is the subject rent roll. - -------------------------------------------------------------------------------- 45 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- =============================================================================== NORTHSIDE MALL RENT ROLL (AS OF JULY 2, 1996) - ------------------------------------------------------------------------------- Square Begin End Base Rent Annual Tenant Feet Date Date per SF Rent - ------------------------------------------------------------------------------- Wal-Mart 111,970 10/83 1/99 $1.96 $219,975 Montgomery Ward 77,140 11/69 11/99 $1.20 $92,432 Goody's 26,840 12/93 11/03 $5.50 $147,620 Troy State University 18,400 12/94 12/96 $3.00 $55,200 Books A Million 18,066 9/95 1/106 $5.00 90,330 Bugle Boy 15,480 11/89 12/96 $0.00 $0 Northside Fitness 15,300 12/91 12/96 $1.46 $22,380 Shepherd's Cafeteria 11,008 1/96 1/01 $3.00 $33,024 Country at Heart 6,070 11/94 11/97 $4.25 $25,797 Catos 6,000 5/85 12/96 $0.00 $0 SE Alabama Em. Medical 3,854 5/92 4/97 $2.34 $9,000 One Price Clothing 3,301 11/93 1/99 $6.00 $19,806 Mark Twain Shop 3,050 8/88 1/97 $0.00 $0 Southern Sampler 3,000 11/95 12/00 $3.50 $10,500 Simply 6 3,000 7/93 7/03 $5.00 $15,000 Oriental Imports 2,010 2/80 12/96 $0.00 $0 Lowery Jewelers 1,860 2/96 2/97 $2.90 $5,400 Dipper Dan 1,750 1/89 12/96 $2.00 $3,500 Heart n Home 1,650 9/95 9/97 $3.65 $6,023 The Cake Box 1,446 12/88 12/96 $4.88 $7,054 Wiregrass Art League 1,400 11/95 12/96 $0.43 $600 CCS Computer Service 825 6/96 5/97 $5.09 $4,200 Joker's Wild 785 1/96 12/96 $3.02 $2,368 Georgianne Stender 750 11/94 10/99 $7.60 $5,700 Evans Barber Shop 630 4/85 12/96 $10.00 $6,300 Top Gun Airbrush 300 12/94 12/96 $8.00 $2,400 Evans Barber Shop (storage) 235 4/85 12/96 $1.28 $300 Fair Wind Travel (storage) 393 4/91 12/96 $0.61 $240 -------- ----- --------- Total Leased Square Feet 336,513 Average Rent: $2.33 $785,149 Community Room 1,049 Break Room 318 -------- Total Occupied Square Feet 337,880 Average Rent: $2.32 $785,149 Unleased Space 43,797 -------- Total Square Footage 381,677 Occupancy-Overall 88.5% Occupancy-Local Tenants 61.0% - ------------------------------------------------------------------------------- Note: Some figures may not calculate due to rounding; annual rent stated correlates with actual rent being collected. Also, tenants with no annual rent pay percentage rent only. Source: Leases and abstracts provided by Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. =============================================================================== It should be noted that including percentage rent, which is significant at the subject, would indicate a weighted average rent of $3.10 per square foot. - -------------------------------------------------------------------------------- 46 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Excluding the anchor tenants and tenants which pay percentage rent only, the weighted average rental rate for local tenants is $3.72 per square foot. This is considered reasonable as compared to market rent for the subject as previously discussed. ANALYSIS OF TENANCY The tenant base is represented by clients of both a national and local credit rating. The following table summarizes the expiration of existing leases over the next five years. It should be noted that we have not considered the options associated with the subject's anchor tenants.
======================================================================================== SUBJECT LEASE EXPIRATION SUMMARY - ---------------------------------------------------------------------------------------- FY Vacancy # of Tenants SF Expiring % Cumulative SF Cumulative % - ---------------------------------------------------------------------------------------- 1997 22 81,912 21.5% 81,912 21.5% 1998 2 7,720 2.0% 89,632 23.5% 1999 2 115,271 30.2% 204,903 53.7% 2000 3 61,151 16.0% 266,054 69.7% 2001 2 14,008 3.7% 280,062 73.4% - ---------------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ========================================================================================
In estimating the potential gross income of the subject property, it is necessary to consider the leases subject to termination during the initial portion of the holding period. The rate and timing of lease expirations is considered to be at a faster rate than is generally typical. However, Mark Centers reports that at least half of the tenants whose leases expire during the next year will renew. As this includes only those tenants whose leases end before the end of 1996. Therefore, the percentage is expected to be significantly higher. Those already indicating that they will renew include Troy State University (18,400 SF). Also, Mark Centers is negotiating to replace the existing fitness center operator (15,300 SF). The first major anchor tenant lease (Wal-Mart) expires in Year 3, while the other major anchor tenant lease expires in Year 4 (Montgomery Ward). We are aware that Wal-Mart has a new super store under construction on the south side of Dothan and have discussed the current lease expiration with the existing Walmart general manager, the president of the Dothan Area Chamber of Commerce and the Dothan city manager. Based on these conversations, it would appear that Wal-Mart will renew their lease even though they apparently have not exercised their option. The subject's excellent location at the primary retail market in Dothan would also suggest that they will not leave. In fact, Mark Centers reports that they are considering expanding the existing store to a size more in line with their current super store concept (150,000 square feet or more). - -------------------------------------------------------------------------------- 47 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Montgomery Ward is also expected to renew their lease because of the excellent location and the fact that they have a very favorable lease renewal rate, approximately $3.40 per square foot on a gross basis including percentage rent. Furthermore, some brokers familiar with the market suggest that one or both of these anchor leaving could actually prove beneficial to the subject given the excellent location and the possibility of releasing the anchor spaces at rental rates in excess of the current low rents. Therefore, much of the subject rollover risk is considered to be mitigated by these factors. EXPENSE REIMBURSEMENTS As discussed, most of the current and future hypothetical leases which will encumber the subject space will be based upon leases which are net of CAM and real estate tax expenses, whereby the tenant is responsible for their prorata share of common area maintenance and real estate taxes. Furthermore, tenants with special expense stops or expense reimbursement limitations may impact the valuation analysis. However, there are some variations in the reimbursement structures, with some of the tenants having specified amounts of recovery or the exclusion of CAM or taxes, or the inclusion of insurance. We have reviewed historical expense reimbursements for the subject property, as compared to a projection of each expense reimbursement for the next year based on existing leases. A review of historical CAM reimbursements is as follows: ====================================== CAM REIMBURSEMENTS - -------------------------------------- Year Total $ Amount - -------------------------------------- 1993 $77,305 1994 $81,738 1995 $103,387 1996 Budget $113,021 Year 1 DCF $100,780 - -------------------------------------- Source: Mark Centers Trust ====================================== CAM expense recoveries have increased annually from $0.20 per square foot in 1993 to $0.27 per square foot in 1995. The 1996 budget projects $0.30 per square foot, approximately 10% higher than the 1995 actual expense. By comparison, the first year of our DCF model suggests total CAM reimbursements of $0.26 per square foot based on a review of lease abstracts. This is consistent with the historical trend. We feel that the DCF model most effectively quantifies the projected expense recoveries. Therefore, we estimate total CAM reimbursements to be $101,000, on a rounded basis. - -------------------------------------------------------------------------------- 48 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- A review of historical tax reimbursements is as follows: ====================================== TAX REIMBURSEMENTS - -------------------------------------- Year Total $ Amount - -------------------------------------- 1993 $53,571 1994 $19,788 1995 $38,407 1996 Budget $30,396 Year 1 DCF $29,054 - -------------------------------------- Source: Mark Centers Trust ====================================== Tax expense recoveries have varied from $0.14 per square foot in 1993 to $0.05 per square foot in 1994 and $0.10 per square foot in 1995. The 1996 budget projects a further decline to $0.08 per square foot. By comparison, the first year of our DCF model suggests total real estate tax reimbursements of $0.08 per square foot based on a review of lease abstracts. This is consistent with the 1996 budgeted amount. We feel that the DCF model most effectively quantifies the projected expense recoveries. Therefore, we estimate total tax reimbursements to be $29,000, on a rounded basis. A review of historical insurance reimbursements is as follows: ====================================== INSURANCE REIMBURSEMENTS - -------------------------------------- Year Total $ Amount - -------------------------------------- 1993 $865 1994 $1,301 1995 $1,472 1996 Budget $3,228 Year 1 DCF $4,919 - -------------------------------------- Source: Mark Centers Trust ====================================== Insurance expense recoveries have been less than $0.01 per square foot from 1993 through 1995. The 1996 budget projects that they will continue to be less than $0.01 per square foot. The first year of our DCF model also suggests total insurance reimbursements of less than $0.01 per square foot based on a review of lease abstracts. We feel that the DCF model most effectively quantifies the projected expense recoveries. Therefore, we estimate total tax reimbursements to be $4,900, on a rounded basis. - -------------------------------------------------------------------------------- 49 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- OTHER INCOME For the purpose of estimating the other income that could reasonably be generated by the subject building, we have again reviewed the historical revenues actually received, as well as surveyed local property management companies regarding similar retail projects. This income category can be derived from several different sources including tenant service income, late fee income, short-term storage income, professional services provided for the tenants by the landlord/management, and other miscellaneous sources. The following chart depicts the historical and budgeted revenues included in Other Income for the subject project. ================================== OTHER INCOME - ---------------------------------- Year Total $ Amount - ---------------------------------- 1993 $16,000 1994 $11,214 1995 $0 1996 Budget $3,990 Year 1 Pro Forma $4,000 - ---------------------------------- Source: Mark Centers Trust ================================== This source income, while not significant, decreased from $0.04 per square foot in 1993 to $0.03 per square foot in 1994. Furthermore, no income from this source was recorded in 1995. The 1996 budget projects only $0.01 per square foot. Therefore, we have estimated Other Income in line with the 1996 budget of $4,000, or $0.01 per square foot of leasable area. - -------------------------------------------------------------------------------- 50 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- PERCENTAGE RENT INCOME According to the lease documents provided, several of the existing tenants have a provision in their lease documents which requires percentage rent payments over a base amount or under a specific formula. That is, in addition to the basic rental charges, the tenant is responsible for paying the landlord additional rent equal to a specified percentage of the tenant's gross sales made in, upon, or from the premises, over a breakpoint factor or according to a specific schedule. However, just six tenants generate percentage rent, with four of these leases being percentage rent only. The remaining two tenants which have sales sufficient to produce percentage rent are Wal-Mart ($300 per square foot) and Montgomery Ward ($100 per square foot). A review of historical percentage rent collections is as follows: ====================================== PERCENTAGE RENT - -------------------------------------- Year Total $ Amount - -------------------------------------- 1993 $240,356 1994 $249,122 1995 $318,300 1996 Budget $299,162 Year 1 DCF $268,518 - -------------------------------------- Source: Mark Centers Trust ====================================== We feel that the DCF model most effectively quantifies the projected expense recoveries. It should be noted that the four leases which are based on percentage rent only all expire in the next seven months. Therefore, we estimate total percentage rent to be $268,500, on a rounded basis. POTENTIAL GROSS INCOME The concluded potential gross income for the subject is summarized as follows: - -------------------------------------------------------------------------------- 51 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
======================================================================================== POTENTIAL GROSS INCOME - ---------------------------------------------------------------------------------------- P.S.F. Totals - ---------------------------------------------------------------------------------------- Existing Contract Rent 337,880 SF $2.32 (wt. avg.) $785,149 Vacant Space at Market Rent 43,097 SF @ $3.00 $129,291 700 SF @ $8.00 $5,600 Percentage Rent $268,500 ---------- Potential Gross Rental Income 381,677 SF $3.11 (wt. avg.) $1,188,540 Expense Reimbursements $134,900 Other Income $4,000 ---------- Potential Gross Income 381,677 SF $3.48 (wt. avg.) $1,327,440 - ---------------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ========================================================================================
VACANCY AND COLLECTION LOSS Typically, this is an allowance for reductions in potential income attributable to vacancies, tenant turnover, and non-payment of effective rent. In the direct capitalization process, a market-derived, stabilized vacancy and collection loss estimate is subtracted from potential gross income in order to arrive at effective gross income. Currently, the subject is 88.5% occupied by tenants of both a local nature and national credit rating. The occupancy rate for local tenants and non-credit quality junior anchor tenants (i.e., Northside Fitness and Shepherd's Cafeteria) is 61.5%. By comparison, comparable retail properties in the neighborhood have overall occupancy rates of 96% to 100% and local tenant occupancy rates of 85% to 100%. The subject's local tenant occupancy rate is significantly lower than the range suggested by the comparables because of the subject's difficulty in leasing local tenant space given that it is directly across the street from Wiregrass Commons, a regional mall built in 1986. Furthermore, the local tenant bays are considered to have too much depth relative to their width. Therefore, we believe that a 40% vacancy and collection loss as applied to local tenant revenues reasonably encompasses the downtime between leases and a credit loss. - -------------------------------------------------------------------------------- 52 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- EFFECTIVE GROSS INCOME SUMMARY The subject's historical effective gross income is shown in the following table: ========================================= EFFECTIVE GROSS INCOME - ----------------------------------------- Year Total $ Amount - ----------------------------------------- 1993 $857,236 1994 $1,008,594 1995 $1,188,594 1996 Budget $1,230,160 - ----------------------------------------- Source: Mark Centers Trust ========================================= Given our estimate of existing rental income and expense reimbursements, other income, and a collection loss, the subject's estimated effective gross income is derived as follows: ===================================================================== STABILIZED EFFECTIVE GROSS INCOME - --------------------------------------------------------------------- Potential Gross Rental Income: $1,188,540 Less Vacancy & Collection Loss (40% of locals only) (125,793) ---------- Effective Rental Income: 1,062,747 Plus Expense Reimbursements: 134,900 Plus Other Income: 4,000 ---------- Effective Gross Income: $1,201,647 ===================================================================== Our projection of effective gross income is 1.1% greater than the level of EGI indicated for the subject for 1995, and 2.4% less than the 1996 budget projection of EGI. The difference as compared to the 1996 budget is associated with expense reimbursements. Therefore, our stabilized projection is considered to be reasonable. OPERATING EXPENSE ANALYSIS In projecting revenue and expenses for the subject property, the historical operating statements for calendar years 1993, 1994 and 1995 have been analyzed. Also, we have reviewed the 1996 budgeted forecast of income and expenses. This information is summarized in the following table. We have analyzed expenses for the subject improvements based on historical information, with expenses for the subject improvements projected based on the per square foot cost implied. We have also considered expense comparable data contained in our files and statistics in the Dollars & Cents of Shopping Centers: 1995, published by the Urban Land - -------------------------------------------------------------------------------- 53 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Institute, and the 1995 Income and Expense Analysis: Shopping Centers, published by the Institute of Real Estate Management.
================================================================================================================= SUBJECT INCOME & EXPENSE HISTORY ACTUAL CALENDAR YEAR DATA AND PROJECTED BUDGET - ----------------------------------------------------------------------------------------------------------------- 1993 Actual 1994 Actual 1995 Actual 1996 Budget(1) - ----------------------------------------------------------------------------------------------------------------- Total $/SF(2) Total $/SF(2) Total $/SF(2) Total $/SF(2) - ----------------------------------------------------------------------------------------------------------------- Income Rental Income $ 469,139 $ 1.23 $ 645,494 $ 1.69 $ 727,028 $ 1.90 $ 780,363 $ 2.04 Percentage Rent 240,356 0.63 249,122 0.65 318,300 0.83 299,162 0.78 CAM Reimb 77,305 0.20 81,738 0.21 103,387 0.27 113,021 0.30 RE Tax Reimb 53,571 0.14 19,788 0.05 38,407 0.10 30,396 0.08 Insurance Reimb 865 0.01 1,301 0.01 1,472 0.01 3,228 0.01 Other Income 16,000 0.04 11,214 0.03 0 0.00 3,990 0.01 --------- --------- ---------- --------- ---------- --------- ---------- --------- Eff. Gr. Income $ 857,236 $ 2.25 $1,008,657 $ 2.64 $1,188,594 $ 3.11 $1,230,160 $ 3.22 Expenses CAM (251,298) (0.66) (238,880) (0.63) (245,561) (0.64) (254,733) (0.67) Property Taxes (56,381) (0.15) (53,970) (0.14) (54,612) (0.14) (54,423) (0.14) Insurance (44,443) (0.12) (38,645) (0.10) (33,331) (0.09) (31,242) (0.08) Mgmt Fee (0) (0.00) (0) (0.00) (0) (0.00) (0) (0.00) General & Admin. (145,908) (0.38) (179,747) (0.47) (194,430) (0.51) (199,434) (0.52) --------- --------- ---------- --------- ---------- --------- ---------- --------- Total Expenses (498,030) (1.30) (511,242) (1.34) (527,934) (1.38) (539,832) (1.41) --------- --------- ---------- --------- ---------- --------- ---------- --------- NOI $ 359,206 $ 0.94 $ 497,415 $ 1.30 $ 660,660 $ 1.73 $ 690,328 $ 1.81 ================================================================================================================= (1) Based on actual First Quarter 1996 and 1996 budget for last three quarters. (2) Based on 381,677 rentable square feet of building area Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. =================================================================================================================
Our projection of the subject's stabilized expenses is detailed as follows. Common Area Maintenance Common area maintenance typically includes all expense items relative to operating, cleaning, maintaining and repairing the subject improvements. Historical common area maintenance expenses are shown as follows: - -------------------------------------------------------------------------------- 54 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- =================================== CAM EXPENSE - ----------------------------------- Year Total $ Amount - ----------------------------------- 1993 $251,298 1994 $238,880 1995 $245,561 1996 Budget $254,733 Year 1 Pro Forma $255,000 =================================== Source: Mark Centers Trust =================================== This expense has varied slightly from $0.66 per square foot in 1993 to $0.63 per square foot in 1994 and $0.64 per square foot in 1995. By comparison, $0.67 per square foot is projected in the 1996 budget. The 1996 budgeted expense represents a 3.7% increase. Therefore, we have projected CAM expense in line with the 1996 budgeted expense to be $255,000, or $0.67 per square foot. Property Taxes Property taxes are forecasted at $54,406, or $0.14 per leasable square foot, based on the discussion contained in the Tax Analysis section of this report. The real estate taxes do not include personal property taxes; however, they do include a credit for sales tax paid. Insurance Historical insurance expenses are shown as follows: =================================== INSURANCE EXPENSE - ----------------------------------- Year Total $ Amount - ----------------------------------- 1993 $44,443 1994 $38,645 1995 $33,331 1996 Budget $31,242 Year 1 Pro Forma $31,250 =================================== Source: Mark Centers Trust =================================== Insurance costs are assumed to include full property and liability coverage and typically are in the range of $0.10 to $0.20 per square foot. By comparison, the historical subject cost has decreased from $0.12 per square foot in 1993 to $0.10 per square foot in 1994 and $0.09 per square foot in 1995. Furthermore, the 1996 budget projects a cost of $0.08 per square foot. Therefore, the subject's insurance expense has been estimated in line with the 1996 budget to - -------------------------------------------------------------------------------- 55 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- be $31,250, or $0.08 per square foot on a rounded basis. Given the advanced age of the subject improvement's, this is consistent with comparable properties. Professional Management Fee Historically, the subject property has not been charged a professional management based on a review of the operating statements provided. Typical professional management fees for enclosed malls are generally in the range 3% to 5% of effective gross income, based on the number and type of tenants, the total square footage of a property and size of the market. Furthermore, management fees for this type of shopping center typically include leasing commissions. Therefore, the management fee for the subject is estimated to be 5.0% of effective gross income. General and Administrative General and administrative typically include all payroll and payroll related items for all directly-employed administrative personnel such as building managers, secretaries, and bookkeepers. Leasing personnel are not included nor are the salaries or fees for off-site management firm personnel and services. However, normal legal or professional fees would be included. Historical salaries and wages expenses are shown as follows: =================================== GENERAL AND ADMINISTRATIVE EXPENSE - ----------------------------------- Year Total $ Amount - ----------------------------------- 1993 $145,908 1994 $179,747 1995 $194,430 1996 Budget $199,434 Year 1 Pro Forma $199,000 =================================== Source: Mark Centers Trust =================================== This expense is a significant one for an enclosed mall such as the subject. It has increased from $0.38 per square foot in 1993 to $0.47 per square foot in 1994 and $0.51 per square foot in 1995. Based on the 1995 expense and the 1996 budget, we have projected this expense to be $199,000, or $0.51 per square foot. We feel that this is consistent with the expense suggested by comparable properties. Replacement Reserves This expense typically represents a reserve for future replacement of long-lived items. The amount of reserve and whether or not it is included in the direct capitalization and DCF - -------------------------------------------------------------------------------- 56 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- analyses, depends on the actions reflected by buyers and sellers in the local market. Based on available comparable data and discussions with brokers and investors, replacement reserves generally range from $0.10 and $0.20 per square foot. Therefore, we have projected reserves for the subject at $0.10 per square foot, or $17,000 annually on a rounded basis, given the subject's age and current condition. Generally, investors feel that it is prudent to deduct replacement reserves in calculating NOI and in determining cash flow in the DCF analysis. Total Concluded Operating Expenses The concluded stabilized operating expenses for the subject total $637,938 annually, or $1.67 per gross leasable square foot. Furthermore, 21% of the total operating costs, or $0.35 per square foot, are recovered from the tenants. DIRECT CAPITALIZATION As previously discussed, direct capitalization is a method used to convert a single year's estimated stabilized net operating income into a value indication. Once the net operating income has been estimated, this conversion is accomplished by dividing the NOI estimate by an appropriate rate. There are several methods for deriving an overall rate for direct capitalization. Derivation from Comparable Sales This is the preferred method when sufficient data exists. Data on each property's sale price, income, expenses, financing terms, and market conditions at the time of sale is needed. The overall capitalization rate is then derived by dividing the net operating income by the sale price. This technique is considered appropriate for the subject. The following is a summary of overall capitalization rates indicated by the comparable sales included in the Sales Comparison Approach. =============================================================== COMPARABLE CAPITALIZATION RATES =============================================================== Date Occupancy Capitalization Sale of Sale Sale Price Rate Rate - --------------------------------------------------------------- 1 8/95 $5,300,000 100% 11.2% 2 7/95 $3,900,000 95% 10.5% 3 5/95 $2,500,000 100% 11.8% 4 2/95 $10,000,000 87% 11.0% 5 12/93 $2,310,000 78% 12.4% =============================================================== Source: CB Commercial Real Estate Group, Inc. =============================================================== - -------------------------------------------------------------------------------- 57 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- The preceding sales indicate a 10.5% to 12.4% range of overall capitalization rates. Sale No. 4, which is located in the Columbus market, is considered to be most similar to the subject, although it is slightly inferior with respect to the anchor tenancy. The remaining sales are also considered to be reasonably similar to the subject with respect to location, occupancy, size, age, condition, and tenancy, particularly given that we are analyzing the subject on a stabilized basis without any income potential attributed to the three vacant anchor tenants. Retail investment market conditions have not changed noticeably since these transactions. Given the subject property's physical and locational characteristics, and placing greatest reliance on Sale No. 4, we feel that a capitalization rate in the range of 10.5% is warranted based on the sales utilized in our analysis. Investor Surveys Another method for establishing an overall capitalization rate for the subject is to review the criteria of major investors in the marketplace. This may serve as a check against other techniques or may be a primary source when ample data exists. This technique is considered to be appropriate for the subject. Therefore, using the First Quarter 1996 CB Commercial National Investor Survey, we have reviewed rates for Class B neighborhood and community shopping centers. This information is summarized in the following table. ================================================================================ CB COMMERCIAL NATIONAL INVESTOR SURVEY SUMMARY OF OVERALL CAP RATES FOR CLASS B SHOPPING CENTERS - -------------------------------------------------------------------------------- Property Type # of Respondents Ro Range Average Rate - -------------------------------------------------------------------------------- Power Centers 8 9.0% - 14.0% 10.2% Community Centers 10 9.5% - 11.0% 10.2% - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The survey categories indicate an overall range of 9% to 14% and an average of 10.2%. The rates mostly fall within the range of 10% to 11%. It is likely that the appropriate capitalization rate would be toward the middle of the range indicated in the preceding table based on economic prospects in the greater Dothan area over the near term future and the subject's marketability. Therefore, we have estimated the appropriate overall capitalization rate for the subject to be in the range of 10.5% based on the investor survey data. - -------------------------------------------------------------------------------- 58 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Conclusion of Overall Capitalization Rate After reviewing the appropriate methods for developing an overall capitalization rate. The following overall capitalization rates are indicated: ========================================================= SUMMARY OF OVERALL CAPITALIZATION RATES - --------------------------------------------------------- Methodology Concluded Range - --------------------------------------------------------- Comparable Sales 10.5% CB Commercial National Investor Survey 10.5% - --------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ========================================================= After reviewing the appropriate methods for developing an overall capitalization rate, with most emphasis placed on the comparable sales data, the concluded overall capitalization rate for the subject is 10.5%. - -------------------------------------------------------------------------------- 59 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Direct Capitalization Summary A summary of the direct capitalization of the subject at stabilized occupancy is illustrated in the following table: ================================================================================ NORTHSIDE MALL DIRECT CAPITALIZATION SUMMARY JULY 2, 1996 - -------------------------------------------------------------------------------- Category Total P.S.F. - -------------------------------------------------------------------------------- Income Existing Tenants: 337,880 SF @ $2.33 per SF (wt. avg.) $ 785,149 $ 2.06 Vacant Space at Market 43,097 SF @ $3.00 per SF 129,291 0.34 700 SF @ $8.00 per SF 5,600 0.01 Percentage Rent 268,500 0.70 ----------- ----------- Potential Gross Rental Income $ 1,188,540 $ 3.11 Less: Vacancy & Collection Loss (40% of local tenant rent) (125,793) (0.33) ----------- ----------- Subtotal $ 1,062,747 $ 2.78 Total Expense Reimbursements 134,900 $ 0.35 Other Income 4,000 0.01 ----------- ----------- Effective Gross Income $ 1,201,647 $ 3.15 Expenses Common Area Maintenance ($ 255,000) (0.67) Real Estate Taxes (54,406) (0.14) Insurance (31,250) (0.08) Management Fee (5.0%) (60,082) (0.16) General & Administrative (199,000) (0.52) Reserves (38,200) (0.10) ----------- ----------- Total Expenses ($ 637,938) ($ 1.67) OER 53.1% Net Operating Income $ 563,709 $ 1.48 CAPITALIZATION OF NOI: @ 10.5% $ 5,368,657 $ 14.07 Rounded $ 5,375,000 $ 14.08 ----------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 60 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW ANALYSIS Our DCF assumptions are summarized as follows: ================================================================================ NORTHSIDE MALL SUMMARY OF DISCOUNTED CASH FLOW ASSUMPTIONS - -------------------------------------------------------------------------------- General Assumptions Start Date July 1, 1996 Terms of Analysis 10 years Basis (calendar/ fiscal) Fiscal Software Pro-Ject Growth Rate Assumptions Expenses YR1: 3.0%; 3.5% thereafter Market Rent YR1: Flat; 3.5% thereafter Market Rent Assumptions Local Tenants upper level less than 800 SF $8.00 all others $3.00 Anchor Tenants upper level $5.00 lower level $3.00 Leasing Assumptions Lease Term local tenants 3 years anchor tenants 10 years Renewal Probability 60% Escalation 5% in Yr 6 for anchors only Weighted Average of: Tenant Improvements ($/SF) $0.60 Months of Free Rent None Leasing Commissions (cashed-out) included in management fee Absorption we have assumed that the vacant local space will remain vacant given the limited demand relative to supply of this space. Down Time Between Leases 3 months Miscellaneous Assumptions Credit Loss 2.0% Avg Occupancy Over Projection Period 88% (overall physical occupancy) 62% (local physical occupancy) Structural Maintenance/ Reserves ($/SF) $0.10 Deferred Maintenance None Financial Assumptions Discount Rate (IRR) 13.0% Terminal Overall Capitalization Rate (R(O) 11.0% Costs of Sale 3.0% - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 61 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Discount Rate Selection Rate selection requires that an appraiser verify and interpret the attitude and expectations of market participants (buyers, sellers, advisors, and brokers, among others). In selecting yield rates at which cash flows are to be discounted, an emphasis is placed on the prospective or forecast yield rates anticipated by typical buyers and sellers. This rate is influenced by many factors, including the degree of apparent risk, market attitudes toward future inflation, the prospective rates of return for alternative investments, the rates of return earned by comparable properties in the past, the supply and demand of mortgage funds, and the availability of tax shelters. One method for establishing a discount rate for the subject is to review the criteria of major investors in the marketplace. This may serve as a check against other techniques or may be a primary source when ample data exists. This technique is considered to be appropriate for the subject. The results of relevant published investor survey data are summarized in the following table. ==================================================================== CB COMMERCIAL 1Q 1996 NATIONAL INVESTOR SURVEY SUMMARY OF INTERNAL RATES OF RETURN FOR CLASS B SHOPPING CENTERS - -------------------------------------------------------------------- # of Average Property Type Respondents IRR Range Rate - -------------------------------------------------------------------- Power Centers 8 11% - 17% 12.8% Community Centers 10 12% - 15% 13.4% - -------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ==================================================================== The survey indicates a range of discount rates between 11% and 17%, with rates generally clustering in the 12% to 13% range. The subject is an average property which is primarily occupied by two major anchors and several junior anchors. Therefore, it would appear that the subject has an average degree risk and the appropriate discount rate is likely to be near the middle of the range indicated in the preceding table. These factors indicate that the appropriate discount rate for the subject would likely fall in the range of 13.0% on the basis of published investor survey data. - -------------------------------------------------------------------------------- 62 NORTHSIDE MALL ANNUAL CASH FLOW REPORT BEGINNING 7/1/96 FOR 11 YEARS
FY1997 FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 INCOME MINIMUM RENT: ALL TENANTS 832,318 958,860 944,042 917,601 960,449 963,200 1,003,998 966,593 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- TOTAL MINIMUM RENT 832,318 956,860 944,042 917,601 960,449 963,200 1,003,998 966,593 RECOVERIES: RE TAX RECOVERY 29,054 34,027 35,437 35,174 36,941 39,362 40,769 40,199 CAM RECOVERY 100,780 111,231 114,652 108,542 114,128 120,976 123,813 115,927 INS RECOVERY 4,919 8,158 8,833 8,350 9,536 11,245 11,658 10,954 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- TOTAL RECOVERIES 134,753 153,416 158,922 152,066 160,605 171,583 176,240 167,080 OVERAGE RENT 268,518 250,839 264,511 279,475 293,098 308,037 324,743 339,276 SALES VOLUME (000) 42,659 44,743 46,085 46,665 48,873 50,358 51,869 52,528 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- GROSS RENTAL INCOME 1,235,589 1,363,115 1,367,475 1,349,142 1,414,152 1,442,820 1,504,981 1,472,949 CREDIT LOSS (10,696) (12,039) (12,004) (11,349) (11,635) (12,161) (12,654) (11,979) OTHER INCOME 4,000 4,060 4,182 4,307 4,436 4,570 4,707 4,848 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- TOTAL INCOME 1,228,893 1,355,136 1,359,653 1,342,100 1,406,953 1,435,229 1,497,034 1,465,818 EXPENSES COMMON AREA MAINT 255,000 259,463 268,544 277,943 287,671 297,739 308,160 318,946 REAL ESTATE TAXES 55,222 57,019 59,015 61,080 63,218 65,430 67,721 70,091 INSURANCE 31,250 31,797 32,910 34,062 35,254 36,488 37,765 39,086 MANAGEMENT FEE 61,445 67,757 67,983 67,105 70,348 71,761 74,852 73,291 GENERAL & ADMIN 199,000 202,483 209,569 216,904 224,496 232,353 240,486 248,903 RESERVES 38,200 38,869 40,229 41,637 43,094 44,602 46,164 47,779 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- TOTAL EXPENSES 640,117 657,388 678,250 698,731 724,081 748,373 775,148 798,096 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- NET OPERATING INCOME 588,776 697,748 681,403 643,369 682,872 686,856 721,886 667,722 ALTERATIONS 20,153 4,567 8,497 300 27,084 0 16,302 21,464 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- CASH FLOW 568,623 693,181 672,906 643,069 655,788 686,856 705,584 646,258
FY2005 FY2006 FY2007 INCOME MINIMUM RENT: ALL TENANTS 1,037,617 1,020,751 1,009,060 ---------- ---------- ---------- TOTAL MINIMUM RENT 1,037,617 1,020,751 1,009,060 RECOVERIES: RE TAX RECOVERY 44,145 45,252 44,612 CAM RECOVERY 131,629 132,721 123,910 INS RECOVERY 12,747 12,953 12,161 ---------- ---------- ---------- TOTAL RECOVERIES 188,521 190,926 180,683 OVERAGE RENT 355,601 373,081 390,895 SALES VOLUME (000) 55,028 56,679 57,398 ---------- ---------- ---------- GROSS RENTAL INCOME 1,581,739 1,584,758 1,580,638 CREDIT LOSS (13,146) (13,057) (12,674) OTHER INCOME 4,993 5,143 5,297 ---------- ---------- ---------- TOTAL INCOME 1,573,586 1,576,844 1,573,261 EXPENSES COMMON AREA MAINT 330,109 341,663 353,621 REAL ESTATE TAXES 72,544 75,083 77,711 INSURANCE 40,454 41,870 43,336 MANAGEMENT FEE 78,679 78,842 78,663 GENERAL & ADMIN 257,614 266,631 275,963 RESERVES 49,452 51,182 52,974 ---------- ---------- ---------- TOTAL EXPENSES 828,852 855,271 882,268 ---------- ---------- ---------- NET OPERATING INCOME 744,734 721,573 690,993 ALTERATIONS 4,917 10,444 30,325 ---------- ---------- ---------- CASH FLOW 739,817 711,129 660,668 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Reversion The reversionary value of the subject is based on an assumed sale at the end of the holding period based on capitalizing the following year's NOI. Additionally, any capital costs, leasing commissions, and tenant improvements associated with the following year's NOI are deducted. Based on our surveys, reversionary capitalization rates are typically considered to be 0 to 100 basis points higher than going-in capitalization rates on a typical holding period. This is a result of the uncertainty of future economic conditions and the natural aging of the property. In the case of the subject, we feel that a 50 basis point premium over the going-in capitalization rate is warranted. The appropriate terminal capitalization rate for the reversion is, therefore, estimated to be 11.0%. DCF Conclusion The subject's projected cash flow generated via this DCF analysis is shown on the facing page. A value of $5,375,000, or $14.08 per square foot, is suggested for this scenario based on a discount rate of 13.0% and a reversion capitalization rate of 11.0%. Furthermore, 67% of the value is derived from cash flow over the holding period, with the remaining 33% generated from the reversionary sale of the property at the end of the holding period. CONCLUSION OF INCOME CAPITALIZATION APPROACH The preceding analysis indicates the following conclusions: ========================================================= INCOME CAPITALIZATION APPROACH VALUES - --------------------------------------------------------- Method Indicated Value - --------------------------------------------------------- Direct Capitalization $5,375,000 Discounted Cash Flow $5,375,000 - --------------------------------------------------------- Source: CB Commercial Real Estate ========================================================= We feel that the direct capitalization analysis generally represents the preferred methodology of potential investors in the market for property such as the subject. However, the DCF model is also employed at times and generally supports the direct capitalization analysis. Therefore, we have correlated at a value between the range indicated by the two methods. As a result, CB Commercial concludes a value for the subject improvements of $5,375,000, or $14.08 per rentable square foot. - -------------------------------------------------------------------------------- 63 CONCLUSION ================================================================================ RECONCILIATION - -------------------------------------------------------------------------------- RECONCILIATION OF VALUE CB Commercial was instructed to estimate the market value of the leased fee interest in the subject property. The value conclusion for each applicable approach is summarized below. ============================================================== SUMMARY OF VALUE CONCLUSIONS - -------------------------------------------------------------- Land Value: N/A Cost Approach: N/A Sales Comparison Approach: $5,350,000 Income Capitalization Approach: $5,375,000 - -------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ============================================================== The Income Capitalization Approach is considered the most persuasive method for valuing the subject property. This approach is predicated on the principle of anticipated economic benefits and therefore, best reflects the investment characteristics of the subject. Properties such as the subject are typically purchased by investors; thus, this approach must closely parallel the anticipated analysis that would be employed by the most typical purchaser. The Sales Comparison Approach is predicated on the principle that an investor would pay no more for an existing property than for a comparable property with similar utility. This approach is contingent on the reliability and comparability of available data. The data developed was considered sufficiently reliable to reach a value conclusion by the Sales Comparison Approach. However, this method is given secondary consideration in the reconciliation and used as support for the Income Approach. The Cost Approach is predicated on the principle that an investor would pay no more for an existing property than it would cost to acquire land and construct a building with similar utility. The Cost Approach is not relied upon because estimating developer profit is very subjective and the Marshall Valuation Service cost guide is based on numerous assumptions that may not directly apply to the subject, rendering this method less reliable. This approach was not utilized in our analysis. In arriving at the final value conclusion, greatest weight was placed on the Income Capitalization Approach. The final value conclusion and the approach relied upon give strong - -------------------------------------------------------------------------------- 64 ================================================================================ RECONCILIATION - -------------------------------------------------------------------------------- consideration to the market behavior of the typical buyer and current market environment for the property appraised. Based on the foregoing analysis, it is concluded that the market value as is of the leased fee interest in the subject property, as of July 2, 1996 is: FIVE MILLION THREE HUNDRED SEVENTY-FIVE THOUSAND DOLLARS ($5,375,000) - -------------------------------------------------------------------------------- 65 CONCLUSION CONCLUSION ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS 1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to total that would adversely affect marketability or value. CB Commercial is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CB Commercial, however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject property's title should be sought from a qualified title company that issues or insures title to real property. 2. It is assumed that improvements have been constructed or will be constructed according to approved architectural plans and specifications and in conformance with recommendations contained in or based upon any soils report(s). Unless otherwise specifically noted in the body of this report, it is assumed: that any existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are, or will be upon completion, in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that it or they will withstand any known elements such as windstorm, hurricane, tornado, flooding, earthquake, or similar natural occurrences; and, that the improvements, as currently constituted, conform to all applicable local, state, and federal building codes and ordinances. CB Commercial professionals are not engineers and are not competent to judge matters of an engineering nature. CB Commercial has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CB Commercial by ownership or management; CB Commercial inspected less than 100% of the entire interior and exterior portions of the improvements; and CB Commercial was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CB Commercial reserves the right to amend the appraisal conclusions reported herein. 3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property was not observed by the appraisers. CB Commercial has no knowledge of the existence of such materials on or in the property. CB Commercial, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the appraisal. 4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CB Commercial. This report may be subject to amendment upon re-inspection of the subject property subsequent to repairs, modifications, alterations and completed new - -------------------------------------------------------------------------------- 66 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels of operation. 5. It is assumed that all factual data furnished by the client, property owner, owner's representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CB Commercial has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, Assessor's Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CB Commercial reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CB Commercial of any questions or errors. 6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CB Commercial will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject. 7. CB Commercial assumes no private deed restrictions, limiting the use of the subject property in any way. 8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposit or subsurface rights of value involved in this appraisal, whether they be gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred. 9. CB Commercial is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject. 10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market. 11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CB Commercial does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CB Commercial. 12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CB Commercial to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form. 13. Also, unless otherwise noted in the body of this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated. 14. This study may not be duplicated in whole or in part without the specific written consent of CB Commercial nor may this report or copies hereof be transmitted to third parties without said consent, which consent CB - -------------------------------------------------------------------------------- 67 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- Commercial reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or its contents shall not be published, in whole or in part, in any public document without the express written consent of CB Commercial which consent CB Commercial reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a "sale" or "offer for sale" of any "security", as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CB Commercial shall have no accountability or responsibility to any such third party. 15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report. 16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used. 17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area of the subject and comparable properties has been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report. 18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CB Commercial unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CB Commercial assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance. 19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or client's designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CB Commercial assumes responsibility for any situation arising out of the Client's failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired. 20. CB Commercial assumes that the subject property analyzed herein will be under prudent and competent management and ownership; neither inefficient or super-efficient. 21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the appraisal report. 22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist. 23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Notwithstanding any discussion of possible readily achievable barrier removal construction items in this report, CB Commercial has not made a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect on the value estimated herein. Since CB Commercial has no specific information relating to this issue, nor is CB Commercial qualified to make - -------------------------------------------------------------------------------- 68 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject property. - -------------------------------------------------------------------------------- 69 ADDENDA ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- Addendum A GLOSSARY OF TERMS assessed value Assessed value applies in ad valorem taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to market value, but it is usually calculated in relation to a market value base. + cash equivalency The procedure in which the sale prices of comparable properties sold with atypical financing are adjusted to reflect typical market terms. contract, coupon, face, or nominal rent The nominal rent payment specified in the lease contract. It does not reflect any offsets for free rent, unusual tenant improvement conditions, or other factors that may modify the effective rent payment. coupon rent See Contract, Coupon, Face, or Nominal Rent effective rent 1) The rental rate net of financial concessions such as periods of no rent during a lease term; may be calculated on a discounted basis, reflecting the time value of money, or on a simple, straight-line basis. ** 2) The economic rent paid by the lessee when normalized to account for financial concessions, such as escalation clauses, and other factors. Contract, or normal, rents must be converted to effective rents to form a consistent basis of comparison between comparables. face rent See Contract, Coupon, Face, or Nominal Rent fee simple estate Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. ** floor area ratio (FAR) The relationship between the above-ground floor area of a building, as described by the building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area; also called building-to-land ratio. ** full service lease A lease in which rent covers all operating expenses. Typically, full service leases are combined with an expense stop, the expense level covered by the contract lease payment. Increases in expenses above the expense stop level are passed through to the tenant and are known as expense pass-throughs. going concern value Going concern value is the value of a proven property operation. It includes the incremental value associated with the business concern, which is distinct from the value of the real estate only. Going concern value includes an intangible enhancement of the value of an operating business enterprise which is produced by the assemblage of the land, building, labor, equipment, and marketing operation. This process creates an economically viable business that is expected to continue. Going concern value refers to the total value of a property, including both real property and intangible personal property attributed to the business value. + gross building area (GBA) The sum of all areas at each floor as measured to the exterior walls. insurable value Insurable Value is based on the replacement and/or reproduction cost of physical items that are subject to loss from hazards. Insurable value is that portion of the value of an asset or asset group that is acknowledged or recognized under the provisions of an applicable loss insurance policy. This value is often controlled by state law and varies from state to state. + investment value Investment value is the value of an investment to a particular investor based on his or her investment requirements. In contrast to market value, investment value is value to an individual, not value in the marketplace. Investment value reflects the subjective relationship between a particular investor and a given investment. When measured in dollars, investment value is the price an investor would pay for an investment in light of its perceived capacity to satisfy his or her desires, needs, or investment goals. To estimate investment value, specific investment criteria must be known. Criteria to evaluate a real estate investment are not necessarily set down by the individual investor; they may be established by an - -------------------------------------------------------------------------------- ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- expert on real estate and its value, that is, an appraiser. + leased fee See leased fee estate leased fee estate An ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.** leasehold See leasehold estate leasehold estate The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.** load factor The amount added to usable area to calculate the rentable area. It is also referred to as a "rentable add-on factor" which, according to BOMA, "is computed by dividing the difference between the usable square footage and rentable square footage by the amount of the usable area. Convert the figure into a percentage by multiplying by 100. market value "as if complete" on the appraisal date Market value as if complete on the appraisal date is an estimate of the market value of a property with all construction, conversion, or rehabilitation hypothetically completed, or under other specified hypothetical conditions as of the date of the appraisal. With regard to properties wherein anticipated market conditions indicate that stabilized occupancy is not likely as of the date of completion, this estimate of value should reflect the market value of the property as if complete and prepared for occupancy by tenants. market value "as is" on the appraisal date Market value "as is" on the appraisal date is an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date of appraisal. market value Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1) A reasonable time is allowed for exposure in the open market; 2) Both parties are well informed or well advised, and acting in what they consider their own best interests; 3) Buyer and seller are typically motivated; 4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.ss. marketing period The time it takes an interest in real property to sell on the market subsequent to the date of an appraisal. ** net lease Lease in which all or some of the operating expenses are paid directly by the tenant. The landlord never takes possession of the expense payment. In a Triple Net Lease all operating expenses are the responsibility of the tenant, including property taxes, insurance, interior maintenance, and other miscellaneous expenses. However, management fees and exterior maintenance are often the responsibility of the lessor in a triple net lease. A modified net lease is one in which some expenses are paid separately by the tenant and some are included in the rent. net rentable area (NRA) 1) The area on which rent is computed. 2) The Rentable Area of a floor shall be computed by measuring to the inside finished surface of the dominant portion of the permanent outer building walls, excluding any major vertical penetrations of the floor. No deductions shall be made for columns and projections necessary to the building. Include space such as mechanical room, janitorial room, restrooms, and lobby of the floor. * nominal rent See Contract, Coupon, Face, or Nominal Rent prospective future value "upon completion of construction" Prospective future value "upon completion of construction" is the prospective value of a property on the future date that construction is completed, based upon market conditions forecast to exist, as of that completion date. The value - -------------------------------------------------------------------------------- ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- estimate at this stage is stated in current dollars unless otherwise indicated. prospective future value "upon reaching stabilized occupancy" Prospective future value "upon reaching stabilized occupancy" is the prospective value of a property at a future point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. The value estimate at this stage is stated in current dollars unless otherwise indicated. reasonable exposure time The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market. ++ rent see full service lease net lease contract, coupon, face, or nominal rent effective rent shell space Space which has not had any interior finishing installed, including even basic improvements such as ceilings and interior walls, as well as partitions, floor coverings, wall coverings, etc.. Usable Area 1) The area actually used by individual tenants. 2) The Usable Area of an office is computed by measuring to the finished surface of the office side of corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished surface of the dominant portion of the permanent outer building walls. Excludes areas such as mechanical rooms, janitorial room, restrooms, lobby, and any major vertical penetrations of a multi-tenant floor. * use value Use value is a concept based on the productivity of an economic good. Use value is the value a specific property has for a specific use. Use value focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to the property's highest and best use or the monetary amount that might be realized upon its sale. + value appraised During the real estate development process, a property typically progresses from a state of unimproved land to construction of improvements to stabilized occupancy. In general, the market value associated with the property increases during these stages of development. After reaching stabilized occupancy, ongoing forces affect the property during its life, including a physical wear and tear, changing market conditions, etc. These factors continually influence the property's market value at any given point in time. See also market value "as is" on the appraisal date market value "as if complete" on the appraisal date prospective future value "upon completion of construction" prospective future value "upon reaching stabilized occupancy" + The Appraisal of Real Estate, Tenth Edition, Appraisal Institute, 1992. ++ The Dictionary of Real Estate Appraisal, Third Edition, 1993. ss. The office of the Comptroller of the Currency, 12 CFR Part 34, Subpart C, ss.42(f), August 24, 1990. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. * 1990 BOMA Experience Exchange Report, Income/Expense Analysis for Office Buildings (Building Owners and Managers Association, 1990) ** Statement on Appraisal Standard No. 6, Appraisal Standards Board of The Appraisal Foundation, September 19, 1992. RETAIL SALE ================================================================================ Location Data Property Name: Priest Lake Plaza Location: SWC Of Murfreesboro Road At Bell Road City: Nashville County: Davidson State/Zip: Tennessee Assessor's Parcel No(s): 149-0-235 Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 8.73 Acres Excess Land: None Gross Leasable Area: Anchors: Kroger 30,975 SF Super X 13,280 SF Local Tenant GLA: 55,745 SF Anchor Tenant GLA: 44,255 SF Total GLA: 100,000 SF GLA Purchased: 100,000 SF Year Built: 1977 Parking: Adequate surface Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 12/93 Marketing Time: N/A Grantor: Bank One, Lexington, NAE Grantee: PL Nashville Limited Partnership Document No.: DB 9200 P 558 Sale Price: $2,310,000 Financing: Cash to Seller Cash Equivalent Price: $2,310,000 Required Capital Cost: $0 Adjusted Sales Price: $2,310,000 Verification: Ed Brown, Broker-Eden & Avant Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 78% Existing or Pro Forma Income: Pro Forma TOTAL P.S.F. -------- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $286,000 $2.86 - -------------------------------------------------------------------------------- CB COMMERCIAL
- ----------------------------------------------------------------------------------------------------------------------------------- Detail Rent Roll NORTHSIDE MALL Report Date: 05/14/96 - ----------------------------------------------------------------------------------------------------------------------------------- -- Rent Dates -- Suite Commence Expire Square Monthly Annual -- Cost Recovery -- Expense --- Other Income --- No. Tenant Name Start Footage Base Rent Rate/SF Description Monthly Stop Description Monthly - ----------------------------------------------------------------------------------------------------------------------------------- 0048S MONTGOMERY WARD 05/21/90 11/30/99 16,740 1,452.67 1.04 05/21/90 OO49O ONE PRICE CLOTHING STORE #59 10/28/93 01/31/99 3,301 1,650.50 6.00 MAINTENANC 263.20 10/28/93 INSURANCE 27.51 REAL ESTAT 44.01 TRASH REMO 44.01 -------- 378.73 OO50O EVANS BARBER SHOP 04/01/85 12/31/96 630 525.00 10.00 MAINTENANC 67.94 04/01/85 HVAC MAINT 4.38 MERCHANTS 21.00 REAL ESTAT 8.56 TENANT STO 25.00 TRASH REMO 20.00 -------- 146.88 00510 THE CAKE BOX 12/09/88 12/31/96 1,446 587.84 4.88 MAINTENANC 155.92 12/09/88 HVAC MAINT 9.13 MERCHANTS 36.15 REAL ESTAT 19.28 TRASH REMO 20.00 -------- 240.48 00550 GOODY'S STORE #140 11/18/93 11/17/03 26,840 12,301.67 5.50 MAINTENANC 1,118.33 11/18/93 REAL ESTAT 357.87 TRASH REMO 178.94 -------- 1,655.14 00560 SIMPLY 6 07/02/93 07/01/03 3,000 0.00 0.00 07/02/93 00710 SOUTH TRUST BANK 06/01/70 05/31/00 0 650.00 0.00 06/01/70
- --------------------------------------------------------- Page: 18 Date: 05/14/96 Report Date: 05/14/96 Time: 13:45:53 - --------------------------------------------------------- Suite ---Future Rent Increases--- No. Tenant Name Date Monthly Amt. Per Sf - --------------------------------------------------------- 0048S MONTGOMERY WARD 12/01/96 1,521.83 1.09 12/01/97 1,591.00 1.14 12/01/98 1,660.17 1.19 12/01/99 1,729.33 1.24 12/01/00 1,798.50 1.29 12/01/01 1,867.67 1.34 12/01/02 1,936.83 1.39 12/01/03 2,066.00 1.48 12/01/04 2,075.17 1.49 12/01/05 2,144.33 1.54 12/01/06 2,213.50 1.59 12/01/07 2,282.67 1.64 12/01/08 2,351.83 1.69 12/01/09 2,421.00 1.74 12/01/10 2,490.17 1.79 12/01/11 2,559.33 1.83 12/01/12 2,628.50 1.88 12/01/13 2,697.67 1.93 OO49O ONE PRICE CLOTHING STORE #59 08/01/96 2,200.67 8.00 OO50O EVANS BARBER SHOP 00510 THE CAKE BOX 00550 GOODY'S STORE #140 00560 SIMPLY SIX 00710 SOUTH TRUST BANK
- ------------------------------------------------------------------------------------------------------------------------------------ Detail Rent Roll Page: 19 NORTHSIDE MALL Date: 05/14/96 Report Date: 05/14/96 Time: 13:46:37 - ------------------------------------------------------------------------------------------------------------------------------------ -- Rent Dates -- Suite Commence Expire Square Monthly Annual -- Cost Recovery -- Expense --- Other Income --- No. Tenant Name Start Footage Base Rent Rate/SF Description Monthly Stop Description Monthly - ----------------------------------------------------------------------------------------------------------------------------------- 0071* SOUTH TRUST/NIGHT DEPOSITORY 05/01/76 04/30/96 0 65.00 0.00 05/01/76 00580 BUGLE BOY 10/28/89 12/31/96 10,000 0.00 0.00 MAINTENANC 833.33 10/28/89 TRASH REMO 206.40 -------- 1,039.73 0058S BUGLE BOY STORAGE 10/28/89 12/31/96 5,480 0.00 0.00 10/28/89 00030 S.E. ALA EMERGENCY MEDICAL S 05/01/92 04/30/97 3,854 750.00 2.34 05/01/92 1000K DAVIS THEATRES 05/01/89 04/30/99 0 0.00 0.00 MAINTENANC 500.00 05/01/89 10010 HARDEE 'S 01/01/95 12/31/96 0 0.00 0.00 01/01/94 00590 GE0RGIANNE STENDER 11/01/94 10/31/99 750 475.00 7.60 MAINTENANC 108.95 11/01/94 MERCHANTS 25.00 REAL ESTAT 9.38 -------- 143.33 00330 COUNTRY AT HEART 11/08/94 11/30/97 6,070 2,149.79 4.25 MAINTENANC 293.38 11/08/94 MERCHANTS 41.97 REAL ESTAT 80.93 -------- 416.28 00220 VACANT 01/10/95 06/03/96 318 344.50 13.00 MERCHANTS 36.61 01/10/95 00050 TROY STATE UNIVERSITY 11/15/94 12/31/96 18,400 4,600.00 3.00 11/15/94 00570 TOP GUN AIR BRUSH 11/07/94 12/31/90 300 200.OO 8.00 MAINTENANC 41.25 12/01/94 MERCHANTS 20.36 TRASH REMO 20.00 ------- 81.61 57A JOKERS WILD 01/96 12/96 785 00540 BOOKS-A-MILLION 08/20/95 01/31/06 17,316 7,215.00 5.00 MAINTENANC 1,702.82 08/20/95 REAL ESTAT 210.77 TRASH REMO 120.44 -------- 2,034.03 00360 HEART 'N HOME 09/04/95 09/30/97 1,650 501.88 3.65 MAINTENANC 206.25 09/04/95 MERCHANTS 45.99 REAL ESIAT 19.25 --------
- --------------------------------------------------------- Page: 19 Date: 05/14/96 Report Date: 05/14/96 Time: 13:46:37 - --------------------------------------------------------- Suite ---Future Rent Increases--- No. Tenant Name Date Monthly Amt. Per Sf - --------------------------------------------------------- 0071* SOUTH TRUST/NIGHT DEPOSITORY 00580 BUGLE BOY 0058S BUGLE BOY STORAGE 00030 S.E. ALA EMERGENCY MEDICAL S 1000K DAVIS THEATRES 10010 HARDEE 'S 00590 GE0RGIANNE STENDER 11/01/96 575.00 9.20 11/01/97 640.00 1O.24 11/01/98 710.00 11.36 00330 COUNTRY AT HEART 12/01/96 2,276.25 4.50 00220 VACANT 00050 TROY STATE UNIVERSITY 00570 TOP GUN AIR BRUSH - 57A JOKERS WILD 00540 BOOKS-A-MILLION 02/01/01 7,575.75 5.25 02/01/06 7,936.50 5.50 02/01/11 8,730.15 6.05 02/01/16 9,595.95 6.65 00360 HEART 'N HOME 10/01/90 750.00 5.45
- ------------------------------------------------------------------------------------------------------------------------------------ Detail Rent Roll Page: 20 NORTHSIDE MALL Date: 05/14/96 Report Date: 05/14/96 Time: 13:46:37 - ------------------------------------------------------------------------------------------------------------------------------------ -- Rent Dates -- Suite Commence Expire Square Monthly Annual -- Cost Recovery -- Expense --- Other Income --- No. Tenant Name Start Footage Base Rent Rate/SF Description Monthly Stop Description Monthly - ------------------------------------------------------------------------------------------------------------------------------------ 00420 SOUTHERN SAMPLER 11/01/95 12/31/00 3,000 875.00 3.50 MAINTENANC 432.12 11/01/95 MERCHANTS 74.11 REAL ESTAT 35.00 -------- 541.23 0014D EVANS BARBER SHOP 04/01/85 12/31/96 235 0.00 0.00 04/01/85 00380 DOTHAN WIREGRASS ART LEAGUE 10/18/95 12/31/96 1,400 0.00 0.00 MERCHANTS 50.00 10/18/95 00010 SHEPHERD'S CAFETERIA 01/11/96 01/10/01 11,008 2,752.00 3.00 MAINTENANC 788.90 01/11/96 MERCHANTS 229.33 REAL ESTAT 128.43 -------- 1,146.66 00290 LOWERY JEWELERS 02/05/96 02/04/97 1,860 450.00 9.00 MAINTENANC 80.00 02/05/96 MERCHANTS 20.00 -------- 100.00 - ------------------------------------------------------------------------------------------------------------------------------------ Total Building Occupied Sqft: 88% 334,097 64,283.79 0.00 12,473.05 Available Sqft: 12% 47,580 Total Sqft: 381,677 - ------------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------- Page: 20 Date: 05/14/96 Report Date: 05/14/96 Time: 13:47:34 - --------------------------------------------------------- Suite ---Future Rent Increases--- No. Tenant Name Date Monthly Amt. Per Sf - --------------------------------------------------------- 00420 SOUTHERN SAMPLER 01/01/97 1,000.00 4.00 01/01/98 1,125.00 4.50 01/01/99 1,250.00 5.00 0014D EVANS BARBER SHOP 00380 DOTHAN WIREGRASS ART LEAGUE 00010 SHEPHERD'S CAFETERIA 00290 LOWERY JEWELERS - -------------------------- Total Building - -------------------------- RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Wiregrass Plaza Location: highway 231 & Westgate Parkway City: Dothan County: Houston State/Zip: Alabama Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 49,150 SF Year Built: 1986 Exterior Walls: Masonry Condition: Good Anchor Tenant: Winn-Dixie, Big B Drugs Parking: adequate surface parking Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 1,000 SF Term: 3 years Base Rent Per Square Foot: $9.00 Rent Escalations: Negotiable Basis: Net Expense Pass-Through: Triple Net Free Rent (months): None Tenant Improvement: Negotiable Leasing Agent: Aronov Realty Phone No.: (205)277-1000 Survey Date: 7/96 ================================================================================ CB COMMERCIAL ================================================================================ ADDENDUM B ADDITIONAL SUBJECT PHOTOGRAPHS - 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-------------------------------------------------------------------------------- INTERIOR VIEW OF SUBJECT PROPERTY'S LOWER LEVEL - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- RETAIL SALE 1 ================================================================================ Location Data Property Name: Broad Street Center Location: NW Broad Street and W. Clark Boulevard City: Murfreesboro County: Rutherford State/Zip: Tennessee Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Land Area: N/A Excess Land: N/A Gross Leasable Area: Anchors: K-Mart 103,171 SF Big Lots 29,888 SF Walgreens 9,824 SF Local Tenant GLA: 38,226 SF Anchor Tenant GLA: 142,883 SF Total GLA: 181,109 SF GLA Purchased: 181,109 SF Year Built: 1975 Parking: Adequate surface Condition: Good Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 08/95 Marketing Time: N/A Grantor: Brinkley & Associates Grantee: Meridan Realty Company Document No.: N/A Sale Price: $5,300,000 Financing: Cash to Seller Cash Equivalent Price: $5,300,000 Required Capital Cost: $0 Adjusted Sales Price: $5,300,000 Verification: Withheld Upon Request Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100% Existing or Pro Forma Income: Existing TOTAL P.S.F. -------- ----- Potential Gross Income: $862,342 $4.76 Vacancy and Credit Loss: $60,364 $0.33 Effective Gross Income: $801,978 $4.43 Expenses: $208,378 $1.15 Net Operating Income: $593,600 $3.28 ================================================================================ CB COMMERCIAL RETAIL SALE 2 ================================================================================ Location Data Property Name: Spring Mill Village Location: 6011 Memorial Drive City: Tucker County: Dekalb State/Zip: Georgia Assessor's Parcel No(s): 18-72-2-71 Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 14.74 Acres Excess Land: None Gross Leasable Area: Anchors: Marshalls 27,840 SF Old Country Buffet 10,848 SF Local Tenant GLA: 60,912 SF Anchor Tenant GLA: 38,688 SF Total GLA: 99,600 SF GLA Purchased: 99,600 SF Year Built: 1974 Parking: 647 surface spaces Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 7/95 Marketing Time: N/A Grantor: Copley Real Estate Advisors/New England Mutual Grantee: Mimms Enterprises Document No.: DB 8611 P 522 Sale Price: $3,900,000 Financing: Cash to Seller Cash Equivalent Price: $3,900,000 Required Capital Cost: $0 Adjusted Sales Price: $3,900,000 Verification: Eric Zimmerman - Broker Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 95% Existing or Pro Forma Income: Existing TOTAL P.S.F. -------- ------ Potential Gross Income: $466,819 $4.69 Vacancy and Credit Loss: $37,346 $0.37 Effective Gross Income: $429,473 $4.31 Expenses: $21,474 $0.22 Net Operating Income: $407,999 $4.10 ================================================================================ CB COMMERCIAL RETAIL SALE 3 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap and DCF Overall Capitalization Rate (OAR): 11.81 % Projected IRR: N/A Effective Gross Multiplier (EGIM): 6.67 Operating Expense Ratio (OER): 21.18 % Price Per Square Foot: $25.75 Comments Deferred maintenance of $75,000 was neccesary for ADA requirements and miscellaneous repairs to the parking lot and roof. ================================================================================ CB COMMERCIAL ================================================================================ ADDENDUM C LEGAL DESCRIPTION ================================================================================ Addendum C LEGAL DESCRIPTION - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM D RENT ROLL ================================================================================ Addendum D RENT ROLL - -------------------------------------------------------------------------------- RETAIL RENT COMPARABLE 1 ================================================================================ Comments This is actually a regional mall located directly across the street from the subject property. When completed in 1986, this property replaced the subject as the dominant retail property in this market. It has good access and visibility due to its location at the intersection of two primary transportation corridors. There is room for a fifth anchor tenant on the back side of the mall; however, there are no plans for expansion at this time. Photograph [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 2 ================================================================================ Comments This property has good access and visibility. Photograph [GRAPHIC OMITTED] ================================================================================ CB COMMERCIAL ================================================================================ ADDENDUM E HISTORICAL OPERATING STATEMENTS ================================================================================ Addendum E HISTORICAL OPERATING STATEMENTS - -------------------------------------------------------------------------------- RETAIL SALE 1 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap Overall Capitalization Rate (OAR): 11.20 % Projected IRR: N/A Effective Gross Multiplier (EGIM): 6.61 Operating Expense Ratio (OER): 25.98 % Price Per Square Foot: $29.26 Comments This center is located in northwest Murfreesboro and has good access, exposure, and market appeal. The center was constructed as an enclosed mall in 1975 and renovated as an open-air community center in 1992. Occupancy at the time of sale was 100% however, Walgreens is due to vacate relatively soon. ================================================================================ CB COMMERCIAL RETAIL SALE 2 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap Overall Capitalization Rate (OAR): 10.46 % Projected IRR: N/A Effective Gross Multiplier (EGIM): 9.08 Operating Expense Ratio (OER): 5.00 % Price Per Square Foot: $39.16 Comments This center is located in an older retail area of metropolitan Atlanta. It has average access and visibility. ================================================================================ CB COMMERCIAL RETAIL SALE 3 ================================================================================ Location Data Property Name: Village Shopping Center Location: West Spring Street & Breedlove Drive City: Monroe County: Walton State/Zip: Georgia Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 10.00 Acres Excess Land: None Gross Leasable Area: Anchors: Winn-Dixie 29,888 SF Heilig Myers 24,768 SF Eckerd Drugs 7,472 SF Local Tenant GLA: 37,872 SF Anchor Tenant GLA: 62,128 SF Total GLA: 100,000 SF GLA Purchased: 100,000 SF Year Built: 1975 Parking: 900 surface spaces Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 5/95 Marketing Time: N/A Grantor: G.D.B. Associates Grantee: Old Colony Associates Document No.: N/A Sale Price: $2,500,000 Financing: Cash To Seller Cash Equivalent Price: $2,500,000 Required Capital Cost: $75,000 Adjusted Sales Price: $2,575,000 Verification: N/A Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100% Existing or Pro Forma Income: Pro Forma TOTAL P.S.F. -------- ----- Potential Gross Income: $428,694 $4.29 Vacancy and Credit Loss: $42,869 $0.43 Effective Gross Income: $385,825 $3.86 Expenses: $81,726 $0.82 Net Operating Income: $304,099 $3.04 ================================================================================ CB COMMERCIAL RETAIL SALE 4 ================================================================================ Location Data Property Name: Cross Country Plaza Location: I-85 & Macon Road City: Columbus County: Muscogee State/Zip: Georgia Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Land Area: 35.50 Acres Excess Land: None Gross Leasable Area: Anchors: Service Merchandise Talbot's Blockbuster Video Fashion Bug Local Tenant GLA: N/A Anchor Tenant GLA: N/A Total GLA: N/A GLA Purchased: 337,360 SF Year Built: 1968 Parking: 2,500 surface spaces Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 2/95 Marketing Time: N/A Grantor: Cross Country Shopping, Inc (The Dial Companies) Grantee: Columbus Cross Country (TCW Asset Mgmt Co.) Document No.: DB 4205 P 285 Sale Price: $10,000,000 Financing: Cash to Seller Cash Equivalent Price: $10,000,000 Required Capital Cost: $0 Adjusted Sales Price: $10,000,000 Verification: Grantor & Deed Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 87% Existing or Pro Forma Income: Existing TOTAL P.S.F. ---------- ----- Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $1,096,420 $3.25 ================================================================================ CB COMMERCIAL ================================================================================ ADDENDUM F COMPARABLE IMPROVED SALES ================================================================================ Addendum F COMPARABLE IMPROVED SALES - -------------------------------------------------------------------------------- RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap Overall Capitalization Rate (OAR): 12.38 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $23.10 Comments The Kroger and Super X tenants both have rental rates of $3.35 per square foot. Other leases range from $8.00 to $14.85 per square foot, and typically average $11.00 per square foot. The broker verifying the sale said the net operating income of $286,000 might be slightly overstated, but was consistant with the purchaser's forecast. ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE 3 ================================================================================ Location Data Property Name: Colony Square Location: Ross Clark Circle and Highway 84 City: Dothan County: Houston State/Zip: Alabama Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 73,825 SF Year Built: 1988 Exterior Walls: Masonry Condition: Good Anchor Tenant: Office Depot Parking: adequate surface parking Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 1,500 SF Term: 3 to 5 years Base Rent Per Square Foot: $7.00 - $8.00 Rent Escalations: Negotiable Basis: Net Expense Pass-Through: Triple Net Free Rent (months): None Tenant Improvement: Negotiable Leasing Agent: Blumberg Investments Phone No.: (205)793-6855 Survey Date: 7/96 ================================================================================ CB COMMERCIAL ================================================================================ ADDENDUM G RENT COMPARABLES ================================================================================ Addendum G RENT COMPARABLES - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- Detail Rent Roll NORTHSIDE MALL Report Date: 05/14/96 - ----------------------------------------------------------------------------------------------------------------------------------- -- Rent Dates -- Suite Commence Expire Square Monthly Annual -- Cost Recovery -- Expense --- Other Income --- No. Tenant Name Start Footage Base Rent Rate/SF Description Monthly Stop Description Monthly - ----------------------------------------------------------------------------------------------------------------------------------- 00000 GROUND LEASE FOR PARKING LOT 10/21/65 04/21/96 0 0.00 0.00 10/21/65 0011* NORTHSIDE FITNESS 12/01/91 12/31/96 15,300 1,865.00 MERCHANTS 31.61 12/01/91 0014C WORLD HORIZON TRAVEL STORAGE 04/01/91 12/31/96 393 0.00 0.00 TENANT STO 20.00 04/01/91 00190 ORIENTAL IMPORTS 02/01/80 12/31/96 2,010 0.00 0.00 MAINTENANC 108.88 02/01/80 HVAC MAINT 108.80 MERCHANTS 61.86 TRASH REMO 5.00 -------- 284.54 00230 CCS COMPUTER SERV 05/96 05/97 825 0.00 0.00 01/06/96 00250 WALMART 08/01/83 01/31/99 111,970 18,331.27 1.96 MAINTENANC 1,666.48 08/01/83 MERCHANTS 411.57 -------- 2,078.05 00310 COUNTRY HEART STORAGE MONTH - MONTH 3,050 0.00 0.00 01/01/92 0032* MARK TWAIN SHOP 07/26/88 01/31/97 3,050 0.00 0.00 MAINTENANC 365.00 07/26/88 . INSURANCE 20.25 MERCHANTS 113.28 REAL ESTAT 36.25 -------- 534.78 00 0 HEART 'N HOME 0.00 0.00 STORAGE 08/01/95 0039* DIPPER DAN 01/01/89 12/31/96 1,750 291.67 2.00 MAINTENANC 180.93 01/01/89 INSURANCE 17.50 MERCHANTS 69.94 REAL ESTAT 23.33 -------- 291.70 00410 CATOS 05/01/85 12/31/96 6,000 0.00 0.00 MAINTENANC 375.00 05/01/85 REAL ESTAT 70.17 TRASH REMO 5.00 -------- 450.17 00480 MONTGOMERY WARD 11/12/69 11/30/99 60,400 6,250.00 1.24 11/12/69
- --------------------------------------------------------- Page: 17 Date: 05/14/96 Report Date: 05/14/96 Time: 13:44:53 - --------------------------------------------------------- Suite ---Future Rent Increases--- No. Tenant Name Date Monthly Amt. Per Sf - --------------------------------------------------------- 00000 GROUND LEASE FOR PARKING LOT 0011* NORTHSIDE FITNESS 0014C WORLD HORIZON TRAVEL STORAGE 00190 ORIENTAL IMPORTS 00230 CCS COMPUTER SERV 00250 WALMART 00310 COUNTRY HEART STORAGE 0032* MARK TWAIN SHOP 00 0 HEART 'N HOME STORAGE 0039* DIPPER DAN 00410 CATOS 00480 MONTGOMERY WARD Mark Centers Trust Net operating income for the mortgaged properties ================================================================================ Northside ================================================================================ For the years ended December 31,
1st Qtr 96 9 months Actuals budget Total 1996 1995 1994 1993 ------- ------ ---------- ---- ---- ---- Income Rent $194,392 $ 585,971 $780,363 $ 727,028 $645,494 $ 469,139 Percentage rents 186,974 112,188 299,162 318,300 249,122 240,356 Common area maintenance 31,056 81,558 112,614 100,981 83,303 72,892 Real estate tax 9,156 21,240 30,396 38,407 19,788 53,571 Utility 56 351 407 2,406 (1,565) 4,413 Insurance 582 2,646 3,228 1,472 1,310 865 Ground rent 0 0 0 0 0 0 Other 480 3,510 3,990 (622) 11,214 16,000 ------------------------------------------------------------------------------ Total Income 422,696 807,464 1,230,160 1,187,972 1,008,666 857,236 ------------------------------------------------------------------------------ Expenses Landscaping 9,096 21,735 30,831 29,625 18,553 18,497 Cleaning 10,139 20,370 30,509 21,101 19,734 19,587 Utilites 22,922 81,322 104,244 118,730 104,850 119,822 Security 7,884 27,495 35,379 27,397 30,290 25,673 Maint. and repairs 16,205 37,565 53,770 48,708 65,453 67,719 Real estate tax 13,608 40,815 54,423 54,612 53,970 56,381 Insurance 6,168 25,074 31,242 33,331 38,645 44,443 Provision for bad debt 3,820 7,524 11,344 1,131 3,139 411 Salaries and wages 38,073 112,959 151,032 133,676 131,063 112,437 Ground rent 1,259 3,780 5,039 5,038 5,038 5,184 Professional fees 7,635 9,000 16,635 12,818 16,096 6,974 Other 7,315 19,413 26,728 42,898 27,550 21,313 ------------------------------------------------------------------------------ Total expenses 144,124 407,052 551,176 529,065 514,381 498,442 ------------------------------------------------------------------------------ Net operating income $ 278,572 $ 400,412 $ 678,984 $ 658,907 $ 494,285 $ 358,794 ==============================================================================
Note: Capital expenditures is provided under section B of Exhibit A 05/16/96 RETAIL SALE 4 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap Overall Capitalization Rate (OAR): 10.96 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $29.64 Comments The center is located across Macon Highway from the Columbus Square Mall at one of the busiest intersections in Columbus. The existing vacancy is generally the least desirable space in the center. The property includes five outparcels, including a movie theater, a bank and two restaurants. Access and visibility are good. ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE 1 ================================================================================ Location Data Property Name: Wiregrass Commons Location: Highway 231 & Ross Clark Circle City: Dothan County: Houston State/Zip: Alabama Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Regional Mall Gross Leaseable Area: 710,000 SF Year Built: 1986 Exterior Walls: Masonry Condition: Good Anchor Tenant: Gayfer's, JC Penney, McCrae's, Parisian Parking: 3,374 surface spaces Lease Data Occupancy: Local: 86% Overall: 94% Typical Size: 2,000 SF Term: 5 years Base Rent Per Square Foot: $10.00 - $16.00 Rent Escalations: Negotiable Basis: Net Expense Pass-Through: Triple Net Free Rent (months): None Tenant Improvement: Negotiable Leasing Agent: Faison-Stone Phone No.: (704)331-2549 Survey Date: 7/96 ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE 3 ================================================================================ Comments This property has good access and visibility. Some of the tenants pay percentage rent only, as opposed to base rent. The center includes room for additional expansion of the local shop space. Photograph [GRAPHIC OMITTED] ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE 4 ================================================================================ Location Data Property Name: Northside Plaza Location: Ross Clark Circle and Denton Road City: Dothan County: Houston State/Zip: Alabama Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 71,348 SF Year Built: 1981 Exterior Walls: Masonry Condition: Average Anchor Tenant: Food World, Big B Drugs Parking: adequate surface parking Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 1,200 SF Term: 3 years Base Rent Per Square Foot: $7.00 - $8.00 Rent Escalations: Negotiable Basis: Net Expense Pass-Through: Triple Net Free Rent (months): None Tenant Improvement: Negotiable Leasing Agent: Lummus Company Phone No.: (205)794-0502 Survey Date: 7/96 ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE 4 Comments This property has average access and visibility. Photograph [GRAPHIC OMITTED] ================================================================================ CB COMMERCIAL ================================================================================ ADDENDUM H PRO-JECT REPORTS ================================================================================ Addendum H PRO-JECT REPORTS - -------------------------------------------------------------------------------- NORTHSIDE MALL PROJECT ASSUMPTIONS REPORT EXCLUDING TENANTS BUILDING PROLOGUE LEASEHOLD ANALYSIS OF NORTHSIDE MALL BEGINNING 7/1996 FOR 13 YEARS ON A FISCAL YEAR BASIS AREA MEASURES GRSF 1996 VALUE - 381,677 THEREAFTER - CONSTANT OCSF 1996 VALUE - 342,060 1997 VALUE - 329,355 1998 VALUE - 345,064 1999 VALUE - 340,451 2000 VALUE - 334,036 2001 VALUE - 340,644 2002 VALUE - 336,751 2003 VALUE - 333,619 2004 VALUE - 342,937 2005 VALUE - 340,576 2006 VALUE - 331,705 2007 VALUE - 336,837 2008 VALUE - 357,902 THEREAFTER - CONSTANT CAML 1996 VALUE - 165,727 THEREAFTER - CONSTANT GROWTH RATES RNTG 1996 VALUE - 0.00 1997 VALUE - 3.00 THEREAFTER - CONSTANT EXPG 1996 VALUE - 3.00 1997 VALUE - 3.50 THEREAFTER - CONSTANT COMN 1996 VALUE - 0.00 THEREAFTER - CONSTANT COMR 1996 VALUE - 0.00 THEREAFTER - CONSTANT COMS +40.0% OF COMN +60.0% OF COMR MARKET RATES RNT1 1996 VALUE - 3.00 THEREAFTER - GROWING AT GROWTH RATE RNTG PAGE 2 TIAN 1996 VALUE - 1.00 THEREAFTER - GROWING AT GROWTH RATE EXPG TIAS +35.0% OF TIAN FRER 1996 VALUE - 0.00 THEREAFTER - CONSTANT RNT2 1996 VALUE - 5.00 THEREAFTER - GROWING AT GROWTH RATE RNTG RNT3 1996 VALUE - 3.00 THEREAFTER - GROWING AT GROWTH RATE RNTG RNT4 1996 VALUE - 8.00 THEREAFTER - GROWING AT GROWTH RATE RNTG MISCELLANEOUS INCOMES OTHER INCOME 1996 VALUE - 4,000 THEREAFTER - GROWING AT GROWTH RATE RNTG EXPENSES COMMON AREA MAINT , REFERRED TO AS CAME CHARGED AGAINST NET OPERATING INCONE 1996 VALUE - 255,000 1997 VALUE - 255,000 THEREAFTER - GROWING AT GROWTH RATE EXPG REAL ESTATE TAXES , REFERRED TO AS TAXE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 54,406 THEREAFTER - GROWING AT GROWTH RATE EXPG INSURANCE , REFERRED TO AS INSE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 31,250 1997 VALUE - 31,250 THEREAFTER - GROWING AT GROWTH RATE EXPG CAM & INS REC BASE, REFERRED TO AS C&IB AN INFORMATIONAL EXPENSE +100.0% OF CAME+1OO.O% OF INSE MANAGEMENT FEE , REFERRED TO AS MGMT CHARGED AGAINST NET OPERATING INCOME 5.00% OF EFFECTIVE GROSS INCOME GENERAL & ADMIN , REFERRED TO AS G&AE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 199,000 1997 VALUE - 199,000 THEREAFTER - GROWING AT GROWTH RATE EXPG RESERVES , REFERRED TO AS RESE CHARGED AGAINST NET OPERATING INCOME PAGE 3 1996 VALUE - 38,200 1997 VALUE - 38,200 THEREAFTER - GROWING AT GROWTH RATE EXPG \\\/ AN INFORMATIONAL EXPENSE CONSTANT VACANCY ALLOWANCE PERCENTAGE OF POTENTIAL GROSS INCOME FOR ALL TENANTS SUBJECT TO VACANCY 1996 VALUE - 2.00 THEREAFTER - CONSTANT MANAGEMENT FEE NONE COMMISSION CALCULATIONS STANDARD METHOD #1 - 0.000% OF TOTAL RENT STANDARD METHOD #2 - 0.000% OF TOTAL RENT STANDARD METHOD #3 - 0.000% OF TOTAL RENT STANDARD METHOD #4 - 0.000% OF TOTAL RENT STANDARD METHOD #5 - 0.000% OF TOTAL RENT COMMISSION PAYOUTS STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT ALTERATION CALCULATION NONE ALTERATION PAYOUTS STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT PAGE 4 STANDARD METHOD #5 - CASHED OUT COMMON AREA MAINTENANCE POOL NONE CAPITAL EXPENDITURES NONE PRIMARY CLASSIFICATION CODES NONE SECONDARY CLASSIFICATION CODES NONE COST CENTERS 100 - CAM RECOVERY 200 - RE TAX RECOVERY 300 - INS RECOVERY SALES VOLUME PROFILE PERCENT OF RELATIVE MONTH ANNUAL SALES VOLUME ----- ------------ ------ JAN 8.33% 1.00 FEB 8.33% 1.00 MAR 8.33% 1.00 APR 8.33% 1.00 MAY 8.33% 1.00 JUN 8.33% 1.00 JUL 8.33% 1.00 AUG 8.33% 1.00 SEP 8.33% 1.00 OCT 8.33% 1.00 NOV 8.33% 1.00 DEC 8.33% 1.00 ------ ----- TOTALS 100.00% 12.00 GLOBAL RECOVERIES NETR ASSIGNED TO COST CENTER 100 - CAM RECOVERY RECOVERY OF AMOUNTS OR RATES GROWING AT A RATE THEREAFTER - GROWING AT GROWTH RATE EXPG CAP - MARKET RATE FRER INSURANCE , REFERRED TO AS INSR ASSIGNED TO COST CENTER 100 - CAM RECOVERY PAGE 5 PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH CAM & TAX RECOVERY, REFERRED TO AS CAMS ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE \\\/ PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH TENANT PROLOGUE MINIMUM RENTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR SALES VOLUMES AND BREAKPOINTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR RENEWAL RENTS ARE COMPOUNDED ANNUALLY RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET REFERENCE TENANTS NONE NORTHSIDE MALL TENANT REGISTER TENANT SQUARE FEET BEGIN DATE END DATE - --------------------------------------------- ----------- ---------- -------- # 1 - SUITE 25 WALMART 111,970 10/1983 1/1999 # 2 - SUITE 19 ORIENTAL IMPORTS 2,010 2/1980 12/1996 # 3 - SUITE 32 MARK TWAIN SHOP 3,050 6/1988 1/1997 # 4 - SUITE 41 CATOS 6,000 2/1985 12/1996 # 5 - SUITE 48 MONTGOMERY WARD 60,400 11/1969 11/1999 # 6 - SUITE 48S MONTGOMERY WARD 16,740 6/1990 11/2013 # 7 - SUITE 58 BUGLE BOY 10,000 11/1989 12/1996 # 8 - SUITE 58S BUGLE BOY 5,480 11/1989 12/1996 # 9 - SUITE 2 OR IMPORTS STORAGE 2,024 6/1996 12/1996 # 10 - SUITE 30 SE ALA EMER MED 3,854 5/1992 4/1997 # 11 - SUITE 1 & 24 SHEPHERD'S CAFE 11,008 11/1995 1/2001 # 12 - SUITE 10,11,12 NORTHSIDE FITNESS 15,300 12/1991 12/1996 # 13 - SUITE 14C FAIR WINDS TRAVEL 393 4/1991 12/1996 # 14 - SUITE 14D EVANS BARBER SHOP 235 4/1985 12/1996 # 15 - SUITE 23 CCS COMPUTERS 825 6/1996 5/1997 # 16 - SUITE 29 LOWERY JEWELERS 1,860 2/1996 2/1997 # 17 - SUITE 31 COUNTRY AT HEART 3,050 6/1996 12/1996 # 18 - SUITE 33/34/35 COUNTRY AT HEART 6,070 1/1994 11/1997 # 19 - SUITE 36 HEART AND HOME 1,650 9/1995 9/1997 # 20 - SUITE 37 HEART & HOME 1,120 8/1995 12/1996 # 21 - SUITE 38 ART LEAGUE 1,400 11/1995 12/1996 # 22 - SUITE 39 DIPPER DAN 1,750 1/1989 12/1996 # 23 - SUITE 42 SOUTHERN SAMPLER 3,000 11/1995 12/2000 # 24 - SUITE 43 SOUTHERN SAMPLER 2,000 6/1996 12/1996 # 25 - SUITE 49 ONE PRICE CLOTHING 3,301 11/1993 1/1999 # 26 - SUITE 50 EVANS BARBER SHOP 630 4/1985 12/1996 # 27 - SUITE 51 THE CAKE BOX 1,446 12/1988 12/1996 # 28 - SUITE 54 BOOKS A MILLION 18,066 9/1995 1/2006 # 29 - SUITE 55 GOODY'S 26,840 12/1993 11/2003 # 30 - SUITE 56 SIMPLY 6 3,000 7/1993 7/2003 # 31 - SUITE 57 TOP GUN AIRBRUSH 300 12/1994 12/1996 # 32 - SUITE 57A JOKERS WILD 785 1/1996 12/1996 # 33 - SUITE 59 G. STENDER 750 9/1994 10/1999 # 34 - SUITE 5..18 TROY STATE UNIV 18,400 12/1994 12/1996 # 35 - SUITE 71 SOUTHTRUST BANK 1 6/1970 5/2000 # 36 - SUITE 1000K DAVIS THEATERS 1 5/1989 4/2009 # 37 - SUITE 8 VACANCY 318 7/2008 6/2009 # 38 - SUITE 22 VACANCY 4,500 7/2008 6/2009 # 39 - SUITE 26 VACANCY 2,250 7/2008 6/2009 # 40 - SUITE 27 VACANCY 2,250 7/2008 6/2009 # 41 - SUITE 28 VACANCY 4,880 7/2008 6/2009 # 42 - SUITE 30 VACANCY 2,630 7/2008 6/2009 # 43 - SUITE 40 VACANCY 3,150 7/2008 6/2009 # 44 - SUITE 44 VACANCY 4,000 7/2008 6/2009 # 45 - SUITE 45 VACANCY 5,000 7/2008 6/2009 # 46 - SUITE 46 VACANCY 2,250 7/2008 6/2009 # 47 - SUITE 47 VACANCY 2,250 7/2008 6/2009 # 48 - SUITE 56A VACANCY 1,425 7/2008 6/2009 # 49 - SUITE 60 VACANCY 700 7/2008 6/2009 # 50 - SUITE 21 COMMUNITY ROOM 1,049 6/1996 5/2016 # 51 - SUITE 20 BREAK ROOM 318 6/1996 5/2016 ------- 51 TENANTS 381,679 ======= NORTHSIDE MALL RENT ROLL AS OF 7/1996 (FISCAL YEAR BASIS) TENANT/ LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES (000)/ RECOVERIES/ REVENUE/ SQUARE FEET PER SF PER SF PER SF PER SF PER SF - -------------------- ---------- -------- ------------ ----------- -------- # 1 - SUITE 25 WALMART BASE LEASE 10/83-1/99 220,021 174,250 33,425 40,833 435,104 111,970 SF 1.96 1.56 298.52 0.36 3.89 # 2 - SUITE 19 ORIENTAL IMPORTS BASE LEASE 2/80-12/96 1,508 2,890 87 770 5,168 2,010 SF 0.75 1.44 43.13 0.38 2.57 # 3 - SUITE 32 MARK TWAIN SHOP BASE LEASE 6/88-1/97 1,525 2,666 101 3,593 7,784 3,050 SF 0.50 0.87 33.10 1.18 2.55 # 4 - SUITE 41 CATOS BASE LEASE 2/85-12/96 4,500 8,698 326 7,695 20,893 6,000 SF 0.75 1.45 54.36 1.28 3.48 # 5 - SUITE 48 MONTGOMERY WARD BASE LEASE 11/69-11/99 74,896 69,854 7,650 0 144,750 60,400 SF 1.24 1.16 126.66 0.00 2.40 # 6 - SUITE 48S MONTGOMERY WARD BASE LEASE 6/90-11/13 17,898 0 0 0 17,898 16,740 SF 1.07 0.00 0.00 0.00 1.07 # 7 - SUITE 58 BUGLE BOY BASE LEASE 11/89-12/96 12,500 10,160 1,071 8,492 31,152 10,000 SF 1.25 1.02 107.05 0.85 3.12 # 8 - SUITE 58S BUGLE BOY BASE LEASE 11/89-12/96 6,850 0 0 1,228 8,078 5,480 SF 1.25 0.00 0.00 0.22 1.47 # 9 - SUITE 2 OR IMPORTS STORAGE BASE LEASE 6/96-12/96 1,518 0 0 453 1,971 2,024 SF 0.75 0.00 0.00 0.22 0.97 # 10 - SUITE 30 SE ALA EMER MED BASE LEASE 5/92-4/97 7,515 0 0 0 7,515 3,854 SF 1.95 0.00 0.00 0.00 1.95 # 11 - SUITE 1 & 24 SHEPHERD'S CAFE BASE LEASE 11/95-1/01 33,024 0 0 9,849 42,873 11,008 SF 3.00 0.00 0.00 0.89 3.89 # 12 - SUITE 10,11,12 NORTHSIDE FITNESS BASE LEASE 12/91-12/96 22,644 0 0 0 22,644 15,300 SF 1.48 0.00 0.00 0.00 1.48 [page illegible] 1996 VALUE 1997 VALUE THEREAFTER \\\/ AN INFORMATION CONSTANT VACANCY ALLOWANCE PERCENTAGE OF FOR ALL TENANTS 1996 VALUE THEREAFTER MANAGEMENT FEE NONE COMMISSION CAL STANDARD METHO STANDARD METHO STANDARD METHO STANDARD METHO STANDARD METHO COMMISSION PA STANDARD METHO STANDARD METHO STANDARD METHO STANDARD METHO STANDARD METHO ALTERATION CAL NONE ALTERATION PAY STANDARD METHO: STANDARD METNO: STANDARD METHO: STANDARD METHO: PAGE 4 [page illegible] PAGE 5 PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH CAM & TAX RECOVERY, REFERRED TO AS CAMS ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE \\\/ PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH TENANT PROLOGUE MINIMUM RENTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR SALES VOLUMES AND BREAKPOINTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR RENEWAL RENTS ARE COMPOUNDED ANNUALLY RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET REFERENCE TENANTS NONE NORTHSIDE MALL TENANT REGISTER TENANT SQUARE FEET BEGIN DATE END DATE - --------------------------------------------- ----------- ---------- -------- # 1 - SUITE 25 WALMART 111,970 10/1983 1/1999 # 2 - SUITE 19 ORIENTAL IMPORTS 2,010 2/1980 12/1996 # 3 - SUITE 32 MARK TWAIN SHOP 3,050 6/1988 1/1997 # 4 - SUITE 41 CATOS 6,000 2/1985 12/1996 # 5 - SUITE 48 MONTGOMERY WARD 60,400 11/1969 11/1999 # 6 - SUITE 48S MONTGOMERY WARD 16,740 6/1990 11/2013 # 7 - SUITE 58 BUGLE BOY 10,000 11/1989 12/1996 # 8 - SUITE 58S BUGLE BOY 5,480 11/1989 12/1996 # 9 - SUITE 2 OR IMPORTS STORAGE 2,024 6/1996 12/1996 # 10 - SUITE 30 SE ALA EMER MED 3,854 5/1992 4/1997 # 11 - SUITE 1 & 24 SHEPHERD'S CAFE 11,008 11/1995 1/2001 # 12 - SUITE 10,11,12 NORTHSIDE FITNESS 15,300 12/1991 12/1996 # 13 - SUITE 14C FAIR WINDS TRAVEL 393 4/1991 12/1996 # 14 - SUITE 14D EVANS BARBER SHOP 235 4/1985 12/1996 # 15 - SUITE 23 CCS COMPUTERS 825 6/1996 5/1997 # 16 - SUITE 29 LOWERY JEWELERS 1,860 2/1996 2/1997 # 17 - SUITE 31 COUNTRY AT HEART 3,050 6/1996 12/1996 # 18 - SUITE 33/34/35 COUNTRY AT HEART 6,070 1/1994 11/1997 # 19 - SUITE 36 HEART AND HOME 1,650 9/1995 9/1997 # 20 - SUITE 37 HEART & HOME 1,120 8/1995 12/1996 # 21 - SUITE 38 ART LEAGUE 1,400 11/1995 12/1996 # 22 - SUITE 39 DIPPER DAN 1,750 1/1989 12/1996 # 23 - SUITE 42 SOUTHERN SAMPLER 3,000 11/1995 12/2000 # 24 - SUITE 43 SOUTHERN SAMPLER 2,000 6/1996 12/1996 # 25 - SUITE 49 ONE PRICE CLOTHING 3,301 11/1993 1/1999 # 26 - SUITE 50 EVANS BARBER SHOP 630 4/1985 12/1996 # 27 - SUITE 51 THE CAKE BOX 1,446 12/1988 12/1996 # 28 - SUITE 54 BOOKS A MILLION 18,066 9/1995 1/2006 # 29 - SUITE 55 GOODY'S 26,840 12/1993 11/2003 # 30 - SUITE 56 SIMPLY 6 3,000 7/1993 7/2003 # 31 - SUITE 57 TOP GUN AIRBRUSH 300 12/1994 12/1996 # 32 - SUITE 57A JOKERS WILD 785 1/1996 12/1996 # 33 - SUITE 59 G. STENDER 750 9/1994 10/1999 # 34 - SUITE 5..18 TROY STATE UNIV 18,400 12/1994 12/1996 # 35 - SUITE 71 SOUTHTRUST BANK 1 6/1970 5/2000 # 36 - SUITE 1000K DAVIS THEATERS 1 5/1989 4/2009 # 37 - SUITE 8 VACANCY 318 7/2008 6/2009 # 38 - SUITE 22 VACANCY 4,500 7/2008 6/2009 # 39 - SUITE 26 VACANCY 2,250 7/2008 6/2009 # 40 - SUITE 27 VACANCY 2,250 7/2008 6/2009 # 41 - SUITE 28 VACANCY 4,880 7/2008 6/2009 # 42 - SUITE 30 VACANCY 2,630 7/2008 6/2009 # 43 - SUITE 40 VACANCY 3,150 7/2008 6/2009 # 44 - SUITE 44 VACANCY 4,000 7/2008 6/2009 # 45 - SUITE 45 VACANCY 5,000 7/2008 6/2009 # 46 - SUITE 46 VACANCY 2,250 7/2008 6/2009 # 47 - SUITE 47 VACANCY 2,250 7/2008 6/2009 # 48 - SUITE 56A VACANCY 1,425 7/2008 6/2009 # 49 - SUITE 60 VACANCY 700 7/2008 6/2009 # 50 - SUITE 21 COMMUNITY ROOM 1,049 6/1996 5/2016 # 51 - SUITE 20 BREAK ROOM 318 6/1996 5/2016 ------- 51 TENANTS 381,679 ======= NORTHSIDE MALL RENT ROLL AS OF 7/1996 (FISCAL YEAR BASIS) TENANT/ LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES (000)/ RECOVERIES/ REVENUE/ SQUARE FEET PER SF PER SF PER SF PER SF PER SF - -------------------- ---------- -------- ------------ ----------- -------- # 1 - SUITE 25 WALMART BASE LEASE 10/83-1/99 220,021 174,250 33,425 40,833 435,104 111,970 SF 1.96 1.56 298.52 0.36 3.89 # 2 - SUITE 19 ORIENTAL IMPORTS BASE LEASE 2/80-12/96 1,508 2,890 87 770 5,168 2,010 SF 0.75 1.44 43.13 0.38 2.57 # 3 - SUITE 32 MARK TWAIN SHOP BASE LEASE 6/88-1/97 1,525 2,666 101 3,593 7,784 3,050 SF 0.50 0.87 33.10 1.18 2.55 # 4 - SUITE 41 CATOS BASE LEASE 2/85-12/96 4,500 8,698 326 7,695 20,893 6,000 SF 0.75 1.45 54.36 1.28 3.48 # 5 - SUITE 48 MONTGOMERY WARD BASE LEASE 11/69-11/99 74,896 69,854 7,650 0 144,750 60,400 SF 1.24 1.16 126.66 0.00 2.40 # 6 - SUITE 48S MONTGOMERY WARD BASE LEASE 6/90-11/13 17,898 0 0 0 17,898 16,740 SF 1.07 0.00 0.00 0.00 1.07 # 7 - SUITE 58 BUGLE BOY BASE LEASE 11/89-12/96 12,500 10,160 1,071 8,492 31,152 10,000 SF 1.25 1.02 107.05 0.85 3.12 # 8 - SUITE 58S BUGLE BOY BASE LEASE 11/89-12/96 6,850 0 0 1,228 8,078 5,480 SF 1.25 0.00 0.00 0.22 1.47 # 9 - SUITE 2 OR IMPORTS STORAGE BASE LEASE 6/96-12/96 1,518 0 0 453 1,971 2,024 SF 0.75 0.00 0.00 0.22 0.97 # 10 - SUITE 30 SE ALA EMER MED BASE LEASE 5/92-4/97 7,515 0 0 0 7,515 3,854 SF 1.95 0.00 0.00 0.00 1.95 # 11 - SUITE 1 & 24 SHEPHERD'S CAFE BASE LEASE 11/95-1/01 33,024 0 0 9,849 42,873 11,008 SF 3.00 0.00 0.00 0.89 3.89 # 12 - SUITE 10,11,12 NORTHSIDE FITNESS BASE LEASE 12/91-12/96 22,644 0 0 0 22,644 15,300 SF 1.48 0.00 0.00 0.00 1.48 PAGE 2 TENANT/ LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES (000)/ RECOVERIES/ REVENUE/ SQUARE FEET PER SF PER SF PER SF PER SF PER SF - -------------------- ---------- -------- ------------ ----------- -------- # 13 - SUITE 14C FAIR WINDS TRAVEL BASE LEASE 4/91-12/96 415 0 0 0 415 393 SF 1.06 0.00 0.00 0.00 1.06 # 14 - SUITE 14D EVANS BARBER SHOP BASE LEASE 4/85-12/96 327 0 0 0 327 235 SF 1.39 0.00 0.00 0.00 1.39 # 15 - SUITE 23 CCS COMPUTERS BASE LEASE 6/96-5/97 3,849 0 0 1,164 5,013 825 SF 4.67 0.00 0.00 1.41 6.08 # 16 - SUITE 29 LOWERY JEWELERS BASE LEASE 2/96/2/97 4,061 0 0 2,124 6,185 1,860 SF 2.18 0.00 0.00 1.41 3.33 # 17 - SUITE 31 COUNTRY AT HEART BASE LEASE 6/96-12/96 2,471 0 0 683 3,154 3,050 SF 0.81 0.00 0.00 0.22 1.03 # 18 - SUITE 33/34/35 COUNTRY AT HEART BASE LEASE 1/94-11/97 26,683 0 0 4,492 31,175 6,070 SF 4.40 0.00 0.00 0.74 5.14 # 19 - SUITE 36 HEART AND HOME BASE LEASE 9/95-9/97 8,993 0 0 1,476 10,469 1,650 SF 5.45 0.00 0.00 0.89 6.34 # 20 - SUlTE 37 HEART & HOME BASE LEASE 8/95-12/96 840 0 0 251 1,091 1,120 SF 0.75 0.00 0.00 0.22 0.97 # 21 - SUITE 38 ART LEAGUE BASE LEASE 11/95-12/96 1,351 0 0 314 1,665 1,400 SF 0.96 0.00 0.00 0.22 1.19 # 22 - SUITE 39 DIPPER DAN BASE LEASE 1/89-12/96 3,063 0 0 517 3,580 1,750 SF 1.75 0.00 0.00 0.30 2.05 # 23 - SUITE 42 SOUTHERN SAMPLER BASE LEASE 11/95-12/00 10,500 0 0 2,684 13,184 3,000 SF 3.50 0.00 0.00 0.89 4.39 # 24 - SUITE 43 SOUTHERN SAMPLER BASE LEASE 6/96-12/96 2,100 0 0 448 2,548 2,000 SF 1.05 0.00 0.00 0.22 1.27 PAGE 3 TENANT/ LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES (000)/ RECOVERIES/ REVENUE/ SQUARE FEET PER SF PER SF PER SF PER SF PER SF - -------------------- ---------- -------- ------------ ----------- -------- # 25 - SUITE 49 ONE PRICE CLOTHING BASE LEASE 11/93-1/99 25,858 0 0 2,953 28,811 3,301 SF 7.83 0.00 0.00 0.89 8.73 # 26 - SUITE 50 EVANS BARBER SHOP BASE LEASE 4/85-12/96 4,410 0 0 141 4,551 630 SF 7.00 0.00 0.00 0.22 7.22 # 27 - SUITE 51 THE CAKE BOX BASE LEASE 12/88-12/96 4,613 0 0 970 5,583 1,446 SF 3.19 0.00 0.00 0.67 3.86 # 28 - SUITE 54 BOOKS A MILLION BASE LEASE 9/95-1/06 90,330 0 0 16,163 106,493 18,066 SF 5.00 0.00 0.00 0.89 5.89 # 29 - SUITE 55 GOODY'S BASE LEASE 12/93-11/03 147,620 0 0 19,501 167,121 26,840 SF 5.50 0.00 0.00 0.73 6.23 # 30 - SUITE 56 SIMPLY 6 BASE LEASE 7/93-7/03 15,000 0 0 0 15,000 3,000 SF 5.00 0.00 0.00 0.00 5.00 # 31 - SUITE 57 TOP GUN AIRBRUSH BASE LEASE 12/94-12/96 1,200 0 0 248 1,448 300 SF 4.00 0.00 0.00 0.83 4.83 # 32 - SUITE 57A JOKERS WILD BASE LEASE 1/96-12/96 2,755 0 0 792 3,547 785 SF 3.51 0.00 0.00 1.01 4.52 # 33 - SUITE 59 G. STENDER BASE LEASE 9/94-10/99 6,500 0 0 671 7,171 750 SF 8.67 0.00 0.00 0.89 9.56 # 34 - SUITE 5..18 TROY STATE UNIV BASE LEASE 12/94-12/96 27,600 0 0 0 27,600 18,400 SF 1.50 0.00 0.00 0.00 1.50 # 35 - SUITE 71 SOUTHTRUST BANK BASE LEASE 6/70-5/00 8,580 0 0 0 8,580 1 SF 8,580.00 0.00 0.00 0.00 8,580.00 # 36 - SUITE 1000K DAVIS THEATERS BASE LEASE 5/89-4/09 0 0 0 6,000 6,000 1 SF 0.00 0.00 0.00 6,000.00 6,000.00 Page 4 TENANT/ LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES (000)/ RECOVERIES/ REVENUE/ SQUARE FEET PER SF PER SF PER SF PER SF PER SF - -------------------- ---------- -------- ------------ ----------- -------- # 50 - SUITE 21 COMMUNITY ROOM BASE LEASE 6/96-5/16 0 0 0 0 0 1,049 SF 0.00 0.00 0.00 0.00 0.00 # 51 - SUITE 20 BREAK ROOM BASE LEASE 6/96-5/16 0 0 0 0 0 318 SF 0.00 0.00 0.00 0.00 0.00 ------- ------- ------ ------- --------- TOTALS 803,518 268,518 42,659 134,505 1,206,541 346,076 SF 2.32 0.78 123.27 0.39 3.49 ======= ======= ====== ======= ========= NORTHSIDE MALL EXPIRATION REPORT YEARS 1997 TO 2009, ALL TENANTS, EXCLUDING OPTIONS, EXCLUDING RENEWALS, BASE RENTS INCLUDING CPI ADJUSTMENTS, INCLUDING PERCENTAGE RENTS TERM/ BASE TOTAL MARKET TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF - -------------------- --------- -------- ------- ------- ------- -------- # 2-SUITE 19 INITIAL ORIENTAL IMPORTS 2,010 12/1996 2.88 0.23 3.10 3.00 # 4-SUITE 41 INITIAL CATOS 6,000 12/1996 2.90 0.43 3.33 3.00 # 7-SUITE 58 INITIAL BUGLE BOY 10,000 12/1996 2.03 1.25 3.28 5.00 # 8-SUITE 58S INITIAL BUGLE BOY 5,480 12/1996 0.00 0.00 0.00 5.00 # 9-SUITE 2 INITIAL OR IMPORTS STORAGE 2,024 12/1996 0.00 0.00 0.00 3.00 # 12-SUITE 10,11,12 INITIAL NORTHSIDE FITNESS 15,300 12/1996 1.46 0.00 1.46 3.00 # 13-SUITE 14C INITIAL FAIR WINDS TRAVEL 393 12/1996 0.61 0.00 0.61 3.00 # 14-SUITE 14D INITIAL EVANS BARBER SHOP 235 12/1996 1.28 0.00 1.28 3.00 # 17-SUITE 31 INITIAL COUNTRY AT HEART 3,050 12/1996 0.12 0.00 0.12 7.00 # 20-SUITE 37 INITIAL HEART & HOME 1,120 12/1996 0.00 0.00 0.00 7.00 # 21-SUITE 38 INITIAL ART LEAGUE 1,400 12/1996 0.43 0.00 0.43 7.00 # 22-SUITE 39 INITIAL DIPPER DAN 1,750 12/1996 2.00 0.07 2.07 7.00 # 24-SUITE 43 INITIAL SOUTHERN SAMPLER 2,000 12/1996 0.60 0.00 0.60 7.00 # 26-SUITE 50 INITIAL EVANS BARBER SHOP 630 12/1996 10.00 0.00 10.00 7.00 # 27-SUITE 51 INITIAL THE CAKE BOX 1,446 12/1996 4.88 0.27 5.15 7.00 # 31-SUITE 57 INITIAL TOP GUN AIRBRUSH 300 12/1996 8.00 1.64 9.64 7.00 # 32-SUITE 57A INITIAL JOKERS WILD 785 12/1996 3.03 1.57 4.60 7.00 # 34-SUITE 5.18 INITIAL TROY STATE UNIV 18,400 12/1996 3.00 0.00 3.00 3.00 # 3-SUITE 32 INITIAL MARK TWAIN SHOP 3,050 1/1997 1.50 0.47 1.97 7.00 # 16-SUITE 29 INITIAL LOWERY JEWELERS 1,860 2/1997 2.90 1.60 4.50 7.00 PAGE 2 TERM/ BASE TOTAL MARKET TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF - -------------------- --------- -------- ------- ------- ------- -------- # 10-SUITE 30 INITIAL SE ALA EMER MED 3,854 4/1997 2.34 0.00 2.34 3.00 # 15-SUITE 23 INITIAL CCS COMPUTERS 825 5/1997 5.09 0.36 5.45 3.00 ------- ------- ---- ------- ---- 22 FY 97 EXPIRATIONS 81,912 2.06 0.27 2.33 4.23 # 19-SUITE 36 INITIAL HEART AND HOME 1,650 9/1997 5.45 0.26 5.71 7.00 # 18-SUITE 33/34/35 INITIAL COUNTRY AT HEART 6,070 11/1997 4.50 0.74 5.24 7.00 ------- ------- ---- ------- ---- 2 FY 98 EXPIRATIONS 7,720 4.70 0.64 5.34 7.00 ------- ------- ---- ------- ---- 24 CUMULATIVE EXPS 89,632 2.29 0.31 2.59 4.47 # 25-SUITE 49 INITIAL ONE PRICE CLOTHING 3,301 1/1999 8.00 0.28 8.28 7.43 # 1-SUITE 25 INITIAL WALMART 111,970 1/1999 3.70 0.24 3.95 3.18 ------- ------- ---- ------- ---- 2 FY 99 EXPIRATIONS 115,271 3.83 0.25 4.07 3.30 ------- ------- ---- ------- ---- 26 CUMULATIVE EXPS 204,903 3.15 0.27 3.42 3.81 # 33-SUITE 59 INITIAL G. STENDER 750 10/1999 11.36 0.29 11.65 7.43 # 5-SUITE 48 INITIAL MONTGOMERY WARD 60,400 11/1999 2.51 0.00 2.51 3.18 # 35-SUITE 71 INITIAL SOUTHTRUST BANK 1 5/2000 8580.00 0.00 8580.00 7.65 ------- ------- ---- ------- ---- 3 FY 100 EXPIRATIONS 61,151 2.76 0.00 2.76 3.23 ------- ------- ---- ------- ---- 29 CUMULATIVE EXPS 266,054 3.06 0.21 3.27 3.68 # 23-SUITE 42 INITIAL SOUTHERN SAMPLER 3,000 12/2000 3.50 0.30 3.80 7.88 # 11-SUITE 1 & 24 INITIAL SHEPHERD'S CAFE 11,008 1/2001 3.00 0.30 3.30 3.38 ------- ------- ---- ------- ---- 2 FY 101 EXPIRATIONS 14,008 3.11 0.30 3.41 4.34 ------- ------- ---- ------- ---- 31 CUMULATIVE EXPS 280,062 3.06 0.22 3.28 3.71 # 30-SUITE 56 INITIAL SIMPLY 6 3,000 7/2003 5.00 0.00 5.00 8.36 PAGE 3 TERM/ BASE TOTAL MARKET TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF - -------------------- --------- -------- ------- ------- ------- -------- # 29-SUITE 55 INITIAL GOODY'S 26,840 11/2003 5.50 0.33 5.83 5.97 ------- ---- ---- ---- ---- 2 FY104 EXPIRATIONS 29,840 5.45 0.29 5.74 6.21 ------- ---- ---- ---- ---- 33 CUMULATIVE EXPS 309,902 3.29 0.22 3.52 3.95 # 28-SUITE 54 INITIAL BOOKS A MILLION 18,066 1/2006 5.25 0.36 5.61 6.52 ------- ---- ---- ---- ---- 1 FY106 EXPIRATIONS 18,066 5.25 0.36 5.61 6.52 ------- ---- ---- ---- ---- 34 CUMULATIVE EXPS 327,968 3.40 0.23 3.63 4.09 NORTHSIDE MALL AVERAGE OCCUPANCY REPORT FOR ALL TENANTS
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- JANUARY 334,950 292,453 340,006 327,376 345,326 341,426 346,076 346,076 341,397 346,076 346,076 FEBRUARY 336,810 289,403 340,006 324,075 346,076 330,418 346,076 345,326 345,251 346,076 345,326 MARCH 336,810 287,543 346,076 324,075 346,076 324,348 346,076 345.326 346,076 346,076 345,326 APRIL 336,810 341,166 346,076 342,775 307,753 328,998 312,076 345,326 341,426 346,076 345,326 MAY 336,810 340,362 346,076 346,076 304,703 340,006 308,775 346,076 341,426 346,076 333,568 JUNE 346,076 341,397 346,076 346,076 302,843 346,076 308,775 346,076 335,356 346,076 333,568 JULY 346,076 341,397 346,076 346,076 341,166 346,076 342,775 307,753 340,006 327,376 333,568 AUGUST 346,076 345,251 346,076 346,076 340,362 346,076 346,076 301,703 340,006 324,075 345,326 SEPTEMBER 346,076 346,076 346,076 346,076 341,397 346,076 346,076 299,843 346,076 324,075 345,326 OCTOBER 346,076 344,426 346,076 346,076 341,397 346,076 346,076 338,166 346,076 342,775 307,003 NOVEMBER 346,076 344,426 346,076 345,326 345,251 346,076 346,076 340,362 346,076 346,076 300,953 DECEMBER 346,076 338,356 346,076 345,326 346,076 346,076 346,076 341,397 346,076 346,076 299,093 AVERAGE SF OCCUPIED-OCSF 342,060 329,355 345,064 340,451 334,036 340,644 336,751 333,619 342,937 340,576 331,705 TOTAL SF-GRSF 381,677 381,677 381,677 381,677 381,677 381,677 381,677 381,677 381,677 381,617 381,677 OCCUPANCY % 89.62 86.29 90.41 89.20 87.52 89.25 88.23 87.41 89.85 89.23 86.91
2007 2008 ---- ---- JANUARY 337,416 345,326 FEBRUARY 339,612 345,326 MARCH 340,647 345,326 APRIL 340,647 345,326 MAY 344,501 345,326 JUNE 345,326 345,326 JULY 325,376 380,929 AUGUST 325,376 380,929 SEPTEMBER 319,306 380,929 OCTOBER 339,256 362,229 NOVEMBER 339,256 358,928 DECEMBER 345,326 358,928 AVERAGE SF OCCUPIED-OCSF 336,837 357,902 TOTAL SF-GRSF 381,677 381,677 ------- ------- OCCUPANCY % 88.25 93.77 ======= ======= NORTHSIDE MALL ANNUAL TENANT REVENUE REPORT FOR ALL TENANTS 1. SUITE 25 WALMART OCCUPIES 111,970 SF ( 29.34% OF GRSF) BASE LEASE FROM OCT 1983 TO JAN 1999
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 220,021 220,021 223,521 228,419 228,419 228,419 228,419 231,684 236,257 236,257 236,257 MINIMUM RENT/SF 1.96 1.96 2.00 2.04 2.04 2.04 2.04 2.07 2.11 2.11 2.11 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.64 3.74 3.86 3.97 PERCENTAGE RENT 174,250 179,264 189,442 199,925 210,723 221,844 233,300 245,099 257,252 269,769 282,662 PERCENTAGE RENT/SF 1.56 1.60 1.69 1.79 1.88 1.98 2.08 2.19 2.30 2.41 2.52 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- MIN + PERCENTAGE 394,271 399,285 412,963 428,344 439,142 450,263 461,719 476,783 493,509 506,026 518,919 MIN + PERCENTAGE/SF 3.52 3.57 3.69 3.83 3.92 4.02 4.12 4.26 4.41 4.52 4.63 MIN + PERCENT/SALES 1.2% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2% RE TAX RECOVERY 16,200 16,727 17,313 17,919 18,546 19,195 19,867 20,562 21,282 22,027 22,798 CAM RECOVERY 24,633 24,633 24,633 24,633 24,633 24,633 24,633 24,633 24,633 24,633 24,633 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL RECOVERIES 40,833 41,360 41,946 42,552 43,179 43,828 44,500 45,195 45,915 46.660 47,431 TOT RECOVERIES/SF 0.36 0.37 0.37 0.38 0.39 0.39 0.40 0.40 0.41 0.42 0.42 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL REVENUE 435,104 440,645 454,909 470,896 482,321 494,091 506,219 521,978 539,424 552,686 566,350 TOTAL REVENUE/SF 3.89 3.94 4.06 4.21 4.31 4.41 4.52 4.66 4.82 4.94 5.06 SALES VOLUME (000) 33,425 33,926 34,944 35,992 37,072 38,184 39,330 40,510 41,725 42,977 44,266 SALES VOLUME/SF 298.52 303.00 312.09 321.45 331.09 341.02 351.25 361.79 372.65 383.83 395.34 TOT REVENUE/SALES 1.3% 1.3% 1.3% 1.3% 1.3% 1.3% 1.3% 1.3% 1.3% 1.3% 1.3% 2. SUITE 19 ORIENTAL IMPORTS OCCUPIES 2,010 SF ( 0.53% OF GRSF) BASE LEASE FROM FEB 1980 TO DEC 1996 FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 1,508 6,030 6,030 4,523 6,589 6,589 6,589 5,400 7,200 7,200 5,852 MINIMUM RENT/SF 0.75 3.00 3.00 2.25 3.28 3.28 3.28 2.69 3.58 3.58 2.91 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.64 3.75 3.86 3.97 PERCENTAGE RENT 2,890 0 0 173 0 0 268 0 0 122 256 PERCENTAGE RENT/SF 1.44 0.00 0.00 0.09 0.00 0.00 0.13 0.00 0.00 0.06 0.13 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- MIN + PERCENTAGE 4,398 6,030 6,030 4,696 6,589 6,589 6,857 5,400 7,200 7,322 6,108 MIN + PERCENTAGE/SF 2.19 3.00 3.00 2.34 3.28 3.28 3.41 2.69 3.58 3.64 3.04 MIN + PERCENT/SALES 5.1% 5.1% 5.0% 5.1% 5.1% 5.0% 5.0% 5.1% 5.0% 4.9% 5.3% RE TAX RECOVERY 217 300 311 240 333 345 357 278 382 395 309 CAM RECOVERY 512 1,366 1,414 1,091 1,515 1,568 1,623 1,267 1,738 1,799 1,405 INS RECOVERY 41 167 173 134 186 192 199 155 213 220 172 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
PAGE 2 TOTAL RECOVERIES 770 1,833 1,898 1,465 2,034 2,105 2,179 1,700 2,333 2,414 1,886 TOT RECOVERIES/SF 0.38 0.91 0.94 0.73 1.01 1.05 1.08 0.85 1.16 1.20 0.94 ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- TOTAL REVENUE 5,168 7,863 7,928 6,161 8,623 8,694 9,036 7,100 9,533 9,736 7,994 TOTAL REVENUE/SF 2.57 3.91 3.94 3.07 4.29 4.33 4.50 3.53 4.74 4.84 3.98 SALES VOLUME (000) 87 117 121 93 128 132 136 106 144 149 115 SALES VOLUME/SF 43.13 58.38 60.13 46.22 63.79 65.70 67.67 52.53 71.79 73.95 57.41 TOT REVENUE/SALES 6.0% 6.7% 6.6% 6.6% 6.7% 6.6% 6.6% 6.7% 6.6% 6.6% 6.9%
3. SUITE 32 MARK TWAIN SHOP OCCUPIES 3,050 SF ( 0.80% OF GRSF) BASE LEASE FROM JUN 1988 TO JAN 1997
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 1,525 9,150 9,150 7.625 9,165 9,998 9,998 8,117 10,926 10,926 8,766 MINIMUM RENT/SF 0.50 3.00 3.00 2.50 3.00 3.28 3.28 2.66 3.58 3.58 2.87 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.64 3.75 3.86 3.97 PERCENTAGE RENT 2,666 0 0 0 0 0 0 0 0 0 0 PERCENTAGE RENT/SF 0.87 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- MIN + PERCENTAGE 4,191 9,150 9,150 7,625 9,165 9,998 9,998 8,117 10,926 10,926 8,766 MIN + PERCEHTAGE/SF 1.37 3.00 3.00 2.50 3.00 3.28 3.28 2.66 3.58 3.58 2.87 MIN + PERCENT/SALES 4.2% 4.4% 4.3% 4.1% 4.4% 4.3% 4.1% 4.3% 4.3% 4.1% 4.3% CAM RECOVERY 3,077 2,073 2,146 1,845 2,111 2,379 2,463 1,922 2,638 2,730 2,123 RE TAX RECOVERY 329 456 472 405 464 523 541 422 580 600 467 INS RECOVERY 187 254 263 226 259 292 302 236 323 335 260 ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- TOTAL RECOVERIES 3,593 2,783 2,881 2,476 2,834 3,194 3,306 2,580 3,541 3,665 2,850 TOT RECOVERIES/SF 1.18 0.91 0.94 0.81 0.93 1.05 1.08 0.85 1.16 1.20 0.93 ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- TOTAL REVENUE 7,784 11,933 12,031 10,101 11,999 13,192 13,304 10,697 14,467 14,591 11,616 TOTAL REVENUE/SF 2.55 3.91 3.94 3.31 3.93 4.33 4.36 3.51 4.74 4.78 3.81 SALES VOLUME (000) 101 209 215 184 210 235 242 188 257 265 205 SALES VOLUME/SF 33.10 68.51 70.57 60.39 68.72 77.11 79.42 61.66 84.26 86.79 67.16 TOT REVENUE/SALES 7.7% 5.7% 5.6% 5.5% 5.7% 5.6% 5.5% 5.7% 5.6% 5.5% 5.7% ALTERATIONS 1,100 0 0 0 1,219 0 0 1,352 0 0 1,551 ALTERATIONS/SF 0.36 0.00 0.00 0.00 0.40 0.00 0.00 0.44 0.00 0.00 0.51
4. SUITE 41 CATOS OCCUPIES 6,000 SF ( 1.57% OF GRSF) BASE LEASE FROM FEB 1985 TO DEC 1996 PAGE 3
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 4,500 18,000 18,000 13,500 19,669 19,669 19,669 16,120 21,493 21,493 17,468 MINIMUM RENT/SF 0.75 3.00 3.00 2.25 3.28 3.28 3.28 2.69 3.58 3.58 2.91 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.64 3.74 3.86 3.97 PERCENTAGE RENT 8,698 0 0 708 0 0 1,049 0 0 544 904 PERCENTAGE RENT/SF 1.45 0.00 0.00 0.12 0.00 0.00 0.17 0.00 0.00 0.09 0.15 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- MIN + PERCENTAGE 13,198 18,000 18,000 14,208 19,669 19,669 20,718 16,120 21,493 22,037 18,372 MIN + PERCENTAGE/SF 2.20 3.00 3.00 2.37 3.28 3.28 3.45 2.69 3.58 3.67 3.06 MIN + PERCENT/SALES 4.0% 4.1% 4.0% 4.1% 4.1% 4.0% 4.0% 4.1% 4.0% 3.9% 4.2% CAM RECOVERY 6,924 9,394 9,722 7,504 10,415 10,779 11,157 8,710 11,951 12,370 9,657 RE TAX RECOVERY 648 896 928 716 994 1,029 1,065 831 1,140 1,180 921 INS RECOVERY 123 500 517 399 554 574 594 463 636 658 514 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL RECOVERIES 7,695 10,790 11,167 8,619 11,963 12,382 12,816 10,004 13,727 14,208 11,092 TOT RECOVERIES/SF 1.28 1.80 1.86 1.44 1.99 2.06 2.14 1.67 2.29 2.37 1.85 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL REVENUE 20,893 28,790 29,167 22,827 31,632 32,051 33,534 26,124 35,220 36,245 29,464 TOTAL REVENUE/SF 3.48 4.80 4.86 3.80 5.27 5.34 5.59 4.35 5.87 6.04 4.91 SALES VOLUME (000) 326 441 455 349 482 497 512 397 543 559 434 SALES VOLUME/SF 54.36 73.57 75.78 58.25 80.39 82.80 85.29 66.21 90.48 93.20 72.35 TOT REVENUE/SALES 6.4% 6.5% 6.4% 6.5% 6.6% 6.5% 6.6% 6.6% 6.5% 6.5% 6.8% ALTERATIONS 2,163 0 0 0 2,398 0 0 2,659 0 0 3,051 ALTERATIONS/SF 0.36 0.00 0.00 0.00 0.40 0.00 0.00 0.44 0.00 0.00 0.51
5. SUITE 48 MONTGOMERY WARD OCCUPIES 60,400 SF ( 15.82% OF GRSF) BASE LEASE FROM NOV 1969 TO NOV 1999
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 74,896 74,896 74,896 74,896 74,896 74,896 74,896 74,896 74,896 74,896 74,896 MINIMUM RENT/SF 1.24 1.24 1.24 1.24 1.24 1.24 1.24 1.24 1.24 1.24 1.24 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.64 3.74 3.86 3.97 PERCENTAGE RENT 69,854 71,575 75,069 78,669 82.375 86,193 90,126 94,177 98,349 102,646 107,073 PERCENTAGE RENT/SF 1.16 1.19 1.24 1.30 1.36 1.43 1.49 1.56 1.63 1.70 1.77 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- MIN + PERCENTAGE 144,750 146,471 149,965 153,565 157,271 161,089 165,022 169,073 173,245 177,542 181,969 MIN + PERCENTAGE/SF 2.40 2.43 2.48 2.54 2.60 2.67 2.73 2.80 2.87 2.94 3.01 NIH + PERCENT/SALES 1.9% 1.9% 1.9% 1.9% 1.9% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8% ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0
PAGE 4 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL REVENUE 144,750 146,471 149,965 153,565 157,271 161,089 165,022 169,073 173,245 117,542 181,969 TOTAL REVENUE/SF 2.40 2.43 2.48 2.54 2.60 2.67 2.73 2.80 2.87 2.94 3.01 SALES VOLUME (000) 7,650 7,765 7,998 8,238 8,485 8,739 9,001 9,272 9,550 9,836 10,131 SALES VOLUME/SF 126.66 128.56 132.41 136.38 140.48 144.69 149.03 153.50 158.11 162.85 167.74 TOT REVENUE/SALES 1.9% 1.9% 1.9% 1.9% 1.9% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8%
6. SUITE 48S MONTGOMERY WARD OCCUPIES 16,740 SF ( 4.39% OF GRSF) BASE LEASE FROM JUN 1990 TO NOV 2013
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 17,898 18,735 19,572 20,409 21,246 22,083 22,920 23,757 24,594 25,431 26,268 MINIMUM RENT/SF 1.07 1.12 1.17 1.22 1.27 1.32 1.37 1.42 1.47 1.52 1.57 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.64 3.74 3.86 3.97 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL REVENUE 17,898 18,735 19,572 20,409 21,246 22,083 22,920 23,757 24,594 25,431 26,268 TOTAL REVENUE/SF 1.07 1.12 1.17 1.22 1.27 1.32 1.37 1.42 1.47 1.52 1.57
7. SUITE 58 BUGLE BOY OCCUPIES 10,000 SF ( 2.62% OF GRSF) BASE LEASE FROM NOV 1989 TO DEC 1996
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 12,500 50,000 50,000 37,500 54,636 54,636 54,636 44,777 59,703 59,703 48,524 MINIMUM RENT/SF 1.25 5.00 5.00 3.75 5.46 5.46 5.46 4.48 5.97 5.97 4.85 MARKET RENT/SF 5.00 5.08 5.23 5.38 5.55 5.71 5.88 6.06 6.24 6.43 6.62 PERCENTAGE RENT 10,160 0 0 0 0 0 0 0 0 0 0 PERCENTAGE RENT/SF 1.02 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- MIN + PERCENTAGE 22,660 50,000 50,000 37,500 54,636 54,636 54,636 44,777 59,703 59,703 48,524 MIN + PERCENTAGE/SF 2.27 5.00 5.00 3.75 5.46 5.46 5.46 4.48 5.97 5.97 4.85 MIN + PERCENT/SALES 2.1% 2.2% 2.1% 2.1% 2.2% 2.1% 2.1% 2.2% 2.1% 2.1% 2.2% CAM RECOVERY 7,920 6,798 7,036 5,430 7,537 7,801 8,074 6,303 8,649 8,952 6,989 RE TAX RECOVERY 367 1,494 1,546 1,193 1,656 1,714 1,174 1,385 1,901 1,967 1,536 INS RECOVERY 205 833 862 665 924 956 989 772 1,060 1,097 856 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
PAGE 5 TOTAL RECOVERIES 8,492 9.125 9,444 7,288 10,117 10,471 10,837 8,460 11,610 12,016 9,381 TOT RECOVERIES/SF 0.85 0.91 0.94 0.73 1.01 1.05 1.08 0.85 1.16 1.20 0.94 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 31,152 59,125 59,444 44,788 64,753 65,107 65,473 53,237 71,313 71,719 57,905 TOTAL REVENUE/SF 3.12 5.91 5.94 4.48 6.48 6.51 6.55 5.32 7.13 7.17 5.79 SALES VOLUME (000) 1,071 2,284 2,352 1,808 2,496 2,570 2,647 2,055 2,809 2,893 2,246 SALES VOLUME/SF 107.05 228.38 235.23 180.82 249.55 257.04 264.75 205.53 280.87 289.30 224.58 TOT REVENUE/SALES 2.9% 2.6% 2.5% 2.5% 2.6% 2.5% 2.5% 2.6% 2.5% 2.5% 2.6% ALTERATIONS 3,605 0 0 0 3,997 0 0 4,431 0 0 5,085 ALTERATIONS/SF 0.36 0.00 0.00 0.00 0.40 0.00 0.00 0.44 0.00 0.00 0.51
8. SUITE 58S BUGLE BOY OCCUPIES 5,480 SF ( 1.44% OF GRSF) BASE LEASE FROM NOV 1989 TO DEC 1996
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 6,850 27,400 27,400 20,550 29,941 29,941 29,941 24,538 32,717 32,717 26,591 MINIMUM RENT/SF 1.25 5.00 5.00 3.75 5.46 5.46 5.46 4.48 5.97 5.97 4.85 MARKET RENT/SF 5.00 5.07 5.23 5.38 5.55 5.71 5.88 6.06 6.24 6.43 6.62 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- CAM RECOVERY 915 3,725 3,856 2,976 4,130 4,275 4,424 3,454 4,740 4,905 3,830 RE TAX RECOVERY 201 819 847 654 908 939 972 759 1,042 1,078 842 INS RECOVERY 112 457 473 365 506 524 542 423 581 601 469 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 1,228 5,001 5,176 3,995 5,544 5,738 5,938 4,636 6,363 6,584 5,141 TOT RECOVERIES/SF 0.22 0.91 0.94 0.73 1.01 1.05 1.08 0.85 1.16 1.20 0.94 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 8,078 32,401 32,576 24,545 35,485 35,679 35,879 29,174 39,080 39,301 31,732 TOTAL REVENUE/SF 1.47 5.91 5.94 4.48 6.48 6.51 6.55 5.32 7.13 7.17 5.79 ALTERATIONS 1,976 0 0 0 2,190 0 0 2,428 0 0 2,787 ALTERATIONS/SF 0.36 0.00 0.00 0.00 0.40 0.00 0.00 0.44 0.00 0.00 0.51
9. SUITE 2 OR IMPORTS STORAGE OCCUPIES 2,024 SF ( 0.53% OF GRSF) BASE LEASE FROM JUN 1996 TO DEC 1996
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 1,518 6,072 6,072 4,554 6,635 6,635 6,635 5,438 7,250 7,250 5,893 MINIMUM RENT/SF 0.75 3.00 3.00 2.25 3.28 3.28 3.28 2.69 3.58 3.58 2.91 MARKET RENT/SF 3.00 3.04 3.14 3.23 3.33 3.43 3.53 3.63 3.74 3.86 3.97 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- --------
PAGE 6 CAM RECOVERY 338 1,376 1,424 1,099 1,525 1,579 1,634 1,276 1,751 1,812 1,414 RE TAX RECOVERY 74 302 313 242 335 347 359 280 385 398 311 INS RECOVERY 41 169 175 135 187 193 200 156 215 222 173 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 453 1,847 1,912 1,476 2,047 2,119 2,193 1,712 2,351 2,432 1,898 TOT RECOVERIES/SF 0.22 0.91 0.94 0.73 1.01 1.05 1.08 0.85 1.16 1.20 0.94 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 1,971 7,919 7,984 6,030 8,682 8,754 8,828 7,150 9,601 9,682 7,791 TOTAL REVENUE/SF 0.97 3.91 3.94 2.98 4.29 4.33 4.36 3.53 4.74 4.78 3.85 ALTERATIONS 730 0 0 0 809 0 0 897 0 0 1,029 ALTERATIOHS/SF 0.36 0.00 0.00 0.00 0.40 0.00 0.00 0.44 0.00 0.00 0.51
10. SUITE 30 SE ALA EMER MED OCCUPIES 3,854 SF ( 1.01% OF GRSF) BASE LEASE FROM MAY 1992 TO APR 1997
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 7,515 10,599 11,562 11,562 9,386 12,634 12,634 10,136 14,220 14,220 10,885 MINIMUM RENT/SF 1.95 2.75 3.00 3.00 2.44 3.28 3.28 2.63 3.69 3.69 2.82 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.64 3.75 3.86 3.97 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- CAM RECOVERY 0 2,405 2,712 2,807 2,191 3,006 3,112 2,420 3,333 3,450 2,663 RE TAX RECOVERY 0 529 596 617 482 661 684 532 733 158 585 INS RECOVERY 0 295 332 344 269 368 381 297 408 423 326 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 0 3,229 3,640 3,768 2,942 4,035 4,177 3,249 4,474 4,631 3,574 TOT RECOVERIES/SF 0.00 0.84 0.94 0.98 0.76 1.05 1.08 0.84 1.16 1.20 0.93 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 7,515 13,828 15,202 15,330 12,328 16,669 16,811 13,385 18,694 18,851 14,459 TOTAL REVENUE/SF 1.95 3.59 3.94 3.98 3.20 4.33 4.36 3.47 4.85 4.89 3.75 ALTERATIONS 0 1,389 0 0 1,540 0 0 1,768 0 0 1,960 ALTERATIONS/SF 0.00 0.36 0.00 0.00 0.40 0.00 0.00 0.46 0.00 0.00 0.51
11. SUITE 1 & 24 SHEPHERD'S CAFE OCCUPIES 11,008 SF ( 2.88% OF GRSF) BASE LEASE FROM NOV 1995 TO JAN 2001
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 33,024 33,024 33,024 33,024 25,459 37,169 37,169 37,169 37,169 30,974 39,498 MINIMUM RENT/SF 3.00 3.00 3.00 3.00 2.31 3.38 3.38 3.38 3.38 2.81 3.59 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.64 3.75 3.86 3.97 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- --------
PAGE 7 CAM RECOVERY 8,256 8,400 8,694 8,999 6,773 8,587 8,888 9,199 9,521 8,183 9,364 RE TAX RECOVERY 1,593 1,644 1,702 1,762 1,360 1,887 1,953 2,021 2,092 1,798 2,058 INS RECOVERY 0 0 0 0 172 1,052 1,089 1,127 1,167 1,003 1,147 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 9,849 10,044 10,396 10,761 8,305 11,526 11,930 12,347 12,780 10,984 12,569 TOT RECOVERIES/SF 0.89 0.91 0.94 0.98 0.75 1.05 1.08 1.12 1.16 1.00 1.14 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 42,873 43,068 43,420 43,785 33,764 48,695 49,099 49,516 49.949 41,958 52,067 TOTAL REVENUE/SF 3.89 3.91 3.94 3.98 3.07 4.42 4.46 4.50 4.54 3.81 4.73 ALTERATIONS 0 0 0 0 4,554 0 0 0 0 0 5,408 ALTERATIONS/SF 0.00 0.00 0.00 0.00 0.41 0.00 0.00 0.00 0.00 0.00 0.49
12. SUITE 10,11,12 NORTHSIDE FITNESS OCCUPIES 15,300 SF ( 4.01% OF GRSF) BASE LEASE FROM DEC 1991 TO DEC 1996
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 22,644 45,900 45,900 45,900 45,900 34,425 53,211 53,211 53,211 53,211 53,211 MINIMUM RENT/SF 1.48 3.00 3.00 3.00 3.00 2.25 3.48 3.48 3.48 3.48 3.48 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.64 3.74 3.86 3.97 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 22,644 45,900 45,900 45,900 45,900 34,425 53,211 53,211 53,211 53,211 53,211 TOTAL REVENUE/SF 1.48 3.00 3.00 3.00 3.00 2.25 3.48 3.48 3.48 3.48 3.48 ALTERATIONS 5,516 0 0 0 0 0 6,551 0 0 0 0 ALTERATIONS/SF 0.36 0.00 0.00 0.00 0.00 0.00 0.43 0.00 0.00 0.00 0.00
13. SUITE 14C FAIR WINDS TRAVEL OCCUPIES 393 SF ( 0.10% OF GRSF) BASE LEASE FROM APR 1991 TO DEC 1996
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 415 1,179 1,179 884 1,288 1,288 1,288 1,056 1,408 1,408 1,144 MINIMUM RENT/SF 1.06 3.00 3.00 2.25 3.28 3.28 3.28 2.69 3.58 3.58 2.91 MARKET RENT/SF 2.99 3.04 3.13 3.22 3.33 3.44 3.53 3.63 3.74 3.85 3.97 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0
PAGE 8 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 415 1,179 1,179 884 1,288 1,288 1,288 1,056 1,408 1,408 1,144 TOTAL REVENUE/SF 1.06 3.00 3.00 2.25 3.28 3.28 3.28 2.69 3.58 3.58 2.91
14. SUITE 14D EVANS BARBER SHOP OCCUPIES 235 SF ( 0.06% OF GRSF) BASE LEASE FROM APR 1985 TO DEC 1996
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 327 705 705 529 770 770 770 631 842 842 684 MINIMUM RENT/SF 1.39 3.00 3.00 2.25 3.28 3.28 3.28 2.69 3.58 3.58 2.91 MARKET RENT/SF 3.01 3.06 3.14 3.22 3.32 3.42 3.52 3.63 3.73 3.86 3.98 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 327 705 705 529 770 770 770 631 842 842 684 TOTAL REVENUE/SF 1.39 3.00 3.00 2.25 3.28 3.28 3.28 2.69 3.58 3.58 2.91
15. SUITE 23 CCS COMPUTERS OCCUPIES 825 SF ( 0.22% OF GRSF) BASE LEASE FROM JUN 1996 TO MAY 1997
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 3,849 2,063 2,475 2,475 1,990 2,704 2,704 2,142 3,044 3,044 2,306 MINIMUM RENT/SF 4.67 2.50 3.00 3.00 2.41 3.28 3.28 2.60 3.69 3.69 2.80 MARKET RENT/SF 3.00 3.04 3.13 3.23 3.32 3.43 3.53 3.64 3.75 3.85 3.97 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- CAM RECOVERY 1,164 469 580 601 469 644 666 516 714 739 570 RE TAX RECOVERY 0 103 128 132 103 141 146 113 157 162 125 INS RECOVERY 0 57 71 74 57 79 82 63 87 91 70 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 1,164 629 779 807 629 864 894 692 958 992 765 TOT RECOVERIES/SF 1.41 0.76 0.94 0.98 0.76 1.05 1.08 0.84 1.16 1.20 0.93 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 5,013 2,692 3,254 3,282 2,619 3,568 3,598 2,834 4,002 4,036 3,071 TOTAL REVENUE/SF 6.08 3.26 3.94 3.98 3.17 4.32 4.36 3.44 4.85 4.89 3.72 ALTERATIONS 0 297 0 0 330 0 0 378 0 0 420 ALTERATIONS/SF 0.00 0.36 0.00 0.00 0.40 0.00 0.00 0.46 0.00 0.00 0.51
PAGE 9 16. SUITE 29 LOWERY JEWELERS OCCUPIES 1,860 SF ( 0.49% OF GRSF) BASE LEASE FROM FEB 1996 TO FEB 1997
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 4,061 5,580 5,580 5,115 5,081 6,097 6,097 4,903 6,663 6,663 5,276 MINIMUM RENT/SF 2.18 3.00 3.00 2.75 2.73 3.28 3.28 2.64 3.58 3.58 2.84 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.64 3.75 3.86 3.97 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- CAM RECOVERY 2,086 1,264 1,309 1,240 1,172 1,451 1,502 1,172 1,609 1,665 1,290 RE TAX RECOVERY 23 278 288 272 258 319 330 258 354 366 283 INS RECOVERY 13 155 160 152 144 178 184 144 197 204 158 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 2,124 1,697 1,757 1,664 1,574 1,948 2,016 1,574 2,160 2,235 1,731 TOT RECOVERIES/SF 1.14 0.91 0.94 0.89 0.85 1.05 1.08 0.85 1.16 1.20 0.93 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 6,185 7,277 7,337 6,779 6,655 8,045 8,113 6,477 8,823 8,898 7,007 TOTAL REVENUE/SF 3.33 3.91 3.94 3.64 3.58 4.33 4.36 3.48 4.74 4.78 3.77 ALTERATIONS 671 0 0 0 743 0 0 824 0 0 946 ALTERATIONS/SF 0.36 0.00 0.00 0.00 0.40 0.00 0.00 0.44 0.00 0.00 0.51
17. SUITE 31 COUNTRY AT HEART OCCUPIES 3,050 SF ( 0.80% OF GRSF) BASE LEASE FROM JUN 1996 TO DEC 1996
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 2,471 9,150 9,150 6,863 9,998 9,998 9,998 8,194 10,926 10,926 8,880 MINIMUM RENT/SF 0.81 3.00 3.00 2.25 3.28 3.28 3.28 2.69 3.58 3.58 2.91 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.64 3.75 3.86 3.97 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- CAM RECOVERY 509 2,073 2,146 1,656 2,299 2,379 2,463 1,922 2,638 2,730 2,132 RE TAX RECOVERY 112 456 472 364 505 523 541 422 580 600 468 INS RECOVERY 62 254 263 203 282 292 302 236 323 335 261 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 683 2,783 2,881 2,223 3,086 3,194 3,306 2,580 3,541 3,665 2,861 TOT RECOVERIES/SF 0.22 0.91 0.94 0.73 1.01 1.05 1.08 0.85 1.16 1.20 0.94 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 3,154 11,933 12,031 9,086 13,084 13,192 13,304 10,774 14,467 14,591 11,741 TOTAL REVENUE/SF 1.03 3.91 3.94 2.98 4.29 4.33 4.36 3.53 4.74 4.78 3.85 ALTERATIONS 1,100 0 0 0 1,219 0 0 1,352 0 0 1,551 ALTERATIONS/SF 0.36 0.00 0.00 0.00 0.40 0.00 0.00 0.44 0.00 0.00 0.51
PAGE 10 18. SUITE 33/34/35 COUNTRY AT HEART OCCUPIES 6,070 SF ( 1.59% OF GRSF) BASE LEASE FROM JAN 1994 TO NOV 1997
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 26,683 17,633 18,756 18,756 14,212 20,496 20,496 18,788 18,663 22,396 22,396 MINIMUM RENT/SF 4.40 2.90 3.09 3.09 2.34 3.38 3.38 3.10 3.07 3.69 3.69 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.64 3.74 3.86 3.97 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- CAM RECOVERY 3,521 2,866 4,271 4,420 3,412 4,735 4,901 4,642 4,390 5,434 5,624 RE TAX RECOVERY 971 712 939 971 750 1,041 1,077 1,020 965 1,194 1,236 INS RECOVERY 0 171 523 542 418 580 601 569 538 666 689 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 4,492 3,749 5,733 5,933 4,580 6,356 6,579 6,231 5,893 7,294 7,549 TOT RECOVERIES/SF 0.74 0.62 0.94 0.98 0.75 1.05 1.08 1.03 0.97 1.20 1.24 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 31,175 21,382 24,489 24,689 18,792 26,852 27,075 25,019 24,556 29,690 29,945 TOTAL REVENUE/SF 5.14 3.52 4.03 4.07 3.10 4.42 4.46 4.12 4.05 4.89 4.93 ALTERATIONS 0 2,265 0 0 2,511 0 0 0 2,784 0 0 ALTERATIONS/SF 0.00 0.37 0.00 0.00 0.41 0.00 0.00 0.00 0.46 0.00 0.00
19. SUITE 36 HEART AND HOME OCCUPIES 1,650 SF ( 0.43% OF GRSF) BASE LEASE FROM SEP 1995 TO SEP 1997
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 8,993 4,797 5,099 5,099 3,942 5,571 5,571 4,178 6,088 6,088 6,088 MINIMUM RENT/SF 5.45 2.91 3.09 3.09 2.39 3.38 3.38 2.53 3.69 3.69 3.69 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.64 3.75 3.86 3.97 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- CAM RECOVERY 1,237 880 1,161 1,202 927 1,287 1,332 1,028 1,427 1,477 1,529 RE TAX RECOVERY 239 186 255 264 204 283 293 226 314 325 336 INS RECOVERY 0 70 142 147 114 158 163 126 175 181 187 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 1,476 1,136 1,558 1,613 1,245 1,728 1,788 1,380 1,916 1,983 2,052 TOT RECOVERIES/SF 0.89 0.69 0.94 0.98 0.75 1.05 1.08 0.84 1.16 1.20 1.24 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 10,469 5,933 6,657 6,712 5,187 7,299 7,359 5,558 8,004 8,071 8,140 TOTAL REVENUE/SF 6.34 3.60 4.03 4.07 3.14 4.42 4.46 3.37 4.85 4.89 4.93 ALTERATIONS 0 616 0 0 683 0 0 0 757 0 0 ALTERATIONS/SF 0.00 0.37 0.00 0.00 0.41 0.00 0.00 0.00 0.46 0.00 0.00
PAGE 11 20. SUITE 37 HEART & HOME OCCUPIES 1,120 SF ( 0.29% OF GRSF) BASE LEASE FROM AUG 1995 TO DEC 1996
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 840 3,360 3,360 2,520 3,672 3,672 3,672 3,009 4,012 4,012 3,261 MINIMUM RENT/SF 0.75 3.00 3.00 2.25 3.28 3.28 3.28 2.69 3.58 3.58 2.91 MARKET RENT/SF 3.00 3.04 3.13 3.23 3.33 3.43 3.53 3.63 3.74 3.86 3.97 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- CAM RECOVERY 187 761 788 608 844 874 904 706 969 1,003 783 RE TAX RECOVERY 41 167 173 134 186 192 199 155 213 220 172 INS RECOVERY 23 93 97 75 103 107 111 87 119 123 96 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 251 1,021 1,058 817 1,133 1,173 1,214 948 1,301 1,346 1,051 TOT RECOVERIES/SF 0.22 0.91 0.94 0.73 1.01 1.05 1.08 0.85 1.16 1.20 0.94 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 1,091 4,381 4,418 3,337 4,805 4,845 4,886 3,957 5,313 5,358 4,312 TOTAL REVENUE/SF 0.97 3.91 3.94 2.98 4.29 4.33 4.36 3.53 4.74 4.78 3.85 ALTERATIONS 404 0 0 0 448 0 0 496 0 0 570 ALTERATIONS/SF 0.36 0.00 0.00 0.00 0.40 0.00 0.00 0.44 0.00 0.00 0.51
21. SUITE 38 ART LEAGUE OCCUPIES 1,400 SF ( 0.37% OF GRSF) BASE LEASE FROM NOV 1995 TO DEC 1996
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 1,351 4,200 4,200 3,150 4,589 4,589 4,589 3,761 5,015 5,015 4,076 MINIMUM RENT/SF 0.96 3.00 3.00 2.25 3.28 3.28 3.28 2.69 3.58 3.58 2.91 MARKET RENT/SF 3.00 3.04 3.13 3.23 3.33 3.43 3.53 3.63 3.74 3.86 3.97 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- CAM RECOVERY 234 952 985 760 1,055 1,092 1,130 882 1,211 1,253 978 RE TAX RECOVERY 51 209 216 167 232 240 248 194 266 275 215 INS RECOVERY 29 117 121 93 129 134 139 108 148 154 120 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 314 1,278 1,322 1,020 1,416 1,466 1,517 1,184 1,625 1,682 1,313 TOT RECOVERIES/SF 0.22 0.91 0.94 0.73 1.01 1.05 1.08 0.85 1.16 1.20 0.94 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 1,665 5,478 5,522 4,170 6,005 6,055 6,106 4,945 6,640 6,697 5,389 TOTAL REVENUE/SF 1.19 3.91 3.94 2.98 4.29 4.32 4.36 3.53 4.14 4.78 3.85 ALTERATIONS 505 0 0 0 560 0 0 620 0 0 712 ALTERATIONS/SF 0.36 0.00 0.00 0.00 0.40 0.00 0.00 0.44 0.00 0.00 0.51
PAGE 12 22. SUITE 39 DIPPER DAN OCCUPIES 1,750 SF ( 0.46% OF GRSF) BASE LEASE FROM JAN 1989 TO DEC 1996
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 3,063 5,250 5,250 3,938 5,737 5,737 5,737 4,702 6,269 6,269 5,095 MINIMUM RENT/SF 1.75 3.00 3.00 2.25 3.28 3.28 3.28 2.69 3.58 3.58 2.91 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.63 3.74 3.86 3.97 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- RE TAX RECOVERY 189 261 271 209 290 300 311 242 333 344 269 CAM RECOVERY 292 1,190 1,231 950 1,319 1,365 1,413 1,103 1,514 1,567 1,223 INS RECOVERY 36 146 151 116 162 167 173 135 185 192 150 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 517 1,597 1,653 1,275 1,771 1,832 1,897 1,480 2,032 2,103 1,642 TOT RECOVERIES/SF 0.30 0.91 0.94 0.73 1.01 1.05 1.08 0.85 1.16 1.20 0.94 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 3,580 6,847 6,903 5,213 7,508 7,569 7,634 6,182 8,301 8,372 6,737 TOTAL REVENUE/SF 2.05 3.91 3.94 2.98 4.29 4.33 4.36 3.53 4.74 4.78 3.85 ALTERATIONS 631 0 0 0 699 0 0 776 0 0 890 ALTERATIONS/SF 0.36 0.00 0.00 0.00 0.40 0.00 0.00 0.44 0.00 0.00 0.51
23. SUITE 42 SOUTHERN SAMPLER OCCUPIES 3,000 SF ( 0.79% OF GRSF) BASE LEASE FROM NOV 1995 TO DEC 2000
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 10,500 10,500 10,500 10,500 7,782 10,130 10,130 7,597 11,069 11,069 11,069 MINIMUM RENT/SF 3.50 3.50 3.50 3.50 2.59 3.38 3.38 2.53 3.69 3.69 3.69 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.64 3.74 3.86 3.97 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- CAM RECOVERY 2,250 2,289 2,369 2,452 1,822 2,340 2,422 1,869 2,595 2,685 2,779 RE TAX RECOVERY 434 448 464 480 371 514 532 411 570 590 611 INS RECOVERY 0 0 0 0 70 287 297 229 318 329 341 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 2,684 2,737 2,833 2,932 2,263 3,141 3,251 2,509 3,483 3,604 3,731 TOT RECOVERIES/SF 0.89 0.91 0.94 0.98 0.75 1.05 1.08 0.84 1.16 1.20 1.24 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 13,184 13,237 13,333 13,432 10,045 13,271 13,381 10,106 14,552 14,673 14,800 TOTAL REVENUE/SF 4.39 4.41 4.44 4.48 3.35 4.42 4.46 3.37 4.85 4.89 4.93 ALTERATIONS 0 0 0 0 1,241 0 0 0 1,376 0 0 ALTERATIONS/SF 0.00 0.00 0.00 0.00 0.41 0.00 0.00 0.00 0.46 0.00 0.00
PAGE 14 26. SUITE 50 EVANS BARBER SHOP OCCUPIES 630 SF ( 0.17% OF GRSF) BASE LEASE FROM APR 1985 TO DEC 1996
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 4,410 5,040 5,040 3,780 5,507 5,507 5,507 4,514 6,018 6,018 4,891 MINIMUM RENT/SF 7.00 8.00 8.00 6.00 8.74 8.74 8.74 7.17 9.55 9.55 7.76 MARKET RENT/SF 8.00 8.12 8.37 8.62 8.88 9.14 9.42 9.70 9.99 10.29 10.59 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- CAM RECOVERY 105 428 443 342 475 491 509 397 545 564 440 RE TAX RECOVERY 23 94 97 75 104 108 112 87 120 124 97 INS RECOVERY 13 52 54 42 58 60 62 49 67 69 54 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 141 574 594 459 637 659 683 533 732 757 591 TOT RECOVERIES/SF 0.22 0.91 0.94 0.73 1.01 1.05 1.08 0.85 1.16 1.20 0.94 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 4,551 5,614 5,634 4,239 6,144 6,166 6,190 5,047 6,750 6,775 5,482 TOTAL REVENUE/SF 7.22 8.91 8.94 6.73 9.75 9.79 9.83 8.01 10.71 10.75 8.70 ALTERATIONS 227 0 0 0 252 0 0 279 0 0 320 ALTERATIONS/SF 0.36 0.00 0.00 0.00 0.40 0.00 0.00 0.44 0.00 0.00 0.51
27. SUITE 51 THE CAKE BOX OCCUPIES 1,446 SF ( 0.38% OF GRSF) BASE LEASE FROM DEC 1988 TO DEC 1996
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 4,613 4,338 4,338 3,254 4,740 4,740 4,740 3,885 5,180 5,180 4,210 MINIMUM RENT/SF 3.19 3.00 3.00 2.25 3.28 3.28 3.28 2.69 3.58 3.58 2.91 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.64 3.75 3.86 3.98 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- CAM RECOVERY 784 983 1,017 785 1,090 1,128 1,167 911 1,251 1,294 1,011 RE TAX RECOVERY 156 216 224 173 240 248 257 200 275 284 222 INS RECOVERY 30 120 125 96 134 138 143 112 153 159 124 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 970 1,319 1,366 1,054 1,464 1,514 1,567 1,223 1,679 1,737 1,357 TOT RECOVERIES/SF 0.67 0.91 0.94 0.73 1.01 1.05 1.08 0.85 1.16 1.20 0.94 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 5,583 5,657 5,704 4,308 6,204 6,254 6,307 5,108 6,859 6,917 5,567 TOTAL REVENUE/SF 3.86 3.91 3.94 2.98 4.29 4.33 4.36 3.53 4.74 4.78 3.85 ALTERATIONS 521 0 0 0 578 0 0 641 0 0 735 ALTERATIONS/SF 0.36 0.00 0.00 0.00 0.40 0.00 0.00 0.44 0.00 0.00 0.51
PAGE 15 28. SUITE 54 BOOKS A MILLION OCCUPIES 17,316 SF ( 4.54% OF GRSF) BASE LEASE FROM SEP 1995 TO JAN 2006
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 90,330 90,330 90,330 90,330 92,212 94,847 94,847 94,847 94,847 95,010 95,238 MINIMUM RENT/SF 5.00 5.00 5.00 5.00 5.10 5.25 5.25 5.25 5.25 5.49 5.50 MARKET RENT/SF 5.00 5.08 5.23 5.38 5.55 5.71 5.88 6.06 6.24 6.59 6.62 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- CAM RECOVERY 12,070 12,281 12,711 13,156 13,616 14,093 14,586 15,097 15,625 15,888 16,043 RE TAX RECOVERY 2,614 2,699 2,793 2,891 2,992 3,097 3,205 3,318 3,434 3,492 3,526 INS RECOVERY 1,479 1,505 1,558 1,612 1,669 1,727 1,788 1,850 1,915 1,947 1,966 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 16,163 16,485 17,062 17,659 18,277 18,917 19,579 20,265 20,974 21,327 21,535 TOT RECOVERIES/SF 0.89 0.91 0.94 0.98 1.01 1.05 1.08 1.12 1.16 1.23 1.24 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 106,493 106,815 107,392 107,989 110,489 113,764 114,426 115,112 115,821 116,337 116,173 TOTAL REVENUE/SF 5.89 5.91 5.94 5.98 6.12 6.30 6.33 6.37 6.41 6.72 6.74
29. SUITE 55 GOODY'S OCCUPIES 26,840 SF ( 7.03% OF GRSF) BASE LEASE FROM DEC 1993 TO NOV 2003
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 147,620 147,620 147,620 147,620 147,620 147,620 147,620 151,534 154,330 154,330 154,330 MINIMUM RENT/SF 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.65 5.75 5.75 5.75 MARKET RENT/SF 5.00 5.07 5.23 5.38 5.55 5.71 5.88 6.06 6.24 6.43 6.62 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- CAM RECOVERY 13,420 13,420 13,420 13,420 13,420 13,420 13,420 13,420 13,420 13,420 13,420 RE TAX RECOVERY 3,883 4,010 4,150 4,295 4,446 4,601 4,762 4,928 5,101 5,280 5,465 INS RECOVERY 2,198 2,236 2,314 2,395 2,479 2,566 2,656 2,749 2,845 2,944 3,047 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 19,501 19,666 19,884 20,110 20,345 20,587 20,838 21,097 21,366 21,644 21,932 TOT RECOVERIES/SF 0.73 0.73 0.74 0.75 0.76 0.77 0.78 0.79 0.80 0.81 0.82 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 167,121 167,286 167,504 167,730 167,965 168,207 168,458 172,631 175,696 175,974 176,262 TOTAL REVENUE/SF 6.23 6.23 6.24 6.25 6.26 6.27 6.28 6.43 6.55 6.56 6.57
30. SUITE 56 SIMPLY 6 OCCUPIES 3,000SF ( 0.79% OF GRSF) BASE LEASE FROM JUL 1993 TO JUL 2003
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 15,000 15,000 15,000 15,000 15,000 15,000 15,000 8,414 10,746 10,746 8,622
PAGE 16 MINIMUM RENT/SF 5.00 5.00 5.00 5.00 5.00 5.00 5.00 2.80 3.58 3.58 2.87 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.64 3.74 3.86 3.97 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- CAM RECOVERY 0 0 0 0 0 0 0 1,686 2,595 2,685 2,089 RE TAX RECOVERY 0 0 0 0 0 0 0 370 570 590 459 INS RECOVERY 0 0 0 0 0 0 0 207 318 329 256 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 0 0 0 0 0 0 0 2,263 3,463 3,604 2,804 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.75 1.16 1.20 0.93 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 15,000 15,000 15,000 15,000 15,000 15,000 15,000 10,677 14,229 14,350 11,426 TOTAL REVENUE/SF 5.00 5.00 5.00 5.00 5.00 5.00 5.00 3.56 4.74 4.78 3.81 ALTERATIONS 0 0 0 0 0 0 0 1,329 0 0 1,526 ALTERATIONS/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.44 0.00 0.00 0.51
31. SUITE 57 TOP GUN AIRBRUSH OCCUPIES 300 SF ( 0.08% OF GRSF) BASE LEASE FROM DEC 1994 TO DEC 1996
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 2,400 2,400 1,837 2,546 2,546 1,910 2,782 2,782 2,782 2,280 3,040 MINIMUM RENT/SF 8.00 8.00 6.12 8.49 8.49 6.37 9.27 9.27 9.27 7.60 10.13 MARKET RENT/SF 8.00 8.12 8.36 8.62 8.88 9.14 9.42 9.70 9.98 10.28 10.60 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- CAM RECOVERY 496 495 301 218 226 175 242 251 259 203 278 RE TAX RECOVERY 0 0 12 48 50 38 53 55 57 45 61 INS RECOVERY 0 0 7 27 28 21 30 31 32 25 34 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 496 495 320 293 304 234 325 337 348 273 373 TOT RECOVERIES/SF 1.65 1.65 1.07 0.98 1.01 0.78 1.08 1.12 1.16 0.91 1.24 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 2,896 2,895 2,157 2,839 2,850 2,144 3,107 3,119 3,130 2,553 3,413 TOTAL REVENUE/SF 9.65 9.65 7.19 9.46 9.50 7.15 10.36 10.40 10.43 8.51 11.38 ALTERATIONS 0 0 116 0 0 0 128 0 0 142 0 ALTERATIONS/SF 0.00 0.00 0.39 0.00 0.00 0.00 0.43 0.00 0.00 0.47 0.00
32. SUITE 57A JOKERS WILD OCCUPIES 785 SF ( 0.21% OF GRSF) BASE LEASE FROM JAN 1996 TO DEC 1996 PAGE 17
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 2,755 6,280 6,280 4,710 6,862 6,862 6,862 5,624 7,499 7,499 6,095 MINIMUM RENT/SF 3.51 8.00 8.00 6.00 8.74 8.74 8.74 7.16 9.55 9.55 7.76 MARKET RENT/SF 7.99 8.12 8.36 8.61 8.87 9.14 9.42 9.70 9.99 10.29 10.59 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- CAM RECOVERY 747 534 552 426 592 612 634 495 679 703 549 RE TAX RECOVERY 29 117 121 94 130 135 139 109 149 154 121 INS RECOVERY 16 65 68 52 73 75 78 61 83 86 67 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 792 716 741 572 795 822 851 665 911 943 737 TOT RECOVERIES/SF 1.01 0.91 0.94 0.73 1.01 1.05 1.08 0.85 1.16 1.20 0.94 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 3,547 6,996 7,021 5,282 7,657 7,684 7,713 6,289 8,410 8,442 6,832 TOTAL REVENUE/SF 4.52 8.91 8.94 6.73 9.75 9.79 9.83 8.01 10.71 10.75 8.70 ALTERATIONS 283 0 0 0 314 0 0 348 0 0 399 ALTERATIONS/SF 0.36 0.00 0.00 0.00 0.40 0.00 0.00 0.44 0.00 0.00 0.51
33. SUITE 59 G. STENDER OCCUPIES 750 SF ( 0.20% OF GRSF) BASE LEASE FROM SEP 1994 TO OCT 1999
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 6,500 7,420 8,240 5,572 6,556 6,556 5,019 7,164 7,164 5,970 7,176 MINIMUM RENT/SF 8.67 9.89 10.99 7.43 8.74 8.74 6.69 9.55 9.55 7.96 9.57 MARKET RENT/SF 8.00 8.12 8.36 8.61 8.87 9.14 9.42 9.70 9.98 10.28 10.59 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- CAM RECOVERY 562 572 592 432 565 585 452 627 649 558 638 RE TAX RECOVERY 109 112 116 90 124 129 99 138 143 123 140 INS RECOVERY 0 0 0 28 69 72 55 77 79 68 78 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 671 684 708 550 758 786 606 842 871 749 856 TOT RECOVERIES/SF 0.89 0.91 0.94 0.73 1.01 1.05 0.81 1.12 1.16 1.00 1.14 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 7,171 8,104 8,948 6,122 7,314 7,342 5,625 8,006 8,035 6,719 8,032 TOTAL REVENUE/SF 9.56 10.81 11.93 8.16 9.75 9.79 7.50 10.67 10.71 8.96 10.71 ALTERATIONS 0 0 0 300 0 0 332 0 0 0 368 ALTERATIONS/SF 0.00 0.00 0.00 0.40 0.00 0.00 0.44 0.00 0.00 0.00 0.49
34. SUITE 5.18 TROY STATE UNIV OCCUPIES 18,400 SF ( 4.82% OF GRSF) BASE LEASE FROM DEC 1994 TO DEC 1996 PAGE 18
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 55,200 55,200 42,240 58,562 58,562 43,921 63,992 63,992 63,992 52,444 69,926 MINIMUM RENT/SF 3.00 3.00 2.30 3.18 3.18 2.39 3.48 3.48 3.48 2.85 3.80 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.64 3.74 3.86 3.97 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 55,200 55,200 42,240 58,562 58,562 43,921 63,992 63,992 63,992 52,444 69,926 TOTAL REVENUE/SF 3.00 3.00 2.30 3.18 3.18 2.39 3.48 3.48 3.48 2.85 3.80 ALTERATIONS 0 0 7,106 0 0 0 7,878 0 0 8,735 0 ALTERATIONS/SF 0.00 0.00 0.39 0.00 0.00 0.00 0.43 0.00 0.00 0.47 0.00
35. SUITE 71 SOUTHTRUST BANK OCCUPIES 1 SF ( 0.00% OF GRSF) BASE LEASE FROM JUN 1970 TO MAY 2000
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 8,580 8,580 8,580 8,930 12,780 12,780 12,780 12,780 12,780 12,780 12,780 MINIMUM RENT/SF 8,580.00 8,580.00 8,580.00 8,930.00 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00 MARKET RENT/SF 0.00 0.00 0.00 1.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 8,580 8,580 8,580 8,930 12,780 12,780 12,780 12,780 12,780 12,780 12,780 TOTAL REVENUE/SF 8,580.00 8,580.00 8,580.00 8,930.00 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00 36. SUITE 1000K DAVIS THEATERS OCCUPIES 1 SF ( 0.00% OF GRSF) BASE LEASE FROM MAY 1989 TO APR 2009 FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 0 0 0 0 0 0 0 0 0 0 0 MINIMUM RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 MARKET RENT/SF 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- CAM RECOVERY 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- --------
PAGE 19 TOTAL RECOVERIES 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 TOT RECOVERIES/SF 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 TOTAL REVENUE/SF 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00
37. SUITE 8 VACANCY OCCUPIES 318 SF ( 0.08% OF GRSF) BASE LEASE FROM JUL 2008 TO JUN 2009
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 0 0 0 0 0 0 0 0 0 0 0 MINIMUM RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 MARKET RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 0 0 0 0 0 0 0 0 0 0 0 TOTAL REVENUE/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
38. SUITE 22 VACANCY OCCUPIES 4,500 SF ( 1.18% OF GRSF) BASE LEASE FROM JUL 2008 TO JUN 2009
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 0 0 0 0 0 0 0 0 0 0 0 MINIMUM RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 MARKET RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 0 0 0 0 0 0 0 0 0 0 0 TOTAL REVENUE/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
39. SUITE 26 VACANCY OCCUPIES 2,250 SF ( 0.59% OF GRSF) BASE LEASE FROM JUL 2008 TO JUN 2009 PAGE 20
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 0 0 0 0 0 0 0 0 0 0 0 MINIMUM RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 MARKET RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 0 0 0 0 0 0 0 0 0 0 0 TOTAL REVENUE/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
40. SUITE 27 VACANCY OCCUPIES 2,250 SF ( 0.59% OF GRSF) BASE LEASE FROM JUL 2008 TO JUN 2009
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 0 0 0 0 0 0 0 0 0 0 0 MINIMUM RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 MARKET RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 0 0 0 0 0 0 0 0 0 0 0 TOTAL REVENUE/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
41. SUITE 28 VACANCY OCCUPIES 4,880 SF ( 1.28% OF GRSF) BASE LEASE FROM JUL 2008 TO JUN 2009
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 0 0 0 0 0 0 0 0 0 0 0 MINIMUM RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 MARKET RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- --------
PAGE 21 TOTAL REVENUE 0 0 0 0 0 0 0 0 0 0 0 TOTAL REVENUE/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
42. SUITE 30 VACANCY OCCUPIES 2,630 SF ( 0.69% OF GRSF) BASE LEASE FROM JUL 2008 TO JUN 2009
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 0 0 0 0 0 0 0 0 0 0 0 MINIMUM RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 MARKET RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 0 0 0 0 0 0 0 0 0 0 0 TOTAL REVENUE/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
43. SUITE 40 VACANCY OCCUPIES 3,150 SF ( 0.83% OF GRSF) BASE LEASE FROM JUL 2008 TO JUN 2009
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 0 0 0 0 0 0 0 0 0 0 0 MINIMUM RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 MARKET RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 0 0 0 0 0 0 0 0 0 0 0 TOTAL REVENUE/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
44. SUITE 44 VACANCY OCCUPIES 4,000 SF ( 1.05% OF GRSF) BASE LEASE FROM JUL 2008 TO JUN 2009
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 0 0 0 0 0 0 0 0 0 0 0 MINIMUM RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 MARKET RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- --------
PAGE 22 TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 0 0 0 0 0 0 0 0 0 0 0 TOTAL REVENUE/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
45. SUITE 45 VACANCY OCCUPIES 5,000 SF ( 1.31% OF GRSF) BASE LEASE FROM JUL 2008 TO JUN 2009
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 0 0 0 0 0 0 0 0 0 0 0 MINIMUM RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 MARKET RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 0 0 0 0 0 0 0 0 0 0 0 TOTAL REVENUE/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
46. SUITE 46 VACANCY OCCUPIES 2,250 SF ( 0.59% OF GRSF) BASE LEASE FROM JUL 2008 TO JUN 2009
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 0 0 0 0 0 0 0 0 0 0 0 MINIMUM RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 MARKET RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 0 0 0 0 0 0 0 0 0 0 0 TOTAL REVENUE/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
47. SUITE 47 VACANCY OCCUPIES 2,250 SF ( 0.59% OF GRSF) BASE LEASE FROM JUL 2008 TO JUN 2009 PAGE 23
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 0 0 0 0 0 0 0 0 0 0 0 MINIMUM RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 MARKET RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 0 0 0 0 0 0 0 0 0 0 0 TOTAL REVENUE/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
48. SUITE 56A VACANCY OCCUPIES 1,425 SF ( 0.37% OF GRSF) BASE LEASE FROM JUL 2008 TO JUN 2009
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 0 0 0 0 0 0 0 0 0 0 0 MINIMUM RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 MARKET RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 0 0 0 0 0 0 0 0 0 0 0 TOTAL REVENUE/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
49. SUITE 60 VACANCY OCCUPIES 700 SF ( 0.18% OF GRSF) BASE LEASE FROM JUL 2008 TO JUN 2009
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 0 0 0 0 0 0 0 0 0 0 0 MINIMUM RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 MARKET RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- --------
PAGE 24 TOTAL REVENUE 0 0 0 0 0 0 0 0 0 0 0 TOTAL REVENUE/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
50. SUITE 21 COMMUNITY ROOM OCCUPIES 1,049 SF ( 0.27% OF GRSF) BASE LEASE FROM JUN 1996 TO MAY 2016
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 0 0 0 0 0 0 0 0 0 0 0 MINIMUM RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 MARKET RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 0 0 0 0 0 0 0 0 0 0 0 TOTAL REVENUE/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
51. SUITE 20 BREAK ROOM OCCUPIES 318 SF ( 0.08% OF GRSF) BASE LEASE FROM JUN 1996 TO MAY 2016
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 0 0 0 0 0 0 0 0 0 0 0 MINIMUM RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 MARKET RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- --------- --------- --------- --------- --------- --------- -------- TOTAL REVENUE 0 0 0 0 0 0 0 0 0 0 0 TOTAL REVENUE/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
REPORT TOTAL FOR NORTHSIDE MALL (GRSF = 381,677 SF)
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 832,318 958,860 944,042 917,601 960,449 963,200 1,003,998 966,593 1,037,617 1,020,751 1,009,060 MINIMUM RENT/SF 2.18 2.51 2.47 2.40 2.52 2.52 2.63 2.53 2.72 2.67 2.64 MARKET RENT/SF 3.06 3.10 3.20 3.29 3.39 3.49 3.60 3.71 3.82 3.93 4.04 PERCENTAGE RENT 268,518 250,839 264,511 279,475 293,098 308,037 324,743 339,276 355,601 373,081 390,895
PAGE 25 PERCENTAGE RENT/SF 0.70 0.66 0.69 0.73 0.77 0.81 0.85 0.89 0.93 0.98 1.02 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- MIN + PERCENTAGE 1,100,836 1,209,699 1,208,553 1,197,076 1,253,547 1,271,237 1,328,741 1,305,869 1,393,218 1,393,832 1,399,955 MIN + PERCENTAGE/SF 2.88 3.17 3.17 3.14 3.28 3.33 3.48 3.42 3.65 3.65 3.67 MIN + PERCENT/SALES 2.6% 2.7% 2.6% 2.6% 2.6% 2.5% 2.6% 2.5% 2.5% 2.5% 2.4% RE TAX RECOVERY 29,054 34,027 35,437 35,174 36,941 39,362 40,769 40,199 44,145 45,252 44,612 CAM RECOVERY 100,780 111,231 114,652 108,542 114,128 120,976 123,813 115,927 131,629 132,721 123,910 INS RECOVERY 4,919 8,158 8,833 8,350 9,536 11,245 11,658 10,954 12,747 12,953 12,161 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- TOTAL RECOVERIES 134,753 153,416 158,922 152,066 160,605 171,583 176,240 167,080 188,521 190,926 180,683 TOT RECOVERIES/SF 0.35 0.40 0.42 0.40 0.42 0.45 0.46 0.44 0.49 0.50 0.47 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- TOTAL REVENUE 1,235,589 1,363,115 1,367,475 1,349,142 1,414,152 1,442,820 1,504,981 1,472,949 1,581,739 1,584,758 1,580,638 TOTAL REVENUE/SF 3.24 3.57 3.58 3.53 3.71 3.78 3.94 3.86 4.14 4.15 4.14 SALES VOLUME (000) 42,659 44,743 46,085 46,665 48,873 50,358 51,869 52,528 55,028 56,679 57,398 SALES VOLUME/SF 111.77 117.23 120.74 122.26 128.05 131.94 135.90 137.62 144.17 148.50 150.38 TOT REVENUE/SALES 2.9% 3.0% 3.0% 2.9% 2.9% 2.9% 2.9% 2.8% 2.9% 2.8% 2.8% ALTERATIONS 20,153 4,567 8,497 300 27,084 0 16,302 21,464 4,917 10,444 30,325 ALTERATIONS/SF 0.05 0.01 0.02 0.00 0.07 0.00 0.04 0.06 0.01 0.03 0.08
================================================================================ ADDENDUM I LETTER OF AUTHORIZATION ================================================================================ Addendum I LETTER OF AUTHORIZATION - -------------------------------------------------------------------------------- [LOGO OF MARK CENTERS TRUST] June 7,1996 VIA FEDERAL EXPRESS Mr. Michael R. Pecorino Senior Vice President CB Commercial 560 Lexington Avenue 16th Floor New York, NY 10022 Re: Mark Centers Engagement dated May 8 1996 Dear Mike: In connection with the above item, please expand the scope of work to include the following two properties: o Northside Mall, 3489 Ross Clark Circle NW, Dothan, Alabama o Midway Plaza, Pepperell Parkway and US Highway 29, Opelika, Alabama We understand that the cost for this additional work shall be $8,500.00 (out of expenses included). The relevant information you require to begin your work is included herein. Sincerely yours, /s/ Joshua Kane ----------------------- Joshua Kane Chief Financial Officer ================================================================================ ADDENDUM J QUALIFICATIONS ================================================================================ Addendum J QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF W. SCOTT BRADFORD Senior Real Estate Analyst CB Commercial Real Estate Group, Inc. - Appraisal 100 Galleria Parkway, Suite 550 Atlanta, Georgia 30339 (770) 951-7843 EDUCATIONAL B.S. in Management, Guilford College, Greensboro, North Carolina M.S. in Real Estate, Georgia State University, Atlanta, Georgia Appraisal Institute: Courses lA-1, 1A-2, lB-A, lB-B, 2-1 and 2-3 CERTIFICATION Certified Real Estate Appraiser: State of Georgia - Certificate Number 00 1784 PROFESSIONAL Appraisal Institute Candidate - Appraisal Institute EMPLOYMENT EXPERIENCE 1989-1993 John Booth & Associates Atlanta, Georgia 1993-Present CB Commercial Real Estate Group, Inc. Atlanta, Georgia Appraisal Southeast Region, Senior Real Estate Analyst Appraiser - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM J QUALIFICATIONS ================================================================================ QUALIFICATIONS OF RONALD A. NEYHART, MAI First Vice President Regional Manager CB Commercial Real Estate Group, Inc., - Appraisal 100 Galleria Parkway, Suite 550 Atlanta, Georgia 30339 (770) 951-7874 EDUCATIONAL B.S. Finance and Management - Florida State University Appraisal Institute Course lA-1, 1A-2, lB-A, lB-B, 2-1,2-2, SPP LICENSE(S)/CERTIFICATION(S) Registered Real Estate Salesman - State of Florida State of Georgia Real Estate Appraisal Board - Certified Real Estate Appraiser - C000490 PROFESSIONAL Appraisal Institute Member, (MAI) Appraisal Institute, Certification No.8484 Other Affiliations Realtor - Associate of the Atlanta Board of Realtors, Inc. EMPLOYMENT EXPERIENCE 1979-1982 American Appraisal Associates, Staff Appraiser Atlanta, Georgia 1982-1983 Cigna Securities, Account Executive Atlanta, Georgia 1983-1984 Johnson, Lane, Space, Smith & Co., Account Executive Atlanta, Georgia 1984-Present First Vice President, Regional Manager Atlanta, Georgia CB Commercial Real Estate Group, Inc. Appraisal Southeast Region This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE BIRNEY PLAZA Route 11 at Pittston Road Moosic, Pennsylvania CB File No. 96-093-Q DATE OF VALUE May 15, 1996 PREPARED FOR MORGAN STANLEY Mortgage Capital Inc. 1585 Broadway New York, New York 10036 PREPARED BY CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES 560 Lexington Avenue, 16th Floor New York, New York 10022 [LETTERHEAD OF CB COMMERCIAL] June 12, 1996 MORGAN STANLEY Mortgage Capital Inc. 1585 Broadway New York, New York 10036 RE: Appraisal of Shopping Center BIRNEY PLAZA Route 11 at Pittston Road Moosic, Pennsylvania CB File No. 96-093-Q Dear Ladies and Gentlemen: At your request and authorization, CB Commercial Real Estate Group, Inc. has prepared a Complete Appraisal presented in a self-contained appraisal report of the current market value of the leased fee estate in the above-referenced real property. The subject property is a single story community shopping center featuring 212,057 square feet of gross leasable area. The shopping center is anchored by a K-Mart and is currently 100% occupied. The property is more fully described, legally and physically, within the enclosed report. Data, information, and calculations leading to the value conclusion are incorporated in the report following this letter. The report, in its entirety, including all assumptions and limiting conditions, is an integral part of and inseparable from this letter. Based on research and analysis contained in this report, it is estimated that the current market value of the leased fee estate in the subject property as of May 15, 1996, is: FIVE MILLION DOLLARS ($5,000,000) The following appraisal sets forth the most pertinent data gathered, the techniques employed, and the reasoning leading to the opinion of value. The analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP), the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, and The Financial Institution Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Furthermore, this report has been prepared in conformance with our interpretation of the appropriate regulations and guidelines set forth by Morgan Stanley. June 12, 1996 Page 2 It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CB Commercial Real Estate Group, Inc. can be of further service, please do not hesitate to contact us. Respectfully Submitted, CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES by: /s/ Dimitri M. Teddone /s/ Michael R. Pecorino - ------------------------------- ------------------------------- Dimitri M. Teddone, MAI Michael R. Pecorino, MAI Assistant Vice President Senior Vice President Senior Real Estate Analyst Northeast Regional Manager Pennsylvania Certification No. GA-001096-R ================================================================================ CERTIFICATION OF THE APPRAISERS - -------------------------------------------------------------------------------- CERTIFICATION OF THE APPRAISERS We certify that to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. 4. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event, such as the approval of a loan. 5. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation and the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. In addition, this report conforms to the requirements of the Financial Institution Reform, Recovery, and Enforcement Act (FIRREA). 6. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 7. Dimitri M. Teddone and Michael R. Pecorino have completed the requirements of the continuing education program of the Appraisal Institute. 8. The property was personally inspected by Dimitri M. Teddone, MAI, but was not inspected by Michael R. Pecorino, MAI. 9. No other person provided professional assistance to the persons signing this report. 10. The undersigned appraisers have extensive experience in the appraisal/review of similar property types. /s/ Dimitri M. Teddone /s/ Michael R. Pecorino - ------------------------------- ------------------------------- Dimitri M. Teddone, MAI Michael R. Pecorino, MAI Assistant Vice President Senior Vice President Senior Real Estate Analyst Northeast Regional Manager Pennsylvania Certification No. GA-001096-R - -------------------------------------------------------------------------------- i ================================================================================ SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- FRONT VIEW OF THE SUBJECT PROPERTY FACING K-MART - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- FRONT VIEW OF THE SUBJECT PROPERTY FACING THE SATELLITE STORES - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ii ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- SUMMARY OF SALIENT FACTS Property Name: Birney Plaza Location: Route 11 at Pittston Avenue, Moosic, Pennsylvania Assessor's Parcel Number: Section 176.08, Block 040, Lots 001, 002 & 003 Section 176.12, Block 010, Lots 014 & 014.01 Section 176.12, Block 070, Lot 016 Section 176.19, Block LLO, Lot 001 Section 184.12, Block FNO, Lot 027 Property Description: The subject property is a single story community shopping center featuring 212,057 square feet of gross leasable area. The improvements are situated on a 1,232,748 square foot lot (28.3 acres). Construction features include a concrete and steel frame and brick and split-faced block exterior walls. Highest and Best Use As Though Vacant: Land banking until such time that retail development becomes financially feasible As Improved: Continued use as a shopping center Property Rights Appraised: Leased Fee Date of Value: May 15, 1996 Land Area 1,232,748 Square Feet (28.3 acres) Improvements Building Area: Gross Leasable Area: 212,057 SF Year Built: 1972 Condition: Average Estimated Marketing Time: 12 months or less - -------------------------------------------------------------------------------- iii ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- Financial Indicators Current Occupancy: 100% Leased / 100% Occupied Stabilized Occupancy: 97% Market Rental Rate: $ 6.00 P.S.F. Anchor $ 7.50 P.S.F. Satellite Income Growth Rate: 3.0% Estimated Stabilized Expenses: $ 1.50 P.S.F. Expense Growth Rate: 3.0% Going-In Overall Capitalization Rate Selected: 10.50% Going-In Overall Capitalization Rate Implied: 11.52% Terminal Overall Capitalization Rate: 11.00% Discount Rate: 12.50% Valuation Land Value: N/A Cost Approach: N/A Sales Comparison Approach: $ 5,100,000 Income Capitalization Approach: $ 5,000,000 Final Value Conclusion: $ 5,000,000 Per Square Foot: $ 23.58/SF - -------------------------------------------------------------------------------- iv ================================================================================ TABLE OF CONTENTS - -------------------------------------------------------------------------------- TABLE OF CONTENTS CERTIFICATION OF THE APPRAISERS................................................i SUBJECT PHOTOGRAPHS...........................................................ii SUMMARY OF SALIENT FACTS.....................................................iii TABLE OF CONTENTS..............................................................v INTRODUCTION...................................................................1 AREA ANALYSIS..................................................................8 MARKET ANALYSIS...............................................................16 SITE ANALYSIS.................................................................21 IMPROVEMENT ANALYSIS..........................................................23 ZONING........................................................................26 TAX AND ASSESSMENT DATA.......................................................27 HIGHEST AND BEST USE..........................................................28 APPRAISAL METHODOLOGY.........................................................31 SALES COMPARISON APPROACH.....................................................33 INCOME CAPITALIZATION APPROACH................................................39 RECONCILIATION OF VALUE.......................................................64 ASSUMPTIONS AND LIMITING CONDITIONS...........................................66 ADDENDA.......................................................................70 A...........................................................Glossary Of Terms B......................................................Additional Photographs C...................................................Improved Comparable Sales D..........................................................Rental Comparables E.............................................Strategic Mapping, Inc. Reports F...................................................................Rent Roll G............................................................PRO-JECT Reports H...........................................................Engagement Letter I..............................................................Qualifications - -------------------------------------------------------------------------------- v INTRODUCTION ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- INTRODUCTION PROPERTY IDENTIFICATION The subject is located on the north side of Route 11 (Birney Avenue) at Pittston Avenue in the Borough of Moosic, Pennsylvania. The city assessor's tax identification number is as follows: ======================================================================= ASSESSOR'S TAX IDENTIFICATION NUMBER ======================================================================= Section 176.08 Block 040 Lots 001, 002 & 003 Section 176.12 Block 010 Lots 014 & 014.01 Section 176.12 Block 070 Lot 016 Section 176.19 Block LLO Lot 001 Section 184.12 Block FNO Lot 027 ======================================================================= A full metes and bounds legal description is included in the Addenda. OWNERSHIP AND PROPERTY HISTORY The subject is currently owned by Mark Centers Limited Partnership. The subject has not sold in the last three years and to the best of our knowledge there is no known current listing, option, or agreement of sale of the subject. DATES OF INSPECTION AND VALUATION The site was last inspected by Dimitri M. Teddone, MAI on May 15, 1996. Michael R. Pecorino, MAI did not inspect the subject or the comparables employed but reviewed this report and concurs with the conclusions. The date of the market value is the date of inspection, May 15, 1996. - -------------------------------------------------------------------------------- 1 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- PURPOSE OF THE APPRAISAL The purpose of this appraisal is to estimate the current market value of the leased fee estate in the subject property in it's "As Is" condition. Market value is defined as follows: Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised, and acting in what they consider their own best interests; 3. A reasonable time is allowed for exposure in the open market; 4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) TERMS AND DEFINITIONS Please refer to the Addenda for a Glossary of the Terms and Definitions that are, and may be used in this appraisal. INTENDED USE OF REPORT This appraisal is for mortgage underwriting purposes. PROPERTY RIGHTS APPRAISED The value estimated represents the leased fee estate. - ---------- (1) The definition of market value is taken from: The Office of the Comptroller of the Currency under 12 CFR, Part 34, Subpart C-Appraisals, ss.34.42(f), August 24, 1966. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. - -------------------------------------------------------------------------------- 2 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- APPRAISAL DEVELOPMENT AND REPORTING PROCESS The following steps were completed by CB Commercial for this assignment: 1. Analyzed regional, city, neighborhood, site, and improvement data. 2. Inspected the subject and the neighborhood. 3. Reviewed data regarding taxes, zoning, utilities, easements, and city services. 4. Considered comparable improved sales, comparable improved building rental information, and comparable site sales. Data was confirmed with principals, managers, or real estate agents representing principals, unless otherwise noted. 5. Analyzed the data to arrive at conclusions via each approach to value used in this report. 6. Reconciled the results of each approach to value employed into a probable range of market data and finally an estimate of value for the subject, as defined herein. 7. Estimated a reasonable exposure time associated with the value estimate. The subject site and improvement descriptions are based on a personal inspection of the property, discussions with representatives of the subject property, and/or a review of relevant plat maps and leasing plans. The inspection is not a substitute for thorough engineering studies. To develop the opinion of value, CB Commercial performed a complete appraisal process, as defined by the Uniform Standards of Professional Appraisal Practice. This means that no departures from Standard 1 were invoked. This is a complete appraisal, in the form of a Self-Contained Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Standards of Professional Appraisal Practice. The definitions of Complete Appraisal and Self-Contained Report are found in the Glossary of Terms and Definitions. In a complete appraisal, CB Commercial uses all known applicable approaches to value. The value conclusion reflects all known information about the subject property, market conditions, and available data. The Self-Contained Report incorporates to the fullest extent possible, practical explanation of the data, reasoning and analysis that were used to develop the opinion of value. It also includes thorough descriptions of the subject property and the market for the subject property type. All data considered significant that was requested for this assignment was received by CB Commercial Real Estate Group, Inc. Appraisal Services. SPECIAL APPRAISAL INSTRUCTIONS There were no special appraisal instructions. - -------------------------------------------------------------------------------- 3 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- MARKETING PERIOD The marketing period section is divided into reasonable exposure time and reasonable marketing time. Exposure time differs from marketing time. Marketing time is the period required to sell a real property interest at market value during the period immediately after the effective date of the appraisal. Exposure time is always presumed to precede the effective date of the appraisal. Exposure time is not intended to be a prediction of a date of sale or a one-line statement. Instead, it is an integral part of the appraisal analysis and is based on one or more of the following: o statistical information about days on the market o information gathered through sales verification o interviews of market participants. The reasonable exposure period is a function of price, time, and use. It is not an isolated estimate of time alone. Exposure time is different for various types of real estate and under various market conditions. Reasonable Exposure Time Exposure time is always presumed to precede the effective date of the appraisal. It is the estimated length of time the property would have been offered prior to a hypothetical market value sale on the effective date of appraisal. It is a retrospective estimate based on an analysis of recent past events, assuming a competitive and open market. It assumes not only adequate, sufficient, and reasonable time but adequate, sufficient, and reasonable marketing effort. Exposure time and appraisal conclusion of value are therefore interrelated. Exposure time is often expressed as a range and is based on direct and indirect market data gathered during the market analysis, sales verifications, interviews with market participants, and other appropriate sources. The amount of time which a property will require to be marketed varies greatly depending on a number of factors including market conditions, listing price, terms of sale offered, and competitive listing inventory. In addition to considering each of the factors noted above, CB Commercial considered: o exposure periods of comparable sales revealed during the course of this appraisal, o the most recent CB Commercial National Investor Survey, and o the opinions of local knowledgeable real estate brokers and investors. - -------------------------------------------------------------------------------- 4 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- Market Conditions Throughout the Scranton--Wilkes-Barre--Hazlet metropolitan area, market conditions for most property types have been generally weak during the past three to four years. The value of most investment grade property types has decreased due to a number of factors. The lack of demand for investment properties and the inability of owners to make mortgage payments resulted in numerous foreclosures, or properties deeded back in lieu of foreclosure. Increased listing inventory has had a substantial downward influence on property values and the exposure time necessary to generate sales. Only recently, due to the competitive pricing in the market and improving economic conditions, has the number of transactions and active investors increased. These market conditions describe the current market and illustrate how exposure time is correlated with listing inventory, competitive pricing structures, and marketing efforts. CB Commercial National Investor Survey In the most recent issue of the CB Commercial National Investor Survey, published in the First Quarter 1996, CB Commercial surveyed a wide range of investors for property type preferences and specific marketing times. Respondents showed a clear preference for apartments, suburban offices, warehouse/distribution, community shopping centers, neighborhood shopping centers, power centers, urban offices, and business parks. Investors indicated that exposure requirements for investment property have changed little from the previous survey, now an average of approximately 8.5 months for the subject property type. Real Estate Broker Surveys As a second information source, appraisers solicited the opinions of real estate brokers knowledgeable in the subject market and property type. While the majority of individuals surveyed were reluctant to predict an exact exposure time length for retail property in general, they generally estimated an approximate range between 6 and 12 months. All assumed that property would be appropriately priced and marketed. When asked about the subject property specifically, the consensus of opinion was that the subject would receive average to above average recognition in the marketplace under a reasonable plan for pricing and promotion. Exposure Time Conclusion In conclusion, based on the foregoing analysis, an exposure time of between 6 and 12 months is reasonable, defensible, and appropriate. Like the brokers surveyed, CB Commercial assumes that the subject property would have been competitively priced and aggressively promoted regionally. - -------------------------------------------------------------------------------- 5 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- Reasonable Marketing Time Reasonable marketing time is the period a prospective investor would forecast to sell the subject property immediately after the date of value, at the value estimated. Anticipated marketing time is essentially a measure of the perceived level of risk associated with the marketability, or liquidity, of the subject as an investment grade property. The sources for this information include those used in estimating the reasonable exposure time, but also an analysis of the anticipated changes in market conditions following the date of appraisal. In other words, the reasonable marketing time is the number of months it will require to sell the subject property from the date of value, into the future. The reader must understand, however, that the future price for the subject property (at the end of the marketing time) may or may not equal the appraisal estimate. The future price depends on unpredictable changes in the physical real estate, demographic and economic trends, real estate markets in general, supply/demand characteristics for the property type, and many other factors. Based on the premise that present market conditions are the best indicators of future performance in the short-term and under stable market conditions, a prudent investor will forecast that, under the conditions described above, the subject property will require a marketing time of 6 to 12 months. - -------------------------------------------------------------------------------- 6 ================================================================================ REGIONAL ANALYSIS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- REGIONAL AREA MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 7 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- AREA ANALYSIS The dynamic nature of economic relationships within a market area have a direct bearing on real estate values and the long-term quality of a real estate investment. In the market, the value of a property is not based on the price paid for it in the past or the cost of its creation, but on what buyers and sellers perceive it will provide in the future. Consequently, the attitude of the market toward a property within a specific neighborhood or market area reflects the probable future trend of that area. Since real estate is an immobile asset, economic trends affecting its locational quality in relation to other competing properties within its market area will also have a direct effect on its value as an investment. To accurately reflect such influences, it is necessary to examine the past and probable future trends which may affect the economic structure of the market and evaluate their impact on the market potential of the subject. This section of the report is designed to isolate and examine the discernible economic trends in the region and neighborhood which influence and create value for the subject property. A regional map indicating the location of the subject is presented on the previous page. REGIONAL INFLUENCES Location The subject is located in the community of Moosic within Lackawanna County, located in the northeastern portion of the state of Pennsylvania. Lackawanna County is part of the Scranton--Wilkes-Barre--Hazlet MSA and is adjacent to the west by Wyoming and Luzern Counties, to the east by Wayne County, to the south by Monroe County, and to the north by Susquehanna County. A regional map indicating the location of the subject is presented on the previous page. Population The 1995 population within the Scranton--Wilkes-Barre--Hazlet MSA was estimated by Strategic Mapping, Inc. to be 637,743. This indicates a decrease of 723, or 0.11% from the April 1, 1990 federal census. The MSA's population is expected to increase slightly to approximately 637,923 by the year 2000, or a 0.03% increase. Demographic statistics for the Scranton--Wilkes-Barre--Hazlet MSA are summarized in the following table. - -------------------------------------------------------------------------------- 8 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ===================================================================== SELECTED AREA DEMOGRAPHICS THE SCRANTON--WILKES-BARRE--HAZLET MSA --------------------------------------------------------------------- Population 1995 Estimate 637,743 1990 Census 638,466 1990-1995 % Change -0.11% Households 1995 Estimate 247,194 1990 Census 246,491 1990-1995 % Change 0.29% 1995 Median Household Income $ 28,672 1995 Average Household Income $ 36,957 1990 Average Home Value $ 71,131 1990 % College Graduates 8.5% --------------------------------------------------------------------- Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ===================================================================== Households Similar to the population level within the Scranton--Wilkes-Barre--Hazlet MSA, the number of households has grown in recent years and is projected to increase over the next five years. Between 1990 and 1995, household growth in the Scranton--Wilkes-Barre--Hazlet MSA was 0.29%. Projections for the year 2000 indicate a mature and stable area with the number of households increasing by 0.56%. While experiencing a significant decline between 1980 and 1990, the average household size did not change significantly in 1995 (2.49) and is expected to remain fairly stable over the next five years. In the Scranton--Wilkes-Barre--Hazlet MSA, the average household size declined from 2.70 in 1980 to 2.50 in 1990. It is projected to decline slightly to 2.48 in the year 2000. Income As per data compiled by the Strategic Mapping, Inc., the 1995 median household income in the Scranton--Wilkes-Barre--Hazlet MSA was $28,672. The median household income increased considerably between the 1980 and 1990 census by approximately 5.49% annually. In 1980 the median household income was $14,203, which increased by 70.6% to $24,232 in 1990. The 1995 estimate indicates that growth in the median household income has slowed to only 3.4% per annum from 1990 to 1995. Income growth is projected to increase at an average annual rate of 3.3% between 1995 and the year 2000. - -------------------------------------------------------------------------------- 9 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Employment The total civilian labor force for the Scranton--Wilkes-Barre--Hazlet MSA was 337,200 in April, 1996 with corresponding employment of 312,922 indicating an April, 1996 unemployment rate of 7.2%. The following table compares the unemployment rate for the area to that of the state and national average. ================================================================================ UNEMPLOYMENT RATES COMPARISON BY MSA, STATE, AND U.S. - -------------------------------------------------------------------------------- Year Scranton--Wilkes-Barre-- Pennsylvania U.S. Hazlet MSA 1995 7.0% 5.9% 5.7% 1994 7.2% 6.2% 6.1% 1993 8.0% 7.1% 6.8% 1992 8.8% 7.6% 7.4% ================================================================================ Source: Pennsylvania Department of Labor and Employment Security, Bureau of Labor Market Information Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ Most of the employment is in the services (34%) and Manufacturing (19%), followed by retail trade industries (13%), similar to the State of Pennsylvania averages. The major employers in the area are as follows: ================================================================================ SCRANTON--WILKES-BARRE--HAZLET MSA MAJOR AREA EMPLOYERS - -------------------------------------------------------------------------------- Company Business No. Employees - -------------------------------------------------------------------------------- WEA Manufacturing Records & CD's 2,800 Commonwealth of Pennsylvania Government 2,096 Community Medical Center Hospital 1,800 Lackawanna County Government 1,550 Mercy Hospital Hospital 1,500 Technaglass TV Screens 1,450 Allied Services Rehabilitation Healthcare 1,400 Thompson Consumer Electronics Picture Tubes 1,275 University of Scranton Education 1,185 U.S. Government Government 1,094 - -------------------------------------------------------------------------------- Source: Lackawanna County Chamber of Commerce Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 10 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Transportation The Interstate highways serving Lackawanna County include Interstate 81, 84 and 380. Interstate 81 connects Canada to the north to all points south to Florida. Interstate 84 connects parts of New York and Connecticut to the east to points west and terminates at the I-81/I-84 interchange in Dunmore, Pennsylvania. Interstate 380 runs from the I-380/I-84 interchange in Dunmore south to the I-380/I-80 interchange in Crescent Lake, Pennsylvania. Other significant arterials include U.S. 9 which runs through the central portion of the county as well as Moosic and S.R. 11 which runs through the central area also. The major airports serving the Lackawanna County area are the Wilkes Barre Scranton International Airport and the Wilkes Barre Wyoming Valley Airport. The Wilkes Barre Scranton International Airport is approximately 10 miles southwest of downtown Scranton while the Wilkes Barre Wyoming Valley Airport is 7 miles north of downtown Wilkes Barre. Both airports provide for private and corporate flights as well as cargo shipments. The Lackawanna County area is also served by several railroads including Amtrak. Conclusion and Relevance to the Subject Property The long term outlook for the Scranton--Wilkes-Barre--Hazlet MSA is considered good. The strategic location between major cities in all directions combined with the convergence of three major arterials are primary factors in the anticipated favorable future of the area. Population projections indicate a stabilization for the Scranton--Wilkes-Barre--Hazlet MSA in the short- and long-term. The affordability and relative ease of obtaining housing within the Scranton--Wilkes-Barre--Hazlet MSA is a key factor for future growth. The vast amount of available land, as well as the large number of existing developments are seen as supportive of the long term growth prospects within this area. Transportation modes are considered excellent as are public utilities and services. Therefore, it would appear that the area will be suitable for additional growth in the future which should be favorable for the subject property in the long run. The overall projection for the Scranton--Wilkes-Barre--Hazlet MSA appears stable. - -------------------------------------------------------------------------------- 11 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- NEIGHBORHOOD INFLUENCES Location The subject is located on the north side of Route 11 at Pittston Avenue, approximately four miles southwest of downtown Scranton. The boundaries for the subject neighborhood are considered to be: North: Lackawanna River South: Interstate 81 West: State Route 9 East: Scranton City Limits A neighborhood map indicating the location of the subject is presented no the following page. Land Use Land use in the neighborhood consists of a mixture of service retail and residential development. Development in the immediate vicinity of the subject consists of 1-4 family residential uses as well as some retail uses. The subject serves as the only major retail development within a one-half mile radius. Other uses within this radius include several converted homes to commercial office/retail, gasoline and automotive service stations, and fast food restaurants. All other improvements in the area tend to be residential in nature. The immediate area is approximately 90+ percent developed. Although we see this as a predominantly residential area, the majority of commercial uses are currently located along the Route 11 corridor in the immediate area. Access Accessibility to the neighborhood in general, and to the subject property in particular, is considered to be good. Access to Interstates 81, 84, and 380 is available via the Route 11-Interstate 81 interchange (Exit 50) located approximately one mile southwest of the subject. A connection with Interstate 81 at Exit 51 is also located approximately one mile northeast of the subject at Davis Street. The subject neighborhood also features a good network of secondary roadways which further enhance accessibility. - -------------------------------------------------------------------------------- 12 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ================================================================================ NEIGHBORHOOD MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 13 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Demographics Selected Neighborhood demographics in a one, three, and five mile radius from the subject are shown in the following table: ================================================================================ SELECTED NEIGHBORHOOD DEMOGRAPHICS - -------------------------------------------------------------------------------- 1 mile 3 mile 5 mile - -------------------------------------------------------------------------------- Population 1995 Estimate 5,589 49,717 109,717 1990 Census 5,696 50,654 113,019 1990-1995 % Change -1.9% -1.8% -2.9% Households 1995 Estimate 2,137 20,065 43,676 1990 Census 2,165 20,338 44,854 1990-1995 % Change -1.3% -1.3% -2.6% 1995 Median Household Income $31,557 $26,578 $26,260 1995 Average Household Income $39,149 $32,389 $33,672 1990 Average Home Value $75,688 $67,075 $67,540 Median Age Total Population 40.4 38.7 38.6 1990 % College Graduates 5.6% 6.4% 7.5% - -------------------------------------------------------------------------------- Source: Conquest Market Data Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The subject property benefits from a location along a highly trafficked commercial corridor with no immediate competition as well as stable demographic characteristics. The population and households have decreased within the one, three and five mile radii. Projections for the year 2000 indicate similar patterns. While the population and households have been decreasing overall, income levels have edged upward approximately 3.5 percent per annum since 1990 within all three radii, similar to the inflation rate. Demographic characteristics appear to be strongest within a three mile radius. The five mile radius extends closer to the City of Scranton which appears to be stabilizing economically slower than Moosic. General characteristics are fairly similar throughout all three radii. Growth and Trends Due to demographic characteristics as well as economic conditions as discussed above, there has not been any retail development in Moosic in recent years. Furthermore, we are not aware of any proposed shopping centers within the Borough of Moosic in upcoming years. The immediate neighborhood has not experienced significant retail development in the recent past. - -------------------------------------------------------------------------------- 14 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Conclusion and Relevance to the Subject Property The subject property is situated in an area consisting primarily of retail, commercial and residential uses. The area features good accessibility to the local transportation system and throughout the city and metropolitan area. Currently, the subject's neighborhood is in the stabilization stage of its life cycle, a period of neither significant growth nor decline. While the area is highly developed, some potential exists for future development whether through construction on the few remaining vacant lots or renovation of existing improvements. We do not expect the character of the neighborhood to change in the near future. - -------------------------------------------------------------------------------- 15 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- MARKET ANALYSIS Retail Overview The retail market in Moosic has witnessed limited growth over the past few years as a result of the economic troubles the region has experienced. We are not aware of any proposed shopping centers within the Borough of Moosic in upcoming years. The immediate neighborhood has not experienced significant retail development in the recent past. According to Strategic Mapping, Inc., total retail development within a one mile radius of the subject property consists of approximately 229,000 square feet. Furthermore, retail development within the three and five mile radii account for 1.997 and 4.359 million square feet, respectively. Local Retail Market In order to project future performance of the retail space in the subject property consideration has been given to various market components that affect the supply and demand for this type of real estate property. Specifically we have: o Inspected the site and surrounding areas for the purpose of familiarizing ourselves with all the locational and environmental factors. In this regard, we have directed our attention to the physical qualities of the site, access and circulation, surrounding uses, and relationship to sources of market support. o Reviewed the principal economic growth trends in the area in industry, population and employment. Our intention was to identify the degree of underlying support for existing improvements and future growth. o Analyzed existing and foreseeable market conditions for retail properties in the area. o Analyzed demographics of the subject property's trade area as well identified competition in order to assess, the subject property's current as well as future position in the market. Trade Area The trade area of a shopping center is defined as the geographic area from which the sustaining patronage for steady support of a center is obtained. Determination of the boundaries is contingent upon various factors including but not limited to the nature of the center, accessibility, physical barriers, location of competing facilities, and limitations of driving time and distance. - -------------------------------------------------------------------------------- 16 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- The subject's general trade area is considered to be that which encompasses a five mile radius of the subject center. We broke this down further to include a one-mile ring (primary), a three-mile ring (secondary) and a five-mile ring (tertiary). Definition Of The Trade Area The primary ingredients for success in these types of projects include the nature of the competition, population density, income levels, and disposable income. The actual size of the population needed to support this type of project cannot be fixed due to the complexities of the above factors, as well as changing methods of merchandising. Local conditions, such as number of households, income levels, and existing centers within the trade area can have the most dramatic impact upon any given project since these factors are what determine the purchasing power in an area. An additional ingredient leading to the success of a shopping center would be the tenant mix and characteristics of the leading tenants which attract shoppers to the project. We have analyzed demographic data, competition, income levels for the subject trade area in the following sections. The demographic profiles of the primary, secondary and tertiary trade areas are presented in the Neighborhood Influences section of the report. Additional demographic information is contained within the Strategic Mapping, Inc. Profile Report located within the Addenda. Population The sales potential of a center is directly related to its proximity to the number of potential patrons. The historical and projected trends for population are important to examine when analyzing the trade area of a shopping center. The historical population trends for the subject's trade areas indicate a decrease in population between 1980 and 1995 followed by a further decrease projected from 1995 to the year 2000. In the primary trade area the population decreased by 13.0% between 1980 and 1990 to 5,696 and then witnessed a decrease to 5,589 in 1995. Population projections indicate a further decrease to 5,488 between 1995 and the year 2000. Both the secondary and tertiary trade areas witnessed a similar pattern and future trend in population in these areas. In order to further analyze the population change, we have examined the distribution of the population by age. When analyzing the population distribution by age, it should indicate in what age groups the population shifts are projected to take place. This is important to distinguish if it will have a great impact on the retail sales of the subject center. Shifts in the age groups under - -------------------------------------------------------------------------------- 17 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- 24 years of age will affect the subject, however, less drastically than changes in the subject's core market approximately between the ages of 25 and 54. As illustrated in the Profile Report located in the Addenda, a large percentage of the population in all three trade areas are in the age groups from 25 - 54. Estimated figures for 1995 indicated that the median age was slightly higher than the 1990 census in all three trade areas ranging from 38.6 to 40.4. Overall, the diversification among age groups is very common among other retail trade areas. Household Trends When analyzing the demographics for a retail center, it is most important to focus on the trends in the household population. A household consists of one or more persons occupying a dwelling unit. A family would be considered a household unit, however single persons living alone or two or more unmarried persons sharing a dwelling are also considered a household unit. The household unit is perhaps the best indicator in determining the economic health of a trade area. One of the important components which bonds a household together is it's economic strength as a unit as compared to the economic viability of an individual; single person households not withstanding. If the population is slightly decreasing and yet the number of households is increasing, this would not necessarily be a negative indicator. This would imply that the average household size was shrinking. Each household has demand for goods that likely is not duplicated with a larger household size. This demand is duplicated however in the number of households. Similar to population figures, the number of households in the trade area decreased between 1980 and 1990. Subsequently, the number of households decreased between 1990 and 1995 though at an accelerated pace in comparison to the decline witnessed in the previous decade. The number of households are projected to decrease further in all three trade areas in upcoming years. Household Income The median household income in the subject's trade areas increased annually at an average rate of 3.4% from 1990 to 1995. Thus, the household incomes in the area grew at a pace slightly below inflation during this period. The projected annual income growth rates between 1995 and the year 2000 are approximately 3.2%, again below the projected rate of inflation. Overall, household income levels varied slightly between the three trade areas. The median household income levels ranged from $26,260 to $31,557 in 1995 with the primary trade area representing the upper end of the range. - -------------------------------------------------------------------------------- 18 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- Employment The income characteristics of the trade areas for the subject property indicate that this is a predominately white collar market. The primary trade area had the highest percent in white collar employment at 53.4% while the secondary trade area had the lowest at 49.1%. Blue collar employment percentages in the primary, secondary and tertiary trade areas were 30.7%, 36.3% and 33.7%, respectively. The remaining percentages were in special services categories. The 1990 Census information indicates that the unemployment rates ranged from a low of 6.1% in the primary trade area to a high of 6.5% in the secondary trade area. As discussed in the Location Analysis, the most recent unemployment rate in the Scranton--Wilkes-Barre--Hazlet MSA was 7.2% which indicates an overall decrease in employment from the 1990 Census. We feel the subject market will witness modest employment growth in upcoming years and a declining unemployment rate. Expenditure Potential The Expenditure Potential charts located in the Addenda outline Strategic Mapping, Inc. retail sales projections for the subject trade area. The highest sales growth in the primary trade area appears to be for electronics, drug, and video stores. These three categories also represent high growth in the secondary and tertiary trade areas. The average growth rate for retail sales in the primary trade area is projected at 1.17% in the primary trade area, 1.27% in the secondary trade area and 1.05% in the tertiary trade area. Strategic Mapping, Inc. examines the product potential for various store types for each portion of the subject trade area. Based on statistical sampling, Strategic Mapping has derived a benchmark per household expenditures for each store type. Comparing the figures in the trade area to the benchmark figure, it is apparent that those individuals in the subject trade area are much more likely to spend on items in drugs, groceries, and convenience stores. The Strategic Mapping Expenditure Potential Index is defined as follows, 'An index which shows the amount by which an area per household expenditures, differed from that of the benchmark.' The benchmark is defined as the average or common expenditure among households for a larger region. Values below 100 signify that this area is below the benchmark per household expenditures and correspondingly values above 100 indicate a higher than average expenditure per household. The overall Expenditure Index for the primary area is 97.6, while the benchmark indices for the secondary and tertiary trade areas are 90.7 and 90.9, respectively. In conclusion, the expenditure indices for the subject trade areas indicate that the trade area - -------------------------------------------------------------------------------- 19 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- populations spend less than the benchmark household on retail goods. The area generates retail sales based on the existing population as well as the increasing income potential. Market Indicators The subject center contains 13 tenant suites ranging in size from approximately 1,500 to 104,956 square feet. Discussions with local leasing agents reveal that typical satellite space rents in the area generally range from $5.50/SF to $15.48/SF depending upon the physical and locational characteristics of the space and $5.77/SF to $10.05/SF for anchor space depending upon the same criteria. Percentage rent clauses tend to be uncommon for satellite tenants. Retail leases are typically structured on an absolute net basis with flat rents over the term. Based upon discussions with brokers and managing agents in the area as well as our observations during our inspection, competing centers in the subject's market area have vacancy rates which generally fall within the 0.0% to 7.0% range with an average vacancy rate of approximately 4.0%. The subject center is currently 100% occupied. Summary Although future projections indicate continued decreases in the population and households in all three trade areas from 1980 through 1995, the trade areas exhibit increased spending potential over the same period. However, income levels appear to be increasing at rates slightly below projected inflationary rates which is common during periods of economic recovery. Overall, the subject trade areas reflect average retail characteristics. Due in part to a lack of competition in the immediate area, we conclude that the trade area represents a viable retail market. - -------------------------------------------------------------------------------- 20 PROPERTY DESCRIPTION ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- SITE ANALYSIS The description of the site can be detailed as follows: Location: The subject is located at the north side of Route 11 (Birney Avenue), approximately two miles northeast of the Route 11-Interstate 81 interchange (Exit 50) and four miles southwest of Downtown Scranton, Pennsylvania. Ingress and egress to the subject are available via curb cuts from Route 11 Assessor's Parcel Number: Section 176.08, Block 040, Lots 001, 002 & 003 Section 176.12, Block 010, Lots 014 & 014.01 Section 176.12, Block 070, Lot 016 Section 176.19, Block LLO, Lot 001 Section 184.12, Block FNO, Lot 027 Land Area(2) The subject site contains 28.3 acre or 1,232,748 square feet. Shape and Frontage: The site is irregular in shape featuring 588.36 linear feet of frontage on the north side of Route 11. Topography and Drainage: The site slopes downward from Route 11 towards the rear. Our investigation did not reveal any significant drainage problems. Soils: No soil report was provided and it is assumed that the soil is adequate for the existing use. Easements: No title report was provided in connection with this appraisal. No survey showing the location of easements was available. Thus, it is not possible to make a definitive conclusion regarding any potential impacts on value of the location of any such easements or encroachments. It is specifically assumed that any easements, restrictions, or encroachments that might appear against the title would have no adverse impact on marketability or value. Covenants, Conditions, No private deeds or restricting covenants and Restrictions: affecting development, other than zoning, were found to affect the site. Utilities: All public utilities including gas, electricity and telephone as well as water, storm and sanitary sewer systems. - ---------- (2) Source: Moosic Tax Assessor's Office - -------------------------------------------------------------------------------- 21 ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- Flood Zone: The municipal offices did not have a copy of a Federal Emergency Management Agency (FEMA) Flood Map, however our discussion with the Borough of Moosic's Planning and Building Department indicated that the subject property is not located within a flood hazzard zone. This was corroborated with the survey of the subject which was submitted to us by Mark Centers Trust. The survey was performed by Thomas B. Dilley and dated 10/19/90 and revised 5/11/93. Environmental Issues: The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the property causing a loss in value. No evidence of hazardous waste or toxic materials was visible and CB Commercial has no knowledge of the existence of these substances on or in the subject property. However, CB Commercial is not qualified to detect hazardous waste or toxic materials. Adjacent Properties North: Vacant land South: Route 11 commercial corridor East: 1-4 family residential uses West: 1-4 family residential uses as well as commercial uses Conclusion: The subject is a 28.3-acre site on a paved street served by necessary utilities. Access and visibility are considered to be good. There are no adverse soil conditions of which CB Commercial Real Estate Group, Inc. is aware. The shape of the parcel is irregular and results in no specific limitation. The topography is sloping though possesses no specific development limitation. There is no excess land and the unimproved portions of the site are fully utilized by a macadam parking lot. From a physical standpoint, the site is considered to be adequate for many types of development. - -------------------------------------------------------------------------------- 22 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS The subject improvements were constructed in 1972. The K-Mart was reportedly renovated in 1992. The improvements consist of a single-story Community shopping center containing 212,057 square feet of gross leasable area. The shopping center contains 13 tenant suites. The following is a description of the improvements based on our physical inspection, municipal records and from discussions with and materials provided by the client. The basic construction features are summarized as follows. Construction Class The class of construction is the basic subdivision in Marshall Valuation Service which divides all buildings into five basic groups by type of framing (supporting columns and beams), walls, floors, roof structure, and fireproofing. The subject is considered to be of construction Class B(3). Competitive Rating The subject is considered a Class B building in terms of quality as it is perceived in the marketplace. Foundation Poured concrete Frame Concrete block over a steel frame Floor Construction Concrete slab Exterior Walls Load-bearing concrete block over a steel frame with split-faced block. Fenestration Aluminum framed glass windows and double-paned glass front doorways. Roof Structure & Covering Flat, presumably built-up composition covering over steel deck with steel bar joist supports. We were unable to inspect the roof and assume the roof is in average overall condition. Exterior Condition Average Interior Partition System Metal studs with gypsum board cover. - ---------- (3) The primary characteristic of Class B Buildings is the reinforced concrete frame in which the columns and beams can be either formed or precast concrete. They may be mechanically stressed, and the structure is fire resistant. (Source: Marshall Valuation Service) - -------------------------------------------------------------------------------- 23 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Interior Finishes - Tenant Space Floors: Combination of vinyl tile and carpet. Walls: Painted or covered gypsum board. Ceilings: Suspended acoustic tiles. Lighting: Recessed florescent lighting. Summary: The interiors of the subject are considered to be of average to good quality and similar to competitors. HVAC Heating and ventilation is provided to the majority of the tenant suites by roof-mounted HVAC units. Each of these units pump the hot air throughout its suite via sheet metal air duct work hidden above the dropped ceiling. Air conditioning is supplied by the same system utilizing the duct work and supplying cool air during the summer months. The HVAC system is a gas-fired forced air system. Electrical The electrical system is assumed to be in good working order and adequate for the building. Fire Protection It is assumed that the subject has adequate fire alarm systems, fire exits, fire extinguishers, fire escapes and/or other fire protection measures to meet local fire marshall requirements. Plumbing The plumbing system is assumed to be in good operating condition. Parking Surface parking is provided for 900+/- vehicles. Landscaping Landscaping on the subject property is minimal which is typical within the subject neighborhood. ADA Compliance Handicap access appears to be available to all areas of the center. However, we are not qualified to determine compliance with the requirements. Please refer to the specific limiting condition regarding ADA compliance. Environmental Issues The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the improvements which would cause a loss in value. - -------------------------------------------------------------------------------- 24 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Functional Quality of Space The interior floor plans are flexible and will accommodate a variety of tenant layouts. There are no observed design problems and none are reported by management. Access to the tenant suites is available at the front and rear of the center. There are no elevators within the center. Deferred Maintenance No deferred maintenance was observed or reported. The improvements have been adequately maintained since it was constructed in 1972. Economic Age and Life Based on the current condition, we estimate the effective age to be approximately 25 years. According to the Marshall Valuation Service cost guide, buildings of this type and quality have an expected life of approximately 45 years. Therefore, the remaining economic life (expected life minus effective age) is estimated at 20 years. While we observed nothing to suggest a different economic life, a capital improvement program could extend life beyond that stated above. Quality/General Condition The subject property conforms well with competitors and substitutes in the area. The quality of construction is typical of the area. Interior amenities are similar to competing properties of the same approximate age. The general condition of the improvements is average. We observed no evidence of structural fatigue and the improvements appear sound. We are not qualified to determine structural integrity, however, and recommend that the reader rely upon an expert in this field for further determination. Conclusion/Comments The subject property is an average quality shopping center located in a relatively stable area. The improvements generally conform with competitors and substitutes in the neighborhood. - -------------------------------------------------------------------------------- 25 ================================================================================ ZONING - -------------------------------------------------------------------------------- ZONING The subject's zoning requirements are detailed below. ================================================================================ ZONING SUMMARY - -------------------------------------------------------------------------------- Current zoning: C-3; Heavy Commercial District Legally conforming?: Yes Uses permitted: Retail, Bank, Food Stores, Dry Cleaning, Drive-In Restaurants, Offices, Service Stations, Motels, Auto Repair Shops Zoning change Not Likely - -------------------------------------------------------------------------------- Category Zoning Requirement - -------------------------------------------------------------------------------- Maximum FAR 50% Minimum Lot Size 20,000 SF Minimum Frontage 75 Feet Maximum Site Coverage None Specified Front Setback 25 feet Rear Setback 20 feet Side Yard Setbacks 20 feet Height Limit 2.5 stories or 35 feet Parking One space per 250 square feet of building area above grade - -------------------------------------------------------------------------------- Source: Borough of Moosic Zoning Ordinance Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ ZONING ANALYSIS AND CONCLUSIONS According to the Borough of Moosic Zoning ordinance, the subject property is a legal and conforming use under current guidelines. In addition, the property appears to conform to bulk and setback requirements as well as to parking requirements. - -------------------------------------------------------------------------------- 26 ================================================================================ TAX ANALYSIS - -------------------------------------------------------------------------------- TAX AND ASSESSMENT DATA The subject property is assessed by Lackawanna County, Pennsylvania, at approximately 22.8% of the assessor's estimated market value. The last general assessment of properties in Lackawanna County was in 1985. A re-valuation has not been rescheduled. School taxes are collected on a fiscal year and town/county taxes are collected on a calendar year. The subject's assessed value and current taxes are summarized below. ================================================================================ CURRENT ASSESSMENT AND TAX INFORMATION (1995) - -------------------------------------------------------------------------------- Assessed Tax Rate Annual Tax ID Value / $1,000 Taxes - -------------------------------------------------------------------------------- Section 176.08, Block 040, Lot 001 $ 87,000 Section 176.08, Block 040, Lot 002 $ 500 Section 176.08, Block 040, Lot 003 $ 3,500 Section 176.12, Block 010, Lot 014 $ 310,000 Section 176.12, Block 010, Lot 014.01 $ 324,000 Section 176.12, Block 070, Lot 016 $ 3,000 Section 176.19, Block LLO, Lot 001 $ 32,600 Section 184.12, Block FNO, Lot 027 $ 650,000 ---------- TOTALS: $1,410,600 96.5288 $136,163.53 - -------------------------------------------------------------------------------- Source: Lackawanna County Assessor's Office Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ Based on the current tax rate of $96.5288 per $1,000 assessed value, the estimated taxes for the subject amount to $136,163.53, or $0.64 per square foot based on the rentable square footage of the center. Tax and Assessment Conclusion We have estimated the taxes for the shopping center at $136,164 for calendar year 1996 in our cash flow. Our discussions with the assessor indicated that the subject's taxes have decreased annually due to repeated tax appeals. However, the subject's future taxes should begin to increase. As a result, we have increased the subject's taxes by 1.0% in year one of our discounted cash flow analysis, 2.0% in year two and 3.0% thereafter which is in-line with the area's inflation rate. - -------------------------------------------------------------------------------- 27 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- HIGHEST AND BEST USE In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The four criteria that the highest and best use must meet are: o legal permissibility; o physical possibility; o financial feasibility; and o maximum profitability. Highest and best use is applied specifically to the use of a site as vacant. It is recognized that in cases where a site has existing improvements, the concluded highest and best use as if vacant may be different from the highest and best use given the existing improvements (as improved). The existing use will continue, however, until the land value, in its highest and best use, exceeds that total value of the property under its existing use plus the cost of removing or altering the existing structure. Implied in the highest and best use is a recognition of the contribution of a specific use to the community environment or to the community's development goals, in addition to wealth maximization of individual property owners. Also implied is that the conclusion of highest and best use that results from the appraiser's judgment and analytical skill, i.e., that the use determined from the analysis represents an opinion, not a fact to be found. Highest and best use analysis involves assessing the subject both as if vacant and as improved. HIGHEST AND BEST USE AS THOUGH VACANT Legal Permissibility The legally permissible uses were discussed in detail in the site analysis and zoning sections of this report. Based on our review of the zoning restrictions, the site can be developed with several different uses, including retail and commercial office uses. Physical Possibility The physical characteristics of the subject site were discussed in detail in the site analysis. Overall, a wide range of legally permissible uses would be physically possible, including a variety of commercial uses. - -------------------------------------------------------------------------------- 28 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- Financial Feasibility The test of financial feasibility is put only to those uses which are legally permissible and physically possible. If the property is capable of generating a sufficient net income to cover the required rate of return on investment and provide a return to the land, then the usage is financially feasible within a defined price limit. In our determination of financial feasibility we have analyzed current market rental rates for several different property types. The net income produced by the proposed or new improvements must provide a return above the cost to develop the property, including acquisition of the land. Through a cost/income analysis we have determined that development of the subject site is not financially feasible at this time. Based on the analysis of supply and demand factors at the present time, rents achieved for retail and/or office uses would not support the cost of construction. Based on the aforementioned, we have determined that development of the subject site at the present time with a retail center is not currently feasible. Maximum Profitability The final test of highest and best use of the site as though vacant is the use be maximally productive, yielding the highest land value. Based on our feasibility analysis we have determined that land banking the subject site is the maximally productive use at the present time. Conclusion: Highest and Best Use As Vacant The concluded highest and best use of the subject as though vacant is land banking until such time that development of the site with a retail/commercial facility is financially feasible. HIGHEST AND BEST USE AS IMPROVED Legal Permissibility As discussed, the subject site's zoning and legal restrictions permit a variety of land uses. Regardless, the site has been improved with a community shopping center. Based upon review of the Borough of Moosic's Zoning Ordinance, it is our opinion that the improvements are within the established guidelines. - -------------------------------------------------------------------------------- 29 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- Physical Possibility The physical characteristics of the subject improvements were discussed in detail in the improvement analysis section of this report. Overall, the layout and positioning of the improvements is considered functional for shopping center use, and the floor plan is considered to be reasonable in comparison to other shopping centers in the area. The improvements have good retail features, have been adequately maintained, and are physically capable of sustaining their current use over the extended future. Financial Feasibility As with the highest and best use of the site as though vacant, the financial feasibility of the site as improved is market derived. Typically, for retail properties similar to the subject, the test of feasibility is based on the amount of rent that can be generated less operating expenses. If a residual amount exists after paying the various expenses, then the land is being put to a productive use. At present, the subject is 100% occupied. CB Commercial estimates that the appropriate stabilized market occupancy approximates 95%. Based on the historical and current operating status of the subject property, CB Commercial anticipates that the improvements are capable of providing an adequate return on the investment before any debt service requirements. Therefore, we conclude that the current use of the improvements is a financially feasible use of the property as improved. Maximum Profitability Similar to the highest and best use of the site as though vacant, the maximum profitable use of the subject as improved should conform to neighborhood trends and be consistent with existing land uses. Although several uses may generate sufficient revenue to satisfy the required rate of return on investment and provide a return on the land, the single use that produces the highest price or value is typically the highest and best use. Conclusion: Highest and Best Use as Improved Based on the foregoing discussions, CB Commercial concludes that the highest and best use of the property, as improved, is consistent with the existing use as a shopping center. There are no apparent alternative uses of the existing improvements that would produce a higher net income and/or value over time than the current use. The current use is a legally permissible use and appears to represent the highest and best use as improved. Furthermore, CB Commercial does not believe that conversion of the improvements or demolition is warranted or financially feasible. - -------------------------------------------------------------------------------- 30 VALUATION ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- APPRAISAL METHODOLOGY The appraisal process is defined as an orderly program by which the problem is planned and the data involved is acquired, classified, analyzed and interpreted into an estimate of value. In this process three basic approaches to value are considered: Cost Approach, Sales Comparison Approach, and Income Capitalization Approach. In appraisal practice, an approach to value is included or omitted based on its applicability to the property type being valued and the quality and quantity of information available. The final step in the appraisal process is reconciliation -- a process by which CB Commercial analyzes alternative conclusions and selects a final value estimate from among two or more indications of value. CB Commercial weighs the relative significance, applicability and defensibility of each approach as it relates to the type of property being appraised. THE COST APPROACH The Cost Approach is based upon the proposition that the informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements which represent the highest and best use of the land or when relatively unique or specialized improvements are located on the site and for which there exist few sales or leases of comparable properties. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. SALES COMPARISON APPROACH The Sales Comparison Approach utilizes sales of comparable properties, adjusted for differences, to indicate a value for the subject property. Valuation is typically accomplished using physical units of comparison such as price per square foot, price per unit, price per floor, etc., or economic units of comparison such as gross rent multiplier. Adjustments are applied to the physical units of comparison derived from the comparable sale. The unit of comparison chosen for the subject is then used to yield a total value. Economic units of comparison are not adjusted, but rather analyzed as to relevant differences with the final estimate derived based on the general comparisons. - -------------------------------------------------------------------------------- 31 ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- The reliability of this approach is dependent upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c) the degree of comparability; (d) the absence of atypical conditions affecting the sales price. Although there have been few sales in the region, the sales that were gathered were utilized to form an opinion of value. However, given the lack of relevant sales data, we have not placed minimal reliance upon this approach and have used it to provide additional support to the Income Approach. INCOME CAPITALIZATION APPROACH The methodology of the Income Capitalization Approach is to determine the income-producing capacity of the property on a stabilized basis by estimating market rent from comparable rentals, making deductions for vacancy and collection losses and building expenses, then capitalizing the net income at a market-derived rate to yield an indication of value. The capitalization rate represents the relationship between net income and value. Related to the direct capitalization method is the discounted cash flow method. In this method of capitalizing future income to a present value, periodic cash flows (which consist of a net income less capital costs, per period) and a reversion (if any) are estimated and discounted to a present value. The discount rate is determined by analyzing current investor yield requirements for similar investments. Since investors are active in the marketplace for properties similar to the subject, the Income Capitalization Approach is particularly applicable to the appraisal problem at hand. There is an adequate quality and quantity of income and expense data available to render a reliable and defensible value conclusion. For income producing properties similar to the subject, the Income Capitalization Approach is considered to be the most reliable. Therefore, this approach has been employed as the primary methodology for this assignment. - -------------------------------------------------------------------------------- 32 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH The Sales Comparison Approach provides an estimate of market value based on analyzing transactions of similar properties in the market area. The method is based on the proposition that an informed purchaser would pay no more for a property than the cost of acquiring an existing one with the same utility. When there is an adequate number of sales of truly similar properties with sufficient information for comparison, a range of values for the subject property can be developed. There are various units of comparison available in the evaluation of sales data in this approach. The sale price per square foot ($/SF) is the most commonly used in this approach. The effective gross income multiplier (EGIM) is rarely used by market participants because of the inconsistencies in estimating effective or gross income, vacancy, and expense differences. However, net income multiplier (NIM) is used when overall capitalization rates are ascertained for an adequate sampling of the sales. The NIM analysis is used by market participants because this analysis accounts for the fluctuations caused by the inherent differences in vacancy and operating expenses in each of the comparable sales. We conducted a thorough sales search for comparable shopping centers in the subject's market area. Through our sales search, we were able to identify a limited number of sales with similar characteristics to the subject. The following table summarizes what are considered to be the most recent and proximate comparable sales. Detailed write-ups of each comparable are included in the addendum. - -------------------------------------------------------------------------------- 33 ================================================================================ SALES COMPARISON APPROACH - --------------------------------------------------------------------------------
============================================================================================= SUMMARY OF COMPARABLE RETAIL SALES - --------------------------------------------------------------------------------------------- Gross No. Property Name/ Location Sale Leasable NOI OAR Sale Price Date Area (SF) Sale Price Per S.F. Per S.F. - --------------------------------------------------------------------------------------------- 1 15th & Allen St. Center 1/96 46,503 $4,242,000 $ 9.94 10.89% $ 91.22 1401-1451 Allen Street Allentown Lehigh County, PA 2 Stefko Shopping Center 1/96 134,446 $5,618,000 $ 4.59 10.99% $ 41.79 Stefko Boulevard Bethlehem Northampton County, PA 3 MacArthur Plaza 10/95 29,600 $3,831,667 $ 13.92 10.76% $ 129.45 2419 MacArthur Road Whitehall Township Lehigh County, PA 4 Columbia Mall 7/95 351,364 $27,650,000 $ 8.42 10.70% $ 78.65 N/E/C Route 42 @ I-80 Bloomsburg Columbia County, PA - --------------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. =============================================================================================
- -------------------------------------------------------------------------------- 34 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMPARABLE SALES MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 35 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF IMPROVED SALES The sales reflect unit prices ranging from a low of about $41.79 to a high of approximately $129.45/SF with the significant difference reflecting the economics of the various centers. The sales all had high levels of occupancy and were in generally good condition. The difference in unit prices then were more directly tied to net operating income and investor yield rates. The comparable sales presented offer a simplistic view of the market. Since only general details of existing income and expenses were available, specific analysis is nearly impossible. Accordingly, this method acts as a general gauge of the market and therefore will be utilized as support to our findings in the Income Approach. Analysis The following discussion analyzes the aforementioned comparables relative to the subject property. Sale 1 Sale number one, located at the intersection of 15th Street and Allen Street in Allentown, is a 46,503 square foot shopping center which sold in January of 1996 for $4,242,000 or $91.22/SF. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed circa 1950 and was in very good overall condition at the time of sale since it was recently renovated. Access, exposure, visibility and general locational attributes of the center are superior to the subject, however, the center is smaller in size to the subject. Market conditions at the time of sale were similar to current market conditions. This sale's NOI is reportedly $462,049 or $9.94/SF indicating an overall rate of 10.89%. The economics of this property, at least in terms of NOI per square foot, is superior to the subject. Sale 2 Sale number two, located in the City of Bethlehem, consists of a single story community center which contains an aggregate 134,446 square feet. This center, known as the Stefko Shopping Center, sold in January of 1995 for $5,618,000 or $41.79/SF of gross leasable area (GLA). Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed in 1965 and appeared to be in average condition. The property's location with regard to access and visibility are considered superior to the subject. Furthermore, the center is significantly smaller than the subject. Market - -------------------------------------------------------------------------------- 36 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- conditions at the time of sale were similar to current market conditions. The NOI was reportedly $617,577 ($4.59/SF) indicating an overall rate of 10.99%. This property operates at a level of net income that is similar to the subject. Sale 3 Sale number three, MacArthur Plaza, is located at 2409 MacArthur Road in Whitehall Township in Lehigh County, Pennsylvania. It is a 29,600 square foot shopping center which sold in October of 1995 for $3,831,667 or $129.45/SF. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed circa 1988 and was in very good overall condition at the time of sale. Access, exposure, visibility and general locational attributes of the center are superior to the subject, however, the center is far smaller in size to the subject. Market conditions at the time of sale were similar to current market conditions. This sale's NOI is reportedly $412,122 or $13.92/SF indicating an overall rate of 10.76%. The economics of this property in terms of NOI per square foot is superior to the subject. Sale 4 Sale number four is located at the northeast quadrant of Route 42 and Interstate 80 in Bloomsburg, Columbia County, Pennsylvania and consists of a single story community center which contains an aggregate 351,364 square feet. This center, known as the Columbia Mall, sold in July of 1995 for $27,650,000 or $78.69/SF of gross leasable area (GLA). Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed in 1988 and appeared to be in good overall condition. The property's location with regard to access and visibility are considered superior to the subject. Furthermore, the center is significantly larger than the subject. Market conditions at the time of sale were similar to current market conditions. The NOI was reportedly $2,958,500 ($8.42/SF) indicating an overall rate of 10.7%. This property operates at a level of net income that is superior to the subject. Net Operating Income Analysis The net operating income level for the comparables ranged from $4.59 to $13.92 per square foot, per year. The subject has a projected NOI for the coming year of $576,231 or $2.72 per square foot reflecting full and stable occupancy. Given the correlation between price paid per square foot and NOI per square foot it would seem reasonable to conclude that the subject would sell below the range established by the comparable properties. - -------------------------------------------------------------------------------- 37 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- The following chart depicts the calculations involved in developing adjustment factors to be applied to the respective price per square foot units of comparison developed from the comparables employed. ================================================================================ NET INCOME MULTIPLIER (NIM) ANALYSIS - -------------------------------------------------------------------------------- Sale Subject's NOI/SF Net Income Sale Price Adjustment Adjusted $/SF No. Sale's NOI/SF Multiplier $/SF for Subject - -------------------------------------------------------------------------------- 1 $2.72 0.27 $91.22 -$66.59 $24.63 ----- $9.94 2 $2.72 0.59 $41.79 -$17.33 $24.66 ----- $4.59 3 $2.72 0.20 $129.45 -$103.56 $25.89 ----- $13.92 4 $2.72 0.32 $78.65 -$53.48 $25.17 ----- $8.42 ================================================================================ For the most part, there is a direct correlation between the NOI/SF and sale price per square foot. As the net income level increases, so does the price paid per square foot. After adjusting the four sales, they support a range of value for the subject between approximately $24.00/SF to $26.00/SF. Based on our analysis, the subject's value would be approximately $24.00/SF. The subject has a total building area of 212,057 square feet. The value estimate via the Sales Comparison Approach is calculated as follows: ================================================================== Net Rentable Area of Subject 212,057 square feet Value per square foot $24.00 per square foot Indicated Value: $5,089,368 ROUNDED: $5,100,000 ================================================================== Overall, very little emphasis has been placed on this approach because of the quality of the data. It is used primarily as a check of the value derived via the Income Approach. We estimate the as is market value of the leased fee interest in the subject property, via the sales comparison approach, as of May 15, 1996, is: --- FIVE MILLION ONE HUNDRED THOUSAND DOLLARS --- ($5,100,000) - -------------------------------------------------------------------------------- 38 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH The Income Capitalization Approach reflects the subject's income-producing capabilities. This approach is based on the assumption that value is created by the expectation of benefits to be derived in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over period of time. The two common valuation techniques associated with the Income Capitalization Approach are direct capitalization and the discounted cash flow (DCF) analysis. DIRECT CAPITALIZATION Direct capitalization is the method used to convert a single year's estimate of income into a value indication. In direct capitalization, a precise allocation between return on and return of capital is not made because investor assumptions or forecasts concerning the holding period, pattern of income, or changes in value of the original investment are not simulated in the method. Direct capitalization is most appropriate when analyzing a stable income stream and in estimating the reversion at the end of a holding period. Using this method, the following sets forth the process: 1. Estimate the Potential Gross Income (PGI) from all sources that a competent owner should be able to generate from a property based on existing and/or market rents. 2. Deduct an estimate of Vacancy and Collection Loss (VCL) to arrive at an Effective Gross Income (EGI) estimate. 3. Deduct operating expenses from the estimate of EGI. The result is an estimate of the stabilized Net Operating Income (NOI). 4. Estimate an Overall capitalization rate (R(o), or OAR). 5. Divide the NOI by R(o), resulting in a value estimate at stabilized occupancy. 6. Adjust the stabilized value to account for "As Is" condition, if applicable. DISCOUNTED CASH FLOW ANALYSIS The discounted cash flow (DCF) analysis is a detailed analysis used when the future income is expected to be variant, usually as a result of numerous lease obligations and/or anticipated changes in income and expenses. It is also particularly relevant when institutional buyers are the most likely purchasers of the subject because institutional buyers often place great weight on this analysis. The DCF analysis specifies the quantity, variability, timing, and duration of NOIs and cash flows. Selecting the proper yield rate (discount rate) is essential. CB Commercial must consider the target yield sought by investors as well as yields derived from comparable sales and/or market information. The methodology is: 1. Estimate the before-tax cash flows for each period of a projected holding period net of any capital expenditures such as leasing expenses and tenant improvements. - -------------------------------------------------------------------------------- 39 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- 2. Estimate a discount rate and a terminal overall capitalization rate. 3. Estimate a selling price, known as the reversion, for the end of the projected holding period. 4. The cash flows and the reversion are then discounted to a present value estimate. APPROPRIATE CAPITALIZATION METHOD A number of factors were considered in evaluating the appropriateness of using the direct capitalization method and/or the DCF technique including the occupancy status, lease structures, above/below market rents and typical buyer behavior. As a result of considering the foregoing factors, both the DCF technique and the income capitalization technique are employed in this appraisal. ESTIMATE OF MARKET RENT Rent analysis involves both a study of market (comparable) rentals and the subject's existing rents (if any). Market rent is the rent that a property would most probably command in the open market; indicated by the current rents paid and asked for comparable space. SUMMARY OF COMPARABLE RENTALS CB Commercial surveyed competitive properties and lease transactions for comparison to the subject. The selected comparable rentals are summarized in the following chart with a map and discussions of each comparable provided on the following pages. - -------------------------------------------------------------------------------- 40 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
========================================================================================================================= SUMMARY OF COMPARABLE SATELLITE SPACE RENTALS - ------------------------------------------------------------------------------------------------------------------------- Center Name & Term Start No. Location Tenant (Yrs) Date Size Rent/SF Escalation Comments - ------------------------------------------------------------------------------------------------------------------------- 1 Kingston Plaza Everything 1 yr 9/95 6,500 $5.50 $950 Step No Option Third Avenue $0.99 Store 3 mos in Year 2 % Rent = 3% over $1,191,660 East of Pierce Street, Kingston, PA - ------------------------------------------------------------------------------------------------------------------------- 2 Mark Plaza Spectrum Rents 5 yrs 10/95 3,600 $8.00 Flat for 1 5-yr Option @ $9.00/SF N/S Route 11, term Edwardsville, PA Keens Floral 5 yrs 8/95 7,000 $8.00 Annual 1 5-yr Option @ $8.83/SF Factory step-up % Rent = 3% over Natural Breakpoint Mattress Man 5 yrs 7/95 3,600 $11.50 Flat for No Option (Pad Site) term % Rent = 4% over Natural Breakpoint - ------------------------------------------------------------------------------------------------------------------------- 3 Dunmore Plaza Malcom's 5 yrs 4/95 1,900 $11.50 $950 Step 1 3 yr Option @ $7.50/SF 1400 Monroe Ave., in Year 2 % Rent = 3% over $933,000 Dunmore, PA Great Wall 10 yrs 1/95 1,900 $11.35 3%/Yr No Option Chinese Rest. No % Rent Little 5 yrs 4/94 1,900 $ 9.25 Periodic 2 5-yr Option @ $9.25/SF & Caesar's Pizza Step up @ $10.75/SF No % Rent - ------------------------------------------------------------------------------------------------------------------------- 4 Triangle Plaza Electronic 5 yrs 06/95 2,400 $11.50 Annual No Option Route 115 Systems Percentage No % Rent Wilkes-Barre, PA increase TCBY 5 yrs 03/95 2,200 $11.00 Annual 1 5 yr Option Percentage No % Rent increase Party City 10 yrs 05/94 9,910 $11.00 $1.65/SF No Option Step-up No % Rent - ------------------------------------------------------------------------------------------------------------------------- 5 Gateway Plaza Holiday Hair 3 yrs 06/94 950 $15.48 Annual No Option N/S Route 11, Fashions Percentage No % Rent Edwardsville, PA (Renewal) increase McKenzie 3 yrs 06/94 3,080 $ 8.50 Annual No Option Percentage No % Rent increase ========================================================================================================================= SUMMARY OF COMPARABLE ANCHOR SPACE RENTALS ========================================================================================================================= 6 Pottstown Center Wal-Mart 20 yrs 07/95 121,267 $6.99 Flat for 6, 5-yr Options Montgomery Cty. term No % Rent Pottstown, PA 7 Route 6 Mall K-Mart 25 yrs 03/95 119,229 $5.77 Flat for 10, 5-yr Options N/S Route 6, term % Rent = 1% over Wayne County $20,000,000 Honesdale, PA 8 Bradford Towne K-Mart 25 yrs 07/94 94,481 $5.00 Flat for 10, 5-yr Options Centre, term % Rent = 1% over Bradford County $16,875,000 Wysox, PA 9 Builder's Square Builder's 25 yrs 03/94 106,400 $10.05 Flat for 10, 5-yr Options Center Square term No % Rent Cetronia Road Lehigh County Whitehall, PA - ------------------------------------------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. =========================================================================================================================
- -------------------------------------------------------------------------------- 41 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMPARABLE RENTALS MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 42 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF COMPARABLE RENTALS We have obtained comparable leases from shopping centers situated within the subject's regional market area which are summarized above. In terms of satellite space, comparables #1 through #5 indicate that the leased spaces range in size from 950 to 9,910 square feet which adequately represents the subject's square footage range. All the leases cited were signed between 1994 and 1995 and represent the most recent leasing activity in the competitive marketplace. The leases include a variety of uses and represent a similar tenant mix to the subject center. The above leases are considered to be generally similar to the subject in terms of condition, quality and location. We have examined the average effective rental rates of these comparables and determined that the effective rent is similar to the face rent, since their was no tenant improvements or free and escalation's were similar. These comparable centers are located throughout the Scranton--Wilkes-Barre metropolitan region in competitive areas to the subject property. Furthermore, they are all similar in age to the subject and considered to be of a similar functional design. All of the retail leases were written on a triple net basis, whereby the tenants assume their proportionate share of operating expenses, real estate taxes, and insurance. The higher rates typically reflect smaller satellite spaces, while lower rental rates are typically negotiated for anchor sized spaces. We have also considered asking rental rates in our analysis, however, they were deemed to be less reliable than the leases presented. As a result, we have not included asking rentals. The satellite space face rental rates ranged from $5.50/SF to $15.48/SF with a central tendency of $10.22/SF. However, the majority fell between $8.00/SF and $11.50/SF. The rents at the lower end of the range, or those in the $7.50/SF range best reflect the subject property's achievable rents. As a result, we have concluded to a rental rate within for the subject's satellite space of $7.50/SF. Based upon our analysis, we feel that a "net" rental rate of $7.50/SF is adequately supported. The anchor leases, or comparables #6 through #9, ranged from $5.00/SF to $10.05/SF with an average lease rate of $6.95/SF. The anchor rents reflect a close range for a variety of locations with the exception of comparable #9. However, this lease to builder's Square has no percentage rent clause and, as a result, agreed to pay a higher basic rent. As a result, we have concluded to a rental rate for the subject's anchor space of $6.00/SF. Based upon our analysis, we feel that a "net" rental rate of $6.00/SF is adequately supported. - -------------------------------------------------------------------------------- 43 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- In addition to surveying comparable centers, we have also analyzed the most recent lease transactions at the subject center. Since there have been two recent leases at the subject property, these leases have been given substantial weight in our analysis of the subject's market rental rates. These leases are detailed below. ANALYSIS OF SUBJECT LEASES The following table summarizes the subject property's recent lease history.
============================================================================================================ SUMMARY OF RECENT SUBJECT LEASES ============================================================================================================ New / Term Contract TI's / Free Tenant Renew (Years) Date Size Rent Escalation SF Rent - ------------------------------------------------------------------------------------------------------------ Everything $0.99 Store New 3 yrs 09/95 4,000 $7.00 Flat for term None None Mattress Man New 5 Yrs 07/93 4,000 $9.00 Step-up to None None $10/SF in 96 - ------------------------------------------------------------------------------------------------------------ * One 3 yr Option @ $7.50/SF, % Rent = 3% over $933,000 ============================================================================================================ Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ============================================================================================================
The typical lease at the subject property is triple net whereby the tenant is responsible for reimbursing the landlord for such expenses as real estate taxes, insurance, and common area maintenance (CAM). Recent retail leases at the subject range from $7.00/SF to $9.00/SF. The terms of the recent leases have typically been between 3 and 5 years which is similar to quoted market terms. Based on our survey of local leasing agents and owners, five year terms are most common with satellite tenants such as those found in the subject center. Therefore, for the purpose of our analysis, we have utilized a lease term of five years for all tenant suites for speculative renewals. In our interviews with competing leasing agents and owners, we also inquired as to the market norm for rent escalations. Most of the agents agreed that one to three year leases are typically flat, with some sort of escalation or bump in five to 10 year leases. Recent leases at the subject either have annual percentage increases (generally 3%) or a periodic step-up. Regardless of the method of escalations, most of the subject and comparable leases have escalations which are intended to be similar to anticipated increases in the CPI. We have utilized an annual rental escalation in all speculative leases of 3.0%. According to the subject leasing agent, TI's are typically not given, with the owner generally providing a " vanilla box" for new tenants and nothing for renewals. Retail space is typically taken "as-is" with the tenant fitting out their space to their own specifications. We project that no tenant alteration allowance would be provided for new or renewal leases. - -------------------------------------------------------------------------------- 44 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- All of the leasing agents surveyed reported minimal if any free rent. A review of the subject lease abstracts indicated that no free rent was typically offered to tenants that leased space in the subject center over the past three to four years. Therefore, based upon the most recent leases written at the subject center as well as conversations with local leasing agents, we have projected that no free rent will be offered to prospective tenants. CONCLUSIONS: MARKET RENT ESTIMATE FOR THE SUBJECT PROPERTY Based on the previous analysis, the current market lease parameters for the subject property are estimated as follows: ======================================================================= CONCLUDED MARKET LEASE TERMS (PER SQUARE FOOT / YEAR) ----------------------------------------------------------------------- Category Satellite Space Anchor Space ----------------------------------------------------------------------- Market Rent $7.50 (NNN) $6.00 (NNN) Lease Term 5 Years 25 Years Annual Escalation 3.0% 0.0% Tenant Improvements $0.00 $0.00 Free Rent (Months) 0 Months 0 Months ----------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ======================================================================= CONTRACT RENT As discussed, the subject's leasable area is divided into 13 suites within one building. Currently, the subject is 100% occupied. Through our research of the subject property, which included a complete review of lease abstracts, rent rolls (both current and historical), and detailed discussions with the on-site property manager, the following rent roll summary was utilized to detail currently leased suites and general information employed for this approach. Additionally, within the Addenda are copies of the tenant lease assumptions, generated by Pro-ject+ Plus, a computerized lease-by-lease analysis program. Information submitted to us and contained in the Addenda provide additional support to the data and assumptions inputted for this method and is assumed to be correct and reliable. CB Commercial reserves the right to amend our input assumptions if any documentation is subsequently available which contradicts that assumed for this method. Located on the following page is the subject rent roll summary. - -------------------------------------------------------------------------------- 45 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ BIRNEY PLAZA - ROUTE 11 RENT ROLL - -------------------------------------------------------------------------------- Square Rent / Annual Suite Tenant Feet Begin End SF Rent - -------------------------------------------------------------------------------- 1 Fashion Bug * 9,000 5/78 5/98 $ 0.00 $ 00,000 2 Thrift Drug 12,000 11/71 10/01 $ 2.75 $ 33,000 3 Spa Consultants 12,000 7/91 7/96 $ 8.75 $105,000 4 Dino's & Francescos 2,000 12/80 11/00 $10.50 $ 21,000 5 Wine & Spirits Shop 2,406 10/81 9/98 $ 5.53 $ 13,296 6 Holiday Hair 1,500 8/88 7/99 $ 7.25 $ 10,875 7 Mattress Man 4,000 7/93 7/98 $ 9.00 $ 36,000 8 K-Mart 104,956 10/74 10/99 $ 1.95 $204,664 9 Big Lots 30,537 3/93 1/98 $ 3.00 $ 91,611 10 Long John Silvers 2,500 9/74 10/01 $ 4.94 $ 12,350 11 Ponderosa Steak House 23,658 12/79 12/96 $ 0.51 $ 12,000 12 Colortyme 3,500 5/81 5/99 $ 7.71 $ 27,000 13 The Everything $0.99 Store 4,000 9/95 8/98 $ 7.00 $ 28,000 ----- ------ -------- Total Leased Square Feet 212,057 Average Rent: $ 2.80 $594,796 Vacant Space 0 Occupancy-Overall 100% - -------------------------------------------------------------------------------- * Fashion Bug rent consists solely of percentage rent. ================================================================================ Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ ANALYSIS OF TENANCY The subject is comprised of regional and local tenants. Additionally, K-Mart and Long John Silvers are national tenants. Overall, the quality of the tenancy is considered to be good for the area. Current rental rates range from $0.51/SF to $10.50/SF. SPECIAL LEASE PROVISIONS AND ASSUMPTIONS The following discussion summarizes any lease provisions and assumptions of special note. Pending Leases There are no pending leases. Renewal Options Options to renew at below or above market rent may have an impact on the valuation analysis. For example, if below market renewals are exercised, they may result in a downward impact on value. However, to the extent that re-tenanting costs are saved (rent loss during downtime, tenant improvements, leasing commissions, etc.), there may be an advantage in having the tenant renew at some rate below market rent in order to avoid these costs. The majority of - -------------------------------------------------------------------------------- 46 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- recent leases at the subject have renewal options. Where applicable, if a tenants' option rent is below market, we have assumed that the tenant would exercise its renewal option. Conversely, if a tenants' option rent is above market, we have assumed that the tenant would not exercise its renewal option and terminate the lease. EXPENSE REIMBURSEMENTS Current and future hypothetical retail leases which will encumber the subject property will be based upon triple net lease structures and are consistent with recent leases written at the subject property and the market in general. The tenants will be responsible for reimbursing the landlord for their pro rata share of operating expenses including their pro rata share of CAM, real estate taxes and insurance. The pro rata share calculations for future tenants are calculated by dividing the tenant's occupied rentable area by the gross leasable area of the center. The following is a breakdown of the subject's historical recoveries and CB Commercial's projections for the proforma. It should be noted that the subject's operating statements are based on a fiscal year basis, beginning June 1 and continuing through May 31. Expense Reimbursements Expense reimbursements for the subject property consist of real estate taxes, insurance, and common area maintenance. Common area maintenance expenses consist utilities, management fees, general and administrative, cleaning and repairs and maintenance expenses. The subject's historical expense reimbursements are as follows: ============================================ EXPENSE REIMBURSEMENT -------------------------------------------- Year Total $ Amount -------------------------------------------- 1993 $209,023 1994 $200,057 1995 $204,265 1996 Budget $197,544 Year 1 Pro Forma $170,545 -------------------------------------------- Source: Mark Centers Trust ============================================ The first year of our DCF model indicates reimbursements of $170,545. Historical expense reimbursements have fallen in recent years due in part to a drop in expenses as management has attempted to cut costs in recent years. The budgeted amount appears to be somewhat high based upon projected expenses and reimbursement clauses for existing tenants. - -------------------------------------------------------------------------------- 47 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- OTHER INCOME This income category can be derived from several different sources including tenant service income, merchants association fees, late fee income, short-term storage income, professional services provided for the tenants by the landlord/management, ground rent as well as other miscellaneous sources. The subject has no additional sources of income. PERCENTAGE RENT INCOME In addition to the basic rental charges, the tenants are sometimes responsible for paying the landlord additional rent equal to a specified percentage of the tenant's gross sales made in, upon, or from the premises, over a breakpoint factor or according to a specific schedule. Ten of the subject tenants have percentage rent clauses contained within their leases. - -------------------------------------------------------------------------------- 48 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
====================================================================================================== PERCENTAGE RENT CLAUSES - ------------------------------------------------------------------------------------------------------ Fiscal Last 12 Mos CBC's FY97 Tenant Breakpoint Percent Year Gross Sales % Rent Paid Projection - ------------------------------------------------------------------------------------------------------ Fashion Bug $0.01 4.00% 1994 $ 631,307 $25,079 $550,000 1995 $ 552,779 $22,289 Thrift Drug $ 825,000 4.00% $1,125,000 3.50% 1994 $1,288,238 $11,379 $1,300,000 $1,375,000 3.00% 1995 $1,294,217 $12,538 $1,625,000 2.50% Spa Consultants $1,850,000 6.00% 1994 $866,898 $21,352 $850,000 1995 $846,709 $ 0 Holiday Hair $ 181,250 6.00% 1994 $200,277 $ 1,261 $200,000 $ 187,500 6.00% 1995 $195,113 $ 548 Mattress Man $ 900,000 4.00% 1994 $535,897 $ 0 $630,000 $1,000,002 4.00% 1995 $633,358 $ 0 K-Mart $8,625,000 1.00% 1994 $14,476,440 ($ 2,473) $16,100,000 1995 $16,075,867 $74,509 Big Lots $3,644,440 2.50% 1994 $2,365,544 $ 0 $2,650,000 1995 $2,631,495 $ 0 Long John Silvers $300,000 4.00% 1994 $845,610 $21,824 $800,000 1995 $800,131 $20,005 Ponderosa Steak House $750,000 2.50% 1994 $669,807 $ 152 $625,000 1995 $609,573 $ 0 Everything $0.99 Store * $933,000 3.00% 1994 N/A $ 0 $300,000 1995 $25,527 ** $ 0 - ------------------------------------------------------------------------------------------------------ * Everything $0.99 Store has sales averaging $25,527 per month for first 2.5 months. - ------------------------------------------------------------------------------------------------------ Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ======================================================================================================
Given the aforementioned sales histories, we have projected the gross sales for each tenant as illustrated in the right column of the table. We have also projected that the gross sales figures will grow by 2.0% per annum over the course of the cash flow projection. POTENTIAL GROSS INCOME The potential gross income for the subject property is summarized as follows. - -------------------------------------------------------------------------------- 49 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ==================================================================== STABILIZED POTENTIAL GROSS INCOME (FY 1997) -------------------------------------------------------------------- Totals -------------------------------------------------------------------- Total Minimum Rent $ 604,659 Expense Reimbursement - Common Area Maintenance Recovery $ 41,072 - Real Estate Tax Recovery $ 122,634 - Insurance Recovery $ 6,839 - Percentage Rent $ 128,608 --------- Potential Gross Income $ 903,812 -------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ==================================================================== VACANCY AND COLLECTION LOSS This is an allowance for reductions in potential income attributable to vacancies, tenant turnover, and non-payment of effective rent. In the direct capitalization process, a market-derived, stabilized vacancy and collection loss estimate is subtracted from potential gross income in order to arrive at effective gross income. The subject property is currently 100% leased. Furthermore, the subject's competitive market exhibits a vacancy level of approximately 4.0%. Due to the long-term occupancies at the subject property (including option terms), the average vacancy rate over the projected holding period, which is attributed to downtime between leases, approximates a minimal 2.0%. In addition to vacancy, we estimated a blended credit loss factor of 2.0% which takes into account both national and local tenants at the subject center. Therefore, the combined long-term vacancy and credit loss factor for the subject property amounts to approximately 4.0%. In the first year of our discounted cash flow analysis, the combined credit loss amounts to $11,108. EFFECTIVE GROSS INCOME Given our estimate of potential gross income, other income, and a vacancy and collection loss, the estimated effective gross income is derived as follows: ===================================================== EFFECTIVE GROSS INCOME (FY 1997) ----------------------------------------------------- Potential Gross Income: $ 903,812 Less: Collection Loss $ 11,108 -------- Effective Gross Income: $ 892,704 ===================================================== Our estimate of effective gross income used in direct capitalization is $892,704. This figure is the same as the EGI in the first year of our cash flow in the discounted cash flow method. - -------------------------------------------------------------------------------- 50 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- OPERATING EXPENSE ANALYSIS In projecting the revenues and expenses for the subject property, we have analyzed the historical figures for fiscal years 1993 through 1995 as well as management's forecast of revenues and expenses for fiscal year 1996. In addition, we have utilized the Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers publication to assist in our analysis. We have considered the category " Regions 1, 2 & 3 (East): Open Shopping Centers" as the most representative of the subject property. A summary of the average expenses taken from this publication increased at an inflationary rate to reflect our fiscal year 1997 analysis are presented as follows: ===================================================== COMPARABLE EXPENSE ANALYSIS ----------------------------------------------------- Expense Category P.S.F. ----------------------------------------------------- General & Administrative $ 0.08 Repairs & Maintenance $ 0.36 Services $ 0.46 Utilities $ 0.18 ------ Total CAM $ 1.08 Real Estate Taxes $ 1.26 Insurance $ 0.15 Management Fees $ 0.41 Total Operating Expenses $ 2.90 ----------------------------------------------------- Source: Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers ===================================================== Our estimate of the subject's stabilized expenses are detailed as follows. Common Area Maintenance The subject's historical and projected common area maintenance (CAM) expenses are as follows: ========================================================== COMMON AREA MAINTENANCE EXPENSE ---------------------------------------------------------- Year Total $ Amount ---------------------------------------------------------- 1993 $118,045 1994 $137,279 1995 $121,208 1996 Budget $123,185 CB 1996 Projection $120,000 ---------------------------------------------------------- Source: Mark Centers Trust ========================================================== - -------------------------------------------------------------------------------- 51 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Common area maintenance (CAM) charges generally includes various items such as general and administrative expenses, repair and maintenance expenses, utilities, and general services such as cleaning, landscaping, security, and common area insurance expenses. We project the total CAM expense in 1996, before management fees, at $120,000 or $0.57/SF. This is lower than the average CAM expenses for the properties surveyed by IREM of $1.23/SF for open shopping centers in the east. However, the subject's historical expenses have ranged from $0.56/SF to $0.65/SF. Given the subject's historical CAM expense structure coupled with its effective age, occupancy and the services provided, the subject's projected CAM figure is considered reasonable. Property Taxes Historical and budgeted property tax expenses are as follows: ======================================================== PROPERTY TAX EXPENSE -------------------------------------------------------- Year Total $ Amount -------------------------------------------------------- 1993 $152,410 1994 $145,212 1995 $139,816 1996 Budget $140,004 Year 1 Pro Forma $136,164 -------------------------------------------------------- Source: Mark Centers Trust ======================================================== As discussed fully within the tax and assessment data section of the report, estimated taxes for fiscal year 1997 are projected to be $136,164. It appears that the 1996 budgeted taxes have not accounted for a recent tax appeal. Insurance Historical and budgeted insurance expenses are as follows: ======================================================== INSURANCE EXPENSE -------------------------------------------------------- Year Total $ Amount -------------------------------------------------------- 1993 $20,421 1994 $19,196 1995 $31,752 1996 Budget $20,580 CB 1996 Projection $20,600 -------------------------------------------------------- Source: Mark Centers Trust ======================================================== - -------------------------------------------------------------------------------- 52 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Insurance at the subject property includes both liability insurance and fire insurance. This expense has increased from 1993 to 1995 to a level of $0.15/SF. We have placed primary emphasis on the subject's historical and 1996 budgeted insurance expenses and have estimated the insurance expense at $20,600, or $0.10/SF. Professional Management Fee In order to maintain the control of the property and subsequently ensure the stream of income that it generates, it is necessary to employ either internal or outside management. This expense is non-recoverable. In the case of the subject property, the property is managed internally and no management expense has been reflected in historical statements. Typical professional management fees in the local market range from 1.0% to 5.0% of effective gross income. Based upon the size and nature of the subject improvements, we have applied a management expense of 3.0% of effective gross income. Because management is calculated based on a percentage of effective gross income, this expense will vary each year because of fluctuations in the income stream. In the first year of our analysis, this expense equates to $26,781 or $0.13/SF. Replacement Reserves This expense typically represents a reserve for future replacement of long-lived items. The amount of reserve and whether it is included or not in the direct capitalization and DCF analyses depends on the actions reflected by buyers and sellers in the local market. Based on the available comparable data and discussions with brokers and investors, replacement reserves generally range from $0.05/SF to $0.20/SF for retail properties of similar quality and condition as the subject. Given the subject's condition, we have estimated this expense at $0.05/SF or $10,603 in 1996 increasing at our projected annual expense growth rate of 3.0%. Based on discussions with local market participants, replacement reserves are typically subtracted in calculating NOI when determining the cash flow in the DCF analysis. Total Concluded Operating Expenses The concluded stabilized operating expenses for the subject total an estimated $316,473, or $1.49 per rentable square foot. This total expense estimate is for the first year of our proforma and incorporates fiscal year conversions not reflected in the previous 1996 calendar year estimates. The expense is slightly lower than the average indicated by IREM ($2.90/SF) but judged reasonable given the historical and budgeted operations of the subject. - -------------------------------------------------------------------------------- 53 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- CAPITALIZATION RATE There are several methods for deriving an overall capitalization rate for direct capitalization. A common method for establishing an overall capitalization rate for properties similar to the subject is to review the criteria of major investors in the marketplace. This may serve as a check against other techniques or may be a primary source when ample data exists. While derivation of capitalization rates from comparable sales is preferable, we were unable to obtain adequate income and expense data to employ this method from the sales used within the Sales Comparison Approach. Therefore, the investor survey method is used as the primary approach in deriving our overall capitalization rate. The subject property is a retail shopping center that would be attractive to either a local or a national investor. The category in the published investor survey most comparable to the subject is class B Community shopping center. The investors typically interviewed for the survey are regional or national investors associated with pension funds, REIT's, insurance companies, financial institutions, etc. The information below is taken from CB Commercial most recent National Investor Survey (first quarter 1996). ================================================================================ SUMMARY OF INVESTOR SURVEY OVERALL CAPITALIZATION RATES COMMUNITY SHOPPING CENTERS - CLASS B - -------------------------------------------------------------------------------- Investor Survey R(o) Range Average Date of Survey - -------------------------------------------------------------------------------- CB Commercial National Investor Survey 9.0% - 11.5% 10.3% First Quarter, 1996 - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The previous survey indicates an overall range of 9.0% to 11.5% for Community shopping centers with an average of approximately 10.3%. The capitalization rate reflects the quality and duration of the income stream as well as the physical characteristics of the property. The tenant mix at the subject center is considered to be good for the area with local and national tenants. The largest tenant at the subject, K-Mart, is a national tenant. The K-Mart lease does not expire until the year 10/99 and the second largest tenant, Big Lots, has a lease which extends to the year 1998. Lease expiration is fairly even throughout the holding period which reduces risk. The center is currently 100% occupied. Overall, the quality, quantity and duration of the cash flow is considered to be good. With respect to physical characteristics, the subject is a functional community center of average quality and in average overall condition. In addition, we have included market-extracted overall rates as presented below. - -------------------------------------------------------------------------------- 54 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================== MARKET-EXTRACTED OVERALL CAPITALIZATION RATES ------------------------------------------------------------------ No Property Name/ Location OAR ------------------------------------------------------------------ 1 15th & Allen St. Center 1401-1451 Allen Street, Allentown 10.89% Lehigh County, PA 2 Stefko Shopping Center Stefko Boulevard, Bethlehem 10.99% Northampton County, PA 3 MacArthur Plaza 2419 MacArthur Road, Whitehall Township 10.76% Lehigh County, PA 4 Columbia Mall N/E/C Route 42 @ Interstate-80, Bloomsburg 10.70% Columbia County, PA ------------------------------------------------------------------ Compiled by: CB Commercial Real Estate Group, Inc. ================================================================== The market extracted overall rates indicate a range from a low of 10.70% to a high of 10.99% with a central tendency of 10.84%. These overall rates coincide with the rates indicated by CB Commercial's National Investor Survey. Based upon the survey as well as the market extracted rates presented discussed above, a 10.5% overall capitalization rate (towards the middle of the range) appears to be appropriate for the subject property. Direct Capitalization Summary A summary of the direct capitalization method as applied to the subject property is illustrated in the following table: - -------------------------------------------------------------------------------- 55 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ ROUTE 11 DIRECT CAPITALIZATION SUMMARY - -------------------------------------------------------------------------------- Category Total P.S.F. - -------------------------------------------------------------------------------- Income Total Market Rent $ 604,659 $ 2.85 Recovery Income 170,545 0.80 ------- ---- Gross Rental Income $ 775,204 $ 3.65 Less: Vacancy and Credit Loss (11,108) (0.05) Plus: Other Income 0 0.00 Plus: Percentage Rents $ 128,608 0.61 ----------- ---- Effective Gross Income $ 903,812 $ 4.26 Expenses Common Area Maintenance (CAM) (121,500) (0.57) Real Estate Taxes (136,731) (0.64) Insurance ( 20,858) (0.10) Management Fees ( 26,781) (0.13) Replacement Reserves (10,603) (0.05) ------------ ------ Total Expenses $ (316,473) $ (1.49) OER 35% Net Operating Income $ 576,231 $ 2.72 CAPITALIZATION OF NOI: @10.5% $ 5,487,914 $ 25.88 Reconciled Value $ 5,500,000 $ 25.94 - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The concluded market value of the subject property, based on the direct capitalization method, is $5,500,000. - -------------------------------------------------------------------------------- 56 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW ANALYSIS Our DCF assumptions are summarized as follows. Most of the following assumptions have been discussed and supported within prior sections of the report. A discussion of the discount rate, terminal capitalization rate and holding period follow the assumptions summarized below. ================================================================================ SUMMARY OF DISCOUNTED CASH FLOW ASSUMPTIONS ROUTE 11 - -------------------------------------------------------------------------------- General Assumptions Start Date June 1, 1996 Terms of Analysis 10 years Basis (Calendar / Fiscal) Fiscal Software Project + Plus Growth Rate Assumptions Expenses 3.0% Market Rent 3.0% Real Estate Taxes 1.0% in Yr 1, 2.0% in Yr 2, 3.0% in Yr 3 and thereafter Inflation (CPI) 3.0% Market Rent Assumptions Anchor $ 6.00 (NNN) Satellite $ 7.50 (NNN) Leasing Assumptions Lease Term 5 Years Renewal Probability 50% Weighted Average of: Tenant Improvements $0.00 Months of Free Rent 0 Leasing Commissions (Cashed-Out) 4.5% Down Time Between Leases 6 Months Tenant Assumptions Existing tenant leases were entered at contract rent and terms. Speculative renewals assume tenants will pay base rent plus their pro rata share of CAM, real estate taxes and insurance. Contractual recoveries were input into the model per their respective leases. Miscellaneous Assumptions Credit Loss 2.0% Avg. Occupancy Over Projection Period 98% Structural Maintenance/ Reserves ($/SF) $ 0.05 Financial Assumptions Discount Rate (IRR) 12.50% Terminal Overall Capitalization Rate (R(O)) 11.00% Costs of Sale 2.00% - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 57 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNT RATE ANALYSIS A discount rate is a rate of return on capital utilized to capitalize future payments or receipts to present value. It is based on the time value of money concept. For appraisal purposes, the rate used to convert income to property value should represent the annual rate of return necessary to attract investment capital. The rate is influenced by many considerations, including the degree of apparent risk, market attitudes with respect to future inflation, the prospective rates of return for alternative investment opportunities, supply of and demand for mortgage funds, and the availability of tax shelters. Because rates of return used in income capitalization represent prospective rates, as distinguished from historical rates, special consideration is given to market perceptions of risk and changes in purchasing power. Although it is not possible to prove conclusively the suitability of a particular rate of return on the basis of market evidence, the chosen rate should be consistent with the available evidence. Rate selection requires judgment and knowledge concerning prevailing market attitudes and economic indicators. Both the discount rate and the reversionary capitalization rate must reflect the relative risk perceived by investors for the specific market being studied. Generalities must be avoided. To determine such rates, we have used surveys of real estate investors analyzed and adjusted for comparative returns found in the capital markets. National investor surveys include data on investors operating regionally and nationally, such as representatives of insurance companies, commercial banks, pension funds, investment banking firms, syndication firms, and investment advisory firms. Such companies invest in all types of properties, including office buildings, retail shopping centers, hotels, apartment complexes, and industrial facilities. These surveys are valuable for determining general parameters but must be honed to the local market. Based on surveys from CB Commercial Real Estate Group Inc. for the first quarter 1996, investment criteria for numerous market participants including investors that would be in competition for acquiring a property such as the subject are illustrated below. ================================================================================ FIRST QUARTER 1996 NATIONAL INVESTOR SURVEY CLASS B COMMUNITY SHOPPING CENTERS ================================================================================ TYPE OF FIRM OVERALL CAP. RATES GENERAL DISCOUNT REAL RATE ----------------------- INFLATION RATE OF RETURN GOING-IN TERMINAL (IRR) (RRR) ================================================================================ Range: 9-11.5 10-12 2-4 12-14.5 9.5-11 Average 10.3 10.8 3.1 13.1 10.1 ================================================================================ Change from -20 +10 -40 +50 +190 3rd Qtr Survey ================================================================================ Source: CB Commercial Real Estate Group Inc. - 1st Quarter 1996 - -------------------------------------------------------------------------------- 58 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- We have surveyed national real estate investors for their investment criteria when purchasing real estate such as the subject. Investor expectations for inflation range from 2% to 4%, with an average of 3.1%. We have selected an inflation rate for our analysis of 3.0%. The discount rate reflects the quality and duration of the income stream as well as the physical and locational characteristics of the property. As discussed within the overall rate section, the tenant mix at the subject center is considered to be good for the area with mostly regional tenants. Moreover, lease expiration is fairly even throughout the holding period which reduces risk. The center is currently 100% occupied. Overall, the quality, quantity and duration of the cash flow is considered to be good. With respect to physical characteristics, the subject is a functional Community center of average quality and in average overall condition. In addition, the subject is situated in an average retail location with relatively low volumes of traffic. In general, the discount rate (IRR) is comprised on a safe rate (usually Treasuries) and a risk premium. The risk premium is difficult to quantify but with sound logic a reasonable rate can be ascertained. The chart presented below graphically depicts real estates position within the risk/reward graph. INVESTOR RISK VERSUS RETURN REQUIREMENTS Anticipated Return _ Real Estate _ Common Stocks _ Corporate Bonds _ Mortgage Backed Securities _ Municipal Bonds _ T - Bills Riskless Rate - -------------------------------------------------------------------------------- Perceived Level of Risk US Treasury notes and bonds are considered risk free since they are backed by the United States government. Their rates only fluctuate with perceived inflation. The use of this, or any short term investment including the prime rate or LIBOR is meaningless when compared to an investment with a 10 year holding period. Accordingly, as a starting point, we only considered - -------------------------------------------------------------------------------- 59 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- risk free or nearly risk free investments with a maturity of 10 years. These include Treasuries, corporate bonds and municipal bonds. Adjusted for daily fluctuations, these debt offerings are yielding 5.59% to 8.25%. Mortgaged backed securities generally tend to fall above these instruments. The next layer of risk would include debt rated as low as BBB. These notes are yielding as much as 10%. Long-term mortgages are also yielding over 10% considering the mortgage constant on a note priced at 250 to 300 basis points over comparable Treasuries. Riskier investments such as junk bonds vary widely from 12% to 22% on an unleveraged basis. Real estate, as indicated on the chart above falls between common stock (10%) and junk bonds (16%). To eliminate the burden of illiquidity, REIT's and similar investments are being created. They represent a quasi-real estate opportunity. REIT's are currently providing dividends ranging from 6% to 8% but offer potential yields of 15% to 20% Various financial instruments are yielding between 5.59% and 8.25% depending upon the type of investment as indicated on the chart below based on data obtained from the Federal Reserve Statistical Release for the week ending May 17, 1996. It should be noted that over the past year we have witnessed an increase in the interest rate of all of the following instruments. =================================================================== INSTRUMENT RATE ------------------------------------------------------------------- Prime Rate 8.25% ------------------------------------------------------------------- Municipal Bonds 5.96% ------------------------------------------------------------------- Short-Term Treasury Securities (1 year) 5.59% ------------------------------------------------------------------- Long Term Treasury Securities (10 years) 6.68% ------------------------------------------------------------------- Corporate Aaa Bonds (10+ years) 7.57% ------------------------------------------------------------------- Corporate Baa Bonds (10 + years) 8.25% =================================================================== The risk premium is the rate added to Treasuries to account for illiquidity, the capital markets and the economy. Whether the risk premium decreases in the near term is dependent solely on inflation, the growth of the economy and capital markets. During 1995, the Federal Reserve decreased interest rates in order to stimulate a sluggish economy. The low rates have continued during the early portion of 1996, however, have recently begun to ascend. Over the longer term, as the existing supply of space is absorbed, the risk premium will decrease. Based on the above, we feel that the current required rate of return (IRR) for the subject would fall slightly below the middle of the range at 12.5%. This reflects the quality, quantity and cash flow risk associated with the subject property. As such, we have utilized a discount rate of 12.5% in our analysis. - -------------------------------------------------------------------------------- 60 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- TERMINAL RATE To estimate the appropriate terminal capitalization rate, we have considered the rates reflected in the investment criteria outlined above for both going-in and terminal capitalization. Typically, under stable market conditions, the terminal capitalization rate will be greater than the going-in rate to reflect the risk associated with the holding period. Typically 50 to 100 basis points are added on to the going-in cap rate under stable market conditions to account for the additional risk. Furthermore, our national investor survey also indicated an average terminal capitalization 50 basis points greater than the going-in rate. It is evident by historical and current performance of the center and it is our opinion that the subject property will encounter average-to-good market acceptance in the future. It is our opinion that a terminal capitalization rate of 11.0% is the most appropriate for the subject property. A 2% deduction for costs of sale has been utilized to reflect the net reversionary value. HOLDING PERIOD To apply the discounted cash flow analysis, an estimate must be made of the appraised property's holding period based on typical investors' motives in the local market. Historical investment holding periods of similar shopping centers typically have ranged from 10 to 15 years. A 10- to 15- year holding period was analyzed to test the property's sensitivity to roll-overs. A 10-year holding period was selected. Our discounted cash flow analysis is presented on the following page. - -------------------------------------------------------------------------------- 61
- ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------ ------------------------------------ Building Size 212,057 Birney Plaza Shopping Center Reconciled Value $5,018 Cost of Sales 2.000% Cash Flow Report Value per SF $23.66 Hold Period (Years) 10 % Residual of Recon. Value 33.2% Reduce Residual by Cap Exp Yes Direct Cap Rate 11.00% Residual Discount Rate 12.50% Direct Cap Value $5,237 ------------------------------------ ------------------------------------ Compounded Ann. --------------------------------------------------------------------- Avg. Growth 1996 1997 1998 1999 2000 2001 2002 --------------------------------------------------------------------- 0.80% BASE RENT 604,659 613,311 642,960 637,308 649,911 613,600 675,188 N/A Free Rent 0 0 0 0 0 0 0 2.68% Expense Recoveries 170,545 173,322 177,523 180,901 187,954 190,139 206,430 2.45% Percentage Rent 128,608 152,741 131,675 140,460 145,870 141,943 151,330 - ---------- --------------------------------------------------------------------- 1.42% GROSS INCOME 903,812 939,374 952,158 958,669 983,735 945,682 1,032,948 1.32% Credit/Vacancy Loss (11,108) (11,735) (11,891) (11,888) (12,261) (11,385) (13,012) N/A Miscellaneous Incomes 0 0 0 0 0 0 0 - ---------- --------------------------------------------------------------------- 1.42% EFFECTIVE GROSS INCOME 892,704 927,639 940,267 946,781 971,474 934,297 1,019,936 - ---------- 2.78% TOTAL EXPENSES 316,605 324,186 332,654 341,984 352,130 360,706 373,255 - ---------- --------------------------------------------------------------------- 0.60% NET OPERATING INCOME 576,099 603,453 607,613 604,797 619,344 573,591 646,681 N/A Commissions 0 0 0 7,343 0 32,800 0 N/A Tenant Improvements 0 0 0 0 0 0 0 N/A Capital Additions 0 0 0 0 0 0 0 - ---------- --------------------------------------------------------------------- N/A TOTAL DEDUCTIONS 0 0 0 7,343 0 32,800 0 - ---------- --------------------------------------------------------------------- 0.06% CASH FLOW 576,099 603,453 607,613 597,454 619,344 540,791 646,681 - ---------- TOTAL CASH FLOW 576,099 603,453 607,613 597,454 619,344 540,791 646,681 --------------------------------------------------------------------- Debt Service N/A N/A N/A N/A N/A N/A N/A --------------------------------------------------------------------- CASH FLOW AFTER DEBT 576,099 603,453 607,613 597,454 619,344 540,791 646,681 --------------------------------------------------------------------- CUMULATIVE SURPLUS N/A N/A N/A N/A N/A N/A N/A --------------------------------------------------------------------- ------------------------------------------------------------------------------------------------- Implied Overall Rate 11.48% 12.03% 12.11% 12.05% 12.34% 11.43% 12.89% Cash on Cash Return 11.48% 12.03% 12.11% 11.91% 12.34% 10.78% 12.89% ------------------------------------------------------------------------------------------------- ----------------------------------------------------- Sale/Yield Matrix (000's) Terminal Cap Rate ------------------------------------------ Disc Rate 10. 75% 11.00% 11.25% 11.50% ----------------------------------------------------- [GRAPHIC OMITTED] 12.00% 5,205 5,164 5,125 5,087 ------------------------------------------ 12.25% 5,130 5,090 5,052 5,015 ------------------------------------------ 12.50% 5,057 5,018 4,980 4,945 ------------------------------------------ 12.75% 4,985 4,947 4,911 4,876 ------------------------------------------ 13.00% 4,915 4,878 4,842 4,808 ------------------------------------------ 13.25% 4,846 4,810 4,775 4,741 ----------------------------------------------------- ----------------------------------------------------- Compounded Ann. ------------------------------------------- Avg. Growth 2003 2004 2005 2006 ------------------------------------------- 0.80% BASE RENT 677,730 682,399 695,102 654,644 N/A Free Rent 0 0 0 0 2.68% Expense Recoveries 210,805 216,481 223,994 222,173 2.45% Percentage Rent 146,074 156,220 161,529 163,779 - ---------- ------------------------------------------- 1.42% GROSS INCOME 1,034,609 1,055,100 1,080,625 1,040,596 1.32% Credit/Vacancy Loss (12,925) (13,211) (13,595) (12,665) N/A Miscellaneous Incomes 0 0 0 0 - ---------- ------------------------------------------- 1.42% EFFECTIVE GROSS INCOME 1,021,684 1,041,889 1,067,030 1,027,931 - ---------- 2.78% TOTAL EXPENSES 383,587 394,782 406,440 416,501 - ---------- ------------------------------------------- 0.60% NET OPERATING INCOME 638,097 647,107 660,590 611,430 N/A Commissions 6,611 8,588 3,612 38,891 N/A Tenant Improvements 0 0 0 0 N/A Capital Additions 0 0 0 0 - ---------- ------------------------------------------- N/A TOTAL DEDUCTIONS 6,611 8,588 3,612 38,891 - ---------- ------------------------------------------- 0.06% CASH FLOW 631,486 638,519 656,978 572,539 - ---------- TOTAL CASH FLOW 631,486 638,519 656,978 572,539 ------------------------------------------- Debt Service N/A N/A N/A N/A ------------------------------------------- CASH FLOW AFTER DEBT 631,486 638,519 656,978 572,539 ------------------------------------------- CUMULATIVE SURPLUS N/A N/A N/A N/A ------------------------------------------- ----------------------------------------------------------------------- Implied Overall Rate 12.72% 12.90% 13.17% 12.19% Cash on Cash Return 12.59% 12.73% 13.09% 11.41% -----------------------------------------------------------------------
================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW CONCLUSION We used "PRO-JECT +plus" computer software to create a cash flow model for a long term hold. Reference is made to the "Annual Cash Flow Report", generated by the Pro-ject software, on the previous page which provides a summary of cash flow from all sources. We utilized a 10-year holding period and have discounted the cash flow on a fiscal year basis from 1997 to 2006. The cash flow incorporates the terms of existing leases during the analysis period and our assumptions regarding the lease-up of vacant space. It also calculates renewal rentals when leases expire based on current market rent escalated at a growth factor. In addition, a forecast was made for 15 years to check for any irregularities in the income stream which may artificially affect the reversionary sale price. It should be noted that based on our analysis of the extended holding period indicated that there was no irregularities. We capitalized the 11th year net operating income to determine the reversionary value at the end of year 10. CONCLUSION OF INCOME CAPITALIZATION APPROACH The preceding analysis indicates the following conclusions: ========================================================== INCOME CAPITALIZATION APPROACH VALUES ---------------------------------------------------------- Method Indicated Value ---------------------------------------------------------- Direct Capitalization $ 5,500,000 Discounted Cash Flow $ 5,000,000 ---------------------------------------------------------- Source: CB Commercial Real Estate ========================================================== Greater emphasis is placed on the DCF analysis because it is the method likely to be used by a typical investor. As a result, based on the Income Capitalization Approach, CB Commercial concludes a value estimate for the subject property of $5,000,000. This equates to $23.58 per rentable square foot. - -------------------------------------------------------------------------------- 63 CONCLUSION ================================================================================ RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- RECONCILIATION OF VALUE CB Commercial was instructed to estimate the market value of the leased fee interest in the subject property. The value conclusions for each applicable approach are summarized below. ================================================================= SUMMARY OF VALUE CONCLUSIONS ----------------------------------------------------------------- Cost Approach N/A Sales Comparison Approach $ 5,100,000 Income Capitalization Approach $ 5,000,000 ----------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================= The Income Capitalization Approach is considered the most persuasive method for valuing the subject property. This approach is predicated on the principle of anticipated economic benefits and, therefore, best reflects the investment characteristics of the subject. Properties such as the subject are typically purchased by investors; thus, this approach must closely parallels the anticipated analysis that would be employed by the most typical purchaser. Since the subject property has a number of existing leases with a variety of terms, the DCF technique best models the future cash flow stream to a prospective buyer. The Sales Comparison Approach is predicated on the principle that an investor would pay no more for an existing property than for a comparable property with similar utility. This approach is contingent on the reliability and comparability of available data. The data developed was considered sufficiently reliable to reach a value conclusion by the Sales Comparison Approach. However, due to the lack of truly comparables sales in recent years, this method is given secondary consideration in the reconciliation. The Cost Approach is predicated on the principle that an investor would pay no more for an existing property than it would cost to acquire land and construct a building with similar utility. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Furthermore, due to the age of the subject and current market conditions, accrued depreciation would be substantial and difficult to estimate. An investor would not use the Cost Approach due to the imprecise nature of estimating the accrued physical, functional, or external depreciation affecting the improvements. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. - -------------------------------------------------------------------------------- 64 ================================================================================ RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- The final value conclusion and the approaches relied upon give strong consideration to the market behavior of the typical buyer and current market environment for the property appraised. Based on the foregoing analysis, it is concluded that the market value of the leased fee interest in the subject property, subject to the assumptions and limiting conditions, as of May 15, 1996, is: FIVE MILLION DOLLARS ($ 5,000,000) This value is subject to all of the assumptions and limiting conditions stated throughout the report, including specific assumptions and limiting conditions. - -------------------------------------------------------------------------------- 65 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS 1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to total that would adversely affect marketability or value. CB Commercial is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CB Commercial, however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject property's title should be sought from a qualified title company that issues or insures title to real property. 2. It is assumed that improvements have been constructed or will be constructed according to approved architectural plans and specifications and in conformance with recommendations contained in or based upon any soils report(s). Unless otherwise specifically noted in the body of this report, it is assumed: that any existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are, or will be upon completion, in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that it or they will withstand any known elements such as windstorm, hurricane, tornado, flooding, earthquake, or similar natural occurrences; and, that the improvements, as currently constituted, conform to all applicable local, state, and federal building codes and ordinances. CB Commercial professionals are not engineers and are not competent to judge matters of an engineering nature. CB Commercial has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CB Commercial by ownership or management; CB Commercial inspected less than 100% of the entire interior and exterior portions of the improvements; and CB Commercial was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CB Commercial reserves the right to amend the appraisal conclusions reported herein. 3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property was not observed by the appraisers. CB Commercial has no knowledge of the existence of such materials on or in the property. CB Commercial, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the appraisal. 4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CB Commercial. This report may be subject to amendment upon re-inspection of the subject property subsequent to repairs, modifications, alterations and completed new construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels of operation. - -------------------------------------------------------------------------------- 66 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 5. It is assumed that all factual data furnished by the client, property owner, owner's representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CB Commercial has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, Assessor's Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CB Commercial reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CB Commercial of any questions or errors. 6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CB Commercial will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject. 7. CB Commercial assumes no private deed restrictions, limiting the use of the subject property in any way. 8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposit or subsurface rights of value involved in this appraisal, whether they be gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred. 9. CB Commercial is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject. 10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market. 11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CB Commercial does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CB Commercial. 12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CB Commercial to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form. 13. Unless otherwise noted in this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated. 14. This study may not be duplicated in whole or in part without the specific written consent of CB Commercial nor may this report or copies hereof be transmitted to third parties without said consent, which consent CB Commercial reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or its contents shall not be published, in whole or in part, in any public document without the express - -------------------------------------------------------------------------------- 67 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- written consent of CB Commercial which consent CB Commercial reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a "sale" or "offer for sale" of any "security", as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CB Commercial shall have no accountability or responsibility to any such third party. 15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report. 16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used. 17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area have been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report. 18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CB Commercial unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CB Commercial assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance. 19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or client's designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CB Commercial assumes responsibility for any situation arising out of the Client's failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired. 20. CB Commercial assumes that the subject property analyzed herein will be under prudent and competent management and ownership; neither inefficient or super-efficient. 21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the appraisal report. 22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist. 23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Not withstanding any discussion of possible readily achievable barrier removal construction items in this report, CB Commercial has not made a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect on the value estimated herein. Since CB Commercial has no specific information relating to this issue, nor is CB Commercial qualified to make such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject property. - -------------------------------------------------------------------------------- 68 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 24. For our analysis, we have relied on the information provided by the detailed rent roll and information provided by the subject leasing agent. We have assumed all information is correct. Furthermore, we have assumed all leases out for signature will be returned signed, and executed as of the date indicated to us by the leasing agent. We reserve the right to amend this appraisal should any of this information be later found to be incorrect. - -------------------------------------------------------------------------------- 69 ADDENDA ================================================================================ ADDENDA - -------------------------------------------------------------------------------- ADDENDA - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- ADDENDUM A - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- GLOSSARY OF TERMS assessed value Assessed value applies in ad valorem taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to market value, but it is usually calculated in relation to a market value base. + cash equivalency The procedure in which the sale prices of comparable properties sold with atypical financing are adjusted to reflect typical market terms. contract, coupon, face, or nominal rent The nominal rent payment specified in the lease contract. It does not reflect any offsets for free rent, unusual tenant improvement conditions, or other factors that may modify the effective rent payment. coupon rent See Contract, Coupon, Face, or Nominal Rent effective rent 1) The rental rate net of financial concessions such as periods of no rent during a lease term; may be calculated on a discounted basis, reflecting the time value of money, or on a simple, straight-line basis. ** 2) The economic rent paid by the lessee when normalized to account for financial concessions, such as escalation clauses, and other factors. Contract, or normal, rents must be converted to effective rents to form a consistent basis of comparison between comparables. face rent See Contract, Coupon, Face, or Nominal Rent fee simple estate Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. ** floor area ratio (FAR) The relationship between the above-ground floor area of a building, as described by the building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area; also called building-to-land ratio. ** full service lease A lease in which rent covers all operating expenses. Typically, full service leases are combined with an expense stop, the expense level covered by the contract lease payment. Increases in expenses above the expense stop level are passed through to the tenant and are known as expense pass-throughs. going concern value Going concern value is the value of a proven property operation. It includes the incremental value associated with the business concern, which is distinct from the value of the real estate only. Going concern value includes an intangible enhancement of the value of an operating business enterprise which is produced by the assemblage of the land, building, labor, equipment, and marketing operation. This process creates an economically viable business that is expected to continue. Going concern value refers to the total value of a property, including both real property and intangible personal property attributed to the business value. + gross building area (GBA) The sum of all areas at each floor as measured to the exterior walls. insurable value Insurable Value is based on the replacement and/or reproduction cost of physical items that are subject to loss from hazards. Insurable value is that portion of the value of an asset or asset group that is acknowledged or recognized under the provisions of an applicable loss insurance policy. This value is often controlled by state law and varies from state to state. + investment value Investment value is the value of an investment to a particular investor based on his or her investment requirements. In contrast to market value, investment value is value to an individual, not value in the marketplace. Investment value reflects the subjective relationship between a particular investor and a given investment. When measured in dollars, investment value is the price an investor would pay for an investment in light of its perceived capacity to satisfy his or her desires, needs, or investment goals. To estimate investment value, specific investment criteria must be known. Criteria to evaluate a real estate investment are not necessarily set down by the individual investor; they may be established by an expert on real estate and its value, that is, an appraiser. + leased fee See leased fee estate - -------------------------------------------------------------------------------- ================================================================================ GLOSSARY OF TERMS - -------------------------------------------------------------------------------- leased fee estate An ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.++ leasehold See leasehold estate leasehold estate The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.++ load factor The amount added to usable area to calculate the rentable area. It is also referred to as a "rentable add-on factor" which, according to BOMA, "is computed by dividing the difference between the usable square footage and rentable square footage by the amount of the usable area. Convert the figure into a percentage by multiplying by 100. market value "as if complete" on the appraisal date Market value as if complete on the appraisal date is an estimate of the market value of a property with all construction, conversion, or rehabilitation hypothetically completed, or under other specified hypothetical conditions as of the date of the appraisal. With regard to properties wherein anticipated market conditions indicate that stabilized occupancy is not likely as of the date of completion, this estimate of value should reflect the market value of the property as if complete and prepared for occupancy by tenants. market value "as is" on the appraisal date Market value "as is" on the appraisal date is an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date of appraisal. market value Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1) A reasonable time is allowed for exposure in the open market; 2) Both parties are well informed or well advised, and acting in what they consider their own best interests; 3) Buyer and seller are typically motivated; 4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.*** marketing period The time it takes an interest in real property to sell on the market subsequent to the date of an appraisal. ++ net lease Lease in which all or some of the operating expenses are paid directly by the tenant. The landlord never takes possession of the expense payment. In a Triple Net Lease all operating expenses are the responsibility of the tenant, including property taxes, insurance, interior maintenance, and other miscellaneous expenses. However, management fees and exterior maintenance are often the responsibility of the lessor in a triple net lease. A modified net lease is one in which some expenses are paid separately by the tenant and some are included in the rent. net rentable area (NRA) 1) The area on which rent is computed. 2) The Rentable Area of a floor shall be computed by measuring to the inside finished surface of the dominant portion of the permanent outer building walls, excluding any major vertical penetrations of the floor. No deductions shall be made for columns and projections necessary to the building. Include space such as mechanical room, janitorial room, restrooms, and lobby of the floor. * nominal rent See Contract, Coupon, Face, or Nominal Rent prospective future value "upon completion of construction" Prospective future value "upon completion of construction" is the prospective value of a property on the future date that construction is completed, based upon market conditions forecast to exist, as of that completion date. The value estimate at this stage is stated in current dollars unless otherwise indicated. prospective future value "upon reaching stabilized occupancy" Prospective future value "upon reaching stabilized occupancy" is the prospective value of a property at a future point in time when all - -------------------------------------------------------------------------------- ================================================================================ GLOSSARY OF TERMS - -------------------------------------------------------------------------------- improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. The value estimate at this stage is stated in current dollars unless otherwise indicated. reasonable exposure time The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market. ** rent see full service lease net lease contract, coupon, face, or nominal rent effective rent shell space Space which has not had any interior finishing installed, including even basic improvements such as ceilings and interior walls, as well as partitions, floor coverings, wall coverings, etc.. Usable Area 1) The area actually used by individual tenants. 2) The Usable Area of an office is computed by measuring to the finished surface of the office side of corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished surface of the dominant portion of the permanent outer building walls. Excludes areas such as mechanical rooms, janitorial room, restrooms, lobby, and any major vertical penetrations of a multi-tenant floor. * use value Use value is a concept based on the productivity of an economic good. Use value is the value a specific property has for a specific use. Use value focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to the property's highest and best use or the monetary amount that might be realized upon its sale. + value appraised During the real estate development process, a property typically progresses from a state of unimproved land to construction of improvements to stabilized occupancy. In general, the market value associated with the property increases during these stages of development. After reaching stabilized occupancy, ongoing forces affect the property during its life, including a physical wear and tear, changing market conditions, etc. These factors continually influence the property's market value at any given point in time. See also market value "as is" on the appraisal date market value "as if complete" on the appraisal date prospective future value "upon completion of construction" prospective future value "upon reaching stabilized occupancy" - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM I - QUALIFICATIONS - -------------------------------------------------------------------------------- - ---------- + The Appraisal of Real Estate, Tenth Edition, Appraisal Institute, 1992. ++ The Dictionary of Real Estate Appraisal, Third Edition, 1993. *** The office of the Comptroller of the Currency, 12 CFR Part 34, Subpart C, SS.34.42(f), August 24, 1966. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. * 1966 BOMA Experience Exchange Report, Income/Expense Analysis for Office Buildings (Building Owners and Managers Association, 1966) ** Statement on Appraisal Standard No. 6, Appraisal Standards Board of The Appraisal Foundation, September 19, 1992. - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- ADDENDUM B ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- PONDEROSA STEAK HOUSE PAD SITE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- LONG JOHN SILVER'S PAD SITE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- LOOKING EAST ON ROUTE 11 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- LOOKING WEST ON ROUTE 11 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM C IMPROVED COMPARABLE SALES - -------------------------------------------------------------------------------- ADDENDUM C IMPROVED COMPARABLE SALES - -------------------------------------------------------------------------------- ================================================================================ RETAIL SALE - -------------------------------------------------------------------------------- Location Data Property Name: 15th & Allen Street Shopping Center Location: 1401-1451 Allen Street City: Allentown County: Lehigh State/Zip: Pennsylvania Assessor's Parcel No(s): G9SW3A-14-4 Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 4.12 Acres Excess Land: None Gross Leasable Area: Anchors: Laneco Supermarket 25,000 SF Local Tenant GLA: 21,503 SF Anchor Tenant GLA: 25,000 SF Total GLA: 46,503 SF GLA Purchased: 46,503 SF Year Built: 1950 Parking: Adequate Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 01/96 Marketing Time: N/A Grantor: Carriage Associates L.P Grantee: Allenbeth Associates L.P. Document No.: 1558/220 Sale Price: $4,242,000 Financing: Market Terms Cash Equivalent Price: $4,242,000 Required Capital Cost: $0 Adjusted Sales Price: $4,242,000 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100 Existing or Pro Forma Income: N/A TOTAL P.S.F. -------- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $462,049 $9.94 - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ RETAIL SALE - -------------------------------------------------------------------------------- Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.89% Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $91.22 Comments The 15th and Allen Street shopping center is a one-story neighborhood retail center located on the corner of 15th and Allen Streets in Downtown Allentown. This property is anchored by a Laneco Supermarket which occupies an estimated 25,000 square feet with the balance of the rentable area, 21,503 square feet allocated to 12 other satellite tenants. This center was built in the 1950's, however, it has undergone significant renovations since that time. Currently, the property is in average condition. At the time of sale, the property was 100% occupied. - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ RETAIL SALE - -------------------------------------------------------------------------------- Location Data Property Name: Stefco Shopping Center Location: Stefco Boulevard City: Bethlehem County: Northampton State/Zip: Pennsylvania Assessor's Parcel No(s): N7SW1B-3-1 Atlas Reference: N/A Physical Data Type: Community Land Area: 10.27 Acres Excess Land: None Gross Leasable Area: Anchors: Laneco Supermarket 65,000 SF Local Tenant GLA: 69,446 SF Anchor Tenant GLA: 65,000 SF Total GLA: 134,446 SF GLA Purchased: 134,446 SF Year Built: 1965 Parking: Adequate Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 01/96 Marketing Time: N/A Grantor: Carriage Associates L.P. Grantee: Allenbeth Associates L.P. Document No.: 1996-1/4082 Sale Price: $5,618,000 Financing: Market Terms Cash Equivalent Price: $5,618,000 Required Capital Cost: $0 Adjusted Sales Price: $5,618,000 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 95.2% Existing or Pro Forma Income: N/A TOTAL P.S.F. -------- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $617,577 $4.59 - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ RETAIL SALE - -------------------------------------------------------------------------------- Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.99% Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $41.79 Comments The Stefco shopping center is a one-story community retail center located on Stefco Boulevard in Bethlehem. This property is anchored by a Laneco Supermarket which occupies an estimated 65,000 square feet with the balance of the rentable area, 69,446 square feet allocated to 21 other satellite tenants. This center was built in 1965, however, it has undergone significant renovations in 1988. Currently, the property is in average condition. At the time of sale, the property was 95.2% occupied. - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ RETAIL SALE - -------------------------------------------------------------------------------- Location Data Property Name: MacArthur Plaza Shopping Center Location: 2419 MacArthur Road (N/E/C Schadt Avenue) City: Whitehall Township County: Lehigh State/Zip: Pennsylvania Assessor's Parcel No(s): F9SW2-3-2 Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 2.20 Acres Excess Land: None Gross Leasable Area: Anchors: Staples 19,200 SF Blockbuster Video 6,930 SF Bell Atlantic 3,470 SF Local Tenant GLA: N/A Anchor Tenant GLA: 29,600 SF Total GLA: 29,600 SF GLA Purchased: 29,600 SF Year Built: 1988 Parking: Adequate Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 10/95 Marketing Time: N/A Grantor: P & D Schweitzer Grantee: Allentown Power Center L.P. Document No.: 1553/1123 Sale Price: $3,831,667 Financing: Cash to Seller Cash Equivalent Price: $3,831,667 Required Capital Cost: $0 Adjusted Sales Price: $3,831,667 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100% Existing or Pro Forma Income: N/A TOTAL P.S.F. -------- ------- Potential Gross Income: $495,121 $16.73 Vacancy and Credit Loss: N/A N/A Effective Gross Income: $495,121 $16.73 Expenses: $82,999 $2.80 Net Operating Income: $412,122 $13.92 - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ RETAIL SALE - -------------------------------------------------------------------------------- Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.76% Projected IRR: N/A Effective Gross Multiplier (EGIM): 7.74 Operating Expense Ratio (OER): 16.76% Price Per Square Foot: $129.45 Comments The MacArthur Plaza shopping center is a one-story neighborhood retail center located on MacArthur Road in Whitehall Township. This property is anchored by Staples which occupies 19,200 square feet with the balance of the rentable area, 10,400 square feet allocated to 2 other satellite tenants. This center was built in 1988 and is currently in average condition. At the time of sale, the property was 100% occupied. - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ RETAIL SALE - -------------------------------------------------------------------------------- Location Data Property Name: Columbia Mall Location: N/E/Quadrant Of Route 42 @ Interstate 80 City: Bloomsburg County: Columbia State/Zip: Pennsylvania Assessor's Parcel No(s): 18.2-48-3 Atlas Reference: N/A Physical Data Type: Community Land Area: 48.69 Acres Excess Land: None Gross Leasable Area: Anchors: Hills 80,000 SF Sears 64,264 SF The Bon Ton 45,000 SF J.C. Penny 34,076 SF Local Tenant GLA: 128,024 SF Anchor Tenant GLA: 223,340 SF Total GLA: 351,364 SF GLA Purchased: 351,364 SF Year Built: 1988 Parking: Adequate Condition: Good Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 07/95 Marketing Time: N/A Grantor: C.M. Group Trust Grantee: MDC Investment Property-1, LLC Document No.: 601/538 Sale Price: $27,650,000 Financing: Cash to Seller Cash Equivalent Price: $27,650,000 Required Capital Cost: $0 Adjusted Sales Price: $27,650,000 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 96% Existing or Pro Forma Income: N/A TOTAL P.S.F. ----------- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $2,958,500 $8.42 - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ RETAIL SALE - -------------------------------------------------------------------------------- Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.70% Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $78.69 Comments The Columbia Mall is a single-story retail center located off or Interstate 80 at Route 42 in Bloomsburg, Pennsylvania. This property is anchored by Hills which occupies 80,000 square feet as well as junior-anchors Sears (64,264 SF), The Bon Ton (45,000 SF), and J.C. Penny (34,076 SF). The balance of the rentable area, 128,024 square feet allocated to numerous other satellite tenants. This center was built in 1988 and is currently in average condition. At the time of sale, the property was approximately 96% occupied with 13,000 square feet vacant. Retail sales for the center in 1994 reportedly averaged $165.00/SF, up 5.8% from the previous year. - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ ADDENDUM D RENTAL COMPARABLES - -------------------------------------------------------------------------------- ADDENDUM D RENTAL COMPARABLES - -------------------------------------------------------------------------------- ================================================================================ RETAIL RENT COMPARABLE - -------------------------------------------------------------------------------- Location Data Property Name: Kingston Plaza Location: S/S Third Avenue East Of Pierce Street City: Kingston County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 64,824 SF Year Built: 1982 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Price Chopper Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$10.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 09/95 6,500 The Everything $5.50 N/A None $950 step in ye 1.30 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent lease includes a term for 1 year and 3 months. Additionally, the tenant has a percentage rent clause of 3.0% over a breakpoint of $1,191,660. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Mark Plaza Location: N/S Route 11 City: Edwardsville County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 176,786 SF Year Built: 1967 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 91.7% Overall: 91.7% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $1.95-$11.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 10/95 3,600 Spectrum Rents $8.00 N/A None Flat 5.00 - -------------------------------------------------------------------------------- 08/95 7,000 Keens Floral Fa $8.00 N/A Annual Step-up 5.00 - -------------------------------------------------------------------------------- 07/95 3,600 Mattress Man $11.50 N/A Flat 5.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 91.7% leased. The most recent leases all include terms for 5 years. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Dunmore Plaza Location: 1400 Monroe Avenue City: Dunmore County: Lackawanna State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 45,380 SF Year Built: 1967 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Price Chopper Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $6.75-$11.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 4/95 1,900 Malcom's $11.50 N/A None $950 Step-up in 5.00 - -------------------------------------------------------------------------------- 1/95 1,900 Great Wall Chin $11.35 N/A 3.0% per year 10.00 - -------------------------------------------------------------------------------- 4/94 1,900 Little Caeser's $9.25 N/A Periodic Step-u 5.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 5 and 10 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Triangle Plaza Location: Route 115 City: Wilkes-Barre County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 125,000 SF Year Built: 1971 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years (Estimate) Base Rent Per Square Foot: $9.00-$12.50 (Estimate) Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 6/95 2,400 Electronic Syst $11.50 N/A None Annual %age inc 5.00 - -------------------------------------------------------------------------------- 3/95 2,200 TCBY $11.00 N/A None Annual %age inc 5.00 - -------------------------------------------------------------------------------- 5/94 9,910 Party City $11.00 N/A None $1.65/SF step-u 10.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 5 and 10 years. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Gateway Plaza Location: N/S Route 11 City: Edwardsville County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 150,000 SF Year Built: 1969 Exterior Walls: Brick Veneer Condition: Fair Anchor Tenant: Parking: Adequate Lease Data Occupancy: Local: 65.0% Overall: 65 0 Typical size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $8.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 6/94 950 Holiday Hair $15.48 N/A None Annual %age inc 3.00 - -------------------------------------------------------------------------------- 6/94 3,080 McKenzie $8.50 N/A None Annual %age inc 3.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 65% leased. The most recent leases all include terms for 3 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Pottstown Center Location: Route 663 City: Pottstown County: Montgomery State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 171,267 SF Year Built: 1976 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Wal-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $8.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 7/95 121,267 Wal-Mart $6.99 N/A None Flat 20.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 20 years. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Route 6 Mall Location: N/S Route 6 City: Honesdale County: Wayne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 144,229 SF Year Built: 1978 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 3/95 119,229 K-Mart $5.77 N/A None Flat 25.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 20 years and includes a percentage rent clause on 1.0% over $20.0 million. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Bradford Towne Centre Location: N/S Route 6 City: Wysox County: Bradford State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 119,481 SF Year Built: 1972 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 7/94 94,481 K-Mart $5.00 N/A None Flat 25.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 25 years and includes a percentage rent clause on 1.0% over $16.875 million. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Builder's Square Shopping Center Location: Cetronia Road City: Whitehall County: Lehigh State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 106,400 SF Year Built: 1994 Exterior Walls: Brick Veneer Condition: Good Anchor Tenant: Builder's Square Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 3/94 106,400 Builder's Squar $10.05 N/A None Flat 25.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 25 years. Construction quality is good and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ ADDENDUM E STRATEGIC MAPPING, INC. REPORTS - -------------------------------------------------------------------------------- ADDENDUM E STRATEGIC MAPPING, INC. REPORTS - -------------------------------------------------------------------------------- Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 BIRNEY PLAZA - MOOSIC, PA 1 Mile Radius 6/7/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 97.6 - ----------------------------------Demographics---------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 5,589 2,137 5,585 2.61 $31,557 2000 5,488 2,113 5,484 2.60 $36,823 - ------------------------------Expenditure Potential----------------------------- 1995 Area Yearly Growth Rate Per Household 1.40% Total 1.17% - -------------------------Retail Support Potential (000)------------------------- 1995: 229 sq. ft. - -------------------------------------------------------------------------------- Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 1,997 2,174 935 1,029 1.71% 91.3 Appliance Store 183 153 86 72 -3.58% 100.5 Auto-Aftermarket Store 3,479 3,530 1,628 1,671 0.29% 97.4 Convenience Store 1,942 1,956 909 926 0.14% 100.3 Dept. Store 2,080 2,201 974 1,042 1.14% 92.1 Drug Store 1,881 2,309 880 1,093 4.18% 112.0 Electronics Store 757 965 354 456 4.97% 91.1 Fast Food Restaurant Store 1,935 1,681 905 796 -2.77% 94.7 Full Serv Restaurant Store 1,900 1,638 889 775 -2.93% 95.0 Furniture Store 683 627 320 297 -1.70% 86.1 Grocery Store 8,821 9,714 4,128 4,597 1.95% 101.0 Hardware Store 395 421 185 199 1.26% 100.4 Home Centers Store 1,922 2,215 899 1,048 2.89% 102.9 Jewelry Store 352 355 165 168 0.19% 97.4 Liquor Store 527 464 247 220 -2.52% 97.0 Mass Merchandiser Store 2,846 3,104 1,332 1,469 1.75% 94.1 Photo Store 39 38 18 18 -0.70% 94.9 Shoe Store 389 448 182 212 2.87% 91.5 Sporting Goods Store 335 382 157 181 2.65% 87.7 Toy Store 253 232 118 110 -1.73% 92.8 Variety Store 165 182 77 86 2.02% 95.1 Area defined by Circle: (41.372276,75.703631): 1 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 BIRNEY PLAZA - MOOSIC, PA 1 Mile Radius 6/7/96 Benchmark = Regional Area Definition Detailed Report Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 114 190 54 90 10.63% 92.9 ------- ------- ------- ------- Total Shopping Center 32,997 34,978 15,441 16,554 All Other Stores 25,308 26,829 11,843 12,697 Total Retail 58,305 61,807 27,284 29,251 Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (41.372276,75.703631): 1 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 1 of 3 BIRNEY PLAZA - MOOSIC, PA 1 Mile Radius 6/7/96 1980 Census 1990 Census Percent Total Percent Total Percent Change Population White 6,535 99.8 5,674 99.6 -13.2 Black 1 0.0 3 0.1 200.0 American Indian, Asian & Other 12 0.2 19 0.3 58.3 Total 6,549 100.0 5,696 100.0 -13.0 Hispanic 8 0.1 7 0.1 -12.5 Age of Population: 0-5 462 7.1 373 6.6 -19.3 6-13 747 11.4 544 9.6 -27.2 14-17 436 6.7 264 4.6 -39.4 18-24 744 11.4 523 9.2 -29.7 25-34 975 14.9 762 13.4 -21.8 35-44 700 10.7 832 14.6 18.9 45-54 815 12.4 646 11.4 -20.7 55-64 862 13.2 698 12.3 -19.0 65 + 806 12.3 1,049 18.4 30.1 Median Age Total Population 34.1 39.5 15.8 Median Age Adult Population 45.4 47.1 3.8 Age of Male Population: 0-5 233 7.4 206 7.5 -11.6 6-13 403 12.7 279 10.2 -30.8 14-17 210 6.6 133 4.9 -36.7 18-24 388 12.3 285 10.4 -26.5 25-34 473 15.0 372 13.6 -21.4 35-44 341 10.8 412 15.1 20.8 45-54 387 12.2 303 11.1 -21.7 55-64 399 12.6 321 11.7 -19.5 65 + 328 10.4 424 15.5 29.3 Total 3,162 100.0 2,738 100.0 -13.4 Median Age Male Population 32.5 37.2 14.5 Median Age Adult Male Population 43.7 44.7 2.4 Age of Female Population: 0-5 229 6.8 167 5.6 -27.1 6-13 344 10.2 265 9.0 -23.0 14-17 226 6.7 131 4.4 -42.0 18-24 356 10.5 238 8.0 -33.1 25-34 502 14.8 390 13.2 -22.3 35-44 359 10.6 420 14.2 17.0 45-54 428 12.6 343 11.6 -19.9 55-64 463 13.7 377 12.8 -18.6 65 + 478 14.1 625 21.1 30.8 Total 3,385 100.0 2,958 100.0 -12.6 Median Age Female Population 36.0 41.8 16.2 Median Age Adult Female Population 46.8 49.3 5.3 Area defined by Circle: (41.372276,75.703631): 1 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 2 of 3 BIRNEY PLAZA - MOOSIC, PA 1 Mile Radius 6/7/96 1980 Census 1990 Census Percent Total Percent Total Percent Change Total Households 2,269 2,165 -4.6 Household Population 6,549 5,692 -13.1 Average Household Size 2.89 2.63 -8.9 Total Families 1,840 1,635 -11.1 Average Family Size 3.32 3.11 -6.3 Average Family Income $19,158 $37,623 96.4 Family Population 6,101 93.2 5,115 89.8 -16.2 Nonfamily Population 448 6.8 577 10.1 28.8 Group Quarters Population 0 0.0 4 0.1 0.0 Foreign Born Population 81 1.2 67 1.2 -17.3 Household Income: $0-$9,999 564 25.8 252 11.8 -55.3 $ 10,000-$14,999 428 19.5 238 11.1 -44.4 $ 15,000-$24,999 721 32.9 485 22.6 -32.7 $ 25,000-$34,999 356 16.3 385 18.0 8.1 $ 35,000-$49,999 98 4.5 381 17.8 288.8 $ 50,000-$74,999 19 0.9 292 13.6 1,436.8 $ 75,000-$99,999 4 0.2 75 3.5 1,775.0 $ 100,000-$149,999 20 0.9 $ 150,000+ 15 0.7 Median Household Income $16,429 $26,828 63.3 Average Household Income $17,647 $32,847 86.1 Per Capita Income $5,901 $12,361 109.5 Median Home Value $33,962 $70,110 106.4 Average Home Value $35,713 $75,688 111.9 Median Contract Rent $136 $253 86.0 Average Contract Rent $131 $252 92.4 Total Housing Units 2,381 100.0 2,252 100.0 -5.4 Owner Occupied 1,820 76.4 1,759 78.1 -3.4 Renter Occupied 449 18.9 403 17.9 -10.2 Vacant 112 4.7 87 3.9 -22.3 Mobile Home or Trailer 288 12.1 237 10.5 -17.7 Condominiums 0 0.0 0 0.0 0.0 Area defined by Circle: (41.372276,75.703631): 1 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 3 of 3 BIRNEY PLAZA - MOOSIC, PA 1 Mile Radius 6/7/96 1980 Census 1990 Census Percent Total Percent Total Percent Change Occupation: Executive & Managerial 206 7.3 254 9.2 23.3 Professional Specialty 162 5.8 275 10.0 69.8 Technical Support 53 1.9 104 3.8 96.2 Administrative Support 478 17.1 539 19.6 12.8 Sales 257 9.2 293 10.7 14.0 Total White Collar 1,156 41.2 1,465 53.4 26.7 Prod/Craft/Repair 349 12.5 300 10.9 -14.0 Machine Operators 587 20.9 234 8.5 -60.1 Trans/Material Moving 137 4.9 165 6.0 20.4 Laborers 208 7.4 145 5.3 -30.3 Total Blue Collar 1,283 45.8 844 30.7 -34.2 Farm/Forest/Fish 2 0.1 3 0.1 50.0 Protective Service 66 2.4 109 4.0 65.2 Private Service 4 0.1 0 0.0 -100.0 Other Service 294 10.5 325 11.8 10.5 Total Employed 2,803 90.1 2,743 93.9 -2.1 Unemployed 309 9.9 178 6.1 -42.4 Total Civil Labor Force 3,112 100.0 2,921 100.0 -6.1 Working Mothers 434 49.2 409 66.3 -5.8 Child <6 or <6 & 6-17 97 11.0 142 23.0 46.4 Child 6-17 Only 337 38.2 267 43.3 -20.8 Nonworking Mothers 449 50.8 208 33.7 -53.7 Means of Transportation to Work: Drive Alone/Carpool 2,420 88.6 2,499 92.9 3.3 Public Transportation 99 3.6 71 2.6 -28.3 Other 211 7.7 119 4.4 -43.6 Area defined by Circle: (41.372276,75.703631): 1 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 BIRNEY PLAZA - MOOSIC, PA 1 Mile Radius 6/7/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 6,549 5,696 5,589 5,488 White 99.8% 99.6% 99.5% 99.4% Black 0.0% 0.1% 0.1% 0.1% American Indian 0.0% 0.0% 0.0% 0.0% Asian 0.2% 0.2% 0.3% 0.3% Other 0.0% 0.1% 0.1% 0.2% Hispanic 0.1% 0.1% 0.1% 0.1% Total Households 2,269 2,165 2,137 2,113 Household Population 6,549 5,692 5,585 5,484 Average Household Size 2.89 2.63 2.61 2.60 Household Income $0-9,999 25.8% 11.8% 9.0% 7.2% $10,000-14,999 19.5% 11.1% 8.3% 6.3% $15,000-24,999 32.9% 22.6% 19.3% 15.8% $25,000-34,999 16.3% 18.0% 19.7% 17.3% $35,000-49,999 4.5% 17.8% 16.9% 19.4% $50,000-74,999 0.9% 13.6% 16.1% 18.3% $75,000-99,999 0.2% 3.5% 6.9% 8.1% $100,000-149,999 - 0.9% 3.0% 6.1% $150,000+ - 0.7% 0.7% 1.3% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 16,429 26,828 31,557 36,823 Aggregate HH Inc ($000) 38,648 70,357 83,662 97,085 Median Family Income ($) 18,718 32,596 38,342 44,740 Per Capita Income ($) 5,901 12,361 14,980 17,703 Median Age Total Population 34.1 39.5 40.4 41.4 Median Age Adult Population 45.4 47.1 48.0 48.8 Median Age Female Population 36.0 41.8 43.0 44.1 Median Age Adult Female Population 46.8 49.3 50.0 51.0 Median Age Male Population 32.5 37.2 38.1 38.9 Median Age Adult Male Population 43.7 44.7 45.6 46.5
Area defined by Circle: (41.372276,75.703631): 1 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 BIRNEY PLAZA - MOOSIC, PA 1 Mile Radius 6/7/96 1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 6,549 5,696 5,589 5,488 0-5 7.1% 6.6% 6.6% 6.4% 6-13 11.4% 9.6% 9.1% 8.8% 14-17 6.7% 4.6% 4.2% 4.1% 18-24 11.4% 9.2% 8.6% 8.2% 25-34 14.9% 13.4% 13.7% 13.8% 35-44 10.7% 14.6% 14.1% 13.5% 45-54 12.4% 11.4% 11.9% 12.4% 55-64 13.2% 12.3% 12.1% 12.2% 65-74 12.3% 11.9% 12.0% 12.1% 75-84 - 5.6% 6.5% 6.9% 85+ - 1.0% 1.2% 1.6% Female Population by Age 3,385 2,958 2,908 2,859 0-5 6.8% 5.6% 5.8% 5.6% 6-13 10.2% 9.0% 8.4% 8.0% 14-17 6.7% 4.4% 4.0% 3.8% 18-24 10.5% 8.0% 8.2% 7.9% 25-34 14.8% 13.2% 13.2% 13.0% 35-44 10.6% 14.2% 13.2% 12.9% 45-54 12.6% 11.6% 12.2% 12.6% 55-64 13.7% 12.8% 13.0% 12.9% 65-74 14.1% 13.0% 12.8% 13.1% 75-84 - 6.8% 7.7% 8.2% 85+ - 1.4% 1.6% 2.0% Male Population by Age 3,162 2,738 2,680 2,622 0-5 7.4% 7.5% 7.6% 7.4% 6-13 12.7% 10.2% 9.9% 9.6% 14-17 6.6% 4.9% 4.4% 4.4% 18-24 12.3% 10.4% 9.0% 8.6% 25-34 15.0% 13.6% 14.3% 14.6% 35-44 10.8% 15.1% 15.0% 14.3% 45-54 12.2% 11.1% 11.6% 12.2% 55-64 12.6% 11.7% 11.2% 11.5% 65-74 10.4% 10.7% 11.1% 10.9% 75-84 - 4.2% 5.1% 5.5% 85+ - 0.5% 0.8% 1.0% Area defined by Circle: (41.372276,75.703631): 1 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 BIRNEY PLAZA - MOOSIC, PA 3 Mile Radius 6/7/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 90.7 - ----------------------------------Demographics---------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 49,717 20,065 49,322 2.46 $26,578 2000 49,003 19,908 48,608 2.44 $31,028 - ------------------------------Expenditure Potential----------------------------- 1995 Area Yearly Growth Rate Per Household 1.43% Total 1.27% - -------------------------Retail Support Potential (000)------------------------- 1995: 1,997 sq. ft. - -------------------------------------------------------------------------------- Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 17,253 18,869 860 948 1.81% 84.0 Appliance Store 1,540 1,290 77 65 -3.48% 89.9 Auto-Aftermarket Store 29,975 30,566 1,494 1,535 0.39% 89.4 Convenience Store 17,219 17,420 858 875 0.23% 94.8 Dept. Store 17,919 19,063 893 958 1.25% 84.5 Drug Store 16,662 20,345 830 1,022 4.08% 105.7 Electronics Store 6,415 8,268 320 415 5.20% 82.2 Fast Food Restaurant Store 16,801 14,683 837 738 -2.66% 87.6 Full Serv Restaurant Store 16,629 14,416 829 724 -2.82% 88.6 Furniture Store 5,864 5,389 292 271 -1.67% 78.7 Grocery Store 79,061 87,490 3,940 4,395 2.05% 96.5 Hardware Store 3,296 3,515 164 177 1.29% 89.2 Home Centers Store 15,746 18,229 785 916 2.97% 89.8 Jewelry Store 2,907 2,951 145 148 0.30% 85.7 Liquor Store 4,587 4,074 229 205 -2.34% 89.9 Mass Merchandiser Store 24,839 27,261 1,238 1,369 1.88% 87.5 Photo Store 333 324 17 16 -0.52% 86.1 Shoe Store 3,448 3,992 172 201 2.98% 86.3 Sporting Goods Store 2,916 3,340 145 168 2.75% 81.2 Toy Store 2,184 2,024 109 102 -1.51% 85.2 Variety Store 1,441 1,600 72 80 2.13% 88.6 Area defined by Circle: (41.372276,75.703631): 3 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 BIRNEY PLAZA - MOOSIC, PA 3 Mile Radius 6/7/96 Benchmark = Regional Area Definition Detailed Report Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 1,016 1,699 51 85 10.83% 87.8 -------- -------- ------- ------- Total Shopping Center 288,048 306,810 14,356 15,411 All Other Stores 220,933 235,323 11,011 11,821 Total Retail 508,981 542,133 25,367 27,232 Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (41.372276,75.703631): 3 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 1 of 3 BIRNEY PLAZA - MOOSIC, PA 3 Mile Radius 6/7/96 1980 Census 1990 Census Percent Total Percent Total Percent Change Population White 54,651 99.6 50,160 99.0 -8.2 Black 97 0.2 270 0.5 178.4 American Indian, Asian & Other 136 0.2 224 0.4 64.7 Total 54,884 100.0 50,654 100.0 -7.7 Hispanic 177 0.3 169 0.3 -4.5 Age of Population: 0-5 3,732 6.8 3,801 7.5 1.8 6-13 5,810 10.6 4,757 9.4 -18.1 14-17 3,480 6.3 2,402 4.7 -31.0 18-24 6,085 11.1 4,767 9.4 -21.7 25-34 7,446 13.6 7,378 14.6 -0.9 35-44 5,333 9.7 6,563 13.0 23.1 45-54 6,181 11.3 5,110 10.1 -17.3 55-64 7,717 14.1 5,420 10.7 -29.8 65 + 9,087 16.6 10,461 20.7 15.1 Median Age Total Population 36.7 38.3 4.4 Median Age Adult Population 48.3 47.1 -2.5 Age of Male Population: 0-5 1,930 7.6 1,936 8.2 0.3 6-13 2,974 11.6 2,479 10.5 -16.6 14-17 1,784 7.0 1,233 5.2 -30.9 18-24 2,998 11.7 2,375 10.1 -20.8 25-34 3,678 14.4 3,555 15.1 -3.3 35-44 2,568 10.1 3,189 13.6 24.2 45-54 2,801 11.0 2,418 10.3 -13.7 55-64 3,352 13.1 2,392 10.2 -28.6 65 + 3,451 13.5 3,927 16.7 13.8 Total 25,536 100.0 23,497 100.0 -8.0 Median Age Male Population 33.3 35.5 6.8 Median Age Adult Male Population 45.6 44.4 -2.8 Age of Female Population: 0-5 1,802 6.1 1,865 6.9 3.5 6-13 2,836 9.7 2,278 8.4 -19.7 14-17 1,696 5.8 1,169 4.3 -31.1 18-24 3,087 10.5 2,392 8.8 -22.5 25-34 3,768 12.8 3,823 14.1 1.5 35-44 2,765 9.4 3,374 12.4 22.0 45-54 3,380 11.5 2,692 9.9 -20.4 55-64 4,365 14.9 3,028 11.2 -30.6 65 + 5,636 19.2 6,534 24.1 15.9 Total 29,335 100.0 27,156 100.0 -7.4 Median Age Female Population 40.3 41.0 1.5 Median Age Adult Female Population 50.6 49.8 - 1.4 Area defined by Circle: (41.372276,75.703631): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 2 of 3 BIRNEY PLAZA - MOOSIC, PA 3 Mile Radius 6/7/96 1980 Census 1990 Census Percent Total Percent Total Percent Change Total Households 20,534 20,338 -1.0 Household Population 54,643 50,259 -8.0 Average Household Size 2.66 2.47 -7.1 Total Families 15,383 14,123 -8.2 Average Family Size 3.20 3.06 -4.5 Average Family Income $17,783 $32,628 83.5 Family Population 49,276 89.8 43,535 85.9 -11.7 Nonfamily Population 5,367 9.8 6,724 13.3 25.3 Group Quarters Population 241 0.4 395 0.8 63.9 Foreign Born Population 1,375 2.5 583 1.2 -57.6 Household Income: $0-$9,999 7,503 36.7 4,314 21.3 -42.5 $10,000-$ 14,999 3,960 19.4 2,704 13.3 -31.7 $15,000-$ 24,999 5,863 28.6 3,943 19.4 -32.7 $25,000-$ 34,999 2,268 11.1 3,540 17.4 56.1 $35,000-$49,999 674 3.3 3,311 16.3 391.2 $50,000-$74,999 180 0.9 1,907 9.4 959.4 $75,000-$99,999 17 0.1 411 2.0 2,317.6 $100,000-$149,999 123 0.6 $150,000+ 46 0.2 Median Household Income $13,446 $22,443 66.9 Average Household Income $15,113 $27,149 79.6 Per Capita Income $5,660 $10,962 93.7 Median Home Value $29,624 $62,073 109.5 Average Home Value $32,666 $67,075 105.3 Median Contract Rent $133 $235 76.7 Average Contract Rent $128 $235 83.6 Total Housing Units 21,868 100.0 21,553 100.0 -1.4 Owner Occupied 13,317 60.9 13,419 62.3 0.8 Renter Occupied 7,220 33.0 6,920 32.1 -4.2 Vacant 1,334 6.1 1,215 5.6 -8.9 Mobile Home or Trailer 778 3.6 983 4.6 26.3 Condominiums 17 0.1 35 0.2 105.9 Area defined by Circle: (41.372276,75.703631): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 3 of 3 BIRNEY PLAZA - MOOSIC, PA 3 Mile Radius 6/7/96 1980 Census 1990 Census Percent Total Percent Total Percent Change Occupation: Executive & Managerial 1,432 6.5 1,793 8.0 25.2 Professional Specialty 1,752 7.9 2,178 9.7 24.3 Technical Support 539 2.4 859 3.8 59.4 Administrative Support 3,568 16.2 4,018 17.9 12.6 Sales 2,071 9.4 2,175 9.7 5.0 Total White Collar 9,362 42.4 11,023 49.1 17.7 Prod/Craft/Repair 2,861 13.0 2,698 12.0 -5.7 Machine Operators 4,492 20.3 2,973 13.3 -33.8 Trans/Material Moving 1,212 5.5 1,151 5.1 -5.0 Laborers 1,254 5.7 1,327 5.9 5.8 Total Blue Collar 9,871 44.7 8,149 36.3 -17.4 Farm/Forest/Fish 52 0.2 106 0.5 103.8 Protective Service 480 2.2 471 2.1 -1.9 Private Service 49 0.2 17 0.1 -65.3 Other Service 2,314 10.5 2,667 11.9 15.3 Total Employed 22,076 91.1 22,437 93.5 1.6 Unemployed 2,145 8.9 1,565 6.5 -27.0 Total Civil Labor Force 24,221 100.0 24,002 100.0 -0.9 Working Mothers 3,082 47.6 3,517 62.6 14.1 Child < 6 or < 6 & 6-17 876 13.5 1,421 25.3 62.2 Child 6-17 Only 2,206 34.1 2,096 37.3 -5.0 Nonworking Mothers 3,391 52.4 2,098 37.4 -38.1 Means of Transportation to Work: Drive Alone/Carpool 18,235 84.9 19,800 90.5 8.6 Public Transportation 1,177 5.5 691 3.2 -41.3 Other 2,061 9.6 1,396 6.4 -32.3 Area defined by Circle: (41.372276,75.703631): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 BIRNEY PLAZA - MOOSIC, PA 3 Mile Radius 6/7/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 54,884 50,654 49,717 49,003 White 99.6% 99.0% 98.7% 98.4% Black 0.2% 0.5% 0.7% 0.9% American Indian 0.0% 0.1% 0.1% 0.1% Asian 0.2% 0.2% 0.3% 0.3% Other 0.1% 0.1% 0.2% 0.2% Hispanic 0.3% 0.3% 0.3% 0.4% Total Households 20,534 20,338 20,065 19,908 Household Population 54,643 50,259 49,322 48,608 Average Household Size 2.66 2.47 2.46 2.44 Household Income $0-9,999 36.7% 21.3% 17.0% 13.9% $10,000-14,999 19.4% 13.3% 12.0% 10.2% $15,000-24,999 28.6% 19.4% 18.4% 17.1% $25,000-34,999 11.1% 17.4% 15.5% 13.8% $35,000-49,999 3.3% 16.3% 17.6% 18.6% $50,000-74,999 0.9% 9.4% 13.6% 16.4% $75,000-99,999 0.1% 2.0% 3.8% 5.7% $100,000-149,999 - 0.6% 1.7% 3.5% $150,000+ - 0.2% 0.4% 0.7% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 13,446 22,443 26,578 31,028 Aggregate HH Inc ($000) 309,295 550,963 649,893 759,580 Median Family Income ($) 16,587 29,548 34,992 40,851 Per Capita Income ($) 5,660 10,962 13,177 15,627 Median Age Total Population 36.7 38.3 38.7 39.2 Median Age Adult Population 48.3 47.1 47.4 47.7 Median Age Female Population 40.3 41.0 41.4 41.9 Median Age Adult Female Population 50.6 49.8 50.0 50.5 Median Age Male Population 33.3 35.5 36.0 36.3 Median Age Adult Male Population 45.6 44.4 44.6 44.9
Area defined by Circle: (41.372276,75.703631): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 BIRNEY PLAZA - MOOSIC, PA 3 Mile Radius 6/7/96 1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 54,884 50,654 49,717 49,003 0-5 6.8% 7.5% 7.4% 7.3% 6-13 10.6% 9.4% 9.7% 9.7% 14-17 6.3% 4.7% 4.4% 4.5% 18-24 11.1% 9.4% 9.0% 8.9% 25-34 13.6% 14.6% 14.4% 13.9% 35-44 9.7% 13.0% 13.3% 13.4% 45-54 11.3% 10.1% 10.5% 10.9% 55-64 14.1% 10.7% 10.4% 10.6% 65-74 16.6% 12.3% 11.9% 11.3% 75-84 - 6.9% 7.4% 7.5% 85+ - 1.5% 1.7% 2.0% Female Population by Age 29,335 27,156 26,597 26,187 0-5 6.1% 6.9% 6.8% 6.7% 6-13 9.7% 8.4% 8.6% 8.6% 14-17 5.8% 4.3% 4.1% 4.1% 18-24 10.5% 8.8% 8.2% 8.1% 25-34 12.8% 14.1% 14.0% 13.3% 35-44 9.4% 12.4% 12.6% 13.0% 45-54 11.5% 9.9% 10.4% 10.7% 55-64 14.9% 11.2% 10.8% 10.8% 65-74 19.2% 13.8% 13.4% 12.9% 75-84 - 8.3% 8.9% 9.1% 85+ - 2.0% 2.2% 2.6% Male Population by Age 25,536 23,497 23,113 22,815 0-5 7.6% 8.2% 8.1% 8.0% 6-13 11.6% 10.5% 10.9% 10.8% 14-17 7.0% 5.2% 4.9% 5.0% 18-24 11.7% 10.1% 9.8% 9.7% 25-34 14.4% 15.1% 14.8% 14.6% 35-44 10.1% 13.6% 14.0% 13.9% 45-54 11.0% 10.3% 10.7% 11.1% 55-64 13.1% 10.2% 9.9% 10.3% 65-74 13.5% 10.6% 10.3% 9.6% 75-84 - 5.3% 5.6% 5.8% 85+ - 0.9% 1.0% 1.2% Area defined by Circle: (41.372276,75.703631): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 BIRNEY PLAZA - MOOSIC, PA 5 Mile Radius 6/7/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 90.9 - ----------------------------------Demographics---------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 109,717 43,676 105,364 2.41 $26,260 2000 107,130 42,831 102,777 2.40 $30,787 - ------------------------------Expenditure Potential----------------------------- 1995 Area Yearly Growth Rate Per Household 1.44% Total 1.05% - -------------------------Retail Support Potential (000)------------------------- 1995: 4,359 sq. ft. - -------------------------------------------------------------------------------- Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 38,106 41,239 872 963 1.59% 85.2 Appliance Store 3,312 2,747 76 64 -3.68% 88.9 Auto-Aftermarket Store 65,518 66,110 1,500 1,544 0.18% 89.7 Convenience Store 37,522 37,547 859 877 0.01% 94.9 Dept. Store 39,372 41,438 901 967 1.03% 85.3 Drug Store 36,640 44,272 839 1,034 3.86% 106.8 Electronics Store 14,102 17,983 323 420 4.98% 83.0 Fast Food Restaurant Store 36,936 31,956 846 746 -2.85% 88.5 Full Serv Restaurant Store 36,621 31,426 838 734 -3.01% 89.6 Furniture Store 13,034 11,844 298 277 -1.90% 80.4 Grocery Store 172,465 188,803 3,949 4,408 1.83% 96.7 Hardware Store 7,002 7,384 160 172 1.07% 87.1 Home Centers Store 32,488 37,171 744 868 2.73% 85.1 Jewelry Store 6,291 6,317 144 147 0.08% 85.2 Liquor Store 9,907 8,701 227 203 -2.56% 89.2 Mass Merchandiser Store 54,396 59,056 1,245 1,379 1.66% 88.0 Photo Store 727 701 17 16 -0.73% 86.4 Shoe Store 7,649 8,762 175 205 2.75% 88.0 Sporting Goods Store 6,399 7,247 147 169 2.52% 81.9 Toy Store 4,773 4,376 109 102 -1.72% 85.6 Variety Store 3,159 3,472 72 81 1.90% 89.2 Area defined by Circle: (41.372276,75.703631): 5 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 BIRNEY PLAZA - MOOSIC, PA 5 Mile Radius 6/7/96 Benchmark = Regional Area Definition Detailed Report Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 2,221 3,676 51 86 10.61% 88.2 -------- -------- ------- ------- Total Shopping Center 628,641 662,228 14,393 15,461 All Other Stores 482,167 507,928 11,040 11,859 Total Retail 1,110,808 1,170,156 25,433 27,320 Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (41.372276,75.703631): 5 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 1 of 3 BIRNEY PLAZA - MOOSIC, PA 5 Mile Radius 6/7/96 1980 Census 1990 Census Percent Total Percent Total Percent Change Population White 121,333 98.8 110,753 98.0 -8.7 Black 897 0.7 1,238 1.1 38.0 American Indian, Asian & Other 609 0.5 1,028 0.9 68.8 Total 122,839 100.0 113,019 100.0 -8.0 Hispanic 444 0.4 567 0.5 27.7 Age of Population: 0-5 8,088 6.6 7,890 7.0 -2.4 6-13 12,601 10.3 10,197 9.0 -19.1 14-17 7,584 6.2 5,133 4.5 -32.3 18-24 14,828 12.1 12,549 11.1 -15.4 25-34 16,260 13.2 16,113 14.3 -0.9 35-44 11,422 9.3 14,178 12.5 24.1 45-54 13,451 11.0 10,746 9.5 -20.1 55-64 16,826 13.7 11,893 10.5 -29.3 65+ 21,771 17.7 24,306 21.5 11.6 Median Age Total Population 36.8 38.1 3.6 Median Age Adult Population 48.5 46.8 -3.5 Age of Male Population: 0-5 4,141 7.3 3,998 7.6 -3.5 6-13 6,446 11.3 5,268 10.1 -18.3 14-17 3,909 6.9 2,609 5.0 -33.3 18-24 7,479 13.1 6,235 11.9 -16.6 25-34 8,057 14.1 8,014 15.3 -0.5 35-44 5,519 9.7 6,948 13.3 25.9 45-54 6,116 10.7 5,164 9.9 -15.6 55-64 7,310 12.8 5,233 10.0 -28.4 65+ 8,036 14.1 8,842 16.9 10.0 Total 57,013 100.0 52,313 100.0 -8.2 Median Age Male Population 32.9 35.0 6.4 Median Age Adult Male Population 45.3 43.5 -4.0 Age of Female Population: 0-5 3,947 6.0 3,892 6.4 -1.4 6-13 6,155 9.4 4,929 8.1 -19.9 14-17 3,675 5.6 2,524 4.2 -31.3 18-24 7,349 11.2 6,314 10.4 -14.1 25-34 8,203 12.5 8,099 13.3 -1.3 35-44 5,903 9.0 7,230 11.9 22.5 45-54 7,335 11.1 5,582 9.2 -23.9 55-64 9,516 14.5 6,660 11.0 -30.0 65+ 13,735 20.9 15,464 25.5 12.6 Total 65,818 100.0 60,707 100.0 -7.8 Median Age Female Population 41.1 41.2 0.4 Median Age Adult Female Population 51.2 50.2 -1.9 Area defined by Circle: (41.372276,75.703631): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 2 of 3 BIRNEY PLAZA - MOOSIC, PA 5 Mile Radius 6/7/96 1980 Census 1990 Census Percent Total Percent Total Percent Change Total Households 45,961 44,854 -2.4 Household Population 120,145 108,665 -9.6 Average Household Size 2.61 2.42 -7.3 Total Families 33,078 29,540 -10.7 Average Family Size 3.21 3.07 -4.4 Average Family Income $18,585 $34,771 87.1 Family Population 106,281 86.5 91,520 81.0 -13.9 Nonfamily Population 13,864 11.3 17,145 15.2 23.7 Group Quarters Population 2,694 2.2 4,354 3.9 61.6 Foreign Born Population 3,912 3.2 2,177 1.9 -44.4 Household Income: $ 0 -$9,999 17,196 37.5 10,220 22.9 -40.6 $10,000-$14,999 8,514 18.5 5,688 12.7 -33.2 $15,000-S24,999 12,457 27.1 8,549 19.1 -31.4 $25,000-$34,999 5,275 11.5 7,453 16.7 41.3 $35,000-$49,999 1,760 3.8 6,885 15.4 291.2 $50,000-$74,999 545 1.2 4,148 9.3 661.1 $75,000-$99,999 151 0.3 1,060 2.4 602.0 $100,000-$149,999 455 1.0 $150,000+ 249 0.6 Median Household Income $13,379 $22,181 65.8 Average Household Income $15,502 $28,181 81.8 Per Capita Income $5,922 $11,594 95.8 Median Home Value $29,810 $61,029 104.7 Average Home Value $33,200 $67,540 103.4 Median Contract Rent $139 $248 78.4 Average Contract Rent $138 $254 84.1 Total Housing Units 49,302 100.0 48,184 100.0 -2.3 Owner Occupied 27,920 56.6 27,435 56.9 -1.7 Renter Occupied 18,038 36.6 17,424 36.2 -3.4 Vacant 3,341 6.8 3,330 6.9 -0.3 Mobile Home or Trailer 985 2.0 1,229 2.6 24.8 Condominiums 45 0.1 220 0.5 388.9 Area defined by Circle: (41.372276,75.703631): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Census Change Report CBC - C1750-41 Page 3 of 3 BIRNEY PLAZA - MOOSIC, PA 5 Mile Radius 6/7/96 1980 Census 1990 Census Percent Total Percent Total Percent Change Occupation: Executive & Managerial 3,511 7.1 4,283 8.7 22.0 Professional Specialty 4,572 9.3 5,559 11.3 21.6 Technical Support 1,290 2.6 1,709 3.5 32.5 Administrative Support 8,328 16.9 8,758 17.8 5.2 Sales 4,531 9.2 5,095 10.4 12.4 Total White Collar 22,232 45.2 25,404 51.7 14.3 Prod/Craft/Repair 6,233 12.7 5,593 11.4 -10.3 Machine Operators 8,903 18.1 5,998 12.2 -32.6 Trans/Material Moving 2,528 5.1 2,283 4.6 -9.7 Laborers 2,915 5.9 2,715 5.5 -6.9 Total Blue Collar 20,726 42.1 16,589 33.7 -20.0 Farm/Forest/Fish 147 0.3 223 0.5 51.7 Protective Service 927 1.9 794 1.6 -14.3 Private Service 130 0.3 63 0.1 -51.5 Other Service 5,190 10.5 6,096 12.4 17.5 Total Employed 49,205 91.4 49,168 93.9 -0.1 Unemployed 4,604 8.6 3,186 6.1 -30.8 Total Civil Labor Force 53,809 100.0 52,354 100.0 -2.7 Working Mothers 6,558 47.2 7,621 64.3 16.2 Child <6 or <6 & 6-17 2,002 14.4 3,073 25.9 53.5 Child 6-17 Only 4,556 32.8 4,548 38.3 -0.2 Nonworking Mothers 7,347 52.8 4,239 35.7 -42.3 Means of Transportation to Work: Drive Alone/Carpool 39,660 83.2 42,381 88.1 6.9 Public Transportation 2,544 5.3 1,440 3.0 -43.4 Other 5,447 11.4 4,285 8.9 -21.3 Area defined by Circle: (41.372276,75.703631): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 BIRNEY PLAZA - MOOSIC, PA 5 Mile Radius 6/7/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 122,839 113,019 109,717 107,130 White 98.8% 98.0% 97.6% 97.3% Black 0.7% 1.1% 1.2% 1.4% American Indian 0.0% 0.1% 0.1% 0.1% Asian 0.3% 0.7% 0.8% 0.9% Other 0.2% 0.2% 0.2% 0.3% Hispanic 0.4% 0.5% 0.5% 0.6% Total Households 45,961 44,854 43,676 42,831 Household Population 120,145 108,665 105,364 102,777 Average Household Size 2.61 2.42 2.41 2.40 Household Income $0-9,999 37.5% 22.9% 18.0% 14.5% $10,000-14,999 18.5% 12.7% 12.0% 10.7% $15,000-24,999 27.1% 19.1% 17.9% 16.7% $25,000-34,999 11.5% 16.7% 15.3% 13.7% $35,000-49,999 3.8% 15.4% 16.8% 17.6% $50,000-74,999 1.2% 9.3% 13.2% 15.8% $75,000-99,999 0.3% 2.4% 3.8% 5.8% $100,000-149,999 - 1.0% 2.2% 3.9% $150,000+ - 0.6% 0.8% 1.3% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 13,379 22,181 26,260 30,787 Aggregate HH Inc ($000) 711,507 1,259,812 1,470,640 1,703,080 Median Family Income ($) 16,972 29,822 35,306 41,393 Per Capita Income ($) 5,922 11,594 13,958 16,571 Median Age Total Population 36.8 38.1 38.6 39.0 Median Age Adult Population 48.5 46.8 47.2 47.6 Median Age Female Population 41.1 41.2 41.7 42.2 Median Age Adult Female Population 51.2 50.2 50.5 50.9 Median Age Male Population 32.9 35.0 35.5 35.9 Median Age Adult Male Population 45.3 43.5 43.9 44.2
Area defined by Circle: (41.372276,75.703631): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 BIRNEY PLAZA - MOOSIC, PA 5 Mile Radius 6/7/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 122,839 113,019 109,717 107,130 0-5 6.6% 7.0% 6.9% 6.9% 6-13 10.3% 9.0% 9.1% 9.0% 14-17 6.2% 4.5% 4.9% 4.9% 18-24 12.1% 11.1% 10.2% 10.1% 25-34 13.2% 14.3% 14.2% 13.8% 35-44 9.3% 12.5% 12.8% 13.0% 45-54 11.0% 9.5% 10.1% 10.5% 55-64 13.7% 10.5% 10.0% 10.2% 65-74 17.7% 12.1% 11.8% 11.3% 75-84 - 7.5% 7.8% 8.0% 85+ - 1.9% 2.1% 2.3% Female Population by Age 65,818 60,707 58,801 57,358 0-5 6.0% 6.4% 6.3% 6.3% 6-13 9.4% 8.1% 8.2% 8.2% 14-17 5.6% 4.2% 4.5% 4.5% 18-24 11.2% 10.4% 9.4% 9.3% 25-34 12.5% 13.3% 13.3% 12.8% 35-44 9.0% 11.9% 12.1% 12.3% 45-54 11.1% 9.2% 9.8% 10.2% 55-64 14.5% 11.0% 10.4% 10.5% 65-74 20.9% 13.5% 13.3% 12.8% 75-84 - 9.3% 9.6% 9.8% 85+ - 2.7% 2.9% 3.2% Male Population by Age 57,013 52,313 50,918 49,764 0-5 7.3% 7.6% 7.6% 7.5% 6-13 11.3% 10.1% 10.1% 10.0% 14-17 6.9% 5.0% 5.3% 5.3% 18-24 13.1% 11.9% 11.0% 11.0% 25-34 14.1% 15.3% 15.2% 14.9% 35-44 9.7% 13.3% 13.7% 13.8% 45-54 10.7% 9.9% 10.4% 10.8% 55-64 12.8% 10.0% 9.6% 9.9% 65-74 14.1% 10.4% 10.1% 9.6% 75-84 - 5.5% 5.8% 5.9% 85+ - 1.0% 1.2% 1.3% Area defined by Circle: (41.372276,75.703631): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved.
Atlas MarketQuest Profile Report CBC - C1750-41 Page 1 of 4 Area 1 = BIRNEY PLAZA - MOOSIC, PA 1 Mile Radius 6/7/96 Area 2 = BIRNEY PLAZA - MOOSIC, PA 3 Mile Radius Area 3 = BIRNEY PLAZA - MOOSIC, PA 5 Mile Radius Description Area 1 Area 2 Area 3 Population: 2000 Projection 5,488 49,003 107,130 1995 Estimate 5,589 49,717 109,717 1990 Census 5,696 50,654 113,019 1980 Census 6,549 54,884 122,839 Percent Change, 1980 - 1990 -13.0 -7.7 -8.0 Percent Change, 1990 - 1995 -1.9 -1.8 -2.9 1995 Population by Race: % White 99.5 98.7 97.6 % Black 0.1 0.7 1.2 % American Indian 0.0 0.1 0.1 % Asian 0.3 0.3 0.8 % Other 0.1 0.2 0.2 % Hispanic 0.1 0.3 0.5 1995 Population by Age: % 0-5 6.6 7.4 6.9 % 6-13 9.1 9.7 9.1 % 14-17 4.2 4.4 4.9 % 18-20 3.8 3.9 4.5 % 21-24 4.8 5.1 5.7 % 25-34 13.7 14.4 14.2 % 35-44 14.1 13.3 12.8 % 45-54 11.9 10.5 10.1 % 55-64 12.1 10.4 10.0 % 65-74 12.0 11.9 11.8 % 75-84 6.5 7.4 7.8 % 85 + 1.2 1.7 2.1 Median Age Total Population 40.4 38.7 38.6 Median Age Adult Population 48.0 47.4 47.2 Households: 2000 Projection 2,113 19,908 42,831 1995 Estimate 2,137 20,065 43,676 1990 Census 2,165 20,338 44,854 1980 Census 2,269 20,534 45,961 Percent Change, 1980 - 1990 -4.6 -1.0 -2.4 Percent Change, 1990 - 1995 -1.3 -1.3 -2.6 1990 Household Population 5,692 50,259 108,665 1990 Households w/ Children under 18 648 5,933 12,427 1990 Households w/ Persons over 65 766 7,687 17,441 Area defined by Circle: (41.372276,75.703631): 1 mile(s) Area defined by Circle: (41.372276,75.703631): 3 mile(s) Area defined by Circle: (41.372276,75.703631): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 2 of 4 Area 1 = BIRNEY PLAZA - MOOSIC, PA 1 Mile Radius 6/7/96 Area 2 = BIRNEY PLAZA - MOOSIC, PA 3 Mile Radius Area 3 = BIRNEY PLAZA - MOOSIC, PA 5 Mile Radius Description Area 1 Area 2 Area 3 1990 Family Population 5,115 43,535 91,520 1990 Nonfamily Population 577 6,724 17,145 1990 Group Quarters Population 4 395 4,354 1990 Average Household Size 2.63 2.47 2.42 1990 Average Family Size 3.11 3.06 3.07 1990 Family Households 1,635 14,123 29,540 1990 Nonfamily Households 525 6,221 15,316 1995 Household Income: % $ 0-$9,999 9.0 17.0 18.0 % $10,000-$14,999 8.3 12.0 12.0 % $15,000-$24,999 19.3 18.4 17.9 % $25,000-$34,999 19.7 15.5 15.3 % $35,000-$49,999 16.9 17.6 16.8 % $50,000-$74,999 16.1 13.6 13.2 % $75,000-$99,999 6.9 3.8 3.8 % $100,000-$149,999 3.0 1.7 2.2 % $150,000+ 0.7 0.4 0.8 2000 Median Household Income $36,823 $31,028 $30,787 1995 Median Household Income $31,557 $26,578 $26,260 1990 Median Household Income $26,828 $22,443 $22,181 2000 Average Household Income $45,946 $38,155 $39,763 1995 Average Household Income $39,149 $32,389 $33,672 1990 Average Household Income $32,847 $27,149 $28,181 2000 Per Capita Income $17,703 $15,627 $16,571 1995 Per Capita Income $14,980 $13,177 $13,958 1990 Per Capita Income $12,361 $10,962 $11,594 2000 Median Family Income $44,740 $40,851 $41,393 1995 Median Family Income $38,342 $34,992 $35,306 1990 Median Family Income $32,596 $29,548 $29,822 1990 Average Family Income $37,623 $32,628 $34,771 Area defined by Circle: (41.372276,75.703631): 1 mile(s) Area defined by Circle: (41.372276,75.703631): 3 mile(s) Area defined by Circle: (41.372276,75.703631): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 3 of 4 Area 1 = BIRNEY PLAZA - MOOSIC, PA 1 Mile Radius 6/7/96 Area 2 = BIRNEY PLAZA - MOOSIC, PA 3 Mile Radius Area 3 = BIRNEY PLAZA - MOOSIC, PA 5 Mile Radius Description Area 1 Area 2 Area 3 1990 Housing Unit Counts: Total Units 2,252 21,553 48,184 Occupied Units 2,165 20,338 44,854 Owner Occupied 1,759 13,419 27,435 Renter Occupied 403 6,920 17,424 Vacant Units 87 1,215 3,330 Year Round 82 1,179 3,248 Seasonal 5 36 81 1990 Housing Unit Percents: % Occupied of Total Units 96.1 94.4 93.1 % Owner Units of Occupied Units 81.2 66.0 61.2 % Renter Units of Occupied Units 18.6 34.0 38.8 % Vacant of Total Units 3.9 5.6 6.9 % Year Round of Vacant Units 94.3 97.0 97.5 % Seasonal of Vacant Units 5.7 3.0 2.4 % Condominiums of Total Units 0.0 0.2 0.5 1990 Condominiums: Total Condominium Units 0 35 220 % Owner Occupied 0.0 0.0 21.8 % Renter Occupied 0.0 100.0 71.8 % Vacant 0.0 0.0 6.4 1990 Units in Structure: % 1, Detached 65.0 50.6 46.9 % 1, Attached 2.9 4.8 5.6 % 2 13.5 20.7 20.5 % 3-9 6.5 16.2 17.6 % 10-49 0.4 1.4 2.6 % 50+ 0.0 0.1 2.7 % Mobile Homes 10.5 4.6 2.6 % Other 1.2 1.6 1.6 1990 Median Home Value $70,110 $62,073 $61,029 1990 Median Contract Rent $253 $235 $248 Area defined by Circle: (41.372276,75.703631): 1 mile(s) Area defined by Circle: (41.372276,75.703631): 3 mile(s) Area defined by Circle: (41.372276,75.703631): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Profile Report CBC - C175O-41 Page 4 of 4 Area 1 = BIRNEY PLAZA - MOOSIC, PA 1 Mile Radius 6/7/96 Area 2 = BIRNEY PLAZA - MOOSIC, PA 3 Mile Radius Area 3 = BIRNEY PLAZA - MOOSIC, PA 5 Mile Radius Description Area 1 Area 2 Area 3 1995 Total Employed 2,598 12,989 42,301 1995 Socio-Economic Measure 52 35 37 1990 Occupation: Total Civil Labor Force 2,921 24,002 52,354 % Unemployed 6.1 6.5 6.1 Total Employed 2,743 22,437 49,168 % White Collar 53.4 49.1 51.7 % Executive & Managerial 9.2 8.0 8.7 % Professional Specialty 10.0 9.7 11.3 % Technical Support 3.8 3.8 3.5 % Administrative Support 19.6 17.9 17.8 % Sales 10.7 9.7 10.4 % Blue Collar 30.7 36.3 33.7 % Precision Production, Craft & Repair 10.9 12.0 11.4 % Machine Operators 8.5 13.3 12.2 % Transportation & Material Moving 6.0 5.1 4.6 % Laborers 5.3 5.9 5.5 % Farming, Forestry & Fishing 0.1 0.5 0.5 % Service: Private Household 0.0 0.1 0.1 % Service: Protective 4.0 2.1 1.6 % Service: Other 11.8 11.9 12.4 1990 Educational Attainment (Age 25 & Over): % Less than Grade 9 8.4 11.6 11.7 % Grade 9-12 (No Diploma) 15.0 18.2 17.7 % High School Graduate or Equivalency 46.3 42.8 40.4 % Some College (No Degree) 14.2 11.5 11.8 % Associate Degree 6.8 6.1 6.1 % Bachelor Degree 5.6 6.4 7.5 % Graduate or Professional Degree 3.8 3.4 4.8 Area defined by Circle: (41.372276,75.703631): 1 mile(s) Area defined by Circle: (41.372276,75.703631): 3 mile(s) Area defined by Circle: (41.372276,75.703631): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - Cl750-4l Page 1 of 9 Area 1 = BIRNEY PLAZA - MOOSIC, PA 1 Mile Radius 6/7/96 Area 2 = BIRNEY PLAZA - MOOSIC, PA 3 Mile Radius Area 3 = BIRNEY PLAZA - MOOSIC, PA 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1995 Socio-Economic Measure: 52 35 37 1995 Employment: 2,598 12,989 42,301 Population: 2000 Projection 5,488 49,003 107,130 1995 Estimate 5,589 49,717 109,717 1990 Census 5,696 50,654 113,019 1990-1995 % Change (Growth) -1.9% -1.8% -2.9% 1990 Group Quarters Population 4 395 4,354 1995 % Population by Race: White 99.5% 98.7% 97.6% Black 0.1% 0.7% 1.2% American Indian, Eskimo & Aleut 0.0% 0.1% 0.1% Asian or Pacific Islander 0.3% 0.3% 0.8% Other 0.1% 0.2% 0.2% Hispanic 0.1% 0.3% 0.5% 1990 % Population by Race: White 99.6% 99.0% 98.0% Black 0.1% 0.5% 1.1% American Indian, Eskimo & Aleut 0.0% 0.1% 0.1% Asian or Pacific Islander 0.2% 0.2% 0.7% Other 0.1% 0.1% 0.2% Hispanic 0.1% 0.3% 0.5% 1995 % Population by Sex: Male 48.0% 46.5% 46.4% Female 52.0% 53.5% 53.6% 1990 % Population by Sex: Male 48.1% 46.4% 46.3% Female 51.9% 53.6% 53.7% 2000 Pop per Square Mile (Pop Density) 853.2 1,658.4 1,553.2 1995 Pop per Square Mile (Pop Density) 868.9 1,682.6 1,590.7 1990 Pop per Square Mile (Pop Density) 885.5 1,714.3 1,638.6 Area (Square Miles) 6.4 29.5 69.0 Area (Square Kilometers) 16.7 76.5 178.6 Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 2 of 9 Area 1 = BIRNEY PLAZA - MOOSIC, PA 1 Mile Radius 6/7/96 Area 2 = BIRNEY PLAZA - MOOSIC, PA 3 Mile Radius Area 3 = BIRNEY PLAZA - MOOSIC, PA 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- Households: 2000 Projection 2,113 19,908 42,831 1995 Estimate 2,137 20,065 43,676 1990 Census 2,165 20,338 44,854 1990-1995 % Change (Growth) -1.3% -1.3% -2.6% 2000 Average Household Size 2.60 2.44 2.40 1995 Average Household Size 2.61 2.46 2.41 1990 Average Household Size 2.63 2.47 2.42 2000 Per Capita Income $17,703 15,627 16,571 1995 Per Capita Income $14,980 13,177 13,958 1990 Per Capita Income $12,361 10,962 11,594 2000 Median Family Income $44,740 40,851 41,393 1995 Median Family Income $38,342 34,992 35,306 1990 Median Family Income $32,596 29,548 29,822 2000 Median Household Income $36,823 31,028 30,787 1995 Median Household Income $31,557 26,578 26,260 1990 Median Household Income $26,828 22,443 22,181 2000 Average Household Income $45,946 38,155 39,763 1995 Average Household Income $39,149 32,389 33,672 1990 Average Household Income $32,847 27,149 28,181 1995 % Household Income: $0-$9,999 9.0% 17.0% 18.0% $10,000-$14,999 8.3% 12.0% 12.0% $15,000-$24,999 19.3% 18.4% 17.9% $25,000-$34,999 19.7% 15.5% 15.3% $35,000-$49,999 16.9% 17.6% 16.8% $50,000-$74,999 16.1% 13.6% 13.2% $75,000-$99,999 6.9% 3.8% 3.8% $100,000-$149,999 3.0% 1.7% 2.2% $150,000+ 0.7% 0.4% 0.8% Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 3 of 9 Area 1 = BIRNEY PLAZA - MOOSIC, PA 1 Mile Radius 6/7/96 Area 2 = BIRNEY PLAZA - MOOSIC, PA 3 Mile Radius Area 3 = BIRNEY PLAZA - MOOSIC, PA 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Household Income: $0-$9,999 11.8% 21.3% 22.9% $10,000-$14,999 11.1% 13.3% 12.7% $15,000-$24,999 22.6% 19.4% 19.1% $25,000-$34,999 18.0% 17.4% 16.7% $35,000-$49,999 17.8% 16.3% 15.4% $50,000-$74,999 13.6% 9.4% 9.3% $75,000-$99,999 3.5% 2.0% 2.4% $100,000-$149,999 0.9% 0.6% 1.0% $150,000+ 0.7% 0.2% 0.6% 1995 % Population by Age: 0-5 6.6% 7.4% 6.9% 6-13 9.1% 9.7% 9.1% 14-17 4.2% 4.4% 4.9% 18-20 3.8% 3.9% 4.5% 21-24 4.8% 5.1% 5.7% 25-34 13.7% 14.4% 14.2% 35-44 14.1% 13.3% 12.8% 45-54 11.9% 10.5% 10.1% 55-64 12.1% 10.4% 10.0% 65-74 12.0% 11.9% 11.8% 75-84 6.5% 7.4% 7.8% 85+ 1.2% 1.7% 2.1% Median Age Total Population 40.4 38.7 38.6 Median Age Adult Population 48.0 47.4 47.2 1990 % Population by Age: 0-5 6.6% 7.5% 7.0% 6-13 9.6% 9.4% 9.0% 14-17 4.6% 4.7% 4.5% 18-20 3.8% 3.9% 5.2% 21-24 5.4% 5.5% 5.9% 25-34 13.4% 14.6% 14.3% 35-44 14.6% 13.0% 12.5% 45-54 11.4% 10.1% 9.5% 55-64 12.3% 10.7% 10.5% 65-74 11.9% 12.3% 12.1% 75-84 5.6% 6.9% 7.5% 85 + 1.0% 1.5% 1.9% Median Age Total Population 39.5 38.3 38.1 Median Age Adult Population 47.1 47.1 46.8 Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC-C1750-41 Page 4 of 9 Area 1 = BIRNEY PLAZA - MOOSIC, PA 1 Mile Radius 6/7/96 Area 2 = BIRNEY PLAZA - MOOSIC, PA 3 Mile Radius Area 3 = BIRNEY PLAZA - MOOSIC, PA 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1995 % Female Population by Age: 0-5 5.8% 6.8% 6.3% 6-13 8.4% 8.6% 8.2% 14-17 4.0% 4.1% 4.5% 18-20 3.6% 3.6% 4.1% 21-24 4.5% 4.6% 5.3% 25-34 13.2% 14.0% 13.3% 35-44 13.2% 12.6% 12.1% 45-54 12.2% 10.4% 9.8% 55-64 13.0% 10.8% 10.4% 65-74 12.8% 13.4% 13.3% 75-84 7.7% 8.9% 9.6% 85 + 1.6% 2.2% 2.9% Female Median Age Total Population 43.0 41.4 41.7 Female Median Age Adult Population 50.0 50.0 50.5 1990 % Female Population by Age: 0-5 5.6% 6.9% 6.4% 6-13 9.0% 8.4% 8.1% 14-17 4.4% 4.3% 4.2% 18-20 3.4% 3.7% 4.9% 21-24 4.6% 5.1% 5.5% 25-34 13.2% 14.1% 13.3% 35-44 14.2% 12.4% 11.9% 45-54 11.6% 9.9% 9.2% 55-64 12.8% 11.2% 11.0% 65-74 13.0% 13.8% 13.5% 75-84 6.8% 8.3% 9.3% 85 + 1.4% 2.0% 2.7% Female Median Age Total Population 41.8 41.0 41.2 Female Median Age Adult Population 49.3 49.8 50.2 1990 % Hispanic Population by Type: Not of Hispanic Origin 99.9% 99.7% 99.5% Mexican 0.0% 0.1% 0.1% Puerto Rican 0.1% 0.2% 0.2% Cuban 0.0% 0.0% 0.0% Other Hispanic 0.0% 0.1% 0.2% Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 5 of 9 Area 1 = BIRNEY PLAZA - MOOSIC, PA 1 Mile Radius 6/7/96 Area 2 = BIRNEY PLAZA - MOOSIC, PA 3 Mile Radius Area 3 = BIRNEY PLAZA - MOOSIC, PA 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Population Enrolled in School (Age 3 & Over): Preprimary School 6.7% 9.4% 7.8% Elementary and High School 66.9% 67.9% 60.7% College 26.4% 22.7% 31.5% Total School Enrollment 1,142 10,318 25,306 1990 % Educational Attainment (Age 25 & Over): Less than Grade 9 8.4% 11.6% 11.7% Grade 9-12 (No Diploma) 15.0% 18.2% 17.7% High School Graduate or Equivalency 46.3% 42.8% 40.4% Some College (No Degree) 14.2% 11.5% 11.8% Associate Degree 6.8% 6.1% 6.1% Bachelor Degree 5.6% 6.4% 7.5% Graduate or Professional Degree 3.8% 3.4% 4.8% 1990 % Employment Status: Total Labor Force: Armed Forces 0.0% 0.0% 0.1% Civilian: Employed 59.3% 54.7% 53.3% Unemployed 3.9% 3.8% 3.5% Not In Labor Force 36.8% 41.4% 43.2% Female Labor Force: Armed Forces 0.0% 0.0% 0.0% Civilian: Employed 52.5% 45.9% 45.2% Unemployed 3.6% 3.4% 3.0% Not In Labor Force 43.9% 50.7% 51.9% 1990 % Working Mothers: Child < 6 Only 11.5% 14.6% 15.3% Child 6-17 Only 43.3% 37.3% 38.3% Child < 6 & 6-17 11.5% 10.7% 10.6% Nonworking Mothers 33.7% 37.4% 35.7% Total Mothers 617 5,615 11,860 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 6 of 9 Area 1 = BIRNEY PLAZA - MOOSIC, PA 1 Mile Radius 6/7/96 Area 2 = BIRNEY PLAZA - MOOSIC, PA 3 Mile Radius Area 3 = BIRNEY PLAZA - MOOSIC, PA S Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Industry Employment: Agriculture/Forestry/Fishing 0.0% 0.4% 0.4% Mining 0.8% 0.2% 0.2% Construction 5.1% 4.8% 4.9% Manufacturing: Nondurable Goods 11.5% 14.0% 13.4% Durable Goods 8.9% 9.5% 8.8% Transportation 6.5% 5.8% 5.0% Communications & Public Utilities 2.5% 2.7% 2.5% Wholesale Trade 6.4% 5.4% 4.9% Retail Trade 20.6% 18.5% 18.8% Finance/Insurance/Real Estate 5.6% 5.0% 5.1% Services: Business & Repair 2.9% 3.3% 3.5% Personal 2.0% 2.7% 2.8% Entertainment & Recreation 0.4% 0.8% 0.8% Health 10.8% 11.3% 11.3% Educational 5.7% 5.5% 7.3% Other Professional & Related 3.4% 5.0% 5.7% Public Administration 7.0% 5.0% 4.6% Total 2,750 22,438 49,162 1990 % Occupation: Executive & Managerial 9.2% 8.0% 8.7% Professional Specialty 10.0% 9.7% 11.3% Technical Support 3.8% 3.8% 3.5% Sales 10.7% 9.7% 10.4% Administrative Support 19.6% 17.9% 17.8% Service: Private Household 0.0% 0.1% 0.1% Service: Protective 4.0% 2.1% 1.6% Service: Other 11.8% 11.9% 12.4% Farming, Forestry & Fishing 0.1% 0.5% 0.5% Precision Production, Craft & Repair 10.9% 12.0% 11.4% Machine Operator, Assemblers & Inspectors 8.5% 13.3% 12.2% Transportation & Material Moving 6.0% 5.1% 4.6% Laborers 5.3% 5.9% 5.5% White Collar Total 53.4% 49.1% 51.7% Blue Collar Total 30.7% 36.3% 33.7% Total Employed 2,746 22,433 49,169 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 7 of 9 Area 1 = BIRNEY PLAZA - MOOSIC, PA 1 Mile Radius 6/7/96 Area 2 = BIRNEY PLAZA - MOOSIC, PA 3 Mile Radius Area 3 = BIRNEY PLAZA - MOOSIC, PA 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Marital Status: Total Male: 2,222 18,774 42,367 Never Married 28.9% 29.9% 33.2% Married 61.4% 58.3% 54.4% Separated 1.5% 1.7% 1.8% Widowed 3.5% 4.2% 4.5% Divorced 4.7% 5.8% 6.1% Total Female: 2,495 22,734 51,301 Never Married 22.6% 23.9% 26.2% Married 54.4% 48.0% 44.7% Separated 1.5% 2.3% 2.2% Widowed 16.2% 18.5% 19.6% Divorced 5.4% 7.3% 7.2% 1990 Households by Type: One Person Households 494 5,798 14,068 Two or more Person Households: Family Households: Married Couple 1,315 10,551 22,065 Male Householder 79 772 1,549 Female Householder 241 2,800 5,926 Nonfamily Households 33 421 1,254 1990 Family Households With Children Married Couple Family 533 4,341 9,124 Male Householder 28 242 457 Female Householder 81 1,324 2,780 1990 Population by Household Type: Family Households 5,115 43,535 91,520 Nonfamily Households 577 6,724 17,145 1990 Households With: Children Under 18 648 5,933 12,427 Persons Over 65 766 7,687 17,441 Householder Over 65 679 7,017 16,045 1990 Average Family Size 3.11 3.06 3.07 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 8 of 9 Area 1 = BIRNEY PLAZA - MOOSIC, PA 1 Mile Radius 6/7/96 Area 2 = BIRNEY PLAZA - MOOSIC, PA 3 Mile Radius Area 3 = BIRNEY PLAZA - MOOSIC, PA 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 Median Home Value $70,110 62,073 61,029 1990 Average Home Value $75,688 67,075 67,540 1990 Median Contract Rent $253 235 248 1990 Average Contract Rent $252 235 254 1990 Persons In Unit: 1 Person Units 494 5,798 14,068 2 Person Units 690 6,430 13,644 3 Person Units 426 3,556 7,346 4+ Person Units 551 4,554 9,796 1990 Housing Unit Counts: Total Units 2,252 21,553 48,184 % Occupied 96.1% 94.4% 93.1% % Vacant 3.9% 5.6% 6.9% % Year Round 3.6% 5.5% 6.7% % Seasonal 0.2% 0.2% 0.2% Occupied Units 2,165 20,338 44,854 % Owner Occupied 81.2% 66.0% 61.2% % Renter Occupied 18.6% 34.0% 38.8% Vacant Units 87 1,215 3,330 % Year Round of Vacant Units 94.3% 97.0% 97.5% % Seasonal of Vacant Units 5.7% 3.0% 2.4% 1990 Total Housing Units in Structure 2,252 21,553 48,184 1, Detached 65.0% 50.6% 46.9% 1, Attached 2.9% 4.8% 5.6% 2, 13.5% 20.7% 20.5% 3-9 6.5% 16.2% 17.6% 10-49 0.4% 1.4% 2.6% 50+ 0.0% 0.1% 2.7% Mobile Home or Trailer 10.5% 4.6% 2.6% Other 1.2% 1.6% 1.6% 1990 Housing Units by Year Built 1,674 13,411 27,429 Built 1985 to March, 1990 5.8% 4.3% 2.9% Built 1980 to 1984 6.8% 3.5% 2.5% Built 1970 to 1979 22.5% 12.7% 9.8% Built 1960 to 1969 15.9% 10.1% 8.4% Built 1950 to 1959 9.2% 8.2% 7.4% Built 1949 or Earlier 39.8% 61.1% 68.8% Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 9 of 9 Area 1 = BIRNEY PLAZA - MOOSIC, PA 1 Mile Radius 6/7/96 Area 2 = BIRNEY PLAZA - MOOSIC, PA 3 Mile Radius Area 3 = BIRNEY PLAZA - MOOSIC, PA 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Means of Transportation to Work: Car, Truck or Van: Drove Alone 77.8% 73.4% 71.1% Carpooled 15.1% 17.1% 17.0% Public Transportation 2.6% 3.2% 3.0% Other Means 2.5% 5.2% 7.5% Worked at Home 1.9% 1.2% 1.4% 1990% Travel Time to Work: 0-14 Minutes 39.1% 43.0% 48.2% 15-29 Minutes 47.7% 43.7% 38.9% 30-59 Minutes 9.7% 11.0% 10.7% 60-89 Minutes 3.1% 1.8% 1.7% 90+ Minutes 0.4% 0.5% 0.5% 1990 Households by Number of Vehicles: 1 Vehicle 662 7,741 17,387 2 Vehicles 881 6,425 13,303 3 Vehicles 286 1,739 3,581 4 Vehicles 51 348 907 5 or More Vehicles 12 82 251 Area defined by Circle: (41.372276,75.703631): 1 mile(s) Area defined by Circle: (41.372276,75.703631): 3 mile(s) Area defined by Circle: (41.372276,75.703631): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. ================================================================================ ADDENDUM F RENT ROLL - -------------------------------------------------------------------------------- ADDENDUM F RENT ROLL - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Mark Centers Trust Annual Rent Roll 17 Date: BIRNEY PLAZA 05/09/96 Report Date: 05/09/96 10:47:23 - ------------------------------------------------------------------------------------------------------------------------------------ Occupancy --Rent Dates--- Square Base Rent -----Com------ --Taxes-- Bldg/Suite/Lease Tenant Name Status Start Expire footage Rent Per Sq Ft Base Fixed Rec Fixed Rec - ------------------------------------------------------------------------------------------------------------------------------------ - ---------------------------------------------------------------- Insurance %Rent Bldg/Suite/Lease Tenant Name Rec Clause - ---------------------------------------------------------------- 330542-00010-000001 FASHION BUG #106 x YES 330542-00070-000004 THRIFT DRUG YES 330542-00090-000005 SPA CONSULTANTS x YES 330542-00100-000006 DINOS AND FRANCESCOS x 330542-00120-000007 WINE & SPIRITS SHOPPE 330542-00130-000008 HOLIDAY HAIR FASHIONS x YES 330542-00140-000009 MATTRESS MAN x YES 330542-00160-000010 K MART YES 330542-00170-000011 BIG LOTS x YES 330542-00180-000012 LONG JOHN SILVERS YES 330542-00190-000013 PONDEROSA STEAK HOUSE YES 330542-00040-000014 COLORTYME x 330542-00030-000015 THE EVERYTHING $.99 S YES
- ------------------------------------------------------------------------------------- Detail Rent Roll Page: 61 BIRNEY PLAZA Date: 05/14/96 Report Date: 05/14/96 Time: 14:19:02 - ------------------------------------------------------------------------------------- -- Rent Dates - Suite Commence Expire Square Monthly Annual No. Tenant Name Start Footage Base Rent Rate/SF - ------------------------------------------------------------------------------------- 00010 FASHION BUG #106 05/24/78 05/31/98 9,000 0.00 0 00 05/24/78 00070 THRIFT DRUG 11/01/71 10/31/01 12,000 2,750.00 2.75 11/01/71 00090 SPA CONSULTANTS 07/01/91 07/31/96 12,000 8,750.00 8.75 07/01/91 00100 DINOS AND FRANCESCOS REST. 12/01/90 11/30/00 2,000 1,750.00 10.50 12/01/80 00120 WINE & SPIRITS SHOPPE - #350 10/01/81 09/30/98 2,406 1,108.00 5.53 10/01/81 00130 HOLIDAY HAIR FASHIONS 08/01/88 07/31/99 1,500 906.25 7.25 08/01/88 00140 MATTRESS MAN 07/28/93 07/31/98 4,000 3,000.00 9.00 07/28/93 00160 K MART 10/02/74 10/31/99 104,956 17,055.33 1.95 10/02/74 00170 BIG LOTS 03/01/93 01/31/98 30,537 7,634.25 3.00 03/01/93 00180 LONG JOHN SILVERS 09/15/74 10/01/01 0 1,029.17 0.00 09/15/74 00190 PONDEROSA STEAK HOUSE - #084 12/10/79 12/31/96 23,658 1,000.00 0.51 12/10/79 00040 COLORTYME 05/28/81 05/31/99 3,500 2,250.00 7.71 05/28/81
- ------------------------------------------------------------------------------------------------------------------------- Suite ---- Cost Recovery ---- Expense ---- Other Income ----- --- Future Rent Increases --- No. Tenant Name Description Monthly Stop Description Monthly Date Monthly Amt. Per Sf - ------------------------------------------------------------------------------------------------------------------------- 00010 FASHION BUG #106 MAINTENANC 415.37 UTILITY IN 23.18 --------- 438.55 00070 THRIFT DRUG MAINTENANC 1,040.69 00090 SPA CONSULTANTS MAINTENANC 1,250.00 REAL ESTAT 707.06 --------- 1,957.06 00100 DINOS AND FRANCESCOS REST. MAINTENANC 229.28 12/01/96 1,791.67 10.75 REAL ESTAT 117.85 12/01/97 1,833.34 11.00 --------- 12/01/98 1,875.00 11.25 347.13 12/01/99 1,916.67 11.50 12/01/00 1,958.34 11.75 12/01/01 2,000.00 12.00 12/01/02 2,050.00 12.30 12/01/03 2,100.00 12.60 12/01/04 2,150.00 12.90 00120 WINE & SPIRITS SHOPPE - #350 10/01/98 1,250.00 6.23 00130 HOLIDAY HAIR FASHIONS MAINTENANC 93.75 08/01/96 937.50 7.50 REAL ESTAT 88.39 --------- 182.14 00140 MATTRESS MAN MAINTENANC 256.09 07/01/96 3,333.34 10.00 REAL ESTAT 236.66 --------- 492.75 00160 K MART 00170 BIG LOTS MAINTENANC 1,145.14 00180 LONG JOHN SILVERS 10/02/96 1,108.34 0.00 00190 PONDEROSA STEAK HOUSE - #084 00040 COLORTYME MAINTENANC 272.50 06/01/97 2,362.5 8.10 REAL ESTAT 176.77 --------- 449.27
- ------------------------------------------------------------------------------------- Detail Rent Roll Page: 62 BIRNEY PLAZA Date: 05/14/96 Report Date: 05/14/96 Time: 14:20:01 - ------------------------------------------------------------------------------------- -- Rent Dates - Suite Commence Expire Square Monthly Annual No. Tenant Name Start Footage Base Rent Rate/SF - ------------------------------------------------------------------------------------- 00030 THE EVERYTHING $ .99 STORE 08/25/95 08/31/98 4,000 2,333 34 7.00 09/23/95 - ------------------------------------------------------------------------------------ Total Building Occupied Sqft: 99% 209,557 49,566.34 Available Sqft: 1% 2,500 Total Sqft: 212,057 - ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------- Suite ---- Cost Recovery ---- Expense ---- Other Income ----- --- Future Rent Increases --- No. Tenant Name Description Monthly Stop Description Monthly Date Monthly Amt. Per Sf - ------------------------------------------------------------------------------------------------------------------------- 00030 THE EVERYTHING $ 99 STORE MAINTENANC 271.84 09/01/98 2,500.00 7.50 REAL ESTAT 226.67 --------- 498.51 - ---------------------------------------------------------------------------------------- 0.00 6,551.24 - ----------------------------------------------------------------------------------------
================================================================================ ADDENDUM G PRO-JECT REPORTS - -------------------------------------------------------------------------------- ADDENDUM G - PRO-JECT REPORTS - -------------------------------------------------------------------------------- BIRNEY PLAZA S.C., MOOSIC, PA PROJECT ASSUMPTIONS REPORT INCLUDING ALL TENANTS BUILDING PROLOGUE - ----------------- LEASEHOLD ANALYSIS OF BIRNEY PLAZA S.C., MOOSIC, PA BEGINNING 6/1996 FOR 31 YEARS ON A FISCAL YEAR BASIS AREA MEASURES - ------------- NRA 1996 VALUE - 212,057 THEREAFTER - CONSTANT OCCA 1996 VALUE - 212,057 1997 VALUE - 212,057 1998 VALUE - 212,057 1999 VALUE - 210,807 2000 VALUE - 212,057 2001 VALUE - 207,039 2002 VALUE - 211,849 2003 VALUE - 211,057 2004 VALUE - 210,932 2005 VALUE - 211,765 2006 VALUE - 209,390 2007 VALUE - 209,164 2008 VALUE - 203,756 2009 VALUE - 211,432 2010 VALUE - 211,099 2011 VALUE - 209,557 2012 VALUE - 205,831 2013 VALUE - 202,173 2014 VALUE - 211,057 2015 VALUE - 187,149 2016 VALUE - 187,899 2017 VALUE - 180,173 2018 VALUE - 178,515 2019 VALUE - 187,399 2020 VALUE - 187,149 2021 VALUE - 187,899 2022 VALUE - 180,381 2023 VALUE - 182,351 2024 VALUE - 183,354 2025 VALUE - 187,274 2026 VALUE - 188,107 THEREAFTER - CONSTANT VACA +100.0% OF NRA -100.0% OF OCCA PAGE 2 GROWTH RATES - ------------ RENT 1996 VALUE - 3.00 THEREAFTER - CONSTANT EXP. 1996 VALUE - 3.00 THEREAFTER - CONSTANT 2.0% 1996 VALUE - 2.00 THEREAFTER - CONSTANT 3.0% 1996 VALUE - 3.00 THEREAFTER - CONSTANT TAX 1996 VALUE - 1.00 1997 VALUE - 2.00 1998 VALUE - 3.00 THEREAFTER - CONSTANT MARKET RATES - ------------ ANCR 1996 VALUE - 6.00 THEREAFTER - GROWING AT GROWTH RATE RENT STOR 1996 VALUE - 7.50 THEREAFTER - GROWING AT GROWTH RATE RENT MISCELLANEOUS INCOMES - --------------------- NONE EXPENSES - -------- CAM , REFERRED TO AS CAM CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 120.000 THEREAFTER - GROWING AT GROWTH RATE EXP. REAL ESTATE TAXES , REFERRED TO AS TAX CHARGED AGAINST NET OPERATING INCOME PAGE 3 1996 VALUE - 136,164 THEREAFTER - GROWING AT GROWTH RATE TAX INSURANCE , REFERRED TO AS INS. CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 20,600 THEREAFTER - GROWING AT GROWTH RATE EXP. MANAGEMENT FEES , REFERRED TO AS MGT AN INFORMATIONAL EXPENSE 1996 VALUE - 26,922 1997 VALUE - 27,269 1998 VALUE - 28,064 1999 VALUE - 28,240 2000 VALUE - 28,996 2001 VALUE - 27,843 2002 VALUE - 29,982 2003 VALUE - 30,626 2004 VALUE - 31,051 2005 VALUE - 31,907 2006 VALUE - 31,539 2007 VALUE - 32,095 2006 VALUE - 36,621 2009 VALUE - 40,896 2010 VALUE - 41,803 2011 VALUE - 42,580 2012 VALUE - 43,152 2013 VALUE - 44,043 2014 VALUE - 49,921 2015 VALUE - 50,101 2016 VALUE - 51,645 2017 VALUE - 49,821 2018 VALUE - 50,021 2019 VALUE - 55,610 2020 VALUE - 56,817 2021 VALUE - 58,591 2022 VALUE - 56,471 2023 VALUE - 58,878 2024 VALUE - 61,422 2025 VALUE - 65,228 2026 VALUE - 67,366 THEREAFTER - CONSTANT VACANCY ALLOWANCE - ----------------- PERCENTAGE OF POTENTIAL GROSS INCOME FOR ALL TENANTS SUBJECT TO VACANCY 1996 VALUE - 2.00 THEREAFTER - CONSTANT PAGE 4 MANAGEMENT FEE - -------------- PERCENTAGE OF EFFECTIVE GROSS INCOME FOR ALL TENANTS PASSED THROUGH TO TENANTS USING EXPENSE MGT 1996 VALUE - 3.00 THEREAFTER - CONSTANT COMMISSION CALCULATIONS - ----------------------- STANDARD METHOD #1 - 4.500% OF TOTAL RENT STANDARD METHOD #2 - 2.250% OF TOTAL RENT STANDARD METHOD #3 - 3.375% OF TOTAL RENT STANDARD METHOD #4 - 0.000% OF TOTAL RENT STANDARD METHOD #5 - 0.000% OF TOTAL RENT COMMISSION PAYOUTS - ------------------ STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT ALTERATION CALCULATION - ---------------------- NONE ALTERATION PAYOUTS - ------------------ STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT PAGE 5 STANDARD METHOD #5 - CASHED OUT COMMON AREA MAINTENANCE POOL - ---------------------------- NONE CAPITAL EXPENDITURES - -------------------- NONE PRIMARY CLASSIFICATION CODES - ---------------------------- NONE SECONDARY CLASSIFICATION CODES - ------------------------------ NONE COST CENTERS - ------------ 1 - Common Area Maint. 2 - Real Estate Taxes 3 - Insurance Recovery SALES VOLUME PROFILE - -------------------- PERCENT OF RELATIVE MONTH ANNUAL SALES VOLUME - ----- ------------ ------- JAN 8.33% 1.00 FEB 8.33% 1.00 MAR 8.33% 1.00 APR 8.33% 1.00 MAY 8.33% 1.00 JUN 8.33% 1.00 JUL 8.33% 1.00 AUG 8.33% 1.00 SEP 8.33% 1.00 OCT 8.33% 1.00 NOV 8.33% 1.00 DEC 8.33% 1.00 ------- ----- PAGE 6 TOTALS 100.00% 12.00 GLOBAL RECOVERIES - ----------------- CAM , REFERRED TO AS CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES , REFERRED TO AS TAX ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE , REFERRED TO AS INS ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH TENANT PROLOGUE - --------------- MINIMUM RENTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR SALES VOLUMES AND BREAKPOINTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR RENEWAL RENTS ARE COMPOUNDED ANNUALLY RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET REFERENCE TENANTS - ----------------- NONE PAGE 7 TENANTS - ------- THERE ARE A TOTAL OF 13 LEASEHOLD TENANT(S): # 1 - FASHION BUG BASE LEASE DATES: 5/1978 TO 5/1998 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 9,000 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 0/YEAR PERCENTAGE RENT: INITIAL SALES - 550,000/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% WITH A ZERO BREAKPOINT LESS MINIMUM RENT 4.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 4,984/YEAR AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 6/1998 TO 5/2003 SQUARE FOOTAGE: 9,000 MINIMUM RENT: INITIAL RENT 13,000/YEAR PERCENTAGE RENT: PAGE 8 INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% WITH A ZERO BREAKPOINT LESS MINIMUM RENT 4.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 4,984/YEAR AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 2 DATES: 6/2003 TO 5/2008 SQUARE FOOTAGE: 9,000 MINIMUM RENT: INITIAL RENT - 13,000/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% WITH A ZERO BREAKPOINT LESS MINIMUM RENT 4.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 4,984/YEAR AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH PAGE 9 REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 3 DATES: 6/2008 TO 5/2013 SQUARE FOOTAGE: 9,000 MINIMUM RENT: INITIAL RENT - 13,000/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% WITH A ZERO BREAKPOINT LESS MINIMUM RENT 4.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 4,984/YEAR AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- PAGE 10 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE STOR MULTIPLIED BY 1.000 INCREASING AT GROWTH RATE 3.0% PER YEAR DURING EACH RENEWAL TERM RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM GLOBAL GROUPING GLOBAL RECOVERY TAX GLOBAL GROUPING GLOBAL RECOVERY INS RENEWAL COMMISSIONS: STANDARD METHOD #3 RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 2 - THRIFT DRUG BASE LEASE DATES: 11/1971 TO 10/2001 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 12,000 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 33,000/YEAR PERCENTAGE RENT: INITIAL SALES - 1,300,000/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 825,000/YEAR 4.00% OF OVERAGE TO A CEILING OF 1,124,999/YEAR 3.50% OF OVERAGE TO A CEILING OF 1,374,999/YEAR 3.00% OF OVERAGE TO A CEILING OF 1,624,999/YEAR 2.50% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PAGE 11 PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 11/2001 TO 10/2006 SQUARE FOOTAGE: 12,000 MINIMUM RENT: INITIAL RENT - 33,000/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 825,000/YEAR 4.00% OF OVERAGE TO A CEILING OF 1,124,999/YEAR 3.50% OF OVERAGE TO A CEILING OF 1,374,999/YEAR 3.00% OF OVERAGE TO A CEILING OF 1,624.999/YEAR 2.50% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES PAGE 12 ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 2 DATES: 11/2006 TO 10/2011 SQUARE FOOTAGE: 12,000 MINIMUM RENT: INITIAL RENT - 33,000/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 825,000/YEAR 4.00% OF OVERAGE TO A CEILING OF 1,124.999/YEAR 3.50% OF OVERAGE TO A CEILING OF 1,374,999/YEAR 3.00% OF OVERAGE TO A CEILING OF 1,624.999/YEAR 2.50% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 3 - SPA CONSULTANTS BASE LEASE DATES: 7/1991 TO 7/1996 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 12,000 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 105,000/YEAR PAGE 14 PERCENTAGE RENT: INITIAL SALES - 850,000/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 1,850,000/YEAR RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 8/1996 TO 7/2001 SQUARE FOOTAGE: 12,000 MINIMUM RENT: INITIAL RENT - 111,000/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 1,850,000/YEAR RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PAGE 15 PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO 4 5.00 3 NONE NONE YES NO 5 5.00 3 NONE NONE YES NO 6 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE STOR MULTIPLIED BY 1.000 INCREASING AT GROWTH RATE 3.0% PER YEAR DURING EACH RENEWAL TERM RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM GLOBAL GROUPING GLOBAL RECOVERY TAX GLOBAL GROUPING GLOBAL RECOVERY INS PAGE 16 RENEWAL COMMISSIONS: STANDARD METHOD #3 RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 4 - DINO'S RESTAURANT BASE LEASE DATES: 12/1980 TO 11/2000 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 2,000 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 21,000/YEAR CHANGING TO - 21,500/YEAR ON 12/1996 CHANGING TO - 22,000/YEAR ON 12/1997 CHANGING TO - 22,500/YEAR ON 12/1998 CHANGING TO - 23.000/YEAR ON 12/1999 PERCENTAGE RENT: INITIAL SALES - 0/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE PAGE 17 ALTERATIONS: NONE OPTION 1 DATES: 12/2000 TO 11/2005 SQUARE FOOTAGE: 2,000 MINIMUM RENT: INITIAL RENT - 23,500/YEAR CHANGING TO - 24,000/YEAR ON 12/2001 CHANGING TO - 24,600/YEAR ON 12/2002 CHANGING TO - 25,200/YEAR ON 12/2003 CHANGING TO - 25,800/YEAR ON 12/2004 PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- PAGE 18 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO 4 5.00 3 NONE NONE YES NO 5 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE STOR MULTIPLIED BY 1.000 INCREASING AT GROWTH RATE 3.0% PER YEAR DURING EACH RENEWAL TERM RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM GLOBAL GROUPING GLOBAL RECOVERY TAX GLOBAL GROUPING GLOBAL RECOVERY INS RENEWAL COMMISSIONS: STANDARD METHOD #3 RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 5 - WINE & SPIRIT SHOP BASE LEASE DATES: 10/1981 TO 9/1998 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 2,406 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 13,296/YEAR PERCENTAGE RENT: INITIAL SALES - 0/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP PAGE 19 AND A BASE AMOUNT OF 139,816 COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 10/1998 TO 9/2001 SQUARE FOOTAGE: 2,406 MINIMUM RENT: INITIAL RENT - 15,000/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 139,816 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO 4 5.00 3 NONE NONE YES NO 5 5.00 3 NONE NONE YES NO 6 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE STOR MULTIPLIED BY 1.000 INCREASING AT GROWTH RATE 3.0% PER YEAR DURING EACH RENEWAL TERM RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: PAGE 20 GLOBAL GROUPING GLOBAL RECOVERY CAM GLOBAL GROUPING GLOBAL RECOVERY TAX GLOBAL GROUPING GLOBAL RECOVERY INS RENEWAL COMMISSIONS: STANDARD METHOD #3 RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 6 - HOLIDAY HAIR BASE LEASE DATES: 8/1988 TO 7/1999 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,500 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 10,875/YEAR CHANGING TO - 11,250/YEAR ON 8/1996 PERCENTAGE RENT: INITIAL SALES - 200,000/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 6.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PAGE 21 PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO 4 5.00 3 NONE NONE YES NO 5 5.00 3 NONE NONE YES NO 6 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE STOR MULTIPLIED BY 1.000 INCREASING AT GROWTH RATE 3.0% PER YEAR DURING EACH RENEWAL TERM RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM GLOBAL GROUPING GLOBAL RECOVERY TAX GLOBAL GROUPING GLOBAL RECOVERY INS RENEWAL COMMISSIONS: STANDARD METHOD #3 RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 7 - SUITE 140 , MATTRESS MAN BASE LEASE DATES: 7/1993 TO 7/1998 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 4,000 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT PAGE 22 INITIAL RENT - 36,000/YEAR CHANGING TO - 40,000/YEAR ON 7/1996 PERCENTAGE RENT: INITIAL SALES - 630,000/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 4.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 8/1998 TO 7/2003 SQUARE FOOTAGE: 4,000 MINIMUM RENT: INITIAL RENT - 44,000/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 4.00% OF OVERAGE TO AN UNLIMITED CEILING PAGE 23 RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO 4 5.00 3 NONE NONE YES NO 5 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE STOR MULTIPLIED BY 1.000 INCREASING AT GROWTH RATE 3.0% PER YEAR DURING EACH RENEWAL TERM RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE (S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM PAGE 24 GLOBAL GROUPING GLOBAL RECOVERY TAX GLOBAL GROUPING GLOBAL RECOVERY INS RENEWAL COMMISSIONS: STANDARD METHOD #3 RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 8 - SUITE ANCHOR ,K-MART BASE LEASE DATES: 10/1974 TO 10/1999 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 104,956 NOT SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 204,664/YEAR PERCENTAGE RENT: INITIAL SALES - 16,100,000/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 8,625,000/YEAR 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 11/1999 TO 10/2049 SQUARE FOOTAGE: 104,956 MINIMUM RENT: INITIAL RENT - 206,644/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% PAGE 25 INITIAL BREAKPOINT - 8,625,000/YEAR 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 9 - BIG LOTS BASE LEASE DATES: 3/1993 TO 1/1998 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 30,537 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 91,611/YEAR PERCENTAGE RENT: INITIAL SALES - 2,650,000/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 2.50% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 13,742/YEAR AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA PAGE 26 CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 2/1998 TO 1/2003 SQUARE FOOTAGE: 30,537 MINIMUM RENT: INITIAL RENT - 106,880/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 2.50% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 13,742/YEAR AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE PAGE 27 WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 2 DATES: 2/2003 TO 1/2008 SQUARE FOOTAGE: 30,537 MINIMUM RENT: INITIAL RENT - 122,148/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 2.50% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 13,742/YEAR AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: PAGE 28 LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO 4 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE STOR MULTIPLIED BY 1.000 INCREASING AT GROWTH RATE 3.0% PER YEAR DURING EACH RENEWAL TERM RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM GLOBAL GROUPING GLOBAL RECOVERY TAX GLOBAL GROUPING GLOBAL RECOVERY INS RENEWAL COMMISSIONS: STANDARD METHOD #3 RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 10 - SUITE PAD SITE, LONG JOHN SILVERS BASE LEASE DATES: 9/1974 TO 10/2001 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 2,500 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 12,350/YEAR CHANGING TO - 13,300/YEAR ON 10/1996 PERCENTAGE RENT: INITIAL SALES - 800,000/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 300,000/YEAR 4.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: NONE COMMISSIONS: NONE PAGE 29 ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO 4 5.00 3 NONE NONE YES NO 5 5.00 3 NONE NONE YES NO 6 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE STOR MULTIPLIED BY 1.000 INCREASING AT GROWTH RATE 3.0% PER YEAR DURING EACH RENEWAL TERM RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM GLOBAL GROUPING GLOBAL RECOVERY TAX GLOBAL GROUPING GLOBAL RECOVERY INS RENEWAL COMMISSIONS: STANDARD METHOD #3 RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 11 - SUITE PAD SITE, PONDEROSA STEAK HS BASE LEASE DATES: 12/1979 TO 12/1996 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 23,658 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 12,000/YEAR PERCENTAGE RENT: INITIAL SALES - 625,000/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 750,000/YEAR 2.50% OF OVERAGE TO AN UNLIMITED CEILING PAGE 30 REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH PAGE 13 INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO 4 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE ANCR MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM GLOBAL GROUPING GLOBAL RECOVERY TAX GLOBAL GROUPING GLOBAL RECOVERY INS RENEWAL COMMISSIONS: STANDARD METHOD #3 RENEWAL PAYOUT: CASHED OUT RECAPTURES: NONE RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 98,000 COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 1/1997 TO 12/2004 SQUARE FOOTAGE: 23,658 MINIMUM RENT: INITIAL RENT - 12,000/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 750,000/YEAR 2.50% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 98,000 COMMISSIONS: NONE ALTERATIONS: NONE OPTION 2 DATES: 1/2005 TO 12/2009 SQUARE FOOTAGE: 23,658 MINIMUM RENT: INITIAL RENT - 12,000/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM PAGE 31 THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 750,000/YEAR 2.50% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 98,000 COMMISSIONS: NONE ALTERATIONS: NONE OPTION 3 DATES: 1/2010 TO 12/2014 SQUARE FOOTAGE: 23,658 MINIMUM RENT: INITIAL RENT - 12,000/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 750,000/YEAR 2.50% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 98,000 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 12 - SUITE 40 , COLORTYME PAGE 32 BASE LEASE DATES: 5/1981 TO 5/1999 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 3,500 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 27,000/YEAR CHANGING TO - 28,350/YEAR ON 6/1997 PERCENTAGE RENT: INITIAL SALES - 0/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO 4 5.00 3 NONE NONE YES NO PAGE 33 5 5.00 3 NONE NONE YES NO 6 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE STOR MULTIPLIED BY 1.000 INCREASING AT GROWTH RATE 3.0% PER YEAR DURING EACH RENEWAL TERM RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM GLOBAL GROUPING GLOBAL RECOVERY TAX GLOBAL GROUPING GLOBAL RECOVERY INS RENEWAL COMMISSIONS: STANDARD METHOD #3 RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 13 - SUITE 30 ,$0.99 STORE BASE LEASE DATES: 9/1995 TO 8/1998 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 4,000 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 28,000/YEAR PERCENTAGE RENT: INITIAL SALES - 300,000/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 933,000/YEAR 3.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH PAGE 34 REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 9/1998 TO 8/2001 SQUARE FOOTAGE: 4,000 MINIMUM RENT: INITIAL RENT - 30,000/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 933,000/YEAR 3.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE PAGE 35 ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO 4 5.00 3 NONE NONE YES NO 5 5.00 3 NONE NONE YES NO 6 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE STOR MULTIPLIED BY 1.000 INCREASING AT GROWTH RATE 3.0% PER YEAR DURING EACH RENEWAL TERM RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE ================================================================================ ADDENDUM H - ENGAGEMENT LETTER - -------------------------------------------------------------------------------- ADDENDUM H ENGAGEMENT LETTER - -------------------------------------------------------------------------------- [LETTERHEAD OF CB COMMERCIAL LETTERHEAD] May 8, 1996 Mr. Josh Kane Chief Financial Officer MARK CENTERS TRUST 660 Third Avenue Kingston, PA 18704 Re: 17 Shopping Centers Nationwide Dear Mr. Kane: At your request, we are pleased to submit the following proposal to appraise the above referenced properties. The purpose of this assignment is to estimate the market value of the leased fee interest. We understand the appraisal reports are to be used for mortgage underwriting purposes. We also understand that the reports will be used by Mark Centers Trust and Morgan Stanley. The properties are briefly described on attachment "A". Our complete valuation will be presented in a self contained (narrative) format and will contain a complete description of the property along with pertinent exhibits and photographs together with supporting factual data and analysis necessary to convey our opinion of value. We will value the property based upon the cost, income and market approaches to value, where applicable, correlating our findings into a final value conclusion. The report will be prepared in conformity with and will be subject to the requirements of the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. Each report will also conform to the Uniform Standards of Professional Appraisal Practice ("USPAP") and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") and the Morgan Stanley Capital Appraisal Standards described in Attachment "B". We assume that there are no major or significant items of deferred maintenance beyond normal wear and tear for properties of their age as of the date of the appraisal which would require the expertise of a professional contractor to estimate the cost of such repairs. If such repairs need to be considered in this appraisal, such estimates are to be provided by a qualified firm hired by you and at no cost to us. The total fee for the assignment is $68,000 ($4,000 per property) including all travel and related expenses which is due and payable upon delivery of the reports. If we are asked to cancel the assignment within two weeks of our engagement an upset fee equal to 50% will be due and payable. If cancellation occurs between two and three weeks, the upset fee will be equal to 75% and any time after three weeks the full fee will be due and payable. We will furnish you with three copies of our final report within four to five weeks of our authorization. Authorization occurs upon our receipt of an executed copy of this proposal and our delivery date is contingent upon the timely receipt of all necessary property information, financial statements and detailed lease information. If all requested data and information is not available as of the authorized date, we reserve the right to extend the delivery date by the amount of time it takes to receive the requested information. May 8, 1996 Mr. Kane Page 2 In order to complete this assignment in a timely manner, we will require the following specific information, if available: o Copy of Ground Lease, if Leasehold o Legal descriptions. o Current rent roll. o Copy of Leases or abstracts o Expense reimbursements on a tenant by tenant basis o Building area calculations and surveys. o Operating statements for the past three full years. o Current year expenses to date. o A copy of the current budget. o Copies of any toxic engineering reports dealing with underground tanks, PCB's, asbestos or chemical spills, if available. o A copy of the next fiscal year's budget, if available. o A list of major repairs which have recently been made, or are scheduled to be made in the next 18 months. o Name and phone number(s) of on-site superintendent(s), or local management firm or trustee for physical inspection. o Notice of any pending changes to the rent roll or pertinent information regarding the current status of the tenants. If we are requested to give court testimony an additional fee will be charged on an hourly basis at $300 per hour for designated MAI-appraisers and $175 for non-designated appraisers. Said hourly billings pertain to court preparation, waiting and travel time, document review and preparation (excludes narrative appraisal report) and all meetings related to court testimony. The client may provide only complete, final copies of the appraisal report to third parties who shall rely on such reports in connection with loan underwriting or securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the client for routine and customary questions. Please note that our consent to allow an appraisal report prepared by CB Commercial, or portions of such report, to become part of or be referenced in any public offering, the granting of such consent will be at our sole discretion and, if given, will be on condition that we will be provided with an Indemnification Agreement and/or Non-Reliance letter, in a form and content satisfactory to us, by a party satisfactory to us. We do consent to your submission of the reports to rating agencies, loan participants or your auditors without the need to provide us with an Indemnification Agreement and/or Non-Reliance letter. In addition to the fee for this assignment, you agree to compensate us at a rate to be mutually agreed to, for any time expended by us should we be required (by subpoena or otherwise) or requested by you, your representatives or other entity to become involved in any litigation or May 8, 1996 Mr. Kane Page 3 legal proceeding in any way involving this engagement to which we are not a party, the appraisal work we produce or the property which is the subject of this assignment. You also agree to pay, on demand, all reasonable expenses which we incur in connection with any litigation or proceedings including the fees of our attorneys. You acknowledge that we are being retained hereunder as an independent contractor to perform the services described herein and nothing in this agreement shall be deemed to create any other relationship between us. This assignment will be deemed concluded and the services hereunder completed upon delivery to you of the appraisal report discussed herein. If these terms are acceptable, please authorize us to proceed by having an officer of the corporation, managing general partner, principal, owner, or a contractually responsible party sign the enclosed copy of this proposal with "Terms and Conditions" and return it to us for our permanent file. Upon receipt of your authorization, we will schedule the necessary personnel to complete the project in a timely manner. We appreciate this opportunity to be of service to you on this assignment. If you have additional questions, please do not hesitate to give me a call. Sincerely, CB COMMERCIAL REAL ESTATE GROUP, INC. Appraisal /s/ Michael R. Pecorino Michael R. Pecorino, MAI MRP:jf cc: Douglas W. Haney Enclosure AGREED & ACCEPTED - ------------------------------------ ------------------------------------ Signature Title - ------------------------------------ ------------------------------------ Name (type or print) Date Office #: Fax #: --------------------------- ------------------------------ ================================================================================ ADDENDUM H - ENGAGEMENT LETTER - -------------------------------------------------------------------------------- ADDENDUM I QUALIFICATIONS - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM I - QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF DIMITRI M. TEDDONE, MAI Assistant Vice President Senior Real Estate Analyst CB Commercial Real Estate Group, Inc. Appraisal 560 Lexington Avenue, 20th Floor New York, New York 10022 (212) 207-6088 EDUCATIONAL Bachelor of Science, Marketing Long Island University, C.W. Post Campus Greenvale, New York Appraisal Institute Successfully completed all the necessary courses to qualify for the MAI designation. LICENSES/CERTIFICATIONS Certified Real Estate General Appraiser: State of New York State #46-7944 PROFESSIONAL Appraisal Institute Designated Member of the Appraisal Institute (MAI), Certificate No. 10348 EXPERIENCE Engaged in the appraisal and consultation of commercial real estate throughout the Northeast United States since July of 1986, specializing in the New York Metropolitan area. Assignments include full and partial interest appraisals of investment grade office buildings, air rights, commercial lofts, multi-family residential properties, cooperatives, condominium, townhouses, shopping centers, industrial facilities, special-use properties, portfolio valuations and multi-property assignments.
1986 - 1991 Joseph J. Blake & Associates New York, New York 1991 - Present CB Commercial Real Estate Group, Inc., Appraisal New York, New York
- -------------------------------------------------------------------------------- ================================================================================ ADDENDUM I - QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF MICHAEL R. PECORINO, MAI Senior Vice President, Regional Manager CB Commercial Real Estate Group, Inc. 560 Lexington Avenue, 20th Floor New York, New York 10022 (212)207-6102 EDUCATIONAL Real Estate Appraisal and Analysis, New York University, the Real Estate Institute Bachelor of Arts, Geography, Planning, Urban Studies, State University College of New York at Oneonta Successfully completed all the necessary courses to qualify for the MAI designation. LICENSES/CERTIFICATIONS Certified General Real Estate Appraiser: State of New York (46000002055) Certified General Real Estate Appraiser: State of New Jersey (RG-01667) Certified General Real Estate Appraiser: State of Pennsylvania (GA-001096-R) Certified General Real Estate Appraiser: State of Connecticut (0000489) Certified General Real Estate Appraiser: State of Maryland (10569) Certified General Real Estate Appraiser: State of New Jersey (3793) Certified General Real Estate Appraiser: State of Delaware (X10000223) Certified General Real Estate Appraiser: State of Maine (CG00001192) Certified General Real Estate Appraiser: State of Vermont (080-0000168) Certified General Real Estate Appraiser: State of District of Columbia (GA00010315) Licensed Real Estate Broker: State of New York PROFESSIONAL Appraisal Institute Designated Member of the Appraisal Institute (MAI), Certificate No. 7944 Member of the Real Estate Board of New York EXPERIENCE Fifteen years of Real Estate Appraisal and Consulting experience throughout the United States specializing in the New York metropolitan area.
1993 - Present CB Commercial Real Estate Group, Inc., Appraisal New York, New York 1983 - 1993 Cushman & Wakefield, Inc. New York, New York 1982 - 1983 Joseph J. Blake & Associates, Inc. New York, New York 1981 - 1982 City of New York - Office of Manhattan Planning New York, New York 1980 - 1981 City of Jersey City - Office of the Mayor Jersey City, New Jersey
Assignments include full and partial interest appraisals of office buildings, air rights, commercial lofts, garden apartments, cooperatives, condominiums, townhouses, shopping centers, industrial facilities, residential and office market studies, portfolio valuations and multi-property assignments. - -------------------------------------------------------------------------------- This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE MOUNTAINVILLE SHOPPING CENTER Located at South Fourth Street Allentown, Pennsylvania CB File No. 96-093-J DATE OF VALUE June 1, 1996 PREPARED FOR MORGAN STANLEY MORTGAGE CAPITAL, INC. 1585 Broadway New York, NY 10036 PREPARED BY CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES 560 Lexington Avenue - 16th Floor New York, New York 10022 [LETTERHEAD FOR CB COMMERCIAL REAL ESTATE GROUP, INC.] June 17, 1996 MORGAN STANLEY MORTGAGE CAPITAL, INC. 1585 Broadway New York, NY 10036 RE: Mountainville Shopping Center South Fourth Street Allentown, Pennsylvania CB File No. #95-093-J Dear Ladies and Gentlemen: At your request, CB Commercial Real Estate Group, Inc. has prepared a Complete Appraisal presented in a self-contained appraisal report of the market value of the leased fee interest. The subject property is a one-story community strip center known as Mountainville Shopping Center containing a gross leasable area of 116,801 square feet. The subject is anchored by Acme Markets, consisting of 32,200 square feet, Kling's Handyman, with 20,000 square feet, and Thrift Drug, consisting of 15,808 square feet. These three anchor stores occupy approximately 59% of the rentable square feet of the center. The improvements were constructed in 1959 and 1978, and were in average condition as of the date of our analysis. Data, information, and calculations leading to the value conclusion are incorporated in the report following this letter. The entire report, including all assumptions and limiting conditions, is an integral part of and inseparable from this letter. Based on research and analysis contained in this report, it is estimated that the market value of the leased fee interest in Mountainville Shopping Center, subject to the Certification, Assumptions, and Limiting Conditions in this appraisal report, as of June 1, 1996, is --- FIVE MILLION DOLLARS --- ($5,000,000) The following appraisal sets forth the most pertinent data gathered, methodology, and reasoning leading to our opinion of value. The analyses, opinions, and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP) and the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. Furthermore, this report has been prepared in conformance with our interpretation of the appropriate regulations and guidelines set forth by Morgan Stanely. MORGAN STANLEY June 17, 1996 Page 2 It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CB Commercial Real Estate Group, Inc. can be of further service, please do not hesitate to contact us. Respectfully Submitted, CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES by: /s/ Maggie Argyros /s/ Michael R. Pecorino - ------------------------------- --------------------------------------- Maggie Argyros Michael R. Pecorino, MAI Real Estate Analyst Senior Vice President & Northeast Regional Manager PA State Certification No. GA -001096-R ================================================================================ CERTIFICATION OF THE APPRAISERS - -------------------------------------------------------------------------------- CERTIFICATION OF THE APPRAISERS We certify that to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. 4. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event, such as the approval of a loan. 5. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation and the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. In addition, this report conforms to the requirements of the Financial Institution Reform, Recovery, and Enforcement Act (FIRREA). 6. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 7. Michael R. Pecorino has completed the requirements of the continuing education program of the Appraisal Institute. 8. Maggie Argyros has made a personal inspection of the property that is a subject of this report. Michael R. Pecorino did not make a personal inspection of the appraised property. 9. No one provided professional assistance to the persons signing this report. 10. Maggie Argyros and Michael R. Pecorino have extensive experience in the appraisal/review of similar property types. 11. Michael Pecorino is certified in the state where the subject is located. /s/ Maggie Argyros - ------------------------------- ------------------------------- Maggie Argyros Michael R. Pecorino, MAI Real Estate Analyst Senior Vice President Northeast Regional Manager - -------------------------------------------------------------------------------- i ================================================================================ SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW ACME SUPERMARKET - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF STRIP CENTER - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ii ================================================================================ SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF STRIP CENTER - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF STRIP CENTER - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- iii ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- SUMMARY OF SALIENT FACTS Property Name: Mountainville Shopping Center Location: South Fourth Street Allentown, Pennsylvania Assessor's Parcel Number: H10SW1D-1-1 & 1D Property Description: The subject property consists of a one-story community strip shopping center containing a total gross leasable area of 116,801 square feet. The center is anchored by Acme Markets, Kling's Handyman, and Thrift Drug. Highest and Best Use As Vacant: A community shopping center As Improved: As a presently utilized - a community shopping center Property Rights Appraised: Leased fee Interest Date of Value: June 1, 1996 Land Area 11.36 acres, or 494,842 square feet Improvements Building Area: Gross Leaseable Area: 116,801 square feet Year Built: 1959 & 1978 (Acme store) Overall Condition: Average to good. Estimated Marketing Time: Based on the size of the subject property and the number of different uses that exist, we have estimated the marketing time to be less than 12 months. Financial Indicators Current Occupancy: 100% Market Rental Rate: $10.00 1,300 - 3,500 sq. ft. $ 7.00 5,000 - 7,500 sq. ft. $ 5.00 15,000 - 20,000 sq. ft. Income Growth Rate: 3% Estimated Stabilized Expenses: $1.95SF - -------------------------------------------------------------------------------- iv Expense Growth Rate: 3% Tax Growth Rate: 3% Going-In Overall Capitulation Rate 10.5% Selected: Going-In Overall Capitalization Rate 10.7% Implied: Terminal Overall Capitalization Rate: 11.0% Discount Rate: 12.5% Valuation Income Capitalization Approach: $5,000,000 Sales Comparison Approach: $5,000,000 Final Value $5,000,000 Unit value (per square foot): $42.81/RSF - -------------------------------------------------------------------------------- v ================================================================================ TABLE OF CONTENTS - -------------------------------------------------------------------------------- TABLE OF CONTENTS CERTIFICATION OF THE APPRAISERS i SUBJECT PHOTOGRAPHS ii SUMMARY OF SALIENT FACTS iv TABLE OF CONTENTS vi INTRODUCTION 1 AREA ANALYSIS 7 MARKET ANALYSIS 18 SITE ANALYSIS 23 IMPROVEMENT ANALYSIS 25 ZONING 28 TAX AND ASSESSMENT DATA 29 HIGHEST AND BEST USE 30 APPRAISAL METHODOLOGY 33 SALES COMPARISON APPROACH 35 INCOME CAPITALIZATION APPROACH 41 RECONCILIATION OF VALUE 66 ASSUMPTIONS AND LIMITING CONDITIONS 68 ADDENDA 72 - -------------------------------------------------------------------------------- vi ================================================================================ TABLE OF CONTENTS - -------------------------------------------------------------------------------- A. Glossary of Terms B. Legal Description C. Improved Comparable Sales D. Rental Comparables E. Strategic Mapping, Inc. Reports F. Rent Roll G. PRO-JECT Assumptions H. Fee Letter I. Qualifications - -------------------------------------------------------------------------------- vii INTRODUCTION ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- INTRODUCTION PROPERTY IDENTIFICATION The subject is known as Mountainville Shopping Center and is located at South Fourth Street in Allentown, Lehigh County, Pennsylvania. The county's assessor's tax identification number is Map H10SW1D, Block 1, Lots 1 & 1D. A full metes and bounds legal description is included in the Addenda. OWNERSHIP AND PROPERTY HISTORY The subject is currently owned by Mark Centers Limited Partnership. The subject last transferred in May 1993 for $1,622,997, or $13.90 per square foot. The subject property was purchased from Lehigh County Industrial Development Authority and Marvin and Isabel Slomowitz. DATES OF INSPECTION AND VALUATION The site was inspected by Maggie Argyros on June 5, 1996. Michael R. Pecorino, MAI did not inspect the subject or the comparables, but reviewed this report and concurs with the conclusions. The date of valuation is June 1, 1996. PURPOSE OF THE APPRAISAL The purpose of this appraisal is to estimate the market value of the leased fee interest in the subject property as of the date of the appraisal. Market value is defined as follows: Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised, and acting in what they consider their own best interests; 3. A reasonable time is allowed for exposure in the open market; 4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and - -------------------------------------------------------------------------------- 1 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- 5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. (1) INTENDED USE OF REPORT This appraisal is for mortgage underwriting purposes. PROPERTY RIGHTS APPRAISED The value estimated represents the leased fee interest. DEFINITION OF THE LEASED FEE INTEREST The term "leased fee interest" as used in this report, is defined as: An ownership interest held by a landlord with the right of use and occupancy conveyed to other; usually consists of the right to receive rent and the right to repossession at the termination of the lease. (The Dictionary of Real Estate Appraisal, The Appraisal Institute, Chicago, Illinois, 1984, p. 179). APPRAISAL DEVELOPMENT AND REPORTING PROCESS The following steps were completed by CB Commercial for this assignment: 1. Analyzed regional, neighborhood, site, and improvement data. 2. Inspected the subject and the neighborhood. 3. Reviewed data regarding taxes, zoning, utilities, easements, and city services. 4. Considered comparable improved sales and comparable improved building rental information. Confirmed data with principals, managers, or real estate agents representing principals, unless otherwise noted. 5. Analyzed the data to arrive at conclusions via each approach to value used in this report. 6. Reconciled the results of each approach to value employed into a probable range of market data and finally an estimate of value for the subject, as defined herein. 7. Estimated a reasonable exposure time associated with the value estimate. - -------- (1) The definition of market value is taken from : The Office of the Comptroller of the Currency under 12 CFR, Part 34, Subpart C-Appraisals, 34.42(f), August 24, 1990. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. - -------------------------------------------------------------------------------- 2 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- The subject site and improvement descriptions are based on a personal inspection of the property, discussions with management, and a review of the provided information. The inspection is not a substitute for thorough engineering studies. To develop the opinion of value, CB Commercial performed a complete appraisal process, as defined by the Uniform Standards of Professional Appraisal Practice. This means that no departures from Standard 1 were invoked. This is a complete appraisal, in the form of a Self-Contained Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Standards of Professional Appraisal Practice. In a complete appraisal, CB Commercial uses all known applicable approaches to value. The value conclusion reflects all known information about the subject property, market conditions, and available data. The Self-Contained Report incorporates to the fullest extent possible, practical explanation of the data, reasoning and analysis that were used to develop the opinion of value. It also includes thorough descriptions of the subject property and the market for the subject property type. SPECIAL APPRAISAL INSTRUCTIONS The client did not give us special appraisal instructions. MARKETING PERIOD The marketing period section is divided into reasonable exposure time and reasonable marketing time. Exposure time differs from marketing time. Marketing time is the period required to sell a real property interest at market value during the period immediately after the effective date of the appraisal. Exposure time is always presumed to precede the effective date of the appraisal. Exposure time is not intended to be a prediction of a date of sale or a one-line statement. Instead, it is an integral part of the appraisal analysis and is based on one or more of the following: o statistical information about days on the market o interviews of market participants. The reasonable exposure period is a function of price, time, and use. It is not an isolated estimate of time alone. Exposure time is different for various types of real estate and under various market conditions. - -------------------------------------------------------------------------------- 3 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- Reasonable Exposure Time Exposure time is always presumed to precede the effective date of the appraisal. It is the estimated length of time the property would have been offered prior to a hypothetical market value sale on the effective date of appraisal. It is a retrospective estimate based on an analysis of recent past events, assuming a competitive and open market. It assumes not only adequate, sufficient, and reasonable time but adequate, sufficient, and reasonable marketing effort. Exposure time and appraisal conclusion of value are therefore interrelated. Exposure time is often expressed as a range and is based on direct and indirect market data gathered during the market analysis, sales verifications, interviews with market participants, and other appropriate sources. The amount of time which a property will require to be marketed varies greatly depending on a number of factors including market conditions, listing price, terms of sale offered, and competitive listing inventory. In addition to considering each of the factors noted above, CB Commercial considered: o the most recent CB Commercial National Investor Survey, and the o opinions of local knowledgeable real estate brokers and investors. Market Conditions Throughout the country, market conditions for most property types, especially those considered Class A and B, have improved over the last year. The market conditions that directly impact the subject are described in this report and illustrate how exposure time is correlated with listing inventory, competitive pricing structures, and marketing efforts. CB Commercial National Investor Survey In the most recent issue of the CB Commercial National Investor Survey, published in the first quarter 1996, CB Commercial surveyed a wide range of investors for property type preferences and specific marketing times. Investors indicated that exposure requirements for investment property generally decreased by 0.4 months from first quarter 1995. The average marketing time for all responses has decreased 3.5 months since second quarter 1993. Currently, the marketing period is 6.4 months for a Class A Power retail center. For all types of retail properties, the marketing period ranges from 0 to 18 months with an average of 11 months. Real Estate Broker Surveys As another information source, appraisers solicited the opinions of real estate brokers knowledgeable in the subject property type. The majority estimated that the property could likely be sold within a 12 month time span. All assumed that property would be appropriately priced and marketed. - -------------------------------------------------------------------------------- 4 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- Exposure Time Conclusion In conclusion, based on the foregoing analysis, an exposure time of less than 12 months is reasonable, defensible, and appropriate. Like the brokers surveyed, CB Commercial assumes that the subject property would have been competitively priced and aggressively promoted on a national basis. Reasonable Marketing Time Reasonable marketing time is the period a prospective investor would forecast to sell the subject property immediately after the date of value, at the value estimated. Anticipated marketing time is essentially a measure of the perceived level of risk associated with the marketability, or liquidity, of the subject as an investment grade property. The sources for this information include those used in estimating the reasonable exposure time, but also an analysis of the anticipated changes in market conditions following the date of appraisal. In other words, the reasonable marketing time is the number of months it will require to sell the subject property from the date of value, into the future. The reader must understand, however, that the future price for the subject property (at the end of the marketing time) may or may not equal the appraisal estimate. The future price depends on unpredictable changes in the physical real estate, demographic and economic trends, real estate markets in general, supply/demand characteristics for the property type, and many other factors. Based on the premise that present market conditions are the best indicators of future performance, a prudent investor will forecast that, under the conditions described above, the subject property will require a marketing time of less than 12 months. - -------------------------------------------------------------------------------- 5 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- REGIONAL AREA MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 6 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- AREA ANALYSIS The dynamic nature of economic relationships within a market area have a direct bearing on real estate values and the long-term quality of a real estate investment. In the market, the value of a property is not based on the price paid for it in the past or the cost of its creation, but on what buyers and sellers perceive it will provide in the future. Consequently, the attitude of the market toward a property within a specific neighborhood or market area reflects the probable future trend of that area. Since real estate is an immobile asset, economic trends affecting its locational quality in relation to other competing properties within its market area will also have a direct effect on its value as an investment. To accurately reflect such influences, it is necessary to examine the past and probable future trends which may affect the economic structure of the market and evaluate their impact on the market potential of the subject. This section of the report is designed to isolate and examine the discernible economic trends in the region and neighborhood which influence and create value for the subject property. A regional map indicating the location of the subject is presented on the previous page. REGIONAL INFLUENCES Location The subject is located within Lehigh Valley which is part of the Allentown-Bethlehem-Easton MSA. Lehigh Valley is comprised of two counties: Lehigh and Northampton. These two counties form the core of the MSA. Other counties in the MSA include Carbon County, Pennsylvania, and Warren County, New Jersey. The Lehigh Valley region is bound to the north by the Blue Mountain, to the east by the Delaware River, to the west by Schuylkill, and to the south by Berks, Montgomery, and Bucks Counties. The Lehigh Valley region (Lehigh and Northampton Counties) is located in the central-eastern portion of the Pennsylvania, within 300 miles of the major metropolitan areas of eastern Unites States including New York, Philadelphia, Baltimore, Washington D.C., and Boston. It is particularly accessible to New York City and Philadelphia. The Lehigh Valley region contains three cities (Allentown, Bethlehem, and Easton), 27 boroughs, and 32 townships. Population The Allentown-Bethlehem-Easton MSA, like Lehigh and Northampton Counties, has experienced slow, relatively steady growth over the past 20 years. During the early 1980s, when other parts of Pennsylvania and the northeast experienced net declines in population - -------------------------------------------------------------------------------- 7 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- growth, the region experienced moderate growth. This population growth continued in the later part of the 1980s and into the 1990s. According to Strategic Mapping, Inc., annual population growth over the past decade in the MSA was 0.80%, which is very similar to the Lehigh Valley Region. Shown in the following table is a breakdown of the population and population growth in the two counties in the Lehigh Valley Region and the MSA total. Lehigh County is the largest county in the Lehigh Valley Region and the MSA with a total population estimate of 299,269 in 1995. The city of Allentown is situated in Lehigh County. Northampton County closely follows behind with a population of 256,899. Northampton County experienced greater population growth compared to Lehigh County over the past decade. Continued population growth is forecasted for the Lehigh Valley Region and the Allentown-Bethlehem-Easton MSA. In Lehigh County, where the subject property is situated, population growth is expected to be slightly lower than the previous decade with a projected annual growth rate of 0.45% between 1990 and 2000. Northampton County and the MSA are both expected to witness slightly greater population growth over the next decade. On the basis of these population trends and forecasts, the Lehigh Valley Region appears to be in a period of relatively moderate growth that is expected to last for the next few years. The following table illustrates the population trends in the two counties, in the Lehigh Valley Region, and the MSA total.
================================================================================================ POPULATION TRENDS LEHIGH VALLEY AND ALLENTOWN-BETHLEHEM-EASTON MSA ================================================================================================ 1980 1990 Annual % 1995 2000 Change Estimate Projection ================================================================================================ Lehigh County 272,349 291,130 0.69% 299,269 304,142 Northampton County 225,418 247,105 0.96% 256,899 264,190 Lehigh Valley Region 497,767 538,235 0.81% 556,168 568,332 Allentown-Bethlehem-Easton MSA 551,002 595,081 0.80% 615,654 630,260 ================================================================================================ Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================================
- -------------------------------------------------------------------------------- 8 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ================================================================== SELECTED AREA DEMOGRAPHICS LEHIGH VALLEY AND ALLENTOWN-BETHLEHEM-EASTON MSA ================================================================== Lehigh Northampton A-B-E County County MSA ================================================================== Population 1995 Estimate 299,269 256,899 615,654 1990 Census 291,130 247,105 595,081 1990-1995 % Change 2.8% 4.0% 3.5% Households 1995 Estimate 116,004 94,376 233,458 1990 Census 112,887 90,955 225,831 1990-1995 % Change 2.8% 3.8% 3.4% 1995 Median Household $37,738 $38,659 $37,136 1995 Average Household $46,878 $47,061 $45,807 1990 Average Home Value $113,429 $117,969 $111,218 1990 % College Graduates 12.6% 10.7% 11.1% ================================================================== Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ================================================================== Households Similar to most areas of Pennsylvania, the Lehigh Valley Region, the MSA, and Lehigh County have witnessed an increase in the number of total households; however, a decrease in the total household size. The number of households in the MSA total approximately 233,458 in 1995 indicating an average household size of 2.56. Lehigh County had the smaller household size of 2.51 in 1995 which can be primarily attributed to the fact that it includes Allentown which is a city. Typically, cities tend to have a smaller household size than a suburban area. As shown above, the number of households in the Lehigh Valley Region has increased annually by approximately 1.24% since 1980, while population growth was only 0.81% for the same time period. This can be attributed to the declining average household size. - -------------------------------------------------------------------------------- 9 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- The projected growth in households over the next five years in the Lehigh Valley region and the MSA is expected to be even greater than the population growth. This indicates a continuing declining number of persons per household. Lehigh County, where the subject property is located, is expected to continue to witness household growth over the next five years, albeit a slower a rate. Income The Lehigh Valley Region and the Allentown-Bethlehem-Easton MSA are considered to be relatively middle class areas. The median household income in the Lehigh Valley Region and MSA of $37,136 and $38,199 is slightly greater than the state average. Northampton County has the highest median household income of in the region. Shown below is a breakdown of the median household income for the Lehigh Valley Region, as well as the MSA. ================================================================================ MEDIAN HOUSEHOLD INCOME LEHIGH VALLEY REGION & ALLENTOWN-BETHLEHEM-EASTON MSA ================================================================================ 1995 2000 ANNUAL ESTIMATE PROJECTION % CHANGE ================================================================================ Lehigh County $37,738 $43,759 3.19% Northampton County $38,659 $45,281 3.43% Lehigh Valley $38,190 $44,520 3.32% Region A-E-B MSA $37,136 $43,221 3.28% ================================================================================ Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The Lehigh Valley Region is expected to outperform the state of Pennsylvania with regards to median household income growth. Lehigh County, where the subject property is located, is expected to witness similar income growth to the region of over 3.19 percent over the next five years. Based on the above, the Lehigh Valley Region and the MSA are both expected to experience modest income growth over the next five years. Employment The Lehigh Valley Region has a predominant industrial and manufacturing base in addition to a service producing economy. Consistent with national trends, one of the most significant changes in the area's economy over the last decade has been the decline in manufacturing employment. In 1980, the manufacturing sector employed approximately 34.5% of the total non-farm employment in the region. By 1996, manufacturing employment dropped to 22.4% of total - -------------------------------------------------------------------------------- 10 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- employment. Although the manufacturing industry has declined, it still represents a significant portion of the employment base in the region. During the same period, the service sector, which includes the accounting, legal, advertising, entertainment, health care, education, business, and publishing industries, increased substantially from 19.3% to 30.2% of total non-farm employment. This large increase in service jobs more than made up for the jobs lost in the manufacturing sector. Other key economic sectors include the trade sector representing 20.9% of total non-farm employment. Major employers in the Lehigh Valley Region include Bethlehem Steel Corporation, AT&T Technologies/Bell Labs, Air Products & Chemicals, Inc., Mack Trucks Inc., Day-Timers Inc, Binney & Smith Inc., Burron Medical Inc., and Victaulic Co, of America. In the Allentown-Bethlehem-Easton MSA the following is the ranking of the ten largest employers. ================================================================================ LEHIGH VALLEY REGION LARGEST EMPLOYERS - -------------------------------------------------------------------------------- Rank Employer Type of Business # of Employees ================================================================================ 1 Lehigh Valley Hospital Acute-care Hospital 5,100 2 Pennsylvania Power & Light Co. Electric Utility 4,268 3 Air Products & Chemicals, Inc. Gas and Chemical Products 4,000 4 AT&T Microelectronics Electronics 3,800 5 Bethlehem Steel Corp. Steel Manufacturing 3,600 6 Saint Luke's Hospital Acute Care Hospital 2,397 7 Wood Co. Food Service 2,000 8 Allentown School District Public Schools 1,800 Mack Trucks, Inc Vehicle Manufacturer 1,800 9 Bethlehem Area School District Public Schools 1,500 Day-Timers, Inc. Stationary Products 1,500 ================================================================================ 10 Easton Hospital Acute-care Hospital 1,470 ================================================================================ Source: Lehigh-Valley Profile and Trends, 1996 ================================================================================ A number of Fortune 100 Companies have recognized this area's good transportation network and good location. As a result Kraft General Foods, K-Mart, Bell Telephone, AT&T, Daytimers and other large firms have built large distribution facilities in the area. In addition, trucking companies such as Roadway Express, Carolina Freight Corporation, and others have also been attracted by the Lehigh Valley's market accessibility. Shown on the following page is a chart which outlines total employment and the composition of the different employment industries in the Allentown-Bethlehem-Easton MSA. The figures shown on the following page reflect the most recently published employment totals for January - -------------------------------------------------------------------------------- 11 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- 1996. (It should be noted that the Bureau of Labor Statistics does not break out this information for the counties within the MSA). ================================================================================ ALLENTOWN-BETHLEHEM-EASTON MSA NON-AGRICULTURAL INSURED EMPLOYMENT BY MAJOR INDUSTRY DIVISION 1995 AND 1995 COMPARISON - NOT SEASONALLY ADJUSTED ================================================================================ Employment Employment Change Industry 1/95 Share 1/96 Share 1995-1996 (000s) (000s) ================================================================================ Manufacturing 60.4 23.9% 56.5 22.4% -6.5% Construction/ 9.3 3.7% 9.1 3.6% -2.2% Mining TCPU 13.5 5.3% 14.0 5.6% 3.7% Trade 53.1 21.0% 52.7 20.9% -0.8% FIRE 13.4 5.3% 13.6 5.4% 1.5% Services 73.8 29.2% 76.1 30.2% 3.1% Government 29.5 11.7% 30.0 11.9% 1.7% - -------------------------------------------------------------------------------- TOTALS 253.0 100% 252.0 100% -0.4% - -------------------------------------------------------------------------------- Source: Bureau of Labor Statistics Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ In January 1996, the total non-farm employment in the Allentown-Bethlehem-Easton MSA totaled 252,000 jobs. Over the past year, total employment in the MSA declined by less than one percent, compared to the previous year which witnessed an increase of 3.6%. The majority of the employment industries witnessed an increase over the past year, however, manufacturing witnessed a decline of 6.5% which resulted in overall decline in total employment. Construction and mining also witnessed a declined of 2.2%, while trade witnessed a decline of less than one percent. Services added 2,300 jobs, while TCPU added 1,500 jobs. Overall, the Lehigh Valley Regional economy witnessed a slight decline in 1995 given the significant decline in the manufacturing industry. Over the next decade, it is projected that manufacturing jobs will continue to decline, however, these job losses will be offset with increases in the service industry, which is projected to increase by 3.6% annually over the next decade (compared to a 1.0% annually decline in the manufacturing industry). The Joint Planning Commission for the Lehigh Valley Region project annual average employment growth of 2.7% over the next decade. The unemployment rate in the Lehigh Valley Region has continued to decline since 1992. In 1992 the unemployment rate was 7.2% compared to 1995 with an average unemployment rate of 5.9% in Lehigh County. Unemployment followed a similar pattern in Northampton County. Shown below is the average unemployment rate for the area. - -------------------------------------------------------------------------------- 12 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ============================================================= AVERAGE UNEMPLOYMENT RATES ============================================================= YEAR LEHIGH COUNTY NORTHAMPTON COUNTY ------------------------------------------------------------- 1992 7.2% 8.0% 1993 6.7% 6.9% 1994 6.0% 6.5% 1995 5.9% 5.9% ------------------------------------------------------------- Source: Bureau of Labor Statistics ============================================================= ====================================================================== CIVILIAN LABOR FORCE & EMPLOYMENT ESTIMATES LEHIGH VALLEY REGION ====================================================================== LEHIGH COUNTY NORTHAMPTON COUNTY ---------------------------------------------------------------------- PERIOD 1/95 1/96 1/95 1/96 Labor Force 133,531 132,779 110,503 110,704 Employment 125,524 123,468 103,111 101,425 Unemployment 8,007 9,311 7,392 9,279 Unemployment Rate 6.0% 7.0% 6.7% 8.4% ---------------------------------------------------------------------- Source: Bureau of Labor Statistics ====================================================================== As shown above, the labor force base in Lehigh County declined over the past year, while unemployment increased, resulting in a higher unemployment rate. As of January 1996 the unemployment rate was 7.0%, approximately 1.0% higher than the previous year. The decline in employment, however, can be partially attributed to the weather conditions during the first month of 1996, otherwise referred to as the "Blizzard of 1996". We do not expect the higher unemployment rate to continue throughout the year in 1996. In fact, labor projections indicate a decline in the unemployment rate in the first quarter 1996. In Northampton County, although the labor force slightly increased, the number of employed persons declined, resulting in an increase in the unemployment rate from 6.7% in 1995 to 8.4% in 1996. Transportation The Lehigh Valley region contains excellent transportation routes. Some of the major routes that are in and around the county include Interstate 78, Routes 22, 145, 29, 33, and several others. In addition, the Pennsylvania Turnpike Northeast Extension (a.k.a. Route 9) extends through the western portion of the county. Overall, the transportation routes servicing the area are considered to be adequate. - -------------------------------------------------------------------------------- 13 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NEIGHBORHOOD AREA MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 14 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Conclusion and Relevance to the Subject Property The Allentown-Bethlehem-Easton MSA has a diverse and stable economy which is primarily fueled by manufacturing and services. Despite the downturn in Pennsylvania's economy over the past several years, the Lehigh Valley Region has shown signs of strength. Over the past several years, the Lehigh Valley Region has witnessed increases in population, income characteristics, and employment. However, given the hefty manufacturing losses, total employment in the MSA declined over the past year. It is projected that in the future, while manufacturing losses will continue, it will be offset by increases in the service industries. Based on the aforementioned, we expect continued growth, albeit at a slower pace, for the foreseeable future. Further, as continued growth occurs, the Lehigh Valley Region should continue to be a desirable location for real estate investment and commercial development over the long term. NEIGHBORHOOD INFLUENCES Location The subject property is located on the west side of South Fourth Street in the city of Allentown, Pennsylvania. The geographic boundaries of the subject are not exact, but the immediate neighborhood is generally considered to be: North: Allentown CBD South: Emmaus East: Salisbury Township West: Salisbury & South Whitehall Townships Land Use The subject is generally located in a suburban neighborhood. Developments in the immediate vicinity of the subject consist of a mixture of commercial, industrial, and residential uses. Located adjacent to the subject property is a K-Mart with a McDonald's and First Union Bank. Residential uses are concentrated to the southwest and east of the subject with commercial industrial developments situated to the north, south, and west of the subject. The residential development consists of multi-family complexes, as well as single-family homes. Overall, the neighborhood appears to be approximately 95 percent developed. Access Accessibility to the neighborhood in general, and to the subject property, is considered adequate. Routes 9, 145, 29, as well as several others provide the primary access to the site. Interstate 78 is located to the south of the subject and U.S. Route 22 is located north of the - -------------------------------------------------------------------------------- 15 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- subject. These Interstates provide good high-speed east/west transportation routes to and from the county. The aforementioned roadways provide adequate accessibility throughout the neighborhood and other locations. In addition, the neighborhood has an adequate level of secondary roadways which further enhance accessibility. Allentown-Bethlehem-Easton Municipal Airport is situated north of the subject property. Demographics Selected Neighborhood demographics in a one, three, and five mile radius from the subject are shown in the following table: ================================================================================ NEIGHBORHOOD DEMOGRAPHICS ALLENTOWN, PA ================================================================================ 1 mile 3 mile 5 mile - -------------------------------------------------------------------------------- Population 1995 Estimate 6,956 80,582 211,701 1990 Census 7,008 78,697 207,807 1990-1995 % Change -0.7% 2.4% 1.9% Households 1995 Estimate 2,746 32,222 83,439 1990 Census 2,767 31,482 81,872 1990-1995 % Change -0.8% 2.4% 1.9% 1995 Median Household Income $37,379 $29,990 $33,707 1995 Average Household Income $41,673 $36,497 $42,537 1990 Average Home Value $92,691 $78,587 $88,818 1990 % College Graduates 7.5% 8.9% 11.8% ================================================================================ Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ As indicated by the above information, the demographic profile becomes less favorable inside a three-mile radius. Income levels, as well as home values are significantly higher in a one-mile and five-mile radius. However, the population and households within a three-mile radius have continued to increase which is positive. Growth and Trends Due to the mature nature of the area, there has been little new development within the subject's immediate area. The majority of the new development is concentrated further north along MacArthur Road (a.k.a. Route 145) at the intersection of Route 22. The newest development is the MacArthur Towne Center which was constructed in 1993 and consists of 200,000 square - -------------------------------------------------------------------------------- 16 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- feet and is anchored by K-Mart, Kiddie City, Giant Foods, and a Barnes and Noble superstore. The vicinity of MacArthur and Route 22 also includes the Lehigh Valley Mall with 1.0 million square feet and Whitehall Square with 300,000 square feet. Further new development has included a number of new pad sites along MacArthur Road. Conclusion and Relevance to the Subject Property The subject is situated in a mature neighborhood that features a mixture of commercial, industrial and residential developments. However, South Fourth Street (a.k.a. Route 145) is predominantly commercial in nature. The area has adequate accessibility to the local transportation system since Interstate highways are located to the north and south. The general character and uses in the area are not anticipated to change in the near future. In summary, we expect development and population to increase modestly over the foreseeable future. - -------------------------------------------------------------------------------- 17 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- MARKET ANALYSIS Retail Overview Allentown has witnessed limited growth over the past few years despite the economic troubles the region has experienced. As noted in the previous section, the majority of the new development is concentrated north of the subject along MacArthur Road (a.k.a. Route 145) at the intersection of Route 22. The newest development is the MacArthur Towne Center which was constructed in 1993 and consists of 200,000 square feet and is anchored by K-Mart, Kiddie City, Giant Foods, and a Barnes and Noble superstore. The vicinity of MacArthur and Route 22 also includes the Lehigh Valley Mall with 1.0 million square feet and Whitehall Square with 300,000 square feet. Further new development has included a number of new pad sites along MacArthur Road. We are not aware of any proposed shopping centers within the city of Reading in upcoming years. According to Strategic Mapping, Inc., total retail development within a three mile radius of the subject property consists of approximately 1.5 million square feet. Furthermore, retail development within the five and seven mile radii account for 4.1 and 5.2 million square feet, respectively. Local Retail Market In order to project future performance of the retail space in the subject property consideration has been given to various market components that affect the supply and demand for this type of real estate property. Specifically we have: O Inspected the site and surrounding areas for the purpose of familiarizing ourselves with all the locational and environmental factors. In this regard, we have directed our attention to the physical qualities of the site, access and circulation, surrounding uses, and relationship to sources of market support. O Reviewed the principal economic growth trends in the area in industry, population and employment. Our intention was to identify the degree of underlying support for existing improvements and future growth. O Analyzed existing and foreseeable market conditions for retail properties in the area. O Analyzed demographics of the subject property's trade area as well identified competition in order to assess, the subject property's current as well as future position in the market. Trade Area The trade area of a shopping center is defined as the geographic area from which the sustaining patronage for steady support of a center is obtained. Determination of the boundaries is - -------------------------------------------------------------------------------- 18 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- contingent upon various factors including but not limited to the nature of the center, accessibility, physical barriers, location of competing facilities, and limitations of driving time and distance. The subject's general trade area is considered to be that which encompasses a seven-mile radius of the subject center. We broke this down further to include a three-mile ring (primary), a five-mile ring (secondary) and a seven-mile ring (tertiary). Definition Of The Trade Area The primary ingredients for success in these types of projects include the nature of the competition, population density, income levels, and disposable income. The actual size of the population needed to support this type of project cannot be fixed due to the complexities of the above factors, as well as changing methods of merchandising. Local conditions, such as number of households, income levels, and existing centers within the trade area can have the most dramatic impact upon any given project since these factors are what determine the purchasing power in an area. An additional ingredient leading to the success of a shopping center would be the tenant mix and characteristics of the leading tenants which attract shoppers to the project. We have analyzed demographic data, competition, income levels for the subject trade area in the following sections. The demographic profiles of the primary, secondary and tertiary trade areas are presented in the Neighborhood Influences section of the report. Additional demographic information is contained within the Strategic Mapping, Inc. Profile Report located within the Addenda. Population The sales potential of a center is directly related to its proximity to the number of potential patrons. The historical and projected trends for population are important to examine when analyzing the trade area of a shopping center. The historical population trends for the subject's trade areas indicate an increase in population between 1980 and 1995 followed by a further increase projected from 1995 to the year 2000. In the primary trade area the population increased by 3.8% between 1980 and 1990 to 78,697 and then witnessed an increase to 80,582 in 1995. Population projections indicate a further increase to 81,746 between 1995 and the year 2000. Both the secondary and tertiary trade areas witnessed a similar pattern and future trend in population in these areas. In order to further analyze the population change, we have examined the distribution of the population by age. When analyzing the population distribution by age, it should indicate in what age groups the population shifts are projected to take place. This is important to distinguish if it will have a great impact on the retail sales of the subject center. Shifts in the age groups under - -------------------------------------------------------------------------------- 19 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- 24 years of age will affect the subject; however, less drastically than changes in the subject's core market approximately between the ages of 25 and 54. As illustrated in the Profile Report located in the Addenda, a large percentage of the population in all three trade areas are in the age groups from 25 - 54. Estimated figures for 1995 indicated that the median age was slightly higher than the 1990 census in all three trade areas ranging from 34.6 to 36.9. Overall, the diversification among age groups is very common among other retail trade areas. Household Trends When analyzing the demographics for a retail center, it is most important to focus on the trends in the household population. A household consists of one or more persons occupying a dwelling unit. A family would be considered a household unit; however single persons living alone or two or more unmarried persons sharing a dwelling are also considered a household unit. The household unit is perhaps the best indicator in determining the economic health of a trade area. One of the important components, which bonds a household together, is it's economic strength as a unit as compared to the economic viability of an individual; single person households not withstanding. If the population is slightly decreasing and yet the number of households is increasing, this would not necessarily be a negative indicator. This would imply that the average household size was shrinking. Each household has demand for goods that likely is not duplicated with a larger household size. This demand is duplicated however in the number of households. Similar to population figures, the number of households in the trade area increased between 1980 and 1990. Subsequently, the number of households increased between 1990 and 1995 though at an accelerated pace in comparison to the increase witnessed in the previous decade. The number of households are projected to increase further in all three trade areas in upcoming years. Household Income The median household income in the subject's trade areas increased annually at an average rate of 2.9% from 1990 to 1995. Thus, the household incomes in the area grew at a pace slightly below inflation during this period. The projected annual income growth rates between 1995 and the year 2000 are approximately 2.9%, again below the projected rate of inflation. Overall, household income levels varied slightly between the three trade areas. The median household income levels ranged from $29,990 to $35,943 in 1995 with the primary trade area representing the low end of the range. - -------------------------------------------------------------------------------- 20 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- Employment The income characteristics of the trade areas for the subject property indicate that this is a predominately white-collar market. The tertiary trade area had the highest percent in white-collar employment at 59.0%, while the primary trade area had the lowest at 52.2%. Blue-collar employment percentages in the primary, secondary and tertiary trade areas were 32.6%, 28.2% and 27.3%, respectively. The remaining percentages were in special services categories. The 1990 Census information indicates that the unemployment rates ranged from a high of 6.2% in the primary trade area to a low of 5.0% in the tertiary trade area. As discussed in the Location Analysis, the most recent unemployment rate in was 7.0%, which indicates an overall increase in employment from the 1990 Census. We feel the subject market will witness modest employment growth in upcoming years and a declining unemployment rate. Expenditure Potential The Expenditure Potential charts located in the Addenda outline Strategic Mapping, Inc. retail sales projections for the subject trade area. The highest sales growth in the primary trade area appears to be for electronics, drug, and video stores. These three categories also represent high growth in the secondary and tertiary trade areas. The average growth rate for retail sales in the primary trade area is projected at 1.65% in the primary trade area, 1.61% in the secondary trade area, and 1.65% in the tertiary trade area. Strategic Mapping, Inc. examines the product potential for various store types for each portion of the subject trade area. Based on statistical sampling, Strategic Mapping has derived a benchmark per household expenditures for each store type. Comparing the figures in the trade area to the benchmark figure, it is apparent that those individuals in the subject trade area are much more likely to spend on items in drugs, groceries, and convenience stores. The Strategic Mapping Expenditure Potential Index is defined as follows, 'An index which shows the amount by which an area per household expenditures, differed from that of the benchmark.' The benchmark is defined as the average or common expenditure among households for a larger region. Values below 100 signify that this area is below the benchmark per household expenditures and correspondingly values above 100 indicate a higher than average expenditure per household. The overall Expenditure Index for the primary area is 92.1, while the benchmark indices for the secondary and tertiary trade areas are 96.7 and 99.2, respectively. In conclusion, the expenditure indices for the subject trade areas indicate that the all of the trade area populations spend less than the benchmark household on retail. The area generates retail sales based on the existing population, as well as the increasing income potential. - -------------------------------------------------------------------------------- 21 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- Market Indicators The subject center contains 17 tenant suites ranging in size from approximately 1,500 to 20,000 square feet and one pad site (Acme supermarket) consisting of 32,200 square feet. Discussions with local leasing agents reveal that typical ground level satellite space rents in the area generally range from $8.00/SF to $15.00/SF depending upon the physical and locational characteristics of the space and $5.50/SF to $10.50/SF for anchor space depending upon the same criteria. Percentage rent clauses tend to be uncommon for satellite tenants. Retail leases are typically structured on an absolute net basis with flat rents over the term. Based upon discussions with brokers and managing agents in the area, as well as our observations during our inspection, competing centers in the subject's market area have vacancy rates which generally fall within the 0.0% to 10.0% range with an average vacancy rate of approximately 5.0%. The subject center is currently 99% occupied. Summary The outlook for the subject's market is good. Future projections indicate an increase in population and households in all three trade areas from 1980 through 1995. Further, the trade areas exhibit increased spending potential over the same period, while income levels appear to be increasing at rates slightly below projected inflationary rates which is common during periods of economic recovery. Overall, the subject trade areas reflect relatively strong retail characteristics; thus, we conclude that the trade area represents a viable retail market. - -------------------------------------------------------------------------------- 22 PROPERTY DESCRIPTION ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- SITE ANALYSIS Location: The subject is located on the west side of South Fourth Street in the city of Allentown, Lehigh County, Pennsylvania. Parcel Number: Map H10SW1D, Block 1, Lots 1 & 1D Land Area: 11.36 acres, or 494,842 square feet Shape and Frontage: The subject consists of an irregularly shaped parcel with a total of 494,842 square feet, or 11.36 acres. The site has approximately 590 feet of frontage along South Fourth Street and approximately 413 feet of frontage along Wabash Street. Exterior Parking: There are 592 parking spaces on site. Topography and Drainage: The site slightly slopes downward from South Fourth Street. Our investigation did not reveal any significant drainage problems. Soils: No soil report was provided and it is assumed that the soils is adequate for the existing use. Easements: No title report was provided in connection with this appraisal. No survey showing the location of any easements was available. Thus, it is not possible to make a definite conclusion regarding any potential impacts on value of the location of any such easements or encroachments. It is specifically assumed that any easements, restrictions, or encroachments that might appear against the title would have no adverse impact on marketability or value. Covenants, Conditions, and No private deeds or restricting convenants Restrictions: affecting the development, other than zoning, were found to affect the site. Utilities All public utilities including gas, electricity, and telephone, as well as water, storm, and sanitary sewer systems are available to the site. Flood Zone: According to maps published by the Federal Emergency Management Agency (FEMA), the subject lies within Zone C as indicated on FEMA Community Map Panel No. 420585-005B, dated January 6, 1995. This zone is described as follows: FEMA Zone C: "This area is identified in the community flood insurance study as an area of moderate or minimal hazard from the principal source of flood in the area. Buildings in this zone could be flooded by severe, concentrated rainfall coupled with inadequate local drainage systems. Local storm - -------------------------------------------------------------------------------- 23 ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- water drainage systems are not normally considered in the community's Flood Insurance Study. The failure of a local drainage system creates areas of high flood risk within this rate zone." Environmental Issues: The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the property that would cause a loss in value. No evidence of hazardous waster or toxic materials was visible. CB Commercial has no knowledge of the existence of these substances on or in the subject property. However, CB Commercial is not qualified to detect hazardous waster or toxic materials. Adjacent Properties: North: Retail and Industrial uses. South: Retail and industrial uses. East: Residential uses. West: Residential uses. Comments/Conclusions: The subject is a 11.36-acre site on a paved street served by necessary utilities. Access and visibility are considered be good. There are no adverse soil conditions of which CB Commercial Real Estate Group, Inc. is aware. The shape of the parcel is irregular and results in no specific limitation. The topography is sloping though possesses no specific development limitation. There is no excess land and the unimproved portions of the site are fully utilized by a macadam parking lot. From a physical standpoint, the site is considered to be adequate for many types of development. - -------------------------------------------------------------------------------- 24 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS The subject improvements were constructed in 1959. Acme was built in 1978 and renovated in 1993. The improvements consist of a single-story community shopping center containing 116,801 square feet of gross leaseable area. The leasable area includes Family Dollar's expansion of 2,000 square feet of used storage space; thus, the former gross leaseable area was 114,801 square feet. The shopping center contains eighteen tenant suites, of which one is an outparcel (Acme). The following is a description of the improvements based on our physical inspection, municipal records, and from discussions with and materials provided by the client. The basic construction features are summarized as follows: Construction Class The class of construction is the basic subdivision in Marshall Valuation Service which divides all buildings into five basic groups by type of framing (supporting columns and beams), walls, floors, roof structure, and fireproofing. The subject is considered to be of construction Class B(1). Competitive Rating The subject is considered a Class B building in terms of quality as it is perceived in the marketplace. Foundation Poured concrete Frame Concrete block over a steel frame Floor Construction Concrete slab Exterior Walls Load-bearing concrete block over a steel frame with split-faced block. Fenestration Aluminum framed glass windows and double-paned glass front doorways. Roof Structure & Covering Flat, presumably built-up composition covering over steel deck with steel bar joist supports. We were unable to inspect the roof and assume the roof is in average overall condition. - ---------- (1) The primary characteristic of Class B Buildings is the reinforced concrete frame in which the columns and beams can be either formed or precast concrete. They may be mechanically stressed, and the structure is fire resistant. (Source: Marshall Valuation Service) - -------------------------------------------------------------------------------- 25 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Exterior Condition Average Interior Partition System Metal studs with gypsum board cover. Interior Finishes - Tenant Space Floors: Combination of vinyl tile and carpet. Walls: Painted or covered gypsum board. Ceilings: Suspended acoustic tiles. Lighting: Recessed florescent lighting. Summary: The interiors of the subject are considered to be of average to good quality and similar to competitors. HVAC Heating and ventilation is provided to the majority of the tenant suites by roof-mounted HVAC units. Each of these units pump the hot air throughout its suite via sheet metal air duct work hidden above the dropped ceiling. Air conditioning is supplied by the same system utilizing the duct work and supplying cool air during the summer months. The HVAC system is a gas-fired forced air system. Electrical The electrical system is assumed to be in good working order and adequate for the building. Fire Protection It is assumed that the subject has adequate fire alarm systems, fire exits, fire extinguishers, fire escapes and/or other fire protection measures to meet local fire marshal requirements. Plumbing The plumbing system is assumed to be in good operating condition. Parking Surface parking is provided for approximately 592+ vehicles. Landscaping Landscaping on the subject property is adequate. ADA Compliance Handicap access appears to be available to all areas of the center. However, we are not qualified to determine compliance with the requirements. Please refer to the specific limiting condition regarding ADA compliance. Environmental Issues The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the - -------------------------------------------------------------------------------- 26 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- improvements which would cause a loss in value. Functional Quality of Space The interior floor plans are flexible and will accommodate a variety of tenant layouts. There are no observed design problems and none are reported by management. Access to the tenant suites is available at the front and rear of the center. There are no elevators within the center. Deferred Maintenance No deferred maintenance was observed or reported. The improvements have been adequately maintained since it was constructed in 1959. Economic Age and Life Based on the current condition, we estimate the effective age to be approximately 30 years. According to the Marshall Valuation Service cost guide, buildings of this type and quality have an expected life of approximately 45 years. Therefore, the remaining economic life (expected life minus effective age) is estimated at 15 years. While we observed nothing to suggest a different economic life, a capital improvement program could extend life beyond that stated above. Quality/General Condition The subject property conforms well with competitors and substitutes in the area. The quality of construction is typical of the area. Interior amenities are similar to competing properties of the same approximate age. The general condition of the improvements is average. We observed no evidence of structural fatigue and the improvements appear sound. We are not qualified to determine structural integrity, however, and recommend that the reader rely upon an expert in this field for further determination. Conclusion/Comments The subject property is an average quality shopping center located in a relatively stable area. The improvements generally conform with competitors and substitutes in the neighborhood. - -------------------------------------------------------------------------------- 27 ================================================================================ ZONING - -------------------------------------------------------------------------------- ZONING The subject's zoning requirements are detailed below. ================================================================================ ZONING SUMMARY ================================================================================ Current Zoning: B4, Shopping Center Business Legally Conforming: Yes Uses Permitted: Shopping centers, retail and service uses, office buildings, gasoline filling stations, public and repair garages, banks restaurants (without drive through service), exercise clubs, laundromats, amusement establishments, taverns, child and adult day-care centers, and greenhouses. Zoning Change: Not likely ================================================================================ Category Zoning Requirement ================================================================================ Minimum lot size:: 4 acres Site coverage: 50% Front setback: 40 feet Rear setback: 25 feet Side yard setbacks: 20 feet Height limit: 50 feet Parking: 5 spaces per 1,000 sq. ft. of gross floor area. ================================================================================ Source: City of Allentown Zoning Ordinance Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ ZONING ANALYSIS AND CONCLUSIONS Based upon our review of the bulk requirements and allowable uses, the subject property appears to represent a legal existing and conforming use. - -------------------------------------------------------------------------------- 28 ================================================================================ TAX ANALYSIS - -------------------------------------------------------------------------------- TAX AND ASSESSMENT DATA The subject property is assessed by Lehigh County, Pennsylvania. According to the assessor's office, properties within Lehigh County are assessed at 50% of market value. The last general assessment of properties in Lehigh County was 1989. No re-valuation is schedule for the near future. The tax assessment for the subject property is presented below. ========================================================================== 1996 ASSESSMENT ========================================================================== Map/Block/Lot: H10SW1D-1-1 H10SW1D-1-1D Land: $1,099,450 $161,000 Improvement: $ 622,400 $627,150 ------------ ---------- -------- Total Assessment $1,721,850 $788,150 Estimated Taxes $ 87,470 $ 40,038 Total Taxes $ 127,508 ========================================================================== Source: Lehigh County Assessor's Office Compiled by: CB Commercial Real Estate Group, Inc. ========================================================================== Based on the current tax rate of $50.80 per $1,000 assessed value, the estimated taxes for the subject is shown in the previous table. The total taxes for the subject are $127,508, or $1.09 per square foot based on the rentable square footage of the center. Tax and Assessment Conclusion According to the tax assessor's office, school taxes are collected on a fiscal year and town/county taxes are collected on a calendar year. We have estimated the taxes for the shopping center at $127,508 for calendar year 1996 in our cash flow. Our discussions with the assessor indicated that the subject's taxes have increased inline with the area's inflation rate, or approximately 3.0% per annum. We have, therefore, projected a long-term tax growth for all taxes equal to 3.0% per year. - -------------------------------------------------------------------------------- 29 ================================================================================ HIGHEST & BEST USE ANALYSIS - -------------------------------------------------------------------------------- HIGHEST AND BEST USE In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The four criteria that the highest and best use must meet are: o legal permissibility; o physical possibility; o financial feasibility; and o maximum profitability. Highest and best use is applied specifically to the use of a site as vacant. It is recognized that in cases where a site has existing improvements, the concluded highest and best use as if vacant may be different from the highest and best use given the existing improvements (as improved). The existing use will continue, however, until the land value, in its highest and best use, exceeds that total value of the property under its existing use plus the cost of removing or altering the existing structure. Implied in the highest and best use is a recognition of the contribution of a specific use to the community environment or to the community's development goals, in addition to wealth maximization of individual property owners. Also implied is that the conclusion of highest and best use that results from the appraiser's judgment and analytical skill, i.e., that the use determined from the analysis represents an opinion, not a fact to be found. Highest and best use analysis involves assessing the subject both as if vacant and as improved. HIGHEST AND BEST USE AS THOUGH VACANT Legal Permissibility The legally permissible uses were discussed in detail in the site analysis and zoning sections of this report. Based on our review of the zoning restrictions, the site can be developed with several different uses, including retail and commercial office uses. Physical Possibility The physical characteristics of the subject site were discussed in detail in the site analysis. Overall, a wide range of legally permissible uses would be physically possible, including a variety of commercial uses. Financial Feasibility The test of financial feasibility is put only to those uses which are legally permissible and physically possible. If the property is capable of generating a sufficient net income to cover the required rate of return on investment and provide a return to the land, then the usage is financially feasible within a defined price limit. - -------------------------------------------------------------------------------- 30 ================================================================================ HIGHEST & BEST USE ANALYSIS - -------------------------------------------------------------------------------- In our determination of financial feasibility we have analyzed current market rental rates for several different property types. The net income produced by the proposed or new improvements must provide a return above the cost to develop the property, including acquisition of the land. Through a cost/income analysis we have determined that development of the subject site is not financially feasible at this time. Based on the analysis of supply and demand factors at the present time, rents achieved for retail and/or office uses would not support the cost of construction. Based on the aforementioned, we have determined that development of the subject site at the present time with a retail center is not currently feasible. Maximum Profitability The final test of highest and best use of the site as though vacant is the use be maximally productive, yielding the highest land value. Based on our feasibility analysis we have determined that land banking the subject site is the maximally productive use at the present time. Conclusion: Highest and Best Use As Vacant The concluded highest and best use of the subject as though vacant is land banking until such time that development of the site with a retail/commercial facility is financially feasible. HIGHEST AND BEST USE AS IMPROVED Legal Permissibility As discussed, the subject site's zoning and legal restrictions permit a variety of land uses. Regardless, the site has been improved with a neighborhood shopping center. Based upon review of the City of Allentown's Zoning Ordinance, it is our opinion that the improvements are within the established guidelines. Physical Possibility The physical characteristics of the subject improvements were discussed in detail in the improvement analysis section of this report. Overall, the layout and positioning of the improvements is considered functional for shopping center use, and the floor plan is considered to be reasonable in comparison to other shopping centers in the area. The improvements have good retail features, have been adequately maintained, and are physically capable of sustaining their current use over the extended future. Financial Feasibility As with the highest and best use of the site as though vacant, the financial feasibility of the site as improved is market derived. Typically, for retail properties similar to the subject, the test of feasibility is based on the amount of rent that can be generated less operating expenses. If a - -------------------------------------------------------------------------------- 31 ================================================================================ HIGHEST & BEST USE ANALYSIS - -------------------------------------------------------------------------------- residual amount exists after paying the various expenses, then the land is being put to a productive use. At present, the subject is 100% occupied. CB Commercial estimates that the appropriate stabilized market occupancy approximates 95%. Based on the historical and current operating status of the subject property, CB Commercial anticipates that the improvements are capable of providing an adequate return on the investment before any debt service requirements. Therefore, we conclude that the current use of the improvements is a financially feasible use of the property as improved. Maximum Profitability Similar to the highest and best use of the site as though vacant, the maximum profitable use of the subject as improved should conform to neighborhood trends and be consistent with existing land uses. Although several uses may generate sufficient revenue to satisfy the required rate of return on investment and provide a return on the land, the single use that produces the highest price or value is typically the highest and best use. Conclusion: Highest and Best Use as Improved Based on the foregoing discussions, CB Commercial concludes that the highest and best use of the property, as improved, is consistent with the existing use as a shopping center. There are no apparent alternative uses of the existing improvements that would produce a higher net income and/or value over time than the current use. The current use is a legally permissible use and appears to represent the highest and best use as improved. Furthermore, CB Commercial does not believe that conversion of the improvements or demolition is warranted or financially feasible. - -------------------------------------------------------------------------------- 32 VALUATION ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- APPRAISAL METHODOLOGY The appraisal process is defined as an orderly program by which the problem is planned and the data involved is acquired, classified, analyzed and interpreted into an estimate of value. In this process three basic approaches to value are considered: Cost Approach, Sales Comparison Approach, and Income Capitalization Approach. In appraisal practice, an approach to value is included or omitted based on its applicability to the property type being valued and the quality and quantity of information available. The final step in the appraisal process is reconciliation -- a process by which CB Commercial analyzes alternative conclusions and selects a final value estimate from among two or more indications of value. CB Commercial weighs the relative significance, applicability and defensibility of each approach as it relates to the type of property being appraised. THE COST APPROACH The Cost Approach is based upon the proposition that the informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements which represent the highest and best use of the land or when relatively unique or specialized improvements are located on the site and for which there exist few sales or leases of comparable properties. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. SALES COMPARISON APPROACH The Sales Comparison Approach utilizes sales of comparable properties, adjusted for differences, to indicate a value for the subject property. Valuation is typically accomplished using physical units of comparison such as price per square foot, price per unit, price per floor, etc., or economic units of comparison such as gross rent multiplier. Adjustments are applied to the physical units of comparison derived from the comparable sale. The unit of comparison chosen for the subject is then used to yield a total value. Economic units of comparison are not adjusted, but rather analyzed as to relevant differences with the final estimate derived based on the general comparisons. - -------------------------------------------------------------------------------- 33 ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- The reliability of this approach is dependent upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c) the degree of comparability; (d) the absence of atypical conditions affecting the sales price. Although there have been few sales in the region, the sales that were gathered were utilized to form an opinion of value. However, given the lack of relevant sales data, we have not placed minimal reliance upon this approach and have used it to provide additional support to the Income Approach. INCOME CAPITALIZATION APPROACH The methodology of the Income Capitalization Approach is to determine the income-producing capacity of the property on a stabilized basis by estimating market rent from comparable rentals, making deductions for vacancy and collection losses and building expenses, then capitalizing the net income at a market-derived rate to yield an indication of value. The capitalization rate represents the relationship between net income and value. Related to the direct capitalization method is the discounted cash flow method. In this method of capitalizing future income to a present value, periodic cash flows (which consist of a net income less capital costs, per period) and a reversion (if any) are estimated and discounted to a present value. The discount rate is determined by analyzing current investor yield requirements for similar investments. Since investors are active in the marketplace for properties similar to the subject, the Income Capitalization Approach is particularly applicable to the appraisal problem at hand. There is an adequate quality and quantity of income and expense data available to render a reliable and defensible value conclusion. For income producing properties similar to the subject, the Income Capitalization Approach is considered to be the most reliable. Therefore, this approach has been employed as the primary methodology for this assignment. - -------------------------------------------------------------------------------- 34 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH The Sales Comparison Approach provides an estimate of market value based on analyzing transactions of similar properties in the market area. The method is based on the proposition that an informed purchaser would pay no more for a property than the cost of acquiring an existing one with the same utility. When there is an adequate number of sales of truly similar properties with sufficient information for comparison, a range of values for the subject property can be developed. There are various units of comparison available in the evaluation of sales data in this approach. The sale price per square foot is the most commonly used in this approach. The effective gross income multiplier (EGIM) is rarely used by market participants because of the inconsistencies in estimating effective or gross income, vacancy, and expense differences. We conducted a thorough sales search for comparable shopping centers in the subject's market area. Through our sales search, we were able to identify a limited number of sales with similar characteristics to the subject. The following table summarizes what are considered to be the most recent and proximate comparable sales. Detailed write-ups of each comparable are included in the addendum.
==================================================================================================================== SUMMARY OF COMPARABLE RETAIL SALES ==================================================================================================================== Gross No. Property Name/ Location Sale Leasable NOI OAR Sale Price Date Area (SF) Sale Price Per S.F. Per S.F. - -------------------------------------------------------------------------------------------------------------------- 1 15th & Allen St. Center 1/96 46,503 $4,242,000 $ 9.94 10.89% $ 91.22 1401-1451 Allen Street Allentown Lehigh County, PA 2 Stefko Shopping Center 1/96 134,446 $5,618,000 $ 4.59 10.99% $ 41.79 Stefko Boulevard Bethlehem Northampton County, PA 3 Town Center Shopping Ctr. 11/95 118,776 $5,714,998 $5.49 11.4% $ 48.12 Route 222 & Lenape Dr. New Britain, Bucks Co., PA 4 MacArthur Plaza 10/95 29,600 $3,831,667 $ 13.92 10.76% $ 129.45 2419 MacArthur Road Whitehall Township Lehigh County, PA ==================================================================================================================== Compiled by: CB Commercial Real Estate Group, Inc. ====================================================================================================================
- -------------------------------------------------------------------------------- 35 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF IMPROVED SALES The sales reflect unit prices ranging from a low of about $41.79 to a high of approximately $129.45/SF with the significant difference reflecting the economics of the various centers. The sales all had high levels of occupancy and were in generally good condition. The difference in unit prices then were more directly tied to net operating income and investor yield rates. The comparable sales presented offer a simplistic view of the market. Since only general details of existing income and expenses were available, specific analysis is nearly impossible. Accordingly, this method acts as a general gauge of the market and therefore will be utilized as support to our findings in the Income Approach. Analysis The following discussion analyzes the aforementioned comparables relative to the subject property. - -------------------------------------------------------------------------------- 36 ================================================================================ COMPARABLE SALES MAP - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMPARABLE SALES MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 37 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- Sale 1 Sale number one, located at the intersection of 15th Street and Allen Street in Allentown, is a 46,503 square foot shopping center which sold in January of 1996 for $4,242,000 or $91.22/SF. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed circa 1950 and was in very good overall condition at the time of sale since it was recently renovated. Access, exposure, visibility and general locational attributes of the center are superior to the subject; however, the center is similar in size to the subject. Market conditions at the time of sale were similar to current market conditions. This sale's NOI is reportedly $462,049, or $9.94/SF, indicating an overall rate of 10.89%. The economics of this property, at least in terms of NOI per square foot, is superior to the subject. Sale 2 Sale number two, located in the City of Bethlehem, consists of a single-story community center which contains an aggregate 134,446 square feet. This center, known as the Stefko Shopping Center, sold in January of 1995 for $5,618,000, or $41.79/SF of gross leasable area (GLA). Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed in 1965 and appeared to be in average condition. The property's location with regard to access and visibility are considered superior to the subject. Furthermore, the center is significantly larger than the subject. Market conditions at the time of sale were similar to current market conditions. The NOI was reportedly $617,577 ($4.59/SF), indicating an overall rate of 10.99%. This property operates at a level of net income that is similar to the subject. Sale 3 Sale number three, Town Center Shopping Center, is located in New Britain, Bucks County. It is a 118,776 square foot shopping center which transferred in November 1995 for $5,714,998, or $48.12 per square foot. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed circa 1967 and was in good overall condition at the time of sale. Access, exposure, visibility, and general locational attributes of the center are superior to the subject. Market conditions at the time of sale were similar to current market conditions. This sale's NOI is reportedly $652,080, or $5.49 per square foot, indicating an overall rate of 11.4%. The economics of this property in terms of NOI per square foot is similar to the subject. - -------------------------------------------------------------------------------- 38 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- Sale 4 Sale number four, MacArthur Plaza, is located at 2409 MacArthur Road in Whitehall Township in Lehigh County, Pennsylvania. It is a 29,600 square foot shopping center which sold in October of 1995 for $3,831,667, or $129.45/SF. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed circa 1988 and was in very good overall condition at the time of sale. Access, exposure, visibility and general locational attributes of the center are superior to the subject, however, the center is considerably smaller in size to the subject. Market conditions at the time of sale were similar to current market conditions. This sale's NOI is reportedly $412,122 or $13.92/SF, indicating an overall rate of 10.76%. The economics of this property in terms of NOI per square foot is superior to the subject. Net Operating Income Analysis The net operating income level for the comparables ranged from $4.59 to $13.92 per square foot, per year. As noted, the subject's first-year NOI is $4.61 per square foot, representing the low end of the comparable range. Given the correlation between price paid per square foot and NOI per square foot it would seem reasonable to conclude that the subject would below the range established by the comparable properties. The following chart depicts the calculations involved in developing adjustment factors to be applied to the respective price per square foot units of comparison developed from the comparables employed.
======================================================================================================= NET OPERATING INCOME (NOI) ANALYSIS - ------------------------------------------------------------------------------------------------------- Subject's NOI/SF Sale ---------------- Sale Price Adjustment Adjusted $/SF No. Sale's NOI/SF Multiplier $/SF for Subject - ------------------------------------------------------------------------------------------------------- 1 $4.61 0.46 $91.22 -$49.26 $41.96 ------ $9.94 2 $4.61 1.00 $41.79 $0.00 $41.79 ------ $4.59 3 $4.61 0.84 $48.12 -$7.70 $40.42 ------ $5.49 4 $4.61 0.33 $129.45 -$85.44 $44.01 ------ $13.92 =======================================================================================================
For the most part, there is a direct correlation between the NOI/SF and sale price per square foot. As the net income level increases, so does the price paid per square foot. After adjusting - -------------------------------------------------------------------------------- 39 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- the four sales, they support a range of value for the subject between approximately $40.01/SF to $44.01/SF. Based on our analysis, the subject's value would be approximately $42.50/SF. The subject has a total building area of 116,801 square feet. The value estimate via the Sales Comparison Approach is calculated as follows: ================================================================ Net Rentable Area of Subject 116,801 square feet Value per square foot $42.50 per square foot Indicated Value: $4,964,043 ---------- ROUNDED: $5,000,000 ================================================================ Overall, very little emphasis has been placed on this approach because of the quality of the data. It is used primarily as a check of the value derived via the Income Approach. We estimate the as is market value of the leased fee interest in the subject property, via the sales comparison approach, as of June 1, 1996, is: --- FIVE MILLION DOLLARS --- ($5,000,000) - -------------------------------------------------------------------------------- 40 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH The Income Capitalization Approach reflects the subject's income-producing capabilities. This approach is based on the assumption that value is created by the expectation of benefits to be derived in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over period of time. The two common valuation techniques associated with the Income Capitalization Approach are direct capitalization and the discounted cash flow (DCF) analysis. DIRECT CAPITALIZATION Direct capitalization is the method used to convert a single year's estimate of income into a value indication. In direct capitalization, a precise allocation between return on and return of capital is not made because investor assumptions or forecasts concerning the holding period, pattern of income, or changes in value of the original investment are not simulated in the method. Direct capitalization is most appropriate when analyzing a stable income stream and in estimating the reversion at the end of a holding period. Using this method, the following sets forth the process: 1. Estimate the Potential Gross Income (PGI) from all sources that a competent owner should be able to generate from a property based on existing and/or market rents. 2. Deduct an estimate of Vacancy and Collection Loss (VCL) to arrive at an Effective Gross Income (EGI) estimate. 3. Deduct operating expenses from the estimate of EGI. The result is an estimate of the stabilized Net Operating Income (NOI). 4. Estimate an Overall capitalization rate (Ro, or OAR). 5. Divide the NOI by Ro, resulting in a value estimate at stabilized occupancy. 6. Adjust the stabilized value to account for "As Is" condition, if applicable. DISCOUNTED CASH FLOW ANALYSIS The discounted cash flow (DCF) analysis is a detailed analysis used when the future income is expected to be variant, usually as a result of numerous lease obligations and/or anticipated changes in income and expenses. It is also particularly relevant when institutional buyers are the most likely purchasers of the subject because institutional buyers often place great weight on this analysis. The DCF analysis specifies the quantity, variability, timing, and duration of NOIs and cash flows. Selecting the proper yield rate (discount rate) is essential. CB Commercial must consider the target yield sought by investors as well as yields derived from comparable sales and/or market information. The methodology is: 1. Estimate the before-tax cash flows for each period of a projected holding period net of any capital expenditures such as leasing expenses and tenant improvements. - -------------------------------------------------------------------------------- 41 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- 2. Estimate a discount rate and a terminal overall capitalization rate. 3. Estimate a selling price, known as the reversion, for the end of the projected holding period. 4. The cash flows and the reversion are then discounted to a present value estimate. APPROPRIATE CAPITALIZATION METHOD A number of factors were considered in evaluating the appropriateness of using the direct capitalization method and/or the DCF technique including the occupancy status, lease structures, above/below market rents and typical buyer behavior. As a result of considering the foregoing factors, both the DCF technique and the income capitalization technique are employed in this appraisal. ESTIMATE OF MARKET RENT Rent analysis involves both a study of market (comparable) rentals and the subject's existing rents (if any). Market rent is the rent that a property would most probably command in the open market; indicated by the current rents paid and asked for comparable space. SUMMARY OF COMPARABLE RENTALS CB Commercial surveyed competitive properties and lease transactions for comparison to the subject. The selected comparable rentals are summarized in the following chart with a map and discussions of each comparable provided on the following pages. ANALYSIS OF COMPARABLE RENTALS We have obtained comparable leases from shopping centers situated within the subject's regional market area which are summarized above. In terms of satellite space, comparables #1 through #5 indicate that the leased spaces range in size from 950 to 9,910 square feet which adequately represents the subject's square footage range. All the leases cited were signed between 1994 and 1995 and represent the most recent leasing activity in the competitive marketplace. The leases include a variety of uses and represent a similar tenant mix to the subject center. The above leases are considered to be generally similar to the subject in terms of condition, quality and location. We have examined the average effective rental rates of these comparables and determined that the effective rent is similar to the face rent, since their was no tenant improvements or free and escalation's were similar. - -------------------------------------------------------------------------------- 42 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
========================================================================================================================= SUMMARY OF COMPARABLE SATELLITE SPACE RENTALS ========================================================================================================================= Center Name & Term Start No. Location Tenant (Yrs) Date Size Rent/SF Escalation Comments - ------------------------------------------------------------------------------------------------------------------------- 1 Kingston Plaza Everything 1 yr 9/95 6,500 $5.50 $950 Step No Option Third Avenue $0.99 Store 3 mos in Year 2 % Rent = 3% over East of Pierce $1,191,660 Street, Kingston, PA - ------------------------------------------------------------------------------------------------------------------------- 2 Mark Plaza Spectrum Rents 5 yrs 10/95 3,600 $8.00 Flat for 1 5-yr Option @ N/S Route 11, term $9.00/SF Edwardsville, PA Keens Floral 5 yrs 8/95 7,000 $8.00 Annual 1 5-yr Option @ Factory step-up $8.83/SF % Rent = 3% over Natural Breakpoint Mattress Man 5 yrs 7/95 3,600 $11.50 Flat for No Option (Pad Site) term % Rent = 4% over Natural Breakpoint - ------------------------------------------------------------------------------------------------------------------------- 3 Birney Plaza Everything 3 yrs 09/95 4,000 $7.00 Flat for 1 3 yr Option @ N/S Route 11, $0.99 Store term $7.50/SF Moosic, PA % Rent = 3% over $933,000 - ------------------------------------------------------------------------------------------------------------------------- 4 Triangle Plaza Electronic 5 yrs 06/95 2,400 $11.50 Annual No Option Route 115 Systems Percentage No % Rent Wilkes-Barre, PA increase TCBY 5 yrs 03/95 2,200 $11.00 Annual 1 5 yr Option Prctge inc. No % Rent Party City 10 yrs 05/94 9,910 $11.00 $1.65/SF No Option Step-up No % Rent - ------------------------------------------------------------------------------------------------------------------------- 5 Gateway Plaza Holiday Hair 3 yrs 06/94 950 $15.48 Annual No Option N/S Route 11, Fashions Percentage No % Rent Edwardsville, PA (Renewal) increase McKenzie 3 yrs 06/94 3,080 $ 8.50 Annual No Option Prctge inc No % Rent ========================================================================================================================= SUMMARY OF COMPARABLE ANCHOR SPACE RENTALS ========================================================================================================================= 6 Pottstown Center Wal-Mart 20 yrs 07/95 121,267 $6.99 Flat for 6, 5-yr Options Montgomery Cty. term No % Rent Pottstown, PA 7 Route 6 Mall K-Mart 25 yrs 03/95 119,229 $5.77 Flat for 10, 5-yr Options N/S Route 6, term % Rent = 1% over Wayne County $20,000,000 Honesdale, PA 8 Bradford Towne K-Mart 25 yrs 07/94 94,481 $5.00 Flat for 10, 5-yr Options Centre, term % Rent = 1% over Bradford County $16,875,000 Wysox, PA 9 Builder's Square Builder's 25 yrs 03/94 106,400 $10.05 Flat for 10, 5-yr Options Center Square term No % Rent Cetronia Road Lehigh County Whitehall, PA ========================================================================================================================= Compiled by: CB Commercial Real Estate Group, Inc. =========================================================================================================================
- -------------------------------------------------------------------------------- 43 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMPARABLE RENTALS MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- These comparable centers are located throughout the metropolitan region in competitive areas to the subject property. Furthermore, they are all similar in age to the subject and considered to be of a similar functional design. All of the retail leases were written on a triple net basis, whereby the tenants assume their proportionate share of operating expenses, real estate taxes, and insurance. The higher rates typically reflect smaller satellite spaces, while lower rental rates are typically negotiated for anchor sized spaces. We have also considered asking rental rates in our analysis; however, they were deemed to be less reliable than the leases presented. As a result, we have not included asking rentals. The satellite space face rental rates ranged from $5.50/SF to $15.48/SF with a central tendency of $9.75/SF. However, the majority fell between $8.00/SF and $11.50/SF. The rents at the upper end of the range, or those in the $11.00/SF range best reflect the subject property's achievable rents. As a result, we have concluded to a rental rate within for the subject's satellite space of $11.00/SF. Based upon our analysis, we feel that a "net" rental rate of $11.00/SF is adequately supported. However, for larger satellite spaces a rental rate somewhat below is necessary. Thus, for spaces greater between 5,000 and 7,500 square feet, we considered a market rent of $7.00 per square foot, net. The anchor leases, or comparables #6 through #9, ranged from $5.00/SF to $10.05/SF with an average lease rate of $6.95/SF. The anchor rents reflect a close range for a variety of locations with the exception of comparable #9. However, this lease to Builder's Square has no percentage rent clause and, as a result, agreed to pay a higher base rent. As a result, we have concluded to a rental rate within for the subject's anchor space of $5.00/SF (spaces ranging from 15,000 to 20,000 square feet). Based upon our analysis, we feel that a "net" rental rate of $5.00/SF is adequately supported. - -------------------------------------------------------------------------------- 46 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- In addition to surveying comparable centers, we have also analyzed the most recent lease transactions at the subject center. Since there have been several recent leases at the subject property, these leases have been given substantial weight in our analysis of the subject's market rental rates. These leases are detailed below. ANALYSIS OF SUBJECT LEASES The following table summarizes the subject property's recent lease history.
================================================================================================================== SUMMARY OF RECENT SUBJECT LEASES ================================================================================================================== New / Term Contract TI's Free Tenant Renew (Years) Date Size Rent Escalation / SF Rent - ------------------------------------------------------------------------------------------------------------------ Vesuvios Pizza Renew 5 6/96 1,808 $10.00 $151 Step in None None Year 2 Chicken & Ribs New 10 6/96 1,500 $10.00 None None None Montesino New 5 4/96 1,500 $10.00 $125 Step in Year 2 ================================================================================================================== Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ==================================================================================================================
The typical lease at the subject property is triple net whereby the tenant is responsible for reimbursing the landlord for such expenses as real estate taxes, insurance, and common area maintenance (CAM). Recent retail leases at the subject were $10.00 per square foot. The terms of the recent leases have typically been between five and 10 years which is similar to quoted market terms. Based on our survey of local leasing agents and owners, five-year terms are most common with satellite tenants such as those found in the subject center. Therefore, for the purpose of our analysis, we have utilized a lease term of five years for all tenant suites for speculative renewals. In our interviews with competing leasing agents and owners, we also inquired as to the market norm for rent escalations. Most of the agents agreed that three- to five-year leases are typically flat, with some sort of escalation or bump in 10-year leases. Regardless of the method of escalations, most of the subject and comparable leases have escalations which are intended to be similar to anticipated increases in the CPI. Therefore, we have assumed that the rent will remain flat throughout the five years of the lease term. According to the subject leasing agent, TI's are typically not given, with the owner generally providing a " vanilla box" for new tenants and nothing for renewals. Retail space is typically taken "as-is" with the tenant fitting out their space to their own specifications. We project that no tenant alteration allowance would be provided for new or renewal leases. All of the leasing agents surveyed reported minimal if any free rent. A review of the immediate market indicated that no free rent was typically offered to tenants that leased space in the - -------------------------------------------------------------------------------- 47 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- subject center over the past three to four years. Therefore, based upon the most recent leases within the market, as well as conversations with local leasing agents, we have projected that no free rent will be offered to prospective tenants. CONCLUSIONS: MARKET RENT ESTIMATE FOR THE SUBJECT PROPERTY Based on the previous analysis, the current market lease parameters for the subject property are estimated as follows: ======================================================================== CONCLUDED MARKET LEASE TERMS (PER SQUARE FOOT / YEAR) - ------------------------------------------------------------------------ Category Satellite Space Anchor Space - ------------------------------------------------------------------------ Market Rent $10.00 & $7.00(NNN) $5.00 (NNN) Lease Term 5 Years 20 Years Annual Escalation 0.0% 0.0% Tenant Improvements $0.00 $0.00 Free Rent (Months) 0 Months 0 Months - ------------------------------------------------------------------------ Source: CB Commercial Real Estate Group, Inc. ======================================================================== CONTRACT RENT As discussed, the subject's leasable area is divided into eighteen suites within one building and one outparcel. Currently, the subject is 100% occupied. Through our research of the subject property, which included a complete review of lease abstracts, rent rolls (both current and historical), and detailed discussions with the property manager and leasing agent, the following rent roll summary was utilized to detail currently leased suites and general information employed for this approach. Additionally, within the Addenda are copies of the tenant lease assumptions, generated by Pro-ject+ Plus, a computerized lease-by-lease analysis program. Information submitted to us and contained in the Addenda provide additional support to the data and assumptions inputted for this method and is assumed to be correct and reliable. CB Commercial reserves the right to amend our input assumptions if any documentation is subsequently available which contradicts that assumed for this method. Located on the following page is the subject rent roll summary. - -------------------------------------------------------------------------------- 48 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
===================================================================================================== MOUNTAINVILLE PLAZA, ALLENTOWN, PA RENT ROLL ===================================================================================================== Square Rent / Annual Suite Tenant Feet Begin End SF Rent - ----------------------------------------------------------------------------------------------------- 1 Rose Garden Laundry 1,500 10/91 06/98 $8.50 $12,750 2 The Beer Mart 3,000 01/92 10/97 $10.00 $30,000 3 Family Dollar Store 8,689 09/90 06/00 $5.91 $51,352 4 Golden Harvest Restaurant 5,000 02/89 10/98 $9.00 $45,000 5 National Auto Stores 7,476 03/88 02/98 $5.50 $41,118 6 Carvel Ice Cream 1,500 01/86 10/97 $10.40 $15,600 7 Kling's Handyman 20,000 10/90 01/99 $4.00 $80,000 8 Colortyme 3,500 04/87 05/99 $8.75 $30,625 9 Beneficial Consumer Discount 2,000 06/88 05/98 $10.00 $20,000 10 Thrift Drug 15,808 04/79 04/99 $3.80 $60,070 11 Wine & Sprits 5,515 12/79 02/96 $6.39 $35,241 12 His & Her Hair Shop 1,305 11/82 10/97 $10.22 $13,337 13 Vesuvios Pizza 1,808 06/84 12/96 $6.00 $10,848 14 Acme Markets 32,200 01/86 04/98 $2.65 $85,330 15 Bargains Galore 3,000 07/94 07/96 $7.00 $21,000 16 Studio Nails 1,500 07/95 07/96 $6.20 $9,300 17 Montesino 1,500 04/96 04/01 $10.00 $15,000 18 Chicken & Ribs 1,500 09/96 08/01 $10.00 $15,000 Total Leased Square Feet 116,801 Average Rent: $ 5.06 $591,571 Vacant Space 0 Occupancy-Overall 100% ===================================================================================================== Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. =====================================================================================================
The subject's tenancy is comprised of regional and local tenants including Acme, Family Dollar, National Auto, and Kling's Handyman. Additionally, Thrift Drug is a national tenant. Overall, the quality of the tenancy is considered to be good for the area. Current rental rates range from $2.65/SF to $10.40/SF. SPECIAL LEASE PROVISIONS AND ASSUMPTIONS The following discussion summarizes any lease provisions and assumptions of special note. Pending Leases According the subject's leasing agent, the lease for the Chicken and Ribs store is out for signature. We have assumed that this lease will commence September 1996. Tenants Vacating According to the subject property's leasing agent, Bargains Galore will vacate at the termination of its lease (July 1996). We have assumed that this space will be re-leased within six months. - -------------------------------------------------------------------------------- 49 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Renewal Options Options to renew at below or above market rent may have an impact on the valuation analysis. For example, if below market renewals are exercised, they may result in a downward impact on value. However, to the extent that re-tenanting costs are saved (rent loss during downtime, tenant improvements, leasing commissions, etc.), there may be an advantage in having the tenant renew at some rate below market rent in order to avoid these costs. Some of the subject leases have renewal options. Where applicable, if a tenants' option rent is below market, we have assumed that the tenant would exercise its renewal option. Conversely, if a tenants' option rent is above market, we have assumed that the tenant would not exercise its renewal option and terminate the lease. EXPENSE REIMBURSEMENTS Current and future hypothetical retail leases which will encumber the subject property will be based upon triple net lease structures and are consistent with recent leases written at the subject property and the market in general. The tenants will be responsible for reimbursing the landlord for their pro rata share of operating expenses including their pro rata share of CAM, real estate taxes, and insurance. The pro rata share calculations for future tenants are calculated by dividing the tenant's occupied rentable area by the gross leasable area of the center. The following is a breakdown of the subject's historical recoveries and CB Commercial's projections for the proforma. It should be noted that the subject's operating statements are based on a fiscal year basis, beginning June 1 and continuing through May 31. Expense Reimbursements Expense reimbursements for the subject property consist of real estate taxes, insurance, and common area maintenance. Common area maintenance expenses consist utilities, management fees, general and administrative, cleaning and repairs, and maintenance expenses. The subject's historical expense reimbursements are as follows: ==================================== EXPENSE REIMBURSEMENT ------------------------------------ Year Total $ Amount ------------------------------------ 1993 $150,871 1994 $141,799 1995 $131,572 1996 Budget $114,792 Year 1 Pro Forma $128,622 ==================================== Source: Mark Centers Trust ==================================== - -------------------------------------------------------------------------------- 50 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- The first year of our DCF model indicates reimbursements of $128,622. Historical expense reimbursements have fallen in recent years due in part to a drop in expenses as management has attempted to cut costs in recent years. The budgeted amount appears to be unreasonably low based upon projected expenses and reimbursement clauses for existing tenants. OTHER INCOME This income category can be derived from several different sources including tenant service income, merchants association fees, late fee income, short-term storage income, professional services provided for the tenants by the landlord/management, ground rent as well as other miscellaneous sources. Other income for the subject property includes $597.50 per month for an adjacent landowner to utilized the subject property's parking lot and $1,500 per month for a cell phone antenna. PERCENTAGE RENT INCOME In addition to the basic rental charges, the tenants are sometimes responsible for paying the landlord additional rent equal to a specified percentage of the tenant's gross sales made in, upon, or from the premises, over a breakpoint factor or according to a specific schedule. Three of the subject tenants have percentage rent clauses contained within their leases. - -------------------------------------------------------------------------------- 51 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
==================================================================================================================================== PERCENTAGE RENT CLAUSES ==================================================================================================================================== Tenant Breakpoint Percent Year Gross Sales % Rent Paid CBC's FY97 Projection - ------------------------------------------------------------------------------------------------------------------------------------ Rose Garden Laundry $192,857 7.00% 1994 $66,261 $ 0 $65,000 1995 $65,143 $ 0 Beer Mart $750,000 3.00% 1994 $605,495 $ 0 $620,000 1995 $643,318 $ 0 Family Dollar $1,448,336 3.0% 1994 $828,440 $ 0 $800,000 1995 $806,556 $ 0 National Auto $1,250,000 1.0% 1994 $1,328,007 $ 780 $1,435,000 $1,495,200 (4/98) 1995 $1,437,000 $ 1,879 $1,774,000 (5/03) $1,933,000 (5/08) $2,242,800 (5/13) Thrift Drug $2,000,000 3.0% 1994 $2,658,831 $ 9,205 $2,790,000 $2,600,000 2.5% 1995 $2,793,643 $12,731 $3,200,000 2.0% Vesuvios $180,800 6.0% 1994 $129,276 $ 0 $130,000 1995 $132,537 $ 0 Acme Markets $9,541,596 1.00% 1994 $11,992,324 $ 0 $12,300,000 1995 $12,310,454 $ 0 ==================================================================================================================================== * Acme and Thrift Drug percentage rents are offset by real estate tax recaptures. ==================================================================================================================================== Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ====================================================================================================================================
Given the aforementioned sales histories, we have projected the gross sales for each tenant as illustrated in the right column of the table. We have also projected that the gross sales figures will grow by 3.0% per annum over the course of the cash flow projection. POTENTIAL GROSS INCOME The potential gross income for the subject property is summarized as follows. - -------------------------------------------------------------------------------- 52 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ STABILIZED POTENTIAL GROSS INCOME (FY 1997) - -------------------------------------------------------------------------------- Totals - -------------------------------------------------------------------------------- Total Minimum Rent $ 588,887 Expense Reimbursement - Common Area Maintenance Recovery (Including Insurance Recovery) $ 49,603 - Real Estate Tax Recovery $ 79,019 - Percentage Rent $ 34,268 --------- Potential Gross Income $ 751,777 - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ VACANCY AND COLLECTION LOSS This is an allowance for reductions in potential income attributable to vacancies, tenant turnover, and non-payment of effective rent. In the direct capitalization process, a market-derived, stabilized vacancy and collection loss estimate is subtracted from potential gross income in order to arrive at effective gross income. The subject property is currently 100% leased. Furthermore, the subject's competitive market exhibits a vacancy level of approximately 4.0%. Due to the long-term leases at the subject property, the average vacancy rate over the projected holding period, which is attributed to downtime between leases, approximates a minimal 1.0%. In addition to vacancy, we estimated a blended credit loss factor of 2.0% which takes into account both national and local tenants at the subject center. Therefore, the combined long-term vacancy and credit loss factor for the subject property amounts to approximately 3.0%. In the first year of our discounted cash flow analysis, the combined credit loss amounts to $22,553. EFFECTIVE GROSS INCOME Given our estimate of potential gross income, other income, and a vacancy and collection loss, the estimated effective gross income is derived as follows: ================================================================================ EFFECTIVE GROSS INCOME (FY 1997) - -------------------------------------------------------------------------------- Potential Gross Income: $ 305,786 Less: Collection Loss $ 3,889 Plus: Miscellaneous Income $ 25,485 Effective Gross Income: $ 754,709 ================================================================================ Our estimate of effective gross income used in direct capitalization is $754,709. This figure is the same as the EGI in the first year of our cash flow in the discounted cash flow method. - -------------------------------------------------------------------------------- 53 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- OPERATING EXPENSE ANALYSIS In projecting the revenues and expenses for the subject property, we have analyzed the historical figures for fiscal years 1993 through 1995 as well as management's forecast of revenues and expenses for fiscal year 1996. In addition, we have utilized the Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers publication to assist in our analysis. We have considered the category " Regions 1, 2 & 3 (East): Open Shopping Centers" as the most representative of the subject property. A summary of the average expenses taken from this publication increased at an inflationary rate to reflect our fiscal year 1997 analysis are presented as follows: ================================================================ COMPARABLE EXPENSE ANALYSIS ================================================================ Expense Category P.S.F. ---------------------------------------------------------------- General & Administrative $ 0.08 Repairs & Maintenance $ 0.36 Services $ 0.46 Utilities $ 0.18 ------ Total CAM $ 1.08 Real Estate Taxes $ 1.26 Insurance $ 0.15 Management Fees $ 0.41 Total Operating Expenses $ 2.90 ================================================================ Source: Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers ================================================================ Our estimate of the subject's stabilized expenses are detailed as follows. Common Area Maintenance The subject's historical and projected common area maintenance (CAM) expenses are as follows: ================================================ COMMON AREA MAINTENANCE EXPENSE ================================================ Year Total $ Amount ------------------------------------------------- 1993 $40,470 1994 $80,444 1995 $49,601 1996 Budget $55,864 CB 1996 Projection $60,000 ================================================ Source: Mark Centers Trust ================================================ Common area maintenance (CAM) charges generally includes various items such as general and administrative expenses, repair and maintenance expenses, utilities, and general services - -------------------------------------------------------------------------------- 54 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- such as cleaning, landscaping, security, and common area insurance expenses. We project the total CAM expense in 1996, before management fees, at $60,000 or $0.51/SF. This is somewhat lower than the average CAM expenses for the properties surveyed by IREM of $1.23/SF for open shopping centers in the east. However, the subject's historical expenses have ranged from $0.35/SF to $0.70/SF. Given the subject's historical CAM expense structure coupled with its effective age, occupancy and the services provided, the subject's projected CAM figure is considered reasonable. Property Taxes Historical and budgeted property tax expenses are as follows: ============================================== PROPERTY TAX EXPENSE ---------------------------------------------- Year Total $ Amount ---------------------------------------------- 1993 $122,042 1994 $113,417 1995 $112,882 1996 Budget $100,800 Year 1 Pro Forma $127,508 ============================================== Source: Mark Centers Trust ============================================== As discussed fully within the tax and assessment data section of the report, estimated taxes for fiscal year 1997 are projected to be $127,508. Insurance Historical and budgeted insurance expenses are as follows: ============================================== INSURANCE EXPENSE ---------------------------------------------- Year Total $ Amount ---------------------------------------------- 1993 $13,351 1994 $12,223 1995 $11,744 1996 Budget $ 9,516 CB 1996 Projection $11,000 ============================================== Source: Mark Centers Trust ============================================== Insurance at the subject property includes both liability insurance and fire insurance. This expense has decreased from 1993 to 1996 to a level of $0.08/SF. We have placed primary emphasis on the subject's historical and 1996 budgeted insurance expenses and have estimated the insurance expense at $11,000, or $0.09/SF. - -------------------------------------------------------------------------------- 55 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Professional Management Fee In order to maintain the control of the property and subsequently ensure the stream of income that it generates, it is necessary to employ either internal or outside management. In the case of the subject property, the property is managed internally and no management expense has been reflected in historical statements. Typical professional management fees in the local market range from 1.0% to 5.0% of effective gross income. Based upon the size and nature of the subject improvements, we have applied a management expense of 2.0% of effective gross income. Because management is calculated based on a percentage of effective gross income, this expense will vary each year because of fluctuations in the income stream. In the first year of our analysis, this expense equates to $15,094 or $0.13/SF. Replacement Reserves This expense typically represents a reserve for future replacement of long-lived items. The amount of reserve and whether it is included or not in the direct capitalization and DCF analyses depends on the actions reflected by buyers and sellers in the local market. Based on the available comparable data and discussions with brokers and investors, replacement reserves generally range from $0.10/SF to $0.20/SF for retail properties of similar quality and condition as the subject. Given the subject's average condition, we have estimated this expense at $0.10/SF or $11,680 in 1996 increasing at our projected annual expense growth rate of 3.0%. Based on discussions with local market participants, replacement reserves are typically subtracted in calculating NOI when determining the cash flow in the DCF analysis. Total Concluded Operating Expenses The concluded stabilized operating expenses for the subject total an estimated $227,763, or $1.95 per rentable square foot. This total expense estimate is for the first year of our proforma and incorporates fiscal year conversions not reflected in the previous 1996 calendar year estimates. The expense is slightly lower than the average indicated by IREM ($2.90/SF) but judged reasonable given the historical and budgeted operations of the subject. CAPITALIZATION RATE There are several methods for deriving an overall capitalization rate for direct capitalization. A common method for establishing an overall capitalization rate for properties similar to the subject is to review the criteria of major investors in the marketplace. This may serve as a check against other techniques or may be a primary source when ample data exists. While derivation of capitalization rates from comparable sales is preferable, we were unable to obtain adequate income and expense data to employ this method from the sales used within the Sales Comparison Approach. Therefore, the investor survey method is used as the primary approach in deriving our overall capitalization rate. The subject property is a retail shopping center that would be attractive to either a local or a national investor. The category in the published investor - -------------------------------------------------------------------------------- 56 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- survey most comparable to the subject is class B neighborhood shopping center. The investors typically interviewed for the survey are regional or national investors associated with pension funds, REIT's, insurance companies, financial institutions, etc. The information below is taken from CB Commercial most recent National Investor Survey (first quarter 1996). ================================================================================ SUMMARY OF INVESTOR SURVEY OVERALL CAPITALIZATION RATES NEIGHBORHOOD SHOPPING CENTERS - CLASS B - -------------------------------------------------------------------------------- Investor Survey R(o) Range Average Date of Survey - -------------------------------------------------------------------------------- CB Commercial National Investor Survey 9.0% - 11.5% 10.3% First Quarter, 1996 ================================================================================ Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The previous survey indicates an overall range of 9.0% to 11.5% for neighborhood shopping centers with an average of approximately 10.3%. The capitalization rate reflects the quality and duration of the income stream as well as the physical characteristics of the property. The tenant mix at the subject center is considered to be good for the area with mostly regional tenants. The largest tenant at the subject , Acme, is a regional tenant. The Acme lease expires 1998; however, Acme has five, five-year options to renew. Kling's Handyman, is also a regional tenant and expires in 1999 and has two, five-year options to renew. Thrift Drug, a national tenant, expires in 1999 and has three, five-year options to renew. Lease expiration is fairly even throughout the holding period which reduces risk. The center is currently 100% occupied. Overall, the quality, quantity and duration of the cash flow is considered to be good. With respect to physical characteristics, the subject is a functional neighborhood center of average quality and in average overall condition. In addition, the subject is situated in a good retail location with moderate volumes of traffic. Based upon this survey and the factors discussed above, an 10.5% overall capitalization rate (towards the middle of the range) appears to be appropriate for the subject property. Direct Capitalization Summary A summary of the direct capitalization method as applied to the subject property is illustrated in the following table: - -------------------------------------------------------------------------------- 57 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ MOUNTAINVILLE PLAZA DIRECT CAPITALIZATION SUMMARY - -------------------------------------------------------------------------------- Category Total P.S.F. - -------------------------------------------------------------------------------- Income Total Market Rent $ 588,887 $ 5.04 Recovery Income 128,622 1.10 Gross Rental Income $ 717,509 $ 6.14 Less: Vacancy and Credit Loss (22,553) (0.19) Plus: Other Income 25,485 0..23 Plus: Percentage Rents $ 34,268 0.29 Effective Gross Income $ 754,709 $ 6.46 Expenses Common Area Maintenance (CAM) (60,750) (0.52) Real Estate Taxes (129,101) (1.11) Insurance (11,138) (0.10) Management Fees (15,094) (0.13) Replacement Reserves (11,680) (0.10) Total Expenses $ (227,763) $(1.95) OER 30% Net Operating Income $ 526,945 $ 4.51 CAPITALIZATION OF NOI: @10.5% $ 5,018,533 $ 42.97 Reconciled Value $ 5,000,000 $ 42.81 ================================================================================ Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The concluded market value of the subject property, based on the direct capitalization method, is $1,700,000. - -------------------------------------------------------------------------------- 58 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW ANALYSIS Our DCF assumptions are summarized as follows. Most of the following assumptions have been discussed and supported within prior sections of the report. A discussion of the discount rate, terminal capitalization rate and holding period follow the assumptions summarized below. ================================================================================ SUMMARY OF DISCOUNTED CASH FLOW ASSUMPTIONS MOUNTAINVILLE PLAZA ================================================================================ General Assumptions Start Date June 1, 1996 Terms of Analysis 10 years Basis (Calendar / Fiscal) Fiscal Software Project + Plus Growth Rate Assumptions Expenses 3.0% Market Rent 3.0% Real Estate Taxes 3.0% Inflation (CPI) 3.0% Market Rent Assumptions Anchor $ 5.00 (NNN) Satellite $10.00 & $7.00(NNN) Leasing Assumptions Lease Term 5 Years Renewal Probability 50% Weighted Average of: Tenant Improvements $0.00 Months of Free Rent 0 Leasing Commissions (Cashed-Out) 4.5% Down Time Between Leases 6 Months Tenant Assumptions Existing tenant leases were entered at contract rent and terms. Speculative renewals assume tenants will pay base rent plus their pro rata share of CAM, real estate taxes and insurance. Contractual recoveries were input into the model per their respective leases. Miscellaneous Assumptions Credit Loss 3.0% Avg. Occupancy Over Projection Period 99% Structural Maintenance/ Reserves ($/SF) $0.10 Financial Assumptions Discount Rate (IRR) 12.50% Terminal Overall Capitalization Rate (R(O)) 11.00% Costs of Sale 2.00% ================================================================================ Source: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 59 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNT RATE ANALYSIS A discount rate is a rate of return on capital utilized to capitalize future payments or receipts to present value. It is based on the time value of money concept. For appraisal purposes, the rate used to convert income to property value should represent the annual rate of return necessary to attract investment capital. The rate is influenced by many considerations, including the degree of apparent risk, market attitudes with respect to future inflation, the prospective rates of return for alternative investment opportunities, supply of and demand for mortgage funds, and the availability of tax shelters. Because rates of return used in income capitalization represent prospective rates, as distinguished from historical rates, special consideration is given to market perceptions of risk and changes in purchasing power. Although it is not possible to prove conclusively the suitability of a particular rate of return on the basis of market evidence, the chosen rate should be consistent with the available evidence. Rate selection requires judgment and knowledge concerning prevailing market attitudes and economic indicators. Both the discount rate and the reversionary capitalization rate must reflect the relative risk perceived by investors for the specific market being studied. Generalities must be avoided. To determine such rates, we have used surveys of real estate investors analyzed and adjusted for comparative returns found in the capital markets. National investor surveys include data on investors operating regionally and nationally, such as representatives of insurance companies, commercial banks, pension funds, investment banking firms, syndication firms, and investment advisory firms. Such companies invest in all types of properties, including office buildings, retail shopping centers, hotels, apartment complexes, and industrial facilities. These surveys are valuable for determining general parameters but must be honed to the local market. Based on surveys from CB Commercial Real Estate Group Inc. for the first quarter 1996, investment criteria for numerous market participants including investors that would be in competition for acquiring a property such as the subject are illustrated below.
================================================================================================================== FIRST QUARTER 1996 NATIONAL INVESTOR SURVEY CLASS B NEIGHBORHOOD SHOPPING CENTERS ================================================================================================================== TYPE OF FIRM OVERALL CAP. RATES GENERAL DISCOUNT REAL RATE INFLATION RATE OF RETURN ======================================== GOING-IN TERMINAL (IRR) (RRR) ================================================================================================================== Range: 9-11.5 10-12 2-4 12-14.5 9.5-11 Average 10.3 10.8 3.1 13.1 10.1 ================================================================================================================== Change from -20 +10 -40 +50 +190 3rd Qtr Survey ==================================================================================================================
Source: CB Commercial Real Estate Group Inc. - 1st Quarter 1996 - -------------------------------------------------------------------------------- 60 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- We have surveyed national real estate investors for their investment criteria when purchasing real estate such as the subject. Investor expectations for inflation range from 2% to 4%, with an average of 3.1%. We have selected an inflation rate for our analysis of 3.0%. The discount rate reflects the quality and duration of the income stream as well as the physical and locational characteristics of the property. As discussed within the overall rate section, the tenant mix at the subject center is considered to be good for the area with mostly regional tenants. Moreover, lease expiration is fairly even throughout the holding period which reduces risk. The center is currently 100% occupied. Overall, the quality, quantity and duration of the cash flow is considered to be good. With respect to physical characteristics, the subject is a functional neighborhood center of average quality and in average overall condition. In addition, the subject is situated in an average retail location with relatively low volumes of traffic. In general, the discount rate (IRR) is comprised on a safe rate (usually Treasuries) and a risk premium. The risk premium is difficult to quantify but with sound logic a reasonable rate can be ascertained. The chart presented below graphically depicts real estates position within the risk/reward graph. - -------------------------------------------------------------------------------- INVESTOR RISK VERSUS RETURN REQUIREMENTS Anticipated Return _ Real Estate _ Common Stocks - Corporate Bonds _ Mortgage Backed Securities _ Municipal Bonds _ T - Bills Riskless Rate - -------------------------------------------------------------------------------- Perceived Level of Risk US Treasury notes and bonds are considered risk free since they are backed by the United States government. Their rates only fluctuate with perceived inflation. The use of this, or any - -------------------------------------------------------------------------------- 61 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- short term investment including the prime rate or LIBOR is meaningless when compared to an investment with a 10-ear holding period. Accordingly, as a starting point, we only considered risk free or nearly risk free investments with a maturity of 10 years. These include Treasuries, corporate bonds and municipal bonds. Adjusted for daily fluctuations, these debt offerings are yielding 5.59% to 8.25%. Mortgaged backed securities generally tend to fall above these instruments. The next layer of risk would include debt rated as low as BBB. These notes are yielding as much as 10%. Long-term mortgages are also yielding over 10% considering the mortgage constant on a note priced at 250 to 300 basis points over comparable Treasuries. Riskier investments such as junk bonds vary widely from 12% to 22% on an unleveraged basis. Real estate, as indicated on the chart above falls between common stock (10%) and junk bonds (16%). To eliminate the burden of illiquidity, REIT's and similar investments are being created. They represent a quasi-real estate opportunity. REIT's are currently providing dividends ranging from 6% to 8% but offer potential yields of 15% to 20% Various financial instruments are yielding between 5.59% and 8.25% depending upon the type of investment as indicated on the chart below based on data obtained from the Federal Reserve Statistical Release for the week ending May 17, 1996. It should be noted that over the past year we have witnessed an increase in the interest rate of all of the following instruments. ================================================================================ INSTRUMENT RATE - -------------------------------------------------------------------------------- Prime Rate 8.25% - -------------------------------------------------------------------------------- Municipal Bonds 5.96% - -------------------------------------------------------------------------------- Short-Term Treasury Securities (1 year) 5.59% - -------------------------------------------------------------------------------- Long Term Treasury Securities (10 years) 6.68% - -------------------------------------------------------------------------------- Corporate Aaa Bonds (10+ years) 7.57% - -------------------------------------------------------------------------------- Corporate Baa Bonds (10 + years) 8.25% ================================================================================ The risk premium is the rate added to Treasuries to account for illiquidity, the capital markets and the economy. Whether the risk premium decreases in the near term is dependent solely on inflation, the growth of the economy and capital markets. During 1995, the Federal Reserve decreased interest rates in order to stimulate a sluggish economy. The low rates have continued during the early portion of 1996, however, have recently begun to ascend. Over the longer term, as the existing supply of space is absorbed, the risk premium will decrease. Based on the above, we feel that the current required rate of return (IRR) for the subject would fall slightly below the middle of the range at 12.5%. This reflects the quality, quantity and cash flow risk associated with the subject property. As such, we have utilized a discount rate of 12.5% in our analysis. - -------------------------------------------------------------------------------- 62 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- TERMINAL RATE To estimate the appropriate terminal capitalization rate, we have considered the rates reflected in the investment criteria outlined above for both going-in and terminal capitalization. Typically, under stable market conditions, the terminal capitalization rate will be greater than the going-in rate to reflect the risk associated with the holding period. Typically 50 to 100 basis points are added on to the going-in cap rate under stable market conditions to account for the additional risk. Furthermore, our national investor survey also indicated an average terminal capitalization 50 basis points greater than the going-in rate. It is evident by historical and current performance of the center and it is our opinion that the subject property will encounter average-to-good market acceptance in the future. It is our opinion that a terminal capitalization rate of 11.0% is the most appropriate for the subject property. A 2% deduction for costs of sale has been utilized to reflect the net reversionary value. HOLDING PERIOD To apply the discounted cash flow analysis, an estimate must be made of the appraised property's holding period based on typical investors' motives in the local market. Historical investment holding periods of similar shopping centers typically have ranged from 10 to 15 years. A 10- to 15- year holding period was analyzed to test the property's sensitivity to roll-overs. A 10-year holding period was selected. Our discounted cash flow analysis is presented on the following page. - -------------------------------------------------------------------------------- 63
------------------------------------ ------------------------------------ Building Size 116,801 Mountainville, Allentown, Center Reconciled Value $5,038 Cost of Sales 2.000% Cash Flow Report Value per SF $43.14 Hold Period (Years) 10 % Residual of Recon. V 38.2% Reduce Residual by Cap Ex Yes Direct Cap Rate 10.50% Residual Discount Rate 12.50% Direct Cap Value $5,130 ------------------------------------ ------------------------------------ Compounded Ann. --------------------------------------------------------------------- Avg. Growth 1997 1998 1999 2000 2001 2002 2003 --------------------------------------------------------------------- 2.15% BASE RENT 588,887 604,414 618,089 640,535 645,248 659,857 651,773 N/A Free Rent 0 0 0 0 0 0 0 4.79% Expense Recoveries 128,622 133,006 138,355 147,683 159,987 168,468 172,145 5.08% Percentage Rent 34,268 9,300 28,410 27,043 26,559 28,785 15,470 - ---------- -------------------------------------------------------------------- 2.79% GROSS INCOME 751,777 746,720 784,854 815,261 831,794 857,110 839,388 2.79% Credit/Vacancy Loss (22,553) (22,402) (23,546) (24,458) (24,954) (25,713) (25,182) 3.00% Miscellaneous Incomes 25,485 26,249 27,037 27,848 28,683 29,544 30,430 - ---------- -------------------------------------------------------------------- 2.80% EFFECTIVE GROSS INCO 754,709 750,567 788,345 818,651 835,523 860,941 844,636 - ---------- 2.99% TOTAL EXPENSES 216,083 222,031 228,997 235,999 242,926 250,220 256,885 - ---------- -------------------------------------------------------------------- 2.72% NET OPERATING INCOM 538,626 528,536 559,348 582,652 592,597 610,721 587,751 N/A Commissions 14,866 12,999 12,720 0 11,552 8,979 15,160 N/A Tenant Improvements 0 0 0 0 0 0 0 N/A Capital Additions 11,680 12,030 12,391 12,763 13,146 13,540 13,947 - ---------- -------------------------------------------------------------------- N/A TOTAL DEDUCTIONS 26,546 25,029 25,111 12,763 24,698 22,519 29,107 - ---------- -------------------------------------------------------------------- 2.84% CASH FLOW 512,080 503,507 534,237 569,889 567,899 588,202 558,644 - ---------- TOTAL CASH FLOW 512,080 503,507 534,237 569,889 567,899 588,202 558,644 -------------------------------------------------------------------- Debt Service N/A N/A N/A N/A N/A N/A N/A -------------------------------------------------------------------- CASH FLOW AFTER DEB 512,080 503,507 534,237 569,889 567,899 588,202 558,644 -------------------------------------------------------------------- CUMULATIVE SURPLUS N/A N/A N/A N/A N/A N/A N/A -------------------------------------------------------------------- ------------------------------------------------------------------------------------------------- Implied Overall Rate 10.69% 10.49% 11.10% 11.56% 11.76% 12.12% 11.67% Cash on Cash Return 10.16% 9.99% 10.60% 11.31% 11.27% 11.67% 11.09% ------------------------------------------------------------------------------------------------- ----------------------------------------------------- Sale/Yield Matrix (000's) Terminal Cap Rate ------------------------------------------ Disc Rate 10. 75% 11.00% 11.25% 11.50% ----------------------------------------------------- [GRAPHIC OMITTED] 12.00% 5,240 5,193 5,148 5,106 ------------------------------------------ 12.25% 5,161 5,115 5,072 5,029 ------------------------------------------ 12.50% 5,083 5,038 4,995 4,954 ------------------------------------------ 12.75% 5,007 4,963 4,921 4,881 ------------------------------------------ 13.00% 4,933 4,890 4,849 4,809 ------------------------------------------ 13.25% 4,860 4,818 4,777 4,739 ----------------------------------------------------- ----------------------------------------------------- Compounded Ann. ------------------------------------------- Avg. Growth 2004 2005 2006 2007 ------------------------------------------- 2.15% BASE RENT 685,669 720,238 720,044 728,285 N/A Free Rent 0 0 0 0 4.79% Expense Recoveries 185,835 193,954 197,815 205,435 5.08% Percentage Rent 52,725 48,710 50,614 56,232 - ---------- ------------------------------------------- 2.79% GROSS INCOME 924,229 962,902 968,473 989,952 2.79% Credit/Vacancy Loss (27,727) (28,887) (29,054) (29,699) 3.00% Miscellaneous Incomes 31,343 32,283 33,252 34,249 - ---------- ------------------------------------------- 2.80% EFFECTIVE GROSS INCOME 927,845 966,298 972,671 994,502 - ---------- 2.99% TOTAL EXPENSES 265,749 273,933 281,699 290,003 - ---------- ------------------------------------------- 2.72% NET OPERATING INCOM 662,096 692,365 690,972 704,499 N/A Commissions 22,852 7,482 13,794 11,027 N/A Tenant Improvements 0 0 0 0 N/A Capital Additions 14,365 14,796 15,240 15,697 - ---------- ------------------------------------------- N/A TOTAL DEDUCTIONS 37,217 22,278 29,034 26,724 - ---------- ------------------------------------------- 2.84% CASH FLOW 624,879 670,087 661,938 677,775 - ---------- TOTAL CASH FLOW 624,879 670,087 661,938 677,775 ------------------------------------------- Debt Service N/A N/A N/A N/A ------------------------------------------- CASH FLOW AFTER DEBT 624,879 670,087 661,938 677,775 ------------------------------------------- CUMULATIVE SURPLUS N/A N/A N/A N/A ------------------------------------------- ----------------------------------------------------------------------- Implied Overall Rate 13.14% 13.74% 13.71% 13.98% Cash on Cash Return 12.40% 13.30% 13.14% 13.45% -----------------------------------------------------------------------
================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW CONCLUSION We used "PRO-JECT +plus" computer software to create a cash flow model for a long term hold. Reference is made to the "Annual Cash Flow Report", generated by the Pro-ject software, on the previous page which provides a summary of cash flow from all sources. We utilized a 10-year holding period and have discounted the cash flow on a fiscal year basis from 1997 to 2006. The cash flow incorporates the terms of existing leases during the analysis period and our assumptions regarding the lease-up of vacant space. It also calculates renewal rentals when leases expire based on current market rent escalated at a growth factor. In addition, a forecast was made for 15 years to check for any irregularities in the income stream which may artificially affect the reversionary sale price. It should be noted that based on our analysis of the extended holding period indicated that there was no irregularities. We capitalized the 11th year net operating income to determine the reversionary value at the end of year 10. CONCLUSION OF INCOME CAPITALIZATION APPROACH The preceding analysis indicates the following conclusions: ========================================================== INCOME CAPITALIZATION APPROACH VALUES ---------------------------------------------------------- Method Indicated Value ---------------------------------------------------------- Direct Capitalization $ 5,000,000 Discounted Cash Flow $ 5,000,000 ========================================================== Source: CB Commercial Real Estate ========================================================== Although the value was the same in both methods, greater emphasis is placed on the DCF analysis because it is the method likely to be used by a typical investor. As a result, based on the Income Capitalization Approach, CB Commercial concludes a value estimate for the subject property of $5,000,000. This equates to $42.81 per rentable square foot. - -------------------------------------------------------------------------------- 65 CONCLUSION ================================================================================ RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- RECONCILIATION OF VALUE CB Commercial was instructed to estimate the market value of the leased fee interest in the subject property. The value conclusions for each applicable approach are summarized below. ================================================================ SUMMARY OF VALUE CONCLUSIONS ================================================================ Cost Approach N/A Sales Comparison Approach $ 5,000,000 Income Capitalization Approach $ 5,000,000 ================================================================ Source: CB Commercial Real Estate Group, Inc. ================================================================ The Income Capitalization Approach is considered the most persuasive method for valuing the subject property. This approach is predicated on the principle of anticipated economic benefits and, therefore, best reflects the investment characteristics of the subject. Properties such as the subject are typically purchased by investors; thus, this approach must closely parallels the anticipated analysis that would be employed by the most typical purchaser. Since the subject property has a number of existing leases with a variety of terms, the DCF technique best models the future cash flow stream to a prospective buyer. The Sales Comparison Approach is predicated on the principle that an investor would pay no more for an existing property than for a comparable property with similar utility. This approach is contingent on the reliability and comparability of available data. The data developed was considered sufficiently reliable to reach a value conclusion by the Sales Comparison Approach. However, due to the lack of truly comparables sales in recent years, this method is given secondary consideration in the reconciliation. The Cost Approach is predicated on the principle that an investor would pay no more for an existing property than it would cost to acquire land and construct a building with similar utility. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Furthermore, due to the age of the subject and current market conditions, accrued depreciation would be substantial and difficult to estimate. An investor would not use the Cost Approach due to the imprecise nature of estimating the accrued physical, functional, or external depreciation affecting the improvements. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. - -------------------------------------------------------------------------------- 66 ================================================================================ RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- The final value conclusion and the approaches relied upon give strong consideration to the market behavior of the typical buyer and current market environment for the property appraised. Based on the foregoing analysis, it is concluded that the market value of the leased fee interest in the subject property, subject to the assumptions and limiting conditions, as of June 1, 1996, is: FIVE MILLION DOLLARS ($5,000,000) This value is subject to all of the assumptions and limiting conditions stated throughout the report, including specific assumptions and limiting conditions. - -------------------------------------------------------------------------------- 67 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS 1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to total that would adversely affect marketability or value. CB Commercial is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CB Commercial, however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject property's title should be sought from a qualified title company that issues or insures title to real property. 2. It is assumed that improvements have been constructed or will be constructed according to approved architectural plans and specifications and in conformance with recommendations contained in or based upon any soils report(s). Unless otherwise specifically noted in the body of this report, it is assumed: that any existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are, or will be upon completion, in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that it or they will withstand any known elements such as windstorm, hurricane, tornado, flooding, earthquake, or similar natural occurrences; and, that the improvements, as currently constituted, conform to all applicable local, state, and federal building codes and ordinances. CB Commercial professionals are not engineers and are not competent to judge matters of an engineering nature. CB Commercial has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CB Commercial by ownership or management; CB Commercial inspected less than 100% of the entire interior and exterior portions of the improvements; and CB Commercial was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CB Commercial reserves the right to amend the appraisal conclusions reported herein. 3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property was not observed by the appraisers. CB Commercial has no knowledge of the existence of such materials on or in the property. CB Commercial, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the appraisal. 4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CB Commercial. This report may be subject to amendment upon re-inspection of the subject property subsequent to repairs, modifications, alterations and completed new construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels of operation. - -------------------------------------------------------------------------------- 68 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 5. It is assumed that all factual data furnished by the client, property owner, owner's representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CB Commercial has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, Assessor's Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CB Commercial reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CB Commercial of any questions or errors. 6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CB Commercial will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject. 7. CB Commercial assumes no private deed restrictions, limiting the use of the subject property in any way. 8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposit or subsurface rights of value involved in this appraisal, whether they be gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred. 9. CB Commercial is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject. 10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market. 11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CB Commercial does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CB Commercial. 12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CB Commercial to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form. 13. Unless otherwise noted in this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated. 14. This study may not be duplicated in whole or in part without the specific written consent of CB Commercial nor may this report or copies hereof be transmitted to third parties without said consent, which consent CB Commercial reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or - -------------------------------------------------------------------------------- 69 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- its contents shall not be published, in whole or in part, in any public document without the express written consent of CB Commercial which consent CB Commercial reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a "sale" or "offer for sale" of any "security", as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CB Commercial shall have no accountability or responsibility to any such third party. 15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report. 16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used. 17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area have been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report. 18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CB Commercial unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CB Commercial assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance. 19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or client's designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CB Commercial assumes responsibility for any situation arising out of the Client's failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired. 20. CB Commercial assumes that the subject property analyzed herein will be under prudent and competent management and ownership; neither inefficient or super-efficient. 21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the appraisal report. 22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist. 23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Not withstanding any discussion of possible readily achievable barrier removal construction items in this report, CB Commercial has not made a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect on the value estimated herein. Since CB Commercial has no specific information relating to this issue, nor is CB Commercial qualified to make such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject property. - -------------------------------------------------------------------------------- 70 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 24. For our analysis, we have relied on the information provided by the detailed rent roll and information provided by the subject leasing agent. We have assumed all information is correct. Furthermore, we have assumed all leases out for signature will be returned signed, and executed as of the date indicated to us by the leasing agent. We reserve the right to amend this appraisal should any of this information be later found to be incorrect. - -------------------------------------------------------------------------------- 71 ADDENDA ================================================================================ ADDENDA - -------------------------------------------------------------------------------- ADDENDA - -------------------------------------------------------------------------------- 72 ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- ADDENDUM A GLOSSARY OF TERMS assessed value Assessed value applies in ad valorem taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to market value, but it is usually calculated in relation to a market value base. + cash equivalency The procedure in which the sale prices of comparable properties sold with atypical financing are adjusted to reflect typical market terms. contract, coupon, face, or nominal rent The nominal rent payment specified in the lease contract. It does not reflect any offsets for free rent, unusual tenant improvement conditions, or other factors that may modify the effective rent payment. coupon rent See Contract, Coupon, Face, or Nominal Rent effective rent 1) The rental rate net of financial concessions such as periods of no rent during a lease term; may be calculated on a discounted basis, reflecting the time value of money, or on a simple, straight-line basis. ++ 2) The economic rent paid by the lessee when normalized to account for financial concessions, such as escalation clauses, and other factors. Contract, or normal, rents must be converted to effective rents to form a consistent basis of comparison between comparables. face rent See Contract, Coupon, Face, or Nominal Rent fee simple estate Absolute ownership unen-cumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. ++ floor area ratio (FAR) The relationship between the above-ground floor area of a building, as described by the building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area; also called building-to-land ratio. ++ full service lease A lease in which rent covers all operating expenses. Typically, full service leases are combined with an expense stop, the expense level covered by the contract lease payment. Increases in expenses above the expense stop level are passed through to the tenant and are known as expense pass-throughs. going concern value Going concern value is the value of a proven property operation. It includes the incremental value associated with the business concern, which is distinct from the value of the real estate only. Going concern value includes an intangible enhancement of the value of an operating business enterprise which is produced by the assemblage of the land, building, labor, equipment, and marketing operation. This process creates an economically viable business that is expected to continue. Going concern value refers to the total value of a property, including both real property and intangible personal property attributed to the business value. + gross building area (GBA) The sum of all areas at each floor as measured to the exterior walls. insurable value Insurable Value is based on the replacement and/or reproduction cost of physical items that are subject to loss from hazards. Insurable value is that portion of the value of an asset or asset group that is acknowledged or recognized under the provisions of an applicable loss insurance policy. This value is often controlled by state law and varies from state to state. + investment value Investment value is the value of an investment to a particular investor based on his or her investment requirements. In contrast to market value, investment value is value to an individual, not value in the marketplace. Investment value reflects the subjective relationship between a particular investor and a given investment. When measured in dollars, investment value is the price an investor would pay for an investment in light of its perceived capacity to satisfy his or her desires, needs, or investment goals. To estimate investment value, specific investment criteria must be known. Criteria to evaluate a real estate investment are not necessarily set down by the individual investor; they - -------------------------------------------------------------------------------- ================================================================================ GLOSSARY OF TERMS - -------------------------------------------------------------------------------- may be established by an expert on real estate and its value, that is, an appraiser. + leased fee See leased fee estate leased fee estate An ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.++ leasehold See leasehold estate leasehold estate The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.++ load factor The amount added to usable area to calculate the rentable area. It is also referred to as a "rentable add-on factor" which, according to BOMA, "is computed by dividing the difference between the usable square footage and rentable square footage by the amount of the usable area. Convert the figure into a percentage by multiplying by 100. market value "as if complete" on the appraisal date Market value as if complete on the appraisal date is an estimate of the market value of a property with all construction, conversion, or rehabilitation hypothetically completed, or under other specified hypothetical conditions as of the date of the appraisal. With regard to properties wherein anticipated market conditions indicate that stabilized occupancy is not likely as of the date of completion, this estimate of value should reflect the market value of the property as if complete and prepared for occupancy by tenants. market value "as is" on the appraisal date Market value "as is" on the appraisal date is an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date of appraisal. market value Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1) A reasonable time is allowed for exposure in the open market; 2) Both parties are well informed or well advised, and acting in what they consider their own best interests; 3) Buyer and seller are typically motivated; 4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.ss. marketing period The time it takes an interest in real property to sell on the market subsequent to the date of an appraisal. ++ net lease Lease in which all or some of the operating expenses are paid directly by the tenant. The landlord never takes possession of the expense payment. In a Triple Net Lease all operating expenses are the responsibility of the tenant, including property taxes, insurance, interior maintenance, and other miscellaneous expenses. However, management fees and exterior maintenance are often the responsibility of the lessor in a triple net lease. A modified net lease is one in which some expenses are paid separately by the tenant and some are included in the rent. net rentable area (NRA) 1) The area on which rent is computed. 2) The Rentable Area of a floor shall be computed by measuring to the inside finished surface of the dominant portion of the permanent outer building walls, excluding any major vertical penetrations of the floor. No deductions shall be made for columns and projections necessary to the building. Include space such as mechanical room, janitorial room, restrooms, and lobby of the floor. * nominal rent See Contract, Coupon, Face, or Nominal Rent prospective future value "upon completion of construction" Prospective future value "upon completion of construction" is the prospective value of a property on the future date that construction is completed, based upon market conditions forecast to exist, as of that completion date. The value estimate at this stage is stated in current dollars unless otherwise indicated. - -------------------------------------------------------------------------------- ================================================================================ GLOSSARY OF TERMS - -------------------------------------------------------------------------------- prospective future value "upon reaching stabilized occupancy" Prospective future value "upon reaching stabilized occupancy" is the prospective value of a property at a future point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. The value estimate at this stage is stated in current dollars unless otherwise indicated. reasonable exposure time The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market. ++ rent see full service lease net lease contract, coupon, face, or nominal rent effective rent shell space Space which has not had any interior finishing installed, including even basic improvements such as ceilings and interior walls, as well as partitions, floor coverings, wall coverings, etc.. Usable Area 1) The area actually used by individual tenants. 2) The Usable Area of an office is computed by measuring to the finished surface of the office side of corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished surface of the dominant portion of the permanent outer building walls. Excludes areas such as mechanical rooms, janitorial room, restrooms, lobby, and any major vertical penetrations of a multi-tenant floor. * use value Use value is a concept based on the productivity of an economic good. Use value is the value a specific property has for a specific use. Use value focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to the property's highest and best use or the monetary amount that might be realized upon its sale. + value appraised During the real estate development process, a property typically progresses from a state of unimproved land to construction of improvements to stabilized occupancy. In general, the market value associated with the property increases during these stages of development. After reaching stabilized occupancy, ongoing forces affect the property during its life, including a physical wear and tear, changing market conditions, etc. These factors continually influence the property's market value at any given point in time. See also market value "as is" on the appraisal date market value "as if complete" on the appraisal date prospective future value "upon completion of construction" prospective future value "upon reaching stabilized occupancy" - ---------- + The Appraisal of Real Estate, Tenth Edition, Appraisal Institute, 1992. ++ The Dictionary of Real Estate Appraisal, Third Edition, 1993. ss. The office of the Comptroller of the Currency, 12 CFR Part 34, Subpart C, |_|34.42(f), August 24, 1966. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. * 1966 BOMA Experience Exchange Report, Income/Expense Analysis for Office Buildings (Building Owners and Managers Association, 1966) ++ Statement on Appraisal Standard No. 6, Appraisal Standards Board of The Appraisal Foundation, September 19, 1992. - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B LEGAL DESCRIPTION - -------------------------------------------------------------------------------- ADDENDUM B LEGAL DESCRIPTION - -------------------------------------------------------------------------------- CHICAGO TITLE INSURANCE COMPANY SCHEDULE A Off. File No. Policy Number Date of Policy Amount of Insurance LE40265 LE40265 June 11, 1993 $5,500,000.00 1. Name of Insured: MARK CENTERS LIMITED PARTNERSHIP, A DELAWARE LIMITED PARTNERSHIP 2. The estate or interest in the land described herein and which is covered by this policy is: FEE SIMPLE Created by Deed dated 5/21/1993 and recorded 6/11/93 in Deed Book V 1507 Page 914 and 1507 Page 921. 3. The estate or interest referred to herein is at Date of Policy vested in the insured. 4. The land herein described is encumbered by the following mortgage or trust deed, and assignments: and the mortgages or trust deeds, if any, shown in Schedule B hereof: 5. The land referred to in this policy is described as follows: BEGINNING at a drill hole in concrete in the westerly property line of South Fourth Street in line of lands of Alfred Ernst; thence, along the westerly property line of South Fourth Street, on a curve to the left having a radius of two-thousand eighty-hundred ninety-four and ninety-three one-hundredths feet (2,894.93'), an arc distance of two-hundred eighty-three and seventy-nine one-hundredths feet (283.79') said arc subtended by a chord being South twenty-three degrees, sixteen minutes, thirty seconds East (S 23 degrees 16' 30" E) two-hundred eighty-three and sixty-seven one-hundredths feet (283.67') to a point of tangency; thence, continuing along the westerly property line of South Fourth Street, South twenty-six degrees, four minutes East (S 26 degrees 04' E three-hundred six and fifty-eight one-hundredths feet (306.58') to an iron pin; thence, along lands of Tommy Oil Company and Rack & Cue Lounge, Inc., South sixty-three degrees, fifty-seven minutes, nine seconds West (S 63 degrees 57' 09" W) two-hundred ninety-nine and eight one-hundredths feet (299.08') to an iron pipe in concrete in the northerly property line of Wabash Street; thence, along the northerly property line of Wabash Street, the following two (2) courses and distances: 1) North forty degrees, forty-one minutes, fifteen seconds West (N 40 degrees 41' 15" W) twelve and twenty-four one-hundredths feet (12.24') to a point of curvature; This policy valid only if Schedule B is attached. Policy Number: LE40265 LEGAL DESCRIPTION, continued 2) on a curve to the left having a radius of one-hundred fifty-five and four one-hundredths feet (155.04') an arc distance of two-hundred sixty and sixty-four one-hundredths feet (260.64') said arc subtended by a chord being North eighty-eight degrees, fifty-seven minutes, eighteen seconds West (N 88 degrees 57' 18" W) two-hundred thirty-one and forty-four one-hundredths feet (231.44') to a point of tangency in the northwesterly property line of Brookdale Street; thence, along the northwesterly property line of Brookdale Street, South forty-two degrees, forty-six minutes, forty-eight seconds West (S 42 degrees 46' 48" W) one-hundred thirty-nine and sixty-five one-hundredths feet (139.65') to a spike; thence, along lands of Mac A. Kaplus, et al, North thirty-seven degrees, fifty-three minutes West (N 37 degrees 53' W) one-hundred one and forty-five one-hundredths feet (l01.45') t a spike; thence, along lands of said Kaplus and Mountainville Associates, North thirty-one degrees, sixteen minutes, twenty-three seconds West (N 31 degrees 16' 23" W) seven-hundred ninety-eight and fifty-seven one-hundredths feet (798.57') to a point in the line of lands of the Lehigh County Industrial Development Authority; thence, along lands of the L.C.I.D.A., South eighty-nine degrees, thirty-four minutes East (S 89 degrees 34' E) eight-hundred thirty-three feet (833.0') to the point of beginning for lands described herein. CONTAINING an area of 11.352 acres of land as surveyed by George J. Dunda, P.L.S. #SU-32485-E and shown on a map dated March 28, 1984 entitled "Land Title Survey for Marvin L. Slomowitz". This policy valid only if Schedule B is attached. ================================================================================ ADDENDUM C IMPROVED COMPARABLE SALES - -------------------------------------------------------------------------------- ADDENDUM C IMPROVED COMPARABLE SALES - -------------------------------------------------------------------------------- RETAIL SALE ================================================================================ Location Data Property Name: 15th & Allen Street Shopping Center Location: 1401-1451 Allen Street City: Allentown County: Lehigh State/Zip: Pennsylvania Assessor's Parcel No(s): G9SW3A-14-4 Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 4.12 Acres Excess Land: None Gross Leasable Area: Anchors: Laneco Supermarket 25,000 SF Local Tenant GLA: 21,503 SF Anchor Tenant GLA: 25,000 SF Total GLA: 46,503 SF GLA Purchased: 46,503 SF Year Built: 1950 Parking: Adequate Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 01/96 Marketing Time: N/A Grantor: Carriage Associates L.P. Grantee: Allenbeth Associates L.P. Document No.: 1558/220 Sale Price: $4,242,000 Financing: Market Terms Cash Equivalent Price: $4,242,000 Required Capital Cost: $0 Adjusted Sales Price: $4,242,000 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100 Existing or Pro Forma Income: N/A TOTAL P.S.F. -------- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $462,049 $9.94 ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.89% Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A% Price Per Square Foot: $91.22 Comments The 15th and Allen Street shopping center is a one-story neighborhood retail center located on the corner of 15th and Allen Streets in Downtown Allentown. This property is anchored by a Laneco Supermarket which occupies an estimated 25,000 square feet with the balance of the rentable area, 21,503 square feet allocated to 12 other satellite tenants. This center was built in the 1950's, however, it has undergone significant renovations since that time. Currently, the property is in average condition. At the time of sale, the property was 100% occupied. ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Stefko Shopping Center Location: Stefko Boulevard City: Bethlehem County: Northampton State/Zip: Pennsylvania Assessor's Parcel No(s): N7SW1B-3-1 Atlas Reference: N/A Physical Data Type: Community Land Area: 10.27 Acres Excess Land: None Gross Leasable Area: Anchors: Laneco Supermarket 65,000 SF Local Tenant GLA: 69,446 SF Anchor Tenant GLA: 65,000 SF Total GLA: 134,446 SF GLA Purchased: 134,446 SF Year Built: 1965 Parking: Adequate Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 01/96 Marketing Time: N/A Grantor: Carriage Associates L.P. Grantee: Allenbeth Associates L.P. Document No.: 1996-1/4082 Sale Price: $5,618,000 Financing: Market Terms Cash Equivalent Price: $5,618,000 Required Capital Cost: $0 Adjusted Sales Price: $5,618,000 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 95.2% Existing or Pro Forma Income: N/A TOTAL P.S.F -------- ----- Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $617,577 $4.59 ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.9% Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A% Price Per Square Foot: $41.79 Comments The Stefco shopping center is a one-story community retail center located on Stefco Boulevard in Bethlehem. This property is anchored by a Laneco Supermarket which occupies an estimated 65,000 square feet with the balance of the rentable area, 69,446 square feet allocated to 21 other satellite tenants. This center was built in 1965. however, it has undergone significant renovations in 1988. Currently, the property is in average condition. At the time of sale. the property was 95.2% occupied. ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Town Center Shopping Center Location: Route 202 & Lenape Drive City: New Britain County: Bucks State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Strip Center Land Area: 16.98 Acres Excess Land: N/A Gross Leasable Area: Anchors: Clemens Market 35,201 SF Rite Aid 7,076 SF Local Tenant GLA: 76,499 SF Anchor Tenant GLA: 42,277 SF Total GLA: 118,776 SF GLA Purchased: 118,776 SF Year Built: 1987 Parking: N/A Condition: Average Exterior Walls: Cement Block Sale Data Transaction Type: Sale Date of Transaction: 11/95 Marketing Time: N/A Grantor: ChalBrit Plaza & ChalBrit Plaza II Grantee: Philbern Assoc. & Jarbritt Assoc. Document No.: 1003708,715,723,730 Sale Price: $5,714,998 Financing: Cash to Seller Cash Equivalent Price: N/A Required Capital Cost: $0 Adjusted Sales Price: $0 Verification: N/A Financial Data Assumptions & Forecast: Seller Occupancy at Sale: 75 Existing or Pro Forma Income: N/A TOTAL P.S.F. -------- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $651,818 $5.49 ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria. Overall Capitalization Rate (OAR): N/A % Projected IRR: 11.41% Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: N/A Comments According to Larry Wygant, the managing agent for the grantor, the transaction included the transfer of the land parcels to Phibern Associates for $1,999,999. The buildings were purchased by Jarbrit Associates for $3,714,999. Jarbrit, in turn, leased the land for 30 years with 2, 5-year options. The total purchase price for the land and buildings was $5,714,998. Also included in the purchase was nin office condos for $810,000, which was not included in the above sales price. At the time of sale, the proforma effective gross income for the shopping center was $1,300,000 and the NOI was $651,818. ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name. MacArthur Plaza Shopping Center Location: 241.9 MacArthur Road (N/E/C Schadt Avenue) City: Whitehall Township County: Lehigh State/Zip: Pennsylvania Assessor's Parcel No(s): F9SW2-3-2 Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 2.20 Acres Excess Land: None Gross Leasable Area: Anchors: Staples 19,200 SF Blockbuster Video 6,930 SF Bell Atlantic 3,470 SF Local Tenant GLA: N/A Anchor Tenant GLA: 29,600 SF Total GLA: 29,600 SF GLA Purchased: 29,600 SF Year Built: 1988 Parking: Adequate Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 10/95 Marketing Time: N/A Grantor: P & D Schweitzer Grantee: Allentown Power Center L.P. Document No.: 1553/1123 Sale Price: $3,831,667 Financing: Cash to Seller Cash Equivalent Price: $3,831,667 Required Capital Cost: $0 Adjusted Sales Price: $3,831,667 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100% Existing or Pro Forma Income: N/A TOTAL P.S.F. -------- ----- Potential Gross Income: $495,121 $16.73 Vacancy and Credit Loss: N/A N/A Effective Gross Income: $495,121 $16.73 Expenses:. $ 82,999 $ 2.80 Net Operating Income: $412,122 $13492 ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.76% Projected IRR: N/A Effective Gross Multiplier (EGIM): 7.74 Operating Expense Ratio (OER): 16.76% Price Per Square Foot: $129.45 Comments The MacArthur Plaza shopping center is a one-story neighborhood retail center located on MacArthur Road in Whitehall Township. This property is anchored by Staples which occupies 19,200 square feet with the balance of the rentable area, 10,400 square fee allocated to 2 other satellite tenants. This center was built in 1988 and is currently in average condition. At the time of sale, the property was 100% occupied. ================================================================================ CB COMMERCIAL ================================================================================ ADDENDUM D RENTAL COMPARABLES ================================================================================ ADDENDUM D RENTAL COMPARABLES - -------------------------------------------------------------------------------- RETAIL RENT COMPARABLE Location Data Property Name: Kingston Plaza Location: S/S Third Avenue East Of Pierce Street City: Kingston County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 64,824 SF Year Built: 1982 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Price Chopper Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$10.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement Minimal Leasing Agent Mark Centers Trust Phone No.: ( ) - Survey Date N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (YRS) ================================================================================ 09/95 6,500 The Everything $5.50 N/A None $950 step in ye 1.30 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent lease includes a term for 1 year and 3 months. Additionally, the tenant has a percentage rent clause of 3.0% over a breakpoint of $1,191 660. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE Location Data Property Name: Mark Plaza Location: N/S Route 11 City: Edwardsville County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 176,756 SF Year Built: 1967 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 91.7% Overall: 91.7% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $1.95-$11.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM Tax Insur Free Rent (months) Minimal Tenant Improvement Minimal Leasing Agent Mark Centers Trust Phone No.: ( ) Survey Date N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (YRS) ================================================================================ 10/95 3,600 Spectrum Rents $8.00 N/A None Flat 5.00 - -------------------------------------------------------------------------------- 08/95 7,000 Keens Floral Fa $8.00 N/A Annual Step-up 5.00 - -------------------------------------------------------------------------------- 07/95 3,600 Mattress Man $11.50 N/A Flat 5.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 91.7% leased. The most recent leases all include terms for 5 years. Construction quality is average and typical of other retail centers in the area. ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Birney Plaza Location: N/S Route 11 City: Moosic County: Lackawanna State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 212,057 SF Year Built: 1972 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $3.00-$10.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (YRS) ================================================================================ 9/95 4,000 Everything $0.9 $7.00 N/A None flat 3.00 - -------------------------------------------------------------------------------- 7/93 4,000 Mattress Man $9.00 N/A None Step-up to $10/ 5.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 3 and 5 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Dunmore Plaza Location: 1400 Monroe Avenue City: Dunmore County: Lackawanna State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 45,380 SF Year Built: 1967 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Price Chopper Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $6.75-$11.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months) Minimal Tenant Improvement Minimal Leasing Agent Mark Centers Trust Phone No.: ( ) Survey Date N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (YRS) ================================================================================ 4/95 1,900 Malcom's $11.50 N/A None $950 Step-up in 5.00 - -------------------------------------------------------------------------------- 1/95 1,900 Great Wall Chin $11.35 N/A 3.0% per year 10.00 - -------------------------------------------------------------------------------- 4/94 1,900 Little Caeser's $9.25 N/A Periodic Step-up 5.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 5 and 10 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Triangle Plaza Location: Route 115 City: Wilkes-Barre County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 125,000 SF Year Built: 1971 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years (Estimate) Base Rent Per Square Foot: $9.00-$12.50 (Estimate) Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax Insur Free Rent (months) Minimal Tenant Improvement Minimal Leasing Agent N/A Phone No ( ) Survey Date N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (YRS) ================================================================================ 6/95 2,400 Electronic Syst $11.50 N/A None Annual %age inc 5.00 - -------------------------------------------------------------------------------- 3/95 2,200 TCBY $11.00 N/A None Annual %age inc 5.00 - -------------------------------------------------------------------------------- 5/94 9,910 Party City $11.00 N/A None $1.65/SF step-up 10.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 5 and 10 years. Construction quality is average and typical of other retail centers in the area. ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Gateway Plaza Location: N/S Route 11 City: Edwardsville County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 150,000 SF Year Built: 1969 Exterior Walls: Brick Veneer Condition: Fair Anchor Tenant: Parking: Adequate Lease Data Occupancy: Local: 65.0% Overall: 65.0 Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $8.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (YRS) ================================================================================ 6/94 950 Holiday Hair $15.48 N/A None Annual %age inc 3.00 - -------------------------------------------------------------------------------- 6/94 3,080 McKenzie $8.50 N/A None Annual %age inc 3.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 65% leased. The most recent leases all include terms for 3 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Pottstown Center Location: Route 663 City: Pottstown County: Montgomery State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 171,267 SF Year Built: 1976 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Wal-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $8.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months) Minimal Tenant Improvement Minimal Leasing Agent N/A Phone No ( ) - Survey Date N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (YRS) ================================================================================ 7/95 121,267 Wal-Mart $6.99 N/A None Flat 20.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 20 years. Construction quality is average and typical of other retail centers in the area. ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Route 6 Mall Location: N/S Route 6 City: Honesdale County: Wayne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 144,229 SF Year Built: 1978 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.5-$1 5.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (YRS) ================================================================================ 3/95 119,229 K-Mart $5.77 N/A None Flat 25.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 20 years and includes a percentage rent clause on 1.0% over $20.0 million. Construction quality is average and typical of other retail centers in the area. ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Bradford Towne Centre Location: N/S Route 6 City: Wysox County: Bradford State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 119,481 SF Year Built: 1972 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM. Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (YRS) ================================================================================ 7/94 94,481 K-Mart $5.00 N/A None Flat 25.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 25 years and includes a percentage rent clause on 1.0% over $16,875 million. Construction quality is average and typical of other retail centers in the area. ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Builder's Square Shopping Center Location: Cetronia Road City: Whitehall County: Lehigh State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 106,400 SF Year Built: 1994 Exterior Walls: Brick Veneer Condition: Good Anchor Tenant: Builder's Square Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (YRS) ================================================================================ 3/94 106,400 Builder's Squar $10.05 N/A None Flat 25.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 25 years. Construction quality is good and typical of other retail centers in the area. ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 25 years. Construction quality is good and typical of other retail centers in the area. ================================================================================ CB COMMERCIAL ================================================================================ ADDENDUM E STRATEGIC MAPPING, INC. REPORTS ================================================================================ ADDENDUM E STRATEGIC MAPPING, INC. REPORTS - -------------------------------------------------------------------------------- Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 PA/77 Lehigh County 6/3/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 272,349 291,130 299,269 304,142 White 96.6% 93.3% 92.1% 90.9% Black 1.5% 2.3% 2.7% 3.0% American Indian 0.1% 0.1% 0.1% 0.2% Asian 0.5% 1.3% 1.4% 1.6% Other 1.3% 3.0% 3.7% 4.3% Hispanic 2.6% 5.2% 6.7% 8.1% Total Households 101,296 112,887 116,004 117,859 Household Population 266,239 283,559 291,698 296,571 Average Household Size 2.63 2.51 2.51 2.52 Household Income $0 - 9,999 24.0% 11.5% 9.4% 7.7% $ 10,000 - 14,999 14.7% 7.8% 6.9% 5.8% $ 15,000 - 24,999 29.3% 17.6% 14.7% 12.2% $ 25,000 - 34,999 19.0% 16.9% 14.8% 13.2% $ 35,000 - 49,999 9.4% 21.0% 20.3% 18.3% $ 50,000 - 74,999 2.6% 16.4% 19.7% 21.9% $ 75,000 - 99,999 1.0% 5.2% 7.6% 9.9% $ 100,000 - 149,999 -- 2.2% 4.7% 7.9% $ 150,000 + -- 1.3% 1.9% 3.0% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 18,848 32,455 37,738 43,759 Aggregate HH Inc ($000) 2,128,620 4,437,860 5,438,077 6,487,151 Median Family Income ($) 21,945 39,120 45,488 52,745 Per Capita Income ($) 7,995 15,651 18,643 21,874 Median Age Total Population 33.2 35.7 37.4 38.8 Median Age Adult Population 43.6 43.0 44.5 46.0 Median Age Female Population 34.7 37.1 38.8 40.5 Median Age Adult Female Population 45.0 44.3 45.9 47.4 Median Age Male Population 31.8 34.3 35.9 37.1 Median Age Adult Male Population 42.1 41.7 43.2 44.6
Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 PA/77 Lehigh County 6/3/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 272,349 291,130 299,269 304,142 0 - 5 7.0% 8.0% 7.7% 7.4% 6 - 13 11.1% 10.0% 10.2% 10.0% 14 - 17 6.6% 4.7% 4.8% 4.9% 18 - 24 12.2% 9.4% 9.0% 9.2% 25 - 34 15.9% 16.9% 14.4% 12.6% 35 - 44 11.2% 15.4% 16.0% 15.5% 45 - 54 11.5% 10.4% 12.2% 13.6% 55 - 64 11.6% 9.9% 9.5% 10.1% 65 - 74 13.0% 8.9% 9.0% 8.8% 75 - 84 -- 5.0% 5.5% 5.8% 85 + -- 1.5% 1.8% 2.0% Female Population by Age 141,558 151,190 155,506 158,044 0 - 5 6.5% 7.4% 7.2% 6.9% 6 - 13 10.4% 9.3% 9.5% 9.4% 14 - 17 6.2% 4.5% 4.5% 4.6% 18 - 24 12.0% 9.2% 8.6% 8.7% 25 - 34 15.4% 16.4% 14.0% 12.2% 35 - 44 11.0% 14.9% 15.6% 15.3% 45 - 54 11.5% 10.3% 12.0% 13.4% 55 - 64 11.9% 10.1% 9.6% 10.3% 65 - 74 15.1% 9.7% 9.7% 9.4% 75 - 84 -- 6.1% 6.8% 7.0% 85 + -- 2.2% 2.5% 2.9% Male Population by Age 130,791 139,940 143,763 146,098 0 - 5 7.6% 8.6% 8.2% 7.8% 6 - 13 11.8% 10.8% 11.0% 10.7% 14 - 17 7.0% 5.0% 5.1% 5.3% 18 - 24 12.3% 9.6% 9.4% 9.8% 25 - 34 16.4% 17.5% 14.9% 13.1% 35 - 44 11.5% 15.9% 16.4% 15.8% 45 - 54 11.5% 10.6% 12.4% 13.8% 55 - 64 11.2% 9.7% 9.3% 10.0% 65 - 74 10.7% 8.0% 8.2% 8.1% 75 - 84 -- 3.8% 4.2% 4.5% 85 + -- 0.8% 1.0% 1.1%
Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC C1750-41 Page 1 of 2 PA/95 Northampton County 6/3/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 225,418 247,105 256,899 264,190 White 96.4% 94.2% 93.2% 92.2% Black 1.8% 2.1% 2.4% 2.7% American Indian 0.0% 0.1% 0.1% 0.1% Asian 0.5% 1.1% 1.4% 1.6% Other 1.3% 2.5% 2.9% 3.4% Hispanic 3.1% 4.7% 5.6% 6.5% Total Households 80,032 90,955 94,376 96,864 Household Population 218,183 238,251 248,045 255,336 Average Household Size 2.73 2.62 2.63 2.64 Household Income $ 0 - 9,999 25.1% 11.4% 9.2% 7.5% $ 10,000 - 14,999 14.5% 8.0% 6.9% 5.6% $ 15,000 - 24,999 29.7% 16.8% 13.9% 11.8% $ 25,000 - 34,999 18.6% 17.2% 14.3% 12.1% $ 35,000 - 49,999 8.5% 21.4% 20.9% 18.7% $ 50,000 - 74,999 2.8% 17.5% 20.8% 22.7% $ 75,000 - 99,999 0.8% 4.6% 7.8% 10.7% $ 100,000 - 149,999 -- 2.2% 4.4% 8.0% $ 150,000 + -- 1.1% 1.7% 2.9% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 18,506 32,890 38,659 45,281 Aggregate HH Inc ($000) 1,647,310 3,551,306 4,441,446 5,402,753 Median Family Income ($) 21,333 38,666 45,448 53,233 Per Capita Income ($) 7,550 l4,906 17,906 21,159 Median Age Total Population 32.9 34.9 36.6 37.8 Median Age Adult Population 43.7 42.5 44.2 45.6 Median Age Female Population 34.7 36.4 38.2 39.8 Median Age Adult Female Population 45.5 43.9 45.6 47.1 Median Age Male Population 31.1 33.6 35.0 35.8 Median Age Adult Male Population 41.7 41.1 42.8 44.1
Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 PA/95 Northampton County 6/3/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 225,418 247,105 256,899 264,190 0 - 5 7.2% 8.0% 7.8% 7.5% 6 - 13 11.4% 10.4% 10.4% 10.2% 14 - 17 6.7% 4.8% 5.3% 5.4% 18 - 24 12.8% 11.1% 10.4% 10.6% 25 - 34 15.0% 15.8% 13.5% 12.4% 35 - 44 11.0% 15.2% 15.6% 14.6% 45 - 54 11.2% 10.2% 12.2% 13.6% 55 - 64 12.1% 9.5% 8.9% 9.7% 65 - 74 12.6% 9.0% 9.0% 8.5% 75 - 84 -- 4.7% 5.4% 5.8% 85 + -- 1.3% 1.5% 1.8% Female Population by Age 115,885 126,915 132,045 135,839 0 - 5 6.9% 7.6% 7.4% 7.1% 6 - 13 10.8% 9.9% 9.8% 9.7% 14 - 17 6.3% 4.6% 5.0% 5.0% 18 - 24 11.7% 10.2% 9.5% 9.8% 25 - 34 14.8% 15.5% 13.3% 11.9% 35 - 44 11.0% 14.8% 15.4% 14.5% 45 - 54 11.3% 10.1% 12.1% 13.5% 55 - 64 12.6% 9.8% 9.1% 9.8% 65 - 74 14.6% 9.9% 9.8% 9.2% 75 - 84 -- 5.7% 6.6% 7.0% 85 + -- 1.8% 2.1% 2.6% Male Population by Age 109,533 120,190 124,854 128,351 0 - 5 7.6% 8.4% 8.2% 7.8% 6 - 13 12.0% 10.9% 11.0% 10.7% 14 - 17 7.2% 5.1% 5.7% 5.8% 18 - 24 14.0% 12.0% 11.3% 11.5% 25 - 34 15.2% 16.1% 13.8% 13.0% 35 - 44 11.0% 15.5% 15.8% 14.6% 45 - 54 11.1% 10.4% 12.4% 13.6% 55 - 64 11.5% 9.2% 8.8% 9.5% 65 - 74 10.4% 8.0% 8.1% 7.8% 75 - 84 -- 3.7% 4.2% 4.5% 85 + -- 0.7% 0.8% 1.0%
Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 1 of 4 Area 1 = PA/77 Lehigh County 6/3/96 Area 2 = PA/95 Northampton County Description Area 1 Area 2 Population: 2000 Projection 304,142 264,190 1995 Estimate 299,269 256,899 1990 Census 291,130 247,105 1980 Census 272,349 225,418 Percent Change, 1980 - 1990 6.9 9.6 Percent Change, 1990 - 1995 2.8 4.0 1995 Population by Race: % White 92.1 93.2 % Black 2.7 2.4 % American Indian 0.1 0.1 % Asian 1.4 1.4 % Other 3.7 2.9 % Hispanic 6.7 5.6 1995 Population by Age: % 0 - 5 7.7 7.8 % 6 - 13 10.2 10.4 % 14 - 17 4.8 5.3 % 18 - 20 4.1 4.7 % 21 - 24 4.9 5.7 % 25 - 34 14.4 13.5 % 35 - 44 16.0 15.6 % 45 - 54 12.2 12.2 % 55 - 64 9.5 8.9 % 65 - 74 9.0 9.0 % 75 - 84 5.5 5.4 % 85 + 1.8 1.5 Median Age Total Population 37.4 36.6 Median Age Adult Population 44.5 44.2 Households: 2000 Projection 117,859 96,864 1995 Estimate 116,004 94,376 1990 Census 112,887 90,955 1980 Census 101,296 80,032 Percent Change, 1980 - 1990 11.4 13.6 Percent Change, 1990 - 1995 2.8 3.8 1990 Household Population 283,559 238,251 1990 Households w/ Children under 18 36,625 31,757 1990 Households w/ Persons over 65 30,889 25,766 Area defined by County Area defined by County Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Profile Report CBC - C1750-41 Page 2 of 4 Area 1 = PA/77 Lehigh County 6/3/96 Area 2 = PA/95 Northampton County Description Area 1 Area 2 1990 Family Population 243,110 208,904 1990 Nonfamily Population 40,449 29,347 1990 Group Quarters Population 7,571 8,854 1990 Average Household Size 2.51 2.62 1990 Average Family Size 3.02 3.06 1990 Family Households 79,183 67,185 1990 Nonfamily Households 33,704 23,770 1995 Household Income: % $ 0 - $ 9,999 9.4 9.2 % $ 10,000 - $ 14,999 6.9 6.9 % $ 15,000 - $ 24,999 14.7 13.9 % $ 25,000 - $ 34,999 14.8 14.3 % $ 35,000 - $ 49,999 20.3 20.9 % $ 50,000 - $ 74,999 19.7 20.8 % $ 75,000 - $ 99,999 7.6 7.8 % $100,000 - $149,999 4.7 4.4 % $l50,000 + 1.9 1.7 2000 Median Household Income $ 43,759 $ 45,281 1995 Median Household Income $ 37,738 $ 38,659 1990 Median Household Income $ 32,455 $ 32,890 2000 Average Household Income $ 55,042 $ 55,777 1995 Average Household Income $ 46,878 $ 47,061 1990 Average Household Income $ 39,429 $ 39,189 2000 Per Capita Income $ 21,874 $ 21,159 1995 Per Capita Income $ 18,643 $ 17,906 1990 Per Capita Income $ 15,651 $ 14,906 2000 Median Family Income $ 52,745 $ 53,233 1995 Median Family Income $ 45,488 $ 45,448 1990 Median Family Income $ 39,120 $ 38,666 1990 Average Family Income $ 45,784 $ 44,827 Area defined by County Area defined by County Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Profile Report CBC - C1750-41 Page 3 of 4 Area 1 = PA/77 Lehigh County 6/3/96 Area 2 = PA/95 Northampton County Description Area 1 Area 2 1990 Housing Unit Counts: Total Units 118,335 95,345 Occupied Units 112,887 90,955 Owner Occupied 78,248 66,907 Renter Occupied 34,639 24,048 Vacant Units 5,448 4,390 Year Round 5,130 3,980 Seasonal 318 410 1990 Housing Unit Percents: % Occupied of Total Units 95.4 95.4 % Owner Units of Occupied Units 69.3 73.6 % Renter Units of Occupied Units 30.7 26.4 % Vacant of Total Units 4.6 4.6 % Year Round of Vacant Units 94.2 90.7 % Seasonal of Vacant Units 5.8 9.3 % Condominiums of Total Units 1.1 1.3 1990 Condominiums: Total Condominium Units 1,335 1,212 % Owner Occupied 61.3 56.8 % Renter Occupied 30.0 32.3 % Vacant 8.7 10.8 1990 Units in Structure: % 1, Detached 45.8 56.3 % 1, Attached 24.6 19.9 % 2 4.9 5.7 % 3 - 9 10.9 8.4 % 10 - 49 7.6 3.4 % 50 + 2.6 1.4 % Mobile Homes 2.7 3.6 % Other 0.9 1.2 1990 Median Home Value $ 97,771 $ 105,995 1990 Median Contract Rent $ 400 $ 379 Area defined by County Area defined by County Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Profile Report CBC - C1750-41 Page 4 of 4 Area 1 = PA/77 Lehigh County 6/3/96 Area 2 = PA/95 Northampton County Description Area 1 Area 2 1995 Total Employed 149,579 80,598 1995 Socio-Economic Measure 55 53 1990 Occupation: Total Civil Labor Force 151,386 123,211 % Unemployed 4.7 4.3 Total Employed 144,250 117,962 % White Collar 58.8 54.5 % Executive & Managerial 11.0 10.1 % Professional Specialty 14.7 13.4 % Technical Support 4.2 3.9 % Administrative Support 17.2 16.4 % Sales 11.8 10.6 % Blue Collar 28.2 32.4 % Precision Production, Craft & Repair 11.5 12.4 % Machine Operators 8.4 10.3 % Transportation & Material Moving 4.1 4.1 % Laborers 4.1 5.5 % Farming, Forestry & Fishing 1.0 1.1 % Service: Private Household 0.2 0.2 % Service: Protective 1.3 1.5 % Service: Other 10.6 10.4 1990 Educational Attainment (Age 25 & Over): % Less than Grade 9 9.6 10.6 % Grade 9-12 (No Diploma) 15.7 16.3 % High School Graduate or Equivalency 35.7 37.6 % Some College (No Degree) 12.9 12.8 % Associate Degree 6.4 6.0 % Bachelor Degree 12.6 10.7 % Graduate or Professional Degree 7.1 6.1 Area defined by County Area defined by County Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 1 of 9 Area 1 = PA/77 Lehigh County 6/3/96 Area 2 = PA/95 Northampton County Description Area 1 Area 2 1995 Socio-Economic Measure: 55 53 1995 Employment: 149,579 80,598 Population: 2000 Projection 304,142 264,190 1995 Estimate 299,269 256,899 1990 Census 291,130 247,105 1990-1995 % Change (Growth) 2.8% 4.0% 1990 Group Quarters Population 7,571 8,854 1995 % Population by Race: White 92.1% 93.2% Black 2.7% 2.4% American Indian, Eskimo & Aleut 0.1% 0.1% Asian or Pacific Islander 1.4% 1.4% Other 3.7% 2.9% Hispanic 6.7% 5.6% 1990 % Population by Race: White 93.3% 94.2% Black 2.3% 2.1% American Indian, Eskimo & Aleut 0.1% 0.1% Asian or Pacific Islander 1.3% 1.1% Other 3.0% 2.5% Hispanic 5.2% 4.7% 1995 % Population by Sex: Male 48.0% 48.6% Female 52.0% 51.4% 1990 % Population by Sex: Male 48.1% 48.6% Female 51.9% 51.4% 2000 Pop per Square Mile (Pop Density) 877.3 706.7 1995 Pop per Square Mile (Pop Density) 863.3 687.2 1990 Pop per Square Mile (Pop Density) 839.8 661.0 Area (Square Miles) 346.7 373.9 Area (Square Kilometers) 897.9 968.3 Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 2 of 9 Area 1 = PA/77 Lehigh County 6/3/96 Area 2 = PA/95 Northampton County Description Area 1 Area 2 Households: 2000 Projection 117,859 96,864 1995 Estimate 116,004 94,376 1990 Census 112,887 90,955 1990 - 1995 % Change (Growth) 2.8% 3.8% 2000 Average Household Size 2.52 2.64 1995 Average Household Size 2.51 2.63 1990 Average Household Size 2.51 2.62 2000 Per Capita Income $ 21,874 21,159 1995 Per Capita Income $ 18,643 17,906 1990 Per Capita Income $ 15,651 14,906 2000 Median Family Income $ 52,745 53,233 1995 Median Family Income $ 45,488 45,448 1990 Median Family Income $ 39,120 38,666 2000 Median Household Income $ 43,759 45,281 1995 Median Household Income $ 37,738 38,659 1990 Median Household Income $ 32,455 32,890 2000 Average Household Income $ 55,042 55,777 1995 Average Household Income $ 46,878 47,061 1990 Average Household Income $ 39,429 39,189 1995 % Household Income: $ 0 - $ 9,999 9.4% 9.2% $ 10,000 - $ 14,999 6.9% 6.9% $ 15,000 - $ 24,999 14.7% 13.9% $ 25,000 - $ 34,999 14.8% 14.3% $ 35,000 - $ 49,999 20.3% 20.9% $ 50,000 - $ 74,999 19.7% 20.8% $ 75,000 - $ 99,999 7.6% 7.8% $100,000 - $ 149,999 4.7% 4.4% $150,000 + 1.9% 1.7% Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 3 of 9 Area 1 = PA/77 Lehigh County 6/3/96 Area 2 = PA/95 Northampton County Description Area 1 Area 2 1990 % Household Income: $ 0 - $ 9,999 11.5% 11.4% $ 10,000 - $ 14,999 7.8% 8.0% $ 15,000 - $ 24,999 17.6% 16.8% $ 25,000 - $ 34,999 16.9% 17.2% $ 35,000 - $ 49,999 21.0% 21.4% $ 50,000 - $ 74,999 16.4% 17.5% $ 75,000 - $ 99,999 5.2% 4.6% $100,000 - $149,999 2.2% 2.2% $150,000 + 1.3% 1.1% 1995 % Population by Age: 0 - 5 7.7% 7.8% 6 - 13 10.2% 10.4% 14 - 17 4.8% 5.3% 18 - 20 4.1% 4.7% 21 - 24 4.9% 5.7% 25 - 34 14.4% 13.5% 35 - 44 16.0% 15.6% 45 - 54 12.2% 12.2% 55 - 64 9.5% 8.9% 65 - 74 9.0% 9.0% 75 - 84 5.5% 5.4% 85 + 1.8% 1.5% Median Age Total Population 37.4 36.6 Median Age Adult Population 44.5 44.2 1990 % Population by Age: 0 - 5 8.0% 8.0% 6 - 13 10.0% 10.4% 14 - 17 4.7% 4.8% 18 - 20 4.0% 5.3% 21 - 24 5.4% 5.8% 25 - 34 16.9% 15.8% 35 - 44 15.4% 15.2% 45 - 54 10.4% 10.2% 55 - 64 9.9% 9.5% 65 - 74 8.9% 9.0% 75 - 84 5.0% 4.7% 85 + 1.5% 1.3% Median Age Total Population 35.7 34.9 Median Age Adult Population 43.0 42.5 Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 4 of 9 Area 1 = PA/77 Lehigh County 6/3/96 Area 2 = PA/95 Northampton County Description Area 1 Area 2 1995 % Female Population by Age: 0 - 5 7.2% 7.4% 6 - 13 9.5% 9.8% 14 - 17 4.5% 5.0% 18 - 20 3.9% 4o3% 21 - 24 4.7% 5.2% 25 - 34 14.0% 13.3% 35 - 44 15.6% 15.4% 45 - 54 12.0% 12.1% 55 - 64 9.6% 9.1% 65 - 74 9.7% 9.8% 75 - 84 6.8% 6.6% 85 + 2.5% 2.1% Female Median Age Total Population 38.8 38.2 Female Median Age Adult Population 45.9 45.6 1990 % Female Population by Age: 0 - 5 7.4% 7.6% 6 - 13 9.3% 9.9% 14 - 17 4.5% 4.6% 18 - 20 3.9% 4.7% 21 - 24 5.3% 5.5% 25 - 34 16.4% 15.5% 35 - 44 14.9% 14.8% 45 - 54 10.3% 10.1% 55 - 64 10.1% 9.8% 65 - 74 9.7% 9.9% 75 - 84 6.1% 5.7% 85 + 2.2% 1.8% Female Median Age Total Population 37.1 36.4 Female Median Age Adult Population 44.3 43.9 1990 % Hispanic Population by Type: Not of Hispanic Origin 94.8% 95.3% Mexican 0.2% 0.3% Puerto Rican 3.8% 3.5% Cuban 0.1% 0.1% Other Hispanic 1.0% 0.8% Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 5 of 9 Area 1 = PA/77 Lehigh County 6/3/96 ARea 2 = PA/95 Northampton County Description Area 1 Area 2 1990 % Population Enrolled in School (Age 3 & Over): Preprimary School 8.3% 7.2% Elementary and High School 65.7% 62.4% College 25.9% 30.3% Total School Enrollment 64,915 61,028 1990 % Educational Attainment (Age 25 & Over): Less than Grade 9 9.6% 10.6% Grade 9-12 (No Diploma) 15.7% 16.3% High School Graduate or Equivalency 35.7% 37.6% Some College (No Degree) 12.9% 12.8% Associate Degree 6.4% 6.0% Bachelor Degree 12.6% 10.7% Graduate or Professional Degree 7.1% 6.1% 1990 % Employment Status: Total Labor Force: Armed Forces 0.1% 0.1% Civilian: Employed 62.2% 60.4% Unemployed 3.1% 2.7% Not In Labor Force 34.7% 36.9% Female Labor Force: Armed Forces 0.0% 0.0% Civilian: Employed 53.9% 52.4% Unemployed 2.4% 2.2% Not In Labor Force 43.7% 45.5% 1990 % Working Mothers: Child <6 Only 16.5% 15.6% Child 6-17 Only 42.5% 42.8% Child <6 & 6-17 10.9% 9.8% Nonworking Mothers 30.1% 31.8% Total Mothers 34,708 29,944 Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 6 of 9 Area 1 = PA/77 Lehigh County 6/3/96 Area 2 = PA/95 Northampton County Description Area 1 Area 2 1990 % Industry Employment: Agriculture/Forestry/Fishing 1.2% 1.2% Mining 0.2% 0.3% Construction 5.7% 6.2% Manufacturing: Nondurable Goods 11.9% 12.5% Durable Goods 12.2% 14.6% Transportation 3.8% 4.0% Communications & Public Utilities 3.1% 2.8% Wholesale Trade 4.6% 3.6% Retail Trade 17.3% 16.1% Finance/Insurance/Real Estate 6.2% 5.5% Services: Business & Repair 5.0% 4.2% Personal 2.4% 2.3% Entertainment & Recreation 1.0% 1.0% Health 9.9% 8.5% Educational 7.4% 9.5% Other Professional & Related 5.9% 5.2% Public Administration 2.3% 2.3% Total 144,250 117,962 1990 % Occupation: Executive & Managerial 11.0% 10.1% Professional Specialty 14.7% 13.4% Technical Support 4.2% 3.9% Sales 11.8% 10.6% Administrative Support 17.2% 16.4% Service: Private Household 0.2% 0.2% Service: Protective 1.3% 1.5% Service: Other 10.6% 10.4% Farming, Forestry & Fishing 1.0% 1.1% Precision Production, Craft & Repair 11.5% 12.4% Machine Operator, Assemblers & Inspectors 8.4% 10.3% Transportation & Material Moving 4.1% 4.1% Laborers 4.1% 5.5% White Collar Total 58.8% 54.5% Blue Collar Total 28.2% 32.4% Total Employed 144,250 117,962 Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 7 of 9 Area 1 = PA/77 Lehigh County 6/3/96 Area 2 = PA/95 Northampton County Description Area 1 Area 2 1990 % Marital Status: Total Male: 111,147 95,533 Never Married 28.0% 29.0% Married 60.7% 60.7% Separated 2.0% 1.7% Widowed 3.0% 3.0% Divorced 6.2% 5.6% Total Female: 124,337 103,250 Never Married 22.2% 22.1% Married 54.1% 55.9% Separated 2.4% 2.1% Widowed 13.5% 13.0% Divorced 7.8% 6.8% 1990 Households by Type: One Person Households 28,223 19,867 Two or more Person Households: Family Households: Married Couple 65,040 55,981 Male Householder 3,494 2,888 Female Householder 10,649 8,316 Nonfamily Households 5,481 3,903 1990 Family Households With Children Married Couple Family 28,374 25,334 Male Householder 1,719 1,362 Female Householder 6,136 4,732 1990 Population by Household Type: Family Households 243,110 208,904 Nonfamily Households 40,449 29,347 1990 Households With: Children Under 18 36,625 31,757 Persons Over 65 30,889 25,766 Householder Over 65 27,815 23,090 1990 Average Family Size 3.02 3.06 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 8 of 9 Area 1 = PA/77 Lehigh County 6/3/96 Area 2 = PA/95 Northampton County Description Area 1 Area 2 1990 Median Home Value $ 97,771 105,995 1990 Average Home Value $ 113,429 117,969 1990 Median Contract Rent $ 400 379 1990 Average Contract Rent $ 397 385 1990 Persons In Unit: 1 Person Units 28,223 19,867 2 Person Units 38,378 30,542 3 Person Units 20,022 16,991 4 + Person Units 26,264 23,555 1990 Housing Unit Counts: Total Units 118,335 95,345 % Occupied 95.4% 95.4% % Vacant 4.6% 4.6% % Year Round 4.3% 4.2% % Seasonal 0.3% 0.4% Occupied Units 112,887 90,955 % Owner Occupied 69.3% 73.6% % Renter Occupied 30.7% 26.4% Vacant Units 5,448 4,390 % Year Round of Vacant Units 94.2% 90.7% % Seasonal of Vacant Units 5.8% 9.3% 1990 Total Housing Units in Structure 118,335 95,345 1, Detached 45.8% 56.3% 1, Attached 24.6% 19.9% 2, 4.9% 5.7% 3 - 9 10.9% 8.4% 10 - 49 7.6% 3.4% 50 + 2.6% 1.4% Mobile Home or Trailer 2.7% 3.6% Other 0.9% 1.2% 1990 Housing Units by Year Built 78,248 67,003 Built 1985 to March, 1990 8.2% 10.6% Built 1980 to 1984 6.0% 4.4% Built 1970 to 1979 14.6% 16.2% Built 1960 to 1969 13.1% 12.3% Built 1950 to 1959 18.1% 15.3% Built 1949 or Earlier 40.0% 41.2% Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 9 of 9 Area 1 = PA/77 Lehigh County 6/3/96 Area 2 = PA/95 Northampton County Description Area 1 Area 2 1990 % Means of Transportation to Work: Car, Truck or Van: Drove Alone 78.5% 78.4% Carpooled 11.7% 12.2% Public Transportation 1.7% 1.2% Other Means 5.7% 5.9% Worked at Home 2.3% 2.3% 1990 % Travel Time to Work: 0 - 14 Minutes 37.9% 36.6% 15 - 29 Minutes 43.8% 39.5% 30 - 59 Minutes 15.2% 18.6% 60 - 89 Minutes 2.5% 4.1% 90 + Minutes 0.7% 1.1% 1990 Households by Number of Vehicles: 1 Vehicle 38,692 28,203 2 Vehicles 43,024 36,919 3 Vehicles 13,601 11,950 4 Vehicles 3,668 3,585 5 or More Vehicles 1,313 1,312 Area defined by County Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 mountainville 1 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 7,078 7,008 6,956 6,842 White 98.3% 96.0% 94.8% 93.7% Black 0.8% 1.9% 2.4% 2.9% American Indian 0.0% 0.1% 0.2% 0.2% Asian 0.5% 0.8% 0.9% 1.0% Other 0.4% 1.2% 1.7% 2.2% Hispanic 0.6% 2.3% 3.2% 4.0% Total Households 2,616 2,767 2,746 2,703 Household Population 7,078 6,981 6,929 6,815 Average Household Size 2.71 2.52 2.52 2.52 Household Income $ 0 - 9,999 18.8% 10.7% 8.7% 7.4% $ 10,000 - 14,999 11.7% 6.4% 5.9% 5.2% $ 15,000 - 24,999 29.4% 19.5% 15.1% 12.0% $ 25,000 - 34,999 25.2% 18.5% 16.0% 14.3% $ 35,000 - 49,999 12.5% 23.7% 22.7% 20.2% $ 50,000 - 74,999 1.9% 15.8% 21.6% 25.2% $ 75,000 - 99,999 0.5% 4.6% 6.7% 8.9% $100,000 - 149,999 -- 0.6% 2.9% 6.1% $150,000 + -- 0.3% 0.4% 0.7% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 21,631 32,381 37,379 42,730 Aggregate HH Inc ($000) 58,079 95,351 114,434 130,888 Median Family Income ($) 24,023 36,927 42,627 48,729 Per Capita Income ($) 8,206 13,659 16,515 19,206 Median Age Total Population 34.5 38.6 40.5 41.8 Median Age Adult Population 44.6 45.2 46.7 48.0 Median Age Female Population 35.9 39.9 41.9 43.3 Median Age Adult Female Population 45.6 46.4 47.6 49.0 Median Age Male Population 33.3 37.3 39.0 40.3 Median Age Adult Male Population 43.4 44.2 45.7 46.9
Area defined by Circle: (40.575493,75.44239): 1 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 mountainville 1 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 7,078 7,008 6,956 6,842 0 - 5 6.2% 6.6% 6.4% 6.2% 6 - 13 10.4% 9.0% 8.7% 8.5% 14 - 17 6.9% 4.7% 4.3% 4.1% 18 - 24 11.1% 8.1% 8.2% 8.1% 25 - 34 16.1% 15.5% 13.8% 12.8% 35 - 44 11.5% 16.0% 15.9% 15.0% 45 - 54 13.6% 11.7% 13.1% 14.5% 55 - 64 13.5% 12.6% 11.6% 11.6% 65 - 74 10.7% 10.2% 11.0% 11.3% 75 - 84 -- 4.6% 5.6% 6.3% 85 + -- 1.0% 1.4% 1.6% Female Population by Age 3,651 3,624 3,601 3,544 0 - 5 5.7% 6.1% 6.1% 6.0% 6 - 13 10.1% 8.2% 8.0% 7.9% 14 - 17 6.8% 4.8% 3.9% 3.8% 18 - 24 10.4% 7.9% 7.9% 7.4% 25 - 34 16.1% 14.8% 13.7% 12.8% 35 - 44 11.4% 16.2% 15.6% 14.6% 45 - 54 14.2% 11.5% 13.2% 14.8% 55 - 64 13.7% 12.8% 11.6% 11.4% 65 - 74 11.7% 11.1% 11.8% 12.0% 75 - 84 -- 5.3% 6.5% 7.2% 85 + -- 1.3% 1.8% 2.1% Male Population by Age 3,426 3,384 3,350 3,289 0 - 5 6.8% 7.2% 6.8% 6.6% 6 - 13 10.8% 9.8% 9.5% 9.1% 14 - 17 6.9% 4.7% 4.7% 4.5% 18 - 24 11.9% 8.3% 8.5% 8.9% 25 - 34 16.1% 16.3% 13.8% 12.7% 35 - 44 11.7% 15.7% 16.2% 15.4% 45 - 54 13.0% 11.9% 13.0% 14.1% 55 - 64 13.2% 12.4% 11.7% 11.8% 65 - 74 9.7% 9.2% 10.2% 10.6% 75 - 84 -- 3.8% 4.7% 5.4% 85 + -- 0.7% 0.9% 1.0%
Area defined by Circle: (40.575493,75.44239): 1 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 mountainville 3 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 75,781 78,697 80,582 81,746 White 92.2% 84.3% 81.1% 78.0% Black 3.7% 5.6% 6.4% 7.0% American Indian 0.1% 0.2% 0.2% 0.3% Asian 0.6% 1.3% 1.5% 1.8% Other 3.4% 8.7% 10.8% 12.9% Hispanic 6.2% 13.5% 17.9% 22.0% Total Households 29,814 31,482 32,222 32,662 Household Population 74,683 77,076 78,967 80,131 Average Household Size 2.50 2.45 2.45 2.45 Household Income $ 0 - 9,999 33.3% 16.5% 14.0% 11.9% $ 10,000 - 14,999 16.0% 9.8% 9.3% 8.1% $ 15,000 - 24,999 27.0% 21.2% 18.2% l5.6% $ 25,000 - 34,999 15.2% 17.9% 16.2% 15.4% $ 35,000 - 49,999 6.7% 20.0% 20.5% 19.3% $ 50,000 - 74,999 1.3% 10.4% 14.7% 18.8% $ 75,000 - 99,999 0.4% 2.5% 4.1% 5.7% $100,000 - 149,999 -- 1.1% 2.1% 3.8% $150,000 + -- 0.6% 0.9% 1.4% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 15,254 26,247 29,990 34,303 Aggregate HH Inc ($000) 520,575 981,057 1,176,011 1,377,625 Median Family Income ($) 19,301 32,041 36,610 41,875 Per Capita Income ($) 6,970 12,728 14,892 17,192 Median Age Total Population 32.4 33.0 34.6 36.2 Median Age Adult Population 43.4 40.4 42.0 43.6 Median Age Female Population 34.2 34.3 36.0 37.7 Median Age Adult Female Population 45.4 42.1 43.5 44.9 Median Age Male Population 30.6 31.8 33.3 34.7 Median Age Adult Male Population 41.4 38.9 40.4 42.2
Area defined by Circle: (40.575493,75.44239): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 mountainville 3 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 75,781 78,697 80,582 81,746 0 - 5 7.6% 9.2% 9.0% 8.7% 6 - 13 10.8% 10.0% 11.1% 11.4% 14 - 17 6.3% 4.5% 4.4% 4.9% 18 - 24 12.8% 10.4% 8.5% 8.6% 25 - 34 16.2% 19.7% 17.7% 14.2% 35 - 44 10.2% 14.0% 15.7% 17.0% 45 - 54 10.6% 9.3% 10.7% 12.1% 55 - 64 11.8% 8.9% 8.3% 8.5% 65 - 74 13.6% 8.3% 8.2% 7.7% 75 - 84 -- 4.5% 5.0% 5.2% 85 + -- 1.1% 1.3% 1.6% Female Population by Age 39,617 40,524 41,454 42,018 0 - 5 6.9% 8.6% 8.6% 8.3% 6 - 13 9.9% 9.2% 10.3% 10.8% 14 - 17 6.1% 4.5% 4.1% 4.5% 18 - 24 12.6% 10.2% 8.1% 7.9% 25 - 34 15.7% 18.8% 17.2% 13.8% 35 - 44 9.9% 13.6% 15.2% 16.6% 45 - 54 10.8% 9.4% 10.7% 12.0% 55 - 64 12.4% 9.2% 8.6% 8.9% 65 - 74 15.9% 9.5% 9.1% 8.5% 75 - 84 -- 5.5% 6.2% 6.4% 85 + -- 1.5% 1.9% 2.3% Male Population by Age 36,149 38,167 39,109 39,714 0 - 5 8.4% 9.8% 9.5% 9.1% 6 - 13 11.8% 10.9% 12.0% 12.2% 14 - 17 6.6% 4.6% 4.8% 5.2% 18 - 24 13.1% 10.6% 9.0% 9.4% 25 - 34 16.8% 20.7% 18.1% 14.5% 35 - 44 10.5% 14.4% 16.4% 17.4% 45 - 54 10.4% 9.3% 10.6% 12.2% 55 - 64 11.2% 8.6% 7.9% 8.1% 65 - 74 11.2% 7.0% 7.2% 7.0% 75 - 84 -- 3.5% 3.7% 3.9% 85 + -- 0.7% 0.8% 1.0%
Area defined by Circle: (40.575493,75.44239): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-4l Page 1 of 2 mountainville 5 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 203,969 207,807 211,701 213,830 White 95.1% 89.9% 87.8% 85.8% Black 2.2% 3.4% 4.0% 4.5% American Indian 0.1% 0.1% 0.2% 0.2% Asian 0.6% 1.5% 1.8% 2.0% Other 2.1% 5.1% 6.3% 7.5% Hispanic 4.3% 8.6% 10.9% 13.1% Total Households 77,764 81,872 83,439 84,284 Household Population 194,841 197,556 201,454 203,583 Average Household Size 2.51 2.41 2.41 2.42 Household Income $ 0 - 9,999 28.4% 13.9% 11.5% 9.5% $ 10,000 - 14,999 15.5% 9.1% 8.2% 6.9% $ 15,000 - 24,999 27.7% 19.4% 16.3% 14.0% $ 25,000 - 34,999 16.9% 17.6% 15.9% 14.3% $ 35,000 - 49,999 8.4% 19.8% 19.8% 18.7% $ 50,000 - 74,999 2.3% 13.3% 17.0% 20.0% $ 75,000 - 99,999 0.9% 3.9% 5.9% 7.9% $100,000 - 149,999 -- 1.9% 3.6% 6.1% $150,000 + -- 1.2% 1.7% 2.6% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 17,222 29,126 33,707 38,946 Aggregate HH Inc ($000) 1,524,380 2,923,661 3,549,250 4,200,420 Median Family Income ($) 21,056 35,700 41,315 47,736 Per Capita Income ($) 7,824 14,799 17,618 20,632 Median Age Total Population 33.4 34.7 36.1 37.5 Median Age Adult Population 44.1 42.0 43.5 44.7 Median Age Female Population 35.9 36.7 38.1 39.5 Median Age Adult Female Population 46.4 44.2 45.5 46.7 Median Age Male Population 31.1 32.9 34.3 35.6 Median Age Adult Male Population 41.4 39.9 41.5 42.9
Area defined by Circle: (40.575493,75.44239): 5 mile(s). Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC C1750-41 Page 2 of 2 mountainville 5 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 203,969 207,807 211,701 213,830 0 - 5 6.4% 7.7% 7.6% 7.4% 6 - 13 9.9% 8.9% 9.6% 9.8% 14 - 17 6.2% 4.2% 4.9% 5.1% 18 - 24 14.8% 12.5% 10.1% 10.2% 25 - 34 15.0% 17.2% 15.9% 13.4% 35 - 44 9.9% 13.7% 14.9% 15.7% 45 - 54 11.1% 9.4% 10.6% 11.8% 55 - 64 12.2% 9.7% 9.1% 9.3% 65 - 74 14.5% 9.5% 9.3% 8.9% 75 - 84 -- 5.5% 6.0% 6.2% 85 + -- 1.7% 1.9% 2.2% Female Population by Age 106,483 108,301 110,296 111,339 0 - 5 5.9% 7.2% 7.1% 6.9% 6 - 13 9.2% 8.3% 9.0% 9.2% 14 - 17 5.8% 4.0% 4.5% 4.8% 18 - 24 13.8% 11.8% 9.4% 9.3% 25 - 34 14.4% 16.3% 15.3% 12.9% 35 - 44 9.8% 13.2% 14.5% 15.2% 45 - 54 11.2% 9.4% 10.5% 11.7% 55 - 64 12.7% 10.0% 9.4% 9.6% 65 - 74 17.1% 10.6% 10.3% 9.7% 75 - 84 -- 6.7% 7.5% 7.7% 85 + -- 2.4% 2.7% 3.1% Male Population by Age 97,469 99,502 101,385 102,489 0 - 5 7.0% 8.2% 8.1% 7.8% 6 - 13 10.6% 9.6% 10.3% 10.4% 14 - 17 6.5% 4.4% 5.3% 5.6% 18 - 24 15.8% 13.3% 11.0% 11.2% 25 - 34 15.6% 18.1% 16.6% 14.0% 35 - 44 10.1% 14.2% 15.5% 16.2% 45 - 54 11.0% 9.4% 10.7% 12.0% 55 - 64 11.7% 9.4% 8.7% 9.0% 65 - 74 11.7% 8.3% 8.3% 8.1% 75 - 84 -- 4.1% 4.4% 4.6% 85 + -- 0.9% 1.1% 1.2%
Area defined by Circle: (40.575493,75.44239): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 1 of 4 Area 1 = mountainville 1 Mile Radius 5/23/96 Area 2 = mountainville 3 Mile Radius Area 3 = mountainville 5 Mile Radius Description Area 1 Area 2 Area 3 Population: 2000 Projection 6,842 81,746 213,830 1995 Estimate 6,956 80,582 211,701 1990 Census 7,008 78,697 207,807 1980 Census 7,078 75,781 203,969 Percent Change, 1980 - 1990 -1.0 3.8 1.9 Percent Change, 1990 - 1995 -0.7 2.4 1.9 1995 Population by Race: % White 94.8 81.1 87.8 % Black 2.4 6.4 4.0 % American Indian 0.2 0.2 0.2 % Asian 0.9 1.5 1.8 % Other 1.7 10.8 6.3 % Hispanic 3.2 17.9 10.9 1995 Population by Age: % 0 - 5 6.4 9.0 7.6 % 6 - 13 8.7 11.1 9.6 % 14 - 17 4.3 4.4 4.9 % 18 - 20 3.7 3.8 4.4 % 21 - 24 4.5 4.8 5.7 % 25 - 34 13.8 17.7 15.9 % 35 - 44 15.9 15.7 14.9 % 45 - 54 13.1 10.7 10.6 % 55 - 64 11.6 8.3 9.1 % 65 - 74 11.0 8.2 9.3 % 75 - 84 5.6 5.0 6.0 % 85 + 1.4 1.3 1.9 Median Age Total Population 40.5 34.6 36.1 Median Age Adult Population 46.7 42.0 43.5 Households: 2000 Projection 2,703 32,662 84,284 1995 Estimate 2,746 32,222 83,439 1990 Census 2,767 31,482 81,872 1980 Census 2,616 29,814 77,764 Percent Change, 1980 - 1990 5.8 5.6 5.3 Percent Change, 1990 - 1995 -0.8 2.4 1.9 1990 Household Population 6,981 77,076 197,556 1990 Households w/ Children under 18 833 9,962 23,868 1990 Households w/ Persons over 65 796 8,200 24,136 Area defined by Circle: (40.575493,75.44239): 1 mile(s) Area defined by Circle: (40.575493,75.44239): 3 mile(s) Area defined by Circle: (40.575493,75.44239): 5 mile(s) Copyright 1995 Strategic Mapping, Inc All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 2 of 4 Area 1 = mountainville 1 Mile Radius 5/23/96 Area 2 = mountainville 3 Mile Radius Area 3 = mountainville 5 Mile Radius Description Area 1 Area 2 Area 3 1990 Family Population 6,153 63,166 162,362 1990 Nonfamily Population 828 13,910 35,194 1990 Group Quarters Population 27 1,615 10,247 1990 Average Household Size 2.52 2.45 2.41 1990 Average Family Size 2.93 3.05 2.98 1990 Family Households 2,068 20,162 53,402 1990 Nonfamily Households 696 11,316 28,465 1995 Household Income: % 0 - $9,999 8.7 14.0 11.5 % $ 10,000 - $ 14,999 5.9 9.3 8.2 % $ 15,000 - $ 24,999 15.1 18.2 16.3 % $ 25,000 - $ 34,999 16.0 16.2 15.9 % $ 35,000 - $ 49,999 22.7 20.5 19.8 % $ 50,000 - $ 74,999 21.6 14.7 17.0 % $ 75,000 - $ 99,999 6.7 4.1 5.9 % $l00,000 - $149,999 2.9 2.1 3.6 % $150,000 + 0.4 0.9 1.7 2000 Median Household Income $ 42,730 $ 34,303 $ 38,946 1995 Median Household Income $ 37,379 $ 29,990 $ 33,707 1990 Median Household Income $ 32,381 $ 26,247 $ 29,126 2000 Average Household Income $ 48,423 $ 42,178 $ 49,837 1995 Average Household Income $ 41,673 $ 36,497 $ 42,537 1990 Average Household Income $ 35,328 $ 31,262 $ 35,889 2000 Per Capita Income $ 19,206 $ 17,192 $ 20,632 1995 Per Capita Income $ 16,515 $ 14,892 $ 17,618 1990 Per Capita Income $ 13,659 $ 12,728 $ 14,799 2000 Median Family Income $ 48,729 $ 41,875 $ 47,736 1995 Median Family Income $ 42,627 $ 36,610 $ 41,315 1990 Median Family Income $ 36,927 $ 32,041 $ 35,700 1990 Average Family Income $ 40,073 $ 36,150 $ 42,553 Area defined by Circle: (40.575493,75.44239): 1 mile(s) Area defined by Circle: (40.57S493,75.44239): 3 mile(s) Area defined by Circle: (40.575493,75.44239): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-4l Page 3 of 4 Area 1 = mountainville 1 Mile Radius 5/23/96 Area 2 = mountainville 3 Mile Radius Area 3 = mountainville 5 Mile Radius Description Area 1 Area 2 Area 3 1990 Housing Unit Counts: Total Units 2,858 33,721 86,650 Occupied Units 2,767 31,482 81,872 Owner Occupied 2,296 18,006 50,564 Renter Occupied 471 13,482 31,303 Vacant Units 91 2,239 4,778 Year Round 81 2,117 4,540 Seasonal 10 121 235 1990 Housing Unit Percents: % Occupied of Total Units 96.8 93.4 94.5 % Owner Units of Occupied Units 83.0 57.2 61.8 % Renter Units of Occupied Units 17.0 42.8 38.2 % Vacant of Total Units 3.2 6.6 5.5 % Year Round of Vacant Units 89.0 94.6 95.0 % Seasonal of Vacant Units 11.0 5.4 4.9 % Condominiums of Total Units 0.1 0.3 0.7 1990 Condominiums: Total Condominium Units 2 85 592 % Owner Occupied 0.0 9.4 31.6 % Renter Occupied 100.0 90.6 58.3 % Vacant 0.0 0.0 10.1 1990 Units in Structure: % 1, Detached 67.4 27.9 35.1 % 1, Attached 16.9 33.3 30.0 % 2 2.3 7.3 6.8 % 3 - 9 6.1 17.6 14.1 % 10 - 49 6.7 9.3 9.1 % 50 + 0.0 3.4 3.5 % Mobile Homes 0.2 0.4 0.4 % Other 0.5 0.9 1.0 1990 Median Home Value $ 92,691 $ 78,587 $ 88,818 1990 Median Contract Rent $ 392 $ 366 $ 393 Area defined by Circle: (40.575493,75.44239): 1 mile(s) Area defined by Circle: (40.575493,75.44239): 3 mile(s) Area defined by Circle: (40.575493,75.44239): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 4 of 4 Area 1 = mountainville 1 Mile Radius 5/23/96 Area 2 = mountainville 3 Mile Radius Area 3 = mountainville 5 Mile Radius Description Area 1 Area 2 Area 3 1995 Total Employed 1,486 33,231 94,615 1995 Socio-Economic Measure 53 38 47 1990 Occupation: Total Civil Labor Force 3,747 40,326 105,433 % Unemployed 4.6 6.2 5.4 Total Employed 3,575 37,818 99,729 % White Collar 49.6 52.2 57.7 % Executive & Managerial 6.2 7.9 9.9 % Professional Specialty 10.6 11.3 14.6 % Technical Support 3.8 4.3 4.3 % Administrative Support 17.9 17.7 17.5 % Sales 11.2 11.0 11.4 % Blue Collar 36.6 32.6 28.2 % Precision Production, Craft & Repair 12.8 11.6 10.9 % Machine Operators 11.2 11.0 9.0 % Transportation & Material Moving 5.3 4.4 3.9 % Laborers 7.4 5.6 4.4 % Farming, Forestry & Fishing 0.4 0.7 0.7 % Service: Private Household 0.0 0.3 0.2 % Service: Protective 2.1 1.6 1.5 % Service: Other 11.3 12.7 11.8 1990 Educational Attainment (Age 25 & Over): % Less than Grade 9 9.5 12.4 10.8 % Grade 9-12 (No Diploma) 17.6 20.0 17.3 % High School Graduate or Equivalency 44.2 36.4 35.0 % Some College (No Degree) 11.9 12.2 12.7 % Associate Degree 6.4 5.6 5.8 % Bachelor Degree 7.5 8.9 11.8 % Graduate or Professional Degree 2.9 4.4 6.7 Area defined by Circle: (40.575493,75.44239): 1 mile(s) Area defined by Circle: (40.575493,75.44239): 3 mile(s) Area defined by Circle: (40.575493,75.44239): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 mountainville 3 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 75,781 78,697 80,582 81,746 White 92.2% 84.3% 81.1% 78.0% Black 3.7% 5.6% 6.4% 7.0% American Indian 0.1% 0.2% 0.2% 0.3% Asian 0.6% 1.3% 1.5% 1.8% Other 3.4% 8.7% 10.8% 12.9% Hispanic 6.2% 13.5% 17.9% 22.0% Total Households 29,814 31,482 32,222 32,662 Household Population 74,683 77,076 78,967 80,131 Average Household Size 2.50 2.45 2.45 2.45 Household Income $ 0 - 9,999 33.3% 16.5% 14.0% 11.9% $ 10,000 - 14,999 16.0% 9.8% 9.3% 8.1% $ 15,000 - 24,999 27.0% 21.2% 18.2% 15.6% $ 25,000 - 34,999 15.2% 17.9% 16.2% 15.4% $ 35,000 - 49,999 6.7% 20.0% 20.5% 19.3% $ 50,000 - 74,999 1.3% 10.4% 14.7% 18.8% $ 75,O00 - 99,999 0.4% 2.5% 4.1% 5.7% $100,000 - 149,999 -- 1.1% 2.1% 3.8% $150,000 + -- 0.6% 0.9% 1.4% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 15,254 26,247 29,990 34,303 Aggregate HH Inc ($000) 520,575 981,057 1,176,011 1,377,625 Median Family Income ($) 19,301 32,041 36,610 41,875 Per Capita Income ($) 6,970 12,728 14,892 17,192 Median Age Total Population 32.4 33.0 34.6 36.2 Median Age Adult Population 43.4 40.4 42.0 43.6 Median Age Female Population 34.2 34.3 36.0 37.7 Median Age Adult Female Population 45.4 42.1 43.5 44.9 Median Age Male Population 30.6 31.8 33.3 34.7 Median Age Adult Male Population 41.4 38.9 40.4 42.2
Area defined by Circle: (40.575493,75.44239): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 mountainville 3 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 75,781 78,697 80,582 81,746 0 - 5 7.6% 9.2% 9.0% 8.7% 6 - 13 10.8% 10.0% 11.1% 11.4% 14 - 17 6.3% 4.5% 4.4% 4.9% 18 - 24 12.8% 10.4% 8.5% 8.6% 25 - 34 16.2% 19.7% 17.7% 14.2% 35 - 44 10.2% 14.0% 15.7% 17.0% 45 - 54 10.6% 9.3% 10.7% 12.1% 55 - 64 11.8% 8.9% 8.3% 8.5% 65 - 74 13.6% 8.3% 8.2% 7.7% 75 - 84 -- 4.5% 5.0% 5.2% 85 + -- 1.1% 1.3% 1.6% Female Population by Age 39,617 40,524 41,454 42,018 0 - 5 6.9% 8.6% 8.6% 8.3% 6 - 13 9.9% 9.2% 10.3% 10.8% 14 - 17 6.1% 4.5% 4.1% 4.5% 18 - 24 12.6% 10.2% 8.1% 7.9% 25 - 34 15.7% 18.8% 17.2% 13.8% 35 - 44 9.9% 13.6% 15.2% 16.6% 45 - 54 10.8% 9.4% 10.7% 12.0% 55 - 64 12.4% 9.2% 8.6% 8.9% 65 - 74 15.9% 9.5% 9.1% 8.5% 75 - 84 -- 5.5% 6.2% 6.4% 85 + -- 1.5% 1.9% 2.3% Male Population by Age 36,149 38,167 39,109 39,714 0 - 5 8.4% 9.8% 9.5% 9.1% 6 - 13 11.8% 10.9% 12.0% 12.2% 14 - 17 6.6% 4.6% 4.8% 5.2% 18 - 24 13.1% 10.6% 9.0% 9.4% 25 - 34 16.8% 20.7% 18.1% 14.5% 35 - 44 10.5% 14.4% 16.4% 17.4% 45 - 54 10.4% 9.3% 10.6% 12.2% 55 - 64 11.2% 8.6% 7.9% 8.1% 65 - 74 11.2% 7.0% 7.2% 7.0% 75 - 84 -- 3.5% 3.7% 3.9% 85 + -- 0.7% 0.8% 1.0%
Area defined by Circle: (40.575493,75.44239): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-4l Page 1 of 2 mountainville 3 Mile Radius 5/23/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 92.1 - ----------------------------------Demographics---------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 80,582 32,222 78,967 2.45 $29,990 2000 81,746 32,662 80,131 2.45 $34,303 - ------------------------------Expenditure Potential----------------------------- 1995 Area Yearly Growth Rate Per Household 1.37% Total 1.65% - -------------------------Retail Support Potential (000)------------------------- 1995: 3,256 sq. ft.
Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 29,341 32,739 911 1,002 2.22% 88.9 Appliance Store 2,439 2,069 76 63 -3.24% 88.7 Auto-Aftermarket Store 48,284 50,194 1,498 1,537 0.78% 89.6 Convenience Store 27,417 28,235 851 864 0.59% 93.9 Dept. Store 30,466 33,129 946 1,014 1.69% 89.5 Drug Store 24,390 30,518 757 934 4.58% 96.3 Electronics Store 11,281 14,929 350 457 5.76% 90.1 Fast Food Restaurant Store 28,569 25,432 887 779 -2.30% 92.8 Full Serv Restaurant Store 28,077 24,683 871 756 -2.54% 93.1 Furniture Store 10,814 10,319 336 316 -0.93% 90.4 Grocery Store 123,353 139,520 3,828 4,272 2.49% 93.7 Hardware Store 5,361 5,804 166 178 1.60% 90.4 Home Centers Store 26,090 30,598 810 937 3.24% 92.6 Jewelry Store 4,992 5,151 155 158 0.63% 91.6 Liquor Store 7,815 7,134 243 218 -1.81% 95.4 Mass Merchandiser Store 41,488 46,511 1,288 1,424 2.31% 91.0 Photo Store 565 566 18 17 0.01% 91.2 Shoe Store 5,818 6,874 181 210 3.39% 90.7 Sporting Goods Store 5,202 6,087 161 186 3.19% 90.2 Toy Store 3,700 3,483 115 107 -1.20% 89.9 Variety Store 2,385 2,709 74 83 2.57% 91.3
Area defined by Circle: (40.575493,75.44239): 3 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 mountainville 3 Mile Radius 5/23/96 Benchmark = Regional Area Definition Detailed Report
Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 1,715 2,872 53 88 10.86% 92.3 ------- ------- ------ ------ Total Shopping Center 469,565 509,556 14,573 15,601 All Other Stores 360,156 390,829 11,177 11,966 Total Retail 829,721 900,385 25,750 27,567
Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (40.575493,75.44239): 3 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 mountainville 5 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 203,969 207,807 211,701 213,830 White 95.1% 89.9% 87.8% 85.8% Black 2.2% 3.4% 4.0% 4.5% American Indian 0.1% 0.1% 0.2% 0.2% Asian 0.6% 1.5% 1.8% 2.0% Other 2.1% 5.1% 6.3% 7.5% Hispanic 4.3% 8.6% 10.9% 13.1% Total Households 77,764 81,872 83,439 84,284 Household Population 194,841 197,556 201,454 203,583 Average Household Size 2.51 2.41 2.41 2.42 Household Income $ 0 - 9,999 28.4% 13.9% 11.5% 9.5% $ 10,000 - 14,999 15.5% 9.1% 8.2% 6.9% $ 15,000 - 24,999 27.7% 19.4% 16.3% 14.0% $ 25,000 - 34,999 16.9% 17.6% 15.9% 14.3% $ 35,000 - 49,999 8.4% 19.8% 19.8% 18.7% $ 50,000 - 74,999 2.3% 13.3% 17.0% 20.0% $ 75,000 - 99,999 0.9% 3.9% 5.9% 7.9% $100,000 - 149,999 -- 1.9% 3.6% 6.1% $150,000 + -- 1.2% 1.7% 2.6% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 17,222 29,126 33,707 38,946 Aggregate HR Inc ($000) 1,524,380 2,923,661 3,549,250 4,200,420 Median Family Income ($) 21,056 35,700 41,315 47,736 Per Capita Income ($) 7,824 14,799 17,618 20,632 Median Age Total Population 33.4 34.7 36.1 37.5 Median Age Adult Population 44.1 42.0 43.5 44.7 Median Age Female Population 35.9 36.7 38.1 39.5 Median Age Adult Female Population 46.4 44.2 45.5 46.7 Median Age Male Population 31.1 32.9 34.3 35.6 Median Age Adult Male Population 41.4 39.9 41.5 42.9
Area defined by Circle: (40.575493,75.44239): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC-C1750-41 Page 2 of 2 mountainville 5 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 203,969 207,807 211,701 213,830 0 - 5 6.4% 7.7% 7.6% 7.4% 6 - 13 9.9% 8.9% 9.6% 9.8% 14 - 17 6.2% 4.2% 4.9% 5.1% 18 - 24 14.8% 12.5% 10.1% 10.2% 25 - 34 15.0% 17.2% 15.9% 13.4% 35 - 44 9.9% 13.7% 14.9% 15.7% 45 - 54 11.1% 9.4% 10.6% 11.8% 55 - 64 12.2% 9.7% 9.1% 9.3% 65 - 74 14.5% 9.5% 9.3% 8.9% 75 - 84 -- 5.5% 6.0% 6.2% 85 + -- 1.7% 1.9% 2.2% Female Population by Age 106,483 108,301 110,296 111,339 0 - 5 5.9% 7.2% 7.1% 6.9% 6 - 13 9.2% 8.3% 9.0% 9.2% 14 - 17 5.8% 4.0% 4.5% 4.8% 18 - 24 13.8% 11.8% 9.4% 9.3% 25 - 34 14.4% 16.3% 15.3% 12.9% 35 - 44 9.8% 13.2% 14.5% 15.2% 45 - 54 11.2% 9.4% 10.5% 11.7% 55 - 64 12.7% 10.0% 9.4% 9.6% 65 - 74 17.1% 10.6% 10.3% 9.7% 75 - 84 -- 6.7% 7.5% 7.7% 85 + -- 2.4% 2.7% 3.1% Male Population by Age 97,469 99,502 101,385 102,489 0 - 5 7.0% 8.2% 8.1% 7.8% 6 - 13 10.6% 9.6% 10.3% 10.4% 14 - 17 6.5% 4.4% 5.3% 5.6% 18 - 24 15.8% 13.3% 11.0% 11.2% 25 - 34 15.6% 18.1% 16.6% 14.0% 35 - 44 10.1% 14.2% 15.5% 16.2% 45 - 54 11.0% 9.4% 10.7% 12.0% 55 - 64 11.7% 9.4% 8.7% 9.0% 65 - 74 11.7% 8.3% 8.3% 8.1% 75 - 84 -- 4.1% 4.4% 4.6% 85 + -- 0.9% 1.1% 1.2%
Area defined by Circle: (40.575493,75.44239): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 mountainville 5 Mile Radius 5/23/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 96.7 - ----------------------------------Demographics---------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 211,701 83,439 201,454 2.41 $33,707 2000 213,830 84,284 203,583 2.42 $38,946 - ------------------------------Expenditure Potential----------------------------- 1995 Area Yearly Growth Rate Per Household 1.41% Total 1.61% - -------------------------Retail Support Potential (000)------------------------- 1995: 8,851 sq. ft.
Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 80,957 90,266 970 1,071 2.20% 94.8 Appliance Store 6,683 5,679 80 67 -3.20% 93.9 Auto-Aftermarket Store 134,641 139,872 1,614 1,660 0.77% 96.5 Convenience Store 74,027 76,198 887 904 0.58% 98.0 Dept. Store 83,614 90,743 1,002 1,077 1.65% 94.8 Drug Store 67,666 84,474 811 1,002 4.54% 103.2 Electronics Store 30,739 40,528 368 481 5.69% 94.8 Fast Food Restaurant Store 77,784 69,223 932 821 -2.31% 97.6 Full Serv Restaurant Store 76,658 67,494 919 801 -2.51% 98.2 Furniture Store 29,537 27,889 354 331 -1.14% 95.4 Grocery Store 330,120 372,561 3,956 4,420 2.45% 96.8 Hardware Store 14,706 15,945 176 189 1.63% 95.8 Home Centers Store 69,662 81,760 835 970 3.25% 95.5 Jewelry Store 13,730 14,170 165 168 0.63% 97.3 Liquor Store 20,724 18,822 248 223 -1.91% 97.7 Mass Merchandiser Store 112,648 126,039 1,350 1,495 2.27% 95.4 Photo Store 1,547 1,541 19 18 -0.07% 96.3 Shoe Store 15,950 18,830 191 223 3.38% 96.0 Sporting Goods Store 14,011 16,342 168 194 3.13% 93.8 Toy Store 9,981 9,393 120 111 -1.21% 93.7 Variety Store 6,500 7,365 78 87 2.53% 96.1
Area defined by Circle: (40.575493,75.44239): 5 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 mountainville 5 Mile Radius 5/23/96 Benchmark = Regional Area Definition Detailed Report
Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 4,637 7,817 56 93 11.01% 96.4 --------- --------- ------ ------ Total Shopping Center 1,276,523 1,382,953 15,299 16,408 All Other Stores 979,093 1,060,725 11,734 12,585 Total Retail 2,255,616 2,443,678 27,033 28,993
Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (40.575493,75.44239): 5 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC-C1750-41 Page 1 of 2 mountainville 7 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 286,594 298,794 305,466 309,289 White 95.4% 91.0% 89.3% 87.7% Black 1.9% 2.8% 3.2% 3.6% American Indian 0.1% 0.1% 0.1% 0.2% Asian 0.6% 1.5% 1.7% 2.0% Other 2.0% 4.6% 5.6% 6.6% Hispanic 4.3% 7.8% 9.8% 11.8% Total Households 107,384 116,325 118,890 120,324 Household Population 276,510 286,956 293,627 297,450 Average Household Size 2.57 2.47 2.47 2.47 Household Income $ 0 - 9,999 26.3% 12.9% 10.7% 8.8% $ 10,000 - 14,999 14.7% 8.5% 7.6% 6.3% $ 15,000 - 24,999 27.8% 18.2% 15.2% 12.9% $ 25,000 - 34,999 18.1% 17.0% 15.1% 13.5% $ 35,000 - 49,999 9.1% 20.0% 19.8% 18.2% $ 50,000 - 74,999 2.8% 14.9% 18.1% 20.6% $ 75,000 - 99,999 1.1% 4.7% 6.9% 9.0% $100,000 - 149,999 -- 2.3% 4.4% 7.3% $150,000 + -- 1.5% 2.2% 3.3% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 18,232 30,945 35,943 41,625 Aggregate HH Inc ($000) 2,223,870 4,438,034 5,428,539 6,468,081 Median Family Income ($) 21,698 37,658 43,740 50,655 Per Capita Income ($) 8,043 15,466 18,488 21,745 Median Age Total Population 33.6 35.4 36.9 38.2 Median Age Adult Population 44.3 42.9 44.4 45.7 Median Age Female Population 35.7 37.2 38.7 40.2 Median Age Adult Female Population 46.2 44.6 46.1 47.4 Median Age Male Population 31.6 33.8 35.1 36.2 Median Age Adult Male Population 42.2 41.2 42.7 43.9
Area defined by Circle: (40.575493,75.44239): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 mountainville 7 Mile Radius 5/23/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 286,594 298,794 305,466 309,289 0 - 5 6.7% 7.8% 7.6% 7.3% 6 - 13 10.4% 9.5% 9.9% 9.8% 14 - 17 6.4% 4.5% 4.9% 5.1% 18 - 24 13.5% 11.1% 9.8% 10.0% 25 - 34 15.0% 16.4% 14.8% 13.0% 35 - 44 10.5% 14.4% 15.1% 15.1% 45 - 54 11.4% 9.9% 11.4% 12.6% 55 - 64 12.3% 9.9% 9.3% 9.8% 65 - 74 13.8% 9.5% 9.4% 9.1% 75 - 84 -- 5.3% 5.9% 6.2% 85 + -- 1.6% 1.8% 2.1% Female Population by Age 149,355 155,978 159,461 161,393 0 - 5 6.2% 7.3% 7.1% 6.8% 6 - 13 9.8% 8.9% 9.2% 9.2% 14 - 17 6.1% 4.3% 4.6% 4.7% 18 - 24 12.8% 10.5% 9.1% 9.2% 25 - 34 14.5% 15.8% 14.3% 12.5% 35 - 44 10.4% 13.9% 14.8% 14.8% 45 - 54 11.5% 9.9% 11.3% 12.5% 55 - 64 12.8% 10.1% 9.5% 10.0% 65 - 74 16.1% 10.5% 10.3% 9.9% 75 - 84 -- 6.5% 7.2% 7.5% 85 + -- 2.3% 2.6% 3.0% Male Population by Age 137,231 142,817 146,002 147,889 0 - 5 7.2% 8.3% 8.1% 7.8% 6 - 13 11.1% 10.3% 10.6% 10.4% 14 - 17 6.8% 4.7% 5.3% 5.5% 18 - 24 14.3% 11.7% 10.5% 10.8% 25 - 34 15.5% 17.1% 15.3% 13.5% 35 - 44 10.6% 15.0% 15.6% 15.4% 45 - 54 11.3% 10.0% 11.6% 12.8% 55 - 64 11.9% 9.6% 9.1% 9.5% 65 - 74 11.3% 8.4% 8.5% 8.3% 75 - 84 -- 4.1% 4.4% 4.7% 85 + -- 0.9% 1.0% 1.2%
Area defined by Circle: (40.575493,75.44239): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 mountainville 7 Mile Radius 5/23/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 99.2 - ----------------------------------Demographics---------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 305,466 118,890 293,627 2.47 $35,943 2000 309,289 120,324 297,450 2.47 $41,625 - ------------------------------Expenditure Potential----------------------------- 1995 Area Yearly Growth Rate Per Household 1.41% Total 1.65% - -------------------------Retail Support Potential (000)------------------------- 1995: 12,939 sq. ft.
Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 119,327 133,434 1,004 1,109 2.26% 98.0 Appliance Store 9,847 8,409 83 70 -3.11% 97.1 Auto-Aftermarket Store 197,634 205,925 1,662 1,711 0.83% 99.4 Convenience Store 107,468 110,893 904 922 0.63% 99.8 Dept. Store 123,309 134,097 1,037 1,114 1.69% 98.1 Drug Store 98,091 123,129 825 1,023 4.65% 105.0 Electronics Store 45,174 59,443 380 494 5.64% 97.7 Fast Food Restaurant Store 113,462 101,092 954 840 -2.28% 99.9 Full Serv Restaurant Store 111,679 98,506 939 819 -2.48% 100.4 Furniture Store 43,666 41,248 367 343 -1.13% 98.9 Grocery Store 478,478 541,106 4,025 4,497 2.49% 98.5 Hardware Store 21,813 23,674 183 197 1.65% 99.7 Home Centers Store 103,345 121,186 869 1,007 3.24% 99.4 Jewelry Store 20,300 21,001 171 175 0.68% 101.0 Liquor Store 30,028 27,239 253 226 -1.93% 99.3 Mass Merchandiser Store 165,233 185,222 1,390 1,539 2.31% 98.2 Photo Store 2,275 2,264 19 19 -0.10% 99.4 Shoe Store 23,324 27,612 196 229 3.43% 98.6 Sporting Goods Store 20,596 24,011 173 200 3.12% 96.8 Toy Store 14,759 13,955 124 116 -1.11% 97.2 Variety Store 9,539 10,833 80 90 2.58% 99.0
Area defined by Circle: (40.575493,75.44239): 7 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 mountainville 7 Mile Radius 5/23/96 Benchmark = Regional Area Definition Detailed Report
Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 6,730 11,359 57 94 11.04% 98.2 --------- --------- ------ ------ Total Shopping Center 1,866,078 2,025,637 15,696 16,835 All Other Stores 1,431,281 1,553,663 12,039 12,912 Total Retail 3,297,359 3,579,300 27,735 29,747
Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (40.575493,75.44239): 7 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 1 of 4 Area 1 = mountainville 3 Mile Radius 6/11/96 Area 2 = mountainville 5 Mile Radius Area 3 = mountainville 7 Mile Radius Description Area 1 Area 2 Area 3 Population: 2000 Projection 81,746 213,830 309,289 1995 Estimate 80,582 211,701 305,466 1990 Census 78,697 207,807 298,794 1980 Census 75,781 203,969 286,594 Percent Change, 1980 - 1990 3.8 1.9 4.3 Percent Change, 1990 - 1995 2.4 1.9 2.2 1995 Population by Race: % White 81.1 87.8 89.3 % Black 6.4 4.0 3.2 % American Indian 0.2 0.2 0.1 % Asian 1.5 1.8 1.7 % Other 10.8 6.3 5.6 % Hispanic 17.9 10.9 9.8 1995 Population by Age: % 0 - 5 9.0 7.6 7.6 % 6 - 13 11.1 9.6 9.9 % 14 - 17 4.4 4.9 4.9 % 18 - 20 3.8 4.4 4.4 % 21 - 24 4.8 5.7 5.4 % 25 - 34 17.7 15.9 14.8 % 35 - 44 15.7 14.9 15.1 % 45 - 54 10.7 10.6 11.4 % 55 - 64 8.3 9.1 9.3 % 65 - 74 8.2 9.3 9.4 % 75 - 84 5.0 6.0 5.9 % 85 + 1.3 1.9 1.8 Median Age Total Population 34.6 36.1 36.9 Median Age Adult Population 42.0 43.5 44.4 Households: 2000 Projection 32,662 84,284 120,324 1995 Estimate 32,222 83,439 118,890 1990 Census 31,482 81,872 116,325 1980 Census 29,814 77,764 107,384 Percent Change, 1980 - 1990 5.6 5.3 8.3 Percent Change, 1990-1995 2.4 1.9 2.2 1990 Household Population 77,076 197,556 286,956 1990 Households w/ Children under 18 9,962 23,868 35,862 1990 Households w/ Persons over 65 8,200 24,136 33,955 Area defined by Circle: (40.575493,75.44239): 3 mile(s) Area defined by Circle: (40.575493,75.44239): 5 mile(s) Area defined by Circle: (40.575493,75.44239): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 2 of 4 Area 1 = mountainville 3 Mile Radius 6/11/96 Area 2 = mountainville 5 Mile Radius Area 3 = mountainville 7 Mile Radius Description Area 1 Area 2 Area 3 1990 Family Population 63,166 162,362 241,725 1990 Nonfamily Population 13,910 35,194 45,231 1990 Group Quarters Population 1,615 10,247 11,839 1990 Average Household Size 2.45 2.41 2.47 1990 Average Family Size 3.05 2.98 3.00 1990 Family Households 20,162 53,402 79,209 1990 Nonfamily Households 11,316 28,465 37,115 1995 Household Income: % $ 0 - $ 9,999 14.0 11.5 10.7 % $ 10,000 - $ 14,999 9.3 8.2 7.6 % $ 15,000 - $ 24,999 18.2 16.3 15.2 % $ 25,000 - $ 34,999 16.2 15.9 15.1 % $ 35,000 - $ 49,999 20.5 19.8 19.8 % $ 50,000 - $ 74,999 14.7 17.0 18.1 % $ 75,000 - $ 99,999 4.1 5.9 6.9 % $100,000 - $149,999 2.1 3.6 4.4 % $150,000 + 0.9 1.7 2.2 2000 Median Household Income $ 34,303 $ 38,946 $ 41,625 1995 Median Household Income $ 29,990 $ 33,707 $ 35,943 1990 Median Household Income $ 26,247 $ 29,126 $ 30,945 2000 Average Household Income $ 42,178 $ 49,837 $ 53,756 1995 Average Household Income $ 36,497 $ 42,537 $ 45,660 1990 Average Household Income $ 31,262 $ 35,889 $ 38,302 2000 Per Capita Income $ 17,192 $ 20,632 $ 21,745 1995 Per Capita Income $ 14,892 $ 17,618 $ 18,488 1990 Per Capita Income $ 12,728 $ 14,799 $ 15,466 2000 Median Family Income $ 41,875 $ 47,736 $ 50,655 1995 Median Family Income $ 36,610 $ 41,315 $ 43,740 1990 Median Family Income $ 32,041 $ 35,700 $ 37,658 1990 Average Family Income $ 36,150 $ 42,553 $ 45,010 Area defined by Circle: (40.575493,75.44239): 3 mile(s) Area defined by Circle: (40.575493,75.44239): 5 mile(s) Area defined by Circle: (40.575493,75.44239): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 3 of 4 Area 1 = mountainville 3 Mile Radius 6/11/96 Area 2 = mountainville 5 Mile Radius Area 3 = mountainville 7 Mile Radius Description Area 1 Area 2 Area 3 1990 Housing Unit Counts: Total Units 33,721 86,650 122,163 Occupied Units 31,482 81,872 116,325 Owner Occupied 18,006 50,564 76,736 Renter Occupied 13,482 31,303 39,589 Vacant Units 2,239 4,778 5,838 Year Round 2,117 4,540 5,534 Seasonal 121 235 304 1990 Housing Unit Percents: % Occupied of Total Units 93.4 94.5 95.2 % Owner Units of Occupied Units 57.2 61.8 66.0 % Renter Units of Occupied Units 42.8 38.2 34.0 % Vacant of Total Units 6.6 5.5 4.8 % Year Round of Vacant Units 94.6 95.0 94.8 % Seasonal of Vacant Units 5.4 4.9 5.2 % Condominiums of Total Units 0.3 0.7 1.1 1990 Condominiums: Total Condominium Units 85 592 1,333 % Owner Occupied 9.4 31.6 52.2 % Renter Occupied 90.6 58.3 38.8 % Vacant 0.0 10.1 9.0 1990 Units in Structure: % 1, Detached 27.9 35.1 41.9 % 1, Attached 33.3 30.0 27.7 % 2 7.3 6.8 5.7 % 3 - 9 17.6 14.1 12.1 % 10 - 49 9.3 9.1 7.9 % 50 + 3.4 3.5 3.0 % Mobile Homes 0.4 0.4 0.8 % Other 0.9 1.0 1.0 1990 Median Home Value $ 78,587 $ 88,818 $ 94,693 1990 Median Contract Rent $ 366 $ 393 $ 392 Area defined by Circle: (40.575493,75.44239): 3 mile(s) Area defined by Circle: (40.575493,75.44239): 5 mile(s) Area defined by Circle: (40.575493,75.44239): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 4 of 4 Area 1 = mountainville 3 Mile Radius 6/11/96 Area 2 = mountainville 5 Mile Radius Area 1 = mountainville 7 Mile Radius Description Area 1 Area 2 Area 3 1995 Total Employed 33,231 94,615 122,247 1995 Socio-Economic Measure 38 47 52 1990 Occupation: Total Civil Labor Force 40,326 105,433 150,667 % Unemployed 6.2 5.4 5.0 Total Employed 37,818 99,729 143,085 % White Collar 52.2 57.7 59.0 % Executive & Managerial 7.9 9.9 10.8 % Professional Specialty 11.3 14.6 15.1 % Technical Support 4.3 4.3 4.1 % Administrative Support 17.7 17.5 17.4 % Sales 11.0 11.4 11.6 % Blue Collar 32.6 28.2 27.3 % Precision Production, Craft & Repair 11.6 10.9 10.6 % Machine Operators 11.0 9.0 8.6 % Transportation & Material Moving 4.4 3.9 3.8 % Laborers 5.6 4.4 4.3 % Farming, Forestry & Fishing 0.7 0.7 0.7 % Service: Private Household 0.3 0.2 0.2 % Service: Protective 1.6 1.5 1.5 % Service: Other 12.7 11.8 11.2 1990 Educational Attainment (Age 25 & Over): % Less than Grade 9 12.4 10.8 10.1 % Grade 9-12 (No Diploma) 20.0 17.3 16.6 % High School Graduate or Equivalency 36.4 35.0 34.8 % Some College (No Degree) 12.2 12.7 12.6 % Associate Degree 5.6 5.8 6.0 % Bachelor Degree 8.9 11.8 12.4 % Graduate or Professional Degree 4.4 6.7 7.5 Area defined by Circle: (40.575493,75.44239): 3 mile(s) Area defined by Circle: (40.575493,75.44239): 5 mile(s) Area defined by Circle: (40.575493,75.44239): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. ================================================================================ ADDENDUM F RENT ROLL - -------------------------------------------------------------------------------- ADDENDUM F RENT ROLL - --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------- Detail Rent Roll Page: 67 MOUNTAINVILLE Date: 05/14/96 Report Date: 05/14/96 Time: 14:23:35 - --------------------------------------------------------------------------------------------------------------------------- -- Rent Dates -- Suite Commence Expire Square Monthly Annual ---- Cost Recovery ----- Expense No. Tenant Name Start Footage Base Rent Rate/SF Description Monthly Stop - --------------------------------------------------------------------------------------------------------------------------- 00010 ROSE GARDEN LAUNDRY 10/01/91 06/30/98 1,500 1,062.50 8.50 10/01/91 0001* C & C ASSOCIATES 03/01/89 02/28/99 0 597.50 0.00 03/01/89 0003* THE BEER MART 01/21/92 10/31/97 3,000 2,500.00 10.00 01/21/92 00040 FAMILY DOLLAR STORE 09/19/90 06/30/00 6,689 3,291.67 5.91 09/19/90 0004A GOLDEN HARVEST RESTURANT 02/15/89 10/31/98 5,000 3,750.00 9.00 02/15/89 00080 NATIONAL AUTO STORES #10 03/01/88 02/28/98 7,476 3,426.50 5.50 03/01/88 00090 CARVEL ICE CREAM 01/01/86 10/31/97 1,500 1,300.00 10.40 01/01/86 00100 KLING'S HANDYMAN 10/01/90 01/31/99 20,000 6,666.67 4.00 10/01/90 00110 COLORTYME 04/01/87 05/31/99 3,500 2,552.08 8.75 06/01/87 0012* BENEFICIAL CONSUMER DISCOUNT 06/01/88 05/31/98 2,000 1,666.67 10.00 06/01/88 00130 THRIFT DRUG 04/23/79 04/30/99 15,808 5,000.00 3.80 04/23/79 00140 WINE & SPIRITS SHOPPE 12/01/79 02/28/96 5,515 2,937.00 6.39 12/01/79 00150 HIS & HER HAIR SHOP 11/01/82 10/31/97 1,305 1,111.60 10.22 11/01/82 00160 VESUVIOS PIZZA 06/01/84 12/31/96 1,808 904.00 6.00 06/01/84 - -------------------------------------------------------------------------------------------- Suite ----- Other Income ---- --- Future Rent Increases --- No. Tenant Name Description Monthly Date Monthly Amt. Per SF - -------------------------------------------------------------------------------------------- 00010 ROSE GARDEN LAUNDRY MAINTENANC 62.50 07/01/96 1,125.00 9.00 REAL ESTAT 132.37 07/01/97 1,187.50 9.50 -------- 194.87 0001* C & C ASSOCIATES 0003* THE BEER MART MAINTENANC 187.50 REAL ESTAT 264.74 -------- 452.24 00040 FAMILY DOLLAR STORE 07/01/96 3,620.84 6.50 0004A GOLDEN HARVEST RESTURANT MAINTENANC 294.85 REAL ESTAT 441.23 -------- 736.08 00080 NATIONAL AUTO STORES #10 MAINTENANC 338.91 00090 CARVEL ICE CREAM 00100 KLING'S HANDYMAN 00110 COLORTYME MAINTENANC 190.84 06/01/96 2,697.92 9.25 REAL ESTAT 308.86 -------- 499.70 0012* BENEFICIAL CONSUMER DISCOUNT MAINTENANC 153.85 REAL ESTAT 171.00 -------- 324.85 00130 THRIFT DRUG MAINTENANC 131.73 CONSTRUCTI -562.50 -------- -430.77 00140 WINE & SPIRITS SHOPPE 00150 HIS & HER HAIR SHOP 00160 VESUVIOS PIZZA MAINTENANC 106.62
- --------------------------------------------------------------------------------------------------------------------------- Detail Rent Roll Page: 68 MOUNTAINVILLE Date: 05/14/96 Report Date: 05/14/96 Time: 14:24:48 - --------------------------------------------------------------------------------------------------------------------------- -- Rent Dates -- Suite Commence Expire Square Monthly Annual ---- Cost Recovery ----- Expense No. Tenant Name Start Footage Base Rent Rate/SF Description Monthly Stop - --------------------------------------------------------------------------------------------------------------------------- 00170 ACME MARKETS 01/01/86 04/30/98 32,200 7,118.00 2.65 01/01/86 00070 BARGAINS GALORE USED FURNITU 07/25/94 01/31/96 3,000 1,750.00 7.00 07/25/94 00050 STUDIO NAILS 07/12/95 07/31/96 1,500 775.00 6.20 07/12/95 00060 MONTESINO 04/11/96 04/30/01 1,500 1,250.00 10.00 04/11/96 - ------------------------------------------------------------------------------------------------------------------- Total Building Occupied Sqft: 99% 113,301 47,659.19 0.00 Available Sqft: l% 1,500 Total Sqft: 114,801 =================================================================================================================== - -------------------------------------------------------------------------------------------- Suite ----- Other Income ---- --- Future Rent Increases --- No. Tenant Name Description Monthly Date Monthly Amt. Per SF - -------------------------------------------------------------------------------------------- 00170 ACME MARKETS GROUND REN 833.33 00070 BARGAINS GALORE USED FURNITU MAINTENANC 212.50 REAL ESTAT 264.74 -------- 477.24 00050 STUDIO NAILS MAINTENANC 93.75 08/01/96 875.00 7.00 REAL ESTAT 132.50 -------- 226.25 00060 MONTESINO MAINTENANC 112.50 05/01/98 1,375.00 11.00 REAL ESTAT 137.50 05/01/01 1,625.00 13.00 -------- 250.00 - ----------------------------------------------------------- Total Building 4,009.32 ===========================================================
================================================================================ ADDENDUM G - PRO-JECT REPORTS - -------------------------------------------------------------------------------- ADDENDUM G PRO-JECT REPORTS - -------------------------------------------------------------------------------- MOUNTAINVILLE, ALLENTOWN, PA PROJECT DESIGNATOR: 693J REVISION: 6/17/96 @ 18:57 PROJECT ASSUMPTIONS REPORT INCLUDING ALL TENANTS 6/19/96 @ 15:56 BUILDING PROLOGUE - ----------------- LEASEHOLD ANALYSIS OF MOUNTAINVILLE, ALLENTOWN, PA BEGINNING 6/1996 FOR 16 YEARS ON A FISCAL YEAR BASIS AREA MEASURES - ------------- GLA 1996 VALUE - 114,801 1997 VALUE - 116,801 THEREAFTER - CONSTANT GROWTH RATES - ------------ MRKT 1996 VALUE - 3.00 THEREAFTER - CONSTANT OPEX 1996 VALUE - 3.00 THEREAFTER - CONSTANT RETG 1996 VALUE - 3.00 THEREAFTER - CONSTANT RENT 1996 VALUE - 3.00 THEREAFTER - CONSTANT MISC 1996 VALUE - 3.00 THEREAFTER - CONSTANT SALE 1996 VALUE - 3.00 THEREAFTER - CONSTANT LCNW 1996 VALUE - 4.50 THEREAFTER - CONSTANT LCRN 1996 VALUE - 2.25 THEREAFTER - CONSTANT LCBL +50.0% OF LCNW +50.0% OF LCRN MARKET RATES - ------------ ANCH 1996 VALUE - 5.00 THEREAFTER - GROWING AT GROWTH RATE MRKT MK07 PAGE 2 1996 VALUE - 7.00 THEREAFTER - GROWING AT GROWTH RATE MRKT MK10 1996 VALUE - 10.00 THEREAFTER - GROWING AT GROWTH RATE MRKT MISCELLANEOUS INCOMES - --------------------- MISCELLANEOUS 1996 VALUE - 25,170 THEREAFTER - GROWING AT GROWTH RATE MISC EXPENSES - -------- COMMON AREA MAINT., REFERRED TO AS CAME CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 60,000 THEREAFTER - GROWING AT GROWTH RATE OPEX INSURANCE , REFERRED TO AS INSE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 11,000 THEREAFTER - GROWING AT GROWTH RATE OPEX MANAGEMENT FEE , REFERRED TO AS MGMT CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 0.00 THEREAFTER - CONSTANT REAL ESTATE TAXES , REFERRED TO AS RETE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 87,470 THEREAFTER - GROWING AT GROWTH RATE RETG R.E. TAX-ACME , REFERRED TO AS TAXE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 40,038 THEREAFTER - GROWING AT GROWTH RATE RETG CAM - RECOVERY , REFERRED TO AS CAM1 AN INFORMATIONAL EXPENSE +100.0% OF CAME+100.0% OF INSE +110.0% OF MGMT R.E.T. - RECOVERY , REFERRED TO AS RETR AN INFORMATIONAL EXPENSE +100.0% OF RETE R.E.T. - RECVR-ACME , REFERRED TO AS TAXR AN INFORMATIONAL EXPENSE +100.0% OF TAXE CAM -RECVRY-ACME , REFERRED TO AS CAMA AN INFORMATIONAL EXPENSE +100.0% OF CAME+100.0% OF MGMT CAM-RECVY-NO INSR., REFERRED TO AS CAM2 AN INFORMATIONAL EXPENSE +100.0% OF CAME+100.0% OF MGMT PAGE 3 VACANCY ALLOWANCE - ----------------- PERCENTAGE OF POTENTIAL GROSS INCOME FOR ALL TENANTS SUBJECT TO VACANCY 1996 VALUE - 3.00 THEREAFTER - CONSTANT MANAGEMENT FEE - -------------- PERCENTAGE OF EFFECTIVE GROSS INCOME FOR ALL TENANTS NOT PASSED THROUGH TO TENANTS 1996 VALUE - 2.00 THEREAFTER - CONSTANT COMMISSION CALCULATIONS - ----------------------- STANDARD METHOD #1 - 0.000% OF TOTAL RENT STANDARD METHOD #2 - 0.000% OF TOTAL RENT STANDARD METHOD #3 - 0.000% OF TOTAL RENT STANDARD METHOD #4 - 0.000% OF TOTAL RENT STANDARD METHOD #5 - 0.000% OF TOTAL RENT COMMISSION PAYOUTS - ------------------ STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT ALTERATION CALCULATION - ---------------------- NONE ALTERATION PAYOUTS - ------------------ STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT PAGE 4 COMMON AREA MAINTENANCE POOL - ---------------------------- NONE CAPITAL EXPENDITURES - -------------------- RESERVES 1996 VALUE - 11,680 THEREAFTER - GROWING AT GROWTH RATE OPEX PRIMARY CLASSIFICATION CODES - ---------------------------- NONE SECONDARY CLASSIFICATION CODES - ------------------------------ NONE COST CENTERS - ------------ 1 - CAM 2 - RET 3 - GROUND RENT SALES VOLUME PROFILE - -------------------- PERCENT OF RELATIVE MONTH ANNUAL SALES VOLUME - ----- ------------ ------ JAN 8.33% 1.00 FEB 8.33% 1.00 MAR 8.33% 1.00 APR 8.33% 1.00 MAY 8.33% 1.00 JUN 8.33% 1.00 JUL 8.33% 1.00 AUG 8.33% 1.00 SEP 8.33% 1.00 OCT 8.33% 1.00 NOV 8.33% 1.00 DEC 8.33% 1.00 ------ ----- TOTALS 100.00% 12.00 GLOBAL RECOVERIES - ----------------- CAM - RECOVERY , REFERRED TO AS CAM1 ASSIGNED TO COST CENTER 1 - CAM PRO RATA SHARE RECOVERY OF EXPENSE CAM1 PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH R.E.T. - RECOVERY , REFERRED TO AS RETR PAGE 5 PRO RATA SHARE RECOVERY OF EXPENSE RETR PRO RATED IN TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH CAM-RECVY-NO INSR., REFERRED TO AS CAM2 ASSIGNED TO COST CENTER 1 - CAM PRO RATA SHARE RECOVERY OF EXPENSE CAM2 PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH TENANT PROLOGUE - --------------- MINIMUM RENTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR SALES VOLUMES AND BREAKPOINTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR RENEWAL RENTS ARE COMPOUNDED ANNUALLY RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET REFERENCE TENANTS - ----------------- NONE TENANTS - ------- THERE ARE A TOTAL OF 19 LEASEHOLD TENANT(S): - -------------------------------------------- # 1 - SUITE #00010 , ROSE GARDEN LANDRY BASE LEASE DATES: 10/1991 TO 6/1998 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,500 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 8.50/SF/YR CHANGING TO - 9.00/SF/YR ON 7/1996 CHANGING TO - 9.50/SF/YR ON 7/1997 PERCENTAGE RENT: INITIAL SALES - 43.33/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 128.57/SF/YR 7.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING PAGE 6 GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTNS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK10 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 2 - SUITE #0003 , THE BEER MART BASE LEASE DATES: 1/1992 TO 10/1997 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 3,000 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 10.00/SF/YR PERCENTAGE RENT: INITIAL SALES - 207.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 250.00/SF/YR 3.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: PAGE 7 LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTNS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK10 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 3 - SUITE #00040 , FAMILY DOLLAR STOR BASE LEASE DATES: 9/1990 TO 5/1997 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 6,689 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 5.91/SF/YR CHANGING TO - 6.49/SF/YR ON 7/1996 PERCENTAGE RENT: INITIAL SALES - 120.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 3.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: R.E.T.- RECOVERY ASSIGNED TO COST CENTER 2 - RET PRO RATA SNARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 76,845 COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 6/1997 TO 6/2000 SQUARE FOOTAGE: 8,689 MINIMUM RENT: INITIAL RENT - 5.00/SF/YR PERCENTAGE RENT: PAGE 8 INITIAL SALES - 95.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 3.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: R.E.T.- RECOVERY ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 76,845 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK07 MULTIPLIED BY 1.000 WITH PERCENTAGE STEPS OF RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR GLOBAL GROUPING GLOBAL RECOVERY CAM1 RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 4 - SUITE #0004A , GOLDEN HARVEST RST BASE LEASE DATES: 2/1989 TO 10/1998 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 5,000 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 9.00/SF/YR PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: PAGE 9 GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK07 MULTIPLIED BY 1.000 WITH PERCENTAGE STEPS OF RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 5 - SUITE #00080 , NAT'L AUTO STORES BASE LEASE DATES: 3/1988 TO 2/1998 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 7,476 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 5.50/SF/YR PERCENTAGE RENT: INITIAL SALES - 192.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 167.00/SF/YR CHANGING TO - 200.00/SF/YR ON 4/1998 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES:NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 R.E.T. - RECOVERY ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA PAGE 10 CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 37,275 COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 3/1998 TO 2/2003 SQUARE FOOTAGE: 7,476 MINIMUM RENT: INITIAL RENT - 6.00/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 167.00/SF/YR CHANGING TO - 200.00/SF/YR ON 4/1998 CHANGING TO - 233.00/SF/YR ON 5/2003 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES:NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 R.E.T.- RECOVERY ASSIGNED TO COST CENTER 2 - RET PRO RATA SNARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 37,275 COMMISSIONS: NONE ALTERATIONS: NONE OPTION 2 DATES: 3/2003 TO 2/2008 SQUARE FOOTAGE: 7,476 MINIMUM RENT: INITIAL RENT - 7.00/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 167.00/SF/YR CHANGING TO - 200.00/SF/YR ON 4/1998 CHANGING TO - 233.00/SF/YR ON 5/2003 CHANGING TO - 258.00/SF/YR ON 5/2008 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 R.E.T.- RECOVERY ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE RETR PAGE 11 PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 37,275 COMMISSIONS: NONE ALTERATIONS: NONE OPTION 3/DATES: 3/2008 TO 2/2013 SQUARE FOOTAGE: 7,476 MINIMUM RENT: INITIAL RENT - 8.00/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 167.00/SF/YR CHANGING TO - 200.00/SF/YR ON 4/1998 CHANGING TO - 233.00/SF/YR ON 5/2003 CHANGING TO - 258.00/SF/YR ON 5/2008 CHANGING TO - 300.00/SF/YR ON 5/2013 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 R.E.T. - RECOVERY ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 37,275 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 6 - SUITE #00090 , CARVEL ICE CREAM BASE LEASE DATES: 1/1986 TO 10/1997 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,500 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 10.40/SF/YR PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM2 PAGE 12 R.E.T. - RECOVERY ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 25,615 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK10 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 7 - SUITE #00100 , KLING'S HANDYMAN BASE LEASE DATES: 10/1990 TO 1/1999 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 20,000 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 4.00/SF/YR PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM2 R.E.T. - RECOVERY ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP PAGE 13 AND A BASE AMOUNT OF 34,772 COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 2/1999 TO 1/2004 SQUARE FOOTAGE: 20,000 MINIMUM RENT: INITIAL RENT - 4.25/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 R.E.T. - RECOVERY ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 34,772 COMMISSIONS: NONE ALTERATIONS: NONE OPTION 2 DATES: 2/2004 TO 1/2009 SQUARE FOOTAGE: 20,000 MINIMUM RENT: INITIAL RENT - 4.50/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 R.E.T. - RECOVERY ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 34,772 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: PAGE 14 LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 20.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE ANCH MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 8 - SUITE #00110 , COLORTYME BASE LEASE DATES: 6/1987 TO 5/1999 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 3,500 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 9.25/SF/YR PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 6/1999 TO 5/2004 SQUARE FOOTAGE: 3,500 MINIMUM RENT: INITIAL RENT - 9.50/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: PAGE 15 GLOBAL GROUPING GLOBAL RECOVERY CAMl GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK10 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 9 - SUITE #0012 , BENEFICIAL CONSUMR BASE LEASE DATES: 6/1988 TO 5/1998 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 2,000 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 10.00/SF/YR PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: PAGE 16 LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK10 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 10 - SUITE #00130 , THRIFT DRUG BASE LEASE DATES: 4/1979 TO 4/1999 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 15,808 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 3.80/SF/YR PERCENTAGE RENT: INITIAL SALES - 176.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 126.00/SF/YR 3.00% OF OVERAGE TO A CEILING OF 164.00/SF/YR 2.50% OF OVERAGE TO A CEILING OF 202.00/SF/YR 2.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: R.E. TAXES RECAPTURE OF RECOVERIES ASSIGNED TO COST CENTER 2 - RET PERCENT OF OVERAGE - 100.00% PERCENT OF RECOVERY - 100.00% ANNUAL MAXIMUM - 0 RECOVERY FLOOR - 0 RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - CAM DIRECT INPUT OF AMOUNTS OR RATES 1996 LEASE YEAR VALUE - 0.10/SF R.E.T. - RECOVERY ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP PAGE 17 AND A BASE AMOUNT OF 32,080 COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 5/1999 TO 4/2004 SQUARE FOOTAGE: 15,808 MINIMUM RENT: INITIAL RENT - 3.80/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 126.00/SF/YR 3.00% OF OVERAGE TO A CEILING OF 164.00/SF/YR 2.50% OF OVERAGE TO A CEILING OF 202.30/SF/YR 2.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: R.E. TAXES RECAPTURE OF RECOVERIES ASSIGNED TO COST CENTER 2 - RET PERCENT OF OVERAGE - 100.00% PERCENT OF RECOVERY - 100.00% ANNUAL MAXIMUM - 0 RECOVERY FLOOR - 0 RECOVERIES: R.E.T. - RECOVERY ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 32,080 CAM ASSIGNED TO COST CENTER 1 - CAM DIRECT INPUT OF AMOUNTS OR RATES 1996 LEASE YEAR VALUE - 0.10/SF COMMISSIONS: NONE ALTERATIONS: NONE OPTION 2 DATES: 5/2004 TO 4/2009 SQUARE FOOTAGE: 15,808 MINIMUM RENT: INITIAL RENT - 3.80/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 126.00/SF/YR 3.00% OF OVERAGE TO A CEILING OF 164.00/SF/YR 2.50% OF OVERAGE TO A CEILING OF 202.00/SF/YR 2.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: R.E. TAXES PAGE 18 RECAPTURE OF RECOVERIES ASSIGNED TO COST CENTER 2 - RET PERCENT OF OVERAGE - 100.00% PERCENT OF RECOVERY - 100.00% ANNUAL MAXIMUM - 0 RECOVERY FLOOR - 0 RECOVERIES: R.E.T. - RECOVERY ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 32,080 CAM ASSIGNED TO COST CENTER 1 - CAM DIRECT INPUT OF AMOUNTS OR RATES 1996 LEASE YEAR VALUE - 0.10/SF COMMISSIONS: NONE ALTERATIONS: NONE OPTION 3 DATES: 5/2009 TO 4/2014 SQUARE FOOTAGE: 15,808 MINIMUM RENT: INITIAL RENT - 3.80/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 126.00/SF/YR 3.00% OF OVERAGE TO A CEILING OF 164.00/SF/YR 2.50% OF OVERAGE TO A CEILING OF 202.00/SF/YR 2.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: R.E. TAXES RECAPTURE OF RECOVERIES ASSIGNED TO COST CENTER 2 - RET PERCENT OF OVERAGE - 100.00% PERCENT OF RECOVERY - 100.00% ANNUAL MAXIMUM - 0 RECOVERY FLOOR - 0 RECOVERIES: R.E.T. - RECOVERY ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE RENT PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 32,080 CAM ASSIGNED TO COST CENTER 1 - CAM DIRECT INPUT OF AMOUNTS OR RATES 1996 LEASE YEAR VALUE - 0.10/SF COMMISSIONS: NONE PAGE 19 ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 11 - SUITE #00140 , WINE & SPIRITS BASE LEASE DATES: 3/1996 TO 2/1999 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 5,515 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 6.39/SF/YR PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: R.E.T. - RECOVERY ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 87,470 COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 3/1999 TO 2/2001 SQUARE FOOTAGE: 5,515 MINIMUM RENT: INITIAL RENT - 6.49/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: R.E.T. - RECOVERY ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 87,470 COMMISSIONS: NONE ALTERATIONS: NONE OPTION 2 DATES: 3/2001 TO 2/2003 SQUARE FOOTAGE: 5,515 MINIMUM RENT: INITIAL RENT - 6.58/SF/YR PAGE 20 PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: R.E.T. - RECOVERY ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 87,470 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK07 MULTIPLIED BY 1.000 WITH PERCENTAGE STEPS OF RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY RETR GLOBAL GROUPING GLOBAL RECOVERY CAM1 RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 12 - SUITE #00160 , VESUVIOS PIZZA BASE LEASE DATES: 6/1984 TO 12/1996 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,808 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 6.00/SF/YR PERCENTAGE RENT: INITIAL SALES - 72.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 6.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: PAGE 21 GLOBAL GROUPING GLOBAL RECOVERY CAM1 R.E.T. - RECOVERY ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 34,772 COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 1/1997 TO 12/2006 SQUARE FOOTAGE: 1,808 MINIMUM RENT: INITIAL RENT - 10.00/SF/YR CHANGING TO - 11.00/SF/YR ON 7/1999 CHANGING TO - 12.50/SF/YR ON 1/2002 CHANGING TO - 14.50/SF/YR ON 7/2004 PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 0.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK10 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT PAGE 22 RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 13 - SUITE #00170 , ACME MARKETS BASE LEASE DATES: 1/1986 TO 4/1998 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 32,200 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 2.96/SF/YR PERCENTAGE RENT: INITIAL SALES - 382.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: R.E. TAXES RECAPTURE OF RECOVERIES ASSIGNED TO COST CENTER 2 - RET PERCENT OF OVERAGE - 100.00% PERCENT OF RECOVERY - 100.00% ANNUAL MAXIMUM - 0 RECOVERY FLOOR - 0 RECOVERIES: CAM - RECVRY-ACME ASSIGNED TO COST CENTER 1 - CAM PRO RATA SHARE RECOVERY OF EXPENSE CAMA PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 5/1998 TO 4/2003 SQUARE FOOTAGE: 32,200 MINIMUM RENT: INITIAL RENT - 3.17/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: R.E. TAXES RECAPTURE OF RECOVERIES PAGE 23 ASSIGNED TO COST CENTER 2 - RET PERCENT OF OVERAGE - 100.00% PERCENT OF RECOVERY - 100.00% ANNUAL MAXIMUM - 0 RECOVERY FLOOR - 0 RECOVERIES: R.E.T. - RECVR-ACME ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE TAXR BASED ON AN ABSOLUTE PERCENTAGE OF 100.00% CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH CAM - RECVRY-ACME ASSIGNED TO COST CENTER 1 - CAM PRO RATA SHARE RECOVERY OF EXPENSE CAMA PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 2 DATES: 5/2003 TO 4/2008 SQUARE FOOTAGE: 32,200 MINIMUM RENT: INITIAL RENT - 2.88/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: R.E. TAXES RECAPTURE OF RECOVERIES ASSIGNED TO COST CENTER 2 - RET PERCENT OF OVERAGE - 100.00% PERCENT OF RECOVERY - 100.00% ANNUAL MAXIMUM - 0 RECOVERY FLOOR - 0 RECOVERIES: R.E.T. - RECVR-ACME ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE TAXR BASED ON AN ABSOLUTE PERCENTAGE OF 100.00% CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH CAM - RECVRY-ACME ASSIGNED TO COST CENTER 1 - CAM PRO RATA SHARE RECOVERY OF EXPENSE CAMA PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH PAGE 24 COMMISSIONS: NONE ALTERATIONS: NONE OPTION 3 DATES: 5/2008 TO 4/2013 SQUARE FOOTAGE: 32,200 MINIMUM RENT: INITIAL RENT - 2.95/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: R.E. TAXES RECAPTURE OF RECOVERIES ASSIGNED TO COST CENTER 2 - RET PERCENT OF OVERAGE - 100.00% PERCENT OF RECOVERY - 100.00% ANNUAL MAXIMUM - 0 RECOVERY FLOOR - 0 RECOVERIES: R.E.T. - RECVR-ACME ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE TAXR BASED ON AN ABSOLUTE PERCENTAGE OF 100.00% CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH CAM - RECVRY-ACME ASSIGNED TO COST CENTER 1 - CAM PRO RATA SHARE RECOVERY OF EXPENSE CAMA PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 4 DATES: 5/2013 TO 4/2018 SQUARE FOOTAGE: 32,200 MINIMUM RENT: INITIAL RENT - 2.95/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: R.E. TAXES RECAPTURE OF RECOVERIES ASSIGNED TO COST CENTER 2 - RET PERCENT OF OVERAGE - 100.00% PAGE 25 PERCENT OF RECOVERY - 100.00% ANNUAL MAXIMUM - 0 RECOVERY FLOOR - 0 RECOVERIES: R.E.T. - RECVR-ACME ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE TAXR BASED ON AN ABSOLUTE PERCENTAGE OF 100.00% CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH CAM - RECVRY-ACME ASSIGNED TO COST CENTER 1 - CAM PRO RATA SHARE RECOVERY OF EXPENSE CAMA PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 14 - SUITE #00070 , BARGAINS GALORE BASE LEASE DATES: 7/1994 TO 7/1996 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 3,000 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 7.00/SF/YR PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 15 - SUITE #00050 , STUDIO NAILS BASE LEASE DATES: 7/1995 TO 7/1996 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,500 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: PAGE 26 INITIAL RENT - 6.20/SF/YR PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 8/1996 TO 7/1997 SQUARE FOOTAGE: 1,500 MINIMUM RENT: INITIAL RENT - 7.00/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK10 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR PAGE 27 RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 16 - SUITE #00060 , MONTESINO BASE LEASE DATES: 4/1996 TO 4/2001 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,500 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 10.00/SF/YR CHANGING TO - 11.00/SF/YR ON 5/1998 PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK10 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 17 - CHICKEN & RIBS BASE LEASE DATES: 9/1996 TO 8/2006 TYPE OF TENANT: RETAIL PAGE 28 SQUARE FOOTAGE: 1,500 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 10.00/SF/YR CHANGING TO - 11.00/SF/YR ON 9/1997 CHANGING TO - 12.65/SF/YR ON 9/2001 PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: GROWTH RATE LCNW PAYOUT: CASHED OUT ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK10 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 18 - SUITE 00150 , HIS & HER HAIR BASE LEASE DATES: 11/1982 TO 10/1997 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,305 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 10.22/SF/YR PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% PAGE 29 WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM2 R.E.T. - RECOVERY ASSIGNED TO COST CENTER 2 - RET PRO RATA SHARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 43,974 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK10 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 19 - VACANT-BARGINS BASE LEASE DATES: 2/1997 TO 1/2002 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 3,000 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - MARKET RATE MK10 PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING PAGE 30 GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY CAM2 COMMISSIONS: GROWTH RATE LCNW PAYOUT: CASHED OUT ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE MK10 MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM1 GLOBAL GROUPING GLOBAL RECOVERY CAM2 RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE ================================================================================ ADDENDUM H - ENGAGEMENT LETTER - -------------------------------------------------------------------------------- ADDENDUM H ENGAGEMENT LETTER - -------------------------------------------------------------------------------- [Letterhead of CB Commercial] May 8, 1996 Mr. Josh Kane Chief Financial Officer MARK CENTERS TRUST 660 Third Avenue Kingston, PA 18704 Re: 17 Shopping Centers Nationwide Dear Mr. Kane: At your request, we are pleased to submit the following proposal to appraise the above referenced properties. The purpose of this assignment is to estimate the market value of the leased fee interest. We understand the appraisal reports are to be used for mortgage underwriting purposes. We also understand that the reports will be used by Mark Centers Trust and Morgan Stanley. The properties are briefly described on attachment "A". Our complete valuation will be presented in a self contained (narrative) format and will contain a complete description of the property along with pertinent exhibits and photographs together with supporting factual data and analysis necessary to convey our opinion of value. We will value the property based upon the cost, income and market approaches to value, where applicable, correlating our findings into a final value conclusion. The report will be prepared in conformity with and will be subject to the requirements of the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. Each report will also conform to the Uniform Standards of Professional Appraisal Practice ("USPAP") and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") and the Morgan Stanley Capital Appraisal Standards described in Attachment "B". We assume that there are no major or significant items of deferred maintenance beyond normal wear and tear for properties of their age as of the date of the appraisal which would require the expertise of a professional contractor to estimate the cost of such repairs. If such repairs need to be considered in this appraisal, such estimates are to be provided by a qualified firm hired by you and at no cost to us. The total fee for the assignment is $68,000 ($4,000 per property) including all travel and related expenses which is due and payable upon delivery of the reports. If we are asked to cancel the assignment within two weeks of our engagement an upset fee equal to 50% will be due and payable. If cancellation occurs between two and three weeks, the upset fee will be equal to 75% and any time after three weeks the full fee will be due and payable. We will furnish you with three copies of our final report within four to five weeks of our authorization. Authorization occurs upon our receipt of an executed copy of this proposal and our delivery date is contingent upon the timely receipt of all necessary property information, financial statements and detailed lease information. If all requested data and information is not available as of the authorized date, we reserve the right to extend the delivery date by the amount of time it takes to receive the requested information. May 8,1996 Mr. Kane Page 2 In order to complete this assignment in a timely manner, we will require the following specific information, if available: o Copy of Ground Lease, if Leasehold o Legal descriptions. o Current rent roll. o Copy of Leases or abstracts o Expense reimbursements on a tenant by tenant basis o Building area calculations and surveys. o Operating statements for the past three full years. o Current year expenses to date. o A copy of the current budget. o Copies of any toxic engineering reports dealing with underground tanks, PCB's, asbestos or chemical spills, if available. o A copy of the next fiscal year's budget, if available. o A list of major repairs which have recently been made, or are scheduled to be made in the next 18 months. o Name and phone number(s) of on-site superintendent(s), or local management firm or trustee for physical inspection. o Notice of any pending changes to the rent roll or pertinent information regarding the current status of the tenants. If we are requested to give court testimony an additional fee will be charged on an hourly basis at $300 per hour for designated MAI-appraisers and $175 for non-designated appraisers. Said hourly billings pertain to court preparation, waiting and travel time, document review and preparation (excludes narrative appraisal report) and all meetings related to court testimony. The client may provide only complete, final copies of the appraisal report to third parties who shall rely on such reports in connection with loan underwriting or securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the client for routine and customary questions. Please note that our consent to allow an appraisal report prepared by CB Commercial, or portions of such report, to become part of or be referenced in any public offering, the granting of such consent will be at our sole discretion and, if given, will be on condition that we will be provided with an Indemnification Agreement and/or Non-Reliance letter, in a form and content satisfactory to us, by a party satisfactory to us. We do consent to your submission of the reports to rating agencies, loan participants or your auditors without the need to provide us with an Indemnification Agreement and/or Non-Reliance letter. In addition to the fee for this assignment, you agree to compensate us at a rate to be mutually agreed to, for any time expended by us should we be required (by subpoena or otherwise) or requested by you, your representatives or other entity to become involved in any litigation or May 8,1996 Mr. Kane Page 3 legal proceeding in any way involving this engagement to which we are not a party, the appraisal work we produce or the property which is the subject of this assignment. You also agree to pay, on demand, all reasonable expenses which we incur in connection with any litigation or proceedings including the fees of our attorneys. You acknowledge that we are being retained hereunder as an independent contractor to perform the services described herein and nothing in this agreement shall be deemed to create any other relationship between us. This assignment will be deemed concluded and the services hereunder completed upon delivery to you of the appraisal report discussed herein. If these terms are acceptable, please authorize us to proceed by having an officer of the corporation, managing general partner, principal, owner, or a contractually responsible party sign the enclosed copy of this proposal with "Terms and Conditions" and return it to us for our permanent file. Upon receipt of your authorization, we will schedule the necessary personnel to complete the project in a timely manner. We appreciate this opportunity to be of service to you on this assignment. If you have additional questions, please do not hesitate to give me a call. Sincerely, CB COMMERCIAL REAL ESTATE GROUP, INC. Appraisal /s/ Michael R. Pecorino Michael R. Pecorino, MAI MRP:jf cc: Douglas W. Haney Enclosure AGREED & ACCEPTED _____________________________________ ______________________________________ Signature Title _____________________________________ ______________________________________ Name (type or print) Date Office #: ___________________________ Fax #: _______________________________ ADDENDUM I QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF MAGGIE ARGYROS Real Estate Analyst CB Commercial Real Estate Group, Inc. 560 Lexington Avenue, 16th Floor New York, New York 10022 (212) 207-6128 EDUCATION Master of Science in Real Estate, Penn State University, State College, Pennsylvania Appraisal Institute Courses 110, 120, 310, 410, 420 PROFESSIONAL Appraisal Institute Candidate for MAI designation EXPERIENCE Five years of Real Estate Appraisal and Consulting experience throughout the United States, specializing in the New York Metropolitan area. 1991 - 1993 J. Blake and Associates, Inc. New York, New York 1993 - 1996 The Weitzman Group, Inc. New York, New York 1996 - Present CB Commercial Real Estate Group, Inc. New York, New York Assignments include full and partial interest appraisals of all types of real estate including office buildings, shopping centers, industrial facilities, apartment buildings, market studies, and cooperatives and condominiums. - -------------------------------------------------------------------------------- QUALIFICATIONS OF MICHAEL R. PECORINO, MAI Senior Vice President, Regional Manager CB Commercial Real Estate Group, Inc. 560 Lexington Avenue, 20th Floor New York, New York 10022 (212)207-6102 EDUCATIONAL Real Estate Appraisal and Analysis, New York University, the Real Estate Institute Bachelor of Arts, Geography, Planning, Urban Studies, State University College of New York at Oneonta Successfully completed all the necessary courses to qualify for the MAI designation. LICENSES/CERTIFICATIONS Certified General Real Estate Appraiser: State of New York (46000002055) Certified General Real Estate Appraiser: State of New Jersey (RG-01667) Certified General Real Estate Appraiser: State of Pennsylvania (GA-001096-R) Certified General Real Estate Appraiser: State of Connecticut (0000489) Certified General Real Estate Appraiser: State of Maryland (10569) Certified General Real Estate Appraiser: State of New Jersey (3793) Certified General Real Estate Appraiser: State of Delaware (X10000223) Certified General Real Estate Appraiser: State of Maine (CG00001192) Certified General Real Estate Appraiser: State of Vermont (080-0000168) Certified General Real Estate Appraiser: State of District of Columbia (GA00010315) Licensed Real Estate Broker: State of New York PROFESSIONAL Appraisal Institute Designated Member of the Appraisal Institute (MAI), Certificate No. 7944 Member of the Real Estate Board of New York EXPERIENCE Fifteen years of Real Estate Appraisal and Consulting experience throughout the United States specializing in the New York metropolitan area. 1993 - Present CB Commercial Real Estate Group, Inc., Appraisal New York, New York 1983 - 1993 Cushman & Wakefield, Inc. New York, New York 1982 - 1983 Joseph J. Blake & Associates, Inc. New York, New York 1981 - 1982 City of New York - Office of Manhattan Planning New York, New York 1980 - 1981 City of Jersey City - Office of the Mayor Jersey City, New Jersey Assignments include full and partial interest appraisals of office buildings, air rights, commercial lofts, garden apartments, cooperatives, condominiums, townhouses, shopping centers, industrial facilities, residential and office market studies, portfolio valuations and multi-property assignments. - -------------------------------------------------------------------------------- This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE MARTINTOWN PLAZA SHOPPING CENTER NEC of Martintown Road and Knox Avenue North Augusta, Aiken County, South Carolina CB File No. 96-106-2 [CB LOGO] Delivering Solutions Through Local Knowledge Worldwide COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE MARTINTOWN PLAZA SHOPPING CENTER NEC of Martintown Road and Knox Avenue North Augusta, Aiken County, South Carolina CB File No. 96-106-2 DATE OF VALUE May 23, 1996 PREPARED FOR Morgan Stanley Morgan Capital Inc. 1585 Broadway New York, New York 10036 PREPARED BY W. Scott Bradford Senior Real Estate Analyst and Ronald A. Neyhart, MAI Regional Manager CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES 100 Galleria Parkway, Suite 550 Atlanta, Georgia 30339 [CB COMMERCIAL LETTERHEAD] June 7, 1996 Morgan Stanley Morgan Capital Inc. 1585 Broadway New York, New York 10036 RE: Appraisal of MARTINTOWN PLAZA SHOPPING CENTER NEC of Martintown Road and Knox Avenue North Augusta, Aiken County, South Carolina CB File No. 96-106-2 Dear Morgan Stanley: At your request and authorization, CB Commercial Real Estate Group, Inc. has prepared a Complete Appraisal presented in a self-contained appraisal report of the Market Value "as is" of the leasehold interest in the above-referenced real property based on market conditions existing as of May 23, 1996. The subject property consists of approximately 136,378 gross leaseable square feet of retail shopping center space constructed in 1974 and 1990 as Martintown Plaza Shopping Center on approximately 19.68 acres of land in North Augusta, South Carolina. The property is more fully described, legally and physically, within the enclosed report. Data, information, and calculations leading to the value conclusion are incorporated in the report following this letter. The report, in its entirety, including all assumptions and limiting conditions, is an integral part of and inseparable from this letter. Based on research and analysis contained in this report, it is estimated that the Market Value "as is" of the leasehold interest in the subject property, as of May 23, 1996, is: FOUR MILLION ONE HUNDRED TWENTY-FIVE THOUSAND DOLLARS ($4,125,000) The following appraisal sets forth the most pertinent data gathered, the techniques employed, and the reasoning leading to the opinion of value. The analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP), the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, and The Financial Institution Reform, Recovery, and Enforcement Act of 1989 (FIRREA). June 7, 1996 Page 2 It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CB Commercial Real Estate Group, Inc. can be of further service, please do not hesitate to contact us. Respectfully Submitted, CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES by: /s/ W. Scott Bradford /s/ Ronald A. Neyhart - ----------------------- ------------------------- W. Scott Bradford Ronald A. Neyhart, MAI Senior Real Estate Analyst First Vice President, Regional Manager Georgia Certification No. CG001784 Georgia Certification No. CG000490 South Carolina Temporary Permit Applied For - -------------------------------------------------------------------------------- CERTIFICATION OF THE APPRAISERS - -------------------------------------------------------------------------------- CERTIFICATION OF THE APPRAISERS We certify that to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. 4. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event, such as the approval of a loan. 5. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation and the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. In addition, this report conforms to the requirements of the Financial Institution Reform, Recovery, and Enforcement Act (FIRREA). 6. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 7. The undersigned MAI has completed the requirements of the continuing education program of the Appraisal Institute. 8. W. Scott Bradford has made a personal inspection of the property that is a subject of this report. Ronald A. Neyhart, MAI has not made a personal inspection of the appraised property. 9. No one provided professional assistance to the persons signing this report. 10. The undersigned appraisers have extensive experience in the appraisal/review of similar property types. 11. W. Scott Bradford is currently certified in the state where the subject is located. /s/ W. Scott Bradford /s/ Ronald A. Neyhart - -------------------------------- ---------------------------------- W. Scott Bradford Ronald A. Neyhart, MAI Senior Real Estate Analyst First Vice President, Regional Manager Georgia State Certification Georgia State Certification No. CG000490 No. CG001784 South Carolina Temporary Permit Applied For - -------------------------------------------------------------------------------- i - -------------------------------------------------------------------------------- SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF THE SUBJECT PROPERTY - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF THE SUBJECT PROPERTY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ii - -------------------------------------------------------------------------------- EXECUTIVE SUMMARY - -------------------------------------------------------------------------------- SUMMARY OF SALIENT FACTS Property Name: Martintown Plaza Shopping Center Location: NEC of Martintown Road and Knox Avenue North Augusta, Aiken County, South Carolina Assessor's Parcel Number: 10-051-1-25 & 27 Property Description: The subject property consists of a 136,378 gross leasable square foot neighborhood shopping center, including a 2,500 square foot, freestanding fast food restaurant. Highest and Best Use As Though Vacant: Commercial development. As Improved: Continued use as a neighborhood shopping center. Property Rights Appraised: Leasehold Interest Date of Value: May 23, 1996 Land Area 19.68 Acres Improvements Building Area (GLA): 136,378 Square Feet Year Built: 1974 and 1990 Condition: Average Anchor Tenants: FoodMax 47,982 SF Belk's 44,000 SF Revco Drugs 8,450 SF Estimated Marketing Time: 12 months - -------------------------------------------------------------------------------- iii - -------------------------------------------------------------------------------- EXECUTIVE SUMMARY - -------------------------------------------------------------------------------- Financial Indicators Current Occupancy: 87.6% Stabilized Occupancy: 93% Estimated Stabilized Expenses: $205,309, or $1.51 per square foot Going-In Overall Capitalization Rate Selected: 10.5% Terminal Overall Capitalization Rate: 11.0% Discount Rate: 12.5% Valuation Land Value: N/A Cost Approach: N/A Sales Comparison Approach: $4,100,000 Income Capitalization Approach: $4,125,000 Final Value Conclusion: $4,125,000 Per Square Foot: $30.25 per SF - -------------------------------------------------------------------------------- iv - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- TABLE OF CONTENTS CERTIFICATION OF THE APPRAISERS................................................i SUBJECT PHOTOGRAPHS...........................................................ii SUMMARY OF SALIENT FACTS.....................................................iii TABLE OF CONTENTS..............................................................v INTRODUCTION...................................................................1 AREA ANALYSIS..................................................................7 MARKET ANALYSIS...............................................................18 SITE ANALYSIS.................................................................23 IMPROVEMENT ANALYSIS..........................................................26 ZONING........................................................................31 TAX AND ASSESSMENT DATA.......................................................32 HIGHEST AND BEST USE..........................................................33 APPRAISAL METHODOLOGY.........................................................36 SALES COMPARISON APPROACH.....................................................38 INCOME CAPITALIZATION APPROACH................................................43 RECONCILIATION OF VALUE.......................................................68 ASSUMPTIONS AND LIMITING CONDITIONS...........................................70 ADDENDA A Glossary Of Terms B Additional Subject Photographs C Legal Description D Rent Roll E Historical Operating Statements F Comparable Improved Sales G Rent Comparables H Pro-Ject Reports I Qualifications - -------------------------------------------------------------------------------- v INTRODUCTION - -------------------------------------------------------------------------------- INTRODUCTION - -------------------------------------------------------------------------------- INTRODUCTION PROPERTY IDENTIFICATION The subject is located at the northeast corner of Martintown Road and Knox Avenue, in North Augusta, South Carolina. The county assessor's tax identification number is 10-051-1-25 & 27. A legal description is presented in the Addenda. OWNERSHIP AND PROPERTY HISTORY The subject is currently owned by Marvin Slomowitz according to a review of Aiken County property records. No transaction involving the subject has occurred within the last three years. There is no known current listing, option, or agreement of sale of the subject. DATES OF INSPECTION AND VALUATION The effective date of valuation is May 23, 1996. The site was inspected by W. Scott Bradford on May 23, 1996. PURPOSE OF THE APPRAISAL The purpose of this appraisal is to estimate the market value "as is" of the leasehold estate in the subject property, as of the date of inspection, May 23, 1996. Market value is defined as follows: Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised, and acting in what they consider their own best interests; 3. A reasonable time is allowed for exposure in the open market; 4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and - -------------------------------------------------------------------------------- 1 - -------------------------------------------------------------------------------- INTRODUCTION - -------------------------------------------------------------------------------- 5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. (1) TERMS AND DEFINITIONS Please refer to the Addenda for a Glossary of the Terms and Definitions that are, and may be used in this appraisal. INTENDED USE OF REPORT This appraisal is for mortgage underwriting purposes. PROPERTY RIGHTS APPRAISED The value estimated represents the leasehold estate. APPRAISAL DEVELOPMENT AND REPORTING PROCESS The following steps were completed by CB Commercial for this assignment: 1. Analyzed regional, city, neighborhood, site, and improvement data. 2. Inspected the subject and the neighborhood. 3. Reviewed data regarding taxes, zoning, utilities, easements, and city services. 4. Considered comparable improved sales, comparable improved building rental information, and comparable site sales. Confirmed data with principals, managers, or real estate agents representing principals, unless otherwise noted. 5. Analyzed the data to arrive at conclusions via each approach to value used in this report. 6. Reconciled the results of each approach to value employed into a probable range of market data and finally an estimate of value for the subject, as defined herein. 7. Estimated a reasonable exposure time associated with the value estimate. - -------- (1) The definition of market value is taken from: The Office of the Comptroller of the Currency under 12 CFR, Part 34, Subpart C-Appraisals, [club]34.42(f), August 24, 1990. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. - -------------------------------------------------------------------------------- 2 - -------------------------------------------------------------------------------- INTRODUCTION - -------------------------------------------------------------------------------- The subject site and improvement descriptions are based on a personal inspection of the property and a review of the relevant plat maps and site plan. The inspection is not a substitute for thorough engineering studies. To develop the opinion of value, CB Commercial performed a complete appraisal process, as defined by the Uniform Standards of Professional Appraisal Practice. This means that no departures from Standard 1 were invoked. This is a complete appraisal, in the form of a Self-Contained Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Standards of Professional Appraisal Practice. The definitions of Complete Appraisal and Self-Contained Report are found in the Glossary of Terms and Definitions. In a complete appraisal, CB Commercial uses all known applicable approaches to value. The value conclusion reflects all known information about the subject property, market conditions, and available data. The Self-Contained Report incorporates to the fullest extent possible, practical explanation of the data, reasoning and analysis that were used to develop the opinion of value. It also includes thorough descriptions of the subject property and the market for the subject property type. All data considered significant that was requested for this assignment was received by CB Commercial Real Estate Group, Inc. Appraisal Services. SPECIAL APPRAISAL INSTRUCTIONS There were no special appraisal instructions. MARKETING PERIOD The marketing period section is divided into reasonable exposure time and reasonable marketing time. Exposure time differs from marketing time. Marketing time is the period required to sell a real property interest at market value during the period immediately after the effective date of the appraisal. Exposure time is always presumed to precede the effective date of the appraisal. Exposure time is not intended to be a prediction of a date of sale or a one-line statement. Instead, it is an integral part of the appraisal analysis and is based on one or more of the following: o statistical information about days on the market o information gathered through sales verification o interviews of market participants. - -------------------------------------------------------------------------------- 3 - -------------------------------------------------------------------------------- INTRODUCTION - -------------------------------------------------------------------------------- The reasonable exposure period is a function of price, time, and use. It is not an isolated estimate of time alone. Exposure time is different for various types of real estate and under various market conditions. Reasonable Exposure Time Exposure time is always presumed to precede the effective date of the appraisal. It is the estimated length of time the property would have been offered prior to a hypothetical market value sale on the effective date of appraisal. It is a retrospective estimate based on an analysis of recent past events, assuming a competitive and open market. It assumes not only adequate, sufficient, and reasonable time but adequate, sufficient, and reasonable marketing effort. Exposure time and appraisal conclusion of value are therefore interrelated. Exposure time is often expressed as a range and is based on direct and indirect market data gathered during the market analysis, sales verifications, interviews with market participants, and other appropriate sources. The amount of time which a property will require to be marketed varies greatly depending on a number of factors including market conditions, listing price, terms of sale offered, and competitive listing inventory. In addition to considering each of the factors noted above, CB Commercial considered: o exposure periods of comparable sales revealed during the course of this appraisal, o the most recent CB Commercial National Investor Survey, and o the opinions of local knowledgeable real estate brokers and investors. Market Conditions Throughout the Southeast, market conditions for most property types have improved significantly during the past one to two years. In fact, the value of most investment grade property types has increased due to a number of factors. During the early 1990's, the lack of demand for investment properties and the inability of owners to make mortgage payments resulted in numerous foreclosures, or properties deeded back in lieu of foreclosure. Increased listing inventory had a substantial downward influence on property values and the exposure time necessary to generate sales. However, in the last few years, due to the competitive pricing in the market and improving national economic conditions, the number of transactions and active investors increased. These market conditions describe the current market and illustrate how exposure time is correlated with listing inventory, competitive pricing structures, and marketing efforts. - -------------------------------------------------------------------------------- 4 - -------------------------------------------------------------------------------- INTRODUCTION - -------------------------------------------------------------------------------- CB Commercial National Investor Survey In the most recent issue of the CB Commercial National Investor Survey, published in the First Quarter 1996, CB Commercial surveyed a wide range of investors for property type preferences and specific marketing times. Respondents showed a clear preference for suburban offices, apartments, warehouse/distribution facilities, community shopping centers, neighborhood shopping centers, power centers, and business parks. The surveyed investors ranked neighborhood shopping centers fifth out of 13 property types in terms of preference, as opposed to fourth in the prior survey (Third Quarter 1995). Investors indicated that exposure requirements for investment property generally increased from the previous survey, now about 6.7 months for the subject property type. Real Estate Broker Surveys As a third information source, appraisers solicited the opinions of real estate brokers knowledgeable in the subject market and property type. While the majority of individuals surveyed were reluctant to predict an exact exposure time length, generally they estimated an approximate range between 9 and 12 months. All assumed that property would be appropriately priced and marketed. When asked about the subject property specifically, the consensus of opinion was that the subject would receive average recognition in the marketplace under a reasonable plan for pricing and promotion. Exposure Time Conclusion In conclusion, based on the foregoing analysis, an exposure time of 12 months is reasonable, defensible, and appropriate. Like the brokers surveyed, CB Commercial assumes that the subject property would have been competitively priced and aggressively promoted regionally. Reasonable Marketing Time Reasonable marketing time is the period a prospective investor would forecast to sell the subject property immediately after the date of value, at the value estimated. Anticipated marketing time is essentially a measure of the perceived level of risk associated with the marketability, or liquidity, of the subject as an investment grade property. The sources for this information include those used in estimating the reasonable exposure time, but also an analysis of the anticipated changes in market conditions following the date of appraisal. In other words, the reasonable marketing time is the number of months it will require to sell the subject property from the date of value, into the future. The reader must understand, however, that the future price for the subject property (at the end of the marketing time) may or may not equal the appraisal estimate. The future price depends - -------------------------------------------------------------------------------- 5 - -------------------------------------------------------------------------------- INTRODUCTION - -------------------------------------------------------------------------------- on unpredictable changes in the physical real estate, demographic and economic trends, real estate markets in general, supply/demand characteristics for the property type, and many other factors. Based on the premise that present market conditions are the best indicators of future performance, a prudent investor will forecast that, under the conditions described above, the subject property will require a marketing time of approximately 12 months. - -------------------------------------------------------------------------------- 6 [GRAPHIC OMITTED] Regional Map - -------------------------------------------------------------------------------- AREA ANALYSIS - -------------------------------------------------------------------------------- AREA ANALYSIS The dynamic nature of economic relationships within a market area have a direct bearing on real estate values and the long-term quality of a real estate investment. In the market, the value of a property is not based on the price paid for it in the past or the cost of its creation, but on what buyers and sellers perceive it will provide in the future. Consequently, the attitude of the market toward a property within a specific neighborhood or market area reflects the probable future trend of that area. Since real estate is an immobile asset, economic trends affecting its locational quality in relation to other competing properties within its market area will also have a direct effect on its value as an investment. To accurately reflect such influences, it is necessary to examine the past and probable future trends which may affect the economic structure of the market and evaluate their impact on the market potential of the subject. This section of the report is designed to isolate and examine the discernible economic trends in the region and neighborhood which influence and create value for the subject property. REGIONAL INFLUENCES Location The subject is located in the southwestern portion of South Carolina near the state border with Georgia, about 150 miles east of Atlanta, and 70 miles west of Columbia, South Carolina. The four county metropolitan area contains a population of nearly 450,000. The largest city in the metro area is Augusta, Georgia. Augusta is perhaps best known as the home of the Masters Golf Tournament, played yearly at Augusta National Golf Course. In 1995, the event was attended by roughly 220,000 and produced an economic impact of about $104 million to the metro area. The metropolitan area is the second largest in both Georgia and South Carolina, and the area serves a large population providing employment, medical and educational services, and transportation needs. A regional map is presented on the following page. The subject property is located within the North Augusta city limits, in Aiken County, South Carolina. Physical Features The MSA is bisected by the Savannah River and is relatively close to the Atlantic Ocean. The area maintains a moderate climate, with an average annual temperature of 64.3 degrees Fahrenheit and relative humidity averaging 71.2%. Annual precipitation averages 44 inches. The area's climate permits year-round business operation, having a demonstrable impact on fuel consumption, construction, and maintenance costs. - -------------------------------------------------------------------------------- 7 - -------------------------------------------------------------------------------- AREA ANALYSIS - -------------------------------------------------------------------------------- Population As of 1994, the population of the metropolitan area was estimated at 439,385. This figure reflects a 10.7% overall increase from the 1990 census of 396,809. Population growth in the metropolitan area is illustrated on the following table. As noted previously, the subject is located in Aiken County. ================================================================================ METROPOLITAN POPULATION TRENDS
- ------------------------------------------------------------------------------------------------ 1970 1980 1990 1994 - ------------------------------------------------------------------------------------------------ Population - MSA 291,063 345,981 396,809 439,385 ------- ------- ------- ------- Richmond County 162,437 181,692 189,719 204,200 Columbia County 22,327 40,118 66,031 77,700 McDuffie County 15,276 18,546 20,119 21,200 Aiken County 91,023 105,625 120,940 136,285 Population Distribution by Percentage Richmond County 55.8 52.5 47.8 46.5 Columbia County 7.7 11.6 16.6 17.7 McDuffie County 5.2 5.4 5.1 4.8 Aiken County 31.3 30.5 30.5 31.0 Average Annual Increase by Percentage MSA - 1.9 1.5 2.7 - --- --- --- --- Richmond County - 1.2 0.4 1.9 Columbia County - 8.0 6.5 4.4 McDuffie County - 2.1 0.8 1.3 Aiken County - 1.6 1.5 3.2 Source: Augusta Chamber of Commerce and Strategic Mapping, Inc. ================================================================================================
As shown by the previous chart, the MSA experienced population growth of 54,918 residents during the 1970's and an increase of 50,828 during the 1980's. Population growth does seem to be on the increase, given the estimated change between 1990 and 1994. Further, Strategic Mapping, Inc. indicates an anticipated population for the MSA of 485,400 by 1999. This estimate reflects an increase in population of 88,591 residents from the 1990 census, and a percentage change of 22.3%, or 2.3% per year. The largest population in the metropolitan area is centered within Richmond County, which includes the city of Augusta. The 1994 population estimate for Richmond County is 204,200, - -------------------------------------------------------------------------------- 8 - -------------------------------------------------------------------------------- AREA ANALYSIS - -------------------------------------------------------------------------------- or 46.5% of the MSA total. Aiken, South Carolina is the second most populated county in the MSA with approximately 136,285 residents. As shown, Columbia County has been the fastest growing in the metropolitan area over the past two decades. This trend is expected to continue for the foreseeable future, primarily because of Columbia's proximity to downtown Augusta, and the fact that it is located in the western portion of the metropolitan area. This has been the primary direction of growth for a number of years. As shown, however, as Columbia grows its rate of such is slowing. Further, during the past several years there has been a resurgence of strong growth in Richmond County, and in terms of absolute numbers, this growth exceeded that experienced in Columbia County. Households and Income As shown on the following chart, Strategic Mapping, Inc. estimates the metropolitan area's total number of households for 1994 at 159,600. This is an increase of 16,891 or 11.8% from the 1990 census and 44,539 or 38.7% from the 1980 census. Strategic Mapping, Inc. anticipates a continued increase in household formation for the metropolitan area to 160,600 by 1999. ================================================================================ HOUSEHOLDS BY COUNTY - -------------------------------------------------------------------------------- COUNTY 1980 1990 1993 - -------------------------------------------------------------------------------- Richmond County 59,501 68,784 74,900 Columbia County 12,834 21,790 25,700 McDuffie County 6,270 7,252 7,700 Aiken County 36,456 44,883 51,300 ------- ------ ------- TOTAL 115,061 142,709 159,600 - -------------------------------------------------------------------------------- Source: Strategic Mapping, Inc. and Augusta Chamber of Commerce ================================================================================ As reported earlier, the primary direction of growth in the area is westerly from the Augusta Central Business District through the northern part of Richmond County and into the rapidly developing eastern section of Columbia County. Geographically, this growth pattern makes sense. Augusta is bounded on the north and east by the Savannah River which has acted as a natural barrier. Land located east of the city tends to be in the flood plain, or it is used for mining and industrial operations. Bush Field, the municipal airport, is also located southeast of the city and Fort Gordon Military Reservation is located on 55,588 acres in the southwestern portion of the MSA. The location of the Fort precludes extensive development in that area. North Augusta and Aiken are located on the northeast side of the Savannah River in Aiken County, South Carolina. Considerable growth is expected here as well, but not at the rate of Columbia County or the western extreme of Richmond County. - -------------------------------------------------------------------------------- 9 - -------------------------------------------------------------------------------- AREA ANALYSIS - -------------------------------------------------------------------------------- Effective buying income in the metropolitan area is slightly below the average for the United States overall. The following chart illustrates. ================================================================================ COMPARISON OF PER CAPITA AND HOUSEHOLD EBI - -------------------------------------------------------------------------------- PER CAPITA HOUSEHOLD 1990 1993 1990 1993 - -------------------------------------------------------------------------------- Augusta MSA $11,699 $13,349 $32,550 $36,871 U.S. $13,952 $16,064 $37,735 $43,484 - -------------------------------------------------------------------------------- Source: Survey of Buying Power, Published by Sales & Marketing Management ================================================================================ Transportation The area's transportation needs are served by a network of interstate, U.S., state, and local highways, as well as train and bus service. The area also maintains a small airport, Bush Field, located just south of Richmond County in Augusta, Georgia. The area's major traffic arteries include Interstate 20 which provides direct access to Atlanta, Georgia to the west and Columbia, South Carolina to the east. Interstate 520 (Bobby Jones Expressway) is also available. This highway will eventually encompass a large portion of the metropolitan area, including North Augusta, South Carolina. It currently provides access to the western and southern portions of Richmond County. Other major traffic arteries in this area include U.S. Highway 1 and Highway 78/278 (Gordon Highway). Bush Municipal Airport, the primary airport in the metropolitan area, is located south of Augusta. It offers 50 flights daily via Delta, ASA, and USAir. Greyhound Lines and Southeastern Stages, Inc., provide national bus service to and from the greater Augusta area. The MSA operates a public bus transit system. Economy The labor force for the MSA averaged 201,911 in 1994, and the rate of unemployment was 7%. This unemployment rate compares to the U.S. rate of 6.8% for the same period. By March 1995, the unemployment rate in the area had improved to a level of 6.2%, similar to the U.S. rate of 6.1%. Non-manufacturing concerns provide the greatest employment in the MSA. The largest employment categories include services, wholesale and retail trade, and government. The Georgia Department of Labor reports the following non-agricultural industry mix for the MSA for August 1994. - -------------------------------------------------------------------------------- 10 - -------------------------------------------------------------------------------- AREA ANALYSIS - -------------------------------------------------------------------------------- ================================================================================ INDUSTRY/TOTAL EMPLOYMENT NUMBER PERCENT - -------------------------------------------------------------------------------- Construction 11,500 6.1% Manufacturing 44,300 23.5% Transportation, Communication, Utilities 5,600 3.0% Wholesale Trade 5,100 2.7% Retail Trade 34,600 18.4% FIRE 6,900 3.7% Services 43,200 22.9% Government 37,200 19.7% ------ ----- Total 188,400 100.0% - -------------------------------------------------------------------------------- Source: Georgia Department of Labor ================================================================================ Major employers in the MSA include the following: ================================================================================ TWENTY FIVE LARGEST EMPLOYERS OF THE MSA
- ---------------------------------------------------------------------------------------------------------------------- COMPANY NAME TYPE PRODUCT/SERVICE COUNTY # OF JOBS - ---------------------------------------------------------------------------------------------------------------------- 1. Westinghouse Mfg. Nuclear Materials Aiken 15,000 2. Medical College of Georgia Service University/Medicine Richmond 6,878 3. Richmond County School System Govt. Education (K-12) Richmond 5,725 4. Veterans Administration Hospital Service Hospital/Medicine Richmond 4,294 5. Bechtel Savannah River Co., Inc. Service Engineering Aiken 4,000 6. University Hospital Service Hospital/Medicine Richmond 3,500 7. Graniteville Company Mfg. Textiles Aiken 3,000 8. Aiken County School System Govt. Education (K-12) Aiken 2,600 9. Fort Gordon (Civilian) Military Signal Corps Richmond 2,159 10. Columbia County School System Military Education (K-12) Columbia 1,838 11. Gracewood State School & Hospital Govt. State Hospital Richmond 1,530 12. Owens-Corning Fiberglass Mfg. Fiberglass Aiken 1,300 13. Kimberly Clark Mfg. Pulp Paper Aiken 1,400 14. St. Joseph Hospital Service Hospital/Medicine Richmond 1,300 15. E-Z-GO/Division of Textron Mfg. Golf Care Richmond 1,108 16. Augusta Regional Medical Center Service Hospital/Medicine Richmond 1,100 17. Federal Paper Board Co., Inc. Mfg. Bleached Paper Board Richmond 1,050 18. Wackenhut Services, Inc. Service Security Aiken 1,040 19. Dwight D. Eisenhower Hospital (Civilian) Military Hospital/Medicine Richmond 802 20. President Baking Company Mfg. Cookies & Crackers Richmond 700 21. Thermal Ceramics Mfg. Refractories Richmond 650 22. Club Car Mfg. Golf Vehicles Columbia 642 23. Kendall Company Mfg. Medical Supplies Richmond 632 24. John P. King Mfg./Div. Spartan Mills Mfg. Textiles Richmond 516 25. Carole Fabrics Mfg. Custom Draperies Richmond 479 - ----------------------------------------------------------------------------------------------------------------------
Note: The Augusta MSA (Metropolitan Statistical Area) is composed of Richmond, Columbia, and McDuffie Counties in Georgia and Aiken County in South Carolina. * Total employment at Savannah River Site is approximately 22,000 including DOE, Westinghouse & all sub-contractors. ** Total military employment at Fort Gordon is approximately 12,023 including civilian, military, and Eisenhower Hospital. Source: Augusta Chamber of Commerce ================================================================================ - -------------------------------------------------------------------------------- 11 - -------------------------------------------------------------------------------- AREA ANALYSIS - -------------------------------------------------------------------------------- The economy is somewhat diversified, but many jobs are concentrated in a few industries. While we anticipate the economy will continue to grow at a moderate pace, it will be particularly sensitive to shifts in medical, retail, paper board, military, and nuclear employment. Several of these are discussed below. Medical The area is becoming one of the major medical centers of the nation. The area includes 10 hospitals and approximately 6,000 hospital and nursing home beds. Major medical facility expansions include a new professional office building at University Hospital in Columbia County, a $2.4 million expansion of the Medical College of Georgia, a $3.75 million rehabilitation center at University Hospital, a $6.0 million expansion and renovation of Augusta Regional Medical Center, the addition of a magnetic resonance imaging (MRI) unit at Eisenhower Medical Center, and a $13 million residential complex for senior citizens at University Hospital-Augusta Resource Center on Aging. According to the Georgia Department of Industry and Trade, there are approximately 25,000 medical industry employees in Richmond County alone. This number includes medical employees at Dwight D. Eisenhower Army Medical Center, a part of Fort Gordon Military Reservation. Eisenhower is the country's largest Army medical center, with 400 active beds and capacity for 750 beds during wartime and/or major emergencies. The Medical College of Georgia (MCG) has additional expansion plans along with the adjacent University Hospital. Because of an aging population, evolving technologies, and the continuing trend of capitalization of medical research at medical centers such as the MCG, we believe the trend of continued growth in the medical sector of this economy is likely. It is important to note that the MCG currently has an enrollment of 2,500 students and Augusta's medical employment includes more than 1,500 medical doctors and over 200 dentists. Retail Since the recession of the early 1980's, the retail market has expanded rapidly. According to information provided by A.C. Cassella, Director of Economic Development at the Augusta Chamber of Commerce, Augusta has become a retail center for the MSA and surrounding rural areas. The following table summarizes the growth in retail sales between 1989 and 1993. - -------------------------------------------------------------------------------- 12 - -------------------------------------------------------------------------------- AREA ANALYSIS - -------------------------------------------------------------------------------- ================================================================================ TOTAL RETAIL SALES ($000) 1989-1993 ================================================================================ Area 1989 1990 1991 1992 1993 - -------------------------------------------------------------------------------- Richmond Co. $1,402,121 $1,499,069 $1,663,207 $1,682,805 $1,895,167 Columbia Co. $146,276 $319,039 $321,045 $338,374 $415,771 McDuffie Co. $127,912 $127,482 $145,826 $139,748 $170,831 Aiken Co. $615,815 $656,757 $719,362 $768,170 $867,744 -------- -------- -------- -------- -------- Total $2,292,124 $2,602,347 $2,849,440 $2,929,097 $3,349,513 - -------------------------------------------------------------------------------- Source: Survey of Buying Power, Published by Sales & Marketing Management ================================================================================ The chart shows that retail sales in this market have grown by 46% over the five year period. Total retail space in the market approximates 6.1 million square feet. The majority of retail space in this area is located in west and south Augusta. These are the locations of the area's largest regional malls which together total 2.3 million square feet. The 447,153 square foot Aiken Mall was constructed in 1989, adding to the area's retail development. Industrial Traditionally, heavy industrial land uses have been located on the east side of Augusta. Major employers have been in the chemical, mining, paper products, and textile industries. As is the trend in the U.S. overall, employment has been declining for larger industries and improving for smaller manufacturers and the service sector. The area has been active in soliciting employers from the Northeast and Midwest to relocate to the area. Military One of the largest employers in the area is the U.S. Army, located at Fort Gordon. Current employment exceeds 12,000 soldiers and nearly 3,000 civilian employees, down substantially from previous years. As a point of reference, total military and civilian employment at the base in 1991 was 18,500. Further, reductions are not expected. As a matter of fact, the Chamber of Commerce reports that a new unit moved to Fort Gordon in 1994, providing an influx of 800 families. According to the Chamber, fewer than 10% of the military families assigned to Fort Gordon reside on the base. Many military activities are centered at Fort Gordon. These include the following: o Fort Gordon serves as the home of the U.S. Army Signal Center, where the latest methods of signal communication, maintenance, repair, training, and instruction are learned by signal personnel in the Army, Navy, Air Force, Marines, and military foreign exchange students. - -------------------------------------------------------------------------------- 13 - -------------------------------------------------------------------------------- AREA ANALYSIS - -------------------------------------------------------------------------------- o Fort Gordon has been designated by the Department of the Army as the information management office of the U.S. Army. The significance of this decision is that all automated data processing publications for the U.S. Army originate with the signal corps. Each year, approximately 30,000 soldiers are trained in the communications skills by the First Battalion and an additional 5,000 by the Second Battalion. o Fort Gordon is also home of the computer science school for the U.S. Army. This operation had previously been located at Fort Benjamin Harrison. o During 1988, the $18 million National Science Center was constructed at the McKenna Gate of Fort Gordon. The addition of the National Science Center created approximately 1,000 new jobs and it is expected to act as a catalyst for industries related to the electronics and communications business. o Dwight D. Eisenhower Medical Center is also part of the Fort. All of the above activities insulate Fort Gordon from additional future defense cutbacks. Also, increasingly important is the number of retired military personnel located in the area. There are approximately 35,000 military retirees here. In addition, there are another 25,000+ dependents of these military retirees. Thus, over 60,000 military retirees and their families are living in the area. Savannah River Site The Savannah River Site, in Aiken, is a 35-year old plant which manufactures nuclear material for use in nuclear weapons. This facility is the largest employer in the metropolitan area, but 2,000 jobs were eliminated in October, 1993. This resulted from the closing of the "K" reactor. About 600 additional jobs were eliminated during 1994, and 1,700 more were lost in 1995. As stated earlier, current employment at the Savannah River Site is about 22,000, including workers of the Department of Energy, Westinghouse, and multiple subcontractors. While additional, unannounced employment cuts at SRS are not expected, continued adjustments of various types continue to concern area business leaders. The most recent announcement pertains to planned office construction at the site. The government intends to relocate 2,240 employees from various locations primarily in North Augusta and Aiken, to newly constructed facilities at SRS. The move would vacate about 380,000 square feet of off-site office space. - -------------------------------------------------------------------------------- 14 [GRAPHIC OMITTED] Neighborhood Map - -------------------------------------------------------------------------------- AREA ANALYSIS - -------------------------------------------------------------------------------- Education Augusta College, a four-year institution offering undergraduate and graduate degrees, is located in the city, with an enrollment of over 5,230 students. The Medical College of Georgia, with 2,500 students, is also located in Augusta, as is Paine College, a smaller facility with 1,000 students. The Aiken campus of the University of South Carolina has over 2,100 students. Vocational education is available at Augusta Area Vocational and Technical School, which has approximately 5,684 enrolled. Of particular importance, the Medical College of Georgia is the state university system's primary health education and research complex. It employs nearly 7,000 people. Summary In summary, the region is the economic focal point of the Central Savannah River Area (CSRA) comprised of 13 counties in Georgia and five in South Carolina. All indicators point toward slow to moderate growth, and the metropolitan area is considered to provide viable location characteristics for virtually all types of well-conceived real estate development. Overall employment was down in 1993 and 1994. This is related to the large number of employees working for only a few large companies, and the fact that a few industries dominate the area economy. Employment growth should resume in the near term along with an improving national economy. NEIGHBORHOOD INFLUENCES Location The subject is located at the northeast corner of Martintown Road and Knox Avenue, within the city limits of North Augusta. The subject's location is approximately two miles northeast of the Augusta Central Business District and is in the main business area of North Augusta. The neighborhood boundaries are defined as: the Savannah River to the south and west; Interstate 20 to the north; and US Highway 278 to the east. The defined area generally encompasses the city limits of North Augusta. Accessibility Accessibility to the neighborhood in general, and the subject property in particular, is considered good. Martintown Road, along which the subject property lies, is the primary north/south roadway in the neighborhood. - -------------------------------------------------------------------------------- 15 - -------------------------------------------------------------------------------- AREA ANALYSIS - -------------------------------------------------------------------------------- The other primary roadways in the neighborhood include Georgia Avenue (US 25) and Knox Avenue, which extend in northerly/southerly directions, while Jefferson Davis Highway and Atomic Drive are the primary east/west roadways. Each of these roadways connects with numerous other roadways and provides convenient access throughout the neighborhood. Access to the neighborhood is provided by I-20, which is located approximately two miles north of the subject property. This highway extends through the area in a northeasterly/southwesterly direction, and connects with Atlanta to the west and Columbia to the northeast. This highway also provides access to the northern and western portions of Augusta. The neighborhood also has an adequate secondary roadway system, which augments area access. The roadways in the neighborhood are identified on the Neighborhood Map. Development The development of the neighborhood is considered quite varied and diverse and generally consists of a mixture of commercial and residential uses. The neighborhood has a significant level of commercial development, which consists primarily of retail uses, including: shopping centers, franchise restaurants, banking facilities, automobiles sales and service facilities, office buildings, and numerous types of similar free-standing uses. Commercial development is generally located along the primary roadways and is concentrated near the intersection of Martintown Road and Georgia Avenue, and extends to the south. This is the primary business section of North Augusta. The residential development varies significantly and is located along the primary and secondary roadways. The single-family development is generally located along the secondary roadways, and varies significantly in market orientation. More specifically, the neighborhood has several areas which have very good quality older homes, which are oriented to higher income groups. However, the neighborhood has numerous areas with older homes that are oriented to lower income groups. The neighborhood has a moderate level of multi-family development, which consists almost exclusively of apartments which were constructed in the early 1970s. These developments are located along the primary and secondary roadways, and most of these properties are in average condition and are oriented to lower-middle income groups. There has been no new multi-family development for several years. The subjects immediate area is almost exclusively residential. The surrounding residential neighborhoods of Lynnhurst, Hidden Hills (includes a golf course), and Hammond Hills are generally middle- to upper-income areas. Additionally, there are no other shopping center - -------------------------------------------------------------------------------- 16 - -------------------------------------------------------------------------------- AREA ANALYSIS - -------------------------------------------------------------------------------- developments north of the subject, meaning many area shoppers must pass the subject property on the way to the retail concentration near Atomic/Knox/Martintown roads. This is an important competitive advantage for the subject. Conclusion and Relevance to the Subject Property In summary, the neighborhood and the subject property have good accessibility. In addition, the subject is located along one of the primary roadways in the neighborhood and benefits from a good level of traffic flow. The area development generally consists of commercial and residential uses. The subject's use is consistent and complementary with the surrounding area. - -------------------------------------------------------------------------------- 17 - -------------------------------------------------------------------------------- MARKETABILITY - -------------------------------------------------------------------------------- MARKET ANALYSIS Marketability refers to the posture of the subject property within its marketplace and its ability to be leased, sold, or marketed relative to its competition and current conditions. In this regard, the subject is very competitive relative to other shopping center developments in the submarket. OVERALL RETAIL TRENDS IN THE AIKEN COUNTY AREA Development of retail uses in Aiken County have been occurring at a moderate pace, and the vast majority of the area shopping centers were constructed between the late 1970s and late 1980s. Two neighborhood shopping centers were opened in Aiken during 1991, with another constructed near the Aiken Mall in 1995. The newest shopping center in North Augusta is Edgewood Square, which was completed in 1989; however, several centers were renovated and/or expanded during the 1990s. The most recent retails developments in the region have been in the Evans, Georgia (Columbia County) area where much of the new residential construction is occurring. These retail developments were facilitated by good household and population growth, which will be described in the following Demographic Analysis section. Also, functional obsolescence or deferred maintenance at several older centers also contributed to the redevelopment trend. As discussed in the Regional Influences section, retail sales in the region, and Aiken County in particular, have increased at a moderate, but steady pace. Provided there are no substantial reductions in area employment, we expect this trend to continue. Demographic Analysis The next portion of our marketability analysis presents a demographic profile of the area. In this section we analyze the existing demographics and their changing patterns. - -------------------------------------------------------------------------------- 18 - -------------------------------------------------------------------------------- MARKETABILITY - -------------------------------------------------------------------------------- ================================================================================ NEIGHBORHOOD DEMOGRAPHICS - -------------------------------------------------------------------------------- 1 mile 3 mile 5 mile - -------------------------------------------------------------------------------- Population 1995 Estimate 7,353 49,416 96,430 1990 Census 6,588 48,597 96,136 1990-1995 % Change 11.6% 1.7% 0.3% Households 1995 Estimate 3,263 19,609 38,837 1990 Census 2,910 19,321 38,747 1990-1995 % Change 12.1% 1.5% 0.2% 1995 Median Household Income $31,407 $24,088 $26,879 1995 Average Household Income $36,665 $33,382 $36,755 1990 Average Home Value $58,771 $59,968 $67,493 1990 % College Graduates 25.4% 20.0% 23.5% - -------------------------------------------------------------------------------- Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The previous table indicates that population and household formation in the area has been occurring at a moderate, but steady pace. The household income is considered average for the area. The 1990 average home value is similar to the regional median. The data generally indicates the neighborhood is a low to middle-income area with moderate population growth. Trade Area Analysis The primary trade area for the subject is the southwestern portion of Aiken County. The subject, as a neighborhood shopping center, generally does not compete with the shopping centers in Augusta or Aiken. A neighborhood shopping center focuses on servicing the needs of the immediate population, and as such, a resident of the neighborhood is not likely to drive outside the area for these goods. There are only two access points to Augusta from the subject neighborhood, and these are bridges that cross the Savannah River. The psychological barrier of the river, and the fact that there are no competitive centers in downtown Augusta, limits the competition from this area. Aiken, the other large city in the area, is a 20 minute drive from the neighborhood. North Augusta Retail Market Neighborhood shopping centers are generally meant to serve the retail needs of a very localized market, usually within a two to five mile radius. Within that radius of the subject there are nine centers, including the subject. There are no potential competitors under construction. These nine properties are summarized in the following table. - -------------------------------------------------------------------------------- 19 - -------------------------------------------------------------------------------- MARKETABILITY - -------------------------------------------------------------------------------- ================================================================================ SUMMARY OF NORTH AUGUSTA RETAIL CENTERS
- ------------------------------------------------------------------------------------------------------------------ Building Year Overall Occ No. of Anchors Tenants Base Rent No. Name & Location Size Built Rate Stores Per SF - ------------------------------------------------------------------------------------------------------------------ 1 North Augusta Plaza 255,002 1961/ 95% 31 Kmart, Publix, $9.50 - $12.00 Martintown @ Knox 1993 Hambrick's 2 Cross Roads Market SC 73,100 1985 96% 10 Kroger $7.00 - $8.00 Martintown @ Knox 3 North Hills SC 83,752 1979/ 96% 22 Winn-Dixie, $6.50 - $8.00 Martintown @ Hampton 1988 Eckerd's 4 Edgewood Square Georgia 217,332 1989 99% 18 Wal Mart, $7.50 @ Edgewood Bi-Lo Foods 5 Breckenridge SC 56,600 1973 100% 9 Bi-Lo Foods $6.50 Martintown @ Atomic 6 K Mart Plaza 103,964 1972 100% 3 K Mart $6.00 US 78 @ Carpentersville 7 Lancaster Plaza 77,400 1971 74% 4 Bi-Lo Foods, Revco $6.00 GA Hwy 9 @ By-Pass 8 Triangle Plaza 67,500 1978 88% 8 Piggly - Wiggly $7.00 US 25 @ Edgewood Subj Martintown Plaza 136,378 1974/ 87% 13 FoodMax, Belk's, $6.00 Martintown @ Knox 1990 Revco - ------------------------------------------------------------------------------------------------------------------
Compiled by: B Commercial Real Estate Group, Inc. ================================================================================ These nine centers exhibit a variety of building quality, condition, and tenant quality. The subject is positioned near the middle to upper end of the local market. Generally, North Augusta Plaza and Edgewood Square are considered superior to the subject overall (better condition and tenant mix). Cross Roads Market and North Hills are considered similar overall, while the remaining centers are considered inferior to the subject. The strongest competitor in the immediate vicinity of subject is the North Augusta Plaza. This center is located directly across Martintown Road and was expanded and renovated during 1992. It is anchored by K-Mart, Publix, and Blockbuster Video and has good visual appeal. Cross Roads Market, anchored by Kroger supermarket, is also located directly across Martintown Road. Including the subject, almost 500,000 square feet of retail space is located at the intersection of Martintown Road and Know Avenue. This creates a strong retail draw for the immediate subject neighborhood. Edgewood Square is the most recent shopping center development in the neighborhood and its rapid lease-up indicates that it was well accepted. It has several large anchors and the area's only Wal Mart. It is superior to the subject in terms of condition and tenant mix, but does not have the surrounding residential base available at the subject. - -------------------------------------------------------------------------------- 20 - -------------------------------------------------------------------------------- MARKETABILITY - -------------------------------------------------------------------------------- The remaining five centers are older and have varying levels of deferred maintenance. Most are in need of renovation. Our discussions with area leasing agents and owners indicate no major renovations or new construction is planned for the area. Subject Marketability In addition to analyzing the overall, or macro, conditions influencing the subject property, it is also important to consider the specific characteristics of the subject. It is particularly important to address those factors that would be considered by a potential purchaser of the subject. From a positive standpoint, the subject is located along a primary traffic corridor and has good visibility and position in the market. With respect to its condition, the center was expanded and partially renovated with the addition of FoodMax and 7,825 square feet of local tenant space in 1990. Also, the old Rose's Department Store was renovated for Belk's in 1993 when they were persuaded to move from the North Augusta Plaza center across the street from the subject. Finally, while there are two competing centers in the immediate vicinity of the subject, this serves to create the primary retail concentration in the North Augusta area. Several negative factors at the subject must also be addressed. First, the subject is on a ground lease. While this has little or no impact on the leasing of the center, it may impact the sale of the property. We were unable to find a recent sale of a shopping center on leased land; however, we did interview several local investors and brokers regarding this issue. The consensus indicated no impact on value provided the remaining lease term was long enough to yield a competitive return on the investment. All indicated that the property would first be analyzed on a direct cap basis with the ground rent included as an expense. If the deal made sense, a discounted cash flow analysis would be used for a more detail study. A quick analysis indicates that an investor would receive a competitive return on an investment in the subject provided there was at least 30 years remaining on the lease. However, we recognize that some investors would not be interested in purchasing the subject because of the ground lease. This reduced "field of investors" warrants some consideration in the analysis. A buyer of the subject would be sensitive to the fact that the regional economy relies to a great extent on government (primarily defense spending) and institutions for its basis. Most of the funds from this sector come from outside the area. This is referred to as Base Employment, and reductions in Base Employment usually have a multiplier effect on the entire economy. This segment of the local economy has been under pressure in recent years and has seen several employment reductions. While the area has responded well to these cuts and job - -------------------------------------------------------------------------------- 21 - -------------------------------------------------------------------------------- MARKETABILITY - -------------------------------------------------------------------------------- growth has remained positive, additional reductions may damage the economy for the long-term. Summary In summary, we believe the North Augusta retail market, and the subject's position in the market, is positive. We expect the subject will continue to experience good market acceptance, provided it is well maintained and up-graded periodically. This will become increasingly important at the subject ages, relative to new competition. - -------------------------------------------------------------------------------- 22 PROPERTY DESCRIPTION [GRAPHIC OMITTED] SITE MAP - -------------------------------------------------------------------------------- SITE ANALYSIS - -------------------------------------------------------------------------------- SITE ANALYSIS The Description of the site can be detailed as follows: Location: The subject is located at the northeast corner of Martintown Road and Knox Avenue. Ingress and egress to the subject is available from one curb cut on Martintown Road and one curb cut on Knox Avenue. A site plan is shown on the facing page. Assessor's Parcel Number: 10-051-1-25 & 27 Land Area(1) Gross Land Area: 19.68 Acres Net Land Area: 19.68 Acres Excess Land: None Outparcels: Includes three outparcels, one of which is developed with a 2,500 square foot fast food restaurant. Because the two unimproved outparcels have been undeveloped for such a long time, we have attributed no additional value to these sites, although they do provide an owner with some upside potential. Shape and Frontage: The site is irregular in shape, with actual street frontage of 1,498 feet along Martintown Road and Knox Avenue. Furthermore, the site has a reasonable depth relative to its width. Topography and Drainage: The site has moderately sloping topography which generally drains in a southerly direction. The site is generally at road grade with Martintown Road and Knox Avenue. Our investigation did not reveal any significant drainage problems. Soils: No soils report was provided and it is assumed that soils are adequate for the existing use. - ---------- (1) Source: Boundary Survey - -------------------------------------------------------------------------------- 23 - -------------------------------------------------------------------------------- SITE ANALYSIS - -------------------------------------------------------------------------------- Easements: A current title report was not provided in connection with this appraisal. Based on our on site inspection, there are only typical utility and access easements, which do not appear to adversely affect the subject. It is specifically assumed that any easements, restrictions or encroachments that might appear against the title would have no adverse impact on marketability or value. Covenants, Conditions, No private deeds or restricting covenants and Restrictions: affecting development, other than zoning and the covenants, conditions and restrictions associated with the shopping center, were found to affect the site. It is specifically assumed that there is no adverse affect on marketability or value. Utilities: All public utilities are available to the subject site. Flood Zone: According to maps published by the Federal Emergency Management Agency (FEMA), the subject lies within Zone C as indicated on FEMA Community Map Panel 450007 0010D, dated August 8, 1994. Flood insurance is available. This zone is described as follows: FEMA Zone C: "This area has been identified in the community flood insurance study as an area of moderate or minimal hazard from the principal source of flood in the area. However, buildings in this zone could be flooded by severe, concentrated rainfall coupled with inadequate local drainage systems. Local storm water drainage systems are not normally considered in the community's Flood Insurance Study. The failure of a local drainage system creates areas of high flood risk within this rate zone. Flood insurance is available in participating communities but is not required by regulation in this zone." Environmental Issues: We were not provided with any environmental report or site assessment for the subject property. The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the property that would cause a loss in value. However, CB Commercial is not qualified to detect hazardous waste or toxic materials. Therefore, we reserve the right to review and revise our valuation conclusions if additional information to the contrary becomes available in the future. - -------------------------------------------------------------------------------- 24 - -------------------------------------------------------------------------------- SITE ANALYSIS - -------------------------------------------------------------------------------- Adjacent Properties North: Vacant land South: NationsBank branch bank, single-family residential homes East: Single-family residential homes West: North Augusta Plaza and Cross Road Market shopping centers Conclusion: The subject is a 19.68-acre site which is accessible via curb cuts from Martintown Road and Knox Avenue. Access appears to be good for the site. Visibility and exposure are also good from Martintown Road and Knox Avenue as the site is generally at road grade. The shape of the parcel is irregular and there is no excess land. However, there are three outparcels included, one of which has been developed. The CB Commercial Real Estate Group, Inc. is aware of no environmental contamination of the site. In conclusion, from a physical standpoint, the subject site has good utility and is considered adequate for many types of commercial development. - -------------------------------------------------------------------------------- 25 [GRAPHIC OMITTED] SITE PLAN - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS The subject property consists of approximately 136,378 gross leaseable square feet of retail center improvements, including a 2,500 square foot, freestanding fast food restaurant. Originally built in 1974 and subsequently expanded in 1990, the center is currently 87.6% occupied. The improvements consist of a one-story neighborhood strip center subdivided into 13 tenant bays and a freestanding fast food restaurant as depicted on the facing page floorplan. The following is a description of the improvements based on our physical inspection. The building area is detailed as follows: ========================================================= MARTINTOWN PLAZA BUILDING AREA - --------------------------------------------------------- Gross % of Gross Category Leasable Area Leasable Area - --------------------------------------------------------- FoodMax 47,982 35.2% Belk's 44,000 32.3% Revco Drugs 8,450 6.2% Local Tenants 33,446 24.5% Fast Food Restaurant 2,500 1.8% ----- --- Total 136,378 100.0% - --------------------------------------------------------- Source: Mark Centers Trust ========================================================= The subject improvements also have a gross building area of 136,378 square feet. The basic construction features are summarized as follows. Construction Class The class of construction is the basic subdivision in Marshall Valuation Service(1), dividing all buildings into five basic groups by type of framing (supporting columns and beams), walls, floors, roof structure, and fireproofing. The subject is construction Class C. Competitive Rating The subject is considered a Class B building in terms of quality as it is perceived in the marketplace. (1) Class C Buildings are characterized by masonry or reinforced concrete (including tilt-up) construction. The walls may be load-bearing, i.e., supporting roof and upper floor loads, or nonbearing with open concrete, steel, or wood columns, bents, or arches supporting the load. (Source: Marshall Valuation Service) - -------------------------------------------------------------------------------- 26 - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Foundation Concrete slab on grade. Frame Steel frame and metal studs. Floor Construction Concrete slab on grade. Exterior Walls Combination of concrete block, brick and stucco. Entries are glass store fronts with bronze finish anodized aluminum windows. Roof Cover The roof is apparently built up tar and gravel over the original portion of the center and a rubber membrane over the more recently constructed section. No specific information about the roof was available, but we have assumed that it is in average to good condition. If additional information to the contrary is provided to the appraiser in the future, we would reserve the right to review and revise our findings and conclusions if necessary. Exterior Condition Average Elevator/Stair System None Interior Partition System Metal studs with gypsum board cover. Interior Finishes - Tenant Space Floors: A combination of commercial grade carpet, vinyl tile and ceramic tile. Walls: Painted sheetrock. Ceilings: Acoustical tile drop ceilings. Lighting: Mostly recessed fluorescents, except for some attached fluorescents. Summary: The interior finishes are good throughout the center. None of the space is unfinished as all of the suites have been occupied at least once. Interior Condition Average HVAC Split heating and cooling system provided by air conditioning compressors mounted on the roof as well as the rear of the building and gas-fired furnaces with individual zone controls and ducted through ceiling registers. We have assumed that these units are in average condition. While tenants are responsible for maintaining the HVAC systems, the landlord could conceivably be required to replace a compressor unit if it fails while a suite was vacant. - -------------------------------------------------------------------------------- 27 - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Electrical The electrical system is assumed to be in good working order and adequate for the building. Fire Protection The subject property is fully fire sprinklered. It is assumed that the subject has adequate fire alarm systems, fire exits, fire extinguishers, fire escapes and/or other fire protection measures adequate to meet local fire marshall requirements. Life Safety and Security The subject has no special security or surveillance system. Plumbing The plumbing system is assumed to be adequate for the proposed subject improvements. Parking Surface parking is provided for 669 vehicles, including several handicapped spaces. This type of parking is similar to that found in the local comparables. The number of parking spaces does satisfy current zoning requirements for the existing use. Therefore, it is considered to be legally conforming. Landscaping The landscaping is average compared to competitors. Tenant Improvements Building standard tenant improvements include wall partitions, carpeting, painted walls, suspended acoustical ceilings, hollow core wood doors, etc. All of the subject space has been finished out. ADA Compliance Handicap access appears be available to all areas of the building. However, we are not qualified to determine compliance with the requirements. Please refer to the specific limiting condition regarding ADA compliance. Environmental Issues We were not provided with any environmental report or site assessment for the subject property. The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the property that would cause a loss in value. However, CB Commercial is not qualified to detect hazardous waste or toxic materials. Therefore, we reserve the right to review and revise our valuation conclusions if additional information to the contrary becomes available in the future. Functional Quality of Space The interior floor plan is flexible and will accommodate a variety of tenant layouts. The only observed design problems reported by management is the excessive depth (100 feet) of most of the local tenant bays. By comparison, 60 to 70 feet is a more typical and functional local tenant bay depth. - -------------------------------------------------------------------------------- 28 - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Deferred Maintenance We have identified no signs of deferred maintenance during our inspection of the subject, nor have we been provided with any information by Mark Centers Trust or one of their representative indicating any items of deferred maintenance. Therefore, the subject property is assumed to have no deferred maintenance. Economic Age and Life The building was erected in 1974 and 1990, with a weighted average chronological age of 15 years. Based on current condition and considering the renovation which the Belk's space underwent in 1993, appraisers estimate effective age to be approximately 12 years. According to the Marshall Valuation Service cost guide, buildings of this type and quality have an expected life of 40 years. Therefore, the remaining economic life (expected life minus effective age) is approximately 28 years. While we observed nothing to suggest a different economic life, a capital improvement program could extend life beyond that stated above. Quality/General Condition The subject property conforms well with similar retail buildings in the neighborhood. The relative quality of construction is good and the aforementioned engineering report indicates that the subject improvements have generally been soundly constructed. - -------------------------------------------------------------------------------- 29 - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- ================================================================================ IMPROVEMENT RATING - -------------------------------------------------------------------------------- Category Exc. Good Average Fair Poor - -------------------------------------------------------------------------------- Appeal/Appearance X Construction Class X Design X Electrical X Exterior Condition x Exterior Walls X Floor Construction X Floor Cover X Floor to Ceiling Height X Foundation X Frame X Functionality/ Floor Plan X HVAC X Interior Condition X Interior Partitions X Landscaping X Lighting X Parking X Plumbing X Restrooms X Roof Cover X Sprinkler System X Tenant Improvements X - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 30 - -------------------------------------------------------------------------------- ZONING - -------------------------------------------------------------------------------- ZONING The subject's zoning requirements are detailed below. ============================================================================ ZONING SUMMARY - ---------------------------------------------------------------------------- Current zoning: C-3, General Commercial District Legally conforming?: Yes Uses permitted: Commercial, retail, and professional offices. Zoning change Not likely - ---------------------------------------------------------------------------- Category Zoning Requirement - ---------------------------------------------------------------------------- Site coverage N/A Front setback 25 feet Rear setback 30 feet Side yard setbacks 30 feet Height limit 45 feet Parking One space per 200 square feet of net floor area. - ---------------------------------------------------------------------------- Source: North Augusta Planning & Zoning Department Compiled by: CB Commercial Real Estate Group, Inc. ============================================================================ ZONING ANALYSIS AND CONCLUSIONS The subject improvements appear to be a legally conforming use within the current zoning. - -------------------------------------------------------------------------------- 32 - -------------------------------------------------------------------------------- TAX ANALYSIS - -------------------------------------------------------------------------------- TAX AND ASSESSMENT DATA The subject is assessed at 6% of market value as estimated by the Aiken County Tax Assessor's Office. The subject property's tax value summarized below. ================================================================================ CURRENT ASSESSMENT AND TAX INFORMATION (1995)
- -------------------------------------------------------------------------------------------- Assessed Tax Rate Annual Tax ID Land Improvements Total Value Per $1,000 Taxes - -------------------------------------------------------------------------------------------- 10-051-1-25 $756,000 $2,744,000 $3,500,000 $210,000 $251.04 $52,718 10-051-1-27 $99,000 $184,300 $283,300 $16,988 $251.04 $4,265 - -------------------------------------------------------------------------------------------- Totals $855,000 $2,928,300 $3,783,300 $226,988 $251.04 $56,983 - -------------------------------------------------------------------------------------------- Source: Aiken County Tax Assessor Compiled by: CB Commercial Real Estate Group, Inc.
================================================================================ The county records indicate that there are no delinquent property taxes. However, county records indicate that the current assessment is under appeal and the property owner has paid only 80% of the tax liability due under the conditions of the appeal. CB Commercial has concluded that the assessor has slightly underestimated market value based on the market value conclusion of this report. Therefore, it is unlikely that any tax valuation mitigation will be achieved by the current appeal. - -------------------------------------------------------------------------------- 32 - -------------------------------------------------------------------------------- HIGHEST AND BEST USE - -------------------------------------------------------------------------------- HIGHEST AND BEST USE In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The four criteria that the highest and best use must meet are: o legal permissibility; o physical possibility; o financial feasibility; and, o maximum profitability. Highest and best use is applied specifically to the use of a site as vacant. It is recognized that in cases where a site has existing improvements, the concluded highest and best use as if vacant may be different from the highest and best use given the existing improvements (as improved). The existing use will continue, however, until the land value, in its highest and best use, exceeds that total value of the property under its existing use plus the cost of removing or altering the existing structure. Implied in the highest and best use is a recognition of the contribution of a specific use to the community environment or to the community's development goals, in addition to wealth maximization of individual property owners. Also implied is that the conclusion of highest and best use results from the appraiser's judgment and analytical skill, i.e., that the use determined from the analysis represents an opinion, not a fact to be found. Highest and best use analysis involves assessing the subject both as if vacant and as improved. HIGHEST AND BEST USE AS THOUGH VACANT Legal Permissibility The legally permissible uses were discussed in detail in the site analysis and zoning sections of this report. Overall, based on our review of the zoning restrictions and the ground lease, the site is limited to commercial use. Physical Possibility The physical characteristics of the subject site were discussed in detail in the site analysis. Overall, a wide range of legally permissible uses would be physically possible. - -------------------------------------------------------------------------------- 33 - -------------------------------------------------------------------------------- HIGHEST AND BEST USE - -------------------------------------------------------------------------------- Financial Feasibility An analysis of local market conditions provides an indication of the financial feasibility of a given use. The market analysis presented earlier in the report assesses the local market and indicates that there is demand. Therefore, a shopping center is financially feasible. Maximum Profitability The final test of highest and best use of the site as though vacant is that the use be maximally productive, yielding the highest land value. In the case of the subject as though vacant, the analysis thus far has indicated that commercial development would be most likely. Given the high probability that commercial use is the highest and best use, this is judged to be a reasonable indication of maximum productivity of the land. Conclusion: Highest and Best Use As Though Vacant The concluded highest and best use of the subject as though vacant is that the site be improved with commercial development. HIGHEST AND BEST USE AS IMPROVED Legal Permissibility Overall, it is our opinion that the improvements are within the established guidelines. Further, we were told by the zoning authority that the subject is a legal and conforming use under the zoning ordinance. Physical Possibility The physical characteristics of the subject improvements were discussed in detail in the improvement analysis section of this report. Overall, the layout and positioning of the improvements is considered functional for commercial use, and the floor plan is considered to be reasonable on a comparison basis. While it would be physically possible for a wide variety of uses, based on the legal restrictions and the design/layout, the improvements would be most functionally utilized for commercial use. Financial Feasibility As with the highest and best use of the site as though vacant, the financial feasibility of the site as improved is market derived. Typically, for commercial properties similar to the subject, the test of feasibility is based on the amount of rent that can be generated, less operating - -------------------------------------------------------------------------------- 34 - -------------------------------------------------------------------------------- HIGHEST AND BEST USE - -------------------------------------------------------------------------------- expenses. If a residual amount exists after paying the various expenses, then the land is being put to a productive use. Maximum Profitability Similar to the highest and best use of the site as though vacant, the maximum profitable use of the subject as improved should conform to neighborhood trends and be consistent with existing land uses. Although several uses may generate sufficient revenue to satisfy the required rate of return on investment and provide a return on the land, the single use that produces the highest price or value is typically the highest and best use. However, the recipient of the property's productivity greatly determines what actual use maximizes profitability. Conclusion: Highest and Best Use as Improved Based on the foregoing discussions, CB Commercial concludes that the highest and best use of the property as improved is consistent with the existing use. There are no alternative uses of the existing improvements that would produce a higher net income and/or value over time than the current use. The current use is a legally permissible use and appears to represent the highest and best use as improved. Furthermore, CB Commercial does not believe that conversion of the improvements or demolition is warranted or financially feasible. - -------------------------------------------------------------------------------- 35 VALUATION - -------------------------------------------------------------------------------- APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- APPRAISAL METHODOLOGY The appraisal process is defined as an orderly program by which the problem is planned and the data involved is acquired, classified, analyzed and interpreted into an estimate of value. In this process three basic approaches to value are considered: Cost Approach, Sales Comparison Approach, and Income Capitalization Approach. In appraisal practice, an approach to value is included or omitted based on its applicability to the property type being valued and the quality and quantity of information available. The final step in the appraisal process is reconciliation -- a process by which CB Commercial analyzes alternative conclusions and selects a final value estimate from among two or more indications of value. CB Commercial weighs the relative significance, applicability and defensibility of each approach as it relates to the type of property being appraised. INCOME CAPITALIZATION APPROACH The methodology of the Income Capitalization Approach is to determine the income-producing capacity of the property on a stabilized basis by estimating market rent from comparable rentals, making deductions for vacancy and collection losses and building expenses, then capitalizing the net income at a market-derived rate to yield an indication of value. The capitalization rate represents the relationship between net income and value. Related to the direct capitalization method is the discounted cash flow method. In this method of capitalizing future income to a present value, periodic cash flows (which consist of a net income less capital costs, per period) and a reversion (if any) are estimated and discounted to a present value. The discount rate is determined by analyzing current investor yield requirements for similar investments. Since investors are active in the marketplace for properties similar to the subject, the Income Approach is particularly applicable to the appraisal problem at hand. There is an adequate quality and quantity of income and expense data available to render a reliable and defensible value conclusion. Therefore, this approach has been employed for this assignment. SALES COMPARISON APPROACH The Sales Comparison Approach utilizes sales of comparable properties, adjusted for differences, to indicate a value for the subject property. Valuation is typically accomplished using physical units of comparison such as price per square foot, price per unit, price per floor, etc., or economic units of comparison such as gross rent multiplier. Adjustments are applied to the physical units of comparison derived from the comparable sale. The unit of comparison - -------------------------------------------------------------------------------- 36 - -------------------------------------------------------------------------------- APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- chosen for the subject is then used to yield a total value. Economic units of comparison are not adjusted, but rather analyzed as to relevant differences with the final estimate derived based on the general comparisons. The reliability of this approach is dependent upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c) the degree of comparability; (d) the absence of atypical conditions affecting the sales price. Through our search of the subject market, we were able to uncover an adequate quality and quantity of sales through which a reliable and defensible indication of value could be concluded. Therefore, this approach has been employed for this assignment. THE COST APPROACH The Cost Approach is based upon the proposition that the informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements which represent the highest and best use of the land or when relatively unique or specialized improvements are located on the site and for which there exist few sales or leases of comparable properties. The first step in the Cost Approach is to estimate the land value (at its highest and best use) applicable to the subject. This is usually done through an analysis of comparable land sales. The second step is to estimate the cost of all improvements. Improvement costs are then depreciated to reflect value loss from physical, functional and economic causes. Land value and depreciated improvement costs are then added to indicate a total value. The Cost Approach is not considered to be appropriate for this assignment given the age of the improvements and resulting subjectivity required in quantifying depreciation. In addition, at the instruction of the client, an estimate of the subject site's land value was also not prepared. - -------------------------------------------------------------------------------- 37 ================================================================================ SUMMARY OF COMPARABLE RETAIL SALES
==================================================================================================================================== Sale Sale Year Building Occupancy Sale Price No. Name / Location Date Built Size (GLA) at Sale Anchor Tenant Sale Price /SF OAR ==================================================================================================================================== 1 Publix @ Fury's Ferry 12/95 1995 67,455 93% Publix $6,025,000 $89.32 9.79 % East Side Of Fury's Ferry Road Martinez,GA 2 Eastgate Shopping Center 9/95 1995 75,716 95% Publix $6,675,000 $88.16 9.86 % Eastgate Drive At Whiskey Road Aiken,SC 3 Barnwell Plaza 01/95 1985 70,725 100% Wal-Mart, $2,860,000 $40.44 10.52 % Dunbarton Boulevard & Ellington Street Food Lion Barnwell,SC 4 Largo Plaza 09/95 1974 88,480 100% Media Play, $3,252,000 $36.75 10.65 % Abercorn Street Extension @ Largo Piggly Wiggly Savannah,GA 5 Market Place 5/96 1987 197,787 100% Wal-Mart,Bi-Lo $8,350,000 $42.22 10.18 % US Hwy 74 Shelby,NC - ------------------------------------------------------------------------------------------------------------------------------------ Compiled by: CB Commercial
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH The Sales Comparison Approach provides an estimate of market value based on analyzing transactions of similar properties in the market area. The method is based on the proposition that an informed purchaser would pay no more for a property than the cost of acquiring an existing one with the same utility. When there is an adequate number of sales of truly similar properties with sufficient information for comparison, a range of values for the subject property can be developed. The applicability of this approach is based on the assemblage of similar market sales and offerings for a comparison to the subject. Factors such as changing market conditions over time, location, size, quality, age, condition, and amenities, as well as the terms of the transactions, are all significant variables relating to the relative marketability of the subject property. Any adjustments to the sale price of market sales to provide indications of market value for the subject must be market-derived; thus, the actions of typical buyers and sellers are reflected in the comparison process. There are various units of comparison available in the evaluation of sales data in this approach. The sale price per square foot is the most commonly used in this approach. We searched the market for sales that qualify as arm's length transactions between willing and knowledgeable buyers and sellers in order to identify value and price trends. Two shopping center investment sales in the Augusta MSA have been identified. We have supplemented this data with three sales from similar communities in Georgia, South Carolina, and North Carolina. The sales utilized in this analysis are summarized on the facing page table, with their location relative to the subject identified on the following facing page map. In addition, sale summaries and photographs are included in the Addenda. Adjustment for Ground Lease Because of the ground lease at the subject, we have made an adjustment for property rights conveyed. The added expense of the ground lease is $24,000 on a stabilized basis. This approximates $0.18 per square foot, which when capitalized at 10.50% yields a value reduction of $1.71 per square foot. We have added an additional $1.25 per square foot for the reduced marketability of the property. This results in a total adjustment for property rights conveyed of approximately $3.00 per square foot. This adjustment has been applied to all the comparables. - -------------------------------------------------------------------------------- 38 [GRAPHIC OMITTED] [Map: Comparable Sales] - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- Adjustment for Economic Characteristics The comparable sales generate net operating income that is slightly to substantially higher than the subject on a per square foot basis. The subject has three anchor leases which are at or below the market rental rate, and this accounts for much of the difference. The subject is an investment property and the price an investor will pay is directly related to the current or potential NOI. As our cash flow indicates, the subject's NOI is not projected to increase substantially over a 10 year holding period. We have calculated the adjustment by subtracting the subject's projected NOI ($3.29/SF) from the NOI of each comparable. We then capitalized the difference by 10.50% to yield an appropriate adjustment. Since we have already made an adjustment for the ground lease payments, we have moderated the calculated adjustment slightly. DISCUSSION OF COMPARABLE SALES Sale Number One Publix @ Fury's Ferry is a neighborhood shopping center located within Martinez, a growing residential suburb of Augusta. This shopping center was built in 1995 and was 93% occupied at the time of sale. It is anchored by a Publix grocery store, which occupies 74% of the center. The center is similar to the subject in terms of location, size, and anchor tenancy. However, it is superior with respect to age and economic characteristics. Overall, a downward adjustment is necessary. Sale Number Two Eastgate Shopping Center is a neighborhood shopping center located in a developing retail area of Aiken, South Carolina. This shopping center was built in 1995 and was 95% occupied at the time of sale. It is anchored by a Publix grocery store, which occupies 74% of the center. The center is similar to the subject in terms of location, size, and anchor tenancy. However, it is superior with respect to age and economic characteristics. Overall, a downward adjustment is necessary. Sale Number Three Barnwell Plaza is a neighborhood shopping center located in Barnwell, South Carolina. This shopping center was built in 1985 and was 100% occupied at the time of sale. It is anchored by Walmart, a Food Lion grocery store, and Revco Drugs, which occupy 91% of the center. - -------------------------------------------------------------------------------- 39 - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- The center is similar to the subject in terms of age, size, and condition. While it is superior with respect to its anchor tenancy and economic characteristics, it is judged to be inferior based on location. Overall, a downward adjustment is necessary. Sale Number Four Largo Plaza is a neighborhood shopping center located in Savannah, Georgia. This shopping center was originally constructed in 1974 and renovated in 1995, at which time Media Play was added to the center in a space previously occupied by a Walmart. It was 100% occupied at the time of sale. It is anchored by Media Play, a Piggly Wiggly grocery store, and Revco Drugs, which occupy 92% of the center. The center is similar to the subject in terms of age, size, condition, tenancy and location. However, it is slightly superior with respect to its economic characteristics. Overall, a downward adjustment is necessary. Sale Number Five Market Place is a community shopping center located in Shelby, North Carolina. This shopping center was built in 1987 and was 100% occupied at the time of sale. It is anchored by Walmart, a Bi-Lo grocery store, Goody's and Revco Drugs, which occupy 85% of the center. The center is similar to the subject in terms of age and condition. While it is superior with respect to its anchor tenancy, size and economic characteristics, it is judged to be inferior based on location. Overall, a downward adjustment is necessary. ANALYSIS Adjustments made to the comparable sales are summarized in the following table. - -------------------------------------------------------------------------------- 40 - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- ================================================================================ IMPROVED SALES ANALYSIS SUMMARY OF ADJUSTMENTS (1)
- -------------------------------------------------------------------------------------------------------- Sale 1 Sale 2 Sale 3 Sale 4 Sale 6 - -------------------------------------------------------------------------------------------------------- Unadjusted Price/ SF $89.32 $88.16 $40.44 $36.75 $42.22 Property Rights -3.00 -3.00 -3.00 -3.00 -3.00 ------ ------ ------ ------ ------ Subtotal $86.32 $85.16 $37.44 $33.75 $39.22 Financing Terms 0.00 0.00 0.00 0.00 0.00 ------ ------ ------ ------ ------ Subtotal $86.32 $85.16 $37.44 $33.75 $39.22 Conditions of Sale 0.00 0.00 0.00 0.00 0.00 ------ ------ ------ ------ ------ Subtotal $86.32 $85.16 $37.44 $33.75 $39.22 Market Conditions 0.00 0.00 0.00 0.00 0.00 ------ ------ ------ ------ ------ Subtotal $86.32 $85.16 $37.44 $33.75 $39.22 Other Adjustments Tenancy 0% 0% -10% -10% -5% Age/Quality/Condition -15% -15% 0% 0% 0% Size 0% 0% 0% 0% -5% Location 0% 0% +10% 0% +10% Economic characteristics -50% -50% -20% -10% -20% ------ ------ ------ ------ ------ Total Other Adjustments -65% -65% -20% -20% -20% Value Indication for Subject $30.21 $29.81 $29.95 $27.00 $31.38 - --------------------------------------------------------------------------------------------------------
(1) The adjustment grid summarizes the direction and magnitude of adjustments judged appropriate to the comparable sales. In some cases adjustments may be derived directly from quantifiable data. However, in many instances the adjustments involve judgment of CB Commercial Real Estate Group, Inc. Source: CB Commercial Real Estate Group, Inc. ================================================================================ SALES COMPARISON APPROACH CONCLUSION The comparable sales indicate an unadjusted range of $36.75 to $89.32 per gross leasable square foot. In our analysis, we have considered adjustments to these comparables for property rights conveyed, financing terms, conditions of sale, date of sale, age, condition, construction quality, building size, tenancy, location, and overall economic conditions. Sale Nos. 3, and 4 are considered to be the most comparable transactions. They have significant anchors and represent neighborhood centers which are similar in terms of location, age, size and condition. After adjustments, the adjusted sale prices indicated for the subject range from $27.00 to $31.38 per square foot, although dropping the high and low end of the range generally suggests an adjusted value of $30 per square foot. Again, primary emphasis was placed on Sale Nos. 3 and 4 as they were judged to be the most similar to the subject in terms of their physical, locational and tenant characteristics. These three sales suggest an adjusted sale price range which generally correlate toward the middle of the range. Therefore, we have estimated a - -------------------------------------------------------------------------------- 41 - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- value of $30 per gross leasable square foot of building area. This would suggest the following market value indication for the subject property based on the Sales Comparison Approach. ======================================================== SALES COMPARISON APPROACH - -------------------------------------------------------- Gross Leasable SF SP per SF Indicated Value - -------------------------------------------------------- 136,378 SF x $30.00 = $4,091,340 Rounded: $4,100,000 - -------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ======================================================== - -------------------------------------------------------------------------------- 42 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH The Income Capitalization Approach reflects the subject's income-producing capabilities. This approach is based on the assumption that value is created by the expectation of benefits to be derived in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over period of time. The two common valuation techniques associated with the Income Approach are direct capitalization and the discounted cash flow (DCF) analysis. DIRECT CAPITALIZATION Direct capitalization is the method used to convert a single year's estimate of income into a value indication. In direct capitalization, a precise allocation between return on and return of capital is not made because investor assumptions or forecasts concerning the holding period, pattern of income, or changes in value of the original investment are not simulated in the method. Direct capitalization is most appropriate when analyzing a stable income stream and in estimating the reversion at the end of a holding period. Using this method, the following sets forth the process: 1. Estimate the Potential Gross Income (PGI) from all sources that a competent owner should be able to generate from a property based on existing and/or market rents. 2. Deduct an estimate of Vacancy and Collection Loss (VCL) to arrive at an Effective Gross Income (EGI) estimate. 3. Deduct operating expenses from the estimate of EGI. The result is an estimate of the stabilized Net Operating Income (NOI). 4. Estimate an Overall capitalization rate (Ro, or OAR). 5. Divide the NOI by Ro, resulting in a value estimate at stabilized occupancy. 6. Adjust the stabilized value to account for "as is" condition, if applicable. DISCOUNTED CASH FLOW ANALYSIS The discounted cash flow (DCF) analysis is a detailed analysis used when the future income is expected to be variant, usually as a result of numerous lease obligations and/or anticipated changes in income and expenses. It is also particularly relevant when institutional buyers are the most likely purchasers of the subject because institutional buyers often place great weight on this analysis. The DCF analysis specifies the quantity, variability, timing, and duration of NOI and cash flow. Selecting the proper yield rate (discount rate) is essential. CB Commercial must consider the target yield sought by investors as well as yields derived from comparable sales and/or market information. The methodology is: - -------------------------------------------------------------------------------- 43 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- 1. Estimate the before-tax cash flows for each period of a projected holding period net of any capital expenditures such as leasing expenses and tenant improvements. 2. Estimate a discount rate and a terminal overall capitalization rate. 3. Estimate a selling price, known as the reversion, for the end of the projected holding period. 4. The cash flows and the reversion are then discounted to a present value estimate. APPROPRIATE CAPITALIZATION METHOD A number of factors were considered in evaluating the appropriateness of using the direct capitalization method and/or the DCF technique. Occupancy Status If the subject is not at stabilized occupancy, the DCF method is typically the preferred method because it better models the present value impact of lease-up costs on value. If the subject is at stabilized occupancy, the direct capitalization method may be the most applicable. The subject is currently 87.6% occupied. However, the occupancy rate is projected to exceed 90% within the next few months due to current lease negotiations which are discussed later in this section. Therefore, both the direct capitalization approach and DCF model are considered to be applicable. Lease Structure Consideration is given to the subject's existing lease structure. Where the subject's lease structure generally reflects market terms, direct capitalization may be appropriate. Discounted cash flow analysis may also be relevant depending on typical buyer preferences. Conversely, the usefulness of a direct capitalization analysis may be limited in instances where the subject includes leases having a variety of rent levels, rent escalation structures, or differing expense treatments. The existing lease parameters generally reflect market terms on average for the existing tenants. Implicit investor assumptions therefore may behave as the market would expect. While the direct capitalization analysis would likely be the preferred methodology, a DCF model is still often utilized by some investors. Above-Market or Below-Market Rent If the subject's rent structure reflects general market levels, both direct capitalization and DCF analysis may be relevant. When average rent is above or below market, however, the Income Approach requires an appropriate adjustment for the present value of the market/contract - -------------------------------------------------------------------------------- 44 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- difference. Reliability of the direct capitalization method becomes more limited as the average rent level becomes more complicated. Discounted cash flow methodology is favored when adjustments become overly subjective or difficult to discern. The subject's lease structure includes terms that generally reflect market conditions. Therefore, the direct capitalization analysis is the preferred method. Typical Buyer Behavior Selection of the appropriate methodology also depends upon the behavior of typical buyers of the subject's property type within the local market. Based on discussions with market participants, the direct capitalization analysis is the definite choice as the appropriate methodology. However, a discounted cash flow model can also be used to incorporate projected fluctuations in market rents, expenses, turnover, etc. Furthermore, when utilizing a DCF model, investors will often check whether the implied capitalization rate falls within an expected range by dividing the first year net operating income into the estimated value. Appraisal Instructions No specific instructions were given for this assignment. Conclusion As a result of considering the foregoing factors, both the DCF technique and the income capitalization technique are employed in this appraisal. ESTIMATE OF MARKET RENT Rent analysis typically involves both a study of market (comparable) rentals and the subject's existing rents. Market rent is the rent that a property would most probably command in the open market; indicated by the current rents paid and asked for comparable space. SUMMARY OF COMPARABLE RENTALS CB Commercial has searched the immediate subject neighborhood for competitive properties and lease transactions for comparison to the subject. We have identified four shopping centers in the immediate subject area which are comparable to the subject. The selected comparable rentals are summarized in the facing page chart, with their location relative to the subject shown on the following facing page map. In addition, photographs and detailed summary sheets of each comparable are included in the Addenda. - -------------------------------------------------------------------------------- 45 ================================================================================ SUMMARY OF COMPARABLE RETAIL RENTALS
==================================================================================================================================== Sale Building Year Local Overall Base No. Name / Location Size (GLA) Built Occupancy Occupancy Anchor Tenant TI/SF Rent/SF ==================================================================================================================================== 1 North Augusta Plaza 255,002 1993 82.4% 95.1% Kmart,Publix $0.50 - $1 .00/SF $9.50 - Martintown At Knox $12.00 North Augusta,SC 2 Cross Roads Market 73,100 1985 91.0% 96.3% Kroger $0.50 - $1 .00/SF $7.00 - Martintown At Knox $8.00 North Augusta,SC 3 North Hills Shopping Center 83,752 1979 92.4% 96.4% Winn-Dixie,Eckerd's Negotiable ($0 on rnwl) $6.50 to 401 Martintown Road $8.00 North Augusta,SC 4 Edgewood Square 217,332 1989 96.7% 99.5% Bi-Lo Foods,Goody's $0.50- $1.00/SF $7.50 Georgia At Edgewood North Augusta,SC - ------------------------------------------------------------------------------------------------------------------------------------ Compiled by: CB Commercial
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF COMPARABLE RENTALS Comparable Rental Number One North Augusta Plaza is a community shopping center located across Martintown Road from the subject property. It is similar to the subject property based on its location, age, and condition. However, it is considered to be superior based on size, occupancy rate and tenant mix, which includes K-Mart, Publix grocery store, Hambrick's department store and Blockbuster Video as anchor tenants. Recent local tenant leases signed in the building are in the range of approximately $9.50 to $12.00 per square foot on a triple net basis. The occupancy rate is currently 95% overall and 82% for local tenants. Overall, a downward rent adjustment is necessary as compared to the subject. Comparable Rental Number Two Cross Roads Market is a neighborhood shopping center located across Martintown Road from the subject property. It is similar to the subject property based on its location, age, and size. It is considered to be slightly superior based overall curb appeal and a stronger local tenant mix, but inferior based on the percentage of anchor tenant space. Recent local tenant leases signed in the building are in the range of approximately $7.00 to $8.00 per square foot on a triple net basis. The occupancy rate is currently 96% overall and 91% for local tenants. Overall, a slight downward rent adjustment for local tenants is necessary as compared to the subject. Comparable Rental Number Three North Hills is a neighborhood shopping center located just north of the subject along Martintown Road. It is similar to the subject property based on its overall curb appeal and size. It is considered to be slightly superior based on age, but inferior based on the percentage of anchor tenant space. Recent local tenant leases signed in the building are in the range of approximately $6.50 to $8.00 per square foot on a triple net basis. The occupancy rate is currently 96% overall and 92% for local tenants. Overall, no rent adjustment is necessary as compared to the subject. Comparable Rental Number Four Edgewood Square is a community shopping center located approximately two miles north of the subject property along Knox Avenue. It is similar based on the percentage of anchor tenant. It is inferior with respect to location, but superior in terms of age, condition, and size. Recent local tenant leases signed in the building are in the range of approximately $7.50 per square foot on a triple net basis. The occupancy rate is currently 99% overall and 97% for local tenants. Overall, a downward rent adjustment is necessary as compared to the subject. - -------------------------------------------------------------------------------- 46 [GRAPHIC OMITTED] Comparable Rentals Map - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- The four comparable rentals suggest local tenant rental rates in the range of $6.50 to $12.00 per square. The high end of the range represents most of the recent leasing activity in North Augusta Plaza (No. 1), which was recently renovated and expanded. The low end of the range is set by North Hills, a center which is most similar to the subject with respect to its local tenancy. Excluding comparable No. 1, a range of $6.50 to $8.00 per square foot is suggested. All of the comparable centers in this market lease space on the basis of passing through CAM and real estate tax expenses. In addition, local tenant improvement allowances typically vary from "as is" to $1.00 per square foot for a new tenant, with nothing typically granted upon renewal. Any significant TI for an anchor tenant will be amortized in the rental rate. Finally, rental concessions do not appear to be typical in this market based on our market survey. However, leasing representatives are not always willing to admit that they might give a potential tenant free rent. It should be noted that the subject bay depths are considerable deeper (100 feet) than is typical for the rent comparables (60 to 75 feet). This generally would require a downward adjustment to the rent comparables, all other factors considered equal. ANALYSIS OF RECENT SUBJECT LEASES The following table summarizes the subject property's recent lease history. ================================================================================ SUMMARY OF RECENT SUBJECT LEASES
- ----------------------------------------------------------------------------------------------------------- New/ Rental Free TI Tenant Renew Term Date Size Rate Escalation Rent per SF - ----------------------------------------------------------------------------------------------------------- Ladies Workout Express new 5 yrs 5/95 10,125 SF $6.00 Flat 5 mths $5.00 - ----------------------------------------------------------------------------------------------------------- Rose Nails new 3 yrs 5/96 2,000 SF $6.00 Flat 2 mths as is - -----------------------------------------------------------------------------------------------------------
Source: Mark Centers Trust. Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The typical lease at the subject property requires that tenants pay expense reimbursements for CAM and real estate taxes. This is similar to the comparables, which also collect net expense reimbursements. All tenants are responsible for their individual utilities and interior cleaning. The two recent leases supports an average of three to five years, which is similar to typical market terms. Also, tenant improvement allowances varied from "as is" to $5.00 per square foot; however, the leasing agent indicates that "as is" is far more typical. Free rent has varied from 2 months to 5 months for recent leasing activity, with the leasing agent indicating that three months spread over the term of a five year lease is fairly typical. - -------------------------------------------------------------------------------- 47 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- The rental rates for recent leases would suggest a rental rate of $6.00 per square foot on a triple net basis with no rent escalations except for operating expense increases. Furthermore, the recent subject leases appear to be at market. Discussions with market participants indicate that this is an appropriate rental rate range for this type of property. However, the leasing representative for the subject suggests that the 7,816 square foot vacancy will likely require a $4.00 per square foot rental rate because of its size and inefficient shape. ANCHOR TENANT LEASES The initial lease terms for FoodMax, Belk's and Revco Drugs end in November 2010, January 2004, and July 1996, respectively. All three leases contain multiple renewal options for a total of 15 (FoodMax), 20 (Belk's), and 15 (Revco) years. These renewal options include an extension of the existing lease terms at either flat or increased rental rates. If the option rental rate is substantially below market, it is likely the tenant will either renew the lease or sublease the space. We have obtained lease data on several anchor tenants in the North Augusta market. We were asked to keep the locations and tenant names confidential; however, these spaces are in six centers that are generally equal to or slightly inferior to the subject. At these centers, food store leases range from $5.40 to $8.40 per square foot, with most under $6.00 per square foot. Drug store leases range from $7.50 to $8.00 per square foot. Large big box or department store leases generally are in the range of $4.00 to $5.00 per square foot. The current lease rates for the anchor tenants at the subject are $3.50 for Belk's, $4.00 for FoodMax and $6.75 for Revco Drugs. While the FoodMax and Revco leases call for increased rent in the first year of each option period, the projected rental rate is still not expected to exceed market rent. Therefore, it is likely that the anchor tenants will renew their leases. We typically allow the leases to expire and renew at a market rate; however, in this instance, it would likely lead to an inflated value, given the lease renewal terms. Therefore, we have renewed the anchor tenant leases through the projection period at the existing rates. CONCLUSIONS: MARKET RENT ESTIMATE FOR THE SUBJECT PROPERTY Based on the previous analysis, the current market lease parameters for the subject property are estimated as follows: - -------------------------------------------------------------------------------- 48 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ======================================================================= CONCLUDED MARKET RENT (PER SQUARE FOOT PER YEAR) - ----------------------------------------------------------------------- Category - ----------------------------------------------------------------------- Local Tenants $6.00 Lease Structure Net of CAM & Taxes Annual escalation Flat Tenant Improvements (new tenants) $1.00 Tenant Improvements (renewals) None Average lease term 4 years Free Rent (Months) 2 months - ----------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ======================================================================= These terms generally reflect the most recent leasing history of the subject, as well as market rent terms as discussed in the previous analysis. EXISTING CONTRACT RENT As discussed, the subject's leasable area has been subdivided into 12 individual suites and one free-standing fast food restaurant, of which 8 are currently occupied and five are available for lease, including the fast food building. The occupied suites total 119,458 square feet, or 87.6% of the building's leasable area. Through our research of the subject property, which included a complete review of all leased documents available, lease abstracts, rent rolls (both current and historical), and detailed discussions with the property manager, the following rent roll summary was utilized to detail currently leased suites and general information employed for this approach. Detailed abstracts of each tenant's lease and miscellaneous assumptions assumed for this assignment have been included in file memorandum. Additionally, within the Addenda are copies of a Tenant Register and Rent Roll generated by Pro-Ject, a computerized lease-by-lease analysis program. The information contained in the chart and in appropriate sections of the Addenda represent the data inputted for this method and is assumed to be correct and reliable. CB Commercial reserves the right to amend our input assumptions if any documentation is subsequently available which contradicts that assumed for this method. Shown in the following table is the subject rent roll. - -------------------------------------------------------------------------------- 49 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ MARTINTOWN PLAZA RENT ROLL (AS OF MAY 23, 1996)
- ------------------------------------------------------------------------------------------- Square Begin End Base Rent Annual Rent Tenant Feet Date Date per SF - ------------------------------------------------------------------------------------------- FoodMax 47,982 12/90 11/10 $4.00 $192,000 Belk's 44,000 8/93 1/04 $3.50 $154,000 Ladies Workout Express 10,125 5/95 5/00 $6.00 $60,750 Revco Drug 8,450 7/91 7/06 $6.75 $57,037 Little Caesar's Pizza 1,400 10/91 9/96 $11.43 $16,000 Rose Nails 2,000 5/96 4/99 $6.00 $12,000 Logan Beauty School 2,500 5/88 12/96 $6.00 $15,000 Lucky Lynn 3,000 6/93 5/98 $9.00 $27,000 ----- Total Leased Square Feet 119,457 Average Rent: $4.47 $533,787 Unleased Space 16,921 ------- Total Square Footage 136,378 Occupancy-Overall 87.6% Occupancy-Local Tenants 61.9% - -------------------------------------------------------------------------------------------
Note: Some figures may not calculate due to rounding; annual rent stated correlates with actual rent being collected. Source: Leases and abstracts provided by Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The weighted average rental rate of $6.84 per square foot for local tenants correlates well with the market rent for the subject as previously discussed. However, Taco Bell has reportedly committed to leasing the 2,500 square foot fast food restaurant on an "as is" basis for five years at $12.00 per square foot, with a 5 year option at $14.40 per square foot. We have assumed that this lease will be signed, with the tenant taking occupancy by September 1996. Also, the subject's leasing representative indicates that they are in negotiations to lease the bay currently occupied by Ladies Workout Express to Goodyear Tire. This would involve moving the existing tenant to the adjacent vacant 7,816 square foot bay. This is apparently acceptable to Ladies Workout as they feel that they have too much space and consequently too much fixed overheard costs. Goodyear would sign a 10 year lease at $11 to $12 per square foot, with the landlord paying tenant improvement cost estimated at $75,000. Ladies Workout would likely pay a rental rate in the range of $4.00 per square foot for the 7,816 square foot vacancy as previously discussed. Ladies Workout would probably require approximately $5.00 per square foot in tenant improvements, consistent with what they received in their current lease. Based on our discussion with the leasing representative, we have assumed that this set of circumstances will occur. We have assumed an $11.00 per square foot rental rate for - -------------------------------------------------------------------------------- 50 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Goodyear and $4.00 per square foot for Ladies Workout Express upon relocation, with the new leases to begin by the end of 1996. ANALYSIS OF TENANCY The tenant base is represented by clients of both a national and local credit rating. The following table summarizes the expiration of existing leases over the next eight years. ================================================================================ SUBJECT LEASE EXPIRATION SUMMARY - -------------------------------------------------------------------------------- FY Vacancy # of Tenants SF Expiring % Cumulative SF Cumulative % - -------------------------------------------------------------------------------- 1997 2 3,900 2.9% 3,900 2.9% 1998 1 3,000 2.2% 6,900 5.1% 1999 1 2,000 1.5% 8,900 6.5% 2000 1 10,125 7.4% 19,025 14.0% 2001 0 0 0.0% 19,025 14.0% 2002 0 0 0.0% 19,025 14.0% 2003 0 0 0.0% 19,025 14.0% 2004 1 44,000 32.3% 63,025 46.2% - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ In estimating the potential gross income of the subject property, it is necessary to consider the leases subject to termination during the initial portion of the holding period. All five of the existing local tenant leases expire within the next four years. The two Year 1 lease expirations are expected to renew based on conversations with the Mark Centers leasing representative. The first anchor tenant lease (Belk's) expires in Year 8, while the other two anchor tenant leases expire in Year 10 (Revco Drugs) and Year 14 (FoodMax). This is not considered to be unusual and represents a fairly low level of rollover risk. EXPENSE REIMBURSEMENTS As discussed, most of the current and future hypothetical leases which will encumber the subject space will be based upon leases which are net of CAM and real estate tax expenses, whereby the tenant is responsible for their prorata share of common area maintenance and real estate taxes. Furthermore, tenants with special expense stops or expense reimbursement limitations may impact the valuation analysis. However, there are some variations in the reimbursement structures, with some of the tenants having specified amounts of recovery or the exclusion of CAM or taxes, or the inclusion of insurance. - -------------------------------------------------------------------------------- 51 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- We have reviewed historical expense reimbursements for the subject property, as compared to a projection of each expense reimbursement for the next year based on existing leases. A review of historical CAM reimbursements is as follows: ====================================== CAM REIMBURSEMENTS - -------------------------------------- Year Total $ Amount - -------------------------------------- 1993 $25,354 1994 $31,242 1995 $39,031 1996 Budget $38,304 Year 1 DCF $43,266 - -------------------------------------- Source: Mark Centers Trust ====================================== CAM expense recoveries have increased annually from $0.19 per square foot in 1993 to $0.29 per square foot in 1995. The 1996 budget projects $0.28 per square foot, in line with the 1995 expense level. By comparison, the first year of our DCF model suggests total CAM reimbursements of $43,266 based on a review of lease abstracts. This is consistent with the historical trend. We feel that the DCF model most effectively quantifies the projected expense recoveries. Therefore, we estimate total CAM reimbursements to be $43,250, on a rounded basis. A review of historical tax reimbursements is as follows: ====================================== TAX REIMBURSEMENTS - -------------------------------------- Year Total $ Amount - -------------------------------------- 1993 $98,911 1994 $38,704 1995 $40,460 1996 Budget $29,544 Year 1 DCF $41,200 - -------------------------------------- Source: Mark Centers Trust ====================================== Tax expense recoveries have decreased from $0.73 per square foot in 1993 to $0.28 per square foot in 1994 and $0.30 per square foot in 1995. The 1996 budget projects a further decline to $0.22 per square foot. By comparison, the first year of our DCF model suggests total real estate tax reimbursements of $41,200 based on a review of lease abstracts. This is consistent with the 1994 and 1995 historical expense, although more than the 1996 budgeted - -------------------------------------------------------------------------------- 52 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- amount. We feel that the DCF model most effectively quantifies the projected expense recoveries. Therefore, we estimate total tax reimbursements to be $41,200. A review of historical insurance reimbursements is as follows: ====================================== INSURANCE REIMBURSEMENTS - -------------------------------------- Year Total $ Amount - -------------------------------------- 1993 $542 1994 $980 1995 $396 1996 Budget $1,032 Year 1 DCF $1,165 - -------------------------------------- Source: Mark Centers Trust ====================================== Insurance expense recoveries have been minimal over the last three years. The 1996 budget projects $1,032, which slightly exceeds the high end of the range established by 1993 through 1995. By comparison, the first year of our DCF model suggests total insurance reimbursements of $1,165 based on a review of lease abstracts. This is consistent with the 1996 budgeted amount. We feel that the DCF model most effectively quantifies the projected expense recoveries. Therefore, we estimate total tax reimbursements to be $1,150, on a rounded basis. OTHER INCOME For the purpose of estimating the other income that could reasonably be generated by the subject building, we have again reviewed the historical revenues actually received, as well as surveyed local property management companies regarding similar retail projects. This income category can be derived from several different sources including tenant service income, late fee income, short-term storage income, professional services provided for the tenants by the landlord/management, and other miscellaneous sources. The following chart depicts the historical and budgeted revenues included in Other Income for the subject project. - -------------------------------------------------------------------------------- 53 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================== OTHER INCOME - ---------------------------------- Year Total $ Amount - ---------------------------------- 1993 $479 1994 $676 1995 $3,751 1996 Budget $180 Year 1 Pro Forma $3,600 - ---------------------------------- Source: Mark Centers Trust ================================== This source income, while not significant, increased from less than $0.01 per square foot in 1993 and 1994 to $0.03 per square foot in 1995. While the 1996 budget also stipulates a very small amount, the first quarter of 1996 would suggest that $7,808 has been attributed to this income category. Therefore, we have estimated a Year 1 Other Income of $3,600, or $0.03 per square foot of leasable area. PERCENTAGE RENT INCOME According to the lease documents provided, four of the existing tenants have a provision in their lease documents which requires percentage rent payments over a base amount or under a specific formula. That is, in addition to the basic rental charges, the tenant is responsible for paying the landlord additional rent equal to a specified percentage of the tenant's gross sales made in, upon, or from the premises, over a breakpoint factor or according to a specific schedule. While the historical operating statements and the 1996 budget include a minimal amount of percentage rent income, a review of sales levels for each of the tenants with a percentage rent clause would suggest none is being generated. Therefore, we have not projected any percentage rent collections in our stabilized pro forma. POTENTIAL GROSS INCOME The concluded potential gross income for the subject is summarized as follows: - -------------------------------------------------------------------------------- 54 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ POTENTIAL GROSS INCOME - -------------------------------------------------------------------------------- P.S.F. Totals - -------------------------------------------------------------------------------- Existing Contract Rent 119,457 SF $4.47 (wt. avg.) $533,787 Lease Out for Signature Taco Bell: 2,500 SF $12.00 $30,000 Vacant Space at Market Rent 6,605 SF $6.00 $39,630 7,816 SF $4.00 31,264 ------ Potential Gross Rental Income 136,378 SF $4.65 (wt. avg.) $634,681 Expense Reimbursements $85,600 Other Income $3,600 -------- Potential Gross Income 136,378 SF $5.31 (wt. avg.) $723,881 - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ VACANCY AND COLLECTION LOSS Typically, this is an allowance for reductions in potential income attributable to vacancies, tenant turnover, and non-payment of effective rent. In the direct capitalization process, a market-derived, stabilized vacancy and collection loss estimate is subtracted from potential gross income in order to arrive at effective gross income. Currently, the subject is 87.6% occupied by tenants of both a local nature and national credit rating. The local tenant occupancy rate is 52.9%. Including the Taco Bell lease out for signature would suggest an 89.4% overall occupancy rate and an 59.9% local tenant occupancy rate. The three most comparable retail properties in the neighborhood have overall occupancy rates of 95% to 99% and local tenant occupancy rates of 82% to 97%. The subject's local tenant occupancy rate is below the low end of the range suggested by the comparables. We feel that this is reasonable given the subject's excessive local tenant bay depths and weak local tenant mix relative to North Augusta Plaza and Cross Roads Market, which are directly across the street from the subject. These two properties have local tenant occupancy rates of 82% and 91%. Therefore, we believe that a 30% vacancy and collection loss as applied to local tenant revenues reasonably encompasses the downtime between leases and a credit loss. - -------------------------------------------------------------------------------- 55 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- EFFECTIVE GROSS INCOME SUMMARY The subject's historical effective gross income is shown in the following table: ========================================== EFFECTIVE GROSS INCOME - ------------------------------------------ Year Total $ Amount - ------------------------------------------ 1993 $582,671 1994 $604,876 1995 $598,929 1996 Budget $622,124 - ------------------------------------------ Source: Mark Centers Trust ========================================== Given our estimate of existing rental income and expense reimbursements, other income, and a collection loss, the subject's estimated effective gross income is derived as follows: ================================================================================ STABILIZED EFFECTIVE GROSS INCOME - -------------------------------------------------------------------------------- Gross Rental Income: $634,681 Less Vacancy & Collection Loss (30% of locals only) (69,493) ------- Effective Rental Income: 565,188 Plus Expense Reimbursements: 85,600 Plus Other Income: 3,600 ------- Effective Gross Income: $654,388 ================================================================================ Our projection of effective gross income is 9.3% more than the level of EGI indicated for the subject for 1995, and 5.2% more than the 1996 budget projection of EGI. The difference between 1995 and 1996 is primarily associated with the income to be generated by the Taco Bell lease. Therefore, our stabilized projection is considered to be reasonable. OPERATING EXPENSE ANALYSIS In projecting revenue and expenses for the subject property, the historical operating statements for calendar years 1993, 1994 and 1995 have been analyzed. Also, we have reviewed the 1996 budgeted forecast of income and expenses. This information is summarized in the following table. We have analyzed expenses for the subject improvements based on historical information, with expenses for the subject improvements projected based on the per square foot cost implied. We have also considered expense comparable data contained in our files and statistics in the Dollars & Cents of Shopping Centers: 1995, published by the Urban Land - -------------------------------------------------------------------------------- 56 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Institute, and the 1995 Income and Expense Analysis: Shopping Centers, published by the Institute of Real Estate Management. ================================================================================ SUBJECT INCOME & EXPENSE HISTORY ACTUAL CALENDAR YEAR DATA AND PROJECTED BUDGET
- -------------------------------------------------------------------------------------------------------- 1993 Actual 1994 Actual 1995 Actual 1996 Budget - -------------------------------------------------------------------------------------------------------- Total $/SF(1) Total $/SF(1) Total $/SF(1) Total $/SF(1) - -------------------------------------------------------------------------------------------------------- Income Rental Income $420,461 $3.08 $533,274 $3.91 $506,032 $3.71 $538,764 $3.95 Percentage Rent 36,924 0.27 0 0.00 9,259 0.07 14,300 0.10 CAM Reimb 25,354 0.19 31,242 0.23 39,031 0.29 38,304 0.28 RE Tax Reimb 98,911 0.73 38,704 0.28 40,460 0.30 29,544 0.22 Insurance Reimb 542 0.01 980 0.01 396 0.01 1,032 0.01 Other Income 479 0.01 676 0.01 3,751 0.03 180 0.00 -------- ----- -------- ----- -------- ----- -------- ----- Eff. Gr. Income $582,671 $4.27 $604,876 $4.44 $598,929 $4.39 $622,124 $4.56 Expenses CAM (54,049) (0.40) (41,256) (0.30) (50,336) (0.37) (55,120) (0.40) Property Taxes (87,233) (0.64) (70,307) (0.52) (49,833) (0.37) (40,404) (0.30) Insurance (10,202) (0.07) (14,542) (0.11) (10,920) (0.08) (11,100) (0.08) Mgmt Fee (0) (0.00) (0) (0.00) (0) (0.00) (0) (0.00) Gen. & Admin (4,792) (0.04) (15,939) (0.12) (9,874) (0.07) (11,614) (0.09) Ground Rent (20,000) (0.15) (24,000) (0.18) (24,000) (0.18) (24,000) (0.18) -------- ----- -------- ----- -------- ----- -------- ----- Total Expenses (176,276) (1.29) (166,044) (1.22) (144,963) (1.06) (142,238) (1.04) -------- ----- -------- ----- -------- ----- -------- ----- NOI $406,395 $2.98 $438,832 $3.22 $453,966 $3.33 $479,886 $3.52 - --------------------------------------------------------------------------------------------------------
(1)Based on 136,378 rentable square feet of building area Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ Our projection of the subject's stabilized expenses is detailed as follows. Common Area Maintenance Common area maintenance typically includes all expense items relative to operating, cleaning, maintaining and repairing the subject improvements. Historical common area maintenance expenses are shown as follows: - -------------------------------------------------------------------------------- 57 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ========================================== CAM EXPENSE - ------------------------------------------ Year Total $ Amount - ------------------------------------------ 1993 $54,049 1994 $41,256 1995 $50,336 1996 Budget $55,120 Year 1 Pro Forma $55,000 - ------------------------------------------ Source: Mark Centers Trust ========================================== This expense has varied from $0.40 per square foot in 1993 to $0.30 per square foot in 1994 and $0.37 per square foot in 1995. By comparison, $0.40 per square foot is projected in the 1996 budget. Therefore, we have projected CAM expense in line with the 1996 budgeted expense to be $55,000, or $0.40 per square foot. Property Taxes Property taxes are forecasted at $56,983, or $0.42 per leasable square foot, based on the discussion contained in the Tax Analysis section of this report. The real estate taxes do not include personal property taxes. Insurance Historical insurance expenses are shown as follows: ========================================== INSURANCE EXPENSE - ------------------------------------------ Year Total $ Amount - ------------------------------------------ 1993 $10,202 1994 $14,542 1995 $10,920 1996 Budget $11,100 Year 1 Pro Forma $11,100 - ------------------------------------------ Source: Mark Centers Trust ========================================== Insurance costs are assumed to include full property and liability coverage and typically are in the range of $0.10 to $0.20 per square foot. By comparison, the historical subject cost has varied from $0.07 per square foot in 1993 to $0.11 per square foot in 1994 and $0.08 per square foot in 1995. Furthermore, the 1996 budget projects a cost of $0.08 per square foot. Therefore, the subject's insurance expense has been estimated in line with the 1996 budget to be $11,100, or $0.08 per square foot on a rounded basis. While we acknowledge that this is at - -------------------------------------------------------------------------------- 58 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- the low end of the range in terms of comparable properties, the subject has the benefit of being insured as part of a portfolio of properties. We feel that this is not unusual for a typical buyer of the subject. Professional Management Fee Historically, the subject property has not been charged a professional management based on a review of the operating statements provided. Typical professional management fees in the local market are generally 3% to 5% of effective gross income, based on the number and type of tenants, the total square footage of a property and size of the market. Therefore, the management fee for the subject is estimated to be 4.0% of effective gross income. General and Administrative General and administrative expenses typically include all payroll and payroll related items for all directly-employed administrative personnel such as building managers, secretaries, and bookkeepers. Leasing personnel are not included nor are the salaries or fees for off-site management firm personnel and services. However, normal legal or professional fees would be included. Historical general and administrative expenses are shown as follows: ========================================== GENERAL AND ADMINISTRATIVE EXPENSE - ------------------------------------------ Year Total $ Amount - ------------------------------------------ 1993 $4,792 1994 15,939 1995 $9,874 1996 Budget $11,614 Year 1 Pro Forma $11,600 ========================================== Source: Mark Centers Trust ========================================== This expense is not a significant one for the subject. It has varied from $0.07 per square foot in 1993 to $0.12 per square foot in 1994 and $0.07 per square foot in 1995. The 1996 budget estimate of $0.09 per square foot falls within this range. Therefore, we have projected this expense to be $11,600, or $0.09 per square foot. We feel that this is consistent with the expense suggested by comparable properties. Ground Rent The subject site is currently under a ground lease, with the pertinent details shown in the following table: - -------------------------------------------------------------------------------- 59 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ ABSTRACT OF SUBJECT GROUND LEASE - -------------------------------------------------------------------------------- Ground Lessor: Julia Mealing Ground Lessee: Arlen Realty, Inc. Lease Start Date: September 1, 1979 Lease Term: 53 years & 7 months Lease End Date: March 1, 2033 Lease Rent: $2,000 per month or $24,000 annually Lease Options: Three 10-year options and one 9-year option Option Rent: Base rent escalated by CPI Reversion: Improvement revert to the lessor at completion of lease and option term, or upon default by the lessee. =============================================================================== Based on our review of the ground lease, this expense has been included at $24,000 per year. Replacement Reserves This expense typically represents a reserve for future replacement of long-lived items. The amount of reserve and whether or not it is included in the direct capitalization and DCF analyses, depends on the actions reflected by buyers and sellers in the local market. Based on available comparable data and discussions with brokers and investors, replacement reserves generally range from $0.10 and $0.20 per square foot. Therefore, we have projected reserves for the subject at $0.15 per square foot, or $20,450 annually on a rounded basis, given the subject's age and current condition. Generally, investors feel that it is prudent to deduct replacement reserves in calculating NOI and in determining cash flow in the DCF analysis. Total Concluded Operating Expenses The concluded stabilized operating expenses for the subject total $205,309 annually, or $1.51 per gross leasable square foot. Furthermore, 41.5% of the total operating costs, or $0.63 per square foot, are recovered from the tenants. DIRECT CAPITALIZATION As previously discussed, direct capitalization is a method used to convert a single year's estimated stabilized net operating income into a value indication. Once the net operating income has been estimated, this conversion is accomplished by dividing the NOI estimate by an appropriate rate. There are several methods for deriving an overall rate for direct capitalization. - -------------------------------------------------------------------------------- 60 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Derivation from Comparable Sales This is the preferred method when sufficient data exists. Data on each property's sale price, income, expenses, financing terms, and market conditions at the time of sale is needed. The overall capitalization rate is then derived by dividing the net operating income by the sale price. This technique is considered appropriate for the subject. The following is a summary of overall capitalization rates indicated by the comparable sales included in the Sales Comparison Approach. =================================================================== COMPARABLE CAPITALIZATION RATES - ------------------------------------------------------------------- Date of Occupancy Capitalization Sale Sale Sale Price Rate Rate - ------------------------------------------------------------------- 1 12/95 $6,025,000 93% 9.8% 2 9/95 $6,675,000 95% 9.9% 3 1/95 $2,860,000 100% 10.5% 4 9/95 $3,252,000 100% 10.6% 5 5/96 $8,450,000 100% 10.3% - ------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. =================================================================== The preceding sales indicate a 9.8% to 10.6% range of overall capitalization rates. Sale Nos. 1 and 2, while located in the Augusta market, are considered to be superior to the subject based on being newly constructed centers anchored by Publix grocery stores, currently a highly desirable investment property throughout the Southeast. Sale Nos. 3 and 4 are considered to be fairly similar to the subject with respect to age, condition, and market area, as well as the percentage and mix of anchor tenants. Sale No. 5 would be considered superior based on the anchor tenant mix, but located in an inferior market area. Retail investment market conditions have not changed noticeably since these transaction. Given the subject property's physical and locational characteristics, we feel that a capitalization rate in the range of 10.5% is warranted based on the sales utilized in our analysis. Investor Surveys Another method for establishing an overall capitalization rate for the subject is to review the criteria of major investors in the marketplace. This may serve as a check against other techniques or may be a primary source when ample data exists. This technique is considered to be appropriate for the subject. Therefore, using the First Quarter 1996 CB Commercial National Investor Survey, we have reviewed rates for Class B neighborhood and community shopping centers. This information is summarized in the following table. - -------------------------------------------------------------------------------- 61 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ CB COMMERCIAL NATIONAL INVESTOR SURVEY SUMMARY OF OVERALL CAP RATES FOR CLASS B SHOPPING CENTERS - -------------------------------------------------------------------------------- Property Type # of Respondents Ro Range Average Rate - -------------------------------------------------------------------------------- Neighborhood Centers 10 9% - 11.5% 10.3% Community Centers 10 9.5% - 11.0% 10.2% - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The survey categories indicate an overall range of 9% to 11.5% and an average range of 10.2% to 10.3%. It is likely that the appropriate capitalization rate would be toward the middle to upper end of the range indicated in the preceding table due to the mediocre economic prospects in the greater Augusta area over the near term future. Therefore, we have estimated the appropriate overall capitalization rate for the subject to be in the range of 10.5% based on the investor survey data. Conclusion of Overall Capitalization Rate After reviewing the appropriate methods for developing an overall capitalization rate. The following overall capitalization rates are indicated: ================================================================================ SUMMARY OF OVERALL CAPITALIZATION RATES - -------------------------------------------------------------------------------- Methodology Concluded Range - -------------------------------------------------------------------------------- Comparable Sales 10.5% CB Commercial National Investor Survey 10.5% - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ After reviewing the appropriate methods for developing an overall capitalization rate, with most emphasis placed on the comparable sales data, the concluded overall capitalization rate for the subject is 10.5%. - -------------------------------------------------------------------------------- 62 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Direct Capitalization Summary A summary of the direct capitalization of the subject at stabilized occupancy is illustrated in the following table: ================================================================================ MARTINTOWN PLAZA SHOPPING CENTER DIRECT CAPITALIZATION SUMMARY MAY 23, 1996
- ---------------------------------------------------------------------------------------- Category Total P.S.F. - ---------------------------------------------------------------------------------------- Income Existing Tenants: 119,457 SF @ $4.47 per SF (wt. avg.) $533,787 $3.91 Taco Bell lease out for signature: 2,500 SF @ $12.00 per SF 30,000 0.22 Vacant Space at Market 6,605 SF @ $6.00 per SF 39,630 0.29 7,816 SF @ $4.00 per SF 31,264 0.23 -------- Potential Gross Rental Income $634,681 $4.65 ----- Less: Vacancy & Collection Loss (30% of local tenant rent) (69,493) (0.51) -------- ----- Subtotal $565,188 $4.14 Total Expense Reimbursements 85,600 $0.63 Other Income 3,600 0.03 -------- ----- Effective Gross Income $654,388 $4.80 Expenses Common Area Maintenance ($55,000) (0.40) Real Estate Taxes (56,983) (0.42) Insurance (11,100) (0.08) Management Fee (4.0%) (26,176) (0.19) General & Administrative (11,600) (0.09) Ground Rent (24,000) (0.18) Reserves (20,450) (0.15) -------- ----- Total Expenses ($205,309) ($1.51) OER 31.5% Net Operating Income $449,079 $3.29 CAPITALIZATION OF NOI: @ 10.5% $4,276,943 $31.36 Rounded $4,275,000 $31.35 - ---------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc.
================================================================================ - -------------------------------------------------------------------------------- 63 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Additional Adjustments In order to attain an "as is" value estimate for the subject property, the appropriate deductions must be made for the cost to achieve stabilized occupancy. The calculation of the cost to achieve stabilized occupancy is the present value of the difference between the stabilized net operating income and the net cash flow (from the DCF), until the net cash flow is equal to or exceeds the stabilized NOI. This is achieved in the second year of the DCF. ============================================= LEASE-UP COSTS MARTINTOWN PLAZA - --------------------------------------------- Year 1 - --------------------------------------------- Stabilized NOI $449,079 Net Cash Flow $289,706 Difference $158,661 Rounded to: $160,000 - --------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ============================================= Direct Capitalization "As Is" Summary The concluded value of the subject based on the direct capitalization method is summarized as follows: ================================================================================ DIRECT CAPITALIZATION CONCLUSION - -------------------------------------------------------------------------------- Capitalized Value, Prior to Final Adjustments $4,275,000 Less: Cost to Achieve Stabilized Occupancy 160,000 ---------- Net Indicated Direct Capitalization Value "As Is" $4,115,000 Rounded: $4,125,000 Direct Capitalization "As Is" per SF $30.25 - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 64 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW ANALYSIS Our DCF assumptions are summarized as follows: ================================================================================ MARTINTOWN PLAZA SHOPPING CENTER SUMMARY OF DISCOUNTED CASH FLOW ASSUMPTIONS - -------------------------------------------------------------------------------- General Assumptions Start Date June 1, 1996 Terms of Analysis 10 years Basis (calendar/ fiscal) Fiscal Software Pro-Ject Growth Rate Assumptions Expenses 3.5% Market Rent YR1 & 2: Flat; 3.5% thereafter Market Rent Assumptions Local Tenants $6.00 Anchor Tenants $4.00 Leasing Assumptions Lease Term 4 years Renewal Probability 60% Escalation Flat Weighted Average of: Tenant Improvements ($/SF) $0.40 Months of Free Rent 2 months Leasing Commissions (cashed-out) 2.8% Down Time Between Leases 8 months Absorption We have estimated that the subject will achieve stabilized occupancy based on Goodyear moving into the space occupied by Ladies Workout Exp., who would relocate into the vacant 7,816 SF bay. The subject leasing rep indicates that Goodyear would pay about $11 per SF with $75,000 in TI, while Ladies Workout would probably pay $4 per SF with approximately $5 per SF in TI. Miscellaneous Assumptions Credit Loss 1.0% (local tenants only) Avg Occupancy Over Projection Period 93.6% (physical occupancy) Structural Maintenance/ Reserves ($/SF) $0.15 Deferred Maintenance None Financial Assumptions Discount Rate (IRR) 12.5% Terminal Overall Capitalization Rate (RO) 11.0% Costs of Sale 3.0% - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 65 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Discount Rate Selection Rate selection requires that an appraiser verify and interpret the attitude and expectations of market participants (buyers, sellers, advisors, and brokers, among others). In selecting yield rates at which cash flows are to be discounted, an emphasis is placed on the prospective or forecast yield rates anticipated by typical buyers and sellers. This rate is influenced by many factors, including the degree of apparent risk, market attitudes toward future inflation, the prospective rates of return for alternative investments, the rates of return earned by comparable properties in the past, the supply and demand of mortgage funds, and the availability of tax shelters. One method for establishing a discount rate for the subject is to review the criteria of major investors in the marketplace. This may serve as a check against other techniques or may be a primary source when ample data exists. This technique is considered to be appropriate for the subject. The results of relevant published investor survey data are summarized in the following table. ================================================================================ CB COMMERCIAL 1Q 1996 NATIONAL INVESTOR SURVEY SUMMARY OF INTERNAL RATES OF RETURN FOR CLASS B SHOPPING CENTERS - -------------------------------------------------------------------------------- # of Average Property Type Respondents IRR Range Rate - -------------------------------------------------------------------------------- Neighborhood Centers 10 12% - 14.5% 13.1% Community Centers 10 12% - 15% 13.4% - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The survey indicates a range of discount rates between 12% and 15%, with rates generally clustering in the 12% to 13% range. The subject is an average property which is primarily occupied by a three anchor tenants. Therefore, it would appear that the subject has an average degree risk and the appropriate discount rate is likely to be near the middle of the range indicated in the preceding table. These factors indicate that the appropriate discount rate for the subject would likely fall in the range of 12.5% on the basis of published investor survey data. - -------------------------------------------------------------------------------- 66 MARTINTOWN PLAZA SHOPPING CENTER PROJECT DESIGNATOR: MTPL ANNUAL CASH FLOW REPORT BEGINNING 6/1/96 FOR 11 YEARS
FY1997 FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 INCOME - --------- MINIMUM RENT: ALL TENANTS 589,455 643,355 625,285 631,950 639,376 601,504 639,980 639,158 649,434 651,610 628,692 FREE RENT 0 (2,500) (3,090) (2,122) 0 (1,407) (10,423) (3,478) (2,388) 0 (16,976) ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL MINIMUM RENT 589,455 640,855 622,195 629,828 639,376 600,097 629,557 635,680 647,046 651,610 611,716 RECOVERIES: RE TAX RECOVERY 41,200 44,406 44,885 46,541 48,345 46,038 50,148 51,429 53,594 55,248 52,979 CAM RECOVERY 43,266 45,845 46,415 48,093 49,910 47,885 51,874 51,750 50,996 52,699 50,734 INS RECOVERY 1,165 1,218 1,143 1,357 1,406 1,208 1,405 1,458 1,613 1,646 1,463 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL RECOVERIES 85,631 91,469 92,443 95,991 99,661 95,131 103,427 104,637 106,203 109,593 105,176 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- GROSS RENTAL INCOME 675,086 732,324 714,638 725,819 739,037 695,228 732,984 740,317 753,249 761,203 716,892 CREDIT LOSS (2,065) (2,627) (2,435) (2,530) (2,646) (2,190) (2,550) (2,619) (2,758) (2,818) (2,266) OTHER INCOME 3,600 3,600 3,645 3,754 3,867 3,983 4,102 4,226 4,352 4,483 4,617 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL INCOME 676,621 733,297 715,848 727,043 740,258 697,021 734,536 741,924 754,843 762,868 719,243 EXPENSES - --------- COMMON AREA MAINT 55,000 55,802 57,755 59,777 61,869 64,034 66,275 68,595 70,996 73,481 76,052 REAL ESTATE TAXES 57,695 59,548 61,633 63,790 66,022 68,333 70,725 73,200 75,762 78,414 81,158 INSURANCE 11,100 11,262 11,656 12,064 12,486 12,923 13,376 13,844 14,328 14,830 15,349 MANAGEMENT FEE 27,065 29,332 28,634 29,082 29,610 27,881 29,381 29,677 30,194 30,515 28,770 GENERAL & ADMIN 11,600 11,769 12,181 12,607 13,049 13,505 13,978 14,467 14,974 15,498 16,040 GROUND RENT 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 RESERVES 20,450 20,748 21,474 22,226 23,004 23,809 24,642 25,505 26,398 27,321 28,278 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL EXPENSES 206,910 212,461 217,333 223,546 230,040 234,485 242,377 249,288 256,652 264,059 269,647 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- NET OPERATING INCOME 469,711 520,836 498,515 503,497 510,218 462,536 492,159 492,636 498,191 498,809 449,596 ALTERATIONS 125,000 1,030 1,324 914 0 1,223 4,510 1,519 1,048 0 8,262 COMMISSIONS 55,005 1,610 1,990 1,366 0 1,812 5,807 2,240 1,538 0 14,129 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- CASH FLOW 289,706 518,196 495,201 501,217 510,218 459,501 481,842 488,877 495,605 498,809 427,205
- -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Reversion The reversionary value of the subject is based on an assumed sale at the end of the holding period based on capitalizing the following year's NOI. Additionally, any capital costs, leasing commissions, and tenant improvements associated with the following year's NOI are deducted. Based on our surveys, reversionary capitalization rates are typically considered to be 0 to 100 basis points higher than going-in capitalization rates on a typical holding period. This is a result of the uncertainty of future economic conditions and the natural aging of the property. In the case of the subject, we feel that a premium of 50 basis points over the going-in capitalization rate is warranted. The appropriate terminal capitalization rate for the reversion is, therefore, estimated to be 11.0%. DCF Conclusion The subject's projected cash flow generated via this DCF analysis is shown on the facing page. A value of $4,000,000, or $29.33 per square foot, is suggested for this scenario based on a discount rate of 12.5% and a reversion capitalization rate of 11.0%. Furthermore, 64% of the value is derived from cash flow over the holding period, with the remaining 36% generated from the reversionary sale of the property at the end of the holding period. CONCLUSION OF INCOME CAPITALIZATION APPROACH The preceding analysis indicates the following conclusions: ============================================================ INCOME CAPITALIZATION APPROACH VALUES - ------------------------------------------------------------ Method Indicated Value - ------------------------------------------------------------ Direct Capitalization $4,125,000 Discounted Cash Flow $4,000,000 - ------------------------------------------------------------ Source: CB Commercial Real Estate ============================================================ We feel that the direct capitalization analysis represents the preferred methodology of potential investors in the market for property such as the subject. The DCF model supports the direct capitalization analysis. As a result, based on the Income Capitalization Approach, CB Commercial concludes a value for the subject improvements of $4,125,000, or $30.25 per gross leaseable square foot. - -------------------------------------------------------------------------------- 67 CONCLUSION - -------------------------------------------------------------------------------- RECONCILIATION - -------------------------------------------------------------------------------- RECONCILIATION OF VALUE CB Commercial was instructed to estimate the market value of the leasehold interest in the subject property. The value conclusion for each applicable approach is summarized below. ================================================================== SUMMARY OF VALUE CONCLUSIONS - ------------------------------------------------------------------ Land Value: N/A Cost Approach: N/A Sales Comparison Approach: $4,100,000 Income Capitalization Approach: $4,125,000 - ------------------------------------------------------------------ Source: CB Commercial Real Estate Group, Inc. ================================================================== The Income Capitalization Approach is considered the most persuasive method for valuing the subject property. This approach is predicated on the principle of anticipated economic benefits and therefore, best reflects the investment characteristics of the subject. Properties such as the subject are typically purchased by investors; thus, this approach must closely parallel the anticipated analysis that would be employed by the most typical purchaser. The Sales Comparison Approach is predicated on the principle that an investor would pay no more for an existing property than for a comparable property with similar utility. This approach is contingent on the reliability and comparability of available data. The data developed was considered sufficiently reliable to reach a value conclusion by the Sales Comparison Approach. However, this method is given secondary consideration in the reconciliation and used as support for the Income Approach. The Cost Approach is predicated on the principle that an investor would pay no more for an existing property than it would cost to acquire land and construct a building with similar utility. The Cost Approach is not relied upon because estimating developer profit is very subjective and the Marshall Valuation Service cost guide is based on numerous assumptions that may not directly apply to the subject, rendering this method less reliable. This approach was not utilized in our analysis. In arriving at the final value conclusion, greatest weight was placed on the Income Capitalization Approach. The final value conclusion and the approach relied upon give strong - -------------------------------------------------------------------------------- 68 - -------------------------------------------------------------------------------- RECONCILIATION - -------------------------------------------------------------------------------- consideration to the market behavior of the typical buyer and current market environment for the property appraised. Based on the foregoing analysis, it is concluded that the market value as is of the leasehold interest in the subject property, as of May 23, 1996 is: FOUR MILLION ONE HUNDRED TWENTY-FIVE THOUSAND DOLLARS ($4,125,000) - -------------------------------------------------------------------------------- 69 - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS 1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to total that would adversely affect marketability or value. CB Commercial is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CB Commercial, however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject property's title should be sought from a qualified title company that issues or insures title to real property. 2. It is assumed that improvements have been constructed or will be constructed according to approved architectural plans and specifications and in conformance with recommendations contained in or based upon any soils report(s). Unless otherwise specifically noted in the body of this report, it is assumed: that any existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are, or will be upon completion, in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that it or they will withstand any known elements such as windstorm, hurricane, tornado, flooding, earthquake, or similar natural occurrences; and, that the improvements, as currently constituted, conform to all applicable local, state, and federal building codes and ordinances. CB Commercial professionals are not engineers and are not competent to judge matters of an engineering nature. CB Commercial has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CB Commercial by ownership or management; CB Commercial inspected less than 100% of the entire interior and exterior portions of the improvements; and CB Commercial was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CB Commercial reserves the right to amend the appraisal conclusions reported herein. 3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property was not observed by the appraisers. CB Commercial has no knowledge of the existence of such materials on or in the property. CB Commercial, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the appraisal. 4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CB Commercial. This report may be subject to amendment upon re-inspection of the subject property subsequent to repairs, modifications, alterations and completed new - -------------------------------------------------------------------------------- 70 - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels of operation. 5. It is assumed that all factual data furnished by the client, property owner, owner's representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CB Commercial has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, Assessor's Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CB Commercial reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CB Commercial of any questions or errors. 6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CB Commercial will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject. 7. CB Commercial assumes no private deed restrictions, limiting the use of the subject property in any way. 8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposit or subsurface rights of value involved in this appraisal, whether they be gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred. 9. CB Commercial is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject. 10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market. 11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CB Commercial does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CB Commercial. 12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CB Commercial to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form. 13. Also, unless otherwise noted in the body of this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated. 14. This study may not be duplicated in whole or in part without the specific written consent of CB Commercial nor may this report or copies hereof be transmitted to third parties without said consent, which consent CB - -------------------------------------------------------------------------------- 71 - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- Commercial reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or its contents shall not be published, in whole or in part, in any public document without the express written consent of CB Commercial which consent CB Commercial reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a "sale" or "offer for sale" of any "security", as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CB Commercial shall have no accountability or responsibility to any such third party. 15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report. 16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used. 17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area of the subject and comparable properties has been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report. 18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CB Commercial unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CB Commercial assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance. 19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or client's designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CB Commercial assumes responsibility for any situation arising out of the Client's failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired. 20. CB Commercial assumes that the subject property analyzed herein will be under prudent and competent management and ownership; neither inefficient or super-efficient. 21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the appraisal report. 22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist. 23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Notwithstanding any discussion of possible readily achievable barrier removal construction items in this report, CB Commercial has not made a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect on the value estimated herein. Since CB Commercial has no specific information relating to this issue, nor is CB Commercial qualified to make - -------------------------------------------------------------------------------- 72 - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject property. - -------------------------------------------------------------------------------- 73 ADDENDA - -------------------------------------------------------------------------------- ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- Addendum A GLOSSARY OF TERMS assessed value Assessed value applies in ad valorem taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to market value, but it is usually calculated in relation to a market value base. + cash equivalency The procedure in which the sale prices of comparable properties sold with atypical financing are adjusted to reflect typical market terms. contract, coupon, face, or nominal rent The nominal rent payment specified in the lease contract. It does not reflect any offsets for free rent, unusual tenant improvement conditions, or other factors that may modify the effective rent payment. coupon rent See Contract, Coupon, Face, or Nominal Rent effective rent 1) The rental rate net of financial concessions such as periods of no rent during a lease term; may be calculated on a discounted basis, reflecting the time value of money, or on a simple, straight-line basis. 2) The economic rent paid by the lessee when normalized to account for financial concessions, such as escalation clauses, and other factors. Contract, or normal, rents must be converted to effective rents to form a consistent basis of comparison between comparables. face rent See Contract, Coupon, Face, or Nominal Rent fee simple estate Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. floor area ratio (FAR) The relationship between the above-ground floor area of a building, as described by the building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area; also called building-to-land ratio. full service lease A lease in which rent covers all operating expenses. Typically, full service leases are combined with an expense stop, the expense level covered by the contract lease payment. Increases in expenses above the expense stop level are passed through to the tenant and are known as expense pass-throughs. going concern value Going concern value is the value of a proven property operation. It includes the incremental value associated with the business concern, which is distinct from the value of the real estate only. Going concern value includes an intangible enhancement of the value of an operating business enterprise which is produced by the assemblage of the land, building, labor, equipment, and marketing operation. This process creates an economically viable business that is expected to continue. Going concern value refers to the total value of a property, including both real property and intangible personal property attributed to the business value. + gross building area (GBA) The sum of all areas at each floor as measured to the exterior walls. insurable value Insurable Value is based on the replacement and/or reproduction cost of physical items that are subject to loss from hazards. Insurable value is that portion of the value of an asset or asset group that is acknowledged or recognized under the provisions of an applicable loss insurance policy. This value is often controlled by state law and varies from state to state. + investment value Investment value is the value of an investment to a particular investor based on his or her investment requirements. In contrast to market value, investment value is value to an individual, not value in the marketplace. Investment value reflects the subjective relationship between a particular investor and a given investment. When measured in dollars, investment value is the price an investor would pay for an investment in light of its perceived capacity to satisfy his or her desires, needs, or investment goals. To estimate investment value, specific investment criteria must be known. Criteria to evaluate a real estate investment are not necessarily set down by the individual investor; they may be established by an - -------------------------------------------------------------------------------- ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- expert on real estate and its value, that is, an appraiser. + leased fee See leased fee estate leased fee estate An ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.++ leasehold See leasehold estate leasehold estate The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.++ load factor The amount added to usable area to calculate the rentable area. It is also referred to as a "rentable add-on factor" which, according to BOMA, "is computed by dividing the difference between the usable square footage and rentable square footage by the amount of the usable area. Convert the figure into a percentage by multiplying by 100. market value "as if complete" on the appraisal date Market value as if complete on the appraisal date is an estimate of the market value of a property with all construction, conversion, or rehabilitation hypothetically completed, or under other specified hypothetical conditions as of the date of the appraisal. With regard to properties wherein anticipated market conditions indicate that stabilized occupancy is not likely as of the date of completion, this estimate of value should reflect the market value of the property as if complete and prepared for occupancy by tenants. market value "as is" on the appraisal date Market value "as is" on the appraisal date is an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date of appraisal. market value Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1) A reasonable time is allowed for exposure in the open market; 2) Both parties are well informed or well advised, and acting in what they consider their own best interests; 3) Buyer and seller are typically motivated; 4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. marketing period The time it takes an interest in real property to sell on the market subsequent to the date of an appraisal. net lease Lease in which all or some of the operating expenses are paid directly by the tenant. The landlord never takes possession of the expense payment. In a Triple Net Lease all operating expenses are the responsibility of the tenant, including property taxes, insurance, interior maintenance, and other miscellaneous expenses. However, management fees and exterior maintenance are often the responsibility of the lessor in a triple net lease. A modified net lease is one in which some expenses are paid separately by the tenant and some are included in the rent. net rentable area (NRA) 1) The area on which rent is computed. 2) The Rentable Area of a floor shall be computed by measuring to the inside finished surface of the dominant portion of the permanent outer building walls, excluding any major vertical penetrations of the floor. No deductions shall be made for columns and projections necessary to the building. Include space such as mechanical room, janitorial room, restrooms, and lobby of the floor. * nominal rent See Contract, Coupon, Face, or Nominal Rent prospective future value "upon completion of construction" Prospective future value "upon completion of construction" is the prospective value of a property on the future date that construction is completed, based upon market conditions forecast to exist, as of that completion date. The value - -------------------------------------------------------------------------------- ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- estimate at this stage is stated in current dollars unless otherwise indicated. prospective future value "upon reaching stabilized occupancy" Prospective future value "upon reaching stabilized occupancy" is the prospective value of a property at a future point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. The value estimate at this stage is stated in current dollars unless otherwise indicated. reasonable exposure time The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market. rent see full service lease net lease contract, coupon, face, or nominal rent effective rent shell space Space which has not had any interior finishing installed, including even basic improvements such as ceilings and interior walls, as well as partitions, floor coverings, wall coverings, etc.. Usable Area 1) The area actually used by individual tenants. 2) The Usable Area of an office is computed by measuring to the finished surface of the office side of corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished surface of the dominant portion of the permanent outer building walls. Excludes areas such as mechanical rooms, janitorial room, restrooms, lobby, and any major vertical penetrations of a multi-tenant floor. * use value Use value is a concept based on the productivity of an economic good. Use value is the value a specific property has for a specific use. Use value focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to the property's highest and best use or the monetary amount that might be realized upon its sale. + value appraised During the real estate development process, a property typically progresses from a state of unimproved land to construction of improvements to stabilized occupancy. In general, the market value associated with the property increases during these stages of development. After reaching stabilized occupancy, ongoing forces affect the property during its life, including a physical wear and tear, changing market conditions, etc. These factors continually influence the property's market value at any given point in time. See also market value "as is" on the appraisal date market value "as if complete" on the appraisal date prospective future value "upon completion of construction" prospective future value "upon reaching stabilized occupancy" - ---------- + The Appraisal of Real Estate, Tenth Edition, Appraisal Institute, 1992. * The Dictionary of Real Estate Appraisal, Third Edition, 1993. **. The office of the Comptroller of the Currency, 12 CFR Part 34, Subpart C, [club]34.42(f), August 24, 1990. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. * 1990 BOMA Experience Exchange Report, Income/Expense Analysis for Office Buildings (Building Owners and Managers Association, 1990) ** Statement on Appraisal Standard No. 6, Appraisal Standards Board of The Appraisal Foundation, September 19, 1992. ================================================================================ ADDENDUM B ADDITIONAL SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- Addendum B ADDITIONAL SUBJECT PHOTOGRAPHS ================================================================================ ADDENDUM B ADDITIONAL SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- VIEW EAST AT MARTINTOWN ROAD ACCESS POINT - 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-------------------------------------------------------------------------------- ================================================================================ ADDENDUM B ADDITIONAL SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- VIEW SOUTH ALONG MARTINTOWN ROAD FROM SUBJECT PROPERTY - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- VIEW NORTH ALONG MARTINTOWN ROAD FROM SUBJECT PROPERTY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B ADDITIONAL SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF SUBJECT PROPERTY - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF SUBJECT PROPERTY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B ADDITIONAL SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF FAST FOOD RESTAURANT FROM MARTINTOWN ROAD - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF FAST FOOD RESTAURANT FROM SUBJECT PARKING LOT - 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-------------------------------------------------------------------------------- Addendum C LEGAL DESCRIPTION - -------------------------------------------------------------------------------- Martintown Plaza North Augusta, SC VOL [ILLEGIBLE] PAGE 239 EXHIBIT A NORTH AUGUSTA GROUND LEASE DESCRIPTION ALL that parcel or tract of land, situate lying and being in North Augusta Attendance Area 6 Aiken County, South Carolina, bounded and measuring as follows: Beginning at the Northwestern corner of Lot 271, Block G, Green Acres Subdivision and running thence South Five (5(degree)) degrees, Eighteen minutes and Twenty-four seconds (18'24") along the Western line of Green Acres Subdivision Seven Hundred Eighty Four (784) feet to a point; thence South Fifty One (51(degree)) degrees, Two minutes Fifty-six seconds (2'56") along the line of the lands of Julia Mealing, Five Hundred Ninty Seven and Forty Five Hundredths (597.45) feet to an iron. Thence South Fifty-one (51(degree)) degrees, Fifteen minutes and Twenty-five seconds (15'25") West along the line of Bankers Trust of North Augusta to a point in the eastern line of the right-of-way of U.S. Highway 125 (South Carolina Highway No. 121); thence Northerly along the right-of-way of U.S. Highway 125 for a curved distance of One Thousand, One Hundred Forty and Thirty-three hundredths (1148'33") with a curved Delta of Forty-seven degrees, Thirty-one minutes Thirty-six seconds (47(degree)31'36") to a point; thence North Eleven degrees Three minutes east along the right-of-way of U.S. Highway 125 for a distance of Two hundred, Thirty-three and Eighty-eight Hundredths feet (233.88") to an iron; thence South Eighty Six (86") degrees, Eighteen Minutes Four seconds (18'4") east along the line of Julia Mealing, Seven Hundred Twenty-five and Nine Hundredths (725.09) feet to the point of beginning, all of which will be more fully shown by reference to a Plot made by P.M. [ILLEGIBLE], dated February 7, 1985. This being a portion of the real estate heretofore devised to Julia F. Mealing in Item IV of the Last Will and Testament of Kate G. Mealing, deceased May 15, 1936, enrolled in the Will Book M from Pages 603 through Page 605 and in the Administration of her estate in Apartment No. 495, Package 15 in the office of the Judge of Probate of Aiken County. [ILLEGIBLE] 7-8-85 at 14:30 hrs ------------------- RETURNED TO: /s/ Franklin O. Beattie, /s/ [ILLEGIBLE] atty ------------------- [ILLEGIBLE] ================================================================================ ADDENDUM D RENT ROLL - -------------------------------------------------------------------------------- Addendum D RENT ROLL - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Detail Rent Roll Page: 58 MARTINTOWN PLAZA Date: 05/14/96 Report Date: 05/14/96 Time: 14:17:06
- ------------------------------------------------------------------------------------------------------------------------------------ -- Rent Dates -- Suite Commence Expire Square Monthly Annual -- Cost Recovery -- Expense --- Other Income -- No. Tenant Name Start Footage Base Rent Rate/SF Description Monthly Stop Description Monthly - ------------------------------------------------------------------------------------------------------------------------------------ 00060 BELK STORE SERVICES 04/28/93 01/31/04 44,000 12,833.33 3.50 MAINTENANC 916.67 07/28/93 00110 LUCKY LYNN STORE 05/15/93 05/14/98 3,000 2,250.00 9.00 MAINTENANC 187.50 05/15/93 REAL ESTAT 37.50 ------ 225.00 00120 REVCO DRUGS STORE #590 07/03/91 07/31/06 8,450 4,753.12 6.75 MAINTENANC 246.46 07/03/91 00130 BRUNO'S INC. 12/01/90 11/30/10 47,982 16,000.00 4.00 11/28/90 00140 RICHEY STREET INVESTMENT 09/30/91 09/30/96 1,400 1,333.33 11.43 MAINTENANC 68.66 09/30/91 REAL ESTAT 77.00 ------ 145.66 00050 CHRIS LOGAN BEAUTY SCHOOL 04/20/88 12/31/96 2,500 1,250.00 6.00 MAINTENANC 104.17 05/06/88 REAL ESTAT 93.89 ------ 198.06 00010 ROSE NAILS 05/01/96 04/30/99 2,000 1,000.00 6.00 MAINTENANC 83.33 05/01/96 REAL ESTAT 110.00 ------ 193.33 00080 LADIES WORKOUT EXPRESS 05/10/95 05/31/00 10,125 5,062.50 6.00 MAINTENANC 486.99 05/10/95 REAL ESTAT 381.11 ------ 868.10 00100 HORNE'S SALES RENTALS SERVIC 12/05/94 12/31/96 2,425 1,414.58 7.00 MAINTENANC 122.44 12/05/94 REAL ESTAT 91.28 -------- 213.72 - ------------------------------------------------------------------------------------------------------------------------------------ Total Building Occupied Sqft: 91% 121,882 45,896.86 0.00 3,007.00 Available Sqft: 9% 11,996 Total Sqft: 133,878 - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------- Suite --- Future Rent Increases -- No. Tenant Name Date Monthly Amt. Per Sf - ------------------------------------------------------------------- 00060 BELK STORE SERVICES 00110 LUCKY LYNN STORE 00120 REVCO DRUGS STORE #590 00130 BRUNO'S INC. 00140 RICHEY STREET INVESTMENT 00050 CHRIS LOGAN BEAUTY SCHOOL 00010 ROSE NAILS 00080 LADIES WORKOUT EXPRESS 00100 HORNE'S SALES RENTALS SERVIC 1,515.63 7.50 1,566.15 7.75 1,616.67 8.00 ================================================================================ ADDENDUM E HISTORICAL OPERATING STATEMENTS - -------------------------------------------------------------------------------- Addendum E HISTORICAL OPERATING STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Report Date: 10/03/95 1996 BUDGET BY QUARTER Company: 0l MARK CENTERS TRUST Selection Id: 330536 MARTINTOWN PLAZA Budget Type: Original Budgt
- ----------------------------------------------------------------------------------------------- Report: BUDGQTR 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 5th Quarter - ----------------------------------------------------------------------------------------------- Report: FFOBUDS INCOME RENT 134,691 134,691 134,691 134,691 538,764 % RENT 3.900 3,900 3,900 2,600 14,300 CAM 9,576 9,576 9,576 9,576 38,304 R/E TAX 7,386 7,386 7,386 7,386 29,544 UTILITY 0 0 0 0 0 INSURANCE 258 258 258 258 1,032 GROUND RENT 0 0 0 0 0 OTHER 45 45 45 45 180 ------- ------- ------- ------- ------- TOTAL INCOME 155,856 155,856 155,856 154.556 622,124 EXPENSES LANDSCAPING 3,600 4,000 4,000 3,600 15,200 CLEANING 1,680 1,680 1,680 1,680 6,720 UTILITIES 4,925 4,575 5,275 4,425 19,200 SECURITY 0 0 0 0 0 MAINT & REPAIR 600 7,500 1,800 4,100 14,000 REAL ESTATE TAXES 10,101 10,101 10,101 10,101 40,404 INSURANCE 2,775 2,775 2,775 2,775 11,100 OTHER FINANCING FEES 0 0 0 0 0 PROVISION FOR BAD DEBT 1,752 1,752 1,752 1,752 7,008 SALARIES & WAGES 0 0 0 0 0 GROUND RENT 6,000 6,000 6,000 6,000 24,000 PROFESSIONAL FEES 0 0 0 0 0 OTHER 3,064 2,850 2,850 2,850 11,614 ------- ------- ------- ------- ------- TOTAL EXPENSES 34,497 41,233 36,233 37,283 149,246 ------- ------- ------- ------- ------- EBIDT 121,359 114,623 119,623 117,273 472,878 INTEREST 0 0 0 0 0 FFO 121,359 114,623 119,623 117,273 472,878 ======= ======= ======= ======= ======= FF0 PER SHARE 0.01 0.01 0.01 0.01 0.05
- -------------------------------------------------------------------------------- Report Date: 05/09/95 NOI - 1ST QUARTER 1996 Page: 10 Company: 0l MARK CENTERS TRUST Date: 05/09/96 Selection Id: 330536 MARTINTOWN PLAZA Time: 12:31:08 Report Name : INCSTYTD - -------------------------------------------------------------------------------- 3 Months Mar 1996 -------- - -------------------------------------------------------------------------------- Report: NOITEMP INCOME RENT 134,691 % RENT 3,316 CAM 11,581 R/E TAX 8,322 UTILITY 0 INSURANCE 111 GROUND RENT 0 OTHER 7,808 ------- TOTAL INCOME 165,829 EXPENSES LANDSCAPING 3,700 CLEANING 1,680 UTILITIES 4,753 SECURITY 0 MAINT & REPAIR 3,761 REAL ESTATE TAXES 15,118 INSURANCE 2,043 PROVISION FOR BAD DEBT 0 SALARIES & WAGES 1,749 GROUND RENT 6,000 PROFESSIONAL FEES 648 OTHER 2,266 ------- TOTAL EXPENSES 41,717 ------- NET OPERATING INCOME 124,111 ======= - -------------------------------------------------------------------------------- Report Date: 05/09/95 MARK CENTERS TRUST Page: 1 Property: MARTINTOWN PLAZA NOI - 1995 AND 1994 Date: 05/09/96 Report Name : TEMPJWG - -------------------------------------------------------------------------------- 1995 ACTUAL 1994 ACTUAL - -------------------------------------------------------------------------------- Report: NOITEMP INCOME RENT 506,032 533,274 % RENT 9,259 0 CAM 39,031 31,242 R/E TAX 40,460 38,704 UTILITY 0 0 INSURANCE 396 980 GROUND RENT 0 0 OTHER 3,751 676 ------- ------- TOTAL INCOME 598,929 604,876 EXPENSES LANDSCAPING 13,200 14,374 CLEANING 6,660 7,120 UTILITIES 19,579 18,257 SECURITY 0 0 MAINT & REPAIR 10,897 1,505 REAL ESTATE TAXES 49,833 70,307 INSURANCE 10,920 14,542 PROVISION FOR BAD DEBT 500 0 SALARIES & WAGES 349 1,556 GROUND RENT 24,000 24,000 PROFESSIONAL FEES 1,120 6,392 OTHER 8,405 7,991 ------- ------- TOTAL EXPENSES 145,464 166,044 ------- ------- NET OPERATING INCOME 453,465 438,832 ======= ======= Mark Centers Trust Property Statement of Net Operating Income - 1993 MARTINTOWN PLAZA INCOME RENT $420,461 % RENT 36,924 CAM 25,354 R/E TAX 98,911 UTILITY 0 INSURANCE 542 GROUND RENT 0 OTHER 479 -------- TOTAL INCOME 582,670 OPERATING EXPENSES LANDSCAPING 14,501 CLEANING 6,310 UTILITIES 19,165 SECURITY 0 MAINT. & REPAIRS 14,073 R/E TAXES 87,233 INSURANCE 10,202 PROVISION FOR BAD DEBT 31 SALARIES & WAGE 0 GROUND RENT 20,000 PROFESSIONAL FEES 4,792 -------- TOTAL EXPENSES 176,306 -------- NET OPERATING INCOME $406,364 ======== ================================================================================ ADDENDUM F COMPARABLE IMPROVED SALES - -------------------------------------------------------------------------------- Addendum F COMPARABLE IMPROVED SALES - -------------------------------------------------------------------------------- RETAIL SALE 1 ================================================================================ Location Data Property Name: Publix @ Fury's Ferry Location: East Side Of Fury's Ferry Road City: Martinez County: Columbia State/Zip: Georgia Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: N/A Excess Land: None Gross Leasable Area: Anchors: Publix 50,000 SF Local Tenant GLA: 17,455 SF Anchor Tenant GLA: 50,000 SF Total GLA: 67,455 SF GLA Purchased: 67,455 SF Year Built: 1995 Parking: Adequate Condition: Excellent Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 12195 Marketing Time: N/A Grantor: PDG Centers Partners, LP Grantee: Southeast U.S. Retail, LP Document No.: N/A Sale Price: $6,025,000 Financing: Cash to Seller Cash Equivalent Price: $6,025,000 Required Capital Cost: $0 Adjusted Sales Price: $6,025,000 Verification: Buyer's Advisor Financial Data Assumptions & Forecast: Advisor Occupancy at Sale: 93% Existing or Pro Forma Income: Pro Forma TOTAL P.S.F. -------- ------ Potential Gross Income: $765,000 $11.34 Vacancy and Credit Loss: $53,550 $0.79 Effective Gross Income: $711,450 $10.55 Expenses: $121,419 $1.80 Net Operating Income: $590,031 $8.75 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 1 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap and DCF Overall Capitalization Rate (OAR): 9.79 % Projected IRR: NIA Effective Gross Multiplier (EGIM): 8.47 Operating Expense Ratio (OER): 17.07 % Price Per Square Foot: $89.32 Comments Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located in the fastest growing residential suburb in the Augusta area. The sale price of $6,225,000 as recorded was adjusted for the value ($200,000) of a single outparcel included in the sale. Photograph [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 2 ================================================================================ Location Data Property Name: Eastgate Shopping Center Location: Eastgate Drive At Whiskey Road City: Aiken County: Aiken State/Zip: South Carolina Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 8.79 Acres Excess Land: None Gross Leasable Area: Anchors: Publix 56,000 SF Local Tenant GLA: 19,716 SF Anchor Tenant GLA: 56,000 SF Total GLA: 75,716 SF GLA Purchased: 75,716 SF Year Built: 1995 Parking: Adequate Condition: Excellent Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 9,95 Marketing Time: 3 months Grantor: PDG Aiken Partners, LP Grantee: Southeast U.S. Retail, LP Document No.: N/A Sale Price: $6,675,000 Financing: Cash to Seller Cash Equivalent Price: $6,675,000 Required Capital Cost: $0 Adjusted Sales Price: $6,675,000 Verification: Buyer's Advisor Financial Data Assumptions & Forecast: Advisor Occupancy at Sale: 95% Existing or Pro Forma Income: Pro Forma TOTAL P.S.F. -------- ------ Potential Gross Income: $782,704 $10.34 Vacancy and Credit Loss: N/A N/A Effective Gross Income: $782,704 $10.34 Expenses: $124,808 $1.65 Net Operating Income: $657,896 $8.69 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 2 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap and DCF Overall Capitalization Rate (OAR): 9.86 % Projected IRR: N/A Effective Gross Multiplier (EGIM): 8.53 Operating Expense Ratio (OER): 15.95% Price Per Square Foot: $88.16 Comments Part of a portfolio of Publix anchored shopping centers being purchased in the Southeast. This center is located adjacent to the Aiken Mall, considered to be the premier retail area in Aiken. The center has been successful in attracting small shop tenants in the $12 to $14 per square foot range, significantly higher than rents at otherwise similar neighborhood grocery-anchored centers. Photograph [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 3 ================================================================================ Location Data Property Name: Barnwell Plaza Location: Dunbarton Boulevard & Ellington Street City: Barnwell County: Barnwell State/Zip: South Carolina Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 13.00 Acres Excess Land: None Gross Leasable Area: Anchors: Wal-Mart 34,875 SF Food Lion 21,000 SF Revco 8,450 SF Local Tenant GLA: 6,400 SF Anchor Tenant GLA: 64,325 SF Total GLA: 70,725 SF GLA Purchased: 70,725 SF Year Built: 1985 Parking: Surface Condition: Good Exterior Walls: Brick Veneer Sale Data Transaction Type: Sale Date of Transaction: 01/95 Marketing Time: 9 months Grantor 1994-NI South Carolina Associates, LP Grantee: Tri-Centers, LP Document No.: N/A Sale Price: $2,860,000 Financing: Cash to Seller Cash Equivalent Price: $2,860,000 Required Capital Cost: $0 Adjusted Sales Price: $2,860,000 Verification: Jude Peck; Edens & Avant, Inc. Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100% Existing or Pro Forma Income: Pro Forma TOTAL P.S.F. -------- ------ Potential Gross Income: $389,720 $5.51 Vacancy and Credit Loss: $19,486 $0.28 Effective Gross Income: $370,234 $5.23 Expenses: $69,461 $0.98 Net Operating Income: $300,773 $4.25 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 3 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap and DCF Overall Capitalization Rate (OAR): 10.52 % Projected IRR: 13.50 % Effective Gross Multiplier (EGIM): 7.72 Operating Expense Ratio (OER): 18.76 % Price Per Square Foot: $40.44 Comments This is a neighborhood shopping center that was in good condition, but of average quality. Property only has three local shop tenant spaces. The remaining space is leased to good quality national tenants. The property was 100% occupied at the time of sale; however, the buyer used a 5% vacancy and credit loss in forecasting the cash flow and stabilized pro forma. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 4 ================================================================================ Location Data Property Name: Largo Plaza Location: Abercom Street Extension @ Largo Drive City: Savannah County: Chatham State/Zip: Georgia Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 9.50 Acres Excess Land: N/A Gross Leasable Area: Anchors: Media Play 48,600 SF Piggly Wiggly 22,955 SF Revco 10,125 SF Local Tenant GLA: 6,800 SF Anchor Tenant GLA: 81,680 SF Total GLA: 88,480 SF GLA Purchased: 88,480 SF Year Built: 1974 Parking: Adequate; Surface Condition: Average Exterior Walls: Concrete Sale Data Transaction Type: Sale Date of Transaction: 09/95 Marketing Time: 14 months Grantor: McGuire Investment Group #17 LP Grantee: Kimco 832, Inc. Document No.: N/A Sale Price: $3,252,000 Financing: Cash to Seller Cash Equivalent Price: $3,252,000 Required Capital Cost: $0 Adjusted Sales Price: $3,252,000 Verification: Rob Carter; Lat Purser & Assc. Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100% Existing or Pro Forma Income: Existing TOTAL P.S.F. -------- ------ Potential Gross Income: $512,534 $5.79 Vacancy and Credit Loss: $15,376 $0.17 Effective Gross Income: $497,158 $5.62 Expenses: $150,884 $1.71 Net Operating Income: $346,274 $3.91 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 4 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap Overall Capitalization Rate (OAR): 10.65 % Projected IRR: 14.00 % Effective Gross Multiplier (EGIM): 6.54 Operating Expense Ratio (OER): 30.35 % Price Per Square Foot: $36.75 Comments Average quality neighborhood shopping center anchored by Media Play, Piggly Wiggly and Revco. The center was renovated when Media Play was added in 1995 to the center. Media play opened in late 1995 in the space originally occupied by Wal-Mart. Piggly Wiggly and Revco reporting strong sales volumes. There are only four shop tenant spaces in the center, and the buyer intends to add up to 15,000 square feet of local shop space. Photograph [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 5 ================================================================================ Location Data Property Name: Market Place Location: US Hwy 74 City: Shelby County: Cleveland State/Zip: North Carolina Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Land Area: N/A Excess Land: 0 Gross Leasable Area: Anchors: Wal-Mart 101,500 SF Bi-Lo 32,000 SF Goody's 25,200 SF Revco 8,470 SF Local Tenant GLA: 30,617 SF Anchor Tenant GLA: 167,170 SF Total GLA: 197,787 SF GLA Purchased: 197,787 SF Year Built: 1987 Parking: Adequate Condition: Good Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 5/96 Marketing Time: 12 months Grantor: ING & Bosch Properties Grantee: Mid-America Capital Document No.: N/A Sale Price: $8,350,000 Financing: Cash to Seller Cash Equivalent Price: $8,350,000 Required Capital Cost: $0 Adjusted Sales Price: $8,350,000 Verification: Withheld By Request Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100% Existing or Pro Forma Income: Pro Forma TOTAL P.S.F. -------- ------ Potential Gross Income: $1,103,124 $5.58 Vacancy and Credit Loss: $33,094 $0.17 Effective Gross income: $1,070,030 $5.41 Expenses: $220,000 $1.11 Net Operating Income: $850,030 $4.30 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 5 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap Overall Capitalization Rate (OAR): 10.18 % Projected IRR: N/A Effective Gross Multiplier (EGIM): 7.80 Operating Expense Ratio (OER): 20.56 % Price Per Square Foot: $42.22 Comments This property is located in a rural community and serves as the primary retail facility for a large trade area. The block building was completed in 1987 and renovated in 1994. Overall, the property has good overall market appeal. Occupancy was 100% at the time of sale, but the Grantee utilized a 6% overall vacancy and collection loss rate when underwriting the deal. Anchor spaces comprise nearly 85% of the total center space. The center reportedly included one vacant out parcel, however, no information regard the Grantee's percieved value of the out parcel was available. - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ ADDENDUM G RENT COMPARABLES - -------------------------------------------------------------------------------- Addendum G RENT COMPARABLES - -------------------------------------------------------------------------------- RETAIL RENT COMPARABLE 1 ================================================================================ Location Data Property Name: North Augusta Plaza Location: Martintown At Knox City: North Augusta County: Aiken State/Zip: South Carolina Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 255,002 SF Year Built: 1993 Exterior Walls: Masonry Condition: Good Anchor Tenant: Kmart, Publix, Hamrick's Parking: 4.1 spaces per 1,000 SF Lease Data Occupancy: Local: 82.4% Overall: 95.1% Typical Size: 1,500 SF Term: 3-5 Base Rent Per Square Foot: $9.50 - $12.00 Rent Escalations: CAM + Steps Basis: Net Expense Pass-Through: CAM + RE Taxes Free Rent (months): None Tenant Improvement: $0.50 - $1.00/SF Leasing Agent: Davis Commercial Properties Phone No.: (706)860-3986 Survey Date: 5/23/96 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 1 ================================================================================ Comments Good quality center with good access and average visibility. The center was originally constructed in 1961, but was subsequently renovated and expanded in 1993 and 1994. Has cross access with the adjacent Cross Roads shopping center anchored by Kroger. Photograph [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 2 ================================================================================ Location Data Property Name: Cross Roads Market Location: Martintown At Knox City: North Augusta County: Aiken State/Zip: South Carolina Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 73,100 SF Year Built: 1985 Exterior Walls: Masonry Condition: Good Anchor Tenant: Kroger Parking: Adequate Lease Data Occupancy: Local: 91.0% Overall: 96.3% Typical Size: 1,200 SF Term: 3-5 Base Rent Per Square Foot: $7.00 - $8.00 Rent Escalations: CAM + Steps Basis: Net Expense Pass-Through: CAM + RE Taxes Free Rent (months): None Tenant Improvement: $0.50 - $1 .00/SF Leasing Agent: Melba Smith Phone No.: (404)873-6900 Survey Date: 5/23/96 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 2 ================================================================================ Comments Good quality center with average access. Has cross access with the recently renovated North Augusta Plaza shopping center anchored by Publix and K-Mart. Photograph [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 3 ================================================================================ Location Data Property Name: North Hills Shopping Center Location: 401 Martintown Road City: North Augusta County: Aiken State/Zip: South Carolina Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 83,752 SF Year Built: 1979 Exterior Wails: Brick Veneer Condition: Average Anchor Tenant: Winn-Dixie, Eckerd's Parking: 5.2 spaces per 1,000 SF Lease Data Occupancy: Local: 92.4% Overall: 96.4% Typical Size: 1,500 SF Term: 5 years Base Rent Per Square Foot: $6.50 to $8.00 Rent Escalations: CAM/Steps/CPI Basis: Net Expense Pass-Through: CAM/Ins/Taxes Free Rent (months): Negotiable Tenant Improvement: Negotiable ($0 on rnwl) Leasing Agent: Krouse Methany Co. Realtors Phone No.: (706)736-6653 Survey Date: 5/23/96 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 3 ================================================================================ Comments This center is well located and has average access. However, it will need renovation to remain competitive. Photograph [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 4 ================================================================================ Location Data Property Name: Edgewood Square Location: Georgia At Edgewood City: North Augusta County: Aiken State/Zip: South Carolina Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 217,332 SF Year Built: 1989 Exterior Walls: Masonry Condition: Good Anchor Tenant: Bi-Lo Foods, Goody's, Wal Mart Parking: 5.0 spaces per 1,000 SF Lease Data Occupancy: Local: 96.7% Overall: 99.5% Typical Size: 1,000 SF Term: 3-5 Base Rent Per Square Foot: $7.50 Rent Escalations: CAM + Steps Basis: Net Expense Pass-Through: CAM + RE Taxes Free Rent (months): None Tenant Improvement: $0.50 - $1 .00/SF Leasing Agent: Ryndie Brusco Phone No.: (803)649-3975 Survey Date: 5/23/96 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 4 ================================================================================ Comments L shaped center with 18 stores which represents the most recently constructed shopping center in the North Augusta area. Photograph [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ ADDENDUM H PRO-JECT REPORTS - -------------------------------------------------------------------------------- Addendum H PRO-JECT REPORTS - -------------------------------------------------------------------------------- MARTINTOWN PLAZA SHOPPING CENTER PROJECT DESIGNATOR: MTPL RENT ROLL AS OF 6/1996 (FISCAL YEAR BASIS) TENANT/ LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES (000)/ RECOVERIES/ REVENUE/ SQUARE FEET PER SF PER SF PER SF PER SF PER SF - --------------------- ---------- -------- ------------ ----------- -------- # 1 - SUITE 103 FOODMAX BASE LEASE 12/90-11/10 191,929 0 0 39,650 231,578 47,982 SF 4.00 0.00 0.00 0.83 4.83 # 2 - SUITE 60 BELK'S BASE LEASE 8/93- 1/04 154,000 0 0 19,800 173,800 44,000 SF 3.50 0.00 0.00 0.45 3.95 # 3 - SUITE 120 REVCO DRUGS BASE LEASE 7/91- 7/06 57,038 0 0 6,208 63,246 8,450 SF 6.75 0.00 0.00 0.73 7.48 # 4 - SUITE 80 LADIES WORKOUT UP BASE LEASE 2/95-10/96 25,313 0 0 3,464 28,777 10,125 SF 2.50 0.00 0.00 0.34 2.84 # 7 - SUITE 140 LITTLE CESEARS BASE LEASE 10/91- 9/96 5,334 0 0 421 5,755 1,400 SF 3.81 0.00 0.00 0.30 4.11 # 8 - SUITE 10 ROSE NAILS BASE LEASE 5/96- 4/99 12,000 0 0 1,653 13,653 2,000 SF 6.00 0.00 0.00 0.83 6.83 # 9 - SUITE 110 LUCKY LYNN STORE BASE LEASE 3/93- 5/98 27,000 0 0 2,723 29,723 3,000 SF 9.00 0.00 0.00 0.91 9.91 # 10 - SUITE 50 LOGAN BEAUTY SCHOL BASE LEASE 5/88-12/96 8,750 0 0 1,316 10,066 2,500 SF 3.50 0.00 0.00 0.53 4.03 ------- ------- - ------ ------- ------- TOTALS 481,363 0 0 75,235 556,598 119,457 SF 4.03 0.00 0.00 0.63 4.66 ======= ======= = ====== ======= ======= MARTINTOWN PLAZA SHOPPING CENTER PROJECT DESIGNATOR: MTPL PROJECT ASSUMPTIONS REPORT INCLUDING ALL TENANTS BUILDING PROLOGUE LEASEHOLD ANALYSIS OF MARTINTOWN PLAZA SHOPPING CENTER BEGINNING 6/1996 FOR 13 YEARS ON A FISCAL YEAR BASIS AREA MEASURES GRSF 1996 VALUE - 136,378 THEREAFTER - CONSTANT OCSF 1996 VALUE - 120,083 1997 VALUE - 128,106 1998 VALUE - 128,023 1999 VALUE - 128,190 2000 VALUE - 129,773 2001 VALUE - 127,287 2002 VALUE - 124,448 2003 VALUE - 127,773 2004 VALUE - 128,440 2005 VALUE - 129,773 2006 VALUE - 122,548 2007 VALUE - 134,364 2008 VALUE - 127,856 THEREAFTER - CONSTANT GROWTH RATES RNTG 1996 VALUE - 0.00 1997 VALUE - 0.00 1998 VALUE - 3.00 THEREAFTER - CONSTANT EXPG 1996 VALUE - 3.00 1997 VALUE - 3.50 THEREAFTER - CONSTANT COMN 1996 VALUE - 4.00 THEREAFTER - CONSTANT PAGE 2 COMR 1996 VALUE - 2.00 THEREAFTER - CONSTANT COMS +40.0% OF COMN +60.0% OF COMR MARKET RATES RNTL 1996 VALUE - 6.00 THEREAFTER - GROWING AT GROWTH RATE RNTG TIAN 1996 VALUE - 1.00 THEREAFTER - GROWING AT GROWTH RATE EXPG TIAS +40.0% OF TIAN FRER 1996 VALUE - 2.00 THEREAFTER - CONSTANT RNTA 1996 VALUE - 4.00 THEREAFTER - GROWING AT GROWTH RATE RNTG MISCELLANEOUS INCOMES OTHER INCOME 1996 VALUE - 3,600 THEREAFTER - GROWING AT GROWTH RATE RNTG EXPENSES COMMON AREA MAINT , REFERRED TO AS CAME CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 55,000 1997 VALUE - 55,000 THEREAFTER - GROWING AT GROWTH RATE EXPG REAL ESTATE TAXES , REFERRED TO AS TAXE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 56,993 THEREAFTER - GROWING AT GROWTH RATE EXPG PAGE 3 INSURANCE , REFERRED TO AS INSE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 11,100 1997 VALUE - 11,100 THEREAFTER - GROWING AT GROWTH RATE EXPO NON-REIMB OPERATNG, REFERRED TO AS \\\\ AN INFORMATIONAL EXPENSE CONSTANT MANAGEMENT FEE , REFERRED TO AS MGMT CHARGED AGAINST NET OPERATING INCOME 4.00% OF EFFECTIVE GROSS INCOME GENERAL & ADMIN , REFERRED TO AS G&AE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 11,600 1997 VALUE - 11,600 THEREAFTER - GROWING AT GROWTH RATE EXPG GROUND RENT , REFERRED TO AS GRRE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 24,000 THEREAFTER - CONSTANT RESERVES , REFERRED TO AS RESE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 20,450 1997 VALUE - 20,450 THEREAFTER - GROWING AT GROWN RATE EXPO CAM & TAX RECOVERY, REFERRED TO AS CAM+ AN INFORMATIONAL EXPENSE +100.0% OF CAME+100.0% OF TAXE VACANCY ALLOWANCE PERCENTAGE OF POTENTIAL GROSS INCOME FOR ALL TENANTS SUBJECT TO VACANCY 1996 VALUE - 1.00 THEREAFTER - CONSTANT MANAGEMENT FEE NONE PAGE 4 COMMISSION CALCULATIONS STANDARD METHOD #1 - 0.000% OF TOTAL RENT STANDARD METHOD #2 - 0.000% OF TOTAL RENT STANDARD METHOD #3 - 0.000% OF TOTAL RENT STANDARD METHOD #4 - 0.000% OF TOTAL RENT STANDARD METHOD #5 - 0.000% OF TOTAL RENT COMMISSION PAYOUTS STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT ALTERATION CALCULATION NONE ALTERATION PAYOUTS STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT COMMON AREA MAINTENANCE POOL NONE PAGE 5 CAPITAL EXPENDITURES NONE PRIMARY CLASSIFICATION CODES NONE SECONDARY CLASSIFICATION CODES NONE COST CENTERS 100 - CAM RECOVERY 200 - RE TAX RECOVERY 300 - INS RECOVERY SALES VOLUME PROFILE PERCENT OF RELATIVE MONTH ANNUAL SALES VOLUME - ----- ------------ -------- JAN 8.33% 1.00 FEB 6.33% 1.00 MAR 6.33% 1~00 APR 8.33% 1.00 MAY 8.33% 1.00 JUN 8.33% 1.00 JUL 8.33% 1.00 AUG 8.33% 1.00 SEP 8.33% 1.00 OCT 8.33% 1.00 NOV 8.33% 1.00 DEC 8.33% 1.00 ------ ----- TOTALS 100.00% 12.00 GLOBAL RECOVERIES TRIPLE NET REIMB , REFERRED TO AS NETR PAGE 6 ASSIGNED TO COST CENTER 100 - CAM RECOVERY RECOVERY OF AMOUNTS OR RATES GROWING AT A RATE YEAR 1 VALUE - MARKET RATE FRER YEAR 2 VALUE - MARKET RATE FRER YEAR 3 VALUE - MARKET RATE FRER YEAR 4 VALUE - MARKET RATE FRER YEAR 5 VALUE - MARKET RATE FRER THEREAFTER - GROWING AT GROWTH RATE EXPO CAP - MARKET RATE FREE INSURANCE , REFERRED TO AS INSR ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH CAM & TAX RECOVERY, REFERRED TO AS CANS ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAM+ PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH TENANT PROLOGUE MINIMUM RENTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR SALES VOLUMES AND BREAKPOINTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR RENEWAL RENTS ARE COMPOUNDED ANNUALLY RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET REFERENCE TENANTS NONE TENANTS THERE ARE A TOTAL OF 14 LEASEHOLD TENANT(S): PAGE 7 - -------------------------------------------------------------------------------- # 1 - SUITE 103 , FOODMAX BASE LEASE DATES: 12/1990 TO 11/2010 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 47,952 MARKET RATE: RNTA GROWTH RATE: RNTG NOT SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 4.00/SF/YR RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 2 - SUITE 60 , BELK'S BASE LEASE DATES: 8/1993 TO 1/2004 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 44,000 MARKET RATE: RNTA GROWTH RATE: RNTG NOT SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 3.50/SF/YR RECOVERIES: PAGE 8 REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 0.20/SF/YEAR AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 0.25/SF/YEAR AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 2/2004 TO 1/2009 SQUARE FOOTAGE: 44,000 MINIMUM RENT: INITIAL RENT - 3.50/SF/YR RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 0.20/SF/YEAR AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 0.15/SF/YEAR AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 2 DATES: 2/2009 TO 1/2014 SQUARE FOOTAGE: 44,000 PAGE 9 MINIMUM RENT: INITIAL RENT - 3.50/SF/YR RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 0.20/SF/YEAR AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMON AREA MAINT ASSIGNED To COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 0.25/SF/YEAR AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 3 - SUITE 120 , REVCO DRUGS BASE LEASE DATES: 7/1991 To 7/2006 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 8,450 MARKET RATE: RNTL GROWTH RATE: RNTG NOT SUBJECT To VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 6.75/SF/YR RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 0.25/SF/YEAR AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PAGE 10 PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 8/2006 TO 7/2011 SQUARE FOOTAGE: 8,450 MINIMUM RENT: INITIAL RENT - 8.00/SF/YR RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED on TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 0.25/SF/YEAR AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE PAGE 11 ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 4 - SUITE 80 , LADIES WORKOUT UP BASE LEASE DATES: 2/1995 TO 10/1996 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 10,125 MARKET RATE: RNTL GROWTH RATE: RNTG SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 6.00/SF/YR RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 5 - SUITE 80 , GOODYEAR TIRE BASE LEASE DATES: 12/1996 TO 11/2007 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 10,125 MARKET RATE: RNTL GROWTH RATE: RNTG SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: PAGE 12 INITIAL RENT - 11.00/SF/YR RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: GROWTH RATE COMM PAYOUT: CASHED OUT ALTERATIONS: 75,000 PAYOUT: CASHED OUT OPTION 1 DATES: 3/2007 To 2/2012 SQUARE FOOTAGE: 10,125 MINIMUM RENT: INITIAL RENT - 12.00/SF/YR RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE PAGE 13 ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 6 - SUITE VAC-2A , LADIES WORKOUT UP BASE LEASE DATES: 11/1996 TO 10/2001 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 7,816 SUBJECT To VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 4.00/SF/YR RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: 50,000 PAYOUT: CASHED OUT SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 4.00 8 NONE FRER YES YES 2 4.00 8 NONE FRER YES YES RENEWAL MINIMUM RENT: MARKET RATE RNTA MULTIPLIED BY 1.000 WITH /SF/YR STEPS OF RENEWAL RECOVERIES: PAGE 14 COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SPARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: GROWTH RATE COMS RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE TIAS RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 7 - SUITE 140 , LITTLE CESEARS BASE LEASE DATES: 10/1991 TO 9/1996 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 1,400 MARKET RATE: RNTL GROWTH RATE: RNTG SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 11.43/SF/YR RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH PAGE 15 INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 10/1996 TO 9/2001 SQUARE FOOTAGE: 1,400 MINIMUM RENT: INITIAL RENT - 12.50/SF/YR RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: PAGE 16 LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 4.00 8 NONE FRER YES YES 2 4.00 8 NONE FRER YES YES RENEWAL MINIMUM RENT: MARKET RATE RNTL MULTIPLIED BY 2.000 WITH /SF/YR STEPS OF RENEWAL RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SPARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: GROWTH RATE COMS RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE TIAS RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 8 - SUITE 10 ROSE NAILS BASE LEASE DATES: 5/1996 TO 4/1999 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 2,000 MARKET RATE: RNTL GROWTH RATE: RNTG SUBJECT TO VACANCY ALLOWANCE PAGE 17 MINIMUM RENT: INITIAL RENT - 6.00/SF/YR RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 4.00 8 NONE FRER YES YES 2 4.00 8 NONE FRER YES YES 3 4.00 8 NONE FRER YES YES RENEWAL MINIMUM RENT: MARKET RATE RNTA MULTIPLIED BY 1.000 WITH /SF/YR STEPS OF RENEWAL RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SPARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF PAGE 18 CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: GROWTH RATE COMS RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE TIAS RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 9 - SUITE 110 , LUCKY LYNN STORE BASE LEASE DATES: 3/1993 TO 5/1998 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 3,000 MARKET RATE: RNTL GROWTH RATE: RNTG SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 9.00/SF/YR RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE PAGE 19 SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 4.00 8 NONE FRER YES YES 2 4.00 8 NONE FRER YES YES 3 4.00 8 NONE FRER YES YES RENEWAL MINIMUM RENT: MARKET RATE RNTA MULTIPLIED BY 1.000 WITH /SF/YR STEPS OF RENEWAL RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: GROWTH RATE COMS RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE TIAS RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 10 - SUITE 50 , LOGAN BEAUTY SCHOL BASE LEASE DATES 5/1988 TO 12/1996 TYPE OF TENANT OFFICE SQUARE FOOTAGE 2,500 MARKET RATE: RNTL PAGE 20 GROWTH RATE: RNTG SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 6.00/SF/YR RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 4.00 8 NONE FRER YES YES 2 4.00 8 NONE FRER YES YES 3 4.00 8 NONE FRER YES YES RENEWAL MINIMUM RENT: MARKET RATE RNLA MULTIPLIED BY 1.000 WITH /SF/YR STEPS OF RENEWAL RECOVERIES: COMMON AREA MAINT PAGE 21 ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: GROWTH RATE COMS RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE TIAS RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 11 - SUITE 2B , STATIC VACANCY BASE LEASE DATES: 12/2019 TO 12/2020 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 2,180 MARKET RATE: RNTL GROWTH RATE: RNTG SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - MARKET RATE RNTL WITH FRER MONTHS FREE RENT RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH PAGE 22 REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: GROWTH RATE COMN PAYOUT: CASHED OUT ALTERATIONS: MARKET RATE TIAN PAYOUT: CASHED OUT SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- RENEWAL MINIMUM RENT: MARKET RATE RNTA MULTIPLIED BY 1.000 WITH /SF/YR STEPS OF RENEWAL RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: GROWTH RATE COMS RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE TIAS RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 12 - SUITE 7 , STATIC VACANCY BASE LEASE DATES: 12/2019 TO 12/2020 PAGE 23 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 2,425 MARKET RATE: RNTL GROWTH RATE: RNTG SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - MARKET RATE RNTL WITH FRER MONTHS FREE RENT RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: GROWTH RATE COMN PAYOUT: CASHED OUT ALTERATIONS: MARKET RATE TIAN PAYOUT: CASHED OUT SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- RENEWAL MINIMUM RENT: MARKET RATE RNTL MULTIPLIED BY 1.000 WITH /SF/YR STEPS OF RENEWAL RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP PAGE 24 AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: GROWTH RATE COMS RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE TIAS RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 13 - SUITE 8 , STATIC VACANCY BASE LEASE DATES: 12/2019 TO 11/2020 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 2,000 MARKET RATE: RNTL GROWTH RATE: RNTG SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - MARKET RATE RNTL RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: GROWTH RATE COMN PAYOUT: CASHED OUT ALTERATIONS: MARKET RATE TIAN PAYOUT: CASHED OUT PAGE 25 SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- RENEWAL MINIMUM RENT: MARKET RATE RNTL MULTIPLIED BY 1.000 WITH /SF/YR STEPS OF RENEWAL RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: GROWTH RATE COMS RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE TIAS RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 14 - SUITE A , TACO BELL BASE LEASE DATES: 9/1996 TO 8/2001 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 2,500 MARKET RATE: RNTL GROWTH RATE: RNTG SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 12.00/SF/YR RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PAGE 26 PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: GROWTH RATE COMN PAYOUT: CASHED OUT ALTERATIONS: NONE OPTION 1 DATES: 9/2001 TO 8/2006 SQUARE FOOTAGE: 2,500 MINIMUM RENT: INITIAL RENT - 13.00/SF/YR RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- PAGE 27 1 5.00 8 NONE FRER YES YES RENEWAL MINIMUM RENT: MARKET RATE RNTL MULTIPLIED BY 2.000 WITH /SF/YR STEPS OF RENEWAL RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SPARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: GROWTH RATE COMS RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE TIAS RENEWAL PAYOUT: CASHED OUT MARTINTOWN PLAZA SHOPPING CENTER PROJECT DESIGNATOR: MTPL EXPIRATION REPORT YEARS 1997 TO 2009, ALL TENANTS, INCLUDING OPTIONS, EXCLUDING RENEWALS, EXCLUDING BASE LEASES AND PRIOR OPTIONS, BASE RENTS INCLUDING CPI ADJUSTMENTS, INCLUDING PERCENTAGE RENTS TERM/ BASE TOTAL MARKET TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF - ------------------ --------- -------- ------- ------- ------- ------- # 4-SUITE 80 INITIAL LADIES WORKOUT EXP 10,125 10/1996 6.00 0.82 6.82 6.00 # 10-SUITE 50 INITIAL LOGAN BEAUTY SCHOL 2,500 12/1996 6.00 0.90 6.90 6.00 ------ ----- ----- ----- ----- 2 FY 97 EXPIRATIONS 12,625 6.00 0.84 6.84 6.00 # 9-SUITE 110 INITIAL LUCKY LYNN STORE 3,000 5/1998 9.00 0.94 9.94 6.00 ------ ----- ----- ----- ----- 1 FY 98 EXPIRATIONS 3,000 9.00 0.94 9.94 6.00 ------ ----- ----- ----- ----- 3 CUMULATIVE EXPS 15,625 6.58 0.86 7.43 6.00 # 8-SUITE 10 INITIAL ROSE NAILS 2,000 4/1999 6.00 0.89 6.89 6.18 ------ ----- ----- ----- ----- 1 FY 99 EXPIRATIONS 2,000 6.00 0.89 6.89 6.18 ------ ----- ----- ----- ----- 4 CUMULATIVE EXPS 17,625 6.51 0.86 7.37 6.02 # 7-SUITE 140 OPTION 1 LITTLE CESEARS 1,400 9/2001 12.50 1.05 13.55 6.56 # 6-SUITE VAC-2A INITIAL LADIES WORKOUT EXP 7,816 10/2001 4.00 0.96 4.96 4.37 ------ ----- ----- ----- ----- 2 FY102 EXPIRATIONS 9,216 5.29 0.97 6.26 4.70 ------ ----- ----- ----- ----- 6 CUMULATIVE EXPS 26,841 6.09 0.90 6.99 5.57 ================================================================================ ADDENDUM J QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF W. SCOTT BRADFORD Senior Real Estate Analyst CB Commercial Real Estate Group, Inc. - Appraisal 100 Galleria Parkway, Suite 550 Atlanta, Georgia 30339 (404) 951-7843 EDUCATIONAL B.S. in Management, Guilford College, Greensboro, Georgia M.S. in Real Estate, Georgia State University, Atlanta, Georgia Appraisal Institute: Courses lA-1, 1A-2, lB-A, lB-B, 2-1, and 2-3 CERTIFICATION Certified Real Estate Appraiser: State of Georgia Certificate Number 00 1784 PROFESSIONAL Appraisal Institute Candidate - Appraisal Institute EMPLOYMENT EXPERIENCE 1989-1993 John Booth & Associates Atlanta, Georgia 1993-Present CB Commercial Real Estate Group, Inc. Atlanta, Georgia Appraisal Southeast Region, Senior Real Estate Analyst Appraiser ================================================================================ ADDENDUM J QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF RONALD A. NEYHART, MAI First Vice President Regional Manager CB Commercial Real Estate Group, Inc., - Appraisal 100 Galleria Parkway, Suite 550 Atlanta, Georgia 30339 (770) 951-7874 EDUCATIONAL B.S. Finance and Management - Florida State University Appraisal Institute Course lA-1, 1A-2, lB-A, lB-B, 2-1,2-2, SPP LICENSE(S)/CERTIFICATION(S) Registered Real Estate Salesman - State of Florida State of Georgia Real Estate Appraisal Board - Certified Real Estate Appraiser - C000490 PROFESSIONAL Appraisal Institute Member, (MAI) Appraisal Institute, Certification No.8484 Other Affiliations Realtor - Associate of the Atlanta Board of Realtors, Inc. EMPLOYMENT EXPERIENCE 1979-1982 American Appraisal Associates, Staff Appraiser Atlanta, Georgia 1982-1983 Cigna Securities, Account Executive Atlanta, Georgia 1983-1984 Johnson, Lane, Space, Smith & Co., Account Executive Atlanta, Georgia 1984-Present First Vice President, Regional Manager Atlanta, Georgia CB Commercial Real Estate Group, Inc. Appraisal Southeast Region
- -------------------------------------------------------------------------------- [LETTERHEAD OF CB COMMERCIAL] May 8, 1996 Mr. Josh Kane Chief Financial Officer MARK CENTERS TRUST 660 Third Avenue Kingston, PA 18704 Re: 17 Shopping Centers Nationwide Dear Mr. Kane: At your request, we are pleased to submit the following proposal to appraise the above referenced properties. The purpose of this assignment is to estimate the market value of the leased fee interest. We understand the appraisal reports are to be used for mortgage underwriting purposes. We also understand that the reports will be used by Mark Centers Trust and Morgan Stanley. The properties are briefly described on attachment "A". Our complete valuation will be presented in a self contained (narrative) format and will contain a complete description of the property along with pertinent exhibits and photographs together with supporting factual data and analysis necessary to convey our opinion of value. We will value the property based upon the cost, income and market approaches to value, where applicable, correlating our findings into a final value conclusion. The report will be prepared in conformity with and will be subject to the requirements of the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. Each report will also conform to the Uniform Standards of Professional Appraisal Practice ("USPAP") and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") and the Morgan Stanley Capital Appraisal Standards described in Attachment "B". We assume that there are no major or significant items of deferred maintenance beyond normal wear and tear for properties of their age as of the date of the appraisal which would require the expertise of a professional contractor to estimate the cost of such repairs. If such repairs need to be considered in this appraisal, such estimates are to be provided by a qualified firm hired by you and at no cost to us. The total fee for the assignment is $68,000 ($4,000 per property) including all travel and related expenses which is due and payable upon delivery of the reports. If we are asked to cancel the assignment within two weeks of our engagement an upset fee equal to 50% will be due and payable. If cancellation occurs between two and three weeks, the upset fee will be equal to 75% and any time after three weeks the full fee will be due and payable. We will furnish you with three copies of our final report within four to five weeks of our authorization. Authorization occurs upon our receipt of an executed copy of this proposal and our delivery date is contingent upon the timely receipt of all necessary property information, financial statements and detailed lease information. If all requested data and information is not available as of the authorized date, we reserve the right to extend the delivery date by the amount of time it takes to receive the requested information. May 8, 1996 Mr. Kane Page 2 In order to complete this assignment in a timely manner, we will require the following specific information, if available: o Copy of Ground Lease, if Leasehold o Legal descriptions. o Current rent roll. o Copy of Leases or abstracts o Expense reimbursements on a tenant by tenant basis o Building area calculations and surveys. o Operating statements for the past three full years. o Current year expenses to date. o A copy of the current budget. o Copies of any toxic engineering reports dealing with underground tanks, PCB's, asbestos or chemical spills, if available. o A copy of the next fiscal year's budget, if available. o A list of major repairs which have recently been made, or are scheduled to be made in the next 18 months. o Name and phone number(s) of on-site superintendent(s), or local management firm or trustee for physical inspection. o Notice of any pending changes to the rent roll or pertinent information regarding the current status of the tenants. If we are requested to give court testimony an additional fee will be charged on an hourly basis at $300 per hour for designated MAI-appraisers and $175 for non-designated appraisers. Said hourly billings pertain to court preparation, waiting and travel time, document review and preparation (excludes narrative appraisal report) and all meetings related to court testimony. The client may provide only complete, final copies of the appraisal report to third parties who shall rely on such reports in connection with loan underwriting or securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the client for routine and customary questions. Please note that our consent to allow an appraisal report prepared by CB Commercial, or portions of such report, to become part of or be referenced in any public offering, the granting of such consent will be at our sole discretion and, if given, will be on condition that we will be provided with an Indemnification Agreement and/or Non-Reliance letter, in a form and content satisfactory to us, by a party satisfactory to us. We do consent to your submission of the reports to rating agencies, loan participants or your auditors without the need to provide us with an Indemnification Agreement and/or Non-Reliance letter. In addition to the fee for this assignment, you agree to compensate us at a rate to be mutually agreed to, for any time expended by us should we be required (by subpoena or otherwise) or requested by you, your representatives or other entity to become involved in any litigation or May 8, 1996 Mr. Kane Page 3 legal proceeding in any way involving this engagement to which we are not a party, the appraisal work we produce or the property which is the subject of this assignment. You also agree to pay, on demand, all reasonable expenses which we incur in connection with any litigation or proceedings including the fees of our attorneys. You acknowledge that we are being retained hereunder as an independent contractor to perform the services described herein and nothing in this agreement shall be deemed to create any other relationship between us. This assignment will be deemed concluded and the services hereunder completed upon delivery to you of the appraisal report discussed herein. If these terms are acceptable, please authorize us to proceed by having an officer of the corporation, managing general partner, principal, owner, or a contractually responsible party sign the enclosed copy of this proposal with "Terms and Conditions" and return it to us for our permanent file. Upon receipt of your authorization, we will schedule the necessary personnel to complete the project in a timely manner. We appreciate this opportunity to be of service to you on this assignment. If you have additional questions, please do not hesitate to give me a call. Sincerely, CB COMMERCIAL REAL ESTATE GROUP, INC. Appraisal /s/ Michael R. Pecorino Michael R. Pecorino, MAI MRP:jf cc: Douglas W. Haney Enclosure AGREED & ACCEPTED - -------------------------------------- -------------------------------------- Signature Title - -------------------------------------- -------------------------------------- Name (type or print) Date Office #: Fax #: ----------------------------- -------------------------------- PAGE 2 TERM/ BASE TOTAL MARKET TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF - ------------------ --------- -------- ------- ------- ------- ------- # 14-SUITE A OPTION 1 FAST FOOD VACANCY 2,500 8/2006 13.00 1.14 14.14 7.60 ------ ----- ----- ----- ----- 1 FY107 EXPIRATIONS 2,500 13.00 1.14 14.14 7.60 ------ ----- ----- ----- ----- 7 CUMULATIVE EXPS 29,341 6.68 0.92 7.60 5.74 MARTINTOWN PLAZA SHOPPING CENTER PROJECT DESIGNATOR MTPL AVERAGE OCCUPANCY REPORT FOR ALL TENANTS
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- JANUARY 117,457 127.273 129,773 126,773 129,773 129,773 118,057 129,773 127,773 129,773 129,773 118,057 126,773 FEBRUARY 117,457 127,273 129,773 129,773 129,773 129,773 118,057 126,773 127,773 129,773 129,773 119,457 126,773 MARCH 117,457 127,273 129,773 129,773 129,773 129,773 118,057 126,773 127,773 129,773 129,773 137,398 126,773 APRIL 117,457 127,273 129,773 129,773 129,773 129,773 118,057 126,773 127,773 129,773 129,773 137,398 126,773 MAY 119,457 127,273 129,773 127,773 129,773 129,773 120,557 126,773 127,773 129,773 127,273 139,898 126,773 JUNE 119,457 127,273 126,773 127,773 129,773 129,773 121,957 126,773 127,773 129,773 125,873 139,898 129,773 JULY 119,457 127,273 126,773 127,773 129,773 129,773 129,773 126,773 127,773 129,773 118,057 139,898 129,773 AUGUST 119.457 127,273 126,773 127,773 129,773 129,773 129,773 126,773 127,773 129,773 118,057 139,898 129,773 SEPTEMBER 121,957 129,773 126,773 127,773 129,773 127,273 129,773 126,773 129,773 129,773 115,557 139,898 127,773 OCTOBER 121,957 129,773 126,773 127,773 129,773 125,873 129,773 129,773 129,773 129,773 115,557 136,898 127,773 NOVEMBER 119,648 129,773 126,773 127,773 129,773 118,057 129,773 129,773 129,773 129,773 115,557 136,898 127,773 DECEMBER 129,773 129,773 126,773 127,773 129,773 118,057 129,773 129,773 129,773 129,773 115,557 126,773 127,773 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- AVERAGE SF OCCUPIED-OCSF 120,083 128,106 128,023 128,190 129,773 127,287 124,448 127,773 128,440 129,773 122,548 134,364 127,856 TOTAL SF-GRSF 136,378 136,378 136,378 136,378 136,378 136,378 136,378 136,378 136,378 136,378 136,378 136,378 136,378 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- OCCUPANCY % 88.05 93.93 93.87 94.00 95.16 93.33 91.25 93.69 94.18 95.16 89.86 98.52 93.75 ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
================================================================================ ADDENDUM I LETTER OF AUTHORIZATION - -------------------------------------------------------------------------------- Addendum I LETTER OF AUTHORIZATION This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE SHILLINGTON PLAZA Located at 1 Parkside Avenue Reading, Pennsylvania [LOGO] CB COMMERCIAL Delivering Solutions Through Local Knowledge Worldwide COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE SHILLINGTON PLAZA Located at 1 Parkside Avenue Reading, Pennsylvania CB File No. 96-093-N DATE OF VALUE June 1, 1996 PREPARED FOR MORGAN STANELY MORTGAGE CAPITAL, INC. 1585 Broadway New York, NY 10036 PREPARED BY CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES 560 Lexington Avenue - 16th Floor New York, New York 10022 [LETTERHEAD OF CB COMMERCIAL] June 17, 1996 MORGAN STANLEY MORTGAGE CAPITAL, INC. 1585 Broadway New York, NY 10036 RE: SHILLINGTON PLAZA 1 Parkside Avenue Reading, Pennsylvania CB File No. #95-093N Dear Ladies and Gentlemen: At your request, CB Commercial Real Estate Group, Inc. has prepared a Complete Appraisal presented in a self-contained appraisal report of the market value of the leased fee interest. The subject property is a one-story community strip center known as Shillington Plaza containing a gross leasable area of 150,742 square feet. The subject is anchored by K-Mart which consists of 94,500 square feet, Weiss Market consisting of 40,107 square feet, and Revco Drugs with 7,200 square feet. These three anchor stores occupy approximately 94% of the rentable square feet of the center. The improvements were constructed in 1974 and were in average condition as of the date of our analysis. Data, information, and calculations leading to the value conclusion are incorporated in the report following this letter. The entire report, including all assumptions and limiting conditions, is an integral part of and inseparable from this letter. Based on research and analysis contained in this report, it is estimated that the market value of the leased fee interest in Shillington Plaza, subject to the Certification, Assumptions, and Limiting Conditions in this appraisal report, as of June 1, 1996, is --- FOUR MILLION EIGHT HUNDRED THOUSAND DOLLARS --- ($4,800,000) The following appraisal sets forth the most pertinent data gathered, methodology, and reasoning leading to our opinion of value. The analyses, opinions, and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP) and the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. Furthermore, this report has been prepared in conformance with our interpretation of the appropriate regulations and guidelines set forth by Morgan Stanley. MORGAN STANLEY June 17, 1996 Page 2 It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CB Commercial Real Estate Group, Inc. can be of further service, please do not hesitate to contact us. Respectfully Submitted, CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES by: /s/Maggie Argyros /s/Michael R. Pecorino - ------------------------------- ------------------------------- Maggie Argyros Michael R. Pecorino, MAI Real Estate Analyst Senior Vice President Northeast Regional Manager PA State Certification No. GA-001096-R ================================================================================ CERTIFICATION OF THE APPRAISERS - -------------------------------------------------------------------------------- CERTIFICATION OF THE APPRAISERS We certify that to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. 4. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event, such as the approval of a loan. 5. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation and the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. In addition, this report conforms to the requirements of the Financial Institution Reform, Recovery, and Enforcement Act (FIRREA). 6. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 7. Michael R. Pecorino has completed the requirements of the continuing education program of the Appraisal Institute. 8. Maggie Argyros has made a personal inspection of the property that is a subject of this report. Michael R. Pecorino did not make a personal inspection of the appraised property. 9. No one provided professional assistance to the persons signing this report. 10. Maggie Argyros and Michael R. Pecorino have extensive experience in the appraisal/review of similar property types. 11. Michael Pecorino is certified in the state where the subject is located. /s/Maggie Argyros /s/Michael R. Pecorino - ------------------------------- ------------------------------- Maggie Argyros Michael R. Pecorino, MAI Real Estate Analyst Senior Vice President Northeast Regional Manager - -------------------------------------------------------------------------------- i ================================================================================ SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- SUBJECT PHOTOGRAPHS [GRAPHIC OMITTED] EXTERIOR VIEW OF SHOPPING CENTER [GRAPHIC OMITTED] EXTERIOR VIEW OF STRIP CENTER - -------------------------------------------------------------------------------- ii ================================================================================ SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] EXTERIOR VIEW OF KMART [GRAPHIC OMITTED] EXTERIOR VIEW OF MERIDIAN BANK (OUTPARCEL) - -------------------------------------------------------------------------------- iii ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- SUMMARY OF SALIENT FACTS Property Name: Shillington Plaza Location: 1 Parkside Avenue Reading, Pennsylvania Assessor's Parcel Number: Map 4395-06, Block 29, Lot 8602 Property Description: The subject property is a single-story community shopping center containing a total gross leasable area of 150,742 square feet. The center is anchored by K-Mart, Weiss Market, and Revco Drugs. Highest and Best Use As Vacant: Land banking until such time that retail development becomes financially feasible. As Improved: As a presently utilized - a community shopping center Property Rights Appraised: Leased fee Interest Date of Value: June 1, 1996 Land Area 893,851 square feet, or 20.52 acres Improvements Building Area: Gross Leaseable Area: 150,742 square feet Year Built: 1974 Overall Condition: Average to good. Estimated Marketing Time: Based on the size of the subject property and the number of different uses that exist, we have estimated the marketing time to be less than 12 months. Financial Indicators Current Occupancy: 100% Market Rental Rate: $ 5.00 psf Anchor $ 8.00 psf 7,000 sf $11.00 psf 1,200 to 2,500 sf Income Growth Rate: 3.0% Estimated Stabilized Expenses: $1.32 psf - -------------------------------------------------------------------------------- iv ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- Expense Growth Rate: 3.0% Going-In Overall Capitalization Rate Selected: 10.5% Going-In Overall Capitalization Rate Implied: 11.2% Terminal Overall Capitalization Rate: 11.0% Discount Rate: 12.5% Valuation Income Capitalization Approach: $4,800,000 Sales Comparison Approach: $4,800,000 Final Value $4,800,000 Unit value (per square foot): $31.84/SF - -------------------------------------------------------------------------------- v ================================================================================ TABLE OF CONTENTS - -------------------------------------------------------------------------------- TABLE OF CONTENTS CERTIFICATION OF THE APPRAISERS i AREA ANALYSIS 7 NEIGHBORHOOD INFLUENCES 13 MARKET ANALYSIS 17 SITE ANALYSIS 22 IMPROVEMENT ANALYSIS 24 ZONING 27 TAX AND ASSESSMENT DATA 28 HIGHEST AND BEST USE 29 APPRAISAL METHODOLOGY 32 SALES COMPARISON APPROACH 34 INCOME CAPITALIZATION APPROACH 41 RECONCILIATION OF VALUE 64 ASSUMPTIONS AND LIMITING CONDITIONS 67 ADDENDA A. Glossary of Terms B. Legal Description C. Improved Comparable Sales D. Rental Comparables E. Strategic Mapping, Inc. F. Rent Roll G. Pro-ject Assumptions H. Engagement Letter I. Qualifications - -------------------------------------------------------------------------------- vi INTRODUCTION ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- INTRODUCTION PROPERTY IDENTIFICATION The subject is known as Shillington Plaza and is located at 1 Parkside Avenue in Reading, Cumru Township, Berks County, Pennsylvania. The city assessor's tax identification number is Map 4395-06, Block 29, Lot 8602. A full metes and bounds legal description is included in the Addenda OWNERSHIP AND PROPERTY HISTORY The subject is currently owned by Marcorp Associates Three, L.P. . The subject was last transferred September 26, 1994 for $4,000,000, or $26.53 per square foot. The property was purchased from Shillington L.P. DATES OF INSPECTION AND VALUATION The site was inspected by Maggie Argyros on June 5, 1996. Michael R. Pecorino, MAI did not inspect the subject or the comparables, but reviewed this report and concurs with the conclusions. The date of valuation is June 1, 1996. PURPOSE OF THE APPRAISAL The purpose of this appraisal is to estimate the market value of the leased fee interest in the subject property as of the date of the appraisal. Market value is defined as follows: Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised, and acting in what they consider their own best interests; 3. A reasonable time is allowed for exposure in the open market; 4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and - -------------------------------------------------------------------------------- 1 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- 5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) TERMS AND DEFINITIONS Please refer to the Addenda for a Glossary of the Terms and Definitions that are, and may be used in this appraisal. INTENDED USE OF REPORT This appraisal is for mortgage underwriting purposes. PROPERTY RIGHTS APPRAISED The value estimated represents the leased fee interest. DEFINITION OF THE LEASED FEE INTEREST The term "leased fee interest" as used in this report, is defined as: An ownership interest held by a landlord with the right of use and occupancy conveyed to other; usually consists of the right to receive rent and the right to repossession at the termination of the lease. (The Dictionary of Real Estate Appraisal, The Appraisal Institute, Chicago, Illinois, 1984, p. 179). - ---------- (1) The definition of market value is taken from : The Office of the Comptroller of the Currency under 12 CFR, Part 34, Subpart C-Appraisals, 34.42(f), August 24, 1990. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. - -------------------------------------------------------------------------------- 2 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- APPRAISAL DEVELOPMENT AND REPORTING PROCESS The following steps were completed by CB Commercial for this assignment: 1. Analyzed regional, neighborhood, site, and improvement data. 2. Inspected the subject and the neighborhood. 3. Reviewed data regarding taxes, zoning, utilities, easements, and city services. 4. Considered comparable improved sales and comparable improved building rental information. Confirmed data with principals, managers, or real estate agents representing principals, unless otherwise noted. 5. Analyzed the data to arrive at conclusions via each approach to value used in this report. 6. Reconciled the results of each approach to value employed into a probable range of market data and finally an estimate of value for the subject, as defined herein. 7. Estimated a reasonable exposure time associated with the value estimate. The subject site and improvement descriptions are based on a personal inspection of the property, discussions with management, and a review of the provided information. The inspection is not a substitute for thorough engineering studies. To develop the opinion of value, CB Commercial performed a complete appraisal process, as defined by the Uniform Standards of Professional Appraisal Practice. This means that no departures from Standard 1 were invoked. This is a complete appraisal, in the form of a Self-Contained Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Standards of Professional Appraisal Practice. In a complete appraisal, CB Commercial uses all known applicable approaches to value. The value conclusion reflects all known information about the subject property, market conditions, and available data. The Self-Contained Report incorporates to the fullest extent possible, practical explanation of the data, reasoning and analysis that were used to develop the opinion of value. It also includes thorough descriptions of the subject property and the market for the subject property type. SPECIAL APPRAISAL INSTRUCTIONS The client did not give us special appraisal instructions. MARKETING PERIOD The marketing period section is divided into reasonable exposure time and reasonable marketing time. Exposure time differs from marketing time. Marketing time is the period - -------------------------------------------------------------------------------- 3 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- required to sell a real property interest at market value during the period immediately after the effective date of the appraisal. Exposure time is always presumed to precede the effective date of the appraisal. Exposure time is not intended to be a prediction of a date of sale or a one-line statement. Instead, it is an integral part of the appraisal analysis and is based on one or more of the following: o statistical information about days on the market o interviews of market participants. The reasonable exposure period is a function of price, time, and use. It is not an isolated estimate of time alone. Exposure time is different for various types of real estate and under various market conditions. Reasonable Exposure Time Exposure time is always presumed to precede the effective date of the appraisal. It is the estimated length of time the property would have been offered prior to a hypothetical market value sale on the effective date of appraisal. It is a retrospective estimate based on an analysis of recent past events, assuming a competitive and open market. It assumes not only adequate, sufficient, and reasonable time but adequate, sufficient, and reasonable marketing effort. Exposure time and appraisal conclusion of value are therefore interrelated. Exposure time is often expressed as a range and is based on direct and indirect market data gathered during the market analysis, sales verifications, interviews with market participants, and other appropriate sources. The amount of time which a property will require to be marketed varies greatly depending on a number of factors including market conditions, listing price, terms of sale offered, and competitive listing inventory. In addition to considering each of the factors noted above, CB Commercial considered: o the most recent CB Commercial National Investor Survey, and o the opinions of local knowledgeable real estate brokers and investors. Market Conditions Throughout the country, market conditions for most property types, especially those considered Class A and B, have improved over the last year. The market conditions that directly impact the subject are described in this report and illustrate how exposure time is correlated with listing inventory, competitive pricing structures, and marketing efforts. CB Commercial National Investor Survey In the most recent issue of the CB Commercial National Investor Survey, published in the first quarter 1996 CB Commercial surveyed a wide range of investors for property type preferences - -------------------------------------------------------------------------------- 4 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- and specific marketing times. Investors indicated that exposure requirements for investment property generally decreased by 0.4 months from first quarter 1995. The average marketing time for all responses has decreased 3.5 months since second quarter 1993. Currently, the marketing period is 6.4 months for a Class A Power retail center. For all types of retail properties, the marketing period ranges from 0 to 18 months with an average of 11 months. Real Estate Broker Surveys As another information source, appraisers solicited the opinions of real estate brokers knowledgeable in the subject property type. The majority estimated that the property could likely be sold within a 12 month time span. All assumed that property would be appropriately priced and marketed. Exposure Time Conclusion In conclusion, based on the foregoing analysis, an exposure time of less than 12 months is reasonable, defensible, and appropriate. Like the brokers surveyed, CB Commercial assumes that the subject property would have been competitively priced and aggressively promoted on a national basis. Reasonable Marketing Time Reasonable marketing time is the period a prospective investor would forecast to sell the subject property immediately after the date of value, at the value estimated. Anticipated marketing time is essentially a measure of the perceived level of risk associated with the marketability, or liquidity, of the subject as an investment grade property. The sources for this information include those used in estimating the reasonable exposure time, but also an analysis of the anticipated changes in market conditions following the date of appraisal. In other words, the reasonable marketing time is the number of months it will require to sell the subject property from the date of value, into the future. The reader must understand, however, that the future price for the subject property (at the end of the marketing time) may or may not equal the appraisal estimate. The future price depends on unpredictable changes in the physical real estate, demographic and economic trends, real estate markets in general, supply/demand characteristics for the property type, and many other factors. Based on the premise that present market conditions are the best indicators of future performance, a prudent investor will forecast that, under the conditions described above, the subject property will require a marketing time of less than 12 months. - -------------------------------------------------------------------------------- 5 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- REGIONAL AREA MAP [GRAPHIC OMITTED] Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- 6 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- AREA ANALYSIS The dynamic nature of economic relationships within a market area have a direct bearing on real estate values and the long-term quality of a real estate investment. In the market, the value of a property is not based on the price paid for it in the past or the cost of its creation, but on what buyers and sellers perceive it will provide in the future. Consequently, the attitude of the market toward a property within a specific neighborhood or market area reflects the probable future trend of that area. Since real estate is an immobile asset, economic trends affecting its locational quality in relation to other competing properties within its market area will also have a direct effect on its value as an investment. To accurately reflect such influences, it is necessary to examine the past and probable future trends which may affect the economic structure of the market and evaluate their impact on the market potential of the subject. This section of the report is designed to isolate and examine the discernible economic trends in the region and neighborhood which influence and create value for the subject property. A regional map indicating the location of the subject is presented on the previous page. REGIONAL INFLUENCES Location The subject is located within Berks County, Pennsylvania. Berks County, which is also known as the Reading Metropolitan Statistical Area (MSA), is located in the southeastern portion of Pennsylvania, approximately 35 miles northwest of downtown Philadelphia. The county is surrounded by Chester and Lancaster Counties to the south, Lebanon County to the west, Schuylkill and Lehigh Counties to the north, and Montgomery County to the east. Population The Berks County region had a population of 336,523 people as of the 1990 Census. The population in Berks County represents only a small portion of the 12.3 million people residing in the state of Pennsylvania. The population of Berks County was estimated to be 349,909 as of year-end 1995 by Strategic Mapping, Inc. This indicates an increase of 13,386 persons or 3.98% from the 1990 census. The following table shows the 1980 and 1990 census figures, as well as the 1995 estimates for the region. ================================================================================ BERKS COUNTY POPULATION ================================================================================ 1980 1990 1980 - 1990 1995 1990 - 1995 % Change % Change - -------------------------------------------------------------------------------- 312,509 336,523 7.68% 349,909 3.98% - -------------------------------------------------------------------------------- Source: U.S. Census Bureau ================================================================================ - -------------------------------------------------------------------------------- 7 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Demographic statistics for Berks County are summarized in the following table. ================================================================================ SELECTED AREA DEMOGRAPHICS BERKS COUNTY ================================================================================ Population 2000 Estimate 359,567 1995 Estimate 349,909 1990 Census 336,523 1990-1995 % Change 3.98% Households 2000 Estimate 135,602 1995 Estimate 132,343 1990 Census 127,649 1990-1995% Change 3.68% 1995 Median Household Income $ 36,463 1995 Average Household Income $ 44,076 1995 Average Home Value $ 90,917 1990 % College Graduates 20.10% - -------------------------------------------------------------------------------- Source: Strategic Mapping, Inc. and the U.S. Bureau of the Census Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ A review of these figures shows that the Berks County region has witnessed continued growth over the past several years. The population has increased approximately .77% per annum from 1980 to 1990 and .80% from 1990 to 1995. As a result, it appears that the population trend from the previous decade has continued which is positive for the region. Population estimates for Berks County over the next five years indicate that growth is anticipated to be approximately 2.76% for the five-ear period. This indicates average annual growth of .55% per annum. As a result, the population in Berks County over the next several years is projected to increase modestly. Households Similar to the population level within Berks County, the number of households has grown in recent years and is projected to increase over the next five years. Between 1990 and 1995, household growth in Berks County was 3.68%. Projections for the year 2000 indicates continued growth with the number of households increasing by 2.46%. While experiencing a significant decline between 1980 and 1990, the average household size did not change significantly in 1995 (2.57) and is expected to remain fairly stable over the next five years. In - -------------------------------------------------------------------------------- 8 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Berks County, the average household size declined from 2.66 in 1980 to 2.56 in 1990. It is projected to increase slightly to 2.58 by 2000. Income Berks County had a 1995 median household income of $36,463, compared to $34,235 for the State of Pennsylvania. The median household income for the area is projected to increase to $41,394 by 2000, or a 2.15% average annual increase. A breakdown of the household income characteristics for Berks County is shown on the following table: ================================================================================ HOUSEHOLD INCOME CHARACTERISTICS - BERKS COUNTY ================================================================================ 1980 1990 1995 Est. 2000 Proj. - -------------------------------------------------------------------------------- $0 - $9,999 26.5% 12.1% 10.2% 8.6% $10,000 - $14,999 15.3% 8.2% 7.3% 6.3% $15,000 - $24,999 29.9% 17.2% 15.0% 12.7% $25,000 - $34,999 17.3% 17.1% 15.1% 13.7% $35,000 - $49,999 7.9% 21.6% 20.9% 19.4% $50,000 - $74,999 2.2% 16.3% 19.6% 21.9% $75,000 - $99,999 0.8% 4.3% 6.6% 8.8% $100,000 - $149,999 -- 2.0% 3.6% 6.1% $150,000+ -- 1.1% 1.6% 2.4% TOTAL 100.0% 100.0% 100.0% 100.0% - -------------------------------------------------------------------------------- Source: Strategic Mapping, Inc. Compiled By: CB Commercial Real Estate Group, Inc. ================================================================================ Referring to the breakdown of household income, it is evident that Berks County has witnessed steady increases in all income categories. In 1980 there was no percentile of the population above the $100,000 mark; however, the figures in 1990 indicate that 3.1% of the households are now represented. Furthermore, this figure is estimated to have increased to approximately 5.2% in 1995. Projections for household income over the near term indicate that the increases previously witnessed should continue, albeit a slower rate. Employment Berks County has a relatively diverse economic base. Manufacturing comprises the largest portion of total employment at approximately 27.7%, while Trade comprises the second largest component of 23.9% with Services the third largest at 23.8%. The following table outlines total employment and the composition of the different employment industries in Berks County (a.k.a. Reading MSA). The figures illustrated below reflect the most recently published employment totals as of March 1996. - -------------------------------------------------------------------------------- 9 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ================================================================================ NON-AGRICULTURAL INSURED EMPLOYMENT BY MAJOR INDUSTRY DIVISION March 1996 and March 1995 Comparison - NOT SEASONALLY ADJUSTED BERKS COUNTY (A.K.A. READING MSA) ================================================================================ Industry Employment Share Employment Share Change As of March As of March 1995-1996 1996 1995 IN (000s) IN (000s) - -------------------------------------------------------------------------------- Manufacturing 43.3 27.7% 43.6 27.8% -0.7% Construction/Mining 5.8 3.7% 5.9 3.8% -1.7% TCPU 7.0 4.5% 7.0 4.5% 0.0% Trade 37.5 23.9% 36.4 23.2% +3.0% FIRE 9.1 5.8% 8.9 5.7% +2.2% Services 37.2 23.8% 35.3 22.5% +5.4% Government 19.3 12.3% 19.5 12.5% -1.0% ----- ----- ----- ----- ----- TOTALS 159.2 100% 156.6 100% +1.7% - -------------------------------------------------------------------------------- Source: Bureau of Labor Statistics Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ Between March 1995 and March 1996, employment increased 1.7%. During this period, the service sector experienced an increase in employment by 5.4%. The trade and F.I.R.E. sectors also experienced increased employment by 3.0% and 2.2%, respectively. The services industry added the most jobs in absolute numbers and also had the greatest percentage increase. The majority of the employers in Berks County are manufacturing in nature. The VF Corporation, the largest publicly held apparel manufacturer in the world is headquartered in the county. Carpenter Technology, which manufacturers stainless steel, have a large industrial park along the Schuylkill River in Reading. Further, Berks County is the headquarters and main manufacturing location for the Exide Corporation, the world's largest maker of automobile and industrial batteries. In addition, AT&T maintains a large research and development operation in Reading. Overall, no manufacturer accounts for more than 2.0% of the total workforce. The following chart summarizes the major employers within the county. - -------------------------------------------------------------------------------- 10 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ================================================================================ MAJOR AREA EMPLOYERS BERKS COUNTY ================================================================================ Organization Industry - -------------------------------------------------------------------------------- The Reading Hospital & Medical Center Service East Penn Manufacturing Co. Manufacturing Carpenter Technology Manufacturing AT&T Technologies Manufacturing Boscov's Department Store Service - -------------------------------------------------------------------------------- Source: Pennsylvania Economic Development Agency Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ Based on the latest figures from the Pennsylvania State Labor Department, in March 1996 the civilian labor force in the county of Berks was approximately 228,263, while total employment was 219,861. The following table compares the unemployment rate for the area to that of the state and national average. ================================================================================ UNEMPLOYMENT RATE COMPARISON BY COUNTY, STATE, AND U.S. ================================================================================ Year Berks County Pennsylvania U.S. ---- ------------ ------------ ---- 3/1996 3.7% 5.9% 5.8% 1995 4.8% 5.9% 5.6% 1994 8.8% 6.2% 6.1% 1993 8.1% 7.1% 6.9% 1992 10.5% 7.6% 7.5% - -------------------------------------------------------------------------------- Source: Pennsylvania Department of Labor and Employment Security, Bureau of Labor Market Information Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ Historically, in terms of unemployment, Berks County has consistently posted higher unemployment figures than the State of Pennsylvania and the U.S. as a whole. Over the past few years, however, the unemployment rate in Berks County has decreased considerably and outperforms the state and the U.S.. The unemployment rate dropped by over 50% from 1992 to 1995, indicating that the economy within the county has strengthened. Transportation The Berks County region contains excellent transportation routes. Some of the major routes that are in and around the county include Interstates 176 and 78, the Pennsylvania Turnpike, Routes 222, 61, 422, and several others. In addition, the Pennsylvania State Thruway is - -------------------------------------------------------------------------------- 11 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- located just south of Wyomissing in the county. Overall, the transportation routes servicing the area are considered to be adequate. The nearest airport serving the Berks County region is Reading Municipal Airport which is situated just north of the subject in Reading. Numerous non-stop national and international flights are available from Harrisburg's Airport to the southwest of the county and also in Philadelphia. Conclusion and Relevance to the Subject Property The long-term outlook for Berks County is considered good. Its close proximity to Harrisburg and Philadelphia and adequate transportation network has resulted in a stable economy throughout the county. The stable population and economic base is also contributing to the improvement in all major real estate sectors. Berks County has remained relatively stable during the past ten years. The employment sector appears to be strengthening in the area with the majority of employment dominated by manufacturers. Overall, the area appears stable, and significant changes are not anticipated. NEIGHBORHOOD INFLUENCES Location The subject property is located at the northwest corner of Revere Boulevard (a.k.a. Route 724) and Lancaster Avenue (a.k.a. Route 222) in the city of Reading. The common mailing address is 1 Parkside Avenue, Reading, Pennsylvania. The geographic boundaries of the subject are not exact, but the immediate neighborhood is generally considered to be: North: Wyomissing South: Mohnton East: Kenhorst West: Spring Township A neighborhood map indicating the location of the subject is presented on the following page. Land Use The subject is generally located in a suburban neighborhood. Developments in the immediate vicinity of the subject consists mainly of retail uses with residential uses located to the west and south. In the immediate vicinity of the subject property retail development is relatively mature, and includes a Hyundai car dealership and a new medical office facility. Located across the street from the subject, along Lancaster Avenue (a.k.a. Route 222) is a Rickle Home Center, AC Moore Arts & Crafts, a Pathmark supermarket, and a pretzel manufacturer. Developments along Revere Boulevard (a.k.a. Route 724) include a Dempsy's Restaurant and - -------------------------------------------------------------------------------- 12 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- a National Penn Bank. Approximately 2 miles northwest of the subject, along Route 724 is the Spring Towne Center, which was constructed in 1990 and consists of approximately 120,000 square feet. Anchors include Giant supermarket and CVS. Overall, the neighborhood appears to be approximately 90 percent developed. Access Accessibility to the neighborhood in general, and to the subject property, is considered adequate. Routes 222, 422, 61, 724, as well as several others provide the primary access to the site. Interstate 78 is located to the north of the subject and Interstate 76 is located south of the subject. These Interstates provide good high-speed east/west transportation routes to and from the county. The aforementioned roadways provide adequate accessibility throughout the neighborhood and other locations. In addition, the neighborhood has an adequate level of secondary roadways which further enhance accessibility. Reading Municipal Airport is situated north of the subject property. Demographics Selected Neighborhood demographics in a one, three, and five mile radius from the subject are shown in the following table: ================================================================================ NEIGHBORHOOD DEMOGRAPHICS READING, PA ================================================================================ 1 mile 3 mile 5 mile - -------------------------------------------------------------------------------- Population 1995 Estimate 6,807 56,099 173,010 1990 Census 6,528 53,705 168,536 1990-1995 % Change 4.27% 4.45 2.65% Households 1995 Estimate 2,755 22,312 69,535 1990 Census 2,645 21,403 67,939 1990-1995 % Change 4.16% 4.25% 2.35% 1995 Median Household Income $ 39,174 $ 40,324 $ 31,849 1995 Average Household Income $ 44,438 $ 52,140 $ 41,688 1990 Average Home Value $ 82,397 $ 91,412 $ 71,861 1990 % College Graduates 12.6% 15.8% 11.2% - -------------------------------------------------------------------------------- Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 13 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- NEIGHBORHOOD AREA MAP [GRAPHIC OMITTED] Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- 14 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- As indicated by the previous table, the demographic profile becomes less favorable inside a five-radius. Income levels, as well as home values are significantly higher in a one-mile and three-mile radius. However, the population and households within a five-mile radius have continued to increase which is positive. Growth and Trends Retail growth has been concentrated north of the subject property in Wyomissing Hills and Sinking Spring. In 1990, the Spring Towne Shopping Center was developed on Route 724 in Sinking Springs. Within Wyomissing Hills, Berkshire Square Shopping Center was developed at Berkshire Mall in 1991. This center consists of approximately 320,000 square feet and is anchored by Wal-Mart, Hechingers, Staples, and Redners Supermarket. In March 1994, Lowe's Home Center opened a 110,000-square-foot facility and BJ's Warehouse opened a 120,000-square-foot store in Muhlenberg Township. Both of these developments are in the vicinity of the Fairground Square Mall off of Route 222. We are not aware of any proposed shopping centers within the city of Reading in upcoming years. Conclusion and Relevance to the Subject Property The subject is situated in a suburban neighborhood that features mainly retail related uses. The area has adequate accessibility to the local transportation system since Interstate highways are located to the north and south. The general character and uses in the area are not anticipated to change in the near future. In summary, we expect development and population to increase modestly over the foreseeable future. - -------------------------------------------------------------------------------- 15 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- MARKET ANALYSIS Retail Overview Reading has witnessed limited growth over the past few years despite the economic troubles the region has experienced. As noted in the previous section, the Spring Towne Center, which was constructed in 1990 and is located along Route 724, contains approximately 120,000 square feet. The anchor tenants are Giant supermarket and CVS. Berkshire Square Shopping Center was developed at Berkshire Mall in 1991 and is approximately three miles north of the subject. It contains 320,000 square feet and is anchored by Wal-Mart, Hechingers, Staples, and Redners supermarket. New development has been concentrated in the vicinity of Berkshire Mall with a new Home Depot. Within Muhlenberg Township, which is approximately six miles north of the subject, a Lowe's Home Center opened a 110,000-square-foot facility and BJ's Warehouse opened a 120,000-square-foot store. We are not aware of any proposed shopping centers within the city of Reading in upcoming years. According to Strategic Mapping, Inc., total retail development within a three-mile radius of the subject property consists of approximately 2.4 million square feet. Furthermore, retail development within the five- and seven-mile radii account for 3.9 and 5.5 million square feet, respectively. Local Retail Market In order to project future performance of the retail space in the subject property consideration has been given to various market components that affect the supply and demand for this type of real estate property. Specifically we have: o Inspected the site and surrounding areas for the purpose of familiarizing ourselves with all the locational and environmental factors. In this regard, we have directed our attention to the physical qualities of the site, access and circulation, surrounding uses, and relationship to sources of market support. o Reviewed the principal economic growth trends in the area in industry, population and employment. Our intention was to identify the degree of underlying support for existing improvements and future growth. o Analyzed existing and foreseeable market conditions for retail properties in the area. o Analyzed demographics of the subject property's trade area as well identified competition in order to assess, the subject property's current as well as future position in the market. Trade Area The trade area of a shopping center is defined as the geographic area from which the sustaining patronage for steady support of a center is obtained. Determination of the - -------------------------------------------------------------------------------- 16 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- boundaries is contingent upon various factors including but not limited to the nature of the center, accessibility, physical barriers, location of competing facilities, and limitations of driving time and distance. The subject's general trade area is considered to be that which encompasses a seven-mile radius of the subject center. We broke this down further to include a three-mile ring (primary), a five-mile ring (secondary), and a seven-mile ring (tertiary). Definition Of The Trade Area The primary ingredients for success in these types of projects include the nature of the competition, population density, income levels, and disposable income. The actual size of the population needed to support this type of project cannot be fixed due to the complexities of the above factors, as well as changing methods of merchandising. Local conditions, such as number of households, income levels, and existing centers within the trade area can have the most dramatic impact upon any given project since these factors are what determine the purchasing power in an area. An additional ingredient leading to the success of a shopping center would be the tenant mix and characteristics of the leading tenants which attract shoppers to the project. We have analyzed demographic data, competition, income levels for the subject trade area in the following sections. The demographic profiles of the primary, secondary, and tertiary trade areas are presented in the Neighborhood Influences section of the report. Additional demographic information is contained within the Strategic Mapping, Inc. Profile Report located within the Addenda. Population The sales potential of a center is directly related to its proximity to the number of potential patrons. The historical and projected trends for population are important to examine when analyzing the trade area of a shopping center. The historical population trends for the subject's trade areas indicate an increase in population between 1980 and 1995 followed by a further increase projected from 1995 to the year 2000. In the primary trade area the population increased by 5.6% between 1980 and 1990 to 53,705 and then witnessed an increase to 56,099 in 1995. Population projections indicate a further increase to 57,825 between 1995 and the year 2000. Both the secondary and tertiary trade areas witnessed a similar pattern and future trend in population in these areas. In order to further analyze the population change, we have examined the distribution of the population by age. When analyzing the population distribution by age, it should indicate in what age groups the population shifts are projected to take place. This is important to - -------------------------------------------------------------------------------- 17 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- distinguish if it will have a great impact on the retail sales of the subject center. Shifts in the age groups under 24 years of age will affect the subject; however, less drastically than changes in the subject's core market approximately between the ages of 25 and 54. As illustrated in the Profile Report located in the Addenda, a large percentage of the population in all three trade areas are in the age groups from 25 - 54. Estimated figures for 1995 indicated that the median age was slightly higher than the 1990 census in all three trade areas ranging from 36.9 to 40.4. Overall, the diversification among age groups is very common among other retail trade areas. Household Trends When analyzing the demographics for a retail center, it is most important to focus on the trends in the household population. A household consists of one or more persons occupying a dwelling unit. A family would be considered a household unit; however single persons living alone or two or more unmarried persons sharing a dwelling are also considered a household unit. The household unit is perhaps the best indicator in determining the economic health of a trade area. One of the important components, which bonds a household together, is it's economic strength as a unit as compared to the economic viability of an individual; single person households not withstanding. If the population is slightly decreasing and yet the number of households is increasing, this would not necessarily be a negative indicator. This would imply that the average household size was shrinking. Each household has demand for goods that likely is not duplicated with a larger household size. This demand is duplicated however in the number of households. Similar to population figures, the number of households in the trade area increased between 1980 and 1990. Subsequently, the number of households increased between 1990 and 1995 though at an accelerated pace in comparison to the increase witnessed in the previous decade. The number of households are projected to increase further in all three trade areas in upcoming years. Household Income The median household income in the subject's trade areas increased annually at an average rate of 2.6% from 1990 to 1995. Thus, the household incomes in the area grew at a pace slightly below inflation during this period. The projected annual income growth rates between 1995 and the year 2000 are approximately 2.6%, again below the projected rate of inflation. Overall, household income levels varied slightly between the three trade areas. The median household income levels ranged from $31,849 to $40,324 in 1995 with the primary trade area representing the upper end of the range. - -------------------------------------------------------------------------------- 18 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- Employment The income characteristics of the trade areas for the subject property indicate that this is a predominately white-collar market. The primary trade area had the highest percent in white-collar employment at 64.9%, while the tertiary trade area had the lowest at 55.5%. Blue-collar employment percentages in the primary, secondary, and tertiary trade areas were 24.8%, 30.6% and 31.1%, respectively. The remaining percentages were in special services categories. The 1990 Census information indicates that the unemployment rates ranged from a low of 3.3% in the primary trade area to a high of 5.9% in the secondary trade area. As discussed in the Location Analysis, the most recent unemployment rate in Berks County was 3.7%, which indicates an overall increase in employment from the 1990 Census. We feel the subject market will witness modest employment growth in upcoming years and a declining unemployment rate. Expenditure Potential The Expenditure Potential charts located in the Addenda outline Strategic Mapping, Inc. retail sales projections for the subject trade area. The highest sales growth in the primary trade area appears to be for electronics, drug, and video stores. These three categories also represent high growth in the secondary and tertiary trade areas. The average growth rate for retail sales in the primary trade area is projected at 1.94% in the primary trade area, 1.38% in the secondary trade area, and 1.39% in the tertiary trade area. Strategic Mapping, Inc. examines the product potential for various store types for each portion of the subject trade area. Based on statistical sampling, Strategic Mapping has derived a benchmark per household expenditures for each store type. Comparing the figures in the trade area to the benchmark figure, it is apparent that those individuals in the subject trade area are much more likely to spend on items in drugs, groceries, and convenience stores. The Strategic Mapping Expenditure Potential Index is defined as follows, 'An index which shows the amount by which an area per household expenditures, differed from that of the benchmark.' The benchmark is defined as the average or common expenditure among households for a larger region. Values below 100 signify that this area is below the benchmark per household expenditures and correspondingly values above 100 indicate a higher than average expenditure per household. The overall Expenditure Index for the primary area is 103.4, while the benchmark indices for the secondary and tertiary trade areas are 94.8 and 97.2, respectively. In conclusion, the expenditure indices for the subject trade areas indicate that the secondary and tertiary trade area populations spend less than the benchmark household on retail goods, while the primary area populations spend above the benchmark. - -------------------------------------------------------------------------------- 19 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- The area generates retail sales based on the existing population, as well as the increasing income potential. Market Indicators The subject center contains 8 tenant suites ranging in size from approximately 1,200 to 94,500 square feet. Discussions with local leasing agents reveal that typical ground level satellite space rents in the area generally range from $8.00/SF to $17.00/SF depending upon the physical and locational characteristics of the space and $5.50/SF to $10.50/SF for anchor space depending upon the same criteria. Percentage rent clauses tend to be uncommon for satellite tenants. Retail leases are typically structured on an absolute net basis with flat rents over the term. Based upon discussions with brokers and managing agents in the area as well as our observations during our inspection, competing centers in the subject's market area have vacancy rates which generally fall within the 0.0% to 7.0% range with an average vacancy rate of approximately 4.0%. The subject center is currently 100% occupied. Summary The outlook for the subject's market is good. Future projections indicate an increase in population and households in all three trade areas from 1980 through 1995. Further, the trade areas exhibit increased spending potential over the same period, while income levels appear to be increasing at rates slightly below projected inflationary rates which is common during periods of economic recovery. Overall, the subject trade areas reflect relatively strong retail characteristics; thus, we conclude that the trade area represents a viable retail market. - -------------------------------------------------------------------------------- 20 PROPERTY DESCRIPTION ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- SITE ANALYSIS Location: The subject is located at the northeast corner of Revere Boulevard (a.k.a. Route 724) and Lancaster Avenue (a.k.a. Route 222) in Reading, Cumru Township, Berks County, Pennsylvania. Parcel Number: Map 4395-06, Block 29, Lot 8602 Land Area: 20.52 acres, or 893,851 square feet. Shape and Frontage: The subject consists of an irregularly shaped parcel with approximately 300 feet of frontage along Revere Boulevard and 700 feet of frontage along Lancaster Avenue. Exterior Parking: There are 848 parking spaces on site. Topography and The site, which is elevated, is generally level. Drainage: Our investigation did not reveal any significant drainage problems. Soils: No soil report was provided and it is assumed that the soil is adequate for the existing use. Easements: No title report was provided in connection with this appraisal. No survey showing the location of any easements was available. Thus, it is not possible to make a definite conclusion regarding any potential impacts on value of the location of any such easements or encroachments. It is specifically assumed that any easements, restrictions, or encroachments that might appear against the title would have no adverse impact on marketability or value. Covenants, Conditions, No private deeds or restricting convenants and Restrictions: affecting the development, other than zoning, were found to affect the site. Utilities: All public utilities including gas, electricity, and telephone as well as water, storm, and sanitary sewer systems are available at the site. Flood Zone: According to maps published by the Federal Emergency Management Agency (FEMA), the subject lies within Zone C as indicated on FEMA Community Map Panel No. 420130-005 B, dated October 31, 1981. This zone is described as follows: FEMA Zone C: "This area is identified in the community flood insurance study as an area of moderate or minimal hazard from the principal source of flood in the area. - -------------------------------------------------------------------------------- 21 ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- Buildings in this zone could be flooded by severe, concentrated rainfall coupled with inadequate local drainage systems. Local storm water drainage systems are not normally considered in the community's Flood Insurance Study. The failure of a local drainage system creates areas of high flood risk within this rate zone." Environmental Issues: The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the property that would cause a loss in value. No evidence of hazardous waster or toxic materials was visible. CB Commercial has no knowledge of the existence of these substances on or in the subject property. However, CB Commercial is not qualified to detect hazardous waster or toxic materials. Adjacent Properties: North: Commercial uses South: Residential uses East: Commercial uses West: Residential uses Comments/Conclusions: The subject is a 20.52-acres site on a paved street served by necessary utilities. Access and visibility are considered to be good. There are no adverse soil conditions of which CB Commercial Real Estate Group, Inc. is aware. The shape of the parcel is irregular and results in no specific limitation. The topography is generally level. From a physical standpoint, the site is considered to be adequate for many types of development. - -------------------------------------------------------------------------------- 22 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS The subject improvements, which were constructed in 1974, consist of a single-story community shopping center containing 150,742 square feet of gross leasable area. The shopping center contains eight tenant suites, of which two are outparcels. The following is a description of the improvements based on our physical inspection, municipal records, and from discussions with and materials provided by the client. The basic construction features are summarized as follows: Construction Class The class of construction is the basic subdivision in Marshall Valuation Service which divides all buildings into five basic groups by type of framing (supporting columns and beams), walls, floors, roof structure, and fireproofing. The subject is considered to be of construction Class B(2). Competitive Rating The subject is considered a Class B building in terms of quality as it is perceived in the marketplace. Foundation Poured concrete Frame Concrete block over a steel frame Floor Construction Concrete slab Exterior Walls Load-bearing concrete block over a steel frame with split-faced block. Fenestration Aluminum framed glass windows and double-paned glass front doorways. Roof Structure & Covering Flat, presumably built-up composition covering over steel deck with steel bar joist supports. We were unable to inspect the roof and assume the roof is in average overall condition. Exterior Condition Average Interior Partition System Metal studs with gypsum board cover. - ---------- (2) The primary characteristic of Class B Buildings is the reinforced concrete frame in which the columns and beams can be either formed or precast concrete. They may be mechanically stressed, and the structure is fire resistant. (Source: Marshall Valuation Service) - -------------------------------------------------------------------------------- 23 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Interior Finishes - Tenant Space Floors: Combination of vinyl tile and carpet. Walls: Painted or covered gypsum board. Ceilings: Suspended acoustic tiles. Lighting: Recessed florescent lighting. Summary: The interiors of the subject are considered to be of average to good quality and similar to competitors. HVAC Heating and ventilation is provided to the majority of the tenant suites by roof-mounted HVAC units. Each of these units pump the hot air throughout its suite via sheet metal air duct work hidden above the dropped ceiling. Air conditioning is supplied by the same system utilizing the duct work and supplying cool air during the summer months. The HVAC system is a gas-fired forced air system. Electrical The electrical system is assumed to be in good working order and adequate for the building. Fire Protection It is assumed that the subject has adequate fire alarm systems, fire exits, fire extinguishers, fire escapes and/or other fire protection measures to meet local fire marshal requirements. Plumbing The plumbing system is assumed to be in good operating condition. Parking Surface parking is provided for 848+/- vehicles. Landscaping Landscaping on the subject property is adequate. ADA Compliance Handicap access appears to be available to all areas of the center. However, we are not qualified to determine compliance with the requirements. Please refer to the specific limiting condition regarding ADA compliance. Environmental Issues The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the improvements which would cause a loss in value. Functional Quality of Space The interior floor plans are flexible and will accommodate a variety of tenant layouts. There are no observed design problems and none are reported by management. Access to - -------------------------------------------------------------------------------- 24 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- the tenant suites is available at the front and rear of the center. There are no elevators within the center. Deferred Maintenance No deferred maintenance was observed or reported. The improvements have been adequately maintained since it was constructed in 1974. Economic Age and Life Based on the current condition, we estimate the effective age to be approximately 20 years. According to the Marshall Valuation Service cost guide, buildings of this type and quality have an expected life of approximately 45 years. Therefore, the remaining economic life (expected life minus effective age) is estimated at 25 years. While we observed nothing to suggest a different economic life, a capital improvement program could extend life beyond that stated above. Quality/General Condition The subject property conforms well with competitors and substitutes in the area. The quality of construction is typical of the area. Interior amenities are similar to competing properties of the same approximate age. The general condition of the improvements is average. We observed no evidence of structural fatigue and the improvements appear sound. We are not qualified to determine structural integrity, however, and recommend that the reader rely upon an expert in this field for further determination. Conclusion/Comments The subject property is an average quality shopping center located in a relatively stable area. The improvements generally conform with competitors and substitutes in the neighborhood. - -------------------------------------------------------------------------------- 25 ================================================================================ ZONING - -------------------------------------------------------------------------------- ZONING The subject's zoning requirements are detailed below. ================================================================================ ZONING SUMMARY ================================================================================ Current Zoning: HC; Highway Commercial Legally Conforming: Yes Uses Permitted: Retail, Service Establishments, Automobile sales, Professional Office, Theaters & Cinemas, Banks, Restaurants, Hotels & Motels, Shopping Centers, & Bowling Alleys. Zoning Change: Not likely - -------------------------------------------------------------------------------- Category Zoning Requirement - -------------------------------------------------------------------------------- Minimum lot size:: 10,000 square feet Site coverage: 65% Front setback: 35 feet Rear setback: 25 feet Side yard setbacks: 20 feet Height limit: 35 feet Parking: 5 spaces per 1,000 sq. ft. of gross floor area. - -------------------------------------------------------------------------------- Source: Cumru Township Zoning Ordinance Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ ZONING ANALYSIS AND CONCLUSIONS Based upon our review of the bulk requirements and allowable uses, the subject property appears to represent a legal existing and conforming use. - -------------------------------------------------------------------------------- 26 ================================================================================ TAX ANALYSIS - -------------------------------------------------------------------------------- TAX AND ASSESSMENT DATA The subject property is assessed by Berks County, Pennsylvania. According to the assessor's office, properties within Berks County are assessed at 100% of market value. The last general assessment of properties in Berks County was 1994. No re-valuation is schedule within the next four years. The tax assessment for the subject property is presented below. ================================================================================ 1996 ASSESSMENT ================================================================================ Section/Block/Lot: #4395-06/29/8602 Land: $2,420,300 Improvement: $2,409,700 ------------ ---------- Total Assessment $4,830,000 Estimated Taxes $ 99,860 - -------------------------------------------------------------------------------- Source: Berks County Assessor's Office Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ Based on the current tax rate of $20.675 per $1,000 assessed value, the estimated taxes for the subject is shown in the previous table. The total taxes for the subject are $99,860, or $0.66 per square foot based on the rentable square footage of the center. Tax and Assessment Conclusion According to the assessor's office, school taxes are collected on a fiscal year and town/county taxes are collected on a calendar year. We have estimated the taxes for the shopping center at $99,860 for calendar year 1996 in our cash flow. Our discussions with the assessor indicated that the subject's taxes have increased inline with the area's inflation rate, or approximately 3.0% per annum. We have, therefore, projected a long-term tax growth for all taxes equal to 3.0% per year. - -------------------------------------------------------------------------------- 27 ================================================================================ HIGHEST & BEST USE ANALYSIS - -------------------------------------------------------------------------------- HIGHEST AND BEST USE In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The four criteria that the highest and best use must meet are: o legal permissibility; o physical possibility; o financial feasibility; and o maximum profitability. Highest and best use is applied specifically to the use of a site as vacant. It is recognized that in cases where a site has existing improvements, the concluded highest and best use as if vacant may be different from the highest and best use given the existing improvements (as improved). The existing use will continue, however, until the land value, in its highest and best use, exceeds that total value of the property under its existing use plus the cost of removing or altering the existing structure. Implied in the highest and best use is a recognition of the contribution of a specific use to the community environment or to the community's development goals, in addition to wealth maximization of individual property owners. Also implied is that the conclusion of highest and best use that results from the appraiser's judgment and analytical skill, i.e., that the use determined from the analysis represents an opinion, not a fact to be found. Highest and best use analysis involves assessing the subject both as if vacant and as improved. HIGHEST AND BEST USE AS THOUGH VACANT Legal Permissibility The legally permissible uses were discussed in detail in the site analysis and zoning sections of this report. Based on our review of the zoning restrictions, the site can be developed with several different uses, including retail and commercial office uses. Physical Possibility The physical characteristics of the subject site were discussed in detail in the site analysis. Overall, a wide range of legally permissible uses would be physically possible, including a variety of commercial uses. Financial Feasibility The test of financial feasibility is put only to those uses which are legally permissible and physically possible. If the property is capable of generating a sufficient net income to cover the - -------------------------------------------------------------------------------- 28 ================================================================================ HIGHEST & BEST USE ANALYSIS - -------------------------------------------------------------------------------- required rate of return on investment and provide a return to the land, then the usage is financially feasible within a defined price limit. In our determination of financial feasibility we have analyzed current market rental rates for several different property types. The net income produced by the proposed or new improvements must provide a return above the cost to develop the property, including acquisition of the land. Through a cost/income analysis we have determined that development of the subject site is not financially feasible at this time. Based on the analysis of supply and demand factors at the present time, rents achieved for retail and/or office uses would not support the cost of construction. Based on the aforementioned, we have determined that development of the subject site at the present time with a retail center is not currently feasible. Maximum Profitability The final test of highest and best use of the site as though vacant is the use be maximally productive, yielding the highest land value. Based on our feasibility analysis we have determined that land banking the subject site is the maximally productive use at the present time. Conclusion: Highest and Best Use As Vacant The concluded highest and best use of the subject as though vacant is land banking until such time that development of the site with a retail/commercial facility is financially feasible. HIGHEST AND BEST USE AS IMPROVED Legal Permissibility As discussed, the subject site's zoning and legal restrictions permit a variety of land uses. Regardless, the site has been improved with a neighborhood shopping center. Based upon review of the Cumru Township's Zoning Ordinance, it is our opinion that the improvements are within the established guidelines. Physical Possibility The physical characteristics of the subject improvements were discussed in detail in the improvement analysis section of this report. Overall, the layout and positioning of the improvements is considered functional for shopping center use, and the floor plan is considered to be reasonable in comparison to other shopping centers in the area. The improvements have good retail features, have been adequately maintained, and are physically capable of sustaining their current use over the extended future. - -------------------------------------------------------------------------------- 29 ================================================================================ HIGHEST & BEST USE ANALYSIS - -------------------------------------------------------------------------------- Financial Feasibility As with the highest and best use of the site as though vacant, the financial feasibility of the site as improved is market derived. Typically, for retail properties similar to the subject, the test of feasibility is based on the amount of rent that can be generated less operating expenses. If a residual amount exists after paying the various expenses, then the land is being put to a productive use. At present, the subject is 100% occupied. CB Commercial estimates that the appropriate stabilized market occupancy approximates 95%. Based on the historical and current operating status of the subject property, CB Commercial anticipates that the improvements are capable of providing an adequate return on the investment before any debt service requirements. Therefore, we conclude that the current use of the improvements is a financially feasible use of the property as improved. Maximum Profitability Similar to the highest and best use of the site as though vacant, the maximum profitable use of the subject as improved should conform to neighborhood trends and be consistent with existing land uses. Although several uses may generate sufficient revenue to satisfy the required rate of return on investment and provide a return on the land, the single use that produces the highest price or value is typically the highest and best use. Conclusion: Highest and Best Use as Improved Based on the foregoing discussions, CB Commercial concludes that the highest and best use of the property, as improved, is consistent with the existing use as a shopping center. There are no apparent alternative uses of the existing improvements that would produce a higher net income and/or value over time than the current use. The current use is a legally permissible use and appears to represent the highest and best use as improved. Furthermore, CB Commercial does not believe that conversion of the improvements or demolition is warranted or financially feasible. - -------------------------------------------------------------------------------- 30 VALUATION ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- APPRAISAL METHODOLOGY The appraisal process is defined as an orderly program by which the problem is planned and the data involved is acquired, classified, analyzed and interpreted into an estimate of value. In this process three basic approaches to value are considered: Cost Approach, Sales Comparison Approach, and Income Capitalization Approach. In appraisal practice, an approach to value is included or omitted based on its applicability to the property type being valued and the quality and quantity of information available. The final step in the appraisal process is reconciliation -- a process by which CB Commercial analyzes alternative conclusions and selects a final value estimate from among two or more indications of value. CB Commercial weighs the relative significance, applicability and defensibility of each approach as it relates to the type of property being appraised. THE COST APPROACH The Cost Approach is based upon the proposition that the informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements which represent the highest and best use of the land or when relatively unique or specialized improvements are located on the site and for which there exist few sales or leases of comparable properties. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. SALES COMPARISON APPROACH The Sales Comparison Approach utilizes sales of comparable properties, adjusted for differences, to indicate a value for the subject property. Valuation is typically accomplished using physical units of comparison such as price per square foot, price per unit, price per floor, etc., or economic units of comparison such as gross rent multiplier. Adjustments are applied to the physical units of comparison derived from the comparable sale. The unit of comparison chosen for the subject is then used to yield a total value. Economic units of comparison are not adjusted, but rather analyzed as to relevant differences with the final estimate derived based on the general comparisons. The reliability of this approach is dependent upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c) the degree of comparability; (d) the absence of atypical - -------------------------------------------------------------------------------- 31 ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- conditions affecting the sales price. Although there have been few sales in the region, the sales that were gathered were utilized to form an opinion of value. However, given the lack of relevant sales data, we have not placed minimal reliance upon this approach and have used it to provide additional support to the Income Approach. INCOME CAPITALIZATION APPROACH The methodology of the Income Capitalization Approach is to determine the income-producing capacity of the property on a stabilized basis by estimating market rent from comparable rentals, making deductions for vacancy and collection losses and building expenses, then capitalizing the net income at a market-derived rate to yield an indication of value. The capitalization rate represents the relationship between net income and value. Related to the direct capitalization method is the discounted cash flow method. In this method of capitalizing future income to a present value, periodic cash flows (which consist of a net income less capital costs, per period) and a reversion (if any) are estimated and discounted to a present value. The discount rate is determined by analyzing current investor yield requirements for similar investments. Since investors are active in the marketplace for properties similar to the subject, the Income Capitalization Approach is particularly applicable to the appraisal problem at hand. There is an adequate quality and quantity of income and expense data available to render a reliable and defensible value conclusion. For income producing properties similar to the subject, the Income Capitalization Approach is considered to be the most reliable. Therefore, this approach has been employed as the primary methodology for this assignment. - -------------------------------------------------------------------------------- 32 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH The Sales Comparison Approach provides an estimate of market value based on analyzing transactions of similar properties in the market area. The method is based on the proposition that an informed purchaser would pay no more for a property than the cost of acquiring an existing one with the same utility. When there is an adequate number of sales of truly similar properties with sufficient information for comparison, a range of values for the subject property can be developed. There are various units of comparison available in the evaluation of sales data in this approach. The sale price per square foot is the most commonly used in this approach. The effective gross income multiplier (EGIM) is rarely used by market participants because of the inconsistencies in estimating effective or gross income, vacancy, and expense differences. We conducted a thorough sales search for comparable shopping centers in the subject's market area. Through our sales search, we were able to identify a limited number of sales with similar characteristics to the subject. The following table summarizes what are considered to be the most recent and proximate comparable sales. Detailed write-ups of each comparable are included in the addendum. - -------------------------------------------------------------------------------- 33 ================================================================================ SALES COMPARISON APPROACH - --------------------------------------------------------------------------------
==================================================================================================================================== SUMMARY OF COMPARABLE RETAIL SALES ==================================================================================================================================== Gross No. Property Name/ Location Sale Leasable Area NOI OAR Sale Price Date (SF) Sale Price Per S.F. Per S.F. - ------------------------------------------------------------------------------------------------------------------------------------ 1 15th & Allen St. Center 1/96 46,503 $ 4,242,000 $ 9.94 10.89% $ 91.22 1401-1451 Allen Street Allentown Lehigh County, PA 2 Stefko Shopping Center 1/96 134,446 $ 5,618,000 $ 4.59 10.99% $ 41.79 Stefko Boulevard Bethlehem Northampton County, PA 3 Kenhorst Plaza 8/95 136,087 $11,000,000 $ 8.10 10.02% $ 80.83 New Holland Rd. & Philadelphia Ave. Reading, Berks Co., PA 4 Hamburg Shopping Ctr. 3/94 42,000 $ 2,705,000 $ 7.49 11.64% $ 64.40 S. 4th St. & Valley Road Hamburg Berks County, PA 5 Subject Property 9/94 150,724 $ 4,000,000 -- -- $ 26.54 Shillington Plaza Parkside Ave. @ Rte. 724 Reading, Berks Co., PA - ------------------------------------------------------------------------------------------------------------------------------------ Compiled by: CB Commercial Real Estate Group, Inc. ====================================================================================================================================
ANALYSIS OF IMPROVED SALES The sales reflect unit prices ranging from a low of about $41.79 to a high of approximately $91.23/SF with the significant difference reflecting the economics of the various centers. The sales all had high levels of occupancy and were in generally good condition. The difference in unit prices then were more directly tied to net operating income and investor yield rates. The comparable sales presented offer a simplistic view of the market. Since only general details of existing income and expenses were available, specific analysis is nearly impossible. Accordingly, this method acts as a general gauge of the market and therefore will be utilized as support to our findings in the Income Approach. Analysis The following discussion analyzes the aforementioned comparables relative to the subject property. - -------------------------------------------------------------------------------- 34 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- COMPARABLE SALES MAP [GRAPHIC OMITTED] Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- 35 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- Sale 1 Sale number one, located at the intersection of 15th Street and Allen Street in Allentown, is a 46,503 square foot shopping center which sold in January of 1996 for $4,242,000 or $91.22/SF. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed circa 1950 and was in very good overall condition at the time of sale since it was recently renovated. Access, exposure, visibility and general locational attributes of the center are superior to the subject. This shopping center is considerably smaller than the subject. Market conditions at the time of sale were similar to current market conditions. This sale's NOI is reportedly $462,049 or $9.94/SF indicating an overall rate of 10.89%. The economics of this property, at least in terms of NOI per square foot, is superior to the subject. Sale 2 Sale number two, located in the City of Bethlehem, consists of a single-story community center which contains an aggregate 134,446 square feet. This center, known as the Stefko Shopping Center, sold in January of 1995 for $5,618,000, or $41.79/SF of gross leasable area (GLA). Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed in 1965 and appeared to be in average condition. The property's location with regard to access and visibility are considered superior to the subject. The center is comparable in size to the subject property. Market conditions at the time of sale were similar to current market conditions. The NOI was reportedly $617,577 ($4.59/SF) indicating an overall rate of 10.99%. This property operates at a level of net income that is similar to the subject. Sale 3 Sale number three, Kenhorst Plaza, is located in Reading in Berks County, Pennsylvania. Kenhorst Plaza is located approximately three miles east of the subject property. It is a 136,087 square foot shopping center which sold in August 1995 for $11,000,000, or $80.83/SF. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed circa 1990 and was in good overall condition at the time of sale. Access, exposure, visibility and general locational attributes of the center are superior to the subject. Market conditions at the time of sale were similar to current market conditions. This sale's NOI is reportedly $1,102,305, or $8.10/SF indicating an overall rate of 10.2%. The economics of this property in terms of NOI per square foot is superior to the subject. - -------------------------------------------------------------------------------- 36 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- Sale 4 Sale number four is located on Valley Road off of South Fourth Street in Hamburg, Berks County, Pennsylvania and consists of a single-story neighborhood center which contains 42,000 gross leaseable area. This center, known as the Hamburg Shopping Center, sold in March 1994 for $2,705,000, or $64.40/SF. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed in circa 1980 and appeared to be in good overall condition. The property's location with regard to access and visibility are considered superior to the subject. Furthermore, the center is significantly larger than the subject. Market conditions at the time of sale were similar to current market conditions. The NOI was reportedly $314,580 ($7.49/SF) indicating an overall rate of 11.64%. This property operates at a level of net income that is superior to the subject. Sale 5 Sale number five, is the subject property, Shillington Plaza, which is located off of Route 724 in Reading, Cumru Township, Berks County, Pennsylvania. The subject property was transferred in September 1994 for $4,000,000, or $26.54 per square foot. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms length. Net Operating Income Analysis The net operating income level for the comparables ranged from $4.59 to $9.94 per square foot, per year. As noted, the subject's NOI is $3.58 per square foot. Given the correlation between price paid per square foot and NOI per square foot it would seem reasonable to conclude that the subject would sell below the range established by the comparable properties. The following chart depicts the calculations involved in developing adjustment factors to be applied to the respective price per square foot units of comparison developed from the comparables employed. - -------------------------------------------------------------------------------- 37 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- ================================================================================ NET OPERATING INCOME (NOI) ANALYSIS ================================================================================ Sale Subject's NOI/SF ---------------- Sale Price Adjustment Adjusted $/SF No. Sale's NOI/SF Multiplier $/SF for Subject - -------------------------------------------------------------------------------- 1 $3.58 0.36 $91.22 -$58.38 $32.84 ----- $9.94 2 $3.58 0.78 $41.79 -$9.19 $32.60 ----- $4.59 3 $3.58 0.44 $80.83 -$45.26 $35.57 ----- $8.10 4 $3.58 0.48 $64.40 -$33.49 $30.91 ----- $7.49 ================================================================================ For the most part, there is a direct correlation between the NOI/SF and sale price per square foot. As the net income level increases, so does the price paid per square foot. After adjusting the four sales, they support a range of value for the subject between approximately $30.00/SF to $37.00/SF. Based on our analysis, the subject's value would be approximately $32.00/SF. The subject has a total building area of 150,742 square feet. The value estimate via the Sales Comparison Approach is calculated as follows: ================================================================================ Net Rentable Area of Subject 150,742 square feet Value per square foot $32.00 per square foot Indicated Value: $4,823,744 ---------- ROUNDED: $4,800,000 ================================================================================ Overall, very little emphasis has been placed on this approach because of the quality of the data. It is used primarily as a check of the value derived via the Income Approach. We estimate the as is market value of the leased fee interest in the subject property, via the sales comparison approach, as of June 1, 1996, is: --- FOUR MILLION EIGHT HUNDRED THOUSAND DOLLARS --- ($4,800,000) - -------------------------------------------------------------------------------- 38 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH The Income Capitalization Approach reflects the subject's income-producing capabilities. This approach is based on the assumption that value is created by the expectation of benefits to be derived in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over period of time. The two common valuation techniques associated with the Income Capitalization Approach are direct capitalization and the discounted cash flow (DCF) analysis. DIRECT CAPITALIZATION Direct capitalization is the method used to convert a single year's estimate of income into a value indication. In direct capitalization, a precise allocation between return on and return of capital is not made because investor assumptions or forecasts concerning the holding period, pattern of income, or changes in value of the original investment are not simulated in the method. Direct capitalization is most appropriate when analyzing a stable income stream and in estimating the reversion at the end of a holding period. Using this method, the following sets forth the process: 1. Estimate the Potential Gross Income (PGI) from all sources that a competent owner should be able to generate from a property based on existing and/or market rents. 2. Deduct an estimate of Vacancy and Collection Loss (VCL) to arrive at an Effective Gross Income (EGI) estimate. 3. Deduct operating expenses from the estimate of EGI. The result is an estimate of the stabilized Net Operating Income (NOI). 4. Estimate an Overall capitalization rate (Ro, or OAR). 5. Divide the NOI by Ro, resulting in a value estimate at stabilized occupancy. 6. Adjust the stabilized value to account for "As Is" condition, if applicable. DISCOUNTED CASH FLOW ANALYSIS The discounted cash flow (DCF) analysis is a detailed analysis used when the future income is expected to be variant, usually as a result of numerous lease obligations and/or anticipated changes in income and expenses. It is also particularly relevant when institutional buyers are the most likely purchasers of the subject because institutional buyers often place great weight on this analysis. The DCF analysis specifies the quantity, variability, timing, and duration of NOIs and cash flows. Selecting the proper yield rate (discount rate) is essential. CB Commercial must consider the target yield sought by investors as well as yields derived from comparable sales and/or market information. The methodology is: 1. Estimate the before-tax cash flows for each period of a projected holding period net of any capital expenditures such as leasing expenses and tenant improvements. - -------------------------------------------------------------------------------- 39 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- 2. Estimate a discount rate and a terminal overall capitalization rate. 3. Estimate a selling price, known as the reversion, for the end of the projected holding period. 4. The cash flows and the reversion are then discounted to a present value estimate. APPROPRIATE CAPITALIZATION METHOD A number of factors were considered in evaluating the appropriateness of using the direct capitalization method and/or the DCF technique including the occupancy status, lease structures, above/below market rents and typical buyer behavior. As a result of considering the foregoing factors, both the DCF technique and the income capitalization technique are employed in this appraisal. ESTIMATE OF MARKET RENT Rent analysis involves both a study of market (comparable) rentals and the subject's existing rents (if any). Market rent is the rent that a property would most probably command in the open market; indicated by the current rents paid and asked for comparable space. SUMMARY OF COMPARABLE RENTALS CB Commercial surveyed competitive properties and lease transactions for comparison to the subject. The selected comparable rentals are summarized in the following chart with a map and discussions of each comparable provided on the following pages. ANALYSIS OF COMPARABLE RENTALS We have obtained comparable leases from shopping centers situated within the subject's regional market area which are summarized above. In terms of satellite space, comparables #1 through #5 indicate that the leased spaces range in size from 950 to 9,910 square feet which adequately represents the subject's square footage range. All the leases cited were signed between 1994 and 1995 and represent the most recent leasing activity in the competitive marketplace. The leases include a variety of uses and represent a similar tenant mix to the subject center. The above leases are considered to be generally similar to the subject in terms of condition, quality and location. We have examined the average effective rental rates of these comparables and determined that the effective rent is similar to the face rent, since their was no tenant improvements or free and escalation's were similar. - -------------------------------------------------------------------------------- 40 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
==================================================================================================================================== SUMMARY OF COMPARABLE SATELLITE SPACE RENTALS ==================================================================================================================================== Center Name & Term Start No. Location Tenant (Yrs) Date Size Rent/SF Escalation Comments - ------------------------------------------------------------------------------------------------------------------------------------ 1 Kingston Plaza Everything 1 yr 9/95 6,500 $5.50 $950 Step in No Option Third Avenue $0.99 Store 3 mos Year 2 % Rent = 3% over East of Pierce Street, $1,191,660 Kingston, PA - ------------------------------------------------------------------------------------------------------------------------------------ 2 Mark Plaza Spectrum Rents 5 yrs 10/95 3,600 $8.00 Flat for term 1 5-yr Option @ N/S Route 11, $9.00/SF Edwardsville, PA Keens Floral 5 yrs 8/95 7,000 $8.00 Annual step-up 1 5-yr Option @ Factory $8.83/SF % Rent = 3% over Natural Breakpoint Mattress Man 5 yrs 7/95 3,600 $11.50 Flat for term No Option (Pad Site) % Rent = 4% over Natural Breakpoint - ------------------------------------------------------------------------------------------------------------------------------------ 3 Birney Plaza Everything 3 yrs 09/95 4,000 $7.00 Flat for term 1 3 yr Option @ N/S Route 11, $0.99 Store $7.50/SF Moosic, PA % Rent = 3% over $933,000 - ------------------------------------------------------------------------------------------------------------------------------------ 4 Triangle Plaza Electronic 5 yrs 06/95 2,400 $11.50 Annual No Option Route 115 Systems Percentage No % Rent Wilkes-Barre, PA increase TCBY 5 yrs 03/95 2,200 $11.00 Annual Prctge 1 5 yr Option inc. No % Rent Party City 10 yrs 05/94 9,910 $11.00 $1.65/SF No Option Step-up No % Rent - ------------------------------------------------------------------------------------------------------------------------------------ 5 Gateway Plaza Holiday Hair 3 yrs 06/94 950 $15.48 Annual No Option N/S Route 11, Fashions Percentage No % Rent Edwardsville, PA (Renewal) increase McKenzie 3 yrs 06/94 3,080 $ 8.50 Annual Prctge No Option inc. No % Rent ==================================================================================================================================== SUMMARY OF COMPARABLE ANCHOR SPACE RENTALS ==================================================================================================================================== 6 Pottstown Center Wal-Mart 20 yrs 07/95 121,267 $6.99 Flat for term 6, 5-yr Options Montgomery Cty. No % Rent Pottstown, PA 7 Route 6 Mall K-Mart 25 yrs 03/95 119,229 $5.77 Flat for term 10, 5-yr Options N/S Route 6, % Rent = 1% over Wayne County $20,000,000 Honesdale, PA 8 Bradford Towne K-Mart 25 yrs 07/94 94,481 $5.00 Flat for term 10, 5-yr Options Centre, % Rent = 1% over Bradford County $16,875,000 Wysox, PA 9 Builder's Square Builder's 25 yrs 03/94 106,400 $10.05 Flat for term 10, 5-yr Options Center Square No % Rent Cetronia Road Lehigh County Whitehall, PA ==================================================================================================================================== Compiled by: CB Commercial Real Estate Group, Inc. ====================================================================================================================================
- -------------------------------------------------------------------------------- 41 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- COMPARABLE RENTALS MAP [GRAPHIC OMITTED] Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- These comparable centers are located throughout the metropolitan region in competitive areas to the subject property. Furthermore, they are all similar in age to the subject and considered to be of a similar functional design. All of the retail leases were written on a triple net basis, whereby the tenants assume their proportionate share of operating expenses, real estate taxes, and insurance. The higher rates typically reflect smaller satellite spaces, while lower rental rates are typically negotiated for anchor sized spaces. We have also considered asking rental rates in our analysis, however, they were deemed to be less reliable than the leases presented. As a result, we have not included asking rentals. The satellite space face rental rates ranged from $5.50/SF to $15.48/SF with a central tendency of $9.75/SF. However, the majority fell between $8.00/SF and $11.50/SF. The rents at the upper end of the range, or those in the $11.00/SF range best reflect the subject property's achievable rents. As a result, we have concluded to a rental rate within for the subject's satellite space of $11.00/SF. Based upon our analysis, we feel that a "net" rental rate of $11.00/SF is adequately supported. However, for larger satellite spaces a rental rate somewhat below is necessary. Thus, for spaces greater than 5,000 square feet, we considered a market rent of $8.00 per square foot, net. The anchor leases, or comparables #6 through #9, ranged from $5.00/SF to $10.05/SF with an average lease rate of $6.95/SF. The anchor rents reflect a close range for a variety of locations with the exception of comparable #9. However, this lease to Builder's Square has no percentage rent clause and, as a result, agreed to pay a higher base rent. As a result, we have concluded to a rental rate within for the subject's anchor space of $6.00/SF. Based upon our analysis, we feel that a "net" rental rate of $6.00/SF is adequately supported. ANALYSIS OF SUBJECT LEASES There have been no recent leases at the subject property. The typical lease at the subject property is triple net whereby the tenant is responsible for reimbursing the landlord for such expenses as real estate taxes, insurance, and common area maintenance (CAM). Existing leases range from $5.00 to $18.50 per square foot for spaces ranging from 1,200 to 7,200 square feet and $2.31 to $2.76 per square foot for spaces ranging from 40,000 to 94,500 square feet. It appears that all of the leases were long term. Since the subject owners recently purchased the property, historical data is limited. In our interviews with competing leasing agents and owners, we also inquired as to the market norm for rent escalations. Most of the agents agreed that three- to five-year leases are typically flat, with some sort of escalation or bump in 10-year leases. Recent leases within the market generally have annual percentage increases (generally 3%) or a periodic step-up. Regardless - -------------------------------------------------------------------------------- 43 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- of the method of escalations, most of the subject and comparable leases have escalations which are intended to be similar to anticipated increases in the CPI. We have assumed five-year lease terms which will remain flat. According to the subject leasing agent, TI's are typically not given, with the owner generally providing a " vanilla box" for new tenants and nothing for renewals. Retail space is typically taken "as-is" with the tenant fitting out their space to their own specifications. We project that no tenant alteration allowance would be provided for new or renewal leases. All of the leasing agents surveyed reported minimal if any free rent. A review of the immediate market indicated that no free rent was typically offered to tenants that leased space in the subject center over the past three to four years. Therefore, based upon the most recent leases within the market, as well as conversations with local leasing agents, we have projected that no free rent will be offered to prospective tenants. CONCLUSIONS: MARKET RENT ESTIMATE FOR THE SUBJECT PROPERTY Based on the previous analysis, the current market lease parameters for the subject property are estimated as follows: ================================================================================ CONCLUDED MARKET LEASE TERMS (PER SQUARE FOOT / YEAR) ================================================================================ Category Satellite Space Anchor Space - -------------------------------------------------------------------------------- Market Rent $11.00 & $8.00(NNN) $6.00 (NNN) Lease Term 5 Years 20 Years Annual Escalation 0.0% 0.0% Tenant Improvements $0.00 $0.00 Free Rent (Months) 0 Months 0 Months - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ CONTRACT RENT As discussed, the subject's leasable area is divided into six suites within one building and two outparcels. Currently, the subject is 100% occupied. Through our research of the subject property, which included a complete review of lease abstracts, rent rolls (both current and historical), and detailed discussions with the property manager and leasing agent, the following rent roll summary was utilized to detail currently leased suites and general information employed for this approach. Additionally, within the - -------------------------------------------------------------------------------- 44 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Addenda are copies of the tenant lease assumptions, generated by Pro-ject+ Plus, a computerized lease-by-lease analysis program. Information submitted to us and contained in the Addenda provide additional support to the data and assumptions inputted for this method and is assumed to be correct and reliable. CB Commercial reserves the right to amend our input assumptions if any documentation is subsequently available which contradicts that assumed for this method. Located on the following page is the subject rent roll summary.
====================================================================================================================== SHILLINGTON PLAZA - READING, PA RENT ROLL ====================================================================================================================== Square Rent/ Annual Suite Tenant Feet Begin End SF Rent - ---------------------------------------------------------------------------------------------------------------------- 1 K-Mart 94,500 08/74 07/99 $ 2.76 $261,000 2 Weiss Market 40,107 08/74 08/99 $ 2.31 $ 92,800 3 Revco Drugs 7,200 03/75 02/00 $ 7.50 $ 54,000 4 Holiday Hair Fashions 1,200 10/76 10/96 $ 5.00 $ 6,000 5 Associates Consumer Discount 1,600 12/74 11/97 $10.00 $ 16,000 6 Reading Home Video 1,200 06/87 06/96 $ 7.75 $ 9,300 7 Meridian Bank 2,535 03/75 02/00 $ 7.77 $ 19,700 8 Sovereign Bank 2,400 01/75 12/99 $18.50 $ 44,400 Total Leased Square Feet 150,742 Average Rent: $ 3.34 $503,200 Vacant Space 0 Occupancy-Overall 100% - ---------------------------------------------------------------------------------------------------------------------- Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ======================================================================================================================
The subject is comprised of regional and local tenants including Weiss supermarket and Revco Drugs. Additionally, K-Mart is a national tenant. Overall, the quality of the tenancy is considered to be good for the area. Current rental rates range from $5.00/SF to $18.50/SF. SPECIAL LEASE PROVISIONS AND ASSUMPTIONS The following discussion summarizes any lease provisions and assumptions of special note. Pending Leases There are no pending leases. Renewal Options Options to renew at below or above market rent may have an impact on the valuation analysis. For example, if below market renewals are exercised, they may result in a downward impact on value. However, to the extent that re-tenanting costs are saved (rent loss during downtime, tenant improvements, leasing commissions, etc.), there may be an advantage in having the - -------------------------------------------------------------------------------- 45 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- tenant renew at some rate below market rent in order to avoid these costs. Some of the subject leases have renewal options. Where applicable, if a tenants' option rent is below market, we have assumed that the tenant would exercise its renewal option. Conversely, if a tenants' option rent is above market, we have assumed that the tenant would not exercise its renewal option and terminate the lease. EXPENSE REIMBURSEMENTS Current and future hypothetical retail leases which will encumber the subject property will be based upon triple net lease structures and are consistent with recent leases written at the subject property and the market in general. The tenants will be responsible for reimbursing the landlord for their pro rata share of operating expenses including their pro rata share of CAM, real estate taxes, and insurance. The pro rata share calculations for future tenants are calculated by dividing the tenant's occupied rentable area by the gross leasable area of the center. The following is a breakdown of the subject's historical recoveries and CB Commercial's projections for the proforma. It should be noted that the subject's operating statements are based on a fiscal year basis, beginning June 1 and continuing through May 31. Expense Reimbursements Expense reimbursements for the subject property consist of real estate taxes, insurance, and common area maintenance. Common area maintenance expenses consist utilities, management fees, general and administrative, cleaning and repairs, and maintenance expenses. The subject's historical expense reimbursements are as follows: ================================================================================ EXPENSE REIMBURSEMENT ================================================================================ Year Total $ Amount - -------------------------------------------------------------------------------- 1993 NA 1994 NA 1995 $129,467 1996 Budget $133,608 Year 1 Pro Forma $170,340 - -------------------------------------------------------------------------------- Source: Mark Centers Trust ================================================================================ The first year of our DCF model indicates reimbursements of $170,340. Historical expense reimbursements have increased over the past two years. As previously noted, the historical data for the subject is limited since the property was purchased in 1994. The budgeted amount appears to be unreasonably low based upon projected expenses and reimbursement clauses for existing tenants. Since our estimated operating expenses (i.e., CAM and Insurance) are somewhat higher than budgeted, the recovery will also be somewhat higher. - -------------------------------------------------------------------------------- 46 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- OTHER INCOME This income category can be derived from several different sources including tenant service income, merchants association fees, late fee income, short-term storage income, professional services provided for the tenants by the landlord/management, ground rent as well as other miscellaneous sources. The only other source of additional income at the subject center CAM recovery from two sites adjacent to the subject. JEKA, Inc. and Evans Products Company pay $150 and $350 per month. PERCENTAGE RENT INCOME In addition to the basic rental charges, the tenants are sometimes responsible for paying the landlord additional rent equal to a specified percentage of the tenant's gross sales made in, upon, or from the premises, over a breakpoint factor or according to a specific schedule. Four of the subject tenants have percentage rent clauses contained within their leases.
============================================================================================================= PERCENTAGE RENT CLAUSES ============================================================================================================= CBC's FY97 Tenant Breakpoint Percent Year Gross Sales % Rent Paid Projection - ------------------------------------------------------------------------------------------------------------- K-Mart $8,700,000 1.00% 1994 $17,115,411 $85,154 $17,000,000 1995 $17,067,131 $77,495 Weiss Market $9,280,000 1.00% 1994 $6,559,856 $ 0 $6,550,000 1995 $6,546,863 $ 0 Revco Drugs $2,700,000 2.0% 1994 $1,712,438 $ 0 $1,790,000 1995 $1,788,039 $ 0 Holiday Hair $ 100,000 6.00% 1994 $119,532 $ 1,172 $140,000 1995 $139,910 $ 2,395 - ------------------------------------------------------------------------------------------------------------- * K-Mart percentage rent is offset by real estate tax recaptures. According to information provided , there are no other offsets. - ------------------------------------------------------------------------------------------------------------- Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. =============================================================================================================
Given the aforementioned sales histories, we have projected the gross sales for each tenant as illustrated in the right column of the table. We have also projected that the gross sales figures will grow by 3.0% per annum over the course of the cash flow projection. POTENTIAL GROSS INCOME The potential gross income for the subject property is summarized as follows. - -------------------------------------------------------------------------------- 47 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ STABILIZED POTENTIAL GROSS INCOME (FY 1997) ================================================================================ Totals - -------------------------------------------------------------------------------- Total Minimum Rent $501,036 Expense Reimbursement - Common Area Maintenance Recovery (Includes Insurance Recover) $ 69,831 - Real Estate Tax Recovery $100,509 - Percentage Rent $ 50,651 -------- Potential Gross Income $737,616 - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ VACANCY AND COLLECTION LOSS This is an allowance for reductions in potential income attributable to vacancies, tenant turnover, and non-payment of effective rent. In the direct capitalization process, a market-derived, stabilized vacancy and collection loss estimate is subtracted from potential gross income in order to arrive at effective gross income. The subject property is currently 100% leased. Furthermore, the subject's competitive market exhibits a vacancy level of approximately 4.0%. Due to the long-term leases at the subject property, the average vacancy rate over the projected holding period, which is attributed to downtime between leases, approximates a minimal 1.0%. In addition to vacancy, we estimated a blended credit loss factor of 1.0% which takes into account both national and local tenants at the subject center. Therefore, the combined long-term vacancy and credit loss factor for the subject property amounts to approximately 2.0%. In the first year of our discounted cash flow analysis, the combined credit loss amounts to $14,752. EFFECTIVE GROSS INCOME Given our estimate of potential gross income, other income, and a vacancy and collection loss, the estimated effective gross income is derived as follows: ================================================================================ EFFECTIVE GROSS INCOME (FY 1997) ================================================================================ Potential Gross Income: $ 737,616 Less: Collection Loss ($ 14,752) Miscellaneous Income $ 506 --------- Effective Gross Income: $ 723,370 ================================================================================ Our estimate of effective gross income used in direct capitalization is $723,370. This figure is the same as the EGI in the first year of our cash flow in the discounted cash flow method. - -------------------------------------------------------------------------------- 48 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- OPERATING EXPENSE ANALYSIS In projecting the revenues and expenses for the subject property, we have analyzed the historical figures for fiscal years 1993 through 1995 as well as management's forecast of revenues and expenses for fiscal year 1996. In addition, we have utilized the Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers publication to assist in our analysis. We have considered the category " Regions 1, 2 & 3 (East): Open Shopping Centers" as the most representative of the subject property. A summary of the average expenses taken from this publication increased at an inflationary rate to reflect our fiscal year 1997 analysis are presented as follows: ================================================================================ COMPARABLE EXPENSE ANALYSIS ================================================================================ Expense Category P.S.F. - -------------------------------------------------------------------------------- General & Administrative $ 0.08 Repairs & Maintenance $ 0.36 Services $ 0.46 Utilities $ 0.18 ------ Total CAM $ 1.08 Real Estate Taxes $ 1.26 Insurance $ 0.15 Management Fees $ 0.41 Total Operating Expenses $ 2.90 - -------------------------------------------------------------------------------- Source: Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers ================================================================================ Our estimate of the subject's stabilized expenses are detailed as follows. Common Area Maintenance The subject's historical and projected common area maintenance (CAM) expenses are as follows: ================================================================================ COMMON AREA MAINTENANCE EXPENSE ================================================================================ Year Total $ Amount - -------------------------------------------------------------------------------- 1993 NA 1994 NA 1995 $32,392 1996 Budget $53,372 CB 1996 Projection $55,000 - -------------------------------------------------------------------------------- Source: Mark Centers Trust ================================================================================ - -------------------------------------------------------------------------------- 49 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Common area maintenance (CAM) charges generally includes various items such as general and administrative expenses, repair and maintenance expenses, utilities, and general services such as cleaning, landscaping, security, and common area insurance expenses. We project the total CAM expense in 1996, before management fees, at $55,000 or $0.36/SF. This is somewhat lower than the average CAM expenses for the properties surveyed by IREM of $1.23/SF for open shopping centers in the east. However, the subject's historical expenses have ranged from $0.21/SF to $0.35/SF. Given the subject's historical CAM expense structure coupled with its effective age, occupancy and the services provided, the subject's projected CAM figure is considered reasonable. Property Taxes Historical and budgeted property tax expenses are as follows: ================================================================================ PROPERTY TAX EXPENSE ================================================================================ Year Total $ Amount - -------------------------------------------------------------------------------- 1993 NA 1994 NA 1995 $ 107,857 1996 Budget $ 107,796 Year 1 Pro Forma $ 99,860 - -------------------------------------------------------------------------------- Source: Mark Centers Trust ================================================================================ As discussed fully within the tax and assessment data section of the report, estimated taxes for fiscal year 1997 are projected to be $99,860. Insurance Historical and budgeted insurance expenses are as follows: ================================================================================ INSURANCE EXPENSE ================================================================================ Year Total $ Amount - -------------------------------------------------------------------------------- 1993 NA 1994 NA 1995 $12,550 1996 Budget $10,764 CB 1996 Projection $12,000 - -------------------------------------------------------------------------------- Source: Mark Centers Trust ================================================================================ Insurance at the subject property includes both liability insurance and fire insurance. This expense has decreased from 1995 to 1996 to a level of $0.07/SF. We have placed primary - -------------------------------------------------------------------------------- 50 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- emphasis on the subject's historical and 1996 budgeted insurance expenses and have estimated the insurance expense at $12,000, or $0.08/SF. Professional Management Fee In order to maintain the control of the property and subsequently ensure the stream of income that it generates, it is necessary to employ either internal or outside management. In the case of the subject property, the property is managed internally and no management expense has been reflected in historical statements. Typical professional management fees in the local market range from 1.0% to 5.0% of effective gross income. Based upon the size and nature of the subject improvements, we have applied a management expense of 2.0% of effective gross income. Because management is calculated based on a percentage of effective gross income, this expense will vary each year because of fluctuations in the income stream. In the first year of our analysis, this expense equates to $14,467 or $0.10/SF. Replacement Reserves This expense typically represents a reserve for future replacement of long-lived items. The amount of reserve and whether it is included or not in the direct capitalization and DCF analyses depends on the actions reflected by buyers and sellers in the local market. Based on the available comparable data and discussions with brokers and investors, replacement reserves generally range from $0.10/SF to $0.20/SF for retail properties of similar quality and condition as the subject. Given the subject's average condition, we have estimated this expense at $0.10/SF or $15,074 in 1996 increasing at our projected annual expense growth rate of 3.0%. Based on discussions with local market participants, replacement reserves are typically subtracted in calculating NOI when determining the cash flow in the DCF analysis. Total Concluded Operating Expenses The concluded stabilized operating expenses for the subject total an estimated $198,487, or $1.32 per rentable square foot. This total expense estimate is for the first year of our proforma and incorporates fiscal year conversions not reflected in the previous 1996 calendar year estimates. The expense is somewhat lower than the average indicated by IREM ($2.90/SF) but judged reasonable given the historical and budgeted operations of the subject. CAPITALIZATION RATE There are several methods for deriving an overall capitalization rate for direct capitalization. A common method for establishing an overall capitalization rate for properties similar to the subject is to review the criteria of major investors in the marketplace. This may serve as a check against other techniques or may be a primary source when ample data exists. While derivation of capitalization rates from comparable sales is preferable, we were unable to obtain adequate income and expense data to employ this method from the sales used within the - -------------------------------------------------------------------------------- 51 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Sales Comparison Approach. Therefore, the investor survey method is used as the primary approach in deriving our overall capitalization rate. The subject property is a retail shopping center that would be attractive to either a local or a national investor. The category in the published investor survey most comparable to the subject is class B neighborhood shopping center. The investors typically interviewed for the survey are regional or national investors associated with pension funds, REIT's, insurance companies, financial institutions, etc. The information below is taken from CB Commercial most recent National Investor Survey (first quarter 1996).
================================================================================================================ SUMMARY OF INVESTOR SURVEY OVERALL CAPITALIZATION RATES NEIGHBORHOOD SHOPPING CENTERS - CLASS B - ---------------------------------------------------------------------------------------------------------------- Investor Survey Ro Range Average Date of Survey - ---------------------------------------------------------------------------------------------------------------- CB Commercial National Investor Survey 9.0% - 11.5% 10.3% First Quarter, 1996 - ---------------------------------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================================================
The previous survey indicates an overall range of 9.0% to 11.5% for neighborhood shopping centers with an average of approximately 10.3%. The capitalization rate reflects the quality and duration of the income stream as well as the physical characteristics of the property. The tenant mix at the subject center is considered to be good for the area with mostly regional tenants. The largest tenant at the subject, K-Mart, is national tenant. The K-Mart lease expires in 1999; however, K-Mart has nine, five-year options to renew at the same terms. Weiss Market, a regional tenant, also expires in 1999. However, Weiss also has options to renew. Revco Drugs, a national tenant, expires in 2000. Lease expiration is fairly even throughout the holding period which reduces risk. The center is currently 100% occupied. Overall, the quality, quantity and duration of the cash flow is considered to be good. With respect to physical characteristics, the subject is a functional neighborhood center of average quality and in average overall condition. In addition, the subject is situated in a good retail location with moderate to high volumes of traffic. Based upon this survey and the factors discussed above, an 10.5% overall capitalization rate appears to be appropriate for the subject property. Direct Capitalization Summary A summary of the direct capitalization method as applied to the subject property is illustrated in the following table: - -------------------------------------------------------------------------------- 52 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ SHILLINGTON PLAZA DIRECT CAPITALIZATION SUMMARY ================================================================================ Category Total P.S.F. - -------------------------------------------------------------------------------- Income Total Market Rent $ 501,036 $ 3.32 Recovery Income 170,340 1.13 ----------- ------ Gross Rental Income $ 671,376 $ 4.45 Less: Vacancy and Credit Loss (14,752) (0.10) Plus: Other Income 506 0.01 Plus: Percentage Rents $ 66,240 0.44 ----------- ------ Effective Gross Income $ 723,370 $ 4.80 Expenses Common Area Maintenance (CAM) (55,688) (0.37) Real Estate Taxes (101,108) (0.67) Insurance (12,150) (0.08) Management Fees (14,467) (0.10) Replacement Reserves (15,074) (0.10) ----------- ------ Total Expenses $ (198,487) $(1.32) OER 27% Net Operating Income $ 524,883 $ 3.48 CAPITALIZATION OF NOI: @10.5% $ 4,998,886 $33.16 Reconciled Value $ 5,000,000 $33.16 - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The concluded market value of the subject property, based on the direct capitalization method, is $5,000,000. - -------------------------------------------------------------------------------- 53 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW ANALYSIS Our DCF assumptions are summarized as follows. Most of the following assumptions have been discussed and supported within prior sections of the report. A discussion of the discount rate, terminal capitalization rate and holding period follow the assumptions summarized below. ================================================================================ SUMMARY OF DISCOUNTED CASH FLOW ASSUMPTIONS SHILLINGTON PLAZA ================================================================================ General Assumptions Start Date June 1, 1996 Terms of Analysis 10 years Basis (Calendar / Fiscal) Fiscal Software Project + Plus Growth Rate Assumptions Expenses 3.0% Market Rent 3.0% Real Estate Taxes 3.0% Inflation (CPI) 3.0% Market Rent Assumptions Anchor $ 6.00 (NNN) Satellite $11.00 & $8.00(NNN) Leasing Assumptions Lease Term 5 Years Renewal Probability 50% Weighted Average of: Tenant Improvements $0.00 Months of Free Rent 0 Leasing Commissions (Cashed-Out) 4.5% Down Time Between Leases 6 Months Tenant Assumptions Existing tenant leases were entered at contract rent and terms. Speculative renewals assume tenants will pay base rent plus their pro rata share of CAM, real estate taxes and insurance. Contractual recoveries were input into the model per their respective leases. Miscellaneous Assumptions Credit Loss 2.0% Avg. Occupancy Over Projection Period 99% Structural Maintenance/ Reserves ($/SF) $ 0.10 Financial Assumptions Discount Rate (IRR) 12.50% Terminal Overall Capitalization Rate (RO) 11.00% Costs of Sale 2.00% - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 54 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNT RATE ANALYSIS A discount rate is a rate of return on capital utilized to capitalize future payments or receipts to present value. It is based on the time value of money concept. For appraisal purposes, the rate used to convert income to property value should represent the annual rate of return necessary to attract investment capital. The rate is influenced by many considerations, including the degree of apparent risk, market attitudes with respect to future inflation, the prospective rates of return for alternative investment opportunities, supply of and demand for mortgage funds, and the availability of tax shelters. Because rates of return used in income capitalization represent prospective rates, as distinguished from historical rates, special consideration is given to market perceptions of risk and changes in purchasing power. Although it is not possible to prove conclusively the suitability of a particular rate of return on the basis of market evidence, the chosen rate should be consistent with the available evidence. Rate selection requires judgment and knowledge concerning prevailing market attitudes and economic indicators. Both the discount rate and the reversionary capitalization rate must reflect the relative risk perceived by investors for the specific market being studied. Generalities must be avoided. To determine such rates, we have used surveys of real estate investors analyzed and adjusted for comparative returns found in the capital markets. National investor surveys include data on investors operating regionally and nationally, such as representatives of insurance companies, commercial banks, pension funds, investment banking firms, syndication firms, and investment advisory firms. Such companies invest in all types of properties, including office buildings, retail shopping centers, hotels, apartment complexes, and industrial facilities. These surveys are valuable for determining general parameters but must be honed to the local market. Based on surveys from CB Commercial Real Estate Group Inc. for the first quarter 1996, investment criteria for numerous market participants including investors that would be in competition for acquiring a property such as the subject are illustrated below.
==================================================================================================================================== FIRST QUARTER 1996 NATIONAL INVESTOR SURVEY CLASS B NEIGHBORHOOD SHOPPING CENTERS ==================================================================================================================================== TYPE OF FIRM OVERALL CAP. RATES GENERAL DISCOUNT REAL RATE INFLATION RATE OF RETURN ----------------------------------------------- GOING-IN TERMINAL (IRR) (RRR) ==================================================================================================================================== Range: 9-11.5 10-12 2-4 12-14.5 9.5-11 Average 10.3 10.8 3.1 13.1 10.1 ==================================================================================================================================== Change from -20 +10 -40 +50 +190 3rd Qtr Survey ==================================================================================================================================== Source: CB Commercial Real Estate Group Inc. - 1st Quarter 1996
- -------------------------------------------------------------------------------- 55 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- We have surveyed national real estate investors for their investment criteria when purchasing real estate such as the subject. Investor expectations for inflation range from 2% to 4%, with an average of 3.1%. We have selected an inflation rate for our analysis of 3.0%. The discount rate reflects the quality and duration of the income stream as well as the physical and locational characteristics of the property. As discussed within the overall rate section, the tenant mix at the subject center is considered to be good for the area with mostly regional tenants. Moreover, lease expiration is fairly even throughout the holding period which reduces risk. The center is currently 100% occupied. Overall, the quality, quantity and duration of the cash flow is considered to be good. With respect to physical characteristics, the subject is a functional neighborhood center of average quality and in average overall condition. In addition, the subject is situated in an average retail location with relatively low volumes of traffic. In general, the discount rate (IRR) is comprised on a safe rate (usually Treasuries) and a risk premium. The risk premium is difficult to quantify but with sound logic a reasonable rate can be ascertained. The chart presented below graphically depicts real estates position within the risk/reward graph.
- ------------------------------------------------------------------------------------------------------------------------------------ INVESTOR RISK VERSUS RETURN REQUIREMENTS Anticipated Return _ Real Estate _ Common Stocks _ Corporate Bonds _ Mortgage Backed Securities _ Municipal Bonds _ T - Bills Riskless Rate - ------------------------------------------------------------------------------------------------------------------------------------
Perceived Level of Risk US Treasury notes and bonds are considered risk free since they are backed by the United States government. Their rates only fluctuate with perceived inflation. The use of this, or any short term investment including the prime rate or LIBOR is meaningless when compared to an - -------------------------------------------------------------------------------- 56 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- investment with a 10-year holding period. Accordingly, as a starting point, we only considered risk free or nearly risk free investments with a maturity of 10 years. These include Treasuries, corporate bonds and municipal bonds. Adjusted for daily fluctuations, these debt offerings are yielding 5.59% to 8.25%. Mortgaged backed securities generally tend to fall above these instruments. The next layer of risk would include debt rated as low as BBB. These notes are yielding as much as 10%. Long-term mortgages are also yielding over 10% considering the mortgage constant on a note priced at 250 to 300 basis points over comparable Treasuries. Riskier investments such as junk bonds vary widely from 12% to 22% on an unleveraged basis. Real estate, as indicated on the chart above falls between common stock (10%) and junk bonds (16%). To eliminate the burden of illiquidity, REIT's and similar investments are being created. They represent a quasi-real estate opportunity. REIT's are currently providing dividends ranging from 6% to 8% but offer potential yields of 15% to 20% Various financial instruments are yielding between 5.59% and 8.25% depending upon the type of investment as indicated on the chart below based on data obtained from the Federal Reserve Statistical Release for the week ending May 17, 1996. It should be noted that over the past year we have witnessed an increase in the interest rate of all of the following instruments. ================================================================================ INSTRUMENT RATE ================================================================================ Prime Rate 8.25% - -------------------------------------------------------------------------------- Municipal Bonds 5.96% - -------------------------------------------------------------------------------- Short-Term Treasury Securities (1 year) 5.59% - -------------------------------------------------------------------------------- Long Term Treasury Securities (10 years) 6.68% - -------------------------------------------------------------------------------- Corporate Aaa Bonds (10+ years) 7.57% - -------------------------------------------------------------------------------- Corporate Baa Bonds (10 + years) 8.25% ================================================================================ The risk premium is the rate added to Treasuries to account for illiquidity, the capital markets and the economy. Whether the risk premium decreases in the near term is dependent solely on inflation, the growth of the economy and capital markets. During 1995, the Federal Reserve decreased interest rates in order to stimulate a sluggish economy. The low rates have continued during the early portion of 1996, however, have recently begun to ascend. Over the longer term, as the existing supply of space is absorbed, the risk premium will decrease. Based on the above, we feel that the current required rate of return (IRR) for the subject would fall slightly below the middle of the range at 12.5%. This reflects the quality, quantity and cash flow risk associated with the subject property. As such, we have utilized a discount rate of 12.5% in our analysis. - -------------------------------------------------------------------------------- 57 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- TERMINAL RATE To estimate the appropriate terminal capitalization rate, we have considered the rates reflected in the investment criteria outlined above for both going-in and terminal capitalization. Typically, under stable market conditions, the terminal capitalization rate will be greater than the going-in rate to reflect the risk associated with the holding period. Typically 50 to 100 basis points are added on to the going-in cap rate under stable market conditions to account for the additional risk. Furthermore, our national investor survey also indicated an average terminal capitalization 50 basis points greater than the going-in rate. It is evident by historical and current performance of the center and it is our opinion that the subject property will encounter average-to-good market acceptance in the future. It is our opinion that a terminal capitalization rate of 11.0% is the most appropriate for the subject property. A 2% deduction for costs of sale has been utilized to reflect the net reversionary value. HOLDING PERIOD To apply the discounted cash flow analysis, an estimate must be made of the appraised property's holding period based on typical investors' motives in the local market. Historical investment holding periods of similar shopping centers typically have ranged from 10 to 15 years. A 10- to 15- year holding period was analyzed to test the property's sensitivity to roll-overs. A 10-year holding period was selected. Our discounted cash flow analysis is presented on the following page. - -------------------------------------------------------------------------------- 58 Shillington Plaza, Reading, PA Cash Flow Report - -------------------------------------- -------------------------------------- Building Size 150,742 Reconciled Value $ 4,821 Cost of Sales 2.000% Value per SF $ 31.98 Hold Period (Years) 10 % Residual of Recon. V 36.9% Reduce Residual by Cap Ex Yes Direct Cap Rate 10.50% Residual Discount Rate 12.50% Direct Cap Value $ 5,142 - -------------------------------------- --------------------------------------
------------------------------------------------------------------------------------------- Compounded Ann. 1997 1998 1999 2000 2001 2002 2003 Avg. Growth ------------------------------------------------------------------------------------------- 1.11% BASE RENT 501,036 511,424 517,428 494,634 522,633 516,376 522,295 N/A Free Rent 0 0 0 0 0 0 0 3.02% Expense Recoveries 170,340 176,232 181,888 183,111 192,842 197,889 203,862 6.51% Percentage Rent 66,240 70,396 75,718 81,200 86,845 92,661 98,650 - ----------- ------------------------------------------------------------------------------------------- 2.16% GROSS INCOME 737,616 758,052 772,034 758,945 802,320 806,926 824,807 2.16% Credit/Vacancy Loss (14,752) (15,161) (15,501) (15,179) (16,046) (16,139) (16,496) 3.00% Miscellaneous Incomes 506 521 537 553 570 587 604 - ----------- ------------------------------------------------------------------------------------------- 2.16% EFFECTIVE GROSS INCO 723,370 743,412 790,070 744,319 786,844 791,374 808,915 - ----------- 2.94% TOTAL EXPENSES 183,413 188,883 194,436 199,498 205,887 211,681 217,909 - ----------- ------------------------------------------------------------------------------------------- 1.88% NET OPERATING INCOM 539,957 554,529 565,634 544,821 580,957 579,693 591,006 N/A Commissions 5,353 3,151 0 3,647 14,792 5,320 0 N/A Tenant Improvements 0 0 0 0 0 0 0 N/A Capital Additions 15,074 15,526 15,992 16,472 16,966 17,475 17,999 - ----------- ------------------------------------------------------------------------------------------- N/A TOTAL DEDUCTIONS 20,427 18,677 15,992 20,119 31,758 22,795 17,999 - ----------- ------------------------------------------------------------------------------------------- 1.95% CASH FLOW 519,530 535,852 549,642 524,702 549,199 556,898 573,007 - ----------- TOTAL CASH FLOW 519,530 535,852 549,642 524,702 549,199 556,898 573,007 ------------------------------------------------------------------------------------------- Debt Service N/A N/A N/A N/A N/A N/A N/A ------------------------------------------------------------------------------------------- CASH FLOW AFTER DEB 519,530 535,852 549,642 524,702 549,199 556,898 573,007 ------------------------------------------------------------------------------------------- CUMULATIVE SURPLUS N/A N/A N/A N/A N/A N/A N/A ------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- Implied Overall Rate 11.20% 11.50% 11.73% 11.30% 12.05% 12.02% 12.26% Cash on Cash Return 10.78% 11.12% 11.40% 10.88% 11.39% 11.55% 11.89% --------------------------------------------------------------------------------------------------------------------- ----------------------------------------------- Compounded Ann. 2004 2005 2006 2007 Avg. Growth ----------------------------------------------- 1.11% BASE RENT 529,937 538,367 535,891 559,444 N/A Free Rent 0 0 0 0 3.02% Expense Recovertes 210,497 215,995 218,995 229,384 6.51% Percentage Rent 104,820 111,174 117,720 124,461 - ----------- ----------------------------------------------- 2.16% GROSS INCOME 845,254 865,536 872,606 913,289 2.16% Credit/Vacancy Loss (16,905) (17,311) (17,452) (18,266) 3.00% Miscellaneous Incomes 623 641 661 680 - ----------- ----------------------------------------------- 2.16% EFFECTIVE GROSS INCO 828,972 848,866 855,815 895,703 - ----------- 2.94% TOTAL EXPENSES 224,361 230,992 237,552 244,963 - ----------- ----------------------------------------------- 1.88% NET OPERATING INCOM 604,611 617,874 618,563 650,740 N/A Commissions 3,653 0 21,374 0 N/A Tenant Improvements 0 0 0 0 N/A Capital Additions 18,539 19,095 19,668 20,258 - ----------- ----------------------------------------------- N/A TOTAL DEDUCTIONS 22,192 19,095 41,042 20,258 - ----------- ----------------------------------------------- 1.95% CASH FLOW 582,419 598,779 577,221 630,482 - ----------- TOTAL CASH FLOW 582,419 598,779 577,221 630,482 ----------------------------------------------- Debt Service N/A N/A N/A N/A ----------------------------------------------- CASH FLOW AFTER DEB 582,419 598,779 577,221 630,482 ----------------------------------------------- CUMULATIVE SURPLUS N/A N/A N/A N/A ----------------------------------------------- ------------------------------------------------------------------------- Implied Overall Rate 12.54% 12.82% 12.82% 13.50% Cash on Cash Return 12.08% 12.42% 11.97% 13.08% -------------------------------------------------------------------------
NOI and CF Trends [GRAPHIC OMITTED] - ---------------------------------------------------------------- Sale/Yield Matrix (000's) Terminal Cap Rate ----------------------------------------------- Disc Rate 10.75% 11.00% 11.25% 11.50% - ---------------------------------------------------------------- 12.00% 5,009 4,966 4,924 4,885 ----------------------------------------------- 12.25% 4,935 4,893 4,852 4,813 ----------------------------------------------- 12.50% 4,862 4,821 4,781 4,743 ----------------------------------------------- 12.75% 4,791 4,750 4,712 4,675 ----------------------------------------------- 13.00% 4,721 4,682 4,644 4,607 ----------------------------------------------- 13.25% 4,653 4,614 4,577 4,542 - ---------------------------------------------------------------- ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW CONCLUSION We used "PRO-JECT +plus" computer software to create a cash flow model for a long term hold. Reference is made to the "Annual Cash Flow Report", generated by the Pro-ject software, on the previous page which provides a summary of cash flow from all sources. We utilized a 10-year holding period and have discounted the cash flow on a fiscal year basis from 1997 to 2006. The cash flow incorporates the terms of existing leases during the analysis period and our assumptions regarding the lease-up of vacant space. It also calculates renewal rentals when leases expire based on current market rent escalated at a growth factor. In addition, a forecast was made for 15 years to check for any irregularities in the income stream which may artificially affect the reversionary sale price. It should be noted that based on our analysis of the extended holding period indicated that there was no irregularities. We capitalized the 11th year net operating income to determine the reversionary value at the end of year 10. CONCLUSION OF INCOME CAPITALIZATION APPROACH The preceding analysis indicates the following conclusions: ================================================================================ INCOME CAPITALIZATION APPROACH VALUES ================================================================================ Method Indicated Value - -------------------------------------------------------------------------------- Direct Capitalization $ 5,000,000 Discounted Cash Flow $ 4,800,000 - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate ================================================================================ Greater emphasis is placed on the DCF analysis because it is the method likely to be used by a typical investor. As a result, based on the Income Capitalization Approach, CB Commercial concludes a value estimate for the subject property of $4,800,000. This equates to $31.84 per rentable square foot. - -------------------------------------------------------------------------------- 60 CONCLUSION ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- RECONCILIATION OF VALUE CB Commercial was instructed to estimate the market value of the leased fee interest in the subject property. The value conclusions for each applicable approach are summarized below. ================================================================================ SUMMARY OF VALUE CONCLUSIONS ================================================================================ Cost Approach N/A Sales Comparison Approach $ 4,800,000 Income Capitalization Approach $ 4,800,000 - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ The Income Capitalization Approach is considered the most persuasive method for valuing the subject property. This approach is predicated on the principle of anticipated economic benefits and, therefore, best reflects the investment characteristics of the subject. Properties such as the subject are typically purchased by investors; thus, this approach must closely parallels the anticipated analysis that would be employed by the most typical purchaser. Since the subject property has a number of existing leases with a variety of terms, the DCF technique best models the future cash flow stream to a prospective buyer. The Sales Comparison Approach is predicated on the principle that an investor would pay no more for an existing property than for a comparable property with similar utility. This approach is contingent on the reliability and comparability of available data. The data developed was considered sufficiently reliable to reach a value conclusion by the Sales Comparison Approach. However, due to the lack of truly comparables sales in recent years, this method is given secondary consideration in the reconciliation. The Cost Approach is predicated on the principle that an investor would pay no more for an existing property than it would cost to acquire land and construct a building with similar utility. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Furthermore, due to the age of the subject and current market conditions, accrued depreciation would be substantial and difficult to estimate. An investor would not use the Cost Approach due to the imprecise nature of estimating the accrued physical, functional, or external depreciation affecting the improvements. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. - -------------------------------------------------------------------------------- 61 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- The final value conclusion and the approaches relied upon give strong consideration to the market behavior of the typical buyer and current market environment for the property appraised. Based on the foregoing analysis, it is concluded that the market value of the leased fee interest in the subject property, subject to the assumptions and limiting conditions, as of June 1, 1996, is: FOUR MILLION EIGHT HUNDRED THOUSAND DOLLARS ($4,800,000) This value is subject to all of the assumptions and limiting conditions stated throughout the report, including specific assumptions and limiting conditions. - -------------------------------------------------------------------------------- 62 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS 1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to total that would adversely affect marketability or value. CB Commercial is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CB Commercial, however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject property's title should be sought from a qualified title company that issues or insures title to real property. 2. It is assumed that improvements have been constructed or will be constructed according to approved architectural plans and specifications and in conformance with recommendations contained in or based upon any soils report(s). Unless otherwise specifically noted in the body of this report, it is assumed: that any existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are, or will be upon completion, in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that it or they will withstand any known elements such as windstorm, hurricane, tornado, flooding, earthquake, or similar natural occurrences; and, that the improvements, as currently constituted, conform to all applicable local, state, and federal building codes and ordinances. CB Commercial professionals are not engineers and are not competent to judge matters of an engineering nature. CB Commercial has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CB Commercial by ownership or management; CB Commercial inspected less than 100% of the entire interior and exterior portions of the improvements; and CB Commercial was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CB Commercial reserves the right to amend the appraisal conclusions reported herein. 3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property was not observed by the appraisers. CB Commercial has no knowledge of the existence of such materials on or in the property. CB Commercial, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the appraisal. 4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CB Commercial. This report may be subject to amendment upon re-inspection of the subject property subsequent to repairs, modifications, alterations and completed new construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels of operation. 5. It is assumed that all factual data furnished by the client, property owner, owner's representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CB Commercial has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, - -------------------------------------------------------------------------------- 63 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- numerical street addresses, lot and block numbers, Assessor's Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CB Commercial reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CB Commercial of any questions or errors. 6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CB Commercial will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject. 7. CB Commercial assumes no private deed restrictions, limiting the use of the subject property in any way. 8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposit or subsurface rights of value involved in this appraisal, whether they be gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred. 9. CB Commercial is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject. 10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market. 11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CB Commercial does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CB Commercial. 12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CB Commercial to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form. 13. Unless otherwise noted in this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated. 14. This study may not be duplicated in whole or in part without the specific written consent of CB Commercial nor may this report or copies hereof be transmitted to third parties without said consent, which consent CB Commercial reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or its contents shall not be published, in whole or in part, in any public document without the express written consent of CB Commercial which consent CB Commercial reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a "sale" or "offer for sale" of any "security", as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CB Commercial shall have no accountability or responsibility to any such third party. - -------------------------------------------------------------------------------- 64 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report. 16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used. 17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area have been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report. 18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CB Commercial unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CB Commercial assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance. 19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or client's designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CB Commercial assumes responsibility for any situation arising out of the Client's failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired. 20. CB Commercial assumes that the subject property analyzed herein will be under prudent and competent management and ownership; neither inefficient or super-efficient. 21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the appraisal report. 22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist. 23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Not withstanding any discussion of possible readily achievable barrier removal construction items in this report, CB Commercial has not made a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect on the value estimated herein. Since CB Commercial has no specific information relating to this issue, nor is CB Commercial qualified to make such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject property. - -------------------------------------------------------------------------------- 65 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 24. For our analysis, we have relied on the information provided by the detailed rent roll and information provided by the subject leasing agent. We have assumed all information is correct. Furthermore, we have assumed all leases out for signature will be returned signed, and executed as of the date indicated to us by the leasing agent. We reserve the right to amend this appraisal should any of this information be later found to be incorrect. - -------------------------------------------------------------------------------- 66 ADDENDA ================================================================================ ADDENDA - -------------------------------------------------------------------------------- ADDENDA - -------------------------------------------------------------------------------- 67 ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- ADDENDUM A - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- GLOSSARY OF TERMS assessed value Assessed value applies in ad valorem taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to market value, but it is usually calculated in relation to a market value base. + cash equivalency The procedure in which the sale prices of comparable properties sold with atypical financing are adjusted to reflect typical market terms. contract, coupon, face, or nominal rent The nominal rent payment specified in the lease contract. It does not reflect any offsets for free rent, unusual tenant improvement conditions, or other factors that may modify the effective rent payment. coupon rent See Contract, Coupon, Face, or Nominal Rent effective rent 1) The rental rate net of financial concessions such as periods of no rent during a lease term; may be calculated on a discounted basis, reflecting the time value of money, or on a simple, straight-line basis. ++ 2) The economic rent paid by the lessee when normalized to account for financial concessions, such as escalation clauses, and other factors. Contract, or normal, rents must be converted to effective rents to form a consistent basis of comparison between comparables. face rent See Contract, Coupon, Face, or Nominal Rent fee simple estate Absolute ownership unen-cumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. ++ floor area ratio (FAR) The relationship between the above-ground floor area of a building, as described by the building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area; also called building-to-land ratio. ++ full service lease A lease in which rent covers all operating expenses. Typically, full service leases are combined with an expense stop, the expense level covered by the contract lease payment. Increases in expenses above the expense stop level are passed through to the tenant and are known as expense pass-throughs. going concern value Going concern value is the value of a proven property operation. It includes the incremental value associated with the business concern, which is distinct from the value of the real estate only. Going concern value includes an intangible enhancement of the value of an operating business enterprise which is produced by the assemblage of the land, building, labor, equipment, and marketing operation. This process creates an economically viable business that is expected to continue. Going concern value refers to the total value of a property, including both real property and intangible personal property attributed to the business value. + gross building area (GBA) The sum of all areas at each floor as measured to the exterior walls. insurable value Insurable Value is based on the replacement and/or reproduction cost of physical items that are subject to loss from hazards. Insurable value is that portion of the value of an asset or asset group that is acknowledged or recognized under the provisions of an applicable loss insurance policy. This value is often controlled by state law and varies from state to state. + investment value Investment value is the value of an investment to a particular investor based on his or her investment requirements. In contrast to market value, investment value is value to an individual, not value in the marketplace. Investment value reflects the subjective relationship between a particular investor and a given investment. When measured in dollars, investment value is the price an investor would pay for an investment in light of its perceived capacity to satisfy his or her desires, needs, or investment goals. To estimate investment value, specific investment criteria must be known. Criteria to evaluate a real estate investment are not necessarily set down by the individual investor; they may be established by an expert on real estate and its value, that is, an appraiser. + leased fee See leased fee estate leased fee estate An ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others. The rights of the - -------------------------------------------------------------------------------- ================================================================================ GLOSSARY OF TERMS - -------------------------------------------------------------------------------- lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.++ leasehold See leasehold estate leasehold estate The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.++ load factor The amount added to usable area to calculate the rentable area. It is also referred to as a "rentable add-on factor" which, according to BOMA, "is computed by dividing the difference between the usable square footage and rentable square footage by the amount of the usable area. Convert the figure into a percentage by multiplying by 100. market value "as if complete" on the appraisal date Market value as if complete on the appraisal date is an estimate of the market value of a property with all construction, conversion, or rehabilitation hypothetically completed, or under other specified hypothetical conditions as of the date of the appraisal. With regard to properties wherein anticipated market conditions indicate that stabilized occupancy is not likely as of the date of completion, this estimate of value should reflect the market value of the property as if complete and prepared for occupancy by tenants. market value "as is" on the appraisal date Market value "as is" on the appraisal date is an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date of appraisal. market value Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1) A reasonable time is allowed for exposure in the open market; 2) Both parties are well informed or well advised, and acting in what they consider their own best interests; 3) Buyer and seller are typically motivated; 4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.ss. marketing period The time it takes an interest in real property to sell on the market subsequent to the date of an appraisal. ++ net lease Lease in which all or some of the operating expenses are paid directly by the tenant. The landlord never takes possession of the expense payment. In a Triple Net Lease all operating expenses are the responsibility of the tenant, including property taxes, insurance, interior maintenance, and other miscellaneous expenses. However, management fees and exterior maintenance are often the responsibility of the lessor in a triple net lease. A modified net lease is one in which some expenses are paid separately by the tenant and some are included in the rent. net rentable area (NRA) 1) The area on which rent is computed. 2) The Rentable Area of a floor shall be computed by measuring to the inside finished surface of the dominant portion of the permanent outer building walls, excluding any major vertical penetrations of the floor. No deductions shall be made for columns and projections necessary to the building. Include space such as mechanical room, janitorial room, restrooms, and lobby of the floor. * nominal rent See Contract, Coupon, Face, or Nominal Rent prospective future value "upon completion of construction" Prospective future value "upon completion of construction" is the prospective value of a property on the future date that construction is completed, based upon market conditions forecast to exist, as of that completion date. The value estimate at this stage is stated in current dollars unless otherwise indicated. prospective future value "upon reaching stabilized occupancy" Prospective future value "upon reaching stabilized occupancy" is the prospective value of a property at a future point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. The value estimate at - -------------------------------------------------------------------------------- ================================================================================ GLOSSARY OF TERMS - -------------------------------------------------------------------------------- this stage is stated in current dollars unless otherwise indicated. reasonable exposure time The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market. **.0 rent see full service lease net lease contract, coupon, face, or nominal rent effective rent shell space Space which has not had any interior finishing installed, including even basic improvements such as ceilings and interior walls, as well as partitions, floor coverings, wall coverings, etc.. Usable Area 1) The area actually used by individual tenants. 2) The Usable Area of an office is computed by measuring to the finished surface of the office side of corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished surface of the dominant portion of the permanent outer building walls. Excludes areas such as mechanical rooms, janitorial room, restrooms, lobby, and any major vertical penetrations of a multi-tenant floor. * use value Use value is a concept based on the productivity of an economic good. Use value is the value a specific property has for a specific use. Use value focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to the property's highest and best use or the monetary amount that might be realized upon its sale. + value appraised During the real estate development process, a property typically progresses from a state of unimproved land to construction of improvements to stabilized occupancy. In general, the market value associated with the property increases during these stages of development. After reaching stabilized occupancy, ongoing forces affect the property during its life, including a physical wear and tear, changing market conditions, etc. These factors continually influence the property's market value at any given point in time. See also market value "as is" on the appraisal date market value "as if complete" on the appraisal date prospective future value "upon completion of construction" prospective future value "upon reaching stabilized occupancy" - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B LEGAL DESCRIPTION - -------------------------------------------------------------------------------- ADDENDUM B LEGAL DESCRIPTION - -------------------------------------------------------------------------------- Shopping Center COPY Reading, PA This Indenture Made the 26th day of September 1994, Between MARCORP ASSOCIATES THREE, a Pennsylvania Limited Partnership (hereinafter called "Grantor") AND [illegible] SHILLINGTON, L.P. , a Pennsylvania limited partnership (hereinafter called "Grantee") Witnesseth, That the said Grantor in consideration of FOUR MILLION and no/100 ($4,000,000.00) ----------------------------------------------------- Dollars, paid to the Grantor by the Grantee, receipt of which is hereby acknowledged, does grant, bargain, sell and convey to the said Grantee , its successors and assigns THAT CERTAIN piece or parcel of land situate in Cumru Township, County of Berks, Commonwealth of Pennsylvania, as shown on Plan No. [illegible], prepared by Spotts, Stevens and McCoy, Inc., Consulting Engineers of Wyomissing, Pennsylvania, and being more fully bounded and described as follows, to wit: [illegible to end of page] along property belonging to Savage Properties, Inc. South twenty-nine degrees thirty-eight minutes fifty-five seconds West (S. 29(degree) 38' 55" W.) a distance of ninety-seven and six hundredths feet (97.06 ft.) to a point on the northern right-of-way line of S.R. 0222, known as Lancaster Pike; thence along the northern right-of-way line of Pennsylvania State Highway S.R. 0222, known as Lancaster Pike, the five (5) following courses and distances, viz: (1) South twenty-one degrees two minutes one second East (S. 21(degree) 02' 01" E.) a distance of ten and zero hundredths feet (10.00 ft.) to a point; (2) thence by a curve deflecting to the left having a central angle of two degrees fifteen minutes zero seconds (02(degree) 15' 00") a radius of two thousand six hundred sixteen and forty-eight hundredths feet (2,616.48 ft.) a length along the arc of one hundred two and seventy-five hundredths feet (102.75 ft.) a cord bearing of South sixty-seven degrees fifty minutes thirty seconds West (S. 67(degree) 50' 30" W.) a cord distance of one hundred two and seventy-four hundredths feet (102.74 ft.) to a point; (3) South twenty-three degrees seventeen minutes one second East (S. 23(degree) 17' 01" E.) a distance of twenty and zero hundredths feet (20.00 ft.) to a point; (4) by curve deflecting to the left having a central angle of seven degrees forty-nine minutes forty-eight seconds (07(degree) 49' 48") a radius of two thousand five hundred nine-six and forty-eight hundredths feet (2,596.48 ft.) a length along the arc of three hundred fifty-four and eighty-four hundredths feet (354.84 ft.) a cord bearing of South sixty-two degrees forty-eight minutes five seconds West (S. 62(degree) 48' 5" W.) a cord distance of three hundred fifty-four and fifty-six hundredths feet (354.56 ft.) to a point; (5) passing through a point one hundred thirty-five and sixty-one hundredths feet (135.61 ft.) from the last described point, South seventy degrees twenty-one minutes forty-five seconds West (S. 70(degree) 21' 45" W.) a distance of 250 and forty-five hundredths feet (250.45 ft.) to a point; thence along property belonging to Andrew E. Bixler and Craig J. Dadey, also along property belonging to Carl F. Bare and passing along the eastern end of a fifteen foot (15 ft.) wide alley North eleven degrees twenty-five minutes ten seconds West (N. 11(degree) 25' 10" W.) a distance of one hundred sixty-two and seventy-nine hundredths feet (162.79 ft.) to a point; thence along property of David Brendel and Debra Brendel, the three (3) following courses and distances, viz: (1) North forty-two degrees twenty-four minutes fifty seconds East (N. 42(degree) 24' 50" E.) a distance of one hundred sixty-six and eighty-three hundredths feet (166.83 ft.) to a point; (2) North forty-seven degrees thirty-three minutes ten seconds West (N. 47(degree) 33' 10" W.) a distance of two hundred twenty-eight and fifty-two hundredths feet (228.52 ft.) to a point; (3) North eleven degrees twenty-five minutes ten seconds West (N. 11(degree) 25' 10" W.) a distance of one and eighteen hundredths feet (1.18 ft.) to a point on the southern right-of-way line of Treemont Avenue; thence along the southern right-of-way line of Treemont Avenue (60 ft. wide) and also along the eastern right-of-way of Beverly Avenue (50 ft. wide), the two (2) following courses and distances, viz: (1) by a curve deflecting to the left having a central angle of seventy-nine degrees forty-three minutes forty-nine seconds (79(degree) 43' 49"), a radius of sixty and zero hundredths feet (60.00 ft.) a distance along the arc of eighty-three and forty-nine hundredths feet (83.49 ft.) a chord bearing of North seven degrees forty-one minutes sixteen seconds West (N. 07(degree) 41' 16" W.) a chord distance of seventy-six and ninety-two hundredths feet (76.92 ft.) to a point; (2) North forty-seven degrees thirty-three minutes ten seconds West (N. 47(degree) 33' 10" W.) a distance of one hundred twenty-nine and seventy-five hundredths feet (129.75 ft.) to a point; thence leaving Beverly Avenue along the southern side of a fifteen foot (15 ft.) wide alley North forty-two degrees twenty-four minutes fifty seconds East (N. 42(degree) 24' 50" E.) a distance of eighty-eight and fifty-three hundredths feet (88.53 ft.) to a point; thence along the eastern end of a fifteen foot (15 ft.) wide alley, along property belonging to Ida J. Clay, the eastern end of a fifteen foot (15 ft.) wide alley, property belonging to Clyde C. Mengel and Dorothy A. Mengel, along the end of Gold Street (50 ft. wide), North eleven degrees twenty-five minutes ten seconds West (N. 11(degree) 25' 10" W.) a distance of three hundred eighty-four and nine hundredths feet (384.09 ft.) to a point on the northern right-of-way line of Gold seven degrees thirty-three minutes ten seconds West (N. 47(degree) 33' 10" W.) a distance of eighty-nine and eighty hundredths feet (89.80 ft.) to a point on the eastern right-of-way line of Parkside Avenue (60 ft. wide); thence along the eastern side of Parkside Avenue (60 ft. wide), North forty-two degrees twenty-four minutes fifty seconds East (N. 42(degree) 24' 50" E.) a distance of sixty-five -2- and fifty-eight hundredths feet (65.58 ft.) to a point; thence along the end of Parkside Avenue, along property belonging to Wilda A. Trexler and also along the end of two (2) fifteen foot (15 ft.) wide alleys, North eleven degrees twenty-five minutes ten seconds West (N. 11(degree) 25' 10" W.) a distance of two hundred seventy-four and forty-three hundredths feet (274.43 ft.) to a point; thence along property belonging to the Berks County District Attorney's Office, also property belonging to David McCaw and Charles McCaw, North twenty-six degrees fifty-one minutes fifty seconds East (N. 26(degree) 51' 50" E.) a distance of one hundred seventy-four and fifty-four hundredths feet (174.54 ft.) to the POINT OR PLACE OF BEGINNING. CONTAINING IN AREA twenty and thirty-one hundredths acres (20.31 Acres) of land. Being a portion of the same property which Edith C. Bender and Bank of Pennsylvania, by deed dated March 26, 1973 and recorded in Deed Book 1627, Page 319, Berks County Records, at Reading, Pennsylvania, granted and conveyed unto Marcorp Associates Three. -3- ================================================================================ ADDENDUM C IMPROVED COMPARABLE SALES - -------------------------------------------------------------------------------- ADDENDUM C IMPROVED COMPARABLE SALES - -------------------------------------------------------------------------------- RETAIL SALE ================================================================================ Location Data Property Name: 15th & Allen Street Shopping Center Location: 1401-1451 Allen Street City: Allentown County: Lehigh State/Zip: Pennsylvania Assessor's Parcel No(s): G9SW3A-14-4 Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 4.12 Acres Excess Land: None Gross Leasable Area: Anchors: Laneco Supermarket 25,000 SF Local Tenant GLA: 21,503 SF Anchor Tenant GLA: 25,000 SF Total GLA: 46,503 SF GLA Purchased: 46,503 SF Year Built: 1950 Parking: Adequate Condition: Average Exterior Walls: Masonry Sale Data Transaction Type Sale Date of Transaction 01/96 Marketing Time. N/A Grantor: Carriage Associates L.P. Grantee: Allenbeth Associates L.P. Document No.: 1558/220 Sale Price: $4,242,000 Financing: Market Terms Cash Equivalent Price: $4,242,000 Required Capital Cost: $0 Adjusted Sales Price: $4,242,000 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100 Existing or Pro Forma Income: N/A TOTAL P.S.F. ----- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $462,049 $9.94 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.89 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $91.22 Comments The 15th and Allen Street shopping center is a one-story neighborhood retail center located on the corner of 15th and Allen Streets in Downtown Allentown. This property is anchored by a Laneco Supermarket which occupies an estimated 25,000 square feet with the balance of the rentable area, 21,503 square feet allocated to 12 other satellite tenants. This center was built in the 1950's, however, it has undergone significant renovations since that time. Currently, the property is in average condition. At the time of sale, the property was 100% occupied. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Stefko Shopping Center Location: Stefko Boulevard City: Bethlehem County: Northampton State/Zip: Pennsylvania Assessor's Parcel No(s): N7SW1B-3-1 Atlas Reference: N/A Physical Data Type: Community Land Area: 10.27 Acres Excess Land: None Gross Leasable Area: Anchors: Laneco Supermarket 65,000 SF Local Tenant GLA: 69,446 SF Anchor Tenant GLA: 65,000 SF Total GLA: 134,446 SF GLA Purchased: 134,446 SF Year Built: 1965 Parking: Adequate Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 01/96 Marketing Time: N/A Grantor: Carriage Associates L.P. Grantee: Allenbeth Associates L.P. Document No.: 1996-1/4082 Sale Price: $5,618,000 Financing: Market Terms Cash Equivalent Price: $5,618,000 Required Capital Cost: $0 Adjusted Sales Price: $5,618,000 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 95.2% Existing or Pro Forma Income: N/A TOTAL P.S.F. ----- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $617,577 $4.59 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR). 10.99 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $41.79 Comments The Stefco shopping center is a one-story community retail center located on Stefco Boulevard in Bethlehem. This property is anchored by a Laneco Supermarket which occupies an estimated 65,000 square feet with the balance of the rentable area, 69,446 square feet allocated to 21 other satellite tenants. This center was built in 1965, however, it has undergone significant renovations in 1988. Currently, the property is in average condition. At the time of sale, the property was 95.2% occupied. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Kenhorst Plaza Location: N/E/C New Holland Rd. & Philadelphia Ave. Kenhorst Borough City: Reading County: Berks State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Strip Center Land Area: 19.19 Acres Excess Land: N/A Gross Leasable Area: Anchors: Redner's Food Mrkt. 44,000 SF U.S. Post Office 11,000 SF Local Tenant GLA: N/A Anchor Tenant GLA: 55,000 SF Total GLA: 55,000 SF GLA Purchased: 136,087 SF Year Built: 1990 Parking: NA Condition: Good Exterior Walls: Cement Block Sale Data Transaction Type: Sale Date of Transaction: 8/95 Marketing Time: N/A Grantor: Kenhorst Plaza Associates, L.P. Grantee: First Washington Realty Partnership Document No.: 2674/1606 Sale Price: $11,000,000 Financing: Cash to Seller Cash Equivalent Price: N/A Required Capital Cost: $0 Adjusted Sales Price: $0 Verification: N/A Financial Data Assumptions & Forecast: N/A Occupancy at Sale: 94 Existing or Pro Forma Income: N/A TOTAL P.S.F. ----- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $1,102,305 $8.10 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Other Overall Capitalization Rate (OAR): N/A % Projected IRR: 9.40 % Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: N/A Comments - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Hamburg Shopping Center Location: South 4th Street & Valley Road City: Borough Of Hamburg County: Berks State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 6.40 Acres Excess Land: N/A Gross Leasable Area: Anchors: Food Lion Supermarke Rite Aid Pharmacy Local Tenant GLA: N/A Anchor Tenant GLA: N/A Total GLA: N/A GLA Purchased: 42,000 SF Year Built: 1980 Parking: N/A Condition: Good Exterior Walls: Sale Data Transaction Type: Sale Date of Transaction: 3 /94 Marketing Time: N/A Grantor: Wagman Equities, Inc. Grantee: Lion Realty I Document No.: 2523/1607 Sale Price: $2,705,000 Financing: Cash to Seller Cash Equivalent Price: N/A Required Capital Cost: $0 Adjusted Sales Price: $0 Verification: N/A Financial Data Assumptions & Forecast: N/A Occupancy at Sale: N/A Existing or Pro Forma Income: N/A TOTAL P.S.F. ----- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $314,728 $7.49 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): N/A % Projected IRR: 11.64% Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: N/A Comments In-line tenants include a Chinese restaurant, Subway sandwich shop, and Randy Rick Hair Salon. There were two vacant stores at the time of sale. - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ ADDENDUM D RENTAL COMPARABLES - -------------------------------------------------------------------------------- ADDENDUM D RENTAL COMPARABLES - -------------------------------------------------------------------------------- RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Kingston Plaza Location: S/S Third Avenue East Of Pierce Street City: Kingston County: Luzerne State/Zip: Pennsylvania Assessors Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 64,824 SF Year Built: 1982 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Price Chopper Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$10.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Terms Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 09/95 6,500 The Everything $5.50 N/A None $950 step in ye 1.30 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent lease includes a term for 1 year and 3 months. Additionally, the tenant has a percentage rent clause of 3.0% over a breakpoint of $1,191,660. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] Photograph - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Mark Plaza Location: N/S Route 11 City: Edwardsville County: Luzerne State/Zip: Pennsylvania Assessors Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 176,786 SF Year Built: 1967 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 91.7% Overall: 91.7% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $1.95-$11.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Terms Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 10/95 3,600 Spectrum Rents $8.00 N/A None Flat 5.00 - -------------------------------------------------------------------------------- 08/95 7,000 Keens Floral Fa $8.00 N/A Annual Step-up 5.00 - -------------------------------------------------------------------------------- 07/95 3,600 Mattress Man $11.50 N/A Flat 5.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 91.7% leased. The most recent leases all include terms for 5 years. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Birney Plaza Location: N/S Route 11 City: Moosic County: Lackawanna State/Zip: Pennsylvania Assessors Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 212,057 SF Year Built: 1972 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $3.00-$10.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Terms Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 9/95 4,000 Everything $0.9 $7.00 N/A None flat 3.00 7/93 4,000 Mattress Man $9.00 N/A None Step-up to $10/ 5.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 3 and 5 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] Photograph - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Dunmore Plaza Location: 1400 Monroe Avenue City: Dunmore County: Lackawanna State/Zip: Pennsylvania Assessors Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 45,380 SF Year Built: 1967 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Price Chopper Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $6.75-$11.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Terms Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 4/95 1,900 Malcom's $11.50 N/A None $950 Step-up in 5.00 - -------------------------------------------------------------------------------- 1/95 1,900 Great Wall Chin $11.35 N/A 3.0% per year 10.00 - -------------------------------------------------------------------------------- 4/94 1,900 Little Caeser's $9.25 N/A Periodic Step-u 5.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 5 and 10 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] Photograph - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Triangle Plaza Location: Route 115 City: Wilkes-Barre County: Luzerne State/Zip: Pennsylvania Assessors Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 125,000 SF Year Built: 1971 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years (Estimate) Base Rent Per Square Foot: $9.00-$12.50 (Estimate) Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Terms Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 6/95 2,400 Electronic Syst $11.50 N/A None Annual %age inc 5.00 - -------------------------------------------------------------------------------- 3/95 2,200 TCBY $11.00 N/A None Annual %age inc 5.00 - -------------------------------------------------------------------------------- 5/94 9,910 Party City $11.00 N/A None $1.65/SF step-u 10.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 5 and 10 years. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Gateway Plaza Location: N/S Route 11 City: Edwardsville County: Luzerne State/Zip: Pennsylvania Assessors Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 150,000 SF Year Built: 1969 Exterior Walls: Brick Veneer Condition: Fair Anchor Tenant: Parking: Adequate Lease Data Occupancy: Local: 65.0% Overall: 65 0 Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $8.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Terms Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 6/94 950 Holiday Hair $15.48 N/A None Annual %age inc 3 00 - -------------------------------------------------------------------------------- 6/94 3,080 McKenzie $8.50 N/A None Annual %age inc 3.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 65% leased. The most recent leases all include terms for 3 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] Photograph - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Pottstown Center Location: Route 663 City: Pottstown County: Montgomery State/Zip: Pennsylvania Assessors Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 171,267 SF Year Built: 1976 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Wal-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $8.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Terms Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 7/95 121,267 Wal-Mart $6.99 N/A None Flat 20.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 20 years. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Route 6 Mall Location: N/S Route 6 City: Honesdale County: Wayne State/Zip: Pennsylvania Assessors Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 144,229 SF Year Built: 1978 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Terms Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 3/95 119,229 K-Mart $5.77 N/A None Flat 25.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 20 years and includes a percentage rent clause on 1.0% over $20.0 million. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLES ================================================================================ Location Data Bradford Towne Centre Property Name: N/S Route 6 Location: Wysox City: Bradford County: Pennsylvania State/Zip: N/A Assessors Parcel No(s): N/A Atlas Reference: Physical Data Type: Community Gross Leaseable Area: 119,481 SF Year Built: 1972 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Terms Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 7/94 94,481 K-Mart $5.00 N/A None Flat 25.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 25 years and includes a percentage rent clause on 1.0% over $16.875 million. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Builder's Square Shopping Center Location: Cetronia Road City: Whitehall County: Lehigh State/Zip: Pennsylvania Assessors Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 106,400 SF Year Built: 1994 Exterior Walls: Brick Veneer Condition: Good Anchor Tenant: Builder's Square Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Terms Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 3/94 106,400 Builder's Square $10.05 N/A None Flat 25.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 25 years. Construction quality is good and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ ADDENDUM E STRATEGIC MAPPING, INC. REPORTS - -------------------------------------------------------------------------------- ADDENDUM E STRATEGIC MAPPING, INC. REPORTS - -------------------------------------------------------------------------------- Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 PA/11 Berks County 5/20/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 312,509 336,523 349,909 359,567 White 95.2 % 93.5 % 92.7 % 92.0 % Black 2.5 % 3.0 % 3.2 % 3.4 % American Indian 0.1 % 0.1 % 0.1 % 0.1 % Asian 0.4 % 0.8 % 1.0 % 1.2 % Other 1.8 % 2.6 % 2.9 % 3.2 % Hispanic 2.9 % 5.1 % 6.3 % 7.4 % Total Households 114,544 127,649 132,343 135,602 Household Population 304,578 326,794 340,180 349,838 Average Household Size 2.66 2.56 2.57 2.58 Household Income $ 0 - 9,999 26.5 % 12.1 % 10.2 % 8.6 % $ 10,000 - 14,999 15.3 % 8.2 % 7.3 % 6.3 % $ 15,000 - 24,999 29.9 % 17.2 % 15.0 % 12.7 % $ 25,000 - 34,999 17.3 % 17.1 % 15.1 % 13.7 % $ 35,000 - 49,999 7.9 % 21.6 % 20.9 % 19.4 % $ 50.000 - 74,999 2.2 % 16.3 % 19.6 % 21.9 % $ 75.000 - 99,999 0.8 % 4.3 % 6.6 % 8.8 % $ 100,000 - 149,999 - 2.0 % 3.6 % 6.1 % $ 150,000+ - 1.1 % 1.6 % 2.4 % Total 100.0 % 100.0 % 100.0 % 100.0 % Median Household Income ($) 17,724 32,048 36,463 41,394 Aggregate HH Inc ($000) 2,271,434 4,860,577 5,833,175 6,871,835 Median Family Income ($) 20,699 38,114 43,365 49,229 Per Capita Income ($) 7,458 14,874 17,147 19,643 Median Age Total Population 33.6 35.4 36.9 38.2 Median Age Adult Population 44.7 43.3 44.7 46.0 Median Age Female Population 35.1 36.8 38.4 39.9 Median Age Adult Female Population 46.0 44.5 46.0 47.4 Median Age Male Population 32.2 34.1 35.4 36.5 Median Age Adult Male Population 43.3 42.0 43.3 44.6
Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC-C1750-41 Page 2 of 2 PA/11 Berks County 5/20/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 312,509 336,523 349,909 359,567 0 - 5 7.2 % 8.0 % 7.8 % 7.5 % 6 - 13 11.2 % 10.4 % 10.4 % 10.2 % 14 - 17 6.8 % 4.9 % 5.1 % 5.3 % 18 - 24 11.8 % 10.0 % 9.8 % 10.1 % 25 - 34 14.9 % 16.1 % 13.9 % 12.4 % 35 - 44 11.0 % 14.8 % 15.1 % 14.6 % 45 - 54 11.4 % 10.3 % 12.0 % 13.3 % 55 - 64 11.5 % 9.9 % 9.5 % 9.9 % 65 - 74 14.1 % 8.8 % 9.0 % 8.7 % 75 - 84 - 5.2 % 5.6 % 5.8 % 85+ - 1.6 % 1.8 % 2.0 % Female Population by Age 162,157 173,877 180,917 186,027 0 - 5 6.8 % 7.6 % 7.4 % 7.1 % 6 - 13 10.6 % 9.7 % 9.8 % 9.6 % 14 - 17 6.4 % 4.6 % 4.9 % 5.0 % 18 - 24 11.6 % 9.8 % 9.4 % 9.6 % 25 - 34 14.6 % 15.5 % 13.4 % 11.8 % 35 - 44 10.8 % 14.3 % 14.8 % 14.4 % 45 - 54 11.3 % 10.2 % 11.9 % 13.2 % 55 - 64 11.7 % 10.0 % 9.6 % 10.1 % 65 - 74 16.2 % 9.5 % 9.5 % 9.3 % 75 - 84 - 6.4 % 6.8 % 7.0 % 85+ - 2.2 % 2.5 % 2.8 % Male Population by Age 150,352 162,646 168,992 173,540 0 - 5 7.7 % 8.5 % 8.3 % 8.0 % 6 - 13 12.0 % 11.0 % 11.0 % 10.8 % 14 - 17 7.2 % 5.2 % 5.4 % 5.5 % 18 - 24 11.9 % 10.2 % 10.2 % 10.6 % 25 - 34 15.4 % 16.7 % 14.3 % 13.1 % 35 - 44 11.2 % 15.2 % 15.5 % 14.9 % 45 - 54 11.6 % 10.4 % 12.2 % 13.5 % 55 - 64 11.2 % 9.8 % 9.3 % 9.8 % 65 - 74 11.9 % 8.1 % 8.3 % 8.2 % 75 - 84 - 4.0 % 4.3 % 4.6 % 85+ - 0.9 % 1.0 % 1.2 %
Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Economic Report CBC - C1750-41 Page 1 of 1 PA/11 Berks County 5/20/96 Sales Volume Number of Employees # of Firms Total Sales Primary SIC Firms in Area Reporting $(00000) Agr/For/Fish 478 3,644 446 2,639 Mining 13 266 4 112 Construction 1,639 8,148 1,508 8,018 Manufacturing 895 45,462 684 115,613 Transp/Comm/Util 491 9,093 284 16,914 Wholesale Trade 769 9,369 594 17,123 Retail Trade 3,201 25,993 2,343 25,095 Fin/Insur/Real Est 883 11,636 600 34,467 Services 5,117 58,880 4,303 49,145 Total 13,486 172,491 10,766 269,126 Financial Institution Deposit Data ($0000) Commercial Savings Banks & Credit Banks Savings & Loans Unions IPC Deposits 381,183 82,321 N/A All Other Deposits 57,823 1,308 N/A Total Deposits 439,006 83,629 50,665 Number of Offices 101 17 25 Number of Offices by Deposits % Under $50 Million 80.2 % 70.6 % 88.0 % % $50 - $100 Million 17.8 % 23.5 % 8.0 % % $100 - $500 Million 1.0 % 5.9 % 4.0 % % $500 - $1 Billion 1.0 % 0.0 % 0.0 % % Over $1 Billion 0.0 % 0.0 % 0.0 % N/A - Data not reported Area defined by County Source: Sheshunoff Information Services Inc. & Dun & Bradstreet Inc. Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-4l Page 1 of 2 PA/11 Berks County 5/20/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 99.9 - --------------------------------- Demographics --------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 349,909 132,343 340,180 2.57 $ 36,463 2000 359,567 135,602 349,838 2.58 $ 41,394 - ----------------------------- Expenditure Potential ---------------------------- 1995 Area Yearly Growth Rate Per Household 1.37% Total 1.87% - ------------------------ Retail Support Potential (000) ------------------------ 1995: 14,511 sq. ft. - -------------------------------------------------------------------------------- Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 130,744 147,042 988 1,084 2.38 % 96.5 Appliance Store 11,031 9,509 83 70 - 2.93 % 97.7 Auto-Aftermarket Store 221,169 232,461 1,671 1,714 1.00 % 100.0 Convenience Store 121,004 126,165 914 930 0.84 % 101.0 Dept. Store 135,909 148,742 1,027 1,097 1.82 % 97.2 Drug Store 110,531 140,810 835 1,038 4.96 % 106.3 Electronics Store 49,982 66,211 378 488 5.78 % 97.1 Fast Food Restaurant Store 124,336 111,375 940 821 - 2.18 % 98.3 Full Serv Restaurant Store 122,332 108,600 924 801 - 2.35 % 98.8 Furniture Store 46,783 44,325 354 327 - 1.07 % 95.2 Grocery Store 545,005 624,660 4,118 4,607 2.77 % 100.8 Hardware Store 24,827 27,118 188 200 1.78 % 101.9 Home Centers Store 123,761 146,256 935 1,079 3.40 % 107.0 Jewelry Store 22,404 23,308 169 172 0.79 % 100.1 Liquor Store 33,453 30,536 253 225 - 1.81 % 99.4 Mass Merchandiser Store 184,141 208,129 1,391 1,535 2.48 % 98.3 Photo Store 2,521 2,519 19 19 - 0.02 % 99.0 Shoe Store 25,509 30,336 193 224 3.53 % 96.8 Sporting Goods Store 22,751 26,658 172 197 3.22 % 96.1 Toy Store 16,397 15,650 124 115 - 0.93 % 97.0 Variety Store 10,584 12,115 80 89 2.74 % 98.6 Area defined by County Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-4l Page 2 of 2 PA/11 Berks County 5/20/96 Benchmark = Regional Area Definition Detailed Report Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 7,548 12,877 57 95 11.28 % 98.9 --------- --------- ------ ------ Total Shopping Center 2,092,724 2,295,404 15,813 16,928 All Other Stores 1,605,119 1,760,574 12,128 12,983 Total Retail 3,697,843 4,055,978 27,941 29,911 Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by County Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 1 of 4 Area 1 = PA/11 Berks County 5/20/96 Description Area 1 Population: 2000 Projection 359,567 1995 Estimate 349,909 1990 Census 336,523 1980 Census 312,509 Percent Change, 1980 - 1990 7.7 Percent Change, 1990 - 1995 4.0 1995 Population by Race: % White 92.7 % Black 3.2 % American Indian 0.1 % Asian 1.0 % Other 2.9 % Hispanic 6.3 1995 Population by Age: % 0 - 5 7.8 % 6 - 13 10.4 % 14 - 17 5.1 % 18 - 20 4.4 % 21 - 24 5.4 % 25 - 34 13.9 % 35 - 44 15.1 % 45 - 54 12.0 % 55 - 64 9.5 % 65 - 74 9.0 % 75 - 84 5.6 % 85 + 1.8 Median Age Total Population 36.9 Median Age Adult Population 44.7 Households: 2000 Projection 135,602 1995 Estimate 132,343 1990 Census 127,649 1980 Census 114,544 Percent Change, 1980 - 1990 11.4 Percent Change, 1990 - 1995 3.7 1990 Household Population 326,794 1990 Households w/ Children under 18 42,693 1990 Households w/ Persons over 65 36,364 Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 2 of 4 Area 1 = PA/11 Berks County 5/20/96 Description Area 1 1990 Family Population 281,742 1990 Nonfamily Population 45,052 1990 Group Quarters Population 9,729 1990 Average Household Size 2.56 1990 Average Family Size 3.03 1990 Family Households 91,268 1990 Nonfamily Households 36,381 1995 Household Income: % $ 0 - $ 9,999 10.2 % $ 10,000 - $ 14,999 7.3 % $ 15,000 - $ 24,999 15.0 % $ 25,000 - $ 34,999 15.1 % $ 35,000 - $ 49,999 20.9 % $ 50,000 - $ 74,999 19.6 % $ 75,000 - $ 99,999 6.6 % $ 100,000 - $ 149,999 3.6 % $ 150,000+ 1.6 2000 Median Household Income $ 41,394 1995 Median Household Income $ 36,463 1990 Median Household Income $ 32,048 2000 Average Household Income $ 50,677 1995 Average Household Income $ 44,076 1990 Average Household Income $ 38,018 2000 Per Capita Income $ 19,643 1995 Per Capita Income $ 17,147 1990 Per Capita Income $ 14,874 2000 Median Family Income $ 49,229 1995 Median Family Income $ 43,365 1990 Median Family Income $ 38,114 1990 Average Family Income $ 43,517 Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750 - 41 Page 3 of 4 Area 1 = PA/11 Berks County 5/20/96 Description Area 1 1990 Housing Unit Counts: Total Units 134,482 Occupied Units 127,649 Owner Occupied 94,336 Renter Occupied 33,313 Vacant Units 6,833 Year Round 6,389 Seasonal 444 1990 Housing Unit Percents: % Occupied of Total Units 94.9 % Owner Units of Occupied Units 73.9 % Renter Units of Occupied Units 26.1 % Vacant of Total Units 5.1 % Year Round of Vacant Units 93.5 % Seasonal of Vacant Units 6.5 % Condominiums of Total Units 1.5 1990 Condominiums: Total Condominium Units 2,073 % Owner Occupied 49.2 % Renter Occupied 42.7 % Vacant 8.2 1990 Units in Structure: % 1, Detached 51.1 % 1, Attached 24.6 % 2 5.1 % 3 - 9 8.3 % 10 - 49 4.5 % 50+ 1.3 % Mobile Homes 4.2 % Other 1.0 1990 Median Home Value $ 81,761 1990 Median Contract Rent $ 344 Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 4 of 4 Area 1 = PA/11 Berks County 5/20/96 Description Area 1 1995 Total Employed 171,015 1995 Socio-Economic Measure 48 1990 Occupation: Total Civil Labor Force 174,191 % Unemployed 4.5 Total Employed 166,292 % White Collar 51.5 % Executive & Managerial 10.2 % Professional Specialty 11.6 % Technical Support 3.4 % Administrative Support 15.6 % Sales 10.7 % Blue Collar 34.6 % Precision Production, Craft & Repair 13.1 % Machine Operators 11.7 % Transportation & Material Moving 4.3 % Laborers 5.5 % Farming, Forestry & Fishing 2.1 % Service: Private Household 0.2 % Service: Protective 1.1 % Service: Other 10.5 1990 Educational Attainment (Age 25 & Over): % Less than Grade 9 12.1 % Grade 9-12 (No Diploma) 17.9 % High School Graduate or Equivalency 39.0 % Some College (No Degree) 10.8 % Associate Degree 5.0 % Bachelor Degree 10.0 % Graduate or Professional Degree 5.1 Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 1 of 9 Area 1 = PA/11 Berks County 5/20/96 - -------------------------------------------------------------------------------- Description Area 1 - -------------------------------------------------------------------------------- 1995 Socio-Economic Measure: 48 1995 Employment: 171,015 Population: 2000 Projection 359,567 1995 Estimate 349,909 1990 Census 336,523 1990 - 1995 % Change (Growth) 4.0 % 1990 Group Quarters Population 9,729 1995 % Population by Race: White 92.7 % Black 3.2 % American Indian, Eskimo & Aleut 0.1 % Asian or Pacific Islander 1.0 % Other 2.9 % Hispanic 6.3 % 1990 % Population by Race: White 93.5 % Black 3.0 % American Indian, Eskimo & Aleut 0.1 % Asian or Pacific Islander 0.8 % Other 2.6 % Hispanic 5.1 % 1995 % Population by Sex: Male 48.3 % Female 51.7 % 1990 % Population by Sex: Male 48.3 % Female 51.7 % 2000 Pop per Square Mile (Pop Density) 418.5 1995 Pop per Square Mile (Pop Density) 407.2 1990 Pop per Square Mile (Pop Density) 391.7 Area (Square Miles) 859.2 Area (Square Kilometers) 2,225.4 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 2 of 9 Area 1 = PA/11 Berks County 5/20/96 - -------------------------------------------------------------------------------- Description Area 1 - -------------------------------------------------------------------------------- Households: 2000 Projection 135,602 1995 Estimate 132,343 1990 Census 127,649 1990 - 1995 % Change (Growth) 3.7 % 2000 Average Household Size 2.58 1995 Average Household Size 2.57 1990 Average Household Size 2.56 2000 Per Capita Income $ 19,643 1995 Per Capita Income $ 17,147 1990 Per Capita Income $ 14,874 2000 Median Family Income $ 49,229 1995 Median Family Income $ 43,365 1990 Median Family Income $ 38,114 2000 Median Household Income $ 41,394 1995 Median Household Income $ 36,463 1990 Median Household Income $ 32,048 2000 Average Household Income $ 50,677 1995 Average Household Income $ 44,076 1990 Average Household Income $ 38,018 1995 % Household Income: $ 0 - $ 9,999 10.2 % $ l0,000 - $ 14,999 7.3 % $ l5,000 - $ 24,999 15.0 % $ 25,000 - $ 34,999 15.1 % $ 35,000 - $ 49,999 20.9 % $ 50,000 - $ 74,999 19.6 % $ 75,000 - $ 99,999 6.6 % $ 100,000 - $ 149,999 3.6 % $ 150,000+ 1.6 % Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 3 of 9 Area 1 = PA/11 Berks County 5/20/96 - -------------------------------------------------------------------------------- Description Area 1 - -------------------------------------------------------------------------------- 1990 % Household Income: $ 0 - $ 9,999 12.1 % $ 10,000 - $ 14,999 8.2 % $ 15,000 - $ 24,999 17.2 % $ 25,000 - $ 34,999 17.1 % $ 35,000 - $ 49,999 21.6 % $ 50,000 - $ 74,999 16.3 % $ 75,000 - $ 99,999 4.3 % $ 100,000 - $ 149,999 2.0 % $ 150,000+ 1.1 % 1995 % Population by Age: 0 - 5 7.8 % 6 - 13 10.4 % 14 - 17 5.1 % 18 - 20 4.4 % 21 - 24 5.4 % 25 - 34 13.9 % 35 - 44 15.1 % 45 - 54 12.0 % 55 - 64 9.5 % 65 - 74 9.0 % 75 - 84 5.6 % 85 + 1.8 % Median Age Total Population 36.9 Median Age Adult Population 44.7 1990 % Population by Age: 0 - 5 8.0 % 6 - 13 10.4 % 14 - 17 4.9 % 18 - 20 4.6 % 21 - 24 5.4 % 25 - 34 16.1 % 35 - 44 14.8 % 45 - 54 10.3 % 55 - 64 9.9 % 65 - 74 8.8 % 75 - 84 5.2 % 85 + 1.6 % Median Age Total Population 35.4 Median Age Adult Population 43.3 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 4 of 9 Area 1 = PA/11 Berks County 5/20/96 - -------------------------------------------------------------------------------- Description Area 1 - -------------------------------------------------------------------------------- 1995 % Female Population by Age: 0 - 5 7.4 % 6 - 13 9.8 % 14 - 17 4.9 % 18 - 20 4.3 % 21 - 24 5.1 % 25 - 34 13.4 % 35 - 44 14.8 % 45 - 54 11.9 % 55 - 64 9.6 % 65 - 74 9.5 % 75 - 84 6.8 % 85+ 2.5 % Female Median Age Total Population 38.4 Female Median Age Adult Population 46.0 1990 % Female Population by Age: 0 - 5 7.6 % 6 - 13 9.7 % 14 - 17 4.6 % 18 - 20 4.5 % 21 - 24 5.3 % 25 - 34 15.5 % 35 - 44 14.3 % 45 - 54 10.2 % 55 - 64 10.0 % 65 - 74 9.5 % 75 - 84 6.4 % 85+ 2.2 % Female Median Age Total Population 36.8 Female Median Age Adult Population 44.5 1990 % Hispanic Population by Type: Not of Hispanic Origin 94.9 % Mexican 0.6 % Puerto Rican 3.9 % Cuban 0.1 % Other Hispanic 0.6 % Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 5 of 9 Area 1 = PA/11 Berks County 5/20/96 - -------------------------------------------------------------------------------- Description Area 1 - -------------------------------------------------------------------------------- 1990 % Population Enrolled in School (Age 3 & Over): Preprimary School 8.6 % Elementary and High School 67.4 % College 24.0 % Total School Enrollment 75,295 1990 % Educational Attainment (Age 25 & Over): Less than Grade 9 12.1 % Grade 9-12 (No Diploma) 17.9 % High School Graduate or Equivalency 39.0 % Some College (No Degree) 10.8 % Associate Degree 5.0 % Bachelor Degree 10.0 % Graduate or Professional Degree 5.1 % 1990 % Employment Status: Total Labor Force: Armed Forces 0.1 % Civilian: Employed 62.3 % Unemployed 3.0 % Not In Labor Force 34.6 % Female Labor Force: Armed Forces 0.0 % Civilian: Employed 53.7 % Unemployed 2.5 % Not In Labor Force 43.8 % 1990 % Working Mothers: Child<6 Only 18.0 % Child 6-17 Only 42.0 % Child<6 & 6-17 11.2 % Nonworking Mothers 28.8 % Total Mothers 39,950 Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 6 of 9 Area 1 = PA/11 Berks County 5/20/96 - -------------------------------------------------------------------------------- Description Area 1 - -------------------------------------------------------------------------------- 1990 % Industry Employment: Agriculture/Forestry/Fishing 2.4 % Mining 0.3 % Construction 5.8 % Manufacturing: Nondurable Goods 11.2 % Durable Goods 17.2 % Transportation 3.0 % Communications & Public Utilities 2.5 % Wholesale Trade 4.4 % Retail Trade 17.4 % Finance/Insurance/Real Estate 6.2 % Services: Business & Repair 4.3 % Personal 2.1 % Entertainment & Recreation 1.0 % Health 7.8 % Educational 6.6 % Other Professional & Related 5.9 % Public Administration 1.9 % Total 166,292 1990 % Occupation: Executive & Managerial 10.2 % Professional Specialty 11.6 % Technical Support 3.4 % Sales 10.7 % Administrative Support 15.6 % Service: Private Household 0.2 % Service: Protective 1.1 % Service: Other 10.5 % Farming, Forestry & Fishing 2.1 % Precision Production, Craft & Repair 13.1 % Machine Operator, Assemblers & Inspectors 11.7 % Transportation & Material Moving 4.3 % Laborers 5.5 % White Collar Total 51.5 % Blue Collar Total 34.6 % Total Employed 166,292 Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 7 of 9 Area 1 = PA/11 Berks County 5/20/96 - -------------------------------------------------------------------------------- Description Area 1 - -------------------------------------------------------------------------------- 1990 % Marital Status: Total Male: 128,835 Never Married 27.3 % Married 60.9 % Separated 1.9 % Widowed 3.2 % Divorced 6.7 % Total Female: 141,774 Never Married 21.9 % Married 55.0 % Separated 2.2 % Widowed 13.1 % Divorced 7.9 % 1990 Households by Type: One Person Households 30,044 Two or more Person Households: Family Households: Married Couple 75,470 Male Householder 4,167 Female Householder 11,631 Nonfamily Households 6,337 1990 Family Households With Children Married Couple Family 32,987 Male Householder 2,159 Female Householder 6,921 1990 Population by Household Type: Family Households 281,742 Nonfamily Households 45,052 1990 Households With: Children Under 18 42,693 Persons Over 65 36,364 Householder Over 65 32,971 1990 Average Family Size 3.03 Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 8 of 9 Area 1 = PA/11 Berks County 5/20/96 - -------------------------------------------------------------------------------- Description Area 1 - -------------------------------------------------------------------------------- 1990 Median Home Value $ 81,761 1990 Average Home Value $ 90,917 1990 Median Contract Rent $ 344 1990 Average Contract Rent $ 355 1990 Persons In Unit: 1 Person Units 30,044 2 Person Units 43,711 3 Person Units 23,123 4+ Person Units 30,771 1990 Housing Unit Counts: Total Units 134,482 % Occupied 94.9 % % Vacant 5.1 % % Year Round 4.8 % % Seasonal 0.3 % Occupied Units 127,649 % Owner Occupied 73.9 % % Renter Occupied 26.1 % Vacant Units 6,833 % Year Round of Vacant Units 93.5 % % Seasonal of Vacant Units 6.5 % 1990 Total Housing Units in Structure 134,482 1, Detached 51.1 % 1, Attached 24.6 % 2, 5.1 % 3 - 9 8.3 % 10 - 49 4.5 % 50 + 1.3 % Mobile Home or Trailer 4.2 % Other 1.0 % 1990 Housing Units by Year Built 94,336 Built 1985 to March, 1990 10.0 % Built 1980 to 1984 5.1 % Built 1970 to 1979 15.5 % Built 1960 to 1969 11.0 % Built 1950 to 1959 13.4 % Built 1949 or Earlier 45.0 % Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 9 of 9 Area 1 = PA/11 Berks County 5/20/96 - -------------------------------------------------------------------------------- Description Area 1 - -------------------------------------------------------------------------------- 1990 % Means of Transportation to Work: Car, Truck or Van: Drove Alone 77.6 % Carpooled 11.5 % Public Transportation 2.2 % Other Means 5.9 % Worked at Home 2.8 % 1990 % Travel Time to Work: 0 - 14 Minutes 37.5 % 15 - 29 Minutes 42.8 % 30 - 59 Minutes 16.8 % 60 - 89 Minutes 2.4 % 90 + Minutes 0.5 % 1990 Households by Number of Vehicles: 1 Vehicle 40,047 2 Vehicles 49,727 3 Vehicles 16,275 4 Vehicles 4,687 5 or More Vehicles 1,723 Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 1 of 4 Area 1 = SHILLINGTON 3 Mile Radius 6/11/96 Area 2 = SHILLINGTON 5 Mile Radius Area 3 = SHILLINGTON 7 Mile Radius Description Area 1 Area 2 Area 3 Population: 2000 Projection 57,825 134,214 198,199 1995 Estimate 56,099 131,393 193,056 1990 Census 53,705 127,339 186,067 1980 Census 50,846 122,036 177,295 Percent Change, 1980 - 1990 5.6 4.3 4.9 Percent Change, 1990 - 1995 4.5 3.2 3.8 1995 Population by Race: % White 93.9 84.9 88.6 % Black 1.6 6.4 4.9 % American Indian 0.0 0.1 0.1 % Asian 2.4 1.7 1.5 % Other 2.0 6.9 5.0 % Hispanic 4.6 14.2 10.4 1995 Population by Age: % 0 - 5 7.1 8.4 8.0 % 6 - 13 9.9 10.7 10.4 % 14 - 17 4.8 4.8 4.8 % 18 - 20 3.9 4.0 4.1 % 21 - 24 4.4 4.9 5.0 % 25 - 34 12.3 14.5 14.3 % 35 - 44 14.2 14.1 14.4 % 45 - 54 12.3 11.2 11.4 % 55 - 64 11.0 9.4 9.6 % 65 - 74 11.0 9.6 9.6 % 75 - 84 6.9 6.4 6.4 % 85 + 2.2 2.1 2.1 Median Age Total Population 40.4 36.9 37.3 Median Age Adult Population 48.1 45.5 45.5 Households: 2000 Projection 22,954 53,842 77,695 1995 Estimate 22,312 52,861 75,962 1990 Census 21,403 51,366 73,485 1980 Census 19,028 48,207 67,996 Percent Change, 1980 - 1990 12.5 6.6 8.1 Percent Change, 1990 - 1995 4.2 2.9 3.4 1990 Household Population 52,846 125,431 181,279 1990 Households w/ Children under 18 6,638 16,073 23,073 1990 Households w/ Persons over 65 7,004 16,110 22,703 Area defined by Circle: (40.298083,75.987473): 3 mile(s) Area defined by Circle: (40.298083,75.987473): 5 mile(s) Area defined by Circle: (40.298083,75.987473): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Profile Report CBC - C1750-41 Page 2 of 4 Area 1 = SHILLINGTON 3 Mile Radius 6/11/96 Area 2 = SHILLINGTON 5 Mile Radius Area 3 = SHILLINGTON 7 Mile Radius Description Area 1 Area 2 Area 3 1990 Family Population 46,019 104,429 152,942 1990 Nonfamily Population 6,827 21,002 28,337 1990 Group Quarters Population 860 1,911 4,797 1990 Average Household Size 2.47 2.44 2.47 1990 Average Family Size 2.94 3.01 3.00 1990 Family Households 15,527 33,818 49,921 1990 Nonfamily Households 5,889 17,553 23,552 1995 Household Income: % $ 0 - $ 9,999 8.7 13.9 12.1 % $ 10,000 - $ 14,999 6.4 8.6 8.1 % $ 15,000 - $ 24,999 13.8 16.9 15.9 % $ 25,000 - $ 34,999 13.8 15.1 15.3 % $ 35,000 - $ 49,999 19.5 18.2 19.4 % $ 50,000 - $ 74,999 20.2 15.7 17.2 % $ 75,000 - $ 99,999 8.7 6.0 6.3 % $ 100,000 - $ 149,999 5.3 3.5 3.7 % $ 150,000 + 3.6 2.1 2.0 2000 Median Household Income $ 46,215 $ 36,094 $ 38,819 1995 Median Household Income $ 40,324 $ 31,849 $ 34,106 1990 Median Household Income $ 35,098 $ 28,103 $ 30,093 2000 Average Household Income $ 60,583 $ 48,068 $ 50,060 1995 Average Household Income $ 52,140 $ 41,688 $ 43,316 1990 Average Household Income $ 44,274 $ 35,859 $ 37,190 2000 Per Capita Income $ 24,412 $ 19,562 $ 20,111 1995 Per Capita Income $ 21,060 $ 17,019 $ 17,478 1990 Per Capita Income $ 18,000 $ 14,686 $ 15,092 2000 Median Family Income $ 55,337 $ 44,648 $ 46,902 1995 Median Family Income $ 48,284 $ 39,397 $ 41,208 1990 Median Family Income $ 42,026 $ 34,763 $ 36,359 1990 Average Family Income $ 51,795 $ 42,739 $ 43,374 Area defined by Circle: (40.298083,75.987473): 3 mile(s) Area defined by Circle: (40.298083,75.987473): 5 mile(s) Area defined by Circle: (40.298083,75.987473): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Profile Report CBC - C1750-41 Page 3 of 4 Area 1 = SHILLINGTON 3 Mile Radius 6/11/96 Area 2 = SHILLINGTON 5 Mile Radius Area 3 = SHILLINGTON 7 Mile Radius Description Area 1 Area 2 Area 3 1990 Housing Unit Counts: Total Units 22,102 54,900 77,952 Occupied Units 21,403 51,366 73,485 Owner Occupied 16,025 32,634 50,519 Renter Occupied 5,378 18,731 22,962 Vacant Units 699 3,534 4,467 Year Round 680 3,480 4,374 Seasonal 21 56 93 1990 Housing Unit Percents: % Occupied of Total Units 96.8 93.6 94.3 % Owner Units of Occupied Units 74.9 63.5 68.7 % Renter Units of Occupied Units 25.1 36.5 31.2 % Vacant of Total Units 3.2 6.4 5.7 % Year Round of Vacant Units 97.3 98.5 97.9 % Seasonal of Vacant Units 3.0 1.6 2.1 % Condominiums of Total Units 3.3 3.0 2.4 1990 Condominiums: Total Condominium Units 719 1,669 1,863 % Owner Occupied 57.9 47.8 48.3 % Renter Occupied 36.4 44.2 44.1 % Vacant 5.7 8.0 7.6 1990 Units in Structure: % 1, Detached 58.4 33.5 38.2 % 1, Attached 21.5 34.8 33.5 % 2 3.5 6.6 6.2 % 3 - 9 5.8 13.3 11.1 % 10 - 49 7.6 7.2 6.3 % 50+ 1.9 3.1 2.2 % Mobile Homes 0.3 0.3 1.5 % Other 0.9 1.1 1.0 1990 Median Home Value $ 91,412 $ 71,861 $ 73,848 1990 Median Contract Rent $ 416 $ 333 $ 341 Area defined by Circle: (40.298083,75.987473): 3 mile(s) Area defined by Circle: (40.298083,75.987473): 5 mile(s) Area defined by Circle: (40.298083,75.987473): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Profile Report CBC - C1750-41 Page 4 of 4 Area 1 = SHILLINGTON 3 Mile Radius 6/11/96 Area 2 = SHILLINGTON 5 Mile Radius Area 3 = SHILLINGTON 7 Mile Radius Description Area 1 Area 2 Area 3 1995 Total Employed 16,067 50,207 68,941 1995 Socio-Economic Measure 64 43 47 1990 Occupation: Total Civil Labor Force 26,751 63,052 93,379 % Unemployed 3.3 5.9 5.2 Total Employed 25,858 59,302 88,493 % White Collar 64.9 55.6 55.5 % Executive & Managerial 14.8 11.9 11.4 % Professional Specialty 16.3 12.6 12.7 % Technical Support 3.7 3.4 3.4 % Administrative Support 17.7 16.3 16.4 % Sales 12.4 11.4 11.6 % Blue Collar 24.8 30.6 31.1 % Precision Production, Craft & Repair 10.1 10.5 11.2 % Machine Operators 7.5 10.8 10.5 % Transportation & Material Moving 3.1 3.5 3.9 % Laborers 4.1 5.8 5.4 % Farming, Forestry & Fishing 0.6 1.1 1.2 % Service: Private Household 0.1 0.2 0.2 % Service: Protective 1.1 1.2 1.3 % Service: Other 8.6 11.3 10.8 1990 Educational Attainment (Age 25 & Over): % Less than Grade 9 7.7 12.0 11.7 % Grade 9 - 12 (No Diploma) 14.7 19.2 18.8 % High School Graduate or Equivalency 35.4 35.5 36.8 % Some College (No Degree) 11.9 11.1 10.9 % Associate Degree 6.3 5.2 5.2 % Bachelor Degree 15.8 11.2 10.8 % Graduate or Professional Degree 8.2 5.8 5.7 Area defined by Circle: (40.298083,75.987473): 3 mile(s) Area defined by Circle: (40.298083,75.987473): 5 mile(s) Area defined by Circle: (40.298083,75.987473): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 shillington 3 Mile Radius 5/24/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 50,846 53,705 56,099 57,825 White 95.8 % 94.4 % 93.9 % 93.5 % Black 1.3 % 1.5 % 1.6 % 1.6 % American Indian 0.0 % 0.0 % 0.0 % 0.0 % Asian 0.7 % 2.0 % 2.4 % 2.9 % Other 2.1 % 2.1 % 2.0 % 2.0 % Hispanic 2.9 % 4.3 % 4.6 % 4.9 % Total Households 19,028 21,403 22,312 22,954 Household Population 50,343 52,846 55,239 56,965 Average Household Size 2.65 2.47 2.48 2.48 Household Income $ 0 - 9,999 21.9 % 10.6 % 8.7 % 7.2 % $ 10,000 - 14,999 13.4 % 7.4 % 6.4 % 5.4 % $ 15,000 - 24,999 29.4 % 16.3 % 13.8 % 11.2 % $ 25,000 - 34,999 19.8 % 15.6 % 13.8 % 12.9 % $ 35,000 - 49,999 10.5 % 20.7 % 19.5 % 17.6 % $ 50,000 - 74,999 3.4 % 17.7 % 20.2 % 21.8 % $ 75,000 - 99,999 1.6 % 6.2 % 8.7 % 10.3 % $ 100,000 - 149,999 - 3.0 % 5.3 % 8.6 % $ 150,000+ - 2.6 % 3.6 % 4.8 % Total 100.0 % 100.0 % 100.0 % 100.0 % Median Household Income ($) 20,005 35,098 40,324 46,215 Aggregate HH Inc ($000) 436,396 951,232 1,163,349 1,390,627 Median Family Income ($) 22,838 42,026 48,284 55,337 Per Capita Income ($) 8,668 18,000 21,060 24,412 Median Age Total Population 36.5 39.2 40.4 41.4 Median Age Adult Population 47.3 47.4 48.1 49.1 Median Age Female Population 38.3 40.7 42.2 43.3 Median Age Adult Female Population 48.1 48.8 49.6 50.6 Median Age Male Population 34.5 37.5 38.4 39.0 Median Age Adult Male Population 46.4 45.7 46.6 47.4
Area defined by Circle: (40.298083,75.987473): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 shillington 3 Mile Radius 5/24/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 50,846 53,705 56,099 57,825 0 - 5 6.7 % 7.3 % 7.1 % 7.0 % 6 - 13 11.2 % 10.3 % 9.9 % 9.4 % 14 - 17 6.9 % 4.9 % 4.8 % 4.7 % 18 - 24 9.8 % 7.5 % 8.4 % 9.0 % 25 - 34 13.9 % 13.9 % 12.3 % 12.0 % 35 - 44 11.1 % 14.7 % 14.2 % 13.1 % 45 - 54 12.9 % 10.7 % 12.3 % 13.1 % 55 - 64 12.7 % 11.4 % 11.0 % 11.5 % 65 - 74 15.0 % 10.7 % 11.0 % 10.8 % 75 - 84 - 6.6 % 6.9 % 7.3 % 85+ - 2.0 % 2.2 % 2.4 % Female Population by Age 26,884 28,591 29,865 30,752 0 - 5 6.1 % 7.0 % 6.6 % 6.5 % 6 - 13 10.5 % 9.5 % 9.2 % 8.7 % 14 - 17 6.4 % 4.5 % 4.5 % 4.5 % 18 - 24 9.6 % 7.2 % 7.8 % 8.4 % 25 - 34 13.7 % 13.6 % 11.9 % 11.2 % 35 - 44 11.3 % 14.4 % 14.1 % 13.0 % 45 - 54 12.8 % 10.7 % 12.2 % 13.1 % 55 - 64 12.6 % 11.5 % 11.2 % 11.8 % 65 - 74 17.1 % 11.1 % 11.4 % 11.2 % 75 - 84 - 7.9 % 8.1 % 8.5 % 85 + - 2.7 % 3.0 % 3.2 % Male Population by Age 23,949 25,115 26,234 27,070 0 - 5 7.3 % 7.7 % 7.7 % 7.5 % 6 - 13 11.9 % 11.2 % 10.7 % 10.2 % 14 - 17 7.5 % 5.3 % 5.1 % 5.0 % 18 - 24 9.9 % 7.9 % 9.1 % 9.6 % 25 - 34 14.1 % 14.2 % 12.8 % 12.8 % 35 - 44 10.8 % 15.0 % 14.3 % 13.1 % 45 - 54 13.0 % 10.6 % 12.4 % 13.1 % 55 - 64 12.7 % 11.4 % 10.8 % 11.1 % 65 - 74 12.7 % 10.2 % 10.5 % 10.3 % 75 - 84 - 5.2 % 5.5 % 5.9 % 85+ - 1.3 % 1.3 % 1.4 %
Area defined by Circle: (40.298083,75.987473): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-4l Page 1 of 2 shillington 3 Mile Radius 5/24/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 103.4 - --------------------------------- Demographics --------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 56,099 22,312 55,239 2.48 $ 40,324 2000 57,825 22,954 56,965 2.48 $ 46,215 - ----------------------------- Expenditure Potential ---------------------------- 1995 Area Yearly Growth Rate Per Household 1.36% Total 1.94% - ------------------------ Retail Support Potential (000) ------------------------ 1995: 2,532 sq. ft. - -------------------------------------------------------------------------------- Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 23,739 26,868 1,064 1,171 2.51 % 103.9 Appliance Store 1,966 1,714 88 75 -2.71 % 103.3 Auto-Aftermarket Store 39,022 41,244 1,749 1,797 1.11 % 104.6 Convenience Store 20,734 21,722 929 946 0.94 % 102.6 Dept. Store 24,538 26,997 1,100 1,176 1.93 % 104.1 Drug Store 19,379 24,764 869 1,079 5.03 % 110.5 Electronics Store 8,837 11,730 396 511 5.83 % 101.9 Fast Food Restaurant Store 22,283 20,106 999 876 -2.04 % 104.5 Full Serv Restaurant Store 21,888 19,575 981 853 -2.21 % 104.8 Furniture Store 8,679 8,238 389 359 -1.04 % 104.8 Grocery Store 91,651 105,383 4,108 4,591 2.83 % 100.6 Hardware Store 4,376 4,812 196 210 1.92 % 106.5 Home Centers Store 20,556 24,419 921 1,064 3.50 % 105.4 Jewelry Store 4,085 4,278 183 186 0.93 % 108.3 Liquor Store 5,855 5,363 262 234 -1.74 % 103.2 Mass Merchandiser Store 32,417 36,818 1,453 1,604 2.58 % 102.6 Photo Store 448 449 20 20 0.04 % 104.3 Shoe Store 4,576 5,477 205 239 3.66 % 103.0 Sporting Goods Store 4,021 4,736 180 206 3.33 % 100.7 Toy Store 2,903 2,790 130 122 -0.79 % 101.9 Variety Store 1,884 2,167 84 94 2.84 % 104.2 Area defined by Circle: (40.298083,75.987473): 3 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-4l Page 2 of 2 shillington 3 Mile Radius 5/24/96 Benchmark = Regional Area Definition Detailed Report Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 1,286 2,211 58 96 11.46% 100.0 ------- ------- ------ ------ Total Shopping Center 365,123 401,862 16,364 17,507 All Other Stores 280,049 308,228 12,552 13,428 Total Retail 645,172 710,090 28,916 30,935 Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (40.298083,75.987473): 3 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 shillington 5 Mile Radius 5/24/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 122,036 127,339 131,393 134,214 White 90.0 % 86.3 % 84.9 % 83.6 % Black 5.2 % 6.1 % 6.4 % 6.8 % American Indian 0.1 % 0.1 % 0.1 % 0.1 % Asian 0.6 % 1.4 % 1.7 % 2.0 % Other 4.2 % 6.2 % 6.9 % 7.5 % Hispanic 6.3 % 11.4 % 14.2 % 16.8 % Total Households 48,207 51,366 52,861 53,842 Household Population 120,386 125,431 129,481 132,302 Average Household Size 2.50 2.44 2.45 2.46 Household Income $ 0 - 9,999 33.1 % 16.2 % 13.9 % 12.0 % $ 10,000 - 14,999 15.1 % 9.5 % 8.6 % 7.7 % $ 15,000 - 24,999 26.8 % 18.9 % 16.9 % 14.6 % $ 25,000 - 34,999 14.8 % 16.5 % 15.1 % 14.3 % $ 35.000 - 49,999 7.1 % 17.9 % 18.2 % 17.7 % $ 50,000 - 74,999 2.1 % 13.5 % 15.7 % 17.6 % $ 75,000 - 99,999 0.9 % 4.0 % 6.0 % 7.5 % $ 100,000 - 149,999 - 2.0 % 3.5 % 5.7 % $ 150,000+ - 1.5 % 2.1 % 2.9 % Total 100.0 % 100.0 % 100.0 % 100.0 % Median Household Income ($) 15,650 28,103 31,849 36,094 Aggregate HH Inc ($000) 891,742 1,842,114 2,203,678 2,588,071 Median Family Income (S) 19,785 34,763 39,397 44,648 Per Capita Income(S) 7,407 14,686 17,019 19,562 Median Age Total Population 35.3 35.8 36.9 38.0 Median Age Adult Population 47.1 44.5 45.5 46.5 Median Age Female Population 37.7 37.7 38.9 40.1 Median Age Adult Female Population 48.7 46.4 47.3 48.3 Median Age Male Population 33.2 34.0 34.9 35.9 Median Age Adult Male Population 45.4 42.8 43.7 44.6
Area defined by Circle: (40.298083,75.987473): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 shillington 5 Mile Radius 5/24/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 122,036 127,339 131,393 134,214 0 - 5 7.3 % 8.6 % 8.4 % 8.1 % 6 - 13 10.8 % 10.5 % 10.7 % 10.5 % 14 - 17 6.6 % 4.8 % 4.8 % 4.9 % 18 - 24 10.9 % 9.3 % 8.9 % 9.2 % 25 - 34 14.2 % 15.7 % 14.5 % 13.1 % 35 - 44 10.2 % 13.7 % 14.1 % 14.1 % 45 - 54 11.3 % 9.7 % 11.2 % 12.3 % 55 - 64 12.2 % 9.9 % 9.4 % 9.7 % 65 - 74 16.6 % 9.7 % 9.6 % 9.2 % 75 - 84 - 6.3 % 6.4 % 6.6 % 85 + - 1.9 % 2.1 % 2.3 % Female Population by Age 65,096 67,416 69,446 70,858 0 - 5 6.6 % 8.0 % 7.8 % 7.6 % 6 - 13 10.1 % 9.7 % 9.9 % 9.7 % 14 - 17 6.1 % 4.5 % 4.5 % 4.7 % 18 - 24 10.9 % 9.0 % 8.5 % 8.6 % 25 - 34 13.7 % 15.1 % 13.9 % 12.5 % 35 - 44 10.0 % 13.3 % 13.7 % 13.7 % 45 - 54 11.0 % 9.7 % 11.2 % 12.3 % 55 - 64 12.3 % 10.0 % 9.6 % 10.0 % 65 - 74 19.4 % 10.4 % 10.3 % 9.8 % 75 - 84 7.7 % 7.9 % 8.0 % 85 + - 2.5 % 2.9 % 3.1 % Male Population by Age 56,950 59,927 61,950 63,363 0 - 5 8.0 % 9.2 % 9.0 % 8.7 % 6 - 13 11.7 % 11.4 % 11.5 % 11.3 % 14 - 17 7.1 % 5.1 % 5.1 % 5.2 % 18 - 24 11.0 % 9.5 % 9.4 % 9.8 % 25 - 34 14.7 % 16.5 % 15.2 % 13.7 % 35 - 44 10.4 % 14.2 % 14.5 % 14.5 % 45 - 54 11.5 % 9.8 % 11.2 % 12.3 % 55 - 64 12.0 % 9.8 % 9.2 % 9.5 % 65 - 74 13.5 % 8.9 % 8.9 % 8.6 % 75 - 84 - 4.6 % 4.8 % 5.1 % 85+ - 1.1 % 1.2 % 1.3 %
Area defined by Circle: (40.298083,75.987473): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-4l Page 1 of 2 shillington 5 Mile Radius 5/24/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 94.8 - --------------------------------- Demographics --------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 131,393 52,861 129,481 2.45 $ 31,849 2000 134,214 53,842 132,302 2.46 $ 36,094 - ----------------------------- Expenditure Potential ---------------------------- 1995 Area Yearly Growth Rate Per Household 1.38% Total 1.75% - ------------------------ Retail Support Potential (000) ------------------------ 1995: 5,498 sq. ft. - -------------------------------------------------------------------------------- Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 50,511 56,526 956 1,050 2.28 % 93.3 Appliance Store 4,160 3,563 79 66 -3.05 % 92.2 Auto-Aftermarket Store 82,087 85,793 1,553 1,593 0.89 % 92.9 Convenience Store 45,747 47,408 865 881 0.72 % 95.6 Dept. Store 52,238 56,922 988 1,057 1.73 % 93.5 Drug Store 42,350 53,359 801 991 4.73 % 102.0 Electronics Store 18,768 24,805 355 461 5.74 % 91.3 Fast Food Restaurant Store 47,920 42,815 907 795 -2.23 % 94.9 Full Serv Restaurant Store 47,035 41,599 890 773 -2.43 % 95.1 Furniture Store 18,573 17,631 351 327 -1.04 % 94.6 Grocery Store 206,546 235,199 3,907 4,368 2.63 % 95.6 Hardware Store 9,079 9,904 172 184 1.75 % 93.3 Home Centers Store 43,367 51,231 820 952 3.39 % 93.8 Jewelry Store 8,522 8,835 161 164 0.72 % 95.3 Liquor Store 13,005 11,848 246 220 -1.85 % 96.8 Mass Merchandiser Store 70,291 79,070 1,330 1,469 2.38 % 93.9 Photo Store 949 946 18 18 -0.06 % 93.3 Shoe Store 9,959 11,789 188 219 3.43 % 94.6 Sporting Goods Store 8,716 10,203 165 189 3.20 % 92.1 Toy Store 6,245 5,920 118 110 -1.06 % 92.5 Variety Store 4,073 4,640 77 86 2.64 % 95.0 Area defined by Circle: (40.298083,75.987473): 5 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-4l Page 2 of 2 shillington 5 Mile Radius 5/24/96 Benchmark = Regional Area Definition Detailed Report Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 2,804 4,749 53 88 11.11 % 92.0 ----- ----- ----- ----- Total Shopping Center 792,944 864,755 15,001 16,061 All Other Stores 608,188 663,267 11,505 12,319 Total Retail 1,401,132 1,528,022 26,506 28,380 Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (40.298083,75.987473): 5 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 shillington 7 Mile Radius 5/24/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 177,295 186,067 193,056 198,199 White 92.5 % 89.6 % 88.6 % 87.5% Black 3.8 % 4.6 % 4.9 % 5.2% American Indian 0.1 % 0.1 % 0.1 % 0.1% Asian 0.5 % 1.2 % 1.5 % 1.7% Other 3.1 % 4.5 % 5.0 % 5.5% Hispanic 4.7 % 8.4 % 10.4 % 12.2 % Total Households 67,996 73,485 75,962 77,695 Household Population 173,160 181,279 188,259 193,402 Average Household Size 2.55 2.47 2.48 2.49 Household Income $ 0 - 9,999 30.4 % 14.3 % 12.1 % 10.3 % $ 10,000 - 14,999 15.2 % 9.0 % 8.1 % 7.1 % $ 15,000 - 24,999 28.0 % 18.1 % 15.9 % 13.7 % $ 25,000 - 34,999 15.7 % 17.1 % 15.3 % 14.0 % $ 35,000 - 49,999 7.6 % 19.3 % 19.4 % 18.6 % $ 50,000 - 74,999 2.2 % 14.6 % 17.2 % 19.3 % $ 75,000 - 99,999 0.9 % 4.1 % 6.3 % 8.2 % $ 100,000 - 149,999 - 2.2 % 3.7 % 6.1 % $ 150,000+ - 1.4 % 2.0 % 2.9 % Total 100.0 % 100.0 % 100.0 % 100.0 % Median Household Income($) 16,571 30,093 34,106 38,819 Aggregate HH Inc ($000) 1,302,554 2,735,900 3,290,337 3,889,412 Median Family Income($) 20,246 36,359 41,208 46,902 Per Capita Income ($) 7,522 15,092 17,478 20,111 Median Age Total Population 35.3 36.2 37.3 38.5 Median Age Adult Population 46.8 44.4 45.5 46.6 Median Age Female Population 37.7 38.0 39.2 40.5 Median Age Adult Female Population 48.3 46.4 47.3 48.3 Median Age Male Population 33.3 34.3 35.4 36.4 Median Age Adult Male Population 45.1 42.7 43.7 44.7
Area defined by Circle: (40.298083,75.987473): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 shillington 7 Mile Radius 5/24/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 177,295 186,067 193,056 198,199 0 - 5 7.0 % 8.2 % 8.0 % 7.8 % 6 - 13 10.7 % 10.1 % 10.4 % 10.2 % 14 - 17 6.5 % 4.7 % 4.8 % 4.9 % 18 - 24 11.3 % 9.4 % 9.1 % 9.4 % 25 - 34 14.2 % 15.9 % 14.3 % 12.8 % 35 - 44 10.4 % 13.9 % 14.4 % 14.4 % 45 - 54 11.5 % 9.9 % 11.4 % 12.6 % 55 - 64 12.1 % 10.2 % 9.6 % 9.8 % 65 - 74 16.3 % 9.7 % 9.6 % 9.3 % 75 - 84 - 6.1 % 6.4 % 6.5 % 85 + - 1.9 % 2.1 % 2.3 % Female Population by Age 93,677 97,745 101,270 103,859 0 - 5 6.4 % 7.7 % 7.5 % 7.3 % 6 - 13 10.0 % 9.4 % 9.7 % 9.5 % 14 - 17 6.1 % 4.4 % 4.5 % 4.7 % 18 - 24 11.1 % 9.1 % 8.6 % 8.8 % 25 - 34 13.7 % 15.2 % 13.7 % 12.1 % 35 - 44 10.2 % 13.5 % 14.0 % 14.0 % 45 - 54 11.3 % 9.8 % 11.4 % 12.6 % 55 - 64 12.3 % 10.3 % 9.7 % 10.1 % 65 - 74 18.9 % 10.4 % 10.3 % 9.9 % 75 - 84 - 7.6 % 7.8 % 7.9 % 85+ - 2.6 % 2.9 % 3.2 % Male Population by Age 83,616 88,330 91,775 94,338 0 - 5 7.7 % 8.7 % 8.6 % 8.3 % 6 - 13 11.6 % 10.9 % 11.1 % 10.9 % 14 - 17 7.0 % 5.0 % 5.1 % 5.2 % 18 - 24 11.4 % 9.7 % 9.6 % 10.0 % 25 - 34 14.7 % 16.8 % 15.0 % 13.5 % 35 - 44 10.6 % 14.4 % 14.8 % 14.8 % 45 - 54 11.8 % 9.9 % 11.4 % 12.7 % 55 - 64 11.9 % 10.1 % 9.4 % 9.6 % 65 - 74 13.4 % 8.9 % 8.9 % 8.6 % 75 - 84 - 4.5 % 4.8 % 5.1 % 85 + - 1.1 % 1.2 % 1.3 %
Area defined by Circle: (40.298083,75.987473): 7 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-4l Page 1 of 2 shillington 7 Mile Radius 5/24/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 97.2 - --------------------------------- Demographics --------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 193,056 75,962 188,259 2.48 $ 34,106 2000 198,199 77,695 193,402 2.49 $ 38,819 - ----------------------------- Expenditure Potential ---------------------------- 1995 Area Yearly Growth Rate Per Household 1.39% Total 1.85% - ------------------------ Retail Support Potential (000) ------------------------ 1995: 8,101 sq. ft. - -------------------------------------------------------------------------------- Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 73,951 83,195 974 1,071 2.38 % 95.1 Appliance Store 6,141 5,286 81 68 -2.95 % 94.8 Auto-Aftermarket Store 122,070 128,230 1,607 1,650 0.99 % 96.1 Convenience Store 67,347 70,148 887 903 0.82 % 97.9 Dept. Store 76,570 83,839 1,008 1,079 1.83 % 95.4 Drug Store 62,441 79,086 822 1,018 4.84 % 104.6 Electronics Store 27,753 36,860 365 474 5.84 % 94.0 Fast Food Restaurant Store 70,269 63,046 925 811 -2.15 % 96.8 Full Serv Restaurant Store 69,074 61,382 909 790 -2.33 % 97.2 Furniture Store 26,874 25,550 354 329 -1.01 % 95.3 Grocery Store 303,268 347,093 3,992 4,467 2.74 % 97.7 Hardware Store 13,647 14,913 180 192 1.79 % 97.6 Home Centers Store 66,314 78,504 873 1,010 3.43 % 99.9 Jewelry Store 12,552 13,065 165 168 0.80 % 97.7 Liquor Store 18,987 17,352 250 223 -1.78 % 98.3 Mass Merchandiser Store 103,155 116,610 1,358 1,501 2.48 % 95.9 Photo Store 1,403 1,405 18 18 0.04 % 95.9 Shoe Store 14,504 17,260 191 222 3.54 % 95.9 Sporting Goods Store 12,765 15,001 168 193 3.28 % 93.9 Toy Store 9,150 8,722 120 112 -0.95 % 94.4 Variety Store 5,961 6,821 78 88 2.73 % 96.8 Area defined by Circle: (40.298083,75.987473): 7 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-4l Page 2 of 2 shillington 7 Mile Radius 5/24/96 Benchmark = Regional Area Definition Detailed Report Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 4,159 7,099 55 91 11.28 % 95.0 --------- --------- ------ ------ Total Shopping Center 1,168,355 1,280,468 15,381 16,480 All Other Stores 896,128 982,119 11,797 12,641 Total Retail 2,064,483 2,262,587 27,178 29,121 Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (40.298083,75.987473): 7 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. ================================================================================ ADDENDUM F RENT ROLL - -------------------------------------------------------------------------------- ADDENDUM F RENT ROLL - -------------------------------------------------------------------------------- Detail Rent Roll Page: 44 SHILLINGTON PLAZA Date: 05/14/96 Report Date: 05/14/96 Time: 14:09:33
- ------------------------------------------------------------------------------------------------------------------------- -- Rent Dates --- Suite Commence Expire Square Monthly Annual ----Cost Recovery---- Expense No. Tenant Name Start Footage Base Rent Rate/SF Description Monthly Stop - ------------------------------------------------------------------------------------------------------------------------- 00010 K MART - STORE #3136 08/01/74 07/31/99 94,500 21,750.00 2.76 11/01/94 00020 WEISS MARKET 08/01/74 08/31/99 40,107 7,733.33 2.31 11/01/94 00030 REVCO DRUGS STORE #1242 03/01/75 02/28/00 7,200 4,500.00 7.50 11/01/94 00050 HOLIDAY HAIR FASHIONS 10/15/76 10/31/96 1,200 500.00 5.00 11/01/94 00060 ASSOCIATES CONSUMER DISCOUNT 12/01/74 11/30/97 1,600 1,333.33 10.00 11/01/94 00070 READING HOME VIDEO 06/11/87 06/30/96 1,200 775.00 7.75 11/01/94 01000 EVANS PRODUCTS COMPANY 07/20/79 07/19/29 0 0.00 0.00 11/01/94 02000 JEKA, INC. 11/28/89 07/20/09 0 0.00 0.00 11/01/94 10000 MERIDIAN BANK 03/01/75 02/28/00 2,535 1,641.67 7.77 11/01/94 20000 SOVEREIGN BANK 01/01/75 12/31/99 2,400 3,700.00 18.50 11/01/94 - ------------------------------------------------------------------------------------------------------------------------- Total Building Occupied Sqft: 100% 150,742 41,933.33 0.00 Available Sqft: 0% 0 Total Sqft: 150,742 - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- ---- Other Income--- --- Future Rent Increases --- Description Monthly Date Monthly Amt. Per Sf - ------------------------------------------------------------------------------------------------------------------- 00010 K MART - STORE #3136 MAINTENANC 1,038.20 00020 WEISS MARKET MAINTENANC 440.62 00030 REVCO DRUGS STORE #1242 MAINTENANC 300.00 03/01/98 4,800.00 8.00 00050 HOLIDAY HAIR FASHIONS MAINTENANC 27.78 REAL ESTAT 73.03 ------ 100.81 00060 ASSOCIATES CONSUMER DISCOUNT MAINTENANC 37.04 REAL ESTAT 97.37 ------ 134.41 00070 READING HOME VIDEO MAINTENANC 27.78 REAL ESTAT 73.00 ------ 100.78 01000 EVANS PRODUCTS COMPANY MAINTENANC 350.00 02000 JEKA, INC. MAINTENANC 150.00 10000 MERIDIAN BANK MAINTENANC 42.11 20000 SOVEREIGN BANK MAINTENANC 39.87 REAL ESTAT 146.05 ------ 185.92 - ------------------------------------------------------------------------------------------------------------------- Total Building 2,842.85 - -------------------------------------------------------------------------------------------------------------------
================================================================================ ADDENDUM G - PRO-JECT REPORTS - -------------------------------------------------------------------------------- ADDENDUM G PRO-JECT REPORTS - -------------------------------------------------------------------------------- SHILLINGTON PLAZA, READING, PA PROJECT DESIGNATOR: 693N REVISION: 6/11/96 @ 12:56 PROJECT ASSUMPTIONS REPORT INCLUDING ALL TENANTS 6/19/96 @ 15:57 BUILDING PROLOGUE LEASEHOLD ANALYSIS OF SHILLINGTON PLAZA, READING, PA BEGINNING 6/1996 FOR 16 YEARS ON A FISCAL YEAR BASIS AREA MEASURES GLA 1996 VALUE - 150,742 THEREAFTER - CONSTANT GROWTH RATES MKRT 1996 VALUE - 3.00 THEREAFTER - CONSTANT OPEX 1996 VALUE - 3.00 THEREAFTER - CONSTANT RETG 1996 VALUE - 3.00 THEREAFTER - CONSTANT RENT 1996 VALUE - 3.00 THEREAFTER - CONSTANT MISC 1996 VALUE - 3.00 THEREAFTER - CONSTANT SALE 1996 VALUE - 3.00 THEREAFTER - CONSTANT LCNW 1996 VALUE - 4.50 THEREAFTER - CONSTANT LCRN 1996 VALUE - 2.25 THEREAFTER - CONSTANT LCBL +50.0% OF LCNW +50.0% OF LCRN MARKET RATES ANCH 1996 VALUE - 6.00 THEREAFTER - GROWING AT GROWTH RATE MKRT SALI 1996 VALUE - 11.00 PAGE 2 THEREAFTER - GROWING AT GROWTH RATE MKRT OUTP 1996 VALUE - 15.00 THEREAFTER - GROWING AT GROWTH RATE MKRT ANC2 1996 VALUE - 8.00 THEREAFTER - GROWING AT GROWTH RATE MKRT MISCELLANEOUS INCOMES MISCELLANEOUS 1996 VALUE - 500 THEREAFTER - GROWING AT GROWTH RATE OPEX EXPENSES COMMON AREA MAINT., REFERRED TO AS CAME CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 55,000 THEREAFTER GROWING AT GROWTH RATE OPEX INSURANCE , REFERRED TO AS INSE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 12,000 THEREAFTER - GROWING AT GROWTH RATE OPEX REAL ESTATE TAXES , REFERRED TO AS RETE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 99,860 THEREAFTER - GROWING AT GROWTH RATE RETG CAM RECOVERY , REFERRED TO AS CAMR AN INFORMATIONAL EXPENSE +100.0 %OF CAME+100.0% OF MGMT +100.0 %OF INSE CAM-RECOV.-ANCHOR , REFERRED TO AS CAMA AN INFORMATIONAL EXPENSE +100.0% OF CAME+100.0% OF MGMT R.E. TAX RECOVERY , REFERRED TO AS RETR AN INFORMATIONAL EXPENSE +100.0 %OF RETE MANAGEMENT FEE , REFERRED TO AS MGMT AN INFORMATIONAL EXPENSE 1996 VALUE - 13,950 1997 VALUE - 14,805 1998 VALUE - 15,046 1999 VALUE - 15,416 2000 VALUE - 14,979 2001 VALUE - 15,873 2002 VALUE - 16,008 2003 VALUE - 16,350 2004 VALUE - 16,827 2005 VALUE - 16,779 2006 VALUE - 17,892 2007 VALUE - 18,024 2008 VALUE - 18,428 2009 VALUE - 18,998 2010 VALUE - 18,839 2011 VALUE - 20,231 PAGE 3 THEREAFTER - CONSTANT VACANCY ALLOWANCE PERCENTAGE OF POTENTIAL GROSS INCOME FOR ALL TENANTS SUBJECT TO VACANCY 1996 VALUE - 2.00 THEREAFTER - CONSTANT MANAGEMENT FEE PERCENTAGE OF EFFECTIVE GROSS INCOME FOR ALL TENANTS PASSED THROUGH TO TENANTS USING EXPENSE MGMT 1996 VALUE - 2.00 THEREAFTER - CONSTANT COMMISSION CALCULATIONS STANDARD METHOD #1 - 0.000% OF TOTAL RENT STANDARD METHOD #2 - 0.000% OF TOTAL RENT STANDARD METHOD #3 - 0.000% OF TOTAL RENT STANDARD METHOD #4 - 0.000% OF TOTAL RENT STANDARD METHOD #5 - 0.000% OF TOTAL RENT COMMISSION PAYOUTS STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT ALTERATION CALCULATION NONE ALTERATION PAYOUTS STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT PAGE 4 COMMON AREA MAINTENANCE POOL NONE CAPITAL EXPENDITURES RESERVES 1996 VALUE - 15,074 THEREAFTER - GROWING AT GROWTH RATE OPEX PRIMARY CLASSIFICATION CODES NONE SECONDARY CLASSIFICATION CODES NONE COST CENTERS 1 - CAM 2 - RET SALES VOLUME PROFILE PERCENT OF RELATIVE MONTH ANNUAL SALES VOLUME - ----- ------------ ------ JAN 8.33 % 1.00 FEB 8.33 % 1.00 MAR 8.33 % 1.00 APR 8.33 % 1.00 MAY 8.33 % 1.00 JUN 8.33 % 1.00 JUL 8.33 % 1.00 AUG 8.33 % 1.00 SEP 8.33 % 1.00 OCT 8.33 % 1.00 NOV 8.33 % 1.00 DEC 8.33 % 1.00 ---- ---- TOTALS 100.00 % 12.00 GLOBAL RECOVERIES CAM RECOVERY , REFERRED TO AS CAMR ASSIGNED TO COST CENTER 1 - CAM PRO RATA SHARE RECOVERY OF EXPENSE CAMR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH R.E. TAX RECOVERY , REFERRED TO AS RETR ASSIGNED TO COST CENTER 2 - RET PAGE 5 PRO RATA SHARE RECOVERY OF EXPENSE RETR PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE or ZERO FOR A COMPLETE PASSTHROUGH CAM-RECOV.-ANCHOR , REFERRED TO AS CAMA ASSIGNED TO COST CENTER 1 - CAM PRO RATA SHARE RECOVERY OF EXPENSE CAMA PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH TENANT PROLOGUE MINIMUM RENTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR SALES VOLUMES AND BREAKPOINTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR RENEWAL RENTS ARE COMPOUNDED ANNUALLY RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET REFERENCE TENANTS NONE TENANTS THERE ARE A TOTAL OF 8 LEASEHOLD TENANT(S): # 1 - SUITE #00010 , KMART STORE #3136 BASE LEASE DATES: 11/1994 TO 7/2044 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 94,500 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 2.76/SF/YR PERCENTAGE RENT: INITIAL SALES - 180.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 92.06/SF/YR 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: R.E. TAXES RECAPTURE OF RECOVERIES ASSIGNED TO COST CENTER 2 - RET PERCENT OF OVERAGE - 100.00% PERCENT OF RECOVERY - 100.00% ANNUAL MAXIMUM - 20,000 RECOVERY FLOOR - 0 PAGE 6 RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAMA GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 2 - SUITE #00020 , WEISS MARKET EASE LEASE DATES: 11/1994 TO 8/1999 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 40,107 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 2.31/SF/YR PERCENTAGE RENT: INITIAL SALES - 163.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAMA GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 9/1999 TO 8/2004 SQUARE FOOTAGE: 40,107 MINIMUM RENT: INITIAL RENT - 2.66/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 530.58/SF/YR 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAMA GLOBAL GROUPING GLOBAL RECOVERY RETR PAGE 7 COMMISSIONS: NONE ALTERATIONS: NONE OPTION 2 DATES: 9/2004 TO 8/2009 SQUARE FOOTAGE: 40,107 MINIMUM RENT: INITIAL RENT - 3.06/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 530.58/SF/YR 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAMA GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE OPTION 3 DATES: 9/2009 TO 8/2014 SQUARE FOOTAGE: 40,107 MINIMUM RENT: INITIAL RENT - 3.52/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 530.58/SF/YR 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAMA GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE OPTION 4 DATES: 9/2014 TO 8/2019 SQUARE FOOTAGE: 40,107 MINIMUM RENT: INITIAL RENT - 4.05/SF/YR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE SALE PAGE 8 INITIAL BREAKPOINT - 530.58/SF/YR 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAMA GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 3 - SUITE #00030 , REVCO DRUGS BASE LEASE DATES: 11/1994 TO 2/2000 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 7,200 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 7.50/SF/YR PERCENTAGE RENT: INITIAL SALES - 249.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 2.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAMA GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ----- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE ANC2 MULTIPLIED BY 1.000 WITH PERCENTAGE STEPS OF RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: PAGE 9 GLOBAL GROUPING GLOBAL RECOVERY CAMR GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 4 - SUITE #00050 , HOLIDAY HAIR FASHN BASE LEASE DATES: 11/1994 TO 10/1996 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,200 SUBJECT TO VACANCY ALLOWANCE MINUMUM RENT: INITIAL RENT - 5.00/SF/YR PERCENTAGE RENT: INITIAL SALES - 117.00/SF/YR THEREAFTER - GROWING AT GROWTH RATE SALE INITIAL BREAKPOINT - 83.33/SF/YR 6.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAMR GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ----- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO 4 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE SALI MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAMR GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT PAGE 10 RENEWAL ALTERATIONS: NONE # 5 - SUITE #00060 , ASSOCIATES CONSUMR BASE LEASE DATES: 11/1994 TO 11/1997 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,600 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 10.00/SF/YR PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAMR GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ----- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE SALI MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAMR GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 6 - SUITE #00070 , READING HOME VIDEO BASE LEASE DATES: 11/1994 TO 6/1996 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,200 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: PAGE 11 INITIAL RENT - 7.75/SF/YR PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAMR GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 1/1997 TO 12/2001 SQUARE FOOTAGE: 1,200 MINIMUM RENT: INITIAL RENT - MARKET RATE SALI PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAMR GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: GROWTH RATE LCNW PAYOUT: CASHED OUT ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ----- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE SALI MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAMR GLOBAL GROUPING GLOBAL RECOVERY RETR PAGE 12 RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 7 - SUITE #10000 , MERIDIAN BANK BASE LEASE DATES: 11/1994 TO 2/2000 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 2,535 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 7.77/SF/YR PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAMR GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ----- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE ANC2 MULTIPLIED BY 1.000 WITH PERCENTAGE STEPS OF RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAME GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 8 - SUITE #20000 , SOVEREIGN BANK BASE LEASE DATES: 11/1994 TO 12/1999 TYPE OF TENANT: RETAIL PAGE 13 SQUARE FOOTAGE: 2,400 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 18.50/SF/YR PERCENTAGE RENT: INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.00% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAMA GLOBAL GROUPING GLOBAL RECOVERY RETR COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ----- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE ANC2 MULTIPLIED BY 1.000 WITH PERCENTAGE STEPS OF RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAMA GLOBAL GROUPING GLOBAL RECOVERY RETR RENEWAL COMMISSIONS: GROWTH RATE LCBL RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE ================================================================================ ADDENDUM H - ENGAGEMENT LETTER - -------------------------------------------------------------------------------- ADDENDUM H ENGAGEMENT LETTER - -------------------------------------------------------------------------------- [LETTERHEAD OF CB COMMERCIAL REAL ESTATE GROUP, INC.] May 8, 1996 Mr. Josh Kane Chief Financial Officer MARK CENTERS TRUST 660 Third Avenue Kingston, PA 18704 Re: 17 Shopping Centers Nationwide Dear Mr. Kane: At your request, we are pleased to submit the following proposal to appraise the above referenced properties. The purpose of this assignment is to estimate the market value of the leased fee interest. We understand the appraisal reports are to be used for mortgage underwriting purposes. We also understand that the reports will be used by Mark Centers Trust and Morgan Stanley. The properties are briefly described on attachment "A". Our complete valuation will be presented in a self contained (narrative) format and will contain a complete description of the property along with pertinent exhibits and photographs together with supporting factual data and analysis necessary to convey our opinion of value. We will value the property based upon the cost, income and market approaches to value, where applicable, correlating our findings into a final value conclusion. The report will be prepared in conformity with and will be subject to the requirements of the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. Each report will also conform to the Uniform Standards of Professional Appraisal Practice ("USPAP") and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") and the Morgan Stanley Capital Appraisal Standards described in Attachment "B". We assume that there are no major or significant items of deferred maintenance beyond normal wear and tear for properties of their age as of the date of the appraisal which would require the expertise of a professional contractor to estimate the cost of such repairs. If such repairs need to be considered in this appraisal, such estimates are to be provided by a qualified firm hired by you and at no cost to us. The total fee for the assignment is $68,000 ($4,000 per property) including all travel and related expenses which is due and payable upon delivery of the reports. If we are asked to cancel the assignment within two weeks of our engagement an upset fee equal to 50% will be due and payable. If cancellation occurs between two and three weeks, the upset fee will be equal to 75% and any time after three weeks the full fee will be due and payable. We will furnish you with three copies of our final report within four to five weeks of our authorization. Authorization occurs upon our receipt of an executed copy of this proposal and our delivery date is contingent upon the timely receipt of all necessary property information, financial statements and detailed lease information. If all requested data and information is not available as of the authorized date, we reserve the right to extend the delivery date by the amount of time it takes to receive the requested information. May 8, 1996 Mr. Kane Page 2 In order to complete this assignment in a timely manner, we will require the following specific information, if available: o Copy of Ground Lease, if Leasehold o Legal descriptions. o Current rent roll. o Copy of Leases or abstracts o Expense reimbursements on a tenant by tenant basis o Building area calculations and surveys. o Operating statements for the past three full years. o Current year expenses to date. o A copy of the current budget. o Copies of any toxic engineering reports dealing with underground tanks, PCB's, asbestos or chemical spills, if available. o A copy of the next fiscal year's budget, if available. o A list of major repairs which have recently been made, or are scheduled to be made in the next 18 months. o Name and phone number(s) of on-site superintendent(s), or local management firm or trustee for physical inspection. o Notice of any pending changes to the rent roll or pertinent information regarding the current status of the tenants. If we are requested to give court testimony an additional fee will be charged on an hourly basis at $300 per hour for designated MAI-appraisers and $175 for non-designated appraisers. Said hourly billings pertain to court preparation, waiting and travel time, document review and preparation (excludes narrative appraisal report) and all meetings related to court testimony. The client may provide only complete, final copies of the appraisal report to third parties who shall rely on such reports in connection with loan underwriting or securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the client for routine and customary questions. Please note that our consent to allow an appraisal report prepared by CB Commercial, or portions of such report, to become part of or be referenced in any public offering, the granting of such consent will be at our sole discretion and, if given, will be on condition that we will be provided with an Indemnification Agreement and/or Non-Reliance letter, in a form and content satisfactory to us, by a party satisfactory to us. We do consent to your submission of the reports to rating agencies, loan participants or your auditors without the need to provide us with an Indemnification Agreement and/or Non-Reliance letter. In addition to the fee for this assignment, you agree to compensate us at a rate to be mutually agreed to, for any time expended by us should we be required (by subpoena or otherwise) or requested by you, your representatives or other entity to become involved in any litigation or May 8, 1996 Mr. Kane Page 3 legal proceeding in any way involving this engagement to which we are not a party, the appraisal work we produce or the property which is the subject of this assignment. You also agree to pay, on demand, all reasonable expenses which we incur in connection with any litigation or proceedings including the fees of our attorneys. You acknowledge that we are being retained hereunder as an independent contractor to perform the services described herein and nothing in this agreement shall be deemed to create any other relationship between us. This assignment will be deemed concluded and the services hereunder completed upon delivery to you of the appraisal report discussed herein. If these terms are acceptable, please authorize us to proceed by having an officer of the corporation, managing general partner, principal, owner, or a contractually responsible party sign the enclosed copy of this proposal with "Terms and Conditions" and return it to us for our permanent file. Upon receipt of your authorization, we will schedule the necessary personnel to complete the project in a timely manner. We appreciate this opportunity to be of service to you on this assignment. If you have additional questions, please do not hesitate to give me a call. Sincerely, CB COMMERCIAL REAL ESTATE GROUP, INC. Appraisal /s/ Michael R. Pecorino - ----------------------- Michael R. Pecorino, MAI MRP:jf cc: Douglas W. Haney Enclosure AGREED & ACCEPTED _____________________________________ _____________________________________ Signature Title _____________________________________ _____________________________________ Name (type or print) Date Office #: ___________________________ Fax #: ______________________________ ADDENDUM I QUALIFICATIONS - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM J- QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF MICHAEL R. PECORINO, MAI Senior Vice President, Regional Manager CB Commercial Real Estate Group, Inc. 560 Lexington Avenue, 20th Floor New York, New York 10022 (212)207-6102 EDUCATIONAL Real Estate Appraisal and Analysis, New York University, the Real Estate Institute Bachelor of Arts, Geography, Planning, Urban Studies, State University College of New York at Oneonta Successfully completed all the necessary courses to qualify for the MAI designation. LICENSES/CERTIFICATIONS Certified General Real Estate Appraiser: State of New York (46000002055) Certified General Real Estate Appraiser: State of New Jersey (RG-01667) Certified General Real Estate Appraiser: State of Pennsylvania (GA-001096-R) Certified General Real Estate Appraiser: State of Connecticut (0000489) Certified General Real Estate Appraiser: State of Maryland (10569) Certified General Real Estate Appraiser: State of New Jersey (3793) Certified General Real Estate Appraiser: State of Delaware (X10000223) Certified General Real Estate Appraiser: State of Maine (CG00001192) Certified General Real Estate Appraiser: State of Vermont (080-0000168) Certified General Real Estate Appraiser: State of District of Columbia (GA00010315) Licensed Real Estate Broker: State of New York PROFESSIONAL Appraisal Institute Designated Member of the Appraisal Institute (MAI), Certificate No. 7944 Member of the Real Estate Board of New York EXPERIENCE Fifteen years of Real Estate Appraisal and Consulting experience throughout the United States specializing in the New York metropolitan area. 1993 - Present CB Commercial Real Estate Group, Inc., Appraisal New York, New York 1983 - 1993 Cushman & Wakefield, Inc. New York, New York 1982 - 1983 Joseph J. Blake & Associates, Inc. New York, New York 1981 - 1982 City of New York - Office of Manhattan Planning New York, New York 1980 - 1981 City of Jersey City - Office of the Mayor Jersey City, New Jersey Assignments include full and partial interest appraisals of office buildings, air rights, commercial lofts, garden apartments, cooperatives, condominiums, townhouses, shopping centers, industrial facilities, residential and office market studies, portfolio valuations and multi-property assignments. - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM J- QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF MAGGIE ARGYROS Real Estate Analyst CB Commercial Real Estate Group, Inc. 560 Lexington Avenue, 16th Floor New York, New York 10022 (212) 207-6128 EDUCATION Master of Science in Real Estate, Penn State University, State College, Pennsylvania Appraisal Institute Courses 110, 120, 310, 410, 420 PROFESSIONAL Appraisal Institute Candidate for MAI designation EXPERIENCE Five years of Real Estate Appraisal and Consulting experience throughout the United States, specializing in the New York Metropolitan area. 1991 - 1993 J. Blake and Associates, Inc. New York, New York 1993 - 1996 The Weitzman Group, Inc. New York, New York 1996 - Present CB Commercial Real Estate Group, Inc. New York, New York Assignments include full and partial interest appraisals of all types of real estate including office buildings, shopping centers, industrial facilities, apartment buildings, market studies, and cooperatives and condominiums. - -------------------------------------------------------------------------------- This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE CLOUD SPRINGS PLAZA SHOPPING CENTER SWC of U.S. Highway 27 and Cloud Springs Road Fort Oglethorpe, Catoosa County, Georgia CB File No. 96-106-1 [LOGO]CB COMMERCIAL Delivering Solutions Through Local Knowledge Worldwide COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE CLOUD SPRINGS PLAZA SHOPPING CENTER SWC of U.S. Highway 27 and Cloud Springs Road Fort Oglethorpe, Catoosa County, Georgia CB File No. 96-106-1 DATE OF VALUE May 17, 1996 PREPARED FOR Morgan Stanley Morgan Capital Inc. 1585 Broadway New York, New York 10036 PREPARED BY W. Scott Bradford Senior Real Estate Analyst and Ronald A. Neyhart, MAI Regional Manager CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES 100 Galleria Parkway, Suite 550 Atlanta, Georgia 30339 June 7, 1996 Morgan Stanley Morgan Capital Inc. 1585 Broadway New York, New York 10036 RE: Appraisal of CLOUD SPRINGS PLAZA SHOPPING CENTER SWC of U.S. Highway 27 and Cloud Springs Road Fort Oglethorpe, Catoosa County, Georgia CB File No. 96-106-1 Dear Morgan Stanley: At your request and authorization, CB Commercial Real Estate Group, Inc. has prepared a Complete Appraisal presented in a self-contained appraisal report of the Market Value "as is" of the leased fee interest in the above-referenced real property based on market conditions existing as of May 17, 1996. The subject property consists of approximately 113,367 gross leaseable square feet of retail shopping center space constructed in 1968 and 1991 as Cloud Springs Plaza Shopping Center on approximately 12.19 acres of land in Fort Oglethorpe, Georgia. The property is more fully described, legally and physically, within the enclosed report. Data, information, and calculations leading to the value conclusion are incorporated in the report following this letter. The report, in its entirety, including all assumptions and limiting conditions, is an integral part of and inseparable from this letter. Based on research and analysis contained in this report, it is estimated that the Market Value "as is" of the leased fee interest in the subject property, as of May 17, 1996, is: FOUR MILLION DOLLARS ($4,000,000) The following appraisal sets forth the most pertinent data gathered, the techniques employed, and the reasoning leading to the opinion of value. The analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP), the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, and The Financial Institution Reform, Recovery, and Enforcement Act of 1989 (FIRREA). June 7, 1996 Page 2 It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CB Commercial Real Estate Group, Inc. can be of further service, please do not hesitate to contact us. Respectfully Submitted, CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES by: /s/ W. Scott Bradford /s/ Ronald A. Neyhart, MAI - ----------------------- ------------------------- W. Scott Bradford Ronald A. Neyhart, MAI Senior Real Estate Analyst First Vice President, Regional Manager Georgia Certification No. CG001784 Georgia Certification No. CG000490 ================================================================================ CERTIFICATION OF THE APPRAISERS - -------------------------------------------------------------------------------- CERTIFICATION OF THE APPRAISERS We certify that to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. 4. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event, such as the approval of a loan. 5. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation and the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. In addition, this report conforms to the requirements of the Financial Institution Reform, Recovery, and Enforcement Act (FIRREA). 6. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 7. The undersigned MAI has completed the requirements of the continuing education program of the Appraisal Institute. 8. W. Scott Bradford has made a personal inspection of the property that is a subject of this report. Ronald A. Neyhart, MAI has not made a personal inspection of the appraised property. 9. No one provided professional assistance to the persons signing this report. 10. The undersigned appraisers have extensive experience in the appraisal/review of similar property types. 11. W. Scott Bradford and Ronald A. Neyhart, MAI are currently certified in the state where the subject is located. /s/ W. Scott Bradford /s/ Ronald A. Neyhart, MAI - -------------------------------- ---------------------------------- W. Scott Bradford Ronald A. Neyhart, MAI Senior Real Estate Analyst First Vice President, Regional Manager Georgia State Certification Georgia State Certification No. CG000490 No. CG001784 - -------------------------------------------------------------------------------- i ================================================================================ SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- SUBJECT PHOTOGRAPHS [GRAPHIC OMITTED] EXTERIOR VIEW OF THE SUBJECT PROPERTY [GRAPHIC OMITTED] EXTERIOR VIEW OF THE SUBJECT PROPERTY - -------------------------------------------------------------------------------- ii ================================================================================ EXECUTIVE SUMMARY - -------------------------------------------------------------------------------- SUMMARY OF SALIENT FACTS Property Name: Cloud Springs Plaza Shopping Center Location: SWC of U.S. Highway 27 and Cloud Springs Road Fort Oglethorpe, Catoosa County, Georgia Assessor's Parcel Number: 2C-73 & 74 Property Description: The subject property consists of a 113,367 gross leasable square foot neighborhood shopping center. Highest and Best Use As Though Vacant: Commercial development. As Improved: Continued use as a neighborhood shopping center. Property Rights Appraised: Leased fee Interest Date of Value: May 17, 1996 Land Area 12.19 Acres Improvements Building Area (GLA): 113,367 Square Feet Year Built: 1968 and 1991 Condition: Average Anchor Tenants: Food Lion 29,000 SF Big Lot's 30,000 SF Badcock Furniture 15,260 SF YMCA 10,287 SF Auto Zone 8,350 SF Estimated Marketing Time: 12 months - -------------------------------------------------------------------------------- iii ================================================================================ EXECUTIVE SUMMARY - -------------------------------------------------------------------------------- Financial Indicators Current Occupancy: 97.8% Stabilized Occupancy: 97% Estimated Stabilized Expenses: $137,921, or $1.22 per square foot Going-In Overall Capitalization Rate Selected: 10.5% Terminal Overall Capitalization Rate: 11.0% Discount Rate: 12.5% Valuation Land Value: N/A Cost Approach: N/A Sales Comparison Approach: $4,075,000 Income Capitalization Approach: $4,000,000 Final Value Conclusion: $4,000,000 Per Square Foot: $35.28 - -------------------------------------------------------------------------------- iv ================================================================================ TABLE OF CONTENTS - -------------------------------------------------------------------------------- TABLE OF CONTENTS CERTIFICATION OF THE APPRAISERS...............................................i SUBJECT PHOTOGRAPHS..........................................................ii SUMMARY OF SALIENT FACTS....................................................iii TABLE OF CONTENTS.............................................................v INTRODUCTION..................................................................1 AREA ANALYSIS.................................................................7 MARKET ANALYSIS..............................................................15 SITE ANALYSIS................................................................18 IMPROVEMENT ANALYSIS.........................................................21 ZONING.......................................................................26 TAX AND ASSESSMENT DATA......................................................27 HIGHEST AND BEST USE.........................................................28 APPRAISAL METHODOLOGY........................................................31 SALES COMPARISON APPROACH....................................................33 INCOME CAPITALIZATION APPROACH...............................................37 RECONCILIATION OF VALUE......................................................61 ASSUMPTIONS AND LIMITING CONDITIONS..........................................63 ADDENDA A Glossary Of Terms B Additional Subject Photographs C Legal Description D Rent Roll E Historical Operating Statements F Comparable Improved Sales G Rent Comparables H Pro-Ject Reports I Qualifications - -------------------------------------------------------------------------------- v INTRODUCTION INTRODUCTION ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- INTRODUCTION PROPERTY IDENTIFICATION The subject is located at the southwest corner of U.S. Highway 27 and Cloud Springs Road, in Fort Oglethorpe, Georgia. The county assessor's tax identification number is 2C-73 & 74. A legal description is presented in the Addenda. OWNERSHIP AND PROPERTY HISTORY The subject is currently owned by Mark Centers Limited Partnership according to a review of Catoosa County property records. The subject property was transferred to Mark Centers Limited Partnership from Mark Fort Oglethorpe Associates, L.P. on June 14, 1993 for $3,300,000. While this price would appear to be at or near the property's market value, we do not consider this sale to be arms length. There is no known current listing, option, or agreement of sale of the subject. DATES OF INSPECTION AND VALUATION The effective date of valuation is May 17, 1996. The site was inspected by W. Scott Bradford on May 17, 1996. PURPOSE OF THE APPRAISAL The purpose of this appraisal is to estimate the market value "as is" of the leased fee estate in the subject property, as of the date of inspection, May 17, 1996. Market value is defined as follows: Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised, and acting in what they consider their own best interests; 3. A reasonable time is allowed for exposure in the open market; - -------------------------------------------------------------------------------- 1 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- 4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. 1 TERMS AND DEFINITIONS Please refer to the Addenda for a Glossary of the Terms and Definitions that are, and may be used in this appraisal. INTENDED USE OF REPORT This appraisal is for mortgage underwriting purposes. PROPERTY RIGHTS APPRAISED The value estimated represents the leased fee estate. APPRAISAL DEVELOPMENT AND REPORTING PROCESS The following steps were completed by CB Commercial for this assignment: 1. Analyzed regional, city, neighborhood, site, and improvement data. 2. Inspected the subject and the neighborhood. 3. Reviewed data regarding taxes, zoning, utilities, easements, and city services. 4. Considered comparable improved sales, comparable improved building rental information, and comparable site sales. Confirmed data with principals, managers, or real estate agents representing principals, unless otherwise noted. 5. Analyzed the data to arrive at conclusions via each approach to value used in this report. 6. Reconciled the results of each approach to value employed into a probable range of market data and finally an estimate of value for the subject, as defined herein. - ---------- (1) The definition of market value is taken from: The Office of the Comptroller of the Currency under 12 CFR, Part 34, Subpart C-Appraisals, ss.34.42(f), August 24, 1990. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. - -------------------------------------------------------------------------------- 2 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- 7. Estimated a reasonable exposure time associated with the value estimate. The subject site and improvement descriptions are based on a personal inspection of the property and a review of the relevant plat maps and site plan. The inspection is not a substitute for thorough engineering studies. To develop the opinion of value, CB Commercial performed a complete appraisal process, as defined by the Uniform Standards of Professional Appraisal Practice. This means that no departures from Standard 1 were invoked. This is a complete appraisal, in the form of a Self-Contained Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Standards of Professional Appraisal Practice. The definitions of Complete Appraisal and Self-Contained Report are found in the Glossary of Terms and Definitions. In a complete appraisal, CB Commercial uses all known applicable approaches to value. The value conclusion reflects all known information about the subject property, market conditions, and available data. The Self-Contained Report incorporates to the fullest extent possible, practical explanation of the data, reasoning and analysis that were used to develop the opinion of value. It also includes thorough descriptions of the subject property and the market for the subject property type. All data considered significant that was requested for this assignment was received by CB Commercial Real Estate Group, Inc. Appraisal Services. SPECIAL APPRAISAL INSTRUCTIONS There were no special appraisal instructions. MARKETING PERIOD The marketing period section is divided into reasonable exposure time and reasonable marketing time. Exposure time differs from marketing time. Marketing time is the period required to sell a real property interest at market value during the period immediately after the effective date of the appraisal. Exposure time is always presumed to precede the effective date of the appraisal. Exposure time is not intended to be a prediction of a date of sale or a one-line statement. Instead, it is an integral part of the appraisal analysis and is based on one or more of the following: - -------------------------------------------------------------------------------- 3 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- o statistical information about days on the o market information gathered through sales verification o interviews of market participants. The reasonable exposure period is a function of price, time, and use. It is not an isolated estimate of time alone. Exposure time is different for various types of real estate and under various market conditions. Reasonable Exposure Time Exposure time is always presumed to precede the effective date of the appraisal. It is the estimated length of time the property would have been offered prior to a hypothetical market value sale on the effective date of appraisal. It is a retrospective estimate based on an analysis of recent past events, assuming a competitive and open market. It assumes not only adequate, sufficient, and reasonable time but adequate, sufficient, and reasonable marketing effort. Exposure time and appraisal conclusion of value are therefore interrelated. Exposure time is often expressed as a range and is based on direct and indirect market data gathered during the market analysis, sales verifications, interviews with market participants, and other appropriate sources. The amount of time which a property will require to be marketed varies greatly depending on a number of factors including market conditions, listing price, terms of sale offered, and competitive listing inventory. In addition to considering each of the factors noted above, CB Commercial considered: o exposure periods of comparable sales revealed during the course of this appraisal, o the most recent CB Commercial National Investor Survey, and o the opinions of local knowledgeable real estate brokers and investors. Market Conditions Throughout the Southeast, market conditions for most property types have improved significantly during the past one to two years. In fact, the value of most investment grade property types has increased due to a number of factors. During the early 1990's, the lack of demand for investment properties and the inability of owners to make mortgage payments resulted in numerous foreclosures, or properties deeded back in lieu of foreclosure. Increased listing inventory had a substantial downward influence on property values and the exposure time necessary to generate sales. However, in the last few years, due to the competitive pricing in the market and improving national economic conditions, the number of transactions and active investors increased. These market conditions describe the current market and illustrate how exposure time is correlated with listing inventory, competitive pricing structures, and marketing efforts. - -------------------------------------------------------------------------------- 4 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- CB Commercial National Investor Survey In the most recent issue of the CB Commercial National Investor Survey, published in the First Quarter 1996, CB Commercial surveyed a wide range of investors for property type preferences and specific marketing times. Respondents showed a clear preference for suburban offices, apartments, warehouse/distribution facilities, community shopping centers, neighborhood shopping centers, power centers, and business parks. The surveyed investors ranked neighborhood shopping centers fifth out of 13 property types in terms of preference, as opposed to fourth in the prior survey (Third Quarter 1995). Investors indicated that exposure requirements for investment property generally increased from the previous survey, now about 6.7 months for the subject property type. Real Estate Broker Surveys As a third information source, appraisers solicited the opinions of real estate brokers knowledgeable in the subject market and property type. While the majority of individuals surveyed were reluctant to predict an exact exposure time length, generally they estimated an approximate range between 9 and 12 months. All assumed that property would be appropriately priced and marketed. When asked about the subject property specifically, the consensus of opinion was that the subject would receive average recognition in the marketplace under a reasonable plan for pricing and promotion. Exposure Time Conclusion In conclusion, based on the foregoing analysis, an exposure time of 12 months is reasonable, defensible, and appropriate. Like the brokers surveyed, CB Commercial assumes that the subject property would have been competitively priced and aggressively promoted regionally. Reasonable Marketing Time Reasonable marketing time is the period a prospective investor would forecast to sell the subject property immediately after the date of value, at the value estimated. Anticipated marketing time is essentially a measure of the perceived level of risk associated with the marketability, or liquidity, of the subject as an investment grade property. The sources for this information include those used in estimating the reasonable exposure time, but also an analysis of the anticipated changes in market conditions following the date of appraisal. In other words, the reasonable marketing time is the number of months it will require to sell the subject property from the date of value, into the future. The reader must understand, however, that the future price for the subject property (at the end of the marketing time) may or may not equal the appraisal estimate. The future price depends - -------------------------------------------------------------------------------- 5 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- on unpredictable changes in the physical real estate, demographic and economic trends, real estate markets in general, supply/demand characteristics for the property type, and many other factors. Based on the premise that present market conditions are the best indicators of future performance, a prudent investor will forecast that, under the conditions described above, the subject property will require a marketing time of approximately 12 months. - -------------------------------------------------------------------------------- 6 [GRAPHIC OMITTED] Regional Map ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- AREA ANALYSIS The dynamic nature of economic relationships within a market area have a direct bearing on real estate values and the long-term quality of a real estate investment. In the market, the value of a property is not based on the price paid for it in the past or the cost of its creation, but on what buyers and sellers perceive it will provide in the future. Consequently, the attitude of the market toward a property within a specific neighborhood or market area reflects the probable future trend of that area. Since real estate is an immobile asset, economic trends affecting its locational quality in relation to other competing properties within its market area will also have a direct effect on its value as an investment. To accurately reflect such influences, it is necessary to examine the past and probable future trends which may affect the economic structure of the market and evaluate their impact on the market potential of the subject. This section of the report is designed to isolate and examine the discernible economic trends in the region and neighborhood which influence and create value for the subject property. REGIONAL INFLUENCES Location The subject is located within the city limits of Fort Oglethorpe, Catoosa County, Georgia, considered to be part of the Chattanooga metropolitan area. Fort Oglethorpe is located in the extreme northwestern portion of the state, just across the state line from Chattanooga, Tennessee. A regional map indicating the location of the subject is presented on the facing page. Population Catoosa County represents less than 1% of Georgia's population. The population of Catoosa County was estimated by Strategic Mapping, Inc. to be 47,441 persons as of 1995. This indicates an increase of 4,977 persons, or 11.7% from the April 1, 1990 federal census. The county's population is expected to reach approximately 50,868 by the year 2000. Demographic statistics for Catoosa County are summarized in the following table. - -------------------------------------------------------------------------------- 7 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ============================================================================= SELECTED AREA DEMOGRAPHICS CATOOSA COUNTY ============================================================================= Population 1995 Estimate 47,441 1990 Census 42,464 1990-1995 % Change 11.7% Households 1995 Estimate 17,751 1990 Census 15,745 1990-1995 % Change 12.7% 1995 Median Household Income $29,018 1995 Average Household Income $34,422 1990 Average Home Value $61,388 1990 % College Graduates 12.5% ============================================================================= Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ============================================================================= As indicated, the base of population and households in Catoosa County is moderate, as has been the growth rate over the last five years. All other demographic statistics suggest moderate income levels and home prices. The rate of growth over the next five years is projected to be consistent with the recent trend. Employment Based on the Georgia Department of Labor, the 1995 civilian labor force for Catoosa County was 23,116. The following table compares the unemployment rate for the area to that of the state and national averages. ============================================================================== UNEMPLOYMENT RATE ANNUAL AVERAGE COMPARISON BY COUNTY, STATE, AND U.S. ============================================================================== Year County State U.S. - ------------------------------------------------------------------------------ 1995 4.4% 4.9% N/A 1994 4.3% 5.2% 6.1% 1993 4.7% 5.8% 6.8% ============================================================================== Source: U.S. Department of Labor. Compiled by: CB Commercial Real Estate Group, Inc. ============================================================================== - -------------------------------------------------------------------------------- 8 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- The Georgia Department of Labor reports a preliminary unemployment as of April 1996 of 4.4% based on a labor force of 23,223 persons. The major employers in the Catoosa County area are as follows: =============================================================================== MAJOR AREA EMPLOYERS =============================================================================== Type of No. Of Company Business Employees - ------------------------------------------------------------------------------- Hutcheson Medical Center hospital 1,555 Shaw Industries carpet manufacturing 1,200 Catoosa County School System public education 900 Candlewick Yarns textile manufacturing 500 Danube Carpet carpet manufacturing 325 Galaxy Carpet carpet manufacturing 300 New York Carpet World carpet manufacturing 254 Pyramid Southern Moldings manufacturing 200 =============================================================================== Source: Catoosa County Chamber of Commerce. Compiled by: CB Commercial Real Estate Group, Inc. =============================================================================== - -------------------------------------------------------------------------------- 9 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Growth and Trends Jobs in Catoosa County can be segmented as follows by industry sector: ============================================================================= EMPLOYMENT BY INDUSTRY SECTOR ============================================================================= % of Total Industry Sector Employment - ----------------------------------------------------------------------------- Construction 3% Agriculture 1% Manufacturing 29% ---- Total Goods Producing 33% Transportation, Communication & Utilities 2% Wholesale Trade 4% Retail Trade 25% Finance, Insurance & Real Estate 2% Services 30% Government 4% ---- Total Service Producing 67% ============================================================================= Source: Georgia Department of Labor ============================================================================= As indicated, services, manufacturing, and retail make up the primary segments of the area economy, combining for 84% of total jobs. The previous table of major employers shows that most of the largest employers in Catoosa County fall in the manufacturing and service employment sectors. Retail jobs are spread throughout a number of employers, with Walmart, K-Mart and a few grocery store chains considered to be the largest retail employers. Additional evidence of the Catoosa County's economic growth is an analysis of annual retail sales as shown in the following table: - -------------------------------------------------------------------------------- 10 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ================================================================== CATOOSA COUNTY HISTORICAL RETAIL SALES - ------------------------------------------------------------------ Annual Year Retail Sales Growth Rate - ------------------------------------------------------------------ 1989 $199,076,000 N/A 1990 $217,414,000 9.2% 1991 $230,704,000 6.1% 1992 $250,030,000 8.4% 1993 $281,484,000 12.6% 1998 (Proj) $403,925,000 7.5% - ------------------------------------------------------------------ Source: The Survey of Buying Power ================================================================== This would suggest an annual average growth in retail sales of 9.0% from 1989 through 1993, with a 7.5% average growth rate projected from 1993 through 1998. By comparison, retail sales in the Chattanooga MSA increased at an annual average rate of 7.9% over the same period. As of 1993, the Chattanooga MSA ranked 107th nationwide in terms of gross retail sales. Based on the projected annual growth rate of 6.8% from 1993 through 1998, the Chattanooga MSA is expected to be the 104th largest by 1998. Transportation The Catoosa County area is bisected by Interstate 75, which travels in a north/south direction. Interstate 75 travels from Fort Myers, Florida north to Canada. Several state and U.S. highways form the primary transportation network throughout the county, with several of these local highways intersecting I-75. The closest commercial airport serving the area is the Chattanooga Airport, located 15 miles to the north. In addition, Hartsfield International Airport in Atlanta, Georgia is located 105 miles to the south. The area is also served by Norfolk Southern and CSX rail. There is no municipal bus service in the county. Conclusion and Relevance to the Subject Property The subject property is located within the northwestern portion of Catoosa County identified as Fort Oglethorpe. It enjoys excellent access within Fort Oglethorpe, as well as throughout the surrounding Catoosa County area. Population and employment levels are moderate, as is the rate of growth. The unemployment rate is below state and national averages. Primary employment sectors include services, manufacturing, and retail, led by the carpet manufacturing industry. Income and housing costs are also moderate, suggesting an affordable cost of living. All of these variables are considered to positively affect the subject property, which is dependent on the local economy and a stable work force. - -------------------------------------------------------------------------------- 11 [GRAPHIC OMITTED] Neighborhood Map ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- NEIGHBORHOOD INFLUENCES Location The subject is located at the southwest corner of U.S. Highway 27 and Cloud Springs Road, just inside of the northern city limits of Fort Oglethorpe. A neighborhood map is shown on the facing page. Boundaries The subject neighborhood is generally comprised of the Fort Oglethorpe area. The area is roughly bounded by Lakeview Drive to the north, U.S. Highway 27 to the west, Chickamauga Battlefield National Military Park to the south, and Interstate 75 to the east. The town of Chattanooga is located to the north via Interstate 75, as well as U.S. Highway 27. Land Use The town of Fort Oglethorpe is a small community whose primary commercial development consists of shopping centers and related retail uses along U.S. Highway 27 and Battlefield Parkway. While previous retail development has focused near the intersection of these two roads, more recent development, including a new Walmart and Lowe's Home Center, have been located along Battlefield Parkway closer to its intersection with Interstate 75 The area currently has four shopping centers, including the subject property, which comprise approximately 645,600 square feet of space. In addition, the concentration of shopping centers has led to related uses such as retail stores and fast food restaurants, and other services such as banking. The surrounding area is primarily residential and rural in nature. Also, the Chickamauga Battlefield National Military Park encompasses approximately 8,000 acres, making the largest and oldest national military park. Access Primary access to the neighborhood is provided by U.S. Highway 27 and Battlefield Parkway, as well as Interstate 75, which bisects Catoosa County. Average daily traffic counts along U.S. Highway 27 as of 1995 were 23,069 vehicles north of the intersection with Cloud Springs Road and 20,739 vehicles south of the intersection. There are several collector corridors serving the neighborhood as well, including Cloud Springs Road. Overall access to the neighborhood is considered good. - -------------------------------------------------------------------------------- 12 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Demographics Selected Neighborhood demographics for the subject's neighborhood is shown below. ============================================================================= SELECTED NEIGHBORHOOD DEMOGRAPHICS THREE-MILE RADIUS ============================================================================= Population 2000 Projection 43,789 1995 Estimate 43,687 1990 Census 42,747 1980 Census 45,400 1990-1995 % Change 2.2% Households 2000 Projection 18,127 1995 Estimate 17,933 1990 Census 17,426 1980 Census 16,934 1990-1995 % Change 2.9% 1995 Median Household Income $26,046 1995 Average Household Income $31,252 1990 Average Home Value $52,374 ============================================================================= Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ============================================================================= This information suggests a very modest population and income base in the subject neighborhood. In addition, the rate of growth in recent years and projected over the near term future, the base will remain minimal. Growth and Trends In general, the subject's neighborhood reflects a rural community with moderate income levels and median home values. Over the past decade this area has witnessed modest growth, which is expected to continue over the next five year period. There are a significant number of shopping centers in the subject neighborhood, suggesting that additional neighborhood and community shopping center development is unlikely. However, the two most recent retail developments have consisted of free-standing Wal-Mart and Lowe's stores. We do not expect the character of the neighborhood to change dramatically in the immediate future. - -------------------------------------------------------------------------------- 13 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Conclusion and Relevance to the Subject Property The subject property is located in the town of Fort Oglethorpe, an area which is primarily a residential suburban community of Chattanooga. It is a rather small community which has added retail and service jobs to the established base of manufacturing jobs to create a more balanced economy. Also, the Chickamauga Battlefield National Military Park, the largest and oldest national military park, draws a substantial number of tourists. While the Fort Oglethorpe area appears to be stagnant in terms of population growth, the surrounding population base is considered to be large enough to support a significant level of retail development. - -------------------------------------------------------------------------------- 14 ================================================================================ MARKETABILITY - -------------------------------------------------------------------------------- MARKET ANALYSIS Marketability refers to the posture of the subject property within its marketplace and its ability to be leased, sold, or marketed relative to its competition and current conditions. In this regard, the subject is very competitive relative to other shopping center developments in the submarket. OVERALL RETAIL TRENDS IN FORT OGLETHORPE As discussed in the Regional Influences section, retail sales in the region, and Catoosa County in particular, have increased at a healthy rate of growth during the beginning of this decade, with this rate of growth projected to be maintained over the near future. Provided there are no substantial reductions in area employment, we expect this trend to continue. Demographic Analysis The next portion of our marketability analysis presents a demographic profile of the area. In this section we analyze the existing demographics and their changing patterns. ================================================================================ NEIGHBORHOOD DEMOGRAPHICS ================================================================================ 1 mile 3 mile 5 mile - -------------------------------------------------------------------------------- Population 1995 Estimate 6,930 43,687 99,615 1990 Census 6,655 42,747 99,116 1990-1995 % Change 4.1% 2.2% 0.5% Households 1995 Estimate 2,704 17,933 40,249 1990 Census 2,571 17,426 39,803 1990-1995 % Change 5.2% 2.9% 1.1% 1995 Median Household Income $27,221 $26,046 $24,534 1995 Average Household Income $29,462 $31,252 $31,074 1990 Average Home Value $49,820 $52,374 $53,326 1990 % College Graduates 8.0% 12.4% 15.5% ================================================================================ Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The previous table indicates that population and household formation in the area has been minimal in terms of the rate of growth. Household incomes, average home values and the percentage of college graduates are considered to be below the regional median. The data generally indicates the neighborhood is a low to middle-income area with moderate population and income growth. - -------------------------------------------------------------------------------- 15 ================================================================================ MARKETABILITY - -------------------------------------------------------------------------------- MARKET ANALYSIS Trade Area Analysis The primary trade area for the subject is the Fort Oglethorpe portion of Catoosa County. The subject, as a neighborhood shopping center, generally does not compete with the shopping centers in Ringgold or Rossville, which are neighboring cities. A neighborhood shopping center focuses on servicing the needs of the immediate population, and as such, a resident of the neighborhood is not likely to drive outside the area for these goods. Fort Oglethorpe Retail Market Neighborhood shopping centers are generally meant to serve the retail needs of a very localized market, usually within a two to five mile radius. Within that radius of the subject, there are four anchored shopping centers, including the subject. There are no potential competitors under construction. These four properties are summarized in the following table.
================================================================================================================== SUMMARY OF FORT OGLETHORPE RETAIL CENTERS ================================================================================================================== Building Year Overall Local Occ Anchors Base Rent No. Name & Location Size Built Occ Rate Rate Tenants Per SF ================================================================================================================== 1 Oglethorpe Plaza 176,903 1974/ 100% 100% Kmart, Revco $8.00-$10.00 Battlefield Pkwy @ Hwy 27 1992 Drug, FoodMax 2 Battlefield Centre 202,414 1992 54% 93% Bi-Lo Foods $7.00 - N side of Battlefield Pkwy $8.00 3 Parkway Shopping Center, 152,932 1981 69% 100% Vacant $4.00 - N. side Battlefield Pkwy $5.50 Subj Cloud Springs Plaza 113,367 1968/ 98% 88% FoodMax, $6.50 Martintown @ Knox 1991 Belk's, Revco ================================================================================================================== Compiled by: B Commercial Real Estate Group, Inc. ==================================================================================================================
These four centers exhibit a variety of building quality, condition, and tenant quality. The subject is positioned near the middle of the local market. Generally, Oglethorpe Plaza is considered superior to the subject overall (similar age and condition, but superior tenant mix). Battlefield Centre is superior in terms of age and condition, but inferior based on the anchor tenant vacancy. Despite being only four years old, Walmart vacated this center in order to move to a larger, free-standing super store a few mile east along Battlefield Parkway. Parkway Center is considered inferior to the subject based on condition and anchor vacancies, which include the grocery store anchor tenant. In addition to the recently completed new location for Walmart, a free-standing Lowe's Home Center is under construction a few miles east of Highway 27 along Battlefield Parkway. Furthermore, three of the four shopping centers in this market, including the subject, have been - -------------------------------------------------------------------------------- 16 ================================================================================ MARKETABILITY - -------------------------------------------------------------------------------- MARKET ANALYSIS renovated and/or expanded in the last five years. Our discussions with area leasing agents and owners indicate no other major renovations or new construction is planned for the area. Subject Marketability In addition to analyzing the overall, or macro, conditions influencing the subject property, it is also important to consider the specific characteristics of the subject. It is particularly important to address those factors that would be considered by a potential purchaser of the subject. From a positive standpoint, the subject is located along a primary traffic corridor through the neighborhood and has good visibility and position in the market. However, it would appear that the focus of retail development in the market has shifted from Highway 27 to Battlefield Parkway as evidenced by the recent choice of sites by Walmart and Lowe's Home Center. With respect to its condition, the center was expanded and partially renovated with the addition of Food Lion in 1991. This has enabled the subject to maintain it overall appeal, as well as stay competitive from a physical standpoint as compared other shopping centers in Fort Oglethorpe. While two competing centers in the immediate vicinity of the subject have suffered from anchor tenant vacancies, the subject property would appear to be relatively secure in this respect. The grocery store anchor lease has more than 14 years remaining and the other anchor has another four years left on their lease. Both also have options considered to be favorable to the tenant, encouraging renewal. Finally, three junior anchors also help diversify the anchor rollover risk, with these tenants varying in size from 8,350 to 15,260 square feet. Summary In summary, we believe the Fort Oglethorpe retail market, and the subject's position in the market, is positive. We expect the subject will continue to experience good market acceptance, provided it is well maintained and up-graded periodically. This will become increasingly important at the subject ages. - -------------------------------------------------------------------------------- 17 PROPERTY DESCRIPTION PROPERTY DESCRIPTION [GRAPHIC OMITTED] AS-BUILT SURVEY ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- SITE ANALYSIS The Description of the site can be detailed as follows: Location: The subject is located at the southwest corner of U.S. Highway 27 and Cloud Springs Road. Ingress and egress to the subject is available from three curb cuts on of U.S. Highway 27 and two curb cuts on Cloud Springs Road. A site plan is shown on the facing page. Assessor's Parcel Number: 2C-73 & 74 Land Area(1) Gross Land Area: 12.19 Acres Net Land Area: 12.19 Acres Excess Land: None Outparcels: Includes one outparcel, which was previously developed as a gas station, but is currently undeveloped. Shape and Frontage: The site is irregular in shape, with actual street frontage of 577 feet along U.S. Highway 27 and 707 feet along Cloud Springs Road. Furthermore, the site has a reasonable depth relative to its width. Topography and Drainage: The site has moderately sloping topography which generally drains in a northwesterly direction. The site is generally at road grade with U.S. Highway 27 and Cloud Springs Road. Our investigation did not reveal any significant drainage problems. Soils: No soils report was provided and it is assumed that soils are adequate for the existing use. (1) Source: Boundary Survey - -------------------------------------------------------------------------------- 18 ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- Easements: A current title report was not provided in connection with this appraisal. Based on our on site inspection, there are only typical utility and access easements, which do not appear to adversely affect the subject. It is specifically assumed that any easements, restrictions or encroachments that might appear against the title would have no adverse impact on marketability or value. Covenants, Conditions, No private deeds or restricting and Restrictions: covenants affecting development, other than zoning and the covenants, conditions and restrictions associated with the shopping center, were found to affect the site. It is specifically assumed that there is no adverse affect on marketability or value. Utilities: All public utilities are available to the subject site. Flood Zone: According to maps published by the Federal Emergency Management Agency (FEMA), the subject lies within Zone C as indicated on FEMA Community Map Panel 130248 0002B, dated February 1, 1984. Flood insurance is available. This zone is described as follows: FEMA Zone C: "This area has been identified in the community flood insurance study as an area of moderate or minimal hazard from the principal source of flood in the area. However, buildings in this zone could be flooded by severe, concentrated rainfall coupled with inadequate local drainage systems. Local storm water drainage systems are not normally considered in the community's Flood Insurance Study. The failure of a local drainage system creates areas of high flood risk within this rate zone. Flood insurance is available in participating communities but is not required by regulation in this zone." Environmental Issues: We were not provided with any environmental report or site assessment for the subject property. While we are aware that a gas station was previously located on the northeast corner of the site, it our understanding that all storage tanks have been removed. The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the property that would cause a loss in value. However, CB Commercial is not qualified to detect hazardous waste or toxic materials. Therefore, we reserve the right to review and revise our valuation conclusions if additional information to the contrary becomes available in the future. - -------------------------------------------------------------------------------- 19 ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- Adjacent Properties North: Conoco convenience store and single-family homes South: Single-family homes East: Used car dealerships West: Wilson Funeral Home and single-family homes Conclusion: The subject is a 12.19-acre site which is accessible via curb cuts from U.S. Highway 27 and Cloud Springs Road. Access appears to be good for the site. Visibility and exposure are also good from U.S. Highway 27 and Cloud Springs Road as the site is generally at road grade. The shape of the parcel is irregular and there is no excess land. However, there is one outparcel included, which is undeveloped. The CB Commercial Real Estate Group, Inc. is aware of no environmental contamination of the site. In conclusion, from a physical standpoint, the subject site has good utility and is considered adequate for many types of commercial development. - -------------------------------------------------------------------------------- 20 [GRAPHIC OMITTED] Ease Plan ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS The subject property consists of approximately 113,367 gross leaseable square feet of retail center improvements. Originally built in 1974 and subsequently expanded in 1990, the center is currently 97.8% occupied. The improvements consist of a one-story neighborhood strip center subdivided into 14 tenant bays as depicted on the facing page floorplan. The following is a description of the improvements based on our physical inspection. The building area is detailed as follows: ============================================================= CLOUD SPRINGS PLAZA BUILDING AREA ============================================================= Gross % of Gross Category Leasable Area Leasable Area ============================================================= Big Lot's 30,000 26.4% Food Lion 29,000 25.6% Badcock Furniture 15,260 13.4% YMCA 10,287 9.1% Auto Zone 8,350 7.4% Local Tenants 20,470 18.1% ------- ----- Total 113,367 100.0% ============================================================= Source: Mark Centers Trust ============================================================= The subject improvements have a gross building area of 117,384 square feet according to the site plan. The basic construction features are summarized as follows. Construction Class The class of construction is the basic subdivision in Marshall Valuation Service(1), dividing all buildings into five basic groups by type of framing (supporting columns and beams), walls, floors, roof structure, and fireproofing. The subject is construction Class C. Competitive Rating The subject is considered a Class B building in terms of quality as it is perceived in the marketplace. - -------------------------------------------------------------------------------- (1) Class C Buildings are characterized by masonry or reinforced concrete (including tilt-up) construction. The walls may be load-bearing, i.e., supporting roof and upper floor loads, or nonbearing with open concrete, steel, or wood columns, bents, or arches supporting the load. (Source: Marshall Valuation Service) - -------------------------------------------------------------------------------- 21 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Foundation Concrete slab on grade. Frame Steel frame and metal studs. Floor Construction Concrete slab on grade. Exterior Walls Combination of concrete block, brick and stucco. Entries are glass store fronts with bronze finish anodized aluminum windows. Roof Cover The roof is built up tar and gravel over the Big Lots and Food Lion section and a rubber membrane over the remainder of the center. No specific information about the roof was available, but we have assumed that it is in average to good condition. If additional information to the contrary is provided to the appraiser in the future, we would reserve the right to review and revise our findings and conclusions if necessary. Exterior Condition Average Elevator/Stair System None Interior Partition System Metal studs with gypsum board cover. Interior Finishes - Tenant Space Floors: A combination of commercial grade carpet, vinyl tile and ceramic tile. Walls: Painted sheetrock. Ceilings: Acoustical tile drop ceilings. Lighting: Mostly recessed fluorescents, except for some attached fluorescents. Summary: The interior finishes are good throughout the center. None of the space is unfinished as all of the suites have been occupied at least once. Interior Condition Average HVAC Split heating and cooling system provided by air conditioning compressors mounted on the roof as well as the rear of the building and gas-fired furnaces with individual zone controls and ducted through ceiling registers. We have assumed that these units are in average condition. While tenants are responsible for maintaining the HVAC systems, the landlord could conceivably be required to replace a compressor unit if it fails while a suite was vacant. - -------------------------------------------------------------------------------- 22 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Electrical The electrical system is assumed to be in good working order and adequate for the building. Fire Protection The subject property is fully fire sprinklered. It is assumed that the subject has adequate fire alarm systems, fire exits, fire extinguishers, fire escapes and/or other fire protection measures adequate to meet local fire marshall requirements. Life Safety and Security The subject has no special security or surveillance system. Plumbing The plumbing system is assumed to be adequate for the proposed subject improvements. Parking Surface parking is provided for 635 vehicles, including 12 handicapped spaces. This type of parking is similar to that found in the local comparables. The number of parking spaces does satisfy current zoning requirements for the existing use. Therefore, it is considered to be legally conforming. Landscaping The landscaping is average compared to competitors. Tenant Improvements Building standard tenant improvements include wall partitions, carpeting, painted walls, suspended acoustical ceilings, hollow core wood doors, etc. All of the subject space has been finished out. ADA Compliance Handicap access appears be available to all areas of the building. However, we are not qualified to determine compliance with the requirements. Please refer to the specific limiting condition regarding ADA compliance. Environmental Issues We were not provided with any environmental report or site assessment for the subject property. While we are aware that a gas station was previously located on the northeast corner of the site, it our understanding that all storage tanks have been removed. The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the property that would cause a loss in value. However, CB Commercial is not qualified to detect hazardous waste or toxic materials. Therefore, we reserve the right to review and revise our valuation conclusions if additional information to the contrary becomes available in the future. - -------------------------------------------------------------------------------- 23 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Functional Quality of Space The interior floor plan is flexible and will accommodate a variety of tenant layouts. The only observed design problems reported by management is the excessive depth (100 feet) of some of the local tenant bays. By comparison, 60 to 70 feet is a more typical and functional local tenant bay depth. Deferred Maintenance We have identified no signs of deferred maintenance during our inspection of the subject, nor have we been provided with any information by Mark Centers Trust or one of their representative indicating any items of deferred maintenance. Therefore, the subject property is assumed to have no deferred maintenance. Economic Age and Life The building was erected in 1968 and partially rebuilt in 1991, with a weighted average chronological age of 16 years. Based on current condition, appraisers estimate effective age to be approximately 16 years. According to the Marshall Valuation Service cost guide, buildings of this type and quality have an expected life of 40 years. Therefore, the remaining economic life (expected life minus effective age) is approximately 24 years. While we observed nothing to suggest a different economic life, a capital improvement program could extend life beyond that stated above. Quality/General Condition The subject property conforms well with similar retail buildings in the neighborhood. The relative quality of construction is good and the aforementioned engineering report indicates that the subject improvements have generally been soundly constructed. - -------------------------------------------------------------------------------- 24 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- ================================================================================ IMPROVEMENT RATING ================================================================================ Category Exc. Good Average Fair Poor - -------------------------------------------------------------------------------- Appeal/Appearance X Construction Class X Design X Electrical X Exterior Condition x Exterior Walls X Floor Construction X Floor Cover X Floor to Ceiling Height X Foundation X Frame X Functionality/ Floor Plan X HVAC X Interior Condition X Interior Partitions X Landscaping X Lighting X Parking X Plumbing X Restrooms X Roof Cover X Sprinkler System X Tenant Improvements X - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 25 ================================================================================ ZONING - -------------------------------------------------------------------------------- ZONING The subject's zoning requirements are detailed below. ================================================================================ ZONING SUMMARY - -------------------------------------------------------------------------------- Current zoning: C-2, Commercial District Legally conforming?: Yes Uses permitted: Shopping center and multi-housing uses. Zoning change Not likely - -------------------------------------------------------------------------------- Category Zoning Requirement - -------------------------------------------------------------------------------- Site coverage 30% Front setback 60 feet Rear setback 50 feet Side yard setbacks 25 feet Height limit 2.5 stories Parking One space per 200 square feet of net floor area. ================================================================================ Source: Fort Oglethorpe Planning & Zoning Department Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ ZONING ANALYSIS AND CONCLUSIONS The subject improvements appear to be a legally conforming use within the current zoning. - -------------------------------------------------------------------------------- 26 ================================================================================ TAX ANALYSIS - -------------------------------------------------------------------------------- TAX AND ASSESSMENT DATA The subject is assessed at 100% of market value as estimated by the Catoosa County Tax Assessor's Office. The subject property's tax value summarized below.
================================================================================================================ CURRENT ASSESSMENT AND TAX INFORMATION (1995) ================================================================================================================ Assessed Tax Rate Annual Tax ID Land Improvements Total Value Per $1,000 Taxes - ---------------------------------------------------------------------------------------------------------------- 2C-73 $656,813 $2,166,333 $2,823,146 $1,129,258 $41.305 $46,644 2C-74 $27,600 $5,289 $32,889 $13,156 $41.305 $543 - ---------------------------------------------------------------------------------------------------------------- Totals $684,413 $2,171,622 $2,856,035 $1,142,414 $41.305 $47,187 - ---------------------------------------------------------------------------------------------------------------- Source: Catoosa County Tax Assessor Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================================================
The county records indicate that there are no delinquent property taxes. However, property owners in Catoosa County and Fort Oglethorpe receive a credit for sales tax paid against real estate taxes owed. In 1995, the subject received a combined city and county real estate tax credit in the amount of $13,561. This would suggest net 1995 real estate taxes for the subject property of $33,626. Based on our discussion with the Tax Assessor's Office and the Tax Commissioner's Office, assessments in 1996 are expected to remain unchanged for the most part, while the millage rate is expected to rise slightly. Therefore, we have estimated 1996 taxes based on escalating the 1995 taxes by 3.5%. This would suggest stabilized taxes for the subject of $34,800, on a rounded basis. CB Commercial has concluded that the assessor has underestimated market value based on the market value conclusion of this report. Therefore, a tax appeal is not recommended. - -------------------------------------------------------------------------------- 27 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- HIGHEST AND BEST USE In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The four criteria that the highest and best use must meet are: o legal permissibility; o physical possibility; o financial feasibility; and, o maximum profitability. Highest and best use is applied specifically to the use of a site as vacant. It is recognized that in cases where a site has existing improvements, the concluded highest and best use as if vacant may be different from the highest and best use given the existing improvements (as improved). The existing use will continue, however, until the land value, in its highest and best use, exceeds that total value of the property under its existing use plus the cost of removing or altering the existing structure. Implied in the highest and best use is a recognition of the contribution of a specific use to the community environment or to the community's development goals, in addition to wealth maximization of individual property owners. Also implied is that the conclusion of highest and best use results from the appraiser's judgment and analytical skill, i.e., that the use determined from the analysis represents an opinion, not a fact to be found. Highest and best use analysis involves assessing the subject both as if vacant and as improved. HIGHEST AND BEST USE AS THOUGH VACANT Legal Permissibility The legally permissible uses were discussed in detail in the site analysis and zoning sections of this report. Overall, based on our review of the zoning restrictions and the ground lease, the site is limited to commercial use. Physical Possibility The physical characteristics of the subject site were discussed in detail in the site analysis. Overall, a wide range of legally permissible uses would be physically possible. - -------------------------------------------------------------------------------- 28 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- Financial Feasibility An analysis of local market conditions provides an indication of the financial feasibility of a given use. The market analysis presented earlier in the report assesses the local market and indicates that there is demand. Therefore, a shopping center is financially feasible. Maximum Profitability The final test of highest and best use of the site as though vacant is that the use be maximally productive, yielding the highest land value. In the case of the subject as though vacant, the analysis thus far has indicated that commercial development would be most likely. Given the high probability that commercial use is the highest and best use, this is judged to be a reasonable indication of maximum productivity of the land. Conclusion: Highest and Best Use As Though Vacant The concluded highest and best use of the subject as though vacant is that the site be improved with commercial development. HIGHEST AND BEST USE AS IMPROVED Legal Permissibility Overall, it is our opinion that the improvements are within the established guidelines. Further, we were told by the zoning authority that the subject is a legal and conforming use under the zoning ordinance. Physical Possibility The physical characteristics of the subject improvements were discussed in detail in the improvement analysis section of this report. Overall, the layout and positioning of the improvements is considered functional for commercial use, and the floor plan is considered to be reasonable on a comparison basis. While it would be physically possible for a wide variety of uses, based on the legal restrictions and the design/layout, the improvements would be most functionally utilized for commercial use. Financial Feasibility As with the highest and best use of the site as though vacant, the financial feasibility of the site as improved is market derived. Typically, for commercial properties similar to the subject, the test of feasibility is based on the amount of rent that can be generated, less operating - -------------------------------------------------------------------------------- 29 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- expenses. If a residual amount exists after paying the various expenses, then the land is being put to a productive use. Maximum Profitability Similar to the highest and best use of the site as though vacant, the maximum profitable use of the subject as improved should conform to neighborhood trends and be consistent with existing land uses. Although several uses may generate sufficient revenue to satisfy the required rate of return on investment and provide a return on the land, the single use that produces the highest price or value is typically the highest and best use. However, the recipient of the property's productivity greatly determines what actual use maximizes profitability. Conclusion: Highest and Best Use as Improved Based on the foregoing discussions, CB Commercial concludes that the highest and best use of the property as improved is consistent with the existing use. There are no alternative uses of the existing improvements that would produce a higher net income and/or value over time than the current use. The current use is a legally permissible use and appears to represent the highest and best use as improved. Furthermore, CB Commercial does not believe that conversion of the improvements or demolition is warranted or financially feasible. - -------------------------------------------------------------------------------- 30 VALUATION VALUATION ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- APPRAISAL METHODOLOGY The appraisal process is defined as an orderly program by which the problem is planned and the data involved is acquired, classified, analyzed and interpreted into an estimate of value. In this process three basic approaches to value are considered: Cost Approach, Sales Comparison Approach, and Income Capitalization Approach. In appraisal practice, an approach to value is included or omitted based on its applicability to the property type being valued and the quality and quantity of information available. The final step in the appraisal process is reconciliation -- a process by which CB Commercial analyzes alternative conclusions and selects a final value estimate from among two or more indications of value. CB Commercial weighs the relative significance, applicability and defensibility of each approach as it relates to the type of property being appraised. INCOME CAPITALIZATION APPROACH The methodology of the Income Capitalization Approach is to determine the income-producing capacity of the property on a stabilized basis by estimating market rent from comparable rentals, making deductions for vacancy and collection losses and building expenses, then capitalizing the net income at a market-derived rate to yield an indication of value. The capitalization rate represents the relationship between net income and value. Related to the direct capitalization method is the discounted cash flow method. In this method of capitalizing future income to a present value, periodic cash flows (which consist of a net income less capital costs, per period) and a reversion (if any) are estimated and discounted to a present value. The discount rate is determined by analyzing current investor yield requirements for similar investments. Since investors are active in the marketplace for properties similar to the subject, the Income Approach is particularly applicable to the appraisal problem at hand. There is an adequate quality and quantity of income and expense data available to render a reliable and defensible value conclusion. Therefore, this approach has been employed for this assignment. SALES COMPARISON APPROACH The Sales Comparison Approach utilizes sales of comparable properties, adjusted for differences, to indicate a value for the subject property. Valuation is typically accomplished using physical units of comparison such as price per square foot, price per unit, price per floor, etc., or economic units of comparison such as gross rent multiplier. Adjustments are applied to the physical units of comparison derived from the comparable sale. The unit of comparison - -------------------------------------------------------------------------------- 31 ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- chosen for the subject is then used to yield a total value. Economic units of comparison are not adjusted, but rather analyzed as to relevant differences with the final estimate derived based on the general comparisons. The reliability of this approach is dependent upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c) the degree of comparability; (d) the absence of atypical conditions affecting the sales price. Through our search of the subject market, we were able to uncover an adequate quality and quantity of sales through which a reliable and defensible indication of value could be concluded. Therefore, this approach has been employed for this assignment. THE COST APPROACH The Cost Approach is based upon the proposition that the informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements which represent the highest and best use of the land or when relatively unique or specialized improvements are located on the site and for which there exist few sales or leases of comparable properties. The first step in the Cost Approach is to estimate the land value (at its highest and best use) applicable to the subject. This is usually done through an analysis of comparable land sales. The second step is to estimate the cost of all improvements. Improvement costs are then depreciated to reflect value loss from physical, functional and economic causes. Land value and depreciated improvement costs are then added to indicate a total value. The Cost Approach is not considered to be appropriate for this assignment given the age of the improvements and resulting subjectivity required in quantifying depreciation. In addition, at the instruction of the client, an estimate of the subject site's land value was also not prepared. - -------------------------------------------------------------------------------- 32
==================================================================================================================================== SUMMARY OF COMPARABLE RETAIL SALES ==================================================================================================================================== Sale Sale Year Building Occupancy Sale Price No. Name/Location Date Built Size (GLA) at Sale Anchor Tenant Sale Price /SF OAR ==================================================================================================================================== 1 Suburban Plaza 4/95 1981 120,949 97.3% Toys R Us, Pier 1 Imports $6,910,000 $57.13 10.82 % Kingston Pike @ N. Winston Road Knoxville, TN 2 640 Plaza 1/95 1983 76,543 98.5% Kroger, Revco Drugs $4,100,000 $53.56 10.99 % S Side Of Western Avenue Just West Of Knoxville, TN 3 Oglethorpe Plaza 7/94 1992 176,903 100% K=Mart, FoodMax $7,250,000 $40.98 10.36 % SEC Of Highway 27 & Battlefield Fort Oglethorpe, GA 4 Cherokee Square 3/94 1982 70,763 96.0% Bi-Lo Foods $3,350,000 $47.34 10.97 % E Side Of Highway 41A @ Washburn Tullahoma, TN 5 Northtowne Square 1/94 1981 74,336 100% Bi-Lo Foods, Hancock Fabrics $3,830,100 $51.52 N/A Highway 153 & Gadd Road Chattanooga, TN - ------------------------------------------------------------------------------------------------------------------------------------ Compiled by: CB Commercial - ------------------------------------------------------------------------------------------------------------------------------------
================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH The Sales Comparison Approach provides an estimate of market value based on analyzing transactions of similar properties in the market area. The method is based on the proposition that an informed purchaser would pay no more for a property than the cost of acquiring an existing one with the same utility. When there is an adequate number of sales of truly similar properties with sufficient information for comparison, a range of values for the subject property can be developed. The applicability of this approach is based on the assemblage of similar market sales and offerings for a comparison to the subject. Factors such as changing market conditions over time, location, size, quality, age, condition, and amenities, as well as the terms of the transactions, are all significant variables relating to the relative marketability of the subject property. Any adjustments to the sale price of market sales to provide indications of market value for the subject must be market-derived; thus, the actions of typical buyers and sellers are reflected in the comparison process. There are various units of comparison available in the evaluation of sales data in this approach. The sale price per square foot is the most commonly used in this approach. We searched the market for sales that qualify as arm's length transactions between willing and knowledgeable buyers and sellers in order to identify value and price trends. One shopping center investment sale in Fort Oglethorpe and one additional shopping center sale in the Chattanooga MSA have been identified. We have supplemented this data with three sales from similar communities in Tennessee. The sales utilized in this analysis are summarized on the facing page table, with their location relative to the subject identified on the following facing page map. In addition, sale summaries and photographs are included in the Addenda. Adjustment for Economic Characteristics The comparable sales generate net operating income that is slightly to substantially higher than the subject on a per square foot basis. The subject has three anchor leases which are at or below the market rental rate, and this accounts for much of the difference. The subject is an investment property and the price an investor will pay is directly related to the current or potential NOI. As our cash flow indicates, the subject's NOI is not projected to increase substantially over a 10 year holding period. We have calculated the adjustment by subtracting the subject's projected NOI ($3.79/SF) from the NOI of each comparable. We then capitalized the difference by 10.50% to yield an appropriate adjustment. - -------------------------------------------------------------------------------- 33 [GRAPHIC OMITTED] Comparable Sales ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- DISCUSSION OF COMPARABLE SALES Sale Number One Suburban Plaza is a neighborhood shopping center located in the southwestern portion of Knoxville. This shopping center was originally constructed in 1964 and subsequently expanded in 1981. It was 97% occupied at the time of sale. It is anchored by Toys R Us and Pier 1 Imports, which occupy 39% of the center. The center is similar to the subject in terms of size, age and condition. It is superior with respect to location and economic characteristics, but inferior based on anchor tenancy. Overall, a downward adjustment is necessary. Sale Number Two 640 Plaza Shopping Center is a neighborhood shopping center located in the western portion of Knoxville. This shopping center was built in 1983 and was 98% occupied at the time of sale. It is anchored by Kroger and Revco Drugs, which occupy 68% of the center. The center is similar to the subject in terms of size, age, anchor tenancy and condition. It is superior with respect to location and economic characteristics. Overall, a downward adjustment is necessary. Sale Number Three Oglethorpe Plaza is a community shopping center located at the southeast corner of Highway 27 and Battlefield Parkway in Fort Oglethorpe, Georgia. This shopping center was originally constructed in 1974 and expanded in 1992. It was 100% occupied at the time of sale. It is anchored by K-Mart, a FoodMax grocery store, and Revco Drugs, which occupy 87% of the center. The center is similar to the subject in terms of location, age, size, and condition. It is slightly superior with respect to its anchor tenancy and economic characteristics. Also, an upward adjustment for the condition of sale is required. Overall, a downward adjustment is necessary. Sale Number Four Cherokee Square is a neighborhood shopping center located in Tullahoma, Tennessee, just northwest of Chattanooga along Interstate 24. This shopping center was built in 1982 and was 96% occupied at the time of sale. It is anchored by Bi-Lo Foods, which occupies 53% of the center. - -------------------------------------------------------------------------------- 34 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- The center is similar to the subject in terms of location, age, size, and condition. While it is superior with respect to its economic characteristics, it is considered inferior in terms of anchor tenancy. Overall, a downward adjustment is necessary. Sale Number Five Northtowne Square is a neighborhood shopping center located in the northern portion of Chattanooga, Tennessee. This shopping center was built in 1981 and was 100% occupied at the time of sale. It is anchored by Bi-Lo Foods, and Hancock Fabrics, which occupy 73% of the center. The center is similar to the subject in terms of age, size and condition. While it is inferior with respect to its anchor tenancy, it is judged to be superior based on location and economic characteristics. Overall, a downward adjustment is necessary. ANALYSIS Adjustments made to the comparable sales are summarized in the following table.
========================================================================================================== IMPROVED SALES ANALYSIS SUMMARY OF ADJUSTMENTS 1 ========================================================================================================== Sale 1 Sale 2 Sale 3 Sale 4 Sale 6 - ---------------------------------------------------------------------------------------------------------- Unadjusted Price/ SF $57.13 $53.56 $40.98 $47.34 $51.52 Property Rights 0.00 0.00 0.00 0.00 0.00 ------ ------ ------ ------ ------ Subtotal $57.13 $53.56 $40.98 $47.34 $51.52 Financing Terms 0.00 0.00 0.00 0.00 0.00 ------ ------ ------ ------ ------ Subtotal $57.13 $53.56 $40.98 $47.34 $51.52 Conditions of Sale 0.00 0.00 4.10 0.00 0.00 ------ ------ ------ ------ ------ Subtotal $57.13 $53.56 $45.08 $47.34 $51.52 Market Conditions 0.00 0.00 0.00 0.00 0.00 ------ ------ ------ ------ ------ Subtotal $57.13 $53.56 $45.08 $47.34 $51.52 Other Adjustments Tenancy +20% 0% -10% +10% +5% Age/Quality/Condition 0% 0% 0% 0% 0% Size 0% 0% 0% 0% 0% Location -10% -10% 0% 0% 0% Economic characteristics -40% -35% -10% -30% -30% ------ ------ ------ ------ ------ Total Other Adjustments -30% -45% -20% -20% -25% Value Indication for Subject $39.99 $29.46 $36.06 $37.87 $38.64 ========================================================================================================== (1) The adjustment grid summarizes the direction and magnitude of adjustments judged appropriate to the comparable sales. In some cases adjustments may be derived directly from quantifiable data. However, in many instances the adjustments involve judgment of CB Commercial Real Estate Group, Inc. Source: CB Commercial Real Estate Group, Inc. ==========================================================================================================
35 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH CONCLUSION The comparable sales indicate an unadjusted range of $40.98 to $57.13 per gross leasable square foot. In our analysis, we have considered adjustments to these comparables for property rights conveyed, financing terms, conditions of sale, date of sale, age, condition, construction quality, building size, tenancy, location, and overall economic conditions. Sale Nos. 3, 4 and 5 are considered to be the most comparable transactions. They represent neighborhood centers which are similar in terms of location, age, size and condition. After adjustments, the adjusted sale prices indicated for the subject range from $29.46 to $39.99 per square foot, although dropping the high and low end of the range generally suggests an adjusted value of $36 to $38 per square foot. Again, primary emphasis was placed on Sale Nos. 3 4 and 5 as they were judged to be the most similar to the subject in terms of their physical, locational and tenant characteristics, particularly Sale No. 3. Therefore, we have estimated a value of $36 per gross leasable square foot of building area. This would suggest the following market value indication for the subject property based on the Sales Comparison Approach. ==================================================================== SALES COMPARISON APPROACH - -------------------------------------------------------------------- Gross Leasable SF SP per SF Indicated Value - -------------------------------------------------------------------- 113,367 SF x $36.00 = $4,081,212 Rounded: $4,075,000 - -------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ==================================================================== - -------------------------------------------------------------------------------- 36 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH The Income Capitalization Approach reflects the subject's income-producing capabilities. This approach is based on the assumption that value is created by the expectation of benefits to be derived in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over period of time. The two common valuation techniques associated with the Income Approach are direct capitalization and the discounted cash flow (DCF) analysis. DIRECT CAPITALIZATION Direct capitalization is the method used to convert a single year's estimate of income into a value indication. In direct capitalization, a precise allocation between return on and return of capital is not made because investor assumptions or forecasts concerning the holding period, pattern of income, or changes in value of the original investment are not simulated in the method. Direct capitalization is most appropriate when analyzing a stable income stream and in estimating the reversion at the end of a holding period. Using this method, the following sets forth the process: 1. Estimate the Potential Gross Income (PGI) from all sources that a competent owner should be able to generate from a property based on existing and/or market rents. 2. Deduct an estimate of Vacancy and Collection Loss (VCL) to arrive at an Effective Gross Income (EGI) estimate. 3. Deduct operating expenses from the estimate of EGI. The result is an estimate of the stabilized Net Operating Income (NOI). 4. Estimate an Overall capitalization rate (Ro, or OAR). 5. Divide the NOI by Ro, resulting in a value estimate at stabilized occupancy. 6. Adjust the stabilized value to account for "as is" condition, if applicable. DISCOUNTED CASH FLOW ANALYSIS The discounted cash flow (DCF) analysis is a detailed analysis used when the future income is expected to be variant, usually as a result of numerous lease obligations and/or anticipated changes in income and expenses. It is also particularly relevant when institutional buyers are the most likely purchasers of the subject because institutional buyers often place great weight on this analysis. The DCF analysis specifies the quantity, variability, timing, and duration of NOI and cash flow. Selecting the proper yield rate (discount rate) is essential. CB Commercial must consider the target yield sought by investors as well as yields derived from comparable sales and/or market information. The methodology is: - -------------------------------------------------------------------------------- 37
============================================================================================================================ SUMMARY OF COMPARABLE RETAIL RENTALS ============================================================================================================================ Sale Building Year Local Overall Base No. Name / Location Size (GLA) Built Occupancy Occupancy Anchor Tenant TI/SF Rent/SF ============================================================================================================================ 1 Oglethorpe Plaza 176,903 1992 100% 100% Kmart, FoodMax Minimal $8.00 - Battlefield Parkway @ Highway 27 $10.00 Fort Oglethorpe, GA 2 Battlefield Centre 202,414 1992 93.4% 53.8% Bi-Lo Foods, Vacancy Minimal $7.00 - N Side Of Battlefield Parkway $8.00 Fort Oglethorpe, GA 3 Parkway Center 152,932 1981 100% 69.2% Vacant, Vacant As Is $4.00 - N Side Of Battlefield Parkway $5.50 Fort Oglethorpe, GA - ---------------------------------------------------------------------------------------------------------------------------- Compiled by: CB Commercial - ----------------------------------------------------------------------------------------------------------------------------
================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- 1. Estimate the before-tax cash flows for each period of a projected holding period net of any capital expenditures such as leasing expenses and tenant improvements. 2. Estimate a discount rate and a terminal overall capitalization rate. 3. Estimate a selling price, known as the reversion, for the end of the projected holding period. 4. The cash flows and the reversion are then discounted to a present value estimate. APPROPRIATE CAPITALIZATION METHOD A number of factors were considered in evaluating the appropriateness of using the direct capitalization method and/or the DCF technique. Occupancy Status If the subject is not at stabilized occupancy, the DCF method is typically the preferred method because it better models the present value impact of lease-up costs on value. If the subject is at stabilized occupancy, the direct capitalization method may be the most applicable. The subject is currently 97.8% occupied. Therefore, while the direct capitalization approach may be most applicable, the DCF model may also be useful. Lease Structure Consideration is given to the subject's existing lease structure. Where the subject's lease structure generally reflects market terms, direct capitalization may be appropriate. Discounted cash flow analysis may also be relevant depending on typical buyer preferences. Conversely, the usefulness of a direct capitalization analysis may be limited in instances where the subject includes leases having a variety of rent levels, rent escalation structures, or differing expense treatments. The existing lease parameters generally reflect market terms on average for the existing tenants. Implicit investor assumptions therefore may behave as the market would expect. While the direct capitalization analysis would likely be the preferred methodology, a DCF model is still often utilized by some investors. Above-Market or Below-Market Rent If the subject's rent structure reflects general market levels, both direct capitalization and DCF analysis may be relevant. When average rent is above or below market, however, the Income Approach requires an appropriate adjustment for the present value of the market/contract difference. Reliability of the direct capitalization method becomes more limited as the average - -------------------------------------------------------------------------------- 38 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- rent level becomes more complicated. Discounted cash flow methodology is favored when adjustments become overly subjective or difficult to discern. The subject's lease structure includes terms that generally reflect market conditions. Therefore, the direct capitalization analysis is the preferred method. Typical Buyer Behavior Selection of the appropriate methodology also depends upon the behavior of typical buyers of the subject's property type within the local market. Based on discussions with market participants, the direct capitalization analysis is the definite choice as the appropriate methodology. However, a discounted cash flow model can also be used to incorporate projected fluctuations in market rents, expenses, turnover, etc. Furthermore, when utilizing a DCF model, investors will often check whether the implied capitalization rate falls within an expected range by dividing the first year net operating income into the estimated value. Appraisal Instructions No specific instructions were given for this assignment. Conclusion As a result of considering the foregoing factors, both the DCF technique and the income capitalization technique are employed in this appraisal. ESTIMATE OF MARKET RENT Rent analysis typically involves both a study of market (comparable) rentals and the subject's existing rents. Market rent is the rent that a property would most probably command in the open market; indicated by the current rents paid and asked for comparable space. SUMMARY OF COMPARABLE RENTALS CB Commercial has searched the immediate subject neighborhood for competitive properties and lease transactions for comparison to the subject. We have identified four shopping centers in the immediate subject area which are comparable to the subject. The selected comparable rentals are summarized in the facing page chart, with their location relative to the subject shown on the following facing page map. In addition, photographs and detailed summary sheets of each comparable are included in the Addenda. - -------------------------------------------------------------------------------- 39 [GRAPHIC OMITTED] Comparable Rentals ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF COMPARABLE RENTALS Comparable Rental Number One Oglethorpe Plaza is a community shopping center located south of the subject property along Highway 27. It is similar to the subject property based on its location, age, condition, and occupancy rate. However, it is considered to be superior based on size and tenant mix, which includes K-Mart, a FoodMax grocery store, and Revco Drugs as anchor tenants. Recent local tenant leases signed in the building are in the range of approximately $8.00 to $10.00 per square foot on a triple net basis. The occupancy rate is currently 100% overall and 100% for local tenants. Overall, a downward rent adjustment is necessary as compared to the subject. Comparable Rental Number Two Battlefield Centre is a neighborhood shopping center located along the north side of Battlefield Parkway a few miles east of Highway 27. It is similar to the subject property based on its location and local tenant occupancy rate. It is considered to be superior based age, overall curb appeal and a stronger local tenant mix, but inferior based on the percentage of anchor tenant space which results from Walmart vacating their space. Recent local tenant leases signed in the building are in the range of approximately $7.00 to $8.00 per square foot on a triple net basis. The occupancy rate is currently 54% overall and 93% for local tenants. Overall, a slight downward rent adjustment for local tenants is necessary as compared to the subject. Comparable Rental Number Three Parkway Center is a neighborhood shopping center along the north side of Battlefield Parkway just east of Highway 27. It is similar to the subject property based on its location and local tenant occupancy, but inferior with respect to age, condition, and the overall occupancy rate resulting from the lack of an anchor tenant. Recent local tenant leases signed in the building are in the range of approximately $4.00 to $5.50 per square foot on a triple net basis. The occupancy rate is currently 69% overall and 100% for local tenants. Overall, an upward rent adjustment is necessary as compared to the subject. It should be noted that some of the subject bay depths are considerable deeper (100 feet) than is typical for the rent comparables (60 to 75 feet). This generally would require a downward adjustment to the rent comparables, all other factors considered equal. ANALYSIS OF RECENT SUBJECT LEASES The following table summarizes the subject property's recent lease history. - -------------------------------------------------------------------------------- 40 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
================================================================================================================= SUMMARY OF RECENT SUBJECT LEASES - ----------------------------------------------------------------------------------------------------------------- New/ Rental Free TI Tenant Renew Term Date Size Rate Escalation Rent per SF - ----------------------------------------------------------------------------------------------------------------- Badcock Furniture new 5 yrs 6/95 15,260 SF $3.00 Flat 3 mths as is Optical Design new 5 yrs 8/95 1,400 SF $6.00 Flat 3 mths as is Books & Bytes new 5 yrs 5/96 2,400 SF $5.75 $0.25 per yr 2 mths as is Nail Salon new 2 yrs 6/95 600 SF $10.00 $1.00 in Yr 2 none as is The Money Tree new 5 yrs 3/96 2,000 SF $9.00 $0.25 per yr 1 mth as is Golden Tan new 5.5 yrs 8/95 4,520 SF $2.40 11% inc. in Yr 2 3 mths as is & 32% inc. in Yr 3 ================================================================================================================= Source: Mark Centers Trust. Compiled by: CB Commercial Real Estate Group, Inc. =================================================================================================================
The typical lease at the subject property requires that tenants pay expense reimbursements for CAM and real estate taxes. This is similar to the comparables, which also collect expense reimbursements for CAM and real estate taxes. All tenants are responsible for their individual utilities and interior cleaning. The recent leases support an average term of five years, which is similar to typical market terms. Also, tenant improvement allowances are not being paid by the landlord, at least not to local tenants, with the space taken "as is" for the six recent leases. Free rent has generally consisted of 3 months on a five year lease. The rental rates for recent leases would suggest a wide range in rental rates from $2.40 to $10.00 per square foot net of CAM and real estate taxes with a variety of rent escalations. However, the low end of this range is established by a larger than typical local tenant (4,520 SF) who has leased a bay which is irregular in shape. This lease also contains escalations which increase the base rent to $3.50 per square foot by Year 3 of the lease. Also at the low end of the range is a mid-sized anchor tenant (15,260 SF), a bay size which is considered to be difficult to lease in this market. The upper end of the range is established by a smaller than typical bay (600 SF). The remaining three local tenant leases are $5.75, $6.00 and $9.00 per square foot, with a weighted average of $7.44 per square foot. While difficult to establish a definitive market rent for the subject based on leasing activity over the last 12 months, the recent subject leases appear to be at market on average. Furthermore, the leasing representative for the subject suggests that $6.50 per square foot is an appropriate market rental rate for the subject relative to the surrounding market. ANCHOR TENANT LEASES The initial lease terms for the two major anchors, Food Lion and Big Lot's, end in January 2012 and October 2000, respectively. The junior anchors, YMCA, Badcock Furniture and Auto Zone, - -------------------------------------------------------------------------------- 41 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- have leases which expire in October 1999, September 2000, and September 2004, respectively. All five leases contain renewal options for a total of 15 (Food Lion), 5 (Big Lot's), 10 (YMCA), 10 (Badcock Furniture) and 5 (Auto Zone) years. These renewal options include an extension of the existing lease terms at either flat or increased rental rates. If the option rental rate is substantially below market, it is likely the tenant will either renew the lease or sublease the space. We have obtained lease data on several anchor tenants in the Fort Oglethorpe market. We were asked to keep the locations and tenant names confidential; however, these spaces are in centers that are generally equal to or slightly inferior to the subject. At these centers, leases range from $4.00 to $7.50 per square foot. The current lease rates for the anchor tenants at the subject are $3.00 for Badcock Furniture, $3.30 for Big Lot's, $4.02 for Auto Zone, $4.37 for YMCA, and $6.25 for Food Lion. While the Big Lot's, Auto Zone, YMCA and Badcock Furniture leases call for increased rent in the first year of each option period, the projected rental rate is still considered to be at or below market rent. Therefore, it is likely that the anchor tenants will renew their leases. We typically allow the leases to expire and renew at a market rate; however, in this instance, it would likely lead to an inflated value, given the lease renewal terms. Therefore, we have renewed the anchor tenant leases through the projection period at the option rental rates. CONCLUSIONS: MARKET RENT ESTIMATE FOR THE SUBJECT PROPERTY Based on the previous analysis, the current market lease parameters for the subject property are estimated as follows: ============================================================================= CONCLUDED MARKET RENT (PER SQUARE FOOT PER YEAR) - ----------------------------------------------------------------------------- Category - ----------------------------------------------------------------------------- Local Tenants $6.50 Grocery Store Anchor $6.50 Other Anchor Tenants $4.00 Lease Structure Net of CAM, Taxes & Insurance Annual escalation $0.25 per year Tenant Improvements (new tenants) None Tenant Improvements (renewals) None Average lease term 5 years Free Rent (Months) 3 months - ----------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ============================================================================= - -------------------------------------------------------------------------------- 42 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- These terms generally reflect the most recent leasing history of the subject, as well as market rent terms as discussed in the previous analysis. EXISTING CONTRACT RENT As discussed, the subject's leasable area has been subdivided into 15 individual suites, of which 14 are currently occupied and one is available for lease. The occupied suites total 110,867 square feet, or 97.8% of the building's leasable area. Through our research of the subject property, which included a complete review of all leased documents available, lease abstracts, rent rolls (both current and historical), and detailed discussions with the property manager, the following rent roll summary was utilized to detail currently leased suites and general information employed for this approach. Detailed abstracts of each tenant's lease and miscellaneous assumptions assumed for this assignment have been included in file memorandum. Additionally, within the Addenda are copies of a Tenant Register and Rent Roll generated by Pro-Ject, a computerized lease-by-lease analysis program. The information contained in the chart and in appropriate sections of the Addenda represent the data inputted for this method and is assumed to be correct and reliable. CB Commercial reserves the right to amend our input assumptions if any documentation is subsequently available which contradicts that assumed for this method. Shown in the following table is the subject rent roll. - -------------------------------------------------------------------------------- 43 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
========================================================================================== CLOUD SPRINGS PLAZA RENT ROLL (AS OF MAY 17, 1996) - ------------------------------------------------------------------------------------------ Square Begin End Base Rent Annual Tenant Feet Date Date per SF Rent - ------------------------------------------------------------------------------------------ Food Lion 29,000 2/91 1/11 $6.25 $181,250 Big Lot's 30,000 10/90 10/00 $3.30 $99,000 Badcock Furniture 15,260 6/95 9/00 $3.00 $45,780 Auto Zone 8,350 11/93 9/04 $4.02 $33,600 YMCA 10,287 11/92 10/99 $4.37 $45,000 Carol's Video 1,050 8/88 10/00 $8.00 $8,400 Optical Design 1,400 8/95 10/00 $6.00 $8,400 Books & Bytes 2,400 5/96 8/01 $5.75 $13,800 Golden Tan 4,520 8/95 3/01 $2.40 $10,829 Paul Stephen's Salon 2,000 12/94 11/99 $5.40 $10,800 Nail Salon 600 6/95 5/97 $10.00 $6,000 Tri State Vacuum 2,000 10/90 9/98 $7.00 $14,000 The Money Tree 2,000 3/96 3/01 $9.00 $18,000 Old Fort Dry Cleaners 2,000 11/88 7/98 $7.00 $14,000 ----- ------- Total Leased Square Feet 110,867 Average Rent: $4.59 $508,859 Unleased Space 2,500 ----- Total Square Footage 113,367 Occupancy-Overall 97.8% Occupancy-Local Tenants 87.8% ========================================================================================== Note: Some figures may not calculate due to rounding; annual rent stated correlates with actual rent being collected. Source: Leases and abstracts provided by Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ==========================================================================================
The weighted average rental rate of $5.80 per square foot for local tenants is slightly less than the market rent for the subject as previously discussed. However, it should be noted that the largest local tenant bay of 4,520 square feet is leased at $2.40 per square foot because of the bay's inefficient L-shape. - -------------------------------------------------------------------------------- 44 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF TENANCY The tenant base is represented by clients of both a national and local credit rating. The following table summarizes the expiration of existing leases over the next nine years.
=========================================================================================================== SUBJECT LEASE EXPIRATION SUMMARY =========================================================================================================== FY Vacancy # of Tenants SF Expiring % Cumulative SF Cumulative % - ----------------------------------------------------------------------------------------------------------- 1997 1 600 0.5% 600 0.5% 1998 0 0 0.0% 600 0.5% 1999 2 4,000 3.5% 4,600 4.0% 2000 2 12,287 10.8% 16,887 14.9% 2001 6 52,230 46.1% 69,117 61.0% 2002 1 2,400 2.1% 71,517 63.1% 2003 0 0 0.0% 71,517 63.1% 2004 0 0 0.0% 71,517 63.1% 2004 1 8,350 7.4% 79,867 70.4% - ----------------------------------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ===========================================================================================================
In estimating the potential gross income of the subject property, it is necessary to consider the leases subject to termination during the initial portion of the holding period. The rate and timing of lease expirations is considered to be rather typical, particularly given that all of the local tenant leases are five years or less. The first major anchor tenant lease (Big Lot's) expires in Year 5, while the other major anchor tenant lease expires in Year 14 (Food Lion). The junior, or smaller, anchors tenant leases expire in Year 4 (YMCA), Year 5 (Badcock Furniture), and Year 9 (Auto Zone). This is not considered to be unusual and represents a fairly typical risk. EXPENSE REIMBURSEMENTS As discussed, most of the current and future hypothetical leases which will encumber the subject space will be based upon leases which are net of CAM and real estate tax expenses, whereby the tenant is responsible for their prorata share of common area maintenance and real estate taxes. Furthermore, tenants with special expense stops or expense reimbursement limitations may impact the valuation analysis. However, there are some variations in the reimbursement structures, with some of the tenants having specified amounts of recovery or the exclusion of CAM or taxes, or the inclusion of insurance. - -------------------------------------------------------------------------------- 45 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- We have reviewed historical expense reimbursements for the subject property, as compared to a projection of each expense reimbursement for the next year based on existing leases. A review of historical CAM reimbursements is as follows: ============================================== CAM REIMBURSEMENTS - ---------------------------------------------- Year Total $ Amount - ---------------------------------------------- 1993 $18,289 1994 $22,271 1995 $31,188 1996 Budget $38,004 Year 1 DCF $36,028 - ---------------------------------------------- Source: Mark Centers Trust ============================================== CAM expense recoveries have increased annually from $0.16 per square foot in 1993 to $0.28 per square foot in 1995. The 1996 budget projects $0.34 per square foot, approximately 20% higher than the 1995 actual expense. By comparison, the first year of our DCF model suggests total CAM reimbursements of $0.32 per square foot based on a review of lease abstracts. This is consistent with the historical trend. We feel that the DCF model most effectively quantifies the projected expense recoveries. Therefore, we estimate total CAM reimbursements to be $36,000, on a rounded basis. A review of historical tax reimbursements is as follows: ============================================== TAX REIMBURSEMENTS - ---------------------------------------------- Year Total $ Amount - ---------------------------------------------- 1993 $14,506 1994 $16,176 1995 $16,299 1996 Budget $21,768 Year 1 DCF $20,071 - ---------------------------------------------- Source: Mark Centers Trust ============================================== Tax expense recoveries have decreased from $0.13 per square foot in 1993 to $0.14 per square foot in 1994 and 1995. The 1996 budget projects a further decline to $0.22 per square foot. By comparison, the first year of our DCF model suggests total real estate tax reimbursements of $0.18 per square foot based on a review of lease abstracts. This is represents an increase over the 1994 and 1995 historical expense, although it is slightly less than the 1996 budgeted amount. We feel that the DCF model most effectively quantifies the - -------------------------------------------------------------------------------- 46 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- projected expense recoveries. Therefore, we estimate total tax reimbursements to be $20,100, on a rounded basis. A review of historical insurance reimbursements is as follows: ============================================== INSURANCE REIMBURSEMENTS - ---------------------------------------------- Year Total $ Amount - ---------------------------------------------- 1993 $5,763 1994 $6,601 1995 $1,967 1996 Budget $4,812 Year 1 DCF $3,711 - ---------------------------------------------- Source: Mark Centers Trust ============================================== Insurance expense recoveries have declined from $0.05 and $0.06 per square foot in 1993 and 1994, respectively, to $0.02 per square foot in 1995. The 1996 budget projects an increase to $0.04 per square foot, more in line with 1993 and 1994. By comparison, the first year of our DCF model suggests total insurance reimbursements of $0.03 per square foot based on a review of lease abstracts. This is consistent with less than the 1996 budgeted amount, but more in line with the historical trend than 1995 reimbursements. We feel that the DCF model most effectively quantifies the projected expense recoveries. Therefore, we estimate total tax reimbursements to be $3,700, on a rounded basis. OTHER INCOME For the purpose of estimating the other income that could reasonably be generated by the subject building, we have again reviewed the historical revenues actually received, as well as surveyed local property management companies regarding similar retail projects. This income category can be derived from several different sources including tenant service income, late fee income, short-term storage income, professional services provided for the tenants by the landlord/management, and other miscellaneous sources. The following chart depicts the historical and budgeted revenues included in Other Income for the subject project. - -------------------------------------------------------------------------------- 47 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ========================================= OTHER INCOME - ----------------------------------------- Year Total $ Amount - ----------------------------------------- 1993 $2,205 1994 $650 1995 $0 1996 Budget $0 Year 1 Pro Forma $1,200 - ----------------------------------------- Source: Mark Centers Trust ========================================= This source income, while not significant, decreased from $0.02 per square foot in 1993 to less than $0.01 per square foot in 1994. Furthermore, no income from this source was recorded in 1995, or in the 1996 budget. However, we feel like it is appropriate to include a minimal level of income from this source for occasional late fee, if nothing else. Therefore, we have estimated Other Income of $100 a month, or $1,200 annually. This equates to $0.01 per square foot of leasable area. PERCENTAGE RENT INCOME According to the lease documents provided, four of the existing tenants have a provision in their lease documents which requires percentage rent payments over a base amount or under a specific formula. That is, in addition to the basic rental charges, the tenant is responsible for paying the landlord additional rent equal to a specified percentage of the tenant's gross sales made in, upon, or from the premises, over a breakpoint factor or according to a specific schedule. The historical operating statements and the 1996 budget include no percentage rent income, and a review of sales levels for each of the tenants with a percentage rent clause would suggest none will be generated over the near term future. Therefore, we have not projected any percentage rent collections in our stabilized pro forma. POTENTIAL GROSS INCOME The concluded potential gross income for the subject is summarized as follows: - -------------------------------------------------------------------------------- 48 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
==================================================================================================== POTENTIAL GROSS INCOME - ---------------------------------------------------------------------------------------------------- P.S.F. Totals - ---------------------------------------------------------------------------------------------------- Existing Contract Rent 110,867 SF $4.59 (wt. avg.) $508,859 Vacant Space at Market Rent 2,500 SF $6.50 16,250 -------- Potential Gross Rental Income 113,367 SF $4.63 (wt. avg.) $525,109 Expense Reimbursements $59,800 Other Income $1,200 -------- Potential Gross Income 113,367 SF $5.17 (wt. avg.) $586,109 - ---------------------------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ====================================================================================================
VACANCY AND COLLECTION LOSS Typically, this is an allowance for reductions in potential income attributable to vacancies, tenant turnover, and non-payment of effective rent. In the direct capitalization process, a market-derived, stabilized vacancy and collection loss estimate is subtracted from potential gross income in order to arrive at effective gross income. Currently, the subject is 97.8% occupied by tenants of both a local nature and national credit rating. The occupancy rate for local tenants and non-credit quality junior anchor tenants (i.e., YMCA and Badcock Furniture) is 87.8%. The three most comparable retail properties in the neighborhood have overall occupancy rates of 54% to 100% and local tenant occupancy rates of 93% to 100%. The subject's local tenant occupancy rate is consistent with the range suggested by the comparables, particularly given the relatively small amount of subject local tenant space relative to the center's size. Therefore, we believe that a 15% vacancy and collection loss as applied to local tenant revenues reasonably encompasses the downtime between leases and a credit loss. - -------------------------------------------------------------------------------- 49 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- EFFECTIVE GROSS INCOME SUMMARY The subject's historical effective gross income is shown in the following table: ================================================== EFFECTIVE GROSS INCOME - -------------------------------------------------- Year Total $ Amount - -------------------------------------------------- 1993 $403,331 1994 $428,973 1995 $474,208 1996 Budget $566,031 - -------------------------------------------------- Source: Mark Centers Trust ================================================== Given our estimate of existing rental income and expense reimbursements, other income, and a collection loss, the subject's estimated effective gross income is derived as follows: ================================================================================ STABILIZED EFFECTIVE GROSS INCOME - -------------------------------------------------------------------------------- Gross Rental Income: $525,109 Less Vacancy & Collection Loss (15% of locals only) (18,072) -------- Effective Rental Income: 507,037 Plus Expense Reimbursements: 59,800 Plus Other Income: 1,200 --------- Effective Gross Income: $568,037 ================================================================================ Our projection of effective gross income is 19.8% more than the level of EGI indicated for the subject for 1995, but only 0.4% more than the 1996 budget projection of EGI. The difference between 1995 and 1996 is primarily associated with the leases signed in 1995 which will generate a full year of income in 1996. Therefore, our stabilized projection is considered to be reasonable. OPERATING EXPENSE ANALYSIS In projecting revenue and expenses for the subject property, the historical operating statements for calendar years 1993, 1994 and 1995 have been analyzed. Also, we have reviewed the 1996 budgeted forecast of income and expenses. This information is summarized in the following table. We have analyzed expenses for the subject improvements based on historical information, with expenses for the subject improvements projected based on the per square foot cost implied. We have also considered expense comparable data contained in our files - -------------------------------------------------------------------------------- 50 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- and statistics in the Dollars & Cents of Shopping Centers: 1995, published by the Urban Land Institute, and the 1995 Income and Expense Analysis: Shopping Centers, published by the Institute of Real Estate Management.
============================================================================================================= SUBJECT INCOME & EXPENSE HISTORY ACTUAL CALENDAR YEAR DATA AND PROJECTED BUDGET ============================================================================================================= 1993 Actual 1994 Actual 1995 Actual 1996 Budget - ------------------------------------------------------------------------------------------------------------- Total $/SF 1 Total $/SF 1 Total $/SF 1 Total $/SF 1 - ------------------------------------------------------------------------------------------------------------- Income Rental Income $362,568 $3.20 $383,275 $3.38 $424,754 $3.75 $501,447 $4.42 Percentage Rent 0 0.00 0 0.00 0 0.00 0 0.00 CAM Reimb 18,289 0.16 22,271 0.20 31,188 0.28 38,004 0.34 RE Tax Reimb 14,506 0.13 16,176 0.14 16,299 0.14 21,768 0.22 Insurance Reimb 5,763 0.05 6,601 0.06 1,967 0.02 4,812 0.04 Other Income 2,205 0.02 650 0.01 0 0.00 0 0.00 -------- ----- -------- ----- -------- ----- -------- ----- Eff. Gr. Income $403,331 $3.56 $428,973 $3.78 $474,208 $4.18 $566,031 $4.99 Expenses CAM (25,455) (0.22) (22,547) (0.20) (41,987) (0.37) (45,620) (0.40) Property Taxes (32,754) (0.29) (33,954) (0.30) (33,866) (0.30) (36,324) (0.32) Insurance (21,849) (0.19) (19,000) (0.17) (15,917) (0.14) (16,104) (0.14) Mgmt Fee (0) (0.00) (0) (0.00) (0) (0.00) (0) (0.00) Gen. & Admin. (1,931) (0.02) (1,325) (0.01) (2,718) (0.02) (1,800) (0.02) -------- ----- -------- ----- -------- ----- -------- ----- Total Expenses (81,989) (0.72) (76,826) (0.68) (94,488) (0.83) (99,848) (0.88) -------- ------ -------- ------ -------- ------ -------- ------ NOI $321,342 $2.83 $352,147 $3.11 $379,720 $3.35 $466,183 $4.11 - ------------------------------------------------------------------------------------------------------------ (1) Based on 113,367 rentable square feet of building area Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. =============================================================================================================
Our projection of the subject's stabilized expenses is detailed as follows. Common Area Maintenance Common area maintenance typically includes all expense items relative to operating, cleaning, maintaining and repairing the subject improvements. Historical common area maintenance expenses are shown as follows: - -------------------------------------------------------------------------------- 51 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ========================================== CAM EXPENSE - ------------------------------------------ Year Total $ Amount - ------------------------------------------ 1993 $25,455 1994 $22,547 1995 $41,987 1996 Budget $45,620 Year 1 Pro Forma $45,600 - ------------------------------------------ Source: Mark Centers Trust ========================================== This expense has varied from $0.22 per square foot in 1993 to $0.20 per square foot in 1994 and $0.37 per square foot in 1995. By comparison, $0.40 per square foot is projected in the 1996 budget. The 1995 actual and 1996 budgeted expenses are more consistent with properties comparable to the subject. Therefore, we have projected CAM expense in line with the 1996 budgeted expense to be $45,600, or $0.40 per square foot. Property Taxes Property taxes are forecasted at $34,800, or $0.31 per leasable square foot, based on the discussion contained in the Tax Analysis section of this report. The real estate taxes do not include personal property taxes; however, they do include a credit for sales tax paid. Insurance Historical insurance expenses are shown as follows: ========================================== INSURANCE EXPENSE - ------------------------------------------ Year Total $ Amount - ------------------------------------------ 1993 $21,849 1994 $19,000 1995 $15,917 1996 Budget $16,104 Year 1 Pro Forma $16,000 - ------------------------------------------ Source: Mark Centers Trust ========================================== Insurance costs are assumed to include full property and liability coverage and typically are in the range of $0.10 to $0.20 per square foot. By comparison, the historical subject cost has decreased from $0.19 per square foot in 1993 to $0.17 per square foot in 1994 and $0.14 per square foot in 1995. Furthermore, the 1996 budget projects a cost of $0.14 per square foot. Therefore, the subject's insurance expense has been estimated in line with the 1995 actual - -------------------------------------------------------------------------------- 52 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- expense and 1996 budget to be $16,000, or $0.14 per square foot on a rounded basis. This is consistent with comparable properties. Professional Management Fee Historically, the subject property has not been charged a professional management based on a review of the operating statements provided. Typical professional management fees in the local market are generally 3% to 5% of effective gross income, based on the number and type of tenants, the total square footage of a property and size of the market. Therefore, the management fee for the subject is estimated to be 4.0% of effective gross income. General and Administrative General and administrative expenses typically include all payroll and payroll related items for all directly-employed administrative personnel such as building managers, secretaries, and bookkeepers. Leasing personnel are not included nor are the salaries or fees for off-site management firm personnel and services. However, normal legal or professional fees would be included. Historical general and administrative expenses are shown as follows: ========================================== GENERAL AND ADMINISTRATIVE EXPENSE - ------------------------------------------ Year Total $ Amount - ------------------------------------------ 1993 $1,931 1994 $1,325 1995 $2,718 1996 Budget $1,800 Year 1 Pro Forma $1,800 - ------------------------------------------ Source: Mark Centers Trust ========================================== This expense is not a significant one for the subject. It has varied from $0.02 per square foot in 1993 to $0.01 per square foot in 1994 and $0.02 per square foot in 1995. The 1996 budget estimate of $0.02 per square foot falls within this range. Therefore, we have projected this expense to be $1,800, or $0.02 per square foot. We feel that this is consistent with the expense suggested by comparable properties. Replacement Reserves This expense typically represents a reserve for future replacement of long-lived items. The amount of reserve and whether or not it is included in the direct capitalization and DCF analyses, depends on the actions reflected by buyers and sellers in the local market. Based on - -------------------------------------------------------------------------------- 53 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- available comparable data and discussions with brokers and investors, replacement reserves generally range from $0.10 and $0.20 per square foot. Therefore, we have projected reserves for the subject at $0.15 per square foot, or $17,000 annually on a rounded basis, given the subject's age and current condition. Generally, investors feel that it is prudent to deduct replacement reserves in calculating NOI and in determining cash flow in the DCF analysis. Total Concluded Operating Expenses The concluded stabilized operating expenses for the subject total $137,921 annually, or $1.22 per gross leasable square foot. Furthermore, 43.4% of the total operating costs, or $0.53 per square foot, are recovered from the tenants. DIRECT CAPITALIZATION As previously discussed, direct capitalization is a method used to convert a single year's estimated stabilized net operating income into a value indication. Once the net operating income has been estimated, this conversion is accomplished by dividing the NOI estimate by an appropriate rate. There are several methods for deriving an overall rate for direct capitalization. Derivation from Comparable Sales This is the preferred method when sufficient data exists. Data on each property's sale price, income, expenses, financing terms, and market conditions at the time of sale is needed. The overall capitalization rate is then derived by dividing the net operating income by the sale price. This technique is considered appropriate for the subject. The following is a summary of overall capitalization rates indicated by the comparable sales included in the Sales Comparison Approach. ============================================================================ COMPARABLE CAPITALIZATION RATES - ---------------------------------------------------------------------------- Date of Occupancy Capitalization Sale Sale Sale Price Rate Rate - ---------------------------------------------------------------------------- 1 4/95 $6,910,000 97% 10.8% 2 1/95 $4,100,000 98.5% 11.0% 3 7/94 $7,250,000 100% 10.4% 4 3/94 $3,350,000 96% 11.0% 5 1/94 $3,830,000 100% N/A - ---------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ============================================================================ - -------------------------------------------------------------------------------- 54 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- The preceding sales indicate a 10.4% to 11.0% range of overall capitalization rates. Sale No. 3, which is located in the Fort Oglethorpe market, is considered to be most similar to the subject, although it is slightly superior with respect to the anchor tenancy. The remaining sales are also considered to be reasonably similar to the subject with respect to location, occupancy, size, age, condition, and tenancy. Retail investment market conditions have not changed noticeably since these transactions. Given the subject property's physical and locational characteristics, and placing greatest reliance on Sale No. 3, we feel that a capitalization rate in the range of 10.5% is warranted based on the sales utilized in our analysis. Investor Surveys Another method for establishing an overall capitalization rate for the subject is to review the criteria of major investors in the marketplace. This may serve as a check against other techniques or may be a primary source when ample data exists. This technique is considered to be appropriate for the subject. Therefore, using the First Quarter 1996 CB Commercial National Investor Survey, we have reviewed rates for Class B neighborhood and community shopping centers. This information is summarized in the following table.
=================================================================================================== CB COMMERCIAL NATIONAL INVESTOR SURVEY SUMMARY OF OVERALL CAP RATES FOR CLASS B SHOPPING CENTERS - --------------------------------------------------------------------------------------------------- Property Type # of Respondents Ro Range Average Rate - --------------------------------------------------------------------------------------------------- Neighborhood Centers 10 9% - 11.5% 10.3% Community Centers 10 9.5% - 11.0% 10.2% - --------------------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ===================================================================================================
The survey categories indicate an overall range of 9% to 11.5% and an average range of 10.2% to 10.3%. It is likely that the appropriate capitalization rate would be toward the middle to upper end of the range indicated in the preceding table due to the mediocre economic prospects in the greater Augusta area over the near term future. Therefore, we have estimated the appropriate overall capitalization rate for the subject to be in the range of 10.5% based on the investor survey data. - -------------------------------------------------------------------------------- 55 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Conclusion of Overall Capitalization Rate After reviewing the appropriate methods for developing an overall capitalization rate. The following overall capitalization rates are indicated: ===================================================================== SUMMARY OF OVERALL CAPITALIZATION RATES - --------------------------------------------------------------------- Methodology Concluded Range - --------------------------------------------------------------------- Comparable Sales 10.5% CB Commercial National Investor Survey 10.5% - --------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ===================================================================== After reviewing the appropriate methods for developing an overall capitalization rate, with most emphasis placed on the comparable sales data, the concluded overall capitalization rate for the subject is 10.5%. - -------------------------------------------------------------------------------- 56 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Direct Capitalization Summary A summary of the direct capitalization of the subject at stabilized occupancy is illustrated in the following table:
====================================================================================== CLOUD SPRINGS PLAZA SHOPPING CENTER DIRECT CAPITALIZATION SUMMARY MAY 17, 1996 - -------------------------------------------------------------------------------------- Category Total P.S.F. - -------------------------------------------------------------------------------------- Income Existing Tenants: 110,867 SF @ $4.59 per SF (wt. avg.) $ 508,859 $ 4.49 Vacant Space at Market 2,500 SF @ $6.50 per SF 16,250 0.14 --------- --------- Potential Gross Rental Income $ 525,109 $ 4.63 --------- --------- Less: Vacancy & Collection Loss (15% of local tenant rent) (18,072) (0.16) --------- --------- Subtotal $ 507,037 $ 4.47 Total Expense Reimbursements 59,800 $ 0.53 Other Income 1,200 0.01 --------- --------- Effective Gross Income $ 568,037 $ 5.01 Expenses Common Area Maintenance ($ 45,600) (0.40) Real Estate Taxes (34,800) (0.31) Insurance (16,000) (0.14) Management Fee (4.0%) (22,721) (0.20) General & Administrative (1,800) (0.02) Reserves (17,000) (0.15) --------- --------- Total Expenses ($137,921) ($ 1.22) OER 24.3% Net Operating Income $ 430,116 $ 3.79 CAPITALIZATION OF NOI: @ 10.5% $4,096,343 $ 36.13 Rounded $4,100,000 $ 36.17 - -------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. - --------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 57 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW ANALYSIS Our DCF assumptions are summarized as follows:
================================================================================ CLOUD SPRINGS PLAZA SHOPPING CENTER SUMMARY OF DISCOUNTED CASH FLOW ASSUMPTIONS - -------------------------------------------------------------------------------- General Assumptions Start Date June 1, 1996 Terms of Analysis 10 years Basis (calendar/ fiscal) Fiscal Software Pro-Ject Growth Rate Assumptions Expenses YR1: 3.0%; 3.5% thereafter Market Rent YR1: Flat; 3.5% thereafter Market Rent Assumptions Local Tenants $6.50 Grocery Store Anchor Tenant $6.50 Other Anchor Tenants $4.00 Leasing Assumptions Lease Term 5 years Renewal Probability 65% Escalation $0.25/SF annually Weighted Average of: Tenant Improvements ($/SF) None Months of Free Rent 1 month Leasing Commissions (cashed-out) 2.6% Down Time Between Leases 4 months Miscellaneous Assumptions Credit Loss 1.0% (local tenants only) Avg Occupancy Over Projection Period 96% (physical occupancy) Structural Maintenance/ Reserves ($/SF) $0.15 Deferred Maintenance None Financial Assumptions Discount Rate (IRR) 12.5% Terminal Overall Capitalization Rate (RO) 11.0% Costs of Sale 3.0% - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================
Discount Rate Selection Rate selection requires that an appraiser verify and interpret the attitude and expectations of market participants (buyers, sellers, advisors, and brokers, among others). In selecting yield rates at which cash flows are to be discounted, an emphasis is placed on the prospective or - -------------------------------------------------------------------------------- 58 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- forecast yield rates anticipated by typical buyers and sellers. This rate is influenced by many factors, including the degree of apparent risk, market attitudes toward future inflation, the prospective rates of return for alternative investments, the rates of return earned by comparable properties in the past, the supply and demand of mortgage funds, and the availability of tax shelters. One method for establishing a discount rate for the subject is to review the criteria of major investors in the marketplace. This may serve as a check against other techniques or may be a primary source when ample data exists. This technique is considered to be appropriate for the subject. The results of relevant published investor survey data are summarized in the following table. ================================================================================ CB COMMERCIAL 1Q 1996 NATIONAL INVESTOR SURVEY SUMMARY OF INTERNAL RATES OF RETURN FOR CLASS B SHOPPING CENTERS - -------------------------------------------------------------------------------- # of Average Property Type Respondents IRR Range Rate - -------------------------------------------------------------------------------- Neighborhood Centers 10 12% - 14.5% 13.1% Community Centers 10 12% - 15% 13.4% - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The survey indicates a range of discount rates between 12% and 15%, with rates generally clustering in the 12% to 13% range. The subject is an average property which is primarily occupied by a three anchor tenants. Therefore, it would appear that the subject has an average degree risk and the appropriate discount rate is likely to be near the middle of the range indicated in the preceding table. These factors indicate that the appropriate discount rate for the subject would likely fall in the range of 12.5% on the basis of published investor survey data. Reversion The reversionary value of the subject is based on an assumed sale at the end of the holding period based on capitalizing the following year's NOI. Additionally, any capital costs, leasing commissions, and tenant improvements associated with the following year's NOI are deducted. Based on our surveys, reversionary capitalization rates are typically considered to be 0 to 100 basis points higher than going-in capitalization rates on a typical holding period. This is a result - -------------------------------------------------------------------------------- 59 CLOUD SPRINGS PLAZA SHOPPING CENTER ANNUAL CASH FLOW REPORT BEGINNING 6/1/96 FOR 11 YEARS
FY1997 FY1998 FY1999 FY2OOO FY2OO1 FY2OO2 FY2OO3 FY2OO4 FYZOO5 FY2OO6 FY2OO7 INCOME - ------ MINIMUM RENT: ALL TENANTS 509,378 509,140 505,696 521,381 533,574 538,688 553,111 547,967 575,502 555,405 617,136 FREE RENT 0 (975) (6,795) (2,368) (5,665) (11,994) (1,164) (2,665) (5,329) (4,117) (15,605) -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- TOTAL MINIMUM RENT 509,378 508,165 498,901 519,013 527,909 526,694 551,947 545,302 570,173 551,288 601,531 RECOVERIES: RE TAX RECOVERY 20,071 20,925 21,576 23,195 23,977 25,509 27,349 28,167 30,161 28,764 27,489 INS RECOVERY 3,711 3,864 4,042 4,675 4,403 4,410 4,740 4,790 5,262 5,521 5,892 CAM RECOVERY 36,028 36,336 36,699 39,353 40,908 44,527 47,442 47,909 51,173 49,201 50,920 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- TOTAL RECOVERIES 59,810 61,125 62,317 67,223 69,288 74,446 79,531 80,866 86,596 83,486 84,301 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- GROSS RENTAL INCOME 569,188 569,290 561,218 586,236 597,197 601,140 631,478 626,168 656,769 634,774 685,832 CREDIT LOSS (3,329) (3,324) (3,232) (3,471) (3,569) (3,596) (3,887) (3,821) (4,023) (3,795) (4,291) OTHER INCOME 1,200 1,215 1,251 1,289 1,328 1,367 1,409 1,451 1,494 1,539 1,585 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- TOTAL INCOME 567,059 567,181 559,237 584,054 594,956 598,911 629,000 623,798 654,240 632,518 683,126 EXPENSES COMMON AREA MAINT 45,600 46,265 47,884 49,560 51,295 53,090 54,948 56,871 58,862 60,922 63,054 REAL ESTATE TAXES 35,235 36,367 37,640 38,957 40,320 41,732 43,192 44,704 46,269 47,888 49,564 INSURANCE 16,000 16,233 16,802 17,390 17,998 18,628 19,280 19,955 20,653 21,376 22,124 MANAGEMENT FEE 22,682 22,687 22,369 23,362 23,798 23,956 25,160 24,952 26,170 25,301 27,325 GENERAL & ADMIN 1,800 1,826 1,890 1,956 2,025 2,096 2,169 2,245 2,323 2,405 2,489 RESERVES 17,000 17,248 17,852 18,476 19,123 19,792 20,485 21,202 21,944 22,712 23,507 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- TOTAL EXPENSES 138,317 140,626 144,437 149,701 154,559 159,294 165,234 169,929 176,221 180,604 188,063 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- NET OPERATING INCOME 428,742 426,555 414,800 434,353 440,397 439,617 463,766 453,869 478,019 451,914 495,063 COMMISSIONS 0 545 3,783 1,970 2,481 6,830 642 2,199 2,199 23,398 10,656 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- CASH FLOW 428,742 426,010 411,017 432,383 437,916 432,787 463,124 451,670 475,820 428,516 484,407
================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- of the uncertainty of future economic conditions and the natural aging of the property. In the case of the subject, we feel that a premium of 50 basis points over the going-in capitalization rate is warranted. The appropriate terminal capitalization rate for the reversion is, therefore, estimated to be 11.0%. DCF Conclusion The subject's projected cash flow generated via this DCF analysis is shown on the facing page. A value of $3,800,000, or $33.52 per square foot, is suggested for this scenario based on a discount rate of 12.5% and a reversion capitalization rate of 11.0%. Furthermore, 63% of the value is derived from cash flow over the holding period, with the remaining 37% generated from the reversionary sale of the property at the end of the holding period. CONCLUSION OF INCOME CAPITALIZATION APPROACH The preceding analysis indicates the following conclusions: ===================================================================== INCOME CAPITALIZATION APPROACH VALUES - --------------------------------------------------------------------- Method Indicated Value - --------------------------------------------------------------------- Direct Capitalization $4,100,000 Discounted Cash Flow $3,800,000 - --------------------------------------------------------------------- Source: CB Commercial Real Estate ===================================================================== We feel that the direct capitalization analysis represents the preferred methodology of potential investors in the market for property such as the subject. However, the DCF model is also employed at times and generally supports the direct capitalization analysis. Therefore, we have correlated at a value between the range indicated by the two methods, with primary emphasis placed on the direct capitalization analysis. As a result, CB Commercial concludes a value for the subject improvements of $4,000,000, or $35.28 per rentable square foot. - -------------------------------------------------------------------------------- 60 CONCLUSION CONCLUSION ================================================================================ RECONCILIATION - -------------------------------------------------------------------------------- RECONCILIATION OF VALUE CB Commercial was instructed to estimate the market value of the leased fee interest in the subject property. The value conclusion for each applicable approach is summarized below. =========================================================================== SUMMARY OF VALUE CONCLUSIONS - --------------------------------------------------------------------------- Land Value: N/A Cost Approach: N/A Sales Comparison Approach: $4,075,000 Income Capitalization Approach: $4,000,000 - --------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. =========================================================================== The Income Capitalization Approach is considered the most persuasive method for valuing the subject property. This approach is predicated on the principle of anticipated economic benefits and therefore, best reflects the investment characteristics of the subject. Properties such as the subject are typically purchased by investors; thus, this approach must closely parallel the anticipated analysis that would be employed by the most typical purchaser. The Sales Comparison Approach is predicated on the principle that an investor would pay no more for an existing property than for a comparable property with similar utility. This approach is contingent on the reliability and comparability of available data. The data developed was considered sufficiently reliable to reach a value conclusion by the Sales Comparison Approach. However, this method is given secondary consideration in the reconciliation and used as support for the Income Approach. The Cost Approach is predicated on the principle that an investor would pay no more for an existing property than it would cost to acquire land and construct a building with similar utility. The Cost Approach is not relied upon because estimating developer profit is very subjective and the Marshall Valuation Service cost guide is based on numerous assumptions that may not directly apply to the subject, rendering this method less reliable. This approach was not utilized in our analysis. In arriving at the final value conclusion, greatest weight was placed on the Income Capitalization Approach. The final value conclusion and the approach relied upon give strong - -------------------------------------------------------------------------------- 61 ================================================================================ RECONCILIATION - -------------------------------------------------------------------------------- consideration to the market behavior of the typical buyer and current market environment for the property appraised. Based on the foregoing analysis, it is concluded that the market value as is of the leased fee interest in the subject property, as of May 17, 1996 is: FOUR MILLION DOLLARS ($4,000,000) - -------------------------------------------------------------------------------- 62 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS 1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to total that would adversely affect marketability or value. CB Commercial is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CB Commercial, however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject property's title should be sought from a qualified title company that issues or insures title to real property. 2. It is assumed that improvements have been constructed or will be constructed according to approved architectural plans and specifications and in conformance with recommendations contained in or based upon any soils report(s). Unless otherwise specifically noted in the body of this report, it is assumed: that any existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are, or will be upon completion, in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that it or they will withstand any known elements such as windstorm, hurricane, tornado, flooding, earthquake, or similar natural occurrences; and, that the improvements, as currently constituted, conform to all applicable local, state, and federal building codes and ordinances. CB Commercial professionals are not engineers and are not competent to judge matters of an engineering nature. CB Commercial has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CB Commercial by ownership or management; CB Commercial inspected less than 100% of the entire interior and exterior portions of the improvements; and CB Commercial was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CB Commercial reserves the right to amend the appraisal conclusions reported herein. 3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property was not observed by the appraisers. CB Commercial has no knowledge of the existence of such materials on or in the property. CB Commercial, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the appraisal. 4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CB Commercial. This report may be subject to amendment upon re-inspection of the subject property subsequent to repairs, modifications, alterations and completed new - -------------------------------------------------------------------------------- 63 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels of operation. 5. It is assumed that all factual data furnished by the client, property owner, owner's representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CB Commercial has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, Assessor's Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CB Commercial reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CB Commercial of any questions or errors. 6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CB Commercial will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject. 7. CB Commercial assumes no private deed restrictions, limiting the use of the subject property in any way. 8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposit or subsurface rights of value involved in this appraisal, whether they be gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred. 9. CB Commercial is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject. 10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market. 11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CB Commercial does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CB Commercial. 12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CB Commercial to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form. 13. Also, unless otherwise noted in the body of this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated. 14. This study may not be duplicated in whole or in part without the specific written consent of CB Commercial nor may this report or copies hereof be transmitted to third parties without said consent, which consent CB - -------------------------------------------------------------------------------- 64 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- Commercial reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or its contents shall not be published, in whole or in part, in any public document without the express written consent of CB Commercial which consent CB Commercial reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a "sale" or "offer for sale" of any "security", as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CB Commercial shall have no accountability or responsibility to any such third party. 15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report. 16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used. 17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area of the subject and comparable properties has been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report. 18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CB Commercial unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CB Commercial assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance. 19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or client's designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CB Commercial assumes responsibility for any situation arising out of the Client's failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired. 20. CB Commercial assumes that the subject property analyzed herein will be under prudent and competent management and ownership; neither inefficient or super-efficient. 21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the appraisal report. 22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist. 23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Notwithstanding any discussion of possible readily achievable barrier removal construction items in this report, CB Commercial has not made a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect on the value estimated herein. Since CB Commercial has no specific information relating to this issue, nor is CB Commercial qualified to make - -------------------------------------------------------------------------------- 65 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject property. - -------------------------------------------------------------------------------- 66 ADDENDA ADDENDA ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- Addendum A GLOSSARY OF TERMS assessed value Assessed value applies in ad valorem taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to market value, but it is usually calculated in relation to a market value base. + cash equivalency The procedure in which the sale prices of comparable properties sold with atypical financing are adjusted to reflect typical market terms. contract, coupon, face, or nominal rent The nominal rent payment specified in the lease contract. It does not reflect any offsets for free rent, unusual tenant improvement conditions, or other factors that may modify the effective rent payment. coupon rent See Contract, Coupon, Face, or Nominal Rent effective rent 1) The rental rate net of financial concessions such as periods of no rent during a lease term; may be calculated on a discounted basis, reflecting the time value of money, or on a simple, straight-line basis. ** 2) The economic rent paid by the lessee when normalized to account for financial concessions, such as escalation clauses, and other factors. Contract, or normal, rents must be converted to effective rents to form a consistent basis of comparison between comparables. face rent See Contract, Coupon, Face, or Nominal Rent fee simple estate Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.** floor area ratio (FAR) The relationship between the above-ground floor area of a building, as described by the building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area; also called building-to-land ratio. ** full service lease A lease in which rent covers all operating expenses. Typically, full service leases are combined with an expense stop, the expense level covered by the contract lease payment. Increases in expenses above the expense stop level are passed through to the tenant and are known as expense pass-throughs. going concern value Going concern value is the value of a proven property operation. It includes the incremental value associated with the business concern, which is distinct from the value of the real estate only. Going concern value includes an intangible enhancement of the value of an operating business enterprise which is produced by the assemblage of the land, building, labor, equipment, and marketing operation. This process creates an economically viable business that is expected to continue. Going concern value refers to the total value of a property, including both real property and intangible personal property attributed to the business value. + gross building area (GBA) The sum of all areas at each floor as measured to the exterior walls. insurable value Insurable Value is based on the replacement and/or reproduction cost of physical items that are subject to loss from hazards. Insurable value is that portion of the value of an asset or asset group that is acknowledged or recognized under the provisions of an applicable loss insurance policy. This value is often controlled by state law and varies from state to state. + investment value Investment value is the value of an investment to a particular investor based on his or her investment requirements. In contrast to market value, investment value is value to an individual, not value in the marketplace. Investment value reflects the subjective relationship between a particular investor and a given investment. When measured in dollars, investment value is the price an investor would pay for an investment in light of its perceived capacity to satisfy his or her desires, needs, or investment goals. To estimate investment value, specific investment criteria must be known. Criteria to evaluate a real estate investment are not necessarily set down by the individual investor; they may be established by an ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- expert on real estate and its value, that is, an appraiser. + leased fee See leased fee estate leased fee estate An ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.** leasehold See leasehold estate leasehold estate The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.** load factor The amount added to usable area to calculate the rentable area. It is also referred to as a "rentable add-on factor" which, according to BOMA, "is computed by dividing the difference between the usable square footage and rentable square footage by the amount of the usable area. Convert the figure into a percentage by multiplying by 100. market value "as if complete" on the appraisal date Market value as if complete on the appraisal date is an estimate of the market value of a property with all construction, conversion, or rehabilitation hypothetically completed, or under other specified hypothetical conditions as of the date of the appraisal. With regard to properties wherein anticipated market conditions indicate that stabilized occupancy is not likely as of the date of completion, this estimate of value should reflect the market value of the property as if complete and prepared for occupancy by tenants. market value "as is" on the appraisal date Market value "as is" on the appraisal date is an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date of appraisal. market value Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1) A reasonable time is allowed for exposure in the open market; 2) Both parties are well informed or well advised, and acting in what they consider their own best interests; 3) Buyer and seller are typically motivated; 4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.ss. marketing period The time it takes an interest in real property to sell on the market subsequent to the date of an appraisal. ** net lease Lease in which all or some of the operating expenses are paid directly by the tenant. The landlord never takes possession of the expense payment. In a Triple Net Lease all operating expenses are the responsibility of the tenant, including property taxes, insurance, interior maintenance, and other miscellaneous expenses. However, management fees and exterior maintenance are often the responsibility of the lessor in a triple net lease. A modified net lease is one in which some expenses are paid separately by the tenant and some are included in the rent. net rentable area (NRA) 1) The area on which rent is computed. 2) The Rentable Area of a floor shall be computed by measuring to the inside finished surface of the dominant portion of the permanent outer building walls, excluding any major vertical penetrations of the floor. No deductions shall be made for columns and projections necessary to the building. Include space such as mechanical room, janitorial room, restrooms, and lobby of the floor. * nominal rent See Contract, Coupon, Face, or Nominal Rent prospective future value "upon completion of construction" Prospective future value "upon completion of construction" is the prospective value of a property on the future date that construction is completed, based upon market conditions forecast to exist, as of that completion date. The value ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- estimate at this stage is stated in current dollars unless otherwise indicated. prospective future value "upon reaching stabilized occupancy" Prospective future value "upon reaching stabilized occupancy" is the prospective value of a property at a future point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. The value estimate at this stage is stated in current dollars unless otherwise indicated. reasonable exposure time The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market. ** rent see full service lease net lease contract, coupon, face, or nominal rent effective rent shell space Space which has not had any interior finishing installed, including even basic improvements such as ceilings and interior walls, as well as partitions, floor coverings, wall coverings, etc.. Usable Area 1) The area actually used by individual tenants. 2) The Usable Area of an office is computed by measuring to the finished surface of the office side of corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished surface of the dominant portion of the permanent outer building walls. Excludes areas such as mechanical rooms, janitorial room, restrooms, lobby, and any major vertical penetrations of a multi-tenant floor. * use value Use value is a concept based on the productivity of an economic good. Use value is the value a specific property has for a specific use. Use value focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to the property's highest and best use or the monetary amount that might be realized upon its sale. + value appraised During the real estate development process, a property typically progresses from a state of unimproved land to construction of improvements to stabilized occupancy. In general, the market value associated with the property increases during these stages of development. After reaching stabilized occupancy, ongoing forces affect the property during its life, including a physical wear and tear, changing market conditions, etc. These factors continually influence the property's market value at any given point in time. See also market value "as is" on the appraisal date market value "as if complete" on the appraisal date prospective future value "upon completion of construction" prospective future value "upon reaching stabilized occupancy" - ---------- + The Appraisal of Real Estate, Tenth Edition, Appraisal Institute, 1992. ++ The Dictionary of Real Estate Appraisal, Third Edition, 1993. ss. The office of the Comptroller of the Currency, 12 CFR Part 34, Subpart C, ss.34.42(f), August 24, 1990. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. * 1990 BOMA Experience Exchange Report, Income/Expense Analysis for Office Buildings (Building Owners and Managers Association, 1990) ** Statement on Appraisal Standard No. 6, Appraisal Standards Board of The Appraisal Foundation, September 19, 1992. ================================================================================ ADDENDUM B ADDITIONAL SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- Addendum B ADDITIONAL SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B ADDITIONAL SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] VIEW SOUTH ALONG U.S. HIGHWAY 27 FROM SUBJECT PROPERTY [GRAPHIC OMITTED] VIEW NORTH ALONG U.S. HIGHWAY 27 FROM SUBJECT PROPERTY - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B ADDITIONAL SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] VIEW WEST ALONG CLOUD SPRINGS ROAD FROM SUBJECT PROPERTY [GRAPHIC OMITTED] VIEW SOUTHWEST ACROSS CLOUD SPRINGS ROAD AT SUBJECT PROPERTY - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B ADDITIONAL SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] VIEW WEST ACROSS HIGHWAY 27 AT SUBJECT PROPERTY VIEW SOUTHEAST AT SUBJECT FROM HIGHWAY 27/CLOUD SPRINGS ROAD INTERSECTION - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B ADDITIONAL SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] EXTERIOR VIEW OF SUBJECT PROPERTY'S NORTHERN FRONT ELEVATION [GRAPHIC OMITTED] EXTERIOR VIEW OF SUBJECT PROPERTY'S EASTERN FRONT ELEVATION - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM C LEGAL DESCRIPTION - -------------------------------------------------------------------------------- Addendum C LEGAL DESCRIPTION - -------------------------------------------------------------------------------- Cloud Springs Plaza Fort Oglethorpe, GA PROPERTY DESCRIPTION All that tract or parcel of land lying and being in Land Lot 61, 9th District, 4th Section, Catoosa County, City of Fort Oglethorpe, Georgia and being more particularly described as follows: TRACT ONE Beginning at the cut cross on the southwesterly right-of-way of Lafayette Road (also known as U.S. Highway No. 27), being an 88 foot right-of-way and the southern right-of-way of Herron Road (also known as West Cloud Springs Road), being a 30 foot right-of-way; thence southeastwardly along the southwestwardly right-of-way of Lafayette Road, South 37 degrees, 46 minutes O0 seconds East, a distance of 576.6 feet to a cut cross at the intersection of said right-of-way with the westerly right-of-way of Old Lafayette Road (also known as Old U.S. Highway No. 27 and Government Road); thence along said right-of-way, along an arc to the left, a distance of 95.31 feet to an iron pipe (said arc being subtended by a chord bearing of South 16 degrees 04 minutes 22 seconds West, a distance of 94.51 feet and a radius of 211.75 feet), thence South 89 degrees 24 minutes 57 seconds West along the northern right-of-way of an unopened 10 foot alley, a distance of 1,067.75 feet to an iron pipe, said point being in the easterly right-of-way of West Cloud Springs Road, being a 30 foot right-of-way; thence northwestwardly along said right-of-way, North Ol degrees 53 minutes 40 seconds West, a distance of 190.08 feet to an iron pipe; thence continuing along said right-of-way, North 01 degree 21 minutes 26 seconds West, a distance of 312.96 feet to a point in a concrete ditch, thence continuing along said right-of-way with an arc to the right, a distance of 76.06 feet to an iron pipe (said arc being subtended by a chord bearing of North 44 degrees O5 minutes 42 seconds East, a distance of 68.33 feet and a radius of 47.94 feet) in the southerly right-of-way of Herron Road; thence along said right-of-way North 89 degrees 32 minutes 50 seconds East, a distance of 706.9 feet to a cut cross, said point being the point of beginning, said tract containing approximately 523,472 square feet or approximately 12.017 acres and being shown as Tracts One and Two on survey by Betts Engineering Associates, Inc. Drawing Number 10013-1-166, dated November 16, 1992 and revised February 25, 1993. EXHIBIT "A" Page 1 of 2 TRACT TWO Being Lot 6, J.F. Bennett Subdivision, as shown by plat of record in Deed Book M, Page 499, in the Office of the Clerk of the Superior Court of Catoosa County, Georgia and being more fully described as follows: BEGINNING at a cut cross at the intersection of the southwesterly right-of-way of Lafayette Road (also known as U.S. Highway No. 27), being an 88 foot right-of-way, and the westerly right-of-way of Old Lafayette Road (also known as Old U.S. Highway 27 and Government Road); thence southwestwardly along said western right-of-way, an arc distance of 95.31 feet to an iron pipe; thence South 89 degrees 24 minutes 57 seconds West, a distance of 216.80 feet to a point; thence South 00 degrees 35 minutes 03 seconds East a distance of 10.00 feet to an iron pipe, said point being the northeastern corner of Lot 6, being the TRUE POINT OF BEGINNING; thence South 01 degrees 48 minutes 07 seconds East a distance of 154.68 feet to a railroad spike, said point being in the northern right-of-way of Hargrave Avenue, being a 20 foot right-of-way; thence along said right-of-way, North 89 degrees 25 minutes 41 seconds West, a distance of 50.00 feet to an iron pipe; thence North 01 degrees 48 minutes 49 seconds West, a distance of 153.67 feet to an iron pipe, said point being in the southern right-of-way of an unopened 10 foot alley; thence East, along said alley North 89 degrees 24 minutes 57 seconds East, a distance of 50.00 feet to the true point of beginning, said tract containing approximately 7,704 square feet or approximately 0.18 acres and being shown as Tract Three on survey by Betts Engineering Associates, Inc. Drawing Number 10013-1-166 dated November 16, 1992, and revised February 25, 1993. EXHIBIT "A" 2 of 2 ================================================================================ Addendum D RENT ROLL - -------------------------------------------------------------------------------- Addendum D RENT ROLL - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- Detail Rent Roll FORT OGELTHORPE Report Date: 05/14/96 - ----------------------------------------------------------------------------------------------------------------------------------- -- Rent Dates -- Suite Commence Expire Square Mocnthly Annual -- Cost Recovery -- Expense --- Other Income --- No. Tenant Name Start Footage Base Rent Rate/SF Description Monthly Stcp Description Monthly - ----------------------------------------------------------------------------------------------------------------------------------- 00020 OLD FORT DRY CLEANERS 08/01/88 07/31/98 2,000 1,166.67 7.00 MAINTENANC 83.33 11/01/88 REAL ESTAT 43.94 -------- 127.27 00030 AUTOZONE 11/17/93 09/30/04 8,350 2,800.00 4.02 MAINTENANC 146.99 11/17/93 00100 TRI STATE VACUUM 09/15/90 09/14/98 2,000 1,166.67 7.00 MAINTENANC 66.67 09/15/90 REAL ESTAT 66.67 -------- 133.34 OO1OA Y M C A 11/01/92 10/31/99 10,287 3,750.00 4.37 MAINTENANC 567.36 11/01/92 REAL ESTAT 216.66 -------- 784.02 00120 CAROL'S VIDEO 08/01/88 10/31/00 1,050 700.00 8.00 MAINTENANC 35.00 08/01/88 MISCELANEO -100.00 REAL ESTAT 23.07 -------- -41.93 00180 BIG LOTS 09/27/90 10/31/00 30,000 8,250.00 3.30 09/27/90 00200 FOOD LION 01/26/91 01/31/11 29,000 15,104.17 6.25 MAINTENANC 483.33 01/26/91 00090 THE MONEY TREE, INC. 03/31/96 03/31/01 2,000 1,500.00 9.00 03/31/96 0017B PAUL STEPHEN'S SALON 12/01/94 11/30/99 2,000 900.00 5.40 12/01/94 07080 W.S. BADCOCK CORPORATION 09/29/95 09/28/00 15,260 3,815.00 3.00 09/29/95 0017C HOANG-TRUNG VUONG 05/16/95 05/31/97 600 500.00 10.00 MAINTENANC 37.50 05/16/95 REAL ESTAT 14.00 -------- 51.50 OO12A OPTICAL DESIGN 10/15/95 10/31/00 1,400 700.00 6.00 MAINTENANC 86.43 10/15/95 REAL ESTAT 32.67
- -------------------------------------------------------- Page: 53 Date: 05/14/96 Time: 14:14:08 - -------------------------------------------------------- Suite Future Rent Increases No. Tenant Name Date Monthly Amt. Per Sf - -------------------------------------------------------- 00020 OLD FORT DRY CLEANERS 08/01/97 1,333.33 8.00 00030 AUTOZONE 11/01/98 3,200.00 4.60 00100 TRI STATE VACUUM OO1OA Y M C A 11/01/96 4,166.67 4.86 11/01/97 4,583.33 5.35 00120 CAROL'S VIDEO 11/01/97 743.75 8.50 11/01/99 787.50 9.00 00180 BIG LOTS 11/01/00 9,075.00 3.63 00200 FOOD LION 00090 THE MONEY TREE, INC. 04/01/97 1,541.67 9.25 04/01/98 1,583.33 9.50 04/01/99 1,625.00 9.75 04/01/00 1,666.67 10.00 04/01/01 1,708.33 10.25 04/01/02 1,750.00 10.50 04/01/03 1,791.67 10.75 04/01/04 1,833.33 11.00 04/01/05 1,875.00 11.25 0017B PAUL STEPHEN'S SALON 12/01/96 950.00 5.70 12/01/97 1,000.00 6.00 12/01/98 1,050.00 6.30 07080 W.S. BADCOCK CORPORATION 09/29/00 4,260.08 3.35 09/29/05 4,578.00 3.60 0017C HOANG-TRUNG VUONG 06/01/96 550.00 11.00 OO12A OPTICAL DESIGN
- ------------------------------------------------------------------------------------------------------------------------------------ Detail Rent Roll FORT OGELTHORPE Report Date: 05/14/96 - ------------------------------------------------------------------------------------------------------------------------------------ -- Rent Dates -- Suite Commence Expire Square Monthly Annual -- Cost Recovery -- Expense --- Other Income --- No. Tenant Name Start Footage Base Rent Rate/SF Description Monthly Stop Description Monthly - ------------------------------------------------------------------------------------------------------------------------------------ 00150 GOLDEN TAN 11/01/95 03/31/01 4,520 902.43 2.40 MAINTENANC 269.07 11/01/95 REAL ESTAT 105.47 -------- 374.54 00130 BOOKS & BYTES 05/01/96 08/30/01 2,400 0.00 0.00 MAINTENANC 110.00 05/01/96 REAL ESTAT 60.00 -------- 170.00 - ------------------------------------------------------------------------------------------------------------------------------------ Total Building Occupied Sqft: 98% 110,867 41,254.94 0.00 2,348.16 Available Sqft: 2% 2,500 Total Sqft: 113,367 - ------------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------- Page: 54 Date: 05/14/96 Report Date: 05/14/96 Time: 14:15:13 - -------------------------------------------------- Suite Future Rent Increases No. Tenant Name Date Monthly Amt. Per Sf - -------------------------------------------------- 00150 GOLDEN TAN 04/01/97 1,002.43 2.66 04/01/98 1,318.33 3.50 04/01/01 1,695.00 4.50 00130 BOOKS & BYTES 09/01/96 1,150.00 5.75 09/01/97 1,200.00 6.00 09/01/98 1,250.00 6.25 09/01/99 1,300.00 6.50 09/01/00 1,350.00 6.75 09/01/01 1,418.00 7.09 09/01/02 1,488.00 7.44 09/01/03 1,562.00 7.81 09/01/04 1,640.00 8.20 09/01/05 1,720.00 8.60 - -------------------------------------------------- Total Building - -------------------------------------------------- ================================================================================ ADDENDUM E HISTORICAL OPERATING STATEMENTS - -------------------------------------------------------------------------------- Addendum E HISTORICAL OPERATING STATEMENTS - -------------------------------------------------------------------------------- Mark Centers Trust Property Statement of Net Operating Income - 1993 PARK PLAZA ----- INCOME - ------ RENT $362,568 % RENT 0 CAM 18,289 R/E TAX 14,506 UTILITY 0 INSURANCE 5,763 GROUND RENT 0 OTHER 2,205 -------- TOTAL INCOME 403,332 OPERATING EXPENSES - ------------------ LANDSCAPING 1,500 CLEANING 6,390 UTILITIES 11,500 SECURITY 0 MAINT. & REPAIRS 6,065 R/E TAXES 32,754 INSURANCE 21,849 PROVISION FOR BAD DEBT 11,563 SALARIES & WAGES 0 GROUND RENT 0 PROFESSIONAL FEES 1,931 -------- TOTAL EXPENSES 93,553 -------- NET OPERATING INCOME $309,779 -------- - -------------------------------------------------------------------------------- Report Date: 05/09/95 MARK CENTERS TRUST Page: Property: FORT OGELTHORPE NOI - 1995 AND 1994 Date: 05/09/96 Report Name : TEMPJWG - -------------------------------------------------------------------------------- 1995 ACTUAL 1994 ACTUAL - -------------------------------------------------------------------------------- Report: NOITEMP INCOME RENT 424,754 383,275 % RENT 0 0 CAM 31,188 22,271 R/E TAX 16,299 16,176 UTILITY 1,618 0 INSURANCE 1,967 6,601 GROUND RENT 0 0 OTHER (400) 650 ------- ------- TOTAL INCOME 475,426 428,972 EXPENSES LANDSCAPING 2,100 1,795 CLEANING 7,965 7,315 UTILITIES 11,436 9,383 SECURITY 0 0 MAINT & REPAIR 20,486 4,054 REAL ESTATE TAXES 33,866 33,954 INSURANCE 15,917 19,000 PROVISION FOR BAD DEBT 500 185 SALARIES & WAGES 0 0 GROUND RENT 0 0 PROFESSIONAL FEES 615 215 OTHER 2,103 1,110 ------- ------- TOTAL EXPENSES 94,989 77,012 ------- ------- NET OPERATING INCOME 380,438 351,960 ======= =======
- --------------------------------------------------------------------------------------------------- Report Date: 10/03/95 1996 BUDGET BY QUARTER Company: 01 MARK CENTERS TRUST Selection Id: 330526 FORT OGELTHORPE Budget Type: Original Budgt - --------------------------------------------------------------------------------------------------- Report: BUDGQTR 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total - --------------------------------------------------------------------------------------------------- Report: FFOBUDS INCOME RENT 123,553 125,553 125,553 126,788 501,447 % RENT 0 0 0 0 0 CAM 9,501 9,501 9,501 9,501 38,004 R/E TAX 5,442 5,442 5,442 5,442 21,768 UTILITY 0 0 0 0 0 INSURANCE 1,203 1,203 1,203 1,203 4,812 GROUND RENT 0 0 0 0 0 OTHER (138) (138) (138) (138) (552) ------- ------- ------- ------- ------- TOTAL INCOME 139,561 141,561 141,561 142,796 565,479 EXPENSES LANDSCAPING 0 2,100 2,100 600 4,800 CLEANING 1,920 1,920 1,920 1,920 7,680 UTILITIES 2,985 3,185 3,185 3,185 12,540 SECURITY 0 0 0 0 0 MAINT & REPAIR 2,150 12,750 3,050 2,650 20,600 REAL ESTATE TAXES 9,081 9,081 9,081 9,081 36,324 INSURANCE 4,026 4,026 4,026 4,026 16,104 OTHER FINANCING FEES 0 0 0 0 0 PROVISION FOR BAD DEBT 1,629 1,629 1,629 1,629 6,516 SALARIES & WAGES 0 0 0 0 0 GROUND RENT 0 0 0 0 0 PROFESSIONAL FEES 0 0 0 0 0 OTHER 450 450 450 450 1,800 ------- ------- ------- ------- ------- TOTAL EXPENSES 22,241 35,141 25,441 23,541 106,364 ------- ------- ------- ------- ------- EBIDT 117,320 106,420 116,120 119,255 459,115 INTEREST 0 0 0 0 0 ------- ------- ------- ------- ------- FF0 117,320 106,420 116,120 119,255 459,115 ======= ======= ======= ======= ======= FF0 PER SHARE 0.01 0.01 0.01 0.01 0.05
- -------------------------------------------------------------------------------- Report Date: 05/09/95 NOI - 1ST QUARTER 1996 Page: 8 Company: 01 MARK CENTERS TRUST Date: 05/09/96 Selection Id: 33O526 FORT OGELTHORPE Time: 12:31:05 Report Name : INCSTYTD - -------------------------------------------------------------------------------- 3 Months Mar 1996 ------- - -------------------------------------------------------------------------------- Report: NOITEMP INCOME RENT 121,223 % RENT 291 CAM 5,955 R/E TAX 4,208 UTILITY 0 INSURANCE 501 GROUND RENT 0 OTHER (5) ------- TOTAL INCOME 132,173 EXPENSES LANDSCAPING 615 CLEANING 2,070 UTILITIES 2,393 SECURITY 0 MAINT & REPAIR 154 REAL ESTATE TAXES 8,542 INSURANCE 3,243 PROVISION FOR BAD DEBT (500) SALARIES & WAGES 0 GROUND RENT 0 PROFESSIONAL FEES 646 OTHER 552 ------- TOTAL EXPENSES 17,715 ------- NET OPERATING INCOME 114,458 ======= ================================================================================ ADDENDUM F COMPARABLE IMPROVED SALES - -------------------------------------------------------------------------------- Addendum F COMPARABLE IMPROVED SALES - -------------------------------------------------------------------------------- RETAIL SALE 1 ================================================================================ Location Data Property Name: Suburban Plaza Location: Kingston Pike @ N. Winston Road City: Knoxville County: Knox State/Zip: Tennessee Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 11.30 Acres Excess Land: None Gross Leasable Area: Anchors: Toys R Us 39,000 SF Pier 1 Imports 7,984 SF Local Tenant GLA: 73,965 SF Anchor Tenant GLA: 46,984 SF Total GLA: 120,949 SF GLA Purchased: 120,949 SF Year Built: 1981 Parking: 7.7 spaces per 1,000 SF Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 4/95 Marketing Time: N/A Grantor: Southmark Realty Partners, Ltd. Grantee: CBL & Associates, Ltd. Document No.: N/A Sale Price: $6,910,000 Financing: Cash to Seller Cash Equivalent Price: $6,910,000 Required Capital Cost: $0 Adjusted Sales Price: $6,910,000 Verification: Grantee Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 97.3% Existing or Pro Forma Income: Existing TOTAL P.S.F. ---------- ----- Potential Gross Income: $1,093,425 $9.04 Vacancy and Credit Loss: $32,803 $0 27 Effective Gross Income: $1,060,622 $8.77 Expenses: $312,700 $2.59 Net Operating Income: $747,922 $6.18 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 1 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap and DCF Overall Capitalization Rate (OAR): 10.82 % Projected IRR: N/A Effective Gross Multiplier (EGIM): 6.52 Operating Expense Ratio (OER): 29.48 % Price Per Square Foot: $57.13 Comments This center is located one block from West Town Mall in the southwestern portion of the Knoxville area. The L-shaped center was originally constructed in 1964, but was expanded and updated in 1981. It has good market appeal and local shop rents in the range of $8.00 to $12.00 per square foot at the time of sale. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 2 ================================================================================ Location Data Property Name: 640 Plaza Location: S Side Of Western Avenue Just West Of I-640 City: Knoxville County: Knox State/Zip: Tennessee Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 14.47 Acres Excess Land: 5.0 Acres Gross Leasable Area: Anchors: Kroger 42,130 SF Revco Drugs 10,069 SF Local Tenant GLA: 24,344 SF Anchor Tenant GLA: 52,199 SF Total GLA: 76,543 SF GLA Purchased: 76,543 SF Year Built: 1983 Parking: 8.5 spaces per 1,000 SF Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 1 /95 Marketing Time: N/A Grantor: Knoxville Realty Associates Grantee: Graham Limited Partnership Document No.: N/A Sale Price: $4,100,000 Financing: See Comments Cash Equivalent Price: $4,100,000 Required Capital Cost: $0 Adjusted Sales Price: $4,100,000 Verification: Grantee Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 98.5% Existing or Pro Forma Income: Existing TOTAL P.S.F. -------- ----- Potential Gross Income: $660,300 $8.63 Vacancy and Credit Loss: $13,206 $0.17 Effective Gross Income: $647,094 $8.45 Expenses: $196,300 $2.56 Net Operating Income: $450,794 $5.89 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 2 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap Overall Capitalization Rate (OAR): 10.99 % Projected IRR: N/A Effective Gross Multiplier (EGIM): 6.34 Operating Expense Ratio (OER): 30.34 % Price Per Square Foot: $53.56 Comments This center is located in a well developed retail area in the western portion of Knoxville which has a high traffic count. It has good market appeal and local shop rents in the range of $9.00 to $11.00 per square foot at the time of sale. Land area includes two outparcels (1.38 and 0.51 acres) and approximately 5 acres of excess land adjacent to Revco, resulting in the higher than typical parking ratio. However, the buyer reports minimal, if any, contributory value attributed to the outparcels or excess land. The terms of sale involved assumption of a first mortgage with a balance of $2,738,148 at 10% interest and a 20 year ammortization, plus cash for the remainder (33%). This is considered cash equivalent. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 3 ================================================================================ Location Data Property Name: Oglethorpe Plaza Location: SEC Of Highway 27 & Battlefield Parkway City: Fort Oglethorpe County: Catoosa State/Zip: Georgia Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Land Area: 16.60 Acres Excess Land: None Gross Leasable Area: Anchors: K-Mart 95,810 SF FoodMax 48,000 SF Revco Drugs 10,500 SF Local Tenant GLA: 22,593 SF Anchor Tenant GLA: 154,310 SF Total GLA: 176,903 SF GLA Purchased: 176,903 SF Year Built: 1992 Parking: Adequate surface Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 7 /94 Marketing Time: N/A Grantor: Bruno's, Inc. Grantee: JDN Realty Corporation Document No.: DB 495 P 80 Sale Price: $7,250,000 Financing: Cash to Seller Cash Equivalent Price: $7,250,000 Required Capital Cost: $0 Adjusted Sales Price: $7,250,000 Verification: Grantor Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100% Existing or Pro Forma Income: Existing TOTAL P.S.F. -------- ----- Potential Gross Income: $873,775 $4.94 Vacancy and Credit Loss: $17,476 $0.10 Effective Gross Income: $856,300 $4.84 Expenses: $105,528 $0.60 Net Operating Income: $750,772 $4.24 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 3 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap and DCF Overall Capitalization Rate (OAR): 10.36 % Projected IRR: N/A Effective Gross Multiplier (EGIM): 8.47 Operating Expense Ratio (OER): 12.32 % Price Per Square Foot: $40.98 Comments This center is located at the primary intersection of this suburban Chattanooga, TN residential community. The center was originally constructed in 1974. The seller purchased the property in 1992, demolished a portion of the existing center and then rebuilt the grocery store anchor space and the local tenant space, as well as renovating the remaining exteriors. Local shop rents were in the range of $7.00 to $10.00 per square foot at the time of sale. The grantor sold this center and two others to the grantee in order to raise capital. Reportedly, there were other offers at higher prices, but the grantor accepted this offer because of the need for a quick, all cash transaction. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 4 ================================================================================ Location Data Property Name: Cherokee Square Location: E Side Of Highway 41A @ Washburn Street City: Tullahoma County: Coffee State/Zip: Tennessee Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 7.50 Acres Excess Land: None Gross Leasable Area: Anchors: Bi-Lo Foods 37,623 SF Local Tenant GLA: 33,140 SF Anchor Tenant GLA: 37,623 SF Total GLA: 70,763 SF GLA Purchased: 70,763 SF Year Built: 1982 Parking: Adequate surface Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 3 /94 Marketing Time: N/A Grantor: Protective Life Insurance Co. Grantee: JDN Realty Corporation Document No.: DB 238 P 264 Sale Price: $3,350,000 Financing: Cash to Seller Cash Equivalent Price: $3,350,000 Required Capital Cost: $0 Adjusted Sales Price: $3,350,000 Verification: Deed Records & Third Party Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 96.0% Existing or Pro Forma Income: Existing TOTAL P.S.F -------- ----- Potential Gross Income: $433,700 $6.13 Vacancy and Credit Loss: $21,685 $0.31 Effective Gross Income: $412,015 $5.82 Expenses: $44,500 $0.63 Net Operating Income: $367,515 $5.19 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 4 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap Overall Capitalization Rate (OAR): 10.97 % Projected IRR: N/A Effective Gross Multiplier (EGIM): 8.13 Operating Expense Ratio (OER): 10.80 % Price Per Square Foot: $47.34 Comments This center is located in a small community northwest of Chattanooga. Local shop rents were in the range of $5.50 per square foot at the time of sale. Sale also included two ground leased out parcels. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 5 ================================================================================ Location Data Property Name: Northtowne Square Location: Highway 153 & Gadd Road City: Chattanooga County: Hamilton State/Zip: Tennessee Assessor's Parcel No(s): 99M-H-5.0 Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 7.99 Acres Excess Land: None Gross Leasable Area: Anchors: Bi-Lo Foods 41,345 SF Hancock Fabrics 9,824 SF Local Tenant GLA: 23,167 SF Anchor Tenant GLA: 51,169 SF Total GLA: 74,336 SF GLA Purchased: 74,336 SF Year Built: 1981 Parking: 4.8 space per 1,000 SF Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 1/94 Marketing Time: N/A Grantor: Hamilton Plaza Associates, L.P. Grantee: Glimcher Centers, L.P. Document No.: DB 1292 P 77 Sale Price: $3,830,100 Financing: Cash to Seller Cash Equivalent Price: $3,830,100 Required Capital Cost: $0 Adjusted Sales Price: $3,830,100 Verification: Deed Records & Third Party Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100% Existing or Pro Forma Income: N/A TOTAL P.S.F -------- ----- Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: N/A N/A - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 5 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap Overall Capitalization Rate (OAR): N/A % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $51.52 Comments This center is located in the northern portion of Chattanooga along a heavily travelled road just north of Northgate Mall and directly across from a large center anchored by Walmart. Local shop rents were in the range of $8.00 to $10.00 per square foot at the time of sale. The center was originally built in 1981, but renovated in 1991. - -------------------------------------------------------------------------------- CB COMMERCIAL ADDENDUM G RENT COMPARABLES ================================================================================ Addendum G RENT COMPARABLES - -------------------------------------------------------------------------------- RETAIL RENT COMPARABLE 1 ================================================================================ Location Data Property Name: Oglethorpe Plaza Location: Battlefield Parkway @ Highway 27 City: Fort Oglethorpe County: Catoosa State/Zip: Georgia Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 176,903 SF Year Built: 1992 Exterior Walls: Masonry Condition: Good Anchor Tenant: Kmart, FoodMax, Revco Drugs Parking: Adequate surface Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 1,500 SF Term: 3-5 Base Rent Per Square Foot: $8.00 - $10.00 Rent Escalations: Negotiable Basis: Net Expense Pass-Through: Triple Net Free Rent (months): None Tenant Improvement: Minimal Leasing Agent: Exchange Realty Phone No.: (615)756-0581 Survey Date: 5/96 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 1 ================================================================================ Comments Good quality center with good access and visibility. The center was originally constructed in 1974, but was subsequently renovated and expanded in 1992. Photograph [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 2 ================================================================================ Location Data Property Name: Battlefield Centre Location: N Side Of Battlefield Parkway City: Fort Oglethorpe County: Catoosa State/Zip: Georgia Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 202,414 SF Year Built: 1992 Exterior Walls: Masonry Condition: Good Anchor Tenant: Bi-Lo Foods, Vacancy Parking: Adequate surface Lease Data Occupancy: Local: 93.4% Overall: 53.8% Typical Size: 1,500 SF Term: 5 Base Rent Per Square Foot: $7.00 - $8.00 Rent Escalations: Negotiable Basis: Net Expense Pass-Through: Triple Net Free Rent (months): None Tenant Improvement: Minimal Leasing Agent: A.B. Shopping Center Propertie Phone No.: (205)969-1000 Survey Date: 5/96 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 2 ================================================================================ Comments Good quality center with good access and visibility. The anchor tenant vacancy was previously occupied by Walmart, who decided that the store was not large enough for their needs and subsequently built a free-standing super store a few miles east of this center on Battlefield Parkway. Photograph [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 3 ================================================================================ Location Data Property Name: Parkway Center Location: N Side Of Battlefield Parkway City: Fort Oglethorpe County: Catoosa State/Zip: Georgia Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 152,932 SF Year Built: 1981 Exterior Walls: Masonry Condition: Good Anchor Tenant: Vacant, Vacant Parking: Adequate surface Lease Data Occupancy: Local: 100% Overall: 69.2% Typical Size: 2,000 SF Term: 3 Base Rent Per Square Foot: $4.00 - $5.50 Rent Escalations: Negotiable Basis: Net Expense Pass-Through: Triple Net Free Rent (months): Negotiable Tenant Improvement: As Is Leasing Agent: Herman Waldorf & Co. Phone No.: (615)756-2400 Survey Date: 5/96 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 3 ================================================================================ Comments Average quality center with good access and visibility which has suffered since losing its anchor tenants. In fact, it has generally become a discount, or thrift oriented center. The grocery store anchor bay is considered to be too small for a first line grocer, but too large to easily lease to a secondary retailer. Photograph [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ ADDENDUM H PRO-JECT REPORTS - -------------------------------------------------------------------------------- Addendum H PRO-JECT REPORTS - -------------------------------------------------------------------------------- CLOUD SPRINGS PLAZA SHOPPING CENTER PROJECT ASSUMPTIONS REPORT EXCLUDING TENANTS BUILDING PROLOGUE - ----------------- LEASEHOLD ANALYSIS OF CLOUD SPRINGS PLAZA SHOPPING CENTER BEGINNING 6/1996 FOR 13 YEARS ON A FISCAL YEAR BASIS AREA MEASURES - ------------- GRSF 1996 VALUE - 113,367 THEREAFTER - CONSTANT OCSF 1996 VALUE - 109,734 1997 VALUE - 110,667 1998 VALUE - 109,700 1999 VALUE - 110,534 2000 VALUE - 109,959 2001 VALUE - 107,485 2002 VALUE - 110,717 2003 VALUE - 110,650 2004 VALUE - 110,396 2005 VALUE - 105,200 2006 VALUE - 102,877 2007 VALUE - 110,067 2008 VALUE - 110,667 THEREAFTER - CONSTANT CAML 1996 VALUE - 54,367 THEREAFTER - CONSTANT GROWTH RATES - ------------ RNTG 1996 VALUE - 0.00 1997 VALUE - 3.00 THEREAFTER - CONSTANT EXPG 1996 VALUE - 3.00 1997 VALUE - 3.50 THEREAFTER - CONSTANT COMN 1996 VALUE - 4.00 THEREAFTER - CONSTANT COMR 1996 VALUE - 2.00 THEREAFTER - CONSTANT COMS +35.0% OF COMN +65.0% OF COMR MARKET RATES - ------------ RNT1 1996 VALUE - 6.50 THEREAFTER - GR0WING AT GR0WTH RATE RNTG PAGE 2 TIAN 1996 VALUE - 0.00 THEREAFTER - GROWING AT GROWTH RATE EXPG TIAS +35.0% OF TIAN FRER 1996 VALUE - 3.00 THEREAFTER - CONSTANT RNT2 1996 VALUE - 4.00 THEREAFTER - GROWING AT GROWTH RATE RNTG RNT3 1996 VALUE - 6.50 THEREAFTER - GROWING AT GROWTH RATE RNTG RNT4 1996 VALUE - 3.00 THEREAFTER - GROWING AT GROWTH RATE RNTG MISCELLANEOUS INCOMES - --------------------- OTHER INCOME 1996 VALUE - 1,200 THEREAFTER - GROWING AT GROWTH RATE RNTG EXPENSES - -------- COMMON AREA MAINT , REFERRED TO AS CAME CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 45,600 1997 VALUE - 45,600 THEREAFTER - GROWING AT GROWTH RATE EXPG REAL ESTATE TAXES , REFERRED TO AS TAXE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 34,800 THEREAFTER - GROWING AT GROWTH RATE EXPG INSURANCE , REFERRED TO AS INSE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 16,000 1997 VALUE - 16,000 THEREAFTER - GROWING AT GROWTH RATE EXPG CAM & INS REI BASE, REFERRED TO AS C&IB AN INFORMATIONAL EXPENSE +100.0% OF CAME+100.O% OF INSE MANAGEMENT FEE , REFERRED TO AS MGMT CHARGED AGAINST NET OPERATING INCOME 4.00% OF EFFECTIVE GROSS INCOME GENERAL & ADMIN , REFERRED TO AS G&AE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 1,800 1997 VALUE - 1,800 THEREAFTER - GROWING AT GROWTH RATE EXPG RESERVES , REFERRED TO AS RESE CHARGED AGAINST NET OPERATING INCOME PAGE 3 1996 VALUE - 17,000 1997 VALUE - 17,000 THEREAFTER - GROWING AT GROWTH RATE EXPG CAM & TAX RECOVERY, REFERRED TO AS CAM+ AN INFORMATIONAL EXPENSE +100.0% OF CAME+100.0% OF TAXE VACANCY ALLOWANCE - ----------------- PERCENTAGE OF POTENTIAL GROSS INCOME FOR ALL TENANTS SUBJECT TO VACANCY 1996 VALUE - 1.00 THEREAFTER - CONSTANT MANAGEMENT FEE - -------------- NONE COMMISSION CALCULATIONS - ----------------------- STANDARD METHOD #1 - 0.000% OF TOTAL RENT STANDARD METHOD #2 - 0.000% OF TOTAL RENT STANDARD METHOD #3 - 0.000% OF TOTAL RENT STANDARD METHOD #4 - 0.000% OF TOTAL RENT STANDARD METHOD #5 - 0.000% OF TOTAL RENT COMMISSION PAYOUTS - ------------------ STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT ALTERATION CALCULATION - ---------------------- NONE ALTERATION PAYOUTS - ------------------ STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT PAGE 4 STANDARD METHOD #5 - CASHED OUT COMMON AREA MAINTENANCE POOL - ---------------------------- NONE CAPITAL EXPENDITURES - -------------------- NONE PRIMARY CLASSIFICATION CODES - ---------------------------- NONE SECONDARY CLASSIFICATION CODES - ------------------------------ NONE COST CENTERS - ------------ 100 - CAM RECOVERY 200 - RE TAX RECOVERY 300 - INS RECOVERY SALES VOLUME PROFILE - -------------------- PERCENT OF RELATIVE MONTH ANNUAL SALES VOLUME - ----- ------------ ------ JAN 8.33% 1.00 FEB 8.33% 1.00 MAR 8.33% 1.00 APR 8.33% 1.00 MAY 8.33% 1.00 JUN 8.33% 1.00 JUL 8.33% 1.00 AUG 8.33% 1.00 SEP 8.33% 1.00 OCT 8.33% 1.00 NOV 8.33% 1.00 DEC 8.33% 1.00 ------ ----- TOTALS 100.00% 12.00 GLOBAL RECOVERIES - ----------------- TRIPLE NET REIMB , REFERRED TO AS NETR ASSIGNED TO COST CENTER 100 - CAM RECOVERY RECOVERY OF AMOUNTS OR RATES GROWlNG AT A RATE YEAR 1 VALUE - MARKET RATE FRER YEAR 2 VALUE - MARKET RATE FRER YEAR 3 VALUE - MARKET RATE FRER YEAR 4 VALUE - MARKET RATE FRER YEAR 5 VALUE - MARKET RATE FRER PAGE 5 THEREAFTER - GROWING AT GROWTH RATE EXPG CAP - MARKET RATE FRER INSURANCE , REFERRED TO AS INSR ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH CAM & TAX RECOVERY, REFERRED TO AS CAMS ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAM+ PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH TENANT PROLOGUE - --------------- MINIMUM RENTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR SALES VOLUMES AND BREAKPOINTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR RENEWAL RENTS ARE COMPOUNDED ANNUALLY RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET REFERENCE TENANTS - ----------------- NONE TENANTS - ------- THERE ARE A TOTAL OF 14 LEASEHOLD TENANT(S): - -------------------------------------------------------------------------------- # 1 - SUITE 200 , FOOD LION BASE LEASE DATES: 2/1991 TO 1/2011 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 29,000 MARKET RATE: RNT3 GROWTH RATE: RNTG NOT SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 6.25/SF/YR RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH PAGE 6 INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF 0.12/SF MULTIPLIED BY AREA MEASURE GRSF COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF 0.20/SF MULTIPLIED BY AREA MEASURE GRSF COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 2 - SUITE 180 , BIG LOT'S BASE LEASE DATES: 10/1990 TO 10/2000 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 30,000 MARKET RATE: RNT2 GROWTH RATE: RNTG SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 3.30/SF/YR RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF 0.28/SF MULTIPLIED BY AREA MEASURE GRSF COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 0.17/SF/YEAR AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF 0.11/SF MULTIPLIED BY AREA MEASURE GRSF COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 11/2000 TO 10/2005 SQUARE FOOTAGE: 30,000 PAGE 7 MINIMUM RENT: INITIAL RENT - 3.63/SF/YR RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 0.20/SF/YEAR AND A BASE OF 0.30/SF MULTIPLIED BY AREA MEASURE GRSF COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 0.25/SF/YEAR AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR%+96 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT 50 FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 4 NONE NONE YES YES RENEWAL MINIMUM RENT: MARKET RATE RNT2 MULTIPLIED BY 1.000 WITH /SF/YR STEPS OF RENEWAL RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER ZOO - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 0.20/SF/YEAR AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH A CAP OF 0.25/SF/YEAR AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP PAGE 8 AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR RENEWAL COMMISSIONS: GROWTH RATE COMS RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 3 - SUITE 7080 , BADCOCK FURNITURE BASE LEASE DATES: 6/1995 TO 9/2000 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 15,260 MARKET RATE: RNT2 GROWTH RATE: RNTG SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 3.00/SF/YR RECOVERIES: NONE COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 10/2000 TO 9/2005 SQUARE FOOTAGE: 15,260 MINIMUM RENT: INITIAL RENT - 3.35/SF/YR RECOVERIES: NONE COMMISSIONS: NONE ALTERATIONS: NONE OPTION 2 DATES: 10/2005 TO 9/2010 SQUARE FOOTAGE: 15,260 MINIMUM RENT: INITIAL RENT - 3.60/SF/YR RECOVERIES: NONE COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 4 - SUITE 10A , YMCA BASE LEASE DATES: 11/1992 TO 10/1999 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 10,287 MARKET RATE: RNT2 GROWTH RATE: RNTG SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 4.37/SF/YR RECOVERIES: PAGE 9 COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CAML CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 11/1999 TO 10/2004 SQUARE FOOTAGE: 10,287 MINIMUM RENT: INITIAL RENT - 5.83/SF/YR RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CAML CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 2 DATES: 11/2004 TO 10/2009 SQUARE FOOTAGE: 10,287 PAGE 10 MINIMUM RENT: INITIAL RENT - 6.80/SF/YR RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CAML CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 5 - SUITE 30 , AUTO ZONE BASE LEASE DATES: 12/1993 TO 10/2004 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 8,350 MARKET RATE: RNT2 GROWTH RATE: RNTG NOT SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 4.02/SF/YR RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE PAGE 11 ALTERATIONS: NONE OPTION 1 DATES: 10/2004 TO 9/2009 SQUARE FOOTAGE: 8,350 MINIMUM RENT: INITIAL RENT - 5.03/SF/YR RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 6 - SUITE 120 , CAROL'S VIDEO BASE LEASE DATES: 8/1988 TO 10/2000 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 1,050 MARKET RATE: RNT1 GROWTH RATE: RNTG SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 8.00/SF/YR RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CAML CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF PAGE 12 CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 4 NONE FRER YES YES 2 5.00 4 NONE FRER YES YES RENEWAL MINIMUM RENT: MARKET RATE RNT1 MULTIPLIED BY 1.000 WITH /SF/YR STEPS OF 0.25 AFTER MONTH 12 0.25 AFTER MONTH 24 0.50 AFTER MONTH 36 RENEWAL RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CAML CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: GROWTH RATE COMS RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE TIAS RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 7 - SUITE 12A , OPTICAL DESIGN BASE LEASE DATES: 8/1995 TO 10/2000 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 1,400 MARKET RATE: RNT1 GROWTH RATE: RNTG SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 6.00/SF/YR PAGE 13 RECOVERIES: CAM & INS REC BASE ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE C&IB PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CAML CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 4 NONE FRER YES YES 2 5.00 4 NONE FRER YES YES RENEWAL MINIMUM RENT: MARKET RATE RNT1 MULTIPLIED BY 1.000 WITH /SF/YR STEPS OF 0.25 AFTER MONTH 12 0.25 AFTER MONTH 24 0.50 AFTER MONTH 36 RENEWAL RECOVERIES: CAM & INS REC BASE ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE C&IB PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CAML CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: GROWTH RATE COMS RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE TIAS RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 8 - SUITE 130 , BOOKS & BYTES BASE LEASE DATES: 5/1996 TO 8/2001 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 2,400 MARKET RATE: RNT1 PAGE 14 GROWTH RATE: RNTG SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 5.75/SF/YR CHANGING TO - 6.00/SF/YR ON 9/1997 CHANGING TO - 6.25/SF/YR ON 9/1998 CHANGING TO - 6.50/SF/YR ON 9/1999 CHANGING TO - 6.75/SF/YR ON 9/2000 RECOVERIES: CAM & INS REC BASE ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE C&IB PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 4 NONE FRER YES YES 2 5.00 4 NONE FRER YES YES RENEWAL MINIMUM RENT: MARKET RATE RNT1 MULTIPLIED BY 1.000 WITH /SF/YR STEPS OF 0.25 AFTER MONTH 12 0.25 AFTER MONTH 24 0.50 AFTER MONTH 36 RENEWAL RECOVERIES: CAM & INS REC BASE ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE C&IB PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: GROWTH RATE COMS RENEWAL PAYOUT: CASHED OUT PAGE 15 RENEWAL ALTERATIONS: MARKET RATE TIAS RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 9 - SUITE 150 , GOLDEN TAN BASE LEASE DATES: 8/1995 TO 3/2001 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 4,520 MARKET RATE: RNT4 GROWTH RATE: RNTG SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 2.40/SF/YR CHANGING TO - 2.66/SF/YR ON 4/1997 CHANGING TO - 3.50/SF/YR ON 4/1998 RECOVERIES: CAM & INS REC BASE ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE C&IB PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CAML CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 4 NONE FRER YES YES 2 5.00 4 NONE FRER YES YES RENEWAL MINIMUM RENT: MARKET RATE RNT4 MULTIPLIED BY 1.000 WITH /SF/YR STEPS OF 0.25 AFTER MONTH 12 0.25 AFTER MONTH 24 0.50 AFTER MONTH 36 RENEWAL RECOVERIES: CAM & INS REC BASE ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE C&IB PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CAML CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PAGE 16 PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: GROWTH RATE COMS RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE TIAS RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 10 - SUITE 17B , PAUL'S SALON BASE LEASE DATES: 12/1994 TO 11/1999 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 2,000 MARKET RATE: RNTl GROWTH RATE: RNTG SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 5.40/SF/YR CHANGING TO - 5.70/SF/YR ON 12/1996 CHANGING TO - 6.00/SF/YR ON 12/1997 CHANGING TO - 6.30/SF/YR ON 12/1998 RECOVERIES: NONE COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 4 NONE FRER YES YES 2 5.00 4 NONE FRER YES YES RENEWAL MINIMUM RENT: MARKET RATE RNT1 MULTIPLIED BY 1.000 WITH /SF/YR STEPS OF 0.25 AFTER MONTH 12 0.25 AFTER MONTH 24 0.50 AFTER MONTH 36 RENEWAL RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PAGE 17 PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: GROWTH RATE COMS RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE TIAS RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 11 - SUITE 17C , NAIL SALON BASE LEASE DATES: 6/1995 TO 5/1997 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 600 MARKET RATE: RNT1 GROWTH RATE: RNTG SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 10.00/SF/YR RECOVERIES: CAM & INS REC BASE ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE C&IB PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CAML CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 4 NONE FRER YES YES 2 5.00 4 NONE FRER YES YES 3 5.00 4 NONE FRER YES YES RENEWAL MINIMUM RENT: MARKET RATE RNT1 MULTIPLIED BY 1.000 WITH /SF/YR STEPS OF 0.25 AFTER MONTH 12 0.25 AFTER MONTH 24 0.50 AFTER MONTH 36 RENEWAL RECOVERIES: CAM & INS REC BASE ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE C&IB PAGE 18 PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CAML CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: GROWTH RATE COMS RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE TIAS RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 12 - SUITE 100 , TRI SATE VACUUM BASE LEASE DATES: 10/1990 TO 9/1998 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 2,000 MARKET RATE: RNT1 GROWTH RATE: RNTG SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 7.00/SF/YR RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CAML CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 4 NONE FRER YES YES PAGE 19 2 5.00 4 NONE FRER YES YES 3 5.00 4 NONE FRER YES YES RENEWAL MINIMUM RENT: MARKET RATE RNT1 MULTIPLIED BY 1.000 WITH /SF/YR STEPS OF 0.25 AFTER MONTH 12 0.25 AFTER MONTH 24 0.50 AFTER MONTH 36 RENEWAL RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CAML CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: GROWTH RATE COMS RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE TIAS RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 13 - SUITE 90 , THE MONEY TREE BASE LEASE DATES: 3/1996 TO 3/2001 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 2,000 MARKET RATE: RNT1 GROWTH RATE: RNTG SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 9.00/SF/YR CHANGING TO - 9.25/SF/YR ON 4/1997 CHANGING TO - 9.50/SF/YR ON 4/1998 CHANGING TO - 9.75/SF/YR ON 4/1999 CHANGING TO - 10.00/SF/YR ON 4/2000 RECOVERIES: NONE COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: PAGE 20 LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 4 NONE FRER YES YES 2 5.00 4 NONE FRER YES YES RENEWAL MINIMUM RENT: MARKET RATE RNT1 MULTIPLIED BY 1.000 WITH /SF/YR STEPS OF 0.25 AFTER MONTH 12 0.25 AFTER MONTH 12 0.50 AFTER MONTH 36 RENEWAL RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: GROWTH RATE COMS RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE TIAS RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 14 - SUITE 20 , OLD FORT CLEANERS BASE LEASE DATES: 11/1988 TO 7/1998 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 2,000 MARKET RATE: RNT1 GROWTH RATE: RNTG SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 7.00/SF/YR RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CAML CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH PAGE 21 REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 4 NONE FRER YES YES 2 5.00 4 NONE FRER YES YES 3 5.00 4 NONE FRER YES YES RENEWAL MINIMUM RENT: MARKET RATE RNT1 MULTIPLIED BY 1.000 WITH /SF/YR STEPS OF 0.25 AFTER MONTH 12 0.25 AFTER MONTH 24 0.50 AFTER MONTH 36 RENEWAL RECOVERIES: COMMON AREA MAINT ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE CAME PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CAML CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 200 - RE TAX RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 300 - INS RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: GROWTH RATE COMS RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE TIAS RENEWAL PAYOUT: CASHED OUT CLOUD SPRINGS PLAZA SHOPPING CENTER TENANT REGISTER TENANT SQUARE FEET BEGIN DATE END DATE - ------------------------------------- ----------- ---------- -------- # 1 - SUITE 200 FOOD LION 29,000 2/1991 1/2011 # 2 - SUITE 180 BIG LOT'S 30,000 10/1990 10/2000 # 3 - SUITE 7080 BADCOCK FURNITURE 15,260 6/1995 9/2000 # 4 - SUITE 10A YMCA 10,287 11/1992 10/1999 # 5 - SUITE 30 AUTO ZONE 8,350 12/1993 10/2004 # 6 - SUITE 120 CAROL'S VIDEO 1,050 8/1988 10/2000 # 7 - SUITE 12A OPTICAL DESIGN 1,400 8/1995 10/2000 # 8 - SUITE 130 BOOKS & BYTES 2,400 5/1996 8/2001 # 9 - SUITE 150 GOLDEN TAN 4,520 8/1995 3/2001 # 10 - SUITE 178 PAUL'S SALON 2,000 12/1994 11/1999 # 11 - SUITE 17B NAIL SALON 600 6/1995 5/1997 # 12 - SUITE 100 TRI SATE VACUUM 2,000 10/1990 9/1998 # 13 - SUITE 90 THE MONEY TREE 2,000 3/1996 3/2001 # 14 - SUITE 20 OLD FORT CLEANERS 2,000 11/1988 7/1998 ------- 14 TENANTS 110,867 ======= CLOUD SPRINGS PLAZA SHOPPING CENTER LEASE ABSTRACT REPORT FOR ALL TENANTS
PRIMARY/ ANNUAL % OF SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT PRO RATA RENT SUBJ TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES SHARE BASE TO CPI - ---------------- --------- ------ ----- ----- ------ ------- -------- ------- ------- ---------- --------------- ---------- ------- # 1-SUITE 200 - 29,000 2/91 1/11 - 6.25 181,250 - - - REAL ESTATE TAXES ZERO FOOD LION - INSURANCE 13,604 COMMON AREA MAINT 22,673 # 2-SUITE 180 - 30,000 10/90 10/00 - 3.30 99,000 - - - REAL ESTATE TAXES 31,743 BIG LOT'S - COMMON AREA MAINT ZERO INSURANCE 12,470 1- 60 3.63 108,900 - - - REAL ESTATE TAXES 34,010 COMMON AREA MAINT ZERO INSURANCE ZERO # 3-SUITE 7080 - 15,260 6/95 9/00 - 3.00 45,780 - - - NONE BADCOCK FURNITURE - 1- 60 3.35 51,121 - - - NONE 2- 60 3.60 54,936 - - - NONE # 4-SUITE 1OA - 10,287 11/92 10/99 - 4.37 44,954 - - - COMMON AREA MAINT ZERO YMCA - REAL ESTATE TAXES ZERO INSURANCE ZERO 1- 60 5.83 59,973 - - - COMMON AREA MAINT ZERO REAL ESTATE TAXES ZERO INSURANCE ZERO 2- 60 6.80 69,952 - - - COMMON AREA MAINT ZERO REAL ESTATE TAXES ZERO INSURANCE ZERO # 5-SUITE 30 - 8,350 12/93 10/04 - 4.02 33,567 - - - COMMON AREA MAINT ZERO AUTO ZONE - REAL ESTATE TAXES ZERO 1- 60 5.03 42,001 - - - COMMON AREA MAINT ZERO REAL ESTATE TAXES ZERO # 6-SUITE 120 - 1,050 8/88 10/00 - 8.00 8,400 - - - COMMON AREA MAINT ZERO CAROL'S VIDEO - REAL ESTATE TAXES ZERO INSURANCE ZERO
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PRIMARY/ ANNUAL BREAK- % OF SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING POINT PRO RATA RENT SUBJ TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES SHARE BASE TO CPI - ---------------- --------- ------ ----- ----- ------ --------- -------- ------- ------- ------- --------------- ---------- ------- # 7-SUITE 12A - 1,400 8/95 10/00 - 6.00 8,400 - - - CAM & INS REC BASE ZERO OPTICAL DESIGN - REAL ESTATE TAXES ZERO # 8-SUITE 130 - 2,400 5/96 8/01 - 5.75 13,800 - - - CAM & INS REC BASE ZERO BOOKS & BYTES - 9/97 6.00 14,400 REAL ESTATE TAXES ZERO 9/98 6.25 15,000 9/99 6.50 15,600 9/00 6.75 16,200 # 9-SUITE 150 - 4,520 8/95 3/01 - 2.40 10,848 - - - CAM & INS REC BASE ZERO GOLDEN TAN - 4/97 2.66 12,023 REAL ESTATE TAXES ZERO 4/98 3.50 15,820 # 10-SUITE 17B - 2,000 12/94 11/99 - 5.40 10,800 - - - NONE PAUL'S SALON - 12/96 5.70 11,400 12/97 6.00 12,000 12/98 6.30 12,600 # 11-SUITE 17C - 600 6/95 5/97 - 10.00 6,000 - - - CAM & INS REC BASE ZERO NAIL SALON - REAL ESTATE TAXES ZERO # 12-SUITE 100 - 2,000 10/90 9/98 - 7.00 14,000 - - - COMMON AREA MAINT ZERO TRI SATE VACUUM - REAL ESTATE TAXES ZERO INSURANCE ZERO # 13-SUITE 90 - 2,000 3/96 3/01 - 9.00 18,000 - - - NONE THE MONEY TREE - 4/97 9.25 18,500 4/98 9.50 19,000 4/99 9.75 19,500 4/00 10.00 20,000 # 14-SUITE 20 - 2,000 11/88 7/98 - 7.00 14,000 - - - COMMON AREA MAINT ZERO OLD FORT CLEANERS - REAL ESTATE TAXES ZERO INSURANCE ZERO ------- 110,867 =======
CLOUD SPRINGS PLAZA SHOPPING CENTER AVERAGE OCCUPANCY REPORT FOR ALL TENANTS
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- JANUARY 106,467 110,867 110,867 108,867 108,867 108,417 110,867 110,267 108,867 110,867 80,867 FEBRUARY 106,467 110,867 110,867 110,867 108,867 108,417 110,867 110,867 106,867 110,867 80,867 MARCH 108,467 110,867 110,867 110,867 108,867 110,867 110,867 110,867 106,867 110,867 108,417 APRIL 108,467 110,867 110,867 110,867 110,867 104,347 110,867 110,867 108,867 108,867 108,417 MAY 110,867 110,867 110,867 110,867 110,867 104,347 110,867 108,867 108,867 108,417 108,417 JUNE 110,867 110,267 110,867 110,867 110,867 104,347 110,867 110,867 110,867 108,867 108,417 JULY 110,867 110,267 110,867 110,867 110,867 104,347 110,867 110,867 110,867 108,867 110,867 AUGUST 110,867 110,267 108,867 110,867 110,867 110,867 110,867 110,867 110,867 110,867 104,347 SEPTEMBER 110,867 110,267 108,867 110,867 110,867 108,467 110,867 110,867 110,867 110,867 104,347 OCTOBER 110,867 110,867 106,867 110,867 110,867 108,467 110,267 110,867 119,217 110,867 104,347 NOVEMBER 110,867 110,867 106,867 110,867 108,417 108,467 110,267 110,867 110,867 80,867 104,347 DECEMBER 110,867 110,867 108,867 108,867 108,417 108,467 110,267 108,867 110,867 80,867 110,867 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- AVERAGE SF OCCUPIED-OCSF 109,734 110,667 109,700 110,534 109,959 107,485 110,717 110,650 110,396 105,200 102,877 TOTAL SF-GRSF 113,367 113,367 113,367 113,367 113,367 113,367 113,367 113,367 113,367 113,367 113,367 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- OCCUPANCY % 96.80 97.62 96.77 97.50 96.99 94.81 97.66 97.60 97.38 92.80 90.75 ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
2007 2008 ---- ---- JANUARY 108,467 110,867 FEBRUARY 108,467 110,267 MARCH 108,467 110,267 APRIL 108,467 110,267 MAY 110,867 110,267 JUNE 110,867 110,867 JULY 110,867 110,867 AUGUST 110,867 110,867 SEPTEMBER 110,867 110,867 OCTOBER 110,867 110,867 NOVEMBER 110,867 110,867 DECEMBER 110,867 110,867 ------- ------- AVERAGE SF OCCUPIED-OCSF 110,067 110,667 TOTAL SF-GRSF 113,367 113,367 ------- ------- OCCUPANCY % 97.09 97.62 ======= ======= ================================================================================ ADDENDUM I LETTER OF AUTHORIZATION - -------------------------------------------------------------------------------- Addendum I LETTER OF AUTHORIZATION - -------------------------------------------------------------------------------- [LETTERHEAD OF CB COMMERCIAL] May 8, 1996 Mr. Josh Kane Chief Financial Officer MARK CENTERS TRUST 660 Third Avenue Kingston, PA 18704 Re: 17 Shopping Centers Nationwide Dear Mr. Kane: At your request, we are pleased to submit the following proposal to appraise the above referenced properties. The purpose of this assignment is to estimate the market value of the leased fee interest. We understand the appraisal reports are to be used for mortgage underwriting purposes. We also understand that the reports will be used by Mark Centers Trust and Morgan Stanley. The properties are briefly described on attachment "A". Our complete valuation will be presented in a self contained (narrative) format and will contain a complete description of the property along with pertinent exhibits and photographs together with supporting factual data and analysis necessary to convey our opinion of value. We will value the property based upon the cost, income and market approaches to value, where applicable, correlating our findings into a final value conclusion. The report will be prepared in conformity with and will be subject to the requirements of the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. Each report will also conform to the Uniform Standards of Professional Appraisal Practice ("USPAP") and the Financial Institutions Reform, Recovery and Enforcement Act of 1989B ("FIRREA") and the Morgan Stanley Capital Appraisal Standards described in Attachment "B". We assume that there are no major or significant items of deferred maintenance beyond normal wear and tear for properties of their age as of the date of the appraisal which would require the expertise of a professional contractor to estimate the cost of such repairs. If such repairs need to be considered in this appraisal, such estimates are to be provided by a qualified firm hired by you and at no cost to us. The total fee for the assignment is $68,000 ($4,000 per property) including all travel and related expenses which is due and payable upon delivery of the reports. If we are asked to cancel the assignment within two weeks of our engagement an upset fee equal to 50% will be due and payable. If cancellation occurs between two and three weeks, the upset fee will be equal to 75% and any time after three weeks the full fee will be due and payable. We will furnish you with three copies of our final report within four to five weeks of our authorization. Authorization occurs upon our receipt of an executed copy of this proposal and our delivery date is contingent upon the timely receipt of all necessary property information, financial statements and detailed lease information. If all requested data and information is not available as of the authorized date, we reserve the right to extend the delivery date by the amount of time it takes to receive the requested information. May 8, 1996 Mr. Kane Page 2 In order to complete this assignment in a timely manner, we will require the following specific information, if available: o Copy of Ground Lease, if Leasehold o Legal descriptions. o Current rent roll. o Copy of Leases or abstracts o Expense reimbursements on a tenant by tenant basis o Building area calculations and surveys. o Operating statements for the past three full years. o Current year expenses to date. o A copy of the current budget. o Copies of any toxic engineering reports dealing with underground tanks, PCB's, asbestos or chemical spills, if available. o A copy of the next fiscal year's budget, if available. o A list of major repairs which have recently been made, or are scheduled to be made in the next 18 months. o Name and phone number(s) of on-site superintendent(s), or local management firm or trustee for physical inspection. o Notice of any pending changes to the rent roll or pertinent information regarding the current status of the tenants. If we are requested to give court testimony an additional fee will be charged on an hourly basis at $300 per hour for designated MAI-appraisers and $175 for non-designated appraisers. Said hourly billings pertain to court preparation, waiting and travel time, document review and preparation (excludes narrative appraisal report) and all meetings related to court testimony. The client may provide only complete, final copies of the appraisal report to third parties who shall rely on such reports in connection with loan underwriting or securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the client for routine and customary questions. Please note that our consent to allow an appraisal report prepared by CB Commercial, or portions of such report, to become part of or be referenced in any public offering, the granting of such consent will be at our sole discretion and, if given, will be on condition that we will be provided with an Indemnification Agreement and/or Non-Reliance letter, in a form and content satisfactory to us, by a party satisfactory to us. We do consent to your submission of the reports to rating agencies, loan participants or your auditors without the need to provide us with an Indemnification Agreement and/or Non-Reliance letter. In addition to the fee for this assignment, you agree to compensate us at a rate to be mutually agreed to, for any time expended by us should we be required (by subpoena or otherwise) or requested by you, your representatives or other entity to become involved in any litigation or May 8, 1996 Mr. Kane Page 3 legal proceeding in any way involving this engagement to which we are not a party, the appraisal work we produce or the property which is the subject of this assignment. You also agree to pay, on demand, all reasonable expenses which we incur in connection with any litigation or proceedings including the fees of our attorneys. You acknowledge that we are being retained hereunder as an independent contractor to perform the services described herein and nothing in this agreement shall be deemed to create any other relationship between us. This assignment will be deemed concluded and the services hereunder completed upon delivery to you of the appraisal report discussed herein. If these terms are acceptable, please authorize us to proceed by having an officer of the corporation, managing general partner, principal, owner, or a contractually responsible party sign the enclosed copy of this proposal with "Terms and Conditions" and return it to us for our permanent file. Upon receipt of your authorization, we will schedule the necessary personnel to complete the project in a timely manner. We appreciate this opportunity to be of service to you on this assignment. If you have additional questions, please do not hesitate to give me a call. Sincerely, CB COMMERCIAL REAL ESTATE GROUP, INC. Appraisal /s/ Michael R. Pecorino Michael R. Pecorino, MAI MRP:jf cc: Douglas W. Haney Enclosure AGREED & ACCEPTED - -------------------------------------- -------------------------------------- Signature Title - -------------------------------------- -------------------------------------- Name (type or print) Date Office #: _____________________________ Fax #: _______________________________ ================================================================================ ADDENDUM J QUALIFICATIONS - -------------------------------------------------------------------------------- Addendum J QUALIFICATIONS - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM J QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF W. SCOTT BRADFORD Senior Real Estate Analyst CB Commercial Real Estate Group, Inc. - Appraisal 100 Galleria Parkway, Suite 550 Atlanta, Georgia 30339 (770) 951-7843 EDUCATIONAL B.S. in Management, Guilford College, Greensboro Georgia M.S. in Real Estate, Georgia State University, Atlanta, Georgia Appraisal Institute: Courses lA-1, 1A-2, lB-A, lB-B, 2-1, and 2-3 CERTIFICATION Certified Real Estate Appraiser: State of Georgia - Certificate Number 00 1784 PROFESSIONAL Appraisal Institute Candidate - Appraisal Institute EMPLOYMENT EXPERIENCE 1989-1993 John Booth & Associates Atlanta, Georgia 1993-Present CB Commercial Real Estate Group, Inc. Atlanta, Georgia Appraisal Southeast Region, Senior Real Estate Analyst Appraiser - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM J QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF RONALD A. NEYHART, MAI First Vice President Regional Manager CB Commercial Real Estate Group, Inc., - Appraisal 100 Galleria Parkway, Suite 550 Atlanta, Georgia 30339 (770) 951-7874 EDUCATIONAL B.S. Finance and Management - Florida State University Appraisal Institute Course lA-1, 1A-2, lB-A, lB-B, 2-1, 2-2, SPP LICENSE(S)/CERTIFICATION(S) Registered Real Estate Salesman - State of Florida State of Georgia Real Estate Appraisal Board - Certified Real Estate Appraiser - C000490 PROFESSIONAL Appraisal Institute Member, (MAI) Appraisal Institute, Certification No.8484 Other Affiliations Realtor - Associate of the Atlanta Board of Realtors, Inc. EMPLOYMENT EXPERIENCE 1979-1982 American Appraisal Associates, Staff Appraiser Atlanta, Georgia 1982-1983 Cigna Securities, Account Executive Atlanta, Georgia 1983-1984 Johnson, Lane, Space, Smith & Co., Account Executive Atlanta, Georgia 1984-Present First Vice President, Regional Manager Atlanta, Georgia CB Commercial Real Estate Group, Inc. Appraisal Southeast Region
- -------------------------------------------------------------------------------- This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE MIDWAY PLAZA SHOPPING CENTER NWC of Pepperell Parkway and Midway Drive Opelika, Lee County, Alabama CB File No. 96-134-2 [LOGO] CB COMMERCIAL Delivering Solutions Through Local Knowledge Worldwide COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE MIDWAY PLAZA SHOPPING CENTER NWC of Pepperell Parkway and Midway Drive Opelika, Lee County, Alabama CB File No. 96-134-2 DATE OF VALUE July 1, 1996 PREPARED FOR Morgan Stanley Morgan Capital Inc. 1585 Broadway New York, New York 10036 PREPARED BY W. Scott Bradford Senior Real Estate Analyst and Ronald A. Neyhart, MAI Regional Manager CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES 100 Galleria Parkway, Suite 550 Atlanta, Georgia 30339 [Letterhead of CB COMMERCIAL] July 11, 1996 Morgan Stanley Morgan Capital Inc. 1585 Broadway New York, New York 10036 RE: Appraisal of MIDWAY PLAZA SHOPPING CENTER NWC of Pepperell Parkway and Midway Drive Opelika, Lee County, Alabama CB File No. 96-134-2 Dear Morgan Stanley: At your request and authorization, CB Commercial Real Estate Group, Inc. has prepared a Complete Appraisal presented in a self-contained appraisal report of the Market Value "as is" of the leased fee interest in the above-referenced real property based on market conditions existing as of July 1, 1996. The subject property consists of approximately 201,976 gross leaseable square feet of retail shopping center space constructed in 1966 and renovated in 1986 as Midway Plaza Shopping Center on approximately 21.725 acres of land in Opelika, Alabama. The property is more fully described, legally and physically, within the enclosed report. Data, information, and calculations leading to the value conclusion are incorporated in the report following this letter. The report, in its entirety, including all assumptions and limiting conditions, is an integral part of and inseparable from this letter. Based on research and analysis contained in this report, it is estimated that the Market Value "as is" of the leased fee interest in the subject property, as of July 1, 1996, is: THREE MILLION THREE HUNDRED THOUSAND DOLLARS ($3,300,000) The following appraisal sets forth the most pertinent data gathered, the techniques employed, and the reasoning leading to the opinion of value. The analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP), the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, and The Financial Institution Reform, Recovery, and Enforcement Act of 1989 (FIRREA). July 11, 1996 Page 2 It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CB Commercial Real Estate Group, Inc. can be of further service, please do not hesitate to contact us. Respectfully Submitted, CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES by: /s/ W. Scott Bradford /s/ Ronald A. Neyhart - ------------------------------------- -------------------------------------- W. Scott Bradford Ronald A. Neyhart, MAI Senior Real Estate Analyst First Vice President, Regional Manager Georgia Certification No. CG001784 Georgia Certification No. CG000490 Alabama Temporary Permit Applied For ================================================================================ CERTIFICATION OF THE APPRAISERS - -------------------------------------------------------------------------------- CERTIFICATION OF THE APPRAISERS We certify that to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. 4. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event, such as the approval of a loan. 5. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation and the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. In addition, this report conforms to the requirements of the Financial Institution Reform, Recovery, and Enforcement Act (FIRREA). 6. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 7. The undersigned MAI has completed the requirements of the continuing education program of the Appraisal Institute. 8. W. Scott Bradford has made a personal inspection of the property that is a subject of this report. Ronald A. Neyhart, MAI has not made a personal inspection of the appraised property. 9. No one provided professional assistance to the persons signing this report. 10. The undersigned appraisers have extensive experience in the appraisal/review of similar property types. 11. W. Scott Bradford is currently certified in the state where the subject is located. /s/ W. Scott Bradford /s/ Ronald A. Neyhart - -------------------------------- ---------------------------------- W. Scott Bradford Ronald A. Neyhart, MAI Senior Real Estate Analyst First Vice President, Regional Manager Georgia State Certification No. CG001784 Georgia State Certification Alabama Temporary Permit Applied For No. CG000490 - -------------------------------------------------------------------------------- i ================================================================================ SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- SUBJECT PHOTOGRAPHS [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF THE SUBJECT PROPERTY - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF THE SUBJECT PROPERTY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ii ================================================================================ EXECUTIVE SUMMARY - -------------------------------------------------------------------------------- SUMMARY OF SALIENT FACTS Property Name: Midway Plaza Shopping Center Location: NWC of Pepperell Parkway and Midway Drive Opelika, Lee County, Alabama Assessor's Parcel Number: 43-9-5-15-3-0-22 Property Description: The subject property consists of a 201,976 gross leasable square foot neighborhood shopping center. Highest and Best Use As Though Vacant: Commercial development. As Improved: Continued use as a neighborhood shopping center. Property Rights Appraised: Leased fee Interest Date of Value: July 1, 1996 Land Area 21.725 Acres Improvements Building Area (GLA): 201,976 Square Feet Year Built: 1966 and renovated in 1986 Condition: Fair Anchor Tenants: Ben Franklin Crafts 30,000 SF Carmike Cinemas 25,238 SF Estimated Marketing Time: 12 months - -------------------------------------------------------------------------------- iii ================================================================================ EXECUTIVE SUMMARY - -------------------------------------------------------------------------------- Financial Indicators Current Occupancy: 60.9% Stabilized Occupancy: 60% Estimated Stabilized Expenses: $158,945, or $0.79 per square foot Going-In Overall Capitalization Rate Selected: 11.0% Terminal Overall Capitalization Rate: 11.0% Discount Rate: 12.0% Valuation Land Value: N/A Cost Approach: N/A Sales Comparison Approach: $3,275,000 Income Capitalization Approach: $3,300,000 Final Value Conclusion: $3,300,000 Per Square Foot: $16.34 - -------------------------------------------------------------------------------- iv ================================================================================ TABLE OF CONTENTS - -------------------------------------------------------------------------------- TABLE OF CONTENTS CERTIFICATION OF THE APPRAISERS.............................................i SUBJECT PHOTOGRAPHS........................................................ii SUMMARY OF SALIENT FACTS..................................................iii TABLE OF CONTENTS...........................................................v INTRODUCTION................................................................1 AREA ANALYSIS...............................................................7 MARKET ANALYSIS............................................................15 SITE ANALYSIS..............................................................19 IMPROVEMENT ANALYSIS.......................................................22 ZONING.....................................................................27 TAX AND ASSESSMENT DATA....................................................28 HIGHEST AND BEST USE.......................................................29 APPRAISAL METHODOLOGY......................................................32 SALES COMPARISON APPROACH..................................................34 INCOME CAPITALIZATION APPROACH.............................................39 RECONCILIATION OF VALUE....................................................64 ASSUMPTIONS AND LIMITING CONDITIONS........................................66 ADDENDA A Glossary Of Terms B Additional Subject Photographs C Legal Description D Rent Roll E Historical Operating Statements F Comparable Improved Sales G Rent Comparables H Pro-Ject Reports I Qualifications - -------------------------------------------------------------------------------- v INTRODUCTION INTRODUCTION ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- INTRODUCTION PROPERTY IDENTIFICATION The subject is located at the northwest corner of Pepperell Parkway and Midway Drive, in Opelika, Alabama. The county assessor's tax identification number is 43-9-5-15-3-0-22. A legal description is presented in the Addenda. OWNERSHIP AND PROPERTY HISTORY The subject is currently owned by Mark Centers Limited Partnership according to a review of Lee County property records. The subject property was transferred to Mark Centers Limited Partnership from Marvin L. Slomowitz. on May 26, 1993, but this is not an arms length sale. There is no known current listing, option, or agreement of sale of the subject. DATES OF INSPECTION AND VALUATION The effective date of valuation is July 1, 1996. The site was inspected by W. Scott Bradford on July 1, 1996. PURPOSE OF THE APPRAISAL The purpose of this appraisal is to estimate the market value "as is" of the leased fee estate in the subject property, as of the date of inspection, July 1, 1996. Market value is defined as follows: Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised, and acting in what they consider their own best interests; 3. A reasonable time is allowed for exposure in the open market; 4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and - -------------------------------------------------------------------------------- 1 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- 5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. (1) TERMS AND DEFINITIONS Please refer to the Addenda for a Glossary of the Terms and Definitions that are, and may be used in this appraisal. INTENDED USE OF REPORT This appraisal is for mortgage underwriting purposes. PROPERTY RIGHTS APPRAISED The value estimated represents the leased fee estate. APPRAISAL DEVELOPMENT AND REPORTING PROCESS The following steps were completed by CB Commercial for this assignment: 1. Analyzed regional, city, neighborhood, site, and improvement data. 2. Inspected the subject and the neighborhood. 3. Reviewed data regarding taxes, zoning, utilities, easements, and city services. 4. Considered comparable improved sales, comparable improved building rental information, and comparable site sales. Confirmed data with principals, managers, or real estate agents representing principals, unless otherwise noted. 5. Analyzed the data to arrive at conclusions via each approach to value used in this report. 6. Reconciled the results of each approach to value employed into a probable range of market data and finally an estimate of value for the subject, as defined herein. 7. Estimated a reasonable exposure time associated with the value estimate. - ---------- (1) The definition of market value is taken from: The Office of the Comptroller of the Currency under 12 CFR, Part 34, Subpart C-Appraisals, ss.34.42(f), August 24, 1990. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. - -------------------------------------------------------------------------------- 2 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- The subject site and improvement descriptions are based on a personal inspection of the property and a review of the relevant plat maps and site plan. The inspection is not a substitute for thorough engineering studies. To develop the opinion of value, CB Commercial performed a complete appraisal process, as defined by the Uniform Standards of Professional Appraisal Practice. This means that no departures from Standard 1 were invoked. This is a complete appraisal, in the form of a Self-Contained Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Standards of Professional Appraisal Practice. The definitions of Complete Appraisal and Self-Contained Report are found in the Glossary of Terms and Definitions. In a complete appraisal, CB Commercial uses all known applicable approaches to value. The value conclusion reflects all known information about the subject property, market conditions, and available data. The Self-Contained Report incorporates to the fullest extent possible, practical explanation of the data, reasoning and analysis that were used to develop the opinion of value. It also includes thorough descriptions of the subject property and the market for the subject property type. All data considered significant that was requested for this assignment was received by CB Commercial Real Estate Group, Inc. Appraisal Services. SPECIAL APPRAISAL INSTRUCTIONS There were no special appraisal instructions. MARKETING PERIOD The marketing period section is divided into reasonable exposure time and reasonable marketing time. Exposure time differs from marketing time. Marketing time is the period required to sell a real property interest at market value during the period immediately after the effective date of the appraisal. Exposure time is always presumed to precede the effective date of the appraisal. Exposure time is not intended to be a prediction of a date of sale or a one-line statement. Instead, it is an integral part of the appraisal analysis and is based on one or more of the following: o statistical information about days on the market o information gathered through sales verification o interviews of market participants. - -------------------------------------------------------------------------------- 3 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- The reasonable exposure period is a function of price, time, and use. It is not an isolated estimate of time alone. Exposure time is different for various types of real estate and under various market conditions. Reasonable Exposure Time Exposure time is always presumed to precede the effective date of the appraisal. It is the estimated length of time the property would have been offered prior to a hypothetical market value sale on the effective date of appraisal. It is a retrospective estimate based on an analysis of recent past events, assuming a competitive and open market. It assumes not only adequate, sufficient, and reasonable time but adequate, sufficient, and reasonable marketing effort. Exposure time and appraisal conclusion of value are therefore interrelated. Exposure time is often expressed as a range and is based on direct and indirect market data gathered during the market analysis, sales verifications, interviews with market participants, and other appropriate sources. The amount of time which a property will require to be marketed varies greatly depending on a number of factors including market conditions, listing price, terms of sale offered, and competitive listing inventory. In addition to considering each of the factors noted above, CB Commercial considered: o exposure periods of comparable sales revealed during the course of this appraisal, o the most recent CB Commercial National Investor Survey, and o the opinions of local knowledgeable real estate brokers and investors. Market Conditions Throughout the Southeast, market conditions for most property types have improved significantly during the past one to two years. In fact, the value of most investment grade property types has increased due to a number of factors. During the early 1990's, the lack of demand for investment properties and the inability of owners to make mortgage payments resulted in numerous foreclosures, or properties deeded back in lieu of foreclosure. Increased listing inventory had a substantial downward influence on property values and the exposure time necessary to generate sales. However, in the last few years, due to the competitive pricing in the market and improving national economic conditions, the number of transactions and active investors increased. These market conditions describe the current market and illustrate how exposure time is correlated with listing inventory, competitive pricing structures, and marketing efforts. - -------------------------------------------------------------------------------- 4 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- CB Commercial National Investor Survey In the most recent issue of the CB Commercial National Investor Survey, published in the First Quarter 1996, CB Commercial surveyed a wide range of investors for property type preferences and specific marketing times. Respondents showed a clear preference for suburban offices, apartments, warehouse/distribution facilities, community shopping centers, neighborhood shopping centers, power centers, and business parks. The surveyed investors ranked neighborhood shopping centers fifth out of 13 property types in terms of preference, as opposed to fourth in the prior survey (Third Quarter 1995). Investors indicated that exposure requirements for investment property generally increased from the previous survey, now about 6.7 months for the subject property type. Real Estate Broker Surveys As a third information source, appraisers solicited the opinions of real estate brokers knowledgeable in the subject market and property type. While the majority of individuals surveyed were reluctant to predict an exact exposure time length, generally they estimated an approximate range between 9 and 12 months. All assumed that property would be appropriately priced and marketed. When asked about the subject property specifically, the consensus of opinion was that the subject would receive average recognition in the marketplace under a reasonable plan for pricing and promotion. Exposure Time Conclusion In conclusion, based on the foregoing analysis, an exposure time of 12 months is reasonable, defensible, and appropriate. Like the brokers surveyed, CB Commercial assumes that the subject property would have been competitively priced and aggressively promoted regionally. Reasonable Marketing Time Reasonable marketing time is the period a prospective investor would forecast to sell the subject property immediately after the date of value, at the value estimated. Anticipated marketing time is essentially a measure of the perceived level of risk associated with the marketability, or liquidity, of the subject as an investment grade property. The sources for this information include those used in estimating the reasonable exposure time, but also an analysis of the anticipated changes in market conditions following the date of appraisal. In other words, the reasonable marketing time is the number of months it will require to sell the subject property from the date of value, into the future. The reader must understand, however, that the future price for the subject property (at the end of the marketing time) may or may not equal the appraisal estimate. The future price depends - -------------------------------------------------------------------------------- 5 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- on unpredictable changes in the physical real estate, demographic and economic trends, real estate markets in general, supply/demand characteristics for the property type, and many other factors. Based on the premise that present market conditions are the best indicators of future performance, a prudent investor will forecast that, under the conditions described above, the subject property will require a marketing time of approximately 12 months. - -------------------------------------------------------------------------------- 6 ------------ Regional Map ------------ [GRAPHIC OMITTED] ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- AREA ANALYSIS The dynamic nature of economic relationships within a market area have a direct bearing on real estate values and the long-term quality of a real estate investment. In the market, the value of a property is not based on the price paid for it in the past or the cost of its creation, but on what buyers and sellers perceive it will provide in the future. Consequently, the attitude of the market toward a property within a specific neighborhood or market area reflects the probable future trend of that area. Since real estate is an immobile asset, economic trends affecting its locational quality in relation to other competing properties within its market area will also have a direct effect on its value as an investment. To accurately reflect such influences, it is necessary to examine the past and probable future trends which may affect the economic structure of the market and evaluate their impact on the market potential of the subject. This section of the report is designed to isolate and examine the discernible economic trends in the region and neighborhood which influence and create value for the subject property. REGIONAL INFLUENCES Location The subject is located within the city limits of Opelika, Lee County, Alabama. Opelika is located in the extreme eastern portion of the state, just west of Columbus, Georgia. A regional map indicating the location of the subject is presented on the facing page. Population Lee County represents approximately 2% of Alabama's population. The population of Lee County was estimated by Strategic Mapping, Inc. to be 92,815 persons as of 1995. This indicates an increase of 5,669 persons, or 6.5% from the April 1, 1990 federal census. The county's population is expected to reach approximately 97,662 by the year 2000. Demographic statistics for Lee County are summarized in the following table. - -------------------------------------------------------------------------------- 7 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ============================================================================= SELECTED AREA DEMOGRAPHICS LEE COUNTY ============================================================================= Population 1995 Estimate 92,815 1990 Census 87,146 1990-1995 % Change 6.5% Households 1995 Estimate 35,545 1990 Census 33,097 1990-1995 % Change 7.4% 1995 Median Household Income $25,412 1995 Average Household Income $36,336 1990 Average Home Value $73,648 1990 % College Graduates 30.5% ============================================================================= Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ============================================================================= As indicated, the base of population and households in Lee County is moderate, as has been the growth rate over the last five years. All other demographic statistics suggest moderate income levels and home prices. The rate of growth over the next five years is projected to be consistent with the recent trend. Employment Based on the Alabama Department of Labor, the May 1996 civilian labor force for Lee County was 46,600. The following table compares the unemployment rate for the area to that of the state and national averages. ================================================================================ UNEMPLOYMENT RATE ANNUAL AVERAGE COMPARISON BY COUNTY, STATE, AND U.S. ================================================================================ Year County State U.S. ================================================================================ 1995 4.5% 6.3% 5.6% 1994 4.1% 6.0% 6.1% 1993 6.2% 7.6% 6.8% ================================================================================ Source: U.S. Department of Labor Statistics. Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 8 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- The Alabama Department of Labor reports a preliminary unemployment rate for Lee County as of May 1996 of 3.1% based on a labor force of 46,600 persons. The major employers in the Lee County area are as follows: ================================================================================ MAJOR AREA EMPLOYERS ================================================================================ Type of No. Of Employees Company Business ================================================================================ Auburn University Four Year University 7,500 - 8,000 East Alabama Medical Center Medical 1,800 - 2,000 Uniroyal Goodrich Tire Automobile Tires 1,600 - 1,700 West Point Stevens, Inc. Fabrics & Bedsheets 1,150 - 1,400 Roadmaster Corporation Bicycles/Fitness Equipment 800 - 1,000 Quantegy, Inc. Magnetic Recording Media 800 - 900 Leshner Mills Kitchen & Bath Towels 400 - 500 Flowers Baking Co. Bread & Dinner Rolls 200 - 300 Southern Union Comm. College Two Year College 185 - 200 Power Guard Cable Security Boxes 175 - 200 Opelika Foundary Co., Inc. Metal Castings/Meter Boxes 100 - 150 Opelika Metalfab, Inc. Metal Fabrication 100 - 150 ================================================================================ Source: Lee County Chamber of Commerce. Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 9 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Growth and Trends Jobs in Lee County can be segmented as follows by industry sector: ================================================================================ EMPLOYMENT BY INDUSTRY SECTOR ================================================================================ % of Total Industry Sector Employment ================================================================================ Construction 5% Agriculture 2% Manufacturing 23% --- Total Goods Producing 30% Transportation, Communication & Utilities 4% Wholesale Trade 2% Retail Trade 17% Finance, Insurance & Real Estate 4% Services 39% Government 4% --- Total Service Producing 70% ================================================================================ Source: Strategic Mapping, Inc. ================================================================================ As indicated, services, manufacturing, and retail make up the primary segments of the area economy, combining for 79% of total jobs. Within the services sector, education accounts for 20% of all jobs in the county. The previous table of major employers shows that Auburn University is the largest employer in Lee County and also accounts for most of the education service sector jobs. Retail jobs are spread throughout a number of employers, with JC Penny's, Sears, Walmart, Lowe's and a few grocery store chains considered to be the largest retail employers. Additional evidence of the Lee County's economic growth is an analysis of annual retail sales as shown in the following table: - -------------------------------------------------------------------------------- 10 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ================================================================== LEE COUNTY HISTORICAL RETAIL SALES ================================================================== Annual Year Retail Sales Growth Rate ================================================================== 1986 $395,325,000 N/A 1987 $422,830,000 7.0% 1988 $454,097,000 7.4% 1989 $581,274,000 28.0% 1990 $593,878,000 2.2% 1991 $589,092,000 (0.8%) 1992 $629,379,000 6.8% 1993 $684,434,000 8.7% 1998 (Proj) $985,317,000 7.6% ================================================================== Source: The Survey of Buying Power ================================================================== This would suggest an annual average growth in retail sales of 7.1% from 1986 through 1993, with a 7.6% average growth rate projected from 1993 through 1998. Transportation Lee County is known as the hub of East Alabama because it four major transportation routes pass through the county. Interstate 85 extends from Mobile, Alabama on the Gulf Coast in a northeasterly direction to Richmond, Virginia. Also, U.S. Highways 29, 280, and 431 form the primary transportation network throughout the county, as well as being transportation routes through the region. The closest commercial airport serving the area is the Columbus Metropolitan Airport, located 30 miles to the east. In addition, Hartsfield International Airport in Atlanta, Georgia is located 110 miles to the northeast. The area also has rail service, but no municipal bus service. Conclusion and Relevance to the Subject Property The subject property is located within the western portion of Lee County identified as Opelika. However, it is generally considered to be in a location between Opelika and Auburn the two largest cities in Lee County. Because, it is located along Highway 29, it enjoys excellent access within Opelika and Auburn, as well as throughout the surrounding Lee County area. Population and employment levels are moderate, as is the rate of growth. The unemployment rate is below state and national averages. Primary employment sectors include services, manufacturing, and retail, with the education sector of service jobs accounting for the largest percentage because of Auburn University. Income and housing costs are also moderate, suggesting an affordable cost of living. All of these variables are considered to positively affect the subject property, which is dependent on the local economy and a stable work force. - -------------------------------------------------------------------------------- 11 ---------------- Neighborhood Map ---------------- [GRAPHIC OMITTED] ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- NEIGHBORHOOD INFLUENCES Location The subject is located at the northwest corner of Pepperell Parkway and Midway Drive, just inside of the western city limits of Opelika. A neighborhood map is shown on the facing page. Boundaries The subject neighborhood is generally comprised of the Opelika/Auburn area. The area generally parallels Interstate 85 and Highway 29 from Shug Jordan Parkway on the west side of Auburn to Highway 431 on the east side of Opelika. Land Use The primary commercial development in the Opelika/Auburn area is located along U.S. Highway 29 between University Drive and Highway 280. This corridor, which is located between the residential populations of Auburn and Opelika, is also known as Pepperell Parkway at this point. The subject neighborhood currently has six shopping centers, including the subject property, which comprise approximately 1,350,000 square feet of space. In addition, the concentration of shopping centers has led to related uses such as retail stores and fast food restaurants, and other services such as branch banking. The surrounding area is primarily residential and rural in nature. Also, two country clubs and the Auburn-Opelika Airport (no commercial flights) are located in the subject neighborhood. Access Primary access to the neighborhood is provided by Pepperell Parkway (Highway 29), as well as Interstate 85, which bisects Lee County. Average daily traffic counts along Pepperell Parkway as of 1994 were 28,100 vehicles just west of the subject property and 27,800 vehicles just east of the subject. There are several collector corridors serving the neighborhood as well, including University Drive, Highway 280, State Route 16. Overall access to the neighborhood is considered good. It should also be noted that access to the neighborhood is expected to improve as a current widening and relocation project for Highway 280 as it crosses Highway 29 just east of the subject is underway. This is part of an on-going Alabama project to widen Highway 280 from Birmingham to Columbus and improve access in the region. It is also expected to benefit the Opelika/Auburn area in general and the subject neighborhood in particular. - -------------------------------------------------------------------------------- 12 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Demographics Selected Neighborhood demographics for the subject's neighborhood is shown below. ============================================================================= SELECTED NEIGHBORHOOD DEMOGRAPHICS THREE-MILE RADIUS ============================================================================= Population 2000 Projection 25,140 1995 Estimate 23,220 1990 Census 21,079 1980 Census 18,738 1990-1995 % Change 10.2% Households 2000 Projection 10,246 1995 Estimate 9,424 1990 Census 8,521 1980 Census 7,508 1990-1995 % Change 10.6% 1995 Median Household Income $25,034 1995 Average Household Income $35,027 1990 Average Home Value $72,790 ============================================================================= Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ============================================================================= This information suggests a fairly modest population and income base in the subject neighborhood. In addition, the rate of growth in recent years and projected over the near term future, the base will grow at a rate consistent with the recent trend. Growth and Trends In general, the subject's neighborhood reflects a rural community with moderate income levels and median home values. Over the past decade this area has witnessed modest growth, which is expected to continue over the next five year period. There are a significant number of shopping centers in the subject neighborhood, suggesting that additional neighborhood and community shopping center development is unlikely. We do not expect the character of the neighborhood to change dramatically in the immediate future. - -------------------------------------------------------------------------------- 13 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Conclusion and Relevance to the Subject Property The subject property is located in the town of Opelika, just east of the Opelika/Auburn city limits. The neighborhood comprises the primary commercial corridor for this two-town community, with a substantial retail inventory of space developed over the years. Neighborhood demographics are considered to be average, suggesting that the neighborhood shopping centers also draw from outside the immediate neighborhood. Therefore, the neighborhood is considered to be a viable location for the subject property. - -------------------------------------------------------------------------------- 14 ================================================================================ MARKETABILITY - -------------------------------------------------------------------------------- MARKET ANALYSIS Marketability refers to the posture of the subject property within its marketplace and its ability to be leased, sold, or marketed relative to its competition and current conditions. In this regard, the subject is very competitive relative to other shopping center developments in the submarket. OVERALL RETAIL TRENDS IN LEE COUNTY As discussed in the Regional Influences section, retail sales in Lee County have increased at a 7.1% rate of growth from 1986 through 1993, with this rate of growth projected to be maintained over the near future. Provided there are no substantial reductions in area employment, we expect this trend to continue. Demographic Analysis The next portion of our marketability analysis presents a demographic profile of the area. In this section we analyze the existing demographics and their changing patterns. ================================================================================ NEIGHBORHOOD DEMOGRAPHICS ================================================================================ 1 mile 3 mile 5 mile ================================================================================ Population 1995 Estimate 2,151 23,220 55,775 1990 Census 1,928 21,079 51,071 1990-1995 % Change 11.6% 10.2% 9.2% Households 1995 Estimate 796 9,424 21,522 1990 Census 703 8,521 19,522 1990-1995 % Change 13.2% 10.6% 10.2% 1995 Median Household Income $29,000 $25,034 $22,359 1995 Average Household Income $32,928 $35,027 $35,355 1990 Average Home Value $49,820 $52,374 $53,326 1990 % College Graduates 34.7% 39.3% 38.4% ================================================================================ Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The previous table indicates that population and household formation in the area has occurred an average rate of growth. Household incomes, average home values and the percentage of college graduates are considered to be at or above the regional median. The data generally indicates the neighborhood is a middle to upper-income area with average population and income growth. - -------------------------------------------------------------------------------- 15 ================================================================================ MARKETABILITY - -------------------------------------------------------------------------------- Trade Area Analysis The primary trade area for the subject is the Opelika/Auburn portion of Lee County. Despite its size, the subject is considered to be a neighborhood shopping center because of the current tenant profile. A neighborhood shopping center focuses on servicing the needs of the immediate population, and as such, a resident of the neighborhood is not likely to drive outside the area for these goods. Opelika/Auburn Retail Market Neighborhood shopping centers are generally meant to serve the retail needs of a very localized market, usually within a two to five mile radius. Within that radius of the subject, there are ten anchored shopping centers, including the subject. These ten properties are summarized in the following table. ================================================================================ SUMMARY OF OPELIKA/AUBURN RETAIL CENTERS
================================================================================================================== Building Year Overall Local Occ Anchors Base Rent Name & Location Size Built Occ Rate Rate Tenants Per SF ================================================================================================================== Village Mall 402,000 renov 97% 93% Gayfer's, Sears, $10.00 - NEQ of Hwy 29 & University Dr 1989 JC Penny $16.00 Pepperell Corners 305,000 1993 100% 100% Wal-Mart, Lowes, $10.00 - Hwy 29 @ Hwy 280 Winn-Dixie, Goody's $12.00 Midway Plaza 202,000 1966 61% 90% Ben Franklin $3.00 - Hwy 29 & Midway Drive Crafts, Carmike $6.00 Cinemas K-Mart Plaza 120,000 N/A 81% 100% K-Mart N/A SEC of Hwy 29 & University Dr Food World Center 110,000 1970 95% 85% Food World, Bud's $3.50 - Hwy 280 north of I-85 Discount City $8.00 Market Square 90,031 N/A N/A N/A Books A Million, N/A SWC of Hwy 29 & C. Club Dr Big Lots, Gold's Gym Flint's Crossing 88,000 1988 100% 100% Food World, Harco $10.00 - SEC of Hwy 29 & University Dr Drug $12.00 University Crossing 80,000 1994 100% 100% Winn-Dixie $10.00 - NWC of Univ. Dr & Glenn Ave $12.00 Glenndean Center 74,000 1986 100% 100% Food World, True $ 7.00 - SWC of Dean Rd & Glenn Ave Value Hardware $ 9.50 Corner Village 62,300 1978 100% 100% Kroger $ 7.00 - NEC of Dean Rd & Glenn Ave $ 9.00 ==================================================================================================================
Compiled by: B Commercial Real Estate Group, Inc. ================================================================================ The area centers exhibit a variety of building quality, condition, and tenant quality. The subject is positioned near the end of the local market. Pepperell Corners, while the most similar in terms of size, is considered superior to the subject based on age, condition and tenant mix). All - -------------------------------------------------------------------------------- 16 ================================================================================ MARKETABILITY - -------------------------------------------------------------------------------- of the remaining properties are generally grocery store anchored centers which are considered superior to the subject based on age, condition, tenant mix and the percentage of anchor tenant space. However, the Food World Center is relatively similar to the subject as it is an older center which has suffered from anchor tenant vacancies and a general decline in the overall condition and appeal of the property. While we are aware of a neighborhood shopping center under construction at the northeast corner of Highways 29 and 431 in the eastern Opelika area, it is not considered to be competition to the subject. The center will be anchored by Winn-Dixie and comprise approximately 60,000 square feet of space. Our discussions with area leasing agents and owners indicate no other major renovations or new construction is planned for the area. Subject Marketability In addition to analyzing the overall, or macro, conditions influencing the subject property, it is also important to consider the specific characteristics of the subject. It is particularly important to address those factors that would be considered by a potential purchaser of the subject. From a positive standpoint, the subject is located along the primary commercial corridor through the Opelika/Auburn area. However, the subject is the oldest shopping center in the market and would benefit from an exterior facelift. Furthermore, it would appear that the focus of more recent retail development in the market has concentrated around Pepperell Parkway's intersections with Highway 280 in Opelika and University Drive in Auburn. As a result, the subject property has suffered as anchor tenants such as Rose's, Sears, and Fashion Bug have closed or relocated to newer centers. However, despite the anchor vacancies, the subject property has maintained a fairly high local tenant occupancy rate which is consistent with the occupancy rate of other centers in the market. With respect to the two existing subject anchors, Carmike Cinemas has seven screens, making it the largest movie theater in the county. They have been a tenant in the center since 1985 and have nine years remaining on their lease. Ben Franklin Crafts, which occupies about 55% of the old Sears space) is a new addition to the subject property (November 1995) and has 9.5 years remaining on their lease. Finally, two junior anchors also help diversify the anchor rollover risk, with these tenants accounting for 9,000 and 15,000 square feet, respectively. Summary In summary, we believe that the Auburn/Opelika retail market is a stable environment with short term prospects for continued growth in retail sales. Occupancy rates are generally high throughout the market, at least for attractive centers with a good balance of anchor space and - -------------------------------------------------------------------------------- 17 ================================================================================ MARKETABILITY - -------------------------------------------------------------------------------- local tenant space. While the subject is not located at either of two primary nodes of recent retail development in the Opelika/Auburn area, it is located along the area's primary transportation corridor, equidistant between the centers of Opelika and Auburn. We feel that improving the subject's exterior appeal will enable it to improve its position in the market and possibly attract some mid-sized anchors to the subject's vacant space given the lack of anchor vacancy in the subject retail market. - -------------------------------------------------------------------------------- 18 PROPERTY DESCRIPTION PROPERTY DESCRIPTION [GRAPHIC OMITTED] [PLAN OF SITE] ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- SITE ANALYSIS The Description of the site can be detailed as follows: Location: The subject is located at the northwest corner of Pepperell Parkway and Midway Drive. Ingress and egress to the subject is available from two curb cuts on Pepperell Parkway and three curb cuts on Midway Drive. The easternmost Pepperell Parkway curb cut is equipped with a traffic signal. A site plan is shown on the facing page. Assessor's Parcel Number: 43-9-5-15-3-0-22 Land Area(1) Gross Land Area: 21.725 Acres Net Land Area: 21.725 Acres Excess Land: None Outparcels: None Shape and Frontage: The site is irregular in shape, with actual street frontage of 918 feet along Pepperell Parkway and 408 feet along Midway Drive. Furthermore, the site has a reasonable depth relative to its width. Topography and Drainage: The site has moderately sloping topography which generally drains in a southeasterly direction. The site is generally at road grade with Pepperell Parkway and Midway Drive. Our investigation did not reveal any significant drainage problems. Soils: No soils report was provided and it is assumed that soils are adequate for the existing use. - ---------- (1) Source: Legal Description - -------------------------------------------------------------------------------- 19 ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- Easements: A current title report was not provided in connection with this appraisal. Based on our on site inspection, there are only typical utility and access easements, which do not appear to adversely affect the subject. It is specifically assumed that any easements, restrictions or encroachments that might appear against the title would have no adverse impact on marketability or value. Covenants, Conditions, and Restrictions: No private deeds or restricting covenants affecting development, other than zoning and the covenants, conditions and restrictions associated with the shopping center, were found to affect the site. It is specifically assumed that there is no adverse affect on marketability or value. Utilities: All public utilities are available to the subject site. Flood Zone: According to maps published by the Federal Emergency Management Agency (FEMA), the subject lies within Zone X as indicated on FEMA Community Map Panel 010145 0018B, dated September 16, 1981. Flood insurance is available. This zone is described as follows: FEMA Zone X: "This area has been identified in the community flood insurance study as an area outside the 500-year floodplain." Environmental Issues: We were not provided with any environmental report or site assessment for the subject property. The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the property that would cause a loss in value. However, CB Commercial is not qualified to detect hazardous waste or toxic materials. Therefore, we reserve the right to review and revise our valuation conclusions if additional information to the contrary becomes available in the future. Adjacent Properties North: Midway Manor and Windsor Village mobile homes parks South: Several small free-standing commercial and services uses East: Mobile home sales lot West: West Super Store lumber yard and a chinese restaurant - -------------------------------------------------------------------------------- 20 ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- Conclusion: The subject is a 21.725-acre site which is accessible via curb cuts from Pepperell Parkway and Midway Drive. Access appears to be good for the site. Visibility and exposure are also good from Pepperell Parkway and Midway Drive as the site is generally at road grade. The shape of the parcel is irregular and there is no excess land or outparcels. The CB Commercial Real Estate Group, Inc. is aware of no environmental contamination of the site. In conclusion, from a physical standpoint, the subject site has good utility and is considered adequate for many types of commercial development. - -------------------------------------------------------------------------------- 21 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS The subject property consists of approximately 201,976 gross leaseable square feet of retail center improvements. Originally built in 1966 and subsequently renovated in 1986, the center is currently 60.9% occupied. The improvements consist of a one-story neighborhood strip center and a free-standing outparcel building. The property is subdivided into 22 tenant bays as depicted on the facing page floorplan. The following is a description of the improvements based on our physical inspection. The building area is detailed as follows: ============================================================= MIDWAY PLAZA SHOPPING CENTER BUILDING AREA ============================================================= Gross % of Gross Category Leasable Area Leasable Area ============================================================= Ben Franklin Crafts 30,000 14.8% Carmike Cinema 25,238 12.5% Bargain Town 15,000 7.4% Hancock Fabric 9,000 4.5% Vacant Anchor 24,240 12.0% Vacant Anchor 24,000 11.9% Vacant Anchor 22,800 11.3% Local Tenants 51,698 25.6% ------- ----- Total 201,976 100.0% ============================================================= Source: Mark Centers Trust ============================================================= The subject improvements have a gross building area of 208,706 square feet according to the site plan. The basic construction features are summarized as follows. Construction Class The class of construction is the basic subdivision in Marshall Valuation Service(1), dividing all buildings into five basic groups by type of framing (supporting columns and beams), walls, floors, roof structure, and fireproofing. The subject is construction Class C. Competitive Rating The subject is considered a Class C building in terms of quality as it is perceived in the marketplace. - ---------- (1) Class C Buildings are characterized by masonry or reinforced concrete (including tilt-up) construction. The walls may be load-bearing, i.e., supporting roof and upper floor loads, or nonbearing with open concrete, steel, or wood columns, bents, or arches supporting the load. (Source: Marshall Valuation Service) - -------------------------------------------------------------------------------- 22 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Foundation Concrete slab on grade. Frame Steel frame and metal studs. Floor Construction Concrete slab on grade. Exterior Walls Combination of concrete block, brick and stucco. Entries are glass store fronts with bronze finish anodized aluminum windows. Roof Cover The roof is a rubber membrane over the Ben Franklin Crafts and Bargain Town sections and built up tar and gravel over the remainder of the center. Reportedly, two sections of roof need to be replaced which comprise approximately 60,000 square feet of space. No estimate of the cost of this repair was provided to the appraiser. No other specific information about the roof was available, but we have assumed that it is in average to good condition overall. If additional information to the contrary is provided to the appraiser in the future, we would reserve the right to review and revise our findings and conclusions if necessary. Exterior Condition Fair Elevator/Stair System None Interior Partition System Metal studs with gypsum board cover. Interior Finishes Floors: A combination of commercial grade carpet, vinyl tile and ceramic tile. Walls: Painted sheetrock. Ceilings: Acoustical tile drop ceilings. Lighting: Mostly recessed fluorescents, except for some attached fluorescents. Summary: The interior finishes are good throughout the center. None of the space is unfinished as all of the suites have been occupied at least once. Interior Condition Average HVAC Split heating and cooling system provided by air conditioning compressors mounted on the roof and gas-fired furnaces with individual zone controls and ducted through ceiling registers. We have assumed that these units are in average condition. While tenants are responsible for maintaining the HVAC systems, the landlord could conceivably be required to - -------------------------------------------------------------------------------- 23 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- replace a compressor unit if it fails while a suite was vacant. Electrical The electrical system is assumed to be in good working order and adequate for the building. Fire Protection The subject property is not fire sprinklered, except for the Ben Franklin Crafts store which was recently built out for this tenant. It is assumed that the subject has adequate fire alarm systems, fire exits, fire extinguishers, fire escapes and/or other fire protection measures adequate to meet local fire marshall requirements. Life Safety and Security The subject has no special security or surveillance system. Plumbing The plumbing system is assumed to be adequate. Parking There are 954 striped surface parking according to the previously cited site plan, including several handicapped spaces, as well as an undetermined number of unstriped space along the property's rear elevations. Information provided by Mark Centers indicates at least 1,400 spaces. We should note that it is outside the scope of this appraisal to count the subject parking spaces. This type of parking is similar to that found in the local comparables. The number of parking spaces is believed to satisfy current zoning requirements for the existing use. Therefore, it is considered to be legally conforming. Landscaping The landscaping is fair compared to competitors. Tenant Improvements Building standard tenant improvements include wall partitions, carpeting, painted walls, suspended acoustical ceilings, hollow core wood doors, etc. All of the subject space has been finished out. ADA Compliance Handicap access appears be available to all areas of the building. However, we are not qualified to determine compliance with the requirements. Please refer to the specific limiting condition regarding ADA compliance. Environmental Issues We were not provided with any environmental report or site assessment for the subject property. The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the property that would cause a loss in value. However, CB Commercial is not qualified to detect hazardous waste or toxic materials. Therefore, we reserve the right to review and revise our valuation conclusions if additional information to the contrary - -------------------------------------------------------------------------------- 24 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- becomes available in the future. Functional Quality The interior floor plan is flexible and will of Space accommodate a variety of tenant layouts. However, the number of vacant anchor tenant bays would suggest that the subject has too many mid-sized anchor bays. Also the depth (80 to 100 feet) of most of the local tenant bays is considered to be excessive. By comparison, 60 to 70 feet is a more typical and functional local tenant bay depth. Deferred Maintenance In addition to the previously mentioned need to replace approximately 60,000 square feet of roof, the subject property is in need of an exterior facelift and resurfacing the parking lots. We have not been provided with any cost information by Mark Centers Trust for these or any other items of deferred maintenance. Based on the recent reroofing of the Ben Franklin Crafts space for a little more than $2.00 per square foot, we have estimated the needed reroofing of approximately 60,000 square feet to cost $125,000. The cost of resurfacing the parking lots has been estimated at $0.25 per square foot by Marshall Valuation Service for approximately 640,000 square feet of paving, or $160,000. Finally, we have estimated the facelift, expected to consist primarily of pressure washing, new paint and new signage, to cost approximately $75,000. This would suggest total deferred maintenance of $360,000. We would reiterate that we have not been provided with any cost estimates for deferred maintenance. The costs indicated in this discussion have derived by the appraiser from available information and an industry cost guide in order to provide a rough estimate of deferred maintenance. We reserve the right to review and revise our valuation conclusions if additional information to the contrary becomes available in the future. Economic Age and Life The building was erected in 1966 and renovated in 1986, suggesting a chronological age of 30 years. Based on current condition, appraisers estimate effective age to be approximately 20 years. According to the Marshall Valuation Service cost guide, buildings of this type and quality have an expected life of 40 years. Therefore, the remaining economic life (expected life minus effective age) is approximately 20 years. While we observed nothing to suggest a different economic life, a capital improvement program could extend life beyond that stated above. - -------------------------------------------------------------------------------- 25 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Quality/General Condition The subject property is considered to be at the low end of the range in terms of overall appeal as compared to other shopping centers in the neighborhood. The relative quality of construction is average and the necessary repairs to the subject should place the property in a more competitive position relative to other centers. ================================================================================ IMPROVEMENT RATING ================================================================================ Category Exc. Good Average Fair Poor ================================================================================ Appeal/Appearance X Construction Class X Design X Electrical X Exterior Condition X Exterior Walls X Floor Construction X Floor Cover X Floor to Ceiling Height X Foundation X Frame X Functionality/ Floor Plan X HVAC X Interior Condition X Interior Partitions X Landscaping X Lighting X Parking X Plumbing X Restrooms X Roof Cover X Sprinkler System X Tenant Improvements X ================================================================================ Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 26 ================================================================================ ZONING - -------------------------------------------------------------------------------- ZONING The subject's zoning requirements are detailed below. =============================================================================== ZONING SUMMARY =============================================================================== Current zoning: C-3, Commercial District Legally conforming?: Yes Uses permitted: A variety of commercial and service uses including shopping centers. Zoning change Not likely - -----------------------======================================================== Category Zoning Requirement - -----------------------======================================================== Site coverage 50% Front setback 30 feet Rear setback 20 feet Side yard setbacks 10 feet Height limit 75 feet Parking One space per 200 square feet of net floor area. =============================================================================== Source: Opelika Planning & Zoning Department Compiled by: CB Commercial Real Estate Group, Inc. =============================================================================== ZONING ANALYSIS AND CONCLUSIONS The subject improvements appear to be a legally conforming use within the current zoning. - -------------------------------------------------------------------------------- 27 ================================================================================ TAX ANALYSIS - -------------------------------------------------------------------------------- TAX AND ASSESSMENT DATA The subject is assessed at 20% of market value as estimated by the Lee County Tax Assessor's Office. The subject property's tax value summarized below. ================================================================================ CURRENT ASSESSMENT AND TAX INFORMATION (1996)
================================================================================================================ Assessed Tax Rate Annual Tax ID Land Improvements Total Value Per $1,000 Taxes ================================================================================================================ 43-9-5-15-3-0-22 $823,280 $1,826,720 $2,650,000 $530,000 $48.00 $25,440 ================================================================================================================
Source: Lee County Tax Assessor Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The county records indicate that there are no delinquent property taxes. CB Commercial has concluded that the assessor has underestimated market value based on the market value conclusion of this report. Therefore, a tax appeal is not recommended. - -------------------------------------------------------------------------------- 28 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- HIGHEST AND BEST USE In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The four criteria that the highest and best use must meet are: o legal permissibility; o physical possibility; o financial feasibility; and, o maximum profitability. Highest and best use is applied specifically to the use of a site as vacant. It is recognized that in cases where a site has existing improvements, the concluded highest and best use as if vacant may be different from the highest and best use given the existing improvements (as improved). The existing use will continue, however, until the land value, in its highest and best use, exceeds that total value of the property under its existing use plus the cost of removing or altering the existing structure. Implied in the highest and best use is a recognition of the contribution of a specific use to the community environment or to the community's development goals, in addition to wealth maximization of individual property owners. Also implied is that the conclusion of highest and best use results from the appraiser's judgment and analytical skill, i.e., that the use determined from the analysis represents an opinion, not a fact to be found. Highest and best use analysis involves assessing the subject both as if vacant and as improved. HIGHEST AND BEST USE AS THOUGH VACANT Legal Permissibility The legally permissible uses were discussed in detail in the site analysis and zoning sections of this report. Overall, based on our review of the zoning restrictions, the site is limited to commercial use. Physical Possibility The physical characteristics of the subject site were discussed in detail in the site analysis. Overall, a wide range of legally permissible uses would be physically possible. - -------------------------------------------------------------------------------- 29 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- Financial Feasibility An analysis of local market conditions provides an indication of the financial feasibility of a given use. The market analysis presented earlier in the report assesses the local market and indicates that there is demand. Therefore, a shopping center is financially feasible. Maximum Profitability The final test of highest and best use of the site as though vacant is that the use be maximally productive, yielding the highest land value. In the case of the subject as though vacant, the analysis thus far has indicated that commercial development would be most likely. Given the high probability that commercial use is the highest and best use, this is judged to be a reasonable indication of maximum productivity of the land. Conclusion: Highest and Best Use As Though Vacant The concluded highest and best use of the subject as though vacant is that the site be improved with commercial development. HIGHEST AND BEST USE AS IMPROVED Legal Permissibility Overall, it is our opinion that the improvements are within the established guidelines. Further, we were told by the zoning authority that the subject is a legal and conforming use under the zoning ordinance. Physical Possibility The physical characteristics of the subject improvements were discussed in detail in the improvement analysis section of this report. Overall, the layout and positioning of the improvements is considered functional for commercial use, and the floor plan is considered to be reasonable on a comparison basis. While it would be physically possible for a wide variety of uses, based on the legal restrictions and the design/layout, the improvements would be most functionally utilized for commercial use. Financial Feasibility As with the highest and best use of the site as though vacant, the financial feasibility of the site as improved is market derived. Typically, for commercial properties similar to the subject, the test of feasibility is based on the amount of rent that can be generated, less operating - -------------------------------------------------------------------------------- 30 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- expenses. If a residual amount exists after paying the various expenses, then the land is being put to a productive use. Maximum Profitability Similar to the highest and best use of the site as though vacant, the maximum profitable use of the subject as improved should conform to neighborhood trends and be consistent with existing land uses. Although several uses may generate sufficient revenue to satisfy the required rate of return on investment and provide a return on the land, the single use that produces the highest price or value is typically the highest and best use. However, the recipient of the property's productivity greatly determines what actual use maximizes profitability. Conclusion: Highest and Best Use as Improved Based on the foregoing discussions, CB Commercial concludes that the highest and best use of the property as improved is consistent with the existing use. There are no alternative uses of the existing improvements that would produce a higher net income and/or value over time than the current use. The current use is a legally permissible use and appears to represent the highest and best use as improved. Furthermore, CB Commercial does not believe that conversion of the improvements or demolition is warranted or financially feasible. - -------------------------------------------------------------------------------- 31 VALUATION VALUATION ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- APPRAISAL METHODOLOGY The appraisal process is defined as an orderly program by which the problem is planned and the data involved is acquired, classified, analyzed and interpreted into an estimate of value. In this process three basic approaches to value are considered: Cost Approach, Sales Comparison Approach, and Income Capitalization Approach. In appraisal practice, an approach to value is included or omitted based on its applicability to the property type being valued and the quality and quantity of information available. The final step in the appraisal process is reconciliation -- a process by which CB Commercial analyzes alternative conclusions and selects a final value estimate from among two or more indications of value. CB Commercial weighs the relative significance, applicability and defensibility of each approach as it relates to the type of property being appraised. INCOME CAPITALIZATION APPROACH The methodology of the Income Capitalization Approach is to determine the income-producing capacity of the property on a stabilized basis by estimating market rent from comparable rentals, making deductions for vacancy and collection losses and building expenses, then capitalizing the net income at a market-derived rate to yield an indication of value. The capitalization rate represents the relationship between net income and value. Related to the direct capitalization method is the discounted cash flow method. In this method of capitalizing future income to a present value, periodic cash flows (which consist of a net income less capital costs, per period) and a reversion (if any) are estimated and discounted to a present value. The discount rate is determined by analyzing current investor yield requirements for similar investments. Since investors are active in the marketplace for properties similar to the subject, the Income Approach is particularly applicable to the appraisal problem at hand. There is an adequate quality and quantity of income and expense data available to render a reliable and defensible value conclusion. Therefore, this approach has been employed for this assignment. SALES COMPARISON APPROACH The Sales Comparison Approach utilizes sales of comparable properties, adjusted for differences, to indicate a value for the subject property. Valuation is typically accomplished using physical units of comparison such as price per square foot, price per unit, price per floor, etc., or economic units of comparison such as gross rent multiplier. Adjustments are applied to the physical units of comparison derived from the comparable sale. The unit of comparison - -------------------------------------------------------------------------------- 32 ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- chosen for the subject is then used to yield a total value. Economic units of comparison are not adjusted, but rather analyzed as to relevant differences with the final estimate derived based on the general comparisons. The reliability of this approach is dependent upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c) the degree of comparability; (d) the absence of atypical conditions affecting the sales price. Through our search of the subject market, we were able to uncover an adequate quality and quantity of sales through which a reliable and defensible indication of value could be concluded. Therefore, this approach has been employed for this assignment. THE COST APPROACH The Cost Approach is based upon the proposition that the informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements which represent the highest and best use of the land or when relatively unique or specialized improvements are located on the site and for which there exist few sales or leases of comparable properties. The first step in the Cost Approach is to estimate the land value (at its highest and best use) applicable to the subject. This is usually done through an analysis of comparable land sales. The second step is to estimate the cost of all improvements. Improvement costs are then depreciated to reflect value loss from physical, functional and economic causes. Land value and depreciated improvement costs are then added to indicate a total value. The Cost Approach is not considered to be appropriate for this assignment given the age of the improvements and resulting subjectivity required in quantifying depreciation. In addition, at the instruction of the client, an estimate of the subject site's land value was also not prepared. - -------------------------------------------------------------------------------- 33 ================================================================================ SUMMARY OF COMPARABLE RETAIL SALES ================================================================================
Sale Sale Year Building Occupancy Sale Price No. Name/Location Date Built Size (GLA) at Sale Anchor Tenant Sale Price /SF OAR ==================================================================================================================================== 1 Broad Street Center 08/95 1975 181,109 100% K-Mart, Big Lots $5,300,000 $29.26 11.20% NW Broad Street and W Clark Boulevard Murfreesboro, TN 2 Spring Mill Village 7/95 1974 99,600 95% Marshalls, OId Country Buffet $3,900,000 $39.16 10.46% 6011 Memorial Drive Tucker, GA 3 Village Shopping Center 5/95 1975 100,000 100% Winn-Dixie, Heilig Myers $2,500,000 $25.75 11.81% West Spring Street & Breedlove Drive Monroe, GA 4 Cross Country Plaza 2/95 1968 337,360 87% Service Merchandise, Talbot's $10,000,000 $29.64 10.96% I-85 & Macon Road Columbus, GA 5 Priest Lake Plaza 12/93 1977 100,000 78% Kroger, Super X $2,310,000 $23.10 12.38% SWC Of Murfreesboro Road At Bell Road Nashville, TN - ------------------------------------------------------------------------------------------------------------------------------------
Compiled by: CB Commercial - -------------------------------------------------------------------------------- ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH The Sales Comparison Approach provides an estimate of market value based on analyzing transactions of similar properties in the market area. The method is based on the proposition that an informed purchaser would pay no more for a property than the cost of acquiring an existing one with the same utility. When there is an adequate number of sales of truly similar properties with sufficient information for comparison, a range of values for the subject property can be developed. The applicability of this approach is based on the assemblage of similar market sales and offerings for a comparison to the subject. Factors such as changing market conditions over time, location, size, quality, age, condition, and amenities, as well as the terms of the transactions, are all significant variables relating to the relative marketability of the subject property. Any adjustments to the sale price of market sales to provide indications of market value for the subject must be market-derived; thus, the actions of typical buyers and sellers are reflected in the comparison process. There are various units of comparison available in the evaluation of sales data in this approach. The sale price per square foot is the most commonly used in this approach. We searched the market for sales that qualify as arm's length transactions between willing and knowledgeable buyers and sellers in order to identify value and price trends. There have apparently been no shopping center investment sales in the Opelika/Auburn area since 1987. Therefore, we have utilized five sales from similar communities in the Southeast. The sales utilized in this analysis are summarized on the facing page table, with their location relative to the subject identified on the following facing page map. In addition, sale summaries are included in the Addenda. Adjustment for Economic Characteristics The comparable sales generate net operating income that is slightly to substantially higher than the subject on a per square foot basis. The subject has three anchor leases which are at or below the market rental rate, and this accounts for much of the difference. The subject is an investment property and the price an investor will pay is directly related to the current or potential NOI. As our cash flow indicates, the subject's NOI is not projected to increase substantially over a 10 year holding period. We have calculated the adjustment by subtracting the subject's projected NOI ($2.07/SF) from the NOI of each comparable. We then capitalized the difference by 11.0% to yield an - -------------------------------------------------------------------------------- 34 ---------------- Regional Location Comparable Sales ---------------- [GRAPHIC OMITTED] [LOGO] CB COMMERCIAL ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- appropriate adjustment. However, the degree of adjustment is mitigated somewhat because the other adjustment variables can have an affect on the property's NOI per square foot. DISCUSSION OF COMPARABLE SALES Sale Number One Broad Street Station is a community shopping center located in Murfreesboro, Tennessee. This shopping center was originally constructed in 1975 as an enclosed mall and was subsequently renovated as an open-air community center in 1992. It was 100% occupied at the time of sale with an indicated NOI of $3.28. It is anchored by K-Mart, Big Lots and Walgreens, which occupy 79% of the center. The center is similar to the subject in terms of size and location. It is superior with respect to age, condition, anchor tenancy and economic characteristics. Overall, a downward adjustment is necessary. Sale Number Two Spring Mill Village is a neighborhood shopping center located in an older retail submarket of Atlanta, Georgia. This shopping center was built in 1974 and was 95% occupied at the time of sale with an indicated NOI of $4.10. It is anchored by Marshall's and Old Country Buffet, which occupy 39% of the center. The center is similar to the subject in terms of size, age, anchor tenancy and condition. It is superior with respect to location and economic characteristics. Overall, a downward adjustment is necessary. Sale Number Three Village Shopping Center is a neighborhood shopping center located in Monroe, Georgia. This shopping center was built in 1975 and was 100% occupied at the time of sale with an indicated NOI of $3.04. It is anchored by a Winn-Dixie grocery store, a Heilig Myers furniture store and Eckerd Drugs, which occupy 62% of the center. The center is similar to the subject in terms of location, age, size, and condition. It is slightly superior with respect to its anchor tenancy and economic characteristics. Overall, a downward adjustment is necessary. - -------------------------------------------------------------------------------- 35 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- Sale Number Four Cross Country Plaza is a community shopping center located in Columbus, Georgia, approximately 30 miles east of Opelika. This shopping center was built in 1968 and was 87% occupied at the time of sale with an indicated NOI of $3.25. It is anchored by Service Merchandise, Talbot's, Fashion Bug, and Blockbuster Video, among others, which occupy a large percentage of the center. The center is similar to the subject in terms of age, size, and condition. It is superior with respect to its location, anchor tenancy, and economic characteristics. Overall, a downward adjustment is necessary. Sale Number Five Priest Lake Plaza is a neighborhood shopping center located in Nashville, Tennessee. This shopping center was built in 1977 and was 78% occupied at the time of sale with an indicated NOI of $2.86. It is anchored by Kroger, and Super X, which occupy 44% of the center. The center is similar to the subject in terms of age, size, condition and anchor tenancy. It is superior based on location and economic characteristics. Overall, a downward adjustment is necessary. ANALYSIS Adjustments made to the comparable sales are summarized in the following table. - -------------------------------------------------------------------------------- 36 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- ================================================================================ IMPROVED SALES ANALYSIS SUMMARY OF ADJUSTMENTS (1) ================================================================================
Sale 1 Sale 2 Sale 3 Sale 4 Sale 6 ======================================================================================================== Unadjusted Price/ SF $29.26 $39.16 $25.75 $29.64 $23.10 Property Rights 0.00 0.00 0.00 0.00 0.00 ---- ---- ---- ---- ---- Subtotal $29.26 $39.16 $25.75 $29.64 $23.10 Financing Terms 0.00 0.00 0.00 0.00 0.00 ---- ---- ---- ---- ---- Subtotal $29.26 $39.16 $25.75 $29.64 $23.10 Conditions of Sale 0.00 0.00 4.10 0.00 0.00 ---- ---- ---- ---- ---- Subtotal $29.26 $39.16 $25.75 $29.64 $23.10 Market Conditions 0.00 0.00 0.00 0.00 0.00 ---- ---- ---- ---- ---- Subtotal $29.26 $39.16 $25.75 $29.64 $23.10 Other Adjustments Tenancy -5% 0% -5% -10% 0% Age/Quality/Condition -10% 0% 0% 0% 0% Size 0% 0% 0% 0% 0% Location 0% -10% 0% -5% -10% Economic characteristics -25% -35% -25% -25% -20% Total Other Adjustments -40% -45% -30% -40% -30% Value Indication for Subject $17.56 $21.54 $18.03 $17.78 $16.17 ========================================================================================================
(1) The adjustment grid summarizes the direction and magnitude of adjustments judged appropriate to the comparable sales. In some cases adjustments may be derived directly from quantifiable data. However, in many instances the adjustments involve judgment of CB Commercial Real Estate Group, Inc. Source: CB Commercial Real Estate Group, Inc. ================================================================================ SALES COMPARISON APPROACH CONCLUSION The comparable sales indicate an unadjusted range of $23.10 to $39.16 per gross leasable square foot. In our analysis, we have considered adjustments to these comparables for property rights conveyed, financing terms, conditions of sale, date of sale, age, condition, construction quality, building size, tenancy, location, and overall economic conditions. Sale Nos. 3 and 5 are considered to be the most comparable transactions. They represent neighborhood centers which are similar in terms of location, age, size and condition. After adjustments, the adjusted sale prices indicated for the subject range from $16.17 to $21.54 per square foot, although dropping the high and low end of the range generally suggests an adjusted value of $18 per square foot. Again, primary emphasis was placed on Sale Nos. 3 and 5 as they were judged to be the most similar to the subject in terms of their physical, locational and tenant characteristics, particularly Sale No. 3. Therefore, we have estimated a value of $18 per gross leasable square foot of building area. This would suggest the following market value indication for the subject property based on the Sales Comparison Approach. - -------------------------------------------------------------------------------- 37 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- ==================================================================== SALES COMPARISON APPROACH ==================================================================== Gross Leasable SF SP per SF Indicated Value ==================================================================== 201,976 SF x $18.00 = $3,635,568 Rounded: $3,625,000 ==================================================================== Source: CB Commercial Real Estate Group, Inc. ==================================================================== Additional Adjustments In order to attain an "as is" value estimate for the subject property, the appropriate deductions must be made for the cost to cure deferred maintenance. The calculation of these costs is discussed in the Improvement Analysis section of this report. We have estimated deferred maintenance of approximately $360,000. Sales Comparison Approach "As Is" Summary The concluded value of the subject based on the Sales Comparison approach is summarized as follows: ============================================================================== SALES COMPARISON APPROACH CONCLUSION ============================================================================== Sales Comparison Value, Prior to Final Adjustments $3,625,000 Less: Deferred Maintenance 360,000 ---------- Net Indicated Sales Comparison Value "As Is" $3,265,000 Rounded: $3,275,000 Sales Comparison Approach "As Is" per SF $16.21 ============================================================================== Source: CB Commercial Real Estate Group, Inc. ============================================================================== - -------------------------------------------------------------------------------- 38 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH The Income Capitalization Approach reflects the subject's income-producing capabilities. This approach is based on the assumption that value is created by the expectation of benefits to be derived in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over period of time. The two common valuation techniques associated with the Income Approach are direct capitalization and the discounted cash flow (DCF) analysis. DIRECT CAPITALIZATION Direct capitalization is the method used to convert a single year's estimate of income into a value indication. In direct capitalization, a precise allocation between return on and return of capital is not made because investor assumptions or forecasts concerning the holding period, pattern of income, or changes in value of the original investment are not simulated in the method. Direct capitalization is most appropriate when analyzing a stable income stream and in estimating the reversion at the end of a holding period. Using this method, the following sets forth the process: 1. Estimate the Potential Gross Income (PGI) from all sources that a competent owner should be able to generate from a property based on existing and/or market rents. 2. Deduct an estimate of Vacancy and Collection Loss (VCL) to arrive at an Effective Gross Income (EGI) estimate. 3. Deduct operating expenses from the estimate of EGI. The result is an estimate of the stabilized Net Operating Income (NOI). 4. Estimate an Overall capitalization rate (Ro, or OAR). 5. Divide the NOI by Ro, resulting in a value estimate at stabilized occupancy. 6. Adjust the stabilized value to account for "as is" condition, if applicable. DISCOUNTED CASH FLOW ANALYSIS The discounted cash flow (DCF) analysis is a detailed analysis used when the future income is expected to be variant, usually as a result of numerous lease obligations and/or anticipated changes in income and expenses. It is also particularly relevant when institutional buyers are the most likely purchasers of the subject because institutional buyers often place great weight on this analysis. The DCF analysis specifies the quantity, variability, timing, and duration of NOI and cash flow. Selecting the proper yield rate (discount rate) is essential. CB Commercial must consider the target yield sought by investors as well as yields derived from comparable sales and/or market information. The methodology is: - -------------------------------------------------------------------------------- 39 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- 1. Estimate the before-tax cash flows for each period of a projected holding period net of any capital expenditures such as leasing expenses and tenant improvements. 2. Estimate a discount rate and a terminal overall capitalization rate. 3. Estimate a selling price, known as the reversion, for the end of the projected holding period. 4. The cash flows and the reversion are then discounted to a present value estimate. APPROPRIATE CAPITALIZATION METHOD A number of factors were considered in evaluating the appropriateness of using the direct capitalization method and/or the DCF technique. Occupancy Status If the subject is not at stabilized occupancy, the DCF method is typically the preferred method because it better models the present value impact of lease-up costs on value. If the subject is at stabilized occupancy, the direct capitalization method may be the most applicable. The subject is currently 60.9% occupied overall. However, when two local tenant leases currently being negotiated are signed, the subject will have a local tenant occupancy rate of 100%. The occupancy problem is associated with three vacant anchor tenant spaces. Therefore, the subject is considered to be at its stabilized occupancy level. Therefore, while the direct capitalization approach may be most applicable, the DCF model may also be useful. Lease Structure Consideration is given to the subject's existing lease structure. Where the subject's lease structure generally reflects market terms, direct capitalization may be appropriate. Discounted cash flow analysis may also be relevant depending on typical buyer preferences. Conversely, the usefulness of a direct capitalization analysis may be limited in instances where the subject includes leases having a variety of rent levels, rent escalation structures, or differing expense treatments. The existing lease parameters generally reflect market terms on average for the existing tenants. Implicit investor assumptions therefore may behave as the market would expect. While the direct capitalization analysis would likely be the preferred methodology, a DCF model is still often utilized by some investors. Above-Market or Below-Market Rent If the subject's rent structure reflects general market levels, both direct capitalization and DCF analysis may be relevant. When average rent is above or below market, however, the Income - -------------------------------------------------------------------------------- 40 ================================================================================ SUMMMARY OF COMPARABLE RETAIL RENTALS ================================================================================
Sale Building Year Local Overall Base No. Name / Location Size (GLA) Built Occupancy Occupancy Anchor Tenant TI/SF Rent/SF ==================================================================================================================================== 1 Pepperell Corners 305,000 1993 100% 100% Wal-Mart, Lowes Minimal $10.00 - NWC Of Pepperell Parkway @ Highway Opelika, AL 2 Flint's Crossing 88,000 1988 100% 100% Food Max, Harco Drugs Negotiable $10.00 - SEC Of Highway 29 @ University Drive Auburn, AL 3 Food World Center 110,000 1970 85% 95% Food World, Bud's Discount City As Is $3.50 - Highway 280 North Of Interstate 85 Opelika, AL 4 Corner Village 62,300 1978 100% 100% Kroger Negotiable $7.00 - NEC Of Dean Road & Glenn Avenue Auburn, AL - ------------------------------------------------------------------------------------------------------------------------------------
Compiled by: CB Commercial - -------------------------------------------------------------------------------- ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Approach requires an appropriate adjustment for the present value of the market/contract difference. Reliability of the direct capitalization method becomes more limited as the average rent level becomes more complicated. Discounted cash flow methodology is favored when adjustments become overly subjective or difficult to discern. The subject's lease structure includes terms that generally reflect market conditions. Therefore, the direct capitalization analysis is the preferred method. Typical Buyer Behavior Selection of the appropriate methodology also depends upon the behavior of typical buyers of the subject's property type within the local market. Based on discussions with market participants, the direct capitalization analysis is the definite choice as the appropriate methodology. However, a discounted cash flow model can also be used to incorporate projected fluctuations in market rents, expenses, turnover, etc. Furthermore, when utilizing a DCF model, investors will often check whether the implied capitalization rate falls within an expected range by dividing the first year net operating income into the estimated value. Appraisal Instructions No specific instructions were given for this assignment. Conclusion As a result of considering the foregoing factors, both the DCF technique and the income capitalization technique are employed in this appraisal. ESTIMATE OF MARKET RENT Rent analysis typically involves both a study of market (comparable) rentals and the subject's existing rents. Market rent is the rent that a property would most probably command in the open market; indicated by the current rents paid and asked for comparable space. SUMMARY OF COMPARABLE RENTALS CB Commercial has searched the immediate subject neighborhood for competitive properties and lease transactions for comparison to the subject. We have identified four shopping centers in the immediate subject area which are comparable to the subject. The selected comparable rentals are summarized in the facing page chart, with their location relative to the subject shown on the following facing page map. In addition, photographs and detailed summary sheets of each comparable are included in the Addenda. - -------------------------------------------------------------------------------- 41 ------------------ Comparable Rentals ------------------ [GRAPHIC OMITTED] ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF COMPARABLE RENTALS Comparable Rental Number One Pepperell Corners is a community shopping center located east of the subject property along Highway 29. It is superior to the subject property based on its location, age, condition, occupancy rate, size and tenant mix, which includes Wal-Mart, a Winn-Dixie grocery store, Lowes and Goody's as anchor tenants. Recent local tenant leases signed in the building are in the range of approximately $10.00 to $12.00 per square foot on a triple net basis. The occupancy rate is currently 100% overall and 100% for local tenants. Overall, a substantial downward rent adjustment is necessary as compared to the subject. Comparable Rental Number Two Flint's Crossing is a neighborhood shopping center located west of the subject at the southeast corner of Highway 29 and University Drive. It is superior based on age, location, occupancy rate, condition and a stronger local tenant mix. Recent local tenant leases signed in the building are in the range of approximately $10.00 to $12.00 per square foot on a triple net basis. The occupancy rate is currently 100% overall and 100% for local tenants. Overall, a substantial downward rent adjustment is necessary as compared to the subject. Comparable Rental Number Three Food World Center is a neighborhood shopping center along the east side of Highway 280 just north of Interstate 85. It is similar to the subject property based on its age, condition, size, and local tenant occupancy, but superior with respect to location and the overall occupancy rate. Recent local tenant leases signed in the building are in the range of approximately $3.50 to $8.00 per square foot on a triple net basis, with most of the leases correlating toward the lower end to middle of the range. The occupancy rate is currently 95% overall and 85% for local tenants. Overall, a slight downward rent adjustment is necessary as compared to the subject. Comparable Rental Number Four Corner Village is a neighborhood shopping center located at the corner of Dean Road and Glenn Avenue. It is superior to the subject property based on its location, occupancy rate, age, and condition. Recent local tenant leases signed in the building are in the range of approximately $7.00 to $9.00 per square foot on a triple net basis. The occupancy rate is currently 100% overall and 100% for local tenants. Overall, a downward rent adjustment is necessary as compared to the subject. - -------------------------------------------------------------------------------- 42 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF RECENT SUBJECT LEASES The following table summarizes the subject property's recent lease history. ================================================================================ SUMMARY OF RECENT SUBJECT LEASES ================================================================================
New/ Rental Lease Free Tenant Renew Term Date Size Rate Escalation Type Rent ================================================================================================================= Southern Anglers new 1 yr 4/96 2,000 SF $5.40 Flat Net None Childcare R. Center renew 2 yrs 1/96 5,200 SF $5.75 $0.25 in Yr 2 Gross None Ben Franklin Crafts new 10 yrs 11/95 30,000 SF $3.00 $0.25 in Yr 6 Net None Dollar Gen. Store new 5 yrs 11/94 7,300 SF $2.88 Flat Net None =================================================================================================================
Source: Mark Centers Trust. Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ We are also aware that the two local tenant vacancies apparently have leases out for signature at this time. O & A Sports will lease the 4,000 square foot vacancy for three years at an annual rent which will reportedly start at $3.00 per square foot, increasing to $4.00 and $5.00 per square foot over the term on a gross basis. Also, Wallpaper For Less will lease the 3,900 square foot vacancy for three years at an annual rent which will reportedly start at $3.00 per square foot, increasing to $3.75 and $4.75 per square foot over the term on a gross basis. Both leases would include no free rent or tenant improvement allowance. Leases at the subject property vary from a net structure whereby tenants pay pro rata expense reimbursements for CAM and real estate taxes to gross leases requiring the landlord to pay all expenses. Including the leases out for signature, recent leasing activity would suggest three gross leases and three net leases. However, the most recent leases, as well as the current lease structure being quoted for the subject are on a gross basis. All tenants are responsible for their individual utilities and interior cleaning. Recent leases indicate a term of one to five years for local tenants and three years on average. The anchor tenant lease was ten years. Furthermore, while some past leases did include an allowance for tenant improvements paid by the landlord, the leasing representative indicates that this is not currently the norm for local tenants, with this space being marketed on an "as is" basis. The rental rates for recent leases would suggest a wide range in rental rates from $2.88 to $5.75 per square foot. The upper end of this range is established by two relatively short term leases, one of which was a renewal. The remaining leases generally correlate in the range of $3.00 per square foot prior to the consideration of expense reimbursements. The two leases out for signature average approximately $4.00 per square foot over a three year term on a gross basis. The anchor tenant lease is also included in this analysis at $3.00 per square foot increasing to $3.25 per square foot in Year 6 on a triple net basis. The fourth lease, which is for - -------------------------------------------------------------------------------- 43 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- a 7,300 square foot tenant, is flat over the five year term at $2.88 per square foot. It should be noted that both of the latter leases has a percentage rent clause, but neither tenant is generating sales at a rate which will create percentage rent. While difficult to establish a definitive market rent for the subject based on leasing activity over the last 18 months, the recent subject leases appear to be at the low end of the market on average. This is considered to be reasonable given that the subject is the oldest center in the market and has three vacant anchor tenant bays. Furthermore, the leasing representative for the subject suggests that a $3.00 to $4.00 per square foot gross rent is an appropriate market rental rate for the subject relative to the surrounding market. ANCHOR TENANT LEASES The initial lease terms for the two major anchors, Ben Franklin Crafts and Carmike Cinema, end in November 2005 and June 2005, respectively. The junior anchors, Hancock Fabric and Bargain Town, have leases which expire in October 1998 and January 1998, respectively. Both of the major tenant leases contain renewal options for a total of 10 years each. These renewal options include an extension of the existing lease terms at either flat or increased rental rates. If the option rental rate is substantially below market, it is likely the tenant will either renew the lease or sublease the space. We have obtained lease data on other anchor tenants in the Opelika market. We were asked to keep the locations and tenant names confidential; however, these spaces are in centers that are generally equal to or superior to the subject. At these centers, leases range from $3.00 to $6.50 per square foot. The current lease rates for the anchor tenants at the subject are $3.00 for Ben Franklin Crafts and $4.54 for Carmike Cinemas. While the Ben Franklin Crafts lease calls for increased rent in the first year of each option period to $3.75 and $4.25 per square foot, the projected rental rates are still considered to be at or below market rent. Therefore, it is likely that the anchor tenants will renew their leases. We typically allow the leases to expire and renew at a market rate; however, in this instance, it would likely lead to an inflated value, given the lease renewal terms. Therefore, we have renewed the anchor tenant leases through the projection period at the option rental rates. Furthermore, we have assumed that the three existing anchor tenant bays will not be leased. They have been vacant for at least three years and the leasing representative indicates that they have had only minimal interest in the space, with no serious potential tenants. Also, - -------------------------------------------------------------------------------- 44 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- discussions brokers and investors suggest that a property such as the subject would be analyzed on its existing income, with no credit given to the vacant space in this situation. CONCLUSIONS: MARKET RENT ESTIMATE FOR THE SUBJECT PROPERTY Based on the previous analysis, the current market lease parameters for the subject property are estimated as follows: ============================================================================= CONCLUDED MARKET RENT (PER SQUARE FOOT PER YEAR) ============================================================================= Category ============================================================================= Local Tenants less than 5,000 SF $4.00 5,000 SF to 10,000 SF $3.00 Anchor Tenants $3.00 Lease Structure Pro rata CAM, Taxes & Insurance over base year Annual escalation Flat Tenant Improvements (new tenants) As Is Tenant Improvements (renewals) None Average lease term local tenant 3 years anchor tenant 10 years Free Rent (Months) None ============================================================================= Source: CB Commercial Real Estate Group, Inc. ============================================================================= These terms generally reflect the most recent leasing history of the subject, as well as market rent terms as discussed in the previous analysis. However, it should be noted that the lease structure stated above varies slightly from the current gross structure being quoted at the subject, as well as the net structure indicated by the comparable properties. Because of the subject's age, condition and tenant mix, we do not feet that the subject can compete with other centers on the basis of leasing space on a net basis. Furthermore, the flat structure assumed for the subject is contradicted by some previous subject leases which have rent escalations. The adjustment to a lease structure with pro rata expense reimbursements over a base year is considered to be a compromise which provides for some increase in revenue collections in the event that property expenses rise during the term of a lease. EXISTING CONTRACT RENT As discussed, the subject's leasable area has been subdivided into 22 individual suites, of which 17 are currently occupied and five is available for lease. The occupied suites total 123,036 square feet, or 60.9% of the building's leasable area. - -------------------------------------------------------------------------------- 45 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Through our research of the subject property, which included a complete review of all leased documents available, lease abstracts, rent rolls (both current and historical), and detailed discussions with the property manager, the following rent roll summary was utilized to detail currently leased suites and general information employed for this approach. Detailed abstracts of each tenant's lease and miscellaneous assumptions assumed for this assignment have been included in file memorandum. Additionally, within the Addenda are copies of a Tenant Register and Rent Roll generated by Pro-Ject, a computerized lease-by-lease analysis program. The information contained in the chart and in appropriate sections of the Addenda represent the data inputted for this method and is assumed to be correct and reliable. CB Commercial reserves the right to amend our input assumptions if any documentation is subsequently available which contradicts that assumed for this method. Shown in the following table is the subject rent roll. ================================================================================ MIDWAY PLAZA RENT ROLL (AS OF JULY 1, 1996) ================================================================================ Square Begin End Base Rent Annual Tenant Feet Date Date per SF Rent ================================================================================ Ben Franklin Crafts 30,000 11/95 11/05 $3.00 $90,000 Carmike Cinema 25,238 7/85 6/05 $4.54 $114,580 Bargain Town 15,000 10/90 1/98 $2.67 $40,000 Hancock Fabric 9,000 10/88 10/98 $3.00 $27,000 Child Care Resource Ctr 5,200 1/96 12/97 $5.75 $29,900 Southern Anglers 2,000 5/96 4/97 $5.40 $10,800 Dollar General Stores 7,300 11/94 11/99 $2.88 $21,000 The Thrifty Nickel 1,750 10/94 9/99 $6.00 $10,500 Olan Mills 1,050 11/84 4/97 $6.50 $6,825 Midway Dental 2,935 9/91 12/96 $4.85 $14,235 Singer Center 3,000 11/81 12/96 $2.20 $6,600 Ala. Medicaid Agency 3,000 12/91 12/96 $6.25 $18,750 General Services Admin. 4,583 9/91 8/96 $10.41 $47,689 Ala. Dept. of Human Res. 4,000 1/94 12/98 $6.00 $24,000 Carol's Styling 1,250 1/81 12/96 $5.00 $6,250 City Finance of Ala. 2,000 11/93 10/98 $6.00 $12,000 Intercel 5,730 2/94 1/99 $4.50 $25,785 ------ ------- Total Leased Square Feet 123,036 Average Rent: $4.11 $505,914 Unleased Space 78,940 ------ Total Square Footage 201,976 Occupancy-Overall 60.9% Occupancy-Local Tenants 84.7% ================================================================================ Note: Some figures may not calculate due to rounding; annual rent stated correlates with actual rent being collected. Source: Leases and abstracts provided by Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 46 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- In addition, we have considered the leases which are apparently out for signature on the two vacant local tenant spaces. Based on the $3.00 per square foot first year rental rates indicated by the subject's leasing representative, this would generate another $23,700 in annual rental income. This would suggest annual contract rent of $529,614 and a weighted average rental rate of $4.04 per square foot. It would also increase the local tenant occupancy rate to 100% and the overall occupancy rate to 64.8%. The weighted average rental rate of $4.04 per square foot for local tenants is consistent with the market rent for the subject as previously discussed. ANALYSIS OF TENANCY The tenant base is represented by clients of both a national and local credit rating. The following table summarizes the expiration of existing leases over the next ten years. ================================================================================ SUBJECT LEASE EXPIRATION SUMMARY ================================================================================ FY Vacancy # of Tenants SF Expiring % Cumulative SF Cumulative % - ----------------------------------------------------------------================ 1997 7 17,818 8.8% 17,818 8.8% 1998 2 20,200 10.0% 38,018 18.8% 1999 4 20,730 10.3% 58,748 29.1% 2000 2 9,050 4.5% 67,798 33.6% 2001 0 0 0.0% 67,798 33.6% 2002 0 0 0.0% 67,798 33.6% 2003 0 0 0.0% 67,798 33.6% 2004 0 0 0.0% 67,798 33.6% 2005 1 25,238 12.5% 93,036 46.1% 2006 1 30,000 14.9% 123,036 60.9% ================================================================================ Source: CB Commercial Real Estate Group, Inc. ================================================================================ In estimating the potential gross income of the subject property, it is necessary to consider the leases subject to termination during the initial portion of the holding period. The rate and timing of lease expirations is considered to be rather typical, particularly given that we have projected local tenant leases to be three years in duration. Furthermore, of the five leases which expire in calendar year 1996, Marks Centers has indicated that four will renew and the fifth will probably renew. The first major anchor tenant lease (Carmike Cinemas) expires in Year 9, while the other major anchor tenant lease expires in Year 10 (Ben Franklin Crafts). The junior, or smaller, anchors tenant leases expire in Year 2 (Bargain Town) and Year 3 (Hancock Fabric). - -------------------------------------------------------------------------------- 47 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- EXPENSE REIMBURSEMENTS As discussed, 11 of the current leases are net of CAM (including insurance) and real estate tax expenses, whereby the tenant is responsible for their prorata share of these expenses. The remaining six tenants have gross leases, whereby the landlord does not receive any reimbursement from the tenant. Furthermore, while three of the four most recent leases were on a net basis, the two leases which are currently out for signature are reportedly on a gross basis. The leasing representative also indicates that they are quoting rents on a gross basis at this time. Given the variance among leases, we have projected pro rata reimbursement of CAM and taxes over the base year expense. This also effectively serves as a rent escalation in future lease years and protects the landlord against expense increases. However, there are some variations in the reimbursement structures, as several of the existing tenants have pro rata recoveries. We have reviewed historical expense reimbursements for the subject property, as compared to a projection of each expense reimbursement for the next year based on existing leases. A review of historical CAM reimbursements is as follows: ============================================== CAM REIMBURSEMENTS ============================================== Year Total $ Amount ============================================== 1993 $11,076 1994 $20,526 1995 $22,721 1996 Budget $44,652 Year 1 DCF $44,458 ============================================== Source: Mark Centers Trust ============================================== CAM expense recoveries have increased annually from $0.05 per square foot in 1993 to $0.11 per square foot in 1995. The 1996 budget projects $0.22 per square foot, almost twice the 1995 reimbursement. By comparison, the first year of our DCF model suggests total CAM reimbursements of $0.22 per square foot based on a review of lease abstracts. The big increase in 1996 is primarily associated with the new anchor tenant as of November 1995 (Ben Franklin Crafts) which pays a pro rata reimbursement of CAM. We feel that the DCF model most effectively quantifies the projected expense recoveries. Therefore, we estimate total CAM reimbursements to be $44,500, on a rounded basis. - -------------------------------------------------------------------------------- 48 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- A review of historical tax reimbursements is as follows: ============================================== TAX REIMBURSEMENTS ============================================== Year Total $ Amount ============================================== 1993 $6,850 1994 $9,944 1995 $6,804 1996 Budget $11,782 Year 1 DCF $10,445 ============================================== Source: Mark Centers Trust ============================================== Tax expense recoveries have varied from $0.03 per square foot in 1993 and 1995 to $0.05 per square foot in 1994. The 1996 budget projects an increase to $0.06 per square foot. By comparison, the first year of our DCF model suggests total real estate tax reimbursements of $0.05 per square foot based on a review of lease abstracts. The increase in 1996 is primarily associated with the new anchor tenant as of November 1995 (Ben Franklin Crafts) which pays a pro rata reimbursement of CAM. We feel that the DCF model most effectively quantifies the projected expense recoveries. Therefore, we estimate total tax reimbursements to be $10,500, on a rounded basis. A review of historical insurance reimbursements is as follows: ============================================== INSURANCE REIMBURSEMENTS ============================================== Year Total $ Amount ============================================== 1993 $527 1994 $904 1995 $415 1996 Budget $835 Year 1 DCF $893 ============================================== Source: Mark Centers Trust ============================================== Insurance expense recoveries have been less than $0.01 per square foot from 1993 through 1995. The 1996 budget projects that they will continue to be less than $0.01 per square foot. The first year of our DCF model also suggests total insurance reimbursements of less than $0.01 per square foot based on a review of lease abstracts. We feel that the DCF model most effectively quantifies the projected expense recoveries. Therefore, we estimate total tax reimbursements to be $900, on a rounded basis. - -------------------------------------------------------------------------------- 49 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- OTHER INCOME For the purpose of estimating the other income that could reasonably be generated by the subject building, we have again reviewed the historical revenues actually received, as well as surveyed local property management companies regarding similar retail projects. This income category can be derived from several different sources including tenant service income, late fee income, short-term storage income, professional services provided for the tenants by the landlord/management, and other miscellaneous sources. The following chart depicts the historical and budgeted revenues included in Other Income for the subject project. ========================================= OTHER INCOME ========================================= Year Total $ Amount ========================================= 1993 $2,510 1994 $1,831 1995 $2,106 1996 Budget $862 Year 1 Pro Forma $1,800 ========================================= Source: Mark Centers Trust ========================================= This source of income has not been significant, amounting to $0.01 per square foot or less from 1993 through 1995. The 1996 budget projects that they will continue to be less than $0.01 per square foot. Therefore, we have estimated Other Income of $150 a month, or $1,800 annually. This equates to $0.01 per square foot of leasable area. PERCENTAGE RENT INCOME According to the lease documents provided, six of the existing tenants have a provision in their lease documents which requires percentage rent payments over a base amount or under a specific formula. That is, in addition to the basic rental charges, the tenant is responsible for paying the landlord additional rent equal to a specified percentage of the tenant's gross sales made in, upon, or from the premises, over a breakpoint factor or according to a specific schedule. The historical operating statements indicate percentage rent collections increasing from $7,556 and $6,928 in 1993 and 1994, respectively, to $14,229 and $16,800 in 1995 and the 1996 budget, respectively. Furthermore, a review of sales levels for each of the tenants with a percentage rent clause would suggest that only Carmike Cinema is generating sales at a level which result in percentage rent payments. Therefore, we have projected percentage rent collections in our stabilized pro forma in line with the 1996 budget at $16,800. - -------------------------------------------------------------------------------- 50 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- POTENTIAL GROSS INCOME It should be noted that we have assumed that the three vacant anchor tenant bays are not leaseable given the length of time which they have been occupied and the overall marginal appeal of the subject property. Therefore, the concluded potential gross income for the subject is summarized as follows: ================================================================================ POTENTIAL GROSS INCOME ================================================================================ P.S.F. Totals - -------------------------------------------------------------------------------- Existing Contract Rent 123,036 SF $4.11 (wt. avg.) $505,914 Leases Out For Signature 7,900 SF $3.00 23,700 ------ Potential Gross Rental Income 130,936 SF $4.04 (wt. avg.) $529,614 Percentage Rent $16,800 Expense Reimbursements $55,900 Other Income $1,800 ------ Potential Gross Income 201,976 SF $2.99 (wt. avg.) $604,114 - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ VACANCY AND COLLECTION LOSS Typically, this is an allowance for reductions in potential income attributable to vacancies, tenant turnover, and non-payment of effective rent. In the direct capitalization process, a market-derived, stabilized vacancy and collection loss estimate is subtracted from potential gross income in order to arrive at effective gross income. Currently, the subject is 60.9% occupied by tenants of both a local nature and national credit rating. Including the two leases out for signature, the subject's overall occupancy rate is 64.8%. Furthermore, the local tenant occupancy rate is 100%, with the existing vacancy comprised of three vacant anchor tenant bays. Comparable retail properties in the neighborhood have overall occupancy rates of 61% to 100% and local tenant occupancy rates of 85% to 100%. Generally, there is very little vacant space in this market. Despite the generally high occupancy rate in the market, we have assumed that the three existing anchor tenant bays will not be leased. They have been vacant for at least three years and the leasing representative indicates that they have had only minimal interest in the space, with no serious potential tenants. Also, discussions brokers and investors suggest that a property such as the subject would be analyzed on its existing income, with no credit given to the vacant space in this situation. Therefore, as noted in the calculation of potential gross income, we have excluded the vacant anchor bays from our analysis of potential income. - -------------------------------------------------------------------------------- 51 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- The subject's local tenant occupancy rate is consistent with the range suggested by the comparables. Therefore, we believe that a 5% vacancy and collection loss as applied to potential rental income reasonably encompasses the downtime between leases and a credit loss. EFFECTIVE GROSS INCOME SUMMARY The subject's historical effective gross income is shown in the following table: ================================================== EFFECTIVE GROSS INCOME ================================================== Year Total $ Amount ================================================== 1993 $475,253 1994 $512,188 1995 $548,375 1996 Budget $572,726 ================================================== Source: Mark Centers Trust ================================================== Given our estimate of existing rental income and expense reimbursements, other income, and a collection loss, the subject's estimated effective gross income is derived as follows: ================================================================================ STABILIZED EFFECTIVE GROSS INCOME ================================================================================ Gross Rental Income: $529,614 Less Vacancy & Collection Loss (5%) (26,481) -------- Effective Rental Income: 503,133 Percentage Rent $16,800 Plus Expense Reimbursements: 55,900 Plus Other Income: 1,800 -------- Effective Gross Income: $577,633 ================================================================================ Our projection of effective gross income is 5.3% more than the level of EGI indicated for the subject for 1995, but less than 1% greater than the 1996 budget projection of EGI. The difference between 1995 and 1996 is associated with the leases signed in late 1995 and early 1996. Therefore, our stabilized projection is considered to be reasonable. OPERATING EXPENSE ANALYSIS In projecting revenue and expenses for the subject property, the historical operating statements for calendar years 1993, 1994 and 1995 have been analyzed. Also, we have reviewed the - -------------------------------------------------------------------------------- 52 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- 1996 budgeted forecast of income and expenses. This information is summarized in the following table. We have analyzed expenses for the subject improvements based on historical information, with expenses for the subject improvements projected based on the per square foot cost implied. We have also considered expense comparable data contained in our files and statistics in the Dollars & Cents of Shopping Centers: 1995, published by the Urban Land Institute, and the 1995 Income and Expense Analysis: Shopping Centers, published by the Institute of Real Estate Management. ================================================================================ SUBJECT INCOME & EXPENSE HISTORY ACTUAL CALENDAR YEAR DATA AND PROJECTED BUDGET ================================================================================
1993 Actual 1994 Actual 1995 Actual 1996 Budget(1) - ------------------ -------------------- --------------------- ---------------------- ------------------------ Total $/SF(2) Total $/SF(2) Total $/SF(2) Total $/SF(2) - ------------------ ------------ ------- ------------ ------- ------------- --------- ------------ ----------- Income Rental Income $446,734 $2.21 $472,055 $2.34 $502,100 $2.49 $497,795 $2.46 Percentage Rent 7,556 0.04 6,928 0.03 14,229 0.07 16,800 0.08 CAM Reimb 11,076 0.05 20,526 0.10 22,721 0.11 44,652 0.22 RE Tax Reimb 6,850 0.03 9,944 0.05 6,804 0.03 11,782 0.06 Insurance Reimb 527 0.01 904 0.01 415 0.01 835 0.01 Other Income 2,510 0.01 1,831 0.01 2,106 0.01 862 0.01 ------- ---- ------- ---- ------- ---- ------- ---- Eff. Gr. Income $475,253 $2.35 $512,188 $2.54 $548,375 $2.72 $572,726 $2.84 Expenses CAM (23,554) (0.12) (70,222) (0.35) (43,601) (0.22) (61,014) (0.30) Property Taxes (26,678) (0.13) (28,325) (0.14) (24,801) (0.12) (27,357) (0.14) Insurance (19,700) (0.10) (17,596) (0.09) (14,895) (0.07) (14,091) (0.07) Mgmt Fee (0) (0.00) (0) (0.00) (0) (0.00) (0) (0.00) ------- ---- ------- ---- ------- ---- ------- ---- Gen. & Admin. (6,113) (0.03) (4,987) (0.02) (5,917) (0.03) (1,931) (0.01) ------- ------ ------- ------ ------- ------ ------- ------ Total Expenses (76,045) (0.38) (121,130) (0.60) (89,214) (0.44) (104,393) (0.52) NOI $399,208 $1.98 $391,058 $1.94 $459,161 $2.27 $468,333 $2.32
================================================================================ (1) Based on actual First Quarter 1996 and 1996 budget for last three quarters. (2) Based on 201,976 rentable square feet of building area Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ Our projection of the subject's stabilized expenses is detailed as follows. Common Area Maintenance Common area maintenance typically includes all expense items relative to operating, cleaning, maintaining and repairing the subject improvements. Historical common area maintenance expenses are shown as follows: - -------------------------------------------------------------------------------- 53 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ========================================== CAM EXPENSE ========================================== Year Total $ Amount ========================================== 1993 $23,554 1994 $70,222 1995 $43,601 1996 Budget $61,014 Year 1 Pro Forma $61,000 ========================================== Source: Mark Centers Trust ========================================== This expense has varied from $0.12 per square foot in 1993 to $0.35 per square foot in 1994 and $0.22 per square foot in 1995. By comparison, $0.30 per square foot is projected in the 1996 budget. The 1996 budgeted expense is more consistent with properties comparable to the subject. Therefore, we have projected CAM expense in line with the 1996 budgeted expense to be $61,000, or $0.30 per square foot. Property Taxes Property taxes are forecasted at $25,440, or $0.13 per leasable square foot, based on the discussion contained in the Tax Analysis section of this report. The real estate taxes do not include personal property taxes. Insurance Historical insurance expenses are shown as follows: ========================================== INSURANCE EXPENSE ========================================== Year Total $ Amount ========================================== 1993 $19,700 1994 $17,596 1995 $14,895 1996 Budget $14,091 Year 1 Pro Forma $14,100 ========================================== Source: Mark Centers Trust ========================================== Insurance costs are assumed to include full property and liability coverage and typically are in the range of $0.10 to $0.20 per square foot. By comparison, the historical subject cost has decreased from $0.10 per square foot in 1993 to $0.09 per square foot in 1994 and $0.07 per square foot in 1995. Furthermore, the 1996 budget projects a cost of $0.07 per square foot. Therefore, the subject's insurance expense has been estimated in line with the 1996 budget to - -------------------------------------------------------------------------------- 54 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- be $14,100, or $0.07 per square foot on a rounded basis. Given the advanced age of the subject improvement's, this is consistent with comparable properties. Professional Management Fee Historically, the subject property has not been charged a professional management based on a review of the operating statements provided. Typical professional management fees in the local market are generally 3% to 5% of effective gross income, based on the number and type of tenants, the total square footage of a property and size of the market. Therefore, the management fee for the subject is estimated to be 4.0% of effective gross income. General and Administrative General and administrative expenses typically include all payroll and payroll related items for all directly-employed administrative personnel such as building managers, secretaries, and bookkeepers. Leasing personnel are not included nor are the salaries or fees for off-site management firm personnel and services. However, normal legal or professional fees would be included. Historical general and administrative expenses are shown as follows: ========================================== GENERAL AND ADMINISTRATIVE EXPENSE ========================================== Year Total $ Amount ========================================== 1993 $6,113 1994 $4,987 1995 $5,917 1996 Budget $1,913 Year 1 Pro Forma $5,000 ========================================== Source: Mark Centers Trust ========================================== This expense is not a significant one for the subject. It has varied from $0.03 per square foot in 1993 to $0.02 per square foot in 1994 and $0.03 per square foot in 1995. The 1996 budget estimates $0.01 per square foot. However, we have projected this expense in line with the historical trend to be $5,000, or $0.02 per square foot. We feel that this is consistent with the expense suggested by comparable properties. Replacement Reserves This expense typically represents a reserve for future replacement of long-lived items. The amount of reserve and whether or not it is included in the direct capitalization and DCF analyses, depends on the actions reflected by buyers and sellers in the local market. Based on - -------------------------------------------------------------------------------- 55 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- available comparable data and discussions with brokers and investors, replacement reserves generally range from $0.10 and $0.20 per square foot. Therefore, we have projected reserves for the subject at $0.15 per square foot, or $30,300 annually on a rounded basis, given the subject's age and current condition. Generally, investors feel that it is prudent to deduct replacement reserves in calculating NOI and in determining cash flow in the DCF analysis. Total Concluded Operating Expenses The concluded stabilized operating expenses for the subject total $158,945 annually, or $0.79 per gross leasable square foot. Furthermore, 35.2% of the total operating costs, or $0.28 per square foot, are recovered from the tenants. DIRECT CAPITALIZATION As previously discussed, direct capitalization is a method used to convert a single year's estimated stabilized net operating income into a value indication. Once the net operating income has been estimated, this conversion is accomplished by dividing the NOI estimate by an appropriate rate. There are several methods for deriving an overall rate for direct capitalization. Derivation from Comparable Sales This is the preferred method when sufficient data exists. Data on each property's sale price, income, expenses, financing terms, and market conditions at the time of sale is needed. The overall capitalization rate is then derived by dividing the net operating income by the sale price. This technique is considered appropriate for the subject. The following is a summary of overall capitalization rates indicated by the comparable sales included in the Sales Comparison Approach. ============================================================================ COMPARABLE CAPITALIZATION RATES ============================================================================ Date of Occupancy Capitalization Sale Sale Sale Price Rate Rate ============================================================================ 1 8/95 $5,300,000 100% 11.2% 2 7/95 $3,900,000 95% 10.5% 3 5/95 $2,500,000 100% 11.8% 4 2/95 $10,000,000 87% 11.0% 5 12/93 $2,310,000 78% 12.4% ============================================================================ Source: CB Commercial Real Estate Group, Inc. ============================================================================ - -------------------------------------------------------------------------------- 56 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- The preceding sales indicate a 10.5% to 12.4% range of overall capitalization rates. Sale No. 4, which is located approximately 30 miles away in the Columbus market, is considered to be most similar to the subject, although it is slightly superior with respect to the anchor tenancy. The remaining sales are also considered to be reasonably similar to the subject with respect to location, occupancy, size, age, condition, and tenancy, particularly given that we are analyzing the subject on a stabilized basis without any income potential attributed to the three vacant anchor tenants. Retail investment market conditions have not changed noticeably since these transactions. Given the subject property's physical and locational characteristics, and placing greatest reliance on Sale No. 4, we feel that a capitalization rate in the range of 11.0% is warranted based on the sales utilized in our analysis. Investor Surveys Another method for establishing an overall capitalization rate for the subject is to review the criteria of major investors in the marketplace. This may serve as a check against other techniques or may be a primary source when ample data exists. This technique is considered to be appropriate for the subject. Therefore, using the First Quarter 1996 CB Commercial National Investor Survey, we have reviewed rates for Class B neighborhood and community shopping centers. This information is summarized in the following table. ================================================================================ CB COMMERCIAL NATIONAL INVESTOR SURVEY SUMMARY OF OVERALL CAP RATES FOR CLASS B SHOPPING CENTERS
=================================================================================================== Property Type # of Respondents R(o) Range Average Rate =================================================================================================== Neighborhood Centers 10 9% - 11.5% 10.3% Community Centers 10 9.5% - 11.0% 10.2% ===================================================================================================
Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The survey categories indicate an overall range of 9% to 11.5% and an average range of 10.2% to 10.3%. It is likely that the appropriate capitalization rate would be toward the middle to upper end of the range indicated in the preceding table due to the mediocre economic prospects in the greater Opelika/Auburn area over the near term future. Therefore, we have estimated the appropriate overall capitalization rate for the subject to be in the range of 11.0% based on the investor survey data. - -------------------------------------------------------------------------------- 57 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Conclusion of Overall Capitalization Rate After reviewing the appropriate methods for developing an overall capitalization rate. The following overall capitalization rates are indicated: ===================================================================== SUMMARY OF OVERALL CAPITALIZATION RATES ===================================================================== Methodology Concluded Range ===================================================================== Comparable Sales 11.0% CB Commercial National Investor Survey 11.0% ===================================================================== Source: CB Commercial Real Estate Group, Inc. ===================================================================== After reviewing the appropriate methods for developing an overall capitalization rate, with most emphasis placed on the comparable sales data, the concluded overall capitalization rate for the subject is 11.0%. - -------------------------------------------------------------------------------- 58 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Direct Capitalization Summary A summary of the direct capitalization of the subject at stabilized occupancy is illustrated in the following table: ================================================================================ MIDWAY PLAZA SHOPPING CENTER DIRECT CAPITALIZATION SUMMARY JULY 1, 1996 ================================================================================
Category Total P.S.F. ================================================================================================== Income Existing Tenants: 123,036 SF @ $4.11 per SF (wt. avg.) $505,914 $2.50 Leases out for Signature 7,900 SF @ $3.00 per SF 23,700 0.12 -------- ------ Potential Gross Rental Income $529,614 $2.62 Less: Vacancy & Collection Loss (5%) (26,481) (0.13) -------- ------ Subtotal $503,133 $2.49 Percentage Rent $16,800 $0.08 Total Expense Reimbursements 55,900 0.28 Other Income 1,800 0.01 -------- ------ Effective Gross Income $577,633 $2.86 Expenses Common Area Maintenance ($61,000) (0.12) Real Estate Taxes (25,440) (0.13) Insurance (14,100) (0.07) Management Fee (4.0%) (23,105) (0.11) General & Administrative (5,000) (0.02) Reserves (30,300) (0.15) -------- ------ Total Expenses ($158,945) ($0.79) OER 27.5% Net Operating Income $418,688 $2.07 CAPITALIZATION OF NOI: @ 11.0% $3,806,255 $18.85 Rounded $3,800,000 $18.81 ==================================================================================================
Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 59 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Additional Adjustments In order to attain an "as is" value estimate for the subject property, the appropriate deductions must be made for the cost to cure deferred maintenance. The calculation of these costs is discussed in the Improvement Analysis section of this report. We have estimated deferred maintenance of approximately $360,000. Direct Capitalization "As Is" Summary The concluded value of the subject based on the direct capitalization method is summarized as follows: ============================================================================== DIRECT CAPITALIZATION CONCLUSION ============================================================================== Capitalized Value, Prior to Final Adjustments $3,800,000 Less: Deferred Maintenance 360,000 Net Indicated Direct Capitalization Value "As Is" $3,440,000 Rounded: $3,450,000 Direct Capitalization "As Is" per SF $17.08 ============================================================================== Source: CB Commercial Real Estate Group, Inc. ============================================================================== - -------------------------------------------------------------------------------- 60 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW ANALYSIS Our DCF assumptions are summarized as follows: ================================================================================ MIDWAY PLAZA SHOPPING CENTER SUMMARY OF DISCOUNTED CASH FLOW ASSUMPTIONS ================================================================================ General Assumptions Start Date July 1, 1996 Terms of Analysis 10 years Basis (calendar/ fiscal) Fiscal Software Pro-Ject Growth Rate Assumptions Expenses YR1: 3.0%; 3.5% thereafter Market Rent YR1: Flat; 3.5% thereafter Market Rent Assumptions Local Tenants less than 5,000 SF $4.00 5,000 to 10,000 SF $3.00 Anchor Tenants $3.00 Leasing Assumptions Lease Term local tenants 3 years anchor tenants 10 years Renewal Probability 60% Escalation Expenses over base year Weighted Average of: Tenant Improvements ($/SF) None Months of Free Rent None Leasing Commissions (cashed-out) 2.8% Down Time Between Leases 4 months Miscellaneous Assumptions Credit Loss 1.0% Avg Occupancy Over Projection Period 61% (overall physical occupancy) Structural Maintenance/ Reserves ($/SF) $0.15 Deferred Maintenance $360,000 (Year 1) Financial Assumptions Discount Rate (IRR) 12.0% Terminal Overall Capitalization Rate (R(o)) 11.0% Costs of Sale 3.0% ================================================================================ Source: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 61 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Discount Rate Selection Rate selection requires that an appraiser verify and interpret the attitude and expectations of market participants (buyers, sellers, advisors, and brokers, among others). In selecting yield rates at which cash flows are to be discounted, an emphasis is placed on the prospective or forecast yield rates anticipated by typical buyers and sellers. This rate is influenced by many factors, including the degree of apparent risk, market attitudes toward future inflation, the prospective rates of return for alternative investments, the rates of return earned by comparable properties in the past, the supply and demand of mortgage funds, and the availability of tax shelters. One method for establishing a discount rate for the subject is to review the criteria of major investors in the marketplace. This may serve as a check against other techniques or may be a primary source when ample data exists. This technique is considered to be appropriate for the subject. The results of relevant published investor survey data are summarized in the following table. ================================================================================ CB COMMERCIAL 1Q 1996 NATIONAL INVESTOR SURVEY SUMMARY OF INTERNAL RATES OF RETURN FOR CLASS B SHOPPING CENTERS ================================================================================ # of Average Property Type Respondents IRR Range Rate ================================================================================ Neighborhood Centers 10 12% - 14.5% 13.1% Community Centers 10 12% - 15% 13.4% ================================================================================ Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The survey indicates a range of discount rates between 12% and 15%, with rates generally clustering in the 12% to 13% range. The subject is an average property which has minimal prospects for income growth over the holding period. Therefore, it would appear that the subject has an average degree risk and the appropriate discount rate is likely to be near the low end of the range indicated in the preceding table. These factors indicate that the appropriate discount rate for the subject would likely fall in the range of 12.0% on the basis of published investor survey data. - -------------------------------------------------------------------------------- 62 MIDWAY PLAZA SHOPPING CENTER ANNUAL CASH FLOW REPORT BEGINNING 7/1/96 FOR 11 YEARS
FY1997 FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 INCOME MINIMUM RENT: ALL TENANTS 525,016 509,877 508,447 455,520 491,141 493,070 462,436 500,683 483,080 475,467 524,699 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL MINIMUM RENT 525,016 509,877 508,447 455,520 491,141 493,070 462,436 500,683 483,080 475,467 524,699 RECOVERIES: RE TAX RECOVERY 10,445 10,481 9,619 8,574 8,556 9,122 9,467 9,485 7,984 8,497 10,849 CAM RECOVERY 44,458 43,671 32,975 21,306 18,580 19,991 20,974 21,071 16,503 17,878 24,665 INS RECOVERY 893 857 662 297 254 404 436 283 454 553 494 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL RECOVERIES 55,796 55,009 43,256 30,177 27,390 29,517 30,877 30,839 24,941 26,928 36,008 OVERAGE RENT 16,781 17,949 19,128 20,320 21,523 22,738 23,965 25,205 26,457 129,306 133,832 SALES VOLUME (000) 1,168 1,179 1,191 1,203 1,215 1,227 1,240 1,252 1,265 1,293 1,338 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- GROSS RENTAL INCOME 597,593 582,835 570,831 506,017 540,054 545,325 517,278 556,727 534,478 631,701 694,539 CREDIT LOSS (5,976) (5,828) (5,708) (5,060) (5,401) (5,453) (5,173) (5,567) (5,345) (6,317) (6,945) OTHER INCOME 1,800 1,827 1,882 1,938 1,996 2,056 2,118 2,182 2,247 2,314 2,384 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL INCOME 593,417 578,834 567,005 502,895 536,649 541,928 514,223 553,342 531,380 627,698 689,978 EXPENSES COMMON AREA MAINT 61,000 62,068 64,240 66,488 68,815 71,224 73,717 76,297 78,967 81,731 84,592 REAL ESTATE TAXES 25,822 26,662 27,595 28,561 29,560 30,595 31,666 32,774 33,921 35,108 36,337 INSURANCE 14,100 14,347 14,849 15,369 15,906 16,463 17,039 17,636 18,253 18,892 19,553 MANAGEMENT FEE 23,737 23,153 22,680 20,116 21,466 21,677 20,569 22,134 21,255 25,108 27,599 GENERAL & ADMIN 5,000 5,088 5,266 5,450 5,641 5,838 6,042 6,254 6,473 6,699 6,934 RESERVES 30,300 30,830 31,909 33,026 34,182 35,378 36,617 37,898 39,225 40,598 42,018 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL EXPENSES 159,959 162,148 166,539 169,010 175,570 181,175 185,650 192,993 198,094 208,136 217,033 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- NET OPERATING INCOME 433,458 416,686 400,466 333,885 361,079 360,753 328,573 360,349 333,286 419,562 472,945 COMMISSIONS 8,202 9,314 12,202 10,976 1,153 1,966 10,280 15,068 2,213 5,117 13,239 DEFERRED MAINT 360,000 0 0 0 0 0 0 0 0 0 0 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- CASH FLOW 65,256 407,372 388,264 322,909 359,926 358,787 318,293 345,281 331,073 414,445 459,706
================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Reversion The reversionary value of the subject is based on an assumed sale at the end of the holding period based on capitalizing the following year's NOI. Additionally, any capital costs, leasing commissions, and tenant improvements associated with the following year's NOI are deducted. Based on our surveys, reversionary capitalization rates are typically considered to be 0 to 100 basis points higher than going-in capitalization rates on a typical holding period. This is a result of the uncertainty of future economic conditions and the natural aging of the property. In the case of the subject, we feel no premium over the going-in capitalization rate is warranted because of the subject's age and current market position. The appropriate terminal capitalization rate for the reversion is, therefore, estimated to be 11.0%. DCF Conclusion The subject's projected cash flow generated via this DCF analysis is shown on the facing page. A value of $3,200,000, or $15.84 per square foot, is suggested for this scenario based on a discount rate of 12.0% and a reversion capitalization rate of 11.0%. Furthermore, 57% of the value is derived from cash flow over the holding period, with the remaining 43% generated from the reversionary sale of the property at the end of the holding period. CONCLUSION OF INCOME CAPITALIZATION APPROACH The preceding analysis indicates the following conclusions: ===================================================================== INCOME CAPITALIZATION APPROACH VALUES ===================================================================== Method Indicated Value ===================================================================== Direct Capitalization $3,450,000 Discounted Cash Flow $3,200,000 ===================================================================== Source: CB Commercial Real Estate ===================================================================== We feel that the direct capitalization analysis represents the preferred methodology of potential investors in the market for property such as the subject. However, the DCF model is also employed at times and generally supports the direct capitalization analysis. Therefore, we have correlated at a value between the range indicated by the two methods, with primary emphasis placed on the direct capitalization analysis. As a result, CB Commercial concludes a value for the subject improvements of $3,300,000, or $16.34 per rentable square foot. - -------------------------------------------------------------------------------- 63 CONCLUSION CONCLUSION ================================================================================ RECONCILIATION - -------------------------------------------------------------------------------- RECONCILIATION OF VALUE CB Commercial was instructed to estimate the market value of the leased fee interest in the subject property. The value conclusion for each applicable approach is summarized below. =========================================================================== SUMMARY OF VALUE CONCLUSIONS =========================================================================== Land Value: N/A Cost Approach: N/A Sales Comparison Approach: $3,275,000 Income Capitalization Approach: $3,300,000 =========================================================================== Source: CB Commercial Real Estate Group, Inc. =========================================================================== The Income Capitalization Approach is considered the most persuasive method for valuing the subject property. This approach is predicated on the principle of anticipated economic benefits and therefore, best reflects the investment characteristics of the subject. Properties such as the subject are typically purchased by investors; thus, this approach must closely parallel the anticipated analysis that would be employed by the most typical purchaser. The Sales Comparison Approach is predicated on the principle that an investor would pay no more for an existing property than for a comparable property with similar utility. This approach is contingent on the reliability and comparability of available data. The data developed was considered sufficiently reliable to reach a value conclusion by the Sales Comparison Approach. However, this method is given secondary consideration in the reconciliation and used as support for the Income Approach. The Cost Approach is predicated on the principle that an investor would pay no more for an existing property than it would cost to acquire land and construct a building with similar utility. The Cost Approach is not relied upon because estimating developer profit is very subjective and the Marshall Valuation Service cost guide is based on numerous assumptions that may not directly apply to the subject, rendering this method less reliable. This approach was not utilized in our analysis. In arriving at the final value conclusion, greatest weight was placed on the Income Capitalization Approach. The final value conclusion and the approach relied upon give strong - -------------------------------------------------------------------------------- 64 ================================================================================ RECONCILIATION - -------------------------------------------------------------------------------- consideration to the market behavior of the typical buyer and current market environment for the property appraised. Based on the foregoing analysis, it is concluded that the market value as is of the leased fee interest in the subject property, as of July 1, 1996 is: THREE MILLION THREE HUNDRED THOUSAND DOLLARS ($3,300,000) - -------------------------------------------------------------------------------- 65 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS 1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to total that would adversely affect marketability or value. CB Commercial is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CB Commercial, however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject property's title should be sought from a qualified title company that issues or insures title to real property. 2. It is assumed that improvements have been constructed or will be constructed according to approved architectural plans and specifications and in conformance with recommendations contained in or based upon any soils report(s). Unless otherwise specifically noted in the body of this report, it is assumed: that any existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are, or will be upon completion, in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that it or they will withstand any known elements such as windstorm, hurricane, tornado, flooding, earthquake, or similar natural occurrences; and, that the improvements, as currently constituted, conform to all applicable local, state, and federal building codes and ordinances. CB Commercial professionals are not engineers and are not competent to judge matters of an engineering nature. CB Commercial has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CB Commercial by ownership or management; CB Commercial inspected less than 100% of the entire interior and exterior portions of the improvements; and CB Commercial was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CB Commercial reserves the right to amend the appraisal conclusions reported herein. 3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property was not observed by the appraisers. CB Commercial has no knowledge of the existence of such materials on or in the property. CB Commercial, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the appraisal. 4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CB Commercial. This report may be subject to amendment upon re-inspection of the subject property subsequent to repairs, modifications, alterations and completed new - -------------------------------------------------------------------------------- 66 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels of operation. 5. It is assumed that all factual data furnished by the client, property owner, owner's representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CB Commercial has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, Assessor's Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CB Commercial reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CB Commercial of any questions or errors. 6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CB Commercial will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject. 7. CB Commercial assumes no private deed restrictions, limiting the use of the subject property in any way. 8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposit or subsurface rights of value involved in this appraisal, whether they be gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred. 9. CB Commercial is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject. 10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market. 11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CB Commercial does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CB Commercial. 12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CB Commercial to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form. 13. Also, unless otherwise noted in the body of this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated. 14. This study may not be duplicated in whole or in part without the specific written consent of CB Commercial nor may this report or copies hereof be transmitted to third parties without said consent, which consent CB - -------------------------------------------------------------------------------- 67 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- Commercial reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or its contents shall not be published, in whole or in part, in any public document without the express written consent of CB Commercial which consent CB Commercial reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a "sale" or "offer for sale" of any "security", as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CB Commercial shall have no accountability or responsibility to any such third party. 15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report. 16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used. 17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area of the subject and comparable properties has been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report. 18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CB Commercial unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CB Commercial assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance. 19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or client's designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CB Commercial assumes responsibility for any situation arising out of the Client's failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired. 20. CB Commercial assumes that the subject property analyzed herein will be under prudent and competent management and ownership; neither inefficient or super-efficient. 21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the appraisal report. 22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist. 23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Notwithstanding any discussion of possible readily achievable barrier removal construction items in this report, CB Commercial has not made a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect on the value estimated herein. Since CB Commercial has no specific information relating to this issue, nor is CB Commercial qualified to make - -------------------------------------------------------------------------------- 68 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject property. - -------------------------------------------------------------------------------- 69 ADDENDA ADDENDA ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- Addendum A GLOSSARY OF TERMS assessed value Assessed value applies in ad valorem taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to market value, but it is usually calculated in relation to a market value base. + cash equivalency The procedure in which the sale prices of comparable properties sold with atypical financing are adjusted to reflect typical market terms. contract, coupon, face, or nominal rent The nominal rent payment specified in the lease contract. It does not reflect any offsets for free rent, unusual tenant improvement conditions, or other factors that may modify the effective rent payment. coupon rent See Contract, Coupon, Face, or Nominal Rent effective rent 1) The rental rate net of financial concessions such as periods of no rent during a lease term; may be calculated on a discounted basis, reflecting the time value of money, or on a simple, straight-line basis. ++ 2) The economic rent paid by the lessee when normalized to account for financial concessions, such as escalation clauses, and other factors. Contract, or normal, rents must be converted to effective rents to form a consistent basis of comparison between comparables. face rent See Contract, Coupon, Face, or Nominal Rent fee simple estate Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. ++ floor area ratio (FAR) The relationship between the above-ground floor area of a building, as described by the building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area; also called building-to-land ratio. ++ full service lease A lease in which rent covers all operating expenses. Typically, full service leases are combined with an expense stop, the expense level covered by the contract lease payment. Increases in expenses above the expense stop level are passed through to the tenant and are known as expense pass-throughs. going concern value Going concern value is the value of a proven property operation. It includes the incremental value associated with the business concern, which is distinct from the value of the real estate only. Going concern value includes an intangible enhancement of the value of an operating business enterprise which is produced by the assemblage of the land, building, labor, equipment, and marketing operation. This process creates an economically viable business that is expected to continue. Going concern value refers to the total value of a property, including both real property and intangible personal property attributed to the business value. + gross building area (GBA) The sum of all areas at each floor as measured to the exterior walls. insurable value Insurable Value is based on the replacement and/or reproduction cost of physical items that are subject to loss from hazards. Insurable value is that portion of the value of an asset or asset group that is acknowledged or recognized under the provisions of an applicable loss insurance policy. This value is often controlled by state law and varies from state to state. + investment value Investment value is the value of an investment to a particular investor based on his or her investment requirements. In contrast to market value, investment value is value to an individual, not value in the marketplace. Investment value reflects the subjective relationship between a particular investor and a given investment. When measured in dollars, investment value is the price an investor would pay for an investment in light of its perceived capacity to satisfy his or her desires, needs, or investment goals. To estimate investment value, specific investment criteria must be known. Criteria to evaluate a real estate investment are not necessarily set down by the individual investor; they may be established by an ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- expert on real estate and its value, that is, an appraiser. + leased fee See leased fee estate leased fee estate An ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.++ leasehold See leasehold estate leasehold estate The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.++ load factor The amount added to usable area to calculate the rentable area. It is also referred to as a "rentable add-on factor" which, according to BOMA, "is computed by dividing the difference between the usable square footage and rentable square footage by the amount of the usable area. Convert the figure into a percentage by multiplying by 100. market value "as if complete" on the appraisal date Market value as if complete on the appraisal date is an estimate of the market value of a property with all construction, conversion, or rehabilitation hypothetically completed, or under other specified hypothetical conditions as of the date of the appraisal. With regard to properties wherein anticipated market conditions indicate that stabilized occupancy is not likely as of the date of completion, this estimate of value should reflect the market value of the property as if complete and prepared for occupancy by tenants. market value "as is" on the appraisal date Market value "as is" on the appraisal date is an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date of appraisal. market value Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1) A reasonable time is allowed for exposure in the open market; 2) Both parties are well informed or well advised, and acting in what they consider their own best interests; 3) Buyer and seller are typically motivated; 4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.*** marketing period The time it takes an interest in real property to sell on the market subsequent to the date of an appraisal. ++ net lease Lease in which all or some of the operating expenses are paid directly by the tenant. The landlord never takes possession of the expense payment. In a Triple Net Lease all operating expenses are the responsibility of the tenant, including property taxes, insurance, interior maintenance, and other miscellaneous expenses. However, management fees and exterior maintenance are often the responsibility of the lessor in a triple net lease. A modified net lease is one in which some expenses are paid separately by the tenant and some are included in the rent. net rentable area (NRA) 1) The area on which rent is computed. 2) The Rentable Area of a floor shall be computed by measuring to the inside finished surface of the dominant portion of the permanent outer building walls, excluding any major vertical penetrations of the floor. No deductions shall be made for columns and projections necessary to the building. Include space such as mechanical room, janitorial room, restrooms, and lobby of the floor. * nominal rent See Contract, Coupon, Face, or Nominal Rent prospective future value "upon completion of construction" Prospective future value "upon completion of construction" is the prospective value of a property on the future date that construction is completed, based upon market conditions forecast to exist, as of that completion date. The value ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- estimate at this stage is stated in current dollars unless otherwise indicated. prospective future value "upon reaching stabilized occupancy" Prospective future value "upon reaching stabilized occupancy" is the prospective value of a property at a future point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. The value estimate at this stage is stated in current dollars unless otherwise indicated. reasonable exposure time The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market. ** rent see full service lease net lease contract, coupon, face, or nominal rent effective rent shell space Space which has not had any interior finishing installed, including even basic improvements such as ceilings and interior walls, as well as partitions, floor coverings, wall coverings, etc.. Usable Area 1) The area actually used by individual tenants. 2) The Usable Area of an office is computed by measuring to the finished surface of the office side of corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished surface of the dominant portion of the permanent outer building walls. Excludes areas such as mechanical rooms, janitorial room, restrooms, lobby, and any major vertical penetrations of a multi-tenant floor. * use value Use value is a concept based on the productivity of an economic good. Use value is the value a specific property has for a specific use. Use value focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to the property's highest and best use or the monetary amount that might be realized upon its sale. + value appraised During the real estate development process, a property typically progresses from a state of unimproved land to construction of improvements to stabilized occupancy. In general, the market value associated with the property increases during these stages of development. After reaching stabilized occupancy, ongoing forces affect the property during its life, including a physical wear and tear, changing market conditions, etc. These factors continually influence the property's market value at any given point in time. See also market value "as is" on the appraisal date market value "as if complete" on the appraisal date prospective future value "upon completion of construction" prospective future value "upon reaching stabilized occupancy" - ---------- + The Appraisal of Real Estate, Tenth Edition, Appraisal Institute, 1992. ++ The Dictionary of Real Estate Appraisal, Third Edition, 1993. *** The office of the Comptroller of the Currency, 12 CFR Part 34, Subpart C, ss.34.42(f), August 24, 1990. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. * 1990 BOMA Experience Exchange Report, Income/Expense Analysis for Office Buildings (Building Owners and Managers Association, 1990) ** Statement on Appraisal Standard No. 6, Appraisal Standards Board of The Appraisal Foundation, September 19, 1992. ================================================================================ ADDENDUM B ADDITIONAL SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- Addendum B ADDITIONAL SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B ADDITIONAL SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- VIEW EAST ALONG PEPPERELL PARKWAY FROM MIDWAY DRIVE - 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-------------------------------------------------------------------------------- EXTERIOR VIEW OF SUBJECT PROPERTY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B ADDITIONAL SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF SUBJECT PROPERTY REAR ELEVATION - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF SUBJECT PROPERTY REAR ELEVATION - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B ADDITIONAL SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF SUBJECT PROPERTY'S REAR ELEVATION - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF SUBJECT PROPERTY REAR ELEVATION - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B ADDITIONAL SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF OUTPARCEL BUILDING - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- EXTERIOR VIEW OF OUTPARCEL BUILDING - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM C LEGAL DESCRIPTION - -------------------------------------------------------------------------------- Addendum C LEGAL DESCRIPTION - -------------------------------------------------------------------------------- ================================================================================ LEGAL DESCRIPTION ALL THAT TRACT OR PARCEL OF LAND LYING AND BEING IN SECTION 15. TOWNSHIP 19 NORTH, RANGE 26 EAST, OPELIKA, LEE COUNTY, ALABAMA AND BEING PARTICULARLY DESCRIBED AS FOLLOWS; STARTING AT THE NORTHWEST CORNER OF SECTION 15, TOWNSHIP 19 NORTH, RANGE 28 EAST; THENCE EAST 820.52'; THENCE SOUTH 2983.87' TO A POINT ON THE EASTERLY RIGHT OF WAY OF SPEEDWAY DRIVE, SAID POINT BEING THE NORTHWEST CORNER AND THE TRUE POINT OF BEGINNING OF THE LAND HEREIN DESCRIBED; THENCE S 89(DEGREE) 30' E, 1133.50' TO A POINT; THENCE S 00(DEGREE) 30' W, 43.00' TO A POINT; THENCE S 89(DEGREE) 30' E 100.00' TO A POINT ON THE WESTERLY RIGHT OF WAY OF MIDWAY DRIVE; THENCE ALONG AND WITH THE WESTERLY RIGHT OF WAY OF MIDWAY DRIVE S 00(DEGREE) 30' W, 407.70' TO A POINT; THENCE LEAVING SAID RIGHT OF WAY LINE N 89(DEGREE) 30' W, 150.30' TO A POINT; THENCE S 00(DEGREE) 30' W, 310.50' TO A POINT ON THE NORTHERLY LINE OF U.S. HIGHWAY 29 (PEPPERELL PARKWAY); THENCE ALONG AND WITH THE NORTHERLY RIGHT OF WAY OF U.S. HIGHWAY 29 (PEPPERELL PARKWAY) S 74(DEGREE) 56' W, 299.60' TO A POINT; THENCE SOUTHWESTERLY ALONG A CURVE TO THE LEFT THROUGH THE FOLLOWING COURSES; S 73(DEGREE) 15' W, 100.00'; S 70(DEGREE) 14' W, 100.00'; S 66(DEGREE) 12' W, 100.00'; S 62 (DEGREE) 44' W, 89.60'; S 58 (DEGREE) 40' W, 128.90; S 54 (DEGREE) 45' W, 100.00' TO A POINT MARKING THE INTERSECTION OF THE NORTHERLY RIGHT OF WAY OF U.S. HIGHWAY 29 (PEPPERELL PARKWAY) AND THE NORTHWESTERLY RIGHT OF WAY OF SPEEDWAY DRIVE; THENCE ALONG AND WITH THE NORTHEASTERLY RIGHT OF WAY OF SPEEDWAY DRIVE N 34(DEGREE) 21' W, 208.40' TO A POINT; THENCE ALONG AND WITH THE NORTHEASTERLY RIGHT OF WAY OF SPEEDWAY DRIVE N 64(DEGREE) 19' W, 12.25' TO A POINT; THENCE LEAVING SAID RIGHT OF WAY LINE N 02(DEGREE) 42' E, 879.60' TO A POINT; THENCE N 89(DEGREE) 30'W, 150.10' TO A POINT ON THE EASTERLY RIGHT OF WAY OF SPEEDWAY DRIVE; THENCE ALONG AND WITH THE EASTERLY RIGHT OF WAY OF SPEEDWAY DRIVE N 02(DEGREE) 42' E, 60.00' TO THE TRUE POINT OF BEGINNING. TRACT CONTAINS 21.725 ACRES. TRACT IS BOUNDED ON THE NORTH BY LONG SUBDIVISION AND LAWLER PROPERTY, ON THE EAST BY MIDWAY DRIVE, EAGLE FEDERAL SAVINGS AND LOAN ASSOCIATION, SAXON OIL [ILLEGIBLE] THE SOUTH BY EAGLE FEDERAL SAVINGS AND LOAN ASSOCIATION, U.S. HIGHWAY 29 (PEPPERELL PARKWAY), AND ON THE WEST BY SPEEDWAY DRIVE AND LONG SUBDIVISION. ================================================================================ ================================================================================ ADDENDUM D RENT ROLL - -------------------------------------------------------------------------------- Addendum D RENT ROLL - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Detail Rent Roll Page: 14 MIDWAY PLAZA Date: 05/14/96 Report Date: 05/14/96 Time: 13:42:59 - --------------------------------------------------------------------------------
Rent Dates Suite Commence Expire Square Monthly Annual ----Cost Recovery -- Expense No. Tenant Name Start Footage Base Rent Rate/SF Description Monthly Stop - ---------------------------------------------------------------------------------------------------------------------- 00010 INTERCEL 02/01/94 01/31/99 5,730 2,148.75 4.50 02/01/94 0002* BARGAIN TOWN STORE #919 09/27/90 01/31/98 15,000 3,333.33 2.67 09/27/90 00030 HANCOCK FABRIC 10/07/88 10/31/98 9,000 2,250.00 3.00 10/07/88 00040 CITY FINANCE CO. OF ALABAMA 10/15/93 10/14/98 2,000 1,000.00 6.00 10/15/93 00050 SOUTHERN ANGLERS 04/22/96 04/30/97 2,000 900.00 5.40 04/22/96 00060 CAROL'S STYLING 01/01/81 12/31/96 1,250 520.84 5.00 01/01/81 0007A AL. DEPT. OF HUMAN RESOURCES 01/02/94 12/31/98 4,000 2,000.00 6.00 01/02/94 0014A GENERAL SERVICES ADMINISTRAT 09/01/91 08/31/96 4,583 3,974.09 10.41 09/01/91 0014B ALAMBAMA MEDICAID AGENCY 12/12/91 12/31/96 3,000 1,562.50 6.25 12/12/91 00190 SINGER CENTER 11/01/81 12/31/96 3,000 550.00 2.20 11/01/81 0020* MIDWAY DENTAL 09/01/91 12/31/96 2,935 1,186.23 4.85 09/01/91 00250 EASTWYNN THEATRES 03/21/85 06/30/05 25,238 9,548.37 4.54 06/28/85 00270 OLAN MILLS 11/01/84 04/30/97 1,050 568.75 6.50 11/01/84 Suite ---- Other Income --- ---- Future Rent Increases -- No. Tenant Name Description Monthly Date Monthly Amt. Per Sf - -------------------------------------------------------------------------------------------- 00010 INTERCEL MAINTENANC 209.97 02/01/97 2,387.50 5.00 REAL ESTAT 71.63 02/01/98 2,626.25 5 50 ----------- 281.60 0002* BARGAIN TOWN STORE #919 00030 HANCOCK FABRIC 00040 CITY FINANCE CO. OF ALABAMA MAINTENANC 125.00 REAL ESTAT 20.73 ----------- 145.73 00050 SOUTHERN ANGLERS MAINTENANC 75.00 05/01/97 966.67 5.80 REAL ESTAT 25.00 ----------- 100.00 00060 CAROL'S STYLING MAINTENANC 43.05 REAL ESTAT 12.96 ----------- 56.01 0007A AL. DEPT. OF HUMAN RESOURCES 01/01/97 2,166.67 6.50 0014A GENERAL SERVICES ADMINISTRAT 0014B ALAMBAMA MEDICAID AGENCY 00190 SINGER CENTER MAINTENANC 46.82 0020* MIDWAY DENTAL NAINTENANC 87.00 REAL ESTAT 37.90 ----------- 124.90 00250 EASTWYNN THEATRES MAINTENMIC 795.67 REAL ESTAT 261.64 ----------- 1,057.31 00270 OLAN MILLS MAINTENAN 17.50 REAL ESTAT 21.02 ----------- 38.52
- -------------------------------------------------------------------------------- Detail Rent Roll Page: 14 MIDWAY PLAZA Date: 05/14/96 Report Date: 05/14/96 Time: 13:44:09 - --------------------------------------------------------------------------------
Rent Dates Suite Commence Expire Square Monthly Annual ----Cost Recovery -- Expense No. Tenant Name Start Footage Base Rent Rate/SF Description Monthly Stop - --------------------------------------------------------------------------------------------------------------------- 0030A DOLLAR GENERAL STORES - #160 11/25/94 11/30/99 7,300 1,750.00 2.88 11/25/94 28290 THE THRIFTY NICKLE 08/01/94 09/30/99 1,750 875.00 6.00 10/01/94 00180 BEN FRANKLIN CRAFTS 11/08/95 11/30/05 30,000 7,500.O0 3.0O 11/08/95 00100 CHILD CARE RESOURCE CENTER 01/01/96 12/31/97 5,200 2,491.67 5.75 01/01/96 - --------------------------------------------------------------------------------------------------------------------- Total Building Occupied Sqft: 61% 123,036 42,159.53 0.00 Available Sqft: 39% 78,940 Total Sqft: 201,976 - --------------------------------------------------------------------------------------------------------------------- Suite ---- Other Income --- ---- Future Rent Increases --- No. Tenant Name Description Monthly Date Monthly Amt. Per Sf. - -------------------------------------------------------------------------------------------- 0030A DOLLAR GENERAL STORES - #160 MAINTENANC 152.08 28290 THE THRIFTY NICKLE 10/01/97 1,O20.83 7.00 00180 BEN FRANKLIN CRAFTS MAINTENANC 1,215.71 12/01/00 8,125.00 3.25 REAL ESTAT 375.00 12/01/05 9,375.00 3.75 ----------- 12/01/10 10,625.00 4.25 1,590.71 00100 CHILD CARE RESOURCE CENTER 01/01/97 2,600.00 6.00 01/01/98 2,708.33 6.25 01/01/99 2,816.67 6.50 - ------------------------------------------------------------ Total Building 3,593.68 - ------------------------------------------------------------
================================================================================ ADDENDUM E HISTORICAL OPERATING STATEMENTS - -------------------------------------------------------------------------------- Addendum E HISTORICAL OPERATING STATEMENTS Mark Centers Trust Net operating income for the mortgaged properties ================================================================================ Midway ================================================================================
For the years ended December 31, 1st Qtr 96 9 months Actuals budget Total 1996 1995 1994 1993 ------- ------ ---------- ---- ---- ---- Income Rent $123,623 $374,172 $497,795 $502,100 $472,055 $446,734 Percentage rents 0 16,800 16,800 14,229 6,928 7,556 Common area maintenance 9.405 35,247 44,652 22,721 20,526 11,076 Real estate tax 1,884 9,898 11,782 6,804 9,944 6,850 Utility 0 0 0 0 0 244 Insurance 106 729 835 415 904 527 Ground rent 0 0 0 0 0 0 Other 520 342 862 2,106 1,831 2,266 ---------------------------------------------------------------------------------- Total income 135,538 437,188 572,726 548,375 512,188 475,254 ---------------------------------------------------------------------------------- Expenses Landscaping 0 450 450 1,527 522 530 Cleaning 2,662 11,725 14,387 13,907 12,464 13,389 Utilities 3,689 10,575 14,264 13,230 10,794 12,058 Security 0 0 0 0 0 0 Maint. and repairs 20,563 11,350 31,913 14,937 46,442 (2,423) Real estate tax 6,360 20,997 27,357 24,801 28,325 26,678 Insurance 3,012 11,079 14,091 14,895 17,596 19,700 Provision for bad debt 0 4,797 4,797 0 0 3,564 Salaries and wages 0 0 0 349 0 0 Ground rent 0 0 0 0 0 0 Professional fees 581 0 581 3,080 0 2,292 Other (110,775) 1,350 (109,425) 2,488 4,987 3,821 ---------------------------------------------------------------------------------- Total expenses (73,908) 72,323 (1,585) 89,214 121,130 79,610 ---------------------------------------------------------------------------------- Net operating income $209,446 $364,865 $574,311 $459,161 $391,058 $395,644 =================================================================================
Note: Capital expenditures is provided under section B of Exhibit A 05/16/96 ================================================================================ ADDENDUM F COMPARABLE IMPROVED SALES - -------------------------------------------------------------------------------- Addendum F COMPARABLE IMPROVED SALES - -------------------------------------------------------------------------------- RETAIL SALE 1 ================================================================================ Location Data Property Name: Broad Street Center Location: NW Broad Street and W. Clark Boulevard City: Murfreesboro County: Rutherford State/Zip: Tennessee Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Land Area: N/A Excess Land: N/A Gross Leasable Area: Anchors: K-Mart 103,171 SF Big Lots 29,888 SF Walgreens 9,824 SF Local Tenant GLA: 38,226 SF Anchor Tenant GLA: 142,883 SF Total GLA: 181,109 SF GLA Purchased: 181,109 SF Year Built: 1975 Parking: Adequate surface Condition: Good Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 08/95 Marketing Time: N/A Grantor: Brinkley & Associates Grantee: Meridan Realty Company Document No.: N/A Sale Price: $5,300,000 Financing: Cash to Seller Cash Equivalent Price: $5,300,000 Required Capital Cost: $0 Adjusted Sales Price: $5,300,000 Verification: Withheld Upon Request Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100% Existing or Pro Forma Income: Existing TOTAL P.S.F. --------- ------- Potential Gross Income: $862,342 $4.76 Vacancy and Credit Loss: $60,364 $0.33 Effective Gross Income: $801,978 $4.43 Expenses: $208,378 $1.15 Net Operating Income: $593,600 $3.28 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 1 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap Overall Capitalization Rate (OAR): 11.20% Projected IRR: N/A Effective Gross Multiplier (EGIM): 6.61 Operating Expense Ratio (OER): 25.98% Price Per Square Foot: $29.26 Comments This center is located in northwest Murfreesboro and has good access, exposure, and market appeal. The center was constructed as an enclosed mall in 1975 and renovated as an open-air community center in 1992. Occupancy at the time of sale was 100% however, Walgreens is due to vacate relatively soon. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 2 ================================================================================ Location Data Property Name: Spring Mill Village Location: 6011 Memorial Drive City: Tucker County: Dekalb State/Zip: Georgia Assessor's Parcel No(s): 18-72-2-71 Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 14.74 Acres Excess Land: None Gross Leasable Area: Anchors: Marshalls 27,840 SF Old Country Buffet 10,848 SF Local Tenant GLA: 60,912 SF Anchor Tenant GLA: 38,688 SF Total GLA: 99,600 SF GLA Purchased: 99,600 SF Year Built: 1974 Parking: 647 surface spaces Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 7/95 Marketing Time: N/A Grantor: Copley Real Estate Advisors/New England Mutual Grantee: Mimms Enterprises Document No.: DB 8611 P 522 Sale Price: $3,900,000 Financing: Cash to Seller Cash Equivalent Price: $3,900,000 Required Capital Cost: $0 Adjusted Sales Price: $3,900,000 Verification: Eric Zimmerman - Broker Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 95% Existing or Pro Forma Income: Existing TOTAL P.S.F. -------- -------- Potential Gross Income: $466,819 $4.69 Vacancy and Credit Loss: $37,346 $0.37 Effective Gross Income: $429,473 $4.31 Expenses: $21,474 $0.22 Net Operating Income: $407,999 $4.10 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 2 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap Overall Capitalization Rate (OAR): 10.46 % Projected IRR: N/A Effective Gross Multiplier (EGIM): 9.08 Operating Expense Ratio (OER): 5.00 % Price Per Square Foot: $39.16 Comments This center is located in an older retail area of metropolitan Atlanta. It has average access and visibility. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 3 ================================================================================ Location Data Property Name: Village Shopping Center Location: West Spring Street & Breedlove Drive City: Monroe County: Walton State/Zip: Georgia Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 10.00 Acres Excess Land: None Gross Leasable Area: Anchors: Winn-Dixie 29,888 SF Heilig Myers 24,768 SF Eckerd Drugs 7,472 SF Local Tenant GLA: 37,872 SF Anchor Tenant GLA: 62,128 SF Total GLA: 100,000 SF GLA Purchased: 100,000 SF Year Built: 1975 Parking: 900 surface spaces Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 5/95 Marketing Time: N/A Grantor: G.D.B. Associates Grantee: Old Colony Associates Document No.: N/A Sale Price: $2,500,000 Financing: Cash To Seller Cash Equivalent Price: $2,500,000 Required Capital Cost: $75,000 Adjusted Sales Price: $2,575,000 Verification: N/A Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100% Existing or Pro Forma Income Pro Forma TOTAL P.S.F. --------- ------ Potential Gross Income: $428,694 $4.29 Vacancy and Credit Loss: $42,869 $0.43 Effective Gross Income: $385,825 $3.86 Expenses: $81,726 $0.82 Net Operating Income: $304,099 $3.04 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 3 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap and DCF Overall Capitalization Rate (OAR): 11.81% Projected IRR: N/A Effective Gross Multiplier (EGIM): 6.67 Operating Expense Ratio (OER): 21.18% Price Per Square Foot: $25.75 Comments Deferred maintenance of $75,000 was neccesary for ADA requirements and miscellaneous repairs to the parking lot and roof. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 5 ================================================================================ Location Data Property Name: Priest Lake Plaza Location: SWC Of Murfreesboro Road At Bell Road City: Nashville County: Davidson State/Zip: Tennessee Assessor's Parcel No(s): 149-0-235 Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 8.73 Acres Excess Land: None Gross Leasable Area: Anchors: Kroger 30,975 SF Super X 13,280 SF Local Tenant GLA: 55,745 SF Anchor Tenant GLA: 44,255 SF Total GLA: 100,000 SF GLA Purchased: 100,000 SF Year Built: 1977 Parking: Adequate surface Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 12/93 Marketing Time: N/A Grantor: Bank One, Lexington, NAE Grantee: PL Nashville Limited Partnership Document No.: DB 9200 P 558 Sale Price: $2,310,000 Financing: Cash to Seller Cash Equivalent Price: $2,310,000 Required Capital Cost: $0 Adjusted Sales Price: $2,310,000 Verification: Ed Brown, Broker-Eden & Avant Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 78% Existing or Pro Forma Income: Pro Forma TOTAL P.S.F. --------- ------- Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $286,000 $2.86 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 4 ================================================================================ Location Data Property Name: Cross Country Plaza Location: I-85 & Macon Road City: Columbus County: Muscogee State/Zip: Georgia Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Land Area: 35.50 Acres Excess Land: None Gross Leasable Area: Anchors: Service Merchandise Talbot's Blockbuster Video Fashion Bug Local Tenant GLA: N/A Anchor Tenant GLA: N/A TotaI GLA: N/A GLA Purchased: 337,360 SF Year Built: 1968 Parking: 2,500 surface spaces Condition: Average Exterior Walls Masonry Sale Data Transaction Type: Sale Date of Transaction: 2/95 Marketing Time: N/A Grantor: Cross Country Shopping, Inc (The Dial Companies) Grantee: Columbus Cross Country (TCW Asset Mgmt Co.) Document No.: DB 4205 P 285 Sale Price: $10,000,000 Financing: Cash to Seller Cash Equivalent Price: $10,000,000 Required Capital Cost: $0 Adjusted Sales Price: $10,000,000 Verification: Grantor & Deed Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 87% Existing or Pro Forma Income: Existing TOTAL P.S.F. ---------- -------- Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $1,096,420 $3.25 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 4 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap Overall Capitalization Rate (OAR): 10.96 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $29.64 Comments The center is located across Macon Highway from the Columbus Square Mall at one of the busiest intersections in Columbus. The existing vacancy is generally the least desirable space in the center. The property includes five outparcels, including a movie theater, a bank and two restaurants. Access and visibility are good. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 5 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap Overall Capitalization Rate (OAR): 12.38 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $23.10 Comments The Kroger and Super X tenants both have rental rates of $3.35 per square foot. Other leases range from $8.00 to $14.85 per square foot, and typically average $11.00 per square foot. The broker verifying the sale said the net operating income of $286,000 might be slightly overstated, but was consistant with the purchaser's forecast. - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ ADDENDUM G RENT COMPARABLES - -------------------------------------------------------------------------------- Addendum G RENT COMPARABLES - -------------------------------------------------------------------------------- RETAIL RENT COMPARABLE 1 ================================================================================ Location Data Property Name: Pepperell Corners Location: NWC Of Pepperell Parkway @ Highway 280 City: Opelika County: Lee State/Zip: Alabama Assessors Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 305,000 SF Year Built: 1993 Exterior Walls: Masonry Condition: Good Anchor Tenant: Wal-Mart Lowes, Winn-Dixie, Goody's Parking: Adequate surface Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 1,500 SF Term: 5 years Base Rent Per Square Foot: $10.00 - $12.00 Rent Escalations: Negotiable Basis: Net Expense Pass-Through: Triple Net Free Rent (months): None Tenant Improvement: Minimal Leasing Agent: JDN Enterprises Phone No.: (404)262-3252 Survey Date: 7/96 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 1 ================================================================================ Comments Good quality center with good access and visibility. The center represents the most recently constructed shopping center in this market. Photograph [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 2 ================================================================================ Location Data Property Name: Flint's Crossing Location: SEC Of Highway 29 @ University Drive City: Auburn County: Lee State/Zip: Alabama Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 88,000 SF Year Built: 1988 Exterior Walls: Masonry Condition: Good Anchor Tenant: Food Max, Harco Drugs Parking: Adequate surface Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 1,500 SF Term: 3-5 years Base Rent Per Square Foot: $10.00 - $12.00 Rent Escalations: Negotiable Basis: Net Expense Pass-Through: Triple Net Free Rent (months): None Tenant Improvement: Negotiable Leasing Agent: Land Locators Phone No.: (205)821-0928 Survey Date: 7/96 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 2 ================================================================================ Comments Good quality center with good access and visibility from both roads. Photograph [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 3 ================================================================================ Location Data Property Name: Food World Center Location: Highway 280 North Of Interstate 85 City: Opelika County: Lee State/Zip: Alabama Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 110,000 SF Year Built: 1970 Exterior Walls: Masonry Condition: Fair Anchor Tenant: Food World, Bud's Discount City Parking: Adequate surface Lease Data Occupancy: Local: 85% Overall: 95% Typical Size: 2,000 SF Term: 3 years Base Rent Per Square Foot: $3.50 - $8.00 Rent Escalations: Flat Basis: Net Expense Pass-Through: Triple Net Free Rent (months): None Tenant Improvement: As Is Leasing Agent: Helms-Roark Phone No.: (205)264-1102 Survey Date: 7/96 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 3 ================================================================================ Comments This is the second oldest shopping center in this market. Wal-Mart was previously the anchor tenant, but they were replaced by Bud's Discount City when Wal-Mart relocated to Pepperell Corners. The center has good access and visibility primarily due to its proximity to the interstate. Photograph [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 4 ================================================================================ Location Data Property Name: Corner Village Location: NEC Of Dean Road & Glenn Avenue City: Auburn County: Lee State/Zip: Alabama Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 62,300 SF Year Built: 1978 Exterior Walls: Masonry Condition: Average Anchor Tenant: Kroger Parking: Adequate surface Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 1,200 SF Terrn: 3 years Base Rent Per Square Foot: $7.00 - $9.00 Rent Escalations: Negotiable Basis: Net Expense Pass-Through: Triple Net Free Rent (months): None Tenant Improvement: Negotiable Leasing Agent: Faison, Inc. Phone No.: (770)955-4343 Survey Date: 7/96 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 3 ================================================================================ Comments This center was renovated in 1989 and has average market appeal. It has good access and location in a heavily developed residential area. Photograph [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ ADDENDUM H PRO-JECT REPORTS - -------------------------------------------------------------------------------- Addendum H PRO-JECT REPORTS - -------------------------------------------------------------------------------- MIDWAY PLAZA SHOPPING CENTER PROJECT ASSUMPTIONS REPORT EXCLUDING TENANTS BUILDING PROLOGUE LEASEHOLD ANALYSIS OF MIDWAY PLAZA SHOPPING CENTER BEGINNING 7/1996 FOR 13 YEARS ON A FISCAL YEAR BASIS AREA MEASURES GRSF 1996 VALUE - 201,976 THEREAFTER - CONSTANT OCSF 1996 VALUE - 125,169 1997 VALUE - 129,919 1998 VALUE - 122,369 1999 VALUE - 120,653 2000 VALUE - 124,554 2001 VALUE - 129,203 2002 VALUE - 127,026 2003 VALUE - 115,363 2004 VALUE - 128,186 2005 VALUE - 102,504 2006 VALUE - 119,886 2007 VALUE - 129,919 2008 VALUE - 125,119 THEREAFTER - CONSTANT CAML 1996 VALUE - 51,698 THEREAFTER - CONSTANT GROWTH RATES RNTG 1996 VALUE - 0.00 1997 VALUE - 3.00 THEREAFTER - CONSTANT EXPG 1996 VALUE - 3.00 1997 VALUE - 3.50 THEREAFTER - CONSTANT COMN 1996 VALUE - 4.00 THEREAFTER - CONSTANT COMR 1996 VALUE - 2.00 THEREAFTER - CONSTANT COMS +40.0% OF CONN +60.0% OF COMR MARKET RATES RNT1 1996 VALUE - 3.00 THEREAFTER - GROWING AT GROWTH RATE RNTG PAGE 2 TIAN 1996 VALUE - 0.00 THEREAFTER - GROWING AT GROWTH RATE EXPG TIAS +35.0% OF TIAN FRER 1996 VALUE - 3.00 THEREAFTER - CONSTANT RNT2 1996 VALUE - 4.00 THEREAFTER - GROWING AT GROWTH RATE RNTG \\// CONSTANT \/\/ CONSTANT MISCELLANEOUS INCOMES OTHER INCOME 1996 VALUE - 1,800 THEREAFTER - GROWING AT GROWTH RATE RNTG EXPENSES COMMON AREA MAINT, REFERRED TO AS CAME CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 61,000 1997 VALUE - 61,000 THEREAFTER - GROWING AT GROWTH RATE EXPG REAL ESTATE TAXES , REFERRED TO AS TAXE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 25,440 THEREAFTER - GROWING AT GROWTH RATE EXPG INSURANCE , REFERRED TO AS INSE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 14,100 1997 VALUE - 14,100 THEREAFTER - GROWING AT GROWTH RATE EXPG CAM & INS REC BASE, REFERRED TO AS C&IB AN INFORMATIONAL EXPENSE +100.0% OF CAME+100.0% OF INSE MANAGEMENT FEE , REFERRED TO AS MGMT CHARGED AGAINST NET OPERATING INCOME 4.00% OF EFFECTIVE GROSS INCOME GENERAL & ADMIN , REFERRED TO AS G&AE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 5,000 1997 VALUE - 5,000 THEREAFTER - GROWING AT GROWTH RATE EXPG RESERVES , REFERRED TO AS RESE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 30,300 1997 VALUE - 30,300 PAGE 3 THEREAFTER - GROWING AT GROWTH RATE EXPG \\\/ AN INFORMATIONAL EXPENSE CONSTANT VACANCY ALLOWANCE PERCENTAGE OF POTENTIAL GROSS INCOME FOR ALL TENANTS SUBJECT TO VACANCY 1996 VALUE - 1.00 THEREAFTER - CONSTANT MANAGEMENT FEE NONE COMMISSION CALCULATIONS STANDARD METHOD #1 - 0.000% OF TOTAL RENT STANDARD METHOD #2 - 0.000% OF TOTAL RENT STANDARD METHOD #3 - 0.000% OF TOTAL RENT STANDARD METHOD #4 - 0.000% OF TOTAL RENT STANDARD METHOD #5 - 0.000% OF TOTAL RENT COMMISSION PAYOUTS STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT ALTERATION CALCULATION NONE ALTERATION PAYOUTS STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT PAGE 4 COMMON AREA MAINTENANCE POOL NONE CAPITAL EXPENDITURES DEFERRED MAINT 1996 VALUE - 360,000 1997 VALUE - 0.00 THEREAFTER - CONSTANT PRIMARY CLASSIFICATION CODES NONE SECONDARY CLASSIFICATION CODES NONE COST CENTERS 100 - CAM RECOVERY 200 - RE TAX RECOVERY 300 - INS RECOVERY SALES VOLUME PROFILE PERCENT OF RELATIVE MONTH ANNUAL SALES VOLUME ----- ------------ ------ JAN 8.33% 1.00 FEB 8.33% 1.00 MAR 8.33% 1.00 APR 8.33% 1.00 MAY 8.33% 1.00 JUN 8.33% 1.00 JUL 8.33% 1.00 AUG 8.33% 1.00 SEP 8.33% 1.00 OCT 8.33% 1.00 NOV 8.33% 1.00 DEC 8.33% 1.00 TOTALS 100.00% 12.00 GLOBAL RECOVERIES NETR ASSIGNED TO COST CENTER 100 - CAM RECOVERY RECOVERY OF AMOUNTS OR RATES GROWING AT A RATE THEREAFTER - GROWING AT GROWTH RATE EXPG CAP - MARKET RATE FRER INSURANCE , REFERRED TO AS INSR ASSIGNED TO COST CENTER 100 - CAM RECOVERY PAGE 5 PRO RATA SHARE RECOVERY OF EXPENSE INSE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH CAM & TAX RECOVERY, REFERRED TO AS CAMS ASSIGNED TO COST CENTER 100 - CAM RECOVERY PRO RATA SHARE RECOVERY OF EXPENSE \\\/ PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GRSF CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH TENANT PROLOGUE MINIMUM RENTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR SALES VOLUMES AND BREAKPOINTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR RENEWAL RENTS ARE COMPOUNDED ANNUALLY RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET REFERENCE TENANTS NONE MIDWAY PLAZA SHOPPING CENTER TENANT REGISTER
TENANT SQUARE FEET BEGIN DATE END DATE - ----------------------------------------- ----------- ---------- -------- # 1 - SUITE 180 BEN FRANKLIN CRAFT 30,000 10/1995 1/2005 # 2 - SUITE 180 CARMIKE CINEMA 25,238 7/1985 6/2005 # 3 - SUITE 15000 BARGAIN TOWN 15,000 10/1990 1/1998 # 4 - SUITE 30 HANCOCK FABRIC 9,000 10/1988 10/1998 # 5 - SUITE 100 CHILD CARE RES CTR 5,200 1/1996 12/1997 # 6 - SUITE 50 SOUTHERN ANGLERS 2,000 4/1996 4/1997 # 7 - SUITE 30A DOLLAR GEN STORES 7,300 11/1994 11/1999 # 8 - SUITE 2829 THRIFTY NICKLE 1,750 8/1994 9/1999 # 9 - SUITE 270 OLAN MILLS 1,050 11/1984 4/1997 # 10 - SUITE 20 MIDWAY DENTAL 2,935 9/1991 12/1996 # 11 - SUITE 190 SINGER CENTER 3,000 11/1981 12/1996 # 12 - SUITE 14B ALABAMA MEDICAID 3,000 12/1991 12/1996 # 13 - SUITE 14A GSA 4,583 9/1991 8/1996 # 14 - SUITE 7A&B ALA HUMAN RESOURCE 4,000 1/1994 12/1998 # 15 - SUITE 60 CAROL'S STYLING 1,250 1/1981 12/1996 # 16 - SUITE 40 CITY FINANCE 2,000 10/1993 10/1998 # 17 - SUITE 10 INTERCEL 5,730 2/1994 1/1999 # 18 - SUITE 300 WALLPAPER FOR LESS 3,900 9/1996 8/1999 # 19 - SUITE 21A O & A SPORTS 4,000 9/1996 8/1999 # 20 - SUITE 7 VACANT ANCHOR A 24,000 10/2010 11/2010 # 21 - SUITE 17 VACANT ANCHOR B 22,800 10/2010 11/2010 # 22 - SUITE 13B VACANT ANCHOR C 24,240 10/2010 11/2010 ------- 22 TENANTS 201,976 =======
MIDWAY PLAZA SHOPPING CENTER ANNUAL TENANT REVENUE REPORT FOR ALL TENANTS 1. SUITE 180 BEN FRANKLIN CRAFT OCCUPIES 30,000 SF (14.85% OF GRSF) BASE LEASE FROM OCT 1995 TO JAN 2005
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 MINIMUM RENT 90,000 90,000 90,000 90,000 94,375 97,500 97,500 97,500 56,875 MINIMUM RENT/SF 3.00 3.00 3.00 3.00 3.15 3.25 3.25 3.25 1.90 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.64 4.27 ------- ------- ------- ------- ------- ------- ------- ------- ------ RE TAX RECOVERY 3,835 3,960 4,099 4,242 4,391 4,544 4,703 4,868 2,903 CAM RECOVERY 11,155 11,350 11,747 12,158 12,584 13,024 13,480 13,952 8,320 ------- ------- ------- ------- ------- ------- ------- ------- ------ TOTAL RECOVERIES 14,990 15,310 15,846 16,400 16,975 17,568 18,183 18,820 11,223 TOT RECOVERIES/SF 0.50 0.51 0.53 0.55 0.57 0.59 0.61 0.63 0.37 ------- ------- ------- ------- ------- ------- ------- ------- ------ TOTAL REVENUE 104,990 105,310 105,846 106,400 111,350 115,068 115,683 116,320 68,098 TOTAL REVENUE/SF 3.50 3.51 3.53 3.55 3.71 3.84 3.86 3.88 2.27
FY 6 FY 7 MINIMUM RENT 65,625 112,500 MINIMUM RENT/SF 2.19 3.75 MARKET RENT/SF 5.14 5.30 ------- ------- RE TAX RECOVERY 3,079 5,397 CAM RECOVERY 8,825 15,469 ------- ------- TOTAL RECOVERIES 11,904 20,866 TOT RECOVERIES/SF 0.40 0.70 ------- ------- TOTAL REVENUE 77,529 133,366 TOTAL REVENUE/SF 2.58 4.45 2. SUITE 180 CARMIKE CINEMA OCCUPIES 25,238 SF (12.50% OF GRSF) BASE LEASE FROM JUL 1985 TO JUN 2005
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 MINIMUM RENT 114,581 114,581 114,581 114,581 114,581 114,581 114,581 114,581 114,581 MINIMUM RENT/SF 4.54 4.54 4.54 4.54 4.54 4.54 4.54 4.54 4.54 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.64 3.75 PERCENTAGE RENT 16,781 17,949 19,128 20,320 21,523 22,738 23,965 25,205 26,457 PERCENTAGE RENT/SF 0.66 0.71 0.76 0.81 0.85 0.90 0.95 1.00 1.05 ------- ------- ------- ------- ------- ------- ------- ------- ------- MIN + PERCENTAGE 131,362 132,530 133,709 134,901 136,104 137,319 138,546 139,786 141,038 MIN + PERCENTAGE/SF 5.20 5.25 5.30 5.35 5.39 5.44 5.49 5.54 5.59 MIN + PERCENT/SALES 11.2% 11.2% 11.2% 11.2% 11.2% 11.2% 11.2% 11.2% 11.2% RE TAX RECOVERY 3,227 3,332 3,448 3,569 3,694 3,823 3,957 4,095 4,239 CAM RECOVERY 4,417 4,417 4,417 4,417 4,417 4,417 4,417 4,417 4,417 ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL RECOVERIES 7,644 7,749 7,865 7,986 8,111 8,240 8,374 8,512 8,656 TOT RECOVERIES/SF 0.30 0.31 0.31 0.32 0.32 0.33 0.33 0.34 0.34 ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL REVENUE 139,006 140,279 141,574 142,887 144,215 145,559 146,920 148,298 149,694 TOTAL REVENUE/SF 5.51 5.56 5.61 5.66 5.71 5.77 5.82 5.88 5.93 SALES VOLUME (000) 1,168 1,179 1,191 1,203 1,215 1,227 1,240 1,252 1,265 SALES VOLUME/SF 46.27 46.73 47.20 47.67 48.15 48.63 49.12 49.61 50.11 TOT REVENUE/SALES 11.9% 11.9% 11.9% 11.9% 11.9% 11.9% 11.9% 11.8% 11.8%
FY 6 FY 7 MINIMUM RENT 114,581 114,581 MINIMUM RENT/SF 4.54 4.54 MARKET RENT/SF 3.86 3.97 PERCENTAGE RENT 129,306 133,832 PERCENTAGE RENT/SF 5.12 5.30 ------- ------- MIN + PERCENTAGE 243,887 248,413 MIN + PERCENTAGE/SF 9.66 9.84 MIN + PERCENT/SALES 18.9% 18.6% ------- ------- RE TAX RECOVERY 4,387 4,541 CAM RECOVERY 4,417 4,417 ------- ------- TOTAL RECOVERIES 8,804 8,958 TOT RECOVERIES/SF 0.35 0.35 ------- ------- TOTAL REVENUE 252,691 257,371 TOTAL REVENUE/SF 10.01 10.20 SALES VOLUME (000) 1,293 1,338 SALES VOLUME/SF 51.24 53.03 TOT REVENUE/SALES 19.5% 19.2% 3. SUITE 15000 BARGAIN TOWN OCCUPIES 15,000 SF (7.43% OF GRSF) BASE LEASE FROM OCT 1990 TO JAN 1998
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 40,050 31,088 46,350 46,350 46,350 46,350 38,625 49,255 53,732 53,732 53,732 MINIMUM RENT/SF 2.67 2.07 3.09 3.09 3.09 3.09 2.58 3.28 3.58 3.58 3.58 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.64 3.74 3.86 3.97 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ CAM RECOVERY 0 0 82 249 422 601 639 97 296 501 713 RE TAX RECOVERY 0 0 35 107 181 258 275 42 127 215 306 INS RECOVERY 0 0 19 58 98 139 148 23 68 116 165 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL RECOVERIES 0 0 136 414 701 998 1,062 162 491 832 1,184 TOT RECOVERIES/SF 0.00 0.00 0.01 0.03 0.05 0.07 0.01 0.01 0.03 0.06 0.08 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL REVENUE 40,050 31,088 46,486 46,764 47,051 47,348 39,687 49,417 54,223 54,564 54,916 TOTAL REVENUE/SF 2.67 2.07 3.10 3.12 3.14 3.16 2.65 3.29 3.61 3.64 3.66
PAGE 2
COMMISSIONS 0 6,489 0 0 0 0 0 7,523 0 0 0 COMMISSIONS/SF 0.00 0.43 0.00 0.00 0.00 0.00 0.00 0.50 0.00 0.00 0.00
4. SUITE 30 HANCOCK FABRIC OCCUPIES 9,000 SF (4.46% OF GRSF) BASE LEASE FROM OCT 1988 TO OCT 1998
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 27,000 27,000 20,935 28,644 28,644 28,644 28,644 28,644 28,644 28,644 28,644 MINIMUM RENT/SF 3.00 3.00 2.33 3.18 3.18 3.18 3.18 3.18 3.18 3.18 3.18 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.64 3.74 3.86 3.97 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ CAM RECOVERY 10,619 10,805 3,664 199 604 1,023 1,457 1,907 2,372 2,853 3,351 RE TAX RECOVERY 1,151 1,188 403 22 66 113 160 210 261 314 368 INS RECOVERY 0 0 0 12 36 61 86 113 140 169 198 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL RECOVERIES 11,770 11,993 4,067 233 706 1,197 1,703 2,230 2,773 3,336 3,917 TOT RECOVERIES/SF 1.31 1.33 0.45 0.03 0.08 0.13 0.19 0.25 0.31 0.31 0.44 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL REVENUE 38,770 38,993 25,002 28,877 29,350 29,841 30,347 30,874 31,417 31,980 32,561 TOTAL REVENUE/SF 4.31 4.33 2.78 3.21 3.26 3.32 3.37 3.43 3.49 3.55 3.62 COMMISSIONS 0 0 8,020 0 0 0 0 0 0 0 0 COMMISSIONS/SF 0.00 0.00 0.89 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
5. SUITE 100 CHILD CARE RES CTR OCCUPIES 5,200 SF (2.57% OF GRSF) BASE LEASE FROM JAN 1996 TO DEC 1997
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 29,900 20,306 21,424 21,424 16,068 23,411 23,411 23,411 19,186 25,581 25,581 MINIMUM RENT/SF 5.75 3.91 4.12 4.12 3.09 4.50 4.50 4.50 3.69 4.92 4.92 MARKET RENT/SF 4.00 4.06 4.18 4.31 4.44 4.57 4.71 4.85 4.99 5.14 5.30 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ CAM RECOVERY 0 0 28 86 102 32 96 162 35 106 180 RE TAX RECOVERY 0 0 12 37 44 14 41 70 15 46 77 INS RECOVERY 0 0 7 20 24 7 22 37 8 25 42 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL RECOVERIES 0 0 47 143 170 53 159 269 58 177 299 TOT RECOVERIES/SF 0.00 0.00 0.01 0.03 0.03 0.01 0.03 0.05 0.01 0.03 0.06 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL REVENUE 29,900 20,306 21,471 21,567 16,238 23,464 23,570 23,680 19,244 25,758 25,880 TOTAL REVENUE/SF 5.75 3.91 4.13 4.15 3.12 4.51 4.53 4.55 3.70 4.95 4.98 COMMISSIONS 0 1,800 0 0 0 1,966 0 0 2,149 0 0 COMMISSIONS/SF 0.00 0.35 0.00 0.00 0.00 0.38 0.00 0.00 0.41 0.00 0.00
6. SUITE 50 SOUTHERN ANGLERS OCCUPIES 2,000 SF (0.99% OF GRSF) BASE LEASE FROM APR 1996 TO APR 1997
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 9,000 7,333 8,000 8,000 6,495 8,742 8,742 7,014 9,839 9,839 7,531 MINIMUM RENT/SF 4.50 3.67 4.00 4.00 3.25 4.37 4.37 3.51 4.92 4.92 3.77 MARKET RENT/SF 4.00 4.06 4.18 4.30 4.43 4.57 4.71 4.85 4.99 5.15 5.30 ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- CAM RECOVERY 620 41 125 212 67 139 235 95 53 159 134 RE TAX RECOVERY 212 5 14 23 7 15 26 10 6 18 15 INS RECOVERY 0 2 7 13 4 8 14 6 3 9 8 ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- TOTAL RECOVERIES 832 48 146 248 78 162 275 111 62 186 157 TOT RECOVERIES/SF 0.42 0.02 0.07 0.12 0.04 0.08 0.14 0.06 0.03 0.09 0.08 ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
PAGE 3 TOTAL REVENUE 9,832 7,381 8,146 8,248 6,573 8,904 9,017 7,125 9,901 10,025 7,688 TOTAL REVENUE/SF 4.92 3.69 4.07 4.12 3.29 4.45 4.51 3.56 4.95 5.01 3.84 COMMISSIONS 0 672 0 0 734 0 0 826 0 0 903 COMMISSIONS/SF 0.00 0.34 0.00 0.00 0.37 0.00 0.00 0.41 0.00 0.00 0.45
7. SUITE 30A DOLLAR GEN STORES OCCUPIES 7,300 SF (3.61% OF GRSF) BASE LEASE FROM NOV 1994 TO NOV 1999
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 21,024 21,024 21,024 16,737 23,931 23,931 18,133 26,150 26,150 23,971 23,812 MINIMUM RENT/SF 2.88 2.88 2.88 2.29 3.28 3.28 2.48 3.58 3.58 3.28 3.26 MARKET RENT/SF 3.00 3.05 3.14 3.23 3.33 3.43 3.53 3.64 3.75 3.86 3.97 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ CAM RECOVERY 1,825 1,825 1,825 760 43 130 131 47 144 219 53 RE TAX RECOVERY 0 16 48 27 18 56 56 20 62 94 23 INS RECOVERY 0 8 26 15 10 30 30 11 33 51 12 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL RECOVERIES 1,825 1,849 1,899 802 71 216 217 78 239 364 88 TOT RECOVERIES/SF 0.25 0.25 0.26 0.11 0.01 0.03 0.03 0.01 0.03 0.05 0.01 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL REVENUE 22,849 22,873 22,923 17,539 24,002 24,147 18,350 26,228 26,389 24,335 23,900 TOTAL REVENUE/SF 3.13 3.13 3.14 2.40 3.29 3.31 2.51 3.59 3.61 3.33 3.27 COMMISSIONS 0 0 0 2,010 0 0 2,197 0 0 0 2,400 COMMISSIONS/SF 0.00 0.00 0.00 0.28 0.00 0.00 0.30 0.00 0.00 0.00 0.33
8. SUITE 2829 THRIFTY NICKLE OCCUPIES 1,750 SF (0.87% OF GRSF) BASE LEASE FROM AUG 1994 TO SEP 1999
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 10,500 10,500 10,500 6,450 7,649 7,649 5,914 8,358 8,358 6,269 9,133 MINIMUM RENT/SF 6.00 6.00 6.00 3.69 4.37 4.37 3.38 4.78 4.78 3.58 5.22 MARKET RENT/SF 3.00 3.05 3.14 4.04 4.44 4.57 4.71 4.85 4.99 5.14 5.30 ------ ------ ------ ----- ----- ----- ----- ----- ----- ----- ----- CAM RECOVERY 0 0 0 0 10 31 21 11 35 41 13 RE TAX RECOVERY 0 0 0 0 4 13 9 5 15 18 5 INS RECOVERY 0 0 0 0 2 7 5 3 8 9 3 ------ ------ ------ ----- ----- ----- ----- ----- ----- ----- ----- TOTAL RECOVERIES 0 0 0 0 16 51 35 19 58 68 21 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.01 0.03 0.02 0.01 0.03 0.04 0.01 ------ ------ ------ ----- ----- ----- ----- ----- ----- ----- ----- TOTAL REVENUE 10,500 10,500 10,500 6,450 7,665 7,700 5,949 8,377 8,416 6,337 9,154 TOTAL REVENUE/SF 6.00 6.00 6.00 3.69 4.38 4.40 3.40 4.79 4.81 3.62 5.23 COMMISSIONS 0 0 0 643 0 0 702 0 0 0 767 COMMISSIONS/SF 0.00 0.00 0.00 0.37 0.00 0.00 0.40 0.00 0.00 0.00 0.44
9. SUITE 270 OLAN MILLS OCCUPIES 1,050 SF (O.52% OF GRSF) BASE LEASE FROM NOV 1984 TO APR 1997
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 5,688 3,850 4,200 4,200 3,410 4,589 4,589 3,682 5,165 5,165 3,954 MINIMUM RENT/SF 5.42 3.67 4.00 4.00 3.25 4.37 4.37 3.51 4.92 4.92 3.77 MARKET RENT/SF 4.00 4.06 4.18 4.30 4.43 4.57 4.71 4.85 4.99 5.14 5.30 ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- CAM RECOVERY 857 6 17 29 9 19 32 13 7 21 18 RE TAX RECOVERY 112 2 7 12 4 8 14 5 3 9 8 INS RECOVERY 61 1 4 7 2 4 7 3 2 5 4 ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
PAGE 4 TOTAL RECOVERIES 1,030 9 28 48 15 31 53 21 12 35 30 TOT RECOVERIES/SF 0.98 0.01 0.03 0.05 0.01 0.03 0.05 0.02 0.01 0.03 0.03 ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- TOTAL REVENUE 6,718 3,859 4,228 4,248 3,425 4,620 4,642 3,703 5,177 5,200 3,984 TOTAL REVENUE/SF 6.40 3.68 4.03 4.05 3.26 4.40 4.42 3.53 493 495 3.79 COMMISSIONS 0 353 0 0 386 0 0 434 0 0 474 COMMISSIONS/SF 0.00 0.34 0.00 0.00 0.37 0.00 0.00 0.41 0.00 0.00 0.45
10. SUITE 20 MIDWAY DENTAL OCCUPIES 2,935 SF (1.45% OF GRSF) BASE LEASE FROM SEP 1991 TO DEC 1996
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 14,234 14,235 14,235 10,325 12,829 12,829 9,621 14,018 14,018 14,018 11,489 MINIMUM RENT/SF 4.85 4.85 4.85 3.52 4.37 4.37 3.28 4.78 4.78 4.78 3.91 MARKET RENT/SF 4.00 4.06 4.18 4.31 4.44 4.57 4.71 4.85 4.99 5.14 5.30 ------ ------ ------ ------ ------ ------ ----- ------ ------ ------ ------ CAM RECOVERY 3,464 3,524 3,647 1,855 17 52 62 19 58 98 21 RE TAX RECOVERY 375 387 401 204 7 22 27 8 25 42 9 INS RECOVERY 204 208 216 110 4 12 14 4 13 23 5 ------ ------ ------ ------ ------ ------ ----- ------ ------ ------ ------ TOTAL RECOVERIES 4,043 4,119 4,264 2,169 28 86 103 31 96 163 35 TOT RECOVERIES/SF 1.38 1.40 1.45 0.74 0.01 0.03 0.04 0.01 0.03 0.06 0.01 ------ ------ ------ ------ ------ ------ ----- ------ ------ ------ ------ TOTAL REVENUE 18,277 18,354 18,499 12,494 12,857 12,915 9,724 14,049 14,114 14,181 11,524 TOTAL REVENUE/SF 6.23 6.25 6.30 4.26 4.38 4.40 3.31 4.79 4.81 4.83 3.93 COMMISSIONS 854 0 0 1,078 0 0 0 1,178 0 0 1,287 COMMISSIONS/SF 0.29 0.00 0.00 0.37 0.00 0.00 0.00 0.40 0.00 0.00 0.44
11. SUITE 190 SINGER CENTER OCCUPIES 3,000 SF (1.49% OF GRSF) BASE LEASE FROM NOV 1981 TO DEC 1996
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 6,600 6,600 6,600 6,578 13,113 13,113 9,835 14,329 14,329 14,329 11,743 MINIMUM RENT/SF 2.20 2.20 2.20 2.19 4.37 4.37 3.28 4.78 4.78 4.78 3.91 MARKET RENT/SF 4.00 4.06 4.18 4.31 4.44 4.57 4.71 4.85 4.99 5.14 5.30 ------ ------ ------ ------ ------ ------ ----- ------ ------ ------ ------ CAM RECOVERY 906 922 954 485 18 53 63 19 59 100 22 RE TAX RECOVERY 384 396 410 208 8 23 27 8 25 43 9 INS RECOVERY 0 0 0 0 4 12 15 5 14 23 5 ------ ------ ------ ------ ------ ------ ----- ------ ------ ------ ------ TOTAL RECOVERIES 1,290 1,318 1,364 693 30 88 105 32 98 166 36 TOT RECOVERIES/SF 0.43 0.44 0.45 0.23 0.01 0.03 0.04 0.01 0.03 0.06 0.01 ------ ------ ------ ------ ------ ------ ----- ------ ------ ------ ------ TOTAL REVENUE 7,890 7,918 7,964 7,271 13,143 13,201 9,940 14,361 14,427 14,495 11,779
TOTAL REVENUE/SF 2.63 2.64 2.65 2.42 4.38 4.40 3.31 4.79 4.81 4.83 3.93 COMMISSIONS 396 0 0 1,101 0 0 0 1,204 0 0 1,315 COMMISSIONS/SF 0.13 0.00 0.00 0.37 0.00 0.00 0.00 0.40 0.00 0.00 0.44
12. SUITE 146 ALABAMA MEDICAID OCCUPIES 3,000 SF (1.49% OF GRSF) BASE LEASE FROM DEC 1991 TO DEC 1996
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 18,750 18,750 18,750 12,653 13,113 13,113 9,835 14,329 14,329 14,329 11,743 MINIMUM RENT/SF 6.25 6.25 6.25 4.22 4.37 4.37 3.28 4.78 4.78 4.78 3.91 MARKET RENT/SF 4.00 4.06 4.18 4.31 4.44 4.57 4.71 4.85 4.99 5.14 5.30 ------ ------ ------ ------ ------ ------ ----- ------ ------ ------ ------
PAGE 5 CAM RECOVERY 0 0 0 0 18 53 63 19 59 100 22 RE TAX RECOVERY 0 0 0 0 8 23 27 8 25 43 9 INS RECOVERY 0 0 0 0 4 12 15 5 14 23 5 ------ ------ ------ ------ ------ ------ ----- ------ ------ ------ ------ TOTAL RECOVERIES 0 0 0 0 30 88 105 32 98 166 36 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.01 0.03 0.04 0.01 0.03 0.06 0.01 ------ ------ ------ ------ ------ ------ ----- ------ ------ ------ ------ TOTAL REVENUE 18,750 18,750 18,750 12,653 13,143 13,201 9,940 14,361 14,427 14,495 11,779 TOTAL REVENUE/SF 6.25 6.25 6.25 4.22 4.38 4.40 3.31 4.79 4.81 4.83 3.93 COMMISSIONS 0 0 0 1,101 0 0 0 1,204 0 0 1,315 COMMISSIONS/SF 0.00 0.00 0.00 0.37 0.00 0.00 0.00 0.40 0.00 0.00 0.44
13. SUITE 14A GSA OCCUPIES 4,583 SF (2.27% OF GRSF) BASE LEASE FROM SEP 1991 TO AUG 1996
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 47,710 47,709 47,709 19,296 19,448 19,448 15,400 21,889 21,889 16,586 23,919 MINIMUM RENT/SF 10.41 10.41 10.41 4.21 4.24 4.24 3.36 4.78 4.78 3.62 5.22 MARKET RENT/SF 4.00 4.06 4.18 4.31 4.44 4.57 4.71 4.85 4.99 5.14 5.30 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ RE TAX RECOVERY 0 10 30 18 34 57 29 13 39 39 14 CAM RECOVERY 0 0 0 26 79 133 67 30 90 91 33 INS RECOVERY 0 0 0 6 18 31 16 7 21 21 8 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL RECOVERIES 0 10 30 50 131 221 112 50 150 151 55 TOT RECOVERIES/SF 0.00 0.00 0.01 0.01 0.03 0.05 0.02 0.01 0.03 0.03 0.01 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL REVENUE 47,710 47,719 47,739 19,346 19,579 19,669 15,512 21,939 22,039 16,737 23,974 TOTAL REVENUE/SF 10.41 10.41 10.42 4.22 4.27 4.29 3.38 4.79 4.81 3.65 5.23 COMMISSIONS 2,863 0 0 1,634 0 0 1,839 0 0 2,009 0 COMMISSIONS/SF 0.62 0.00 0.00 0.36 0.00 0.00 0.40 0.00 0.00 0.44 0.00
14. SUITE 7A&B ALA HUMAN RESOURCE OCCUPIES 4,000 SF (1.98% OF GRSF) BASE LEASE FROM JAN 1994 TO DEC 1998
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 25,000 26,000 17,244 16,974 16,974 12,731 18,548 18,548 18,548 15,201 20,268 MINIMUM RENT/SF 6.25 6.50 4.31 4.24 4.24 3.18 4.64 4.64 4.64 3.80 5.07 MARKET RENT/SF 4.00 4.06 4.18 4.31 4.44 4.57 4.71 4.85 4.99 5.14 5.30 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ CAM RECOVERY 0 0 0 23 69 81 25 76 129 28 84 RE TAX RECOVERY 0 0 0 10 30 35 11 33 55 12 36 INS RECOVERY 0 0 0 5 16 19 6 18 30 6 20 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL RECOVERIES 0 0 0 38 115 135 42 127 214 46 140 TOT RECOVERIES/SF 0.00 0.00 0.00 0.01 0.03 0.03 0.01 0.03 0.05 0.01 0.04 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL REVENUE 25,000 26,000 17,244 17,012 17,089 12,866 18,590 18,675 18,762 15,247 20,408 TOTAL REVENUE/SF 6.25 6.50 4.31 4.25 4.27 3.22 4.65 4.67 4.69 3.81 5.10 COMMISSIONS 0 0 1,426 0 0 0 1,558 0 0 1,703 0 COMMISSIONS/SF 0.00 0.00 0.36 0.00 0.00 0.00 0.39 0.00 0.00 0.43 0.00
15. SUITE 60 CAROL'S STYLING OCCUPIES 1,250 SF (0.62% OF GRSF) BASE LEASE FROM JAN 1981 TO DEC 1996
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 6,250 6,250 6,250 4,491 5,464 5,464 4,098 5,970 5,970 5,970 4,893
PAGE 6 MINIMUM RENT/SF 5.00 5.00 5.00 3.59 4.37 4.37 3.28 4.78 4.78 4.78 3.91 MARKET RENT/SF 4.00 4.06 4.18 4.31 4.44 4.57 4.71 4.85 4.99 5.15 5.30 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ CAM RECOVERY 1,474 1,501 1,553 790 7 22 26 8 25 42 9 RE TAX RECOVERY 160 165 171 87 3 10 11 3 11 18 4 INS RECOVERY 88 89 92 47 2 5 6 2 6 10 2 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL RECOVERIES 1,722 1,755 1,816 924 12 37 43 13 42 70 15 TOT RECOVERIES/SF 1.38 1.40 1.45 0.74 0.01 0.03 0.03 0.01 0.03 0.06 0.01
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL REVENUE 7,972 8,005 8,066 5,415 5,476 5,501 4,141 5,983 6,012 6,040 4,908 TOTAL REVENUE/SF 6.38 6.40 6.45 4.33 4.38 4.40 3.31 4.79 4.81 4.83 3.93 COMMISSIONS 375 0 0 459 0 0 0 502 0 0 548 COMMISSIONS/SF 0.30 0.00 0.00 0.37 0.00 0.00 0.00 0.40 0.00 0.00 0.44
16. SUITE 40 CITY FINANCE OCCUPIES 2,000 SF (0.99% OF GRSF) BASE LEASE FROM OCT 1993 TO OCT 1998
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 12,000 12,000 7,536 8,487 8,487 6,497 9,274 9,274 7,728 9,290 10,134 MINIMUM RENT/SF 6.00 6.00 3.77 4.24 4.24 3.25 4.64 4.64 3.86 4.65 5.07 MARKET RENT/SF 4.00 4.06 4.18 4.30 4.43 4.57 4.71 4.85 4.99 5.15 5.30 ------ ------ ----- ----- ----- ----- ----- ----- ----- ----- ------ CAM RECOVERY 2,360 2,401 814 11 34 29 13 38 52 14 42 RE TAX RECOVERY 256 264 90 5 15 12 5 16 22 6 18 INS RECOVERY 140 142 48 3 8 7 3 9 12 3 10 ------ ------ ----- ----- ----- ----- ----- ----- ----- ----- ------ TOTAL RECOVERIES 2,756 2,807 952 19 57 48 21 63 86 23 70 TOT RECOVERIES/SF 1.38 1.40 0.48 0.01 0.03 0.02 0.01 0.03 0.04 0.01 0.04 ------ ------ ----- ----- ----- ----- ----- ----- ----- ----- ------ TOTAL REVENUE 14,756 14,807 8,488 8,506 8,544 6,545 9,295 9,337 7,814 9,313 10,204 TOTAL REVENUE/SF 7.38 7.40 4.24 4.25 4.27 3.27 4.65 4.67 3.91 4.66 5.10 COMMISSIONS 0 0 713 0 0 779 0 0 0 851 0 COMMISSIONS/SF 0.00 0.00 0.36 0.00 0.00 0.39 0.00 0.00 0.00 0.43 0.00
17. SUITE 10 INTERCEL OCCUPIES 5,730 SF (2.84% OF GRSF) BASE LEASE FROM FEB 1994 TO JAN 1999
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 26,979 29,844 22,436 24,316 24,316 20,263 24,356 26,571 26,571 21,570 29,034 MINIMUM RENT/SF 4.71 5.21 3.92 4.24 4.24 3.54 4.25 4.64 4.64 3.76 5.07 MARKET RENT/SF 4.00 4.06 4.18 4.31 4.44 4.57 4.71 4.85 4.99 5.14 5.30 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ CAM RECOVERY 6,761 6,879 4,102 32 98 133 36 109 185 59 121 RE TAX RECOVERY 733 756 451 14 42 57 15 47 79 25 52 INS RECOVERY 400 407 243 7 23 31 8 25 43 14 28 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL RECOVERIES 7,894 8,042 4,796 53 163 221 59 181 307 98 201 TOT RECOVERIES/SF 1.38 1.40 0.84 0.01 0.03 0.04 0.01 0.03 0.05 0.02 0.04 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL REVENUE 34,873 37,886 27,232 24,369 24,479 20,484 24,415 26,752 26,878 21,668 29,235 TOTAL REVENUE/SF 6.09 6.61 4.75 4.25 4.27 3.57 4.26 4.67 4.69 3.78 5.10 COMMISSIONS 0 0 2,043 0 0 0 2,232 0 0 2,439 0 COMMISSIONS/SF 0.00 0.00 0.36 0.00 0.00 0.00 0.39 0.00 0.00 0.43 0.00
PAGE 7 18. SUITE 300 WALLPAPER FOR LESS OCCUPIES 3,900 SF (1.93% OF GRSF) BASE LEASE FROM SEP 1996 TO AUG 1999
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 9,750 14,138 17,875 12,742 16,550 16,550 13,105 18,627 18,627 14,114 20,354 MINIMUM RENT/SF 2.50 3.63 4.58 3.27 4.24 4.24 3.36 4.78 4.78 3.62 5.22 MARKET RENT/SF 3.33 4.06 4.18 4.31 4.44 4.57 4.71 4.85 4.99 5.14 5.30 ----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ CAM RECOVERY 0 0 0 22 67 114 57 25 77 78 28 RE TAX RECOVERY 0 0 0 9 29 49 25 11 33 33 12 INS RECOVERY 0 0 0 5 15 26 13 6 18 18 6 ----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL RECOVERIES 0 0 0 36 111 189 95 42 128 129 46 TOT RECOVERIES/SF 0.00 0.00 0.00 0.01 0.03 0.05 0.02 0.01 0.03 0.03 0.01 ----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL REVENUE 9,750 14,138 17,875 12,778 16,661 16,739 13,200 18,669 18,755 14,243 20,400 TOTAL REVENUE/SF 2.50 3.63 4.58 3.28 4.27 4.29 3.38 4.79 4.81 3.65 5.23 COMMISSIONS 1,794 0 0 1,390 0 0 1,565 0 0 1,710 0 COMMISSIONS/SF 0.46 0.00 0.00 0.36 0.00 0.00 0.40 0.00 0.00 0.44 0.00
19. SUITE 21A O & A SPORTS OCCUPIES 4,000 SF (1.98% OF GRSF) BASE LEASE FROM SEP 1996 TO AUG 1999
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 10,000 15,333 19,333 13,235 16,974 16,974 13,441 19,105 19,105 14,476 20,876 MINIMUM RENT/SF 2.50 3.83 4.83 3.31 4.24 4.24 3.36 4.78 4.78 3.62 5.22 MARKET RENT/SF 3.33 4.06 4.18 4.31 4.44 4.57 4.71 4.85 4.99 5.14 5.30 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ CAM RECOVERY 0 0 0 23 69 116 59 26 79 80 29 RE TAX RECOVERY 0 0 0 10 30 50 25 11 34 34 12 INS RECOVERY 0 0 0 5 16 27 14 6 18 18 7 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL RECOVERIES 0 0 0 38 115 193 98 43 131 132 48 TOT RECOVERIES/SF 0.00 0.00 0.00 0.01 0.03 0.05 0.02 0.01 0.03 0.03 0.01 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL REVENUE 10,000 15,333 19,333 13,273 17,089 17,167 13,539 19,148 19,236 14,608 20,924 TOTAL REVENUE/SF 2.50 3.83 4.83 3.32 4.27 4.29 3.38 4.79 4.81 3.65 5.23 COMMISSIONS 1,920 0 0 1,426 0 0 1,605 0 0 1,754 0 COMMISSIONS/SF 0.48 0.00 0.00 0.36 0.00 0.00 0.40 0.00 0.00 0.44 0.00
20. SUITE 7 VACANT ANCHOR A OCCUPIES 24,000 SF (11.88% OF GRSF) BASE LEASE FROM OCT 2010 TO NOV 2010
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7
MINIMUM RENT 0 0 0 0 0 0 0 0 0 0 0 MINIMUM RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 MARKET RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- TOTAL REVENUE 0 0 0 0 0 0 0 0 0 0 0 TOTAL REVENUE/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
21. SUITE 17 VACANT ANCHOR B OCCUPIES 22,800 SF (11.29% OF GRSF) BASE LEASE FROM OCT 2010 TO NOV 2010 PAGE 8
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 0 0 0 0 0 0 0 0 0 0 0 MINIMUM RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 MARKET RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- TOTAL REVENUE 0 0 0 0 0 0 0 0 0 0 0 TOTAL REVENUE/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
22. SUITE 13B VACANT ANCHOR C OCCUPIES 24,240 SF (12.00% OF GRSF) BASE LEASE FROM OCT 2010 TO NOV 2010
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 0 0 0 0 0 0 0 0 0 0 0 MINIMUM RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 MARKET RENT/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- TOTAL RECOVERIES 0 0 0 0 0 0 0 0 0 0 0 TOT RECOVERIES/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- TOTAL REVENUE 0 0 0 0 0 0 0 0 0 0 0 TOTAL REVENUE/SF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
REPORT TOTAL FOR MIDWAY PLAZA SHOPPING CENTER (GRSF = 201,976 SF)
FY97 FY98 FY99 FY 0 FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 MINIMUM RENT 525,016 516,541 514,982 465,483 488,771 492,379 467,652 521,255 483,644 473,290 543,921 MINIMUM RENT/SF 2.60 2.56 2.55 2.30 2.42 2.44 2.32 2.58 2.39 2.34 2.69 MARKET RENT/SF 2.13 2.19 2.25 2.33 2.40 2.47 2.55 2.62 2.78 2.97 3.06 PERCENTAGE RENT 16,781 17,949 19,128 20,320 21,523 22,738 23,965 25,205 26,457 129,306 133,832 PERCENTAGE RENT/SF 0.08 0.09 0.09 0.10 0.11 0.11 0.12 0.12 0.13 0.64 0.66 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- MIN + PERCENTAGE 541,797 534,490 534,110 485,803 510,294 515,117 491,617 546,460 510,101 602,596 677,753 MIN + PERCENTAGE/SF 2.68 2.65 2.64 2.41 2.53 2.55 2.43 2.71 2.53 2.98 3.36 MIN + PERCENT/SALES 46.4% 45.3% 44.8% 40.4% 42.0% 42.0% 39.7% 43.6% 40.3% 46.6% 50.6% ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- RE TAX RECOVERY 10,445 10,481 9,619 8,604 8,615 9,182 9,443 9,483 7,979 8,475 10,915 CAM RECOVERY 44,458 43,671 32,975 21,377 18,734 20,202 20,979 21,070 16,492 17,832 24,759 INS RECOVERY 893 857 662 313 286 438 422 283 451 543 528 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL RECOVERIES 55,796 55,009 43,256 30,294 27,635 29,822 30,844 30,836 24,922 26,850 36,202 TOT RECOVERIES/SF 0.28 0.27 0.21 0.15 0.14 0.15 0.15 0.15 0.12 0.13 0.18 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL REVENUE 597,593 589,499 577,366 516,097 537,929 544,939 522,461 577,296 535,023 629,446 713,955 TOTAL REVENUE/SF 2.96 2.92 2.86 2.56 2.66 2.70 2.59 2.86 2.65 3.12 3.53 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- SALES VOLUME (000) 1,168 1,179 1,191 1,203 1,215 1,227 1,240 1,252 1,265 1,293 1,338 SALES VOLUME/SF 5.78 5.84 5.90 5.96 6.02 6.08 6.14 6.20 6.26 6.40 6.63 TOT REVENUE/SALES 51.2% 50.0% 48.5% 42.9% 44.3% 44.4% 42.1% 46.1% 42.3% 48.7% 53.3% COMMISSIONS 8,202 9,314 12,202 10,842 1,120 2,745 11,698 12,871 2,149 10,466 9,009 COMMISSIONS/SF 0.04 0.05 0.06 0.05 0.01 0.01 0.06 0.06 0.01 0.05 0.04
MIDWAY PLAZA SHOPPING CENTER AVERAGE OCCUPANCY REPORT FOR ALL TENANTS
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- JANUARY 121,036 130,936 125,736 115,936 113,451 130,936 130,936 116,703 127,886 130,936 130,936 FEBRUARY 121,036 130,936 110,736 121,206 113,451 130,936 128,936 116,703 130,936 100,936 130,936 MARCH 121,036 130,936 110,736 121,206 120,751 130,936 128,936 121,886 130,936 100,936 118,453 APRIL 123,036 130,936 115,936 125,206 130,936 125,736 124,936 113,451 130,936 100,936 116,703 MAY 123,036 127,886 130,936 130,936 130,936 125,736 121,206 98,451 130,936 98,936 116,703 JUNE 123,036 127,886 130,936 130,936 130,936 125,736 121,206 105,751 130,936 98,936 121,886 JULY 123,036 127,886 130,936 130,936 130,936 130,936 125,206 115,936 125,736 94,936 113,451 AUGUST 123,036 130,936 130,936 130,936 127,886 130,936 130,936 130,936 125,736 91,206 113,451 SEPTEMBER 130,936 130,936 130,936 118,453 127,886 130,936 130,936 130,936 125,736 91,206 120,751 OCTOBER 130,936 130,936 130,936 116,703 127,886 130,936 130,936 130,936 130,936 95,206 130,936 NOVEMBER 130,936 130,936 119,936 116,703 130,936 130,936 130,936 127,886 130,936 100,936 130,936 DECEMBER 130,936 130,936 119,936 121,886 130,936 130,936 118,453 127,886 130,936 130,936 130,936 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- AVERAGE SF OCCUPIED-OCSF 125,169 130,174 124,053 123,420 126,411 129,636 126,963 119,788 129,382 103,004 123,007 TOTAL SF-GRSF 201,976 201,976 201,976 201,976 201,976 201,976 201,976 201,976 201,976 201,976 201,976 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- OCCUPANCY % 61.97 64.45 61.42 61.11 62.59 64.18 62.86 59.31 64.06 51.00 60.90 ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
2007 2008 ------- ------- JANUARY 130,936 130,936 FEBRUARY 127,886 130,936 MARCH 127,886 130,936 APRIL 127,886 130,936 MAY 130,936 130,936 JUNE 130,936 130,936 JULY 130,936 130,936 AUGUST 130,936 113,936 SEPTEMBER 130,936 113,936 OCTOBER 125,736 109,936 NOVEMBER 125,736 121,206 DECEMBER 125,736 121,206 ------- ------- AVERAGE SF OCCUPIED-OCSF 128,874 124,731 TOTAL SF-GRSF 201,976 201,976 ------- ------- OCCUPANCY % 63.81 61.76 ======= ======= MIDWAY PLAZA SHOPPING CENTER EXPIRATION REPORT YEARS 1997 TO 2007, ALL TENANTS, INCLUDING OPTIONS, EXCLUDING RENEWALS, EXCLUDING BASE LEASES AND PRIOR OPTIONS, BASE RENTS EXCLUDING CPI ADJUSTMENTS, INCLUDING PERCENTAGE RENTS
TERM/ BASE TOTAL MARKET TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF - --------------------------- --------- -------- ------- ------- ------- ------- # 9-SUITE 270 INITIAL OLAN MILLS 1,050 4/1997 6.50 1.18 7.68 4.00 # 6-SUITE 50 INITIAL SOUTHERN ANGLERS 2,000 4/1997 5.40 0.50 5.90 4.00 ------- ------- ------ ------- ------ 2 FY 97 EXPIRATIONS 3,050 5.78 0.74 6.52 4.00 # 5-SUITE 100 INITIAL CHILD CARE RES CTR 5,200 12/1997 5.75 0.00 5.75 4.12 # 3-SUITE 15000 INITIAL BARGAIN TOWN 15,000 1/1998 2.67 0.00 2.67 3.09 ------- ------- ------ ------- ------ 2 FY 98 EXPIRATIONS 20,200 3.46 0.00 3.46 3.36 ------- ------- ------ ------- ------ 4 CUMULATIVE EXPS 23,250 3.77 0.10 3.86 3.44 # 4-SUITE 30 INITIAL HANCOCK FABRIC 9,000 10/1998 3.00 1.36 4.36 3.09 # 16-SUITE 40 INITIAL CITY FINANCE 2,000 10/1998 6.00 1.43 7.43 4.12 # 14-SUITE 7A&B INITIAL ALA HUMAN RESOURCE 4,000 12/1998 6.50 O.OO 6.50 4.24 # 17-SUITE 10 INITIAL INTERCEL 5,730 1/1999 5.50 1.48 6.98 4.24 4 FY 99 EXPIRATIONS 20,730 4.66 1.14 5.79 3.73 ------- ------- ------ ------- ------ 8 CUMULATIVE EXPS 43,980 4.19 0.59 4.77 3.58 ------- ------- ------ ------- ------ # 13-SUITE 14A OPTION 1 GSA 4,583 8/1999 10.41 0.01 10.42 4.24 # 18-SUITE 300 INITIAL WALLPAPER FOR LESS 3,900 8/1999 4.75 0.00 4.75 4.24 # 19-SUITE 21A INITIAL O & A SPORTS 4,000 8/1999 5.0O 0.00 5.00 4.24 # 8 SUITE 2829 INITIAL THRIFTY NICKLE 1,750 9/1999 6.00 0.00 6.00 3.18 # 7-SUITE 30A INITIAL DOLLAR GEN STORES 7,300 11/1999 2.88 0.26 3.14 3.18 # 10-SUITE 20 OPTION 1 MIDWAY DENTAL 2,935 12/1999 4.85 1.48 6.33 4.37
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TERM/ BASE TOTAL MARKET TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF - --------------------------- --------- -------- ------- ------- ------- ------- # 12-SUITE 14B OPTION 1 ALABAMA MEDICAID 3,000 12/1999 6.25 0.00 6.25 4.37 # 11-SUITE 190 OPTION 1 SINGER CENTER 3,000 12/1999 2.20 0.46 2.66 4.37 # 15-SUITE 60 OPTION 1 CAROL'S STYLING 1,250 12/1999 5.00 1.48 6.48 4.37 9 FYlO0 EXPIRATIONS 31,718 5.16 0.30 5.46 3.98 ------- ------- ------ ------- ------ 17 CUMULATIVE EXPS 75,698 4.59 0.47 5.06 3.75 ------- ------- ------ ------- ------
MIDWAY PLAZA SHOPPING CENTER RENT ROLL AS OF 7/1996 (FISCAL YEAR BASIS)
TENANT/ LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/ SQUARE FEET PER SF PER SF PER SF PER SF PER SF - -------------------------- ----------- --------- ----------- ----------- ---------- # 1 - SUITE 180 BEN FRANKLIN CRAFT BASE LEASE 10/95- 1/05 90,000 0 0 14,990 104,990 30,000 SF 3.00 0.00 0.00 0.50 3.50 # 2 - SUITE 180 CARMIKE CINEMA BASE LEASE 7/85-6/05 114,581 16,781 1,168 7,644 139,006 25,238 SF 4.54 0.66 46.27 0.30 5.51 # 3 - SUITE 15000 BARGAIN TOWN BASE LEASE 1090-1/98 40,050 0 0 0 40,050 15,000 SF 2.67 0.00 0.00 0.00 2.67 # 4 - SUITE 30 HANCOCK FABRIC BASE LEASE 10/88-10/98 27,000 0 0 11,770 38,770 9,000 SF 3.00 0.00 0.00 1.31 4.31 # 5 - SUITE 100 CHILD CARE RES CTR BASE LEASE 1/96-12/97 29,900 0 0 0 29,900 5,200 SF 5.75 0.00 0.00 0.00 5.75 # 6 - SUITE 50 SOUTHERN ANGLERS BASE LEASE 4/96- 4/97 9,000 0 0 832 9,832 2,000 SF 4.50 0.00 0.00 0.42 4.92 # 7 - SUITE 30A DOLLAR GEN STORES BASE LEASE 11/94-11/99 21,024 0 0 1,825 22,849 7,300 SF 2.88 0.00 0.00 0.25 3.13 # 8 - SUITE 2829 THRIFTY NICKLE BASE LEASE 8/94-9/99 10,500 0 0 0 10,500 1,750 SF 6.00 0.00 0.00 0.00 6.00 # 9 - SUITE 270 OLAN MILLS BASE LEASE 11/84-4/97 5,688 0 0 1,030 6,718 1,050 SF 5.42 0.00 0.00 0.98 6.40 # 10 - SUITE 20 MIDWAY DENTAL BASE LEASE 9/91-12/96 67,117 0 0 2,019 9,136 2,935 SF 2.42 0.00 0.00 0.69 3.11 # 11 - SUITE 190 SINGER CENTER BASE LEASE 11/81-12/96 63,300 0 0 642 3,942 3,000 SF 1.10 0.00 0.00 0.21 1.31 # 12 - SUITE 14B ALABAMA MEDICAID BASE LEASE 12/91-12/96 69,375 0 0 0 9,375 3,000 SF 3.13 0.00 0.00 0.00 3.13
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TENANT/ LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/ SQUARE FEET PER SF PER SF PER SF PER SF PER SF - -------------------------- ----------- --------- ----------- ----------- ---------- # 13 - SUITE 14A GSA BASE LEASE 9/91-8/96 7,952 0 0 0 7,952 4,583 SF 1.74 0.00 0.00 0.00 1.74 # 14 - SUITE 7A&B ALA HUMAN RESOURCE BASE LEASE 1/94-12/98 25,000 0 0 0 25,000 4,000 SF 6.25 0.00 0.00 0.00 6.25 # 15 - SUITE 60 CAROL'S STYLING BASE LEASE 1/81-12/96 3,125 0 0 860 3,985 1,250 SF 2.50 O.00 0.00 0.69 3.19 # 16 - SUITE 40 CITY FINANCE BASE LEASE 10/93-10/98 12,000 0 0 2,756 14,756 2,000 SF 6.00 0.00 0.00 1.38 7.38 # 17 - SUITE 10 INTERCEL BASE LEASE 2/94-1/99 26,979 0 0 7,894 34,873 5,730 SF 4.71 0.00 0.00 1.38 6.09 -------- -------- -------- -------- --------- TOTALS 442,591 16,781 1,168 52,262 511,634 123,036 SF 3.60 0.14 9.49 0.42 4.16 ======== ======== ======== ======== =========
MIDWAY PLAZA SHOPPING CENTER AVERAGE OCCUPANCY REPORT FOR ALL TENANTS
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- JANUARY 121,036 130,936 125,736 115,936 113,451 130,936 130,936 116,703 127,886 130,936 130,936 FEBRUARY 121,036 130,936 110,736 121,206 113,451 130,936 128,936 116,703 130,936 100,936 130,936 MARCH 121,036 130,936 110,736 121,206 120,751 130,936 128,936 121,886 130,936 100,936 118,453 APRIL 123,036 130,936 115,936 125,206 130,936 125,736 124,936 113,451 130,936 100,936 116,703 MAY 123,036 127,886 130,936 130,936 130,936 125,736 121,206 98,451 130,936 98,936 116,703 JUNE 123,036 127,886 130,936 130,936 130,936 125,736 121,206 105,751 130,936 98,936 121,886 JULY 123,036 127,886 130,936 130,936 130,936 130,936 125,206 115,936 125,736 94,936 113,451 AUGUST 123,036 130,936 130,936 130,936 127,886 130,936 130,936 130,936 125,736 91,206 113,451 SEPTEMBER 130,936 130,936 130,936 118,453 127,886 130,936 130,936 130,936 125,736 91,206 120,751 OCTOBER 130,936 130,936 130,936 116,703 127,886 130,936 130,936 130,936 130,936 95,206 130,936 NOVEMBER 130,936 130,936 119,936 116,703 130,936 130,936 130,936 127,886 130,936 100,936 130,936 DECEMBER 130,936 130,936 119,936 121,886 130,936 130,936 118,453 127,886 130,936 130,936 130,936 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- AVERAGE SF OCCUPIED-OCSF 125,169 130,174 124,053 123,420 126,411 129,636 126,963 119,788 129,382 103,004 123,007 TOTAL SF-GRSF 201,976 201,976 201,976 201,976 201,976 201,976 201,976 201,976 201,976 201,976 201,976 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- OCCUPANCY % 61.97 64.45 61.42 61.11 62.59 64.18 62.86 59.31 64.06 51.00 60.90 ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
2007 2008 ------- ------- JANUARY 130,936 130,936 FEBRUARY 127,886 130,936 MARCH 127,886 130,936 APRIL 127,886 130,936 MAY 130,936 130,936 JUNE 130,936 130,936 JULY 130,936 130,936 AUGUST 130,936 113,936 SEPTEMBER 130,936 113,936 OCTOBER 125,736 109,936 NOVEMBER 125,736 121,206 DECEMBER 125,736 121,206 ------- ------- AVERAGE SF OCCUPIED-OCSF 128,874 124,731 TOTAL SF-GRSF 201,976 201,976 ------- ------- OCCUPANCY % 63.81 61.76 ------- ------- ================================================================================ ADDENDUM I LETTER OF AUTHORIZATION - -------------------------------------------------------------------------------- Addendum I LETTER OF AUTHORIZATION - -------------------------------------------------------------------------------- [Letterhead of MARK CENTERS TRUST] June 7, 1996 VIA FEDERAL EXPRESS Mr. Michael R. Pecorino Senior Vice President CB Commercial 560 Lexington Avenue 16th Floor New York, NY 10022 Re: Mark Centers Engagement dated May 8, 1996 Dear Mike: In connection with the above item, please expand the scope of work to include the following two properties: o Northside Mall, 3489 Ross Clark Circle NW, Dothan, Alabama o Midway Plaza, Pepperell Parkway and US Highway 29, Opelika, Alabama We understand that the cost for this additional work shall be S8.500.00 (out of expenses included). The relevant information you require to begin your work is included herein Sincerely yours, /s/ Joshua Kane Joshua Kane Senior Vice President Chief Financial Officer jk/cb67 Enclosures ================================================================================ ADDENDUM J QUALIFICATIONS - -------------------------------------------------------------------------------- Addendum J QUALIFICATIONS - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM J QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF W. SCOTT BRADFORD Senior Real Estate Analyst CB Commercial Real Estate Group, Inc. - Appraisal 100 Galleria Parkway, Suite 550 Atlanta, Georgia 30339 (770) 951-7843 EDUCATIONAL B.S. in Management, Guilford College, Greensboro, North Carolina M.S. in Real Estate, Georgia State University, Atlanta, Georgia Appraisal Institute: Courses 1A-1, 1A-2, 1B-A, 1B-B, 2-1, and 2-3 CERTIFICATION Certified Real Estate Appraiser: State of Georgia - Certificate Number 00 1784 PROFESSIONAL Appraisal Institute Candidate - Appraisal Institute EMPLOYMENT EXPERIENCE 1989-1993 John Booth & Associates Atlanta, Georgia 1993-Present CB Commercial Real Estate Group, Inc. Atlanta, Georgia Appraisal Southeast Region, Senior Real Estate Analyst Appraiser ================================================================================ ADDENDUM J QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF RONALD A. NEYHART, MAI First Vice President Regional Manager CB Commercial Real Estate Group, Inc., - Appraisal 100 Galleria Parkway, Suite 550 Atlanta, Georgia 30339 (770) 951-7874 EDUCATIONAL B.S. Finance and Management - Florida State University Appraisal Institute Course 1A-1, 1A-2, 1B-A, 1B-B, 2-1, 2-2, SPP LICENSE(S)/CERTIFICATION(S) Registered Real Estate Salesman - State of Florida State of Georgia Real Estate Appraisal Board - Certified Real Estate Appraiser - C000490 PROFESSIONAL Appraisal Institute Member, (MAI) Appraisal Institute, Certification No. 8484 Other Affiliations Realtor - Associate of the Atlanta Board of Realtors, Inc. EMPLOYMENT EXPERIENCE 1979-1982 American Appraisal Associates, Staff Appraiser Atlanta, Georgia 1982-1983 Cigna Securities, Account Executive Atlanta, Georgia 1983-1984 Johnson, Lane, Space, Smith & Co., Account Atlanta, Georgia Executive 1984-Present First Vice President, Regional Manager Atlanta, Georgia CB Commercial Real Estate Group, Inc. Appraisal Southeast Region This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE TROY PLAZA 156 Hoosick Street Troy, New York CB File No. 96-093C [LOGO] CB COMMERCIAL Delivering Solutions Through Local Knowledge Worldwide COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE TROY PLAZA 156 Hoosick Street Troy, New York CB File No. 96-093C DATE OF VALUE May 31, 1996 PREPARED FOR MORGAN STANLEY Morgan Capital Inc. 1585 Broadway New York, NY 10036 PREPARED BY CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES 560 Lexington Avenue, 16th Floor New York, New York 10022 [LETTERHEAD OF CB COMMERCIAL] June 10, 1996 MORGAN STANLEY Morgan Capital Inc. 1585 Broadway New York, NY 10036 RE: Appraisal of Shopping Center TROY PLAZA 156 Hoosick Street Troy, New York CB File No. 96-093C Dear Ladies and Gentlemen: At your request and authorization, CB Commercial Real Estate Group, Inc. has prepared a Complete Appraisal presented in a self-contained appraisal report of the current market value of the leased fee estate in the above-referenced real property. The subject property is a single story community shopping center featuring 128,579 square feet of gross leasable area. The shopping center is anchored by Ames Department Store and Price Chopper Supermarket and is currently 100% occupied. The property is more fully described, legally and physically, within the enclosed report. Data, information, and calculations leading to the value conclusion are incorporated in the report following this letter. The report, in its entirety, including all assumptions and limiting conditions, is an integral part of and inseparable from this letter. Based on research and analysis contained in this report, it is estimated that the current market value of the leased fee estate in the subject property as of May 31, 1996, is: THREE MILLION FIVE HUNDRED THOUSAND DOLLARS ($ 3,500,000) The following appraisal sets forth the most pertinent data gathered, the techniques employed, and the reasoning leading to the opinion of value. The analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP), the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, and The Financial Institution Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Furthermore, this report has been prepared in conformance with our interpretation of the appropriate regulations and guidelines set forth by Morgan Stanley. June 10, 1996 Page 2 It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CB Commercial Real Estate Group, Inc. can be of further service, please do not hesitate to contact us. Respectfully Submitted, CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES by: /s/Chris L. Harland /s/Michael R. Pecorino - ------------------------------ -------------------------------- Chris L. Harland Michael R. Pecorino, MAI Senior Real Estate Analyst Senior Vice President, Northeast Regional Manager New York State Certification No. 46000002055 ================================================================================ CERTIFICATION OF THE APPRAISERS - -------------------------------------------------------------------------------- CERTIFICATION OF THE APPRAISERS We certify that to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. 4. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event, such as the approval of a loan. 5. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation and the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. In addition, this report conforms to the requirements of the Financial Institution Reform, Recovery, and Enforcement Act (FIRREA). 6. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 7. Michael R. Pecorino has completed the requirements of the continuing education program of the Appraisal Institute. 8. The property was personally inspected by Chris L. Harland, but was not inspected by Michael R. Pecorino, MAI. 9. No other person provided professional assistance to the persons signing this report. 10. The undersigned appraisers have extensive experience in the appraisal/review of similar property types. /s/Chris L. Harland /s/Michael R. Pecorino - ------------------------------ -------------------------------- Chris L. Harland Michael R. Pecorino, MAI Senior Real Estate Analyst Senior Vice President, Northeast Regional Manager New York State Certification No. 46000002055 - -------------------------------------------------------------------------------- i ================================================================================ SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- SUBJECT PHOTOGRAPHS [GRAPHIC OMITTED] FRONT VIEW OF THE SUBJECT PROPERTY FACING SOUTHEAST [GRAPHIC OMITTED] ENTRANCE FACING NORTHEAST - -------------------------------------------------------------------------------- ii ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- SUMMARY OF SALIENT FACTS Property Name: Troy Plaza Location: 156 Hoosick Street, Troy, New York Assessor's Parcel Number: Section 101.31, Block 10, Lot 3./1 Property Description: The subject property is a single story community shopping center featuring 128,579 square feet of gross leasable area. The improvements are situated on a 533,610 square foot lot (12.25 acre). Construction features include a concrete and steel frame with brick and stucco exterior walls. Highest and Best Use As Though Vacant: Retail use As Improved: Continued use as a shopping center Property Rights Appraised: Leased Fee Date of Value: May 31, 1996 Land Area 533,610 Square Feet (12.25 Acres) Improvements Building Area: Gross Leasable Area: 128,579 SF Year Built: 1966 (renovated 1988) Condition: Average Estimated Marketing Time: 12 months or less - -------------------------------------------------------------------------------- iii ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- Financial Indicators Current Occupancy: 100% Leased / 100% Occupied Stabilized Occupancy: 98% Market Rental Rate: $ 5.50 P.S.F. Anchor $11.00 P.S.F. Satellite $14.00 P.S.F. PAD $200.00 P.F.F. ATM Income Growth Rate: 3.5% Estimated Stabilized Expenses: $3.17 P.S.F. Expense Growth Rate: 3.5% Going-In Overall Capitalization Rate Selected: 9.50% Going-In Overall Capitalization Rate Implied: 9.38% Terminal Overall Capitalization Rate: 10.50% Discount Rate: 13.00% Valuation Land Value: N/A Cost Approach: N/A Sales Comparison Approach: $ 3,350,000 Income Capitalization Approach: $ 3,500,000 Final Value Conclusion: $ 3,500,000 Per Square Foot: $ 27.22 - -------------------------------------------------------------------------------- iv ================================================================================ TABLE OF CONTENTS - -------------------------------------------------------------------------------- TABLE OF CONTENTS CERTIFICATION OF THE APPRAISERS................................................i SUBJECT PHOTOGRAPHS...........................................................ii SUMMARY OF SALIENT FACTS.....................................................iii TABLE OF CONTENTS..............................................................v INTRODUCTION...................................................................1 AREA ANALYSIS..................................................................7 MARKET ANALYSIS...............................................................16 SITE ANALYSIS.................................................................23 IMPROVEMENT ANALYSIS..........................................................25 ZONING........................................................................29 TAX AND ASSESSMENT DATA.......................................................30 HIGHEST AND BEST USE..........................................................32 APPRAISAL METHODOLOGY.........................................................35 SALES COMPARISON APPROACH.....................................................37 INCOME CAPITALIZATION APPROACH................................................42 RECONCILIATION OF VALUE.......................................................71 ASSUMPTIONS AND LIMITING CONDITIONS...........................................73 ADDENDA.......................................................................77 A Glossary Of Terms B Additional Photographs C Improved Comparable Sales D Rental Comparables E Strategic Mapping, Inc. Reports F Rent Roll G PRO-JECT Reports H Engagement Letter I Legal Description J Qualifications - -------------------------------------------------------------------------------- v INTRODUCTION ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- INTRODUCTION PROPERTY IDENTIFICATION The subject is located on the south side of Hoosick Street in the City of Troy, New York. The common street address for the subject is 156 Hoosick Street. The city assessor's tax identification number is Section 101.31, Block 10, Lot 3./1. A full metes and bounds legal description is included in the Addenda. OWNERSHIP AND PROPERTY HISTORY The subject is currently owned by Mark Centers Limited Partnership. The subject has not sold in the last three years and to the best of our knowledge there is no known current listing, option, or agreement of sale of the subject. DATES OF INSPECTION AND VALUATION The site was last inspected by Chris L. Harland on May 31, 1996. Michael R. Pecorino, MAI did not inspect the subject or the comparables employed but reviewed this report and concurs with the conclusions. The date of the market value is the date of inspection, May 31, 1996. PURPOSE OF THE APPRAISAL The purpose of this appraisal is to estimate the current market value of the leased fee estate in the subject property in it's "As Is" condition. Market value is defined as follows: Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised, and acting in what they consider their own best interests; 3. A reasonable time is allowed for exposure in the open market; 4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and - -------------------------------------------------------------------------------- 1 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- 5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) TERMS AND DEFINITIONS Please refer to the Addenda for a Glossary of the Terms and Definitions that are, and may be used in this appraisal. INTENDED USE OF REPORT This appraisal is for mortgage underwriting purposes. PROPERTY RIGHTS APPRAISED The value estimated represents the leased fee estate. APPRAISAL DEVELOPMENT AND REPORTING PROCESS The following steps were completed by CB Commercial for this assignment: 1. Analyzed regional, city, neighborhood, site, and improvement data. 2. Inspected the subject and the neighborhood. 3. Reviewed data regarding taxes, zoning, utilities, easements, and city services. 4. Considered comparable improved sales, comparable improved building rental information, and comparable site sales. Data was confirmed with principals, managers, or real estate agents representing principals, unless otherwise noted. 5. Analyzed the data to arrive at conclusions via each approach to value used in this report. 6. Reconciled the results of each approach to value employed into a probable range of market data and finally an estimate of value for the subject, as defined herein. 7. Estimated a reasonable exposure time associated with the value estimate. The subject site and improvement descriptions are based on a personal inspection of the property, discussions with representatives of the subject property, and/or a review of relevant plat maps and leasing plans. The inspection is not a substitute for thorough engineering studies. - ---------- (1) The definition of market value is taken from: The Office of the Comptroller of the Currency under 12 CFR, Part 34, Subpart C-Appraisals, ss.34.42(f), August 24, 1966. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. - -------------------------------------------------------------------------------- 2 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- To develop the opinion of value, CB Commercial performed a complete appraisal process, as defined by the Uniform Standards of Professional Appraisal Practice. This means that no departures from Standard 1 were invoked. This is a complete appraisal, in the form of a Self-Contained Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Standards of Professional Appraisal Practice. The definitions of Complete Appraisal and Self-Contained Report are found in the Glossary of Terms and Definitions. In a complete appraisal, CB Commercial uses all known applicable approaches to value. The value conclusion reflects all known information about the subject property, market conditions, and available data. The Self-Contained Report incorporates to the fullest extent possible, practical explanation of the data, reasoning and analysis that were used to develop the opinion of value. It also includes thorough descriptions of the subject property and the market for the subject property type. All data considered significant that was requested for this assignment was received by CB Commercial Real Estate Group, Inc. Appraisal Services. SPECIAL APPRAISAL INSTRUCTIONS There were no special appraisal instructions. MARKETING PERIOD The marketing period section is divided into reasonable exposure time and reasonable marketing time. Exposure time differs from marketing time. Marketing time is the period required to sell a real property interest at market value during the period immediately after the effective date of the appraisal. Exposure time is always presumed to precede the effective date of the appraisal. Exposure time is not intended to be a prediction of a date of sale or a one-line statement. Instead, it is an integral part of the appraisal analysis and is based on one or more of the following: o statistical information about days on the market o information gathered through sales verification o interviews of market participants. The reasonable exposure period is a function of price, time, and use. It is not an isolated estimate of time alone. Exposure time is different for various types of real estate and under various market conditions. - -------------------------------------------------------------------------------- 3 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- Reasonable Exposure Time Exposure time is always presumed to precede the effective date of the appraisal. It is the estimated length of time the property would have been offered prior to a hypothetical market value sale on the effective date of appraisal. It is a retrospective estimate based on an analysis of recent past events, assuming a competitive and open market. It assumes not only adequate, sufficient, and reasonable time but adequate, sufficient, and reasonable marketing effort. Exposure time and appraisal conclusion of value are therefore interrelated. Exposure time is often expressed as a range and is based on direct and indirect market data gathered during the market analysis, sales verifications, interviews with market participants, and other appropriate sources. The amount of time which a property will require to be marketed varies greatly depending on a number of factors including market conditions, listing price, terms of sale offered, and competitive listing inventory. In addition to considering each of the factors noted above, CB Commercial considered: o exposure periods of comparable sales revealed during the course of this appraisal, o the most recent CB Commercial National Investor Survey, and o the opinions of local knowledgeable real estate brokers and investors. Market Conditions Throughout the Troy metropolitan area, market conditions for most property types have been generally weak during the past three to four years. The value of most investment grade property types has decreased due to a number of factors. The lack of demand for investment properties and the inability of owners to make mortgage payments resulted in numerous foreclosures, or properties deeded back in lieu of foreclosure. Increased listing inventory has had a substantial downward influence on property values and the exposure time necessary to generate sales. Only recently, due to the competitive pricing in the market and improving economic conditions, has the number of transactions and active investors increased. These market conditions describe the current market and illustrate how exposure time is correlated with listing inventory, competitive pricing structures, and marketing efforts. CB Commercial National Investor Survey In the most recent issue of the CB Commercial National Investor Survey, published in the Third Quarter 1995, CB Commercial surveyed a wide range of investors for property type preferences and specific marketing times. Respondents showed a clear preference for apartments, suburban offices, warehouse/distribution, community shopping centers, neighborhood shopping centers, power centers, urban offices, and business parks. Investors indicated that exposure - -------------------------------------------------------------------------------- 4 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- requirements for investment property have changed little from the previous survey, now an average of approximately 8.5 months for the subject property type. Real Estate Broker Surveys As a second information source, appraisers solicited the opinions of real estate brokers knowledgeable in the subject market and property type. While the majority of individuals surveyed were reluctant to predict an exact exposure time length for retail property in general, they generally estimated an approximate range between 6 and 12 months. All assumed that property would be appropriately priced and marketed. When asked about the subject property specifically, the consensus of opinion was that the subject would receive average to above average recognition in the marketplace under a reasonable plan for pricing and promotion. Exposure Time Conclusion In conclusion, based on the foregoing analysis, an exposure time of between 6 and 12 months is reasonable, defensible, and appropriate. Like the brokers surveyed, CB Commercial assumes that the subject property would have been competitively priced and aggressively promoted regionally. Reasonable Marketing Time Reasonable marketing time is the period a prospective investor would forecast to sell the subject property immediately after the date of value, at the value estimated. Anticipated marketing time is essentially a measure of the perceived level of risk associated with the marketability, or liquidity, of the subject as an investment grade property. The sources for this information include those used in estimating the reasonable exposure time, but also an analysis of the anticipated changes in market conditions following the date of appraisal. In other words, the reasonable marketing time is the number of months it will require to sell the subject property from the date of value, into the future. The reader must understand, however, that the future price for the subject property (at the end of the marketing time) may or may not equal the appraisal estimate. The future price depends on unpredictable changes in the physical real estate, demographic and economic trends, real estate markets in general, supply/demand characteristics for the property type, and many other factors. Based on the premise that present market conditions are the best indicators of future performance in the short-term and under stable market conditions, a prudent investor will forecast that, under the conditions described above, the subject property will require a marketing time of 6 to 12 months. - -------------------------------------------------------------------------------- 5 Regional Map [GRAPHIC OMITTED] ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- AREA ANALYSIS The dynamic nature of economic relationships within a market area have a direct bearing on real estate values and the long-term quality of a real estate investment. In the market, the value of a property is not based on the price paid for it in the past or the cost of its creation, but on what buyers and sellers perceive it will provide in the future. Consequently, the attitude of the market toward a property within a specific neighborhood or market area reflects the probable future trend of that area. Since real estate is an immobile asset, economic trends affecting its locational quality in relation to other competing properties within its market area will also have a direct effect on its value as an investment. To accurately reflect such influences, it is necessary to examine the past and probable future trends which may affect the economic structure of the market and evaluate their impact on the market potential of the subject. This section of the report is designed to isolate and examine the discernible economic trends in the region and neighborhood which influence and create value for the subject property. A regional map indicating the location of the subject is presented on the previous page. REGIONAL INFLUENCES Location The subject property is located in the City of Troy within the Albany-Schenectady-Troy Metropolitan Statistical Area. The Albany-Schenectady-Troy MSA is made up of Albany, Montgomery, Rensselaer, Saratoga, Schenectady and Schoharie Counties in the mid-eastern section of New York. The subject property is located approximately 10 miles northeast of downtown Albany and 20 miles southeast of Schenectady. Troy is located within Rensselaer County which is bordered to the east by the Massachusetts state border, to the north by Washington County, NY, to the west by Albany County, NY and to the south by Columbia County, NY. Population According to Strategic Mapping, Inc., the population in the Albany-Schenectady-Troy MSA increased between 1980 and 1990, increased between 1990 and 1995, and is projected to increase further through the year 2000. Since 1990, the population in the Albany-Schenectady-Troy MSA increased by 2.1%. Projections for population change over the next five years show a similar pattern of growth of 1.6%. - -------------------------------------------------------------------------------- 7 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Demographic statistics for the Albany-Schenectady-Troy MSA are summarized in the following table. ================================================================================ SELECTED AREA DEMOGRAPHICS ALBANY-SCHENECTADY-TROY MSA - -------------------------------------------------------------------------------- Population 1995 Estimate 879,448 1990 Census 861,424 1990-1995 % Change 2.1% Households 1995 Estimate 338,107 1990 Census 330,484 1990-1995 % Change 2.3% 1995 Median Household Income $ 37,958 1995 Average Household Income $ 46,540 1990 Median Home Value $ 98,954 1990 % College Graduates 24.6% - -------------------------------------------------------------------------------- Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ Households Similar to the population level within the Albany-Schenectady-Troy MSA, the number of households has grown in recent years and is projected to increase over the next five years. Between 1990 and 1995, household growth in the Albany-Schenectady-Troy MSA was 2.3%. Projections for the year 2000 indicate a mature and stable area with the number of households increasing by 1.9%. While experiencing decline between 1980 and 1990, the average household size did not change in the early 1990's and is expected to remain fairly stable over the next five years. In the Albany-Schenectady-Troy MSA, the average household size declined from 2.68 in 1980 to 2.51 in 1990. It is projected to decline slightly to 2.50 in the year 2000. Income As per data compiled by the Strategic Mapping, Inc., the 1995 median household income in the Albany-Schenectady-Troy MSA was $37,958. The median household income increased considerably between the 1980 and 1990 census by approximately 9.1% annually. In 1980 the median household income was $16,934, which increased by 91.5% to $32,428 in 1990. The 1995 estimate indicates that growth in the median household income has slowed to only 3.4% per annum from 1990 to 1995. Income growth is projected to increase at an average annual rate of 3.3% between 1995 and the year 2000. - -------------------------------------------------------------------------------- 8 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Employment The Albany-Schenectady-Troy Metropolitan Statistical Area (MSA) employment base, like many other cities in the northeast, has its largest employment concentrations in the services sector with a 30.6% share of total non-farm workers. The second largest employment group is in government with a 25.6% share. Since Albany is the state capital of New York, the regional economy is heavily influenced by the government sector. The most recently published labor statistics for the Albany-Schenectady-Troy MSA as of January 1996 indicate that the area's civilian labor force declined by 3,900 people (0.9%) from the previous year. Shown below is a breakdown of the labor force, number employed, and unemployed in the Albany-Schenectady-Troy Metropolitan Statistical Area. ================================================================================ CIVILIAN LABOR FORCE - ALBANY-SCHENECTADY-TROY MSA (BY PLACE OF RESIDENCE) ================================================================================ January 1996 January 1995 - -------------------------------------------------------------------------------- LABOR FORCE 446,900 450,800 - -------------------------------------------------------------------------------- EMPLOYMENT 422,000 425,700 - -------------------------------------------------------------------------------- UNEMPLOYMENT 24,900 25,100 - -------------------------------------------------------------------------------- UNEMPLOYMENT RATE 5.5% 5.5% ================================================================================ Over the past year, the labor force and the number of employed decreased. The labor force and employment both decreased by approximately 0.9%. As a result, the number of unemployed workers decreased by 0.8%. The unemployment rate of 5.5% remained the same within the Albany-Schenectady-Troy Metropolitan Statistical Area. The unemployment rate within the MSA is significantly lower than the state unemployment rate of 6.8%. When analyzing employment by industry, the data is collected by place of work as opposed to by residence (as shown above). An analysis of employment by industry indicates that nonfarm employment declined slightly by 0.9%, which can be primarily attributed to decreases in the goods producing industries as well as the government sector of the services category. The following chart illustrates the employment by sector for the Albany-Schenectady-Troy MSA between January 1995 and 1996. - -------------------------------------------------------------------------------- 9 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ================================================================================ EMPLOYMENT BY INDUSTRY - ALBANY-SCHENECTADY-TROY MSA (BY PLACE OF WORK) ================================================================================ Employment Sectors 1/1/95 1/1/96 % Change - -------------------------------------------------------------------------------- Goods Producing 55,100 52,500 -4.7% Manufacturing 41,600 39,900 -4.1% Durable Goods 20,600 19,300 -6.3% Non-Durable 21,000 20,600 -1.9% Construction & Mining 13,500 12,500 -7.6% Services 370,600 369,600 -0.3% Retail Trade 70,400 71,500 1.6% Wholesale Trade 18,500 19,000 2.7% Services 127,300 129,200 1.5% TCPU 16,000 16,300 1.9% FIRE 25,900 25,600 -1.2% Government 112,500 108,000 -4.0% - -------------------------------------------------------------------------------- TOTAL EMPLOYMENT 425,700 422,000 -0.9% ================================================================================ Despite significant declines within all goods producing industries as well as the government sector of the services category, given gains in wholesale and retail trade, services, and TCPU, total employment decreased by only 0.9%. Given cutbacks in government spending, the government sector lost approximately 4,500 jobs over the past year. In addition, manufacturing also witnessed a decline in employment of approximately 1,700 jobs. Theses losses, however, were almost offset by increases in most of the services subcategories. Based on our analysis of the labor force and employment, it appears that the economy is stable overall though recent government cutbacks have hit the MSA harder than other areas of New York and the northeast region. The major employers within Rensselaer County are as follows: - -------------------------------------------------------------------------------- 10 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ================================================================================ RENSSELAER COUNTY MAJOR AREA EMPLOYERS ================================================================================ Company Business No. Employees - -------------------------------------------------------------------------------- General Electronic Silicones Computers/Appliances 1,650 Rensselaer Polytechnic Institute Education 1,450 Samaritan Hospital Hospital 1,400 Rensselaer County Government 1,150 Seton Health System Healthcare 1,120 Garden Way, Inc. Agriculture 1,000 Hudson Valley Community College Education 950 Grand Union Retail/Grocery 900 The Enlarged City School District Education 700 Troy City Government 560 - -------------------------------------------------------------------------------- Source: Rensselaer County Chamber of Commerce Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ Transportation Two major interstate highway systems converge in the Albany-Schenectady-Troy MSA. The New York State Thruway (I-90 and I-87) connects the area with New York City to the south, Buffalo to the west, and the Massachusetts Turnpike and Boston to the east. The Northway (I-87) proceeds north through the Adirondack and Lake Champlain region and connects with the Canadian Highway system in Montreal. I-88 intersects the Thruway just north of Albany County and provides direct access to Binghamton, the southern New York tier and Pennsylvania. Located 7 miles west of the City of Albany, the Albany County Airport is the major commercial service air facility in the region. In 1966, the airport handled more than 2.3 million passengers. The Port of Albany is operational year-round and is located 124 nautical miles north of New York City on the Hudson River. The port consists of 200 acres of land on both sides of the river which has a channel width of 400 feet and a channel depth of 32 feet. The region is an excellent distribution point for motor freight carriers within overnight trucking time to 35 of the nation's top 100 retail markets. Rail freight facilities operated by Conrail, D&H/CP Rail System and Guilford railways service the Northeast and Mid-Atlantic states and Canada with connections nationwide. Amtrak provides passenger service throughout the U.S. and Canada. The Albany/Rensselaer station is the 11th busiest in the nation. Amtrak operates daily service to New York City, Buffalo, Montreal and Boston. - -------------------------------------------------------------------------------- 11 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Conclusion and Relevance to the Subject Property During the early 1990's, the region experienced a downturn in the economy as a result of the national recession. Despite the downturn, it appears that the region maintained slow growth in both population and household levels. As new jobs are created, the unemployment rate is expected to gradually decline though it is currently well below that of the State of New York. The region is heavily influenced by the government sector since Albany is the state capital of New York. Over the past year, government cutbacks have had an adverse affect upon employment levels. While overall employment dropped slightly, the unemployment rate did not change over the past year. The region's transportation system is considered to be very good and has contributed to the recent slow growth despite the economic downturn of the region and nation. Overall, the Albany-Schenectady-Troy MSA is projected to remain financially and demographically healthy into the foreseeable future. NEIGHBORHOOD INFLUENCES Location The subject is located on the south side of Hoosick Street between Tenth and Fourteenth Streets, approximately two miles northeast of downtown Troy. The common mailing address is 156 Hoosick Street, Troy, New York. The boundaries for the subject neighborhood are considered to be: North: Park Boulevard South: Jacob Street West: U.S. Route 4 East: Burdett Avenue A neighborhood map indicating the location of the subject is presented on the following page. Land Use Land use in the neighborhood consists of a mixture of commercial and residential development. Development in the immediate vicinity of the subject consists of 1-4 family residential uses to the south and west and mixed residential and commercial uses to the north and east. In the vicinity of the subject, there are primarily small service and retail uses along Hoosick Street with scattered industrial and residential uses as well. Predominantly residential uses are located along the sidestreets. The immediate area is approximately 90 to 95 percent developed. Most desirable commercial lots are currently utilized. However, there is some potential for development and renovation in the area when market conditions improve. - -------------------------------------------------------------------------------- 12 [GRAPHIC OMITTED] NEIGHBORHOOD MAP ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Access Accessibility to the neighborhood in general, and to the subject property in particular, is considered to be good. Access to Interstate 787 is located approximately two miles west of the subject while a connection with U.S. Highway 4 is located approximately one mile west. The subject neighborhood also features a good network of secondary roadways which further enhance accessibility. Demographics Selected neighborhood demographics in a one-, three-, and five-mile radius from the subject are shown in the following table: ================================================================================ SELECTED NEIGHBORHOOD DEMOGRAPHICS ================================================================================ 1-Mile 3-Mile 5-Mile - -------------------------------------------------------------------------------- Population 2000 Projection 20,175 79,793 138,495 1995 Estimate 20,502 80,495 136,910 1990 Census 20,907 81,234 134,747 1990-1995 % Change -1.9% -0.9% 1.6% Households 2000 Projection 7,210 31,725 54,544 1995 Estimate 7,327 31,962 53,728 1990 Census 7,490 32,250 52,746 1990-1995 % Change -2.2% -0.9% 1.9% 1995 Median Household Income $ 26,728 $ 28,914 $ 34,295 1995 Average Household Income $ 33,549 $ 35,980 $ 42,293 1990 Average Home Value $ 88,719 $ 87,281 $ 96,284 1990 % College Graduates 29.3% 25.0% 28.8% - -------------------------------------------------------------------------------- Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The subject property benefits from a good commercial location as well as stable demographic characteristics. The population and households have decreased within one and three mile radii but have increased within a five mile radius. Projections for the year 2000 indicate similar patterns. While the population and households have been stable overall, income levels have edged upward approximately 3.5 percent per annum since 1990 within all three radii, similar to the inflation rate. Demographic characteristics appear to be strongest within a five mile radius. The five mile radius extends closer to the City of Albany which appears to be recovering economically more quickly than Troy. General characteristics are fairly similar throughout all three radii. - -------------------------------------------------------------------------------- 14 Growth and Trends Due to stable demographic characteristics as discussed above as well as improving economic conditions, there has been some retail development in Troy in recent years. A community center known as the Brunswick Plaza was constructed in 1995. This center is located at Hoosick and McChesney Avenues, contains 145,050 square feet and is anchored by Grand Union. We are not aware of any proposed shopping centers within the City of Troy in upcoming years. Most retail development within the region has been concentrated in Albany County to the southwest of the subject in Colonie, Latham and Albany. Recent developments include the Latham Farms Plaza, a 700,000 square foot regional discount center anchored by WalMart, Home Quarters and Shop-N-Save. This center is located at the intersection of Route 2 and the Northway in Colonie. The immediate neighborhood has not experienced significant retail development in the recent past. Conclusion and Relevance to the Subject Property The subject property is situated in an area consisting primarily of retail, service and residential uses. The area features good accessibility to the local transportation system and throughout the city and metropolitan area. Currently, the subject's neighborhood is in the stabilization stage of its life cycle, a period of neither significant growth nor decline. While the area is highly developed, some potential exists for future development whether through construction on the few remaining vacant lots or renovation of existing improvements. We do not expect the character of the neighborhood to change in the near future. - -------------------------------------------------------------------------------- 15 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- MARKET ANALYSIS Retail Overview The retail market in Troy has witnessed some growth over the past few years despite the economic troubles the region has experienced. As noted in the previous section, a community center known as the Brunswick Plaza was constructed in 1995. This center is located at Hoosick and McChesney Avenues, contains 145,050 square feet and is anchored by Grand Union. We are not aware of any proposed shopping centers within the City of Troy in upcoming years. Most retail development within the region has been concentrated in Albany County to the southwest of the subject in Colonie, Latham and Albany. Recent developments include the Latham Farms Plaza, a 700,000 square foot regional discount center anchored by WalMart, Home Quarters and Shop-N-Save. This center is located at the intersection of Route 2 and the Northway in Colonie. Also, the Crossgates Mall, a 1,700,000 super regional mall, was expanded and renovated in 1993. This mall is located on the Washington Avenue Extension in Albany. The immediate neighborhood has not experienced significant retail development in the recent past. Total retail development within Albany County consists of approximately 9.5 million square feet while retail development within Rensselaer County totals approximately 1.3 million square feet. The City of Troy contains 450,000+ square feet of retail space within its major shopping centers including the subject. Local Retail Market In order to project future performance of the retail space in the subject property consideration has been given to various market components that affect the supply and demand for this type of real estate property. Specifically we have: o Inspected the site and surrounding areas for the purpose of familiarizing ourselves with all the locational and environmental factors. In this regard, we have directed our attention to the physical qualities of the site, access and circulation, surrounding uses, and relationship to sources of market support. o Reviewed the principal economic growth trends in the area in industry, population and employment. Our intention was to identify the degree of underlying support for existing improvements and future growth. o Analyzed existing and foreseeable market conditions for retail properties in the area. o Analyzed demographics of the subject property's trade area as well identified competition in order to assess, the subject property's current as well as future position in the market. - -------------------------------------------------------------------------------- 16 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- Trade Area The trade area of a shopping center is defined as the geographic area from which the sustaining patronage for steady support of a center is obtained. Determination of the boundaries is contingent upon various factors including but not limited to the nature of the center, accessibility, physical barriers, location of competing facilities, and limitations of driving time and distance. The subject's general trade area is considered to be that which encompasses a ten mile radius of the subject center. We broke this down further to include a three-mile ring (primary), a five-mile ring (secondary) and a ten-mile ring (tertiary). Definition Of The Trade Area The primary ingredients for success in these types of projects include the nature of the competition, population density, income levels, and disposable income. The actual size of the population needed to support this type of project cannot be fixed due to the complexities of the above factors, as well as changing methods of merchandising. Local conditions, such as number of households, income levels, and existing centers within the trade area can have the most dramatic impact upon any given project since these factors are what determine the purchasing power in an area. An additional ingredient leading to the success of a shopping center would be the tenant mix and characteristics of the leading tenants which attract shoppers to the project. We have analyzed demographic data, competition, income levels for the subject trade area in the following sections. The demographic profiles of the primary, secondary and tertiary trade areas are contained within the Strategic Mapping, Inc. Profile Report located within the Addenda. Population The sales potential of a center is directly related to its proximity to the number of potential patrons. The historical and projected trends for population are important to examine when analyzing the trade area of a shopping center. The historical population trends for the subject's trade areas indicate a decrease in population between 1990 and 1995 in the primary trade area and increases over the same period in the secondary and tertiary trade areas. In the primary trade area the population decreased by 0.9% between 1990 and 1995 to 80,495 and is projected to decrease further to 79,793 (0.9%) by the year 2000. Both the secondary and tertiary trade areas increased in population between 1990 and 1995 by 1.6% and 0.6%, respectively. Future population increases in the secondary and tertiary trade areas are projected to be 1.2% and 0.2%, respectively. - -------------------------------------------------------------------------------- 17 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- In order to further analyze this population change, we have examined the distribution of the population by age. When analyzing the population distribution by age, it should indicate in what age groups the population shifts are projected to take place. This is important to distinguish if it will have a great impact on the retail sales of the subject center. Shifts in the age groups under 25 years of age will affect the subject however less drastically than changes in the subject's core market approximately between the ages of 25 and 54. As illustrated in the Profile Report located in the Addenda, a large percentage of the population in all three trade areas are in the age groups from 25 - 54. Estimated figures for 1995 indicated that the median age was slightly higher than the 1990 census in all three trade areas ranging from 32.6 in the primary trade area to 34.7 in the tertiary trade area. Overall, the diversification among age groups is very common among other retail trade areas. Household Trends When analyzing the demographics for a retail center, it is most important to focus on the trends in the household population. A household consists of one or more persons occupying a dwelling unit. A family would be considered a household unit, however single persons living alone or two or more unmarried persons sharing a dwelling are also considered a household unit. The household unit is perhaps the best indicator in determining the economic health of a trade area. One of the important components which bonds a household together is it's economic strength as a unit as compared to the economic viability of an individual; single person households not withstanding. If the population is slightly decreasing and yet the number of households is increasing, this would not necessarily be a negative indicator. This would imply that the average household size was shrinking. Each household has demand for goods that likely is not duplicated with a larger household size. This demand is duplicated however in the number of households. Similar to population figures, the number of households in the trade area decreased between 1990 and 1995 in the primary trade area and increased over the same period in the secondary and tertiary trade areas. In the primary trade area the population decreased by 0.9% between 1990 and 1995 to 31,962 and is projected to decrease further to 31,725 (0.7%) by the year 2000. Both the secondary and tertiary trade areas increased in population between 1990 and 1995 by 1.9% and 0.7%, respectively. Future population increases in the secondary and tertiary trade areas are projected to be 1.5% and 0.4%, respectively. Household Income The median household income in the subject's trade areas increased annually at an average rate of 3.4% to 3.6% from 1990 to 1995. Thus, the household incomes in the area grew at a - -------------------------------------------------------------------------------- 18 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- pace similar to inflation during this period. The projected annual income growth rates between 1995 and the year 2000 are approximately 3.3% to 3.4%, again similar to the projected rate of inflation. Overall, household income levels varied significantly between the three trade areas. The median household income levels ranged from a low of $28,914 in the primary trade area to a high of $36,794 in the tertiary trade area in 1995. Employment Based upon 1990 census figures, the income characteristics of the trade areas indicate that this is a predominately white collar market. The tertiary trade area had the highest percent in white collar employment at 68.3% while the primary trade area had the lowest at 61.1%. Blue collar employment percentages in the primary, secondary and tertiary trade areas were 22.5%, 21.1% and 17.9%, respectively. The remaining percentages were in special services categories. The 1990 Census information indicates that the unemployment rates ranged from a low of 5.0% in the tertiary trade area to a high of 7.0% in the primary trade area. As discussed in the Location Analysis, the unemployment rate in the Albany-Schenectady-Troy MSA as of January 1996 was 5.5% which was the same as the same month of the previous year. We feel the subject market will witness modest employment growth in upcoming years and a declining unemployment rate given the forecasted improvement in local and regional economic conditions. Expenditure Potential The Expenditure Potential charts located in the Addenda outline Strategic Mapping, Inc. retail sales projections for the subject trade area. The highest sales growth in the primary trade area appears to be in electronics, drug, home center, shoe and sporting goods stores. These five categories also represent high growth in the secondary and tertiary trade areas. The average growth rate for retail sales in the primary trade area is projected at 1.33% in the primary trade area, 1.76% in the secondary trade area and 1.52% in the tertiary trade area. Strategic Mapping, Inc. examines the product potential for various store types for each portion of the subject trade area. Based on statistical sampling, Strategic Mapping has derived a benchmark per household expenditures for each store type. Comparing the figures in the trade area to the benchmark figure, it is apparent that those individuals in the subject trade area are much more likely to spend on items in convenience, drug and grocery stores as well as restaurants. The Strategic Mapping Expenditure Potential Index is defined as follows, 'An index which shows the amount by which an area per household expenditures, differed from that of the benchmark.' The benchmark is defined as the average or common expenditure among households for a - -------------------------------------------------------------------------------- 19 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- larger region. Values below 100 signify that this area is below the benchmark per household expenditures and correspondingly values above 100 indicate a higher than average expenditure per household. The overall Expenditure Index for the primary area is 92.0, while the benchmark indices for the secondary and tertiary trade areas are 97.0 and 98.8, respectively. In conclusion, the expenditure indices for the subject trade areas indicate that the trade area populations spend less than the benchmark household on retail goods. Market Indicators The subject center contains fifteen tenant suites ranging in size from approximately 1,200 to 71,665 square feet. Therefore, the tenants represent a mix of satellite and anchor tenants. Discussions with local leasing agents reveal that satellite space rents in the area generally range from $10.00 to $15.00/ SF depending upon the physical and locational characteristics of the space. In addition, anchor tenant rents in the area generally range from $5.00 to $8.00/ SF. In addition to minimum rent, most tenants (except service oriented businesses such as banks and marketing research, travel agents etc.) pay percentage rents. Most percentage charges range from 3% to 6% for satellite tenants depending on the mark up on merchandise and 1% to 3% for anchor tenants. Percentage rent for the majority of tenants is over specified breakpoints. Retail leases are typically structured on an absolute net basis and have either predetermined rent increases over the term or a scheduled CPI increases. Based upon discussions with brokers and managing agents in the area as well as our observations during our inspection, competing centers in the subject's market area have vacancy rates which generally fall within the 90% to 100% range with an average vacancy rate of approximately 95%. The subject center is currently 100% occupied. - -------------------------------------------------------------------------------- 20 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- Summary The trade area represents a stable and viable retail market. Declining population and household levels in the primary trade area are offset by increases in the secondary and tertiary trade areas. The trade areas exhibit lower spending potential in comparison to the region. While this may have a negative impact upon the subject to some degree, the subject has proven to be successful regardless as demonstrated by its 100% occupancy. The subject's good access, visibility, location on a heavily traveled roadway and a lack of competition in the immediate area all appear to compensate for the lower spending potential. Income levels appear to be increasing at rates similar to historical and projected inflationary rates. Overall, the subject trade areas reflect average to good retail characteristics which should have a positive impact upon the subject property in years to come. - -------------------------------------------------------------------------------- 21 PROPERTY DESCRIPTION ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- Site Plan [GRAPHIC OMITTED] ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- SITE ANALYSIS The description of the site can be detailed as follows: Location: The subject is located at the south side of Hoosick Street (State Route 7), approximately two miles east of an interchange of I-787 in Troy, New York. Ingress and egress to the subject are available via the main entrance on the south side of Hoosick Street. Assessor's Parcel Number: Section 101.31, Block 10, Lot 3./1 Land Area(1) The subject site contains 12.25 acres or 533,610 square feet. Shape and Frontage: The site is generally irregular in shape featuring good frontage on Hoosick Street (859 feet). Though irregular, the shape does not limit the use of the site. Topography and Drainage: The site slopes gently upward from Hoosick Street towards the rear. Our investigation did not reveal any significant drainage problems. Soils: No soil report was provided and it is assumed that the soil is adequate for the existing use. Easements: No title report was provided in connection with this appraisal. No survey showing the location of easements was available. Thus, it is not possible to make a definitive conclusion regarding any potential impacts on value of the location of any such easements or encroachments. It is specifically assumed that any easements, restrictions, or encroachments that might appear against the title would have no adverse impact on marketability or value. Covenants, Conditions, No private deeds or restricting covenants and Restrictions: affecting development, other than zoning, were found to affect the site. Utilities: All public utilities including gas, electricity and telephone as well as water, storm and sanitary sewer systems. - ---------- (1) Source: Troy Tax Assessor's Office - -------------------------------------------------------------------------------- 23 ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- Flood Zone: According to maps published by the Federal Emergency Management Agency (FEMA), the subject lies within Zone C, as indicated on FEMA Community Map Panel 360677 0003 B, dated March 18, 1980. This zone is described as follows: FEMA Zone C: " This area is identified in the community flood insurance study as an area of moderate or minimal hazard from the principal source of flood in the area. Buildings in this zone could be flooded by severe, concentrated rainfall coupled with inadequate local drainage systems. Local storm water drainage systems are not normally considered in the community's Flood Insurance Study. The failure of a local drainage system creates areas of high flood risk within this rate zone. Flood insurance is available in participating communities but is not required by regulation in this zone." Environmental Issues: The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the property causing a loss in value. No evidence of hazardous waste or toxic materials was visible and CB Commercial has no knowledge of the existence of these substances on or in the subject property. However, CB Commercial is not qualified to detect hazardous waste or toxic materials. Adjacent Properties North: Small retail, service and residential uses as well as one industrial property noted South: One to four family residential uses East: Small retail, service and residential uses West: One to four family residential uses Conclusion: The subject is a 12.25-acre site on a paved street served by necessary utilities. Access and visibility are considered to be good. There are no adverse soil conditions of which CB Commercial Real Estate Group, Inc. is aware. The shape of the parcel is irregular but results in no specific limitation. Furthermore, the topography is gently sloping and possesses no specific development limitation. There is no excess land and the unimproved portions of the site are fully utilized by a macadam parking lot. From a physical standpoint, the site is considered to be adequate for many types of development. - -------------------------------------------------------------------------------- 24 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS The subject improvements were constructed in 1966 and renovated in 1988. The improvements consist of a one story community shopping center containing 128,579 square feet of gross leasable area. The shopping center contains fifteen tenant suites. The following is a description of the improvements based on our physical inspection, municipal records and from discussions with and materials provided by the client. The building areas are detailed as follows: ================================================================================ 156 HOOSICK STREET BUILDING AREAS ================================================================================ Gross Type Leasable Area - -------------------------------------------------------------------------------- Anchors (2 suites) 100,709 Satellite (13 suites) 27,770 ------ Total (15 suites) 128,579 - -------------------------------------------------------------------------------- Source: Client rent roll Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The basic construction features are summarized as follows. Construction Class The class of construction is the basic subdivision in Marshall Valuation Service which divides all buildings into five basic groups by type of framing (supporting columns and beams), walls, floors, roof structure, and fireproofing. The subject is considered to be of construction Class B(1). Competitive Rating The subject is considered a Class B building in terms of quality as it is perceived in the marketplace. Foundation Poured concrete Frame Concrete block over a steel frame Floor Construction Concrete slab - ---------- (1) The primary characteristic of Class B Buildings is the reinforced concrete frame in which the columns and beams can be either formed or precast concrete. They may be mechanically stressed, and the structure is fire resistant. (Source: Marshall Valuation Service) - -------------------------------------------------------------------------------- 25 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Exterior Walls Load-bearing concrete block over a steel frame with brick veneer and concrete siding. Fenestration Aluminum framed glass windows and glass front doorways. Roof Structure & Covering Flat, presumably built-up composition covering over steel deck with steel bar joist supports. We were unable to inspect the roof and assume the roof is in average overall condition. Exterior Condition Average Interior Partition System Metal studs with gypsum board cover. Interior Finishes - Tenant Space Floors: Combination of vinyl tile and carpet. Walls: Painted or covered gypsum board. Ceilings: Suspended acoustic tiles. Lighting: Recessed florescent lighting. Summary: The interiors of the subject are considered to be of average quality and similar to competitors. HVAC Heating and ventilation is provided to the majority of the tenant suites by roof-mounted HVAC units. Each of these units pump the hot air throughout its suite via sheet metal air duct work hidden above the dropped ceiling. Air conditioning is supplied by the same system utilizing the duct work and supplying cool air during the summer months. The HVAC system is a gas-fired forced air system. Electrical The electrical system is assumed to be in good working order and adequate for the building. Fire Protection It is assumed that the subject has adequate fire alarm systems, fire exits, fire extinguishers, fire escapes and/or other fire protection measures to meet local fire marshall requirements. Plumbing The plumbing system is assumed to be in good operating condition. - -------------------------------------------------------------------------------- 26 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Parking Surface parking is provided for 535+ vehicles. The main parking area is located towards the front of the center with additional parking located towards the west side of the site. The number of parking spaces satisfies current zoning requirements for the existing use. Landscaping Landscaping on the subject property is minimal which is typical within the subject neighborhood. ADA Compliance Handicap access does not appear to be available to all areas of the center. However, we are not qualified to determine compliance with the requirements. Please refer to the specific limiting condition regarding ADA compliance. Environmental Issues The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the improvements which would cause a loss in value. Functional Quality of Space The interior floor plans are flexible and will accommodate a variety of tenant layouts. There are no observed design problems. There is one pad building currently occupied by Fleet Bank towards the north side of the site. This building contains 2,400 square feet and is located near the front entranceway with good visibility. Deferred Maintenance No deferred maintenance was observed or reported. The improvements have been adequately maintained since it was constructed in 1966. Economic Age and Life Based on the current condition, we estimate the effective age to be approximately 10 years. The center has a physical age of 30 years but was renovated 8 years ago. According to the Marshall Valuation Service cost guide, buildings of this type and quality have an expected life of approximately 45 years. Therefore, the remaining economic life (expected life minus effective age) is estimated at 35 years. While we observed nothing to suggest a different economic life, a capital improvement program could extend life beyond that stated above. - -------------------------------------------------------------------------------- 27 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Quality/General Condition The subject property conforms well with competitors and substitutes in the area. The quality of construction is typical of the area. Interior amenities are similar to competing properties of the same approximate age. The general condition of the improvements is average. We observed no evidence of structural fatigue and the improvements appear sound. We are not qualified to determine structural integrity, however, and recommend that the reader rely upon an expert in this field for further determination. Conclusion/Comments The subject property is an average quality shopping center located in a stable commercial area. The improvements generally conform with competitors and substitutes in the neighborhood. - -------------------------------------------------------------------------------- 28 ================================================================================ ZONING - -------------------------------------------------------------------------------- ZONING The subject's zoning requirements are detailed below. ================================================================================ ZONING SUMMARY ================================================================================ Current zoning: B3; Shopping Center Commercial Legally conforming?: Yes Uses permitted: Retail, Bank, Food Stores, Dry Cleaning, Drive-In Restaurants, Offices, Service Stations, Motels, Auto Repair Shops, Nightclubs, Theaters, Indoor Recreation, Factory Outlets, Vocational and Trade Schools Zoning change Not Likely - -------------------------------------------------------------------------------- Category Zoning Requirement - -------------------------------------------------------------------------------- Minimum Lot Area 25,000 square feet Minimum Lot Width 150 feet Front Setback 100 feet Rear Setback 50 feet Side Yard Setbacks 50 feet Maximum Percentage 35% Height Limit 40 feet Parking 1.25 spaces per 300 square feet - -------------------------------------------------------------------------------- Source: City of Troy Zoning Ordinance Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ ZONING ANALYSIS AND CONCLUSIONS According to the City of Troy Zoning ordinance, the subject property is a legal and conforming use under current guidelines. In addition, the property appears to conform to most other requirements with the exception of setback requirements. - -------------------------------------------------------------------------------- 29 ================================================================================ TAX ANALYSIS - -------------------------------------------------------------------------------- TAX AND ASSESSMENT DATA Real estate in the City of Troy is assessed at 23.1% of the assessor's estimated market value. The subject's market value, assessed value, and current taxes are summarized below.
========================================================================================================================= CURRENT ASSESSMENT AND TAX INFORMATION (1995) ========================================================================================================================= Assessed Value Tax Rate / Annual Taxes Tax ID Land Improvements Total $1,000 - ------------------------------------------------------------------------------------------------------------------------- 101.31-10-3./1 $1,349,610 $4,981,948 $6,331,558 $1,462,590 $148.04 $216,522 (Proj.) - ------------------------------------------------------------------------------------------------------------------------- Source: Troy Tax Assessor's Office Compiled by: CB Commercial Real Estate Group, Inc. =========================================================================================================================
Real estate taxes in City of Troy are considered to be delinquent after December 31. Officials with the city assessor's office indicate that there are no delinquent property taxes against the subject. Based on the concluded value in this report $3,500,000, CB Commercial believes that the assessor's estimate of market value is high despite a recent reduction in the assessment. The last citywide reassessment within the City of Troy has not been for many years. A date for the next city-wide reassessment has yet to be scheduled. Following is a chart summarizing recent annual changes in the commercial tax rate. ================================================================================ HISTORICAL TAX RATE GROWTH ================================================================================ Year Rate/$1,000 of AV Percent Change 1991 122.94 --- 1992 128.75 4.72 1993 136.42 5.95 1994 139.57 2.31 1995 147.98 6.02 1996* 148.04 0.04 - -------------------------------------------------------------------------------- Source: Troy Assessor's Office * Based upon the 1996 county rate and the 1995/1996 school rate Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ According to the city of Troy Assessor's Office, the subject property has an assessed value of $1,462,590. The subject was recently reassessed as a result of a tax appeal and the assessment was reduced from $1,828,240 to the current assessment of $1,462,590. The current tax rate is 148.04 per $1,000 of assessed valuation based upon the 1996 county rate and the 1995/1996 school rate. The assessor's estimated taxes for the subject in the 1996 tax year total $216,522. Over the past five years, the commercial tax rate within Troy increased at - -------------------------------------------------------------------------------- 30 ================================================================================ TAX ANALYSIS - -------------------------------------------------------------------------------- an average annual rate of 3.8 percent. However, the 1996 combined rate shown above is based upon the 1995 school rate since the new rate has yet to be announced. Therefore, the increase in 1996 rate may be understated. Thus, an average annual increase in taxes of four percent, which takes into consideration the combined increases in the assessment and tax rate, is considered to be reasonable into the foreseeable future. Since the subject was reassessed, the subject's tax liability will decline substantially in the upcoming year. The subject is not reportedly impacted by any special assessments and is not within an improvement district. - -------------------------------------------------------------------------------- 31 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- HIGHEST AND BEST USE In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The four criteria that the highest and best use must meet are: o legal permissibility; o physical possibility; o financial feasibility; and o maximum profitability. Highest and best use is applied specifically to the use of a site as vacant. It is recognized that in cases where a site has existing improvements, the concluded highest and best use as if vacant may be different from the highest and best use given the existing improvements (as improved). The existing use will continue, however, until the land value, in its highest and best use, exceeds that total value of the property under its existing use plus the cost of removing or altering the existing structure. Implied in the highest and best use is a recognition of the contribution of a specific use to the community environment or to the community's development goals, in addition to wealth maximization of individual property owners. Also implied is that the conclusion of highest and best use that results from the appraiser's judgment and analytical skill, i.e., that the use determined from the analysis represents an opinion, not a fact to be found. Highest and best use analysis involves assessing the subject both as if vacant and as improved. HIGHEST AND BEST USE AS THOUGH VACANT Legal Permissibility The legally permissible uses were discussed in the zoning section of this report. Based on our review of the zoning restrictions, the site can be developed with several different uses, including retail, office, and a variety of commercial uses. Physical Possibility The physical characteristics of the subject site were discussed in detail in the site analysis section. Overall, a wide range of legally permissible uses would be physically possible, including a variety of retail and commercial uses. - -------------------------------------------------------------------------------- 32 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- Financial Feasibility In the course of our investigation, we considered among the permissible uses those uses that appear most likely to return the highest income to the land. The subject's location lends itself well to retail use given the high volume of traffic and a lack of competing centers in the immediate area. The closest community shopping center to the subject is the Brunswich Plaza, a 145,000 square foot center constructed in 1995, located approximately three miles to the east on Route 7. The site is well located with respect to its proximity to highways and residential neighborhoods. Maximum Profitability Based upon an analysis of the previous requirements, it is our opinion that retail development would be the most logical use of the subject site. The zoning ordinance allows for a variety of commercial uses. However, based upon the site's physical characteristics and types of uses which would be financially feasible, it is our opinion that the highest and best use of the subject site as if vacant would be for the retail development. Conclusion: Highest and Best Use As Though Vacant The concluded highest and best use of the subject, as though vacant, is that the site be improved with a retail use. HIGHEST AND BEST USE AS IMPROVED Legal Permissibility As discussed, the subject site's zoning and legal restrictions permit a variety of land uses. Regardless, the site has been improved with a community shopping center. Based upon review of the Troy Zoning Ordinance, it is our opinion that the improvements are within the established guidelines. Physical Possibility The physical characteristics of the subject improvements were discussed in detail in the improvement analysis section of this report. Overall, the layout and positioning of the improvements are considered to be functional for a shopping center use, and the floor plan is considered to be reasonable in comparison to other shopping centers in the area. The improvements have good retail features, have been adequately maintained, and are physically capable of sustaining their current use over the extended future. - -------------------------------------------------------------------------------- 33 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- Financial Feasibility As with the highest and best use of the site as though vacant, the financial feasibility of the site as improved is market derived. Typically, for retail properties similar to the subject, the test of feasibility is based on the amount of rent that can be generated less operating expenses. If a residual amount exists after paying the various expenses, then the land is being put to a productive use. At present, the subject is 100% occupied. CB Commercial estimates that the appropriate stabilized market occupancy is 98%. Based on the historical and current operating status of the subject property, CB Commercial anticipates that the improvements are capable of providing an adequate return on the investment before any debt service requirements. Therefore, we conclude that the current use of the improvements is a financially feasible use of the property as improved. Maximum Profitability Similar to the highest and best use of the site as though vacant, the maximum profitable use of the subject as improved should conform to neighborhood trends and be consistent with existing land uses. Although several uses may generate sufficient revenue to satisfy the required rate of return on investment and provide a return on the land, the single use that produces the highest price or value is typically the highest and best use. Conclusion: Highest and Best Use as Improved Based on the foregoing discussions, CB Commercial concludes that the highest and best use of the property, as improved, is consistent with the existing use as a shopping center. There are no apparent alternative uses of the existing improvements that would produce a higher net income and/or value over time than the current use. The current use is a legally permissible use and appears to represent the highest and best use as improved. Furthermore, CB Commercial does not believe that conversion of the improvements or demolition is warranted or financially feasible. - -------------------------------------------------------------------------------- 34 VALUATION ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- APPRAISAL METHODOLOGY The appraisal process is defined as an orderly program by which the problem is planned and the data involved is acquired, classified, analyzed and interpreted into an estimate of value. In this process three basic approaches to value are considered: Cost Approach, Sales Comparison Approach, and Income Capitalization Approach. In appraisal practice, an approach to value is included or omitted based on its applicability to the property type being valued and the quality and quantity of information available. The final step in the appraisal process is reconciliation -- a process by which CB Commercial analyzes alternative conclusions and selects a final value estimate from among two or more indications of value. CB Commercial weighs the relative significance, applicability and defensibility of each approach as it relates to the type of property being appraised. THE COST APPROACH The Cost Approach is based upon the proposition that an informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements which represent the highest and best use of the land or when relatively unique or specialized improvements are located on the site and for which there exist few sales or leases of comparable properties. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Furthermore, the subject was originally constructed in 1966, 30 years ago. An investor would not use the Cost Approach due to the imprecise nature of estimating the accrued physical, functional, or external depreciation affecting the improvements. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. SALES COMPARISON APPROACH The Sales Comparison Approach utilizes sales of comparable properties, adjusted for differences, indicating a value for the subject. Valuation is typically accomplished using physical units of comparison such as price per square foot and price per unit, or economic units of comparison such as gross rent multiplier. Adjustments are then applied to the physical units of comparison derived from the comparable sale yielding a total value. Economic units of comparison are not adjusted, but rather analyzed as to relevant differences with the final estimate derived based on the general comparisons. - -------------------------------------------------------------------------------- 35 ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- The reliability of this approach is dependent upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c) the degree of comparability; and, (d) the absence of nontypical conditions affecting the sales price. Through our search of the subject market, we were able to uncover a limited though adequate number of recent and comparable sales. Therefore, this approach has been employed for this assignment but is given little weight in the final reconciliation. INCOME CAPITALIZATION APPROACH The methodology of the Income Capitalization Approach is to determine the income-producing capacity of the property on a stabilized basis. In the direct capitalization method, this is done by estimating market rent from comparable rentals, making deductions for vacancy and collection losses and building expenses, then capitalizing the net income at a market-derived rate to yield an indication of value. The capitalization rate represents the relationship between net income and value. Related to the direct capitalization method is the discounted cash flow method. In this method of capitalizing future income to a present value, periodic cash flows (which consist of a net income less capital costs, per period) and a reversion (if any) are estimated and discounted to a present value. The discount rate is determined by analyzing current investor yield requirements for similar investments. Since investors are active in the marketplace for properties similar to the subject, the Income Capitalization Approach is particularly applicable to the appraisal problem at hand. There is an adequate quality and quantity of income and expense data available to render a reliable and defensible value conclusion. Therefore, this approach has been employed as the primary method for this assignment. - -------------------------------------------------------------------------------- 36 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH The Sales Comparison Approach provides an estimate of market value based on analyzing transactions of similar properties in the market area. The method is based on the proposition that an informed purchaser would pay no more for a property than the cost of acquiring an existing one with the same utility. When there is an adequate number of sales of truly similar properties with sufficient information for comparison, a range of values for the subject property can be developed There are various units of comparison available in the evaluation of sales data in this approach. The sale price per square foot and net income multiplier methods are the most commonly used in this approach. The effective gross income multiplier (EGIM) is rarely used by market participants because of the inconsistencies in estimating effective or gross income, vacancy, and expense differences. We conducted a thorough sales search for comparable shopping centers in the subject's market area. Through our sales search, we were able to identify a limited number of sales with similar characteristics to the subject. The following table summarizes what are considered to be the most recent and proximate comparable sales. Detailed write-ups of each comparable are included in the addendum.
============================================================================================================== SUMMARY OF COMPARABLE RETAIL SALES ============================================================================================================== Gross Sale Sale Leasable Sale Price No. Property Name/ Location Date Area (SF) Sale Price Per S.F. OAR - -------------------------------------------------------------------------------------------------------------- 1 West Brighton Plaza 12/93 165,000 $ 4,300,000 $ 26.06 12.3% 2611 West Henrietta Rd Brighton, NY 2 2345 Buffalo Road 7/93 79,647 $ 3,700,000 $ 46.45 9.5% Gates, NY 3 7905 Route 11 3/95 28,000 $ 900,000 $ 32.14 13.0% Cicero, NY - -------------------------------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ==============================================================================================================
- -------------------------------------------------------------------------------- 37 [GRAPHIC OMITTED] IMPROVED SALES MAP ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF IMPROVED SALES Sale Number One Sale number one, located at 2611 West Henrietta Road in Brighton, NY, is a 165,000 square foot community shopping center which sold in December of 1993 for $4,300,000 or $26.06 per square foot. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed in 1962 and was in average condition at the time of sale, similar to the subject. Visibility and overall locational characteristics are similar to the subject. No size adjustment is warranted. Market conditions at the time of sale were similar to current market conditions. Therefore, no adjustment for time is warranted. The center was 100% occupied at the time of sale by four tenants with long term leases. Sale Number Two Sale number two, located at 2345 Buffalo Road in Gates, NY, is a 79,647 square foot community shopping center which sold in July of 1993 for $3,700,000 or $46.45 per square foot. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was in superior condition to the subject at the time of sale. Locational characteristics are considered to be similar to the subject location. No size adjustment is warranted. Market conditions at the time of sale were similar to current market conditions. The purchaser owns the adjacent property on which a Caldor's store is situated and was reportedly highly motivated to purchase. We have therefore adjusted the price downward for conditions of sale. An large downward adjustment is required due the conditions of sale and condition adjustments. Sale Number Three Sale number three, located at 7905 Route 11 in Cicero, NY, is a 28,000 square foot shopping center which sold in March of 1995 for $900,000 or $32.14 per square foot. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed in the 1970's and was in average condition at the time of sale, similar to the subject. The lot contained excess development rights, according to a representative of the owner, and approximately 6,000 SF will be added. The sale price is therefore adjusted downward to reflect the additional building rights. Visibility and overall locational characteristics are similar to the subject. In addition, market conditions at the time of sale were similar to current market conditions. Therefore, no adjustment for time is warranted. An overall downward adjustment is required due to the excess development rights. - -------------------------------------------------------------------------------- 39 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- Summary of Adjustments Adjustments made to the comparables are summarized in the following grid: ================================================================================ IMPROVED SALES ADJUSTMENT GRID ================================================================================ Sale No. 1 Sale No. 2 Sale No. 4 - -------------------------------------------------------------------------------- Sale Price / SF $26.06 $46.45 $32.14 - -------------------------------------------------------------------------------- Property Rights = = = Financing = = = Conditions of Sale = = Market Conditions = = = Occupancy at Sale = Not Avail. Not Avail. Location = = = Visibility = = = Condition = = Parking = = = Quality = = = Excess Devel. Rights = = Size = = = - -------------------------------------------------------------------------------- Net Adjustment = ================================================================================ Sale Price Per Square Foot Conclusion The unadjusted sales prices of the comparables range from $26.06 to $46.45 per square foot. After adjustments, the value range narrows significantly. We have placed equal emphasis upon each of the three comparable sales. Based on our previous analysis of the comparable improved sales, we have concluded that the indicated value for the subject property would likely range from $25.00 to $27.00 per square foot. Given this estimated range, our estimate of value via the Sales Comparison Approach is provided in the following table. ================================================================================ SALES PRICE PER SQUARE FOOT INDICATION ================================================================================ Indicated Value/SF Subject GBA Total - -------------------------------------------------------------------------------- $ 25.00 x 128,579 = $ 3,214,475 $ 27.00 x 128,579 = $ 3,471,633 - -------------------------------------------------------------------------------- Rounded $ 3,350,000 - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ Net Operating Income Analysis The net operating income level for the comparables ranged from $3.21 to $4.41 per square foot, per year. The subject has a projected NOI for the coming year of $325,536 or $2.53 per square foot reflecting the first year of our projected cash flow. Given the correlation between price paid - -------------------------------------------------------------------------------- 40 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- per square foot and NOI per square foot it would seem reasonable to conclude that the subject would sell within the adjusted range established by the comparable properties. The following chart depicts the calculations involved in developing adjustment factors to be applied to the respective price per square foot units of comparison developed from the comparables employed.
================================================================================================================= NET OPERATING INCOME (NOI) ANALYSIS ================================================================================================================= Sale Subject's NOI/SF ---------------- Sale Price Adjustment Adjusted $/SF No. Sale's NOI/SF Multiplier $/SF for Subject - ----------------------------------------------------------------------------------------------------------------- 1 $2.53 0.79 $26.06 -$5.48 $20.58 ----- $3.21 2 $2.53 0.57 $46.45 -$19.98 $26.47 ----- $4.41 3 $2.53 0.61 $32.14 -$12.54 $19.60 ----- $4.18 =================================================================================================================
For the most part, there is a direct correlation between the NOI/SF and sale price per square foot. Typically, as the net income level increases, so does the price paid per square foot. After adjusting the four sales, a range of value for the subject between approximately $20.00/SF to $26.00/SF is indicated. We have concluded towards the upper end of the range due to the subject's high occupancy rate, good quality anchors and good location. The subject has a total building area of 128,579 square feet. The value estimate via the net operating income analysis is calculated as follows: ================================================================================ Net Rentable Area of Subject 128,579 square feet Value per square foot $26.00 per square foot Indicated Value: $3,343,054 ---------- ROUNDED: $3,350,0000 ================================================================================ The concluded values via the sales price per square foot and net operating income analyses are both $3,350,000. Each method is given equal consideration. Overall, little emphasis has been placed on this approach due to the quality of the data. It is used primarily as a check of the value derived via the Income Approach. We estimate the as is market value of the leased fee interest in the subject property, via the Sales Comparison Approach, as of May 31, 1996, to be: --- THREE MILLION THREE HUNDRED FIFTY THOUSAND DOLLARS --- ($3,350,000) - -------------------------------------------------------------------------------- 41 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH The Income Capitalization Approach reflects the subject's income-producing capabilities. This approach is based on the assumption that value is created by the expectation of benefits to be derived in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over period of time. The two common valuation techniques associated with the Income Capitalization Approach are direct capitalization and the discounted cash flow (DCF) analysis. DIRECT CAPITALIZATION Direct capitalization is the method used to convert a single year's estimate of income into a value indication. In direct capitalization, a precise allocation between return on and return of capital is not made because investor assumptions or forecasts concerning the holding period, pattern of income, or changes in value of the original investment are not simulated in the method. Direct capitalization is most appropriate when analyzing a stable income stream and in estimating the reversion at the end of a holding period. Using this method, the following sets forth the process: 1. Estimate the Potential Gross Income (PGI) from all sources that a competent owner should be able to generate from a property based on existing and/or market rents. 2. Deduct an estimate of Vacancy and Collection Loss (VCL) to arrive at an Effective Gross Income (EGI) estimate. 3. Deduct operating expenses from the estimate of EGI. The result is an estimate of the stabilized Net Operating Income (NOI). 4. Estimate an Overall capitalization rate (Ro, or OAR). 5. Divide the NOI by Ro, resulting in a value estimate at stabilized occupancy. 6. Adjust the stabilized value to account for "As Is" condition, if applicable. DISCOUNTED CASH FLOW ANALYSIS The discounted cash flow (DCF) analysis is a detailed analysis used when the future income is expected to be variant, usually as a result of numerous lease obligations and/or anticipated changes in income and expenses. It is also particularly relevant when institutional buyers are the most likely purchasers of the subject because institutional buyers often place great weight on this analysis. The DCF analysis specifies the quantity, variability, timing, and duration of NOIs and cash flows. Selecting the proper yield rate (discount rate) is essential. CB Commercial must consider the target yield sought by investors as well as yields derived from comparable sales and/or market information. The methodology is: 1. Estimate the before-tax cash flows for each period of a projected holding period net of any capital expenditures such as leasing expenses and tenant improvements. - -------------------------------------------------------------------------------- 42 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- 2. Estimate a discount rate and a terminal overall capitalization rate. 3. Estimate a selling price, known as the reversion, for the end of the projected holding period. 4. The cash flows and the reversion are then discounted to a present value estimate. APPROPRIATE CAPITALIZATION METHOD A number of factors were considered in evaluating the appropriateness of using the direct capitalization method and/or the DCF technique including the occupancy status, lease structures, above/below market rents and typical buyer behavior. As a result of considering the foregoing factors, both the DCF technique and the income capitalization technique are employed in this appraisal. ESTIMATE OF MARKET RENT Rent analysis involves both a study of market (comparable) rentals and the subject's existing rents (if any). Market rent is the rent that a property would most probably command in the open market; indicated by the current rents paid and asked for comparable space. SUMMARY OF COMPARABLE RENTALS CB Commercial surveyed competitive properties and lease transactions for comparison to the subject. The selected comparable rentals are summarized in the following chart with a map and discussions of each comparable provided on the following pages.
==================================================================================================================================== SUMMARY OF COMPARABLE RETAIL RENTALS ==================================================================================================================================== Building Name / Building Size Year Built Overall Base Rent Per Comments No. Location Occup. Tls/SF S.F. - ------------------------------------------------------------------------------------------------------------------------------------ 1 Builders Square Plaza 157,000+/- 1990 98% None Yrs 1-2 $12.00 October 1994 1814 Central Avenue Year 3 $12.60 lease of 2,100 Colonie, NY Year 4 $13.23 SF; no free rent Year 5 $13.89 NNN 2 Builders Square Plaza 157,000+/- 1990 98% None Year 1 $12.00 April 1994 lease of 1814 Central Avenue Yrs 2-5 incr 5%/yr 1,050 SF; no free Colonie, NY NNN rent; five year option 3 Wolf Road Shoppers Park 258,300+/- 1974 95% None Year 1 $12.50 3rd Qtr 1995 lease; Wolf & Sand Creek Rds. (renov Yrs 2-5 annual no free rent Colonie, NY 1982) CPI incr. NNN 4 Colonie Plaza Central 137,476+/- 1987 95% None Year 1 $11.00 1995 lease; no Ave near Rte Yrs 2-5 annual free rent 155 Colonie, NY CPI incr. NNN ==================================================================================================================================== Compiled by: CB Commercial Real Estate Group, Inc. ====================================================================================================================================
- -------------------------------------------------------------------------------- 43 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF COMPARABLE RENTALS We have obtained four comparable leases within three shopping centers in the subject market area which are summarized above. All leases are considered to be in the subject trade area. Following are detailed descriptions of each lease transaction with a map indicating the locations of each lease comparable following these descriptions. Comparable Rental Number One Comparable lease number one is located within Builders Square Plaza, a 157,000 square foot shopping center located approximately seven miles west of the subject in Colonie. The center was constructed in 1990, is in good condition, and is currently 98% occupied. Albany Windows leased 2,100 square feet of space within this center in October of 1994. The lease term is five years and the base rent is $12.00 per square foot on a triple net basis for the first two years with 5% annual increases thereafter. Locational characteristics are considered to be reasonably similar to the subject though the condition of the center is superior to the subject. Overall, the rental rate is adjusted downward for condition in order to reflect market rent for satellite space at the subject. Comparable Rental Number Two Comparable lease number two is also located within Builders Square Plaza in Colonie. Pizza Express leased 1,050 square feet of space within this center in April of 1994. The lease term is five years and the base rent is $12.00 per square foot on a triple net basis for the first year with 5% annual increases thereafter. Similar to the above lease, the rental rate is adjusted downward for condition in order to reflect market rent for satellite space at the subject. Comparable Rental Number Three Comparable lease number three is located within Wolf Road Shoppers Park, a 258,300 square foot community center located approximately five miles west of the subject in Colonie. The center was constructed in 1974, renovated in 1982, is in good condition, and is currently 95% occupied. While the precise terms of the lease are confidential, we were informed that a satellite lease was signed in the third quarter of 1995 for five years at $12.50 PSF triple net with annual CPI increases. Locational characteristics are similar to the subject center. Overall, the rental rate is adjusted downward for condition in order to reflect market rent for satellite space at the subject. - -------------------------------------------------------------------------------- 44 [GRAPHIC OMITTED] Comparable Rentals ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Comparable Rental Number Four Comparable lease number four is located within Colonie Plaza, a 137,476 square foot community center located approximately eight miles west of the subject in Colonie. The center was constructed in 1987, is in good condition, and is currently 95% occupied. The center is set in a deep site with limited visibility from Central Avenue. While the precise terms of the lease are confidential, we were informed that a satellite lease was signed in 1995 for five years at $11.00 PSF triple net with annual CPI increases. Locational characteristics are similar to the subject center. While the condition of the center is superior, the visibility is inferior. Overall, these factors offset each other and no adjustment is applied to the rental rate. ANCHOR SPACE The following table summarizes recent leases for anchor tenants within the region.
==================================================================================================================================== ANCHOR TENANT LEASES ==================================================================================================================================== Location/Tenant Date Term Size Rent/SF Comments - ------------------------------------------------------------------------------------------------------------------------------------ Rensselaer County Plaza 1/93 20 Years 116,100 $5.73 NNN Rent increases by $0.35/SF every East Greenbush, NY 5 x 5 year five years; % rent not Wal-Mart options available; located six miles south of the subject Latham Farms 10/93 20 Years 120,000 $7.23 NNN Recently constructed off-price Latham, NY regional center 4 miles west of Wal-Mart subject; % rent not available St. Lawrence Mall 2/95 10 Years 30,000 1-5 $6.00 NNN Regional mall located near Massena, NY 6-10 $8.00 NNN Canadian border T.J. Maxx Eastview Mall 10/93 25 Years 113,275 $7.85 NNN plus 1% Store recently constructed Victor, NY 2x10 year over $25,000,000 Caldor's options Riverside Mall 1993 20 Years 109,015 $6.70 NNN incr by 8% Store recently constructed; % rent Utica, NY 4 x 5 year every 5 years not available BJ's Wholesale Club options ====================================================================================================================================
The anchor leases range from $5.73 PSF to $7.85 PSF on a triple net basis. The upper end of the is more reflective of recently constructed anchor space within regional centers. The low end of the range represents anchor space within a similar community center to the subject located in East Greenbush approximately six miles south of the subject. This center, the Rensselaer County Plaza, is situated in a similar location but is slightly newer than the subject. We have therefore chosen a market rental rate slightly below the indicated range for anchor space. - -------------------------------------------------------------------------------- 46 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- PAD BUILDING There is one pad building located within the subject center which consists of a 2,400 square foot bank leased by Fleet Bank. Based upon conversations with local brokers and managers, pad buildings typically command rental rates which are 20 to 30 percent higher than a center's satellite space due to greater exposure and visibility. We have therefore applied a premium of 25% to the estimated market rental rate of the subject's satellite space. This appears to be supported by recent leasing activity at the subject. In addition to surveying comparable centers, we have also analyzed the most recent lease transactions at the subject center. There have been very few recent leases signed at the subject. The two most recent leases are detailed below. ANALYSIS OF SUBJECT LEASES The following table summarizes the subject property's recent lease history.
==================================================================================================================================== SUMMARY OF RECENT SUBJECT LEASES ==================================================================================================================================== New / Term Contract TI's / Free Tenant (Floor) Renew (Years) Date Size Rent Escalation SF Rent - ------------------------------------------------------------------------------------------------------------------------------------ Fleet Bank of NY (Pad) New 10 3/94 2,400 $ 14.00 1/99 $16.00 None None Sally Beauty Supply New 7 1/91 1,200 $ 11.00 None None None - ------------------------------------------------------------------------------------------------------------------------------------ Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ====================================================================================================================================
The typical retail lease at the subject property is triple net whereby the tenant is responsible for reimbursing the landlord for such expenses as real estate taxes, insurance, and common area maintenance (CAM). The terms of recent leases in similar centers in the area have typically been between five and ten years. Based on our survey of competing leasing agents, and discussions with the subject agent, 5 year terms are more typical with satellite tenants, 10 year terms are more typical with pad building tenants, and 15-25 year terms being more typical of anchor and junior anchor tenants. Therefore, for the purpose of our analysis, we have utilized a lease term of 5 years for the satellite tenant suites, 10 years for the pad (bank) building and 20 years for the anchor space. In our interviews with competing leasing agents, we also inquired as to the market norm for rent escalations. Most of the agents agreed that one to three year leases are typically flat, with some sort of escalation or bump in 5+ year leases. We have utilized an annual rental escalation in all speculative leases in line with our projected CPI growth factor. - -------------------------------------------------------------------------------- 47 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- According to the subject leasing agent, TI's are typically not given, with the owner generally providing a "vanilla box" for new tenants and nothing for renewals. Furthermore, conversations with competing leasing agents indicated that TI's are typically not provided by the landlord in most shopping centers in the subject market area. This is supported by our comparable leases as no TI's were provided to any of these tenants. Retail space is typically taken "as-is" with the tenant fitting out their space to their own specifications. Although no allowance is paid to the new tenant, the owner does incur an upfit cost for the work which typically ranges from $1.00 to $3.00 per square foot. Also, certain tenants may require a tenant allowance even though it is not typical in the market. Therefore, we estimated a small tenant improvement allowance for new tenants at $5 per square foot. In reality, most tenants will not be given any allowance and some retailers would require an amount in excess of $5.00 per square foot. We project that a blended $5.00 per square foot tenant alteration allowance would be adequate. No tenant improvements are provided on a renewal lease. All of the leasing agents surveyed reported minimal if any free rent. The subject leasing agent indicated that no free rent was offered to any of the tenants that leased space in the subject center over the past three to four years. Therefore, based upon the most recent leases written at the subject center as well as conversations with local leasing agents, we have projected that no free rent will be offered to prospective tenants. CONCLUSIONS: MARKET RENT ESTIMATE FOR THE SUBJECT PROPERTY Based on the previous analysis, the current market lease parameters for the subject property are estimated as follows: ================================================================================ CONCLUDED MARKET LEASE TERMS (PER SQUARE FOOT / YEAR) ================================================================================ Category Amount - -------------------------------------------------------------------------------- Market Rent - Satellite Space $11.00 (NNN) Market Rent - Pad Building $14.00 (NNN) Market Rent - Anchor Space $5.50 (NNN) Lease Term - Satellite Space 5 Years Lease Term - Pad Building 10 Years Lease Term - Anchor Space 20 Years Annual Escalation 3.5% Tenant Improvements (New) $5.00 Tenant Improvements (Renewal) $0.00 Free Rent (Months) 0 Months - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 48 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- CONTRACT RENT Through our research of the subject property, which included a complete review of lease abstracts, rent rolls (both current and historical), and detailed discussions with a representitive of Mark Centers Trust, the following rent roll summary was utilized to detail currently leased suites and general information employed for this approach. Additionally, within the Addenda are copies of the tenant lease assumptions, generated by Pro-ject+ Plus, a computerized lease-by-lease analysis program. Information submitted to us and contained in the Addenda provide additional support to the data and assumptions inputted for this method and is assumed to be correct and reliable. CB Commercial reserves the right to amend our input assumptions if any documentation is subsequently available which contradicts that assumed for this method. Located below is the subject rent roll summary.
======================================================================================================= TROY PLAZA RENT ROLL (AS OF MAY 14, 1996) ======================================================================================================= Square Rent / Monthly Suite Tenant Feet Begin End SF Rent - ------------------------------------------------------------------------------------------------------- 1 Ames Distributing 71,665 4/90 5/101 $1.95 $11,667 2 Price Chopper 29,004 10/79 9/99 $1.93 $4,667 3 Friendly Ice Cream 4,000 4/88 4/98 $13.07 $4,356 4 Strawberries 1,600 6/85 6/97 $13.00 $1,733 5 Fleet Bank of NY 2,400 3/94 12/103 $14.00 $2,800 6 Plaza Discount Wines 1,200 5/88 9/97 $14.84 $1,484 7 Sally Beauty Supply 1,200 1/91 1/98 $11.00 $1,100 8 Casey's East 4,350 12/86 11/96 $9.00 $3,263 9 Polley's Card and Gifts 2,000 7/87 7/97 $10.50 $1,750 10 Volume Shoes 2,500 1/87 1/97 $9.50 $1,979 11 Rent a Center of America 2,000 9/86 8/98 $12.00 $2,000 12 Radio Shack 2,500 9/89 8/99 $11.25 $2,344 13 Eastern Moon Chinese 1,620 7/90 7/00 $12.04 $1,625 14 Key Bank (ATM) 100 3/79 12/104 $200.00 $1,667 15 Label Shopper 2,400 6/89 6/97 $10.75 $2,150 ------- ------- -------- Total Leased Square Feet 128,579 Average Rent: $4.16 $44,584 Vacant Space 0 x 12 -------- Occupancy-Overall 100% $535,008 - ------------------------------------------------------------------------------------------------------- Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. =======================================================================================================
- -------------------------------------------------------------------------------- 49 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF TENANCY The subject is comprised of a mix of local, regional and national tenants. Overall, the quality of the tenancy is considered to be average for community centers in the area. Current rental rates range from $1.93 to $1.95 PSF for the anchor tenants and $9.00 to $14.84 PSF for the satellite tenants. In addition, the one pad suite is currently paying $14.00 PSF and the ATM is paying a flat rate of $200.00 PSF based upon an applied area of 100 square feet. The following table summarizes the expiration of existing leases during the next six years. ================================================================================ SUBJECT LEASE EXPIRATION SUMMARY ================================================================================ Fiscal Year # of SF Cumulative Cumulative Vacant Space Tenants Expiring % SF % - -------------------------------------------------------------------------------- 1997 1 2,500 1.9% 2,500 1.9% 1998 6 12,400 9.6% 14,900 11.6% 1999 1 2,000 1.6% 16,900 13.1% 2000 1 2,500 1.9% 19,400 15.1% 2001 1 1,620 1.3% 21,020 16.3% 2002 1 2,500 1.9% 23,520 18.3% - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ Based on the existing leases in place, one lease will roll over in FY 1997. Six leases representing 11.6% of the center will roll over during FY 1998. Four the next four years FY 1999 through FY 2002), one lease will roll over in each year. Rollover therefore appears to be spaced fairly evenly during the first six years. While six tenants roll over in FY 1998, the percentage of the center rolling over is still relatively small. This would indicate average risk to an investor with respect to tenant rollover. Due to below market leases, we have assumed that both anchors will exercise their renewal options, extending their leases to well beyond the holding period. SPECIAL LEASE PROVISIONS AND ASSUMPTIONS The following discussion summarizes any lease provisions and assumptions of special note. Pending Leases/Delinquencies According to Mark Centers Trust, Casey's East is $29,000 in arrears and will likely be evicted soon. Therefore, we will treat the space as if it were vacant. We have assumed a downtime of four months to lease up this space based upon discussions with management and local brokers. Renewal Options Options to renew at below or above market rent may have an impact on the valuation analysis. For example, if below market renewals are exercised, they may result in a downward impact on - -------------------------------------------------------------------------------- 50 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- value. However, to the extent that re-tenanting costs are saved (rent loss during downtime, tenant improvements and leasing commissions for new leases), there may be an advantage in having the tenant renew at some rate below market rent in order to avoid these costs. Approximately half of the leases at the subject have renewal options including the two anchors. We have reviewed each of these options in order to determine whether the scheduled option rents are either above or below market. In the case of the satellite space, no tenants with option rents significantly above or below market were identified. Therefore, these leases are assumed to be speculative renewals upon expiration of the base leases. However, both anchor leases have option periods at flat rents under $2.00 PSF, well below our concluded market rent of $5.50 PSF. Ames has two five year options while Price Chopper has three five year options. We have assumed in our analysis that both tenants will exercise their options at the stated contract rent. EXPENSE REIMBURSEMENTS Tenants generally pay their pro rata share of common area maintenance charges (CAM) based on the total gross leasable area of 128,579 square feet minus the occupied areas of the two anchors, Ames and Price Chopper. Common area maintenance charges generally include various items such as cleaning, utilities, repairs and maintenance, professional, landscaping, property insurance and security. In most instances, the CAM of the major department stores listed above is deducted from the CAM of the entire center before it is passed through to satellite tenants. In addition, CAM charges are typically grossed up by 15% or 20% for an administrative expense otherwise referred to as "overhead". Furthermore, in addition to the overhead charge CAM typically includes a management fee. In our Pro-Ject model, we modeled each tenant according to their existing lease structure. For speculative renewals, we structured the CAM according to the most frequently utilized CAM pool structure for recent leases. The CAM pool was modeled to include an overhead of 20% (most frequent in new leases for Mark Centers Trust owned shopping centers), management fee, less deductions for the anchors' (Ames and Price Chopper) CAM contributions. Tenants also typically pay a proportionate share of all real property taxes. It should be noted that the subject's operating statements are based on a fiscal year basis, beginning June 1 and continuing through May 31. OTHER INCOME This income category can be derived from several different sources including tenant service income, merchants association fees, late fee income, short-term storage income, professional services provided for the tenants by the landlord/management, and other miscellaneous - -------------------------------------------------------------------------------- 51 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- sources. Other income at the subject has averaged $6,353 over the past three years. We have estimated other income in 1996 to be $6,500. PERCENTAGE RENT INCOME Percentage rent is based upon the sales volume forecast for each particular tenant. In addition to minimum rent, most tenants (except service oriented businesses such as banks and marketing research, travel agents etc.) pay percentage rents. Most percentage charges range from 3% to 6% for satellite tenants depending on the mark up on merchandise and 1% to 3% for anchor tenants. Percentage rent for the majority of the tenants is over a specified breakpoint. In addition, for the two anchor tenants, real estate tax recoveries paid by the tenant are deducted from any percentage rent paid in a given year. Percentage rent is based upon the sales volume forecast for each particular tenant. Based upon the rent per square foot and the appropriate percentage, a breakpoint of sales volume can established when specified breakpoints are not included in the lease. For example, if a tenant's rent is $15 per square foot for 1,500 square feet, and the percentage rent is 6%, then the sales volume breakpoint (natural) is $375,000 ($15/SF x 1,500 SF : .06). For annual sales of less than $375,000, the tenant pays no percentage rent. However, for sales in excess of $375,000, 6% would be the appropriate percentage rent. In order to project the sales volume in our analysis, we took into consideration the historical sales volume for each tenant. Approximately two thirds of the subject tenants have percentage rent clauses. Projecting a per annum increase over the 1995 sales volumes, we were able to project the sales volume of the subject over the holding period. Sales volumes for the center were approximately $191 PSF in 1994. Sales volumes in 1995 averaged approximately $186 PSF. Therefore, from 1994 to 1995 the sales volume dropped by approximately 2.7%. Located below is a chart which summarizes the centers most recent sales volumes and percentage rent terms for each tenant paying percentage rent. In 1995, only Price Chopper paid percentage rent. While Ames also exceeded the breakpoint, the tax recovery paid by Ames exceeded the calculated percentage rent. - -------------------------------------------------------------------------------- 52 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
======================================================================================================== Tenant FY 1994 Sales FY 1995 Sales % Rent Terms/Breakpoints ======================================================================================================== Ames Distributing $7,650,995 $7,774,031 2.0% > $6,000,000 less tax recovery paid Price Chopper $10,453,484 $10,340,527 1.0% > $3,775,000 less tax recovery paid Friendly Ice Cream $1,415,856 $1,473,977 3.0% > $1,742,500 Plaza Discount Wines $259,930 $265,125 4.0% > $445,313 Sally Beauty Supply $293,402 $279,829 3.5% > $400,000 Casey's East $789,975 $744,460 5.0% > $809,000 Polley's Card & Gifts $261,232 $255,736 6.0% > $350,000 Volume Shoes $282,355 $285,003 5.0% > $570,000 Radio Shack $637,656 $614,177 3.0% > $958,333 Label Shopper $423,717 $367,154 4.0% > $600,000 ========================================================================================================
SALES GROWTH RATE We project that the sales growth rates for the anchor and satellite tenants will remain stable for several years then increase thereafter. Projections from Strategic Mapping, Inc. indicate a growth rate in retail sales of approximately 1.33% to 1.76% over the next five years in a three to ten mile radius. We project that sales volumes for all stores will remain flat for two years, increase 2% in FY 1999, and 4% thereafter. - -------------------------------------------------------------------------------- 53 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- POTENTIAL GROSS INCOME The concluded potential gross income for the subject in FY 1997 is summarized as follows: ================================================================================ STABILIZED POTENTIAL GROSS INCOME (FY 1997) ================================================================================ P.S.F. Totals - -------------------------------------------------------------------------------- Existing Contract Rent $4.05 $520,350 Percentage Rent $0.17 $ 22,453 Expense Reimbursement $1.66 $212,895 ----- -------- Gross rental income $5.88 $755,698 Other Income $0.05 $ 6,595 Potential Gross Income $5.93 $762,293 - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ VACANCY AND COLLECTION LOSS This is an allowance for reductions in potential income attributable to vacancies, tenant turnover, and non-payment of effective rent. In the direct capitalization process, a market-derived, stabilized vacancy and collection loss estimate is subtracted from potential gross income in order to arrive at effective gross income. The subject property is currently 100% leased. Furthermore, the subject's competitive market in Troy exhibits a vacancy level of approximately 5%. The average long term vacancy rate at the subject center, which is attributed to downtime between leases, is approximately 2%. This is lower than the market since the two anchor tenants, which occupy almost 80% of the center, are expected to remain over the course of the holding period. In addition to vacancy, we estimated a blended credit loss factor of 3% which takes into account the mix of national, regional and local tenants at the subject center. EFFECTIVE GROSS INCOME Given our estimate of potential gross income, other income, and a vacancy and collection loss, the estimated effective gross income is derived as follows: Gross Rental Income: $755,698 Less Vacancy and Collection Loss (5.0%) $ 37,785 -------- Effective Rental Income: $717,913 Plus Other Income: $ 6,595 -------- Effective Gross Income: $724,508 - -------------------------------------------------------------------------------- 54 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- OPERATING EXPENSE ANALYSIS In projecting the revenues and expenses for the subject property, we have analyzed the historical figures for fiscal years 1993 through 1995 as well as management's forecast of revenues and expenses for fiscal year 1996. In addition, we have utilized the Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers publication to assist in our analysis. We have considered the category " Regions 1, 2 & 3 (East): Open Shopping Centers" as the most representative of the subject property. A summary of the average expenses taken from this publication increased at an inflationary rate to reflect our fiscal year 1997 analysis are presented as follows: ================================================================================ COMPARABLE EXPENSE ANALYSIS ================================================================================ Expense Category P.S.F. - -------------------------------------------------------------------------------- Real Estate Taxes $ 1.26 Insurance $ 0.15 Repairs & Maintenance $ 0.36 Services $ 0.37 Landscaping $ 0.09 Utilities $ 0.18 Management Fees $ 0.41 General & Administrative $ 0.08 ------ Total Operating Expenses $ 2.90 - -------------------------------------------------------------------------------- Source: Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers ================================================================================ Our estimate of the subject's stabilized expenses are detailed as follows. Property Taxes Historical and budgeted property tax expenses are as follows: ================================================================================ PROPERTY TAX EXPENSE ================================================================================ Year Total $ Amount - -------------------------------------------------------------------------------- 1993 $ 247,445 1994 $ 252,258 1995 $ 229,983 1996 Budget $ 270,600 Year 1 Pro Forma $ 216,522 ================================================================================ Source: Mark Centers Trust ================================================================================ As discussed fully within the tax and assessment data section of the report, estimated taxes for fiscal year 1997 are projected to be $216,522. This estimate is lower than historical figures - -------------------------------------------------------------------------------- 55 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- since the subject was recently reassessed as a result of a tax appeal and the assessment was reduced from $1,828,240 to the current assessment of $1,462,590. Common Area Maintenance Common area maintenance charges generally includes various items such as cleaning, utilities, repairs and maintenance, professional, landscaping, security, and property insurance. In most instances, the CAM of the major department stores listed above is deducted from the CAM of the entire center before it is passed through to satellite tenants. In addition, CAM charges are typically grossed up by 15% or 20% for an administrative expense otherwise referred to as "overhead". Furthermore, in addition to the overhead charge CAM typically includes a management fee. We project the total CAM expense in 1996, before management fees, at $148,088 or $1.15 per square foot. This is similar to the average CAM expenses for the properties surveyed by IREM of $1.23 PSF (less taxes and management). The subject's CAM expenses are therefore considered to be reasonable with respect to market standards. Replacement Reserves While an expense category for replacement reserves was not included in the historical operating statements, we included a reserves expense in our projections to cover items which generally wear out before the building structure such as the roof, HVAC and parking lot. These items are recoverable by the landlord according to the subject leases. They are not considered to be routine maintenance items typically included within the repairs & maintenance expense category. Replacement reserves have been estimated at $0.15 per square foot of gross leasable area. Management Fee In order to maintain the control of the property and subsequently ensure the stream of income that it generates, it is necessary to employ either internal or outside management. This expense is non-recoverable. In the case of the subject property, the property is managed internally and no management expense has been reflected in historical statements. Typical professional management fees in the local market range from 1.0% to 5.0% of effective gross income. Based upon the size and nature of the subject improvements, we have applied a management expense of 3.0% of effective gross income. Because management is calculated based on a percentage of effective gross income, this expense will vary each year because of fluctuations in the income stream. In the first year of our analysis, this expense equates to $23,149 or $0.18 per square foot. - -------------------------------------------------------------------------------- 56 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Total Concluded Operating Expenses The concluded stabilized operating expenses for the subject total an estimated $413,096, or $3.21 per rentable square foot in FY 1997. A summary chart of historical and projected expenses for each expense category is located on the following page. This total expense estimate is for the first year of our proforma and incorporates fiscal year conversions not reflected in the previous 1996 calendar year estimates. The expense is greater than the average indicated by IREM of $2.90 but judged reasonable given the historical and budgeted operations of the subject as well as the age and condition of the subject. We project that over the holding period expenses will increase on average by 3.5 percent per year. - -------------------------------------------------------------------------------- 57
==================================================================================================================================== TROY PLAZA TROY, NEW YORK HISTORICAL AND PROJECTED EXPENSES ==================================================================================================================================== - ------------------------------------------------------------------------------------------------------------------------------------ 128,579 GLA ANNUAL CB 1996 1993 1994 1995 1996 Budget PER SF % CHANGE PROTECTION PER SF ---- ---- ---- ----------- ------ -------- ---------- ------ EXPENSES Landscaping $ 5,208 $ 7,502 $ 6,680 $ 9,100 $ 0.07 20.4% $ 9,100 $ 0.07 Cleaning $ 44,621 $ 37,635 $ 35,014 $ 31,300 $ 0.24 -11.1% $ 36,239 $ 0.28 Utilities $ 9,006 $ 11,327 $ 12,748 $ 12,175 $ 0.09 10.6% $ 13,194 $ 0.10 Security $ 15,856 $ 27,840 $ 30,580 $ 30,000 $ 0.23 23.7% $ 30,000 $ 0.23 Repairs & Maintenance $ 25,263 $ 37,628 $ 20,707 $ 17,500 $ 0.14 -11.5% $ 21,432 $ 0.17 Real Estate Taxes $247,445 $252,258 $229,983 $270,600 $ 2.10 3.0% $216,522 $ 1.68 Insurance $ 13,488 $ 36,282 $ 20,016 $ 33,180 $ 0.26 35.0% $ 33,180 $ 0.26 General & Administrative $ 3,368 $ 2,889 $ 4,776 $ 5,476 $ 0.04 17.6% $ 4,943 $ 0.04 Management Fees* $ 23,242 $ 23,783 $ 24,091 $ 24,554 $ 0.19 1.8% $ 23,149 $ 0.18 Reserves** $ 17,133 $ 17,817 $ 18,531 $ 19,272 $ 0.15 4.0% $ 19,272 $ 0.15 TOTAL OPERATING EXPENSES $404,630 $454,942 $403,126 $453,157 $ 3.52 3.8% $407,031 $ 3.17 * Market rate of 3% of EGI applied ** Estimated - ------------------------------------------------------------------------------------------------------------------------------------
================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- CAPITALIZATION RATE Derivation from Comparable Sales This is the preferred method when sufficient data exists. Data on each property's sale price, income, expenses, financing terms, and market conditions at the time of sale is needed. The overall capitalization rate is then derived by dividing the net operating income by the sale price. The following is a summary of overall capitalization rates indicated by the comparable sales, discussed in the Sales Comparison Approach.
============================================================================================================= CAPITALIZATION RATES DERIVED FROM COMPARABLE RETAIL SALES ============================================================================================================= Gross Sale Property Name/ Location Sale Leasable Sale Price No. Date Area (SF) Sale Price Per S.F. OAR - ------------------------------------------------------------------------------------------------------------- 1 West Brighton Plaza 12/93 165,000 $4,300,000 $ 26.06 12.3% 2611 West Henrietta Rd Brighton, NY 2 2345 Buffalo Road 7/93 79,647 $3,700,000 $ 46.45 9.5% Gates, NY 3 7905 Route 11 3/95 28,000 $ 900,000 $ 32.14 13.0% Cicero, NY - ------------------------------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. =============================================================================================================
The preceding sales indicate a range of 9.5% to 13.0% for overall capitalization rates. Investor Surveys A common method for establishing an overall capitalization rate for properties similar to the subject is to review the criteria of major investors in the marketplace. This may serve as a check against other techniques or may be a primary source when ample data exists. The subject property is a community shopping center that would be attractive to either a local or a national investor. The category in the published investor survey most comparable to the subject is class B community shopping center. The investors typically interviewed for the survey are regional or national investors associated with pension funds, REIT's, insurance companies, financial institutions, etc. The information below is taken from CB Commercial most recent National Investor Survey (first quarter 1996). - -------------------------------------------------------------------------------- 59 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
================================================================================================================ SUMMARY OF INVESTOR SURVEY OVERALL CAPITALIZATION RATES COMMUNITY SHOPPING CENTERS - CLASS B - ---------------------------------------------------------------------------------------------------------------- Investor Survey Ro Range Average Date of Survey - ---------------------------------------------------------------------------------------------------------------- CB Commercial National Investor Survey 9.5% - 11.0% 10.2% First Quarter, 1996 - ---------------------------------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================================================
The previous survey indicates an overall range of 9.5% to 11.0% for community shopping centers with an average of approximately 10.2%. The capitalization rate reflects the quality and duration of the income stream as well as the physical characteristics of the property. The tenant mix at the subject center is considered to be average for the area with a mix of local, regional and national tenants. However, the two anchor tenants, which occupy approximately 80% of the center are national tenants which reduces risk of nonpayment. Lease expiration is fairly even throughout the holding period which reduces turnover risk. The center is currently 100% occupied. Overall, the quality, quantity and duration of the cash flow is considered to be average to good. With respect to physical characteristics, the subject is a functional community shopping center of average quality and in average overall condition. The subject is situated in a good retail location with high volumes of traffic. In addition, the two anchors are projected to remain at the center well beyond our projected holding period. Based upon this indicated rates derived from comparable sales, the investor survey as well as the factors discussed above, an 9.5% overall capitalization rate (at the low end of the range) appears to be appropriate for the subject property. - -------------------------------------------------------------------------------- 60 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Direct Capitalization Summary A summary of the direct capitalization method as applied to the subject property is illustrated in the following table. Income and expenses vary slightly from 1996 projections due to fiscal year conversions. ================================================================================ TROY PLAZA DIRECT CAPITALIZATION SUMMARY (FY 1997) ================================================================================ Category Total P.S.F. - -------------------------------------------------------------------------------- Income Existing Contract Rent $ 520,350 $ 4.05 Percentage Rent 22,453 0.17 Recovery Income 212,895 1.66 ----------- ------ Gross Rental Income $ 755,698 $ 5.88 Less: Vacancy and Credit Loss (7.0%) (37,785) (0.29) Plus: Other Income 6,595 0.05 ----------- ------ Effective Gross Income $ 724,508 $ 5.63 Expenses Real Estate Taxes $ (220,131) $(1.71) Insurance (33,664) (0.26) Repairs & Maintenance (21,745) (0.17) Landscaping (9,233) (0.07) Cleaning (36,767) (0.29) Security (30,438) (0.24) Utilities (13,386) (0.10) Professional Management Fee (3.0%) (23,149) (0.18) General & Administrative (5,015) (0.04) Replacement Reserves ($0.15 / SF) (19,568) (0.15) ----------- ------ Total Expenses $ (413,096) $(3.21) OER 57% Net Operating Income $ 311,410 $ 2.42 CAPITALIZATION OF NOI: @9.5% $ 3,278,000 $25.49 Reconciled Value $ 3,300,000 $25.65 - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The concluded market value of the subject property, based on the direct capitalization method, is $3,300,000. - -------------------------------------------------------------------------------- 61 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW ANALYSIS Discount Rate Analysis A discount rate is a rate of return on capital utilized to capitalize future payments or receipts to present value. It is based on the time value of money concept. For appraisal purposes, the rate used to convert income to property value should represent the annual rate of return necessary to attract investment capital. The rate is influenced by many considerations, including the degree of apparent risk, market attitudes with respect to future inflation, the prospective rates of return for alternative investment opportunities, supply of and demand for mortgage funds, and the availability of tax shelters. Because rates of return used in income capitalization represent prospective rates, as distinguished from historical rates, special consideration is given to market perceptions of risk and changes in purchasing power. Although it is not possible to prove conclusively the suitability of a particular rate of return on the basis of market evidence, the chosen rate should be consistent with the available evidence. Rate selection requires judgment and knowledge concerning prevailing market attitudes and economic indicators. Both the discount rate and the reversionary capitalization rate must reflect the relative risk perceived by investors for the specific market being studied. Generalities must be avoided. To determine such rates, we have used surveys of real estate investors analyzed and adjusted for comparative returns found in the capital markets. National investor surveys include data on investors operating regionally and nationally, such as representatives of insurance companies, commercial banks, pension funds, investment banking firms, syndication firms, and investment advisory firms. Such companies invest in all types of properties, including office buildings, retail shopping centers, hotels, apartment complexes, and industrial facilities. These surveys are valuable for determining general parameters but must be honed to the local market. Based on surveys from CB Commercial Real Estate Group Inc. for the first quarter 1996, investment criteria for numerous market participants including investors that would be in competition for acquiring a property such as the subject are illustrated below. - -------------------------------------------------------------------------------- 62 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
==================================================================================================================================== FIRST QUARTER 1996 NATIONAL INVESTOR SURVEY CLASS B COMMUNITY SHOPPING CENTERS ==================================================================================================================================== TYPE OF FIRM OVERALL CAP. RATES GENERAL DISCOUNT REAL RATE INFLATION RATE OF RETURN ----------------------------------------------- (IRR) (RRR) GOING-IN TERMINAL ==================================================================================================================================== Range: 9.5-11 10-12 2-4 12-15 9.5-11.5 Average 10.2 10.7 3.3 13.4 10.9 ==================================================================================================================================== Change from -10 +10 -10 +110 +390 1st Qtr Survey ==================================================================================================================================== Source: CB Commercial Real Estate Group Inc. - 1st Quarter 1996
We have surveyed national real estate investors for their investment criteria when purchasing real estate such as the subject. Investor expectations for inflation range from 2% to 4%, with an average of 3.3%. We have selected an inflation rate for our analysis of 3.5%. The discount rate reflects the quality and duration of the income stream as well as the physical and locational characteristics of the property. As discussed within the overall rate section, the tenant mix at the subject center is considered to be average for the area with a mix of local, regional and national tenants. However, the two anchor tenants, which occupy approximately 80% of the center are national tenants which reduces risk of nonpayment. Lease expiration is fairly even throughout the holding period which reduces turnover risk. The center is currently 100% occupied. Overall, the quality, quantity and duration of the cash flow is considered to be average to good. With respect to physical characteristics, the subject is a functional community shopping center of average quality and in average overall condition. The subject is situated in a good retail location with high volumes of traffic. In addition, the two anchors are projected to remain at the center well beyond our projected holding period. In general, the discount rate (IRR) is comprised on a safe rate (usually Treasuries) and a risk premium. The risk premium is difficult to quantify but with sound logic a reasonable rate can be ascertained. The chart on the following page graphically depicts real estates position within the risk/reward graph. - -------------------------------------------------------------------------------- 63 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ INVESTOR RISK VERSUS RETURN REQUIREMENTS Anticipated Return _ Real Estate _ Common Stocks _ Corporate Bonds _ Mortgage Backed Securities _ Municipal Bonds _ T - Bills Riskless Rate - ------------------------------------------------------------------------------------------------------------------------------------
Perceived Level of Risk The risk premium is the rate added to Treasuries to account for illiquidity, inflation, the capital markets and the economy. Whether the risk premium decreases in the near term is dependent solely on inflation, the growth of the economy and capital markets. There has been a mixed view with regards to inflation. Over the past year, interest rates have declined in order to stimulate the economy. This indicates a reversal from the previous year when the Federal Reserve increased interest rates to offset any inflation. U.S. Treasury notes and bonds are considered risk free since they are backed by the United States government. Their rates only fluctuate with perceived inflation. The use of this, or any short term investment including the prime rate or LIBOR is meaningless when compared to an investment with a 10 year holding period. Accordingly, as a starting point, we only considered risk free or nearly risk free investments with a maturity of 10 years. These include Treasuries, corporate bonds and municipal bonds. Adjusted for daily fluctuations, these debt offerings are yielding 5.31% to 8.33%. Mortgaged backed securities generally tend to fall above these instruments. The next layer of risk would include debt rated as low as Baa. These notes are yielding as much as 10%. Long term mortgages are also yielding nearly 10% considering the mortgage constant on a note priced at 250 to 300 basis points over comparable Treasuries. Riskier investments such as junk bonds vary widely with anticipated returns often falling within 15% to 20% on an unleveraged basis. Real estate generally falls between common stock (10%) and junk bonds (15-20%). To eliminate the burden of illiquidity, REIT's and similar investments - -------------------------------------------------------------------------------- 64 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- are being created. They represent a quasi-real estate opportunity. REIT's are currently providing dividends ranging from 6% to 8% but offer potential yields of 15% to 20% Various financial instruments are yielding between 5.31% and 8.33% depending upon the type of investment as indicated on the chart below based on data obtained from the Federal Reserve Statistical Release for the week ending May 3, 1996. It should be noted that in 1995 interest rates declined in an effort to stimulate the stagnant economic recovery. This represents a reversal from 1994, during which time the rates were on the rise to offset any potential inflation. So far in 1996 rates appear to be on the rise again. ================================================================================ INSTRUMENT RATE ================================================================================ Prime Rate 8.25% - -------------------------------------------------------------------------------- Municipal Bonds 6.06% - -------------------------------------------------------------------------------- Short-Term Treasury Securities (6 months) 5.31% - -------------------------------------------------------------------------------- Long Term Treasury Securities (10 years) 5.74% - -------------------------------------------------------------------------------- Corporate Aaa Bonds (10+ years) 7.65% - -------------------------------------------------------------------------------- Corporate Baa Bonds (10 + years) 8.33% ================================================================================ The rate must reflect the quantity, quality, duration, and timing of the income being discounted. At the subject property, these factors are considered to be average to good as discussed above. Therefore, we conclude that a discount rate slightly below the average is reasonable for the subject. We have used a discount rate of 13.0% in our analysis. Terminal Rate To estimate the appropriate terminal capitalization rate, we have considered the rates reflected in the investment criteria outlined above for both going-in and terminal capitalization. Typically, under stable market conditions, the terminal capitalization rate will be greater than the going-in rate to reflect the risk associated with the holding period. Typically 50 to 100 basis points are added on to the going-in cap rate under stable market conditions to account for the additional risk. Our concluded overall capitalization rate, which was derived through a combination of interviews with local brokers and our national investor survey, is 10.5%. A 3.0% deduction for costs of sale has been utilized to reflect the net reversionary value. Holding Period To apply the discounted cash flow analysis, an estimate must be made of the appraised property's holding period based on typical investors' motives in the local market. Historical investment holding periods of similar shopping centers typically have ranged from ten to fifteen years. A ten to fifteen year holding period was analyzed to test the property's sensitivity to roll-overs. A ten year holding period was selected. - -------------------------------------------------------------------------------- 65 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- TROY PLAZA CASH FLOW ASSUMPTIONS SUMMARY Mill Basin Plaza is a community center containing 128,579 square feet. The current vacancy rate of the center is 0%. The quality of the tenancy is average. The breakdown of space is summarized as follows: Ames: 71,665 SF Price Chopper: 29,044 SF Pad Building (Bank): 2,400 SF Satellite Space: 25,470 SF ------ Gross Leasable Area 128,579 SF Cash flow Term 10 year holding period, capitalizing the NOI in the 11th year of our analysis. Date Of Valuation May 31, 1996 Discount Rate 13.0 Percent Terminal Capitalization Rate 10.5 Percent Proforma leases Existing tenant leases were entered at contract rent and terms. Although the subject is 100% occupied, one tenant (Casey's East) will likely be evicted in the near future. We have assumed this suite is vacant and have applied the downtime for speculative leases discussed below. Proforma lease terms for vacant space assume tenants will pay base rent plus recoveries described below. Lease terms are 20 years for anchors, 10 years for the pad (bank) building, and 5 years for satellite suites. Recoveries In our Pro-Ject model, we modeled each tenant according to their existing lease structure. For speculative renewals, we structured the CAM according to the most frequently utilized CAM pool structure. The CAM pool was modeled to include an overhead of 20%, management fee, less deductions for the anchors' CAM contributions. Overage rents Per lease agreements, most tenants pay additional overage rents based upon a stated sales breakpoint and overage percentages. If sales exceed the breakpoint, then percentage rents are paid to the landlord. In addition, for the two anchor tenants, real estate tax recoveries paid by the tenant are deducted from any percentage rent paid in a given year. Only one tenant paid overage rent in 1995 . Operating Expenses We projected expenses in FY 1996, the first year of our analysis, at $413,096 or $3.21/SF of total GLA. Operating expenses are projected to grow at 3.5% per annum. - -------------------------------------------------------------------------------- 66 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Real Estate Taxes According to the city of Troy Assessor's Office, the subject property has an assessed value of $1,462,590. The subject was recently reassessed as a result of a tax appeal and the assessment was reduced from $1,828,240 to the current assessment of $1,462,590. The current tax rate is 148.04 per $1,000 of assessed valuation based upon the 1996 county rate and the 1995/1996 school rate. The assessor's estimated taxes for the subject in the 1996 tax year total $216,522. We project that the combined changes in the tax rate and assessments will represent an average annual increase of 4 percent compounded annually over the duration of the holding period. Reserves Included at $.15 per square foot of GLA and growing at 3.5 percent thereafter. Retail Market Rent Based on our analysis of recently signed leases at the subject property, in addition to lease comparables, we have estimated the base market rent at the subject property as follows: TROY PLAZA MARKET RENT ================================================================================ Tenant Size (SF) Base Rent/SF Rent Steps/SF Typical Term (Yrs) - -------------------------------------------------------------------------------- Anchor Space $5.50 Annual with CPI 20 - -------------------------------------------------------------------------------- Satellite Space $11.00 Annual with CPI 5 - -------------------------------------------------------------------------------- Pad Building $14.00 Annual with CPI 10 ================================================================================ Retail Market Concessions While retail space is typically taken "as is", some tenants may require TI's. We utilized a blended $5.00 per square foot tenant alteration allowance for new tenants. No tenant improvements are provided on a renewal lease. For speculative renewals, workletters are blended at our renewal probability rate of 60%. No free rent is offered to tenants. Commissions 4% per for new tenants, 2% for renewal tenants and 2.8% blended at our 60% renewal probability. Retail Rent Inflation 3.5% per annum Sales Volume Growth 0% in FY 1997 & FY 1998, 2% in FY 1999 and 4% thereafter - -------------------------------------------------------------------------------- 67 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Vacancy/Credit Loss The subject property is currently 100% leased. Furthermore, the subject's competitive market in Troy exhibits a vacancy level of approximately 5%. The average long term vacancy rate at the subject center, which is attributed to downtime between leases, is approximately 2%. In addition to vacancy, we estimated a blended credit loss factor of 3% which takes into account both national and local tenants at the subject center. Downtime We estimated a blended vacancy allowance (downtime) of four months between leases as applied to all tenants upon speculative renewal. Renewal Probabilities Following the expiration of the initial leases, we have estimated a 60% renewal probability assuming competent management and continued maintenance of the subject property. - -------------------------------------------------------------------------------- 68 Troy Plaza Cash Flow Report - -------------------------------------- -------------------------------------- Building Size 128,579 Reconciled Value $3,469,604 Cost of Sales 3.000% Value per SF $26.98 Hold Period (Years) 10 % Residual of Recon. V 10.2% Reduce Residual by Cap Ex Yes Direct Cap Rate 10.00% Residual Discount Rate 13.00% Direct Cap Value N/A - -------------------------------------- --------------------------------------
---------------------------------------------------------------------------------------------------- 1997 1998 1999 2000 2001 2002 2003 2004 ---------------------------------------------------------------------------------------------------- BASE RENT 520,350 511,371 525,394 539,012 543,890 538,571 531,905 551,276 Free Rent 0 0 0 0 0 0 0 0 Expense Recoveries 212,895 255,421 312,370 345,637 373,673 383,076 382,521 404,737 Percentage Rent 22,453 21,311 21,429 23,620 25,815 28,096 30,469 32,936 ---------------------------------------------------------------------------------------------------- GROSS INCOME 755,698 788,103 859,193 908,269 943,378 949,743 944,895 988,949 Credit/Vacancy Loss (23,661) (23,643) (25,776) (27,248) (28,301) (28,492) (28,647) (29,669) Miscellaneous Incomes 6,595 6,826 7,065 7,312 7,568 7,833 8,107 8,390 ---------------------------------------------------------------------------------------------------- EFFECTIVE GROSS INCOM 738,632 771,286 840,482 888,333 922,645 929,084 924655 967,670 TOTAL EXPENSES 413,096 427,835 445,217 462,546 480,069 497,384 515022 534,761 ---------------------------------------------------------------------------------------------------- NET OPERATING INCOME 325,536 343,451 395,265 425,787 442,576 431,700 409633 432,909 Commissions 6,699 15,528 11,994 4,418 2,863 8,235 16489 29,359 Tenant Improvements 8,700 20,166 15,576 5,738 3,718 10,695 21413 28,228 Capital Additions 0 0 0 0 0 0 0 0 ---------------------------------------------------------------------------------------------------- TOTAL DEDUCTIONS 15,399 35,694 27,570 10,156 6,581 18,930 31902 57,487 ---------------------------------------------------------------------------------------------------- CASH FLOW 310,137 307,757 367,695 415,631 435,995 412,770 371731 375,422 TOTAL CASH FLOW 310,137 307,757 367,695 415,631 435,995 412,770 371,731 375,422 ---------------------------------------------------------------------------------------------------- Debt Service N/A N/A N/A N/A N/A N/A N/A N/A ---------------------------------------------------------------------------------------------------- CASH FLOW AFTER DEBT 310,137 307,757 367,695 415,631 435,995 412,770 371,731 375,422 ---------------------------------------------------------------------------------------------------- CUMULATIVE SURPLUS N/A N/A N/A N/A N/A N/A N/A N/A ---------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------ Implied Overall Rate 9.38% 9.90% 11.39% 12.27% 12.76% 12.44% 11.81% 12.48% Cash on Cash Return 8.94% 8.87% 10.60% 11.98% 12.57% 11.90% 10.71% 10.82% - ------------------------------------------------------------------------------------------------------------------------------ ----------------------------------------- 2005 2006 2007 ----------------------------------------- BASE RENT 593,286 616,520 607,636 Free Rent 0 0 0 Expense Recoveries 454,037 477,799 487,936 Percentage Rent 35,802 38,172 40,948 ----------------------------------------- GROSS INCOME 1,082,825 1,132,491 1,136,520 Credit/Vacancy Loss (32,485) (33,973) (34,096) Miscellaneous Incomes 8,684 8,988 9,303 ----------------------------------------- EFFECTIVE GROSS INCOM 1,059,024 1,107,504 1,111,727 TOTAL EXPENSES 556,649 577,980 598,741 ----------------------------------------- NET OPERATING INCOME 502,373 529,524 512,986 Commissions 12,879 3,519 0 Tenant Improvements 7,087 4,570 0 Capital Additions 0 0 0 ----------------------------------------- TOTAL DEDUCTIONS 19,966 8,089 0 ----------------------------------------- CASH FLOW 482,409 521,435 512,986 TOTAL CASH FLOW 42,409 521,435 512,986 ----------------------------------------- Debt Service N/A N/A N/A ----------------------------------------- CASH FLOW AFTER DEBT 42,409 521,435 512,986 ----------------------------------------- CUMULATIVE SURPLUS N/A N/A N/A ----------------------------------------- - ------------------------------------------------------------------- Implied Overall Rate 14.48% 15.26% 14.79% Cash on Cash Return 13.90% 15.03% 14.79% - -------------------------------------------------------------------
NOI and CF Trends [GRAPHIC OMITTED] Sale/Yield Matrix (000's) Terminal Cap Rate ------------------------------------------------------ Disc Rate 10.00% 10.50% 11.00% 11.50% - ------------------------------------------------------------------------- 12.00% 3,768 3,692 3,623 3,559 ------------------------------------------------------ 12.50% 3,651 3,578 3,512 3,452 ------------------------------------------------------ 13.00% 3,539 3,470 3,406 3,348 ------------------------------------------------------ 13.50% 3,432 3,365 3,304 3,249 ------------------------------------------------------ 14.00% 3,329 3,265 3,207 3,154 ------------------------------------------------------ 14.50% 3,230 3,169 3,113 3,063 - ------------------------------------------------------------------------- ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW CONCLUSION Based on the DCF value conclusions, a first year cash on cash return of 8.94% is indicated and a second year cash on cash return of 8.87% is indicated. Additionally, the present value of the reversion represents approximately 40.2% of the indicated value. The reversion and cash on cash returns are within an acceptable range for investors of this property type. CONCLUSION OF INCOME CAPITALIZATION APPROACH The preceding analysis indicates the following conclusions: ================================================================================ INCOME CAPITALIZATION APPROACH VALUES ================================================================================ Method Indicated Value - -------------------------------------------------------------------------------- Direct Capitalization $ 3,300,000 Discounted Cash Flow $ 3,500,000 - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate ================================================================================ Greater emphasis is placed on the DCF analysis because it is the method likely to be used by a typical investor. As a result, based on the Income Capitalization Approach, CB Commercial concludes a value estimate for the subject property of $3,500,000. This equates to $27.22 per rentable square foot. - -------------------------------------------------------------------------------- 70 CONCLUSION ================================================================================ RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- RECONCILIATION OF VALUE CB Commercial was instructed to estimate the market value of the leased fee interest in the subject property. The value conclusions for each applicable approach are summarized below. ================================================================================ SUMMARY OF VALUE CONCLUSIONS ================================================================================ Cost Approach N/A Sales Comparison Approach $ 3,350,000 Income Capitalization Approach $ 3,500,000 ================================================================================ Source: CB Commercial Real Estate Group, Inc. ================================================================================ The Income Capitalization Approach is considered the most persuasive method for valuing the subject property. This approach is predicated on the principle of anticipated economic benefits and, therefore, best reflects the investment characteristics of the subject. Properties such as the subject are typically purchased by investors; thus, this approach must closely parallels the anticipated analysis that would be employed by the most typical purchaser. Since the subject property has a number of existing leases with a variety of terms, the DCF technique best models the future cash flow stream to a prospective buyer. The Sales Comparison Approach is predicated on the principle that an investor would pay no more for an existing property than for a comparable property with similar utility. This approach is contingent on the reliability and comparability of available data. The data developed was considered sufficiently reliable to reach a value conclusion by the Sales Comparison Approach. However, due to the lack of truly comparables sales in recent years, this method is given secondary consideration in the reconciliation. The Cost Approach is predicated on the principle that an investor would pay no more for an existing property than it would cost to acquire land and construct a building with similar utility. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Furthermore, due to the age of the subject and current market conditions, accrued depreciation would be substantial and difficult to estimate. An investor would not use the Cost Approach due to the imprecise nature of estimating the accrued physical, functional, or external depreciation affecting the improvements. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. - -------------------------------------------------------------------------------- 71 ================================================================================ RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- The final value conclusion and the approaches relied upon give strong consideration to the market behavior of the typical buyer and current market environment for the property appraised. Based on the foregoing analysis, it is concluded that the market value of the leased fee interest in the subject property, subject to the assumptions and limiting conditions as of May 31, 1996, is: THREE MILLION FIVE HUNDRED THOUSAND DOLLARS ($ 3,500,000) This value is subject to all of the assumptions and limiting conditions stated throughout the report, including specific assumptions and limiting conditions. - -------------------------------------------------------------------------------- 72 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS 1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to total that would adversely affect marketability or value. CB Commercial is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CB Commercial, however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject property's title should be sought from a qualified title company that issues or insures title to real property. 2. It is assumed that improvements have been constructed or will be constructed according to approved architectural plans and specifications and in conformance with recommendations contained in or based upon any soils report(s). Unless otherwise specifically noted in the body of this report, it is assumed: that any existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are, or will be upon completion, in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that it or they will withstand any known elements such as windstorm, hurricane, tornado, flooding, earthquake, or similar natural occurrences; and, that the improvements, as currently constituted, conform to all applicable local, state, and federal building codes and ordinances. CB Commercial professionals are not engineers and are not competent to judge matters of an engineering nature. CB Commercial has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CB Commercial by ownership or management; CB Commercial inspected less than 100% of the entire interior and exterior portions of the improvements; and CB Commercial was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CB Commercial reserves the right to amend the appraisal conclusions reported herein. 3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property was not observed by the appraisers. CB Commercial has no knowledge of the existence of such materials on or in the property. CB Commercial, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the appraisal. 4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CB Commercial. This report may be subject to amendment upon re-inspection of the subject property subsequent to repairs, modifications, alterations and completed new construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels of operation. - -------------------------------------------------------------------------------- 73 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 5. It is assumed that all factual data furnished by the client, property owner, owner's representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CB Commercial has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, Assessor's Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CB Commercial reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CB Commercial of any questions or errors. 6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CB Commercial will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject. 7. CB Commercial assumes no private deed restrictions, limiting the use of the subject property in any way. 8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposit or subsurface rights of value involved in this appraisal, whether they be gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred. 9. CB Commercial is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject. 10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market. 11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CB Commercial does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CB Commercial. 12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CB Commercial to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form. 13. Unless otherwise noted in this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated. 14. This study may not be duplicated in whole or in part without the specific written consent of CB Commercial nor may this report or copies hereof be transmitted to third parties without said consent, which consent CB Commercial reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or - -------------------------------------------------------------------------------- 74 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- its contents shall not be published, in whole or in part, in any public document without the express written consent of CB Commercial which consent CB Commercial reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a "sale" or "offer for sale" of any "security", as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CB Commercial shall have no accountability or responsibility to any such third party. 15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report. 16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used. 17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area have been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report. 18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CB Commercial unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CB Commercial assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance. 19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or client's designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CB Commercial assumes responsibility for any situation arising out of the Client's failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired. 20. CB Commercial assumes that the subject property analyzed herein will be under prudent and competent management and ownership; neither inefficient or super-efficient. 21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the appraisal report. 22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist. 23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Not withstanding any discussion of possible readily achievable barrier removal construction items in this report, CB Commercial has not made a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect on the value estimated herein. Since CB Commercial has no specific information relating to this issue, nor is CB Commercial qualified to make such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject property. - -------------------------------------------------------------------------------- 75 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 24. For our analysis, we have relied on the information provided by the detailed rent roll and information provided by the subject leasing agent. We have assumed all information is correct. Furthermore, we have assumed all leases out for signature will be returned signed, and executed as of the date indicated to us by the leasing agent. We reserve the right to amend this appraisal should any of this information be later found to be incorrect. - -------------------------------------------------------------------------------- 76 ADDENDA ================================================================================ ADDENDA - -------------------------------------------------------------------------------- ADDENDA - -------------------------------------------------------------------------------- 77 ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- ADDENDUM A GLOSSARY OF TERMS ================================================================================ GLOSSARY OF TERMS - -------------------------------------------------------------------------------- assessed value Assessed value applies in ad valorem taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to market value, but it is usually calculated in relation to a market value base. + cash equivalency The procedure in which the sale prices of comparable properties sold with atypical financing are adjusted to reflect typical market terms. contract, coupon, face, or nominal rent The nominal rent payment specified in the lease contract. It does not reflect any offsets for free rent, unusual tenant improvement conditions, or other factors that may modify the effective rent payment. coupon rent See Contract, Coupon, Face, or Nominal Rent effective rent 1) The rental rate net of financial concessions such as periods of no rent during a lease term; may be calculated on a discounted basis, reflecting the time value of money, or on a simple, straight-line basis. ** 2) The economic rent paid by the lessee when normalized to account for financial concessions, such as escalation clauses, and other factors. Contract, or normal, rents must be converted to effective rents to form a consistent basis of comparison between comparables. face rent See Contract, Coupon, Face, or Nominal Rent fee simple estate Absolute ownership unen-cumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. ++ floor area ratio (FAR) The relationship between the above-ground floor area of a building, as described by the building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area; also called building-to-land ratio. ** full service lease A lease in which rent covers all operating expenses. Typically, full service leases are combined with an expense stop, the expense level covered by the contract lease payment. Increases in expenses above the expense stop level are passed through to the tenant and are known as expense pass-throughs. going concern value Going concern value is the value of a proven property operation. It includes the incremental value associated with the business concern, which is distinct from the value of the real estate only. Going concern value includes an intangible enhancement of the value of an operating business enterprise which is produced by the assemblage of the land, building, labor, equipment, and marketing operation. This process creates an economically viable business that is expected to continue. Going concern value refers to the total value of a property, including both real property and intangible personal property attributed to the business value. + gross building area (GBA) The sum of all areas at each floor as measured to the exterior walls. insurable value Insurable Value is based on the replacement and/or reproduction cost of physical items that are subject to loss from hazards. Insurable value is that portion of the value of an asset or asset group that is acknowledged or recognized under the provisions of an applicable loss insurance policy. This value is often controlled by state law and varies from state to state. + investment value Investment value is the value of an investment to a particular investor based on his or her investment requirements. In contrast to market value, investment value is value to an individual, not value in the marketplace. Investment value reflects the subjective relationship between a particular investor and a given investment. When measured in dollars, investment value is the price an investor would pay for an investment in light of its perceived capacity to satisfy his or her desires, needs, or investment goals. To estimate investment value, specific investment criteria must be known. Criteria to evaluate a real estate investment are not necessarily set down by the individual investor; they - -------------------------------------------------------------------------------- ================================================================================ GLOSSARY OF TERMS - -------------------------------------------------------------------------------- may be established by an expert on real estate and its value, that is, an appraiser. + leased fee See leased fee estate leased fee estate An ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.** leasehold See leasehold estate leasehold estate The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.** load factor The amount added to usable area to calculate the rentable area. It is also referred to as a "rentable add-on factor" which, according to BOMA, "is computed by dividing the difference between the usable square footage and rentable square footage by the amount of the usable area. Convert the figure into a percentage by multiplying by 100. market value "as if complete" on the appraisal date Market value as if complete on the appraisal date is an estimate of the market value of a property with all construction, conversion, or rehabilitation hypothetically completed, or under other specified hypothetical conditions as of the date of the appraisal. With regard to properties wherein anticipated market conditions indicate that stabilized occupancy is not likely as of the date of completion, this estimate of value should reflect the market value of the property as if complete and prepared for occupancy by tenants. market value "as is" on the appraisal date Market value "as is" on the appraisal date is an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date of appraisal. market value Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1) A reasonable time is allowed for exposure in the open market; 2) Both parties are well informed or well advised, and acting in what they consider their own best interests; 3) Buyer and seller are typically motivated; 4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.ss. marketing period The time it takes an interest in real property to sell on the market subsequent to the date of an appraisal. ** net lease Lease in which all or some of the operating expenses are paid directly by the tenant. The landlord never takes possession of the expense payment. In a Triple Net Lease all operating expenses are the responsibility of the tenant, including property taxes, insurance, interior maintenance, and other miscellaneous expenses. However, management fees and exterior maintenance are often the responsibility of the lessor in a triple net lease. A modified net lease is one in which some expenses are paid separately by the tenant and some are included in the rent. net rentable area (NRA) 1) The area on which rent is computed. 2) The Rentable Area of a floor shall be computed by measuring to the inside finished surface of the dominant portion of the permanent outer building walls, excluding any major vertical penetrations of the floor. No deductions shall be made for columns and projections necessary to the building. Include space such as mechanical room, janitorial room, restrooms, and lobby of the floor. * nominal rent See Contract, Coupon, Face, or Nominal Rent prospective future value "upon completion of construction" Prospective future value "upon completion of construction" is the prospective value of a property on the future date that construction is completed, based upon market conditions forecast to exist, as of that completion date. The value estimate at this stage is stated in current dollars unless otherwise indicated. - -------------------------------------------------------------------------------- ================================================================================ GLOSSARY OF TERMS - -------------------------------------------------------------------------------- prospective future value "upon reaching stabilized occupancy" Prospective future value "upon reaching stabilized occupancy" is the prospective value of a property at a future point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. The value estimate at this stage is stated in current dollars unless otherwise indicated. reasonable exposure time The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market. ++ rent see full service lease net lease contract, coupon, face, or nominal rent effective rent shell space Space which has not had any interior finishing installed, including even basic improvements such as ceilings and interior walls, as well as partitions, floor coverings, wall coverings, etc.. Usable Area 1) The area actually used by individual tenants. 2) The Usable Area of an office is computed by measuring to the finished surface of the office side of corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished surface of the dominant portion of the permanent outer building walls. Excludes areas such as mechanical rooms, janitorial room, restrooms, lobby, and any major vertical penetrations of a multi-tenant floor. * use value Use value is a concept based on the productivity of an economic good. Use value is the value a specific property has for a specific use. Use value focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to the property's highest and best use or the monetary amount that might be realized upon its sale. + value appraised During the real estate development process, a property typically progresses from a state of unimproved land to construction of improvements to stabilized occupancy. In general, the market value associated with the property increases during these stages of development. After reaching stabilized occupancy, ongoing forces affect the property during its life, including a physical wear and tear, changing market conditions, etc. These factors continually influence the property's market value at any given point in time. See also market value "as is" on the appraisal date market value "as if complete" on the appraisal date prospective future value "upon completion of construction" prospective future value "upon reaching stabilized occupancy" - ---------- + The Appraisal of Real Estate, Tenth Edition, Appraisal Institute, 1992. ++ The Dictionary of Real Estate Appraisal, Third Edition, 1993. ss. The office of the Comptroller of the Currency, 12 CFR Part 34, Subpart C, section 34.42(f), August 24, 1966. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. * 1966 BOMA Experience Exchange Report, Income/Expense Analysis for Office Buildings (Building Owners and Managers Association, 1966) ++ Statement on Appraisal Standard No. 6, Appraisal Standards Board of The Appraisal Foundation, September 19, 1992. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ADDENDUM B ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- ADDENDUM B ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ADDENDUM B ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- STREET SCENE - HOOSICK STREET FACING EAST - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- STREET SCENE - HOOSICK STREET FACING WEST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ADDENDUM B ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- INTERIOR PHOTOGRAPH - AMES DEPARTMENT STORE - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- INTERIOR PHOTOGRAPH - PRICE CHOPPER - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ADDENDUM C IMPROVED COMPARABLE SALES - -------------------------------------------------------------------------------- ADDENDUM C IMPROVED COMPARABLE SALES - -------------------------------------------------------------------------------- RETAIL SALE ================================================================================ Location Data Property Name: West Brighton Plaza Location: 2611 West Henrietta Road City: Brighton County: Monroe State/Zip: New York Assessor's Parcel No(s): N/A Atlas Reference: E4 Physical Data Type: Community Land Area: 15.00 Acres Excess Land: None Gross Leasable Area: Anchors: Central Tractor Local Tenant GLA: N/A Anchor Tenant GLA: N/A Total GLA: N/A GLA Purchased: 165,000 SF Year Built: 1962 Parking: Adequate Condition: Average Exterior Walls: Brick Veneer Sale Data Transaction Type: Sale Date of Transaction: 12/93 Marketing Time: N/A Grantor: West Brighton Plaza Co., L.P. Grantee: Nicholas Ac. Cutaia, Inc. Document No.: N/A Sale Price: $4,300,000 Financing: Market Terms Cash Equivalent Price: N/A Required Capital Cost: $0 Adjusted Sales Price: $0 Verification: Public Records Financial Data Assumptions & Forecast N/A Occupancy at Sale: 100% Existing or Pro Forma Income: Existing TOTAL P.S.F. ----- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $530,000 $3.21 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap, DCF and P.S.F Overall Capitalization Rate (OAR): N/A % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: N/A Comments Sale of a one and part two story community center constructed circa 1962. Similar condition the the subject. Similar retail location. Net operating income at the time of sale was $530,000 indicating an overall rate of 12.3%. The tenants are Central Tractor Farm and Family Store, Buyer's Bazaar, Xerox and Dunn Tire. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: 7905 Route 11 Location: 7905 Route 11 City: Cicero County: Onondaga State/Zip: New York Assessors Parcel No(s): N/A Atlas Reference: H5 Physical Data Type: Neighborhood Land Area: 3.31 Acres Excess Land: Yes - see below Gross Leasable Area: Anchors: None Local Tenant GLA: N/A Anchor Tenant GLA: N/A Total GLA: N/A GLA Purchased: 28,000 SF Year Built: N/A Parking: 100 spaces Condition: Average Exterior Walls: Cement Block Sale Data Transaction Type: Sale Date of Transaction: 7/93 Marketing Time: N/A Grantor: Rochester Shopping Associates Grantee: Kimco Gates 149 Inc. Document No.: N/A Sale Price: $3,700,000 Financing: Market Terms Cash Equivalent Price: N/A Required Capital Cost: $0 Adjusted Sales Price: $0 Verification: Grantee Financial Data Assumptions & Forecast: N/A Occupancy at Sale: N/A Existing or Pro Forma Income: Existing TOTAL P.S.F. ----- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $117,040 $4.18 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap,DCF and P.S.F Overall Capitalization Rate (OAR): N/A % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: N/A Comments Sale of a one story community center in good condition at the time of sale. Similar retail location. Net operating income at the time of sale was $351,500 indicating an overall rate of 9.5%. The tenants include Top's Supermarket, Denny's, Perkin's and Ground Round. Kimco, an active retail REIT in the northeast, also owns an adjacent building occupied by Caldor which was part of the buyers motivation for acquiring the property. - -------------------------------------------------------------------------------- CB COMMERCIAL - -------------------------------------------------------------------------------- ADDENDUM D RENTAL COMPARABLES - -------------------------------------------------------------------------------- ADDENDUM D RENTAL COMPARABLES - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ADDENDUM D RENTAL COMPARABLES - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- BUILDERS SQUARE PLAZA COLONIE, NY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Builders Square Plaza Location: 1814 Central Avenue City: Colonie County: Albany State/Zip: New York Assessor's Parcel No(s): N/A Atlas Reference: N5 Physical Data Type: Community Gross Leaseable Area: N/A Year Built: 1990 Exterior Walls: Stucco Condition: Good Anchor Tenant: Builder's Square, Office Max Parking: 761 spaces Lease Data Occupancy: Local: N/A Overall: 98% Typical Size: N/A Term: 3-10 years (satellite) Base Rent Per Square Foot: $10-$14 (satellite) Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Lerner-Heidenburg Assoc. Phone No.: (201)768-1300 Survey Date: 5/96 Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 10/94 2,100 Albany Windows $12.00 N/A None 5% per year 5.00 - -------------------------------------------------------------------------------- 4/94 1,050 Pizza Express $12.00 N/A 5% per year 5.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story community shopping center located in Colonie, NY, located approximately 7 miles west of the subject. Conctructed in 1990 and in good condition. 98% occupied as of the survey date. Similar retail location to the subject. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Wolf Road Shoppers Park Location: Wold and Sand Creek Roads City: Colonie County: Albany State/Zip: New York Assessor's Parcel No(s): N/A Atlas Reference: N5 Physical Data Type: Community Gross Leaseable Area: N/A Year Built: 1974 Exterior Walls: Brick Veneer Condition: Good Anchor Tenant: Service Merchandise, Barbizon Lingerie, Stickley Furniture Parking: 2,000 spaces Lease Data Occupancy: Local: N/A Overall: 95% Typical Size: N/A Term: 3-10 years (satellite) Base Rent Per Square Foot: $10-$15 (satellite) Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Wolf Road Industrial Developme Phone No.: (518)785-6611 Survey Date: 5/96 Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 3Qtr95 N/A $12.50 N/A None Annual CPI 5.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL - -------------------------------------------------------------------------------- ADDENDUM D RENTAL COMPARABLES - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- WOLF ROAD SHOPPERS PARK COLONIE, NY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- RETAIL RENT COMPARABLE ================================================================================ Comments One story community shopping center located in Colonie, NY, located approximately 5 miles west of the subject. Conctructed in 1974, renovated in 1982 and in good condition. 95% occupied as of the survey date. Similar retail location to the subject. - -------------------------------------------------------------------------------- CB COMMERCIAL - -------------------------------------------------------------------------------- ADDENDUM D RENTAL COMPARABLES - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- COLONIE PLAZA COLONIE, NY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Colonie Plaza Location: Central Avenue Near Route 155 City: Colonie County: Albany State/Zip: New York Assessor's Parcel No(s): N/A Atlas Reference: N5 Physical Data Type: Community Gross Leaseable Area: N/A Year Built: 1987 Exterior Walls: Concrete Condition: Good Anchor Tenant: Price Chopper, Paper Cutter Parking: 680 Lease Data Occupancy: Local: N/A Overall: 95% Typical Size: N/A Term: 3-10 years (satellite) Base Rent Per Square Foot: $9-$14 (satellite) Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mid-Atlantic Realty Trust Phone No.: (301)684-2000 Survey Date: 5/96 Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 1995 N/A $11.00 N/A None Annual CPI 5.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story community shopping center located in Colonie, NY, located approximately 8 miles west of the subject. Constructed in 1987 and in good condition. 95% occupied as of the survey date. Similar retail location to the subject. Inferior visibility as the center is set back from the road. - -------------------------------------------------------------------------------- CB COMMERCIAL - -------------------------------------------------------------------------------- ADDENDUM E STRATEGIC MAPPING, INC. REPORTS - -------------------------------------------------------------------------------- ADDENDUM E STRATEGIC MAPPING, INC. REPORTS - -------------------------------------------------------------------------------- RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap,DCF and P.S.F Overall Capitalization Rate (OAR): N/A % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: N/A Comments Sale of a one story neighborhood center in average condition at the time of sale. Similar retail location. Net operating income at the time of sale was $117,040 indicating an overall rate of 13.0%. The center currently consists of six non-credit rated stores. However, there is excess land and approximately 6,000 SF of additional space will be added to the property. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: 2345 Buffalo Road Location: 2345 Buffalo Road City: Gates County: Monroe State/Zip: New York Assessor's Parcel No(s): N/A Atlas Reference: E4 Physical Data Type: Community Land Area: 8.60 Acres Excess Land: None Gross Leasable Area: Anchors: Top's Supermarket Local Tenant GLA: N/A Anchor Tenant GLA: N/A Total GLA: N/A GLA Purchased: 79,647 SF Year Built: N/A Parking: Adequate Condition: Good Exterior Walls: Brick Veneer Sale Data Transaction Type: Sale Date of Transaction: 7/93 Marketing Time: N/A Grantor: Rochester Shopping Associates Grantee: Kimco Gates 149 Inc. Document No.: N/A Sale Price: $3,700,000 Financing: Market Terms Cash Equivalent Price: N/A Required Capital Cost: $0 Adjusted Sales Price: $0 Verification: Grantee Financial Data Assumptions & Forecast: N/A Occupancy at Sale: N/A Existing or Pro Forma Income: Existing TOTAL P.S.F. ----- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $351,500 $4.41 - -------------------------------------------------------------------------------- CB COMMERCIAL Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 TROY 3,5,10 3 Mile Radius 6/4/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 92.0 - --------------------------------- Demographics --------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 80,495 31,962 75,183 2.35 $28,914 2000 79,793 31,725 74,481 2.35 $33,627 - ------------------------------Expenditure Potential----------------------------- 1995 Area Yearly Growth Rate Per Household 1.48 % Total 1.33 % - --------------------------Retail Support Potential (000)------------------------ 1995: 3,228 sq. ft. - -------------------------------------------------------------------------------- Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 29,302 32,108 917 1,012 1.85 % 89.5 Appliance Store 2,343 1,958 73 62 -3.53 % 85.9 Auto-Aftermarket Store 48,587 49,604 1,520 1,564 0.42 % 90.9 Convenience Store 27,611 28,039 864 884 0.31 % 95.4 Dept. Store 29,975 32,012 938 1,009 1.32 % 88.7 Drug Store 24,635 30,123 771 950 4.10 % 98.1 Electronics Store 11,375 14,860 356 468 5.49 % 91.5 Fast Food Restaurant Store 28,745 25,310 899 798 -2.51 % 94.1 Full Serv Restaurant Store 28,729 25,049 899 790 -2.70 % 96.1 Furniture Store 9,834 9,140 308 288 -1.45 % 82.9 Grocery Store 124,837 138,938 3,906 4,379 2.16 % 95.6 Hardware Store 4,771 5,165 149 163 1.60 % 81.1 Home Centers Store 22,269 26,129 697 824 3.25 % 79.7 Jewelry Store 4,723 4,816 148 152 0.39 % 87.4 Liquor Store 7,348 6,571 230 207 -2.21 % 90.4 Mass Merchandiser Store 41,123 45,285 1,287 1,427 1.95 % 90.9 Photo Store 561 553 18 17 -0.30 % 91.2 Shoe Store 5,875 6,808 184 215 2.99 % 92.3 Sporting Goods Store 5,054 5,830 158 184 2.90 % 88.4 Toy Store 3,656 3,355 114 106 -1.71 % 89.6 Variety Store 2,353 2,621 74 83 2.19 % 90.8 Area defined by Circle: (42.7386,73.6756): 3 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 TROY 3,5,10 3 Mile Radius 6/4/96 Benchmark = Regional Area Definition Detailed Report Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 1,792 3,008 56 95 10.91 % 97.3 ------- ------- ------ ------ Total Shopping Center 465,501 497,282 14,564 15,674 All Other Stores 357,039 381,416 11,171 12,023 Total Retail 822,540 878,698 25,735 27,697 Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (42.7386,73.6756): 3 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 TROY 3,5,10 5 Mile Radius 6/4/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 97.0 - --------------------------------- Demographics --------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 136,910 53,728 128,910 2.40 $34,295 2000 138,495 54,544 130,495 2.39 $40,046 - ------------------------------Expenditure Potential----------------------------- 1995 Area Yearly Growth Rate Per Household 1.46 % Total 1.76% - --------------------------Retail Support Potential (000)------------------------ 1995: 5,717 sq. ft. - -------------------------------------------------------------------------------- Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 52,877 59,280 984 1,087 2.31 % 96.1 Appliance Store 4,208 3,600 78 66 -3.08 % 91.8 Auto-Aftermarket Store 87,104 91,064 1,621 1,670 0.89 % 97.0 Convenience Store 48,185 50,046 897 918 0.76 % 99.0 Dept. Store 54,110 59,073 1,007 1,083 1.77 % 95.3 Drug Store 43,132 54,123 803 992 4.64 % 102.2 Electronics Store 20,466 27,209 381 499 5.86 % 98.0 Fast Food Restaurant Store 51,142 45,973 952 843 -2.11 % 99.6 Full Serv Restaurant Store 50,969 45,410 949 833 -2.28 % 101.4 Furniture Store 18,068 17,121 336 314 -1.07 % 90.6 Grocery Store 214,940 244,413 4,001 4,481 2.60 % 97.9 Hardware Store 8,805 9,700 164 178 1.96 % 89.0 Home Centers Store 41,238 49,190 768 902 3.59 % 87.8 Jewelry Store 8,698 9,071 162 166 0.84 % 95.7 Liquor Store 13,088 11,935 244 219 -1.83 % 95.8 Mass Merchandiser Store 73,134 82,316 1,361 1,509 2.39 % 96.2 Photo Store 1,012 1,016 19 19 0.08 % 97.8 Shoe Store 10,403 12,331 194 226 3.46 % 97.3 Sporting Goods Store 9,044 10,621 168 195 3.27 % 94.1 Toy Store 6,519 6,144 121 113 -1.18 % 95.0 Variety Store 4,191 4,777 78 88 2.65 % 96.2 Area defined by Circle: (42.7386,73.6756): 5 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 TROY 3,5,10 5 Mile Radius 6/4/96 Benchmark = Regional Area Definition Detailed Report Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 3,130 5,366 58 98 11.38 % 101.1 --------- --------- ------ ------ Total Shopping Center 824,462 899,780 15,345 16,496 All Other Stores 632,363 690,131 11,770 12,653 Total Retail 1,456,825 1,589,911 27,115 29,149 Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (42.7386,73.6756): 5 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 TROY 3,5,10 10 Mile Radius 6/4/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 98.8 - --------------------------------- Demographics --------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 353,944 139,792 335,109 2.40 $36,794 2000 354,629 140,400 335,794 2.39 $ 43,048 - ------------------------------Expenditure Potential----------------------------- 1995 Area Yearly Growth Rate Per Household 1.43 % Total 1.52% - --------------------------Retail Support Potential (000)------------------------ 1995: 15,151 sq. ft. - -------------------------------------------------------------------------------- Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000 HH HH Total $ Index Apparel Store 143,433 159,148 1,026 1,134 2.10 % 100.2 Appliance Store 11,337 9,598 81 68 -3.28 % 95.0 Auto-Aftermarket Store 229,309 237,274 1,640 1,690 0.69 % 98.1 Convenience Store 125,271 128,634 896 916 0.53 % 98.9 Dept. Store 146,539 158,222 1,048 1,127 1.55 % 99.2 Drug Store 110,608 137,916 791 982 4.51 % 100.7 Electronics Store 55,175 72,335 395 515 5.57 % 101.5 Fast Food Restaurant Store 136,669 121,165 978 863 -2.38 % 102.3 Full Serv Restaurant Store 135,901 119,395 972 850 -2.56 % 103.9 Furniture Store 49,911 46,660 357 332 -1.34 % 96.2 Grocery Store 557,885 627,709 3,991 4,471 2.39 % 97.7 Hardware Store 24,363 26,417 174 188 1.63 % 94.7 Home Centers Store 112,170 131,456 802 936 3.22 % 91.8 Jewelry Store 23,825 24,525 170 175 0.58 % 100.8 Liquor Store 35,385 31,867 253 227 -2.07 % 99.6 Mass Merchandiser Store 195,413 217,511 1,398 1,549 2.17 % 98.8 Photo Store 2,702 2,675 19 19 -0.20 % 100.4 Shoe Store 27,898 32,753 200 233 3.26 % 100.3 Sporting Goods Store 24,526 28,394 175 202 2.97 % 98.0 Toy Store 17,265 16,130 124 115 -1.35 % 96.7 Variety Store 11,188 12,617 80 90 2.43 % 98.7 Area defined by Circle: (42.7386,73.6756): 10 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 TROY 3,5,10 10 Mile Radius 6/4/96 Benchmark = Regional Area Definition Detailed Report Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 8,287 13,985 59 100 11.03 % 102.8 --------- --------- ------ ------ Total Shopping Center 2,185,061 2,356,386 15,631 16,783 All Other Stores 1,675,941 1,807,347 11,989 12,873 Total Retail 3,861,002 4,163,733 27,620 29,656 Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (42.7386,73.6756): 10 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 1 of 4 Area 1 = TROY 3,5,10 3 Mile Radius 6/4/96 Area 2 = TROY 3,5,10 5 Mile Radius Area 3 = TROY 3,5,10 10 Mile Radius Description Area 1 Area 2 Area 3 Population: 2000 Projection 79,793 138,495 354,629 1995 Estimate 80,495 136,910 353,944 1990 Census 81,234 134,747 351,959 1980 Census 84,107 135,941 348,213 Percent Change, 1980 - 1990 -3.4 -0.9 1.1 Percent Change, 1990 - 1995 -0.9 1.6 0.6 1995 Population by Race: % White 90.4 92.6 88.0 % Black 5.9 4.3 8.7 % American Indian 0.3 0.2 0.2 % Asian 2.9 2.4 2.3 % Other 0.6 0.5 0.7 % Hispanic 2.0 1.7 2.2 1995 Population by Age: % 0 - 5 8.1 7.6 7.5 % 6 - 13 10.0 9.8 9.6 % 14 - 17 5.5 5.3 5.2 % 18 - 20 5.3 5.0 4.9 % 21 - 24 7.2 6.6 6.7 % 25 - 34 18.3 17.0 16.6 % 35 - 44 13.8 14.3 15.2 % 45 - 54 9.3 10.5 11.1 % 55 - 64 7.2 7.9 8.1 % 65 - 74 7.9 8.5 8.0 % 75 - 84 5.6 5.6 5.2 % 85 + 2.0 1.9 1.9 Median Age Total Population 32.6 34.2 34.7 Median Age Adult Population 39.9 41.8 41.8 Households: . 2000 Projection 31,725 54,544 140,400 1995 Estimate 31,962 53,728 139,792 1990 Census 32,250 52,746 138,856 1980 Census 31,489 49,871 128,417 Percent Change, 1980- 1990 2.4 5.8 8.1 Percent Change, 1990- 1995 -0.9 1.9 0.7 1990 Household Population 75,922 126,753 333,143 1990 Households w/ Children under 18 9,471 15,782 40,847 1990 Households w/ Persons over 65 9,223 14,872 35,957 Area defined by Circle: (42.7386,73.6756): 3 mile(s) Area defined by Circle: (42.7386,73.6756): 5 mile(s) Area defined by Circle: (42.7386,73.6756): 10 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 2 of 4 Area 1 = TROY 3,5,10 3 Mile Radius 6/4/96 Area 2 = TROY 3,5,10 5 Mile Radius Area 3 = TROY 3,5,10 10 Mile Radius Description Area 1 Area 2 Area 3 1990 Family Population 59,134 101,802 263,428 1990 Nonfamily Population 16,788 24,951 69,715 1990 Group Quarters Population 5,312 8,000 18,835 1990 Average Household Size 2.35 2.40 2.40 1990 Average Family Size 3.06 3.06 3.05 1990 Family Households 18,856 32,615 84,674 1990 Nonfamily Households 13,393 20,127 54,182 1995 Household Income: % $ 0 - $9,999 15.8 12.3 11.2 % $ 10,000 - $ 14,999 10.1 8.1 7.3 % $ 15,000 - $ 24,999 17.7 16.2 15.1 % $ 25,000 - $ 34,999 14.9 14.4 13.9 % $ 35,000 - $ 49,999 18.4 19.8 19.1 % $ 50,000 - $ 74,999 14.9 17.9 19.1 % $ 75,000 - $ 99,999 4.9 6.4 7.9 % $100,000 - $149,999 2.6 3.7 4.9 % $150,000 + 0.7 1.4 1.5 2000 Median Household Income $ 33,627 $ 40,046 $ 43,048 1995 Median Household Income $ 28,914 $ 34,295 $ 36,794 1990 Median Household Income $ 24,677 $ 29,227 $ 31,364 2000 Average Household Income $ 42,294 $ 49,993 $ 53,206 1995 Average Household Income $ 35,980 $ 42,293 $ 44,988 1990 Average Household Income $ 30,175 $ 35,321 $ 37,513 2000 Per Capita income $ 18,015 $ 20,896 $ 22,246 1995 Per Capita Income $ 15,296 $ 17,627 $ 18,767 1990 Per Capita Income $ 12,840 $ 14,719 $ 15,647 2000 Median Family Income $ 45,093 $ 51,501 $ 55,253 1995 Median Family Income $ 38,773 $ 44,105 $ 47,225 1990 Median Family Income $ 33,091 $ 37,587 $ 40,256 1990 Average Family Income $ 37,076 $ 42,977 $ 45,586 Area defined by Circle: (42.7386,73.6756): 3 mile(s) Area defined by Circle: (42.7386,73.6756): 5 mile(s) Area defined by Circle: (42.7386,73.6756): 10 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 3 of 4 Area 1 = TROY 3,5,10 3 Mile Radius 6/4/96 Area 2 = TROY 3,5,10 5 Mile Radius Area 3 = TROY 3,5,10 10 Mile Radius Description Area 1 Area 2 Area 3 1990 Housing Unit Counts: Total Units 35,002 56,550 148,962 Occupied Units 32,250 52,746 138,856 Owner Occupied 13,761 26,820 75,697 Renter Occupied 18,492 25,927 63,159 Vacant Units 2,752 3,804 10,106 Year Round 2,693 3,663 9,371 Seasonal 57 141 733 1990 Housing Unit Percents: % Occupied of Total Units 92.1 93.3 93.2 % Owner Units of Occupied Units 42.7 50.8 54.5 % Renter Units of Occupied Units 57.3 49.2 45.5 % Vacant of Total Units 7.9 6.7 6.8 % Year Round of Vacant Units 97.9 96.3 92.7 % Seasonal of Vacant Units 2.1 3.7 7.3 % Condominiums of Total Units 0.8 1.3 1.3 1990 Condominiums: Total Condominium Units 265 735 2,005 % Owner Occupied 25.3 44.1 52.6 % Renter Occupied 60.0 40.3 37.2 % Vacant 14.7 15.6 10.2 1990 Units in Structure: % 1, Detached 25.7 37.0 42.8 % 1, Attached 2.2 2.4 3.8 % 2 33.3 25.3 20.4 % 3 - 9 24.6 21.2 18.4 % 10 - 49 7.8 9.1 7.8 % 50+ 4.6 3.0 4.0 % Mobile Homes 0.4 0.8 1.6 % Other 1.4 1.2 1.3 1990 Median Home Value $87,281 $96,284 $104,293 1990 Median Contract Rent $324 $341 $380 Area defined by Circle: (42.7386,73.6756): 3 mile(s) Area defined by Circle: (42.7386,73.6756): 5 mile(s) Area defined by Circle: (42.7386,73.6756): 10 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 4 of 4 Area 1 = TROY 3,5,10 3 Mile Radius 6/4/96 Area 2 = TROY 3,5,10 5 Mile Radius Area 3 = TROY 3,5,10 10 Mile Radius Description Area 1 Area 2 Area 3 1995 Total Employed 28,509 43,695 181,484 1995 Socio-Economic Measure 40 50 57 1990 Occupation: Total Civil Labor Force 40,585 69,676 188,395 % Unemployed 7.0 5.5 5.0 Total Employed 37,728 65,859 178,941 % White Collar 61.1 64.7 68.3 % Executive & Managerial 9.8 12.3 13.9 % Professional Specialty 14.1 15.0 16.2 % Technical Support 4.4 4.4 4.6 % Administrative Support 23.8 23.1 23.2 % Sales 8.9 9.8 10.5 % Blue Collar 22.5 21.1 17.9 % Precision Production, Craft & Repair 9.0 8.6 7.8 % Machine Operators 5.9 5.3 3.7 % Transportation & Material Moving 3.9 3.8 3.3 % Laborers 3.6 3.4 3.1 % Farming, Forestry & Fishing 0.6 0.6 0.7 % Service: Private Household 0.3 0.2 0.2 % Service: Protective 2.4 2.1 1.8 % Service: Other 13.2 11.3 11.1 1990 Educational Attainment (Age 25 & Over): % Less than Grade 9 11.9 10.2 8.5 % Grade 9-12 (No Diploma) 15.8 13.8 12.7 % High School Graduate or Equivalency 32.4 31.7 29.9 % Some College (No Degree) 15.0 15.6 15.3 % Associate Degree 8.4 9.1 8.9 % Bachelor Degree 9.1 11.0 13.6 % Graduate or Professional Degree 7.5 8.7 11.0 Area defined by Circle: (42.7386,73.6756): 3 mile(s) Area defined by Circle: (42.7386,73.6756): 5 mile(s) Area defined by Circle: (42.7386,73.6756): 10 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. - -------------------------------------------------------------------------------- ADDENDUM F RENT ROLL - -------------------------------------------------------------------------------- ADDENDUM F RENT ROLL - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Mark Centers Trust Annual Rent Roll 14 Date: TROY PLAZA 05/09/96 Report Date: 05/09/96 10:45:24
- --------------------------------------------------------------------------------------- Occupancy -- Rent Dates -- Square Base Bldg/Suite/Lease Tenant Name Status Start Expire Footage Rent - --------------------------------------------------------------------------------------- 330529-0001*-000001 AMES DISTRIBUTING ACTIVE 04/26/90 05/31/01 71,665 140,000 330529-00020-000002 PRICE CHOPPER - STORE ACTIVE 10/01/79 09/30/99 29,044 56,000 330529-00030-000003 FRIENDLY ICE CREAM ACTIVE 08/25/67 04/30/98 4,000 52,275 330529-00040-000004 STRAWBERRIES RECORDS ACTIVE 06/29/85 06/30/97 1,600 20,800 330529-0005*-000005 FLEET BANK OF NEW YOR ACTIVE 03/19/94 12/31/03 2,400 33,600 330529-0006*-000006 PLAZA DISCOUNT WINES ACTIVE 05/23/88 09/30/97 1,200 17,813 330529-00070-000007 SALLY BEAUTY SUPPLY/S ACTIVE 01/14/91 01/31/98 1,200 13,200 330529-00100-000008 CASEY'S EAST ACTIVE 12/01/86 11/30/96 4,350 39,150 330529-00110-000009 POLLEY'S CARD AND GIF ACTIVE 07/10/67 07/31/97 2,000 21,000 330529-00120-000010 VOLUME SHOES - #1041 ACTIVE 01/24/87 01/31/97 2,500 23,750 330529-00130-000011 RENT A CENTER OF AMER ACTIVE 09/01/86 08/31/98 2,000 24,000 330529-00140-000012 RADIO SHACK #01-1323 ACTIVE 08/15/84 08/31/99 2,500 28,125 330529-0015*-000013 EASTERN MOON CHINESE ACTIVE 07/09/90 07/31/00 1,620 19,500 330529-00160-000014 KEY BANK ACTIVE 03/16/79 12/31/04 0 20,000 330529-08090-000015 LABEL SHOPPER ACTIVE 06/20/89 06/30/97 2,400 25,800 ----------------------------------- Total GLA: 128,479 535,013 Building File: 128,479 Vacant Space: 0 ----------------------------------- - ------------------------------------------------------------------------------------------------- Rent -----Cam----- --Taxes-- Insurance Rent Bldg/Suite/Lease Tenant Name Per Sq Ft Base Fixed Rec Fixed Rec Rec Clause - ------------------------------------------------------------------------------------------------- 330529-0001*-000001 AMES DISTRIBUTING 1.95 0 0 x x x YES 330529-00020-000002 PRICE CHOPPER - STORE 1.93 0 7,336 x x x YES 330529-00030-000003 FRIENDLY ICE CREAM 13.07 0 0 x x YES 330529-00040-000004 STRAWBERRIES RECORDS 13.00 0 0 x 2,808 x x 330529-0005*-000005 FLEET BANK OF NEW YOR 14.00 0 2,894 x 4,212 x x 330529-0006*-000006 PLAZA DISCOUNT WINES 14.84 0 1,397 x 1,721 x x YES 330529-00070-000007 SALLY BEAUTY SUPPLY/S 11.00 0 1,500 x 2,031 x x YES 330529-00100-000008 CASEY'S EAST 9.00 0 5,108 x x x YES 330529-00110-000009 POLLEY'S CARD AND GIF 10.50 0 2,349 x 3,510 x x YES 330529-00120-000010 VOLUME SHOES - #1041 9.50 0 2,028 x x x YES 330529-00130-000011 RENT A CENTER OF AMER 12.00 0 1,500 x 3,510 x x 330529-00140-000012 RADIO SHACK #01-1323 11.25 0 2,530 x x x YES 330529-0015*-000013 EASTERN MOON CHINESE 12.04 0 1,125 x 2,632 x x 330529-00160-000014 KEY BANK .00 0 330529-08090-000015 LABEL SHOPPER 10.75 0 2,818 x 4,212 x x YES -------------------------------------------------- Total GLA: 30,586 24,634 --------------------------------------------------
- -------------------------------------------------------------------------------- ADDENDUM G - PRO-JECT REPORTS - -------------------------------------------------------------------------------- ADDENDUM G PRO-JECT REPORTS - -------------------------------------------------------------------------------- TROY PLAZA AVERAGE OCCUPANCY REPORT FOR ALL TENANTS
1996 1997 1998 1999 2000 2001 2002 2003 ------- ------- ------- ------- ------- ------- ------- ------- JANUARY 128,579 128,579 127,379 128,579 128,579 128,579 124,229 122,579 FEBRUARY 128,579 126,079 127,379 128,579 128,579 128,579 128,579 121,379 MARCH 128,579 126,079 127,379 128,579 128,579 128,579 128,579 125,379 APRIL 128,579 126,079 127,379 128,579 128,579 128,579 128,579 127,379 MAY 128,579 126,079 123,379 128,579 128,579 128,579 128,579 127,379 JUNE 124,229 128,579 124,579 128,579 128,579 128,579 126,079 127,379 JULY 124,229 124,579 124,579 128,579 128,579 128,579 126,079 127,379 AUGUST 124,229 122,579 124,579 128,579 126,959 128,579 126,079 127,379 SEPTEMBER 124,229 122,579 126,579 126,079 126,959 128,579 126,079 123,379 OCTOBER 128,579 121,379 126,579 126,079 126,959 124,229 128,579 124,579 NOVEMBER 128,579 125,379 126,579 126,079 126,959 124,229 124,579 124,579 DECEMBER 128,579 127,379 126,579 126,079 128,579 124,229 122,579 124,579 ------- ------- ------- ------- ------- ------- ------- ------- AVERAGE SF OCCUPIED-OCCA 127,129 125,446 126,079 127,746 128,039 127,492 126,550 125,279 TOTAL SF-GLA 128,579 128,579 128,579 128,579 128,579 128,579 128,579 128,579 ------- ------- ------- ------- ------- ------- ------- ------- OCCUPANCY % 98.87 97.56 98.06 99.35 99.58 99.15 98.42 97.43 ======= ======= ======= ======= ====== ======= ======= ======= 2010 2011 2012 2013 2014 2015 2016 2017 ------- ------- ------- ------- ------- ------- ------- ------- JANUARY 128,579 128,579 128,579 128,579 127,379 99,535 128,579 128,579 FEBRUARY 128,579 128,579 128,579 126,079 127,379 128,579 128,579 128,579 MARCH 128,579 128,579 128,579 126,079 127,379 128,579 128,579 128,579 APRIL 128,579 126,959 128,579 126,079 127,379 128,579 128,579 128,579 MAY 126,079 126,959 128,579 126,079 120,979 128,479 128,579 128,579 JUNE 126,079 55,294 124,229 128,579 122,179 128,479 128,579 128,579 JULY 126,079 55,294 124,229 124,579 122,179 128,479 128,579 128,579 AUGUST 126,079 56,914 124,229 122,579 122,179 128,479 126,959 128,579 SEPTEMBER 128,579 56,914 124,229 122,579 126,579 126,079 126,959 128,579 OCTOBER 128,579 128,579 128,579 121,379 97,535 126,079 126,959 124,229 NOVEMBER 128,579 128,579 128,579 125,379 97,535 126,079 126,959 124,229 DECEMBER 128,579 128,579 128,579 127,379 97,535 126,079 128,579 124,229 ------- ------- ------- ------- ------- ------- ------- ------- AVERAGE SF OCCUPIED-OCCA 127,746 104,151 127,129 125,446 118,018 125,292 128,039 127,492 TOTAL SF-GLA 128,579 128,579 128,579 128,579 128,579 128,579 128,579 128,579 ------- ------- ------- ------- ------- ------- ------- ------- OCCUPANCY % 99.35 81.00 98.87 97.56 91.79 97.44 99.58 99.15 ======= ======= ======= ======= ====== ======= ======= ======= 2004 2005 2006 2007 2008 2009 ------- ------- ------- ------- ------- ---- JANUARY 124,179 125,979 126,959 128,579 126,079 123, FEBRUARY 124,179 125,979 126,959 124,229 128,579 124, MARCH 124,179 125,979 126,959 124,229 124,579 124, APRIL 124,179 125,979 128,579 124,229 122,579 124, MAY 128,579 128,579 128,579 124,229 122,579 126, JUNE 128,579 128,579 128,579 128,579 121,379 126, JULY 128,579 128,579 128,579 128,579 125,379 126, AUGUST 128,579 128,579 128,579 128,579 127,379 126, SEPTEMBER 128,579 128,579 128,579 128,579 127,379 128, OCTOBER 128,579 128,579 128,579 126,079 127,379 128, NOVEMBER 128,579 128,579 128,579 126,079 127,379 128, DECEMBER 128,579 126,959 128,579 126,079 127,379 128, ------- ------- ------- ------- ------- ---- AVERAGE SF OCCUPIED-OCCA 127,112 127,577 128,174 126,504 125,671 126, TOTAL SF-GLA 128,579 128,579 128,579 128,579 128,579 128, ------- ------- ------- ------- ------- ---- OCCUPANCY % 98.86 99.22 99.69 98.39 97.74 98. ======= ======= ======= ======= ======= ==== 2018 2019 2020 2021 2022 2023 ------- ------- ------- ------- ------- ---- JANUARY 124,229 122,579 126,579 126,079 126,959 128, FEBRUARY 128,579 121,379 126,579 126,079 126,959 124, MARCH 128,579 125,379 126,579 126,079 126,959 124, APRIL 128,579 127,379 126,579 126,079 128,579 124, MAY 128,579 127,379 128,579 128,579 128,579 124, JUNE 126,079 127,379 128,579 128,579 128,579 128, JULY 126,079 127,379 128,579 128,579 128,579 128, AUGUST 126,079 127,379 128,579 128,579 128,579 128, SEPTEMBER 126,079 123,379 128,579 128,579 128,579 128, OCTOBER 128,579 124,579 128,579 128,579 128,579 126, NOVEMBER 124,579 124,579 128,579 128,579 128,579 126, DECEMBER 122,579 124,579 128,579 126,959 128,579 126, ------- ------- ------- ------- ------- ---- AVERAGE SF OCCUPIED-OCCA 126,550 125,279 127,912 127,611 128,174 126, TOTAL SF-GLA 128,579 128,579 128,579 128,579 128,579 128, ------- ------- ------- ------- ------- ---- OCCUPANCY % 98.42 97.43 99.48 99.25 99.69 98 ======= ======= ======= ======= ======= ====
TROY PLAZA EXPIRATION REPORT YEARS 1997 TO 2009, ALL TENANTS, EXCLUDING OPTIONS, INCLUDING RENEWALS, BASE RENTS EXCLUDING CPI ADJUSTMENTS, INCLUDING PERCENTAGE RENTS TERM/ BASE TOTAL MARKET TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF - ------ --------- -------- ------- ------- ------- ------- # 10-SUITE 10 INITIAL VULUME SHOES 2,500 1/1997 9.50 3.01 12.51 11.38 ------ ----- ----- ----- ----- 1 FY 97 EXPIRATIONS 2,500 9.50 3.01 12.51 11.38 # 4-SUITE 4 INITIAL STRAWBERRIES 1,600 6/1997 13.00 3.02 16.01 11.38 # 15-SUITE 15 INITIAL LABEL SHOPPER 2,400 6/1997 10.75 2.95 13.70 11.38 # 9-SUITE 9 INITIAL POLLEY'S CARD 2,000 7/1997 10.50 2.95 13.45 11.38 # 6-SUITE 6 INITIAL PLAZA DISCOUNT WIN 1,200 9/1997 14.84 2.63 17.47 11.38 # 7-SUITE 7 INITIAL SALLY BEAUTY SUPPL 1,200 1/1998 11.00 3.06 14.06 11.78 # 3-SUITE 3 INITIAL FRINDLY'S 4,000 4/1998 13.07 3.09 16.16 11.78 ------ ----- ----- ----- ----- 6 FY 98 EXPIRATIONS 12,400 12.17 2.98 15.15 11.55 ------ ----- ----- ----- ----- 7 CUMULATIVE EXPS 14,900 11.72 2.99 14.71 11.52 # 11-SUITE 11 INITIAL RENT AMERICA 2,000 8/1998 12.00 3.07 15.07 11.78 ------ ----- ----- ----- ----- 1 FY 99 EXPIRATIONS 2,000 12.00 3.07 15.07 11.78 ------ ----- ----- ----- ----- 8 CUMULATIVE EXPS 16,900 11.75 3.00 14.75 11.55 # 12-SUITE 12 INITIAL RADIO SHACK 2,500 8/1999 12.00 3.20 15.20 12.20 ------ ----- ----- ----- ----- 1 FY1OO EXPIRATIONS 2,500 12.00 3.20 15.20 12.20 ------ ----- ----- ----- ----- 9 CUMULATIVE EXPS 19,400 11.79 3.02 14.81 11.64 # 13-SUITE 13 INITIAL EASTERN MOON CHINE 1,620 7/2000 12.04 3.33 15.36 12.62 ------ ----- ----- ----- ----- 1 FYl0l EXPIRATIONS 1,620 12,04 3.33 15.36 12.62 ------ ----- ----- ----- ----- 10 CUMULATIVE EXPS 21,020 11.80 3.05 14.85 11.71 PAGE 2 TERM/ BASE TOTAL MARKET TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF - ------ --------- -------- ------- ------- ------- ------- # 10-SUITE 10 RENEWAL 1 VULUME SHOES 2,500 5/2002 11.39 8.91 20.29 13.52 ------ ----- ----- ----- ----- 1 FY1O2 EXPIRATIONS 2,500 11.39 8.91 20.29 13.52 ------ ----- ----- ----- ----- 11 CUMULATIVE EXPS 23,520 11.76 3.67 15.43 11.91 # 4-SUITE 4 RENEWAL 1 STRAWBERRIES 1,600 10/2002 11.39 8.91 20.30 13.52 # 15-SUITE 15 RENEWAL 1 LABEL SHOPPER 2,400 10/2002 11.39 8.91 20.30 13.52 # 9-SUITE 9 RENEWAL 1 POLLEY'S CARD 2,000 11/2002 11.38 8.91 20.29 13.52 # 6-SUITE 6 RENEWAL 1 PLAZA DISCOUNT WIN 1,200 1/2003 11.78 9.19 20.97 14.00 # 7-SUITE 7 RENEWAL 1 SALLY BEAUTY SUPPL 1,200 5/2003 11.78 9.19 20.97 14.00 ------ ----- ----- ----- ----- 5 FY1O3 EXPIRATIONS 8,400 11.50 8.99 20.49 13.66 ------ ----- ----- ----- ----- 16 CUMULATIVE EXPS 31.920 11.69 5.07 16.76 12.37 # 3-SUITE 3 RENEWAL 1 FRINDLY'S 4,000 8/2003 11.78 9.19 20.97 14.00 # 5-SUITE 5 INITIAL FLEET BANK 2,400 12/2003 16.00 3.70 19.70 18.44 # 11-SUITE 11 RENEWAL 1 RENT AMERICA 2,000 12/2003 12.20 9.18 21.38 14.48 ------ ----- ----- ----- ----- 3 FY104 EXPIRATIONS 8,400 13.09 7.62 20.70 15.38 ------ ----- ----- ----- ----- 19 CUMULATIVE EXPS 40,320 11.98 5.60 17.58 12.99 # 12-SUITE 12 RENEWAL 1 RADIO SHACK 2,500 12/2004 12.62 9.54 22.16 14.99 # 14-SUITE 14 INITIAL KEY BANK ATM 100 12/2004 200.04 0.00 200.04 272.58 ------ ----- ----- ----- ----- 2 FYl05 EXPIRATIONS 2,600 19.83 9.17 29.00 24.90 ------ ----- ----- ----- ----- 21 CUMULATIVE EXPS 42,920 12.46 5.82 18.27 13.72 # 13-SUITE 13 RENEWAL 1 EASTERN MOON CHINE 1,620 11/2005 12.62 9.96 22.59 14.99 ------ ----- ----- ----- ----- 1 FY106 EXPIRATIONS 1,620 12.62 9.96 22.59 14.99 ------ ----- ----- ----- ----- 22 CUMULATIVE EXPS 44,540 12.46 5.97 18.43 13.76 PAGE 3 TERM/ BASE TOTAL MARKET TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF - ------ --------- -------- ------- ------- ------- ------- # 10-SUITE 10 RENEWAL 2 VULUME SHOES 2,500 9/2007 13.52 10.66 24.18 16.06 # 4-SUITE 4 RENEWAL 2 STRAWBERRIES 1,600 2/2008 13.99 11.02 25.01 16.62 # 15-SUITE 15 RENEWAL 2 LABEL SHOPPER 2,400 2/2008 13.99 11.02 25.01 16.62 # 9-SUITE 9 RENEWAL 2 POLLEY'S CARD 2,000 3/2008 14.00 11.02 25.01 16.62 # 6-SUITE 6 RENEWAL 2 PLAZA DISCOUNT WIN 1,200 5/2008 14.00 11.02 25.02 16.62 ------ ----- ----- ----- ----- 5 FYl08 EXPIRATIONS 9,700 13.87 10.93 24.80 16.48 ------ ----- ----- ----- ----- 27 CUMULATIVE EXPS 54,240 12.72 6.85 19.57 14.25 # 7-SUITE 7 RENEWAL 2 SALLY BEAUTY SUPPL 1,200 9/2008 14.00 11.02 25.02 16.62 # 3-SUITE 3 RENEWAL 2 FRINDLY'S 4,000 12/2008 14.48 11.02 25.50 17.20 # 11-SUITE 11 RENEWAL 2 RENT AMERICA 2,000 4/2009 14.48 11.40 25.88 17.20 ------ ----- ----- ----- ----- 3 FY109 EXPIRATIONS 7,200 14.40 11.13 25.53 17.11 ------ ----- ----- ----- ----- 30 CUMULATIVE EXPS 61,440 12.91 7.35 20.27 14.58 TROY PLAZA PROJECT ASSUMPTIONS REPORT INCLUDING ALL TENANTS BUILDING PROLOGUE LEASEHOLD ANALYSIS OF TROY PLAZA BEGINNING 6/1996 FOR 31 YEARS ON A FISCAL YEAR BASIS AREA MEASURES GLA 1996 VALUE - 128,579 THEREAFTER - CONSTANT ANCH 1996 VALUE - 100,709 THEREAFTER - CONSTANT SATL +100.0% OF GLA -100.0% OF ANCH OCCA 1996 VALUE - 127,129 1997 VALUE - 125,446 1998 VALUE - 126,079 1999 VALUE - 127,746 2000 VALUE - 128,039 2001 VALUE - 127,492 2002 VALUE - 126,550 2003 VALUE - 125,279 2004 VALUE - 127,112 2005 VALUE - 127,577 2006 VALUE - 128,174 2007 VALUE - 126,504 2008 VALUE - 125,671 2009 VALUE - 126,479 2010 VALUE - 127,746 2011 VALUE - 104,151 2012 VALUE - 127,129 2013 VALUE - 125,446 2014 VALUE - 118,018 2015 VALUE - 125,292 2016 VALUE - 128,039 2017 VALUE - 127,492 2018 VALUE - 126,55O 2019 VALUE - 125,279 2020 VALUE - 127,912 2021 VALUE - 127,611 2022 VALUE - 128,174 2023 VALUE - 126,504 2024 VALUE - 124,871 2025 VALUE - 126,446 2026 VALUE - 127,746 THEREAFTER - CONSTANT GROWTH RATES CFIG 1996 VALUE - 3.50 THEREAFTER - CONSTANT TAXG 1996 VALUE - 4.00 THEREAFTER - CONSTANT PAGE 2 SLVG 1996 VALUE - 0.00 1997 VALUE - 0.00 1998 VALUE - 2.00 1999 VALUE - 4.00 THEREAFTER - CONSTANT RETG 1996 VALUE - 3.50 THEREAFTER - CONSTANT EXPG 1996 VALUE - 3.50 THEREAFTER - CONSTANT NCOM 1996 VALUE - 4.00 THEREAFTER - CONSTANT RCOM 1996 VALUE - 2.00 THEREAFTER - CONSTANT BCOM +40.0% OF NCOM +60.0% OF RCOM MARKET RATES ANCR 1996 VALUE - 5.50 THEREAFTER - GROWING AT GROWTH RATE RETG SATR 1996 VALUE - 11.00 THEREAFTER - GROWING AT GROWTH RATE RETG PADR 1996 VALUE - 14.00 THEREAFTER - GROWING AT GROWTH RATE RETG ATMR 1996 VALUE - 200 THEREAFTER - GROWING AT GROWTH RATE RETG NWTI 1996 VALUE - 5.00 THEREAFTER - GROWING AT GROWTH RATE EXPG RWTI 1996 VALUE - 0.00 THEREAFTER - GROWING AT GROWTH RATE EXPG BLTI +40.0% OF NWTI +60.0% OF RWTI NWFR 1996 VALUE - 0.00 THEREAFTER - CONSTANT RWFR 1996 VALUE - 0.00 THEREAFTER - CONSTANT BLFR +40.0% OF NWFR +60.0% OF RWFR PAGE 3 RSVR 1996 VALUE - 0.15 THEREAFTER - GROWING AT GROWTH RATE EXPG SLVR 1996 VALUE - 186 THEREAFTER - GROWING AT GROWTH RATE SLVG MISCELLANEOUS INCOMES OTHER INCOME 1996 VALUE - 6,500 THEREAFTER - GROWING AT GROWTH RATE CPIG EXPENSES LANDSCAPING , REFERRED TO AS LNDE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 9,100 THEREAFTER - GROWING AT GROWTH RATE EXPG CLEANING , REFERRED TO AS CLNE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 36,239 THEREAFTER - GROWING AT GROWTH RATE EXPG UTILITIES , REFERRED TO AS UTLE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 13,194 THEREAFTER - GROWING AT GROWTH RATE EXPG SECURITY , REFERRED TO AS SECE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 30,000 THEREAFTER - GROWING AT GROWTH RATE EXPG REPAIRS & MAINT. , REFERRED TO AS R&ME CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 21,432 THEREAFTER - GROWING AT GROWTH RATE EXPG REAL ESTATE TAXES , REFERRED TO AS TAXE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 216,522 THEREAFTER - GROWING AT GROWTH RATE TAXG INSURANCE , REFERRED TO AS INSE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 33,180 THEREAFTER - GROWING AT GROWTH RATE EXPG GENERAL & ADMIN. , REFERRED TO AS G&AE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 4,943 THEREAFTER - GROWING AT GROWTH RATE EXPG MANAGEMENT , REFERRED TO AS MGTE CHARGED AGAINST NET OPERATING INCOME 3.00% OF EFFECTIVE GROSS INCOME RESERVES , REFERRED TO AS RESE CHARGED AGAINST NET OPERATING INCOME MARKET RATE RSVR MULTIPLIED BY AREA MEASURE GLA PAGE 4 PURE CAM , REFERRED TO AS PCAM AN INFORMATIONAL EXPENSE +100.0% OF LNDE+100.0% OF CLNE +100.0% OF UTLE+100.0% OF SECE +100.0% OF R&ME +0.0% OF INSE +100.0% OF MGTE CAM 15% OH , REFERRED TO AS CM15 AN INFORMATIONAL EXPENSE +115.0% OF PCAM CAM 20% OH , REFERRED TO AS CM20 AN INFORMATIONAL EXPENSE +120.0% OF PCAM ANCHOR RECOVERY , REFERRED TO AS ANRC AN INFORMATIONAL EXPENSE 1996 VALUE - 7,336 THEREAFTER - GROWING AT GROWTH RATE CPIG PURE CAM - ANCHOR , REFERRED TO AS PC-A AN INFORMATIONAL EXPENSE +100.0% OF PCAM-100.0% OF ANRC CAM 15% - ANCHOR , REFERRED TO AS 15-A AN INFORMATIONAL EXPENSE +100.0% OF CM15-100.0% OF ANRC CAM 20 - ANCHOR , REFERRED TO AS 20-A AN INFORMATIONAL EXPENSE +100.0% OF CM20-100.0% OF ANRC PROPERTY INSURANCE, REFERRED TO AS PINS AN INFORMATIONAL EXPENSE +15.0% OF INSE VACANCY ALLOWANCE PERCENTAGE OF POTENTIAL GROSS INCOME FOR ALL TENANTS SUBJECT TO VACANCY 1996 VALUE - 3.00 THEREAFTER - CONSTANT MANAGEMENT FEE NONE COMMISSION CALCULATIONS STANDARD METHOD #1 - 0.000% OF TOTAL RENT STANDARD METHOD #2 - 0.000% OF TOTAL RENT STANDARD METHOD #3 - 0.000% OF TOTAL RENT STANDARD METHOD #4 - 0.000% OF TOTAL RENT STANDARD METHOD #5 - 0.000% OF TOTAL RENT COMMISSION PAYOUTS PAGE 5 STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT ALTERATION CALCULATION NONE ALTERATION PAYOUTS STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT COMMON AREA MAINTENANCE POOL NONE CAPITAL EXPENDITURES NONE PRIMARY CLASSIFICATION CODES 1 - ANCHOR 2 - SATELLITE 3 - PAD 4 - ATM SECONDARY CLASSIFICATION CODES NONE COST CENTERS 1 - CAM 2 - TAXES 3 - INSURANCE PAGE 6 SALES VOLUME PROFILE PERCENT OF RELATIVE MONTH ANNUAL SALES VOLUME - ----- ------------ ------ JAN 8.33% 1.00 FEB 8.33% 1.00 MAR 8.33% 1.00 APR 8.33% 1.00 MAY 8.33% 1.00 JUN 8.33% 1.00 JUL 8.33% 1.00 AUG 8.33% 1.00 SEP 8.33% 1.00 OCT 8.33% 1.00 NOV 8.33% 1.00 DEC 8.33% 1.00 ------ ----- TOTALS 100.00% 12.00 GLOBAL RECOVERIES CAM 20 - ANCHOR , REFERRED TO AS CAMS ASSIGNED TO COST CENTER 1 - CAM PRO RATA SHARE RECOVERY OF EXPENSE 20-A PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE SAL ALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES , REFERRED TO AS TAXS ASSIGNED TO COST CENTER 2 - TAXES PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH PROPERTY INSURANCE, REFERRED TO AS INSS ASSIGNED TO COST CENTER 3 - INSURANCE PRO RATA SHARE RECOVERY OF EXPENSE PINS PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH GLBL GLOBAL GROUPING GLOBAL RECOVERY CAMS GLOBAL RECOVERY TAXS GLOBAL RECOVERY INSS CAM 20% OH , REFERRED TO AS CAML ASSIGNED TO COST CENTER 1 - CAM PRO RATA SHARE RECOVERY OF EXPENSE CM20 PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH GLB2 GLOBAL GROUPING GLOBAL RECOVERY CML GLOBAL RECOVERY TAXS GLOBAL RECOVERY INSS PAGE 7 CAM 15% OH , REFERRED TO AS C15L ASSIGNED TO COST CENTER 1 - CAM PRO RATA SHARE RECOVERY OF EXPENSE CM15 PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH CAM 15% - ANCHOR , REFERRED TO AS CM15 ASSIGNED TO COST CENTER 1 - CAM PRO RATA SHARE RECOVERY OF EXPENSE 15-A PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH GLB3 GLOBAL GROUPING GLOBAL RECOVERY TAXS GLOBAL RECOVERY INSS GLOBAL RECOVERY C15L GLB4 GLOBAL GROUPING GLOBAL RECOVERY TAXS GLOBAL RECOVERY INSS GLOBAL RECOVERY CM15 GLB5 GLOBAL GROUPING GLOBAL RECOVERY TAXS GLOBAL RECOVERY C15L TENANT PROLOGUE MINIMUM RENTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR SALES VOLUMES AND BREAKPOINTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR RENEWAL RENTS ARE COMPOUNDED ANNUALLY RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET REFERENCE TENANTS NONE TENANTS THERE ARE A TOTAL OF 15 LEASEHOLD TENANT (S) - -------------------------------------------------------------------------------- # 1 - SUITE 1 , AMES BASE LEASE DATES: 4/1990 TO 5/2011 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 71,665 PRIMARY CODE: 1 - ANCHOR SUBJECT TO VACANCY ALLOWANCE PAGE 8 MINIMUM RENT: INITIAL RENT - 1.95/SF/YR PERCENTAGE RENT: INITIAL SALES - 7,744,031/YEAR THEREAFTER - GROWING AT GROWTH RATE SLVG INITIAL BREAKPOINT - 6,000,000/YEAR 2.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: TAXES RECAPTURE OF RECOVERIES ASSIGNED TO COST CENTER 2 - TAXES PERCENT OF OVERAGE - 100.00% PERCENT OF RECOVERY - 100.00% ANNUAL MAXIMUM - 0 RECOVERY FLOOR - 0 RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - TAXES PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 86,123 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 20.00 4 NONE NONE YES YES RENEWAL MINIMUM RENT: MARKET RATE ANCR MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - TAXES PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: GROWTH RATE BCOM RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE BLTI RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 2 - SUITE 2 , PRICE CHOPPER BASE LEASE DATES: 10/1979 TO 9/2014 TYPE OF TENANT RETAIL SQUARE FOOTAGE 29,044 PAGE 9 PRIMARY CODE: 1 - ANCHOR SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 1.93/SF/YR PERCENTAGE RENT: INITIAL SALES - 10,340,527/YEAR THEREAFTER - GROWING AT GROWTH RATE SLVG INITIAL BREAKPOINT - 3,775,000/YEAR 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: TAXES RECAPTURE OF RECOVERIES ASSIGNED TO COST CENTER 2 - TAXES PERCENT OF OVERAGE - 100.00% PERCENT OF RECOVERY - 100.00% ANNUAL MAXIMUM - 0 RECOVERY FLOOR - 0 RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - TAXES PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE AMOUNT OF 28,872 CAM PRICE CHOPPER ASSIGNED TO COST CENTER 1 - CAM RECOVERY OF AMOUNTS OR RATES GROWING AT A RATE YEAR 1 VALUE - 0.25/SF THEREAFTER - GROWING AT GROWTH RATE EXPG CAP - NONE PROPERTY INSURANCE ASSIGNED TO COST CENTER 3 - INSURANCE PRO RATA SHARE RECOVERY OF EXPENSE PINS PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 20.00 4 NONE NONE YES YES RENEWAL MINIMUM RENT: MARKET RATE ANCR MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - TAXES PAGE 10 PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH CAM PRICE CHOPPER ASSIGNED TO COST CENTER 1 - CAM RECOVERY OF AMOUNTS OR RATES GROWING AT A RATE YEAR 1 VALUE - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE EXPG CAP - NONE PROPERTY INSURANCE ASSIGNED TO COST CENTER 3 - INSURANCE PRO RATA SHARE RECOVERY OF EXPENSE PINS PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: GROWTH RATE BCOM RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE BLTI RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 3 - SUITE 3 , FRINDLY'S BASE LEASE DATES: 8/1967 TO 4/1998 TYPE OF TENANT RETAIL SQUARE FOOTAGE 4,000 PRIMARY CODE 2 - SATELLITE SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT INITIAL RENT - 13.07/SF/YR PERCENTAGE RENT INITIAL SALES - 1,473,977/YEAR THEREAFTER - GROWING AT GROWTH RATE SLVG INITIAL BREAKPOINT - 1,742,500/YEAR 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLB5 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 4 NONE NONE YES YES 2 5.00 4 NONE NONE YES YES 3 5.00 4 NONE NONE YES YES 4 5.00 4 NONE NONE YES YES 5 5.00 4 NONE NONE YES YES 6 5.00 4 NONE NONE YES YES PAGE 11 RENEWAL MINIMUM RENT: MARKET RATE SATR MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE (S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLBL RENEWAL COMMISSIONS: GROWTH RATE BCOM RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE BLTI RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 4 - SUITE 4 , STRAWBERRIES BASE LEASE DATES: 6/1985 TO 6/1997 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 1,600 PRIMARY CODE: 2 - SATELLITE SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 13.00/SF/YR RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLB3 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 4 NONE NONE YES YES 2 5.00 4 NONE NONE YES YES 3 5.00 4 NONE NONE YES YES 4 5.00 4 NONE NONE YES YES 5 5.00 4 NONE NONE YES YES 6 5.00 4 NONE NONE YES YES RENEWAL MINIMUM RENT: MARKET RATE SATR MULTIPLIED BY 1.000 RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLBL RENEWAL COMMISSIONS: GROWTH RATE BCOM RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE BLTI RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 5 - SUITE 5 , FLEET BANK BASE LEASE DATES: 3/1994 TO 12/2003 PAGE 12 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 2,400 PRIMARY CODE: 3 - PAD SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 14.00/SF/YR CHANGING TO - 16.00/SF/YR ON 1/1999 RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLB4 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 10.00 4 NONE NONE YES YES 2 10.00 4 NONE NONE YES YES 3 10.00 4 NONE NONE YES YES RENEWAL MINIMUM RENT: MARKET RATE PADR MULTIPLIED BY 1.000 RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLBL RENEWAL COMMISSIONS: GROWTH RATE BCOM RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE BLTI RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 6 - SUITE 6 , PLAZA DISCOUNT WIN BASE LEASE DATES: 5/1988 TO 9/1997 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,200 PRIMARY CODE: 2 - SATELLITE SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 14.84/SF/YR PERCENTAGE RENT: INITIAL SALES - 265,125/YEAR THEREAFTER - GROWING AT GROWTH RATE SLVG INITIAL BREAKPOINT - 445,313/YEAR 4.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - TAXES PRO RATA SHARE RECOVERY OF EXPENSE TAXE PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE PAGE 13 WITH NO CAP AND A BASE AMOUNT OF 41,248 GLOBAL GROUPING GLOBAL RECOVERY INSS GLOBAL GROUPING GLOBAL RECOVERY CM15 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 4 NONE NONE YES YES 2 5.00 4 NONE NONE YES YES 3 5.00 4 NONE NONE YES YES 4 5.00 4 NONE NONE YES YES 5 5.00 4 NONE NONE YES YES 6 5.00 4 NONE NONE YES YES RENEWAL MINIMUM RENT: MARKET RATE SATR MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLBL RENEWAL COMMISSIONS: GROWTH RATE BCOM RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE BLTI RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 7 - SUITE 7 , SALLY BEAUTY SUPPL BASE LEASE DATES: 1/1991 TO 1/1998 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,200 PRIMARY CODE: 2 - SATELLITE SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 11.00/SF/YR PERCENTAGE RENT: INITIAL SALES - 279,829/YEAR THEREAFTER - GROWING AT GROWTH RATE SLVG INITIAL BREAKPOINT - 400,000/YEAR 3.50% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLB4 COMMISSIONS: NONE PAGE 14 ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 4 NONE NONE YES YES 2 5.00 4 NONE NONE YES YES 3 5.00 4 NONE NONE YES YES 4 5.00 4 NONE NONE YES YES 5 5.00 4 NONE NONE YES YES 6 5.00 4 NONE NONE YES YES RENEWAL MINIMUM RENT: MARKET RATE SATR MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLBL RENEWAL COMMISSIONS: GROWTH RATE BCOM RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE BLTI RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 8 - SUITE 8 , VACANT BASE LEASE DATES: 12/1986 TO 5/1996 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 4,350 PRIMARY CODE: 2 - SATELLITE SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 9.00/SF/YR PERCENTAGE RENT: INITIAL SALES - 744,460/YEAR THEREAFTER - GROWING AT GROWTH RATE SLVG INITIAL BREAKPOINT - 809,000/YEAR 5.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLB4 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 4 NONE NONE YES YES 2 5.00 4 NONE NONE YES YES 3 5.00 4 NONE NONE YES YES PAGE 15 4 5.00 4 NONE NONE YES YES 5 5.00 4 NONE NONE YES YES 6 5.00 4 NONE NONE YES YES 7 5.00 4 NONE NONE YES YES RENEWAL MINIMUM RENT: MARKET RATE SATR MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLBL RENEWAL COMMISSIONS: GROWTH RATE BCOM RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE BLTI RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 9 - SUITE 9 , POLLEY'S CARD BASE LEASE DATES: 7/1987 TO 7/1997 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 2.000 PRIMARY CODE: 2 - SATELLITE SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 10.50/SF/YR PERCENTAGE RENT: INITIAL SALES - 255,736/YEAR THEREAFTER - GROWING AT GROWTH RATE SLVG INITIAL BREAKPOINT - 350,000/YEAR 6.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLB4 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 4 NONE NONE YES YES 2 5.00 4 NONE NONE YES YES 3 5.00 4 NONE NONE YES YES 4 5.00 4 NONE NONE YES YES 5 5.00 4 NONE NONE YES YES 6 5.00 4 NONE NONE YES YES RENEWAL MINIMUM RENT: MARKET RATE SATR MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE PAGE 16 RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLBL RENEWAL COMMISSIONS: GROWTH RATE BCOM RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE BLTI RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 10 - SUITE 10 , VULUME SHOES BASE LEASE DATES: 1/1987 TO 1/1997 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 2,500 PRIMARY CODE: 2 - SATELLITE SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 9.50/SF/YR PERCENTAGE RENT: INITIAL SALES - 285,003/YEAR THEREAFTER - GROWING AT GROWTH RATE SLVG INITIAL BREAKPOINT - 475,000/YEAR CHANGING TO - 570,000/YEAR ON 2/1997 5.00% OF OVERAGE TO A CEILING OF 0/YEAR 5.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLB3 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 4 NONE NONE YES YES 2 5.00 4 NONE NONE YES YES 3 5.00 4 NONE NONE YES YES 4 5.00 4 NONE NONE YES YES 5 5.00 4 NONE NONE YES YES 6 5.00 4 NONE NONE YES YES RENEWAL MINIMUM RENT: MARKET RATE SATR MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLBL RENEWAL COMMISSIONS: GROWTH RATE BOOM RENEWAL PAYOUT: CASHED OUT PAGE 17 RENEWAL ALTERATIONS: MARKET RATE BLTI RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 11 - SUITE 11 , RENT AMERICA BASE LEASE DATES: 9/1986 TO 8/1998 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 2,000 PRIMARY CODE: 2 - SATELLITE SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 12.00/SF/YR CHANGING TO - 12.75/SF/YR ON 9/1998 RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLB4 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 4 NONE NONE YES YES 2 5.00 4 NONE NONE YES YES 3 5.00 4 NONE NONE YES YES 4 5.00 4 NONE NONE YES YES 5 5.00 4 NONE NONE YES YES 6 5.00 4 NONE NONE YES YES RENEWAL MINIMUM RENT: MARKET RATE SATR MULTIPLIED BY 1.000 RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLBL RENEWAL COMMISSIONS: GROWTH RATE BCOM RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE BLTI RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 12 - SUITE 12 , RADIO SHACK BASE LEASE DATES: 9/1989 TO 9/1999 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 2,500 PRIMARY CODE: 2 - SATELLITE SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 11.25/SF/YR CHANGING TO - 11.50/SF/YR ON 9/1996 CHANGING TO - 11.75/SF/YR ON 9/1997 CHANGING TO - 12.00/SF/YR ON 9/1998 PERCENTAGE RENT: INITIAL SALES - 614,177/YEAR PAGE 18 THEREAFTER - GROWING AT GROWTH RATE SLVG INITIAL BREAKPOINT - 937,500/YEAR CHANGING TO - 958,333/YEAR ON 9/1996 3.00% OF OVERAGE TO A CEILING OF 0/YEAR 3.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLB4 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 4 NONE NONE YES YES 2 5.00 4 NONE NONE YES YES 3 5.00 4 NONE NONE YES YES 4 5.00 4 NONE NONE YES YES 5 5.00 4 NONE NONE YES YES 6 5.00 4 NONE NONE YES YES RENEWAL MINIMUM RENT: MARKET RATE SATR MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLBL RENEWAL COMMISSIONS: GROWTH RATE BCOM RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE BLTI RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 13 - SUITE 13 , EASTERN MOON CHINE BASE LEASE DATES: 7/1990 TO 7/2000 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 1,620 PRIMARY CODE: 2 - SATELLITE SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 12.04/SF/YR RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLB4 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: PAGE 19 LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 4 NONE NONE YES YES 2 5.00 4 NONE NONE YES YES 3 5.00 4 NONE NONE YES YES 4 5.00 4 NONE NONE YES YES 5 5.00 4 NONE NONE YES YES 6 5.00 4 NONE NONE YES YES RENEWAL MINIMUM RENT: MARKET RATE SATR MULTIPLIED BY 1.000 RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLBL RENEWAL COMMISSIONS: GROWTH RATE BCOM RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE BLTI RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 14 - SUITE 14 , KEY BANK ATM BASE LEASE DATES: 3/1979 TO 12/2004 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 100 PRIMARY CODE: 4 - ATM SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 200.00/SF/YR RECOVERIES: NONE COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 10.00 4 NONE NONE YES YES 2 10.00 4 NONE NONE YES YES 3 10.00 4 NONE NONE YES YES RENEWAL MINIMUM RENT: MARKET RATE ATMR MULTIPLIED BY 1.000 RENEWAL RECOVERIES: NONE RENEWAL COMMISSIONS: GROWTH RATE BCOM RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE BLTI RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- # 15 - SUITE 15 , LABEL SHOPPER BASE LEASE DATES: 6/1989 TO 6/1997 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 2,400 PAGE 20 PRIMARY CODE: 2 - SATELLITE SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 10.75/SF/YR PERCENTAGE RENT: INITIAL SALES - 367,154/YEAR THEREAFTER - GROWING AT GROWTH RATE SLVG INITIAL BREAKPOINT - 600,000/YEAR 4.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLB4 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 4 NONE NONE YES YES 2 5.00 4 NONE NONE YES YES 3 5.00 4 NONE NONE YES YES 4 5.00 4 NONE NONE YES YES 5 5.00 4 NONE NONE YES YES 6 5.00 4 NONE NONE YES YES RENEWAL MINIMUM RENT: MARKET RATE SATR MULTIPLIED BY 1.000 RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY GLBL RENEWAL COMMISSIONS: GROWTH RATE BCOM RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE BLTI RENEWAL PAYOUT: CASHED OUT - -------------------------------------------------------------------------------- ADDENDUM H - ENGAGEMENT LETTER - -------------------------------------------------------------------------------- ADDENDUM H ENGAGEMENT LETTER - -------------------------------------------------------------------------------- [CB COMMERCIAL LETTERHEAD] May 8, 1996 Mr. Josh Kane Chief Financial Officer MARK CENTERS TRUST 660 Third Avenue Kingston, PA 18704 Re: 17 Shopping Centers Nationwide Dear Mr. Kane: At your request, we are pleased to submit the following proposal to appraise the above referenced properties. The purpose of this assignment is to estimate the market value of the leased fee interest. We understand the appraisal reports are to be used for mortgage underwriting purposes. We also understand that the reports will be used by Mark Centers Trust and Morgan Stanley. The properties are briefly described on attachment "A". Our complete valuation will be presented in a self contained (narrative) format and will contain a complete description of the property along with pertinent exhibits and photographs together with supporting factual data and analysis necessary to convey our opinion of value. We will value the property based upon the cost, income and market approaches to value, where applicable, correlating our findings into a final value conclusion. The report will be prepared in conformity with and will be subject to the requirements of the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. Each report will also conform to the Uniform Standards of Professional Appraisal Practice ("USPAP") and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") and the Morgan Stanley Capital Appraisal Standards described in Attachment "B". We assume that there are no major or significant items of deferred maintenance beyond normal wear and tear for properties of their age as of the date of the appraisal which would require the expertise of a professional contractor to estimate the cost of such repairs. If such repairs need to be considered in this appraisal, such estimates are to be provided by a qualified firm hired by you and at no cost to us. The total fee for the assignment is $68,000 ($4,000 per property) including all travel and related expenses which is due and payable upon delivery of the reports. If we are asked to cancel the assignment within two weeks of our engagement, an upset fee equal to 50% will be due and payable. If cancellation occurs between two and three weeks, the upset fee will be equal to 75% and any time after three weeks, the full fee will be due and payable. We will furnish you with three copies of our final report within four to five weeks of our authorization. Authorization occurs upon our receipt of an executed copy of this proposal and our delivery date is contingent upon the timely receipt of all necessary property information, financial statements and detailed lease information. If all requested data and information is not available as of the authorized date, we reserve the right to extend the delivery date by the amount of time it takes to receive the requested information. May 8,1996 Mr. Kane Page 2 In order to complete this assignment in a timely manner, we will require the following specific information, if available: o Copy of Ground Lease, if Leasehold. o Legal descriptions. o Current rent roll. o Copy of Leases or abstracts. o Expense reimbursements on a tenant-by-tenant basis. o Building area calculations and surveys. o Operating statements for the past three full years. o Current year expenses to date. o A copy of the current budget. o Copies of any toxic engineering reports dealing with underground. tanks, PCB's, asbestos or chemical spills, if available. o A copy of the next fiscal year's budget, if available. o A list of major repairs which have recently been made, or are scheduled to be made in the next 18 months. o Name and phone number(s) of on-site superintendent(s), or local management firm or trustee for physical inspection. o Notice of any pending changes to the rent roll or pertinent information regarding the current status of the tenants. If we are requested to give court testimony an additional fee will be charged on an hourly basis at $300 per hour for designated MAI-appraisers and $175 for non-designated appraisers. Said hourly billings pertain to court preparation, waiting and travel time, document review and preparation (excludes narrative appraisal report) and all meetings related to court testimony. The client may provide only complete, final copies of the appraisal report to third parties who shall rely on such reports in connection with loan underwriting or securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the client for routine and customary questions. Please note that our consent to allow an appraisal report prepared by CB Commercial, or portions of such report, to become part of or be referenced in any public offering, the granting of such consent will be at our sole discretion and, if given, will be on condition that we will be provided with an Indemnification Agreement and/or Non-Reliance letter, in a form and content satisfactory to us, by a party satisfactory to us. We do consent to your submission of the reports to rating agencies, loan participants or your auditors without the need to provide us with an Indemnification Agreement and/or Non-Reliance letter. In addition to the fee for this assignment, you agree to compensate us at a rate to be mutually agreed to, for any time expended by us should we be required (by subpoena or otherwise) or requested by you, your representatives or other entity to become involved in any litigation or May 8, 1996 Mr. Kane Page 3 legal proceeding in any way involving this engagement to which we are not a party, the appraisal work we produce or the property which is the subject of this assignment. You also agree to pay, on demand, all reasonable expenses which we incur in connection with any litigation or proceedings including the fees of our attorneys. You acknowledge that we are being retained hereunder as an independent contractor to perform the services described herein and nothing in this agreement shall be deemed to create any other relationship between us. This assignment will be deemed concluded and the services hereunder completed upon delivery to you of the appraisal report discussed herein. If these terms are acceptable, please authorize us to proceed by having an officer of the corporation, managing general partner, principal, owner, or a contractually responsible party sign the enclosed copy of this proposal with "Terms and Conditions" and return it to us for our permanent file. Upon receipt of your authorization, we will schedule the necessary personnel to complete the project in a timely manner. We appreciate this opportunity to be of service to you on this assignment. If you have additional questions, please do not hesitate to give me a call. Sincerely, CB COMMERCIAL REAL ESTATE GROUP, INC. Appraisal /s/ Michael R. Pecorino Michael R. Pecorino, MAI MRP:jf cc: Douglas W. Haney Enclosure AGREED & ACCEPTED _______________________________________ ______________________________________ Signature Title _______________________________________ ______________________________________ Name (type or print) Date Office #: ______________________________ Fax #: _______________________________ TERMS AND CONDITIONS OF AGREEMENT CB COMMERCIAL REAL ESTATE GROUP, INC. - APPRAISAL 1. These Terms and Conditions by CB Commercial Real Estate Group, Inc., Appraisal Services, a division of CB Commercial Real Estate Group, Inc. (Appraiser or Consultant) and the client for whom Appraiser or Consultant will perform appraisal or consultation services (Client), and attached to any agreement for appraisal or consultation services between Client and Appraiser or Consultant (Agreement), shall be deemed a part of such Agreement as though set forth in full therein. 2. Appraiser or Consultant shall exercise independent judgment and complete the assignment called for by the Agreement (Assignment) in accordance with sound appraisal or consultation practice and the Code of Professional Ethics and Standards of Professional Conduct of the Appraisal Institute, as applicable. 3. All statements of the fact in the report which are used as the basis of Appraiser's or Consultant's analyses, opinions, and conclusions will be true and correct to the best of Appraiser's or Consultant's knowledge and belief. Appraiser or Consultant may rely upon the accuracy of information and material furnished to Appraiser or Consultant by Client. 4. Appraiser or Consultant shall have no responsibility for legal matters, questions of survey or title, soil or subsoil conditions, engineering, or other similar technical matters. The report will not constitute a survey of the property analyzed. 5. Client shall provide Appraiser or Consultant with such materials with respect to the Assignment as are requested by Appraiser or Consultant and in the possession or under the control of Client. Client shall provide Appraiser or Consultant with sufficient access to the real property to be analyzed and hereby grants permission for entry, unless discussed in advance to the contrary. 6. Unless expressly specified in the Agreement, the fee quoted does not include the attendance or giving of testimony by Appraiser or Consultant at any court, regulatory, or other proceeding, or any conferences or other work in preparation for such a proceeding. If any employee of CB Commercial Real Estate Group, Inc. is asked or required to testify at any deposition, trial, or other proceeding about the preparation, conclusions, or any other aspect of the assignment, Client shall compensate Appraiser or Consultant for the time spent by the employee in testifying and in preparing to testify according to the Appraiser's or Consultant's then current hourly rate for that employee plus reimbursement of expenses. 7. In the event Client requests additional consultation beyond the scope of this assignment, Client shall pay an additional charge for such consultation at rates specified by Appraiser or Consultant whether or not the completed report has been delivered to Client at the time of the request. 8. The aggregate liability of Appraiser or Consultant for any negligent acts, errors, or omissions in connection with the Assignment shall not exceed the compensation payable to Appraiser or Consultant on account of the Assignment. 9. Client agrees that the report shall not be quoted or referred to in any report or financial statement of Client or in any documents filed with any governmental agency without the prior written consent of Appraiser or Consultant. Neither all nor any part of the content of the report including, without limitation, the conclusions as to value, the identity of Appraiser or Consultant, references to the Appraisal Institute or references to the MAI or SRA designations shall be disseminated to the public through advertising or other mass media without the prior written consent of Appraiser or Consultant. 10. The data gathered in the course of the Assignment (except data furnished by Client) and the report prepared pursuant to the Agreement are and will remain the property of Appraiser/Consultant. With respect to data provided by Client, Appraiser or Consultant shall not violate the confidential nature of the appraiser- or consultant-client relationship by improperly disclosing any confidential information furnished to Appraiser or Consultant. Notwithstanding the foregoing, Appraiser or Consultant is authorized by client to disclose all or any portion of the report and the related data to appropriate representatives of the Appraisal Institute if such disclosure is required to enable Appraiser or Consultant to comply with the Bylaws and Regulations of such Institute as now or hereafter in effect. 11. In the event Client fails to make payments when due and payable, then from the date due and payable until paid the amount due and payable shall bear interest at the maximum rate permitted in the state in which the office of Appraiser or Consultant executing the Agreement is located. If Appraiser or Consultant is required to institute legal action against Client relating to the Agreement, Appraiser or Consultant shall be entitled to recover reasonable attorneys' fees and costs from Client. 12. This appraisal or consultation will not take into consideration the possibility of the existence of asbestos, PCB transformers, or other toxic, hazardous, or contaminated substances and/or underground storage tanks (hazardous material), or the cost of encapsulation or removal thereof. Should client have concern over the existence of such substances on the property, Appraiser or Consultant considers it imperative for the Client to retain the services of a qualified, independent engineer or contractor to determine the existence and extent of any hazardous materials, as well as the cost associated with any required or desirable treatment or removal thereof. 13. CB Commercial Real Estate Group, Inc., Appraisal Services and Client agree that the Agreement (including these Terms and Conditions) shall be governed by the laws of the state of the CB Commercial Real Estate Group, Inc., Appraisal Services office shown on the Agreement. 14. Client shall not indemnify Appraiser or Consultant or hold Appraiser or Consultant harmless unless and only to the extent that the Client misrepresents, distorts, or provides incomplete or inaccurate appraisal results to others, which acts of the Client proximately result in damage to Appraiser or Consultant. The Client shall indemnify and hold Appraiser or Consultant harmless from any claims, expenses, judgments or other items or costs arising as a result of the Client's failure or the failure of any of the Client's agents to provide a complete copy of the appraisal report to any third party. In the event of any litigation between the parties, the prevailing party to such litigation shall be entitled to recover from the other reasonable attorney fees and costs. 15. Appraiser understands that the Client may provide complete final copies of the appraisal report (but not partial or summarized copies) to third parties who shall rely on such reports in connection with the Client's securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the Client for routine and customary questions that may arise. - -------------------------------------------------------------------------------- ADDENDUM I - LEGAL DESCRIPTION - -------------------------------------------------------------------------------- ADDENDUM I LEGAL DESCRIPTION - -------------------------------------------------------------------------------- (Schedule A Continued) Policy Number: 33 0105 60 000503 (Owners) Title Number: 9200 105 000745 ALL that certain plot, piece or parcel of land, situate, lying and being in the City of Troy, County of Rensselaer, New York, bounded and described as follows: BEGINNING at a point in the South line of Hoosick Street, said point being 195 feet distant on a bearing of North 64 degrees 52 minutes West as measured along the south line of Hoosick Street from its intersection with the West line of 15th Street; 1. RUNNING THENCE parallel with the West line of 15th Street South 25 degrees 48 minutes West 100 feet; 2. THENCE South 64 degrees 12 minutes East 25.00 feet; 3. THENCE South 25 degrees 48 minutes West 127.56 feet; 4. THENCE South 64 degrees 12 minutes East 20 feet; 5. THENCE South 25 degrees 48 minutes West 98.08 feet; 6. THENCE South 64 degrees 12 minutes East 25.00 feet; 7. THENCE South 28 degrees 52 minutes 14 seconds West 180.56 feet; 8. THENCE South 64 degrees 12 minutes East 25.00 feet; 9. THENCE South 25 degrees 48 minutes West 122.42 feet; 10. THENCE North 60 degrees 28 minutes 52 seconds West 1037.18 feet; 11. THENCE North 25 degrees 48 minutes East 231.50 feet; 12. THENCE along the South side of a public lane, South 64 degrees 12 minutes East 100 feet; 13. THENCE North 25 degrees 48 minutes East 265.45 feet to the South line of the lands acquired by the State of New York, known as Map No. 3, Parcel No. 3, acquired for the Hoosick Street Arterial Highway; 14. THENCE along said line South 43 degrees 31 minutes 59 seconds East 40.02 feet to a point of bend; 15. THENCE along said line South 68 degrees 20 minutes 59 seconds East 182.07 feet to a point of bend; 16. THENCE along said line South 75 degrees 24 minutes 59 seconds East 315.40 feet to a point in the South line of Hoosick Street; 17. THENCE along the South line of Hoosick Street, South 64 degrees 52 minutes East 321.28 feet to the point and place of BEGINNING. Subject to a permanent easement to the State of New York on and over the property hereinafter described for the purpose of constructing slopes and appurtenances thereto as established for and by the construction of the project herein identified, and for the repair and maintenance of such slopes and appurtenances thereto. Also for the purpose of constructing, reconstructing and maintaining thereon a sidewalk, said easement being more particularly described as follows: BEGINNING at a point on the southerly boundary of existing Hoosick Street, said point being 90 +/- feet distant southerly measured at right angles from Station "Q" 16 + 27 +/- of the hereinafter described survey baseline for the construction of Interstate Route Connection 540-2-1, Hudson River to Hoosick Street Arterial; (Schedule A Continued) Policy Number: 33 0105 60 000503 (Owners) Title Number: 9200 105 000745 THENCE through the property of Levin Properties the following two courses and distances: (1) South 79 degrees 17 minutes 24 seconds East, 170 +/- feet to a point 90 feet distance southerly measured at right angles from Station "Q" 17+97 +/- feet of said baseline; and (2) North 10 degrees 42 minutes 36 seconds East, 30 +/- feet to a point on the first mentioned southerly boundary of said existing Hoosick Street the last mentioned point being 60 +/- feet distant southerly measured at right angles from Station "Q" 17+97 +/- feet of said baseline; THENCE westerly along the last mentioned southerly boundary of said existing street 173 +/- feet to the point of BEGINNING, being 2,850 +/- square feet or 0.065 acres more or less. Reserving, however, to the owner of any right, title or interest in and to the property described above and such owner's successors or assigns the right of using said property and such use shall not be further limited or restricted under this easement beyond that which is necessary to effectuate its purposes for, and as established by, the construction and as so constructed, the maintenance, of the herein identified project. The above mentioned survey baseline is a portion of the 1977 survey baseline for the construction of Interstate Route Connection 540-2-1, Hudson River to Hoosick Street Arterial shown on a map and plan on file in the Office of the State Department of Transportation and described as follows: BEGINNING at Station "Q" 15+98.77; THENCE South 79 degrees 17 minutes 24 seconds East to Station "Q" 23+67.12; All bearings referred to True North at the 79 degrees 20 seconds Meridian of West Longitude . ================================================================================ ADDENDUM J - QUALIFICATIONS ADDENDUM J QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF CHRISTOPHER L. HARLAND Senior Real Estate Analyst CB Commercial Real Estate Group, Inc. 560 Lexington Avenue, 20th Floor New York, New York 10022 (212)207-6102 EDUCATIONAL Master of Science in Real Estate (MS), Valuation and Analysis Concentration, New York University (The Real Estate Institute), New York, NY Bachelor of Arts Degree in History (BA), Minor in Governmental/International Affairs, Franklin & Marshall College, Lancaster, PA Appraisal Institute - New York Metropolitan Chapter, New York, NY Courses 110, 120, 310, 410, 420 and 510 PROFESSIONAL Appraisal Institute Associate Member EMPLOYMENT EXPERIENCE Six years of Real Estate Appraisal and Consulting experience through the New York Metropolitan area. Jul 1990-Jan 1991 Doem Appraisals LTD Mamaroneck, NY Staff Appraiser Jan 1991-Dec 1993 McGrath, Basciani & Associates Briarcliff Manor, NY Staff Appraiser Jan 1994-Present CB Commercial Real Estate Group New York NY Senior Real Estate Analyst QUALIFICATIONS OF MICHAEL R. PECORINO, MAI Senior Vice President, Regional Manager CB Commercial Real Estate Group, Inc. 560 Lexington Avenue, 20th Floor New York, New York 10022 (212)207-6102 EDUCATIONAL Real Estate Appraisal and Analysis, New York University, the Real Estate Institute Bachelor of Arts, Geography, Planning, Urban Studies, State University College of New York at Oneonta Successfully completed all the necessary courses to qualify for the MAI designation. LICENSES/CERTIFICATIONS Certified General Real Estate Appraiser: State of New York (46000002055) Certified General Real Estate Appraiser: State of New Jersey (RG-01667) Certified General Real Estate Appraiser: State of Pennsylvania (GA-001096-R) Certified General Real Estate Appraiser: State of Connecticut (0000489) Certified General Real Estate Appraiser: State of Maryland (10569) Certified General Real Estate Appraiser: State of Massachusetts (3793) Certified General Real Estate Appraiser: State of Maine (CG00001192) Certified General Real Estate Appraiser: State of Vermont (080-0000168) Licensed Real Estate Broker: State of New York PROFESSIONAL Appraisal Institute Designated Member (MAI), Certificate No. 7944 Member of the Real Estate Board of New York EXPERIENCE 14 years of Real Estate Appraisal and Consulting experience throughout the United States specializing in the New York metropolitan area. 1993 - Present CB Commercial Real Estate Group, Inc., Appraisal New York, New York 1983 - 1993 Cushman & Wakefield, Inc. New York, New York 1982 - 1983 Joseph J. Blake & Associates, Inc. New York, New York 1981 - 1982 City of New York - Office of Manhattan Planning New York, New York 1980 - 1981 City of Jersey City - Office of the Mayor Jersey City, New Jersey Assignments include full and partial interest appraisals of office buildings, air rights, commercial lofts, garden apartments, cooperatives, condominiums, townhouses, shopping centers, industrial facilities, residential and office market studies, portfolio valuations and multi-property assignments. This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE KINGSTON PLAZA Third Avenue East of Pierce Street Kingston, Pennsylvania CB File No. 96-093-K [LOGO]CB COMMERCIAL Delivering Solutions Through Local Knowledge Worldwide COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE KINGSTON PLAZA Third Avenue East of Pierce Street Kingston, Pennsylvania CB File No. 96-093-K DATE OF VALUE May 15, 1996 PREPARED FOR MORGAN STANLEY Mortgage Capital Inc. 1585 Broadway New York, New York 10036 PREPARED BY CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES 560 Lexington Avenue, 16th Floor New York, New York 10022 [LETTERHEAD OF CB COMMERCIAL REAL ESTATE GROUP, INC.] June 12, 1996 MORGAN STANLEY Mortgage Capital Inc. 1585 Broadway New York, New York 10036 RE: Appraisal of Shopping Center KINGSTON PLAZA Third Avenue East of Pierce Street Kingston, Pennsylvania CB File No. 96-093-K Dear Ladies and Gentlemen: At your request and authorization, CB Commercial Real Estate Group, Inc. has prepared a Complete Appraisal presented in a self-contained appraisal report of the current market value of the leased fee estate in the above-referenced real property. The subject property is a single story community shopping center featuring 64,824 square feet of gross leasable area. The shopping center is anchored by a Price Chopper and is currently 100% occupied. The property is more fully described, legally and physically, within the enclosed report. Data, information, and calculations leading to the value conclusion are incorporated in the report following this letter. The report, in its entirety, including all assumptions and limiting conditions, is an integral part of and inseparable from this letter. Based on research and analysis contained in this report, it is estimated that the current market value of the leased fee estate in the subject property as of May 15, 1996, is: THREE MILLION THREE HUNDRED THOUSAND DOLLARS ($3,300,000) The following appraisal sets forth the most pertinent data gathered, the techniques employed, and the reasoning leading to the opinion of value. The analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP), the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, and The Financial Institution Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Furthermore, this report has been prepared in conformance with our interpretation of the appropriate regulations and guidelines set forth by Morgan Stanley. June 12, 1996 Page 2 It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CB Commercial Real Estate Group, Inc. can be of further service, please do not hesitate to contact us. Respectfully Submitted, CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES by: /s/ Dimitri M. Teddone /s/ Michael R. Pecorino - ------------------------------- ------------------------------- Dimitri M. Teddone, MAI Michael R. Pecorino, MAI Assistant Vice President Senior Vice President Senior Real Estate Analyst Northeast Regional Manager Pennsylvania Certification No. GA-001096-R ================================================================================ CERTIFICATION OF THE APPRAISERS - -------------------------------------------------------------------------------- CERTIFICATION OF THE APPRAISERS We certify that to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. 4. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event, such as the approval of a loan. 5. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation and the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. In addition, this report conforms to the requirements of the Financial Institution Reform, Recovery, and Enforcement Act (FIRREA). 6. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 7. Dimitri M. Teddone and Michael R. Pecorino have completed the requirements of the continuing education program of the Appraisal Institute. 8. The property was personally inspected by Dimitri M. Teddone, MAI, but was not inspected by Michael R. Pecorino, MAI. 9. No other person provided professional assistance to the persons signing this report. 10. The undersigned appraisers have extensive experience in the appraisal/review of similar property types. /s/ Dimitri M. Teddone /s/ Michael R. Pecorino - ------------------------------- ------------------------------- Dimitri M. Teddone, MAI Michael R. Pecorino, MAI Assistant Vice President Senior Vice President Senior Real Estate Analyst Northeast Regional Manager Pennsylvania Certification No. GA-001096-R - -------------------------------------------------------------------------------- i ================================================================================ SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] FRONT VIEW OF THE SUBJECT PROPERTY FACING PRICE CHOPPER [GRAPHIC OMITTED] SITE ACCESS OF THE SUBJECT PROPERTY - -------------------------------------------------------------------------------- ii ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- SUMMARY OF SALIENT FACTS Property Name: Kingston Plaza Location: Third Avenue East of Pierce Street, Kingston, Pennsylvania Assessor's Parcel Number: Section H9NE2, Block B-04C, Lot 002 Property Description: The subject property is a single story community shopping center featuring 64,824 square feet of gross leasable area. The improvements are situated on a 598,514 square foot lot (13.74 acres). Construction features include a concrete and steel frame and brick and split-faced block exterior walls. Highest and Best Use As Though Vacant: Land banking until such time that retail development becomes financially feasible As Improved: Continued use as a shopping center Property Rights Appraised: Leased Fee Date of Value: May 15, 1996 Land Area 598,514 Square Feet (13.74 acres) Improvements Building Area: Gross Leasable Area: 64,824 SF Year Built: 1982 Condition: Average Estimated Marketing Time: 12 months or less - -------------------------------------------------------------------------------- iii ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- Financial Indicators Current Occupancy: 100% Leased / 100% Occupied Stabilized Occupancy: 97% Market Rental Rate: $ 6.00 P.S.F. Anchor $ 7.50 P.S.F. Satellite Income Growth Rate: 3.0% Estimated Stabilized Expenses: $ 2.12 P.S.F. Expense Growth Rate: 3.0% Going-In Overall Capitalization Rate Selected: 10.50% Going-In Overall Capitalization Rate Implied: 11.08% Terminal Overall Capitalization Rate: 11.00% Discount Rate: 12.50% Valuation Land Value: N/A Cost Approach: N/A Sales Comparison Approach: $ 3,400,000 Income Capitalization Approach: $ 3,300,000 Final Value Conclusion: $ 3,300,000 Per Square Foot: $ 50.91/SF - -------------------------------------------------------------------------------- iv ================================================================================ TABLE OF CONTENTS - -------------------------------------------------------------------------------- TABLE OF CONTENTS CERTIFICATION OF THE APPRAISERS...............................................i SUBJECT PHOTOGRAPHS..........................................................ii SUMMARY OF SALIENT FACTS....................................................iii TABLE OF CONTENTS.............................................................v INTRODUCTION..................................................................1 AREA ANALYSIS.................................................................7 MARKET ANALYSIS..............................................................15 SITE ANALYSIS................................................................20 IMPROVEMENT ANALYSIS.........................................................22 ZONING.......................................................................25 TAX AND ASSESSMENT DATA......................................................26 HIGHEST AND BEST USE.........................................................27 APPRAISAL METHODOLOGY........................................................30 SALES COMPARISON APPROACH....................................................32 INCOME CAPITALIZATION APPROACH...............................................38 RECONCILIATION OF VALUE......................................................61 ASSUMPTIONS AND LIMITING CONDITIONS..........................................63 ADDENDA......................................................................67 A........................................................Glossary Of Terms B...................................................Additional Photographs C................................................Improved Comparable Sales D.......................................................Rental Comparables E..........................................Strategic Mapping, Inc. Reports F................................................................Rent Roll G.........................................................PRO-JECT Reports H........................................................Engagement Letter I...........................................................Qualifications - -------------------------------------------------------------------------------- v INTRODUCTION ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- INTRODUCTION PROPERTY IDENTIFICATION The subject is located on the south side of Third Avenue east of Pierce Street in the Borough of Kingston, Pennsylvania. The city assessor's tax identification number is as Section H9NE2, Block B-04C, Lot 002. A full metes and bounds legal description is included in the Addenda. OWNERSHIP AND PROPERTY HISTORY The subject is currently owned by Mark Centers Limited Partnership. The subject has not sold in the last three years and to the best of our knowledge there is no known current listing, option, or agreement of sale of the subject. DATES OF INSPECTION AND VALUATION The site was last inspected by Dimitri M. Teddone, MAI on May 15, 1996. Michael R. Pecorino, MAI did not inspect the subject or the comparables employed but reviewed this report and concurs with the conclusions. The date of the market value is the date of inspection, May 15, 1996. PURPOSE OF THE APPRAISAL The purpose of this appraisal is to estimate the current market value of the leased fee estate in the subject property in it's "As Is" condition. Market value is defined as follows: Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised, and acting in what they consider their own best interests; 3. A reasonable time is allowed for exposure in the open market; 4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and - -------------------------------------------------------------------------------- 1 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- 5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) TERMS AND DEFINITIONS Please refer to the Addenda for a Glossary of the Terms and Definitions that are, and may be used in this appraisal. INTENDED USE OF REPORT This appraisal is for mortgage underwriting purposes. PROPERTY RIGHTS APPRAISED The value estimated represents the leased fee estate. APPRAISAL DEVELOPMENT AND REPORTING PROCESS The following steps were completed by CB Commercial for this assignment: 1. Analyzed regional, city, neighborhood, site, and improvement data. 2. Inspected the subject and the neighborhood. 3. Reviewed data regarding taxes, zoning, utilities, easements, and city services. 4. Considered comparable improved sales, comparable improved building rental information, and comparable site sales. Data was confirmed with principals, managers, or real estate agents representing principals, unless otherwise noted. 5. Analyzed the data to arrive at conclusions via each approach to value used in this report. 6. Reconciled the results of each approach to value employed into a probable range of market data and finally an estimate of value for the subject, as defined herein. 7. Estimated a reasonable exposure time associated with the value estimate. The subject site and improvement descriptions are based on a personal inspection of the property, discussions with representatives of the subject property, and/or a review of relevant plat maps and leasing plans. The inspection is not a substitute for thorough engineering studies. - ---------- (1) The definition of market value is taken from: The Office of the Comptroller of the Currency under 12 CFR, Part 34, Subpart C-Appraisals, ss.34.42(f), August 24, 1966. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. - -------------------------------------------------------------------------------- 2 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- To develop the opinion of value, CB Commercial performed a complete appraisal process, as defined by the Uniform Standards of Professional Appraisal Practice. This means that no departures from Standard 1 were invoked. This is a complete appraisal, in the form of a Self-Contained Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Standards of Professional Appraisal Practice. The definitions of Complete Appraisal and Self-Contained Report are found in the Glossary of Terms and Definitions. In a complete appraisal, CB Commercial uses all known applicable approaches to value. The value conclusion reflects all known information about the subject property, market conditions, and available data. The Self-Contained Report incorporates to the fullest extent possible, practical explanation of the data, reasoning and analysis that were used to develop the opinion of value. It also includes thorough descriptions of the subject property and the market for the subject property type. All data considered significant that was requested for this assignment was received by CB Commercial Real Estate Group, Inc. Appraisal Services. SPECIAL APPRAISAL INSTRUCTIONS There were no special appraisal instructions. MARKETING PERIOD The marketing period section is divided into reasonable exposure time and reasonable marketing time. Exposure time differs from marketing time. Marketing time is the period required to sell a real property interest at market value during the period immediately after the effective date of the appraisal. Exposure time is always presumed to precede the effective date of the appraisal. Exposure time is not intended to be a prediction of a date of sale or a one-line statement. Instead, it is an integral part of the appraisal analysis and is based on one or more of the following: o statistical information about days on the market o information gathered through sales verification o interviews of market participants. The reasonable exposure period is a function of price, time, and use. It is not an isolated estimate of time alone. Exposure time is different for various types of real estate and under various market conditions. - -------------------------------------------------------------------------------- 3 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- Reasonable Exposure Time Exposure time is always presumed to precede the effective date of the appraisal. It is the estimated length of time the property would have been offered prior to a hypothetical market value sale on the effective date of appraisal. It is a retrospective estimate based on an analysis of recent past events, assuming a competitive and open market. It assumes not only adequate, sufficient, and reasonable time but adequate, sufficient, and reasonable marketing effort. Exposure time and appraisal conclusion of value are therefore interrelated. Exposure time is often expressed as a range and is based on direct and indirect market data gathered during the market analysis, sales verifications, interviews with market participants, and other appropriate sources. The amount of time which a property will require to be marketed varies greatly depending on a number of factors including market conditions, listing price, terms of sale offered, and competitive listing inventory. In addition to considering each of the factors noted above, CB Commercial considered: o exposure periods of comparable sales revealed during the course of this appraisal, o the most recent CB Commercial National Investor Survey, and o the opinions of local knowledgeable real estate brokers and investors. Market Conditions Throughout the Scranton--Wilkes-Barre--Hazlet metropolitan area, market conditions for most property types have been generally weak during the past three to four years. The value of most investment grade property types has decreased due to a number of factors. The lack of demand for investment properties and the inability of owners to make mortgage payments resulted in numerous foreclosures, or properties deeded back in lieu of foreclosure. Increased listing inventory has had a substantial downward influence on property values and the exposure time necessary to generate sales. Only recently, due to the competitive pricing in the market and improving economic conditions, has the number of transactions and active investors increased. These current market conditions illustrate how exposure time is correlated with listing inventory, competitive pricing structures, and marketing efforts. CB Commercial National Investor Survey In the most recent issue of the CB Commercial National Investor Survey, published in the Third Quarter 1995, CB Commercial surveyed a wide range of investors for property type preferences and specific marketing times. Respondents showed a clear preference for apartments, suburban offices, warehouse/distribution, community shopping centers, neighborhood shopping centers, power centers, urban offices, and business parks. Investors indicated that exposure - -------------------------------------------------------------------------------- 4 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- requirements for investment property have changed little from the previous survey, now an average of approximately 8.5 months for the subject property type. Real Estate Broker Surveys As a second information source, appraisers solicited the opinions of real estate brokers knowledgeable in the subject market and property type. While the majority of individuals surveyed were reluctant to predict an exact exposure time length for retail property in general, they generally estimated an approximate range between 6 and 12 months. All assumed that property would be appropriately priced and marketed. When asked about the subject property specifically, the consensus of opinion was that the subject would receive average to above average recognition in the marketplace under a reasonable plan for pricing and promotion. Exposure Time Conclusion In conclusion, based on the foregoing analysis, an exposure time of between 6 and 12 months is reasonable, defensible, and appropriate. Like the brokers surveyed, CB Commercial assumes that the subject property would have been competitively priced and aggressively promoted regionally. Reasonable Marketing Time Reasonable marketing time is the period a prospective investor would forecast to sell the subject property immediately after the date of value, at the value estimated. Anticipated marketing time is essentially a measure of the perceived level of risk associated with the marketability, or liquidity, of the subject as an investment grade property. The sources for this information include those used in estimating the reasonable exposure time, but also an analysis of the anticipated changes in market conditions following the date of appraisal. In other words, the reasonable marketing time is the number of months it will require to sell the subject property from the date of value, into the future. The reader must understand, however, that the future price for the subject property (at the end of the marketing time) may or may not equal the appraisal estimate. The future price depends on unpredictable changes in the physical real estate, demographic and economic trends, real estate markets in general, supply/demand characteristics for the property type, and many other factors. Based on the premise that present market conditions are the best indicators of future performance in the short-term and under stable market conditions, a prudent investor will forecast that, under the conditions described above, the subject property will require a marketing time of 6 to 12 months. - -------------------------------------------------------------------------------- 5 ================================================================================ REGIONAL ANALYSIS - -------------------------------------------------------------------------------- ================================================================================ REGIONAL AREA MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 6 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- AREA ANALYSIS The dynamic nature of economic relationships within a market area have a direct bearing on real estate values and the long-term quality of a real estate investment. In the market, the value of a property is not based on the price paid for it in the past or the cost of its creation, but on what buyers and sellers perceive it will provide in the future. Consequently, the attitude of the market toward a property within a specific neighborhood or market area reflects the probable future trend of that area. Since real estate is an immobile asset, economic trends affecting its locational quality in relation to other competing properties within its market area will also have a direct effect on its value as an investment. To accurately reflect such influences, it is necessary to examine the past and probable future trends which may affect the economic structure of the market and evaluate their impact on the market potential of the subject. This section of the report is designed to isolate and examine the discernible economic trends in the region and neighborhood which influence and create value for the subject property. A regional map indicating the location of the subject is presented on the previous page. REGIONAL INFLUENCES Location The subject is located in the community of Kingston within Luzerne County, located in the northeastern portion of the state of Pennsylvania. Luzerne County is part of the Scranton--Wilkes-Barre--Hazlet MSA and is adjacent to the west by Columbia County, to the east by Lackawanna and Monroe Counties, to the south by Carbon and Schuylkill Counties, and to the north by Wyoming County. A regional map indicating the location of the subject is presented on the previous page. Population The 1995 population within the Scranton--Wilkes-Barre--Hazlet MSA was estimated by Strategic Mapping, Inc. to be 637,743. This indicates a decrease of 723, or 0.11% from the April 1, 1990 federal census. The MSA's population is expected to increase slightly to approximately 637,923 by the year 2000, or a 0.03% increase. Demographic statistics for the Scranton--Wilkes-Barre--Hazlet MSA are summarized in the following table. - -------------------------------------------------------------------------------- 7 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ============================================================================= SELECTED AREA DEMOGRAPHICS THE SCRANTON--WILKES-BARRE--HAZLET MSA - ----------------------------------------------------------------------------- Population 1995 Estimate 637,743 1990 Census 638,466 1990-1995 % Change -0.11% Households 1995 Estimate 247,194 1990 Census 246,491 1990-1995 % Change 0.29% 1995 Median Household Income $ 28,672 1995 Average Household Income $ 36,957 1990 Average Home Value $ 71,131 1990 % College Graduates 8.5% - ----------------------------------------------------------------------------- Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ============================================================================= Households Similar to the population level within the Scranton--Wilkes-Barre--Hazlet MSA, the number of households has grown in recent years and is projected to increase over the next five years. Between 1990 and 1995, household growth in the Scranton--Wilkes-Barre--Hazlet MSA was 0.29%. Projections for the year 2000 indicate a mature and stable area with the number of households increasing by 0.56%. While experiencing a significant decline between 1980 and 1990, the average household size did not change significantly in 1995 (2.49) and is expected to remain fairly stable over the next five years. In the Scranton--Wilkes-Barre--Hazlet MSA, the average household size declined from 2.70 in 1980 to 2.50 in 1990. It is projected to decline slightly to 2.48 in the year 2000. Income As per data compiled by the Strategic Mapping, Inc., the 1995 median household income in the Scranton--Wilkes-Barre--Hazlet MSA was $28,672. The median household income increased considerably between the 1980 and 1990 census by approximately 5.49% annually. In 1980 the median household income was $14,203, which increased by 70.6% to $24,232 in 1990. The 1995 estimate indicates that growth in the median household income has slowed to only 3.4% per annum from 1990 to 1995. Income growth is projected to increase at an average annual rate of 3.3% between 1995 and the year 2000. - -------------------------------------------------------------------------------- 8 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Employment The total civilian labor force for the Scranton--Wilkes-Barre--Hazlet MSA was 337,200 in April, 1996 with corresponding employment of 312,922 indicating an April, 1996 unemployment rate of 7.2%. The following table compares the unemployment rate for the area to that of the state and national average. =============================================================================== UNEMPLOYMENT RATES COMPARISON BY MSA, STATE, AND U.S. - ------------------------------------------------------------------------------- Year Scranton--Wilkes-Barre--Hazlet Pennsylvania U.S. MSA 1995 7.0% 5.9% 5.7% 1994 7.2% 6.2% 6.1% 1993 8.0% 7.1% 6.8% 1992 8.8% 7.6% 7.4% - ------------------------------------------------------------------------------- Source: Pennsylvania Department of Labor and Employment Security, Bureau of Labor Market Information Compiled by: CB Commercial Real Estate Group, Inc. =============================================================================== Most of the employment is in the services (34%) and Manufacturing (19%), followed by retail trade industries (13%), similar to the State of Pennsylvania averages. The major employers in the area are as follows: =============================================================================== SCRANTON--WILKES-BARRE--HAZLET MSA MAJOR AREA EMPLOYERS - ------------------------------------------------------------------------------- Company Business No. Employees - ------------------------------------------------------------------------------- WEA Manufacturing Records & CD's 2,800 Commonwealth of Pennsylvania Government 2,096 Community Medical Center Hospital 1,800 Lackawanna County Government 1,550 Mercy Hospital Hospital 1,500 Technaglass TV Screens 1,450 Allied Services Rehabilitation Healthcare 1,400 Thompson Consumer Electronics Picture Tubes 1,275 University of Scranton Education 1,185 U.S. Government Government 1,094 - ------------------------------------------------------------------------------- Source: Lackawanna County Chamber of Commerce Compiled by: CB Commercial Real Estate Group, Inc. =============================================================================== - -------------------------------------------------------------------------------- 9 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Transportation The Interstate highways serving Lackawanna County include Interstate 81, 84 and 380. Interstate 81 connects Canada to the north to all points south to Florida. Interstate 84 connects parts of New York and Connecticut to the east to points west and terminates at the I-81/I-84 interchange in Dunmore, Pennsylvania. Interstate 380 runs from the I-380/I-84 interchange in Dunmore south to the I-380/I-80 interchange in Crescent Lake, Pennsylvania. Other significant arterials include U.S. 9 which runs through the central portion of the county and S.R. 11 which runs through the central area as well as Kingston. The major airports serving the Luzerne County area are the Wilkes Barre Scranton International Airport and the Wilkes Barre Wyoming Valley Airport. The Wilkes Barre Scranton International Airport is approximately 10 miles southwest of downtown Scranton while the Wilkes Barre Wyoming Valley Airport is 7 miles north of downtown Wilkes Barre. Both airports provide for private and corporate flights as well as cargo shipments. The Luzerne County area is also served by several railroads including Amtrak. Conclusion and Relevance to the Subject Property The long term outlook for the Scranton--Wilkes-Barre--Hazlet MSA is considered good. The strategic location between major cities in all directions combined with the convergence of three major arterials are primary factors in the anticipated favorable future of the area. Population projections indicate a stabilization for the Scranton--Wilkes-Barre--Hazlet MSA in the short- and long-term. The affordability and relative ease of obtaining housing within the Scranton--Wilkes-Barre--Hazlet MSA is a key factor for future growth. The vast amount of available land, as well as the large number of existing developments are seen as supportive of the long term growth prospects within this area. Transportation modes are considered excellent as are public utilities and services. Therefore, it would appear that the area will be suitable for additional growth in the future which should be favorable for the subject property in the long run. The overall projection for the Scranton--Wilkes-Barre--Hazlet MSA appears stable. - -------------------------------------------------------------------------------- 10 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- NEIGHBORHOOD INFLUENCES Location The subject is located on the south side of Third Avenue east of Pierce Street, approximately four miles northwest of downtown Wilkes-Barre. The boundaries for the subject neighborhood are considered to be: North: Boroughs of Pringle and Luzerne South: Susquehanna River West: Borough of Edwardsville East: Forty Fort Borough A neighborhood map indicating the location of the subject is presented no the following page. Land Use Land use in the neighborhood consists of a mixture of service retail and residential development. Development in the immediate vicinity of the subject consists of office and retail uses. The subject serves as the only major retail development within a one-quarter mile radius. Other uses within this radius include several converted homes to commercial office/retail, gasoline and automotive service stations, and fast food restaurants. The immediate area is approximately 80+ percent developed. The majority of commercial uses are currently located along the Route 11 corridor which is a few blocks north of the subject's immediate area. Access Accessibility to the neighborhood in general, and to the subject property in particular, is considered to be good. Access to Interstates 81, 84, and 380 is available via the Route 309-Interstate 81 interchange (Exit 47) located approximately three miles southeast of the subject. The subject neighborhood also features a good network of secondary roadways which further enhance accessibility. - -------------------------------------------------------------------------------- 11 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ================================================================================ NEIGHBORHOOD MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 12 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Demographics Selected Neighborhood demographics in a one, three, and five mile radius from the subject are shown in the following table: =========================================================================== SELECTED NEIGHBORHOOD DEMOGRAPHICS - --------------------------------------------------------------------------- 1 mile 3 mile 5 mile - --------------------------------------------------------------------------- Population 1995 Estimate 16,363 100,141 137,234 1990 Census 16,903 103,276 140,339 1990-1995 % Change -3.2% -3.0% -2.2% Households 1995 Estimate 6,497 41,413 56,233 1990 Census 6,688 42,523 57,201 1990-1995 % Change -2.9% -2.6% -1.7% 1995 Median Household Income $28,284 $25,453 $26,004 1995 Average Household Income $40,971 $33,006 $33,860 1990 Average Home Value $82,609 $59,942 $62,405 Median Age Total Population 38.7 39.0 39.3 1990 % College Graduates 13.0% 9.0% 8.6% - --------------------------------------------------------------------------- Source: Conquest Market Data Compiled by: CB Commercial Real Estate Group, Inc. =========================================================================== The subject property benefits from a location along a moderately-trafficked commercial corridor with no immediate competition as well as stable demographic characteristics. The population and households have decreased within the one, three and five mile radii. Projections for the year 2000 indicate similar patterns. While the population and households have been decreasing overall, income levels have edged upward approximately 3.5 percent per annum since 1990 within all three radii, similar to the inflation rate. Demographic characteristics appear to be strongest within a three mile radius. The five mile radius extends closer to the City of Wilkes-Barre which appears to be stabilizing economically slower than the Borough of Kingston. General characteristics are fairly similar throughout all three radii. Growth and Trends Due to demographic characteristics as well as economic conditions as discussed above, there has not been any retail development in Kingston in recent years. Furthermore, we are not aware of any proposed shopping centers within the Borough of Kingston in upcoming years. The immediate neighborhood has not experienced significant retail development in the recent past. - -------------------------------------------------------------------------------- 13 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Conclusion and Relevance to the Subject Property The subject property is situated in an area consisting primarily of retail, commercial and residential uses. The area features good accessibility to the local transportation system and throughout the city and metropolitan area. Currently, the subject's neighborhood is in the stabilization stage of its life cycle, a period of neither significant growth nor decline. While the area is mostly developed, some potential exists for future development whether through construction on the few remaining vacant lots or renovation of existing improvements. We do not expect the character of the neighborhood to change in the near future. - -------------------------------------------------------------------------------- 14 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- MARKET ANALYSIS Retail Overview The retail market in Kingston has witnessed limited growth over the past few years as a result of the economic troubles the region has experienced. We are not aware of any proposed shopping centers within the Borough of Kingston in upcoming years. The immediate neighborhood has not experienced significant retail development in the recent past. According to Strategic Mapping, Inc., total retail development within a one mile radius of the subject property consists of approximately 678,000 square feet. Furthermore, retail development within the three and five mile radii account for 4.090 and 5.612 million square feet, respectively. Local Retail Market In order to project future performance of the retail space in the subject property consideration has been given to various market components that affect the supply and demand for this type of real estate property. Specifically we have: o Inspected the site and surrounding areas for the purpose of familiarizing ourselves with all the locational and environmental factors. In this regard, we have directed our attention to the physical qualities of the site, access and circulation, surrounding uses, and relationship to sources of market support. o Reviewed the principal economic growth trends in the area in industry, population and employment. Our intention was to identify the degree of underlying support for existing improvements and future growth. o Analyzed existing and foreseeable market conditions for retail properties in the area. o Analyzed demographics of the subject property's trade area as well identified competition in order to assess, the subject property's current as well as future position in the market. Trade Area The trade area of a shopping center is defined as the geographic area from which the sustaining patronage for steady support of a center is obtained. Determination of the boundaries is contingent upon various factors including but not limited to the nature of the center, accessibility, physical barriers, location of competing facilities, and limitations of driving time and distance. - -------------------------------------------------------------------------------- 15 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- The subject's general trade area is considered to be that which encompasses a five mile radius of the subject center. We broke this down further to include a one-mile ring (primary), a three-mile ring (secondary) and a five-mile ring (tertiary). Definition Of The Trade Area The primary ingredients for success in these types of projects include the nature of the competition, population density, income levels, and disposable income. The actual size of the population needed to support this type of project cannot be fixed due to the complexities of the above factors, as well as changing methods of merchandising. Local conditions, such as number of households, income levels, and existing centers within the trade area can have the most dramatic impact upon any given project since these factors are what determine the purchasing power in an area. An additional ingredient leading to the success of a shopping center would be the tenant mix and characteristics of the leading tenants which attract shoppers to the project. We have analyzed demographic data, competition, income levels for the subject trade area in the following sections. The demographic profiles of the primary, secondary and tertiary trade areas are presented in the Neighborhood Influences section of the report. Additional demographic information is contained within the Strategic Mapping, Inc. Profile Report located within the Addenda. Population The sales potential of a center is directly related to its proximity to the number of potential patrons. The historical and projected trends for population are important to examine when analyzing the trade area of a shopping center. The historical population trends for the subject's trade areas indicate a decrease in population between 1980 and 1995 followed by a further decrease projected from 1995 to the year 2000. In the primary trade area the population decreased by 6.3% between 1980 and 1990 to 16,903 and then witnessed a decrease to 16,363 in 1995. Population projections indicate a further decrease to 15,915 between 1995 and the year 2000. Both the secondary and tertiary trade areas witnessed a similar pattern and future trend in population in these areas. In order to further analyze the population change, we have examined the distribution of the population by age. When analyzing the population distribution by age, it should indicate in what age groups the population shifts are projected to take place. This is important to distinguish if it will have a great impact on the retail sales of the subject center. Shifts in the age groups under - -------------------------------------------------------------------------------- 16 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- 24 years of age will affect the subject, however, less drastically than changes in the subject's core market approximately between the ages of 25 and 54. As illustrated in the Profile Report located in the Addenda, a large percentage of the population in all three trade areas are in the age groups from 25 - 54. Estimated figures for 1995 indicated that the median age was slightly higher than the 1990 census in all three trade areas ranging from 38.7 to 39.3. Overall, the diversification among age groups is very common among other retail trade areas. Household Trends When analyzing the demographics for a retail center, it is most important to focus on the trends in the household population. A household consists of one or more persons occupying a dwelling unit. A family would be considered a household unit, however single persons living alone or two or more unmarried persons sharing a dwelling are also considered a household unit. The household unit is perhaps the best indicator in determining the economic health of a trade area. One of the important components which bonds a household together is it's economic strength as a unit as compared to the economic viability of an individual; single person households not withstanding. If the population is slightly decreasing and yet the number of households is increasing, this would not necessarily be a negative indicator. This would imply that the average household size was shrinking. Each household has demand for goods that likely is not duplicated with a larger household size. This demand is duplicated however in the number of households. Similar to population figures, the number of households in the trade area decreased between 1980 and 1990. Subsequently, the number of households decreased between 1990 and 1995 though at an accelerated pace in comparison to the decline witnessed in the previous decade. The number of households are projected to decrease further in all three trade areas in upcoming years. Household Income The median household income in the subject's trade areas increased annually at an average rate of 3.4% from 1990 to 1995. Thus, the household incomes in the area grew at a pace slightly below inflation during this period. The projected annual income growth rates between 1995 and the year 2000 are approximately 3.3%, again below the projected rate of inflation. Overall, household income levels varied slightly between the three trade areas. The median household income levels ranged from $25,453 to $28,284 in 1995 with the primary trade area representing the upper end of the range. - -------------------------------------------------------------------------------- 17 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- Employment The income characteristics of the trade areas for the subject property indicate that this is a predominately white collar market. The primary trade area had the highest percent in white collar employment at 65.8% while the tertiary trade area had the lowest at 55.6%. Blue collar employment percentages in the primary, secondary and tertiary trade areas were 20.6%, 27.6% and 29.0%, respectively. The remaining percentages were in special services categories. The 1990 Census information indicates that the unemployment rates ranged from a low of 4.1% in the primary trade area to a high of 6.4% in the secondary and tertiary trade areas. As discussed in the Location Analysis, the most recent unemployment rate in the Scranton--Wilkes-Barre--Hazlet MSA was 7.2% which indicates an overall decrease in employment from the 1990 Census. We feel the subject market will witness modest employment growth in upcoming years and a declining unemployment rate. Expenditure Potential The Expenditure Potential charts located in the Addenda outline Strategic Mapping, Inc. retail sales projections for the subject trade area. The highest sales growth in the primary trade area appears to be for electronics, drug, and video stores. These three categories also represent high growth in the secondary and tertiary trade areas. The average growth rate for retail sales in the trade area is projected at 0.97% in the primary trade area, 1.01% in the secondary trade area and 1.18% in the tertiary trade area. Strategic Mapping, Inc. examines the product potential for various store types for each portion of the subject trade area. Based on statistical sampling, Strategic Mapping has derived a benchmark per household expenditures for each store type. Comparing the figures in the trade area to the benchmark figure, it is apparent that those individuals in the subject trade area are much more likely to spend on items in drugs, groceries, and convenience stores. The Strategic Mapping Expenditure Potential Index is defined as follows, 'An index which shows the amount by which an area per household expenditures, differed from that of the benchmark.' The benchmark is defined as the average or common expenditure among households for a larger region. Values below 100 signify that this area is below the benchmark per household expenditures and correspondingly values above 100 indicate a higher than average expenditure per household. The overall Expenditure Index for the primary area is 95.1, while the benchmark indices for the secondary and tertiary trade areas are 90.0 and 90.9, respectively. In conclusion, the expenditure indices for the subject trade areas indicate that the trade area populations spend less than the benchmark household on retail goods. The area generates retail sales based on the existing population as well as the increasing income potential. - -------------------------------------------------------------------------------- 18 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- Market Indicators The subject center contains 8 tenant suites ranging in size from approximately 1,000 to 45,000 square feet. Discussions with local leasing agents reveal that typical satellite space rents in the area generally range from $5.50/SF to $15.48/SF depending upon the physical and locational characteristics of the space and $5.77/SF to $10.05/SF for anchor space depending upon the same criteria. Percentage rent clauses tend to be uncommon for satellite tenants. Retail leases are typically structured on an absolute net basis with flat rents over the term. Based upon discussions with brokers and managing agents in the area as well as our observations during our inspection, competing centers in the subject's market area have vacancy rates which generally fall within the 0.0% to 7.0% range with an average vacancy rate of approximately 4.0%. The subject center is currently 100% occupied. Summary Although future projections indicate continued decreases in the population and households in all three trade areas from 1980 through 1995, the trade areas exhibit increased spending potential over the same period. However, income levels appear to be increasing at rates slightly below projected inflationary rates which is common during periods of economic recovery. Overall, the subject trade areas reflect average retail characteristics. Due in part to a lack of competition in the immediate area, we conclude that the trade area represents a viable retail market. - -------------------------------------------------------------------------------- 19 PROPERTY DESCRIPTION ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- SITE ANALYSIS The description of the site can be detailed as follows: Location: The subject is located at the south side of Third Avenue, approximately four miles northwest of downtown Wilkes-Barre, Pennsylvania. Ingress and egress to the subject are available via curb cuts from Third Avenue Assessor's Parcel Number: Section H9NE2, Block B-04C, Lot 002 Land Area(2) The subject site contains 13.74 acre or 598,514 square feet. The subject site has approximately 5.0 acres of excess developable land. Note, however, that this portion of the site is towards the rear of the center and has poor visibility. Shape and Frontage: The site is irregular in shape featuring 416.87 linear feet of frontage on the south side of Third Avenue. Topography and Drainage: The site is level at grade. Our investigation did not reveal any significant drainage problems. Soils: No soil report was provided and it is assumed that the soil is adequate for the existing use. Easements: No title report was provided in connection with this appraisal. A survey showing the location of a 50-foot-wide utility easement was available and submitted to us. As a result, it appears that the location of the easement would not have any negative impacts on value of the subject. For the purpose of this analysis, it is specifically assumed that any easements, restrictions, or encroachments that might appear against the title would have no adverse impact on marketability or value. Covenants, Conditions, and No private deeds or restricting covenants Restrictions: affecting development, other than zoning, were found to affect the site. Utilities: All public utilities including gas, electricity and telephone as well as water, storm and sanitary sewer systems. - ---------- (2) Source: Kingston Tax Assessor's Office - -------------------------------------------------------------------------------- 20 ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- Flood Zone: According to maps published by the Federal Emergency Management Agency (FEMA), the subject lies within Zone B, as indicated on FEMA Community Map Panel 420612A H&I01, dated June 1, 1977. Environmental Issues: The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the property causing a loss in value. No evidence of hazardous waste or toxic materials was visible and CB Commercial has no knowledge of the existence of these substances on or in the subject property. However, CB Commercial is not qualified to detect hazardous waste or toxic materials. Adjacent Properties North: "End Zone" skating and dance pavilion South: Vacant land East: Kingston Manor Retirement Home West: Residential apartments Conclusion: The subject is a 13.74-acre site on a paved street served by necessary utilities. Access and visibility are considered to be average. There are no adverse soil conditions of which CB Commercial Real Estate Group, Inc. is aware. The shape of the parcel is irregular and results in no specific limitation. The topography is level and possesses no specific development limitation. As previously mentioned, the subject has approximately 5.0 acres of excess developable land, however, located towards the rear of the center with poor access and visibility. From a physical standpoint, the site is considered to be adequate for many types of development. - -------------------------------------------------------------------------------- 21 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS The subject improvements were constructed in 1982 and anchored by a Price Chopper supermarket. The improvements consist of a single-story community shopping center containing 64,824 square feet of gross leasable area. The shopping center contains 8 tenant suites. The following is a description of the improvements based on our physical inspection, municipal records and from discussions with and materials provided by the client. The basic construction features are summarized as follows. Construction Class The class of construction is the basic subdivision in Marshall Valuation Service which divides all buildings into five basic groups by type of framing (supporting columns and beams), walls, floors, roof structure, and fireproofing. The subject is considered to be of construction Class B(3). Competitive Rating The subject is considered a Class B building in terms of quality as it is perceived in the marketplace. Foundation Poured concrete Frame Concrete block over a steel frame Floor Construction Concrete slab Exterior Walls Load-bearing concrete block over a steel frame with split-faced block. Fenestration Aluminum framed glass windows and double-paned glass front doorways. Roof Structure & Covering Flat, presumably built-up composition covering over steel deck with steel bar joist supports. We were unable to inspect the roof and assume the roof is in average overall condition. Exterior Condition Average Interior Partition System Metal studs with gypsum board cover. - ---------- (3) The primary characteristic of Class B Buildings is the reinforced concrete frame in which the columns and beams can be either formed or precast concrete. They may be mechanically stressed, and the structure is fire resistant. (Source: Marshall Valuation Service) - -------------------------------------------------------------------------------- 22 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Interior Finishes - Tenant Space Floors: Combination of vinyl tile and carpet. Walls: Painted or covered gypsum board. Ceilings: Suspended acoustic tiles. Lighting: Recessed florescent lighting. Summary: The interiors of the subject are considered to be of average to good quality and similar to competitors. HVAC Heating and ventilation is provided to the majority of the tenant suites by roof-mounted HVAC units. Each of these units pump the hot air throughout its suite via sheet metal air duct work hidden above the dropped ceiling. Air conditioning is supplied by the same system utilizing the duct work and supplying cool air during the summer months. The HVAC system is a gas-fired forced air system. Electrical The electrical system is assumed to be in good working order and adequate for the building. Fire Protection It is assumed that the subject has adequate fire alarm systems, fire exits, fire extinguishers, fire escapes and/or other fire protection measures to meet local fire marshall requirements. Plumbing The plumbing system is assumed to be in good operating condition. Parking Surface parking is provided for 422+ vehicles. Landscaping Landscaping on the subject property is minimal which is typical within the subject neighborhood. ADA Compliance Handicap access appears to be available to all areas of the center. However, we are not qualified to determine compliance with the requirements. Please refer to the specific limiting condition regarding ADA compliance. Environmental Issues The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the improvements which would cause a loss in value. - -------------------------------------------------------------------------------- 23 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Functional Quality of Space The interior floor plans are flexible and will accommodate a variety of tenant layouts. There are no observed design problems and none are reported by management. Access to the tenant suites is available at the front and rear of the center. There are no elevators within the center. Deferred Maintenance No deferred maintenance was observed or reported. The improvements have been adequately maintained since it was constructed in 1982. Economic Age and Life Based on the current condition, we estimate the effective age to be approximately 15 years. According to the Marshall Valuation Service cost guide, buildings of this type and quality have an expected life of approximately 45 years. Therefore, the remaining economic life (expected life minus effective age) is estimated at 30 years. While we observed nothing to suggest a different economic life, a capital improvement program could extend life beyond that stated above. Quality/General Condition The subject property conforms well with competitors and substitutes in the area. The quality of construction is typical of the area. Interior amenities are similar to competing properties of the same approximate age. The general condition of the improvements is average. We observed no evidence of structural fatigue and the improvements appear sound. We are not qualified to determine structural integrity, however, and recommend that the reader rely upon an expert in this field for further determination. Conclusion/Comments The subject property is an average quality shopping center located in a relatively stable area. The improvements generally conform with competitors and substitutes in the neighborhood. - -------------------------------------------------------------------------------- 24 ================================================================================ ZONING - -------------------------------------------------------------------------------- ZONING The subject's zoning requirements are detailed below. =============================================================================== ZONING SUMMARY - ------------------------------------------------------------------------------- Current zoning: C-2; Community Commercial District Legally conforming?: Yes Uses permitted: Retail shops, banks and financial facilities, grocery stores, fast food and family restaurants, general offices Zoning change Not Likely - ------------------------------------------------------------------------------- Category Zoning Requirement - ------------------------------------------------------------------------------- Maximum FAR None Specified Minimum Lot Size None Specified Minimum Frontage 75 Feet Maximum Site Coverage None Specified Front Setback 5 feet Rear Setback 20 feet Side Yard Setbacks None Specified Height Limit 2.5 stories or 35 feet Parking One space per 250 square feet of building area above grade - ------------------------------------------------------------------------------- Source: Borough of Kingston Zoning Ordinance Compiled by: CB Commercial Real Estate Group, Inc. =============================================================================== ZONING ANALYSIS AND CONCLUSIONS According to the Borough of Kingston Zoning ordinance, the subject property is a legal and conforming use under current guidelines. In addition, the property appears to conform to bulk and setback requirements as well as to parking requirements. - -------------------------------------------------------------------------------- 25 ================================================================================ TAX ANALYSIS - -------------------------------------------------------------------------------- TAX AND ASSESSMENT DATA The subject property is assessed by Luzerne County, Pennsylvania, at approximately 7.8% of the assessor's estimated market value. The last general assessment of properties in Luzerne County was reportedly in the early 1970's. A re-valuation has not been rescheduled. School taxes are collected on a fiscal year and town/county taxes are collected on a calendar year. The subject's assessed value and current taxes are summarized below. ============================================================================== CURRENT ASSESSMENT AND TAX INFORMATION (1995) - ------------------------------------------------------------------------------ Assessed Tax Rate Annual Tax ID Value / $1,000 Taxes Section H9NE2, Block B-04C, Lot 002 $186,660 270.400 $ 50,472.86 - ------------------------------------------------------------------------------ Source: Luzerne County Assessor's Office Compiled by: CB Commercial Real Estate Group, Inc. ============================================================================== Based on the current tax rate of $270.4 per $1,000 assessed value, the estimated taxes for the subject amount to $50,472.86, or $0.78 per square foot based on the rentable square footage of the center. Tax and Assessment Conclusion We have estimated the taxes for the shopping center at $50,473 for calendar year 1996 in our cash flow. Our discussions with the assessor indicated that the subject's taxes have decreased annually due to repeated tax appeals. However, the subject's future taxes should begin to increase. As a result, we have increased the subject's taxes by 1.0% in year one of our discounted cash flow analysis, 2.0% in year two and 3.0% thereafter which is in-line with the area's inflation rate. - -------------------------------------------------------------------------------- 26 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- HIGHEST AND BEST USE In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The four criteria that the highest and best use must meet are: o legal permissibility; o physical possibility; o financial feasibility; and o maximum profitability. Highest and best use is applied specifically to the use of a site as vacant. It is recognized that in cases where a site has existing improvements, the concluded highest and best use as if vacant may be different from the highest and best use given the existing improvements (as improved). The existing use will continue, however, until the land value, in its highest and best use, exceeds that total value of the property under its existing use plus the cost of removing or altering the existing structure. Implied in the highest and best use is a recognition of the contribution of a specific use to the community environment or to the community's development goals, in addition to wealth maximization of individual property owners. Also implied is that the conclusion of highest and best use that results from the appraiser's judgment and analytical skill, i.e., that the use determined from the analysis represents an opinion, not a fact to be found. Highest and best use analysis involves assessing the subject both as if vacant and as improved. HIGHEST AND BEST USE AS THOUGH VACANT Legal Permissibility The legally permissible uses were discussed in detail in the site analysis and zoning sections of this report. Based on our review of the zoning restrictions, the site can be developed with several different uses, including retail and commercial office uses. Physical Possibility The physical characteristics of the subject site were discussed in detail in the site analysis. Overall, a wide range of legally permissible uses would be physically possible, including a variety of commercial uses. - -------------------------------------------------------------------------------- 27 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- Financial Feasibility The test of financial feasibility is put only to those uses which are legally permissible and physically possible. If the property is capable of generating a sufficient net income to cover the required rate of return on investment and provide a return to the land, then the usage is financially feasible within a defined price limit. In our determination of financial feasibility we have analyzed current market rental rates for several different property types. The net income produced by the proposed or new improvements must provide a return above the cost to develop the property, including acquisition of the land. Through a cost/income analysis we have determined that development of the subject site is not financially feasible at this time. Based on the analysis of supply and demand factors at the present time, rents achieved for retail and/or office uses would not support the cost of construction. Based on the aforementioned, we have determined that development of the subject site at the present time with a retail center is not currently feasible. Maximum Profitability The final test of highest and best use of the site as though vacant is the use be maximally productive, yielding the highest land value. Based on our feasibility analysis we have determined that land banking the subject site is the maximally productive use at the present time. Conclusion: Highest and Best Use As Vacant The concluded highest and best use of the subject as though vacant is land banking until such time that development of the site with a retail/commercial facility is financially feasible. HIGHEST AND BEST USE AS IMPROVED Legal Permissibility As discussed, the subject site's zoning and legal restrictions permit a variety of land uses. Regardless, the site has been improved with a community shopping center. Based upon review of the Borough of Kingston's Zoning Ordinance, it is our opinion that the improvements are within the established guidelines. - -------------------------------------------------------------------------------- 28 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- Physical Possibility The physical characteristics of the subject improvements were discussed in detail in the improvement analysis section of this report. Overall, the layout and positioning of the improvements is considered functional for shopping center use, and the floor plan is considered to be reasonable in comparison to other shopping centers in the area. The improvements have good retail features, have been adequately maintained, and are physically capable of sustaining their current use over the extended future. Financial Feasibility As with the highest and best use of the site as though vacant, the financial feasibility of the site as improved is market derived. Typically, for retail properties similar to the subject, the test of feasibility is based on the amount of rent that can be generated less operating expenses. If a residual amount exists after paying the various expenses, then the land is being put to a productive use. At present, the subject is 100% occupied. CB Commercial estimates that the appropriate stabilized market occupancy approximates 97%. Based on the historical and current operating status of the subject property, CB Commercial anticipates that the improvements are capable of providing an adequate return on the investment before any debt service requirements. Therefore, we conclude that the current use of the improvements is a financially feasible use of the property as improved. Maximum Profitability Similar to the highest and best use of the site as though vacant, the maximum profitable use of the subject as improved should conform to neighborhood trends and be consistent with existing land uses. Although several uses may generate sufficient revenue to satisfy the required rate of return on investment and provide a return on the land, the single use that produces the highest price or value is typically the highest and best use. Conclusion: Highest and Best Use as Improved Based on the foregoing discussions, CB Commercial concludes that the highest and best use of the property, as improved, is consistent with the existing use as a shopping center. There are no apparent alternative uses of the existing improvements that would produce a higher net income and/or value over time than the current use. The current use is a legally permissible use and appears to represent the highest and best use as improved. Furthermore, CB Commercial does not believe that conversion of the improvements or demolition is warranted or financially feasible. - -------------------------------------------------------------------------------- 29 VALUATION ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- APPRAISAL METHODOLOGY The appraisal process is defined as an orderly program by which the problem is planned and the data involved is acquired, classified, analyzed and interpreted into an estimate of value. In this process three basic approaches to value are considered: Cost Approach, Sales Comparison Approach, and Income Capitalization Approach. In appraisal practice, an approach to value is included or omitted based on its applicability to the property type being valued and the quality and quantity of information available. The final step in the appraisal process is reconciliation -- a process by which CB Commercial analyzes alternative conclusions and selects a final value estimate from among two or more indications of value. CB Commercial weighs the relative significance, applicability and defensibility of each approach as it relates to the type of property being appraised. THE COST APPROACH The Cost Approach is based upon the proposition that the informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements which represent the highest and best use of the land or when relatively unique or specialized improvements are located on the site and for which there exist few sales or leases of comparable properties. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. SALES COMPARISON APPROACH The Sales Comparison Approach utilizes sales of comparable properties, adjusted for differences, to indicate a value for the subject property. Valuation is typically accomplished using physical units of comparison such as price per square foot, price per unit, price per floor, etc., or economic units of comparison such as gross rent multiplier. Adjustments are applied to the physical units of comparison derived from the comparable sale. The unit of comparison chosen for the subject is then used to yield a total value. Economic units of comparison are not adjusted, but rather analyzed as to relevant differences with the final estimate derived based on the general comparisons. - -------------------------------------------------------------------------------- 30 ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- The reliability of this approach is dependent upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c) the degree of comparability; (d) the absence of atypical conditions affecting the sales price. Although there have been few sales in the region, the sales that were gathered were utilized to form an opinion of value. However, given the lack of relevant sales data, we have not placed minimal reliance upon this approach and have used it to provide additional support to the Income Approach. INCOME CAPITALIZATION APPROACH The methodology of the Income Capitalization Approach is to determine the income-producing capacity of the property on a stabilized basis by estimating market rent from comparable rentals, making deductions for vacancy and collection losses and building expenses, then capitalizing the net income at a market-derived rate to yield an indication of value. The capitalization rate represents the relationship between net income and value. Related to the direct capitalization method is the discounted cash flow method. In this method of capitalizing future income to a present value, periodic cash flows (which consist of a net income less capital costs, per period) and a reversion (if any) are estimated and discounted to a present value. The discount rate is determined by analyzing current investor yield requirements for similar investments. Since investors are active in the marketplace for properties similar to the subject, the Income Capitalization Approach is particularly applicable to the appraisal problem at hand. There is an adequate quality and quantity of income and expense data available to render a reliable and defensible value conclusion. For income producing properties similar to the subject, the Income Capitalization Approach is considered to be the most reliable. Therefore, this approach has been employed as the primary methodology for this assignment. - -------------------------------------------------------------------------------- 31 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH The Sales Comparison Approach provides an estimate of market value based on analyzing transactions of similar properties in the market area. The method is based on the proposition that an informed purchaser would pay no more for a property than the cost of acquiring an existing one with the same utility. When there is an adequate number of sales of truly similar properties with sufficient information for comparison, a range of values for the subject property can be developed. There are various units of comparison available in the evaluation of sales data in this approach. The sale price per square foot ($/SF) is the most commonly used in this approach. The effective gross income multiplier (EGIM) is rarely used by market participants because of the inconsistencies in estimating effective or gross income, vacancy, and expense differences. However, net income multiplier (NIM) is used when overall capitalization rates are ascertained for an adequate sampling of the sales. The NIM analysis is used by market participants because this analysis accounts for the fluctuations caused by the inherent differences in vacancy and operating expenses in each of the comparable sales. We conducted a thorough sales search for comparable shopping centers in the subject's market area. Through our sales search, we were able to identify a limited number of sales with similar characteristics to the subject. The following table summarizes what are considered to be the most recent and proximate comparable sales. Detailed write-ups of each comparable are included in the addendum. - -------------------------------------------------------------------------------- 32 ================================================================================ SALES COMPARISON APPROACH - --------------------------------------------------------------------------------
======================================================================================================================= SUMMARY OF COMPARABLE RETAIL SALES - ----------------------------------------------------------------------------------------------------------------------- Gross No. Property Name/ Location Sale Leasable NOI OAR Sale Price Date Area (SF) Sale Price Per S.F. Per S.F. - ----------------------------------------------------------------------------------------------------------------------- 1 15th & Allen St. Center 1/96 46,503 $4,242,000 $ 9.94 10.89% $ 91.22 1401-1451 Allen Street Allentown Lehigh County, PA 2 Stefko Shopping Center 1/96 134,446 $5,618,000 $ 4.59 10.99% $ 41.79 Stefko Boulevard Bethlehem Northampton County, PA 3 MacArthur Plaza 10/95 29,600 $3,831,667 $ 13.92 10.76% $ 129.45 2419 MacArthur Road Whitehall Township Lehigh County, PA 4 Columbia Mall 7/95 351,364 $27,650,000 $ 8.42 10.70% $ 78.65 N/E/C Route 42 @ I-80 Bloomsburg Columbia County, PA - ----------------------------------------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. =======================================================================================================================
- -------------------------------------------------------------------------------- 33 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- COMPARABLE SALES MAP [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- 34 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF IMPROVED SALES The sales reflect unit prices ranging from a low of about $41.79 to a high of approximately $129.45/SF with the significant difference reflecting the economics of the various centers. The sales all had high levels of occupancy and were in generally good condition. The difference in unit prices then were more directly tied to net operating income and investor yield rates. The comparable sales presented offer a simplistic view of the market. Since only general details of existing income and expenses were available, specific analysis is nearly impossible. Accordingly, this method acts as a general gauge of the market and therefore will be utilized as support to our findings in the Income Approach. Analysis The following discussion analyzes the aforementioned comparables relative to the subject property. Sale 1 Sale number one, located at the intersection of 15th Street and Allen Street in Allentown, is a 46,503 square foot shopping center which sold in January of 1996 for $4,242,000 or $91.22/SF. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed circa 1950 and was in very good overall condition at the time of sale since it was recently renovated. Access, exposure, visibility and general locational attributes of the center are superior to the subject, however, the center is similar in size to the subject. Market conditions at the time of sale were similar to current market conditions. This sale's NOI is reportedly $462,049 or $9.94/SF indicating an overall rate of 10.89%. The economics of this property, at least in terms of NOI per square foot, is superior to the subject. Sale 2 Sale number two, located in the City of Bethlehem, consists of a single story community center which contains an aggregate 134,446 square feet. This center, known as the Stefko Shopping Center, sold in January of 1995 for $5,618,000 or $41.79/SF of gross leasable area (GLA). Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed in 1965 and appeared to be in average condition. The property's location with regard to access and visibility are considered superior to the subject. Furthermore, the center is significantly larger than the subject. Market - -------------------------------------------------------------------------------- 35 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- conditions at the time of sale were similar to current market conditions. The NOI was reportedly $617,577 ($4.59/SF) indicating an overall rate of 10.99%. This property operates at a level of net income that is inferior to the subject. Sale 3 Sale number three, MacArthur Plaza, is located at 2409 MacArthur Road in Whitehall Township in Lehigh County, Pennsylvania. It is a 29,600 square foot shopping center which sold in October of 1995 for $3,831,667 or $129.45/SF. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed circa 1988 and was in very good overall condition at the time of sale. Access, exposure, visibility and general locational attributes of the center are superior to the subject, however, the center is smaller in size to the subject. Market conditions at the time of sale were similar to current market conditions. This sale's NOI is reportedly $412,122 or $13.92/SF indicating an overall rate of 10.76%. The economics of this property in terms of NOI per square foot is superior to the subject. Sale 4 Sale number four is located at the northeast quadrant of Route 42 and Interstate 80 in Bloomsburg, Columbia County, Pennsylvania and consists of a single story community center which contains an aggregate 351,364 square feet. This center, known as the Columbia Mall, sold in July of 1995 for $27,650,000 or $78.69/SF of gross leasable area (GLA). Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed in 1988 and appeared to be in good overall condition. The property's location with regard to access and visibility are considered superior to the subject. Furthermore, the center is significantly larger than the subject. Market conditions at the time of sale were similar to current market conditions. The NOI was reportedly $2,958,500 ($8.42/SF) indicating an overall rate of 10.7%. This property operates at a level of net income that is superior to the subject. Net Operating Income Analysis The net operating income level for the comparables ranged from $4.59 to $13.92 per square foot, per year. The subject has a projected NOI for the coming year of $372,794 or $5.75 per square foot reflecting full and stable occupancy. Given the correlation between price paid per square foot and NOI per square foot it would seem reasonable to conclude that the subject would sell within the range established by the comparable properties. - -------------------------------------------------------------------------------- 36 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- The following chart depicts the calculations involved in developing adjustment factors to be applied to the respective price per square foot units of comparison developed from the comparables employed. ================================================================================ NET INCOME MULTIPLIER (NIM) ANALYSIS - -------------------------------------------------------------------------------- Sale Subject's NOI/SF ---------------- Net Income Sale Price Adjustment Adjusted $/SF No. Sale's NOI/SF Multiplier $/SF for Subject - -------------------------------------------------------------------------------- 1 $5.75 0.58 $91.22 -$38.31 $52.91 ----- $9.94 2 $5.75 1.25 $41.79 +$10.45 $52.24 ----- $4.59 3 $5.75 0.41 $129.45 -$76.38 $53.07 ----- $13.92 4 $5.75 0.68 $78.65 -$25.17 $53.48 ----- $8.42 ================================================================================ For the most part, there is a direct correlation between the NOI/SF and sale price per square foot. As the net income level increases, so does the price paid per square foot. After adjusting the four sales, they support a range of value for the subject between approximately $52.00/SF to $53.00/SF. Based on our analysis, the subject's value would be approximately $52.00/SF. The subject has a total building area of 64,824 square feet. The value estimate via the Sales Comparison Approach is calculated as follows: ========================================================== Net Rentable Area of Subject 64,824 square feet Value per square foot $52.00 per square foot Indicated Value: $3,370,848 ---------- ROUNDED: $3,400,000 ========================================================== Overall, very little emphasis has been placed on this approach because of the quality of the data. It is used primarily as a check of the value derived via the Income Approach. We estimate the as is market value of the leased fee interest in the subject property, via the sales comparison approach, as of May 15, 1996, is: --- THREE MILLION FOUR HUNDRED THOUSAND DOLLARS --- ($3,400,000) - -------------------------------------------------------------------------------- 37 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH The Income Capitalization Approach reflects the subject's income-producing capabilities. This approach is based on the assumption that value is created by the expectation of benefits to be derived in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over period of time. The two common valuation techniques associated with the Income Capitalization Approach are direct capitalization and the discounted cash flow (DCF) analysis. DIRECT CAPITALIZATION Direct capitalization is the method used to convert a single year's estimate of income into a value indication. In direct capitalization, a precise allocation between return on and return of capital is not made because investor assumptions or forecasts concerning the holding period, pattern of income, or changes in value of the original investment are not simulated in the method. Direct capitalization is most appropriate when analyzing a stable income stream and in estimating the reversion at the end of a holding period. Using this method, the following sets forth the process: 1. Estimate the Potential Gross Income (PGI) from all sources that a competent owner should be able to generate from a property based on existing and/or market rents. 2. Deduct an estimate of Vacancy and Collection Loss (VCL) to arrive at an Effective Gross Income (EGI) estimate. 3. Deduct operating expenses from the estimate of EGI. The result is an estimate of the stabilized Net Operating Income (NOI). 4. Estimate an Overall capitalization rate (Ro, or OAR). 5. Divide the NOI by Ro, resulting in a value estimate at stabilized occupancy. 6. Adjust the stabilized value to account for "As Is" condition, if applicable. DISCOUNTED CASH FLOW ANALYSIS The discounted cash flow (DCF) analysis is a detailed analysis used when the future income is expected to be variant, usually as a result of numerous lease obligations and/or anticipated changes in income and expenses. It is also particularly relevant when institutional buyers are the most likely purchasers of the subject because institutional buyers often place great weight on this analysis. The DCF analysis specifies the quantity, variability, timing, and duration of NOIs and cash flows. Selecting the proper yield rate (discount rate) is essential. CB Commercial must consider the target yield sought by investors as well as yields derived from comparable sales and/or market information. The methodology is: 1. Estimate the before-tax cash flows for each period of a projected holding period net of any capital expenditures such as leasing expenses and tenant improvements. - -------------------------------------------------------------------------------- 38 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- 2. Estimate a discount rate and a terminal overall capitalization rate. 3. Estimate a selling price, known as the reversion, for the end of the projected holding period. 4. The cash flows and the reversion are then discounted to a present value estimate. APPROPRIATE CAPITALIZATION METHOD A number of factors were considered in evaluating the appropriateness of using the direct capitalization method and/or the DCF technique including the occupancy status, lease structures, above/below market rents and typical buyer behavior. As a result of considering the foregoing factors, both the DCF technique and the income capitalization technique are employed in this appraisal. ESTIMATE OF MARKET RENT Rent analysis involves both a study of market (comparable) rentals and the subject's existing rents (if any). Market rent is the rent that a property would most probably command in the open market; indicated by the current rents paid and asked for comparable space. SUMMARY OF COMPARABLE RENTALS CB Commercial surveyed competitive properties and lease transactions for comparison to the subject. The selected comparable rentals are summarized in the following chart with a map and discussions of each comparable provided on the following pages. - -------------------------------------------------------------------------------- 39 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
=========================================================================================================================== SUMMARY OF COMPARABLE SATELLITE SPACE RENTALS - --------------------------------------------------------------------------------------------------------------------------- Center Name & Term Start No. Location Tenant (Yrs) Date Size Rent/SF Escalation Comments - --------------------------------------------------------------------------------------------------------------------------- 1 Birney Plaza Everything 3 yrs 09/95 4,000 $7.00 Flat for 1 3-yr Option @ $7.50/SF Route 11, $0.99 Store term % Rent = 3% over $933,000 Moosic, PA Mattress Man 5 Yrs 07/93 4,000 $9.00 1996 Step 1 5-yr Option @ $11.00/SF to $10/SF % Rent = 4% over Natural Breakpoint - --------------------------------------------------------------------------------------------------------------------------- 2 Mark Plaza Spectrum Rents 5 yrs 10/95 3,600 $8.00 Flat for 1 5-yr Option @ $9.00/SF N/S Third Avenue, term Edwardsville, PA Keens Floral 5 yrs 8/95 7,000 $8.00 Annual 1 5-yr Option @ $8.83/SF Factory step-up % Rent = 3% over Natural Breakpoint Mattress Man 5 yrs 7/95 3,600 $11.50 Flat for No Option (Pad Site) term % Rent = 4% over Natural Breakpoint - --------------------------------------------------------------------------------------------------------------------------- 3 Dunmore Plaza Malcom's 5 yrs 4/95 1,900 $11.50 $950 Step 1 3 yr Option @ $7.50/SF 1400 Monroe Ave., in Year 2 % Rent = 3% over $933,000 Dunmore, PA Great Wall 10 yrs 1/95 1,900 $11.35 3%/Yr No Option Chinese Rest. No % Rent Little 5 yrs 4/94 1,900 $9.25 Periodic 2 5-yr Option @ $9.25/SF & Caesar's Pizza Step up @ $10.75/SF - No % Rent - --------------------------------------------------------------------------------------------------------------------------- 4 Triangle Plaza Electronic 5 yrs 06/95 2,400 $11.50 Annual No Option Route 115 Systems Percentage No % Rent Wilkes-Barre, PA increase TCBY 5 yrs 03/95 2,200 $11.00 Annual 1 5 yr Option Percentage No % Rent increase Party City 10 yrs 05/94 9,910 $11.00 $1.65/SF No Option Step-up No % Rent - --------------------------------------------------------------------------------------------------------------------------- 5 Gateway Plaza Holiday Hair 3 yrs 06/94 950 $15.48 Annual No Option N/S Third Avenue, Fashions Percentage No % Rent Edwardsville, PA (Renewal) increase McKenzie 3 yrs 06/94 3,080 $ 8.50 Annual No Option Percentage No % Rent increase =========================================================================================================================== SUMMARY OF COMPARABLE ANCHOR SPACE RENTALS =========================================================================================================================== 6 Pottstown Center Wal-Mart 20 yrs 07/95 121,267 $6.99 Flat for 6, 5-yr Options Montgomery Cty. term No % Rent Pottstown, PA 7 Route 6 Mall K-Mart 25 yrs 03/95 119,229 $5.77 Flat for 10, 5-yr Options N/S Route 6, term % Rent = 1% over $20,000,000 Wayne County Honesdale, PA 8 Bradford Towne K-Mart 25 yrs 07/94 94,481 $5.00 Flat for 10, 5-yr Options Centre, term % Rent = 1% over $16,875,000 Bradford County Wysox, PA 9 Builder's Square Builder's 25 yrs 03/94 106,400 $10.05 Flat for 10, 5-yr Options Center Square term No % Rent Cetronia Road Lehigh County Whitehall, PA - --------------------------------------------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ===========================================================================================================================
- -------------------------------------------------------------------------------- 40 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- COMPARABLE RENTALS MAP [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF COMPARABLE RENTALS We have obtained comparable leases from shopping centers situated within the subject's regional market area which are summarized above. In terms of satellite space, comparables #1 through #5 indicate that the leased spaces range in size from 950 to 9,910 square feet which adequately represents the subject's square footage range. All the leases cited were signed between 1994 and 1995 and represent the most recent leasing activity in the competitive marketplace. The leases include a variety of uses and represent a similar tenant mix to the subject center. The above leases are considered to be generally similar to the subject in terms of condition, quality and location. We have examined the average effective rental rates of these comparables and determined that the effective rent is similar to the face rent, since their was no tenant improvements or free and escalation's were similar. These comparable centers are located throughout the Scranton--Wilkes-Barre metropolitan region in competitive areas to the subject property. Furthermore, they are all similar in age to the subject and considered to be of a similar functional design. All of the retail leases were written on a triple net basis, whereby the tenants assume their proportionate share of operating expenses, real estate taxes, and insurance. The higher rates typically reflect smaller satellite spaces, while lower rental rates are typically negotiated for anchor sized spaces. We have also considered asking rental rates in our analysis, however, they were deemed to be less reliable than the leases presented. As a result, we have not included asking rentals. The satellite space face rental rates ranged from $5.50/SF to $15.48/SF with a central tendency of $10.22/SF. However, the majority fell between $8.00/SF and $11.50/SF. The rents at the lower end of the range, or those in the $7.50/SF range best reflect the subject property's achievable rents. As a result, we have concluded to a rental rate within for the subject's satellite space of $7.50/SF. Based upon our analysis, we feel that a "net" rental rate of $7.50/SF is adequately supported. The anchor leases, or comparables #6 through #9, ranged from $5.00/SF to $10.05/SF with an average lease rate of $6.95/SF. The anchor rents reflect a close range for a variety of locations with the exception of comparable #9. However, this lease to builder's Square has no percentage rent clause and, as a result, agreed to pay a higher basic rent. As a result, we have concluded to a rental rate for the subject's anchor space of $6.00/SF. Based upon our analysis, we feel that a "net" rental rate of $6.00/SF is adequately supported. - -------------------------------------------------------------------------------- 42 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- In addition to surveying comparable centers, we have also analyzed the most recent lease transactions at the subject center. Since there has been only one recent lease at the subject property, it has been given substantial weight in our analysis of the subject's market rental rates. The lease is detailed below. ANALYSIS OF SUBJECT LEASES The following table summarizes the subject property's recent lease history.
================================================================================================================== SUMMARY OF RECENT SUBJECT LEASES ================================================================================================================== New / Term Contract TI's / Free Tenant Renew (Years) Date Size Rent Escalation SF Rent - ------------------------------------------------------------------------------------------------------------------ The Everything $0.99 Store New 1 yr 9/95 6,500 $5.50 $950 Step in None None 3 mos Year 2 - ------------------------------------------------------------------------------------------------------------------ No Option % Rent = 3% over $1,191,660 ================================================================================================================== Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ==================================================================================================================
The typical lease at the subject property is triple net whereby the tenant is responsible for reimbursing the landlord for such expenses as real estate taxes, insurance, and common area maintenance (CAM). The most recent retail lease at the subject had a face rental rate of $5.50/SF. Although the term was for only 15 months, the more recent leases signed at the subject typically have terms between 3 and 5 years which is similar to quoted market terms. Based on our survey of local leasing agents and owners, five year terms are most common with satellite tenants such as those found in the subject center. Therefore, for the purpose of our analysis, we have utilized a lease term of five years for all tenant suites for speculative renewals. In our interviews with competing leasing agents and owners, we also inquired as to the market norm for rent escalations. Most of the agents agreed that one to three year leases are typically flat, with some sort of escalation or bump in five to 10 year leases. Recent leases at the subject either have annual percentage increases (generally 3%) or a periodic step-up. Regardless of the method of escalations, most of the subject and comparable leases have escalations which are intended to be similar to anticipated increases in the CPI. We have utilized an annual rental escalation in all speculative leases of 3.0%. According to the subject leasing agent, TI's are typically not given, with the owner generally providing a " vanilla box" for new tenants and nothing for renewals. Retail space is typically taken "as-is" with the tenant fitting out their space to their own specifications. We project that no tenant alteration allowance would be provided for new or renewal leases. - -------------------------------------------------------------------------------- 43 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- All of the leasing agents surveyed reported minimal if any free rent. A review of the subject lease abstracts indicated that no free rent was typically offered to tenants that leased space in the subject center over the past three to four years. Therefore, based upon the most recent leases written at the subject center as well as conversations with local leasing agents, we have projected that no free rent will be offered to prospective tenants. CONCLUSIONS: MARKET RENT ESTIMATE FOR THE SUBJECT PROPERTY Based on the previous analysis, the current market lease parameters for the subject property are estimated as follows: ================================================================================ CONCLUDED MARKET LEASE TERMS (PER SQUARE FOOT / YEAR) - -------------------------------------------------------------------------------- Category Satellite Space Anchor Space - -------------------------------------------------------------------------------- Market Rent $7.50 (NNN) $6.00 (NNN) Lease Term 5 Years 25 Years Annual Escalation 3.0% 0.0% Tenant Improvements $0.00 $0.00 Free Rent (Months) 0 Months 0 Months - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ CONTRACT RENT As discussed, the subject's leasable area is divided into 8 suites within one building. Currently, the subject is 100% occupied. Through our research of the subject property, which included a complete review of lease abstracts, rent rolls (both current and historical), and detailed discussions with the on-site property manager, the following rent roll summary was utilized to detail currently leased suites and general information employed for this approach. Additionally, within the Addenda are copies of the tenant lease assumptions, generated by Pro-ject+ Plus, a computerized lease-by-lease analysis program. Information submitted to us and contained in the Addenda provide additional support to the data and assumptions inputted for this method and is assumed to be correct and reliable. CB Commercial reserves the right to amend our input assumptions if any documentation is subsequently available which contradicts that assumed for this method. Located on the following page is the subject rent roll summary. - -------------------------------------------------------------------------------- 44 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
===================================================================================================== KINGSTON PLAZA - THIRD AVENUE RENT ROLL - ----------------------------------------------------------------------------------------------------- Square Rent / SF Annual Suite Tenant Feet Begin End Rent - ----------------------------------------------------------------------------------------------------- 1 The Tan Generation 1,000 9/87 8/96 $ 9.90 $ 9,900 2 Basically Bagels 4,000 3/91 3/02 $10.50 $ 42,000 3 Hong Kong Chinese Restaurant 1,500 8/89 8/99 $10.00 $ 15,000 4 Uptown Video 2,000 12/89 4/97 $ 7.08 $ 14,160 5 Tony's Pizza 2,000 4/92 3/01 $ 8.00 $ 16,000 6 Penna Liquors 2,824 9/93 8/97 $ 7.01 $ 19,800 7 Price Chopper 45,000 12/81 12/06 $ 5.44 $245,000 8 The Everything $0.99 Store 6,500 9/95 12/96 $ 5.50 $ 35,750 ----- ------ -------- Total Leased Square Feet 64,824 Average Rent: $ 6.13 $397,610 Vacant Space 0 Occupancy-Overall 100% - ----------------------------------------------------------------------------------------------------- Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. =====================================================================================================
ANALYSIS OF TENANCY The subject is primarily comprised of local tenants. Additionally, Price Chopper is a national tenant. Overall, the quality of the tenancy is considered to be good for the area. Current rental rates range from $5.44/SF to $10.50/SF. SPECIAL LEASE PROVISIONS AND ASSUMPTIONS The following discussion summarizes any lease provisions and assumptions of special note. Pending Leases There are no pending leases. Renewal Options Options to renew at below or above market rent may have an impact on the valuation analysis. For example, if below market renewals are exercised, they may result in a downward impact on value. However, to the extent that re-tenanting costs are saved (rent loss during downtime, tenant improvements, leasing commissions, etc.), there may be an advantage in having the tenant renew at some rate below market rent in order to avoid these costs. The majority of recent leases at the subject have renewal options. Where applicable, if a tenants' option rent is below market, we have assumed that the tenant would exercise its renewal option. Conversely, if a tenants' option rent is above market, we have assumed that the tenant would not exercise its renewal option and terminate the lease. - -------------------------------------------------------------------------------- 45 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- EXPENSE REIMBURSEMENTS Current and future hypothetical retail leases which will encumber the subject property will be based upon triple net lease structures and are consistent with recent leases written at the subject property and the market in general. The tenants will be responsible for reimbursing the landlord for their pro rata share of operating expenses including their pro rata share of CAM, real estate taxes and insurance. The pro rata share calculations for future tenants are calculated by dividing the tenant's occupied rentable area by the gross leasable area of the center. The following is a breakdown of the subject's historical recoveries and CB Commercial's projections for the proforma. It should be noted that the subject's operating statements are based on a fiscal year basis, beginning June 1 and continuing through May 31. Expense Reimbursements Expense reimbursements for the subject property consist of real estate taxes, insurance, and common area maintenance. Common area maintenance expenses consist utilities, management fees, general and administrative, cleaning and repairs and maintenance expenses. The subject's historical expense reimbursements are as follows: ============================================ EXPENSE REIMBURSEMENT -------------------------------------------- Year Total $ Amount -------------------------------------------- 1993 $102,915 1994 $107,662 1995 $101,277 1996 Budget $103,622 Year 1 Pro Forma $103,037 -------------------------------------------- Source: Mark Centers Trust ============================================ The first year of our DCF model indicates reimbursements of $103,037. Historical expense reimbursements have fluctuated in recent years due in part to a drop in expenses as management has attempted to cut costs in recent years. The budgeted amount appears to be reasonable based upon projected expenses and reimbursement clauses for existing tenants. OTHER INCOME This income category can be derived from several different sources including tenant service income, merchants association fees, late fee income, short-term storage income, professional services provided for the tenants by the landlord/management, ground rent as well as other miscellaneous sources. The subject has no additional sources of income. - -------------------------------------------------------------------------------- 46 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- PERCENTAGE RENT INCOME In addition to the basic rental charges, the tenants are sometimes responsible for paying the landlord additional rent equal to a specified percentage of the tenant's gross sales made in, upon, or from the premises, over a breakpoint factor or according to a specific schedule. Six of the subject tenants have percentage rent clauses contained within their leases.
=================================================================================================================== PERCENTAGE RENT CLAUSES =================================================================================================================== CBC's FY97 Tenant Breakpoint Percent Year Gross Sales % Rent Paid Projection - ------------------------------------------------------------------------------------------------------------------- The Tan Generation $165,000 6.00% 1994 $ 69,979 $ 0 $ 60,000 1995 $ 60,073 $ 0 Basically Bagels $800,000 5.00% 1994 $1,003,114 $11,089 $1,200,000 1995 $1,241,209 $14,508 Uptown Video $236,000 6.00% 1994 $ 67,466 $ 0 $ 67,000 1995 $ 66,847 $ 0 Tony's Pizza $333,000 6.00% 1994 $149,847 $ 0 $110,000 1995 $141,868 $ 0 Price Chopper $20,000,000 1.25% 1994 $12,989,451 $ 0 $14,200,000 1995 $14,213,629 $ 0 Everything $0.99 Store $1,191,600 3.00% 1994 N/A $ 0 $200,000 1995 $16,755 * $ 0 - ------------------------------------------------------------------------------------------------------------------- * Everything $0.99 Store has sales averaging $16,755 per month for first 3.0 months. - ------------------------------------------------------------------------------------------------------------------- Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ===================================================================================================================
Given the aforementioned sales histories, we have projected the gross sales for each tenant as illustrated in the right column of the table. We have also projected that the gross sales figures will grow by 2.0% per annum over the course of the cash flow projection. POTENTIAL GROSS INCOME The potential gross income for the subject property is summarized as follows. - -------------------------------------------------------------------------------- 47 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- =========================================================================== STABILIZED POTENTIAL GROSS INCOME (FY 1997) - --------------------------------------------------------------------------- Totals - --------------------------------------------------------------------------- Total Minimum Rent $ 395,574 Expense Reimbursement - Common Area Maintenance Recovery $ 48,625 - Real Estate Tax Recovery $ 46,455 - Insurance Recovery $ 7,957 - Percentage Rent $ 20,500 --------- Potential Gross Income $ 519,111 - --------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. =========================================================================== VACANCY AND COLLECTION LOSS This is an allowance for reductions in potential income attributable to vacancies, tenant turnover, and non-payment of effective rent. In the direct capitalization process, a market-derived, stabilized vacancy and collection loss estimate is subtracted from potential gross income in order to arrive at effective gross income. The subject property is currently 100% leased. Furthermore, the subject's competitive market exhibits a vacancy level of approximately 4.0%. Due to the long-term occupancies at the subject property (including option terms), the average vacancy rate over the projected holding period, which is attributed to downtime between leases, approximates a minimal 2.0%. In addition to vacancy, we estimated a blended credit loss factor of 2.0% which takes into account both national and local tenants at the subject center. Therefore, the combined long-term vacancy and credit loss factor for the subject property amounts to approximately 4.0%. In the first year of our discounted cash flow analysis, the combined credit loss amounts to $ 9,049. EFFECTIVE GROSS INCOME Given our estimate of potential gross income, other income, and a vacancy and collection loss, the estimated effective gross income is derived as follows: ================================================== EFFECTIVE GROSS INCOME (FY 1997) ================================================== Potential Gross Income: $ 519,111 Less: Collection Loss $ 9,049 --------- Effective Gross Income: $ 510,062 ================================================== Our estimate of effective gross income used in direct capitalization is $510,062. This figure is the same as the EGI in the first year of our cash flow in the discounted cash flow method. - -------------------------------------------------------------------------------- 48 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- OPERATING EXPENSE ANALYSIS In projecting the revenues and expenses for the subject property, we have analyzed the historical figures for fiscal years 1993 through 1995 as well as management's forecast of revenues and expenses for fiscal year 1996. In addition, we have utilized the Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers publication to assist in our analysis. We have considered the category " Regions 1, 2 & 3 (East): Open Shopping Centers" as the most representative of the subject property. A summary of the average expenses taken from this publication increased at an inflationary rate to reflect our fiscal year 1997 analysis are presented as follows: ======================================================= COMPARABLE EXPENSE ANALYSIS ------------------------------------------------------- Expense Category P.S.F. ------------------------------------------------------- General & Administrative $ 0.08 Repairs & Maintenance $ 0.36 Services $ 0.46 Utilities $ 0.18 ------ Total CAM $ 1.08 Real Estate Taxes $ 1.26 Insurance $ 0.15 Management Fees $ 0.41 Total Operating Expenses $ 2.90 ------------------------------------------------------- Source: Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers ======================================================= Our estimate of the subject's stabilized expenses are detailed as follows. Common Area Maintenance The subject's historical and projected common area maintenance (CAM) expenses are as follows: ========================================================== COMMON AREA MAINTENANCE EXPENSE ---------------------------------------------------------- Year Total $ Amount ---------------------------------------------------------- 1993 $ 50,363 1994 $ 57,291 1995 $ 49,461 1996 Budget $ 60,284 CB 1996 Projection $ 55,000 ---------------------------------------------------------- Source: Mark Centers Trust ========================================================== - -------------------------------------------------------------------------------- 49 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Common area maintenance (CAM) charges generally includes various items such as general and administrative expenses, repair and maintenance expenses, utilities, and general services such as cleaning, landscaping, security, and common area insurance expenses. We project the total CAM expense in 1996, before management fees, at $55,000 or $0.85/SF. This is lower than the average CAM expenses for the properties surveyed by IREM of $1.23/SF for open shopping centers in the east. However, the subject's historical expenses have ranged from $0.76/SF to $0.93/SF. Given the subject's historical CAM expense structure coupled with its effective age, occupancy and the services provided, the subject's projected CAM figure is considered reasonable. Property Taxes Historical and budgeted property tax expenses are as follows: ======================================================== PROPERTY TAX EXPENSE -------------------------------------------------------- Year Total $ Amount -------------------------------------------------------- 1993 $ 41,801 1994 $ 49,128 1995 $ 49,840 1996 Budget $ 49,500 Year 1 Pro Forma $ 50,473 -------------------------------------------------------- Source: Mark Centers Trust ======================================================== As discussed fully within the tax and assessment data section of the report, estimated taxes for fiscal year 1997 are projected to be $50,473. It appears that the 1996 budgeted taxes have not accounted for an increase in the 1996-1997 tax rate. Insurance Historical and budgeted insurance expenses are as follows: ======================================================== INSURANCE EXPENSE -------------------------------------------------------- Year Total $ Amount -------------------------------------------------------- 1993 $ 6,751 1994 $ 8,881 1995 $ 8,545 1996 Budget $ 9,936 CB 1996 Projection $ 9,000 -------------------------------------------------------- Source: Mark Centers Trust ======================================================== - -------------------------------------------------------------------------------- 50 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Insurance at the subject property includes both liability insurance and fire insurance. This expense has increased from 1993 to 1995 to a level of $0.13/SF. We have placed primary emphasis on the subject's historical and 1996 budgeted insurance expenses and have estimated the insurance expense at $9,000, or $0.14/SF. Professional Management Fee In order to maintain the control of the property and subsequently ensure the stream of income that it generates, it is necessary to employ either internal or outside management. This expense is non-recoverable. In the case of the subject property, the property is managed internally and no management expense has been reflected in historical statements. Typical professional management fees in the local market range from 1.0% to 5.0% of effective gross income. Based upon the size and nature of the subject improvements, we have applied a management expense of 3.0% of effective gross income. Because management is calculated based on a percentage of effective gross income, this expense will vary each year because of fluctuations in the income stream. In the first year of our analysis, this expense equates to $15,302 or $0.24/SF. Replacement Reserves This expense typically represents a reserve for future replacement of long-lived items. The amount of reserve and whether it is included or not in the direct capitalization and DCF analyses depends on the actions reflected by buyers and sellers in the local market. Based on the available comparable data and discussions with brokers and investors, replacement reserves generally range from $0.05/SF to $0.20/SF for retail properties of similar quality and condition as the subject. Given the subject's condition, we have estimated this expense at $0.10/SF or $6,482 in 1996 increasing at our projected annual expense growth rate of 3.0%. Based on discussions with local market participants, replacement reserves are typically subtracted in calculating NOI when determining the cash flow in the DCF analysis. Total Concluded Operating Expenses The concluded stabilized operating expenses for the subject total an estimated $137,268, or $2.12 per rentable square foot. This total expense estimate is for the first year of our proforma and incorporates fiscal year conversions not reflected in the previous 1996 calendar year estimates. The expense is slightly lower than the average indicated by IREM ($2.90/SF) but judged reasonable given the historical and budgeted operations of the subject. - -------------------------------------------------------------------------------- 51 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- CAPITALIZATION RATE There are several methods for deriving an overall capitalization rate for direct capitalization. A common method for establishing an overall capitalization rate for properties similar to the subject is to review the criteria of major investors in the marketplace. This may serve as a check against other techniques or may be a primary source when ample data exists. While derivation of capitalization rates from comparable sales is preferable, we were unable to obtain adequate income and expense data to employ this method from the sales used within the Sales Comparison Approach. Therefore, the investor survey method is used as the primary approach in deriving our overall capitalization rate. The subject property is a retail shopping center that would be attractive to either a local or a national investor. The category in the published investor survey most comparable to the subject is class B community shopping center. The investors typically interviewed for the survey are regional or national investors associated with pension funds, REIT's, insurance companies, financial institutions, etc. The information below is taken from CB Commercial most recent National Investor Survey (first quarter 1996).
==================================================================================================== SUMMARY OF INVESTOR SURVEY OVERALL CAPITALIZATION RATES COMMUNITY SHOPPING CENTERS - CLASS B - ---------------------------------------------------------------------------------------------------- Investor Survey R(o) Range Average Date of Survey - ---------------------------------------------------------------------------------------------------- CB Commercial National Investor Survey 9.0% - 11.5% 10.3% First Quarter, 1996 - ---------------------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ====================================================================================================
The previous survey indicates an overall range of 9.0% to 11.5% for community shopping centers with an average of approximately 10.3%. The capitalization rate reflects the quality and duration of the income stream as well as the physical characteristics of the property. The tenant mix at the subject center is considered to be good for the area with local and national tenants. The largest tenant at the subject, Price Chopper, is a national tenant. The Price Chopper lease does not expire until the year 12/06. Lease expiration is fairly even throughout the holding period which reduces risk. The center is currently 100% occupied. Overall, the quality, quantity and duration of the cash flow is considered to be good. With respect to physical characteristics, the subject is a functional community center of average quality and in average overall condition. In addition, we have included market-extracted overall rates as presented below. - -------------------------------------------------------------------------------- 52 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- =========================================================================== MARKET-EXTRACTED OVERALL CAPITALIZATION RATES --------------------------------------------------------------------------- No Property Name/ Location OAR --------------------------------------------------------------------------- 1 15th & Allen St. Center 1401-1451 Allen Street, Allentown 10.89% Lehigh County, PA 2 Stefko Shopping Center Stefko Boulevard, Bethlehem 10.99% Northampton County, PA 3 MacArthur Plaza 2419 MacArthur Road, Whitehall Township 10.76% Lehigh County, PA 4 Columbia Mall N/E/C Route 42 @ Interstate-80, Bloomsburg 10.70% Columbia County, PA --------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. =========================================================================== The market extracted overall rates indicate a range from a low of 10.70% to a high of 10.99% with a central tendency of 10.84%. These overall rates coincide with the rates indicated by CB Commercial's National Investor Survey. Based upon this survey and the factors discussed above, an 10.5% overall capitalization rate (towards the middle of the range) appears to be appropriate for the subject property. Direct Capitalization Summary A summary of the direct capitalization method as applied to the subject property is illustrated in the following table: - -------------------------------------------------------------------------------- 53 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ===================================================================== KINGSTON PLAZA DIRECT CAPITALIZATION SUMMARY --------------------------------------------------------------------- Category Total P.S.F. --------------------------------------------------------------------- Income Total Market Rent $ 395,574 $ 6.10 Recovery Income 103,037 1.59 ------- ---- Gross Rental Income $ 498,611 $ 7.69 Less: Vacancy and Credit Loss ( 9,049) (0.14) Plus: Other Income 0 0.00 Plus: Percentage Rents $ 20,500 0.32 ----------- ---- Effective Gross Income $ 510,062 $ 7.87 Expenses Common Area Maintenance (CAM) ( 55,688) (0.86) Real Estate Taxes ( 50,683) (0.78) Insurance ( 9,113) (0.14) Management Fees ( 15,302) (0.24) Replacement Reserves ( 6,482) (0.10) ------------- ------ Total Expenses $ (137,268) $ (2.12) OER 27% Net Operating Income $ 372,794 $ 5.75 CAPITALIZATION OF NOI: @10.5% $ 3,550,419 $ 54.77 Reconciled Value $ 3,550,000 $ 54.76 --------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ===================================================================== The concluded market value of the subject property, based on the direct capitalization method, is $3,550,000. - -------------------------------------------------------------------------------- 54 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW ANALYSIS Our DCF assumptions are summarized as follows. Most of the following assumptions have been discussed and supported within prior sections of the report. A discussion of the discount rate, terminal capitalization rate and holding period follow the assumptions summarized below. ================================================================================ SUMMARY OF DISCOUNTED CASH FLOW ASSUMPTIONS THIRD AVENUE - -------------------------------------------------------------------------------- General Assumptions Start Date June 1, 1996 Terms of Analysis 10 years Basis (Calendar/Fiscal) Fiscal Software Project + Plus Growth Rate Assumptions Expenses 3.0% Market Rent 3.0% Real Estate Taxes 1.0% in Yr 1, 2.0% in Yr 2, 3.0% in Yr 3 and thereafter Inflation (CPI) 3.0% Market Rent Assumptions Anchor $ 6.00 (NNN) Satellite $ 7.50 (NNN) Leasing Assumptions Lease Term 5 Years Renewal Probability 50% Weighted Average of: Tenant Improvements $0.00 Months of Free Rent 0 Leasing Commissions (Cashed-Out) 4.5% Down Time Between Leases 6 Months Tenant Assumptions Existing tenant leases were entered at contract rent and terms. Speculative renewals assume tenants will pay base rent plus their pro rata share of CAM, real estate taxes and insurance. Contractual recoveries were input into the model per their respective leases. Miscellaneous Assumptions Credit Loss 2.0% Avg. Occupancy Over Projection Period 98% Structural Maintenance/ Reserves ($/SF) $ 0.10 Financial Assumptions Discount Rate (IRR) 12.50% Terminal Overall Capitalization Rate (RO) 11.00% Costs of Sale 2.00% - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 55 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNT RATE ANALYSIS A discount rate is a rate of return on capital utilized to capitalize future payments or receipts to present value. It is based on the time value of money concept. For appraisal purposes, the rate used to convert income to property value should represent the annual rate of return necessary to attract investment capital. The rate is influenced by many considerations, including the degree of apparent risk, market attitudes with respect to future inflation, the prospective rates of return for alternative investment opportunities, supply of and demand for mortgage funds, and the availability of tax shelters. Because rates of return used in income capitalization represent prospective rates, as distinguished from historical rates, special consideration is given to market perceptions of risk and changes in purchasing power. Although it is not possible to prove conclusively the suitability of a particular rate of return on the basis of market evidence, the chosen rate should be consistent with the available evidence. Rate selection requires judgment and knowledge concerning prevailing market attitudes and economic indicators. Both the discount rate and the reversionary capitalization rate must reflect the relative risk perceived by investors for the specific market being studied. Generalities must be avoided. To determine such rates, we have used surveys of real estate investors analyzed and adjusted for comparative returns found in the capital markets. National investor surveys include data on investors operating regionally and nationally, such as representatives of insurance companies, commercial banks, pension funds, investment banking firms, syndication firms, and investment advisory firms. Such companies invest in all types of properties, including office buildings, retail shopping centers, hotels, apartment complexes, and industrial facilities. These surveys are valuable for determining general parameters but must be honed to the local market. Based on surveys from CB Commercial Real Estate Group Inc. for the first quarter 1996, investment criteria for numerous market participants including investors that would be in competition for acquiring a property such as the subject are illustrated below. ============================================================================ FIRST QUARTER 1996 NATIONAL INVESTOR SURVEY CLASS B COMMUNITY SHOPPING CENTERS ============================================================================ TYPE OF FIRM OVERALL CAP. RATES GENERAL DISCOUNT REAL RATE INFLATION RATE OF RETURN ------------------------ GOING-IN TERMINAL (IRR) (RRR) ============================================================================ Range: 9-11.5 10-12 2-4 12-14.5 9.5-11 Average 10.3 10.8 3.1 13.1 10.1 ============================================================================ Change from -20 +10 -40 +50 +190 3rd Qtr Survey ============================================================================ Source: CB Commercial Real Estate Group Inc. - 1st Quarter 1996 - -------------------------------------------------------------------------------- 56 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- We have surveyed national real estate investors for their investment criteria when purchasing real estate such as the subject. Investor expectations for inflation range from 2% to 4%, with an average of 3.1%. We have selected an inflation rate for our analysis of 3.0%. The discount rate reflects the quality and duration of the income stream as well as the physical and locational characteristics of the property. As discussed within the overall rate section, the tenant mix at the subject center is considered to be good for the area with mostly regional tenants. Moreover, lease expiration is fairly even throughout the holding period which reduces risk. The center is currently 100% occupied. Overall, the quality, quantity and duration of the cash flow is considered to be good. With respect to physical characteristics, the subject is a functional Community center of average quality and in average overall condition. In addition, the subject is situated in an average retail location with relatively low volumes of traffic. In general, the discount rate (IRR) is comprised on a safe rate (usually Treasuries) and a risk premium. The risk premium is difficult to quantify but with sound logic a reasonable rate can be ascertained. The chart presented below graphically depicts real estates position within the risk/reward graph. INVESTOR RISK VERSUS RETURN REQUIREMENTS Anticipated Return _ Real Estate _ Common Stocks _ Corporate Bonds _ Mortgage Backed Securities _ Municipal Bonds _ T - Bills Riskless Rate ----------------------------------------------------------------------------- Perceived Level of Risk US Treasury notes and bonds are considered risk free since they are backed by the United States government. Their rates only fluctuate with perceived inflation. The use of this, or any short term investment including the prime rate or LIBOR is meaningless when compared to an investment with a 10 year holding period. Accordingly, as a starting point, we only considered - -------------------------------------------------------------------------------- 57 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- risk free or nearly risk free investments with a maturity of 10 years. These include Treasuries, corporate bonds and municipal bonds. Adjusted for daily fluctuations, these debt offerings are yielding 5.59% to 8.25%. Mortgaged backed securities generally tend to fall above these instruments. The next layer of risk would include debt rated as low as BBB. These notes are yielding as much as 10%. Long-term mortgages are also yielding over 10% considering the mortgage constant on a note priced at 250 to 300 basis points over comparable Treasuries. Riskier investments such as junk bonds vary widely from 12% to 22% on an unleveraged basis. Real estate, as indicated on the chart above falls between common stock (10%) and junk bonds (16%). To eliminate the burden of illiquidity, REIT's and similar investments are being created. They represent a quasi-real estate opportunity. REIT's are currently providing dividends ranging from 6% to 8% but offer potential yields of 15% to 20% Various financial instruments are yielding between 5.59% and 8.25% depending upon the type of investment as indicated on the chart below based on data obtained from the Federal Reserve Statistical Release for the week ending May 17, 1996. It should be noted that over the past year we have witnessed an increase in the interest rate of all of the following instruments. =================================================================== INSTRUMENT RATE ------------------------------------------------------------------- Prime Rate 8.25% ------------------------------------------------------------------- Municipal Bonds 5.96% ------------------------------------------------------------------- Short-Term Treasury Securities (1 year) 5.59% ------------------------------------------------------------------- Long Term Treasury Securities (10 years) 6.68% ------------------------------------------------------------------- Corporate Aaa Bonds (10+ years) 7.57% ------------------------------------------------------------------- Corporate Baa Bonds (10 + years) 8.25% =================================================================== The risk premium is the rate added to Treasuries to account for illiquidity, the capital markets and the economy. Whether the risk premium decreases in the near term is dependent solely on inflation, the growth of the economy and capital markets. During 1995, the Federal Reserve decreased interest rates in order to stimulate a sluggish economy. The low rates have continued during the early portion of 1996, however, have recently begun to ascend. Over the longer term, as the existing supply of space is absorbed, the risk premium will decrease. Based on the above, we feel that the current required rate of return (IRR) for the subject would fall slightly below the middle of the range at 12.5%. This reflects the quality, quantity and cash flow risk associated with the subject property. As such, we have utilized a discount rate of 12.5% in our analysis. - -------------------------------------------------------------------------------- 58 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- TERMINAL RATE To estimate the appropriate terminal capitalization rate, we have considered the rates reflected in the investment criteria outlined above for both going-in and terminal capitalization. Typically, under stable market conditions, the terminal capitalization rate will be greater than the going-in rate to reflect the risk associated with the holding period. Typically 50 to 100 basis points are added on to the going-in cap rate under stable market conditions to account for the additional risk. Furthermore, our national investor survey also indicated an average terminal capitalization 50 basis points greater than the going-in rate. It is evident by historical and current performance of the center and it is our opinion that the subject property will encounter average-to-good market acceptance in the future. It is our opinion that a terminal capitalization rate of 11.0% is the most appropriate for the subject property. A 2% deduction for costs of sale has been utilized to reflect the net reversionary value. HOLDING PERIOD To apply the discounted cash flow analysis, an estimate must be made of the appraised property's holding period based on typical investors' motives in the local market. Historical investment holding periods of similar shopping centers typically have ranged from 10 to 15 years. A 10- to 15- year holding period was analyzed to test the property's sensitivity to roll-overs. A 10-year holding period was selected. Our discounted cash flow analysis is presented on the following page. - -------------------------------------------------------------------------------- 59 Kingston Plaza Shopping Center Cash Flow Report Building Size 64,824 Reconciled Value $3,282 Cost of Sales 2.000% Value per SF $50.63 Hold Period (Years) 10 % Residual of Recon. Val 34.3% Reduce Residual by Cap Exp Yes Direct Cap Rate 11.00% Residual Discount Rate 12.50% Direct Cap Value $3,388
----------------------------------------------------------------------------------------- Compounded Ann. 1996 1997 1998 1999 2000 2001 2002 2003 Ave. Growth ----------------------------------------------------------------------------------------- 0.56% BASE RENT 395,574 411,979 412,814 411,333 414,966 408,416 405,136 418,729 N/A Free Rent 0 0 0 0 0 0 0 0 3.89% Expense Recoveries 103,037 115,239 118,081 120,838 124,934 127,824 133,423 140,730 5.20% Percentage Rent 20,500 21,710 22,944 24,203 25,487 26,797 23,330 33,137 - ------------- ----------------------------------------------------------------------------------------- 1.51% GROSS INCOME 519,111 548,928 553,839 556,374 565,387 563,037 561,889 592,596 1.15% Credit/Vacancy Loss (9,049) (9,176) (9,245) (9,356) (9,465) (9,381) (9,825) (10,063) N/A Miscellaneous Incomes 0 0 0 0 0 0 0 0 - ------------- ----------------------------------------------------------------------------------------- 1.52% EFFECTIVE GROSS INCOME 510,062 539,752 544,594 547,018 555,922 553,656 552,064 582,533 - ------------- 2.76% TOTAL EXPENSES 137,349 141,099 144,694 148,618 152,851 156,869 161,029 166,276 - ------------- ----------------------------------------------------------------------------------------- 1.02% NET OPERATING INCOME 372,713 398,653 399,900 398,400 403,071 396,787 391,035 416,257 N/A Commissions 14,396 0 0 8,810 0 15,032 29,526 0 N/A Tenant Improvements 0 0 0 0 0 0 0 0 N/A Capital Additions 0 0 0 0 0 0 0 0 - ------------- ----------------------------------------------------------------------------------------- N/A TOTAL DEDUCTIONS 14,396 0 0 8,810 0 15,032 29,526 0 - ------------- ----------------------------------------------------------------------------------------- 0.98% CASH FLOW 358,317 398,653 399,900 389,590 403,071 381,755 361,509 416,257 - ------------- TOTAL CASH FLOW 398,653 399,900 389,590 403,071 381,755 361,509 416,257 389,949 ----------------------------------------------------------------------------------------- Debt Service N/A N/A N/A N/A N/A N/A N/A N/A ----------------------------------------------------------------------------------------- CASH FLOW AFTER DEBT 358,317 398,653 399,900 389,590 403,071 381,755 361,509 416,257 ----------------------------------------------------------------------------------------- CUMULATIVE SURPLUS N/A N/A N/A N/A N/A N/A N/A N/A ========================================================================================= -------------------------------------------------------------------------------------------------------------------- Implied Overall Rate 11.36% 12.15% 12.19% 12.14% 12.28% 12.09% 11.92% 12.68% Cash on Cash Return 10.92% 12.15% 12.19% 11.87% 12.28% 11.63% 11.02% 12.68% ====================================================================================================================
------------------------------ 2004 2005 2006 ------------------------------ BASE RENT 409,971 424,751 418,201 Free Rent 0 0 0 Expense Recoveries 142,452 149,299 150,920 Percentage Rent 33,436 33,730 34,019 ------------------------------ GROSS INCOME 585,859 607,780 603,140 Credit/Vacancy Loss (9,946) (10,282) (10,147) Miscellaneous Income 0 0 0 ------------------------------ EFFECTIVE GROSS INCOME 575,913 597,498 592,993 ------------------------------ TOTAL EXPENSES 170,540 175,788 180,388 ------------------------------ NET OPERATING INCOME 405,373 421,710 412,605 Commissions 15,424 0 17,730 Tenant Improvements 0 0 0 Capital Additions 0 0 0 ------------------------------ TOTAL DEDUCTIONS 15,424 0 17,730 ------------------------------ CASH FLOW 389,949 421,710 394,875 ------------------------------ TOTAL CASH FLOW 421,710 394,875 ------------------------------ Debt Service N/A N/A ------------------------------ CASH FLOW AFTER DEBT 389,949 421,710 394,875 ------------------------------ CUMULATIVE SURPLUS N/A N/A N/A ============================== - --------------------------------------------------------- Implied Overall Rate 12.35% 12.85% 12.57% Cash on Cash Return 11.88% 12.85% 12.03% ========================================================= [GRAPH OMITTED - NOI and CF Trends, 1996-2006] - ------------------------------------------------------- Sale/Yield Matrix (000's) Terminal Cap Rate ------------------------------------------ Disc Rate 10.25% 10.50% 10.75% 11.00% - ------------------------------------------------------- 11.00% 3,405 3,378 3,352 3,327 ------------------------------------------ 11.25% 3,356 3,329 3,304 3,279 ------------------------------------------ 11.50% 3,308 3,282 3,257 3,233 ------------------------------------------ 11.75% 3,261 3,235 3,211 3,187 ------------------------------------------ 12.00% 3,215 3,189 3,165 3,142 ------------------------------------------ 12.25% 3,169 3,145 3,121 3,099 - ------------------------------------------------------- - ------------------------------------------------------- ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW CONCLUSION We used "PRO-JECT +plus" computer software to create a cash flow model for a long term hold. Reference is made to the "Annual Cash Flow Report", generated by the Pro-ject software, on the previous page which provides a summary of cash flow from all sources. We utilized a 10-year holding period and have discounted the cash flow on a fiscal year basis from 1997 to 2006. The cash flow incorporates the terms of existing leases during the analysis period and our assumptions regarding the lease-up of vacant space. It also calculates renewal rentals when leases expire based on current market rent escalated at a growth factor. In addition, a forecast was made for 15 years to check for any irregularities in the income stream which may artificially affect the reversionary sale price. It should be noted that based on our analysis of the extended holding period indicated that there was no irregularities. We capitalized the 11th year net operating income to determine the reversionary value at the end of year 10. CONCLUSION OF INCOME CAPITALIZATION APPROACH The preceding analysis indicates the following conclusions: ========================================================== INCOME CAPITALIZATION APPROACH VALUES ---------------------------------------------------------- Method Indicated Value ---------------------------------------------------------- Direct Capitalization $ 3,550,000 Discounted Cash Flow $ 3,300,000 ---------------------------------------------------------- Source: CB Commercial Real Estate ========================================================== Greater emphasis is placed on the DCF analysis because it is the method likely to be used by a typical investor. As a result, based on the Income Capitalization Approach, CB Commercial concludes a value estimate for the subject property of $3,300,000. This equates to $50.91 per rentable square foot. - -------------------------------------------------------------------------------- 60 CONCLUSION ================================================================================ RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- RECONCILIATION OF VALUE CB Commercial was instructed to estimate the market value of the leased fee interest in the subject property. The value conclusions for each applicable approach are summarized below. =============================================================== SUMMARY OF VALUE CONCLUSIONS --------------------------------------------------------------- Cost Approach N/A Sales Comparison Approach $ 3,400,000 Income Capitalization Approach $ 3,300,000 --------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. =============================================================== The Income Capitalization Approach is considered the most persuasive method for valuing the subject property. This approach is predicated on the principle of anticipated economic benefits and, therefore, best reflects the investment characteristics of the subject. Properties such as the subject are typically purchased by investors; thus, this approach must closely parallels the anticipated analysis that would be employed by the most typical purchaser. Since the subject property has a number of existing leases with a variety of terms, the DCF technique best models the future cash flow stream to a prospective buyer. The Sales Comparison Approach is predicated on the principle that an investor would pay no more for an existing property than for a comparable property with similar utility. This approach is contingent on the reliability and comparability of available data. The data developed was considered sufficiently reliable to reach a value conclusion by the Sales Comparison Approach. However, due to the lack of truly comparables sales in recent years, this method is given secondary consideration in the reconciliation. The Cost Approach is predicated on the principle that an investor would pay no more for an existing property than it would cost to acquire land and construct a building with similar utility. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Furthermore, due to the age of the subject and current market conditions, accrued depreciation would be substantial and difficult to estimate. An investor would not use the Cost Approach due to the imprecise nature of estimating the accrued physical, functional, or external depreciation affecting the improvements. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. - -------------------------------------------------------------------------------- 62 ================================================================================ RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- The final value conclusion and the approaches relied upon give strong consideration to the market behavior of the typical buyer and current market environment for the property appraised. Based on the foregoing analysis, it is concluded that the market value of the leased fee interest in the subject property, subject to the assumptions and limiting conditions, as of May 15, 1996, is: THREE MILLION THREE HUNDRED THOUSAND DOLLARS ($ 3,300,000) This value is subject to all of the assumptions and limiting conditions stated throughout the report, including specific assumptions and limiting conditions. - -------------------------------------------------------------------------------- 63 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS 1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to total that would adversely affect marketability or value. CB Commercial is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CB Commercial, however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject property's title should be sought from a qualified title company that issues or insures title to real property. 2. It is assumed that improvements have been constructed or will be constructed according to approved architectural plans and specifications and in conformance with recommendations contained in or based upon any soils report(s). Unless otherwise specifically noted in the body of this report, it is assumed: that any existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are, or will be upon completion, in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that it or they will withstand any known elements such as windstorm, hurricane, tornado, flooding, earthquake, or similar natural occurrences; and, that the improvements, as currently constituted, conform to all applicable local, state, and federal building codes and ordinances. CB Commercial professionals are not engineers and are not competent to judge matters of an engineering nature. CB Commercial has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CB Commercial by ownership or management; CB Commercial inspected less than 100% of the entire interior and exterior portions of the improvements; and CB Commercial was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CB Commercial reserves the right to amend the appraisal conclusions reported herein. 3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property was not observed by the appraisers. CB Commercial has no knowledge of the existence of such materials on or in the property. CB Commercial, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the appraisal. 4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CB Commercial. This report may be subject to amendment upon re-inspection of the subject property subsequent to repairs, modifications, alterations and completed new construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels of operation. - -------------------------------------------------------------------------------- 64 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 5. It is assumed that all factual data furnished by the client, property owner, owner's representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CB Commercial has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, Assessor's Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CB Commercial reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CB Commercial of any questions or errors. 6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CB Commercial will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject. 7. CB Commercial assumes no private deed restrictions, limiting the use of the subject property in any way. 8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposit or subsurface rights of value involved in this appraisal, whether they be gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred. 9. CB Commercial is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject. 10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market. 11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CB Commercial does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CB Commercial. 12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CB Commercial to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form. 13. Unless otherwise noted in this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated. 14. This study may not be duplicated in whole or in part without the specific written consent of CB Commercial nor may this report or copies hereof be transmitted to third parties without said consent, which consent CB Commercial reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or its contents shall not be published, in whole or in part, in any public document without the express - -------------------------------------------------------------------------------- 65 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- written consent of CB Commercial which consent CB Commercial reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a "sale" or "offer for sale" of any "security", as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CB Commercial shall have no accountability or responsibility to any such third party. 15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report. 16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used. 17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area have been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report. 18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CB Commercial unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CB Commercial assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance. 19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or client's designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CB Commercial assumes responsibility for any situation arising out of the Client's failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired. 20. CB Commercial assumes that the subject property analyzed herein will be under prudent and competent management and ownership; neither inefficient or super-efficient. 21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the appraisal report. 22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist. 23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Not withstanding any discussion of possible readily achievable barrier removal construction items in this report, CB Commercial has not made a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect on the value estimated herein. Since CB Commercial has no specific information relating to this issue, nor is CB Commercial qualified to make such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject property. - -------------------------------------------------------------------------------- 66 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 24. For our analysis, we have relied on the information provided by the detailed rent roll and information provided by the subject leasing agent. We have assumed all information is correct. Furthermore, we have assumed all leases out for signature will be returned signed, and executed as of the date indicated to us by the leasing agent. We reserve the right to amend this appraisal should any of this information be later found to be incorrect. - -------------------------------------------------------------------------------- 67 ADDENDA ================================================================================ ADDENDA - -------------------------------------------------------------------------------- ADDENDA - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- ADDENDUM A - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- GLOSSARY OF TERMS assessed value Assessed value applies in ad valorem taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to market value, but it is usually calculated in relation to a market value base. + cash equivalency The procedure in which the sale prices of comparable properties sold with atypical financing are adjusted to reflect typical market terms. contract, coupon, face, or nominal rent The nominal rent payment specified in the lease contract. It does not reflect any offsets for free rent, unusual tenant improvement conditions, or other factors that may modify the effective rent payment. coupon rent See Contract, Coupon, Face, or Nominal Rent effective rent 1) The rental rate net of financial concessions such as periods of no rent during a lease term; may be calculated on a discounted basis, reflecting the time value of money, or on a simple, straight-line basis. ** 2) The economic rent paid by the lessee when normalized to account for financial concessions, such as escalation clauses, and other factors. Contract, or normal, rents must be converted to effective rents to form a consistent basis of comparison between comparables. face rent See Contract, Coupon, Face, or Nominal Rent fee simple estate Absolute ownership unen-cumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. ** floor area ratio (FAR) The relationship between the above-ground floor area of a building, as described by the building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area; also called building-to-land ratio. ** full service lease A lease in which rent covers all operating expenses. Typically, full service leases are combined with an expense stop, the expense level covered by the contract lease payment. Increases in expenses above the expense stop level are passed through to the tenant and are known as expense pass-throughs. going concern value Going concern value is the value of a proven property operation. It includes the incremental value associated with the business concern, which is distinct from the value of the real estate only. Going concern value includes an intangible enhancement of the value of an operating business enterprise which is produced by the assemblage of the land, building, labor, equipment, and marketing operation. This process creates an economically viable business that is expected to continue. Going concern value refers to the total value of a property, including both real property and intangible personal property attributed to the business value. + gross building area (GBA) The sum of all areas at each floor as measured to the exterior walls. insurable value Insurable Value is based on the replacement and/or reproduction cost of physical items that are subject to loss from hazards. Insurable value is that portion of the value of an asset or asset group that is acknowledged or recognized under the provisions of an applicable loss insurance policy. This value is often controlled by state law and varies from state to state. + investment value Investment value is the value of an investment to a particular investor based on his or her investment requirements. In contrast to market value, investment value is value to an individual, not value in the marketplace. Investment value reflects the subjective relationship between a particular investor and a given investment. When measured in dollars, investment value is the price an investor would pay for an investment in light of its perceived capacity to satisfy his or her desires, needs, or investment goals. To estimate investment value, specific investment criteria must be known. Criteria to evaluate a real estate investment are not necessarily set down by the individual investor; they may be established by an expert on real estate and its value, that is, an appraiser. + leased fee See leased fee estate - -------------------------------------------------------------------------------- ================================================================================ GLOSSARY OF TERMS - -------------------------------------------------------------------------------- leased fee estate An ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.** leasehold See leasehold estate leasehold estate The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.** load factor The amount added to usable area to calculate the rentable area. It is also referred to as a "rentable add-on factor" which, according to BOMA, "is computed by dividing the difference between the usable square footage and rentable square footage by the amount of the usable area. Convert the figure into a percentage by multiplying by 100. market value "as if complete" on the appraisal date Market value as if complete on the appraisal date is an estimate of the market value of a property with all construction, conversion, or rehabilitation hypothetically completed, or under other specified hypothetical conditions as of the date of the appraisal. With regard to properties wherein anticipated market conditions indicate that stabilized occupancy is not likely as of the date of completion, this estimate of value should reflect the market value of the property as if complete and prepared for occupancy by tenants. market value "as is" on the appraisal date Market value "as is" on the appraisal date is an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date of appraisal. market value Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1) A reasonable time is allowed for exposure in the open market; 2) Both parties are well informed or well advised, and acting in what they consider their own best interests; 3) Buyer and seller are typically motivated; 4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.*** marketing period The time it takes an interest in real property to sell on the market subsequent to the date of an appraisal. ** net lease Lease in which all or some of the operating expenses are paid directly by the tenant. The landlord never takes possession of the expense payment. In a Triple Net Lease all operating expenses are the responsibility of the tenant, including property taxes, insurance, interior maintenance, and other miscellaneous expenses. However, management fees and exterior maintenance are often the responsibility of the lessor in a triple net lease. A modified net lease is one in which some expenses are paid separately by the tenant and some are included in the rent. net rentable area (NRA) 1) The area on which rent is computed. 2) The Rentable Area of a floor shall be computed by measuring to the inside finished surface of the dominant portion of the permanent outer building walls, excluding any major vertical penetrations of the floor. No deductions shall be made for columns and projections necessary to the building. Include space such as mechanical room, janitorial room, restrooms, and lobby of the floor. * nominal rent See Contract, Coupon, Face, or Nominal Rent prospective future value "upon completion of construction" Prospective future value "upon completion of construction" is the prospective value of a property on the future date that construction is completed, based upon market conditions forecast to exist, as of that completion date. The value estimate at this stage is stated in current dollars unless otherwise indicated. prospective future value "upon reaching stabilized occupancy" Prospective future value "upon reaching stabilized occupancy" is the prospective value of a property at a future point in time when all - -------------------------------------------------------------------------------- ================================================================================ GLOSSARY OF TERMS - -------------------------------------------------------------------------------- improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. The value estimate at this stage is stated in current dollars unless otherwise indicated. reasonable exposure time The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market. ** rent see full service lease net lease contract, coupon, face, or nominal rent effective rent shell space Space which has not had any interior finishing installed, including even basic improvements such as ceilings and interior walls, as well as partitions, floor coverings, wall coverings, etc.. Usable Area 1) The area actually used by individual tenants. 2) The Usable Area of an office is computed by measuring to the finished surface of the office side of corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished surface of the dominant portion of the permanent outer building walls. Excludes areas such as mechanical rooms, janitorial room, restrooms, lobby, and any major vertical penetrations of a multi-tenant floor. * use value Use value is a concept based on the productivity of an economic good. Use value is the value a specific property has for a specific use. Use value focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to the property's highest and best use or the monetary amount that might be realized upon its sale. + value appraised During the real estate development process, a property typically progresses from a state of unimproved land to construction of improvements to stabilized occupancy. In general, the market value associated with the property increases during these stages of development. After reaching stabilized occupancy, ongoing forces affect the property during its life, including a physical wear and tear, changing market conditions, etc. These factors continually influence the property's market value at any given point in time. See also market value "as is" on the appraisal date market value "as if complete" on the appraisal date prospective future value "upon completion of construction" prospective future value "upon reaching stabilized occupancy" - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- ADDENDUM B ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] LOOKING EAST ON THIRD AVENUE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] LOOKING WEST ON THIRD AVENUE - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM C IMPROVED COMPARABLE SALES - -------------------------------------------------------------------------------- ADDENDUM C IMPROVED COMPARABLE SALES - -------------------------------------------------------------------------------- RETAIL SALE ================================================================================ Location Data Property Name: 15th & Allen Street Shopping Center Location: 1401-1451 Allen Street City: Allentown County: Lehigh State/Zip: Pennsylvania Assessor's Parcel No(s): G9SW3A-14-4 Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 4.12 Acres Excess Land: None Gross Leasable Area: Anchors: Laneco Supermarket 25,000 SF Local Tenant GLA: 21,503 SF Anchor Tenant GLA: 25,000 SF Total GLA: 46,503 SF GLA Purchased: 46,503 SF Year Built: 1950 Parking: Adequate Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 01/96 Marketing Time: N/A Grantor: Carriage Associates L.P. Grantee: Allenbeth Associates L.P. Document No.: 1558/220 Sale Price: $4,242,000 Financing: Market Terms Cash Equivalent Price: $4,242,000 Required Capital Cost: $0 Adjusted Sales Price: $4,242,000 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100 Existing or Pro Forma Income: N/A TOTAL P.S.F. ----- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $462,049 $9.94 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.89 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $91.22 Comments The 15th and Allen Street shopping center is a one-story neighborhood retail center located on the corner of 15th and Allen Streets in Downtown Allentown. This property is anchored by a Laneco Supermarket which occupies an estimated 25,000 square feet with the balance of the rentable area, 21,503 square feet allocated to 12 other satellite tenants. This center was built in the 1950's, however, it has undergone significant renovations since that time. Currently, the property is in average condition. At the time of sale, the property was 100% occupied. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Stefco Shopping Center Location: Stefco Boulevard City: Bethlehem County: Northampton State/Zip: Pennsylvania Assessor's Parcel No(s): N7SW1B-3-l Atlas Reference: N/A Physical Data Type: Community Land Area: 10.27 Acres Excess Land: None Gross Leasable Area: Anchors: Laneco Supermarket 65,000 SF Local Tenant GLA: 69,446 SF Anchor Tenant GLA: 65,000 SF Total GLA: 134,446 SF GLA Purchased: 134,446 SF Year Built: 1965 Parking: Adequate Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 01/96 Marketing Time: N/A Grantor: Carriage Associates L. P. Grantee: Allenbeth Associates L. P. Document No.: 1996-1/4082 Sale Price: $5,618,000 Financing: Market Terms Cash Equivalent Price: $5,618,000 Required Capital Cost: $0 Adjusted Sales Price: $5,618,000 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 95.2% Existing or Pro Forma Income: N/A TOTAL P.S.F. ----- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $617,577 $4.59 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.99 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $41.79 Comments The Stefco shopping center is a one-story community retail center located on Stefco Boulevard in Bethlehem. This property is anchored by a Laneco Supermarket which occupies an estimated 65,000 square feet with the balance of the rentable area, 69,446 square feet allocated to 21 other satellite tenants. This center was built in 1965, however it has undergone significant renovations in 1988. Currently, the property is in average condition. At the time of sale the property was 95.2% occupied. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: MacArthur Plaza Shopping Center Location: 2419 MacArthur Road (N/E/C Schadt Avenue) City: Whitehall Township County: Lehigh State/Zip: Pennsylvania Assessor's Parcel No(s): F9SW2-3-2 Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 2.20 Acres Excess Land: None Gross Leasable Area: Anchors: Staples 19,200 SF Blockbuster Video 6,930 SF Bell Atlantic 3,470 SF Local Tenant GLA: N/A Anchor Tenant GLA: 29,600 SF Total GLA: 29,600 SF GLA Purchased: 29,600 SF Year Built: 1988 Parking: Adequate Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 10/95 Marketing Time: N/A Grantor: P & D Schweitzer Grantee: Allentown Power Center L.P. Document No.: 1553/1123 Sale Price: $3,831,667 Financing: Cash to Seller Cash Equivalent Price: $3,831,667 Required Capital Cost: $0 Adjusted Sales Price: $3,831,667 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100% Existing or Pro Forma Income: N/A TOTAL P.S.F. ----- ------ Potential Gross Income: $495,121 $16.73 Vacancy and Credit Loss: N/A N/A Effective Gross Income: $495,121 $16.73 Expenses: $82,999 $2.80 Net Operating Income: $412,122 $13.92 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.76 % Projected IRR: N/A Effective Gross Multiplier (EGIM): 7.74 Operating Expense Ratio (OER): 16.76 % Price Per Square Foot: $129.45 Comments The MacArthur Plaza shopping center is a one-story neighborhood retail center located on MacArthur Road in Whitehall Township. This property is anchored by Staples which occupies 19,200 square feet with the balance of the rentable area, 10,400 square feet allocated to 2 other satellite tenants. This center was built in 1988 and is currently in average condition. At the time of sale, the property was 100% occupied. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Columbia Mall Location: N/E/Quadrant Of Route 42 @ Interstate 80 City: Bloomsburg County: Columbia State/Zip: Pennsylvania Assessor's Parcel No(s): 18.2-48-3 Atlas Reference: N/A Physical Data Type: Community Land Area: 48.69 Acres Excess Land: None Gross Leasable Area: Anchors: Hills 80,000 SF Sears 64,264 SF The Bon Ton 45,000 SF J.C. Penny 34,076 SF Local Tenant GLA: 128,024 SF Anchor Tenant GLA: 223,340 SF Total GLA: 351,364 SF GLA Purchased: 351,364 SF YearBuilt: 1988 Parking: Adequate Condition: Good Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 07/95 Marketing Time: N/A Grantor: C.M. Group Trust Grantee: MDC Investment Property-1, LLC Document No.: 601/538 Sale Price: $27,650,000 Financing: Cash to Seller Cash Equivalent Price: $27,650,000 Required Capital Cost: $0 Adjusted Sales Price: $27,650,000 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 96% Existing or Pro Forma Income: N/A TOTAL P.S.F ----- ----- Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $2,958,500 $8.42 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.70 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $78.69 Comments The Columbia Mall is a single-story retail center located off or Interstate 80 at Route 42 in Bloomsburg, Pennsylvania. This property is anchored by Hills which occupies 80,000 square feet as well as junior-anchors Sears (64,264 SF), The Bon Ton (45,000 SF), and J.C. Penny (34,076 SF). The balance of the rentable area 128,024 square feet allocated to numerous other satellite tenants. This center was built in 1988 and is currently in average condition. At the time of sale, the property was approximately 96% occupied with 13,000 square feet vacant. Retail sales for the center in 1994 reportedly averaged $165.00/SF, up 5.8% from the previous year. - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ ADDENDUM D RENTAL COMPARABLES - -------------------------------------------------------------------------------- ADDENDUM D RENTAL COMPARABLES - -------------------------------------------------------------------------------- RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Birney Plaza Location: N/S Route 11 City: Moosic County: Lackawanna State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 212,057 SF Year Built: 1972 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $3.00-$10.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 9/95 4,000 Everything $0.9 $7.00 N/A None flat 3.00 - -------------------------------------------------------------------------------- 7/93 4,000 Mattress Man $9.00 N/A None Step-up to $10/ 5.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 3 and 5 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Kingston Plaza Location: S/S Third Avenue East Of Pierce Street City: Kingston County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 64,824 SF Year Built: 1982 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Price Chopper Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$10.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 09/95 6,500 The Everything $5.50 N/A None $950 step in ye 1.30 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent lease includes a term for 1 year and 3 months. Additionally, the tenant has a percentage rent clause of 3.0% over a breakpoint of $1,191,660. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Mark Plaza Location: N/S Route 11 City: Edwardsville County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 176,786 SF Year Built: 1967 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 91.7% Overall: 9l.7% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $1.95-$11.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 10/95 3,600 Spectrum Rents $8 00 N/A None Flat 5.00 08/95 7,000 Keens Floral Fa $8.00 N/A Annual Step-up 5.00 07/95 3,600 Mattress Man $11.50 N/A Flat 5.00 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 91.7% leased. The most recent leases all include terms for 5 years. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Dunmore Plaza Location: 1400 Monroe Avenue City: Dunmore County: Lackawanna State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 45,380 SF Year Built: 1967 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Price Chopper Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $6.75-$11.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 4/95 1,900 Malcom's $11.50 N/A None $950 Step-up in 5.00 - -------------------------------------------------------------------------------- 1/95 1,900 Great Wall Chin $11.35 N/A 3.0% per year 10.00 - -------------------------------------------------------------------------------- 4/94 1,900 Little Caeser's $9.25 N/A Periodic Step-u 5.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 5 and 10 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Triangle Plaza Location: Route 115 City: Wilke-Barre County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 125,000 SF Year Built: 1971 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years (Estimate) Base Rent Per Square Foot: $9.00-$12.50 (Estimate) Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 6/95 2,400 Electronic Syst $11.50 N/A None Annual %age inc 5.00 - -------------------------------------------------------------------------------- 3/95 2,200 TCBY $11.00 N/A None Annual %age inc 5.00 - -------------------------------------------------------------------------------- 5/94 9,910 Party City $11.00 N/A None $1.65/SF step-u 10.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 5 and 10 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Gateway Plaza Location: N/S Route 11 City: Edwardsville County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 150,000 SF Year Built: 1969 Exterior Walls: Brick Veneer Condition: Fair Anchor Tenant: Parking: Adequate Lease Data Occupancy: Local: 65.0% Overall: 65 0 Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $8.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 6/94 950 Holiday Hair $15.48 N/A None Annual %age inc 3.00 - -------------------------------------------------------------------------------- 6/94 3,080 McKenzie $8.50 N/A None Annual %age inc 3.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 65% leased. The most recent leases all include terms for 3 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Pottstown Center Location: Route 663 City: Pottstown County: Montgomery State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 171,267 SF Year Built: 1976 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Wal-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $8.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 7/95 121,267 Wal Mart $6.99 N/A None Flat 20.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 20 years. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Route 6 Mall Location: N/S Route 6 City: Honesdale County: Wayne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 144,229 SF Year Built: 1978 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 3/95 119,229 K-Mart $5.77 N/A None Flat 25.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 20 years and includes a percentage rent clause on 1.0% over $20.0 million. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Bradford Towne Centre Location: N/S Route 6 City: Wysox County: Bradford State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 119,481 SF Year Built: 1972 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 7/94 94,481 K-Mart $5.00 N/A None Flat 25.00 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 25 years and includes a percentage rent clause on 1.0% over $16.875 million. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Builder's Square Shopping Center Location: Cetronia Road City: Whitehall County: Lehigh State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 106,400 SF Year Built: 1994 Exterior Walls: Brick Veneer Condition: Good Anchor Tenant: Builder's Square Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 3/94 106,400 Builder's Squar $10.05 N/A None Flat 25.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 25 years. Construction quality is good and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ ADDENDUM E STRATEGIC MAPPING, INC. REPORTS - -------------------------------------------------------------------------------- ADDENDUM E STRATEGIC MAPPING, INC. REPORTS - -------------------------------------------------------------------------------- Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 Kingston Plaza S.C. 1 Mile Radius 6/11/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 95.1 - ----------------------------------Demographics---------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 16,363 6,497 14,559 2.24 $ 28,284 2000 15,915 6,352 14,111 2.22 $33,258 - ------------------------------Expenditure Potential----------------------------- 1995 Area Yearly Growth Rate Per Household 1.43% Total 0.97% - -------------------------Retail Support Potential (000)------------------------- 1995: 678 sq. ft. - -------------------------------------------------------------------------------- Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 6,207 6,717 955 1,057 1.59% 93.3 Appliance Store 498 414 77 65 -3.65% 89.9 Auto-Aftermarket Store 10,530 10,608 1,621 1,670 0.15% 96.9 Convenience Store 5,767 5,759 888 907 -0.03% 98.0 Dept. Store 6,341 6,668 976 1,050 1.01% 92.4 Drug Store 5,541 6,661 853 1,049 3.75% 108.5 Electronics Store 2,308 2,936 355 462 4.93% 91.4 Fast Food Restaurant Store 5,932 5,125 913 807 -2.88% 95.6 Full Serv Restaurant Store 5,896 5,054 908 796 -3.04% 97.0 Furniture Store 2,187 1,982 337 312 -1.94% 90.7 Grocery Store 25,835 28,192 3,976 4,438 1.76% 97.3 Hardware Store 1,072 1,125 165 177 0.96% 89.7 Home Centers Store 4,643 5,291 715 833 2.64% 81.8 Jewelry Store 992 997 153 157 0.09% 90.3 Liquor Store 1,504 1,318 232 208 -2.61% 91.1 Mass Merchandiser Store 8,573 9,294 1,320 1,463 1.63% 93.2 Photo Store 117 113 18 18 -0.77% 93.6 Shoe Store 1,239 1,420 191 224 2.75% 95.8 Sporting Goods Store 1,040 1,175 160 185 2.46% 89.5 Toy Store 757 693 116 109 -1.74% 91.2 Variety Store 498 546 77 86 1.87% 94.5 Area defined by Circle: (41.258898,75.881047): 1 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 Kingston Plaza S.C. 1 Mile Radius 6/11/96 Benchmark = Regional Area Definition Detailed Report Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 351 581 54 92 10.59% 93.8 ------- ------- ------ ------ Total Shopping Center 97,829 102,668 15,058 16,163 All Other Stores 75,035 78,746 11,549 12,397 Total Retail 172,864 181,414 26,607 28,560 Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (41.258898,75.881047): 1 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 1 of 3 Kingston Plaza S.C. 1 Mile Radius 6/11/96 1980 Census 1990 Census Percent Total Percent Total Percent Change Population White 17,877 99.1 16,597 98.2 -7.2 Black 64 0.4 106 0.6 65.6 American Indian, Asian & Other 101 0.6 200 1.2 98.0 Total 18,043 100.0 16,903 100.0 -6.3 Hispanic 106 0.6 119 0.7 12.3 Age of Population: 0 - 5 1,052 5.8 1,014 6.0 -3.6 6 - 13 1,557 8.6 1,325 7.8 -14.9 14 - 17 999 5.5 711 4.2 -28.8 18 - 24 2,546 14.1 2,393 14.2 -6.0 25 - 34 2,541 14.1 2,258 13.4 -11.1 35 - 44 1,481 8.2 2,312 13.7 56.1 45 - 54 1,902 10.5 1,396 8.3 -26.6 55 - 64 2,386 13.2 1,689 10.0 -29.2 65 + 3,575 19.8 3,805 22.5 6.4 Median Age Total Population 37.2 38.2 2.8 Median Age Adult Population 48.4 44.8 -7.4 Age of Male Population: 0 - 5 530 6.5 531 6.8 0.2 6 - 13 803 9.8 687 8.8 -14.4 14 - 17 472 5.8 348 4.4 -26.3 18 - 24 1,331 16.2 1,220 15.6 -8.3 25 - 34 1,287 15.7 1,204 15.3 -6.4 35 - 44 728 8.9 1,161 14.8 59.5 45 - 54 852 10.4 679 8.7 -20.3 55 - 64 1,009 12.3 727 9.3 -27.9 65 + 1,183 14.4 1,288 16.4 8.9 Total 8,195 100.0 7,843 100.0 -4.3 Median Age Male Population 32.3 34.4 6.7 Median Age Adult Male Population 42.9 41.2 -4.1 Age of Female Population: 0 - 5 522 5.3 483 5.3 -7.5 6 - 13 754 7.7 638 7.0 -15.4 14 - 17 527 5.4 363 4.0 -31.1 18 - 24 1,215 12.3 1,173 12.9 -3.5 25 - 34 1,254 12.7 1,054 11.6 -15.9 35 - 44 753 7.6 1,151 12.7 52.9 45 - 54 1,050 10.7 717 7.9 -31.7 55 - 64 1,377 14.0 962 10.6 -30.1 65 + 2,392 24.3 2,517 27.8 5.2 Total 9,844 100.0 9,059 100.0 -8.0 Median Age Female Population 43.6 42.0 -3.7 Median Age Adult Female Population 52.6 50.4 -4.2 Area defined by Circle: (41.258898,75.881047): 1 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 2 of 3 Kingston Plaza S.C. 1 Mile Radius 6/11/96 1980 Census 1990 Census Percent Total Percent Total Percent Change Total Households 6,983 6,688 -4.2 Household Population 16,730 15,097 -9.8 Average Household Size 2.40 2.26 -5.8 Total Families 4,497 3,941 -12.4 Average Family Size 3.10 3.00 -3.3 Average Family Income $22,314 $43,530 95.1 Family Population 13,956 77.3 11,972 70.8 -14.2 Nonfamily Population 2,774 15.4 3,125 18.5 12.7 Group Quarters Population 1,313 7.3 1,804 10.7 37.4 Foreign Born Population 623 3.5 420 2.5 -32.6 Household Income: $ 0 - $ 9,999 2,530 35.7 1,405 20.9 -44.5 $ 10,000 - $ 14,999 1,264 17.9 828 12.3 -34.5 $ 15,000 - $ 24,999 1,939 27.4 1,245 18.5 -35.8 $ 25,000 - $ 34,999 777 11.0 1,074 16.0 38.2 $ 35,000 - $ 49,999 252 3.6 988 14.7 292.1 $ 50,000 - $ 74,999 168 2.4 696 10.3 314.3 $ 75,000 - $ 99,999 148 2.1 262 3.9 77.0 $ l00,000 - $ 149,999 116 1.7 $ 150,000 + 113 1.7 Median Household Income $ 13,991 $ 23,787 70.0 Average Household Income $ 17,583 $ 33,830 92.4 Per Capita Income $ 7,439 $ 15,086 102.8 Median Home Value $ 36,338 $ 65,119 79.2 Average Home Value $ 41,443 $ 82,609 99.3 Median Contract Rent $ 164 $ 299 82.3 Average Contract Rent $ 173 $ 314 81.5 Total Housing Units 7,459 100.0 7,106 100.0 -4.7 Owner Occupied 3,869 51.9 3,688 51.9 -4.7 Renter Occupied 3,118 41.8 3,002 42.2 -3.7 Vacant 476 6.4 418 5.9 -12.2 Mobile Home or Trailer 8 0.1 5 0.1 -37.5 Condominiums 0 0.0 48 0.7 0.0 Area defined by Circle: (41.258898,75.881047): 1 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 3 of 3 Kingston Plaza S.C. 1 Mile Radius 6/11/96 1980 Census 1990 Census Percent Total Percent Total Percent Change Occupation: Executive & Managerial 837 11.2 982 13.3 17.3 Professional Specialty 1,108 14.8 1,211 16.4 9.3 Technical Support 202 2.7 196 2.6 -3.0 Administrative Support 1,242 16.6 1,326 17.9 6.8 Sales 1,100 14.7 1,153 15.6 4.8 Total White Collar 4,489 59.8 4,868 65.8 8.4 Prod/Craft/Repair 718 9.6 583 7.9 -18.8 Machine Operators 623 8.3 462 6.2 -25.8 Trans/Material Moving 303 4.0 183 2.5 -39.6 Laborers 268 3.6 298 4.0 11.2 Total Blue Collar 1,964 26.2 1,526 20.6 -22.3 Farm/Forest/Fish 52 0.7 31 0.4 -40.4 Protective Service 140 1.9 147 2.0 5.0 Private Service 34 0.5 17 0.2 -50.0 Other Service 877 11.7 814 11.0 -7.2 Total Employed 7,504 93.1 7,411 95.9 -1.2 Unemployed 559 6.9 319 4.1 -42.9 Total Civil Labor Force 8,063 100.0 7,730 100.0 -4.1 Working Mothers 869 50.1 964 62.3 10.9 Child < 6 or < 6 & 6-17 285 16.4 381 24.6 33.7 Child 6-17 Only 584 33.7 583 37.7 -0.2 Nonworking Mothers 864 49.9 583 37.7 -32.5 Means of Transportation to Work: Drive Alone/Carpool 5,533 75.3 6,041 83.1 9.2 Public Transportation 437 6.0 158 2.2 -63.8 Other 1,374 18.7 1,075 14.8 -21.8 Area defined by Circle: (41.258898,75.881047): 1 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 Kingston Plaza S.C. 1 Mile Radius 6/11/96 1980 1990 1995 2000 Census Census Estimate Projection Total Population 18,043 16,903 16,363 15,915 White 99.1% 98.2% 97.7% 97.3% Black 0.4% 0.6% 0.8% 1.0% American Indian 0.1% 0.1% 0.1% 0.1% Asian 0.3% 1.0% 1.2% 1.5% Other 0.2% 0.2% 0.2% 0.2% Hispanic 0.6% 0.7% 0.7% 0.7% Total Households 6,983 6,688 6,497 6,352 Household Population 16,730 15,097 14,559 14,111 Average Household Size 2.40 2.26 2.24 2.22 Household Income $ 0 - 9,999 35.7% 20.9% 16.1% 12.7% $ 10,000 - 14,999 17.9% 12.3% 12.1% 9.9% $ 15,000 - 24,999 27.4% 18.5% 17.1% 16.0% $ 25,000 - 34,999 11.0% 16.0% 13.7% 13.4% $ 35,000 - 49,999 3.6% 14.7% 17.6% 16.9% $ 50,000 - 74,999 2.4% 10.3% 12.4% 15.2% $ 75,000 - 99,999 2.1% 3.9% 5.1% 6.8% $ 100,000 - 149,999 -- 1.7% 3.6% 6.0% $ 150,000 + -- 1.7% 2.3% 3.2% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 13,991 23,787 28,284 33,258 Aggregate HH Inc ($000) 124,453 227,747 266,187 309,812 Median Family Income ($) 18,318 32,333 38,446 45,207 Per Capita Income ($) 7,439 15,086 18,283 21,955 Median Age Total Population 37.2 38.2 38.7 39.0 Median Age Adult Population 48.4 44.8 46.1 46.5 Median Age Female Population 43.6 42.0 42.7 42.9 Median Age Adult Female Population 52.6 50.4 50.9 51.1 Median Age Male Population 32.3 34.4 34.8 35.1 Median Age Adult Male Population 42.9 41.2 42.2 42.5 Area defined by Circle: (41.258898,75.881047): 1 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 Kingston Plaza S.C. 1 Mile Radius 6/11/96 1980 1990 1995 2000 Census Census Estimate Projection Total Population by Age 18,043 16,903 16,363 15,915 0 - 5 5.8% 6.0% 6.0% 5.9% 6 - 13 8.6% 7.8% 7.9% 7.7% 14 - 17 5.5% 4.2% 5.6% 5.7% 18 - 24 14.1% 14.2% 12.5% 12.4% 25 - 34 14.1% 13.4% 13.2% 13.0% 35 - 44 8.2% 13.7% 13.3% 13.2% 45 - 54 10.5% 8.3% 9.6% 10.3% 55 - 64 13.2% 10.0% 8.8% 8.9% 65 - 74 19.8% 11.2% 11.2% 10.8% 75 - 84 - 8.5% 8.8% 8.7% 85 + - 2.9% 3.1% 3.3% Female Population by Age 9,844 9,059 8,767 8,508 0 - 5 5.3% 5.3% 5.4% 5.3% 6 - 13 7.7% 7.0% 7.0% 6.9% 14 - 17 5.4% 4.0% 5.5% 5.6% 18 - 24 12.3% 12.9% 11.4% 11.3% 25 - 34 12.7% 11.6% 11.4% 11.2% 35 - 44 7.6% 12.7% 12.3% 12.3% 45 - 54 10.7% 7.9% 9.3% 10.0% 55 - 64 14.0% 10.6% 9.0% 9.1% 65 - 74 24.3% 12.5% 12.7% 12.3% 75 - 84 - 11.0% 11.4% 11.2% 85 + - 4.3% 4.6% 4.9% Male Population by Age 8,195 7,843 7,602 7,409 0 - 5 6.5% 6.8% 6.6% 6.5% 6 - 13 9.8% 8.8% 9.0% 8.7% 14 - 17 5.8% 4.4% 5.7% 5.9% 18 - 24 16.2% 15.6% 13.8% 13.8% 25 - 34 15.7% 15.3% 15.3% 15.1% 35 - 44 8.9% 14.8% 14.6% 14.3% 45 - 54 10.4% 8.7% 10.0% 10.6% 55 - 64 12.3% 9.3% 8.6% 8.7% 65 - 74 14.4% 9.7% 9.4% 9.1% 75 - 84 - 5.6% 5.8% 5.9% 85 + - 1.2% 1.3% 1.4% Area defined by Circle: (41.258898,75.881047): 1 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 Kingston Plaza S.C. 3 Mile Radius 6/11/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 90.0 - ----------------------------------Demographics---------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 100,141 41,413 96,801 2.34 $25,453 2000 97,573 40,579 94,233 2.32 $ 29,936 - ------------------------------Expenditure Potential----------------------------- 1995 Area Yearly Growth Rate Per Household 1.42% Total 1.01% - -------------------------Retail Support Potential (000)------------------------- 1995: 4,090 sq. ft, - -------------------------------------------------------------------------------- Product Potential 1995 2000 1995 2000 Yearly Bench Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 36,075 39,050 871 962 1.60% 85.1 Appliance Store 3,089 2,562 75 63 -3.67% 87.4 Auto-Aftermarket Store 61,662 62,164 1,489 1,532 0.16% 89.1 Convenience Store 35,198 35,181 850 867 -0.01% 93.3 Dept. Store 37,220 39,159 899 965 1.02% 85.1 Drug Store 33,935 40,908 819 1,008 3.81% 104.3 Electronics Store 13,410 17,069 324 421 4.94% 83.3 Fast Food Restaurant Store 35,006 30,232 845 745 -2.89% 88.5 Full Serv Restaurant Store 34,733 29,746 839 733 -3.05% 89.6 Furniture Store 12,393 11,256 299 277 -1.91% 80.6 Grocery Store 160,685 175,636 3,880 4,328 1.80% 95.0 Hardware Store 6,579 6,902 159 170 0.96% 86.3 Home Centers Store 29,794 33,962 719 837 2.65% 82.3 Jewelry Store 5,921 5,948 143 147 0.09% 84.5 Liquor Store 9,390 8,230 227 203 -2.60% 89.2 Mass Merchandiser Store 51,172 55,505 1,236 1,368 1.64% 87.3 Photo Store 685 659 17 16 -0.77% 85.9 Shoe Store 7,221 8,271 174 204 2.75% 87.6 Sporting Goods Store 6,060 6,849 146 169 2.48% 81.8 Toy Store 4,482 4,103 108 101 -1.75% 84.8 Variety Store 2,974 3,265 72 80 1.88% 88.6 Area defined by Circle: (41.258898,75.881047): 3 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 Kingston Plaza S.C. 3 Mile Radius 6/11/96 Benchmark = Regional Area Definition Detailed Report Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 2,089 3,455 50 85 10.58% 87.5 ------- ------- ------ ------ Total Shopping Center 589,773 620,110 14,241 15,281 All Other Stores 452,357 475,624 10,923 11,721 Total Retail 1,042,130 1,095,734 25,164 27,002 Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (41.258898,75.881047): 3 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 1 of 3 Kingston Plaza S.C. 3 Mile Radius 6/11/96 1980 Census 1990 Census Percent Total Percent Total Percent Change Population White 109,223 98.5 100,832 97.6 -7.7 Black 1,128 1.0 1,565 1.5 38.7 American Indian, Asian & Other 533 0.5 879 0.9 64.9 Total 110,884 100.0 103,276 100.0 -6.9 Hispanic 442 0.4 579 0.6 31.0 Age of Population: 0 - 5 7,009 6.3 7,138 6.9 1.8 6 - 13 11,141 10.0 9,368 9.1 -15.9 14 - 17 6,803 6.1 4,734 4.6 -30.4 18 - 24 13,161 11.9 10,840 10.5 -17.6 25 - 34 15,002 13.5 14,782 14.3 -1.5 35 - 44 9,902 8.9 13,569 13.1 37.0 45 - 54 12,311 11.1 9,444 9.1 -23.3 55 - 64 15,171 13.7 11,270 10.9 -25.7 65 + 20,385 18.4 22,159 21.5 8.7 Median Age Total Population 37.3 38.4 2.8 Median Age Adult Population 49.0 46.9 -4.3 Age of Male Population: 0 - 5 3,492 6.9 3,659 7.7 4.8 6 - 13 5,672 11.2 4,673 9.9 -17.6 14 - 17 3,392 6.7 2,371 5.0 -30.1 18 - 24 6,539 12.9 5,395 11.4 -17.5 25 - 34 7,443 14.7 7,387 15.6 -0.8 35 - 44 4,831 9.5 6,709 14.2 38.9 45 - 54 5,570 11.0 4,536 9.6 -18.6 55 - 64 6,510 12.9 4,896 10.3 -24.8 65 + 7,165 14.2 7,757 16.4 8.3 Total 50,614 100.0 47,366 100.0 -6.4 Median Age Male Population 33.2 35.3 6.2 Median Age Adult Male Population 45.4 43.2 -4.8 Age of Female Population: 0 - 5 3,517 5.8 3,479 6.2 -1.1 6 - 13 5,469 9.1 4,695 8.4 -14.2 14 - 17 3,411 5.7 2,363 4.2 -30.7 18 - 24 6,622 11.0 5,445 9.7 -17.8 25 - 34 7,559 12.5 7,395 13.2 -2.2 35 - 44 5,071 8.4 6,860 12.3 35.3 45 - 54 6,741 11.2 4,908 8.8 -27.2 55 - 64 8,661 14.4 6,374 11.4 -26.4 65 + 13,220 21.9 14,402 25.8 8.9 Total 60,271 100.0 55,906 100.0 -7.2 Median Age Female Population 42.0 41.5 -1.1 Median Age Adult Female Population 52.0 50.9 -2.0 Area defined by Circle: (41.258898,75.881047): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 2 of 3 Kingston Plaza S.C. 3 Mile Radius 6/ll/96 1980 Census 1990 Census Percent Total Percent Total Percent Change Total Households 42,633 42,523 -0.3 Household Population 108,111 99,932 -7.3 Average Household Size 2.54 2.35 -7.3 Total Families 29,341 26,838 -8.5 Average Family Size 3.19 3.04 -4.8 Average Family Income $ 18,734 $ 34,289 83.0 Family Population 93,614 84.4 82,407 79.8 -12.0 Nonfamily Population 14,497 13.1 17,525 17.0 20.9 Group Quarters Population 2,773 2.5 3,340 3.2 20.4 Foreign Born Population 3,232 2.9 1,916 1.9 -40.7 Household Income: $ 0 - $ 9,999 16,585 38.8 9,697 22.9 -41.5 $ 10,000 - $ 14,999 7,976 18.6 5,547 13.1 -30.5 $ 15,000 - $ 24,999 11,615 27.1 8,559 20.2 -26.3 $ 25,000 - $ 34,999 4,345 10.2 6,840 16.2 57.4 $ 35,000 - $ 49,999 1,546 3.6 6,556 15.5 324.1 $ 50,000 - $ 74,999 450 1.1 3,682 8.7 718.2 $ 75,000 - $ 99,999 274 0.6 845 2.0 208.4 $ l00,000 - $ 149,999 352 0.8 $ 150,000 + 255 0.6 Median Household Income $ 13,016 $21,558 65.6 Average Household Income $ 15,395 $ 27,589 79.2 Per Capita Income $ 6,094 $ 11,686 91.8 Median Home Value $ 28,492 $ 50,570 77.5 Average Home Value $ 32,377 $ 59,942 85.1 Median Contract Rent $ 147 $ 259 76.2 Average Contract Rent $ 152 $ 270 77.6 Total Housing Units 45,436 100.0 45,029 100.0 -0.9 Owner Occupied 25,227 55.5 24,908 55.3 -1.3 Renter Occupied 17,410 38.3 17,617 39.1 1.2 Vacant 2,803 6.2 2,506 5.6 -10.6 Mobile Home or Trailer 267 0.6 406 0.9 52.1 Condominiums 213 0.5 317 0.7 48.8 Area defined by Circle: (41.258898,75.881047): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 3 of 3 Kingston Plaza S.C. 3 Mile Radius 6/11/96 1980 Census 1990 Census Percent Total Percent Total Percent Change Occupation: Executive & Managerial 3,242 7.3 4,472 9.9 37.9 Professional Specialty 4,547 10.2 5,642 12.5 24.1 Technical Support 1,004 2.3 1,411 3.1 40.5 Administrative Support 7,936 17.8 8,314 18.5 4.8 Sales 4,596 10.3 5,590 12.4 21.6 Total White Collar 21,325 47.9 25,429 56.5 19.2 Prod/Craft/Repair 5,159 11.6 4,680 10.4 -9.3 Machine Operators 6,873 15.5 3,889 8.6 -43.4 Trans/Material Moving 2,074 4.7 1,742 3.9 -16.0 Laborers 2,355 5.3 2,131 4.7 -9.5 Total Blue Collar 16,725 37.6 12,442 27.6 -25.6 Farm/Forest/Fish 264 0.6 282 0.6 6.8 Protective Service 930 2.1 942 2.1 1.3 Private Service 124 0.3 106 0.2 -14.5 Other Service 5,376 12.1 5,819 12.9 8.2 Total Employed 44,480 91.1 45,018 93.6 1.2 Unemployed 4,332 8.9 3,058 6.4 -29.4 Total Civil Labor Force 48,812 100.0 48,076 100.0 -1.5 Working Mothers 6,041 49.8 7,053 64.3 16.8 Child < 6 or < 6 & 6-17 1,993 16.4 2,798 25.5 40.4 Child 6-17 Only 4,048 33.4 4,255 38.8 5.1 Nonworking Mothers 6,094 50.2 3,912 35.7 -35.8 Means of Transportation to Work: Drive Alone/Carpool 34,870 80.3 38,808 87.9 11.3 Public Transportation 2,902 6.7 1,181 2.7 -59.3 Other 5,655 13.0 4,164 9.4 -26.4 Area defined by Circle: (41.258898,75.881047): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC -C1750-41 Page 1 of 2 Kingston Plaza S.C. 3 Mile Radius 6/11/96 1980 1990 1995 2000 Census Census Estimate Projection Total Population 110,884 103,276 100,141 97,573 White 98.5% 97.6% 97.2% 96.8% Black 1.0% 1.5% 1.8% 2.0% American Indian 0.1% 0.1% 0.1% 0.1% Asian 0.3% 0.6% 0.7% 0.8% Other 0.1% 0.2% 0.2% 0.3% Hispanic 0.4% 0.6% 0.7% 0.7% Total Households 42,633 42,523 41,413 40,579 Household Population 108,111 99,932 96,801 94,233 Average Household Size 2.54 2.35 2.34 2.32 Household Income $ 0 - 9,999 38.8% 22.9% 18.3% 14.7% $ 10,000 - 14,999 18.6% 13.1% 12.7% 10.7% $ 15,000 - 24,999 27.1% 20.2% 18.3% 17.2% $ 25,000 - 34,999 10.2% 16.2% 15.1% 14.2% $ 35,000 - 49,999 3.6% 15.5% 17.7% 17.1% $ 50,000 - 74,999 1.1% 8.7% 11.6% 15.7% $ 75,000 - 99,999 0.6% 2.0% 3.7% 5.5% $ 100,000 - 149,999 - 0.8% 1.9% 3.7% $ 150,000 + - 0.6% 0.8% 1.2% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 13,016 21,558 25,453 29,936 Aggregate HH Inc ($000) 658,775 1,167,838 1,366,893 1,587,314 Median Family Income ($) 16,700 29,211 34,489 40,563 Per Capita Income ($) 6,094 11,686 14,121 16,845 Median Age Total Population 37.3 38.4 39.0 39.6 Median Age Adult Population 49.0 46.9 47.4 47.9 Median Age Female Population 42.0 41.5 42.2 42.7 Median Age Adult Female Population 52.0 50.9 50.9 51.1 Median Age Male Population 33.2 35.3 35.9 36.3 Median Age Adult Male Population 45.4 43.2 44.0 44.5 Area defined by Circle: (41.258898,75.881047): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 Kingston Plaza S.C. 3 Mile Radius 6/11/96 1980 1990 1995 2000 Census Census Estimate Projection Total Population by Age 110,884 103,276 100,141 97,573 0 - 5 6.3% 6.9% 6.9% 6.8% 6 - 13 10.0% 9.1% 9.2% 9.2% 14 - 17 6.1% 4.6% 4.8% 4.9% 18 - 24 11.9% 10.5% 9.8% 9.8% 25 - 34 13.5% 14.3% 13.7% 13.4% 35 - 44 8.9% 13.1% 13.4% 13.1% 45 - 54 11.1% 9.1% 10.2% 11.0% 55 - 64 13.7% 10.9% 10.1% 10.1% 65 - 74 18.4% 11.9% 11.7% 11.3% 75 - 84 - 7.6% 7.9% 8.0% 85 + - 1.9% 2.2% 2.5% Female Population by Age 60,271 55,906 54,052 52,532 0 - 5 5.8% 6.2% 6.2% 6.1% 6 - 13 9.1% 8.4% 8.4% 8.4% 14 - 17 5.7% 4.2% 4.5% 4.5% 18 - 24 11.0% 9.7% 9.1% 9.1% 25 - 34 12.5% 13.2% 12.8% 12.3% 35 - 44 8.4% 12.3% 12.5% 12.4% 45 - 54 11.2% 8.8% 9.8% 10.6% 55 - 64 14.4% 11.4% 10.4% 10.4% 65 - 74 21.9% 13.4% 13.1% 12.6% 75 - 84 - 9.6% 10.0% 10.0% 85 + - 2.8% 3.2% 3.5% Male Population by Age 50,614 47,366 46,097 45,054 0 - 5 6.9% 7.7% 7.7% 7.5% 6 - 13 11.2% 9.9% 10.1% 10.1% 14 - 17 6.7% 5.0% 5.3% 5.3% 18 - 24 12.9% 11.4% 10.7% 10.5% 25 - 34 14.7% 15.6% 14.9% 14.6% 35 - 44 9.5% 14.2% 14.4% 14.0% 45 - 54 11.0% 9.6% 10.6% 11.5% 55 - 64 12.9% 10.3% 9.7% 9.8% 65 - 74 14.2% 10.3% 10.1% 9.8% 75 - 84 - 5.2% 5.5% 5.6% 85 + - 0.9% 1.1% 1.2% Area defined by Circle: (41.258898,75.881047): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 Kingston Plaza S.C. 5 Mile Radius 6/11/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 90.9 - ----------------------------------Demographics---------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 137,234 56,233 133,231 2.37 $26,004 2000 134,723 55,565 130,720 2.35 $ 30,575 - ------------------------------Expenditure Potential----------------------------- 1995 Area Yearly Growth Rate Per Household 1.42% Total 1.18% - -------------------------Retail Support Potential (000)------------------------- 1995: 5,612 sq. ft. - -------------------------------------------------------------------------------- Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 49,380 53,888 878 970 1.76% 85.8 Appliance Store 4,264 3,565 76 64 -3.52% 88.9 Auto-Aftermarket Store 84,868 86,282 1,509 1,553 0.33% 90.3 Convenience Store 48,226 48,606 858 875 0.16% 94.7 Dept. Store 51,020 54,118 907 974 1.19% 85.9 Drug Store 46,489 56,573 827 1,018 4.00% 105.2 Electronics Store 18,360 23,553 327 424 5.11% 84.0 Fast Food Restaurant Store 47,818 41,640 850 749 -2.73% 89.0 Full Serv Restaurant Store 47,392 40,928 843 737 -2.89% 90.1 Furniture Store 16,968 15,532 302 280 -1.75% 81.3 Grocery Store 219,878 242,308 3,910 4,361 1.96% 95.7 Hardware Store 9,169 9,697 163 175 1.13% 88.6 Home Centers Store 42,199 48,464 750 872 2.81% 85.8 Jewelry Store 8,146 8,249 145 148 0.25% 85.7 Liquor Store 12,857 11,363 229 205 -2.44% 89.9 Mass Merchandiser Store 70,135 76,698 1,247 1,380 1.81% 88.1 Photo Store 940 912 17 16 -0.61% 86.9 Shoe Store 9,853 11,380 175 205 2.92% 88.0 Sporting Goods Store 8,310 9,465 148 170 2.64% 82.6 Toy Store 6,160 5,690 110 102 -1.58% 85.8 Variety Store 4,072 4,509 72 81 2.06% 89.3 Area defined by Circle: (41.258898,75.881047): 5 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 Kingston Plaza S.C. 5 Mile Radius 6/11/96 Benchmark Regional Area Definition Detailed Report Product Potential 1995 2000 1995 2000 Yearly Bench- Within All Stores Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 2,861 4,767 51 86 10.75% 88.2 --------- --------- ------ ------ Total Shopping Center 809,368 858,188 14,393 15,445 All Other Stores 620,785 658,229 11,040 11,846 Total Retail 1,430,153 1,516,417 25,433 27,291 Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (41.258898,75.881047): 5 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Census Change Report CBC - C1750-41 Page 1 of 3 Kingston Plaza S.C. 5 Mile Radius 6/11/96 1980 Census 1990 Census Percent Total Percent Total Percent Change Population White 147,570 98.7 137,654 98.1 -6.7 Black 1,244 0.8 1,656 1.2 33.1 American Indian, Asian & Other 629 0.4 1,029 0.7 63.6 Total 149,446 100.0 140,339 100.0 -6.1 Hispanic 569 0.4 737 0.5 29.5 Age of Population: 0 - 5 9,623 6.4 9,803 7.0 1.9 6 - 13 15,366 10.3 12,887 9.2 -16.1 14 - 17 9,210 6.2 6,453 4.6 -29.9 18 - 24 17,147 11.5 14,035 10.0 -18.1 25 - 34 20,161 13.5 20,090 14.3 -0.4 35 - 44 13,758 9.2 18,513 13.2 34.6 45 - 54 16,946 11.3 13,269 9.5 -21.7 55 - 64 20,491 13.7 15,454 11.0 -24.6 65 + 26,743 17.9 29,822 21.2 11.5 Median Age Total Population 37.3 38.6 3.3 Median Age Adult Population 48.9 47.1 -3.6 Age of Male Population: 0 - 5 4,792 7.0 5,042 7.8 5.2 6 - 13 7,795 11.4 6,511 10.1 -16.5 14 - 17 4,642 6.8 3,227 5.0 -30.5 18 - 24 8,524 12.4 6,974 10.8 -18.2 25 - 34 10,023 14.6 10,003 15.5 -0.2 35 - 44 6,720 9.8 9,153 14.2 36.2 45 - 54 7,731 11.3 6,381 9.9 -17.5 55 - 64 8,870 12.9 6,798 10.5 -23.4 65 + 9,512 13.9 10,584 16.4 11.3 Total 68,609 100.0 64,687 100.0 -5.7 Median Age Male Population 33.4 35.6 6.5 Median Age Adult Male Population 45.5 43.6 -4.2 Age of Female Population: 0 - 5 4,831 6.0 4,761 6.3 -1.4 6 - 13 7,571 9.4 6,376 8.4 -15.8 14 - 17 4,568 5.7 3,226 4.3 -29.4 18 - 24 8,623 10.7 7,061 9.3 -18.1 25 - 34 10,138 12.5 10,087 13.3 -0.5 35 - 44 7,038 8.7 9,360 12.4 33.0 45 - 54 9,215 11.4 6,888 9.1 -25.3 55 - 64 11,621 14.4 8,656 11.4 -25.5 65 + 17,231 21.3 19,238 25.4 11.6 Total 80,836 100.0 75,654 100.0 -6.4 Median Age Female Population 41.7 41.6 -0.1 Median Age Adult Female Population 51.7 50.8 -1.6 Area defined by Circle: (41.258898,75.881047): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Census Change Report CBC - C1750-41 Page 2 of 3 Kingston Plaza S.C. 5 Mile Radius 6/11/96 1980 Census 1990 Census Percent Total Percent Total Percent Change Total Households 56,705 57,201 0.9 Household Population 146,136 136,337 -6.7 Average Household Size 2.58 2.38 -7.5 Total Families 40,066 37,151 -7.3 Average Family Size 3.20 3.04 -5.0 Average Family Income $ 18,712 $ 34,865 86.3 Family Population 128,064 85.7 114,049 81.3 -10.9 Nonfamily Population 18,072 12.1 22,288 15.9 23.3 Group Quarters Population 3,310 2.2 4,004 2.9 21.0 Foreign Born Population 4,166 2.8 2,458 1.8 -41.0 Household Income: $ 0 - $ 9,999 21,492 37.8 12,577 22.1 -41.5 $ 10,000 - $ 14,999 10,748 18.9 7,344 12.9 -31.7 $ 15,000 - $ 24,999 15,609 27.4 11,710 20.5 -25.0 $ 25,000 - $ 34,999 6,026 10.6 9,221 16.2 53.0 $ 35,000 - $ 49,999 2,136 3.8 9,045 15.9 323.5 $ 50,000 - $ 74,999 578 1.0 5,123 9.0 786.3 $ 75,000 - $ 99,999 330 0.6 1,161 2.0 251.8 $ l00,000 - $ 149,999 485 0.9 $ 150,000 + 354 0.6 Median Household Income $ 13,241 $21,991 66.1 Average Household Income $ 15,561 $28,269 81.7 Per Capita Income $6,061 $11,822 95.1 Median Home Value $ 29,207 $ 52,419 79.5 Average Home Value $ 32,897 $ 62,405 89.7 Median Contract Rent $ 144 $ 254 76.4 Average Contract Rent $ 148 $ 264 78.4 Total Housing Units 60,467 100.0 60,607 100.0 0.2 Owner Occupied 35,492 58.7 35,596 58.7 0.3 Renter Occupied 21,212 35.1 21,603 35.6 1.8 Vacant 3,762 6.2 3,406 5.6 -9.5 Mobile Home or Trailer 864 1.4 1,611 2.7 86.5 Condominiums 263 0.4 431 07 63.9 Area defined by Circle: (41.258898,75.881047): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Census Change Report CBC - C1750-41 Page 3 of 3 Kingston Plaza S.C. 5 Mile Radius 6/11/96 1980 Census 1990 Census Percent Total Percent Total Percent Change Occupation: Executive & Managerial 4,341 7.3 5,869 9.6 35.2 Professional Specialty 6,056 10.2 7,487 12.2 23.6 Technical Support 1,357 2.3 2,060 3.4 51.8 Administrative Support 10,326 17.4 11,267 18.4 9.1 Sales 5,794 9.8 7,409 12.1 27.9 Total White Collar 27,874 47.0 34,092 55.6 22.3 Prod/Craft/Repair 7,198 12.1 6,672 10.9 -7.3 Machine Operators 9,410 15.9 5,579 9.1 -40.7 Trans/Material Moving 2,833 4.8 2,493 4.1 -12.0 Laborers 3,155 5.3 3,007 4.9 -4.7 Total Blue Collar 22,936 38.7 17,751 29.0 -22.6 Farm/Forest/Fish 340 0.6 371 0.6 9.1 Protective Service 1,138 1.9 1,248 2.0 9.7 Private Service 153 0.3 109 0.2 -28.8 Other Service 7,222 12.2 7,695 12.6 6.5 Total Employed 59,323 90.9 61,260 93.6 3.3 Unemployed 5,941 9.1 4,172 6.4 -29.8 Total Civil Labor Force 65,264 100.0 65,432 100.0 0.3 Working Mothers 8,132 49.0 10,025 65.6 23.3 Child < 6 or < 6 & 6-17 2,656 16.0 3,984 26.1 50.0 Child 6-17 Only 5,476 33.0 6,041 39.5 10.3 Nonworking Mothers 8,451 51.0 5,263 34.4 -37.7 Means of Transportation to Work: Drive Alone/Carpool 47,530 82.0 53,389 88.9 12.3 Public Transportation 3,589 6.2 1,516 2.5 -57.8 Other 6,876 11.9 5,160 8.6 -25.0 Area defined by Circle: (41.258898,75.881047): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Trend Report CBC - C1750-4l Page 1 of 2 Kingston Plaza S.C. 5 Mile Radius 6/11/96 1980 1990 1995 2000 Census Census Estimate Projection Total Population 149,446 140,339 137,234 134,723 White 98.7% 98.1% 97.8% 97.5% Black 0.8% 1.2% 1.4% 1.5% American Indian 0.0% 0.1% 0.1% 0.1% Asian 0.3% 0.5% 0.6% 0.7% Other 0.1% 0.2% 0.2% 0.2% Hispanic 0.4% 0.5% 0.6% 0.7% Total Households 56,705 57,201 56,233 55,565 Household Population 146,136 136,337 133,231 130,720 Average Household Size 2.58 2.38 2.37 2.35 Household Income $ 0 - 9,999 37.8% 22.1% 17.5% 14.1% $ 10,000 - 14,999 18.9% 12.9% 12.5% 10.5% $ 15,000 - 24,999 27.4% 20.5% 18.3% 17.1% $ 25,000 - 34,999 10.6% 16.2% 15.2% 14.4% $ 35,000 - 49,999 3.8% 15.9% 17.8% 17.2% $ 50,000 - 74,999 1.0% 9.0% 12.2% 16.0% $ 75,000 - 99,999 0.6% 2.0% 3.8% 5.7% $ 100,000 - 149,999 - 0.9% 1.9% 3.7% $ 150,000 + - 0.6% 0.8% 1.3% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 13,241 21,991 26,004 30,575 Aggregate HH Inc ($000) 885,739 1,611,780 1,904,058 2,230,589 Median Family Income ($) 16,785 29,382 34,744 40,851 Per Capita Income ($) 6,061 11,822 14,291 17,064 Median Age Total Population 37.3 38.6 39.3 39.9 Median Age Adult Population 48.9 47.1 47.6 48.2 Median Age Female Population 41.7 41.6 42.3 42.9 Median Age Adult Female Population 51.7 50.8 50.8 51.3 Median Age Male Population 33.4 35.6 36.3 36.7 Median Age Adult Male Population 45.5 43.6 44.4 45.0 Area defined by Circle: (41.258898,75.881047): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Trend Report CBC-C1750-41 Page 2 of 2 Kingston Plaza S.C. 5 Mile Radius 6/11/96 1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 149,446 140,339 137,234 134,723 0-5 6.4% 7.0% 7.0% 6.8% 6-13 10.3% 9.2% 9.3% 9.3% 14-17 6.2% 4.6% 4.7% 4.8% 18-24 11.5% 10.0% 9.5% 9.4% 25-34 13.5% 14.3% 13.7% 13.3% 35-44 9.2% 13.2% 13.3% 13.1% 45-54 11.3% 9.5% 10.4% 11.2% 55-64 13.7% 11.0% 10.3% 10.3% 65-74 17.9% 11.9% 11.7% 11.3% 75-84 - 7.4% 7.9% 8.0% 85+ - 1.9% 2.2% 2.5% Female Population by Age 80,836 75,654 73,831 72,348 0-5 6.0% 6.3% 6.3% 6.2% 6-13 9.4% 8.4% 8.5% 8.4% 14-17 5.7% 4.3% 4.3% 4.4% 18-24 10.7% 9.3% 8.8% 8.8% 25-34 12.5% 13.3% 12.8% 12.4% 35-44 8.7% 12.4% 12.5% 12.4% 45-54 11.4% 9.1% 10.1% 10.9% 55-64 14.4% 11.4% 10.5% 10.6% 65-74 21.3% 13.3% 13.0% 12.6% 75-84 - 9.4% 9.9% 9.9% 85+ - 2.8% 3.2% 3.5% Male Population by Age 68,609 64,687 63,399 62,379 0-5 7.0% 7.8% 7.7% 7.6% 6-13 11.4% 10.1% 10.3% 10.2% 14-17 6.8% 5.0% 5.2% 5.2% 18-24 12.4% 10.8% 10.3% 10.2% 25-34 14.6% 15.5% 14.7% 14.5% 35-44 9.8% 14.2% 14.3% 13.9% 45-54 11.3% 9.9% 10.8% 11.6% 55-64 12.9% 10.5% 9.9% 10.0% 65-74 13.9% 10.3% 10.2% 9.9% 75-84 - 5.2% 5.5% 5.7% 85+ - 0.9% 1.1% 1.3% Area defined by Circle: (41.258898,75.881047): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Profile Report CBC-C1750-41 Page 1 of 4 Area 1 = Kingston Plaza S.C. 1 Mile Radius 6/11/96 Area 2 = Kingston Plaza S.C. 3 Mile Radius Area 3 = Kingston Plaza S.C. 5 Mile Radius Description Area 1 Area 2 Area 3 Population: 2000 Projection 15,915 97,573 134,723 1995 Estimate 16,363 100,141 137,234 1990 Census 16,903 103,276 140,339 1980 Census 18,043 110,884 149,446 Percent Change, 1980-1990 -6.3 -6.9 -6.1 Percent Change, 1990-1995 -3.2 -3.0 -2.2 1995 Population by Race: % White 97.7 97.2 97.8 % Black 0.8 1.8 1.4 % American Indian 0.1 0.1 0.1 % Asian 1.2 0.7 0.6 % Other 0.2 0.2 0.2 % Hispanic 0.7 0.7 0.6 1995 Population by Age: % 0-5 6.0 6.9 7.0 % 6-13 7.9 9.2 9.3 % 14-17 5.6 4.8 4.7 % 18-20 5.5 4.4 4.2 % 21-24 7.0 5.5 5.3 % 25-34 13.2 13.7 13.7 % 35-44 13.3 13.4 13.3 % 45-54 9.6 10.2 10.4 % 55-64 8.8 10.1 10.3 % 65-74 11.2 11.7 11.7 % 75-84 8.8 7.9 7.9 % 85+ 3.1 2.2 2.2 Median Age Total Population 38.7 39.0 39.3 Median Age Adult Population 46.1 47.4 47.6 Households: 2000 Projection 6,352 40,579 55,565 1995 Estimate 6,497 41,413 56,233 1990 Census 6,688 42,523 57,201 1980 Census 6,983 42,633 56,705 Percent Change, 1980-1990 -4.2 -0.3 0.9 Percent Change, 1990-1995 -2.9 -2.6 -1.7 1990 Household Population 15,097 99,932 136,337 1990 Households w/ Children under 18 1,632 11,642 16,068 1990 Households w/ Persons over 65 2,553 16,265 21,653 Area defined by Circle: (41.258898,75.881047): 1 mile(s) Area defined by Circle: (41.258898,75.881047): 3 mile(s) Area defined by Circle: (41.258898,75.881047): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Profile Report CBC-C1750-41 Page 3 of 4 Area 1 = Kingston Plaza S.C. 1 Mile Radius 6/11/96 Area 2 = Kingston Plaza S.C. 3 Mile Radius Area 3 = Kingston Plaza S.C. 5 Mile Radius Description Area 1 Area 2 Area 3 1990 Housing Unit Counts: Total Units 7,106 45,029 60,607 Occupied Units 6,688 42,523 57,201 Owner Occupied 3,688 24,908 35,596 Renter Occupied 3,002 17,617 21,603 Vacant Units 418 2,506 3,406 Year Round 400 2,423 3,269 Seasonal 18 81 139 1990 Housing Unit Percents: % Occupied of Total Units 94.1 94.4 94.4 % Owner Units of Occupied Units 55.1 58.6 62.2 % Renter Units of Occupied Units 44.9 41.4 37.8 % Vacant of Total Units 5.9 5.6 5.6 % Year Round of Vacant Units 95.7 96.7 96.0 % Seasonal of Vacant Units 4.3 3.2 4.1 % Condominiums of Total Units 0.7 0.7 0.7 1990 Condominiums: Total Condominium Units 48 317 431 % Owner Occupied 29.2 19.6 28.5 % Renter Occupied 58.3 76.7 67.7 % Vacant 12.5 3.8 3.7 1990 Units in Structure: % 1, Detached 45.7 49.7 51.8 % 1, Attached 13.0 13.3 13.2 % 2 11.3 10.1 9.5 % 3-9 18.6 13.4 12.3 % 10-49 5.6 6.0 5.1 % 50+ 4.1 4.8 3.8 % Mobile Homes 0.1 0.9 2.7 % Other 1.7 1.7 1.7 1990 Median Home Value $65,119 $50,570 $52,419 1990 Median Contract Rent $299 $259 $254 Area defined by Circle: (41.258898,75.881047): 1 mile(s) Area defined by Circle: (41.258898,75.881047): 3 mile(s) Area defined by Circle: (41.258898,75.881047): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Profile Report CBC-C1750-41 Page 4 of 4 Area 1 = Kingston Plaza S.C. 1 Mile Radius 6/11/96 Area 2 = Kingston Plaza S.C. 3 Mile Radius Area 3 = Kingston Plaza S.C. 5 Mile Radius Description Area 1 Area 2 Area 3 1995 Total Employed 15,376 44,975 55,087 1995 Socio-Economic Measure 53 39 39 1990 Occupation: Total Civil Labor Force 7,730 48,076 65,432 % Unemployed 4.1 6.4 6.4 Total Employed 7,411 45,018 61,260 % White Collar 65.8 56.5 55.6 % Executive & Managerial 13.3 9.9 9.6 % Professional Specialty 16.4 12.5 12.2 % Technical Support 2.6 3.1 3.4 % Administrative Support 17.9 18.5 18.4 % Sales 15.6 12.4 12.1 % Blue Collar 20.6 27.6 29.0 % Precision Production, Craft & Repair 7.9 10.4 10.9 % Machine Operators 6.2 8.6 9.1 % Transportation & Material Moving 2.5 3.9 4.1 % Laborers 4.0 4.7 4.9 % Farming, Forestry & Fishing 0.4 0.6 0.6 % Service: Private Household 0.2 0.2 0.2 % Service: Protective 2.0 2.1 2.0 % Service: Other 11.0 12.9 12.6 1990 Educational Attainment (Age 25 & Over): % Less than Grade 9 8.5 11.7 11.7 % Grade 9-12 (No Diploma) 13.4 16.7 16.8 % High School Graduate or Equivalency 36.7 39.6 40.3 % Some College (No Degree) 14.0 12.4 12.4 % Associate Degree 5.3 5.1 5.2 % Bachelor Degree 13.0 9.0 8.6 % Graduate or Professional Degree 9.1 5.5 5.1 Area defined by Circle: (41.258898,75.881047): 1 mile(s) Area defined by Circle: (41.258898,75.881047): 3 mile(s) Area defined by Circle: (41.258898,75.881047): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC-C1750-41 Page 1 of 9 Area 1 = Kingston Plaza S.C. 1 Mile Radius 6/11/96 Area 2 = Kingston Plaza S.C. 3 Mile Radius Area 3 = Kingston Plaza S.C. 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1995 Socio-Economic Measure: 53 39 39 1995 Employment: 15,376 44,975 55,087 Population: 2000 Projection 15,915 97,573 134,723 1995 Estimate 16,363 100,141 137,234 1990 Census 16,903 103,276 140,339 1990-1995% Change (Growth) -3.2% -3.0% -2.2% 1990 Group Quarters Population 1,804 3,340 4,004 1995 % Population by Race: White 97.7% 97.2% 97.8% Black 0.8% 1.8% 1.4% American Indian, Eskimo & Aleut 0.1% 0.1% 0.1% Asian or Pacific Islander 1.2% 0.7% 0.6% Other 0.2% 0.2% 0.2% Hispanic 0.7% 0.7% 0.6% 1990 % Population by Race: White 98.2% 97.6% 98.1% Black 0.6% 1.5% 1.2% American Indian, Eskimo & Aleut 0.1% 0.1% 0.1% Asian or Pacific Islander 1.0% 0.6% 0.5% Other 0.2% 0.2% 0.2% Hispanic 0.7% 0.6% 0.5% 1995 % Population by Sex: Male 46.5% 46.0% 46.2% Female 53.6% 54.0% 53.8% 1990 % Population by Sex: Male 46.4% 45.9% 46.1% Female 53.6% 54.1% 53.9% 2000 Pop per Square Mile (Pop Density) 5,888.5 3,052.8 1,668.5 1995 Pop per Square Mile (Pop Density) 6,054.3 3,133.2 1,699.6 1990 Pop per Square Mile (Pop Density) 6,254.1 3,231.3 1,738.0 Area (Square Miles) 2.7 32.0 80.7 Area (Square Kilometers) 7.0 82.8 209.1 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC-C1750-41 Page 2 of 9 Area 1 = Kingston Plaza S.C. 1 Mile Radius 6/11/96 Area 2 = Kingston Plaza S.C. 3 Mile Radius Area 3 = Kingston Plaza S.C. 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- Households: 2000 Projection 6,352 40,579 55,565 1995 Estimate 6,497 41,413 56,233 1990 Census 6,688 42,523 57,201 1990-1995% Change (Growth) -2.9% -2.6% -1.7% 2000 Average Household Size 2.22 2.32 2.35 1995 Average Household Size 2.24 2.34 2.37 1990 Average Household Size 2.26 2.35 2.38 2000 Per Capita Income $21,955 16,845 17,064 1995 Per Capita Income $18,283 14,121 14,291 1990 Per Capita Income $15,086 11,686 11,822 2000 Median Family Income $45,207 40,563 40,851 1995 Median Family Income $38,446 34,489 34,744 1990 Median Family Income $32,333 29,211 29,382 2000 Median Household Income $33,258 29,936 30,575 1995 Median Household Income $28,284 25,453 26,004 1990 Median Household Income $23,787 21,558 21,991 2000 Average Household Income $48,774 39,117 40,144 1995 Average Household Income $40,971 33,006 33,860 1990 Average Household Income $33,830 27,589 28,269 1995 % Household Income: $0-$9,999 16.1% 18.3% 17.5% $l0,000-$14,999 12.1% 12.7% 12.5% $l5,000-$24,999 17.1% 18.3% 18.3% $25,000-$34,999 13.7% 15.1% 15.2% $35,000-$49,999 17.6% 17.7% 17.8% $50,000-$74,999 12.4% 11.6% 12.2% $75,000-$99,999 5.1% 3.7% 3.8% $100,000-$149,999 3.6% 1.9% 1.9% $150,000+ 2.3% 0.8% 0.8% Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC-C1750-4l Page 3 of 9 Area 1 = Kingston Plaza S.C. 1 Mile Radius 6/11/96 Area 2 = Kingston Plaza S.C. 3 Mile Radius Area 3 = Kingston Plaza S.C. 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Household Income: $0-$9,999 20.9% 22.9% 22.1% $10,000-$14,999 12.3% 13.1% 12.9% $l5,000-$24,999 18.5% 20.2% 20.5% $25,000-$34,999 16.0% 16.2% 16.2% $35,000-$49,999 14.7% 15.5% 15.9% $50,000-$74,999 10.3% 8.7% 9.0% $75,000-$99,999 3.9% 2.0% 2.0% $l00,000-$149,999 1.7% 0.8% 0.9% $150,000+ 1.7% 0.6% 0.6% 1995 % Population by Age: 0-5 6.0% 6.9% 7.0% 6-13 7.9% 9.2% 9.3% 14-17 5.6% 4.8% 4.7% 18-20 5.5% 4.4% 4.2% 21-24 7.0% 5.5% 5.3% 25-34 13.2% 13.7% 13.7% 35-44 13.3% 13.4% 13.3% 45-54 9.6% 10.2% 10.4% 55-64 8.8% 10.1% 10.3% 65-74 11.2% 11.7% 11.7% 75-84 8.8% 7.9% 7.9% 85+ 3.1% 2.2% 2.2% Median Age Total Population 38.7 39.0 39.3 Median Age Adult Population 46.1 47.4 47.6 1990 % Population by Age: 0-5 6.0% 6.9% 7.0% 6-13 7.8% 9.1% 9.2% 14-17 4.2% 4.6% 4.6% 18-20 7.9% 5.0% 4.7% 21-24 6.3% 5.5% 5.3% 25-34 13.4% 14.3% 14.3% 35-44 13.7% 13.1% 13.2% 45-54 8.3% 9.1% 9.5% 55-64 10.0% 10.9% 11.0% 65-74 11.2% 11.9% 11.9% 75-84 8.5% 7.6% 7.4% 85+ 2.9% 1.9% 1.9% Median Age Total Population 38.2 38.4 38.6 Median Age Adult Population 44.8 46.9 47.1 Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC-C1750-4l Page 4 of 9 Area 1 = Kingston Plaza S.C. 1 Mile Radius 6/11/96 Area 2 = Kingston Plaza S.C. 3 Mile Radius Area 3 = Kingston Plaza S.C. 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1995 % Female Population by Age: 0-5 5.4% 6.2% 6.3% 6-13 7.0% 8.4% 8.5% 14-17 5.5% 4.5% 4.3% 18-20 5.2% 4.1% 3.9% 21-24 6.1% 5.1% 4.9% 25-34 11.4% 12.8% 12.8% 35-44 12.3% 12.5% 12.5% 45-54 9.3% 9.8% 10.1% 55-64 9.0% 10.4% 10.5% 65-74 12.7% 13.1% 13.0% 75-84 11.4% 10.0% 9.9% 85+ 4.6% 3.2% 3.2% Female Median Age Total Population 42.7 42.2 42.3 Female Median Age Adult Population 50.9 50.9 50.8 1990 % Female Population by Age: 0-5 5.3% 6.2% 6.3% 6-13 7.0% 8.4% 8.4% 14-17 4.0% 4.2% 4.3% 18-20 7.7% 4.6% 4.3% 21-24 5.2% 5.2% 5.1% 25-34 11.6% 13.2% 13.3% 35-44 12.7% 12.3% 12.4% 45-54 7.9% 8.8% 9.1% 55-64 10.6% 11.4% 11.4% 65-74 12.5% 13.4% 13.3% 75-84 11.0% 9.6% 9.4% 85+ 4.3% 2.8% 2.8% Female Median Age Total Population 42.0 41.5 41.6 Female Median Age Adult Population 50.4 50.9 50.8 1990 % Hispanic Population by Type: Not of Hispanic Origin 99.3% 99.4% 99.5% Mexican 0.1% 0.1% 0.1% Puerto Rican 0.2% 0.2% 0.2% Cuban 0.0% 0.0% 0.0% Other Hispanic 0.3% 0.2% 0.2% Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC-C1750-4l Page 5 of 9 Area 1 = Kingston Plaza S.C. 1 Mile Radius 6/11/96 Area 2 = Kingston Plaza S.C. 3 Mile Radius Area 3 = Kingston Plaza S.C. 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990% Population Enrolled in School (Age 3 & Over): Preprimary School 5.6% 6.4% 6.8% Elementary and High School 45.8% 61.8% 63.4% College 48.6% 31.7% 29.8% Total School Enrollment 4,136 22,419 30,268 1990 % Educational Attainment (Age 25 & Over): Less than Grade 9 8.5% 11.7% 11.7% Grade 9-12 (No Diploma) 13.4% 16.7% 16.8% High School Graduate or Equivalency 36.7% 39.6% 40.3% Some College (No Degree) 14.0% 12.4% 12.4% Associate Degree 5.3% 5.1% 5.2% Bachelor Degree 13.0% 9.0% 8.6% Graduate or Professional Degree 9.1% 5.5% 5.1% 1990 % Employment Status: Total Labor Force: Armed Forces 0.1% 0.2% 0.1% Civilian: Employed 51.4% 53.1% 53.4% Unemployed 2.2% 3.6% 3.6% Not In Labor Force 46.2% 43.1% 42.9% Female Labor Force: Armed Forces 0.0% 0.0% 0.0% Civilian: Employed 44.5% 45.6% 45.8% Unemployed 1.8% 2.4% 2.4% Not In Labor Force 53.7% 52.0% 51.7% 1990 % Working Mothers: Child < 6 Only 17.2% 15.1% 16.3% Child 6-17 Only 37.7% 38.8% 39.5% Child < 6 & 6-17 7.4% 10.4% 9.8% Nonworking Mothers 37.7% 35.7% 34.4% Total Mothers 1,547 10,965 15,288 Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC-C1750-4l Page 6 of 9 Area 1 = Kingston Plaza S.C. 1 Mile Radius 6/11/96 Area 2 = Kingston Plaza S.C. 3 Mile Radius Area 3 = Kingston Plaza S.C. 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Industry Employment: Agriculture/Forestry/Fishing 0.5% 0.7% 0.7% Mining 0.1% 0.2% 0.2% Construction 3.7% 4.8% 5.1% Manufacturing: Nondurable Goods 7.2% 9.6% 10.1% Durable Goods 7.5% 8.1% 8.3% Transportation 2.0% 3.0% 3.3% Communications & Public Utilities 3.0% 3.1% 3.2% Wholesale Trade 5.8% 5.0% 5.0% Retail Trade 20.1% 20.1% 20.0% Finance/Insurance/Real Estate 8.2% 7.2% 6.7% Services: Business & Repair 3.5% 4.2% 4.2% Personal 2.6% 2.6% 2.4% Entertainment & Recreation 1.2% 1.1% 1.1% Health 14.4% 12.3% 12.2% Educational 10.0% 7.7% 7.2% Other Professional & Related 6.4% 5.7% 5.3% Public Administration 3.9% 4.9% 5.0% Total 7,410 45,022 61,268 1990 % Occupation: Executive & Managerial 13.3% 9.9% 9.6% Professional Specialty 16.4% 12.5% 12.2% Technical Support 2.6% 3.1% 3.4% Sales 15.6% 12.4% 12.1% Administrative Support 17.9% 18.5% 18.4% Service: Private Household 0.2% 0.2% 0.2% Service: Protective 2.0% 2.1% 2.0% Service: Other 11.0% 12.9% 12.6% Farming, Forestry & Fishing 0.4% 0.6% 0.6% Precision Production, Craft & Repair 7.9% 10.4% 10.9% Machine Operator, Assemblers & Inspectors 6.2% 8.6% 9.1% Transportation & Material Moving 2.5% 3.9% 4.1% Laborers 4.0% 4.7% 4.9% White Collar Total 65.8% 56.5% 55.6% Blue Collar Total 20.6% 27.6% 29.0% Total Employed 7,403 45,020 61,266 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC-C1750-4l Page 7 of 9 Area 1 = Kingston Plaza S.C. 1 Mile Radius 6/11/96 Area 2 = Kingston Plaza S.C. 3 Mile Radius Area 3 = Kingston Plaza S.C. 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Marital Status: Total Male: 6,555 38,515 52,400 Never Married 37.4% 33.7% 32.3% Married 48.6% 53.4% 55.l% Separated 2.7% 2.1% 2.0% Widowed 4.5% 4.4% 4.4% Divorced 6.8% 6.5% 6.2% Total Female: 7,862 47,177 63,748 Never Married 30.1% 26.2% 25.0% Married 40.2% 43.3% 45.0% Separated 1.8% 2.4% 2.4% Widowed 20.9% 20.6% 20.4% Divorced 7.1% 7.4% 7.2% 1990 Households by Type: One Person Households 2,482 14,339 18,366 Two or more Person Households: Family Households: Married Couple 3,017 19,640 27,641 Male Householder 193 1,441 1,923 Female Householder 731 5,757 7,587 Nonfamily Households 262 1,347 1,682 1990 Family Households With Children Married Couple Family 1,237 8,347 11,741 Male Householder 66 461 614 Female Householder 314 2,738 3,589 1990 Population by Household Type: Family Households 11,972 82,407 114,049 Nonfamily Households 3,125 17,525 22,288 1990 Households With: Children Under 18 1,632 11,642 16,068 Persons Over 65 2,553 16,265 21,653 Householder Over 65 2,410 15,099 20,014 1990 Average Family Size 3.00 3.04 3.04 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC-C1750-4l Page 8 of 9 Area 1 = Kingston Plaza S.C. 1 Mile Radius 6/11/96 Area 2 = Kingston Plaza S.C. 3 Mile Radius Area 3 = Kingston Plaza S.C. 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 Median Home Value $65,119 50,570 52,419 1990 Average Home Value $82,609 59,942 62,405 1990 Median Contract Rent $299 259 254 1990 Average Contract Rent $314 270 264 1990 Persons In Unit: 1 Person Units 2,482 14,339 18,366 2 Person Units 2,011 12,831 17,554 3 Person Units 940 6,664 9,273 4+ Person Units 1,254 8,691 12,009 1990 Housing Unit Counts: Total Units 7,106 45,029 60,607 % Occupied 94.1% 94.4% 94.4% % Vacant 5.9% 5.6% 5.6% % Year Round 5.6% 5.4% 5.4% % Seasonal 0.3% 0.2% 0.2% Occupied Units 6,688 42,523 57,201 % Owner Occupied 55.1% 58.6% 62.2% % Renter Occupied 44.9% 41.4% 37.8% Vacant Units 418 2,506 3,406 % Year Round of Vacant Units 95.7% 96.7% 96.0% % Seasonal of Vacant Units 4.3% 3.2% 4.1% 1990 Total Housing Units in Structure 7,106 45,029 60,607 1, Detached 45.7% 49.7% 51.8% 1, Attached 13.0% 13.3% 13.2% 2, 11.3% 10.1% 9.5% 3-9 18.6% 13.4% 12.3% 10-49 5.6% 6.0% 5.1% 50+ 4.1% 4.8% 3.8% Mobile Home or Trailer 0.1% 0.9% 2.7% Other 1.7% 1.7% 1.7% 1990 Housing Units by Year Built 3,667 24,974 35,609 Built 1985 to March, 1990 0.3% 2.4% 3.8% Built 1980 to 1984 4.9% 2.7% 3.2% Built 1970 to 1979 7.8% 8.7% 11.1% Built 1960 to 1969 3.2% 5.3% 6.2% Built 1950 to 1959 9.5% 6.3% 7.4% Built 1949 or Earlier 74.3% 74.6% 68.3% Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC-C1750-4l Page 9 of 9 Area 1 = Kingston Plaza S.C. 1 Mile Radius 6/11/96 Area 2 = Kingston Plaza S.C. 3 Mile Radius Area 3 = Kingston Plaza S.C. 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Means of Transportation to Work: Car, Truck or Van: Drove Alone 72.4% 71.9% 73.0% Carpooled 10.7% 16.0% 15.9% Public Transportation 2.2% 2.7% 2.5% Other Means 12.3% 7.9% 7.1% Worked at Home 2.4% 1.6% 1.5% 1990 % Travel Time to Work: 0-14 Minutes 59.1% 48.3% 44.4% 15-20 Minutes 30.6% 39.5% 42.2% 30-59 Minutes 8.4% 10.0% 11.1% 60-89 Minutes 1.5% 1.8% 1.9% 90+ Minutes 0.4% 0.4% 0.4% 1990 Households by Number of Vehicles: 1 Vehicle 2,993 17,116 22,648 2 Vehicles 2,044 12,416 17,267 3 Vehicles 402 3,071 4,563 4 Vehicles 153 893 1,326 5 or More Vehicles 37 233 391 Area defined by Circle: (41.258898,75.881047): 1 mile(s) Area defined by Circle: (41.258898,75.881047): 3 mile(s) Area defined by Circle: (41.258898,75.881047): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. ================================================================================ ADDENDUM F RENT ROLL - -------------------------------------------------------------------------------- ADDENDUM F RENT ROLL - -------------------------------------------------------------------------------- Mark Centers Trust Annual Rent Roll KINGSTON PLAZA 20 Date: 05/09/96 Report Date: 05/09/96 10:49:26
- --------------------------------------------------------------------------------------------------- Occupancy --Rent Dates-- Square Base Rent Bldg/Suite/Lease Tenant Name Status Start Expire Footage Rent Per Sq Ft - --------------------------------------------------------------------------------------------------- 330574-00010-000001 THE TAN GENERATION ACTIVE 1 09/15/87 08/31/96 1,000 9,900 9.90 330574-00040-000003 BASICALLY BAGELS ACTIVE 2 03/08/91 03/31/02 4,000 42,000 10.50 330574-0004A-000004 HONG KONG CHINESE RES ACTIVE 3 08/31/89 08/31/99 1,500 15,000 10.00 330574-0004B-000005 UPTOWN VIDEO ACTIVE 4 12/18/89 04/30/97 2,000 14,160 7.08 330574-0004C-000006 TONY'S PIZZA ACTIVE 5 04/01/92 03/31/01 2,000 16,000 8.00 330574-00070-000007 PENNA LIQUOR CONTROL ACTIVE 6 09/01/83 08/31/97 2,824 19,800 7.01 330574-00050-000008 PRICE CHOPPER-STORE ACTIVE 7 12/02/81 12/31/06 45,000 245,000 5.44 330574-00030-000010 THE EVERYTHING $.99 S ACTIVE 8 09/28/95 12/31/96 6,500 35,750 5.50 -------------------------------------------------------- Total GLA: 64,824 397,610 Building File: 64,824 Vacant Space: 0 ======================================================== - -------------------------------------------------------------------------------------------- --------Cam------- --Taxes-- Insurance %Rent Bldg/Suite/Lease Tenant Name Base Fixed Rec Fixed Rec Rec Clause - -------------------------------------------------------------------------------------------- 330574-00010-000001 THE TAN GENERATION 1,138 963 x 791 x x YES 330574-00040-000003 BASICALLY BAGELS 0 4,117 x 3,163 x x YES 330574-0004A-000004 HONG KONG CHINESE RES 0 1,544 x 1,186 x x 330574-0004B-000005 UPTOWN VIDEO 2,300 1,791 x 1,582 x x YES 330574-0004C-000006 TONY'S PIZZA 0 2,058 x 1,000 x x YES 330574-00070-000007 PENNA LIQUOR CONTROL 0 0 x 330574-00050-000008 PRICE CHOPPER-STORE 0 6,988 x 0 x x YES 330574-00030-000010 THE EVERYTHING $.99 S 0 YES ------------------------------------------------ 17,462 7,722 ================================================
================================================================================ ADDENDUM G - PRO-JECT REPORTS - -------------------------------------------------------------------------------- ADDENDUM G PRO-JECT REPORTS - -------------------------------------------------------------------------------- KINGSTON PLAZA S.C., KINGSTON, PA PROJECT ASSUMPTIONS REPORT INCLUDING ALL TENANTS BUILDING PROLOGUE LEASEHOLD ANALYSIS OF KINGSTON PLAZA S.C., KINGSTON, PA BEGINNING 6/1996 FOR 31 YEARS ON A FISCAL YEAR BASIS AREA MEASURES NRA 1996 VALUE - 64,824 THEREAFTER - CONSTANT OCCA 1996 VALUE - 45,380 1997 VALUE - 45,380 1998 VALUE - 45,380 1999 VALUE - 45,380 2000 VALUE - 45,380 2001 VALUE - 45,380 2002 VALUE - 45,380 2003 VALUE - 45,380 2004 VALUE - 45,380 2005 VALUE - 44,430 2006 VALUE - 45,380 2007 VALUE - 44,905 2008 VALUE - 45,380 2009 VALUE - 45,380 2010 VALUE - 44,430 2011 VALUE - 45,380 2012 VALUE - 44,905 2013 VALUE - 45,380 2014 VALUE - 45,380 2015 VALUE - 42,224 2016 VALUE - 18,905 2017 VALUE - 18,430 2018 VALUE - 18,905 2019 VALUE - 17,805 2020 VALUE - 5,225 2021 VALUE - 5,225 2022 VALUE - 5,225 2023 VALUE - 5,700 2024 VALUE - 5,700 2025 VALUE - 5,700 2026 VALUE - 4,750 THEREAFTER - CONSTANT VACA +100.0% OF NRA -100.0% OF OCCA PAGE 2 GROWTH RATES RENT 1996 VALUE - 3.00 THEREAFTER - CONSTANT EXP. 1996 VALUE - 3.00 THEREAFTER - CONSTANT 2.0% 1996 VALUE - 2.00 THEREAFTER - CONSTANT 3.0% 1996 VALUE - 3.00 THEREAFTER - CONSTANT TAX 1996 VALUE - 1.00 1997 VALUE - 2.00 1998 VALUE - 3.00 THEREAFTER - CONSTANT MARKET RATES ANCR 1996 VALUE - 6.00 THEREAFTER - GROWING AT GROWTH RATE RENT STOR 1996 VALUE - 7.50 THEREAFTER - GROWING AT GROWTH RATE RENT MISCELLANEOUS INCOMES NONE EXPENSES CAM , REFERRED TO AS CAM CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 55,000 THEREAFTER - GROWING AT GROWTH RATE EXP. REAL ESTATE TAXES REFERRED TO AS TAX CHARGED AGAINST NET OPERATING INCOME PAGE 3 1996 VALUE - 50.473 THEREAFTER - GROWING AT GROWTH RATE TAX INSURANCE , REFERRED TO AS INS. CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 9,000 THEREAFTER - GROWING AT GROWTH RATE EXP. MANAGEMENT FEES , REFERRED TO AS MGT AN INFORMATIONAL EXPENSE 1996 VALUE - 15,391 1997 VALUE - 15,733 1998 VALUE - 16,301 1999 VALUE - 16,286 2000 VALUE - 16,689 2001 VALUE - 16,615 2002 VALUE - 16,271 2003 VALUE - 17,365 2004 VALUE - 17,266 2005 VALUE - 17,743 2006 VALUE - 17,830 2007 VALUE - 17,522 2008 VALUE - 18,290 2009 VALUE - 18,860 2010 VALUE - 19,128 2011 VALUE - 19,528 2012 VALUE - 19,205 2013 VALUE - 19,787 2014 VALUE - 20,980 2015 VALUE - 20,975 2016 VALUE - 22,048 2017 VALUE - 22,000 2018 VALUE - 21,667 2019 VALUE - 23,746 2020 VALUE - 23,728 2021 VALUE - 24,959 2022 VALUE - 24,890 2023 VALUE - 24,529 2024 VALUE - 26,887 2025 VALUE - 26,961 2026 VALUE - 28,172 THEREAFTER - CONSTANT VACANCY ALLOWANCE PERCENTAGE OF POTENTIAL GROSS INCOME FOR ALL TENANTS SUBJECT TO VACANCY 1996 VALUE - 2.00 THEREAFTER - CONSTANT PAGE 4 MANAGEMENT FEE PERCENTAGE OF EFFECTIVE GROSS INCOME FOR ALL TENANTS PASSED THROUGH TO TENANTS USING EXPENSE MGT 1996 VALUE - 3.00 THEREAFTER - CONSTANT COMMISSION CALCULATIONS STANDARD METHOD #1 - 4.500% OF TOTAL RENT STANDARD METHOD #2 - 2.250% OF TOTAL RENT STANDARD METHOD #3 - 3.375% OF TOTAL RENT STANDARD METHOD #4 - 0.000% OF TOTAL RENT STANDARD METHOD #5 - 0.000% OF TOTAL RENT COMMISSION PAYOUTS STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT ALTERATION CALCULATION NONE ALTERATION PAYOUTS STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT PAGE 5 STANDARD METHOD #5 - CASHED OUT COMMON AREA MAINTENANCE POOL NONE CAPITAL EXPENDITURES NONE PRIMARY CLASSIFICATION CODES NONE SECONDARY CLASSIFICATION CODES NONE COST CENTERS 1 - Common Area Maint. 2 - Real Estate Taxes 3 - Insurance Recovery SALES VOLUME PROFILE PERCENT OF RELATIVE MONTH ANNUAL SALES VOLUME - ----- ------------ ------ JAN 8.33% 1.00 FEB 8.33% 1.00 MAR 8.33% 1.00 APR 8.33% 1.00 MAY 8.33% 1.00 JUN 8.33% 1.00 JUL 8.33% 1.00 AUG 8,33% 1.00 SEP 8.33% 1.00 OCT 8.33% 1.00 NOV 8.33% 1.00 DEC 8.33% 1.00 ---- ---- PAGE 6 TOTALS 100.00% 12.00 GLOBAL RECOVERIES CAM , REFERRED TO AS CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES , REFERRED TO AS TAX ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE , REFERRED TO AS INS. ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH TENANT PROLOGUE MINIMUM RENTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR SALES VOLUMES AND BREAKPOINTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR RENEWAL RENTS ARE COMPOUNDED ANNUALLY RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET REFERENCE TENANTS NONE PAGE 7 TENANTS THERE ARE A TOTAL OF 8 LEASEHOLD TENANT(S): - -------------------------------------------------------------------------------- # 1 - THE TAN GENERATION BASE LEASE DATES: 9/1987 TO 8/1996 TYPE OF TENANT: OFFICE SQUARE FOOTAGE: 1,000 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 9,900/YEAR RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 8/1996 TO 9/1999 SQUARE FOOTAGE: 1,000 MINIMUM RENT: INITIAL RENT - 10,890/YEAR PERCENTAGE RENT: PAGE 8 INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 165,000/YEAR 6.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SNARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO 4 5.00 3 NONE NONE YES NO 5 5.00 3 NONE NONE YES NO 6 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE STOR MULTIPLIED BY 1.000 INCREASING AT GROWTH RATE 3.0% PER YEAR DURING EACH RENEWAL TERM RENEWAL PERCENTAGE RENT: PAGE 9 SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM GLOBAL GROUPING GLOBAL RECOVERY TAX GLOBAL GROUPING GLOBAL RECOVERY INS. RENEWAL COMMISSIONS: STANDARD METHOD #3 RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 2 - BASICALLY BAGELS BASE LEASE DATES: 3/1991 TO 8/1996 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 4,000 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 42,000/YEAR PERCENTAGE RENT: INITIAL SALES - 1,200,000/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 800,000/YEAR 5.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH PAGE 10 INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 9/1996 TO 8/2002 SQUARE FOOTAGE: 4,000 MINIMUM RENT: INITIAL RENT - 48,400/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 800,000/YEAR 5.O0% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE PAGE 11 ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO 4 5.00 3 NONE NONE YES NO 5 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE STOR MULTIPLIED BY 1.000 INCREASING AT GROWTH RATE 3.0% PER YEAR DURING EACH RENEWAL TERM RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM GLOBAL GROUPING GLOBAL RECOVERY TAX GLOBAL GROUPING GLOBAL RECOVERY INS. RENEWAL COMMISSIONS: STANDARD METHOD #3 RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 3 - HONG KONG CHINESE BASE LEASE DATES: 8/1989 TO 8/1999 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,500 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 15,000/YEAR CHANGING TO - 15,750/YEAR ON 9/1996 CHANGING TO - l6,500/YEAR ON 9/1998 PERCENTAGE RENT: INITIAL SALES 0/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE PAGE 12 RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 9/1999 TO 8/2004 SQUARE FOOTAGE: 1,500 MINIMUM RENT: INITIAL RENT - 18,000/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES PAGE 13 ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NEA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.0O 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO 4 5.00 3 NONE NONE YES NO 5 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE STOR MULTIPLIED BY 1.000 INCREASING AT GROWTH RATE 3.O% PER YEAR DURING EACH RENEWAL TERM RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM GLOBAL GROUPING GLOBAL RECOVERY TAX GLOBAL GROUPING GLOBAL RECOVERY INS. RENEWAL COMMISSIONS: STANDARD METHOD #3 RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE PAGE 14 - -------------------------------------------------------------------------------- # 4 - UPTOWN VIDEO BASE LEASE DATES: 12/1989 TO 4/1997 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 2,000 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 14,160/YEAR PERCENTAGE RENT: INITIAL SALES - 67,000/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 236,000/YEAR 6.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 5/1997 TO 4/1999 SQUARE FOOTAGE: 2,000 PAGE 15 MINIMUM RENT: INITIAL RENT - 14,868/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 236,000/YEAR 6.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SNARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NEA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.O0 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO 4 5.00 3 NONE NONE YES NO 5 5.00 3 NONE NONE YES NO 6 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: PAGE 16 MARKET RATE STOR MULTIPLIED BY 1.000 INCREASING AT GROWTH RATE 3.0% PER YEAR DURING EACH RENEWAL TERM RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE (S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM GLOBAL GROUPING GLOBAL RECOVERY TAX GLOBAL GROUPING GLOBAL RECOVERY INS. RENEWAL COMMISSIONS.. STANDARD METHOD #3 RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 5 TONY'S PIZZA BASE LEASE DATES: 4/1992 TO 3/2001 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 2.000 SUBJECT TO VACANCY ALLOWANCE - MINIMUM RENT: INITIAL RENT - 16,000/YEAR PERCENTAGE RENT: INITIAL SALES - 110,000/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT 333,000/YEAR 6.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SNARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SNARE RECOVERY OF EXPENSE TAX PAGE 17 PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NEA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NEA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO 4 5.00 3 NONE NONE YES NO 5 5.00 3 NONE NONE YES NO 6 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE STOR MULTIPLIED NY 1.000 INCREASING AT GROWTH RATE 3.0% PER YEAR DURING EACH RENEWAL TERM RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE (S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM GLOBAL GROUPING GLOBAL RECOVERY TAX GLOBAL GROUPING GLOBAL RECOVERY INS. RENEWAL COMMISSIONS: STANDARD METHOD #3 RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE PAGE l8 # 6 - PENNA LIQUIOR CONT BASE LEASE DATES: 9/1983 TO 8/1997 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 2,824 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 19,800/YEAR PERCENTAGE RENT: INITIAL SALES - 0/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 9/1997 TO 8/2001 SQUARE FOOTAGE: 2,824 MINIMUM RENT: INITIAL RENT - 21,000/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH PAGE 19 COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO 4 5.00 3 NONE NONE YES NO 5 5.00 3 NONE NONE YES NO 6 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE STOR MULTIPLIED BY 1.000 INCREASING AT GROWTH RATE 3.0% PER YEAR DURING EACH RENEWAL TERM RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM GLOBAL GROUPING GLOBAL RECOVERY TAX GLOBAL GROUPING GLOBAL RECOVERY INS. RENEWAL COMMISSIONS: STANDARD METHOD #3 RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 7 - PRICE CHOPPER BASE LEASE DATES: 12/1981 TO 12/2006 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 45,000 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 245,000/YEAR PERCENTAGE RENT: INITIAL SALES - 14,200,000/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 20,000,000/YEAR PAGE 20 1.25% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 1/2007 TO 12/2026 SQUARE FOOTAGE: 45,000 MINIMUM RENT: INITIAL RENT - 245,000/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 20,000,000/YEAR 1.25% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER l - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PAGE 21 PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 8 - EVERYTHING $0.99/ BASE LEASE DATES: 9/1995 TO 12/1996 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 6,500 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 35,750/YEAR PERCENTAGE RENT: INITIAL SALES - 200,000/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 1,191,600/YEAR 3.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: NONE COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: PAGE 22 LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO 4 5.00 3 NONE NONE YES NO 5 5.00 3 NONE NONE YES NO 6 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE ANCR MULTIPLIED BY 1.000 INCREASING AT GROWTH RATE 3.0% PER YEAR DURING EACH RENEWAL TERM RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE (S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM GLOBAL GROUPING GLOBAL RECOVERY TAX GLOBAL GROUPING GLOBAL RECOVERY INS. RENEWAL COMMISSIONS: STANDARD METHOD #3 RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE ================================================================================ ADDENDUM H - ENGAGEMENT LETTER - -------------------------------------------------------------------------------- ADDENDUM H ENGAGEMENT LETTER - -------------------------------------------------------------------------------- [Letterhead of CB Commercial] May 8,1996 Mr. Josh Kane Chief Financial Officer MARK CENTERS TRUST 660 Third Avenue Kingston, PA 18704 Re: 17 Shopping Centers Nationwide Dear Mr. Kane: At your request, we are pleased to submit the following proposal to appraise the above referenced properties. The purpose of this assignment is to estimate the market value of the leased fee interest. We understand the appraisal reports are to be used for mortgage underwriting purposes. We also understand that the reports will be used by Mark Centers Trust and Morgan Stanley. The properties are briefly described on attachment "A". Our complete valuation will be presented in a self contained (narrative) format and will contain a complete description of the property along with pertinent exhibits and photographs together with supporting factual data and analysis necessary to convey our opinion of value. We will value the property based upon the cost, income and market approaches to value, where applicable, correlating our findings into a final value conclusion. The report will be prepared in conformity with and will be subject to the requirements of the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. Each report will also conform to the Uniform Standards of Professional Appraisal Practice ("USPAP") and the Financial Institutions Reform, Recovery and Enforcement Act of 1 989 ("FIRREA") and the Morgan Stanley Capital Appraisal Standards described in Attachment "B". We assume that there are no major or significant items of deferred maintenance beyond normal wear and tear for properties of their age as of the date of the appraisal which would require the expertise of a professional contractor to estimate the cost of such repairs. If such repairs need to be considered in this appraisal, such estimates are to be provided by a qualified firm hired by you and at no cost to us. The total fee for the assignment is $68,000 ($4,000 per property) including all travel and related expenses which is due and payable upon delivery of the reports. If we are asked to cancel the assignment within two weeks of our engagement an upset fee equal to 50% will be due and payable. If cancellation occurs between two and three weeks, the upset fee will be equal to 75% and any time after three weeks the full fee will be due and payable. We will furnish you with three copies of our final report within four to five weeks of our authorization. Authorization occurs upon our receipt of an executed copy of this proposal and our delivery date is contingent upon the timely receipt of all necessary property information, financial statements and detailed lease information. If all requested data and information is not available as of the authorized date, we reserve the right to extend the delivery date by the amount of time it takes to receive the requested information. May 8,1996 Mr. Kane Page 2 In order to complete this assignment in a timely manner, we will require the following specific information, if available: o Copy of Ground Lease, if Leasehold o Legal descriptions. o Current rent roll. o Copy of Leases or abstracts o Expense reimbursements on a tenant by tenant basis o Building area calculations and surveys. o Operating statements for the past three full years. o Current year expenses to date. o A copy of the current budget. o Copies of any toxic engineering reports dealing with underground tanks, PCB's, asbestos or chemical spills, if available. o A copy of the next fiscal year's budget, if available. o A list of major repairs which have recently been made, or are scheduled to be made in the next 18 months. o Name and phone number(s) of on-site superintendent(s), or local management firm or trustee for physical inspection. o Notice of any pending changes to the rent roll or pertinent information regarding the current status of the tenants. If we are requested to give court testimony an additional fee will be charged on an hourly basis at $300 per hour for designated MAI-appraisers and $175 for non-designated appraisers. Said hourly billings pertain to court preparation, waiting and travel time, document review and preparation (excludes narrative appraisal report) and all meetings related to court testimony. The client may provide only complete, final copies of the appraisal report to third parties who shall rely on such reports in connection with loan underwriting or securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the client for routine and customary questions. Please note that our consent to allow an appraisal report prepared by CB Commercial, or portions of such report, to become part of or be referenced in any public offering, the granting of such consent will be at our sole discretion and, if given, will be on condition that we will be provided with an Indemnification Agreement and/or Non-Reliance letter, in a form and content satisfactory to us, by a party satisfactory to us. We do consent to your submission of the reports to rating agencies, loan participants or your auditors without the need to provide us with an Indemnification Agreement and/or Non-Reliance letter. In addition to the fee for this assignment, you agree to compensate us at a rate to be mutually agreed to, for any time expended by us should we be required (by subpoena or otherwise) or requested by you, your representatives or other entity to become involved in any litigation or May 8,1996 Mr. Kane Page 3 legal proceeding in any way involving this engagement to which we are not a party, the appraisal work we produce or the property which is the subject of this assignment. You also agree to pay, on demand, all reasonable expenses which we incur in connection with any litigation or proceedings including the fees of our attorneys. You acknowledge that we are being retained hereunder as an independent contractor to perform the services described herein and nothing in this agreement shall be deemed to create any other relationship between us. This assignment will be deemed concluded and the services hereunder completed upon delivery to you of the appraisal report discussed herein. If these terms are acceptable, please authorize us to proceed by having an officer of the corporation, managing general partner, principal, owner, or a contractually responsible party sign the enclosed copy of this proposal with "Terms and Conditions" and return it to us for our permanent file. Upon receipt of your authorization, we will schedule the necessary personnel to complete the project in a timely manner. We appreciate this opportunity to be of service to you on this assignment. If you have additional questions, please do not hesitate to give me a call. Sincerely, CB COMMERCIAL REAL ESTATE GROUP, INC. Appraisal /s/ Michael R. Pecorino Michael R. Pecorino, MAI MRP:jf cc: Douglas W. Haney Enclosure AGREED & ACCEPTED - ----------------------------- ------------------------------- Signature Title - ----------------------------- ------------------------------- Name (type or print) Date Office #: Fax #: -------------------- ------------------------- ================================================================================ ADDENDUM H - ENGAGEMENT LETTER - -------------------------------------------------------------------------------- ADDENDUM I QUALIFICATIONS - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM I - QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF DIMITRI M. TEDDONE, MAI Assistant Vice President Senior Real Estate Analyst CB Commercial Real Estate Group, Inc. Appraisal 560 Lexington Avenue, 20th Floor New York, New York 10022 (212) 207-6088 EDUCATIONAL Bachelor of Science, Marketing Long Island University, C.W. Post Campus Greenvale, New York Appraisal Institute Successfully completed all the necessary courses to qualify for the MAI designation. LICENSES/CERTIFICATIONS Certified Real Estate General Appraiser: State of New York State #46-7944 PROFESSIONAL Appraisal Institute Designated Member of the Appraisal Institute (MAI), Certificate No. 10348 EXPERIENCE Engaged in the appraisal and consultation of commercial real estate throughout the Northeast United States since July of 1986, specializing in the New York Metropolitan area. Assignments include full and partial interest appraisals of investment grade office buildings, air rights, commercial lofts, multi-family residential properties, cooperatives, condominium, townhouses, shopping centers, industrial facilities, special-use properties, portfolio valuations and multi-property assignments. 1986 - 1991 Joseph J. Blake & Associates New York, New York 1991 - Present CB Commercial Real Estate Group, Inc., Appraisal New York, New York - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM I - QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF MICHAEL R. PECORINO, MAI Senior Vice President, Regional Manager CB Commercial Real Estate Group, Inc. 560 Lexington Avenue, 20th Floor New York, New York 10022 (212)207-6102 EDUCATIONAL Real Estate Appraisal and Analysis, New York University, the Real Estate Institute Bachelor of Arts, Geography, Planning, Urban Studies, State University College of New York at Oneonta Successfully completed all the necessary courses to qualify for the MAI designation. LICENSES/CERTIFICATIONS Certified General Real Estate Appraiser: State of New York (46000002055) Certified General Real Estate Appraiser: State of New Jersey (RG-01667) Certified General Real Estate Appraiser: State of Pennsylvania (GA-001096-R) Certified General Real Estate Appraiser: State of Connecticut (0000489) Certified General Real Estate Appraiser: State of Maryland (10569) Certified General Real Estate Appraiser: State of New Jersey (3793) Certified General Real Estate Appraiser: State of Delaware (X10000223) Certified General Real Estate Appraiser: State of Maine (CG00001192) Certified General Real Estate Appraiser: State of Vermont (080-0000168) Certified General Real Estate Appraiser: State of District of Columbia (GA00010315) Licensed Real Estate Broker: State of New York PROFESSIONAL Appraisal Institute Designated Member of the Appraisal Institute (MAI), Certificate No. 7944 Member of the Real Estate Board of New York EXPERIENCE Fifteen years of Real Estate Appraisal and Consulting experience throughout the United States specializing in the New York metropolitan area. 1993 - Present CB Commercial Real Estate Group, Inc., Appraisal New York, New York 1983 - 1993 Cushman & Wakefield, Inc. New York, New York 1982 - 1983 Joseph J. Blake & Associates, Inc. New York, New York 1981 - 1982 City of New York - Office of Manhattan Planning New York, New York 1980 - 1981 City of Jersey City - Office of the Mayor Jersey City, New Jersey Assignments include full and partial interest appraisals of office buildings, air rights, commercial lofts, garden apartments, cooperatives, condominiums, townhouses, shopping centers, industrial facilities, residential and office market studies, portfolio valuations and multi-property assignments. - -------------------------------------------------------------------------------- This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE PLAZA 15 MALL Route 15 Lewisburg, Pennsylvania CB File No. 96-093M [CB COMMERCIAL LOGO] Delivering Solutions Through Local Knowledge Worldwide COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE PLAZA 15 MALL Route 15 Lewisburg, Pennsylvania CB File No. 96-093M DATE OF VALUE May 23, 1996 PREPARED FOR MORGAN STANLEY Mortgage Capital Inc. 1585 Broadway New York, NY 10036 PREPARED BY CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES 560 Lexington Avenue, 16th Floor New York, New York 10022 [CB Commercial Letterhead] June 19, 1996 MORGAN STANLEY Mortgage Capital Inc. 1585 Broadway New York, NY 10036 RE: Appraisal of Shopping Center PLAZA 15 MALL Route 15 Lewisburg, Pennsylvania CB File No. 96-093M Dear Ladies and Gentlemen: At your request and authorization, CB Commercial Real Estate Group, Inc. has prepared a Complete Appraisal presented in a self-contained appraisal report of the current market value of the leased fee estate in the above-referenced real property. The subject property is a single story community shopping center containing 113,600 square feet of gross leasable area. The shopping center is anchored by an Ames Department Store and Bi-Lo Supermarket and is currently 89% occupied. The property is more fully described, legally and physically, within the enclosed report. Data, information, and calculations leading to the value conclusion are incorporated in the report following this letter. The report, in its entirety, including all assumptions and limiting conditions, is an integral part of and inseparable from this letter. Based on research and analysis contained in this report, it is estimated that the current market value of the leased fee estate in the subject property as of May 23, 1996, is: THREE MILLION FOUR HUNDRED THOUSAND DOLLARS ($ 3,400,000) The following appraisal sets forth the most pertinent data gathered, the techniques employed, and the reasoning leading to the opinion of value. The analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP), the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, and The Financial Institution Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Furthermore, this report has been prepared in conformance with our interpretation of the appropriate regulations and guidelines set forth by Morgan Stanley. Morgan Stanley June 19, 1996 Page 2 It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CB Commercial Real Estate Group, Inc. can be of further service, please do not hesitate to contact us. Respectfully Submitted, CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES by: /s/ Peter J. Jolicoeur /s/ Michael R. Pecorino - ------------------------------- ------------------------------- Peter J. Jolicoeur Michael R. Pecorino, MAI Senior Real Estate Analyst Senior Vice President Northeast Regional Manager Pennsylvania Certification No. GA-001096-R ================================================================================ CERTIFICATION OF THE APPRAISERS - -------------------------------------------------------------------------------- CERTIFICATION OF THE APPRAISERS We certify that to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. 4. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event, such as the approval of a loan. 5. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation and the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. In addition, this report conforms to the requirements of the Financial Institution Reform, Recovery, and Enforcement Act (FIRREA). 6. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 7. Michael R. Pecorino has completed the requirements of the continuing education program of the Appraisal Institute. 8. The property was personally inspected by Peter J. Jolicoeur, but was not inspected by Michael R. Pecorino, MAI. 9. No other person provided professional assistance to the persons signing this report. 10. The undersigned appraisers have extensive experience in the appraisal/review of similar property types. /s/ Peter J. Jolicoeur /s/ Michael R. Pecorino - ------------------------------- ------------------------------- Peter J. Jolicoeur Michael R. Pecorino, MAI Senior Real Estate Analyst Senior Vice President Northeast Regional Manager Pennsylvania Certification No. GA-001096-R ================================================================================ i ================================================================================ SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- SUBJECT PHOTOGRAPHS [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- FRONT VIEW OF THE SUBJECT PROPERTY FACING AMES - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- FRONT VIEW OF THE SUBJECT PROPERTY FACING BI-LO - -------------------------------------------------------------------------------- ================================================================================ ii ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- SUMMARY OF SALIENT FACTS Property Name: Plaza 15 Mall Location: Route 15, Lewisburg, Pennsylvania Assessor's Parcel Number: Section 06, Map 056, Parcel #'s 50 & 50.1 Property Description: The subject property is a single story community shopping center containing 113,600 square feet of gross leasable area. The improvements are situated on a 758,815 square foot lot (17.42 acre). Construction features include a concrete and steel frame and brick and split-faced block exterior walls. Highest and Best Use As Though Vacant: Retail development As Improved: Continued use as a shopping center Property Rights Appraised: Leased Fee Date of Value: May 23, 1996 Land Area 758,815 Square Feet (17.42 acres) Improvements Building Area: Gross Leasable Area: 113,600 SF Year Built: 1976 Condition: Average Estimated Marketing Time: 12 months or less - -------------------------------------------------------------------------------- iii ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- Financial Indicators Current Occupancy: 89% Leased / 89% Occupied Stabilized Occupancy: 95% $ 4.00 P.S.F. Market Rental Rate: Anchor $ 5.50 P.S.F. Satellite < 5,000 square feet $ 10.00 P.S.F. Satellite > 5,000 square feet Income Growth Rate: 3.0% Estimated Stabilized Expenses: $ 2.10 P.S.F Expense Growth Rate: 3.0% Going-In Overall Capitalization Rate Selected: 10.50% Going-In Overall Capitalization Implied: 10.40% Terminal Overall Capitalization Rate: 11.00% Discount Rate: 12.50% Valuation Land Value: N/A Cost Approach: N/A Sales Comparison Approach: $ 3,400,000 Income Capitalization Approach: $ 3,400,000 Final Value Conclusion: $ 3,400,000 Per Square Foot: $ 29.93/SF ================================================================================ iv ================================================================================ TABLE OF CONTENTS - -------------------------------------------------------------------------------- TABLE OF CONTENTS CERTIFICATION OF THE APPRAISERS..............................................i SUBJECT PHOTOGRAPHS.........................................................ii SUMMARY OF SALIENT FACTS...................................................iii TABLE OF CONTENTS............................................................v INTRODUCTION.................................................................1 AREA ANALYSIS................................................................7 MARKET ANALYSIS.............................................................15 SITE ANALYSIS...............................................................20 IMPROVEMENT ANALYSIS........................................................22 ZONING......................................................................25 TAX AND ASSESSMENT DATA.....................................................26 HIGHEST AND BEST USE........................................................27 APPRAISAL METHODOLOGY.......................................................30 SALES COMPARISON APPROACH...................................................32 INCOME CAPITALIZATION APPROACH..............................................39 RECONCILIATION OF VALUE.....................................................63 ASSUMPTIONS AND LIMITING CONDITIONS.........................................65 ADDENDA.....................................................................69 A.........................................................Glossary Of Terms B.........................................................Legal Description C.................................................Improved Comparable Sales D........................................................Rental Comparables E...........................................Strategic Mapping, Inc. Reports F.................................................................Rent Roll G..........................................................PRO-JECT Reports H.........................................................Engagement Letter I............................................................Qualifications ================================================================================ v INTRODUCTION INTRODUCTION ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- INTRODUCTION PROPERTY IDENTIFICATION The subject is located on the northwest corner of Route 15 and Hospital Drive approximately one-half mile north of Lewisburg, Pennsylvania. The assessor's tax identification number is Section 06, Map 046, Parcel Nos. 50.0 & 50.1. A full metes and bounds legal description is included in the Addenda. OWNERSHIP AND PROPERTY HISTORY The subject is currently owned by Mark Centers Limited Partnership. The subject has not sold in the last three years and to the best of our knowledge there is no known current listing, option, or agreement of sale of the subject. DATES OF INSPECTION AND VALUATION The site was last inspected by Peter J. Jolicoeur on May 23, 1996. Michael R. Pecorino, MAI did not inspect the subject or the comparables employed but reviewed this report and concurs with the conclusions. The date of the market value is the date of inspection, May 23, 1996. PURPOSE OF THE APPRAISAL The purpose of this appraisal is to estimate the current market value of the leased fee estate in the subject property in it's "As Is" condition. Market value is defined as follows: Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised, and acting in what they consider their own best interests; 3. A reasonable time is allowed for exposure in the open market; 4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and ================================================================================ 1 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- 5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) TERMS AND DEFINITIONS Please refer to the Addenda for a Glossary of the Terms and Definitions that are, and may be used in this appraisal. INTENDED USE OF REPORT This appraisal is for mortgage underwriting purposes. PROPERTY RIGHTS APPRAISED The value estimated is the fee simple interest subject to existing long-term lease tenancies which is analogous to the leased fee estate. APPRAISAL DEVELOPMENT AND REPORTING PROCESS The following steps were completed by CB Commercial for this assignment: 1. Analyzed regional, city, neighborhood, site, and improvement data. 2. Inspected the subject and the neighborhood. 3. Reviewed data regarding taxes, zoning, utilities, easements, and city services. 4. Considered comparable improved sales, comparable improved building rental information, and comparable site sales. Data was confirmed with principals, managers, or real estate agents representing principals, unless otherwise noted. 5. Analyzed the data to arrive at conclusions via each approach to value used in this report. 6. Reconciled the results of each approach to value employed into a probable range of market data and finally an estimate of value for the subject, as defined herein. 7. Estimated a reasonable exposure time associated with the value estimate. The subject site and improvement descriptions are based on a personal inspection of the property, discussions with representatives of the subject property, and/or a review of relevant plat maps and leasing plans. The inspection is not a substitute for thorough engineering studies. - ---------- (1) The definition of market value is taken from: The Office of the Comptroller of the Currency under 12 CFR, Part 34, Subpart C-Appraisals, + 34.42(f), August 24, 1966. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. ================================================================================ 2 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- To develop the opinion of value, CB Commercial performed a complete appraisal process, as defined by the Uniform Standards of Professional Appraisal Practice. This means that no departures from Standard 1 were invoked. This is a complete appraisal, in the form of a self-contained Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Standards of Professional Appraisal Practice. The definitions of Complete Appraisal and self-contained Report are found in the Glossary of Terms and Definitions. In a complete appraisal, CB Commercial uses all known applicable approaches to value. The value conclusion reflects all known information about the subject property, market conditions, and available data. The self-contained Report incorporates to the fullest extent possible, practical explanation of the data, reasoning and analysis that were used to develop the opinion of value. It also includes thorough descriptions of the subject property and the market for the subject property type. All data considered significant that was requested for this assignment was received by CB Commercial Real Estate Group, Inc. Appraisal Services. SPECIAL APPRAISAL INSTRUCTIONS There were no special appraisal instructions. MARKETING PERIOD The marketing period section is divided into reasonable exposure time and reasonable marketing time. Exposure time differs from marketing time. Marketing time is the period required to sell a real property interest at market value during the period immediately after the effective date of the appraisal. Exposure time is always presumed to precede the effective date of the appraisal. Exposure time is not intended to be a prediction of a date of sale or a one-line statement. Instead, it is an integral part of the appraisal analysis and is based on one or more of the following: o statistical information about days on the market o information gathered through sales verification o interviews of market participants. The reasonable exposure period is a function of price, time, and use. It is not an isolated estimate of time alone. Exposure time is different for various types of real estate and under various market conditions. ================================================================================ 3 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- Reasonable Exposure Time Exposure time is always presumed to precede the effective date of the appraisal. It is the estimated length of time the property would have been offered prior to a hypothetical market value sale on the effective date of appraisal. It is a retrospective estimate based on an analysis of recent past events, assuming a competitive and open market. It assumes not only adequate, sufficient, and reasonable time but adequate, sufficient, and reasonable marketing effort. Exposure time and appraisal conclusion of value are therefore interrelated. Exposure time is often expressed as a range and is based on direct and indirect market data gathered during the market analysis, sales verifications, interviews with market participants, and other appropriate sources. The amount of time which a property will require to be marketed varies greatly depending on a number of factors including market conditions, listing price, terms of sale offered, and competitive listing inventory. In addition to considering each of the factors noted above, CB Commercial considered: o exposure periods of comparable sales revealed during the course of this appraisal, o the most recent CB Commercial National Investor Survey, and o the opinions of local knowledgeable real estate brokers and investors. Market Conditions Throughout the Union area, market conditions for most property types have been generally weak during the past three to four years. The value of most investment grade property types has decreased due to a number of factors. The lack of demand for investment properties and the inability of owners to make mortgage payments resulted in numerous foreclosures, or properties deeded back in lieu of foreclosure. Increased listing inventory has had a substantial downward influence on property values and the exposure time necessary to generate sales. Only recently, due to the competitive pricing in the market and improving economic conditions, has the number of transactions and active investors increased. These market conditions describe the current market and illustrate how exposure time is correlated with listing inventory, competitive pricing structures, and marketing efforts. CB Commercial National Investor Survey In the most recent issue of the CB Commercial National Investor Survey, published in the Second Quarter 1996, CB Commercial surveyed a wide range of investors for property type preferences and specific marketing times. Respondents showed a clear preference for apartments, suburban offices, warehouse/distribution, community shopping centers, neighborhood shopping centers, power centers, urban offices, and business parks. Investors ================================================================================ 4 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- indicated that exposure requirements for investment property have changed little from the previous survey, now an average of approximately 8.5 months for the subject property type. Real Estate Broker Surveys As a second information source, appraisers solicited the opinions of real estate brokers knowledgeable in the subject market and property type. While the majority of individuals surveyed were reluctant to predict an exact exposure time length for retail property in general, they generally estimated an approximate range between 6 and 12 months. All assumed that property would be appropriately priced and marketed. When asked about the subject property specifically, the consensus of opinion was that the subject would receive average to above average recognition in the marketplace under a reasonable plan for pricing and promotion. Exposure Time Conclusion In conclusion, based on the foregoing analysis, an exposure time of between 6 and 12 months is reasonable, defensible, and appropriate. Like the brokers surveyed, CB Commercial assumes that the subject property would have been competitively priced and aggressively promoted regionally. Reasonable Marketing Time Reasonable marketing time is the period a prospective investor would forecast to sell the subject property immediately after the date of value, at the value estimated. Anticipated marketing time is essentially a measure of the perceived level of risk associated with the marketability, or liquidity, of the subject as an investment grade property. The sources for this information include those used in estimating the reasonable exposure time, but also an analysis of the anticipated changes in market conditions following the date of appraisal. In other words, the reasonable marketing time is the number of months it will require to sell the subject property from the date of value, into the future. The reader must understand, however, that the future price for the subject property (at the end of the marketing time) may or may not equal the appraisal estimate. The future price depends on unpredictable changes in the physical real estate, demographic and economic trends, real estate markets in general, supply/demand characteristics for the property type, and many other factors. Based on the premise that present market conditions are the best indicators of future performance in the short-term and under stable market conditions, a prudent investor will forecast that, under the conditions described above, the subject property will require a marketing time of 6 to 12 months. ================================================================================ 5 ================================================================================ REGIONAL ANALYSIS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] REGIONAL AREA MAP ================================================================================ 6 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- AREA ANALYSIS The dynamic nature of economic relationships within a market area have a direct bearing on real estate values and the long-term quality of a real estate investment. In the market, the value of a property is not based on the price paid for it in the past or the cost of its creation, but on what buyers and sellers perceive it will provide in the future. Consequently, the attitude of the market toward a property within a specific neighborhood or market area reflects the probable future trend of that area. Since real estate is an immobile asset, economic trends affecting its locational quality in relation to other competing properties within its market area will also have a direct effect on its value as an investment. To accurately reflect such influences, it is necessary to examine the past and probable future trends which may affect the economic structure of the market and evaluate their impact on the market potential of the subject. This section of the report is designed to isolate and examine the discernible economic trends in the region and neighborhood which influence and create value for the subject property. A regional map indicating the location of the subject is presented on the previous page. REGIONAL INFLUENCES Location The subject is located in the community of Lewisburg within Union County, in the middle portion of the state of Pennsylvania. Union County is not part of any larger Metropolitan Statistical Area (MSA). It is a rural county with three small communities, Lewisburg, Linntown and Mifflinburg, each having a population of less than 10,000. Union County is bordered to the west by Centre County, to the east by Northumberland County, to the south by Snyder County, and to the north by Lycoming County. A regional map indicating the location of the subject is presented on the following page. Population The 1995 population within Union County was estimated by Strategic Mapping, Inc. to be 37,855 which reflects a population density of 120 persons per square mile, similar to Snyder County to the south but roughly half that of Northumberland County to the east. This population level indicates a increase of 1,679, or 4.6% from the April 1, 1990 federal census. The population is expected to further increase slightly to approximately 39,627 by the year 2000. ================================================================================ 7 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Demographic statistics for Union County are summarized in the following table. ================================================================================ SELECTED AREA DEMOGRAPHICS UNION COUNTY ================================================================================ Population 1995 Estimate 37,855 1990 Census 36,176 1990-1995 % Change 4.6% Households 1995 Estimate 12,323 1990 Census 11,689 1990-1995 % Change 5.4% 1995 Median Household $32,871 Income 1995 Average Household $41,292 Income 1990 Average Home Value $78,379 1990 % College Graduates 22.6% - -------------------------------------------------------------------------------- Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ Households Similar to the population level within the Union County, the number of households has increased in recent years and is projected to increase by 5.5% over the next five years. Between 1990 and 1995, the number of households in Union County increased by 5.4%. Projections for the year 2000 indicate a growing market area. The average household size did not change between 1990 and 1995 (averaging 2.64 persons per household) and is expected to remain flat over the next five years as well. Income Per the data compiled by Strategic Mapping, Inc., the 1995 median household income in the Union County was $32,871. The median household income increased considerably between the 1980 and 1990 census by approximately 5.6% annually. The 1995 estimate indicates that growth in the median household income has slowed to 3.5% per annum from 1990 to 1995. Following this more recent trend, income growth is projected to increase at an average annual rate of 3.4% between 1995 and the year 2000, slightly less than inflation. ================================================================================ 8 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Employment The total civilian labor force for Union County was 17,060 in April, 1996 with corresponding employment of 16,198 indicating an April, 1996 unemployment rate of 5.1%. The following table compares the unemployment rate for the area to that of the state and national average. ================================================================================ UNEMPLOYMENT RATES COMPARISON BY COUNTY, STATE, AND U.S. - -------------------------------------------------------------------------------- Year Union County Pennsylvania U.S. 1995 4.7% 5.9% 5.7% 1994 4.7% 6.2% 6.1% 1993 6.2% 7.1% 6.8% 1992 7.3% 7.6% 7.4% - -------------------------------------------------------------------------------- Source: Pennsylvania Department of Labor and Employment Security, Bureau of Labor Market Information Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ Most of the employment is in Services (34%) particularly education and Manufacturing (27%), followed by retail trade industries (14%). The area saw a slight loss of 7% in manufacturing employment between 1980 and 1990, but a much greater increase in white-collar jobs of 35.7%. This area has a higher rate of service sector workers as compared to the surrounding counties reflecting Bucknell University's presence within the county. The major employers in the area are as follows: ================================================================================ UNION COUNTY MAJOR AREA EMPLOYERS - -------------------------------------------------------------------------------- Company Business No. Employees - -------------------------------------------------------------------------------- Pennsylvania House Furniture, Inc. Wood furniture 1,100 Bucknell University Education 950 Evangelical Community Hospital Hospital 750 Lewisburg Federal Penitentiary Federal Prison 600 Ritz-Craft Corporation Pre-fabricated 525 buildings/homes JPM Company Electric mechanical 525 assembly Country Cupboard Restaurant/hotel/shops 350 Lewisburg United Retirement Community 330 Methodist Homes Yorktowne, Inc. Kitchen cabinets 314 - -------------------------------------------------------------------------------- Source: Union County Chamber of Commerce Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ ================================================================================ 9 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Transportation The Interstate highways serving Union County is primarily Interstate 80 which traverses the northern portion of the county. Interstate 80 traverses Pennsylvania in an east-west direction providing direct access to New Jersey and New York City. Access to this interstate is direct and easy via route 15. Route 15 traverses Union County making direct connections to Williamsport to the north and Harrisburg to the south. To the south, at Harrisburg, connections can be made to I-81. Overall, access to Lewisburg is very good as there is direct access from Route 15 to Interstate 80, approximately five miles to the north. The major airports serving the Union County area are the Wilkes Barre Scranton International Airport and locally the Penn Valley Airport in Snyder County. The Wilkes Barre Scranton International Airport is approximately 70 miles northeast of Lewisburg located along I-81 southwest of downtown Scranton. This airport provides for private and corporate flights as well as cargo shipments. The Union County area is also served by various Conrail freight lines. Conclusion and Relevance to the Subject Property The long term outlook for the Union County is considered good. The county has direct access to I-80 via route 15, a primary north-south roadway in this area. The county has a diverse economy with a strong educational base which has promoted growth in service sector employment over the past 15 years. At the same time, its industrial base has declined moderately but this has not affected the health of the economy. Population projections indicate increases for Union County in the short- and long-term. This growth trend holds true for households and income levels as well. This is a strong middle income area which should continue to support the existing retail stock and perhaps grow in the mid term. ================================================================================ 10 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- NEIGHBORHOOD INFLUENCES Location The subject is located on the west side of Federal Highway 15, at its intersection with Hospital Drive, a local road. The boundaries for the subject neighborhood are considered to be a concentric ring having a radius of five miles. This encompasses the primary trade area, which emanates from the Borough of Lewisburg. A neighborhood map indicating the location of the subject is presented on the following page. Land Use Land use in the neighborhood consists of a mixture of commercial and residential development. To the north, along Route 15 the area is largely undeveloped. The area to the west is developed with low density residential uses. To the east is the Susquehanna River and across the river is East Lewisburg, a small community. Moving south along Route 15 through Lewisburg, is a strip of commercial improvements. The immediate area along Route 15 has a scattering of commercial and institutional improvements. Adjacent to the north is a division of International Paper. Adjacent to the south of the subject is a large site occupied by Evangelical Hospital. Moving further south is a small strip of competing retailers, including a Staples situated within a neighborhood center, followed by a Wal-Mart and Weis Supermarket. These larger commercial improvements are located on the outskirts of Lewisburg. Lewisburg has an historic commercial downtown situated along route 45, made-up of two- and three-story brick buildings dating from before the civil war and a housing stock made-up of one family homes, some of which also date from the same time. Post war housing is typically located beyond the boundaries of downtown. On the south side of Lewisburg is the campus of Bucknell University and further south is a correctional facility. Access Accessibility to the neighborhood in general, and to the subject property in particular, is considered to be very good. Access to Interstate 80 is direct from Route 15, approximately five miles north . Lewisburg is accessed from the east and west via Route 45, a local roadway. This route provides access to Mifflinburgh, East Lewisburg and Danville. Route 15 is an undivided highway with multiple intersections within the Borough of Lewisburg. Intersections and access to commercial improvements are controlled by traffic lights. ================================================================================ 11 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ================================================================================ NEIGHBORHOOD MAP ================================================================================ [GRAPHIC OMITTED] ================================================================================ 12 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Demographics Selected Neighborhood demographics in a five, ten, and a fifteen mile radius from the subject are shown in the following table: ================================================================================ SELECTED NEIGHBORHOOD DEMOGRAPHICS ================================================================================ 5 mile 10 mile 15 mile - -------------------------------------------------------------------------------- Population 1995 Estimate 30,288 78,136 125,718 1990 Census 29,523 77,012 121,973 1990-1995 % Change 2.6% 1.5% 3.1% Households 1995 Estimate 10,183 28,512 45,360 1990 Census 9,860 28,080 43,881 1990-1995 % Change 3.3% 1.5% 3.4% 1995 Median Household Income $33,054 $30,831 $31,170 1995 Average Household Income $41,074 $37,650 $37,852 1990 Average Home Value $78,6237 $67,924 $66,039 Median Age Total Population 34.6 35.7 35.3 1990 % College Graduates 23.2% 18.3% 17.9% - -------------------------------------------------------------------------------- Source: Conquest Market Data Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The moderate upward trend in population and housing units is projected to continue through the year 2000. The subject property is situated within a solid middle-income residential area. The subject's department store competes directly with a free-standing Wal-Mart located just south and less-so with a McCrory's located 2.5 miles to the east in Milton. The population and households have increased within the primary, secondary and tertiary trade areas. Projections for the year 2000 indicate similar patterns. Income levels have edged upward approximately 3.5 percent per annum keeping pace with inflation. General income characteristics are slightly stronger for the five-mile radii and fall off when including the 15 mile radii. More wealthy residents live tend to live within Lewisburg. Growth and Trends We are not aware of any proposed shopping centers within greater Lewisburg in the upcoming years. The immediate neighborhood has not experienced significant retail development in the recent past although there has been some upgrading of existing stores. Most recently a Wal-Mart was built within one-quarter mile of the subject, on the westerly side of Route 15. The county is developing a 670 acre parcel to the north at the I-80 and route 15 interchange. The ================================================================================ 13 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- plans call for a mixed commercial and residential development. Given the demographic profile and trends projected for this area, it is likely that new retail development may take place in the mid- to long-term. Conclusion and Relevance to the Subject Property The subject property is situated along a major retail strip surrounded primarily by residential uses. The area features good accessibility to both the local transportation system and throughout the county and larger area. Currently, the subject's neighborhood is in the stabilization stage of its life cycle, but may be poised for further growth given the county's promotion of a business park to the north. The commercial strip is largely undeveloped and we do not expect the character of the neighborhood to change in the near term. The long-term prospects for the area including retail growth appear to be good. ================================================================================ 14 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- MARKET ANALYSIS Retail Overview The retail market in Lewisburg is essentially stable. The immediate neighborhood was largely developed during the late 1960's through the mid 1970's. The most recent addition came in 1994, with the opening of a Wal-Mart Store. The make-up of this small market, two grocery stores and three department stores, has been relatively constant. We are not aware of any proposed shopping centers within the greater Lewisburg area in upcoming years. According to Strategic Mapping, Inc., as well as our own observations and research, total retail development within the primary trade area, a five-mile radius of the subject property consists of approximately 360,000 square feet. This includes a 45,000 square foot neighborhood center in nearby Milton anchored by a McCrory department store. The level of retail development for the ten mile radius increases to 1,200,000 including community centers and free-standing department stores in Shamokin Dam to the south as well as the Susquehanna regional mall. Furthermore, retail development within a 15 mile radius consists of an estimated 1,400,000 square feet. This additional retail development is located in Danville a slightly larger sized community located to the east of the subject in Montour County. Local Retail Market In order to project future performance of the retail space in the subject property consideration has been given to various market components that affect the supply and demand for this type of real estate property. Specifically we have: o Inspected the site and surrounding areas for the purpose of familiarizing ourselves with all the locational and environmental factors. In this regard, we have directed our attention to the physical qualities of the site, access and circulation, surrounding uses, and relationship to sources of market support. o Reviewed the principal economic growth trends in the area in industry, population and employment. Our intention was to identify the degree of underlying support for existing improvements and future growth. o Analyzed existing and foreseeable market conditions for retail properties in the area. o Analyzed demographics of the subject property's trade area as well identified competition in order to assess, the subject property's current as well as future position in the market. ================================================================================ 15 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- Trade Area The trade area of a shopping center is defined as the geographic area from which the sustaining patronage for steady support of a center is obtained. Determination of the boundaries is contingent upon various factors including but not limited to the nature and size of the center, area population, accessibility, physical barriers, location of competing facilities, and limitations of driving time and distance. The subject's general trade area is considered to be that which encompasses a fifteen mile radius of the subject center. We broke this down further to include a five-mile ring (primary trade area), a ten-mile ring (secondary trade area) and a fifteen-mile ring (tertiary trade area). Definition Of The Trade Area The primary ingredients for success in these types of projects include the nature of the competition, population density, income levels, and disposable income. The actual size of the population needed to support this type of project cannot be fixed due to the complexities of the above factors, as well as changing methods of merchandising. Local conditions, such as number of households, income levels, and existing centers within the trade area can have the most dramatic impact upon any given project since these factors are what determine the purchasing power in an area. An additional ingredient leading to the success of a shopping center would be the tenant mix and characteristics of the leading tenants which attract shoppers to the project. We have analyzed demographic data, competition, income levels for the subject trade area in the following sections. The demographic profiles of the primary, secondary and tertiary trade areas are presented in the Neighborhood Influences section of the report. Additional information is contained in the Strategic Mapping, Inc. Profile Report located in the Addenda. Population The sales potential of a center is directly related to its proximity to the number of potential patrons. The historical and projected trends for population are important to examine when analyzing the trade area of a shopping center. The historical population trends for the subject's trade areas indicate an increase in population between 1980 and 1995 followed by a further, albeit moderate, increase projected from 1995 to the year 2000. In the primary trade area the population increased by 8.8% between 1980 and 1990 to 29,523 and then witnessed a lesser gain to 30,288 in 1995. Population projections indicate an increase to 31,070 between 1995 and the year 2000. The secondary trade area witnessed strong increases between 1980 and 1990, moderating in the last five years. Both the secondary and tertiary areas have a future upward trend in population. ================================================================================ 16 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- In order to further analyze the population change, we have examined the distribution of the population by age. When analyzing the population distribution by age, it should indicate in what age groups the population shifts are projected to take place. This is important to distinguish if it will have a great impact on the retail sales of the subject center. Shifts in the age groups under 24 years of age will affect the subject, however, less drastically than changes in the subject's core market approximately between the ages of 25 and 54. As illustrated in the Profile Report located in the Addenda, a large percentage of the population in all three trade areas are in the age groups from 25 - 54. The population has a fair number of young persons (off-setting the plus-65 year-old category) which will move into their prime spending years. Estimated figures for 1995 indicated that the median age was slightly higher than the 1990 census in all three trade areas ranging from 33.6 to 34.5. Overall, the diversification among age groups is typical of the broader region. Household Trends When analyzing the demographics for a retail center, it is most important to focus on the trends in the household population. A household consists of one or more persons occupying a dwelling unit. A family would be considered a household unit, however single persons living alone or two or more unmarried persons sharing a dwelling are also considered a household unit. The household unit is perhaps the best indicator in determining the economic health of a trade area. One of the important components which bonds a household together is it's economic strength as a unit as compared to the economic viability of an individual; single person households not withstanding. If the population is slightly decreasing and yet the number of households is increasing, this would not necessarily be a negative indicator. This would imply that the average household size was shrinking. Each household has demand for goods that likely is not duplicated with a larger household size. This demand is duplicated however in the number of households. Similar to population figures, the number of households in the trade area increased between 1980 and 1990. The number of households increased between 1990 and 1995 though at a slower pace in comparison to the previous decade. The number of households are projected to increase further in all three trade areas in upcoming years. These projections indicate a bolstering in retail sales. Household Income The median household income in the subject's trade areas increased annually at an average rate of 3.4% from 1990 to 1995. Thus, the household incomes in the area grew at a pace slightly below inflation during this period. The projected annual income growth rates between ================================================================================ 17 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- 1995 and the year 2000 are approximately 3.3%, lower than the projected rate of inflation. Overall, household income levels varied slightly between the three trade areas. The median household income levels ranged from $30,831 to $33,054 in 1995 with the primary trade area representing the higher end of the range. Employment The income characteristics of the trade areas for the subject property indicate that this is a predominately white-collar market. The trade areas had diminishing levels of white-collar employment: from 53% in the primary to 44% in the tertiary. The concentration of blue-collar workers was just the opposite; 31% in the primary to 37% in the tertiary. The remaining percentages were in special services categories. Each area saw loses in manufacturing employment ranging from 13% in the primary area to 7% in the tertiary area over the past 10 to 15 years. During the same period white-collar employment increased by 30% to 41% across the three trade areas. The largest gains were experienced in the primary trade area. The 1990 Census information indicates that the unemployment rates ranged from a low of 5.1% in the secondary trade area to a high of 5.5% in the primary trade area. As discussed in the Location Analysis, the most recent unemployment rate in Union County was 5.1% which indicates an overall moderate decrease in employment from the 1990 Census. The relatively low unemployment rates in the primary and secondary trade areas reflect their diversity and the growth of these areas in white-collar employment. The existence of Susquehanna University and Bucknell University adds to the stability of these areas. Expenditure Potential The Expenditure Potential charts located in the Addenda outline Strategic Mapping, Inc. retail sales projections for the subject trade area. The highest sales growth in the primary trade area appears to be for drug, home center and grocery stores. These categories also represent high growth in the secondary and tertiary trade areas. The average growth rate for retail sales is projected at 2.33% in the primary trade area, 2.05% in the secondary trade area and 2.36% in the tertiary trade area. Strategic Mapping, Inc. examines the product potential for various store types for each portion of the subject trade area. Based on statistical sampling, Strategic Mapping has derived a benchmark per household expenditures for each store type. Comparing the figures in the trade area to the benchmark figure, it is apparent that those individuals in the subject trade area are much more likely to spend on items in drugs, groceries, and convenience stores. The Strategic Mapping Expenditure Potential Index is defined as follows, 'An index which shows the amount by which an area per household expenditures, differed from that of the ================================================================================ 18 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- benchmark.' The benchmark is defined as the average or common expenditure among households for a larger region. Values below 100 signify that this area is below the benchmark per household expenditures and correspondingly values above 100 indicate a higher than average expenditure per household. The overall Expenditure Index for the primary area is 100.7, while the benchmark indices for the secondary and tertiary trade areas are 95.6 and 96.3, respectively. In conclusion, the expenditure indices indicate that the trade area populations spend as much or slightly less than the benchmark household on retail goods. Several product categories had benchmarks in excess of 100: convenience, drug, grocery, hardware, home center and video store sales. The next highest benchmark categories were fast food, auto-aftermarket and electronics stores. Overall, these statistics reveal a market that is economically in the middle and therefore one that spends on both necessities, (food stuffs and drugs primarily) and such middle class interests such as home improvement products and restaurants. Though not a high-end market, this community does spend some money on luxury-type goods such as electronics, jewelry and apparel. Market Indicators The subject consists of a community-sized shopping center anchored by Ames and a Bi-Lo Supermarket. Discussions with local leasing agents reveal that typical anchor space rents in the area generally range from $4.00/SF to $8.00/SF and satellite space rents range from $5.50 to $11.00/SF depending upon the physical and locational characteristics of the space. Percentage rent clauses tend to be uncommon for satellite tenants. Retail leases are typically structured on an absolute net basis with flat rents over the term. Based upon discussions with brokers and managing agents in the area as well as our observations during our inspection, competing centers in the subject's market area have vacancy rates which generally fall within the 5.0% to 20.0% range mostly in satellite store space with no major vacancies noted. Summary Future projections indicate continued moderate increases in the population and households in all three trade areas from 1995 through 2000. Income levels appear to be increasing at rates equal with projected inflationary rates which is common during periods of economic recovery. Overall, the subject trade areas reflect average-to-good retail characteristics. The trade areas will exhibit moderate increases in spending potential over the near term. While the primary area is has relatively dense population there are only a few big box retailers although the nearest one is a Wal-Mart. Thus, this is not a highly competitive marketplace. ================================================================================ 19 PROPERTY DESCRIPTION ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- SITE ANALYSIS The description of the site can be detailed as follows: Location: The subject is located at the northwest corner of Route 15 and Hospital Drive, approximately five miles south of the Route 15-Interstate 80 interchange (Exit 30) and one-half mile north of Downtown Lewisburg, Pennsylvania. Ingress and egress to the subject are available via curb cuts from both Route 15 and Hospital Drive. Assessor's Parcel Number: Section 06, Map 046, Parcel No. 50.0 & 50.1 Land Area(2) The subject site contains 17.42 acre or 758,815 square feet. Shape and Frontage: The site is rectangular in shape featuring good frontage on Route 15 (843 feet) and 718 feet on Hospital Drive. Topography and Drainage: The site slopes gradually downward from west to east towards Route 15. Our investigation did not reveal any significant drainage problems. Soils: No soil report was provided and it is assumed that the soil is adequate for the existing use. Easements: No title report was provided in connection with this appraisal. A survey showing the location of easements was submitted. There is an existing right-of-way which runs along the Hospital Drive frontage and encompasses 0.169 acres. Typical utility easements also exist. Our reading of submitted plans is not meant to be a definitive conclusion regarding any potential impacts on value of the location of any such easements or encroachments. It is specifically assumed that any easements, restrictions, or encroachments that might appear against the title would have no adverse impact on marketability or value. Covenants, Conditions, and Restrictions: No private deeds or restricting covenants affecting development, other than zoning, were found to affect the site. Utilities: All public utilities including gas, electricity and telephone as well as water, storm and sanitary sewer systems. - ---------- (2) Source: Lewisburg Tax Assessor's Office ================================================================================ 20 ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- Flood Zone: The municipal offices did not have a copy of a Federal Emergency Management Agency (FEMA) Flood Map, however our discussion with the City of Lewisburg's Planning and Building Department indicated that the subject property is not located within a flood hazard zone. This was corroborated with the survey of the subject which was submitted to us by Mark Centers Trust. Environmental Issues: The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the property causing a loss in value. No evidence of hazardous waste or toxic materials was visible and CB Commercial has no knowledge of the existence of these substances on or in the subject property. However, CB Commercial is not qualified to detect hazardous waste or toxic materials. Adjacent Properties North: Industrial use and undeveloped land South: Institutional land use: Evangelical Hospital East: Commercial uses West: residential uses Conclusion: The subject is a 17.42-acre site on a paved street served by necessary utilities. Access and visibility are considered to be good. There are no adverse soil conditions of which CB Commercial Real Estate Group, Inc. is aware. The shape of the parcel is regular and results in no specific limitation. The topography is gradually sloping though possesses no specific development limitation. There is excess development capacity per zoning requirements, however, the building-to-land ratio of roughly 20% falls within a range typical found at competing centers. There are no present plans to expand the center. From a physical standpoint, the site is considered to be adequate for many types of development. ================================================================================ 21 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS The subject improvements were constructed in 1976. The improvements consist of a single-story community shopping center containing 113,600 square feet of gross leasable area. The shopping center contains two anchors, seven satellite stores (3 vacant) and three pad sites. The following is a description of the improvements based on our physical inspection, municipal records and from discussions with and materials provided by the client. The basic construction features are summarized as follows. Construction Class The class of construction per Marshall Valuation Service which divides all buildings into five basic groups by type of framing (supporting columns and beams), walls, floors, roof structure, and fireproofing. The subject is considered to be of construction Class B(3). Competitive Rating The subject is considered a Class B building in terms of quality as it is perceived in the marketplace. Foundation Poured concrete Frame Concrete block over a steel frame Floor Construction Concrete slab Exterior Walls Load-bearing concrete block over a steel frame with face brick. The satellite stores have an enclosed walkway finished with aluminum and glass and a stucco canopy used for signage. Fenestration Aluminum framed glass windows and double-paned glass front doorways. Roof Structure & Covering Flat, presumably built-up composition covering over steel deck with steel bar joist supports. We were unable to inspect the roof and assume the roof is in average overall condition. Exterior Condition Average Interior Partition System Metal studs with gypsum board cover. - ---------- (3) The primary characteristic of Class B Buildings is the reinforced concrete frame in which the columns and beams can be either formed or precast concrete. They may be mechanically stressed, and the structure is fire resistant. (Source: Marshall Valuation Service) ================================================================================ 22 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Interior Finishes - Tenant Space Floors: Combination of vinyl tile and carpet. Walls: Painted or covered gypsum board. Ceilings: Suspended acoustic tiles. Lighting: Recessed florescent lighting. Summary: The interiors of the subject are considered to be of average to good HVAC Heating and ventilation is provided to the majority of the tenant suites by roof-mounted HVAC units. Each of these units pump hot air throughout its suite via sheet metal air duct work hidden above the dropped ceiling. Air conditioning is supplied by the same system utilizing the duct work and supplying cool air during the summer months. The HVAC system is a gas-fired forced air system. Electrical The electrical system is assumed to be in good working order and adequate for the building. Fire Protection It is assumed that the subject has adequate fire alarm systems, fire exits, fire extinguishers, fire escapes and/or other fire protection measures to meet local fire marshall requirements. Plumbing The plumbing system is assumed to be in good operating condition. Parking Surface parking is provided for 1061+ vehicles. - Landscaping Landscaping on the subject property is minimal consisting of a green belt along Route 15, which is typical within the subject neighborhood. ADA Compliance Handicap access appears to be available to all areas of the center. However, we are not qualified to determine compliance with the requirements. Please refer to the specific limiting condition regarding ADA compliance. ================================================================================ 23 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Environmental Issues The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the improvements which would cause a loss in value. Functional Quality of Space The interior floor plans are flexible and will accommodate a variety of tenant layouts. There are no observed design problems and none are reported by management. Access to the tenant suites is available at the front and rear of the center. Deferred Maintenance No deferred maintenance was observed or reported. The improvements have been adequately maintained since it was constructed in 1976. Economic Age and Life Based on the current condition, we estimate the effective age to be approximately 10 years. According to the Marshall Valuation Service cost guide, buildings of this type and quality have an expected life of approximately 45 years. Therefore, the remaining economic life (expected life minus effective age) is estimated at 30 years. While we observed nothing to suggest a different economic life, a capital improvement program could extend life beyond that stated above. Quality/General Condition The subject property conforms well with competitors in the area. The quality of construction is typical of the area. Interior amenities are similar to competing properties of the same approximate age. The general condition of the improvements is average. We observed no evidence of structural fatigue and the improvements appear sound. We are not qualified to determine structural integrity, however, and recommend that the reader rely upon an expert in this field for further determination. Conclusion/Comments The subject property is an average quality shopping center located in a stable area. The improvements generally conform with competitors in the neighborhood. ================================================================================ 24 ================================================================================ ZONING - -------------------------------------------------------------------------------- ZONING The subject's zoning requirements are detailed below. ================================================================================ ZONING SUMMARY - -------------------------------------------------------------------------------- Current zoning: Commercial District Legally conforming?: Yes Uses permitted: Retail and wholesale, personal services, Offices, Hotels and Motels, Agricultural. Zoning change Not Likely - -------------------------------------------------------------------------------- Category Zoning Requirement - -------------------------------------------------------------------------------- Maximum FAR Non Specified Maximum Site Coverage 40% Front Setback 80 feet Rear Setback 20 feet; 40 feet if abutting a residential district Side Yard Setbacks 30 feet; 40 feet if abutting a residential district Height Limit 35 feet Parking One space per 200 square feet of building area above grade - -------------------------------------------------------------------------------- Source: Kelly Township Zoning Ordinance Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ ZONING ANALYSIS AND CONCLUSIONS According to the Kelly Township Zoning ordinance, the subject property is a legal and conforming use under current guidelines. In addition, the property appears to conform to bulk and setback requirements as well as to parking requirements. ================================================================================ 25 ================================================================================ TAX ANALYSIS - -------------------------------------------------------------------------------- TAX AND ASSESSMENT DATA The subject property is assessed by Union County, Pennsylvania, at approximately 22.1% of the assessor's estimated market value. The last general assessment of properties in Union County was in 1978. A re-valuation has not been rescheduled. School taxes are collected on a fiscal year and town/county taxes are collected on a calendar year. The subject's assessed value and current taxes are summarized below. ================================================================================ CURRENT ASSESSMENT AND TAX INFORMATION (1995) - -------------------------------------------------------------------------------- Assessed Tax Rate Annual Tax ID Value / $1,000 Taxes - -------------------------------------------------------------------------------- Section 06 Map 046 Parcel 50.1 $1,055,440 77.10 $81,373 Section 06 Map 046 Parcel 50.0 $129,665 77.10 $9,997 -------- ------ TOTALS: $1,185,105 77.10 $91,370 - -------------------------------------------------------------------------------- Source: Union County Assessor's Office Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ Based on the current tax rate of $77.10 per $1,000 assessed value, the estimated taxes for the subject amount to $91,370, or $0.80 per square foot based on the rentable square footage of the center. The 1996 tax rate will be released in July. We have assumed the rate will increase with inflation or by 3.0%. Tax and Assessment Conclusion We have estimated the taxes for the shopping center at $94,111 (1995 tax liability of $91,370 times 1.03) for calendar year 1996 in our cash flow. Our discussions with the assessor indicated that the subject's taxes have increased in-line with the area's inflation rate, or approximately 3.0% per annum. We have therefore projected a long-term tax growth for all taxes equal to 3.0% per year. ================================================================================ 26 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- HIGHEST AND BEST USE In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The four criteria that the highest and best use must meet are: o legal permissibility; o physical possibility; o financial feasibility; and o maximum profitability. Highest and best use is applied specifically to the use of a site as vacant. It is recognized that in cases where a site has existing improvements, the concluded highest and best use as if vacant may be different from the highest and best use given the existing improvements (as improved). The existing use will continue, however, until the land value, in its highest and best use, exceeds that total value of the property under its existing use plus the cost of removing or altering the existing structure. Implied in the highest and best use is a recognition of the contribution of a specific use to the community environment or to the community's development goals, in addition to wealth maximization of individual property owners. Also implied is that the conclusion of highest and best use that results from the appraiser's judgment and analytical skill, i.e., that the use determined from the analysis represents an opinion, not a fact to be found. Highest and best use analysis involves assessing the subject both as if vacant and as improved. HIGHEST AND BEST USE AS THOUGH VACANT Legal Permissibility The legally permissible uses were discussed in detail in the site analysis and zoning sections of this report. Based on our review of the zoning restrictions, the site can be developed with several different uses, including retail and commercial office uses. Physical Possibility The physical characteristics of the subject site were discussed in detail in the site analysis. Overall, a wide range of legally permissible uses would be physically possible, including a variety of commercial uses. ================================================================================ 27 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- Financial Feasibility The test of financial feasibility is put only to those uses which are legally permissible and physically possible. If the property is capable of generating a sufficient net income to cover the required rate of return on investment and provide a return to the land, then the usage is financially feasible within a defined price limit. In our determination of financial feasibility we have analyzed current market rental rates for several different property types. The net income produced by the proposed or new improvements must provide a return above the cost to develop the property, including acquisition of the land. Through a cost/income analysis we have determined that development of the subject site is marginally financially feasible at this time. Based on the analysis of supply and demand factors at the present time, rents achieved for retail use would support the cost of construction. Based on the aforementioned, we have determined that development of the subject site at the present time with a retail center is currently feasible. Maximum Profitability The final test of highest and best use of the site as though vacant is the use be maximally productive, yielding the highest land value. Based on our feasibility analysis we have determined that retail development of the subject site is the maximally productive use at the present time. Conclusion: Highest and Best Use As Vacant The concluded highest and best use of the subject as though vacant is development of the site with a retail facility. HIGHEST AND BEST USE AS IMPROVED Legal Permissibility As discussed, the subject site's zoning and legal restrictions permit a variety of land uses. Regardless, the site has been improved with a community shopping center. Based upon review of the Kelly Township Zoning Ordinance, it is our opinion that the improvements are within the established guidelines. ================================================================================ 28 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- Physical Possibility The physical characteristics of the subject improvements were discussed in detail in the improvement analysis section of this report. Overall, the layout and positioning of the improvements is considered functional for shopping center use, and the floor plan is considered to be reasonable in comparison to other shopping centers in the area. The improvements have good retail features, have been adequately maintained, and are physically capable of sustaining their current use over the extended future. Financial Feasibility As with the highest and best use of the site as though vacant, the financial feasibility of the site as improved is market derived. Typically, for retail properties similar to the subject, the test of feasibility is based on the amount of rent that can be generated less operating expenses. If a residual amount exists after paying the various expenses, then the land is being put to a productive use. At present, the subject is 89% occupied. CB Commercial estimates that the appropriate stabilized market occupancy approximates 95%. Based on the historical and current operating status of the subject property, CB Commercial anticipates that the improvements are capable of providing an adequate return on the investment before any debt service requirements. Therefore, we conclude that the current use of the improvements is a financially feasible use of the property as improved. Maximum Profitability Similar to the highest and best use of the site as though vacant, the maximum profitable use of the subject as improved should conform to neighborhood trends and be consistent with existing land uses. Although several uses may generate sufficient revenue to satisfy the required rate of return on investment and provide a return on the land, the single use that produces the highest price or value is typically the highest and best use. Conclusion: Highest and Best Use as Improved Based on the foregoing discussions, CB Commercial concludes that the highest and best use of the property, as improved, is consistent with the existing use as a shopping center. There are no apparent alternative uses of the existing improvements that would produce a higher net income and/or value over time than the current use. The current use is a legally permissible use and appears to represent the highest and best use as improved. Furthermore, CB Commercial does not believe that conversion of the improvements or demolition is warranted or financially feasible. ================================================================================ 29 VALUATION ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- APPRAISAL METHODOLOGY The appraisal process is defined as an orderly program by which the problem is planned and the data involved is acquired, classified, analyzed and interpreted into an estimate of value. In this process three basic approaches to value are considered: Cost Approach, Sales Comparison Approach, and Income Capitalization Approach. In appraisal practice, an approach to value is included or omitted based on its applicability to the property type being valued and the quality and quantity of information available. The final step in the appraisal process is reconciliation -- a process by which CB Commercial analyzes alternative conclusions and selects a final value estimate from among two or more indications of value. CB Commercial weighs the relative significance, applicability and defensibility of each approach as it relates to the type of property being appraised. THE COST APPROACH The Cost Approach is based upon the proposition that the informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements which represent the highest and best use of the land or when relatively unique or specialized improvements are located on the site and for which there exist few sales or leases of comparable properties. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. SALES COMPARISON APPROACH The Sales Comparison Approach utilizes sales of comparable properties, adjusted for differences, to indicate a value for the subject property. Valuation is typically accomplished using physical units of comparison such as price per square foot, price per unit, price per floor, etc., or economic units of comparison such as gross rent multiplier. Adjustments are applied to the physical units of comparison derived from the comparable sale. The unit of comparison chosen for the subject is then used to yield a total value. Economic units of comparison are not adjusted, but rather analyzed as to relevant differences with the final estimate derived based on the general comparisons. ================================================================================ 30 ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- The reliability of this approach is dependent upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c) the degree of comparability; (d) the absence of atypical conditions affecting the sales price. Although there have been few sales in the region, the sales that were gathered were utilized to form an opinion of value. However, given the lack of relevant sales data, we have not placed minimal reliance upon this approach and have used it to provide additional support to the Income Approach. INCOME CAPITALIZATION APPROACH The methodology of the Income Capitalization Approach is to determine the income-producing capacity of the property on a stabilized basis by estimating market rent from comparable rentals, making deductions for vacancy and collection losses and building expenses, then capitalizing the net income at a market-derived rate to yield an indication of value. The capitalization rate represents the relationship between net income and value. Related to the direct capitalization method is the discounted cash flow method. In this method of capitalizing future income to a present value, periodic cash flows (which consist of a net income less capital costs, per period) and a reversion (if any) are estimated and discounted to a present value. The discount rate is determined by analyzing current investor yield requirements for similar investments. Since investors are active in the marketplace for properties similar to the subject, the Income Capitalization Approach is particularly applicable to the appraisal problem at hand. There is an adequate quality and quantity of income and expense data available to render a reliable and defensible value conclusion. For income producing properties similar to the subject, the Income Capitalization Approach is considered to be the most reliable. Therefore, this approach has been employed as the primary methodology for this assignment. ================================================================================ 31 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH The Sales Comparison Approach provides an estimate of market value based on analyzing transactions of similar properties in the market area. The method is based on the proposition that an informed purchaser would pay no more for a property than the cost of acquiring an existing one with the same utility. When there is an adequate number of sales of truly similar properties with sufficient information for comparison, a range of values for the subject property can be developed. There are various units of comparison available in the evaluation of sales data in this approach. The sale price per square foot is the most commonly used in this approach. The effective gross income multiplier (EGIM) is rarely used by market participants because of the inconsistencies in estimating effective or gross income, vacancy, and expense differences. We conducted a thorough sales search for comparable shopping centers in the subject's market area. Through our sales search, we were able to identify a limited number of sales with similar characteristics to the subject. The following table summarizes what are considered to be the most recent and proximate comparable sales. Detailed write-ups of each comparable are included in the addendum. ================================================================================ 32 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- ================================================================================ SUMMARY OF COMPARABLE RETAIL SALES ================================================================================ Gross No. Property Name/ Sale Leasable Sale NOI OAR Sale Price Location Date Area (SF) Price Per S.F. Per S.F. - -------------------------------------------------------------------------------- 1 15th & Allen St. 1/96 46,503 $4,242,000 $ 9.94 10.89% $ 91.22 Center 1401-1451 Allen Street Allentown Lehigh County, PA 2 Stefko Shopping 1/96 134,446 $5,618,000 $ 4.59 10.99% $ 41.79 Center Stefko Boulevard Bethlehem Northampton County, PA 3 MacArthur Plaza 10/95 29,600 $3,831,667 $ 13.92 10.76% $129.45 2419 MacArthur Road Whitehall Township Lehigh County, PA 4 Columbia Mall 7/95 351,364 $ 27,650,000 $ 8.42 10.70% $ 78.65 N/E/C Route 42 @ I-80 Bloomsburg Columbia County, PA 5 Shillington Plaza 9/94 150,724 $4,000,000 $ 3.63 13.70% $ 26.54 Parkside Ave @ Rte 724 Reading Berks County, PA - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ ================================================================================ 33 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMPARABLE SALES MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] ================================================================================ 34 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF IMPROVED SALES The sales reflect unit prices ranging from a low of $26.54 to a high of $129.45/SF with the significant difference reflecting the economics of the various centers. The sales all had high levels of occupancy and were in generally good condition. The difference in unit prices then were more directly tied to net operating income and investor yield rates. The comparable sales presented offer a simplistic view of the market. Since only general details of existing income and expenses were available, specific analysis is nearly impossible. Accordingly, this method acts as a general gauge of the market and therefore will be utilized as support to our findings in the Income Approach. Analysis The following discussion analyzes the aforementioned comparables relative to the subject property. Sale 1 Sale number one, located at the intersection of 15th Street and Allen Street in Allentown, is a 46,503 square foot shopping center which sold in January of 1996 for $4,242,000 or $91.22/SF. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed circa 1950 and was in very good overall condition at the time of sale since it was recently renovated. Market conditions at the time of sale were similar to current market conditions. This sale's NOI is reportedly $462,049 or $9.94/SF indicating an overall rate of 10.89%. The economics of this property, at least in terms of NOI per square foot, is superior to the subject. Sale 2 Sale number two, located in the City of Bethlehem, consists of a single story community center which contains an aggregate 134,446 square feet. This center, known as the Stefko Shopping Center, sold in January of 1995 for $5,618,000 or $41.79/SF of gross leasable area (GLA). Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed in 1965 and appeared to be in average condition. Market conditions at the time of sale were similar to current market conditions. The NOI was reportedly $617,577 ($4.59/SF) indicating an overall rate of 10.99%. This property operates at a level of net income that is close to the subject. ================================================================================ 35 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- Sale 3 Sale number three, MacArthur Plaza, is located at 2409 MacArthur Road in Whitehall Township in Lehigh County, Pennsylvania. It is a 29,600 square foot shopping center which sold in October of 1995 for $3,831,667 or $129.45/SF. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed circa 1988 and was in very good overall condition at the time of sale. Market conditions at the time of sale were similar to current market conditions. This sale's NOI is reportedly $412,122 or $13.92/SF indicating an overall rate of 10.76%. The economics of this property in terms of NOI per square foot is superior to the subject. Sale 4 Sale number four is located at the northeast quadrant of Route 42 and Interstate 80 in nearby Bloomsburg, Columbia County, Pennsylvania. It consists of a single story community center which contains an aggregate 351,364 square feet. This center, known as the Columbia Mall, sold in July of 1995 for $27,650,000 or $78.69/SF of gross leasable area (GLA). Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed in 1988 and appeared to be in good overall condition. The property's location with regard to access and visibility are considered very good. This center is significantly larger than the subject. Market conditions at the time of sale were similar to current market conditions. The NOI was reportedly $2,958,500 ($8.42/SF) indicating an overall rate of 10.7%. This property operates at a level of net income that is superior to the subject. Sale 5 Sale number five is located at the intersection of Parkside Avenue and Route 724 in Shellington, a small town just south of Reading in Berks County, Pennsylvania. It consists of a single story community center which contains an aggregate 150,724 square feet. This center, known as Shellington Plaza, sold in September of 1994 for $4,000,000 or $26.54/SF of gross leasable area (GLA). Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed in 1974 and appeared to be in average overall condition. The NOI in the following year (CY 1995) was reportedly $547,769 ($3.63/SF) indicating an overall rate of 13.7%. This property operates at a level of net income that is similar to the subject. ================================================================================ 36 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- Net Operating Income Analysis The net operating income level for the comparables ranged from $3.63 to $13.92 per square foot, per year. The subject has a projected stabilized NOI (reflecting market rent applied against the vacant space) for the coming year of $395,300 or $3.48 per square foot. Given the correlation between price paid per square foot and NOI per square foot it would seem reasonable to conclude that the subject would sell at the low end of the range established by the comparable properties. The following chart depicts the calculations involved in developing adjustment factors to be applied to the respective price per square foot units of comparison developed from the comparables employed. ================================================================================ NET OPERATING INCOME (NOI) ANALYSIS - -------------------------------------------------------------------------------- Sale Subject's NOI/SF Sale Price Adjustment Adjusted $/SF No. Sale's NOI/SF Multiplier $/SF for Subject - -------------------------------------------------------------------------------- 1 $3.48 035 $91.22 -$59.28 $31.94 ----- $9.94 2 $3.48 0.76 $41.79 -$10.03 $31.76 ----- $4.59 3 $3.48 0.25 $129.45 -$97.09 $32.36 ----- $13.92 4 $3.48 0.41 $78.65 -$45.77 $32.88 ----- $8.42 5 $3.48 0.96 $26.54 -$ 1.10 $25.44 ----- $3.63 ================================================================================ For the most part, there is a direct correlation between the NOI/SF and sale price per square foot. As the net income level increases, so does the price paid per square foot. After adjusting the five sales, they support a range of value for the subject between approximately $25.00/SF to $33.00/SF, with the majority at the high end of the range. Based on our analysis, the subject's value would be approximately $30.00/SF. The subject has a total building area of 113,600 square feet. The value estimate via the Sales Comparison Approach is calculated as follows: ================================================================================ Net Rentable Area of Subject 113,600 square feet Value per square foot $30.00 per square foot Indicated Value: $3,408,000 ---------- ROUNDED: $3,400,000 ================================================================================ Overall, little emphasis has been placed on this approach because of the quality of the data. It is used primarily as a check of the value derived via the Income Approach. ================================================================================ 37 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- We estimate the as is market value of the leased fee interest in the subject property, via the sales comparison approach, as of May 23, 1996, is: --- THREE MILLION FOUR HUNDRED THOUSAND DOLLARS --- ($3,400,000) ================================================================================ 38 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH The Income Capitalization Approach reflects the subject's income-producing capabilities. This approach is based on the assumption that value is created by the expectation of benefits to be derived in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over period of time. The two common valuation techniques associated with the Income Capitalization Approach are direct capitalization and the discounted cash flow (DCF) analysis. DIRECT CAPITALIZATION Direct capitalization is the method used to convert a single year's estimate of income into a value indication. In direct capitalization, a precise allocation between return on and return of capital is not made because investor assumptions or forecasts concerning the holding period, pattern of income, or changes in value of the original investment are not simulated in the method. Direct capitalization is most appropriate when analyzing a stable income stream and in estimating the reversion at the end of a holding period. Using this method, the following sets forth the process: 1. Estimate the Potential Gross Income (PGI) from all sources that a competent owner should be able to generate from a property based on existing and/or market rents. 2. Deduct an estimate of Vacancy and Collection Loss (VCL) to arrive at an Effective Gross Income (EGI) estimate. 3. Deduct operating expenses from the estimate of EGI. The result is an estimate of the stabilized Net Operating Income (NOI). 4. Estimate an Overall capitalization rate (Ro, or OAR). 5. Divide the NOI by Ro, resulting in a value estimate at stabilized occupancy. 6. Adjust the stabilized value to account for "As Is" condition, if applicable. DISCOUNTED CASH FLOW ANALYSIS The discounted cash flow (DCF) analysis is a detailed analysis used when the future income is expected to be variant, usually as a result of numerous lease obligations and/or anticipated changes in income and expenses. It is also particularly relevant when institutional buyers are the most likely purchasers of the subject because institutional buyers often place great weight on this analysis. The DCF analysis specifies the quantity, variability, timing, and duration of NOIs and cash flows. Selecting the proper yield rate (discount rate) is essential. CB Commercial must consider the target yield sought by investors as well as yields derived from comparable sales and/or market information. The methodology is: 1. Estimate the before-tax cash flows for each period of a projected holding period net of any capital expenditures such as leasing expenses and tenant improvements. ================================================================================ 39 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- 2. Estimate a discount rate and a terminal overall capitalization rate. 3. Estimate a selling price, known as the reversion, for the end of the projected holding period. 4. The cash flows and the reversion are then discounted to a present value estimate. APPROPRIATE CAPITALIZATION METHOD A number of factors were considered in evaluating the appropriateness of using the direct capitalization method and/or the DCF technique including the occupancy status, lease structures, above/below market rents and typical buyer behavior. As a result of considering the foregoing factors, both the DCF technique and the income capitalization technique are employed in this appraisal. ESTIMATE OF MARKET RENT Rent analysis involves both a study of market (comparable) rentals and the subject's existing rents (if any). Market rent is the rent that a property would most probably command in the open market; indicated by the current rents paid and asked for comparable space. SUMMARY OF COMPARABLE RENTALS CB Commercial surveyed competitive properties and lease transactions for comparison to the subject. The selected comparable rentals are summarized in the following chart with a map and discussions of each comparable provided on the following pages. ================================================================================ 40 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
========================================================================================================================== SUMMARY OF COMPARABLE SATELLITE SPACE RENTALS - -------------------------------------------------------------------------------------------------------------------------- Center Name & Term Start No. Location Tenant (Yrs) Date Size Rent/SF Escalation Comments - -------------------------------------------------------------------------------------------------------------------------- 1 Kingston Plaza Everything 1 yr 9/95 6,500 $5.50 $950 Step No Option Third Avenue $0.99 Store 3 mos in Year 2 % Rent = 3% over $1,191,660 East of Pierce Street, Kingston, PA - -------------------------------------------------------------------------------------------------------------------------- 2 Mark Plaza Spectrum Rents 5 yrs 10/95 3,600 $8.00 Flat for 1 5-yr Option @ $9.00/SF N/S Route 11, term Edwardsville, PA Keens Floral 5 yrs 8/95 7,000 $8.00 Annual 1 5-yr Option @ $8.83/SF Factory step-up % Rent = 3% over Natural Breakpoint Mattress Man 5 yrs 7/95 3,600 $11.50 Flat for No Option (Pad Site) term % Rent = 4% over Natural Breakpoint - -------------------------------------------------------------------------------------------------------------------------- 3 Birney Plaza Everything 3 yrs 09/95 4,000 $7.00 Flat for 1 3 yr Option @ $7.50/SF N/S Route 11, $0.99 Store term % Rent = 3% over $933,000 Moosic, PA - -------------------------------------------------------------------------------------------------------------------------- 4 Triangle Plaza Electronic 5 yrs 06/95 2,400 $11.50 Annual No Option Route 115 Systems Percentage No % Rent Wilkes-Barre, PA increase TCBY 5 yrs 03/95 2,200 $11.00 Annual 1 5 yr Option Percentage No % Rent increase Party City 10 yrs 05/94 9,910 $11.00 $1.65/SF No Option Step-up No % Rent - -------------------------------------------------------------------------------------------------------------------------- 5 Gateway Plaza Holiday Hair 3 yrs 06/94 950 $15.48 Annual No Option N/S Route 11, Fashions Percentage No % Rent Edwardsville, PA (Renewal) increase McKenzie 3 yrs 06/94 3,080 $ 8.50 Annual No Option Percentage No % Rent increase ========================================================================================================================== SUMMARY OF COMPARABLE ANCHOR SPACE RENTALS ========================================================================================================================== 6 Pottstown Center Wal-Mart 20 yrs 07/95 121,267 $6.99 Flat for 6, 5-yr Options Montgomery Cty. term No % Rent Pottstown, PA 7 Route 6 Mall K-Mart 25 yrs 03/95 119,229 $5.77 Flat for 10, 5-yr Options N/S Route 6, term % Rent = 1% over $20,000,000 Wayne County Honesdale, PA 8 Bradford Towne K-Mart 25 yrs 07/94 94,481 $5.00 Flat for 10, 5-yr Options Centre, term % Rent = 1% over Bradford County $16,875,000 (or $179/SF Wysox, PA leased area) 9 Builder's Square Builder's 25 yrs 03/94 106,400 $10.05 Flat for 10, 5-yr Options Center Square term No % Rent Cetronia Road Lehigh County Whitehall, PA - -------------------------------------------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ==========================================================================================================================
================================================================================ 41 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMPARABLE RENTALS MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] ================================================================================ - -------------------------------------------------------------------------------- ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF COMPARABLE RENTALS We have obtained comparable leases from shopping centers situated within the subject's regional market area which are summarized above. In terms of satellite space, comparables #1 through #5 indicate that the leased spaces range in size from 950 to 9,910 square feet which adequately represents the subject's square footage range. All the leases cited were signed between 1994 and 1995 and represent the most recent leasing activity in the competitive marketplace. The leases include a variety of uses and represent a similar tenant mix to the subject center. The above leases are considered to be generally similar to the subject in terms of condition, quality and location. We have examined the average effective rental rates of these comparables and determined that the effective rent is similar to the face rent, since their was no tenant improvements, nor free rent periods and escalation's were similar. These comparable centers are located throughout eastern Pennsylvania region in competitive areas to the subject property. Furthermore, they are all similar in age to the subject and considered to be of a similar functional design. All of the retail leases were written on a triple net basis, whereby the tenants assume their proportionate share of operating expenses, real estate taxes, and insurance. The higher rates typically reflect smaller satellite spaces, while lower rental rates are typically negotiated for anchor sized spaces. We have also considered asking rental rates in our analysis, however, they were deemed to be less reliable than the leases presented. As a result, we have not included asking rentals. The satellite space face rental rates ranged from $5.50/SF to $15.48/SF with a central tendency of $9.75/SF. However, the majority fell between $8.00/SF and $11.50/SF. The rents at the lower end of the range, or those in the $10.00/SF range best reflect the subject property's achievable rents. As a result, we have concluded to a rental rate within for the subject's satellite space of $10.00/SF. Additional support is gained by analyzing recent subject satellite rents below. Based upon our analysis, we feel that a "net" rental rate of $10.00/SF is adequately supported. The anchor leases, or comparables #6 through #9, ranged from $5.00/SF to $10.05/SF with an average lease rate of $6.95/SF. The anchor rents reflect a close range for a variety of locations with the exception of comparable #9. However, this lease to Builder's Square has no percentage rent clause which partly explains the higher base rent. Anchor rents are more difficult to establish and are heavily influenced by gross sales. For this reason we have looked closely at the historical sales volumes for the subject's anchor stores to help determine market rent for these stores. ================================================================================ 43 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- In addition to surveying comparable centers, we have also analyzed the most recent lease transactions at the subject center. Since there have been several recent leases at the subject property, these leases have been given substantial weight in our analysis of the subject's market rental rates. These leases are detailed below. ANALYSIS OF SUBJECT LEASES The following table summarizes the subject property's recent lease history.
================================================================================================================= SUMMARY OF RECENT SUBJECT LEASES - ----------------------------------------------------------------------------------------------------------------- New/ Term Contract TI's/ Free Tenant Renew (Years) Date Size Rent Escalation SF Rent - ----------------------------------------------------------------------------------------------------------------- G.C. Murphy New 11 1/90 53,000 $2.30 Thru % Rent None None Sears Authorized New 5 4/95 6,500 $ 5.50 No Steps None None Dollar General. New 5 under 7,800 $ 3.50 No Steps None None negotiation Volume Shoe New 5 Under 2,500 $ 11.00 No Steps $5/sf None negotiation - ----------------------------------------------------------------------------------------------------------------- Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. =================================================================================================================
Anchor Rent Conclusion The most recent anchor lease signed at the subject was the G.C. Murphy (d/b/a Ames) store. That lease calls for a base rent of $2.30/SF, however with percentage rent payments, the total rent equates to $4.00/SF. The total rent for Ames equates to 3.5% of gross sales, which falls within the range of exceptable cost of occupancy for a department store of 3.00% to 4.00%. The exceptable cost of occupancy for a grocery store is 1.75% to 2.25%. Given Bi-Lo's most recent annual sales, the grocery store could support a range of rent from $3.11/SF to $4.00/SF. Based upon our rent and cost-of-occupancy analysis, we feel that a "net" rental rate of $4.00/SF for anchor space is adequately supported. Satellite Rent Analysis The typical lease at the subject property is triple net whereby the tenant is responsible for reimbursing the landlord for such expenses as real estate taxes, insurance, and common area maintenance (CAM). Recent satellite leases at the subject range from $3.50/SF to $11.00/SF. The high end of the range also included a $5.00/SF T.I. allowance which reduces the effective rate of the lease to $10.00/SF over a five year term. The terms of the recent leases have typically been between five years which is similar to quoted market terms. Based on our survey of local leasing agents and owners, five year terms are most common with satellite tenants such as those found in the subject center. Therefore, for the purpose of our analysis, we have utilized a lease term of five years for all satellite suites for speculative renewals. ================================================================================ 44 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- In our interviews with competing leasing agents and owners, we also inquired as to the market norm for rent escalation's. Most of the agents agreed that five year leases are typically flat, with some sort of escalation or step in 10 year leases. Recent short-term leases (five years or less) at the subject have been flat. The recent anchor lease which was written for a long-term with options was also flat. We have assumed no rental escalation's for speculative leases According to the subject leasing agent, TI's are typically not given, with the owner generally providing a " vanilla box" for new tenants and nothing for renewals. Retail space is typically taken "as-is" with the tenant fitting out their space to their own specifications. We project that no tenant alteration allowance would be provided for new or renewal leases. All of the leasing agents surveyed reported minimal if any free rent. A review of the subject lease abstracts indicated that no free rent was typically offered to tenants that leased space in the subject center over the past three to four years. Therefore, based upon the most recent leases written at the subject center as well as conversations with local leasing agents, we have projected that no free rent will be offered to prospective tenants. CONCLUSIONS: MARKET RENT ESTIMATE FOR THE SUBJECT PROPERTY Based on the previous analysis, the current market lease parameters for the subject property are estimated as follows: ================================================================================ CONCLUDED MARKET LEASE TERMS (PER SQUARE FOOT / YEAR) - -------------------------------------------------------------------------------- Category Satellite Space Satellite Space > Anchor Space <5,000 SF 5,000 SF - -------------------------------------------------------------------------------- Market Rent $10.00 (NNN) $5.50 (NNN) $4.00 (NNN) Lease Term 5 Years 5 Years 25 Years Annual Escalation 0.0% 0.0% 0.0% Tenant Improvements $0.00 $0.00 $0.00 Free Rent (Months) 0 Months 0 Months 0 Months - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ CONTRACT RENT As discussed, the subject's leasable area is divided into two anchors and seven suites within one building and three separate pad sites. Currently, the subject is 89% occupied. Through our research of the subject property, which included a complete review of lease abstracts, rent rolls (both current and historical), and detailed discussions with the on-site property manager, the following rent roll summary was utilized to detail currently leased suites and general information employed for this approach. Additionally, within the Addenda are ================================================================================ 45 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- copies of the tenant lease assumptions, generated by Pro-ject+ Plus, a computerized lease-by-lease analysis program. Information submitted to us and contained in the Addenda provide additional support to the data and assumptions inputted for this method and is assumed to be correct and reliable. CB Commercial reserves the right to amend our input assumptions if any documentation is subsequently available which contradicts that assumed for this method. Located on the following page is the subject rent roll summary. ================================================================================ PLAZA 15 MALL - ROUTE 15 RENT ROLL - -------------------------------------------------------------------------------- Square Rent/ Annual Base Suite Tenant Feet Begin End SF Rent - -------------------------------------------------------------------------------- 1 Ames 53,000 1/90 4/01 $02.30 $121,900 2 Fashion Bug* 8,000 5/76 5/97 $ 0.00 $0 3 Custom Cuts 1,500 11/91 10/98 $ 8.50 $12,750 4 Yung Tin Restaurant 1,500 12/86 12/01 $11.00 $16,500 5 Original Italian Pizza 2,000 11/89 5/01 $9.00 $18,000 6 Bi-Lo Supermarket 28,800 12/76 12/96 $3.30 $95,088 7 Sears Authorized 6,500 4/95 4/98 $5.50 $35,750 8 Arthur Treachers pad 1/77 1/97 $0.00 $23,500 9 McDonald's pad 1/76 1/97 $0.00 $13,200 10 Mellon Bank pad 11/81 10/01 $0.00 $11,000 - -------------------------------------------------------------------------------- Total Leased Square Feet 101,300 Average Rent: $ 3.06 $347,688 Vacant Space 12,300 Occupancy-Overall 89% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- * Fashion Bug is currently paying percentage rent only. Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ ANALYSIS OF TENANCY The subject is comprised of regional tenants including Ames, Bi-Lo Supermarket and Fashion Bug as well as local satellite tenants such as the restaurants. Additionally, McDonalds and Arthur Treachers are national tenants. Overall, the quality of the tenancy is considered to be good for the area. Current rental rates range from $2.30/SF to $11.00/SF. SPECIAL LEASE PROVISIONS AND ASSUMPTIONS The following discussion summarizes any lease provisions and assumptions of special note. ================================================================================ 46 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Pending Leases There are two pending leases according to the subject leasing agent. One of these is for 7,800 square feet. The tenant is Dollar General and the proposed base rent is $3.50 per square foot. The rent is low for two reasons, the first of which is the size of the space and the second is the expected sales volume that Dollar General stores typically generate. Thus, the base rent reflects the cost of occupancy associated with Dollar Generals business operation. The second pending lease is for 2,500 square feet. The lessee is Volume Shoe and the base rental is $11.00 per square foot. A $5.00/SF tenant improvement allowance will be given reducing the effective rent to $10.00/SF over a five year lease term. Renewal Options Options to renew at below or above market rent may have an impact on the valuation analysis. For example, if below market renewals are exercised, they may result in a downward impact on value. However, to the extent that re-tenanting costs are saved (rent loss during downtime, tenant improvements, leasing commissions, etc.), there may be an advantage in having the tenant renew at some rate below market rent in order to avoid these costs. The majority of recent leases at the subject have renewal options. Where applicable, if a tenants' option rent is below market, we have assumed that the tenant would exercise its renewal option. Conversely, if a tenants' option rent is above market, we have assumed that the tenant would not exercise its renewal option and terminate the lease. EXPENSE REIMBURSEMENTS Current and future hypothetical retail leases which will encumber the subject property will be based upon triple net lease structures and are consistent with recent leases written at the subject property and the market in general. The tenants will be responsible for reimbursing the landlord for their pro rata share of operating expenses including their pro rata share of CAM, real estate taxes and insurance. The pro rata share calculations for future tenants are calculated by dividing the tenant's occupied rentable area by the gross leasable area of the center. The following is a breakdown of the subject's historical recoveries and CB Commercial's projections for the proforma. It should be noted that the subject's operating statements are based on a fiscal year basis, beginning June 1 and continuing through May 31. Expense Reimbursements Expense reimbursements for the subject property consist of real estate taxes, insurance, and common area maintenance. Common area maintenance expenses consist utilities, ================================================================================ 47 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- management fees, general and administrative, cleaning and repairs and maintenance expenses. The subject's historical expense reimbursements are as follows: ===================================== EXPENSE REIMBURSEMENT ------------------------------------- Year Total $ Amount ------------------------------------- 1995 $28,101 1996 Budget $105,900 Year 1 Pro Forma $110,897 ------------------------------------- Source: Mark Centers Trust ===================================== The first year of our DCF model indicates reimbursements of $110,897. There was insufficient information in past years to generate reliable historical expense reimbursement information. The budgeted amount appears to be accurate based upon projected expenses and reimbursement clauses for existing tenants. OTHER INCOME This income category can be derived from several different sources including tenant service income, merchants association fees, late fee income, short-term storage income, professional services provided for the tenants by the landlord/management, ground rent as well as other miscellaneous sources. We have included the income from the three pad sites under this category. The three pad sites have been improved with the following: a McDonald's franchise restaurant, an Arthur Treachers franchise restaurant and a bank branch occupied by Mellon Bank. Combined the ground rent payments generated from these pad sites equals $51,408 per annum. PERCENTAGE RENT INCOME In addition to the basic rental charges, the tenants are sometimes responsible for paying the landlord additional rent equal to a specified percentage of the tenant's gross sales made in, upon, or from the premises, over a breakpoint factor or according to a specific schedule. Three of the subject tenants have percentage rent clauses contained within their leases. ================================================================================ 48 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
================================================================================================================ PERCENTAGE RENT CLAUSES ================================================================================================================ CBC's FY97 Tenant Breakpoint Percent Year Gross Sales % Rent Paid Projection - ---------------------------------------------------------------------------------------------------------------- GC Murphy d/b/a Ames $2,500,000 2.50% 1994 $6,132,772 $90,819 $6,386,000 1995 $6,199,060 $98,680 Fashion Bug $0.00 4.00% 1994 $909,524 $34,270 $734,390 1995 $713,006 $28,942 Original Italian Pizza $200,000 6.00% 1994 $186,218 $0 $228,800 $333,333 1995 $222,150 $ 1,320 as of 6/96 Bi-Lo Supermarket $7,607,040 1.25% 1994 $7,200,095 $ 0 $5,268,450 1995 $5,114,898 $ 0 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================================================
Given the aforementioned sales histories, we have projected the gross sales for each tenant as illustrated in the right column of the table. We have also projected that the gross sales figures will grow by 3.0% per annum over the course of the cash flow projection. POTENTIAL GROSS INCOME The potential gross income for the subject property is summarized as follows. ============================================== STABILIZED POTENTIAL GROSS INCOME (FY 1997) ---------------------------------------------- Totals ---------------------------------------------- Total Minimum Rent $300,176 Lease-up Income from Vacancies $70,980 Other Income $51,408 ------- Expense Reimbursement - Common Area Maintenance Recovery $29,137 - Real Estate Tax Recovery $81,760 - Insurance Recovery $ 0 - Percentage Rent $111,974 Potential Gross Income $645,435 ---------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ============================================== ================================================================================ 49 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- VACANCY AND COLLECTION LOSS This is an allowance for reductions in potential income attributable to vacancies, tenant turnover, and non-payment of effective rent. In the direct capitalization process, a market-derived, stabilized vacancy and collection loss estimate is subtracted from potential gross income in order to arrive at effective gross income. The subject property is currently 89% leased. Few of the subject's competitors are traditional strip centers. Many of the competing retailers tend to be free-standing big box stores. Thus, it is difficult to determine an average market vacancy. Due to the long-term leases at the subject property, the average vacancy rate over the projected holding period, which is attributed to downtime between leases, approximates 2.0%. In addition to vacancy, we estimated a blended credit loss factor of 2.0% which takes into account both national and local tenants at the subject center. In the first year of our discounted cash flow analysis, the credit loss amounts to $11,306. EFFECTIVE GROSS INCOME Given our estimate of potential gross income, other income, and a vacancy and collection loss, the estimated effective gross income is derived as follows: =========================================================== EFFECTIVE GROSS INCOME (FY 1997) =========================================================== Potential Gross Income: $ 645,435 Less: Collection Loss $ 12,907 --------- Effective Gross Income: $ 632,438 =========================================================== Our estimate of effective gross income used in direct capitalization is $632,438. This figure is greater than the EGI in the first year of our cash flow in the discounted cash flow method since it has accounted for all vacant space. The DCF reflects a lease-up period for the vacancies. OPERATING EXPENSE ANALYSIS In projecting the revenues and expenses for the subject property, we have analyzed the historical figures for fiscal years 1993 through 1995 as well as management's forecast of revenues and expenses for fiscal year 1996. In addition, we have utilized the Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers publication to assist in our analysis. We have considered the category " Regions 1, 2 & 3 (East): Open Shopping Centers" as the most representative of the subject property. A summary of the average expenses taken from this publication increased at an inflationary rate to reflect our fiscal year 1997 analysis are presented as follows: ================================================================================ 50 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ======================================================= COMPARABLE EXPENSE ANALYSIS ------------------------------------------------------- Expense Category P.S.F. ------------------------------------------------------- General & Administrative $ 0.08 Repairs & Maintenance $ 0.36 Services $ 0.46 Utilities $ 0.18 Total CAM $ 1.08 Real Estate Taxes $ 1.26 Insurance $ 0.15 Management Fees $ 0.41 Total Operating Expenses $ 2.90 ------------------------------------------------------- Source: Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers ======================================================= Our estimate of the subject's stabilized expenses are detailed as follows. Common Area Maintenance The subject's historical and projected common area maintenance (CAM) expenses are as follows: ========================================== COMMON AREA MAINTENANCE EXPENSE ------------------------------------------ Year Total $ Amount ------------------------------------------ 1995 $45,317 1996 Budget $109,783 CB 1996 Projection $111,155 ------------------------------------------ Source: Mark Centers Trust ========================================== Common area maintenance (CAM) charges generally includes various items such as general and administrative expenses, repair and maintenance expenses, utilities, and general services such as cleaning, landscaping, security, and common area insurance expenses. We project the total CAM expense in 1996, before management fees, at $111,155 or $0.98/SF. The range of this cost as published by IREM is $0.57 to $1.64 with an average of $1.08. Our estimate is falls within the range. Given the subject's historical CAM expense structure coupled with its remote location, effective age, size of tenancy and the services provided, the subject's projected CAM figure is considered reasonable. ================================================================================ 51 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Property Taxes Historical and budgeted property tax expenses are as follows: ======================================= PROPERTY TAX EXPENSE --------------------------------------- Year Total $ Amount --------------------------------------- 1995 $ 4,503 1996 Budget $ 89,160 Year 1 Pro Forma $ 94,111 --------------------------------------- Source: Mark Centers Trust ======================================= The submitted 1995 historical expense data is an aberration from the actual expense. As discussed fully within the tax and assessment data section of the report, estimated taxes for calendar year 1996 are projected to be $94,111. It appears that the 1996 budgeted taxes have not accounted for the 1996-1997 tax rate. Insurance Historical and budgeted insurance expenses are as follows: ======================================= INSURANCE EXPENSE --------------------------------------- Year Total $ Amount --------------------------------------- 1995 $ 2,494 1996 Budget $ 8,352 CB 1996 Projection $8,600 --------------------------------------- Source: Mark Centers Trust ======================================= Insurance at the subject property includes both liability insurance and fire insurance. We have placed primary emphasis on the subject's 1996 budgeted insurance expenses and have estimated the insurance expense at $8,600, or $0.08/SF. Professional Management Fee In order to maintain the control of the property and subsequently ensure the stream of income that it generates, it is necessary to employ either internal or outside management. This expense is non-recoverable. In the case of the subject property, the property is managed internally and no management expense has been reflected in historical statements. Typical professional management fees in the local market range from 1.0% to 5.0% of effective gross income. Based upon the size and nature of the subject improvements, we have applied a management expense of 3.0% of effective gross income. Because management is calculated based on a percentage of effective gross income, this expense will vary each year because of ================================================================================ 52 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- fluctuations in the income stream. In the first year of our analysis, this expense equates to $12,108 or $0.11/SF. Replacement Reserves This expense typically represents a reserve for future replacement of long-lived items. The amount of reserve and whether it is included or not in the direct capitalization and DCF analyses depends on the actions reflected by buyers and sellers in the local market. Based on the available comparable data and discussions with brokers and investors, replacement reserves generally range from $0.10/SF to $0.20/SF for retail properties of similar quality and condition as the subject. Given the subject's average condition, we have estimated this expense at $0.10/SF or $11,360 in 1996 increasing at our projected annual expense growth rate of 3.0%. Based on discussions with local market participants, replacement reserves are typically subtracted in calculating NOI when determining the cash flow in the DCF analysis. Total Concluded Operating Expenses The concluded stabilized operating expenses for the subject total an estimated $238,508, or $2.10 per rentable square foot. This total expense estimate is for the first year of our proforma and incorporates fiscal year conversions not reflected in the previous 1996 calendar year estimates. The expense is slightly lower than the average indicated by IREM ($2.90/SF) but judged reasonable given the subject's location, actual tax liability and its historical and budgeted operations. CAPITALIZATION RATE There are several methods for deriving an overall capitalization rate for direct capitalization. A common method for establishing an overall capitalization rate for properties similar to the subject is to review the criteria of major investors in the marketplace. This may serve as a check against other techniques or may be a primary source when ample data exists. We have derived capitalization rates from comparable sales used within the Sales Comparison Approach. In addition, the investor survey method is used as a secondary approach in deriving our overall capitalization rate. The subject property is a retail shopping center that would be attractive to either a local or a national investor. The category in the published investor survey most comparable to the subject is a class B community shopping center. The investors typically interviewed for the survey are regional or national investors associated with pension funds, REIT's, insurance companies, financial institutions, etc. The information below is taken from CB Commercial most recent National Investor Survey (first quarter 1996). ================================================================================ 53 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ SUMMARY OF INVESTOR SURVEY OVERALL CAPITALIZATION RATES COMMUNITY SHOPPING CENTERS - CLASS B - -------------------------------------------------------------------------------- Investor Survey R(o) Range Average Date of Survey - -------------------------------------------------------------------------------- CB Commercial National Investor Survey 9.5% - 11.0% 10.2% First Quarter, 1996 - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The previous survey indicates an overall range of 9.5% to 11.0% for neighborhood shopping centers with an average of approximately 10.2%. The sales data produced a range of 10.7% to 10.99% with an average of 10.84%. The capitalization rate reflects the quality and duration of the income stream as well as the physical characteristics of the property. The tenant mix at the subject center is considered to be good for the area with mostly regional tenants. The largest tenant at the subject, Ames, is a regional tenant. The Ames lease does not expire until the year 2001 and the second largest tenant, Bi-Lo Supermarket, has a base lease which is coming due May 1997. Both of these leases have three, five-year options at the same rent and overage terms as the base lease. While Bi-Lo has experienced a decrease in sales in the past year, the current base rent equates to 1.9% of gross sales, which falls within the range of exceptable cost of occupancy for a grocery store of 1.75% to 2.25%. Therefore, we have assumed that Bi-Lo will exercise its first option as of 5/31/97. Nor have we received any information to the contrary from Mark Center's. The center is currently 89% occupied. Overall, the quality, quantity and duration of the cash flow is considered to be good. With respect to physical characteristics, the subject is a functional neighborhood center of average quality and in average overall condition. In addition, the subject is situated in an average retail location with relatively low volumes of traffic. Based upon this survey and the factors discussed above, an 11.00% overall capitalization rate (towards the top of the range) appears to be appropriate for the subject property given the associated risk of unrealized income attributed to the vacant space. Direct Capitalization Summary A summary of the direct capitalization method as applied to the subject property is illustrated in the following table: ================================================================================ 54 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ PLAZA 15 MALL - ROUTE 15 LEWISBURG DIRECT CAPITALIZATION SUMMARY - -------------------------------------------------------------------------------- Category Total P.S.F. - -------------------------------------------------------------------------------- Income Total Base Rent $ 300,176 $ 2.64 Market Rent Applied to Vacant Suites 70,980 .62 Recovery Income 110,897 0.98 ---------- ------ Gross Rental Income $ 482,053 $ 4.24 Plus: Percentage Rents $ 111,974 0.99 ---------- ------ Less: Vacancy and Credit Loss (11,306) (0.10) Plus: Other Income 51,448 0.45 Effective Gross Income $ 634,169 $ 5.58 Expenses Common Area Maintenance (CAM) (111,155) (0.98) Real Estate Taxes (95,287) (0.84) Insurance (8,456) (0.07) Management Fees (12,108) (0.11) Replacement Reserves (11,502) (0.10) ---------- ------ Total Expenses $ (238,508) $(2.10) OER 38% Net Operating Income @ Full Occupancy $ 395,661 $ 3.48 CAPITALIZATION OF NOI: @11.00% $3,596,918 $31.66 Deduction for Lease-up Costs ($99,450) $ 0.88 VALUE AFTER CAPITAL COSTS/RENT LOSS $3,497,468 $30.79 Reconciled Value $3,500,000 $30.81 - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ ================================================================================ 55 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW ANALYSIS Our DCF assumptions are summarized as follows. Most of the following assumptions have been discussed and supported within prior sections of the report. A discussion of the discount rate, terminal capitalization rate and holding period follow the assumptions summarized below. ================================================================================ SUMMARY OF DISCOUNTED CASH FLOW ASSUMPTIONS PLAZA 15 MALL, ROUTE 15 IN LEWISBURG, PA. - -------------------------------------------------------------------------------- General Assumptions Start Date June 1, 1996 Terms of Analysis 10 years Basis (Calendar / Fiscal) Fiscal Software Project + Plus Growth Rate Assumptions Expenses 3.0% Market Rent 3.0% Real Estate Taxes 3.0% Inflation (CPI) 3.0% Market Rent Assumptions Anchor $ 4.00 (NNN) Satellite < 5,000 SF $10.00 (NNN) Satellite > 5,000 SF $5.50 (NNN) Leasing Assumptions Lease Term 5 Years Renewal Probability 50% Weighted Average of: Tenant Improvements $0.00 Months of Free Rent 0 Leasing Commissions (Cashed-Out) 4.5% Down Time Between Leases 6 Months Tenant Assumptions Existing tenant leases were entered at contract rent and terms. Speculative renewals assume tenants will pay base rent plus their pro rata share of CAM, real estate taxes and insurance. Contractual recoveries were input into the model per their respective leases. Miscellaneous Assumptions Credit Loss 2.0% Avg. Occupancy Over Projection Period 98% Structural Maintenance/ Reserves ($/SF) $ 0.10 Financial Assumptions Discount Rate (IRR) 12.50% Terminal Overall Capitalization Rate (RO) 11.00% Costs of Sale 2.00% - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ ================================================================================ 56 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNT RATE ANALYSIS A discount rate is a rate of return on capital utilized to capitalize future payments or receipts to present value. It is based on the time value of money concept. For appraisal purposes, the rate used to convert income to property value should represent the annual rate of return necessary to attract investment capital. The rate is influenced by many considerations, including the degree of apparent risk, market attitudes with respect to future inflation, the prospective rates of return for alternative investment opportunities, supply of and demand for mortgage funds, and the availability of tax shelters. Because rates of return used in income capitalization represent prospective rates, as distinguished from historical rates, special consideration is given to market perceptions of risk and changes in purchasing power. Although it is not possible to prove conclusively the suitability of a particular rate of return on the basis of market evidence, the chosen rate should be consistent with the available evidence. Rate selection requires judgment and knowledge concerning prevailing market attitudes and economic indicators. Both the discount rate and the reversionary capitalization rate must reflect the relative risk perceived by investors for the specific market being studied. Generalities must be avoided. To determine such rates, we have used surveys of real estate investors analyzed and adjusted for comparative returns found in the capital markets. National investor surveys include data on investors operating regionally and nationally, such as representatives of insurance companies, commercial banks, pension funds, investment banking firms, syndication firms, and investment advisory firms. Such companies invest in all types of properties, including office buildings, retail shopping centers, hotels, apartment complexes, and industrial facilities. These surveys are valuable for determining general parameters but must be honed to the local market. Based on surveys from CB Commercial Real Estate Group Inc. for the first quarter 1996, investment criteria for numerous market participants including investors that would be in competition for acquiring a property such as the subject are illustrated below. ================================================================================ FIRST QUARTER 1996 NATIONAL INVESTOR SURVEY CLASS B COMMUNITY SHOPPING CENTERS ================================================================================ TYPE OF FIRM OVERALL CAP. RATES GENERAL DISCOUNT REAL RATE INFLATION RATE OF RETURN --------------------- GOING-IN TERMINAL (IRR) (RRR) ================================================================================ Range: 9.5-11.0 10-12 2-4 12-15.0 9.5-11.5 Average 10.2 10.7 3.3 13.4 10.9 ================================================================================ Change from -10 +10 -10 +110 +390 3rd Qtr Survey ================================================================================ Source: CB Commercial Real Estate Group Inc. - 1st Quarter 1996 ================================================================================ 57 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- We have surveyed national real estate investors for their investment criteria when purchasing real estate such as the subject. Investor expectations for inflation range from 2% to 4%, with an average of 3.3%. We have selected an inflation rate for our analysis of 3.0%. The discount rate reflects the quality and duration of the income stream as well as the physical and locational characteristics of the property. As discussed within the overall rate section, the tenant mix at the subject center is considered to be good for the area with mostly regional tenants. Moreover, the majority of the center is occupied by anchor tenants which have multiple renewal options which could extend their occupancies by more than 15 years from the date of value, reducing risk. The center is currently 89% occupied. Overall, the quality, quantity and duration of the cash flow is considered to be good. With respect to physical characteristics, the subject is a functional community center of average quality and in average overall condition. In addition, the subject is situated in an average retail location with relatively low volumes of traffic. In general, the discount rate (IRR) is comprised on a safe rate (usually Treasuries) and a risk premium. The risk premium is difficult to quantify but with sound logic a reasonable rate can be ascertained. The chart presented below graphically depicts real estates position within the risk/reward graph. INVESTOR RISK VERSUS RETURN REQUIREMENTS Anticipated Return _ Real Estate _ Common Stocks - Corporate Bonds _ Mortgage Backed Securities _ Municipal Bonds _ T - Bills Riskless Rate - -------------------------------------------------------------------------------- Perceived Level of Risk US Treasury notes and bonds are considered risk free since they are backed by the United States government. Their rates only fluctuate with perceived inflation. The use of this, or any ================================================================================ 58 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- short term investment including the prime rate or LIBOR is meaningless when compared to an investment with a 10 year holding period. Accordingly, as a starting point, we only considered risk free or nearly risk free investments with a maturity of 10 years. These include Treasuries, corporate bonds and municipal bonds. Adjusted for daily fluctuations, these debt offerings are yielding 5.59% to 8.25%. Mortgaged backed securities generally tend to fall above these instruments. The next layer of risk would include debt rated as low as BBB. These notes are yielding as much as 10%. Long-term mortgages are also yielding over 10% considering the mortgage constant on a note priced at 250 to 300 basis points over comparable Treasuries. Riskier investments such as junk bonds vary widely from 12% to 22% on an unleveraged basis. Real estate, as indicated on the chart above falls between common stock (10%) and junk bonds (16%). To eliminate the burden of illiquidity, REIT's and similar investments are being created. They represent a quasi-real estate opportunity. REIT's are currently providing dividends ranging from 6% to 8% but offer potential yields of 15% to 20% Various financial instruments are yielding between 5.59% and 8.25% depending upon the type of investment as indicated on the chart below based on data obtained from the Federal Reserve Statistical Release for the week ending May 17, 1996. It should be noted that over the past year we have witnessed an increase in the interest rate of all of the following instruments. ========================================================== INSTRUMENT RATE ========================================================== Prime Rate 8.25% ========================================================== Municipal Bonds 5.96% ========================================================== Short-Term Treasury Securities (1 year) 5.59% ========================================================== Long Term Treasury Securities (10 years) 6.68% ========================================================== Corporate Aaa Bonds (10+ years) 7.57% ========================================================== Corporate Baa Bonds (10 + years) 8.25% ========================================================== The risk premium is the rate added to Treasuries to account for illiquidity, the capital markets and the economy. Whether the risk premium decreases in the near term is dependent solely on inflation, the growth of the economy and capital markets. During 1995, the Federal Reserve decreased interest rates in order to stimulate a sluggish economy. The low rates have continued during the early portion of 1996, however, have recently begun to ascend. Based on the above, we feel that the current required rate of return (IRR) for the subject would fall slightly below the middle of the range at 12.5%. This reflects the quality, quantity and cash flow risk associated with the subject property. As such, we have utilized a discount rate of 12.5% in our analysis. ================================================================================ 59 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- TERMINAL RATE To estimate the appropriate terminal capitalization rate, we have considered the rates reflected in the investment criteria outlined above for both going-in and terminal capitalization. Typically, under stable market conditions, the terminal capitalization rate will be greater than the going-in rate to reflect the risk associated with the holding period. Typically 50 to 100 basis points are added on to the going-in cap rate under stable market conditions to account for the additional risk. Furthermore, our national investor survey also indicated an average terminal capitalization 50 basis points greater than the going-in rate. It is evident by historical and current performance of the center and it is our opinion that the subject property will encounter average-to-good market acceptance in the future. It is our opinion that a terminal capitalization rate of 11.0% is the most appropriate for the subject property. A 2% deduction for costs of sale has been utilized to reflect the net reversionary value. HOLDING PERIOD To apply the discounted cash flow analysis, an estimate must be made of the appraised property's holding period based on typical investors' motives in the local market. Historical investment holding periods of similar shopping centers typically have ranged from 10 to 15 years. A 10- to 15- year holding period was analyzed to test the property's sensitivity to roll-overs. We found the subject cash flow to be affected by lease roll-over in year ten, necessitating the use of an 11-year holding period. Our discounted cash flow analysis is presented on the following page. ================================================================================ 60 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
- --------------------------------- ------------------------------------ Building Size 113,600 Plaza 15 - Lewisburg, PA Reconciled Value $3,391 Cost of Sales 3.000% Cash flow Report Value per SF $29.85 Hold Period (Years) 11 % Residual of Recon. Val 31.2% Reduce Residual by Cap Exp Yes Direct Cap Rate 11.00% Residual Discount Rate 12.50% Direct Cap Value $3,335 - --------------------------------- ------------------------------------ Compounded Ann. -------------------------------------------------------------------------------------------------- Ave. Growth 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 -------------------------------------------------------------------------------------------------- 0.93% BASE RENT 342,424 398,908 396,067 403,331 400,650 345,853 409,553 417,615 414,462 420,796 375,681 N/A Expense Rent 0 0 0 0 0 0 0 0 0 0 0 2.41% Expense Recoveries 110,897 118,605 120,438 125,285 127,652 118,758 136,428 141,052 143,846 149,319 140,666 2.91% Percentage Rent 111,974 99,146 103,995 108,990 114,135 119,434 124,892 130,723 136,995 143,536 149,216 - ------- -------------------------------------------------------------------------------------------------- 1.65% GROSS INCOME 565,295 616,659 620,500 637,606 642,437 584,045 670,873 689,390 695,303 713,651 665,563 1.65% Credit/Vacancy Loss (11,306) (12,333) (12,410) (12,752) (12,849) (11,681) (13,417) (13,788) (13,906) (14,273) (13,311) 2.33% Miscellaneous Incomes 51,408 56,600 56,600 56,600 56,600 58,850 62,000 62,000 62,000 62,000 64,750 - ------- -------------------------------------------------------------------------------------------------- 1.71% EFFECTIVE GROSS INCOME 605,397 660,926 664,690 681,454 686,188 631,214 719,456 737,602 743,397 761,378 717,002 2.94% TOTAL EXPENSES 238,508 246,412 253,482 261,024 268,541 275,084 284,723 293,1% 301,665 310,629 318,604 - ------- -------------------------------------------------------------------------------------------------- 0.83% NET OPERATING INCOME 366,889 414,514 411,208 420,430 417,647 356,130 434,733 444,406 441,732 450,749 398,398 N/A Commissions N/A Tenant Improvements 12,500 0 0 0 0 0 0 0 0 0 0 N/A Capital Additions 0 0 0 0 0 0 0 0 0 0 0 - ------- -------------------------------------------------------------------------------------------------- N/A TOTAL DEDUCTIONS 28,470 0 2,213 0 0 21,376 5,642 0 2,565 0 7,592 - ------- -------------------------------------------------------------------------------------------------- 1.45% CASH FLOW 338,419 414,514 408,995 420,430 417,647 334,754 429,091 444,406 439,167 450,749 390,806 TOTAL CASH FLOW 338,419 414,514 408,995 420,430 417,647 334,754 429,091 444,406 439,167 450,749 390,806 -------------------------------------------------------------------------------------------------- Debt service N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A -------------------------------------------------------------------------------------------------- CASH FLOW AFTER DEBT 338,419 414,514 408,995 420,430 417,647 334,754 429,091 444,406 439,167 450,749 390,806 -------------------------------------------------------------------------------------------------- CUMULATIVE SURPLUS N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A ================================================================================================== - ------------------------------------------------------------------------------------------------------------------------------------ Implied Overall Rate 10.82% 12.22% 12.12% 12.40% 12.31% 10.50% 12.82% 13.10% 13.02% 13.29% 11.75% Cash on Cash Return 9.98% 12.22% 12.06% 12.40% 12.31% 9.87% 12.65% 13.10% 12.95% 13.29% 11.52% ====================================================================================================================================
NOI and CF Trends [TABLE OMITTED] - ----------------------------------------------------------------- Sale/Yield Matrix (000's) Terminal Cap Rate ------------------------------------------------------- Disc Rate 10.75% 11.00% 11.25% 11.50% - ----------------------------------------------------------------- 12.00% 3,523 3,497 3,472 3,449 ------------------------------------------------------- 12.25% 3,469 3,444 3,420 3,396 ------------------------------------------------------- 12.50% 3,416 3,391 3,368 3,345 ------------------------------------------------------- 12.75% 3,364 3,340 3,317 3,295 ------------------------------------------------------- 13.00% 3,314 3,290 3,268 3,246 ------------------------------------------------------- 13.25% 3,264 3,241 3,219 3,198 - ----------------------------------------------------------------- ================================================================= ================================================================================ ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW CONCLUSION We used "PRO-JECT +plus" computer software to create a cash flow model for a long term hold. Reference is made to the "Annual Cash Flow Report", generated by the Pro-ject software, on the previous page which provides a summary of cash flow from all sources. We utilized an 11-year holding period and have discounted the cash flow on a fiscal year basis from 1997 to 2006. The cash flow incorporates the terms of existing leases during the analysis period and our assumptions regarding the lease-up of vacant space. It also calculates renewal rentals when leases expire based on current market rent escalated at a growth factor. In addition, a forecast was made for 15 years to check for any irregularities in the income stream which may artificially affect the reversionary sale price. It should be noted that based on our analysis of the extended holding period indicated that there was no irregularities. We capitalized the 12th year net operating income to determine the reversionary value at the end of year 11. CONCLUSION OF INCOME CAPITALIZATION APPROACH The preceding analysis indicates the following conclusions: ======================================== INCOME CAPITALIZATION APPROACH VALUES ---------------------------------------- Method Indicated Value ---------------------------------------- Direct Capitalization $3,500,000 Discounted Cash Flow $3,400,000 ---------------------------------------- Source: CB Commercial Real Estate ======================================== Greater emphasis is placed on the DCF analysis because it is the method likely to be used by a typical investor. As a result, based on the Income Capitalization Approach, CB Commercial concludes a value estimate for the subject property of $3,400,000. This equates to $29.93 per rentable square foot. ================================================================================ 62 CONCLUSION ================================================================================ RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- RECONCILIATION OF VALUE CB Commercial was instructed to estimate the market value of the leased fee interest in the subject property. The value conclusions for each applicable approach are summarized below. ==================================================== SUMMARY OF VALUE CONCLUSIONS ---------------------------------------------------- Cost Approach N/A Sales Comparison Approach $ 3,400,000 Income Capitalization Approach $ 3,400,000 ---------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ==================================================== The Income Capitalization Approach is considered the most persuasive method for valuing the subject property. This approach is predicated on the principle of anticipated economic benefits and, therefore, best reflects the investment characteristics of the subject. Properties such as the subject are typically purchased by investors; thus, this approach must closely parallels the anticipated analysis that would be employed by the most typical purchaser. Since the subject property has a number of existing leases with a variety of terms, the DCF technique best models the future cash flow stream to a prospective buyer. The Sales Comparison Approach is predicated on the principle that an investor would pay no more for an existing property than for a comparable property with similar utility. This approach is contingent on the reliability and comparability of available data. The data developed was considered sufficiently reliable to reach a value conclusion by the Sales Comparison Approach. However, due to the lack of truly comparables sales in recent years, this method is given secondary consideration in the reconciliation. The Cost Approach is predicated on the principle that an investor would pay no more for an existing property than it would cost to acquire land and construct a building with similar utility. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Furthermore, due to the age of the subject and current market conditions, accrued depreciation would be substantial and difficult to estimate. An investor would not use the Cost Approach due to the imprecise nature of estimating the accrued physical, functional, or external depreciation affecting the improvements. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. ================================================================================ 63 ================================================================================ RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- The final value conclusion and the approaches relied upon give strong consideration to the market behavior of the typical buyer and current market environment for the property appraised. Based on the foregoing analysis, it is concluded that the market value of the leased fee interest in the subject property, subject to the assumptions and limiting conditions, as of May 23, 1996, is: THREE MILLION FOUR HUNDRED THOUSAND DOLLARS ($ 3,400,000) This value is subject to all of the assumptions and limiting conditions stated throughout the report, including specific assumptions and limiting conditions. ================================================================================ 64 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS 1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to total that would adversely affect marketability or value. CB Commercial is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CB Commercial, however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject property's title should be sought from a qualified title company that issues or insures title to real property. 2. It is assumed that improvements have been constructed or will be constructed according to approved architectural plans and specifications and in conformance with recommendations contained in or based upon any soils report(s). Unless otherwise specifically noted in the body of this report, it is assumed: that any existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are, or will be upon completion, in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that it or they will withstand any known elements such as windstorm, hurricane, tornado, flooding, earthquake, or similar natural occurrences; and, that the improvements, as currently constituted, conform to all applicable local, state, and federal building codes and ordinances. CB Commercial professionals are not engineers and are not competent to judge matters of an engineering nature. CB Commercial has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CB Commercial by ownership or management; CB Commercial inspected less than 100% of the entire interior and exterior portions of the improvements; and CB Commercial was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CB Commercial reserves the right to amend the appraisal conclusions reported herein. 3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property was not observed by the appraisers. CB Commercial has no knowledge of the existence of such materials on or in the property. CB Commercial, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the appraisal. 4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CB Commercial. This report may be subject to amendment upon re-inspection of the subject property subsequent to repairs, modifications, alterations and completed new construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels of operation. ================================================================================ 65 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 5. It is assumed that all factual data furnished by the client, property owner, owner's representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CB Commercial has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, Assessor's Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CB Commercial reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CB Commercial of any questions or errors. 6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CB Commercial will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject. 7. CB Commercial assumes no private deed restrictions, limiting the use of the subject property in any way. 8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposit or subsurface rights of value involved in this appraisal, whether they be gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred. 9. CB Commercial is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject. 10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market. 11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CB Commercial does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CB Commercial. 12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CB Commercial to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form. 13. Unless otherwise noted in this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated. 14. This study may not be duplicated in whole or in part without the specific written consent of CB Commercial nor may this report or copies hereof be transmitted to third parties without said consent, which consent CB Commercial reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or its contents shall not be published, in whole or in part, in any public document without the express ================================================================================ 66 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- written consent of CB Commercial which consent CB Commercial reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a "sale" or "offer for sale" of any "security", as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CB Commercial shall have no accountability or responsibility to any such third party. 15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report. 16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used. 17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area have been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report. 18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CB Commercial unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CB Commercial assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance. 19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or client's designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CB Commercial assumes responsibility for any situation arising out of the Client's failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired. 20. CB Commercial assumes that the subject property analyzed herein will be under prudent and competent management and ownership; neither inefficient or super-efficient. 21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the appraisal report. 22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist. 23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Not withstanding any discussion of possible readily achievable barrier removal construction items in this report, CB Commercial has not made a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect on the value estimated herein. Since CB Commercial has no specific information relating to this issue, nor is CB Commercial qualified to make such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject property. ================================================================================ 67 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 24. For our analysis, we have relied on the information provided by the detailed rent roll and information provided by the subject leasing agent. We have assumed all information is correct. Furthermore, we have assumed all leases out for signature will be returned signed, and executed as of the date indicated to us by the leasing agent. We reserve the right to amend this appraisal should any of this information be later found to be incorrect. ================================================================================ 68 ================================================================================ ADDENDA ================================================================================ ================================================================================ ADDENDA - -------------------------------------------------------------------------------- ADDENDA ================================================================================ 69 ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- ADDENDUM A ================================================================================ ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- GLOSSARY OF TERMS assessed value Assessed value applies in ad valorem taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to market value, but it is usually calculated in relation to a market value base. + cash equivalency The procedure in which the sale prices of comparable properties sold with atypical financing are adjusted to reflect typical market terms. contract, coupon, face, or nominal rent The nominal rent payment specified in the lease contract. It does not reflect any offsets for free rent, unusual tenant improvement conditions, or other factors that may modify the effective rent payment. coupon rent See Contract, Coupon, Face, or Nominal Rent effective rent 1) The rental rate net of financial concessions such as periods of no rent during a lease term; may be calculated on a discounted basis, reflecting the time value of money, or on a simple, straight-line basis. ++ 2) The economic rent paid by the lessee when normalized to account for financial concessions, such as escalation clauses, and other factors. Contract, or normal, rents must be converted to effective rents to form a consistent basis of comparison between comparables. face rent See Contract, Coupon, Face, or Nominal Rent fee simple estate Absolute ownership unen-cumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. ++ floor area ratio (FAR) The relationship between the above-ground floor area of a building, as described by the building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area; also called building-to-land ratio. ++ full service lease A lease in which rent covers all operating expenses. Typically, full service leases are combined with an expense stop, the expense level covered by the contract lease payment. Increases in expenses above the expense stop level are passed through to the tenant and are known as expense pass-throughs. going concern value Going concern value is the value of a proven property operation. It includes the incremental value associated with the business concern, which is distinct from the value of the real estate only. Going concern value includes an intangible enhancement of the value of an operating business enterprise which is produced by the assemblage of the land, building, labor, equipment, and marketing operation. This process creates an economically viable business that is expected to continue. Going concern value refers to the total value of a property, including both real property and intangible personal property attributed to the business value. + gross building area (GBA) The sum of all areas at each floor as measured to the exterior walls. insurable value Insurable Value is based on the replacement and/or reproduction cost of physical items that are subject to loss from hazards. Insurable value is that portion of the value of an asset or asset group that is acknowledged or recognized under the provisions of an applicable loss insurance policy. This value is often controlled by state law and varies from state to state. + investment value Investment value is the value of an investment to a particular investor based on his or her investment requirements. In contrast to market value, investment value is value to an individual, not value in the marketplace. Investment value reflects the subjective relationship between a particular investor and a given investment. When measured in dollars, investment value is the price an investor would pay for an investment in light of its perceived capacity to satisfy his or her desires, needs, or investment goals. To estimate investment value, specific investment criteria must be known. Criteria to evaluate a real estate investment are not necessarily set down by the individual investor; they may be established by an expert on real estate and its value, that is, an appraiser. + leased fee See leased fee estate leased fee estate An ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others. The rights of the ================================================================================ ================================================================================ GLOSSARY OF TERMS - -------------------------------------------------------------------------------- lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.++ leasehold See leasehold estate leasehold estate The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.++ load factor The amount added to usable area to calculate the rentable area. It is also referred to as a "rentable add-on factor" which, according to BOMA, "is computed by dividing the difference between the usable square footage and rentable square footage by the amount of the usable area. Convert the figure into a percentage by multiplying by 100. market value "as if complete" on the appraisal date Market value as if complete on the appraisal date is an estimate of the market value of a property with all construction, conversion, or rehabilitation hypothetically completed, or under other specified hypothetical conditions as of the date of the appraisal. With regard to properties wherein anticipated market conditions indicate that stabilized occupancy is not likely as of the date of completion, this estimate of value should reflect the market value of the property as if complete and prepared for occupancy by tenants. market value "as is" on the appraisal date Market value "as is" on the appraisal date is an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date of appraisal. market value Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1) A reasonable time is allowed for exposure in the open market; 2) Both parties are well informed or well advised, and acting in what they consider their own best interests; 3) Buyer and seller are typically motivated; 4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.ss. marketing period The time it takes an interest in real property to sell on the market subsequent to the date of an appraisal. ++ net lease Lease in which all or some of the operating expenses are paid directly by the tenant. The landlord never takes possession of the expense payment. In a Triple Net Lease all operating expenses are the responsibility of the tenant, including property taxes, insurance, interior maintenance, and other miscellaneous expenses. However, management fees and exterior maintenance are often the responsibility of the lessor in a triple net lease. A modified net lease is one in which some expenses are paid separately by the tenant and some are included in the rent. net rentable area (NRA) 1) The area on which rent is computed. 2) The Rentable Area of a floor shall be computed by measuring to the inside finished surface of the dominant portion of the permanent outer building walls, excluding any major vertical penetrations of the floor. No deductions shall be made for columns and projections necessary to the building. Include space such as mechanical room, janitorial room, restrooms, and lobby of the floor. * nominal rent See Contract, Coupon, Face, or Nominal Rent prospective future value "upon completion of construction" Prospective future value "upon completion of construction" is the prospective value of a property on the future date that construction is completed, based upon market conditions forecast to exist, as of that completion date. The value estimate at this stage is stated in current dollars unless otherwise indicated. prospective future value "upon reaching stabilized occupancy" Prospective future value "upon reaching stabilized occupancy" is the prospective value of a property at a future point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. The value ================================================================================ ================================================================================ GLOSSARY OF TERMS - -------------------------------------------------------------------------------- estimate at this stage is stated in current dollars unless otherwise indicated. reasonable exposure time The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market. ++ rent see full service lease net lease contract, coupon, face, or nominal rent effective rent shell space Space which has not had any interior finishing installed, including even basic improvements such as ceilings and interior walls, as well as partitions, floor coverings, wall coverings, etc.. Usable Area 1) The area actually used by individual tenants. 2) The Usable Area of an office is computed by measuring to the finished surface of the office side of corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished surface of the dominant portion of the permanent outer building walls. Excludes areas such as mechanical rooms, janitorial room, restrooms, lobby, and any major vertical penetrations of a multi-tenant floor. * use value Use value is a concept based on the productivity of an economic good. Use value is the value a specific property has for a specific use. Use value focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to the property's highest and best use or the monetary amount that might be realized upon its sale. + value appraised During the real estate development process, a property typically progresses from a state of unimproved land to construction of improvements to stabilized occupancy. In general, the market value associated with the property increases during these stages of development. After reaching stabilized occupancy, ongoing forces affect the property during its life, including a physical wear and tear, changing market conditions, etc. These factors continually influence the property's market value at any given point in time. See also market value "as is" on the appraisal date market value "as if complete" on the appraisal date prospective future value "upon completion of construction" prospective future value "upon reaching stabilized occupancy" ================================================================================ ================================================================================ ADDENDUM B ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- ADDENDUM B LEGAL DESCRIPTION ================================================================================ EXHIBIT A ALL that certain tract or parcel of land situate in Kelly Township, Union County, Pennsylvania, bounded and described as follows, and as shown on survey dated April 3, 1973, and last revised September 27, 1976: FROM the point of intersection of centerline of Legislative Route 59024 and the centerline of North bound cartway of Legislative Route 176; North fifty-nine degrees forty-eight minutes and thirty seconds West (N 59 degrees 46 minutes 30 seconds West) a distance of two hundred seventy-five feet (275.00') to a point of centerline of L.R. 59024; THENCE North thirty degrees eleven minutes and thirty second East (N 30 degrees 11 minutes 30 seconds East) a distance of sixteen and one-half feet (16.5') to a point on the Northerly legal right-of-way line of L.R. 59024; THIS point being the Point of Beginning; THENCE along this public road and on the Northerly legal right-of-way North fifty-nine degrees forty-eight minutes and thirty seconds West (N59 degrees 48 minutes 30 seconds West) a distance of seven hundred eighteen and ten hundredths feet (718.10') to a point on right-of-way; THENCE along lands formerly of Village Colonial, Inc.. and land formerly of Evangelical Homes, Inc., North thirty-two degrees thirty minutes and thirty seconds East (N 32 degrees 30 minutes 30 seconds East) a distance of five hundred and sixty-one feet (561.00') to a point; THENCE along land formerly of Evangelical Homes, Inc., South fifty-seven degrees twenty-nine minutes and thirty seconds East (S 57 degrees 29 minutes 30 seconds East) a distance of forty-nine and ninety-six hundredths feet (49.96') to a point; THENCE along same north thirty-two degrees thirty minutes and thirty seconds East (N 32 degrees 30 minutes 30 seconds East) a distance of three hundred forty-nine and seventy-nine hundredths feet (349.79') to a point; THENCE along same South Fifty-seven degrees, twenty-nine minutes and thirty seconds East (S 57 degrees 29 minutes 30 seconds East) a distance of five hundred fifty-two and ninety-nine hundredths feet (552.99') to a found iron pin; being the Southwesterly corner of land of H.R. Ruhl; THENCE along land of H.R. Ruhl South seventy-five degrees thirty-four minutes and thirty seconds East (S 75 degrees 34 minutes 30 seconds East) a distance of two hundred eight and eighty-eight hundredths feet (280.88') to a point on the Westerly right-of-way line of L.R. 176 (U.S. Route l5); THENCE along this right-of-way line South thirty-two degrees, thirty minutes and thirty seconds West 9S 32 degrees 30 minutes 30 seconds West) a distance of three hundred and sixty-four and sixty-seven hundredths feet (364.67') to a point; THENCE along the same North fifth-seven degrees, twenty-nine minutes and thirty seconds West (N 57 degrees 29 minutes 30 seconds West) a distance of ten feet (10.00) to a found iron pin; THENCE along the same South thirty-two degrees thirty minutes and thirty seconds West (S 32 degrees 30 minutes 30 seconds West) a distance of four hundred and seventy-eight and fifty-six hundredths feet (478.56') to a point of curvature to the right (this curvature having a ninety foot (90') radius, a distance of eighty-seven degrees and forty-one minutes (87 degrees 41 minutes) with an arc length of one hundred thirty-seven and seventy-three hundredths feet (137.73'); THENCE along the chord of said curvature South seventy-six degrees and twenty-one minutes West (S 76 degrees 21 minutes 00 seconds West) a distance of one hundred twenty-four and sixty-eight hundredths feet (124.68') to a point of tangency on the Northerly legal right-of-way line of L.R. 59024; THENCE along the same North fifty-nine degrees forty-eight minutes and thirty seconds West (N 59 degrees 48 minutes 30 seconds West) a distance of fifty-seven and forty-eight hundredths (57.48') to a point; THENCE along the same South thirty degrees eleven minutes and thirty seconds West (S 30 degrees 11 minutes 30 seconds West) a distance of thirty-three and fifty hundredths feet (33.50') to a Point of Beginning. CONTAINING 17.420 acres neat measure and does not include any area for roadway right-of-way. This area does contain one (1) exception and it is bounded and described as follows, to wit: ================================================================================ ADDENDUM C IMPROVED COMPARABLE SALES - -------------------------------------------------------------------------------- ADDENDUM C IMPROVED COMPARABLE SALES ================================================================================ RETAIL SALE ================================================================================ Location Data Property Name: 15th & Allen Street Shopping Center Location: 1401-1451 Allen Street City: Allentown County: Lehigh State/Zip: Pennsylvania Assessor's Parcel No(s): G9SW3A-14-4 Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 4.12 Acres Excess Land: None Gross Leasable Area: Anchors: Laneco Supermarket 25,000 SF Local Tenant GLA: 21,503 SF Anchor Tenant GLA: 25,000 SF Total GLA: 46,503 SF GLA Purchased: 46,503 SF Year Built: 1950 Parking: Adequate Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 01/96 Marketing Time: N/A Grantor: Carriage Associates L.P. Grantee: Allenbeth Associates L.P. Document No.: 1558/220 Sale Price: $4,242,000 Financing: Market Terms Cash Equivalent Price: $4,242,000 Required Capital Cost: $0 Adjusted Sales Price: $4,242,000 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100 Existing or Pro Forma Income: N/A TOTAL P.S.F. -------- ----- Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $462,049 $9.94 ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.89 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $91.22 Comments The 15th and Allen Street shopping center is a one-story neighborhood retail center located on the corner of 15th and Allen Streets in Downtown Allentown. This property is anchored by a Laneco Supermarket which occupies an estimated 25,000 square feet with the balance of the rentable area, 21,503 square feet allocated to 12 other satellite tenants. This center was built in the 1950's, however, it has undergone significant renovations since that time. Currently, the property is in average condition. At the time of sale, the property was 100% occupied. ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Stefko Shopping Center Location: Stefko Boulevard City: Bethlehem County: Northampton State/Zip: Pennsylvania Assessor's Parcel No(s): N7SW1B-3-1 Atlas Reference: N/A Physical Data Type: Community Land Area: 10.27 Acres Excess Land: None Gross Leasable Area: Anchors: Laneco Supermarket 65,000 SF Local Tenant GLA: 69,446 SF Anchor Tenant GLA: 65,000 SF Total GLA: 134,446 SF GLA Purchased: 134,446 SF Year Built: 1965 Parking: Adequate Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 01/96 Marketing Time: N/A Grantor: Carriage Associates L.P. Grantee: Allenbeth Associates L.P. Document No.: 1996-1/4082 Sale Price: $5,618,000 Financing: Market Terms Cash Equivalent Price: $5,618,000 Required Capital Cost: $0 Adjusted Sales Price: $5,618,000 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 95.2% Existing or Pro Forma Income: N/A TOTAL P.S.F. -------- ----- Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $617,577 $4.59 ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.99 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $41.79 Comments The Stefco shopping center is a one-story community retail center located on Stefco Boulevard in Bethlehem. This property is anchored by a Laneco Supermarket which occupies an estimated 65,000 square feet with the balance of the rentable area, 69,446 square feet allocated to 21 other satellite tenants. This center was built in 1965, however, it has undergone significant renovations in 1988. Currently, the property is in average condition. At the time of sale, the property was 95.2% occupied. ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: MacArthur Plaza Shopping Center Location: 2419 MacArthur Road (N/E/C Schadt Avenue) City: Whitehall Township County: Lehigh State/Zip: Pennsylvania Assessor's Parcel No(s): F9SW2-3-2 Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 2.20 Acres Excess Land: None Gross Leasable Area: Anchors: Staples 19,200 SF Blockbuster Video 6,930 SF Bell Atlantic 3,470 SF Local Tenant GLA: N/A Anchor Tenant GLA: 29,600 SF Total GLA: 29,600 SF GLA Purchased: 29,600 SF Year Built: 1988 Parking: Adequate Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 10/95 Marketing Time: N/A Grantor: P & D Schweitzer Grantee: Allentown Power Center L.P. Document No.: 1553/1123 Sale Price: $3,831,667 Financing: Cash to Seller Cash Equivalent Price: $3,831,667 Required Capital Cost: $0 Adjusted Sales Price: $3,831,667 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100% Existing or Pro Forma Income: N/A TOTAL P.S.F. -------- ------ Potential Gross Income: $495,121 $16.73 Vacancy and Credit Loss: N/A N/A Effective Gross Income: $495,121 $16.73 Expenses: $82,999 $2.80 Net Operating Income: $412,122 $13.92 ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.76 % Projected IRR: N/A Effective Gross Multiplier (EGIM): 7.74 Operating Expense Ratio (OER): 16.76 % Price Per Square Foot: $129.45 Comments The MacArthur Plaza shopping center is a one-story neighborhood retail center located on MacArthur Road in Whitehall Township. This property is anchored by Staples which occupies 19,200 square feet with the balance of the rentable area, 10,400 square feet allocated to 2 other satellite tenants. This center was built in 1988 and Is currently in average condition. At the time of sale, the property was 100% occupied. ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Columbia Mall Location: N/E/Quadrant Of Route 42 @ Interstate 80 City: Bloomsburg County: Columbia State/Zip: Pennsylvania Assessor's Parcel No(s): 18.2-48-3 Atlas Reference: N/A Physical Data Type: Community Land Area: 48.69 Acres Excess Land: None Gross Leasable Area: Anchors: Hills 80,000 SF Sears 64,264 SF The Bon Ton 45,000 SF J.C. Penny 34,076 SF Local Tenant GLA: 128,024 SF Anchor Tenant GLA: 223,340 SF Total GLA: 351,364 SF GLA Purchased: 351,364 SF Year Built: 1988 Parking: Adequate Condition: Good Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 07/95 Marketing Time: N/A Grantor: C.M. Group Trust Grantee: MDC Investment Property-1, LLC Document No.: 601/538 Sale Price: $27,650,000 Financing: Cash to Seller Cash Equivalent Price: $27,650,000 Required Capital Cost: $0 Adjusted Sales Price: $27,650,000 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 96% Existing or Pro Forma Income: N/A TOTAL P.S.F. ---------- ----- Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $2,958,500 $8.42 ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.70 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $78.69 Comments The Columbia Mall is a single-story retail center located off or Interstate 80 at Route 42 in Bloomsburg, Pennsylvania. This property is anchored by Hills which occupies 80,000 square feet as well as junior-anchors Sears (64,264 SF), The Bon Ton (45,000 SF), and J.C. Penny (34,076 SF). The balance of the rentable area, 128,024 square feet allocated to numerous other satellite tenants. This center was built in 1988 and is currently in average condition. At the time of sale, the property was approximately 96% occupied with 13,000 square feet vacant. Retail sales for the center in 1994 reportedly averaged $165.00/SF, up 5.8% from the previous year. ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Shillington Plaza Location: Parkside Avenue @ Route 724 City: Reading County: Berks State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Land Area: 20.52 Acres Excess Land: N/A Gross Leasable Area: Anchors: K-Mart 94,500 SF Weis Markets 40,107 SF Local Tenant GLA: 16,117 SF Anchor Tenant GLA: 134,607 SF Total GLA: 150,724 SF GLA Purchased: 150,724 SF Year Built: 1967 Parking: 848 Condition: Average Exterior Walls: Brick Veneer Sale Data Transaction Type: Sale Date of Transaction: 9 /94 Marketing Time: N/A Grantor: Marcorp Associates Three Grantee: Shillington Plaza, L.P. Document No.: N/A Sale Price: $4,000,000 Financing: Cash Equivalent Price: $4,000,000 Required Capital Cost: $0 Adjusted Sales Price: $4,000,000 Verification: N/A Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100 Existing or Pro Forma Income: Pro Forma TOTAL P.S.F. -------- ----- Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $547,769 $3.63 ================================================================================ CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 13.69 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $26.54 Comments ================================================================================ CB COMMERCIAL ================================================================================ ADDENDUM D RENTAL COMPARABLES - -------------------------------------------------------------------------------- ADDENDUM D RENTAL COMPARABLES ================================================================================ RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Kingston Plaza Location: S/S Third Avenue East Of Pierce Street City: Kingston County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 64,824 SF Year Built: 1982 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Price Chopper Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$10.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 09/95 6,500 The Everything 5.50 N/A None $950 step in ye 1.30 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent lease includes a term for 1 year and 3 months. Additionally, the tenant has a percentage rent clause of 3.0% over a breakpoint of $1,191,660. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] CB COMMERCIAL ================================================================================ RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Mark Plaza Location: N/S Route 11 City: Edwardsville County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 176,786 SF Year Built: 1967 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 91.7% Overall: 91.7% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $1.95-$11.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 10/95 3,600 Spectrum Rents $8.00 N/A None Flat 5.00 08/95 7,000 Keens Floral Fa $8.00 N/A Annual Step-up 5.00 07/95 3,600 Mattress Man $11.50 N/A Flat 5.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 91.7% leased. The most recent leases all include terms for 5 years. Construction quality is average and typical of other retail centers in the area. ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Birney Plaza Location: N/S Route 11 City: Moosic County: Lackawanna State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 212,057 SF Year Built: 1972 Exterior Wails: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $3.00-$10.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 9/95 4,000 Everything $0.9 $7.00 N/A None flat 3.00 - -------------------------------------------------------------------------------- 7/93 4,000 Mattress Man $9.00 N/A None Step-up to $10/ 5.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 3 and 5 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Dunmore Plaza Location: 1400 Monroe Avenue City: Dunmore County: Lackawanna State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 45.380 SF Year Built: 1967 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Price Chopper Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $6.75-$11.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 4/95 1,900 Malcom'S $11.50 N/A None $950 Step-up in 5.00 - -------------------------------------------------------------------------------- 1/95 1,900 Great Wall Chin $11.35 N/A 3.0% per year 10.00 - -------------------------------------------------------------------------------- 4/94 1,900 Little Caeser's $9.25 N/A Periodic Step-up 5.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 5 and 10 years. Construction quality is average and typical of other retail centers in the area [GRAPHIC OMITTED] ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Triangle Plaza Location: Route 115 City: Wilkes Barre County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 125,000 SF Year Built: 1971 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years (Estimate) Base Rent Per Square Foot: $9.00-$12.50 (Estimate) Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 6/95 2,400 Electronic Syst $11.50 N/A None Annual %age inc 5.00 - -------------------------------------------------------------------------------- 3/95 2,200 TCBY $11.00 N/A None Annual %age inc 5.00 - -------------------------------------------------------------------------------- 5/94 9,910 Party City $11.00 N/A None $1.65/SF step-u 10.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 5 and 10 years. Construction quality is average and typical of other retail centers in the area. ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Gateway Plaza Location: N/S Route 11 City: Edwardsville County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 150,000 SF Year Built: 1969 Exterior Walls: Brick Veneer Condition: Fair Anchor Tenant: Parking: Adequate Lease Data Occupancy: Local: 65.0% Overall: 65 0 Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $8.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: () - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 6/94 950 Holiday Hair $15.48 N/A None Annual %age inc 3 00 - -------------------------------------------------------------------------------- 6/94 3,080 McKenzie $8.50 N/A None Annual %age inc 3.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 65% leased. The most recent leases all include terms for 3 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Pottstown Center Location: Route 663 City: Pottstown County: Montgomery State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 171,267 SF Year Built: 1976 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Wal-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $8.50-$15.50 Rent Escalations: Various Basis: N/A Expense PasS-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 7/95 121,267 Wal-Mart $6.99 N/A None Flat 20.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 20 years. Construction quality is average and typical of other retail centers in the area. ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Route 6 Mall Location: N/S Route 6 City: Honesdale County: Wayne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 144,229 SF Year Built: 1978 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 3/95 119,229 K Mart $5.77 N/A None Flat 25.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 20 years and includes a percentage rent clause on 1.0% over $20.0 million. Construction quality is average and typical of other retail centers in the area. ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Bradford Towne Centre Location: N/S Route 6 City: Wysox County: Bradford State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 119,481 SF Year Built: 1972 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.00 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 7/94 94,481 K-Mart $5.00 N/A None Flat 25.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 25 years and includes a percentage rent clause on 1.0% over $16.875 million. Construction quality is average and typical of other retail centers in the area. ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Builder's Square Shopping Center Location: Cetronia Road City: Whitehall County: Lehigh State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 106,400 SF Year Built: 1994 Exterior Walls: Brick Veneer Condition: Good Anchor Tenant: Builder's Square Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2.000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.00 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 3/94 106,400 Builder's Squar $10.05 N/A None Flat 25.00 ================================================================================ ================================================================================ CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 25 years. Construction quality is good and typical of other retail centers in the area. ================================================================================ CB COMMERCIAL ================================================================================ ADDENDUM E STRATEGIC MAPPING, INC. REPORTS ================================================================================ ADDENDUM E STRATEGIC MAPPING, INC. REPORTS ================================================================================ Atlas MarketQuest Market Stats Report CBC Cl750-4l Page 1 of 9 Area 1 = Lewisburg, PA 5 Mile Radius 6/8/96 Area 2 = Lewisburg, PA 10 Mile Radius Area 3 = Lewisburg, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1995 Socio-Economic Measure: 42 35 35 1995 Employment: 9,675 20,321 29,425 Population: 2000 Projection 31,070 79,552 129,743 1995 Estimate 30,288 78,136 125,718 1990 Census 29,523 77,012 121,973 1990 - 1995% Change (Growth) 2.6% 1.5% 3.1% 1990 Group Quarters Population 5,095 6,037 9,009 1995% Population by Race: White 94.7% 97.3% 97.6% Black 3.6% 1.6% 1.4% American Indian, Eskimo & Aleut 0.3% 0.2% 0.2% Asian or Pacific Islander 1.1% 0.6% 0.5% Other 0.4% 0.3% 0.4% Hispanic 3.0% 1.6% 1.4% 1990% Population by Race: White 94.8% 97.5% 97.9% Black 3.7% 1.6% 1.3% American Indian, Eskimo & Aleut 0.2% 0.2% 0.1% Asian or Pacific Islander 0.8% 0.4% 0.4% Other 0.4% 0.3% 0.3% Hispanic 2.2% 1.3% 1.1% 1995% Population by Sex: Male 51.4% 49.3% 49.2% Female 48.6% 50.7% 50.8% 1990% Population by Sex: Male 51.6% 49.4% 49.3% Female 48.4% 50.6% 50.7% 2000 Pop per Square Mile (Pop Density) 404.4 244.7 181.4 1995 Pop per Square Mile (Pop Density) 394.2 240.3 175.7 1990 Pop per Square Mile (Pop Density) 384.2 236.9 170.5 Area (Square Miles) 76.8 325.1 715.3 Area (Square Kilometers) 199.0 842.1 1,852.7 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC Cl750-4l Page 2 of 9 Area 1 = Lewisburg, PA 5 Mile Radius 6/8/96 Area 2 = Lewisburg, PA 10 Mile Radius Area 3 = Lewisburg, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- Households: 2000 Projection 10,522 29,079 47,006 1995 Estimate 10,183 28,512 45,360 1990 Census 9,860 28,080 43,881 1990- 1995 % Change (Growth) 3.3% 1.5% 3.4% 2000 Average Household Size 2.47 2.53 2.57 1995 Average Household Size 2.47 2.53 2.57 1990 Average Household Size 2.48 2.53 2.57 2000 Per Capita Income $ 20,021 17,773 17,580 1995 Per Capita Income $ 16,602 14,889 14,712 1990 Per Capita Income $ 13,479 12,331 12,153 2000 Median Family Income $ 47,465 43,800 43,673 1995 Median Family Income $ 40,133 37,166 37,049 1990 Median Family Income $ 33,734 31,352 31,226 2000 Median Household Income $ 39,093 36,334 36,743 1995 Median Household Income $ 33,054 30,831 31,170 1990 Median Household Income $ 27,784 26,008 26,271 2000 Average Household Income $ 49,425 44,932 45,155 1995 Average Household Income $ 41,074 37,650 37,852 1990 Average Household Income $ 33,749 31,297 31,419 1995 % Household Income: $ 0 - $9,999 11.6% 12.2% 11.9% $ 10,000 - $14,999 7.8% 9.0% 9.1% $ 15,000 - $24,999 16.8% 17.9% 17.8% $ 25,000 - $34,999 16.7% 17.6% 17.4% $ 35,000 - $49,999 21.3% 21.5% 21.9% $ 50,000 - $74,999 15.7% 14.6% 14.6% $ 75,000 - $99,999 5.1% 3.6% 3.7% $ 100,000 - $149,999 3.2% 2.2% 2.2% $ 150,000+ 1.7% 1.4% 1.4% Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC Cl750-4l Page 3 of 9 Area 1 = Lewisburg, PA 5 Mile Radius 6/8/96 Area 2 = Lewisburg, PA 10 Mile Radius Area 3 = Lewisburg, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990% Household Income: $ 0 - $9,999 15.0% 15.8% 15.4% $ 10,000 - $14,999 8.9% 10.1% 10.4% $ 15,000 - $24,999 20.7% 21.9% 21.4% $ 25,000 - $34,999 18.3% 19.2% 19.7% $ 35,000 - $49,999 20.0% 19.3% 19.0% $ 50,000 - $74,999 11.2% 9.4% 9.7% $ 75,000 - $99,999 3.2% 2.2% 2.2% $ 100,000 - $149,999 1.4% 1.1% 1.2% $ 150,000 + 1.3% 1.0% 0.9% 1995 % Population by Age: 0 - 5 6.7% 7.7% 7.9% 6 - 13 8.9% 10.3% 10.5% 14 - 17 6.4% 5.6% 5.6% 18 - 20 6.5% 5.1% 5.1% 21 - 24 9.0% 6.7% 6.6% 25 - 34 13.1% 13.5% 13.7% 35 - 44 14.6% 15.1% 15.2% 45 - 54 11.1% 11.7% 11.8% 55 - 64 8.4% 8.8% 8.7% 65 - 74 7.9% 8.3% 8.0% 75 - 84 5.4% 5.4% 5.0% 85 + 2.0% 1.9% 1.7% Median Age Total Population 34.6 35.7 35.3 Median Age Adult Population 42.1 43.5 43.2 1990 % Population by Age: 0 - 5 6.8% 7.9% 8.1% 6 - 13 8.9% 10.2% 10.5% 14 - 17 4.3% 5.1% 5.3% 18 - 20 9.7% 6.0% 5.9% 21 - 24 8.1% 6.3% 6.3% 25 - 34 14.2% 15.2% 15.4% 35 - 44 14.7% 14.8% 14.9% 45 - 54 10.2% 10.4% 10.5% 55 - 64 8.5% 9.1% 9.1% 65 - 74 7.8% 8.2% 7.9% 75 - 84 4.8% 4.9% 4.6% 85 + 1.8% 1.7% 1.5% Median Age Total Population 33.6 34.5 34.0 Median Age Adult Population 40.1 42.1 41.8 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC Cl750-4l Page 4 of 9 Area 1 = Lewisburg, PA 5 Mile Radius 6/8/96 Area 2 = Lewisburg, PA 10 Mile Radius Area 3 = Lewisburg, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1995 % Female Population by Age: 0 - 5 6.6% 7.4% 7.6% 6 - 13 8.6% 9.8% 10.0% 14 - 17 6.4% 5.4% 5.5% 18 - 20 6.2% 4.9% 4.9% 21 - 24 8.2% 6.2% 6.1% 25 - 34 11.6% 12.7% 13.1% 35 - 44 13.2% 14.4% 14.7% 45 - 54 10.7% 11.3% 11.4% 55 - 64 8.8% 9.0% 8.9% 65 - 74 9.2% 9.3% 8.9% 75 - 84 7.2% 6.8% 6.3% 85 + 3.3% 2.9% 2.6% Female Median Age Total Population 36.8 37.5 36.8 Female Median Age Adult Population 45.0 45.4 44.7 1990 % Female Population by Age: 0 - 5 6.5% 7.5% 7.7% 6 - 13 8.8% 9.9% 10.2% 14 - 17 4.4% 5.0% 5.1% 18 - 20 9.3% 5.7% 5.7% 21 - 24 7.4% 5.9% 6.0% 25 - 34 13.2% 14.6% 14.9% 35 - 44 13.1% 13.9% 14.1% 45 - 54 9.6% 10.1% 10.2% 55 - 64 9.0% 9.3% 9.3% 65 - 74 9.2% 9.3% 8.8% 75 - 84 6.6% 6.2% 5.8% 85 + 3.0% 2.5% 2.2% Female Median Age Total Population 35.3 36.0 35.2 Female Median Age Adult Population 42.8 44.0 43.4 1990 % Hispanic Population by Type: Not of Hispanic Origin 97.8% 98.7% 98.9% Mexican 0.2% 0.1% 0.1% Puerto Rican 0.7% 0.5% 0.5% Cuban 0.7% 0.3% 0.2% Other Hispanic 0.6% 0.3% 0.3% Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC Cl750-4l Page 5 of 9 Area 1 = Lewisburg, PA 5 Mile Radius 6/8/96 Area 2 = Lewisburg, PA 10 Mile Radius Area 3 = Lewisburg, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Population Enrolled in School (Age 3 & Over): Preprimary School 5.1% 6.5% 6.4% Elementary and High School 44.9% 63.3% 65.0% College 50.0% 30.2% 28.6% Total School Enrollment 8,529 18,277 29,084 1990 % Educational Attainment (Age 25 & Over): Less than Grade 9 10.5% 11.0% 11.7% Grade 9-12 (No Diploma) 14.2% 15.3% 15.9% High School Graduate or Equivalency 39.8% 45.2% 44.7% Some College (No Degree) 11.3% 10.1% 9.9% Associate Degree 5.2% 4.4% 4.6% Bachelor Degree 10.0% 8.2% 7.7% Graduate or Professional Degree 9.0% 5.7% 5.6% 1990 % Employment Status: Total Labor Force: Armed Forces 0.2% 0.1% 0.1% Civilian: Employed 52.2% 57.7% 58.1% Unemployed 3.0% 3.2% 3.1% Not In Labor Force 44.6% 39.0% 38.6% Female Labor Force: Armed Forces 0.0% 0.0% 0.0% Civilian: Employed 48.0% 50.4% 50.7% Unemployed 3.4% 3.0% 2.9% Not In Labor Force 48.6% 46.5% 46.3% 1990 % Working Mothers: Child <6 Only 17.3% 17.0% 16.4% Child 6-17 Only 44.0% 42.2% 41.3% Child <6 & 6-17 11.3% 11.5% 11.6% Nonworking Mothers 27.3% 29.3% 30.7% Total Mothers 3,084 9,263 14,738 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC Cl750-4l Page 6 of 9 Area 1 = Lewisburg, PA 5 Mile Radius 6/8/96 Area 2 = Lewisburg, PA 10 Mile Radius Area 3 = Lewisburg, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Industry Employment: Agriculture/Forestry/Fishing 2.8% 2.9% 3.4% Mining 0.1% 0.1% 0.2% Construction 4.7% 5.6% 5.8% Manufacturing: Nondurable Goods 12.8% 12.5% 11.8% Durable Goods 13.7% 15.1% 15.5% Transportation 2.8% 3.1% 3.1% Communications & Public Utilities 1.7% 1.9% 2.0% Wholesale Trade 2.0% 2.8% 2.8% Retail Trade 15.7% 17.8% 17.1% Finance/Insurance/Real Estate 3.1% 3.3% 3.3% Services: Business & Repair 2.5% 2.5% 2.4% Personal 2.0% 2.3% 2.3% Entertainment & Recreation 1.1% 0.9% 0.8% Health 8.8% 9.8% 11.5% Educational 17.3% 10.8% 10.0% Other Professional & Related 4.9% 4.7% 4.5% Public Administration 3.9% 3.7% 3.5% Total 12,656 35,291 55,816 1990 % Occupation: Executive & Managerial 9.6% 7.8% 7.3% Professional Specialty 15.3% 11.3% 11.5% Technical Support 3.4% 3.2% 3.3% Sales 9.0% 9.3% 8.9% Administrative Support 15.5% 13.9% 13.5% Service: Private Household 0.2% 0.2% 0.2% Service: Protective 2.3% 1.9% 1.9% Service: Other 11.7% 13.7% 13.8% Farming, Forestry & Fishing 2.5% 2.7% 3.2% Precision Production, Craft & Repair 9.2% 10.8% 11.3% Machine Operator, Assemblers & Inspectors 8.8% 11.0% 11.7% Transportation & Material Moving 4.0% 4.7% 4.6% Laborers 8.6% 9.4% 9.0% White Collar Total 52.7% 45.5% 44.4% Blue Collar Total 30.6% 35.9% 36.6% Total Employed 12,661 35,286 55,811 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC Cl750-4l Page 7 of 9 Area 1 = Lewisburg, PA 5 Mile Radius 6/8/96 Area 2 = Lewisburg, PA 10 Mile Radius Area 3 = Lewisburg, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Marital Status: Total Male: 12,635 30,349 47,674 Never Married 35.6% 28.6% 28.5% Married 52.1% 59.6% 60.3% Separated 2.7% 2.1% 2.0% Widowed 2.6% 2.9% 2.8% Divorced 7.0% 6.8% 6.5% Total Female: 11,950 31,746 50,065 Never Married 27.1% 21.5% 22.4% Married 50.2% 55.0% 55.5% Separated 1.6% 1.8% 1.8% Widowed 14.1% 13.9% 13.0% Divorced 7.1% 7.7% 7.3% 1990 Households by Type: One Person Households 2,577 6,942 10,379 Two or more Person Households: Family Households: Married Couple 5,811 16,996 27,082 Male Householder 244 744 1,234 Female Householder 760 2,286 3,485 Nonfamily Households 471 1,115 1,700 1990 Family Households With Children Married Couple Family 2,569 7,814 12,677 Male Householder 148 433 699 Female Householder 485 1,457 2,193 1990 Population by Household Type: Family Households 20,628 61,362 98,506 Nonfamily Households 3,804 9,614 14,453 1990 Households With: Children Under 18 3,254 9,841 15,775 Persons Over 65 2,755 7,719 11,698 Householder Over 65 2,590 7,179 10,827 1990 Average Family Size 2.99 3.03 3.06 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC Cl750-4l Page 8 of 9 Area 1 = Lewisburg, PA 5 Mile Radius 6/8/96 Area 2 = Lewisburg, PA 10 Mile Radius Area 3 = Lewisburg, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 Median Home Value $ 65,738 59,877 59,148 1990 Average Home Value $ 78,237 67,924 66,039 1990 Median Contract Rent $ 256 236 239 1990 Average Contract Rent $ 265 243 244 1990 Persons In Unit: 1 Person Units 2,577 6,942 10,379 2 Person Units 3,385 9,520 14,752 3 Person Units 1,688 5,008 7,926 4+ Person Units 2,210 6,611 10,827 1990 Housing Unit Counts: Total Units 10,279 29,598 46,406 % Occupied 95.9% 94.9% 94.6% % Vacant 4.1% 5.1% 5.4% % Year Round 3.3% 3.8% 3.8% % Seasonal 0.8% 1.3% 1.6% Occupied Units 9,860 28,080 43,881 % Owner Occupied 67.4% 69.0% 71.3% % Renter Occupied 32.7% 31.0% 28.7% Vacant Units 419 1,518 2.525 % Year Round of Vacant Units 80.7% 75.0% 70.1% % Seasonal of Vacant Units 19.8% 25.0% 29.9% 1990 Total Housing Units in Structure 10,279 29,598 46,406 1, Detached 60.1% 60.6% 63.2% 1, Attached 8.6% 10.1% 8.9% 2, 5.6% 5.9% 5.4% 3-9 10.3% 8.3% 7.6% 10-49 2.8% 2.1% 1.9% 50 + 1.9% 2.3% 1.8% Mobile Home or Trailer 8.8% 8.7% 9.4% Other 1.9% 2.0% 1.8% 1990 Housing Units by Year Built 6,670 19,388 31,263 Built 1985 to March, 1990 8.8% 8.7% 8.6% Built 1980 to 1984 5.7% 5.8% 6.2% Built 1970 to 1979 21.1% 21.7% 22.3% Built 1960 to 1969 14.6% 12.6% 12.5% Built 1950 to 1959 11.5% 11.0% 10.9% Built 1949 or Earlier 38.3% 40.2% 39.6% Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC Cl750-4l Page 9 of 9 Area 1 = Lewisburg, PA 5 Mile Radius 6/8/96 Area 2 = Lewisburg, PA 10 Mile Radius Area 3 = Lewisburg, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Means of Transportation to Work: Car, Truck or Van: Drove Alone 74.5% 75.3% 74.7% Carpooled 10.6% 12.5% 12.9% Public Transportation 0.1% 0.3% 0.2% Other Means 11.3% 8.6% 8.4% Worked at Home 3.5% 3.4% 3.9% 1990 % Travel Time to Work: 0 - 14 Minutes 56.2% 47.2% 46.2% 15 - 29 Minutes 32.0% 40.2% 39.5% 30-59 Minutes 10.1% 10.6% 12.3% 60-89 Minutes 1.2% 1.5% 1.6% 90 + Minutes 0.5% 0.5% 0.5% 1990 Households by Number of Vehicles: 1 Vehicle 3,462 9,764 14,409 2 Vehicles 4,129 11,419 18,227 3 Vehicles 1,066 3,004 5,153 4 Vehicles 273 936 1,523 5 or More Vehicles 121 280 488 Area defined by Circle: (40.9664,76.8944): 5 mile(s) Area defined by Circle: (40.9664,76.8944): 10 mile(s) Area defined by Circle: (40.9664,76.8944): 15 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC Cl750-4l Page 1 of 4 Area 1 = Lewisburg, PA 5 Mile Radius 6/8/96 Area 2 = Lewisburg, PA 10 Mile Radius Area 3 = Lewisburg, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- Population: 2000 Projection 31,070 79,552 129,743 1995 Estimate 30,288 78,136 125,718 1990 Census 29,523 77,012 121,973 1980 Census 27,125 69,422 115,613 Percent Change, 1980 - 1990 8.8 10.9 5.5 Percent Change, 1990 - 1995 2.6 1.5 3.1 1995 Population by Race: % White 94.7 97.3 97.6 % Black 3.6 1.6 1.4 % American Indian 0.3 0.2 0.2 % Asian 1.1 0.6 0.5 % Other 0.4 0.3 0.4 % Hispanic 3.0 1.6 1.4 1995 Population by Age: % 0-5 6.7 7.7 7.9 % 6- 13 8.9 10.3 10.5 % 14-17 6.4 5.6 5.6 % 18-20 6.5 5.1 5.1 % 21 -24 9.0 6.7 6.6 % 25-34 13.1 13.5 13.7 % 35-44 14.6 15.1 15.2 % 45 - 54 11.1 11.7 11.8 % 55 - 64 8.4 8.8 8.7 % 65 - 74 7.9 8.3 8.0 % 75 - 84 5.4 5.4 5.0 % 85 + 2.0 1.9 1.7 Median Age Total Population 34.6 35.7 35.3 Median Age Adult Population 42.1 43.5 43.2 Households: 2000 Projection 10,522 29,079 47,006 1995 Estimate 10,183 28,512 45,360 1990 Census 9,860 28,080 43,881 1980 Census 8,545 24,013 39,102 Percent Change, 1980 - 1990 15.4 16.9 12.2 Percent Change, 1990 1995 3.3 1.5 3.4 1990 Household Population 24,432 70,976 112,959 1990 Households w/ Children under 18 3,254 9,841 15,775 1990 Households w/ Persons over 65 2,755 7,719 11,698 Area defined by Circle: (40.9664,76.8944): 5 mile(s) Area defined by Circle: (40.9664,76.8944)10 mile(s) Area defined by Circle: (40.9664,76.8944): 15 mile(s) Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Profile Report CBC Cl750-4l Page 2 of 4 Area 1 = Lewisburg, PA 5 Mile Radius 6/8/96 Area 2 = Lewisburg, PA 10 Mile Radius Area 3 = Lewisburg, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 Family Population 20,628 61,362 98,506 1990 Nonfamily Population 3,804 9,614 14,453 1990 Group Quarters Population 5,095 6,037 9,009 1990 Average Household Size 2.48 2.53 2.57 1990 Average Family Size 2.99 3.03 3.06 1990 Family Households 6,815 20,026 31,801 1990 Nonfamily Households 3,048 8,056 12,081 1995 Household Income: % $0- $9,999 11.6 12.2 11.9 % $10,000 - $14,999 7.8 9.0 9.1 % $15,000 - $24,999 16.8 17.9 17.8 % $25,000 - $34,999 16.7 17.6 17.4 % $35,000 - $49,999 21.3 21.5 21.9 % $50,000 - $74,999 15.7 14.6 14.6 % $75,000 - $99,999 5.1 3.6 3.7 % $100,000- $149,999 3.2 2.2 2.2 % $150,000 + 1.7 1.4 1.4 2000 Median Household Income $ 39,093 $ 36,334 $ 36,743 1995 Median Household Income $ 33,054 $ 30,831 $ 31,170 1990 Median Household Income $ 27,784 $ 26,008 $ 26,271 2000 Average Household Income $ 49,425 $ 44,932 $ 45,155 1995 Average Household Income $ 41,074 $ 37,650 $ 37,852 1990 Average Household Income $ 33,749 $ 31,297 $ 31,419 2000 Per Capita Income $ 20,021 $ 17,773 $ 17,580 1995 Per Capita Income $ 16,602 $ 14,889 $ 14,712 1990 Per Capita Income $ 13,479 $ 12,331 $ 12,153 2000 Median Family Income $ 47,465 $ 43,800 $ 43,673 1995 Median Family Income $ 40,133 $ 37,166 $ 37,049 1990 Median Family Income $ 33,734 $ 31,352 $ 31,226 1990 Average Family Income $ 39,964 $ 36,388 $ 36,236 Area defined by Circle: (40.9664,76.8944): 5 mile(s) Area defined by Circle: (40.9664,76.8944): 10 mile(s) Area defined by Circle: (40.9664,76.8944): 15 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC Cl750-4l Page 3 of 4 Area 1 = Lewisburg, PA 5 Mile Radius 6/8/96 Area 2 = Lewisburg, PA 10 Mile Radius Area 3 = Lewisburg, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 Housing Unit Counts: Total Units 10,279 29,598 46,406 Occupied Units 9,860 28,080 43,881 Owner Occupied 6,641 19,380 31,270 Renter Occupied 3,220 8,698 12,612 Vacant Units 419 1,518 2,525 Year Round 338 1,139 1.771 Seasonal 83 380 755 1990 Housing Unit Percents: % Occupied of Total Units 95.9 94.9 94.6 % Owner Units of Occupied Units 67.4 69.0 71.3 % Renter Units of Occupied Units 32.7 31.0 28.7 % Vacant of Total Units 4.1 5.1 5.4 % Year Round of Vacant Units 80.7 75.0 70.1 % Seasonal of Vacant Units 19.8 25.0 29.9 % Condominiums of Total Units 1.0 0.5 0.5 1990 Condominiums: Total Condominium Units 100 148 233 % Owner Occupied 33.0 27.7 21.0 % Renter Occupied 67.0 72.3 78.1 % Vacant 0.0 0.0 0.9 1990 Units in Structure: % 1, Detached 60.1 60.6 63.2 % 1, Attached 8.6 10.1 8.9 % 2 5.6 5.9 5.4 % 3-9 10.3 8.3 7.6 % 10-49 2.8 2.1 1.9 % 50+ 1.9 2.3 1.8 % Mobile Homes 8.8 8.7 9.4 % Other 1.9 2.0 1.8 1990 Median Home Value $ 65,738 $ 59,877 $ 59,148 1990 Median Contract Rent $ 256 $ 236 $ 239 Area defined by Circle: (40.9664,76.8944): 5 mile(s) Area defined by Circle: (40.9664,76.8944): 10 mile(s) Area defined by Circle: (40.9664,76.8944): 15 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC Cl750-4l Page 4 of 4 Area 1 = Lewisburg, PA 5 Mile Radius 6/8/96 Area 2 = Lewisburg, PA 10 Mile Radius Area 3 = Lewisburg, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1995 Total Employed 9,675 20,321 29,425 1995 Socio-Economic Measure 42 35 35 l990 Occupation: Total Civil Labor Force 13,398 37,225 58,818 % Unemployed 5.5 5.2 5.1 Total Employed 12,665 35,289 55,809 % White Collar 52.7 45.5 44.4 % Executive & Managerial 9.6 7.8 7.3 % Professional Specialty 15.3 11.3 11.5 % Technical Support 3.4 3.2 3.3 % Administrative Support 15.5 13.9 13.5 % Sales 9.0 9.3 8.9 % Blue Collar 30.6 35.9 36.6 % Precision Production, Craft & Repair 9.2 10.8 11.3 % Machine Operators 8.8 11.0 11.7 % Transportation & Material Moving 4.0 4.7 4.6 % Laborers 8.6 9.4 9.0 % Farming, Forestry & Fishing 2.5 2.7 3.2 % Service: Private Household 0.2 0.2 0.2 % Service: Protective 2.3 1.9 1.9 % Service: Other 11.7 13.7 13.8 1990 Educational Attainment (Age 25 & Over): % Less than Grade 9 10.5 11.0 11.7 % Grade 9-12 (No Diploma) 14.2 15.3 15.9 % High School Graduate or Equivalency 39.8 45.2 44.7 % Some College (No Degree) 11.3 10.1 9.9 % Associate Degree 5.2 4.4 4.6 % Bachelor Degree 10.0 8.2 7.7 % Graduate or Professional Degree 9.0 5.7 5.6 Area defined by Circle: (40.9664,76.8944): 5 mile(s) Area defined by Circle: (40.9664,76.8944): 10 mile(s) Area defined by Circle: (40.9664,76.8944): 15 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 Lewisburg, PA 5 Mile Radius 6/8/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 100.7 - ----------------------------------Demographics---------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 30,288 10,183 25,193 2.47 $33,054 2000 31,070 10,522 25,975 2.47 $39,093 - ------------------------------Expenditure Potential----------------------------- 1995 Area Yearly Growth Rate Per Household 1.66 % Total 2.33 % - -------------------------Retail Support Potential (000)------------------------- 1995: 1,100 sq. ft. - --------------------------------------------------------------------------------
Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/Total Retail Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 8,838 10,205 868 970 2.92% 95.9 Appliance Store 947 839 93 80 -2.41% 95.0 Auto-Aftermarket Store 19,992 21,430 1,963 2,037 1.40% 99.2 Convenience Store 10,561 11,193 1,037 1,064 1.17% 101.2 Dept. Store 9,388 10,532 922 1,001 2.33% 95.6 Drug Store 9,826 12,598 965 1,197 5.10% 107.0 Electronics Store 3,686 4,974 362 473 6.18% 96.9 Fast Food Restaurant Store 7,739 7,124 760 677 -1.64% 99.5 Full Serv Restaurant Store 7,459 6,801 732 646 -1.83% 97.6 Furniture Store 3,229 3,161 317 300 -0.43% 92.0 Grocery Store 40,270 46,515 3,955 4,421 2.93% 104.9 Hardware Store 2,055 2,269 202 216 2.00% 100.6 Home Centers Store 10,865 12,961 1,067 1,232 3.59% 106.2 Jewelry Store 1,411 1,509 139 143 1.35% 97.0 Liquor Store 1,648 1,515 162 144 -1.67% 96.5 Mass Merchandiser Store 13,807 15,923 1,356 1,513 2.89% 98.3 Photo Store 227 230 22 22 0.33% 99.5 Shoe Store 1,914 2,334 188 222 4.05% 98.6 Sporting Goods Store 2,290 2,740 225 260 3.66% 96.3 Toy Store 1,046 1,022 103 97 -0.47% 94.6 Variety Store 761 889 75 85 3.16% 98.1
Area defined by Circle: (40.9664,76.8944): 5 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 Lewisburg, PA 5 Mile Radius 6/8/96 Benchmark = Regional Area Definition Detailed Report
Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/Total Retail Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 740 1,290 73 123 11.74% 101.4 ------- ------- ------ ------ Total Shopping Center 158,698 178,052 15,585 16,922 All Other Stores 121,722 136,567 11,953 12,979 Total Retail 280,420 314,619 27,538 29,901
Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (40.9664,76.8944): 5 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 Lewisburg, PA 10 Mile Radius 6/8/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 95.6 - ----------------------------------Demographics---------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 78,136 28,512 72,099 2.53 $ 30,831 2000 79,552 29,079 73,515 2.53 $ 36,334 - ------------------------------Expenditure Potential----------------------------- 1995 Area Yearly Growth Rate Per Household 1.65% Total 2.05% - -------------------------Retail Support Potential (000)------------------------- 1995: 2,924 sq. ft. - --------------------------------------------------------------------------------
Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/Total Retail Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 22,485 25,563 789 879 2.60% 87.1 Appliance Store 2,497 2,174 88 75 -2.74% 89.5 Auto-Aftermarket Store 53,756 56,780 1,885 1,953 1.10% 95.2 Convenience Store 28,974 30,292 1,016 1,042 0.89% 99.2 Dept. Store 24,101 26,605 845 915 2.00% 87.6 Drug Store 27,209 34,499 954 1,186 4.86% 105.8 Electronics Store 9,467 12,626 332 434 5.93% 88.9 Fast Food Restaurant Store 20,465 18,552 718 638 -1.94% 94.0 Full Serv Restaurant Store 19,711 17,687 691 608 -2.14% 92.1 Furniture Store 8,107 7,768 284 267 -0.85% 82.5 Grocery Store 109,250 124,734 3,832 4,289 2.69% 101.6 Hardware Store 5,515 5,990 193 206 1.67% 96.5 Home Centers Store 28,281 33,362 992 1,147 3.36% 98.7 Jewelry Store 3,433 3,617 120 124 1.05% 84.3 Liquor Store 4,372 3,959 153 136 -1.96% 91.4 Mass Merchandiser Store 36,035 40,941 1,264 1,408 2.59% 91.6 Photo Store 578 580 20 20 0.07% 90.6 Shoe Store 4,871 5,866 171 202 3.79% 89.7 Sporting Goods Store 5,839 6,894 205 237 3.38% 87.7 Toy Store 2,796 2,681 98 92 -0.84% 90.3 Variety Store 1,996 2,296 70 79 2.84% 91.9
Area defined by Circle: (40.9664,76.8944): 10 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 Lewisburg, PA 10 Mile Radius 6/8/96 Benchmark = Regional Area Definition Detailed Report
Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/Total Retail Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 1,968 3,388 69 117 11.48% 96.2 ------- ------- ------ ------ Total Shopping Center 421,706 466,854 14,791 16,055 All Other Stores 323,449 358,077 11,344 12,314 Total Retail 745,155 824,931 26,135 28,369
Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (40.9664,76.8944): 10 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 Lewisburg, PA 15 Mile Radius 6/8/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 96.3 - ----------------------------------Demographics---------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 125,718 45,360 116,709 2.57 $ 31,170 2000 129,743 47,006 120,734 2.57 $ 36,743 - ------------------------------Expenditure Potential----------------------------- 1995 Area Yearly Growth Rate Per Household 1.63% Total 2.36% - -------------------------Retail Support Potential (000)------------------------- 1995: 4,692 sq. ft. - --------------------------------------------------------------------------------
Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/Total Retail Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 36,071 41,618 795 885 2.90% 87.4 Appliance Store 3,972 3,512 88 75 -2.43% 89.9 Auto-Aftermarket Store 85,690 91,907 1,889 1,955 1.41% 96.0 Convenience Store 46,303 49,152 1,021 1,046 1.20% 100.1 Dept. Store 38,714 43,377 853 923 2.30% 88.2 Drug Store 43,386 55,837 956 1,188 5.18% 106.6 Electronics Store 15,177 20,543 335 437 6.24% 89.4 Fast Food Restaurant Store 33,036 30,388 728 646 -1.66% 94.5 Full Serv Restaurant Store 31,848 29,005 702 617 -1.85% 92.7 Furniture Store 13,069 12,706 288 270 -0.56% 83.3 Grocery Store 175,627 203,504 3,872 4,329 2.99% 102.4 Hardware Store 8,883 9,800 196 208 1.98% 98.0 Home Centers Store 45,547 54,498 1,004 1,159 3.65% 100.4 Jewelry Store 5,497 5,876 121 125 1.34% 84.3 Liquor Store 7,128 6,556 157 139 -1.66% 91.9 Mass Merchandiser Store 57,788 66,629 1,274 1,417 2.89% 92.3 Photo Store 920 937 20 20 0.36% 91.2 Shoe Store 7,802 9,534 172 203 4.09% 90.1 Sporting Goods Store 9,295 11,137 205 237 3.68% 88.6 Toy Store 4,551 4,426 100 94 -0.56% 91.7 Variety Store 3,200 3,737 71 79 3.15% 92.4
Area defined by Circle: (40.9664,76.8944): 15 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 Lewisburg, PA 15 Mile Radius 6/8/96 Benchmark = Regional Area Definition Detailed Report
Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/Total Retail Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 3,154 5,513 70 117 11.82% 97.7 ------- ------- ------ ------ Total Shopping Center 676,658 760,191 14,917 16,172 All Other Stores 518,997 583,067 11,442 12,404 Total Retail 1,195,655 1,343,258 26,359 28,576
Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (40.9664,76.8944): 15 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. ================================================================================ ADDENDUM F RENT ROLL - -------------------------------------------------------------------------------- ADDENDUM F RENT ROLL - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Detail Rent Roll Page: 64 PLAZA 15 Date: 05/14/96 Report Date: 05/14/96 Time: 14:20:53
- ------------------------------------------------------------------------------------------------------------------------------------ -- Rent Dates -- Suite Commence Expire Square Monthly Annual ---- Cost Recovery ---- Expense --- Other Income --- No. Tenant Name Start Footage Base Rent Rate/SF Description Monthly Stop Description Monthly - ------------------------------------------------------------------------------------------------------------------------------------ 00140 ARTHUR TREACHERS 01/24/77 01/23/97 0 1,958.33 0.00 01/24/77 00010 FASHION BUG #062 05/12/76 05/31/97 8,000 0.00 0.00 MAINTENANC 417.80 05/12/76 SPRINKLER 30.07 ------- 447.87 00040 CUSTOM CUTS 11/01/91 10/31/98 1,500 1,062.50 8.50 MAINTENANC 245.62 11/01/91 REAL ESTAT 90.43 ------- 336.05 00050 YUNG TIN RESTAURANT 12/31/86 12/31/01 1,500 1,375.00 11.00 MAINTENANC 150.02 12/31/86 REAL ESTAT 90.43 ------- 240.45 0007* ORIGINAL ITALIAN PIZZA 11/13/86 05/31/01 2,000 1,500.00 9.00 MAINTENANC 200.03 11/13/89 REAL ESTAT 120.57 ------- 320.60 00100 BI-LO #281 12/13/76 12/31/96 28,800 7,924.00 3.30 12/13/76 0011* G. C. MURPHY 04/26/90 04/30/01 53,000 10,158.33 2.30 MAINTENANC 662.50 01/01/90 00012 MCDONALDS 01/28/76 01/27/97 0 1,100.00 0.00 01/28/76 00130 MELLON BANK 11/01/81 10/31/01 0 916.66 0.00 11/01/81 00060 SEARS AUTHORIZED 04/13/95 04/30/98 6,500 2,979.17 5.50 MAINTENANC 606.08 04/13/95 REAL ESTAT 391.85 ------- 997.93 - ------------------------------------------------------------------------------------------------------------------------------------ Total Building Occupied Sqft: 89% 101,300 28,973.99 0.00 3,005.40 Available Sqft: l1% 12,300 Total Sqft: 113,600 - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------- Suite --- Future Rent Increases --- No. Tenant Name Date Monthly Amt. Per Sf - ------------------------------------------------------------- 00140 ARTHUR TREACHERS 00010 FASHION BUG #062 00040 CUSTOM CUTS 00050 YUNG TIN RESTAURANT 01/01/97 1,412.50 11.30 01/01/98 1,456.25 11.65 01/01/99 1,500.00 12.00 01/01/00 1,550.00 12.40 01/01/01 1,593.75 12.75 0007* ORIGINAL ITALIAN PIZZA 06/01/96 1,666.67 10.00 06/01/99 1,833.33 11.00 00100 BI-LO #281 0011* G. C. MURPHY 00012 MCDONALDS 01/28/97 1,300.00 0.00 01/28/02 1,500.00 0.00 01/28/07 1,700.00 0.00 00130 MELLON BANK 11/01/01 1,166.66 0.00 11/01/11 1,516.66 0.00 00060 SEARS AUTHORIZED 05/01/98 3,250.00 6.00 ================================================================================ ADDENDUM G - PRO-JECT REPORTS - -------------------------------------------------------------------------------- ADDENDUM G PRO-JECT REPORTS - -------------------------------------------------------------------------------- PLAZA 15 - LEWISBURG, PA PROJECT ASSUMPTIONS REPORT EXCLUDING TENANTS BUILDING PROLOGUE - ----------------- LEASEHOLD ANALYSIS OF PLAZA 15 - LEWISBURG, PA BEGINNING 6/1996 FOR 21 YEARS ON A FISCAL YEAR BASIS AREA MEASURES - ------------- TNRA 1996 VALUE - 113,600 THEREAFTER - CONSTANT OCCA 1996 VALUE - 104,733 1997 VALUE - 112,933 1998 VALUE - 113,350 1999 VALUE - 113,100 2000 VALUE - 113,600 2001 VALUE - 105,917 2002 VALUE - 110,133 2003 VALUE - 113,600 2004 VALUE - 112,850 2005 VALUE - 113,600 2016 VALUE - 112,350 2107 VALUE - 104,367 2008 VALUE - 112,933 2009 VALUE - 113,350 2010 VALUE - 113,100 2011 VALUE - 113,600 2012 VALUE - 101,250 2013 VALUE - 102,133 2014 VALUE - 105,600 2015 VALUE - 104,850 2116 VALUE - 70,267 THEREAFTER - CONSTANT GROWTH RATES - ------------ EXPG 1996 VALUE - 3.00 THEREAFTER - CONSTANT RTXG 1996 VALUE - 3.00 THEREAFTER - CONSTANT SLSG 1996 VALUE - 3.00 THEREAFTER - CONSTANT RNTG 1996 VALUE - 3.00 THEREAFTER - CONSTANT NCOM 1996 VALUE - 4.50 THEREAFTER - CONSTANT RCOM +50.0% OF NCOM BCOM TERMS AND CONDITIONS OF AGREEMENT CB COMMERCIAL REAL ESTATE GROUP, INC. - APPRAISAL 1. These Terms and Conditions by CB Commercial Real Estate Group, Inc., Appraisal Services, a division of CB Commercial Real Estate Group, Inc. (Appraiser or Consultant) and the client for whom Appraiser or Consultant will perform appraisal or consultation services (Client), and attached to any agreement for appraisal or consultation services between Client and Appraiser or Consultant (Agreement), shall be deemed a part of such Agreement as though set forth in full therein. 2. Appraiser or Consultant shall exercise independent judgment and complete the assignment called for by the Agreement (Assignment) in accordance with sound appraisal or consultation practice and the Code of Professional Ethics and Standards of Professional Conduct of the Appraisal Institute, as applicable. 3. All statements of the fact in the report which are used as the basis of Appraiser's or Consultant's analyses, opinions, and conclusions will be true and correct to the best of Appraiser's or Consultant's knowledge and belief. Appraiser or Consultant may rely upon the accuracy of information and material furnished to Appraiser or Consultant by Client. 4. Appraiser or Consultant shall have no responsibility for legal matters, questions of survey or title, soil or subsoil conditions, engineering, or other similar technical matters. The report will not constitute a survey of the property analyzed. 5. Client shall provide Appraiser or Consultant with such materials with respect to the Assignment as are requested by Appraiser or Consultant and in the possession or under the control of Client. Client shall provide Appraiser or Consultant with sufficient access to the real property to be analyzed and hereby grants permission for entry, unless discussed in advance to the contrary. 6. Unless expressly specified in the Agreement, the fee quoted does not include the attendance or giving of testimony by Appraiser or Consultant at any court, regulatory, or other proceeding, or any conferences or other work in preparation for such a proceeding. If any employee of CB Commercial Real Estate Group, Inc. is asked or required to testify at any deposition, trial, or other proceeding about the preparation, conclusions, or any other aspect of the assignment, Client shall compensate Appraiser or Consultant for the time spent by the employee in testifying and in preparing to testify according to the Appraiser's or Consultant's then current hourly rate for that employee plus reimbursement of expenses. 7. In the event Client requests additional consultation beyond the scope of this assignment, Client shall pay an additional charge for such consultation at rates specified by Appraiser or Consultant whether or not the completed report has been delivered to Client at the time of the request. 8. The aggregate liability of Appraiser or Consultant for any negligent acts, errors, or omissions in connection with the Assignment shall not exceed the compensation payable to Appraiser or Consultant on account of the Assignment. 9. Client agrees that the report shall not be quoted or referred to in any report or financial statement of Client or in any documents filed with any governmental agency without the prior written consent of Appraiser or Consultant. Neither all nor any part of the content of the report including, without limitation, the conclusions as to value, the identity of Appraiser or Consultant, references to the Appraisal Institute or references to the MAI or SRA designations shall be disseminated to the public through advertising or other mass media without the prior written consent of Appraiser or Consultant. 10. The data gathered in the course of the Assignment (except data furnished by Client) and the report prepared pursuant to the Agreement are and will remain the property of Appraiser/Consultant. With respect to data provided by Client, Appraiser or Consultant shall not violate the confidential nature of the appraiser- or consultant-client relationship by improperly disclosing any confidential information furnished to Appraiser or Consultant. Notwithstanding the foregoing, Appraiser or Consultant is authorized by client to disclose all or any portion of the report and the related data to appropriate representatives of the Appraisal Institute if such disclosure is required to enable Appraiser or Consultant to comply with the Bylaws and Regulations of such Institute as now or hereafter in effect. 11. In the event Client fails to make payments when due and payable, then from the date due and payable until paid the amount due and payable shall bear interest at the maximum rate permitted in the state in which the office of Appraiser or Consultant executing the Agreement is located. If Appraiser or Consultant is required to institute legal action against Client relating to the Agreement, Appraiser or Consultant shall be entitled to recover reasonable attorneys' fees and costs from Client. 12. This appraisal or consultation will not take into consideration the possibility of the existence of asbestos, PCB transformers, or other toxic, hazardous, or contaminated substances and/or underground storage tanks (hazardous material), or the cost of encapsulation or removal thereof. Should client have concern over the existence of such substances on the property, Appraiser or Consultant considers it imperative for the Client to retain the services of a qualified, independent engineer or contractor to determine the existence and extent of any hazardous materials, as well as the cost associated with any required or desirable treatment or removal thereof. 13. CB Commercial Real Estate Group, Inc., Appraisal Services and Client agree that the Agreement (including these Terms and Conditions) shall be governed by the laws of the state of the CB Commercial Real Estate Group, Inc., Appraisal Services office shown on the Agreement. 14. Client shall not indemnify Appraiser or Consultant or hold Appraiser or Consultant harmless unless and only to the extent that the Client misrepresents, distorts, or provides incomplete or inaccurate appraisal results to others, which acts of the Client proximately result in damage to Appraiser or Consultant. The Client shall indemnify and hold Appraiser or Consultant harmless from any claims, expenses, judgments or other items or costs arising as a result of the Client's failure or the failure of any of the Client's agents to provide a complete copy of the appraisal report to any third party. In the event of any litigation between the parties, the prevailing party to such litigation shall be entitled to recover from the other reasonable attorney fees and costs. 15. Appraiser understands that the Client may provide complete final copies of the appraisal report (but not partial or summarized copies) to third parties who shall rely on such reports in connection with the Client's securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the Client for routine and customary questions that may arise. ================================================================================ ADDENDUM H - ENGAGEMENT LETTER - -------------------------------------------------------------------------------- ADDENDUM I QUALIFICATIONS - -------------------------------------------------------------------------------- ================================================================================ - -------------------------------------------------------------------------------- QUALIFICATIONS OF PETER J. JOLICOEUR Senior Real Estate Analyst CB Commercial Real Estate Group, Inc. Appraisal 560 Lexington Avenue, 20th Floor New York, New York 10022 (212) 207-6104 EDUCATIONAL Bachelor of Arts, Economics, University of Connecticut Storrs, Connecticut Appraisal Institute Courses 110, 120, 310, 410, 420, 510, 540, 550 LICENSES/CERTIFICATIONS Certified Real Estate General Appraiser: State of New York State #46-3537 PROFESSIONAL Appraisal Institute Associate Member of the Appraisal Institute EXPERIENCE Engaged in the appraisal and consultation of commercial real estate throughout the Northeast United States since 1987, specializing in New York City. Assignments include investment grade office buildings, multi-family residential, cooperative and condominium conversions, shopping centers, industrial facilities, special-use properties, portfolio valuations and multi-property assignments. 1987 - 1990 Henry Boeckmann Jr. & Associates New York, New York 1990 - Present CB Commercial Real Estate Group, Inc., Appraisal New York, New York - -------------------------------------------------------------------------------- ================================================================================ - -------------------------------------------------------------------------------- QUALIFICATIONS OF MICHAEL R. PECORINO, MAI Senior Vice President, Regional Manager CB Commercial Real Estate Group, Inc. 560 Lexington Avenue, 20th Floor New York, New York 10022 (212) 207-6102 EDUCATIONAL Real Estate Appraisal and Analysis, New York University, the Real Estate Institute Bachelor of Arts, Geography, Planning, Urban Studies, State University College of New York at Oneonta Successfully completed all the necessary courses to qualify for the MAI designation. LICENSES/CERTIFICATIONS Certified General Real Estate Appraiser: State of New York (46000002055) Certified General Real Estate Appraiser: State of New Jersey (RG-01667) Certified General Real Estate Appraiser: State of Pennsylvania (GA-001096-R) Certified General Real Estate Appraiser: State of Connecticut (0000489) Certified General Real Estate Appraiser: State of Maryland (10569) Certified General Real Estate Appraiser: State of New Jersey (3793) Certified General Real Estate Appraiser: State of Delaware (X10000223) Certified General Real Estate Appraiser: State of Maine (CG00001192) Certified General Real Estate Appraiser: State of Vermont (080-0000168) Certified General Real Estate Appraiser: State of District of Columbia (GA00010315) Licensed Real Estate Broker: State of New York PROFESSIONAL Appraisal Institute Designated Member of the Appraisal Institute (MAI), Certificate No. 7944 Member of the Real Estate Board of New York EXPERIENCE Fifteen years of Real Estate Appraisal and Consulting experience throughout the United States specializing in the New York metropolitan area. 1993 - Present CB Commercial Real Estate Group, Inc., Appraisal New York, New York 1983 - 1993 Cushman & Wakefield, Inc. New York, New York 1982 - 1983 Joseph J. Blake & Associates, Inc. New York, New York 1951 - 1982 City of New York - Office of Manhattan Planning New York, New York 1980 - 1981 City of Jersey City - Office of the Mayor Jersey City, New Jersey Assignments include full and partial interest appraisals of office buildings, air rights, commercial lofts, garden apartments, cooperatives, condominiums, townhouses, shopping centers, industrial facilities, residential and office market studies, portfolio valuations and multi-property assignments. - -------------------------------------------------------------------------------- PAGE 2 +50.0% OF NCOM +50.0% OF RCOM MARKET RATES - ------------ ANCR 1996 VALUE - 4.00 THEREAFTER - GROWING AT GROWTH RATE RNTG SATR 1996 VALUE - 8.00 THEREAFTER - GROWING AT GROWTH RATE RNTG RSVR 1996 VALUE - 0.10 THEREAFTER - GROWING AT GROWTH RATE EXPG LSAT 1996 VALUE - 5.00 THEREAFTER - GROWING AT GROWTH RATE RNTG MISCELLANEOUS INCOMES - --------------------- ARTHUR TREACHERS 1996 VALUE - 23,500 1997 VALUE - 30,000 THEREAFTER - CONSTANT MCDONALDS 1996 VALUE - 13,200 1997 VALUE - 15,600 1998 VALUE - 15,600 1999 VALUE - 15,600 2000 VALUE - 15,600 2001 VALUE - 15,600 2002 VALUE - 18,000 2003 VALUE - 18,000 2004 VALUE - 18,000 2005 VALUE - 18,000 2006 VALUE - 18,000 2007 VALUE - 20,400 THEREAFTER - CONSTANT MELLON BANK 1996 VALUE - 11,000 1997 VALUE - 11,000 1998 VALUE - 11,000 1999 VALUE - 11,000 2000 VALUE - 11,000 2001 VALUE - 11,000 2002 VALUE - 14,000 2003 VALUE - 14,000 2004 VALUE - 14,000 2005 VALUE - 14,000 2006 VALUE - 14,000 2007 VALUE - 18,200 THEREAFTER - CONSTANT EXPENSES - -------- COMMON AREA MAINT , REFERRED TO AS CAME CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 109,783 PAGE 3 THEREAFTER - GROWING AT GROWTH RATE EXPG REAL ESTATE TAXES , REFERRED TO AS RETX CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 94,111 THEREAFTER - GROWING AT GROWTH RATE RTXG INSURANCE ,REFERRED TO AS INSE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 8,352 THEREAFTER - GROWING AT GROWTH RATE EXPG MANAGEMENT , REFERRED TO AS MGMT CHARGED AGAINST NET OPERATING INCOME 2.00% OF EFFECTIVE GROSS INCOME RESERVES , REFERRED TO AS RSVS CHARGED AGAINST NET OPERATING INCOME MARKET RATE RSVR MULTIPLIED BY AREA MEASURE TNRA VACANCY ALLOWANCE - ----------------- PERCENTAGE OF POTENTIAL GROSS INCOME FOR ALL TENANTS SUBJECT TO VACANCY 1996 VALUE - 2.00 THEREAFTER - CONSTANT MANAGEMENT FEE - -------------- NONE COMMISSION CALCULATIONS - ----------------------- STANDARD METHOD #1 - 0.000% OF TOTAL RENT STANDARD METHOD #2 - 0.000% OF TOTAL RENT STANDARD METHOD #3 - 0.000% OF TOTAL RENT STANDARD METHOD #4 - 0.000% OF TOTAL RENT STANDARD METHOD #5 - 0.000% OF TOTAL RENT COMMISSION PAYOUTS - ------------------ STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT ALTERATION CALCULATION - ---------------------- NONE PAGE 4 ALTERATION PAYOUTS - ------------------ STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT COMMON AREA MAINTENANCE POOL - ---------------------------- NONE CAPITAL EXPENDITURES - -------------------- NONE PRIMARY CLASSIFICATION CODES - ---------------------------- 1 - ANCHOR TENANT 2 - SATELLITE TENANT SECONDARY CLASSIFICATION CODES - ------------------------------ NONE COST CENTERS - ------------ 1 - CAM ESCALATIONS 2 - REAL ESTATE TAXES SALES VOLUME PROFILE - -------------------- PERCENT OF RELATIVE MONTH ANNUAL SALES VOLUME - ----- ------------ -------- JAN 8.33% 1.00 FEB 8.33% 1.00 MAR 8.33% 1.00 APR 8.33% 1.00 MAY 8.33% 1.00 JUN 8.33% 1.00 JUL 8.33% 1.00 AUG 8.33% 1.00 SEP 8.33% 1.00 OCT 8.33% 1.00 NOV 8.33% 1.00 DEC 8.33% 1.00 ------ ----- TOTALS 100.00% 12.00 PAGE 5 GLOBAL RECOVERIES - ----------------- NONE TENANT PROLOGUE - --------------- MINIMUM RENTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR SALES VOLUMES AND BREAKPOINTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR RENEWAL RENTS ARE COMPOUNDED ANNUALLY RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET REFERENCE TENANTS - ----------------- NONE ================================================================================ ADDENDUM H - ENGAGEMENT LETTER - -------------------------------------------------------------------------------- ADDENDUM H ENGAGEMENT LETTER - -------------------------------------------------------------------------------- [Letterhead of CB COMMERCIAL] May 8, 1996 Mr. Josh Kane Chief Financial Officer MARK CENTERS TRUST 660 Third Avenue Kingston, PA 18704 Re: 17 Shopping Centers Nationwide Dear Mr. Kane: At your request, we are pleased to submit the following proposal to appraise the above referenced properties. The purpose of this assignment is to estimate the market value of the leased fee interest. We understand the appraisal reports are to be used for mortgage underwriting purposes. We also understand that the reports will be used by Mark Centers Trust and Morgan Stanley. The properties are briefly described on attachment "A". Our complete valuation will be presented in a self contained (narrative) format and will contain a complete description of the property along with pertinent exhibits and photographs together with supporting factual data and analysis necessary to convey our opinion of value. We will value the property based upon the cost, income and market approaches to value, where applicable, correlating our findings into a final value conclusion. The report will be prepared in conformity with and will be subject to the requirements of the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. Each report will also conform to the Uniform Standards of Professional Appraisal Practice ("USPAP") and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") and the Morgan Stanley Capital Appraisal Standards described in Attachment "B". We assume that there are no major or significant items of deferred maintenance beyond normal wear and tear for properties of their age as of the date of the appraisal which would require the expertise of a professional contractor to estimate the cost of such repairs. If such repairs need to be considered in this appraisal, such estimates are to be provided by a qualified firm hired by you and at no cost to us. The total fee for the assignment is $68,000 ($4,000 per property) including all travel and related expenses which is due and payable upon delivery of the reports. If we are asked to cancel the assignment within two weeks of our engagement an upset fee equal to 50% will be due and payable. If cancellation occurs between two and three weeks, the upset fee will be equal to 75% and any time after three weeks the full fee will be due and payable. We will furnish you with three copies of our final report within four to five weeks of our authorization. Authorization occurs upon our receipt of an executed copy of this proposal and our delivery date is contingent upon the timely receipt of all necessary property information, financial statements and detailed lease information. If all requested data and information is not available as of the authorized date, we reserve the right to extend the delivery date by the amount of time it takes to receive the requested information. May 8, 1996 Mr. Kane Page 2 In order to complete this assignment in a timely manner, we will require the following specific information, if available: o Copy of Ground Lease, if Leasehold o Legal descriptions. o Current rent roll. o Copy of Leases or abstracts o Expense reimbursements on a tenant by tenant basis o Building area calculations and surveys. o Operating statements for the past three full years. o Current year expenses to date. o A copy of the current budget. o Copies of any toxic engineering reports dealing with underground tanks, PCB's, asbestos or chemical spills, if available. o A copy of the next fiscal year's budget, if available. o A list of major repairs which have recently been made, or are scheduled to be made in the next 18 months. o Name and phone number(s) of on-site superintendent(s), or local management firm or trustee for physical inspection. o Notice of any pending changes to the rent roll or pertinent information regarding the current status of the tenants. If we are requested to give court testimony an additional fee will be charged on an hourly basis at $300 per hour for designated MAI-appraisers and $175 for non-designated appraisers. Said hourly billings pertain to court preparation, waiting and travel time, document review and preparation (excludes narrative appraisal report) and all meetings related to court testimony. The client may provide only complete, final copies of the appraisal report to third parties who shall rely on such reports in connection with loan underwriting or securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the client for routine and customary questions. Please note that our consent to allow an appraisal report prepared by CB Commercial, or portions of such report, to become part of or be referenced in any public offering, the granting of such consent will be at our sole discretion and, if given, will be on condition that we will be provided with an Indemnification Agreement and/or Non-Reliance letter, in a form and content satisfactory to us, by a party satisfactory to us. We do consent to your submission of the reports to rating agencies, loan participants or your auditors without the need to provide us with an Indemnification Agreement and/or Non-Reliance letter. In addition to the fee for this assignment, you agree to compensate us at a rate to be mutually agreed to, for any time expended by us should we be required (by subpoena or otherwise) or requested by you, your representatives or other entity to become involved in any litigation or May 8, 1996 Mr. Kane Page 3 legal proceeding in any way involving this engagement to which we are not a party, the appraisal work we produce or the property which is the subject of this assignment. You also agree to pay, on demand, all reasonable expenses which we incur in connection with any litigation or proceedings including the fees of our attorneys. You acknowledge that we are being retained hereunder as an independent contractor to perform the services described herein and nothing in this agreement shall be deemed to create any other relationship between us. This assignment will be deemed concluded and the services hereunder completed upon delivery to you of the appraisal report discussed herein. If these terms are acceptable, please authorize us to proceed by having an officer of the corporation, managing general partner, principal, owner, or a contractually responsible party sign the enclosed copy of this proposal with "Terms and Conditions" and return it to us for our permanent file. Upon receipt of your authorization, we will schedule the necessary personnel to complete the project in a timely manner. We appreciate this opportunity to be of service to you on this assignment. If you have additional questions, please do not hesitate to give me a call. Sincerely, CB COMMERCIAL REAL ESTATE GROUP, INC. Appraisal /s/ Michael R. Pecorino Michael R. Pecorino, MAI MRP:jf cc: Douglas W. Haney Enclosure AGREED & ACCEPTED - -------------------------------------- --------------------------------------- Signature Title - -------------------------------------- --------------------------------------- Name (type or print) Date Office #: ____________________________ Fax #: ________________________________ This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE NEW SMYRNA BEACH SHOPPING PLAZA 100,430 SF GLA 1430 South Dixie Freeway (U.S. 1) New Smyrna Beach, Volusia County, Florida CBC File No. 96-86 [CB LOGO] Delivering Solutions Through Local Knowledge Worldwide COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE NEW SMYRNA BEACH SHOPPING PLAZA 100,430 SF GLA 1430 South Dixie Freeway (U.S. 1) New Smyrna Beach, Volusia County, Florida CBC File No. 96-86 DATE OF VALUE June 1, 1996 PREPARED FOR Mr. Richard Fawley FIRST FEDERAL SAVINGS OF NEW SMYRNA 900 North Dixie Freeway New Smyrna, Florida 32168 PREPARED BY Timothy K. Wilhoit, MAI Assistant Vice President and Sam Hines, MAI, SGA Regional Manager CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES 201 South Orange Avenue, Suite 1400 Orlando, Florida 32801 [CB COMMERCIAL LETTERHEAD] June 4, 1996 Mr. Morgan Stanley MORGAN CAPITAL, INC. 1585 Broadway New York, New York 10036 RE: Appraisal of The New Smyrna Beach Shopping Plaza 100,430 SF GLA 1430 South Dixie Freeway (U.S. 1) New Smyrna Beach, Volusia County, Florida CBC File No. 96-86 Gentlemen: At your request and authorization, we have prepared a complete self-contained appraisal of the above-referenced real property. The purpose of this appraisal was to estimate the market value of the leased fee interest in the subject property under the market conditions prevailing as of the date of the appraisal. The function of this appraisal was for mortgage underwriting purposes. We understand that the report will be used by Mark Centers Trust and Morgan Stanley. The subject is a 100,430 square foot neighborhood shopping center anchored with a New Smyrna Beacon 8 Theatre (24,780 SF) and a Brian's Crafts store (21,050 SF) along with 54,600 square feet of local tenant space. The improvements were built in 1963 on a 10+ acre site. The project was renovated most recently in 1995 and is in good overall condition with no deferred maintenance. The subject has had considerable leasing interest and activity since its 1995 renovation and as a result, approximately 13,888 square feet of additional space has either been leased or is pending at this time. This recent leasing activity has increased the overall occupancy of the project from 84% in late 1995 to 97% at present. Some of the new leases that have been agreed on by both lessor and tenant have not been formally signed but are expected to be finalized within approximately two weeks of the effective date of this report. Based on our conversations with the property manager, we believe that the pending leases are bona-fide and that they will ultimately be signed at the reported terms. Therefore, as a special assumption of this report, we have assumed that the pending leases on the square footage previously indicated will in fact be in effect for purposes of this analysis. June 4, 1996 Page 2 Based on our research and analysis contained in the following appraisal report, it is our opinion that the leased fee interest in the subject property, as of June 1, 1996, was: THREE MILLION EIGHT HUNDRED THOUSAND DOLLARS ($3,800,000) We believe that the subject property could be effectively marketed within approximately 12 months at the above market value estimate. The data, information, and calculations leading to our value conclusion are incorporated in the report following this letter. The report, in its entirety, including all assumptions and limiting conditions, is an integral part of and inseparable from this letter. The analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP), the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, and The Financial Institution Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Furthermore, this report has been prepared in conformance with our interpretation of the guidelines set forth by the Morgan Stanley Capital Appraisal Standards. It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if we can be of further service, please do not hesitate to contact us. Respectfully Submitted, CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES by: - ------------------------------- ------------------------------- Timothy K. Wilhoit, MAI Sam Hines, MAI, SGA Assistant Vice President/ 1st. Vice President/Regional Manager Sr. Real Estate Analyst - -------------------------------------------------------------------------------- CERTIFICATION OF THE APPRAISERS - -------------------------------------------------------------------------------- CERTIFICATION OF THE APPRAISERS We certify that to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. 4. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event, such as the approval of a loan. 5. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation and the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. In addition, this report conforms to the requirements of the Financial Institution Reform, Recovery, and Enforcement Act (FIRREA). 6. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 7. We have completed the requirements of the continuing education program of the Appraisal Institute. 8. Timothy K. Wilhoit, MAI and Sam Hines, MAI have made a personal inspection of the property that is a subject of this report. 9. No one provided professional assistance to the persons signing this report. 10. We have extensive experience in the appraisal/review of similar property types. 11. We are currently certified in the state where the subject is located. 12. This appraisal assignment was not based on a requested minimum valuation, a specific valuation, or the approval of a loan. - ------------------------------- ------------------------------- Timothy K. Wilhoit, MAI Sam Hines, MAI, SGA St. Cert. Gen. REA #RZ0000882 St. Cert. Gen. REA #RZ0000126 - -------------------------------------------------------------------------------- i - -------------------------------------------------------------------------------- SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- FRONT VIEW OF NORTHERN PORTION OF SUBJECT - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- FRONT VIEW OF MIDDLE PORTION OF SUBJECT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ii - -------------------------------------------------------------------------------- SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- FRONT VIEW OF SOUTHERN PORTION OF SUBJECT - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- FRONT VIEW OF FLOWERS BAKERY TENANT BUILDING - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- iii - -------------------------------------------------------------------------------- SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- SUMMARY OF SALIENT FACTS Property Name: New Smyrna Beach Shopping Plaza 1430 South Dixie Freeway Location: New Smyrna Beach, Volusia County, Florida Property Description: Neighborhood Shopping Center Assessor's Parcel Number: 7449-04-01-0010 Highest and Best Use As Though Vacant: Future retail development As Improved: Continued operation as a shopping center Property Rights Appraised: Leased fee interest Date of Value: June 1, 1996 Land Area: 10+/- acres Zoning: B-5, Planned Shopping Center District Improvements: 100,430 square foot shopping center built in 1963 (1995 renovation). Good overall condition, no deferred maintenance. Estimated Marketing Time: 12 months Financial Indicators Current Occupancy: 84.4% overall, 71.2% for local tenants (as is) 97.4% overall, 95.3% for local tenants (with pending leases) Stabilized Occupancy: 93.5% overall, 88% for local tenants Market Rental Rate: $5.00-$9.00/SF - Anchor Tenants $7.50/SF - Local Tenants - -------------------------------------------------------------------------------- iv - -------------------------------------------------------------------------------- SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- Growth Rate: Income: 3% Expenses: 3.5% Going-In Overall Capitalization 11.02% Rate implied: Terminal Overall Capitalization 12.0% Rate: Discount Rate: 14.5% Valuation: Sales Comparison Approach: $3,800,000 Income Capitalization Approach: $3,800,000 Value Conclusion: $3,800,000 Unit value (per square foot): $37.84/SF GLA - -------------------------------------------------------------------------------- v - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- TABLE OF CONTENTS CERTIFICATION OF THE APPRAISERS................................................i SUBJECT PHOTOGRAPHS...........................................................ii SUMMARY OF SALIENT FACTS......................................................iv TABLE OF CONTENTS............................................................vii INTRODUCTION...................................................................1 AREA ANALYSIS..................................................................6 RETAIL MARKET ANALYSIS........................................................15 SITE ANALYSIS.................................................................21 IMPROVEMENT ANALYSIS..........................................................24 ZONING........................................................................28 TAX AND ASSESSMENT DATA.......................................................29 HIGHEST AND BEST USE..........................................................30 APPRAISAL METHODOLOGY.........................................................33 SALES COMPARISON APPROACH.....................................................35 INCOME CAPITALIZATION APPROACH................................................44 RECONCILIATION OF VALUE.......................................................60 ASSUMPTIONS AND LIMITING CONDITIONS...........................................62 SPECIFIC ASSUMPTIONS AND LIMITING CONDITIONS..................................66 ADDENDA A Glossary of Terms B Additional Photographs C Improved Sale Comparables D Rental Comparables E Legal Description F Demographics G PROJECT Reports, Rent Roll, Market Analysis Form H IREM & Urban Land Institute Income and Expense Data I Appraisers' Qualifications - -------------------------------------------------------------------------------- vi INTRODUCTION - -------------------------------------------------------------------------------- INTRODUCTION - -------------------------------------------------------------------------------- INTRODUCTION PROPERTY IDENTIFICATION The subject is known as the New Smyrna Beach Shopping Plaza and is located at 1430 South Dixie Freeway (U.S. 1) in New Smyrna Beach, Volusia County, Florida. The property consists of a 100,430 square foot neighborhood shopping center situated on a 10+ acre site. Anchor tenants include a Beacon 8 Theatre (24,780 SF) and a Brian's Craft store (21,050 SF) along with 54,600 square feet of local tenant space. The improvements were built in 1963 with the most recent renovation completed in 1995. The project is in good overall condition with no deferred maintenance. The county assessor's tax identification number is 7449-04-01-0010. The complete legal description is presented in the Addenda, Exhibit E. OWNERSHIP AND PROPERTY HISTORY The subject is currently owned by Mark Centers Limited Partnership. The most recent transfer of the property occurred in May, 1993 and was from Jacksonville Partners. The transfer was recorded in O.R. Book 3834, Page 2702 of the Volusia County, Florida public records. The deed indicated a transfer price of $3,000,000. Verification of the transaction revealed it to be a transfer to the existing REIT at an allocated value and not an actual sale. Therefore, the recent transaction is not considered to be an arms length sale transaction for purposes of analysis and valuation. No other sale transactions involving the subject have occurred during the past three year period according to the public records. To the best of our knowledge, the subject property is not currently on the market for sale. DATES OF INSPECTION AND VALUATION The subject was inspected by Timothy K. Wilhoit, MAI on May 21, 1996. Sam Hines, MAI inspected the subject on June 1, 1996, the date of valuation. PURPOSE OF THE APPRAISAL The purpose of this appraisal is to estimate the current market value of the leased fee interest in the subject property, in its "as is" condition. Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means: - -------------------------------------------------------------------------------- 1 - -------------------------------------------------------------------------------- INTRODUCTION - -------------------------------------------------------------------------------- The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised, and acting in what they consider their own best interests; 3. A reasonable time is allowed for exposure in the open market; 4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. 1 TERMS AND DEFINITIONS Please refer to the Addenda, Exhibit A for a Glossary of the Terms and Definitions that are, and may be used in this appraisal. INTENDED USE OF REPORT This appraisal is for use by Mark Centers Trust and Morgan Stanley for loan underwriting. PROPERTY RIGHTS APPRAISED The value estimated represents the leased fee estate in the subject shopping center. APPRAISAL DEVELOPMENT AND REPORTING PROCESS The following steps were completed by CB Commercial for this assignment: 1. Analyzed regional, city, neighborhood, site, and improvement data. 2. Inspected the subject and the neighborhood. 3. Reviewed data regarding taxes, zoning, utilities, easements, and city services. 4. Considered comparable improved sales, comparable improved building rental information, and comparable site sales. Confirmed data with principals, managers, or real estate agents representing principals, unless otherwise noted. - ---------- (1) The definition of market value is taken from: The Office of the Comptroller of the Currency under 12 CFR, Part 34, Subpart C-Appraisals, [club]34.42(f), August 24, 1990. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. - -------------------------------------------------------------------------------- 2 - -------------------------------------------------------------------------------- INTRODUCTION - -------------------------------------------------------------------------------- 5. Analyzed the data to arrive at conclusions via each approach to value used in this report. 6. Reconciled the results of each approach to value employed into a probable range of market data and finally an estimate of value for the subject, as defined herein. 7. Estimated a reasonable exposure time associated with the value estimate. The subject site and improvement descriptions are based on a personal inspection of the property, discussions with the property manager, and a review of the relevant plat maps and site plan. The inspection is not a substitute for thorough engineering studies. To develop the opinion of value, CB Commercial performed a complete appraisal process, as defined by the Uniform Standards of Professional Appraisal Practice. This means that no departures from Standard 1 were invoked. This is a complete appraisal, in the form of a Self-Contained Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Standards of Professional Appraisal Practice. The definitions of Complete Appraisal and Self-Contained Report are found in the Glossary of Terms and Definitions. In a complete appraisal, CB Commercial uses all known applicable approaches to value. The value conclusion reflects all known information about the subject property, market conditions, and available data. The Self-Contained Report incorporates to the fullest extent possible, practical explanation of the data, reasoning and analysis that were used to develop the opinion of value. It also includes thorough descriptions of the subject property and the market for the subject property type. All data considered significant that was requested for this assignment was received by CB Commercial Real Estate Group, Inc. Appraisal Services. We were provided with summaries of all of the subject leases, each of which were read by the appraisers. SPECIAL APPRAISAL INSTRUCTIONS No special appraisal instructions were given. MARKETING PERIOD The marketing period section is divided into reasonable exposure time and reasonable marketing time. Exposure time differs from marketing time. Marketing time is the period required to sell a real property interest at market value during the period immediately after the effective date of the appraisal. Exposure time is always presumed to precede the effective date of the appraisal. - -------------------------------------------------------------------------------- 3 - -------------------------------------------------------------------------------- INTRODUCTION - -------------------------------------------------------------------------------- Exposure time is not intended to be a prediction of a date of sale or a one-line statement. Instead, it is an integral part of the appraisal analysis and is based on one or more of the following: o statistical information about days on the market o information gathered through sales verification o interviews of market participants. The reasonable exposure period is a function of price, time, and use. It is not an isolated estimate of time alone. Exposure time is different for various types of real estate and under various market conditions. Reasonable Exposure Time Exposure time is always presumed to precede the effective date of the appraisal. It is the estimated length of time the property would have been offered prior to a hypothetical market value sale on the effective date of appraisal. It is a retrospective estimate based on an analysis of recent past events, assuming a competitive and open market. It assumes not only adequate, sufficient, and reasonable time but adequate, sufficient, and reasonable marketing effort. Exposure time and appraisal conclusion of value are therefore interrelated. Exposure time is often expressed as a range and is based on direct and indirect market data gathered during the market analysis, sales verifications, interviews with market participants, and other appropriate sources. The amount of time which a property will require to be marketed varies greatly depending on a number of factors including market conditions, listing price, terms of sale offered, and competitive listing inventory. In addition to considering each of the factors noted above, CB Commercial considered: o exposure periods of comparable sales revealed during the course of this appraisal, o the most recent CB Commercial National Investor Survey, and o the opinions of local knowledgeable real estate brokers and investors. Exposure Time of Comparable Sales CB Commercial analyzed sales and listings of comparable properties in the immediate and overall metropolitan area for the Sales Comparison Approach. Each comparable reflects competitive locational and physical characteristics, sharing similar social and economic amenities with the subject. The Exposure Time of Improved Sales chart illustrates the range of exposure time necessary to generate a sale at market value. - -------------------------------------------------------------------------------- 4 - -------------------------------------------------------------------------------- INTRODUCTION - -------------------------------------------------------------------------------- ================================================================ EXPOSURE TIME OF IMPROVED SALES - ---------------------------------------------------------------- Comparable Marketing Period - ---------------------------------------------------------------- 1 12 months 2 10 months 3 12 months 4 14 months 5 18 months - ---------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================ CB Commercial National Investor Survey In the most recent issue of the CB Commercial National Investor Survey, published in the First Quarter 1996, CB Commercial surveyed a wide range of investors for building preferences and specific marketing times. Respondents showed a clear preference for apartments, suburban office, urban office, warehouse/distribution, community shopping centers, neighborhood shopping centers and power centers. Investors indicated that exposure requirements for investment property generally decreased slightly from the previous survey, now about 12 months for the subject property type. Exposure Time Conclusion In conclusion, based on the foregoing analysis, an exposure time of approximately 12 months is reasonable, defensible, and appropriate. Like the brokers surveyed, CB Commercial assumes that the subject property would have been competitively priced and aggressively promoted regionally. Reasonable Marketing Time Reasonable marketing time is the period a prospective investor would forecast to sell the subject property immediately after the date of value, at the value estimated. Anticipated marketing time is essentially a measure of the perceived level of risk associated with the marketability, or liquidity, of the subject as an investment grade property. The sources for this information include those used in estimating the reasonable exposure time, but also an analysis of the anticipated changes in market conditions following the date of appraisal. In other words, the reasonable marketing time is the number of months it will require to sell the subject property from the date of value, into the future. Based on the premise that present market conditions are the best indicators of future performance, a prudent investor will forecast that, under the conditions described above, the subject property will require a marketing time of approximately 12 months. - -------------------------------------------------------------------------------- 5 - -------------------------------------------------------------------------------- AREA ANALYSIS - -------------------------------------------------------------------------------- AREA ANALYSIS The dynamic nature of economic relationships within a market area have a direct bearing on real estate values and the long-term quality of a real estate investment. In the market, the value of a property is not based on the price paid for it in the past or the cost of its creation, but on what buyers and sellers perceive it will provide in the future. Consequently, the attitude of the market toward a property within a specific neighborhood or market area reflects the probable future trend of that area. Since real estate is an immobile asset, economic trends affecting its locational quality in relation to other competing properties within its market area will also have a direct effect on its value as an investment. To accurately reflect such influences, it is necessary to examine the past and probable future trends which may affect the economic structure of the market and evaluate their impact on the market potential of the subject. This section of the report is designed to isolate and examine the discernible economic trends in the region and neighborhood which influence and create value for the subject property. REGIONAL INFLUENCES Location The subject is located in the city of New Smyrna Beach within Volusia County, in the state of Florida. Volusia County is located on the east coast in the central portion of the state. A regional map indicating the location of the subject is presented on the following page. - -------------------------------------------------------------------------------- 6 - -------------------------------------------------------------------------------- AREA ANALYSIS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- REGIONAL AREA MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 7 - -------------------------------------------------------------------------------- AREA ANALYSIS - -------------------------------------------------------------------------------- Population Volusia County represents approximately 2.9% of Florida's population. The population of Volusia County was estimated by Strategic Mapping, Inc. to be 409,706 as of January, 1996. This indicates an increase of 38,994 or 10.5% from the April 1, 1990 federal census figure. The county's population is expected to reach approximately 441,039 by the year 2000. Demographic statistics for Volusia County are summarized in the following table. =============================================================== SELECTED AREA DEMOGRAPHICS VOLUSIA COUNTY =============================================================== Population 1995 Estimate 409,706 1990 Census 370,712 1990-1995 % Change 10.5% Households 1995 Estimate 168,689 1990 Census 153,416 1990-1995 % Change 10.0% 1995 Median Household Income $ 28,128 1995 Average Household Income $ 36,323 1990 Average Home Value $ 82,311 1990 % College Graduates 9.9% =============================================================== Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. =============================================================== Employment Based on the Florida Department of Labor and Employment Security, Bureau of Labor Market Information, the 1995 annual average civilian labor force was 173,277. The following table compares the unemployment rate for the county to that of the state and national average. - -------------------------------------------------------------------------------- 8 - -------------------------------------------------------------------------------- AREA ANALYSIS - -------------------------------------------------------------------------------- ========================================================================= UNEMPLOYMENT RATE ANNUAL AVERAGE COMPARISON BY COUNTY, STATE, AND U.S. ========================================================================= Year County State U.S. - ------------------------------------------------------------------------- 1995 4.8% 5.5% 5.6% 1994 6.2% 6.6% 6.1% 1993 6.7% 7.0% 6.8% 1992 7.7% 8.2% 7.4% ========================================================================= Source: Florida Department of Labor and Employment Security, Bureau of Labor Market Information Compiled by: CB Commercial Real Estate Group, Inc. ========================================================================= The major employers in the area are as follows: ======================================================= MAJOR AREA EMPLOYERS ======================================================= COMPANY No. Of Employees ------------------------------------------------------- Volusia County Schools 7,100 Halifax Medical Center 2,400 Volusia County 1,700 General Electric 1,500 City of Daytona 960 Sherwood Medical Industries 850 Brunswick Corporation 850 Spartan Electronics 600 Stetson University 500 Ardmore Farms 300 ======================================================= Source: East Central Florida Regional Planning Council. Compiled by: CB Commercial Real Estate Group, Inc. ======================================================= Housing Building permits for Volusia County were down slightly in 1995 for both commercial and residential properties. The following table shows housing changes that occurred in Volusia County from 1991 to 1995. - -------------------------------------------------------------------------------- 9 - -------------------------------------------------------------------------------- AREA ANALYSIS - -------------------------------------------------------------------------------- ================================================================================ HOUSING 1991 - 1995 ================================================================================ 1991 1992 1993 1994 1995 - -------------------------------------------------------------------------------- Single Family 2,453 2,509 2,275 2,246 2,032 Multiple Family 490 151 328 703 466 Mobile Homes, etc. 485 521 454 413 333 --- --- --- --- --- Totals 3,428 3,181 3,057 3,362 2,831 ================================================================================ Source: East Central Florida Regional Planning Council Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ Transportation The Volusia County area is served by Interstates 4 and 95. Interstate 4 runs in an east/west direction through Orlando and connects Daytona Beach to Tampa on Florida's west coast. Interstate 95 runs along Florida's east coast and provides access from Miami to the south, northward to the state of Maine. The major airport serving the Volusia County area is the Daytona Beach International Airport situated in the heart of the city. The airport also provides private, corporate flights and cargo shipments. The area is also served by several railroads including the Florida East Coast Railroad. Growth/Trends Daytona Beach is commonly known as "The World's Most Famous Beach", reflecting the significance of tourism on the local economy. The concentration of tourist attractions is along the beaches in Volusia County and most of the county's tourist dollar is received in that area. Therefore, the east coast is where the resort tax money is being spent to promote activities to lure more tourists. The most significant new development is the Ocean Center convention facility, which is beginning to draw more visitors. It is hoped that a major new convention and business hotel across from the center will generate even more interest in conventions. An advertising campaign promoting Daytona as a family-vacation destination seems to have produced a higher average number of nights for out-of-state auto visitors staying in Volusia County. Also, Volusia County's visitor profile is one of the most diversified of any county in the East Central Florida region. It ranges from the summer family traveling group to the fall/winter older retiree, and from the auto and motorcycle race fan at the Daytona International Speedway to the college and high school spring breaker. With continued aggressive advertising and promotion, Volusia County may find itself in the enviable position of having a year-round steady stream of tourists. - -------------------------------------------------------------------------------- 10 - -------------------------------------------------------------------------------- AREA ANALYSIS - -------------------------------------------------------------------------------- CONCLUSION AND RELEVANCE TO THE SUBJECT PROPERTY The Volusia County area is currently experiencing a healthy growth rate with similar increases expected in the future. The employment profile is reasonably diverse and the unemployment rate is down from recent high levels which were a result of the area's dependency upon the tourism and trade industries. The overall economic climate is considered good which will likely have a positive impact on the subject in the long term. NEIGHBORHOOD INFLUENCES Location The subject property is located at the southeast corner of Dixie Highway (U.S. 1) and Sixth Street in an incorporated area known as New Smyrna Beach in Volusia County. New Smyrna Beach is located on the east coast of Florida just south of Daytona Beach. The community is divided by the Indian River (intercostal waterway) which separates the "mainland" from the "oceanside". The subject is on the mainland side of New Smyrna Beach. Development History/Trends Original development in the area followed the Florida east coast railroad and U.S. Highway 1 which paralleled the Atlantic Ocean on the west side of the Indian River. When causeways were provided to the oceanside, development sprang up along State Road A1A primarily taking the form of condominiums and single-family residential homes on the oceanfront with a limited amount of commercial development. Currently, the oceanside has experienced little growth as it is almost fully built up. The mainland continues to grow moderately to the west. The trend has been for sporadic commercial development along State Road 44, U.S. Highway 1 and State Road A1A. A limited amount of new residential development is occurring in smaller residential subdivisions west of New Smyrna Beach and in Sugar Mill Estates, a golf course community just northwest of New Smyrna Beach. Virtually no development is occurring in the oceanside locations. New commercial developments include the New Smyrna Regional Shopping Center anchored with Publix and Wal Mart on the mainland side and Smyrna Creek Plaza and Indian River Village on the oceanside of New Smyrna Beach. These shopping centers were developed in the 1980's to take advantage of the growing residential support population base. As in most other parts of Florida, an oversupply of retail space has depressed occupancies and rental rates temporarily. The current situation is now stabilized as demand has caught up with the excess supply. A more detailed discussion of the local retail market is included in the "Retail Market Analysis" section of this report. - -------------------------------------------------------------------------------- 5 - -------------------------------------------------------------------------------- AREA ANALYSIS - -------------------------------------------------------------------------------- Access The major thoroughfares for the subject neighborhood include Interstate 95, State Road 44, U.S. Highway 1 and State Road A1A. Interstate 95 extend in a north-south direction along the east coast of Florida providing regional access for the region. State Road 44 extends east-west providing the primary access to Orlando. U.S. Highway 1 is the original commercial thoroughfare along the east coast of Florida. State Road A1A extends in a north-south direction along the Atlantic Ocean. U.S. Highway 1 is the primary access route for the subject neighborhood with 1995 average daily traffic counts reported at 13,500 northbound and 14,500 southbound in the immediate vicinity of the subject. Overall, the road network serving the neighborhood provides good access to the subject property. Utilities Water, sewer and electricity is provided by New Smyrna Beach Utilities and telephone by Southern Bell. The immediate area of the subject has adequate utility services available for most any type of development. - -------------------------------------------------------------------------------- 12 ================================================================================ NEIGHBORHOOD MAP ================================================================================ [GRAPHIC OMITTED] ================================================================================ Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AREA ANALYSIS - -------------------------------------------------------------------------------- Conclusion/Relevance To Subject Property New Smyrna Beach is primarily a seasonal tourist-oriented town with numerous "snowbirds" vacationing in the area in the winter months. The area is also a popular destination for Orlando "weekenders" due to its good proximity to this major metropolitan area. New residential development is oriented primarily to the retirement population that desires the amenities associated with the somewhat remote oceanfront location. Population and income growth has been moderately positive which portends increasing demand for retail goods and services. Property values in general, are expected to reflect moderate increases over the long term.. These factors are favorable for the long term prospects of the subject property. - -------------------------------------------------------------------------------- 14 - -------------------------------------------------------------------------------- RETAIL MARKET ANALYSIS - -------------------------------------------------------------------------------- RETAIL MARKET ANALYSIS NATIONAL INVESTOR SURVEY The Appraisal Services Group of CB Commercial Real Estate Group, Inc. publishes a National Investor Survey on a periodic basis. The most current survey was completed in the First Quarter of 1996. This issue, which is the seventh, contains responses from 56 investors covering 14 various property types and three property classes. The three property types are defined as follows: Class-A Property - Top quality, institutional-grade property Class-B Property - Average-quality, non-institutional-grade property Class-C Property - Low-quality, developer/speculator-type property. The subject is considered a low Class B or high Class C investment property. The respondents represent a cross section of the national real estate investment community. A breakdown of market participants is shown below. =========================================== Percent of Total Participant Type Responses =========================================== Real Estate Advisors 29% Developers 12% REITs 16% Investment Firms 9% Financial 4% Institutions Insurance Companies 18% Investors 9% Pension Funds 4% Syndicators 4% Other 4% =========================================== Source: CB Commercial Real Estate Group =========================================== INVESTMENT MARKET Value Trends The percentage of respondents who felt that values increased dramatically: from 21 percent in the Second Quarter 1993 Survey and 52 percent in the Second Quarter 1994 Survey, to 70 percent at in the Third Quarter 1995. However, the percentage of respondents in the First Quarter 1996 Survey who felt that overall values have increased over the past six months decreased to 42%. The percentage of investors surveyed that still feel real estate values have decreased over the past six months as continued to decline substantially from 55 percent in the - -------------------------------------------------------------------------------- 15 - -------------------------------------------------------------------------------- RETAIL MARKET ANALYSIS - -------------------------------------------------------------------------------- Second Quarter 1993 Survey, to 11 percent in the Second Quarter 1994 Survey, to 4 percent in the First Quarter 1995 Survey, and to 0% at present ( First Quarter 1996 Survey). Acquisition Focus For acquisitions, investors are generally focusing on top-quality, investment-grade properties located in high-growth or development-constrained areas. Most are looking to purchase stabilized properties at or below replacement cost (leased at or below market rental rates and/or with strong credit tenants). For under-performing or "value-added" properties, investors are buying current income at high cap rates. Emphasis is placed on cash-on-cash returns, IRRs, and a balance between current or going-in yields and future appreciation potential. TRADE AREA ANALYSIS A trade area is the area adjacent to a retail property from which it draws or should draw its customers. The size of the trade area is dependent upon the size of the facility, its accessibility and the scope of merchandise or services offered and the competitiveness of other facilities. For a typical neighborhood or community shopping center, the normal trade area extends in a three mile radius of the subject site. DEMOGRAPHICS We obtained demographic data for the subject market area from Strategic Mapping, Inc. This data was projected from the 1990 census, which is the most current available. The complete demographic report is presented in the Addenda, Exhibit F. The following is a summary of important trade area demographics: - -------------------------------------------------------------------------------- 16 - -------------------------------------------------------------------------------- RETAIL MARKET ANALYSIS - -------------------------------------------------------------------------------- ================================================================================ SUBJECT TRADE AREA DEMOGRAPHICS - -------------------------------------------------------------------------------- 1 mile radius 3 mile radius 5 mile radius - -------------------------------------------------------------------------------- 1995 Estimate 2,505 28,040 44,840 2000 Projection 2,603 29,983 49,248 Percent Change 3.91% 6.93% 9.83% - -------------------------------------------------------------------------------- 1995 Households (HH) 1,154 12,624 19,276 2000 Households (HH) 1,192 13,437 20,959 Percent Change 3.29% 6.44% 8.73% - -------------------------------------------------------------------------------- 1995 Median Household $22,754 $25,587 $27,683 Income 2000 Median Household $25,302 $28,936 $31,216 Income Percent Change 11.20% 13.09% 12.76% - -------------------------------------------------------------------------------- Median Age Total Population 43.2 47.7 44.9 1990 Median Home Value $60,537 $66,443 $68,255 1990 Average Home Value $86,019 $82,007 $83,547 - -------------------------------------------------------------------------------- Source: Strategic Mapping, Inc. ================================================================================ The population is expected to grow at .78% annually within a one mile radius, 1.39% annually within a three mile radius and at 1.97% annually within a five mile radius. The immediate trade area is less affluent, with higher incomes and home values in outlying areas to the north and south. The median age of 43.2 within a one mile radius compared to 47.7 within a three mile radius is relatively low compared to other areas of the county. Subject demographics are considered average to good for retail use. RETAIL SALES Volusia County's total retail sales are analyzed by store group by Sales & Marketing Management - Survey of Buying Power. Total retail sales for the County are up 5.93% per year from 1990 indicating strong growth in sales for the region. Automotive, general merchandise and furniture/appliances have been the fastest growing segments. The following is a summary of historical retail sales for Volusia County: ================================================================================ RETAIL SALES BY STORE GROUP ($000'S) ================================================================================ Category 1990 1994 Annual Change - -------------------------------------------------------------------------------- Food Stores $ 639,098 $ 700,220 2.39% Eating & Drinking $ 320,017 $ 386,480 5.19% Places General Merchandise $ 343,299 $477,778 9.79% Furniture/Appliances $ 130,406 $ 175,840 8.71% Automotive $600,038 $893,338 12.22% Drug Stores $ 143,291 $ 169,641 4.60% --------- --------- ----- Total Retail Sales $2,867,877 $3,548,455 5.93% ================================================================================ Source: Sales and Marketing Management, 1991 and 1995 Survey of Buying Power ================================================================================ - -------------------------------------------------------------------------------- 17 - -------------------------------------------------------------------------------- RETAIL MARKET ANALYSIS - -------------------------------------------------------------------------------- AREA COMPETITION Existing competition for the subject property includes a small number of neighborhood and community shopping centers located along the major roads within the subject trade area. The following shopping centers compete directly or indirectly with the subject: Shopping Center No. 1 was Florida Shores Plaza located at the southwest corner of U.S. Highway 1 (Ridgewood Avenue) and Indian River Boulevard in Edgewater. This location is approximately five miles south of the subject. The center was originally constructed in 1984 with subsequent renovation in 1994. The anchors include Winn Dixie (50,130 SF) and Eckerd Drug (10,370 SF) and account for a majority of the space with 18,500 square feet of local space. Actual rental rates for the local tenants are $8.00 to $9.00 per square foot plus a pro rata share of operating expenses currently billed at $2.65 per square foot. Rental rates for the Winn Dixie and Eckerd Drug anchors were reported at approximately $6.00 and $7.50 per square foot net, respectively. Current asking rents for vacant local tenant space are quoted at $10.00 per square foot on average. Occupancy was 70% for local tenant space and 93% occupied overall. This center was considered similar to the subject in locational characteristics, but superior in age and anchor tenants. Shopping Center No. 2 was Smyrna Creek Plaza located along the north side of North Causeway (S.R. 44) just east of the Indian River in New Smyrna Beach. This location is approximately two miles north of the subject. The center was constructed in 1983. The anchor tenant is Food Lion (28,864 SF) with 34,892 square feet of local space. Actual rental rates for the local tenants are $7.00 to $8.00 per square foot plus a pro rata share of operating expenses currently billed at $1.75 per square foot. Current asking rents for vacant local tenant space are quoted at $9.00 per square foot on average. Occupancy was 93% for local tenant space and 96% occupied overall. This center was considered inferior to the subject in locational characteristics, but similar in age and condition. Shopping Center No. 3 was Beach Plaza located along the south side of South Causeway (S.R. A1A) just east of the Indian River in New Smyrna Beach. This location is approximately 2 1/2 miles northeast of the subject. The center was constructed in 1982 with Winn Dixie as the anchor tenant (35,200 SF) and 12,600 square feet of local space. Actual rental rates for the local tenants average $9.00 per square foot plus a pro rata share of operating expenses currently billed at $1.25 per square foot. The rental rate for the Winn Dixie was reported at $6.65 per square foot net. Occupancy was 100% for local tenant space and 100% occupied overall. This center was considered inferior to the subject in locational characteristics, but similar in age and condition. Shopping Center No. 4 was Indian River Village located along the south side of South Causeway (S.R. A1A) just east of the Indian River in New Smyrna Beach. This location is approximately 2 3/4 miles northeast of the subject. The center was constructed in 1976 with anchor tenants including Publix (37,249 SF), Eckerd Drug (9,824 SF) and Bealls (29,888 SF) along with 39,039 square feet of local space. Actual rental rates for the local tenants average approximately $9.00 to $10.00 per square foot plus a pro rata share of operating expenses currently billed at $1.75 per square foot. Occupancy was 90% for local tenant space and 97% - -------------------------------------------------------------------------------- 18 - -------------------------------------------------------------------------------- RETAIL MARKET ANALYSIS - -------------------------------------------------------------------------------- occupied overall. This center was considered inferior to the subject in locational characteristics, similar in age and condition and superior in anchor tenants. Shopping Center No. 5 was Ocean Village Square located along the west side of South Atlantic Avenue (S.R. A1A) just west of the Atlantic beaches in New Smyrna Beach. This location is approximately three miles southeast of the subject. The center was constructed in 1990 with anchor tenants including Food Lion (29,000 SF), Rite Aid Drug (6,700 SF) and 24,932 square feet of local space. Actual rental rates for the local tenants average $9.00 per square foot plus a pro rata share of operating expenses currently billed at $2.25 per square foot. Occupancy was 86% for local tenant space and 94% occupied overall. This center was considered inferior to the subject in locational characteristics, but superior in age and condition. Shopping Center No. 6 was New Smyrna Beach Regional Shopping Center located along the south side of Canal Street (S.R. 44) just west of downtown New Smyrna Beach. This location is approximately 2 1/2 miles northwest of the subject. The center was constructed in 1987 with anchor tenants including Publix (41,360 SF), Walgreen Drug (12,900 SF), Wal Mart (66,300 SF) and 63,740 square feet of local space. Actual rental rates for the local tenants average $11.00 to $12.00 per square foot plus a pro rata share of operating expenses currently billed at $2.93 per square foot. Current asking rents for vacant local tenant space are quoted at $12.00 to $15.00 per square foot on average . Occupancy was 94% for local tenant space and 98% occupied overall. This center was considered superior to the subject in locational characteristics, anchor tenants, age and condition. Shopping Center No. 7 was K-Mart Plaza located along the south side of Canal Street (S.R. 44) just west of downtown New Smyrna Beach. This location is approximately 2 1/2 miles northwest of the subject. The center was constructed in 1980 with K-Mart (45,000 SF) as the anchor tenant along with 18,000 square feet of local space. Actual rental rates for the local tenants average $10.00 per square foot plus a pro rata share of operating expenses currently billed at $2.75 per square foot. Current asking rents for vacant local tenant space are quoted at $10.00 per square foot. Occupancy was 94% for local tenant space and 98% occupied overall. This center was considered superior to the subject in locational characteristics, anchor tenant, age and condition. The competitive properties reflect actual rental rates for local space ranging from approximately $7.00 to $12.00 per square foot, with tenant operating expenses ranging from $1.25 to $2.93 per square foot. The center's in the area are generally similar to the subject regarding visibility and exposure, with some being superior in age and anchor tenants. The subject local tenant space is currently quoted from about $8.00 to $10.00 per square foot plus operating expenses at $1.10 per square foot. Considering the subject's relative quality, age and anchor tenants, the rent levels currently being quoted are consistent with the competitive properties. SUBJECT POSITION The subject property's position in its sub-market is considered slightly below average as evidenced by the current overall occupancy at the subject (84% overall) versus the submarket - -------------------------------------------------------------------------------- 19 - -------------------------------------------------------------------------------- RETAIL MARKET ANALYSIS - -------------------------------------------------------------------------------- comparables at 96% occupancy overall. However, considering the pending leases totaling approximately 13,888 square feet, the overall occupancy of the subject would be approximately 97.4% which slightly exceeds the market average. The subject center is considered one of the average neighborhood centers in its trade area due to its lack of major regional or national anchor tenants and age. The subject has a higher than average local tenant to anchor tenant ratio. With 54,600 square feet of in-line space and 45,830 square feet of anchor space, the subject's ratio is 46% anchor space, which is lower than most of the comparables. The comparables reflect anchor tenant ratios of from 45% to 77% with an average of approximately 65%. The subject center was originally designed for and occupied by a third anchor tenant (McCrory's) of 16,000 square feet. This space however, has subsequently been broken up into two smaller spaces. The subject center therefore reflects its age and somewhat outdated design which is reflected in both occupancy and rental rates as compared to most of the other centers in the trade area. CONCLUSION The subject trade area has a moderate income population base which is limited by physical boundaries to the east. The population base is growing at a moderate pace and retail sales levels are increasing. No significant neighborhood or community shopping centers are expected to be built in the area over the next few years. Free-standing stores will likely continue to surface in the established retail corridors, while the existing neighborhood and community centers will continue service the residential areas in suburbs to the north and south. Overall, we anticipate occupancy levels to be stable over the short term due to continued population increase and lack of new competition. This indicates good retail market conditions for the subject property, consideration given to effective market rates. - -------------------------------------------------------------------------------- 20 PROPERTY DESCRIPTION - -------------------------------------------------------------------------------- SITE ANALYSIS - -------------------------------------------------------------------------------- SITE ANALYSIS The Description of the site can be detailed as follows: Address: 1430 South Dixie Freeway (U.S. 1), New Smyrna Beach, Florida Location: Southeast corner of Dixie Highway (U. S. 1) and Sixth Street. Access: Access is good from along the east side of U.S. Highway 1 via three entrance drives and from Sixth Street via two drives. Assessor's Parcel Numbers: 7449-04-01-0010 Land Area:(1) The subject contains 10+/- acres. Shape and Frontage: The site consists of a slightly irregular shaped parcel with approximately 500 feet frontage along the east side of U.S. 1 and 200+ feet along the south side of Sixth Street. Topography and Drainage: The site is generally level and at grade. Our investigation did not reveal any significant drainage problems. Soils: No soils report was provided; it is assumed that soils are adequate for the existing use. Easements: Various public utility and drainage easements across the subject were noted. In our opinion, these easements benefit the property owner and are not considered detrimental. Utilities: New Smyrna Beach Utilities for water, sewer and electricity, Southern Bell for telephone. Flood Zone: According to maps published by the Federal Emergency Management Agency (FEMA), the subject lies within Zone B as indicated on FEMA Community Map Panel 125132-0005D, dated June 16, 1992. This zone is described as follows: FEMA Zone B: "This area has been identified in the community flood insurance study as an area of moderate or minimal hazard from the principal source of flood in the area. However, buildings in this zone could be flooded by severe, concentrated rainfall coupled with inadequate local drainage systems. Local - ---------- (1)Source: Public Records - -------------------------------------------------------------------------------- 21 - -------------------------------------------------------------------------------- SITE ANALYSIS - -------------------------------------------------------------------------------- ================================================================================ MAP ================================================================================ [GRAPHIC OMITTED] ================================================================================ Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SITE ANALYSIS - -------------------------------------------------------------------------------- storm water drainage systems are not normally considered in the community's Flood Insurance Study. The failure of a local drainage system creates areas of high flood risk within this rate zone. Flood insurance is available in participating communities but is not required by regulation in this zone." According to the appropriate flood map, the required base floor elevation is one foot above the crown of the nearest road. Environmental Issues: The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the property that would cause a loss in value. No evidence of hazardous waste or toxic materials was visible. CB Commercial has no knowledge of the existence of these substances on or in the subject property. However, CB Commercial is not qualified to detect hazardous waste or toxic materials. Adjacent Properties North: Elementary School South: Residential East: Residential West: U.S. 1 & Florida East Coast Railroad line Conclusion: The subject is a 10+/- acre site on a paved thoroughfare served by all necessary utilities. Access is good. Visibility/exposure is good. The shape of the parcel is slightly irregular, but results in no specific development limitation. The topography is generally level and poses no specific development limitation. In conclusion, the site is considered adequate for many types of development. - -------------------------------------------------------------------------------- 22 - -------------------------------------------------------------------------------- SITE ANALYSIS - -------------------------------------------------------------------------------- ================================================================================ SUBJECT SITE PLAN ================================================================================ [GRAPHIC OMITTED] ================================================================================ Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- ================================================================================ FLOOR PLAN ================================================================================ [GRAPHIC OMITTED] ================================================================================ Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS The subject is a single story neighborhood shopping center built in 1963. The shopping center is anchored with the New Smyrna Beacon 8 Theatre (24,780 SF) and Brian's Crafts (21,050 SF). The following is a description of the improvements based on our physical inspection, information from the property manager and analysis of the site plan. The subject site plan is shown on the following page. Photographs of the subject are presented in the Addenda, Exhibit B. The building area is detailed as follows: ================================================================== NEW SMYRNA BEACH SHOPPING PLAZA BUILDING AREA ================================================================== No. of Total % of Tenant Units Area (SF) Total - ------------------------------------------------------------------ Theatre 1 24,780 24.67% Brian's Crafts 1 21,050 20.96% Small Shops 17 54,600 54.37% -- ------ ------ Total 19 100,430 100.0% ================================================================== Source: Mark Centers, Property Owner & Manager Compiled by: CB Commercial Real Estate Group, Inc. ================================================================== The shopping center consists of two buildings; the main building of 98,630 square feet and a smaller single tenant building of 1,800 square feet. The project is under one ownership. The basic construction features are summarized as follows: Construction Class The class of construction is the basic subdivision in Marshall Valuation Service, dividing all buildings into five basic groups by type of framing (supporting columns and beams), walls, floors, roof structure, and fireproofing. The subject is construction Class C. 3 Competitive Rating The subject is considered a Class C project in terms of quality as it is perceived in the marketplace. Foundation Poured reinforced concrete footings. Frame Masonry bearing walls and steel columns supporting steel bar joists. - ---------- (1) Class C Buildings are characterized by masonry or reinforced concrete (including tilt-up) construction. The walls may be load-bearing, i.e., supporting roof and upper floor loads, or nonbearing with open concrete, steel, or wood columns, bents, or arches supporting the load. (Source: Marshall Valuation Service) - -------------------------------------------------------------------------------- 24 - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Floors Concrete slab on grade. The floors are finished with vinyl tile or carpeting. Exterior Walls Concrete block Roof Cover The roofs are flat with a built up composition. We have not inspected the roofs but assume they are in average condition and leak free. The property manager reported no recent problems with any roof leakage. Exterior Condition Average Interior Finish The tenants typically have metal or wood studs supporting gypsum board, finished with paint or vinyl wallcoverings. The ceilings are typically finished with suspended acoustical tile. HVAC Central heating and cooling system with individual controls. Climitization delivered through ceiling registers. The HVAC systems are assumed to be in good operating condition and adequate for the building. Electrical The electrical system is assumed to be in good working order and adequate for the buildings. Fire Protection The subject buildings are fire sprinkled. It is assumed that the subject has adequate fire alarm systems, fire exits, fire extinguishers, fire escapes and/or other fire protection measures adequate to meet local fire marshall requirements. Life Safety and Security The subject has no special security system. Plumbing The plumbing system is assumed to be in good operating condition. Parking The shopping center has a total of 445 surface parking spaces. This amount of parking indicates a parking ratio of approximately 4.4 spaces per 1,000 square feet of total building area. The number of parking spaces satisfies the current zoning requirements for the existing use and is considered adequate by local market standards. Landscaping The landscaping is average in quality compared to competitors. ADA Compliance Handicap access appears to be available to all areas of the buildings. However, we are not qualified to determine compliance with the requirements. Please refer to the - -------------------------------------------------------------------------------- 25 - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- specific limiting condition regarding ADA compliance. Environmental Issues No evidence of hazardous waste or toxic materials were visible. We have no knowledge of the existence of these substances or in the subject improvements. However, we are not qualified to detect hazardous waste or toxic materials. Economic Age and Life The buildings were erected in 1963 for a chronological age of 33+/- years. The most recent renovation of the project was reportedly performed in 1994-95 and the improvements are in good overall condition. Based on its current observed condition, we estimate the effective age to be approximately 25 years. According to the Marshall Valuation Service cost guide, buildings of this type and quality have an expected life of 45 years. Therefore, the remaining economic life (expected life minus effective age) is about 20 years, consistent with our on-site observations. While we observed nothing to suggest a different economic life, a capital improvement program could extend life beyond that stated above. Quality/General Condition The subject property conforms reasonably well with competitors and substitutes in the area. The relative quality of construction is average. The appearance is similar to competing properties of the same approximate age. We observed no evidence of structural fatigue and the improvements appear sound. However, we are not qualified to determine structural integrity, and recommend that the reader rely upon an expert in this field for further determination. Functional Utility The subject has a good layout with all tenants in-line with the anchors and facing U.S. Highway 1. Bay depths are typical at 70 to 90 feet. The bays can be partitioned to accommodate a wide variety of tenant sizes. Thus, we have observed no functional obsolescence associated with the subject building improvements. Deferred Maintenance No significant deferred maintenance observed or reported by the property manager. - -------------------------------------------------------------------------------- 26 - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- ========================================================================= IMPROVEMENT RATING ========================================================================= Category Exc. Good Average Fair Poor - ------------------------------------------------------------------------- Appeal/Appearance X Construction Class X Design X Electrical X Exterior Condition X Exterior Walls X Floor Construction X Floor Cover X Foundation X Frame X Functionality/ Floor X Plan HVAC X Interior Condition X Landscaping X Life Safety System X Lighting X Parking X Plumbing X Roof Cover X Security System X Sprinkler System X ========================================================================= Compiled by: CB Commercial Real Estate Group, Inc. ========================================================================= - -------------------------------------------------------------------------------- 27 - -------------------------------------------------------------------------------- ZONING - -------------------------------------------------------------------------------- ZONING The subject's zoning requirements are detailed below. ======================================================================= ZONING SUMMARY ======================================================================= Current zoning: B-5, Planned Shopping Center District, City of New Smyrna Beach Legally conforming: Yes Uses permitted: Retail, service establishments, office, restaurants Zoning change: Not likely - ----------------------------------------------------------------------- Category Zoning Requirement - ----------------------------------------------------------------------- Maximum Lot Coverage: None other than setbacks Minimum size: 5 acres Front setback: 50 feet Rear setback: 25 feet Side yard setbacks: 25 feet Height limit: 45 feet Parking: One space per 250 square feet of GLA ======================================================================= Source: City of New Smyrna Beach Zoning Compiled by: CB Commercial Real Estate Group, Inc. ======================================================================= ZONING ANALYSIS AND CONCLUSIONS The subject is a legally conforming use within the current zoning. The future land use designation is also for commercial use. - -------------------------------------------------------------------------------- 28 - -------------------------------------------------------------------------------- TAX ANALYSIS - -------------------------------------------------------------------------------- TAX AND ASSESSMENT DATA The subject is identified with tax parcel No. 7449-04-01-0010. The subject's assessed value, and current taxes are summarized below: ================================================================================ CURRENT ASSESSMENT AND TAX INFORMATION (1995) ================================================================================ Assessed Value Tax Rate Annual Tax ID Land Improvements Total / $1,000 Taxes - -------------------------------------------------------------------------------- 7449-04-01-0010 $764,395 $1,176,821 $1,941,216 25.79053 $50,064.99 Net Taxes $48,062.39 ================================================================================ Source: Volusia County Property Appraiser Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The subject's 1995 assessment is up somewhat from the 1994 assessment of $1,900,000. The 1996 assessment will not be available until September or October. The subject as well as nearly all shopping centers in the county are valued based on an Income valuation if income and expenses data is provided by the property owner. Representatives of the Property Appraiser's Office reported that property assessments are reviewed annually and that the tax rate is subject to change annually also. Based on data from the Property Appraiser's Office, we have estimated that actual taxes for the subject would follow general inflation trends due to likely increases in the tax rate over time. The county records indicate that there are no delinquent property taxes. No special assessments were reportedly applicable to the subject property. Our research indicates that market participants use the actual taxes in analyzing properties similar to the subject, therefore we have utilized actual taxes in this valuation. - -------------------------------------------------------------------------------- 29 - -------------------------------------------------------------------------------- HIGHEST AND BEST USE - -------------------------------------------------------------------------------- HIGHEST AND BEST USE In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The four criteria that the highest and best use must meet are: o legal permissibility; o physical possibility; o financial feasibility; and o maximum profitability. Highest and best use is applied specifically to the use of a site as vacant. It is recognized that in cases where a site has existing improvements, the concluded highest and best use as if vacant may be different from the highest and best use given the existing improvements (as improved). The existing use will continue, however, until the land value, at its highest and best use, exceeds that total value of the property under its existing use, plus the cost of removing or altering the existing structure. Implied in the highest and best use is a recognition of the contribution of a specific use to the community environment or to the community's development goals, in addition to wealth maximization of individual property owners. Also implied is that the conclusion of highest and best use results from the appraiser's judgment and analytical skill, i.e., that the use determined from the analysis represents an opinion, not a fact to be found. HIGHEST AND BEST USE AS THOUGH VACANT Legal Permissibility The legally permissible uses were discussed in the zoning section of this report. Overall, based on our review of the zoning restrictions, the site is limited to retail commercial development. Physical Possibility The physical characteristics of the subject site were discussed in detail in the site analysis. Overall, retail commercial development would be physically possible. Financial Feasibility An analysis of local market conditions provides an indication of the financial feasibility of a given use. The market analysis presented earlier in the report assesses the local market and indicates that there is demand. Occupancy and rental rates have been increasing over the past few years. However, rent levels are still too low to support new construction. Thus, the cost of the land and improvements would be greater than the market value of the property, if - -------------------------------------------------------------------------------- 30 - -------------------------------------------------------------------------------- HIGHEST AND BEST USE - -------------------------------------------------------------------------------- developed and leased with tenants having similar rent levels. Therefore, retail development is not currently feasible. Considering the upward trend in rent levels, we anticipate feasible rent levels within the next two+ years. Maximum Profitability The final test of highest and best use of the site as though vacant is the use be maximally productive, yielding the highest land value. In the case of the subject as though vacant, the analysis thus far has indicated that retail development would be most likely. Given the trend toward well anchored neighborhood centers, this use is judged to be the most profitable. Conclusion: Highest and Best Use As Though Vacant The concluded highest and best use of the subject as though vacant is that the site be held for future shopping center development. HIGHEST AND BEST USE AS IMPROVED Legal Permissibility The site has been improved with a neighborhood shopping center. Overall, it is our opinion that the improvements are within the existing legally established guidelines. Physical Possibility The physical characteristics of the subject improvements were discussed in detail in the improvement analysis section of this report. Overall, the layout and positioning of the improvements is considered functional for retail use, and the floor plan is functional on a comparison basis. While it would be physically possible for a wide variety of uses, based on the legal restrictions and the design/layout, the improvements would be the most functionally utilized for a retail use. Financial Feasibility As with the highest and best use of the site as though vacant, the financial feasibility of the site as improved is market derived. Typically, the test of feasibility is based on the amount of rent that can be generated, less operating expenses. If a residual amount exists after paying the various expenses, then the land is being put to a productive use. At present, the subject is 84% occupied (97.4% considering pending leases). Based on the current and forecasted operating conditions, we anticipate that the improvements are capable of providing an adequate return on the investment. We therefore conclude that the current use - -------------------------------------------------------------------------------- 31 - -------------------------------------------------------------------------------- HIGHEST AND BEST USE - -------------------------------------------------------------------------------- of the improvements is a financially feasible use of the property as improved. Furthermore, we do not believe that conversion of the improvements or demolition is warranted or financially feasible. Maximum Profitability Although several uses may generate sufficient revenue to satisfy the required rate of return on investment and provide a return on the land, the single use that produces the highest price or value is typically the highest and best use. However, the recipient of the property's productivity greatly determines what actual use maximizes profitability. In our opinion, the subject is most suited for retail rather than office use, due to the lack of amenities and relatively higher tenant finish costs associated with office use. Conclusion: Highest and Best Use as Improved Based on the foregoing discussions, we conclude that the highest and best use of the property as improved is consistent with the existing use. There are no alternative uses of the existing improvements that would produce a higher net income and/or value over time than the current use. The current use is a legally permissible use and appears to represent the highest and best use as improved. - -------------------------------------------------------------------------------- 32 VALUATION - -------------------------------------------------------------------------------- APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- APPRAISAL METHODOLOGY The appraisal process is defined as an orderly program by which the problem is planned and the data involved is acquired, classified, analyzed and interpreted into an estimate of value. In this process three basic approaches to value are considered: Cost Approach, Sales Comparison Approach, and Income Capitalization Approach. In appraisal practice, an approach to value is included or omitted based on its applicability to the property type being valued and the quality and quantity of information available. The final step in the appraisal process is reconciliation -- a process by which we analyze alternative conclusions and select a final value estimate from among two or more indications of value. We then weigh the relative significance, applicability and defensibility of each approach as it relates to the type of property being appraised and provide a reconciled estimate of value. THE COST APPROACH The Cost Approach is based upon the proposition that the informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements which represent the highest and best use of the land or when relatively unique or specialized improvements are located on the site and for which there exist few sales or leases of comparable properties. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Furthermore, the Cost Approach is not deemed to render a reliable indication of value due to the imprecise nature of estimating the accrued physical, functional, or external depreciation affecting the improvements. Therefore, the Cost Approach has not been employed to render a value indication for the subject property in this instance. SALES COMPARISON APPROACH The Sales Comparison Approach utilizes sales of comparable properties, adjusted for differences, to indicate a value for the subject property. Valuation is typically accomplished using physical units of comparison such as price per square foot, price per unit, price per floor, etc., or economic units of comparison such as gross rent multiplier or net income multiplier. Adjustments are applied to the physical units of comparison derived from the comparable sales. The unit of comparison chosen for the subject is then used to yield a total value. Economic - -------------------------------------------------------------------------------- 33 - -------------------------------------------------------------------------------- APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- units of comparison are not adjusted, but rather analyzed as to relevant differences with the final estimate derived based on the general comparisons. The reliability of this approach is dependent upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c) the degree of comparability; (d) the absence of nontypical conditions affecting the sales price. Through our search of the subject market, we were able to uncover an adequate quality and quantity of sales through which a reliable and defensible indication of value could be concluded. Therefore, this approach has been employed for this assignment. INCOME CAPITALIZATION APPROACH The methodology of the Income Capitalization Approach is to determine the income-producing capacity of the property on a stabilized basis by estimating market rent from comparable rentals, making deductions for vacancy and collection losses and building expenses, then capitalizing the net income at a market-derived rate to yield an indication of value. The capitalization rate represents the relationship between net income and value as found in the market. The discounted cash flow method is an alternative method of capitalizing future income to a present value. Periodic cash flows (which consist of a net income less capital costs, per period) and a reversion (if any) are estimated and discounted to a present value. The discount rate is determined by analyzing current investor yield requirements for similar investments. Since investors are active in the marketplace for properties similar to the subject, the Income Capitalization Approach is particularly applicable to the appraisal problem at hand. There is an adequate quality and quantity of income and expense data available to render a reliable and defensible value conclusion. Therefore, this approach has been employed for this assignment. - -------------------------------------------------------------------------------- 34 - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH The Sales Comparison Approach provides an estimate of market value based on analyzing transactions of similar properties in the market area. The method is based on the proposition that an informed purchaser would pay no more for a property than the price to acquire an alternative one with the same utility. When there is an adequate number of sales of truly similar properties with sufficient information for comparison, a range of values for the subject property can be developed. The applicability of this approach is based on the assemblage of similar market sales and offerings for a comparison to the subject. Considerations for such factors as changing market conditions over time, location, size, quality, age/condition, and amenities, as well as the terms of the transactions, are all significant variables relating to the comparison to the subject property. Any adjustments to the sale price of market sales to provide indications of market value for the subject must be market-derived; thus, the actions of typical buyers and sellers are reflected in the comparison process. There are various units of comparison available in the evaluation of sales data in this approach. The sale price per unit is the most commonly used in this approach. An adjustment grid is used to summarize the direction and magnitude of adjustments judged appropriate to the comparable sales. In some cases adjustments may be derived directly from quantifiable data (e.g., the estimated cost to replace a roof). However, in many instances the adjustments involve the judgment of CB Commercial. After a diligent effort has been made to identify and adjust for all salient differences, one of several patters is likely to emerge: 1. There may be a clear clustering of adjusted values within a narrow range; 2. There may be no discernible pattern; or 3. There may be a general clustering, but with one or several adjusted sales outside the general range indicated by the other data. In the first instance, a point estimate of value within the resulting adjusted range is typically concluded. In the second instance, it is generally possible only to conclude a reasonable value range. In the third instance, the "outliers" typically receive little weight in the analysis unless they are the most comparable sales, represent a fundamental change in market dynamics, or are otherwise particularly relevant to the subject analysis. - -------------------------------------------------------------------------------- 35 - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- The following table summarizes the comparable sales used in the analysis with a comparable map on the following page. A more detailed description of each comparable and a photograph is presented in the Addenda, Exhibit D. ================================================================================ SUMMARY OF COMPARABLE SALES
==================================================================================================== Sale Sale Year Price EGIM/ No. Property Name City Date Size (SF) Built Per SF NIM OAR - ---------------------------------------------------------------------------------------------------- 1 Kissimmee Square Kissimmee, FL 12/95 106,157 1986 $55.11 7.00/ 11.27% 8.87 2 Merritt Crossing Merritt 8/95 89,727 1984 $34.55 6.46/ 10.71% Island, FL 9.34 3 Northgate Melbourne, FL 2/94 132,468 1982 $26.99 5.41/ 12.31% Shopping Center 8.13 4 Daytona Plaza Daytona Beach, 1/94 141,254 1970 $29.28 7.16/ 9.84% FL 10.16 5 Indian River Titusville, FL 7/93 73,377 1963 $36.11 5.50/ 11.89 Plaza 8.41 ==================================================================================================== Compiled by: CB Commercial Real Estate Group, Inc. ====================================================================================================
- -------------------------------------------------------------------------------- 36 - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- ================================================================================ COMPARABLE IMPROVED SALES MAP ================================================================================ [GRAPHIC OMITTED] ================================================================================ Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- SALE PRICE PER SQUARE FOOT ANALYSIS Adjustments are then applied to the comparable sales to make them more similar to the subject. A sequence of adjustments is necessary to reflect market conditions and buyer behavior. The elements of comparison in the proper sequence are: 1) Property Rights Conveyed, 2) Financing Terms, 3) Conditions of Sale, 4) Market Conditions, 5) Location, 6) Physical characteristics, 7) Income Characteristics, 8) Use and 9) Non-realty Components of Value. Property Rights Real estate carries with it a bundle of property rights, which can be transferred in whole or in part. Examples of some of the most common property rights are the fee simple estate, leased fee estate, leasehold estate, and partial interests. The fee simple estate is the most all encompassing property right, and includes all rights to use the property. The leased fee estate is characterized by property that is encumbered by one or more leases. The leasehold estate is the lessee's rights to use a property on which there is a lease. Partial interests result when property rights are divided among two or more parties, and may involve controlling or noncontrolling interests. Selling prices may be impacted by the specific property; rights included in the transfer. Thus, any differences in property rights among the comparable sales must be identified, and may require adjustment to account for differences in property rights compares with the property rights appraised for the subject. In addition, adjustments may be necessary to reflect the difference between properties leased at market rent and those leased at a rent that is either below or above market levels. All sales involved a leased fee estate, consistent with the interest being appraised. Hence, no adjustment is necessary for this factor. Financing Terms Financing terms can affect the sales price if they differ from terms available from third party lenders. The value estimate in this appraisal is based on an all cash payment to the seller, with buyers typically using institutional financing based on an appropriate loan-to-value ratio and market interest rate. Seller financing may have an upward influence on the sale price if favorable terms are provided. None of these sales had financing which influenced the sale price. Hence, no adjustment is indicated. - -------------------------------------------------------------------------------- 38 - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- Conditions of Sale Conditions of sale refers to buyer and seller motivations. In order to be instructive to the analysis, sales prices should be representative of arm's length transactions with no unusual buyer or seller motivations. Examples of unusual motivations include related parties, assemblage (plottage) value, forced sale, tax considerations, and lack of sufficient exposure on the market. These circumstances may result in the following: manipulation of the price by buyer or seller, distress prices that do not reflect typical exposure or marketing time, or premiums (or discounts) associated with unusual motivations. In these cases, it is necessary to consider any unusual conditions of sale, and to make adjustments, if possible. Another example of a circumstance which is analyzed within the conditions of sale category is the situation of asking prices. Asking prices are often higher than the amount ultimately negotiated once an arm's length transaction has been consummated. Hence, it may be necessary; to adjust down for asking prices. There are no known special buyer or seller motivations, or other conditions of sale that impacted the sales price on any of the comparables. Thus, no adjustment is necessary for this factor. Market Conditions Economic conditions may change between the sale date of the comparables and the effective date of value provided. Examples of changes in the market include changes in the economy, tax laws, supply, population growth, employment growth, inflation rates and buyer and seller perceptions. These forces may result in appreciation or depreciation, or may have no impact on real estate prices. Changes may impact real estate in general, or may have different impacts on different real estate segments. The adjustment for this factor is not a function of time, but of differences, if any, between time periods. Thus, it is possible that a long period of time could elapse without a material change in market conditions having occurred. In our opinion, market conditions have improved significantly from 1992-1993. This was demonstrated in our Retail Market Overview and evidenced by the increase in occupancy and rental rates for the subject's market. The enclosed comparable sales took place from mid-1993 to late-1995 and are therefore considered to be the most recent sales and reflect current market conditions. Therefore, no adjustment for market conditions was necessary. Locational Characteristics An analysis of location takes into account differences in the comparables relative to their surrounding environs. Location considers factors such as exposure, corner, view, traffic, - -------------------------------------------------------------------------------- 39 - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- access, surrounding land uses, proximity to major transportation routes, distance/time between employment centers and/or residential centers, and economics and demographics in the immediate area. These factors were considered in the comparables relative to the subject's locational characteristics. Downward adjustment was applied to Sales No. 1, 2 and 3 for superior locational characteristics. Upward adjustment was made to Sale No. 5 for inferior characteristics. The adjustment was estimated based on differences in support population, traffic counts and development trends. PHYSICAL CHARACTERISTICS Physical characteristics of the comparable sales were considered. Physical characteristics include items such as age, quality, condition, design, amenities, building materials, size, parking adequacy, and functional utility. Age/Quality/Condition Age, quality and condition are often interdependent and are typically considered together. The adjustments made for age, quality and condition assume that curable depreciation (if any) of the subject has been corrected. The comparable sales used in the analysis range in age from approximately 7 to 33 years of age. Adjustment was based on observed condition considering recent renovations, repairs, etc. Size Typically, larger properties tend to sell for less per unit than smaller properties with the same or similar use. Conversely, smaller properties tend to sell for more per unit than larger properties of the same or similar type. Adjustments were considered and made to the comparables as deemed necessary. Land Area/Parking The land to building ratio of the comparable sales was examined and compared to the subject. Adjustment was based on the differences in amount of land provided and the estimated land value. Functional Utility Functional utility is concerned with assessing whether a property functions properly. Functional issues were examined among the sales. No significant functional characteristics were noted. - -------------------------------------------------------------------------------- 40 - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- ECONOMIC CHARACTERISTICS Economic characteristics include factors relating to differences in economics of the comparables as compared with the subject. One of the most distinguishable economic factor relates to differences in occupancy at the time of sale. Sales that have not achieved stabilized occupancy require additional costs to achieve stabilization. Other examples of economic characteristics include above- or below-market rents, or an anticipated change in occupancy. The common characteristic of these influences is that they impact the economics of a comparable, without regard to its physical features or other characteristics discussed earlier. The sales reflected occupancies ranging from approximately 89% to 100% at the time of sale, and were therefore considered to be at more or less stabilized occupancy. Other economic factors including rent levels were considered as well. Use Differences in intended use or in the highest and best use for a property can impact its sales price. Typically, only properties with the same use are included in the comparable sales analysis. However, it is sometimes necessary to include a broader spectrum of properties depending on data constraints and relevancy to the appraisal problem. All of the comparable properties are similar in their intended use and/or highest and best use, and no adjustment for this factor is necessary. Nonrealty Components of Value Nonrealty components of value include personal, business concerns, or other items that do not constitute real property; but are included in the sale price of the comparable. None of the comparables included personal property or furnishings, etc. Hence, no adjustment is required. Summary of Adjustments Adjustments made to the comparables are summarized in the following grid: - -------------------------------------------------------------------------------- 41 - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- ================================================================================ IMPROVED SALES ANALYSIS SUMMARY OF ADJUSTMENTS 1
================================================================================================================= Sale 1 Sale 2 Sale 3 Sale 4 Sale 5 - ----------------------------------------------------------------------------------------------------------------- Unadjusted Price/ SF $55.11 $34.55 $26.99 $29.28 $36.11 Property Rights 0% 0% 0% 0% 0% -- -- -- -- -- Subtotal $55.11 $34.55 $26.99 $29.28 $36.11 Financing Terms 0% 0% 0% 0% 0% -- -- -- -- -- Subtotal $55.11 $34.55 $26.99 $29.28 $36.11 Conditions of Sale 0% 0% 0% 0% 0% -- -- -- -- -- Subtotal $55.11 $34.55 $26.99 $29.28 $36.11 Market Conditions 0% 0% 0% 0% 0% -- -- -- -- -- Subtotal $55.11 $34.55 $26.99 $29.28 $36.11 Other adjustments Locational Characteristics -20% 0% +20% +10% 0% Physical Characteristics Age/Quality/Condition -10% -5% -5% 0% +5% Size 0% 0% 0% 0% 0% Land Area/Parking 0% 0% 0% 0% 0% Functional Utility 0% 0% 0% 0% 0% Economic characteristics 0% +15% +15% +15% 0% Use 0% 0% 0% 0% 0% Nonrealty Components 0% 0% 0% 0% 0% Total Other Adjustments -30% +10% +30% +25% +5% Value Indication for Subject $38.58 $38.01 $35.09 $36.60 $37.92 =================================================================================================================
(1) The adjustment grid summarizes the direction and magnitude of adjustments judged appropriate to the comparable sales. In some cases adjustments may be derived directly from quantifiable data. However, in many instances the adjustments involve judgment of CB Commercial Real Estate Group, Inc. Source: CB Commercial Real Estate Group, Inc. ================================================================================ Sale Price Per Square Foot Conclusion After analysis, the adjusted values indicated for the subject ranged from $35.09 to $38.58 per square foot. Sales Number 2 and 5 required the least net adjustment and were therefore considered most comparable. With primary emphasis on the adjusted unit prices provided from these comparables, we have concluded a unit value of $38.00 per square foot for the subject. The total value is calculated as follows: 100,430 SF @ $38.00/ SF = $3,816,340 Rounded To: $3,800,000 Through our interviews with numerous buyers, sellers, and other real estate investors, our research has indicated that investors will review the price per square foot of nearby comparable sales, but will not attempt to quantify adjustments for differences in properties. Typically, - -------------------------------------------------------------------------------- 42 - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- investors will look at directly competitive properties that have sold and make generalized assumptions based on occupancy levels and the quality of the project. Effective Gross Income Multiplier (EGIM) The Effective Gross Income Multiplier reflects the relationship between income and value as observed in the market. Since rental rates are easily estimated for the comparables, this methodology can be effective in establishing a value. It eliminates the need for subjective adjustments, because relative differences are already reflected in the varying rent levels. The Effective Gross Income Multipliers from the comparable sales ranged from 5.50 to 7.16. Sale No. 4 had a superior anchor tenant setting the upper end of the range. Eliminating this comparable, the range is narrowed to 5.50 to 7.0 with an average of 6.09. Considering the comparables to be generally similar in age, quality and condition, we have tended toward the middle of this range. Consequently, we have concluded an effective gross income multiplier of 6.50. Applying this to our estimated effective gross income produces a value as follows: ========================================================================== EFFECTIVE GROSS INCOME MULTIPLIER VALUE INDICATION - -------------------------------------------------------------------------- Effective Gross Income x EGIM = Value - -------------------------------------------------------------------------- $604,805 x 6.25 = $3,780,030 Rounded to $3,800,000 ============================= ==================== ======================= SALES COMPARISON APPROACH CONCLUSION The following table summarizes the value indications based on the Sales Comparison Approach. ============================================== SALES COMPARISON APPROACH VALUE INDICATIONS - ---------------------------------------------- Method Indicated Value - ---------------------------------------------- Price Per SF $3,800,000 EGIM $3,800,000 ============================================== Source: CB Commercial Real Estate Group, Inc. ============================================== Both methodologies were considered adequately supported and equally reliable. Hence, we have placed more or less equal emphasis on each and have concluded an "as is" value of $3,800,000. - -------------------------------------------------------------------------------- 43 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH The Income Capitalization Approach reflects the subject's income-producing capabilities. This approach is based on the assumption that value is created by the expectation of benefits to be derived in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over period of time. The two common valuation techniques associated with the Income Capitalization Approach are direct capitalization and the discounted cash flow (DCF) analysis. DIRECT CAPITALIZATION Direct capitalization is the method used to convert a single year's estimate of income into a value indication. In direct capitalization, a precise allocation between return on and return of capital is not made because investor assumptions or forecasts concerning the holding period, pattern of income, or changes in value of the original investment are not simulated in the method. Direct capitalization is most appropriate when analyzing a stable income stream and in estimating the reversion at the end of a holding period. Using this method, the following sets forth the process: 1. Estimate the Potential Gross Income (PGI) from all sources that a competent owner should be able to generate from a property based on existing and/or market rents. 2. Deduct an estimate of Vacancy and Collection Loss (VCL) to arrive at an Effective Gross Income (EGI) estimate. 3. Deduct operating expenses from the estimate of EGI. The result is an estimate of the stabilized Net Operating Income (NOI). 4. Estimate an Overall capitalization rate (Ro, or OAR). 5. Divide the NOI by Ro, resulting in a value estimate at stabilized occupancy. 6. Adjust the stabilized value to account for "as is" condition, if applicable. DISCOUNTED CASH FLOW ANALYSIS The discounted cash flow (DCF) analysis is a detailed analysis used when the future income is expected to be variant, usually as a result of numerous lease obligations and/or anticipated changes in income and expenses. It is also particularly relevant when institutional buyers are the most likely purchasers of the subject because institutional buyers often place great weight on this analysis. The DCF analysis specifies the quantity, variability, timing, and duration of NOIs and cash flows. Selecting the proper yield rate (discount rate) is essential. CB Commercial must consider the target yield sought by investors as well as yields derived from comparable sales and/or market information. The methodology is: - -------------------------------------------------------------------------------- 44 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- 1. Estimate the before-tax cash flows for each period of a projected holding period net of any capital expenditures such as leasing expenses and tenant improvements. 2. Estimate a discount rate and a terminal overall capitalization rate. 3. Estimate a selling price, known as the reversion, for the end of the projected holding period. 4. The cash flows and the reversion are then discounted to a present value estimate. APPROPRIATE CAPITALIZATION METHOD A number of factors were considered in evaluating the appropriateness of using the direct capitalization method and/or the DCF technique. Since the subject is near stabilized occupancy and good income and expense data was available as well as good data for estimating a capitalization rate, Direct Capitalization is considered applicable. However, we have also applied a Discounted Cash Flow Methodology since this method is commonly used by investors analyzing properties with changing income and expenses. ESTIMATE OF MARKET RENT Consideration has been given to the existing leases at the subject and competitive properties to estimate the market rent for the subject. A summary of the subjects existing rental rates as of June, 1996 is shown in the following table. A complete Lease Abstract Report is presented in the Addenda, Exhibit G. ================================================================================ NEW SMYRNA BEACH SHOPPING PLAZA EXISTING RENTS ================================================================================ Total Units Unit Type Size (SF) Annual Rent Rent/SF - -------------------------------------------------------------------------------- 1 Theatre 24,780 $223,020 $9.00 1 Brian's Crafts 21,050 $ 52,625 $2.50 16 Small Tenants 52,028 $304,303 $5.85 -- ------------- ------ -------- ----- 18 Total/Averages 97,858 $579,948 $5.93 ================================================================================ * 2,572 SF Vacant; Total Center is 100,430 SF ================================================================================ Source: Mark Centers, Property Owner & Manager ================================================================================ In order to determine if the existing leases are at market, we analyzed the most recent local tenant leases negotiated at the subject in 1995-96. These leases are summarized as follows: - -------------------------------------------------------------------------------- 45 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ NEW SMYRNA BEACH SHOPPING PLAZA RECENT LEASING ACTIVITY ================================================================================ Suite # Tenant Size (SF) Annual Rent Rent/SF - -------------------------------------------------------------------------------- 1 Beacon 8 Theatre 24,780 $223,020 $ 9.00 17 Plaza Video 1,700 $ 9,350 $ 5.50 13 Bedding & Furniture 2,300 $ 17,825 $ 7.75 7 K's Ice Cream 750 $ 7,500 $10.00 14-A Fitness Plus 8,960 $ 35,840 $ 4.00 14-B Dollar General 7,040 $ 24,000 $ 3.41 4 Hien Cong Van 650 $ 6,500 $10.00 15 HRS 3,528 $ 40,572 $11.50* -- --- ----- -------- ------- Total/Averages 49,708 $364,607 $ 7.33 ================================================================================ Source: Mark Centers, Property Owner & Manager ================================================================================ * HRS space leased on full-service basis. A total of 49,708 square feet leased revealed an average rental rate of $7.33 per square foot. Hence, the overall existing rental rates are slightly lower as compared to several of the other similar centers within the subject's general market area. This is reflective of the subject's age and lack of major regional anchors. The subject has two anchor tenants. We have reviewed the leases for these tenants. The terms of the leases are summarized as follows: ================================================================================ NEW SMYRNA BEACON 8 THEATRE LEASE SUMMARY ================================================================================ Area 24,780 SF Term 10 years (11/95 - 11/2005) Options 2-5 year (#1- $9.0/SF; #2- $9.00/SF) Base Rent $223,020 ($9.00/SF) 11/17/95 - 1130/2005 Percentage Rent 10.0% of sales over $2,230,000 breakpoint ($90/SF) Real Estate Taxes None during original term Insurance None during original term Common Area None during original term Maintenance ================================================================================ Four months of gross sales figures were available from the property manager. The gross sales averaged $111,680 per month or $1,340,157 annualized. The gross sales at $54 per square foot is below national averages of approximately $102 for a neighborhood or community cinema. However, the limited sales history is insufficient for future projections. Based on discussions with the property manager, the tenant is not expected to be responsible for percentage rent during the projection period. - -------------------------------------------------------------------------------- 46 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ BRIAN'S CRAFTS LEASE SUMMARY ================================================================================ Area 21,050 SF Term 10.5 years (5/1/86 - 12/31/96) Options N/A Base Rent $52,625 ($2.50/SF) Percentage Rent 3.0% of gross sales over $1,052,500 annually ($50/SF). Real Estate Taxes None Insurance None Common Area None Maintenance ================================================================================ Two years of gross sales figures were available from the property manager. The gross sales were $1,227,738 or $58 for 1994 and $1,110,292 or $53 per square foot for 1995. This tenant has been paying percentage rent and combined with the base rent, reflects total rent of approximately $4.60 per square foot. The gross sales at approximately $55 per square foot is slightly below the median sales volume range of approximately $61 per square foot for a neighborhood or community crafts store. Although continued steady sales are expected for this tenant, we believe that future renewal of this lease would likely be at a higher rent and/or adjusted breakpoint. Therefore, the tenant is expected to be responsible for percentage rent during the remainder of the initial lease but is expected to renew at market rent and terms with no percentage rent estimated for the remainder of the projection period. Limited data was available to estimate the market rent of the anchor tenants. Based on our analysis of the most recent lease data for anchor tenants in east central Florida, we have concluded that the subject's anchor tenant rents are reasonably representative of the market. The Beacon 8 Theatre rent is considered to be reasonable considering the quality of finish and the Brian's Crafts rent is somewhat low. Theatre rental rates are typically higher than grocery, drug or other anchor tenant space due to their higher level and quality of finished interior. Based on Cinema leases from our CB files, we found recent leases from approximately $7.50 to $12.00 per square foot for 27,000+/- square foot spaces on a net basis. Market rates for Cinemas tend to bracket the subject's lease at $9.00 per square foot. We have estimated a market rental rate of $9.00 per square foot for the New Smyrna 8 Theatre and $5.00 per square foot for the Brian's Crafts space. SUMMARY OF COMPARABLE RENTALS We have surveyed competitive shopping centers for comparison to the subject. Existing competition for the subject property includes a small number of neighborhood and community shopping centers located along the major roads within the subject trade area. - -------------------------------------------------------------------------------- 47 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- The selected comparable rentals are summarized in the following chart. A location map of these properties is presented on the following page. Please see the Addenda, Exhibit D for more detail and a photograph of each comparable. ================================================================================ SUMMARY OF COMPARABLE SHOPPING CENTERS
========================================================================================================================== Existing Asking Avg. Size Year Overall Occ./ Base Base Tenant No. Property Name (SF) Built Local Occ. Rent/SF Rent/SF Escalators Finish - --------------------------------------------------------------------------------------------------------------------------- 1 Florida Shores 79,000 1984 93%/ $8.00- $10.00 Stepped or $1.00- Plaza 70% $9.00 CPI $2.00/SF 2 Smyrna Creek 63,756 1983 96%/ $7.00-$8.00 $9.00 Stepped or $1.00- Plaza 93% CPI $2.00/SF 3 Beach Plaza 47,800 1982 100%/ $9.00 $10.00 Negotiable $2.00/SF 100% 4 Indian River 116,000 1976 97%/ $9.00- $12.00 Stepped or $1.00- Village 90% $10.00 CPI $2.00/SF 5 Ocean Village 60,632 1990 94%/ $9.00 $11.00 Stepped or $2.00/SF Square 86% CPI ========================================================================================================================== Compiled by: CB Commercial Real Estate Group, Inc. ==========================================================================================================================
- -------------------------------------------------------------------------------- 47 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ COMPARABLE RENTALS MAP ================================================================================ [GRAPHIC OMITTED] ================================================================================ Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Rent Comparable No. 1 was Florida Shores Plaza located at the southwest corner of U.S. Highway 1 (Ridgewood Avenue) and Indian River Boulevard in Edgewater. This location is approximately five miles south of the subject. The center was originally constructed in 1984 with subsequent renovation in 1994. The anchors include Winn Dixie (50,130 SF) and Eckerd Drug (10,370 SF) and account for a majority of the space with 18,500 square feet of local space. Actual rental rates for the local tenants are $8.00 to $9.00 per square foot plus a pro rata share of operating expenses currently billed at $2.65 per square foot. Rental rates for the Winn Dixie and Eckerd Drug anchors were reported at approximately $6.00 and $7.50 per square foot net, respectively. Current asking rents for vacant local tenant space are quoted at $10.00 per square foot on average. Occupancy was 70% for local tenant space and 93% occupied overall. This center was considered similar to the subject in locational characteristics, but superior in age and anchor tenants. Rent Comparable No. 2 was Smyrna Creek Plaza located along the north side of North Causeway (S.R. 44) just east of the Indian River in New Smyrna Beach. This location is approximately two miles north of the subject. The center was constructed in 1983. The anchor tenant is Food Lion (28,864 SF) with 34,892 square feet of local space. Actual rental rates for the local tenants are $7.00 to $8.00 per square foot plus a pro rata share of operating expenses currently billed at $1.75 per square foot. Current asking rents for vacant local tenant space are quoted at $9.00 per square foot on average. Occupancy was 93% for local tenant space and 96% occupied overall. This center was considered inferior to the subject in locational characteristics, but similar in age and condition. Rent Comparable No. 3 was Beach Plaza located along the south side of South Causeway (S.R. A1A) just east of the Indian River in New Smyrna Beach. This location is approximately 2 1/2 miles northeast of the subject. The center was constructed in 1982 with Winn Dixie as the anchor tenant (35,200 SF) and 12,600 square feet of local space. Actual rental rates for the local tenants average $9.00 per square foot plus a pro rata share of operating expenses currently billed at $1.25 per square foot. The rental rate for the Winn Dixie was reported at $6.65 per square foot net. Occupancy was 100% for local tenant space and 100% occupied overall. This center was considered inferior to the subject in locational characteristics, but similar in age and condition. Rent Comparable No. 4 was Indian River Village located along the south side of South Causeway (S.R. A1A) just east of the Indian River in New Smyrna Beach. This location is approximately 2 3/4 miles northeast of the subject. The center was constructed in 1976 with anchor tenants including Publix (37,249 SF), Eckerd Drug (9,824 SF) and Bealls (29,888 SF) along with 39,039 square feet of local space. Actual rental rates for the local tenants average approximately $9.00 to $10.00 per square foot plus a pro rata share of operating expenses currently billed at $1.75 per square foot. Occupancy was 90% for local tenant space and 97% occupied overall. This center was considered inferior to the subject in locational characteristics, similar in age and condition and superior in anchor tenants. Rent Comparable No. 5 was Ocean Village Square located along the west side of South Atlantic Avenue (S.R. A1A) just west of the Atlantic beaches in New Smyrna Beach. This location is approximately three miles southeast of the subject. The center was constructed in 1990 with anchor tenants including Food Lion (29,000 SF), Rite Aid Drug (6,700 SF) and 24,932 square feet of local space. Actual rental rates for the local tenants average $9.00 per - -------------------------------------------------------------------------------- 50 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- square foot plus a pro rata share of operating expenses currently billed at $2.25 per square foot. Occupancy was 86% for local tenant space and 94% occupied overall. This center was considered inferior to the subject in locational characteristics, but superior in age and condition. CONCLUSION OF MARKET RENT (LOCAL TENANT SPACE) Based on this analysis, we have concluded the market rental rate for the subject local space to be $7.50 per square foot, triple net. This is higher than the existing overall effective rental rates averaging $5.85 per square foot but is consistent the most recent lease rates, which revealed an average of $7.33 per square foot. This is due to the improving leasing conditions in the subject neighborhood with increases in market rental rates recently. For the leased fee valuation, we will utilize the existing contract rental rates with escalation to market rent upon rollover. VACANCY AND COLLECTION LOSS This is an allowance for reductions in income attributable to vacancies, tenant turnover and non-payment of rent. In the direct capitalization process, a market-derived, stabilized vacancy and collection loss estimate is subtracted from the potential gross income order to arrive at effective gross income. The subject neighborhood has a current overall occupancy of approximately 96% and 88% for local tenant space as indicated in the Retail Market Overview section of this report. Overall, the submarket occupancy continues to improve due to growing demand with limited new supply. The subject's overall occupancy of 97.4% and local space occupancy of 95.3% exceeds the current submarket average and is likely due to the recent renovation which spurred leasing activity and lack of competition in the immediate area. Based on the overall market, vacancy for the subject has been estimated at 8% as a stabilized vacancy for local tenants, with 4.00% attributable to collection loss, for a total of 12% vacancy and collection loss factor. This is consistent with the market vacancy for local space of approximately 12%. Few rental concessions are prevalent in this market and we do not expect any significant rental concessions at the subject over the foreseeable future. In our opinion, the aforementioned stabilized vacancy and collection loss factor adequately accounts for any future concessions. No deduction for vacancy and credit loss is made for the Theatre tenant, since it is considered to be a credit worthy tenant. This indicates an overall vacancy and collection loss allowance of approximately 6.5%. For the Discounted Cash Flow Analysis, the vacancy and collection loss has been estimated with a combination of downtime between leases and a collection loss factor. We have utilized - -------------------------------------------------------------------------------- 51 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- an average of 4 months downtime between average four year leases plus a specific collection loss factor of 4%. OTHER INCOME Nearly all retail space in the market area is rented on a triple net basis, meaning the tenants are also responsible for a prorata share of real estate taxes, insurance and common area maintenance. The comparables provided a range of quoted pass-through charges of approximately $1.25 to $2.65 per square foot, with an average of $2.04 per square foot. The subject's pass-through charge is currently quoted at $1.10 per square foot for 1996. This is near the low end of the indicated range but considered reasonable considering the subject's age, layout and amenities. Most tenants are paying full pass-through charges for real estate taxes, insurance and common area maintenance, often plus add-on charges for management, or 5% to 15% for administration costs. A few tenants have specified expenses or have otherwise slightly different pass-through charges. The specific contractual pass-through charges for each tenant have been included for the leased fee analysis. Upon rollover, these tenants will be converted to triple net terms with full pass-through of taxes, insurance and CAM including the 15% administrative add-on charge. OPERATING EXPENSE ANALYSIS Historical operating statements for calendar years 1993, 1994, 1995 and a 1996 budget were provided by Mark Centers. This data has been presented in the following format for analysis: - -------------------------------------------------------------------------------- 52 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ NEW SMYRNA BEACH SHOPPING PLAZA INCOME/EXPENSE HISTORY & BUDGET
============================================================================================================================= 1993 1994 1995 1996 Budget - ----------------------------------------------------------------------------------------------------------------------------- Total $/SF Total $/SF Total $/SF Total $/SF - ----------------------------------------------------------------------------------------------------------------------------- Income Rental Income $214,821 $2.14 $166,965 $1.66 $212,120 $2.11 $463,947 $4.62 % Rent 41,805 .42 42,055 .42 40,814 .41 2,500 .02 CAM Recovery 6,391 .06 6,000 .06 8,524 .08 17,256 .17 Tax Recovery 5,375 .05 5,510 .05 6,201 .06 13,200 .13 Ins. Recovery 330 .01 157 .01 187 .01 360 .01 Misc. Income 2,341 .02 3,568 .04 9,982 .10 3,396 .03 ----- --- ----- --- ----- --- ----- --- Effective Gross 271,063 2.70 224,255 2.23 277,828 2.77 500,659 4.99 Income Expenses Utilities 4,360 .04 3,501 .03 3,643 .04 5,400 .05 Administrative 2,292 .02 5,114 .05 3,339 .03 3,828 .04 Maintenance 21,483 .21 18,802 .19 31,412 .31 31,050 .31 Insurance 9,663 .10 9,573 .10 13,051 .13 16,800 .17 Management 0 0 0 0 0 0 0 0 Real Estate Tax 42,074 .42 45,279 .45 48,563 .48 49,800 .50 Other 0 0 13,877 .14 11,814 .12 10,800 .11 - - ------ --- ------ --- ------ --- Total Operating (79,872) (.80) (96,146) (.96) (111,822) (1.11) (117,678) (1.17) ------- ---- ------- ---- -------- ----- -------- ----- Exp. Net Operating $191,191 $1.90 $128,109 $1.28 $166,006 $1.65 $382,981 $3.81 Income - ----------------------------------------------------------------------------------------------------------------------------- Source: Mark Centers Compiled by: CB Commercial Real Estate Group, Inc. =============================================================================================================================
The subject income has increased since 1994 due to renovation and renewed interest in the center and is expected to continue to increase in 1996. We have placed much emphasis on the subject's historical and budgeted data however, the historicals do not reflect the project at stabilized occupancy. Therefore, we have given industry averages as well as expenses from other similar stabilized projects considerable weight. The subject operating expense data was compared to industry averages for shopping centers as indicated in the Institute of Real Estate Management, Income and Expense Analysis for Region 4 shopping centers and data from the Urban Land Institute, 1995 Dollars and Cents of Shopping Centers (Addenda, Exhibit H). Our estimate of the subject's stabilized expenses are detailed as follows. Utilities Utilities include common area electricity, water, sewer, and trash removal. The subject expense has been stable recently at $.03 to $.04 per square foot, with $.05 budgeted for 1996. The industry averages report this expense to be approximately $.12 to $19 per square foot of leaseable area. With moderate increase expected due to increases in cost of services, we - -------------------------------------------------------------------------------- 53 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- have projected this expense as stabilized, at $18,100, or $.18 per square foot for fiscal year 1996-97. Maintenance Maintenance and Repair expenses, which are recoverable include such items as the parking lot, landscaping, various contractual services and building maintenance excluding structural maintenance . The recoverable expense amounted to $.19 to $.31 per square foot in the historical data and budget. The IREM median average is $.41 per square foot. For fiscal year 1996-97, we have projected the recoverable expense at $.40 per square foot, or $40,170. Administrative Administrative expenses include costs pertaining to the administration of the shopping center. Most of these costs are incurred by management. Administrative costs for the subject have been relatively minor over the past few years. Historical administrative expenses were $.02 per square foot in 1993, $.05 per square foot in 1994 and $.03 per square foot reported for 1995. The budgeted amount for 1996 amounted to approximately $.04 per square foot. We believe the historical administrative costs are reasonable for a this type of project. For this analysis, we have projected administrative costs at $.05 per square foot, or $5,020 based on industry averages and comparable projects. Insurance The insurance cost for the subject has been relatively consistent over the past few years at approximately $.10 to $.13 per square foot, with $.17 per square foot budgeted for 1996. This is only slightly higher than the IREM median expense of $.11 per square foot, however, the subject is an older project and the budgeted expense is baded on actual quotes. With primary emphasis on the historical and budgeted data, we have estimated a fiscal year 1996-97 expense of $18,100, or $.18 per square foot. Management Typical professional management fees in the local market are 4.0% to 5.0% of effective gross income. No specific management fee was reported in the operating history for the subject. For a shopping center of this size, an adequate management fee is estimated at 4.5% of effective gross income. - -------------------------------------------------------------------------------- 53 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Real Estate Taxes The gross real estate tax liability for the shopping center only, for 1995 was previously reported at $50,064. A 4% deduction is available for early payment discount. This indicates a net tax liability of $48,061. The subject real estate tax liability has increased over time. Now that occupancies and rents are rising, we anticipate a moderately increasing tax liability. We have estimated the real estate tax liability to increase 3.0% per year, slightly less than the expected increase in operating expenses. Replacement Reserves This expense is for future replacement of capital items. The amount of reserve and whether it is included or not, depends on the actions reflected by buyers and sellers in the local market. Based on the comparable data and discussions with brokers and investors, replacement reserves generally range from $.10 to $.20 per square foot. Adequate replacement reserves for the subject are estimated at $.20 per square foot considering the age of the improvements. Based on discussions with local market participants, replacement reserves are included prior to calculating net operating income for direct capitalization, but are included below the line for discounted cash flow analysis. TOTAL OPERATING EXPENSES The concluded operating expenses for the subject were $178,192, or $1.77 per square foot, including reserves. This is within than the range of the industry average expenses and at the lower end of the range indicated by the improved sales ($1.75 to $2.55/SF) which also included reserves. The IREM range of expenses was from $1.28 to $2.93 per square foot with a median expense for Region 4 shopping centers of $1.99 per square foot, excluding reserves. Hence, our total operating expense estimate is supported with the industry averages and comparable data. CAPITALIZATION RATE Derivation from comparable sales is the preferred method of estimating a capitalization rate when sufficient data exists. Data on each property's sale price, income, expenses, financing terms, and market conditions at the time of sale is needed. The overall capitalization rate is then derived by dividing the net operating income by the sale price. The following is a summary of overall capitalization rates indicated by the comparable sales, as discussed later in the Sales Comparison Approach. - -------------------------------------------------------------------------------- 55 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ SUMMARY OF CAPITALIZATION RATES ================================================================================ Sale No. Name Sale Date Year Built OAR - -------------------------------------------------------------------------------- 1 Kissimmee Square 12/95 1986 11.27% 2 Merritt Crossing 8/95 1984 10.71% 3 Northgate 2/94 1982 12.31% 4 Daytona Plaza 1/94 1970 9.84% 5 Indian River Plaza 7/93 1963 11.89% ================================================================================ Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The preceding sales indicate a range of 9.84% to 12.31% with an mean of 11.20%. Because most properties are purchased with debt and equity capital, the overall capitalization rate must satisfy the market return requirements of both investment positions. Lenders must receive a competitive interest rate commensurate with the perceived risk of the investment or they will not make funds available. Similarly, equity investors anticipate receiving a competitive equity cash return commensurate with the perceived risk or they will invest elsewhere. The band of investment method calculates a weighted average of the debt and equity capitalization rate. Current mortgage loan terms for the subject would likely include a 75% loan to value with an 8.25% mortgage interest rate and a 20 year amortization. This indicates a mortgage constant of .1022. Equity dividend rates are typically within the range of 10% to 14%. This produces an overall rate as follows: ====================================================================== BAND OF INVESTMENT ANALYSIS ====================================================================== Mortgage Component .75 x .1022 = .0767 Equity Component .25 x .1200 = .0300 Ro = .1067 Rounded = 10.7% ====================================================================== Source: CB Commercial Real Estate Group, Inc. ====================================================================== Another method for establishing an overall capitalization rate for the subject is to review the criteria of major investors in the marketplace. This may serve as a check against other techniques or may be a primary source when inadequate comparable data exists. The results of the First Quarter 1996 CB Commercial National Investor Survey are summarized in the following table. - -------------------------------------------------------------------------------- 55 - -------------------------------------------------------------------------------- NEW SMYRNA BEACH SHOPPING PLAZA DIRECT CAPITALIZATION SUMMARY (LEASED FEE) - -------------------------------------------------------------------------------- GROSS LEASEABLE AREA (SF) 100,430 CATEGORY TOTAL PER SF - -------- ----- ------ INCOME BASE RENTAL INCOME ANCHOR TENANTS $275,645 $2.74 LOCAL TENANTS $323,593 $3.22 PASS THROUGH INCOME CAM RECOVERY $ 24,200 $0.24 TAX RECOVERY $ 17,900 $018 INSURANCE RECOVERY $ 5,512 $0.05 TOTAL POTENTIAL GROSS INCOME $646,850 $5.44 LESS. VACANCY & COLLECTION LOSS @ 6.5% ($42 045) ($0.42) EFFECTIVE GROSS INCOME $604,805 $6.02 LESS EXPENSES UTILITIES $ 18,100 $0.18 ADMINISTRATIVE $ 5,020 $0.05 MAINTENANCE $ 40,170 $0.40 INSURANCE $ 18,100 $0.18 MANAGEMENT $ 27,216 $0.27 REAL ESTATE TAXES $ 49,500 $0.49 REPLACEMENT RESERVES $ 20,086 $0.20 TOTAL OPERATING EXPENSES $178,192 $1.77 EXPENSE RATIO 29.46% NET OPERATING INCOME $426,613 $4.25 NOI $426,613 VALUE = ------ -------- $3,878,296 OAR 0.11 ROUNDED: $3,900,000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ CB COMMERCIAL NATIONAL INVESTOR SURVEY CLASS C NEIGHBORHOOD CENTERS
====================================================================================================================== Going in Cap Rate Terminal Cap Rate Discount Market Rent Expense Growth Rate Growth Rate Rate - ---------------------------------------------------------------------------------------------------------------------- Range 9.5% - 15% 10.0% - 15.0% 12.5% - 18% 0% - 5.0% 3.0% - 4.0% Average 11.5% 11.7% 14.3% 2.8% 3.3% Change from 3Q95(1) 0 0 +20 +30 0 ====================================================================================================================== Source: CB Commercial Real Estate Group, Inc., National Investor Survey, First Quarter 1996 (1) Basis Points ======================================================================================================================
Because of the subject's average location with stabilized occupancy, it is likely that the appropriate going-in capitalization rate would be near the middle of the range indicated in the preceding table. This indicates that the appropriate overall capitalization rate for the subject would likely fall in the 10.70% to 11.50% range. Conclusion of Overall Capitalization Rate After reviewing the appropriate methods for developing an overall capitalization rate. The following ranges of overall capitalization rates are indicated: ========================================================== SUMMARY OF OVERALL CAPITALIZATION RATES ========================================================== Methodology Concluded Range - ---------------------------------------------------------- Comparable Sales 9.84% - 12.31% Band of Investment 10.7% CBC Investor Survey 10.5% - 11.50% ========================================================== Source: CB Commercial Real Estate Group, Inc. ========================================================== After reviewing the appropriate methods for developing an overall capitalization rate, with most emphasis placed on the comparable sales data, we have concluded an overall capitalization rate of 11.00%. A summary of the direct capitalization of the subject is presented in the following table. - -------------------------------------------------------------------------------- 57 - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Discounted Cash Flow Analysis We have also applied a discounted cash flow analysis for the subject. Our DCF assumptions are summarized as follows: ================================================================================ NEW SMYRNA BEACH SHOPPING PLAZA SUMMARY OF DISCOUNTED CASH FLOW ASSUMPTIONS ================================================================================ General Assumptions Start Date June 1996 Holding Period 10 years Basis (calendar/ fiscal) Fiscal Software Project Growth Rate Assumptions Market Rent 3.0% Expenses 3.5% Miscellaneous Assumptions Vacancy and Credit Loss 12.0% Concessions N/A Tenant Finish $2.00/SF new; $1.00/SF renewal Commissions 4.0% new; 2.0% renewal Renewal Ratio 70% Financial Assumptions Discount Rate (IRR) 14.50% Terminal Capitalization Rate (RO) 12.00% Costs of Sale 3.0% =============================================================================== Source: CB Commercial Real Estate Group, Inc. ================================================================================ The income and expense growth rates were estimated based on projected submarket conditions and information in the CB National Investor Survey presented previously. The discount rate of 14.5% is considered reasonable given a going-in capitalization rate of 11.00% and considering the added risk associated with a center lacking major regional or national anchor tenants. The terminal rate was loaded 100 basis points to reflect increased risk at the end of the holding period. A survey of the comparable rentals revealed tenant retention ratios of 70% to 80%. We believe these ratios are reasonable under current market conditions for renewals at market rent, but over longer periods of time a higher turnover is expected. For this analysis, we have estimated 70% of existing tenants will renew and 30% will turnover. - -------------------------------------------------------------------------------- 58 - -------------------------------------------------------------------------------- [CB LOGO] Reconciled Value $3,800,000 Value Per Square Foot $37.84 % Residual 35.3% Building Size 100,430 SqFt Sale Cost at Reversion 3.00% Holding Period 10 Years ====================================
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 -------------------------------------------------------------------------- BASE RENT $542,732 $587,509 $699,085 $733,614 $752,250 $729,449 Free Rent 0 0 0 0 0 0 Expense Recoveries 47,602 58,401 91,738 96,652 96,441 96,066 Percentage Rent 2,894 1,688 0 0 0 0 -------------------------------------------------------------------------- GROSS INCOME $593,228 $647,598 $790,823 $830,266 $848,691 $825,515 Less: Credit Loss (14,808) (16,983) (22,712) (24,290) (25,027) (24,100) Add: Miscellaneous Income 0 0 0 0 0 0 -------------------------------------------------------------------------- EFFECTIVE GROSS INCOME $578,420 $630,615 $768,111 $805,976 $823,664 $801,415 Less: Total Expenses (158,828) (165,825) (176,823) (183,505) (189,455) (193,788) -------------------------------------------------------------------------- NET OPERATING INCOME $419,592 $464,790 $591,288 $622,471 $634,209 $607,627 Commissons 10,148 28,305 4,544 836 3,040 14,013 Tenant Improvements 198,343 46,191 5,862 1,081 3,971 19,689 Capital Additions 20,100 20,804 21,532 22,285 23,065 23,872 -------------------------------------------------------------------------- Total Deductions (228,591) (95,300) (31,938) (24,202) (30,076) (57,574) -------------------------------------------------------------------------- CASH FLOW $191,001 $369,490 $559,350 $598,269 $604,133 $550,053 DEBT SERVICE ANALYSIS Total Cash Flow $191,001 $369,490 $559,350 $598,269 $604,133 $550,053 -------------------------------------------------------------------------- Less: Debt Service N/A N/A N/A N/A N/A N/A -------------------------------------------------------------------------- Cash Flow After Debt $191,001 $369,490 $559,350 $598,269 $604,133 $550,053 -------------------------------------------------------------------------- Cumulative Deficit N/A N/A N/A N/A N/A N/A -------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------- Implied Overall Rate 11.04% 12.23% 15.56% 16.38% 16.69% 15.99% Cash on Cash Return 5.03% 9.72% 14.72% 15.74% 15.90% 14.48% - ---------------------------------------------------------------------------------------------------------- Year 7 Year 8 Year 9 Year 10 Year 11 -------------------------------------------------------------- BASE RENT $734,933 $779,682 $810,469 $779,693 $757,239 Free Rent 0 0 0 0 0 Expense Recoveries 100,578 116,521 120,440 137,867 148,635 Percentage Rent 0 0 0 0 0 -------------------------------------------------------------- GROSS INCOME $835,511 $896,203 $930,909 $917,560 $905,874 Less: Credit Loss (24,500) (26,927) (28,316) (32,242) (36,235) Add: Miscellaneous Income 0 0 0 0 0 -------------------------------------------------------------- EFFECTIVE GROSS INCOME $811,011 $869,276 $902,593 $885,318 $869,639 Less: Total Expenses (199,740) (208,074) (215,489) (220,830) (226,459) -------------------------------------------------------------- NET OPERATING INCOME $611,271 $661,202 $687,104 $664,488 $643,180 Commissons 33,850 3,101 1,426 23,125 50,723 Tenant Improvements 55,667 4,096 1,899 32,460 81,399 Capital Additions 24,708 25,573 26,468 27,394 28,353 -------------------------------------------------------------- Total Deductions (114,225) (32,770) (29,793) (82,979) (160,475) -------------------------------------------------------------- CASH FLOW $497,046 $628,432 $657,311 $581,509 $482,705 DEBT SERVICE ANALYSIS Total Cash Flow $497,046 $628,432 $657,311 $581,509 $482,705 -------------------------------------------------------------- Less: Debt Service N/A N/A N/A N/A N/A -------------------------------------------------------------- Cash Flow After Debt $497,046 $628,432 $657,311 $581,509 $482,705 -------------------------------------------------------------- Cumulative Deficit N/A N/A N/A N/A N/A -------------------------------------------------------------- - ---------------------------------------------------------------------------------------------- Implied Overall Rate 16.09% 17.40% 18.08% 17.49% 16.93% Cash on Cash Return 13.08% 16.54% 17.30% 15.30% 12.70% - ----------------------------------------------------------------------------------------------
================================================================================ [GRAPHIC OMITTED] [Line Graph: NOI and Cash Flow Trend, compared over 11 years] ================================================================================ ================================================================================ SALE/YIELD MATRIX Terminal Capitalization Rate IRR 11.50% 12.00% 12.50% -------------------------------------- 13.50% $4,112,368 $4,048,853 $3,990,236 -------------------------------------- 14.00% $3,989,299 $3,928,324 $3,872,228 -------------------------------------- 14.50% $3,870,974 $3,812,611 $3,758,917 -------------------------------------- 15.00% $3,753,363 $3,701,489 $3,650,084 -------------------------------------- 15.50% $3,648,246 $3,594,743 $3,545,321 -------------------------------------- ================================================================================ - -------------------------------------------------------------------------------- COMPILED BY: CB Commercial Real East Group, Inc. - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Our survey of the comparables revealed moderate tenant finish provided under the current market conditions. We have estimated typical new tenant finish costs of $2.00 per square foot. Renewal tenants have been allocated $1.00 per square foot. The Discounted Cash Flow Summary is presented on the facing page. The value indication for a 10 year holding period amounted to $3,800,000. A more detailed cash flow report is presented in the Addenda, Exhibit G. Conclusion of Income Capitalization Approach The preceding analysis provides the following value indications: ================================================== INCOME CAPITALIZATION APPROACH VALUE INDICATIONS - -------------------------------------------------- Method Indicated Value - -------------------------------------------------- Direct Capitalization $3,900,000 Discounted Cash Flow $3,800,000 ================================================== Source: CB Commercial Real Estate ================================================== We have placed primary emphasis on the Discounted Cash Flow Methodology, since this method should best reflect the varying income associated with the specific subject leases. Secondary emphasis was placed on direct capitalization, since this methodology fails to account for capital expenditure items and tends to provide a higher value indication. Based on this analysis, we have concluded a value of $3,800,000 via the Income Capitalization Approach. - -------------------------------------------------------------------------------- 59 CONCLUSION - -------------------------------------------------------------------------------- RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- RECONCILIATION OF VALUE In this final step of the appraisal process, the value estimates, appraisal data and reasoning used in the three approaches are analyzed in relationship to one another. In estimating the market value of the subject property, all three approaches to value were utilized. The value estimates as indicated by these approaches are summarized as follows: ============================================================== SUMMARY OF VALUE CONCLUSIONS ============================================================== Sales Comparison Approach $3,800,000 Income Capitalization Approach $3,800,000 ============================================================== Source: CB Commercial Real Estate Group, Inc. ============================================================== In analyzing and correlating these value indications to a final estimate of value, each approach must be weighed in relation to: - Its ability to reflect the motives of a prospective buyer or seller; - The type, quality and depth of the data upon which the conclusions are based; - Its sensitivity and ability to reflect economic changes that affect the availability and cost of mortgage financing; and - Its ability to reflect the unique character of the property being appraised including factors such as location, size and income potential. Generally, in relation to subject property, the Income Approach most effectively meets the above requirements, due in part to the following: - The Income Approach is more sensitive to a variety of market data, and is more precise in its application. - The Income Approach more accurately reflects the interrelationship with the supply, demand, income, locational factors, physical attributes of the improvements, and intangible elements that affect value. - The methodology of the Income Approach more closely approximates the thought processes of typical purchasers of this type of property, as it is the potential return on an investment that is of major interest. We utilized both Direct Capitalization and a Discounted Cash Flow Analysis in valuing the subject property via the Income Approach. We had good historical operating data and were able to analyze several comparable projects to estimate income and expenses. This technique is considered to be the most reliable indication of value for an income producing property such as the subject. Overall, there were no major weaknesses of this approach. The Sales Comparison Approach is primarily applicable when there is an active market and numerous transactions can be analyzed and directly compared to the subject. The market has - -------------------------------------------------------------------------------- 60 - -------------------------------------------------------------------------------- RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- been reasonably active for neighborhood and community shopping centers in the region, and the sales utilized were considered to be good substitutes for the subject. Five sales were selected as the most comparable and were utilized for this analysis. However, there were difficulties in making market supported adjustments. Therefore, secondary emphasis has been given to the Sales Comparison indication. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Furthermore, the Cost Approach is not deemed to render a reliable indication of value due to the imprecise nature of estimating the accrued physical, functional, or external depreciation affecting the improvements. Therefore, the Cost Approach has not been employed to render a value indication for the subject property in this instance. In the final analysis, we placed the greatest reliance on the Income Approach estimate, since this is the approach on which the typical purchaser makes his decision to buy. The Sales Comparison Approach supported the Income Approach estimate of value. Based on this analysis, it is our opinion that the leased fee market value of the subject, effective June 1, 1996 was: THREE MILLION EIGHT HUNDRED THOUSAND DOLLARS ($3,800,000) - -------------------------------------------------------------------------------- 61 - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS 1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to total that would adversely affect marketability or value. CB Commercial is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CB Commercial, however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject property's title should be sought from a qualified title company that issues or insures title to real property. 2. Unless otherwise specifically noted in the body of this report, it is assumed: that any existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are, or will be upon completion, in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that it or they will withstand any known elements such as windstorm, hurricane, tornado, flooding, earthquake, or similar natural occurrences; and, that the improvements, as currently constituted, conform to all applicable local, state, and federal building codes and ordinances. CB Commercial professionals are not engineers and are not competent to judge matters of an engineering nature. CB Commercial has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CB Commercial by ownership or management; CB Commercial inspected less than 100% of the entire interior and exterior portions of the improvements; and CB Commercial was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CB Commercial reserves the right to amend the appraisal conclusions reported herein. 3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property was not observed by the appraisers. CB Commercial has no knowledge of the existence of such materials on or in the property. CB Commercial, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the appraisal. 4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CB Commercial. This report may be subject to amendment upon re-inspection of the subject property subsequent to repairs, modifications, alterations and completed new construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels of operation. - -------------------------------------------------------------------------------- 62 - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 5. It is assumed that all factual data furnished by the client, property owner, owner's representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CB Commercial has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, Assessor's Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CB Commercial reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CB Commercial of any questions or errors. 6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CB Commercial will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject. 7. CB Commercial assumes no private deed restrictions, limiting the use of the subject property in any way. 8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposit or subsurface rights of value involved in this appraisal, whether they be gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred. 9. CB Commercial is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject. 10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market. 11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CB Commercial does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CB Commercial. 12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CB Commercial to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form. 13. Also, unless otherwise noted in the body of this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated. 14. This study may not be duplicated in whole or in part without the specific written consent of CB Commercial nor may this report or copies hereof be transmitted to third parties without said consent, which consent CB Commercial reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory - -------------------------------------------------------------------------------- 63 - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or its contents shall not be published, in whole or in part, in any public document without the express written consent of CB Commercial which consent CB Commercial reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a "sale" or "offer for sale" of any "security", as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CB Commercial shall have no accountability or responsibility to any such third party. 15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report. 16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used. 17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area of the subject and comparable properties has been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report. 18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CB Commercial unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CB Commercial assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance. 19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or client's designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CB Commercial assumes responsibility for any situation arising out of the Client's failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired. 20. CB Commercial assumes that the subject property analyzed herein will be under prudent and competent management and ownership; neither inefficient or super-efficient. 21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the appraisal report. 22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist. 23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Notwithstanding any discussion of possible readily achievable barrier removal construction items in this report, CB Commercial has not made a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect on the value estimated herein. Since CB Commercial has no specific information relating to this issue, nor is CB Commercial qualified to make such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject property. - -------------------------------------------------------------------------------- 64 - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 24. Client shall not indemnify Appraiser or hold Appraiser harmless unless and only to the extent that the Client misrepresents, distorts, or provides incomplete or inaccurate appraisal results to others, which acts of the Client proximately result in damage to Appraiser. The Client shall indemnify and hold Appraiser harmless from any claims, expenses, judgments or other items or costs arising as a result of the Client's failure or the failure of any of the Client's agents to provide a complete copy of the appraisal report to any third party. In the event of any litigation between the parties, the prevailing party to such litigation shall be entitled to recover from the other reasonable attorney fees and costs. 25. Appraiser understands that the Client may provide complete final copies of the appraisal report (but not partial or summarized copies) to third parties who shall rely on such reports in connection with the Client's securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the Client for routine and customary questions that may arise. - -------------------------------------------------------------------------------- 65 - -------------------------------------------------------------------------------- SPECIFIC ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- SPECIFIC ASSUMPTIONS AND LIMITING CONDITIONS 1. A Current Environmental Audit was provided to CB Commercial. It specifically reported that no hazardous materials are present on the property. Therefore, we assume that in fact there are no such hazardous materials located within the subject property. CB Commercial reserves the right to amend the conclusions of this report should any future change in these conditions occur. 2. The estimate of marketing time is approximately 12 months based upon such items as statistical information about days on market; information gathered through sales verification; interviews of marketing participants; and anticipated changes in market conditions. The reasonable marketing time is a function of price, time, use, and anticipated market conditions such as changes in the cost and availability of funds; not an isolated estimate of time alone. 3. All value opinions expressed herein are as of the date of value. In some cases, facts or opinions are expressed in the present time. All opinions are expressed as of the date of value, unless specifically noted. 4. The prospective future income shown in this report (DCF) is not a guarantee of future performance. They are projections based on current market trends, which are subject to change. They are included only to assist in underwriting the risks in the subject property, and for no other purpose. The future values are mathematical projections and may or may not represent market values at that time. 5. The report and parts thereof and any additional material submitted, may not be used in any prospectus or printed material used in conjunction with the sale of securities or participation interests in Public Offering as defined under U.S. Security laws. Further, neither all nor any part of this appraisal report shall be disseminated to the general public by the use of advertising media, public relations media, news media, sales media, or other media for public communication without the prior consent of CB Commercial. The use of all or any part of this report in connection with real estate tax shelters, syndication of interests in real estate, the offering of securities, shares or partnership interests in real estate or any other public or private offering without the specific written consent of CB Commercial is not authorized. Neither the whole, or any part of this report, nor any reference thereto may be included in any document, statement, appraisal or circular without the signatories prior written approval of the form and context in which it is to appear. 6. The reasonable exposure time of 12 months is based on current market conditions. The reasonable exposure time inherent in the market value concept is always presumed to precede the effective date of the appraisal. We also recognize the exposure time is different for various types of real estate and under various market conditions and that the reasonable exposure time should always incorporate the answer to the question, "For what kind of real estate at what value range?" rather than appear as a statement of an isolated time period. 7. This study is not being prepared for use in connection with litigation. Accordingly, no rights to expert testimony, pretrial or other conferences, deposition, or related services are included with this appraisal. If, as a result of this undertaking, CB Commercial or any of its principals, its appraisers or consultants are requested or required to provide any litigation services, such shall be subject to the provisions of CB Commercial's engagement letter or, if not specified therein, subject to the reasonable availability of CB Commercial and/or said principals or appraisers at the time and shall further be subject to the party or parties requesting or requiring such services paying the then-applicable professional fees and expenses of CB Commercial either in accordance with the provisions of the engagement letter or arrangements at the time, as the case may be. 8. We assume that the income and expense data furnished by the property owner is true and correct. 9. The subject has had considerable leasing interest and activity since its 1995 renovation and as a result, approximately 13,888 square feet of additional space has either been leased or is pending at this time. This recent leasing activity has increased the overall occupancy of the project from 84% in late 1995 to 97% at present. Some of the new leases that have been agreed on by both lessor and tenant have not been formally signed but are expected to be finalized within approximately two weeks of the effective date of this report. Based on our conversations with the property manager, we believe that the pending leases are bona-fide and that they will ultimately be signed at the reported terms. Therefore, as a special assumption of this report, we have assumed that the pending leases on the square footage previously indicated will in fact be in effect for purposes of this analysis - -------------------------------------------------------------------------------- 66 ADDENDA - -------------------------------------------------------------------------------- ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- Addendum A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- GLOSSARY OF TERMS - -------------------------------------------------------------------------------- assessed value Assessed value applies in ad valorem taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to market value, but it is usually calculated in relation to a market value base. + cash equivalency The procedure in which the sale prices of comparable properties sold with atypical financing are adjusted to reflect typical market terms. contract, coupon, face, or nominal rent The nominal rent payment specified in the lease contract. It does not reflect any offsets for free rent, unusual tenant improvement conditions, or other factors that may modify the effective rent payment. coupon rent See Contract, Coupon, Face, or Nominal Rent effective rent 1) The rental rate net of financial concessions such as periods of no rent during a lease term; may be calculated on a discounted basis, reflecting the time value of money, or on a simple, straight-line basis. ++ 2) The economic rent paid by the lessee when normalized to account for financial concessions, such as escalation clauses, and other factors. Contract, or normal, rents must be converted to effective rents to form a consistent basis of comparison between comparables. face rent See Contract, Coupon, Face, or Nominal Rent fee simple estate Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. ++ floor area ratio (FAR) The relationship between the above-ground floor area of a building, as described by the building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area; also called building-to-land ratio. ++ full service lease A lease in which rent covers all operating expenses. Typically, full service leases are combined with an expense stop, the expense level covered by the contract lease payment. Increases in expenses above the expense stop level are passed through to the tenant and are known as expense pass-throughs. going concern value Going concern value is the value of a proven property operation. It includes the incremental value associated with the business concern, which is distinct from the value of the real estate only. Going concern value includes an intangible enhancement of the value of an operating business enterprise which is produced by the assemblage of the land, building, labor, equipment, and marketing operation. This process creates an economically viable business that is expected to continue. Going concern value refers to the total value of a property, including both real property and intangible personal property attributed to the business value. + gross building area (GBA) The sum of all areas at each floor as measured to the exterior walls. insurable value Insurable Value is based on the replacement and/or reproduction cost of physical items that are subject to loss from hazards. Insurable value is that portion of the value of an asset or asset group that is acknowledged or recognized under the provisions of an applicable loss insurance policy. This value is often controlled by state law and varies from state to state. + investment value Investment value is the value of an investment to a particular investor based on his or her investment requirements. In contrast to market value, investment value is value to an individual, not value in the marketplace. Investment value reflects the subjective relationship between a particular investor and a given investment. When measured in dollars, investment value is the price an investor would pay for an investment in light of its perceived capacity to satisfy his or her desires, needs, or investment goals. To estimate investment value, specific investment criteria must be known. Criteria to evaluate a real estate investment are not necessarily set down by the individual investor; they may be established by an expert on real estate and its value, that is, an appraiser. + leased fee See leased fee estate leased fee estate An ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.++ leasehold See leasehold estate leasehold estate The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.++ load factor The amount added to usable area to calculate the rentable area. It is also referred to as a "rentable add-on factor" which, according to BOMA, "is computed by dividing the difference between the usable square footage and rentable square footage by the amount of the usable area. Convert the figure into a percentage by multiplying by 100. market value "as if complete" on the appraisal date Market value as if complete on the appraisal date is an estimate of the market value of a - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- GLOSSARY OF TERMS - -------------------------------------------------------------------------------- property with all construction, conversion, or rehabilitation hypothetically completed, or under other specified hypothetical conditions as of the date of the appraisal. With regard to properties wherein anticipated market conditions indicate that stabilized occupancy is not likely as of the date of completion, this estimate of value should reflect the market value of the property as if complete and prepared for occupancy by tenants. market value "as is" on the appraisal date Market value "as is" on the appraisal date is an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date of appraisal. market value Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1) A reasonable time is allowed for exposure in the open market; 2) Both parties are well informed or well advised, and acting in what they consider their own best interests; 3) Buyer and seller are typically motivated; 4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.+++ marketing period The time it takes an interest in real property to sell on the market subsequent to the date of an appraisal. ++ net lease Lease in which all or some of the operating expenses are paid directly by the tenant. The landlord never takes possession of the expense payment. In a Triple Net Lease all operating expenses are the responsibility of the tenant, including property taxes, insurance, interior maintenance, and other miscellaneous expenses. However, management fees and exterior maintenance are often the responsibility of the lessor in a triple net lease. A modified net lease is one in which some expenses are paid separately by the tenant and some are included in the rent. net rentable area (NRA) 1) The area on which rent is computed. 2) The Rentable Area of a floor shall be computed by measuring to the inside finished surface of the dominant portion of the permanent outer building walls, excluding any major vertical penetrations of the floor. No deductions shall be made for columns and projections necessary to the building. Include space such as mechanical room, janitorial room, restrooms, and lobby of the floor. * nominal rent See Contract, Coupon, Face, or Nominal Rent prospective future value "upon completion of construction" Prospective future value "upon completion of construction" is the prospective value of a property on the future date that construction is completed, based upon market conditions forecast to exist, as of that completion date. The value estimate at this stage is stated in current dollars unless otherwise indicated. prospective future value "upon reaching stabilized occupancy" Prospective future value "upon reaching stabilized occupancy" is the prospective value of a property at a future point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. The value estimate at this stage is stated in current dollars unless otherwise indicated. reasonable exposure time The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market. ++ rent see full service lease net lease contract, coupon, face, or nominal rent effective rent shell space Space which has not had any interior finishing installed, including even basic improvements such as ceilings and interior walls, as well as partitions, floor coverings, wall coverings, etc.. Usable Area 1) The area actually used by individual tenants. 2) The Usable Area of an office is computed by measuring to the finished surface of the office side of corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished surface of the dominant portion of the permanent outer building walls. Excludes areas such as mechanical rooms, janitorial room, restrooms, lobby, and any major vertical penetrations of a multi-tenant floor. * - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- GLOSSARY OF TERMS - -------------------------------------------------------------------------------- use value Use value is a concept based on the productivity of an economic good. Use value is the value a specific property has for a specific use. Use value focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to the property's highest and best use or the monetary amount that might be realized upon its sale. + value appraised During the real estate development process, a property typically progresses from a state of unimproved land to construction of improvements to stabilized occupancy. In general, the market value associated with the property increases during these stages of development. After reaching stabilized occupancy, ongoing forces affect the property during its life, including a physical wear and tear, changing market conditions, etc. These factors continually influence the property's market value at any given point in time. See also market value "as is" on the appraisal date market value "as if complete" on the appraisal date prospective future value "upon completion of construction" prospective future value "upon reaching stabilized occupancy" - -------- + The Appraisal of Real Estate, Tenth Edition, Appraisal Institute, 1992. ++ The Dictionary of Real Estate Appraisal, Third Edition, 1993. +++ The office of the Comptroller of the Currency, 12 CFR Part 34, Subpart C, ss.34.42(f), August 24, 1990. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. * 1990 BOMA Experience Exchange Report, Income/Expense Analysis for Office Buildings (Building Owners and Managers Association, 1990) ** Statement on Appraisal Standard No. 6, Appraisal Standards Board of The Appraisal Foundation, September 19, 1992. - -------------------------------------------------------------------------------- ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- Addendum B ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- SOUTH ALONG DIXIE HIGHWAY (U.S. 1) SUBJECT ON LEFT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- NORTH ALONG DIXIE HIGHWAY (U.S. 1) SUBJECT ON RIGHT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CLOSE-UP VIEW OF SUBJECT THEATRE BUILDING - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CLOSE-UP VIEW OF SUBJECT BRIAN'S CRAFTS BUILDING - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CLOSE-UP VIEW OF SUBJECT FORMER MCCRORY BUILDING - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CLOSE-UP VIEW OF SUBJECT SOUTHERLY TENANT SPACE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- NORTHERLY VIEW OF SUBJECT CENTER FROM SOUTH END - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- SOUTHERLY REAR VIEW OF SUBJECT CENTER - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- NORTHERLY REAR VIEW OF SUBJECT CENTER - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CLOSE-UP VIEW OF SUBJECT FLOWERS BAKERY BUILDING - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- INTERIOR VIEW OF BRIAN'S CRAFTS TENANT SPACE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- INTERIOR VIEW OF SEARS TENANT SPACE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ADDENDUM C IMPROVED COMPARABLES - -------------------------------------------------------------------------------- Addendum C IMPROVED SALE COMPARABLES - -------------------------------------------------------------------------------- RETAIL SALE 1 ================================================================================ Location Data Property Name: Kissimmee Square Location: NE Comer Of U.S. 192 and Michigan Avenue City: Kissimmee County: Osceola State/Zip: Florida Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 13.40 Acres Excess Land: N/A Gross Leasable Area: Anchors: Winn Dixie 50,000 SF Blockbuster Video 10,500 SF Local Tenant GLA: 45,657 SF Anchor Tenant GLA: 60,500 SF Total GLA: 106,157 SF GLA Purchased: 106,157 SF Year Built: 1986 Parking: N/A Condition: Good Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 12/95 Marketing Time: 12 months Grantor: Kissimmee Square Limited Grantee: Hart Properties I, Ltd. Document No.: 1300/989 Sale Price: $5,850,000 Financing: Cash to Seller Cash Equivalent Price: $5,850,000 Required Capital Cost: $0 Adjusted Sales Price: $5,850,000 Verification: Dan Baker, CB Commercial Financial Data Assumptions & Forecast: Appraiser Occupancy at Sale: 90% Existing or Pro Forma Income: Pro Forma TOTAL P.S.F. -------- ------ Potential Gross Income: $928,571 $8.75 Vacancy and Credit Loss: $92,857 $0.87 Effective Gross Income: $835,714 $7.87 Expenses: $176,416 $1.66 Net Operating Income: $659,296 $6.21 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 1 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap and DCF Overall Capitalization Rate (OAR): 11.27 % Projected IRR: N/A Effective Gross Multiplier (EGIM): 7.00 Operating Expense Ratio (OER): 21.11 % Price Per Square Foot: $55.1 1 Comments This is a good quality neighborhood center located in the southern Orlando MSA in Kissimmee. The center has a prominent comer location and was in good overall condition at the time of sale. Photograph - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 2 ================================================================================ Location Data Property Name: Merritt Crossing Shopping Center Location: SWQ Courtenay Pkwy, and Crockett Drive City: Merritt Island County: Brevard State/Zip: Florida Assessor's Parcel No(s): 24-3~23-BX-.07 Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 15.89 Acres Excess Land: N/A Gross Leasable Area: Anchors: Publix 38,250 SF Eckerd 10,368 SF Local Tenant GLA: 41,109 SF Anchor Tenant GLA: 48,618 SF Total GLA: 89,727 SF GLA Purchased: 89,727 SF Year Built: 1984 Parking: Adequate Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 08/95 Marketing Time: 10 months Grantor: USM Real Estate Company Grantee: Noble Properties II, Ltd. Document No.: 3494/3759 Sale Price: $3,100,000 Financing: Cash to Seller Cash Equivalent Price: $3,100,000 Required Capital Cost: $0 Adjusted Sales Price: $3,100,000 Verification: Neil Efron, Grantor Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 89% Existing or Pro Forma Income: Pro Forma TOTAL P.S.F. Potential Gross Income: -------- ------ $533,195 $5.94 Vacancy and Credit Loss: $53,320 $0.59 Effective Gross Income: $479,876 $5.35 Expenses: $147,922 $1.65 Net Operating Income: $331 954 $3.70 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 2 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap Overall Capitalization Rate (OAR): 10.71 % Projected IRR: N/A Effective Gross Multiplier (EGIM): 6.46 Operating Expense Ratio (OER): 30.83 % Price Per Square Foot: $34.55 Comments Publix agreed to remodel their store during the upcoming year at their own expense, with a budget of approximately $1.9 million. At the time of sale, the project had five vacant bays, totaling 10,132 S.F., indicating an 11.3% vacancy rate. This sale does not include the Burger king and Amoco outparcels. Photograph - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 3 ================================================================================ Location Data Property Name: Northgate. Shopping Center Location: 1874-1974 North Wickham Road City: Melboume County: Brevard State/Zip: Florida Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Land Area: 13.84 Acres Excess Land: N/A Gross Leasable Area: 102,588 SF Local Tenant GLA: 29,880 SF Anchor Tenant GLA: 102,588 SF Total GLA: 132,468 SF GLA Purchased: 132,468 SF Year Built: 1982 Parking: N/A Condition: Good Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 02/94 Marketing Time: 12 months Grantor: Massachusetts Mutual Life Insurance Co. Grantee: Kimco Melbourne GIG, Inc. Document No.: 3374/390 Sale Price: $3,575,000 Financing: Cash to Seller Cash Equivalent Price: $3,575,000 Required Capital Cost: $0 Adjusted Sales Price: Verification: $3,575,000 Dan Baker, CB Commercial Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 96.57% Existing or Pro Forma Income: Pro Forma TOTAL P.S.F. -------- ------ Potential Gross Income: $696,233 $5.26 Vacancy and Credit Loss: $34,812 $0.26 Effective Gross Income: $661 421 $4.99 Expenses: $221,448 $1.67 Net Operating Income: $439,973 $3.32 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 3 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap and DCF Overall Capitalization Rate (OAR): 12.31 % Projected IRR: N/A Effective Gross Multiplier (EGIM): 5.41 Operating Expense Ratio (OER): 33.48 % Price Per Square Foot: $26.99 Comments This project is a solid community shopping center which has consistently reflected high occupancy. The center has a prominent location in a growing population base and the improvements were in good overall condition at the time of sale. Photograph - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 4 ================================================================================ Location Data Property Name: Daytona Plaza Location: NWC Of Volusia Avenue and Clyde Morris Blvd. City: Daytona Beach County: Volusia State/Zip: Florida Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 14.40 Acres Excess Land: N/A Gross Leasable Area: Anchors: K Mart 116,907 SF Local Tenant GLA: 24,347 SF Anchor Tenant GLA: 116,907 SF Total GLA: 141,254 SF GLA Purchased: 141,254 SF Year Built.. 1970 Parking: N/A Condition: Fair Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 01/94 Marketing Time: 14 months Grantor: Daytona Plaza Associates, Ltd Grantee: Glimcher Centers, Ltd. Document No.: 3894/1202 Sale Price: $4,136,000 Financing: Cash to Seller Cash Equivalent Price: $4,136,000 Required Capital Cost: $0 Adjusted Sales Price: $4,136,000 Verification: Sally Dunker, Rep Of Grantee Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100% Existing or Pro Forma Income: Pro Forma TOTAL P.S.F. -------- ----- Potential Gross Income: $608,422 $4.31 Vacancy and Credit Loss: $30,421 $0.22 Effective Gross Income: $578,001 $4.09 Expenses: $171,000 $1.21 Net Operating Income: $407,001 $2.88 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 4 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap and DCF Overall Capitalization Rate (OAR): 9,84 % Projected IRR: N/A Effective Gross Multiplier (EGIM): 7.16 Operating Expense Ratio (OER): 29.58 % Price Per Square Foot: $29.28 Comments K Mart is in their first option period at $2.42 per square foot, with no expense pass-throughs and has generally gross sales of approximately $20.8 million, or $178 per square foot. K Mart is also responsible for approximately $100,000 in overage rent or an additional $86 per square foot. Photograph - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 5 ================================================================================ Location Data Property Name: Indian River Plaza Location: NWC Of State Road 50 and Coquina Avenue City: Titusville County: Brevard State/Zip: Florida Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 8.93 Acres Excess Land: N/A Gross Leasable Area: Anchors: Winn Dixie 28,900 SF Eckerd Drugs 10,330 SF Local Tenant GLA: 34,147 SF Anchor Tenant GLA: 39,230 SF Total GLA: 73,377 SF GLA Purchased: 73,377 SF Year Built: 1963 Parking: N/A Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 07/93 Marketing Time: 18 months Grantor: Sun Bank, NA Grantee: Noble Properties, Ltd. Document No.: 3303/4445 Sale Price: $2,650,000 Financing: Cash to Seller Cash Equivalent Price: $2,650,000 Required Capital Cost: $0 Adjusted Sales Price: $2,650,000 Verification: Joel Hart, Noble Management Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 96% Existing or Pro Forma Income: Existing TOTAL P.S.F. -------- ------ Potential Gross Income: $507,474 $6.92 Vacancy and Credit Loss: $25,374 $0.35 Effective Gross Income: $482,100 $6.57 Expenses: $167,000 $2.28 Net Operating Income: $315,100 $4.29 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE 5 ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap Overall Capitalization Rate (OAR): 11.89 % Projected IRR: N/A Effective Gross Multiplier (EGIM): 5.50 Operating Expense Ratio (OER): 34.64 % Price Per Square Foot: $36.11 Comments The center previously sold in 1988 for $5,200,000*. The center was taken back by the lender in 1991. This indicates a marketing period of approximately 18 months. This project was renovated in 1986 and was in average condition at the time of sale. Photograph - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL - -------------------------------------------------------------------------------- ADDENDUM D RENTAL COMPARABLES - -------------------------------------------------------------------------------- Addendum D RENTAL COMPARABLES - -------------------------------------------------------------------------------- RETAIL RENT COMPARABLE 1 ================================================================================ Location Data Property Name: Florida Shores Plaza Location: 1838 S. Ridgewood Avenue City: Edgewater County: Volusia State/Zip: Florida Assessors Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 79,000 SF Year Built: 1984 Exterior Walls: Masonry Condition: Average Anchor Tenant: Winn Dixie, Eckerd Drug Parking: Adequate Lease Data Occupancy: Local: 70% Overall: 93% Typical Size: 1,800 SF Term: 3-5 years Base Rent Per Square Foot: $9.00/SF Avg. Rent Escalations: Stepped/CPI Basis: Triple Net Expense Pass-Through: $2.65/SF Free Rent (months): None Tenant Improvement: $1 .00-$2.00/SF Leasing Agent: Scott Copeland Phone No.: (904)4284002 Survey Date: 5/96 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 1 ================================================================================ Comments This is a neighborhood shopping center with two anchor tenants; a Winn Dixie Marketplace Supermarket and an Eckerd Drug store. The center is located in the northern Edgewater area at the southwest comer of U.S. 1 and Indian River Boulevard (S.R. 442). This is a good quality project with good visibility and anchor tenants. It was also reported that Winn Dixie's rent was approximately $6.00 per square foot and the rent for Eckerd Drug was $7.50 per square foot, both on a net basis. Photograph - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 2 ================================================================================ Location Data Property Name: SMYRNA Creek Plaza Location: 95 North Causeway City: New SMYRNA Beach County: Volusia State/Zip: Florida Assessors Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 63,756 SF Year Built: 1983 Exterior Walls: Masonry Condition: Average Anchor Tenant: Food Lion Parking: Adequate Lease Data Occupancy: Local: 93% Overall: 96% Typical Size: 1,800 SF Term: 3-5 years Base Rent Per Square Foot: $8.00/SF Rent Escalations: Stepped/CpI Basis: Triple Net Expense Pass-Through: $2.25/SF Free Rent (months): None Tenant Improvement: $1 .00-$2.00/SF Leasing Agent: Equity Fund Advisors Phone No.: (407)8694373 Survey Date: 5/96 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 2 ================================================================================ Comments This is a neighborhood shopping center a Food Lion Supermarket as anchor tenant. The center is located in northern New SMYRNA Beach along the north side of North Causeway (S.R. 44) just east of the downtown area. This is an average quality project with good visibility and anchor tenant. Photograph - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 3 ================================================================================ Location Data Property Name: Beach Plaza Location: 411 E. Third Avenue City: New SMYRNA Beach County: Volusia State/Zip: Florida Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 47,800 SF Year Built: 1982 Exterior Walls: Masonry Condition: Average Anchor Tenant: Winn Dixie Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 1,500 SF Term: 3-5 years Base Rent Per Square Foot: $9.00/SF Avg. Rent Escalations: Negotiable Basis: Triple Net Expense Pass-Through: $1 .25/SF Free Rent (months): None Tenant Improvement: $2.00/SF Leasing Agent: Charles Wayne Properties Phone No.: (904)238-3600 Survey Date: 5/96 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 3 ================================================================================ Comments This is a neighborhood shopping center which formerly had a Winn Dixie Supermarket as the anchor tenant. Winn Dixie recently moved to a new location on Canal Street west of the downtown area of New Sm yma Beach but continues to pay rent at $6.65 per square foot net, until a replacement tenant is leased. The current asking rent for this space is $6.50 per square foot. The center is located in northeast New SMYRNA Beach along the south side of South Causeway (3rd Ave.), east of the downtown area. This is an average quality project with average visibility. Photograph - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 4 ================================================================================ Location Data Property Name: Indian River Village Location: 765 E. Third Avenue City: New SMYRNA Beach County: Volusia State/Zip: Florida Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 116,000 SF Year Built: 1976 Exterior Walls: Masonry Condition: Average Anchor Tenant: Publix, Eckerd, Bealls Parking: Adequate Lease Data Occupancy: Local: 90% Overall: 97% Typical Size: 1,500 SF Term: 3-5 years Base Rent Per Square Foot: $9.00/SF Avg. Rent Escalations: Stepped/CPI Basis: Triple Net Expense Pass-Through: $1.75/SF Free Rent (months): None Tenant Improvement: $1 .0~$2.00/SF Leasing Agent: Sutton Properties Phone No.: (813)347-9221 Survey Date: 5/96 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 4 ================================================================================ Comments This is a community shopping center with a Publix Supermarket, Eckerd Drug and a Bealls as the anchor tenants. The center is located in northeast New SMYRNA Beach along the south side of South Causeway (3rd Ave.), east of the downtown area. This is an older, average quality project with good visibility. Photograph - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 5 ================================================================================ Location Data Property Name: Ocean Village Square Location: 4178 South Atlantic Avenue City: New SMYRNA Beach County: Volusia State/Zip: Florida Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 60,632 SF Year Built: 1990 Exterior Walls: Masonry Condition: Average Anchor Tenant: Food Lion, Rite Aid Parking: Adequate Lease Data Occupancy: Local: 86% Overall: 94% Typical Size: 1,500 SF Term: 3-5 years Base Rent Per Square Foot: $9.00/SF Avg. Rent Escalations: Stepped/CPI Basis: Triple Net Expense Pass-Through: $2.29/SF Free Rent (months): None Tenant Improvement: $2.00/SF Leasing Agent: Main Street Investments Phone No.: (407)72~8938 Survey Date: 5/96 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE 5 ================================================================================ Comments This is a newer neighborhood shopping center with a Food Lion Supermarket and a Rite Aid Drug store as the anchor tenants. The center is located in southeast New SMYRNA Beach along the west side of South Atlantic Avenue (S.R. Al A), southeast of the downtown area. This is a newer, good quality project with good visibility from its comer location. Photograph - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL - -------------------------------------------------------------------------------- Addendum E LEGAL DESCRIPTION - -------------------------------------------------------------------------------- Addendum E LEGAL DESCRIPTION - -------------------------------------------------------------------------------- LEGAL DESCRIPTION ALL BLOCKS 1 AND 2; THAT PART OF BLOCK 5, AND LOTS 1 TO 9 INCLUSIVE, BLOCK 4 LYING EAST OF U.S. NO. 1 HIGHWAY (SOUTH DIXIE FREEWAY) EDSONRIDGE SUBDIVISION UNIT NO. 2, ACCORDING TO THE PLAT THEREOF AS RECORDED IN MAP BOOK 19, PAGE 96, OF THE PUBLIC RECORDS OF VOLUSIA COUNTY, FLORIDA, AND THAT PART OF ORANGE STREET ABANDONED LYING EAST OF U.S. NO. 1 HIGHWAY AND LYING BETWEEN BLOCKS 1 AND 2, AND BLOCKS 4 AND 5, SAID EDSONRIDGE SUBDIVISION, THAT PART OF SEVENTH STREET ABANDONED LYING EAST OF U.S. NO. 1 HIGHWAY, LYING BETWEEN BLOCKS 1 AND 4, BETWEEN BLOCK 2 AND 5, AND THAT PART IN THE INTERSECTION OF ORANGE STREET AND SEVENTH STREET, SAID EDSONRIDGE SUBDIVISION AND THAT PART OF CYPRESS STREET LYING EAST OF U.S. NO. 1 HIGHWAY AND SOUTH OF SIXTH STREET, EDSONRIDGE SUBDIVISION, ALSO DESCRIBED AS: BEGIN AT THE NORTHEAST CORNER OF LOT 1, BLOCK 1, EDSONRIDGE SUBDIVISION NO. 2, ACCORDING TO THE PLAT THEREOF AS RECORDED IN MAP BOOK 19, PAGE 96, OF THE PUBLIC RECORDS OF VOLUSIA COUNTY, FLORIDA; THENCE SOUTH 21(Degrees)10'41" EAST ALONG THE EAST LINE OF BLOCKS 1 AND 4, 1,376.10 FEET; THENCE SOUTH 18(Degrees)53'41" EAST 51.6 FEET TO THE SOUTHEASTERLY MOST CORNER OF LOT 9, BLOCK 4, OF SAID EDSONRIDGE SUBDIVISION UNIT NO. 2 THENCE 57(Degrees)23'19" WEST ALONG THE SOUTHERLY LINE OF SAID LOT 9, BLOCK 4, A PORTION OF WHICH ALSO BEING ALONG THE EASTERLY RIGHT OF WAY LINE OF U.S. HIGHWAY NO. 1, A DISTANCE OF 68.74 FEET TO A POINT ON A CIRCULAR CURVE CONCAVED NORTHEASTERLY, HAVING A RADIUS OF 1860.08 FEET AND TO WHICH POINT A RADIAL LINE BEARS S 35(Degrees)07'29" WEST; THENCE NORTHWESTERLY ALONG THE EASTERLY RIGHT OF WAY LINE OF U.S. HIGHWAY NO. 1 AND ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 90810 A DISTANCE OF 296.60 FEET TO A POINT LYING ON THE EASTERLY LINE OF LOT 5, BLOCK 5 OF SAID EDSONRIDGE SUBDIVISION UNIT NO. 2, AND TO WHICH POINT A RADIAL LINE BEARS S 44(Degrees)15'39" WEST; THENCE N 21(Degrees)10'41" WEST ALONG SAID EASTERLY RIGHT OF WAY LINE AND THE EASTERLY LINE OF SAID LOT 5 A DISTANCE OF 66.60 FEET; THENCE S71(Degrees)23'19" WEST ALONG SAID EASTERLY RIGHT OF WAY LINE AND THE NORTHERLY LINE OF SAID LOT 5 A DISTANCE OF 29.45 FEET TO A POINT ON A CIRCULAR CURVE CONCAVED NORTHEASTERLY HAVING A RADIUS OF 1860.08 FEET, AND TO WHICH POINT A RADIAL LINE BEARS S46(Degrees)32'28" WEST; THENCE NORTHWESTERLY ALONG SAID EASTERLY RIGHT OF WAY LINE AND ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 16(Degrees)15'32", AN ARC DISTANCE OF 527.84 FEET TO POINT WHICH A RADIAL LINE BEARS S62(Degrees)48'00" WEST; THENCE N20(Degrees)37'21" WEST ALONG SAID EASTERLY RIGHT OF WAY LINE A DISTANCE OF 595.46 FEET TO THE SOUTH RIGHT OF WAY LINE OF SIXTH STREET; THENCE ALONG SAID SOUTH RIGHT OF WAY LINE 367.3 FEET TO THE POINT OF BEGINNING, OTHERWISE DESCRIBED AS THAT PART OF EDSONRIDGE SUBDIVISION NO. 2 AS RECORDED IN MAP BOOK 19, PAGE 96, PUBLIC RECORDS OF VOLUSIA COUNTY, FLORIDA, INCLUDING SEVENTH STREET, ORANGE STREET AND CYPRESS STREET (SAID STREETS HAVING BEEN VACATED), EXCEPT PROPERTY CONVEYED TO CITY OF NEW SMYRNA BEACH DESCRIBED AS FOLLOWS: COMMENCING AT THE NORTHEAST CORNER OF LOT 1, BLOCK 1, EDSONRIDGE SUBDIVISION, MAP BOOK 19, PAGE 96, NEW SMYRNA BEACH, VOLUSIA COUNTY, FLORIDA, THENCE SOUTH 21(Degrees)10'41" EAST ALONG THE EASTERLY PROPERTY LINE OF LOTS 1 THROUGH 9, INCLUSIVE, BLOCK 1, OF SAID EDSONRIDGE SUBDIVISION A DISTANCE OF 579.00 FEET; THENCE SOUTH 70(Degrees)01'19 WEST ALONG THE SOUTHERLY LOT LINE OF LOT 9, A DISTANCE OF 38.90 FEET TO THE POINT OF BEGINNING; THENCE SOUTH 21(Degrees)10'41" EAST ALONG EXISTING CHAIN LINK FENCE A DISTANCE OF 2.28 FEET TO FACE OF BUILDING; THENCE SOUTH 68(Degrees)49'19" WEST ALONG FACE OF BUILDING A DISTANCE OF 8.00 FEET; THENCE NORTH 21(Degrees)10'41" WEST ALONG CHAIN LINK FENCE A DISTANCE OF 17.00 FEET; THENCE NORTH 68(Degrees)49'19" EAST ALONG CHAIN LINK FENCE A DISTANCE OF 8.0 FEET; THENCE SOUTH 21(Degrees)10,41" EAST ALONG CHAIN LINK FENCE A DISTANCE OF 14.72 FEET TO POINT OF BEGINNING, BEING THE SITE OF LIFT STATION. - -------------------------------------------------------------------------------- ADDENDUM DEMOGRAPHICS - -------------------------------------------------------------------------------- Addendum F DEMOGRAPHICS - -------------------------------------------------------------------------------- Atlas Market Quest Market Stats Report
CBC - C175-48 Page 1 of 9 Area 1 = US 1/10th St, New SMYRNA Beach, FL I Mil 5/20/96 Area 2 = US 1/10th St, New SMYRNA Beach, FL 3 Mil Area 3 = US 1/10th St, New SMYRNA Beach, FL 5 Mil - ------------------------------------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - ------------------------------------------------------------------------------------------------------------- 1995 Socio-Economic Measure: 24 38 42 1995 Employment: 1,108 7.549 9.183 Population: 2000 Projection 2,603 29,983 49.248 1995 Estimate 2.505 28,040 44.840 1990 Census 2.359 25.480 39,486 1990- 1995% Change (Growth) 6.2% 10.0% 13.6% 1990 Group Quarters Population 1 204 249 1995 % Population by Race: White 97.4% 93.1% 95.1% Black 2.0% 6.1% 4.0% American Indian, Eskimo & Aleut 0.1% 0.3% 0.3% Asian or Pacific Islander 0.5% 0.5% 0.5% Other 0.1% 0.1% 0.1% Hispanic 1.8% 1.2% 1.2% 1990 % Population by Race: White 96.7% 92.4% 94.6% Black 2.6% 6.9% 4.6% American Indian, Eskimo & Aleut 0.1% 0.2% 0.2% Asian or Pacific Islander 0.4% 0.4% 0.4% Other 0.1% 0.1% 0.1% Hispanic 1.4% 1.0% 1.1% 1995 % Population by Sex: Male 45.5% 47.0% 47.6% Female 54.2% 53.0% 52.4% 1990 % Population by Sex: Male 45.4% 47.0% 47.6% Female 54.6% 53.0% 52.4% 2000 Pop per Square Mile (Pop Density) 1,174.5 1,179.8 868.5% 1995 Pop per Square Mile (Pop Density) 1,130.3 1,103.4 790.7% 1990 Pop per Square Mile (Pop Density) 1,064.4 1,002.6 696.3% Area (Square Miles) 2.2 25.4 56.7% Area (Square Kilometers) 5.7 65.8 146.9%
Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas Market Quest Market Stats Report
CBC-Cl750-48 Page 2 of 9 Area I = US 1/10th St, New SMYRNA Beach, FL I Mil 5/20/96 Area 2 = US 1/10th St, New SMYRNA Beach, FL 3 Mil Area 3 = US 1/10th St, New SMYRNA Beach, FL 5 Mil - --------------------------------------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - --------------------------------------------------------------------------------------------------------------- Households: 2000 Projection 1,192 13,437 20,959 1995 Estimate 1,154 12,624 19,276 1990 Census 1,093 11,519 17,152 1990- 1995 %Change(Growth) 5.6% 9.6% 12.4% 2000 Average Household Size 2.18 2.22 2.34 1995 Average Household Size 2.17 2.21 2.31 1990 Average Household Size 2.16 2.19 2.29 2000 Per Capita Income $15,888 16,735 16.803 1995 Per Capita Income $14.172 14,792 14,952 1990 Per Capita Income $12,103 12,987 13,258 2000 Median Family Income $32,567 34,388 36,062 1995 Median Family Income $29,288 30,408 31,981 1990 Median Family Income $26,106 26,783 28.270 2000 Median Household Income $25,302 28.936 31,216 1995 Median Household Income $22,754 25,587 27,683 1990 Median Household Income $20,282 22.537 24,471 2000 Average Household Income $34.681 37,090 39,283 1995 Average Household Income $30.750 32,618 34.587 1990 Average Household Income $26,975 28,420 30.299 1995 % Household Income: $0 - $9,999 18.0% 14.8% 12.4% S10,000-S14,999 14.2% 11.3% 10.3% $15,000-$24,999 22.8% 22.9% 22.3% $25,000-$34,999 15.2% 17.7% 18.4% $35,000-$49,999 13.9% 16.5% 18.3% $50,000-$74,999 9.0% 10.8% 11.7% $75,000-$99,999 4.2% 3.7% 3.8% $100,000-$ 149,999 1.7% 1.5% 1.7% $150,000+ 1.0% 0.9% 1.0%
Copyright 1995 Strategic Mapping, Inc. All rights reserved. - -------------------------------------------------------------------------------- ADDENDUM G PROJECT REPORTS - -------------------------------------------------------------------------------- Addendum G PROJECT CASH FLOW REPORT PROJECT ASSUMPTIONS REPORT PROJECT LEASE ABSTRACT REPORT & RENT ROLL MARKET ANALYSIS FORM - -------------------------------------------------------------------------------- NEW SMYRNA BEACH SHOPPING PLAZA ANNUAL CASH FLOW REPORT BEGINNING 6/1/96 FOR 11 YEARS
FY1997 FY1998 FY1999 FYZODO FY2OO1 FY2002 INCOME MINIMUM RENT: ALL TENANTS 542,732 587,509 699,085 733,614 752,250 729,449 ---------- ---------- ----------- ----------- ---------- ----------- TOTAL MINIMUM RENT 542,732 587,509 699,085 733,614 752,250 729,449 RECOVERIES: REAL ESTATE TAX 17,906 21,850 34,125 35,947 35,883 35,748 CAM +15% ADMN. 23,789 29,003 45,544 47,988 47,877 47,910 INSURANCE 5,512 7,045 11,501 12,130 12,073 11,985 COMMON AREA MAINT. 395 503 568 587 608 423 ---------- ---------- ----------- ----------- ---------- ----------- TOTAL RECOVERIES 47,602 58,401 91,738 96,652 96,441 96,066 OVERAGE RENT 2,894 1,688 0 0 0 0 SALES VOLUME (000) 2,589 1,755 2,680 2,727 2,775 2,296 ---------- ---------- ----------- ----------- ---------- ----------- GROSS RENTAL INCOME 593,228 647,598 790,823 830,266 848,691 825,515 CREDIT LOSS (14,808) (16,983) (22,712) (24,290) (25,027) (24,100) ---------- ---------- ----------- ----------- ---------- ----------- TOTAL INCOME 578,420 630,615 768,111 805,976 823,664 801,415 EXPENSES UTILITIES 18,364 19,007 19,672 20,360 21,073 21,811 ADMINISTRATIVE 5,093 5,271 5,456 5,647 5,845 6,049 MAINTENANCE 40,756 42,182 43,659 45,187 46,768 48,405 INSURANCE 18,364 19,007 19,672 20,360 21,073 21,811 REAL ESTATE TAX 50,222 51,980 53,799 55,682 57,631 59,648 MANAGEMENT FEE 26,029 28,378 34,565 36,269 37,065 36,064 ---------- ---------- ----------- ----------- ---------- ----------- TOTAL EXPENSES 158,828 165,825 176,823 183,505 189,455 193,788 ---------- ---------- ----------- ----------- ---------- ----------- NET OPERATING INCOME 419,592 464,790 591,288 622,471 634,209 607,627 ALTERATIONS 198,343 46,191 5,862 1,081 3,971 19,689 COMMISSIONS 10,148 28,305 4,544 836 3,040 14,013 RESERVES 20,100 20,804 21,532 22,285 23,065 23,872 ---------- ---------- ----------- ----------- ---------- ----------- CASH FLOW 191,001 369,490 559,350 598,269 604,133 550,053 FY2003 FY2004 FY2005 FY2O06 FY2OO7 INCOME MINIMUM RENT: ALL TENANTS 734,933 779,682 810,469 779,693 757,239 ---------- ----------- ---------- ----------- ----------- TOTAL MINIMUM RENT 734,933 779,682 810,469 779,693 757,239 RECOVERIES: REAL ESTATE TAX 37,435 43,313 44,771 51,028 55,462 CAM +15% ADMN. 49,928 57,859 59,806 68,527 74,221 INSURANCE 12,564 14,675 15,165 17,831 18,205 COMMON AREA MAINT. 651 674 698 481 747 ---------- ----------- ---------- ----------- ----------- TOTAL RECOVERIES 100,578 116,521 120,440 137,867 148,635 OVERAGE RENT 0 0 0 0 0 SALES VOLUME (000) 2,454 2,929 2,984 3,040 2,074 ---------- ----------- ---------- ----------- ----------- GROSS RENTAL INCOME 835,511 896,203 930,909 917,560 905,874 CREDIT LOSS (24,500) (26,927) (28,316) (32,242) (36,235) ---------- ----------- ---------- ----------- ----------- TOTAL INCOME 811,011 869,276 902,593 885,318 869,639 EXPENSES UTILITIES 22,574 23,364 24,182 25,028 25,904 ADMINISTRATIVE 6,261 6,480 6,707 6,942 7,184 MAINTENANCE 50,099 51,853 53,668 55,546 57,490 INSURANCE 22,574 23,364 24,182 25,028 25,904 REAL ESTATE TAX 61,736 63,896 66,133 68,447 70,843 MANAGEMENT FEE 36,496 39,117 40,617 39,839 39,134 ---------- ----------- ---------- ----------- ----------- TOTAL EXPENSES 199,740 208,074 215,489 220,830 226,459 ---------- ----------- ---------- ----------- ----------- NET OPERATING INCOME 611,271 661,202 687,104 664,488 643,180 ALTERATIONS 55,667 4,096 1,899 32,460 81,399 COMMISSIONS 33,850 3,101 1,426 23,125 50,723 RESERVES 24,708 25,573 26,468 27,394 28,353 ---------- ----------- ---------- ----------- ----------- CASH FLOW 497,046 628,432 657,311 581,509 482,705
NEW SMYRNA BEACH SHOPPING PLAZA MNEMONIC REFERENCE TABLE AREA MEASURES - ------------- GLA - GROSS LEASEABLE AREA GROWTH RATES - ------------- RENT - RENT GROWTH EXP - EXPENSE GROWTH NCOM - NEW TENANT COMMISSIONS RCOM - RENEWAL COMMISSIONS BCOM - BLENOED COMMISSIONS MARKET RATES - ------------- MKT1 - ANCHOR TENANT MARKET RENT MKT3 - LOCAL TENANT MARKET RENT WT1 - NEW TENANT IMPROVEMENTS RT1 - RENEWAL TENANT IMPROVEMENTS BT1 - BLENDED TENANT IMPROVEMENTS MKT2 - ANCHOR TENANT MARKET RENT EXPENSES - ------------- UTIL - UTILITIES ADMN - ADMINISTRATIVE MAIM - MAINTENANCE INS - INSURANCE RETX - REAL ESTATE TAX CAM - COMMON AREA CHARGE CM15 - CAM + 5% ADMINISTRATIVE CHARGE NEW SMYRNA BEACH SHOPPING PLAZA PROJECT ASSUMPTIONS REPORT EXCLUDING TENANTS BUILDING PROLOGUE LEASEHOLD ANALYSIS OF NEW SMYRNA BEACH SHOPPING PLAZA BEGINNING 611996 FOR 12 YEARS ON A FISCAL YEAR BASIS AREA MEASURES GLA DESCRIBED AS GROSS LEASEABLE AREA 1996 VALUE 100,430 THEREAFTER - CONSTANT GROWTH RATES RENT DESCRIBED AS RENT GROWTH 1996 VALUE - 3.00 THEREAFTER - CONSTANT EXP DESCRIBED AS EXPENSE GROWTH 1996 VALUE - 3.50 THEREAFTER - CONSTANT NCOM DESCRIBED AS NEW TENANT COMMISSIONS 1996 VALUE - 5.00 THEREAFTER - CONSTANT RCOM DESCRIBED AS RENEWAL COMMISSIONS 1996 VALUE - 2.50 THEREAFTER - CONSTANT BCOM DESCRIBED AS BLENDED COMMISSIONS +30.0% OF NCOM +70.0% OF RCOM MARKET RATES PAGE 2 MKT1 DESCRIBED AS ANCHOR TENANT MARKET RENT 1996 VALUE - 5.00 THEREAFTER - GROWING AT GROWTH RATE RENT MKT2 DESCRIBED AS LOCAL TENANT MARKET RENT 1996 VALUE - 7.50 THEREAFTER - GROWING AT GROWTH RATE RENT NTI DESCRIBED AS NEW TENANT IMPROVEMENTS 1996 VALUE - 2.00 THEREAFTER - GROWING AT GROWTH RATE EXP RTI DESCRIBED AS RENEWAL TENANT IMPROVEMENTS 1996 VALUE - 1.00 THEREAFTER - GROWING AT GROWTH RATE EXP BTI DESCRIBED AS BLENDED TENANT IMPROVEMENTS +30.O% OF NTI +70.0% OF RTI DESCRIBED AS ANCHOR TENANT MARKET RENT 1996 VALUE - 0.00 THEREAFTER - GROWING AT GROWTH RATE RENT MISCELLANEOUS INCOMES NONE EXPENSES UTILITIES , REFERRED TO AS UTIL DESCRIBED AS UTILITIES CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 18,100 THEREAFTER - GROWING AT GROWTH RATE EXP ADMINISTRATIVE , REFERRED TO AS ADMN DESCRIBED AS ADMINISTRATIVE CHARGED AGAINST NET OPERATING INCOME PAGE 3 1996 VALUE - 5,020 THEREAFTER - GROWING AT GROWTH RATE EXP MAINTENANCE , REFERRED TO AS MAIN DESCRIBED AS MAINTENANCE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 40,170 THEREAFTER - GROWING AT GROWTH RATE EXP INSURANCE REFERRED TO AS INS DESCRIBED AS INSURANCE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 18,100 THEREAFTER - GROWING AT GROWTH RATE EXP REAL ESTATE TAX , REFERRED TO AS RETX DESCRIBED AS REAL ESTATE TAX CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 49,500 THEREAFTER - GROWING AT GROWTH RATE EXP COMMON AREA MAINT., REFERRED TO AS CAM DESCRIBED AS COMMON AREA CHARGE AN INFORMATIONAL EXPENSE +100.0% OF UTIL+100.0% OF MAIN +0.0% OF INS CAM +15% ADMN. , REFERRED TO AS 0115 DESCRIBED AS CAM + 15% ADMINISTRATIVE CHARGE AN INFORMATIONAL EXPENSE +115.0% OF CAM VACANCY ALLOWANCE PERCENTAGE OF POTENTIAL GROSS INCOME FOR ALL TENANTS SUBJECT TO VACANCY 1996 VALUE - 4.00 THEREAFTER - CONSTANT MANAGEMENT FEE PERCENTAGE OF EFFECTIVE GROSS INCOME FOR ALL TENANTS NOT PASSED THROUGH TO TENANTS PAGE 4 1996 VALUE - 4.50 THEREAFTER - CONSTANT COMMISSION CALCULATIONS STANDARD METHOD #1 - 0.000% OF TOTAL RENT STANDARD METHOD #2 - 0.000% OF TOTAL RENT STANDARD METHOD #3 - 0.000% OF TOTAL RENT STANDARD METHOD #4 - 0.000% OF TOTAL RENT STANDARD METHOD #5 - 0.000% OF TOTAL RENT COMMISSION PAYOUTS STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT ALTERATION CALCULATION NONE ALTERATION PAYOUTS STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT PAGE 5 STANDARD METHOD #5 - CASHED OUT COMMON AREA MAINTENANCE POOL NONE CAPITAL EXPENDITURES RESERVES 1996 VALUE - 20,100 THEREAFTER - GROWING AT GROWTH RATE EXP PRIMARY CLASSIFICATION CODES NONE SECONDARY CLASSIFICATION CODES NONE COST CENTERS NONE SALES VOLUME PROFILE PERCENT OF RELATIVE MONTH ANNUAL SALES VOLUME - ----- ------------ ------ JAN 8.33% 1.00 FEB 8.33% 1.00 MAR 8.33% 1.00 APR 8.33% 1.00 MAY 8.33% 1.00 JUN 8.33% 1.00 JUL 8.33% 1.00 PAGE 6 AUG 8.33% 1.00 SEP 8.33% 1.00 OCT 8.33% 1.00 NOV 8.33% 1.00 DEC 8.33% 1.00 ------ ----- TOTALS 100.00% 12.00 GLOBAL RECOVERIES NONE TENANT PROLOGUE MINIMUM RENTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR SALES VOLUMES AND BREAKPOINTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR RENEWAL RENTS ARE COMPOUNDED ANNUALLY RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET REFERENCE TENANTS THERE ARE A TOTAL OF 1 REFERENCE TENANT(S): # 1 - NEW TENANT BASE LEASE DATES: 7/1996 TO 6/2000 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: 1997 VALUE - MARKET RATE MKT2 THEREAFTER - GROWING AT GROWTH RATE RENT PERCENTAGE RENT: PAGE 7 INITIAL SALES - 0.00/SF/YR THEREAFTER - GROWING AT 0.OO% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES:NONE RECOVERIES: REAL ESTATE TAX PRO RATA SHARE RECOVERY OF EXPENSE RETX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH CAM +15% ADMN. PRO RATA SHARE RECOVERY OF EXPENSE CM15 PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: GROWTH RATE NCOM PAYOUT: CASHED OUT ALTERATIONS: MARKET RATE NTI PAYOUT: CASHED OUT SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ----------------- ------ -------- --------- ----------- ----------- 1 4.00 4 NONE NONE YES YES 2 4.00 4 NONE NONE YES YES RENEWAL MINIMUM RENT: MARKET RATE MKT2 MULTIPLIED BY 1.000 INCREASING AT GROWTH RATE RENT PER YEAR DURING EACH RENEWAL TERM RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: REAL ESTATE TAX PRO RATA SHARE RECOVERY OF EXPENSE RETX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE PAGE 8 WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH CAM +15% ADMN. PRO RATA SHARE RECOVERY OF EXPENSE CM15 PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: GROWTH RATE BCOM RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: MARKET RATE BTI RENEWAL PAYOUT: CASHED OUT NEW SMYRNA BEACH SHOPPING PLAZA LEASE ABSTRACT REPORT FOR ALL TENANTS
PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) ------------ -------- ---- ----- --- ----- ------- ---- ------- ------- # 1-SUITE 14-A - 8,960 10/96 9/06 - 4.00 35,840 FITNESS PLUS - 10/98 41,664 10/99 6.00 53,760 10/01 6.75 60,480 # 2-SUITE 4 - 650 8/96 7/98 - 10.00 6,500 HIEN CONG VAN - # 3-SUITE 1 - 24,780 11/95 11/05 - 9.00 223,020 BEACON THEATRE - 1- 60 9.00 223,020 2- 60 9.00 223,020 # 4-SUITE 10 - 1,500 3/95 3/97 - 5.25 7,875 CURLEY'S BARBER - # 5-SUITE 12 - 1,400 10/92 10/97 - 8.50 11,900 FANTASTIC SAM'S - 1- 60 9.00 12,600 # 6-SUITE 13 - 2,300 1/96 12/00 - 7.75 17,825 BEDDING & FURN. - 1- 60 8.15 18,745 BREAKPOINT PRO RATA % OF RENT TENANT (000'S) RECOVERIES SHARE BASE SUBJ TO CPI ----------- ------- ---------- ---------------------- # 1-SUITE 14-A NATURAL REAL ESTATE TAX ZERO FITNESS PLUS CAM +15% ADMN. ZERO INSURANCE ZERO # 2-SUITE 4 NATURAL REAL ESTATE TAX ZERO HIEN CONG VAN CAM +15% ADMN. ZERO INSURANCE ZERO # 3-SUITE 1 NATURAL NONE BEACON THEATRE NATURAL INSURANCE ZERO REAL ESTATE TAX ZERO CAM +15% ADMN. ZERO NATURAL INSURANCE ZERO REAL ESTATE TAX ZERO CAM +15% ADMN. ZERO # 4-SUITE 10 NATURAL INSURANCE ZERO CURLEY'S BARBER REAL ESTATE TAX ZERO CAM +15% ADMN. ZERO # 5-SUITE 12 NATURAL INSURANCE ZERO FANTASTIC SAM'S REAL ESTATE TAX ZERO CAM +15% ADMN. ZERO NATURAL INSURANCE ZERO REAL ESTATE TAX ZERO CAM +15% ADMN. ZERO # 6-SUITE 13 NATURAL INSURANCE ZERO BEDDING & FURN. REAL ESTATE TAX ZERO CAM +15% ADMN. ZERO NATURAL INSURANCE ZERO REAL ESTATE TAX ZERO CAM +15% ADMN. ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) ---------- --------- ---- ----- --- ----- ------- ------- ------- ------- # 7-SUITE 14-A - 7,040 7/96 6/99 - 3.41 24,006 DOLLAR GENERAL - # 8-SUITE 16 - 2,300 7/91 12/96 - 6.67 15,341 CHEMICAL PEOPLE - # 9-SUITE 17 1,700 12/95 11/98 5.50 9,350 PLAZA VIDEO - 12/96 5.75 9,775 12/97 6.00 10,200 #10-SUITE 18 - 8,000 10/94 10/97 - 5.00 40,000 3.00 UNLIMITED SEARS # 11-SUITE 19 - 4,400 9/94 9/96 5.00 22,000 CURTIS MATHES - # 12-SUITE 20 - 5,000 10/95 10/00 - 7.00 35,000 GOODYEAR 1- 60 7.80 39,000 # 13-SUITE 21 - 1,800 1/94 11/97 - 8.50 15,300 FLOWERS BAKING - # 14-SUITE 5-6 - 1,800 6/94 5/96 - 8.50 15,300 NATIONAL PROPANE - 1- 12 5.00 9,000 2- 12 5.30 9,540 #15-SUITE 7 - 750 8/96 7/99 - 10.00 7,500 K'S ICE CREAM - BREAKPOINT PRO RATA % OF RENT TENANT (000'S) RECOVERIES SHARE BASE SUBJ TO CPI ---------- ------- ---------- ---------------------- # 7-SUITE 14-A NATURAL NONE DOLLAR GENERAL # 8-SUITE 16 NATURAL NONE CHEMICAL PEOPLE # 9-SUITE 17 NATURAL INSURANCE ZERO PLAZA VIDEO REAL ESTATE TAX ZERO CAM +15% ADMN. ZERO #10-SUITE 18 2,504 INSURANCE ZERO SEARS 11/96 3,000 REAL ESTATE TAX ZERO CAM +15% ADMN. ZERO # 11-SUITE 19 NATURAL INSURANCE ZERO CURTIS MATHES REAL ESTATE TAX ZERO CAM +15% ADMN. ZERO # 12-SUITE 20 NATURAL REAL ESTATE TAX ZERO GOODYEAR CAM +15% ADMN. ZERO NATURAL REAL ESTATE TAX ZERO CAM +15% ADMN. ZERO # 13-SUITE 21 NATURAL INSURANCE ZERO FLOWERS BAKING REAL ESTATE TAX ZERO CAM +15% ADMN. ZERO # 14-SUITE 5-6 NATURAL INSURANCE ZERO NATIONAL PROPANE REAL ESTATE TAX ZERO CAM +15% ADMN. ZERO NATURAL INSURANCE ZERO REAL ESTATE TAX ZERO CAM +15% ADMN. ZERO NATURAL INSURANCE ZERO REAL ESTATE TAX ZERO CAM +15% ADMN. ZERO #15-SUITE 7 NATURAL INSURANCE ZERO K'S ICE CREAM REAL ESTATE TAX ZERO (AM +15% ADMN. ZERO
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PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) ----------- --------- ---- ----- --- ----- ------- ------- ------- ------- # 16-SUITE 8 - 900 8/89 2/97 - 7.00 6,300 APRIL'S HAIR - # 17-SUITE 9 - 21,050 5/86 12/96 - 2.50 52,625 5.00 UNLIMITED BRIAN'S CRAFTS - 1- 12 2.60 54,730 5.00 UNLIMITED # 18-SUITE 15 - 3,528 12/96 11/01 - 11.50 40,572 HRS 12/97 11.85 41,807 12/95 12.20 43,042 12/99 12.57 44,347 12/00 12.94 45,652 # 19-SUITE 15-A - 1,072 9/96 8/00 - 7.50 8,040 VACANT 9/97 7.72 8,281 9/98 7.96 8,530 9/99 8.20 8,786 # 20-SUITE 11 1,500 12/96 11/00 - 7.50 11,250 VACANT 12/97 7.72 11,588 12/98 7.96 11,935 12/99 8.20 12,293 ------- 100,430 ======= BREAKPOINT PRO RATA % OF RENT TENANT (000'S) RECOVERIES SHARE BASE SUBJ TO CPI --------- ------- ---------- ---------------------- # 16-SUITE 8 NATURAL COMMON AREA MAINT. ZERO APRIL'S HAIR REAL ESTATE TAX ZERO # 17-SUITE 9 1,053 NONE BRIAN'S CRAFTS 1,053 NONE # 18-SUITE 15 NATURAL NONE HRS # 19-SUITE 15-A NATURAL REAL ESTATE TAX ZERO VACANT CAM +15% ADMN. ZERO INSURANCE ZERO # 20-SUITE 11 NATURAL REAL ESTATE TAX ZERO VACANT CAM +15% ADMN. ZERO INSURANCE ZERO
- -------------------------------------------------------------------------------- Detail Rent Roll Page: 59 NEW SMYRNA BEACH Date: 05/14/96 Report Date: 05/14/96 Time: 14:17:51
- ---------------------------------------------------------------------------------------------------------------------------------- -- Rent Dates -- Suite Commence Expire Square Monthly Annual ---- Cost Recovery ---- Expense No. Tenant Name Start Footage Base Rent Rate/SF Description Monthly Stop - ---------------------------------------------------------------------------------------------------------------------------------- 00050 NATIONAL PROPANE DIST. #2440 05/25/94 05/31/96 1,800 750.00 5.00 05/25/94 00080 APRIL'S HAIR DESIGN 08/01/89 02/28/97 900 525.00 7.00 08/01/89 00090 BRIAN'S CRAFTS 05/01/86 12/31/962 21,050 4,385.42 2.50 05/01/86 00120 FANTASTIC SAM'S 10/05/92 10/04/97 1,400 991.67 8.50 10/05/92 00160 THE CHEMICAL PEOPLE 07/01/91 12/31/96 2,300 1,278.42 6.67 07/01/91 00180 SEARS 10/22/94 10/31/97 8,000 3,333.33 5.00 10/22/94 00190 CURTIS MATHES 09/27/94 09/30/96 4,400 1,833.33 5.00 09/27/94 00200 GOODYEAR TIRE & RUBBER 10/22/65 10/21/00 5,000 2,916.66 7.00 10/22/65 00210 FLOWERS BAKING 12/01/93 11/30/97 1,800 1,275.00 8.50 01/01/94 00010 NEW SMYRNA BEACON 8 THEATRES 11/17/95 11/30/05 24,780 18,585.00 9.00 11/17/95 00100 CURLEY'S BARBER SHOP 03/30/95 03/31/97 1,500 656.25 5.25 03/30/95 00170 PLAZA VIDEO 12/01/95 11/30/98 1,700 779.17 5.50 12/01/95 00130 BEDDING & FURNITURE DISCOUNT 01/01/96 12/31/00 2,300 1,485.42 7.75 01/01/96 ------------------------------------------------------- ---Other Income --- --- Future Rent Increases --- Description Monthly Date Monthly Amt. Per Sf ------------------------------------------------------- 00050 NATIONAL PROPANE DIST. #2440 MAINTENANC 76.78 REAL ESTAT 81.00 157.78 00080 APRIL'S HAIR DESIGN MAINTENANC 50.25 REAL ESTAT 48.21 98.46 00090 BRIAN'S CRAFTS 00120 FANTASTIC SAM'S MAINTENANC 67.43 10/01/99 1,050.00 9.00 REAL ESTAT 62.68 130.11 00160 THE CHEMICAL PEOPLE 00180 SEARS MAINTENANC 420.81 10/01/96 0.00 0.00 11/01/96 3,333.33 5.00 00190 CURTIS MATHES MAINTENANC 239.05 00200 GOODYEAR TIRE & RUBBER 10/22/00 3,250.00 7.80 00210 FLOWERS BAKING MAINTENANC 94.96 REAL ESTAT 72.26 167.22 00010 NEW SMYRNA BEACON 8 THEATRES 00100 CURLEY'S BARBER SHOP MAINTENANC 84.06 REAL ESTAT 58.75 142.81 00170 PLAZA VIDEO MAINTENANC 100.12 12/01/96 814.58 5.75 REAL ESTAT 66.58 12/01/97 850.00 6.00 166.70 00130 BEDDING & FURNITURE DISCOUNT MAINTENANC 80.50 01/01/01 0.00 0.00 REAL ESTAT 90.08 170.58
- -------------------------------------------------------------------------------- Detail Rent Roll Page: 60 NEW SMYRNA BEACH Date: 15/14/96 Report Date: 05/14/96 Time: 14:19:02
- --------------------------------------------------------------------------------------------------------------------- -- Rent Dates -- Suite Commence Expire Square Monthly Annual ---- Cost Recovery ---- No. Tenant Name Start Footage Base Rent Rate/SF Description Monthly - --------------------------------------------------------------------------------------------------------------------- 00070 K'S ICE CREAM & TREATS 12/31/99 01/01/00 750 625.00 10.00 12/31/99 0014B DOLLAR GENERAL STORE 12/31/99 01/01/00 7,040 2,000.00 3.41 12/31/99 - --------------------------------------------------------------------------------------------------------------------- Total Building Occupied Sqft: 85% 84,720 41,419.67 0.00 Available Sqft: 15% 15,060 Total Sqft: 99,780 - --------------------------------------------------------------------------------------------------------------------- 14-A Fitness Plus 10/1/96 9/30/96 8,960 2,986.67 4.00 4 Hien Cong Van 8/1/96 7/30/98 650 541.67 10.00 15 HRS 12/1/96 11/30/01 3,528 3,381.00 11.50 (Full Service) 97,858 SF Leased - -------------------------------------------------------------------------------------------------- Suite Expense ---Other Income --- --- Future Rent Increases --- No. Tenant Name Stop Description Monthly Date Monthly Amt. Per Sf - -------------------------------------------------------------------------------------------------- 00070 K'S ICE CREAM & TREATS MAINTENANC 26.25 REAL ESTAT 29.38 55.63 0014B DOLLAR GENERAL STORE 117.33 2,250.00 3.84 - ------------------------------------------------------------------- Total Building 1,866.48 - ------------------------------------------------------------------- 14-A Fitness Plus 4 Hien Cong Van 15 HRS
MARKET ANALYSIS - -------------------------------------------------------------------------------- Market Definitions: 3 mile radius of subject property - -------------------------------------------------------------------------------- Market Size: 8 Renters including Absorption (LTM): Market is stabilized subject - Total of 714,918 SF Under Construction: None Market rental rates: $7.00 - $10.00 (gross or net) net Planned: None Market TI's/Leasing Commissions: New $2/SF 4% Renewal $1/SF 2% Current Vacancy: % Overall Market Commission: (free rent) - -------------------------------------------------------------------------------- Comments: The market area is relatively stable with no new (Trends) construction. Stabilized occupancy is in the 90-96% range. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Employment Statistics - -------------------------------------------------------------------------------- Unemployment Rate: 1995 - 4.8% for Volusia County Major Employers: County schools, Halifax Medical Center, County Govt. Comments: The 1995 unemployment rate is down from 7.7% reported in 1992. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Demographic/Trade Area Analysis: (based on Urban Decision Systems Population Studies) - population 3 mile radius - 1995 estimate = $28,040 - income 1995 median household income = $25,587 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Sales Trends of Anchors: Beacon 8 Theatre - New tenant: no history (if applicable/available) Brian's Crafts - 1994 - $58/SF; 1995 - $53/SF - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ADDENDUM H INCOME AND EXPENSE DATA - -------------------------------------------------------------------------------- Addendum H IREM & URBAN LAND INSTITUTE INCOME AND EXPENSE DATA - -------------------------------------------------------------------------------- SELECTED METORPOLITAN AREAS OPEN ================================================================================
OPEN SHOPPING CENTERS METROPOLITAN ORLANDO, FL - ------------------------------------------------------------------------------------------------------------------------------------ CHART OF ACCTS $/TOTAL POTENTIAL GLA $/TOTAL AVG. ACTUAL OCCUP. $/BALANCE TOTAL $/BALANCE AVG. POTENTIAL GLA ACTUAL OCCUPANCY CENTERS SQ. ------$------- CENTERS SQ. ------$----- CENTERS SQ. -$- CENTERS SQ. -$- FT. MED. RANGE FT. MED. RANGE FT. MED FT. MED INCOME (10000) LOW HIGH (10000) LOW HIGH (10000) (10000) ANCHORS ------------------------------------------------------------------------------------------------------------- OWNED PARCEL NOT APPLICABLE NOT APPLICABLE GROSS MINIMUM ACTUAL MINIMUM PERCENTAGE RENT ENCLOSED CA SVS NON-ENCL CA SVS FOOD CRT CA SVS HVAC RECOVERY R/E TAX RCVRY INSURANCE RCVRY UTILITIES RCVRY MERCH ASSOC MKTG FUND TEMP TENANT INC MISC INCOME TOTL ANNUAL INC ------------------------------------------------------------------------------------------------------------- SQ FOOTAGE OCCUPANCY LEVEL 0% TENANTS OCCUPANCY LEVEL 0% ------------------------------------------------------------------------------------------------------------- GRND LEASE ONLY GROSS MINIMUM ACTUAL MINIMUM PERCENTAGE RENT ENCLOSED CA SVS NON-ENCL CA SVS FOOD CRT CA SVS HVAC RECOVERY R/E TAX RCVRY INSURANCE RCVRY UTILITIES RCVRY MERCH ASSOC MKTG FUND TEMP TENANT INC MISC INCOME TOTL ANNUAL INC ------------------------------------------------------------------------------------------------------------- SQ FOOTAGE OCCUPANCY LEVEL 0% TENANTS OCCUPANCY LEVEL 0% ------------------------------------------------------------------------------------------------------------- BUILDING LEASE GROSS MINIMUM 6 26 7.75 4.75 10.85 6 26 7.75 4.75 10.85 ACTUAL MINIMUM 6 26 7.75 4.75 10.85 6 26 7.75 4.75 10.85 PERCENTAGE RENT 3 11 .39 .16 .59 3 11 .59 .16 .59 ENCLOSED CA SVS NON-ENCL CA SVS 6 26 .80 .45 1.24 6 26 .80 .45 1.24 FOOD CRT CA SVS HVAC RECOVERY R/E TAX RCVRY 7 40 .76 .52 .82 7 33 .82 .52 1.29 INSURANCE RCVRY 4 17 .11 .10 .11 4 17 .11 .10 .11 UTILITIES RCVRY 2 9 .24 .17 .24 2 9 .24 .17 .24 MERCH ASSOC MKTG FUND 1 6 .03 .03 .03 1 6 .03 .03 .03 TEMP TENANT INC MISC INCOME 1 2 .12 .12 .12 1 2 .12 .12 .12 TOTL ANNUAL INC 7 40 8.05 5.79 8.72 7 33 8.05 5.79 8.72 ------------------------------------------------------------------------------------------------------------- SQ FOOTAGE OCCUPANCY LEVEL 100% TENANTS OCCUPANCY LEVEL 100% ------------------------------------------------------------------------------------------------------------- OUTPARCES/PADS GRND LEASE ONLY GROSS MINIMUM ACTUAL MINIMUM PERCENTAGE RENT ENCLOSED CA SVS NON-ENCL CA SVS FOOD CRT CA SVS HVAC RECOVERY R/E TAX RCVRY INSURANCE RCVRY UTILITIES RCVRY MERCH ASSOC MKTG FUND TEMP TENANT INC MISC INCOME TOTL ANNUAL INC ------------------------------------------------------------------------------------------------------------- SQ FOOTAGE OCCUPANCY LEVEL 0% TENANTS OCCUPANCY LEVEL 0% - ------------------------------------------------------------------------------------------------------------------------------------
FOOTNOTE: SQUARE FOOTAGE FIGURES (SQ.FT.) ARE REPORTED IN MULTIPLES OF TEN THOUSAND. SEE GUIDELINES SECTION FOR EXPLANATION OF REPORTS AND INTERPRETATION OF DATA. COPYRIGHT 1995, IREM. ================================================================================ open - metro 165 SELECTED METORPOLITAN AREAS OPEN ================================================================================
OPEN SHOPPING CENTERS METROPOLITAN ORLANDO, FL - ------------------------------------------------------------------------------------------------------------------------------------ CHART OF ACCTS $/TOTAL POTENTIAL GLA $/TOTAL AVG. ACTUAL OCCUP. $/BALANCE TOTAL $/BALANCE AVG. POTENTIAL GLA ACTUAL OCCUPANCY CENTERS SQ. ------$------- CENTERS SQ. ------$----- CENTERS SQ. -$- CENTERS SQ. -$- FT. MED. RANGE FT. MED. RANGE FT. MED FT. MED (10000) LOW HIGH (10000) LOW HIGH (10000) (10000) BUILDING LEASE ------------------------------------------------------------------------------------------------------------- GROSS MINIMUM 3 2 10.96 6.00 10.96 3 2 10.96 6.00 10.96 NOT APPLICABLE NOT APPLICABLE ACTUAL MINIMUM 3 2 10.96 6.00 10.96 3 2 10.96 6.00 10.96 PERCENTAGE RENT 1 0 .69 .69 .69 0 .69 .69 .69 ENCLOSED CA SVS NON-ENCL CA SVS 2 1 1.25 .43 1.25 2 1 1.25 .43 1.25 FOOD CRT CA SVS HVAC RECOVERY R/E TAX RCVRY 3 2 1.48 .34 1.48 3 2 1.48 .34 1.48 INSURANCE RCVRY 2 1 .26 .10 .26 2 1 .26 .10 .26 UTILITIES RCVRY 1 1 .16 .16 .16 1 1 .16 .16 .16 MERCH ASSOC MKTG FUND TEMP TENANT INC MISC INCOME 1 1 .12 .12 .12 1 1 .12 .12 .12 TOTAL ANNUAL INC 3 2 14.08 7.03 14.08 3 2 14.08 7.03 14.08 ------------------------------------------------------------------------------------------------------------- SQ FOOTAGE OCCUPANCY LEVEL 100% TENANTS OCCUPANCY LEVEL 100% ------------------------------------------------------------------------------------------------------------- BALANCE OF SHOPPING CENTER GROSS MINIMUM 15 95 8.50 7.48 9.70 15 77 9.81 9.19 12.27 ACTUAL MINIMUM 15 95 7.64 5.48 9.34 15 77 8.78 6.84 10.69 PERCENTAGE RENT 2 8 .14 .08 .14 2 8 .15 .08 .15 ENCLOSED CA SVS NON-ENCL CA SVS 15 95 .65 .52 .85 15 77 .78 .66 .98 FOOD CRT CA SVS HVAC RECOVERY R/E TAX RCVRY 13 75 .67 .41 .97 13 62 .82 .55 1.04 INSURANCE RCVRY 12 71 .11 .08 .13 12 59 .14 .11 .16 UTILITIES RCVRY 6 28 .23 .14 .25 6 22 .27 .18 .33 MERCH ASSOC MKTG FUND 1 6 .06 .06 .06 1 6 .06 .06 .06 TEMP TENANT INC MISC INCOME 6 44 .12 .04 .17 6 37 .13 .05 .21 TOTL ANNUAL INC 15 95 9.13 6.53 11.35 15 77 10.45 8.16 12.24 ------------------------------------------------------------------------------------------------------------- SQ FOOTAGE OCCUPANCY LEVEL 87% TENANTS OCCUPANCY LEVEL 81% ------------------------------------------------------------------------------------------------------------- TOTAL GROSS MINIMUM 16 137 8.43 6.39 9.32 16 111 9.69 8.74 11.44 ACTUAL MINIMUM 16 137 7.64 5.81 9.19 16 111 8.78 6.18 10.00 PERCENTAGE RENT 5 35 .10 .08 .19 5 32 .10 .08 .20 ENCL0SED CA SVS NON-ENCL CA SVS 16 137 .73 .40 .85 16 111 .78 .59 .98 FOOD CRT CA SVS HVAC RECOVERY R/E TAX RCVRY 15 123 .66 .45 .82 15 101 .77 .53 .93 INSURANCE RCVRY 12 93 .11 .09 .13 12 81 .13 .10 .16 UTILITIES RCVRY 6 38 .23 .14 .25 6 32 .27 .18 .27 MERCH ASSOC MKTG FUND 1 6 .09 .09 .09 1 6 .09 .09 .09 TEMP TENANT INC MISC INCOME 6 68 .10 .04 .11 6 53 .12 .05 .12 TOTAL ANNUAL INC 16 137 8.85 7.32 11.35 16 111 10.00 7.86 12.19 ------------------------------------------------------------------------------------------------------------- SQ FOOTAGE OCCUPANCY LEVEL 93% TENANTS OCCUPANCY LEVEL 82% ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------
FOOTNOTE: SQUARE FOOTAGE FIGURES (SQ.FT. ) ARE REPORTED IN MULTIPLES OF TEN THOUSAND. SEE GUIDELINES SECTION FOR EXPLANATION OF REPORTS AND INTERPRETATION OF DATA. COPYRIGHT 1995, IREM. ================================================================================ 166 open-metro SELECTED METORPOLITAN AREAS OPEN ================================================================================
OPEN SHOPPING CENTERS METROPOLITAN ORLANDO, FL - ------------------------------------------------------------------------------------------------------------------------------------ CHART OF ACCTS $/TOTAL POTENTIAL GLA $/TOTAL AVG. ACTUAL OCCUP. $/BALANCE TOTAL $/BALANCE AVG. POTENTIAL GLA ACTUAL OCCUPANCY CENTERS SQ. ------$------- CENTERS SQ. ------$----- CENTERS SQ. -$- CENTERS SQ. -$- FT. MED. RANGE FT. MED. RANGE FT. MED FT. MED EXPNS-OPEN/CA (10000) LOW HIGH (10000) LOW HIGH (10000) (10000) MAINT & REPAIR ------------------------------------------------------------------------------------------------------------- PRKG LOT/SDWLK 13 109 .01 .01 .03 13 93 .01 .01 .03 12 81 .02 12 65 .03 SWEEPING 13 109 .08 .05 .11 13 93 .09 .05 .12 12 82 .09 12 65 .12 ROOF REPAIR 15 133 .02 .01 .04 15 107 .03 .02 .04 14 91 .04 14 73 .06 PLUMBING 11 103 .00 .00 .01 11 83 .01 .00 .01 10 72 .01 10 60 .01 ELECTRICAL 13 125 .03 .01 .05 13 99 .04 .01 .05 12 86 .03 12 68 .04 PAINT/DECORATE 7 62 .01 .00 .01 7 54 .01 .00 .01 6 46 .01 6 38 .01 OTHER 8 71 .09 .06 .10 8 55 .09 .08 .10 7 39 .10 7 31 .10 SUBTOTAL M & R 15 133 .17 .14 .29 15 107 .21 .16 .30 14 91 .18 14 73 .30 SERVICES OUTDR LANDSCAPE 16 137 .17 .07 .23 16 111 .20 .13 .25 15 95 .20 15 77 .24 SNOW REMOVAL SECURITY 3 36 .01 .01 .01 3 29 .02 .01 .02 3 27 .03 3 21 .03 TRASH REMOVAL 14 120 .06 .01 .13 14 95 .10 .02 .14 13 88 .07 13 71 .14 CLEANING 9 83 .07 .02 .07 9 65 .08 .02 .10 8 53 .09 8 42 .14 OTHER 4 31 .02 .02 .02 4 28 .02 .02 .02 3 16 .02 3 14 .02 SUBTOTAL SRVCS 16 137 .29 .14 .33 16 111 .32 .23 .37 15 95 .33 15 77 .41 UTILITIES ELECTRICITY 14 129 .12 .07 .14 14 103 .14 .10 .20 13 90 .15 13 71 .19 HVAC FUEL-ELEC 1 5 .09 .09 .09 1 5 .10 .10 .10 1 2 .22 1 2 .23 -OIL -GAS -STEAM -OTHER 1 14 .02 .02 .02 1 10 .03 .03 .03 1 14 .02 1 10 .03 WATER & SEWER 14 110 .10 .01 .17 14 94 .11 .02 .19 13 82 .10 13 66 .00 COMB ELEC 1 4 .10 .10 .10 1 3 .11 .11 .11 1 4 .10 1 3 .00 OTHER 1 21 .01 .01 .01 1 11 .03 .03 .03 1 6 .05 1 4 .07 SUBTOTAL UTILS 16 137 .18 .14 .29 16 111 .23 .16 .31 15 95 .28 15 77 .31 OTHER ADMIN FEE 6 55 .07 .02 .07 6 40 .07 .02 .07 6 31 .07 6 23 .10 OTHER CA EXPNS 3 25 .02 .01 .02 3 22 .02 .01 .02 3 25 .02 3 22 .02 TAXES R/E TAX 16 137 .96 .82 1.09 16 111 1.12 .88 1.35 15 95 1.14 15 77 1.32 - -ANCHOR OWNED - -ANCHOR G/L - -ANCHOR B/L 4 28 .49 .47 .49 4 26 .52 .47 .52 3 9 1.22 3 7 1.43 - -OUTPARCEL G/L - -OUTPARCEL B/L 4 26 .19 .17 .19 4 21 .23 .17 .23 4 18 .49 4 12 .97 - -BALANCE 12 88 .88 .63 1.02 12 73 1.03 .77 1.12 12 74 1.02 12 59 1.12 OTHER TAX/FEES 1 10 .01 .01 .01 1 6 .01 .01 .01 1 9 .01 1 5 .01 INSURANCE 16 137 .14 .10 .17 16 111 .17 .13 .19 15 95 .17 15 77 .08 - -LIABILITY 11 90 .06 .06 .09 11 79 .07 .06 .11 10 66 .10 10 55 .12 - -PROPERTY 11 100 .07 .03 .08 11 85 .07 .04 .08 10 76 .07 10 61 .08 - -OTHER 4 35 .16 .14 .16 4 24 .18 .17 .18 4 14 .07 4 11 1.73 SUBTOTL INS/TAX 6 137 1.13 .91 1.23 16 111 1.26 1.10 1.52 15 95 1.25 15 77 1.55 OTHER EXPENSE ADMIN PAYROLL 7 83 .11 .09 .18 7 61 .17 .12 .19 7 53 .30 7 39 .00 MANAGEMENT FEE 16 137 .31 .25 .35 16 11 .37 .31 .41 15 95 .35 15 77 .00 MERCH ASSOC 1 14 .01 .01 .01 1 10 .01 .01 .01 1 11 .01 1 10 .00 MKTG FUND PROF SRVCS 10 86 .07 .02 .08 10 72 .09 .02 .11 9 64 .07 9 51 .12 MARKETING 8 64 .06 .01 .06 8 53 .07 .02 .09 7 49 .06 7 38 .09 OTHER MAINT 1 3 .00 .00 .00 1 3 .00 .00 .00 1 3 .00 1 3 .00 OTHER HVAC 2 7 .03 .01 .03 2 6 .03 .01 .03 2 7 .03 2 6 .03 FOOD COURT OTHER 8 38 .02 .02 .18 5 28 .02 .02 .18 4 15 .18 4 13 .18 TOTAL EXPENSES 16 137 2.08 1.98 2.5O 16 111 2.64 2.26 2.93 15 95 2.90 15 77 3.13 ------------------------------------------------------------------------------------------------------------- E/I RATIO (TAE/TAI) .26 MGT FEE CAM REIMBURSABLE (% YES) 94% - --------------------------------------------------------------------------------
FOOTNOTE: SQUARE FOOTAGE FIGURES (SQ.FT.) ARE REPORTED IN MULTIPLES OF TEN THOUSAND. SEE GUIDELINES SECTION FOR EXPLANATION OF REPORTS AND INTERPRETATION OF DATA. COPYRIGHT 1995, IREM. ================================================================================ open - metro 167 METROPOLITAN ANALYSIS BY BUILDING SIZE OPEN ================================================================================
OPEN SHOPPING CENTERS BY BUILDING SIZE ORLANDO, FL 50,000 - 99,999 SQ.FT - ------------------------------------------------------------------------------------------------------------------------------------ CHART OF ACCTS $/TOTAL POTENTIAL GLA $/TOTAL AVG. ACTUAL OCCUP. $/BALANCE TOTAL $/BALANCE AVG. POTENTIAL GLA ACTUAL OCCUPANCY CENTERS SQ. ------$------- CENTERS SQ. ------$----- CENTERS SQ. -$- CENTERS SQ. -$- FT. MED. RANGE FT. MED. RANGE FT. MED FT. MED (10000) LOW HIGH (10000) LOW HIGH (10000) (10000) INCOME-ANCHORS ------------------------------------------------------------------------------------------------------------- OWNED PARCEL ACTUAL MINIMUM NOT APPLICABLENOT APPLICABLE TOTL ANNUAL INC GRND LEASE ONLY ACTUAL MINIMUM TOTL ANNUAL INC BUILDING LEASE ACTUAL MINIMUM 3 11 7.75 4.54 7.75 3 11 7.75 4.54 7.75 TOTAL ANNUAL INC 3 11 8.72 5.79 8.72 3 11 8.72 5.79 8.72 OUTPARCELS/PADS GRND LEASE ONLY ACTUAL MINIMUM TOTL ANNUAL INC BUILDING LEASE ACTUAL MINIMUM 2 1 23.31 6.00 23.31 2 1 23.31 6.00 23.31 TOTL ANNUAL INC 2 1 26.27 7.03 26.27 2 1 26.27 7.03 26.27 BAL OF CENTER ACTUAL MINIMUM 4 22 9.34 4.37 9.34 4 16 10.00 8.68 10.00 TOTL ANNUAL INC 4 22 11.39 5.26 11.39 4 16 12.19 10.45 12.19 TOTL ALL INC ACTUAL MINIMUM 5 34 7.74 4.54 9.34 5 28 9.56 4.54 10.00 TOTL ANNUAL INC 5 34 8.85 5.79 11.39 5 28 10.93 5.79 12.19 EXPNS OPEN/CA SUBTOTAL M & R 5 34 .17 .17 .17 5 28 .21 .18 .27 4 22 .18 4 16 .30 SUBTOTAL SRVCS 5 34 .27 .27 .35 5 28 .37 .29 .40 4 22 .50 4 16 .55 SUBTOTAL UTILS 5 34 .17 .14 .18 5 28 .18 .18 .22 4 22 .25 4 16 .27 SUBTOTL INS/TAX 5 34 1.13 .70 1.23 5 28 1.21 .70 1.45 4 22 2.02 4 16 2.18 TOTAL EXPENSES 5 34 1.97 1.96 2.09 5 28 2.58 2.10 2.64 4 22 4.07 4 16 4.38 - ------------------------------------------------------------------------------------------------------------------------------------ OPEN SHOPPING CENTERS BY BUILDING SIZE ORLANDO, FL 100,000 - 199,999 SQ.FT - ------------------------------------------------------------------------------------------------------------------------------------ CHART OF ACCTS $/TOTAL POTENTIAL GLA $/TOTAL AVG. ACTUAL OCCUP. $/BALANCE TOTAL $/BALANCE AVG. POTENTIAL GLA ACTUAL OCCUPANCY CENTERS SQ. ------$------- CENTERS SQ. ------$----- CENTERS SQ. -$- CENTERS SQ. -$- FT. MED. RANGE FT. MED. RANGE FT. MED FT. MED (10000) LOW HIGH (10000) LOW HIGH (10000) (10000) INCOME-ANCHORS ------------------------------------------------------------------------------------------------------------- OWNED PARCEL ACTUAL MINIMUM NOT APPLICABLE NOT APPLICABLE TOTL ANNUAL INC GRND LEASE ONLY ACTUAL MINIMUM TOTL ANNUAL INC BUILDING LEASE ACTUAL MINIMUM 2 13 5.63 4.75 5.63 2 13 5.63 4.75 5.63 TOTL ANNUAL INC 2 13 8.05 6.22 8.05 2 13 8.05 6.22 8.05 OUTPARCELS/PADS GRND LEASE ONLY ACTUAL MINIMUM TOTL ANNUAL INC BAL OF CENTER ACTUAL MINIMUM 5 51 6.71 5.48 7.38 5 42 7.58 6.84 8.67 TOTL ANNUAL INC 5 51 8.49 6.53 8.98 5 42 9.59 8.16 10.32 TOTL ALL INC ACTUAL MINIMUM 5 64 6.27 5.81 6.71 5 55 7.20 6.18 7.58 TOTAL ANNUAL INC 5 64 8.00 7.39 8.49 5 55 9.20 7.86 9.59 EXPNS OPEN/CA SUBTOTAL M & R 5 64 .16 .15 .21 5 55 .21 .18 .23 5 51 .16 5 42 .21 SUBTOTAL SRVCS 5 64 .10 .09 .14 5 55 .14 .10 .15 5 51 .10 5 42 .14 SUBTOTAL UTILS 5 64 .29 .05 .31 5 55 .33 .05 .36 5 51 .29 5 42 .33 SUBTOTL lNS/TAX 5 64 .91 .89 1.08 5 55 1.24 .97 1.26 5 51 1.14 5 42 1.29 TOTAL EXPENSES 5 64 2.00 1.99 2.05 5 55 2.35 2.26 2.81 5 51 2.05 5 42 2.81 - ------------------------------------------------------------------------------------------------------------------------------------
FOOTNOTE: SQUARE FOOTAGE FIGURES (SQ.FT.) ARE REPORTED IN MULTIPLES OF TEN THOUSAND. SEE GUIDELINES SECTION FOR EXPLANATION OF REPORTS AND INTERPRETATION OF DATA. COPYRIGHT 1995, IREM. ================================================================================ open - metro 231 METROPOLITAN ANALYSIS BY AGE GROUP OPEN ================================================================================
OPEN SHOPPING CENTERS BY AGE GROUP ORLANDO, FL 1978 TO DATE - ------------------------------------------------------------------------------------------------------------------------------------ CHART OF ACCTS $/TOTAL POTENTIAL GLA $/TOTAL AVG. ACTUAL OCCUP. $/BALANCE TOTAL $/BALANCE AVG. POTENTIAL GLA ACTUAL OCCUPANCY CENTERS SQ. ------$------- CENTERS SQ. ------$----- CENTERS SQ. -$- CENTERS SQ. -$- FT. MED. RANGE FT. MED. RANGE FT. MED FT. MED INCOME (1000) LOW HIGH (1000) LOW HIGH (1000) (1000) ANCHORS ------------------------------------------------------------------------------------------------------------- INCOME-ANCHORS OWNED PARCEL ACTUAL MINIMUM NOT APPLICABLE NOT APPLICABLE TOTL ANNUAL INC GRND LEASE ONLI ACTUAL MINIMUM TOTL ANNUAL INC BUILDING LEASE ACTUAL MINIMUM 6 26 7.75 4.75 10.85 6 26 7.75 4.75 10.85 TOTL ANNUAL INC 7 40 8.05 5.79 8.72 7 33 8.05 5.79 8.72 OUTPARCELS/PADS GRND LEASE ONLI ACTUAL MINIMUM TOTL ANNUAL INC BUILDING LEASE ACTUAL MINIMUM 3 2 10.96 6.00 10.96 3 2 10.96 6.00 10.96 TOTL ANNUAL INC 3 2 14.08 7.03 14.08 3 2 14.08 7.03 14.08 BAL OF CENTER ACTUAL MINIMUM 13 78 7.64 5.81 9.34 13 63 8.78 7.58 11.27 TOTL ANNUAL INC 13 78 9.13 7.32 11.39 13 63 10.45 9.59 13.73 TOTL ALL ANNUAL INC ACTUAL MINIMUM 14 120 7.64 5.81 9.19 14 98 8.78 6.18 10.00 TOTL ANNUAL INC 14 120 8.85 7.32 11.39 14 98 10.00 7.86 12.19 EXPNS OPEN/CA SUBTOTAL M & R 13 116 .17 .14 .29 13 94 .21 .16 .30 12 74 .18 12 60 .30 SUBTOTAL SRVCS 14 120 .29 .14 .35 14 98 .33 .23 .40 13 78 .35 13 63 .48 SUBTOTAL UTILS 14 120 .18 .14 .29 14 98 .23 .16 .31 13 78 .28 13 63 .31 SUBTOTL INS/TAX 14 120 1.13 .91 1.23 14 98 1.24 .97 1.52 13 78 1.25 13 63 1.56 TOTAL EXPENSES 14 120 2.08 1.97 2.50 14 98 2.58 2.10 2.93 13 78 3.29 13 63 4.38 - ------------------------------------------------------------------------------------------------------------------------------------ OPEN SHOPPING CENTERS BY AGE GROUP PHOENIX, AZ 1965 - 1977 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME-ANCHORS OWNED PARCEL ACTUAL MINIMUM NOT APPLICABLE NOT APPLICABLE TOTL ANNUAL INC GRND LEASE ONLY ACTUAL MINIMUM 1 3 1.35 1.35 1.35 1 1 4.93 4.93 4.93 TOTL ANNUAL INC 1 3 2.42 2.42 2.42 1 1 8.86 8.86 8.86 BUILDING LEASE ACTUAL MINIMUM 4 21 2.35 1.99 2.35 4 21 2.35 1.99 2.35 TOTL ANNUAL INC 4 21 3.47 3.16 3.47 4 21 3.47 3.16 3.47 OUTPARCELS/PADS GRND LEASE ONLY ACTUAL MINIMUM TOTL ANNUAL INC BUILDING LEASE ACTUAL MINIMUM TOTL ANNUAL INC BAL OF CENTER ACTUAL MINIMUM 8 39 6.39 6.02 7.99 8 35 7.38 6.76 7.99 TOTL ANNUAL INC 8 39 8.63 7.80 10.59 8 35 9.44 8.22 10.59 TOTL ALL INC ACTUAL MINIMUM 9 77 5.00 4.68 5.87 9 70 5.87 5.22 6.62 ANNUAL INC 9 77 6.11 5.78 7.32 9 70 7.60 6.81 8.33 EXPNS OPEN/CA SUBTOTAL M & R 9 77 .16 .12 .17 9 70 .18 .12 .18 9 47 .27 9 42 .33 SUBTOTAL SRVCS 9 77 .24 .19 .36 9 70 .26 .25 .39 9 47 .43 9 42 .46 SUBTOTAL UTILS 9 77 .16 .13 .32 9 70 .18 .15 .33 9 47 .41 9 42 .50 SUBTOTL INS/TAX 9 77 .75 .66 1.39 9 70 1.07 .74 1.44 9 47 1.63 9 42 1.74 TOTAL EXPENSES 9 77 2.49 2.21 2.66 9 70 2.66 2.45 2.76 9 47 4.75 9 42 4.75 - ------------------------------------------------------------------------------------------------------------------------------------
FOOTNOTE: SQUARE FOOTAGE FIGURES (SQ.FT.) ARE REPORTED IN MULTIPLES OF TEN THOUSAND. SEE GUIDELINES SECTION FOR EXPLANATION OF REPORTS AND INTERPRETATION OF DATA. COPYRIGHT 1995, IREM. ================================================================================ open - metro 247 SELECTED REGIONAL AREAS OPEN ================================================================================
OPEN SHOPPING CENTERS REGION 4 - ------------------------------------------------------------------------------------------------------------------------------------ CHART OF ACCTS $/TOTAL POTENTIAL GLA $/TOTAL AVG. ACTUAL OCCUP. $/BALANCE TOTAL $/BALANCE AVG. POTENTIAL GLA ACTUAL OCCUPANCY CENTERS SQ. ------$------- CENTERS SQ. ------$----- CENTERS SQ. -$- CENTERS SQ. -$- FT. MED. RANGE FT. MED. RANGE FT. MED FT. MED INCOME (10000) LOW HIGH (10000) LOW HIGH (10000) (10000) ANCHORS ------------------------------------------------------------------------------------------------------------- INCOME ANCHORS OWNED PARCEL GROSS MINIMUM 13 75 4.09 3.05 6.15 13 75 4.09 3.05 6.15 NOT APPLICABLE NOT APPLICABLE ACTUAL MINIMUM 13 75 4.09 3.05 6.15 13 75 4.09 3.05 6.15 PERCENTAGE RENT 3 15 .20 .13 .20 3 15 .20 .13 .20 ENCLOSED CA SVS NON-ENCL CA SVS 13 88 .42 .23 .69 13 88 .42 .23 .69 FOOD CRT CA SVS HVAC RECOVERY R/E TAX RCVRY 9 57 .51 .17 .64 9 57 .51 .17 .64 INSURANCE RCVRY 6 50 .21 .06 .21 6 50 .21 .06 .21 UTILITIES RCVRY 3 13 .08 .00 .08 3 12 .08 .00 .08 MERCH ASSOC MKTG FUND TEMP TENANT INC MISC INCOME 1 3 .09 .09 .09 1 3 .09 .09 .09 TOTL ANNUAL INC 16 95 4.04 2.65 6.48 16 95 4.04 2.65 6.48 ------------------------------------------------------------------------------------------------------------- SQ FOOTAGE OCCUPANCY LEVEL 100% TENANTS OCCUPANCY LEVEL 100% ------------------------------------------------------------------------------------------------------------- GRND LEASE ONLY GROSS MINIMUM 4 18 13.39 3.60 13.39 3 15 13.39 3.60 13.39 ACTUAL MINIMUM 4 18 13.39 3.60 13.39 3 15 13.39 3.60 13.39 PERCENTAGE RENT 2 11 25.25 25.25 25.25 2 11 25.25 25.25 21.25 ENCLOSED CA SVS NON-ENCL CA SVS 3 15 2.69 .28 2.69 3 15 2.69 .28 2.69 FOOD CRT CA SVS HVAC RECOVERY 2 11 .02 .02 .02 2 11 .02 .02 .02 R/E TAX RCVRY 3 13 4.96 1.66 4.96 2 11 4.96 4.96 4.96 INSURANCE RCVRY 2 11 .17 .17 .17 2 11 .17 .17 .17 UTILITIES RCVRY 2 11 .32 .32 .32 2 11 .32 .32 .32 MERCH ASSOC MKTG FUND 2 28 .17 .17 .17 2 28 .17 .17 .17 TEMP TENANT INC MISC INCOME TOTL ANNUAL INC 3 15 47.24 3.88 47.24 3 15 47.24 3.88 47.24 ------------------------------------------------------------------------------------------------------------- SQ FOOTAGE OCCUPANCY LEVEL 100% TENANTS OCCUPANCY LEVEL 100% ------------------------------------------------------------------------------------------------------------- BUILDING LEASE GROSS MINIMUM 137 848 5.45 4.29 7.00 137 816 5.63 4.46 7.07 ACTUAL MINIMUM 137 848 5.39 3.85 6.80 137 816 5.51 4.19 7.00 PERCENTAGE RENT 28 221 .24 .11 .59 28 211 .25 .11 .59 ENCLOSED CA SVS 2 6 6.94 .52 6.94 2 5 9.03 .52 9.03 NON-ENCL CA SVS 109 654 .27 .17 .63 109 622 .30 .17 .66 FOOD CRT CA SVS HVAC RECOVERY 1 7 .01 .01 .01 1 6 .02 .02 .02 R/E TAX RCVRY 106 623 .55 .31 .83 106 593 .58 .31 .85 INSURANCE RCVRY 75 441 .07 .03 .11 75 425 .07 .03 .12 UTILITIES RCVRY 12 90 .05 .03 .10 12 89 .05 .03 .10 MERCH ASSOC MKTG FUND 1 6 .03 .03 .03 1 6 .03 .03 .03 TEMP TENANT INC 1 15 1.46 1.46 1.46 1 15 1.46 1.46 1.46 MISC INCOME 4 17 .12 .04 .12 4 15 .12 .04 .12 TOTL ANNUAL INC 138 863 6.22 4.45 8.30 138 823 6.42 4.90 8.36 ------------------------------------------------------------------------------------------------------------- SQ FOOTAGE OCCUPANCY LEVEL 100% TENANTS OCCUPANCY LEVEL 100% ------------------------------------------------------------------------------------------------------------- OUTPARCELS/PADS GRND LEASE ONLY GROSS MINIMUM 16 18 12.60 5.00 16.75 16 16 13.09 5.00 18.25 ACTUAL MINIMUM 16 18 12.60 5.00 15.39 16 16 13.09 5.00 16.29 PERCENTAGE RENT 1 1 2.13 2.13 2.13 1 1 2.13 2.13 2.13 ENCLOSED CA SVS NON-ENCL CA SVS 8 8 .56 .31 .73 8 6 .56 .31 .79 FOOD CRT CA SVS HVAC RECOVERY R/E TAX RCVRY 11 9 .69 .60 .82 11 8 .73 .60 1.00 INSURANCE RCVRY 2 1 .38 .10 .38 2 1 .38 .10 .38 UTILITIES RCVRY MERCH ASSOC MKTG FUND 1 19 .04 .04 .04 1 18 .04 .04 .04 TEMP TENANT INC MISC INCOME 1 0 .03 .03 .03 1 0 .03 .03 .03 TOTL ANNUAL INC 17 18 12.57 4.00 17.48 17 17 12.60 4.00 18.79 ------------------------------------------------------------------------------------------------------------- SQ FOOTAGE OCCUPANCY LEVEL 100% TENANTS OCCUPANCY LEVEL 100% - ------------------------------------------------------------------------------------------------------------------------------------
FOOTNOTE: SQUARE FOOTAGE FIGURES (SQ.FT.) ARE REPORTED IN MULTIPLES OF TEN THOUSAND. SEE GUIDELINES SECTION FOR EXPLANATION OF REPORTS AND INTERPRETATION OF DATA. COPYRIGHT 1995, IREM. ================================================================================ open - metro 255 SELECTED REGIONAL AREAS OPEN ================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------- OPEN SHOPPING CENTERS REGION 4 - ----------------------------------------------------------------------------------------------------------------------------------- CHART OF ACCTS $/TOTAL POTENTIAL GLA $/TOTAL AVG. ACTUAL OCCUP. $/BALANCE TOTAL $/BALANCE AVG. POTENTIAL GLA ACTUAL OCCUPANCY CENTERS SQ. --------$-------- CENTERS SQ. --------$-------- CENTERS SQ. -$- CENTERS SQ. -$- FT. MED. RANGE FT. MED. RANGE FT. MED FT. MED (10000) LOW HIGH (10000) LOW HIGH (10000) (10000) BUILDING LEASE - ---------------- ------------------------------------------------------------------------------------------------------------- GROSS MINIMUM 27 35 10.11 7.38 14.69 26 33 10.48 7.38 14.86 NOT APPLICABLE NOT APPLICABLE ACTUAL MINIMUM 26 34 10.40 6.70 14.86 26 33 10.40 7.38 14.86 PERCENTAGE RENT 8 6 2.45 .69 2.45 8 6 2.45 .69 2.45 ENCLOSED CA SVS NON-ENCL CA SVS 13 23 .43 .31 .65 13 22 .43 .31 .71 FOOD CRT CA SVS HVAC RECOVERY R/E TAX RCVRY 14 14 .79 .30 1.48 14 13 .84 .30 1.48 INSURANCE RCVRY 9 12 .17 .10 .26 9 11 .21 .10 .26 UTILITIES RCVRY 3 4 .16 .06 .16 3 4 .16 .06 .16 MERCH ASSOC MKTG FUND TEMP TENANT INC 1 0 .61 .61 .61 1 0 .61 .61 .61 MISC INCOME 2 3 .12 .04 .12 2 3 .12 .04 .12 TOTL ANNUAL INC 26 34 11.15 7.32 17.34 26 33 11.15 7.43 17.34 ------------------------------------------------------------------------------------------------------------- SQ FOOTAGE OCCUPANCY LEVEL 100% TENANTS OCCUPANCY LEVEL 100% ------------------------------------------------------------------------------------------------------------- BALANCE OF SHOPPING CENTER - ---------------- GROSS MINIMUM 184 827 8.22 6.39 10.79 182 690 9.58 6.96 13.06 ACTUAL MINIMUM 183 811 7.03 5.20 9.70 182 690 8.01 6.25 11.17 PERCENTAGE RENT 54 314 .16 .05 .30 52 262 .16 .06 .32 ENCLOSED CA SVS 7 39 .46 .12 .61 7 29 .75 .13 .75 NON-ENCL CA SVS 162 738 .46 .29 .87 161 629 .56 .36 1.11 FOOD CRT CA SVS HVAC RECOVERY 3 19 .11 .11 .11 3 19 .11 .11 .11 R/E TAX RCVRY 158 730 .58 .32 .92 156 605 .64 .40 1.02 INSURANCE RCVRY 135 588 .09 .05 .14 134 493 .11 .06 .18 UTILlTIES RCVRY 45 215 .11 .04 .25 45 185 .14 .04 .29 MERCH ASSOC 3 9 .20 .10 .20 3 9 .20 .10 .20 MKTG FUND 8 79 .06 .03 .25 8 76 .06 .03 .25 TEMP TENANT INC 8 37 .04 .00 .07 8 30 .04 .00 .09 MISC INCOME 97 505 .07 .03 .18 96 422 .09 .04 .21 TOTL ANNUAL INC 183 811 8.27 6.23 11.39 182 690 9.67 7.21 13.63 ------------------------------------------------------------------------------------------------------------- SQ FOOTAGE OCCUPANCY LEVEL 92% TENANTS OCCUPANCY LEVEL 90% ------------------------------------------------------------------------------------------------------------- TOTAL - ---------------- GROSS MINIMUM 203 1988 6.50 4.96 8.95 201 1785 7.33 5.30 9.81 ACTUAL MINIMUM 203 1967 5.84 4.54 7.98 202 1787 6.34 4.81 8.73 PERCENTAGE RENT 75 948 .14 .04 .37 73 845 .15 .04 .38 ENCLOSED CA SVS 10 100 .43 .12 1.09 10 79 .49 .13 1.09 NON-ENCL CA SVS 182 1801 .36 .21 .79 181 1642 .39 .22 .82 FOOD CRT CA SVS HVAC RECOVERY 4 60 .08 .02 .08 4 58 .08 .02 .08 R/E TAX RCVRY 183 1851 .46 .28 .76 181 1656 .52 .31 .84 INSURANCE RCVRY 156 1545 .05 .03 .11 154 1373 .06 .03 .13 UTTILITIES RCVRY 56 596 .08 .02 .23 55 530 .07 .03 .26 MERCH ASSOC 4 69 .11 .03 .11 3 47 .03 .02 .03 MKTG FUND 9 88 .09 .03 .29 9 85 .09 .03 .30 TEMP TENANT INC 12 179 .02 .01 .02 12 152 .02 .01 .03 MISC INC0ME 110 1282 .03 .01 .09 108 1126 .04 .01 .09 TOTL. ANNUAL INC 204 1990 6.91 5.41 9.53 202 1787 7.54 5.77 10.32 ------------------------------------------------------------------------------------------------------------- SQ FOOTAGE OCCUPANCY LEVEL 96% TENANTS OCCUPANCY LEVEL 92% ------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------------------
FOOTNOTE: SQUARE FOOTAGE FIGURES (SQ.FT.) ARE REPORTED IN MULTIPLES OF TEN THOUSAND. SEE GUIDELINES SECTION FOR EXPLANATION OF REPORTS AND INTERPRETATION OF DATA. COPYRIGHT 1995, IREM. ================================================================================ 256 open - regional SELECTED REGIONAL AREAS OPEN ================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------- OPEN SHOPPING CENTERS REGION 4 - ----------------------------------------------------------------------------------------------------------------------------------- CHART OF ACCTS S/TOTAL POTENTIAL GLA S/TOTAL AVG. ACTUAL OCCUP. $/BALANCE TOTAL S/BALANCE AVG. POTENTIAL GLA ACTUAL OCCUPANCY CENTERS SQ. --------S-------- CENTERS SQ. --------S-------- CENTERS SQ. -S- CENTERS SQ. -S- FT. MED. RANGE FT. MED. RANGE FT. MED FT. MED (10000) LOW HIGH (10000) LOW HIGH (10000) (10000) EXPNS-OPEN/CA --------------------------------------------------------------------------------------------------------------- - ---------------- MAINT & REPAIR - ---------------- PRKG LOT/SDWLK 163 1650 .03 .01 .07 162 1507 .03 .01 .08 156 737 .07 153 628 SWEEPING 176 1768 .08 .06 .11 174 1591 .09 .06 .12 169 790 .19 165 654 ROOF REPAIR 136 1371 .02 .01 .04 134 1191 .02 .01 .05 130 665 .04 127 538 PLUMBING 114 1058 .01 .00 .02 112 916 .01 .00 .02 109 564 .02 105 457 ELECTRICAL 152 1524 .02 .01 .03 151 1370 .02 .01 .04 144 709 .05 141 594 PAINT/DECORATE 92 932 .02 .01 .06 92 847 .02 .01 .06 87 451 .04 85 385 OTHER 120 1245 .04 .01 .10 120 1133 .04 .02 .12 114 576 .07 114 499 SUBTOTAL M & R 202 1984 .20 .14 .31 200 1781 .21 .15 .35 191 880 .48 187 733 SERVICES - ---------------- OUTDR LANSCAPE 192 1930 .10 .05 .16 190 1731 .10 .06 .17 182 858 .22 178 715 SNOW REMOVAL 50 565 .01 .00 .04 50 539 .01 .00 .04 47 195 .04 47 179 SECURITY 57 691 .03 .01 .07 56 622 .03 .01 .07 57 316 .05 56 222 TRASH REMOVAL 131 1341 .06 .02 .13 129 1177 .07 .02 .14 125 654 .13 121 533 CLEANING 70 720 .05 .01 .10 69 630 .04 .01 .12 66 391 .08 64 327 OTHER 77 857 .02 .01 .04 76 778 .02 .01 .05 74 377 .03 73 322 SUBTOTAL SRVCS 200 1972 .16 .09 .33 198 1768 .19 .09 .37 190 881 .40 186 734 UTILITIES - ---------------- ELECTRICITY 160 1587 .08 .05 .13 159 1440 .09 .05 .13 151 706 .18 149 599 HVAC FUEL-ELEC 12 156 .09 .07 .14 11 113 .10 .06 .13 12 98 .21 1l 67 -OIL 3 17 .14 .02 .14 2 9 .28 .02 .28 3 9 .24 2 4 -GAS 14 216 .01 .00 .01 14 191 .01 .00 .01 14 94 .01 14 77 -STEAM -OTHER 4 38 .04 .02 .04 4 33 .05 .03 .05 4 25 .07 4 21 WATER & SEWER 144 1455 .03 .01 .13 143 1320 .04 .01 .15 137 666 .07 134 560 COMB ELEC 26 246 .13 .10 .17 26 227 .16 .11 .22 26 102 .25 25 87 OTHER 18 206 .01 .01 .01 18 187 .01 .01 .03 18 92 .03 18 80 SUBTOTAL UTILS 196 1954 .12 .06 .23 194 1751 .13 .07 .25 186 878 .29 182 731 OTHER - ---------------- ADMIN FEE 74 709 .04 .01 .08 73 627 .04 .01 .09 72 331 .09 70 211 OTHER CA EXPNS 40 489 .01 .00 .03 38 423 .02 .00 .03 38 191 .02 36 145 TAXES - ---------------- R/E TAX 204 1990 .65 .40 .95 202 1787 .69 .46 1.11 192 884 1.50 188 737 - -ANCHOR OWNED 13 111 .51 .40 .66 12 100 .56 .40 .66 10 38 1.40 9 30 - -ANCHOR G/L 3 44 2.46 .02 2.46 3 42 2.46 .03 2.46 3 18 4.06 3 18 - -ANCHOR B/L 73 711 .31 .21 .51 73 650 .37 .22 .52 67 220 1.13 65 80 - -OUTPARCEL G/L 9 105 .08 .01 .12 9 101 .09 .01 .12 7 31 .16 7 29 - -OUTPARCEL B/L 16 168 .17 .06 .57 16 148 .17 .06 .62 16 68 .49 16 51 - -BALANCE 147 1439 .51 .21 .91 146 1292 .56 .22 1.03 145 682 .88 144 572 OTHER TAX/FEES 26 335 .31 .00 .02 26 300 .01 .00 .02 24 174 .02 24 45 - ---------------- INSURANCE 204 1990 .11 .07 .17 202 1787 .12 .08 .19 192 884 .25 188 737 - -LIABILITY 163 1636 .05 .02 .09 162 1491 .05 .02 .11 153 710 .10 150 134 - -PROPERTY 152 1524 .07 .04 .12 151 1371 .58 .04 .13 143 698 .16 140 183 - -OTHER 40 361 .01 .00 .06 40 308 .01 .00 .07 37 165 .03 37 134 SUBTOTAL INS/TAX 204 1990 .76 .50 1.11 202 1787 .81 .58 1.25 192 884 1.89 188 737 OTHER EXPENSES - ---------------- ADMIN PAYROLL 32 498 .15 .09 .34 31 411 .17 .09 .37 32 266 .32 30 204 MANAGEMENT FEE 187 1773 .28 .19 .37 185 1577 .31 .20 .41 176 817 .63 172 677 MERCH ASSOC 6 73 .12 .01 .05 6 - .02 .01 .05 6 15 .28 5 35 MKTG FUND 25 312 .03 .01 .13 24 275 .03 .01 .12 23 131 .08 22 106 PROF SRVCS 142 1556 .06 .02 .13 140 1388 .06 .02 .13 137 701 .13 133 577 MARKETING 49 460 .01 .01 .03 48 400 .02 .01 .04 48 219 .04 45 172 OTHER MAINT 76 759 .04 .02 .09 75 696 .04 .02 .10 72 293 .10 70 248 OTHER HVAC 58 539 .01 .00 .03 57 490 .01 .00 .04 52 216 .02 51 182 FOOD COURT OTHER 97 1042 .02 .01 .08 97 935 .02 .01 .09 93 404 .05 93 337 TOTAL EXPENSES 204 1990 1.77 1.17 2.50 202 1787 1.99 1.28 2.93 192 884 4.29 188 737 ------------------------------------------------------------------------------------------------------------- E/I RATIO (TAE/TAI) .25 MGT FEE CAM REIMBURSABLE (% YES) 36% - -----------------------------------------------------------------------------------------------------------------------------------
FOOTNOTE: SQUARE FOOTAGE FIGURES (SQ.FT.) ARE REPORTED IN MULTIPLES OF TEN THOUSAND. SEE GUIDELINES SECTION FOR EXPLANATION OF REPORTS AND INTERPRETATION OF DATA. COPYRIGHT 1995, IREM. ================================================================================ open - regional 257 REGIONAL ANALYSIS BY BUILDING SIZE OPEN ================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------- OPEN SHOPPING CENTERS BY BUILDING SIZE REGION 4 25,000- 49,999 SQ. FT - ----------------------------------------------------------------------------------------------------------------------------------- CHART OF ACCTS S/TOTAL POTENTIAL GLA S/TOTAL AVG. ACTUAL OCCUP. $/BALANCE TOTAL S/BALANCE AVG. POTENTIAL GLA ACTUAL OCCUPANCY CENTERS SQ. --------S-------- CENTERS SQ. --------S-------- CENTERS SQ. -S- CENTERS SQ. -S- FT. MED. RANGE FT. MED. RANGE FT. MED FT. MED (10000) LOW HIGH (10000) LOW HIGH (10000) (10000) -------------------------------------------------------------------------------------------------------------- INCOME-ANCHORS - -------------- OWNED PARCEL ACTUAL MINIMUM 4 11 5.64 3.05 5.64 4 11 5.64 3.05 5.64 NOT APPLICABLE NOT APPLICABLE TOTL ANNUAL INC 4 11 6.48 3.14 6.48 4 11 6.48 3.14 6.48 GRAND LEASE ONLY ACTUAL MINIMUM TOTL ANNUAL INC BUILDING LEASE ACTUAL MINIMUM 25 65 5.90 4.95 8.31 25 63 6.10 5.42 9.00 TOTAL ANNUAL INC 25 65 6.70 5.34 10.55 25 63 6.76 5.67 12.58 OUTPARCELS/PADS GRND LEASE ONLY ACTUAL MINIMUM 2 1 9.29 3.65 9.29 2 1 9.29 3.65 9.29 TOTL ANNUAL INC 2 1 12.57 4.00 12.57 2 1 12.57 4.00 12.57 BUILDING LEASE ACTUAL MINIMUM 3 2 10.96 5.00 10.96 3 2 10.96 5.00 10.96 TOTL ANNUAL INC 3 2 14.08 5.00 14.08 3 2 14.08 5.00 14.08 BAL OF CENTER ACTUAL MINIMUM 45 107 6.78 5.24 9.14 45 96 7.69 5.84 9.50 TOTL ANNUAL INC 45 107 7.87 5.94 11.12 45 96 8.41 7.02 11.45 TOTL ALL INC ACTUAL MINIMUM 51 186 6.25 5.16 8.76 51 173 6.86 5.62 9.19 TOTL ANNUAL INC 51 186 7.16 5.87 11.10 51 173 7.87 6.45 11.40 EXPNS OPEN/CA - ----- SUBTOTAL M & R 50 183 .22 .16 .36 50 169 .22 .16 .40 45 105 .40 44 92 .44 SUBTOTAL SRVCS 49 179 .20 .09 .40 49 165 .22 .09 .48 44 106 .39 43 93 .40 SUBTOTAL UTILS 46 167 .17 .11 .33 46 153 .18 .11 .42 41 105 .28 40 92 .31 SUBTOTL INS/TAX 51 186 .77 .58 1.11 51 173 .82 .58 1.36 46 109 1.53 45 96 1.63 TOTAL EXPENSES 51 186 1.79 1.23 3.01 51 173 2.26 1.23 3.15 46 109 3.54 45 96 3.98 - ----------------------------------------------------------------------------------------------------------------------------------- OPEN SHOPPING CENTERS BY BUILDING SIZE REGION 4 50,000- 99,999 SQ. FT - ----------------------------------------------------------------------------------------------------------------------------------- CHART OF ACCTS S/TOTAL POTENTIAL GLA S/TOTAL AVG. ACTUAL OCCUP. $/BALANCE TOTAL S/BALANCE AVG. POTENTIAL GLA ACTUAL OCCUPANCY CENTERS SQ. --------S-------- CENTERS SQ. --------S-------- CENTERS SQ. -S- CENTERS SQ. -S- FT. MED. RANGE FT. MED. RANGE FT. MED FT. MED (10000) LOW HIGH (10000) LOW HIGH (10000) (10000) -------------------------------------------------------------------------------------------------------------- INCOME-ANCHORS - -------------- OWNED PARCEL ACTUAL MINIMUM 4 13 9.75 3.69 9.75 4 13 9.75 3.69 9.75 NOT APPLICABLE NOT APPLICABLE TOTL ANNUAL INC 5 18 4.04 3.84 10.96 5 18 4.34 3.84 10.96 GRAND LEASE ONLY ACTUAL MINIMUM 1 5 3.60 3.60 3.60 1 5 3.60 3.60 3.60 TOTL ANNUAL INC 1 5 3.88 3.88 3.88 1 5 3.38 3.88 3.88 BUILDING LEASE ACTUAL MINIMUM 54 226 6.02 4.42 7.09 TOTAL ANNUAL INC 54 226 7.13 5.50 8.72 54 222 7.13 5.50 8.72 OUTPARCELS/PADS GRND LEASE ONLY ACTUAL MINIMUM 6 5 13.09 3.21 21.54 6 5 13.19 3.21 21.54 TOTL ANNUAL INC 6 5 13.82 3.81 25.86 6 5 13.82 3.81 25.86 BUILDING LEASE ACTUAL MINIMUM 11 10 10.40 6.70 20.12 11 9 10.40 7.43 20.12 TOTL ANNUAL INC 11 10 10.75 7.32 22.57 11 9 10.75 7.43 22.57 BAL OF CENTER ACTUAL MINIMUM 62 231 7.06 5.38 9.53 61 196 3.67 6.43 10.56 TOTL ANNUAL INC 62 231 8.42 6.69 11.33 61 196 9.90 7.13 12.68 TOTL ALL INC ACTUAL MINIMUM 69 511 6.54 5.19 7.80 68 467 7.40 5.61 8.45 TOTL ANNUAL INC 69 511 7.77 5.84 9.27 68 467 3.17 6.51 10.25 EXPNS OPEN/CA SUBTOTAL M & R 69 511 .20 .15 .30 68 467 .22 .16 .32 64 241 .47 63 205 .55 SUBTOTAL SRVCS 68 503 .18 .10 .27 67 458 .19 .10 .29 64 241 .39 63 205 .44 SUBTOTAL UTILS 67 497 .13 .08 .18 66 453 .13 .08 .22 63 239 .28 62 203 .30 SUBTOTL INS/TAX 69 511 .81 .54 1.21 68 467 .92 .67 1.25 64 241 2.02 63 205 2.39 TOTAL EXPENSES 69 511 1.87 1.44 2.36 68 467 2.05 1.44 2.64 64 241 4.24 63 205 5.05 - -----------------------------------------------------------------------------------------------------------------------------------
FOOTNOTE: SQUARE FOOTAGE FIGURES (SQ.FT.) ARE REPORTED IN MULTIPLES OF TEN THOUSAND. SEE GUIDELINES SECTION FOR EXPLANATION OF REPORTS AND INTERPRETATION OF DATA. COPYRIGHT 1995, IREM. ================================================================================ Open - regional 271 REGIONAL ANALYSIS BY BUILDING SIZE OPEN ================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------- OPEN SHOPPING CENTERS BY BUILDING SIZE REGION 4 100,000- 199,999 SQ. FT - ----------------------------------------------------------------------------------------------------------------------------------- CHART OF ACCTS S/TOTAL POTENTIAL GLA S/TOTAL AVG. ACTUAL OCCUP. $/BALANCE TOTAL S/BALANCE AVG. POTENTIAL GLA ACTUAL OCCUPANCY CENTERS SQ. --------S-------- CENTERS SQ. --------S-------- CENTERS SQ. -S- CENTERS SQ. -S- FT. MED. RANGE FT. MED. RANGE FT. MED FT. MED (10000) LOW HIGH (10000) LOW HIGH (10000) (10000) -------------------------------------------------------------------------------------------------------------- INCOME-ANCHORS - -------------- OWNED PARCEL ACTUAL MINIMUM 4 32 4.12 4.09 4.12 4 32 4.12 4.09 4.12 NOT APPLICABLE NOT APPLICABLE TOTL ANNUAL INC 6 48 4.67 .69 5.26 6 48 4.67 .69 5.26 GRAND LEASE ONLY ACTUAL MINIMUM 2 11 13.39 13.39 13.39 2 11 13.39 13.39 13.39 TOTL ANNUAL INC 2 11 47.24 47.24 47.24 2 11 47.24 47.24 47.24 BUILDING LEASE ACTUAL MINIMUM 48 427 4.75 3.74 6.40 48 406 4.75 3.85 6.40 TOTAL ANNUAL INC 48 427 5.27 4.19 7.26 48 406 5.30 4.45 7.26 OUTPARCELS/PADS GRND LEASE ONLY ACTUAL MINIMUM 6 7 15.39 9.85 28.69 6 6 16.29 14.32 28.69 TOTL ANNUAL INC 7 8 17.25 6.09 17.48 7 6 17.48 6.09 18.79 BUILDING LEASE ACTUAL MINIMUM 11 21 9.68 4.24 10.48 11 21 9.68 4.24 10.48 TOTL ANNUAL INC 11 21 11.15 4.24 14.46 11 21 11.15 4.24 14.46 BAL OF CENTER ACTUAL MINIMUM 57 329 7.40 5.04 10.69 57 284 7.96 6.50 12.10 TOTL ANNUAL INC 57 329 8.58 6.63 12.97 57 284 9.62 8.03 14.36 TOTL ALL INC ACTUAL MINIMUM 61 867 5.09 4.12 8.03 61 800 5.45 4.54 8.78 TOTL ANNUAL INC 61 867 6.09 4.99 9.12 61 800 6.70 5.41 10.19 EXPNS OPEN/CA - ------------- SUBTOTAL M & R 61 867 .17 .12 .27 61 800 .18 .13 .32 60 344 .53 59 298 .59 SUBTOTAL SRVCS 61 867 .12 .08 .33 61 800 .14 .09 .35 60 344 .56 59 298 .57 SUBTOTAL UTILS 61 867 .07 .05 .21 61 800 .07 .05 .22 60 344 .29 59 298 .30 SUBTOTL INS/TAX 61 867 .72 .43 .91 61 800 .76 .47 1.17 60 344 1.89 59 298 2.17 TOTAL EXPENSES 61 867 1.62 .95 2.27 61 800 1.76 1.12 2.81 60 344 4.91 59 298 5.49 - ----------------------------------------------------------------------------------------------------------------------------------- OPEN SHOPPING CENTERS BY BUILDING SIZE REGION 4 50,000- 99,999 SQ. FT - ----------------------------------------------------------------------------------------------------------------------------------- CHART OF ACCTS S/TOTAL POTENTIAL GLA S/TOTAL AVG. ACTUAL OCCUP. $/BALANCE TOTAL S/BALANCE AVG. POTENTIAL GLA ACTUAL OCCUPANCY CENTERS SQ. --------S-------- CENTERS SQ. --------S-------- CENTERS SQ. -S- CENTERS SQ. -S- FT. MED. RANGE FT. MED. RANGE FT. MED FT. MED (10000) LOW HIGH (10000) LOW HIGH (10000) (10000) -------------------------------------------------------------------------------------------------------------- INCOME-ANCHORS - -------------- OWNED PARCEL ACTUAL MINIMUM 2 12 4.30 3.14 4.30 1 4 7.83 7.83 7.83 NOT APPLICABLE NOT APPL:.~FI.. TOTL ANNUAL INC 2 12 5.33 4.54 5.33 1 4 9.70 9.70 9.70 GRAND LEASE ONLY ACTUAL MINIMUM TOTL ANNUAL INC BUILDING LEASE ACTUAL MINIMUM 19 81 4.27 3.71 4.66 18 74 4.30 3.81 4.77 TOTAL ANNUAL INC 19 81 5.71 4.79 7.07 18 74 6.40 5.44 7.07 OUTPARCELS/PADS GRND LEASE ONLY ACTUAL MINIMUM 3 2 10.04 1.25 10.04 3 2 10.04 1.25 10.04 TOTL ANNUAL INC 3 2 10.04 3.38 10.04 3 2 10.04 3.38 10.04 BUILDING LEASE ACTUAL MINIMUM 5 2 10.69 6.78 14.29 5 2 10.69 6.78 14.29 TOTL ANNUAL INC 5 2 11.19 10.49 15.68 5 2 11.19 10.49 15.68 BAL OF CENTER ACTUAL MINIMUM 31 147 6.01 4.56 7.61 29 120 6.43 5.19 8.65 TOTL ANNUAL INC 31 147 8.44 6.64 10.78 29 120 9.19 7.27 13.19 TOTL ALL INC ACTUAL MINIMUM 35 259 4.98 4.18 7.31 33 220 5.49 4.72 7.88 TOTL ANNUAL INC 35 259 7.25 5.54 9.46 33 220 7.57 5.79 11.71 EXPNS OPEN/CA - ------------- SUBTOTAL M & R 35 259 .20 .12 .34 33 220 .23 .12 .37 33 154 .39 31 126 .42 SUBTOTAL SRVCS 35 259 .29 .21 .42 33 220 .30 .23 .60 33 154 .46 31 126 .50 SUBTOTAL UTILS 34 252 .13 .10 .21 32 214 .17 .11 .24 32 152 .25 30 124 .28 SUBTOTL INS/TAX 35 259 1.38 .83 2.29 33 220 1.68 .99 2.08 33 154 2.84 31 126 2.96 TOTAL EXPENSES 35 259 2.58 1.82 4.15 33 220 2.75 1.90 4.24 33 154 4.78 31 126 5.30 - -----------------------------------------------------------------------------------------------------------------------------------
FOOTNOTE: SQUARE FOOTAGE FIGURES (SQ.FT.) ARE REPORTED IN MULTIPLES OF TEN THOUSAND. SEE GUIDELINES SECTION FOR EXPLANATION OF REPORTS AND INTERPRETATION OF DATA. COPYRIGHT 1995, IREM. ================================================================================ 272 Open - regional Dollars & Cents of Shopping Centers(TM): 1995 A Study of Receipts and Expenses in Shopping Center Operations Michael D. Beyard Project Director Suzan J. Spink Project Manager Deloitte & Touche Accountants for the Study Algorists, Inc. Software Engineering for the Study [LOGO] Urban Land Institute ================================================================================ Table 6-3 U.S. Neighborhood Shopping Centers in the South: Center Size, Center Sales, and Operating Results
==================================================================================================================================== Number of Centers in sample: 118 Lower Upper Lower Upper Number Average Median Decile Decile Median Decile Decile Reporting ==================================================================================================================================== ==================================================================================================================================== Center Size (Square Feet) ==================================================================================================================================== Total floor space (GLA and all other floor area) 60,817 60,680 36,321 88,824 117 - ------------------------------------------------------------------------------------------------------------------------------------ Owned gross leasable area 58,361 57,281 34,480 87,485 118 - ------------------------------------------------------------------------------------------------------------------------------------ ==================================================================================================================================== Center Sales ==================================================================================================================================== All tenants (per square foot of GLA) $218.06 $219.07 $90.09 $346.68 70 - ------------------------------------------------------------------------------------------------------------------------------------ ==================================================================================================================================== Operating Results Dollars per Square Foot of GLA Percent of Total Receipts ==================================================================================================================================== ==================================================================================================================================== Total Operating Receipts $7.13 $6.82 $3.05 $12.34 100.00% 100.00% 100.00% 118 ==================================================================================================================================== Total rent 6.09 5.75 2.81 10.09 87.29 78.94 95.83 118 - ------------------------------------------------------------------------------------------------------------------------------------ Rental income--minimum 5.98 5.66 2.64 10.09 85.07 73.63 93.89 118 - ------------------------------------------------------------------------------------------------------------------------------------ Rental income--overages 0.28 0.19 0.02 0.75 3.59 0.20 18.77 40 - ------------------------------------------------------------------------------------------------------------------------------------ Total common area charges 0.40 0.37 0.06 0.92 5.18 1.44 9.43 105 - ------------------------------------------------------------------------------------------------------------------------------------ Total other charges 0.60 0.59 0.12 1.32 7.62 2.77 14.63 111 - ------------------------------------------------------------------------------------------------------------------------------------ Property taxes and insurance 0.59 0.59 0.16 1.21 7.25 3.39 13.68 103 - ------------------------------------------------------------------------------------------------------------------------------------ Property taxes 0.51 0.50 0.13 1.06 6.54 2.94 12.04 106 - ------------------------------------------------------------------------------------------------------------------------------------ Insurance 0.08 0.08 0.02 0.18 0.97 0.32 2.29 85 - ------------------------------------------------------------------------------------------------------------------------------------ Other escalation charges 0.29 0.23 0.01 0.93 3.31 0.07 10.99 12 - ------------------------------------------------------------------------------------------------------------------------------------ Income from sale of liabilities 0.10 0.07 0.01 0.25 0.72 0.13 2.85 18 - ------------------------------------------------------------------------------------------------------------------------------------ Total miscellaneous income 0.06 0.03 0.00 0.30 0.38 0.04 2.96 80 - ------------------------------------------------------------------------------------------------------------------------------------ ==================================================================================================================================== Total Operating Expenses $2.12 $2.04 $0.90 $3.78 30.02% 19.02% 50.99% 118 ==================================================================================================================================== Total maintenance and housekeeping 0.64 0.80 0.23 1.30 8.40 3.87 18.11 118 - ------------------------------------------------------------------------------------------------------------------------------------ Parking lot, mall, other common areas 0.44 0.40 0.11 1.00 6.29 2.52 11.93 118 - ------------------------------------------------------------------------------------------------------------------------------------ Parking lot 0.11 0.10 0.02 0.26 1.35 0.26 3.85 105 - ------------------------------------------------------------------------------------------------------------------------------------ Utilities 0.13 0.11 0.04 0.30 1.59 0.63 3.99 111 - ------------------------------------------------------------------------------------------------------------------------------------ Security 0.04 0.03 0.00 0.16 0.29 0.04 1.96 36 - ------------------------------------------------------------------------------------------------------------------------------------ Enclosed mall HVAC 2 - ------------------------------------------------------------------------------------------------------------------------------------ Snow removal 0.01 0.01 0.00 0.02 0.08 0.02 0.35 19 - ------------------------------------------------------------------------------------------------------------------------------------ Trash removal 0.07 0.05 0.01 0.19 0.82 0.08 2.32 72 - ------------------------------------------------------------------------------------------------------------------------------------ Landscaping 0.10 0.09 0.01 0.23 1.22 0.35 2.74 108 - ------------------------------------------------------------------------------------------------------------------------------------ Elevator/escalator 3 - ------------------------------------------------------------------------------------------------------------------------------------ Other 0.07 0.05 0.01 0.32 0.58 0.14 3.95 64 - ------------------------------------------------------------------------------------------------------------------------------------ Building maintenance 0.15 0.13 0.02 0.39 1.64 0.23 7.84 113 - ------------------------------------------------------------------------------------------------------------------------------------ Roof repair 0.04 0.03 0.00 0.16 0.44 0.04 3.35 80 - ------------------------------------------------------------------------------------------------------------------------------------ Other maintenance 0.12 0.10 0.01 0.31 1.23 0.18 5.14 105 - ------------------------------------------------------------------------------------------------------------------------------------ Central utility system 0 - ------------------------------------------------------------------------------------------------------------------------------------ Other office area services 0.09 0.07 0.01 0.27 0.88 0.24 4.93 13 - ------------------------------------------------------------------------------------------------------------------------------------ Total advertising and promotion 0.02 0.01 0.00 0.09 0.22 0.03 1.30 74 - ------------------------------------------------------------------------------------------------------------------------------------ Advertising 0.01 0.01 0.00 0.06 0.18 0.02 1.22 60 - ------------------------------------------------------------------------------------------------------------------------------------ Promotions/special events 0.06 0.02 0.00 0.30 0.25 0.06 1.87 14 - ------------------------------------------------------------------------------------------------------------------------------------ Christmas decor/events 0.02 0.01 0.00 0.06 0.17 0.06 0.78 26 - ------------------------------------------------------------------------------------------------------------------------------------ Marketing administration 0.01 0.00 0.10 8 - ------------------------------------------------------------------------------------------------------------------------------------ Merchants association 1 - ------------------------------------------------------------------------------------------------------------------------------------ Total real estate taxes 0.71 0.70 0.26 1.39 9.56 5.56 17.48 116 - ------------------------------------------------------------------------------------------------------------------------------------ Total insurance 0.15 0.15 0.06 0.26 2.34 0.77 4.86 115 - ------------------------------------------------------------------------------------------------------------------------------------ Liability insurance 0.06 0.06 0.02 0.21 0.88 0.22 3.95 70 - ------------------------------------------------------------------------------------------------------------------------------------ Property insurance 0.09 0.08 0.02 0.21 1.17 0.45 3.48 80 - ------------------------------------------------------------------------------------------------------------------------------------ Special (earthquake/fire) 0.05 0.05 0.51 5 - ------------------------------------------------------------------------------------------------------------------------------------ Other insurance 0.02 0.02 0.00 0.05 0.22 0.08 0.71 20 - ------------------------------------------------------------------------------------------------------------------------------------ Total general and administrative 0.54 0.49 0.18 1.06 7.12 3.78 13.83 114 - ------------------------------------------------------------------------------------------------------------------------------------ Management agent fees 0.31 0.31 0.14 0.55 4.58 2.66 6.33 100 - ------------------------------------------------------------------------------------------------------------------------------------ Leasing agent fees 0.14 0.11 0.02 0.35 1.49 0.31 4.24 68 - ------------------------------------------------------------------------------------------------------------------------------------ Bad debt allowance 0.13 0.09 0.01 0.39 1.07 0.11 6.68 18 - ------------------------------------------------------------------------------------------------------------------------------------ On-site payroll and benefits 0.18 0.08 0.02 0.71 1.17 0.36 8.70 22 - ------------------------------------------------------------------------------------------------------------------------------------ Professional services 0.06 0.04 0.01 0.20 0.67 0.19 2.00 86 - ------------------------------------------------------------------------------------------------------------------------------------ Other 0.04 0.02 0.01 0.20 0.32 0.04 3.79 79 - ------------------------------------------------------------------------------------------------------------------------------------ ==================================================================================================================================== Net Operating Balance $4.96 $4.65 $1.66 $8.70 69.98% 49.01% 80.98% 118 ====================================================================================================================================
Note: Because data are means, medians, and deciles, detaile amounts do not add to totals. No median figures are shown if fewer than five values were reported for any income or expense category, and no lower and upper decile amounts are shown if fewer than 10 values were reported. ================================================================================ 188 U.S. Neighborhood Shopping Centers ================================================================================ Table 6-6 Comparison of Sales and Rent of Principal Tenants in U.S. Neighborhood Centers and In Eastern Neighborhood Centers ================================================================================ Tenant Sales Volume per Sales Volume per Classification Square Foot of GLA Square Foot of GLA ================================================================================ U.S. Eastern U.S. Eastern Median Median Median Median - -------------------------------------------------------------------------------- Supermarket $302.64 $342.08 $4.30 $3.47 - -------------------------------------------------------------------------------- Superstore 308.37 436.68 6.42 7.23 - -------------------------------------------------------------------------------- Restaurant (with liquor) 168.00 142.47 10.83 7.83 - -------------------------------------------------------------------------------- Cleaner and dyer 114.80 74.35 12.44 13.56 - -------------------------------------------------------------------------------- Drugs 208.63 227.18 7.26 8.25 - -------------------------------------------------------------------------------- Superdrugs 197.28 171.13 6.38 7.45 - -------------------------------------------------------------------------------- ================================================================================ Table 6-7 Comparison of Sales and Rent of Principal Tenants in U.S. Neighborhood Centers and In Southern Neighborhood Centers ================================================================================ Tenant Sales Volume per Sales Volume per Classification Square Foot of GLA Square Foot of GLA ================================================================================ U.S. Southern U.S. Southern Median Median Median Median - -------------------------------------------------------------------------------- Supermarket $302.64 $290.33 $4.30 $4.09 - -------------------------------------------------------------------------------- Superstore 308.37 301.82 6.42 6.27 - -------------------------------------------------------------------------------- Restaurant (with liquor) 168.00 221.76 10.83 11.17 - -------------------------------------------------------------------------------- Cleaner and dyer 114.80 119.46 12.44 11.56 - -------------------------------------------------------------------------------- Drugs 208.63 207.82 7.26 6.18 - -------------------------------------------------------------------------------- Superdrugs 197.28 186.54 6.38 6.75 - -------------------------------------------------------------------------------- ================================================================================ Table 6-8 Comparison of Sales and Rent of Principal Tenants in U.S. Neighborhood Centers and In Midwestern Neighborhood Centers ================================================================================ Tenant Sales Volume per Sales Volume per Classification Square Foot of GLA Square Foot of GLA ================================================================================ U.S. Midwestern U.S. Midwestern Median Median Median Median - -------------------------------------------------------------------------------- Supermarket $302.64 $249.72 $4.30 $3.94 - -------------------------------------------------------------------------------- Superstore 308.37 293.36 6.42 5.00 - -------------------------------------------------------------------------------- Restaurant (with liquor) 168.00 104.72 10.83 9.06 - -------------------------------------------------------------------------------- Cleaner and dyer 114.80 127.20 12.44 11.33 - -------------------------------------------------------------------------------- Drugs 208.63 7.26 6.94 - -------------------------------------------------------------------------------- Superdrugs 197.28 271.36 6.38 5.69 - -------------------------------------------------------------------------------- ================================================================================ ================================================================================ Table 6-9 Comparison of Sales and Rent of Principal Tenants in U.S. Neighborhood Centers and In Western Neighborhood Centers ================================================================================ Tenant Sales Volume per Sales Volume per Classification Square Foot of GLA Square Foot of GLA ================================================================================ U.S. Western U.S. Western Median Median Median Median - -------------------------------------------------------------------------------- Supermarket $302.64 $378.71 $4.30 $4.71 - -------------------------------------------------------------------------------- Superstore 308.37 412.70 6.42 7.07 - -------------------------------------------------------------------------------- Restaurant (with liquor) 168.00 196.09 10.83 16.02 - -------------------------------------------------------------------------------- Cleaner and dyer 114.80 111.43 12.44 15.60 - -------------------------------------------------------------------------------- Drugs 208.63 7.26 8.54 - -------------------------------------------------------------------------------- Superdrugs 197.28 167.63 6.38 5.83 - -------------------------------------------------------------------------------- ================================================================================ U.S. Neighborhood Shopping Centers 191 ================================================================================ Table 6-14 U.S. Neighborhood Shopping Centers in Agre Group 20 Years Old and Older: Center Size, Center Sales, and Operating Results
==================================================================================================================================== Number of Centers in sample: 95 Lower Upper Lower Upper Number Average Median Decile Decile Median Decile Decile Reporting ==================================================================================================================================== ==================================================================================================================================== Center Size (Square Feet) ==================================================================================================================================== Total floor space (GLA and all other floor area) 66,095 66,388 35,899 95,958 94 - ------------------------------------------------------------------------------------------------------------------------------------ Owned gross leasable area 62,095 61,237 33,528 95,241 95 - ------------------------------------------------------------------------------------------------------------------------------------ ==================================================================================================================================== Center Sales ==================================================================================================================================== All tenants (per square foot of GLA) $194.24 $188.33 $89.40 $305.04 68 - ------------------------------------------------------------------------------------------------------------------------------------ ==================================================================================================================================== Operating Results Dollars per Square Foot of GLA Percent of Total Receipts ==================================================================================================================================== ==================================================================================================================================== Total Operating Receipts $7.21 $6.79 $2.97 $12.97 100.00% 100.00% 100.00% 95 ==================================================================================================================================== Total rent 5.99 5.46 2.74 11.21 84.96 74.69 96.20 95 - ------------------------------------------------------------------------------------------------------------------------------------ Rental income--minimum 5.75 5.38 2.36 10.41 82.26 67.21 93.34 95 - ------------------------------------------------------------------------------------------------------------------------------------ Rental income--overages 0.30 0.24 0.03 1.09 3.87 0.27 18.96 55 - ------------------------------------------------------------------------------------------------------------------------------------ Total common area charges 0.47 0.44 0.07 1.23 6.24 1.24 11.52 84 - ------------------------------------------------------------------------------------------------------------------------------------ Total other charges 0.68 0.66 0.08 1.62 8.88 1.64 17.81 85 - ------------------------------------------------------------------------------------------------------------------------------------ Property taxes and insurance 0.67 0.63 0.11 1.40 8.22 1.75 17.57 78 - ------------------------------------------------------------------------------------------------------------------------------------ Property taxes 0.57 0.53 0.08 1.28 6.59 1.55 15.33 79 - ------------------------------------------------------------------------------------------------------------------------------------ Insurance 0.10 0.09 0.03 0.23 1.05 0.36 2.74 61 - ------------------------------------------------------------------------------------------------------------------------------------ Other escalation charges 0.10 0.05 0.45 9 - ------------------------------------------------------------------------------------------------------------------------------------ Income from sale of Utilities 0.20 0.12 0.00 0.77 1.44 0.07 5.90 19 - ------------------------------------------------------------------------------------------------------------------------------------ Total miscellaneous income 0.05 0.04 0.00 0.21 0.44 0.04 2.14 50 - ------------------------------------------------------------------------------------------------------------------------------------ ==================================================================================================================================== Total Operating Expenses $2.34 $2.16 $1.01 $4.46 32.85% 16.99% 65.96% 95 ==================================================================================================================================== Total maintenance and housekeeping 0.73 0.74 0.24 1.37 9.28 4.96 21.53 95 - ------------------------------------------------------------------------------------------------------------------------------------ Parking lot, mall, other common areas 0.47 0.45 0.14 0.94 6.48 2.85 14.79 95 - ------------------------------------------------------------------------------------------------------------------------------------ Parking lot 0.12 0.10 0.03 0.31 1.59 0.34 4.50 89 - ------------------------------------------------------------------------------------------------------------------------------------ Utilities 0.14 0.12 0.05 0.32 1.82 0.67 4.16 89 - ------------------------------------------------------------------------------------------------------------------------------------ Security 0.09 0.05 0.00 0.31 0.65 0.05 2.73 24 - ------------------------------------------------------------------------------------------------------------------------------------ Enclosed mall HVAC 0.07 0.08 1.59 5 - ------------------------------------------------------------------------------------------------------------------------------------ Snow removal 0.06 0.06 0.01 0.20 0.85 0.16 3.27 47 - ------------------------------------------------------------------------------------------------------------------------------------ Trash removal 0.05 0.04 0.01 0.14 0.42 0.13 1.55 57 - ------------------------------------------------------------------------------------------------------------------------------------ Landscaping 0.07 0.06 0.01 0.16 0.80 0.22 2.53 78 - ------------------------------------------------------------------------------------------------------------------------------------ Elevator/escalator 1 - ------------------------------------------------------------------------------------------------------------------------------------ Other 0.11 0.07 0.02 0.43 1.19 0.27 5.29 39 - ------------------------------------------------------------------------------------------------------------------------------------ Building maintenance 0.22 0.19 0.03 0.58 2.74 0.50 10.75 92 - ------------------------------------------------------------------------------------------------------------------------------------ Roof repair 0.06 0.04 0.01 0.24 0.62 0.16 3.52 70 - ------------------------------------------------------------------------------------------------------------------------------------ Other maintenance 0.16 0.11 0.03 0.50 1.82 0.35 6.59 84 - ------------------------------------------------------------------------------------------------------------------------------------ Central utility system 2 - ------------------------------------------------------------------------------------------------------------------------------------ Other office area services 0.10 0.10 0.03 0.23 1.36 0.61 3.14 11 - ------------------------------------------------------------------------------------------------------------------------------------ Total advertising and promotion 0.04 0.02 0.00 0.15 0.36 0.04 2.07 53 - ------------------------------------------------------------------------------------------------------------------------------------ Advertising 0.02 0.01 0.00 0.08 0.19 0.01 1.40 41 - ------------------------------------------------------------------------------------------------------------------------------------ Promotions/special events 0.03 0.02 0.00 0.08 0.28 0.06 1.07 14 - ------------------------------------------------------------------------------------------------------------------------------------ Christmas decor/events 0.02 0.02 0.00 0.05 0.19 0.04 0.71 18 - ------------------------------------------------------------------------------------------------------------------------------------ Marketing administration 0.04 0.01 0.37 5 - ------------------------------------------------------------------------------------------------------------------------------------ Merchants association 0.03 0.01 0.35 8 - ------------------------------------------------------------------------------------------------------------------------------------ Total real estate taxes 0.74 0.72 0.24 1.73 9.85 4.10 21.85 90 - ------------------------------------------------------------------------------------------------------------------------------------ Total insurance 0.18 0.17 0.09 0.30 2.66 1.12 4.85 95 - ------------------------------------------------------------------------------------------------------------------------------------ Liability insurance 0.08 0.08 0.01 0.17 1.20 0.24 3.03 66 - ------------------------------------------------------------------------------------------------------------------------------------ Property insurance 0.10 0.11 0.03 0.22 1.54 0.44 3.62 66 - ------------------------------------------------------------------------------------------------------------------------------------ Special (earthquake/fire) 0.10 0.10 0.77 9 - ------------------------------------------------------------------------------------------------------------------------------------ Other insurance 0.01 0.01 0.00 0.03 0.15 0.04 0.59 18 - ------------------------------------------------------------------------------------------------------------------------------------ Total general and administrative 0.55 0.50 0.09 1.31 7.06 1.47 18.80 91 - ------------------------------------------------------------------------------------------------------------------------------------ Management agent fees 0.27 0.28 0.07 0.51 4.24 0.89 5.96 69 - ------------------------------------------------------------------------------------------------------------------------------------ Leasing agent fees 0.18 0.13 0.02 0.47 2.15 0.36 5.37 38 - ------------------------------------------------------------------------------------------------------------------------------------ Bad debt allowance 0.09 0.07 0.01 0.22 0.95 0.10 2.88 14 - ------------------------------------------------------------------------------------------------------------------------------------ On-site payroll and benefits 0.38 0.40 0.03 0.96 3.59 0.34 15.35 23 - ------------------------------------------------------------------------------------------------------------------------------------ Professional services 0.06 0.04 0.01 0.25 0.65 0.17 3.36 72 - ------------------------------------------------------------------------------------------------------------------------------------ Other 0.13 0.05 0.00 0.71 0.50 0.04 15.16 46 - ------------------------------------------------------------------------------------------------------------------------------------ ==================================================================================================================================== Net Operating Balance $4.68 $4.39 $1.34 $9.92 67.15% 34.04% 83.01% 95 ====================================================================================================================================
Note: Because data are means, medians, and deciles, detailed amounts do not add to totals. No median figures are shown if fewer than five values were reported for any income or expense category, and no lower and upper decile amounts are shown if fewer than 10 values were reported. ================================================================================ U.S. Neighborhood Shopping Centers 197 ================================================================================ Table 6-15 Tenants Most Frequently Found in U.S. Neighborhood Shopping Centers
================================================================================================================== Average Median Sales Median Total Number Median GLA Volume Per Rent Per Tenant Classification Rank of Stores (Square Feet) Square Foot of GLA Square Foot of GLA ================================================================================================================== Food - ------------------------------------------------------------------------------------------------------------------ Supermarket 8 0.3 24,448 $302.64 $4.30 - ------------------------------------------------------------------------------------------------------------------ Superstore 7 0.3 36,975 308.37 6.42 - ------------------------------------------------------------------------------------------------------------------ Food Service - ------------------------------------------------------------------------------------------------------------------ Restaurant (without liquor) 12 0.2 2,230 153.32 12.00 - ------------------------------------------------------------------------------------------------------------------ Restaurant (with liquor) 3 0.4 3,400 168.00 10.83 - ------------------------------------------------------------------------------------------------------------------ Sandwich shop 13 0.2 1,289 193.45 10.87 - ------------------------------------------------------------------------------------------------------------------ Pizza 5 0.3 1,720 155.76 11.42 - ------------------------------------------------------------------------------------------------------------------ Gifts/Specialty - ------------------------------------------------------------------------------------------------------------------ Cards and gifts 14 0.2 2,600 100.78 10.59 - ------------------------------------------------------------------------------------------------------------------ Jewelry - ------------------------------------------------------------------------------------------------------------------ Jewelry 20 0.2 1,250 270.07 13.56 - ------------------------------------------------------------------------------------------------------------------ Liquor - ------------------------------------------------------------------------------------------------------------------ Liquor/wine 18 0.2 2,800 226.85 8.58 - ------------------------------------------------------------------------------------------------------------------ Drugs - ------------------------------------------------------------------------------------------------------------------ Superdrugs 15 0.2 1,500 197.28 6.38 - ------------------------------------------------------------------------------------------------------------------ Drugs 9 0.2 8,125 208.63 7.26 - ------------------------------------------------------------------------------------------------------------------ Other Retail - ------------------------------------------------------------------------------------------------------------------ Flowers/plant store 17 0.2 1,281 91.17 11.40 - ------------------------------------------------------------------------------------------------------------------ Personal Services - ------------------------------------------------------------------------------------------------------------------ Beauty 1 0.5 1,200 148.69 10.00 - ------------------------------------------------------------------------------------------------------------------ Cleaner and dyer 4 0.4 1,500 114.80 12.44 - ------------------------------------------------------------------------------------------------------------------ Laundry 19 0.2 1,800 65.46 9.03 - ------------------------------------------------------------------------------------------------------------------ Travel agent 16 0.2 1,050 11.50 - ------------------------------------------------------------------------------------------------------------------ Unisex hair 10 0.2 1,200 126.29 11.26 - ------------------------------------------------------------------------------------------------------------------ Video tape rentals 6 0.3 2,500 96.45 9.70 - ------------------------------------------------------------------------------------------------------------------ Financial - ------------------------------------------------------------------------------------------------------------------ Banks 11 0.2 3,200 13.81 - ------------------------------------------------------------------------------------------------------------------ Offices (other than Financial) - ------------------------------------------------------------------------------------------------------------------ Medical and dental 2 0.5 1,514 10.86 - ------------------------------------------------------------------------------------------------------------------ ==================================================================================================================
U.S. Neighborhood Shopping Centers 199 ================================================================================ Table 6-19 High Sales Volume Tenants in U.S. Neighborhood Shopping Centers ================================================================================ Tenant Median Sales Volume per Classification Square Foot of GLA ================================================================================ Superstore $308.37 - -------------------------------------------------------------------------------- Supermarket 302.64 - -------------------------------------------------------------------------------- Jewelry 270.07 - -------------------------------------------------------------------------------- Bakery 256.21 - -------------------------------------------------------------------------------- Records and tapes 245.97 - -------------------------------------------------------------------------------- Special apparel--unisex 240.60 - -------------------------------------------------------------------------------- Hamburgers 234.32 - -------------------------------------------------------------------------------- Liquor/wine 226.85 - -------------------------------------------------------------------------------- Ice cream parlor 214.73 - -------------------------------------------------------------------------------- Drugs 208.63 - -------------------------------------------------------------------------------- ================================================================================ ================================================================================ Table 6-20 Low Sales Volume Tenants in U.S. Neighborhood Shopping Centers ================================================================================ Tenant Median Sales Volume per Classification Square Foot of GLA ================================================================================ Health spa/figure salon $40.39 - -------------------------------------------------------------------------------- Arts and crafts 61.15 - -------------------------------------------------------------------------------- Fabric shops 62.79 - -------------------------------------------------------------------------------- Laundry 65.46 - -------------------------------------------------------------------------------- Shoe repair 66.90 - -------------------------------------------------------------------------------- Chines fast food 69.22 - -------------------------------------------------------------------------------- Interior decorator 74.56 - -------------------------------------------------------------------------------- Variety store 82.30 - -------------------------------------------------------------------------------- Hardware 90.40 - -------------------------------------------------------------------------------- Flowers/plant store 91.17 - -------------------------------------------------------------------------------- ================================================================================ ================================================================================ Table 6-21 High Total Rent Tenants in U.S. Neighborhood Shopping Centers ================================================================================ Tenant Median Total Rent per Classification Square Foot of GLA ================================================================================ Automatic teller machine $29.83 - -------------------------------------------------------------------------------- Italian fast food 17.03 - -------------------------------------------------------------------------------- Coffee/tea 16.42 - -------------------------------------------------------------------------------- Ice cream parlor 16.00 - -------------------------------------------------------------------------------- Doughnut/muffin shop 15.96 - -------------------------------------------------------------------------------- Eyeglasses--optician 15.50 - -------------------------------------------------------------------------------- Delicatessan 15.00 - -------------------------------------------------------------------------------- Brokerage 14.58 - -------------------------------------------------------------------------------- Savings and loan 14.40 - -------------------------------------------------------------------------------- Home accessories 14.17 - -------------------------------------------------------------------------------- ================================================================================ ================================================================================ Table 6-22 Low Total Rent Tenants in U.S. Neighborhood Shopping Centers ================================================================================ Tenant Median Total Rent per Classification Square Foot of GLA ================================================================================ Discount department store $3.38 - -------------------------------------------------------------------------------- Cinemas 3.89 - -------------------------------------------------------------------------------- Variety store 4.09 - -------------------------------------------------------------------------------- Supermarket 4.30 - -------------------------------------------------------------------------------- Hardware 5.46 - -------------------------------------------------------------------------------- Arts and crafts 6.24 - -------------------------------------------------------------------------------- Fabric shops 6.25 - -------------------------------------------------------------------------------- Interior decorator 6.25 - -------------------------------------------------------------------------------- Superdrugs 6.38 - -------------------------------------------------------------------------------- Superstore 6.42 - -------------------------------------------------------------------------------- ================================================================================ U.S. Neighborhood Shopping Centers 201 ================================================================================ Table 6-23 Anchor Tenants In U.S. Neighborhood Shopping Centers
================================================================================================================= Average Median Sales Median Total Number Median GLA Volume Per Rent Per Tenant Classification Rank of Stores (Square Feet) Square Foot of GLA Square Foot of GLA ================================================================================================================= Variety store 6 12,189 71.35 4.00 - ----------------------------------------------------------------------------------------------------------------- Discount department store 5 0.1 28,239 98.46 3.33 - ----------------------------------------------------------------------------------------------------------------- Supermarket 2 0.2 24,448 302.64 4.18 - ----------------------------------------------------------------------------------------------------------------- Superstore 1 0.3 36,975 307.36 6.42 - ----------------------------------------------------------------------------------------------------------------- Restaurant (with liquor) 8 7,500 257.42 13.98 - ----------------------------------------------------------------------------------------------------------------- Furniture 9 19,006 87.64 2.95 - ----------------------------------------------------------------------------------------------------------------- Automotive (TB&A) 10 6,350 151.91 7.79 - ----------------------------------------------------------------------------------------------------------------- Superdrugs 3 0.1 16,160 194.12 6.16 - ----------------------------------------------------------------------------------------------------------------- Drugs 4 0.1 8,640 232.79 7.50 - ----------------------------------------------------------------------------------------------------------------- Banks 7 4,855 15.14 - ----------------------------------------------------------------------------------------------------------------- *Less than 0.05% =================================================================================================================
================================================================================ Table 6-24 Comparison of Sales and Rent of Principal Tenants in U.S. Neighborhood Shopping Centers ================================================================================ Tenant Sales Volume per Sales Volume per Classification Square Foot of GLA Square Foot of GLA ================================================================================ U.S. U.S. U.S. U.S. Average Median Average Median - -------------------------------------------------------------------------------- Supermarket $305.24 $302.64 $4.30 $4.30 - ------------------------------------------------------------------------------- Superstore 343.29 308.37 6.23 6.42 - ------------------------------------------------------------------------------- Restaurant (with liquor) 174.00 168.00 11.08 10.83 - ------------------------------------------------------------------------------- Cleaner and dyer 116.12 114.80 12.79 12.44 - ------------------------------------------------------------------------------- Drugs 222.58 208.63 7.38 7.26 - ------------------------------------------------------------------------------- Superdrugs 240.28 197.28 6.32 6.38 - ------------------------------------------------------------------------------- Restaurant (with liquor) 173.63 153.32 12.69 12.00 - -------------------------------------------------------------------------------- ================================================================================ 202 U.S. Neighborhood Shopping Centers - -------------------------------------------------------------------------------- ADDENDUM I QUALIFICATIONS - -------------------------------------------------------------------------------- Addendum I QUALIFICATIONS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF TIMOTHY K. WILHOIT, MAI Assistant Vice President CB Commercial Real Estate Group, Inc., Appraisal Services 201 South Orange Avenue, Suite 1460 Orlando, Florida 32801 (407) 843A020 EDUCATIONAL BS,Business Administration, East Tennessee State University, Johnson City, Tennessee - 1978 Appraisal Institute Courses 1-A, 1-B, 2, 3, 4. Attended numerous educational seminars sponsored by the Appraisal Institute and the State of Florida since 1983, including Standards of Professional Practice, Appraising for Federal Agencies, Hotel/Motel Valuation and Computer Income Analysis LICENSE(S)/CERTIFICATION(S) Registered Real Estate Broker-Salesman; State of Florida (No. BL0414574) Certified General Appraiser; State of Florida (No. RZ0000882) PROFESSIONAL Appraisal Institute Designated Member (MAI), Certificate No.7819 Qualified Expert Witness District and Circuit Courts - State of Florida EMPLOYMENT EXPERIENCE Eighteen years of Real Estate Appraisal and Consulting experience throughout the United States. 1978-1983 Tennessee Department of Transportation Knoxville, TN 1983-1986 Pardue, Heid, Church, Smith & Walker, Inc. Orlando & Tampa, FL 1986-Present CB Commercial Real Estate Group, Inc. - Orlando, FL Appraisal Services - Asst. Vice President - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF SAMUEL W. HINES, MAI, SGA First Vice President - Regional Manager CB Commercial Real Estate Group, Inc., Appraisal Services 201 South Orange Avenue, Suite 1460 Orlando, Florida 32801 (407) 843A020 EDUCATIONAL BBA - Management & Finance, Univ. of Postgraduate, Marketing, University of Miami-1966 Coral Gables, Florida Akron - 1968 Akron, Ohio Appraisal Institute Courses 1-A, 1-B, 2, 4, 6. Numerous educational seminars sponsored by the Appraisal Institute and State of Florida since 1974, including Standards of Professional Practice, Appraisal Regulations for Federal Agencies, Appraising Pension Fund Portfolios, Hotel/Motel Valuation and computer Income Analysis. Co-author of seminar on Appraisal of Golf Properties. LICENSE(S)/CERTIFICATION(S) Registered Real Estate Broker State of Florida (No. BL0131749) Certified General Appraiser; State of Florida (No. RZ0000126) PROFESSIONAL Appraisal Institute Designated Member (MAI), Certificate No.6467 President - East Florida - National Board of Directors (1994-1996) Chapter (1993) National Nominating Committee (1996) Chair - Region X (1996) National Finance Committee (1996) Society of Golf Appraisers SGA Charter Member - President 1994-95 Qualified Expert Witness U.S. Department of Justice - NY District County, District Civil, & Appellate Federal Bankruptcy, NY, MO, FL Courts - FL Past Special Master, Property Appraisal Adjustment Board, Seminole/Orange Counties, FL (1985-1994) Other Affiliations Associate Member - Urban Land Institute Associate Member - U.S. Golf- Sponsor Member - National Golf Foundation Association Golf Course Superintendents Association of America - Affiliate Member National Conference of Real Estate Investment Fiduciaries - Member - Valuation Committee EMPLOYMENT EXPERIENCE Twenty-two years of Real Estate Appraisal and Consulting experience throughout the United States. 1969-1973 Merrill Lynch, Pierce, Fenner & Smith Santa Ana, CA/Orlando, FL 1974-1976 Charter Mortgage Commercial Division Orlando, FL 1977-1981 Pardue, Heid, Church, Smith & Wailer Orlando, FL 1982-1984 Zom Companies (Investors & Developers) winter Park, FL 1984-Present CB Commercial Real Estate Group, Inc. Orlando, FL 1st Vice President - FL Regional Manager Lodging Appraisal Group & Golf Properties Appraisal Group - National Coordinator - -------------------------------------------------------------------------------- This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE CIRCLE PLAZA K-MART Route 15 Shamokin Dam, Pennsylvania CB File No. 96-093P [LOGO]CB COMMERCIAL Delivering Solutions Through Local Knowledge Worldwide COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE CIRCLE PLAZA K-MART Route 15 Shamokin Dam, Pennsylvania CB File No. 96-093P DATE OF VALUE May 15, 1996 PREPARED FOR MORGAN STANLEY Mortgage Capital Inc. 1585 Broadway New York, NY 10036 PREPARED BY CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES 560 Lexington Avenue, 16th Floor New York, New York 10022 [LETTERHEAD OF CB COMMERCIAL REAL ESTATE GROUP, INC.] June 19, 1996 MORGAN STANLEY Mortgage Capital Inc. 1585 Broadway New York, NY 10036 RE: Appraisal of Shopping Center CIRCLE PLAZA K-MART Route 15 & 11 Shamokin Dam, Pennsylvania CB File No. 96-093P Dear Ladies and Gentlemen; At your request and authorization, CB Commercial Real Estate Group, Inc. has prepared a Complete Appraisal presented in a self-contained appraisal report of the current market value of the leased fee estate in the above-referenced real property. The subject property is a single story neighborhood shopping center featuring 92,171 square feet of gross leasable area. The shopping center consists of a single-tenant K-Mart Department Store. The property is more fully described, legally and physically, within the enclosed report. Data, information, and calculations leading to the value conclusion are incorporated in the report following this letter. The report, in its entirety, including all assumptions and limiting conditions, is an integral part of and inseparable from this letter. Based on research and analysis contained in this report, it is estimated that the current market value of the leased fee estate in the subject property as of May 15, 1996, is: TWO MILLION THREE HUNDRED THOUSAND DOLLARS ($2,300,000) The following appraisal sets forth the most pertinent data gathered, the techniques employed, and the reasoning leading to the opinion of value. The analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP), the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, and The Financial Institution Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Furthermore, this report has been prepared in conformance with our interpretation of the appropriate regulations and guidelines set forth by Morgan Stanley. Morgan Stanley June 19, 1996 Page 2 It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CB Commercial Real Estate Group, Inc. can be of further service, please do not hesitate to contact us. Respectfully Submitted, CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES by: /s/ Peter J. Jolicoeur /s/ Michael R. Pecorino - ------------------------------- ------------------------------- Peter J. Jolicoeur Michael R. Pecorino, MAI Senior Real Estate Analyst Senior Vice President Northeast Regional Manager Pennsylvania Certification No. GA-001096-R ================================================================================ CERTIFICATION OF THE APPRAISERS - -------------------------------------------------------------------------------- CERTIFICATION OF THE APPRAISERS We certify that to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. 4. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event, such as the approval of a loan. 5. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation and the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. In addition, this report conforms to the requirements of the Financial Institution Reform, Recovery, and Enforcement Act (FIRREA). 6. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 7. Peter J. Jolicoeur and Michael R. Pecorino have completed the requirements of the continuing education program of the Appraisal Institute. 8. The property was personally inspected by Peter J. Jolicoeur, but was not inspected by Michael R. Pecorino, MAI. 9. No other person provided professional assistance to the persons signing this report. 10. The undersigned appraisers have extensive experience in the appraisal/review of similar property types. /s/ Peter J. Jolicoeur /s/ Michael R. Pecorino - ------------------------------- ------------------------------- Peter J. Jolicoeur Michael R. Pecorino, MAI Senior Real Estate Analyst Senior Vice President Northeast Regional Manager Pennsylvania Certification No. GA-001096-R - -------------------------------------------------------------------------------- i ================================================================================ SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] FRONT VIEW OF THE SUBJECT PROPERTY FACING K-MART [GRAPHIC OMITTED] FRONT VIEW OF THE SUBJECT PROPERTY FACING K-MART - -------------------------------------------------------------------------------- ii ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- SUMMARY OF SALIENT FACTS Property Name: Circle Plaza K-Mart Location: Route 15, Shamokin Dam, Pennsylvania Assessor's Parcel Number: Map 6, Parcel No. 54 Property Description: The subject property is a single story neighborhood shopping center featuring 92,171 square feet of gross leasable area. The improvements are situated on a 912,732 square foot lot (20.95 acre). Construction features include a concrete and steel frame and brick and split-faced block exterior walls. Highest and Best Use As Though Vacant: Land banking until such time that retail development becomes financially feasible As Improved: Continued use as a shopping center Property Rights Appraised: Leased Fee Date of Value: May 15, 1996 Land Area 912,732 Square Feet (20.95 acres) Improvements Building Area: Gross Leasable Area: 92,171 SF Year Built: 1979 Condition: good Estimated Marketing Time: 12 months or less - -------------------------------------------------------------------------------- iii ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- Financial Indicators Current Occupancy: 100% Leased /100% Occupied Stabilized Occupancy: 100% Market Rental Rate: $ 4.00 P.S.F. Anchor Income Growth Rate: 3.0% Estimated Stabilized Expenses: $ 0.98 P.S.F. Expense Growth Rate: 3.0% Going-In Overall Capitalization Rate Selected: 10.00% Going-In Overall Capitalization Rate Implied: 11.3% Terminal Overall Capitalization Rate: 10.50% Discount Rate: 11.50% Valuation Land Value: N/A Cost Approach: N/A Sales Comparison Approach: $ 2,500,000 Income Capitalization Approach: $ 2,300,000 Final Value Conclusion: $ 2,300,000 Per Square Foot: $ 24.95/SF - -------------------------------------------------------------------------------- iv ================================================================================ TABLE OF CONTENTS - -------------------------------------------------------------------------------- TABLE OF CONTENTS CERTIFICATION OF THE APPRAISERS...............................................i SUBJECT PHOTOGRAPHS..........................................................ii SUMMARY OF SALIENT FACTS....................................................iii TABLE OF CONTENTS.............................................................v INTRODUCTION..................................................................1 AREA ANALYSIS.................................................................7 MARKET ANALYSIS..............................................................15 SITE ANALYSIS................................................................20 IMPROVEMENT ANALYSIS.........................................................22 ZONING.......................................................................25 TAX AND ASSESSMENT DATA......................................................26 HIGHEST AND BEST USE.........................................................27 APPRAISAL METHODOLOGY........................................................30 SALES COMPARISON APPROACH....................................................32 INCOME CAPITALIZATION APPROACH...............................................37 RECONCILIATION OF VALUE......................................................58 ASSUMPTIONS AND LIMITING CONDITIONS..........................................20 ADDENDA......................................................................64 A........................................................Glossary Of Terms B...................................................Additional Photographs C................................................Improved Comparable Sales D.......................................................Rental Comparables E..........................................Strategic Mapping, Inc. Reports F................................................................Rent Roll G.........................................................PRO-JECT Reports H........................................................Engagement Letter I...........................................................Qualifications - -------------------------------------------------------------------------------- v INTRODUCTION ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- INTRODUCTION PROPERTY IDENTIFICATION The subject is located at the intersection of Routes 15 and 11 in the borough of Shamokin Dam, Snyder County, Pennsylvania. The Borough assessor's tax identification number is Map 6, Parcel No. 54. A full metes and bounds legal description is included in the Addenda. OWNERSHIP AND PROPERTY HISTORY The subject is currently owned by Mark Centers Limited Partnership. The subject has not sold in the last three years and to the best of our knowledge there is no known current listing, option, or agreement of sale of the subject. DATES OF INSPECTION AND VALUATION The site was last inspected by Peter J. Jolicoeur on May 15, 1996. Michael R. Pecorino, MAI did not inspect the subject or the comparables employed but reviewed this report and concurs with the conclusions. The date of the market value is the date of inspection, May 15, 1996. PURPOSE OF THE APPRAISAL The purpose of this appraisal is to estimate the current market value of the leased fee estate in the subject property in it's "As Is" condition. Market value is defined as follows: Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised, and acting in what they consider their own best interests; 3. A reasonable time is allowed for exposure in the open market; 4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and - -------------------------------------------------------------------------------- 1 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- 5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) TERMS AND DEFINITIONS Please refer to the Addenda for a Glossary of the Terms and Definitions that are, and may be used in this appraisal. INTENDED USE OF REPORT This appraisal is for mortgage underwriting purposes. PROPERTY RIGHTS APPRAISED The value estimated represents the leased fee estate. APPRAISAL DEVELOPMENT AND REPORTING PROCESS The following steps were completed by CB Commercial for this assignment: 1. Analyzed regional, city, neighborhood, site, and improvement data. 2. Inspected the subject and the neighborhood. 3. Reviewed data regarding taxes, zoning, utilities, easements, and city services. 4. Considered comparable improved sales, comparable improved building rental information, and comparable site sales. Data was confirmed with principals, managers, or real estate agents representing principals, unless otherwise noted. 5. Analyzed the data to arrive at conclusions via each approach to value used in this report. 6. Reconciled the results of each approach to value employed into a probable range of market data and finally an estimate of value for the subject, as defined herein. 7. Estimated a reasonable exposure time associated with the value estimate. The subject site and improvement descriptions are based on a personal inspection of the property, discussions with representatives of the subject property, and/or a review of relevant plat maps and leasing plans. The inspection is not a substitute for thorough engineering studies. - ---------- (1) The definition of market value is taken from: The Office of the Comptroller of the Currency under 12 CFR, Part 34, Subpart C-Appraisals, ss.34.42(f), August 24, 1966. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. - -------------------------------------------------------------------------------- 2 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- To develop the opinion of value, CB Commercial performed a complete appraisal process, as defined by the Uniform Standards of Professional Appraisal Practice. This means that no departures from Standard 1 were invoked. This is a complete appraisal, in the form of a Self-Contained Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Standards of Professional Appraisal Practice. The definitions of Complete Appraisal and Self-Contained Report are found in the Glossary of Terms and Definitions. In a complete appraisal, CB Commercial uses all known applicable approaches to value. The value conclusion reflects all known information about the subject property, market conditions, and available data. The Self-Contained Report incorporates to the fullest extent possible, practical explanation of the data, reasoning and analysis that were used to develop the opinion of value. It also includes thorough descriptions of the subject property and the market for the subject property type. All data considered significant that was requested for this assignment was received by CB Commercial Real Estate Group, Inc. Appraisal Services. SPECIAL APPRAISAL INSTRUCTIONS There were no special appraisal instructions. MARKETING PERIOD The marketing period section is divided into reasonable exposure time and reasonable marketing time. Exposure time differs from marketing time. Marketing time is the period required to sell a real property interest at market value during the period immediately after the effective date of the appraisal. Exposure time is always presumed to precede the effective date of the appraisal. Exposure time is not intended to be a prediction of a date of sale or a one-line statement. Instead, it is an integral part of the appraisal analysis and is based on one or more of the following: o statistical information about days on the market o information gathered through sales verification o interviews of market participants. The reasonable exposure period is a function of price, time, and use. It is not an isolated estimate of time alone. Exposure time is different for various types of real estate and under various market conditions. - -------------------------------------------------------------------------------- 3 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- Reasonable Exposure Time Exposure time is always presumed to precede the effective date of the appraisal. It is the estimated length of time the property would have been offered prior to a hypothetical market value sale on the effective date of appraisal. It is a retrospective estimate based on an analysis of recent past events, assuming a competitive and open market. It assumes not only adequate, sufficient, and reasonable time but adequate, sufficient, and reasonable marketing effort. Exposure time and appraisal conclusion of value are therefore interrelated. Exposure time is often expressed as a range and is based on direct and indirect market data gathered during the market analysis, sales verifications, interviews with market participants, and other appropriate sources. The amount of time which a property will require to be marketed varies greatly depending on a number of factors including market conditions, listing price, terms of sale offered, and competitive listing inventory. In addition to considering each of the factors noted above, CB Commercial considered: o exposure periods of comparable sales revealed during the course of this appraisal, o the most recent CB Commercial National Investor Survey, and o the opinions of local knowledgeable real estate brokers and investors. Market Conditions Throughout the Snyder area, market conditions for most property types have been generally weak during the past three to four years. The value of most investment grade property types has decreased due to a number of factors. The lack of demand for investment properties and the inability of owners to make mortgage payments resulted in numerous foreclosures, or properties deeded back in lieu of foreclosure. Increased listing inventory has had a substantial downward influence on property values and the exposure time necessary to generate sales. Only recently, due to the competitive pricing in the market and improving economic conditions, has the number of transactions and active investors increased. These market conditions describe the current market and illustrate how exposure time is correlated with listing inventory, competitive pricing structures, and marketing efforts. CB Commercial National Investor Survey In the most recent issue of the CB Commercial National Investor Survey, published in the Second Quarter 1996, CB Commercial surveyed a wide range of investors for property type preferences and specific marketing times. Respondents showed a clear preference for apartments, suburban offices, warehouse/distribution, community shopping centers, neighborhood shopping centers, power centers, urban offices, and business parks. Investors - -------------------------------------------------------------------------------- 4 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- indicated that exposure requirements for investment property have changed little from the previous survey, now an average of approximately 8.5 months for the subject property type. Real Estate Broker Surveys As a second information source, appraisers solicited the opinions of real estate brokers knowledgeable in the subject market and property type. While the majority of individuals surveyed were reluctant to predict an exact exposure time length for retail property in general, they generally estimated an approximate range between 6 and 12 months. All assumed that property would be appropriately priced and marketed. When asked about the subject property specifically, the consensus of opinion was that the subject would receive average to above average recognition in the marketplace under a reasonable plan for pricing and promotion. Exposure Time Conclusion In conclusion, based on the foregoing analysis, an exposure time of between 6 and 12 months is reasonable, defensible, and appropriate. Like the brokers surveyed, CB Commercial assumes that the subject property would have been competitively priced and aggressively promoted regionally. Reasonable Marketing Time Reasonable marketing time is the period a prospective investor would forecast to sell the subject property immediately after the date of value, at the value estimated. Anticipated marketing time is essentially a measure of the perceived level of risk associated with the marketability, or liquidity, of the subject as an investment grade property. The sources for this information include those used in estimating the reasonable exposure time, but also an analysis of the anticipated changes in market conditions following the date of appraisal. In other words, the reasonable marketing time is the number of months it will require to sell the subject property from the date of value, into the future. The reader must understand, however, that the future price for the subject property (at the end of the marketing time) may or may not equal the appraisal estimate. The future price depends on unpredictable changes in the physical real estate, demographic and economic trends, real estate markets in general, supply/demand characteristics for the property type, and many other factors. Based on the premise that present market conditions are the best indicators of future performance in the short-term and under stable market conditions, a prudent investor will forecast that, under the conditions described above, the subject property will require a marketing time of 6 to 12 months. - -------------------------------------------------------------------------------- 5 ================================================================================ REGIONAL ANALYSIS - -------------------------------------------------------------------------------- ================================================================================ REGIONAL AREA MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 6 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- AREA ANALYSIS The dynamic nature of economic relationships within a market area have a direct bearing on real estate values and the long-term quality of a real estate investment. In the market, the value of a property is not based on the price paid for it in the past or the cost of its creation, but on what buyers and sellers perceive it will provide in the future. Consequently, the attitude of the market toward a property within a specific neighborhood or market area reflects the probable future trend of that area. Since real estate is an immobile asset, economic trends affecting its locational quality in relation to other competing properties within its market area will also have a direct effect on its value as an investment. To accurately reflect such influences, it is necessary to examine the past and probable future trends which may affect the economic structure of the market and evaluate their impact on the market potential of the subject. This section of the report is designed to isolate and examine the discernible economic trends in the region and neighborhood which influence and create value for the subject property. A regional map indicating the location of the subject is presented on the previous page. REGIONAL INFLUENCES Location The subject is located in the community of Shamokin Dam within Snyder County, in the middle portion of the state of Pennsylvania. Snyder County is not part of any larger Metropolitan Statistical Area (MSA). It is a rural county with three small communities, Shamokin Dam, Selinsgrove and Middleburg, each having a population of less than 10,000. Snyder County is bordered to the west by Mifflin County, to the east by Northumberland County, to the south by Juniata County, and to the north by Union County. A regional map indicating the location of the subject is presented on the following page. Population The 1995 population within Snyder County was estimated by Strategic Mapping, Inc. to be 38,023 which reflects a population density of 115 persons per square mile, similar to Union County to the north but roughly half that of Northumberland County to the east. This population level indicates a increase of 1,343, or 3.7% from the April 1, 1990 federal census. The population is expected to further increase slightly to approximately 39,395 by the year 2000. - -------------------------------------------------------------------------------- 7 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Demographic statistics for Snyder County are summarized in the following table. ============================================================================= SELECTED AREA DEMOGRAPHICS SNYDER COUNTY - ----------------------------------------------------------------------------- Population 1995 Estimate 38,023 1990 Census 36,680 1990-1995 % Change 3.7% Households 1995 Estimate 13,299 1990 Census 12,764 1990-1995 % Change 4.2% 1995 Median Household Income $ 30,846 1995 Average Household Income $ 37,120 1990 Average Home Value $ 62,720 1990 % College Graduates 14.2% - ----------------------------------------------------------------------------- Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ============================================================================= Households Similar to the population level within the Snyder County, the number of households has increased in recent years and is projected to increase by 4.2% over the next five years. Between 1990 and 1995, the number of households in Snyder County increased by 4.2%. Projections for the year 2000 indicate a mature area with moderate growth. The average household size did not change between 1990 and 1995 (averaging 2.70 persons per household) and is expected to remain fairly stable over the next five years, dropping only slightly to 2.69. Income Per the data compiled by Strategic Mapping, Inc., the 1995 median household income in the Snyder County was $30,846. The median household income increased considerably between the 1980 and 1990 census by approximately 5.1% annually. The 1995 estimate indicates that growth in the median household income has slowed to 3.6% per annum from 1990 to 1995. Following this more recent trend, income growth is projected to increase at an average annual rate of 3.4% between 1995 and the year 2000, slightly less than inflation. - -------------------------------------------------------------------------------- 8 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Employment The total civilian labor force for Snyder County was 18,817 in April, 1996 with corresponding employment of 17,669 indicating an April, 1996 unemployment rate of 6.1%. The following table compares the unemployment rate for the area to that of the state and national average. ============================================================================== UNEMPLOYMENT RATES COMPARISON BY COUNTY, STATE, AND U.S. ============================================================================== Year Snyder County Pennsylvania U.S. 1995 5.4% 5.9% 5.7% 1994 5.2% 6.2% 6.1% 1993 6.4% 7.1% 6.8% 1992 7.7% 7.6% 7.4% ============================================================================== Source: Pennsylvania Department of Labor and Employment Security, Bureau of Labor Market Information Compiled by: CB Commercial Real Estate Group, Inc. ============================================================================== Most of the employment is in Manufacturing (34%) and Services (25%), followed by retail trade industries (17%). The area saw a slight gain in manufacturing employment between 1980 and 1990 but a much greater increase in white-collar jobs. Still this area has a high rate of manufacturing sector workers as compared to State of Pennsylvania averages. This reflects the county's history in manufacturing. The major employers in the area are as follows: ========================================================================== SNYDER COUNTY MAJOR AREA EMPLOYERS - -------------------------------------------------------------------------- Company Business No. Employees - -------------------------------------------------------------------------- Woodmode Cabinetry 1,000 Phillips Products Manufacturers 300 Selinsgrove School District Education 300 Boscov Department Store Retailer 250 Midwest School District Education 300 Apex Homes Housing 200 Excel Homes Housing 200 Penn Luther Village Nursing Home 200 Susquehanna University Education 250 - -------------------------------------------------------------------------- Source: Snyder County Chamber of Commerce Compiled by: CB Commercial Real Estate Group, Inc. ========================================================================== - -------------------------------------------------------------------------------- 9 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Transportation The Interstate highways serving Snyder County is primarily Interstate 80 which traverses Union County to the north. Interstate 80 traverses Pennsylvania in an east-west direction providing direct access to New Jersey and New York City. Access to this interstate is direct and easy via route 15. Route 15 traverses Snyder County making direct connections to Williamsport to the north and Harrisburg to the south. To the south, at Harrisburg, connections can be made to I-81. Overall, access to Shamokin Dam is good as there is direct access via Interstate 80. The major airports serving the Snyder County area are the Wilkes Barre Scranton International Airport and locally the Penn Valley Airport. The Wilkes Barre Scranton International Airport is approximately 70 miles northeast of Shamokin Dam located along I-81 southwest of downtown Scranton. This airport provides for private and corporate flights as well as cargo shipments. The Snyder County area is also served by various Conrail freight lines. Conclusion and Relevance to the Subject Property The long term outlook for the Snyder County is considered good. The county has direct access to I-80 via route 15, a primary north-south roadway in this area. The county, while containing a number of industries, has grown in service sector employment over the past 15 years. At the same time, its industrial base has remained relatively constant. Population projections indicate moderate increases for Snyder County in the short- and long-term. This moderate growth trend holds true for households and income levels as well. This is a middle income area which should continue to support the existing retail stock. - -------------------------------------------------------------------------------- 10 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- NEIGHBORHOOD INFLUENCES Location The subject is located on the west side of Federal Highway 15, at its intersection with route 11. The boundaries for the subject neighborhood are considered to be a concentric ring having a radius of five miles. This encompasses the primary trade area, which emanates from the Borough of Shamokin Dam. A neighborhood map indicating the location of the subject is presented on the following page. Land Use Land use in the neighborhood consists of a mixture of commercial and residential development. To the north, along Route 15 the area is undeveloped, until the next county. It has recently been re-zoned for commercial use. The area to the northwest is also undeveloped and zoned for residential use. To the northeast across the Susquehanna River is the City of Sunbury. Moving south along Route 15 through to Hummels Wharf, is a strip of commercial improvements. The immediate area along Route 15 has a scattering of commercial improvements. Adjacent to the south of the subject is Orchard Hills Shopping Center. This center is anchored by a Giant supermarket and M & L Warehouse Outlet. Other small users are generally fast food franchises such as McDonalds, Pizza Hut and Long John Silvers. In addition there are other free-standing commercial uses such as motels, diners, bowling alleys and service stations. Approximately two miles south, situated on the west side of Route 15 is the Susquehanna Mall. The mall is the only one in the region. It is a 423,000 square foot mall, anchored by Boscov's Department Store, Bon-Ton, JC Penny and an Acme supermarket. Located across the street from the mall are two competing centers, the Plaza Shopping Center anchored by Value City and a Wal-Mart which opened in 1994. Shamokin Dam is made up primarily of single family homes located on either side of Route 15. The industrial base is concentrated in an area located south of Route 15, situated along the Susquehanna River. Access Accessibility to the neighborhood in general, and to the subject property in particular, is considered to be good. Access to Interstate 80 is direct from Route 15, approximately 20 miles north . Shamokin Dam is accessed from the west via Route 522, a local roadway. From the east, Shamokin Dam can be accessed from Route 11 which provides access to both Sunbury and Danville. Route 15 is a divided highway with multiple intersections within the Borough of Shamokin Dam. Intersections and access to commercial improvements are controlled by traffic lights. - -------------------------------------------------------------------------------- 11 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ================================================================================ NEIGHBORHOOD MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 12 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Demographics Selected Neighborhood demographics in a five, ten, and a fifteen mile radius from the subject are shown in the following table: ============================================================================== SELECTED NEIGHBORHOOD DEMOGRAPHICS ============================================================================== 5 mile 10 mile 15 mile ============================================================================== Population 1995 Estimate 34,166 67,676 142,592 1990 Census 34,201 67,007 140,468 1990-1995 % Change -0.1% 1.0% 1.5% Households 1995 Estimate 13,191 24,515 52,899 1990 Census 13,187 24,217 51,970 1990-1995 % Change 0.0% 1.2% 1.8% 1995 Median Household Income $28,952 $31,017 $29,565 1995 Average Household Income $35,692 $38,673 $36,889 1990 Average Home Value $61,602 $67,876 $60,346 Median Age Total Population 36.7 35.3 36.3 1990 % College Graduates 15.8% 19.0% 17.2% ============================================================================== Source: Conquest Market Data Compiled by: CB Commercial Real Estate Group, Inc. ============================================================================== The moderate upward trend in population and housing units is projected to continue through the year 2000. The subject property is situated within a middle-income residential area. The subject's department store competes with a free-standing Wal-Mart and several other department stores within the Susquehanna Mall, all located two miles south along Route 15. The population and households have increased within the primary, secondary and tertiary trade areas. Projections for the year 2000 indicate similar patterns. Income levels have edged upward approximately 3.4 percent per annum keeping pace with inflation. General income characteristics are slightly stronger for the ten-mile radii and fall off when including the 15 mile radii. More wealthy residents live to the north of Shamokin Dam in Lewisburg. Growth and Trends We are not aware of any proposed shopping centers within greater Shamokin Dam in the upcoming years. The owner's of the subject have indicated that a Redners Market has shown interest in a free-standing build-to-suit on the subject site, however, no formal plans have been made. The immediate neighborhood has not experienced significant retail development in the recent past. Most recently a Wal-Mart was built opposite the Susquehanna Mall, on the - -------------------------------------------------------------------------------- 13 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- southeasterly side of Route 15. Given the demographic profile and trends projected for this area, it is unlikely that any new retail development will take place for some time. Conclusion and Relevance to the Subject Property The subject property is situated along a major retail strip surrounded primarily by residential uses. The area features good accessibility to both the local transportation system and throughout the county and larger area. Currently, the subject's neighborhood is in the stabilization stage of its life cycle, a period of neither significant growth nor decline. The commercial strip is largely developed, although infill and redevelopment sites exist. There does not appear to be enough demand for any future development. We do not expect the character of the neighborhood to change in the near future. - -------------------------------------------------------------------------------- 14 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- MARKET ANALYSIS Retail Overview The retail market in Shamokin Dam is essentially stable. The immediate neighborhood was largely developed during the late 1960's through 1980. The most recent addition came in 1994, with the opening of a Wal-Mart Store. While there has been some vacancies by anchor tenants, these have generally been replaced by a competing store. Therefore, the make-up of this small market, two to three grocery stores and five department stores, has been relatively constant. We are not aware of any proposed shopping centers within the greater Shamokin Dam area in upcoming years. We noted, however, that the subject could be expanded with a planned grocery store. These negotiations are in the early stages. According to Strategic Mapping, Inc., as well as our own observations and research, total retail development within the primary trade area, a five-mile radius of the subject property consists of approximately 900,000 square feet. This includes a 140,000 square foot community center in nearby Sunbury anchored by an Ames department store. The level of retail development for the ten mile radius increases to 1,230,000 including centers and free-standing department stores in Lewisburg to the north. Furthermore, retail development within a 15 mile radius consists of an estimated 1,700,000 square feet. This additional retail development is located in Shamokin and Danville, slightly larger sized communities located to the east of the subject in Montour and Northumberland Counties. Local Retail Market In order to project future performance of the retail space in the subject property consideration has been given to various market components that affect the supply and demand for this type of real estate property. Specifically we have: o Inspected the site and surrounding areas for the purpose of familiarizing ourselves with all the locational and environmental factors. In this regard, we have directed our attention to the physical qualities of the site, access and circulation, surrounding uses, and relationship to sources of market support. o Reviewed the principal economic growth trends in the area in industry, population and employment. Our intention was to identify the degree of underlying support for existing improvements and future growth. o Analyzed existing and foreseeable market conditions for retail properties in the area. o Analyzed demographics of the subject property's trade area as well identified competition in order to assess, the subject property's current as well as future position in the market. - -------------------------------------------------------------------------------- 15 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- Trade Area The trade area of a shopping center is defined as the geographic area from which the sustaining patronage for steady support of a center is obtained. Determination of the boundaries is contingent upon various factors including but not limited to the nature and size of the center, area population, accessibility, physical barriers, location of competing facilities, and limitations of driving time and distance. The subject's general trade area is considered to be that which encompasses a fifteen mile radius of the subject center. We broke this down further to include a five-mile ring (primary trade area), a ten-mile ring (secondary trade area) and a fifteen-mile ring (tertiary trade area). Definition Of The Trade Area The primary ingredients for success in these types of projects include the nature of the competition, population density, income levels, and disposable income. The actual size of the population needed to support this type of project cannot be fixed due to the complexities of the above factors, as well as changing methods of merchandising. Local conditions, such as number of households, income levels, and existing centers within the trade area can have the most dramatic impact upon any given project since these factors are what determine the purchasing power in an area. An additional ingredient leading to the success of a shopping center would be the tenant mix and characteristics of the leading tenants which attract shoppers to the project. We have analyzed demographic data, competition, income levels for the subject trade area in the following sections. The demographic profiles of the primary, secondary and tertiary trade areas are presented in the Neighborhood Influences section of the report. Additional demographic information is contained within the Strategic Mapping, Inc. Profile Report located within the Addenda. Population The sales potential of a center is directly related to its proximity to the number of potential patrons. The historical and projected trends for population are important to examine when analyzing the trade area of a shopping center. The historical population trends for the subject's trade areas indicate an increase in population between 1980 and 1995 followed by a further, albeit moderate, increase projected from 1995 to the year 2000. In the primary trade area the population increased by 6.0% between 1980 and 1990 to 34,201 and then witnessed a nominal decline to 34,166 in 1995. Population projections indicate an increase to 34,318 between 1995 and the year 2000. Both the - -------------------------------------------------------------------------------- 16 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- secondary and tertiary trade areas have witnessed moderate increases in the past and have a future upward trend in population. In order to further analyze the population change, we have examined the distribution of the population by age. When analyzing the population distribution by age, it should indicate in what age groups the population shifts are projected to take place. This is important to distinguish if it will have a great impact on the retail sales of the subject center. Shifts in the age groups under 24 years of age will affect the subject, however, less drastically than changes in the subject's core market approximately between the ages of 25 and 54. As illustrated in the Profile Report located in the Addenda, a large percentage of the population in all three trade areas are in the age groups from 25 - 54. The population has a fair number of young persons (off-setting the plus-65 year-old category) which will move into their prime spending years. Estimated figures for 1995 indicated that the median age was slightly higher than the 1990 census in all three trade areas ranging from 35.3 to 36.7. Overall, the diversification among age groups is typical of the broader region. Household Trends When analyzing the demographics for a retail center, it is most important to focus on the trends in the household population. A household consists of one or more persons occupying a dwelling unit. A family would be considered a household unit, however single persons living alone or two or more unmarried persons sharing a dwelling are also considered a household unit. The household unit is perhaps the best indicator in determining the economic health of a trade area. One of the important components which bonds a household together is it's economic strength as a unit as compared to the economic viability of an individual; single person households not withstanding. If the population is slightly decreasing and yet the number of households is increasing, this would not necessarily be a negative indicator. This would imply that the average household size was shrinking. Each household has demand for goods that likely is not duplicated with a larger household size. This demand is duplicated however in the number of households. Similar to population figures, the number of households in the trade area increased between 1980 and 1990. Subsequently, the number of households increased between 1990 and 1995 though at a slower pace in comparison to the previous decade. The number of households are projected to increase further in all three trade areas in upcoming years. These projections indicate a bolstering in retail sales. - -------------------------------------------------------------------------------- 17 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- Household Income The median household income in the subject's trade areas increased annually at an average rate of 3.6% from 1990 to 1995. Thus, the household incomes in the area grew at a pace slightly above inflation during this period. The projected annual income growth rates between 1995 and the year 2000 are approximately 3.5%, roughly at the projected rate of inflation. Overall, household income levels varied slightly between the three trade areas. The median household income levels ranged from $28,852 to $31,017 in 1995 with the primary trade area representing the lower end of the range. Employment The income characteristics of the trade areas for the subject property indicate that this is a predominately white-collar market. The trade areas had similar levels of white-collar employment, ranging from 45.3 to 48.6%. Each area saw loses in manufacturing employment ranging from 3% in the primary area to 10% in the tertiary area over the past 10 to 15 years. During the same period white-collar employment increased by 30% across the three trade areas. White-collar workers made-up similar percentages ranging from 45.3 to 48.6%. These ratios are similar to the state. Blue-collar workers made-up between 33.7% and 36.2% of the work force. The remaining percentages were in special services categories. The 1990 Census information indicates that the unemployment rates ranged from a low of 4.8% in the secondary trade area to a high of 5.6% in the tertiary trade area. As discussed in the Location Analysis, the most recent unemployment rate in Snyder County was x.2% which indicates an overall decrease in employment from the 1990 Census. The relatively low unemployment rates in the primary and secondary trade areas reflect their diversity and the growth of these areas in white-collar employment. The existence of Susquehanna University and Bucknell University adds to the stability of these areas. Expenditure Potential The Expenditure Potential charts located in the Addenda outline Strategic Mapping, Inc. retail sales projections for the subject trade area. The highest sales growth in the primary trade area appears to be for drug and grocery stores. These categories also represent high growth in the secondary and tertiary trade areas. The average growth rate for retail sales in the primary trade area is projected at 1.78% in the primary trade area, 2.04% in the secondary trade area and 2.15% in the tertiary trade area. Strategic Mapping, Inc. examines the product potential for various store types for each portion of the subject trade area. Based on statistical sampling, Strategic Mapping has derived a benchmark per household expenditures for each store type. Comparing the figures in the - -------------------------------------------------------------------------------- 18 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- trade area to the benchmark figure, it is apparent that those individuals in the subject trade area are much more likely to spend on items in drugs, groceries, and convenience stores. The Strategic Mapping Expenditure Potential Index is defined as follows, 'An index which shows the amount by which an area per household expenditures, differed from that of the benchmark.' The benchmark is defined as the average or common expenditure among households for a larger region. Values below 100 signify that this area is below the benchmark per household expenditures and correspondingly values above 100 indicate a higher than average expenditure per household. The overall Expenditure Index for the primary area is 91.9, while the benchmark indices for the secondary and tertiary trade areas are 96.9 and 94.1, respectively. In conclusion, the expenditure indices for the subject trade areas indicate that the trade area populations spend slightly less than the benchmark household on retail goods. Several product categories had benchmarks in excess of 100: drug, grocery and home center store sales. The next highest benchmark categories were convenience, fast food and auto-aftermarket stores. Overall, these statistics reveal a market that is economically moderate and therefore one that spends primarily upon necessities, (food stuffs and drugs primarily) with additional moneys on the home and in restaurants, particularly fast food. Still, less money was spend on high-end or luxury goods such as electronics, jewelry and apparel. Market Indicators The subject consists of a free-standing K-Mart. Discussions with local leasing agents reveal that typical anchor space rents in the area generally range from $4.00/SF to $8.00/SF depending upon the physical and locational characteristics of the space. Percentage rent clauses tend to be uncommon for satellite tenants. Retail leases are typically structured on an absolute net basis with flat rents over the term. Based upon discussions with brokers and managing agents in the area as well as our observations during our inspection, competing centers in the subject's market area have vacancy rates which generally fall within the 5.0% to 25.0% range mostly in satellite store space. There is only one major vacancy in the primary market, the Bi-Lo grocery store opposite the mall vacated their store in January of 1996. Summary Future projections indicate continued moderate increases in the population and households in all three trade areas from 1995 through 2000. Income levels appear to be increasing at rates equal with projected inflationary rates which is common during periods of economic recovery. Overall, the subject trade areas reflect average retail characteristics. The trade areas will exhibit moderate increases in spending potential over the near term. While the primary area is has relatively dense population there are a number of big box retailers including a recently built Wal-Mart. Thus, this area is highly competitive marketplace. - -------------------------------------------------------------------------------- 19 PROPERTY DESCRIPTION ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- SITE ANALYSIS The description of the site can be detailed as follows: Location: The subject is located at the northwest corner of Routes 15 and 15/11 in the borough of Shamokin Dam. Ingress and egress to the subject are available via curb cuts from Route 15 and the merged Route 15/11 running through Shamokin Dam. Assessor's Parcel Number: Map 6, Parcel No. 54 Land Area(2) The site contains 20.95 acres or 912,732 square feet. According to the submitted plot plan, some 350,533 SF (8.05 acres) is non-usable, leaving the net area at 12.9 acres. Shape and Frontage: The site is irregular in shape featuring good frontage along Route 15 of approximately 1,200 feet and approximately 450 feet of frontage along merged Route 15/11. Topography and Drainage: The bulk of the site is flat, however, it is recessed from Route 15 and is roughly 10 feet above street grade. Thus, the entranceway slopes up from Routes 15 and 11/15 to the main parking area. The Ted's Landing Restaurant is located on a pad site situated across Route 15 and is at street grade. Our investigation did not reveal any significant drainage problems. Soils: No soil report was provided and it is assumed that the soil is adequate for the existing use. Easements: No title report was provided in connection with this appraisal. A survey showing the location of easements was submitted. Most of these refer to utility (gas) and water & sewer easements which should not affect the development or use of the site. There is a PA Department of Transportation right-of-way easement running through the northeast portion of the site, which may have affected the usable area. Our reading of the submitted site plan is not meant to be a definitive conclusion regarding any potential impacts on value of the location of any such easements or encroachments. It is specifically assumed that any easements, restrictions, or encroachments that might appear against the title would have no adverse impact on marketability or value. - ---------- (2) Source: Submitted plot plan - -------------------------------------------------------------------------------- 20 ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- Covenants, Conditions, and No private deeds or restricting Restrictions: covenants affecting development, other than zoning, were found to affect the site. Utilities: All public utilities including gas, electricity and telephone as well as water, storm and sanitary sewer systems. Flood Zone: According to the Federal Emergency Management Agency (FEMA) Flood Map, Community Panel #420809A covering Shamokin Dam the subject property is not located within a flood hazard zone. Environmental Issues: The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the property causing a loss in value. No evidence of hazardous waste or toxic materials was visible and CB Commercial has no knowledge of the existence of these substances on or in the subject property. However, CB Commercial is not qualified to detect hazardous waste or toxic materials. Adjacent Properties North: Cemetery and undeveloped land along Route 15. South: Gas Station, Orchard Hills shopping center East: Small commercial improvements, Susquehanna River beyond. West: Single family residential. Conclusion: The subject is a 20.95-acre site which has a net usable area of 12.9 acres according to a submitted survey by Merlyn Jenkins, Land Surveyor. The site is accessible from two major roadways and served by necessary utilities. Access and visibility are considered to be good. There are no adverse soil conditions of which CB Commercial Real Estate Group, Inc. is aware. The shape of the parcel is irregular and the topography is sloping above street grade limiting visibility somewhat, although signs and traffic signals mark the center and provide easy accessibility. There is excess land and some of the unimproved portions of the site are wooded while a portion located south the existing structure is cleared. From a physical standpoint, the site is considered to be adequate for many types of development. - -------------------------------------------------------------------------------- 21 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS The subject improvements were constructed in 1979 and expanded in 1992. The improvements consist of a detached single-story K-Mart Department Store containing 92,171 square feet of gross leasable area. The center contains a pad site improved with a restaurant. The following is a description of the improvements based on our physical inspection, municipal records and from discussions with and materials provided by the client. The basic construction features are summarized as follows. Construction Class The class of construction is the basic subdivision in Marshall Valuation Service which divides all buildings into five basic groups by type of framing (supporting columns and beams), walls, floors, roof structure, and fireproofing. The subject is considered to be of construction Class B(3). Competitive Rating The subject is considered a Class A building in terms of quality as it is perceived in the marketplace. Foundation Poured concrete Frame Concrete block over a steel frame Floor Construction Concrete slab Exterior Walls Load-bearing concrete block over a steel frame with face- brick at the front facade. Fenestration Aluminum framed glass windows and double-paned glass front doorways. Roof Structure & Covering Flat, presumably built-up composition covering over steel deck with steel bar joist supports. We were unable to inspect the roof and assume the roof is in average overall condition. Exterior Condition Good Interior Partition System Metal studs with gypsum board cover. - ---------- (3) The primary characteristic of Class B Buildings is the reinforced concrete frame in which the columns and beams can be either formed or precast concrete. They may be mechanically stressed, and the structure is fire resistant. (Source: Marshall Valuation Service) - -------------------------------------------------------------------------------- 22 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Interior Finishes - Tenant Space Floors: Vinyl tile. Walls: Painted or covered gypsum board. Ceilings: Suspended acoustic tiles. Lighting: Florescent lighting. Summary: The interior of the subject is considered to be of good quality and similar to competitors. HVAC Heating and ventilation is provided of the tenant by roof-mounted HVAC units. Each of these units pump the hot air throughout its suite via sheet metal air duct work hidden above the dropped ceiling. Air conditioning is supplied by the same system utilizing the duct work and supplying cool air during the summer months. The HVAC system is a gas-fired forced air system. Electrical The electrical system is assumed to be in good working order and adequate for the building. Fire Protection It is assumed that the subject has adequate fire alarm systems, fire exits, fire extinguishers, fire escapes and/or other fire protection measures to meet local fire marshall requirements. Plumbing The plumbing system is assumed to be in good operating condition. Parking Surface parking is provided for 421+/- vehicles. Landscaping Landscaping on the subject property is minimal which is typical within the subject neighborhood. ADA Compliance Handicap access appears to be available to all areas of the center. However, we are not qualified to determine compliance with the requirements. Please refer to the specific limiting condition regarding ADA compliance. Environmental Issues The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the improvements which would cause a loss in value. - -------------------------------------------------------------------------------- 23 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Functional Quality of Space The interior floor plan is essentially open and flexible and will accommodate a variety of big box tenant layouts. There are no observed design problems and none are reported by management. Access to the each store is available at the front and rear of the center. Deferred Maintenance No deferred maintenance was observed or reported. The improvements have been adequately maintained since it was constructed in 1979 and renovated and expanded in 1992. Economic Age and Life Based on the current condition, we estimate the effective age to be approximately 10 years. According to the Marshall Valuation Service cost guide, buildings of this type and quality have an expected life of approximately 45 years. Therefore, the remaining economic life (expected life minus effective age) is estimated at 30 years. While we observed nothing to suggest a different economic life, a capital improvement program could extend life beyond that stated above. Quality/General Condition The subject property conforms well with competitors in the area. The quality of construction is typical of the area. Interior amenities are similar to competing properties of the same approximate age. The general condition of the improvements is good. We observed no evidence of structural fatigue and the improvements appear sound. We are not qualified to determine structural integrity, however, and recommend that the reader rely upon an expert in this field for further determination. Conclusion/Comments The subject property is an average quality shopping center located in a relatively stable area. The improvements generally conform with competitors in the neighborhood. - -------------------------------------------------------------------------------- 24 ================================================================================ ZONING - -------------------------------------------------------------------------------- ZONING The subject's zoning requirements are detailed below. ================================================================================ ZONING SUMMARY - -------------------------------------------------------------------------------- Current zoning: C-1; Commercial Highway District Legally conforming?: Yes Uses permitted: Retail, Bank, Food Stores, Dry Cleaning, Drive-In Restaurants, Offices, Service Stations, Motels, Auto Repair Shops Zoning change Not Likely - -------------------------------------------------------------------------------- Category Zoning Requirement - -------------------------------------------------------------------------------- Maximum FAR Non Specified Maximum Site Coverage 20% Front Setback 40 feet Rear Setback 10 feet Side Yard Setbacks 10 feet Height Limit 3 stories or 40 feet Parking One space per 200 square feet of building area above grade - -------------------------------------------------------------------------------- Source: Borough of Shamokin Dam Zoning Ordinance Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ ZONING ANALYSIS AND CONCLUSIONS According to the Borough of Shamokin Dam Zoning ordinance, the subject property is a legal and conforming use under current guidelines. In addition, the property appears to conform to bulk and setback requirements as well as to parking requirements. - -------------------------------------------------------------------------------- 25 ================================================================================ TAX ANALYSIS - -------------------------------------------------------------------------------- TAX AND ASSESSMENT DATA The subject property is assessed by Snyder County, Pennsylvania, at approximately 25.0% of the assessor's estimated market value. The last general assessment of properties in Snyder County was in 1972. A re-valuation has not been rescheduled. School taxes are collected on a fiscal year and town/county taxes are collected on a calendar year. The subject's assessed value and current taxes are summarized below. ================================================================================ CURRENT ASSESSMENT AND TAX INFORMATION (1995) - -------------------------------------------------------------------------------- Assessed Tax Rate Annual Tax ID Building/Tenant Value / $1,000 Taxes - -------------------------------------------------------------------------------- Map 6, Parcel No. 54 K-Mart $216,920 177.25 $38,449 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Source: Snyder County Assessor's Office Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The foregoing assessed value reflects a recent reduction granted following an appeal by the owner. Based on the current tax rate of $177.25 per $1,000 assessed value, the estimated taxes for the subject amount to $38,449, or $0.42 per square foot based on the rentable square footage of the center. Tax and Assessment Conclusion We have estimated the taxes for the center at $39,602 (the 1995 tax rate increased by 3% and applied against the 1996 assessment) for calendar year 1996 in our cash flow. Our discussions with the assessor indicated that the subject's taxes have increased in-line with the area's inflation rate, or approximately 3.0% per annum. We have therefore projected a long-term tax growth for all taxes equal to 3.0% per year. - -------------------------------------------------------------------------------- 26 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- HIGHEST AND BEST USE In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The four criteria that the highest and best use must meet are: o legal permissibility; o physical possibility; o financial feasibility; and o maximum profitability. Highest and best use is applied specifically to the use of a site as vacant. It is recognized that in cases where a site has existing improvements, the concluded highest and best use as if vacant may be different from the highest and best use given the existing improvements (as improved). The existing use will continue, however, until the land value, in its highest and best use, exceeds that total value of the property under its existing use plus the cost of removing or altering the existing structure. Implied in the highest and best use is a recognition of the contribution of a specific use to the community environment or to the community's development goals, in addition to wealth maximization of individual property owners. Also implied is that the conclusion of highest and best use that results from the appraiser's judgment and analytical skill, i.e., that the use determined from the analysis represents an opinion, not a fact to be found. Highest and best use analysis involves assessing the subject both as if vacant and as improved. HIGHEST AND BEST USE AS THOUGH VACANT Legal Permissibility The legally permissible uses were discussed in detail in the site analysis and zoning sections of this report. Based on our review of the zoning restrictions, the site can be developed with several different uses, including retail and commercial office uses. Physical Possibility The physical characteristics of the subject site were discussed in detail in the site analysis. Overall, a wide range of legally permissible uses would be physically possible, including a variety of commercial uses. - -------------------------------------------------------------------------------- 27 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- Financial Feasibility The test of financial feasibility is put only to those uses which are legally permissible and physically possible. If the property is capable of generating a sufficient net income to cover the required rate of return on investment and provide a return to the land, then the usage is financially feasible within a defined price limit. In our determination of financial feasibility we have analyzed current market rental rates for several different property types. The net income produced by the proposed or new improvements must provide a return above the cost to develop the property, including acquisition of the land. Through a cost/income analysis we have determined that development of the subject site is marginally financially feasible at this time. Based on the analysis of supply and demand factors at the present time, rents achieved for retail and/or office uses would not support the cost of construction. Based on the aforementioned, we have determined that development of the subject site at the present time with a retail center is not currently feasible. Maximum Profitability The final test of highest and best use of the site as though vacant is the use be maximally productive, yielding the highest land value. Based on our feasibility analysis we have determined that land banking the subject site is the maximally productive use at the present time. Conclusion: Highest and Best Use As Vacant The concluded highest and best use of the subject as though vacant is land banking until such time that development of the site with a retail/commercial facility is financially feasible. HIGHEST AND BEST USE AS IMPROVED Legal Permissibility As discussed, the subject site's zoning and legal restrictions permit a variety of land uses. Regardless, the site has been improved with a free-standing department store. Based upon review of Shamokin Dam's Zoning Ordinance, it is our opinion that the improvements are within the established guidelines. - -------------------------------------------------------------------------------- 28 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- Physical Possibility The physical characteristics of the subject improvements were discussed in detail in the improvement analysis section of this report. Overall, the layout and positioning of the improvements is considered functional for shopping center use, and the floor plan is considered to be reasonable in comparison to other shopping centers in the area. The improvements have good retail features, have been adequately maintained, and are physically capable of sustaining their current use over the extended future. Financial Feasibility As with the highest and best use of the site as though vacant, the financial feasibility of the site as improved is market derived. Typically, for retail properties similar to the subject, the test of feasibility is based on the amount of rent that can be generated less operating expenses. If a residual amount exists after paying the various expenses, then the land is being put to a productive use. At present, the subject is 100% occupied. Based on the historical and current operating status of the subject property, CB Commercial anticipates that the improvements are capable of providing an adequate return on the investment before any debt service requirements. Therefore, we conclude that the current use of the improvements is a financially feasible use of the property as improved. Maximum Profitability Similar to the highest and best use of the site as though vacant, the maximum profitable use of the subject as improved should conform to neighborhood trends and be consistent with existing land uses. Although several uses may generate sufficient revenue to satisfy the required rate of return on investment and provide a return on the land, the single use that produces the highest price or value is typically the highest and best use. Conclusion: Highest and Best Use as Improved Based on the foregoing discussions, CB Commercial concludes that the highest and best use of the property, as improved, is consistent with the existing use as a free-standing department store. There are no apparent alternative uses of the existing improvements that would produce a higher net income and/or value over time than the current use. The current use is a legally permissible use and appears to represent the highest and best use as improved. Furthermore, CB Commercial does not believe that conversion of the improvements or demolition is warranted or financially feasible. - -------------------------------------------------------------------------------- 29 VALUATION ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- APPRAISAL METHODOLOGY The appraisal process is defined as an orderly program by which the problem is planned and the data involved is acquired, classified, analyzed and interpreted into an estimate of value. In this process three basic approaches to value are considered: Cost Approach, Sales Comparison Approach, and Income Capitalization Approach. In appraisal practice, an approach to value is included or omitted based on its applicability to the property type being valued and the quality and quantity of information available. The final step in the appraisal process is reconciliation -- a process by which CB Commercial analyzes alternative conclusions and selects a final value estimate from among two or more indications of value. CB Commercial weighs the relative significance, applicability and defensibility of each approach as it relates to the type of property being appraised. THE COST APPROACH The Cost Approach is based upon the proposition that the informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements which represent the highest and best use of the land or when relatively unique or specialized improvements are located on the site and for which there exist few sales or leases of comparable properties. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. SALES COMPARISON APPROACH The Sales Comparison Approach utilizes sales of comparable properties, adjusted for differences, to indicate a value for the subject property. Valuation is typically accomplished using physical units of comparison such as price per square foot, price per unit, price per floor, etc., or economic units of comparison such as gross rent multiplier. Adjustments are applied to the physical units of comparison derived from the comparable sale. The unit of comparison chosen for the subject is then used to yield a total value. Economic units of comparison are not adjusted, but rather analyzed as to relevant differences with the final estimate derived based on the general comparisons. - -------------------------------------------------------------------------------- 30 ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- The reliability of this approach is dependent upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c) the degree of comparability; (d) the absence of atypical conditions affecting the sales price. Although there have been few sales in the region, the sales that were gathered were utilized to form an opinion of value. However, given the lack of relevant sales data, we have not placed minimal reliance upon this approach and have used it to provide additional support to the Income Approach. INCOME CAPITALIZATION APPROACH The methodology of the Income Capitalization Approach is to determine the income-producing capacity of the property on a stabilized basis by estimating market rent from comparable rentals, making deductions for vacancy and collection losses and building expenses, then capitalizing the net income at a market-derived rate to yield an indication of value. The capitalization rate represents the relationship between net income and value. Related to the direct capitalization method is the discounted cash flow method. In this method of capitalizing future income to a present value, periodic cash flows (which consist of a net income less capital costs, per period) and a reversion (if any) are estimated and discounted to a present value. The discount rate is determined by analyzing current investor yield requirements for similar investments. Since investors are active in the marketplace for properties similar to the subject, the Income Capitalization Approach is particularly applicable to the appraisal problem at hand. There is an adequate quality and quantity of income and expense data available to render a reliable and defensible value conclusion. For income producing properties similar to the subject, the Income Capitalization Approach is considered to be the most reliable. Therefore, this approach has been employed as the primary methodology for this assignment. - -------------------------------------------------------------------------------- 31 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH The Sales Comparison Approach provides an estimate of market value based on analyzing transactions of similar properties in the market area. The method is based on the proposition that an informed purchaser would pay no more for a property than the cost of acquiring an existing one with the same utility. When there is an adequate number of sales of truly similar properties with sufficient information for comparison, a range of values for the subject property can be developed. There are various units of comparison available in the evaluation of sales data in this approach. The sale price per square foot is the most commonly used in this approach. The effective gross income multiplier (EGIM) is rarely used by market participants because of the inconsistencies in estimating effective or gross income, vacancy, and expense differences. We conducted a thorough sales search for comparable shopping centers in the subject's market area. Through our sales search, we were able to identify a limited number of sales with similar characteristics to the subject. The following table summarizes what are considered to be the most recent and proximate comparable sales. Detailed write-ups of each comparable are included in the addendum. - -------------------------------------------------------------------------------- 32 ================================================================================ SALES COMPARISON APPROACH - --------------------------------------------------------------------------------
======================================================================================================================= SUMMARY OF COMPARABLE RETAIL SALES ======================================================================================================================= Gross No. Store Name/ Location Sale Leasable NOI OAR Sale Price Date Area (SF) Sale Price Per S.F. Per S.F. - ----------------------------------------------------------------------------------------------------------------------- 1 K-Mart 4/96 99,264 $2,289,357 $ 2.21 9.6% $ 23.06 Lancaster Lancaster County, PA 2 Wal-Mart 10/94 126,249 $6,587,493 $ 4.78 9.2% $ 52.18 Orangeburg, NC 3 Sam's Club 5/94 134,900 $9,494,691 $ 5.80 8.2% $ 70.38 Anderson Township Anderson County, SC 4 Pace Warehouse 4/92 145,825 $10,480,357 $ 7.12 9.9% $ 71.87 Baltimore, MD 5 Giant Supermarket 12/94 55,980 $4,525,000 $ 8.12 9.8% $ 80.83 City of York York County, PA 6 BJ's Wholesale Club 8/93 114,880 $9,350,000 $ 8.62 10.6% $ 81.39 Babylon Township Suffolk County, NY 7 Price Chopper 4/95 77,000 $7,277,500 $ 9.35 9.9% $ 94.51 Dunmore Township Lackawanna County, PA 8 Price Chopper 4/95 81,987 $8,302,500 $ 9.59 9.50% $101.27 Albany Albany County, NY - ----------------------------------------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. =======================================================================================================================
- -------------------------------------------------------------------------------- 33 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF IMPROVED SALES The sales reflect unit prices ranging from a low of $23.06 to a high of $101.27/SF with the primary difference reflecting the economics (anticipated net income stream) generated by these various big box retail stores. The sales consist of single tenant regional and national retailers. They fell into three broad categories: department stores such as Wal-Mart and K-mart, "price clubs" such as BJ's, Pace Warehouse and Sam's Club and Grocery Stores such as Price Chopper and Giant. There was little correlation between the type of user and the net rent being paid. The net rental is affected by annual retail sales and the date when the lease was originally written. Regardless of these variables it is clearly evident that the difference in unit prices is directly tied to the level net operating income and investor yield rates. The typical analysis of property sales attempts to attribute differences in unit prices to the particular features of the various properties. The unit prices are a means of more clearly showing those factors which affect market value such as the date of sale, location of the property, and the size, quality, and condition of the improvements. We have examined these factors for the eight sales and found that wide variations in the per square foot indicator are a reflection of the interest transferred, i.e., the leased fee estate. Units of comparison, such as sales price per square foot of building area are usually influenced by patterns of net operating income and do not operate as independent variables. This demonstrates the inherent difficulty in applying such unit indicators, especially in this instance, where the subject is rented long-term at rates that are at the low-end of the range for similar space in the region. We have gathered sufficient information on the eight sales to show the relationship between physical unit measures and income. Therefore, this physical unit indicator will be used to derive an indication of value for the subject. From the summary sales chart above we can see a correlation between net income per square foot and the price paid per square foot of building. Proof that the level of physical unit indicator is driven by anticipated benefits (income), is shown as this chart plots price per square foot and per unit against net income per square foot. In each instance, there is a direct correlation between income level and unit value measured as price per square foot. Adjustments made to the physical unit indicators without knowledge of each sales' level of net income are subjective at best and results in dubious conclusions. Net Operating Income Analysis The net operating income level for the comparables ranged from $2.21 to $9.59 per square foot, per year. The subject has a projected NOI for the coming year of $242,000 (rounded) or $2.63 per square foot reflecting full and stable occupancy. Given the correlation between price - -------------------------------------------------------------------------------- 34 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- paid per square foot and NOI per square foot it would seem reasonable to conclude that the subject would sell at the low end of the range established by the comparable properties. The following chart depicts the calculations involved in developing adjustment factors to be applied to the respective price per square foot units of comparison developed from the comparables employed. =============================================================================== NET OPERATING INCOME (NOI) ANALYSIS - ------------------------------------------------------------------------------- Sale Subject's NOI/SF Sale Price Adjustment Adjusted $/SF ---------------- No. Sale's NOI/SF Multiplier $/SF for Subject - ------------------------------------------------------------------------------- 1 $2.63 1.19 $23.06 +$4.38 $27.44 ----- $2.21 2 $2.63 0.55 $52.18 -$23.48 $28.70 ----- $4.78 3 $2.63 0.45 $70.38 -$38.71 $31.67 ----- $5.80 4 $2.63 0.37 $71.87 -$45.28 $26.59 ----- $7.12 5 $2.63 0.32 $80.83 -$54.96 $25.87 ----- $8.12 6 $2.63 0.31 $81.39 -$56.16 $25.23 ----- $8.62 7 $2.63 0.28 $94.51 -$68.05 $26.46 ----- $9.35 8 $2.63 0.27 $101.27 -$73.93 $27.34 ----- $9.59 =============================================================================== There is a direct correlation between the NOI/SF and sale price per square foot. As the net income level increases, so does the price paid per square foot. After adjusting the eight sales, they support a range of value for the subject between approximately $26.00/SF to $31.00/SF. Based on our analysis, the subject's value would be approximately $27.00/SF. The subject has a total building area of 92,171 square feet. The value estimate via the Sales Comparison Approach is calculated as follows: - -------------------------------------------------------------------------------- 35 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- ========================================================== Net Rentable Area of Subject 92,171 square feet Value per square foot $27.00 per square foot Indicated Value: $2,488,617 ---------- ROUNDED: $2,500,000 ========================================================== Overall, less emphasis has been placed on this approach because of the quality of the data. It is used primarily as a check of the value derived via the Income Approach. We estimate the as is market value of the leased fee interest in the subject property, via the sales comparison approach, as of May 15, 1996, is: --- TWO MILLION FIVE HUNDRED THOUSAND DOLLARS --- ($2,500,000) - -------------------------------------------------------------------------------- 36 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH The Income Capitalization Approach reflects the subject's income-producing capabilities. This approach is based on the assumption that value is created by the expectation of benefits to be derived in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over period of time. The two common valuation techniques associated with the Income Capitalization Approach are direct capitalization and the discounted cash flow (DCF) analysis. DIRECT CAPITALIZATION Direct capitalization is the method used to convert a single year's estimate of income into a value indication. In direct capitalization, a precise allocation between return on and return of capital is not made because investor assumptions or forecasts concerning the holding period, pattern of income, or changes in value of the original investment are not simulated in the method. Direct capitalization is most appropriate when analyzing a stable income stream and in estimating the reversion at the end of a holding period. Using this method, the following sets forth the process: 1. Estimate the Potential Gross Income (PGI) from all sources that a competent owner should be able to generate from a property based on existing and/or market rents. 2. Deduct an estimate of Vacancy and Collection Loss (VCL) to arrive at an Effective Gross Income (EGI) estimate. 3. Deduct operating expenses from the estimate of EGI. The result is an estimate of the stabilized Net Operating Income (NOI). 4. Estimate an Overall capitalization rate (R(o), or OAR). 5. Divide the NOI by R(o), resulting in a value estimate at stabilized occupancy. 6. Adjust the stabilized value to account for "As Is" condition, if applicable. DISCOUNTED CASH FLOW ANALYSIS The discounted cash flow (DCF) analysis is a detailed analysis used when the future income is expected to be variant, usually as a result of numerous lease obligations and/or anticipated changes in income and expenses. It is also particularly relevant when institutional buyers are the most likely purchasers of the subject because institutional buyers often place great weight on this analysis. The DCF analysis specifies the quantity, variability, timing, and duration of NOIs and cash flows. Selecting the proper yield rate (discount rate) is essential. CB Commercial must consider the target yield sought by investors as well as yields derived from comparable sales and/or market information. The methodology is: 1. Estimate the before-tax cash flows for each period of a projected holding period net of any capital expenditures such as leasing expenses and tenant improvements. - -------------------------------------------------------------------------------- 37 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- 2. Estimate a discount rate and a terminal overall capitalization rate. 3. Estimate a selling price, known as the reversion, for the end of the projected holding period. 4. The cash flows and the reversion are then discounted to a present value estimate. APPROPRIATE CAPITALIZATION METHOD A number of factors were considered in evaluating the appropriateness of using the direct capitalization method and/or the DCF technique including the occupancy status, lease structures, above/below market rents and typical buyer behavior. As a result of considering the foregoing factors, both the DCF technique and the income capitalization technique are employed in this appraisal. ESTIMATE OF MARKET RENT Rent analysis involves both a study of market (comparable) rentals and the subject's existing rents (if any). Market rent is the rent that a property would most probably command in the open market; indicated by the current rents paid and asked for comparable space. SUMMARY OF COMPARABLE RENTALS CB Commercial surveyed competitive properties and lease transactions for comparison to the subject. The selected comparable rentals are summarized in the following chart with a map and discussions of each comparable provided on the following pages.
=========================================================================================================================== SUMMARY OF COMPARABLE ANCHOR SPACE RENTALS =========================================================================================================================== 1 Plaza 15 Mall G.C. Murphy 11 yrs 01/90 53,000 $2.30 Flat for 3, 5-yr Options Route 15. term % Rent = 2.5% over Lewisburg, PA $2,500,000 With % rent, total rent payment equates to $4.00/SF 2 Pottstown Center Wal-Mart 20 yrs 07/95 121,267 $6.99 Flat for 6, 5-yr Options Montgomery Cty. term No % Rent Pottstown, PA 3 Route 6 Mall K-Mart 25 yrs 03/95 119,229 $5.77 Flat for 10, 5-yr Options N/S Route 6, term % Rent = 1% over $20,000,000 Wayne County Honesdale, PA 4 Bradford Towne K-Mart 25 yrs 07/94 94,481 $5.00 Flat for 10, 5-yr Options Centre, term % Rent = 1% over Bradford County $16,875,000 (or $179/SF Wysox, PA leased area) 5 Builder's Square Builder's 25 yrs 03/94 106,400 $10.05 Flat for 10, 5-yr Options Center Square term No % Rent Cetronia Road Lehigh County Whitehall, PA =========================================================================================================================== Compiled by: CB Commercial Real Estate Group, Inc. ===========================================================================================================================
- -------------------------------------------------------------------------------- 39 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMPARABLE RENTALS MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 40 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF COMPARABLE RENTALS We have obtained comparable leases from shopping centers and free-standing retailers situated within the subject's regional market area which are summarized above. The leases include a variety of uses and represent a similar tenant type to the subject. The above leases are considered to be generally similar to the subject in terms of condition, quality and location. We have examined the average effective rental rates of these comparables and determined that the effective rent is similar to the face rent, since their was no tenant improvements or free and escalation's were similar. These comparable centers are located throughout eastern Pennsylvania. Some areas are more competitive than others, for which we have attempted to make adjustments. Furthermore, they are all similar in age to the subject and considered to be of a similar functional design. All of the retail leases were written on a triple net basis, whereby the tenants assume their proportionate share of operating expenses, real estate taxes, and insurance. The lease comparables ranged from $4.00/SF (including percentage rent payments) to $10.05/SF with an average lease rate of $6.36/SF. The anchor rents reflect a close range for a variety of locations with the exception of comparable #9. However, this lease to Builder's Square has no percentage rent clause which partly explains the higher base rent. The low end of the range, from Plaza 15 in Lewisburg, is an Ames which was signed in 1990. The base rent was set to approximate 2.0% of gross sales, however, the breakpoint was set below the natural breakpoint level so that overage rent is generated at lower sales volumes. Thus, this store pays a combined rent (base plus overage) equal to 3.5% of annual sales volume. Anchor rents are more difficult to establish and are heavily influenced by gross sales. For this reason we have looked closely at the historical sales volumes for the subject's anchor stores to help determine market rent for these stores. - -------------------------------------------------------------------------------- 40 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF SUBJECT LEASES The following table summarizes the subject property's lease history.
================================================================================================================== SUMMARY OF SUBJECT LEASES ================================================================================================================== New / Term Contract TI's Free Tenant Renew (Years) Date Size Rent Escalation / SF Rent - ------------------------------------------------------------------------------------------------------------------ K-Mart New 25 11/79 92,171 $ 2.74 No Steps None None - ------------------------------------------------------------------------------------------------------------------ Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ==================================================================================================================
Anchor Rent Conclusion There have been no recent anchor leases signed at the subject. We have analyzed the sales volumes of K-Mart to help establish market rent based upon cost of occupancy. The total rent for K-Mart equates to 2.0% of gross sales, which falls at the low the range of exceptable cost of occupancy for a department store of 2.00% to 4.00%. Using the 1995 sales volume at K-Mart of $12,772,115 and applying the excepted cost of occupancy, an appropriate net rental range of $2.77/SF to $5.54/SF is derived. K-Mart also pays approximately $0.80/SF in CAM and real estate tax pass-throughs. Based upon our rent and cost-of-occupancy analysis, we feel that a "net" rental rate of $4.00/SF for anchor space is adequately supported. CONCLUSIONS: MARKET RENT ESTIMATE FOR THE SUBJECT PROPERTY Based on the previous analysis, the current market lease parameters for the subject property are estimated as follows: =========================================================================== CONCLUDED MARKET LEASE TERMS (PER SQUARE FOOT / YEAR) - --------------------------------------------------------------------------- Category Anchor Space - --------------------------------------------------------------------------- Market Rent $4.00 (NNN) Lease Term 25 Years Annual Escalation 0.0% Tenant Improvements $0.00 Free Rent (Months) 0 Months =========================================================================== Source: CB Commercial Real Estate Group, Inc. =========================================================================== CONTRACT RENT As discussed, the subject is a single tenant department store with an off-site pad site improved with a restaurant. The pad site is leased long-term but does not generate any income. - -------------------------------------------------------------------------------- 41 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Through our research of the subject property, which included a complete review of lease abstracts, rent rolls (both current and historical), and discussions with the property manager, the following rent roll summary was utilized to detail currently leased suites and general information employed for this approach. Additionally, within the Addenda are copies of the tenant lease assumptions, generated by Pro-ject+ Plus, a computerized lease-by-lease analysis program. Information submitted to us and contained in the Addenda provide additional support to the data and assumptions inputted for this method and is assumed to be correct and reliable. CB Commercial reserves the right to amend our input assumptions if any documentation is subsequently available which contradicts that assumed for this method. Located on the following page is the subject rent roll summary.
====================================================================================================== CIRCLE PLAZA K-MART - ROUTE 15 RENT ROLL - ------------------------------------------------------------------------------------------------------ Square Rent / SF Annual Suite Tenant Feet Begin End Rent - ------------------------------------------------------------------------------------------------------ 1 K-Mart * 92,171 11/79 11/04 $2.74 $252,289 4 Ted's Landing Pad 6/80 12/50 0 $0 Total Leased Square Feet 92,171 Average Rent: $2.74 $252,289 Vacant Space 0 Occupancy-Overall 100% - ------------------------------------------------------------------------------------------------------ K-Mart has a percentage rent clause that allows an off-set for tax payments. - ------------------------------------------------------------------------------------------------------ Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ======================================================================================================
ANALYSIS OF TENANCY The subject is fully occupied by K-Mart, a national department store chain. Overall, the quality of the tenancy is considered to be very good for the area. The current rental rate is $2.74/SF. SPECIAL LEASE PROVISIONS AND ASSUMPTIONS The following discussion summarizes any lease provisions and assumptions of special note. Pending Leases There are no pending leases, although we have been informed that Redners Market has expressed interest in occupying a building to be built-to-suit on the site's excess parcel. - -------------------------------------------------------------------------------- 42 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Renewal Options Options to renew at below or above market rent may have an impact on the valuation analysis. For example, if below market renewals are exercised, they may result in a downward impact on value. However, to the extent that re-tenanting costs are saved (rent loss during downtime, tenant improvements, leasing commissions, etc.), there may be an advantage in having the tenant renew at some rate below market rent in order to avoid these costs. The K-Mart lease has multiple renewal options. If a tenants' option rent is below market, we have assumed that the tenant would exercise its renewal option. Conversely, if a tenants' option rent is above market, we have assumed that the tenant would not exercise its renewal option and terminate the lease. We have estimated that K-Mart is paying a below market contract rent and therefore is assumed to exercise all options since the stipulated option rent is equivalent to the current base rent. EXPENSE REIMBURSEMENTS Current and future hypothetical retail leases which will encumber the subject property will be based upon triple net lease structures and are consistent with recent leases written at the subject property and the market in general. The tenants will be responsible for reimbursing the landlord for their pro rata share of operating expenses including their pro rata share of CAM, real estate taxes and insurance. The pro rata share calculations for future tenants are calculated by dividing the tenant's occupied rentable area by the gross leasable area of the center. The following is a breakdown of the subject's historical recoveries and CB Commercial's projections for the proforma. It should be noted that the subject's operating statements are based on a fiscal year basis, beginning June 1 and continuing through May 31. Expense Reimbursements Expense reimbursements for the subject property consist of real estate taxes, insurance, and common area maintenance. Common area maintenance expenses consist utilities, management fees, general and administrative, cleaning and repairs and maintenance expenses. The subject's historical expense reimbursements are as follows: - -------------------------------------------------------------------------------- 43 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ============================================ EXPENSE REIMBURSEMENT -------------------------------------------- Year Total $ Amount -------------------------------------------- 1993 $91,210 1994 $78,985 1995 $77,343 1996 Budget $84,696 Year 1 Pro Forma $91,404 -------------------------------------------- Source: Mark Centers Trust ============================================ The first year of our DCF model indicates reimbursements of $91,404. Historical expense reimbursements have been fairly steady between 1994 and 1996. The budgeted amount appears to be reasonable based upon projected expenses and reimbursement clauses for K-Mart. OTHER INCOME This income category can be derived from several different sources including tenant service income, merchants association fees, late fee income, short-term storage income, professional services provided for the tenants by the landlord/management, ground rent as well as other miscellaneous sources. There are no sources of additional income at this center. PERCENTAGE RENT INCOME In addition to the basic rental charges, the tenants are sometimes responsible for paying the landlord additional rent equal to a specified percentage of the tenant's gross sales made in, upon, or from the premises, over a breakpoint factor or according to a specific schedule. Three of the subject tenants have percentage rent clauses contained within their leases.
==================================================================================================================== PERCENTAGE RENT CLAUSES - -------------------------------------------------------------------------------------------------------------------- CBC's FY97 Tenant Breakpoint Percent Year Gross Sales % Rent Paid Projection - -------------------------------------------------------------------------------------------------------------------- K-Mart * $8,350,000 1.00% 1994 $15,081,086 $0* $13,319,000 1995 $12,772,115 $0* - -------------------------------------------------------------------------------------------------------------------- * K-Mart's percentage rent is offset by real estate tax recaptures. - -------------------------------------------------------------------------------------------------------------------- Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ====================================================================================================================
Given the aforementioned sales history, we have projected the gross sales for K-Mart as illustrated in the right column of the table. We have also projected that the gross sales figures will grow by 3.0% per annum over the course of the cash flow projection. - -------------------------------------------------------------------------------- 44 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- POTENTIAL GROSS INCOME The potential gross income for the subject property is summarized as follows, with adjustments to account for the vacant satellite space. =========================================================================== STABILIZED POTENTIAL GROSS INCOME (FY 1997) - --------------------------------------------------------------------------- Totals - --------------------------------------------------------------------------- Total Minimum Rent $252,289 Expense Reimbursement - Common Area Maintenance Recovery $ 33,643 - Real Estate Tax Recovery $ 40,097 - Insurance Recovery $ 0 - Percentage Rent $ 9,597 -------- Potential Gross Income $335,626 - --------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. =========================================================================== VACANCY AND COLLECTION LOSS This is an allowance for reductions in potential income attributable to vacancies, tenant turnover, and non-payment of effective rent. In the direct capitalization process, a market-derived, stabilized vacancy and collection loss estimate is subtracted from potential gross income in order to arrive at effective gross income. The subject property is currently 100% leased and occupied. Due to the long-term lease at the subject property the average vacancy rate over the projected holding period, which is attributed to downtime between leases, is assumed to be zero. In addition to vacancy, we estimated a credit loss factor of 1.0% which takes into account the national tenant, K-Mart. In the first year of our discounted cash flow analysis, the credit loss amounts to $3,356. EFFECTIVE GROSS INCOME Given our estimate of potential gross income, other income, and a vacancy and collection loss, the estimated effective gross income is derived as follows: ======================================================== EFFECTIVE GROSS INCOME (FY 1997) ======================================================== Potential Gross Income: $332,626 Less: Collection Loss $ 3,356 -------- Effective Gross Income: $332,270 ======================================================== - -------------------------------------------------------------------------------- 45 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Our estimate of effective gross income used in direct capitalization is $332,270. This figure is the same EGI in the first year of our cash flow in the discounted cash flow method. OPERATING EXPENSE ANALYSIS In projecting the revenues and expenses for the subject property, we have analyzed the historical figures for fiscal years 1993 through 1995 as well as management's forecast of revenues and expenses for fiscal year 1996. In addition, we have utilized the Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers publication to assist in our analysis. We have considered the category " Regions 1, 2 & 3 (East): Open Shopping Centers" as the most representative of the subject property. A summary of the average expenses taken from this publication increased at an inflationary rate to reflect our fiscal year 1997 analysis are presented as follows: ======================================================= COMPARABLE EXPENSE ANALYSIS ======================================================= Expense Category P.S.F. ------------------------------------------------------- General & Administrative $ 0.08 Repairs & Maintenance $ 0.36 Services $ 0.46 Utilities $ 0.18 ------ Total CAM $ 1.08 Real Estate Taxes $ 1.26 Insurance $ 0.15 Management Fees $ 0.41 Total Operating Expenses $ 2.90 ------------------------------------------------------- Source: Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers ======================================================= Our estimate of the subject's stabilized expenses are detailed as follows. Common Area Maintenance The subject's historical and projected common area maintenance (CAM) expenses are as follows: ========================================================== COMMON AREA MAINTENANCE EXPENSE ---------------------------------------------------------- Year Total $ Amount ---------------------------------------------------------- 1993 $26,053 1994 $34,755 1995 $17,628 1996 Budget $23,400 CB 1996 Projection $23,400 ---------------------------------------------------------- Source: Mark Centers Trust ========================================================== - -------------------------------------------------------------------------------- 46 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Common area maintenance (CAM) charges generally includes various items such as general and administrative expenses, repair and maintenance expenses, utilities, and general services such as cleaning, landscaping, security, and common area insurance expenses. We project the total CAM expense in 1996, before management fees, at $38,160 or $0.39/SF. The range of this cost as published by IREM is $0.57 to $1.64 with an average of $1.08. Our estimate is lower than the low end of the range. However, the subject's historical expenses have ranged from $0.19/SF to $0.38/SF. Given the subject's historical CAM expense structure coupled with its remote location, effective age, size of tenancy and the services provided, the subject's projected CAM figure is considered reasonable. Property Taxes Historical and budgeted property tax expenses are as follows: ======================================================== PROPERTY TAX EXPENSE -------------------------------------------------------- Year Total $ Amount -------------------------------------------------------- 1993 $ 53,970 1994 $ 54,873 1995 $ 55,511 1996 Budget $ 57,048 Year 1 Pro Forma $ 39,602 -------------------------------------------------------- Source: Mark Centers Trust ======================================================== As discussed fully within the tax and assessment data section of the report, estimated taxes for calendar year 1996 are projected to be $39,602. It appears that the 1996 budgeted taxes have not accounted for the reduction is assessed value granted the property following appeal. Insurance Historical and budgeted insurance expenses are as follows: ======================================================== INSURANCE EXPENSE -------------------------------------------------------- Year Total $ Amount -------------------------------------------------------- 1993 $ 7,463 1994 $ 8,525 1995 $13,186 1996 Budget $ 9,828 CB 1996 Projection $ 9,828 -------------------------------------------------------- Source: Mark Centers Trust ======================================================== - -------------------------------------------------------------------------------- 47 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Insurance at the subject property includes both liability insurance and fire insurance. This expense has decreased from 1995 to 1996 to a level of $0.11/SF. We have placed primary emphasis on the subject's historical and 1996 budgeted insurance expenses and have estimated the insurance expense at $9,828, or $0.11/SF. Professional Management Fee In order to maintain the control of the property and subsequently ensure the stream of income that it generates, it is necessary to employ either internal or outside management. This expense is non-recoverable. In the case of the subject property, the property is managed internally and no management expense has been reflected in historical statements. Typical professional management fees in the local market range from 1.0% to 5.0% of effective gross income. Based upon the size and nature of the subject improvements, we have applied a management expense of 3.0% of effective gross income. Because management is calculated based on a percentage of effective gross income, this expense will vary each year with fluctuations in the income stream. In the first year of our analysis, this expense equates to $7,161 or $0.08/SF. Replacement Reserves This expense typically represents a reserve for future replacement of long-lived items. The amount of reserve and whether it is included or not in the direct capitalization and DCF analyses depends on the actions reflected by buyers and sellers in the local market. Based on the available comparable data and discussions with brokers and investors, replacement reserves generally range from $0.10/SF to $0.20/SF for retail properties of similar quality and condition as the subject. Given the subject's average condition, we have estimated this expense at $0.10/SF or $9,217 in 1996 increasing at our projected annual expense growth rate of 3.0%. Based on discussions with local market participants, replacement reserves are typically subtracted in calculating NOI when determining the cash flow in the DCF analysis. Total Concluded Operating Expenses The concluded stabilized operating expenses for the subject total an estimated $107,898 in fiscal year 1996-1997, or $1.17 per rentable square foot. This total expense estimate is for the first year of our proforma and incorporates fiscal year conversions not reflected in the previous 1996 calendar year estimates. The expense is lower than the average indicated by IREM ($2.90/SF) but judged reasonable given the historical and budgeted operations of the subject. - -------------------------------------------------------------------------------- 48 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- CAPITALIZATION RATE There are several methods for deriving an overall capitalization rate for direct capitalization. A common method for establishing an overall capitalization rate for properties similar to the subject is to review the criteria of major investors in the marketplace. This may serve as a check against other techniques or may be a primary source when ample data exists. We have derived capitalization rates from comparable sales used within the Sales Comparison Approach. In addition, the investor survey method is used as a secondary approach in deriving our overall capitalization rate. The subject property is a retail shopping center that would be attractive to either a local or a national investor. The category in the published investor survey most comparable to the subject is a class B community shopping center. The investors typically interviewed for the survey are regional or national investors associated with pension funds, REIT's, insurance companies, financial institutions, etc. The information below is taken from CB Commercial most recent National Investor Survey (first quarter 1996).
==================================================================================================== SUMMARY OF INVESTOR SURVEY OVERALL CAPITALIZATION RATES COMMUNITY SHOPPING CENTERS - CLASS B - ---------------------------------------------------------------------------------------------------- Investor Survey R(o) Range Average Date of Survey - ---------------------------------------------------------------------------------------------------- CB Commercial National Investor Survey 9.5% - 11.0% 10.2% First Quarter, 1996 - ---------------------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ====================================================================================================
The previous survey indicates an overall range of 9.5% to 11.0% for neighborhood shopping centers with an average of approximately 10.2%. The sales data produced a range of 8.2% to 10.7% with an average of 9.6%. The capitalization rate reflects the quality and duration of the income stream as well as the physical characteristics of the property. The subject center is typical of the area containing a discount department store, however, it is a national tenant; K-Mart which occupies the entire building. The K-Mart lease is due to expire in 2004, although it carries ten, five-year renewal options at the same terms as the base lease. Overall, the quality, quantity and duration of the cash flow is considered to be very good. With respect to physical characteristics, the subject is a functional neighborhood center of average quality and in good overall condition. In addition, the subject is situated in an average retail location with relatively low volumes of traffic. Based upon this survey and the factors discussed above, a 10.00% overall capitalization rate (towards the top of the range) appears to be appropriate for the subject property given the associated risk of unrealized income attributed to the vacant space. - -------------------------------------------------------------------------------- 49 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Direct Capitalization Summary A summary of the direct capitalization method as applied to the subject property is illustrated in the following table: =============================================================================== CIRCLE PLAZA K-MART ROUTE 15 DIRECT CAPITALIZATION SUMMARY - ------------------------------------------------------------------------------- Category Total P.S.F. - ------------------------------------------------------------------------------- Income Total Market Rent $ 252,289 $ 2.74 Recovery Income 73,740 0.80 ------ ---- Gross Rental Income $ 326,029 $ 3.54 Less: Vacancy and Credit Loss (3,260) (0.04) Plus: Other Income 0 0.00 Plus: Percentage Rents $ 9,597 0.00 ---------- ------- Effective Gross Income $ 332,366 $ 3.61 Expenses Common Area Maintenance (CAM) (23,693) (0.26) Real Estate Taxes (40,097) (0.44) Insurance ( 9,951) (0.11) Management Fees ( 7,161) (0.08) Replacement Reserves (9,332) (0.10) ---------- -------- Total Expenses $ ( 90,055) $ (0.98) OER 27% Net Operating Income $ 242,311 $ 2.63 CAPITALIZATION OF NOI: @10.0% $ 2,423,110 $ 26.29 Reconciled Value $ 2,400,000 $ 26.04 - ------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. =============================================================================== The concluded market value of the subject property, based on the direct capitalization method, is $2,400,000. - -------------------------------------------------------------------------------- 50 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW ANALYSIS Our DCF assumptions are summarized as follows. Most of the following assumptions have been discussed and supported within prior sections of the report. A discussion of the discount rate, terminal capitalization rate and holding period follow the assumptions summarized below. ================================================================================ SUMMARY OF DISCOUNTED CASH FLOW ASSUMPTIONS CIRCLE PLAZA K-MART, ROUTE 15 IN SHAMOKIN DAM, PA. ================================================================================ General Assumptions Start Date June 1, 1996 Terms of Analysis 10 years Basis (Calendar / Fiscal) Fiscal Software Project + Plus Growth Rate Assumptions Expenses 3.0% Market Rent 3.0% Real Estate Taxes 3.0% Inflation (CPI) 3.0% Market Rent Assumptions Anchor $4.00 (NNN) Leasing Assumptions Lease Term 25 Years Anchor Renewal Probability 100% Weighted Average of: Tenant Improvements $0.00 Months of Free Rent 0 Tenant Assumptions Existing K-Mart lease was entered at contract rent and terms. It is assumed that K-Mart will exercise all options which are written on the same terms and conditions as the base lease. Miscellaneous Assumptions Credit Loss 1.0% Avg. Occupancy Over Projection Period 100% Structural Maintenance/ Reserves ($/SF) $ 0.10 Financial Assumptions Discount Rate (IRR) 11.50% Terminal Overall Capitalization Rate (RO) 10.50% Costs of Sale 2.00% ================================================================================ Source: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 51 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNT RATE ANALYSIS A discount rate is a rate of return on capital utilized to capitalize future payments or receipts to present value. It is based on the time value of money concept. For appraisal purposes, the rate used to convert income to property value should represent the annual rate of return necessary to attract investment capital. The rate is influenced by many considerations, including the degree of apparent risk, market attitudes with respect to future inflation, the prospective rates of return for alternative investment opportunities, supply of and demand for mortgage funds, and the availability of tax shelters. Because rates of return used in income capitalization represent prospective rates, as distinguished from historical rates, special consideration is given to market perceptions of risk and changes in purchasing power. Although it is not possible to prove conclusively the suitability of a particular rate of return on the basis of market evidence, the chosen rate should be consistent with the available evidence. Rate selection requires judgment and knowledge concerning prevailing market attitudes and economic indicators. Both the discount rate and the reversionary capitalization rate must reflect the relative risk perceived by investors for the specific market being studied. Generalities must be avoided. To determine such rates, we have used surveys of real estate investors analyzed and adjusted for comparative returns found in the capital markets. National investor surveys include data on investors operating regionally and nationally, such as representatives of insurance companies, commercial banks, pension funds, investment banking firms, syndication firms, and investment advisory firms. Such companies invest in all types of properties, including office buildings, retail shopping centers, hotels, apartment complexes, and industrial facilities. These surveys are valuable for determining general parameters but must be honed to the local market. Based on surveys from CB Commercial Real Estate Group Inc. for the first quarter 1996, investment criteria for numerous market participants including investors that would be in competition for acquiring a property such as the subject are illustrated below. ================================================================================ FIRST QUARTER 1996 NATIONAL INVESTOR SURVEY CLASS B COMMUNITY SHOPPING CENTERS ================================================================================ TYPE OF FIRM OVERALL CAP. RATES GENERAL DISCOUNT REAL RATE INFLATION RATE OF RETURN --------------------------- GOING-IN TERMINAL (IRR) (RRR) ================================================================================ Range: 9.5-11.0 10-12 2-4 12-15.0 9.5-11.5 Average 10.2 10.7 3.3 13.4 10.9 ================================================================================ Change from -10 +10 -10 +110 +390 3rd Qtr Survey ================================================================================ Source: CB Commercial Real Estate Group Inc. - 1st Quarter 1996 - -------------------------------------------------------------------------------- 52 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- We have surveyed national real estate investors for their investment criteria when purchasing real estate such as the subject. Investor expectations for inflation range from 2% to 4%, with an average of 3.3%. We have selected an inflation rate for our analysis of 3.0%. The discount rate reflects the quality and duration of the income stream as well as the physical and locational characteristics of the property. As discussed within the overall rate section, the subject center is considered to be typical of the area although it benefits from having a national tenant. Overall, the quality, quantity and duration of the cash flow is considered to be good. With respect to physical characteristics, the subject is a functional community center of average quality and in average overall condition. In addition, the subject is situated in an average retail location with relatively low volumes of traffic. In general, the discount rate (IRR) is comprised on a safe rate (usually Treasuries) and a risk premium. The risk premium is difficult to quantify but with sound logic a reasonable rate can be ascertained. The chart presented below graphically depicts real estates position within the risk/reward graph. INVESTOR RISK VERSUS RETURN REQUIREMENTS Anticipated Return _ Real Estate _ Common Stocks _ Corporate Bonds _ Mortgage Backed Securities _ Municipal Bonds _ T - Bills Riskless Rate ----------------------------------------------------------------------------- Perceived Level of Risk US Treasury notes and bonds are considered risk free since they are backed by the United States government. Their rates only fluctuate with perceived inflation. The use of this, or any short term investment including the prime rate or LIBOR is meaningless when compared to an investment with a 10 year holding period. Accordingly, as a starting point, we only considered risk free or nearly risk free investments with a maturity of 10 years. These include Treasuries, - -------------------------------------------------------------------------------- 53 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- corporate bonds and municipal bonds. Adjusted for daily fluctuations, these debt offerings are yielding 5.59% to 8.25%. Mortgaged backed securities generally tend to fall above these instruments. The next layer of risk would include debt rated as low as BBB. These notes are yielding as much as 10%. Long-term mortgages are also yielding over 10% considering the mortgage constant on a note priced at 250 to 300 basis points over comparable Treasuries. Riskier investments such as junk bonds vary widely from 12% to 22% on an unleveraged basis. Real estate, as indicated on the chart above falls between common stock (10%) and junk bonds (16%). To eliminate the burden of illiquidity, REIT's and similar investments are being created. They represent a quasi-real estate opportunity. REIT's are currently providing dividends ranging from 6% to 8% but offer potential yields of 15% to 20% Various financial instruments are yielding between 5.59% and 8.25% depending upon the type of investment as indicated on the chart below based on data obtained from the Federal Reserve Statistical Release for the week ending May 17, 1996. It should be noted that over the past year we have witnessed an increase in the interest rate of all of the following instruments. ================================================================ INSTRUMENT RATE ================================================================ Prime Rate 8.25% ================================================================ Municipal Bonds 5.96% ================================================================ Short-Term Treasury Securities (1 year) 5.59% ================================================================ Long Term Treasury Securities (10 years) 6.68% ================================================================ Corporate Aaa Bonds (10+ years) 7.57% ================================================================ Corporate Baa Bonds (10 + years) 8.25% ================================================================ The risk premium is the rate added to Treasuries to account for illiquidity, the capital markets and the economy. Whether the risk premium decreases in the near term is dependent on inflation, the growth of the economy and capital markets. During 1995, the Federal Reserve decreased interest rates in order to stimulate a sluggish economy. The low rates have continued during the early portion of 1996, however, have recently begun to ascend. Based on the above, we feel that the current required rate of return (IRR) for the subject would fall at the low end the range at 11.5%. This reflects the quality, quantity and cash flow risk associated with the subject property. As such, we have utilized a discount rate of 11.5% in our analysis. - -------------------------------------------------------------------------------- 54 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- TERMINAL RATE To estimate the appropriate terminal capitalization rate, we have considered the rates reflected in the investment criteria outlined above for both going-in and terminal capitalization. Typically, under stable market conditions, the terminal capitalization rate will be greater than the going-in rate to reflect the risk associated with the holding period. Typically 50 to 100 basis points are added on to the going-in cap rate under stable market conditions to account for the additional risk. Furthermore, our national investor survey also indicated an average terminal capitalization 50 basis points greater than the going-in rate. Going-in capitalization rates extracted from sales averaged 9.6% and we utilized a 10.0% going-in cap rate in the direct capitalization approach. It is evident by historical and current performance of the center and it is our opinion that the subject property will encounter average-to-good market acceptance in the future. It is our opinion that a terminal capitalization rate of 10.5% is the most appropriate for the subject property. A 2% deduction for costs of sale has been utilized to reflect the net reversionary value. HOLDING PERIOD To apply the discounted cash flow analysis, an estimate must be made of the appraised property's holding period based on typical investors' motives in the local market. Historical investment holding periods of similar shopping centers typically have ranged from 10 to 15 years. A 10- to 15- year holding period was analyzed to test the property's sensitivity to roll-overs. A 10-year holding period was selected. Our discounted cash flow analysis is presented on the following page. - -------------------------------------------------------------------------------- 55 Kmart - Shamokin Dam, PA Cash Flow Report Building Size 92,171 Reconciled Value $2,295 Cost of Sales 3.000% Value per SF $24.90 Hold Period (Years) 10 % Residual of Recon. Val 36.6% Reduce Residual by Cap Exp Yes Direct Cap Rate 10.00% Residual Discount Rate 11.50% Direct Cap Value $2,423
Compounded Ann. ----------------------------------------------------------------------------------------- Ave. Growth 1996 1997 1998 1999 2000 2001 2002 2003 ----------------------------------------------------------------------------------------- 0.00% BASE RENT 252,289 252,289 252,289 252,289 252,289 252,289 252,289 252,289 N/A Free Rent 0 0 0 0 0 0 0 0 3.00% Expense Recoveries 73,740 75,953 78,231 80,578 82,996 85,485 88,050 90,691 15.98% Percentage Rent 9,597 12,900 15,792 18,771 21,839 24,999 28,254 31,607 - -------------- ----------------------------------------------------------------------------------------- 1.61% GROSS INCOME 335,626 341,142 346,312 351,638 357,124 362,773 368,593 374,587 1.90% Credit/Vacancy Loss (3,260) (3,411) (3,463) (3,516) (3,571) (3,628) (3,686) (3,746) N/A Miscellaneous Incomes 0 0 0 0 0 0 0 0 - -------------- ----------------------------------------------------------------------------------------- 1.60% EFFECTIVE GROSS INCOME 332,366 337,731 342,849 348,122 353,553 359,145 364,907 370,841 - -------------- ----------------------------------------------------------------------------------------- 2.86% TOTAL EXPENSES 90,055 92,319 94,989 97,738 100,571 103,487 106,491 109,586 - -------------- ----------------------------------------------------------------------------------------- 1.10% NET OPERATING INCOME 242,311 245,412 247,860 250,384 252,982 255,658 258,416 261,255 N/A Commissions 0 0 0 0 0 0 0 0 N/A Tenant Improvements 0 0 0 0 0 0 0 0 N/A Capital Additions 0 0 0 0 0 0 0 0 N/A TOTAL DEDUCTIONS 0 0 0 0 0 0 0 0 - -------------- ----------------------------------------------------------------------------------------- 1.10% CASH FLOW 242,311 245,412 247,860 250,384 252,982 255,658 258,416 261,255 - -------------- ----------------------------------------------------------------------------------------- TOTAL CASH FLOW 242,311 245,412 247,860 250,384 252,982 255,658 258,416 261,255 ----------------------------------------------------------------------------------------- Debt Service N/A N/A N/A N/A N/A N/A N/A N/A ----------------------------------------------------------------------------------------- CASH FLOW AFTER DEBT 242,311 245,412 247,860 250,384 252,982 255,658 258,416 261,255 ----------------------------------------------------------------------------------------- CUMULATIVE SURPLUS N/A N/A N/A N/A N/A N/A N/A N/A ========================================================================================= -------------------------------------------------------------------------------------------------------------------- Implied Overall Rate 10.56% 10.69% 10.80% 10.91% 11.02% 11.14% 11.26% 11.38% Cash on Cash Return 10.56% 10.69% 10.80% 10.91% 11.02% 11.14% 11.26% 11.38% ====================================================================================================================
------------------------------ 2004 2005 2006 ------------------------------ BASE RENT 252,288 252,289 252,289 Free Rent 0 0 0 Expense Recoveries 93,411 96,215 99,101 Percentage Rent 35,060 38,616 42,280 ------------------------------ GROSS INCOME 380,759 387,120 393,670 Credit/Vacancy Loss (3,808) (3,871) (3,937) Miscellaneous Income 0 0 0 ------------------------------ EFFECTIVE GROSS INCOME 376,951 383,249 389,733 ------------------------------ TOTAL EXPENSES 112,773 116,057 119,438 ------------------------------ NET OPERATING INCOME 264,178 267,192 270,295 Commissions 0 0 0 Tenant Improvements 0 0 0 Capital Additions 0 0 0 TOTAL DEDUCTIONS 0 0 0 ------------------------------ CASH FLOW 264,178 267,192 270,295 ------------------------------ TOTAL CASH FLOW 264,178 267,192 270,295 ------------------------------ Debt Service N/A N/A N/A ------------------------------ CASH FLOW AFTER DEBT 264,178 267,192 270,295 ------------------------------ CUMULATIVE SURPLUS N/A N/A N/A ------------------------------ Cash on Cash Return 11.51% 11.64% 11.78% [GRAPH OMITTED - NOI and CF Trends, 1996-2006] - ------------------------------------------------------- Sale/Yield Matrix (000's) Terminal Cap Rate ------------------------------------------ Disc Rate 10.25% 10.50% 10.75% 11.00% - ------------------------------------------------------- 11.00% 2,387 2,365 2,345 2,325 ------------------------------------------ 11.25% 2,351 2,330 2,310 2,291 ------------------------------------------ 11.50% 2,316 2,295 2,276 2,257 ------------------------------------------ 11.75% 2,281 2,261 2,242 2,224 ------------------------------------------ 12.00% 2,248 2,228 2,210 2,192 ------------------------------------------ 12.25% 2,215 2,196 2,178 2,160 - ------------------------------------------------------- - ------------------------------------------------------- ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW CONCLUSION We used "PRO-JECT +plus" computer software to create a cash flow model for a long term hold. Reference is made to the "Annual Cash Flow Report", generated by the Pro-ject software, on the previous page which provides a summary of cash flow from all sources. We utilized a 10-year holding period and have discounted the cash flow on a fiscal year basis from 1997 to 2006. The cash flow incorporates the terms of existing leases during the analysis period and our assumptions regarding the lease-up of vacant space. It also calculates renewal rentals when leases expire based on current market rent escalated at a growth factor. In addition, a forecast was made for 15 years to check for any irregularities in the income stream which may artificially affect the reversionary sale price. It should be noted that based on our analysis of the extended holding period indicated that there was no irregularities. We capitalized the 11th year net operating income to determine the reversionary value at the end of year 10. CONCLUSION OF INCOME CAPITALIZATION APPROACH The preceding analysis indicates the following conclusions: ========================================================== INCOME CAPITALIZATION APPROACH VALUES ---------------------------------------------------------- Method Indicated Value ---------------------------------------------------------- Direct Capitalization $ 2,400,000 Discounted Cash Flow $ 2,300,000 ---------------------------------------------------------- Source: CB Commercial Real Estate ========================================================== Greater emphasis is placed on the DCF analysis because it is the method likely to be used by a typical investor. As a result, based on the Income Capitalization Approach, CB Commercial concludes a value estimate for the subject property of $2,300,000. This equates to $24.95 per rentable square foot. - -------------------------------------------------------------------------------- 57 CONCLUSION ================================================================================ RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- RECONCILIATION OF VALUE CB Commercial was instructed to estimate the market value of the leased fee interest in the subject property. The value conclusions for each applicable approach are summarized below. ================================================================ SUMMARY OF VALUE CONCLUSIONS ================================================================ Cost Approach N/A Sales Comparison Approach $ 2,500,000 Income Capitalization Approach $ 2,300,000 ================================================================ Source: CB Commercial Real Estate Group, Inc. ================================================================ The Income Capitalization Approach is considered the most persuasive method for valuing the subject property. This approach is predicated on the principle of anticipated economic benefits and, therefore, best reflects the investment characteristics of the subject. Properties such as the subject are typically purchased by investors; thus, this approach must closely parallels the anticipated analysis that would be employed by the most typical purchaser. Since the subject property has a number of existing leases with a variety of terms, the DCF technique best models the future cash flow stream to a prospective buyer. The Sales Comparison Approach is predicated on the principle that an investor would pay no more for an existing property than for a comparable property with similar utility. This approach is contingent on the reliability and comparability of available data. The data developed was considered sufficiently reliable to reach a value conclusion by the Sales Comparison Approach. However, due to the lack of truly comparables sales in recent years, this method is given secondary consideration in the reconciliation. The Cost Approach is predicated on the principle that an investor would pay no more for an existing property than it would cost to acquire land and construct a building with similar utility. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Furthermore, due to the age of the subject and current market conditions, accrued depreciation would be substantial and difficult to estimate. An investor would not use the Cost Approach due to the imprecise nature of estimating the accrued physical, functional, or external depreciation affecting the improvements. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. - -------------------------------------------------------------------------------- 58 ================================================================================ RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- The final value conclusion and the approaches relied upon give strong consideration to the market behavior of the typical buyer and current market environment for the property appraised. Based on the foregoing analysis, it is concluded that the market value of the leased fee interest in the subject property, subject to the assumptions and limiting conditions, as of May 15, 1996, is: TWO MILLION THREE HUNDRED THOUSAND DOLLARS ($2,300,000) This value is subject to all of the assumptions and limiting conditions stated throughout the report, including specific assumptions and limiting conditions. - -------------------------------------------------------------------------------- 59 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS 1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to total that would adversely affect marketability or value. CB Commercial is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CB Commercial, however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject property's title should be sought from a qualified title company that issues or insures title to real property. 2. It is assumed that improvements have been constructed or will be constructed according to approved architectural plans and specifications and in conformance with recommendations contained in or based upon any soils report(s). Unless otherwise specifically noted in the body of this report, it is assumed: that any existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are, or will be upon completion, in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that it or they will withstand any known elements such as windstorm, hurricane, tornado, flooding, earthquake, or similar natural occurrences; and, that the improvements, as currently constituted, conform to all applicable local, state, and federal building codes and ordinances. CB Commercial professionals are not engineers and are not competent to judge matters of an engineering nature. CB Commercial has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CB Commercial by ownership or management; CB Commercial inspected less than 100% of the entire interior and exterior portions of the improvements; and CB Commercial was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CB Commercial reserves the right to amend the appraisal conclusions reported herein. 3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property was not observed by the appraisers. CB Commercial has no knowledge of the existence of such materials on or in the property. CB Commercial, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the appraisal. 4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CB Commercial. This report may be subject to amendment upon re-inspection of the subject property subsequent to repairs, modifications, alterations and completed new construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels of operation. - -------------------------------------------------------------------------------- 60 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 5. It is assumed that all factual data furnished by the client, property owner, owner's representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CB Commercial has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, Assessor's Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CB Commercial reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CB Commercial of any questions or errors. 6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CB Commercial will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject. 7. CB Commercial assumes no private deed restrictions, limiting the use of the subject property in any way. 8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposit or subsurface rights of value involved in this appraisal, whether they be gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred. 9. CB Commercial is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject. 10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market. 11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CB Commercial does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CB Commercial. 12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CB Commercial to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form. 13. Unless otherwise noted in this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated. 14. This study may not be duplicated in whole or in part without the specific written consent of CB Commercial nor may this report or copies hereof be transmitted to third parties without said consent, which consent CB Commercial reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or its contents shall not be published, in whole or in part, in any public document without the express - -------------------------------------------------------------------------------- 61 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- written consent of CB Commercial which consent CB Commercial reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a "sale" or "offer for sale" of any "security", as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CB Commercial shall have no accountability or responsibility to any such third party. 15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report. 16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used. 17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area have been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report. 18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CB Commercial unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CB Commercial assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance. 19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or client's designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CB Commercial assumes responsibility for any situation arising out of the Client's failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired. 20. CB Commercial assumes that the subject property analyzed herein will be under prudent and competent management and ownership; neither inefficient or super-efficient. 21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the appraisal report. 22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist. 23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Not withstanding any discussion of possible readily achievable barrier removal construction items in this report, CB Commercial has not made a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect on the value estimated herein. Since CB Commercial has no specific information relating to this issue, nor is CB Commercial qualified to make such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject property. - -------------------------------------------------------------------------------- 62 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 24. For our analysis, we have relied on the information provided by the detailed rent roll and information provided by the subject leasing agent. We have assumed all information is correct. Furthermore, we have assumed all leases out for signature will be returned signed, and executed as of the date indicated to us by the leasing agent. We reserve the right to amend this appraisal should any of this information be later found to be incorrect. - -------------------------------------------------------------------------------- 63 ADDENDA ================================================================================ ADDENDA - -------------------------------------------------------------------------------- ADDENDA - -------------------------------------------------------------------------------- 64 ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- ADDENDUM A - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- GLOSSARY OF TERMS assessed value Assessed value applies in ad valorem taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to market value, but it is usually calculated in relation to a market value base. + cash equivalency The procedure in which the sale prices of comparable properties sold with atypical financing are adjusted to reflect typical market terms. contract, coupon, face, or nominal rent The nominal rent payment specified in the lease contract. It does not reflect any offsets for free rent, unusual tenant improvement conditions, or other factors that may modify the effective rent payment. coupon rent See Contract, Coupon, Face, or Nominal Rent effective rent 1) The rental rate net of financial concessions such as periods of no rent during a lease term; may be calculated on a discounted basis, reflecting the time value of money, or on a simple, straight-line basis. ++ 2) The economic rent paid by the lessee when normalized to account for financial concessions, such as escalation clauses, and other factors. Contract, or normal, rents must be converted to effective rents to form a consistent basis of comparison between comparables. face rent See Contract, Coupon, Face, or Nominal Rent fee simple estate Absolute ownership unen-cumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. ** floor area ratio (FAR) The relationship between the above-ground floor area of a building, as described by the building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area; also called building-to-land ratio. ** full service lease A lease in which rent covers all operating expenses. Typically, full service leases are combined with an expense stop, the expense level covered by the contract lease payment. Increases in expenses above the expense stop level are passed through to the tenant and are known as expense pass-throughs. going concern value Going concern value is the value of a proven property operation. It includes the incremental value associated with the business concern, which is distinct from the value of the real estate only. Going concern value includes an intangible enhancement of the value of an operating business enterprise which is produced by the assemblage of the land, building, labor, equipment, and marketing operation. This process creates an economically viable business that is expected to continue. Going concern value refers to the total value of a property, including both real property and intangible personal property attributed to the business value. + gross building area (GBA) The sum of all areas at each floor as measured to the exterior walls. insurable value Insurable Value is based on the replacement and/or reproduction cost of physical items that are subject to loss from hazards. Insurable value is that portion of the value of an asset or asset group that is acknowledged or recognized under the provisions of an applicable loss insurance policy. This value is often controlled by state law and varies from state to state. + investment value Investment value is the value of an investment to a particular investor based on his or her investment requirements. In contrast to market value, investment value is value to an individual, not value in the marketplace. Investment value reflects the subjective relationship between a particular investor and a given investment. When measured in dollars, investment value is the price an investor would pay for an investment in light of its perceived capacity to satisfy his or her desires, needs, or investment goals. To estimate investment value, specific investment criteria must be known. Criteria to evaluate a real estate investment are not necessarily set down by the individual investor; they may be established by an expert on real estate and its value, that is, an appraiser. + leased fee See leased fee estate leased fee estate An ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others. The rights of the - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.++ leasehold See leasehold estate leasehold estate The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.** load factor The amount added to usable area to calculate the rentable area. It is also referred to as a "rentable add-on factor" which, according to BOMA, "is computed by dividing the difference between the usable square footage and rentable square footage by the amount of the usable area. Convert the figure into a percentage by multiplying by 100. market value "as if complete" on the appraisal date Market value as if complete on the appraisal date is an estimate of the market value of a property with all construction, conversion, or rehabilitation hypothetically completed, or under other specified hypothetical conditions as of the date of the appraisal. With regard to properties wherein anticipated market conditions indicate that stabilized occupancy is not likely as of the date of completion, this estimate of value should reflect the market value of the property as if complete and prepared for occupancy by tenants. market value "as is" on the appraisal date Market value "as is" on the appraisal date is an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date of appraisal. market value Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1) A reasonable time is allowed for exposure in the open market; 2) Both parties are well informed or well advised, and acting in what they consider their own best interests; 3) Buyer and seller are typically motivated; 4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.ss. marketing period The time it takes an interest in real property to sell on the market subsequent to the date of an appraisal. ** net lease Lease in which all or some of the operating expenses are paid directly by the tenant. The landlord never takes possession of the expense payment. In a Triple Net Lease all operating expenses are the responsibility of the tenant, including property taxes, insurance, interior maintenance, and other miscellaneous expenses. However, management fees and exterior maintenance are often the responsibility of the lessor in a triple net lease. A modified net lease is one in which some expenses are paid separately by the tenant and some are included in the rent. net rentable area (NRA) 1) The area on which rent is computed. 2) The Rentable Area of a floor shall be computed by measuring to the inside finished surface of the dominant portion of the permanent outer building walls, excluding any major vertical penetrations of the floor. No deductions shall be made for columns and projections necessary to the building. Include space such as mechanical room, janitorial room, restrooms, and lobby of the floor. * nominal rent See Contract, Coupon, Face, or Nominal Rent prospective future value "upon completion of construction" Prospective future value "upon completion of construction" is the prospective value of a property on the future date that construction is completed, based upon market conditions forecast to exist, as of that completion date. The value estimate at this stage is stated in current dollars unless otherwise indicated. prospective future value "upon reaching stabilized occupancy" Prospective future value "upon reaching stabilized occupancy" is the prospective value of a property at a future point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. The value - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- estimate at this stage is stated in current dollars unless otherwise indicated. reasonable exposure time The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market. ** rent see full service lease net lease contract, coupon, face, or nominal rent effective rent shell space Space which has not had any interior finishing installed, including even basic improvements such as ceilings and interior walls, as well as partitions, floor coverings, wall coverings, etc.. Usable Area 1) The area actually used by individual tenants. 2) The Usable Area of an office is computed by measuring to the finished surface of the office side of corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished surface of the dominant portion of the permanent outer building walls. Excludes areas such as mechanical rooms, janitorial room, restrooms, lobby, and any major vertical penetrations of a multi-tenant floor. * use value Use value is a concept based on the productivity of an economic good. Use value is the value a specific property has for a specific use. Use value focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to the property's highest and best use or the monetary amount that might be realized upon its sale. + value appraised During the real estate development process, a property typically progresses from a state of unimproved land to construction of improvements to stabilized occupancy. In general, the market value associated with the property increases during these stages of development. After reaching stabilized occupancy, ongoing forces affect the property during its life, including a physical wear and tear, changing market conditions, etc. These factors continually influence the property's market value at any given point in time. See also market value "as is" on the appraisal date market value "as if complete" on the appraisal date prospective future value "upon completion of construction" prospective future value "upon reaching stabilized occupancy" - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- ADDENDUM B LEGAL DESCRIPTION - -------------------------------------------------------------------------------- All that certain lot or parcel of ground situate in the Borough of Shamokin Dam, County of Snyder, State of Pennsylvania, bounded and described as follows: Beginning at a railroad spike (set) located on the West right-of-way line of PennDOT S.R. 0015 (L.R. 24) and PennDOT S.R. 0011 (L.R. 25), said point being situate opposite centerline highway station 31 + 98.05; THENCE FROM THE PLACE OF BEGINNING along line of land of Charles E. Kulp, North fifty-five degrees no minutes and forty seconds West (N 55(degree)00'40" W) for a distance of one hundred and no hundredths feet (100.00') to an iron pin (set); thence further along the same, South thirty-four degrees fifty-nine minutes and twenty seconds West (S 34(degree)59'20" W) for a distance of two hundred three and ninety-nine hundredths feet (203.99') to an iron pin (set); thence along line of lands of the West Side Cemetery Company, the following five (5) courses and distances: 1) North fifty-four degrees twenty-six minutes and thirty-four seconds West (N 54(degree)26'34" W) for a distance of sixty-two and sixteen hundredths feet (62.16') to a concrete monument (found); 2) North thirty-eight degrees thirty-three minutes and thirty-five seconds West (N 38(degree)33'35" W) for a distance of two hundred sixty-seven and twenty-six hundredths feet (267.26') to a concrete monument (found); 3) North twenty-five degrees fifty-seven minutes and fifty seconds East (N 25(degree)57'50" E) for a distance of one hundred thirty-eight and twenty-eight hundredths feet (138.28') to a concrete monument (found); VOL 313 PAGE 637 EXHIBIT "A" 4) North thirty-seven degrees fifty-three minutes and fifty-five seconds West (N 37(degree)53'55" W) for a distance of seven hundred eight and fifty-six hundredths feet (708.56') to a concrete monument (found); 5) North forty-seven degrees forty-two minutes and thirty-two seconds East (N 47(degree)42'32" E) for a distance of one thousand one hundred nine and two hundredths feet (1,109.02') to an iron pin (set); thence along the West right-of-way line of PennDOT S.R. 0015 (L.R. 24), the following four (4) courses and distances: 1) South two degrees eleven minutes and forty seconds East (S 2(degree)11'40" E) for a distance of eighty-eight and eighty-seven hundredths feet (88.87') to a point; 2) around a curve having an angle of five degrees twenty-eight minutes and thirty-eight seconds (5(degree)8'38"), a radius of two thousand nine hundred fifty-four and ninety-three hundredths feet (2,954.93'), a tangent of one hundred forty-one and thirty-five hundredths feet (141.35'), an arc of two hundred eighty-two and forty-eight hundredths feet (282.48'), for a chord course of South four degrees fifty-six minutes and no seconds East (S 4(degree)56'00" E) for a chord distance of two hundred eighty-two and thirty-seven hundredths feet (282.37') to a point; 3) South twelve degrees fifty-seven minutes and twenty seconds West (S 12(degree)57'20" W) for a distance of fifty-five and forty-eight hundredths feet (55.48') to a point; 4) North eighty-one degrees nineteen minutes and forty-two seconds East (N 81(degree)19'42" E) for a distance of fifty and no hundredths feet (50.00') to a point; thence further along the same and along the line dividing the Borough of Shamokin Dam and the Township of Monroe, the following three (3) courses and distances: VOL 313 PAGE 638 1) around a curve having an angle of eight degrees two minutes and twenty-one seconds (8(degree)02'21"), a radius of two thousand nine hundred twenty-four and ninety-three hundredths feet (2,924.93'), a tangent of two hundred five and fifty-four hundredths feet (205.54'), an arc of four hundred ten and forty hundredths feet (410.40'), for a chord course of South twelve degrees forty-one minutes and thirty seconds East (S 12(degree)41'30" E) for a chord distance of four hundred ten and six hundredths feet (410.06') to a point; 2) South sixteen degrees forty-two minutes and forty seconds East (S 16(degree)42'40" E) for a distance of two hundred nine and fifty-seven hundredths feet (209.57') to a point; 3) around a curve having an angle of twenty-four degrees thirteen minutes and four seconds (24(degree)13'04"), a radius of four hundred eighteen and thirty-four hundredths feet (418.34'), a tangent of eighty-nine and seventy-five hundredths feet (89.75'), an arc of one hundred seventy-six and eighty-two hundredths feet (176.82'), a chord course of South five degrees fifty-three minutes and thirty-five seconds West (S 5(degree)53'35" W) for a chord distance of one hundred seventy-five and fifty-one hundredths feet (175.51') to a point; thence still further along the aforementioned West right-of-way line of PennDOT S.R. 0015 (L.R. 24) and along the aforementioned West right-of-way line of PennDOT L.R. 0011 (L.R. 25) the following three (3) courses and distances: 1) South four degrees forty-nine minutes and fifteen seconds East (S 4(degree)49'15" E) for a distance of twenty-four and twenty-eight hundredths feet (24.28') to a point; 2) around a curve having an angle of thirteen degrees fifty-nine minutes and thirty seconds (13(degree)59'30"), a radius of four hundred twenty-eight and thirty-four VOL 313 PAGE 639 hundredths feet (428.34'), a tangent of fifty-two and fifty-six hundredths feet (52.56'), an arc of one hundred four and sixty hundredths feet (104.60'), for a chord course of south twenty-seven degrees fifty-nine minutes and forty seconds West (S 27(degree)59'40" W) for a chord distance of one hundred four and thirty-five hundredths feet (104.35') to an iron pin (set); 3) South thirty-four degrees fifty-nine minutes and twenty seconds West (S 34(degree)59'20" W) for a distance of three hundred thirteen and thirty-six hundredths feet (313.36') to the place of beginning. Containing 912,731.60 Square Feet (20.954 Acres) and being shown in greater detail on a plan laid out by Merlyn J. Jenkins, Registered Professional Land Surveyor, of Merlyn J. Jenkins & Associates, Inc., Pottsville, Pennsylvania, dated January 20, 1993, and revised April 26, 1993, and being designated as Drawing No. SK-1299. BEING the same premises conveyed to Snyder County Industrial Development Authority by deed dated February 17, 1978 and recorded in the Office of the Recorder of Deeds in and for Snyder County in Deed Book 139 at page 457. VOL 313 PAGE 640 ================================================================================ ADDENDUM C IMPROVED COMPARABLE SALES - -------------------------------------------------------------------------------- ADDENDUM C IMPROVED COMPARABLE SALES - -------------------------------------------------------------------------------- RETAIL SALE ================================================================================ Location Data Property Name: BJ's Wholesale Club Location: City: Babylon County: Suffolk State/Zip: New York Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Free-Standing Land Area: 9.40 Acres Excess Land: N/A Gross Leasable Area: Anchors: BJ's Wholesale Club 114,880 SF Local Tenant GLA: N/A Anchor Tenant GLA: 114,880 SF Total GLA: 114,880 SF GLA Purchased: 114,880 SF Year Built: 1974 Parking: N/A Condition: Good Exterior Walls: Brick Veneer Sale Data Transaction Type: Sale Date of Transaction: 8/93 Marketing Time: N/A Grantor: N/A Grantee: N/A Document No.: N/A Sale Price: $9,350,000 Financing: Cash Equivalent Price: $9,350,000 Required Capital Cost: $0 Adjusted Sales Price: $9,350,000 Verification: N/A Financial Data Assumptions & Forecast: N/A Occupancy at Sale: 100 Existing or Pro Forma Income: Existing TOTAL P.S.F. ----- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $990,266 $8.62 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap Overall Capitalization Rate (OAR): 10.59 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $81.39 Comments - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Giant Supermarket, York Location: City: York County: York State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Free-Standing Land Area: 9.30 Acres Excess Land: N/A Gross Leasable Area: Anchors: Giant Supermarket 55,980 SF Local Tenant GLA: N/A Anchor Tenant GLA: 55,980 SF Total GLA: 55,980 SF GLA Purchased: 55,980 SF Year Built: 1994 Parking: N/A Condition: Good Exterior Walls: Brick Veneer Sale Data Transaction Type: Sale Date of Transaction: 12/94 Marketing Time: N/A Grantor: N/A Grantee: N/A Document No.: N/A Sale Price: $4,525,000 Financing: Cash Equivalent Price: $4,525,000 Required Capital Cost: $0 Adjusted Sales Price: $4,525,000 Verification: N/A Financial Data Assumptions & Forecast: N/A Occupancy at Sale: 100 Existing or Pro Forma Income: Existing TOTAL P.S.F. --------- ------- Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $454,558 $8.12 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.05 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $80.83 Comments - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: K-Mart Lancaster Location: Lancaster City: Lancaster County: Lancaster State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Free-Standing Land Area: 11.03 Acres Excess Land: N/A Gross Leasable Area: Anchors: K-Mart 99,264 SF Local Tenant GLA: N/A Anchor Tenant GLA: 99,264 SF Total GLA: 99,264 SF GLA Purchased: 99,264 SF Year Built: 2 Parking: N/A Condition: Average Exterior Walls: Brick Veneer Sale Data Transaction Type: Sale Date of Transaction: 4/93 Marketing Time: N/A Grantor: N/A Grantee: N/A Document No.: N/A Sale Price: $2,289,357 Financing: Cash Equivalent Price: $2,289,357 Required Capital Cost: $0 Adjusted Sales Price: $2,289,357 Verification: N/A Financial Data Assumptions & Forecast: N/A Occupancy at Sale: 100 Existing or Pro Forma Income: Existing TOTAL P.S.F. ----- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $219,373 $2.21 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 9.58 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $23.06 Comments - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Pace Warehouse, Baltimore Location: Baltimore City: Baltimore County: Baltimore State/Zip: Maryland Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Free-Standing Land Area: 13.50 Acres Excess Land: N/A Gross Leasable Area: Anchors: Pace Warehous 145,825 SF Local Tenant GLA: N/A Anchor Tenant GLA: 145,825 SF Total GLA: 145,825 SF GLA Purchased: 145,825 SF Year Built: 1972 Parking: N/A Condition: Good Exterior Walls: Brick Veneer Sale Data Transaction Type: Sale Date of Transaction: 4 /92 Marketing Time: N/A Grantor: N/A Grantee: N/A Document No.: N/A Sale Price: $10,480,357 Financing: Cash Equivalent Price: $10,480,357 Required Capital Cost: $0 Adjusted Sales Price: $10,480,357 Verification: N/A Financial Data Assumptions & Forecast: N/A Occupancy at Sale: 100 Existing or Pro Forma Income: Existing TOTAL P.S.F. ----- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $1,038,274 $7.12 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Price Per S.F. Overall Capitalization Rate (OAR): 9.91 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $71.87 Comments - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Price Chopper, Dunmore Location: City: Dunmore County: Lackawanna State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Free-Standing Land Area: 6.30 Acres Excess Land: N/A Gross Leasable Area: Anchors: Price Chopper 77,000 SF Local Tenant GLA: N/A Anchor Tenant GLA: 77,000 SF Total GLA: 77,000 SF GLA Purchased: 77,000 SF Year Built: 1975 Parking: N/A Condition: Good Exterior Walls: Brick Veneer Sale Data Transaction Type: Sale Date of Transaction: 4/95 Marketing Time: N/A Grantor: N/A Grantee: N/A Document No.: N/A Sale Price: $7,277,500 Financing: Cash Equivalent Price: $7,277,500 Required Capital Cost: $0 Adjusted Sales Price: $7,277,500 Verification: N/A Financial Data Assumptions & Forecast: N/A Occupancy at Sale: 100 Existing or Pro Forma Income: Existing TOTAL P.S.F. ----- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $719,950 $9.35 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 9.89 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $94.51 Comments - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: PRICE CHOPPER, ALBANY Location: City: Albany County: Albany State/Zip: New York Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Free-Standing Land Area: 2.80 Acres Excess Land: N/A Gross Leasable Area: Anchors: Price Chopper 81,987 SF Local Tenant GLA: N/A Anchor Tenant GLA: 81,987 SF Total GLA: 81,987 SF GLA Purchased: 81,987 SF Year Built: 1975 Parking: N/A Condition: Good Exterior Walls: Brick Veneer Sale Data Transaction Type: Sale Date of Transaction: 4/95 Marketing Time: N/A Grantor: N/A Grantee: N/A Document No.: N/A Sale Price: $8,302,500 Financing: Cash Equivalent Price: $8,302,500 Required Capital Cost: $0 Adjusted Sales Price: $8,302,500 Verification: N/A Financial Data Assumptions & Forecast: N/A Occupancy at Sale: 100 Existing or Pro Forma Income: Existing TOTAL P.S.F. ----- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $786,255 $9.59 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap Overall Capitalization Rate (OAR): 9.47 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $101.27 Comments - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ ADDENDUM D RENTAL COMPARABLES - -------------------------------------------------------------------------------- ADDENDUM D RENTAL COMPARABLES - -------------------------------------------------------------------------------- RETAIL RENT COMPARABLES ================================================================================ Location Data Property Name: Pottstown Center Location: Route 663 City: Pottstown County: Montgomery State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 171,267 SF Year Built: 1976 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Wal-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $8.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Terms Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 7/95 121,267 Wal-Mart $6.99 N/A None Flat 20.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLES ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 20 years. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLES ================================================================================ Location Data Property Name: Route 6 Mall Location: N/S Route 6 City: Honesdale County: Wayne State/Zip: Pennsylvania Assessors Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 144,229 SF Year Built: 1978 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM. Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Terms Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 3/95 119,229 K-Mart $5.77 N/A None Flat 25.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLES ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 20 years and includes a percentage rent clause on 1.0% over $20.0 million. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLES ================================================================================ Location Data Property Name: Bradford Towne Centre Location: N/S Route 6 City: Wysox County: Bradford State/Zip: Pennsylvania Assessors Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 119,481 SF Year Built: 1972 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Terms Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 7/94 94,481 K-Mart $5.00 N/A None Flat 25.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLES ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 25 years and includes a percentage rent clause on 1.0% over $16.875 million. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLES ================================================================================ Location Data Property Name: Builder's Square Shopping Center Location: Cetronia Road City: Whitehall County: Lehigh State/Zip: Pennsylvania Assessors Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 106,400 SF Year Built: 1994 Exterior Walls: Brick Veneer Condition: Good Anchor Tenant: Builder's Square Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Terms Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 3/94 106,400 Builder's Square $10.05 N/A None Flat 25.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLES ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 25 years. Construction quality is good and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ ADDENDUM E STRATEGIC MAPPING, INC. REPORTS - -------------------------------------------------------------------------------- ADDENDUM E STRATEGIC MAPPING, INC. REPORTS - -------------------------------------------------------------------------------- Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 1 of 9 Area 1 = Shamokin Dam, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin Dam, PA 10 Mile Radius Area 3 = Shamokin Dam, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1995 Socio-Economic Measure: 34 38 33 1995 Employment: 9,434 15,635 32,461 Population: 2000 Projection 34,318 68,638 145,361 1995 Estimate 34,166 67,676 142,592 1990 Census 34,201 67,007 140,468 1990 - 1995 % Change (Growth) -0.1% 1.0% 1.5% 1990 Group Quarters Population 1,827 6,108 9,398 1995 % Population by Race: White 98.4% 98.0% 98.0% Black 0.5% 0.9% 1.1% American Indian, Eskimo & Aleut 0.1% 0.1% 0.1% Asian or Pacific Islander 0.4% 0.6% 0.5% Other 0.6% 0.4% 0.3% Hispanic 1.1% 1.2% 1.2% 1990 % Population by Race: White 98.7% 98.3% 98.2% Black 0.5% 0.8% 1.0% American Indian, Eskimo & Aleut 0.1% 0.1% 0.1% Asian or Pacific Islander 0.3% 0.5% 0.4% Other 0.4% 0.3% 0.3% Hispanic 1.0% 1.0% 0.9% 1995 % Population by Sex: Male 47.2% 48.6% 48.5% Female 52.8% 51.4% 51.5% 1990 % Population by Sex: Male 47.1% 48.6% 48.6% Female 52.8% 51.4% 51.4% 2000 Pop per Square Mile (Pop Density) 360.9 229.9 204.8 1995 Pop per Square Mile (Pop Density) 359.3 226.7 200.9 1990 Pop per Square Mile (Pop Density) 359.6 224.5 197.9 Area (Square Miles) 95.1 298.5 709.8 Area (Square Kilometers) 246.3 773.1 1,838.4 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 2 of 9 Area 1 = Shamokin Dam, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin Dam, PA 10 Mile Radius Area 3 = Shamokin Dam, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- Households: 2000 Projection 13,279 24,949 54,151 1995 Estimate 13,191 24,515 52,899 1990 Census 13,187 24,217 51,970 1990 - 1995 % Change (Growth) 0.0% 1.2% 1.8% 2000 Average Household Size 2.45 2.51 2.51 1995 Average Household Size 2.45 2.51 2.52 1990 Average Household Size 2.45 2.51 2.52 2000 Per Capita Income $17,384 18,540 17,607 1995 Per Capita Income $14,559 15,399 14,651 1990 Per Capita Income $12,138 12,638 12,015 2000 Median Family Income $42,781 45,059 42,617 1995 Median Family Income $36,282 38,010 36,032 1990 Median Family Income $30,645 31,873 30,308 2000 Median Household Income $34,138 36,769 34,968 1995 Median Household Income $28,952 31,017 29,565 1990 Median Household Income $24,454 26,009 24,868 2000 Average Household Income $42,533 46,467 44,209 1995 Average Household Income $35,692 38,673 36,889 1990 Average Household Income $29,732 31,882 30,423 1995 % Household Income: $ 0- $9,999 13.6% 12.0% 13.5% $ 10,000 - $ 14,999 10.6% 9.5% 10.0% $ 15,000 - $ 24,999 18.6% 17.9% 18.0% $ 25,000 - $ 34,999 16.7% 16.8% 17.3% $ 35,000 - $ 49,999 20.9% 20.7% 20.0% $ 50,000 - $ 74,999 13.3% 14.9% 14.0% $ 75,000 - $ 99,999 3.1% 4.1% 3.7% $ 100,000 - $ 149,999 1.7% 2.4% 2.1% $ 150,000 + 1.4% 1.7% 1.3% Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 3 of 9 Area 1 = Shamokin Dam, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin Dam, PA 10 Mile Radius Area 3 = Shamokin Dam, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Household Income: $ 0 - $ 9,999 17.7% 15.6% 17.5% $ 10,000 - $ 14,999 12.1% 11.0% 11.4% $ 15,000 - $ 24,999 21.2% 21.2% 21.4% $ 25,000 - $ 34,999 18.5% 18.3% 18.7% $ 35,000 - $ 49,999 18.1% 18.7% 17.5% $ 50,000 - $ 74,999 8.5% 10.2% 9.5% $ 75,000 - $ 99,999 1.7% 2.5% 2.1% $ 100,000 - $ 149,999 1.1% 1.3% 1.1% $ 150,000 + 0.9% 1.1% 0.9% 1995 % Population by Age: 0-5 7.7% 7.4% 7.7% 6-13 10.2% 9.8% 10.3% 14-17 5.1% 6.0% 5.5% 18-20 4.6% 5.7% 4.9% 21-24 5.9% 7.5% 6.2% 25-34 14.0% 13.2% 13.4% 35-44 15.1% 14.7% 14.7% 45-54 11.7% 11.5% 11.5% 55-64 8.8% 8.7% 9.1% 65-74 8.9% 8.4% 9.0% 75-84 5.9% 5.2% 5.8% 85 + 2.2% 1.9% 1.9% Median Age Total Population 36.7 35.3 36.3 Median Age Adult Population 44.4 43.1 44.3 1990 % Population by Age: 0-5 7.8% 7.6% 7.9% 6-13 9.9% 9.7% 10.3% 14-17 5.1% 4.9% 5.2% 18-20 5.2% 7.6% 5.5% 21-24 6.1% 7.2% 6.0% 25-34 15.3% 14.5% 14.9% 35-44 14.3% 14.3% 14.4% 45-54 10.4% 10.3% 10.4% 55-64 9.4% 9.2% 9.5% 65-74 9.0% 8.2% 8.9% 75-84 5.5% 4.9% 5.4% 85 + 1.9% 1.6% 1.7% Median Age Total Population 35.4 34.0 35.2 Median Age Adult Population 43.3 41.5 43.2 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 4 of 9 Area 1 = Shamokin Dam, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin Dam, PA 10 Mile Radius Area 3 = Shamokin Dam, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1995 % Female Population by Age: 0-5 7.1% 7.0% 7.2% 6-13 9.6% 9.3% 9.6% 14-17 4.9% 5.8% 5.2% 18-20 4.4% 5.4% 4.6% 21-24 5.4% 6.8% 5.8% 25-34 13.4% 12.8% 12.8% 35-44 14.6% 14.3% 14.2% 45-54 11.3% 11.3% 11.1% 55-64 8.9% 8.9% 9.4% 65-74 9.9% 9.3% 10.0% 75-84 7.3% 6.4% 7.3% 85 + 3.2% 2.7% 2.8% Female Median Age Total Population 38.4 37.0 38.3 Female Median Age Adult Population 46.1 44.8 46.4 1990 % Female Population by Age: 0-5 7.3% 7.1% 7.3% 6-13 9.5% 9.4% 9.7% 14-17 4.9% 4.8% 4.9% 18-20 4.9% 7.1% 5.3% 21-24 5.7% 6.7% 5.7% 25-34 14.7% 14.1% 14.3% 35-44 13.6% 13.8% 13.6% 45-54 10.1% 10.2% 10.1% 55-64 9.5% 9.4% 9.8% 65-74 10.0% 9.1% 10.0% 75-84 6.9% 6.1% 6.8% 85 + 2.7% 2.3% 2.4% Female Median Age Total Population 37.0 35.6 36.9 Female Median Age Adult Population 45.2 43.2 45.2 1990 % Hispanic Population by Type: Not of Hispanic Origin 99.0% 99.0% 99.1% Mexican 0.1% 0.1% 0.1% Puerto Rican 0.7% 0.5% 0.4% Cuban 0.0% 0.1% 0.2% Other Hispanic 0.2% 0.3% 0.3% Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 5 of 9 Area 1 = Shamokin Dam, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin Dam, PA 10 Mile Radius Area 3 = Shamokin Dam, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Population Enrolled in School (Age 3 & Over): Preprimary School 6.9% 5.9% 6.8% Elementary and High School 68.6% 56.5% 66.3% College 24.5% 37.6% 26.9% Total School Enrollment 7,234 16,851 31,891 1990 % Educational Attainment (Age 25 & Over): Less than Grade 9 11.2% 12.1% 13.1% Grade 9-12 (No Diploma) 15.7% 15.0% 16.4% High School Graduate or Equivalency 47.6% 44.6% 44.4% Some College (No Degree) 9.6% 9.4% 8.9% Associate Degree 3.3% 3.8% 4.2% Bachelor Degree 7.7% 8.5% 7.4% Graduate or Professional Degree 4.8% 6.7% 5.6% 1990 % Employment Status: Total Labor Force: Armed Forces 0.1% 0.2% 0.1% Civilian: Employed 58.6% 57.5% 56.1% Unemployed 3.2% 2.9% 3.3% Not In Labor Force 38.1% 39.4% 40.5% Female Labor Force: Armed Forces 0.0% 0.0% 0.0% Civilian: Employed 49.9% 49.7% 47.9% Unemployed 2.8% 2.8% 3.0% Not In Labor Force 47.3% 47.5% 49.1% 1990 % Working Mothers: Child <6 Only 16.6% 16.6% 16.3% Child 6-17 Only 41.3% 40.6% 40.6% Child <6 & 6-17 12.4% 12.1% 11.6% Nonworking Mothers 29.8% 30.7% 31.5% Total Mothers 4,151 7,722 16,685 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 6 of 9 Area 1 = Shamokin Dam, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin Dam, PA 10 Mile Radius Area 3 = Shamokin Dam, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Industry Employment: Agriculture/Forestry/Fishing 1.5% 2.8% 3.5% Mining 0.2% 0.3% 0.4% Construction 5.0% 5.5% 6.0% Manufacturing: Nondurable Goods 10.1% 10.3% 11.8% Durable Goods 13.0% 13.2% 13.5% Transportation 3.3% 3.4% 3.2% Communications & Public Utilities 2.4% 2.1% 2.1% Wholesale Trade 3.5% 3.1% 3.0% Retail Trade 23.0% 19.3% 17.3% Finance/Insurance/Real Estate 3.8% 3.7% 3.4% Services: Business & Repair 2.0% 2.2% 2.4% Personal 2.7% 2.3% 2.2% Entertainment & Recreation 1.0% 1.0% 0.8% Health 10.5% 10.1% 12.4% Educational 9.6% 12.6% 9.7% Other Professional & Related 4.7% 4.8% 4.5% Public Administration 3.7% 3.6% 3.9% Total 16,020 30,964 62,480 1990 % Occupation: Executive & Managerial 7.4% 8.2% 7.3% Professional Specialty 10.9% 12.5% 12.1% Technical Support 2.8% 3.1% 3.3% Sales 11.7% 10.2% 9.1% Administrative Support 14.5% 14.6% 13.6% Service: Private Household 0.1% 0.2% 0.2% Service: Protective 1.8% 1.8% 1.8% Service: Other 15.1% 13.1% 13.3% Farming, Forestry & Fishing 1.4% 2.7% 3.2% Precision Production, Craft & Repair 10.4% 10.7% 11.5% Machine Operator, Assemblers & Inspectors 10.4% 10.2% 11.6% Transportation & Material Moving 4.4% 4.7% 4.9% Laborers 9.2% 8.1% 8.3% White Collar Total 47.3% 48.6% 45.3% Blue Collar Total 34.4% 33.7% 36.2% Total Employed 16,019 30,966 62,488 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 7 of 9 Area 1 = Shamokin Dam, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin Dam, PA 10 Mile Radius Area 3 = Shamokin Dam, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Marital Status: Total Male: 12,887 26,245 54,128 Never Married 27.6% 31.8% 28.5% Married 60.9% 58.0% 60.2% Separated 1.8% 1.6% 1.8% Widowed 3.2% 2.9% 3.3% Divorced 6.4% 5.8% 6.2% Total Female: 14,852 28,402 59,107 Never Married 21.7% 24.9% 22.3% Married 52.7% 52.8% 54.0% Separated 2.0% 1.7% 1.8% Widowed 15.3% 13.4% 14.8% Divorced 8.3% 7.1% 7.1% 1990 Households by Type: One Person Households 3,516 6,012 13,260 Two or more Person Households: Family Households: Married Couple 7,602 14,602 31,005 Male Householder 341 636 1,502 Female Householder 1,192 1,937 4,384 Nonfamily Households 538 1,034 1,826 1990 Family Households With Children Married Couple Family 3,446 6,630 14,156 Male Householder 177 335 774 Female Householder 741 1,195 2,600 1990 Population by Household Type: Family Households 27,610 52,375 113,457 Nonfamily Households 4,756 8,527 17,613 1990 Households With: Children Under 18 4,413 8,254 17,739 Persons Over 65 3,898 6,773 15,341 Householder Over 65 3,616 6,259 14,185 1990 Average Family Size 2.99 3.01 3.04 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 8 of 9 Area 1 = Shamokin Dam, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin Dam, PA 10 Mile Radius Area 3 = Shamokin Dam, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 Median Home Value $ 54,766 59,255 53,577 1990 Average Home Value $ 61,602 67,896 60,346 1990 Median Contract Rent $ 234 244 231 1990 Average Contract Rent $ 238 253 238 1990 Persons In Unit: 1 Person Units 3,516 6,012 13,260 2 Person Units 4,417 8,215 17,354 3 Person Units 2,356 4,363 9,113 4+ Person Units 2,901 5,631 12,249 1990 Housing Unit Counts: Total Units 13,979 25,617 55,352 % Occupied 94.3% 94.5% 93.9% % Vacant 5.7% 5.5% 6.1% % Year Round 4.6% 4.3% 5.1% % Seasonal 1.0% 1.1% 1.1% Occupied Units 13,187 24,217 51,970 % Owner Occupied 65.6% 70.4% 71.8% % Renter Occupied 34.4% 29.5% 28.2% Vacant Units 792 1,400 3,382 % Year Round of Vacant Units 82.1% 79.2% 82.9% % Seasonal of Vacant Units 17.9% 20.7% 17.2% 1990 Total Housing Units in Structure 13,979 25,617 55,352 1, Detached 57.0% 62.1% 59.3% 1, Attached 14.8% 10.7% 15.1% 2, 7.0% 5.7% 5.2% 3-9 8.6% 7.9% 7.7% 10-49 2.4% 2.0% 2.0% 50+ 3.5% 2.2% 1.8% Mobile Home or Trailer 4.7% 7.6% 7.1% Other 2.1% 1.8% 1.7% 1990 Housing Units by Year Built 8,631 17,083 37,259 Built 1985 to March, 1990 7.0% 8.0% 7.4% Built 1980 to 1984 4.9% 6.0% 5.6% Built 1970 to 1979 17.2% 19.8% 18.7% Built 1960 to 1969 12.1% 12.9% 11.2% Built l950 to 1959 12.4% 11.3% 9.9% Built 1949 or Earlier 46.5% 42.1% 47.3% Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 9 of 9 Area 1 = Shamokin Dam, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin Dam, PA 10 Mile Radius Area 3 = Shamokin Dam, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Means of Transportation to Work: Car, Truck or Van: Drove Alone 74.9% 73.6% 73.0% Carpooled 13.5% 12.7% 14.2% Public Transportation 0.2% 0.2% 0.3% Other Means 8.8% 9.7% 8.5% Worked at Home 2.6% 3.9% 4.1% 1990 % Travel Time to Work: 0 - 14 Minutes 47.9% 47.1% 46.7% 15 - 29 Minutes 39.7% 38.6% 36.6% 30 - 59 Minutes 10.2% 11.8% 13.4% 60 - 89 Minutes 1.7% 1.9% 2.5% 90 + Minutes 0.6% 0.6% 0.9% 1990 Households by Number of Vehicles: 1 Vehicle 4,845 8,265 17,654 2 Vehicles 4,865 9,699 20,143 3 Vehicles 1,331 2,825 5,891 4 Vehicles 466 883 1,680 5 or More Vehicles 105 279 541 Area defined by Circle: (40.8544,76.8122): 5 mile(s) Area defined by Circle: (40.8544,76.8122): 10 mile(s) Area defined by Circle: (40.8544,76.8122): 15 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 Shamokin Dam, PA 5 Mile Radius 6/8/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 91.9 - --------------------------------- Demographics --------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 34,166 13,191 32,338 2.45 $ 28,952 2000 34,318 13,279 32,490 2.45 $ 34,138 - ----------------------------- Expenditure Potential ---------------------------- 1995 Area Yearly Growth Rate Per Household 1.65% Total 1.78% - ------------------------ Retail Support Potential (000) ------------------------ 1995: 1,300 sq. ft. - -------------------------------------------------------------------------------- Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/ Total Total $ Per $ Per Growth Rate mark Total Retail ($000) ($000) HH HH Total $ Index Apparel Store 9,907 11,110 751 837 2.32% 83.0 Appliance Store 1,120 962 85 72 -2.99% 86.7 Auto-Aftermarket Store 23,819 24,834 1,806 1,870 0.84% 91.2 Convenience Store 12,991 13,416 985 1,010 0.65% 96.1 Dept. Store 10,616 11,558 805 870 1.71% 83.4 Drug Store 12,366 15,445 937 1,163 4.55% 103.9 Electronics Store 4,161 5,493 315 414 5.71% 84.4 Fast Food Restaurant Store 9,071 8,120 688 611 -2.19% 90.1 Full Serv Restaurant Store 8,766 7,771 665 585 -2.38% 88.6 Furniture Store 3,527 3,321 267 250 -1.20% 77.6 Grocery Store 49,158 55,369 3,727 4,170 2.41% 98.8 Hardware Store 2,398 2,574 182 194 1.43% 90.6 Home Centers Store 12,278 14,286 931 1,076 3.07% 92.6 Jewelry Store 1,501 1,555 114 117 0.70% 79.7 Liquor Store 1,961 1,760 149 133 -2.13% 88.6 Mass Merchandiser Store 15,949 17,873 1,209 1,346 2.30% 87.7 Photo Store 251 249 19 19 -0.18% 85.1 Shoe Store 2,138 2,538 162 191 3.49% 85.0 Sporting Goods Store 2,542 2,963 193 223 3.12% 82.6 Toy Store 1,221 1,156 93 87 -1.08% 85.2 Variety Store 888 1,008 67 76 2.56% 88.4 Area defined by Circle: (40.8544,76.8122): 5 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 Shamokin Dam, PA 5 Mile Radius 6/8/96 Benchmark = Regional Area Definition Detailed Report Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/ Total Total $ Per $ Per Growth Rate mark Total Retail ($000) ($000) HH HH Total $ Index Video Store 869 1,479 66 111 11.24% 91.8 -------- ------- ------ ------ Total Shopping Center 187,498 204,840 14,214 15,425 All Other Stores 143,811 157,112 10,902 11,832 Total Retail 331,309 361,952 25,116 27,257 Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (40.8544,76.8122): 5 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 Shamokin Dam, PA 10 Mile Radius 6/8/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 96.9 - --------------------------------- Demographics --------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 67,676 24,515 61,568 2.51 $31,017 2000 68,638 24,949 62,530 2.51 $36,769 - ----------------------------- Expenditure Potential ---------------------------- 1995 Area Yearly Growth Rate Per Household 1.68% Total 2.04% - ------------------------ Retail Support Potential (000) ------------------------ 1995: 2,548 sq. ft. - -------------------------------------------------------------------------------- Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/ Total Total $ Per $ Per Growth Rate mark Total Retail ($000) ($000) HH HH Total $ Index Apparel Store 19,900 22,656 812 908 2.63% 89.7 Appliance Store 2,178 1,898 89 76 -2.72% 90.7 Auto-Aftermarket Store 46,675 49,285 1,904 1,975 1.09% 96.2 Convenience Store 25,007 26,126 1,020 1,047 0.88% 99.6 Dept. Store 21,268 23,506 868 942 2.02% 89.9 Drug Store 23,595 29,831 962 1,196 4.80% 106.7 Electronics Store 8,271 11,031 337 442 5.93% 90.3 Fast Food Restaurant Store 17,880 16,228 729 650 -1.92% 95.5 Full Serv Restaurant Store 17,266 15,519 704 622 -2.11% 93.9 Furniture Store 7,252 6,964 296 279 -0.81% 85.8 Grocery Store 94,434 107,541 3,852 4,310 2.63% 102.2 Hardware Store 4,775 5,190 195 208 1.68% 97.1 Home Centers Store 24,740 29,103 1,009 1,166 3.30% 100.4 Jewelry Store 3,067 3,228 125 129 1.03% 87.6 Liquor Store 3,787 3,436 154 138 -1.92% 92.1 Mass Merchandiser Store 31,586 35,890 1,288 1,439 2.59% 93.4 Photo Store 505 507 21 20 0.05% 92.2 Shoe Store 4,318 5,196 176 208 3.77% 92.4 Sporting Goods Store 5,145 6,075 210 244 3.38% 89.9 Toy Store 2,417 2,324 99 93 -0.78% 90.7 Variety Store 1,749 2,013 71 81 2.85% 93.6 Area defined by Circle: (40.8544,76.8122): 10 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 Shamokin Dam, PA 10 Mile Radius 6/8/96 Benchmark = Regional Area Definition Detailed Report Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/ Total Total $ Per $ Per Growth Rate mark Total Retail ($000) ($000) HH HH Total $ Index Video Store 1,718 2,956 70 118 11.47% 97.7 -------- ------- ------ ------ Total Shopping Center 367,532 406,501 14,992 16,293 All Other Stores 281,897 311,786 11,499 12,497 Total Retail 649,429 718,287 26,491 28,790 Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (40.8544,76.8122): 10 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 Shamokin Dam, PA 15 Mile Radius 6/8/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 94.1 - --------------------------------- Demographics --------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 142,592 52,899 133,194 2.52 $29,565 2000 145,361 54,151 135,963 2.51 $34,968 - ----------------------------- Expenditure Potential ---------------------------- 1995 Area Yearly Growth Rate Per Household 1.67% Total 2.15% - ------------------------ Retail Support Potential (000) ------------------------ 1995: 5,340 sq. ft. - -------------------------------------------------------------------------------- Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/ Total Total $ Per $ Per Growth Rate mark Total Retail ($000) ($000) HH HH Total $ Index Apparel Store 40,633 46,453 768 858 2.71% 84.8 Appliance Store 4,590 4,010 87 74 -2.67% 88.6 Auto-Aftermarket Store 96,928 102,845 1,832 1,899 1.19% 92.6 Convenience Store 52,788 55,416 998 1,023 0.98% 97.4 Dept. Store 43,744 48,555 827 897 2.11% 85.7 Drug Store 51,066 64,876 965 1,198 4.90% 107.1 Electronics Store 17,210 23,037 325 425 6.01% 87.1 Fast Food Restaurant Store 37,024 33,754 700 623 -1.83% 91.6 Full Serv Restaurant Store 35,677 32,223 674 595 -2.02% 89.8 Furniture Store 14,840 14,311 281 264 -0.72% 81.4 Grocery Store 201,210 230,421 3,804 4,255 2.75% 100.9 Hardware Store 10,137 11,071 192 204 1.78% 95.6 Home Centers Store 51,861 61,352 980 1,133 3.42% 97.6 Jewelry Store 6,207 6,567 117 121 1.13% 82.1 Liquor Store 7,964 7,261 151 134 -1.83% 89.6 Mass Merchandiser Store 65,625 74,923 1,241 1,384 2.69% 89.9 Photo Store 1,042 1,050 20 19 0.15% 88.1 Shoe Store 8,803 10,646 166 197 3.88% 87.3 Sporting Goods Store 10,527 12,511 199 231 3.51% 85.3 Toy Store 5,076 4,899 96 90 -0.71% 88.3 Variety Store 3,645 4,215 69 78 2.95% 90.4 Area defined by Circle: (40.8544,76.8122): 15 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 Shamokin Dam, PA 15 Mile Radius 6/8/96 Benchmark = Regional Area Definition Detailed Report Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/ Total Total $ Per $ Per Growth Rate mark Total Retail ($000) ($000) HH HH Total $ Index Video Store 3,541 6,134 67 113 11.62% 93.4 -------- ------- ------ ------ Total Shopping Center 770,139 856,529 14,559 15,817 All Other Stores 590,696 656,958 11,166 12,132 Total Retail 1,360,835 1,513,487 25,725 27,949 Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (40.8544,76.8122): 15 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 1 of 4 Area 1 = Shamokin Dam, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin Dam, PA 10 Mile Radius Area 3 = Shamokin Dam, PA 15 Mile Radius Description Area 1 Area 2 Area 3 Population: 2000 Projection 34,318 68,638 145,361 1995 Estimate 34,166 67,676 142,592 1990 Census 34,201 67,007 140,468 1980 Census 32,255 64,848 135,971 Percent Change, 1980 - 1990 6.0 3.3 3.3 Percent Change, 1990 - 1995 -0.1 1.0 1.5 1995 Population by Race: % White 98.4 98.0 98.0 % Black 0.5 0.9 1.1 % American Indian 0.1 0.1 0.1 % Asian 0.4 0.6 0.5 % Other 0.6 0.4 0.3 % Hispanic 1.1 1.2 1.2 1995 Population by Age: % 0-5 7.7 7.4 7.7 % 6-13 10.2 9.8 10.3 % 14-17 5.1 6.0 5.5 % 18-20 4.6 5.7 4.9 % 21-24 5.9 7.5 6.2 % 25-34 14.0 13.2 13.4 % 35-44 15.1 14.7 14.7 % 45-54 11.7 11.5 11.5 % 55-64 8.8 8.7 9.1 % 65-74 8.9 8.4 9.0 % 75-84 5.9 5.2 5.8 % 85+ 2.2 1.9 1.9 Median Age Total Population 36.7 35.3 36.3 Median Age Adult Population 44.4 43.1 44.3 Households: 2000 Projection 13,279 24,949 54,151 1995 Estimate 13,191 24,515 52,899 1990 Census 13,187 24,217 51,970 1980 Census 11,862 21,974 47,200 Percent Change, 1980 - 1990 11.2 10.2 10.1 Percent Change, 1990 - 1995 0.0 1.2 1.8 1990 Household Population 32,366 60,902 131,070 1990 Households w/ Children under 18 4,413 8,254 17,739 1990 Households w/ Persons over 65 3,898 6,773 15,341 Area defined by Circle: (40.8544,76.8122): 5 mile(s) Area defined by Circle: (40.8544,76.8122): 10 mile(s) Area defined by Circle: (40.8544,76.8122): 15 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 2 of 4 Area 1 = Shamokin Dam, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin Dam, PA 10 Mile Radius Area 3 = Shamokin Dam, PA 15 Mile Radius Description Area 1 Area 2 Area 3 1990 Family Population 27,610 52,375 113,457 1990 Nonfamily Population 4,756 8,527 17,613 1990 Group Quarters Population 1,827 6,108 9,398 1990 Average Household Size 2.45 2.51 2.52 1990 Average Family Size 2.99 3.01 3.04 1990 Family Households 9,135 17,175 36,891 1990 Nonfamily Households 4,050 7,045 15,086 1995 Household Income: % $0- $9,999 13.6 12.0 13.5 % $10,000-$14,999 10.6 9.5 10.0 % $l5,000-$24,999 18.6 17.9 18.0 % $25,000-$34,999 16.7 16.8 17.3 % $35,000-$49,999 20.9 20.7 20.0 % $50,000-$74,999 13.3 14.9 14.0 % $75,000-$99,999 3.1 4.1 3.7 % $100,000-$149,999 1.7 2.4 2.1 % $150,000 + 1.4 1.7 1.3 2000 Median Household Income $34,138 $36,769 $34,968 1995 Median Household Income $28,952 $31,017 $29,565 1990 Median Household Income $24,454 $26,009 $24,868 2000 Average Household Income $42,533 $46,467 $44,209 1995 Average Household Income $35,692 $38,673 $36,889 1990 Average Household Income $29,732 $31,882 $30,423 2000 Per Capita Income $17,384 $18,540 $17,607 1995 Per Capita Income $14,559 $15,399 $14,651 1990 Per Capita Income $12,138 $12,638 $12,015 2000 Median Family Income $42,781 $45,059 $42,617 1995 Median Family Income $36,282 $38,010 $36,032 1990 Median Family Income $30,645 $31,873 $30,308 1990 Average Family Income $35,128 $37,326 $35,696 Area defined by Circle: (40.8544,76.8122): 5 mile(s) Area defined by Circle: (40.8544,76.8122): 10 mile(s) Area defined by Circle: (40.8544,76.8122): 15 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 3 of 4 Area 1 = Shamokin Dam, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin Dam, PA 10 Mile Radius Area 3 = Shamokin Dam, PA 15 Mile Radius Description Area 1 Area 2 Area 3 1990 Housing Unit Counts: Total Units 13,979 25,617 55,352 Occupied Units 13,187 24,217 51,970 Owner Occupied 8,654 17,060 37,298 Renter Occupied 4,533 7,156 14,675 Vacant Units 792 1,400 3,382 Year Round 650 1,109 2,804 Seasonal 142 290 583 1990 Housing Unit Percents: % Occupied of Total Units 94.3 94.5 93.9 % Owner Units of Occupied Units 65.6 70.4 71.8 % Renter Units of Occupied Units 34.4 29.5 28.2 % Vacant of Total Units 5.7 5.5 6.1 % Year Round of Vacant Units 82.1 79.2 82.9 % Seasonal of Vacant Units 17.9 20.7 17.2 % Condominiums of Total Units 0.6 0.5 0.6 1990 Condominiums: Total Condominium Units 81 121 358 % Owner Occupied 9.9 13.2 23.2 % Renter Occupied 90.1 86.8 69.8 % Vacant 0.0 0.0 7.0 1990 Units in Structure: % 1, Detached 57.0 62.1 59.3 % 1, Attached 14.8 10.7 15.1 % 2 7.0 5.7 5.2 % 3-9 8.6 7.9 7.7 % 10-49 2.4 2.0 2.0 % 50+ 3.5 2.2 1.8 % Mobile Homes 4.7 7.6 7.1 % Other 2.1 1.8 1.7 1990 Median Home Value $54,766 $59,255 $53,577 1990 Median Contract Rent $234 $244 $231 Area defined by Circle: (40.8544,76.8122): 5 mile(s) Area defined by Circle: (40.8544,76.8122): 10 mile(s) Area defined by Circle: (40.8544,76.8122): 15 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 4 of 4 Area 1 = Shamokin Dam, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin Dam, PA 10 Mile Radius Area 3 = Shamokin Dam, PA 15 Mile Radius Description Area 1 Area 2 Area 3 1995 Total Employed 9,434 15,635 32,461 1995 Socio-Economic Measure 34 38 33 1990 Occupation: Total Civil Labor Force 16,885 32,525 66,185 % Unemployed 5.1 4.8 5.6 Total Employed 16,018 30,965 62,480 % White Collar 47.3 48.6 45.3 % Executive & Managerial 7.4 8.2 7.3 % Professional Specialty 10.9 12.5 12.1 % Technical Support 2.8 3.1 3.3 % Administrative Support 14.5 14.6 13.6 % Sales 11.7 10.2 9.1 % Blue Collar 34.4 33.7 36.2 % Precision Production, Craft & Repair 10.4 10.7 11.5 % Machine Operators 10.4 10.2 11.6 % Transportation & Material Moving 4.4 4.7 4.9 % Laborers 9.2 8.1 8.3 % Farming, Forestry & Fishing 1.4 2.7 3.2 % Service: Private Household 0.1 0.2 0.2 % Service: Protective 1.8 1.8 1.8 % Service: Other 15.1 13.1 13.3 1990 Educational Attainment (Age 25 & Over): % Less than Grade 9 11.2 12.1 13.1 % Grade 9-12 (No Diploma) 15.7 15.0 16.4 % High School Graduate or Equivalency 47.6 44.6 44.4 % Some College (No Degree) 9.6 9.4 8.9 % Associate Degree 3.3 3.8 4.2 % Bachelor Degree 7.7 8.5 7.4 % Graduate or Professional Degree 4.8 6.7 5.6 Area defined by Circle: (40.8544,76.8122): 5 mile(s) Area defined by Circle: (40.8544,76.8122): 10 mile(s) Area defined by Circle: (40.8544,76.8122): 15 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. ================================================================================ ADDENDUM F RENT ROLL - -------------------------------------------------------------------------------- ADDENDUM F RENT ROLL - -------------------------------------------------------------------------------- Detail Rent Roll Page: 1 SHAMOKIN DAM Date: 05/14/96 Report Date: 05/14/96 Time: 16:02:08
-- Rent Dates --- Suite Commence Expire Square Monthly Annual ---- Cost Recovery ---- Expense No. Tenant Name Start Footage Base Rent Rate/SF Description Monthly Stop 00010 K MART #7075 11/08/79 11/07/04 92,171 21,024.08 2.74 11/08/79 00020 TEDS LANDING 06/19/80 12/31/50 0 0.00 0.00 06/19/80 Total Building Occupied Sqft: 100% 92,171 21,024.08 0.00 Available Sqft: 0% 0 Total Sqft: 92,171 Suite ---- Other Income ---- --- Future Rent Increases --- No. Tenant Name Description Monthly Date Monthly Amt. Per Sf 00010 K MART #7075 MAINTENANC 550.00 00020 TEDS LANDING Total Building 550.00
================================================================================ ADDENDUM G - PRO-JECT REPORTS - -------------------------------------------------------------------------------- ADDENDUM G PRO-JECT REPORTS - -------------------------------------------------------------------------------- KMART - SHAMOKIN DAM, PA PROJECT ASSUMPTIONS REPORT EXCLUDING TENANTS BUILDING PROLOGUE - ----------------- LEASEHOLD ANALYSIS OF KMART - SHAMOKIN DAM, PA BEGINNING 6/1996 FOR 21 YEARS ON A FISCAL YEAR BASIS AREA MEASURES - ------------- TNRA 1996 VALUE - 92,171 THEREAFTER - CONSTANT OCCA CONSTANT GROWTH RATES - ------------ EXPG 1996 VALUE - 3.00 THEREAFTER - CONSTANT RTXG 1996 VALUE - 3.00 THEREAFTER - CONSTANT SLSG 1996 VALUE - 3.00 THEREAFTER - CONSTANT RNTG 1996 VALUE - 3.00 THEREAFTER - CONSTANT MARKET RATES - ------------ ANCR 1996 VALUE - 4.00 THEREAFTER - GROWING AT GROWTH RATE RNTG SATR 1996 VALUE - 0.00 THEREAFTER - GROWING AT GROWTH RATE RNTG RSVR 1996 VALUE - 0.10 THEREAFTER - GROWING AT GROWTH RATE EXPG MISCELLANEOUS INCOMES - --------------------- NONE EXPENSES - -------- COMMON AREA MAINT , REFERRED TO AS CAME CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 23,400 PAGE 2 THEREAFTER - GROWING AT GROWTH RATE EXPG REAL ESTATE TAXES , REFERRED TO AS RETX CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 39,602 THEREAFTER - GROWING AT GROWTH RATE RTXG INSURANCE , REFERRED TO AS INSE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 9,828 THEREAFTER - GROWING AT GROWTH RATE EXPG MANAGEMENT , REFERRED TO AS MGMT CHARGED AGAINST NET OPERATING INCOME 2.00% OF EFFECTIVE GROSS INCOME RESERVES , REFERRED TO AS RSVS CHARGED AGAINST NET OPERATING INCOME MARKET RATE RSVR MULTIPLIED BY AREA MEASURE TNRA VACANCY ALLOWANCE - ----------------- PERCENTAGE OF POTENTIAL GROSS INCOME FOR ALL TENANTS SUBJECT TO VACANCY 1996 VALUE - 1.00 THEREAFTER - CONSTANT MANAGEMENT FEE - -------------- NONE COMMISSION CALCULATIONS - ----------------------- STANDARD METHOD #1 - 0.000% OF TOTAL RENT STANDARD METHOD #2 - 0.000% OF TOTAL RENT STANDARD METHOD #3 - 0.000% OF TOTAL RENT STANDARD METHOD #4 - 0.000% OF TOTAL RENT STANDARD METHOD #5 - 0.000% OF TOTAL RENT COMMISSION PAYOUTS - ------------------ STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT ALTERATION CALCULATION - ---------------------- NONE PAGE 3 ALTERATION PAYOUTS - ------------------ STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT COMMON AREA MAINTENANCE POOL - ---------------------------- NONE CAPITAL EXPENDITURES - -------------------- NONE PRIMARY CLASSIFICATION CODES - ---------------------------- 1 - ANCHOR TENANT 2 - SATELLITE TENANT SECONDARY CLASSIFICATION CODES - ------------------------------ NONE COST CENTERS - ------------ 1 - CAM ESCALATIONS 2 - REAL ESTATE TAXES SALES VOLUME PROFILE - -------------------- PERCENT OF RELATIVE MONTH ANNUAL SALES VOLUME - ----- ------------ ------ JAN 8.33% 1.00 FEB 8.33% 1.00 MAR 8.33% 1.00 APR 8.33% 1.00 MAY 8.33% 1.00 JUN 8.33% 1.00 JUL 8.33% 1.00 AUG 8.33% 1.00 SEP 8.33% 1.00 OCT 8.33% 1.00 NOV 8.33% 1.00 DEC 8.33% 1.00 ------ ----- TOTALS 100.00% 12.00 PAGE 4 GLOBAL RECOVERIES - ---------------------- NONE TENANT PROLOGUE - --------------- MINIMUM RENTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR SALES VOLUMES AND BREAKPOINTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR RENEWAL RENTS ARE COMPOUNDED ANNUALLY RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET REFERENCE TENANTS - ----------------- NONE ================================================================================ ADDENDUM I - QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF MICHAEL R. PECORINO, MAI Senior Vice President, Regional Manager CB Commercial Real Estate Group, Inc. 560 Lexington Avenue, 20th Floor New York, New York 10022 (212)207-6102 EDUCATIONAL Real Estate Appraisal and Analysis, New York University, the Real Estate Institute Bachelor of Arts, Geography, Planning, Urban Studies, State University College of New York at Oneonta Successfully completed all the necessary courses to qualify for the MAI designation. LICENSES/CERTIFICATIONS Certified General Real Estate Appraiser: State of New York (46000002055) Certified General Real Estate Appraiser: State of New Jersey (RG-01667) Certified General Real Estate Appraiser: State of Pennsylvania (GA-001096-R) Certified General Real Estate Appraiser: State of Connecticut (0000489) Certified General Real Estate Appraiser: State of Maryland (10569) Certified General Real Estate Appraiser: State of New Jersey (3793) Certified General Real Estate Appraiser: State of Delaware (X10000223) Certified General Real Estate Appraiser: State of Maine (CG00001192) Certified General Real Estate Appraiser: State of Vermont (080-0000168) Certified General Real Estate Appraiser: State of District of Columbia (GA00010315) Licensed Real Estate Broker: State of New York PROFESSIONAL Appraisal Institute Designated Member of the Appraisal Institute (MAI), Certificate No. 7944 Member of the Real Estate Board of New York EXPERIENCE Fifteen years of Real Estate Appraisal and Consulting experience throughout the United States specializing in the New York metropolitan area. 1993 - Present CB Commercial Real Estate Group, Inc., Appraisal New York, New York 1983 - 1993 Cushman & Wakefield, Inc. New York, New York 1982 - 1983 Joseph J. Blake & Associates, Inc. New York, New York 1981 - 1982 City of New York - Office of Manhattan Planning New York, New York 1980 - 1981 City of Jersey City - Office of the Mayor Jersey City, New Jersey Assignments include full and partial interest appraisals of office buildings, air rights, commercial lofts, garden apartments, cooperatives, condominiums, townhouses, shopping centers, industrial facilities, residential and office market studies, portfolio valuations and multi-property assignments. - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM H - ENGAGEMENT LETTER - -------------------------------------------------------------------------------- ADDENDUM H ENGAGEMENT LETTER - -------------------------------------------------------------------------------- [LETTERHEAD OF CB COMMERCIAL REAL ESTATE GROUP, INC.] May 8, 1996 Mr. Josh Kane Chief Financial Officer MARK CENTERS TRUST 660 Third Avenue Kingston, PA 18704 Re: 17 Shopping Centers Nationwide Dear Mr. Kane: At your request, we are pleased to submit the following proposal to appraise the above referenced properties. The purpose of this assignment is to estimate the market value of the leased fee interest. We understand the appraisal reports are to be used for mortgage underwriting purposes. We also understand that the reports will be used by Mark Centers Trust and Morgan Stanley. The properties are briefly described on attachment "A". Our complete valuation will be presented in a self contained (narrative) format and will contain a complete description of the property along with pertinent exhibits and photographs together with supporting factual data and analysis necessary to convey our opinion of value. We will value the property based upon the cost, income and market approaches to value, where applicable, correlating our findings into a final value conclusion. The report will be prepared in conformity with and will be subject to the requirements of the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. Each report will also conform to the Uniform Standards of Professional Appraisal Practice ("USPAP") and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") and the Morgan Stanley Capital Appraisal Standards described in Attachment "B". We assume that there are no major or significant items of deferred maintenance beyond normal wear and tear for properties of their age as of the date of the appraisal which would require the expertise of a professional contractor to estimate the cost of such repairs. If such repairs need to be considered in this appraisal, such estimates are to be provided by a qualified firm hired by you and at no cost to us. The total fee for the assignment is $68,000 ($4,000 per property) including all travel and related expenses which is due and payable upon delivery of the reports. If we are asked to cancel the assignment within two weeks of our engagement an upset fee equal to 50% will be due and payable. If cancellation occurs between two and three weeks, the upset fee will be equal to 75% and any time after three weeks the full fee will be due and payable. We will furnish you with three copies of our final report within four to five weeks of our authorization. Authorization occurs upon our receipt of an executed copy of this proposal and our delivery date is contingent upon the timely receipt of all necessary property information, financial statements and detailed lease information. If all requested data and information is not available as of the authorized date, we reserve the right to extend the delivery date by the amount of time it takes to receive the requested information. May 8,1996 Mr. Kane Page 2 In order to complete this assignment in a timely manner, we will require the following specific information, if available: o Copy of Ground Lease, if Leasehold o Legal descriptions. o Current rent roll. o Copy of Leases or abstracts o Expense reimbursements on a tenant by tenant basis o Building area calculations and surveys. o Operating statements for the past three full years. o Current year expenses to date. o A copy of the current budget. o Copies of any toxic engineering reports dealing with underground tanks, PCB's, asbestos or chemical spills, if available. o A copy of the next fiscal year's budget, if available. o A list of major repairs which have recently been made, or are scheduled to be made in the next 18 months. o Name and phone number(s) of on-site superintendent(s), or local management firm or trustee for physical inspection. o Notice of any pending changes to the rent roll or pertinent information regarding the current status of the tenants. If we are requested to give court testimony an additional fee will be charged on an hourly basis at $300 per hour for designated MAI-appraisers and $175 for non-designated appraisers. Said hourly billings pertain to court preparation, waiting and travel time, document review and preparation (excludes narrative appraisal report) and all meetings related to court testimony. The client may provide only complete, final copies of the appraisal report to third parties who shall rely on such reports in connection with loan underwriting or securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the client for routine and customary questions. Please note that our consent to allow an appraisal report prepared by CB Commercial, or portions of such report, to become part of or be referenced in any public offering, the granting of such consent will be at our sole discretion and, if given, will be on condition that we will be provided with an Indemnification Agreement and/or Non-Reliance letter, in a form and content satisfactory to us, by a party satisfactory to us. We do consent to your submission of the reports to rating agencies, loan participants or your auditors without the need to provide us with an Indemnification Agreement and/or Non-Reliance letter. In addition to the fee for this assignment, you agree to compensate us at a rate to be mutually agreed to, for any time expended by us should we be required (by subpoena or otherwise) or requested by you, your representatives or other entity to become involved in any litigation or May 8,1996 Mr. Kane Page 3 legal proceeding in any way involving this engagement to which we are not a party, the appraisal work we produce or the property which is the subject of this assignment. You also agree to pay, on demand, all reasonable expenses which we incur in connection with any litigation or proceedings including the fees of our attorneys. You acknowledge that we are being retained hereunder as an independent contractor to perform the services described herein and nothing in this agreement shall be deemed to create any other relationship between us. This assignment will be deemed concluded and the services hereunder completed upon delivery to you of the appraisal report discussed herein. If these terms are acceptable, please authorize us to proceed by having an officer of the corporation, managing general partner, principal, owner, or a contractually responsible party sign the enclosed copy of this proposal with "Terms and Conditions" and return it to us for our permanent file. Upon receipt of your authorization, we will schedule the necessary personnel to complete the project in a timely manner. We appreciate this opportunity to be of service to you on this assignment. If you have additional questions, please do not hesitate to give me a call. Sincerely, CB COMMERCIAL REAL ESTATE GROUP, INC. Appraisal /s/ Michael R. Pecorino - ----------------------- Michael R. Pecorino, MAI MRP:jf cc: Douglas W. Haney Enclosure AGREED & ACCEPTED _____________________________________ _____________________________________ Signature Title _____________________________________ _____________________________________ Name (type or print) Date Office #: ___________________________ Fax #: ______________________________ ================================================================================ ADDENDUM H - ENGAGEMENT LETTER - -------------------------------------------------------------------------------- ADDENDUM I QUALIFICATIONS - -------------------------------------------------------------------------------- TERMS AND CONDITIONS OF AGREEMENT CB COMMERCIAL REAL ESTATE GROUP, INC. - APPRAISAL 1. These Terms and Conditions by CB Commercial Real Estate Group, Inc., Appraisal Services, a division of CB Commercial Real Estate Group, Inc. (Appraiser or Consultant) and the client for whom Appraiser or Consultant will perform appraisal or consultation services (Client), and attached to any agreement for appraisal or consultation services between Client and Appraiser or Consultant (Agreement), shall be deemed a part of such Agreement as though set forth in full therein. 2. Appraiser or Consultant shall exercise independent judgment and complete the assignment called for by the Agreement (Assignment) in accordance with sound appraisal or consultation practice and the Code of Professional Ethics and Standards of Professional Conduct of the Appraisal Institute, as applicable. 3. All statements of the fact in the report which are used as the basis of Appraiser's or Consultant's analyses, opinions, and conclusions will be true and correct to the best of Appraiser's or Consultant's knowledge and belief. Appraiser or Consultant may rely upon the accuracy of information and material furnished to Appraiser or Consultant by Client. 4. Appraiser or Consultant shall have no responsibility for legal matters, questions of survey or title, soil or subsoil conditions, engineering, or other similar technical matters. The report will not constitute a survey of the property analyzed. 5. Client shall provide Appraiser or Consultant with such materials with respect to the Assignment as are requested by Appraiser or Consultant and in the possession or under the control of Client. Client shall provide Appraiser or Consultant with sufficient access to the real property to be analyzed and hereby grants permission for entry, unless discussed in advance to the contrary. 6. Unless expressly specified in the Agreement, the fee quoted does not include the attendance or giving of testimony by Appraiser or Consultant at any court, regulatory, or other proceeding, or any conferences or other work in preparation for such a proceeding. If any employee of CB Commercial Real Estate Group, Inc. is asked or required to testify at any deposition, trial, or other proceeding about the preparation, conclusions, or any other aspect of the assignment, Client shall compensate Appraiser or Consultant for the time spent by the employee in testifying and in preparing to testify according to the Appraiser's or Consultant's then current hourly rate for that employee plus reimbursement of expenses. 7. In the event Client requests additional consultation beyond the scope of this assignment, Client shall pay an additional charge for such consultation at rates specified by Appraiser or Consultant whether or not the completed report has been delivered to Client at the time of the request. 8. The aggregate liability of Appraiser or Consultant for any negligent acts, errors, or omissions in connection with the Assignment shall not exceed the compensation payable to Appraiser or Consultant on account of the Assignment. 9. Client agrees that the report shall not be quoted or referred to in any report or financial statement of Client or in any documents filed with any governmental agency without the prior written consent of Appraiser or Consultant. Neither all nor any part of the content of the report including, without limitation, the conclusions as to value, the identity of Appraiser or Consultant, references to the Appraisal Institute or references to the MAI or SRA designations shall be disseminated to the public through advertising or other mass media without the prior written consent of Appraiser or Consultant. 10. The data gathered in the course of the Assignment (except data furnished by Client) and the report prepared pursuant to the Agreement are and will remain the property of Appraiser/Consultant. With respect to data provided by Client, Appraiser or Consultant shall not violate the confidential nature of the appraiser- or consultant-client relationship by improperly disclosing any confidential information furnished to Appraiser or Consultant. Notwithstanding the foregoing, Appraiser or Consultant is authorized by client to disclose all or any portion of the report and the related data to appropriate representatives of the Appraisal Institute if such disclosure is required to enable Appraiser or Consultant to comply with the Bylaws and Regulations of such Institute as now or hereafter in effect. 11. In the event Client fails to make payments when due and payable, then from the date due and payable until paid the amount due and payable shall bear interest at the maximum rate permitted in the state in which the office of Appraiser or Consultant executing the Agreement is located. If Appraiser or Consultant is required to institute legal action against Client relating to the Agreement, Appraiser or Consultant shall be entitled to recover reasonable attorneys' fees and costs from Client. 12. This appraisal or consultation will not take into consideration the possibility of the existence of asbestos, PCB transformers, or other toxic, hazardous, or contaminated substances and/or underground storage tanks (hazardous material), or the cost of encapsulation or removal thereof. Should client have concern over the existence of such substances on the property, Appraiser or Consultant considers it imperative for the Client to retain the services of a qualified, independent engineer or contractor to determine the existence and extent of any hazardous materials, as well as the cost associated with any required or desirable treatment or removal thereof. 13. CB Commercial Real Estate Group, Inc., Appraisal Services and Client agree that the Agreement (including these Terms and Conditions) shall be governed by the laws of the state of the CB Commercial Real Estate Group, Inc., Appraisal Services office shown on the Agreement. 14. Client shall not indemnify Appraiser or Consultant or hold Appraiser or Consultant harmless unless and only to the extent that the Client misrepresents, distorts, or provides incomplete or inaccurate appraisal results to others, which acts of the Client proximately result in damage to Appraiser or Consultant. The Client shall indemnify and hold Appraiser or Consultant harmless from any claims, expenses, judgments or other items or costs arising as a result of the Client's failure or the failure of any of the Client's agents to provide a complete copy of the appraisal report to any third party. In the event of any litigation between the parties, the prevailing party to such litigation shall be entitled to recover from the other reasonable attorney fees and costs. 15. Appraiser understands that the Client may provide complete final copies of the appraisal report (but not partial or summarized copies) to third parties who shall rely on such reports in connection with the Client's securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the Client for routine and customary questions that may arise. ================================================================================ ADDENDUM I - QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF PETER J. JOLICOEUR Senior Real Estate Analyst CB Commercial Real Estate Group, Inc. Appraisal 560 Lexington Avenue, 20th Floor New York, New York 10022 (212) 207-6104 EDUCATIONAL Bachelor of Arts, Economics, University of Connecticut Storrs, Connecticut Appraisal Institute Courses 110, 120, 310, 410, 420, 510, 540, 550 LICENSES/CERTIFICATIONS Certified Real Estate General Appraiser: State of New York State #46-3537 PROFESSIONAL Appraisal Institute Associate Member of the Appraisal Institute EXPERIENCE Engaged in the appraisal and consultation of commercial real estate throughout the Northeast United States since 1987, specializing in New York City. Assignments include investment grade office buildings, multi-family residential, cooperative and condominium conversions, shopping centers, industrial facilities, special-use properties, portfolio valuations and multi-property assignments. 1987 - 1990 Henry Boeckmann Jr. & Associates New York, New York 1990 - Present CB Commercial Real Estate Group, Inc., Appraisal New York, New York This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE DUNMORE PLAZA 1400 Monroe Avenue Dunmore, Pennsylvania CB File No. 96-093-I [LOGO]CB COMMERCIAL Delivering Solutions Through Local Knowledge Worldwide COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE DUNMORE PLAZA 1400 Monroe Avenue Dunmore, Pennsylvania CB File No. 96-093-I DATE OF VALUE May 15, 1996 PREPARED FOR MORGAN STANLEY Mortgage Capital Inc. 1585 Broadway New York, New York 10036 PREPARED BY CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES 560 Lexington Avenue, 16th Floor New York, New York 10022 [LETTERHEAD OF CB COMMERCIAL REAL ESTATE GROUP, INC.] June 12, 1996 MORGAN STANLEY Mortgage Capital Inc. 1585 Broadway New York, New York 10036 RE: Appraisal of Shopping Center DUNMORE PLAZA 1400 Monroe Avenue Dunmore, Pennsylvania CB File No. 96-093-I Dear Ladies and Gentlement: At your request and authorization, CB Commercial Real Estate Group, Inc. has prepared a Complete Appraisal presented in a self-contained appraisal report of the current market value of the leased fee estate in the above-referenced real property. The subject property is a single story neighborhood shopping center featuring 45,380 square feet of gross leasable area. The shopping center is anchored by a Price Chopper Supermarket and is currently 100% occupied. The property is more fully described, legally and physically, within the enclosed report. Data, information, and calculations leading to the value conclusion are incorporated in the report following this letter. The report, in its entirety, including all assumptions and limiting conditions, is an integral part of and inseparable from this letter. Based on research and analysis contained in this report, it is estimated that the current market value of the leased fee estate in the subject property as of May 15, 1996, is: ONE MILLION EIGHT HUNDRED THOUSAND DOLLARS ($ 1,800,000) The following appraisal sets forth the most pertinent data gathered, the techniques employed, and the reasoning leading to the opinion of value. The analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP), the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, and The Financial Institution Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Furthermore, this report has been prepared in conformance with our interpretation of the appropriate regulations and guidelines set forth by Morgan Stanley. June 12, 1996 Page 2 It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CB Commercial Real Estate Group, Inc. can be of further service, please do not hesitate to contact us. Respectfully Submitted, CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES by: /s/ Dimitri M. Teddone /s/ Michael R. Pecorino - ------------------------------- ------------------------------------------ Dimitri M. Teddone, MAI Michael R. Pecorino, MAI Assistant Vice President Senior Vice President Senior Real Estate Analyst Northeast Regional Manager Pennsylvania Certification No. GA-001096-R ================================================================================ CERTIFICATION OF THE APPRAISERS - -------------------------------------------------------------------------------- CERTIFICATION OF THE APPRAISERS We certify that to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. 4. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event, such as the approval of a loan. 5. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation and the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. In addition, this report conforms to the requirements of the Financial Institution Reform, Recovery, and Enforcement Act (FIRREA). 6. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 7. Dimitri M. Teddone and Michael R. Pecorino have completed the requirements of the continuing education program of the Appraisal Institute. 8. The property was personally inspected by Dimitri M. Teddone, MAI, but was not inspected by Michael R. Pecorino, MAI. 9. No other person provided professional assistance to the persons signing this report. 10. The undersigned appraisers have extensive experience in the appraisal/review of similar property types. /s/ Dimitri M. Teddone /s/ Michael R. Pecorino - ------------------------------- ------------------------------------------ Dimitri M. Teddone, MAI Michael R. Pecorino, MAI Assistant Vice President Senior Vice President Senior Real Estate Analyst Northeast Regional Manager Pennsylvania Certification No. GA-001096-R - -------------------------------------------------------------------------------- i ================================================================================ SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- SUBJECT PHOTOGRAPHS [GRAPHIC OMITTED] FRONT VIEW OF THE SUBJECT PROPERTY FACING PRICE CHOPPER [GRAPHIC OMITTED] FRONT VIEW OF THE SUBJECT PROPERTY FACING FAY DRUGS - -------------------------------------------------------------------------------- ii ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- SUMMARY OF SALIENT FACTS Property Name: Dunmore Plaza Location: 1400 Monroe Avenue, Dunmore, Pennsylvania Assessor's Parcel Number: Section 14610, Block 030, Lots 015 & 017 Property Description: The subject property is a single story neighborhood shopping center featuring 45,380 square feet of gross leasable area. The improvements are situated on a 265,498 square foot lot (6.095 acre). Construction features include a concrete and steel frame and brick and split-faced block exterior walls. Highest and Best Use As Though Vacant: Land banking until such time that retail development becomes financially feasible As Improved: Continued use as a shopping center Property Rights Appraised: Leased Fee Date of Value: May 15, 1996 Land Area 265,498 Square Feet (6.095 acres) Improvements Building Area: Gross Leasable Area: 45,380 SF Year Built: 1967 Condition: Average Estimated Marketing Time: 12 months or less - -------------------------------------------------------------------------------- iii ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- Financial Indicators Current Occupancy: 100% Leased / 100% Occupied Stabilized Occupancy: 99% Market Rental Rate: $ 6.00 P.S.F. Anchor $11.00 P.S.F. Satellite Income Growth Rate: 3.0% Estimated Stabilized Expenses: $ 2.65 P.S.F. Expense Growth Rate: 3.0% Going-In Overall Capitalization Rate Selected: 10.50% Going-In Overall Capitalization Rate Implied: 10.08% Terminal Overall Capitalization Rate: 11.00% Discount Rate: 12.50% Valuation Land Value: N/A Cost Approach: N/A Sales Comparison Approach: $ 1,700,000 Income Capitalization Approach: $ 1,800,000 Final Value Conclusion: $ 1,800,000 Per Square Foot: $ 39.67/SF - -------------------------------------------------------------------------------- iv ================================================================================ TABLE OF CONTENTS - -------------------------------------------------------------------------------- TABLE OF CONTENTS CERTIFICATION OF THE APPRAISERS...............................................i SUBJECT PHOTOGRAPHS..........................................................ii SUMMARY OF SALIENT FACTS....................................................iii TABLE OF CONTENTS.............................................................v INTRODUCTION..................................................................1 AREA ANALYSIS.................................................................7 MARKET ANALYSIS..............................................................15 SITE ANALYSIS................................................................20 IMPROVEMENT ANALYSIS.........................................................22 ZONING.......................................................................25 TAX AND ASSESSMENT DATA......................................................26 HIGHEST AND BEST USE.........................................................27 APPRAISAL METHODOLOGY........................................................30 SALES COMPARISON APPROACH....................................................32 INCOME CAPITALIZATION APPROACH...............................................37 RECONCILIATION OF VALUE......................................................61 ASSUMPTIONS AND LIMITING CONDITIONS..........................................63 ADDENDA......................................................................67 A........................................................Glossary Of Terms B...................................................Additional Photographs C................................................Improved Comparable Sales D.......................................................Rental Comparables E..........................................Strategic Mapping, Inc. Reports F................................................................Rent Roll G.........................................................PRO-JECT Reports H........................................................Engagement Letter I...........................................................Qualifications - -------------------------------------------------------------------------------- v INTRODUCTION INTRODUCTION ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- INTRODUCTION PROPERTY IDENTIFICATION The subject is located on the west side of Monroe Avenue in the Borough of Dunmore, Pennsylvania. The common street address for the subject is 1400 Monroe Avenue. The city assessor's tax identification number is Section 14610, Block 030, Lots 015 & 017. A full metes and bounds legal description is included in the Addenda. OWNERSHIP AND PROPERTY HISTORY The subject is currently owned by Mark Centers Limited Partnership. The subject has not sold in the last three years and to the best of our knowledge there is no known current listing, option, or agreement of sale of the subject. DATES OF INSPECTION AND VALUATION The site was last inspected by Dimitri M. Teddone, MAI on May 15, 1996. Michael R. Pecorino, MAI did not inspect the subject or the comparables employed but reviewed this report and concurs with the conclusions. The date of the market value is the date of inspection, May 15, 1996. PURPOSE OF THE APPRAISAL The purpose of this appraisal is to estimate the current market value of the leased fee estate in the subject property in it's "As Is" condition. Market value is defined as follows: Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised, and acting in what they consider their own best interests; 3. A reasonable time is allowed for exposure in the open market; 4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and - -------------------------------------------------------------------------------- 1 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- 5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) TERMS AND DEFINITIONS Please refer to the Addenda for a Glossary of the Terms and Definitions that are, and may be used in this appraisal. INTENDED USE OF REPORT This appraisal is for mortgage underwriting purposes. PROPERTY RIGHTS APPRAISED The value estimated represents the leased fee estate. APPRAISAL DEVELOPMENT AND REPORTING PROCESS The following steps were completed by CB Commercial for this assignment: 1. Analyzed regional, city, neighborhood, site, and improvement data. 2. Inspected the subject and the neighborhood. 3. Reviewed data regarding taxes, zoning, utilities, easements, and city services. 4. Considered comparable improved sales, comparable improved building rental information, and comparable site sales. Data was confirmed with principals, managers, or real estate agents representing principals, unless otherwise noted. 5. Analyzed the data to arrive at conclusions via each approach to value used in this report. 6. Reconciled the results of each approach to value employed into a probable range of market data and finally an estimate of value for the subject, as defined herein. 7. Estimated a reasonable exposure time associated with the value estimate. The subject site and improvement descriptions are based on a personal inspection of the property, discussions with representatives of the subject property, and/or a review of relevant plat maps and leasing plans. The inspection is not a substitute for thorough engineering studies. - ---------- (1) The definition of market value is taken from: The Office of the Comptroller of the Currency under 12 CFR, Part 34, Subpart C-Appraisals, ss.34.42(f), August 24, 1966. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. - -------------------------------------------------------------------------------- 2 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- To develop the opinion of value, CB Commercial performed a complete appraisal process, as defined by the Uniform Standards of Professional Appraisal Practice. This means that no departures from Standard 1 were invoked. This is a complete appraisal, in the form of a Self-Contained Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Standards of Professional Appraisal Practice. The definitions of Complete Appraisal and Self-Contained Report are found in the Glossary of Terms and Definitions. In a complete appraisal, CB Commercial uses all known applicable approaches to value. The value conclusion reflects all known information about the subject property, market conditions, and available data. The Self-Contained Report incorporates to the fullest extent possible, practical explanation of the data, reasoning and analysis that were used to develop the opinion of value. It also includes thorough descriptions of the subject property and the market for the subject property type. All data considered significant that was requested for this assignment was received by CB Commercial Real Estate Group, Inc. Appraisal Services. SPECIAL APPRAISAL INSTRUCTIONS There were no special appraisal instructions. MARKETING PERIOD The marketing period section is divided into reasonable exposure time and reasonable marketing time. Exposure time differs from marketing time. Marketing time is the period required to sell a real property interest at market value during the period immediately after the effective date of the appraisal. Exposure time is always presumed to precede the effective date of the appraisal. Exposure time is not intended to be a prediction of a date of sale or a one-line statement. Instead, it is an integral part of the appraisal analysis and is based on one or more of the following: o statistical information about days on the market o information gathered through sales verification o interviews of market participants. The reasonable exposure period is a function of price, time, and use. It is not an isolated estimate of time alone. Exposure time is different for various types of real estate and under various market conditions. - -------------------------------------------------------------------------------- 3 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- Reasonable Exposure Time Exposure time is always presumed to precede the effective date of the appraisal. It is the estimated length of time the property would have been offered prior to a hypothetical market value sale on the effective date of appraisal. It is a retrospective estimate based on an analysis of recent past events, assuming a competitive and open market. It assumes not only adequate, sufficient, and reasonable time but adequate, sufficient, and reasonable marketing effort. Exposure time and appraisal conclusion of value are therefore interrelated. Exposure time is often expressed as a range and is based on direct and indirect market data gathered during the market analysis, sales verifications, interviews with market participants, and other appropriate sources. The amount of time which a property will require to be marketed varies greatly depending on a number of factors including market conditions, listing price, terms of sale offered, and competitive listing inventory. In addition to considering each of the factors noted above, CB Commercial considered: o exposure periods of comparable sales revealed during the course of this appraisal, o the most recent CB Commercial National Investor Survey, and o the opinions of local knowledgeable real estate brokers and investors. Market Conditions Throughout the Scranton--Wilkes-Barre--Hazlet metropolitan area, market conditions for most property types have been generally weak during the past three to four years. The value of most investment grade property types has decreased due to a number of factors. The lack of demand for investment properties and the inability of owners to make mortgage payments resulted in numerous foreclosures, or properties deeded back in lieu of foreclosure. Increased listing inventory has had a substantial downward influence on property values and the exposure time necessary to generate sales. Only recently, due to the market's competitive pricing and improving economic conditions, has the number of transactions and active investors increased. These current market conditions illustrate how exposure time is correlated with listing inventory, competitive pricing structures, and marketing efforts. CB Commercial National Investor Survey In the most recent issue of the CB Commercial National Investor Survey, published in the First Quarter 1996, CB Commercial surveyed a wide range of investors for property type preferences and specific marketing times. Respondents showed a clear preference for apartments, suburban offices, warehouse/distribution, community shopping centers, neighborhood shopping centers, power centers, urban offices, and business parks. Investors indicated that exposure - -------------------------------------------------------------------------------- 4 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- requirements for investment property have changed little from the previous survey, now an average of approximately 8.5 months for the subject property type. Real Estate Broker Surveys As a second information source, appraisers solicited the opinions of real estate brokers knowledgeable in the subject market and property type. While the majority of individuals surveyed were reluctant to predict an exact exposure time length for retail property in general, they generally estimated an approximate range between 6 and 12 months. All assumed that property would be appropriately priced and marketed. When asked about the subject property specifically, the consensus of opinion was that the subject would receive average to above average recognition in the marketplace under a reasonable plan for pricing and promotion. Exposure Time Conclusion In conclusion, based on the foregoing analysis, an exposure time of between 6 and 12 months is reasonable, defensible, and appropriate. Like the brokers surveyed, CB Commercial assumes that the subject property would have been competitively priced and aggressively promoted regionally. Reasonable Marketing Time Reasonable marketing time is the period a prospective investor would forecast to sell the subject property immediately after the date of value, at the value estimated. Anticipated marketing time is essentially a measure of the perceived level of risk associated with the marketability, or liquidity, of the subject as an investment grade property. The sources for this information include those used in estimating the reasonable exposure time, but also an analysis of the anticipated changes in market conditions following the date of appraisal. In other words, the reasonable marketing time is the number of months it will require to sell the subject property from the date of value, into the future. The reader must understand, however, that the future price for the subject property (at the end of the marketing time) may or may not equal the appraisal estimate. The future price depends on unpredictable changes in the physical real estate, demographic and economic trends, real estate markets in general, supply/demand characteristics for the property type, and many other factors. Based on the premise that present market conditions are the best indicators of future performance in the short-term and under stable market conditions, a prudent investor will forecast that, under the conditions described above, the subject property will require a marketing time of 6 to 12 months. - -------------------------------------------------------------------------------- 5 ================================================================================ REGIONAL ANALYSIS - -------------------------------------------------------------------------------- REGIONAL AREA MAP [GRAPHIC OMITTED] Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- 6 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- AREA ANALYSIS The dynamic nature of economic relationships within a market area have a direct bearing on real estate values and the long-term quality of a real estate investment. In the market, the value of a property is not based on the price paid for it in the past or the cost of its creation, but on what buyers and sellers perceive it will provide in the future. Consequently, the attitude of the market toward a property within a specific neighborhood or market area reflects the probable future trend of that area. Since real estate is an immobile asset, economic trends affecting its locational quality in relation to other competing properties within its market area will also have a direct effect on its value as an investment. To accurately reflect such influences, it is necessary to examine the past and probable future trends which may affect the economic structure of the market and evaluate their impact on the market potential of the subject. This section of the report is designed to isolate and examine the discernible economic trends in the region and neighborhood which influence and create value for the subject property. A regional map indicating the location of the subject is presented on the previous page. REGIONAL INFLUENCES Location The subject is located in the community of Dunmore within Lackawanna County, located in the northeastern portion of the state of Pennsylvania. Lackawanna County is part of the Scranton--Wilkes-Barre--Hazlet MSA and is adjacent to the west by Wyoming and Luzern Counties, to the east by Wayne County, to the south by Monroe County, and to the north by Susquehanna County. A regional map indicating the location of the subject is presented on the following page. Population The 1995 population within the Scranton--Wilkes-Barre--Hazlet MSA was estimated by Strategic Mapping, Inc. to be 637,743. This indicates a decrease of 723, or 0.11% from the April 1, 1990 federal census. The MSA's population is expected to increase slightly to approximately 637,923 by the year 2000, or a 0.03% increase. Demographic statistics for the Scranton--Wilkes-Barre--Hazlet MSA are summarized in the following table. - -------------------------------------------------------------------------------- 7 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ================================================================================ SELECTED AREA DEMOGRAPHICS THE SCRANTON--WILKES-BARRE--HAZLET MSA - -------------------------------------------------------------------------------- Population 1995 Estimate 637,743 1990 Census 638,466 1990-1995 % Change -0.11% Households 1995 Estimate 247,194 1990 Census 246,491 1990-1995 % Change 0.29% 1995 Median Household Income $ 28,672 1995 Average Household Income $ 36,957 1990 Average Home Value $ 71,131 1990 % College Graduates 8.5% - -------------------------------------------------------------------------------- Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ Households Similar to the population level within the Scranton--Wilkes-Barre--Hazlet MSA, the number of households has grown in recent years and is projected to increase over the next five years. Between 1990 and 1995, household growth in the Scranton--Wilkes-Barre--Hazlet MSA was 0.29%. Projections for the year 2000 indicate a mature and stable area with the number of households increasing by 0.56%. While experiencing a significant decline between 1980 and 1990, the average household size did not change significantly in 1995 (2.49) and is expected to remain fairly stable over the next five years. In the Scranton--Wilkes-Barre--Hazlet MSA, the average household size declined from 2.70 in 1980 to 2.50 in 1990. It is projected to decline slightly to 2.48 in the year 2000. Income As per data compiled by the Strategic Mapping, Inc., the 1995 median household income in the Scranton--Wilkes-Barre--Hazlet MSA was $28,672. The median household income increased considerably between the 1980 and 1990 census by approximately 5.49% annually. In 1980 the median household income was $14,203, which increased by 70.6% to $24,232 in 1990. The 1995 estimate indicates that growth in the median household income has slowed to only 3.4% per annum from 1990 to 1995. Income growth is projected to increase at an average annual rate of 3.3% between 1995 and the year 2000. - -------------------------------------------------------------------------------- 8 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Employment The total civilian labor force for the Scranton--Wilkes-Barre--Hazlet MSA was 337,200 in April, 1996 with corresponding employment of 312,922 indicating an April, 1996 unemployment rate of 7.2%. The following table compares the unemployment rate for the area to that of the state and national average. ================================================================================ UNEMPLOYMENT RATES COMPARISON BY MSA, STATE, AND U.S. - -------------------------------------------------------------------------------- Year Scranton--Wilkes-Barre-- Pennsylvania U.S. Hazlet MSA 1995 7.0% 5.9% 5.7% 1994 7.2% 6.2% 6.1% 1993 8.0% 7.1% 6.8% 1992 8.8% 7.6% 7.4% - -------------------------------------------------------------------------------- Source: Pennsylvania Department of Labor and Employment Security, Bureau of Labor Market Information Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ Most of the employment is in the services (34%) and Manufacturing (19%), followed by retail trade industries (13%), similar to the State of Pennsylvania averages. The major employers in the area are as follows: ================================================================================ SCRANTON--WILKES-BARRE--HAZLET MSA MAJOR AREA EMPLOYERS - -------------------------------------------------------------------------------- Company Business No. Employees - -------------------------------------------------------------------------------- WEA Manufacturing Records & CD's 2,800 Commonwealth of Pennsylvania Government 2,096 Community Medical Center Hospital 1,800 Lackawanna County Government 1,550 Mercy Hospital Hospital 1,500 Technaglass TV Screens 1,450 Allied Services Rehabilitation Healthcare 1,400 Thompson Consumer Electronics Picture Tubes 1,275 University of Scranton Education 1,185 U.S. Government Government 1,094 - -------------------------------------------------------------------------------- Source: Lackawanna County Chamber of Commerce Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 9 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Transportation The Interstate highways serving Lackawanna County include Interstate 81, 84 and 380. Interstate 81 connects Canada to the north to all points south to Florida. Interstate 84 connects parts of New York and Connecticut to the east to points west and terminates at the I-81/I-84 interchange in Dunmore, Pennsylvania. Interstate 380 runs from the I-380/I-84 interchange in Dunmore south to the I-380/I-80 interchange in Crescent Lake, Pennsylvania. Other significant arterials include U.S. 6 which runs through the central portion of the county as well as Dunmore and S.R. 347 which runs through the central area also. The major airports serving the Lackawanna County area are the Wilkes Barre Scranton International Airport and the Wilkes Barre Wyoming Valley Airport. The Wilkes Barre Scranton International Airport is approximately 10 miles southwest of downtown Scranton while the Wilkes Barre Wyoming Valley Airport is 7 miles north of downtown Wilkes Barre. Both airports provide for private and corporate flights as well as cargo shipments. The Lackawanna County area is also served by several railroads including Amtrak. Conclusion and Relevance to the Subject Property The long term outlook for the Scranton--Wilkes-Barre--Hazlet MSA is considered good. The strategic location between major cities in all directions combined with the convergence of three major arterials are primary factors in the anticipated favorable future of the area. Population projections indicate a stabilization for the Scranton--Wilkes-Barre--Hazlet MSA in the short- and long-term. The affordability and relative ease of obtaining housing within the Scranton--Wilkes-Barre--Hazlet MSA is a key factor for future growth. The vast amount of available land, as well as the large number of existing developments are seen as supportive of the long term growth prospects within this area. Transportation modes are considered excellent as are public utilities and services. Therefore, it would appear that the area will be suitable for additional growth in the future which should be favorable for the subject property in the long run. The overall projection for the Scranton--Wilkes-Barre--Hazlet MSA appears stable. - -------------------------------------------------------------------------------- 10 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- NEIGHBORHOOD INFLUENCES Location The subject is located on the west side of Monroe Avenue between Marion and Grove Streets, approximately one mile west of downtown Dunmore. The common mailing address is 1400 Monroe Avenue, Dunmore, Pennsylvania. The boundaries for the subject neighborhood are considered to be: North: Green Ridge Street South: Poplar Street West: Washington Street East: U.S. Route 347 A neighborhood map indicating the location of the subject is presented no the following page. Land Use Land use in the neighborhood consists of a mixture of industrial and residential development. Development in the immediate vicinity of the subject consists of 1-4 family residential uses as well as some industrial uses. The subject serves as the only retail development within a four block radius. Other uses within this small radius include three industrial uses occupied by the Dillon Floral Corporation, the Comprehensive Health Services Center, and two United Gilsonite Laboratories (UGL) warehouses. All other improvements in the area are residential. The immediate area is approximately 95+ percent developed. As this is predominantly a residential area, the most desirable commercial lots are currently located outside of the immediate area. Access Accessibility to the neighborhood in general, and to the subject property in particular, is considered to be average. Access to Interstates 81, 84, and 380 is available via the Route 347-Interstate 81 interchange (Exit 55) located approximately three miles northeast of the subject. A connection with Interstate 81 at Exit 53 is also located approximately two miles southwest of the subject in Downtown Scranton. The subject neighborhood also features a good network of secondary roadways which further enhance accessibility. - -------------------------------------------------------------------------------- 11 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- NEIGHBORHOOD MAP [GRAPHIC OMITTED] Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- 12 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Demographics Selected Neighborhood demographics in a one, three, and five mile radius from the subject are shown in the following table: ================================================================================ SELECTED NEIGHBORHOOD DEMOGRAPHICS - -------------------------------------------------------------------------------- 1 mile 3 mile 5 mile - -------------------------------------------------------------------------------- Population 1995 Estimate 21,804 89,699 126,051 1990 Census 22,804 94,044 130,323 1990-1995 % Change -4.4% -4.6% -3.3% Households 1995 Estimate 8,535 35,963 50,100 1990 Census 8,903 37,643 51,703 1990-1995 % Change -4.1% -4.5% -3.1% 1995 Median Household Income $30,255 $25,525 $26,593 1995 Average Household Income $40,400 $33,531 $34,131 1990 Average Home Value $70,112 $59,393 $62,684 Median Age Total Population 39.0 38.1 38.4 1990 % College Graduates 12.4% 8.6% 8.5% - -------------------------------------------------------------------------------- Source: Conquest Market Data Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The subject property benefits from a location in the middle of a residential area with no immediate competition as well as stable demographic characteristics. The population and households have decreased within the one, three and five mile radii. Projections for the year 2000 indicate similar patterns. While the population and households have been decreasing overall, income levels have edged upward approximately 3.5 percent per annum since 1990 within all three radii, similar to the inflation rate. Demographic characteristics appear to be strongest within a five mile radius. The five mile radius extends closer to the City of Scranton which appears to be stabilizing economically more quickly than Dunmore. General characteristics are fairly similar throughout all three radii. Growth and Trends Due to demographic characteristics as discussed above as well as stabilizing economic conditions, there has been some retail development in Dunmore in recent years. A Price Chopper supermarket was constructed in 1995 and is located along Route 347, north of the Interstate 81 interchange, contains approximately 65,000 square feet and has a group of four other satellite tenants as well as a Taco Bell pad site. We are not aware of any proposed - -------------------------------------------------------------------------------- 13 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- shopping centers within the Borough of Dunmore in upcoming years. The immediate neighborhood has not experienced significant retail development in the recent past. Conclusion and Relevance to the Subject Property The subject property is situated in an area consisting primarily of retail, industrial and residential uses. The area features average accessibility to the local transportation system and throughout the city and metropolitan area. Currently, the subject's neighborhood is in the stabilization stage of its life cycle, a period of neither significant growth nor decline. While the area is highly developed, some potential exists for future development whether through construction on the few remaining vacant lots or renovation of existing improvements. We do not expect the character of the neighborhood to change in the near future. - -------------------------------------------------------------------------------- 14 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- MARKET ANALYSIS Retail Overview The retail market in Dunmore has witnessed limited growth over the past few years despite the economic troubles the region has experienced. As noted in the previous section, a Price Chopper supermarket was constructed in 1995 and is located along Route 347, north of the Interstate 81 interchange, contains approximately 65,000 square feet and has a group of four other satellite tenants as well as a Taco Bell pad site. We are not aware of any proposed shopping centers within the Borough of Dunmore in upcoming years. The immediate neighborhood has not experienced significant retail development in the recent past. According to Strategic Mapping, Inc., total retail development within a one mile radius of the subject property consists of approximately 893,000 square feet. Furthermore, retail development within the three and five mile radii account for 3.56 and 5.0 million square feet, respectively. Local Retail Market In order to project future performance of the retail space in the subject property consideration has been given to various market components that affect the supply and demand for this type of real estate property. Specifically we have: o Inspected the site and surrounding areas for the purpose of familiarizing ourselves with all the locational and environmental factors. In this regard, we have directed our attention to the physical qualities of the site, access and circulation, surrounding uses, and relationship to sources of market support. o Reviewed the principal economic growth trends in the area in industry, population and employment. Our intention was to identify the degree of underlying support for existing improvements and future growth. o Analyzed existing and foreseeable market conditions for retail properties in the area. o Analyzed demographics of the subject property's trade area as well identified competition in order to assess, the subject property's current as well as future position in the market. Trade Area The trade area of a shopping center is defined as the geographic area from which the sustaining patronage for steady support of a center is obtained. Determination of the boundaries is contingent upon various factors including but not limited to the nature of the - -------------------------------------------------------------------------------- 15 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- center, accessibility, physical barriers, location of competing facilities, and limitations of driving time and distance. The subject's general trade area is considered to be that which encompasses a five mile radius of the subject center. We broke this down further to include a one-mile ring (primary), a three-mile ring (secondary) and a five-mile ring (tertiary). Definition Of The Trade Area The primary ingredients for success in these types of projects include the nature of the competition, population density, income levels, and disposable income. The actual size of the population needed to support this type of project cannot be fixed due to the complexities of the above factors, as well as changing methods of merchandising. Local conditions, such as number of households, income levels, and existing centers within the trade area can have the most dramatic impact upon any given project since these factors are what determine the purchasing power in an area. An additional ingredient leading to the success of a shopping center would be the tenant mix and characteristics of the leading tenants which attract shoppers to the project. We have analyzed demographic data, competition, income levels for the subject trade area in the following sections. The demographic profiles of the primary, secondary and tertiary trade areas are presented in the Neighborhood Influences section of the report. Additional demographic information is contained within the Strategic Mapping, Inc. Profile Report located within the Addenda. Population The sales potential of a center is directly related to its proximity to the number of potential patrons. The historical and projected trends for population are important to examine when analyzing the trade area of a shopping center. The historical population trends for the subject's trade areas indicate a decrease in population between 1980 and 1995 followed by a further decrease projected from 1995 to the year 2000. In the primary trade area the population decreased by 9.6% between 1980 and 1990 to 22,804 and then witnessed a decrease to 21,804 in 1995. Population projections indicate a further decrease to 20,990 between 1995 and the year 2000. Both the secondary and tertiary trade areas witnessed a similar pattern and future trend in population in these areas. In order to further analyze the population change, we have examined the distribution of the population by age. When analyzing the population distribution by age, it should indicate in what - -------------------------------------------------------------------------------- 16 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- age groups the population shifts are projected to take place. This is important to distinguish if it will have a great impact on the retail sales of the subject center. Shifts in the age groups under 24 years of age will affect the subject, however, less drastically than changes in the subject's core market approximately between the ages of 25 and 54. As illustrated in the Profile Report located in the Addenda, a large percentage of the population in all three trade areas are in the age groups from 25 - 54. Estimated figures for 1995 indicated that the median age was slightly higher than the 1990 census in all three trade areas ranging from 38.1 to 39.0. Overall, the diversification among age groups is very common among other retail trade areas. Household Trends When analyzing the demographics for a retail center, it is most important to focus on the trends in the household population. A household consists of one or more persons occupying a dwelling unit. A family would be considered a household unit, however single persons living alone or two or more unmarried persons sharing a dwelling are also considered a household unit. The household unit is perhaps the best indicator in determining the economic health of a trade area. One of the important components which bonds a household together is it's economic strength as a unit as compared to the economic viability of an individual; single person households not withstanding. If the population is slightly decreasing and yet the number of households is increasing, this would not necessarily be a negative indicator. This would imply that the average household size was shrinking. Each household has demand for goods that likely is not duplicated with a larger household size. This demand is duplicated however in the number of households. Similar to population figures, the number of households in the trade area decreased between 1980 and 1990. Subsequently, the number of households decreased between 1990 and 1995 though at an accelerated pace in comparison to the decline witnessed in the previous decade. The number of households are projected to decrease further in all three trade areas in upcoming years. Household Income The median household income in the subject's trade areas increased annually at an average rate of 3.4% from 1990 to 1995. Thus, the household incomes in the area grew at a pace slightly below inflation during this period. The projected annual income growth rates between 1995 and the year 2000 are approximately 3.3%, again below the projected rate of inflation. Overall, household income levels varied slightly between the three trade areas. The median - -------------------------------------------------------------------------------- 17 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- household income levels ranged from $25,525 to $30,255 in 1995 with the primary trade area representing the upper end of the range. Employment The income characteristics of the trade areas for the subject property indicate that this is a predominately white collar market. The primary trade area had the highest percent in white collar employment at 60.9% while the tertiary trade area had the lowest at 53.3%. Blue collar employment percentages in the primary, secondary and tertiary trade areas were 25.3%, 31.0% and 31.7%, respectively. The remaining percentages were in special services categories. The 1990 Census information indicates that the unemployment rates ranged from a low of 4.8% in the primary trade area to a high of 6.1% in the secondary trade area. As discussed in the Location Analysis, the most recent unemployment rate in the Scranton--Wilkes-Barre--Hazlet MSA was 7.2% which indicates an overall decrease in employment from the 1990 Census. We feel the subject market will witness modest employment growth in upcoming years and a declining unemployment rate. Expenditure Potential The Expenditure Potential charts located in the Addenda outline Strategic Mapping, Inc. retail sales projections for the subject trade area. The highest sales growth in the primary trade area appears to be for electronics, drug, and video stores. These three categories also represent high growth in the secondary and tertiary trade areas. The average growth rate for retail sales in the primary trade area is projected at 0.75% in the primary trade area, 0.71% in the secondary trade area and 0.98% in the tertiary trade area. Strategic Mapping, Inc. examines the product potential for various store types for each portion of the subject trade area. Based on statistical sampling, Strategic Mapping has derived a benchmark per household expenditures for each store type. Comparing the figures in the trade area to the benchmark figure, it is apparent that those individuals in the subject trade area are much more likely to spend on items in drugs, groceries, and convenience stores. The Strategic Mapping Expenditure Potential Index is defined as follows, 'An index which shows the amount by which an area per household expenditures, differed from that of the benchmark.' The benchmark is defined as the average or common expenditure among households for a larger region. Values below 100 signify that this area is below the benchmark per household expenditures and correspondingly values above 100 indicate a higher than average expenditure per household. The overall Expenditure Index for the primary area is 95.4, while the benchmark indices for the secondary and tertiary trade areas are 90.2 and 91.3, respectively. In - -------------------------------------------------------------------------------- 18 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- conclusion, the expenditure indices for the subject trade areas indicate that the trade area populations spend less than the benchmark household on retail goods. The area generates retail sales based on the existing population as well as the increasing income potential. Market Indicators The subject center contains 5 tenant suites ranging in size from approximately 1,900 to 26,475 square feet. Discussions with local leasing agents reveal that typical ground level satellite space rents in the area generally range from $5.50/SF to $15.48/SF depending upon the physical and locational characteristics of the space and $5.77/SF to $10.05/SF for anchor space depending upon the same criteria. Percentage rent clauses tend to be uncommon for satellite tenants. Retail leases are typically structured on an absolute net basis with flat rents over the term. Based upon discussions with brokers and managing agents in the area as well as our observations during our inspection, competing centers in the subject's market area have vacancy rates which generally fall within the 0.0% to 7.0% range with an average vacancy rate of approximately 4.0%. The subject center is currently 100% occupied. Summary Although future projections indicate continued decreases in the population and households in all three trade areas from 1980 through 1995, the trade areas exhibit increased spending potential over the same period. However, income levels appear to be increasing at rates slightly below projected inflationary rates which is common during periods of economic recovery. Overall, the subject trade areas reflect average retail characteristics. Due in part to a lack of competition in the immediate area, we conclude that the trade area represents a viable retail market. - -------------------------------------------------------------------------------- 19 PROPERTY DESCRIPTION PROPERTY DESCRIPTION ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- SITE ANALYSIS The description of the site can be detailed as follows: Location: The subject is located at the west side of Monroe Street, approximately three miles southwest of the Route 347-Interstate 81 interchange (Exit 55) and one mile west of Downtown Dunmore, Pennsylvania. Ingress and egress to the subject are available via curb cuts from Monroe Avenue and supplementary access via Jefferson Avenue as well as Court Street. Assessor's Parcel Number: Section 14610, Block 030, Lots 015 & 017 Land Area(2) The subject site contains 6.095 acre or 265,498 square feet. Shape and Frontage: The site is irregular in shape featuring good frontage on Monroe Avenue (534.32 feet), 50 feet on Jefferson Avenue, and 76.53 feet on Court Street. Topography and Drainage: The site slopes downward from Monroe Avenue towards the rear. Our investigation did not reveal any significant drainage problems. Soils: No soil report was provided and it is assumed that the soil is adequate for the existing use. Easements: No title report was provided in connection with this appraisal. No survey showing the location of easements was available. Thus, it is not possible to make a definitive conclusion regarding any potential impacts on value of the location of any such easements or encroachments. It is specifically assumed that any easements, restrictions, or encroachments that might appear against the title would have no adverse impact on marketability or value. Covenants, Conditions, and No private deeds or restricting Restrictions: covenants affecting development, other than zoning, were found to affect the site. Utilities: All public utilities including gas, electricity and telephone as well as water, storm and sanitary sewer systems. - ---------- (2) Source: Dunmore Tax Assessor's Office - -------------------------------------------------------------------------------- 20 ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- Flood Zone: The municipal offices did not have a copy of a Federal Emergency Management Agency (FEMA) Flood Map, however our discussion with the Borough of Dunmore's Planning and Building Department indicated that the subject property is not located within a flood hazzard zone. This was corroborated with the survey of the subject which was submitted to us by Mark Centers Trust. The survey was prepared by G. Dunda Associates and dated 1/19/93. Environmental Issues: The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the property causing a loss in value. No evidence of hazardous waste or toxic materials was visible and CB Commercial has no knowledge of the existence of these substances on or in the subject property. However, CB Commercial is not qualified to detect hazardous waste or toxic materials. Adjacent Properties North: Industrial uses South: 1-4 family residential uses East: 1-4 family residential uses West: Industrial uses Conclusion: The subject is a 6.095-acre site on a paved street served by necessary utilities. Access and visibility are considered to be good. There are no adverse soil conditions of which CB Commercial Real Estate Group, Inc. is aware. The shape of the parcel is irregular and results in no specific limitation. The topography is sloping though possesses no specific development limitation. There is no excess land and the unimproved portions of the site are fully utilized by a macadam parking lot. From a physical standpoint, the site is considered to be adequate for many types of development. - -------------------------------------------------------------------------------- 21 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS The subject improvements were constructed in 1967. The improvements consist of a single-story neighborhood shopping center containing 45,380 square feet of gross leasable area. The shopping center contains 5 tenant suites. The following is a description of the improvements based on our physical inspection, municipal records and from discussions with and materials provided by the client. The basic construction features are summarized as follows. Construction Class The class of construction is the basic subdivision in Marshall Valuation Service which divides all buildings into five basic groups by type of framing (supporting columns and beams), walls, floors, roof structure, and fireproofing. The subject is considered to be of construction Class B(3). Competitive Rating The subject is considered a Class B building in terms of quality as it is perceived in the marketplace. Foundation Poured concrete Frame Concrete block over a steel frame Floor Construction Concrete slab Exterior Walls Load-bearing concrete block over a steel frame with split-faced block. Fenestration Aluminum framed glass windows and double-paned glass front doorways. Roof Structure & Covering Flat, presumably built-up composition covering over steel deck with steel bar joist supports. We were unable to inspect the roof and assume the roof is in average overall condition. Exterior Condition Average Interior Partition System Metal studs with gypsum board cover. - ---------- (3) The primary characteristic of Class B Buildings is the reinforced concrete frame in which the columns and beams can be either formed or precast concrete. They may be mechanically stressed, and the structure is fire resistant. (Source: Marshall Valuation Service) - -------------------------------------------------------------------------------- 22 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Interior Finishes - Tenant Space Floors: Combination of vinyl tile and carpet. Walls: Painted or covered gypsum board. Ceilings: Suspended acoustic tiles. Lighting: Recessed florescent lighting. Summary: The interiors of the subject are considered to be of average to good quality and similar to competitors. HVAC Heating and ventilation is provided to the majority of the tenant suites by roof-mounted HVAC units. Each of these units pump the hot air throughout its suite via sheet metal air duct work hidden above the dropped ceiling. Air conditioning is supplied by the same system utilizing the duct work and supplying cool air during the summer months. The HVAC system is a gas-fired forced air system. Electrical The electrical system is assumed to be in good working order and adequate for the building. Fire Protection It is assumed that the subject has adequate fire alarm systems, fire exits, fire extinguishers, fire escapes and/or other fire protection measures to meet local fire marshall requirements. Plumbing The plumbing system is assumed to be in good operating condition. Parking Surface parking is provided for 208+/- vehicles. Landscaping Landscaping on the subject property is minimal which is typical within the subject neighborhood. ADA Compliance Handicap access appears to be available to all areas of the center. However, we are not qualified to determine compliance with the requirements. Please refer to the specific limiting condition regarding ADA compliance. Environmental Issues The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the improvements which would cause a loss in value. - -------------------------------------------------------------------------------- 23 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Functional Quality of Space The interior floor plans are flexible and will accommodate a variety of tenant layouts. There are no observed design problems and none are reported by management. Access to the tenant suites is available at the front and rear of the center. There are no elevators within the center. Deferred Maintenance No deferred maintenance was observed or reported. The improvements have been adequately maintained since it was constructed in 1967. Economic Age and Life Based on the current condition, we estimate the effective age to be approximately 30 years. According to the Marshall Valuation Service cost guide, buildings of this type and quality have an expected life of approximately 45 years. Therefore, the remaining economic life (expected life minus effective age) is estimated at 15 years. While we observed nothing to suggest a different economic life, a capital improvement program could extend life beyond that stated above. Quality/General Condition The subject property conforms well with competitors and substitutes in the area. The quality of construction is typical of the area. Interior amenities are similar to competing properties of the same approximate age. The general condition of the improvements is average. We observed no evidence of structural fatigue and the improvements appear sound. We are not qualified to determine structural integrity, however, and recommend that the reader rely upon an expert in this field for further determination. Conclusion/Comments The subject property is an average quality shopping center located in a relatively stable area. The improvements generally conform with competitors and substitutes in the neighborhood. - -------------------------------------------------------------------------------- 24 ================================================================================ ZONING - -------------------------------------------------------------------------------- ZONING The subject's zoning requirements are detailed below. ================================================================================ ZONING SUMMARY - -------------------------------------------------------------------------------- Current zoning: C-1; Community Commercial District Legally conforming?: Yes Uses permitted: Retail, Bank, Food Stores, Dry Cleaning, Drive-In Restaurants, Offices, Service Stations, Motels, Auto Repair Shops Zoning change Not Likely - -------------------------------------------------------------------------------- Category Zoning Requirement - -------------------------------------------------------------------------------- Maximum FAR Non Specified Maximum Site Coverage 70% Front Setback 10 feet & 20 feet if abutting a residential district Rear Setback 10 feet & 20 feet if abutting a residential district Side Yard Setbacks 20 feet & 30 feet if abutting a residential district Height Limit 6 stories or 75 feet Parking One space per 200 square feet of building area above grade - -------------------------------------------------------------------------------- Source: Borough of Dunmore Zoning Ordinance Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ ZONING ANALYSIS AND CONCLUSIONS According to the Borough of Dunmore Zoning ordinance, the subject property is a legal and conforming use under current guidelines. In addition, the property appears to conform to bulk and setback requirements as well as to parking requirements. - -------------------------------------------------------------------------------- 25 ================================================================================ TAX ANALYSIS - -------------------------------------------------------------------------------- TAX AND ASSESSMENT DATA The subject property is assessed by Lackawanna County, Pennsylvania, at approximately 22.8% of the assessor's estimated market value. The last general assessment of properties in Lackawanna County was in 1985. A re-valuation has not been rescheduled. School taxes are collected on a fiscal year and town/county taxes are collected on a calendar year. The subject's assessed value and current taxes are summarized below. ================================================================================ CURRENT ASSESSMENT AND TAX INFORMATION (1995) - -------------------------------------------------------------------------------- Assessed Tax Rate Annual Tax ID Value / $1,000 Taxes - -------------------------------------------------------------------------------- Section 14610 Block 030 Lot 015 $200,000 114.0293 $22,805.86 Section 14610 Block 030 Lot 017 $265,550 114.0293 $30,280.48 -------- ---------- TOTALS: $465,550 114.0293 $53,086.34 - -------------------------------------------------------------------------------- Source: Lackawanna County Assessor's Office Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ Based on the current tax rate of $114.0293 per $1,000 assessed value, the estimated taxes for the subject amount to $53,086, or $1.22 per square foot based on the rentable square footage of the center. Tax and Assessment Conclusion We have estimated the taxes for the shopping center at $53,086 for calendar year 1996 in our cash flow. Our discussions with the assessor indicated that the subject's taxes have increased in-line with the area's inflation rate, or approximately 4.0% per annum. We have therefore projected a long-term tax growth for all taxes equal to 4.0% per year. - -------------------------------------------------------------------------------- 26 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- HIGHEST AND BEST USE In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The four criteria that the highest and best use must meet are: o legal permissibility; o physical possibility; o financial feasibility; and o maximum profitability. Highest and best use is applied specifically to the use of a site as vacant. It is recognized that in cases where a site has existing improvements, the concluded highest and best use as if vacant may be different from the highest and best use given the existing improvements (as improved). The existing use will continue, however, until the land value, in its highest and best use, exceeds that total value of the property under its existing use plus the cost of removing or altering the existing structure. Implied in the highest and best use is a recognition of the contribution of a specific use to the community environment or to the community's development goals, in addition to wealth maximization of individual property owners. Also implied is that the conclusion of highest and best use that results from the appraiser's judgment and analytical skill, i.e., that the use determined from the analysis represents an opinion, not a fact to be found. Highest and best use analysis involves assessing the subject both as if vacant and as improved. HIGHEST AND BEST USE AS THOUGH VACANT Legal Permissibility The legally permissible uses were discussed in detail in the site analysis and zoning sections of this report. Based on our review of the zoning restrictions, the site can be developed with several different uses, including retail and commercial office uses. Physical Possibility The physical characteristics of the subject site were discussed in detail in the site analysis. Overall, a wide range of legally permissible uses would be physically possible, including a variety of commercial uses. - -------------------------------------------------------------------------------- 27 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- Financial Feasibility The test of financial feasibility is put only to those uses which are legally permissible and physically possible. If the property is capable of generating a sufficient net income to cover the required rate of return on investment and provide a return to the land, then the usage is financially feasible within a defined price limit. In our determination of financial feasibility we have analyzed current market rental rates for several different property types. The net income produced by the proposed or new improvements must provide a return above the cost to develop the property, including acquisition of the land. Through a cost/income analysis we have determined that development of the subject site is not financially feasible at this time. Based on the analysis of supply and demand factors at the present time, rents achieved for retail and/or office uses would not support the cost of construction. Based on the aforementioned, we have determined that development of the subject site at the present time with a retail center is not currently feasible. Maximum Profitability The final test of highest and best use of the site as though vacant is the use be maximally productive, yielding the highest land value. Based on our feasibility analysis we have determined that land banking the subject site is the maximally productive use at the present time. Conclusion: Highest and Best Use As Vacant The concluded highest and best use of the subject as though vacant is land banking until such time that development of the site with a retail/commercial facility is financially feasible. HIGHEST AND BEST USE AS IMPROVED Legal Permissibility As discussed, the subject site's zoning and legal restrictions permit a variety of land uses. Regardless, the site has been improved with a neighborhood shopping center. Based upon review of the City of Dunmore's Zoning Ordinance, it is our opinion that the improvements are within the established guidelines. - -------------------------------------------------------------------------------- 28 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- Physical Possibility The physical characteristics of the subject improvements were discussed in detail in the improvement analysis section of this report. Overall, the layout and positioning of the improvements is considered functional for shopping center use, and the floor plan is considered to be reasonable in comparison to other shopping centers in the area. The improvements have good retail features, have been adequately maintained, and are physically capable of sustaining their current use over the extended future. Financial Feasibility As with the highest and best use of the site as though vacant, the financial feasibility of the site as improved is market derived. Typically, for retail properties similar to the subject, the test of feasibility is based on the amount of rent that can be generated less operating expenses. If a residual amount exists after paying the various expenses, then the land is being put to a productive use. At present, the subject is 100% occupied. CB Commercial estimates that the appropriate stabilized market occupancy approximates 95%. Based on the historical and current operating status of the subject property, CB Commercial anticipates that the improvements are capable of providing an adequate return on the investment before any debt service requirements. Therefore, we conclude that the current use of the improvements is a financially feasible use of the property as improved. Maximum Profitability Similar to the highest and best use of the site as though vacant, the maximum profitable use of the subject as improved should conform to neighborhood trends and be consistent with existing land uses. Although several uses may generate sufficient revenue to satisfy the required rate of return on investment and provide a return on the land, the single use that produces the highest price or value is typically the highest and best use. Conclusion: Highest and Best Use as Improved Based on the foregoing discussions, CB Commercial concludes that the highest and best use of the property, as improved, is consistent with the existing use as a shopping center. There are no apparent alternative uses of the existing improvements that would produce a higher net income and/or value over time than the current use. The current use is a legally permissible use and appears to represent the highest and best use as improved. Furthermore, CB Commercial does not believe that conversion of the improvements or demolition is warranted or financially feasible. - -------------------------------------------------------------------------------- 29 VALUATION VALUATION ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- APPRAISAL METHODOLOGY The appraisal process is defined as an orderly program by which the problem is planned and the data involved is acquired, classified, analyzed and interpreted into an estimate of value. In this process three basic approaches to value are considered: Cost Approach, Sales Comparison Approach, and Income Capitalization Approach. In appraisal practice, an approach to value is included or omitted based on its applicability to the property type being valued and the quality and quantity of information available. The final step in the appraisal process is reconciliation -- a process by which CB Commercial analyzes alternative conclusions and selects a final value estimate from among two or more indications of value. CB Commercial weighs the relative significance, applicability and defensibility of each approach as it relates to the type of property being appraised. THE COST APPROACH The Cost Approach is based upon the proposition that the informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements which represent the highest and best use of the land or when relatively unique or specialized improvements are located on the site and for which there exist few sales or leases of comparable properties. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. SALES COMPARISON APPROACH The Sales Comparison Approach utilizes sales of comparable properties, adjusted for differences, to indicate a value for the subject property. Valuation is typically accomplished using physical units of comparison such as price per square foot, price per unit, price per floor, etc., or economic units of comparison such as gross rent multiplier. Adjustments are applied to the physical units of comparison derived from the comparable sale. The unit of comparison chosen for the subject is then used to yield a total value. Economic units of comparison are not adjusted, but rather analyzed as to relevant differences with the final estimate derived based on the general comparisons. - -------------------------------------------------------------------------------- 30 ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- The reliability of this approach is dependent upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c) the degree of comparability; (d) the absence of atypical conditions affecting the sales price. Although there have been few sales in the region, the sales that were gathered were utilized to form an opinion of value. However, given the lack of relevant sales data, we have not placed minimal reliance upon this approach and have used it to provide additional support to the Income Approach. INCOME CAPITALIZATION APPROACH The methodology of the Income Capitalization Approach is to determine the income-producing capacity of the property on a stabilized basis by estimating market rent from comparable rentals, making deductions for vacancy and collection losses and building expenses, then capitalizing the net income at a market-derived rate to yield an indication of value. The capitalization rate represents the relationship between net income and value. Related to the direct capitalization method is the discounted cash flow method. In this method of capitalizing future income to a present value, periodic cash flows (which consist of a net income less capital costs, per period) and a reversion (if any) are estimated and discounted to a present value. The discount rate is determined by analyzing current investor yield requirements for similar investments. Since investors are active in the marketplace for properties similar to the subject, the Income Capitalization Approach is particularly applicable to the appraisal problem at hand. There is an adequate quality and quantity of income and expense data available to render a reliable and defensible value conclusion. For income producing properties similar to the subject, the Income Capitalization Approach is considered to be the most reliable. Therefore, this approach has been employed as the primary methodology for this assignment. - -------------------------------------------------------------------------------- 31 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH The Sales Comparison Approach provides an estimate of market value based on analyzing transactions of similar properties in the market area. The method is based on the proposition that an informed purchaser would pay no more for a property than the cost of acquiring an existing one with the same utility. When there is an adequate number of sales of truly similar properties with sufficient information for comparison, a range of values for the subject property can be developed. There are various units of comparison available in the evaluation of sales data in this approach. The sale price per square foot is the most commonly used in this approach. The effective gross income multiplier (EGIM) is rarely used by market participants because of the inconsistencies in estimating effective or gross income, vacancy, and expense differences. We conducted a thorough sales search for comparable shopping centers in the subject's market area. Through our sales search, we were able to identify a limited number of sales with similar characteristics to the subject. The following table summarizes what are considered to be the most recent and proximate comparable sales. Detailed write-ups of each comparable are included in the addendum.
======================================================================================================================= SUMMARY OF COMPARABLE RETAIL SALES - ----------------------------------------------------------------------------------------------------------------------- Gross No. Property Name/ Location Sale Leasable NOI OAR Sale Price Date Area (SF) Sale Price Per S.F. Per S.F. - ----------------------------------------------------------------------------------------------------------------------- 1 15th & Allen St. Center 1/96 46,503 $4,242,000 $ 9.94 10.89% $ 91.22 1401-1451 Allen Street Allentown Lehigh County, PA 2 Stefko Shopping Center 1/96 134,446 $5,618,000 $ 4.59 10.99% $ 41.79 Stefko Boulevard Bethlehem Northampton County, PA 3 MacArthur Plaza 10/95 29,600 $3,831,667 $ 13.92 10.76% $ 129.45 2419 MacArthur Road Whitehall Township Lehigh County, PA 4 Columbia Mall 7/95 351,364 $27,650,000 $ 8.42 10.70% $ 78.65 N/E/C Route 42 @ I-80 Bloomsburg Columbia County, PA - ----------------------------------------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. =======================================================================================================================
- -------------------------------------------------------------------------------- 32 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- COMPARABLE SALES MAP [GRAPHIC OMITTED] Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF IMPROVED SALES The sales reflect unit prices ranging from a low of about $41.79 to a high of approximately $129.45/SF with the significant difference reflecting the economics of the various centers. The sales all had high levels of occupancy and were in generally good condition. The difference in unit prices then were more directly tied to net operating income and investor yield rates. The comparable sales presented offer a simplistic view of the market. Since only general details of existing income and expenses were available, specific analysis is nearly impossible. Accordingly, this method acts as a general gauge of the market and therefore will be utilized as support to our findings in the Income Approach. Analysis The following discussion analyzes the aforementioned comparables relative to the subject property. Sale 1 Sale number one, located at the intersection of 15th Street and Allen Street in Allentown, is a 46,503 square foot shopping center which sold in January of 1996 for $4,242,000 or $91.22/SF. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed circa 1950 and was in very good overall condition at the time of sale since it was recently renovated. Access, exposure, visibility and general locational attributes of the center are superior to the subject, however, the center is far smaller in size to the subject. Market conditions at the time of sale were similar to current market conditions. This sale's NOI is reportedly $462,049 or $9.94/SF indicating an overall rate of 10.89%. The economics of this property, at least in terms of NOI per square foot, is superior to the subject. Sale 2 Sale number two, located in the City of Bethlehem, consists of a single story community center which contains an aggregate 134,446 square feet. This center, known as the Stefko Shopping Center, sold in January of 1995 for $5,618,000 or $41.79/SF of gross leasable area (GLA). Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed in 1965 and appeared to be in average condition. The property's location with regard to access and visibility are considered superior to the subject. Furthermore, the center is significantly smaller than the subject. Market conditions at the time of sale were similar to current market conditions. The NOI was - -------------------------------------------------------------------------------- 34 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- reportedly $617,577 ($4.59/SF) indicating an overall rate of 10.99%. This property operates at a level of net income that is similar to the subject. Sale 3 Sale number three, MacArthur Plaza, is located at 2409 MacArthur Road in Whitehall Township in Lehigh County, Pennsylvania. It is a 29,600 square foot shopping center which sold in October of 1995 for $3,831,667 or $129.45/SF. Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed circa 1988 and was in very good overall condition at the time of sale. Access, exposure, visibility and general locational attributes of the center are superior to the subject, however, the center is far smaller in size to the subject. Market conditions at the time of sale were similar to current market conditions. This sale's NOI is reportedly $412,122 or $13.92/SF indicating an overall rate of 10.76%. The economics of this property in terms of NOI per square foot is superior to the subject. Sale 4 Sale number four is located at the northeast quadrant of Route 42 and Interstate 80 in Bloomsburg, Columbia County, Pennsylvania and consists of a single story community center which contains an aggregate 351,364 square feet. This center, known as the Columbia Mall, sold in July of 1995 for $27,650,000 or $78.69/SF of gross leasable area (GLA). Property rights conveyed were the leased fee interest and the transaction was reportedly cash equivalent and arms-length. The shopping center was constructed in 1988 and appeared to be in good overall condition. The property's location with regard to access and visibility are considered superior to the subject. Furthermore, the center is significantly larger than the subject. Market conditions at the time of sale were similar to current market conditions. The NOI was reportedly $2,958,500 ($8.42/SF) indicating an overall rate of 10.7%. This property operates at a level of net income that is superior to the subject. Net Operating Income Analysis The net operating income level for the comparables ranged from $4.59 to $13.92 per square foot, per year. The subject has a projected NOI for the coming year of $181,496 or $4.00 per square foot reflecting full and stable occupancy. Given the correlation between price paid per square foot and NOI per square foot it would seem reasonable to conclude that the subject would sell below the range established by the comparable properties. - -------------------------------------------------------------------------------- 35 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- The following chart depicts the calculations involved in developing adjustment factors to be applied to the respective price per square foot units of comparison developed from the comparables employed. ================================================================================ NET OPERATING INCOME (NOI) ANALYSIS - -------------------------------------------------------------------------------- Subject's NOI/SF Sale ---------------- Sale Price Adjustment Adjusted $/SF No. Sale's NOI/SF Multiplier $/SF for Subject - -------------------------------------------------------------------------------- 1 $4.00 0.40 $91.22 -$54.51 $36.71 ----- $9.94 2 $4.00 0.87 $41.79 -$5.37 $36.42 ----- $4.59 3 $4.00 0.29 $129.45 -$91.91 $37.54 ----- $13.92 4 $4.00 0.48 $78.65 -$40.90 $37.75 ----- $8.42 ================================================================================ For the most part, there is a direct correlation between the NOI/SF and sale price per square foot. As the net income level increases, so does the price paid per square foot. After adjusting the four sales, they support a range of value for the subject between approximately $36.00/SF to $38.00/SF. Based on our analysis, the subject's value would be approximately $38.00/SF. The subject has a total building area of 45,380 square feet. The value estimate via the Sales Comparison Approach is calculated as follows: ========================================================== Net Rentable Area of Subject 45,380 square feet Value per square foot $38.00 per square foot Indicated Value: $1,724,440 ---------- ROUNDED: $1,700,000 ========================================================== Overall, very little emphasis has been placed on this approach because of the quality of the data. It is used primarily as a check of the value derived via the Income Approach. We estimate the as is market value of the leased fee interest in the subject property, via the sales comparison approach, as of May 15, 1996, is: --- ONE MILLION SEVEN HUNDRED THOUSAND DOLLARS --- ($1,700,000) - -------------------------------------------------------------------------------- 36 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH The Income Capitalization Approach reflects the subject's income-producing capabilities. This approach is based on the assumption that value is created by the expectation of benefits to be derived in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over period of time. The two common valuation techniques associated with the Income Capitalization Approach are direct capitalization and the discounted cash flow (DCF) analysis. DIRECT CAPITALIZATION Direct capitalization is the method used to convert a single year's estimate of income into a value indication. In direct capitalization, a precise allocation between return on and return of capital is not made because investor assumptions or forecasts concerning the holding period, pattern of income, or changes in value of the original investment are not simulated in the method. Direct capitalization is most appropriate when analyzing a stable income stream and in estimating the reversion at the end of a holding period. Using this method, the following sets forth the process: 1. Estimate the Potential Gross Income (PGI) from all sources that a competent owner should be able to generate from a property based on existing and/or market rents. 2. Deduct an estimate of Vacancy and Collection Loss (VCL) to arrive at an Effective Gross Income (EGI) estimate. 3. Deduct operating expenses from the estimate of EGI. The result is an estimate of the stabilized Net Operating Income (NOI). 4. Estimate an Overall capitalization rate (R(o), or OAR). 5. Divide the NOI by R(o), resulting in a value estimate at stabilized occupancy. 6. Adjust the stabilized value to account for "As Is" condition, if applicable. DISCOUNTED CASH FLOW ANALYSIS The discounted cash flow (DCF) analysis is a detailed analysis used when the future income is expected to be variant, usually as a result of numerous lease obligations and/or anticipated changes in income and expenses. It is also particularly relevant when institutional buyers are the most likely purchasers of the subject because institutional buyers often place great weight on this analysis. The DCF analysis specifies the quantity, variability, timing, and duration of NOIs and cash flows. Selecting the proper yield rate (discount rate) is essential. CB Commercial must consider the target yield sought by investors as well as yields derived from comparable sales and/or market information. The methodology is: 1. Estimate the before-tax cash flows for each period of a projected holding period net of any capital expenditures such as leasing expenses and tenant improvements. - -------------------------------------------------------------------------------- 37 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- 2. Estimate a discount rate and a terminal overall capitalization rate. 3. Estimate a selling price, known as the reversion, for the end of the projected holding period. 4. The cash flows and the reversion are then discounted to a present value estimate. APPROPRIATE CAPITALIZATION METHOD A number of factors were considered in evaluating the appropriateness of using the direct capitalization method and/or the DCF technique including the occupancy status, lease structures, above/below market rents and typical buyer behavior. As a result of considering the foregoing factors, both the DCF technique and the income capitalization technique are employed in this appraisal. ESTIMATE OF MARKET RENT Rent analysis involves both a study of market (comparable) rentals and the subject's existing rents (if any). Market rent is the rent that a property would most probably command in the open market; indicated by the current rents paid and asked for comparable space. SUMMARY OF COMPARABLE RENTALS CB Commercial surveyed competitive properties and lease transactions for comparison to the subject. The selected comparable rentals are summarized in the following chart with a map and discussions of each comparable provided on the following pages. - -------------------------------------------------------------------------------- 38 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
=========================================================================================================================== SUMMARY OF COMPARABLE SATELLITE SPACE RENTALS - --------------------------------------------------------------------------------------------------------------------------- Center Name & Term Start No. Location Tenant (Yrs) Date Size Rent/SF Escalation Comments - --------------------------------------------------------------------------------------------------------------------------- 1 Kingston Plaza Everything 1 yr 9/95 6,500 $5.50 $950 Step No Option Third Avenue $0.99 Store 3 mos in Year 2 % Rent = 3% over $1,191,660 East of Pierce Street, Kingston, PA - --------------------------------------------------------------------------------------------------------------------------- 2 Mark Plaza Spectrum Rents 5 yrs 10/95 3,600 $8.00 Flat for 1 5-yr Option @ $9.00/SF N/S Route 11, term Edwardsville, PA Keens Floral 5 yrs 8/95 7,000 $8.00 Annual 1 5-yr Option @ $8.83/SF Factory step-up % Rent = 3% over Natural Breakpoint Mattress Man 5 yrs 7/95 3,600 $11.50 Flat for No Option (Pad Site) term % Rent = 4% over Natural Breakpoint - --------------------------------------------------------------------------------------------------------------------------- 3 Birney Plaza Everything 3 yrs 09/95 4,000 $7.00 Flat for 1 3 yr Option @ $7.50/SF N/S Route 11, $0.99 Store term % Rent = 3% over $933,000 Moosic, PA - --------------------------------------------------------------------------------------------------------------------------- 4 Triangle Plaza Electronic 5 yrs 06/95 2,400 $11.50 Annual No Option Route 115 Systems Percentage No % Rent Wilkes-Barre, PA increase TCBY 5 yrs 03/95 2,200 $11.00 Annual 1 5 yr Option Percentage No % Rent increase Party City 10 yrs 05/94 9,910 $11.00 $1.65/SF No Option Step-up No % Rent - --------------------------------------------------------------------------------------------------------------------------- 5 Gateway Plaza Holiday Hair 3 yrs 06/94 950 $15.48 Annual No Option N/S Route 11, Fashions Percentage No % Rent Edwardsville, PA (Renewal) increase McKenzie 3 yrs 06/94 3,080 $ 8.50 Annual No Option Percentage No % Rent increase =========================================================================================================================== SUMMARY OF COMPARABLE ANCHOR SPACE RENTALS =========================================================================================================================== 6 Pottstown Center Wal-Mart 20 yrs 07/95 121,267 $6.99 Flat for 6, 5-yr Options Montgomery Cty. term No % Rent Pottstown, PA 7 Route 6 Mall K-Mart 25 yrs 03/95 119,229 $5.77 Flat for 10, 5-yr Options N/S Route 6, term % Rent = 1% over $20,000,000 Wayne County Honesdale, PA 8 Bradford Towne K-Mart 25 yrs 07/94 94,481 $5.00 Flat for 10, 5-yr Options Centre, term % Rent = 1% over $16,875,000 Bradford County Wysox, PA 9 Builder's Square Builder's 25 yrs 03/94 106,400 $10.05 Flat for 10, 5-yr Options Center Square term No % Rent Cetronia Road Lehigh County Whitehall, PA - --------------------------------------------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ===========================================================================================================================
- -------------------------------------------------------------------------------- 39 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- COMPARABLE RENTALS MAP [GRAPHIC OMITTED] Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- 40 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF COMPARABLE RENTALS We have obtained comparable leases from shopping centers situated within the subject's regional market area which are summarized above. In terms of satellite space, comparables #1 through #5 indicate that the leased spaces range in size from 950 to 9,910 square feet which adequately represents the subject's square footage range. All the leases cited were signed between 1994 and 1995 and represent the most recent leasing activity in the competitive marketplace. The leases include a variety of uses and represent a similar tenant mix to the subject center. The above leases are considered to be generally similar to the subject in terms of condition, quality and location. We have examined the average effective rental rates of these comparables and determined that the effective rent is similar to the face rent, since their was no tenant improvements or free and escalation's were similar. These comparable centers are located throughout the Scranton--Wilkes-Barre metropolitan region in competitive areas to the subject property. Furthermore, they are all similar in age to the subject and considered to be of a similar functional design. All of the retail leases were written on a triple net basis, whereby the tenants assume their proportionate share of operating expenses, real estate taxes, and insurance. The higher rates typically reflect smaller satellite spaces, while lower rental rates are typically negotiated for anchor sized spaces. We have also considered asking rental rates in our analysis, however, they were deemed to be less reliable than the leases presented. As a result, we have not included asking rentals. The satellite space face rental rates ranged from $5.50/SF to $15.48/SF with a central tendency of $9.75/SF. However, the majority fell between $8.00/SF and $11.50/SF. The rents at the upper end of the range, or those in the $11.00/SF range best reflect the subject property's achievable rents. As a result, we have concluded to a rental rate within for the subject's satellite space of $11.00/SF. Based upon our analysis, we feel that a "net" rental rate of $11.00/SF is adequately supported. The anchor leases, or comparables #6 through #9, ranged from $5.00/SF to $10.05/SF with an average lease rate of $6.95/SF. The anchor rents reflect a close range for a variety of locations with the exception of comparable #9. However, this lease to builder's Square has no percentage rent clause and, as a result, agreed to pay a higher basic rent. As a result, we have concluded to a rental rate within for the subject's anchor space of $6.00/SF. Based upon our analysis, we feel that a "net" rental rate of $6.00/SF is adequately supported. - -------------------------------------------------------------------------------- 41 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- In addition to surveying comparable centers, we have also analyzed the most recent lease transactions at the subject center. Since there have been several recent leases at the subject property, these leases have been given substantial weight in our analysis of the subject's market rental rates. These leases are detailed below. ANALYSIS OF SUBJECT LEASES The following table summarizes the subject property's recent lease history.
================================================================================================================== SUMMARY OF RECENT SUBJECT LEASES - ------------------------------------------------------------------------------------------------------------------ New / Term Contract TI's Free Tenant Renew (Years) Date Size Rent Escalation / SF Rent - ------------------------------------------------------------------------------------------------------------------ Malcom's New 5 4/95 1,900 $ 11.50 $950 Step in None None Year 2 Great Wall Chinese Rest. New 10 1/95 1,900 $ 11.35 3%/Yr None None Little Caesar's Pizza New 5 4/94 1,900 $ 9.25 $1,425 Step None None in Year 2 - ------------------------------------------------------------------------------------------------------------------ Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ==================================================================================================================
The typical lease at the subject property is triple net whereby the tenant is responsible for reimbursing the landlord for such expenses as real estate taxes, insurance, and common area maintenance (CAM). Recent retail leases at the subject range from $9.25/SF to $11.50/SF. The terms of the recent leases have typically been between five and 10 years which is similar to quoted market terms. Based on our survey of local leasing agents and owners, five year terms are most common with satellite tenants such as those found in the subject center. Therefore, for the purpose of our analysis, we have utilized a lease term of five years for all tenant suites for speculative renewals. In our interviews with competing leasing agents and owners, we also inquired as to the market norm for rent escalations. Most of the agents agreed that one to three year leases are typically flat, with some sort of escalation or bump in five to 10 year leases. Recent leases at the subject either have annual percentage increases (generally 3%) or a periodic step-up. Regardless of the method of escalations, most of the subject and comparable leases have escalations which are intended to be similar to anticipated increases in the CPI. We have utilized an annual rental escalation in all speculative leases of 3.0%. According to the subject leasing agent, TI's are typically not given, with the owner generally providing a " vanilla box" for new tenants and nothing for renewals. Retail space is typically taken "as-is" with the tenant fitting out their space to their own specifications. We project that no tenant alteration allowance would be provided for new or renewal leases. - -------------------------------------------------------------------------------- 42 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- All of the leasing agents surveyed reported minimal if any free rent. A review of the subject lease abstracts indicated that no free rent was typically offered to tenants that leased space in the subject center over the past three to four years. Therefore, based upon the most recent leases written at the subject center as well as conversations with local leasing agents, we have projected that no free rent will be offered to prospective tenants. CONCLUSIONS: MARKET RENT ESTIMATE FOR THE SUBJECT PROPERTY Based on the previous analysis, the current market lease parameters for the subject property are estimated as follows: ================================================================================ CONCLUDED MARKET LEASE TERMS (PER SQUARE FOOT / YEAR) - -------------------------------------------------------------------------------- Category Satellite Space Anchor Space - -------------------------------------------------------------------------------- Market Rent $11.00 (NNN) $6.00 (NNN) Lease Term 5 Years 25 Years Annual Escalation 3.0% 0.0% Tenant Improvements $0.00 $0.00 Free Rent (Months) 0 Months 0 Months - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ CONTRACT RENT As discussed, the subject's leasable area is divided into five suites within one building. Currently, the subject is 100% occupied. Through our research of the subject property, which included a complete review of lease abstracts, rent rolls (both current and historical), and detailed discussions with the on-site property manager, the following rent roll summary was utilized to detail currently leased suites and general information employed for this approach. Additionally, within the Addenda are copies of the tenant lease assumptions, generated by Pro-ject+ Plus, a computerized lease-by-lease analysis program. Information submitted to us and contained in the Addenda provide additional support to the data and assumptions inputted for this method and is assumed to be correct and reliable. CB Commercial reserves the right to amend our input assumptions if any documentation is subsequently available which contradicts that assumed for this method. Located on the following page is the subject rent roll summary. - -------------------------------------------------------------------------------- 43 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
====================================================================================================== DUNMORE PLAZA - 1400 MONROE AVENUE RENT ROLL - ------------------------------------------------------------------------------------------------------ Square Rent / Annual Suite Tenant Feet Begin End SF Rent - ------------------------------------------------------------------------------------------------------ 1 Price Chopper * 26,475 1/67 11/00 $00.16 $ 4,322 2 Fay's Drugs 13,205 12/84 11/04 $ 6.75 $89,134 3 Little Caesars Pizza 1,900 1/94 12/96 $ 9.25 $17,575 4 Malcom's 1,900 4/95 3/00 $11.50 $21,850 5 Great Wall Chinese Restaurant 1,900 1/95 12/04 $11.35 $21,565 Total Leased Square Feet 45,380 Average Rent: $ 3.40 $154,446 Vacant Space 0 Occupancy-Overall 100% - ------------------------------------------------------------------------------------------------------ * Price Chopper pays rent to Benjamin Brothers Pension Trust. Benjamin Brothers Pension Trust pays ground rent to Mark Centers Trust. - ------------------------------------------------------------------------------------------------------ Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ======================================================================================================
ANALYSIS OF TENANCY The subject is comprised of regional and local tenants including Price Chopper, and Fay's Drug Store. Additionally, Little Caesar's Pizza is a national tenant. Overall, the quality of the tenancy is considered to be good for the area. Current rental rates range from $6.75/SF to $11.50/SF. SPECIAL LEASE PROVISIONS AND ASSUMPTIONS The following discussion summarizes any lease provisions and assumptions of special note. Pending Leases There are no pending leases. Renewal Options Options to renew at below or above market rent may have an impact on the valuation analysis. For example, if below market renewals are exercised, they may result in a downward impact on value. However, to the extent that re-tenanting costs are saved (rent loss during downtime, tenant improvements, leasing commissions, etc.), there may be an advantage in having the tenant renew at some rate below market rent in order to avoid these costs. The majority of recent leases at the subject have renewal options. Where applicable, if a tenants' option rent is below market, we have assumed that the tenant would exercise its renewal option. Conversely, if a tenants' option rent is above market, we have assumed that the tenant would not exercise its renewal option and terminate the lease. - -------------------------------------------------------------------------------- 44 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- EXPENSE REIMBURSEMENTS Current and future hypothetical retail leases which will encumber the subject property will be based upon triple net lease structures and are consistent with recent leases written at the subject property and the market in general. The tenants will be responsible for reimbursing the landlord for their pro rata share of operating expenses including their pro rata share of CAM, real estate taxes and insurance. The pro rata share calculations for future tenants are calculated by dividing the tenant's occupied rentable area by the gross leasable area of the center. The following is a breakdown of the subject's historical recoveries and CB Commercial's projections for the proforma. It should be noted that the subject's operating statements are based on a fiscal year basis, beginning June 1 and continuing through May 31. Expense Reimbursements Expense reimbursements for the subject property consist of real estate taxes, insurance, and common area maintenance. Common area maintenance expenses consist utilities, management fees, general and administrative, cleaning and repairs and maintenance expenses. The subject's historical expense reimbursements are as follows: ============================================ EXPENSE REIMBURSEMENT -------------------------------------------- Year Total $ Amount -------------------------------------------- 1993 $144,616 1994 $145,674 1995 $136,023 1996 Budget $129,048 Year 1 Pro Forma $150,905 -------------------------------------------- Source: Mark Centers Trust ============================================ The first year of our DCF model indicates reimbursements of $150,905. Historical expense reimbursements have fallen in recent years due in part to a drop in expenses as management has attempted to cut costs in recent years. The budgeted amount appears to be unreasonably low based upon projected expenses and reimbursement clauses for existing tenants. - -------------------------------------------------------------------------------- 45 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- OTHER INCOME This income category can be derived from several different sources including tenant service income, merchants association fees, late fee income, short-term storage income, professional services provided for the tenants by the landlord/management, ground rent as well as other miscellaneous sources. The only other source of additional income at the subject center is collected from a ground lease agreement which is abstracted as follows: ================================================================================ DUNMORE PLAZA GROUND LEASE ABSTRACT ================================================================================ Landlord: Mark Centers Trust Tenant: Benjamin Brothers Pension Trust Lease Commencement: January 1, 1967 Lease Term: 33 Years Annual Base Rent Payment: $ 4,322 (Flat) ================================================================================ Benjamin Brothers Pension Trust pays ground rent to Mark Centers Trust for the land under the Price Chopper building. Price Chopper, in turn, pays and undisclosed amount of rent to Benjamin Brothers Pension Trust. At the termination of the ground lease, the building reverts back to Mark Centers Trust. Additionally, Price Chopper has three 5-year options for their space at a fixed minimum base rent of $78,895.56 per annum, or $2.98/SF of gross leasable area. All other terms of Price Chopper's lease remain the same. PERCENTAGE RENT INCOME In addition to the basic rental charges, the tenants are sometimes responsible for paying the landlord additional rent equal to a specified percentage of the tenant's gross sales made in, upon, or from the premises, over a breakpoint factor or according to a specific schedule. Three of the subject tenants have percentage rent clauses contained within their leases.
=================================================================================================================== PERCENTAGE RENT CLAUSES - ------------------------------------------------------------------------------------------------------------------- CBC's FY97 Tenant Breakpoint Percent Year Gross Sales % Rent Paid Projection - ------------------------------------------------------------------------------------------------------------------- Price Chopper * $6,311,040 1.25% 1994 $13,636,874 $30,115 $12,800,000 1995 $12,844,271 $38,804 $4,450,000 2.00% Fay's Drugs $5,000,000 1.50% 1994 $ 3,871,671 $ 0 $2,800,000 $6,500,000 1.00% 1995 $ 2,855,679 $ 0 Malcom's $364,166 6.00% 1994 N/A $ 3,659 $390,000 1995 $390,583 $ 2,051 - ------------------------------------------------------------------------------------------------------------------- * Price Chopper's percentage rent is offset by CAM and real estate tax recaptures. - ------------------------------------------------------------------------------------------------------------------- Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ===================================================================================================================
- -------------------------------------------------------------------------------- 46 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Given the aforementioned sales histories, we have projected the gross sales for each tenant as illustrated in the right column of the table. We have also projected that the gross sales figures will grow by 2.0% per annum over the course of the cash flow projection. POTENTIAL GROSS INCOME The potential gross income for the subject property is summarized as follows. =========================================================================== STABILIZED POTENTIAL GROSS INCOME (FY 1997) - --------------------------------------------------------------------------- Totals - --------------------------------------------------------------------------- Total Minimum Rent $ 154,881 Expense Reimbursement - Common Area Maintenance Recovery $ 45,563 - Real Estate Tax Recovery $ 53,749 - Insurance Recovery $ 942 - Percentage Rent $ 50,651 --------- Potential Gross Income $ 305,786 - --------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. =========================================================================== VACANCY AND COLLECTION LOSS This is an allowance for reductions in potential income attributable to vacancies, tenant turnover, and non-payment of effective rent. In the direct capitalization process, a market-derived, stabilized vacancy and collection loss estimate is subtracted from potential gross income in order to arrive at effective gross income. The subject property is currently 100% leased. Furthermore, the subject's competitive market exhibits a vacancy level of approximately 4.0%. Due to the long-term leases at the subject property, the average vacancy rate over the projected holding period, which is attributed to downtime between leases, approximates a minimal 1.0%. In addition to vacancy, we estimated a blended credit loss factor of 2.0% which takes into account both national and local tenants at the subject center. Therefore, the combined long-term vacancy and credit loss factor for the subject property amounts to approximately 3.0%. In the first year of our discounted cash flow analysis, the combined credit loss amounts to $3,889. - -------------------------------------------------------------------------------- 47 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- EFFECTIVE GROSS INCOME Given our estimate of potential gross income, other income, and a vacancy and collection loss, the estimated effective gross income is derived as follows: ======================================================== EFFECTIVE GROSS INCOME (FY 1997) -------------------------------------------------------- Potential Gross Income: $ 305,786 Less: Collection Loss $ 3,889 --------- Effective Gross Income: $ 301,897 ======================================================== Our estimate of effective gross income used in direct capitalization is $301,897. This figure is the same as the EGI in the first year of our cash flow in the discounted cash flow method. OPERATING EXPENSE ANALYSIS In projecting the revenues and expenses for the subject property, we have analyzed the historical figures for fiscal years 1993 through 1995 as well as management's forecast of revenues and expenses for fiscal year 1996. In addition, we have utilized the Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers publication to assist in our analysis. We have considered the category " Regions 1, 2 & 3 (East): Open Shopping Centers" as the most representative of the subject property. A summary of the average expenses taken from this publication increased at an inflationary rate to reflect our fiscal year 1997 analysis are presented as follows: ======================================================= COMPARABLE EXPENSE ANALYSIS - ------------------------------------------------------- Expense Category P.S.F. - ------------------------------------------------------- General & Administrative $ 0.08 Repairs & Maintenance $ 0.36 Services $ 0.46 Utilities $ 0.18 ------ Total CAM $ 1.08 Real Estate Taxes $ 1.26 Insurance $ 0.15 Management Fees $ 0.41 Total Operating Expenses $ 2.90 - ------------------------------------------------------- Source: Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers ======================================================= Our estimate of the subject's stabilized expenses are detailed as follows. - -------------------------------------------------------------------------------- 48 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Common Area Maintenance The subject's historical and projected common area maintenance (CAM) expenses are as follows: ========================================================== COMMON AREA MAINTENANCE EXPENSE ---------------------------------------------------------- Year Total $ Amount ---------------------------------------------------------- 1993 $47,635 1994 $47,928 1995 $40,040 1996 Budget $47,315 CB 1996 Projection $45,000 ---------------------------------------------------------- Source: Mark Centers Trust ========================================================== Common area maintenance (CAM) charges generally includes various items such as general and administrative expenses, repair and maintenance expenses, utilities, and general services such as cleaning, landscaping, security, and common area insurance expenses. We project the total CAM expense in 1996, before management fees, at $45,000 or $0.99/SF. This is slightly lower than the average CAM expenses for the properties surveyed by IREM of $1.23/SF for open shopping centers in the east. However, the subject's historical expenses have ranged from $0.88/SF to $1.06/SF. Given the subject's historical CAM expense structure coupled with its effective age, occupancy and the services provided, the subject's projected CAM figure is considered reasonable. Property Taxes Historical and budgeted property tax expenses are as follows: ======================================================== PROPERTY TAX EXPENSE -------------------------------------------------------- Year Total $ Amount -------------------------------------------------------- 1993 $ 51,972 1994 $ 49,188 1995 $ 49,287 1996 Budget $ 49,356 Year 1 Pro Forma $ 53,086 -------------------------------------------------------- Source: Mark Centers Trust ======================================================== As discussed fully within the tax and assessment data section of the report, estimated taxes for fiscal year 1997 are projected to be $53,086. It appears that the 1996 budgeted taxes have not accounted for the 1996-1997 tax rate. - -------------------------------------------------------------------------------- 49 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Insurance Historical and budgeted insurance expenses are as follows: ======================================================== INSURANCE EXPENSE - -------------------------------------------------------- Year Total $ Amount - -------------------------------------------------------- 1993 $ 8,735 1994 $ 4,743 1995 $ 5,999 1996 Budget $ 7,416 CB 1996 Projection $ 7,400 - -------------------------------------------------------- Source: Mark Centers Trust ======================================================== Insurance at the subject property includes both liability insurance and fire insurance. This expense has decreased from 1993 to 1995 to a level of $0.13/SF. We have placed primary emphasis on the subject's historical and 1996 budgeted insurance expenses and have estimated the insurance expense at $7,400, or $0.16/SF. Professional Management Fee In order to maintain the control of the property and subsequently ensure the stream of income that it generates, it is necessary to employ either internal or outside management. This expense is non-recoverable. In the case of the subject property, the property is managed internally and no management expense has been reflected in historical statements. Typical professional management fees in the local market range from 1.0% to 5.0% of effective gross income. Based upon the size and nature of the subject improvements, we have applied a management expense of 3.0% of effective gross income. Because management is calculated based on a percentage of effective gross income, this expense will vary each year because of fluctuations in the income stream. In the first year of our analysis, this expense equates to $9,057 or $0.20/SF. Replacement Reserves This expense typically represents a reserve for future replacement of long-lived items. The amount of reserve and whether it is included or not in the direct capitalization and DCF analyses depends on the actions reflected by buyers and sellers in the local market. Based on the available comparable data and discussions with brokers and investors, replacement reserves generally range from $0.10/SF to $0.20/SF for retail properties of similar quality and condition as the subject. Given the subject's average condition, we have estimated this expense at $0.10/SF or $4,538 in 1996 increasing at our projected annual expense growth rate - -------------------------------------------------------------------------------- 50 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- of 3.0%. Based on discussions with local market participants, replacement reserves are typically subtracted in calculating NOI when determining the cash flow in the DCF analysis. Total Concluded Operating Expenses The concluded stabilized operating expenses for the subject total an estimated $119,081, or $2.62 per rentable square foot. This total expense estimate is for the first year of our proforma and incorporates fiscal year conversions not reflected in the previous 1996 calendar year estimates. The expense is slightly lower than the average indicated by IREM ($2.90/SF) but judged reasonable given the historical and budgeted operations of the subject. CAPITALIZATION RATE There are several methods for deriving an overall capitalization rate for direct capitalization. A common method for establishing an overall capitalization rate for properties similar to the subject is to review the criteria of major investors in the marketplace. This may serve as a check against other techniques or may be a primary source when ample data exists. While derivation of capitalization rates from comparable sales is preferable, we were unable to obtain adequate income and expense data to employ this method from the sales used within the Sales Comparison Approach. Therefore, the investor survey method is used as the primary approach in deriving our overall capitalization rate. The subject property is a retail shopping center that would be attractive to either a local or a national investor. The category in the published investor survey most comparable to the subject is class B neighborhood shopping center. The investors typically interviewed for the survey are regional or national investors associated with pension funds, REIT's, insurance companies, financial institutions, etc. The information below is taken from CB Commercial most recent National Investor Survey (first quarter 1996).
==================================================================================================== SUMMARY OF INVESTOR SURVEY OVERALL CAPITALIZATION RATES NEIGHBORHOOD SHOPPING CENTERS - CLASS B - ---------------------------------------------------------------------------------------------------- Investor Survey R(o) Range Average Date of Survey - ---------------------------------------------------------------------------------------------------- CB Commercial National Investor Survey 9.0% - 11.5% 10.3% First Quarter, 1996 - ---------------------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ====================================================================================================
The previous survey indicates an overall range of 9.0% to 11.5% for neighborhood shopping centers with an average of approximately 10.3%. The capitalization rate reflects the quality and duration of the income stream as well as the physical characteristics of the property. The - -------------------------------------------------------------------------------- 51 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- tenant mix at the subject center is considered to be good for the area with mostly regional tenants. The largest tenant at the subject, Price Chopper, is a regional tenant. The Price Chopper lease does not expire until the year 2000 and the second largest tenant, Fay's Drug Store, has a lease which extends to the year 2004. Lease expiration is fairly even throughout the holding period which reduces risk. The center is currently 100% occupied. Overall, the quality, quantity and duration of the cash flow is considered to be good. With respect to physical characteristics, the subject is a functional neighborhood center of average quality and in average overall condition. In addition, the subject is situated in an average retail location with relatively low volumes of traffic. In addition, we have included market-extracted overall rates as presented below. =============================================================================== MARKET-EXTRACTED OVERALL CAPITALIZATION RATES - -------------------------------------------------------------------------------- No Property Name/ Location OAR - -------------------------------------------------------------------------------- 1 15th & Allen St. Center 1401-1451 Allen Street, Allentown 10.89% Lehigh County, PA 2 Stefko Shopping Center Stefko Boulevard, Bethlehem 10.99% Northampton County, PA 3 MacArthur Plaza 2419 MacArthur Road, Whitehall Township 10.76% Lehigh County, PA 4 Columbia Mall N/E/C Route 42 @ Interstate-80, Bloomsburg 10.70% Columbia County, PA - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. =============================================================================== The market extracted overall rates indicate a range from a low of 10.70% to a high of 10.99% with a central tendency of 10.84%. These overall rates coincide with the rates indicated by CB Commercial's National Investor Survey. Based upon this survey and the factors discussed above, an 10.5% overall capitalization rate (towards the middle of the range) appears to be appropriate for the subject property. Direct Capitalization Summary A summary of the direct capitalization method as applied to the subject property is illustrated in the following table: - -------------------------------------------------------------------------------- 52 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ 1400 MONROE AVENUE DIRECT CAPITALIZATION SUMMARY - -------------------------------------------------------------------------------- Category Total P.S.F. - -------------------------------------------------------------------------------- Income Total Market Rent $ 154,881 $ 3.41 Recovery Income 100,254 2.21 ----------- -------- Gross Rental Income $ 255,135 $ 5.62 Less: Vacancy and Credit Loss (3,889) (0.09) Plus: Other Income 0 0.00 Plus: Percentage Rents $ 50,651 1.12 ----------- -------- Effective Gross Income $ 301,897 $ 6.65 Expenses Common Area Maintenance (CAM) (45,563) (1.00) Real Estate Taxes (53,750) (1.18) Insurance ( 7,493) (0.17) Management Fees ( 9,057) (0.20) Replacement Reserves (4,538) (0.10) ----------- -------- Total Expenses $ (120,401) $ (2.65) OER 40% Net Operating Income $ 181,496 $ 4.00 CAPITALIZATION OF NOI: @10.5% $ 1,728,533 $ 38.09 Reconciled Value $ 1,700,000 $ 37.46 - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The concluded market value of the subject property, based on the direct capitalization method, is $1,700,000. - -------------------------------------------------------------------------------- 53 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW ANALYSIS Our DCF assumptions are summarized as follows. Most of the following assumptions have been discussed and supported within prior sections of the report. A discussion of the discount rate, terminal capitalization rate and holding period follow the assumptions summarized below. ================================================================================ SUMMARY OF DISCOUNTED CASH FLOW ASSUMPTIONS 1400 MONROE AVENUE - -------------------------------------------------------------------------------- General Assumptions Start Date June 1, 1996 Terms of Analysis 10 years Basis (Calendar / Fiscal) Fiscal Software Project + Plus Growth Rate Assumptions Expenses 3.0% Market Rent 3.0% Real Estate Taxes 3.0% Inflation (CPI) 3.0% Market Rent Assumptions Anchor $ 6.00 (NNN) Satellite $11.00 (NNN) Leasing Assumptions Lease Term 5 Years Renewal Probability 50% Weighted Average of: Tenant Improvements $0.00 Months of Free Rent 0 Leasing Commissions (Cashed-Out) 4.5% Down Time Between Leases 6 Months Tenant Assumptions Existing tenant leases were entered at contract rent and terms. Speculative renewals assume tenants will pay base rent plus their pro rata share of CAM, real estate taxes and insurance. Contractual recoveries were input into the model per their respective leases. Miscellaneous Assumptions Credit Loss 2.0% Avg. Occupancy Over Projection Period 99% Structural Maintenance/ Reserves ($/SF) $ 0.10 Financial Assumptions Discount Rate (IRR) 12.50% Terminal Overall Capitalization Rate (R(O)) 11.00% Costs of Sale 2.00% - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 54 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNT RATE ANALYSIS A discount rate is a rate of return on capital utilized to capitalize future payments or receipts to present value. It is based on the time value of money concept. For appraisal purposes, the rate used to convert income to property value should represent the annual rate of return necessary to attract investment capital. The rate is influenced by many considerations, including the degree of apparent risk, market attitudes with respect to future inflation, the prospective rates of return for alternative investment opportunities, supply of and demand for mortgage funds, and the availability of tax shelters. Because rates of return used in income capitalization represent prospective rates, as distinguished from historical rates, special consideration is given to market perceptions of risk and changes in purchasing power. Although it is not possible to prove conclusively the suitability of a particular rate of return on the basis of market evidence, the chosen rate should be consistent with the available evidence. Rate selection requires judgment and knowledge concerning prevailing market attitudes and economic indicators. Both the discount rate and the reversionary capitalization rate must reflect the relative risk perceived by investors for the specific market being studied. Generalities must be avoided. To determine such rates, we have used surveys of real estate investors analyzed and adjusted for comparative returns found in the capital markets. National investor surveys include data on investors operating regionally and nationally, such as representatives of insurance companies, commercial banks, pension funds, investment banking firms, syndication firms, and investment advisory firms. Such companies invest in all types of properties, including office buildings, retail shopping centers, hotels, apartment complexes, and industrial facilities. These surveys are valuable for determining general parameters but must be honed to the local market. Based on surveys from CB Commercial Real Estate Group Inc. for the first quarter 1996, investment criteria for numerous market participants including investors that would be in competition for acquiring a property such as the subject are illustrated below.
================================================================================================================== FIRST QUARTER 1996 NATIONAL INVESTOR SURVEY CLASS B NEIGHBORHOOD SHOPPING CENTERS ================================================================================================================== TYPE OF FIRM OVERALL CAP. RATES GENERAL DISCOUNT REAL RATE ---------------------------------------- INFLATION RATE OF RETURN GOING-IN TERMINAL (IRR) (RRR) ================================================================================================================== Range: 9-11.5 10-12 2-4 12-14.5 9.5-11 Average 10.3 10.8 3.1 13.1 10.1 ================================================================================================================== Change from -20 +10 -40 +50 +190 3rd Qtr Survey ==================================================================================================================
Source: CB Commercial Real Estate Group Inc. - 1st Quarter 1996 - -------------------------------------------------------------------------------- 55 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- We have surveyed national real estate investors for their investment criteria when purchasing real estate such as the subject. Investor expectations for inflation range from 2% to 4%, with an average of 3.1%. We have selected an inflation rate for our analysis of 3.0%. The discount rate reflects the quality and duration of the income stream as well as the physical and locational characteristics of the property. As discussed within the overall rate section, the tenant mix at the subject center is considered to be good for the area with mostly regional tenants. Moreover, lease expiration is fairly even throughout the holding period which reduces risk. The center is currently 100% occupied. Overall, the quality, quantity and duration of the cash flow is considered to be good. With respect to physical characteristics, the subject is a functional neighborhood center of average quality and in average overall condition. In addition, the subject is situated in an average retail location with relatively low volumes of traffic. In general, the discount rate (IRR) is comprised on a safe rate (usually Treasuries) and a risk premium. The risk premium is difficult to quantify but with sound logic a reasonable rate can be ascertained. The chart presented below graphically depicts real estates position within the risk/reward graph. INVESTOR RISK VERSUS RETURN REQUIREMENTS Anticipated Return _ Real Estate _ Common Stocks _ Corporate Bonds _ Mortgage Backed Securities _ Municipal Bonds _ T - Bills Riskless Rate - -------------------------------------------------------------------------------- Perceived Level of Risk US Treasury notes and bonds are considered risk free since they are backed by the United States government. Their rates only fluctuate with perceived inflation. The use of this, or any short term investment including the prime rate or LIBOR is meaningless when compared to an investment with a 10 year holding period. Accordingly, as a starting point, we only considered - -------------------------------------------------------------------------------- 56 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- risk free or nearly risk free investments with a maturity of 10 years. These include Treasuries, corporate bonds and municipal bonds. Adjusted for daily fluctuations, these debt offerings are yielding 5.59% to 8.25%. Mortgaged backed securities generally tend to fall above these instruments. The next layer of risk would include debt rated as low as BBB. These notes are yielding as much as 10%. Long-term mortgages are also yielding over 10% considering the mortgage constant on a note priced at 250 to 300 basis points over comparable Treasuries. Riskier investments such as junk bonds vary widely from 12% to 22% on an unleveraged basis. Real estate, as indicated on the chart above falls between common stock (10%) and junk bonds (16%). To eliminate the burden of illiquidity, REIT's and similar investments are being created. They represent a quasi-real estate opportunity. REIT's are currently providing dividends ranging from 6% to 8% but offer potential yields of 15% to 20% Various financial instruments are yielding between 5.59% and 8.25% depending upon the type of investment as indicated on the chart below based on data obtained from the Federal Reserve Statistical Release for the week ending May 17, 1996. It should be noted that over the past year we have witnessed an increase in the interest rate of all of the following instruments. =============================================================================== INSTRUMENT RATE - ------------------------------------------------------------------------------- Prime Rate 8.25% - ------------------------------------------------------------------------------- Municipal Bonds 5.96% - ------------------------------------------------------------------------------- Short-Term Treasury Securities (1 year) 5.59% - ------------------------------------------------------------------------------- Long Term Treasury Securities (10 years) 6.68% - ------------------------------------------------------------------------------- Corporate Aaa Bonds (10+ years) 7.57% - ------------------------------------------------------------------------------- Corporate Baa Bonds (10 + years) 8.25% =============================================================================== The risk premium is the rate added to Treasuries to account for illiquidity, the capital markets and the economy. Whether the risk premium decreases in the near term is dependent solely on inflation, the growth of the economy and capital markets. During 1995, the Federal Reserve decreased interest rates in order to stimulate a sluggish economy. The low rates have continued during the early portion of 1996, however, have recently begun to ascend. Over the longer term, as the existing supply of space is absorbed, the risk premium will decrease. Based on the above, we feel that the current required rate of return (IRR) for the subject would fall slightly below the middle of the range at 12.5%. This reflects the quality, quantity and cash flow risk associated with the subject property. As such, we have utilized a discount rate of 12.5% in our analysis. - -------------------------------------------------------------------------------- 57 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- TERMINAL RATE To estimate the appropriate terminal capitalization rate, we have considered the rates reflected in the investment criteria outlined above for both going-in and terminal capitalization. Typically, under stable market conditions, the terminal capitalization rate will be greater than the going-in rate to reflect the risk associated with the holding period. Typically 50 to 100 basis points are added on to the going-in cap rate under stable market conditions to account for the additional risk. Furthermore, our national investor survey also indicated an average terminal capitalization 50 basis points greater than the going-in rate. It is evident by historical and current performance of the center and it is our opinion that the subject property will encounter average-to-good market acceptance in the future. It is our opinion that a terminal capitalization rate of 11.0% is the most appropriate for the subject property. A 2% deduction for costs of sale has been utilized to reflect the net reversionary value. HOLDING PERIOD To apply the discounted cash flow analysis, an estimate must be made of the appraised property's holding period based on typical investors' motives in the local market. Historical investment holding periods of similar shopping centers typically have ranged from 10 to 15 years. A 10- to 15- year holding period was analyzed to test the property's sensitivity to roll-overs. A 10-year holding period was selected. Our discounted cash flow analysis is presented on the following page. - -------------------------------------------------------------------------------- 58 Dunmore Plaza Shopping Center Cash Flow Report - --------------------------------- ---------------------------------- Building Size 45,380 Reconciled Value $1,821 Cost of Sales 2.000% Value per SF $40.13 Hold Period (Years) 10 % Residual of Recon. Value 39.2% Reduce Residual by Cap Exp Yes Direct Cap Rate 11.00% Residual Discount Rate 12.50% Direct Cap Value $1,649 - --------------------------------- ----------------------------------
Compounded Ann. -------------------------------------------------------------------------------------------------- Ave. 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Growth -------------------------------------------------------------------------------------------------- 5.02% BASE RENT 154,881 156,932 158,428 159,251 198,035 236,675 238,267 239,858 236,004 253,461 252,826 N/A Free Rent 0 0 0 0 0 0 0 0 0 0 0 2.88% Expense Recoveries 100,254 103,262 106,359 109,550 112,836 116,221 119,710 123,300 124,597 130,326 133,203 1.95% Percentage Rent 50,651 27,998 30,002 31,871 33,129 35,200 37,294 39,408 40,843 40,126 41,614 -------------------------------------------------------------------------------------------------- 3.41% GROSS INCOME 305,786 288,192 294,789 300,672 344,000 388,096 395,271 402,566 401,444 423,913 427,643 1.69% Credit / Vacancy Loss (3,889) (3,949) (4,015) (4,065) (4,117) (4,183) (4,254) (4,327) (4,230) (4,603) (4,600) N/A Miscellaneous Incomes 0 0 0 0 0 0 0 0 0 0 0 -------------------------------------------------------------------------------------------------- 3.43% EFFECTIVE GROSS INCOME 301,897 284,243 290,774 296,607 339,883 383,913 391,017 398,239 397,214 419,310 423,043 3.03% TOTAL EXPENSES 120,458 123,268 126,907 130,627 135,577 140,659 144,746 148,954 153,032 157,930 162,402 -------------------------------------------------------------------------------------------------- 3.69% NET OPERATING INCOME 181,439 160,975 163,867 165,980 204,306 243,254 246,271 249,285 244,182 261,380 260,641 N/A Commissions 0 0 0 0 0 0 0 0 4,886 4,886 5,184 N/A Tenant Improvements 0 0 0 0 0 0 0 0 0 0 0 N/A Capital Additions 0 0 0 0 0 0 0 0 0 0 0 -------------------------------------------------------------------------------------------------- N/A TOTAL DEDUCTIONS 0 0 0 0 0 0 0 0 4,886 4,886 5,184 -------------------------------------------------------------------------------------------------- 3.48% CASH FLOW 181,439 160,975 163,867 165,980 204,306 243,254 246,271 249,285 239,296 256,494 255,457 TOTAL CASH FLOW 181,439 160,975 163,867 165,980 204,306 243,254 246,271 249,285 239,296 256,494 255,457 -------------------------------------------------------------------------------------------------- Debt Service N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A -------------------------------------------------------------------------------------------------- CASH FLOW AFTER DEBT 181,439 160,975 163,867 165,980 204,306 243,254 246,271 249,285 239,296 256,494 255,457 -------------------------------------------------------------------------------------------------- CUMULATIVE SURPLUS N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A -------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------- Implied Overall Rate 9.96% 8.84% 9.00% 9.11% 11.22% 13.36% 13.52% 13.69% 13.41% 14.35% 14.31% Cash on Cash Return 9.96% 8.84% 9.00% 9.11% 11.22% 13.36% 13.52% 13.69% 13.14% 14.08% 14.03% --------------------------------------------------------------------------------------------------------------------------
================================================================================ NOI and CF Trends [Line Graph Omitted] ================================================================================ - -------------------------------------------------------------------- Sale/Yield Matrix (000's) Terminal Cap Rate ------------------------------------------------ Disc Rate 10.75% 11.00% 11.25% 11.50% - -------------------------------------------------------------------- 12.00% 1,896 1,879 1,862 1,846 ------------------------------------------------ 12.25% 1,866 1,849 1,833 1,818 ------------------------------------------------ 12.50% 1,838 1,821 1,805 1,790 ------------------------------------------------ 12.75% 1,809 1,793 1,778 1,763 ------------------------------------------------ 13.00% 1,782 1,766 1,751 1,736 ------------------------------------------------ 13.25% 1,755 1,739 1,724 1,710 - -------------------------------------------------------------------- ==================================================================== ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW CONCLUSION We used "PRO-JECT +plus" computer software to create a cash flow model for a long term hold. Reference is made to the "Annual Cash Flow Report", generated by the Pro-ject software, on the previous page which provides a summary of cash flow from all sources. We utilized a 10-year holding period and have discounted the cash flow on a fiscal year basis from 1997 to 2006. The cash flow incorporates the terms of existing leases during the analysis period and our assumptions regarding the lease-up of vacant space. It also calculates renewal rentals when leases expire based on current market rent escalated at a growth factor. In addition, a forecast was made for 15 years to check for any irregularities in the income stream which may artificially affect the reversionary sale price. It should be noted that based on our analysis of the extended holding period indicated that there was no irregularities. We capitalized the 11th year net operating income to determine the reversionary value at the end of year 10. CONCLUSION OF INCOME CAPITALIZATION APPROACH The preceding analysis indicates the following conclusions: ========================================================== INCOME CAPITALIZATION APPROACH VALUES ---------------------------------------------------------- Method Indicated Value ---------------------------------------------------------- Direct Capitalization $ 1,700,000 Discounted Cash Flow $ 1,800,000 ---------------------------------------------------------- Source: CB Commercial Real Estate ========================================================== Greater emphasis is placed on the DCF analysis because it is the method likely to be used by a typical investor. As a result, based on the Income Capitalization Approach, CB Commercial concludes a value estimate for the subject property of $1,800,000. This equates to $39.67 per rentable square foot. - -------------------------------------------------------------------------------- 60 CONCLUSION CONCLUSION ================================================================================ RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- RECONCILIATION OF VALUE CB Commercial was instructed to estimate the market value of the leased fee interest in the subject property. The value conclusions for each applicable approach are summarized below. =========================================================================== SUMMARY OF VALUE CONCLUSIONS - --------------------------------------------------------------------------- Cost Approach N/A Sales Comparison Approach $ 1,700,000 Income Capitalization Approach $ 1,800,000 - --------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. =========================================================================== The Income Capitalization Approach is considered the most persuasive method for valuing the subject property. This approach is predicated on the principle of anticipated economic benefits and, therefore, best reflects the investment characteristics of the subject. Properties such as the subject are typically purchased by investors; thus, this approach must closely parallels the anticipated analysis that would be employed by the most typical purchaser. Since the subject property has a number of existing leases with a variety of terms, the DCF technique best models the future cash flow stream to a prospective buyer. The Sales Comparison Approach is predicated on the principle that an investor would pay no more for an existing property than for a comparable property with similar utility. This approach is contingent on the reliability and comparability of available data. The data developed was considered sufficiently reliable to reach a value conclusion by the Sales Comparison Approach. However, due to the lack of truly comparables sales in recent years, this method is given secondary consideration in the reconciliation. The Cost Approach is predicated on the principle that an investor would pay no more for an existing property than it would cost to acquire land and construct a building with similar utility. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Furthermore, due to the age of the subject and current market conditions, accrued depreciation would be substantial and difficult to estimate. An investor would not use the Cost Approach due to the imprecise nature of estimating the accrued physical, functional, or external depreciation affecting the improvements. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. - -------------------------------------------------------------------------------- 61 ================================================================================ RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- The final value conclusion and the approaches relied upon give strong consideration to the market behavior of the typical buyer and current market environment for the property appraised. Based on the foregoing analysis, it is concluded that the market value of the leased fee interest in the subject property, subject to the assumptions and limiting conditions, as of May 15, 1996, is: ONE MILLION EIGHT HUNDRED THOUSAND DOLLARS ($ 1,800,000) This value is subject to all of the assumptions and limiting conditions stated throughout the report, including specific assumptions and limiting conditions. - -------------------------------------------------------------------------------- 62 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS 1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to total that would adversely affect marketability or value. CB Commercial is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CB Commercial, however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject property's title should be sought from a qualified title company that issues or insures title to real property. 2. It is assumed that improvements have been constructed or will be constructed according to approved architectural plans and specifications and in conformance with recommendations contained in or based upon any soils report(s). Unless otherwise specifically noted in the body of this report, it is assumed: that any existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are, or will be upon completion, in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that it or they will withstand any known elements such as windstorm, hurricane, tornado, flooding, earthquake, or similar natural occurrences; and, that the improvements, as currently constituted, conform to all applicable local, state, and federal building codes and ordinances. CB Commercial professionals are not engineers and are not competent to judge matters of an engineering nature. CB Commercial has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CB Commercial by ownership or management; CB Commercial inspected less than 100% of the entire interior and exterior portions of the improvements; and CB Commercial was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CB Commercial reserves the right to amend the appraisal conclusions reported herein. 3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property was not observed by the appraisers. CB Commercial has no knowledge of the existence of such materials on or in the property. CB Commercial, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the appraisal. 4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CB Commercial. This report may be subject to amendment upon re-inspection of the subject property subsequent to repairs, modifications, alterations and completed new construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels - -------------------------------------------------------------------------------- 63 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- of operation. 5. It is assumed that all factual data furnished by the client, property owner, owner's representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CB Commercial has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, Assessor's Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CB Commercial reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CB Commercial of any questions or errors. 6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CB Commercial will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject. 7. CB Commercial assumes no private deed restrictions, limiting the use of the subject property in any way. 8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposit or subsurface rights of value involved in this appraisal, whether they be gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred. 9. CB Commercial is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject. 10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market. 11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CB Commercial does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CB Commercial. 12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CB Commercial to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form. 13. Unless otherwise noted in this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated. 14. This study may not be duplicated in whole or in part without the specific written consent of CB Commercial nor may this report or copies hereof be transmitted to third parties without said consent, which consent CB Commercial reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also - -------------------------------------------------------------------------------- 64 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or its contents shall not be published, in whole or in part, in any public document without the express written consent of CB Commercial which consent CB Commercial reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a "sale" or "offer for sale" of any "security", as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CB Commercial shall have no accountability or responsibility to any such third party. 15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report. 16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used. 17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area have been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report. 18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CB Commercial unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CB Commercial assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance. 19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or client's designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CB Commercial assumes responsibility for any situation arising out of the Client's failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired. 20. CB Commercial assumes that the subject property analyzed herein will be under prudent and competent management and ownership; neither inefficient or super-efficient. 21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the appraisal report. 22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist. 23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Not withstanding any discussion of possible readily achievable barrier removal construction items in this report, CB Commercial has not made a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect on the value estimated herein. Since CB Commercial has no specific information relating to this issue, nor is CB Commercial qualified to make such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject property. - -------------------------------------------------------------------------------- 65 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 24. For our analysis, we have relied on the information provided by the detailed rent roll and information provided by the subject leasing agent. We have assumed all information is correct. Furthermore, we have assumed all leases out for signature will be returned signed, and executed as of the date indicated to us by the leasing agent. We reserve the right to amend this appraisal should any of this information be later found to be incorrect. - -------------------------------------------------------------------------------- 66 ================================================================================ ADDENDA - -------------------------------------------------------------------------------- ADDENDA - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- ADDENDUM A - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- GLOSSARY OF TERMS assessed value Assessed value applies in ad valorem taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to market value, but it is usually calculated in relation to a market value base. + cash equivalency The procedure in which the sale prices of comparable properties sold with atypical financing are adjusted to reflect typical market terms. contract, coupon, face, or nominal rent The nominal rent payment specified in the lease contract. It does not reflect any offsets for free rent, unusual tenant improvement conditions, or other factors that may modify the effective rent payment. coupon rent See Contract, Coupon, Face, or Nominal Rent effective rent 1) The rental rate net of financial concessions such as periods of no rent during a lease term; may be calculated on a discounted basis, reflecting the time value of money, or on a simple, straight-line basis. ** 2) The economic rent paid by the lessee when normalized to account for financial concessions, such as escalation clauses, and other factors. Contract, or normal, rents must be converted to effective rents to form a consistent basis of comparison between comparables. face rent See Contract, Coupon, Face, or Nominal Rent fee simple estate Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. ** floor area ratio (FAR) The relationship between the above-ground floor area of a building, as described by the building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area; also called building-to-land ratio. ** full service lease A lease in which rent covers all operating expenses. Typically, full service leases are combined with an expense stop, the expense level covered by the contract lease payment. Increases in expenses above the expense stop level are passed through to the tenant and are known as expense pass-throughs. going concern value Going concern value is the value of a proven property operation. It includes the incremental value associated with the business concern, which is distinct from the value of the real estate only. Going concern value includes an intangible enhancement of the value of an operating business enterprise which is produced by the assemblage of the land, building, labor, equipment, and marketing operation. This process creates an economically viable business that is expected to continue. Going concern value refers to the total value of a property, including both real property and intangible personal property attributed to the business value. + gross building area (GBA) The sum of all areas at each floor as measured to the exterior walls. insurable value Insurable Value is based on the replacement and/or reproduction cost of physical items that are subject to loss from hazards. Insurable value is that portion of the value of an asset or asset group that is acknowledged or recognized under the provisions of an applicable loss insurance policy. This value is often controlled by state law and varies from state to state. + investment value Investment value is the value of an investment to a particular investor based on his or her investment requirements. In contrast to market value, investment value is value to an individual, not value in the marketplace. Investment value reflects the subjective relationship between a particular investor and a given investment. When measured in dollars, investment value is the price an investor would pay for an investment in light of its perceived capacity to satisfy his or her desires, needs, or investment goals. To estimate investment value, specific investment criteria must be known. Criteria to evaluate a real estate investment are not necessarily set down by the individual investor; they may be established by an expert on real estate and its value, that is, an appraiser. + leased fee See leased fee estate - -------------------------------------------------------------------------------- ================================================================================ GLOSSARY OF TERMS - -------------------------------------------------------------------------------- leased fee estate An ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.** leasehold See leasehold estate leasehold estate The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.** load factor The amount added to usable area to calculate the rentable area. It is also referred to as a "rentable add-on factor" which, according to BOMA, "is computed by dividing the difference between the usable square footage and rentable square footage by the amount of the usable area. Convert the figure into a percentage by multiplying by 100. market value "as if complete" on the appraisal date Market value as if complete on the appraisal date is an estimate of the market value of a property with all construction, conversion, or rehabilitation hypothetically completed, or under other specified hypothetical conditions as of the date of the appraisal. With regard to properties wherein anticipated market conditions indicate that stabilized occupancy is not likely as of the date of completion, this estimate of value should reflect the market value of the property as if complete and prepared for occupancy by tenants. market value "as is" on the appraisal date Market value "as is" on the appraisal date is an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date of appraisal. market value Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1) A reasonable time is allowed for exposure in the open market; 2) Both parties are well informed or well advised, and acting in what they consider their own best interests; 3) Buyer and seller are typically motivated; 4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.ss. marketing period The time it takes an interest in real property to sell on the market subsequent to the date of an appraisal. ** net lease Lease in which all or some of the operating expenses are paid directly by the tenant. The landlord never takes possession of the expense payment. In a Triple Net Lease all operating expenses are the responsibility of the tenant, including property taxes, insurance, interior maintenance, and other miscellaneous expenses. However, management fees and exterior maintenance are often the responsibility of the lessor in a triple net lease. A modified net lease is one in which some expenses are paid separately by the tenant and some are included in the rent. net rentable area (NRA) 1) The area on which rent is computed. 2) The Rentable Area of a floor shall be computed by measuring to the inside finished surface of the dominant portion of the permanent outer building walls, excluding any major vertical penetrations of the floor. No deductions shall be made for columns and projections necessary to the building. Include space such as mechanical room, janitorial room, restrooms, and lobby of the floor. * nominal rent See Contract, Coupon, Face, or Nominal Rent prospective future value "upon completion of construction" Prospective future value "upon completion of construction" is the prospective value of a property on the future date that construction is completed, based upon market conditions forecast to exist, as of that completion date. The value estimate at this stage is stated in current dollars unless otherwise indicated. prospective future value "upon reaching stabilized occupancy" Prospective future value "upon reaching stabilized occupancy" is the prospective value of a property at a future point in time when all - -------------------------------------------------------------------------------- ================================================================================ GLOSSARY OF TERMS - -------------------------------------------------------------------------------- improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. The value estimate at this stage is stated in current dollars unless otherwise indicated. reasonable exposure time The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market. ** rent see full service lease net lease contract, coupon, face, or nominal rent effective rent shell space Space which has not had any interior finishing installed, including even basic improvements such as ceilings and interior walls, as well as partitions, floor coverings, wall coverings, etc.. Usable Area 1) The area actually used by individual tenants. 2) The Usable Area of an office is computed by measuring to the finished surface of the office side of corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished surface of the dominant portion of the permanent outer building walls. Excludes areas such as mechanical rooms, janitorial room, restrooms, lobby, and any major vertical penetrations of a multi-tenant floor. * use value Use value is a concept based on the productivity of an economic good. Use value is the value a specific property has for a specific use. Use value focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to the property's highest and best use or the monetary amount that might be realized upon its sale. + value appraised During the real estate development process, a property typically progresses from a state of unimproved land to construction of improvements to stabilized occupancy. In general, the market value associated with the property increases during these stages of development. After reaching stabilized occupancy, ongoing forces affect the property during its life, including a physical wear and tear, changing market conditions, etc. These factors continually influence the property's market value at any given point in time. See also market value "as is" on the appraisal date market value "as if complete" on the appraisal date prospective future value "upon completion of construction" prospective future value "upon reaching stabilized occupancy" - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- ADDENDUM B ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] LOOKING NORTH ON MONROE AVENUE [GRAPHIC OMITTED] LOOKING SOUTH ON MONROE AVENUE - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM C IMPROVED COMPARABLE SALES - -------------------------------------------------------------------------------- ADDENDUM C IMPROVED COMPARABLE SALES - -------------------------------------------------------------------------------- RETAIL SALE ================================================================================ Location Data Property Name: 15th & Allen Street Shopping Center Location: 1401-1451 Allen Street City: Allentown County: Lehigh State/Zip: Pennsylvania Assessor's Parcel No(s): G9SW3A-14-4 Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 4.12 Acres Excess Land: None Gross Leasable Area: Anchors: Laneco Supermarket 25,000 SF Local Tenant GLA: 21,503 SF Anchor Tenant GLA: 25,000 SF Total GLA: 46,503 SF GLA Purchased: 46,503 SF Year Built: 1950 Parking: Adequate Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 01/96 Marketing Time: N/A Grantor: Carriage Associates L.P. Grantee: Allenbeth Associates L.P. Document No.: 1558/220 Sale Price: $4,242,000 Financing: Market Terms Cash Equivalent Price: $4,242,000 Required Capital Cost: $0 Adjusted Sales Price: $4,242,000 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100 Existing or Pro Forma Income: N/A TOTAL P.S.F. ----- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $462,049 $9.94 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.89 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $91.22 Comments The 15th and Allen Street shopping center is a one-story neighborhood retail center located on the corner of 15th and Allen Streets in Downtown Allentown. This property is anchored by a Laneco Supermarket which occupies an estimated 25,000 square feet with the balance of the rentable area, 21,503 square feet allocated to 12 other satellite tenants. This center was built in the 1950's, however, it has undergone significant renovations since that time. Currently, the property is in average condition. At the time of sale, the property was 100% occupied. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Stefco Shopping Center Location: Stefco Boulevard City: Bethlehem County: Northampton State/Zip: Pennsylvania Assessor's Parcel No(s): N7SW1B-3-l Atlas Reference: N/A Physical Data Type: Community Land Area: 10.27 Acres Excess Land: None Gross Leasable Area: Anchors: Laneco Supermarket 65,000 SF Local Tenant GLA: 69,446 SF Anchor Tenant GLA: 65,000 SF Total GLA: 134,446 SF GLA Purchased: 134,446 SF Year Built: 1965 Parking: Adequate Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 01/96 Marketing Time: N/A Grantor: Carriage Associates L. P. Grantee: Allenbeth Associates L. P. Document No.: 1996-1/4082 Sale Price: $5,618,000 Financing: Market Terms Cash Equivalent Price: $5,618,000 Required Capital Cost: $0 Adjusted Sales Price: $5,618,000 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 95.2% Existing or Pro Forma Income: N/A TOTAL P.S.F. ----- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $617,577 $4.59 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.99 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $41.79 Comments The Stefco shopping center is a one-story community retail center located on Stefco Boulevard in Bethlehem. This property is anchored by a Laneco Supermarket which occupies an estimated 65,000 square feet with the balance of the rentable area, 69,446 square feet allocated to 21 other satellite tenants. This center was built in 1965, however it has undergone significant renovations in 1988. Currently, the property is in average condition. At the time of sale the property was 95.2% occupied. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: MacArthur Plaza Shopping Center Location: 2419 MacArthur Road (N/E/C Schadt Avenue) City: Whitehall Township County: Lehigh State/Zip: Pennsylvania Assessor's Parcel No(s): F9SW2-3-2 Atlas Reference: N/A Physical Data Type: Neighborhood Land Area: 2.20 Acres Excess Land: None Gross Leasable Area: Anchors: Staples 19,200 SF Blockbuster Video 6,930 SF Bell Atlantic 3,470 SF Local Tenant GLA: N/A Anchor Tenant GLA: 29,600 SF Total GLA: 29,600 SF GLA Purchased: 29,600 SF Year Built: 1988 Parking: Adequate Condition: Average Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 10/95 Marketing Time: N/A Grantor: P & D Schweitzer Grantee: Allentown Power Center L.P. Document No.: 1553/1123 Sale Price: $3,831,667 Financing: Cash to Seller Cash Equivalent Price: $3,831,667 Required Capital Cost: $0 Adjusted Sales Price: $3,831,667 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 100% Existing or Pro Forma Income: N/A TOTAL P.S.F. ----- ------ Potential Gross Income: $495,121 $16.73 Vacancy and Credit Loss: N/A N/A Effective Gross Income: $495,121 $16.73 Expenses: $82,999 $2.80 Net Operating Income: $412,122 $13.92 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.76 % Projected IRR: N/A Effective Gross Multiplier (EGIM): 7.74 Operating Expense Ratio (OER): 16.76 % Price Per Square Foot: $129.45 Comments The MacArthur Plaza shopping center is a one-story neighborhood retail center located on MacArthur Road in Whitehall Township. This property is anchored by Staples which occupies 19,200 square feet with the balance of the rentable area, 10,400 square feet allocated to 2 other satellite tenants. This center was built in 1988 and is currently in average condition. At the time of sale, the property was 100% occupied. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Columbia Mall Location: N/E/Quadrant Of Route 42 @ Interstate 80 City: Bloomsburg County: Columbia State/Zip: Pennsylvania Assessor's Parcel No(s): 18.2-48-3 Atlas Reference: N/A Physical Data Type: Community Land Area: 48.69 Acres Excess Land: None Gross Leasable Area: Anchors: Hills 80,000 SF Sears 64,264 SF The Bon Ton 45,000 SF J.C. Penny 34,076 SF Local Tenant GLA: 128,024 SF Anchor Tenant GLA: 223,340 SF Total GLA: 351,364 SF GLA Purchased: 351,364 SF YearBuilt: 1988 Parking: Adequate Condition: Good Exterior Walls: Masonry Sale Data Transaction Type: Sale Date of Transaction: 07/95 Marketing Time: N/A Grantor: C.M. Group Trust Grantee: MDC Investment Property-1, LLC Document No.: 601/538 Sale Price: $27,650,000 Financing: Cash to Seller Cash Equivalent Price: $27,650,000 Required Capital Cost: $0 Adjusted Sales Price: $27,650,000 Verification: Public Records Financial Data Assumptions & Forecast: Buyer Occupancy at Sale: 96% Existing or Pro Forma Income: N/A TOTAL P.S.F ----- ----- Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $2,958,500 $8.42 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.70 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $78.69 Comments The Columbia Mall is a single-story retail center located off or Interstate 80 at Route 42 in Bloomsburg, Pennsylvania. This property is anchored by Hills which occupies 80,000 square feet as well as junior-anchors Sears (64,264 SF), The Bon Ton (45,000 SF), and J.C. Penny (34,076 SF). The balance of the rentable area 128,024 square feet allocated to numerous other satellite tenants. This center was built in 1988 and is currently in average condition. At the time of sale, the property was approximately 96% occupied with 13,000 square feet vacant. Retail sales for the center in 1994 reportedly averaged $165.00/SF, up 5.8% from the previous year. - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ ADDENDUM D RENTAL COMPARABLES - -------------------------------------------------------------------------------- ADDENDUM D RENTAL COMPARABLES - -------------------------------------------------------------------------------- RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Kingston Plaza Location: S/S Third Avenue East Of Pierce Street City: Kingston County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 64,824 SF Year Built: 1982 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Price Chopper Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$10.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) ================================================================================ 09/95 6,500 The Everything $5.50 N/A None $950 step in ye 1.30 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent lease includes a term for 1 year and 3 months. Additionally, the tenant has a percentage rent clause of 3.0% over a breakpoint of $1,191,660. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Mark Plaza Location: N/S Route 11 City: Edwardsville County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 176,786 SF Year Built: 1967 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 91.7% Overall: 9l.7% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $1.95-$11.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 10/95 3,600 Spectrum Rents $8 00 N/A None Flat 5.00 08/95 7,000 Keens Floral Fa $8.00 N/A Annual Step-up 5.00 07/95 3,600 Mattress Man $11.50 N/A Flat 5.00 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 91.7% leased. The most recent leases all include terms for 5 years. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Birney Plaza Location: N/S Route 11 City: Moosic County: Lackawanna State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 212,057 SF Year Built: 1972 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $3.00-$10.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 9/95 4,000 Everything $0.9 $7.00 N/A None flat 3.00 - -------------------------------------------------------------------------------- 7/93 4,000 Mattress Man $9.00 N/A None Step-up to $10/ 5.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 3 and 5 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Dunmore Plaza Location: 1400 Monroe Avenue City: Dunmore County: Lackawanna State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 45,380 SF Year Built: 1967 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Price Chopper Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $6.75-$11.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 4/95 1,900 Malcom's $11.50 N/A None $950 Step-up in 5.00 - -------------------------------------------------------------------------------- 1/95 1,900 Great Wall Chin $11.35 N/A 3.0% per year 10.00 - -------------------------------------------------------------------------------- 4/94 1,900 Little Caeser's $9.25 N/A Periodic Step-u 5.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 5 and 10 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Triangle Plaza Location: Route 115 City: Wilke-Barre County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 125,000 SF Year Built: 1971 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years (Estimate) Base Rent Per Square Foot: $9.00-$12.50 (Estimate) Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 6/95 2,400 Electronic Syst $11.50 N/A None Annual %age inc 5.00 - -------------------------------------------------------------------------------- 3/95 2,200 TCBY $11.00 N/A None Annual %age inc 5.00 - -------------------------------------------------------------------------------- 5/94 9,910 Party City $11.00 N/A None $1.65/SF step-u 10.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 5 and 10 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Gateway Plaza Location: N/S Route 11 City: Edwardsville County: Luzerne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 150,000 SF Year Built: 1969 Exterior Walls: Brick Veneer Condition: Fair Anchor Tenant: Parking: Adequate Lease Data Occupancy: Local: 65.0% Overall: 65 0 Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $8.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 6/94 950 Holiday Hair $15.48 N/A None Annual %age inc 3.00 - -------------------------------------------------------------------------------- 6/94 3,080 McKenzie $8.50 N/A None Annual %age inc 3.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 65% leased. The most recent leases all include terms for 3 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Pottstown Center Location: Route 663 City: Pottstown County: Montgomery State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 171,267 SF Year Built: 1976 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Wal-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $8.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 7/95 121,267 Wal Mart $6.99 N/A None Flat 20.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 20 years. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Route 6 Mall Location: N/S Route 6 City: Honesdale County: Wayne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 144,229 SF Year Built: 1978 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 3/95 119,229 K-Mart $5.77 N/A None Flat 25.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 20 years and includes a percentage rent clause on 1.0% over $20.0 million. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Bradford Towne Centre Location: N/S Route 6 City: Wysox County: Bradford State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 119,481 SF Year Built: 1972 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 7/94 94,481 K-Mart $5.00 N/A None Flat 25.00 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 25 years and includes a percentage rent clause on 1.0% over $16.875 million. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Builder's Square Shopping Center Location: Cetronia Road City: Whitehall County: Lehigh State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 106,400 SF Year Built: 1994 Exterior Walls: Brick Veneer Condition: Good Anchor Tenant: Builder's Square Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases - -------------------------------------------------------------------------------- Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 3/94 106,400 Builder's Squar $10.05 N/A None Flat 25.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 25 years. Construction quality is good and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ ADDENDUM E STRATEGIC MAPPING, INC. REPORTS - -------------------------------------------------------------------------------- ADDENDUM E STRATEGIC MAPPING, INC. REPORTS - -------------------------------------------------------------------------------- Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 DUNMORE PLAZA, PA 1 Mile Radius 6/4/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 25,232 22,804 21,804 20,990 White 99.1% 98.4% 98.1% 97.8% Black 0.5% 0.9% 1.1% 1.3% American Indian 0.0% 0.0% 0.1% 0.1% Asian 0.2% 0.4% 0.5% 0.6% Other 0.2% 0.2% 0.2% 0.3% Hispanic 0.3% 0.6% 0.8% 1.0% Total Households 9,121 8,903 8,535 8,242 Household Population 23,935 21,405 20,407 19,593 Average Household Size 2.62 2.40 2.39 2.38 Household Income $ 0 - 9,999 33.5% 19.4% 15.1% 12.0% $ 10,000 - 14,999 18.6% 10.5% 9.8% 8.8% $ 15,000 - 24,999 25.4% 19.1% 17.0% 14.6% $ 25,000 - 34,999 14.7% 18.0% 15.3% 13.6% $ 35,000 - 49,999 4.8% 15.5% 18.2% 18.5% $ 50,000 - 74,999 2.4% 10.1% 14.4% 16.8% $ 75,000 - 99,999 0.7% 4.1% 4.3% 7.0% $ 100,000 - 149,999 -- 2.0% 4.3% 5.7% $ 150,000 + -- 1.4% 1.6% 2.9% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 14,451 25,485 30,255 35,677 Aggregate HH Inc ($000) 161,256 299,931 344,815 397,307 Median Family Income ($) 18,654 32,845 38,993 45,980 Per Capita Income ($) 6,737 14,012 16,897 20,278 Median Age Total Population 37.2 38.5 39.0 39.5 Median Age Adult Population 49.0 47.1 47.6 48.0 Median Age Female Population 41.7 42.2 42.6 43.1 Median Age Adult Female Population 51.4 50.8 51.4 51.7 Median Age Male Population 33.0 35.0 35.5 35.9 Median Age Adult Male Population 46.1 43.4 43.7 44.2
Area defined by Circle: (41.4222,75.6386): 1 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 DUNMORE PLAZA, PA 1 Mile Radius 6/4/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 25,232 22,804 21,804 20,990 0-5 6.3% 6.7% 6.5% 6.4% 6-13 9.7% 8.5% 8.5% 8.3% 14-17 6.0% 4.4% 4.9% 4.9% 18-24 13.5% 11.5% 10.5% 10.5% 25-34 12.6% 14.4% 14.4% 14.0% 35-44 8.5% 12.3% 12.5% 12.5% 45-54 10.6% 8.8% 9.6% 10.1% 55-64 13.6% 10.6% 10.0% 10.1% 65-74 19.1% 12.3% 12.3% 12.0% 75-84 -- 8.1% 8.1% 8.3% 85 + -- 2.4% 2.7% 2.8% Female Population by Age 14,053 12,585 12,024 11,570 0-5 5.5% 5.7% 5.6% 5.5% 6-13 8.4% 7.4% 7.4% 7.3% 14-17 5.1% 3.7% 4.8% 4.8% 18-24 14.2% 12.0% 10.3% 10.3% 25-34 11.5% 12.9% 13.0% 12.5% 35-44 8.0% 11.5% 11.6% 11.8% 45-54 10.6% 8.5% 9.3% 9.8% 55-64 14.0% 11.0% 10.4% 10.3% 65-74 22.7% 13.7% 13.5% 13.3% 75-84 -- 10.2% 10.1% 10.4% 85 + -- 3.4% 3.8% 4.0% Male Population by Age 11,175 10,217 9,784 9,418 0-5 7.2% 7.9% 7.7% 7.5% 6-13 11.5% 9.8% 9.8% 9.6% 14-17 7.1% 5.1% 5.1% 5.0% 18-24 12.7% 11.0% 10.7% 10.8% 25-34 14.1% 16.3% 16.1% 15.8% 35-44 9.2% 13.3% 13.6% 13.4% 45-54 10.7% 9.1% 9.9% 10.4% 55-64 13.0% 10.1% 9.6% 9.9% 65-74 14.6% 10.7% 10.7% 10.4% 75-84 -- 5.6% 5.6% 5.7% 85 + -- 1.2% 1.3% 1.4%
Area defined by Circle: (41.4222,75.6386): 1 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 1 of 3 DUNMORE PLAZA, PA 1 Mile Radius 6/4/96
1980 Census 1990 Census Percent Total Percent Total Percent Change Population White 25,006 99.1 22,442 98.4 -10.3 Black 122 0.5 212 0.9 73.8 American Indian, Asian & Other 104 0.4 15O 0.7 44.2 Total 25,232 100.0 22,804 100.0 -9.6 Hispanic 75 0.3 147 0.6 96.0 Age of Population: 0-5 1,577 6.3 1,519 6.7 -3.7 6-13 2,457 9.7 1,933 8.5 -21.3 14-17 1,505 6.0 993 4.4 -34.0 15-24 3,418 13.5 2,631 11.5 -23.0 25-34 3,191 12.6 3,287 14.4 3.0 35-44 2,155 8.5 2,813 12.3 30.5 45-54 2,677 10.6 1,999 8.8 -25.3 55-64 3,423 13.6 2,419 10.6 -29.3 65 + 4,825 19.1 5,225 22.9 8.3 Median Age Total Population 37.2 38.5 3.6 Median Age Adult Population 49.0 47.1 -3.9 Age of Male Population: 0-5 800 7.2 804 7.9 0.5 6 -13 1,283 11.5 1,005 9.8 -21.7 14-17 793 7.1 524 5.1 -33.9 18-24 1,424 12.7 1,122 11.0 -21.2 25-34 1,574 14.1 1,663 16.3 5.7 35-44 1,024 9.2 1,362 13.3 33.0 45-54 1,192 10.7 927 9.1 -22.2 55-64 1,454 13.0 1,030 10.1 -29.2 65 + 1,631 14.6 1,789 17.5 9.7 Total 11,175 100.0 10,217 100.0 -8.6 Median Age Male Population 33.0 35.0 6.0 Median Age Adult Male Population 46.1 43.4 -5.9 Age of Female Population: 0-5 777 5.5 715 5.7 -8.0 6-13 1,174 8.4 928 7.4 -21.0 14-17 712 5.1 469 3.7 -34.1 18-24 1,994 14.2 1,509 12.0 -24.3 25-34 1,617 11.5 1,624 12.9 0.4 35-44 1,131 8.0 1,451 11.5 28.3 45-54 1,485 10.6 1,072 8.5 -27.8 55-64 1,969 14.0 1,389 11.0 -29.5 65 + 3,194 22.7 3,436 27.3 7.6 Total 14,053 100.0 12,585 100.0 -10.4 Median Age Female Population 41.7 42.2 1.2 Median Age Adult Female Population 51.4 50.8 -1.2
Area defined by Circle: (41.4222,75.6386): 1 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 2 of 3 DUNMORE PLAZA, PA 1 Mile Radius 6/4/96
1980 Census 1990 Census Percent Total Percent Total Percent Change Total Households 9,121 8,903 -2.4 Household Population 23,935 21,405 -10.6 Average Household Size 2.62 2.40 -8.4 Total Families 6,473 5,736 -11.4 Average Family Size 3.25 3.08 -5.2 Average Family Income $21,523 $42,182 96.0 Family Population 21,049 83.4 17,835 78.2 -15.3 Nonfamily Population 2,886 11.4 3,570 15.7 23.7 Group Quarters Population 1,297 5.1 1,397 6.1 7.7 Foreign Born Population 852 3.4 479 2.1 43.8 Household Income: $0 - $9,999 3,084 33.5 1,731 19.4 -43.9 $ 10,000 - $ 14,999 1,712 18.6 938 10.5 45.2 $ 15,000 - $ 24,999 2,338 25.4 1,709 19.1 -26.9 $ 25,000 - $ 34,999 1,354 14.7 1,610 18.0 18.9 $ 35,000 - $ 49,999 442 4.8 1,387 15.5 213.8 $ 50,000 - $ 74,999 219 2.4 907 10.1 314.2 $ 75,000 - $ 99,999 67 0.7 363 4.1 441.8 $ 100,000 - $ 149,999 176 2.0 $ 150,000 + 121 1.4 Median Household Income $ 14,451 $25,485 76.4 Average Household Income $ 17,497 $33,557 91.8 Per Capita Income $6,737 $14,012 108.0 Median Home Value $ 34,326 $ 70,112 104.3 Average Home Value $ 36,443 $ 80,478 120.8 Median Contract Rent $151 $278 84.1 Average Contract Rent $ 153 $ 281 83.7 Total Housing Units 9,676 100.0 9,562 100.0 -1.2 Owner Occupied 5,287 54.6 5,229 54.7 -1.1 Renter Occupied 3,834 39.6 3,678 38.5 -4.1 Vacant 555 5.7 659 6.9 18.7 Mobile Home or Trailer 7 0.1 5 0.1 -28.6 Condominiums 0 0.0 9 0.1 0.0
Area defined by Circle: (41.4222,75.6386): 1 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 3 of 3 DUNMORE PLAZA, PA 1 Mile Radius 6/4/96
1980 Census 1990 Census Percent Total Percent Total Percent Change Occupation: Executive & Managerial 938 8.9 1,197 11.4 27.6 Professional Specialty 1,597 15.1 1,811 17.3 13.4 Technical Support 208 2.0 293 2.8 40.9 Administrative Support 2,078 19.7 1,821 17.4 -12.4 Sales 1,068 10.1 1,260 12.0 18.0 Total White Collar 5,889 55.8 6,382 60.9 8.4 Prod/Craft/Repair 1,087 10.3 1,050 10.0 -3.4 Machine Operators 1,327 12.6 801 7.6 -39.6 Trans/Material Moving 338 3.2 307 2.9 -9.2 Laborers 601 5.7 495 4.7 -17.6 Total Blue Collar 3,379 32.0 2,653 25.3 -21.5 Farm/Forest/Fish 26 0.2 65 0.6 150.0 Protective Service 166 1.6 120 1.1 -27.7 Private Service 40 0.4 15 0.1 -62.5 Other Service 1,071 10.2 1,253 11.9 17.0 Total Employed 10,545 93.0 10,492 95.2 -0.5 Unemployed 790 7.0 525 4.8 -33.5 Total Civil Labor Force 11,335 100.0 11,017 100.0 -2.8 Working Mothers 1,207 46.7 1,557 69.6 29.0 Child<6or<6&6-17 369 14.3 615 27.5 66.7 Child 6-17 Only 838 32.4 942 42.1 12.4 Nonworking Mothers 1,380 53.3 679 30.4 -50.8 Means of Transportation to Work: Drive Alone/Carpool 8,298 81.3 8,802 84.9 6.1 Public Transportation 479 4.7 289 2.8 -39.7 Other 1,431 14.0 1,277 12.3 -10.8
Area defined by Circle: (41.4222,75.6386): 1 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 DUNMORE PLAZA, PA 1 Mile Radius 6/4/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 95.4 Demographics - -------------------------------------------------------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 21,804 8,535 20,407 2.39 $ 30,255 2000 20,990 8,242 19,593 2.38 $ 35,677 Expenditure Potential - -------------------------------------------------------------------------------- 1995 Area Yearly Growth Rate Per Household 1.46 % Total 0.75 % Retail Support Potential (000) - -------------------------------------------------------------------------------- 1995: 893 sq. ft.
Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/Total Retail Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 8,143 8,704 954 1,056 1.34% 93.2 Appliance Store 677 553 79 67 -3.95% 92.9 Auto-Aftermarket Store 13,610 13,558 1,595 1,645 -0.08% 95.4 Convenience Store 7,540 7,443 883 903 -0.26% 97.5 Dept. Store 8,358 8,683 979 1,054 0.77% 92.7 Drug Store 7,434 8,865 871 1,076 3.59% 110.8 Electronics Store 3,028 3,804 355 462 4.67% 91.? Fast Food Restaurant Store 7,692 6,563 901 796 -3.13% 94.3 Full Serv Restaurant Store 7,639 6,466 895 785 -3.28% 95.7 Furniture Store 2,876 2,579 337 313 -2.15% 90.8 Grocery Store 34,252 36,961 4,013 4,484 1.53% 98.2 Hardware Store 1,461 1,516 171 184 0.75% 93.0 Home Centers Store 6,285 7,078 736 859 2.41% 84.2 Jewelry Store 1,314 1,301 154 158 -0.19% 91.0 Liquor Store 2,003 1,733 235 210 -2.86% 92.3 Mass Merchandiser Store 11,298 12,104 1,324 1,469 1.39% 93.5 Photo Store 152 145 18 18 -0.99% 92.6 Shoe Store 1,611 1,823 189 221 2.51% 94.8 Sporting Goods Store 1,358 1,516 159 184 2.22% 88.9 Toy Store 1,002 908 117 110 -1.96% 92.0 Variety Store 658 714 77 87 1.63% 95.2
Area defined by Circle: (41.4222,75.6386): 1 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 DUNMORE PLAZA, PA 1 Mile Radius 6/4/96 Benchmark = Regional Area Definition Detailed Report
Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/Total Retail Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 461 752 54 91 10.30% 93.6 Total Shopping Center 128,852 133,771 15,097 16,230 All Other Stores 98,829 102,603 11,579 12,449 Total Retail 227,681 236,374 26,676 28,679
Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (41.4222,75.6386): 1 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 DUNMORE PLAZA, PA 3 Mile Radius 6/4/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 102,039 94,044 89,699 86,240 White 98.5% 97.6% 97.1% 96.7% Black 0.9% 1.3% 1.5% 1.6% American Indian 0.0% 0.1% 0.1% 0.1% Asian 0.3% 0.8% 1.0% 1.2% Other 0.2% 0.2% 0.3% 0.3% Hispanic 0.4% 0.6% 0.7% 0.9% Total Households 38,549 37,643 35,963 34,683 Household Population 98,348 89,152 84,809 81,350 Average Household Size 2.55 2.37 2.36 2.35 Household Income $ 0 - 9,999 38.8% 23.7% 18.7% 15.0% $ 10,000 - 14,999 18.6% 12.6% 12.3% 11.1% $ 15,000 - 24,999 25.9% 19.5% 18.1% 16.7% $ 25,000 - 34,999 11.2% 16.9% 15.4% 14.1% $ 35,000 - 49,999 3.8% 14.4% 16.8% 17.6% $ 50,000 - 74,999 1.3% 8.7% 12.0% 14.8% $ 75,000 - 99,999 0.5% 2.3% 3.4% 5.4% $ 100,000 - 149,999 -- 1.1% 2.2% 3.6% $ 150,000 + -- 0.7% 1.1% 1.7% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 13,000 21,691 25,525 29,898 Aggregate HR Inc ($000) 593,672 1,059,018 1,205,889 1,374,201 Median Family Income ($) 16,705 29,418 34,618 40,549 Per Capita Income ($) 6,036 11,879 14,219 16,892 Median Age Total Population 37.3 37.7 38.1 38.5 Median Age Adult Population 49.2 46.5 46.9 47.1 Median Age Female Population 42.3 41.1 41.4 41.8 Median Age Adult Female Population 52.1 50.3 50.5 50.7 Median Age Male Population 32.8 34.4 34.8 35.1 Median Age Adult Male Population 45.6 42.9 43.3 43.6
Area defined by Circle: (41.4222,75.6386): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 DUNMORE PLAZA, PA 3 Mile Radius 6/4/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 102,039 94,044 89,699 86,240 0 - 5 6.4% 6.9% 6.8% 6.8% 6 - 13 9.7% 8.9% 8.9% 8.8% 14 - 17 5.9% 4.5% 5.2% 5.2% 18 - 24 13.1% 11.9% 10.8% 10.9% 25 - 34 12.9% 14.4% 14.3% 13.9% 35 - 44 8.6% 12.1% 12.5% 12.7% 45 - 54 10.6% 8.8% 9.4% 9.9% 55 - 64 13.8% 10.3% 9.7% 9.8% 65 - 74 19.0% 12.0% 11.8% 11.3% 75 - 84 -- 7.9% 8.1% 8.1% 85 + -- 2.2% 2.4% 2.6% Female Population by Age 55,410 51,039 48,556 46,607 0 - 5 5.8% 6.2% 6.2% 6.1% 6 - 13 8.6% 8.0% 7.9% 7.8% 14 - 17 5.3% 4.0% 4.8% 4.9% 18 - 24 12.5% 11.4% 10.2% 10.3% 25 - 34 11.9% 13.4% 13.3% 12.8% 35 - 44 8.1% 11.4% 11.7% 11.9% 45 - 54 10.8% 8.5% 9.2% 9.7% 55 - 64 14.4% 10.8% 10.1% 10.0% 65 - 74 22.6% 13.4% 13.2% 12.7% 75 - 84 -- 9.9% 10.1% 10.1% 85 + -- 3.0% 3.4% 3.7% Male Population by Age 46,617 43,003 41,137 39,637 0 - 5 7.1% 7.7% 7.6% 7.6% 6 - 13 10.9% 10.1% 10.1% 9.9% 14 - 17 6.7% 5.1% 5.6% 5.6% 18 - 24 13.8% 12.5% 11.5% 11.6% 25 - 34 14.1% 15.5% 15.4% 15.1% 35 - 44 9,1% 13.1% 13.5% 13.6% 45 - 54 10.4% 9.2% 9.7% 10.3% 55 - 64 13.0% 9.8% 9.4% 9.5% 65 - 74 14.8% 10.4% 10.1% 9.7% 75 - 84 -- 5.5% 5.7% 5.8% 85 + -- 1.1% 1.3% 1.4% Area defined by Circle: (41.4222,75.6386): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 1 of 3 DUNMORE PLAZA, PA 3 Mile Radius 6/4/96 1980 Census 1990 Census Percent Total Percent Total Percent Change Population White 100,533 98.5 91,785 97.6 -8.7 Black 910 0.9 1,222 1.3 34.3 American Indian, Asian & Other 597 0.6 1,037 1.1 73.7 Total 102,039 100.0 94,044 100.0 -7.8 Hispanic 404 0.4 597 0.6 47.8 Age of Population: 0 - 5 6,526 6.4 6,450 6.9 -1.2 6 - 13 9,867 9.7 8,414 8.9 -14.7 14 - 17 6,070 5.9 4,225 4.5 -30.4 18 - 24 13,402 13.1 11,224 11.9 -16.3 25 - 34 13,146 12.9 13,513 14.4 2.8 35 - 44 8,730 8.6 11,407 12.1 30.7 45 - 54 10,851 10.6 8,315 8.8 -23.4 55 - 64 14,055 13.8 9,726 10.3 -30.8 65 + 19,380 19.0 20,772 22.1 7.2 Median Age Total Population 37.3 37.7 1.0 Median Age Adult Population 49.2 46.5 -5.4 Age of Male Population: 0 - 5 3,315 7.1 3,298 7.7 -0.5 6 - 13 5,091 10.9 4,347 10.1 -14.6 14 - 17 3,132 6.7 2,183 5.1 -30.3 18 - 24 6,456 13.8 5,384 12.5 -16.6 25 - 34 6,569 14.1 6,675 15.5 1.6 35 - 44 4,238 9.1 5,613 13.1 32.4 45 - 54 4,863 10.4 3,977 9.2 -18.2 55 - 64 6,071 13.0 4,209 9.8 -30.7 65 + 6,882 14.8 7,321 17.0 6.4 Total 46,617 100.0 43,003 100.0 -7.8 Median Age Male Population 32.8 34.4 4.8 Median Age Adult Male Population 45.6 42.9 -5.8 Age of Female Population: 0 - 5 3,211 5.8 3,152 6.2 -1.8 6 - 13 4,776 8.6 4,067 8.0 -14.8 14-17 2,938 5.3 2,042 4.0 -30.5 18 - 24 6,946 12.5 5,840 11.4 -15.9 25 - 34 6,577 11.9 6,838 13.4 4.0 35 - 44 4,492 8.1 5,794 11.4 29.0 45 - 54 5,988 10.8 4,338 8.5 -27.6 55 - 64 7,984 14.4 5,517 10.8 -30.9 65 + 12,498 22.6 13,451 26.4 7.6 Total 55,410 100.0 51,039 1000 -7.9 Median Age Female Population 42.3 41.1 -2.8 Median Age Adult Female Population 52.1 50.3 -3.4
Area defined by Circle: (41.4222,75.6386): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 2 of 3 DUNMORE PLAZA, PA 3 Mile Radius 6/4/96
1980 Census 1990 Census Percent Total Percent Total Percent Change Total Households 38,549 37,643 -2.4 Household Population 98,348 89,152 -9.4 Average Household Size 2.55 2.37 -7.2 Total Families 26,816 23,723 -11.5 Average Family Size 3.19 3.06 4.0 Average Family Income $ 18,746 $35,176 87.6 Family Population 85,593 83.9 73,397 78.0 -14.2 Nonfamily Population 12,755 12.5 15,755 16.8 23.5 Group Quarters Population 3,691 3.6 4,890 5.2 32.5 Foreign Born Population 3,660 3.6 2,313 2.5 -36.8 Household Income: $ 0 - $ 9,999 14,962 38.8 8,944 23.7 -40.2 $ 10,000 - $ 14,999 7,188 18.6 4,763 12.6 -33.7 $ 15,000 - $ 24,999 9,973 25.9 7,353 19.5 -26.3 $ 25,000 - $ 34,999 4,304 11.2 6,362 16.9 47.8 $ 35,000 - $ 49,999 1,457 3.8 5,430 14.4 272.7 $ 50,000 - $ 74,999 486 1.3 3,287 8.7 576.3 $ 75,000 - $ 99,999 179 0.5 860 2.3 380.4 $100,000 - $ 149,999 422 1.1 $ 150,000 + 280 0.7 Median Household Income $ 13,000 $ 21,691 66.9 Average Household Income $ 15,400 $ 28,091 82.4 Per Capita Income $6,036 $ 11,879 96.8 Median Home Value $27,850 $ 59,393 113.3 Average Home Value $ 31,917 $ 66,774 109.2 Median Contract Rent $142 $ 257 81.0 Average Contract Rent $ 143 $ 265 85.3 Total Housing Units 41,408 100.0 40,665 100.0 -1.8 Owner Occupied 21,453 51.8 21,004 51.7 -2.1 Renter Occupied 17,093 41.3 16,634 40.9 -2.7 Vacant 2,859 6.9 3,022 7.4 5.7 Mobile Home or Trailer 73 0.2 104 0.3 42.5 Condominiums 35 0.1 279 0.7 697.1
Area defined by Circle: (41.4222,75.6386): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 3 of 3 DUNMORE PLAZA, PA 3 Mile Radius 6/4/96
1980 Census 1990 Census Percent Total Percent Total Percent Change Occupation: Executive & Managerial 3,123 7.6 3,882 9.6 24.3 Professional Specialty 4,286 10.4 4,934 12.2 15.1 Technical Support 1,023 2.5 1,213 3.0 18.6 Administrative Support 7,257 17.6 7,206 17.8 -0.7 Sales 4,083 9.9 4,495 11.1 10.1 Total White Collar 19,772 48.0 21,730 53.7 9.9 Prod/Craft/Repair 4,823 11.7 4,378 10.8 -9.2 Machine Operators 6,430 15.6 4,272 10.6 -33.6 Trans/Material Moving 1,907 4.6 1,707 4.2 -10.5 Laborers 2,205 5.4 2,199 5.4 -0.3 Total Blue Collar 15,491 37.6 12,556 31.0 -18.9 Farm/Forest/Fish 126 0.3 154 0.4 22.2 Protective Service 902 2.2 694 1.7 -23.1 Private Service 169 0.4 65 0.2 -61.5 Other Service 4,877 11.8 5,288 13.1 8.4 Total Employed 41,211 92.0 40,494 93.9 -1.7 Unemployed 3,595 8.0 2,629 6.1 -26.9 Total Civil Labor Force 44,806 100.0 43,123 100.0 -3.8 Working Mothers 5,151 47.7 6,275 65.0 21.8 Child <6 or <6 & 6-17 1,603 14.8 2,564 26.6 60.0 Child 6-17 Only 3,548 32.8 3,711 38.5 4.6 Nonworking Mothers 5,655 52.3 3,372 35.0 -40.4 Means of Transportation to Work: Drive Alone/Carpool 32,465 81.4 34,073 86.0 5.0 Public Transportation 2,408 6.0 1,273 3.2 -47.1 Other 5,016 12.6 4,286 10.8 -14.6
Area defined by Circle: (41.4222,75.6386): 3 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 DUNMORE PLAZA, PA 3 Mile Radius 6/4/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 90.2 Demographics - -------------------------------------------------------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 89,699 35,963 84,809 2.36 $ 25,525 2000 86,240 34,683 81,350 2.35 $ 29,898 Expenditure Potential - -------------------------------------------------------------------------------- 1995 Area Yearly Growth Rate Per Household 1.44 % Total 0.71 % Retail Support Potential (000) - -------------------------------------------------------------------------------- 1995: 3,560 sq. ft. - --------------------------------------------------------------------------------
Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/Total Retail Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 31,382 33,421 873 964 1.27% 85.2 Appliance Store 2,681 2,188 75 63 -3.98% 87.4 Auto-Aftermarket Store 53,481 53,091 1,487 1,531 -0.15% 88.9 Convenience Store 30,666 30,184 853 870 -0.32% 94.2 Dept. Store 32,314 33,463 899 965 0.70% 85.0 Drug Store 30,035 35,658 835 1,028 3.49% 106.3 Electronics Store 11,612 14,566 323 420 4.64% 83.1 Fast Food Restaurant Store 30,352 25,833 844 745 -3.17% 88.3 Full Serv Restaurant Store 30,137 25,439 838 733 -3.33% 89.6 Furniture Store 10,755 9,621 299 277 -2.20% 80.6 Grocery Store 140,994 151,837 3,921 4,378 1.49% 96.0 Hardware Store 5,608 5,814 156 168 0.73% 84.7 Home Centers Store 25,186 28,370 700 818 2.41% 80.1 Jewelry Store 5,105 5,041 142 145 -0.25% 83.9 Liquor Store 8,049 6,951 224 200 -2.89% 88.0 Mass Merchandiser Store 44,562 47,606 1,239 1,373 1.33% 87.5 Photo Store 593 563 16 16 -1.05% 85.7 Shoe Store 6,330 7,134 176 206 2.42% 88.4 Sporting Goods Store 5,256 5,857 146 169 2.19% 81.7 Toy Store 3,904 3,520 109 101 -2.05% 85.0 Variety Store 2,592 2,802 72 81 1.57% 88.9
Area defined by Circle: (41.4222,75.6386): 3 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 DUNMORE PLAZA, PA 3 Mile Radius 6/4/96 Benchmark = Regional Area Definition Detailed Report
Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/Total Retail Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 1,827 2,977 51 86 10.26% 88.1 ------- ------- ------ ------ Total Shopping Center 513,420 531,937 14,276 15,337 All Other Stores 393,793 407,995 10,950 11,764 Total Retail 907,213 939,932 25,226 27,101
Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (41.4222,75.6386): 3 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 DUNMORE PLAZA, PA 5 Mile Radius 6/4/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 139,429 130,323 126,051 122,732 White 98.8% 98.0% 97.6% 97.2% Black 0.7% 1.1% 1.2% 1.4% American Indian 0.0% 0.1% 0.1% 0.1% Asian 0.3% 0.7% 0.9% 1.0% Other 0.2% 0.2% 0.2% 0.3% Hispanic 0.4% 0.6% 0.7% 0.8% Total Households 52,008 51,703 50,100 48,937 Household Population 135,214 124,651 120,382 117,063 Average Household Size 2.60 2.41 2.40 2.39 Household Income $ 0 - 9,999 37.7% 22.7% 17.9% 14.4% $ l0,000 - 14,999 18.6% 12.3% 11.7% 10.5% $ 15,000 - 24,999 26.6% 19.4% 17.8% 16.3% $ 25,000 - 34,999 11.4% 17.1% 15.6% 13.8% $ 35,000 - 49,999 3.9% 14.8% 17.0% 17.8% $ 50,000 - 74,999 1.3% 9.7% 13.0% 15.5% $ 75,000 - 99,999 0.5% 2.4% 3.9% 6.2% $ 100,000 - 149,999 -- 1.1% 2.3% 4.1% $ 150,000 + -- 0.6% 0.9% 1.5% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 13,303 22,446 26,593 31,258 Aggregate HH Inc ($000) 817,442 1,470,888 1,710,449 1,982,082 Median Family Income ($) 16,889 29,937 35,468 41,690 Per Capita Income ($) 6,046 11,800 14,209 16,932 Median Age Total Population 36.8 37.9 38.4 38.8 Median Age Adult Population 48.7 46.7 47.1 47.5 Median Age Female Population 41.2 41.0 41.4 41.9 Median Age Adult Female Population 51.3 50.2 50.3 50.6 Median Age Male Population 32.8 34.9 35.4 35.6 Median Age Adult Male Population 45.5 43.4 43.9 44.3
Area defined by Circle: (41.4222,75.6386): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 DUNMORE PLAZA, PA 5 Mile Radius 6/4/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 139,429 130,323 126,051 122,732 0 - 5 6.6% 7.1% 7.1% 7.0% 6 - 13 10.0% 9.2% 9.2% 9.2% 14 - 17 6.1% 4.6% 5.0% 5.0% 18 - 24 12.5% 11.0% 10.2% 10.2% 25 - 34 13.2% 14.3% 14.0% 13.6% 35 - 44 8.9% 12.7% 13.0% 12.9% 45 - 54 10.9% 9.1% 9.9% 10.5% 55 - 64 13.6% 10.5% 9o9% 9.9% 65 - 74 18.1% 11.9% 11.7% 11.2% 75 - 84 -- 7.6% 7o9% 7.9% 85 + -- 2.1% 2.3% 2.5% Female Population by Age 75,309 70,460 67,979 66,062 0 - 5 5.9% 6.4% 6.4% 6.4% 6 - 13 9.0% 8.2% 8.2% 8.2% 14 - 17 5.5% 4.1% 4.6% 4.7% 18 - 24 12.0% 10.5% 9.6% 9.6% 25 - 34 12.3% 13.5% 13.1% 12.6% 35 - 44 8.5% 11.9% 12.2% 12.3% 45 - 54 11.1% 8.7% 9.6% 10.2% 55 - 64 14.3% 11.0% 10.3% 10.2% 65 - 74 21.4% 13.3% 13.0% 12.5% 75 - 84 -- 9.5% 9.7% 9.8% 85 + -- 2.9% 3.2% 3.5% Male Population by Age 64,098 59,860 58,063 56,677 0 - 5 7.3% 7.9% 7.9% 7.8% 6 - 13 11.2% 10.3% 10.4% 10.3% 14 - 17 6.8% 5.1% 5.4% 5.4% 18 - 24 13.1% 11.5% 10.9% 11.0% 25 - 34 14.4% 15.3% 14.9% 14.7% 35 - 44 9.4% 13.6% 13.9% 13.6% 45 - 54 10.7% 9.4% 10.2% 10.9% 55 - 64 12.9% 10.0% 9.4% 9.6% 65 - 74 14.2% 10.4% 10.2% 9.6% 75 - 84 -- 5.4% 5.7% 5.8% 85 + -- 1.1% 1.2% 1.4%
Area defined by Circle: (41.4222,75.6386): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 1 of 3 DUNMORE PLAZA, PA 5 Mile Radius 6/4/96
1980 Census 1990 Census Percent Total Percent Total Percent Change Population White 137,688 98.8 127,685 98.0 -7.3 Black 1,002 0.7 1,395 1.1 39.2 American Indian, Asian & Other 735 0.5 1,243 1.0 69.1 Total 139,429 100.0 130,323 100.0 -6.5 Hispanic 524 0.4 737 0.6 40.6 Age of Population: 0 - 5 9,186 6.6 9,284 7.1 1.1 6 - 13 13,968 10.0 11,935 9.2 -14.6 14 - 17 8,490 6.1 5,932 4.6 -30.1 18 - 24 17,427 12.5 14,280 11.0 -18.1 25 - 34 18,443 13.2 18,700 14.3 14 35 - 44 12,401 8.9 16,511 12.7 33.1 45 - 54 15,236 10.9 11,801 9.1 -22.5 55 - 64 19,031 13.6 13,714 10.5 -27.9 65 + 25,225 18.1 28,158 21.6 11.6 Median Age Total Population 36.8 37.9 3.1 Median Age Adult Population 48.7 46.7 -4.1 Age of Male Population: 0-5 4,707 7.3 4,750 7.9 0.9 6-13 7,194 11.2 6,173 10.3 -14.2 14-17 4,336 6.8 3,039 5.1 -29.9 18-24 8,421 13.1 6,886 11.5 -18.2 25 - 34 9,199 14.4 9,182 15.3 -0.2 35 - 44 5,999 9.4 8,125 13.6 35.4 45 - 54 6,863 10.7 5,650 9.4 -17.7 55 - 64 8,270 12.9 5,962 10.0 -27.9 65 + 9,109 14.2 10,089 16.9 10.8 Total 64,098 100.0 59,860 100.0 -6.6 Median Age Male Population 32.8 34.9 6.3 Median Age Adult Male Population 45.5 43.4 -4.6 Age of Female Population: 0 - 5 4,479 5.9 4,534 6.4 1.2 6 - 13 6,774 9.0 5,762 8.2 -14.9 14 - 17 4,154 5.5 2,893 4.1 -30.4 18 - 24 9,006 12.0 7,394 10.5 -17.9 25 - 34 9,244 12.3 9,518 13.5 3.0 35 - 44 6,402 8.5 8,386 11.9 31.0 45 - 54 8,373 11.1 6,151 8.7 -26.5 55 - 64 10,761 14.3 7,752 11.0 -28.0 65 + 16,116 21.4 18,069 25.6 12.1 Total 75,309 100.0 70,460 100.0 -6.4 Median Age Female Population 41.2 41.0 -0.7 Median Age Adult Female Population 51.3 50.2 -2.2
Area defined by Circle: (41.4222,75.6386): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 2 of 3 DUNMORE PLAZA, PA 5 Mile Radius 6/4/96
1980 Census 1990 Census Percent Total Percent Total Percent Change Total Households 52,008 51,703 -0.6 Household Population 135,214 124,651 -7.8 Average Household Size 2.60 2.41 -7.3 Total Families 37,191 33,723 -9.3 Average Family Size 3.21 3.07 -4.2 Average Family Income $ 18,937 $35,184 85.8 Family Population 119,230 85.5 104,501 80.2 -12.4 Nonfamily Population 15,984 11.5 20,150 15.5 26.1 Group Quarters Population 4,215 3.0 5,669 4.3 34.5 Foreign Born Population 4,628 3.3 2,899 2.2 -37.4 Household Income: $ 0 - $ 9,999 19,643 37.7 11,723 22.7 -40.3 $ 10,000 - $ 14,999 9,673 18.6 6,363 12.3 -34.2 $ 15,000 - $ 24,999 13,869 26.6 10,011 19.4 -27.8 $ 25,000 - $ 34,999 5,939 11.4 8,826 17.1 48.6 $ 35,000 - $ 49,999 2,029 3.9 7,636 14.8 276.3 $ 50,000 - $ 74,999 670 1.3 4,997 9.7 645.8 $ 75,000 - $ 99,999 242 0.5 1,223 2.4 405.4 $ l00,000 - $ 149,999 550 1.1 $ 150,000+ 331 0.6 Median Household Income $ 13,303 $ 22,446 68.7 Average Household Income $ 15,700 $ 28,475 81.4 Per Capita Income $ 6,046 $ 11,800 95.2 Median Home Value $29,545 $ 62,684 112.2 Average Home Value $ 33,039 $ 70,382 113.0 Median Contract Rent $ 140 $252 80.0 Average Contract Rent $ 141 $259 83.7 Total Housing Units 55,689 100.0 55,421 100.0 -0.5 Owner Occupied 30,819 55.3 30,847 55.7 0.1 Renter Occupied 21,189 38.0 20,853 37.6 -1.6 Vacant 3,681 6.6 3,718 6.7 1.0 Mobile Home or Trailer 589 1.1 836 1.5 41.9 Condominiums 57 0.1 317 0.6 456.1
Area defined by Circle: (41.4222,75.6386): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 3 of 3 DUNMORE PLAZA, PA 5 Mile Radius 6/4/96
1980 Census 1990 Census Percent Total Percent Total Percent Change Occupation: Executive & Managerial 4,182 7.4 5,257 9.3 25.7 Professional Specialty 5,579 9.9 6,877 12.1 23.3 Technical Support 1,475 2.6 1,885 3.3 27.8 Administrative Support 9,755 17.3 9,971 17.6 2.2 Sales 5,449 9.7 6,205 10.9 13.9 Total White Collar 26,440 46.9 30,195 53.3 14.2 Prod/Craft/Repair 6,865 12.2 6,385 11.3 -7.0 Machine Operators 9,303 16.5 6,076 10.7 -34.7 Trans/Material Moving 2,627 4.7 2,411 4.3 -8.2 Laborers 3,044 5.4 3,130 s.5 2.8 Total Blue Collar 22,043 39.1 18,002 31.7 -18.3 Farm/Forest/Fish 204 0.4 254 0.4 24.5 Protective Service 1,164 2.1 974 1.7 -16.3 Private Service 211 0.4 82 0.1 -61.1 Other Service 6,571 11.6 7,193 12.7 9.5 Total Employed 56,429 91.7 56,698 94.1 0.5 Unemployed 5,076 8.3 3,536 5.9 -30.3 Total Civil Labor Force 61,505 100.0 60,234 100.0 -2.1 Working Mothers 7,360 47.5 8,954 65.1 21.7 Child <6 or< 6 & 6-17 2,250 14.5 3,598 26.2 59.9 Child 6-17 Only 5,110 33.0 5,356 39.0 4.8 Nonworking Mothers 8,121 52.5 4,795 34.9 -41.0 Means of Transportation to Work: Drive Alone/Carpool 45,310 82.9 48,632 87.6 7.3 Public Transportation 2,933 5.4 1,637 2.9 -44.2 Other 6,392 11.7 5,245 9.4 -17.9
Area defined by Circle: (41.4222,75.6386): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 DUNMORE PLAZA, PA 5 Mile Radius 6/4/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 91.3 Demographics - -------------------------------------------------------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 126,051 50,100 120,382 2.40 $26,593 2000 122,732 48,937 117,063 2.39 $31,258 Expenditure Potential - -------------------------------------------------------------------------------- 1995 Area Yearly Growth Rate Per Household 1.45 % Total 0.98 % Retail Support Potential (000) - -------------------------------------------------------------------------------- 1995: 5,018 sq. ft. - --------------------------------------------------------------------------------
Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/Total Retail Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 44,136 47,664 881 974 1.55% 86.0 Appliance Store 3,804 3,143 76 64 -3.74% 89.0 Auto-Aftermarket Store 75,468 75,929 1,506 1,552 0.12% 90.1 Convenience Store 43,096 42,978 860 878 -0.05% 95.0 Dept. Store 45,570 47,837 910 978 0.98% 86.1 Drug Store 42,082 50,608 840 1,034 3.76% 106.9 Electronics Store 16,400 20,839 327 426 4.91% 84.2 Fast Food Restaurant Store 42,587 36,702 850 750 -2.93% 89.0 Full Serv Restaurant Store 42,241 36,117 843 738 -3.08% 90.1 Furniture Store 15,166 13,739 303 281 -1.96% 81.5 Grocery Store 198,097 216,095 3,954 4,416 1.75% 96.8 Hardware Store 8,050 8,438 161 172 0.95% 87.3 Home Centers Store 36,798 41,931 734 857 2.65% 84.0 Jewelry Store 7,224 7,230 144 148 0.02% 85.3 Liquor Store 11,350 9,916 227 203 -2.66% 89.1 Mass Merchandiser Store 62,814 67,999 1,254 1,390 1.60% 88.6 Photo Store 839 805 17 16 -0.81% 87.0 Shoe Store 8,851 10,118 177 207 2.71% 88.8 Sporting Goods Store 7,428 8,382 148 171 2.45% 82.8 Toy Store 5,528 5,055 110 103 -1.77% 86.4 Variety Store 3,648 3,997 73 82 1.84% 89.8
Area deftned by Circle: (41.4222,75.6386): 5 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 DUNMORE PLAZA, PA 5 Mile Radius 6/4/96 Benchmark = Regional Area Definition Detailed Report
Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/Total Retail Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 2,571 4,243 51 87 10.54% 89.0 --------- --------- ------ ------ Total Shopping Center 723,747 759,766 14,446 15,525 All Other Stores 555,113 582,740 11,080 11,908 Total Retail 1,278,860 1,342,506 25,526 27,433
Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area deftned by Circle: (41.4222,75.6386): 5 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 1 of 4 Area 1 = DUNMORE PLAZA, PA 1 Mile Radius 6/4/96 Area 2 = DUNMORE PLAZA, PA 3 Mile Radius Area 3 = DUNMORE PLAZA, PA 5 Mile Radius Description Area 1 Area 2 Area 3 Population: 2000 Projection 20,990 86,240 122,732 1995 Estimate 21,804 89,699 126,051 1990 Census 22,804 94,044 130,323 1980 Census 25,232 102,039 139,429 Percent Change, 1980 - 1990 -9.6 -7.8 -6.5 Percent Change, 1990 - 1995 -4.4 -4.6 -3.3 1995 Population by Race: % White 98.1 97.1 97.6 % Black 1.1 lo5 1.2 % American Indian 0.1 0.1 0.1 % Asian 0.5 1.0 0.9 % Other 0.2 0.3 0.2 % Hispanic 0.8 0.7 0.7 1995 Population by Age: % 0 - 5 6.5 6.8 7.1 % 6 - 13 8.5 8.9 9.2 % 14 - 17 4.9 5.2 5.0 % 18 - 20 4.6 4.8 4.5 % 21 - 24 6.0 6.0 5.7 % 25 - 34 14.4 14.3 14.0 % 35 - 44 12.5 12.5 13.0 % 45 - 54 9.6 9.4 9.9 % 55 - 64 10.0 9.7 9.9 % 65 - 74 12.3 11.8 11.7 % 75 - 84 8.1 8.1 7.9 % 85 + 2.7 2.4 2.3 Median Age Total Population 39.0 38.1 38.4 Median Age Adult Population 47.6 46.9 47.1 Households: 2000 Projection 8,242 34,683 48,937 1995 Estimate 8,535 35,963 50,100 1990 Census 8,903 37,643 51,703 1980 Census 9,121 38,549 52,008 Percent Change, 1980 - 1990 -2.4 -2.4 -0.6 Percent Change, 1990 - 1995 -4.1 -4.5 -3.1 1990 Household Population 21,405 89,152 124,651 1990 Households w/ Children under 18 2,319 10,033 14,425 1990 Households w/ Persons over 65 3,523 14,853 19,980 Area defined by Circle: (41.4222,75.6386): 1 mile(s) Area defined by Circle: (41.4222,75.6386): 3 mile(s) Area defined by Circle: (41.4222,75.6386): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 2 of 4 Area 1 = DUNMORE PLAZA, PA 1 Mile Radius 6/4/96 Area 2 = DUNMORE PLAZA, PA 3 Mile Radius Area 3 = DUNMORE PLAZA, PA 5 Mile Radius Description Area 1 Area 2 Area 3 1990 Family Population 17,835 73,397 104,501 1990 Nonfamily Population 3,570 15,755 20,150 1990 Group Quarters Population 1,397 4,890 5,669 1990 Average Household Size 2.40 2.37 2.41 1990 Average Family Size 3.08 3.06 3.07 1990 Family Households 5,736 23,723 33,723 1990 Nonfamily Households 3,169 13,914 17,981 1995 Household Income: % $ 0 - $9,999 15.1 18.7 17.9 % $ 10,000 - $14,999 9.8 12.3 11.7 % $ 15,000 - $24,999 17.0 18.1 17.8 % $ 25,000 - $34,999 15.3 15.4 15.6 % $ 35,000 - $49,999 18.2 16.8 17.0 % $ 50,000 - $74,999 14.4 12.0 13.0 % $ 75,000 - $ 99,999 4.3 3.4 3.9 % $100,000 - $149,999 4.3 2.2 2.3 % $150,000 + 1.6 1.1 0.9 2000 Median Household Income $35,677 $29,898 $ 31,258 1995 Median Household Income $30,255 $25,525 $ 26,593 1990 Median Household Income $25,485 $21,691 $ 22,446 2000 Average Household Income $48,205 $39,622 $ 40,503 1995 Average Household Income $40,400 $33,531 $ 34,141 1990 Average Household Income $33,557 $28,091 $ 28,475 2000 Per Capita Income $20,278 $16,892 $ 16,932 1995 Per Capita Income $16,897 $14,219 $ 14,209 1990 Per Capita Income $14,012 $11,879 $ 11,800 2000 Median Family Income $45,980 $40,549 $ 41,690 1995 Median Family Income $38,993 $34,618 $ 35,468 1990 Median Family Income $32,845 $29,418 $ 29,937 1990 Average Family Income $42,182 $35,176 $ 35,184 Area defined by Circle: (41.4222,75.6386): 1 mile(s) Area defined by Circle: (41.4222,75.6386): 3 mile(s) Area defined by Circle: (41.4222,75.6386): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 3 of 4 Area 1 = DUNMORE PLAZA, PA 1 Mile Radius 6/4/96 Area 2 = DUNMORE PLAZA, PA 3 Mile Radius Area 3 = DUNMORE PLAZA, PA 5 Mile Radius Description Area 1 Area 2 Area 3 1990 Housing Unit Counts: Total Units 9,562 40,665 55,421 Occupied Units 8,903 37,643 51,703 Owner Occupied 5,229 21,004 30,847 Renter Occupied 3,678 16,634 20,853 Vacant Units 659 3,022 3,718 Year Round 650 2,965 3,638 Seasonal 9 58 77 1990 Housing Unit Percents: % Occupied of Total Units 93.1 92.6 93.3 % Owner Units of Occupied Units 58.7 55.8 59o7 % Renter Units of Occupied Units 41.3 44.2 40.3 % Vacant of Total Units 6.9 7.4 6.7 % Year Round of Vacant Units 98.6 98.1 97.8 % Seasonal of Vacant Units 1.4 1.9 2.1 % Condominiums of Total Units 0.1 0.7 0.6 1990 Condominiums: Total Condominium Units 9 279 317 % Owner Occupied 0.0 19.4 19.2 % Renter Occupied 100.0 72.4 70.3 % Vacant 0.0 8.2 10.4 1990 Units in Structure: % 1, Detached 43.0 42.0 46.6 % 1, Attached 5.0 5.8 5.1 % 2 27.1 23.3 21.2 % 3 - 9 21.4 20.4 18.3 % 10 - 49 1.4 3.6 3.4 % 50 + 0.5 2.9 2.4 % Mobile Homes 0.1 0.3 1.5 % Other 1.5 1.6 1.5 1990 Median Home Value $70,112 $59,393 $ 62,684 1990 Median Contract Rent $ 278 $ 257 $ 252 Area defined by Circle: (41.4222,75.6386): 1 mile(s) Area defined by Circle: (41.4222,75.6386): 3 mile(s) Area defined by Circle: (41.4222,75.6386): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 4 of 4 Area 1 = DUNMORE PLAZA, PA 1 Mile Radius 6/4/96 Area 2 = DUNMORE PLAZA, PA 3 Mile Radius Area 3 = DUNMORE PLAZA, PA 5 Mile Radius Description Area 1 Area 2 Area 3 1995 Total Employed 9,199 39,514 52,651 1995 Socio-Economic Measure 52 38 39 1990 Occupation: Total Civil Labor Force 11,017 43,123 60,234 % Unemployed 4.8 6.1 5.9 Total Employed 10,492 40,494 56,698 ------ ------ ------ % White Collar 60.9 53.7 53.3 ------ ------ ------ % Executive & Managerial 11.4 9.6 9.3 % Professional Specialty 17.3 12.2 12.1 % Technical Support 2.8 3.0 3.3 % Administrative Support 174 17.8 17.6 % Sales 12.0 11.1 10.9 ------ ------ ------ % Blue Collar 25.3 31.0 31.7 ------ ------ ------ % Precision Production, Craft& Repair 10.0 10.8 11.3 % Machine Operators 76 10.6 10.7 % Transportation & Material Moving 2 9 4.2 4.3 % Laborers 4.7 5.4 5.5 % Farming, Forestry & Fishing 0.6 0.4 0.4 % Service: Private Household 0.1 0.2 0.1 % Service: Protective 1.1 1.7 1.7 % Service: Other 11.9 13.1 12.7 1990 Educational Attainment (Age 25 & Over): % Less than Grade 9 8.4 11.1 11.3 % Grade 9-12(No Diploma) 15.2 18.1 17.8 % High School Graduate or Equivalency 36.1 39.2 39.5 % Some College(No Degree) 12.1 11.8 11.8 % Associate Degree 6.5 5.7 5.8 % Bachelor Degree 12.4 8.6 8.5 % Graduate or Professional Degree 9.4 5.6 5.3 Area defined by Circle: (41.4222,75.6386): 1 mile(s) Area defined by Circle: (41.4222,75.6386): 3 mile(s) Area defined by Circle: (41.4222,75.6386): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 1 of 9 Area 1 = DUNMORE PLAZA, PA 1 Mile Radius 6/4/96 Area 2 = DUNMORE PLAZA, PA 3 Mile Radius Area 3 = DUNMORE PLAZA, PA 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1995 Socio-Economic Measure: 52 38 39 1995 Employment: 9,199 39,514 52,651 Population: 2000 Projection 20,990 86,240 122,732 1995 Estimate 21,804 89,699 126,051 1990 Census 22,804 94,044 130,323 1990 - 1995 % Change (Growth) -4.4% -4.6% -3.3% 1990 Group Quarters Population 1,397 4,890 5,669 1995 % Population by Race: White 98.1% 97.1% 97.6% Black 1.1% 1.5% 1.2% American Indian, Eskimo & Aleut 0.1% 0.1% 0.1% Asian or Pacific Islander 0.5% 1.0% 0.9% Other 0.2% 0.3% 0.2% Hispanic 0.8% 0.7% 0.7% 1990 % Population by Race: White 98.4% 97.6% 98.0% Black 0.9% 1.3% 1.1% American Indian, Eskimo & Aleut 0.0% 0.1% 0.1% Asian or Pacific Islander 014% 0.8% 0.7% Other 0.2% 0.2% 0.2% Hispanic 0.6% 0.6% 0.6% 1995 % Population by Sex: Male 44.9% 45.9% 46.1% Female 55.1% 54.1% 53.9% 1990 % Population by Sex: Male 44.8% 45.7% 45.9% Female 55.2% 54.3% 54.1% 2000 Pop per Square Mile (Pop Density) 6,471.9 2,733.9 1,675.4 1995 Pop per Square Mile (Pop Density) 6,722.9 2,843.6 1,720.7 1990 Pop per Square Mile (Pop Density) 7,031.2 2,981.3 1,779.0 Area (Square Miles) 3.2 31.5 73.3 Area (Square Kilometers) 8.4 81.7 189.7 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 2 of 9 Area 1 = DUNMORE PLAZA, PA 1 Mile Radius 6/4/96 Area 2 = DUNMORE PLAZA, PA 3 Mile Radius Area 3 = DUNMORE PLAZA, PA 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- Households: 2000 Projection 8,242 34,683 48,937 1995 Estimate 8,535 35,963 50,100 1990 Census 8,903 37,643 51,703 1990 - 1995 % Change (Growth) -4.1% -4.5% -3.1% 2000 Average Household Size 2.38 2.35 2.39 1995 Average Household Size 2.39 2.36 2.40 1990 Average Household Size 2.40 2.37 2.41 2000 Per Capita Income $20,278 16,892 16,932 1995 Per Capita Income $16,897 14,219 14,209 1990 Per Capita Income $14,012 11,879 11,800 2000 Median Family Income $45,980 40,549 41,690 1995 Median Family Income $38,993 34,618 35,468 1990 Median Family Income $32,845 29,418 29,937 2000 Median Household Income $35,677 29,898 31,258 1995 Median Household Income $30,255 25,525 26,593 1990 Median Household Income $25,485 21,691 22,446 2000 Average Household Income $48,205 39,622 40,503 1995 Average Household Income $40,400 33,531 34,141 1990 Average Household Income $33,557 28,091 28,475 1995 % Household Income: $ 0 - $9,999 15.1% 18.7% 17.9% $ l0,000 - $ 14,999 9.8% 12.3% 11.7% $ l5,000 - $24,999 17.0% 18.1% 17.8% $ 25,000 - $ 34,999 15.3% 15.4% 15.6% $ 35,000 - $49,999 18.2% 16.8% 17.0% $ 50,000 - $ 74,999 14.4% 12.0% 13.0% $ 75,000 - $ 99,999 4.3% 3.4% 3.9% $ 100,000 - $ 149,999 4.3% 2.2% 2.3% $ 150,000 + 1.6% 1.1% 0.9% Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 3 of 9 Area 1 = DUNMORE PLAZA, PA 1 Mile Radius 6/4/96 Area 2 = DUNMORE PLAZA, PA 3 Mile Radius Area 3 = DUNMORE PLAZA, PA 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990% Household Income: $ 0 - $ 9,999 19.4% 23.7% 22.7% $ 10,000 - $ 14,999 10.5% 12.6% 12.3% $ 15,000 - $ 24,999 19.1% 19.5% 19.4% $ 25,000 - $ 34,999 18.0% 16.9% 17.1% $ 35,000 - $ 49,999 15.5% 14.4% 14.8% $ 50,000 - $ 74,999 10.1% 8.7% 9.7% $ 75,000 - $ 99,999 4.1% 2.3% 2.4% $ 100,000 - $ 149,999 2.0% 1.1% 1.1% $ 150,000 + 1.4% 0.7% 0.6% 1995% Population by Age: 0 - 5 6.5% 6.8% 7.1% 6 - 13 8.5% 8.9% 9.2% 14 - 17 4.9% 5.2% 5.0% 18 - 20 4.6% 4.8% 4.5% 21 - 24 6.0% 6.0% 5.7% 25 - 34 14.4% 14.3% 14.0% 35 - 44 12.5% 12.5% 13.0% 45 - 54 9.6% 9.4% 9.9% 55 - 64 10.0% 9.7% 9.9% 65 - 74 12.3% 11.8% 11.7% 75 - 84 8.1% 8.1% 7.9% 85 + 2.7% 2.4% 2.3% Median Age Total Population 39.0 38.1 38.4 Median Age Adult Population 47.6 46.9 47.1 1990% Population by Age: 0 - 5 6.7% 6.9% 7.1% 6 - 13 8.5% 8.9% 9.2% 14 - 17 4.4% 4.5% 4.6% 18 - 20 5.3% 5.8% 5.2% 21 - 24 6.2% 6.2% 5.8% 25 - 34 14.4% 14.4% 14.3% 35 - 44 12.3% 12.1% 12.7% 45 - 54 8.8% 8.8% 9.1% 55 - 64 10.6% 10.3% 10.5% 65 - 74 12.3% 12.0% 11.9% 75 - 84 8.1% 7.9% 7.6% 85 + 2.4% 2.2% 2.1% Median Age Total Population 38.5 37.7 37.9 Median Age Adult Population 47.1 46.5 46.7 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 1 of 9 Area 1 = DUNMORE PLAZA, PA 1 Mile Radius 6/4/96 Area 2 = DUNMORE PLAZA, PA 3 Mile Radius Area 3 = DUNMORE PLAZA, PA 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1995 % Female Population by Age: 0 - 5 5.6% 6.2% 6.4% 6 - 13 7.4% 7.9% 8.2% 14 - 17 4.8% 4.8% 4.6% 18 - 20 4.5% 4.5% 4.2% 21 - 24 5.8% 5.7% 5.4% 25 - 34 13.0% 13.3% 13.1% 35 - 44 11.6% 11.7% 12.2% 45 - 54 9,3% 9.2% 9.6% 55 - 64 10.4% 10.1% 10.3% 65 - 74 13.5% 13.2% 13.0% 75 - 84 10.1% 10.1% 9,7% 85 + 3.8% 3.4% 3.2% Female Median Age Total Population 42.6 41.4 41.4 Female Median Age Adult Population 51.4 50.5 50.3 1990 % Female Population by Age: 0 - 5 5.7% 6.2% 6.4% 6 - 13 7.4% 8.0% 8.2% 14 - 17 3.7% 4.0% 4.1% 18 - 20 6.0% 5.7% 5.1% 21 - 24 6.0% 5.8% 5.4% 25 - 34 12.9% 13.4% 13.5% 35 - 44 11.5% 11.4% 11.9% 45 - 54 8.5% 8.5% 8.7% 55 - 64 11.0% 10.8% 11.0% 65 - 74 13.7% 13.4% 13.3% 75 - 84 10.2% 9.9% 9.5% 85 + 3.4% 3.0% 2.9% Female Median Age Total Population 42.2 41.1 41.0 Female Median Age Adult Population 50.8 50.3 50.2 1990 % Hispanic Population by Type: Not of Hispanic Origin 99.4% 99.4% 99.4% Mexican 0.0% 0.1% 0.1% Puerto Rican 0.2% 0.3% 0.2% Cuban 0.0% 0.0% 0.0% Other Hispanic 0.3% 0.3% 0.3% Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 5 of 9 Area 1 = DUNMORE PLAZA, PA 1 Mile Radius 6/4/96 Area 2 = DUNMORE PLAZA, PA 3 Mile Radius Area 3 = DUNMORE PLAZA, PA 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990% Population Enrolled in School (Age 3 & Over): Preprimary School 6.9% 7.9% 7.8% Elementary and High School 57.4% 57.9% 61.0% College 35.7% 34.2% 31.2% Total School Enrollment 5,138 21,782 29,358 1990% Educational Attainment (Age 25 & Over): Less than Grade 9 8.4% 11.1% 11.3% Grade 9-12(No Diploma) 15.2% 18.1% 17.8% High School Graduate or Equivalency 36.1% 39.2% 39.5% Some College(No Degree) 12.1% 11.8% 11.8% Associate Degree 6.5% 5.7% 5.8% Bachelor Degree 12.4% 8.6% 8.5% Graduate or Professional Degree 9.4% 5.6% 5.3% 1990% Employment Status: Total Labor Force: Armed Forces 0.1% 0.1% 0.1% Civilian: Employed 55.5% 52.5% 53.4% Unemployed 2.8% 3.4% 3.3% Not In Labor Force 41.6% 44.0% 43.2% Female Labor Force: Armed Forces 0.0% 0.0% 0.0% Civilian: Employed 48.9% 45.1% 45.7% Unemployed 2.1% 2.7% 2.7% Not In Labor Force 48.9% 52.3% 51.6% 1990% Working Mothers: Child <6 Only 15.3% 16.1% 15.5% Child 6-17 Only 42.1% 38.5% 39.0% Child <6 & 6-17 12.3% 10.5% 10.6% Nonworking Mothers 30.4% 35.0% 34.9% Total Mothers 2,236 9,647 13,749 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 6 of 9 Area 1 = DUNMORE PLAZA, PA 1 Mile Radius 6/4/96 Area 2 = DUNMORE PLAZA, PA 3 Mile Radius Area 3 = DUNMORE PLAZA, PA 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990% Industry Employment: Agriculture/Forestry/Fishing 0.6% 0.4% 0.4% Mining 0.1% 0.1% 0.1% Construction 5.2% 5.0% 4.9% Manufacturing: Nondurable Goods 10.0% 12.1% 12.1% Durable Goods 6.2% 8.2% 9.0% Transportation 3.1% 4.2% 4.4% Communications & Public Utilities 2.1% 2.4% 2.4% Wholesale Trade 4.4% 4.8% 4.8% Retail Trade 17.0% 19.3% 19.3% Finance/Insurance/Real Estate 5.8% 5.1% 5.1% Services: Business & Repair 3.8% 3.9% 3.7% Personal 3.2% 3.1% 2.9% Entertainment & Recreation 0.9% 0.8% 0.9% Health 13.4% 11.2% 11.4% Educational 11.6% 8.6% 7.9% Other Professional & Related 8.2% 6.4% 6.1% Public Administration 4.4% 4.3% 4.6% Total 10,493 40,492 56,697 1990% Occupation: Executive & Managerial 11.4% 9.6% 9.3% Professional Specialty 17.3% 12.2% 12.1% Technical Support 2.8% 3.0% 3.3% Sales 12.0% 11.1% 10.9% Administrative Support 17.4% 17.8% 17.6% Service: Private Household 0.1% 0.2% 0.1% Service: Protective 1.1% 1.7% 1.7% Service: Other 11.9% 13.1% 12.7% Farming, Forestry & Fishing 0.6% 0.4% 0.4% Precision Production, Craft & Repair 10.0% 10.8% 11.3% Machine Operator, Assemblers & Inspectors 7.6% 10.6% 10.7% Transportation & Material Moving 2.9% 4.2% 4.3% Laborers 4.7% 5.4% 5.5% White Collar Total 60.9% 53.7% 53.3% Blue Collar Total 25.3% 31.0% 31.7% Total Employed 10,488 40,487 56,700 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 7 of 9 Area 1 = DUNMORE PLAZA, PA 1 Mile Radius 6/4/96 Area 2 = DUNMORE PLAZA, PA 3 Mile Radius Area 3 = DUNMORE PLAZA, PA 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Marital Status: Total Male: 8,271 34,793 48,165 Never Married 32.9% 34.7% 33.1% Married 55.2% 52.3% 54.4% Separated 1.9% 1.9% 1.8% Widowed 4.4% 4.6% 4.5% Divorced 5.5% 6.5% 6.1% Total Female: 10,839 43,348 59,498 Never Married 31.3% 28.4% 27.0% Married 41.8% 41.9% 44.0% Separated 1.9% 2.2% 2.2% Widowed 18.5% 19.9% 19.5% Divorced 6.5% 7.6% 7.3% 1990 Households by Type: One Person Households 2,858 12,678 16,480 Two or more Person Households: Family Households: Married Couple 4,365 17,430 25,130 Male Householder 283 1,293 1,771 Female Householder 1,088 5,000 6,822 Nonfamily Households 310 1,237 1,503 1990 Family Households With Children Married Couple Family 1,783 7,223 10,620 Male Householder 74 383 534 Female Householder 451 2,365 3,194 1990 Population by Household Type: Family Households 17,835 73,397 104,501 Nonfamily Households 3,570 15,755 20,150 1990 Households With: Children Under 18 2,319 10,033 14,425 Persons Over 65 3,523 14,853 19,980 Householder Over 65 3,244 13,773 18,452 1990 Average Family Size 3.08 3.06 3.07 Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 8 of 9 Area 1 = DUNMORE PLAZA, PA 1 Mile Radius 6/4/96 Area 2 = DUNMORE PLAZA, PA 3 Mile Radius Area 3 = DUNMORE PLAZA, PA 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 Median Home Value $70,112 59,393 62,684 1990 Average Home Value $80,478 66,774 70,382 1990 Median Contract Rent $ 278 257 252 1990 Average Contract Rent $ 281 265 259 1990 Persons In Unit: 1 Person Units 2,858 12,678 16,480 2 Person Units 2,784 11,337 15,736 3 Person Units 1,340 5,820 8,271 4+ Person Units 1,928 7,808 11,212 1990 Housing Unit Counts: Total Units 9,562 40,665 55,421 % Occupied 93.1% 92.6% 93.3% % Vacant 6.9% 7.4% 6.7% % Year Round 6.8% 7.3% 6.6% % Seasonal 0.1% 0.1% 0.1% Occupied Units 8,903 37,643 51,703 % Owner Occupied 58.7% 55.8% 59.7% % Renter Occupied 41.3% 44.2% 40.3% Vacant Units 659 3,022 3,718 % Year Round of Vacant Units 98.6% 98.1% 97.8% % Seasonal of Vacant Units 1.4% 1.9% 2.1% 1990 Total Housing Units in Structure 9,562 40,665 55,421 1, Detached 43.0% 42.0% 46.6% 1, Attached 5.0% 5.8% 5.1% 2, 27.1% 23.3% 21.2% 3 - 9 21.4% 20.4% 18.3% 10 - 49 1.4% 3.6% 3.4% 50 + 0.5% 2.9% 2.4% Mobile Home or Trailer 0.1% 0.3% 1.5% Other 1.5% 1.6% 1.5% 1990 Housing Units by Year Built 5,194 21,092 30,836 Built 1985 to March, 1990 0.9% 1.5% 3.1% Built 1980 to 1984 0.4% 1.3% 2.5% Built 1970 to 1979 2.4% 4.3% 7.9% Built 1960 to 1969 4.4% 5.2% 7.8% Built 1950 to 1959 5.9% 5.8% 6.2% Built 1949 or Earlier 86.0% 82.0% 72.5% Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 9 of 9 Area 1 = DUNMORE PLAZA, PA 1 Mile Radius 6/4/96 Area 2 = DUNMORE PLAZA, PA 3 Mile Radius Area 3 = DUNMORE PLAZA, PA 5 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Means of Transportation to Work: Car, Truck or Van: Drove Alone 70.0% 69.4% 71.2% Carpooled 14.9% 16.6% 16.4% Public Transportation 2.8% 3.2% 2.9% Other Means 11.0% 9.4% 7.9% Worked at Home 1.3% 1.4% 1.5% 1990 % Travel Time to Work: 0 - 14 Minutes 59.0% 54.4% 50.9% 15 - 29 Minutes 30.0% 34.3% 37.2% 30 - 59 Minutes 8.9% 9.4% 9.8% 60 - 89 Minutes 1.8% 1.5% 1.7% 90 + Minutes 0.3% 0.4% 0.4% 1990 Households by Number of Vehicles: 1 Vehicle 3,674 15,566 20,702 2 Vehicles 2,714 10,219 14,952 3 Vehicles 658 2,550 4,040 4 Vehicles 200 659 897 5 or More Vehicles 64 220 295 Area defined by Circle: (41.4222,75.6386): 1 mile(s) Area defined by Circle: (41.4222,75.6386): 3 mile(s) Area defined by Circle: (41.4222,75.6386): 5 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. - -------------------------------------------------------------------------------- Detail Rent Roll Page: 52 DUNMORE PLAZA Date: 05/14/96 Report Date: 05/14/96 Time: 14:13:42
- ------------------------------------------------------------------------------------------------------------------------------------ -- Rent Dates -- Suite Commence Expire Square Monthly Annual -- Cost Recovery -- Expense --- Other Income -- No. Tenant Name Start Footage Base Rent Rate/SF Description Monthly Stop Description Monthly - ------------------------------------------------------------------------------------------------------------------------------------ 00010 PRICE CHOPPER 01/01/67 11/30/00 26,475 0.00 0.00 01/01/67 00020 FAY'S DRUG STORE STORE #110 12/01/84 11/30/04 13,205 7,427.81 6.75 SPRINKLER 167.64 12/01/84 00040 LITTLE CAESARS 01/01/94 12/31/96 1,900 1,464.58 9.25 MAINTENANC 158.33 01/01/94 REAL ESTAT 158.33 SPRINKLER 24.12 340.78 00030 MALCOLM'S 04/01/95 03/31/00 1,900 1,820.83 11.50 MAINTENANC 134.58 04/01/95 REAL ESTAT 118.75 253.33 00050 GREAT WALL CHINESE RESTURANT 01/01/95 12/31/04 1,900 1,197.08 11.35 MAINTENANC 188.42 01/01/95 REAL ESTAT 180.34 368.76 - ------------------------------------------------------------------------------------------------------------------------------------ Total Building Occupied Sqft: 100% 45,380 12,510.30 0.00 1,130.51 Available Sqft: 0% 0 Total Sqft: 45,380 - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------- Suite --- Future Rent Increases -- No. Tenant Name Date Monthly Amt. Per Sf - ------------------------------------------------------------------- 00010 PRICE CHOPPER 00020 FAY'S DRUG STORE STORE #110 00040 LITTLE CAESARS 01/01/98 1,583.33 10.00 01/01/01 1,702.08 10.75 01/01/04 1,860.42 11.75 00030 MALCOLM'S 04/01/97 1,900.00 12.00 00050 GREAT WALL CHINESE RESTURANT 01/01/97 1,852.50 11.70 01/01/98 1,907.92 12.05 01/01/99 1,963.33 12.40 01/01/00 2,018.75 12.75 01/01/01 2,082.08 13.15 01/01/02 2,145.42 13.55 01/01103 2,208.75 13.95 01/01/04 2,280.00 14.40 ================================================================================ ADDENDUM G - PRO-JECT REPORTS - -------------------------------------------------------------------------------- ADDENDUM G PRO-JECT REPORTS - -------------------------------------------------------------------------------- RENEWAL RECOVERIES: GLOBAL GROUPING GLOBAL RECOVERY CAM GLOBAL GROUPING GLOBAL RECOVERY TAX GLOBAL GROUPING GLOBAL RECOVERY INS RENEWAL COMMISSIONS: STANDARD METHOD #3 RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE DUNMORE PLAZA SHOPPING CENTER PROJECT ASSUMPTIONS REPORT INCLUDING ALL TENANTS BUILDING PROLOGUE LEASEHOLD ANALYSIS OF DUNMORE PLAZA SHOPPING CENTER BEGINNING 6/1996 FOR 31 YEARS ON A FISCAL YEAR BASIS AREA MEASURES NRA 1996 VALUE - 45,380 THEREAFTER - CONSTANT OCCA 1996 VALUE - 45,380 1997 VALUE - 45,380 1998 VALUE - 45,380 1999 VALUE - 45,380 2000 VALUE - 45,380 2001 VALUE - 45,380 2002 VALUE - 45,380 2003 VALUE - 45,380 2004 VALUE - 45,380 2005 VALUE - 44,430 2006 VALUE - 45.380 2007 VALUE - 44,905 2008 VALUE - 45.380 2009 VALUE - 45.380 2010 VALUE - 44,430 2011 VALUE - 45,380 2012 VALUE - 44,905 2013 VALUE - 45,380 2014 VALUE - 45,380 2015 VALUE - 42,224 2016 VALUE - 18,905 2017 VALUE - 18,430 2018 VALUE - 18,905 2019 VALUE - 17,805 2020 VALUE - 5,225 2021 VALUE - 5,225 2022 VALUE - 5,22S 2023 VALUE - 5,700 2024 VALUE - 5,700 2025 VALUE - 5,700 2026 VALUE - 4,750 THEREAFTER - CONSTANT VACA +100.0% OF NRA -100.0% OF OCCA PAGE 2 GROWTH RATES RENT 1996 VALUE - 3.00 THEREAFTER - CONSTANT EXP. 1996 VALUE - 3.00 THEREAFTER - CONSTANT 2.0% 1996 VALUE - 2.00 THEREAFTER - CONSTANT 3.0% 1996 VALUE - 3.00 THEREAFTER - CONSTANT MARKET RATES ANCR 1996 VALUE - 6.00 THEREAFTER - GROWING AT GROWTH RATE RENT STOR 1996 VALUE - 11.00 THEREAFTER - GROWING AT GROWTH RATE RENT MISCELLANEOUS INCOMES NONE EXPENSES CAM , REFERRED TO AS CAM CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 45,000 THEREAFTER - GROWING AT GROWTH RATE EXP. REAL ESTATE TAXES , REFERRED TO AS TAX CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 53,086 THEREAFTER - GROWING AT GROWTH RATE EXP. INSURANCE , REFERRED TO AS INS. CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 7,400 PAGE 3 THEREAFTER - GROWING AT GROWTH RATE EXP. MANAGEMENT FEES , REFERRED TO AS MGT AN INFORMATIONAL EXPENSE 1996 VALUE - 8,251 1997 VALUE - 8,417 1998 VALUE - 8,628 1999 VALUE - 8,801 2000 VALUE - 9,164 2001 VALUE - 11,397 2002 VALUE - 11,626 2003 VALUE - 11,816 2004 VALUE - 12,094 2005 VALUE - 12,065 2006 VALUE - 12,753 2007 VALUE - 12,897 2008 VALUE - 13,388 2009 VALUE - 13,651 2010 VALUE - 13,499 2011 VALUE - 14,311 2012 VALUE - 14,283 2013 VALUE - 14,853 2014 VALUE - 15,154 2015 VALUE - 14,389 2016 VALUE - 8,808 2017 VALUE - 8,627 2018 VALUE - 9,135 2019 VALUE - 8,897 2020 VALUE - 4,106 2021 VALUE - 4,258 2022 VALUE - 4,376 2023 VALUE - 4,950 2024 VALUE - 5,099 2025 VALUE - 5,251 2026 VALUE - 4,506 THEREAFTER - CONSTANT VACANCY ALLOWANCE PERCENTAGE OF POTENTIAL GROSS INCOME FOR ALL TENANTS SUBJECT TO VACANCY 1996 VALUE - 2.00 THEREAFTER - CONSTANT MANAGEMENT FEE PERCENTAGE OF EFFECTIVE GROSS INCOME FOR ALL TENANTS PASSED THROUGH TO TENANTS USING EXPENSE MGT 1996 VALUE - 3.00 PAGE 4 THEREAFTER - CONSTANT COMMISSION CALCULATIONS STANDARD METHOD #1 - 4.500% OF TOTAL RENT STANDARD METHOD #2 - 2.250% OF TOTAL RENT STANDARD METHOD #3 - 3.375% OF TOTAL RENT STANDARD METHOD #4 - 0.000% OF TOTAL RENT STANDARD METHOD #5 - 0.000% OF TOTAL RENT COMMISSION PAYOUTS STANDARD METHOD#1 - CASHED OUT STANDARD METHOD#2 - CASHED OUT STANDARD METHOD#3 - CASHED OUT STANDARD METHOD#4 - CASHED OUT STANDARD METHOD#5 - CASHED OUT ALTERATION CALCULATION NONE ALTERATION PAYOUTS STANDARD METHOD#1 - CASHED OUT STANDARD METHOD#2 - CASHED OUT STANDARD METHOD#3 - CASHED OUT STANDARD METHOD#4 - CASHED OUT STANDARD METHOD#5 - CASHED OUT PAGE 5 COMMON AREA MAINTENANCE POOL NONE CAPITAL EXPENDITURES NONE PRIMARY CLASSIFICATION CODES NONE SECONDARY CLASSIFICATION CODES NONE COST CENTERS 1 - Common Area Maint. 2 - Real Estate Taxes 3 - Insurance Recovery SALES VOLUME PROFILE PERCENT OF RELATIVE MONTH ANNUAL SALES VOLUME - ----- ------------ ------ JAN 8.33% 1.00 FEB 8.33% 1.00 MAR 8.33% 1.00 APR 8.33% 1.00 MAY 8.33% 1.00 JUN 8.33% 1.00 JUL 8.33% 1.00 AUG 8.33% 1.00 SEP 8.33% 1.00 OCT 8.33% 1.00 NOV 8.33% 1.00 DEC 8.33% 1.00 ------ ----- TOTALS 100.00% 12.00 PAGE 6 GLOBAL RECOVERIES NONE TENANT PROLOGUE MINIMUM RENTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR SALES VOLUMES AND BREAKPOINTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR RENEWAL RENTS ARE COMPOUNDED ANNUALLY RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET REFERENCE TENANTS NONE TENANTS THERE ARE A TOTAL OF 5 LEASEHOLD TENANT(S): - -------------------------------------------------------------------------------- # 1 - PRICE CHOPPER BASE LEASE DATES: 1/1967 TO 11/2000 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 26,475 NOT SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 4.322/YEAR PERCENTAGE RENT: INITIAL SALES - 12,800,000/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 6,311,040/YEAR 1.25% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: CAM RECAPTURE OF RECOVERIES ASSIGNED TO COST CENTER 1 - Common Area Maint. PAGE 7 PERCENT OF OVERAGE - 100.00% PERCENT OF RECOVERY - 100.00% ANNUAL MAXIMUM - 0 RECOVERY FLOOR - 0 REAL ESTATE TAX RECAPTURE OF RECOVERIES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PERCENT OF OVERAGE - 100.00% PERCENT OF RECOVERY - 100.00% ANNUAL MAXIMUM - 0 RECOVERY FLOOR - 0 RECOVERIES CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 12/2000 TO 11/2005 SQUARE FOOTAGE: 26,415 MINIMUM RENT: INITIAL RENT - 78,896/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 6,111,040/YEAR 1.25% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: CAM RECAPTURE OF RECOVERIES ASSIGNED TO COST CENTER 1 - Common Area Maint. PERCENT OF OVERAGE - 100.00% PAGE 8 PERCENT OF RECOVERY - l00.00% ANNUAL MAXIMUM - 0 RECOVERY FLOOR - 0 TAXES RECAPTURE OF RECOVERIES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PERCENT OF OVERAGE - l00.00% PERCENT OF RECOVERY - 100.00% ANNUAL MAXIMUM - 0 RECOVERY FLOOR - 0 RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAN PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 2 DATES: 12/2005 TO 11/2010 SQUARE FOOTAGE: 26,475 MINIMUM RENT: INITIAL RENT - 78,896/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 6,311,040/YEAR 1.25% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: CAM RECAPTURE OF RECOVERIES ASSIGNED TO COST CENTER 1 - Common Area Maint. PERCENT OF OVERAGE - 100.00% PERCENT OF RECOVERY - 100.00% PAGE 9 ANNUAL MAXIMUM - 0 RECOVERY FLOOR - 0 TAXES RECAPTURE OF RECOVERIES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PERCENT OF OVERAGE - 100.00% PERCENT OF RECOVERY - 100.00% ANNUAL MAXIMUM - 0 RECOVERY FLOOR - 0 RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 3 DATES: 12/2010 TO 11/2015 SQUARE FOOTAGE: 26,475 MINIMUM RENT: INITIAL RENT - 78,896/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 6,311.040/YEAR 1.25% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: CAM RECAPTURE OF RECOVERIES ASSIGNED TO COST CENTER 1 - Common Area Maint. PERCENT OF OVERAGE - 100.00% PERCENT OF RECOVERY - 100.00% ANNUAL MAXIMUM - 0 PAGE 10 RECOVERY FLOOR - 0 TAXES RECAPTURE OF RECOVERIES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PERCENT OF OVERAGE - 100.00% PERCENT OF RECOVERY - 100.00% ANNUAL MAXIMUM - 0 RECOVERY FLOOR - 0 RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 2 - FAY'S DRUGS BASE LEASE DATES: 12/1984 TO 11/2004 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: l3,205 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 89,134/YEAR PERCENTAGE RENT: INITIAL SALES - 2,800,000/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 4,450,000/YEAR 2.00% OF OVERAGE TO A CEILING OF 4,999,999/YEAR 1.50% OF OVERAGE TO A CEILING OF 6,499,999/YEAR 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE PAGE 11 RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SNARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 12/2004 TO 11/2009 SQUARE FOOTAGE: 13,205 MINIMUM RENT: INITIAL RENT 99,838/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 4,450,000/YEAR 2.00% OF OVERAGE TO A CEILING OF 4,999,999/YEAR 1.50% OF OVERAGE TO A CEILING OF 6,499,999/YEAR 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE PAGE 12 WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 2 DATES: 12/2009 TO 11/2014 SQUARE FOOTAGE: 13,205 MINIMUM RENT: INITIAL RENT - 105,640/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 4,450,000/YEAR 2.00% OF OVERAGE TO A CEILING OF 4,999,999/YEAR 1.50% OF OVERAGE TO A CEILING OF 6,499,999/YEAR 1.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAN ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 3 DATES: 12/2014 TO 11/2019 SQUARE FOOTAGE: 13,205 MINIMUM RENT: INITIAL RENT - 112,243/YEAR PERCENTAGE RENT: PAGE 13 INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 4,450,000/YEAR 2.00% OF OVERAGE TO A CEILING OF 4,999,999/YEAR 1.50% OF OVERAGE TO A CEILING OF 6,499,999/YEAR l.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: NONE - -------------------------------------------------------------------------------- # 3 - LITTLE CAESARS BASE LEASE DATES: 1/1994 TO 12/1996 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,900 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 17,575/YEAR PERCENTAGE RENT: INITIAL SALES - 0/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 4,450,000/YEAR RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PAGE 14 PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 1/1997 TO 12/2001 SQUARE FOOTAGE: 1,900 MINIMUM RENT: INITIAL RENT - 17,575/YEAR CHANGING TO - 19,000/YEAR ON 1/1998 PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 4,450,000/YEAR RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA PAGE 15 ================================================================================ ADDENDUM F RENT ROLL - -------------------------------------------------------------------------------- ADDENDUM F RENT ROLL CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 2 DATES: 1/2002 TO 12/2006 SQUARE FOOTAGE: 1,900 MINIMUM RENT: INITIAL RENT - 20,425/YEAR CHANGING TO - 22,325/YEAR ON 1/2004 PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% INITIAL BREAKPOINT - 4,450,000/YEAR RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SNARE RECOVERY OF EXPENSE INS PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP PAGE 16 AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO 4 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE STOR MULTIPLIED BY l.000 INCREASING AT GROWTH RATE 3.0% PER YEAR DURING EACH RENEWAL TERM RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SNARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SNARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: STANDARD METHOD #3 RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE PAGE 17 - -------------------------------------------------------------------------------- # 4 - MALCOM'S BASE LEASE DATES: 4/1995 TO 3/2000 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,900 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 2l,850/YEAR CHANGING TO - 22,800/YEAR ON 4/1997 PERCENTAGE RENT: INITIAL SALES - 390,000/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 6.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SNARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE OPTION 1 DATES: 4/2000 TO 3/2005 SQUARE FOOTAGE: 1,900 PAGE 18 MINIMUM RENT: INITIAL RENT - 23,750/YEAR PERCENTAGE RENT: INITIAL SALES - CONTINUED FROM PRIOR TERM THEREAFTER - GROWING AT GROWTH RATE 2.0% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT 6.00% OF OVERAGE TO AN UNLIMITED CEILING RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO 4 5.00 3 NONE NONE YES NO 5 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE STOR MULTIPLIED BY 1.000 PAGE 19 INCREASING AT GROWTH RATE 3.0% PER YEAR DURING EACH RENEWAL TERM RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE RENEWAL RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SNARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 -Real Estate Taxes PRO RATA SNARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 -Insurance Recovery PRO RATA SNARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: STANDARD METHOD #3 RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE - -------------------------------------------------------------------------------- # 5 - GREAT WALL CHINESE BASE LEASE DATES: 1/1995 TO 12/2004 TYPE OF TENANT: RETAIL SQUARE FOOTAGE: 1,900 SUBJECT TO VACANCY ALLOWANCE MINIMUM RENT: INITIAL RENT - 21,565/YEAR CHANGING TO - 22,230/YEARON 1/1997 CHARGING TO - 22,895/YEARON 1/1998 CHANGING TO - 23,560/YEARON 1/1999 CHANGING TO - 24,225/YEARON 1/2000 CHANGING TO - 24,985/YEARON 1/2001 CHARGING TO - 25,745/YEARON 1/2002 CHARGING TO - 26,505/YEARON 1/2003 CHANGING TO - 27,360/YEARON 1/2004 PAGE 20 PERCENTAGE RENT: INITIAL SALES 0/YEAR THEREAFTER - GROWING AT GROWTH RATE 2.0% WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT RECAPTURES: NONE RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH COMMISSIONS: NONE ALTERATIONS: NONE SPECULATIVE RENEWALS: LENGTH VACANT SQ FT MONTHS OF TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS - ---- ------------ ------ -------- --------- ----------- ----------- 1 5.00 3 NONE NONE YES NO 2 5.00 3 NONE NONE YES NO 3 5.00 3 NONE NONE YES NO 4 5.00 3 NONE NONE YES NO 5 5.00 3 NONE NONE YES NO RENEWAL MINIMUM RENT: MARKET RATE STOR MULTIPLIED BY 1.000 INCREASING AT GROWTH RATE 3.0% PER YEAR DURING EACH RENEWAL TERM RENEWAL PERCENTAGE RENT: SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE PAGE 21 RENEWAL RECOVERIES: CAM ASSIGNED TO COST CENTER 1 - Common Area Maint. PRO RATA SHARE RECOVERY OF EXPENSE CAM PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH REAL ESTATE TAXES ASSIGNED TO COST CENTER 2 - Real Estate Taxes PRO RATA SHARE RECOVERY OF EXPENSE TAX PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH INSURANCE ASSIGNED TO COST CENTER 3 - Insurance Recovery PRO RATA SHARE RECOVERY OF EXPENSE INS. PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH RENEWAL COMMISSIONS: STANDARD METHOD #1 RENEWAL PAYOUT: CASHED OUT RENEWAL ALTERATIONS: NONE ================================================================================ ADDENDUM H - ENGAGEMENT LETTER - -------------------------------------------------------------------------------- ADDENDUM H ENGAGEMENT LETTER - -------------------------------------------------------------------------------- [Letterhead of CB Commercial] May 8,1996 Mr. Josh Kane Chief Financial Officer MARK CENTERS TRUST 660 Third Avenue Kingston, PA 18704 Re: 17 Shopping Centers Nationwide Dear Mr. Kane: At your request, we are pleased to submit the following proposal to appraise the above referenced properties. The purpose of this assignment is to estimate the market value of the leased fee interest. We understand the appraisal reports are to be used for mortgage underwriting purposes. We also understand that the reports will be used by Mark Centers Trust and Morgan Stanley. The properties are briefly described on attachment "A". Our complete valuation will be presented in a self contained (narrative) format and will contain a complete description of the property along with pertinent exhibits and photographs together with supporting factual data and analysis necessary to convey our opinion of value. We will value the property based upon the cost, income and market approaches to value, where applicable, correlating our findings into a final value conclusion. The report will be prepared in conformity with and will be subject to the requirements of the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. Each report will also conform to the Uniform Standards of Professional Appraisal Practice ("USPAP") and the Financial Institutions Reform, Recovery and Enforcement Act of 1 989 ("FIRREA") and the Morgan Stanley Capital Appraisal Standards described in Attachment "B". We assume that there are no major or significant items of deferred maintenance beyond normal wear and tear for properties of their age as of the date of the appraisal which would require the expertise of a professional contractor to estimate the cost of such repairs. If such repairs need to be considered in this appraisal, such estimates are to be provided by a qualified firm hired by you and at no cost to us. The total fee for the assignment is $68,000 ($4,000 per property) including all travel and related expenses which is due and payable upon delivery of the reports. If we are asked to cancel the assignment within two weeks of our engagement an upset fee equal to 50% will be due and payable. If cancellation occurs between two and three weeks, the upset fee will be equal to 75% and any time after three weeks the full fee will be due and payable. We will furnish you with three copies of our final report within four to five weeks of our authorization. Authorization occurs upon our receipt of an executed copy of this proposal and our delivery date is contingent upon the timely receipt of all necessary property information, financial statements and detailed lease information. If all requested data and information is not available as of the authorized date, we reserve the right to extend the delivery date by the amount of time it takes to receive the requested information. May 8,1996 Mr. Kane Page 2 In order to complete this assignment in a timely manner, we will require the following specific information, if available: o Copy of Ground Lease, if Leasehold o Legal descriptions. o Current rent roll. o Copy of Leases or abstracts o Expense reimbursements on a tenant by tenant basis o Building area calculations and surveys. o Operating statements for the past three full years. o Current year expenses to date. o A copy of the current budget. o Copies of any toxic engineering reports dealing with underground tanks, PCB's, asbestos or chemical spills, if available. o A copy of the next fiscal year's budget, if available. o A list of major repairs which have recently been made, or are scheduled to be made in the next 18 months. o Name and phone number(s) of on-site superintendent(s), or local management firm or trustee for physical inspection. o Notice of any pending changes to the rent roll or pertinent information regarding the current status of the tenants. If we are requested to give court testimony an additional fee will be charged on an hourly basis at $300 per hour for designated MAI-appraisers and $175 for non-designated appraisers. Said hourly billings pertain to court preparation, waiting and travel time, document review and preparation (excludes narrative appraisal report) and all meetings related to court testimony. The client may provide only complete, final copies of the appraisal report to third parties who shall rely on such reports in connection with loan underwriting or securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the client for routine and customary questions. Please note that our consent to allow an appraisal report prepared by CB Commercial, or portions of such report, to become part of or be referenced in any public offering, the granting of such consent will be at our sole discretion and, if given, will be on condition that we will be provided with an Indemnification Agreement and/or Non-Reliance letter, in a form and content satisfactory to us, by a party satisfactory to us. We do consent to your submission of the reports to rating agencies, loan participants or your auditors without the need to provide us with an Indemnification Agreement and/or Non-Reliance letter. In addition to the fee for this assignment, you agree to compensate us at a rate to be mutually agreed to, for any time expended by us should we be required (by subpoena or otherwise) or requested by you, your representatives or other entity to become involved in any litigation or May 8,1996 Mr. Kane Page 3 legal proceeding in any way involving this engagement to which we are not a party, the appraisal work we produce or the property which is the subject of this assignment. You also agree to pay, on demand, all reasonable expenses which we incur in connection with any litigation or proceedings including the fees of our attorneys. You acknowledge that we are being retained hereunder as an independent contractor to perform the services described herein and nothing in this agreement shall be deemed to create any other relationship between us. This assignment will be deemed concluded and the services hereunder completed upon delivery to you of the appraisal report discussed herein. If these terms are acceptable, please authorize us to proceed by having an officer of the corporation, managing general partner, principal, owner, or a contractually responsible party sign the enclosed copy of this proposal with "Terms and Conditions" and return it to us for our permanent file. Upon receipt of your authorization, we will schedule the necessary personnel to complete the project in a timely manner. We appreciate this opportunity to be of service to you on this assignment. If you have additional questions, please do not hesitate to give me a call. Sincerely, CB COMMERCIAL REAL ESTATE GROUP, INC. Appraisal /s/ Michael R. Pecorino Michael R. Pecorino, MAI MRP:jf cc: Douglas W. Haney Enclosure AGREED & ACCEPTED - ----------------------------- ------------------------------- Signature Title - ----------------------------- ------------------------------- Name (type or print) Date Office #: Fax #: -------------------- ------------------------- ================================================================================ ADDENDUM H - ENGAGEMENT LETTER - -------------------------------------------------------------------------------- ADDENDUM I QUALIFICATIONS - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM I - QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF DIMITRI M. TEDDONE, MAI Assistant Vice President Senior Real Estate Analyst CB Commercial Real Estate Group, Inc. Appraisal 560 Lexington Avenue, 20th Floor New York, New York 10022 (212) 207-6088 EDUCATIONAL Bachelor of Science, Marketing Long Island University, C.W. Post Campus Greenvale, New York Appraisal Institute Successfully completed all the necessary courses to qualify for the MAI designation. LICENSES/CERTIFICATIONS Certified Real Estate General Appraiser: State of New York State #46-7944 PROFESSIONAL Appraisal Institute Designated Member of the Appraisal Institute (MAI), Certificate No. 10348 EXPERIENCE Engaged in the appraisal and consultation of commercial real estate throughout the Northeast United States since July of 1986, specializing in the New York Metropolitan area. Assignments include full and partial interest appraisals of investment grade office buildings, air rights, commercial lofts, multi-family residential properties, cooperatives, condominium, townhouses, shopping centers, industrial facilities, special-use properties, portfolio valuations and multi-property assignments. 1986 - 1991 Joseph J. Blake & Associates New York, New York 1991 - Present CB Commercial Real Estate Group, Inc., Appraisal New York, New York
- -------------------------------------------------------------------------------- ================================================================================ ADDENDUM I - QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF MICHAEL R. PECORINO, MAI Senior Vice President, Regional Manager CB Commercial Real Estate Group, Inc. 560 Lexington Avenue, 20th Floor New York, New York 10022 (212)207-6102 EDUCATIONAL Real Estate Appraisal and Analysis, New York University, the Real Estate Institute Bachelor of Arts, Geography, Planning, Urban Studies, State University College of New York at Oneonta Successfully completed all the necessary courses to qualify for the MAI designation. LICENSES/CERTIFICATIONS Certified General Real Estate Appraiser: State of New York (46000002055) Certified General Real Estate Appraiser: State of New Jersey (RG-01667) Certified General Real Estate Appraiser: State of Pennsylvania (GA-001096-R) Certified General Real Estate Appraiser: State of Connecticut (0000489) Certified General Real Estate Appraiser: State of Maryland (10569) Certified General Real Estate Appraiser: State of New Jersey (3793) Certified General Real Estate Appraiser: State of Delaware (X10000223) Certified General Real Estate Appraiser: State of Maine (CG00001192) Certified General Real Estate Appraiser: State of Vermont (080-0000168) Certified General Real Estate Appraiser: State of District of Columbia (GA00010315) Licensed Real Estate Broker: State of New York PROFESSIONAL Appraisal Institute Designated Member of the Appraisal Institute (MAI), Certificate No. 7944 Member of the Real Estate Board of New York EXPERIENCE Fifteen years of Real Estate Appraisal and Consulting experience throughout the United States specializing in the New York metropolitan area. 1993 - Present CB Commercial Real Estate Group, Inc., Appraisal New York, New York 1983 - 1993 Cushman & Wakefield, Inc. New York, New York 1982 - 1983 Joseph J. Blake & Associates, Inc. New York, New York 1981 - 1982 City of New York - Office of Manhattan Planning New York, New York 1980 - 1981 City of Jersey City - Office of the Mayor Jersey City, New Jersey
Assignments include full and partial interest appraisals of office buildings, air rights, commercial lofts, garden apartments, cooperatives, condominiums, townhouses, shopping centers, industrial facilities, residential and office market studies, portfolio valuations and multi-property assignments. - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM I - QUALIFICATIONS - -------------------------------------------------------------------------------- - ---------- + The Appraisal of Real Estate, Tenth Edition, Appraisal Institute, 1992. ++ The Dictionary of Real Estate Appraisal, Third Edition, 1993. ss. The office of the Comptroller of the Currency, 12 CFR Part 34, Subpart C, ss.34.42(f), August 24, 1966. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. * 1966 BOMA Experience Exchange Report, Income/Expense Analysis for Office Buildings (Building Owners and Managers Association, 1966) ++ Statement on Appraisal Standard No. 6, Appraisal Standards Board of The Appraisal Foundation, September 19, 1992. - -------------------------------------------------------------------------------- This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE AMES PLAZA Route 61 Shamokin, Pennsylvania CB File No. 96-093G [CB COMMERCIAL LOGO] Delivering Solutions Through Local Knowledge Worldwide COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE AMES PLAZA Route 61 Shamokin, Pennsylvania CB File No. 96-093G DATE OF VALUE May 15, 1996 PREPARED FOR MORGAN STANLEY Mortgage Capital Inc. 1585 Broadway New York, NY 10036 PREPARED BY CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES 560 Lexington Avenue, 16th Floor New York, New York 10022 [LETTERHEAD OF CB COMMERCIAL REAL ESTATE GROUP, INC.] June 19, 1996 MORGAN STANLEY Mortgage Capital Inc. 1585 Broadway New York, NY 10036 RE: Appraisal of Shopping Center AMES PLAZA Route 61 Shamokin, Pennsylvania CB File No. 96-093G Dear Ladies and Gentlemen; At your request and authorization, CB Commercial Real Estate Group, Inc. has prepared a Complete Appraisal presented in a self-contained appraisal report of the current market value of the leased fee estate in the above-referenced real property. The subject property is a single story neighborhood shopping center featuring 98,210 square feet of gross leasable area. The shopping center is anchored by a Ames Department Store and is currently 100% leased though only 60% occupied. The property's second anchor, an Acme Supermarket vacated their store in February 1996, but is current in their rent payments. The property is more fully described, legally and physically, within the enclosed report. Data, information, and calculations leading to the value conclusion are incorporated in the report following this letter. The report, in its entirety, including all assumptions and limiting conditions, is an integral part of and inseparable from this letter. Based on research and analysis contained in this report, it is estimated that the current market value of the leased fee estate in the subject property as of May 15, 1996, is: TWO MILLION DOLLARS ($2,000,000) The following appraisal sets forth the most pertinent data gathered, the techniques employed, and the reasoning leading to the opinion of value. The analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP), the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, and The Financial Institution Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Furthermore, this report has been prepared in conformance with our interpretation of the appropriate regulations and guidelines set forth by Morgan Stanley. Morgan Stanley June 19, 1996 Page 2 It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CB Commercial Real Estate Group, Inc. can be of further service, please do not hesitate to contact us. Respectfully Submitted, CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES by: /s/ Peter J. Jolicoeur /s/ Michael R. Pecorino - ------------------------------- ------------------------------- Peter J. Jolicoeur Michael R. Pecorino, MAI Assistant Vice President Senior Vice President Senior Real Estate Analyst Northeast Regional Manager Pennsylvania Certification No. GA-001096-R ================================================================================ CERTIFICATION OF THE APPRAISERS - -------------------------------------------------------------------------------- CERTIFICATION OF THE APPRAISERS We certify that to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. 4. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event, such as the approval of a loan. 5. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation and the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. In addition, this report conforms to the requirements of the Financial Institution Reform, Recovery, and Enforcement Act (FIRREA). 6. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 7. Michael R. Pecorino has completed the requirements of the continuing education program of the Appraisal Institute. 8. The property was personally inspected by Peter J. Jolicoeur, but was not inspected by Michael R. Pecorino, MAI. 9. No other person provided professional assistance to the persons signing this report. 10. The undersigned appraisers have extensive experience in the appraisal/review of similar property types. /s/ Peter J. Jolicoeur /s/ Michael R. Pecorino - ------------------------------- ------------------------------- Peter J. Jolicoeur Michael R. Pecorino, MAI Senior Real Estate Analyst Senior Vice President Northeast Regional Manager Pennsylvania Certification No. GA-001096-R - -------------------------------------------------------------------------------- i ================================================================================ SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- FRONT VIEW OF THE SUBJECT PROPERTY FACING AMES - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- FRONT VIEW OF THE SUBJECT PROPERTY FACING VACANT ACME STORE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ii ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- SUMMARY OF SALIENT FACTS Property Name: Ames Plaza Location: Route 61, Shamokin, Pennsylvania Assessor's Parcel Number: Section 68, Parcel Nos 44C, 44C 001L & 44C 0013L Property Description: The subject property is a single story neighborhood shopping center featuring 98,210 square feet of gross leasable area. The improvements are situated on a 765,465 square foot lot (17.57 acre). Construction features include a concrete and steel frame and brick and split-faced block exterior walls. Highest and Best Use As Though Vacant: Land banking until such time that retail development becomes financially feasible As Improved: Continued use as a shopping center Property Rights Appraised: Leased Fee Date of Value: May 15, 1996 Land Area 765,465 Square Feet (17.57 acres) Improvements Building Area: Gross Leasable Area: 98,210 SF Year Built: 1967 Condition: Good Estimated Marketing Time: 12 months or less - -------------------------------------------------------------------------------- iii ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- Financial Indicators Current Occupancy: 100% Leased / 60% Occupied Stabilized Occupancy: 99% Market Rental Rate: $ 3.50 P.S.F. Anchor $ 5.00 P.S.F. Satellite Income Growth Rate: 3.0% Estimated Stabilized Expenses: $ 0.86 P.S.F. Expense Growth Rate: 3.0% Going-In Overall Capitalization Rate Selected: 10.00% Going-In Overall Capitalization Rate Implied: 9.2% Terminal Overall Capitalization Rate: 10.50% Discount Rate: 12.00% Valuation Land Value: N/A Cost Approach: N/A Sales Comparison Approach: $ 2,100,000 Income Capitalization Approach: $ 2,000,000 Final Value Conclusion: $ 2,000,000 Per Square Foot: $ 20.36/SF - -------------------------------------------------------------------------------- iv INTRODUCTION INTRODUCTION ================================================================================ TABLE OF CONTENTS - -------------------------------------------------------------------------------- TABLE OF CONTENTS CERTIFICATION OF THE APPRAISERS................................................i SUBJECT PHOTOGRAPHS...........................................................ii SUMMARY OF SALIENT FACTS.....................................................iii TABLE OF CONTENTS..............................................................v INTRODUCTION...................................................................1 AREA ANALYSIS..................................................................7 MARKET ANALYSIS...............................................................15 SITE ANALYSIS.................................................................20 IMPROVEMENT ANALYSIS..........................................................22 ZONING........................................................................25 TAX AND ASSESSMENT DATA.......................................................26 HIGHEST AND BEST USE..........................................................27 APPRAISAL METHODOLOGY.........................................................30 SALES COMPARISON APPROACH.....................................................32 INCOME CAPITALIZATION APPROACH................................................37 RECONCILIATION OF VALUE.......................................................60 ASSUMPTIONS AND LIMITING CONDITIONS...........................................62 ADDENDA.......................................................................66 A.........................................................Glossary Of Terms B.........................................................Legal Description C.................................................Improved Comparable Sales D........................................................Rental Comparables E...........................................Strategic Mapping, Inc. Reports F.................................................................Rent Roll G..........................................................PRO-JECT Reports H.........................................................Engagement Letter I............................................................Qualifications - -------------------------------------------------------------------------------- v INTRODUCTION ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- INTRODUCTION PROPERTY IDENTIFICATION The subject is located on the south side of Route 61 in Coal Township, approximately one-half mile east of the City of Shamokin, Pennsylvania. The Coal Township assessor's tax identification number is Section 68, Parcel Nos 44C, 44C 001L & 44C 0013L. A full metes and bounds legal description is included in the Addenda. OWNERSHIP AND PROPERTY HISTORY The subject is currently owned by Mark Centers Limited Partnership. The subject has not sold in the last three years and to the best of our knowledge there is no known current listing, option, or agreement of sale of the subject. DATES OF INSPECTION AND VALUATION The site was last inspected by Peter J. Jolicoeur on May 15, 1996. Michael R. Pecorino, MAI did not inspect the subject or the comparables employed but reviewed this report and concurs with the conclusions. The date of the market value is the date of inspection, May 15, 1996. PURPOSE OF THE APPRAISAL The purpose of this appraisal is to estimate the current market value of the leased fee estate in the subject property in it's "As Is" condition. Market value is defined as follows: Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised, and acting in what they consider their own best interests; 3. A reasonable time is allowed for exposure in the open market; 4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and - -------------------------------------------------------------------------------- 1 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- 5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) TERMS AND DEFINITIONS Please refer to the Addenda for a Glossary of the Terms and Definitions that are, and may be used in this appraisal. INTENDED USE OF REPORT This appraisal is for mortgage underwriting purposes. PROPERTY RIGHTS APPRAISED The value estimated represents the leased fee estate. APPRAISAL DEVELOPMENT AND REPORTING PROCESS The following steps were completed by CB Commercial for this assignment: 1. Analyzed regional, city, neighborhood, site, and improvement data. 2. Inspected the subject and the neighborhood. 3. Reviewed data regarding taxes, zoning, utilities, easements, and city services. 4. Considered comparable improved sales, comparable improved building rental information, and comparable site sales. Data was confirmed with principals, managers, or real estate agents representing principals, unless otherwise noted. 5. Analyzed the data to arrive at conclusions via each approach to value used in this report. 6. Reconciled the results of each approach to value employed into a probable range of market data and finally an estimate of value for the subject, as defined herein. 7. Estimated a reasonable exposure time associated with the value estimate. The subject site and improvement descriptions are based on a personal inspection of the property, discussions with representatives of the subject property, and/or a review of relevant plat maps and leasing plans. The inspection is not a substitute for thorough engineering studies. - ---------- (1) The definition of market value is taken from: The Office of the Comptroller of the Currency under 12 CFR, Part 34, Subpart C-Appraisals, ss.34.42(f), August 24, 1966. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. - -------------------------------------------------------------------------------- 2 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- To develop the opinion of value, CB Commercial performed a complete appraisal process, as defined by the Uniform Standards of Professional Appraisal Practice. This means that no departures from Standard 1 were invoked. This is a complete appraisal, in the form of a Self-Contained Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Standards of Professional Appraisal Practice. The definitions of Complete Appraisal and Self-Contained Report are found in the Glossary of Terms and Definitions. In a complete appraisal, CB Commercial uses all known applicable approaches to value. The value conclusion reflects all known information about the subject property, market conditions, and available data. The Self-Contained Report incorporates to the fullest extent possible, practical explanation of the data, reasoning and analysis that were used to develop the opinion of value. It also includes thorough descriptions of the subject property and the market for the subject property type. All data considered significant that was requested for this assignment was received by CB Commercial Real Estate Group, Inc. Appraisal Services. SPECIAL APPRAISAL INSTRUCTIONS There were no special appraisal instructions. MARKETING PERIOD The marketing period section is divided into reasonable exposure time and reasonable marketing time. Exposure time differs from marketing time. Marketing time is the period required to sell a real property interest at market value during the period immediately after the effective date of the appraisal. Exposure time is always presumed to precede the effective date of the appraisal. Exposure time is not intended to be a prediction of a date of sale or a one-line statement. Instead, it is an integral part of the appraisal analysis and is based on one or more of the following: o statistical information about days on the market o information gathered through sales verification o interviews of market participants. The reasonable exposure period is a function of price, time, and use. It is not an isolated estimate of time alone. Exposure time is different for various types of real estate and under various market conditions. - -------------------------------------------------------------------------------- 3 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- Reasonable Exposure Time Exposure time is always presumed to precede the effective date of the appraisal. It is the estimated length of time the property would have been offered prior to a hypothetical market value sale on the effective date of appraisal. It is a retrospective estimate based on an analysis of recent past events, assuming a competitive and open market. It assumes not only adequate, sufficient, and reasonable time but adequate, sufficient, and reasonable marketing effort. Exposure time and appraisal conclusion of value are therefore interrelated. Exposure time is often expressed as a range and is based on direct and indirect market data gathered during the market analysis, sales verifications, interviews with market participants, and other appropriate sources. The amount of time which a property will require to be marketed varies greatly depending on a number of factors including market conditions, listing price, terms of sale offered, and competitive listing inventory. In addition to considering each of the factors noted above, CB Commercial considered: o exposure periods of comparable sales revealed during the course of this appraisal, o the most recent CB Commercial National Investor Survey, and o the opinions of local knowledgeable real estate brokers and investors. Market Conditions Throughout the Northumberland area, market conditions for most property types have been generally weak during the past three to four years. The value of most investment grade property types has decreased due to a number of factors. The lack of demand for investment properties and the inability of owners to make mortgage payments resulted in numerous foreclosures, or properties deeded back in lieu of foreclosure. Increased listing inventory has had a substantial downward influence on property values and the exposure time necessary to generate sales. Only recently, due to the competitive pricing in the market and improving economic conditions, has the number of transactions and active investors increased. These market conditions describe the current market and illustrate how exposure time is correlated with listing inventory, competitive pricing structures, and marketing efforts. CB Commercial National Investor Survey In the most recent issue of the CB Commercial National Investor Survey, published in the Second Quarter 1996, CB Commercial surveyed a wide range of investors for property type preferences and specific marketing times. Respondents showed a clear preference for apartments, suburban offices, warehouse/distribution, community shopping centers, neighborhood shopping centers, power centers, urban offices, and business parks. Investors - -------------------------------------------------------------------------------- 4 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- indicated that exposure requirements for investment property have changed little from the previous survey, now an average of approximately 8.5 months for the subject property type. Real Estate Broker Surveys As a second information source, appraisers solicited the opinions of real estate brokers knowledgeable in the subject market and property type. While the majority of individuals surveyed were reluctant to predict an exact exposure time length for retail property in general, they generally estimated an approximate range between 6 and 12 months. All assumed that property would be appropriately priced and marketed. When asked about the subject property specifically, the consensus of opinion was that the subject would receive average to above average recognition in the marketplace under a reasonable plan for pricing and promotion. Exposure Time Conclusion In conclusion, based on the foregoing analysis, an exposure time of between 6 and 12 months is reasonable, defensible, and appropriate. Like the brokers surveyed, CB Commercial assumes that the subject property would have been competitively priced and aggressively promoted regionally. Reasonable Marketing Time Reasonable marketing time is the period a prospective investor would forecast to sell the subject property immediately after the date of value, at the value estimated. Anticipated marketing time is essentially a measure of the perceived level of risk associated with the marketability, or liquidity, of the subject as an investment grade property. The sources for this information include those used in estimating the reasonable exposure time, but also an analysis of the anticipated changes in market conditions following the date of appraisal. In other words, the reasonable marketing time is the number of months it will require to sell the subject property from the date of value, into the future. The reader must understand, however, that the future price for the subject property (at the end of the marketing time) may or may not equal the appraisal estimate. The future price depends on unpredictable changes in the physical real estate, demographic and economic trends, real estate markets in general, supply/demand characteristics for the property type, and many other factors. Based on the premise that present market conditions are the best indicators of future performance in the short-term and under stable market conditions, a prudent investor will forecast that, under the conditions described above, the subject property will require a marketing time of 6 to 12 months. - -------------------------------------------------------------------------------- 5 ================================================================================ REGIONAL ANALYSIS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- REGIONAL AREA MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 6 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- AREA ANALYSIS The dynamic nature of economic relationships within a market area have a direct bearing on real estate values and the long-term quality of a real estate investment. In the market, the value of a property is not based on the price paid for it in the past or the cost of its creation, but on what buyers and sellers perceive it will provide in the future. Consequently, the attitude of the market toward a property within a specific neighborhood or market area reflects the probable future trend of that area. Since real estate is an immobile asset, economic trends affecting its locational quality in relation to other competing properties within its market area will also have a direct effect on its value as an investment. To accurately reflect such influences, it is necessary to examine the past and probable future trends which may affect the economic structure of the market and evaluate their impact on the market potential of the subject. This section of the report is designed to isolate and examine the discernible economic trends in the region and neighborhood which influence and create value for the subject property. A regional map indicating the location of the subject is presented on the previous page. REGIONAL INFLUENCES Location The subject is located in the community of Shamokin within Northumberland County, in the middle portion of the state of Pennsylvania. Northumberland County is not part of any larger Metropolitan Statistical Area (MSA). It is a rural county with two small cities, Shamokin and Sunbury, each having a population of less than 25,000. Northumberland County is bordered to the west by Union and Snyder Counties, to the east by Columbia and Schuylkill Counties, to the south by Dauphin County, and to the north by Lycoming and Montour Counties. A regional map indicating the location of the subject is presented on the following page. Population The 1995 population within Northumberland County was estimated by Strategic Mapping, Inc. to be 95,811, a density of 208 persons per square mile, which is nearly double some of the surrounding counties. This indicates a decrease of 960, or 1% from the April 1, 1990 federal census. The population is expected to further decrease slightly to approximately 95,629 by the year 2000. Demographic statistics for Northumberland County are summarized in the following table. - -------------------------------------------------------------------------------- 7 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ========================================================================= SELECTED AREA DEMOGRAPHICS NORTHUMBERLAND COUNTY ------------------------------------------------------------------------- Population 1995 Estimate 95,811 1990 Census 96,771 1990-1995 % Change -1.0% Households 1995 Estimate 38,380 1990 Census 38,736 1990-1995 % Change -0.9% 1995 Median Household Income $ 26,192 1995 Average Household Income $ 31,948 1990 Average Home Value $ 46,347 1990 % College Graduates 12.3% ========================================================================= Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ========================================================================= Households Similar to the population level within the Northumberland County, the number of households has decreased in recent years and is projected to remain relatively flat over the next five years. Between 1990 and 1995, the number of households in Northumberland County declined by 0.9%. Projections for the year 2000 indicate a mature and stable area with the number of households increasing at a nominal rate. The average household size did not change between 1990 and 1995 (averaging 2.46 persons per household) and is expected to remain fairly stable over the next five years, dropping only slightly to 2.45. Income Per the data compiled by Strategic Mapping, Inc., the 1995 median household income in the Northumberland County was $26,192. The median household income increased considerably between the 1980 and 1990 census by approximately 5.4% annually. The 1995 estimate indicates that growth in the median household income has slowed to 3.4% per annum from 1990 to 1995. Following this more recent trend, income growth is projected to increase at an average annual rate of 3.3% between 1995 and the year 2000, slightly less than inflation. Employment The total civilian labor force for the Northumberland County was 44,531 in April, 1996 with corresponding employment of 41,350 indicating an April, 1996 unemployment rate of 7.1%. - -------------------------------------------------------------------------------- 8 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- The following table compares the unemployment rate for the area to that of the state and national average. ================================================================================ UNEMPLOYMENT RATES COMPARISON BY COUNTY, STATE, AND U.S. - -------------------------------------------------------------------------------- Year Northumberland County Pennsylvania U.S. 1995 6.9% 5.9% 5.7% 1994 8.2% 6.2% 6.1% 1993 9.9% 7.1% 6.8% 1992 10.2% 7.6% 7.4% - -------------------------------------------------------------------------------- Source: Pennsylvania Department of Labor and Employment Security, Bureau of Labor Market Information Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ Most of the employment is in Manufacturing (34%) and Services (32%), followed by retail trade industries (19%). The area lost 15% of its manufacturing employment between 1980 and 1990 but still has a high rate of manufacturing sector workers as compared to State of Pennsylvania averages. This reflects the county's history in coal mining and manufacturing. The major employers in the area are as follows: ================================================================================ NORTHUMBERLAND COUNTY MAJOR AREA EMPLOYERS - -------------------------------------------------------------------------------- Company Business No. Employees - -------------------------------------------------------------------------------- Paper Magic Group, Inc Paper products 700 Fleetwood Motor Homes 490 Packing Resources Plastic products 200 International Paper Corrugated paper products 160 Kirsch Window Treatments Window treatments 150 National Ticket Company Ticket printing 150 Catawissa Lumber Lumber 150 Alumo Products Aluminum manufacturing 100 Trevorton Industries Textiles 110 Len-Jef, Inc. Textiles 107 - -------------------------------------------------------------------------------- Source: Greater Shamokin Chamber of Commerce Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 9 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Transportation The Interstate highways serving Northumberland County include Interstate 80 at the county's northernmost point and Interstate 81 which traverses Schuylkill County to the east. I-81 intersects I-80 to the north and continues north through Scranton and up to Canada. To the south I-81 joins I-78 through Harrisburg and continues through to Florida. Interstate 80 traverses Pennsylvania in an east-west direction providing direct access to New Jersey and New York City. Locally, Shamokin is connected to Sunbury via State Route 61 and to Mt. Carmel and points east including I-81 via both 61 and route 901. Overall, access to Shamokin is fair as there is no direct route via an interstate highway. The major airports serving the Northumberland County area are the Wilkes Barre Scranton International Airport and locally the Shamokin Airport. The Wilkes Barre Scranton International Airport is approximately 50 miles northeast of Shamokin located along I-81 southwest of downtown Scranton. This airport provides for private and corporate flights as well as cargo shipments. The Northumberland County area is also served by various Conrail freight lines. Conclusion and Relevance to the Subject Property The long term outlook for the Northumberland County is considered fair. While a portion of the county has direct access to I-80, its two major cities, Sunbury and Shamokin, are removed from this interstate highway as well as I-81 which runs in a southwesterly direct past the county. The county developed around coal mining and various industries and, like many communities throughout the northeast, has lost a large number of manufacturing jobs since the 1980 census. Nor does it appear that this county would draw any major new manufacturers which might add jobs. Population projections indicate a stabilization for Northumberland County in the short- and long-term. This stable state holds true for households, household size and income levels as well. With no new residential units being added, there is little upside in the way of retail sales. - -------------------------------------------------------------------------------- 10 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- NEIGHBORHOOD INFLUENCES Location The subject is located on the south side of State Highway 61, one-half mile east of the City of Shamokin and one-half mile west of the intersection of S.H. 61 and S.H. 901. The boundaries for the subject neighborhood are considered to be a concentric ring having a radius of five miles. This encompasses the primary trade area, which eminates from the City of Shamokin. A neighborhood map indicating the location of the subject is presented on the following page. Land Use Land use in the neighborhood consists of a mixture of industrial and residential development. To the north of route 61 the area is made up of strip coal mines. Development to the south of 61 in the vicinity of the subject consists of 1-4 family residential uses. The immediate area along route 61 has a scattering of commercial improvements. Other major retailers along this small strip include a K-Mart, a local hardware store and Anthra Plaza, anchored by Scot's Low Cost grocery store. Other small users are generally fast food franchises such as Burger King, Pizza Hut and Long John Silvers. Moving to the east, there is little development. To the west is the City of Shamokin which is fully developed with a mix of low-rise commercial buildings and a large housing stock apparently dating from the turn-of-the-century. The housing stock is of average quality and appeared to be in fair condition. Commercial improvements tend to be convenience stores, local banks and franchise restaurants. As this is predominantly a residential area, the larger and more desirable commercial lots are situated outside of the downtown area. There is, however, a Weis supermarket located downtown one block southeast of the intersection of routes 61 and 125. Access Accessibility to the neighborhood in general, and to the subject property in particular, is considered to be average. Access to Interstates 81 and 80 is indirect. Shamokin is accessed from the west via route 61 which travels north along the Susquehanna River to I-180 with connections then to Interstate 80. From the east, Shamokin can be accessed from either route 61 or 901 both of which provide connections to I-81 nearly twenty miles distant. Route 61 is a divided highway which acts a through route having few intersecting roadways in the immediate area except route 901 to the east. The commercial improvements are distination stops which are accessible via jug handles when travelling in the opposite lane from a right-turn access point. - -------------------------------------------------------------------------------- 11 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- ================================================================================ NEIGHBORHOOD MAP - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 12 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Demographics Selected Neighborhood demographics in a five, ten, and a fifteen mile radius from the subject are shown in the following table: ========================================================================= SELECTED NEIGHBORHOOD DEMOGRAPHICS ------------------------------------------------------------------------- 5 mile 10 mile 15 mile ------------------------------------------------------------------------- Population 1995 Estimate 26,521 56,172 112,885 1990 Census 27,509 57,372 113,747 1990-1995 % Change -3.6% -2.1% -0.8% Households 1995 Estimate 11,181 23,117 45,201 1990 Census 11,554 23,776 98,210 1990-1995 % Change -3.2% -1.7% -0.4% 1995 Median Household Income $21,259 $23,537 $26,007 1995 Average Household Income $26,180 $29,387 $33,239 1990 Average Home Value $33,427 $38,838 $45,385 Median Age Total Population 41.5 40.6 39.4 1990 % College Graduates 9.0% 10.8% 13.3% ------------------------------------------------------------------------- Source: Conquest Market Data Compiled by: CB Commercial Real Estate Group, Inc. ========================================================================= The downward trend in population and housing units is projected to continue through the year 2000. The subject property is situated within a low-income residential area with a large number of families living below the poverty line. The subject's department store competes with a K-Mart located immediately to the east along Route 61. The subject supermarket (recently vacated) competes with two other supermarkets within a one-half mile radius. One of these is located within the Anthra Shopping Center at Route 901. The other supermarket operated by Weis is located within downtown Shamokin. The population and households have decreased within the primary, secondary and tertiary trade areas. Projections for the year 2000 indicate similar patterns. Income levels have edged upward approximately 3.5 percent per annum keeping pace with inflation. General income characteristics are stronger for the larger radii, i.e, more distant from Shamokin. Growth and Trends We are not aware of any proposed shopping centers within greater Shamokin in upcoming years. The owner's of the subject have indicated that Weis markets has shown interest in taking over the Acme supermarket and expanding the store by 12,000 SF, however, no formal - -------------------------------------------------------------------------------- 13 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- plans have been made. The immediate neighborhood has not experienced significant retail development in the recent past. Given the demographic profile and trends projected for this area, it is unlikely that any new retail development will take place for some time. Conclusion and Relevance to the Subject Property The subject property is situated along a minor retail strip surrounded primarily by industrial and residential uses. The area features good accessibility to the local transportation system but fair access throughout the county and larger area. Currently, the subject's neighborhood is in the stabilization stage of its life cycle, a period of neither significant growth nor decline. While the area is partially developed, little potential exists for any future development. We do not expect the character of the neighborhood to change in the near future. - -------------------------------------------------------------------------------- 14 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- MARKET ANALYSIS Retail Overview The retail market in Shamokin is essentially stable. The immediate neighborhood has not experienced significant retail development in the recent past. While there has been some vacancies by anchor tenants, these have generally been replaced by a competing store. Therefore, the make-up of this small market, two to three grocery stores and two department stores, has been relatively constant. We are not aware of any proposed shopping centers within the greater Shamokin area in upcoming years. We noted, however, that the subject grocery store has been vacated recently and may be replaced by a Weis Market. These negotiations are in the early stages. According to Strategic Mapping, Inc., as well as our own observations and research, total retail development within a five mile radius of the subject property consists of approximately 350,000 square feet. This level of retail development was the same for the ten mile radius as well. Furthermore, retail development within a 15 mile radius consists of an estimated 600,000 square feet. This additional retail development is located in Danville, a similarly sized community located just south of I-80, approximately 15 miles north of the subject in Montour County. Local Retail Market In order to project future performance of the retail space in the subject property consideration has been given to various market components that affect the supply and demand for this type of real estate property. Specifically we have: o Inspected the site and surrounding areas for the purpose of familiarizing ourselves with all the locational and environmental factors. In this regard, we have directed our attention to the physical qualities of the site, access and circulation, surrounding uses, and relationship to sources of market support. o Reviewed the principal economic growth trends in the area in industry, population and employment. Our intention was to identify the degree of underlying support for existing improvements and future growth. o Analyzed existing and foreseeable market conditions for retail properties in the area. o Analyzed demographics of the subject property's trade area as well identified competition in order to assess, the subject property's current as well as future position in the market. - -------------------------------------------------------------------------------- 15 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- Trade Area The trade area of a shopping center is defined as the geographic area from which the sustaining patronage for steady support of a center is obtained. Determination of the boundaries is contingent upon various factors including but not limited to the nature and size of the center, area population, accessibility, physical barriers, location of competing facilities, and limitations of driving time and distance. The subject's general trade area is considered to be that which encompasses a fifteen mile radius of the subject center. We broke this down further to include a five-mile ring (primary trade area), a ten-mile ring (secondary trade area) and a fifteen-mile ring (tertiary trade area). Definition Of The Trade Area The primary ingredients for success in these types of projects include the nature of the competition, population density, income levels, and disposable income. The actual size of the population needed to support this type of project cannot be fixed due to the complexities of the above factors, as well as changing methods of merchandising. Local conditions, such as number of households, income levels, and existing centers within the trade area can have the most dramatic impact upon any given project since these factors are what determine the purchasing power in an area. An additional ingredient leading to the success of a shopping center would be the tenant mix and characteristics of the leading tenants which attract shoppers to the project. We have analyzed demographic data, competition, income levels for the subject trade area in the following sections. The demographic profiles of the primary, secondary and tertiary trade areas are presented in the Neighborhood Influences section of the report. Additional demographic information is contained within the Strategic Mapping, Inc. Profile Report located within the Addenda. Population The sales potential of a center is directly related to its proximity to the number of potential patrons. The historical and projected trends for population are important to examine when analyzing the trade area of a shopping center. The historical population trends for the subject's trade areas indicate a decrease in population between 1980 and 1995 followed by a further decrease projected from 1995 to the year 2000. In the primary trade area the population decreased by 9.3% between 1980 and 1990 to 27,509 and then witnessed a decrease to 26,521 in 1995. Population projections indicate a further - -------------------------------------------------------------------------------- 16 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- decrease to 25,944 between 1995 and the year 2000. Both the secondary and tertiary trade areas witnessed a similar historic pattern and future trend in population in these areas. In order to further analyze the population change, we have examined the distribution of the population by age. When analyzing the population distribution by age, it should indicate in what age groups the population shifts are projected to take place. This is important to distinguish if it will have a great impact on the retail sales of the subject center. Shifts in the age groups under 24 years of age will affect the subject, however, less drastically than changes in the subject's core market approximately between the ages of 25 and 54. As illustrated in the Profile Report located in the Addenda, a large percentage of the population in all three trade areas are in the age groups from 25 - 54. The population, however, is getting older moving more people into the 55 and older category. Estimated figures for 1995 indicated that the median age was slightly higher than the 1990 census in all three trade areas ranging from 38.4 to 41.2. Overall, the diversification among age groups is skewed toward an older population. Household Trends When analyzing the demographics for a retail center, it is most important to focus on the trends in the household population. A household consists of one or more persons occupying a dwelling unit. A family would be considered a household unit, however single persons living alone or two or more unmarried persons sharing a dwelling are also considered a household unit. The household unit is perhaps the best indicator in determining the economic health of a trade area. One of the important components which bonds a household together is it's economic strength as a unit as compared to the economic viability of an individual; single person households not withstanding. If the population is slightly decreasing and yet the number of households is increasing, this would not necessarily be a negative indicator. This would imply that the average household size was shrinking. Each household has demand for goods that likely is not duplicated with a larger household size. This demand is duplicated however in the number of households. Similar to population figures, the number of households in the trade area decreased between 1980 and 1990. Subsequently, the number of households decreased between 1990 and 1995 though at an accelerated pace in comparison to the decline witnessed in the previous decade. The number of households are projected to decrease further in all three trade areas in upcoming years. These projections indicate a dampening of retail sales growth. - -------------------------------------------------------------------------------- 17 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- Household Income The median household income in the subject's trade areas increased annually at an average rate of 3.4% from 1990 to 1995. Thus, the household incomes in the area grew at a pace slightly below inflation during this period. The projected annual income growth rates between 1995 and the year 2000 are approximately 3.3%, again below the projected rate of inflation. Overall, household income levels varied slightly between the three trade areas. The median household income levels ranged from $21,259 to $26,007 in 1995 with the primary trade area representing the lower end of the range. Employment The income characteristics of the trade areas for the subject property indicate that this is a predominately blue-collar market. The trade areas had similar levels of blue-collar employment, ranging from 41.2 to 41.9%. Each area saw dramatic loses in manufacturing employment over the past 10 to 15 years. White-collar workers made-up similar percentages ranging from 41.6 to 42.3%. These ratios are low compared to the state. The remaining percentages were in special services categories. The 1990 Census information indicates that the unemployment rates ranged from a low of 6.4% in the tertiary trade area to a high of 10.3% in the primary trade area. As discussed in the Location Analysis, the most recent unemployment rate in Northumberland County was 8.2% which indicates an overall decrease in employment from the 1990 Census. The high unemployment rates in the primary trade area again reflects the history of Shamokin as a manufacturing town. It is unlikely that the unemployment situation will improve much in the near future. Expenditure Potential The Expenditure Potential charts located in the Addenda outline Strategic Mapping, Inc. retail sales projections for the subject trade area. The highest sales growth in the primary trade area appears to be for drug and grocery stores. These categories also represent high growth in the secondary and tertiary trade areas. The average growth rate for retail sales in the primary trade area is projected at 1.29% in the primary trade area, 1.50% in the secondary trade area and 1.72% in the tertiary trade area. Strategic Mapping, Inc. examines the product potential for various store types for each portion of the subject trade area. Based on statistical sampling, Strategic Mapping has derived a benchmark per household expenditures for each store type. Comparing the figures in the trade area to the benchmark figure, it is apparent that those individuals in the subject trade area are much more likely to spend on items in drugs, groceries, and convenience stores. - -------------------------------------------------------------------------------- 18 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- The Strategic Mapping Expenditure Potential Index is defined as follows, 'An index which shows the amount by which an area per household expenditures, differed from that of the benchmark.' The benchmark is defined as the average or common expenditure among households for a larger region. Values below 100 signify that this area is below the benchmark per household expenditures and correspondingly values above 100 indicate a higher than average expenditure per household. The overall Expenditure Index for the primary area is 79.8, while the benchmark indices for the secondary and tertiary trade areas are 84.1 and 88.5, respectively. In conclusion, the expenditure indices for the subject trade areas indicate that the trade area populations spend less than the benchmark household on retail goods. Only one product category had a benchmark in excess of 100: drug store sales. This makes sense given the aging population. The next highest benchmark category was grocery stores. Overall, these statistics reveal a market that is economically weak and therefore one that spends primarily upon necessities, (food stuffs and drugs primarily) rather than high-end or luxury goods such as electronics, jewelry and apparel. Market Indicators The subject center contains two anchor stores and one suite. Recently the grocery store and drug store vacated. Discussions with local leasing agents reveal that typical satellite space rents in the area generally range from $5.50/SF to $10.00/SF depending upon the physical and locational characteristics of the space and $4.00/SF to $7.00/SF for anchor space depending upon the same criteria. Percentage rent clauses tend to be uncommon for satellite tenants. Retail leases are typically structured on an absolute net basis with flat rents over the term. Based upon discussions with brokers and managing agents in the area as well as our observations during our inspection, competing centers in the subject's market area have vacancy rates which generally fall within the 0.0% to 40.0% range. The wide range reflects the small number of centers which typically have just one or two anchor stores. Therefore, the loss of an anchor increases the vacancy rate drastically. There are two major vacancies in this market, the subject grocery store and a mid-sized space at Anthra Plaza formerly occupied by M & L Warehouse Outlet. Summary Future projections indicate continued decreases in the population and households in all three trade areas from 1995 through 2000. In addition, income levels appear to be increasing at rates slightly below projected inflationary rates which is uncommon during periods of economic recovery. Overall, the subject trade areas reflect below-average retail characteristics. The trade areas will exhibit moderate increases in spending potential over the near term. The postive attributes of the primary area is a relatively dense population and few competitors. - -------------------------------------------------------------------------------- 19 PROPERTY DESCRIPTION ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- SITE ANALYSIS The description of the site can be detailed as follows: Location: The subject is located at the south side of Route 61, approximately one-half mile east of the City of Shamokin and one-half mile west of the intersection fo Route 61 with Route 901. Ingress and egress to the subject are available via curb cuts from Route 61. Assessor's Parcel Number: Section 68, Parcel Nos 44C, 44C 001L & 44C 0013L Land Area(2) The subject site contains 17.57 acre or 765,465 square feet. Shape and Frontage: The site is irregular in shape featuring good frontage along Route 61 of approximately 1000 feet. Topography and Drainage: The bulk of the site is flat, however, it is recessed from Route 61 and is roughly 20 feet below street grade. Thus, the entranceway slopes downward from Route 61 to the main parking area. The Long John Silvers Restaurant is located on a pad site situated along Route 61 and is at street grade. Our investigation did not reveal any significant drainage problems. Soils: No soil report was provided and it is assumed that the soil is adequate for the existing use. Easements: No title report was provided in connection with this appraisal. A survey showing the location of easements was submitted. The majority of these refer to utility and water & sewer easements which should not affect the development or use of the site. There is a railroad easement running along the rear portion of the site. And finally, there appears to be an easement for the right to mine and remove minerals from a portion of the site. Our reading of the submitted site plan is not meant to be a definitive conclusion regarding any potential impacts on value of the location of any such easements or encroachments. It is specifically assumed that any easements, restrictions, or encroachments that might appear against the title would have no adverse impact on marketability or value. - ---------- (2) Source: Shamokin Tax Assessor's Office - -------------------------------------------------------------------------------- 20 ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- Covenants, Conditions, No private deeds or restricting covenants and Restrictions: affecting development, other than zoning, were found to affect the site. Utilities: All public utilities including gas, electricity and telephone as well as water, storm and sanitary sewer systems. Flood Zone: According to the Federal Emergency Management Agency (FEMA) Flood Map, Community Panel #421936A covering Coal Township the majority of the subject property is not located within a flood hazard zone. Only a small portion of the rear lot falls within zone X and AE, areas of special flood hazard. Environmental Issues: The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the property causing a loss in value. No evidence of hazardous waste or toxic materials was visible and CB Commercial has no knowledge of the existence of these substances on or in the subject property. However, CB Commercial is not qualified to detect hazardous waste or toxic materials. Adjacent Properties North: Commercial and undeveloped land along Route 61 and mining uses further north. South: 1-4 family residential uses East: Commercial along Route 61. West: Commercial and undeveloped land along Route 61. Conclusion: The subject is a 17.57-acre site on a paved street served by necessary utilities. Access and visibility are considered to be good. There are no adverse soil conditions of which CB Commercial Real Estate Group, Inc. is aware. The shape of the parcel is irregular and does not have full street frontage along Route 61. The topography is sloping below street grade limiting visibility and access. There is excess land and some of the unimproved portions of the site are wooded while a portion located between the two existing strutures is cleared. From a physical standpoint, the site is considered to be adequate for many types of development. - -------------------------------------------------------------------------------- 21 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS The subject improvements were constructed in 1967. The improvements consist of two detatched single-story big-box retail stores (Ames and until recently an Acme Supermarket) containing a combined 98,210 square feet of gross leasable area. The center contains one satellite store which is part of the supermarket and one pad site improved with a franchise restaurant. Both the supermarket and satellite store are presently vacant though the lessee is paying rent. The following is a description of the improvements based on our physical inspection, municipal records and from discussions with and materials provided by the client. The basic construction features are summarized as follows. Construction Class The class of construction is the basic subdivision in Marshall Valuation Service which divides all buildings into five basic groups by type of framing (supporting columns and beams), walls, floors, roof structure, and fireproofing. The subject is considered to be of construction Class B(3). Competitive Rating The subject is considered a Class B building in terms of quality as it is perceived in the marketplace. Foundation Poured concrete Frame Concrete block over a steel frame Floor Construction Concrete slab Exterior Walls Load-bearing concrete block over a steel frame with face- brick at the front facade. Fenestration Aluminum framed glass windows and double-paned glass front doorways. Roof Structure & Covering Flat, presumably built-up composition covering over steel deck with steel bar joist supports. We were unable to inspect the roof and assume the roof is in average overall condition. Exterior Condition Good Interior Partition System Metal studs with gypsum board cover. - ---------- (3) The primary characteristic of Class B Buildings is the reinforced concrete frame in which the columns and beams can be either formed or precast concrete. They may be mechanically stressed, and the structure is fire resistant. (Source: Marshall Valuation Service) - -------------------------------------------------------------------------------- 22 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Interior Finishes - Tenant Space Floors: Vinyl tile. Walls: Painted or covered gypsum board. Ceilings: Suspended acoustic tiles. Lighting: Florescent lighting. Summary: The interiors of the subject are considered to be of average to good quality and similar to competitors. HVAC Heating and ventilation is provided to the majority of the tenant suites by roof-mounted HVAC units. Each of these units pump the hot air throughout its suite via sheet metal air duct work hidden above the dropped ceiling. Air conditioning is supplied by the same system utilizing the duct work and supplying cool air during the summer months. The HVAC system is a gas-fired forced air system. Electrical The electrical system is assumed to be in good working order and adequate for the building. Fire Protection It is assumed that the subject has adequate fire alarm systems, fire exits, fire extinguishers, fire escapes and/or other fire protection measures to meet local fire marshall requirements. Plumbing The plumbing system is assumed to be in good operating condition. Parking Surface parking is provided for 577+/- vehicles. Landscaping Landscaping on the subject property is minimal which is typical within the subject neighborhood. ADA Compliance Handicap access appears to be available to all areas of the center. However, we are not qualified to determine compliance with the requirements. Please refer to the specific limiting condition regarding ADA compliance. Environmental Issues The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the improvements which would cause a loss in value. - -------------------------------------------------------------------------------- 23 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Functional Quality of Space The interior floor plans are flexible and will accommodate a variety of tenant layouts. The existing supermarket is vacant and the landlord reports interest in the space by a competing market which would expand the store, perhaps incorporating the vacant satellite store which is part of the struture. There are no observed design problems and none are reported by management. Access to the each store is available at the front and rear of the center. Deferred Maintenance No deferred maintenance was observed or reported. The improvements have been adequately maintained since it was constructed in 1967 and renovated in 1988. Economic Age and Life Based on the current condition, we estimate the effective age to be approximately 10 years. According to the Marshall Valuation Service cost guide, buildings of this type and quality have an expected life of approximately 45 years. Therefore, the remaining economic life (expected life minus effective age) is estimated at 30 years. While we observed nothing to suggest a different economic life, a capital improvement program could extend life beyond that stated above. Quality/General Condition The subject property conforms well with competitors in the area. The quality of construction is typical of the area. Interior amenities are similar to competing properties of the same approximate age. The general condition of the improvements is good. We observed no evidence of structural fatigue and the improvements appear sound. We are not qualified to determine structural integrity, however, and recommend that the reader rely upon an expert in this field for further determination. Conclusion/Comments The subject property is an average quality shopping center located in a relatively stable area. The improvements generally conform with competitors in the neighborhood. - -------------------------------------------------------------------------------- 24 ================================================================================ ZONING - -------------------------------------------------------------------------------- ZONING The subject's zoning requirements are detailed below. ============================================================================ ZONING SUMMARY ---------------------------------------------------------------------------- Current zoning: C-2; Regional Commercial District Legally conforming?: Yes Uses permitted: Retail, Bank, Food Stores, Dry Cleaning, Drive-In Restaurants, Offices, Service Stations, Motels, Auto Repair Shops Zoning change Not Likely ---------------------------------------------------------------------------- Category Zoning Requirement ---------------------------------------------------------------------------- Maximum FAR Non Specified Maximum Site Coverage 50% Front Setback 25 feet; greater if abutting a residential district Rear Setback 20 feet; greater if abutting a residential district Side Yard Setbacks 10 feet; greater if abutting a residential district Height Limit 2 stories or 30 feet Parking One space per 300 square feet of building area above grade ---------------------------------------------------------------------------- Source: Coal Township Zoning Ordinance Compiled by: CB Commercial Real Estate Group, Inc. ============================================================================ ZONING ANALYSIS AND CONCLUSIONS According to the Coal Township Zoning ordinance, the subject property is a legal and conforming use under current guidelines. In addition, the property appears to conform to bulk and setback requirements as well as to parking requirements. - -------------------------------------------------------------------------------- 25 ================================================================================ TAX ANALYSIS - -------------------------------------------------------------------------------- TAX AND ASSESSMENT DATA The subject property is assessed by Coal Township, Pennsylvania, at approximately 25.0% of the assessor's estimated market value. The last general assessment of properties in Northumberland County was in 1985. A re-valuation has not been rescheduled. School taxes are collected on a fiscal year and town/county taxes are collected on a calendar year. The subject's assessed value and current taxes are summarized below. ================================================================================ CURRENT ASSESSMENT AND TAX INFORMATION (1995) - -------------------------------------------------------------------------------- Assessed Tax Rate Annual Tax ID Building/Tenant Value / $1,000 Taxes - -------------------------------------------------------------------------------- Section 68, Parcel No 44C 001L Acme $63,000 162.5 $10,238 - -------------------------------------------------------------------------------- Section 68, Parcel No 44C Ames $112,075 162.5 $18,212 Section 68, Parcel No 44C 0013L Satellite $21,375 162.5 $3,473 ------- ------ TOTALS: $133,450 162.5 $21,685 - -------------------------------------------------------------------------------- Source: Coal Township Assessor's Office Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The Acme store is separately assessed and tax liability is passed through directly to the tenant. The remaining two parcels encompass the Ames store, the vacant satellite and the pad site. Based on the current tax rate of $162.5 per $1,000 assessed value, the estimated taxes for the subject amount to $21,685, or $0.32 per square foot based on the rentable square footage of the center. Tax and Assessment Conclusion We have estimated the taxes for the shopping center at $22,336 (the 1995 tax liability of $21,685 times 1.03) for calendar year 1996 in our cash flow. Our discussions with the assessor indicated that the subject's taxes have increased in-line with the area's inflation rate, or approximately 3.0% per annum. We have therefore projected a long-term tax growth for all taxes equal to 3.0% per year. - -------------------------------------------------------------------------------- 26 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- HIGHEST AND BEST USE In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The four criteria that the highest and best use must meet are: o legal permissibility; o physical possibility; o financial feasibility; and o maximum profitability. Highest and best use is applied specifically to the use of a site as vacant. It is recognized that in cases where a site has existing improvements, the concluded highest and best use as if vacant may be different from the highest and best use given the existing improvements (as improved). The existing use will continue, however, until the land value, in its highest and best use, exceeds that total value of the property under its existing use plus the cost of removing or altering the existing structure. Implied in the highest and best use is a recognition of the contribution of a specific use to the community environment or to the community's development goals, in addition to wealth maximization of individual property owners. Also implied is that the conclusion of highest and best use that results from the appraiser's judgment and analytical skill, i.e., that the use determined from the analysis represents an opinion, not a fact to be found. Highest and best use analysis involves assessing the subject both as if vacant and as improved. HIGHEST AND BEST USE AS THOUGH VACANT Legal Permissibility The legally permissible uses were discussed in detail in the site analysis and zoning sections of this report. Based on our review of the zoning restrictions, the site can be developed with several different uses, including retail and commercial office uses. Physical Possibility The physical characteristics of the subject site were discussed in detail in the site analysis. Overall, a wide range of legally permissible uses would be physically possible, including a variety of commercial uses. - -------------------------------------------------------------------------------- 27 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- Financial Feasibility The test of financial feasibility is put only to those uses which are legally permissible and physically possible. If the property is capable of generating a sufficient net income to cover the required rate of return on investment and provide a return to the land, then the usage is financially feasible within a defined price limit. In our determination of financial feasibility we have analyzed current market rental rates for several different property types. The net income produced by the proposed or new improvements must provide a return above the cost to develop the property, including acquisition of the land. Through a cost/income analysis we have determined that development of the subject site is not financially feasible at this time. Based on the analysis of supply and demand factors at the present time, rents achieved for retail and/or office uses would not support the cost of construction. Based on the aforementioned, we have determined that development of the subject site at the present time with a retail center is not currently feasible. Maximum Profitability The final test of highest and best use of the site as though vacant is the use be maximally productive, yielding the highest land value. Based on our feasibility analysis we have determined that land banking the subject site is the maximally productive use at the present time. Conclusion: Highest and Best Use As Vacant The concluded highest and best use of the subject as though vacant is land banking until such time that development of the site with a retail/commercial facility is financially feasible. HIGHEST AND BEST USE AS IMPROVED Legal Permissibility As discussed, the subject site's zoning and legal restrictions permit a variety of land uses. Regardless, the site has been improved with a neighborhood shopping center. Based upon review of the City of Shamokin's Zoning Ordinance, it is our opinion that the improvements are within the established guidelines. - -------------------------------------------------------------------------------- 28 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- Physical Possibility The physical characteristics of the subject improvements were discussed in detail in the improvement analysis section of this report. Overall, the layout and positioning of the improvements is considered functional for shopping center use, and the floor plan is considered to be reasonable in comparison to other shopping centers in the area. The improvements have good retail features, have been adequately maintained, and are physically capable of sustaining their current use over the extended future. Financial Feasibility As with the highest and best use of the site as though vacant, the financial feasibility of the site as improved is market derived. Typically, for retail properties similar to the subject, the test of feasibility is based on the amount of rent that can be generated less operating expenses. If a residual amount exists after paying the various expenses, then the land is being put to a productive use. At present, the subject is 60% occupied. CB Commercial estimates that the appropriate stabilized market occupancy approximates 95%. Based on the historical and current operating status of the subject property, CB Commercial anticipates that the improvements are capable of providing an adequate return on the investment before any debt service requirements. Therefore, we conclude that the current use of the improvements is a financially feasible use of the property as improved. Maximum Profitability Similar to the highest and best use of the site as though vacant, the maximum profitable use of the subject as improved should conform to neighborhood trends and be consistent with existing land uses. Although several uses may generate sufficient revenue to satisfy the required rate of return on investment and provide a return on the land, the single use that produces the highest price or value is typically the highest and best use. Conclusion: Highest and Best Use as Improved Based on the foregoing discussions, CB Commercial concludes that the highest and best use of the property, as improved, is consistent with the existing use as a shopping center. There are no apparent alternative uses of the existing improvements that would produce a higher net income and/or value over time than the current use. The current use is a legally permissible use and appears to represent the highest and best use as improved. Furthermore, CB Commercial does not believe that conversion of the improvements or demolition is warranted or financially feasible. - -------------------------------------------------------------------------------- 29 VALUATION ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- APPRAISAL METHODOLOGY The appraisal process is defined as an orderly program by which the problem is planned and the data involved is acquired, classified, analyzed and interpreted into an estimate of value. In this process three basic approaches to value are considered: Cost Approach, Sales Comparison Approach, and Income Capitalization Approach. In appraisal practice, an approach to value is included or omitted based on its applicability to the property type being valued and the quality and quantity of information available. The final step in the appraisal process is reconciliation -- a process by which CB Commercial analyzes alternative conclusions and selects a final value estimate from among two or more indications of value. CB Commercial weighs the relative significance, applicability and defensibility of each approach as it relates to the type of property being appraised. THE COST APPROACH The Cost Approach is based upon the proposition that the informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements which represent the highest and best use of the land or when relatively unique or specialized improvements are located on the site and for which there exist few sales or leases of comparable properties. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. SALES COMPARISON APPROACH The Sales Comparison Approach utilizes sales of comparable properties, adjusted for differences, to indicate a value for the subject property. Valuation is typically accomplished using physical units of comparison such as price per square foot, price per unit, price per floor, etc., or economic units of comparison such as gross rent multiplier. Adjustments are applied to the physical units of comparison derived from the comparable sale. The unit of comparison chosen for the subject is then used to yield a total value. Economic units of comparison are not adjusted, but rather analyzed as to relevant differences with the final estimate derived based on the general comparisons. - -------------------------------------------------------------------------------- 30 ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- The reliability of this approach is dependent upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c) the degree of comparability; (d) the absence of atypical conditions affecting the sales price. Although there have been few sales in the region, the sales that were gathered were utilized to form an opinion of value. However, given the lack of relevant sales data, we have not placed minimal reliance upon this approach and have used it to provide additional support to the Income Approach. INCOME CAPITALIZATION APPROACH The methodology of the Income Capitalization Approach is to determine the income-producing capacity of the property on a stabilized basis by estimating market rent from comparable rentals, making deductions for vacancy and collection losses and building expenses, then capitalizing the net income at a market-derived rate to yield an indication of value. The capitalization rate represents the relationship between net income and value. Related to the direct capitalization method is the discounted cash flow method. In this method of capitalizing future income to a present value, periodic cash flows (which consist of a net income less capital costs, per period) and a reversion (if any) are estimated and discounted to a present value. The discount rate is determined by analyzing current investor yield requirements for similar investments. Since investors are active in the marketplace for properties similar to the subject, the Income Capitalization Approach is particularly applicable to the appraisal problem at hand. There is an adequate quality and quantity of income and expense data available to render a reliable and defensible value conclusion. For income producing properties similar to the subject, the Income Capitalization Approach is considered to be the most reliable. Therefore, this approach has been employed as the primary methodology for this assignment. - -------------------------------------------------------------------------------- 31 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH The Sales Comparison Approach provides an estimate of market value based on analyzing transactions of similar properties in the market area. The method is based on the proposition that an informed purchaser would pay no more for a property than the cost of acquiring an existing one with the same utility. When there is an adequate number of sales of truly similar properties with sufficient information for comparison, a range of values for the subject property can be developed. There are various units of comparison available in the evaluation of sales data in this approach. The sale price per square foot is the most commonly used in this approach. The effective gross income multiplier (EGIM) is rarely used by market participants because of the inconsistencies in estimating effective or gross income, vacancy, and expense differences. We conducted a thorough sales search for comparable shopping centers in the subject's market area. Through our sales search, we were able to identify a limited number of sales with similar characteristics to the subject. The following table summarizes what are considered to be the most recent and proximate comparable sales. Detailed write-ups of each comparable are included in the addendum. - -------------------------------------------------------------------------------- 32 ================================================================================ SALES COMPARISON APPROACH - --------------------------------------------------------------------------------
============================================================================================= SUMMARY OF COMPARABLE RETAIL SALES ============================================================================================= Gross No. Store Name/ Location Sale Leasable NOI OAR Sale Price Date Area (SF) Sale Price Per S.F. Per S.F. - --------------------------------------------------------------------------------------------- 1 K-Mart 4/96 99,264 $2,289,357 $ 2.21 9.6% $ 23.06 Lancaster Lancaster County, PA 2 Wal-Mart 10/94 126,249 $6,587,493 $ 4.78 9.2% $ 52.18 Orangeburg, NC 3 Sam's Club 5/94 134,900 $9,494,691 $ 5.80 8.2% $ 70.38 Anderson Township Anderson County, SC 4 Pace Warehouse 4/92 145,825 $10,480,357 $ 7.12 9.9% $ 71.87 Baltimore, MD 5 Giant Supermarket 12/94 55,980 $4,525,000 $ 8.12 9.8% $ 80.83 City of York York County, PA 6 BJ's Wholesale Club 8/93 114,880 $9,350,000 $ 8.62 10.6% $ 81.39 Babylon Township Suffolk County, NY 7 Price Chopper 4/95 77,000 $7,277,500 $ 9.35 9.9% $ 94.51 Dunmore Township Lackawanna County, PA 8 Price Chopper 4/95 81,987 $8,302,500 $ 9.59 9.50% $101.27 Albany Albany County, NY - --------------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. =============================================================================================
- -------------------------------------------------------------------------------- 33 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF IMPROVED SALES The sales reflect unit prices ranging from a low of $23.06 to a high of $101.27/SF with the primary difference reflecting the economics (anticipated net income stream) generated by these various big box retail stores. The sales consist of single tenant regional and national retalers. They fell into three broad categories: department stores such as Wal-Mart and K-mart, "price clubs" such as BJ's, Pace Warehouse and Sam's Club and Grocery Stores such as Price Chopper and Giant. There was little correlation between the type of user and the net rent being paid. The net rental is affected by annual retail sales and the date when the lease was originally written. Regardless of these variables it is clearly evident that the difference in unit prices is directly tied to the level net operating income and investor yield rates. The typical analysis of property sales attempts to attribute differences in unit prices to the particular features of the various properties. The unit prices are a means of more clearly showing those factors which affect market value such as the date of sale, location of the property, and the size, quality, and condition of the improvements. We have examined these factors for the eight sales and found that wide variations in the per square foot indicator are a reflection of the interest transferred, i.e., the leased fee estate. Units of comparison, such as sales price per square foot of building area are usually influenced by patterns of net operating income and do not operate as independent variables. This demonstrates the inherent difficulty in applying such unit indicators, especially in this instance, where the subject is rented long-term at rates that are at the low-end of the range for similar space in the region. We have gathered sufficient information on the eight sales to show the relationship between physical unit measures and income. Therefore, this physical unit indicator will be used to derive an indication of value for the subject. From the summary sales chart above we can see a correlation between net income per square foot and the price paid per square foot of building. Proof that the level of physical unit indicator is driven by anticipated benefits (income), is shown as this chart plots price per square foot and per unit against net income per square foot. In each instance, there is a direct correlation between income level and unit value measured as price per square foot. Adjustments made to the physical unit indicators without knowledge of each sales' level of net income are subjective at best and results in dubious conclusions. Net Operating Income Analysis The net operating income level for the comparables ranged from $2.21 to $9.59 per square foot, per year. The subject has a projected NOI for the coming year of $203,000 (rounded) or $2.07 per square foot reflecting full and stable occupancy. Given the correlation between price - -------------------------------------------------------------------------------- 34 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- paid per square foot and NOI per square foot it would seem reasonable to conclude that the subject would sell below the range established by the comparable properties. The following chart depicts the calculations involved in developing adjustment factors to be applied to the respective price per square foot units of comparison developed from the comparables employed. ================================================================================ NET OPERATING INCOME (NOI) ANALYSIS - -------------------------------------------------------------------------------- Sale Subject's NOI/SF Sale Price Adjustment Adjusted $/SF No. Sale's NOI/SF Multiplier $/SF for Subject - -------------------------------------------------------------------------------- 1 $2.07 0.94 $23.06 -$3.51 $19.55 ----- $2.21 2 $2.07 0.43 $52.18 -$29.58 $22.60 ----- $4.78 3 $2.07 0.34 $70.38 -$46.11 $24.27 ----- $5.80 4 $2.07 0.28 $71.87 -$51.68 $20.19 ----- $7.12 5 $2.07 0.25 $80.83 -$60.92 $19.91 ----- $8.12 6 $2.07 0.23 $81.39 -$62.51 $18.88 ----- $8.62 7 $2.07 0.21 $94.51 -$74.29 $20.21 ----- $9.35 8 $2.07 0.21 $101.27 -$80.15 $21.12 ----- $9.59 ================================================================================ There is a direct correlation between the NOI/SF and sale price per square foot. As the net income level increases, so does the price paid per square foot. After adjusting the eight sales, they support a range of value for the subject between approximately $19.00/SF to $24.00/SF. Based on our analysis, the subject's value would be approximately $21.00/SF. The subject has a total building area of 98,210 square feet. The value estimate via the Sales Comparison Approach is calculated as follows: ================================================================= Net Rentable Area of Subject 98,210 square feet Value per square foot $21.00 per square foot Indicated Value: $2,062,410 ROUNDED: $2,100,000 ================================================================= Overall, little emphasis has been placed on this approach because of the quality of the data. It is used primarily as a check of the value derived via the Income Approach. - -------------------------------------------------------------------------------- 35 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- We estimate the as is market value of the leased fee interest in the subject property, via the sales comparison approach, as of May 15, 1996, is: --- TWO MILLION ONE HUNDRED THOUSAND DOLLARS --- ($2,100,000) - -------------------------------------------------------------------------------- 36 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH The Income Capitalization Approach reflects the subject's income-producing capabilities. This approach is based on the assumption that value is created by the expectation of benefits to be derived in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over period of time. The two common valuation techniques associated with the Income Capitalization Approach are direct capitalization and the discounted cash flow (DCF) analysis. DIRECT CAPITALIZATION Direct capitalization is the method used to convert a single year's estimate of income into a value indication. In direct capitalization, a precise allocation between return on and return of capital is not made because investor assumptions or forecasts concerning the holding period, pattern of income, or changes in value of the original investment are not simulated in the method. Direct capitalization is most appropriate when analyzing a stable income stream and in estimating the reversion at the end of a holding period. Using this method, the following sets forth the process: 1. Estimate the Potential Gross Income (PGI) from all sources that a competent owner should be able to generate from a property based on existing and/or market rents. 2. Deduct an estimate of Vacancy and Collection Loss (VCL) to arrive at an Effective Gross Income (EGI) estimate. 3. Deduct operating expenses from the estimate of EGI. The result is an estimate of the stabilized Net Operating Income (NOI). 4. Estimate an Overall capitalization rate (Ro, or OAR). 5. Divide the NOI by Ro, resulting in a value estimate at stabilized occupancy. 6. Adjust the stabilized value to account for "As Is" condition, if applicable. DISCOUNTED CASH FLOW ANALYSIS The discounted cash flow (DCF) analysis is a detailed analysis used when the future income is expected to be variant, usually as a result of numerous lease obligations and/or anticipated changes in income and expenses. It is also particularly relevant when institutional buyers are the most likely purchasers of the subject because institutional buyers often place great weight on this analysis. The DCF analysis specifies the quantity, variability, timing, and duration of NOIs and cash flows. Selecting the proper yield rate (discount rate) is essential. CB Commercial must consider the target yield sought by investors as well as yields derived from comparable sales and/or market information. The methodology is: 1. Estimate the before-tax cash flows for each period of a projected holding period net of any capital expenditures such as leasing expenses and tenant improvements. - -------------------------------------------------------------------------------- 37 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- 2. Estimate a discount rate and a terminal overall capitalization rate. 3. Estimate a selling price, known as the reversion, for the end of the projected holding period. 4. The cash flows and the reversion are then discounted to a present value estimate. APPROPRIATE CAPITALIZATION METHOD A number of factors were considered in evaluating the appropriateness of using the direct capitalization method and/or the DCF technique including the occupancy status, lease structures, above/below market rents and typical buyer behavior. As a result of considering the foregoing factors, both the DCF technique and the income capitalization technique are employed in this appraisal. ESTIMATE OF MARKET RENT Rent analysis involves both a study of market (comparable) rentals and the subject's existing rents (if any). Market rent is the rent that a property would most probably command in the open market; indicated by the current rents paid and asked for comparable space. SUMMARY OF COMPARABLE RENTALS CB Commercial surveyed competitive properties and lease transactions for comparison to the subject. The selected comparable rentals are summarized in the following chart with a map and discussions of each comparable provided on the following pages. - -------------------------------------------------------------------------------- 38 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
======================================================================================================================= SUMMARY OF COMPARABLE SATELLITE SPACE RENTALS - ----------------------------------------------------------------------------------------------------------------------- Center Name & Term Start No. Location Tenant (Yrs) Date Size Rent/SF Escalation Comments - ----------------------------------------------------------------------------------------------------------------------- 1 Plaza 15 Mall Sears 3 yr 4/95 6,500 $5.50 Flat for Three Year Option Route 15 term No % Rent Lewisburg, PA - ----------------------------------------------------------------------------------------------------------------------- 2 Kingston Plaza Everything 1 yr 9/95 6,500 $5.50 $950 Step No Option Third Avenue $0.99 Store 3 mos in Year 2 % Rent = 3% over $1,191,660 East of Pierce Street, Kingston, PA - ----------------------------------------------------------------------------------------------------------------------- 3 Mark Plaza Spectrum Rents 5 yrs 10/95 3,600 $8.00 Flat for 1 5-yr Option @ $9.00/SF N/S Route 11, term Edwardsville, PA Keens Floral 5 yrs 8/95 7,000 $8.00 Annual 1 5-yr Option @ $8.83/SF Factory step-up % Rent = 3% over Natural Breakpoint - ----------------------------------------------------------------------------------------------------------------------- 4 Birney Plaza Everything 3 yrs 09/95 4,000 $7.00 Flat for 1 3 yr Option @ $7.50/SF N/S Route 11, $0.99 Store term % Rent = 3% over $933,000 Moosic, PA 5 Gateway Plaza McKenzie 3 yrs 06/94 3,080 $ 8.50 Annual No Option N/S Route 11, Percentage No % Rent Edwardsville, PA increase ======================================================================================================================= SUMMARY OF COMPARABLE ANCHOR SPACE RENTALS ======================================================================================================================= 6 Plaza 15 Mall G.C. Murphy 11 yrs 01/90 53,000 $2.30 Flat for 3, 5-yr Options Route 15. term % Rent = 2.5% over Lewisburg, PA $2,500,000 With % rent, total rent payment equates to $4.00/SF 7 Pottstown Center Wal-Mart 20 yrs 07/95 121,267 $6.99 Flat for 6, 5-yr Options Montgomery Cty. term No % Rent Pottstown, PA 8 Route 6 Mall K-Mart 25 yrs 03/95 119,229 $5.77 Flat for 10, 5-yr Options N/S Route 6, term % Rent = 1% over $20,000,000 Wayne County Honesdale, PA 9 Bradford Towne K-Mart 25 yrs 07/94 94,481 $5.00 Flat for 10, 5-yr Options Centre, term % Rent = 1% over Bradford County $16,875,000 (or $179/SF Wysox, PA leased area) 10 Builder's Square Builder's 25 yrs 03/94 106,400 $10.05 Flat for 10, 5-yr Options Center Square term No % Rent Cetronia Road Lehigh County Whitehall, PA - ----------------------------------------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. =======================================================================================================================
- -------------------------------------------------------------------------------- 39 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMPARABLE RENTALS MAP - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 40 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF COMPARABLE RENTALS We have obtained comparable leases from shopping centers situated within the subject's regional market area which are summarized above. In terms of satellite space, comparables #1 through #5 indicate that the leased spaces range in size from 3,080 to 7,000 square feet which adequately represents the subject's lone satellite store of 7,800 SF. All the leases cited were signed between 1994 and 1995 and represent the most recent leasing activity in the competitive marketplace. The leases include a variety of uses and represent a similar tenant mix to the subject center. The above leases are considered to be generally similar to the subject in terms of condition, quality and location. We have examined the average effective rental rates of these comparables and determined that the effective rent is similar to the face rent, since their was no tenant improvements or free and escalation's were similar. These comparable centers are located throughout eastern Pennsylvania in competitive areas to the subject property. Furthermore, they are all similar in age to the subject and considered to be of a similar functional design. All of the retail leases were written on a triple net basis, whereby the tenants assume their proportionate share of operating expenses, real estate taxes, and insurance. The higher rates typically reflect smaller satellite spaces, while lower rental rates are typically negotiated for anchor sized spaces. We have also considered asking rental rates in our analysis, however, they were deemed to be less reliable than the leases presented. As a result, we have not included asking rentals. The satellite space face rental rates ranged from $5.50/SF to $8.00/SF with a central tendency of $5.75/SF. However, the majority fell between $5.50/SF and $6.50/SF. The rents at the lower end of the range, or those in the $5.50/SF range best reflect the subject property's achievable rents. Given the weak economic characteristics of Shamokin and the most recent lease rate for the subject's satellite space was at $4.72/SF, we have estimated a rent rental rate for the subject's satellite space of $5.00/SF. The anchor leases, or comparables #6 through #10, ranged from $4.00/SF (including percentage rent payments) to $10.05/SF with an average lease rate of $6.36/SF. The anchor rents reflect a close range for a variety of locations with the exception of comparable #9. However, this lease to Builder's Square has no percentage rent clause which partly explains the higher base rent. The low end of the range from Plaza 15 in Lewisburg is an Ames which was signed in 1990. The base rent was set to approximate 2.0% of gross sales, however, the breakpoint was set below the natural breakpoint level so that overage rent is generated at lower sales volumes. Thus, this store pays a combined rent (base plus overage) equal to 3.5% of annual sales volume. Anchor rents are more difficult to establish and are heavily influenced - -------------------------------------------------------------------------------- 41 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- by gross sales. For this reason we have looked closely at the historical sales volumes for the subject's anchor stores to help determine market rent for these stores. Anchor Rent Conclusion There have been no recent anchor leases signed at the subject. We have analyzed the sales volumes of the two anchors to help establish market rent based upon cost of occupancy. The total rent for Ames equates to 2.0% of gross sales, which falls below the range of exceptable cost of occupancy for a department store of 2.00% to 4.00%. Using the 1995 sales volume at Ames of $5,655,614 and applying the excepted cost of occupancy, an appropriate net rental range of $2.13/SF to $3.83/SF is derived. The exceptable cost of occupancy for a grocery store is 1.75% to 2.25% of annual gross sales. Given Acme's most recent annual sales of $5,417,213, a grocery store in this location could support a range of rent from $3.03/SF to $3.89/SF. Based upon our rent and cost-of-occupancy analysis, we feel that a "net" rental rate of $3.50/SF for anchor space is adequately supported. Satellite Rent Analysis The typical lease at the subject property is triple net whereby the tenant is responsible for reimbursing the landlord for such expenses as real estate taxes, insurance, and common area maintenance (CAM). There have been no recent retail leases at the subject except for the Family Dollar Store which was signed in 1990 at $4.72/SF. This tenant has vacated their store as of the beginning of 1996. The terms of this lease was for five years which is similar to quoted market terms. Based on our survey of local leasing agents and owners, five year terms are most common with satellite tenants such as those found in the subject center. Therefore, for the purpose of our analysis, we have utilized a lease term of five years for the one satellite suite for new and speculative renewals. In our interviews with competing leasing agents and owners, we also inquired as to the market norm for rent escalations. Most of the agents agreed that one to three year leases are typically flat, with some sort of escalation or bump in five to 10 year leases. Recent leases at the subject either have annual percentage increases (generally 3%) or a periodic step-up. Regardless of the method of escalations, most of the subject and comparable leases have escalations which are intended to be similar to anticipated increases in the CPI. We have utilized an annual rental escalation in all speculative leases of 3.0%. According to the subject leasing agent, TI's are typically not given, with the owner generally providing a " vanilla box" for new tenants and nothing for renewals. Retail space is typically taken "as-is" with the tenant fitting out their space to their own specifications. We project that no tenant alteration allowance would be provided for new or renewal leases. - -------------------------------------------------------------------------------- 42 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- flat, with some sort of escalation or bump in five to 10 year leases. Recent leases at the subject either have annual percentage increases (generally 3%) or a periodic step-up. Regardless of the method of escalations, most of the subject and comparable leases have escalations which are intended to be similar to anticipated increases in the CPI. We have utilized an annual rental escalation in all speculative leases of 3.0%. According to the subject leasing agent, TI's are typically not given, with the owner generally providing a " vanilla box" for new tenants and nothing for renewals. Retail space is typically taken "as-is" with the tenant fitting out their space to their own specifications. We project that no tenant alteration allowance would be provided for new or renewal leases. All of the leasing agents surveyed reported minimal if any free rent. A review of the subject lease abstracts indicated that no free rent was typically offered to tenants that leased space in the subject center over the past three to four years. Therefore, based upon the most recent leases written at the subject center as well as conversations with local leasing agents, we have projected that no free rent will be offered to prospective tenants. CONCLUSIONS: MARKET RENT ESTIMATE FOR THE SUBJECT PROPERTY Based on the previous analysis, the current market lease parameters for the subject property are estimated as follows: ===================================================================== CONCLUDED MARKET LEASE TERMS (PER SQUARE FOOT / YEAR) --------------------------------------------------------------------- Category Satellite Space Anchor Space --------------------------------------------------------------------- Market Rent $5.00 (NNN) $3.50 (NNN) Lease Term 5 Years 25 Years Annual Escalation 3.0% 0.0% Tenant Improvements $0.00 $0.00 Free Rent (Months) 0 Months 0 Months --------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ===================================================================== CONTRACT RENT As discussed, the subject's leasable area is divided into two anchors in two buildings and one satellite store. Currently, the subject is 60% occupied. Through our research of the subject property, which included a complete review of lease abstracts, rent rolls (both current and historical), and detailed discussions with the on-site property manager, the following rent roll summary was utilized to detail currently leased suites and general information employed for this approach. Additionally, within the Addenda are - -------------------------------------------------------------------------------- 43 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ AMES PLAZA - ROUTE 61 RENT ROLL ================================================================================ Square Rent / Annual Suite Tenant Feet Begin End SF Rent - -------------------------------------------------------------------------------- 1 Ames * 59,116 4/90 1/98 $1.42 $84,006 2 Acme (vacated) 31,294 8/78 4/99 $3.04 $95,000 3 Family Dollar Store (vacated) 7,800 11/90 6/96 $4.72 $36,855 4 Long John Silvers pad site Pad 5/80 5/00 0 $27,500 Total Leased Square Feet 98,210 Average Rent: $2.48 $243,361 Vacant Space 0 Occupancy-Overall 60% - -------------------------------------------------------------------------------- Acme is still paying rent and is negotiating to assign the lease to Weis Markets. - -------------------------------------------------------------------------------- Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ ANALYSIS OF TENANCY The subject is comprised of regional tenants including Ames and Long John Silvers. Overall, the quality of the tenancy is considered to be good for the area. Current rental rates range from $1.42/SF to $4.72/SF. SPECIAL LEASE PROVISIONS AND ASSUMPTIONS The following discussion summarizes any lease provisions and assumptions of special note. Pending Leases There are no pending leases, although we have been informed that Weis Market may take over the Acme Store lease by way of assignment and wishes to expand the store. If expanded a new lease would cover the expansion space. Renewal Options Options to renew at below or above market rent may have an impact on the valuation analysis. For example, if below market renewals are exercised, they may result in a downward impact on value. However, to the extent that re-tenanting costs are saved (rent loss during downtime, tenant improvements, leasing commissions, etc.), there may be an advantage in having the tenant renew at some rate below market rent in order to avoid these costs. The majority of recent leases at the subject have renewal options. Where applicable, if a tenants' option rent is below market, we have assumed that the tenant would exercise its renewal option. Conversely, if a tenants' option rent is above market, we have assumed that the tenant would not exercise its renewal option and terminate the lease. - -------------------------------------------------------------------------------- 44 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Renewal Options Options to renew at below or above market rent may have an impact on the valuation analysis. For example, if below market renewals are exercised, they may result in a downward impact on value. However, to the extent that re-tenanting costs are saved (rent loss during downtime, tenant improvements, leasing commissions, etc.), there may be an advantage in having the tenant renew at some rate below market rent in order to avoid these costs. The majority of recent leases at the subject have renewal options. Where applicable, if a tenants' option rent is below market, we have assumed that the tenant would exercise its renewal option. Conversely, if a tenants' option rent is above market, we have assumed that the tenant would not exercise its renewal option and terminate the lease. EXPENSE REIMBURSEMENTS Current and future hypothetical retail leases which will encumber the subject property will be based upon triple net lease structures and are consistent with recent leases written at the subject property and the market in general. The tenants will be responsible for reimbursing the landlord for their pro rata share of operating expenses including their pro rata share of CAM, real estate taxes and insurance. The pro rata share calculations for future tenants are calculated by dividing the tenant's occupied rentable area by the gross leasable area of the center. The following is a breakdown of the subject's historical recoveries and CB Commercial's projections for the proforma. It should be noted that the subject's operating statements are based on a fiscal year basis, beginning June 1 and continuing through May 31. Expense Reimbursements Expense reimbursements for the subject property consist of real estate taxes, insurance, and common area maintenance. Common area maintenance expenses consist utilities, management fees, general and administrative, cleaning and repairs and maintenance expenses. The subject's historical expense reimbursements are as follows: - -------------------------------------------------------------------------------- 45 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- PERCENTAGE RENT INCOME In addition to the basic rental charges, the tenants are sometimes responsible for paying the landlord additional rent equal to a specified percentage of the tenant's gross sales made in, upon, or from the premises, over a breakpoint factor or according to a specific schedule. Three of the subject tenants have percentage rent clauses contained within their leases.
=========================================================================================== PERCENTAGE RENT CLAUSES - ------------------------------------------------------------------------------------------- CBC's FY97 Tenant Breakpoint Percent Year Gross Sales % Rent Paid Projection - ------------------------------------------------------------------------------------------- Ames * $3,000,000 1.50% 1994 $5,759,313 $36,090 $5,825,000 1995 $5,655,614 $33,790 Acme Supermarket $7,600,000 1.13% 1994 $6,166,172 $ 0 $5,580,000** 1995 $5,417,172 $ 0 Long John Silver's $1,170,000 3.00% 1994 $486,367 $ 0 $522,000 1995 $507,367 $ 0 - ------------------------------------------------------------------------------------------- * Ames's percentage rent is offset by real estate tax recaptures. ** Projected sales assumes the lease for this space is assumed by another supermarket user. - ------------------------------------------------------------------------------------------- Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ===========================================================================================
Given the aforementioned sales histories, we have projected the gross sales for each tenant as illustrated in the right column of the table. We have also projected that the gross sales figures will grow by 3.0% per annum over the course of the cash flow projection. POTENTIAL GROSS INCOME The potential gross income for the subject property is summarized as follows, with adjustments to account for the vacant satellite space. ================================================================ STABILIZED POTENTIAL GROSS INCOME (FY 1997) ---------------------------------------------------------------- Totals ---------------------------------------------------------------- Total Minimum Rent $ 219,176 Expense Reimbursement - Common Area Maintenance Recovery $ 4,380 - Real Estate Tax Recovery $ 3,349 - Insurance Recovery $ 0 - Percentage Rent $ 38,195 --------- Potential Gross Income $ 265,100 ---------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================ - -------------------------------------------------------------------------------- 46 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Given the aforementioned sales histories, we have projected the gross sales for each tenant as illustrated in the right column of the table. We have also projected that the gross sales figures will grow by 3.0% per annum over the course of the cash flow projection. POTENTIAL GROSS INCOME The potential gross income for the subject property is summarized as follows, with adjustments to account for the vacant satellite space. ================================================================ STABILIZED POTENTIAL GROSS INCOME (FY 1997) ---------------------------------------------------------------- Totals ---------------------------------------------------------------- Total Minimum Rent $ 219,176 Expense Reimbursement - Common Area Maintenance Recovery $ 4,380 - Real Estate Tax Recovery $ 3,349 - Insurance Recovery $ 0 - Percentage Rent $ 38,195 --------- Potential Gross Income $ 265,100 ---------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================ VACANCY AND COLLECTION LOSS This is an allowance for reductions in potential income attributable to vacancies, tenant turnover, and non-payment of effective rent. In the direct capitalization process, a market-derived, stabilized vacancy and collection loss estimate is subtracted from potential gross income in order to arrive at effective gross income. The subject property is currently 100% leased, although only 60% occupied. We have assumed the lease for the Acme store will be assigned to another supermarket and have not reflected such vacancy in the cash flow since the lessee continues to pay rent. Due to the long-term leases at the subject property and few number of tenants, the average vacancy rate over the projected holding period, which is attributed to downtime between leases, approximates a minimal 1.0%. In addition to vacancy, we estimated a blended credit loss factor of 2.0% which takes into account both national and local tenants at the subject center. Therefore, the combined long-term vacancy and credit loss factor for the subject property amounts to approximately 3.0%. In the first year of our discounted cash flow analysis, the credit loss amounts to $4,895. - -------------------------------------------------------------------------------- 47 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- EFFECTIVE GROSS INCOME Given our estimate of potential gross income, other income, and a vacancy and collection loss, the estimated effective gross income is derived as follows: ================================================================ EFFECTIVE GROSS INCOME (FY 1997) ---------------------------------------------------------------- Potential Gross Income: $ 265,100 Less: Collection Loss $ 4,895 ------- Effective Gross Income: $ 260,205 ================================================================ Our estimate of effective gross income used in direct capitalization is $260,205. This figure is slightly greater than the EGI in the first year of our cash flow in the discounted cash flow method. The reason for this is because we have applied market rent to the vacant space without regard for lease-up simply to reflect the stabilized NOI. OPERATING EXPENSE ANALYSIS In projecting the revenues and expenses for the subject property, we have analyzed the historical figures for fiscal years 1993 through 1995 as well as management's forecast of revenues and expenses for fiscal year 1996. In addition, we have utilized the Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers publication to assist in our analysis. We have considered the category " Regions 1, 2 & 3 (East): Open Shopping Centers" as the most representative of the subject property. A summary of the average expenses taken from this publication increased at an inflationary rate to reflect our fiscal year 1997 analysis are presented as follows: ======================================================= COMPARABLE EXPENSE ANALYSIS ------------------------------------------------------- Expense Category P.S.F. ------------------------------------------------------- General & Administrative $ 0.08 Repairs & Maintenance $ 0.36 Services $ 0.46 Utilities $ 0.18 ------ Total CAM $ 1.08 Real Estate Taxes $ 1.26 Insurance $ 0.15 Management Fees $ 0.41 Total Operating Expenses $ 2.90 ------------------------------------------------------- Source: Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers ======================================================= Our estimate of the subject's stabilized expenses are detailed as follows. - -------------------------------------------------------------------------------- 48 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Property Taxes Historical and budgeted property tax expenses are as follows: ======================================================== PROPERTY TAX EXPENSE -------------------------------------------------------- Year Total $ Amount -------------------------------------------------------- 1993 $ 31,268 1994 $ 21,252 1995 $ 28,105 1996 Budget $ 21,888 Year 1 Pro Forma $ 22,336 -------------------------------------------------------- Source: Mark Centers Trust ======================================================== As discussed fully within the tax and assessment data section of the report, estimated taxes for calendar year 1996 are projected to be $22,336. It appears that the 1996 budgeted taxes have not accounted for the 1996 tax rate. Insurance Historical and budgeted insurance expenses are as follows: ======================================================== INSURANCE EXPENSE -------------------------------------------------------- Year Total $ Amount -------------------------------------------------------- 1993 $13,543 1994 $ 9,939 1995 $ 7,354 1996 Budget $ 7,444 CB 1996 Projection $ 7,444 -------------------------------------------------------- Source: Mark Centers Trust ======================================================== Insurance at the subject property includes both liability insurance and fire insurance. This expense has decreased from 1993 to 1995 to a level of $0.08/SF. We have placed primary emphasis on the subject's historical and 1996 budgeted insurance expenses and have estimated the insurance expense at $7,444, or $0.08/SF. Professional Management Fee In order to maintain the control of the property and subsequently ensure the stream of income that it generates, it is necessary to employ either internal or outside management. This expense is non-recoverable. In the case of the subject property, the property is managed internally and no management expense has been reflected in historical statements. Typical - -------------------------------------------------------------------------------- 49 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Insurance Historical and budgeted insurance expenses are as follows: ======================================================== INSURANCE EXPENSE -------------------------------------------------------- Year Total $ Amount -------------------------------------------------------- 1993 $13,543 1994 $ 9,939 1995 $ 7,354 1996 Budget $ 7,444 CB 1996 Projection $ 7,444 -------------------------------------------------------- Source: Mark Centers Trust ======================================================== Insurance at the subject property includes both liability insurance and fire insurance. This expense has decreased from 1993 to 1995 to a level of $0.08/SF. We have placed primary emphasis on the subject's historical and 1996 budgeted insurance expenses and have estimated the insurance expense at $7,444, or $0.08/SF. Professional Management Fee In order to maintain the control of the property and subsequently ensure the stream of income that it generates, it is necessary to employ either internal or outside management. This expense is non-recoverable. In the case of the subject property, the property is managed internally and no management expense has been reflected in historical statements. Typical professional management fees in the local market range from 1.0% to 5.0% of effective gross income. Based upon the size and nature of the subject improvements, we have applied a management expense of 3.0% of effective gross income. Because management is calculated based on a percentage of effective gross income, this expense will vary each year with fluctuations in the income stream. In the first year of our analysis, this expense equates to $5,347 or $0.05/SF. Replacement Reserves This expense typically represents a reserve for future replacement of long-lived items. The amount of reserve and whether it is included or not in the direct capitalization and DCF analyses depends on the actions reflected by buyers and sellers in the local market. Based on the available comparable data and discussions with brokers and investors, replacement reserves generally range from $0.10/SF to $0.20/SF for retail properties of similar quality and condition as the subject. Given the subject's average condition, we have estimated this expense at $0.10/SF or $9,821 in 1996 increasing at our projected annual expense growth - -------------------------------------------------------------------------------- 50 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- rate of 3.0%. Based on discussions with local market participants, replacement reserves are typically subtracted in calculating NOI when determining the cash flow in the DCF analysis. Total Concluded Operating Expenses The concluded stabilized operating expenses for the subject total an estimated $84,076 in fiscal year 1996-1997, or $0.86 per rentable square foot. This total expense estimate is for the first year of our proforma and incorporates fiscal year conversions not reflected in the previous 1996 calendar year estimates. The expense is slightly lower than the average indicated by IREM ($2.90/SF) but judged reasonable given the historical and budgeted operations of the subject. CAPITALIZATION RATE There are several methods for deriving an overall capitalization rate for direct capitalization. A common method for establishing an overall capitalization rate for properties similar to the subject is to review the criteria of major investors in the marketplace. This may serve as a check against other techniques or may be a primary source when ample data exists. We have derived capitalization rates from comparable sales used within the Sales Comparison Approach. In addition, the investor survey method is used as a secondary approach in deriving our overall capitalization rate. The subject property is a retail shopping center that would be attractive to either a local or a national investor. The category in the published investor survey most comparable to the subject is a class B community shopping center. The investors typically interviewed for the survey are regional or national investors associated with pension funds, REIT's, insurance companies, financial institutions, etc. The information below is taken from CB Commercial most recent National Investor Survey (first quarter 1996).
========================================================================================= SUMMARY OF INVESTOR SURVEY OVERALL CAPITALIZATION RATES COMMUNITY SHOPPING CENTERS - CLASS B - ----------------------------------------------------------------------------------------- Investor Survey R(o) Range Average Date of Survey - ----------------------------------------------------------------------------------------- CB Commercial National Investor Survey 9.5% - 11.0% 10.2% First Quarter, 1996 - ----------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. =========================================================================================
The previous survey indicates an overall range of 9.5% to 11.0% for neighborhood shopping centers with an average of approximately 10.2%. The sales data produced a range of 8.2% to 10.7% with an average of 9.6%. The capitalization rate reflects the quality and duration of the - -------------------------------------------------------------------------------- 51 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- income stream as well as the physical characteristics of the property. The tenant mix at the subject center is typical of the area containing a discount department store and a supermarket store (presently vacant). Over 92% of the center space is devoted to two anchor tenants. The largest of these is an Ames Store a regional tenant. The Ames lease is due to expire in 1998, although it carries three, five-year renewal options at the same terms as the base lease. The second largest tenant, Acme Supermarket, vacated their space in February 1996 but continues to pay rent. The base lease extends to April 1999. This lease also has three, five-year options at the same rent and overage terms as the base lease. While Acme vacated their store, their contract base rent equates to 1.75% of gross sales for the previous year. That ratio falls within the range of exceptable cost of occupancy for a grocery store of 1.75% to 2.25%. Therefore, we have assumed that a competing supermarket will assume the Acme lease. In fact, we have been informed that Weis Markets has approached Acme and is negotiating to take over the lease. The center is currently 92% leased. Overall, the quality, quantity and duration of the cash flow is considered to be good. With respect to physical characteristics, the subject is a functional neighborhood center of average quality and in good overall condition. In addition, the subject is situated in an average retail location with relatively low volumes of traffic. Based upon this survey and the factors discussed above, a 10.00% overall capitalization rate (towards the top of the range) appears to be appropriate for the subject property given the associated risk of unrealized income attributed to the vacant space. Direct Capitalization Summary A summary of the direct capitalization method as applied to the subject property is illustrated in the following table: - -------------------------------------------------------------------------------- 52 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ ROUTE 61 DIRECT CAPITALIZATION SUMMARY - -------------------------------------------------------------------------------- Category Total P.S.F. - -------------------------------------------------------------------------------- Income Total Market Rent $ 246,676 $ 2.51 Recovery Income 7,729 0.08 ----- ---- Gross Rental Income $ 254,405 $ 2.59 Less: Vacancy and Credit Loss (5,088) (0.05) Plus: Other Income 0 0.28 Plus: Percentage Rents $ 38,195 0.39 ----------- ------- Effective Gross Income $ 287,512 $ 2.92 Expenses Common Area Maintenance (CAM) (38,637) (0.39) Real Estate Taxes (22,615) (0.23) Insurance ( 7,533) (0.08) Management Fees ( 5,347) (0.05) Replacement Reserves (9,944) (0.10) ---------- -------- Total Expenses $ (84,076) $ (0.86) OER 29% Net Operating Income $ 203,436 $ 2.07 CAPITALIZATION OF NOI: @10.0% $ 2,034,360 $ 20.71 Reconciled Value $ 2,000,000 $ 20.36 - -------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The concluded market value of the subject property, based on the direct capitalization method, is $2,000,000. - -------------------------------------------------------------------------------- 53 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW ANALYSIS Our DCF assumptions are summarized as follows. Most of the following assumptions have been discussed and supported within prior sections of the report. A discussion of the discount rate, terminal capitalization rate and holding period follow the assumptions summarized below. ================================================================================ SUMMARY OF DISCOUNTED CASH FLOW ASSUMPTIONS AMES PLAZA, ROUTE 61 IN SHAMOKIN, PA. - -------------------------------------------------------------------------------- General Assumptions Start Date June 1, 1996 Terms of Analysis 10 years Basis (Calendar / Fiscal) Fiscal Software Project + Plus Growth Rate Assumptions Expenses 3.0% Market Rent 3.0% Real Estate Taxes 3.0% Inflation (CPI) 3.0% Market Rent Assumptions Anchor $3.50 (NNN) Satellite $5.00 (NNN) Leasing Assumptions Lease Term 5 Years Satellite Renewal Probability 50% Weighted Average of: Tenant Improvements $0.00 Months of Free Rent 0 Leasing Commissions (Cashed-Out) 4.5% Down Time Between Leases 6 Months Tenant Assumptions Existing tenant leases were entered at contract rent and terms. Speculative renewals assume tenants will pay base rent plus their pro rata share of CAM, real estate taxes and insurance. Contractual recoveries were input into the model per their respective leases. Miscellaneous Assumptions Credit Loss 2.0% Avg. Occupancy Over Projection Period 99% Structural Maintenance/ Reserves ($/SF) $ 0.10 Financial Assumptions Discount Rate (IRR) 11.50% Terminal Overall Capitalization Rate (RO) 10.50% Costs of Sale 2.00% - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 54 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNT RATE ANALYSIS A discount rate is a rate of return on capital utilized to capitalize future payments or receipts to present value. It is based on the time value of money concept. For appraisal purposes, the rate used to convert income to property value should represent the annual rate of return necessary to attract investment capital. The rate is influenced by many considerations, including the degree of apparent risk, market attitudes with respect to future inflation, the prospective rates of return for alternative investment opportunities, supply of and demand for mortgage funds, and the availability of tax shelters. Because rates of return used in income capitalization represent prospective rates, as distinguished from historical rates, special consideration is given to market perceptions of risk and changes in purchasing power. Although it is not possible to prove conclusively the suitability of a particular rate of return on the basis of market evidence, the chosen rate should be consistent with the available evidence. Rate selection requires judgment and knowledge concerning prevailing market attitudes and economic indicators. Both the discount rate and the reversionary capitalization rate must reflect the relative risk perceived by investors for the specific market being studied. Generalities must be avoided. To determine such rates, we have used surveys of real estate investors analyzed and adjusted for comparative returns found in the capital markets. National investor surveys include data on investors operating regionally and nationally, such as representatives of insurance companies, commercial banks, pension funds, investment banking firms, syndication firms, and investment advisory firms. Such companies invest in all types of properties, including office buildings, retail shopping centers, hotels, apartment complexes, and industrial facilities. These surveys are valuable for determining general parameters but must be honed to the local market. Based on surveys from CB Commercial Real Estate Group Inc. for the first quarter 1996, investment criteria for numerous market participants including investors that would be in competition for acquiring a property such as the subject are illustrated below. ================================================================================ FIRST QUARTER 1996 NATIONAL INVESTOR SURVEY CLASS B COMMUNITY SHOPPING CENTERS ================================================================================ TYPE OF FIRM OVERALL CAP. RATES GENERAL DISCOUNT REAL RATE --------------------- INFLATION RATE OF RETURN GOING-IN TERMINAL (IRR) (RRR) ================================================================================ Range: 9.5-11.0 10-12 2-4 12-15.0 9.5-11.5 Average 10.2 10.7 3.3 13.4 10.9 ================================================================================ Change from -10 +10 -10 +110 +390 3rd Qtr Survey ================================================================================ Source: CB Commercial Real Estate Group Inc. - 1st Quarter 1996 - -------------------------------------------------------------------------------- 55 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- We have surveyed national real estate investors for their investment criteria when purchasing real estate such as the subject. Investor expectations for inflation range from 2% to 4%, with an average of 3.3%. We have selected an inflation rate for our analysis of 3.0%. The discount rate reflects the quality and duration of the income stream as well as the physical and locational characteristics of the property. As discussed within the overall rate section, the tenant mix at the subject center is considered to be typical of the area with two anchors occupying 92% of the center, each having multiple renewal options which could extend their occupancies by more than 15 years from the date of value, reducing risk. The center is currently 92% leased and 60% occupied. Overall, the quality, quantity and duration of the cash flow is considered to be good. With respect to physical characteristics, the subject is a functional community center of average quality and in average overall condition. In addition, the subject is situated in an average retail location with relatively low volumes of traffic. In general, the discount rate (IRR) is comprised on a safe rate (usually Treasuries) and a risk premium. The risk premium is difficult to quantify but with sound logic a reasonable rate can be ascertained. The chart presented below graphically depicts real estates position within the risk/reward graph. INVESTOR RISK VERSUS RETURN REQUIREMENTS Anticipated Return _ Real Estate _ Common Stocks _ Corporate Bonds _ Mortgage Backed Securities _ Municipal Bonds _ T - Bills Riskless Rate - -------------------------------------------------------------------------------- Perceived Level of Risk US Treasury notes and bonds are considered risk free since they are backed by the United States government. Their rates only fluctuate with perceived inflation. The use of this, or any short term investment including the prime rate or LIBOR is meaningless when compared to an - -------------------------------------------------------------------------------- 56 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- investment with a 10 year holding period. Accordingly, as a starting point, we only considered risk free or nearly risk free investments with a maturity of 10 years. These include Treasuries, corporate bonds and municipal bonds. Adjusted for daily fluctuations, these debt offerings are yielding 5.59% to 8.25%. Mortgaged backed securities generally tend to fall above these instruments. The next layer of risk would include debt rated as low as BBB. These notes are yielding as much as 10%. Long-term mortgages are also yielding over 10% considering the mortgage constant on a note priced at 250 to 300 basis points over comparable Treasuries. Riskier investments such as junk bonds vary widely from 12% to 22% on an unleveraged basis. Real estate, as indicated on the chart above falls between common stock (10%) and junk bonds (16%). To eliminate the burden of illiquidity, REIT's and similar investments are being created. They represent a quasi-real estate opportunity. REIT's are currently providing dividends ranging from 6% to 8% but offer potential yields of 15% to 20% Various financial instruments are yielding between 5.59% and 8.25% depending upon the type of investment as indicated on the chart below based on data obtained from the Federal Reserve Statistical Release for the week ending May 17, 1996. It should be noted that over the past year we have witnessed an increase in the interest rate of all of the following instruments. ================================================================= INSTRUMENT RATE ----------------------------------------------------------------- Prime Rate 8.25% ----------------------------------------------------------------- Municipal Bonds 5.96% ----------------------------------------------------------------- Short-Term Treasury Securities (1 year) 5.59% ----------------------------------------------------------------- Long Term Treasury Securities (10 years) 6.68% ----------------------------------------------------------------- Corporate Aaa Bonds (10+ years) 7.57% ----------------------------------------------------------------- Corporate Baa Bonds (10 + years) 8.25% ================================================================= The risk premium is the rate added to Treasuries to account for illiquidity, the capital markets and the economy. Whether the risk premium decreases in the near term is dependent on inflation, the growth of the economy and capital markets. During 1995, the Federal Reserve decreased interest rates in order to stimulate a sluggish economy. The low rates have continued during the early portion of 1996, however, have recently begun to ascend. Based on the above, we feel that the current required rate of return (IRR) for the subject would fall at the low end the range at 12.0%. This reflects the quality, quantity and cash flow risk associated with the subject property. As such, we have utilized a discount rate of 12.0% in our analysis. - -------------------------------------------------------------------------------- 57 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- TERMINAL RATE To estimate the appropriate terminal capitalization rate, we have considered the rates reflected in the investment criteria outlined above for both going-in and terminal capitalization. Typically, under stable market conditions, the terminal capitalization rate will be greater than the going-in rate to reflect the risk associated with the holding period. Typically 50 to 100 basis points are added on to the going-in cap rate under stable market conditions to account for the additional risk. Furthermore, our national investor survey also indicated an average terminal capitalization 50 basis points greater than the going-in rate. Going-in capitalization rates extracted from sales averaged 9.6% and we utilized a 10.0% going-in cap rate in the direct capitalization approach. It is evident by historical and current performance of the center and it is our opinion that the subject property will encounter average-to-good market acceptance in the future. It is our opinion that a terminal capitalization rate of 10.5% is the most appropriate for the subject property. A 2% deduction for costs of sale has been utilized to reflect the net reversionary value. HOLDING PERIOD To apply the discounted cash flow analysis, an estimate must be made of the appraised property's holding period based on typical investors' motives in the local market. Historical investment holding periods of similar shopping centers typically have ranged from 10 to 15 years. A 10- to 15- year holding period was analyzed to test the property's sensitivity to roll-overs. A 10-year holding period was selected. Our discounted cash flow analysis is presented on the following page. - -------------------------------------------------------------------------------- 58
------------------------------------ ------------------------------------ Building Size 98,210 Ames Plaza Shopping Center Reclined Value $1,967 Cost of Sales 3.000% Cash Flow Report Value per SF $20.03 Hold Period (Years) 10 % Residual of Recon. Value 37.7% Reduce Residual by Cap Esp Yes Direct Cap Rate 10.00% Residual Discount Rate 12.00% Direct Cap Value $1,877 ------------------------------------ ------------------------------------ Compounded Ann. --------------------------------------------------------------------- Ave. Growth 1996 1997 1998 1999 2000 2001 2002 --------------------------------------------------------------------- 1.96% BASE RENT 208,857 243,278 243,278 243,278 243,278 216,498 247,306 N/A Free Rent 0 0 0 0 0 0 0 N/A Expense Recoveries 0 0 0 0 0 0 0 5.46% Percentage Rent 40,050 42,601 45,230 47,936 50,725 53,596 56,554 - ---------- --------------------------------------------------------------------- 2.63% GROSS INCOME 248,907 285,879 288,508 291,214 294,003 270,094 303,860 2.63% Credit/Vacancy Loss (4,978) (5,718) (5,770) (5,824) (5,880) (5,402) (6,077) 1.92% Miscellaneous Incomes 27,500 27,500 27,500 27,500 27,844 28,679 29,539 - ---------- --------------------------------------------------------------------- 2.56% EFFECTIVE GROSS INCOM 271,429 307,661 310,238 312,890 315,967 293,371 327,322 - ---------- 2.97% TOTAL EXPENSES 83,705 86,776 89,247 94,793 94,418 96,610 100,011 - ---------- --------------------------------------------------------------------- 2.38% NET OPERATING INCOME 187,724 120,885 220,991 221,097 221,549 196,761 227,311 N/A Commissions 0 0 0 0 0 0 0 N/A Tenant Improvements 0 0 0 0 0 0 0 N/A Capital Additions 0 0 0 0 0 0 0 - ---------- --------------------------------------------------------------------- N/A TOTAL DEDUCTIONS 0 0 0 0 0 0 0 - ---------- --------------------------------------------------------------------- 2.38% CASH FLOW 187,724 220,885 220,991 221,097 221,549 196,761 227,311 - ---------- TOTAL CASH FLOW 187,724 220,885 220,991 221,097 221,549 196,761 227,311 --------------------------------------------------------------------- Debt Service N/A N/A N/A N/A N/A N/A N/A --------------------------------------------------------------------- CASH FLOW AFTER DEBT 187,724 220,885 220,991 221,097 221,549 196,761 227,311 --------------------------------------------------------------------- CUMULATIVE SURPLUS N/A N/A N/A N/A N/A N/A N/A --------------------------------------------------------------------- ------------------------------------------------------------------------------------------------- Implied Overall Rate 9.54% 11.23% 11.24% 11.24% 11.26% 10.00% 11.56% Cash on Cash Return 9.54% 11.23% 11.24% 11.24% 11.26% 10.00% 11.56% ------------------------------------------------------------------------------------------------- ----------------------------------------------------- Sale/Yield Matrix (000's) Terminal Cap Rate ------------------------------------------ Disc Rate 9.75% 10.00% 10.25% 10.50% ----------------------------------------------------- [GRAPHIC OMITTED] 11.50% 2,047 2,027 2,008 1,990 ------------------------------------------ 11.75% 2,016 1,997 1,978 1,960 ------------------------------------------ 12.00% 1,986 1,967 1,949 1,931 ------------------------------------------ 12.25% 1,956 1,938 1,920 1,903 ------------------------------------------ 12.50% 1,927 1,909 1,892 1,875 ------------------------------------------ 12.75% 1,899 1,881 1,864 1,848 ----------------------------------------------------- -----------------------------------------------------
Compounded Ann. ------------------------------------------- Ave. Growth 2003 2004 2005 2006 ------------------------------------------- 1.96% BASE RENT 253,515 253,515 253,515 253,515 N/A Free Rent 0 0 0 0 N/A Expense Recoveries 0 0 0 0 5.64% Percentage Rent 59,601 62,739 65,971 69,300 - ---------- ------------------------------------------- 2.63% GROSS INCOME 313,116 316,254 319,486 322,815 2.63% Credit/Vacancy Loss (6,262) (6,325) (6,390) (6,456) 1.92% Miscellaneous Incomes 30,426 31,338 32,279 33,247 - ---------- ------------------------------------------- 2.56% EFFECTIVE GROSS INCOM 337,280 341,267 345,375 349,606 - ---------- 2.97% TOTAL EXPENSES 103,016 105,982 109,039 112,188 - ---------- ------------------------------------------- 2.38% NET OPERATING INCOME 234,264 235,285 236,336 237,418 N/A Commissions 0 0 0 0 N/A Tenant Improvements 0 0 0 0 N/A Capital Additions 0 0 0 0 - ---------- ------------------------------------------- N/A TOTAL DEDUCTIONS 0 0 0 0 - ---------- ------------------------------------------- 2.38% CASH FLOW 234,264 235,285 236,336 237,418 - ---------- TOTAL CASH FLOW 234,264 235,285 236,336 237,418 ------------------------------------------- Debt Service N/A N/A N/A N/A ------------------------------------------- CASH FLOW AFTER DEBT 234,264 235,285 236,336 237,418 ------------------------------------------- CUMULATIVE SURPLUS N/A N/A N/A N/A ------------------------------------------- ----------------------------------------------------------------------- Implied Overall Rate 11.91% 11.96% 12.02% 12.07% Cash on Cash Return 11.91% 11.96% 12.02% 12.07% -----------------------------------------------------------------------
================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW CONCLUSION We used "PRO-JECT +plus" computer software to create a cash flow model for a long term hold. Reference is made to the "Annual Cash Flow Report", generated by the Pro-ject software, on the previous page which provides a summary of cash flow from all sources. We utilized a 10-year holding period and have discounted the cash flow on a fiscal year basis from 1997 to 2006. The cash flow incorporates the terms of existing leases during the analysis period and our assumptions regarding the lease-up of vacant space. It also calculates renewal rentals when leases expire based on current market rent escalated at a growth factor. In addition, a forecast was made for 15 years to check for any irregularities in the income stream which may artificially affect the reversionary sale price. It should be noted that based on our analysis of the extended holding period indicated that there was no irregularities. We capitalized the 11th year net operating income to determine the reversionary value at the end of year 10. CONCLUSION OF INCOME CAPITALIZATION APPROACH The preceding analysis indicates the following conclusions: ======================================================= INCOME CAPITALIZATION APPROACH VALUES ------------------------------------------------------- Method Indicated Value ------------------------------------------------------- Direct Capitalization $ 2,000,000 Discounted Cash Flow $ 2,000,000 ------------------------------------------------------- Source: CB Commercial Real Estate ======================================================= Greater emphasis is placed on the DCF analysis because it is the method likely to be used by a typical investor. As a result, based on the Income Capitalization Approach, CB Commercial concludes a value estimate for the subject property of $2,000,000. This equates to $20.36 per rentable square foot. - -------------------------------------------------------------------------------- 60 CONCLUSION ================================================================================ RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- RECONCILIATION OF VALUE CB Commercial was instructed to estimate the market value of the leased fee interest in the subject property. The value conclusions for each applicable approach are summarized below. ============================================================== SUMMARY OF VALUE CONCLUSIONS -------------------------------------------------------------- Cost Approach N/A Sales Comparison Approach $ 2,100,000 Income Capitalization Approach $ 2,000,000 -------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ============================================================== The Income Capitalization Approach is considered the most persuasive method for valuing the subject property. This approach is predicated on the principle of anticipated economic benefits and, therefore, best reflects the investment characteristics of the subject. Properties such as the subject are typically purchased by investors; thus, this approach must closely parallels the anticipated analysis that would be employed by the most typical purchaser. Since the subject property has a number of existing leases with a variety of terms, the DCF technique best models the future cash flow stream to a prospective buyer. The Sales Comparison Approach is predicated on the principle that an investor would pay no more for an existing property than for a comparable property with similar utility. This approach is contingent on the reliability and comparability of available data. The data developed was considered sufficiently reliable to reach a value conclusion by the Sales Comparison Approach. However, due to the lack of truly comparables sales in recent years, this method is given secondary consideration in the reconciliation. The Cost Approach is predicated on the principle that an investor would pay no more for an existing property than it would cost to acquire land and construct a building with similar utility. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Furthermore, due to the age of the subject and current market conditions, accrued depreciation would be substantial and difficult to estimate. An investor would not use the Cost Approach due to the imprecise nature of estimating the accrued physical, functional, or external depreciation affecting the improvements. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. - -------------------------------------------------------------------------------- 61 ================================================================================ RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- The final value conclusion and the approaches relied upon give strong consideration to the market behavior of the typical buyer and current market environment for the property appraised. Based on the foregoing analysis, it is concluded that the market value of the leased fee interest in the subject property, subject to the assumptions and limiting conditions, as of May 15, 1996, is: TWO MILLION DOLLARS ($2,000,000) This value is subject to all of the assumptions and limiting conditions stated throughout the report, including specific assumptions and limiting conditions. - -------------------------------------------------------------------------------- 62 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS 1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to total that would adversely affect marketability or value. CB Commercial is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CB Commercial, however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject property's title should be sought from a qualified title company that issues or insures title to real property. 2. It is assumed that improvements have been constructed or will be constructed according to approved architectural plans and specifications and in conformance with recommendations contained in or based upon any soils report(s). Unless otherwise specifically noted in the body of this report, it is assumed: that any existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are, or will be upon completion, in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that it or they will withstand any known elements such as windstorm, hurricane, tornado, flooding, earthquake, or similar natural occurrences; and, that the improvements, as currently constituted, conform to all applicable local, state, and federal building codes and ordinances. CB Commercial professionals are not engineers and are not competent to judge matters of an engineering nature. CB Commercial has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CB Commercial by ownership or management; CB Commercial inspected less than 100% of the entire interior and exterior portions of the improvements; and CB Commercial was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CB Commercial reserves the right to amend the appraisal conclusions reported herein. 3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property was not observed by the appraisers. CB Commercial has no knowledge of the existence of such materials on or in the property. CB Commercial, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the appraisal. 4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CB Commercial. This report may be subject to amendment upon re-inspection of the subject property subsequent to repairs, modifications, alterations and completed new construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels of operation. - -------------------------------------------------------------------------------- 63 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 5. It is assumed that all factual data furnished by the client, property owner, owner's representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CB Commercial has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, Assessor's Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CB Commercial reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CB Commercial of any questions or errors. 6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CB Commercial will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject. 7. CB Commercial assumes no private deed restrictions, limiting the use of the subject property in any way. 8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposit or subsurface rights of value involved in this appraisal, whether they be gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred. 9. CB Commercial is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject. 10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market. 11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CB Commercial does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CB Commercial. 12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CB Commercial to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form. 13. Unless otherwise noted in this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated. 14. This study may not be duplicated in whole or in part without the specific written consent of CB Commercial nor may this report or copies hereof be transmitted to third parties without said consent, which consent CB Commercial reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or its contents shall not be published, in whole or in part, in any public document without the express - -------------------------------------------------------------------------------- 64 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- written consent of CB Commercial which consent CB Commercial reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a "sale" or "offer for sale" of any "security", as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CB Commercial shall have no accountability or responsibility to any such third party. 15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report. 16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used. 17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area have been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report. 18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CB Commercial unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CB Commercial assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance. 19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or client's designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CB Commercial assumes responsibility for any situation arising out of the Client's failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired. 20. CB Commercial assumes that the subject property analyzed herein will be under prudent and competent management and ownership; neither inefficient or super-efficient. 21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the appraisal report. 22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist. 23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Not withstanding any discussion of possible readily achievable barrier removal construction items in this report, CB Commercial has not made a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect on the value estimated herein. Since CB Commercial has no specific information relating to this issue, nor is CB Commercial qualified to make such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject property. - -------------------------------------------------------------------------------- 65 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 24. For our analysis, we have relied on the information provided by the detailed rent roll and information provided by the subject leasing agent. We have assumed all information is correct. Furthermore, we have assumed all leases out for signature will be returned signed, and executed as of the date indicated to us by the leasing agent. We reserve the right to amend this appraisal should any of this information be later found to be incorrect. - -------------------------------------------------------------------------------- 66 ADDENDA ADDENDA ================================================================================ ADDENDA - -------------------------------------------------------------------------------- ADDENDA - -------------------------------------------------------------------------------- 67 ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- ADDENDUM A ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- GLOSSARY OF TERMS assessed value Assessed value applies in ad valorem taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to market value, but it is usually calculated in relation to a market value base. + cash equivalency The procedure in which the sale prices of comparable properties sold with atypical financing are adjusted to reflect typical market terms. contract, coupon, face, or nominal rent The nominal rent payment specified in the lease contract. It does not reflect any offsets for free rent, unusual tenant improvement conditions, or other factors that may modify the effective rent payment. coupon rent See Contract, Coupon, Face, or Nominal Rent effective rent 1) The rental rate net of financial concessions such as periods of no rent during a lease term; may be calculated on a discounted basis, reflecting the time value of money, or on a simple, straight-line basis. ++ 2) The economic rent paid by the lessee when normalized to account for financial concessions, such as escalation clauses, and other factors. Contract, or normal, rents must be converted to effective rents to form a consistent basis of comparison between comparables. face rent See Contract, Coupon, Face, or Nominal Rent fee simple estate Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. ++ floor area ratio (FAR) The relationship between the above-ground floor area of a building, as described by the building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area; also called building-to-land ratio. ++ full service lease A lease in which rent covers all operating expenses. Typically, full service leases are combined with an expense stop, the expense level covered by the contract lease payment. Increases in expenses above the expense stop level are passed through to the tenant and are known as expense pass-throughs. going concern value Going concern value is the value of a proven property operation. It includes the incremental value associated with the business concern, which is distinct from the value of the real estate only. Going concern value includes an intangible enhancement of the value of an operating business enterprise which is produced by the assemblage of the land, building, labor, equipment, and marketing operation. This process creates an economically viable business that is expected to continue. Going concern value refers to the total value of a property, including both real property and intangible personal property attributed to the business value. + gross building area (GBA) The sum of all areas at each floor as measured to the exterior walls. insurable value Insurable Value is based on the replacement and/or reproduction cost of physical items that are subject to loss from hazards. Insurable value is that portion of the value of an asset or asset group that is acknowledged or recognized under the provisions of an applicable loss insurance policy. This value is often controlled by state law and varies from state to state. + investment value Investment value is the value of an investment to a particular investor based on his or her investment requirements. In contrast to market value, investment value is value to an individual, not value in the marketplace. Investment value reflects the subjective relationship between a particular investor and a given investment. When measured in dollars, investment value is the price an investor would pay for an investment in light of its perceived capacity to satisfy his or her desires, needs, or investment goals. To estimate investment value, specific investment criteria must be known. Criteria to evaluate a real estate investment are not necessarily set down by the individual investor; they may be established by an expert on real estate and its value, that is, an appraiser. + leased fee See leased fee estate leased fee estate An ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others. The rights of the - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.++ leasehold See leasehold estate leasehold estate The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.++ load factor The amount added to usable area to calculate the rentable area. It is also referred to as a "rentable add-on factor" which, according to BOMA, "is computed by dividing the difference between the usable square footage and rentable square footage by the amount of the usable area. Convert the figure into a percentage by multiplying by 100. market value "as if complete" on the appraisal date Market value as if complete on the appraisal date is an estimate of the market value of a property with all construction, conversion, or rehabilitation hypothetically completed, or under other specified hypothetical conditions as of the date of the appraisal. With regard to properties wherein anticipated market conditions indicate that stabilized occupancy is not likely as of the date of completion, this estimate of value should reflect the market value of the property as if complete and prepared for occupancy by tenants. market value "as is" on the appraisal date Market value "as is" on the appraisal date is an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date of appraisal. market value Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1) A reasonable time is allowed for exposure in the open market; 2) Both parties are well informed or well advised, and acting in what they consider their own best interests; 3) Buyer and seller are typically motivated; 4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.ss. marketing period The time it takes an interest in real property to sell on the market subsequent to the date of an appraisal. ++ net lease Lease in which all or some of the operating expenses are paid directly by the tenant. The landlord never takes possession of the expense payment. In a Triple Net Lease all operating expenses are the responsibility of the tenant, including property taxes, insurance, interior maintenance, and other miscellaneous expenses. However, management fees and exterior maintenance are often the responsibility of the lessor in a triple net lease. A modified net lease is one in which some expenses are paid separately by the tenant and some are included in the rent. net rentable area (NRA) 1) The area on which rent is computed. 2) The Rentable Area of a floor shall be computed by measuring to the inside finished surface of the dominant portion of the permanent outer building walls, excluding any major vertical penetrations of the floor. No deductions shall be made for columns and projections necessary to the building. Include space such as mechanical room, janitorial room, restrooms, and lobby of the floor. * nominal rent See Contract, Coupon, Face, or Nominal Rent prospective future value "upon completion of construction" Prospective future value "upon completion of construction" is the prospective value of a property on the future date that construction is completed, based upon market conditions forecast to exist, as of that completion date. The value estimate at this stage is stated in current dollars unless otherwise indicated. prospective future value "upon reaching stabilized occupancy" Prospective future value "upon reaching stabilized occupancy" is the prospective value of a property at a future point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. The value - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- estimate at this stage is stated in current dollars unless otherwise indicated. reasonable exposure time The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market. ++ rent see full service lease net lease contract, coupon, face, or nominal rent effective rent shell space Space which has not had any interior finishing installed, including even basic improvements such as ceilings and interior walls, as well as partitions, floor coverings, wall coverings, etc.. Usable Area 1) The area actually used by individual tenants. 2) The Usable Area of an office is computed by measuring to the finished surface of the office side of corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished surface of the dominant portion of the permanent outer building walls. Excludes areas such as mechanical rooms, janitorial room, restrooms, lobby, and any major vertical penetrations of a multi-tenant floor. * use value Use value is a concept based on the productivity of an economic good. Use value is the value a specific property has for a specific use. Use value focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to the property's highest and best use or the monetary amount that might be realized upon its sale. + value appraised During the real estate development process, a property typically progresses from a state of unimproved land to construction of improvements to stabilized occupancy. In general, the market value associated with the property increases during these stages of development. After reaching stabilized occupancy, ongoing forces affect the property during its life, including a physical wear and tear, changing market conditions, etc. These factors continually influence the property's market value at any given point in time. See also market value "as is" on the appraisal date market value "as if complete" on the appraisal date prospective future value "upon completion of construction" prospective future value "upon reaching stabilized occupancy" - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B ADDITIONAL PHOTOGRAPHS - -------------------------------------------------------------------------------- ADDENDUM B LEGAL DESCRIPTION - -------------------------------------------------------------------------------- Shamokin, PA CHICAGO TITLE INSURANCE COMPANY SCHEDULE A Off. File No. Policy Number Date of Policy Amount of Insurance NU40278A NU40278A June l0, 1993 $1,825,000.00 1. Name of Insured: MARK CENTERS LIMITED PARTNERSHIP, A DELAWARE LIMITED PARTNERSHIP 2. The estate or interest in the land described herein and which is covered by this policy is: FEE SIMPLE Created by Deeds dated 5/26/93 and recorded 6/10/93 in Deed Book 909 Page 580 and dated 6/3/93 and recorded 6/10/93 in Deed Book 909 Page 570. 3. The estate or interest referred to herein is at Date of Policy vested in the insured. 4. The land herein described is encumbered by the following mortgage or trust deed, and assignments: and the mortgages or trust deeds, if any, shown in Schedule B hereof: 5. The land referred to in this policy is described as follows: PARCEL "A" ALL THAT CERTAIN lot or parcel of ground situate in the Township of Coal, County of Northumberland, State of Pennsylvania, bounded and described as follows: BEGINNING at an iron pin (found) located on the South right-of-way line of PennDOT S.R. 0061 (L.R. 161), said point being situate South eighty-seven degrees forty-one minutes and no seconds East (S 87 degrees 41' 00" E) a distance of seventy-five and no hundredths feet (75.00') South eighty-seven degrees seven minutes and no seconds East (S 87 degrees 07' 00" E) a distance of one hundred seventy-five and no hundredths feet (175.00), North eight degrees twenty-five minutes and no seconds East (N 8 degrees 25' 00" E) a distance of fifty-five and no hundredths feet (55.00') South seventy-eight degrees one minute and no seconds East (S 78 degrees 0l' 00" E) a distance of ninety-two and no hundredths feet (92.00'), and North eight degrees ten minutes and no seconds East (N 8 degrees 10' 00" E) a distance of sixty and six hundredths feet (60.06') from an iron pin (found) located on the aforementioned South right-of-way line of PennDOT S.R. 0061 (L.R. 161) said point being opposite highway centerline station 939 + 86.50; THENCE FROM THE PLACE OF BEGINNING along the aforementioned South right-of-way line of PennDOT S.R. 0061 (L.R. 161) South eighty-seven degrees six minutes and forty seconds East (S 87 degrees 06' 40" E) for a distance of thirty-four and fifty-seven hundredths feet (34.57') to an iron pin (found); thence further along the same, South eighty-four degrees twenty-seven minutes and no seconds East (S 84 degrees 27' 00" E) for a distance of one hundred thirty-four and eighty-nine This policy valid only if Schedule B is attached. CHICAGO TITLE INSURANCE COMPANY Policy Number: NU40278A LEGAL DESCRIPTION, continued hundredths feet (134.89') to an iron pin (found); thence along line of land of Mario J. Stello, South eight degrees twenty-eight minutes and no seconds West (S 8 degrees 28' 00" W) for a distance of eighty and sixty-six hundredths feet (00.66') to an iron pin (found); thence further along line of land of Mario J. Stello, along the South line of land of John Sabotchick, along the South line of land of Thomas I. Gallagher, along the South line of land of Virginia M. Donanski, along the South line of land of John M. Lashay, and through a portion of Berry Street, South seventy-eight degrees one minute and no seconds East (S 78 degrees 01' 00" E) for a distance of two hundred forty-nine and thirty-seven hundredths feet (249.37') to an iron pin (found); thence through a portion of aforementioned Berry Street (unopened) South one degree thirty-five minutes and no seconds West (S 1 degree 35' 00" W) for a distance of four hundred ninety-eight and fifty-two hundredths feet (498.52') to an iron pin (found); thence along the North right-of-way line of Consolidated Rail Corporation (formerly Pennsylvania Railroad), North eighty-one degrees twenty-three minutes and no seconds West (N 81 degrees 23' 00" W) for a distance of four hundred fifty-four and twenty-seven hundredths feet (454.27') to an iron pin (found); thence along the East line of other land of Marvin Realty Company, designated as Parcel "B", and of which this is a part, North eight degrees thirty-seven minutes and no seconds East (N 8 degrees 37' 00" E) for a distance of four hundred seventy-three and forty-one hundredths feet (473.41') to an iron pin (found); thence further along the same, North eighty-one degrees twenty-three minutes and no seconds West (N 81 degrees 23' 00" W) for a distance of twenty-four and eighteen hundredths feet (24.18') to an iron pin (found); thence still further along the same and along the East line of land of Edward and Caroline Lushinski, North eight degrees ten minutes and no seconds East (N 8 degrees 10' 00" E) for a distance of one hundred six and no hundredths feet (106.00') to the place of beginning. CONTAINING 227,303.61 square feet (5.218 acres) and being shown in greater detail on a plan laid out by Merlyn J. Jenkins, Registered Professional Land Surveyor, of Merlyn J. Jenkins & Associates, Inc., Pottsville, Pennsylvania, dated March 10, 1993, and being designated as Parcel "A" on Drawing No. SK-1310. PARCEL "B" ALL THAT CERTAIN lot or parcel of ground situate in the Township of Coal, County of Northumberland, State of Pennsylvania, bounded and described as follows: BEGINNING at an iron pin (found) located on the South right-of-way line of PennDOT S.R. 0061 (L.R. 161), said point being opposite highway centerline station 939 + 86.50; THENCE FROM THE PLACE OF BEGINNING along the South line of lands of Michael and Patrice Dupnock, South eighty-seven degrees forty-one minutes and no seconds East (S 87 degrees 41' 00" E) for a distance of seventy-five and no hundredths feet (75.00') to an iron pin (found); thence further along the same, South eighty-seven degrees seven minutes and no seconds East This policy valid only if Schedule B is attached. CHICAGO TITLE INSURANCE COMPANY Policy Number: NU40278A LEGAL DESCRIPTION, continued (S 87 degrees 07' 00" E) for a distance of one hundred seventy-five and no hundredths feet (175.00') to an iron pin (found); thence along the East line of lands of aforementioned Michael and Patrice Dupnock, North eight degrees twenty-five minutes and no seconds East (N 8 degrees 25' 00" E) for a distance of fifty-five and no hundredths feet (55.00') to an iron pin (found); thence along the South line of land of Edward and Caroline Lushinski, South seventy-eight degrees one minute and no seconds East (S 78 degrees 01' 00" E) for a distance of ninety-two and no hundredths feet (92.00') to an iron pin (found); thence along the West line of other lands of Marvin Realty Company (Shamokin Area Industrial Development Authority), designated as Parcel "A", and of which this is a part, South eight degrees ten minutes and no seconds West (S 8 degrees 10' 00" W) for a distance of forty-five and ninety-four hundredths feet (45.94') to an iron pin (found); thence further along the same, South eighty-one degrees twenty-three minutes and no seconds East (S 81 degrees 23' 00" E) for a distance of twenty-four and eighteen hundredths feet (24.18') to an iron pin (found); thence still further along the same, South eight degrees thirty-seven minutes and no seconds West (S 8 degrees 37' 00" W) for a distance of four hundred seventy-three and forty-one hundredths feet (473.41') to an iron pin (found); thence along the North right-of-way line of Consolidated Rail Corporation (formerly Pennsylvania Railroad), North eighty-one degrees twenty-three minutes and no seconds West (N 81 degrees 23' 00" W) for a distance of one thousand twelve and fifty hundredths feet (1,012.50') to an iron pin (found); thence along line of land of the Commissioners of Coal Township, North eight degrees thirty-seven minutes and no seconds East (N 8 degrees 37' 00" E) for a distance of fifty and no hundredths feet (50.00') to an iron pin (found); thence further along the same, North eighty-one degrees twenty-three minutes and no seconds West (N 81 degrees 23' 00" W) for a distance of fifty and no hundredths feet (50.00') to an iron pin (found); thence still further along the same, South eight degrees thirty-seven minutes and no seconds West (S 8 degrees 37' 00" W) for a distance of fifty and no hundredths feet (50.00') to an iron pin (found); thence further along the aforementioned North right-of-way line of Consolidated Rail Corporation (formerly of Pennsylvania Railroad), North eighty-one degrees twenty-three minutes and no seconds West (N 81 degrees 23' 00" W) for a distance of two hundred thirty-five and no hundredths feet (235.00') to an iron pin (found); thence along the East line of lands of Chervanik Realty Company, North three degrees twenty-six minutes and no seconds West (N 3 degrees 26' 00" W) for a distance of two hundred seventy-seven and seventy-eight hundredths feet (277.78') to an iron pin (found); thence along the aforementioned South right-of-way line of PennDOT S.R. 0061 (L.R. 161), North eighty-one degrees thirty-five minutes and no seconds East (N 81 degrees 35' 00" E) for a distance of four hundred ninety-seven and fifty hundredths feet (497.50') to an iron pin (set); thence further along the same, South seventy degrees twenty minutes and no seconds East (S 70 degrees 20' 00" E) for a distance of one hundred sixty-five and no hundredths feet (165.00') to an iron pin (set); thence still further along the same, North eighty-nine degrees fourteen minutes and thirty-five seconds East (N 89 degrees 14' 35" E) This policy valid only if Schedule B is attached. CHICAGO TITLE INSURANCE COMPANY Policy Number: NU40278A LEGAL DESCRIPTION, continued for a distance of three hundred fifty-seven and seventy-nine hundredths feet (357.79') to the place of beginning. CONTAINING 538,161.52 square feet (12.354 acres) and being shown in greater detail on a plan laid out by Merlyn J. Jenkins, Registered Professional Land Surveyor, of Merlyn J. Jenkins & Associates, Inc., Pottsville, Pennsylvania dated March 10, 1993, and being designated as Parcel "B" on Drawing No. SK-1310. PARCELS "A" AND "B" COMBINED ALL THAT CERTAIN lot or parcel of ground situate in the Township of Coal, County of Northumberland, State of Pennsylvania, bounded and described as follows: BEGINNING at an iron pin (found) located on the South right-of-way line of PennDOT S.R. 0061 (L.R. 161), said point being opposite highway centerline station 939 + 86.50; THENCE FROM THE PLACE OF BEGINNING along the South line of lands of Michael and Patrice Dupnock, South eighty-seven degrees forty-one minutes and no seconds East (S 87 degrees 41' 00" E) for a distance of seventy-five and no hundredths (75.00') to an iron pin (found); thence further along the same, South eighty-seven degrees seven minutes and no seconds East (S 87 degrees 07' 00" E) for a distance of one hundred seventy-five and no hundredths feet (175.00') to an iron pin (found); thence along the East line of lands of aforementioned Michael and Patrice Dupnock, North eight degrees twenty-five minutes and no seconds East (N 8 degrees 25' 00" E) for a distance of fifty-five and no hundredths feet (55.00') to an iron pin (found); thence along the South line of land of Edward and Caroline Lushinski, South seventy-eight degrees one minute and no seconds East (S 78 degrees 01' 00" E) for a distance of ninety-two and no hundredths feet (92.00') to an iron pin (found); thence along the East line of land of aforementioned Edward and Caroline Lushinski, North eight degrees ten minutes and no seconds East (N 8 degrees 10' 00" E) for a distance of sixty and six hundredths feet (60.06') to an iron pin (found); thence along the aforementioned South right-of-way line of PennDOT S.R. 0061 (L.R. 161), South eighty-seven degrees six minutes and forty seconds East (S 87 degrees 06' 40" E) for a distance of thirty-four and fifty-seven hundredths (34.57') to an iron pin (found); thence further along the same, South eighty-four degrees twenty-seven minutes and no seconds East (S 84 degrees 27' 00" E) for a distance of one hundred thirty-four and eighty-nine hundredths feet (134.89') to an iron pin (found); thence along line of land of Mario J. Stello, South eight degrees twenty-eight minutes and no seconds West (S 8 degrees 28' 00" W) for a distance of eighty and sixty-six hundredths feet (80.66') to an iron pin (found); thence further along line of land of Mario J. Stello, along the South line of land of John Sabotchick, along the South line of land of Thomas I. Gallagher, along the South line of land of Virginia M. Domanski, along the South line of land of John M. Lashay, and through a portion of Berry Street, South seventy-eight degrees one minute and no seconds East (S 78 degrees 01' This policy valid only if Schedule B is attached. CHICAGO TITLE INSURANCE COMPANY Policy Number: NU40278A LEGAL DESCRIPTION, continued 00" E) for a distance of two hundred forty-nine and thirty-seven hundredths feet (249.37') to an iron pin (found); thence through a portion of aforementioned Berry Street (unopened), South one degree thirty-five minutes and no seconds West (S 1 degree 35' 00" W) for a distance of four hundred ninety-eight and fifty-two hundredths feet (498.52') to an iron pin (found); thence along the North right-of-way of Consolidated Rail Corporation (formerly Pennsylvania Railroad), North eighty-one degrees twenty-three minutes and no seconds West (N 81 degrees 23' 00" W) for a distance of one thousand four hundred sixty-six and seventy-seven hundredths feet (1,466.77') to an iron pin (found); thence along line of land of the Commissioners of Coal Township, North eight degrees thirty seven minutes and no seconds East (N 8 degrees 37' 00" E) for a distance of fifty and no hundredths feet (50.00') to an iron pin (found); thence further along the same, North eighty-one degrees twenty-three minutes and no seconds West (N 81 degrees 23' 00" W) for a distance of fifty and no hundredths feet (50.00') to an iron pin (found); thence still further along the same, South eight degrees thirty-seven minutes and no seconds West (S 8 degrees 37' 00" W) for a distance of fifty and no hundredths feet (50.00') to an iron pin (found); thence further along the aforementioned North right-of-way line of Consolidated Rail Corporation (formerly Pennsylvania Railroad), North eighty-one degrees twenty-three minutes and no seconds West (N 81 degrees 23' 00" W) for a distance of two hundred thirty-five and no hundredths feet (235.00') to an iron pin (found); thence along the East line of lands of Chervanik Realty Company, North three degrees twenty-six minutes and no seconds West (N 3 degrees 26' 00" W) for a distance of two hundred seventy-seven and seventy-eight hundredths feet (277.78') to an iron pin (found); thence along the aforementioned South right-of-way line of PennDOT S.R. 0061 (L.R. 161), North eighty-one degrees thirty-five minutes and no seconds East (N 81 degrees 35' 00" E) for a distance of four hundred ninety seven and fifty hundredths feet (497.50') to an iron pin (set); thence further along the same, South seventy degrees twenty minutes and no seconds East (S 70 degrees 20' 00" E) for a distance of one hundred sixty-five and no hundredths feet (165.00') to an iron pin (set); thence still further along the same, North eighty-nine degrees fourteen minutes and thirty-five seconds East (N 89 degrees 14' 35" E) for a distance of three hundred fifty-seven and seventy-nine hundredths feet (357.79') to the place of beginning. CONTAINING 765,465.13 square feet (17.572 acres) and being shown in greater detail on a plan laid out by Merlyn J. Jenkins, Registered Professional Land Surveyor, of Merlyn J. Jenkins & Associates, Inc., Pottsville, Pennsylvania, dated March 10, 1993, and being designated as Parcels "A" and "B" combined on Drawing No. SK-1310. This policy valid only if Schedule B is attached. ================================================================================ ADDENDUM C IMPROVED COMPARABLE SALES - -------------------------------------------------------------------------------- ADDENDUM C IMPROVED COMPARABLE SALES - -------------------------------------------------------------------------------- RETAIL SALE ================================================================================ Location Data Property Name: BJ'S Wholesale Club Location: City: Babylon County: Suffolk State/Zip: New York Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Free-Standing Land Area: 9.40 Acres Excess Land: N/A Gross Leasable Area: Anchors: BJ's Wholesale Club 114,880 SF Local Tenant GLA: N/A Anchor Tenant GLA: 114,880SF Total GLA: 114,880SF GLA Purchased: 114,880SF Year Built: 1974 Parking: N/A Condition: Good Exterior Walls: Brick Veneer Sale Data Transaction Type: Sale Date of Transaction: 8/93 Marketing Time: N/A Grantor: N/A Grantee: N/A Document No.: N/A Sale Price: $9,350,000 Financing: Cash Equivalent Price: $9,350,000 Required Capital Cost: $0 Adjusted Sales Price: $9,350,000 Verification: N/A Financial Data Assumptions & Forecast: N/A Occupancy at Sale: 100 Existing or Pro Forma Income: Existing TOTAL P.S.F. -------- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $990,266 $8.62 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap Overall Capitalization Rate (OAR): 10.59% Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $81.39 Comments - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Giant Supermarket, York Location: City: York County: York State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Free-Standing Land Area: 9.30 Acres Excess Land: N/A Gross Leasable Area: Anchors: Giant Supermarket 55,980 SF Local Tenant GLA: N/A Anchor Tenant GLA: 55,980 SF Total GLA: 55,980 SF GLA Purchased: 55,980 SF Year Built: 1994 Parking: N/A Condition: Good Exterior Walls: Brick Veneer Sale Data Transaction Type: Sale Date of Transaction: 12/94 Marketing Time: N/A Grantor: N/A Grantee: N/A Document No.: N/A Sale Price: $4,525,000 Financing: Cash Equivalent Price: $4,525,000 Required Capital Cost: $0 Adjusted Sales Price: $4,525,000 Verification: N/A Financial Data Assumptions & Forecast: N/A Occupancy at Sale: 100 Existing or Pro Forma Income: Existing TOTAL P.S.F. -------- ------- Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $454,558 $8.12 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 10.05 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $80.83 Comments - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: K-Mart Lancaster Location: Lancaster City: Lancaster County: Lancaster State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Free-Standing Land Area: 11.03 Acres Excess Land: N/A Gross Leasable Area: Anchors: K-Mart 99,264 SF Local Tenant GLA: N/A Anchor Tenant GLA: 99,264 SF Total GLA: 99,264 SF GLA Purchased: 99,264 SF Year Built: 2 Parking: N/A Condition: Average Exterior Walls: Brick Veneer Sale Data Transaction Type: Sale Date of Transaction: 4/93 Marketing Time: N/A Grantor: N/A Grantee: N/A Document No.: N/A Sale Price: $2,289,357 Financing: Cash Equivalent Price: $2,289,357 Required Capital Cost: $0 Adjusted Sales Price: $2,289,357 Verification: N/A Financial Data Assumptions & Forecast: N/A Occupancy at Sale: 100 Existing or Pro Forma Income: Existing TOTAL P.S.F. -------- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $219,373 $2.21 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 9.58 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $23.06 Comments - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Pace Warehouse, Baltimore Location: Baitimore City: Baltimore County: Baltimore State/Zip: Maryland Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Free-Standing Land Area: 13.50 Acres Excess Land: N/A Gross Leasable Area: Anchors: Pace Warehous 145,825 SF Local Tenant GLA: N/A Anchor Tenant GLA: 145,825 SF Total GLA: 145,825 SF GLA Purchased: 145,825 SF Year Built: 1972 Parking: N/A Condition: Good Exterior Walls: Brick Veneer Sale Data Transaction Type: Sale Date of Transaction: 4/92 Marketing Time: N/A Grantor: N/A Grantee: N/A Document No.: N/A Sale Price: $10,480,357 Financing: Cash Equivalent Price: $10,480,357 Required Capital Cost: $0 Adjusted Sales Price: $10,480,357 Verification: N/A Financial Data Assumptions & Forecast: N/A Occupancy at Sale: 100 Existing or Pro Forma Income: Existing TOTAL P.S.F. ---------- ------- Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $1,038,274 $7.12 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Price Per S.F. Overall Capitalization Rate (OAR): 9.91 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $71.87 Comments - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: Price Chopper, Dunmore Location: City: Dunmore County: Lackawanna State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Free-Standing Land Area: 6.30 Acres Excess Land: N/A Gross Leasable Area: Anchors: Price Chopper 77,000 SF Local Tenant GLA: N/A Anchor Tenant GLA: 77,000 SF Total GLA: 77,000 SF GLA Purchased: 77,000 SF Year Built: 1975 Parking: N/A Condition: Good Exterior Walls: Brick Veneer Sale Data Transaction Type: Sale Date of Transaction: 4/95 Marketing Time: N/A Grantor: N/A Grantee: N/A Document No.: N/A Sale Price: $7,277,500 Financing: Cash Equivalent Price: $7,277,500 Required Capital Cost: $0 Adjusted Sales Price: $7,277,500 Verification: N/A Financial Data Assumptions & Forecast: N/A Occupancy at Sale: 100 Existing or Pro Forma Income: Existing TOTAL P.S.F. -------- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $719,950 $9.35 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Overall Capitalization Rate (OAR): 9.89 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $94.51 Comments - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Location Data Property Name: PRICE CHOPPER, ALBANY Location: City: Albany County: Albany State/Zip: New York Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Free-Standing Land Area: 2.80 Acres Excess Land: N/A Gross Leasable Area: Anchors: Price Chopper 81,987 SF Local Tenant GLA: N/A Anchor Tenant GLA: 81,987 SF Total GLA: 81,987 SF GLA Purchased: 81,987 SF Year Built: 1975 Parking: N/A Condition: Good Exterior Walls: Brick Veneer Sale Data Transaction Type: Sale Date of Transaction: 4/95 Marketing Time: N/A Grantor: N/A Grantee: N/A Document No.: N/A Sale Price: $8,302,500 Financing: Cash Equivalent Price: $8,302,500 Required Capital Cost: $0 Adjusted Sales Price: $8,302,500 Verification: N/A Financial Data Assumptions & Forecast: N/A Occupancy at Sale: 100 Existing or Pro Forma Income: Existing TOTAL P.S.F. -------- ------ Potential Gross Income: N/A N/A Vacancy and Credit Loss: N/A N/A Effective Gross Income: N/A N/A Expenses: N/A N/A Net Operating Income: $786,255 $9.59 - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL SALE ================================================================================ Analysis Buyers Underwriting Criteria: Direct Cap Overall Capitalization Rate (OAR): 9.47 % Projected IRR: N/A Effective Gross Multiplier (EGIM): N/A Operating Expense Ratio (OER): N/A % Price Per Square Foot: $101.27 Comments - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ ADDENDUM D RENTAL COMPARABLES - -------------------------------------------------------------------------------- ADDENDUM D RENTAL COMPARABLES - -------------------------------------------------------------------------------- Location Data Property Name: Kingston Plaza Location: S/S Third Avenue East Of Pierce Street City: Kingston County: Luzeme State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 64,824 SF Year Built: 1982 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Price Chopper Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$10.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM Tax, Insur Free Rent (months) Minimal Tenant Improvement Minimal Leasing Agent Mark Centers Trust Phone No.: ( ) Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 09/95 6,500 The Everything $5.50 N/A None $950 step in ye 1.30 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent lease includes a term for 1 year and 3 months. Additionally, the tenant has a percentage rent clause of 3.0% over a breakpoint of $1,191,660. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 91.7% leased. The most recent leases all include terms for 5 years. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Birney Plaza Location: N/S Route 11 City: Moosic County: Lackawanna State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 212,057 SF Year Built: 1972 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $3.00-$10.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 9/95 4,000 Everything $0.9 $7.00 N/A None flat 3.00 - -------------------------------------------------------------------------------- 7/93 4,000 Mattress Man $9.00 N/A None Step-up to $101 5.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 3 and 5 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 5 and 10 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Dunmore Plaza Location: 1400 Monroe Avenue City: Dunmore County: Lackawanna State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Neighborhood Gross Leaseable Area: 45,380 SF Year Built: 1967 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Price Chopper Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $6.75-$11.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: Mark Centers Trust Phone No: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 4/95 1,900 Malcom's $11.50 N/A None $950 Step-up in 5.00 - -------------------------------------------------------------------------------- 1/95 1,900 Great Wall Chin $11.35 N/A 3.0% per year 10.00 - -------------------------------------------------------------------------------- 4/94 1,900 Little Ceasar's $9.25 N/A Periodic Step-up 5.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Triangle Plaza Location: Route 115 City: Wilke-Barre County: Luzeme State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 125,000 SF Year Built: 1971 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years (Estimate) Base Rent Per Square Foot: $9.00-$12.50 (Estimate) Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 6/95 2,400 Electronic Syst $11.50 N/A None Annual %age inc 5 00 - -------------------------------------------------------------------------------- 3/95 2,200 TCBY $11.00 N/A None Annual %age inc 5.00 - -------------------------------------------------------------------------------- 5/94 9,910 Party City $11.00 N/A None $1.65/SF step-u 10.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent leases include terms for 5 and 10 years. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Gateway Plaza Location: N/S Route 11 City: Edwardsville County: Luzeme State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 150,000 SF Year Built: 1969 Exterior Walls: Brick Veneer Condition: Fair Anchor Tenant: Parking: Adequate Lease Data Occupancy: Local: 65.0% Overall: 65.0 Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $8.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 6/94 950 Holiday Hair $15.48 N/A None Annual %age inc 3.00 - -------------------------------------------------------------------------------- 6/94 3,080 McKenzie $8.50 N/A None Annual %age inc 3.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 65% leased. The most recent leases all include terms for 3 years. Construction quality is average and typical of other retail centers in the area. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Pottstown Center Location: Route 663 City: Pottstown County: Montgomery State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 171,267 SF Year Built: 1976 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: Wal-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $8.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 7/95 121,267 Wal-Mart $6.99 N/A None Flat 20.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 20 years. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Route 6 Mall Location: N/S Route 6 City: Honesdale County: Wayne State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 144,229 SF Year Built: 1978 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 3/95 119,229 K-Mart $5.77 N/A None Flat 25.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 20 years and includes a percentage rent clause on 1.0% over $20.0 million. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Bradford Towne Centre Location: N/S Route 6 City: Wysox County: Bradford State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 119,481 SF Year Built: 1972 Exterior Walls: Brick Veneer Condition: Average Anchor Tenant: K-Mart Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 7/94 94,481 K-Mart $5.00 N/A None Flat 25.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 25 years and includes a percentage rent clause on 1.0% over $16.875 million. Construction quality is average and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Location Data Property Name: Builder's Square Shopping Center Location: Cetronia Road City: Whitehall County: Lehigh State/Zip: Pennsylvania Assessor's Parcel No(s): N/A Atlas Reference: N/A Physical Data Type: Community Gross Leaseable Area: 106,400 SF Year Built: 1994 Exterior Walls: Brick Veneer Condition: Good Anchor Tenant: Builder's Square Parking: Adequate Lease Data Occupancy: Local: 100% Overall: 100% Typical Size: 2,000 SF Term: 3-5 years Base Rent Per Square Foot: $5.50-$15.50 Rent Escalations: Various Basis: N/A Expense Pass-Through: CAM, Tax, Insur Free Rent (months): Minimal Tenant Improvement: Minimal Leasing Agent: N/A Phone No.: ( ) - Survey Date: N/A Recent Leases ================================================================================ Size Rent TI Free Rent Term Date (SF) Tenant (PSF) (PSF) (Months) Escalations (Yrs) - -------------------------------------------------------------------------------- 3/94 106,400 Builder's Squar $10.05 N/A None Flat 25.00 ================================================================================ - -------------------------------------------------------------------------------- CB COMMERCIAL RETAIL RENT COMPARABLE ================================================================================ Comments One story shopping center currently 100% leased. The most recent anchor lease includes a term for 25 years. Construction quality is good and typical of other retail centers in the area. - -------------------------------------------------------------------------------- CB COMMERCIAL ================================================================================ ADDENDUM E STRATEGIC MAPPING, INC. REPORTS - -------------------------------------------------------------------------------- ADDENDUM E STRATEGIC MAPPING, INC. REPORTS - -------------------------------------------------------------------------------- Atlas MarketQuest Profile Report CBC - C1750-41 Page 1 of 4 Area 1 = Shamokin, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin, PA 10 Mile Radius Area 3 = Shamokin, PA 15 Mile Radius Description Area 1 Area 2 Area 3 Population: 2000 Projection 25,944 55,523 112,734 1995 Estimate 26,521 56,172 112,885 1990 Census 27,509 57,372 113,747 1980 Census 30,313 62,171 122,927 Percent Change, 1980 - 1990 -9.3 -7.7 -7.5 Percent Change, 1990 - 1995 -3.6 -2.1 -0.8 1995 Population by Race: % White 99.7 99.6 99.2 % Black 0.1 0.1 0.2 % American Indian 0.0 0.0 0.0 % Asian 0.2 0.2 0.3 % Other 0.0 0.0 0.2 % Hispanic 0.4 0.3 0.6 1995 Population by Age: %0-5 6.8 6.8 7.2 %6-13 9.3 9.6 9.8 %14-17 4.5 4.7 4.8 %18-20 3.9 4.0 4.1 %21-24 4.8 4.8 5.0 %25-34 12.3 12.2 12.7 %35-44 12.7 13.6 14.1 %45-54 10.3 10.6 10.9 %55-64 11.4 11.0 10.3 %65-74 13.1 12.6 11.5 %75-84 8.5 7.9 7.3 %85+ 2.4 2.0 2.1 Median Age Total Population 41.5 40.6 39.4 Median Age Adult Population 50.8 49.2 47.7 Households: 2000 Projection 10,986 22,961 45,377 1995 Estimate 11,181 23,117 45,201 1990 Census 11,554 23,524 45,380 1980 Census 11,804 23,776 45,865 Percent Change, 1980 - 1990 -2.1 -1.1 -1.1 Percent Change, 1990 - 1995 -3.2 -1.7 -0.4 1990 Household Population 27,034 56,712 111,297 1990 Households w/ Children under 18 3,287 7,049 14,213 1990 Households w/ Persons over 65 4,686 9,166 16,271 Area defined by Circle: (40.7869,76.5217): 5 mile(s) Area defined by Circle: (40.7869,76.5217): 10 mile(s) Area defined by Circle: (40.7869,76.5217): 15 mile(s) Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 2 of 4 Area 1 = Shamokin, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin, PA 10 Mile Radius Area 3 = Shamokin, PA 15 Mile Radius Description Area 1 Area 2 Area 3 1990 Family Population 22,785 48,667 96,024 1990 Nonfamily Population 4,249 8,045 15,273 1990 Group Quarters Population 474 653 2,449 1990 Average Household Size 2.34 2.41 2.45 1990 Average Family Size 2.95 2.99 3.01 1990 Family Households 7,636 16,112 31,549 1990 Nonfamily Households 3,915 7,418 13,837 1995 Household Income: %$0-$9,999 22.1 18.9 16.5 %$10,000-$14,999 14.6 13.8 12.1 %$15,000-$24,999 21.0 20.4 19.5 %$25,000-$34,999 16.3 16.1 16.3 %$35,000-$49,999 15.4 16.6 18.3 %$50,000-$74,999 7.8 10.4 11.7 %$75,000-$99,999 2.1 2.4 3.0 %$100,000-$149,999 0.5 0.9 1.6 %$150,000+ 0.2 0.5 0.9 2000 Median Household Income $24,852 $27,680 $30,748 1995 Median Household Income $21,259 $23,537 $26,007 1990 Median Household Income $18,062 $19,947 $21,822 2000 Average Household Income $30,840 $34,829 $39,680 1995 Average Household Income $26,180 $29,387 $33,239 1990 Average Household Income $22,091 $24,578 $27,562 2000 Per Capita Income $13,302 $14,574 $16,326 1995 Per Capita Income $11,238 $12,236 $13,604 1990 Per Capita Income $ 9,507 $10,245 $11,275 2000 Median Family Income $32,680 $35,160 $39,108 1995 Median Family Income $27,955 $29,897 $33,078 1990 Median Family Income $23,751 $25,337 $27,755 1990 Average Family Income $27,049 $29,707 $32,885 Area defined by Circle: (40.7869,76.5217): 5 mile(s) Area defined by Circle: (40.7869,76.5217): 10 mile(s) Area defined by Circle: (40.7869,76.5217): 15 mile(s) Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Profile Report CBC - C1750-41 Page 3 of 4 Area 1 = Shamokin, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin, PA 10 Mile Radius Area 3 = Shamokin, PA 15 Mile Radius Description Area 1 Area 2 Area 3 1990 Housing Unit Counts: Total Units 12,877 26,120 49,503 Occupied Units 11,554 23,524 45,380 Owner Occupied 8,798 18,474 34,703 Renter Occupied 2,758 5,047 10,676 Vacant Units 1,323 2,596 4,123 Year Round 1,248 2,307 3,592 Seasonal 75 291 529 1990 Housing Unit Percents: % Occupied of Total Units 89.7 90.1 91.7 % Owner Units of Occupied Units 76.1 78.5 76.5 % Renter Units of Occupied Units 23.9 21.5 23.5 % Vacant of Total Units 10.3 9.9 8.3 % Year Round of Vacant Units 94.3 88.9 87.1 % Seasonal of Vacant Units 5.7 11.2 12.8 % Condominiums of Total Units 0.1 0.1 0.4 1990 Condominiums: Total Condominium Units 14 33 180 % Owner Occupied 0.0 0.0 27.2 % Renter Occupied 100.0 100.0 58.9 % Vacant 0.0 0.0 13.9 1990 Units in Structure: % 1, Detached 37.0 44.7 51.0 % 1, Attached 45.3 38.4 29.8 % 2 3.8 3.3 4.0 % 3 - 9 6.4 5.8 6.2 % 10 - 49 2.2 1.6 1.5 % 50 + 2.0 1.3 1.5 % Mobile Homes 2.1 3.5 4.7 % Other 1.3 1.4 1.4 1990 Median Home Value $24,561 $29,933 $36,708 1990 Median Contract Rent $ 179 $ 182 $ 209 Area defined by Circle: (40.7869,76.5217): 5 mile(s) Area defined by Circle: (40.7869,76.5217): 10 mile(s) Area defined by Circle: (40.7869,76.5217): 15 mile(s) Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Profile Report CBC - Cl750-4l Page 4 of 4 Area 1 = Shamokin, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin, PA 10 Mile Radius Area 3 = Shamokin, PA 15 Mile Radius Description Area 1 Area 2 Area 3 1995 Total Employed 3,288 7,716 18,294 1995 Socio-Economic Measure 15 21 27 1990 Occupation: Total Civil Labor Force 11,442 24,507 50,736 % Unemployed 10.3 7.7 6.4 Total Employed 10,266 22,610 47,480 % White Collar 41.6 40.2 42.3 % Executive & Managerial 5.6 6.4 6.7 % Professional Specialty 9.1 9.4 11.2 % Technical Support 3.0 3.2 3.6 % Administrative Support 13.8 12.6 12.4 % Sales 10.2 8.7 8.4 % Blue Collar 41.9 43.3 41.2 % Precision Production, Craft & Repair 13.8 14.5 13.7 % Machine Operators 15.1 15.9 15.3 % Transportation & Material Moving 5.5 5.8 5.5 % Laborers 7.5 7.2 6.8 % Farming, Forestry & Fishing 1.3 2.5 2.3 % Service: Private Household 0.2 0.2 0.1 % Service: Protective 2.6 1.9 1.6 % Service: Other 12.4 11.9 12.5 1990 Educational Attainment (Age 25 & Over): % Less than Grade 9 17.8 16.0 13.4 % Grade 9-12 (No Diploma) 20.9 19.9 18.8 % High School Graduate or Equivalency 46.0 46.2 46.3 % Some College (No Degree) 6.2 7.1 8.1 % Associate Degree 3.2 3.6 3.8 % Bachelor Degree 3.8 4.5 5.5 % Graduate or Professional Degree 2.0 2.7 4.0 Area defined by Circle: (40.7869,76.5217): 5 mile(s) Area defined by Circle: (40.7869,76.5217): 10 mile(s) Area defined by Circle: (40.7869,76.5217): 15 mile(s) Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 1 of 9 Area 1 = Shamokin, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin, PA 10 Mile Radius Area 3 = Shamokin, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1995 Socio-Economic Measure: 15 21 27 1995 Employment: 3,288 7,716 18,294 Population: 2000 Projection 25,944 55,523 112,734 1995 Estimate 26,521 56,172 112,885 1990 Census 27,509 57,372 113,747 1990 - 1995 % Change (Growth) -3.6% -2.1% -0.8% 1990 Group Quarters Population 474 653 2,449 1995 % Population by Race: White 99.7% 99.6% 99.2% Black 0.1% 0.1% 0.2% American Indian, Eskimo & Aleut 0.0% 0.0% 0.0% Asian or Pacific Islander 0.2% 0.2% 0.3% Other 0.0% 0.0% 0.2% Hispanic 0.4% 0.3% 0.6% 1990 % Population by Race: White 99.7% 99.7% 99.4% Black 0.1% 0.1% 0.2% American Indian, Eskimo & Aleut 0.0% 0.0% 0.0% Asian or Pacific Islander 0.2% 0.2% 0.3% Other 0.0% 0.0% 0.2% Hispanic 0.3% 0.3% 0.5% 1995 % Population by Sex: Male 46.3% 47.1% 47.3% Female 53.8% 52.9% 52.7% 1990 % Population by Sex: Male 46.3% 47.1% 47.3% Female 53.7% 52.9% 52.7% 2000 Pop per Square Mile (Pop Density) 333.5 172.4 162.6 1995 Pop per Square Mile (Pop Density) 340.9 174.4 162.9 1990 Pop per Square Mile (Pop Density) 353.6 178.1 164.1 Area (Square Miles) 77.8 322.1 693.2 Area (Square Kilometers) 201.5 834.1 1,795.3 Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 2 of 9 Area 1 = Shamokin, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin, PA 10 Mile Radius Area 3 = Shamokin, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- Households: 2000 Projection 10,986 22,961 45,377 1995 Estimate 11,181 23,117 45,201 1990 Census 11,554 23,524 45,380 1990 - 1995% Change (Growth) -3.2% -1.7% -0.4% 2000 Average Household Size 2.32 2.39 2.43 1995 Average Household Size 2.33 2.40 2.44 1990 Average Household Size 2.34 2.41 2.45 2000 Per Capita Income $ 13,302 14,574 16,326 1995 Per Capita Income $ 11,238 12,236 13,604 1990 Per Capita Income $ 9,507 10,245 11,275 2000 Median Family Income $ 32,680 35,160 39,108 1995 Median Family Income $ 27,955 29,897 33,078 1990 Median Family Income $ 23,751 25,337 27,755 2000 Median Household Income $ 24,852 27,680 30,748 1995 Median Household Income $ 21,259 23,537 26,007 1990 Median Household Income $ 18,062 19,947 21,822 2000 Average Household Income $ 30,840 34,829 39,680 1995 Average Household Income $ 26,180 29,387 33,239 1990 Average Household Income $ 22,091 24,578 27,562 1995 % Household Income: $0- $9,999 22.1% 18.9% 16.5% $10,000-$14,999 14.6% 13.8% 12.1% $15,000-$24,999 21.0% 20.4% 19.5% $25,000-$34,999 16.3% 16.1% 16.3% $35,000-$49,999 15.4% 16.6% 18.3% $50,000-$74,999 7.8% 10.4% 11.7% $75,000-$99,999 2.1% 2.4% 3.0% $100,000-$149,999 0.5% 0.9% 1.6% $150,000+ 0.2% 0.5% 0.9% Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 3 of 9 Area 1 = Shamokin, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin, PA 10 Mile Radius Area 3 = Shamokin, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990% Household Income: $0-$9,999 27.4% 24.1% 21.3% $l0,000-$14,999 15.1% 14.1% 13.0% $15,000-$24,999 22.8% 23.0% 22.1% $25,000-$34,999 15.6% 16.0% 17.1% $35,000-$49,999 12.7% 13.9% 15.6% $50,000-$74,999 5.2% 7.1% 8.0% $75,000-$99,999 0.9% 1.0% 1.6% $100,000-$149,999 0.0% 0.4% 0.8% $150,000+ 0.2% 0.4% 0.6% 1995 % Population by Age: 0-5 6.8% 6.8% 7.2% 6-13 9.3% 9.6% 9.8% 14-17 4.5% 4.7% 4.8% 18-20 3.9% 4.0% 4.1% 21-24 4.8% 4.8% 5.0% 25-34 12.3% 12.2% 12.7% 35-44 12.7% 13.6% 14.1% 45-54 10.3% 10.6% 10.9% 55-64 11.4% 11.0% 10.3% 65-74 13.1% 12.6% 11.5% 75-84 8.5% 7.9% 7.3% 85+ 2.4% 2.0% 2.1% Median Age Total Population 41.5 40.6 39.4 Median Age Adult Population 50.8 49.2 47.7 1990 % Population by Age: 0-5 6.7% 6.8% 7.3% 6-13 9.5% 10.1% 10.1% 14-17 5.0% 5.1% 5.2% 18-20 3.4% 3.5% 3.6% 21-24 4.6% 4.5% 4.8% 25-34 12.8% 13.2% 14.1% 35-44 12.6% 13.3% 13.7% 45-54 10.2% 10.0% 10.0% 55-64 11.8% 11.7% 11.1% 65-74 12.9% 12.3% 11.4% 75-84 8.3% 7.6% 7.0% 85+ 2.3% 1.8% 1.8% Median Age Total Population 41.2 39.8 38.4 Median Age Adult Population 51.0 49.4 47.5 Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 4 of 9 Area 1 = Shamokin, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin, PA 10 Mile Radius Area 3 = Shamokin, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1995 % Female Population by Age: 0-5 5.8% 6.1% 6.6% 6-13 8.4% 8.9% 9.1% 14-17 4.2% 4.4% 4.4% 18-20 3.6% 3.7% 3.8% 21-24 4.5% 4.4% 4.7% 25-34 11.6% 11.6% 12.1% 35-44 11.9% 13.0% 13.5% 45-54 9.7% 10.1% 10.5% 55-64 11.8% 11.4% 10.6% 65-74 14.5% 13.8% 12.6% 75-84 10.6% 9.8% 9.1% 85+ 3.3% 2.8% 3.0% Female Median Age Total Population 45.0 43.3 41.8 Female Median Age Adult Population 54.5 52.4 50.3 1990 % Female Population by Age: 0-5 5.7% 6.0% 6.6% 6-13 8.6% 9.3% 9.4% 14-17 4.7% 4.8% 4.8% 18-20 3.3% 3.2% 3.4% 21-24 4.4% 4.2% 4.5% 25-34 12.0% 12.6% 13.5% 35-44 11.7% 12.5% 12.9% 45-54 9.6% 9.7% 9.7% 55-64 12.2% 12.1% 11.4% 65-74 14.4% 13.6% 12.5% 75-84 10.3% 9.4% 8.7% 85+ 3.2% 2.5% 2.6% Female Median Age Total Population 44.7 42.7 40.8 Female Median Age Adult Population 54.5 52.6 50.4 1990 % Hispanic Population by Type: Not of Hispanic Origin 99.7% 99.7% 99.5% Mexican 0.1% 0.0% 0.1% Puerto Rican 0.1% 0.1% 0.2% Cuban 0.0% 0.0% 0.0% Other Hispanic 0.2% 0.1% 0.2% Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 5 of 9 Area 1 = Shamokin, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin, PA 10 Mile Radius Area 3 = Shamokin, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Population Enrolled in School (Age 3 & Over): Preprimary School 6.7% 6.6% 7.1% Elementary and High School 78.1% 78.3% 76.6% College 15.2% 15.1% 16.3% Total School Enrollment 5,062 11,018 22,294 1990 % Educational Attainment (Age 25 & Over): Less than Grade 9 17.8% 16.0% 13.4% Grade 9-12 (No Diploma) 20.9% 19.9% 18.8% High School Graduate or Equivalency 46.0% 46.2% 46.3% Some College (No Degree) 6.2% 7.1% 8.1% Associate Degree 3.2% 3.6% 3.8% Bachelor Degree 3.8% 4.5% 5.5% Graduate or Professional Degree 2.0% 2.7% 4.0% 1990 % Employment Status: Total Labor Force: Armed Forces 0.2% 0.1% 0.1% Civilian: Employed 45.7% 48.8% 52.0% Unemployed 5.2% 4.1% 3.6% Not in Labor Force 48.9% 47.0% 44.3% Female Labor Force: Armed Forces 0.0% 0.1% 0.1% Civilian: Employed 36.6% 39.5% 42.7% Unemployed 3.8% 3.0% 2.7% Not in Labor Force 59.5% 57.5% 54.6% 1990 % Working Mothers: Child < 6 Only 13.1% 12.5% 14.8% Child 6-17 Only 42.4% 42.2% 41.0% Child < 6 & 6-17 10.8% 11.1% 10.8% Nonworking Mothers 33.7% 34.2% 33.4% Total Mothers 2,995 6,498 13,296 Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-4l Page 6 of 9 Area 1 = Shamokin, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin, PA 10 Mile Radius Area 3 = Shamokin, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Industry Employment: Agriculture/Forestry/Fishing 1.4% 2.8% 2.6% Mining 1.6% 1.8% 1.6% Construction 6.4% 7.1% 6.3% Manufacturing: Nondurable Goods 16.8% 16.3% 15.4% Durable Goods 9.5% 10.7% 11.7% Transportation 3.7% 3.9% 3.3% Communications & Public Utilities 2.5% 2.2% 2.3% Wholesale Trade 3.2% 3.2% 3.1% Retail Trade 19.3% 16.9% 16.4% Finance/Insurance/Real Estate 3.1% 3.1% 3.2% Services: Business & Repair 2.5% 2.7% 2.8% Personal 2.3% 2.3% 2.2% Entertainment & Recreation 0.9% 0.7% 0.6% Health 11.1% 11.5% 13.9% Educational 5.7% 5.9% 6.4% Other Professional & Related 3.7% 3.6% 3.7% Public Administration 6.4% 5.3% 4.5% Total 10,274 22,618 47,492 1990 % Occupation: Executive & Managerial 5.6% 6.4% 6.7% Professional Specialty 9.1% 9.4% 11.2% Technical Support 3.0% 3.2% 3.6% Sales 10.2% 8.7% 8.4% Administrative Support 13.8% 12.6% 12.4% Service: Private Household 0.2% 0.2% 0.1% Service: Protective 2.6% 1.9% 1.6% Service: Other 12.4% 11.9% 12.5% Farming, Forestry & Fishing 1.3% 2.5% 2.3% Precision Production, Craft & Repair 13.8% 14.5% 13.7% Machine Operator, Assemblers & Inspectors 15.1% 15.9% 15.3% Transportation & Material Moving 5.5% 5.8% 5.5% Laborers 7.5% 7.2% 6.8% White Collar Total 41.6% 40.2% 42.3% Blue Collar Total 41.9% 43.3% 41.2% Total Employed 10,265 22,620 47,492 Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-4l Page 7 of 9 Area 1 = Shamokin, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin, PA 10 Mile Radius Area 3 = Shamokin, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Marital Status: Total Male: 10,202 21,620 42,829 Never Married 26.7% 26.4% 26.3% Married 60.1% 61.6% 61.9% Separated 1.4% 1.4% 1.5% Widowed 5.4% 4.7% 4.3% Divorced 6.3% 5.9% 6.0% Total Female: 12,494 25,349 49,748 Never Married 19.6% 18.7% 19.5% Married 49.2% 52.5% 53.2% Separated 1.9% 1.8% 1.8% Widowed 22.7% 20.9% 18.9% Divorced 6.5% 6.1% 6.5% 1990 Households by Type: One Person Households 3,667 6,929 12,701 Two or more Person Households: Family Households: Married Couple 5,915 12,892 25,603 Male Householder 435 835 1,534 Female Householder 1,286 2,385 4,412 Nonfamily Households 250 488 1,137 1990 Family Households With Children Married Couple Family 2,469 5,539 11,205 Male Householder 166 329 640 Female Householder 611 1,111 2,238 1990 Population by Household Type: Family Households 22,785 48,667 96,024 Nonfamily Households 4,249 8,045 15,273 1990 Households With: Children Under 18 3,287 7,049 14,213 Persons Over 65 4,686 9,166 16,271 Householder Over 65 4,358 8,492 15,036 1990 Average Family Size 2.95 2.99 3.01 Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 8 of 9 Area 1 = Shamokin, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin, PA 10 Mile Radius Area 3 = Shamokin, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 Median Home Value $24,561 29,933 36,708 1990 Average Home Value $33,427 38,838 45,385 1990 Median Contract Rent $179 182 209 1990 Average Contract Rent $182 186 210 1990 Persons In Unit: 1 Person Units 3,667 6,929 12,701 2 Person Units 3,708 7,619 14,760 3 Person Units 1,907 3,896 7,804 4+ Person Units 2,272 5,081 10,122 1990 Housing Unit Counts: Total Units 12,877 26,120 49,503 % Occupied 89.7% 90.1% 91.7% % Vacant 10.3% 9.9% 8.3% % Year Round 9.7% 8.8% 7.3% % Seasonal 0.6% 1.1% 1.1% Occupied Units 11,554 23,524 45,380 % Owner Occupied 76.1% 78.5% 76.5% % Renter Occupied 23.9% 21.5% 23.5% Vacant Units 1,323 2,596 4,123 % Year Round of Vacant Units 94.3% 88.9% 87.1% % Seasonal of Vacant Units 5.7% 11.2% 12.8% 1990 Total Housing Units in Structure 12,877 26,120 49,503 1, Detached 37.0% 44.7% 51.0% 1, Attached 45.3% 38.4% 29.8% 2, 3.8% 3.3% 4.0% 3-9 6.4% 5.8% 6.2% 10-49 2.2% 1.6% 1.5% 50+ 2.0% 1.3% 1.5% Mobile Home or Trailer 2.1% 3.5% 4.7% Other 1.3% 1.4% 1.4% 1990 Housing Units by Year Built 8,787 18,485 34,893 Built 1985 to March, 1990 2.8% 4.6% 5.2% Built 1980 to 1984 1.7% 3.7% 4.1% Built 1970 to 1979 6.9% 9.8% 11.8% Built 1960 to 1969 4.1% 4.8% 6.6% Built 1950 to 1959 3.9% 5.1% 7.3% Built 1949 or Earlier 80.5% 72.0% 65.1% Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Market Stats Report CBC - C1750-41 Page 9 of 9 Area 1 = Shamokin, PA 5 Mile Radius 6/8/96 Area 2 = Shamokin, PA 10 Mile Radius Area 3 = Shamokin, PA 15 Mile Radius - -------------------------------------------------------------------------------- Description Area 1 Area 2 Area 3 - -------------------------------------------------------------------------------- 1990 % Means of Transportation to Work: Car, Truck or Van: Drove Alone 67.4% 69.8% 71.4% Carpooled 21.4% 20.4% 18.3% Public Transportation 0.7% 0.4% 0.3% Other Means 7.9% 6.6% 7.0% Worked at Home 2.6% 2.8% 3.0% 1990 % Travel Time to Work: 0-14 Minutes 41.6% 38.8% 41.3% 15-29 Minutes 30.4% 32.9% 34.4% 30-59 Minutes 20.1% 20.4% 18.0% 60-89 Minutes 4.9% 5.1% 4.5% 90+ Minutes 3.1% 2.7% 1.8% 1990 Households by Number of Vehicles: 1 Vehicle 4,546 8,583 16,200 2 Vehicles 3,253 7,444 15,591 3 Vehicles 952 2,470 5,053 4 Vehicles 186 545 1,205 5 or More Vehicles 74 223 465 Area defined by Circle: (40.7869,76.5217): 5 mile(s) Area defined by Circle: (40.7869,76.5217): 10 mile(s) Area defined by Circle: (40.7869,76.5217): 15 mile(s) Copyright 1995 Strategic Mapping, Inc. 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Atlas MarketQuest Census Change Report CBC - C1750-41 Page 1 of 3 PA/97 Northumberland County 6/11/96 1980 Census 1990 Census Percent Total Percent Total Percent Change Population White 99,956 99.6 95,997 99.2 -4.0 Black 162 0.2 326 0.3 101.2 American Indian, Asian & Other 263 0.3 448 0.5 70.3 Total 100,381 100.0 96,771 100.0 -3.6 Hispanic 301 0.3 532 0.5 76.7 Age of Population: 0-5 7,333 7.3 7,270 7.5 -0.9 6-13 11,734 11.7 9,991 10.3 -14.9 14-17 6,927 6.9 5,170 5.3 -25.4 18-24 10,216 10.2 8,163 8.4 -20.1 25-34 13,821 13.8 13,850 14.3 0.2 35-44 10,632 10.6 13,492 13.9 26.9 45-54 11,002 11.0 10,205 10.5 -7.2 55-64 12,566 12.5 10,343 10.7 -17.7 65+ 16,150 16.1 18,287 18.9 13.2 Median Age Total Population 35.2 37.8 7.5 Median Age Adult Population 47.3 46.6 -1.5 Age of Male Population: 0-5 3,776 8.0 3,806 8.3 0.8 6-13 5,980 12.6 5,083 11.1 -15.0 14-17 3,553 7.5 2,597 5.7 -26.9 18-24 4,974 10.5 4,077 8.9 -18.0 25-34 6,879 14.5 6,859 15.0 -0.3 35-44 5,221 11.0 6,758 14.7 29.4 45-54 5,123 10.8 5,010 10.9 -2.2 55-64 5,641 11.9 4,739 10.3 -16.0 65+ 6,288 13.3 6,937 15.1 10.3 Total 47,435 100.0 45,866 100.0 -3.3 Median Age Male Population 32.8 35.7 8.9 Median Age Adult Male Population 45.0 44.2 -1.7 Age of Female Population: 0-5 3,557 6.7 3,464 6.8 -2.6 6-13 5,754 10.9 4,908 9.6 -14.7 14-17 3,374 6.4 2,573 5.1 -23.7 18-24 5,242 9.9 4,086 8.0 -22.1 25-34 6,942 13.1 6,991 13.7 0.7 35-44 5,411 10.2 6,734 13.2 24.5 45-54 5,879 11.1 5,195 10.2 -11.6 55-64 6,925 13.1 5,604 11.0 -19.1 65+ 9,862 18.6 11,350 22.3 15.1 Total 52,946 100.0 50,905 100.0 -3.9 Median Age Female Population 38.0 39.9 5.0 Median Age Adult Female Population 49.3 49.1 -0.4 Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 2 of 3 PA/97 Northumberland County 6/11/96 1980 Census 1990 Census Percent Total Percent Total Percent Change Total Households 37,846 38,736 2.4 Household Population 99,429 95,186 4.3 Average Household Size 2.63 2.46 -6.5 Total Families 28,105 26,998 -3.9 Average Family Size 3.16 3.00 -5.2 Average Family Income $17,678 $31,833 80.1 Family Population 88,857 88.5 81,965 84.7 -7.8 Nonfamily Population 10,572 10.5 13,221 13.7 25.1 Group Quarters Population 952 0.9 1,585 1.6 66.5 Foreign Born Population 1,242 1.2 954 1.0 -23.2 Household Income: $0 -$9,999 14,355 38.0 8,130 21.0 -43.4 $10,000-$14,999 7,253 19.2 4,842 12.5 -33.2 $15,000-$24,999 10,545 27.9 8,647 22.3 -18.0 $25,000-$34,999 3,999 10.6 6,826 17.6 70.7 $35,000-$49,999 1,150 3.0 6,437 16.6 459.7 $50,000-$74,999 325 0.9 2,900 7.5 792.3 $75,000-$99,999 124 0.3 566 1.5 356.5 $100,000-$149,999 238 0.6 $150,000+ 203 0.5 Median Household Income $13,116 $22,124 68.7 Average Household Income $15,034 $26,812 78.3 Per Capita Income $ 5,708 $10,926 91.4 Median Home Value $23,848 $39,584 66.0 Average Home Value $28,118 $46,347 64.8 Median Contract Rent $126 $206 63.5 Average Contract Rent $122 $208 70.5 Total Housing Units 40,888 100.0 41,900 100.0 2.5 Owner Occupied 27,665 67.7 28,399 67.8 2.7 Renter Occupied 10,181 24.9 10,337 24.7 1.5 Vacant 3,042 7.4 3,164 7.6 4.0 Mobile Home or Trailer 1,735 4.2 2,294 5.5 32.2 Condominiums 54 0.1 88 0.2 63.0 Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Census Change Report CBC - C1750-41 Page 3 of 3 PA/97 Northumberland County 6/11/96 1980 Census 1990 Census Percent Total Percent Total Percent Change Occupation: Executive & Managerial 2,279 5.8 2,822 6.8 23.8 Professional Specialty 3,174 8.0 3,822 9.2 20.4 Technical Support 849 2.1 1,438 3.5 69.4 Administrative Support 4,809 12.2 5,575 13.4 15.9 Sales 3,315 8.4 3,653 8.8 10.2 Total White Collar 14,426 36.4 17,310 41.6 20.0 Prod/Craft/Repair 5,553 14.0 5,261 12.7 -5.3 Machine Operators 7,447 18.8 5,552 13.4 -25.4 Trans/Material Moving 2,479 6.3 2,331 5.6 -6.0 Laborers 3,604 9.1 3,856 9.3 7.0 Total Blue Collar 19,901 50.3 17,000 40.9 -14.6 Farm/Forest/Fish 818 2.1 949 2.3 16.0 Protective Service 513 1.3 738 1.8 43.9 Private Service 96 0.2 46 0.1 -52.1 Other Service 4,644 11.7 5,541 13.3 19.3 Total Employed 39,580 91.3 41,584 93.0 5.1 Unemployed 3,756 8.7 3,134 7.0 -16.6 Total Civil Labor Force 43,336 100.0 44,718 100.0 3.2 Working Mothers 6,988 52.6 7,928 68.9 13.5 Child < 6 or < 6 & 6-17 2,394 18.0 3,098 26.9 29.4 Child 6-17 Only 4,594 34.6 4,830 42.0 5.1 Nonworking Mothers 6,292 47.4 3,571 31.1 -43.2 Means of Transportation to Work: Drive Alone/Carpool 32,611 84.4 36,827 90.2 12.9 Public Transportation 337 0.9 137 0.3 -59.3 Other 5,681 14.7 3,868 9.5 -31.9 Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 1 of 2 PA/97 Northumberland County 6/11/96
1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population 100,381 96,771 95,811 95,629 White 99.6% 99.2% 99.0% 98.8% Black 0.2% 0.3% 0.4% 0.5% American Indian 0.0% 0.1% 0.1% 0.1% Asian 0.1% 0.2% 0.2% 0.3% Other 0.1% 0.2% 0.3% 0.3% Hispanic 0.3% 0.5% 0.6% 0.6% Total Households 37,846 38,736 38,380 38,388 Household Population 99,429 95,186 94,226 94,044 Average Household Size 2.63 2.46 2.46 2.45 Household Income $0-9,999 38.0% 21.0% 16.5% 13.2% $10,000-14,999 19.2% 12.5% 11.8% 10.0% $15,000-24,999 27.9% 22.3% 19.4% 17.0% $25,000-34,999 10.6% 17.6% 16.8% 16.3% $35,000- 49,999 3.0% 16.6% 19.5% 19.0% $50,000-74,999 0.9% 7.5% 11.5% 16.1% $75,000-99,999 0.3% 1.5% 2.6% 4.8% $100,000-149,999 - 0.6% 1.3% 2.6% $150,000+ - 0.5% 0.7% 1.0% Total 100.0% 100.0% 100.0% 100.0% Median Household Income ($) 13,116 22,124 26,192 30,734 Aggregate HH Inc ($000) 567,560 1,040,018 1,226,174 1,449,777 Median Family Income ($) 16,088 27,936 33,073 38,808 Per Capita Income ($) 5,708 10,926 13,013 15,416 Median Age Total Population 35.2 37.8 38.8 39.7 Median Age Adult Population 47.3 46.6 47.0 47.8 Median Age Female Population 38.0 39.9 41.0 42.0 Median Age Adult Female Population 49.3 49.1 49.3 49.9 Median Age Male Population 32.8 35.7 36.6 37.2 Median Age Adult Male Population 45.0 44.2 44.8 45.6
Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Trend Report CBC - C1750-41 Page 2 of 2 PA/97 Northumberland County 6/11/96 1980 Census 1990 Census 1995 Estimate 2000 Projection Total Population by Age 100,381 96,771 95,811 95,629 0-5 7.3% 7.5% 7.4% 7.3% 6-13 11.7% 10.3% 10.2% 9.9% 14-17 6.9% 5.3% 4.8% 4.8% 18-24 10.2% 8.4% 9.2% 9.2% 25-34 13.8% 14.3% 12.8% 12.6% 35-44 10.6% 13.9% 14.3% 13.7% 45-54 11.0% 10.5% 11.5% 12.5% 55-64 12.5% 10.7% 10.1% 10.5% 65-74 16.1% 10.7% 10.8% 10.3% 75-84 - 6.4% 6.9% 7.1% 85+ - 1.8% 2.0% 2.2% Female Population by Age 52,946 50,905 50,388 50,267 0-5 6.7% 6.8% 6.8% 6.6% 6-13 10.9% 9.6% 9.5% 9.2% 14-17 6.4% 5.1% 4.5% 4.5% 18-24 9.9% 8.0% 8.6% 8.5% 25-34 13.1% 13.7% 12.3% 12.0% 35-44 10.2% 13.2% 13.7% 13.3% 45-54 11.1% 10.2% 11.0% 12.0% 55-64 13.1% 11.0% 10.4% 10.7% 65-74 18.6% 11.8% 11.9% 11.4% 75-84 - 7.9% 8.4% 8.8% 85+ - 2.5% 2.9% 3.1% Male Population by Age 47,435 45,866 45,423 45,362 0-5 8.0% 8.3% 8.1% 8.0% 6-13 12.6% 11.1% 11.0% 10.7% 14-17 7.5% 5.7% 5.1% 5.1% 18-24 10.5% 8.9% 9.9% 9.9% 25-34 14.5% 15.0% 13.4% 13.2% 35-44 11.0% 14.7% 14.9% 14.1% 45-54 10.8% 10.9% 12.0% 13.0% 55-64 11.9% 10.3% 9.8% 10.3% 65-74 13.3% 9.4% 9.6% 9.1% 75-84 - 4.7% 5.1% 5.3% 85+ - 1.0% 1.1% 1.3% Area defined by County Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 Shamokin, PA 5 Mile Radius 6/8/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 79.8 - ----------------------------------Demographics---------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 26,521 11,181 26,047 2.33 $21,259 2000 25,944 10,986 25,470 2.32 $24,852 - ------------------------------Expenditure Potential----------------------------- 1995 Area Yearly Growth Rate Per Household 1.65% Total 1.29% - -------------------------Retail Support Potential (000)------------------------- 1995: 957 sq. ft.
- --------------------------------------------------------------------------------------------- Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/Total Retail Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 6,535 7,104 584 647 1.68% 64.5 Appliance Store 858 713 77 65 -3.62% 78.4 Auto-Aftermarket Store 16,425 16,617 1,469 1,513 0.23% 74.3 Convenience Store 9,666 9,689 865 882 0.05% 84.4 Dept. Store 7,215 7,623 645 694 1.11% 66.9 Drug Store 10,863 13,184 972 1,200 3.95% 107.8 Electronics Store 2,961 3,778 265 344 5.00% 70.9 Fast Food Restaurant Store 6,083 5,276 544 480 -2.80% 71.1 Full Serv Restaurant Store 5,793 4,984 518 454 -2.96% 69.0 Furniture Store 2,350 2,149 210 196 -1.78% 61.0 Grocery Store 39,304 43,110 3,515 3,924 1.87% 93.2 Hardware Store 1,876 1,972 168 179 1.00% 83.7 Home Centers Store 9,102 10,350 814 942 2.60% 81.1 Jewelry Store 1,043 1,050 93 96 0.13% 65.2 Liquor Store 1,421 1,247 127 113 -2.58% 75.5 Mass Merchandiser Store 11,309 12,318 1,011 1,121 1.72% 73.3 Photo Store 165 159 15 15 -0.74% 66.2 Shoe Store 1,435 1,650 128 150 2.82% 67.4 Sporting Goods Store 1,621 1,844 145 168 2.61% 62.2 Toy Store 807 745 72 68 -1.60% 66.4 Variety Store 642 708 57 64 1.97% 75.3
Area defined by Circle: (40.7869,76.5217): 5 mile(s) Benchmark: Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 Shamokin, PA 5 Mile Radius 6/8/96 Benchmark = Regional Area Definition Detailed Report
Product Potential 1995 2000 1995 2000 Yearly Bench Within Shopping Center/Total Retail Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 552 915 49 83 10.64% 68.9 ------- -------- ------- ------- Total Shopping Center 138,025 147,183 12,345 13,397 All Other Stores 105,866 112,889 9,468 10,276 Total Retail 243,891 260,072 21,813 23,673
Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (40.7869,76.5217): 5 mile(s) Benchmark: Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 Shamokin, PA 10 Mile Radius 6/8/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 84.1 - ----------------------------------Demographics---------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 56,172 23,117 55,519 2.40 $23,537 2000 55,523 22,961 54,870 2.39 $27,680 - ------------------------------Expenditure Potential----------------------------- 1995 Area Yearly Growth Rate Per Household 1.64% Total 1.50% - -------------------------Retail Support Potential (000)------------------------- 1995: 2,089 sq. ft. - --------------------------------------------------------------------------------
Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/Total Retail Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 14,821 16,320 641 711 1.94% 70.3 Appliance Store 1,830 1,541 79 67 -3.38% 81.4 Auto-Aftermarket Store 36,352 37,241 1,573 1,622 0.48% 80.1 Convenience Store 20,820 21,122 901 920 0.29% 88.5 Dept. Store 16,234 17,366 702 756 1.36% 72.4 Drug Store 22,560 27,702 976 1,206 4.19% 109.0 Electronics Store 6,517 8,411 282 366 5.23% 75.3 Fast Food Restaurant Store 13,824 12,147 598 529 -2.55% 77.2 Full Serv Restaurant Store 13,204 11,507 571 501 -2.71% 75.1 Furniture Store 5,394 4,999 233 218 -1.51% 67.4 Grocery Store 83,395 92,500 3,608 4,029 2.09% 95.2 Hardware Store 4,099 4,342 177 189 1.16% 88.8 Home Centers Store 20,033 22,999 867 1,002 2.80% 86.9 Jewelry Store 2,321 2,365 100 103 0.37% 69.6 Liquor Store 3,187 2,825 138 123 -2.38% 79.9 Mass Merchandiser Store 24,947 27,497 1,079 1,198 1.97% 78.1 Photo Store 374 364 16 16 -0.53% 72.8 Shoe Store 3,232 3,763 140 164 3.09% 73.2 Sporting Goods Store 3,667 4,218 159 184 2.84% 68.9 Toy Store 1,848 1,723 80 75 -1.39% 72.9 Variety Store 1,411 1,574 61 69 2.22% 79.8
Area defined by Circle: (40.7869,76.5217): 10 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 Shamokin, PA 10 Mile Radius 6/8/96 Benchmark = Regional Area Definition Detailed Report
Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/Total Retail Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 1,225 2,058 53 90 10.94% 74.7 ------- ------- ------ ------ Total Shopping Center 301,294 324,582 13,033 14,137 All Other Stores 231,093 248,954 9,997 10,842 Total Retail 532,387 573,536 23,030 24,979
Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (40.7869,76.5217): 10 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 1 of 2 Shamokin, PA 15 Mile Radius 6/8/96 Benchmark = Regional Area Definition Detailed Report Shopping Center/Total Retail Expenditure Index: 88.5 - ----------------------------------Demographics---------------------------------- Total Total Household Average Median HH Population Households Population HH Size Income 1995 112,885 45,201 110,436 2.44 $26,007 2000 112,734 45,377 110,285 2.43 $30,748 - -----------------------------Expenditure Potential------------------------------ 1995 Area Yearly Growth Rate Per Household 1.64% Total 1.72% - -------------------------Retail Support Potential (000)------------------------- 1995: 4,305 sq. ft. - --------------------------------------------------------------------------------
Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/Total Retail Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Apparel Store 32,072 35,818 710 789 2.23% 77.2 Appliance Store 3,703 3,157 82 70 -3.14% 84.9 Auto-Aftermarket Store 75,518 78,399 1,671 1,728 0.75% 85.9 Convenience Store 42,196 43,357 934 955 0.54% 92.3 Dept. Store 34,726 37,662 768 830 1.64% 78.8 Drug Store 43,484 54,013 962 1,190 4.43% 108.2 Electronics Store 13,616 17,815 301 393 5.52% 80.3 Fast Food Restaurant Store 29,808 26,563 659 585 -2.28% 84.0 Full Serv Restaurant Store 28,686 25,347 635 559 -2.44% 82.3 Furniture Store 11,725 11,026 259 243 -1.22% 74.6 Grocery Store 167,083 187,427 3,696 4,130 2.32% 97.1 Hardware Store 8,262 8,836 183 195 1.35% 92.0 Home Centers Store 40,879 47,393 904 1,044 3.00% 91.3 Jewelry Store 4,963 5,120 110 113 0.63% 75.3 Liquor Store 6,775 6,061 150 134 -2.20% 84.5 Mass Merchandiser Store 52,229 58,321 1,155 1,285 2.23% 83.5 Photo Store 796 785 18 17 -0.27% 80.0 Shoe Store 6,892 8,137 152 179 3.38% 79.6 Sporting Goods Store 7,832 9,132 173 201 3.12% 76.2 Toy Store 4,014 3,793 89 84 -1.13% 80.2 Variety Store 2,944 3,329 65 73 2.49% 84.9
Area defined by Circle: (40.7869,76.5217): 15 mile(s) Benchmark: Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Market Potential: Shopping Center/Total Retail CBC - C1750-41 Page 2 of 2 Shamokin, PA 15 Mile Radius 6/8/96 Benchmark = Regional Area Definition Detailed Report
Product Potential 1995 2000 1995 2000 Yearly Bench- Within Shopping Center/Total Retail Total Total $ Per $ Per Growth Rate mark ($000) ($000) HH HH Total $ Index Video Store 2,613 4,448 58 98 11.22% 82.4 --------- --------- ------ ------ Total Shopping Center 620,816 675,937 13,735 14,896 All Other Stores 476,165 518,443 10,534 11,425 Total Retail 1,096,981 1,194,380 24,269 26,321
Expenditure Index - Shows the amount by which area per household expenditures differed from that of the benchmark. Values below 100 signify that this area is below the benchmark per household expenditures. Retail Support Potential - Provides the square footage which this area should be capable of supporting. Area defined by Circle: (40.7869,76.5217): 15 mile(s) Benchmark : Definition by Region Copyright 1995 Strategic Mapping, Inc. All rights reserved. ================================================================================ ADDENDUM F RENT ROLL - -------------------------------------------------------------------------------- ADDENDUM F RENT ROLL - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM G - PRO-JECT REPORTS - -------------------------------------------------------------------------------- ADDENDUM G PRO-JECT REPORTS - -------------------------------------------------------------------------------- AMES PLAZA, SHAMOKIN PA PROJECT ASSUMPTIONS REPORT EXCLUDING TENANTS BUILDING PROLOGUE - ----------------- LEASEHOLD ANALYSIS OF AMES PLAZA, SHAMOKIN PA BEGINNING 6/1996 FOR 21 YEARS ON A FISCAL YEAR BASIS AREA MEASURES - ------------- TNRA 1996 VALUE - 98,210 THEREAFTER - CONSTANT OCCA 1996 VALUE - 94,310 1997 VALUE - 98,210 1998 VALUE - 98,210 1999 VALUE - 98,210 2000 VALUE - 98,210 2001 VALUE - 98,210 2002 VALUE - 94,310 2003 VALUE - 98,210 2004 VALUE - 98,210 2005 VALUE - 98,210 2006 VALUE - 98,210 2007 VALUE - 94,310 2008 VALUE - 98,210 2009 VALUE - 98,210 2010 VALUE - 98,210 2011 VALUE - 98,210 2012 VALUE - 98,210 2013 VALUE - 40,120 2014 VALUE - 18,231 2015 VALUE - 7,800 2016 VALUE - 7,800 THEREAFTER - CONSTANT GROWTH RATES - ------------ EXPG 1996 VALUE - 3.00 THEREAFTER - CONSTANT RTXG 1996 VALUE - 3.00 THEREAFTER - CONSTANT SLSG 1996 VALUE - 3.00 THEREAFTER - CONSTANT RNTG 1996 VALUE - 3.00 THEREAFTER - CONSTANT NCOM 1996 VALUE - 4.50 THEREAFTER - CONSTANT RCOM +50.0% OF NCOM BCOM PAGE 2 +50.0% OF NCOM +50.0% OF RCOM MARKET RATES - ------------ ANCR 1996 VALUE - 3.50 THEREAFTER - GROWING AT GROWTH RATE RNTG SATR 1996 VALUE - 5.00 THEREAFTER - GROWING AT GROWTH RATE RNTG RSVR 1996 VALUE - 0.10 THEREAFTER - GROWING AT GROWTH RATE EXPG MISCELLANEOUS INCOMES - --------------------- PAD SITE 1996 VALUE - 27,500 1997 VALUE - 27,500 1998 VALUE - 27,500 1999 VALUE - 27,500 2000 VALUE - 27,500 THEREAFTER - GROWING AT GROWTH RATE RNTG EXPENSES - -------- COMMON AREA MAINT , REFERRED TO AS CAME CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 38,160 THEREAFTER - GROWING AT GROWTH RATE EXPG REAL ESTATE TAXES , REFERRED TO AS RETX CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 22,336 THEREAFTER - GROWING AT GROWTH RATE RTXG INSURANCE , REFERRED TO AS INSE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 7,440 THEREAFTER - GROWING AT GROWTH RATE EXPG MANAGEMENT , REFERRED TO AS MGMT CHARGED AGAINST NET OPERATING INCOME 2.00% OF EFFECTIVE GROSS INCOME RESERVES , REFERRED TO AS RSVS CHARGED AGAINST NET OPERATING INCOME MARKET RATE RSVR MULTIPLIED BY AREA MEASURE TNRA VACANCY ALLOWANCE - ----------------- PERCENTAGE OF POTENTIAL GROSS INCOME FOR ALL TENANTS SUBJECT TO VACANCY 1996 VALUE - 2.00 THEREAFTER - CONSTANT PAGE 3 MANAGEMENT FEE - -------------- NONE COMMISSION CALCULATIONS - ----------------------- STANDARD METHOD #1 - 0.000% OF TOTAL RENT STANDARD METHOD #2 - 0.000% OF TOTAL RENT STANDARD METHOD #3 - 0.000% OF TOTAL RENT STANDARD METHOD #4 - 0.000% OF TOTAL RENT STANDARD METHOD #5 - 0.000% OF TOTAL RENT COMMISSION PAYOUTS - ------------------ STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT ALTERATION CALCULATION - ---------------------- NONE ALTERATION PAYOUTS - ------------------ STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT COMMON AREA MAINTENANCE POOL - ---------------------------- NONE CAPITAL EXPENDITURES - -------------------- NONE PAGE 4 PRIMARY CLASSIFICATION CODES - ---------------------------- 1 - ANCHOR TENANT 2 - SATELLITE TENANT SECONDARY CLASSIFICATION CODES - ------------------------------ NONE COST CENTERS - ------------- 1 - CAM ESCALATIONS 2 - REAL ESTATE TAXES SALES VOLUME PROFILE - -------------------- PERCENT OF RELATIVE MONTH ANNUAL SALES VOLUME - ----- ------------ -------- JAN 8.33% 1.00 FEB 8.33% 1.00 MAR 8.33% 1.00 APR 8.33% 1.00 MAY 8.33% 1.00 JUN 8.33% 1.00 JUL 8.33% 1.00 AUG 8.33% 1.00 SEP 8.33% 1.00 OCT 8.33% 1.00 NOV 8.33% 1.00 DEC 8.33% 1.00 ------- ----- TOTALS 100.00% 12.00 GLOBAL RECOVERIES - ----------------- NONE TENANT PROLOGUE - --------------- MINIMUM RENTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR SALES VOLUMES AND BREAKPOINTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR RENEWAL RENTS ARE COMPOUNDED ANNUALLY RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET REFERENCE TENANTS - ----------------- NONE ================================================================================ ADDENDUM H - ENGAGEMENT LETTER - -------------------------------------------------------------------------------- ADDENDUM H ENGAGEMENT LETTER - -------------------------------------------------------------------------------- [LETTERHEAD OF CB COMMERCIAL REAL ESTATE GROUP, INC.] May 8, 1996 Mr. Josh Kane Chief Financial Officer MARK CENTERS TRUST 660 Third Avenue Kingston, PA 18704 Re: 17 Shopping Centers Nationwide Dear Mr. Kane: At your request, we are pleased to submit the following proposal to appraise the above referenced properties. The purpose of this assignment is to estimate the market value of the leased fee interest. We understand the appraisal reports are to be used for mortgage underwriting purposes. We also understand that the reports will be used by Mark Centers Trust and Morgan Stanley. The properties are briefly described on attachment "A". Our complete valuation will be presented in a self contained (narrative) format and will contain a complete description of the property along with pertinent exhibits and photographs together with supporting factual data and analysis necessary to convey our opinion of value. We will value the property based upon the cost, income and market approaches to value, where applicable, correlating our findings into a final value conclusion. The report will be prepared in conformity with and will be subject to the requirements of the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. Each report will also conform to the Uniform Standards of Professional Appraisal Practice ("USPAP") and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") and the Morgan Stanley Capital Appraisal Standards described in Attachment "B". We assume that there are no major or significant items of deferred maintenance beyond normal wear and tear for properties of their age as of the date of the appraisal which would require the expertise of a professional contractor to estimate the cost of such repairs. If such repairs need to be considered in this appraisal, such estimates are to be provided by a qualified firm hired by you and at no cost to us. The total fee for the assignment is $68,000 ($4,000 per property) including all travel and related expenses which is due and payable upon delivery of the reports. If we are asked to cancel the assignment within two weeks of our engagement an upset fee equal to 50% will be due and payable. If cancellation occurs between two and three weeks, the upset fee will be equal to 75% and any time after three weeks the full fee will be due and payable. We will furnish you with three copies of our final report within four to five weeks of our authorization. Authorization occurs upon our receipt of an executed copy of this proposal and our delivery date is contingent upon the timely receipt of all necessary property information, financial statements and detailed lease information. If all requested data and information is not available as of the authorized date, we reserve the right to extend the delivery date by the amount of time it takes to receive the requested information. May 8,1996 Mr. Kane Page 2 In order to complete this assignment in a timely manner, we will require the following specific information, if available: o Copy of Ground Lease, if Leasehold o Legal descriptions. o Current rent roll. o Copy of Leases or abstracts o Expense reimbursements on a tenant by tenant basis o Building area calculations and surveys. o Operating statements for the past three full years. o Current year expenses to date. o A copy of the current budget. o Copies of any toxic engineering reports dealing with underground tanks, PCB's, asbestos or chemical spills, if available. o A copy of the next fiscal year's budget, if available. o A list of major repairs which have recently been made, or are scheduled to be made in the next 18 months. o Name and phone number(s) of on-site superintendent(s), or local management firm or trustee for physical inspection. o Notice of any pending changes to the rent roll or pertinent information regarding the current status of the tenants. If we are requested to give court testimony an additional fee will be charged on an hourly basis at $300 per hour for designated MAI-appraisers and $175 for non-designated appraisers. Said hourly billings pertain to court preparation, waiting and travel time, document review and preparation (excludes narrative appraisal report) and all meetings related to court testimony. The client may provide only complete, final copies of the appraisal report to third parties who shall rely on such reports in connection with loan underwriting or securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the client for routine and customary questions. Please note that our consent to allow an appraisal report prepared by CB Commercial, or portions of such report, to become part of or be referenced in any public offering, the granting of such consent will be at our sole discretion and, if given, will be on condition that we will be provided with an Indemnification Agreement and/or Non-Reliance letter, in a form and content satisfactory to us, by a party satisfactory to us. We do consent to your submission of the reports to rating agencies, loan participants or your auditors without the need to provide us with an Indemnification Agreement and/or Non-Reliance letter. In addition to the fee for this assignment, you agree to compensate us at a rate to be mutually agreed to, for any time expended by us should we be required (by subpoena or otherwise) or requested by you, your representatives or other entity to become involved in any litigation or May 8, 1996 Mr. Kane Page 3 legal proceeding in any way involving this engagement to which we are not a party, the appraisal work we produce or the property which is the subject of this assignment. You also agree to pay, on demand, all reasonable expenses which we incur in connection with any litigation or proceedings including the fees of our attorneys. You acknowledge that we are being retained hereunder as an independent contractor to perform the services described herein and nothing in this agreement shall be deemed to create any other relationship between us. This assignment will be deemed concluded and the services hereunder completed upon delivery to you of the appraisal report discussed herein. If these terms are acceptable, please authorize us to proceed by having an officer of the corporation, managing general partner, principal, owner, or a contractually responsible party sign the enclosed copy of this proposal with "Terms and Conditions" and return it to us for our permanent file. Upon receipt of your authorization, we will schedule the necessary personnel to complete the project in a timely manner. We appreciate this opportunity to be of service to you on this assignment. If you have additional questions, please do not hesitate to give me a call. Sincerely, CB COMMERCIAL REAL ESTATE GROUP, INC. Appraisal /s/ Michael R. Pecorino Michael R. Pecorino, MAI MRP:jf cc: Douglas W. Haney Enclosure AGREED & ACCEPTED - -------------------------------------- -------------------------------------- Signature Title - -------------------------------------- -------------------------------------- Name (type or print) Date Office #: Fax #: ----------------------------- -------------------------------- TERMS AND CONDITIONS OF AGREEMENT CB COMMERCIAL REAL ESTATE GROUP, INC. - APPRAISAL 1. These Terms and Conditions by CB Commercial Real Estate Group, Inc., Appraisal Services, a division of CB Commercial Real Estate Group, Inc. (Appraiser or Consultant) and the client for whom Appraiser or Consultant will perform appraisal or consultation services (Client), and attached to any agreement for appraisal or consultation services between Client and Appraiser or Consultant (Agreement), shall be deemed a part of such Agreement as though set forth in full therein. 2. Appraiser or Consultant shall exercise independent judgment and complete the assignment called for by the Agreement (Assignment) in accordance with sound appraisal or consultation practice and the Code of Professional Ethics and Standards of Professional Conduct of the Appraisal Institute, as applicable. 3. All statements of the fact in the report which are used as the basis of Appraiser's or Consultant's analyses, opinions, and conclusions will be true and correct to the best of Appraiser's or Consultant's knowledge and belief. Appraiser or Consultant may rely upon the accuracy of information and material furnished to Appraiser or Consultant by Client. 4. Appraiser or Consultant shall have no responsibility for legal matters, questions of survey or title, soil or subsoil conditions, engineering, or other similar technical matters. The report will not constitute a survey of the property analyzed. 5. Client shall provide Appraiser or Consultant with such materials with respect to the Assignment as are requested by Appraiser or Consultant and in the possession or under the control of Client. Client shall provide Appraiser or Consultant with sufficient access to the real property to be analyzed and hereby grants permission for entry, unless discussed in advance to the contrary. 6. Unless expressly specified in the Agreement, the fee quoted does not include the attendance or giving of testimony by Appraiser or Consultant at any court, regulatory, or other proceeding, or any conferences or other work in preparation for such a proceeding. If any employee of CB Commercial Real Estate Group, Inc. is asked or required to testify at any deposition, trial, or other proceeding about the preparation, conclusions, or any other aspect of the assignment, Client shall compensate Appraiser or Consultant for the time spent by the employee in testifying and in preparing to testify according to the Appraiser's or Consultant's then current hourly rate for that employee plus reimbursement of expenses. 7. In the event Client requests additional consultation beyond the scope of this assignment, Client shall pay an additional charge for such consultation at rates specified by Appraiser or Consultant whether or not the completed report has been delivered to Client at the time of the request. 8. The aggregate liability of Appraiser or Consultant for any negligent acts, errors, or omissions in connection with the Assignment shall not exceed the compensation payable to Appraiser or Consultant on account of the Assignment. 9. Client agrees that the report shall not be quoted or referred to in any report or financial statement of Client or in any documents filed with any governmental agency without the prior written consent of Appraiser or Consultant. Neither all nor any part of the content of the report including, without limitation, the conclusions as to value, the identity of Appraiser or Consultant, references to the Appraisal Institute or references to the MAI or SRA designations shall be disseminated to the public through advertising or other mass media without the prior written consent of Appraiser or Consultant. 10. The data gathered in the course of the Assignment (except data furnished by Client) and the report prepared pursuant to the Agreement are and will remain the property of Appraiser/Consultant. With respect to data provided by Client, Appraiser or Consultant shall not violate the confidential nature of the appraiser- or consultant-client relationship by improperly disclosing any confidential information furnished to Appraiser or Consultant. Notwithstanding the foregoing, Appraiser or Consultant is authorized by client to disclose all or any portion of the report and the related data to appropriate representatives of the Appraisal Institute if such disclosure is required to enable Appraiser or Consultant to comply with the Bylaws and Regulations of such Institute as now or hereafter in effect. 11. In the event Client fails to make payments when due and payable, then from the date due and payable until paid the amount due and payable shall bear interest at the maximum rate permitted in the state in which the office of Appraiser or Consultant executing the Agreement is located. If Appraiser or Consultant is required to institute legal action against Client relating to the Agreement, Appraiser or Consultant shall be entitled to recover reasonable attorneys' fees and costs from Client. 12. This appraisal or consultation will not take into consideration the possibility of the existence of asbestos, PCB transformers, or other toxic, hazardous, or contaminated substances and/or underground storage tanks (hazardous material), or the cost of encapsulation or removal thereof. Should client have concern over the existence of such substances on the property, Appraiser or Consultant considers it imperative for the Client to retain the services of a qualified, independent engineer or contractor to determine the existence and extent of any hazardous materials, as well as the cost associated with any required or desirable treatment or removal thereof. 13. CB Commercial Real Estate Group, Inc., Appraisal Services and Client agree that the Agreement (including these Terms and Conditions) shall be governed by the laws of the state of the CB Commercial Real Estate Group, Inc., Appraisal Services office shown on the Agreement. 14. Client shall not indemnify Appraiser or Consultant or hold Appraiser or Consultant harmless unless and only to the extent that the Client misrepresents, distorts, or provides incomplete or inaccurate appraisal results to others, which acts of the Client proximately result in damage to Appraiser or Consultant. The Client shall indemnify and hold Appraiser or Consultant harmless from any claims, expenses, judgments or other items or costs arising as a result of the Client's failure or the failure of any of the Client's agents to provide a complete copy of the appraisal report to any third party. In the event of any litigation between the parties, the prevailing party to such litigation shall be entitled to recover from the other reasonable attorney fees and costs. 15. Appraiser understands that the Client may provide complete final copies of the appraisal report (but not partial or summarized copies) to third parties who shall rely on such reports in connection with the Client's securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the Client for routine and customary questions that may arise. ================================================================================ ADDENDUM H - ENGAGEMENT LETTER - -------------------------------------------------------------------------------- ADDENDUM I QUALIFICATIONS - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM I - QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF PETER J. JOLICOEUR Senior Real Estate Analyst CB Commercial Real Estate Group, Inc. Appraisal 560 Lexington Avenue, 20th Floor New York, New York 10022 (212) 207-6104 EDUCATIONAL Bachelor of Arts, Economics, University of Connecticut Storrs, Connecticut Appraisal Institute Courses 110, 120, 310, 410, 420, 510, 540, 550 LICENSES/CERTIFICATIONS Certified Real Estate General Appraiser: State of New York State #46-3537 PROFESSIONAL Appraisal Institute Associate Member of the Appraisal Institute EXPERIENCE Engaged in the appraisal and consultation of commercial real estate throughout the Northeast United States since 1987, specializing in New York City. Assignments include investment grade office buildings, multi-family residential, cooperative and condominium conversions, shopping centers, industrial facilities, special-use properties, portfolio valuations and multi-property assignments.
1987 - 1990 Henry Boeckmann Jr. & Associates New York, New York 1990 - Present CB Commercial Real Estate Group, Inc., Appraisal New York, New York
- -------------------------------------------------------------------------------- ================================================================================ ADDENDUM I - QUALIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF MICHAEL R. PECORINO, MAI Senior Vice President, Regional Manager CB Commercial Real Estate Group, Inc. 560 Lexington Avenue, 20th Floor New York, New York 10022 (212)207-6102 EDUCATIONAL Real Estate Appraisal and Analysis, New York University, the Real Estate Institute Bachelor of Arts, Geography, Planning, Urban Studies, State University College of New York at Oneonta Successfully completed all the necessary courses to qualify for the MAI designation. LICENSES/CERTIFICATIONS Certified General Real Estate Appraiser: State of New York (46000002055) Certified General Real Estate Appraiser: State of New Jersey (RG-01667) Certified General Real Estate Appraiser: State of Pennsylvania (GA-001096-R) Certified General Real Estate Appraiser: State of Connecticut (0000489) Certified General Real Estate Appraiser: State of Maryland (10569) Certified General Real Estate Appraiser: State of New Jersey (3793) Certified General Real Estate Appraiser: State of Delaware (X10000223) Certified General Real Estate Appraiser: State of Maine (CG00001192) Certified General Real Estate Appraiser: State of Vermont (080-0000168) Certified General Real Estate Appraiser: State of District of Columbia (GA00010315) Licensed Real Estate Broker: State of New York PROFESSIONAL Appraisal Institute Designated Member of the Appraisal Institute (MAI), Certificate No. 7944 Member of the Real Estate Board of New York EXPERIENCE Fifteen years of Real Estate Appraisal and Consulting experience throughout the United States specializing in the New York metropolitan area.
1993 - Present CB Commercial Real Estate Group, Inc., Appraisal New York, New York 1983 - 1993 Cushman & Wakefield, Inc. New York, New York 1982 - 1983 Joseph J. Blake & Associates, Inc. New York, New York 1981 - 1982 City of New York - Office of Manhattan Planning New York, New York 1980 - 1981 City of Jersey City - Office of the Mayor Jersey City, New Jersey
Assignments include full and partial interest appraisals of office buildings, air rights, commercial lofts, garden apartments, cooperatives, condominiums, townhouses, shopping centers, industrial facilities, residential and office market studies, portfolio valuations and multi-property assignments. - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------- Detail Rent Roll Page: 49 Report Date: 05/14/96 SHAMOKIN Date: 05/14/96 Time: 14:12:32 - ------------------------------------------------------------------------------------- -- Rent Dates - Suite Commence Expire Square Monthly Annual No. Tenant Name Start Footage Base Rent Rate/SF - ------------------------------------------------------------------------------------- 0002* FAMILY DOLLAR STORE 11/28/90 06/30/96 7,800 3,071.25 4.72 11/28/90 00030 BI-LO #280 [ILLEGIBLE] 05/01/79 04/30/99 31,294 7,916.67 3.04 08/27/78 00040 LONG JOHN SILVERS 06/01/80 05/31/00 0 2,291.67 0.00 05/20/80 1000* AMES DISTRIBUTING STORE #031 04/26/90 01/31/98 59,116 7,000.50 1.42 04/26/90 - ------------------------------------------------------------------------------------- Total Building Occupied Sqft: 100% 98,210 20,280.09 Available Sqft: 0% 0 Total Sqft: 98,210 - -------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------- Suite ---- Cost Recovery ---- Expense ---- Other Income ----- --- Future Rent Increases --- No. Tenant Name Description Monthly Stop Description Monthly Date Monthly Amt. Per Sf - ------------------------------------------------------------------------------------------------------------------------- 0002* FAMILY DOLLAR STORE 00030 BI-LO #280 [ILLEGIBLE] 00040 LONG JOHN SILVERS 1000* AMES DISTRIBUTING STORE #031 - ------------------------------------------------------------------------------------------------------------------------- Total Building 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------
This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE KINGS FAIRGROUNDS SHOPPING CENTER 89 Piney Forest Road Danville, Virginia CB File No. 96-093-a [LOGO]CB COMMERCIAL Delivering Solutions Through Local Knowledge Worldwide COMPLETE APPRAISAL SELF-CONTAINED APPRAISAL REPORT OF THE KINGS FAIRGROUNDS SHOPPING CENTER 89 Piney Forest Road Danville, Virginia CB File No. 96-093-a DATE OF VALUE June 5, 1996 PREPARED FOR MORGAN STANLEY MORTGAGE CAPITAL 1585 Broadway New York, New York 10036 PREPARED BY CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES 560 Lexington Avenue, 16th Floor New York, New York 10022 [LETTERHEAD OF CB COMMERCIAL REAL ESTATE GROUP, INC.] June 19, 1996 MORGAN STANLEY MORTGAGE CAPITAL 1585 Broadway New York, New York 10036 RE: Appraisal of Shopping Center KINGS FAIRGROUNDS SHOPPING CENTER 89 Piney Forest Road Danville, Virginia CB File No. 96-093-a Dear Ladies and Gentlemen: At your request and authorization, CB Commercial Real Estate Group, Inc. has prepared a Complete Appraisal presented in a self-contained appraisal report of the current market value of the leasehold Interest in the above-referenced real property. The subject property is a single story neighborhood shopping center featuring 118,535 square feet of gross leasable area. The shopping center is anchored by a Schewel Furniture, 60,200 SF and a Kroger Grocery Store 30,975, square feet and is currently 100% leased, with the assumption that Dollar General for 6,800 square feet will be signed by the end of June 1996. Which according to the subjects leasing agent is a done deal. The property is more fully described, legally and physically, within the enclosed report. Data, information, and calculations leading to the value conclusion are incorporated in the report following this letter. The report, in its entirety, including all assumptions and limiting conditions, is an integral part of and inseparable from this letter. Based on research and analysis contained in this report, it is estimated that the current market value of the leasehold Interest in the subject property as of June 5, 1996, is: ONE MILLION NINE HUNDRED THOUSAND DOLLARS ($ 1,900,000) The following appraisal sets forth the most pertinent data gathered, the techniques employed, and the reasoning leading to the opinion of value. The analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP), the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, and The Financial Institution Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Furthermore, this report June 19, 1996 Page 2 has been prepared in conformance with our interpretation of the appropriate regulations and guidelines set forth by Mark Centers Trust. It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CB Commercial Real Estate Group, Inc. can be of further service, please do not hesitate to contact us. Respectfully Submitted, CB COMMERCIAL REAL ESTATE GROUP, INC. APPRAISAL SERVICES by: /s/ John S. Ward /s/ Jerrold Harvey - ------------------------------- ------------------------------- John S. Ward Jerrold Harvey, MAI Real Estate Analyst Assistant Vice President & Manager Commonwealth of Virginia No. 4001-001321 ================================================================================ CERTIFICATION OF THE APPRAISERS - -------------------------------------------------------------------------------- CERTIFICATION OF THE APPRAISERS We certify that to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. 4. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event, such as the approval of a loan. 5. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation and the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. In addition, this report conforms to the requirements of the Financial Institution Reform, Recovery, and Enforcement Act (FIRREA). 6. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 7. Jerrold Harvey has completed the requirements of the continuing education program of the Appraisal Institute. 8. The property was personally inspected by John S. Ward, but was not inspected by Jerrold Harvey, MAI. 9. No other person provided professional assistance to the persons signing this report. 10. The undersigned appraisers have extensive experience in the appraisal/review of similar property types. /s/ John S. Ward /s/ Jerrold Harvey - ------------------------------- ------------------------------- John S. Ward Jerrold Harvey, MAI Real Estate Analyst Assistant Vice President & Manager Commonwealth of Virginia No. 4001-001321 [Commonwealth of Virginia STAMP] - -------------------------------------------------------------------------------- i ================================================================================ SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- SUBJECT PHOTOGRAPHS [GRAPHIC OMITTED] FRONT VIEW OF THE SUBJECT PROPERTY FACING SCHEWELS [GRAPHIC OMITTED] FRONT VIEW OF THE SUBJECT PROPERTY FACING KROGER AND REVCO - -------------------------------------------------------------------------------- ii ================================================================================ SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] FRONT VIEW OF THE SUBJECT PROPERTY FACING IN-LINE TENANTS [GRAPHIC OMITTED] FRONT VIEW OF THE SUBJECT PROPERTY FACING BANK PAD SITE - -------------------------------------------------------------------------------- iii ================================================================================ SUBJECT PHOTOGRAPHS - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] VIEW OF PINEY FOREST ROAD NORTH [GRAPHIC OMITTED] VIEW OF ROUTE 58/PINEY FOREST INTERSECTION - -------------------------------------------------------------------------------- iv ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- SUMMARY OF SALIENT FACTS Property Name: Kings Fairgrounds Location: 83 Piney Forest Road Danville, Virginia Assessor's Parcel Number: Map 62, Block 1, Lot 1 Property Description: The subject property is a single story neighborhood shopping center featuring 118,535 square feet of gross leasable area. The improvements are situated on a 645,995 square foot lot (14.83 acre). Construction features include a concrete and steel frame with brick and split-faced block exterior walls. Highest and Best Use As Though Vacant: Land banking until such time that retail development becomes financially feasible As Improved: Continued use as a shopping center Property Rights Appraised: Leasehold Estate Date of Value: June 5, 1996 Land Area 645,995 Square Feet (14.83 acres) Improvements Building Area: Gross Leasable Area: 118,535 SF Year Built: 1972 Condition: Average Estimated Marketing Time: 12 months or less - -------------------------------------------------------------------------------- v ================================================================================ SUMMARY OF SALIENT FACTS - -------------------------------------------------------------------------------- Financial Indicators Current Occupancy: 100% Leased w/ Dollar General Stabilized Occupancy: 99% Market Rental Rate: $2.50 P.S.F. Anchor $4.25 P.S.F. Satellite $6.00 P.S.F Pad Site Income Growth Rate: 3.0% Estimated Stabilized Expenses: $ 0.98 P.S.F. Expense Growth Rate: 3.0% Going-In Overall Capitalization Rate Selected: 11.75% Going-In Overall Capitalization Rate Implied: 12.32% Terminal Overall Capitalization Rate: 11.00% Discount Rate: 13.00% Valuation Land Value: N/A Cost Approach: N/A Sales Comparison Approach: $ 1,900,000 Income Capitalization Approach: $ 1,900,000 Final Value Conclusion: $ 1,900,000 Per Square Foot: $ 16.03/SF - -------------------------------------------------------------------------------- vi ================================================================================ TABLE OF CONTENTS - -------------------------------------------------------------------------------- TABLE OF CONTENTS CERTIFICATION OF THE APPRAISERS...............................................i SUBJECT PHOTOGRAPHS..........................................................ii SUMMARY OF SALIENT FACTS......................................................v TABLE OF CONTENTS...........................................................vii INTRODUCTION..................................................................1 AREA ANALYSIS.................................................................8 MARKET ANALYSIS..............................................................16 SITE ANALYSIS................................................................21 IMPROVEMENT ANALYSIS.........................................................23 ZONING.......................................................................26 TAX AND ASSESSMENT DATA......................................................27 HIGHEST AND BEST USE.........................................................28 APPRAISAL METHODOLOGY........................................................31 SALES COMPARISON APPROACH....................................................33 INCOME CAPITALIZATION APPROACH...............................................41 RECONCILIATION OF VALUE......................................................68 ASSUMPTIONS AND LIMITING CONDITIONS..........................................70 ADDENDA......................................................................74 A........................................................Glossary Of Terms B...............................................Comparable Rental Profiles C............................................Comparable Rental Photographs D.................................................Comparable Sale Profiles E..........................................Strategic Mapping, Inc. Reports F................................................................Rent Roll G.........................................................PRO-JECT Reports H........................................................Engagement Letter I.......................................................Legal Descriptions J...........................................................Qualifications - -------------------------------------------------------------------------------- vii INTRODUCTION INTRODUCTION ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- INTRODUCTION PROPERTY IDENTIFICATION The subject is located just north of the Dan River, which is located just outside the city limits of Danville in Pittsylvania County, Virginia. The subject is more specifically located in the northeast quadrant of Routes 29 and 58, which are two major commercial thoroughfares in the central portion of Danville. However, the subject cannot be accessed by either of these highways, rather at the interchange of these routes, a secondary road, (Piney Forest), spurs off of Route 58 to the subject. The common street address for the subject is 89 Piney Forest Road. The assessor's tax identification number is 62-1-1. A full metes and bounds legal description is included in the Addenda. OWNERSHIP AND PROPERTY HISTORY The subject is currently owned by Mark Centers Limited Partnership. The subject has not sold in the last three years and to the best of our knowledge there is no known current listing, option, or agreement of sale of the subject. DATES OF INSPECTION AND VALUATION The site was last inspected by John S. Ward on June 5, 1996. Jerrold Harvey, MAI did not inspect the subject or the comparables employed but reviewed this report and concurs with the conclusions. The date of the market value is the date of inspection, June 5, 1996. PURPOSE OF THE APPRAISAL The purpose of this appraisal is to estimate the current market value of the leased fee estate in the subject property in it's "As Is" condition. Market value is defined as follows: Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised, and acting in what they consider their own best interests; 3. A reasonable time is allowed for exposure in the open market; - -------------------------------------------------------------------------------- 1 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- 4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.(1) TERMS AND DEFINITIONS Please refer to the Addenda for a Glossary of the Terms and Definitions that are, and may be used in this appraisal. INTENDED USE OF REPORT This appraisal is for mortgage underwriting purposes. PROPERTY RIGHTS APPRAISED The value estimated represents the leasehold estate. APPRAISAL DEVELOPMENT AND REPORTING PROCESS The following steps were completed by CB Commercial for this assignment: 1. Analyzed regional, city, neighborhood, site, and improvement data. 2. Inspected the subject and the neighborhood. 3. Reviewed data regarding taxes, zoning, utilities, easements, and city services. 4. Considered comparable improved sales, comparable improved building rental information, and comparable site sales. Data was confirmed with principals, managers, or real estate agents representing principals, unless otherwise noted. 5. Analyzed the data to arrive at conclusions via each approach to value used in this report. 6. Reconciled the results of each approach to value employed into a probable range of market data and finally an estimate of value for the subject, as defined herein. 7. Estimated a reasonable exposure time associated with the value estimate. The subject site and improvement descriptions are based on a personal inspection of the property, discussions with representatives of the subject property, and/or a review of relevant - ---------- (1) The definition of market value is taken from: The Office of the Comptroller of the Currency under 12 CFR, Part 34, Subpart C-Appraisals, ss.34.42(f), August 24, 1966. This definition is compatible with the definition of market value contained in The Dictionary of Real Estate Appraisal, Third Edition, and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System definition of market value. - -------------------------------------------------------------------------------- 2 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- plat maps and leasing plans. The inspection is not a substitute for thorough engineering studies. To develop the opinion of value, CB Commercial performed a complete appraisal process, as defined by the Uniform Standards of Professional Appraisal Practice. This means that no departures from Standard 1 were invoked. This is a complete appraisal, in the form of a Self-Contained Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Standards of Professional Appraisal Practice. The definitions of Complete Appraisal and Self-Contained Report are found in the Glossary of Terms and Definitions. In a complete appraisal, CB Commercial uses all known applicable approaches to value. The value conclusion reflects all known information about the subject property, market conditions, and available data. The Self-Contained Report incorporates to the fullest extent possible, practical explanation of the data, reasoning and analysis that were used to develop the opinion of value. It also includes thorough descriptions of the subject property and the market for the subject property type. All data considered significant that was requested for this assignment was received by CB Commercial Real Estate Group, Inc. Appraisal Services. SPECIAL APPRAISAL INSTRUCTIONS There were no special appraisal instructions. MARKETING PERIOD The marketing period section is divided into reasonable exposure time and reasonable marketing time. Exposure time differs from marketing time. Marketing time is the period required to sell a real property interest at market value during the period immediately after the effective date of the appraisal. Exposure time is always presumed to precede the effective date of the appraisal. Exposure time is not intended to be a prediction of a date of sale or a one-line statement. Instead, it is an integral part of the appraisal analysis and is based on one or more of the following: o statistical information about days on the market o information gathered through sales verification o interviews of market participants. - -------------------------------------------------------------------------------- 3 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- The reasonable exposure period is a function of price, time, and use. It is not an isolated estimate of time alone. Exposure time is different for various types of real estate and under various market conditions. Reasonable Exposure Time Exposure time is always presumed to precede the effective date of the appraisal. It is the estimated length of time the property would have been offered prior to a hypothetical market value sale on the effective date of appraisal. It is a retrospective estimate based on an analysis of recent past events, assuming a competitive and open market. It assumes not only adequate, sufficient, and reasonable time but adequate, sufficient, and reasonable marketing effort. Exposure time and appraisal conclusion of value are therefore interrelated. Exposure time is often expressed as a range and is based on direct and indirect market data gathered during the market analysis, sales verifications, interviews with market participants, and other appropriate sources. The amount of time which a property will require to be marketed varies greatly depending on a number of factors including market conditions, listing price, terms of sale offered, and competitive listing inventory. In addition to considering each of the factors noted above, CB Commercial considered: o exposure periods of comparable sales revealed during the course of this appraisal, o the most recent CB Commercial National Investor Survey, and o the opinions of local knowledgeable real estate brokers and investors. Market Conditions Throughout the Danville metropolitan area, market conditions for most property types have been generally weak during the past three to four years. The value of most investment grade property types has decreased due to a number of factors. The lack of demand for investment properties and the inability of owners to make mortgage payments resulted in numerous foreclosures, or properties deeded back in lieu of foreclosure. Increased listing inventory has had a substantial downward influence on property values and the exposure time necessary to generate sales. Only recently, due to the competitive pricing in the market and improving economic conditions, has the number of transactions and active investors throughout the region somewhat increased. These market conditions describe the current market and illustrate how exposure time is correlated with listing inventory, competitive pricing structures, and marketing efforts. - -------------------------------------------------------------------------------- 4 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- CB Commercial National Investor Survey In the most recent issue of the CB Commercial National Investor Survey, published in the First Quarter 1996, CB Commercial surveyed a wide range of investors for property type preferences and specific marketing times. Respondents showed a clear preference for apartments, suburban offices, warehouse/distribution, community shopping centers, neighborhood shopping centers, power centers, urban offices, and business parks. Investors indicated that exposure requirements for investment property have changed little from the previous survey, now an average of approximately 8.5 months for the subject property type. Real Estate Broker Surveys As a second information source, appraisers solicited the opinions of real estate brokers knowledgeable in the subject market and property type. While the majority of individuals surveyed were reluctant to predict an exact exposure time length for retail property in general, they generally estimated an approximate range between 6 and 12 months. All assumed that property would be appropriately priced and marketed. When asked about the subject property specifically, the consensus of opinion was that the subject would receive average to above average recognition in the marketplace under a reasonable plan for pricing and promotion. Exposure Time Conclusion In conclusion, based on the foregoing analysis, an exposure time of between 6 and 12 months is reasonable, defensible, and appropriate. Like the brokers surveyed, CB Commercial assumes that the subject property would have been competitively priced and aggressively promoted regionally. Reasonable Marketing Time Reasonable marketing time is the period a prospective investor would forecast to sell the subject property immediately after the date of value, at the value estimated. Anticipated marketing time is essentially a measure of the perceived level of risk associated with the marketability, or liquidity, of the subject as an investment grade property. The sources for this information include those used in estimating the reasonable exposure time, but also an analysis of the anticipated changes in market conditions following the date of appraisal. In other words, the reasonable marketing time is the number of months it will require to sell the subject property from the date of value, into the future. The reader must understand, however, that the future price for the subject property (at the end of the marketing time) may or may not equal the appraisal estimate. The future price depends on unpredictable changes in the physical real estate, demographic and economic trends, real - -------------------------------------------------------------------------------- 5 ================================================================================ INTRODUCTION - -------------------------------------------------------------------------------- estate markets in general, supply/demand characteristics for the property type, and many other factors. Based on the premise that present market conditions are the best indicators of future performance in the short-term and under stable market conditions, a prudent investor will forecast that, under the conditions described above, the subject property will require a marketing time of 6 to 12 months. - -------------------------------------------------------------------------------- 6 ================================================================================ [GRAPHIC OMITTED] AREA MAP ================================================================================ ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- AREA ANALYSIS The dynamic nature of economic relationships within a market area have a direct bearing on real estate values and the long-term quality of a real estate investment. In the market, the value of a property is not based on the price paid for it in the past or the cost of its creation, but on what buyers and sellers perceive it will provide in the future. Consequently, the attitude of the market toward a property within a specific neighborhood or market area reflects the probable future trend of that area. Since real estate is an immobile asset, economic trends affecting its locational quality in relation to other competing properties within its market area will also have a direct effect on its value as an investment. To accurately reflect such influences, it is necessary to examine the past and probable future trends which may affect the economic structure of the market and evaluate their impact on the market potential of the subject. This section of the report is designed to isolate and examine the discernible economic trends in the region and neighborhood which influence and create value for the subject property. A regional map indicating the location of the subject is presented on the previous page. REGIONAL INFLUENCES Location The subject is located in the community of Danville, Virginia within Pittsylvania County, located in the southwestern portion of the state of Virginia. Pittsylvania County and the City of Danville, make up the Danville MSA. While the subject in not technically inside the Danville City limits, it is inside the Danville area annexation from Pittsylvania County, which occurred in January of 1988. The following demographic figures include the City of Danville and the annexed portions totaling 44 square miles. Danville City encompasses 17.1 square miles while the annexed portion totals 27 square miles. Therefore, we have focused on what is known as the "Danville Area" demographics as they are the driving force in the subject market. Population Very little demographic data for Pittsylvania County alone was available as it is a very rural jurisdiction. According to the Danville Chamber of Commerce, the total population of Danville was 53,056 during the 1990 census, while Pittsylvania County had a population of 56,300. As mentioned, we will be focusing on the City of Danville plus the additional annexed areas making up the Danville area, as this is the area affecting the subject. - -------------------------------------------------------------------------------- 8 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- The 1995 population within the Danville area was estimated by Strategic Mapping, Inc. to be 54,152. This indicates a slight increase of 53,056, or 2.1% from the April 1, 1990 federal census. The area's population is expected to increase slightly to approximately 55,023 by the year 2000, or a 1.61% increase. Demographic statistics for the Danville area are summarized in the following table. ============================================================================= SELECTED AREA DEMOGRAPHICS THE DANVILLE AREA ============================================================================= Population 1995 Estimate 54,152 1990 Census 53,056 1990-1995 % Change 2.1% Households 1995 Estimate 22,265 1990 Census 21,712 1990-1995 % Change 2.5% 1995 Median Household Income $ 23,474 1995 Average Household Income $ 32,222 1990 Average Home Value $ 54,653 1990 % College Graduates 7.9% ============================================================================= Source: Strategic Mapping, Inc. Compiled by: CB Commercial Real Estate Group, Inc. ============================================================================= Households Similar to the population level within the Danville area, the number of households has grown in recent years and is projected to increase over the next five years. Between 1990 and 1995, household growth in the Danville area was 2.5%. Projections for the year 2000 indicate a mature and stable area with the number of households increasing by 2.16%. While experiencing a small decline between 1980 and 1990, the average household size did not change significantly in 1995 (2.37) and is expected to remain fairly stable over the next five years. In the Danville area, the average household size declined from 2.38 in 1990 to 2.37 in 1995. It is projected to decline slightly to 2.36 in the year 2000. Income As per data compiled by the Strategic Mapping, Inc., the 1995 median household income in the Danville area was $23,474. The median household income increased at a steady rate between the 1990 census and 1995 estimates by approximately 3.99% annually. In 1990 the median household income was $20,413, which increased by a total of 14.99% to $23,474 by 1995 - -------------------------------------------------------------------------------- 9 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- estimates. The Income growth is projected to increase at an average annual rate of 2.95% between 1995 and the year 2000. Employment The total civilian labor force for the City of Danville was 27,397 in April, 1996 with corresponding employment of 25,315 indicating an April, 1996 unemployment rate of 7.6%. The following table compares the unemployment rate for the city to that of the state and national average. ======================================================================== UNEMPLOYMENT RATES COMPARISON BY CITY, STATE, AND U.S. - ------------------------------------------------------------------------ Year Danville City Virginia U.S. 1995 8.1% 4.5% 5.7% 1994 8.2% 4.9% 6.1% 1993 8.1% 5.0% 6.8% 1992 10.5% 6.4% 7.4% - ------------------------------------------------------------------------ Source: Bureau of Labor Market Information Compiled by: CB Commercial Real Estate Group, Inc. ======================================================================== Most of the employment is in the Services (31%) and Manufacturing (25.8%), followed by retail trade industries (18.6%), similar to the State of Virginia averages. The major employers in the area are as follows: ================================================================================ DANVILLE MAJOR AREA EMPLOYERS - -------------------------------------------------------------------------------- Company Business No. Employees - -------------------------------------------------------------------------------- Dan River Textile Textile Manufacturing 4,900 Goodyear Tire & Rubber 2,200 Nestle Food Goods 500 Southern Processors, Inc. Tobacco Processing Plant 450 Owens Brockway Glass Production of Clear Flint Containers 300 Woodfiber Industries Woodfiber Hardboard 300 C.M Offray Craft & floral Ribbon 200 Star Paper Tube Textile cores and tubes 110 Source: Danville Area Chamber of Commerce Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 10 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- Transportation The Interstate highways serving the Danville area include U.S. Highways 58/301 and 29. Route 58/301 passes through the State of Virginia in an east\west direction, extending from the Hampton Roads area on the eastern shores of Virginia to the east, passing through to the far western portion of the state. Route 29, is a north-south highway extending from the Virginia/North Carolina boarder in Danville in a northeasterly direction and interesting with I-66 near Washington D.C. It should be mentioned that Danville, is not served by a major interstate. The airport serving the Danville area is the Danville Municipal Airport approximately four miles east of the subject along Route 58. The airport has three one mile paved runways and is served by CCAir Piedmont Commuter, with daily flights to Charlotte, N.C. The area is also served by Norfolk-Southern Railway, providing main line double track service to all major points of interchange in the United States. Conclusion and Relevance to the Subject Property The long term outlook for the Danville area is stable. The strategic location between major large cities such as Roanoke and Lynchburg Virginia to the north and Charlotte North Carolina to the south combined with good access via Route 29 and 58/301 are primary factors in the anticipation that the city will remain a primarily service/manufacturing area with a steady population and economic base. Population projections indicate a stabilization to slight increase for the area in the short- and long-term. The affordability and relative ease of obtaining housing within the Danville area is a key factor for future growth. The vast amount of available land, as well as the fair number of existing developments are seen as supportive of the long term growth prospects within this area. Transportation modes are considered average to good as are public utilities and services. Therefore, it would appear that the area will be suitable for moderate additional growth in the future which should be favorable for the subject property in the long run. The overall projection for the Danville area appears stable. - -------------------------------------------------------------------------------- 11 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- NEIGHBORHOOD INFLUENCES Location The subject is located just north of the Dan River, which is located just outside the city limits of Danville, but in the area annexed by the city in 1988. The subject is located in Pittsylvania County, Virginia. The subject is more specifically located in the northeast quadrant of Routes 29 and 58, which are two major commercial thoroughfares in the central portion of the Danville area. However, the subject cannot be accessed by either of these highways, rather at the interchange of these routes, (Piney Forest - a tertiary road), spurs off of Route 58 to the subject. The common street address for the subject is 89 Piney Forest Road. The boundaries for the subject neighborhood are considered to be: North: Route 29 South: Main Street West: Route 265, Danville Expressway East: Piedmont Drive A neighborhood map indicating the location of the subject is presented on the following page. Land Use Land use in the neighborhood consists of a mixture of mainly small to large commercial/retail and residential development. Development in the immediate vicinity of the subject consists of fast food stores, auto dealerships, gas stations, two hotels and a few shopping centers including the 600,000 square foot Piedmont Regional Mall, which is anchored by a Belk-Leggett, Hill's Department Store, JC Penny, and Peebles Department Store. The mall is less than one mile west of the subject on the opposite side of the Route 29/58 interchange up on a hill providing excellent visibility. The other shopping centers considered direct competition for the subject in the immediate area include the Danville Plaza and Riverside Shopping Center to the west on Route 58. The remaining improvements in the areas north and south of the Route 58 corridor are primarily residential. The immediate areas along Route 58 are approximately 90+ percent developed. As Route 58 is the largest commercial area in Danville next to Route 29, the most desirable commercial lots are currently directly on this highway. Access Accessibility to the neighborhood in general is excellent, however access to the subject is poor as well as its exposure and visibility. As mentioned, the subject is located in the northeast quadrant of the Route 29/Route 58 interchange. However, the subject cannot be accessed from either of these roads. A normal patron must access the center via Piney Forest Road, - -------------------------------------------------------------------------------- 12 ================================================================================ [GRAPHIC OMITTED] NEIGHBORHOOD MAP ================================================================================ ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- which is gained by a difficult turn off of the Riverside Drive (Route 58) cloverleaf to Route 29. For first time shoppers this can and does provide a problem. Furthermore, brokers handling the shopping centers in the area verified this is a problem for the subject property which has made prospective retailers wary of leasing space at the subject. Finally, the exposure and visibility is poor as the Route 28/58 interchange is above grade obscuring it from the subject's visibility, mainly from Route 29 coming into the city. The regional mall on the west side of the interchange benefits being located on a high point providing excellent exposure, further detracting from notice of the subject property. Furthermore, the subject is set back from Route 58 due to the parking lot area being in the front of the center. This makes it easy to drive by without noticing, due to the location of the interchange abutting it. Again, this has been a problem for the subject according to local market participants familiar with the subject and the competing centers. Demographics Selected Neighborhood demographics were available for the Danville area as a whole only. Therefore, the total area demographic data is shown in the following table: =============================================================== SELECTED DANVILLE AREA DEMOGRAPHICS - --------------------------------------------------------------- Area - --------------------------------------------------------------- Population 1995 Estimate 54,152 1990 Census 53,056 1990-1995 % Change 2.1% Households 1995 Estimate 22,265 1990 Census 21,712 1990-1995 % Change 2.5% 1995 Median Household Income $23,474 1995 Average Household Income $32,222 1990 Average Home Value $54,653 Median Age Total Population 38.2 1990 % College Graduates 7.9% - --------------------------------------------------------------- Source: Conquest Market Data Compiled by: CB Commercial Real Estate Group, Inc. =============================================================== The subject property benefits from a location in the middle of a highly commercialized area that produced high levels of traffic volume. However, the poor access and visibility/exposure of the subject hinder the property in achievable rental rates. The population and households have slightly increased in the area and are expected to remain stable to slightly increasing into the - -------------------------------------------------------------------------------- 14 ================================================================================ AREA ANALYSIS - -------------------------------------------------------------------------------- future. Projections for the year 2000 indicate similar patterns. Furthermore, overall income levels have edged upward approximately 3.0 percent per annum since 1990, similar to our chosen inflation rate. Growth and Trends Due to demographic characteristics as discussed above as well as stabilizing economic conditions, there has been some retail development in Danville in recent years. However, this has come in the form of major renovations to existing centers in the area as opposed to new development. The two most notable rehabilitation programs are at the Ballou Park Shopping Center, which is currently renovating the entire 260,000 SF area plus adding a small amount of new space, and the Nor Dan shopping center which completed a major renovation two years ago on its approximated 160,000 square feet. Finally, it is known that two other large centers in the area, the Danville Plaza Shopping center near the subject being one, are looking into major renovations to attract higher rental rates and maintain strong tenant bases. This has worked in the case of Ballou and Nor Dan and should produce similar effects for Danville Plaza. Conclusion and Relevance to the Subject Property The subject property is situated in an area consisting primarily of retail/commercial and residential uses. The area features good accessibility to the local transportation system and throughout the city and metropolitan area, however poor access and exposure to the subject. Currently, the subject's neighborhood is in the stabilization stage of its life cycle, a period of neither significant growth nor decline. While the area is highly developed, some potential exists for future development, mainly in the form of major renovation and some expansion. However, we do not expect the character of the neighborhood to change in the near future. - -------------------------------------------------------------------------------- 15 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- MARKET ANALYSIS Retail Overview The retail market in Danville has witnessed limited growth over the past few years due to the stabilized economic conditions experienced in the region as opposed to other areas of Virginia and North Carolina that were harder hit. As noted in the previous section, two centers with two others probable, have been completely renovated and in some cases have slightly expanded the existing space over the past two years. We are not aware of any proposed shopping centers within the Danville area in upcoming years. The most current major retail development was The Market Square Shopping Center (51,069 SF), in 1990 approximately three miles north of the subject property. Before this, the most notable development was the Piedmont Regional Shopping Mall at 600,000 square feet. Over the past five years, the immediate neighborhood has not experienced significant retail development. According to Strategic Mapping, Inc., total retail development within the Danville area including the regional mall consists of approximately 2,094,000 square feet. Local Retail Market In order to project future performance of the retail space in the subject property consideration has been given to various market components that affect the supply and demand for this type of real estate property. Specifically we have: o Inspected the site and surrounding areas for the purpose of familiarizing ourselves with all the locational and environmental factors. In this regard, we have directed our attention to the physical qualities of the site, access and circulation, surrounding uses, and relationship to sources of market support. o Reviewed the principal economic growth trends in the area in industry, population and employment. Our intention was to identify the degree of underlying support for existing improvements and future growth. o Analyzed existing and foreseeable market conditions for retail properties in the area. o Analyzed demographics of the subject property's trade area as well identified competition in order to assess, the subject property's current as well as future position in the market. Trade Area The trade area of a shopping center is defined as the geographic area from which the sustaining patronage for steady support of a center is obtained. Determination of the boundaries is contingent upon various factors including but not limited to the nature of the - -------------------------------------------------------------------------------- 16 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- center, accessibility, physical barriers, location of competing facilities, and limitations of driving time and distance. The subject's general trade area is considered to be that area which encompasses the City of Danville and the areas annexed by Danville. From our observations and conversations with commercial retail brokers familiar with the Danville area retail market, this area encompasses 11 shopping centers over 30,000 square feet and the regional mall. These centers are considered to compete with one another, based upon the fact that the area examined encompasses an approximate radius of five miles of the subject, which is near the center of the Danville area. We were not able to break this down into the traditional one-mile ring (primary), and three-mile ring (secondary), due to the lack of data available. Definition Of The Trade Area The primary ingredients for success in these types of projects include the nature of the competition, population density, income levels, and disposable income. The actual size of the population needed to support this type of project cannot be fixed due to the complexities of the above factors, as well as changing methods of merchandising. Local conditions, such as number of households, income levels, and existing centers within the trade area can have the most dramatic impact upon any given project since these factors are what determine the purchasing power in an area. An additional ingredient leading to the success of a shopping center would be the tenant mix and characteristics of the leading tenants which attract shoppers to the project. We have analyzed demographic data, competition, income levels for the subject trade area in the following sections. The demographic profiles of the trade area are presented in the Neighborhood Influences section of the report. Additional demographic information is contained within the Strategic Mapping, Inc. Profile Report located within the Addenda. Population The sales potential of a center is directly related to its proximity to the number of potential patrons. The historical and projected trends for population are important to examine when analyzing the trade area of a shopping center. The historical population trends for the subject's trade areas indicate an increase in population between 1990 and 1995 followed by a further increase projected for the year 2000, by approximately 2.5%. In order to further analyze the population change, we have examined the distribution of the population by age. When analyzing the population distribution by age, it should indicate in - -------------------------------------------------------------------------------- 17 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- what age groups the population shifts are projected to take place. This is important to distinguish if it will have a great impact on the retail sales of the subject center. Shifts in the age groups under 24 years of age will affect the subject, however, less drastically than changes in the subject's core market approximately between the ages of 25 and 54. As illustrated in the Profile Report located in the Addenda, a large percentage of the population in the trade area is in the age groups from 25 - 54. Estimated figures for 1995 indicated that the median age of 38.2 was slightly higher than the 1990 census at 37.4. Overall, the diversification among age groups is very common among other retail trade areas. Household Trends When analyzing the demographics for a retail center, it is most important to focus on the trends in the household population. A household consists of one or more persons occupying a dwelling unit. A family would be considered a household unit, however single persons living alone or two or more unmarried persons sharing a dwelling are also considered a household unit. The household unit is perhaps the best indicator in determining the economic health of a trade area. One of the important components which bonds a household together is it's economic strength as a unit as compared to the economic viability of an individual; single person households not withstanding. If the population is slightly decreasing and yet the number of households is increasing, this would not necessarily be a negative indicator. This would imply that the average household size was shrinking. Each household has demand for goods that likely is not duplicated with a larger household size. This demand is duplicated however in the number of households. Similar to population figures, the number of households in the trade area has increased between 1990 and 1995 at approximately 2.5% total . Furthermore, the number of households is estimated to continue a gradual increase to total 2.16% from 1995 to 2000. Household Income The median household income in the subject's trade area increased annually at an average rate of 2.99% from 1990 to 1995. Thus, the household incomes in the area grew at a pace slightly below inflation during this period. The projected annual income growth rates between 1995 and the year 2000 are approximately 2.95%, again below the projected rate of inflation. The median household income level was $23,474 in 1995. Employment The income characteristics of the trade areas for the subject property indicate that this is a predominately white collar market. The primary trade area had the highest percent in white - -------------------------------------------------------------------------------- 18 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- collar employment at 45.4%. Blue collar employment percentages in the trade area was 39.6%. The remaining percentages were in special services categories. The 1990 Census information indicates that the unemployment rates were 8.7% in the trade area. As discussed in the Location Analysis, the most recent unemployment rate in the Danville Area was 7.6% which indicates an overall decrease in employment from the 1990 Census. We feel the subject market will witness modest employment growth in upcoming years and a declining unemployment rate. Expenditure Potential The Expenditure Potential charts located in the Addenda outline Strategic Mapping, Inc. retail sales projections for the subject trade area. The highest sales growth in the trade area appears to be for electronics, drug, and video stores. The average growth rate for retail sales in the trade area is projected at 1.85%. Strategic Mapping, Inc. examines the product potential for various store types for each portion of the subject trade area. Based on statistical sampling, Strategic Mapping has derived a benchmark per household expenditures for each store type. Comparing the figures in the trade area to the benchmark figure, it is apparent that those individuals in the subject trade area are much more likely to spend on items in drugs, groceries, and home centers stores. The Strategic Mapping Expenditure Potential Index is defined as follows, 'An index which shows the amount by which an area per household expenditures, differed from that of the benchmark.' The benchmark is defined as the average or common expenditure among households for a larger region. Values below 100 signify that this area is below the benchmark per household expenditures and correspondingly values above 100 indicate a higher than average expenditure per household. The overall Expenditure Index for the trade area is 85.8. In conclusion, the expenditure index for the subject trade area indicates that the trade area populations spend less than the benchmark household on retail goods. The area generates retail sales based on the existing population as well as the increasing income potential. Market Indicators The subject center contains 6 tenant suites ranging in size from approximately 2,000 to 60,000 square feet. Discussions with local leasing agents reveal that typical ground level satellite space rents in the area generally range from $4.00/SF to $9.00/SF depending upon the physical and locational characteristics of the space and $2.00/SF to $8.00/SF for anchor space depending upon the same criteria. Percentage rent clauses tend to be uncommon for satellite - -------------------------------------------------------------------------------- 19 ================================================================================ MARKET ANALYSIS - -------------------------------------------------------------------------------- tenants. Retail leases are typically structured on an absolute net basis with flat rents over the term for the newer and recently renovated centers in the area, while the older centers generating low rental rates have leases typically based upon a gross deal or a capped reimbursement. Based upon discussions with brokers and managing agents in the area as well as our observations during our inspection, competing centers in the subject's market area have vacancy rates which generally fall within the 0.0% to 8.0% range with an average vacancy rate of approximately 4.0%. The subject center is currently 100% occupied, based upon the assumption of Dollar General (which has agreed to the terms), signing the 6,800 square foot lease that is scheduled for July 1,1996. Summary Future projections indicate continued gradual increases in the population and households in the trade area from 1990 through 2000, the trade area exhibits increased spending potential over the same period. Additionally, income levels appear to be increasing at rates slightly below projected inflationary rates which is common during periods of economic recovery. Overall, the subject trade areas reflect average retail characteristics. Based upon this information, and the successes of other centers in the trade area, we conclude that the trade area represents a viable retail market. - -------------------------------------------------------------------------------- 20 PROPERTY DESCRIPTION PROPERTY DESCRIPTION ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- SITE ANALYSIS The description of the site can be detailed as follows: Location: The subject is located in the northeast quadrant of Routes 29 and 58, in the central portion of the Danville area. However, the subject cannot be accessed by either of these highways, rather at the interchange of these routes, (Piney Forest - a tertiary road), spurs off of Route 58 to the subject. The common street address for the subject is 89 Piney Forest Road. Ingress and egress to the subject are available via one curb cut from Piney Forest Road. Assessor's Parcel Number: Section 62 Block 1, Lots 1 Land Area(2) The subject site contains 14.83 acres or 645,995 square feet. Shape and Frontage: The site is irregular in shape featuring poor frontage Route 58 (Riverside Road) and average frontage on Piney Forest Road. Topography and Drainage: The site is fairly level. Our investigation did not reveal any significant drainage problems. Soils: No soil report was provided and it is assumed that the soil is adequate for the existing use. Easements: No title report was provided in connection with this appraisal. No survey showing the location of easements was available. Thus, it is not possible to make a definitive conclusion regarding any potential impacts on value of the location of any such easements or encroachments. It is specifically assumed that any easements, restrictions, or encroachments that might appear against the title would have no adverse impact on marketability or value. Covenants, Conditions, and No private deeds or restricting Restrictions: covenants affecting development, other than zoning, were found to affect the site. Utilities: All public utilities including electricity and telephone as well as water, storm and sanitary sewer systems. - ---------- (2) Source: Dunmore Tax Assessor's Office - -------------------------------------------------------------------------------- 21 ================================================================================ SITE ANALYSIS - -------------------------------------------------------------------------------- Flood Zone: According to maps published by the Federal Emergency Management Agency (FEMA), and information from the City of Danville Planning Office, the subject lies within Zone C as indicated on FEMA Community Map Panel 510044 0010 B dated March 16, 1981. Flood insurance is available. This zone is described as follows: FEMA Zone B or C: "This area has been identified in the community flood insurance study as an area of moderate or minimal hazard from the principal source of flood in the area. However, buildings in this zone could be flooded by severe, concentrated rainfall coupled with inadequate local drainage systems. Local storm water drainage systems are not normally considered in the community's Flood Insurance Study. The failure of a local drainage system creates areas of high flood risk within this rate zone. Flood insurance is available in participating communities but is not required by regulation in this zone." Environmental Issues: The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in the property causing a loss in value. No evidence of hazardous waste or toxic materials was visible and CB Commercial has no knowledge of the existence of these substances on or in the subject property. However, CB Commercial is not qualified to detect hazardous waste or toxic materials. Adjacent Properties North: Residential/small commercial South: Commercial East: Commercial West: Route 29/Route 58 Cloverleaf Conclusion: The subject is a 14.83-acre site on a paved street served by necessary utilities. Access and visibility are considered to be poor. There are no adverse soil conditions of which CB Commercial Real Estate Group, Inc. is aware. The shape of the parcel is irregular and results in no specific limitation. The topography is fairly level a possesses no specific development limitation. There is no excess land and the unimproved portions of the site are fully utilized by a macadam parking lot. From a physical standpoint, the site is considered to be adequate for many types of development. - -------------------------------------------------------------------------------- 22 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- IMPROVEMENT ANALYSIS The subject improvements were constructed in 1972. The improvements consist of a single-story neighborhood shopping center containing 118,535 square feet of gross leasable area. The shopping center contains 5 tenant suites and one pad site, this assumes the recent consolidation of the old Pizza Grinder space and the Outlet Clothier for Dollar General, which is expected to be signed by the end of June. The following is a description of the improvements based on our physical inspection, municipal records and from discussions with and materials provided by the client. The basic construction features are summarized as follows. Construction Class The class of construction is the basic subdivision in Marshall Valuation Service which divides all buildings into five basic groups by type of framing (supporting columns and beams), walls, floors, roof structure, and fireproofing. The subject is considered to be of construction Class B3. Competitive Rating The subject is considered a Class B building in terms of quality as it is perceived in the marketplace. Foundation Poured concrete Frame Concrete block over a steel frame Floor Construction Concrete slab Exterior Walls Load-bearing concrete block over a steel frame with split-faced block and brick. Different exterior materials are used for each tenant. Fenestration Aluminum framed glass windows and double-paned glass front doorways. Roof Structure & Covering Flat, presumably built-up composition covering over steel deck with steel bar joist supports. We were unable to inspect the roof and assume the roof is in average overall condition. Exterior Condition Average - ---------- (3) The primary characteristic of Class B Buildings is the reinforced concrete frame in which the columns and beams can be either formed or precast concrete. They may be mechanically stressed, and the structure is fire resistant. (Source: Marshall Valuation Service) - -------------------------------------------------------------------------------- 23 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- Interior Partition System Metal studs with gypsum board cover. Interior Finishes - Tenant Space Floors: Combination of vinyl tile and carpet. Walls: Painted or covered gypsum board. Ceilings: Suspended acoustic tiles. Lighting: Recessed florescent lighting. Summary: The interiors of the subject are considered to be of average quality and similar to the un-renovated competitors. HVAC Heating and ventilation is provided to the majority of the tenant suites by roof-mounted HVAC units. Each of these units pump the hot air throughout its suite via sheet metal air duct work hidden above the dropped ceiling. Air conditioning is supplied by the same system utilizing the duct work and supplying cool air during the summer months. Electrical The electrical system is assumed to be in good working order and adequate for the building. Fire Protection It is assumed that the subject has adequate fire alarm systems, fire exits, fire extinguishers, fire escapes and/or other fire protection measures to meet local fire marshall requirements. Plumbing The plumbing system is assumed to be in good operating condition. Parking Surface parking is provided for 489+/- vehicles. Landscaping Landscaping on the subject property is minimal which is typical within the subject neighborhood. ADA Compliance Handicap access appears to be available to all areas of the center. However, we are not qualified to determine compliance with the requirements. Please refer to the specific limiting condition regarding ADA compliance. Environmental Issues The value estimate rendered in this report is predicated on the assumption that there is no hazardous material on or in - -------------------------------------------------------------------------------- 24 ================================================================================ IMPROVEMENT ANALYSIS - -------------------------------------------------------------------------------- the improvements which would cause a loss in value. Functional Quality of Space The interior floor plans are flexible and will accommodate a variety of tenant layouts. There are no observed design problems and none are reported by management. Access to the tenant suites is available at the front and rear of the center. There are no elevators within the center. Deferred Maintenance No deferred maintenance was observed or reported. The improvements have been adequately maintained since it was constructed in 1972. Economic Age and Life Based on the current condition, we estimate the effective age to be approximately 24 years. According to the Marshall Valuation Service cost guide, buildings of this type and quality have an expected life of approximately 45 years. Therefore, the remaining economic life (expected life minus effective age) is estimated at 21 years. While we observed nothing to suggest a different economic life, a capital improvement program could extend life beyond that stated above. Quality/General Condition The subject property conforms well with competitors and substitutes in the area that have not been renovated. The quality of construction is typical of the area. Interior amenities are similar to competing properties of the same approximate age. The general condition of the improvements is average. We observed no evidence of structural fatigue and the improvements appear sound. We are not qualified to determine structural integrity, however, and recommend that the reader rely upon an expert in this field for further determination. Conclusion/Comments The subject property is an average quality shopping center located in a relatively stable area. The improvements generally conform with competitors and substitutes in the neighborhood. - -------------------------------------------------------------------------------- 25 ================================================================================ ZONING - -------------------------------------------------------------------------------- ZONING The subject's zoning requirements are detailed below. ================================================================================ ZONING SUMMARY - -------------------------------------------------------------------------------- Current zoning: C-2; General Commercial District Legally conforming?: Yes Uses permitted: Retail, Bank, Food Stores, Dry Cleaning, Drive-In Restaurants, Offices, Service Stations, Motels, Auto Repair Shops Zoning change Not Likely - -------------------------------------------------------------------------------- Category Zoning Requirement - -------------------------------------------------------------------------------- Maximum FAR Non Specified Minimum Lot Size 6,000 SF Front Setback 20 - For shopping centers & malls no setback required Rear Setback 20 - For shopping centers & malls no setback required Side Yard Setbacks 20 Height Limit 45 feet Parking One space per 200 square feet of net building area above grade. The subject would be required to have 593 parking spaced under this requirement. However, the subject has only 489 spaces. According to the zoning office, the subject is considered to be a legal non-conforming use. - -------------------------------------------------------------------------------- Source: City of Danville Zoning Ordinance Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ ZONING ANALYSIS AND CONCLUSIONS According to the City of Danville Zoning ordinance, the subject property is a legal and non- onforming use under current guidelines. In addition, the property appears to conform to bulk and setback requirements as well as to parking requirements via a grandfather clause. - -------------------------------------------------------------------------------- 26 ================================================================================ TAX ANALYSIS - -------------------------------------------------------------------------------- TAX AND ASSESSMENT DATA The subject property is assessed by the City of Danville, Virginia, at approximately 100% of the assessor's estimated market value. The last general assessment of properties in Danville was in 1996/96. A re-valuation has not been rescheduled. Taxes are collected twice a year and are based upon a fiscal calendar from July to June. The subject's assessed value and current taxes are summarized below. ============================================================================== CURRENT ASSESSMENT AND TAX INFORMATION (1996/97) - ------------------------------------------------------------------------------ Assessed Tax Rate Annual Tax ID Value / $100 Taxes - ------------------------------------------------------------------------------ Section 62 Block 1 Lot 1 $2,994,700 .0075 $22,460 - ------------------------------------------------------------------------------ Source: City of Danville Assessor's Office Compiled by: CB Commercial Real Estate Group, Inc. ============================================================================== Based on the current tax rate of $0.75 per $100 assessed value, the estimated taxes for the subject amounts to $22,460, or $0.19 per square foot based on the rentable square footage of the center. Tax and Assessment Conclusion We have estimated the taxes for the shopping center at $22,460 for calendar year 1996 in our cash flow. Our discussions with the assessor indicated that the subject's taxes have increased in-line with the area's inflation rate, or approximately 4.0% per annum. We have therefore projected a long-term tax growth for all taxes equal to 4.0% per year. - -------------------------------------------------------------------------------- 27 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- HIGHEST AND BEST USE In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The four criteria that the highest and best use must meet are: o legal permissibility; o physical possibility; o financial feasibility; and o maximum profitability. Highest and best use is applied specifically to the use of a site as vacant. It is recognized that in cases where a site has existing improvements, the concluded highest and best use as if vacant may be different from the highest and best use given the existing improvements (as improved). The existing use will continue, however, until the land value, in its highest and best use, exceeds that total value of the property under its existing use plus the cost of removing or altering the existing structure. Implied in the highest and best use is a recognition of the contribution of a specific use to the community environment or to the community's development goals, in addition to wealth maximization of individual property owners. Also implied is that the conclusion of highest and best use that results from the appraiser's judgment and analytical skill, i.e., that the use determined from the analysis represents an opinion, not a fact to be found. Highest and best use analysis involves assessing the subject both as if vacant and as improved. HIGHEST AND BEST USE AS THOUGH VACANT Legal Permissibility The legally permissible uses were discussed in detail in the site analysis and zoning sections of this report. Based on our review of the zoning restrictions, the site can be developed with several different uses, including retail and commercial office uses. Physical Possibility The physical characteristics of the subject site were discussed in detail in the site analysis. Overall, a wide range of legally permissible uses would be physically possible, including a variety of commercial uses. - -------------------------------------------------------------------------------- 28 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- Financial Feasibility The test of financial feasibility is put only to those uses which are legally permissible and physically possible. If the property is capable of generating a sufficient net income to cover the required rate of return on investment and provide a return to the land, then the usage is financially feasible within a defined price limit. In our determination of financial feasibility we have analyzed current market rental rates for several different property types. The net income produced by the proposed or new improvements must provide a return above the cost to develop the property, including acquisition of the land. Through a cost/income analysis we have determined that development of the subject site is not financially feasible at this time. Based on the analysis of supply and demand factors at the present time, rents achieved for retail and/or office uses would not support the cost of construction. Based on the aforementioned, we have determined that development of the subject site at the present time with a retail center is not currently feasible. Maximum Profitability The final test of highest and best use of the site as though vacant is the use be maximally productive, yielding the highest land value. Based on our feasibility analysis we have determined that land banking the subject site is the maximally productive use at the present time. Conclusion: Highest and Best Use As Vacant The concluded highest and best use of the subject as though vacant is land banking until such time that development of the site with a retail/commercial facility is financially feasible. HIGHEST AND BEST USE AS IMPROVED Legal Permissibility As discussed, the subject site's zoning and legal restrictions permit a variety of land uses. Regardless, the site has been improved with a neighborhood shopping center. Based upon review of the City of Danville's Zoning Ordinance, it is our opinion that the improvements are within the established guidelines. - -------------------------------------------------------------------------------- 29 ================================================================================ HIGHEST AND BEST USE - -------------------------------------------------------------------------------- Physical Possibility The physical characteristics of the subject improvements were discussed in detail in the improvement analysis section of this report. Overall, the layout and positioning of the improvements is considered functional for shopping center use, and the floor plan is considered to be reasonable in comparison to other shopping centers in the area. The improvements have good retail features, have been adequately maintained, and are physically capable of sustaining their current use over the extended future. Financial Feasibility As with the highest and best use of the site as though vacant, the financial feasibility of the site as improved is market derived. Typically, for retail properties similar to the subject, the test of feasibility is based on the amount of rent that can be generated less operating expenses. If a residual amount exists after paying the various expenses, then the land is being put to a productive use. At present, the subject is 100% leased, assuming the Dollar General lease is signed. CB Commercial estimates that the appropriate stabilized market occupancy approximates 95%. Based on the historical and current operating status of the subject property, CB Commercial anticipates that the improvements are capable of providing an adequate return on the investment before any debt service requirements. Therefore, we conclude that the current use of the improvements is a financially feasible use of the property as improved. Maximum Profitability Similar to the highest and best use of the site as though vacant, the maximum profitable use of the subject as improved should conform to neighborhood trends and be consistent with existing land uses. Although several uses may generate sufficient revenue to satisfy the required rate of return on investment and provide a return on the land, the single use that produces the highest price or value is typically the highest and best use. Conclusion: Highest and Best Use as Improved Based on the foregoing discussions, CB Commercial concludes that the highest and best use of the property, as improved, is consistent with the existing use as a shopping center. There are no apparent alternative uses of the existing improvements that would produce a higher net income and/or value over time than the current use. The current use is a legally permissible use and appears to represent the highest and best use as improved. Furthermore, CB Commercial does not believe that conversion of the improvements or demolition is warranted or financially feasible. - -------------------------------------------------------------------------------- 30 VALUATION VALUATION ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- APPRAISAL METHODOLOGY The appraisal process is defined as an orderly program by which the problem is planned and the data involved is acquired, classified, analyzed and interpreted into an estimate of value. In this process three basic approaches to value are considered: Cost Approach, Sales Comparison Approach, and Income Capitalization Approach. In appraisal practice, an approach to value is included or omitted based on its applicability to the property type being valued and the quality and quantity of information available. The final step in the appraisal process is reconciliation -- a process by which CB Commercial analyzes alternative conclusions and selects a final value estimate from among two or more indications of value. CB Commercial weighs the relative significance, applicability and defensibility of each approach as it relates to the type of property being appraised. THE COST APPROACH The Cost Approach is based upon the proposition that the informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements which represent the highest and best use of the land or when relatively unique or specialized improvements are located on the site and for which there exist few sales or leases of comparable properties. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. SALES COMPARISON APPROACH The Sales Comparison Approach utilizes sales of comparable properties, adjusted for differences, to indicate a value for the subject property. Valuation is typically accomplished using physical units of comparison such as price per square foot, price per unit, price per floor, etc., or economic units of comparison such as gross rent multiplier. Adjustments are applied to the physical units of comparison derived from the comparable sale. The unit of comparison chosen for the subject is then used to yield a total value. Economic units of comparison are not adjusted, but rather analyzed as to relevant differences with the final estimate derived based on the general comparisons. - -------------------------------------------------------------------------------- 31 ================================================================================ APPRAISAL METHODOLOGY - -------------------------------------------------------------------------------- The reliability of this approach is dependent upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c) the degree of comparability; (d) the absence of atypical conditions affecting the sales price. Although there have been few sales in the region, the sales that were gathered were utilized to form an opinion of value. However, given the lack of relevant sales data, we have not placed minimal reliance upon this approach and have used it to provide additional support to the Income Approach. INCOME CAPITALIZATION APPROACH The methodology of the Income Capitalization Approach is to determine the income-producing capacity of the property on a stabilized basis by estimating market rent from comparable rentals, making deductions for vacancy and collection losses and building expenses, then capitalizing the net income at a market-derived rate to yield an indication of value. The capitalization rate represents the relationship between net income and value. Related to the direct capitalization method is the discounted cash flow method. In this method of capitalizing future income to a present value, periodic cash flows (which consist of a net income less capital costs, per period) and a reversion (if any) are estimated and discounted to a present value. The discount rate is determined by analyzing current investor yield requirements for similar investments. Since investors are active in the marketplace for properties similar to the subject, the Income Capitalization Approach is particularly applicable to the appraisal problem at hand. There is an adequate quality and quantity of income and expense data available to render a reliable and defensible value conclusion. For income producing properties similar to the subject, the Income Capitalization Approach is considered to be the most reliable. Therefore, this approach has been employed as the primary methodology for this assignment. - -------------------------------------------------------------------------------- 32 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- SALES COMPARISON APPROACH The Sales Comparison Approach provides an estimate of market value based on analyzing transactions of similar properties in the market area. The method is based on the proposition that an informed purchaser would pay no more for a property than the cost of acquiring an existing one with the same utility. When there is an adequate number of sales of truly similar properties with sufficient information for comparison, a range of values for the subject property can be developed. There are various units of comparison available in the evaluation of sales data in this approach. The sale price per square foot is the most commonly used in this approach. The effective gross income multiplier (EGIM) is rarely used by market participants because of the inconsistencies in estimating effective or gross income, vacancy, and expense differences. We conducted a thorough sales search for comparable shopping centers in the subject's market area. Through our sales search, we were able to identify a limited number of sales with similar characteristics to the subject. Due to the nature of the small market that the subject is located in, we had to expand our search to include similar small towns and cities throughout Virginia. Therefore, photographs were not available. The following table summarizes what are considered to be the most recent and proximate comparable sales. Detailed write-ups of each comparable are included in the addendum.
========================================================================================================================= SUMMARY OF COMPARABLE RETAIL SALES - ------------------------------------------------------------------------------------------------------------------------- Gross No. Property Name/ Location Sale Leasable NOI OAR Sale Price Date Area (SF) Sale Price Per S.F. Per S.F. - ------------------------------------------------------------------------------------------------------------------------- 1 Franklin Plaza 4/95 78,000 $1,650,000 N/A, as the N/A $ 21.15 center was 50% College & Armoury Dr. occupied Franklin, South Hampton County, Virginia 2 Southwyck Plaza 10/94 66,922 $2,100,000 N/A, as the N/A $ 31.38 center was 77% South Main St., Danville, occupied Virginia 3 Town Square 8/94 133,037 $2,364,000 N/A, as the N/A $ 17.77 center was 57% Route 58 & I-85 occupied South Hill, Mecklenburg County, Virginia 4 Nor-Dan Shopping 7/92 153,923 $2,100,000 N/A, as the N/A $ 13.64 center was 55% Piney Forest Rd. occupied Danville, Virginia - ------------------------------------------------------------------------------------------------------------------------- Compiled by: CB Commercial Real Estate Group, Inc. =========================================================================================================================
- -------------------------------------------------------------------------------- 33 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] COMPARABLE SALES - -------------------------------------------------------------------------------- ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- PRICE PER SQUARE FOOT ANALYSIS The comparable sales indicate an unadjusted range of $13.64 per square foot to $31.38 per square foot. The following paragraphs discuss the analysis of the sales and the basis for adjustment. PROPERTY RIGHTS Real estate carries with it a bundle of property rights, which can be transferred in whole or in part. Examples of some of the most common property rights are the fee simple estate, leased fee estate, leasehold estate, and partial interests. The fee simple estate is the most all encompassing property right, and includes all rights to use the property. The leased fee estate is characterized by property that is encumbered by one or more leases. The leasehold estate is the lessee's rights to use a property on which there is a lease. Partial interests result when property rights are divided among two or more parties, and may involve controlling or noncontrolling interests. Selling prices may be impacted by the specific property; rights included in the transfer. Thus, any differences in property rights among the comparable sales must be identified, and may require adjustment to account for differences in property rights compares with the property rights appraised for the subject. In addition, adjustments may be necessary to reflect the difference between properties leased at market rent and those leased at a rent that is either below or above market levels. All sales involved a leased fee estate, consistent with the interest being appraised. Therefore, no adjustments were required. FINANCING TERMS Financing terms provided by the seller can affect the sales price if they differ from terms available from third party lenders. The value estimate in this appraisal is based on an all cash payment to the seller, with buyers typically using institutional financing based on an appropriate loan-to-value ratio and market interest rate. Seller financing may have an upward influence on the sale price if favorable terms are provided. All of the comparables sold for cash, or cash equivalent terms, to the seller. Therefore, no adjustments were necessary for this factor. CONDITIONS OF SALE Conditions of sale refers to buyer and seller motivations. In order to be instructive to the analysis, sales prices should be representative of arm's length transactions with no unusual buyer or seller motivations. Examples of unusual motivations include related parties, - -------------------------------------------------------------------------------- 35 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- assemblage (plottage) value, forced sale, tax considerations, and lack of sufficient exposure on the market. These circumstances may result in the following: manipulation of the price by buyer or seller, distress prices that do not reflect typical exposure or marketing time, or premiums (or discounts) associated with unusual motivations. In these cases, it is necessary to consider any unusual conditions of sale, and to make adjustments, if possible. Another example of a circumstance which is analyzed within the conditions of sale category is the situation of asking prices. Asking prices are often higher than the amount ultimately negotiated once an arm's length transaction has been consummated. Hence, it may be necessary; to adjust down for asking prices. None of the sales will require condition adjustments as they are all deemed standard arms-length transactions. MARKET CONDITIONS Economic conditions may change between the sale date of the comparables and the effective date of value provided. Examples of changes in the market include changes in the economy, tax laws, supply, population growth, employment growth, inflation rates and buyer and seller perceptions. These forces may result in appreciation or depreciation, or may have no impact on real estate prices. Changes may impact real estate in general, or may have different impacts on different real estate segments. The adjustment for this factor is not a function of time, but of differences, if any, between time periods. Thus, it is possible that a period of time could elapse with no material change in market conditions having occurred. The Danville and surrounding market has shown slow but steady growth as explained in our market analysis. Local market participants feel that little change has occurred over the past 1.5 to 2 years, however, before that, the market has improved in terms of rental rates and overall strength. Therefore sale #4, which transferred in July on 1992, will require an upward market conditions adjustment. The following discussion analyzes the aforementioned comparables relative to the subject property. Sale 1 Sale number one, is located in Franklin, South Hampton County, Virginia, which is approximately 175 miles east of the subject. The comparable is located near Route 58, which runs from Danville. Rental rates at the comparable property are superior ranging from $10.00/SF+. This is due to the Hampton Roads/Virginia Beach MSA being located less than 15 miles east of the subject property, which provides the area with close proximity to a major metropolitan area. Therefore, a downward location adjustment will be required. Furthermore, - -------------------------------------------------------------------------------- 36 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- the comparable has superior access and exposure being located on the corner of a fairly well traveled intersection in town. Therefore, downward adjustments will be required for location and exposure. Franklin Plaza, is a 78,000 square foot shopping center which sold in April of 1995 for $21.21/SF. The transaction was reportedly cash equivalent and arms-length, requiring no size, market or conditions adjustments. The shopping center was constructed circa 1970 and is considered to be in similar condition to the subject property, requiring no physical adjustments. At the time of sale, the property was 50% occupied, which is significantly inferior to the subject property's 100% leased status assuming the Dollar General Store is in place. Therefore, a large upward occupancy adjustment will be required. The subject center is leased primarily on gross deals or expense reimbursement caps that significantly limit the expense recovery the subject can attain. Additionally, the subject has several leases that have what are considered to be favorable options. Some of the larger tenants such as Kroger and the Drug Store have renewal options for rental rates that do not increase from the current terms. As the comparable sale has standard triple net leases that do not have low rent options, its economic characteristics are considered to be superior, requiring a downward adjustment. Finally, the anchor tenants are considered similar requiring no adjustments. Overall, a downward adjustment is required. Sale 2 Sale number two, is located on South Main Street in Danville, approximately five miles south of the subject property. The comparable is currently achieving rental rates of $5.00/SF for anchor space and $9.00/SF+ for satellite space. This area of Main Street is considered to be similar to the subject warranting no locational adjustments. However, the exposure and access are considered superior warranting a downward adjustment. Southwyck Plaza, is a 66,922 square foot shopping center which sold in October of 1994 for $31.38/SF. The transaction was reportedly cash equivalent and arms-length, requiring no size, market or conditions adjustments. The shopping center was constructed in 1989 and is considered significantly superior in terms of quality and condition, requiring a downward adjustment. At the time of sale, the property was 77% occupied, which is inferior to the subject property. Therefore, an upward occupancy adjustment will be required. As mentioned in the previous sale, as the comparable sale has standard triple net leases that do not have low rent options, its economic characteristics are considered to be superior, requiring a downward adjustment. Finally, the anchor tenants are considered similar requiring no adjustments. Overall, a downward adjustment is required. - -------------------------------------------------------------------------------- 37 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- Sale 3 Sale number three, is located in South Hill, Mecklenburg County, Virginia, which is approximately 60 miles east of the subject. The comparable is located near at the Route 58/I-85 interchange. Rental rates at the comparable property are superior ranging from $8.00/SF+. The comparable is located just off of Interstate 85, which provides direct access to Raleigh /Durham North Carolina to the south and Richmond Virginia to the north. Therefore, due to this superior highway location, a downward adjustment will be required. Furthermore, the comparable has superior access and exposure requiring a downward adjustment. Town Square, is a 133,037 square foot shopping center which sold in august of 1994 for $17.77/SF. The transaction was reportedly cash equivalent and arms-length, requiring no size, market or conditions adjustments. The shopping center was constructed circa 1970 and somewhat renovated in 1983. However, it was reported that the center will require a significant amount of deferred maintenance to bring it up to a competitive level in its market place. Therefore, the comparable is considered to be in similar condition to the subject property, requiring no physical adjustments. At the time of sale, the property was 57% occupied, which is significantly inferior to the subject property, requiring a large upward occupancy adjustment. As mentioned previously, as the comparable sale has standard triple net leases that do not have low rent options, its economic characteristics are considered to be superior, requiring a downward adjustment. Finally, the anchor tenants are considered similar requiring no adjustments. Overall, a downward adjustment is required. Sale 4 Sale number four is located on Route 29 in Danville, approximately two miles north of the subject property. The comparable was achieving rental rates of approximately $5.00/SF for anchor space and $7.00/SF+ for satellite space. This area of Route 29 is considered very similar to the stretch of Route 58 that the subject is located on requiring no locational adjustments. However, the exposure and access are considered superior warranting a downward adjustment. Nor Dan Shopping Center, at the time of sale was a 153,923 square foot shopping center which sold in July of 1992 for $13.64/SF. The transaction was reportedly cash equivalent and arms-length, requiring no size or conditions adjustments. However, as mentioned earlier, a market conditions adjustment will be required. The shopping center was constructed in 1961 and is considered to be inferior in terms of quality and condition, requiring an upward adjustment. At the time of sale, the property was 55% occupied, which is inferior to the subject property. Therefore, an upward occupancy adjustment will be required. Several of the comparable's leases were structured similar to the subject property, however, the main - -------------------------------------------------------------------------------- 38 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- anchors had standard triple net leases that do not have low rent options, therefore, its economic characteristics are still considered to be superior, requiring a downward adjustment. Finally, the anchor tenants are considered similar requiring no adjustments. Overall, a downward adjustment is required. Summary of Adjustments Adjustments made to the comparables are summarized in the following grid: ================================================================================ IMPROVED SALES ANALYSIS SUMMARY OF ADJUSTMENTS (1) - -------------------------------------------------------------------------------- Sale 1 Sale 2 Sale 3 Sale 4 - -------------------------------------------------------------------------------- Unadjusted Price/ SF $21.15 $31.38 $17.77 $13.64 Property Rights 0.00% 0.00% 0.00% 0.00% ----- ----- ----- ----- Subtotal $21.15 $31.38 $17.77 $13.64 Financing Terms 0.00% 0.00% 0.00% 0.00% ----- ----- ----- ----- Subtotal $21.15 $31.38 $17.77 $13.64 Conditions of Sale 0.00% 0.00% $13.00 0.00% ----- ----- ------ ----- Subtotal $21.15 $31.38 $17.77 $13.64 Market Conditions 0.00% 0.00% 0.00% +10.00% ----- ----- ----- ------- Subtotal $21.15 $31.38 $17.77 $15.00 Other adjustments Physical characteristics Age/Quality/Condition 00.0% -25.00% 0.00% +5.00% Size 0.00% 0.00% 0.00% 0.00% Parking 0.00% 0.00% 00.0% 0.00% Functional Utility 0.00% 0.00% 0.00% 0.00% Location -15.00% 0.00% -10.00% 0.00% Exposure/Access -15.00% -15.00% -15.00% -15.00% Occupancy +25.00% +20.00% +25.00% +25.00% Economic Characteristics -15.00% -15.00% -15.00% -10.00% ------- ------- ------- ------- Total Other Adjustments -20.00% -35.00% -15.00% +5.00% ------- ------- ------- ------ Value Indication for Subject $16.92 $20.40 $15.10 $15.75 - -------------------------------------------------------------------------------- (1) The adjustment grid summarizes the direction and magnitude of adjustments judged appropriate to the comparable sales. In some cases adjustments may be derived directly from quantifiable data. However, in many instances the adjustments involve judgment of CB Commercial Real Estate Group, Inc. Source: CB Commercial Real Estate Group, Inc. ================================================================================ Sale Price Per Square Foot Conclusion The adjusted sales prices of the comparables range from $15.10 to $20.40 per square foot, with an average of $17.04 per square foot. - -------------------------------------------------------------------------------- 39 ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- We have placed the most weight on sales #1, #2 and #4 due to the recent transfer date of sale #1 and the proximate location in Danville for sales #2 and #4. Therefore, we estimate a value of $16.00 PSF, for the subject. The calculation is presented as follows. =================================================================== SALES PRICE PER SQUARE FOOT INDICATION STABILIZED VALUE ------------------------------------------------------------------- Indicated Total Rentable Value/SF Square Feet Total ------------------------------------------------------------------- $16.00 x 118,535 = $1,896,560 Source: CB Commercial Real Estate Group, Inc. =================================================================== The final value conclusion via the Sales Comparison Approach is calculated as follows: ================================================================================ SALES COMPARISON APPROACH - -------------------------------------------------------------------------------- Sales Comparison Approach "As Is" $1,896,550 Rounded $1,900,000 Sales Comparison Approach "As Is" per square foot $16.03 - -------------------------------------------------------------------------------- (1) See Income Capitalization Approach Source: CB Commercial Real Estate Group, Inc. ================================================================================ Therefore we estimate that the as is market value of the leasehold Interest in the subject property, via the sales comparison approach, as of June 5, 1996, is: --- ONE MILLION NINE HUNDRED THOUSAND DOLLARS --- ($1,900,000) - -------------------------------------------------------------------------------- 40 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- INCOME CAPITALIZATION APPROACH The Income Capitalization Approach reflects the subject's income-producing capabilities. This approach is based on the assumption that value is created by the expectation of benefits to be derived in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over period of time. The two common valuation techniques associated with the Income Capitalization Approach are direct capitalization and the discounted cash flow (DCF) analysis. DIRECT CAPITALIZATION Direct capitalization is the method used to convert a single year's estimate of income into a value indication. In direct capitalization, a precise allocation between return on and return of capital is not made because investor assumptions or forecasts concerning the holding period, pattern of income, or changes in value of the original investment are not simulated in the method. Direct capitalization is most appropriate when analyzing a stable income stream and in estimating the reversion at the end of a holding period. Using this method, the following sets forth the process: 1. Estimate the Potential Gross Income (PGI) from all sources that a competent owner should be able to generate from a property based on existing and/or market rents. 2. Deduct an estimate of Vacancy and Collection Loss (VCL) to arrive at an Effective Gross Income (EGI) estimate. 3. Deduct operating expenses from the estimate of EGI. The result is an estimate of the stabilized Net Operating Income (NOI). 4. Estimate an Overall capitalization rate (R(o), or OAR). 5. Divide the NOI by R(o), resulting in a value estimate at stabilized occupancy. 6. Adjust the stabilized value to account for "As Is" condition, if applicable. DISCOUNTED CASH FLOW ANALYSIS The discounted cash flow (DCF) analysis is a detailed analysis used when the future income is expected to be variant, usually as a result of numerous lease obligations and/or anticipated changes in income and expenses. It is also particularly relevant when institutional buyers are the most likely purchasers of the subject because institutional buyers often place great weight on this analysis. The DCF analysis specifies the quantity, variability, timing, and duration of NOIs and cash flows. Selecting the proper yield rate (discount rate) is essential. CB Commercial must consider the target yield sought by investors as well as yields derived from comparable sales and/or market information. The methodology is: 1. Estimate the before-tax cash flows for each period of a projected holding period net of any capital expenditures such as leasing expenses and tenant improvements. - -------------------------------------------------------------------------------- 41 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- 2. Estimate a discount rate and a terminal overall capitalization rate. 3. Estimate a selling price, known as the reversion, for the end of the projected holding period. 4. The cash flows and the reversion are then discounted to a present value estimate. APPROPRIATE CAPITALIZATION METHOD A number of factors were considered in evaluating the appropriateness of using the direct capitalization method and/or the DCF technique including the occupancy status, lease structures, above/below market rents and typical buyer behavior. As a result of considering the foregoing factors, both the DCF technique and the income capitalization technique are employed in this appraisal. ESTIMATE OF MARKET RENT Rent analysis involves both a study of market (comparable) rentals and the subject's existing rents (if any). Market rent is the rent that a property would most probably command in the open market; indicated by the current rents paid and asked for comparable space. SUMMARY OF COMPARABLE RENTALS CB Commercial surveyed competitive properties and lease transactions for comparison to the subject. The selected comparable rentals are considered some of the most competitive properties to the subject. Brokers in this market are uncomfortable with giving out specific lease data. They did however, tell us what the current rents in the centers are for anchor and in-line space without naming specific tenants. These are listed the following chart with a map and discussions of each comparable provided on the following pages. - -------------------------------------------------------------------------------- 42 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
========================================================================================================================= SUMMARY OF DANVILLE AREA COMPARABLE SATELLITE & ANCHOR SPACE RENTALS ========================================================================================================================= Center Age Center Name & ---------- Space Tenant Space No. Location Size Type Name Rent/SF Size Comments ========================================================================================================================= 1 Danville Plaza Early 1970's In-Line Confiden. $7.00 9,800 No escalation's, S/W Quadrant of ------------ NNN Rt. 58 & 29 143,000 Danville, VA Confiden. $6.00 13,500 Same Anchor Harris $6.80 30,924 Flat, expense cap Teeter reimbursement ========================================================================================================================= 2 Ballou Park 1963/1996 In-Line Confiden. $9.00 3,800 Recent rent for South Main --------- renovated space Street Danville, 260,000 VA Confiden. $4- $5.00 Varies Reflects rental rates on old space, these lease structures are similar to the subject property Anchor Food Lion $7.75 29,000 Lease in new section Cit Finance $3.85 33,193 Lease in old section ========================================================================================================================= 3 Nor Dan S.C. 1961/1994 In-Line Confiden. $5.00+ Varies According to the Route 29 North --------- leasing agent, the Danville, VA 159,848 leases in the pre-renovated space are at the $5.00 range where the most recent leases signed are at the $7.00+ SF range. Anchor Winn Dixie $6.00+ 22,720 The leasing agent was very reluctant to give exact data, she said this is basically what the rental rate is for this tenant. ========================================================================================================================= 4 Riverside S.C. 1960 In-Line Confiden. $5.00+ 1,000 Lease structure 3232 Route 58 ---- SF+ varies from NNN to Danville, VA 150,000 Gross Anchor Big Lots & $ 3.50+ 20,000 Lease structure Winn Dixie SF+ triple net =========================================================================================================================
- -------------------------------------------------------------------------------- 43 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] COMPARABLE RENTALS - -------------------------------------------------------------------------------- ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ANALYSIS OF COMPARABLE RENTALS We have obtained comparable leases from shopping centers situated within the subject's micro market area which are summarized in the previous chart. In terms of satellite space, comparables #1 through #4 indicate that the leased spaces basically range in size from 1,000 to 9,800 square feet which adequately represents the subject's square footage range. All the leases cited were considered to represent current market conditions in the competitive marketplace. The leases include a variety of uses and represent a similar tenant mix to the subject center. The above leases are considered to be generally superior to the subject in terms of condition. Comparable #1 and #4 are both older centers that have not received extensive renovation. They have both been well maintained and are considered similar to the subject. Comparables #2 and #3 are both recent renovated centers, as can be seen some of the rents reflect space in the new sections and some reflect rents previous to the centers renovations. The pre-renovated rents are considered similar, while the renovated rents are superior. All of the compatibles are considered superior in terms of access and exposure, as detailed earlier in this report, the subject suffers from a lack of both exposure and accessibility. However, overall location is considered similar as the subject is located in a major commercial corridor similar to the comparables. We have examined the average effective rental rates of these comparables and determined that the effective rent is similar to the face rent, since their was no tenant improvements or free and escalation's in this market are generally flat. These comparable centers are located throughout the Danville area in competitive areas to the subject property. The retail leases in the older properties and un-renovated shopping centers generally are based upon some form of gross lease or base year expense reimbursement. This basically means that the expense reimbursements are either zero in the case of a gross lease or only partial in the case of payments over a base year or of a specified cap. The newer and renovated centers as well as some of the more competitive older centers are generally signing leases on a triple net basis, whereby the tenants assume their proportionate share of operating expenses, real estate taxes, and insurance. The reason for the older, less well positioned centers in the market offering these advantageous lease terms to the tenants is to entice them from the newer centers in the area, which is the strategy of the subject property. We have also considered asking rental rates in our analysis, however, they were deemed to be less reliable than the leases presented. As a result, we have not included asking rentals. The satellite space face rental rates ranged from $4.00/SF to $9.00/SF with a central tendency of $6.00/SF. The rents at the lower end of the range, or those in the $5.00/SF- range best reflect the subject property's achievable rents. As a result, we have concluded to a rental rate for the subject's satellite space of $4.25/SF. Based upon our analysis, we feel that a "gross" rental rate of $4.25/SF is adequately supported. Furthermore, local brokers reported that pad - -------------------------------------------------------------------------------- 45 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- site rentals similar to the subject's Virginia Bank, generally lease for a premium compared to the general in-line space. In polling brokers familiar with the subject and the competing properties, it was determined that a market rental rate of $6.00/SF would be most representative of the subject property. The anchor leases from the competing properties ranged from $3.50/SF to $7.75/SF with an average lease rate of $5.58/SF. The anchor rents are based upon the same adjustments and general lease structures that the in-line have. In addition, all of the anchor leases have percentage rent clauses similar to the subject. For further support, we have analyzed several anchor leases from various small cities similar to Danville. As can be seen these range from $1.86/SF to $3.50/SF on a primarily gross basis. An additional upward adjustment will be required for the strengthening of market conditions since the time these lease were signed, however, they do give a good indication of what a center similar to the subject could achieve. As a result, we have concluded to a rental rate for the subject's anchor space of $2.50/SF. Based upon our analysis, we feel that a "gross" rental rate of $2.50/SF is adequately supported.
========================================================================================================================= SUMMARY OF COMPARABLE REGIONAL ANCHOR SPACE RENTALS ========================================================================================================================= Location Tenant Date Size Rent Comments ========================================================================================================================= 1 Knoxville TN Knoxville 8/92 73,000 $3.12 Gross lease with landlord Wholesales paying all expenses Furniture 2 Ahoskie, N.C. Belks 3/92 43,200 $2.00 Gross Lease Structure Department Store 3 Hickory N.C. Furniture 10/91 60,000 $1.86 Gross Lease Structure Outlet 4 Albermarle N.C. Helig Meyers 7/90 20,000 $3.50 Gross Lease Structure Furniture ========================================================================================================================= Compiled by: CB Commercial Real Estate Group, Inc. =========================================================================================================================
- -------------------------------------------------------------------------------- 46 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- In addition to surveying comparable centers, we have also analyzed the most recent lease transactions at the subject center. Since there have been a few recent leases at the subject property, these leases have been given substantial weight in our analysis of the subject's market rental rates. These leases are detailed below. ANALYSIS OF SUBJECT LEASES The following table summarizes the subject property's recent lease history.
================================================================================================================== SUMMARY OF RECENT SUBJECT LEASES ================================================================================================================== New / Term Contract TI's Free Tenant Renew (Years) Date Size Rent Escalation / SF Rent ================================================================================================================== Danville Chiropractic New 5 4/96 6,400 $ 4.75 Flat None None Dollar Store New 5 7/96 6,800 $ 3.75 Flat $7.98 None ================================================================================================================== Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ==================================================================================================================
The typical lease at the subject property is gross whereby the tenant is not responsible for reimbursing the landlord for such expenses as real estate taxes, insurance, and common area maintenance (CAM). Recent retail leases at the subject range from $3.75/SF to $4.75/SF. The terms of the recent leases have typically been five years which is similar to quoted market terms. Based on our survey of local leasing agents and owners, five year terms are most common with satellite tenants such as those found in the subject center. Therefore, for the purpose of our analysis, we have utilized a lease term of five years for all tenant suites for speculative renewals. In our interviews with competing leasing agents and owners, we also inquired as to the market norm for rent escalation's. Most of the agents agreed that leases are typically flat, with some sort of escalation or bump in the first option period. However, the newer and recently renovated centers are able to get some rental rate escalation's. Recent leases at the subject are flat for the term. Therefore, we have utilized an annual rental escalation in all speculative leases of 0.0%. According to the subject leasing agent, small TI's are typically given for new space as an enticement, with the owner generally providing a " vanilla box" and some finishing for new tenants and nothing for renewals. We project that new TI's will equate to $5.00/SF and $0.00/SF for renewal leases. All of the leasing agents surveyed reported minimal if any free rent. A review of the subject lease abstracts indicated that no free rent was typically offered to tenants that leased space in the subject center over the past three to four years. Therefore, based upon the most recent - -------------------------------------------------------------------------------- 47 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- leases written at the subject center as well as conversations with local leasing agents, we have projected that no free rent will be offered to prospective tenants. CONCLUSIONS: MARKET RENT ESTIMATE FOR THE SUBJECT PROPERTY Based on the previous analysis, the current market lease parameters for the subject property are estimated as follows: ================================================================================ CONCLUDED MARKET LEASE TERMS (PER SQUARE FOOT / YEAR) - -------------------------------------------------------------------------------- Category Satellite Space Pad Space Anchor Space - -------------------------------------------------------------------------------- Market Rent $4.25 (gross) $6.00 (gross) $2.50 (gross) Lease Term 5 Years 5 Years 10 Years Annual Escalation Flat Flat Flat Tenant Improvements $5.00 $5.00 $5.00 Free Rent (Months) 0 Months 0 Months 0 Months - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ CONTRACT RENT As discussed, the subject's leasable area is comprises of one floor containing four suites and one pad site within one building. Currently, the subject is 100% leased, assuming the Dollar General lease is in place. Through our research of the subject property, which included a complete review of lease abstracts, rent rolls (both current and historical), and detailed discussions with the on-site property manager, the following rent roll summary was utilized to detail currently leased suites and general information employed for this approach. Additionally, within the Addenda are copies of the tenant lease assumptions, generated by Pro-ject+ Plus, a computerized lease-by-lease analysis program. Information submitted to us and contained in the Addenda provide additional support to the data and assumptions inputted for this method and is assumed to be correct and reliable. CB Commercial reserves the right to amend our input assumptions if any documentation is subsequently available which contradicts that assumed for this method. Located on the following page is the subject rent roll summary. - -------------------------------------------------------------------------------- 48 ================================================================================ INCOME CAPITALIZATION APPROACH - --------------------------------------------------------------------------------
====================================================================================================== KINGS FAIRGROUNDS SHOPPING CENTER RENT ROLL ====================================================================================================== Square Rent / SF Annual Suite Tenant Feet Begin End Rent ====================================================================================================== 1 Schewel Furniture 60,200 8/90 1/01 $2.75 $165,550 2 Danville Chiropractic 6,400 4/96 3/01 $4.75 $30,400 3 Dollar General* 6,800 7/96 6/01 $3.75 $25,500 4 Hook/Super-X 12,160 3/72 2/97 $2.40 $29,184 5 Kroger 30,975 3/72 2/97 $2.40 $74,340 6 Virginia Bank 2,000 8/72 3/98 $5.40 $10,800 Total Leased Square Feet 118,535 Average Rent: $ 3.57 $335,774 Vacant Space 0 Occupancy-Overall 100% ====================================================================================================== * Currently, the clothing outlet is in place for 4,000 SF of the 6,800 square foot space that Dollar General is set to lease by the end of June or early July 1996. According to the leasing agent for the subject, Dollar General has committed to signing the lease and has said that it is a done deal. For purposes of this analysis, we have included the rent that the outlet store pays which is on a month to month basis for $1,500 for the month of June, The Dollar General is expected to start paying rent in July. ====================================================================================================== Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ======================================================================================================
ANALYSIS OF TENANCY The subject is comprised of regional and local tenants including Schewel, Kroger, Revco and soon Dollar General Store. Overall, the quality of the tenancy is considered to be good for the area. However, local brokers in the area point out that Schewel is not a large population draw to the center and feel that for the lead tenant it is a weak one. Current rental rates range from $2.40/SF to $5.40/SF. SPECIAL LEASE PROVISIONS AND ASSUMPTIONS The following discussion summarizes any lease provisions and assumptions of special note. Pending Leases As mentioned, the clothing outlet is in place for 4,000 SF of the 6,800 SF space that Dollar General is set to lease by the end of June or early July 1996. According to the leasing agent for the subject, Dollar General has committed to signing the lease and has said that it is a done deal. For purposes of this analysis, we have included the rent that the outlet store pays which is on a month to month basis for $1,500 for the month of June, The Dollar General is expected to start paying rent in July. This is the assumption that we have made in our leasing analysis. - -------------------------------------------------------------------------------- 49 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Renewal Options Options to renew at below or above market rent may have an impact on the valuation analysis. For example, if below market renewals are exercised, they may result in a downward impact on value. However, to the extent that re-tenanting costs are saved (rent loss during downtime, tenant improvements, leasing commissions, etc.), there may be an advantage in having the tenant renew at some rate below market rent in order to avoid these costs. The majority of recent leases at the subject have renewal options. Where applicable, if a tenants' option rent is below market, we have assumed that the tenant would exercise its renewal option. This is the case with Schewel Furniture, Kroger, Hook/Super-X and Virginia Bank. The Kroger and Hook-Super-X lease options are for the original lease terms including no rental rate increase, while the Schewel, option has a $0.50/SF increase in rent for the first option and a $0.16/SF increase in rent for the second option. Finally, the Virginia Bank option has an increase to $6.60/SF, which is slightly higher than market will be in 1998 when this lease expires. However, we have opted to renew this lease based upon conversations with property management that Virginia Bank has been in place since 1973 and have made no known intention of leaving. Furthermore, if they did opt to leave, they would most likely have to pay a triple net lease structure in a center that has available pad space, which would net a much higher lease rate than the gross lease structures at the subject property. Therefore, all of the mentioned lease options have been assumed to be renewed. EXPENSE REIMBURSEMENTS Current and future hypothetical retail leases which will encumber the subject property will be based upon gross or base year lease structures depending on the tenant. As the majority of the space at the center will be on option renewal through the end of our holding period, this really affects the in-line space only. In these situations, the lease renewals have been assumed to be similar to the current ones just negotiated, which are gross of all expenses. The landlord will be responsible for all operating expenses including CAM, real estate taxes and insurance. The following is a breakdown of the subject's historical recoveries and CB Commercial's projections for the proforma. It should be noted that the subject's operating statements are based on a fiscal year basis, beginning June 1 and continuing through May 31. Expense Reimbursements Expense reimbursements for the subject property consist of either a capped figure for reimbursements of the CAM expense or a pro-rate reimbursement of taxes of a specified based year. The subject's historical expense reimbursements are as follows: - -------------------------------------------------------------------------------- 50 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ============================================ EXPENSE REIMBURSEMENT ============================================ Year Total $ Amount ============================================ 1993 $13,895 1994 $8,020 1995 $15,375 1996 Budget $9,672 Year 1 Pro Forma $9,257 ============================================ Source: Mark Centers Trust ============================================ The first year of our DCF model indicates reimbursements of $9,257. Historical expense reimbursements have fallen in recent years due in part to the in-line space being recently leased upon a total gross basis, where no expenses are recovered. As our pro-forma falls in line with the 1996 budget, we feel that these figures are supported. OTHER INCOME This income category can be derived from several different sources including tenant service income, merchants association fees, late fee income, short-term storage income, professional services provided for the tenants by the landlord/management, ground rent as well as other miscellaneous sources. The subject has no miscellaneous sources of income. PERCENTAGE RENT INCOME In addition to the basic rental charges, the tenants are sometimes responsible for paying the landlord additional rent equal to a specified percentage of the tenant's gross sales made in, upon, or from the premises, over a breakpoint factor or according to a specific schedule. Three of the subject tenants have percentage rent clauses contained within their leases.
=================================================================================================================== PERCENTAGE RENT CLAUSES =================================================================================================================== CBC's FY97 Tenant Breakpoint Percent Year Gross Sales % Rent Paid Projection =================================================================================================================== Schewel Furniture $4,000,000 2.00% 1994 $4,334,681 $6,694 $3,975,000 $4,750,000 1995 $3,708,929 $0.00 Hook-Super X $1,167,360 2.50 1994 $ 1,828,416 $16,526 1995 $ 1,624,191 $11,420 $1,640,000 Kroger $7,434,000 1.00% 1994 $8,031,549 $ 5,975 $7,745,000 1995 $7,718,161 $ 2,842 =================================================================================================================== * Price Chopper's percentage rent is offset by CAM and real estate tax recaptures. =================================================================================================================== Source: Mark Centers Trust Compiled by: CB Commercial Real Estate Group, Inc. ===================================================================================================================
Given the aforementioned sales histories, we have projected the gross sales for each tenant as illustrated in the right column of the table. We have also projected that the gross sales - -------------------------------------------------------------------------------- 51 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- figures will grow by 3.0% per annum over the course of the cash flow projection, which follows the economic growth trends outlined in our trade area analysis. POTENTIAL GROSS INCOME The potential gross income for the subject property is summarized as follows. =========================================================================== STABILIZED POTENTIAL GROSS INCOME (FY 1997) - --------------------------------------------------------------------------- Totals - --------------------------------------------------------------------------- Total Minimum Rent $ 335,149 Expense Reimbursement - Common Area MaintenanceRecovery $ 5,252 - Real Estate Tax Recovery $ 4,005 - Percentage Rent $ 16,434 --------- Potential Gross Income $ 360,840 - --------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. =========================================================================== VACANCY AND COLLECTION LOSS This is an allowance for reductions in potential income attributable to vacancies, tenant turnover, and non-payment of effective rent. In the direct capitalization process, a market-derived, stabilized vacancy and collection loss estimate is subtracted from potential gross income in order to arrive at effective gross income. The subject property is currently 100% leased. Furthermore, the subject's competitive market exhibits a vacancy level of approximately 4.0%. Due to the long-term leases and options at the subject property, the average vacancy rate over the projected holding period, which is attributed to downtime between leases, approximates a minimal 1.0%. In addition to vacancy, we estimated a blended credit loss factor of 2.0% which takes into account both national and local tenants at the subject center. Therefore, the combined long-term vacancy and credit loss factor for the subject property amounts to approximately 3.0%. In the first year of our discounted cash flow analysis, the combined credit loss amounts to $10,825. EFFECTIVE GROSS INCOME Given our estimate of potential gross income, other income, and a vacancy and collection loss, the estimated effective gross income is derived as follows: ========================================================== EFFECTIVE GROSS INCOME (FY 1997) ========================================================== Potential Gross Income: $ 360,840 Less: Collection Loss $ 10,825 -------- Effective Gross Income: $ 350,015 ========================================================== - -------------------------------------------------------------------------------- 52 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Our estimate of effective gross income used in direct capitalization is $350,015. This figure is the same as the EGI in the first year of our cash flow in the discounted cash flow method. OPERATING EXPENSE ANALYSIS In projecting the revenues and expenses for the subject property, we have analyzed the historical figures for fiscal years 1993 through 1995 as well as management's forecast of revenues and expenses for fiscal year 1996. In addition, we have utilized the Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers publication to assist in our analysis. We have considered the category " Region 4 (East): Open Shopping Centers" as the most representative of the subject property. A summary of the average expenses taken from this publication increased at an inflationary rate to reflect our fiscal year 1997 analysis are presented as follows: ======================================================= COMPARABLE EXPENSE ANALYSIS ------------------------------------------------------- Expense Category P.S.F. ------------------------------------------------------- General & Administrative $ 0.04 Repairs & Maintenance $ 0.15 Services $ 0.09 Utilities $ 0.07 ------ Total CAM $ 0.35 Real Estate Taxes $ 0.22 Insurance $ 0.08 Management Fees $ 0.20 Total Operating Expenses $ 0.85 ------------------------------------------------------- Source: Institute of Real Estate Management's 1995 Income/Expense Analysis: Shopping Centers ======================================================= The actual income and expense history of the subject as well as our estimate of the subject's stabilized expenses are detailed as follows. - -------------------------------------------------------------------------------- 53 ================================================================================ - -------------------------------------------------------------------------------- OPERATING HISTORY KINGS FAIRGROUNDS SHOPPING CENTER DANVILLE, VIRGINIA - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------- 118,535 SF-GLA 1993 1994 1995 l996 Budget Amount $/SF Amount $/SF Amount $/SF Amount $/SF --------------------------------------------------------------------------- Gross Potential Income $282,924 $2.39 $268,091 $2.26 $264,824 $2.23 $278,622 $2.35 Percentage Rent $3,000 $0.03 $15,000 $0.13 $21,941 $0.19 $30,200 $0.25 Expense Reimbursements $13,895 $0.12 $8,020 $0.07 $15,375 $0.13 $9,672 $0.08 Credit Loss (Provision for Bad D ($26,862) ($0.23) ($290) ($0.00) $0 $0.00 ($3,624) ($0.03) Total Income $272,957 $2.30 $290,821 $2.45 $302,140 $2.55 $314,870 $2.66 Legal & Professional & Other $3,807 $0.03 $3,636 $0.03 $939 $0.01 $4,328 $0.04 Management $0 $0.00 $0 $0.00 $0 $0.00 $0 $0.00 Common Area Maint. (CAM)* $29,743 $0.25 $28,657 $0.24 $36,224 $0.31 $43,880 $0.37 Real Estate Taxes $21,522 $0.18 $21,891 $0.18 $22,610 $0.19 $23,220 $0.20 Insurance $14,239 $0.12 $12,011 $0.10 $13,350 $0.11 $12,024 $0.10 Ground Rent $31,000 $0.26 $31,000 $0.26 $31,000 $0.26 $30,996 $0.26 - -------------------------------------------------------------------------------------------------------------- Total Expenses $100,311 $0.85 $97,195 $0.82 $104,123 $0.88 $114,448 $0.97 - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- NOI $172,646 $1.46 $193,626 $1.63 $198,017 $1.67 $200,422 $1.69 - --------------------------------------------------------------------------------------------------------------
CAM includes landscaping, cleaning, utilities, security and maint. & repairs. Source: GB Commercial Real Estate Group, Inc - Appraisal Services ================================================================================ ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Common Area Maintenance The subject's historical and projected common area maintenance (CAM) expenses are as follows: ========================================================== COMMON AREA MAINTENANCE EXPENSE ---------------------------------------------------------- Year Total $/SF Amount ---------------------------------------------------------- 1993 $0.28 1994 $0.27 1995 $0.32 1996 Budget $0.41 CB 1996 Projection $0.33 ---------------------------------------------------------- Source: Mark Centers Trust ========================================================== Common area maintenance (CAM) charges generally includes various items such as general and administrative expenses, repair and maintenance expenses, utilities, and general services such as cleaning, landscaping, security, and common area insurance expenses. We project the total CAM expense in 1996, before management fees, at $39,116 or $0.33/SF, which includes our administrative estimate of $0.03/SF. This is in-line with the historical and IREM expense analysis. According to accounting for the subject property, the 1996 budget was estimated conservatively high, therefore, significant weight was not put on this figure. Given the subject's historical CAM expense structure coupled with its effective age, occupancy and the services provided, the subject's projected CAM figure is considered reasonable. Property Taxes Historical and budgeted property tax expenses are as follows: ======================================================== PROPERTY TAX EXPENSE -------------------------------------------------------- Year Total $/SF Amount -------------------------------------------------------- 1993 $ 0.18 1994 $ 0.18 1995 $ 0.19 1996 Budget $ 0.20 Year 1 Pro Forma $ 0.19 -------------------------------------------------------- Source: Mark Centers Trust ======================================================== As discussed fully within the tax and assessment data section of the report, estimated taxes for fiscal year 1997 according to the City of Danville assessors office are $22,460. - -------------------------------------------------------------------------------- 55 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- Insurance Historical and budgeted insurance expenses are as follows: ======================================================== INSURANCE EXPENSE -------------------------------------------------------- Year Total $/SF Amount -------------------------------------------------------- 1993 $ 0.12 1994 $ 0.10 1995 $ 0.11 1996 Budget $ 0.10 CB 1996 Projection $ 0.10 -------------------------------------------------------- Source: Mark Centers Trust ======================================================== Insurance at the subject property includes both liability insurance and fire insurance. This expense has decreased from 1993 to 1995 to a level of $0.10/SF. We have placed primary emphasis on the subject's historical and 1996 budgeted insurance expenses and have estimated the insurance expense at $11,853, or $0.10/SF. Professional Management Fee In order to maintain the control of the property and subsequently ensure the stream of income that it generates, it is necessary to employ either internal or outside management. This expense is non-recoverable. In the case of the subject property, the property is managed internally and no management expense has been reflected in historical statements. Typical professional management fees in the local market range from 1.0% to 5.0% of effective gross income. Based upon the size and nature of the subject improvements, we have applied a management expense of 3.0% of effective gross income. Because management is calculated based on a percentage of effective gross income, this expense will vary each year because of fluctuations in the income stream. In the first year of our analysis, this expense equates to $10,500 or $0.08/SF. Ground Lease Payments The subject property is current encumbered by a ground lease agreement which is abstracted as follows: - -------------------------------------------------------------------------------- 56 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ KINGS FAIRGROUNDS GROUND LEASE ABSTRACT ================================================================================ Landlord: Danville Fair Association Tenant: Mark Centers Trust Lease Commencement: May 1, 1971 Lease Term: 55 Years Options: Three 10 year options & one 14 year option (total of 44 option years) Rent: Year one - $15,000 Years 2-55 - $31,000 1st Option - $36,000 2nd Option - $39,500 3rd Option - $43,000 4th option - $46,500 ================================================================================ Current Annual Base Rent Payment: $ 31,000 ================================================================================ In addition to the above terms the tenant is obligated to pay an additional 10% of gross revenue from all income at the center beginning with the 13th lease year or in May of 1983. However, the landlord has not been paying this extra fee. As can be seen in the historical figures, the base payment of $31,000 only has been the final charge, therefore, we have estimated this to continue into the future. Replacement Reserves This expense typically represents a reserve for future replacement of long-lived items. The amount of reserve and whether it is included or not in the direct capitalization and DCF analyses depends on the actions reflected by buyers and sellers in the local market. Based on the available comparable data and discussions with brokers and investors, replacement reserves generally range from $0.10/SF to $0.20/SF for retail properties of similar quality and condition as the subject. Given the subject's average condition, we have estimated this expense at $0.15/SF or $17,780 in 1996 increasing at our projected annual expense growth rate of 3.0%. Based on discussions with local market participants, replacement reserves not are typically subtracted in calculating NOI when determining the cash flow in the DCF analysis. Total Concluded Operating Expenses The concluded stabilized operating expenses for the subject total an estimated $115,847, or $0.98 per rentable square foot. This total expense estimate is for the first year of our proforma and incorporates fiscal year conversions not reflected in the previous 1996 calendar year estimates. The expenses minus the ground lease payment for a total of $0.72/SF are slightly lower than the average indicated by IREM ($0.85/SF), the difference is the IREM management - -------------------------------------------------------------------------------- 57 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- fee which is $0.10/SF higher. However, according to local brokers a management fee higher than 3% would not be warranted in the area. Therefore, based upon this data and the historical operating expenses, our year one pro-forma is deemed reasonable. CAPITALIZATION RATE There are several methods for deriving an overall capitalization rate for direct capitalization. A common method for establishing an overall capitalization rate for properties similar to the subject is to review the criteria of major investors in the marketplace. This may serve as a check against other techniques or may be a primary source when ample data exists. While derivation of capitalization rates from comparable sales is preferable, we were unable to obtain adequate income and expense data to employ this method from the sales used within the Sales Comparison Approach. Therefore, the investor survey method is used as the primary approach in deriving our overall capitalization rate. The subject property is a retail shopping center that would be attractive to either a local or a national investor. The category in the published investor survey most comparable to the subject is class B neighborhood shopping center. The investors typically interviewed for the survey are regional or national investors associated with pension funds, REIT's, insurance companies, financial institutions, etc. The information below is taken from CB Commercial most recent National Investor Survey (first quarter 1996).
=================================================================================================== SUMMARY OF INVESTOR SURVEY OVERALL CAPITALIZATION RATES NEIGHBORHOOD SHOPPING CENTERS - CLASS B ==================================================================================================== Investor Survey R(o) Range Average Date of Survey ==================================================================================================== CB Commercial National Investor Survey 9.0% - 11.5% 10.3% First Quarter, 1996 ==================================================================================================== Compiled by: CB Commercial Real Estate Group, Inc. ====================================================================================================
The previous survey indicates an overall range of 9.0% to 11.5% for neighborhood shopping centers with an average of approximately 10.3%. The capitalization rate reflects the quality and duration of the income stream as well as the physical characteristics of the property. The tenant mix at the subject center is considered to be average to below average for the area, due tot he lead anchor tenant being a low draw furniture store. However, they are a national credit tenant which does help with future secured income stream. Lease expiration is fairly heavy, with approximately 40% of the center coming up for renewal in 1997, although it is most likely that the tenants will exercise their favorable lease options, this factor still presents risk to a potential Investor. The center is currently 100% leased, assuming the signing of the Dollar - -------------------------------------------------------------------------------- 58 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- General lease, which is said to be a guarantee. Overall, the quality, quantity and duration of the cash flow is considered to be fair. With respect to physical characteristics, the subject is a functional neighborhood center of average quality with poor visibly and access, in average overall condition. However, the subject is situated in one of the highest traffic volume area of Danville along Route 58 (Riverside Road). Based upon this survey and the factors discussed above, an 11.0% overall capitalization rate (towards the upper middle of the range) appears to be appropriate for the subject property. However, as mentioned, the subject has several below market lease options for the majority of the space, that has been assumed to be exercised. In addition, the majority of the subject expenses are not reimbursed, which produced a very flat increase in NOI over the holding period. These combined factors affecting value, have produced a 12.32% implied overall rate in the first year of the cash-flow. Therefore, to reflect the fairly flat income stream over the holding period, an investor interested in the subject would normally load the overall rate by 50 to 100 basis points. Based upon this analysis, we have loaded the capitalization rate by 75 basis points to derive an overall capitalization rate on 11.75%, which is deemed reflective of current and future conditions at the subject property. Direct Capitalization Summary A summary of the direct capitalization method as applied to the subject property is illustrated in the following table: - -------------------------------------------------------------------------------- 59 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- ================================================================================ KINGS FAIRGROUNDS DIRECT CAPITALIZATION SUMMARY ================================================================================ Category Total P.S.F. ================================================================================ Income Total Market Rent $ 335,149 $ 2.83 Recovery Income 9,257 0.08 ----- ---- Gross Rental Income $ 344,406 $ 2.91 Less: Vacancy and Credit Loss (10,825) (0.09) Plus: Other Income 0 0.00 Plus: Percentage Rents $ 16,434 0.14 ----------- ---- Effective Gross Income $ 350,015 $ 2.95 Expenses Common Area Maintenance (CAM) (39,605) (0.33) Real Estate Taxes (22,741) (0.19) Insurance (12,001) (0.10) Management Fees ( 10,500) (0.20) Ground Rent (31,000) (0.09) ----------- ------ Total Expenses $ (115,847) $ (0.98) OER 33% Net Operating Income $ 234,168 $ 1.97 CAPITALIZATION OF NOI: @11.75% $ 1,992,919 $ 16.81 Reconciled Value $ 2,000,000 $ 16.87 ================================================================================ Compiled by: CB Commercial Real Estate Group, Inc. ================================================================================ The concluded market value of the subject property, based on the direct capitalization method, is $2,000,000. - -------------------------------------------------------------------------------- 60 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW ANALYSIS Our DCF assumptions are summarized as follows. Most of the following assumptions have been discussed and supported within prior sections of the report. A discussion of the discount rate, terminal capitalization rate and holding period follow the assumptions summarized below. ================================================================================ SUMMARY OF DISCOUNTED CASH FLOW ASSUMPTIONS KINGS FAIRGROUNDS SHOPPING CENTER ================================================================================ General Assumptions Start Date June 1, 1996 Terms of Analysis 11 years Basis (Calendar / Fiscal) Fiscal Software Project + Plus Growth Rate Assumptions Expenses 3.0% Market Rent 3.0% Real Estate Taxes 3.0% Inflation (CPI) 3.0% Market Rent Assumptions Anchor $ 2.50 (Gross) Satellite $4.25 (Gross) Pad Site $6.00 (Gross) Leasing Assumptions Lease Term 5 Years Renewal Probability 50% Weighted Average of: Tenant Improvements $2.50 Months of Free Rent 0 Leasing Commissions (Cashed-Out) 4.0% Down Time Between Leases 6 Months Tenant Assumptions Existing tenant leases were entered at contract rent and terms. Speculative renewals assume tenants will pay base rent only, their pro rata share of CAM, real estate taxes and insurance is gross meaning the landlord pays the expense. Contractual recoveries were input into the model per their respective leases. Miscellaneous Assumptions Credit Loss 3.0% Avg. Occupancy Over Projection Period 99% Structural Maintenance/ Reserves ($/SF) $ 0.15 Financial Assumptions Discount Rate (IRR) 13.00% Terminal Overall Capitalization Rate (RO) 11.00% Costs of Sale 3.00% - -------------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. ================================================================================ - -------------------------------------------------------------------------------- 61 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNT RATE ANALYSIS A discount rate is a rate of return on capital utilized to capitalize future payments or receipts to present value. It is based on the time value of money concept. For appraisal purposes, the rate used to convert income to property value should represent the annual rate of return necessary to attract investment capital. The rate is influenced by many considerations, including the degree of apparent risk, market attitudes with respect to future inflation, the prospective rates of return for alternative investment opportunities, supply of and demand for mortgage funds, and the availability of tax shelters. Because rates of return used in income capitalization represent prospective rates, as distinguished from historical rates, special consideration is given to market perceptions of risk and changes in purchasing power. Although it is not possible to prove conclusively the suitability of a particular rate of return on the basis of market evidence, the chosen rate should be consistent with the available evidence. Rate selection requires judgment and knowledge concerning prevailing market attitudes and economic indicators. Both the discount rate and the reversionary capitalization rate must reflect the relative risk perceived by investors for the specific market being studied. Generalities must be avoided. To determine such rates, we have used surveys of real estate investors analyzed and adjusted for comparative returns found in the capital markets. National investor surveys include data on investors operating regionally and nationally, such as representatives of insurance companies, commercial banks, pension funds, investment banking firms, syndication firms, and investment advisory firms. Such companies invest in all types of properties, including office buildings, retail shopping centers, hotels, apartment complexes, and industrial facilities. These surveys are valuable for determining general parameters but must be honed to the local market. Based on surveys from CB Commercial Real Estate Group Inc. for the first quarter 1996, investment criteria for numerous market participants including investors that would be in competition for acquiring a property such as the subject are illustrated below. ================================================================================ FIRST QUARTER 1996 NATIONAL INVESTOR SURVEY CLASS B NEIGHBORHOOD SHOPPING CENTERS ================================================================================ TYPE OF FIRM OVERALL CAP. RATES GENERAL DISCOUNT REAL RATE INFLATION RATE OF RETURN ---------------------------- GOING-IN TERMINAL (IRR) (RRR) ================================================================================ Range: 9-11.5 10-12 2-4 12-14.5 9.5-11 Average 10.3 10.8 3.1 13.1 10.1 ================================================================================ Change from -20 +10 -40 +50 +190 3rd Qtr Survey ================================================================================ Source: CB Commercial Real Estate Group Inc. - 1st Quarter 1996 - -------------------------------------------------------------------------------- 62 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- We have surveyed national real estate investors for their investment criteria when purchasing real estate such as the subject. Investor expectations for inflation range from 2% to 4%, with an average of 3.1%. We have selected an inflation rate for our analysis of 3.0%. The discount rate reflects the quality and duration of the income stream as well as the physical and locational characteristics of the property. As discussed within the overall rate section, the tenant mix at the subject center is considered to be fair for the area with some regional tenants. Moreover, lease expiration is fairly concentrated into 1997 with several below market options. The center is currently 100% leased assuming the inclusion of the Dollar General that is said to be a done deal. Overall, the quality, quantity and duration of the cash flow is considered to be fair. With respect to physical characteristics, the subject is a functional neighborhood center of average quality and poor access and exposure in average overall condition. In addition, the subject is situated in an above average retail location with relatively high volumes of traffic. Finally, the subject is on a long term ground lease including the option periods. From the point of view of an investor purchasing a leasehold value is less desirable than a leased fee estate, which will cause an investor to increase the desired yield to account for the added risk. In general, the discount rate (IRR) is comprised on a safe rate (usually Treasuries) and a risk premium. The risk premium is difficult to quantify but with sound logic a reasonable rate can be ascertained. The chart presented below graphically depicts real estates position within the risk/reward graph. INVESTOR RISK VERSUS RETURN REQUIREMENTS Anticipated Return _ Real Estate _ Common Stocks _ Corporate Bonds _ Mortgage Backed Securities _ Municipal Bonds _ T - Bills Riskless Rate ----------------------------------------------------------------------------- Perceived Level of Risk - -------------------------------------------------------------------------------- 63 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- US Treasury notes and bonds are considered risk free since they are backed by the United States government. Their rates only fluctuate with perceived inflation. The use of this, or any short term investment including the prime rate or LIBOR is meaningless when compared to an investment with a 10 year holding period. Accordingly, as a starting point, we only considered risk free or nearly risk free investments with a maturity of 10 years. These include Treasuries, corporate bonds and municipal bonds. Adjusted for daily fluctuations, these debt offerings are yielding 5.59% to 8.25%. Mortgaged backed securities generally tend to fall above these instruments. The next layer of risk would include debt rated as low as BBB. These notes are yielding as much as 10%. Long-term mortgages are also yielding over 10% considering the mortgage constant on a note priced at 250 to 300 basis points over comparable Treasuries. Riskier investments such as junk bonds vary widely from 12% to 22% on an unleveraged basis. Real estate, as indicated on the chart above falls between common stock (10%) and junk bonds (16%). To eliminate the burden of illiquidity, REIT's and similar investments are being created. They represent a quasi-real estate opportunity. REIT's are currently providing dividends ranging from 6% to 8% but offer potential yields of 15% to 20% Various financial instruments are yielding between 5.59% and 8.25% depending upon the type of investment as indicated on the chart below based on data obtained from the Federal Reserve Statistical Release for the general time period of May 1996. It should be noted that over the past year we have witnessed an increase in the interest rate of all of the following instruments. ===================================================================== INSTRUMENT RATE - --------------------------------------------------------------------- Prime Rate 8.25% - --------------------------------------------------------------------- Municipal Bonds 5.96% - --------------------------------------------------------------------- Short-Term Treasury Securities (1 year) 5.59% - --------------------------------------------------------------------- Long Term Treasury Securities (10 years) 6.68% - --------------------------------------------------------------------- Corporate Aaa Bonds (10+ years) 7.57% - --------------------------------------------------------------------- Corporate Baa Bonds (10 + years) 8.25% ===================================================================== The risk premium is the rate added to Treasuries to account for illiquidity, the capital markets and the economy. Whether the risk premium decreases in the near term is dependent solely on inflation, the growth of the economy and capital markets. During 1995, the Federal Reserve decreased interest rates in order to stimulate a sluggish economy. The low rates have continued during the early portion of 1996, however, have recently begun to ascend. Over the longer term, as the existing supply of space is absorbed, the risk premium will decrease. Based on the above, we feel that the current required rate of return (IRR) for the subject would fall slightly below the middle of the range at 13.0%. This reflects the quality, quantity and cash - -------------------------------------------------------------------------------- 64 ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- flow risk associated with the subject property. As such, we have utilized a discount rate of 13.0% in our analysis. TERMINAL RATE To estimate the appropriate terminal capitalization rate, we have considered the rates reflected in the investment criteria outlined above for both going-in and terminal capitalization. Typically, under stable market conditions, the terminal capitalization rate will be greater than the going-in rate to reflect the risk associated with the holding period. Typically 50 to 100 basis points are added on to the terminal cap rate under stable market conditions to account for the additional risk. Furthermore, our national investor survey also indicated an average terminal capitalization 50 basis points greater than the going-in rate. However, with lower quality investments such as the subject, this spread tends to disappear as investors analyzing a property on a direct cap will load the overall rate, which typically will then equate to a supportable terminal rate. It is evident by historical and current performance of the center and it is our opinion that the subject property will encounter fair-to-average market acceptance in the future. It is our opinion that a terminal capitalization rate of 11.0% is the most appropriate for the subject property. A 3% deduction for costs of sale has been utilized to reflect the net reversionary value. HOLDING PERIOD To apply the discounted cash flow analysis, an estimate must be made of the appraised property's holding period based on typical investors' motives in the local market. Historical investment holding periods of similar shopping centers typically have ranged from 10 to 15 years. A 10- to 15- year holding period was analyzed to test the property's sensitivity to roll-overs. A 11-year holding period was selected. Our discounted cash flow analysis is presented on the following page. - -------------------------------------------------------------------------------- 65 - --------------------------------- KINGS FAIRGROUNDS SHOPPING CENTER DANVILLE VIRGINIA - --------------------------------- - ------------------- DCF ANALYSIS OF THE LEASED FEE INTEREST - -------------------
1 2 3 4 5 6 7 Fiscal Year 1997 1998 1999 2000 2001 2002 2003 ================================================================================================================= REVENUE - ---------------------- GROSS RENTS $335,149 $336,174 $338,174 $338,174 $338,124 $350,689 $362,359 TOTAL MINIMUM RENT $335,149 $336,174 $338,174 $338,174 $338,124 $350,689 $362,359 TOTAL RECOVERIES $9,257 $9,864 $10,488 $11,131 $11,795 $12,475 $13,180 TOTAL OVERAGE RENT $16,434 $20,034 $23,740 $27,558 $31,490 $35,540 $39,712 POTENTIAL GROSS INCOME $360,840 $366,072 $372,402 $376,863 $381,409 $398,704 $415,251 Less: - ------ CREDIT LOSS ($10,825) ($10,982) ($11,172) ($11,306) ($11,442) ($11,961) ($12,457) --------------------------------------------------------------------------------------- EFFECTIVE GROSS INCOME $350,015 $355,090 $361,230 $365,557 $369,967 $386,743 $402,794 EXPENSES - ---------------------- LEGAL & PROFESSION ($3,600) ($3,708) ($3,820) ($3,934) ($4,052) ($4,174) ($4,299) COMMON AREA MAINT. ($36,005) ($37,085) ($38,197) ($39,343) ($40,523) ($41,739) ($42,991) REAL ESTATE TAXES ($22,741) ($23,423) ($24,126) ($24,849) ($25,595) ($26,363) ($27,154) INSURANCE ($12,001) ($12,361) ($12,732) ($13,114) ($13,507) ($13,913) ($14,330) GROUND RENT ($31,000) ($31,000) ($31,000) ($31,000) ($31,000) ($31,000) ($31,000) MANAGEMENT FEE ($10,500) ($10,653) ($10,837) ($10,967) ($11,099) ($11,602) ($12,084) --------------------------------------------------------------------------------------- TOTAL EXPENSES ($115,847) ($118,230) ($120,712) ($123,207) ($125,776) ($128,791) ($131,858) NET OPERATING INCOME $234,168 $236,860 $240,518 $242,350 $244,191 $257,952 $270,936 CAPITAL COSTS - ------------- RESERVES ($17,780) ($18,491) ($19,231) ($20,000) ($20,800) ($21,632) ($22,498) COMMISSIONS ($16,727) ($1,320) $0 $0 ($18,060) ($21,733) ($1,320) ALTERATIONS ($53,992) ($5,304) $0 $0 $0 ($38,256) ($6,149) --------------------------------------------------------------------------------------- CASH FLOW $145,669 $211,745 $221,287 $222,350 $205,331 $176,331 $240,969 VALUATION OF THE LEASED FEE INTEREST: As of June 5, 1996 ================================================================================================================= NPV of the annual cash flow: Calculation of the lump sum reversion: - -------------------------------------------------------- ------------------------------------------------ Holding period in # of years 11 12th year NOI: $304,577 SF/GLA 118,535 Reversionary cap. rate: 11.00% Discount rate: 13.00% Reversion: $2,768,882 NPV of Cash Flow, FY 1997-2007 $1,179,590 Less: Selling Costs (3%) ($83,066) Alterations $0 Commissions $0 Reserves ($27,372) ---------- Net Sale Price $2,658,443 ================================================================================================================= 8 9 10 11 12 Fiscal Year 2004 2005 2006 2007 2008 ========================================================================================== REVENUE - ---------------------- GROSS RENTS $362,359 $362,359 $367,376 $367,207 $386,733 TOTAL MINIMUM RENT $362,359 $362,359 $367,376 $367,207 $386,733 TOTAL RECOVERIES $13,903 $14,648 $15,417 $16,208 $16,775 TOTAL OVERAGE RENT $44,010 $48,436 $53,143 $57,690 $62,526 POTENTIAL GROSS INCOME $420,272 $425,443 $435,936 $441,105 $466,034 Less: - ------ CREDIT LOSS ($12,608) ($12,763) ($13,078) ($13,233) ($13,981) ----------------------------------------------------------------- EFFECTIVE GROSS INCOME $407,664 $412,680 $422,858 $427,872 $452,053 EXPENSES - ---------------------- LEGAL & PROFESSION ($4,428) ($4,561) ($4,698) ($4,839) ($4,984) COMMON AREA MAINT ($44,281) ($45,609) ($46,978) ($48,387) ($49,839) REAL ESTATE TAXES ($27,968) ($28,807) ($29,672) ($30,562) ($31,479) INSURANCE ($14,760) ($15,203) ($15,659) ($16,129) ($16,612) GROUND RENT ($31,000) ($31,000) ($31,000) ($31,000) ($31,000) MANAGEMENT FEE ($12,230) ($12,380) ($12,686) ($12,836) ($13,562) ----------------------------------------------------------------- TOTAL EXPENSES ($134,667) ($137,560) ($140,693) ($143,753) ($147,476) NET OPERATING INCOME $272,997 $275,120 $282,165 $284,119 $304,577 CAPITAL COSTS - ------------- RESERVES ($23,398) ($24,333) ($25,307) ($26,319) ($27,372) COMMISSIONS $0 $0 ($19,565) ($23,750) $0 ALTERATIONS $0 $0 $0 ($45,035) $0 ----------------------------------------------------------------- CASH FLOW $249,599 $250,787 $237,293 $189,015 $277,205 VALUATION OF THE LEASED FE =========================================================================================== Value is calculated as: Distribution - ------------------------------------------------------------------------------------- NPV of the Annual NOI: $1,179,590 63.0% NPV of the Reversion: $693,050 37.0% -------- ----- MARKET VALUE: $1,872,640 100.0% ROUNDED TO: $1,900,000 ------------------------ Price Per SF: $16 ===========================================================================================
Prepared by: CB COMMERCIAL REAL ESTATE GROUP. INC - APPRAISAL - ------------------------------------------------------------- ================================================================================ INCOME CAPITALIZATION APPROACH - -------------------------------------------------------------------------------- DISCOUNTED CASH FLOW CONCLUSION We used "PRO-JECT +plus" computer software to create a cash flow model for a long term hold. Reference is made to the "Annual Cash Flow Report", generated by the Pro-ject software, on the previous page which provides a summary of cash flow from all sources. We utilized a 11-year holding period and have discounted the cash flow on a fiscal year basis from 1997 to 2007. The cash flow incorporates the terms of existing leases during the analysis period and our assumptions regarding the lease-up of vacant space. It also calculates renewal rentals when leases expire based on current market rent escalated at a growth factor. In addition, a forecast was made for 15 years to check for any irregularities in the income stream which may artificially affect the reversionary sale price. It should be noted that based on our analysis of the extended holding period indicated that there was significant rollover in the 11th year indicating an eleven year hold with a cap of the twelfth year would be most representative of current market conditions. Therefore, we capitalized the 12th year net operating income to determine the reversionary value at the end of year 11. CONCLUSION OF INCOME CAPITALIZATION APPROACH The preceding analysis indicates the following conclusions: ========================================================== INCOME CAPITALIZATION APPROACH VALUES ---------------------------------------------------------- Method Indicated Value ---------------------------------------------------------- Direct Capitalization $ 2,000,000 Discounted Cash Flow $ 1,900,000 ---------------------------------------------------------- Source: CB Commercial Real Estate ========================================================== Greater emphasis is placed on the DCF analysis because it is the method likely to be used by a typical investor. As a result, based on the Income Capitalization Approach, CB Commercial concludes a value estimate for the subject property of $1,900,000. This equates to $16.03 per rentable square foot. - -------------------------------------------------------------------------------- 67 CONCLUSION CONCLUSION ================================================================================ RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- RECONCILIATION OF VALUE CB Commercial was instructed to estimate the market value of the leasehold interest in the subject property. The value conclusions for each applicable approach are summarized below. =========================================================================== SUMMARY OF VALUE CONCLUSIONS - --------------------------------------------------------------------------- Cost Approach N/A Sales Comparison Approach $ 1,900,000 Income Capitalization Approach $ 1,900,000 - --------------------------------------------------------------------------- Source: CB Commercial Real Estate Group, Inc. =========================================================================== The Income Capitalization Approach is considered the most persuasive method for valuing the subject property. This approach is predicated on the principle of anticipated economic benefits and, therefore, best reflects the investment characteristics of the subject. Properties such as the subject are typically purchased by investors; thus, this approach must closely parallels the anticipated analysis that would be employed by the most typical purchaser. Since the subject property has a number of existing leases with a variety of terms, the DCF technique best models the future cash flow stream to a prospective buyer. The Sales Comparison Approach is predicated on the principle that an investor would pay no more for an existing property than for a comparable property with similar utility. This approach is contingent on the reliability and comparability of available data. The data developed was considered sufficiently reliable to reach a value conclusion by the Sales Comparison Approach. However, due to the lack of truly comparables sales in recent years, this method is given secondary consideration in the reconciliation. The Cost Approach is predicated on the principle that an investor would pay no more for an existing property than it would cost to acquire land and construct a building with similar utility. Based on our analysis of the subject area, market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Furthermore, due to the age of the subject and current market conditions, accrued depreciation would be substantial and difficult to estimate. An investor would not use the Cost Approach due to the imprecise nature of estimating the accrued physical, functional, or external depreciation affecting the improvements. Therefore, for this assignment, the Cost Approach has not been employed to render a value indication for the subject property. - -------------------------------------------------------------------------------- 68 ================================================================================ RECONCILIATION OF VALUE - -------------------------------------------------------------------------------- The final value conclusion and the approaches relied upon give strong consideration to the market behavior of the typical buyer and current market environment for the property appraised. Based on the foregoing analysis, it is concluded that the market value of the leasehold interest in the subject property, subject to the assumptions and limiting conditions, as of June 5, 1996, is: ONE MILLION NINE HUNDRED THOUSAND DOLLARS ($ 1,900,000) This value is subject to all of the assumptions and limiting conditions stated throughout the report, including specific assumptions and limiting conditions. - -------------------------------------------------------------------------------- 69 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- ASSUMPTIONS AND LIMITING CONDITIONS 1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to total that would adversely affect marketability or value. CB Commercial is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CB Commercial, however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject property's title should be sought from a qualified title company that issues or insures title to real property. 2. It is assumed that improvements have been constructed or will be constructed according to approved architectural plans and specifications and in conformance with recommendations contained in or based upon any soils report(s). Unless otherwise specifically noted in the body of this report, it is assumed: that any existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are, or will be upon completion, in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that it or they will withstand any known elements such as windstorm, hurricane, tornado, flooding, earthquake, or similar natural occurrences; and, that the improvements, as currently constituted, conform to all applicable local, state, and federal building codes and ordinances. CB Commercial professionals are not engineers and are not competent to judge matters of an engineering nature. CB Commercial has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CB Commercial by ownership or management; CB Commercial inspected less than 100% of the entire interior and exterior portions of the improvements; and CB Commercial was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CB Commercial reserves the right to amend the appraisal conclusions reported herein. 3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property was not observed by the appraisers. CB Commercial has no knowledge of the existence of such materials on or in the property. CB Commercial, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the appraisal. 4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CB Commercial. This report may be subject to amendment upon re-inspection of the subject property subsequent to repairs, modifications, alterations and completed new construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels of operation. - -------------------------------------------------------------------------------- 70 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 5. It is assumed that all factual data furnished by the client, property owner, owner's representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CB Commercial has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, Assessor's Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CB Commercial reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CB Commercial of any questions or errors. 6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CB Commercial will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject. 7. CB Commercial assumes no private deed restrictions, limiting the use of the subject property in any way. 8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposit or subsurface rights of value involved in this appraisal, whether they be gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred. 9. CB Commercial is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject. 10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market. 11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CB Commercial does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CB Commercial. 12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CB Commercial to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form. 13. Unless otherwise noted in this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated. 14. This study may not be duplicated in whole or in part without the specific written consent of CB Commercial nor may this report or copies hereof be transmitted to third parties without said consent, which consent CB Commercial reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or its contents shall not be published, in whole or in part, in any public document without the express - -------------------------------------------------------------------------------- 71 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- written consent of CB Commercial which consent CB Commercial reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a "sale" or "offer for sale" of any "security", as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CB Commercial shall have no accountability or responsibility to any such third party. 15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report. 16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used. 17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area have been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report. 18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CB Commercial unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CB Commercial assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance. 19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or client's designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CB Commercial assumes responsibility for any situation arising out of the Client's failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired. 20. CB Commercial assumes that the subject property analyzed herein will be under prudent and competent management and ownership; neither inefficient or super-efficient. 21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the appraisal report. 22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist. 23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Not withstanding any discussion of possible readily achievable barrier removal construction items in this report, CB Commercial has not made a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect on the value estimated herein. Since CB Commercial has no specific information relating to this issue, nor is CB Commercial qualified to make such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject property. - -------------------------------------------------------------------------------- 72 ================================================================================ ASSUMPTIONS AND LIMITING CONDITIONS - -------------------------------------------------------------------------------- 24. For our analysis, we have relied on the information provided by the detailed rent roll and information provided by the subject leasing agent. We have assumed all information is correct. Furthermore, we have assumed all leases out for signature will be returned signed, and executed as of the date indicated to us by the leasing agent. We reserve the right to amend this appraisal should any of this information be later found to be incorrect. - -------------------------------------------------------------------------------- 73 ADDENDA ADDENDA ================================================================================ ADDENDA - -------------------------------------------------------------------------------- ADDENDA ADDENDA - -------------------------------------------------------------------------------- 74 ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- ADDENDUM A - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM A GLOSSARY OF TERMS - -------------------------------------------------------------------------------- GLOSSARY OF TERMS assessed value Assessed value applies in ad valorem taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to market value, but it is usually calculated in relation to a market value base. + cash equivalency The procedure in which the sale prices of comparable properties sold with atypical financing are adjusted to reflect typical market terms. contract, coupon, face, or nominal rent The nominal rent payment specified in the lease contract. It does not reflect any offsets for free rent, unusual tenant improvement conditions, or other factors that may modify the effective rent payment. coupon rent See Contract, Coupon, Face, or Nominal Rent effective rent 1) The rental rate net of financial concessions such as periods of no rent during a lease term; may be calculated on a discounted basis, reflecting the time value of money, or on a simple, straight-line basis. ** 2) The economic rent paid by the lessee when normalized to account for financial concessions, such as escalation clauses, and other factors. Contract, or normal, rents must be converted to effective rents to form a consistent basis of comparison between comparables. face rent See Contract, Coupon, Face, or Nominal Rent fee simple estate Absolute ownership unen-cumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. ** floor area ratio (FAR) The relationship between the above-ground floor area of a building, as described by the building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area; also called building-to-land ratio. ** full service lease A lease in which rent covers all operating expenses. Typically, full service leases are combined with an expense stop, the expense level covered by the contract lease payment. Increases in expenses above the expense stop level are passed through to the tenant and are known as expense pass-throughs. going concern value Going concern value is the value of a proven property operation. It includes the incremental value associated with the business concern, which is distinct from the value of the real estate only. Going concern value includes an intangible enhancement of the value of an operating business enterprise which is produced by the assemblage of the land, building, labor, equipment, and marketing operation. This process creates an economically viable business that is expected to continue. Going concern value refers to the total value of a property, including both real property and intangible personal property attributed to the business value. + gross building area (GBA) The sum of all areas at each floor as measured to the exterior walls. insurable value Insurable Value is based on the replacement and/or reproduction cost of physical items that are subject to loss from hazards. Insurable value is that portion of the value of an asset or asset group that is acknowledged or recognized under the provisions of an applicable loss insurance policy. This value is often controlled by state law and varies from state to state. + investment value Investment value is the value of an investment to a particular investor based on his or her investment requirements. In contrast to market value, investment value is value to an individual, not value in the marketplace. Investment value reflects the subjective relationship between a particular investor and a given investment. When measured in dollars, investment value is the price an investor would pay for an investment in light of its perceived capacity to satisfy his or her desires, needs, or investment goals. To estimate investment value, specific investment criteria must be known. Criteria to evaluate a real estate investment are not necessarily set down by the individual investor; they may be established by an expert on real estate and its value, that is, an appraiser. + leased fee See leased fee estate leased fee estate An ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others. The rights of the - -------------------------------------------------------------------------------- ================================================================================ GLOSSARY OF TERMS - -------------------------------------------------------------------------------- lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.** leasehold See leasehold estate leasehold estate The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.** load factor The amount added to usable area to calculate the rentable area. It is also referred to as a "rentable add-on factor" which, according to BOMA, "is computed by dividing the difference between the usable square footage and rentable square footage by the amount of the usable area. Convert the figure into a percentage by multiplying by 100. market value "as if complete" on the appraisal date Market value as if complete on the appraisal date is an estimate of the market value of a property with all construction, conversion, or rehabilitation hypothetically completed, or under other specified hypothetical conditions as of the date of the appraisal. With regard to properties wherein anticipated market conditions indicate that stabilized occupancy is not likely as of the date of completion, this estimate of value should reflect the market value of the property as if complete and prepared for occupancy by tenants. market value "as is" on the appraisal date Market value "as is" on the appraisal date is an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date of appraisal. market value Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1) A reasonable time is allowed for exposure in the open market; 2) Both parties are well informed or well advised, and acting in what they consider their own best interests; 3) Buyer and seller are typically motivated; 4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.ss. marketing period The time it takes an interest in real property to sell on the market subsequent to the date of an appraisal. ** net lease Lease in which all or some of the operating expenses are paid directly by the tenant. The landlord never takes possession of the expense payment. In a Triple Net Lease all operating expenses are the responsibility of the tenant, including property taxes, insurance, interior maintenance, and other miscellaneous expenses. However, management fees and exterior maintenance are often the responsibility of the lessor in a triple net lease. A modified net lease is one in which some expenses are paid separately by the tenant and some are included in the rent. net rentable area (NRA) 1) The area on which rent is computed. 2) The Rentable Area of a floor shall be computed by measuring to the inside finished surface of the dominant portion of the permanent outer building walls, excluding any major vertical penetrations of the floor. No deductions shall be made for columns and projections necessary to the building. Include space such as mechanical room, janitorial room, restrooms, and lobby of the floor. * nominal rent See Contract, Coupon, Face, or Nominal Rent prospective future value "upon completion of construction" Prospective future value "upon completion of construction" is the prospective value of a property on the future date that construction is completed, based upon market conditions forecast to exist, as of that completion date. The value estimate at this stage is stated in current dollars unless otherwise indicated. prospective future value "upon reaching stabilized occupancy" Prospective future value "upon reaching stabilized occupancy" is the prospective value of a property at a future point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. The value estimate at - -------------------------------------------------------------------------------- ================================================================================ GLOSSARY OF TERMS - -------------------------------------------------------------------------------- this stage is stated in current dollars unless otherwise indicated. reasonable exposure time The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market. ** rent see full service lease net lease contract, coupon, face, or nominal rent effective rent shell space Space which has not had any interior finishing installed, including even basic improvements such as ceilings and interior walls, as well as partitions, floor coverings, wall coverings, etc.. Usable Area 1) The area actually used by individual tenants. 2) The Usable Area of an office is computed by measuring to the finished surface of the office side of corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished surface of the dominant portion of the permanent outer building walls. Excludes areas such as mechanical rooms, janitorial room, restrooms, lobby, and any major vertical penetrations of a multi-tenant floor. * use value Use value is a concept based on the productivity of an economic good. Use value is the value a specific property has for a specific use. Use value focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to the property's highest and best use or the monetary amount that might be realized upon its sale. + value appraised During the real estate development process, a property typically progresses from a state of unimproved land to construction of improvements to stabilized occupancy. In general, the market value associated with the property increases during these stages of development. After reaching stabilized occupancy, ongoing forces affect the property during its life, including a physical wear and tear, changing market conditions, etc. These factors continually influence the property's market value at any given point in time. See also market value "as is" on the appraisal date market value "as if complete" on the appraisal date prospective future value "upon completion of construction" prospective future value "upon reaching stabilized occupancy" - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B - COMPARABLE RENTAL PROFILES - -------------------------------------------------------------------------------- COMPARABLE RENTAL PROFILES - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B - COMPARABLE RENTAL PROFILES - -------------------------------------------------------------------------------- COMPARABLE RENTAL #1 Project: Danville Plaza Location: S/W quadrant of Route 58 and Route 29 interchange Danville, Virginia Description Size: 143,000 SF Stories: 1 % Occupied: 100% Year Built: Early 1970's Anchor Tenants: Value City Furniture - 74,499 SF, Harris Teeter - 30,924 SF Leasing information Lessee: Confidential Commencement Date: 1995 Lease Term: 5 Years Area Leased: 9,800 SF Annual Rent/SF: $7.00/SF Rent Escalation: Flat Concessions: None Effective Rent/SF: $7.00/SF Tenant Improvements: None Lease Type: Triple Net Lessee: Confidential Commencement Date: 1996 Lease Term: 5 Years Area Leased: 13,500 SF Annual Rent/SF: $6.00/SF Rent Escalation: Flat Concessions: None Effective Rent/SF: $6.00/SF Tenant Improvements: None Lease Type: Triple Net Lessee: Harris Teeter Commencement Date: N/A Lease Term: N/A Area Leased: 30,924 SF Annual Rent/SF: $6.80/SF Rent Escalation: Flat Concessions: None Effective Rent/SF: $6.80/SF Tenant Improvements: None Lease Type: Expense Cap reimbursement Comment: This shopping center is located in close proximity to the subject center and is fairly similar in overall condition. The property owners are considering a major renovation on the center. - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B - COMPARABLE RENTAL PROFILES - -------------------------------------------------------------------------------- COMPARABLE RENTAL #2 Project: Ballou Park Shopping Center Location: South Main Street, Danville, Virginia Description Size: 260,000 SF (after renovations complete, currently 240,000 SF) Stories: 1 % Occupied: 92% Year Built: 1963 - currently under complete renovation Anchor Tenants: CIT Finance - 33,193 SF, Food Lion - 29,000 SF Leasing information Lessee: Confidential Commencement Date: 1996 Lease Term: 5 Years Area Leased: 3,800 SF Annual Rent/SF: $9.00/SF Rent Escalation: Flat Concessions: None Effective Rent/SF: $9.00/SF Tenant Improvements: None Lease Type: Triple Net Lessee: Confidential Commencement Date: N/A Lease Term: 5 Years Area Leased: Varies Annual Rent/SF: $4.00/SF - $5.00/SF (Rates for un-renovated space) Rent Escalation: Flat Concessions: None Effective Rent/SF: $6.00/SF Tenant Improvements: None Lease Type: Mainly gross or expense cap Lessee: Food Lion Commencement Date: 1996 Lease Term: 20 Years Area Leased: 29,000 SF Annual Rent/SF: $7.75/SF Rent Escalation: Flat Concessions: None Effective Rent/SF: $6.80/SF Tenant Improvements: None Lease Type: NNN Comment: This shopping center is currently undergoing a complete renovation. The center is located approximately three miles south of the subject property. - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B - COMPARABLE RENTAL PROFILES - -------------------------------------------------------------------------------- COMPARABLE RENTAL #3 Project: Nor Dan Shopping Center Location: Route 29 north, Danville, Virginia Description Size: 159,848 SF Stories: 1 % Occupied: 100% Year Built: 1961 - major renovation completed 1994 Anchor Tenants: Winn Dixie - 22,720 SF, Revco, Woolworth Leasing information Lessee: Confidential Commencement Date: 1994 Lease Term: 5 Years Area Leased: N/A Annual Rent/SF: $5.00/SF+ (pre-renovated leases) Rent Escalation: Flat Concessions: None Effective Rent/SF: $5.00/SF Tenant Improvements: None Lease Type: Gross to expense cap Lessee: Winn Dixie Commencement Date: N/A Lease Term: N/A Area Leased: 22,720 SF Annual Rent/SF: $6.00/SF+ Rent Escalation: Flat Concessions: None Effective Rent/SF: $6.00/SF+ Tenant Improvements: None Lease Type: N/A Comment: This shopping center is located approximately two miles north of the subject center and was recently renovated in 1994. It last sold in 1992 for a price of $13.64/SF in its pre-renovated state, with a 45% vacancy rate. - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM B COMPARABLE RENTAL PROFILES - -------------------------------------------------------------------------------- COMPARABLE RENTAL #4 Project: Riverside Shopping Center Location: 3232 Riverside Drive, Danville, Virginia Description Size: 150,000 SF Stories: 1 % Occupied: 95% Year Built: 1960 Anchor Tenants: Big Lots - 19,648 SF, Winn Dixie - 27,840 SF Leasing information Lessee: Confidential Commencement Date: N/A Lease Term: 5 Years Area Leased: 1,000 SF+ Annual Rent/SF: $5.00/SF+ Rent Escalation: Flat Concessions: None Effective Rent/SF: $5.00/SF Tenant Improvements: None Lease Type: Varies from triple net to gross Lessee: Big Lots & Winn Dixie Commencement Date: N/A Lease Term: N/A Area Leased: 19,000 SF+ Annual Rent/SF: $4.00/SF+ Rent Escalation: Flat Concessions: None Effective Rent/SF: $4.00/SF+ Tenant Improvements: None Lease Type: N/A Comment: This shopping center is located approximately 1 mile west of the subject along Route 58. However, it has far superior access and exposure directly on Route 28. The center is in good condition with apparent minor renovations and above average maintenance. - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM C - COMPARABLE RENTAL PHOTOGRAPHS - -------------------------------------------------------------------------------- COMPARABLE RENTAL PHOTOGRAPHS - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM C - COMPARABLE RENTAL PHOTOGRAPHS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] RENTAL #1 - DANVILLE PLAZA - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] RENTAL #2 - BALLOU PARK SHOPPING CENTER - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM C - COMPARABLE RENTAL PHOTOGRAPHS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] RENTAL #3 - NOR DAN SHOPPING CENTER - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] RENTAL #4 - RIVERSIDE SHOPPING CENTER - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM D - COMPARABLE SALE PROFILES - -------------------------------------------------------------------------------- COMPARABLE SALE PROFILES - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM D - COMPARABLE SALE PROFILES - -------------------------------------------------------------------------------- COMPARABLE IMPROVED SALE #1 PROPERTY IDENTIFICATION Project: Franklin Plaza Location: Corner of College & Armoury Drive, Franklin, South Hampton County, Virginia Tax Map No.: 120 - (110)-2A PROPERTY DESCRIPTION Land Area: 7.0 acres Building Area (GLA): 78,000 square feet Construction: Steel Frame with Masonry facade Year Built: 1973 Quality/Condition: Average/Average SALE DATA Sale Price: $1,650,000 Interest Conveyed: Leased Fee Financing: Cash Equivalent Date of Sale: April, 1995 Grantor: Franklin Associates Grantee: Sout Hampton Realty L.L.C INCOME DATA Occupancy at Sale: 50% Gross Income: N/A Expenses: N/A Net Income: N/A VALUE INDICATORS Price/SF GLA: $21.15/SF GIM: N/A OAR: N/A COMMENTS: This is the sale of a shopping center just west of the Hampton-Roads/Virginia Beach MSA, approximately 175 miles east of the subject property. The comparable is located just off of Route 58, which runs directly in front of the subject. Current anchors include Winn Dixie, Family Dollar and Rite Aid. - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM D - COMPARABLE SALE PROFILES - -------------------------------------------------------------------------------- COMPARABLE IMPROVED SALE #2 PROPERTY IDENTIFICATION Project: Southwyck Plaza Location: South Main Street (Route 86), Danville, Virginia Tax Map No.: 178A-13-1 & 5 PROPERTY DESCRIPTION Land Area: 11.408 acres Building Area (GLA): 66,922 square feet Construction: Steel Frame with Masonry facade Year Built: 1989 Quality/Condition: Good/Good SALE DATA Sale Price: $2,100,000 Interest Conveyed: Leased Fee Financing: Cash Equivalent Date of Sale: October, 1994 Grantor: Granite Development Limited Grantee: Benson & Associates INCOME DATA Occupancy at Sale: 77% Gross Income: N/A Expenses: N/A Net Income: N/A VALUE INDICATORS Price/SF GLA: $31.38/SF GIM: N/A OAR: N/A COMMENTS: This is the sale of a shopping center located approximately five miles south of the subject property in Danville. The center last sold in 1992 for $19.11/SF with a vacancy of 43%. Current rents at the property are %.00/SF for the Food Lion, $7.00/SF for the Revco, and approximately $9.00/SF for the in-line tenants. - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM D - COMPARABLE SALE PROFILES - -------------------------------------------------------------------------------- COMPARABLE IMPROVED SALE #3 PROPERTY IDENTIFICATION Project: Town Square Shopping Center Location: Interchange of Interstate 85 and Route 58, South Hill, Mecklenburg County, Virginia Tax Map No.: PROPERTY DESCRIPTION Land Area: 15.62 acres Building Area (GLA): 133,037 square feet Construction: Steel Frame with Masonry facade Year Built: 191970/83 Quality/Condition: Average/Average SALE DATA Sale Price: $2,364,000 Interest Conveyed: Leased Fee Financing: Cash Equivalent Date of Sale: August 1994 Grantor: NationsBank of Virginia Grantee: South Hill Company L.L.C INCOME DATA Occupancy at Sale: 57% Gross Income: N/A Expenses: N/A Net Income: N/A VALUE INDICATORS Price/SF GLA: $17.77/SF GIM: N/A OAR: N/A COMMENTS: This is the sale of a shopping center located approximately 60 miles east of the subject in South Hill Virginia at the interchange of Interstate 85 and Route 58. Interstate 85 provides direct access to Raleigh/Durham North Carolina to the south and Richmond Virginia to the north. The center was renovated in 1983, but has had a poor maintenance schedule causing several items of deferred maintenance to be taken into account at the time of sale. The center is anchored by a Winn Dixie, Peebles and Rite Aid. Currently, a former 46,247 square foot Ames store sits vacant. - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM D - COMPARABLE SALE PROFILES - -------------------------------------------------------------------------------- COMPARABLE IMPROVED SALE #4 PROPERTY IDENTIFICATION Project: Nor Dan Shopping Center Location: Corner of Piney Forest Road and Nor Dan Drive just off of Route 29, Danville, Virginia Tax Map No.: 152-3-61 PROPERTY DESCRIPTION Land Area: 15.90 acres Building Area (GLA): 153,923 square feet Construction: Steel Frame with Masonry facade Year Built: 1961 Quality/Condition: Average/Average SALE DATA Sale Price: $2,100,000 Interest Conveyed: Leased Fee Financing: Cash Equivalent Date of Sale: July, 1992 Grantor: Nor-Dan M Limited Partnership Grantee: Old 97, Inc. INCOME DATA Occupancy at Sale: 45% Gross Income: N/A Expenses: N/A Net Income: N/A VALUE INDICATORS Price/SF GLA: $13.64 SF GIM: N/A OAR: N/A COMMENTS: This is the sale of a shopping center just north of the subject property off of Route 29. The center is anchored by a Winn Dixie, Revco and Woolworth's. Since the time of sale a major renovation has taken place, which has lead to the 100% lease-up of the center for the past two years. - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM E STRATEGIC MAPPING, INC. REPORTS ================================================================================ ADDENDUM E STRATEGIC MAPPING, INC. REPORTS - -------------------------------------------------------------------------------- Atlas MarketQuest Profile Report CBC - C1750-41 Page 1 of 4 Area I = VA/P370 Danville city 6/3/96 Description Area 1 Population: 2000 Projection 55,023 1995 Estimate 54,152 1990 Census 53,056 1980 Census 56,923 Percent Change, 1980 - 1990 -6.8 Percent Change, 1990 - 1995 2.1 1995 Population by Race: % White 59.2 % Black 39.9 % American Indian 0.2 % Asian 0.6 % Other 0.1 % Hispanic 0.5 1995 Population by Age: % 0 - 5 7.7 % 6 - 13 10.1 % 14 - 17 4.8 % 18 - 20 4.2 % 21 - 24 5.2 % 25 - 34 13.4 % 35 - 44 14.0 % 45 - 54 11.2 % 55 - 64 10.3 % 65 - 74 10.9 % 75 - 84 6.4 % 85+ 2.0 Median Age Total Population 38.2 Median Age Adult Population 46.7 Households: 2000 Projection 22,746 1995 Estimate 22,265 1990 Census 21,712 1980 Census 21,568 Percent Change, 1980 - 1990 0.7 Percent Change, 1990 - 1995 2.5 1990 Household Population 51,632 1990 Households w/ Children under 18 6,771 1990 Households w/ Persons over 65 7,133 Area defined by Place Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC - C1750-41 Page 2 of 4 Area 1 = VA/P370 Danville city 6/3/96 Description Area 1 1990 Family Population 43,618 1990 Nonfamily Population 8,014 1990 Group Quarters Population 1,424 1990 Average Household Size 2.38 1990 Average Family Size 2.96 1990 Family Households 14,520 1990 Nonfamily Households 7,192 1995 Household Income: % $ 0 - $9,999 21.3 % $ 10,000 - $ 14,999 11.9 % $ 15,000 - $ 24,999 19.4 % $ 25,000 - $34,999 13.4 % $ 35,000 - $49,999 16.1 % $ 50,000 - $ 74,999 11.6 % $ 75,000 - $ 99,999 3.7 % $100,000 - $149,999 1.8 % $150,000+ 0.9 2000 Median Household Income $26,938 1995 Median Household Income $23,474 1990 Median Household Income $20,413 2000 Average Household Income $37,456 1995 Average Household Income $32,222 1990 Average Household Income $27,456 2000 Per Capita Income $15,895 1995 Per Capita Income $13,606 1990 Per Capita Income $11,520 2000 Median Family Income $36,475 1995 Median Family Income $31,785 1990 Median Family Income $27,640 1990 Average Family Income $33,244 Area defined by Place Copyright 1995 Strategic Mapping, Inc. All rights reserved Atlas MarketQuest Profile Report CBC - C1750-41 Page 3 of 4 Area 1 = VA/P370 Danville city 6/3/96 Description Area 1 1990 Housing Unit Counts: Total Units 23,297 Occupied Units 21,712 Owner Occupied 12,905 Renter Occupied 8,807 Vacant Units 1,585 Year Round 1,531 Seasonal 54 1990 Housing Unit Percents: % Occupied of Total Units 93.2 % Owner Units of Occupied Units 59.4 % Renter Units of Occupied Units 40.6 % Vacant of Total Units 6.8 % Year Round of Vacant Units 96.6 % Seasonal of Vacant Units 3.4 % Condominiums of Total Units 2.5 1990 Condominiums: Total Condominium Units 589 % Owner Occupied 17.1 % Renter Occupied 76.6 % Vacant 6.3 1990 Units in Structure: % 1, Detached 68.7 % 1, Attached 1.6 % 2 4.9 % 3-9 10.9 % 10-49 7.2 % 50+ 1.3 % Mobile Homes 4.5 % Other 0.9 1990 Median Home Value $47,132 1990 Median Contract Rent $ 194 Area defined by Place Copyright 1995 Strategic Mapping, Inc. All rights reserved. Atlas MarketQuest Profile Report CBC C1750-41 Page 4 of 4 Area 1 = VA/P370 Danville city 6/3/96 Description Area 1 1995 Total Employed 24,826 1995 Socio-Economic Measure 28 1990 Occupation: Total Civil Labor Force 25,482 % Unemployed 8.7 Total Employed 23,259 % White Collar 45.4 % Executive & Managerial 7.7 % Professional Specialty 11.8 % Technical Support 2.4 % Administrative Support 12.1 % Sales 11.5 % Blue Collar 39.6 % Precision Production, Craft & Repair 11.5 % Machine Operators 18.1 % Transportation & Material Moving 4.1 % Laborers 5.9 % Farming, Forestry & Fishing 0.5 % Service: Private Household 0.6 % Service: Protective 1.3 % Service: Other 12.6 1990 Educational Attainment (Age 25 & Over): % Less than Grade 9 20.7 % Grade 9-12 (No Diploma) 21.9 % High School Graduate or Equivalency 26.3 % Some College (No Degree) 13.4 % Associate Degree 5.4 % Bachelor Degree 7.9 % Graduate or Professional Degree 4.5 Area defined by Place Copyright 1995 Strategic Mapping, Inc. All rights reserved. ================================================================================ ADDENDUM F RENT ROLL ================================================================================ ADDENDUM F RENT ROLL - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Mark Centers Trust Annual Rent Roll 8 Date: KINGS FAIRGROUNDS 05/09/96 Report Date: 05/09/96 10:43:19
- ------------------------------------------------------------------------------------------------------------------------------------ Occupancy -- Rent Dates -- Square Base Rent -------Cam---------- Bldg/Suite/Lease Tenant Name Status Start Expire Footage Rent Per Sq Ft Base Fixed Rec - ------------------------------------------------------------------------------------------------------------------------------------ 330507-00010-000001 SCHEWEL FURNITURE ACTIVE 08/23/90 01/31/01 60,200 165,550 2.75 0 x 330507-00060-000002 HOOK-SUPER RX INC. ACTIVE 03/01/72 02/28/97 12,160 29,184 2.40 0 14,592 330507-00070-000003 THE KROGER COMPANY ACTIVE 03/01/72 02/28/97 30,975 74,340 2.40 3,098 0 x 330507-00080-000004 VIRGINIA BANK AND TRU ACTIVE 08/01/72 03/31/98 2,000 10,800 5.40 0 939 330507-00040-000005 MANUFACTURERS OUTLET ACTIVE 04/01/96 05/31/96 4,000 0 .00 0 ------------------------------------------------------------------------- Total GLA: 109,335 279,874 15,531 0 Building File: 118,535 Vacant Space: 0 =========================================================================
- ------------------------------------------------------------------------------ ---Taxes--- Insurance %Rent Bldg/Suite/Lease Tenant Name Fixed Rec Rec Clause - ------------------------------------------------------------------------------ 330507-00010-000001 SCHEWEL FURNITURE x x YES 330507-00060-000002 HOOK-SUPER RX INC. x YES 330507-00070-000003 THE KROGER COMPANY x YES 330507-00080-000004 VIRGINIA BANK AND TRU x 330507-00040-000005 MANUFACTURERS OUTLET 0 ----------------------------------- =================================== ================================================================================ ADDENDUM G - PRO-JECT REPORTS - -------------------------------------------------------------------------------- ADDENDUM G PRO-JECT REPORTS - -------------------------------------------------------------------------------- KINGS FAIRGROUNDS SHOPPING CENTER PROJECT DESIGNATOR: KING REVISION: 6/10/96 @ 14:32 ANNUAL CASH FLOW REPORT BEGINNING 6/1/96 FOR 16 YEARS
FY1997 FY1998 FY1999 FY2OOO FY2OO1 FY2002 FY2003 FY2004 FY2OO5 INCOME - ------ MINIMUM RENT: ALL TENANTS 335,149 336,174 338,174 338,174 338,124 350,689 362,359 362,359 362,359 ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL MINIMUM RENT 335,149 336,174 338,174 338,174 338,124 350,689 362,359 362,359 362,359 RECOVERIES: REAL ESTATE TAXES 4,005 4,610 5,235 5,878 6,542 7,223 7,926 8,650 9,395 TOTAL CAM EXPENSE 5,252 5,254 5,253 5,253 5,253 5,252 5,254 5,253 5,253 ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL RECOVERIES 9,257 9,864 10,488 11,131 11,795 12,475 13,180 13,903 14,648 OVERAGE RENT 16,434 20,034 23,740 27,558 31,490 35,540 39,712 44,010 48,436 SALES VOLUME (000) 13,526 13,931 14,349 14,780 15,223 15,680 16,150 16,635 17,134 ------- ------- ------- ------- ------- ------- ------- ------- ------- GROSS RENTAL INCOME 360,840 366,072 372,402 376,863 381,409 398,704 415,251 420,272 425,443 CREDIT LOSS (10,825) (10,982) (11,172) (11,306) (11,442) (11,961) (12,457) (12,608) (12,763) ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL INCOME 350,015 355,090 361,230 365,557 369,967 386,743 402,794 407,664 412,680 EXPENSES - -------- LEGAL & PROFESSION 3,600 3,708 3,820 3,934 4,052 4,174 4,299 4,428 4,561 COMMON AREA MAINT 36,005 37,085 38,197 39,343 40,523 41,739 42,991 44,281 45,609 REAL ESTATE TAXES 22,741 23,423 24,126 24,849 25,595 26,363 27,154 27,968 28,807 INSURANCE 12,001 12,361 12,732 13,114 13,507 13,913 14,330 14,760 15,203 GROUND RENT 31,000 31,000 31,000 31,000 31,000 31,000 31,000 31,000 31,000 MANAGEMENT FEE 10,500 10,653 10,837 10,967 11,099 11,602 12,084 12,230 12,380 ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL EXPENSES 115,847 118,230 120,712 123,207 125,776 128,791 131,858 134,667 137,560 ------- ------- ------- ------- ------- ------- ------- ------- ------- NET OPERATING INCOME 234,168 236,860 240,518 242,350 244,191 257,952 270,936 272,997 275,120 ALTERATIONS 53,992 5,304 0 0 0 38,256 6,149 0 0 COMMISSIONS 16,727 1,320 0 0 18,060 21,733 1,320 0 0 ------- ------- ------- ------- ------- ------- ------- ------- ------- CASH FLOW 163,449 230,236 240,518 242,350 226,131 197,963 263,467 272,997 275,120
FY2006 FY2007 FY2OO8 FY2009 INCOME - ------ MINIMUM RENT: ALL TENANTS 367,376 367,207 386,733 391,416 ------- ------- ------- ------- TOTAL MINIMUM RENT 367,376 367,207 386,733 391,416 RECOVERIES: REAL ESTATE TAXES 10,164 10,956 11,678 12,563 TOTAL CAM EXPENSE 5,253 5,252 5,097 5,667 ------- ------- ------- ------- TOTAL RECOVERIES 15,417 16,208 16,775 18,230 OVERAGE RENT 53,143 57,690 62,526 67,508 SALES VOLUME (000) 17,648 18,177 18,722 19,284 ------- ------- ------- ------- GROSS RENTAL INCOME 435,936 441,105 466,034 477,154 CREDIT LOSS (13,078) (13,233) (13,981) (14,315) ------- ------- ------- ------- TOTAL INCOME 422,858 427,872 452,053 462,839 EXPENSES - -------- LEGAL & PROFESSION 4,698 4,839 4,984 5,133 COMMON AREA MAINT 46,978 48,387 49,839 51,334 REAL ESTATE TAXES 29,672 30,562 31,479 32,423 INSURANCE 15,659 16,129 16,612 17,111 GROUND RENT 31,000 31,000 31,000 31,000 MANAGEMENT FEE 12,686 12,836 13,562 13,885 ------- ------- ------- ------- TOTAL EXPENSES 140,693 143,753 147,476 150,886 ------- ------- ------- ------- NET OPERATING INCOME 282,165 284,119 304,577 311,953 ALTERATIONS 0 45,035 0 7,129 COMMISSIONS 19,565 23,750 0 2,994 ------- ------- ------- ------- CASH FLOW 262,600 215,334 304,577 301,830 KINGS FAIRGROUNDS SHOPPING CENTER PROJECT DESIGNATOR: KING REVISION: 6/10/96 @1 14:32 AVERAGE OCCUPANCY REPORT FOR ALL TENANTS
1996 1997 1998 1999 2000 2001 2002 2003 2004 ------- ------- ------- ------- ------- ------- ------- ------- ------- JANUARY 105,335 118,535 118,535 118,535 118,535 118,535 118,535 118,535 118,535 FEBRUARY 105,335 118,535 118,535 118,535 118,535 118,535 118,535 118,535 118,535 MARCH 105,335 118,535 118,535 118,535 118,535 118,535 118,535 118,535 118,535 APRIL 111,735 118,535 118,535 118,535 118,535 112,135 118,535 118,535 118,535 MAY 115,735 118,535 118,535 118,535 118,535 112,135 118,535 118,535 118,535 JUNE 115,735 118,535 118,535 118,535 118,535 112,135 118,535 118,535 118,535 JULY 118,535 118,535 118,535 118,535 118,535 111,735 118,535 118,535 118,535 AUGUST 118,535 118,535 118,535 118,535 118,535 111,735 118,535 118,535 118,535 SEPTEMBER 118,535 118,535 118,535 118,535 118,535 111,735 118,535 118,535 118,535 OCTOBER 118,535 118,535 118,535 118,535 118,535 118,535 118,535 118,535 118,535 NOVEMBER 118,535 118,535 118,535 118,535 118,535 118,535 118,535 118,535 118,535 DECEMBER 118,535 118,535 118,535 118,535 118,535 118,535 118,535 118,535 118,535 ------- ------- ------- ------- ------- ------- ------- ------- ------- AVERAGE SF OCCUPIED 114,202 118,535 118,535 118,535 118,535 115,235 118,535 118,535 118,535 TOTAL SF-NRAA 118,535 118,535 118,535 118,535 118,535 118,535 118,535 118,535 118,535 ------- ------- ------- ------- ------- ------- ------- ------- ------- OCCUPANCY % 96.34 100.00 100.00 100.00 100.00 97.22 100.00 100.00 100.00 ======= ======= ======= ======= ======= ======= ======= ======= ======= 2005 2006 2007 2008 2009 2010 2011 ------- ------- ------- ------- ------- ------- ------- JANUARY 118,535 118,535 118,535 118,535 118,535 118,535 118,535 FEBRUARY 118,535 118,535 118,535 118,535 118,535 118,535 58,335 MARCH 118,535 118,535 118,535 118,535 118,535 118,535 58,335 APRIL 118,535 118,535 118,535 116,535 118,535 118,535 58,335 MAY 118,535 118,535 118,535 116,535 118,535 118,535 58,335 JUNE 118,535 118,535 118,535 116,535 118,535 118,535 58,335 JULY 118,535 112,135 118,535 118,535 118,535 118,535 58,335 AUGUST 118,535 112,135 118,535 118,535 118,535 118,535 58,335 SEPTEMBER 118,535 112,135 118,535 118,535 118,535 118,535 58,335 OCTOBER 118,535 111,735 118,535 118,535 118,535 118,535 51,935 NOVEMBER 118,535 111,735 118,535 118,535 118,535 118,535 51,935 DECEMBER 118,535 111,735 118,535 118,535 118,535 118,535 51,935 ------- ------- ------- ------- ------- ------- ------- AVERAGE SF OCCUPIED 115,235 118,535 118,035 118,035 118,535 118,535 61,752 TOTAL SF-NRAA 118,535 118,535 118,535 118,535 118,535 118,535 118,535 ------- ------- ------- ------- ------- ------- ------- OCCUPANCY % 100.00 97.22 100.00 99.58 ====== ===== ====== =====
KINGS FAIRGROUNDS SHOPPING CENTER PROJECT DESIGNATOR: KING REVISION: 6/10/96 @ 14:32 RENT ROLL AS OF 7/1996 (FISCAL YEAR BASIS)
TENANT/ LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/ SQUARE FEET PER SF PER SF PER SF PER SF PER SF - --------------------- --------- -------- ----------- ----------- --------- # 1 - SUITE 1 SCHEWEL FURNITURE BASE LEASE 8/90- 1/01 165,550 0 4,023 365 165,915 60,200 SF 2.75 0.00 66.82 0.01 2.76 # 2 - SUITE 2 DANVILLE CHIROPRAC BASE LEASE 4/96- 3/01 30,400 0 0 0 30,400 6,400 SF 4.75 0.00 0.00 0.00 4.75 # 4 - SUITE 4 DOLLAR GENERAL STO BASE LEASE 7/96- 6/01 23,375 0 0 0 23,375 6,800 SF 3.44 0.00 0.00 0.00 3.44 # 5 - SUITE 5 HOOK-SUPER X INC. BASE LEASE 3/72- 2/97 21,888 9,097 1,239 1,590 32,575 12,160 SF 1.80 0.75 101.93 0.13 2.68 # 6 - SUITE 6 THE KROGER COMPANY BASE LEASE 3/72- 2/97 55,755 2,710 5,847 4,051 62,516 30,975 SF 1.80 0.09 188.75 0.13 2.02 # 7 - SUITE 7 VIRGINIA BANK BASE LEASE 8/72- 3/98 10,800 0 0 1,323 12,123 2,000 SF 5.40 0.00 0.00 0.66 6.06 ------- ------ ------ ----- ------- TOTALS 307,768 11,807 11,109 7,329 326,904 118,535 SF 2.60 0.10 93.72 0.06 2.76 ======= ====== ====== ===== =======
KINGS FAIRGROUNDS SHOPPING CENTER PROJECT DESIGNATOR: KING REVISION: 6/10/96 @ 14:32 PROJECT ASSUMPTIONS REPORT EXCLUDING TENANTS BUILDING PROLOGUE - ----------------- LEASEHOLD ANALYSIS OF KINGS FAIRGROUNDS SHOPPING CENTER BEGINNING 6/1996 FOR 16 YEARS ON A FISCAL YEAR BASIS AREA MEASURES - ------------- NRAA 1996 VALUE - 118,535 THEREAFTER - CONSTANT 1996: 118,535 1997: 118,535 1998: 118,535 1999: 118,535 2000: 118,535 2001: 118,535 2002: 118,535 2003: 118,535 2004: 118,535 2005: 118,535 2006: 118,535 2007: 118,535 2008: 118,535 2009: 118,535 2010: 118,535 2011: 118,535 GROWTH RATES - ------------ EXPG 1996 VALUE - 3.00 THEREAFTER - CONSTANT 1996: 3.0000 1997: 3.0000 1998: 3.0000 1999: 3.0000 2000: 3.0000 2001: 3.0000 2002: 3.0000 2003: 3.0000 2004: 3.0000 2005: 3.0000 2006: 3.0000 2007: 3.0000 2008: 3.0000 2009: 3.0000 2010: 3.0000 2011: 3.0000 RNTG 1996 VALUE - 3.00 THEREAFTER - CONSTANT 1996: 3.0000 1997: 3.0000 1998: 3.0000 1999: 3.0000 2000: 3.0000 2001: 3.0000 2002: 3.0000 2003: 3.0000 2004: 3.0000 2005: 3.0000 2006: 3.0000 2007: 3.0000 2008: 3.0000 2009: 3.0000 2010: 3.0000 2011: 3.0000 PAGE 2 CONG CONSTANT 1996: 0.0000 1997: 0.0000 1998: 0.0000 1999: 0.0000 2000: 0.0000 2001: 0.0000 2002: 0.0000 2003: 0.0000 2004: 0.0000 2005: 0.0000 2006: 0.0000 2007: 0.0000 2008: 0.0000 2009: 0.0000 2010: 0.0000 2011: 0.0000 MARKET RATES - ------------ SATR 1996 VALUE - 4.25 THEREAFTER - GROWING AT GROWTH RATE RNTG 1996: 4.2500 1997: 4.3775 1998: 4.5088 1999: 4.6441 2000: 4.7834 2001: 4.9269 2002: 5.0747 2003: 5.2270 2004: 5.3838 2005: 5.5453 2006: 5.7116 2007: 5.8830 2008: 6.0595 2009: 6.2413 2010: 6.4285 2011: 6.6214 ANCR 1996 VALUE - 2.50 THEREAFTER - GROWING AT GROWTH RATE RNTG 1996: 2.5000 1997: 2.5750 1998: 2.6522 1999: 2.7318 2000: 2.8138 2001: 2.8982 2002: 2.9851 2003: 3.0747 2004: 3.1669 2005: 3.2619 2006: 3.3598 2007: 3.4606 2008: 3.5644 2009: 3.6713 2010: 3.7815 2011: 3.8949 NTIR 1996 VALUE - 5.00 THEREAFTER - GROWING AT GROWTH RATE EXPG 1996: 5.0000 1997: 5.1500 1998: 5.3045 1999: 5.4636 2000: 5.6275 2001: 5.7964 2002: 5.9703 2003: 6.1494 2004: 6.3338 2005: 6.5239 2006: 6.7196 2007: 6.9212 2008: 7.1288 2009: 7.3427 2010: 7.5629 2011: 7.7898 RTIR 1996 VALUE - 0.00 THEREAFTER - CONSTANT 1996: 0.0000 1997: 0.0000 1998: 0.0000 1999: 0.0000 PAGE 3 2000: 0.0000 2001: 0.0000 2002: 0.0000 2003: 0.0000 2004: 0.0000 2005: 0.0000 2006: 0.0000 2007: 0.0000 2008: 0.0000 2009: 0.0000 2010: 0.0000 2011: 0.0000 BTIR +50.0% OF NTIR +50.0% OF RTIR 1996: 2.5000 1997: 2.5750 1998: 2.6522 1999: 2.7318 2000: 2.8138 2001: 2.8982 2002: 2.9851 2003: 3.0747 2004: 3.1669 2005: 3.2619 2006: 3.3598 2007: 3.4606 2008: 3.5644 2009: 3.6713 2010: 3.7815 2011: 3.8949 satr 1996 VALUE - 6.00 THEREAFTER - GROWING AT GROWTH RATE RNTG 1996: 6.0000 1997: 6.1800 1998: 6.3654 1999: 6.5564 2000: 6.7531 2001: 6.9556 2002: 7.1643 2003: 7.3792 2004: 7.6006 2005: 7.8286 2006: 8.0635 2007: 8.3054 2008: 8.5546 2009: 8.8112 2010: 9.0755 2011: 9.3478 MISCELLANEOUS INCOMES - --------------------- NONE EXPENSES - -------- LEGAL & PROFESSION, REFERRED TO AS L&PE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 3,556 THEREAFTER - GROWING AT GROWTH RATE EXPG 1996: 3,556 1997: 3,663 1998: 3,773 1999: 3,886 2000: 4,002 2001: 4,122 2002: 4,246 2003: 4,373 2004: 4,505 2005: 4,640 2006: 4,779 2007: 4,922 2008: 5,070 2009: 5,222 2010: 5,379 2011 5,540 MANAGEMENT , REFERRED TO AS MANE AN INFORMATIONAL EXPENSE 1996 VALUE - 10,437 PAGE 4 1997 VALUE - 10,589 1998 VALUE - 10,766 1999 VALUE - 10,912 2000 VALUE - 11,044 2001 VALUE - 11,249 2002 VALUE - 12,024 2003 VALUE - 12,168 2004 VALUE - 12,317 2005 VALUE - 12,470 2006 VALUE - 12,597 2007 VALUE - 13,563 2008 VALUE - 13,688 2009 VALUE - 14,033 2010 VALUE - 14,217 2011 VALUE - 8,741 THEREAFTER - CONSTANT 1996: 10,437 1997: 10,589 1998: 10,766 1999: 10,912 2000: 11,044 2001: 11,249 2002: 12,024 2003: 12,168 2004: 12,317 2005: 12,470 2006: 12,597 2007: 13,563 2008: 13,688 2009: 14,033 2010: 14,217 2011: 8,741 COMMON AREA MAINT., REFERRED TO AS CAME CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 35,560 THEREAFTER - GROWING AT GROWTH RATE EXPG 1996: 35,560 1997: 36,627 1998: 37,726 1999: 38,857 2000: 40,023 2001: 41,224 2002: 42,460 2003: 43,734 2004: 45,046 2005: 46,398 2006: 47,790 2007: 49,223 2008: 50,700 2009: 52,221 2010: 53,788 2011: 55,401 REAL ESTATE TAXES , REFERRED TO AS RETE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 22,460 THEREAFTER - GROWING AT GROWTH RATE EXPG 1996: 22,460 1997: 23,134 1998: 23,828 1999: 24,543 2000: 25,279 2001: 26,037 2002: 26,818 2003: 27,623 2004: 28,452 2005: 29,305 2006: 30,184 2007: 31,090 2008: 32,023 2009: 32,983 2010: 33,973 2011: 34,992 INSURANCE , REFERRED TO AS INSE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 11,853 PAGE 5 THEREAFTER - GROWING AT GROWTH RATE EXPG 1996: 11,853 1997: 12,209 1998: 12,575 1999: 12,952 2000: 13,341 2001: 13,741 2002: 14,153 2003: 14,578 2004: 15,015 2005: 15,465 2006: 15,929 2007: 16,407 2008: 16,900 2009: 17,407 2010: 17,929 2011: 18,467 GROUND RENT , REFERRED TO AS GNDE CHARGED AGAINST NET OPERATING INCOME 1996 VALUE - 31,000 THEREAFTER - CONSTANT 1996: 31,000 1997: 31,000 1998: 31,000 1999: 31,000 2000: 31,000 2001: 31,000 2002: 31,000 2003: 31,000 2004: 31,000 2005: 31,000 2006: 31,000 2007: 31,000 2008: 31,000 2009: 31,000 2010: 31,000 2011: 31,000 TOTAL CAM EXPENSE , REFERRED TO AS TCAM AN INFORMATIONAL EXPENSE +100.0% OF L&PE+100.0% OF MANE +100.0% OF CAME+100.0% OF INSE 1996: 61,406 1997: 63,087 1998: 64,839 1999: 66,607 2000: 68,410 2001: 70,336 2002: 72,883 2003: 74,853 2004: 76,883 2005: 78,973 2006: 81,095 2007: 84,116 2008: 86,358 2009: 88,882 2010: 91,312 2011: 88,149 VACANCY ALLOWANCE - ----------------- PERCENTAGE OF POTENTIAL GROSS INCOME FOR ALL TENANTS SUBJECT TO VACANCY 1996 VALUE - 3.00 THEREAFTER - CONSTANT MANAGEMENT FEE - -------------- PERCENTAGE OF EFFECTIVE GROSS INCOME FOR ALL TENANTS PASSED THROUGH TO TENANTS USING EXPENSE MANE 1996 VALUE - 3.00 THEREAFTER - CONSTANT PAGE 6 COMMISSION CALCULATIONS - ----------------------- STANDARD METHOD #1 - 5.000% OF TOTAL RENT STANDARD METHOD #2 - 2.000% OF TOTAL RENT STANDARD METHOD #3 - 3.500% OF TOTAL RENT STANDARD METHOD #4 - 0.000% OF TOTAL RENT STANDARD METHOD #5 - 0.000% OF TOTAL RENT COMMISSION PAYOUTS - ------------------ STANDARD METHOD #1 - CASHED CUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT ALTERATION CALCULATION - ---------------------- NONE ALTERATION PAYOUTS - ------------------ STANDARD METHOD #1 - CASHED OUT STANDARD METHOD #2 - CASHED OUT STANDARD METHOD #3 - CASHED OUT STANDARD METHOD #4 - CASHED OUT STANDARD METHOD #5 - CASHED OUT PAGE 7 COMMON AREA MAINTENANCE POOL - ---------------------------- NONE CAPITAL EXPENDITURES - -------------------- NONE PRIMARY CLASSIFICATION CODES - ---------------------------- NONE SECONDARY CLASSIFICATION CODES - ------------------------------ NONE COST CENTERS - ------------ NONE SALES VOLUME PROFILE - -------------------- PERCENT OF RELATIVE MONTH ANNUAL SALES VOLUME - ----- ------------ ------ JAN 8.33% 1.00 FEB 8.33% 1.00 MAR 8.33% 1.00 APR 8.33% 1.00 MAY 8.33% 1.00 JUN 8.33% 1.00 JUL 8.33% 1.00 AUG 8.33% 1.00 SEP 8.33% 1.00 OCT 8.33% 1.00 NOV 8.33% 1.00 DEC 8.33% 1.00 ---- ---- PAGE 8 TOTALS 100.00% 12.00 GLOBAL RECOVERIES - ----------------- NONE TENANT PROLOGUE - --------------- MINIMUM RENTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR SALES VOLUMES AND BREAKPOINTS: SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR RENEWAL RENTS ARE COMPOUNDED ANNUALLY RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET REFERENCE TENANTS - ----------------- NONE ================================================================================ ADDENDUM H ENGAGEMENT LETTER - -------------------------------------------------------------------------------- ADDENDUM H ENGAGEMENT LETTER - -------------------------------------------------------------------------------- [LETTERHEAD OF CB COMMERCIAL REAL ESTATE GROUP. INC.] May 8, 1996 Mr. Josh Kane Chief Financial Officer MARK CENTERS TRUST 660 Third Avenue Kingston, PA 18704 Re: 17 Shopping Centers Nationwide Dear Mr. Kane: At your request, we are pleased to submit the following proposal to appraise the above referenced properties. The purpose of this assignment is to estimate the market value of the leased fee interest. We understand the appraisal reports are to be Used for mortgage underwriting purposes. We also understand that the reports will be used by Mark Centers Trust and Morgan Stanley. The properties are briefly described on attachment "A". Our complete valuation will be presented in a self contained (narrative) format and will contain a complete description of the property along with pertinent exhibits and photographs together with supporting factual data and analysis necessary to convey our opinion of value. We will value the property based upon the cost, income and market approaches to value, where applicable, correlating our findings into a final value conclusion. The report will be prepared in conformity with and will be subject to the requirements of the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. Each report will also conform to the Uniform Standards of Professional Appraisal Practice ("USPAP") and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") and the Morgan Stanley Capital Appraisal Standards described in Attachment "B". We assume that there are no major or significant items of deferred maintenance beyond normal wear and tear for properties of their age as of the date of the appraisal which would require the expertise of a professional contractor to estimate the cost of such repairs. If such repairs need to be considered in this appraisal, such estimates are to be provided by a qualified firm hired by you and at no cost to us. The total fee for the assignment is $68,000 ($4,000 per property) including all travel and related expenses which is due and payable upon delivery of the reports. If we are asked to cancel the assignment within two weeks of our engagement an upset fee equal to 50% will be due and payable. If cancellation occurs between two and three weeks, the upset fee will be equal to 75% and any time after three weeks the full fee will be due and payable. We will furnish you with three copies of our final report within four to five weeks of our authorization. Authorization occurs upon our receipt of an executed copy of this proposal and our delivery date is contingent upon the timely receipt of all necessary property information, financial statements and detailed lease information. If all requested data and information is not available as of the authorized date, we reserve the right to extend the delivery date by the amount of time it takes to receive the requested information. May 8, 1996 Mr. Kane Page 2 In order to complete this assignment in a timely manner, we will require the following specific information, if available: o Copy of Ground Lease, if Leasehold o Legal descriptions. o Current rent roll. o Copy of Leases or abstracts o Expense reimbursements on a tenant by tenant basis o Building area calculations and surveys. o Operating statements for the past three full years. o Current year expenses to date. o A copy of the current budget. o Copies of any toxic engineering reports dealing with underground tanks, PCB's, asbestos or chemical spills, if available. o A copy of the next fiscal year's budget, if available. o A list of major repairs which have recently been made, or are scheduled to be made in the next 18 months. o Name and phone number(s) of on-site superintendent(s), or local management firm or trustee for physical inspection. o Notice of any pending changes to the rent roll or pertinent information regarding the current status of the tenants. If we are requested to give court testimony an additional fee will be charged on an hourly basis at $300 per hour for designated MAI appraisers and $175 for non-designated appraisers. Said hourly billings pertain to court preparation, waiting and travel time, document review and preparation (excludes narrative appraisal report) and all meetings related to court testimony. The client may provide only complete,. final copies of the appraisal report to third parties who shall rely on such reports in connection with loan underwriting or securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the client for routine and customary questions. Please note that our consent to allow an appraisal report prepared by CB Commercial, or portions of such report, to become part of or be referenced in any public offering, the granting of such consent will be at our sole discretion and,. if given, will be on condition that we will be provided with an Indemnification Agreement and/or Non-Reliance letter, in a form and content satisfactory to us, by a party satisfactory to us. We do consent to your submission of the reports to rating agencies, loan participants or your auditors without the need to provide us with an Indemnification Agreement and/or Non-Reliance letter. In addition to the fee for this assignment, you agree to compensate us at a rate to be mutually agreed to, for any time expended by us should we be required (by subpoena or otherwise) or requested by you, your representatives or other entity to become involved in any litigation or May 8, 1996 Mr. Kane Page 3 legal proceeding in any way involving this engagement to which we are not a party, the appraisal work we produce or the property which is the subject of this assignment. You also agree to pay, on demand, all reasonable expenses which we incur in connection with any litigation or proceedings including the fees of our attorneys. You acknowledge that we are being retained hereunder as an independent contractor to perform the services described herein and nothing in this agreement shall be deemed to create any other relationship between us. This assignment will be deemed concluded and the services hereunder completed upon delivery to you of the appraisal report discussed herein. If these terms are acceptable, please authorized us to proceed by having an officer of the corporation, managing general partner, principal, owner, or a contractually responsible party sign the enclosed copy of this proposal with "Terms and Conditions" and return it to us for our permanent file. Upon receipt of your authorization, we will schedule the necessary personnel to complete the project in a timely manner. We appreciate this opportunity to be of service to you on this assignment. If you have additional questions, please do not hesitate to give me a call. Sincerely, CB COMMERCIAL REAL ESTATE GROUP, INC. Appraisal /s/ Michael R. Pecorino Michael R. Pecorino, MAI MRP:jf cc: Douglas W. Harvey Enclosure AGREED & ACCEPTED /s/ Joshua Kane Sr. VP & CFO - ------------------------------- -------------------------------- Signature Title JOSHUA KANE 5-8-96 - ------------------------------- -------------------------------- Name (type or print) Date Office #: 717-288-4581 Fax #: 717-288-1028 ----------------------- -------------------------- TERMS AND CONDITIONS OF AGREEMENT CB COMMERCIAL REAL ESTATE GROUP. INC. - APPRAISAL 1. These Terms and Conditions by CB Commercial Real Estate Group, Inc., Appraisal Services, a division of CB Commercial Real Estate Group, Inc. (Appraiser or Consultant) and the client for whom Appraiser or Consultant will perform appraisal or consultation services (Client), and attached to any agreement for appraisal or consultation services between Client and Appraiser or Consultant (Agreement), shall be deemed a part of such Agreement as though set forth in full therein. 2. Appraiser or Consultant shall exercise independent judgment and complete the assignment called for by the Agreement (Assignment) in accordance with sound appraisal or consultation practice and the Code of Professional Ethics and Standards of Professional Conduct of the Appraisal Institute, as applicable. 3. All statements of the fact in the report which are used as the basis of Appraiser's or Consultant's analyses, opinions, and conclusions will be true and correct to the best of Appraiser's or Consultant's knowledge and belief. Appraiser or Consultant may rely upon the accuracy of information and material furnished to Appraiser or Consultant by Client. 4. Appraiser or Consultant shall have no responsibility for legal matters, questions of survey or title, soil or subsoil conditions, engineering, or other similar technical matters. The report will not constitute a survey of the property analyzed. 5. Client shall provide Appraiser or Consultant with such materials with respect to the Assignment as are requested by Appraiser or Consultant and in the possession or under the control of Client. Client shall provide Appraiser or Consultant with sufficient access to the real property to be analyzed and hereby grants permission for entry, unless discussed in advance to the contrary. 6. Unless expressly specified in the Agreement, the fee quoted does not include the attendance or giving of testimony by Appraiser or Consultant at any court, regulatory, or other proceeding, or any conferences or other work in preparation for such a proceeding. If any employee of CB Commercial Real Estate Group, Inc. is asked or required to testify at any deposition, trial, or other proceeding about the preparation, conclusions, or any other aspect of the assignment, Client shall compensate Appraiser or Consultant for the time spent by the employee in testifying and in preparing to testify according to the Appraiser's or Consultant's then current hourly rate for that employee plus reimbursement of expenses. 7. In the event Client requests additional consultation beyond the scope of this assignment, Client shall pay an additional charge for such consultation at rates specified by Appraiser or Consultant whether or not the completed report has been delivered to Client at the time of the request. 8. The aggregate liability of Appraiser or Consultant for any negligent acts, errors, or omissions in connection with the Assignment shall not exceed the compensation payable to Appraiser or Consultant on account of the Assignment. 9. Client agrees that the report shall not be quoted or referred to in any report or financial statement of Client or in any documents filed with any governmental agency without the prior written consent of Appraiser or Consultant. Neither all nor any part of the content of the report including, without limitation, the conclusions as to value, the identity of Appraiser or Consultant, references to the Appraisal Institute or references to the MAI or SRA designations shall be disseminated to the public through advertising or other mass media without the prior written consent of Appraiser or Consultant. 10. The data gathered in the course of the Assignment (except data furnished by Client) and the report prepared pursuant to the Agreement are and will remain the property of Appraiser/Consultant. With respect to data provided by Client, Appraiser or Consultant shall not violate the confidential nature of the appraiser- or consultant-client relationship by improperly disclosing any confidential information furnished to Appraiser or Consultant. Notwithstanding the foregoing, Appraiser or Consultant is authorized by client to disclose all or any portion of the report and the related data to appropriate representatives of the Appraisal Institute if such disclosure is required to enable Appraiser or Consultant to comply with the Bylaws and Regulations of such Institute as now or hereafter in effect. 11. In the event Client fails to make payments when due and payable, then from the date due and payable until paid the amount due and payable shall bear interest at the maximum rate permitted in the state in which the office of Appraiser or Consultant executing the Agreement is located. If Appraiser or Consultant is required to institute legal action against Client relating to the Agreement, Appraiser or Consultant shall be entitled to recover reasonable attorneys' fees and costs from Client. 12. This appraisal or consultation will not take into consideration the possibility of the existence of asbestos, PCB transformers, or other toxic, hazardous, or contaminated substances and/or underground storage tanks (hazardous material), or the cost of encapsulation or removal thereof. Should client have concern over the existence of such substances on the property, Appraiser or Consultant considers it imperative for the Client to retain the services of a qualified, independent engineer or contractor to determine the existence and extent of any hazardous materials, as well as the cost associated with any required or desirable treatment or removal thereof. 13. CB Commercial Real Estate Group, Inc., Appraisal Services and Client agree that the Agreement (including these Terms and Conditions) shall be governed by the laws of the state of the CB Commercial Real Estate Group, Inc., Appraisal Services office shown on the Agreement. 14. Client shall not indemnify Appraiser or Consultant or hold Appraiser or Consultant harmless unless and only to the extent that the Client misrepresents, distorts, or provides incomplete or inaccurate appraisal results to others, which acts of the Client proximately result in damage to Appraiser or Consultant. The Client shall indemnify and hold Appraiser or Consultant harmless from any claims, expenses, judgments or other items or costs arising as a result of the Client's failure or the failure of any of the Client's agents to provide a complete copy of the appraisal report to any third party. In the event of any litigation between the parties, the prevailing party to such litigation shall be entitled to recover from the other reasonable attorney fees and costs. 15. Appraiser understands that the Client may provide complete final copies of the appraisal report (but not partial or summarized copies) to third parties who shall rely on such reports in connection with the Client's securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the Client for routine and customary questions that may arise. ATTACHMENT "A" MARK CENTERS Location Size No. of Tenants -------- ---- -------------- Danville, VA 118,535 4 Ft. Ogelthorpe. GA 113,367 15 Troy, NY 128,479 15 Martintown, SC 133,878 9 New Smyrna. FL 99,780 14 Auburn, ME 256,459 18 Shamokin, PA 98,210 4 Stroudsburg, PA 130,569 9 Dunmore, PA 45,380 5 Allentown, PA 114,801 18 Kingston. PA 64,824 8 Easton, PA 131,477 33 Lewisburg, PA 113,600 10 Reading, PA 150,742 12 Edwardsville, PA 176,786 10 Shamokin Dam, PA 92,171 1 Moosic, PA 212,057 13 ATTACHMENT "B" Morgan Stanley Mortgage Capital Appraisal Standards Each appraisal content and quality will comply with standards established by the Appraisal Institute and Appraisal Foundation as well as the office of the Comptroller of the Currency. The appraisal will be a full narrative appraisal and will also comply with the requirements of FIRREA. For multifamily assets, the report must also comply with FNMA and FHLMC standards. The following serves as a guideline for minimum requirements. Each situation should be evaluated individually to determine the need for additional information or analysis. I. Transmittal Letter, Executed by responsible appraiser(s) o Name and address of the property o Ownership interest appraisal o Statements that necessary investigation and inspections were performed and the appraisal complies with reporting requirements of MSMC, FIRREA and various appraisal organizations noted above and of which appraiser is a member o Effective date o Concluded value on a cash or equivalent term o Marketing time concluded o Unusual conditions or limitations II. Assumptions/Limiting Conditions o List in summary any conditions, special assumptions, or contingencies assumed o Where made available by lender, appraiser should incorporate information from recently prepared Property Condition Assessment reports and Phase I Environmental reports III. Certification Content o Appraiser inspected the property and comparables o Statements of fact in the report are true o Appraiser has no prospective interest in the property or parties involved o Report complies with USPAP of Appraisal Foundation, Code of Professional Ethics, and Standards of Professional Practices of Appraisal Institute o Appraiser has complied with continuing education requirements of the Appraisal Institute/American Society of Appraisers o Compensation for the report is not contingent upon the value derived IV. Summary of Salient Facts and Conclusions o Property names, address and type o Year of construction o Ownership interest appraised o Land area o Zoning o Improvements description (gross and rentable sq. ft., number of units) o Highest and best use (vacant, as improved) o Valuation date o Value by each method (cost, sales, income) o Land value o Final value conclusion (as is) Morgan Stanley Mortgage Capital Appraisal Standards (continued) V. Appraisal Report Identification of Property -------------------------- A brief summary description of the subject property identifying the property by name, street address and location, legal description and current ownership. The Tax Assessor's Parcel number is optional but desirable. Site size and an improvement description summarizing gross building area, net rentable area, number of units and number of floors should be provided. History of Subject Property --------------------------- Give a three-year history of ownership of the subject property as required by the Appraisal Institute. Dates, as well as identification of deed recording documents, should be referenced for all transfers within the three-year period. Purpose of Appraisal -------------------- State the purpose of the appraisal which is the objective of this report (i.e., type of value and interest appraised) and identify the dates to which estimated value(s) apply and date of report. Function of the Appraisal ------------------------- The function of the appraisal is for loan purposes secured by the subject property. Certain assumptions in the valuation of the property may depend upon the loan proposal and lending conditions for the loan. Scope of the Assignment ----------------------- Define the extent and the procedures used in collecting, confirming, and reporting data. Definitions ----------- State the interest to be appraised and provide an acceptable fee simple value definition of the value that the purpose of the appraisal (fair value or market value, fee simple value, leased fee value, leasehold value, etc.). Include only those definitions applicable to the property to be appraised. Morgan Stanley will only accept appraisal reports which define and identify market value 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 and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specific date and the passing of title from seller to buyer under conditions whereby: o Buyer and seller are typically motivated; o Both parties are well informed or well advised, and acting in what they consider their own best interest; o A reasonable time allowed for exposure in the open market; o Payment is made in terms of cash in US dollars or in terms of financial arrangements comparable thereto; and o The price represents the normal consideration for the property sold unaffected by special creative financing or sales concessions granted by anyone associated with the sale." Morgan Stanley Mortgage Capital Appraisal Standards (continued) Commercial multifamily and industrial properties require the following value estimate, where applicable. o Value "as is" on the appraisal date (Current or "As Is" Value) - market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions or qualifications as of the date the appraisal is prepared; this would apply to a proposed property ("as is" would be the land only) or non-stabilized properties as of the appraisal date; for a non-stabilized property, this would include all lease-up costs such as rent loss, concessions, tenant improvements, and leasing commissions. Property Rights Appraised ------------------------- Indicated if fee simple, leased fee or leasehold. Date of Appraisal ----------------- Indicate the effective date of the appraisal and the date(s) of value estimates. Real Property Taxes and Assessments ----------------------------------- Identify assessor's parcel number, current assessed value, current taxes, tax rate and tax rate area. When the appraisal assignment requires that taxes be estimated, fully explain the methodology employed by estimating taxes. Discuss the tax assessment policy, the tax policy affecting the sale of the subject property and the frequency of real estate reassessments. Any next term revaluations or changes in the milleage rate should be discussed. Location Analysis ----------------- Analyze regional and city conditions and trends. Address existing conditions as well as probable future trends (e.g., proposed development moratorium). Describe existing or potential adverse influences. Include population, household, demographic and employment statistics, trends and analysis, transportation influences and other issues when relevant. Neighborhood Analysis --------------------- Analyze neighborhood conditions and trends. Indicate neighborhood boundaries. Include traffic patterns and counts. Discuss the development of the neighborhood, population/household/demographic characteristics (past, present, and future), transportation and the accessibility of the area, employment centers and other issues if you believe they are relevant. In other words, enlighten the reader about who lives or works nearby and why they do (or don't) live or work nearby. Also describe the subject location quality within the neighborhood commenting on accessibility, visibility and compatibility. Market Analysis --------------- This section should serve as the "foundation" of assumptions employed in the valuation section of the appraisal report. A discussion of market supply hand demand (existing and projected), absorption of competing properties and anticipated absorption of the subject property is essential. Discuss vacancy levels, rent levels, rental concessions and absorption on a macro and micro basis. Morgan Stanley Mortgage Capital Appraisal Standards (continued) If data is available, the appraisal report must address the following areas on a macro and micro basis: a. Total inventory in number of square feet or number of units in the market (including historical figures, if available); b. Current vacancy in the market (including historical figures, if available); c. Number of square feet under construction and also planned in the next 24 months; d. Average rent in the marketplace, including a description of any concessions such as tenant improvements, free rent, and allowances and a description of lease style (triple net, gross, base year stop etc.); e. Annual absorption and vacancies as they relate specifically to this product type, e.g., Class A office space, high-rise/Class B, mid-rise/Class C, low-rise/walk-up, etc.; and, f. Economic forces which generate demand in the marketplace. A separate analysis of absorption is required if the subject property or a material portion of it is vacant, if key tenants are anticipated to vacate, or if the property is proposed. Macro and micro market trends should be included, with a rate of absorption and period to reach stabilized occupancy stated. This analysis should consider supply and demand factors in the market, including competitive projects under construction, in addition to income lost and expenses incurred over the absorption period. These expenses should include tenant improvement costs, advertising promotion, and leasing commissions; profit should also be deducted. In cases where net leases are typical in the market, operating expenses such as taxes, insurance, utilities, and maintenance must also be considered. The total loss in value due to absorption should be deducted from the value conclusion in each of the approaches to value to accurately reflect market value. For subdivisions, the appraisal must clearly state the estimated sales period which the property would require if marketed, based on comparable sales or other market evidence. The absorption analysis should be clearly written and logical in its conclusions. The appraiser must specifically address and consider the anticipated economic feasibility, as well as cite all significant market data utilized in developing conclusions. Such analyses must be presented in sufficient detail to support the appraiser's forecast of the probable success and the conclusion of highest and best use of the project. Surveys with the investor market should be conducted to address the marketability of the appraised property. This information should lend credence to the assumptions employed throughout the remainder of the appraisal report. In addition, Appraiser must complete the enclosed market analysis form for every report. Appraiser should summarize market information and present it in a form similar to the enclosed example. Site Description ---------------- The site description must include a plot map and/or site plan. Also include the following: o Site size and shape o Dimensions o Topography o Soils/geologic conditions o Drainage o Zoning and compliance status o Utilities o Easement, encroachments or other legal constraints o Exposure and ingress/egress o Off-site improvements Morgan Stanley Mortgage Capital Appraisal Standards (continued) A report on the subject property's location in relation to earthquake faults (special study maps), flood zones, slide areas, hazardous dump sites, and other local hazards is required. Also include whether there is existence of underground storage tanks, storage containers of known or unknown contents, evidence of waste disposal, chemicals, residuals, or oil spillage, and asbestos content in building materials. Discuss any observed or reported easements that affect site development and value. If an easement is part of the legal description, provide a concise discussion of where the easement is located. Discuss any known or observed environmental hazard or risk conditions and/or any factors contributing to external obsolescence. Vintage construction should be noted and any potential concerns arising from the date of construction or quality of materials and craftsmanship used should be noted. Improvement Description ----------------------- This section should include and discuss all building and improvement data relevant to the appraisal. The items to be included are: o Actual building age and size o Type structure and/or use of the building o Structural and construction details and mechanical equipment o Interior detail o Physical condition, effective age, economic life o Functional utility o Site improvements, including the number of on-site parking spaces Identification of the total gross building and rentable and usable areas must be included. These should also be identified on a per floor basis, if available. Include an illustration of the basic floor plans, if available. Discuss any know or observed environmental hazard or risk conditions. Comment on condition and effective age and discuss any factors contributing to physical deterioration and/or functional and external obsolescence. Conclude as to the market acceptance and functionality of the improvements. Include exterior, interior and/or aerial views, if feasible, of the subject property. Label photos with street names and photo direction so we may visualize the building improvements and site boundaries. Highest and Best Use -------------------- The appraisal is to contain a properly documented and supported estimate of the highest and best use of the property appraised, which is consistent with the definition of market value. Such estimate must consider the effect on use and value of the following factors: o Existing land use regulations; o Reasonably probable modifications of such land use regulations; o Economic demand; o Physical adaptability of the property; o Neighborhood trends; and o Optimal usage of the property Highest and best use analysis should address the property "as if vacant" and "as improved." Morgan Stanley Mortgage Capital Appraisal Standards (continued) Valuation Process ----------------- All three approaches to value should be used and explained, if applicable. If one or more approach(es) is (are) not used, justification as to why an approach(es) was omitted must be included. Its applicability to the appraisal problem must be addressed. Land Valuation -------------- Land is always appraised as if vacant and available for development to its highest and best use. The concluded land value must reflect cash or cash equivalent terms and must be identified as such. For all comparable land sales, include: o Legal description (tax map, block and parcel number) o Grantor/Grantee o Date of sale and sale price (cash equivalent if necessary) o Deed (back and page) o Description of site (frontage, shape, topography, availability of utilities, access/ingress/egress available, etc.) o Zoning and highest and best use o Terms of sale; cash equivalency o Source of information (buyer/seller/broker) o Any other relevant information Identify the comparable on a land sales location map. Each sale should be adjusted accordingly to make it similar to the subject site, where applicable. Discuss adjustment process and include an adjustment grid. Cost Approach ------------- Identify the source of reproduction/replacement cost estimates (e.g., Marshall Valuation Service). Identify direct and soft or indirect costs and any potential entrepreneurial profit. For recently completed properties, include a copy of the developer's cost breakdown, if available, and a discussion of the estimated or actual development costs. Functional and/or external obsolescence must be fully explained. Quantify any allowances for curable physical depreciation. Sales Comparison Approach ------------------------- Summary sales comparable information should be presented in a chart, an example of which is attached hereto. In addition, each comparable sale should be presented on an individual data sheet which identifies: o Property address o Assessor's parcel number (legal description) o A photograph of the property o Adequate description of the sale property o Sale price o Cash equivalent price o Date of sale Morgan Stanley Mortgage Capital Appraisal Standards (continued) o Building size o Land size o Deed of Record o Grantor/Grantee o Terms of sale o Zoning o Source of information o Income characteristics (rents, income and expenses) o Investment characteristics (GIM, EGIM, cap rate, cash-on-cash rate, discount rate, terminal cap rate, growth rates, etc.) For each comparable, indicate the vacancy, actual income and expenses at the time of sale or for the projected year (indicate whether financial data is actual or projected) and whether estimated by the appraiser or based on the buyer's or seller's pro forms, or sometimes all three or a combination of the three sources. If details of the sale are insufficient to calculate the cash equivalency, comment on the relationship between price paid and the potential cash equivalent value. Always include details on financing terms. Units of comparison applied to the subject must assume cash terms. Site coverage and parking availability should be addressed when significant. Identify the subject property on a chart summarizing the sales. Also include a comparable sales location map. Provide sufficient descriptive information on each comparable sale property to demonstrate the following: o Highest and best use of the comparable is equivalent to that of the subject; o The sale property is physically and economically comparable to the subject; o The adjustments used in the analysis are supported by the market (explain derivation of adjustments). Indicate adjusted unit prices for each sale; and o The gross income multiplier (GIM) or effective gross income multiplier (EGIM) should be used as another unit of comparison for income producing properties. Discussion of expense ratios and a comparison with the subject's expense ratio should be indicated. Justify and discuss selection of EGIM or GIM from market comparables; o Include an adjustment grid Income Approach --------------- The appraiser should choose the appropriate valuation techniques, i.e., direct capitalization of a stabilized income and/or discounted cash flow analysis. An explanation of why a particular method was not chosen should be provided. The key is to select the method that reflects the actions of informed investors. a. Include a comparable rent survey for all uses appraised (e.g., retail, office, etc.). Also include an adequate description of the surveyed comparable properties, reflecting: o Lease date o Contract rent o Term o Expenses of tenant o Expenses of landlord (stop, if applicable) Morgan Stanley Mortgage Capital Appraisal Standards (continued) o Building size o Land size o Deed of Record o Grantor/Grantee o Terms of sale o Zoning o Source of information o Income characteristics (rents, income and expenses) o Investment characteristics (GIM, EGIM cap rate, cash-on-cash rate, discount rate, cap rate, growth rates, etc.) For each comparable, indicate the vacancy, actual income and expenses at the time of sale or for the projected year (indicate whether financial data is actual or projected) and whether estimated by the appraiser or based on the buyer's or seller's pro forms, or sometimes all three or a combination of the three sources. If details of the sale are insufficient to calculate the cash equivalency, comment on the relationship between price paid and the potential cash equivalent value. Always include details on financing terms. Units of comparison applied to the subject must assume cash terms. Site coverage and parking availability should be addressed when significant. Identify the subject property on a chart summarizing the sales. Also include a comparable sales location map. Provide sufficient descriptive information on each comparable sale property to demonstrate the following: o Highest and best use of the comparable is equivalent to that of the subject; o The sale property is physically and economically comparable to the subject; o The adjustment used in the analysis are supported by the market (explain derivation of adjustments). Indicate adjusted unit prices for each sale; and o The gross income multiplier (GIM) or effective gross income multiplier (EGIM) should be used as another unit of comparison for income producing properties. Discussion of expense ratios and a comparison with the subject's expense ratio should be indicated: o Justify and discuss selection of EGIM or GIM from market comparables; o Include an adjustment grid Income Approach --------------- The appraiser should choose the appropriate valuation techniques, i.e., direct capitalization of a stabilized income and/or discounted cash flow analysis. An explanation of why a particular method was not chosen should be provided. The key is to select the method that reflects the actions of informed investors. a. Include a comparable rent survey for all uses appraised (e.g., retail, office, etc.). Also include an adequate description of the surveyed comparable properties, reflecting: o Lease date o Contract rent o Term o Expenses of tenant o Expenses of landlord (stop, if applicable) Morgan Stanley Mortgage Capital Appraisal Standards (continued) o Expense recoveries and growth rates; o Tenant improvements and leasing commissions; o Reversionary capitalization rates; and, o Determination, support and justification of yield rates Comparable data should be presented and discussed for estimates of market rent as well as expense items. Each expense item must be discussed separately. Reconciliation and Final Value Estimate(s) Discuss the relevancy of each approach and lead the reader to the applicable conclusions of value. The emphasis assigned to each approach or the methods of selection of one estimate in preference to another should be clearly set forth and explained. Valuations involving such properties must fully reflect all appropriate deductions and discounts as well as anticipated cash flow that can be derived from the disposition of the asset over time. Appropriate deductions and discounts are considered to be those which reflect all expenses associated with the disposition of the realty, as of the date of completion, as well as the cost of capital and entrepreneurial profit. VI. Miscellaneous Include the miscellaneous documents and supplemental reports pertinent to the value conclusions and the appraiser's qualifications in the Addenda of the report. VII. Ground Lease When the subject property involves a ground lease, the appraisal report must include a summary of all terms and conditions of the ground lease. VIII. Approval The appraisal is subject to the approval of and acceptance by Morgan Stanley. ================================================================================ ADDENDUM I - LEGAL DESCRIPTION - -------------------------------------------------------------------------------- ADDENDUM I LEGAL DESCRIPTION - -------------------------------------------------------------------------------- NUMBER: 92653136; NBU NO. 9241-1044 SCHEDULE A CONTINUED thence northwestwardly along the meandering center line of Sandy Creek the following calls and dimensions; North 29 degrees, 52 minutes and 36 seconds West, 214.94 feet; North 53 degrees, 20 minutes and No seconds West, 220.0 feet; North 36 degrees, 20 minutes and No seconds West, 270.00 feet; North 70 degrees, 50 minutes and No seconds West, 250.0 feet; North 11 degrees, 45 minutes and No seconds West, 105.0 feet; thence North 41 degrees, 27 minutes and 21 seconds East, leaving Sandy Creek, 580.59 feet to a point; thence South 79 degrees, 36 minutes and 36 seconds East, 133.27 feet to a point; thence South 17 degrees, 32 minutes and 56 seconds East, 79.84 feet to a point thence South 26 degrees, 18 minutes and 55 seconds East, 100.97 to a point; thence South 78 degrees, 45 minutes and No seconds East, 174.44 feet to a point in the western line of Hairston Street; thence South 11 degrees, 15 minutes and No seconds West, along the western line of Hairston Street, 77.03 feet to a point where the western line of Hairston Street makes a bend to the left; thence South 84 degrees 18 minutes and no seconds East, along a southern line of Hairston Street, 162.31 feet; thence South 11 degrees, 8 minutes and 14 seconds West, leaving Hairston Street 238.32 feet to a point; thence South 78 degrees, 51 minutes and No seconds East, 114.20 feet to the western line of Piney Forest Road; thence southwardly and southwestwardly along the western line of Piney Forest Road and the rounding of its intersection with the northwestern line of U.S. Route 58 (Riverside Drive) and in an irregular curve to the right, the chord to it having the following calls and dimensions: South 16 degrees, 26 minutes and 35 seconds West, 23.69 feet, South 19 degrees, 26 minutes and No seconds West,, 174.80 feet; South 32 degrees, 16 minutes and No seconds west, 112.96 feet; South 33 degrees, 44 minutes and No seconds West, 44.87 feet, South 43 degrees, 39 minutes and No seconds West, 224.13 feet; South 53 degrees, 43 minutes and 30 seconds West, 82.60 feet to the point of beginning and containing 14.83 acres. AND BEING the same property conveyed to MARK CENTERS LIMITED PARTNERSHIP, A DELAWARE LIMITED PARTNERSHIP by deed from MARVIN L. SLOMOWITZ AND ISOBEL SLOMOWITZ, HIS WIFE, dated May 26, 1993 recorded June 11, 1993 at 3:55 P.M. in the Clerk's Office of the Circuit Court of Danville, Virginia, in Deed Book 987, Page 918. ================================================================================ ADDENDUM J - QULAIFICATIONS - -------------------------------------------------------------------------------- ADDENDUM J QUALIFICATIONS - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM I - QULAIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF JERROLD HARVEY, MAI Assistant Vice President CB Commercial Real Estate Group, Inc. 1001 Pennsylvania Avenue, N.W., Suite 210 Washington, D.C. 20004-2505 (202) 457-5782 EDUCATIONAL Bachelor in Business Administration, Emory University, Atlanta, Georgia Successfully completed all the necessary courses to qualify for the MAI designation. Graduate course work at various institutions in real estate law, commercial leasing, finance and investment, construction cost analysis and valuation of fractional interests. PROFESSIONAL Member, Appraisal Institute (MAI) #8935, Current on Continuing Education Member, Local Appraisal Institute Chapter Admissions Committee. Member, Regional Appraisal Institute Ethics and Counseling Panel. LICENSES/CERTIFICATIONS Certified General Real Estate Appraiser: District of Columbia (10016) Certified General Real Estate Appraiser: State of Maryland (10086) Certified General Real Estate Appraiser: Commonwealth of Virginia (4001-001321) Licensed Real Estate Salesperson: District of Columbia and State of Maryland EXPERIENCE Nearly 15 years of Real Estate Appraisal, Consulting and Brokerage Experience throughout the United States specializing in the Washington - Baltimore Corridor. 1995 - Present CB Commercial Real Estate Group, Inc., Appraisal Washington, D.C. 1994 - 1995 Metropolitan Realty Advisors, Inc. Washington, D.C. 1987 - 1994 Chase National Corporate Services Washington, D.C. 1982 - 1987 Chase Manhattan Bank, NA. New York, New York 1981 - 1982 Kenneth D. Laub & Company New York, New York Assignments span a wide variety of properties and markets, including office buildings, community retail centers, regional malls, industrial buildings, residential and commercial subdivisions, apartment buildings and hotels. - -------------------------------------------------------------------------------- ================================================================================ ADDENDUM I - QULAIFICATIONS - -------------------------------------------------------------------------------- QUALIFICATIONS OF JOHN S. WARD Real Estate Analyst CB Commercial Real Estate Group, Inc. 1001 Pennsylvania Avenue, N.W., Suite 210 Washington, D.C. 20004-2505 (202) 457-4206 EDUCATIONAL Bachelor of Arts, Urban Planning and Development, Virginia Polytechnic Institute, Blacksburg, Virginia Graduate course work toward Masters of Science in Real Estate, John Hopkins University, Baltimore, Maryland PROFESSIONAL Candidate for MAI Designation, Appraisal Institute EXPERIENCE 1995 - Present CB Commercial Real Estate Group, Inc., Appraisal Washington, D.C. 1993 - 1995 Joseph J. Blake & Associates, Appraisal Washington, D.C. 1990 - 1993 Digges Brothers Construction, Development Williamsburg, Virginia This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. APPRAISAL OF WESTGATE MALL FAIRVIEW PARK, OHIO APPRAISAL OF WESTGATE MALL FAIRVIEW PARK, OHIO AS OF SEPTEMBER 1, 1997 PREPARED FOR MORGAN STANLEY MORTGAGE CAPITAL, INC. 1585 BROADWAY, 37TH FLOOR NEW YORK, NY 10036 PREPARED BY LANDAUER ASSOCIATES, INC. 225 WEST WASHINGTON STREET SUITE 1500 CHICAGO, ILLINOIS 60606 [Letterhead of Landauer Associates, Inc.] September 18, 1997 Mr. James Flaum Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway, 37th Floor New York, NY 10036 Re: Revised Appraisal Westgate Mall Fairview Park, Ohio Dear Mr. Flaum: As directed, we have made an appraisal of the above-captioned property, which consists of a regional shopping mall situated on a 50.8-acre site. The improvements were originally built in 1954, were enclosed in 1969, were renovated in 1979 and 1986, and were expanded in 1989 and 1996. Owned square footage includes 215,771 square feet of in-line tenant space, a 5,060 square foot food court, 1,170 square feet of kiosks, and a 67,343 square foot peripheral development. Also part of ownership are two department store anchors - Dillard's North (194,511 SF) and Kohl's (94,500 SF), a movie theater (24,974 SF), Applebee's (5,001 SF), and Longhorn Steaks (5,320 SF), all of which are under ground leases. A third anchor, Dillard's South is separately owned, and is not part of this valuation. Excluding Dillard's South, the mall's total gross leasable area measures 613,650 square feet. The purpose of this self-contained appraisal report is to estimate the Market Value of the Leased Fee Interest in the real property described herein, subject to the existing leases and encumbrances, and the general and specific assumptions and limiting conditions as discussed in the attached report. NOTE: The ensuing report reflects a revised market value conclusion resulting from the collection of various data from the Richard E. Jacobs Group concerning non-recoverable capital improvements. LANDAUER REAL ESTATE COUNSELORS Morgan Stanley Mortgage Capital, Inc. September 18, 1997 Page Two Based upon our analysis, we estimate the Market Value of the Leased Fee Interest in Westgate Mall, subject to the existing leases, assumptions and limiting conditions contained in this report, as of September 1, 1997, is: SIXTY FIVE MILLION DOLLARS $65,000,000 Details of our analyses, opinions, and conclusions are contained in the following report, of which this letter is a part. Thank you for the opportunity to be of service. Respectfully submitted, LANDAUER ASSOCIATES, INC. /s/ James C. Kafes (MAI) /s/ John I. Wrzesinski James C. Kafes, MAI, CRE John I. Wrzesinski, MAI, CRE Executive Managing Director Senior Managing Director /s/ Paul F. Engel /s/ Donald T. Broderick (MAI) Paul F. Engel Donald T. Broderick Managing Director Associate LANDAUER REAL ESTATE COUNSELORS TABLE OF CONTENTS Page Assumptions and Limiting Conditions............................................1 Certification..................................................................6 Summary of Important Facts and Conclusions.....................................7 Nature of the Appraisal........................................................8 Identification of the Property and Interests Appraised..................8 Purpose, Function and Date of Appraisal.................................9 Scope of the Appraisal..................................................9 History of Property....................................................10 Exposure Time and Marketing Period.....................................10 Cleveland Area Overview.......................................................13 Population.............................................................13 Transportation.........................................................14 Economy................................................................15 Employment Forecast Profile............................................16 NOACA Employment Projections...........................................18 Neighborhood Analysis..................................................18 Conclusion.............................................................19 Retail Market Overview........................................................20 Trade Area Delineation.................................................20 Trade Area Population..................................................20 Income Estimates and Comparisons.......................................22 Trade Area Expenditure Potential.......................................22 Competitive Property Analysis..........................................24 Property Description..........................................................26 Site Analysis..........................................................26 Zoning.................................................................26 Real Estate Taxes......................................................27 Improvements...........................................................28 Highest and Best Use..........................................................30 As If Vacant...........................................................30 As Improved............................................................30 LANDAUER REAL ESTATE COUNSELORS TABLE OF CONTENTS Page Valuation Methodology.........................................................31 Cost Approach.................................................................32 Sales Comparison Approach.....................................................33 Elements of Comparison.................................................34 Applicability of Adjustments...........................................35 Comparable Sales Data..................................................36 Price Per Square Foot..................................................37 Income Capitalization Approach................................................40 Discounted Cash Flow ("DCF") Analysis Assumptions......................40 Revenue................................................................45 Expenses...............................................................48 Occupancy Costs........................................................50 Capital Items..........................................................51 Cash Flow..............................................................52 Discounted Cash Flow Analysis..........................................53 Rate Selection.........................................................54 Valuation by Discounted Cash Flow Analysis.............................56 Market Value Analysis as of September 1, 1997..........................57 Correlation and Conclusion ...................................................58 ADDENDA Legal Description Lease Abstract Report Rent Roll (June 30, 1997) Photographs (Westgate Mall) Photographs (Competing Malls) NOACA Employment Statistics Operating Statements (1994-96) Recent Leasing Activity Professional Qualifications LANDAUER 1 REAL ESTATE COUNSELORS ASSUMPTIONS AND LIMITING CONDITIONS This appraisal report has been made with the following general assumptions: o Title to the property is assumed to be good and marketable unless otherwise stated. No responsibility is assumed for the legal description or any legal matter. The property is considered to be under responsible ownership, management, subject to responsible leasing efforts, and free of all liens and encumbrances except as specifically discussed herein. o The definition of value, together with other definitions and assumptions on which our analyses are based are set forth in appropriate sections of this report and are to be part of these General Assumptions as if included here in their entirety. o The information furnished to the appraisers by the client and others, as contained in this report, is considered to be from reliable sources and, where feasible, has been verified; however, no responsibility is assumed for the accuracy of the information. The appraisers reserve the right to modify the value conclusion should the accuracy of that information change subsequent to delivery of this report. o It is assumed that there are no hidden or unapparent conditions in the property, soil, subsoil, or structures which would render the property more or less valuable. No responsibility is assumed for such conditions or for arranging for engineering which would be required to discover them. All materials used in the structures on the appraised property are assumed to be free of asbestos, toxic materials, or any other potential health risks unless otherwise so stated and identified herein. No opinion is expressed on structural or mechanical conditions and all engineering is assumed to be correct. o It is assumed that there is full compliance with all applicable federal, state and local environmental regulations and LANDAUER 2 REAL ESTATE COUNSELORS laws, that all applicable zoning and use regulations and restrictions have been complied with, unless a non-conformity has been stated, defined and considered in the appraisal report. o It is assumed that all required licenses, certificates of occupancy, legislative or administrative consents from any local or national governmental or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based. o It is assumed that the utilization of the land and/or improvements is within the boundaries or property lines of the property described herein and that there is no encroachment or trespass unless noted within the report. The appraisal report has been made with, and is subject to, the following general limiting conditions: o The appraisers herein, by reason of this appraisal report, are not required to give further consultation, testimony or to be in attendance in court or at any governmental or other hearing with reference to the property without prior arrangements having been made relative to such additional employment. o The distribution, if any, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and buildings must not be used in conjunction with any other appraisal and are invalid if so used. o Use and disclosure of the contents of this report is governed by the bylaws and regulations of the Appraisal Institute. o The client may distribute copies of this appraisal report only in its entirety, to such third parties as may be selected by you; however, portions of this appraisal report shall not be LANDAUER 3 REAL ESTATE COUNSELORS given to third parties without our written consent. Liability to third parties will not be accepted. o The Landauer Report in full (and only in full) may be reproduced; references to the Landauer Report and to Landauer may not be made in a prospectus, private placement memorandum, proxy statement or other document ("Offering Material") in connection with an offer to sell, exchange or purchase securities or similar interests or in connection with a merger, liquidation or other corporate transaction unless Landauer shall have approved, in writing, the text of any such references prior to the distribution or filing thereof. o This appraisal report is based upon and supported by available factual economic and market data and our interpretation of market conditions as of the date of the appraisal. Though we believe that our assumptions and forecasts are well supported, we cannot be held responsible for events which may alter market and property conditions between the date of inspection and the effective date of the opinion of value. o The information furnished to the appraisers by the client and others, as contained in this report, is considered to be from reliable sources; however, no responsibility is assumed for its accuracy. The appraisers reserve the right to modify the value conclusion should the accuracy of that information change subsequent to delivery of this appraisal report. o The Americans with Disabilities Act ("ADA") became effective January 26, 1992. Landauer has not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the property. Since we have no direct evidence relating to this issue, we did not consider possible non-compliance with the requirements of ADA in estimating the value of the property. LANDAUER 4 REAL ESTATE COUNSELORS The appraisal report has been made with, and is subject to, the following specific limiting conditions. o We have relied upon information supplied by the property manager, owner, a previous appraisal of Westgate Mall (dated December 31, 1996 - prepared by Bach Thoreen McDermott Inc.), and Morgan Stanley Mortgage Capital, Inc. Some data, including copies of tax bills, lease abstracts, operating budgets and recovery statements, among others, were requested but unavailable for review. We reserve the right to review and change this appraisal should the data become available to us. o We have used a June 30, 1997 rent roll report as the basis for our estimate of potential gross income. Verbal confirmation of two new lease agreements (#FC10 and # D410), one lease offer (Casual Corner), and one lease renewal (Ohio Motorists Association) were provided by Jacobs Group representative Dan Zoghby, and are assumed to be factual. o We have relied upon audited 1994, 1995, and 1996 income and operating expense data in formulating our cash flow projections. Neither a 1997 or 1998 budget report were available for review. o In the absence of detailed recovery statements it was necessary to project operating expense and real estate tax levels similar to those which have been collected over the last three full years of operation. While projecting recoveries on a tenant-by-tenant basis is considered more accurate relative to future projections, the uniformity reflected in historical recoveries allows us to consider our methodology reliable. o It is assumed that the anchor tenants whose leases or operating covenants expire during the analysis period will remain as tenants at lease terms similar to those currently in place, or will exercise all available renewal options as specified within their lease agreements. LANDAUER 5 REAL ESTATE COUNSELORS o It has come to our attention that the subject property is currently in the process of being abated of asbestos, the extent of which is reportedly minor. Since Landauer Associates is not an expert in this field, we advise that an independent study be performed to recognize the extent of this undertaking. o The current lease agreement with Dillard's Home Store expires in August 31, 2000. Based on information provided in the December 1996 appraisal report, we have modeled our cash flow such that Dillard's Home Store will exercise a 10-year renewal option of their existing lease at the same terms. o No information regarding the owned anchor tenant (Dillard's South) was provided other than an estimate of size, and historical sales volumes. Accordingly, any monetary contribution towards common area maintenance is unknown. Depending on the level of payment, if any, there could be a substantial differential in our estimate of market value. If this information becomes available we reserve the right to amend this appraisal report. o Special Limiting Conditions are also stated in various portions of the Self-Contained Appraisal Report, and are to be carefully noted in accepting this report. LANDAUER 6 REAL ESTATE COUNSELORS CERTIFICATION The undersigned certify to the best of their knowledge and belief that the statements of fact contained in this appraisal report and upon which the analyses, opinions and conclusions expressed herein are true and correct. This report is made subject to the Assumptions and Limiting Conditions set forth on the following pages which set forth all of the limiting conditions (imposed by the terms of the assignment or by the appraisers) affecting the analyses, opinions and conclusions contained in this report. Employment and compensation for making this appraisal are not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the attainment of a stipulated result, or the occurrence of a subsequent event. We have no direct or indirect current or prospective personal interest or bias in the subject matter of this appraisal report or to the parties involved. The appraisal assignment was not based on a requested minimum valuation, a specific valuation, or the approval of a loan. This report has been performed in accordance with the Uniform Standards of Professional Appraisal Practice as promulgated by the Appraisal Standards Board of the Appraisal Foundation adopted by the Appraisal Institute, and the Code of Professional Ethics of the Appraisal Institute. The use of this report is subject to the requirements of the Appraisal Institute relating to review by their duly authorized representatives. As of the date of this report, James C. Kafes and John I. Wrzesinski have completed the requirements of the continuing education program of the Appraisal Institute. No one other than the undersigned prepared the analyses, opinion and conclusions concerning real estate that are set forth in this report. Donald T. Broderick inspected the property on September 3, 1997, and John I. Wrzesinski inspected the property on September 5, 1997. James C. Kafes and Paul F. Engel did not inspect the property. /s/James C. Kafes /s/John I. Wrzesinski James C. Kafes, MAI, CRE John I. Wrzesinski, MAI, CRE Executive Managing Director Senior Managing Director /s/Paul F. Engel /s/Donald T. Broderick Paul F. Engel Donald T. Broderick Managing Director Associate LANDAUER 7 REAL ESTATE COUNSELORS SUMMARY OF IMPORTANT FACTS AND CONCLUSIONS Property Identification: Westgate Mall Location: Southeast corner of Center Ridge Road and West 210th Street, Fairview Park, Cuyahoga County, Ohio. Property Description: The improvements consist of a regional shopping center situated on a site of approximately 50.8 acres. The improve-ments were originally built in 1954 and were last expanded in 1996. Owned square footage includes 215,771 square feet of in-line tenant space, a 5,060 square foot food court, 1,170 square feet of kiosks, and a 67,343 square foot peripheral development. Also part of ownership are two department store anchors - Dillard's North (194,511 SF) and Kohl's (94,500 SF), a movie theater (24,974 SF), Applebee's (5,001 SF), and Longhorn Steaks (5,320 SF). A third anchor, Dillard's South is separately owned, and is not part of this valuation. Zoning: General Business "A" (GB-A) Occupancy: 86.7 percent leased and occupied, excluding the anchor stores, peripheral units, and kiosks. All tenants combined, Westgate Mall is 95.2 percent leased and occupied. Highest and Best Use: Present Use - Regional Mall Interest Appraised: Leased Fee Interest, subject to the existing and pending tenant leases and assumptions and limiting conditions stated herein. Date of Valuation: September 1, 1997 Date of Inspection: September 3, 1997 and September 5, 1997 Market Value Indications Cost Approach - Not Applicable Sales Comparison Approach - $61,000,000 to $65,000,000 Income Capitalization Approach - $65,000,000 Final Value Conclusion: $65,000,000 =========== LANDAUER 8 REAL ESTATE COUNSELORS NATURE OF THE APPRAISAL IDENTIFICATION OF THE PROPERTY AND INTERESTS APPRAISED Westgate Mall is a regional shopping mall situated on approximately 50.8 acres of land located at the southeast corner of Center Ridge Road and West 210th Street in Fairview Park, Cuyahoga County, Ohio. The improvements were originally built in 1954, were enclosed in 1969, were renovated in 1979 and 1986, and were expanded in 1989 and 1996. Owned square footage includes 215,771 square feet of in-line tenant space, a 5,060 square foot food court, 1,170 square feet of kiosks, and a 67,343 square foot peripheral development. Also part of ownership are two department store anchors - Dillard's North (194,511 SF) and Kohl's (94,500 SF), a movie theater (24,974 SF), Applebee's (5,001 SF), and Longhorn Steaks (5,320 SF), all of which are under ground leases. A third anchor, Dillard's South is separately owned, and is not part of this valuation. Excluding Dillard's South, the mall's total gross leasable area measures 613,650 square feet. The property is currently in good condition. On-site asphalt surface parking is available, with 3,719 spaces provided. A copy of the legal description is presented in the Addenda. The property rights appraised in this report consist of the Leased Fee Estate. Leased Fee Estate, is defined by the Appraisal Institute Dictionary of Real Estate Appraisal, Third Edition, page 204, as being: an ownership interest held by a landlord with the rights of use and occupancy conveyed by lease to others. The rights of lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease. LANDAUER 9 REAL ESTATE COUNSELORS PURPOSE, FUNCTION AND DATE OF APPRAISAL The purpose of the appraisal is to estimate the Market Value of the Leased Fee Estate as of September 1, 1997. The function of the appraisal is to assist Morgan Stanley Mortgage Capital, Inc. relating to Morgan Stanley Capital I, Inc., Commercial Pass-through Certificates, Series 1997-LL1. The Uniform Standards of Professional Appraisal Practice defines Market Value as being: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: - Buyer and seller are typically motivated. - Both parties are well informed or well advised, and acting in what they consider their own best interests. - A reasonable time is allowed for exposure in the open market. - Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto. - 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. SCOPE OF THE APPRAISAL The scope of this complete appraisal involved the systematic research and analysis necessary to reach a market value conclusion for the subject. The initial step was an inspection of the property, the general market area and the neighborhood. After investigating the area regarding economic, political, social and physical factors, research was conducted relevant to the valuation process, including gathering land sales, financial information, data concerning competitive shopping center properties and comparable LANDAUER 10 REAL ESTATE COUNSELORS improved sales, and other information pertinent to the valuation. This information was reviewed, confirmed and analyzed through the use of the Sales Comparison Approach and Income Capitalization Approach to value. These methodologies are detailed in the appropriate sections of the report. The Cost Approach is not considered to provide a meaningful value indication and is excluded from the analysis, as agreed upon by the client. Finally, a Market Value estimate was concluded based on the above analyses, which, in turn, were influenced by the most reliable and appropriate data. This narrative report is the result of our findings and analyses. HISTORY OF PROPERTY The owner of record for Westgate Mall is Westgate Joint Venture. The ownership has not changed over the past three years, and to the best of our knowledge the property is not being marketed for sale. EXPOSURE TIME AND MARKETING PERIOD The concept of exposure time is historical in nature and is presumed to have occurred prior to the effective date of the appraisal. Alternatively, marketing period occurs after the effective date of the appraisal and may or may not be directly related to the value presented. The actual sale price could increase, decrease, or remain static during the marketing period depending upon market conditions and the type of property being appraised. CB Commercial's National Investor Survey - First Quarter 1997 reports marketing times for Class A regional malls ranging from 8 to 12 months. They report an overall average marketing time for regional mall properties of 9.9 months. Korpacz's Real Estate Investor Survey - Second Quarter 1997 states an average marketing time for regional malls at 10.44 months. LANDAUER 11 REAL ESTATE COUNSELORS Since most investors' perceptions and estimates of marketing period are based largely on exposure times that they have recently encountered in similar transactions, it stands to reason that there should be some correlation between marketing periods and exposure times. In fact, in the absence of perceived changes in the market or other extenuating circumstances, marketing period and exposure time should be identical. That is to say, if all other things are held constant, a property that (retrospectively) required an exposure time of one year could be expected to have a marketing period (prospectively) also of one year. Differences in the two concepts could appear when there is a perceived change in the market. To use the same example presented above, if a property required an exposure time of one year but perceived market conditions are improving, an appropriate estimate of marketing period could reasonably be expected to be less than one year. Conversely, if market conditions were anticipated to worsen, marketing period might exceed exposure time. Objectively quantifying such differences would be virtually impossible; however, understanding the relationship between the two concepts and how they are affected by perceived changes in the market allows one to better estimate (subjectively) a reasonable period for exposure time and marketing period. This is especially important during periods when actual market evidence is limited by a lack of transactions. It is then necessary to decide if exposure time began when the property was first offered for sale or when the price was dropped to (or near) the ultimate sale price. Further complicating the issue is the question of whether exposure time ends when a sale contract is signed or whether it ends at the closing date of a sale. Based upon our investigations, we believe that a marketing period up to 12 months is reasonably appropriate. Furthermore, it is our opinion that the exposure time commensurate with our estimate of value for the subject would also be up to 12 months. AREA MAP - CLEVELAND [GRAPHIC OMITTED] LANDAUER 13 REAL ESTATE COUNSELORS CLEVELAND AREA OVERVIEW Cleveland is strategically located half-way between New York and Chicago and is at the center of a 600-mile circle that contains one-half of the population of the United States and Canada. Greater Cleveland is located on the south shore of Lake Erie, one of the world's largest bodies of fresh water, extending 100 miles along the shoreline and more than 40 miles inland. The city of Cleveland contains a total land area of approximately 76 square miles. The metropolitan area is generally defined as the Cleveland-Lorain-Elyria PMSA (Primary Metropolitan Statistical Area). This area, which contains approximately 1,519 square miles, encompasses Ashtabula, Cuyahoga, Geauga, Lake, Lorain and Medina counties. POPULATION Cleveland is the nation's 24th largest city with a 1990 Census population of 505,616 persons. The six-county PMSA has a 1996 estimated population of 2,227,977 persons, making it the 20th most populous metro area in the nation. The PMSA is by far the largest in Ohio, with 28.0 percent more residents than Cincinnati and 35.0 percent more residents than the state capital, Columbus. Cuyahoga County, which includes the city of Cleveland, and measures 456 square miles, had a 1990 population of 1,412,140. The 1996 estimated population for Cuyahoga County stands at 1,394,647 persons.
Population Data Population Sample Estimated Projected % Change % Change % Change 1990 1996 2001 (1980-90) (1990-96) (1996-2001) ---- ---- ---- --------- --------- ----------- Cuyahoga County 1,412,140 1,394,647 1,370,201 -0.6% -0.2% -0.4% Cleveland PMSA 2,202,069 2,227,977 2,233,324 -0.3% +0.2% 0.0% Source - Urban Decision Systems (Regional Economic Demographic Fact Sheet, Cuyahoga County)
As shown, the six-county PMSA experienced an overall population decrease of 0.3 percent between 1980 and 1990; however, this trend reversed itself and a 0.2 percent total population gain between 1990 and 1996 has been attained. The chart on the preceding page indicates that total population LANDAUER 14 REAL ESTATE COUNSELORS should remain unchained in the PMSA through 2001. Another widely recognized demographic service firm, DRI/McGraw-Hill forecasts a negligible 0.1 percent population gain for the Cleveland metropolitan area between 1995 and 2000. According to this study, Cleveland's population growth through 1997 is projected to be the eight-slowest pace in the nation. Cuyahoga County on the other hand experienced a population decline of 0.2 percent between 1990 and 1996, following a decline of 0.6 percent during the period 1980 to 1990. The chart on the preceding page forecasts a further drop of 0.4 percent between 1996 and 2001. Most of the County's population loss is a result of suburbanization, a common trend of other major U.S. cities. Thus far however, the impact of the population migration to the suburban areas thus far has had a minimal impact on the downtown work force, due in part to the region's transportation network. TRANSPORTATION Highways - Area highways include six interstate highways, three of which (I-71, I-77, and I-90) traverse downtown Cleveland; five U.S. highways, all of which lead to downtown Cleveland; and 23 state highways. The proximity of the Cleveland metropolitan area to the Ohio Turnpike and the north/south interstate system make it ideal for motor transportation and the interstate network furnishes quick access to other major U.S. urban centers. Cleveland is located within 700 miles of 65 percent of the nation's manufacturing plants. Mass Transit System - The mass transit system in the Cleveland area covers all of Cuyahoga County and extends into the counties of Lorain, Medina, Geauga, and Lake. It includes a rail rapid transit facility from the Cleveland Hopkins International Airport in southwest Cuyahoga County to downtown Cleveland, with feeder bus routes throughout the county and into four surrounding counties. All three rail rapid transit systems feed into the downtown, while a loop bus system provides additional service throughout the city. LANDAUER 15 REAL ESTATE COUNSELORS Railroads - Cleveland and northeastern Ohio are served by Chessie System, Norfolk & Western, and Conrail. Because of Cleveland's geographic location, first-day service by rail is provided to many key markets including Pittsburgh, Detroit, Chicago, and Cincinnati. Most major markets in the East, Midwest and South can be reached in the second day by rail service. Ports - The St. Lawrence Seaway provides Cleveland with an international port. This port is the largest on Lake Erie and the third largest U.S. port on the Great Lakes, having 10 miles of docks along the Cuyahoga River. Air Transportation - Cleveland Hopkins International Airport is the region's principal airport. Thirty major metropolitan markets in the United States and Canada are served, with over 60 major cities served by non-stop or direct flights. In addition, the Burke Lakefront Airport in downtown Cleveland provides private commuter service and facilities for business jets. The Cuyahoga County Airport, located 20 miles to the east, also provides excellent facilities and services for business jets and is the primary general aviation reliever to the Cleveland Hopkins International Airport. ECONOMY Cleveland is a midwestern center for Finance, Insurance and Health Care. Regionally, only Chicago, Detroit, Minneapolis and St. Louis have more workers in the combined Finance, Insurance and Real Estate (FIRE) sector, while Health Care accounts for more than one-third of all services employment. Due to the area's location along Lake Erie, its proximity to Detroit, Buffalo and Canada, as well its position between the Northeastern states and the industrial Midwest, Cleveland has attracted a large number of transportation and warehousing facilities. However, with Manufacturing accounting for nearly 20.0 percent of all non-farm employment, Cleveland's economy remains dependent of the fortunes of this cyclically sensitive sector. Cleveland's local economy is especially dependent upon the LANDAUER 16 REAL ESTATE COUNSELORS durable goods-producing industries, which effectively accounts for nearly 69.0 percent of all manufacturing jobs. Cleveland's dominant primary and fabricated metals industries supply the region's massive auto industry, including two assembly plants within the PMSA. Non-electrical machinery is the area's second-largest industrial employer, producing metal-working machinery and general heavy-industrial machinery. Cuyahoga County's largest employers are listed as follows: Cuyahoga County's 15 Largest Employers (1994 - 1996) Company 1994 1995 1996 - ------- ---- ---- ---- United States of America 17,200 17,898 17,540 Cuyahoga County 9,917 9,643 9,382 Cleveland Clinic Foundation 9,208 9,420 9,445 University Hospitals N/A 8,972 9,206 Cleveland Board of Education 8,950 8,881 8,520 City of Cleveland 8,210 8,297 9,327 Ford Motor Company N/A 7,406 8,000 KeyCorp 6,888 6,982 6,582 LTV Corporation 6,540 6,381 5,979 National City Corporation 4,170 5,000 3,556 MetroHealth System 5,165 4,862 4,769 Ameritech Ohio N/A 4,497 4,703 Meridia Health System 4,131 4,469 4,382 Case Western University 4,271 4,377 4,492 State of Ohio 3,942 3,955 3,739 Source - Crain's Cleveland Business EMPLOYMENT FORECAST PROFILE DRI/McGraw-Hill studies indicate that Cleveland's overall job growth, restrained by its dependence on a shrinking Manufacturing sector and ongoing out-migration, will average a paltry 0.5 percent rate per year between 1998 and 2001, among the slowest in the nation. Consequently, now that strong cyclical gains in Manufacturing have come to an end, Cleveland must turn to its non-manufacturing sectors to support growth. Sluggish population gains however are expected to restrain growth locally. Still, it is LANDAUER 17 REAL ESTATE COUNSELORS expected that the Service sector will continue to dominate job growth among Cleveland's non-manufacturing sectors, with most of the growth concentrated in business services. It is generally believed that the fastest growing segment of business services, namely personnel services, will see its robust expansion continue. It is also believed that slow population gains will limit the demand for personal and education services, while growth in health care will continue to be restrained by structural changes in the industry. As a whole, job growth in Cleveland's Service sector should average 1.4 percent per year, which is still considerably slower than the rate expected for the average Top 100-Plus PMSAs. Cuyahoga County has recently under-performed the 6-county PMSA, posting a 0.1 percent decline in total non-agricultural employment between 1990 and 1996, as evidenced in following chart compiled by Data Resources, Inc. However, from 1996 to 2001, total non-agricultural employment is expected to parallel those gains anticipated in the PMSA with a growth rate of 0.6 percent. Like the PMSA, most of the job gains in Cuyahoga County should be realized in the Trade, FIRE and Service sectors, while continued job loss is anticipated in the Mining and Manufacturing sectors. Non-Agricultural Employment Forecast Cuyahoga County (1990-2001) % Change % Change Industry 1990 1996 2001 1990-96 1996-01 ---- ---- ---- ------- ------- Mining 456 782 654 8.1% -2.1% Construction 26,515 28,119 28,031 1.0% -0.1% Manufacturing 163,436 139,192 129,807 -2.6% -1.4% Note (a) 38,373 35,996 35,355 -1.1% -0.4% Trade 188,186 182,770 190,967 -0.5% 0.9% FIRE 52,922 59,759 61,669 2.0% 0.6% Services 226,873 246,244 269,260 1.4% 1.8% Government 99,795 100,113 101,803 0.1% 0.3% TOTAL 796,556 792,921 817,545 -0.1% 0.6% (a) Transportation and Public Utilities Source - Data Resources, Inc. LANDAUER 18 REAL ESTATE COUNSELORS Employment growth on both a regional and county-wide basis is expected to lag behind those growth projections for the State of Ohio and United States. NOACA EMPLOYMENT PROJECTIONS In a study of employment projections released in April, 1997, the Northeast Ohio Areawide Coordinating Agency estimated non-agricultural regional employment at 1,201,000 in 1995. A copy of this study is presented in the Addenda. Per NOACA statistics, the two largest employment industries as of 1995 were the service sector (30.5 percent) and the manufacturing sector (19.4 percent). NOACA projects that by the year 2000, total non-agricultural employment will increase by 2.4 percent, or at a compound annual rate of nearly 0.5 percent. By the year 2000, the service sector is expected to increase its share of total employment to 32.1 percent, while the manufacturing sector is projected to decline its share to 17.6 percent. The 1990 to 1996 regional unemployment statistics analyzed by NOACA are also presented in the Addenda. Per this table, Cuyahoga County had a 1996 unemployment rate of 5.0 percent, slightly higher than the regional rate of 4.9 percent. NEIGHBORHOOD ANALYSIS Westgate Mall is located in Fairview Park, Cuyahoga County, Ohio, approximately 8 miles west of Downtown Cleveland. The immediate area has a mix of residential and commercial development. Commercial development primarily consists of retail, office and restaurant improvements. Little land remains for additional development. Fairview Park is accessible to the area's Interstate Highway System and Westgate Mall itself is situated less than one mile from Interstate Highway I-90 and two miles north of Interstate Highway I-480. East-West traffic arteries within a one mile radius include Detroit Road (Route 2), Center Ridge Road (Route 22) and Lorain Road (Route 10), while north-south traffic arteries primarily include Wooster Road and West 210th Street. Fairview Park is less than 6 miles southwest from Downtown Cleveland and 2 miles north of Cleveland Hopkins International Airport. LANDAUER 19 REAL ESTATE COUNSELORS CONCLUSION The long-term outlook for the metropolitan Cleveland economy is justifiably favorable. Economic restructuring beginning in the early 1980s has brought about a greater balance in the employment sectors, resulting in a healthier and stronger economy better able to retain stability through a variety of economic cycles. Population losses have been stemmed in the metropolitan area and the long-term outlook for continued economic growth in the area is favorable. Population growth, however, is expected to be negative for the city of Cleveland during the remaining part of the decade. Most of the population and employment growth in the 1990s will take place in the collar counties, with overall employment growth in Cuyahoga County likely to remain flat. LANDAUER 20 REAL ESTATE COUNSELORS RETAIL MARKET OVERVIEW TRADE AREA DELINEATION The ability of a retail store or group of stores to attract customers from within a specific market is limited by physical (geographic) are retail merchandising constraints. Consideration must be given to such factors as distance, driving times, the access convenience provided by existing and future highway systems, distribution of the resident population within the related region, and the natural as well as man-made barriers which direct or channel the movement of residents within the area. Other factors such as merchandising profile and strength exhibited by on-site retailers relative to competing shopping facilities may also have a profound impact on the trade area's definition. Typically, the majority of a mall's recurring sales are generated by residents located within a "Primary Trade Area", while additional sales are generated by persons residing outside of this area, either in a "Secondary Trade Area" or outside of the region altogether. The subject property is a suburban mall, located in an area having a high population density. According to the General Manager (David Reed), the Primary Trade Area includes Bay Village, Lakewood, Rocky River, Fairview Park, Westlake and North Olmstead. According to Mr. Reed, almost 80.0 percent of all shoppers reside in those communities. In Mr. Reed's opinion, 10.0 percent of the remaining shoppers come from the Secondary Trade Area, while the other 10.0 percent are in-flow consumers. The distance of the trade area boundaries vary from the subject, but most of the shoppers appear to come from an area within 10- to 15-miles. For this analysis, we have chosen an area contained within a 10-mile radius from the intersection of Centeridge Road and West 210th Street. TRADE AREA POPULATION Per our review of Demographic Trends published by Urban Decision Systems, Inc., the current population within a 10-mile ring of Westgate Mall is estimated at 640,546 residents. In 1990, the Census indicated a population count of 638,124 residents within the 10-mile ring, suggesting that LANDAUER 21 REAL ESTATE COUNSELORS population has remained relatively level over the past six year period. Urban Decision Systems projects a slight decline in population to a level of 636,827 residents by the year 2001. The table below shows population projections for both the subject's trade area and the Cleveland-Lorain-Elyria, OH, PMSA. Westgate Mall - Population Estimates 1990 Census 1996 Est. 2001 Proj. ----------- --------- ---------- Trade Area 638,124 640,546 636,827 Cleveland PMSA 2,202,069 2,227,977 2,233,324 Source -Urban Decision Systems, Inc. The preceding table indicates that population in the trade area is expected to decline by a compound annual rate of 0.1 percent between 1996 and 2001, in contrast to the PMSA, which is not expected to show any movement at all. The following table displays the number of households included in the trade area, as estimated by UDS. Similar to population, the number of households in the trade area is projected to decline by the year 2001, unlike the PMSA, which is anticipated to grow at a compound annual rate of 0.1 percent. Nevertheless, the growth/decline represents relative stability in both population and households. Westgate Mall - Household Estimates 1990 Census 1996 Est. 2001 Proj. ----------- --------- ---------- Trade Area 254,911 263,028 262,895 Cleveland PMSA 845,186 876,236 881,190 Source - Urban Decision Systems, Inc. LANDAUER 22 REAL ESTATE COUNSELORS INCOME ESTIMATES AND COMPARISONS The income characteristics of the subject property's trade area has a direct bearing on the property's economic viability. The following table presents a comparison of the income characteristics of the subject property's trade area to the Cleveland-Lorain-Elyria, OH, PMSA and the nation. Westgate Mall - Average Household Income 1990 Census 1996 Est. 2001 Proj. ----------- --------- ---------- Trade Area $36,951 $41,680 $49,326 Cleveland PMSA $37,701 $43,018 $51,319 United States $38,464 $44,680 $53,841 Source - Urban Decision Systems, Inc. Unlike population, the average household income for the trade area is projected to increase to $49,328 by the year 2001, indicating an 18.4 percent gain over the 1996 level of $41,680. The above chart indicates that the average household income level for the trade area will grow at a compound annual rate of 3.4 percent, a level slightly lower than the 3.6 and 3.8 percent rates forecast for the PMSA and United States, respectively. We note that the estimated average household income for the trade area is below the PMSA and U.S. average. TRADE AREA EXPENDITURE POTENTIAL The retail expenditure potential of the subject's trade area is estimated by a three-step process: first, the total personal income of the trade area is calculated by multiplying the average household income by the number of households; second, the total personal income is multiplied by a disposable income factor (income remaining after taxes); and third, disposable income is multiplied by a GAFO factor (expenditures for general merchandise, apparel, furnishings, and other retail purchases) to estimate the amount of trade area income available for retail purchases. LANDAUER 23 REAL ESTATE COUNSELORS The disposability factor for the state of Ohio was 87.14 percent in 1990, and is estimated at 86.85 percent for both 1996 and 2001. The general benchmark for GAFO expenditures generally is estimated to be 20.0 percent of disposable income. For the 6 year period between 1990 and 1996, GAFO sales within the subject's 10-mile trade ring increased by a compound annual rate of 2.65 percent. For the 5-year period between 1996 and 2001, GAFO sales for the trade ring are expected to increase by 3.43 percent per year, compounded. For purposes of comparison, the expenditure calculations for the subject trade area are illustrated below for the years 1990, 1996 and 2001. Westgate Mall - Trade Area GAFO Expenditures 1990 1996 2001 ---- ---- ---- Population 638,124 640,546 636,827 Total Households 254,911 263,028 262,895 Average Household Income $ 36,951 $ 41,680 $ 49,326 Total Income (Million) $ 9,419 $ 11,055 $ 13,084 Disposability Factor 0.871 0.869 0.869 Disposable Income (Million) $ 8,208 $ 9,601 $ 11,363 GAFO Factor 0.20 0.20 0.20 GAFO Expenditures (Million) $ 1,642 $ 1,920 $ 2,273 Source - Urban Decision Systems, Inc., Landauer Associates, Inc. In our analysis, we are projecting total first year mall sales (FY 1998) to be $100,556,000 (anchors included), which is expected to increase to $124,410,000 by FY 2002, indicating a 4.1 percent compound annual growth rate. Our sales projections suggest that Westgate Mall is expected to capture 5.2 percent of potential trade area GAFO expenditures in 1997, increasing to a 5.5 percent capture rate by 2001. Typical capture rates for regional malls range between 7.0 and 15.0 percent of GAFO. The subject's capture rate is below the range given the presence of 3 regional malls within the trade area. Growth rates for retail sales and market rents used later in this appraisal are developed based on projected growth in trade area retail expenditures. Utilizing the above analysis, historic and projected compound annual sales growth figures are extracted and analyzed. In this analysis, we have applied a LANDAUER 24 REAL ESTATE COUNSELORS general inflation rate of 3.5 percent. Tenant sales were grown at 4.0 percent, reflecting the addition of Kohl's as an anchor. Competitive Property Analysis Westgate Mall is a strong performer within its market. The center's location, size and tenant mix all act to enhance its competitive position and the merchandise mix of the center appears to cater well to the population within its market. Numerous department stores and retail centers in Metro Cleveland provide competition for the subject. Following is a summary of those malls which we consider to be most competitive with Westgate. o Great Northern Mall - located in N. Olmstead, just north of Interstate Highway I-480 along Great Northern Boulevard, 4 miles southwest of the subject, provides the primary competition. This mall is owned by CGR Advisors and was originally built in 1976, expanded in 1987 and renovated in 1992. The 891,479 square foot center is anchored by JC Penney, Kaufmann's and Sears. It is rumored that a Dillard's will be added near the mall's South Court; however, no announcements have been made. Local brokers believe the area in question can accommodate a 140,000 square foot anchor. Located adjacent to the mall are the Plazas at Great Northern, a 70-store power-center featuring Kids `R Us and Marshall's. During our inspection of the property on September 2, 1997, we encountered 3 in-line vacancies. Leasing representatives of The Richard Jacobs Group indicated that retail sales at Great Northern Mall have reportedly dropped between 5.0 and 10.0 percent since the opening of SouthPark Center. o SouthPark Center - located along State Route 82, one mile west of Interstate Highway I-71, 10 miles south of the subject, provides secondary competition. This two-level mall is owned by The Richard Jacobs Group and first opened in November LANDAUER 25 REAL ESTATE COUNSELORS 1996. The 1,384,555 square foot center is anchored by JC Penney, Kaufmann's, Sears, Dillard's and Kohl's. SouthPark Center is the largest shopping mall in Cleveland. During our inspection of the property on September 2, 1997, we encountered 12 in-line vacancies. SouthPark's contemporary design accommodates bay depths of approximately 100 feet. o Parmatown Mall - located at the intersection of Ridgewood Drive and Ridge Road, 8 miles southeast of the subject in Parma, provides secondary competition. This mall is owned by Forest City Enterprises and was originally built in 1956 and was renovated in 1986. The 1,300,000 square foot center is anchored by JC Penney, Kaufmann's and Dillard's. The mall layout is circuitous. During our inspection of the property on September 2, 1997, we encountered 13 in-line vacancies. Leasing representatives of The Richard Jacobs Group indicated that retail sales at Parmatown Mall have dropped between 20.0 and 25.0 percent since the opening of SouthPark Center. o Midway Mall - located at the intersection of Interstate Highway I-90 and Route 57, 13 miles northwest in Elyria, provides secondary competition. This mall is owned by The Richard Jacobs Group and was originally built in 1966 and expanded in 1991. The 1,184,004 square foot center is anchored by JC Penney, Kaufmann's, Sears and Dillard's. Located adjacent to the mall are freestanding restaurants and big-box retailers Kmart and Wal-Mart. During our inspection of the property on September 3, 1997, we encountered 13 in-line vacancies. With the noted exception of Great Northern Mall, we have no knowledge of any new retail center additions which are currently planned for this market area that would have an immediate impact on the performance of Westgate Mall. Site Plan [GRAPHIC OMITTED] LANDAUER 26 REAL ESTATE COUNSELORS PROPERTY DESCRIPTION SITE ANALYSIS The Westgate site is located at the southeast corner of Center Ridge Road and West 210th Street, in Fairview Park, Cuyahoga County, Ohio. The site measures a total of 50.8 acres, or 2,211,106 square feet, and contains 1,010 feet of frontage along the south side of Center Ridge Road, 1,580 feet of frontage along the east side of West 210th Street, and 950 feet of frontage along the west side of Linden Road. Access is most direct along Center Ridge Road. A site plan is presented on the facing page. Parking is provided for 3,719 cars. Surrounding land uses include commercial properties to the north, a medical building, high school and park to the south, mid-rise offices and a bank to the east, and residential homes to the west. All standard public utilities are available to the site - water/sewer service is provided by the City of Cleveland, electricity by the Cleveland Illuminating Co., natural gas by the East Ohio Gas Co., and telephone service by Ameritech. No soils tests were available for our review, and we assume that no adverse soil conditions exist. The site is subject to various utility easements, setback lines and cross-reciprocal easements that are standard in most malls. The site is irregular in shape, and the topography is basically level. The site is identified on Flood Insurance Rate Map 390108 0005B dated February 4, 1983, and is part of the Zone C, and area outside of the 500-year flood plain. ZONING The subject property is zoned General Business "A" (GB-A), by the City of Fairview Park, a zoning classification that allows a variety of retail, office, hospital and hotel use and development. It appears that the subject improvements are in conformance with the zoning ordinance. Applicable portions of the zoning ordinance are retained in our files. LANDAUER 27 REAL ESTATE COUNSELORS REAL ESTATE TAXES The subject falls within the tax jurisdiction of Cuyahoga County, Ohio. Real estate taxes in the State of Ohio are assessed at 35.0 percent of the property's estimated Market Value. Real estate taxes are due and payable in two installments. The 1997 Assessments and Tax Rates were not yet available as of the effective date of this analysis. 1997 is a reassessment year. The subject property consists of two tax parcels, 304-200-01 and 323-340-05. Total 1995 Taxes, payable in 1996 equated to $445,352, based on a total Assessed Value of $22,194,742. Total 1996 Taxes, payable in 1997, equate to $680,938, and are based on a total Assessed Value of $31,878,257. The new Kohl's is currently assessed at a 100.0 percent level of completion. According to representatives of the Cuyahoga County Auditor's Office, 1997 is an update year for assessments. The new values were not yet available; however, as of September 9, 1997, county representatives indicated that 2.0 to 3.0 percent assessment increases could be expected. Over the long-term, we anticipate property tax increases will average 3.5 percent per annum. LANDAUER 28 REAL ESTATE COUNSELORS IMPROVEMENTS Westgate Mall is a single-level, masonry and steel, regional shopping center situated on a 50.8-acre site. A breakdown of the center's square footage is as follows. Westgate Mall Area Delineation (SF) In-Line Tenants 215,771 Food Court 5,060 Peripherals 67,343 Dillard's North 194,511 Kohl's 94,500 General Cinema 24,974 Applebee's 5,001 Longhorn Steaks 5,320 ------- Total (Owned) Appraised 613,650 Dillard's South 172,000 Total (Mall) 785,650 On the initial date of inspection (September 3, 1997), the permanent enclosed mall shops were 86.7 percent leased and occupied. Including the anchor stores, outlot tenants, and kiosks, the mall was 95.2 percent occupied. Beginning January 1, 1998, pending the completion of 3 lease agreements, we anticipate the in-line occupancy level to increase to 90.5 percent. For calculating occupancy, we have treated temporary tenants as vacant units. The following is a brief description of the physical components of Westgate Mall. Foundations: Slab on grade. Exterior Walls: Brick veneer with steel column covers. Roof: Graveled built-up roofs, single ply membrane, fiber and single ply flashing and skylights. The food court and west mall have proprietary standing seam metal roofs. Ceilings: Acoustic tile mounted with exposed or concealed splines. LANDAUER 29 REAL ESTATE COUNSELORS Floor: Generally carpeted or finished wood, with some quarry or ceramic tile. Lighting: Common lighting is provided via post light fixtures with flood lights and metal halide down lights. Skylights are located throughout the mall area. Exterior lighting is pole-mounted. HVAC System: All mall tenants are heated by individual roof-mounted package units. Anchor tenants have separate HVAC systems. Dillard's Home Center has a central boiler, pumps, Chiller and rooftop cooling tower. Fire Protection: The shopping center is fully sprinklered with a wet system. Condition: Based on our observations, the property is considered to be in good condition. The center is of average-quality construction with an appealing single-level design. Circulation and parking are adequate and appropriate for a multi-tenant shopping center. Based on information provided in a December 1996 appraisal report prepared by Bach Thoreen McDermott Inc., The Jacobs Group has reportedly implemented a five-year capital improvement plan to address pavement repairs, metal door and frame replacements, miscellaneous exterior repairs, roof revisions, some HVAC replacement, and ADA compliance issues. The total 5-year expenditure, as budgeted by the Jacobs Group is $1,338,900, which we have incorporated into our annual cash flow projections on a straight line basis with equal annual installments of $267,780 for Calendar Years 1997 through 2001. LANDAUER 30 REAL ESTATE COUNSELORS HIGHEST AND BEST USE Highest and best use is defined in The Appraisal of Real Estate, 10th Edition, as: The reasonably, probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible and that results in the highest value. Inherent in this definition is the separation of land and improvements. That is, the highest and best use for the land, as if vacant and available, could be different from the highest and best use of the improved property. All criteria must be met separately for both land and improvements. AS IF VACANT The subject property is located on a well-traveled commercial artery. The best potential use would be one that benefits from the site's exposure and accessibility. The existing terrain is suitable for almost any type of commercial development. The property is zoned for commercial development and has been approved as a regional shopping center site by the City of Fairview Park. Surrounding land uses include residential, commercial and office developments with commercial use as the dominant use. Considering these factors, the Highest and Best Use of the site, if vacant, would be for a regional shopping center. AS IMPROVED The appraised property is improved with a regional shopping mall. The design and layout of the center are suitable for typical tenant needs. Having analyzed competing retail centers, as well as the property's location, design, and condition, we conclude that the present use represents the Highest and Best Use of the site, as improved. LANDAUER 31 REAL ESTATE COUNSELORS VALUATION METHODOLOGY All three approaches to value - the Cost Approach, Sales Comparison Approach, and Income Capitalization Approach were considered in the valuation of the subject property. The Cost Approach is based upon the theory of substitution, which implies that a prudent investor will not pay more to purchase a property than it would cost to create a comparable substitute property. The value of the underlying land as if vacant and available for development is first estimated. To this is added the estimated cost of reproducing or replacing the subject property, less the estimated amount of any depreciation (physical and functional) and obsolescence (economic). The Cost Approach is not used in this appraisal are agreed to by the client. The Sales Comparison Approach involves a direct comparison of the subject property with similar properties that have sold, in order to derive an estimate of market value. It is also based on the theory of substitution, and implies that a prudent investor would not pay more to buy the subject property than he would to buy an equally desirable substitute property. Because of wide differences in age, condition, tenancy, location, and (most importantly) anticipated net income, this analysis often provides only broad indications of general valuation parameters, such as price per square foot of gross building or rentable area, and overall capitalization rates. The Income Capitalization Approach is usually regarded as the primary indicator of value when analyzing income-producing properties. Either through the direct capitalization of net income or the discounting of projected cash flows into a present worth indication, the analyst has reliable tools with which to formulate an estimate of market value. Essential to this approach is an awareness of market rents, operating costs, current investor yield requirements, and the relative risks associated with varying types of investment instruments. Based on the methodologies of the three approaches to value, we have conducted our analysis of the subject property. Our assumptions and conclusions for each approach are presented in the following sections of the report. LANDAUER 32 REAL ESTATE COUNSELORS COST APPROACH The Cost Approach was considered but not employed for three reasons - (a) the lack of comparable construction cost data; (b) the inappropriateness of the valuation technique; and (c) the lack of comparable land sales suitable for regional mall development. Income producing properties like the subject property do not lend themselves to reliable estimates of value by the Cost Approach. The purpose of this appraisal is to estimate the market value of the Leased Fee Interest. Because of the potential impact of above or below market leases, specific anchor tenant operating agreements, ground leases, and other unique lease requirements oftentimes found in regional malls, the Cost Approach cannot accurately measure the effect of such factors. In addition, the Cost Approach does not reflect the motivations inherent in purchasing income-producing properties. Shopping centers in many instances require intensive leasing, management and operational skills in order to maximize their performance. The above relationships are economic in nature, and in our opinion are best measured by proper application of the Income Approach to value. As a result of this, we have not undertaken an analysis of the property by the Cost Approach, as previously agreed to by the client and Landauer. LANDAUER 33 REAL ESTATE COUNSELORS SALES COMPARISON APPROACH The Sales Comparison Approach is based on the principle of substitution, which implies that a prudent investor will not pay more to buy a property than what it would cost to purchase an equally desirable or substitute property. The Sales Comparison Approach is a valuation technique by which market value is estimated by direct comparison of the subject property with current offerings and/or actual sales transactions of like or similar properties that occurred recently. The process is one of analyzing the listing or sale, and correlating the characteristics of the property involved and the known details of the transaction so that such data can then be adjusted relative to the subject property. To apply the Sales Comparison Approach, an appraiser considers data on sales, contracts, offers, refusals, and listings of properties considered comparable to the subject property. First, the appraiser thoroughly researches the prices, real property rights conveyed, financing terms, motivations of buyers and sellers, and transaction dates of the sale properties. Then, details on each property's location, physical and functional condition, and income producing characteristics must be examined. The degree of reliance placed on the Sales Comparison Approach is directly related to the following. 1) The degree of comparability of each property with the subject property; 2) The date of the sale in relation to the date of the current appraisal, taking into account market changes during the interim; 3) Reliability of the sales data; and 4) Appropriate adjustments for unusual conditions, if any, affecting price or terms of the sale. LANDAUER 34 REAL ESTATE COUNSELORS ELEMENTS OF COMPARISON The appraiser considers and compares all differences between the comparable properties and the subject property that could affect value. Adjustments for dissimilarities are made to the price of each comparable property to make the comparable equal to the subject on the date of the appraisal. There are several common elements of comparison that should always be considered in a sales comparison analysis. Each is described as follows: Real Property Rights Conveyed: A transaction price is always predicated upon the real property interest conveyed. Many types of real estate, particularly income producing property, are sold subject to existing leases. The revenue generating potential of a property is often fixed or limited by the terms of existing leases. In the valuation process, adjustments must be made to any limitations which may inhibit the property's ability to generate a level of net operating income constrained only by market events. Financing Terms: The transaction price of one property may differ from that of an identical property due to different financing arrangements. Estimates of market value are generally based upon an all cash basis or subject to financing terms typically available in the market. Calculations for atypical financing vary depending upon the type of financing arrangement and the market perceptions of the added value. These adjustments are commonly referred to as "cash equivalency" adjustments. Conditions of Sale: These adjustments reflect the motivations of the buyer and the seller. The motivations of the sale must be thoroughly researched before an adjustment is made. Date of Sale: Market conditions generally change over time, but the date of an appraisal is a specific point in time. Therefore, past sales must be examined in light of the direction of change LANDAUER 35 REAL ESTATE COUNSELORS between the sale date of the comparable and the valuation date of the subject property. This adjustment reflects change in value and is often called a "time adjustment". Location: An adjustment may be required when the locational characteristics of a comparable property are different from those of the subject property. Adjustments for location are usually expressed as percentages that reflect the increase or decrease in value attributable to the property's location or neighborhood. Physical Characteristics: If the physical characteristics of a comparable property and the subject property differ. Dissimilarities may require comparison and adjustment to equal the attributes of the subject. Physical divergence may include the magnitude of improvement, the quality of construction, age/condition, functional utility, site size and amenities. Income Characteristics: Factors affecting the income a property can generate include the quality of management and resulting efficiencies of operations, as well as market penetration, average rents and growth rates. For regional malls, the number and type of anchor tenants is a key consideration. APPLICABILITY OF ADJUSTMENTS In practice, when considering the purchase of a regional mall, buyers tend to relate one mall to another in income oriented terminology i.e., discount rates, capitalization rates. The rating process would include judgments of a center's location, market potential, development or expansion potential, and competitive advantage. This information would form the conclusions relating to capitalizing net income or discounting cash flows. Very little credence is given to the usual comparison factors utilized in the Sales Comparison Approach such as price per square foot, or gross income multiplier. The presence or absence of owned anchor stores, ground leases or other factors tend to result in a disparate price per square
REGIONAL MALL SALES Owned Sale Property Year Date SF Sale Interest GLA Occ, No. Location Built of Sale Sold Price Purchased $/SF of At Sale ================================================================================================================ 1 Towne East Mall 1971 Pending 426,000 $112,500,000 100.0% $264 93.00% Mesquite, TX 1996 2 Silver Lake Mall 1989 Jun-97 324,300 $38,000,000(2) 70.0% $0 99.40% Coeur d'Alene, ID $27,000,000(3) Leased Fee 3 Visalia Mall 1963 Jun-97 439,500 $38,000,000 100.0% $86 95.30% Visalia, CA 1989 Leased Fee 1995 4 South Towne Mall 1986 Mar-97 995,900 $98,000,000 100.0% $98 83.00% Sandy, UT 1994 Leased Fee 5 Valley Fair Mall 1970 Dec-96 608,000 $37,300,000 100.0% $61 85.00% West Valley City, UT 1986 Leased Fee 1987 6 Old Orchard 1956 Dec-96 630,000 $266,000,000 100.0% $421 88.00% Skokie, IL 1995 Fee Simple 7 St. Clair Square 1978 Nov-96 280,000 $86,400,000 100.0% $309 94.00% Fairview, IL 1992 Fee Simple 8 Park Mall 1974 Oct-96 447,300 $50,000,000 100.0% $112 85.00% Tucson, AZ Leased Fee 9 Valley View Center 1975 Oct-96 704,600 $85,500,000 100.0% $121 85.00% Dallas, TX 1993 Leased Fee 1996 10 Paseo Nuevo 1990 Jun-96 158,120 $37,000,000 100.0% $236 88.00% Santa Barbara, CA Leasehold 11 Grand Teton Mall 1984 Apr-96 521,000 $34,375,000 100.0% $66 85.00% Idaho Falls, ID 1990 Leased Fee 12 Charlestowne Mall 1991 Apr-96 744,901 $85,000,000 32.0% $114 79.00% St. Charles, IL 1993 Partnership 1995 Interest 1st (1) Year Final Sale Price/ Sale Property OAR Year Mall Sales Mall Sales No. Location COC OAR IRR Per SF Ratio ================================================================================== 1 Towne East Mall 8.80% -- -- $300 0.88 Mesquite, TX 2 Silver Lake Mall 6.51% -- -- N/A N/A Coeur d'Alene, ID 3 Visalia Mall 10.29% -- -- N/A N/A Visalia, CA 4 South Towne Mall 8.60% -- -- $249 0.91 Sandy, UT -- 1996 5 Valley Fair Mall 11.l0% -- -- $250 0.57 West Valley City, UT 6 Old Orchard 8.10% 7.90% N/A $310 1.36 Skokie, IL 7 St. Clair Square 8.65% 8.90% 11.00% $330 0.94 Fairview, IL -- 1996 Projected 8 Park Mall 10.00% -- -- $225 0.64 Tucson, AZ -- 9 Valley View Center 9.36% 9.00% -- $228 0.80 Dallas, TX 1996 10 Paseo Nuevo l0.30% -- -- $340 0.69 Santa Barbara, CA -- 11 Grand Teton Mall 10.24% -- -- $240 0.73 Idaho Falls, ID -- 12 Charlestowne Mall 9.56% -- 12.0% $202 0.56 St. Charles, IL --
(1) Includes only enclosed mall area. (2) Represents 100.0 percent interest. (3) Represents 70.0 percent interest. LANDAUER 36 REAL ESTATE COUNSELORS foot comparison, while gross income characteristics can vary widely depending on escalation practices, real estate tax levels, etc. The foregoing factors make it very difficult to adjust comparison factors from one mall to another. COMPARABLE SALES DATA Landauer's files contain information on over 120 sales of regional malls since 1985. Of these sales, the unit prices have ranged from $98 to $461 per square foot of gross leasable area. The unit prices are not only influenced by the quality of the mall but also by the inclusion of anchor stores in the sale. Typically, where anchors are included, a lower unit price is indicated. From these sales, we have selected twelve of the most recent sales for analysis, as shown in the table on the facing page. Detailed narratives of these transactions are presented in the Addenda. During the late 1980s, there was an increasing spread between center sales productivity and purchase price per square foot, with ratios of 161.0 and 167.0 percent becoming increasingly common. This was significantly greater than the 100.0 percent ratios seen during the early 1980s. The high ratios in excess of 160.0 percent seen in the past reflected a recognition of the quality of the project and the potential on the part of the new investor to increase sales (either through remerchandising or expansion). In 1990 and 1991, buyers continued to examine the relationship between center sales productivity and purchase price, with the indicated ratios for centers of prime quality remaining virtually unchanged and ranging from 1.25 to 1.50, and in 1992, this ratio declined slightly and ranged from 1.00 to 1.24. In 1993 and 1994, the ratio generally centered around 1.0, unless significant vacancy or development rights were a factor. In the future, we would anticipate this differential to continue to narrow, as the market remains soft for many centers located throughout the country. LANDAUER 37 REAL ESTATE COUNSELORS Price Per Square Foot Of the comprehensive inventory of regional mall sales, most of the recent sales exclude anchor stores, or include just one of the anchors. All of the 12 sales selected for this analysis occurred in 1996 and 1997, but none are located in Ohio reflecting the general lack of market activity in the state. The selected sale prices range from $34,375,000 to $266,000,000, with corresponding unit prices ranging from $61.00 to $421.00 per square foot of gross leasable area. The subject property is considered a traditional mall typical of its vintage, and consistent with the type found in Metro Cleveland. Total first-year (FY-1998) retail sales from the Income Approach are projected to be $49,003,000 or $222 per square foot, excluding the anchors, peripheral tenants, and kiosks. As previously noted, all tenants included, sales are estimated to be $100,556,000 for the fiscal year ending August 31, 1998. In purchasing centers, investors analyze the relationship between purchase price and center sales productivity, as it is this productivity which contributes to a large portion of the value of the asset. Where expansion potential exists at a center, or anchor store improvements are excluded from the purchase, the ratio of purchase price to a center's sales tends to be greater than where there is no such potential or anchor store improvements are included. Over the past few years, the ratio of purchase price to mall tenant sales productivity has ranged upward from 80.0 for centers where anchor stores were not included. LANDAUER 38 REAL ESTATE COUNSELORS Sales Ratio Analysis Sales Price Sale Anchors Price Mall Sales to Center No. Property Included Per SF Per SF Sales Ratio --- -------- -------- ------ ------ ----------- 1 Texas 0 $264 $300 0.88 2 Idaho 3 $117 N/A N/A 3 California 2 $86 N/A N/A 4 Utah 4 $98 $249 0.91 5 Utah 3 $61 $250 0.57 6 Illinois 0 $421 $310 1.36 7 Illinois 0 $309 $330 0.94 8 Arizona 1 $112 $225 0.64 9 Texas 1 $121 $228 0.80 10 California 0 $236 $340 0.69 11 Idaho 4 $66 $240 0.73 12 Illinois 4 $114 $202 0.56 SP Ohio 0 N/A (FY-'98) N/A On a price/sales ratio basis, Westgate Mall is more suitably compared to the unanchored centers, due to the lack of historical sales volumes for Kohl's. As previously stated, total FY-1998 mall sales (anchors/peripherals/kiosks excluded) are projected to be about $222 per square foot of GLA, as calculated below. FY 1998 Retail Sales Total Mall Sales $49,003,000 Divided by In-Line/Food Court GLA 220,831 ----------- Mall Sales Per SF (Rounded) $222 The table on the facing page features regional mall sales and the rates and ratios associated with the transaction. In the columns entitled "sale price to center sales ratio" a pattern of ratios is discerned. Sales with anchors included in the transaction typically have a ratio of 0.39 to 1.22. When no anchors are included the ratio increases and is presented in a wider range of 0.50 to 1.50. Most ratios are within the range of 0.50 to 1.00; however, only two sales are less than 0.50, LANDAUER 39 REAL ESTATE COUNSELORS whereas 16 sales are greater than 1.00. It is our opinion that the ratio to be applied to the subject would be toward the high end of the range given the improvement in sales over the last few years. The subject's in-line/food court tenant sales for the fiscal year ending August 31, 1998 are projected to be $49,003,000, or $222 per square foot. Assuming a ratio range of 1.25 to 1.35 for the subject, based on $222 per square foot, would be $60,700,000 (Rounded), as calculated below. $222/SF x 1.25 x 220,831 square feet = $60,728,525, or $61,000,000 (Rounded) $222/SF x 1.35 x 220,831 square feet = $65,586,807, or $65,000,000 (Rounded) INDICATED VALUE RANGE BY THE DIRECT SALES COMPARISON APPROACH....................$61,000,000 to $65,000,000 ========================== LANDAUER 40 REAL ESTATE COUNSELORS INCOME CAPITALIZATION APPROACH Income property exists for the production of income. It is only natural that the value of an income producing property should be a function of earning power. This is the essence of the Income Capitalization Approach and all related theory and techniques. This is not to say that the production of income is necessarily the sole reason for such a property's existence, nor is it meant to suggest that factors not related to earning power cannot influence value. There is no question, however, that the expectation of monetary gain is the major consideration in the valuation of income properties. The theory of the Income Capitalization Approach is based on the present worth of the net income, cash flow, and reversionary value in the property it will produce during the remainder of its productive life over a reasonable holding (ownership) period. The Income Capitalization Approach, therefore, is a process of measuring or estimating the extent of future benefits which might reasonably be expected and translating these benefits into a present value at a particular point in time. DISCOUNTED CASH FLOW ANALYSIS ("DCF") ASSUMPTIONS We have utilized a computer-generated (Pro-Ject) discounted cash flow analysis program to estimate the future financial performance of the subject property. The assumptions are summarized below. LEASING SUMMARY The subject property has 70 enclosed mall, standard in-line retail compartments, 9 food court units, 6 kiosks, 3 anchors (one tenant owned), and 5 additional peripheral tenants, including two restaurants and a movie theater. A total of five tenants, Dillard's North, Kohl's, General Cinema, Applebee's and Longhorn Steaks are all reportedly under ground leases. As of the date of valuation, 13 in-line tenant compartments and 2 food court units were vacant, creating a mall occupancy level of 86.7 percent, excluding the anchors, peripheral tenants, and kiosks. Overall, the occupancy for Westgate Mall is Lease Plan [GRAPHIC OMITTED] LANDAUER 41 REAL ESTATE COUNSELORS 95.2 percent. Based on our assumptions regarding lease renewals, the average occupancy of the enclosed mall tenants over the 10-year holding period, kiosks included, is 96.6 percent. Following are brief summaries of the more pertinent details of the anchor leases, outlot leases and a general description of the enclosed mall lease terms, where available. Please note, however, that with the exception of the Dillard's North's lease agreement, we have only been provided with a rent roll report, and consequently complete details regarding renewal options and expense reimbursements were somewhat limited. A lease plan is presented on the facing page. ANCHOR LEASES Dillard's South Dillard's South is a 172,000 square foot, two-level, tenant-owned improvement that is not a part of this analysis. Their operating covenant with Westgate Joint Venture reportedly ends on December 31, 2000, however we have assumed that this tenant will remain throughout the holding period. Sales for 1994, 1995 and 1996 were $100, $107, and $100 per square foot, respectively. We do not have any information regarding CAM contributions (if any), and reserve the right to amend this appraisal should this data become available at a future date. Dillard's North Dillard's North is a 194,511 square foot, three-level, improvement reportedly under a ground lease that expires in 2008, but contains one 10-year renewal option at the same rent. The duplication of Dillard's effectively makes Westgate a two anchor mall. Sales for 1994, 1995 and 1996 were $129, $133, and $129 per square foot, respectively. Dillard's North is responsible for 1/12th of 105.0 percent of the actual common area expense (CAM). LANDAUER 42 REAL ESTATE COUNSELORS Kohl's The two-level 94,500 square foot Kohl's first opened in April 1996. Kohl's is under a 20-year ground lease, with two consecutive 10-year renewal options. Rent is currently $206,000 per annum until May 2001, at which time it becomes $236,900. The Kohl's lease was signed in July 1995. With the exception of sales breakpoints, no other information was provided. PERIPHERAL TENANTS (RESTAURANTS INCLUDED) Tenants in this group include Dillard's Home Store, the Ohio Motorists Association, General Cinema, Applebee's, and Longhorn Steaks. The Cinema and two restaurants all are under ground leases. Dillard's Home Store, together with the Ohio Motorists Association, form a freestanding building containing 67,343 square feet of gross leasable area. The Dillard's Home Store lease expires in August 2000; however, long-term renewal options are reportedly available at the same rent. Dillard's Home Store has been a tenant since 1975. Sales for 1994, 1995 and 1996 were $93, $82, and $78 per square foot, respectively. The Ohio Motorists lease agreement expires in January 1998, but has been reportedly been renewed for a period of 3 years (no work letter) at a rent of $9.26 per square foot. General Cinema is a freestanding movie theater complex measuring 24,974 square feet. This tenant is currently under a ground lease which expires in June 2009, subsequent to this analysis period. The Applebee's ground lease expires in November 2116, well beyond the holding period analyzed herein. The Longhorn Steaks ground lease apparently expires in February 2005 and we have assumed a lease renewal at similar terms. LANDAUER 43 REAL ESTATE COUNSELORS ENCLOSED MALL TENANT LEASES The mall tenant leases vary in length, but average about 6 to 10 years in duration. In most leases, enclosed mall expenses have a 15-percent administrative surcharge added for calculating recoveries on common area expenditures. Food Court tenants reportedly have additional charges passed through, however details of this recovery were not provided by the owner. MARKET RENT In estimating market rents for Westgate Mall, recent leases were analyzed, actual spaces were examined, and leasing plans were reviewed. As summarized in the Addenda, since January 1995, 29 leases have commenced (or been negotiated), Kohl's excluded, representing all categories of tenants. At least 11 of these 29 agreements are known to be renewals. The weighted average by space category of the initial rents for these leases are summarized below. Recent Lease Summary Size of Space No. of Average (Sq. Ft.) Leases Rent/SF --------- ------ ------- 0-999 5 $41.31 1,000-2,500 8 $25.80 2,501 + 8 $14.77 Food Court 2 $54.42 Kiosk 6 $150.74 At present, there are 13 vacant in-line compartments and 2 vacant food court units. Three of the in-line units are projected to be combined into one unit (Casual Corner) beginning January 1, 1998. In this analysis, the market rent conclusion for all vacant spaces will be applied, unless otherwise stated. Market rents for Westgate Mall have been estimated on a tenant-by-tenant basis. These estimates are influenced by recent leasing trends, the quality of the location and the size of the space. LANDAUER 44 REAL ESTATE COUNSELORS Although rents vary by space, they generally fall within a range dictated by the size of the space. Market rental rate estimates for 1997 are summarized in the chart below: These rents, as depicted, consider the possibility of rent steps over the term of the lease. The provided rent roll report, dated June 30, 1997, revealed only 12 lease agreements with steps. In addition, only 7 of the 29 new leases incorporate steps. Estimated Market Rent Size of Space Market Rent (Sq. Ft.) Per Sq. Ft. ------------- ----------- 0-999 $40.00 1,000-2,500 $26.00 2,501 + $16.00 Food Court $80.00 Kiosk $150.00 The basic lease structure and assumptions have been derived from the market, as determined by the rent survey and activity at the subject. The assumptions used in the DCF Analysis are: Projection Period: The projection period begins September 1, 1997, and extends for a term of 10 years through August 31, 2007. Fiscal year 1998 (the first full year) is used as the initial base year. The 11th year's net operating income is capitalized to establish the reversionary value, and is added to the 10th year cash flow. Gross Leasable Area: 613,650 square feet (Total) Lease Term: Typical enclosed mall retail leases at the subject are for an 8-year term; 3-year lease terms are applied to the Kiosks. Growth Rates: Market rental rates will escalate annually at a rate of 4.0 percent from Year-1. Expense categories are escalated annually at a rate of LANDAUER 45 REAL ESTATE COUNSELORS 3.5 percent through the projection period, except for management fees which are based upon a percentage of base plus overage rent. Sales volumes are projected to increase at 4.0 percent, the same rate as for market rent. REVENUE Minimum Rent: Rental rates for current tenants are dependent on specific lease terms which have been modeled in our analysis. For currently vacant spaces and for lease rollovers, tenant spaces have been assigned the market rent for the appropriate category. Most of the leases at the center are structured on a net basis with the tenant responsible for their defined pro rata share of operating expenses and real estate taxes. Percentage Rent: Also known as overage rent, percentage rent cited in the existing leases vary from 1.5 to 15.0 percent of sales above a natural or predetermined breakpoint. The most typical percentage rent rates found at the subject are 6.0 to 8.0 percent. Future sales volume forecasts for each tenant are based upon the information from 1992, 1993, 1994, 1995 and 1996 year-end sales volumes for those tenants in occupancy. Reimbursements: No information regarding expense recovery methodologies were provided to the appraisers after repeated requests. We have therefore accounted for operating recoveries as described below. LANDAUER 46 REAL ESTATE COUNSELORS CAM Recovery - Between 1994 and 1996, the mall operators collected between 117.0 and 124.0 percent of those recoverable CAM costs. We have modeled our cash flow so that 120.0 percent of recoverable CAM expenses are paid by the tenants in occupancy. As stated earlier, in-line tenants typically pay a 15.0 percent surcharge on these line items. Tax Recovery - Between 1994 and 1996, the mall operators collected between 79.0 and 97.5 percent of the reported property tax expense. We have modeled our cash flow so that, initially 85.0 percent of the real estate tax expense is recovered. As tenants roll over, the recovery method is assumed to provide for pro rata share recovery of real estate taxes based on occupied area, which is the most common method used in the current market. Based on the expiration schedule resulting from the current rent roll, we have assumed that after five years, approximately 95.0 percent of taxes are recovered and that after 10 years, 100 percent is recovered. Vacancy/Credit Loss: Vacancies will be incurred as individual tenants rollover. An additional 2.0 percent deduction is taken against effective gross income to account for anticipated credit loss and unexpected vacancies. Anchor tenants are not subject to this factor. As stated previously, based on our assumptions regarding lease renewals, the average occupancy of the enclosed mall tenants over the 10-year holding period, kiosks included, is 96.6 percent. Misc./Other Income: This category includes income from stroller rentals, termination fees, temporary tenants and minor recovery income for various utilities and insurance. Miscellaneous income is estimated at LANDAUER 47 REAL ESTATE COUNSELORS $95,000 for Calendar Year 1997, and is increased at a general growth rate of 4.0 percent per year. Our estimate also includes consideration for storage revenue. Tenant Retention Ratio: Upon the expiration of the existing leases, it is estimated that 65.0 percent of the expiring enclosed mall tenants will renew and 35.0 percent will vacate when the leases expire. Vacancy Between Leases: A weighted average of two months vacancy between leases is assumed at rollover for all in-line space. The weighted average assumes an actual downtime of six to nine months for non-anchor tenants. Kiosk tenants are subject to an average downtime of only one month. Rent Concessions: Rent concessions are not common in the regional mall market. However, some malls will give free rent in lieu of contributing toward the tenant's alterations. No rent concessions are assumed in this analysis. Lease-up Assumptions: Following the assumed commencement of three new lease agreements on January 1, 1998, Westgate mall is projected to have 20,962 square feet of vacant space remaining contained in 9 standard in-line compartments and one food court unit. Based on conversations with the property manager, it seems unlikely that there will be leasing prospects for the food court unit given is current layout, as we have not leased this space throughout the projection period accordingly. We assume all remaining in-line units will lease at market rates over a 9-month period beginning in April 1998. WESTGATE MALL - HISTORICAL OPERATING STATEMENTS CALENDAR YEAR CY-1994 CY-1995 CY-1996 (ACTUAL) (ACTUAL) (ACTUAL) REVENUE RENT (BASE) $5,361,106 $5,876,233 $5,942,226 RENT (OVERAGE) $ 208,524 $ 222,054 $ 221,566 RECOVERY (CAM) $1,427,519 $1,476,979 $1,595,263 RECOVERY (TAXES) $ 425,778 $ 539,194 $ 569,008 MISC./OTHER INCOME $ 355,770 $ 77,677 $ 87,148 ---------- ---------- ---------- TOTAL REVENUE (EGI) $7,778,697 $8,192,137 $8,415,211 EXPENSES REAL ESTATE TAXES $ 436,915 $ 629,890 $ 720,000 MANAGMENT FEE $ 380,072 $ 396,942 $ 411,078 CAM (RECOVERABLE) $1,176,926 $1,259,549 $1,283,562 CAM (NON-RECOVERABLE) $ 94,250 $ 69,373 $ 76,057 MISC./OTHER EXPENSES $ 228,114 $ 267,842 $ 312,869 ---------- ---------- ---------- TOTAL EXPENSES $2,316,277 $2,623,596 $2,803,566 NET OPERATING INCOME $5,462,420 $5,568,541 $5,611,645 CAPITAL COSTS RESERVES FOR REPLACEMENT NONE NONE NONE TENANT IMPROVEMENTS NONE NONE NONE LEASING COMMISSIONS $ 210,159 $ 160,153 $ 169,266 ---------- ---------- ---------- TOTAL CAPITAL COSTS $ 210,159 $ 160,153 $ 169,266 CASH FLOW (BEFORE DEBT) $5,252,261 $5,408,388 $5,442,379 SOURCE - AUDITED SCHEDULES CF NET RENTAL INCOME BEFORE DEBT SERVICE (RECOMPILED BY LANDAUER ASSOCIATES, INC.) LANDAUER 48 REAL ESTATE COUNSELORS Options: The appraisers were not furnished with a list of those tenants which have renewal options included in their original leases. Typically, options are avoided wherever possible to assure flexibility in tenant relocation. Noted exceptions are discussed in the Limiting Conditions section of this report (pages 1-5). Renewals: Upon expiration of current leases, tenants are renewed at the higher of the last effective rent or the market rent (base plus percentage rent) in the renewal year. The sales volume continues from the base lease. Each tenant is charged with a weighted average tenant improvement allowance. EXPENSES Operating Expenses: Operating expense estimates for Westgate Mall were based solely upon historical data from 1994, 1995, and 1996 year-end audited financial statements depicting net income before debt service. Neither a 1997 or 1998 Budget report were available for review. A summary table of the provided statements is presented on the facing page. NOTE - The provided financial documents do not designate insurance as an individual line item, and it is assumed to be included in one of the categories depicted. Real Estate Taxes: Calendar Year 1997 real estate taxes are concluded at an estimated level as discussed in the previous Real Estate Tax section of the report ($680,000, rounded). Taxes for the mall and anchors, plaza LANDAUER 49 REAL ESTATE COUNSELORS and outlots are included in the analysis. We have not included the real estate taxes for the owned anchor (Dillard's South). Management Fee: Management fees in the regional mall market range from 3.0 percent to 5.0 percent, depending on the revenues to which it is applied and whether leasing commissions are paid separately. For most malls, the management fee is typically in the range of 4.5 percent of minimum and percentage rent and utility sales, charged between related entities. A higher management fee of 5.0 percent would be applied to a lower level of minimum and percentage rent. When applied to all revenue, management fees range between 3.0 and 3.5 percent. For the Westgate Mall, we conclude 4.0 percent which is applied to all revenue and which includes commissions for leasing of the spaces. CAM (Recoverable): Recoverable CAM items primarily include maintenance, utilities, security, janitorial and administrative expenses. Calendar Year expense totals for 1994, 1995 and 1996 were $1,176,926, $1,259,549 and $1,283,562, respectively. We have stabilized a 1997 calendar year cost at $1,325,000. Management indicated that they did not expect a significant increase in costs due to the Kohl's addition. CAM (Non-Recoverable): Non-recoverable CAM items consist of maintenance items, information booth expenditures, miscellaneous utilities and minor annual asbestos abatement. Calendar Year expense totals for 1994, 1995 and 1996 were $94,250, $69,373 and $76,057, respectively. We have stabilized the 1997 calendar year cost at $80,000. LANDAUER 50 REAL ESTATE COUNSELORS Misc./Other Expenses: This line item expense primarily covers costs associated with advertising and promotion, legal fees, tenant coordination services, relocation costs, and accounting fees. This line item excludes leasing commissions which we have treated as a separate line item. Also excluded were bad debt expenses. The adjusted totals for 1994, 1995 and 1996 were $228,114, $267,842 and $312,869, respectively. We have estimated the total 1997 calendar year expense at $350,000. TOTAL EXPENSES Total expenses for the fiscal year ending August 31, 1998 are projected to be $2,806,331. The 1994 actual expenses were $2,316,277, the 1995 expenses were $2,623,596, and the 1996 expenses were $2,803,566. Our 1997 conclusion is in line with the indicated historical trend. OCCUPANCY COSTS Occupancy costs for the mall and tenants were reviewed. It is found that the occupancy costs generally decline over the holding period. The average is about 8.0 percent over the ten-year holding period for all tenants. As a benchmark, the enclosed mall retail tenants, excluding the food and kiosk tenants, have an average occupancy cost of about 12.7 percent over the ten-year holding period. Those tenants with low occupancy costs would likely have a high probability of renewing their leases upon expiration of their lease. Conversely, the tenants with high occupancy costs would have a low probability of renewing their leases upon lease expiration. Nevertheless, the total mall occupancy cost is within reason, and we have confidence in the cash flow and assumptions used in the analysis. The occupancy costs from this analysis appear reasonable, and point to a stable mall operation. LANDAUER 51 REAL ESTATE COUNSELORS CAPITAL ITEMS This non-operating expense category includes tenant alteration and improvement costs, leasing commissions, and a capital reserve (or reserve for capital replacements). Tenant Alterations: Historical detail on landlord's new tenant improvement allowance was limited, and we have therefore based our estimate on our knowledge of other malls as well as statistics published in various investor surveys. It is expected that National and retail tenants with longer lease terms or good credit would receive a greater amount of tenant finish from the landlord. For Westgate Mall, we project an allowance of $15.00 per square foot for new enclosed mall retail tenants, with no allowance for tenant renewal. The allowance equates to nearly $2.00 per square foot per year of lease term. We have assumed that no anchor lease will terminate during our analysis period. Leasing Commissions: Leasing commissions at the subject property are not applied and are included in the management fee. Reserves: This category accounts for the fact that capital items such as the roof, building mechanical systems, and parking lot eventually will need major repairs or replacement. We are projecting a $0.15 per square foot expense, growing at a 3.5 percent rate. Capital Budget: In addition to a $0.15 per square foot reserve fund, we will also include a $267,780 annual installment to address those items of deferred maintenance reportedly budgeted by the Jacobs Group. Cash Flow Analysis: Based upon the foregoing assumptions and projections, the cash flow forecast for Westgate Mall is presented on the following page.
WESTGATE MALL ANNUAL CASH FLOW REPORT BEGINNING 9/1/97 FOR 11 YEARS FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 ----------- ----------- ----------- ----------- ----------- ----------- ----------- INCOME - ------ MINIMUM RENT: IN-LINE STORES 4,035,470 4,474,842 4,684,568 4,695,581 4,881,149 4,998,234 4,992,235 FOOD COURT 342,848 350,497 344,759 414,114 424,949 441,876 442,542 KIOSKS 171,956 199,841 199,162 193,937 215,404 214,213 208,899 GROUND LEASES 1,344,535 1,344,535 1,347,939 1,361,739 1,386,730 1,388,130 1,388,130 PERIPHERAL 238,141 241,996 241,996 258,507 308,820 308,820 308,820 ----------- ----------- ----------- ----------- ----------- ----------- ----------- TOTAL MINIMUM RENT 6,132,950 6,611,711 6,818,424 6,923,878 7,217,052 7,351,273 7,340,626 RECOVERIES REAL ESTATE TAX 591,487 612,189 633,615 655,792 678,744 702,501 727,088 COMMON AREA MAINT 1,627,100 1,684,048 1,742,990 1,803,995 1,867,134 1,932,484 2,000,121 ----------- ----------- ----------- ----------- ----------- ----------- ----------- TOTAL RECOVERIES 2,218,587 2,296,237 2,376,605 2,459,787 2,545,878 2,634,985 2,727,209 OVERAGE RENT 129,070 175,400 114,799 130,208 165,367 218,742 278,640 SALES VOLUME (000) 100,559 107,385 111,456 114,935 119,882 124,843 128,827 ----------- ----------- ----------- ----------- ----------- ----------- ----------- GROSS RENTAL INCOME 8,480,607 9,083,348 9,309,828 9,513,873 9,928,297 10,205,000 10,346,475 CREDIT LOSS (169,612) (181,667) (186,197) (190,277) (198,566) (204,100) (206,930) MISCELLANEOUS 97,217 100,619 104,141 107,786 111,558 115,463 119,504 TOTAL INCOME 8,408,212 9,002,300 9,227,772 9,431,382 9,841,289 10,116,363 10,259,049 EXPENSES - -------- REAL ESTATE TAX 695,867 720,222 745,430 771,520 798,523 826,471 855,398 COMMON AREA MAINT 1,355,917 1,403,374 1,452,492 1,503,329 1,555,946 1,610,404 1,666,768 NON-RECOV. CAM 81,867 84,732 87,698 90,767 93,944 97,232 100,635 MISCELLANEOUS 358,167 370,703 383,677 397,106 411,004 425,390 440,278 MANAGEMENT FEE 313,101 339,356 346,661 352,705 369,122 378,502 380,964 ----------- ----------- ----------- ----------- ----------- ----------- ----------- TOTAL EXPENSES 2,804,919 2,918,387 3,015,958 3,115,427 3,228,539 3,337,999 3,444,043 ----------- ----------- ----------- ----------- ----------- ----------- ----------- NET OPERATING INCOME 5,603,293 6,083,913 6,211,814 6,315,955 6,612,750 6,778,364 6,815,006 ALTERATIONS 492,237 262,768 86,491 282,628 84,027 15,022 53,676 RESERVES 33,300 34,466 35,672 36,921 38,213 39,550 40,935 CAPITAL BUDGET 89,260 267,780 267,780 267,780 267,780 0 0 ----------- ----------- ----------- ----------- ----------- ----------- ----------- CASH FLOW 4,988,496 5,518,899 5,821,871 5,728,626 6,222,730 6,723,792 6,720,395 FY2005 FY2006 FY2007 FY2008 INCOME - ------ MINIMUM RENT: IN-LINE STORES 4,970,849 5,050,680 5,297,201 5,590,332 FOOD COURT 442,542 449,698 465,834 450,629 KIOSKS 235,109 233,474 226,717 257,015 GROUND LEASES 1,388,093 1,437,073 1,465,147 1,466,735 PERIPHERAL 308,820 308,820 308,820 308,820 ----------- ----------- ----------- ----------- TOTAL MINIMUM RENT 7,345,413 7,479,745 7,763,719 8,073,531 RECOVERIES REAL ESTATE TAX 752,536 778,875 806,135 834,350 COMMON AREA MAINT 2,070,125 2,142,580 2,217,570 2,295,185 ----------- ----------- ----------- ----------- TOTAL RECOVERIES 2,822,661 2,921,455 3,023,705 3,129,535 OVERAGE RENT 312,006 342,546 361,656 391,800 SALES VOLUME (000) 131,641 135,568 140,729 146,322 ----------- ----------- ----------- ----------- GROSS RENTAL, INCOME 10,480,080 10,743,746 11,149,080 11,594,866 CREDIT LOSS (209,602) (214,875) (222,982) (231,898) MISCELLANEOUS 123,687 128,016 132,496 137,134 TOTAL INCOME 10,394,165 10,656,887 11,058,594 11,500,102 EXPENSES - -------- REAL ESTATE TAX 885,337 916,323 948,395 981,588 COMMON AREA MAINT 1,725,104 1,785,483 1,847,975 1,912,654 NON-RECOV. CAM 104,157 107,803 111,576 115,481 MISCELLANEOUS 455,688 471,637 488,144 505,229 MANAGEMENT FEE 382,871 391,115 406,269 423,266 ----------- ----------- ----------- ----------- TOTAL EXPENSES 3,553,157 3,672,361 3,802,359 3,938,218 ----------- ----------- ----------- ----------- NET OPERATING INCOME 6,841,008 6,984,526 7,256,235 7,561,884 ALTERATIONS 325,807 310,091 387,414 176,439 RESERVES 42,367 43,850 45,385 46,973 CAPITAL BUDGET 0 0 0 0 ----------- ----------- ----------- ----------- CASH FLOW 6,472,834 6,630,585 6,823,436 7,338,472
LANDAUER 53 REAL ESTATE COUNSELORS DISCOUNTED CASH FLOW ANALYSIS As previously discussed, once the projected income stream over the projection period is determined, the next step is to discount the periodic cash flow and the reversion at the end of the holding period to an indicated value as of the valuation date. The following definitions and assumptions were employed in our analysis. Net Operating Income: Net income remaining after all expenses but before capital items, i.e., tenant improvement cost, leasing commissions, and capital expenditures. Cash Flow: Income available after all capital items, including reserves, leasing commissions and tenant improvements. Overall Rate: A rate which reflects the relationship of the first year's net income to total value, derived by dividing the net income by the indicated value. Discount Rate: A rate of return used to estimate the present value of future cash flows including the reversion (sales proceeds) of the property at the end of the holding period. The discount rate is alternately called an Internal Rate of Return. Terminal Capitalization Rate: An overall rate applied to the projected net operating income at the end of the holding period to determine the amount of the reversion. A disposition fee is usually deducted from the reversion. Holding Period: A holding period is the term of ownership of an investment, also referred to as the projection period for the purposes of analysis and valuation. Survey of Investment Criterea Second Quarter, 1997 Regional Mall Market Current Last Year Quarter Quarter Ago ------- ------- --- Free & Clear Equity IRR Range 10.50%-14.00% 10.00%-14.00% 10.00%-14.00% Average 11.75% 11.69% 11.50% Change (Basis Points) -- 6 25 Free & Clear Equity Cap Rate Range 7.00%-11.00% 7.00%-11.00% 6.25%-11.00% Average 8.57% 8.57% 8.17% Change (Basis Points) -- 0 40 Market Rent Change Rate Range 0.00%-4.00% 0.00%-4.00% 0.00%-4.00% Average 2.86% 2.86% 2.64% Change (Basis Points) -- 0 22 Expense Change Rate Range 3.00%-4.00% 3.00%-4.00% 3.00%-4.00% Average 3.75% 3.78% 3.89% Change (Basis Points) -- -3 -14 Residual Cap Rate Range 7.50%-11.00% 7.50%-11.00% 7.00%-11.00% Average 8.78% 8.76% 8.56% Change (Basis Points) -- 2 22 Source: Peter F. Korpacz & Associates, Inc. - Quarterly Survey of Investment Criteria National Investor Survey First Quarter, 1997 Regional Malls, Class "A" Third Quarter Third Quarter First Quarter 1996 1996 1996 ---- ---- ---- Free & Clear Equity IRR Range 10.50%-11.80% 10.00%-11.80% 10.00%-11.50% Average 11.10% 11.10% 11.00% Change (Basis Points) -- 0 10 Free & Clear Equity Cap Rate Range 8.00%-8.60% 7.00%-9.00% 6.00%-10.00% Average 8.2% 8.2% 8.0% Change (Basis Points) -- 0 20 Market Rent Change Rate Range 3.00%-4.00% 1.50%-5.00% 0.00%-6.00% Average 3.50% 3.20% 3.50% Change (Basis Points) -- 30 0 Expense Change Rate Range 3.00%-4.00% 3.00%-4.00% 3.00%-4.00% Average 3.70% 3.70% 3.80% Change (Basis Points) -- 0 -10 Residual Cap Rate Range 8.00%-9.30% 7.00%-9.50% 8.00%-10.00% Average 8.70% 8.70% 8.70% Change (Basis Points) -- 0 0 Source: CB Commercial National Investor Survey LANDAUER 54 REAL ESTATE COUNSELORS RATE SELECTION The selection of appropriate Discount Rates and Terminal Capitalization Rates for use in arriving at an estimate of value is a judgmental process. Community centers similar to the subject have a market appeal to both national and local investors. Therefore, competition with many other investment vehicles has an influence on rates of return required by investors. One method used to estimate an appropriate discount rate to apply in the discounted cash flow model is to analyze the investment parameters of institutional-type investors, both for real estate and non-real estate types of investments. The following yields were noted for non-real estate investments for the week ending August 22, 1997. Non-Real Estate Investment Yields Investment Instrument Yield Rate --------------------- ---------- Government Bonds (10 Years) 6.27% U.S. Treasury (30 Years) 6.57% Aaa-rated Corporate Bonds 7.22% Baa-rated Corporate Bonds 7.85% A-rated Utility Bonds (30 Years) 7.74% Government issues, considered near risk-free, tend to offer the lowest yield, while Baa-rated issues are generally among the highest. For real estate investments, rates may be influenced by risk, degree of liquidity, burden of management, tax benefits, and future appreciation or depreciation. Adjustments must be made to the safe rate to compensate for these factors. Consequently, required real estate yields are generally higher than those for non-real estate investments. The discount rates and terminal capitalization rates applicable to first-tier regional malls have remained relatively stable over the last year. As summarized on the facing page, according to the Korpacz Real Estate Investor Survey, Second Quarter 1997, discount rates range from 10.5 to 14.0 percent, with an average of 11.75 percent. This represents a 25 basis point increase from average rates of one year ago. ASSUMPTIONS AND RATES FROM SALES REGIONAL MALLS Price/ Sale # of Sale Location Date OAR IRR Anchors Ratio - -------------------------------------------------------------------------------- Texas Pending 8.80% -- 0 0.88 Idaho Jun-97 6.51% 3 -- California Jun-97 10.29% -- 2 -- Utah Mar-97 8.60% -- 4 0.91 California Dec-96 10.00% -- 3 0.46 Utah Dec-96 11.10% -- 3 0.57 Michigan Dec-96 10.50% -- 4 0.43 Illinois Dec-96 7.90% -- 0 1.36 Illinois Nov-96 8.65% 11.00% 0 0.94 California Nov-96 9.10% 15.20% 2 0.47 Montana Nov-96 9.90% 15.80% 2 0.47 Tennessee Nov-96 9.90% -- 0 0.33 Texas Oct-96 9.00% -- 1 0.80 Arizona Oct-96 10.00% -- 1 0.64 California Jun-96 10.30% -- 0 0.69 Illinois Apr-96 9.56% 12.00% 4 1.56 Idaho Apr-96 10.24% -- 4 0.56 Connecticut Mar-96 6.80% -- 0 -- California Mar-96 7.60% -- 1 1.18 Pennsylvania Mar-96 13.00% 10.50% 0 0.50 Florida Feb-96 7.70% -- 0 0.80 New Jersey Aug-95 8.70% -- 0 1.09 California Jun-95 8.90% 12.30% 0 0.95 Massachusetts Apr-95 8.50% 10.70% 1 0.81 California Jan-95 12.60% 13.50% 0 0.50 California Jan-95 7.80% 10.50% 0 1.14 Virginia Jan-95 7.80% -- - 0.55 Texas Dec-94 6.70% 11.60% 0 1.03 Texas Dec-94 8.70% 11.50% 2 0.39 Florida Dec-94 8.20% 11.50% 1 1.00 Florida Dec-94 8.60% 12.00% 0 0.80 Arizona Dec-94 7.80% -- -- 1.02 Missouri Dec-94 8.00% 12.10% 0 -- Louisiana Dec-94 10.70% -- 0 0.50 No. Carolina Sep-94 10.60% 14.70% 0 0.50 Virginia Jul-94 9.00% -- 3 1.11 Louisiana Jul-94 8.90% -- 2 1.10 Florida Jun-94 7.50% 11.00% All 1.22 Alabama Feb-94 7.40% 11.50% 0 1.10 California Dec-93 7.00% - 0 1.12 Arizona Dec-93 8.00% 11.00% 0 1.17 Florida Dec-93 7.50% 11.50% 0 0.91 Ohio Dec-93 7.50% 11.30% 0 1.16 New Mexico Dec-93 7.25% 11.00% 1 0.76 New Jersey Jul-93 7.50% 12.40% 1 0.68 9.00% Oregon Jul-93 8.00% 11.50% 0 0.88 No. Carolina Jul-93 7.00% 12.10% 2 0.77 Florida May-93 7.50% 12.00% 1 0.64 Texas May-93 8.50% 12.20% 1 0.85 Florida Jan-93 7.50% 11.00% 0 1.00 Florida Dec-92 7.25% 11.50% 0 1.50 11.70% 11.70% Illinois Dec-92 8.00% 12.00% 1 0.96 Texas Sep-92 8.00% 12.00% 1 0.73 Connecticut Aug-92 7.00% 11.50% 0 -- Florida Jul-92 7.10% 11.50% 1 0.81 Florida Apr-92 7.00% 11.10% 0 1.24 Nebraska Apr-92 7.50% 12.50% 1 0.79 Florida Mar-92 7.90% 11.50% 1 0.79 Pennsylvania Dec-91 6.80% 11.20% 1 0.55 Maine Dec-91 7.30% 11.80% 3 -- LANDAUER 55 REAL ESTATE COUNSELORS Residual capitalization rates range from 7.5 to 11.0 percent, with an average of 8.78 percent, a 22 basis point increase from Second Quarter 1996 levels. First year overall rates are reported at 7.00 to 11.0 percent with an average of 8.57 percent, representing a 40 basis point increase from the previous year's rates. CB Commercial's National Investor Survey, First Quarter 1997, for Class A regional malls, indicates similar averages in discount rates (10.5-11.8 percent, average 11.0 percent), terminal capitalization rates (8.0-9.3 percent, average 8.7 percent), and going-in capitalization rates (8.0-8.6 percent, average 8.2 percent). In addition to the investor survey, we have reviewed the market for recent sales of regional malls in order to extract rates from the market. The table on the facing page shows the rates for the regional mall sales that have sold since 1991. The sales indicate a range of discount rates (IRR) from 10.50 to 14.70 percent with an average of 11.91 percent. Initial capitalization rates range from 6.80 to 12.60 percent with an average of 8.44 percent. Overall rates varied based on the number of anchors included in the sale as well as on expansion opportunities of a center. This usually results in a lower rate because investors can expect to reap a development profit from a potential increase in cash flow. Yield requirements for investment properties throughout the United States have been relatively stable over the past year and competition for the better properties appears to be steady due to a variety of factors, including the scarcity of good quality investment real estate, the desire for an adequate hedge against inflation, and the quest for a safe haven for investment capital. Arising out of concerns over troubled real estate markets due to a receding economy and overbuilding, investor cash flow projections today tend to be more "realistic", incorporating assumptions and probabilities in keeping with actual market experience and predicated upon moderate future expectations. Good quality regional malls remain the top property preference for investors. Demand for these relatively scarce properties is strong and the market is characterized as a "seller's" market whereby the best properties are bid up in price. The market for average or "B" quality malls is less active than "A" LANDAUER 56 REAL ESTATE COUNSELORS malls like the subject in similar locations, and these properties must be competitively priced in order to attract buyers. The subject property is considered among the top malls in its metropolitan area. Competition primarily comes from existing malls outlined in our retail overview section. In 1996, Westgate Mall gained a new anchor, Kohl's, who signed a lease agreement for 20 years. In addition, based upon the data provided, total mall sales have grown at a compound annual growth rate of 1.48 percent between 1992 and 1996, but are projected to maintain a growth rate of 4.0 percent in the future. Taking these factors into consideration, it is our opinion that a discount rate of 11.5 percent is applicable to the cash flows forecast during the ten year holding period. Further, a terminal capitalization rate of 9.25 percent applied to the 11th year net operating income is appropriate to calculate the reversion value estimate. VALUATION BY DISCOUNTED CASH FLOW ANALYSIS The initial step when discounting with this methodology is to estimate the appraised property's reversionary value. Our reversion calculation assumes that the property would be sold at the end of the previously stated holding period. The reversion value of the property at that time is estimated by dividing the forecast net operating income (NOI) from the year following the projected holding period by the terminal capitalization rate. In addition, disposition costs of 1.0 percent are applied against the reversionary value in order to arrive at an estimate of the net reversion. The net reversion value is added to the last year of the projection period's net cash flow, which then represents the total future net cash flow to be received in that last year. LANDAUER 57 REAL ESTATE COUNSELORS MARKET VALUE ANALYSIS AS OF SEPTEMBER 3, 1997 This analysis begins September 1, 1997, and continues for ten years, ending August 31, 2007. The 11th year net operating income (Fiscal Year 2008) is capitalized to produce an estimated reversionary value at the end of the holding period. Considering the foregoing, the results of our analysis for Westgate Mall are as follows: Calculation of the Reversion 11th Year NOI (FY 2008) $8,052,887 Terminal Cap Rate 9.25% Gross Reversion $87,058,238 Disposition Costs (1.0%) (870,582) ----------- Net Reversion $86,187,655 This net reversion is then added to the 10th year's net cash flow, which then represents the total future net cash flow to be received in the 10th year. The following matrix shows the values indicated by discounting the cash flows at rates of 11.0, 11.5 and 12.0 percent. Valuation Matrix Discount Rate Property Value -------- -------------- 11.0% $66,990,365 11.5% $64,856,554 12.0% $62,813,356 Utilizing a 11.5 percent discount rate, the estimated value is $65,000,000 (rounded). The overall rate in the first year is 8.7 percent and 9.5 percent in year 2. The discounted value of the reversion ($29,019,932) represents nearly 45.0 percent of the final value, below the 50/50 ratio preferred by many investors for a stabilized property. However, the reversion contribution to value also suggests that more reliance is placed in the cash flow, which is an investment assumption confirmed by numerous investors who have purchased malls in secondary markets. LANDAUER 58 REAL ESTATE COUNSELORS CORRELATION AND CONCLUSION In this report, we have utilized the Sales Comparison and Income Capitalization Approaches in estimating the Market Value of the Leased Fee Interest of the subject property. A summary of our value estimates by each approach is as follows: Cost Approach Not Applicable Sales Comparison Approach $61,000,000 to $65,000,000 Income Capitalization Approach $65,000,000 The reliability of the Cost Approach for the appraised property is weakened because an investor--the most probable potential purchaser of the property--typically is more concerned with the property's location, amenities, and ability to generate a required cash flow than with its replacement cost. In addition, the Cost Approach does not directly reflect the specific terms of actual leases signed or in negotiation at the property. Therefore, we have not used a Cost Approach in this analysis. The Sales Comparison Approach is an appraisal technique whereby the data of recent transactions involving similar or like properties is analyzed in order to derive an indication of the most probable sale price of the property being appraised. The reliability of this technique is dependent upon (a) the availability of comparable sales data, (b) the verification of the sales data, (c) the degree of comparability or extent of adjustment necessary for various factors, and (d) the absence of non-typical conditions affecting the sale price. This approach is most meaningful when income properties exhibit similar income and expense characteristics. The sales utilized in the analysis are national in nature, but are not truly comparable because of varying economic structures of the transactions, including lease structures, occupancy, etc. However, the concluded value and the investment rates exhibited by the sales are useful as a check of the reasonableness of the Income Capitalization Approach. LANDAUER 59 REAL ESTATE COUNSELORS Most significant is the Income Capitalization Approach, which focuses on investors' primary concerns about the property's potential for generating income and value appreciation. This approach is particularly relevant when well-supported market rent and income data are available, and when major cash flow assumptions are supported by market-derived analysis. Because this approach closely parallels the thinking of well-informed buyers and sellers of income-producing properties, the present value estimate by this approach is given the most weight. Greatest reliance is placed on the Discounted Cash Flow Analysis value estimate. After consideration of the factors presented in this report and with greatest consideration given to the Discounted Cash Flow Analysis of the Income Capitalization Approach in arriving at a final value, the Market Value of Westgate Mall, as of September 1, 1997, subject to existing tenant leases and the Assumptions and Limiting Conditions stated herein, is estimated to be: SIXTY FIVE MILLION DOLLARS $65,000,000 NOTE: The ensuing report reflects a revised market value conclusion resulting from the collection of various data from the Richard E. Jacobs Group concerning non-recoverable capital improvements. WESTGATE MAIL PROJECT DESIGNATOR: WES1 ANNUAL CASH FLOW REPORT BEGINNING 9/1/97 FOR 11 YEARS
FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 INCOME - ------ MINIMUM RENT: ALL TENANTS 6,108,497 6,592,147 6,805,077 6,921,151 7,225,305 7,364,836 7,357,317 ---------- ---------- ---------- ---------- ----------- ----------- ----------- TOTAL MINIMUM RENT 6,108,497 6,592,147 6,805,077 6,921,151 7,225,305 7,364,836 7,357,317 RECOVERIES: REAL ESTATE TAX 591,487 612,189 633,615 655,792 705,665 743,824 769,858 COMMON AREA MAINT. 1,627,100 1,684,048 1,742,990 1,803,995 1,867,134 1,932,484 2,000,121 ---------- ---------- ---------- ---------- ----------- ----------- ----------- TOTAL RECOVERIES 2,218,587 2,296,237 2,376,605 2,459,787 2,572,799 2,676,308 2,769,979 OVERAGE RENT 181,761 246,200 190,415 210,380 271,114 346,488 422,053 SALES VOLUME (000) 101,556 109,671 114,555 118,701 124,410 130,185 134,988 ---------- ---------- ---------- ---------- ----------- ----------- ----------- GROSS RENTAL INCOME 8,508,845 9,134,584 9,372,097 9,591,318 10,069,218 10,387,632 10,549,349 CREDIT LOSS (170,177) (182,691) (187,441) (191,826) (201,384) (207,752) (210,986) MISCELLANEOUS 97,533 101,435 105,492 109,712 114,100 118,664 123,411 ---------- ---------- ---------- ---------- ----------- ----------- ----------- TOTAL INCOME 8,436,201 9,053,328 9,290,148 9,509,204 9,981,934 10,298,544 10,461,774 EXPENSES - -------- REAL ESTATE TAX 695,867 720,222 745,430 771,520 798,523 826,471 855,398 COMMON AREA MAINT. 1,355,917 1,403,374 1,452,492 1,503,329 1,555,946 1,610,404 1,666,768 NON-RECOV. CAM 81,867 84,732 87,698 90,767 93,944 97,232 100,635 MISCELLANEOUS 358,167 370,703 383,677 397,106 411,004 425,390 440,278 MANAGEMENT FEE 314,513 341,918 349,774 356,577 374,822 385,566 388,969 ---------- ---------- ---------- ---------- ----------- ----------- ----------- TOTAL EXPENSES 2,806,331 2,920,949 3,019,071 3,119,299 3,234,239 3,345,063 3,452,048 ---------- ---------- ---------- ---------- ----------- ----------- ----------- NET OPERATING INCOME 5,629,870 6,132,379 6,271,077 6,389,905 6,747,695 6,953,481 7,009,726 ALTERATIONS 493,382 265,314 87,751 288,126 86,078 15,393 55,518 RESERVES 33,300 34,466 35,672 36,921 38,213 39,550 40,935 CAPITAL BUDGET 0 57,500 160,000 148,000 0 0 0 ---------- ---------- ---------- ---------- ----------- ----------- ----------- CASH FLOW 5,103,188 5,775,099 5,987,654 5,916,858 6,623,404 6,898,538 6,913,273
FY2005 FY2006 FY2007 FY2008 INCOME - ------ MINIMUM RENT: ALL TENANTS 7,382,932 7,557,423 7,896,954 8,259,753 ----------- ----------- ----------- ----------- TOTAL MINIMUM RENT 7,382,932 7,557,423 7,896,954 8,259,753 RECOVERIES: REAL ESTATE TAX 796,803 824,691 917,502 981,588 COMMON AREA MAINT. 2,070,125 2,142,580 2,217,569 2,295,185 ----------- ----------- ----------- ----------- TOTAL RECOVERIES 2,866,928 2,967,271 3,135,071 3,276,773 OVERAGE RENT 464,870 500,916 524,857 570,600 SALES VOLUME (000) 138,600 143,423 149,603 156,301 ----------- ----------- ----------- ----------- GROSS RENTAL INCOME 10,714,730 11,025,610 11,556,882 12,107,126 CREDIT LOSS (214,294) (220,512) (231,137) (242,142) MISCELLANEOUS 128,347 133,481 138,820 144,373 ----------- ----------- ----------- ----------- TOTAL INCOME 10,628,783 10,938,579 11,464,565 12,009,357 EXPENSES - -------- REAL ESTATE TAX 885,337 916,323 948,395 981,588 COMMON AREA MAINT. 1,725,104 1,785,483 1,847,975 1,912,654 NON-RECOV. CAM 104,157 107,803 111,576 115,481 MISCELLANEOUS 455,688 471,637 488,144 505,229 MANAGEMENT FEE 392,390 402,917 421,090 441,518 ----------- ----------- ----------- ----------- TOTAL EXPENSES 3,562,676 3,684,163 3,817,180 3,956,470 ----------- ----------- ----------- ----------- NET OPERATING INCOME 7,066,107 7,254,416 7,647,385 8,052,887 ALTERATIONS 338,615 323,804 406,333 186,044 RESERVES 42,367 43,850 45,385 46,973 CAPITAL BUDGET 0 0 0 0 ----------- ----------- ----------- ----------- CASH FLOW 6,685,125 6,886,762 7,195,667 7,819,870 ADDENDA Legal Description Lease Abstract Report Rent Roll (June 30, 1997) Photographs (Westgate Mall) Photographs (Competing Malls) NOACA Employment Statistics Operating Statements (1994-96) Recent Leasing Activity Professional Qualifications EXHIBIT B LEGAL DESCRIPTION OF WESTGATE SHOPPING CENTER Situated partly in the City of Fairview Park and partly in the City of Rocky River, County of Cuyahoga, State of Ohio and known as being part of Original Rockport Township Section 14 and more fully described as follows: Beginning at a point at the intersection of the original centerline of Center Ridge Road and the centerline of West 210 Street, formerly Wagar Road; Thence along the original centerline of Center Ridge Road, North 66 degrees 29' 33" East, 1013.84 feet to a point at the Northerly prolongation of the Southwesterly line of lands conveyed to Central National Bank of Cleveland by deed recorded in Volume 7675, Pages 576 and 580, formerly the lands conveyed to Carl P. and Anna B. Thibo by deed recorded in Volume 3574, Page 133, Cuyahoga County Deed Records; Thence along the Southwesterly line of land so conveyed to the Central National Bank and along the Southwesterly line of lands conveyed to Konstantina Fotopoulos, by deed recorded in Volume 13163, Page 147, Cuyahoga County Deed Records, formerly lands of Vardes and Helen Kriaris by deed recorded in Volume 7291, Page 506, Cuyahoga County Deed Records, South 23 degrees 30' 27" East, 274.29 feet to a point; Thence along the Southerly line of land so conveyed to Konstantina Fotopoulos, as aforesaid, North 75 degrees 50' 21" East, 113.04 feet to a point on the corporation line between Fairview Park and Rocky River, said point being on the Westerly line of a parcel of land conveyed to Israel D. Wagar by deed dated December 30, 1878, and recorded in Volume 299 Page 564 of Cuyahoga County Deed Records; Thence along the Westerly line of said land conveyed to Israel D. Wagar, South 01 degrees 10' 08" West, 188.13 feet to the Northwesterly corner of parcel No. 6 in the I.D. Wagar's Heirs Subdivision as shown by plat recorded in Volume 36, Page 20, Cuyahoga County Map Records; EXHIBIT B Thence along the Northerly line of said Parcel No. 6, South 88 degrees 50' 02" East, 434.53 feet to a point in the centerline of Linden Road, 60 feet wide: Thence along said centerline of Linden Road, South 01 degrees 09' 58" West, 961.70 feet to the Northeasterly corner of land conveyed to the Cleveland Lutheran High School Association by deed recorded in Volume 9022, Page 245, Cuyahoga County deed records; Thence along the Northerly line of said Parcel, North 88 degrees 50' 02" West, 434.57 feet to an iron pipe found at the Northwesterly corner of said Parcel: Thence along the Westerly line of land so conveyed to Israel D. Wagar, as aforesaid, and along the corporation line between the Cities of Fairview Park and Rocky River, South 01 degrees 10' 08" West, 337.08 feet to an iron pin at the Northeasterly corner of a parcel of land conveyed to Leo J. Congeni, D.D.S., by deed recorded in Volume 15042, Page 51 of Cuyahoga County Deed Records: Thence along the Northerly line of land so conveyed to Leo J. Congeni, North 88 degrees 55' 13" West, 300.00 feet to an iron pin at the Northwesterly corner thereof; Thence along the Westerly line of land so conveyed to said Leo J. Congeni, South 01 degrees 10' 08" West, 370.00 feet to the centerline of Addington Boulevard, 70 feet wide, as shown by plat recorded in Volume 118, Page 16, Cuyahoga County Map Records; Thence along the centerline of said Addington Boulevard, North 88 degrees 55' 13" West, 842.67 feet to the centerline of West 210th Street as aforesaid; Thence along the centerline of said West 210th Street, North 01 degrees 05' 43" East, 1654.78 feet to the principal place of beginning, be the same, more or less, but subject to all legal highways, and excepting from the above described land the following described parcels; Exception No. 1: H.W. Realty Company Situated in the City of Fairview Park, County of Cuyahoga and State of Ohio and known as being part of Original Rockport Township Section 14 and more fully described as follows: Commencing at the intersection of the centerline of Linden Road, 60 feet wide, and the original centerline of Center Ridge Road, originally 60 feet wide: EXHIBIT B Thence along said centerline of Center Ridge Road, South 68 degrees 57' 33" West, 316.96 feet to an angle point of said centerline; Thence continuing along said centerline, South 66 degrees 29' 33" West, 581.38 feet to a point; Thence at right angles to said centerline, South 23 degrees 30' 27" East, 406.09 feet to a point and the principal place of beginning for the parcel of land herein described; Thence South 01 degrees 09' 18" West, 265.87 feet to a point; Thence North 88 degrees 52' 22" West, 373.89 feet to a point; Thence North 01 degrees 02' 33" East; 167.12 feet to a point; Thence South 89 degrees 02' 15" East, 34.86 feet to a point; Thence North 01 degrees 06' 40" East, 98.72 feet to a point; Thence South 88 degrees 51' 39" East, 339.43 feet to the principal place of beginning and containing 2.2048 acres of land, be the same, more or less, but subject to all legal highways and easements of record. Exception No. 2: The Higbee Company Situated in the City of Fairview Park, County of Cuyahoga and State of Ohio and known as being part of Original Rockport Township Section 14 and more fully described as follows: Beginning at an iron pin at the intersection of the centerline of Addington Boulevard, 70 feet wide, and the corporation line between the Cities of Fairview Park and Rocky River, said point being on the Westerly line of the I.D. Wagar Heirs Subdivision as shown by plat recorded in Volume 36, Page 20 of Cuyahoga County Map Records; Thence along said corporation line North 01 degrees 10' 08" East, 432.97 feet to a drill hole found; Thence North 88 degrees 54' 12" West, 622.04 feet to a point and the principal place of beginning for the parcel of land herein described; EXHIBIT B Thence continuing, North 88 degrees 54' 12" West, 429, 16 feet to a point; Thence North 01 degrees 04' 08" East, 290.91 feet to a point; Thence South 88 degrees 52' 32" East, 163.28 feet to a point; Thence South 17 degrees 00' 32" East, 25.02 feet to a point; Thence South 88 degrees 53' 32" East, 74.50 feet to a point: Thence South 01 degrees 06' 28" West, 41.71 feet to a point; Thence South 88 degrees 53' 32" East, 183.80 feet to a point; Thence South 01 degrees 06' 28" West, 225.29 feet to the principal place of beginning and containing 2.5469 acres of land, be the same, more or less but subject to all legal highways and easements of record; The above described parcel of land, after the subtraction of the H.W. Realty Company property, the Higbee Company property and the area within the legal roadways of Center Ridge Road, West 210th Street, Linden Road and Addington Boulevard, has a net area of 47.9830 acres of land according to a survey by Wheeler & Melena, Inc. dated July, 1979 and revised May, 1982.
WESTGATE MALL PROJECT DESIGNATOR: WEST REVISION: 9/9/97 @ 11:09 LEASE ABSTRACT REPORT FOR ALL TENANTS 9/9/97 @ 17:23 PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ------ ----- ---- ----- --- ----- ------- ---- ------- 1 IN-LINE STORES #1-SUITE D435 1 821 10/95 1/01 -- 52.38 43,004 8.00 1 HOUR PHOTO -- #2-SUITE A100 1 2,867 8/91 1/02 -- 27.68 79,359 8.00 ABBOTT'S CARDS -- 8/99 28.70 82,283 #3-SUITE A68 1 1,861 2/97 1/99 -- 12.00 22,332 15.00 ALADDIN'S CASTLE -- #4-SUITE C300A 1 3,578 4/92 1/98 -- 24.20 86,588 7.00 ALL FOR ONE -- #5 SUITE A156 1 1,047 2/96 1/01 -- 33.00 34,551 6.00 AMER. COMMODORE -- #6-SUITE A112 1 4,155 6/89 1/00 -- 18.70 77,699 6.00 AMERICAN EAGLE OUT -- #7-SUITE B206 1 3,622 4/91 1/07 -- 18.00 65,196 5.00 ANN TAYLOR -- #9-SUITE C332 1 1,056 11/90 1/01 -- 30.00 31,680 6.00 ART WORKS -- #10-SUITE A72 1 3,065 2/90 1/01 -- 23.00 70,495 6.00 ATHLETIC X-PRESS -- #11-SUITE P3 1 2,433 2/93 1/06 -- 25.00 60,825 BABY GAP -- 10/99 27.00 65,691 10/03 29.00 70,557 #12-SUITE D420 1 2,611 9/95 1/06 -- 24.00 62,664 5.00 BATH & BODY WORKS -- #14-SUITE C336 1 4,120 9/96 1/05 -- 26.00 107,120 6.00 BOMBAY COMPANY -- #15-SUITE B236 1 3,239 2/91 1/01 -- 40.00 129,560 6.00 CAMELOT MUSIC -- #16-SUITE B256 1 8,412 2/91 1/01 -- 9.45 79,493 4.00 CHI-CHI'S -- #18-SUITE C348 1 738 11/94 1/05 -- 54.19 39,992 8.00 CLAIRE'S BOUTIQUE -- 2/00 59.61 43,992 #19-SUITE B212 1 2,704 2/93 1/98 -- 17.00 45,968 6.00 CLEVELAND TRUNK CO. -- #21-SUITE B248 1 7,290 1/98 12/07 -- 16.00 116,640 7.00 CASUAL CORNER -- CEILING BREAKPOINT TENANT (000'S) (000'S) RECOVERIES - ------ ------- ------- ---------- 1 IN-LINE STORES #1-SUITE D435 UNLIMITED NATURAL NONE 1 HOUR PHOTO #2-SUITE A100 UNLIMITED 1,015 NONE ABBOTT'S CARDS 2/99 1,035 2/00 1,055 #3-SUITE A68 UNLIMITED NATURAL NONE ALADDIN'S CASTLE #4-SUITE C300A UNLIMITED NATURAL NONE ALL FOR ONE #5 SUITE A156 UNLIMITED NATURAL NONE AMER. COMMODORE #6-SUITE A112 UNLIMITED NATURAL NONE AMERICAN EAGLE OUT #7-SUITE B206 UNLIMITED 1,630 NONE ANN TAYLOR 2/02 2,264 #9-SUITE C332 UNLIMITED NATURAL NONE ART WORKS #10-SUITE A72 UNLIMITED NATURAL NONE ATHLETIC X-PRESS #11-SUITE P3 1,217 NONE BABY GAP 2/99 1,248 2/00 1,314 2/03 1,345 2/04 1,411 #12-SUITE D420 UNLIMITED NATURAL NONE BATH & BODY WORKS #14-SUITE C336 UNLIMITED 1,784 NONE BOMBAY COMPANY #15-SUITE B236 UNLIMITED NATURAL NONE CAMELOT MUSIC #16-SUITE B256 UNLIMITED 2,591 NONE CHI-CHI'S #18-SUITE C348 UNLIMITED NATURAL NONE CLAIRE'S BOUTIQUE #19-SUITE B212 UNLIMITED NATURAL NONE CLEVELAND TRUNK CO. #21-SUITE B248 UNLIMITED NATURAL NONE CASUAL CORNER
PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ------ ----- ---- ----- --- ----- ------- ---- ------- #22-SUITE B240 1 3,112 2/91 1/01 -- 33.00 102,696 8.00 COZAD'S HALLMARK -- #23-SUITE D480 1 1,679 2/97 1/02 -- 17.86 29,987 6.00 D.O.C. OPTICAL -- 2/99 19.46 30,994 #28-SUITE B203 1 788 9/93 1/04 -- 32.00 25,216 6.00 DINO PALMIERI -- #29-SUITE B202 1 1,625 6/88 1/99 -- 20.00 32,500 6.00 DOCKTOR PET CENTER -- #30-SUITE A160 1 3,045 2/87 1/98 -- 16.00 48,720 - DOLLAR BANK -- #31-SUITE D446 1 7,045 6/94 1/07 -- 19.00 133,855 5.00 EXPRESS -- #32-SUITE A144 1 1,023 2/97 1/98 -- 26.94 27,560 7.00 FLORSHEIM -- #33-SUITE A116 1 4,820 3/93 1/04 -- 16.60 80,012 6.00 FOOT LOCKER -- #34-SUITE C324 1 6,080 5/88 1/01 -- 16.00 97,280 5.00 GANTOS -- #35-SUITE D420 1 6,349 6/93 1/06 -- 25.00 158,725 6.00 GAP -- #36-SUITE P1 1 3,006 8/93 1/06 -- 22.00 66,132 6.00 GAP KIDS -- 9/99 24.00 72,144 9/01 26.00 78,156 #38-SUITE A88 1 1,260 2/94 1/05 -- 27.00 34,020 7.00 GNC -- #41-SUITE A84 1 994 2/96 1/98 -- 15.95 15,854 7.00 HANOVER SHOES -- #42-SUITE D460 1 686 6/90 1/01 -- 32.08 22,007 10.00 HOT SAM -- #44-SUITE D416 1 1,561 8/96 1/02 -- 32.03 49,999 6.00 INDIANS TEAM SHOP -- #45-SUITE B204 1 1,164 5/87 1/99 -- 66.00 76,824 6.00 J.B. ROBINSON -- #46-SUITE B206 1 804 6/89 1/00 -- 31.08 24,988 8.00 JUST FOR LAUGHS -- #47-SUITE B228 1 3,810 2/95 1/05 -- 20.00 76,200 6.00 KAYBEE TOY & HOBBY -- #48-SUITE C300 1 7,389 2/91 1/01 -- 15.00 110,835 4.00 KOENIG SPORTING GD -- #50-SUITE D436 1 5,241 2/96 1/99 -- 15.00 78,615 5.00 LANE BRYANT -- CEILING BREAKPOINT TENANT (000'S) (000'S) RECOVERIES - ------ ------- ------- ---------- #22-SUITE B240 UNLIMITED NATURAL NONE COZAD'S HALLMARK #23-SUITE D480 UNLIMITED NONE D.O.C. OPTICAL 2/99 484 517 #28-SUITE B203 UNLIMITED NATURAL NONE DINO PALMIERI #29-SUITE B202 UNLIMITED NATURAL NONE DOCKTOR PET CENTER #30-SUITE A160 -- -- NONE DOLLAR BANK #31-SUITE D446 UNLIMITED NATURAL NONE EXPRESS #32-SUITE A144 UNLIMITED 392 NONE FLORSHEIM #33-SUITE A116 UNLIMITED NATURAL NONE FOOT LOCKER #34-SUITE C324 UNLIMITED NATURAL NONE GANTOS #35-SUITE D420 UNLIMITED 3,175 NONE GAP #36-SUITE P1 UNLIMITED 1,323 NONE GAP KIDS 2/99 1,374 2/00 1,443 2/01 1,494 2/02 1,563 #38-SUITE A88 UNLIMITED NATURAL NONE GNC #41-SUITE A84 UNLIMITED NATURAL NONE HANOVER SHOES #42-SUITE D460 UNLIMITED NATURAL NONE HOT SAM #44-SUITE D416 UNLIMITED NATURAL NONE INDIANS TEAM SHOP #45-SUITE B204 UNLIMITED NATURAL NONE J.B. ROBINSON #46-SUITE B206 UNLIMITED NATURAL NONE JUST FOR LAUGHS #47-SUITE B228 UNLIMITED NATURAL NONE KAYBEE TOY & HOBBY #48-SUITE C300 UNLIMITED NATURAL NONE KOENIG SPORTING GD #50-SUITE D436 UNLIMITED NATURAL NONE LANE BRYANT
PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ------ ----- ---- ----- --- ----- ------- ---- ------- #51-SUITE B216 1 3,993 6/94 1/05 -- 18.00 71,694 6.00 LECHTER'S HOUSEWAR -- 7/01 20.00 79,660 #52-SUITE C368 1 5,799 3/87 1/02 -- 11.60 67,268 4.00 LENSCRAFTERS -- 2/00 13.60 78,866 #53-SUITE C314 1 9,880 11/92 1/05 -- 19.00 187,720 5.00 LERNER NY -- #54-SUITE A124 1 8,002 7/92 1/05 -- 19.00 152,038 5.00 LIMITED -- #55-SUITE A120 1 3,810 8/95 1/06 -- 19.00 72,390 5.00 LIMITED TOO -- #57-SUITE A136 1 1,406 9/96 1/04 -- 35.57 50,011 10.00 MALLEY'S CHOCOLATE -- #58-SUITE A132 1 972 1/88 1/98 -- 66.00 64,152 6.00 MARLEN JEWELERS -- #60-SUITE A80 1 932 12/96 1/00 -- 25.00 23,300 8.00 MODERN NAILS -- #62-SUITE A148 1 1,269 9/88 1/99 -- 24.00 30,456 6.00 MUSIC BOX -- #63-SUITE B205 1 840 2/88 1/99 -- 39.90 33,516 7.00 NATURALIZER -- #65-SUITE D464 1 3,239 2/96 1/01 -- 20.00 64,780 6.00 PAYLESS SHOESOURCE -- #66-SUITE D412 1 1,016 9/96 1/02 -- 25.00 25,400 7.00 PERFUMES DE PARIS -- 9/98 28.00 28,448 9/99 31.00 31,496 #68-SUITE D472 1 2,256 7/92 6/02 -- 17.00 38,352 3.00 RADIO SHACK -- #69-SUITE P2 1 1,642 4/89 1/00 -- 50.00 82,100 6.00 ROGERS JEWELERS -- #70-SUITE P2A 1 1,624 11/88 1/99 -- 33.00 53,592 7.00 SAN FRAN. MUSIC BX -- #72-SUITE B244 1 5,270 6/93 1/99 -- 0.00 0 5.00 SHUTTLERS -- 6.00 #73-SUITE B252 1 858 3/88 1/99 -- 36.98 31,729 6.00 STRIDE RITE -- #74-SUITE D440 1 5,094 9/94 1/07 -- 19.00 96,786 5.00 STRUCTURE -- #75-SUITE C340 1 10,015 11/89 1/05 -- 33.00 130,195 6.00 SUNCOAST MOTION -- #76-SUITE B254 1 775 8/89 1/00 -- 30.97 24,002 7.00 TRADE SECRET -- CEILING BREAKPOINT TENANT (000'S) (000'S) RECOVERIES - ------ ------- ------- ---------- #51-SUITE B216 UNLIMITED 1,119 NONE LECHTER'S HOUSEWAR 2/98 1,195 2/01 1,271 2/02 1,326 #52-SUITE C368 UNLIMITED NATURAL NONE LENSCRAFTERS #53-SUITE C314 UNLIMITED 3,754 NONE LERNER NY #54-SUITE A124 UNLIMITED NATURAL NONE LIMITED #55-SUITE A120 UNLIMITED 1,448 NONE LIMITED TOO #57-SUITE A136 UNLIMITED NATURAL NONE MALLEY'S CHOCOLATE #58-SUITE A132 UNLIMITED 369 NONE MARLEN JEWELERS #60-SUITE A80 UNLIMITED NATURAL NONE MODERN NAILS #62-SUITE A148 UNLIMITED NATURAL NONE MUSIC BOX #63-SUITE B205 UNLIMITED NATURAL NONE NATURALIZER #65-SUITE D464 UNLIMITED NATURAL NONE PAYLESS SHOESOURCE #66-SUITE D412 UNLIMITED NATURAL NONE PERFUMES DE PARIS #68-SUITE D472 UNLIMITED NATURAL NONE RADIO SHACK #69-SUITE P2 UNLIMITED NATURAL NONE ROGERS JEWELERS #70-SUITE P2A UNLIMITED NATURAL NONE SAN FRAN. MUSIC BX #72-SUITE B244 748 ZERO NONE SHUTTLERS UNLIMITED #73-SUITE B252 UNLIMITED NATURAL NONE STRIDE RITE #74-SUITE D440 UNLIMITED NATURAL NONE STRUCTURE #75-SUITE C340 UNLIMITED 2,604 NONE SUNCOAST MOTION #76-SUITE B254 UNLIMITED NATURAL NONE TRADE SECRET
PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ------ ----- ---- ----- --- ----- ------- ---- ------- #79-SUITE C328 1 3,664 10/89 1/00 -- 22.00 80,608 VICTORIA'S SECRET -- #80-SUITE D448 1 7,018 3/95 1/06 -- 20.00 140,360 6.00 WALDENBOOKS -- #81-SUITE C352 1 692 10/96 1/07 -- 52.01 35,991 8.00 ZACH'S COFFEE AND -- #82-SUITE D410 1 572 1/98 12/07 -- 61.19 35,001 7.00 PRETZELS -- 1/03 69.93 40,000 #85 1 1 1/97 12/27 -- 0.00 0 - RECOVERY TENANT -- #86-SUITE A096 1 415 4/98 3/06 -- 41.40 17,181 7.00 VACANT SPACE -- #87-SUITE A108 1 4,344 4/98 3/06 -- 16.56 71,937 7.00 VACANT SPACE -- #88-SUITE A114 1 2,565 7/98 6/06 -- 16.56 42,476 7.00 VACANT SPACE -- #89-SUITE B224 1 2,604 7/98 6/06 -- 16.56 43,122 7.00 VACANT SPACE -- #90-SUITE C304 1 2,944 1/99 12/06 -- 17.14 50,459 7.00 VACANT SPACE -- #91-SUITE C320 1 4,575 1/99 12/06 -- 17.14 78,414 7.00 VACANT SPACE -- #92-SUITE D452 1 540 1/99 12/06 -- 42.85 23,138 7.00 VACANT SPACE -- #93-SUITE D476 1 1,381 1/99 12/06 -- 27.85 38,463 7.00 VACANT SPACE -- #94-SUITE A140 1 675 7/98 6/06 -- 41.00 27,945 7.00 VACANT SPACE -- ------- 215,772 2 FOOD COURT #13-SUITE FC3 2 374 11/89 1/00 -- 82.31 30,784 BOARDWALK FRIES -- #17-SUITE FC1 2 402 2/96 1/01 -- 68.48 27,529 8.00 CINNABON -- #24-SUITE FC9 2 431 12/94 1/00 -- 61.25 26,399 8.00 DELI AT WESTGATE -- #39-SUITE FC2 2 499 4/89 1/00 -- 70.22 35,040 8.00 GREAT STEAK & POTA -- #43-SUITE FC5 2 554 2/91 1/02 -- 59.51 32,969 8.00 MARK PI HUNAN EXPR -- 3/98 65.46 36,265 #59-SUITE FC6 2 878 4/89 1/00 -- 42.16 37,016 6.00 MCDONALD'S -- CEILING BREAKPOINT TENANT (000'S) (000'S) RECOVERIES - ------ ------- ------- ---------- #79-SUITE C328 1,612 NONE VICTORIA'S SECRET #80-SUITE D448 UNLIMITED NATURAL NONE WALDENBOOKS #81-SUITE C352 UNLIMITED NATURAL NONE ZACH'S COFFEE AND #82-SUITE D410 UNLIMITED NATURAL NONE PRETZELS #85 -- -- REAL ESTATE TAX RECOVERY TENANT COMMON AREA MAINT. #86-SUITE A096 UNLIMITED NATURAL NONE VACANT SPACE #87-SUITE A108 UNLIMITED NATURAL NONE VACANT SPACE #88-SUITE A114 UNLIMITED NATURAL NONE VACANT SPACE #89-SUITE B224 UNLIMITED NATURAL NONE VACANT SPACE #90-SUITE C304 UNLIMITED NATURAL NONE VACANT SPACE #91-SUITE C320 UNLIMITED NATURAL NONE VACANT SPACE #92-SUITE D452 UNLIMITED NATURAL NONE VACANT SPACE #93-SUITE D476 UNLIMITED NATURAL NONE VACANT SPACE #94-SUITE A140 UNLIMITED NATURAL NONE VACANT SPACE 2 FOOD COURT #23-SUITE FC3 NATURAL NONE BOARDWALK FRIES #17-SUITE FC1 UNLIMITED NATURAL NONE CINNABON #24-SUITE FC9 UNLIMITED NATURAL NONE DELI AT WESTGATE #39-SUITE FC2 UNLIMITED NATURAL NONE GREAT STEAK & POTA #43-SUITE FC5 UNLIMITED NATURAL NONE MARK PI HUNAN EXPR #59-SUITE FC6 UNLIMITED NATURAL NONE MCDONALD'S
PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ------ ----- ---- ----- --- ----- ------- ---- ------- #71-SUITE FC4 2 557 4/89 1/00 -- 118.39 65,943 10.00 SBARRO THE ITALIAN -- #83-SUITE FC10 2 446 1/98 12/07 -- 40.36 18,001 7.00 DAIRY QUEEN -- 1/03 44.84 19,999 #84-SUITE FC7 2 919 1/97 1/97 -- 0.00 0 - VACANT SPACE -- ------- 5,060 3 KIOSKS #20-SUITE K50000 3 148 2/95 1/00 -- 179.05 26,499 10.00 COOPERS WATCHWORKS -- 2/98 189.19 28,000 #40-SUITE K50060 3 289 12/96 1/98 -- 103.86 30,016 - GTE MOBILNET -- #61-SUITE K50020 3 148 2/96 1/98 -- 89.19 13,200 7.00 MONOGRAMS WEST -- #67-SUITE K50050 3 148 2/96 1/98 -- 172.50 25,530 10.00 PIERCING PAGODA -- #76-SUITE K50030 3 148 2/95 1/98 -- 227.03 33,600 8.00 SUNGLASS HUT -- #77-SUITE K50070 3 289 2/95 1/98 -- 133.00 38,437 10.00 THINGS REMEMBERED -- ------- 1,170 4 GROUND LEASES #8-SUITE B260 4 5,001 11/91 11/16 -- 9.00 45,009 1.50 APPLEBEE'S -- 12/01 10.12 50,610 12/06 11.39 56,961 12/11 12.81 64,063 #26-SUITE ANCHOR 4 194,511 6/86 1/08 -- 3.86 750,812 2.50 DILLARD'S NORTH -- 1-240 3.86 750,812 2.50 #27-SUITE GROUND 4 1 1/85 12/30 -- 0.00 0 - DILLARD'S SOUTH -- #37-SUITE GROUND 4 24,974 11/88 6/09 -- 11.00 274,714 8.00 GENERAL CINEMA -- 1-240 11.00 274,714 8.00 #49-SUITE DS1 4 94,500 4/96 4/16 -- 2.18 206,010 0.50 KOHL'S DEPT. STORE -- 5/01 2.51 237,195 5/06 2.88 272,160 5/11 3.32 313,740 #56-SUITE DP1 4 5,320 2/95 2/05 -- 12.78 67,990 2.00 LONGHORN STEAKS -- 3/00 14.06 74,799 ------- 324,307 CEILING BREAKPOINT TENANT (000'S) (000'S) RECOVERIES - ------ ------- ------- ---------- #71-SUITE FC4 UNLIMITED NATURAL NONE SBARRO THE ITALIAN #83-SUITE FC10 UNLIMITED NATURAL NONE DAIRY QUEEN #84-SUITE FC7 -- -- NONE VACANT SPACE 3 KIOSKS #20-SUITE K50000 UNLIMITED NATURAL NONE COOPERS WATCHWORKS #40-SUITE K50060 -- -- NONE GTE MOBILNET #61-SUITE K50020 UNLIMITED NATURAL NONE MONOGRAMS WEST #67-SUITE K50050 UNLIMITED NATURAL NONE PIERCING PAGODA #76-SUITE K50030 UNLIMITED NATURAL NONE SUNGLASS HUT #77-SUITE K50070 UNLIMITED NATURAL NONE THINGS REMEMBERED 4 GROUND LEASES #8-SUITE B260 UNLIMITED 1,700 NONE APPLEBEE'S #26-SUITE ANCHOR UNLIMITED 29,955 NONE DILLARD'S NORTH UNLIMITED 29,955 NONE #27-SUITE GROUND -- -- NONE DILLARD'S SOUTH #37-SUITE GROUND UNLIMITED 4,071 NONE GENERAL CINEMA UNLIMITED 4,071 NONE #49-SUITE DS1 UNLIMITED 17,955 NONE KOHL'S DEPT. STORE #56-SUITE DP1 UNLIMITED 1,798 NONE LONGHORN STEAKS 3/00 1,979
PRIMARY/ ANNUAL SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ------ ----- ---- ----- --- ----- ------- ---- ------- 6 PERIPHERAL #25-SUITE CW14 6 60,000 3/75 8/00 -- 2.90 174,000 3.00 DILLARD'S HOME STR -- 3.50 3.00 2.00 1-240 2.90 174,000 3.00 3.50 3.00 2.00 #64-SUITE CW13 6 7,343 12/90 1/98 -- 8.00 56,744 -- OHIO MOTORISTS ASS -- 1-36 9.26 67,596 ------- 67,343 ------- 613,652 ======= CEILING BREAKPOINT TENANT (000'S) (000'S) RECOVERIES - ------ ------- ------- ---------- 6 PERIPHERAL #25-SUITE CW14 6,000 5,000 NONE DILLARD'S HOME STR 7,000 7,980 UNLIMITED 6,000 5,000 NONE 7,000 7,980 UNLIMITED #64-SUITE CW13 -- -- NONE OHIO MOTORISTS ASS -- -- NONE
Financial Rent Roll Report [ILLEGIBLE] Financial Rent Roll Report [ILLEGIBLE] Financial Rent Roll Report [ILLEGIBLE] PHOTOGRAPHS OF WESTGATE MALL [GRAPHIC OMITTED] SOUTH ENTRANCE [GRAPHIC OMITTED] PERIPHERAL DEVELOPMENT PHOTOGRAPHS OF WESTGATE MALL [GRAPHIC OMITTED] FOOD COURT [GRAPHIC OMITTED] VACANT UNIT PHOTOGRAPHS OF WESTGATE MALL [GRAPHIC OMITTED] DILLARD'S NORTH [GRAPHIC OMITTED] KOHL'S PHOTOGRAPHS OF COMPETING MALLS [GRAPHIC OMITTED] PARMATOWN MALL (PARMA) [GRAPHIC OMITTED] MIDWAY MALL (ELYRIA) PHOTOGRAPHS OF COMPETING MALLS [GRAPHIC OMITTED] GREAT NORTHERN MALL (N. OLMSTEAD) [GRAPHIC OMITTED] SOUTHPARK CENTER (STRONGSVILLE)
TABLE 1: PROJECTED REGIONAL EMPLOYMENT, BY INDUSTRY MAJOR INDUSTRY 1993 1995 2000 2005 2010 2015 2020 2025 MINING 1,800 1,800 1,800 1,800 1,800 1,700 1,600 1,600 CONSTRUCTION 53,800 50,500 55,900 59,200 62,200 64,500 66,500 68,500 MANUFACTURING 215,500 233,200 216,900 204,900 193,300 179,300 167,300 157,600 TRANS & PUB UTIL 47,000 49,200 46,800 45,100 43,400 41,500 39,900 38,400 WHOLESALE TDE 71,200 72,100 72,300 72,500 72,600 72,100 71,700 71,300 RETAIL TRADE 195,500 196,600 207,300 214,600 221,400 227,700 233,200 238,600 FIN, INS & R E 94,300 93,300 100,000 104,600 109,000 112,900 116,400 119,800 SERVICES 364,900 365,900 395,200 415,500 429,600 435,000 439,700 443,200 GOVERNMENT 144,000 138,400 133,800 130,200 126,000 120,200 115,100 110,900 TOTAL: NON-AGRIC 1,188,000 1,201,000 1,229,900 1,248,300 1,259,300 1,255,000 1,251,400 1,249,900 Source: NOACA staff, April 1997. Note: 1993 is last year of reported data; all numbers rounded to nearest 100.
1990 1991 1992 1993 1994 1995 1996 CUYAHOGA COUNTY LABOR FORCE 651,400 675,300 676,800 671,600 675,600 675,908 690,175 EMPLOYMENT 647,400 636,000 628,100 625,700 636,300 644,058 655,758 UNEMPLOYMENT 34,000 39,400 48,700 45,900 39,400 31,833 34,408 UNEMP RATE 5.0 5.8 7.2 6.8 5.8 4.7 5.0 GEAUGA COUNTY LABOR FORCE 42,700 42,600 43,300 42,800 43,200 43,392 44,267 EMPLOYMENT 41,100 40,800 40,800 40,600 41,300 41,817 42,692 UNEMPLOYMENT 1,700 1,800 2,500 2,200 1,900 1,558 1,592 UNEMP RATE 3.9 4.3 5.7 5.1 4.4 3.6 3.6 LAKE COUNTY LABOR FORCE 118,400 118,500 120,200 119,400 119,700 119,592 122,975 EMPLOYMENT 112,600 111,800 111,600 111,200 113,100 114,442 117,608 UNEMPLOYMENT 5,800 6,700 8,600 8,200 6,700 5,158 5,358 UNEMP RATE 4.9 5.7 7.2 6.9 5.6 4.3 4.4 LORAIN COUNTY LABOR FORCE 135,800 136,700 136,600 132,900 134,100 136,450 140,850 EMPLOYMENT 126,100 125,000 124,600 124,200 126,300 127,808 132,000 UNEMPLOYMENT 9,700 11,700 12,000 8,800 7,800 8,650 8,842 UNEMP RATE 7.1 8.6 8.8 6.6 5.8 6.3 6.3 MEDINA COUNTY LABOR FORCE 65,400 66,300 67,800 67,000 67,600 67,950 71,875 EMPLOYMENT 62,400 62,700 63,400 63,100 64,200 65,000 68,683 UNEMPLOYMENT 3,000 3,600 4,400 3,800 3,400 2,967 3,183 UNEMP RATE 4.6 5.4 6.5 5.7 5.0 4.4 4.4 NOACA LABOR FORCE 1,043,700 1,039,400 1,044,700 1,033,700 1,040.200 1,043,292 1,070,142 EMPLOYMENT 989,600 976,300 968,500 964,800 981,200 993,125 1,016,742 UNEMPLOYMENT 54,200 63,200 76,200 68,900 59,200 50,167 53,383 UNEMP RATE 5.2 6.1 7.3 6.7 5.7 4.8 5.0 PORTAGE COUNTY LABOR FORCE 75,300 76,400 78,500 78,400 80,400 80,408 82,475 EMPLOYMENT 71,300 72,000 73,100 73,900 76,200 77,050 78,817 UNEMPLOYMENT 4,000 4,500 5,400 4,500 4,200 3,358 3,642 UNEMP RATE 5.3 5.8 6.9 5.8 5.2 4.2 4.4 SUMMIT COUNTY LABOR FORCE 258,200 261,900 266,700 267,300 273,000 253,842 278,675 EMPLOYMENT 244,600 246,200 248,300 251,300 259,000 261,950 265,717 UNEMPLOYMENT 13,600 15,700 18,300 16,000 14,100 12,600 12,967 UNEMP RATE 5.3 6.0 6.9 6.0 5.2 5.0 4.7 SEVEN COUNTIES LABOR FORCE 1,377,200 1,377,700 1,389,900 1,379,400 1,393,600 1,377,542 1,431,292 EMPLOYMENT 1,305,500 1,294,500 1,289,900 1,290,000 1,316,400 1,332,125 1,361,275 UNEMPLOYMENT 71,800 83,400 99,900 89,400 77,500 66,125 69,992 UNEMP RATE 5.2 6.1 7.2 6.5 5.6 4.8 4.9
REGIONAL MALL SALE #1 Name: Towne East Mall Location: Mesquite, Texas Sale Date: Pending Interest Sold: Leased Fee Seller: Grosvenor International Buyer: REIT Land Area: 102 acres Description of Improvements Total GLA Sold: 426,000 Square Feet Enclosed Mall Area: 426,000 Anchors Dillard's 206,300 Foley's 190,200 JC Penney 190,100 Sears 190,100 Miscellaneous 45,300 ------- Anchor Total 822,000 Total GLA: 1,248,000 Square Feet ========= Year Constructed: 1971/1996 Sale price: $112,500,000 Sale Terms: Assumed cash. Price per Square Foot: $264 Income Data Net Operating Income: $9,900,000 ($23.24 per square foot) Retail Sales: $300 per square foot of enclosed mall Financial Indicators OAR: 8.8% Sale-to-price Ratio: 0.88:1 Internal Rate of Return: N/A Remarks: Mall stores were 93 percent occupied at the time of sale. The NOI is based on the reported OAR. REGIONAL MALL SALE #2 Name: Silver Lake Mall Location: Coeur d'Alene, Idaho Sale Date: June 1997 Interest Sold: Leased Fee (70%) Seller: Roebbelen Engineering, Inc. Buyer: JP Realty, Inc. Land Area: 31 Acres Description of Improvements Total GLA Sold: 324,300 Square Feet Enclosed Mall Area: 113,400 Anchors Lamont -- Sears 51,600 JC Penney 49,500 Emporium 43,400 ------- Anchor Total 210,900 Total GLA: 324,300 Square Feet ======= Year Constructed: 1989 Sale price: $38,000,000 (100% interest) $27,000,000 (70% interest sold) Sale Terms: The consideration consisted of 72,000 units of limited partner interest in Price Development Company ($1,863,000); assumption of debt $24,755,000; $9,000,000 in revolving debt, and $12,936,000 cash. Price per Square Foot: $117 Income Data Net Operating Income: $2,473,370 ($8.46 per square foot) Retail Sales: N/A Financial Indicators OAR: 6.51 percent Sale-to-price Ratio: N/A Internal Rate of Return: N/A Remarks: The mall was reportedly 99.4 percent occupied at the time of sale. JP Realty was managing the mall for the seller. Sears will expand to 95,000 square feet. This is a dominant mall in its area. REGIONAL MALL SALE #3 Name: Visalia Mall Location: Visalia, California Sale Date: June 1997 Interest Sold: Leased Fee Seller: Connecticut General Life Buyer: JP Realty, Inc. Land Area: 28 acres Description of Improvements Total GLA Sold: 439,500 Square Feet Enclosed Mall Area: 265,000 Anchors Gottschalk's 74,600 JC Penney 99,100 ------- Anchor Total 173,700 Total GLA: 439,500 Square Feet ======= Year Constructed: 1963, 1989 and 1995 Sale price: $38,000,000 Sale Terms: $37,000,000 third-party financing, $593,000 cash, and $407,000 tax-free exchange. Price per Square Foot: $86.46 Income Data Net Operating Income: $3,910,730 ($8.90 per square foot) Retail Sales: N/A Financial Indicators OAR: 10.3% Sale-to-price Ratio: N/A Internal Rate of Return: N/A Remarks: At the time of sale, the mall was 95.3 percent occupied (88.2% mall shops). The mall is a dominant mall in the area. REGIONAL MALL SALE #4 Name: South Towne Mall and Power Center Location: NEC 10600 South and I-15 Sandy, Utah Sale Date: March 1997 Interest Sold: Leased Fee Seller: Zell/Merrill Lynch R.E. Opportunity Partners Buyer: Macerich Company Land Area: 104 Acres Description of Improvements Total GLA Sold: 995,900 Square Feet Enclosed Mall Area: 434,000 Anchors JC Penney 99,200 Mervyn's 82,700 Target 171,800 ZCMI 198,200 ------- Anchor Total 561,900 Total GLA: 995,000 Square Feet ======= Year Constructed: 1986, 1992 and 1994 Sale price: $98,000,000 Sale Terms: The debt assumed bears an interest rate of LIBOR plus 1.75 percent. Purchase included an assumption of existing debt totaling $47,000,000 with the balance of $51,000,000 paid in cash. Price per Square Foot: $98.40 Income Data Net Operating Income: $8,400,000 ($8.43 per square foot) Retail Sales: $249 per square foot Financial Indicators OAR: 8.6% Sale-to-price Ratio: 0.91:1 Internal Rate of Return: N/A Remarks: Several out-parcel and pad sites were included, but no value is allocated to the pad sites. A Dillard's (212,000 sf) and enclosed mall expansion (27,000 sf) were under construction. The mall will total 1,234,900 square feet when these areas are open, but no allocation of the purchase price was made for the yet-to-be-completed improvements. The enclosed mall shops were 83 percent leased when sold. REGIONAL MALL SALE #5 Name: Valley Fair Mall Location: 3601 South 2700 West West Valley City, Utah Sale Date: December 1996 Interest Sold: Leased Fee Seller: Valley Fair Shopping Center, Inc. Buyer: Excel Realty Trust Land Area: 54 acres Description of Improvements Total GLA Sold: 608,000 Square Feet Enclosed Mall Area: 264,400 Anchors JC Penney 141,000 Mervyn's 91,000 CMI 111,500 ------- Anchor Total 343,600 Total GLA: 608,000 Square Feet ======= Year Constructed: 1970/1986/1987 Sale price: $37,300,000 Sale Terms: Excel REITs 1996 annual report states that $17,900,000 was financed with an existing 7.6 percent mortgage using about 50 percent leverage. Price per Square Foot: $61.35 Income Data Net Operating Income: $4,140,000 ($6.81 per square foot) Retail Sales: $250 per square foot of enclosed mall Financial Indicators OAR: 11.1% Sale-to-price Ratio: 0.56:1 (based on enclosed mall sales) Internal Rate of Return: N/A Remarks: The property was 85 percent occupied at the time of sale. A fourth anchor is planned. Additionally, 6 pad sites and four acres of excess land were included in the sale; however, no allocation is made for the value of the excess land. REGIONAL MALL SALE #6 Name: Old Orchard Shopping Center Location: Skokie, Illinois Sale Date: December 1996 Interest Sold: Leased Fee Seller: Zell/Merrill Lynch II Buyer: Urban Retail Properties Co. Land Area: N/A Description of Improvements Total GLA Sold: 630,000 Square Feet Enclosed Mall Area: 630,000 Anchors Nordstrom's -- Bloomingdale's -- Lord & Taylor 115,500 Saks 5th Avenue 103,300 Marshall Field's 446,000 --------- Anchor Total 1,211,000 Total GLA: 1,841,000 Square Feet ========= Year Constructed: 1956/1995 Sale price: $266,000,000 Sale Terms: Reported price included $106 million cash and $160 million of existing debt. Price per Square Foot: $421 Income Data Net Operating Income: $21,546,000 ($34.20 per square foot) Retail Sales: $310 per square foot of mall shops Financial Indicators OAR: 8.1% Sale-to-price Ratio: 1.56:1 Internal Rate of Return: N/A Remarks: This upscale property was 88 percent occupied at the time of sale. The mall underwent a major expansion and renovation in 1995. NOI is based on the reported OAR of 8.1 percent. REGIONAL MALL SALE #7 Name: St. Clair Square Location: Fairview Heights, Illinois Sale Date: November 1996 Interest Sold: Leased Fee and Leasehold Seller: Prudential Real Estate Buyer: CBL & Associates Properties Land Area: 89 acres (20 acres ground leased through 2071) Description of Improvements Total GLA Sold 280,000 Square Feet Enclosed Mall Area: 280,000 Anchors Dillard's 170,000 Famous-Barr 236,000 JC Penney 164,000 Sears 169,000 Out-Parcels 35,000 ------- Anchor Total 774,000 Total GLA: 1,044,000 Square Feet ========= Year Constructed: 1978/1992 Sale price: $86,400,000 Sale Terms: Not disclosed. Price per Square Foot: $309 Income Data Net Operating Income: $7,733,000 ($27.62 per square foot) Retail Sales: $330 per square foot Financial Indicators OAR: 8.65% Sale-to-price Ratio: 0.94:1 Internal Rate of Return: 11.0% Remarks: The mall was 94 percent occupied at the time of sale. The mall is a primary retail destination for the St. Louis MSA population located east of the Mississippi River. REGIONAL MALL SALE #8 Name: Park Mall Location: Tucson, Arizona Sale Date: October 1996 Interest Sold: Leased Fee Seller: K-GAM Buyer: General Growth Properties, Inc. Land Area: 75 Acres (63 acres for mall, 12 acres excess) Description of Improvements Total GLA Sold: 447,300 Square Feet Enclosed Mall Area: 348,200 Sold Anchors Sears 255,500 Macy's 157,200 Dillard's 99,100 Sold Sears 190,100 ------- Anchor Total 511,800 Total GLA: 860,000 Square Feet ======= Year Constructed: 1974 Sale price: $50,000,000 Sale Terms: $25 million in shares of common stock and $25 million in cash. The motivation of the seller was in question. The mall was controlled by the estate of Joseph Kivel who was recently deceased. The mall was debt free, but the family of Mr. Kivel did not want to continue to operate the mall, choosing to place it on the market. Price per Square Foot: $112 Income Data Net Operating Income: $5,000,000 ($11.18 per square foot) Retail Sales: $225 per square foot (mall shops) Financial Indicators OAR: 10.0% Sale-to-price Ratio: 0.64:1 Internal Rate of Return: N/A Remarks: This is one of two malls in the Tucson area but is not the more dominate of the two. The buyer intends to add two anchors and a small amount of shop GLA. The mall shops were 85 percent occupied at the time of sale. The mall was in excellent condition but had never had a major renovation. The 12 acres of excess land were landlocked at the rear of the site and, no value was ascribed to it by the buyer. REGIONAL MALL SALE #9 Name: Valley View Center Location: Dallas, Texas Sale Date: October 1996 Interest Sold: Leased Fee Seller: LaSalle Partners Buyer: The Macerich Company Land Area: 95 Acres Description of Improvements Total GLA Sold: 704,600 Square Feet Enclosed Mall Area: 471,600 Sold Anchors Dillard's 298,500 Foley's 298,400 Sears 265,000 JC Penney 233,000 Sold --------- Anchor Total 1,095,000 Total GLA: 1,567,000 Square Feet ========= Year Constructed: 1975/1993/1996 Sale price: $85,500,000 Sale Terms: Assumed cash. Price per Square Foot: $121 Income Data Net Operating Income: $8,000,000 ($11.35 per square foot) 1996 $7,700,000 ($10.93 per square foot) 1995 Retail Sales: $228 per square foot (enclosed mall) Financial Indicators OAR: 9.36% - 1996 NOI 9.00% - 1995 NOI Sale-to-price Ratio: 0.80:1 Internal Rate of Return: N/A Remarks: This is the largest mall in the Dallas/Fort Worth area, and has a fashion orientation. The center's mall shops were 85 percent occupied at the time of sale. The NOI shown is as projected for 1996, but the 1995 NOI was $7,700,000 which indicates an OAR of 9.0 percent. The buyer anticipated a significant upside potential by increasing the occupancy. JC Penney is a new lease in the mall in a space that was vacant for an extended period of time. REGIONAL MALL SALE #10 Name: Paseo Nuevo Location: Santa Barbara, California Sale Date: June 1996 Interest Sold: Leasehold Seller: JMB Realty Corporation Buyer: Taubman Realty Land Area: 12 Acres Description of Improvements Total GLA Sold: 158,120 Square Feet Enclosed Mall Area: 158,120 Anchors The Broadway 132,600 Nordstrom's 165,400 ------- Anchor Total 298,000 Total GLA: 456,120 Square Feet ======= Year Constructed: 1990 Sale price: $37,000,000 Sale Terms: Assumed cash to seller Price per Square Foot: $236 Income Data Net Operating Income: $3,810,000 ($24.10 per square foot) Retail Sales: $340 per square foot (enclosed mall) Financial Indicators OAR: 10.3% Sale-to-price Ratio: 0.69:1 Internal Rate of Return: N/A Remarks: At the time of sale the mall shops were 88 percent occupied. This is an unenclosed mall of quality. The high first year return is reflective of the leasehold interest being acquired (with stipulated ground rent payments reportedly limiting the buyer's upside potential) and a few small environment and engineering issues. This is the buyer's analysis. REGIONAL MALL SALE #11 Name: Grand Teton Mall Location: Idaho Falls, Idaho Sale Date: April 1996 Interest Sold: Leased Fee Seller: Equiteton Associates Buyer: J.R. Realty Inc. Land Area: 58 Acres Description of Improvements Total GLA Sold: 521,000 Square Feet Enclosed Mall Area: 195,500 Anchors Bon Marche 62,200 JC Penney 66,800 Sears 73,500 ZCMI 123,000 ------- Anchor Total 325,500 Total GLA: 521,000 Square Feet ======= Year Constructed: 1984/1990 Sale price: $34,375,000 Sale Terms: Assumed cash. Price per Square Foot: $65.98 Income Data Net Operating Income: $3,520,000 ($6.76 per square foot) Retail Sales: $240 per square foot (enclosed mall) Financial Indicators OAR: 10.24% Sale-to-price Ratio: 0.73:1 Internal Rate of Return: N/A Remarks: At the time of sale the mall was 85 percent occupied. The marketability of this mall was affected by its 2nd to 3rd tier status. Also, 1/3 of the employment base of the area comes from the National Energy Laboratory and investors were concerned about a potential downsizing of the operation. REGIONAL MALL SALE #12 Name: Charlestowne Mall Location: St. Charles, Illinois Sale Date: April 1996 Interest Sold: Leased Fee (32% interest) Seller: Charwill Associates Buyer: Ivenhoe Equities Land Area: 80.3 Acres Description of Improvements Total GLA Sold: 744,900 Square Feet Enclosed Mall Area: 315,300 Sold Anchors Carson Pirie Scott 141,800 Sold JC Penney 99,600 Sold Sears 98,200 Sold Regal Cinema 90,000 Sold Kohl's 80,000 ------- Anchor Total 509,600 Total GLA: 824,900 Square Feet ======= Year Constructed: 1991/1993/1995 Sale Price: $85,000,000 (100% interest) Sale Terms: All cash Price per Square Foot: $114 Total sold (744,900 sq. ft.) $270 Enclosed mall (315,300 sq. ft.) Income Data Net Operating Income: $8,125,000 ($10.91 per square foot) - enclosed mall Retail Sales: $202 per square foot (total mall) Financial Indicators OAR: 9.6% Sale-to-price Ratio: 0.56:1 Internal Rate of Return: 12.0 Remarks: Buyer purchased 32 percent of the available equity for $27, 172,000. A deal pending with Regal Cinema which would provide about $1.4 million in annual rent is not reflected in the NOI. The mall shops were reported to be about 79 percent occupied at the time of sale. Westgate Mall Fairview Park, OH
- ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOW SUMMARY - ------------------------------------------------------------------------------------------------------------------------------------ Year Year Analysis Period: 1994 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Actual Adjustments Adjusted Actual Adjustments Adjusted -------------------------------------------------------------------------------------------- Revenues: Total Minimum/Basis Rent Rental Income 5,508,906 (237,800) 3,061,106 6,089,733 (213,500) 5,876,233 Miscellaneous 0 0 -------------------------------------------------------------------------------------------- Total Minimum/Base Rent 5,508,906 (237,800) 3,061,106 6,089,733 (213,500) 5,876,233 Percentage Rent Rental Income 208,524 208,524 222,054 222,054 Miscellaneous 0 0 -------------------------------------------------------------------------------------------- Percentage Rent 208,524 0 208,524 222,054 222,054 Recoveries Real Estate Taxes 428,775 428,778 539,194 539,194 Insurance 25,663 25,663 28,399 28,399 CAM/Mgmt Reimbursements 1,427,519 1,427,519 1,476,079 1,476,079 Other Expense Recoveries 2,820 2,820 3,077 3,077 -------------------------------------------------------------------------------------------- Total Recoveries 1,881,780 0 1,881,780 2,047,649 0 2,047,649 Other Recurring Income Interest 0 0 Promotion 0 0 [Illegible] 0 0 Lease Cancellation 303,679 303,679 16,536 16,536 Security Deposits 0 0 Push-cart 0 0 Other 23,608 23,608 29,665 29,665 -------------------------------------------------------------------------------------------- Other Recurring Income 327,287 0 327,287 46,201 0 46,201 -------------------------------------------------------------------------------------------- Total Gross Income 8,016,497 (237,800) 7,778,697 8,405,637 (213,500) 8,192,137 Vacancy 0 0 Credit Loss 0 0 -------------------------------------------------------------------------------------------- Effective Gross Income 8,016,497 (237,800) 7,778,697 8,405,637 (213,500) 8,192,137 - ------------------------------------------------------------------------------------------------------------------------------------ - ----------------------------------------------------------------------------------------------------------------------------------- Year Underwritable Notes Analysis Period: 1996 Cash Flow - ----------------------------------------------------------------------------------------------------------------------------------- Actual Adjustments Adjusted Adjustments Adjusted ------------------------------------------------------------------------------------ Revenues: Total Minimum/Basis Rent Rental Income 6,180,926 (238,700) 5,942,225 (34,944) 5,907,282 (1) Miscellaneous 0 0 ------------------------------------------------------------------------------------ Total Minimum/Base Rent 6,180,926 (238,700) 5,942,225 (34,944) 5,907,282 Percentage Rent Rental Income 221,566 221,566 221,566 Miscellaneous 0 0 ------------------------------------------------------------------------------------ Percentage Rent 221,566 221,566 221,566 Recoveries Real Estate Taxes 569,008 569,008 569,008 Insurance 29,781 29,781 29,781 CAM/Mgmt Reimbursements 1,595,263 1,595,263 1,595,263 Other Expense Recoveries 3,251 3,251 3,251 ------------------------------------------------------------------------------------ Total Recoveries 2,197,303 0 2,197,303 0 2,197,303 Other Recurring Income Interest 0 Promotion 0 [Illegible] 0 Lease Cancellation 26,165 26,165 Security Deposits 0 Push-cart 0 Other 27,951 27,951 ------------------------------------------------------------------------------------ Other Recurring Income 54,116 0 54,116 (2) ------------------------------------------------------------------------------------ Total Gross Income 8,653,911 (238,700) 8,415,211 (34,944) 8,380,267 Vacancy 0 0 0 (3) Credit Loss 0 0 0 ------------------------------------------------------------------------------------ Effective Gross Income 8,653,911 (238,700) 8,415,211 (34,944) 8,380,267 - -----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOW SUMMARY - ------------------------------------------------------------------------------------------------------------------------------------ Year Year Analysis Period: 1994 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Actual Adjustments Adjusted Actual Adjustments Adjusted -------------------------------------------------------------------------------------------- Expenses Recoverable Expenses CAM (1,176,928) (1,176,928) (1,259,549) (1,259,549) Real Estate Tax (438,915) (438,915) (629,890) (629,890) Marketing (86,263) (86,263) (95,490) (95,490) Other 0 0 -------------------------------------------------------------------------------------------- Total Recoverable Expenses (1,700,104) 0 (1,700,104) (1,984,929) 0 (1,984,929) Non-recoverable Expenses Repairs & Maintenance (20,959) (20,959) (28,863) (28,863) Cleaning & Decorating 0 0 Insurance (15,466) (15,466) (18,521) (18,521) Other Fixed 0 0 Electric/Gas 0 0 Other Utilities 0 0 Other Operating (142,845) (142,845) (88,918) (88,918) Management Fees (380,072) (380,072) (396,942) (396,942) Legal and Professional (51,985) (51,985) (63,727) (63,727) Payroll (10,474) (10,474) (12,114) (12,114) Other Administration (10,185) (10,185) (9,139) (9,139) Interest (4,043,507) 4,043,507 0 (3,988,887) 3,988,887 0 Depreciation and Amortization (1,808,699) 1,808,699 0 (1,783,209) 1,783,209 0 Other (99,235) 25,046 (74,189) (53,361) 10,699 (42,662) -------------------------------------------------------------------------------------------- Total Non-Recoverable Expenses (6,583,427) 5,877,252 (706,175) (6,443,681) 5,782,795 (660,886) -------------------------------------------------------------------------------------------- Total Expenses (8,283,531) 5,877,252 (2,406,279) (8,428,610) 5,782,795 (2,645,815) -------------------------------------------------------------------------------------------- Net Operating Income (267,034) 5,639,452 5,372,418 (22,973) 5,569,295 5,546,322 Debt Service Coverage (NOI) 1.22 1.25 Capital Reserves 0 0 Tenant Improvements 0 0 Leasing Commissions (210,159) (210,159) (160,153) (160,153) -------------------------------------------------------------------------------------------- Net Cash Flow (477,193) 5,639,452 5,162,259 (183,126) 5,569,295 5,386,169 - ------------------------------------------------------------------------------------------------------------------------------------ Debt Service Coverage (NCF) 1.17 1.22 - ----------------------------------------------------------------------------------------------------------------------------------- Year Underwritable Notes Analysis Period: 1996 Cash Flow - ----------------------------------------------------------------------------------------------------------------------------------- Actual Adjustments Adjusted Adjustments Adjusted ------------------------------------------------------------------------------------ Expenses Recoverable Expenses CAM (1,283,562) (1,283,562) (1,283,562) Real Estate Tax (720,000) (720,000) (720,000) Marketing (98,117) (98,117) (98,117) Other 0 0 ------------------------------------------------------------------------------------ Total Recoverable Expenses (2,101,679) 0 (2,101,679) 0 (2,101,679) Non-recoverable Expenses Repairs & Maintenance (39,420) (39,420) (39,420) Cleaning & Decorating 0 0 Insurance (18,927) (18,927) (18,927) Other Fixed 0 0 Electric/Gas 0 0 Other Utilities 0 0 Other Operating (169,695) (159,595) (169,695) (4) Management Fees (411,078) (411,078) 104,636 (306,442) (5) Legal and Professional (97,895) (97,895) (97,895) Payroll (12,303) (12,303) (12,303) Other Administration (9,445) (9,445) (9,445) Interest (3,957,140) 3,957,140 0 0 Depreciation and Amortization (1,812,622) 1,812,622 0 0 Other (70,848) 32,671 (38,177) (38,177) (6) ------------------------------------------------------------------------------------ Total Non-Recoverable Expenses (6,599,373) 5,802,433 (796,940) 104,636 (692,304) ------------------------------------------------------------------------------------ Total Expenses (8,701,052) 5,802,433 (2,898,619) 104,636 (2,793,983) ------------------------------------------------------------------------------------ Net Operating Income (47,141) 5,563,733 5,516,592 69,692 5,586,284 Debt Service Coverage (NOI) 1.25 1.26 Capital Reserves 0 (58,579) (58,579) (7) Tenant Improvements 0 (169,671) (169,671) (7) Leasing Commissions (169,266) (169,266) 132,338 (36,928) (7) ------------------------------------------------------------------------------------ Net Cash Flow (216,407) 5,563,733 5,347,326 (26,221) 5,321,105 - ----------------------------------------------------------------------------------------------------------------------------------- Debt Service Coverage (NCF) 1.21 1.20
WESTGATE JOINT VENTURE (AN OHIO PARTNERSHIP) SCHEDULES OF NET RENTAL INCOME BEFORE DEBT SERVICE YEARS ENDED DECEMBER 31, 1996 AND 1995 - -------------------------------------------------------------------------------- 1996 1995 RENTAL INCOME AND REIMBURSEMENTS: Fixed rents: Billed: Tenants $5,105,617 $5,023,853 Department Stores 836,609 852,380 Straight line 238,700 213,500 Overage rents: Tenants 154,151 147,943 Department stores 67,415 74,111 CAM recoveries: Tenants 1,114,620 982,447 Department stores 480,643 494,532 Real estate tax recoveries: Tenants 549,333 519,814 Department stores 19,675 19,380 Utility recoveries 3,251 3,077 Insurance recoveries 29,781 28,399 Other income: Stroller 7,448 6,276 Miscellaneous 20,503 23,389 Termination fees 26,165 16,536 ---------- ---------- 8,653,911 8,405,637 RENTAL EXPENSES: Real estate taxes 720,000 629,890 ---------- ---------- Management fee 411,078 396,942 ---------- ---------- General operating expenses: CAM expenses: Recoverable 1,283,562 1,259,549 Nonrecoverable 76,057 69,373 Insurance expense 17,016 16,573 Other operating expenses 560,172 433,641 ---------- ---------- l,936,807 1,779,136 ---------- ---------- 3,067,885 2,805,963 ---------- ---------- NET RENTAL INCOME BEFORE DEBT SERVICE $5,586,026 $5,599,669 ========== ========== WESTGATE JOINT VENTURE (AN OHIO PARTNERSHIP) SCHEDULES OF CAM EXPENSES YEARS ENDED DECEMBER 31.1996 AND 1995 - -------------------------------------------------------------------------------- 1996 1995 RECOVERABLE - TENANTS Administrative $ 96,926 $ 108,564 Energy management 1,799 1,066 Equipment expense 20,540 22,231 Food court 65,923 72,290 Housekeeping 37,361 42,905 Janitorial 107,267 94,026 Landscape exterior 49,410 53,802 Landscape interior 19,686 18,747 Maintenance 338,546 385,698 Offsite parking -- 3,795 Security 151,289 147,418 Snow removal 52,942 38,931 Sweeping 12,623 13,292 Utilities 329,245 256,784 ---------- ---------- $1,283,562 $1,259,549 ========== ========== NONRECOVERABLE Asbestos $ 3,637 $ 1,410 Information booth 29,578 33,350 Maintenance 37,880 26,711 Temporary tenant 643 571 Utilities 4,319 7,331 ---------- ---------- $ 76,057 $ 69,373 ========== ========== WESTGATE JOINT VENTURE (AN OHIO PARTNERSHIP) SCHEDULES OF OTHER OPERATING EXPENSES YEARS ENDED DECEMBER 31, 1996 AND 1995 - -------------------------------------------------------------------------------- 1996 1995 Administrative $ 9,445 $ 9,139 Advertising and promotion 98,117 95,490 Architectural and engineering 9,373 10,611 Bad debt expense 95,053 22,219 Communications 6,173 4,601 Contract services 4,101 3,451 Financial and accounting fees 21,630 25,909 Insurance 1,911 1,948 Lease commissions 169,266 160,153 Legal fees 76,265 37,818 Miscellaneous 1,324 814 Payroll 12,303 12,114 Relocation costs 21,383 15,354 Repairs and maintenance 1,540 2,152 Tenant coordination services 28,713 26,202 Travel and entertainment 3,575 5,666 -------- -------- $560,172 $433,641 ======== ======== WESTGATE JOINT VENTURE (AN OHIO PARTNERSHIP) SCHEDULES OF NET RENTAL INCOME BEFORE DEBT SERVICE YEARS ENDED DECEMBER 31,1995 AND 1994 - -------------------------------------------------------------------------------- 1995 1994 RENTAL INCOME AND REIMBURSEMENTS: Fixed rents: Billed: Tenants $5,023,853 $4,441,054 Department stores 852,380 920,052 Straight line 213,500 237,800 Overage rents: Tenants 147,943 144,580 Department stores 74,111 63,944 CAM recoveries: - Tenants 982,447 950,800 Department Stores 494,532 476,719 Real estate tax recoveries: Tenants 339,984 390,925 Department stores 19,380 34,853 Utility recoveries 3,077 2,820 Insurance recoveries 28,399 25,663 Other income: Stroller 6,276 6,019 Miscellaneous 23,389 17,589 Termination fees 16,536 303,679 ---------- ---------- 8,225,807 8,016,497 RENTAL EXPENSES: Real estate taxes 450,060 436,915 ---------- ---------- Management fee 396,942 380,072 ---------- ---------- General operating expenses: CAM expenses: Recoverable 1,259,549 1,176,926 Nonrecoverable 69,373 94,250 Insurance expense 16,573 15,466 Other operating expenses 433,641 512,809 ---------- ---------- 1,779,136 1,799,451 ---------- ---------- 2,626,138 2,616,438 ---------- ---------- NET RENTAL INCOME BEFORE DEBT SERVICE $5,599,669 $5,400,059 ========== ========== WESTGATE JOINT VENTURE (AN OHIO PARTNERSHIP) SCHEDULES OF CAM EXPENSES YEARS ENDED DECEMBER 31,1995 AND 1994 - -------------------------------------------------------------------------------- 1995 1994 RECOVERABLE - TENANTS Administrative 108,564 102,090 Energy management 1,066 794 Equipment expense 22,231 25,010 Food court 72,290 73,829 Housekeeping 42,905 39,996 Janitorial 94,026 92,813 Landscape exterior 53,802 52,655 Landscape interior 18,747 18,899 Maintenance 385,698 312,181 Offsite parking 3,795 -- Security 147,418 138,918 Snow removal 38,931 43,722 Sweeping 13,292 12,628 Utilities 256,784 263,391 ---------- ---------- $1,259,549 $1,176,926 ---------- ---------- NONRECOVERABLE Asbestos 1,410 27,136 Information booth 33,350 32,486 Maintenance 26,711 20,061 Temporary tenant 571 -- Utilities 7,331 14,567 ---------- ---------- $ 69,373 $ 94,250 ========== ========== WESTGATE JOINT VENTURE (AN OHIO PARTNERSHIP) SCHEDULES OF OTHER OPERATING EXPENSES YEARS ENDED DECEMBER 31, 1995 AND 1994 - -------------------------------------------------------------------------------- 1995 1994 Administrative $ 9,139 $ 10,185 Advertising and promotion 95,490 86,263 Architectural and engineering 10,611 18,032 Bad debt expense 22,219 90,002 Communications 4,601 5,030 Contract services 3,451 2,300 Financial and accounting fees 25,909 13,009 Relocation costs 15,354 -- Insurance 1,948 -- Lease commissions 160,153 210,159 Legal fees 37,818 38,976 Miscellaneous 814 1,112 Payroll 12,114 10,474 Repairs and maintenance 2,152 898 Tenant coordination services 26,202 24,182 Travel and entertainment 5,666 2,187 -------- -------- $433,641 $512,809 ======== ========
WESTGATE MALL - RECENT LEASING ACTIVITY (1/95 - PRESENT) Units < 1,000 Sq. Ft. Suite Size Start End Term Rent (Y1) Rent (Avg) - --------------------- ----- ---- ----- --- ---- --------- ---------- Hanover Shoes (R) A084 994 Feb-96 Jan-98 2.0 $15.95 $15.95 Modern Nails A080 932 Dec-96 Jan-00 3.0 $25.00 $25.00 Pretzels (New) D410 572 Jan-98 Dec-07 10.0 $61.19 $65.56 One Hour Photo D456 821 Oct-95 Jan-01 5.3 $52.38 $52.38 Zach's Coffee & Tea C352 692 Oct-96 Jan-07 10.3 $52.01 $52.01 ---- ---- ----- ------- ------ Lease Analysis (Avg.) 5 4,011 6.1 $41.31 $42.18 Units 1,000-2,500 Sq. Ft. Suite Size Start End Term Rent (Y1) Rent (Avg) - ------------------------- ----- ---- ----- --- ---- --------- ---------- Bath & Body Works D420 2,611 Sep-95 Jan-06 10.4 $24.00 $24.00 Alladin's Castle (R) A068 1,861 Feb-97 Jan-99 2.0 $12.00 $12.00 Indians Team Shop D416 1,561 Aug-96 Jan-02 5.5 $32.01 $32.01 Malley's Chocolates A136 1,406 Sep-96 Jan-04 7.4 $35.57 $35.57 American Tuxedo (R) A156 1,047 Feb-96 Jan-01 5.0 $33.00 $33.00 Florsheim A144 1,023 Feb-97 Jan-98 1.0 $26.94 $26.94 Perfumes de Paris D412 1,016 Sep-96 Jan-02 5.4 $25.00 $28.50 D.O.C. Optical D480 1,679 Feb-97 Jan-02 5.0 $17.86 $18.22 ---- ------ ---- ------- ------ Lease Analysis (Avg.) 8 12,204 5.2 $25.80 $26.28 Units > 2,501 Sq. Ft. Suite Size Start End Term Rent (Y1) Rent (Avg) - --------------------- ----- ---- ----- --- ---- --------- ---------- Waldenbooks D448 7,018 Mar-95 Jan-06 10.9 $20.00 $20.00 Longhorn Steaks DP01 5,320 Feb-95 Jan-05 10.0 $12.78 $13.42 Lane Bryant (R) D436 5,241 Feb-96 Jan-99 3.0 $15.00 $15.00 Limited Too A120 3,810 Aug-95 Jan-06 10.5 $5.00 $16.33 Kay-Bee Toys (R) B228 3,810 Feb-95 Jan-05 10.0 $20.00 $20.00 Casual Corner (Prospect) B248 7,290 Jan-98 Dec-07 10.0 $16.00 $16.00 Payless Shoe Source (R) D464 3,239 Feb-96 Jan-01 5.0 $20.00 $20.00 Ohio Motorists (R) CW33 7,343 Feb-98 Jan-01 3.0 $9.36 $9.36 ---- ------ ---- ------ ----- Lease Analysis (Avg.) 8 43,071 7.8 $14.77 $16.26 Food Court Suite Size Start End Term Rent (Y1) Rent (Avg) - ---------- ----- ---- ----- --- ---- --------- ---------- Dairy Queen (New) FC10 446 Jan-98 Dec-07 10.0 $40.36 $42.60 Cinnabon (R) FC01 402 Feb-96 Jan-01 5.0 $68.48 $68.48 ---- ---- ---- ------- ------ Lease Analysis (Avg.) 2 848 7.5 $54.42 $55.54 Kiosks Suite Size Start End Term Rent (Y1) Rent (Avg) - ------ ----- ---- ----- --- ---- --------- ---------- GTE Mobilnet K506 289 Dec-96 Jan-98 2.0 $103.86 $103.86 Things Remembered K507 289 Feb-95 Jan-98 3.0 $133.00 $133.00 Piercing Pogoda (R) K505 148 Feb-96 Jan-98 2.0 $172.30 $172.30 Monograms West (R) K502 148 Feb-96 Jan-98 2.0 $89.19 $89.19 Coopers Watchworks K500 148 Feb-95 Jan-00 5.0 $179.05 $183.11 Sunglass Hut (R) K503 148 Feb-95 Jan-98 3.0 $227.03 $227.03 ---- ---- -------- ------- Lease Analysis (Avg.) 6 1,170 2.8 $150.74 $151.42
LANDAUER REAL ESTATE COUNSELORS - -------------------------------------------------------------------------------- Professional Qualifications JAMES C. KAFES, MAI, CRE EXPERIENCE: Landauer Associates, Inc. (since 1986) Managing Director, Member of the Board of Directors, Member of the Management Committee, and General Manager of the New York Valuation and Technical Services Division. Valuation and real estate counseling on major urban properties and portfolios, including financial and feasibility analyses, appraisal reviews and independent fiduciary services. Miller & Kafes Associates, Inc. (1972-1986) Principal. Valuations, market studies, investment analyses and counseling services on major commercial developments nationwide and in the Caribbean. James E. Gibbons Associates (1970-1972) Assistant Director. Real estate valuations and counseling services. National Bank of North America (1969-1970) Chief Appraiser. Market valuations and analysis of investment opportunities. General Services Administration (1962-1968) Economic analyses, highest and best use studies, market valuations. PROFESSIONAL ACTIVITIES: MAI: Appraisal Institute CRE: American Society of Real Estate Counselors Has served on national committees of the Appraisal Institute and ASREC since 1971, including current service as a board member and past service as Editor-in- Chief and Chairman of the Editorial Board of The Appraisal Journal, published quarterly by the Appraisal Institute. Member: Board of Directors, Cedar Income Fund Board of Directors, Realty Credit Corp. Roundtable of Advisors, Murray H. Goodman Center for Real Estate Studies, Lehigh University The Real Estate Board of New York, Inc. CERTIFICATION: Currently certified in the Appraisal Institute's voluntary program of continuing education for its designated members. EDUCATION: BS, MBA, Lehigh University LANDAUER REAL ESTATE COUNSELORS - -------------------------------------------------------------------------------- Professional Qualifications JOHN I. WRZESINSKI, MAI, CRE EXPERIENCE: Landauer Associates, Inc., Chicago, Illinois (since 1982) Senior Managing Director, Member of the Management Committee and General Manager of the Chicago Regional Office. Active in general real estate consulting since 1972 with an emphasis in the valuation and financial analysis of income properties. Specialized experience in the preparation of feasibility, market and land use studies and litigation support. Assignments involved the evaluation and valuation of all types of real properly throughout the United States for Insurance Companies, Pension Funds, financial institutions, developers, and industrial corporations. Lake Michigan Appraisal Co., Chicago, Illinois (1977-1982) Assistant Vice President and Secretary, (Subsidiary of Arthur Rubloff & Co.). Co-manager of the appraisal group; performing various market, feasibility studies and valuations of all types throughout the United States. Marshall & Stevens, Chicago, Illinois (1976-1977) Senior Appraiser. Appraisal and counseling assignments involving real property of all types in the Midwest principally but also in the Northeast and West. PROFESSIONAL DESIGNATIONS: MAI: Appraisal Institute CRE: American Society of Real Estate Counselors Member: - Appraisal Journal Board-Appraisal Institute - Chicago Real Estate Board - Illinois Association of Realtors - National Association of Realtors - Illinois Association of Certified Real Estate Appraisers - International Council of Shopping Centers - Lambda Alpha, Ely Chapter CERTIFICATION: Currently certified in the voluntary program of continuing education for designated members conducted by the Appraisal Institute. Currently State certified as a General Real Estate Appraiser Licensed Real Estate Broker EDUCATION: Bachelor of Science, School of Business Southern Illinois University, Carbondale, Illinois (1969) Numerous professional practice and real estate related courses offered by the Appraisal Institute. Also, various seminars, workshops and continuing education courses sponsored by the Appraisal Institute and the Chicago Real Estate Board. LANDAUER REAL ESTATE COUNSELORS - -------------------------------------------------------------------------------- Professional Qualifications PAUL F. ENGEL EXPERIENCE: Landauer Associates, Inc., Chicago, Illinois (since 1984) Managing Director, Valuation and Technical Services Division. Management, preparation and review of real estate valuation services in all types of real property including portfolio valuation, partial interests and investment consulting in the Midwest region and nationally. Talman Home Federal Savings & Loan, Chicago, Illinois (1982-1984) Assistant Vice President, Appraisal Specialist. Real estate appraisals, feasibility studies, market analyses and liquidation pricing for all types of properties, Chicago area and nationally. Northwest Federal Savings and Loan, Chicago, Illinois (1968-1982) Assistant Vice President, Chief Appraiser and Manager of Appraisal Services. Real estate appraisals, loan committee participation, appraisal policy formation and administration of Appraisal Department. ASSOCIATION MEMBERSHIPS: Candidate Member - Appraisal Institute PROFESSIONAL ACTIVITIES: Past Secretary - Chicagoland Market Data Center Past Committee Member - Appraisal Institute Market Data Center (Chicagoland) OTHER ACTIVITIES: Participated in various programs for the Appraisal Institute; contributed to forming a monthly market data publication for Chicago-area appraisers. CERTIFICATION: Currently certified as State General Appraiser in: Illinois (License No. 153-000410) Indiana (License No. CG 69201411) EDUCATION: Northeastern Illinois University Central YMCA College of Real Estate Appraisal Institute Courses 101, 201, R-2 Exam. Narrative Report Writing, Standards of Professional Practice. Seminars: Tax Considerations in Real Estate, Investment Feasibility Analysis, Special Use Properties, Regression Analysis, and others. Savings & Loan Institute; various courses related to real estate and Financial Industry. LANDAUER REAL ESTATE COUNSELORS - -------------------------------------------------------------------------------- Professional Qualifications DONALD T. BRODERICK EXPERIENCE: Landauer Associates, Inc., Chicago, Illinois (Since 1996) Associate, Valuation and Technical Services Division Real estate consultation with emphasis on the valuation of commercial and industrial properties. Joseph J. Blake and Associates, Inc., Chicago, Illinois (1996) Associate Appraiser, Midwest Regional Office Performed real estate and portfolio valuation services for office, retail, multi- family, and special purpose properties throughout the Midwest. Goodman-Marks Associates, Inc., Mineola, New York (1995) Prepared narrative appraisals of special-purpose and income-producing properties to determine market value. These reports were used for mortgages, settlement of estates, real estate tax certiorari actions and condemnation cases. Smith and Salerno Valuation, Inc., Mineola, New York (1991 - 1994) Prepared narrative and form appraisals estimating the market value of residential and commercial properties in the New York metropolitan and Long Island areas. PROFESSIONAL AFFILIATION: Appraisal Institute Candidate for Designation (MM) CERTIFICATION: General Real Estate Appraiser State of Illinois, #153-001131 EDUCATION: Bucknell University Bachelor of Arts - Economics Appraisal Institute - Introduction to Appraising Real Property - Applied Residential Property Valuation - Standards of Professional Practice, Parts A and B - Capitalization Theory and Techniques, Part A - Advanced Income Capitalization - Advanced Applications - Report Writing and Valuation Analysis This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. APPRAISAL OF YORKTOWN MALL LOMBARD, ILLINOIS APPRAISAL OF YORKTOWN MALL LOMBARD, ILLINOIS AS OF SEPTEMBER 1, 1997 PREPARED FOR MORGAN STANLEY MORTGAGE CAPITAL, INC. 1585 BROADWAY, 37TH FLOOR NEW YORK, NY 10036 PREPARED BY LANDAUER ASSOCIATES, INC. 225 WEST WASHINGTON STREET SUITE 1500 CHICAGO, ILLINOIS 60606 [Letterhead of Landauer Associates, Inc.] September 9, 1997 Mr. James Flaum Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway, 37th Floor New York, NY 10036 Re: Yorktown Mall Lombard, Illinois Dear Mr. Flaum: As directed, we have made an appraisal of the above-captioned property. Yorktown Shopping Center is a 1,305,907 square foot, two-level regional mall. The mall was originally constructed in 1968 and was expanded/renovated several times with the last renovation occurring in 1994 with the addition of the Von Maur anchor store. Completion and opening of an 18-screen General Cinema Multiplex with stadium seating is expected by approximately March 1, 1998. Anchors include JC Penney (239,110 square feet), Carson Pirie Scott & Company (214,534 square feet), Von Maur (206,342 square feet), and Montgomery Ward (165,382 square feet). Each anchor owns its land and building. Our appraisal includes only the mall stores of 392,658 square feet of gross leasable area and four outlot parcels consisting of a Cole Taylor Bank (4,800 square feet), Firestone (9,217 square feet), Pizza Hut (4,035 square feet), and General Cinema Multiplex (69,829 square feet). The total area appraised is 480,539 gross leasable square feet. The enclosed mall tenant space is 88.0 percent leased. The purpose of this self-contained appraisal report is to estimate the Market Value of the Leased Fee Interest in the real property described herein, subject to the existing leases and encumbrances, and the general and specific assumptions and limiting conditions as discussed in the attached report. The estimate of Market Value is made as of September 1, 1997. Our value is subject to completion of the General Cinema Multiplex in a good workmanlike manner with completion by March 1, 1998. Our value does not include any landlord contributions, if any, for the cost to complete the site improvements for the Cinema. Steven C. Ogasawara personally inspected the subject property on September 3, 1997. James C. Kafes and John I. Wrzesinski did not inspect the property. Mr. James Flaum Morgan Stanley Mortgage Capital, Inc. September 9, 1997 Page Two Based upon our analysis, we estimate the Market Value of the Leased Fee Interest in Yorktown Mall, subject to the existing leases and the assumptions and limiting conditions contained in this report, as of September 1, 1997, to be: ONE HUNDRED NINETEEN MILLION FIVE HUNDRED THOUSAND DOLLARS $119,500,000 A summary of our analyses, opinions, and conclusions is contained in the following report, of which this letter is a part of the document. Thank you for the opportunity to be of service. Respectfully submitted, LANDAUER ASSOCIATES, INC. /s/ James C. Kafes (MJK) /s/ John I. Wrzesinski James C. Kafes, MAI, CRE John I. Wrzesinski, MAI, CRE Executive Managing Director Senior Managing Director Certified Illinois Appraiser License #153-000208 Expiration Date: September 30, 1999 /s/ Steven C. Ogasawara Steven C. Ogasawara, MAI, SRA Managing Director Certified Illinois Appraiser License #153-000162 Expiration Date: September 30, 1999 LANDAUER REAL ESTATE CONSELORS TABLE OF CONTENTS Page Assumptions and Limiting Conditions............................................1 Certification..................................................................7 Summary of Salient Facts and Conclusions.......................................8 Nature of the Appraisal.......................................................10 Identification of the Property and Interest Appraised....................10 Purpose, Function and Date of Appraisal..................................10 Scope of the Appraisal...................................................11 History of Property......................................................12 Exposure Time and Marketing Period.......................................12 Area Analysis.................................................................15 Introduction.............................................................15 Population...............................................................15 Households...............................................................16 Income...................................................................16 Employment...............................................................16 Economic Base............................................................18 Transportation...........................................................19 Local Government.........................................................21 Culture and Higher Education.............................................22 Conclusion...............................................................22 Neighborhood Analysis.........................................................25 Retail Market Overview........................................................28 Overview.................................................................28 Trade Area Delineation...................................................28 Trade Area Population....................................................29 Income Estimates and Comparisons.........................................30 Trade Area Expenditure Potential.........................................31 Competitive Retail Analysis..............................................32 Property Description..........................................................36 Site Analysis............................................................36 Zoning...................................................................38 Real Estate Taxes........................................................39 Improvements.............................................................42 LANDAUER REAL ESTATE CONSELORS TABLE OF CONTENTS Page Highest and Best Use..........................................................46 Highest and Best Use Assuming a Vacant Site..............................46 Highest and Best Use, As Improved........................................47 Valuation Methodology.........................................................48 Cost Approach.................................................................49 Sales Comparison Approach.....................................................50 Elements of Comparison...................................................50 Applicability of Adjustments.............................................52 Comparable Sales Data....................................................52 Price Per Square Foot....................................................53 Income Approach...............................................................56 Discounted Cash Flow ("DCF") Analysis Assumptions........................56 Revenue..................................................................63 Expenses.................................................................69 Occupancy Costs..........................................................71 Capital Items............................................................72 Cash Flow................................................................75 Discounted Cash Flow Analysis............................................76 Valuation Analysis.......................................................77 Rate Selection...........................................................78 Valuation by Discounted Cash Flow Analysis...............................81 Market Value Analysis as of September 1, 1997............................81 Correlation and Conclusion ...................................................83 ADDENDA Photographs of Subject Property Legal Description Leasing Plan Comparable Mall Sales Lease Abstract Reports Professional Qualifications LANDAUER REAL ESTATE CONSELORS ASSUMPTIONS AND LIMITING CONDITIONS This appraisal report has been made with the following general assumptions: o Title to the property is assumed to be good and marketable unless otherwise stated. No responsibility is assumed for the legal description or any legal matter. The property is considered to be under responsible ownership, management, subject to responsible leasing efforts, and free of all liens and encumbrances except as specifically discussed herein. o The definition of value, together with other definitions and assumptions on which our analyses are based are set forth in appropriate sections of this report and are to be part of these General Assumptions as if included here in their entirety. o The information furnished to the appraisers by the client and others, as contained in this report, is considered to be from reliable sources and, where feasible, has been verified; however, no responsibility is assumed for the accuracy of the information. The appraisers reserve the right to modify the value conclusion should the accuracy of that information change subsequent to delivery of this report. o All engineering is assumed to be correct. o It is assumed that there are no hidden or unapparent conditions in the property, soil, subsoil, or structures which would render the property more or less valuable. No responsibility is assumed for such conditions or for arranging for engineering which would be required to discover them. All materials used in the structures on the appraised property are assumed to be free of asbestos, toxic materials, or any other potential health risks unless otherwise so stated and identified herein. No opinion is expressed on structural or mechanical conditions. o Landauer has reviewed and relied upon the tenant lease profiles provided by Pehrson/Long. LANDAUER REAL ESTATE CONSELORS 2 o It is assumed that there is full compliance with all applicable federal, state and local environmental regulations and laws, that all applicable zoning and use regulations and restrictions have been complied with, unless a non-conformity has been stated, defined and considered in the appraisal report. o It is assumed that all required licenses, certificates of occupancy, legislative or administrative consents from any local or national governmental or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based. o It is assumed that the utilization of the land and/or improvements is within the boundaries or property lines of the property described herein and that there is no encroachment or trespass unless noted within the report. The appraisal report has been made with, and is subject to, the following general limiting conditions: o The appraisers herein, by reason of this appraisal report, are not required to give further consultation, testimony or to be in attendance in court or at any governmental or other hearing with reference to the property without prior arrangements having been made relative to such additional employment. o The distribution, if any, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and buildings must not be used in conjunction with any other appraisal and are invalid if so used. o Use and disclosure of the contents of this report is governed by the bylaws and regulations of the Appraisal Institute. LANDAUER REAL ESTATE CONSELORS 3 o The client may show the reports in their entirety to interested parties outside its organization. Furthermore, the client may reference Landauer as its appraiser of record and the limited reports in their entirety only in any registration statement, prospectus, proxy materials, other offering materials or other communication (whether oral or written) distributed to third parties, subject to Landauer's prior written consent to any such reference. It is the understanding of Landauer that among the uses of the reports will be the disclosure of their contents in offering materials for the sale of securities and in various filings pursuant to state and federal securities laws. o This appraisal report is based upon and supported by available factual economic and market data and our interpretation of market conditions as of the date of the appraisal. Though we believe that our assumptions and forecasts are well supported, we cannot be held responsible for events which may alter market and property conditions between the date of inspection and the effective date of the opinion of value. o The information furnished to the appraisers by the client and others, as contained in this report, is considered to be from reliable sources; however, no responsibility is assumed for its accuracy. The appraisers reserve the right to modify the value conclusion should the accuracy of that information change subsequent to delivery of this appraisal report. o The Americans with Disabilities Act ("ADA") became effective January 26, 1992. Landauer has not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the property. Since we have no direct evidence relating to this issue, we did not consider possible non-compliance with the requirements of ADA in estimating the value of the property. LANDAUER REAL ESTATE CONSELORS 4 The appraisal report has been made with, and is subject to, the following specific limiting conditions. o We have relied upon information supplied by the property manager and owner (Pehrson/Long) and Morgan Stanley Mortgage Capital, Inc. Additional details including landlord's tenant finish contribution for 1997 leases, and detailed income and expense statements were not provided. o We have used individual tenant lease profiles, percentage rent report, 1994-1996 gross sales report, and verbal confirmation of occupancy and tenant retention as the basis for our estimate of potential gross income. o We have relied upon 1994, 1995 and 1996 operating expense data provided by Pehrson/Long and Morgan Stanley Mortgage Capital, Inc. o It is assumed that JC Penney, Carson Pirie Scott, and Montgomery Ward, whose lease operating covenants have reportedly expired, will continue to pay the exterior common area maintenance, enclosed mall maintenance, and mall improvement tax per the December 31, 1996 recovery calculation worksheets as provided by Pehrson/Long. o Our value is subject to completion of the General Cinema Multiplex in a good workmanlike manner with completion by March 1, 1998. Our value does not include any landlord contributions, if any, for the cost to complete the site improvements for the Cinema. o It is our understanding the Pacific Club building (outlot parcel) is owned by JC Penney. Pehrson/Long leases the property from JC Penney and subleases it to the Pacific Club. No information regarding the terms of the JC Penney position were provided. Because of the lack of information regarding a renewal or extension option, we have not included any revenue from the Pacific Club beyond the expiration of the base lease, as of December 31, 1999. LANDAUER REAL ESTATE CONSELORS 5 o Montgomery Ward filed for Chapter 11 bankruptcy protection on July 7, 1997. Our discussions with Pehrson/Long indicate they are not aware if Montgomery Ward will close down this store. Our analysis assumes Montgomery Ward will continue to occupy their space through the projection period and continue to pay the exterior common area maintenance, enclosed mall maintenance, and mall improvement tax per the December 31, 1996 recovery calculation worksheets, as provided by Pehrson/Long. o The following tenants are on month-to-month lease terms and are projected to continue through the end of 1997 at the same terms and then go to a speculative renewal. 1. Murray's Irish Outfitters (Suite #107) 2. Record Town (Suite #115) 3. Love From Chicago (Suite #117) 4. Footlocker (Suite #131) 5. American Legal Outfitters (Suite #158) 6. Metro's T (Suite #210-A) 7. Health Rider (Suite #211) 8. World of Science (Suite #240) 9. Sportscard Heaven (Kiosk) 10. Superstars (Suite #105) 11. Craftwalk Outfitters (Suite #111) o We have assumed that two lease proposals provided by Pehrson/Long for Natural Wonders (Suite #133) and Contempo Casual (Suite #169) will be consummated at the stated proposal terms and have been incorporated in our analysis. o We have assumed the Yorktown Barber Shop (Suite #205-B), Yorktown Shoe Repair (Suite #201-B), and Cole Taylor's ATM will continue occupying their space through the protection period at the same terms with 2.0 percent annual base rent increases. LANDAUER REAL ESTATE CONSELORS 6 o We have assumed the Yorktown Merchant Association (Suite 260-A) will continue to occupy their space through the projection period at the same terms of its current lease. o Because of lack of information regarding renewal or extension options to the Firestone, Pizza Hut, and Cole Taylor outlot parcels we have assumed upon lease expiration each tenant will renew its lease at a rate that is 3.5 percent greater than the current rent being paid. A 3.5 percent annual increase in base rent is assumed thereafter. o Information regarding the Yorktown Mall land area was provided from the Yorktown Assessor's Office. o We have assumed the real estate taxes for the outlot parcels of Firestone, Pizza Hut, Cole Taylor Bank, and General Cinema Multiplex will be paid directly by these tenants. Therefore, the taxes associated with these outlot parcels are not included in the real estate tax projection for the mall. o Information regarding the total on-site parking of 9,750 spaces was provided by Morgan Stanley Mortgage Capital, Inc., and is assumed to be correct. o Special Limiting Conditions are also stated in various portions of the Self-Contained Appraisal Report and are to be carefully noted in accepting this report. LANDAUER REAL ESTATE CONSELORS 7 CERTIFICATION The undersigned certify to the best of their knowledge and belief that: The statements of fact contained in this appraisal report and upon which the analyses, opinions and conclusions expressed herein are based are true and correct. This report is made subject to the Assumptions and Limiting Conditions set forth on the following pages which set forth all of the limiting conditions (imposed by the terms of the assignment or by the appraisers) affecting the analyses, opinions and conclusions contained in this report. Employment and compensation for making this appraisal are not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the attainment of a stipulated result, or the occurrence of a subsequent event. We have no direct or indirect current or prospective personal interest or bias in the subject matter of this appraisal report or to the parties involved. The appraisal assignment was not based on a requested minimum valuation, a specific valuation, or the approval of a loan. This report has been performed in accordance with the Uniform Standards of Professional Appraisal Practice as promulgated by the Appraisal Standards Board of the Appraisal Foundation adopted by the Appraisal Institute, and the Code of Professional Ethics of the Appraisal Institute. The use of this report is subject to the requirements of the Appraisal Institute relating to review by their duly authorized representatives. As of the date of this report, James C. Kafes, John I. Wrzesinski, and Steven C. Ogasawara have completed the requirements of the continuing education program of the Appraisal Institute. No one other than the undersigned prepared the analyses, opinion and conclusions concerning real estate that are set forth in this report. Steven C. Ogasawara inspected the property on September 3, 1997. /s/ James C. Kafes (MJK) /s/ John I. Wrzesinski James C. Kafes, MAI, CRE John I. Wrzesinski, MAI, CRE Executive Managing Director Senior Managing Director Certified Illinois Appraiser License #153-000208 Expiration Date: September 30, 1999 /s/ Steven C. Ogasawara Steven C. Ogasawara, MAI, SRA Managing Director Certified Illinois Appraiser License #153-000162 Expiration Date: September 30, 1999 LANDAUER REAL ESTATE CONSELORS 8 SUMMARY OF SALIENT FACTS AND CONCLUSIONS Property Identification: Yorktown Mall Lombard, Illinois Location: Northeast corner of Highland Avenue and Butterfield Road, Lombard, Illinois. Improvements/Site: Yorktown Shopping Center is a 1,305,907 square foot, two-level regional mall. The mall was originally constructed in 1968 and was expanded/ renovated several times with the last renovation occurring in 1994 with the addition of the Von Maur anchor store. Completion and opening of an 18-screen General Cinema Multiplex with stadium seating is expected by approximately March 1, 1998. Anchors include JC Penney (239,110 square feet), Carson Pirie Scott & Company (214,534 square feet), Von Maur (206,342 square feet), and Montgomery Ward (165,382 square feet). Each anchor owns its land and building. Our appraisal includes only the mall stores of 392,658 square feet of gross leasable area and four outlot parcels consisting of a Cole Taylor Bank (4,800 square feet), Firestone (9,217 square feet), Pizza Hut (4,035 square feet), and General Cinema Multiplex (69,829 square feet). The total area appraised is 480,539 gross leasable square feet. The Yorktown Shopping Center is situated on approximately 154.48 acres. Our appraisal includes only 38.90 acres of this total. Zoning: B-3, Community Shopping District-Planned Development Occupancy: 88.0 percent leased (not including outlot tenants). Highest and Best Use: Present Use; Regional Mall Interest Appraised: Leased Fee Interest, subject to the existing and pending tenant leases and assumptions and limiting conditions stated herein. Date of Valuation: September 1, 1997 Date of Inspection: September 3, 1997 LANDAUER REAL ESTATE CONSELORS 9 Market Value Indications Cost Approach: Not Applicable Sales Comparison Approach: $111,000,000 to $123,000,000 Income Approach: $119,500,000 Final Value Conclusion: $119,500,000 ============ LANDAUER REAL ESTATE CONSELORS 10 NATURE OF THE APPRAISAL IDENTIFICATION OF THE PROPERTY AND INTEREST APPRAISED Yorktown Mall consists of 1,305,907 square feet of retail space situated on approximately 154.48 acres of land at the northeast corner of Highland Avenue and Butterfield Road in Lombard, Illinois. The attached anchors, Von Maur, JC Penney, Carson Pirie Scott & Co., and Montgomery Ward, as well as the Yorktown Convenience Center, Montgomery Ward Auto Center, Target store, vacant restaurant, and 12.4 acres of vacant land are not part of the ownership. Only the 392,658 square feet of gross leasable mall stores and the Cole Taylor, Firestone, Pizza Hut, and Cinema outlot parcels are part of this appraisal. The property is in good condition with no deferred maintenance noted. On-site asphalt surface parking is available with 9,750 spaces. A copy of the legal description is included in the Addenda. The property rights appraised in this report consist of the Leased Fee Estate. Leased Fee Estate, as defined by the Appraisal Institute Dictionary of Real Estate Appraisal, Third Edition, page 204, is: an ownership interest held by a landlord with the rights of use and occupancy conveyed by lease to others. The rights of lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease. PURPOSE, FUNCTION AND DATE OF APPRAISAL The purpose of the appraisal is to estimate the Market Value of the Leased Fee Estate as of September 1, 1997. The function of the appraisal is to assist Morgan Stanley Mortgage Capital, Inc. with loan underwriting. LANDAUER REAL ESTATE CONSELORS 11 The Uniform Standards of Professional Appraisal Practice defines Market Value as: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: - Buyer and seller are typically motivated. - Both parties are well informed or well advised, and acting in what they consider their own best interests. - A reasonable time is allowed for exposure in the open market. - Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto. - 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. SCOPE OF THE APPRAISAL The scope of this complete appraisal involved the systematic research and analysis necessary to reach a market value conclusion for the subject. The initial step was to inspect the property, the general market area and the neighborhood. After investigating the area regarding economic, political, social and physical factors, research was conducted relevant to the valuation process, including gathering financial information, data concerning competitive shopping center properties and comparable improved sales, and other information pertinent to the valuation. This information was reviewed, confirmed and analyzed through the use of the Sales Comparison and Income Approaches to value. These approaches are detailed in the appropriate LANDAUER REAL ESTATE CONSELORS 12 sections of the report. The Cost Approach is not considered to provide a meaningful value indication and is excluded from the analysis as agreed upon by the client. Lastly, a final value estimate was concluded based on the above analyses, which, in turn, were influenced by the most reliable and appropriate data. This narrative report is the result of our findings and analyses. HISTORY OF PROPERTY The subject property is owned by Yorktown Joint Venture, an Illinois general partnership, whose general partners are the estate of E.D. Pehrson and Arthur Schactman, the Rogers Family, Joel Wilder, and Sumner Schein. The subject property was constructed in 1968 by Yorktown Joint Venture. No transfer of ownership has occurred subsequently. EXPOSURE TIME AND MARKETING PERIOD The concept of exposure time is historical in nature and is presumed to have occurred prior to the effective date of the appraisal. Alternatively, marketing period occurs after the effective date of the appraisal and may or may not be directly related to the value presented. The actual sale price could increase, decrease, or remain static during the marketing period depending upon market conditions and the type of property being appraised. CB Commercial's National Investor Survey - First Quarter 1997 reports marketing times for Class A regional malls ranging from 8 to 12 months. They report an overall average marketing time for regional mall properties of 9.9 months. Korpacz's Real Estate Investor Survey - Second Quarter 1997 states an average marketing time for regional malls at 10.44 months. LANDAUER REAL ESTATE CONSELORS 13 Since most investors' perceptions and estimates of marketing period are based largely on exposure times that they have recently encountered in similar transactions, it stands to reason that there should be some correlation between marketing periods and exposure times. In fact, in the absence of perceived changes in the market or other extenuating circumstances, marketing period and exposure time should be identical. That is to say, if all other things are held constant, a property that (retrospectively) required an exposure time of one year could be expected to have a marketing period (prospectively) also of one year. Differences in the two concepts could appear when there is a perceived change in the market. To use the same example presented above, if a property required an exposure time of one year but perceived market conditions are improving, an appropriate estimate of marketing period could reasonably be expected to be less than one year. Conversely, if market conditions were anticipated to worsen, marketing period might exceed exposure time. Objectively quantifying such differences would be virtually impossible; however, understanding the relationship between the two concepts and how they are affected by perceived changes in the market allows one to better estimate (subjectively) a reasonable period for exposure time and marketing period. This is especially important during periods when actual market evidence is limited by a lack of transactions. It is then necessary to decide if exposure time began when the property was first offered for sale or when the price was dropped to (or near) the ultimate sale price. Further complicating the issue is the question of whether exposure time ends when a sale contract is signed or whether it ends at the closing date of a sale. Based upon our investigations, we believe that a marketing period up to 12 months is reasonably appropriate. Furthermore, it is our opinion that the exposure time commensurate with our estimate of value for the subject would also be up to 12 months. [GRAPHIC OMITTED] AREA MAP LANDAUER REAL ESTATE CONSELORS 15 AREA ANALYSIS INTRODUCTION Chicago is the nation's third most populous metropolitan area and the most influential economic region between the East and West Coasts. Chicago's locational advantages have fostered its development as an international center for banking, securities, insurance, air transportation, business services, wholesale and retail trade, and manufacturing. In addition, the area has long been known as a world-class center for higher education, health care, the arts, and popular culture. Chicago has one of the most diversified economies of any region in the country, making it less vulnerable to fluctuations in the fortunes of individual industries than most other large urban regions. Because of Chicago's varied economic base and its large concentration of manufacturing and executive jobs, the population exhibits strong income characteristics. On the negative side, Chicago's cost of living is among the highest in the nation, as measured by such indicators as housing costs, taxes, and utilities. The city of Chicago is increasingly challenged by intractable urban problems such as poverty, crime, the poor quality of its public schools, and population emigration to the suburbs. The degree to which the city and region are able to manage these problems will have a major influence upon Chicago's long-term attractiveness as a place in which to live and engage in commerce. POPULATION The 1990 Census recorded 7,410,858 persons residing in the Chicago PMSA (Primary Metropolitan Statistical Area) which is estimated to have increased to 7,784,107 persons in 1996. The population in the PMSA has been increasing at an annual compound rate of approximately 0.2 percent since 1980 and 0.8 percent since 1990. Urban Decision Systems (UDS) projections to 2001 forecast the population to increase to approximately 8,036,122, a total increase of 3.2 percent over 1996. DU PAGE COUNTY, IL REGIONAL ECONOMIC & DEMOGRAPHIC FACT SHEET (1990-2001)
Compound Annual 1996 2001 Percent Growth 1990 (est.) (proj.) 1980-1990 1990-1996 1996-2001 ---- ------ ------- --------- --------- --------- Population Du Page County, IL 781,666 866,981 931,222 1.7% 1.7% 1.4% Chicago, IL, PMSA 7,410,858 7,784,107 8,036,122 0.2% 0.8% 0.6% State of Illinois 11,430,602 11,905,681 12,212,104 0.1% 0.7% 0.5% United States 248,708,990 265,253,151 276,918,306 1.0% 1.1% 0.9% Households Du Page County, IL 279,344 319,325 345,384 2.4% 2.3% 1.6% Chicago, IL, PMSA 2,671,540 2,877,904 2,984,459 0.5% 1.2% 0.7% State of Illinois 4,202,240 4,493,099 4,629,816 0.4% 1.1% 0.6% United States 91,947,195 100,066,882 104,497,652 1.4% 1.4% 0.9% Avg. Household Income Du Page County, IL $58,804 $68,025 $81,610 6.6% 2.5% 3.7% Chicago, IL, PMSA $45,879 $53,087 $63,762 6.6% 2.5% 3.7% State of Illinois $40,895 $46,894 $56,089 6.1% 2.3% 3.6% United States $38,464 $44,680 $53,841 6.6% 2.5% 3.8% Per Capita Income Du Page County, IL $21,015 $25,112 $30,327 7.2% 3.0% 3.8% Chicago, IL, PMSA $16,539 $19,753 $23,822 6.8% 3.0% 3.8% State of Illinois $15,034 $17,850 $21,443 6.4% 2.9% 3.7% United States $14,220 $17,043 $20,545 6.8% 3.1% 3.8% Aggregate Income (000) Du Page County, IL $16,427 $21,772 $28,241 9.1% 4.8% 5.3% Chicago, IL, PMSA $122,568 $153,761 $191,437 7.1% 3.9% 4.5% State of Illinois $171,850 $212,517 $261,860 6.5% 3.6% 4.3% United States $3,536,695 $4,520,610 $5,689,345 7.9% 4.2% 4.7% Non-Agricultural Employment Du Page County, IL 427,732 545,191 646,457 4.1% 4.1% 3.5% Chicago, IL, PMSA 3,674,740 3,899,404 4,203,159 1.5% 1.0% 1.5% State of Illinois 5,287,953 5,588,168 5,992,307 0.9% 0.9% 1.4% United States 109,685,073 118,346,895 129,163,244 2.0% 1.3% 1.8% Retail Sales (000) Du Page County, IL $11,049,386 $14,277,621 5.3% Chicago, IL, PMSA $71,507,560 $87,561,547 4.1% State of Illinois $104,527,984 $127,002,807 4.0% United States $2,355,241,609 $2,871,024,805 4.0%
Source: Urban Decision Systems; Market Statistics; Data Resources, Inc. Retail Sales data is for 1995 and 2000 [BAR GRAPH OMITTED] GROWTH RATES - 1996 TO 2001 LANDAUER REAL ESTATE CONSELORS 16 HOUSEHOLDS Since 1980, the growth in the number of households in the Chicago PMSA has increased at a rate slightly below that of the nation as a whole. Typical of most areas of the country, household growth has generally outpaced population growth due to the increased number of young people living alone, the increased number of single parent households, and an increased number of elderly persons choosing to maintain their own households. The above trends have resulted in slight declines in the average household size, which despite only moderate increases in population, has lead to greater increases in household formation and the number of housing units developed. The average household size for the Chicago area declined from 2.77 in 1990 to 2.70 in 1996 and is expected to stabilize through the year 2001. Although experiencing similar trends in the relationship between population growth and household formation, the Chicago PMSA has experienced relative growth in households at a slightly slower growth rate than the country as a whole, and is projected to continue this pace through 2001. INCOME Average household income growth from 1990 to 1996, at 2.5 percent per year, was similar to the national income growth rate of 2.5 percent per year. Average household income is estimated to increase at a rate of 3.7 percent per year from 1996 to 2001, slightly lower than the projected national growth rate of 3.8 percent. The Chicago PMSA currently has average household income levels greater than the nation as a whole. EMPLOYMENT Chicago's PMSA employment base has continued to grow at an estimated 1.0 percent compound annual rate between 1990 and 1996. Employment is projected to continue to grow at approximately DU PAGE COUNTY, IL REGIONAL EMPLOYMENT FACT SHEET (1990-2001)
Compound Annual % Growth 1996 2001 1980 to 1990 to 1996 to Industry Location 1990 (est.) (proj.) 1990 1996 2001 Weight (1) Quotient (2) ---- ------ ------- ---- ---- ---- ---------- ------------ Du Page County, IL Mining 233 162 149 7.0% -5.9% -1.7% 0.0% 6.1% Construction 26,841 27,329 29,263 7.1% 0.3% 1.4% 5.0% 112.7% Manufacturing 66,980 74,874 82,995 3.9% 1.9% 2.1% 13.7% 88.9% Transportation & Utilities 28,801 33,378 37,746 8.3% 2.5% 2.5% 6.1% 118.4% Trade 119,619 157,327 187,580 6.2% 4.7% 3.6% 28.9% 122.5% Finance, Insurance & Real Estate 26,743 37,319 43,618 7.6% 5.7% 3.2% 6.8% 117.7% Services 122,350 169,138 211,423 8.2% 5.5% 4.6% 31.0% 109.1% Government 36,165 45,664 53,684 -7.7% 4.0% 3.3% 8.4% 50.4% ----------- ----------- ----------- --- --- --- ----- ----- Total Non-Agricultural Employment 427,732 545,191 646,457 4.1% 4.1% 3.5% 100.0% 100.0% - ---------------------------------------------------------------------------------------------------------------------------------- Chicago, IL, PMSA Mining 2,868 1,861 1,709 -4.4% -7.0% -1.7% 0.0% 9.7% Construction 157,995 144,380 149,917 3.0% -1.5% 0.8% 3.7% 83.2% Manufacturing 669,473 656,296 649,923 -2.2% -0.3% -0.2% 16.8% 108.9% Transportation & Utilities 225,309 232,111 238,053 1.5% 0.5% 0.5% 6.0% 115.1% Trade 892,147 913,412 998,727 1.9% 0.4% 1.8% 23.4% 99.4% Finance, Insurance & Real Estate 295,284 310,906 328,738 2.6% 0.9% 1.1% 8.0% 137.1% Services 994,478 1,167,980 1,328,385 4.4% 2.7% 2.6% 30.0% 105.3% Government 437,186 472,457 507,708 0.8% 1.3% 1.4% 12.1% 72.9% ----------- ----------- ----------- --- --- --- ----- ----- Total Non-Agricultural Employment 3,674,740 3,899,404 4,203,159 1.5% 1.0% 1.5% 100.0% 100.0% - ---------------------------------------------------------------------------------------------------------------------------------- State of Illinois Mining 19,597 14,084 13,244 -4.6% -5.4% -1.2% 0.3% 51.4% Construction 220,102 217,783 224,677 1.5% -0.2% 0.6% 3.9% 87.6% Manufacturing 982,514 957,440 944,964 -2.0% -0.4% -0.3% 17.1% 110.9% Transportation & Utilities 308,357 324,285 331,798 0.8% 0.8% 0.5% 5.8% 112.2% Trade 1,263,765 1,312,456 1,428,797 1.1% 0.6% 1.7% 23.5% 99.7% Finance, Insurance & Real Estate 378,997 396,663 418,353 1.9% 0.8% 1.1% 7.1% 122.1% Services 1,348,659 1,574,158 1,783,823 3.7% 2.6% 2.5% 28.2% 99.1% Government 765,947 791,310 846,633 0.2% 0.5% 1.4% 14.2% 85.2% ----------- ----------- ----------- --- --- --- ----- ----- Total Non-Agricultural Employment 5,287,953 5,588,168 5,992,307 0.9% 0.9% 1.4% 100.0% 100.0% - ---------------------------------------------------------------------------------------------------------------------------------- United States Mining 706,935 580,297 555,131 -3.6% -3.2% -0.9% 0.5% 100.0% Construction 4,999,505 5,265,186 5,550,150 1.5% 0.9% 1.1% 4.4% 100.0% Manufacturing 19,114,481 18,291,693 18,206,940 -0.6% -0.7% -0.1% 15.5% 100.0% Transportation & Utilities 5,788,409 6,121,598 6,348,340 1.2% 0.9% 0.7% 5.2% 100.0% Trade 25,866,231 27,888,031 31,009,236 2.4% 1.3% 2.1% 23.6% 100.0% Finance, Insurance & Real Estate 6,692,006 6,881,294 7,374,991 2.6% 0.5% 1.4% 5.8% 100.0% Services 27,876,068 33,655,628 38,961,776 4.5% 3.2% 3.0% 28.4% 100.0% Government 18,641,411 19,663,109 21,156,568 1.2% 0.9% 1.5% 16.6% 100.0% ----------- ----------- ----------- --- --- --- ----- ----- Total Non-Agricultural Employment 109,685,073 118,346,895 129,163,244 2.0% 1.3% 1.8% 100.0% 100.0% - ----------------------------------------------------------------------------------------------------------------------------------
[LINE GRAPH OMITTED] CHANGE IN EMPLOYMENT Source: Data Resources, Inc. 1) Number of jobs in this industry as a percentage of the total jobs in all industries. 2) The industry weight for the area referenced here (either county, MSA or state) divided by the industry weight for the nation. LANDAUER REAL ESTATE CONSELORS 17 1.5 percent compound annual rate from 1996 to 2001. The following table illustrates the changes which have occurred since 1990. Non-Agricultural Employment Chicago, Illinois PMSA (Thousands) Change - 1990-2001 ------------------ Estimate Projection Compound 1990 1996 2001 Total Annual Change ---- ---- ---- ----- ------------- Total Employment 3,674.7 3,899.4 4,203.1 528.4 1.2% Manufacturing 669.5 656.3 649.9 (19.6) (0.3%) Construction & Mining 160.9 146.2 151.6 (9.3) (0.5%) Transportation/Utilities 225.3 232.1 238.1 12.8 0.5% Wholesale/Retail Trade 892.1 913.4 998.7 106.6 1.0% FIRE 295.3 310.9 328.7 33.4 1.0% Services 994.5 1,168.0 1,328.4 333.9 2.7% Government 437.2 472.5 507.7 70.5 1.4% - ---------- Source: Data Resources, Inc. In 1990, approximately 18.2 percent of Chicago's PMSA employment base was concentrated in the manufacturing sector. Over the 6-year period that followed, total manufacturing employment decreased to only 16.8 percent of the employment base. Several economic factors contributed to the decline of manufacturing employment within this PMSA during the 1980s, including the strength of the dollar combined with high interest rates which resulted in the purchase of foreign goods at the expense of domestic investment. The increase in automation also occurring since the early 1980s is yet another cause of declining manufacturing employment. During 1990, the proportion of service oriented jobs accounted for approximately 994,500 jobs, or 27.1 percent of the total employment base. Employment within this category has continued to expand at an estimated 2.7 percent compound annual rate over the past 6 years, resulting in a 1996 estimate of 1,168,000 jobs, or 30.0 percent of the employment base. LANDAUER REAL ESTATE CONSELORS 18 The proportion of the employment base categorized as finance, insurance, and real estate (FIRE) jobs represents an estimated 8.0 percent of the employment base in 1996, similar to 1990. The number of jobs within this category in 1996 is estimated to be 310,900 employees. The construction sector represents an estimated 3.7 percent of the PMSA employment base in 1996, reflecting a decrease in the employment base since 1990. The number of those employed within this category for 1996 is estimated to be 146,200 jobs. Government employment accounts for approximately 12.1 percent of the total PMSA employment base, up slightly from 11.9 percent 6 years earlier. This results in an estimate of 472,500 jobs. Unemployment in the Chicago area has dropped sharply from a peak of 12.5 percent (unadjusted) reached in February 1983 to its current low. As of June 1997, the Chicago area PMSA unemployment rate was 4.3 percent, compared with 5.9, 4.6, and 5.2 percent for the City of Chicago, State of Illinois, and the United States, respectively. ECONOMIC BASE Chicago's importance as a worldwide financial center is underscored by the presence of three of the nation's four largest futures exchanges (the Chicago Board of Trade, the Chicago Mercantile Exchange, and the Mid-America Commodity Exchange), the world's largest listed options exchange (the Chicago Board Options Exchange) and the Chicago Stock Exchange (formerly the Midwest Stock Exchange). The Chicago Board of Trade, the Chicago Mercantile Exchange and the Mid-America Commodity Exchange account for the majority of the world's traded commodities. Chicago is the national leader in stock options trading, currency futures and interest rate futures. The complex financial activity associated with this volume of trading and the Midwest's expanding role in world trade have created a solid base for growth in the financial community here. LANDAUER REAL ESTATE CONSELORS 19 Chicago is a top host city for conventions and trade shows. During 1996, an estimated 4.362 million people attended conventions, trade shows and corporate meetings, spending an estimated $4.780 billion. This number is expected to increase in 1997 when an estimated 4.560 million people are expected to attend conventions, trade shows and corporate meetings, spending an estimated $5.082 billion. A total of 30,533 hotel rooms are now available in the downtown area. A major $987 million expansion of McCormick Place has recently been completed in 1997 by The Metropolitan Pier and Exposition Authority. This expansion offers an additional 840,000 square feet of space and 109 meeting rooms totaling 170,000 square feet. It is expected that the enlarged facility will bring more conventions and trade shows to the city, ensuring Chicago's continued prominence as a convention center city and helping to improve hotel occupancy and room rates. Metropolitan Chicago is the largest retail market in the country. Retail sales per household in the metro area are projected to grow at a compound annual growth rate of 3.2 percent between 1994 and 1999, according to Sales and Marketing Management. This growth rate is slightly higher than the projection of 3.0 percent for the nation. TRANSPORTATION One of the primary reasons for Chicago's historic and continuing success as a major metropolitan center is its outstanding transportation system. The road network is highly developed and is being continually upgraded and expanded. The city is served by numerous interstate highways. Interstates 55, 90 and 94 have interchanges very close to the Loop, and Interstates 57, 88, 290 and 294 are easily accessible from downtown. The DuPage County North-South tollway opened in 1990; part of the Elgin-O'Hare tollway is opened. The Kennedy Expressway recently (1994) completed a major three year reconstruction program while other reconstruction programs for remaining area expressways are in the planning stages. LANDAUER REAL ESTATE CONSELORS 20 As a great rail center, Chicago not only has an excellent distribution network for its industrial commodities, but has an extensive commuter rail system and is the hub for Amtrak intercity train service. Chicago has developed perhaps the nation's finest integrated mass transit system. Central to this system are ten heavy-rail commuter lines that radiate from four downtown terminals. An extensive bus network in the city and adjoining suburbs is operated by the Chicago Transit Authority (CTA), and an outer suburban bus system is operated by PACE. The CTA rapid transit system operates nine elevated and subway lines and offers direct service to both O'Hare and Midway Airports. Some sources estimate that as many as 80.0 percent of downtown's half-million plus workers arrive each day by mass transit. O'Hare International Airport processes over $6 billion in air freight shipments annually and has the highest volume of passenger traffic of any airport in the world. There were approximately 67,253,000 passenger arrivals and departures at O'Hare in 1995, representing a 1.2 percent increase over 1994. A new international terminal opened at O'Hare during 1993. Midway Airport is located on the southwest side of the city approximately 15 miles from the downtown area. In recent years, Southwest Airlines has become the dominant carrier at the airport. The addition of new discount airlines to the market in the past few years, such as Kiwi, American Trans Air and others, have increased the traffic at Midway. There were approximately 9,922,000 passenger arrivals and departures at Midway in 1995, representing a 3.8 percent increase over 1994. Plans for a third regional airport have been debated for years, but it is still unclear whether such an airport is needed. The third airport continues to be a political issue with many factions including the mayor of Chicago, the Governor of Illinois and various political bodies within the state all arguing over need, location, and control of a possible third airport. LANDAUER REAL ESTATE CONSELORS 21 LOCAL GOVERNMENT The Chicago metropolitan area is particularly notable for its large number of governmental bodies. The area is composed of over 200 municipalities plus numerous districts, authorities, and boards. County government is weak in Cook County but somewhat stronger in the collar counties. Metro-wide there is only the Regional Transportation Authority (RTA), a body designed mainly to distribute state funds to the various operating authorities (METRA commuter rail system, PACE suburban bus systems, and the Chicago Transit Authority) and the Metropolitan Water Reclamation District (formerly named the Metropolitan Sanitary District). The multitude of local governments has made effective regional planning nearly impossible to achieve; in fact, the suburbs and the city are often at odds with each other, and then both at odds with "downstate" interests. Politically, the Republican outer suburbs find little common interest with Democratic Cook County. The strength and unity of the Cook County Democratic Party has long provided a power center in Springfield (the state capitol), but a weakening of this unity has given the suburbs a powerful voice. In Illinois, property taxes are the most important revenue source available for local governments. State income tax rates are relatively low compared with other states. Property owners have been increasingly vocal in protest over the rising tax burden; yet the state legislature has only been able to pass a temporary increase in the income tax rate. Property tax caps were recently instituted for commercial real estate in the collar counties. The authorizing legislation exempted Cook County from the caps. After the first year, the caps appear to have been successful in restraining tax growth in the collar counties. The unrestrained Cook County tax rates are widening the gap in tax rates, further increasing occupancy costs relative to the collar counties. In the short run, this trend is expected to favor the collar counties when firms make location decisions. In the longer term, however, the tax caps may present serious fiscal constraints to growth in the collar counties by restricting infrastructure investments. LANDAUER REAL ESTATE CONSELORS 22 CULTURE AND HIGHER EDUCATION The Chicago area is home to several of the nation's finest institutions of higher learning, including Northwestern University, the University of Chicago, the University of Illinois at Chicago, and the Illinois Institute of Technology. There are also over 50 other colleges and universities, and 40 professional and technical schools located throughout the Chicago metropolitan area. There are more than 600 industrial research laboratories that contribute to the economy and to the development of new and improved products. The area is also home to the Fermi National Accelerator and Argonne National Laboratory. Chicago is well known for the high quality of its museums. The Art Institute, Field Museum, Adler Planetarium, and Shedd Aquarium are among the finest museums in the world. The Museum of Science and Industry is one of the state's largest tourist attractions. Chicago's beautiful parks and unique lakefront are essential ingredients in the special character of the city. The city's commercial architectural tradition has been at the forefront of international design for over a century. Chicago's symphony and opera, as well as its blues and jazz music traditions, are world-renowned. Chicago is home to two major league baseball teams, as well as professional football, hockey, basketball, and soccer teams. CONCLUSION The underlying strength of the Chicago economy is showing signs of resurgence after three difficult years bracketing the recession of the early 1990s. Moderate economic growth is expected over the next several years for the entire region, although a faster rate of growth in the collar counties will result in nearly as many jobs being added in the outer ring of counties as in the larger Cook County employment base. The anticipated regional expansion will be spearheaded by an improving industrial sector and supported by expanding business and professional services. Chicago is expected to maintain its position as a preeminent center of commerce, industry and trade. LANDAUER REAL ESTATE CONSELORS 23 The collar counties are expected to grow in population while the city and Cook County continue their decline. The net effect for the region, however, will be continued population growth. All areas will gain in income, and the region will continue to rank favorably among other metro areas in income characteristics. The city of Chicago's continuing struggle to compete with the suburbs for jobs and economic growth may benefit from the limits to growth increasingly faced by the suburban ring. [GRAPHIC OMITTED] NEIGHBORHOOD MAP LANDAUER REAL ESTATE CONSELORS 25 NEIGHBORHOOD ANALYSIS The subject property is located in the village of Lombard, DuPage County, Illinois, approximately 18 miles west of Chicago's Central Business District (CBD). The Village of Lombard has an estimated 1997 population of 24,787 residents. This area is situated near the eastern edge of the East/West Office Corridor, the largest of the four Chicago suburban office submarkets, which derives much of its strength and tenant appeal from the strong network of nearby roadways and proximity to an abundant suburban work force. Reflective of the many locational and transportational amenities, the immediate area has become home to a number of Fortune 500 corporations, including McDonald's, Waste Management, Interlake, Ace Hardware, and CBI Industries. DuPage County, characterized as an affluent white-collar county, has traditionally experienced lower unemployment than the surrounding counties in metropolitan Chicago. As of December 1996, DuPage County had a 3.1 percent unemployment rate compared with Cook County (5.5 percent) and the State of Illinois (4.9 percent). The main draw to the subject's neighborhood is its excellent accessibility via Routes I-355, I-88, and the I-290 extension, all of which provide access to the other major expressways and interstates serving the Chicago metropolitan area. IMMEDIATE ENVIRONS The subject property is located along the north side of Butterfield Road, at the northeast corner of Highland Avenue and Butterfield Road. The immediate environs include the following property uses. West: A three-story Class B office building (2500 Highland Avenue) and the Club Croix Townhomes. LANDAUER REAL ESTATE CONSELORS 26 North: The Yorktown II apartment complex. East: Low-rise Class B office buildings. South: Immediately south of Butterfield Road is the East/West Tollway, which serves as a buffer to the upper-middle-class and affluent residential properties to the south. In addition, the Unisys office building, Bally Fitness Center, several Class B office buildings, and the Embassy Suites, are situated directly south of the Yorktown Mall, along Butterfield Road. ACCESSIBILITY Primary access through the community is provided by several major east/west surface arterials, Cermak Road (22nd Street), which becomes Butterfield Road just west of Route 83, and Roosevelt Road (Route 38). These roads serve as east/west feeders to the local office buildings and shopping areas as well as nearby communities. North/south vehicular movement is via York Road, Robert Kingery Expressway (Route 83), Midwest Road, Meyers Road, and Highland Avenue, as well as by I-355 (North-South Tollway). These roadways also serve to connect the communities of Downers Grove, Hinsdale, Westmont, Elmhurst, Lombard, Oak Brook, and Oakbrook Terrace. Direct access to downtown Chicago is available via I-88, with an entrance just south of Butterfield Road on Highland Avenue; I-88 connects with the Eisenhower Expressway into Chicago. CONCLUSION The location of the subject property provides easy access to local and regional thoroughfares including Interstates 88, 294, and 355, as well as State Route 83. The strategic location of Yorktown Mall and the Oak Brook Regional Shopping Center, approximately 2.0 miles east of the subject property, has produced and nurtured a sizable skilled work force and helped create an LANDAUER REAL ESTATE CONSELORS 27 expansive commercial retail/office submarket. These positive aspects, coupled with the pleasant suburban atmosphere that has been created, should continue to have a significant impact on the growth of this area in the future. In terms of suburban office and commercial development, the local area is regarded to be among the most prestigious communities in the region. LANDAUER REAL ESTATE CONSELORS 28 RETAIL MARKET OVERVIEW OVERVIEW Yorktown Mall and Oak Brook Shopping Center are the two regional malls serving the immediate area. Also competing for customers are several shopping centers including the Oaks of Oakbrook, and The Shops at Oak Brook. Department stores serving the area include Kohl's, Sears, JC Penny, Carson Pirie Scott, Montgomery Ward, Von Maur, Neiman Marcus, Saks Fifth Avenue, Nordstrom's, and Marshall Fields. JC Penney, Carson, Pirie Scott, Montgomery Ward, and Von Maur are represented at the subject. Big-box retailers such as Target, Venture, TJ Maxx, Ultra 3, Zainy Brainy, Bed, Bath & Beyond, Toys 'R Us/Kids 'R Us, and Service Merchandise are active in the area. TRADE AREA DELINEATION The ability of a retail store or group of stores to attract customers from within a specific market is limited by physical (geographic) are retail merchandising constraints. Consideration must be given to such factors as distance, driving times, the access convenience provided by existing and future highway systems, distribution of the resident population within the related region and the natural as well as man-made barriers which direct or channel the movement of residents within the area, (such as rivers, large bodies of water, marshlands, large public open spaces, political boundaries, and expressways or railroads). Other factors such as merchandising profile and strength exhibited by on-site retailers relative to competing shopping facilities may also have a profound impact on the trade area's definition. Typically, the majority of a mall's recurring sales are generated by residents located within a "Primary Trade Area", while additional sales are generated by persons residing outside of this area, either in a "Secondary Trade Area" or outside of the region altogether. The subject property is a suburban mall, LANDAUER REAL ESTATE CONSELORS 29 located in an area having a relatively good population density. For the analysis, we have designated the trade area to be within a 4-mile radius from the subject property. TRADE AREA POPULATION The table below shows the population of the subject's trade area, comparing the 1990 census data with 1996 estimates and 2001 projections. Urban Decision Systems, Inc. (UDS) estimates the 1996 trade area population was 157,488 persons, and this is a 4.2 percent increase from 1990 census levels. Based on the 2001 population projections, the total population is expected to increase an additional 15.4 percent. Yorktown Mall Trade Area Population Estimates 1990 Census 1996 Est. 2001 Proj. ----------- --------- ---------- Trade Area 151,188 157,488 181,757 DuPage County 781,666 866,981 931,222 - ---------- Source: Urban Decision Systems, Inc. The preceding table shows population in the trade area increasing from 1996 to 2001 at a compound annual rate of 2.9 percent. This is above the 1.4 percent compound annual growth expected for DuPage County. The following table displays the number of households included in the trade area as estimated by UDS. As with population, the total number of households in the trade area has increased 7.0 percent from 1990 census figures, a trend expected to continue at a slower rate (3.1 percent ) through the year 2001. Compared to DuPage County, the trade area households have increased and are projected to increase at a slower rate. LANDAUER REAL ESTATE CONSELORS 30 Yorktown Mall Trade Area Household Estimates 1990 Census 1996 Est. 2001 Proj. ----------- --------- ---------- Trade Area 57,643 61,698 63,619 DuPage County 279,344 319,325 345,384 - ---------- Source: Urban Decision Systems, Inc. INCOME ESTIMATES AND COMPARISONS The income characteristics of the population of the subject property's trade area has a direct bearing on the property's economic viability. The following table presents a comparison of the income characteristics of the subject property's trade area to DuPage County and the nation. Yorktown Mall Average Household Income Comparison 1990 Census 1996 Est. 2001 Proj. ------------- ----------- ----------- Trade Area $59,748 $69,974 $84,912 DuPage County $58,804 $68,025 $81,610 United States $38,464 $44,680 $53,841 - ---------- Source: Urban Decision Systems, Inc. The preceding table indicates that the average household income level for the trade area is slightly above DuPage County, however, and substantially higher than the nation. Since the 1990 census, the trade area has seen average household income increase at a compound annual rate of 2.7 percent, in comparison to 2.5 percent for DuPage County and a 2.5 percent for the nation. The average household income for the trade area is projected to grow faster over the next five years, with a compound annual growth rate of 3.9 percent projected through 2001. For DuPage County the growth rate through 2001 is 3.7 percent and is 3.8 percent for the nation. LANDAUER REAL ESTATE CONSELORS 31 TRADE AREA EXPENDITURE POTENTIAL The retail expenditure potential of the subject property's trade area is key to the mall's success. Landauer estimates the retail expenditure potential of a mall's trade area using a three step process: First, the total gross income of the trade area is calculated by multiplying the average 1990, 1996 and 2001 household income by the number of households; Second, the total gross income is multiplied by a disposable income factor (income remaining after taxes); and Third, disposable income is multiplied by a GAFO factor (the percentage of expenditures for general merchandise, apparel, furnishings and other retail purchases--the expenditure categories most directly related to a typical regional mall tenant mix) to estimate the amount of trade area income available for retail purchases. The disposable income factor in Illinois was estimated to be approximately 86.3 percent in 1990 and 86.0 percent for 1996 and 2001. GAFO expenditures (expenditures for general merchandise, apparel, furnishings and other retail purchases) are estimated to be 20.0 percent of disposable income. For purposes of comparison, the expenditure calculations for the subject trade area are illustrated below for the years 1990, 1996 and 2001. Yorktown Mall Trade Area GAFO Expenditures 1990 1996 2001 -------- -------- ------ Total Households 57,643 61,698 63,619 Average Household Income $59,748 $69,974 $84,912 Total Income (000) $3,444,054 $4,317,256 $5,402,017 Disposability Factor 0.863 0.863 0.863 Disposable Income (000) $2,972,219 $3,725,792 $4,661,941 GAFO Factor 0.20 0.20 0.20 GAFO Expenditures (000) $594,444 $745,158 $932,388 - ---------- Source: Urban Decision Systems, Inc., Landauer Associates, Inc. LANDAUER REAL ESTATE CONSELORS 32 GAFO expenditures are projected to increase by 4.6 percent per year between 1996 and 2001 which is faster than the 3.8 percent annual rate from 1990 to 1996. In our analysis, we are projecting fiscal year 1998 mall sales to be $87,659,000, exclusive of all anchors and outlots, which is expected to increase to $133,677,000 by fiscal year 2001, a 15.1 percent annual growth rate. A higher growth rate is reflected because of the lease-up of current and future vacant space at the mall. Our sales projections indicate that the Yorktown Mall is expected to capture 11.8 percent of potential trade area GAFO expenditures in fiscal year 1998, increasing to a 14.3 percent capture rate by 2001. Typical capture rates for regional malls range between 7.0 and 15.0 percent of GAFO and the subject's capture rate is within the range. Growth rates for retail sales and market rents used later in this appraisal are developed based on projected growth in trade area retail expenditures. Utilizing the above analysis, historic and projected compound annual sales growth figures are extracted and analyzed. Between 1990 and 1996, estimated GAFO sales grew at a compound annual rate of 3.8 percent. Between 1996 and 2001, GAFO sales are expected to grow at a slightly faster rate of 4.6 percent. However, as there is continued competition from Oak Brook Center Mall and future commercial development in the area, we have tempered the growth rate and have applied a general inflation rate of 3.5 percent. COMPETITIVE RETAIL ANALYSIS Yorktown Mall is a strong performer within its market. The center's location, size, tenant mix, and recent renovation of the mall all act to enhance its competitive position. The merchandise mix of the center appears to cater well to the population within its market. Retail development in the MSA has been driven by national and regional big-box retailers. Also, discount department stores (such as Target) are continuing to expand in the market area. In the last few years a number of category killers have built facilities in the Chicago metropolitan area to gain market share and distribution and advertising efficiencies. These stores include Target, Barnes & Noble, and others. LANDAUER REAL ESTATE CONSELORS 33 According to CB Commercial, there is approximately 25,395,000 square feet of gross leasable retail space in the West and Far West suburbs of the Chicago metropolitan area. Approximately 151 community, neighborhood, strip centers, and free-standing centers are included in this total. The overall vacancy rate as of first quarter 1997 was 11.7 percent. Regional malls are not included in this retail survey. The overall vacancy rate for the Chicago metropolitan market was 10.2 percent. Our discussions with Pehrson/Long (management and leasing agent for Yorktown Mall) indicate four regional malls to be competition to the subject property. Primary competition comes from Oak Brook Center in Oak Brook, Stratford Square in Bloomingdale, and Fox Valley Center in Aurora. Secondary competition comes from Woodfield Mall based on its distance from Yorktown Mall. Following is a brief discussion of the four competing centers. o Oak Brook Center is anchored by Lord & Taylor, Marshall Field's Sears, Nordstrom's, Saks Fifth Avenue, and Neiman Marcus and contains approximately 2,013,000 square feet of retail space including the anchors. The unenclosed mall area contains about 851,000 square feet and there are about 166 stores, of which five were vacant when the mall was inspected. The mall does not have a dedicated food court area. First opened in 1962, this center is owned and managed by Urban Retail Properties Company. The mall's appearance is considered good and sales are reported to be high because of the upscale tenant base. This mall is located approximately 2.0 miles east of Yorktown Mall. o Stratford Square is located approximately 9 miles northwest of Yorktown Mall and is managed by Urban Retail Properties, Inc. This is a two-level mall anchored by Sears, Kohl's, Marshall Fields, JC Penney, Montgomery Ward, and Carson Pirie Scott. The mall opened in 1981 and is in good condition. The mall contains about 1,295,000 square feet with the anchors and 499,000 square feet without the anchors. On the day of inspection the mall had about 18 vacant units. Overall, occupancy was approximately 90.0 percent. Several new tenant spaces were under construction at the LANDAUER REAL ESTATE CONSELORS 34 time of inspection that include Leather Limited, Finish Line, and Day By Day Calendar. o Fox Valley is located approximately 10 miles west of Yorktown Mall and is anchored by Sears, Carson, Pirie Scott, Marshall Fields, and JC Penney. The mall opened in 1975 and was recently renovated in 1997. The mall contains about 1,466,000 square feet, including anchors and 599,000 square feet, excluding the anchors. Of the 170 in-line stores at the mall, there were approximately 17 vacant units when the mall was inspected. Overall occupancy was reported to be 90.0 percent. New tenants anticipated to occupy space in this mall later this year include Kay Jewelers, Hot Topics, Oshkosh, Natural Nails and Tanning, and Harvest of the Greens. o Woodfield Mall is located approximately 13 miles northwest of Yorktown Mall, and its distance from the subject makes it a secondary competitor for the subject. This mall first opened in 1971. In 1995 Nordstrom's and approximately 175,000 square feet of new in-line space opened in the mall. With anchors, the mall contains about 2,700,000 square feet with in-line tenant space of about 1,320,000 square feet. Occupancy was reported to be approximately 90.0 percent. Average rents for in-line tenant stores range from $40.00 to $46.00 per square foot. Tenant sales were reported to be $375.00 per square foot. As mentioned previously, the subject property was originally developed in 1968. Renovations took place in 1985 and 1994. The 1994 renovation included the addition of the Von Maur department store in the space previously occupied by Wieboldt's, which had been vacant for several years. The result is a very attractive mall. The anchor stores are all attractive and appear to be well stocked. The Von Maur department store is the only Chicago-area outlet for this Iowa-based, family-owned retailer. Their prototype store contains 206,342 square feet and they operate 12 stores in Iowa, Illinois, and Nebraska. The merchandise and LANDAUER REAL ESTATE CONSELORS 35 operation are similar to Nordstrom's (i.e., service-oriented) but operates in the shadow of Oak Brook Center with its upscale tenant base. The other anchor stores are typical for the area and are not duplicated in the trade area, but are found at some of the competing malls. Carson Pirie Scott & Co. contains 215,000 square feet, in comparison to its stores in Stratford Square (141,000 square feet) and Fox Valley Center (115,000 square feet). JC Penney contains 239,000 square feet, in comparison to its stores of 141,000 square feet at Stratford Square and 231,000 square feet at Fox Valley Center. The Woodfield store contains 331,000 square feet. Montgomery Ward contains 165,000 square feet at Yorktown, compared to 157,000 square feet at Stratford Square. On July 7, 1997, Montgomery Ward filed for Chapter 11 protection. Our discussions with Pehrson/Long indicate they are not aware if Montgomery Ward will close down this store. Our analysis assumes Montgomery Ward will continue to occupy their space through the projection period and continue to pay the exterior common area maintenance, enclosed mall maintenance, and mall improvement tax per the December 31, 1996 recovery calculation worksheets, as provided by Pehrson/Long. The property is located in a mature suburban area of Chicago. The renovation has made this an attractive property but, with Oak Brook Center dominating the fashion end of the consumer business in the area, Yorktown is best described as a moderate traditional mall. [GRAPHIC OMITTED] SITE PLAN LANDAUER REAL ESTATE CONSELORS 36 PROPERTY DESCRIPTION SITE ANALYSIS The subject site is located at the northeast corner of Highland Avenue and Butterfield Road in Lombard, Illinois. The site is bounded by Butterfield Road on the south and Highland Avenue on the west. All the usual public utilities are available to the site. A site plan with the Yorktown Mall, anchors, outlots, convenience strip center, and Target are outlined. No soils tests were available for our review, and we assume that no adverse soil conditions exist. Presented in the following table is a breakdown of all parcels at Yorktown Mall, including the sites that are part of this appraisal. LANDAUER REAL ESTATE CONSELORS 37 Shopping Center Site Size Tax Parcel Number (Acres) Comments ----------------- ------- -------- Appraised Sites 29-101-007 9.44 Main Mall 29-200-054 17.32 Main Mall 29-200-028 7.71 Cinema 29-200-030 1.00 Cinema Access Road 29-101-019 0.90 Pizza Hut 29-101-020 1.61 Cole Taylor Bank 29-200-017 0.92 Firestone Total Appraised Sites 38.90 ===== Non-Appraised Sites 29-101-028 9.52 Convenience Shopping Center 29-101-005 9.27 JC Penney 29-200-043 8.13 JC Penney 29-101-006 17.22 Carson Pirie Scott & Co. 29-301-006 17.34 Montgomery Ward 29-301-008 4.03 Von Maur 29-400-002 9.48 Von Maur 29-301-007 1.74 Vacant Restaurant 29-200-044 0.38 Pacific Club 29-200-047 15.35 Target 29-200-053 0.64 Target Access Road 29-200-048 6.69 Vacant Land 29-200-049 2.73 Vacant Land 29-200-050 5.89 Vacant Land 29-200-051 3.52 Vacant Land 29-200-052 3.65 Vacant Land Total Non-Appraised Sites 115.58 ====== Total Appraised and Non-Appraised Sites 154.48 ====== LANDAUER REAL ESTATE CONSELORS 38 The site is irregular in shape but generally at grade with its fronting streets, Highland Avenue and Butterfield Road. According to the Lombard Engineering Department, the subject property is identified on Flood Insurance Rate Map (FIRM) 170212-0005B, dated October 17, 1978. The subject is included in Zone C, which is the area outside the 500-year flood plain. ACCESS AND VISIBILITY Visibility to the site is good from both Highland Avenue and Butterfield Road. Access is available directly from these roadways. Signal lights permitting full-turning movements are located at the subject on Highland Avenue (two stoplight intersections) and Butterfield Road at Fairfield Avenue. There is a full interchange at Butterfield Road and I-355, approximately 2.0 miles west of Yorktown Mall. In addition, there is an interchange at Highland Avenue and Interstate 88, directly southwest of the subject property. ZONING The subject property is located in the B-3, Community Shopping Zoning District of the village of Lombard. The Community Shopping District encompasses the area surrounding the subject property and is designed for the needs of a large consumer population and, thus, a wide range of uses and structure sizes is permitted for both daily and occasional shopping. This district is generally located adjacent to regional or major arterial roadways. The B-3 District allows a variety of large retail and department store development. The specific requirements of the B-3 Community Shopping District are as follows: Minimum Lot Area: All uses located within this district shall have a minimum lot area of 20,000 square feet. Minimum Lot Width: All uses located within this district shall have a minimum lot width of 100 feet. Maximum Building Height: The height of any building in this district shall not exceed two stories or 30 feet, whichever is less. LANDAUER REAL ESTATE CONSELORS 39 Minimum Open Space: The minimum open space for each use shall not be less than 10.0 percent of the lot area. Restriction of Business Use: All business establishments shall be retail or service establishments dealing directly with consumers. All goods produced on the premises shall be sold, at retail, on the premises where produced. Minimum Yard Setbacks: Front Yards 30 feet Corner Side Yards 30 feet Interior Side Yards 10 feet Rear Yards 30 feet The off-street parking requirements for a regional shopping center, with an area greater than 200,000 square feet, is five spaces per one thousand square feet of gross floor area. Based on the size and configuration of the subject property (including the anchor stores), approximately 6,500 parking spaces are required by code; the subject property contains an estimated 9,750 parking spaces. Based upon the zoning requirements described above, the subject property appears to conform to the intent of the B-3 zoning regulation. REAL ESTATE TAXES Yorktown Mall is located in York Township and is assessed and taxed under the taxing authority imposed by DuPage County, Illinois. Real estate taxes for properties located within DuPage County are levied one-year in arrears, billed in two annual installments. There are four factors which interact to effect the annual real estate tax liability for properties located within DuPage County, including the assessed valuation of the property, the township factor, the state equalization factor, and the tax rate. ASSESSED VALUES Historically, real properties located within York Township, DuPage County, Illinois, have been reassessed at four-year intervals, with the last of these quadrennial reassessments occurring in 1995. However, the York Township Assessor has attempted to reassess commercial properties on an annual basis. Once a property reaches its stabilized occupancy level, the assessed value may change from LANDAUER REAL ESTATE CONSELORS 40 year-to-year according to changes in the township factors, recent capital improvements, and/or appeals in assessed values. The process by which the assessor determines the assessed value begins by first estimating the "fair market value" of the property. This is accomplished via the use of traditional real property valuation techniques. The Assessor's estimate of market value is then multiplied by the 33-1/3 percent assessment ratio yielding the assessed value of the property. TOWNSHIP FACTORS Township factors are determined by the assessor through the use of comparable sales ratios, calculated from the sales of all properties located within York Township in comparison with the other DuPage County townships. The township factor is then applied to the assessed value yielding an adjusted assessed value. STATE EQUALIZATION FACTOR After the adjusted assessed value is determined by the assessor, the state equalization factor is applied in an effort to stabilize assessment practices throughout the State of Illinois. This rate, as determined by the Illinois Department of Revenue, has been constant over the past few years for properties located within York Township. TAX RATES Each legal taxing body within the county is responsible for establishing their annual tax levy according to law. These taxing entities include High School District #87, Grade School District #44, College of DuPage #502, County of DuPage, County Health Department, the Forest Preserve District, DuPage Water Commission, DuPage Airport Authority, York Township, village of Lombard, and others. LANDAUER REAL ESTATE CONSELORS 41 York Township Historical Tax Data State Township Equalization Tax Rate Tax Rate Year Factor Factor (per $100)[1] (Per $100)[2] 1996 1.00000 1.0000 6.6077 6.6727 1995 1.00000 1.0000 6.7790 6.7512 1994 1.00000 1.0000 6.9470 6.8324 1993 1.00000 1.0000 7.1581 7.0486 1992 1.00000 1.0000 7.2543 7.1489 [1] Tax rate for tax parcels #06-29-101-007 and 019, #06-29-200-054, #06-29-200-008, #06-29-200-017, #06-29-101-020, and #06-29-200-028. [2] Tax rate for tax parcel #06-29-200-030. ANALYSIS AND APPLICATION Over the past four years, the tax rates tended to change while the state equalization and township factor remained stable at approximately 1.0000. Overall, there has been a decrease in the tax rate since 1991. However, this apparent decrease was more than compensated for by the increases in assessed valuation of properties. SUBJECT TAXES The following table depicts the current taxes (1996 taxes payable 1997) for the subject property. LANDAUER REAL ESTATE CONSELORS 42 Yorktown Mall - Subject Parcels Real Estate Taxes 1996 1996 Taxes Tax Parcel Number Assessed Value Payable 1997 Comments - ----------------- -------------- ------------ -------- 06-29-101-007 $14,575,770 $963,123 Mall Parcel 06-29-200-054 $6,330,250 $418,284 Mall Parcel 06-29-200-030 $173,960 $11,608 Cinema Access Road 06-29-200-017 $231,680 $15,309 Firestone Parcel 06-29-101-020 $363,050 $23,989 Cole Taylor Bank Parcel 06-29-101-019 $181,530 $11,995 Pizza Hut Parcel 06-29-200-028 $1,387,710 $91,696 Cinema Parcel ----------- ---------- Total $23,243,950 $1,536,004 =========== ========== In our analysis we have assumed Firestone, Cole Taylor Bank, Pizza Hut, and the Cinema are responsible for their real estate taxes. Therefore, only the mall parcels (06-29-101-007 and 06-29-200-054) and the Cinema access road (06-29-200-030) taxes are the responsibility of the mall tenants. For 1997 the real estate taxes are $1,393,015. The real estate taxes are projected to increase at an annual rate of 3.5 percent per year. IMPROVEMENTS Yorktown Mall is a two-story, masonry and steel, regional shopping center containing a total of 1,305,907 square feet including enclosed mall, four anchor stores, and four outlots. Our appraisal includes only the mall stores of 392,658 gross leasable area and four outlot parcels consisting of a Cole Taylor Bank (4,800 square feet), Firestone (9,217 square feet), Pizza Hut (4,035 square feet), and General Cinema Multiplex (69,829 square feet). The total area appraised is 480,539 gross leasable square feet. The center's square footage is distributed as follows: LANDAUER REAL ESTATE CONSELORS 43 Yorktown Mall Area Delineations (square feet) Enclosed Mall Stores 392,658 JC Penney 239,110 Carson Pirie Scott & Co. 214,534 Von Maur 206,342 Montgomery Ward 165,382 --------- Anchor Total 825,368 Cole Taylor Bank 4,800 Firestone 9,217 Pizza Hut 4,035 General Cinema Multiplex 69,829 --------- Total Outlots 87,881 Mall Total 1,305,907 ========= Yorktown Mall was constructed in 1968 and was expanded and renovated several times with the last renovation occurring in 1994. The 1994 renovation included the addition of Von Maur department store in the space previously occupied by Wieboldt's, which had been vacant for several years. Currently, an 18-screen General Cinema Multiplex with stadium seating is under construction on an outlot parcel at the southeast corner of the Yorktown Mall site. Completion is anticipated by March 1998. The enclosed mall area is presently about 88.0 percent occupied. The following is a brief description of the physical components of the subject property. Foundations: Spread reinforced concrete footings. Exterior Walls: Concrete block and face brick. Roof: The roof is asphalt cover with a gravel overlay, supported on an insulated corrugated roof deck. LANDAUER REAL ESTATE CONSELORS 44 Ceilings: Acoustical ceilings with skylights throughout the mall. Floor: Poured Terrazzo floor covering on the mall corridor. Lighting: Incandescent, fluorescent, and sodium lighting along with skylights in the mall corridor. Because of the large number of skylights, natural light is abundant in the mall. HVAC System: Hot and chilled system with individual HVAC units located in the ceiling. Anchor tenants have separate HVAC systems. Fire Protection: The shopping center is fully sprinklered with a wet system. Layout: The mall contains a total of approximately 114 mall shop stores situated on two levels. In addition, there are four anchor stores, a 239,110 square foot JC Penney; a 214,534 square foot Carson Pirie Scott; a 165,382 square foot Montgomery Ward; and a 206,342 square foot Von Maur. The Von Maur department store opened in 1994, replacing the former Wieboldt's store. In addition, a 14-unit food court was constructed in 1994 on the second level of what was formerly a Madigan's department store. The lower level of the former Madigan's space was reconfigured into in-line mall stores. Condition: Based on our inspection, the property is considered to be in good condition with no deferred maintenance noted. The center is of average-quality construction with an appealing two-level design. Circulation and parking are adequate and appropriate for a multi-tenant shopping center. LANDAUER REAL ESTATE CONSELORS 45 The mall renovation in 1994 and 1995 included new common area flooring, new wall treatments, improved lighting, new skylights, new handrails and banisters, mall furniture, interior landscaping, new escalators, new security system, new exterior mall entrances, and new roof. A leasing plan for Yorktown Mall is presented in the Addenda of this report. LANDAUER REAL ESTATE CONSELORS 46 HIGHEST AND BEST USE Highest and Best Use is defined in The Appraisal of Real Estate, 10th Edition, as: The reasonably, probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible and that results in the highest value. Inherent in this definition is the separation of land and improvements. That is, the Highest and Best Use for the land, as if vacant and available, could be different from the Highest and Best Use of the improved property. All criteria must be met separately for both land and improvements. HIGHEST AND BEST USE ASSUMING A VACANT SITE Physically Possible: The first constraint imposed on the possible use of the property is dictated by the physical aspects of the site itself. The size and location within a given block are the most important determinants of potential use. In general, the larger the site the greater its potential to achieve economies of scale and flexibility in development. The subject site encompasses an area of approximately 38.9 acres. The site is irregularly shaped and of sufficient length and width to permit most development. There are no unusual deficiencies of the site which would hinder development. All types of improvements suitably scaled to the site are physically possible. Legally Permissible: Legal restrictions as they apply to the subject property are private restrictions and the public restrictions of zoning. There are no known private restrictions affecting title. Common restrictions (utility easements) exist, but do not affect the utilization of the site. As discussed previously, the subject property's B-3 zoning permits a variety of large retail and department store uses. LANDAUER REAL ESTATE CONSELORS 47 Financially Feasible: The demand for commercial facilities in suburban Chicago has continued to improve over the last several years. It is our opinion retail or service establishments would be financially feasible for the site. Maximally Productive: In the final analysis, a determination must be made as to which feasible use is the Highest and Best Use. The immediate area is predominantly developed with a variety of real estate uses. The subject property occupies a good location, accessible to major roadways and commercial development. The demand for commercial properties is good in the local area and, therefore, the use is neither speculative nor conjectural. No other use could provide the subject land with a higher net income than that of a commercial property. Highest and Best Use: As a result of our analysis of the market, supply and demand relationships within the subject market area and expected economic returns, the Highest and Best Use for the site is for future commercial development, not to begin until sufficient pre-leasing and securing of anchor tenants is completed. HIGHEST AND BEST USE, AS IMPROVED The approximate 38.9-acre parcel of land is presently improved with approximately 1,305,907 square feet of retail space, configured in a two-level enclosed mall and four outparcels. Under the present use, the subject improvements represent a conforming use which is neither speculative nor conjectural. The property also conforms to the physical and economic characteristics of the neighborhood environment. The improvements represent the most intensive use of the site. Since the improvements make a contribution to value, the continuation of the existing use is justified. There is no alternative economically feasible use that could justify removal of the existing improvements. The design and layout of the center are suitable for typical tenant needs. Having analyzed competing retail centers, as well as the property's location, design, and condition, it is our opinion that the Highest and Best Use of the subject property, as improved, is for continued use as a regional shopping center. LANDAUER REAL ESTATE CONSELORS 48 VALUATION METHODOLOGY All three approaches to value--the Cost Approach, Sales Comparison Approach, and Income Approach--were considered in the valuation of the Leased Fee Estate in the subject property. The Cost Approach is based upon the theory of substitution, which implies that a prudent investor will not pay more to purchase a property than it would cost to create a comparable substitute property. The value of the underlying land as if vacant and available for development is first estimated. To this is added the estimated cost of reproducing or replacing the subject property, minus the estimated amount of any depreciation (physical and functional) and obsolescence (economic). The Cost Approach is not used in this appraisal as agreed to by the client. The Sales Comparison Approach involves a direct comparison of the subject property with similar properties that have sold, in order to derive an estimate of market value. It is also based on the theory of substitution, and implies that a prudent investor would not pay more to buy the subject property than he would to buy an equally desirable substitute property. Because of wide differences in age, condition, tenancy, location, and (most importantly) anticipated net income, this analysis often provides only broad indications of general valuation parameters, such as price per square foot of gross building or rentable area, and overall capitalization rates. The Income Approach is usually relied upon as the primary indicator of value when analyzing income-producing properties. Either through the direct capitalization of net income or the discounting of projected cash flows into a present worth indication, the analyst has reliable tools with which to formulate an estimate of market value. Essential to this approach is an awareness of market rents, operating costs, current investor yield requirements, and the relative risks associated with varying types of investment instruments. Based on the methodologies of the three approaches to value, we have conducted our analysis of the subject property. Our assumptions and conclusions for each approach are presented in the following sections of the report. LANDAUER REAL ESTATE CONSELORS 49 COST APPROACH The Cost Approach to value has not been used in this report for two specific reasons: Lack of truly comparable construction cost data; and the inappropriateness of the valuation technique. Current land value and construction cost estimates may be higher or lower than those estimated since the mall was built; as a result, the lack of recent construction data prevents us from quantifying the changes in replacement costs. The lack of comparable regional mall development activity also precludes us from making a reliable estimate of developer's profit. What was once achievable in the market may not be achievable today, and without an active market, the estimation of an appropriate profit margin becomes even more subjective. Income producing properties like the subject property do not lend themselves to reliable estimates of value by the Cost Approach. The purpose of this appraisal is to estimate the market value of the Leased Fee Interest in the subject property. Because of the potential impact of above or below market leases, specific anchor tenant operating agreements, ground leases, and other unique lease requirements oftentimes found in shopping centers, the Cost Approach cannot accurately measure the effect of such factors. In addition, the Cost Approach does not reflect the motivations inherent in purchasing income-producing properties. Shopping centers in many instances require intensive leasing, management and operational skills in order to maximize their performance. The above relationships are economic in nature, and in our opinion are best measured by proper application of the Income Approach to value. As a result of this, we have not undertaken an analysis of the property by the Cost Approach as previously agreed to by the client and Landauer. LANDAUER REAL ESTATE CONSELORS 50 SALES COMPARISON APPROACH The Sales Comparison Approach is based on the principle of substitution, which implies that a prudent investor will not pay more to buy a property than what it would cost to purchase an equally desirable substitute property. The Sales Comparison Approach is a valuation technique by which market value is estimated by direct comparison of the subject property with current offerings and/or actual sales transactions of like or similar properties that occurred recently. The process is one of analyzing the listing or sale and correlating the characteristics of the property involved and the known details of the transaction so that such data can then be adjusted relative to the subject property. To apply the Sales Comparison Approach, an appraiser considers data on sales, contracts, offers, refusals, and listings of properties considered comparable to the subject property. First, the appraiser thoroughly researches the prices, real property rights conveyed, financing terms, motivations of buyers and sellers, and transaction dates of the sale properties. Then details on each property's location, physical and functional condition, and income producing characteristics must be examined. The degree of reliance placed on the Sales Comparison Approach is directly related to the following. 1) The degree of comparability of each property with the subject property; 2) The date of the sale in relation to the date of the current appraisal, taking into account market changes during the interim; 3) Reliability of the sales data; and 4) Appropriate adjustments for unusual conditions, if any, affecting price or terms of the sale. ELEMENTS OF COMPARISON These are the characteristics of properties and transactions that cause the prices paid for real estate to vary. The appraiser considers and compares all differences between the comparable properties and the subject property that could affect value. Adjustments for dissimilarities are made to the price of each comparable property to make the comparable equal to the subject on the date of the appraisal. LANDAUER REAL ESTATE CONSELORS 51 There are several common elements of comparison that should always be considered in a sales comparison analysis. Each is described as follows: Real Property Rights Conveyed: A transaction price is always predicated upon the real property interest conveyed. Many types of real estate, particularly income producing property, are sold subject to existing leases. The revenue generating potential of a property is often fixed or limited by the terms of existing leases. In the valuation process, adjustments must be made to any limitations which may inhibit the property's ability to generate a level of net operating income constrained only by market events. Financing Terms: The transaction price of one property may differ from that of an identical property due to different financing arrangements. Estimates of market value are generally based upon an all cash basis or subject to financing terms typically available in the market. Calculations for atypical financing vary depending upon the type of financing arrangement and the market perceptions of the added value. These adjustments are commonly referred to as "cash equivalency" adjustments. Conditions of Sale: These adjustments usually reflect the motivations of the buyer and the seller. When non-market conditions of sales are detected in a transaction, e.g. distressed sale, related parties or foreclosure, the sale can be used as a comparable only after extensive investigation. The motivations of the sale must be thoroughly researched before an adjustment is made. Date of Sale: Market conditions generally change over time, but the date of an appraisal is a specific point in time. Therefore, past sales must be examined in light of the direction of change between the sale date of the comparable and the valuation date of the subject property. This adjustment reflects change in value and is often called a "time adjustment". Location: An adjustment may be required when the locational characteristics of a comparable property are different from those of the subject property. Adjustments for location are usually expressed as percentages that reflect the increase or decrease in value attributable to the property's location or neighborhood. LANDAUER REAL ESTATE CONSELORS 52 Physical Characteristics: If the physical characteristics of a comparable property and the subject property differ in any way, each of these dissimilarities may require comparison and adjustment to equal the attributes of the subject. Physical divergences may include magnitude of improvement, quality of construction, age/condition, functional utility, site size and amenities. Income Characteristics: Factors that affect the income a property can generate include the quality of management and resulting efficiencies of operations, as well as market penetration, average rents and growth rates. For regional malls, the number and type of anchor tenants is a key consideration. APPLICABILITY OF ADJUSTMENTS In practice, when considering the purchase of a regional mall, buyers tend to relate one mall to another in income oriented terminology i.e., discount rates, capitalization rates. The rating process would include judgments of a center's location, market potential, development or expansion potential, and competitive advantage. This information would form the conclusions relating to capitalizing net income or discounting cash flows. Very little credence is given to the usual comparison factors utilized in the Sales Comparison Approach such as price per square foot or gross income multiplier. The presence or absence of owned anchor stores, ground leases or other factors tend to result in a disparate price per square foot comparison, while gross income characteristics can vary widely depending on escalation practices, real estate tax levels, etc. The foregoing factors make it very difficult to adjust comparison factors from one mall to another. COMPARABLE SALES DATA Landauer's files contain information on over 120 sales of regional malls since 1985. Of these sales, the prices have ranged from $98 to $461 per square foot. The unit prices are not only influenced by the quality of the mall but also by the inclusion of anchor stores in the sale. For example, where anchors are included, a lower unit price is indicated. From these sales, we have selected twelve of the REGIONAL MALL SALES
Owned Sale Property Year Date SF Sale Interest GLA Occ' No. Location Built of Sale Sold Price Purchased $/SF of At Sale - -------------------------------------------------------------------------------------------------------------------------------- 1 Towne East Mall 1971 Pending 426,000 $112,500,000 100.0% $264 93.00% Mesquite, TX 1996 2 Silver Lake Mall 1989 Jun-97 324,300 $38,000,000(2) 70.0% $0 99.40% Coeur d'Alene, ID $27,000,000(3) Leased Fee 3 Visalia Mall 1963 Jun-97 439,500 $38,000,000 100.0% $86 95.30% Visalia, CA 1989 Leased Fee 1995 4 South Towne Mall 1986 Mar-97 995,900 $98,000,000 100.0% $98 83.00% Sandy, UT 1994 Leased Fee 5 Valley Fair Mall 1970 Dec-96 608,000 $37,300,000 100.0% $61 85.00% West Valley City, UT 1986 Leased Fee 1987 6 Old Orchard 1956 Dec-96 630,000 $266,000,000 100.0% $421 88.00% Skokie, IL 1995 Fee Simple 7 St. Clair Square 1978 Nov-96 280,000 $86,400,000 100.0% $309 94.00% Fairview, IL 1992 Fee Simple 8 Park Mall 1974 Oct-96 447,300 $50,000,000 100.0% $112 85.00% Tucson, AZ Leased Fee 9 Valley View Center 1975 Oct-96 704,600 $85,500,000 100.0% $121 85.00% Dallas, TX 1993 Leased Fee 1996 10 Paseo Nuevo 1990 Jun-96 158,120 $37,000,000 100.0% $236 88.00% Santa Barbara, CA Leasehold 11 Grand Teton Mall 1984 Apr-96 521,000 $34,375,000 100.0% $66 85.00% Idaho Falls, ID 1990 Leased Fee 12 Charlestowne Mall 1991 Apr-96 744,901 $85,000,000 32.0% $114 79.00% St. Charles, IL 1993 Partnership 1995 Interest 1st (1) Year Final Sale Price/ Sale Property OAR Year Mall Sales Mall Sales No. Location COC OAR IRR Per SF Ratio - -------------------------------------------------------------------------------------------------- 1 Towne East Mall 8.80% - - - - - - $300 0.88 Mesquite, TX 2 Silver Lake Mall 6.51% - - - - - - N/A N/A Coeur d'Alene, ID 3 Visalia Mall 10.29% - - - - - - N/A N/A Visalia, CA 4 South Towne Mall 8.60% - - - - - - $249 0.91 Sandy, UT - - - 1996 5 Valley Fair Mall 11.10% - - - - - - $250 0.57 West Valley City, UT 6 Old Orchard 8.10% 7.90% N/A $310 1.36 Skokie, IL 7 St. Clair Square 8.65% 8.90% 11.00% $330 0.94 Fairview, IL - - - 1996 Projected 8 Park Mall 10.00% - - - - - - $225 0.64 Tucson, AZ - - - 9 Valley View Center 9.36% 9.00% - - - $228 0.80 Dallas, TX 1996 10 Paseo Nuevo 10.30% - - - - - - $340 0.69 Santa Barbara, CA - - - 11 Grand Teton Mall 10.24% - - - - - - $240 0.73 Idaho Falls, ID - - - 12 Charlestowne Mall 9.56% - - - 12.0% $202 0.56 St. Charles, IL - - -
(1) Includes only enclosed mall area (2) Represents 100.0 percent interest. (3) Represents 70.0 percent interest. LANDAUER REAL ESTATE CONSELORS 53 most recent sales for analysis, as shown in the tabulation on the facing page. Also, detailed narratives of each transaction are included in the Addenda. During the late 1980s, there was an increasing spread between center sales productivity and purchase price per square foot, with ratios of 161 and 167 percent becoming increasingly common. This was significantly greater than the 100 percent ratios seen during the early 1980s. The high ratios in excess of 160 percent seen in the past reflected a recognition of the quality of the project and the potential on the part of the new investor to increase sales (either through remerchandising or expansion). In 1990 and 1991, buyers continued to examine the relationship between center sales productivity and purchase price, with the indicated ratios for centers of prime quality remaining virtually unchanged and ranging from 1.25 to 1.50, and in 1992, this ratio declined slightly and ranged from 1.00 to 1.24. In 1993 and 1994, the ratio was generally around 1.0 unless significant vacancy or development rights were a factor. In the future, we would anticipate this differential to continue to narrow, as the market remains soft for many centers located throughout the country. PRICE PER SQUARE FOOT Of the comprehensive inventory of regional mall sales, most of the more recent sales exclude anchor stores or include just one of the anchors; the subject does not include an anchor. Accordingly, sales productivity, tenancy, and other factors can be used to select recent comparable sales. Based on these factors, 12 sales were found to provide the best indication of value for the subject. All of the sales occurred in 1996 and 1997, with three sales taking place in Illinois. The sale prices range from $34,375,000 to $266,000,000, with the unit price ranging from $61 to $421 per square foot. The subject property is a traditional mall and competes with Oak Brook Center in the local market area. Total fiscal year 1998 retail sales from the Income Approach are $87,651,000 or $256 per square foot, excluding the sales from the outlot parcels. In addition, in calculating the sales per square foot for the mall, we have excluded the area of Woolworth's because they have vacated their space. The subject property does not include any anchor tenants. LANDAUER REAL ESTATE CONSELORS 54 In purchasing centers, investors analyze the relationship between purchase price and center sales productivity, as it is this productivity which contributes to a large portion of the value of the asset. Where expansion potential exists at a center or anchor store improvements are excluded from the purchase, the ratio of purchase price to a center's sales tends to be greater than where there is no such potential or anchor store improvements are included. Over the past few years, the ratio of purchase price to mall tenant sales productivity has ranged upward from 80.0 for centers where anchor stores were not included. Sales Ratio Analysis Price Sale Price Mall Sales to Center No. Property Per SF Per SF Sales Ratio --- -------- ------ ------ ----------- 1 Texas $264 $300 0.88 2 Idaho $117 N/A N/A 3 California $86 N/A N/A 4 Utah $98 $249 0.91 5 Utah $61 $250 0.57 6 Illinois $421 $310 1.36 7 Illinois $309 $330 0.94 8 Arizona $112 $225 0.64 9 Texas $121 $228 0.80 10 California $236 $340 0.69 11 Idaho $66 $240 0.73 12 Illinois $114 $202 0.56 Subject Sales -- $256 (FY-1998) -- On a price/sales ratio basis, Yorktown Mall is best compared to the unanchored centers. As shown below, total FY-1998 mall store sales (excluding outlot parcels and Woolworth's ) at the subject property are projected to be about $256 per square foot of mall GLA. FY 1998 Retail Sales Total Mall Sales $87,651,000 Divided by In-Line Tenant Area 342,808 square feet (excluding Woolworth's and outlot parcels) $256 per square foot ASSUMPTIONS AND RATES FROM SALES REGIONAL MALLS Price/ Sale # of Sale Location Date OAR IRR Anchors Ratio ================================================================================ Texas Pending 8.80% --- 0 0.88 Idaho Jun-97 6.51% --- 3 --- California Jun-97 10.29% --- 2 --- Utah Mar-97 8.60% --- 4 0.91 California Dec-96 10.00% --- 3 0.46 Utah Dec-96 11.10% --- 3 0.56 Michigan Dec-96 10.50% --- 4 0.43 Illinois Dec-96 7.90% --- 0 --- Illinois Nov-96 8.65% 11.00% 0 0.94 California Nov-96 9.10% 15.20% 2 0.47 Montana Nov-96 9.90% 15.80% 2 0.47 Tennessee Nov-96 9.90% --- 0 0.33 Texas Oct-96 9.00% --- 1 0.80 Arizona Oct-96 10.00% --- 1 0.64 California Jun-96 10.30% --- 0 0.69 Illinois Apr-96 9.56% 12.00% 4 1.56 Idaho Apr-96 10.24% --- 4 0.56 Connecticut Mar-96 6.80% --- 0 --- California Mar-96 7.60% --- 1 1.18 Pennsylvania Mar-96 13.00% 10.50% 0 0.50 Florida Feb-96 7.70% --- 0 0.80 New Jersey Aug-95 8.70% --- 0 1.09 California Jun-95 8.90% 12.30% 0 0.95 Massachusetts Apr-95 8.50% 10.70% 1 0.81 California Jan-95 12.60% 13.50% 0 0.50 California Jan-95 7.80% 10.50% 0 1.14 Virginia Jan-95 7.80% --- --- 0.55 Texas Dec-94 6.70% 11.60% 0 1.03 Texas Dec-94 8.70% 11.50% 2 0.39 Florida Dec-94 8.20% 11.50% 1 1.00 Florida Dec-94 8.60% 12.00% 0 0.80 Arizona Dec-94 7.80% --- --- 1.02 Missouri Dec-94 8.00% 12.10% 0 --- Louisiana Dec-94 10.70% --- 0 0.50 No. Carolina Sep-94 10.60% 14.70% 0 0.50 Virginia Jul-94 9.00% --- 3 1.11 Louisiana Jul-94 8.90% --- 2 1.10 Florida Jun-94 7.50% 11.00% All 1.22 Alabama Feb-94 7.40% 11.50% 0 1.10 California Dec-93 7.00% --- 0 1.12 Arizona Dec-93 8.00% 11.00% 0 1.17 Florida Dec-93 7.50% 11.50% 0 0.91 Ohio Dec-93 7.50% 11.30% 0 1.16 New Mexico Dec-93 7.25% 11.00% 1 0.76 New Jersey Jul-93 7.50% 12.40% 1 0.68 9.00% Oregon Jul-93 8.00% 11.50% 0 0.88 No. Carolina Jul-93 7.00% 12.10% 2 0.77 Florida May-93 7.50% 12.00% 1 0.64 Texas May-93 8.50% 12.20% 1 0.85 Florida Jan-93 7.50% 11.00% 0 1.00 Florida Dec-92 7.25% 11.50% 0 1.50 11.70% 11.70% Illinois Dec-92 8.00% 12.00% 1 0.96 Texas Sep-92 8.00% 12.00% 1 0.73 Connecticut Aug-92 7.00% 11.50% 0 --- Florida Jul-92 7.10% 11.50% 1 0.81 Florida Apr-92 7.00% 11.10% 0 1.24 Nebraska Apr-92 7.50% 12.50% 1 0.79 Florida Mar-92 7.90% 11.50% 1 0.79 Pennsylvania Dec-91 6.80% 11.20% 1 0.55 Maine Dec-91 7.30% 11.80% 3 --- LANDAUER REAL ESTATE CONSELORS 55 The table on the facing page features regional mall sales and the rates and ratios associated with the transaction. In the columns entitled "sale price/mall sales ratio" a pattern of ratios is discerned. Sales with anchors included in the transaction typically have a ratio of 0.39 to 1.22. When no anchors are included the ratio increases and is presented in a wide range of 0.50 to 1.50. Most ratios are within the range of 0.50 to 1.00; however, two sales are less than 0.50 and 16 sales are greater than 1.00. It is our opinion that the ratio to be applied to the subject would be at the upper end of the range given the recent renovation of the mall and its position within the market. The subject's in-line tenant retail sales for FY 1998 are projected to be $87,651,000, or $256 per square foot. Assuming a ratio range of 0.90 to 1.00 a value range for the subject, based on $256 per square foot, would be $111,000,000 to $123,000,000, as shown below. $256 per square foot x 0.90 x 480,539 square feet = $110,716,186 (Rounded) $111,000,000 $256 per square foot x 1.00 x 480,539 square feet = $123,017,984 (Rounded) $123,000,000 INDICATED MARKET VALUE OF THE LEASED FEE ESTATE BY THE SALES COMPARISON APPROACH............$111,000,000 to $123,000,000 ============ ============ LANDAUER REAL ESTATE CONSELORS 56 INCOME APPROACH Income property exists for the production of income. It is only natural that the value of an income producing property should be a function of earning power. This is the essence of the Income Approach to Value and all related theory and techniques. This is not to say that the production of income is necessarily the sole reason for such a property's existence, nor is it meant to suggest that factors not related to earning power cannot influence value. There is no question, however, that the expectation of monetary gain is the major consideration in the valuation of income properties. Indeed, the anticipation of future benefits, either amenities or dollars, is the very basis of the value of any kind of property. The theory of the Income Approach is based on the present worth of the net income, cash flow, and reversionary value in the property it will produce during the remainder of its productive life over a reasonable holding (ownership) period. The Income Approach, therefore, is a process of measuring or estimating the extent of future benefits which might reasonably be expected and translating these benefits into a present value at a particular point in time. DISCOUNTED CASH FLOW ANALYSIS ("DCF") ASSUMPTIONS We have utilized a computer-generated (Pro-Ject) discounted cash flow analysis program to estimate the future financial performance of the subject property. The assumptions employed to structure the pro forma cash flow and determine future income and expense estimates in addition to capital items are summarized below. The model also allows for the entry of basic assumptions concerning future lease revenues and expenses. LEASING SUMMARY The subject property has approximately 112 enclosed mall retail tenants, 2 kiosk tenants, 4 anchors and 4 outlot parcels. Currently, there is 47,063 square feet of vacant in-line mall space. We have assumed that two lease proposals provided by Pehrson/Long for Natural Wonders (Suite #133) and Contempo LANDAUER REAL ESTATE CONSELORS 57 Casual (Suite #269) will be consummated at the stated proposal terms starting January 15, 1998 and April 1, 1998, respectively. In addition, we have assumed Suite 162, which is temporarily occupied by Christmas On The Mall until January 15, 1998, will become available for lease after the expiration date. Finally, Woolworth's, which leases Suite 106 (35,303 square feet) and Suite 206 (14,547 square feet) vacated both spaces in January 1994. Pehrson/Long reports Woolworth's will continue to pay rent until lease expiration on January 31, 1999. We have incorporated both Christmas On The Mall and the Woolworth's space in our lease-up projection. Following, we have summarized the following tenant assumptions specific to our cash flow projection. o It is assumed that JC Penney, Carson Pirie Scott, and Montgomery Ward, whose lease operating covenants have reportedly expired, will continue to pay the exterior common area maintenance, enclosed mall maintenance, and mall improvement tax per the December 31, 1996 recovery calculation worksheets as provided by Pehrson/Long. o Our value is subject to completion of the General Cinema Multiplex in a good workmanlike manner with completion by March 1, 1998. Our value does not include any landlord contributions, if any, for the cost to complete the site improvements for the Cinema. o It is our understanding the Pacific Club building (outlot parcel) is owned by JC Penney. Pehrson/Long leases the property from JC Penney and subleases it to the Pacific Club. No information regarding the terms of the JC Penney position were provided. Because of the lack of information regarding a renewal or extension option, we have not included any revenue from the Pacific Club beyond the expiration of the base lease, as of December 31, 1999. o Montgomery Ward filed for Chapter 11 bankruptcy protection on July 7, 1997. Our discussions with Pehrson/Long indicate they are not aware if Montgomery Ward will close down this store. Our analysis assumes Montgomery Ward will continue to occupy their space through the projection period and continue to pay the exterior common area maintenance, enclosed mall maintenance, and LANDAUER REAL ESTATE CONSELORS 58 mall improvement tax per the December 31, 1996 recovery calculation worksheets, as provided by Pehrson/Long. o The following tenants are on month-to-month lease terms and are projected to continue through the end of 1997 at the same terms and then go to a speculative renewal. 1. Murray's Irish Outfitters (Suite #107) 2. Record Town (Suite #115) 3. Love From Chicago (Suite #117) 4. Footlocker (Suite #131) 5. American Legal Outfitters (Suite #158) 6. Metro's T (Suite #210-A) 7. Health Rider (Suite #211) 8. World of Science (Suite #240) 9. Sportscard Heaven (Kiosk) 10. Superstars (Suite #105) 11. Craftwalk Outfitters (Suite #111) o We have assumed the Yorktown Barber Shop (Suite #205-B), Yorktown Shoe Repair (Suite #201-B), and Cole Taylor's ATM will continue occupying their space through the protection period at the same terms with 2.0 percent annual base rent increases. o We have assumed the Yorktown Merchant Association (Suite 260-A) will continue to occupy their space through the projection period at the same terms of its current lease. o Because of lack of information regarding renewal or extension options to the Firestone, Pizza Hut, and Cole Taylor outlot parcels we have assumed upon lease expiration each tenant will renew its LANDAUER REAL ESTATE CONSELORS 59 lease at a rate that is 3.5 percent greater than the current rent being paid. A 3.5 percent annual increase in base rent is assumed thereafter. o We have assumed the real estate taxes for the outlot parcels of Firestone, Pizza Hut, Cole Taylor Bank, and General Cinema Multiplex will be paid directly by these tenants. Therefore, the taxes associated with these outlot parcels are not included in the real estate tax projection for the mall. Presented below is a brief summary of the most pertinent details of the operation and covenant agreements, General Cinema Theatre's lease, and a general description of the enclosed mall leases. It is our understanding that the Operation and Covenant Agreements for JC Penney, Carson Pirie Scott, and Montgomery Ward have reportedly expired. In our analysis, we have assumed all three anchor tenants will continue to pay exterior common area maintenance, enclosed mall maintenance, and mall improvement tax per the December 31, 1996, recovery calculation worksheets as provided by Pehrson/Long. The Von Maur Operation and Covenant Agreement was made on May 14, 1993. According to this agreement, Von Maur shall pay Yorktown Joint Venture for interior mall maintenance, enclosed mall improvement tax, and common area maintenance, including maintenance of the parking area on the Von Maur property, in the following amounts: First 5-Year Period - $100,000 per annum Second 5-Year Period - $125,000 per annum Third 5-Year Period - $150,000 per annum Thereafter Every 5-Year Period - CPI Adjustment General Cinema Theatres of Illinois, Inc. has entered into a lease agreement with Yorktown Joint Venture dated April 3, 1997, to construct an 18-screen General Cinema Multiplex with stadium seating for approximately 4,200 people. The 69,829 square foot theatre is currently under construction at the southeast corner of the Yorktown Mall site. The commencement date has been projected to be March 1, 1998, with lease termination January 31, 2018. Base rent and extension option rents are as follows: LANDAUER REAL ESTATE CONSELORS 60 General Cinema Multiplex Base Rental Schedule Commencement Base Rent Date (Per Sq.Ft.) 3/1/98 $10.74 1/1/03 $11.67 1/1/08 $12.68 1/1/13 $13.78 2/1/18 $15.16 (extension period) 1/1/23 $16.68 (extension period) 1/1/28 $18.35 (extension period) In addition to base rent, General Cinema is responsible for common area contributions of $69,829 (year 1) adjusted each year by 105.0 percent. A 7.5 percent administrative fee is also charged. General Cinema also agrees to pay up to $850,000 to be used by the landlord to complete the required site improvements. Our value does not include any landlord contributions, if any, for the cost to complete the site improvements for the Cinema. ENCLOSED MALL TENANT LEASES The mall tenant leases vary in length, but average about 10-years in duration. In most leases, enclosed mall expenses have a 15-percent administrative surcharge added for calculating recoveries. The majority of the mall tenant leases require that the tenant pay both interior and exterior common area maintenance expenses based on the occupied GLA of the enclosed mall. The exterior common area maintenance recovery is based on the inclusion of CAM insurance and deduction of anchor contribution before the 15 percent administrative surcharge. For interior common area maintenance the recovery is based on the inclusion of CAM insurance and CAM taxes before the 15 percent administrative surcharge. Anchor contributions are not included. For real estate tax and insurance recovery we have assumed recoveries based on GLA. For all new leases and speculative renewals, interior and exterior common area maintenance expenses will be recovered based on tenant's prorata - -------------------------------------------------------------------------------- Yorktown Mall - Recent Leasing Analysis - 1/95 to 04/98 ================================================================================
Initial Average Tenant Minimum Minimum Buildout Tenant - 0-999 Sq. Ft. Suite Size Type Start End Term Rent Rent Allowance - ---------------------- ----- ---- ---- ----- --- ---- ---- ---- --------- Oberweis Dairy 157 494 1 Jul-97 Dec-03 6.5 $60.73 $60.73 Mrs. Fields 121 600 1 Jan-97 Dec-04 8.0 $70.00 $75.00 Lids 223 506 1 Nov-96 Dec-06 10.1 $84.98 $84.98 Kenny G's Coffee 254 946 1 Jul-95 Dec-02 7.5 $40.00 $41.87 ----- Inline leases: 4 2,546 8.0 $63.93 $65.65 Initial Average Tenant Minimum Minimum Buildout Tenant - 1,000-3,500 Sq. Ft. Suite Size Type Start End Term Rent Rent Allowance - ---------------------------- ----- ---- ---- ----- --- ---- ---- ---- --------- Aerosoles 146 1,280 1 May-97 May-07 10.0 $22.50 $31.25 Mario Tricoci 256 1,290 1 Aug-97 Aug-07 10.0 $21.45 $35.07 Natural Wonders 133 2,835 1 Jan-98 Jan-07 8.8 $29.00 $29.00 $102,000 Garden Botanika 229 1,271 1 Aug-96 Dec-06 10.4 $50.00 $54.21 $33,500 Wilson Leathers 144 1,785 1 Jan-96 Dec-02 7.0 $38.00 $38.00 Nine West 227 1,266 1 May-95 Apr-05 10.0 $32.00 $34.00 $75,000 Wicks "N" Sticks 127 1,280 1 Jun-95 Mar-05 9.8 $52.20 $57.43 Easy Spirit 231 1,375 1 Apr-95 Dec-04 9.8 $40.00 $42.05 Gymboree 157 1,800 1 Jul-95 Jan-06 10.6 $25.00 $26.89 $63,198 Franklin Quest 114 2,350 1 May-95 Dec-00 5.7 $30.00 $31.77 Eyestop 173 3,000 1 Feb-97 Dec-01 4.9 $18.00 $18.00 Gadzooks 134 3,279 1 Aug-97 Jan-08 10.5 $26.53 $27.92 Deck The Walls 170 2,050 1 Oct-96 Dec-06 10.2 $28.00 $31.71 ------ In-line leases: 13 24,861 9.1 $31.74 $35.18 $273,698 Initial Average Tenant Minimum Minimum Buildout Tenant - 3,501-12,000 Sq. Ft. Suite Size Type Start End Term Rent Rent Allowance - ----------------------------- ----- ---- ---- ----- --- ---- ---- ---- --------- Lane Bryant 209 5,686 1 Nov-95 Jan-08 12.2 $20.00 $21.00 $170,580 Pacific Rim 206 6,691 1 Jun-97 May-07 10.0 $17.94 $19.06 Bath & Body 266 7,413 1 Nov-97 Dec-07 10.1 $21.00 $21.00 Contemp Casuals 269 4,152 1 Apr-98 Mar-08 10.0 $27.00 $30.30 Disney Store 159 6,432 1 Apr-96 Apr-06 10.0 $22.00 $22.85 $275,000 Gap Kids 237 4,491 1 Nov-95 Jan-04 8.2 $19.50 $19.50 $224,550 ------ In-line leases: 6 34,865 10.1 $21.24 $22.29 $670,130 Initial Average Tenant Minimum Minimum Buildout Tenant - 12,001 Sq. Ft. or Greater Suite Size Type Start End Term Rent Rent Allowance - --------------------------------- ----- ---- ---- ----- --- ---- ---- ---- --------- Sam Goody 173 12,486 1 Dec-95 Jan-06 10.1 $13.05 $13.05 $41,360 ------ In-line leases: 1 12,486 10.1 $13.05 $13.05 $41,360 Initial Average Tenant Minimum Minimum Buildout Food Court Tenants Suite Size Type Start End Term Rent Rent Allowance - ------------------ ----- ---- ---- ----- --- ---- ---- ---- --------- Great American Cookie 12 512 2 Oct-96 Dec-06 10.3 $78.13 $82.32 Frullati 7 616 2 Dec-96 Dec-06 10.0 $109.58 $115.67 ----- Food Court leases: 2 1,128 10.1 $93.86 $99.00
Type 1 = In-Line 2 = Food Court LANDAUER REAL ESTATE CONSELORS 61 share of occupied GLA. In addition, a 15 percent administrative surcharge is added for calculating recoveries. We were not provided with information regarding tenant renewal options. For this reason, renewal options are not modeled for the enclosed mall tenants or outlot parcel tenants. MARKET RENT In estimating market rents for Yorktown Mall, recent leases were analyzed, actual spaces were examined and leasing plans were reviewed at the subject center. As summarized on the facing page, 26 recent leases have been examined. For the Jewelry tenants, we have included older leases because of the lack of new leases. The average minimum rent by space category for these leases are summarized as follows: Recent Lease Summary Size of Space No. of Average (Sq. Ft.) Leases Rent/SF --------- ------ ------- 0-999 4 $65.65 1,000-3,500 13 $35.18 3,501-12,000 + 6 $22.29 12,000+ 1 $13.05 Food Court 2 $99.00 Because of the lack of recent leases for jewelry tenants, we have taken into consideration the three jewelry store tenants in the mall. The average rental is $77.84 per square foot. The most recent jewelry store lease was $73.53 per square foot in September 1993. There has been one recent lease in the mall for a kiosk tenant. The average rent is $200.00 per square foot for 3 years. There are 12 food court tenants in the mall. Average rents range from $59.79 to $132.35 per square foot. The average rent for all food court tenants is $96.67 per square foot. LANDAUER REAL ESTATE CONSELORS 62 For tenant space up to 999 square feet there have been two leases in 1997. The average rent ranges from $60.73 to $75.00 per square foot. For tenant space from 1,000 to 3,500 square feet the average rent ranges from $18.00 to $35.07 per square foot for the four leases in 1997. There is one current proposal to Natural Wonders for $29.00 per square foot. This lease is projected to commence January 1998. For tenants between 3,501 and 12,000 square feet there has been two leases signed in 1997. The average rent during the lease term ranges from $19.06 to $21.00 per square foot. There is one current proposal to Contempo Casuals for an average rent of $30.30 per square foot. For space greater than 12,001 square feet the most recent lease is to Sam Goody (December 1995) for an average base rent of $13.05 per square foot. The only other space in this size category is Evans at 15,719 square feet. This lease commenced in June 1994 for $15.00 per square foot. Market rents for Yorktown Mall have been estimated on a tenant-by-tenant basis. These estimates are influenced by recent leasing trends, the quality of the location and the size of the space. Although rents vary by space, they generally fall within a range dictated by the size of the space. Market rental rates for 1997 are summarized as follows: Estimated Average Market Rent Size of Space Market Rent (Sq. Ft.) Per Sq. Ft. --------- ----------- 0-999 $65.00 1,000-3,500 $35.00 3,501-12,000 $22.00 12,000+ $13.00 Food Court $100.00 Kiosk $200.00 Jewelry $80.00 Because the projected market rents are average rates over the lease term, no base rent adjustments have been projected during the lease term. LANDAUER REAL ESTATE CONSELORS 63 The forecasted basic lease structure and assumptions have been derived from the market, as determined by the rent survey and activity at the subject. The assumptions used in the DCF Analysis are as follows: Projection Period: The projection period begins September 1, 1997, and extends for a term of 10 years through August, 2007. Fiscal year 1998 (the first full year) is used as the initial base year. The 11th year's (2008) net operating income is capitalized to establish the reversionary value and is added to the 10th year cash flow. Gross Leasable Area: 392,658 square feet (in-line mall space) 87,881 square feet (4 outlot parcels) Lease Term: Lease terms for enclosed mall retail leases and food court tenants at the subject are projected for a 10-year term. Kiosk tenants are projected to have 3-year lease terms. Growth Rates: Market rental rates have annual escalations of 3.5 percent from Year-1. Expense categories are escalated annually at a rate of 3.5 percent through the projection period, except for management fees which are based upon a percentage of minimum rent and percentage rent. REVENUE Minimum Rent: Rental rates for current tenants are dependent on specific lease terms which have been modeled in our analysis. For currently vacant spaces and for lease rollovers, tenant spaces have been assigned the market rent for the appropriate category. LANDAUER REAL ESTATE CONSELORS 64 Most of the leases at the center are structured on a net basis with the tenant responsible for their defined pro rata share of operating expenses and real estate taxes. A Pro-Ject lease abstract report is presented in the Addenda. According to interior and exterior common area worksheets provided by Pehrson/Long, there are several expense recovery schedules. The general expense recovery structure applied in the analysis is described below. Exterior Common Area Expenses: Enclosed mall tenants pay a pro-rata share of exterior common area maintenance expenses based on a proportion of unit size to either the enclosed mall GLA, the occupied area of the enclosed mall, or 95.0 or 90.0 percent of rentable area, excluding anchor tenants. The exterior CAM recovery includes such expenses as insurance, service contracts, utilities, supplies, repair and maintenance and payroll and related taxes. An administrative fee of 15.0 percent is applied to this total, and anchor tenant contributions are deducted. Interior Common Area Expenses: Items included within this category include supplies, real estate taxes, utilities, payroll and related taxes, service contracts, insurance and repairs and maintenance. Most tenants pay a pro-rata share of these expenses based on the GLA at the mall, occupied area of the enclosed mall, or 95.0 or 90.0 percent of rentable area, excluding anchor tenants. This expense includes a 15.0 percent administrative charge. No anchor tenant contributions are deducted from the expense total. LANDAUER REAL ESTATE CONSELORS 65 Sprinkler, Store HVAC and Mall HVAC Recovery: This recovery category includes the sprinkler (cost of maintenance), store HVAC, and mall HVAC recovery from mall tenants. Specified in most tenant leases is a per square foot amount recovery for each item. This recovery amount is increased each year by a CPI adjustment. In our cash flow projection we have established individual recovery line items for the three recovery charges. Presented in the following table are the 1997 projected recovery charges. We have assumed a 3.0 percent growth rate for these recovery charges because the base recovery amounts are adjusted only periodically. Sprinkler, Store HVAC and Mall HVAC Recovery 1997 Sprinkler Store Mall Recovery HVAC Recovery HVAC Recovery -------- ------------- ------------- $40,000 $210,000 $85,000 Real Estate Taxes: Real estate taxes are projected to be recovered based on the tenants prorated share of the GLA. The four outlots are separately assessed and are assumed to pay their real estate taxes, directly. In our analysis, we have not included the outlot taxes paid by the tenant. Insurance: Insurance is also projected to be recovered based on the tenants prorated share of the GLA. Percentage Rent: Also known as overage rent, percentage rent cited in the existing leases vary from 3.5 to 12.0 percent of sales above a natural or predetermined breakpoint. Future sales volume forecasts for each tenant are based upon the information from 1994, 1995, and 1996
Commencement Expiration Base Use Code Suite Level Tenant Name Size Date Date Term Rent - -------- ----- ----- ----------- ---- ---- ---- ---- ---- Food Ct. FC-6 Upper McDonald's 1,050 12/20/93 11/30/00 7.00 $59.79 Food Ct. FC-1 Upper Dairy Queen 393 10/01/93 10/31/03 10.08 $89.06 Food Ct. FC-10 Upper Great Steak & Potatoe 612 11/15/93 09/30/03 9.88 $132.35 Food Ct. FC-4 Upper Sbarro 850 10/31/93 10/31/05 12.00 $102.35 Food Ct. FC-11 Upper Panda Express 750 11/23/93 12/31/03 10.08 $116.44 Food Ct. FC-9 Upper Chicago Hot Dog 612 02/15/94 02/14/04 10.00 $71.90 Food Ct. FC-2 Upper Sakkio Japan 519 12/30/93 12/31/03 10.00 $119.46 Food Ct. FC-3 Upper Soupmasters 519 06/01/94 01/31/04 9.67 $104.05 Food Ct. FC-12 Upper Cinnabon 593 12/15/93 12/31/01 8.04 $67.45 Food Ct. FC-5 Upper Aladdin's Castle 2,529 12/13/93 M-T-M M-T-M $25.00 Food Ct. FC-1A Upper Auntie Anne's Pretzels 329 11/21/93 12/31/03 10.08 $109.42 Food Mall 234 Upper Boudin Bakery 1,933 01/01/94 12/31/03 10.00 $30.00 Food Mall 157-C Lower Kerry's Grill 6,045 12/01/95 Food Mall 158 Lower Breslers 825 01/01/92 12/31/00 9.00 $44.00 Jewelry 221 Upper Marks Bros. Jewelers 1,122 01/01/89 12/31/98 10.00 $100.00 Jewelry 152 Lower Lundstrom Jewelers 816 09/01/93 12/31/03 10.33 $73.53 Jewelry 236 Upper Rogers Jewelers 1,887 01/01/92 12/31/02 11.00 $60.00 Kiosk Lower Sportscard Heaven 225 10/31/91 M-T-M M-T-M No Mall 165 Lower Bachrach's 5,058 09/12/86 01/31/00 13.38 $20.86 Mall 115 Lower Record Town 2,898 12/01/92 M-T-M M-T-M None Mall 160 Lower Rave 2,712 11/16/84 12/31/97 13.13 $20.00 Mall 201-A Upper Photo Finish 995 01/01/88 12/31/97 10.00 $42.00 Mall 157-G Lower Plaza News 400 07/01/94 03/31/99 4.75 $46.50 Mall 233 Upper Picture Us 1,926 05/01/92 12/31/00 8.67 $28.00 Mall 173 Lower Sam Goody 12,486 12/16/95 01/31/06 10.13 $13.05 Mall 267 Upper Petite Sophisticate 2,500 08/15/94 07/31/04 10.00 $26.71 Mall 232 Upper Personal Creations 1,300 06/01/93 12/31/98 5.58 $42.00 Mall 170-A Lower Paul Harris 4,515 06/01/86 05/31/98 12.00 $23.12 Mall 104 Lower Barretts Audio 4,060 07/01/89 01/31/99 9.58 $5.00 Mall 207 Upper Champs Sport 6,170 05/01/94 04/30/04 10.00 $18.00 Mall 156 Lower Sole Outdoors 1,819 10/01/94 01/31/05 10.33 $30.00 Mall 217-A Upper Select Comfort 609 12/31/93 01/31/01 7.08 $53.37 Mall 201-B Upper Shoe Repair 663 01/01/93 M-T-M M-T-M $22.00 Mall 205-A Upper Tinder Box 1,320 05/15/88 12/31/97 9.63 $30.00 Mall 129 Lower With Best Wishes 1,880 04/01/94 03/31/02 8 $32.00 Mall 127 Lower Wicks 'N' Sticks 1,280 06/15/95 03/31/05 9.79 $52.20 Mall 261 Upper Walden Book 3,032 01/01/91 12/31/00 10.00 $29.00 Mall 157-E Lower Victoria's Secret 6,700 06/25/86 01/31/06 19.58 $22.00 Mall 205 Upper Treats 'N' More 2,639 03/10/88 12/31/98 10.83 $27.00 Mall 119 Lower Topkapi 680 11/22/91 12/31/98 7.08 $110.00 Mall 210-B Upper Things Remembered 1,134 11/01/88 12/31/98 10.17 $40.00 Mall 140 Lower This End Up 2,250 11/15/93 12/31/04 11.13 $30.00 Mall 238 Upper Naturalizer 1,865 02/05/93 12/31/01 8.92 $30.00 Mall 250 Upper The Gap 5,603 02/08/93 05/31/05 12.33 $27.00 Mall 157-G Lower Sunglass Hut 705 11/15/94 01/31/04 9.21 $61.99 Mall 157-H Lower Successories 710 10/01/92 12/31/02 10.25 $49.30 Mall 135 Lower Structure 5,180 11/15/94 01/31/07 12.21 $20.00 Mall 220 Upper Stride Rite 1,260 09/01/93 12/31/00 7.33 $37.06 Mall 215 Upper Anna's Hallmark 3,146 01/01/92 01/31/02 10.08 $33.00 Mall 227 Upper Nine West 1,266 05/12/95 04/30/05 10.00 $32.00 Mall 210-A Upper Metro's T's 756 09/01/96 08/31/97 1.00 $23.81 Mall 121 Lower Mrs. Field's 600 01/01/97 12/31/04 8.00 $70.00 Mall 217-B Upper Motherhood 796 08/15/92 01/31/03 10.46 $33.00 Mall 235 Upper Emporium Luggage 2,073 11/01/87 12/31/08 21.17 $33.00 Mall 142 Lower Foot Action 1,765 02/14/88 01/31/99 31.00 $6.75 Mall 222 Upper Florsheim Shoes 1,280 04/01/89 12/31/99 10.75 $38.00 Mall 225 Upper Fannie May 956 12/15/92 12/31/00 8.04 $65.00 Mall 120 Lower Express, Inc. 10,110 09/19/91 01/31/07 15.3 $20.00 Mall 168 Lower Expressly Portraits 1,401 09/10/93 08/31/03 10.0 $32.85 Mall 273 Upper Evans 15,719 06/01/94 05/31/06 11.00 $15.00 Mall 125 Lower Electronics Boutiques 1,280 06/15/87 12/31/01 14.54 $58.59 Mall 114 Lower Franklin Quest 2,350 05/01/95 12/31/00 5.67 $30.00 Mall 231 Upper Easy Spirit 1,375 04/01/95 05/31/04 9.75 $40.00 Mall 138 Lower Dolcis (Sam & Libby) 1,280 08/01/91 05/31/01 9.83 $40.00 Mall 224 Upper Desmonds For Men 800 11/01/88 12/31/98 10.17 $37.40 Mall 163 Lower County Seat 3,593 09/23/91 09/30/97 10.33 $28.00 Mall 148 Lower Claire's Boutique 1,354 09/01/93 01/31/01 7.42 $65.00 Mall 113 Lower B. Dalton 3,000 09/01/82 01/31/98 15.42 Mall 131 Lower Footlocker 1,667 04/01/82 M-T-M M-T-M $25.00 Mall 258 Upper Casual Corner 4,500 08/15/94 01/31/06 11.46 $24.13 Mall 237 Upper Gap Kids 4,491 11/17/95 01/31/04 8.21 $19.50 Mall 229 Upper Garden Botanika 1,271 08/07/96 12/31/06 10.42 $50.00 Mall 154-A Lower Merle Norman 525 09/22/94 12/31/99 5.25 $55.00 Mall 136 Lower Bombay Co. 1,765 05/19/87 12/31/97 10.58 $35.00 Mall 216 Upper Limited 11,070 11/21/91 01/31/07 15.17 $20.00 Mall 265 Upper Lechter's 3,324 09/01/86 01/31/98 11.42 $20.00 Mall 209 Upper Lane Bryant 5,686 11/15/95 01/31/08 12.21 $20.00 Mall 123 Lower Lady Footlocker 1,280 04/06/93 03/31/03 10.00 $39.06 Mall 254 Upper Kenny G's Coffee 946 07/01/95 12/31/02 7.50 $40.00 Mall 157-A Lower Gymboree 1,800 07/03/95 01/31/06 10.58 $25.00 Mall 201 Upper General Nutrition 1,300 01/01/93 12/31/02 10.00 $29.40 Mall 133 Lower Lerners 2,635 04/01/79 M-T-M M-T-M $24.67 Mall 218 Upper J. Riggings 2,472 10/15/94 01/31/05 10.29 $25.50 116 Lower Kaybee Toys 4,005 11/12/93 12/31/04 11.13 $18.11 ------- TOTAL 209,595 ------- Compound % 1994 1995 1996 Break Growth Rent Use Code Rent Sale Sales Sales Point 1994-96 Steps - -------- ---- ---- ----- ----- ----- ------- ----- Food Ct. 6.00% $811,827 $815,887 $837,120 0.50% No Food Ct. 10.00% $283,466 $301,623 $350,000 6.41% Yes Food Ct. 12.00% $449,493 $416,627 $420,278 $750,000 -3.30% Yes Food Ct. 12.00% $1,157,047 $1,184,780 $1,156,480 $725,000 -0.02% Yes Food Ct. 10.00% $723,368 $872,945 $934,280 $872,940 13.65% No Food Ct. 12.00% $399,201 $409,290 $366,668 2.53% Yes Food Ct. 11.00% $433,652 $452,584 $684,583 $563,636 25.64% Yes Food Ct. 10.00% $343,103 $369,111 $540,000 7.58% Yes Food Ct. 8.00% $636,213 $627,812 $583,345 $500,000 -4.24% No Food Ct. 25.00% $263,878 $305,839 $283,096 $252,900 3.58% No Food Ct. 12.00% $344,684 $374,443 $394,829 $300,000 7.03% No Food Mall 7.00% $415,555 $372,510 $435,750 $828,429 2.40% Yes Food Mall 7.00% $117,028 $796,873 Yes Food Mall 8.00% $177,153 $180,239 $160,266 $453,752 -4.89% No Jewelry 6.00% $1,681,629 $2,056,294 $2,109,653 $1,870,000 12.01% No Jewelry 6.00% $577,533 $822,783 $984,191 $1,000,000 30.54% Yes Jewelry 6.00% $1,123,668 $1,042,371 $1,122,325 $1,887,000 -0.06% Yes Kiosk 6.00% $132,556 $129,132 $146,128 $200,000 4.99% No Mall 5.00% $2,000,591 $1,932,575 $1,621,897 $2,110,196 -9.96% No Mall 5.00% $586,786 $642,775 $701,238 None 9.32% No Mall 5.00% $418,380 $572,157 $759,659 $1,084,800 34.75% No Mall 7.00% $241,013 $216,428 $217,699 $398,000 -4.96% No Mall $126,251 $147,060 16.48% No Mall 10.00% $293,118 $344,652 $395,705 $539,280 16.19% No Mall 12.00% $1,781,167 $135,800 Yes Mall 5.00% $616,300 $533,825 $1,335,400 -13.38% No Mall 10.00% $226,232 $240,108 $258,437 $546,000 6.88% Yes Mall 5.00% $971,167 $958,187 $1,248,435 $2,087,800 13.38% No Mall 3.50% $1,038,033 $1,080,061 $983,754 $1,856,000 -2.65% ? Mall 5.00% $1,187,074 $1,242,027 $2,221,200 4.63% Yes Mall 6.00% $468,759 $488,483 $909,500 4.21% No Mall 6.00% $286,895 $416,326 $468,355 $541,668 27.77% No Mall 7.00% $56,141 $51,020 $54,246 $208,371 -1.70% No Mall 6.00% $719,154 $801,782 $1,025,961 $660,000 19.44% No Mall 7.00% $478,854 $560,646 $859,428 17.08% Yes Mall 8.00% $512,992 $674,553 $721,262 $800,000 18.57% Yes Mall 6.00% $873,935 $869,166 $1,009,275 $1,465,467 7.46% Yes Mall 5.00% $1,998,101 $2,190,676 $2,278,620 $2,948,000 6.79% No Mall 5.00% $572,991 $644,277 $844,281 $1,425,060 21.39% No Mall 8.00% $275,236 $314,658 $322,446 $935,000 8.24% No Mall 8.00% $410,835 $426,970 $390,172 $567,000 -2.55% No Mall 5.00% $728,836 $685,782 $727,366 $1,350,000 -3.00% No Mall 10.00% $657,040 $707,317 $851,797 $750,000 13.86% Yes Mall 5.00% $1,988,399 $2,125,001 $2,322,267 $3,025,620 8.07% Yes Mall 8.00% $15,654 $257,376 $291,778 $475,000 13.37% Yes Mall 7.00% $368,366 $438,971 $500,000 47.28% No Mall 5.00% $359,629 $1,054,260 $1,190,407 $2,072,000 12.91% Yes Mall 7.00% $344,445 $420,908 $481,505 $356,571 18.23% Yes Mall 8.00% $1,044,184 $1,209,975 $1,443,630 $1,297,724 17.58% Yes Mall 6.00% $541,847 $675,200 Yes Mall $100,522 $112,739 12.15% No Mall 8.00% $275,406 $335,333 $348,499 $525,000 12.49% Yes Mall 6.00% $235,379 $233,122 $310,924 $437,800 14.93% Yes Mall 7.00% $597,348 $636,109 $769,454 $977,271 13.50% ? Mall 6.00% $462,559 $488,698 $552,313 $198,563 9.27% No Mall 7.00% $461,526 $415,217 $493,699 $694,857 3.43% No Mall 8.00% $400,806 $486,333 $567,444 $776,752 18.99% No Mall 5.00% $2,467,364 $2,888,330 $2,761,526 $4,044,000 5.79% Yes Mall 8.00% $338,065 $299,595 $286,722 $575,285 -7.91% No Mall 5.00% $2,737,942 $2,640,415 $4,244,004 -3.56% Yes Mall 6.00% $635,963 $701,352 $791,195 $1,250,000 11.54% No Mall 5.00% $1,000,392 $1,410,000 127.40% Yes Mall 6.00% $493,679 $635,663 $640,439 $916,667 13.90% ? Mall 6.00% $211,437 $303,379 $373,671 $853,332 32.94% No Mall 8.00% $183,683 $239,477 $261,685 $374,000 19.36% No Mall 6.00% $840,504 $788,769 $782,922 $1,676,734 -3.49% Yes Mall 8.00% $516,186 $614,956 $721,359 $1,100,126 18.22% No Mall 10.00% $578,021 $546,122 $545,137 -2.89% No Mall 6.00% $645,777 $708,260 $793,197 $694,584 10.83% No Mall 5.00% $796,149 $811,294 $2,171,700 1.90% Yes Mall 5.00% $1,260,527 $1,920,528 No Mall 6.00% $206,523 $1,059,167 Yes Mall 8.00% $206,007 $225,675 $360,938 9.55% No Mall 6.00% $455,283 $376,192 $410,102 $1,029,584 -5.09% No Mall 4.00% $2,210,798 $2,266,824 $2,012,697 $5,535,000 -4.59% Yes Mall 7.00% $685,741 $645,284 $702,881 $949,716 1.24% No Mall 5.00% $995,088 $880,783 $1,038,587 $2,274,400 2.16% Yes Mall 6.00% $336,028 $376,309 $442,587 $833,333 14.77% Yes Mall 6.00% $347,865 $365,577 $371,176 $504,533 3.30% Yes Mall 5.00% $951,724 $900,000 Yes Mall 7.00% $547,694 $558,546 $534,041 $546,000 -1.25% Yes Mall 5.00% $671,148 $664,743 $635,210 $1,300,000 -2.71% No Mall 5.00% $588,519 $557.926 $1,260,720 -5.20% No 6.00% $757,396 $806,289 $1,034,687 $1,208,750 16.90% No ---------- ---------- ---------- TOTAL 41,086,960 54,565,979 64,401,573 ---------- ---------- ---------- Sales P.S. $286 $287 $307
LANDAUER REAL ESTATE CONSELORS 66 sales volume. Based on historic mall sales, we have projected mall sales in 1997 to be $318 per square foot. Presented on the facing page are the tenant sales reported for 1994, 1995, and 1996. Presented in the following table are the projected percentage rents for tenants at Yorktown Mall Projected Percentage Rent For Yorktown Mall 1997 Percentage Tenant Category Rent --------------- ---- In-Line Mall Tenants 6.0% Jewelry 6.0% Food Court 11.0% Kiosks 6.0% Vacancy/Credit Loss: A 4.0 percent deduction is taken against effective gross income to account for anticipated future vacancies and credit losses. All mall tenants are subject to the vacancy and credit loss. Historically, bad debt at Yorktown Mall, based on effective gross income, was 2.4 percent in 1994, 1.4 percent in 1995, and 2.7 percent in 1996. The average over the three-year period was 2.2 percent. We have projected a 2.0 percent credit loss for our analysis. In addition, a 2.0 percent vacancy loss is included to account for any unexpected vacancy in the mall. Tenant Service Income: This category includes income from landlord services to tenant for interior repairs or maintenance. Tenant service income has been $89,212 in 1994, $49,132 in 1995, and $56,179 in 1996. The average over the last three years has been $64,841. Tenant service YORKTOWN MALL HISTORIC INCOME 1994-1996 1994 1995 1996 ---- ---- ---- Revenues: Total Minimum/Base Rent Rental Income $6,515,434 $6,911,743 $7,147,773 Miscellaneous 0 0 0 ---------- ---------- ----------- Total Minimum/Base Rent $6,515,434 $6,911,743 $7,147,773 Percentage Rent Rental Income $284,032 $396,362 $586,539 Miscellaneous 0 0 0 ---------- ---------- ----------- Percentage Rent $284,032 $396,362 $586,539 Recoveries Real Estate Taxes $753,878 $1,082,680 $870,329 Insurance 53,803 42,373 50,698 Net Service Income 1,301,520 645,738 471,659(1) Other Expense Recoveries (465,063) (315,542) (214,597) ---------- ---------- ----------- Total Recoveries $1,644,138 $1,455,249 $1,178,089 Other Recurring Income Interest $386,450 $628,855 $329,393 Promotion 50,546 62,295 41,486 Services sold 89,212 49,132 56,179 Cancellation 90,956 0 50,715 Security Deposits 0 0 0 Other 53,810 207,831 975,378(2) ---------- ---------- ----------- Total Other Recurring Income $670,974 $948,113 $1,453,151 Total Gross Income $9,114,578 $9,711,467 $10,365,552 (1) Net service income recoveries are common area recoveries net of common area expenses. (2) The 1996 Other Income includes lease termination payments of $727,853 received from the Limited and Chess King lease terminations (a non-recurring item). LANDAUER REAL ESTATE CONSELORS 67 income is estimated at $65,000 for 1997, and is increased at the general growth rate of 3.5 percent per year. Other Income: We have not been provided a breakdown of what contributes to other income. Historically, other income has been $53,810 in 1994, $207,631 in 1995, and $975,378 in 1996. It was reported that lease termination payments of $727,853 contributed to the abnormally high income level in 1996. Deducting the termination payments results in an adjusted 1996 total of $247,525. The average over the last three years taking into consideration the 1996 adjusted amount is $169,722. For 1997 we have projected $170,000 for other income. This income is increased 3.5 percent per annum. Tenant Retention Ratio: Upon the expiration of the existing leases, it is estimated that 65.0 percent of the expiring enclosed mall tenants will renew and 35.0 percent will vacate when the leases expire. Peter F. Korpacz Real Estate Investor Survey for the second quarter 1997 indicated tenant retention ratios as follows by various investors surveyed. Investor Survey Tenant Retention Ratio Tenant Investor Type Retention Ratio ------------- --------------- Investment Advisor 60.0%-75.0% Investment Banker 70.0% Domestic Pension Fund 70.0%-75.0% Domestic Pension Fund 60.0%-70.0% Investment Advisor 60.0%-75.0% CURRENT AND FUTURE LEASE-UP PROJECTION SCHEDULE FOR VACANT SPACE
Size Lease-Up Location (Sq.Ft.) Date Comments -------- -------- ---- -------- Current Vacant Space 164 5,976 1/98 Previous status unknown. 133 2,835 1/98 Natural Wonders will occupy this space. 163 3,593 2/98 County Seat will vacate space 9/30/97. 201-A 995 3/98 Photo Finish has vacated space but is paying rent through 12/97. 172 4,905 4/98 Craftwork vacated this space 3/97. 269 4,152 4/98 Contempo Casuals will occupy this space. 218 2,472 5/98 J. Riggings vacated this space 8/97. FC-8 610 6/98 Never leased. 171 1,802 8/98 Previous status unknown. 266-B 8,367 9/98 Evans vacated in 5/94. 266-C 6,607 12/98 Evans vacated in 5/94. Kiosk 280 1/99 Vacant kiosk space. 102 4,469 None This space will remain vacant during the ------ projection period. Total Current Vacant Space 47,063 ====== Future Vacant Space 162-A 5,980 01/99 Christmas on the Mall occupied this space. 162-B 5,980 04/99 Christmas on the Mall occupied this space. 206-A 7,274 05/99 Woolworth's space 106-B 17,651 07/99 Woolworth's space 206-B 7,273 09/99 Woolworth's space 106-A 17,652 12/99 Woolworth's space ------ Total Future Vacant Space 61,810 ======
LANDAUER REAL ESTATE CONSELORS 68 Our projected retention ratio of 65.0 percent is substantiated by the investor survey. Vacancy Between Leases: A weighted average of three months vacancy between leases is assumed at rollover. The weighted averages assume an actual downtime of seven to nine months for non-anchor tenants. Rent Concessions: Rent concessions are not common in the regional mall market. However, some malls will give free rent in lieu of contributing toward the tenant's alterations. No rent concessions are assumed in this analysis. Lease-up Assumptions: As of September 1, 1997, the subject is projected to have 47,063 square feet of vacant space. Presented in the table on the facing page is the lease-up projection for the existing vacant space. In addition, Woolworth's, which leases Suite 106 (35,303 square feet) and Suite 206 (14,547 square feet) has vacated both spaces in January 1994. Pehrson/Long reports Woolworth's will continue to pay rent until lease expiration on January 31, 1999. Also, Suite 162 (11,960 square feet) is temporarily occupied by Christmas On The Mall until January 15, 1998. This space will become available for lease after the expiration date. We have incorporated both Christmas On The Mall and Woolworth's space in our lease-up projection. We have assumed that two lease proposals provided by Pehrson/Long for Natural Wonders (Suite 133-2,835 square feet) and Contempo Casual (Suite 269-4,152 square feet) will be consummated at the stated proposal terms starting January 15, 1998, and April 1, 1998, respectively. YORKTOWN MALL HISTORIC OPERATING EXPENSES Landauer Projection 1995 1996 1997 ---- ---- ---- Exterior Common Area $745,399 $735,775 $760,000 Interior Common Area 1,342,887 1,308,022 1,350,000 Real Estate Taxes 1,313,009 1,363,221 1,393,015 Insurance 302,924 265,036 275,000 Non-Recoverable(1) 654,274 667,125(2) 600,000 Management Fee (3) (3) 5.0% (1) Excludes bad debt expense. (2) Includes $109,476 in lease termination expense. (3) Management fee based on 5.0 percent of the first $5.5 million total revenue (excludes real estate tax reimbursement, interest income, and bad debt) and 4.0 percent over $5.5 million total revenue thereafter. LANDAUER REAL ESTATE CONSELORS 69 Options: We were not provided with information regarding renewal options for in-line mall tenants or outlot tenants. For this reason, we have assumed speculative renewals for in-line mall tenants. For the outlot parcels we have assumed upon lease expiration each tenant will renew its lease at a rate that is 3.5 percent greater than the current rent being paid. A 3.5 percent annual increase in base rent is assumed thereafter. Speculative Renewals: Upon expiration of current leases, tenants are renewed at the higher of the last effective rent or the market rent (base plus percentage rent) in the renewal year. The sales volume continues from the base lease. Each tenant is charged with a weighted average tenant improvement allowance. EXPENSES Operating Expenses: Operating expense estimates for Yorktown Mall were based upon historical data from 1994, 1995, and 1996 income and expense statements. However, because no breakdown was available for interior and exterior common area maintenance in 1994, we have relied upon the 1995 and 1996 figures. A summary of the historical operating levels are found in the table on the facing page. Exterior Common Area: Exterior common area expenses include items such as payroll and relates taxes, repairs and maintenance, service contracts, supplies, and utilities. This expense has been $745,399 in 1995 and $735,775 in 1996. For 1997 we have projected exterior common area to be $760,000. LANDAUER REAL ESTATE CONSELORS 70 Interior Common Area: The interior common area expenses consist of payroll and related taxes, repairs and maintenance, service contracts, supplies and utilities. The expense has been $1,342,887 in 1995 and $1,308,022 in 1996. For 1997 we have projected interior common area to be $1,350,000. Insurance: Insurance expenses have been $302,924 in 1995 and $265,036 in 1996. For 1997 we have projected insurance to be $275,000. Real Estate Taxes: Real estate taxes are concluded at an estimated level as discussed in the previous Real Estate Tax section of the report. Taxes for the outlots are not included in the analysis. As displayed in the Real Estate Tax Section of this report, the subject's taxes are based on 1996 taxes payable in 1997. For 1997, real estate taxes are $1,393,015. Non-Recoverable: This expense category includes non-recoverable expenses that consist of salaries, advertising, data processing, electricity and gas, legal and other professional expenses, lease termination, merchant's association assessments, office expenses, postage, telephone, supplies, and repairs and maintenance. This expense has been $654,274 in 1995 and $667,125 in 1996. In 1996, $109,476 in lease termination expenses were incurred, an abnormally high amount. Deducting the lease termination expenses results in an adjusted 1996 total of $557,649. For 1997 we have projected non-recoverable expenses to be $600,000. LANDAUER REAL ESTATE CONSELORS 71 Management Fee: Management fees in the regional mall market range from 3.0 percent to 5.0 percent, depending the revenues to which it is applied and whether leasing commissions are paid separately. For most malls, the management fee is typically in the range of 4.5 to 5.0 percent of minimum and percentage rent and utility sales, charged between related entities. When applied to all revenue, management fees range between 3.0 and 3.5 percent. For the Yorktown Mall, we conclude 5.0 percent which is applied to minimum and percentage rent and which includes commissions for leasing of the spaces. TOTAL EXPENSES The total expenses as concluded for fiscal year 1998 are projected to be $4,919,547. The 1995 actual expenses (management fee estimated to be 5.0 percent of minimum and percentage rent) were $4,723,898 and 1996 expenses were $4,725,895. Our fiscal year 1998 conclusion of $4,919,547 is supported by the historical expenses. OCCUPANCY COSTS Occupancy costs for the mall tenants were reviewed. The occupancy costs for mall tenants (excluding food court and kiosk tenants) ranges from 13.1 percent in fiscal year 1998 to 11.2 percent in fiscal year 2007. Within the regional mall market, enclosed mall (in-line) retail tenant's occupancy costs would be in the 12.0 percent range, and the subject's occupancy costs are near the average. The total mall occupancy cost is within reason, and we have confidence in the cash flow and assumptions used in the analysis. The occupancy costs from this analysis appear reasonable. LANDAUER REAL ESTATE CONSELORS 72 Yorktown Mall Occupancy Cost (Excludes Food Court and Kiosk Tenants) Occupancy Fiscal Year Cost % ----------- ------ 1998 13.1% 1999 12.3% 2000 11.5% 2001 11.3% 2002 11.4% 2003 11.4% 2004 11.3% 2005 11.3% 2006 11.2% 2007 11.2% CAPITAL ITEMS This non-operating expense category includes tenant alteration and improvement costs, leasing commissions, and a capital reserve (or reserve for capital replacements). Tenant Alterations: Historical detail on landlord's tenant improvement allowance is limited. Based on the information available, the tenant buildout allowance for new tenants (26 leases summarized in the Recent Leasing Analysis) has averaged approximately $13.00 per square foot for leases signed since 1995. Local tenants would typically receive a lesser amount of tenant finish as will tenants with short term leases. National and retail tenants with longer lease terms or good credit would receive a greater amount of tenant finish from the landlord. At Yorktown Mall we project an allowance of $13.00 per square foot for new enclosed mall retail tenants, with no allowance for tenant renewal. For the Woolworth's space we have estimated an initial buildout allowance of $20.00 per square foot. No buildout allowance was projected for the kiosk or food court tenants. Leasing Commissions: Leasing commissions at the subject property are not applied and are included in the management fee. LANDAUER REAL ESTATE CONSELORS 73 Capital Reserves: This category includes reserves for replacement of the roof and structural components and other items which cannot be passed through to the tenants. Reserves for replacement provides for the periodic replacement of building components requiring periodic replacement during the building's economic life. In other words, it is money which is accumulated to pay for the replacement of short-lived capital items. Under this theory, if proper reserves are set aside annually, none of the cost of major replacements will have to be paid out of current earnings. Peter F. Korpacz Real Estate Investor Survey for the second quarter of 1997 indicated a reserve account as follows by various investors surveyed. Investor Survey Building Reserves Reserve Assumptions Investor Type Per Square Foot ------------- --------------- Real Estate Investment Trust $0.25 Investment Advisor $0.15 to $0.25 Institutional Investor $0.10 to $0.20 Domestic Pension Fund $0.15 Domestic Pension Fund $0.25 to $0.75 Considering the 1994 renovation of the mall, we have estimated reserves for Yorktown Mall to be equivalent to $0.20 per square foot beginning in 1997. The projected reserve amount is substantiated by the investor survey. Growth Rate: Respondents to the second quarter 1997 Investor Survey conducted by Peter F. Korpacz & Associates, Inc. indicated inflation expectations of between 0.0 percent to 4.0 percent for national regional mall building expenses, with an average of 3.75 percent. The CB Commercial National Investor Survey for first quarter 1997 reflects a range from 3.0 to 4.0 percent, with a 3.6 percent average for Class A regional malls. Based upon our review, exterior and interior common area maintenance, insurance, real estate taxes, non-recoverable expenses, and reserves for replacement are LANDAUER REAL ESTATE CONSELORS 74 estimated to increase at a 3.5 percent annual rate, which is an anticipated average change expected over the period of analysis based upon investor criteria. Management fees are calculated as 5.0 percent of minimum and percentage rent Cash Flow Analysis: Based upon the foregoing assumptions and projections, the cash flow forecast for Yorktown Mall is presented on the following page. YORKTOWN SHOPPING CENTER ANNUAL CASH FLOW REPORT BEGINNING 9/1/97 FOR 11 YEARS
FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 INCOME - ------ MINIMUM RENT: ALL TENANTS 8,023,203 10,181,288 11,205,008 11,388,242 11,865,694 12,313,732 12,399,648 12,764,652 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- TOTAL MINIMUM RENT 8,023,203 10,181,288 11,205,008 11,388,242 11,865,694 12,313,732 12,399,648 12,764,652 RECOVERIES: REAL ESTATE TAX 949,620 1,029,957 1,150,019 1,200,658 1,242,403 1,293,081 1,325,705 1,373,678 INSURANCE 105,482 114,399 127,733 133,358 137,991 143,625 147,248 152,573 INTERIOR CAM 2,035,703 2,174,460 2,298,702 2,349,186 2,434,321 2,530,120 2,603,011 2,701,973 EXTERIOR CAM 373,365 388,766 413,651 424,808 442,472 452,670 463,366 483,741 MAJOR'S CAM POOL 513,975 534,089 550,594 567,677 585,358 611,992 635,099 654,703 MAJOR'S CAM CONTRI 805,711 836,036 863,110 891,131 920,133 958,484 993,718 1,025,874 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- TOTAL RECOVERIES 4,783,856 5,077,707 5,403,809 5,566,818 5,762,678 5,989,972 6,168,147 6,392,542 OVERAGE RENT 764,363 644,036 870,675 938,131 961,094 1,023,703 1,103,783 1,233,461 SALES VOLUME (000) 87,990 107,894 128,680 134,052 138,931 144,479 147,785 153,429 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- GROSS RENTAL INCOME 13,571,422 15,903,031 17,479,492 17,893,192 18,589,466 19,327,408 19,671,580 20,390,656 CREDIT LOSS ( 490,070) ( 581,317) ( 642,630) ( 657,375) ( 683,360) ( 710,277) ( 721,709) ( 748,403) MALL HVAC RECOVERY 86,700 89,301 91,980 94,739 97,582 100,509 103,524 106,630 STORE HVAC RECOVER 214,200 220,626 227,245 234,062 241,084 248,317 255,766 263,439 SPRINKLER RECOVERY 40,800 42,024 43,285 44,583 45,921 47,298 48,717 50,179 SERVICES SOLD 66,517 68,845 71,254 73,748 76,329 79,001 81,766 84,628 OTHER INCOME 173,967 180,056 186,357 192,880 199,631 206,618 213,849 221,334 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- TOTAL INCOME 13,663,536 15,922,566 17,456,982 17,875,828 18,566,652 19,298,872 19,653,496 20,368,464 EXPENSES - -------- EXTERIOR CAM 777,733 804,954 833,127 862,287 892,467 923,703 956,033 989,494 INTERIOR CAM 1,381,500 1,429,853 1,479,897 1,531,694 1,585,303 1,640,789 1,698,216 1,757,654 INSURANCE 281,417 291,266 301,461 312,012 322,932 334,235 345,933 358,041 REAL ESTATE TAX 1,425,519 1,475,412 1,527,051 1,580,498 1,635,815 1,693,069 1,752,326 1,813,658 NON-RECOVERABLE EX 614,000 635,490 657,732 680,753 704,579 729,239 754,763 781,179 MANAGEMENT FEE 439,378 541,265 603,783 616,318 641,340 666,872 675,171 699,905 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- TOTAL EXPENSES 4,919,547 5,178,240 5,403,051 5,583,562 5,782,436 5,987,907 6,182,442 6,399,931 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- NET OPERATING INCOME 8,743,989 10,744,326 12,053,931 12,292,266 12,784,216 13,310,965 13,471,054 13,968,533 ALTERATIONS 587,057 996,394 568,626 91,955 74,767 41,523 99,816 89,935 RESERVES 78,532 81,280 84,125 87,069 90,117 93,271 96,535 99,914 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- CASH FLOW 8,078,400 9,666,652 11,401,180 12,113,242 12,619,332 13,176,171 13,274,703 13,778,684
FY2006 FY2007 FY2008 INCOME - ------ MINIMUM RENT: ALL TENANTS 13,028,882 13,429,320 13,773,968 ---------- ---------- ---------- TOTAL MINIMUM RENT 13,028,882 13,429,320 13,773,968 RECOVERIES: REAL ESTATE TAX 1,387,479 1,448,162 1,454,411 INSURANCE 154,111 160,850 161,546 INTERIOR CAM 2,771,061 2,900,427 2,983,445 EXTERIOR CAM 498,579 524,781 531,106 MAJOR'S CAM POOL 674,992 695,992 727,727 MAJOR'S CAM CONTRI 1,059,154 1,093,599 1,139,251 ---------- ---------- ---------- TOTAL RECOVERIES 6,545,376 6,823,811 6,997,486 OVERAGE RENT 1,224,410 1,190,685 1,216,082 SALES VOLUME (000) 157,008 162,717 163,410 ---------- ---------- ---------- GROSS RENTAL INCOME 20,798,668 21,443,816 21,987,536 CREDIT LOSS ( 762,580) ( 786,167) ( 804,821) MALL HVAC RECOVERY 109,829 113,124 116,518 STORE HVAC RECOVER 271,342 279,482 287,867 SPRINKLER RECOVERY 51,684 53,235 54,832 SERVICES SOLD 87,590 90,655 93,828 OTHER INCOME 229,081 237,099 245,397 ---------- ---------- ---------- TOTAL INCOME 20,785,612 21,431,244 21,981,156 EXPENSES - -------- EXTERIOR CAM 1,024,126 1,059,970 1,097,069 INTERIOR CAM 1,819,171 1,882,842 1,948,742 INSURANCE 370,572 383,542 396,966 REAL ESTATE TAX 1,877,136 1,942,835 2,010,834 NON-RECOVERABLE EX 808,521 836,819 866,107 MANAGEMENT FEE 712,665 731,001 749,503 ---------- ---------- ---------- TOTAL EXPENSES 6,612,191 6,837,009 7,069,221 ---------- ---------- ---------- NET OPERATING INCOME 14,173,421 14,594,235 14,911,935 ALTERATIONS 285,542 321,409 624,502 RESERVES 103,411 107,030 110,777 ---------- ---------- ---------- CASH FLOW 13,784,468 14,165,796 14,176,656 LANDAUER REAL ESTATE CONSELORS 76 DISCOUNTED CASH FLOW ANALYSIS As previously discussed, once the projected income stream over the projection period is determined, the next step is to discount the periodic cash flow and the reversion at the end of the holding period to an indicated value as of the valuation date. The following definitions and assumptions were employed in our analysis. Net Operating Income: Net income remaining after all expenses but before capital items, i.e., tenant improvement cost, leasing commissions, and capital expenditures. Cash Flow: Income available after all capital items, including reserves, leasing commissions and tenant improvements. Overall Rate: A rate which reflects the relationship of the first year's net income to total value, derived by dividing the net income by the indicated value. Discount Rate: A rate of return used to estimate the present value of future cash flows including the reversion (sales proceeds) of the property at the end of the holding period. The discount rate is alternately called an Internal Rate of Return (IRR). Terminal Capitalization Rate: An overall rate applied to the projected net operating income at the end of the holding period to determine the amount of the reversion. A disposition fee is usually deducted from the reversion. Holding Period: A holding period is the term of ownership of an investment, also referred to as the projection period for the purposes of analysis and valuation. LANDAUER REAL ESTATE CONSELORS 77 VALUATION ANALYSIS NATIONAL RETAIL INVESTMENT MARKET OVERVIEW According to the Second Quarter 1997 Investment Trends Quarterly Report, published as a joint venture by the Commercial Investment Real Estate Institute (CIREI) and Landauer Associates, Inc., investors' interest in retail real estate ranked below office, industrial, multi-family, and hotel properties during the January-March quarter. Real estate investors spent $1,275 million on office buildings, $602 million on industrial complexes, $527 million on residential apartments, and $467 million on hotels during this period. Shopping centers of all types accounted for only $359 million or 10.0 percent of all sales transactions tracked by the CCIM/Landauer survey. Only 4.2 million square feet of shopping center inventory was traded in this quarter, or half as much as in the peak period at the end of 1996. What was somewhat unusual was the absence of any established regional or super-regional malls among the reported sales. This gap in large property sales accounts for the sharp drop in dollar volume in the retail category in early 1997. Nevertheless, several regions had significant activity to report. Some 20.0 percent of all shopping center transactions and 25.0 percent of dollars gravitated to the Southeast during this period. Transactions in the Pacific states amounted to $79.3 million, 22.0 percent of the U.S. total. Retail capitalization rates display a tight clustering for the quarter, and the median cap rate for retail property fell 30 basis points from late 1996 to 10.1 percent this quarter. While the capitalization rates generally declined as facility size increased, the differential was very narrow this quarter, in recognition of the excellent market position of a number of the smaller centers reported. The capitalization rate for large shopping centers supports solid pricing for these facilities. During the first quarter, the average capitalization rate for shopping centers in the 300,000 to 700,000 square foot range fell from 10.0 percent to 9.75 percent, a rate ranging from 53 to 93 basis points lower than for smaller shopping centers. The CCIM/Landauer survey indicates that the very smallest shopping LANDAUER REAL ESTATE CONSELORS 78 centers, those selling for less than $500,000, demanded an average capitalization rate approximately 270 basis points greater than shopping centers selling for more than $5 million at 12.1 percent and 9.4 percent, respectively. Limited partnerships were truly dominant as retail investors in the quarter accounting for approximately half of all retail dollars. These investors spent $177 million in 16 deals, paying an average of $142 per square foot. They bought at an average 9.8 percent capitalization rate, the lowest of any investor. Private investors spent 28.0 percent or $100 million on 22 properties, with an average price of $132 per square foot. Developers paid the least for retail properties, purchasing space at a mean capitalization rate of 12.9 percent. Limited partnerships and private investors were also the largest sellers of retail properties. Together, they accounted for $212 million in property sales, 59.0 percent of all shopping center dollars realized during the first quarter. Pension funds, however, obtained some of the highest prices. They sold retail properties at an average capitalization rate of 9.4 percent, the lowest cap rate of any seller of retail property during the first quarter. RATE SELECTION The selection of appropriate Discount Rates and Terminal Capitalization Rates for use in arriving at an estimate of value is a judgmental process. Regional malls similar to the subject have a market appeal to national investors. Therefore, competition with many other investment vehicles has an influence on rates of return required by investors. One method used to estimate an appropriate discount rate to apply in the discounted cash flow model is to analyze the investment parameters of institutional-type investors, both for real estate and non-real estate types of investments. Survey of Investment Criteria Second Quarter, 1997 Regional Mall Market
Current Quarter Last Quarter Year Ago --------------- ------------ -------- Free & Clear Equity IRR Range 10.50%-14.00% 10.00%-14.00% 10.00%-14.00% Average 11.75% 11.69% 11.50% Change (Basis Points) -- 6 25 Free & Clear Equity Cap Rate Range 7.00%-11.00% 7.00%-11.00% 6.25%-11.00% Average 8.57% 8.57% 8.17% Change (Basis Points) -- 0 40 Market Rent Change Rate Range 0.00%-4.00% 0.00%-4.00% 0.00%-4.00% Average 2.86% 2.86% 2.64% Change (Basis Points) -- 0 22 Expense Change Rate Range 3.00%-4.00% 3.00%-4.00% 3.00%-4.00% Average 3.75% 3.78% 3.89% Change (Basis Points) -- -3 -14 Residual Cap Rate Range 7.50%-11.00% 7.50%-11.00% 7.00%-11.00% Average 8.78% 8.76% 8.56% Change (Basis Points) -- 2 22
Source: Peter F. Korpacz & Associates, Inc. - Quarterly Survey of Investment Criteria National Investor Survey First Quarter, 1997 Regional Malls, Class "A"
First Quarter 1997 Third Quarter 1996 First Quarter 1996 ------------------ ------------------ ------------------ Free & Clear Equity IRR Range 10.50%-11.80% 10.00%-11.80% 10.00%-11.50% Average 11.10% 11.10% 11.00% Change (Basis Points) -- 0 10 Free & Clear Equity Cap Rate Range 8.00%-8.60% 7.00%-9.00% 6.00%-10.00% Average 8.2% 8.2% 8.0% Change (Basis Points) -- 0 20 Market Rent Change Rate Range 3.00%-4.00% 2.00%-5.00% 0.00%-6.00% Average 3.50% 3.20% 3.50% Change (Basis Points) -- 30 0 Expense Change Rate Range 3.00%-4.00% 3.00%-4.00% 3.00%-4.00% Average 3.70% 3.70% 3.80% Change (Basis Points) -- 0 -10 Residual Cap Rate Range 8.00%-9.30% 7.00%-9.50% 8.00%-10.00% Average 8.70% 8.70% 8.70% Change (Basis Points) -- 0 0
Source: CB Commercial National Investor Survey LANDAUER REAL ESTATE CONSELORS 79 The following yields were noted for non-real estate investments for the week ended August 22, 1997. Non-Real Estate Investment Yields Investment Instrument Yield Rate --------------------- ---------- Government Bonds (10 Years) 6.38% U.S. Treasury (30 Years) 6.67% Aaa-rated Corporate Bonds 7.32% Baa-rated Corporate Bonds 7.88% A-rated Utility Bonds (30 Years) 7.74% Government issues, considered near risk-free, tend to offer the lowest yield, while Baa-rated issues are generally among the highest. Yield rates have decreased since one year ago. Ten-year government bonds have decreased approximately 34 basis points since last year, with 30-year treasury bills decreasing 26 basis points. For real estate investments, rates may be influenced by risk, degree of liquidity, burden of management, tax benefits, and future appreciation or depreciation. Adjustments must be made to the safe rate to compensate for these factors. Consequently, required real estate yields are generally higher than those for non-real estate investments. The discount rates and terminal capitalization rates applicable to Class A regional malls have remained relatively stable over the last year. As summarized on the facing page, according to the Korpacz Real Estate Investor Survey, Second Quarter 1997, discount rates range from 10.5 to 14.0 percent, with an average of 11.75 percent. This represents a 25 basis point increase from average rates of one year ago. Residual capitalization rates range from 7.5 to 11.0 percent, with an average of 8.78 percent, a 22 basis point increase from one year ago. First year overall rates are reported at 7.00 to 11.0 percent with an average of 8.57 percent, representing a 40 basis point increase from last year's rates. CB Commercial's National Investor Survey, First Quarter 1997, also indicates similar ranges for Class A regional malls, with averages in discount rates of 10.5-11.8 percent, averaging 11.1 percent, terminal capitalization rates (8.0-9.3 percent, average 8.7 percent), and going-in capitalization rates (8.0-8.6 ASSUMPTIONS AND RATES FROM SALES REGIONAL MALLS Price/ Sale # of Sale Location Date OAR IRR Anchors Ratio ================================================================================ Texas Pending 8.80% --- 0 0.88 Idaho Jun-97 6.51% --- 3 --- California Jun-97 10.29% --- 2 --- Utah Mar-97 8.60% --- 4 0.91 California Dec-96 10.00% --- 3 0.46 Utah Dec-96 11.10% --- 3 0.57 Michigan Dec-96 10.50% --- 4 0.43 Illinois Dec-96 7.90% --- 0 1.36 Illinois Nov-96 8.65% 11.00% 0 0.94 California Nov-96 9.10% 15.20% 2 0.47 Montana Nov-96 9.90% 15.80% 2 0.47 Tennessee Nov-96 9.90% --- 0 0.33 Texas Oct-96 9.00% --- 1 0.80 Arizona Oct-96 10.00% --- 1 0.64 California Jun-96 10.30% --- 0 0.69 Illinois Apr-96 9.56% 12.00% 4 1.56 Idaho Apr-96 10.24% --- 4 0.56 Connecticut Mar-96 6.80% --- 0 --- California Mar-96 7.60% --- 1 1.18 Pennsylvania Mar-96 13.00% 10.50% 0 0.50 Florida Feb-96 7.70% --- 0 0.80 New Jersey Aug-95 8.70% --- 0 1.09 California Jun-95 8.90% 12.30% 0 0.95 Massachusetts Apr-95 8.50% 10.70% 1 0.81 California Jan-95 12.60% 13.50% 0 0.50 California Jan-95 7.80% 10.50% 0 1.14 Virginia Jan-95 7.80% --- --- 0.55 Texas Dec-94 6.70% 11.60% 0 1.03 Texas Dec-94 8.70% 11.50% 2 0.39 Florida Dec-94 8.20% 11.50% 1 1.00 Florida Dec-94 8.60% 12.00% 0 0.80 Arizona Dec-94 7.80% --- --- 1.02 Missouri Dec-94 8.00% 12.10% 0 --- Louisiana Dec-94 10.70% --- 0 0.50 No. Carolina Sep-94 10.60% 14.70% 0 0.50 Virginia Jul-94 9.00% --- 3 1.11 Louisiana Jul-94 8.90% --- 2 1.10 Florida Jun-94 7.50% 11.00% All 1.22 Alabama Feb-94 7.40% 11.50% 0 1.10 California Dec-93 7.00% --- 0 1.12 Arizona Dec-93 8.00% 11.00% 0 1.17 Florida Dec-93 7.50% 11.50% 0 0.91 Ohio Dec-93 7.50% 11.30% 0 1.16 New Mexico Dec-93 7.25% 11.00% 1 0.76 New Jersey Jul-93 7.50% 12.40% 1 0.68 9.00% Oregon Jul-93 8.00% 11.50% 0 0.88 No. Carolina Jul-93 7.00% 12.10% 2 0.77 Florida May-93 7.50% 12.00% 1 0.64 Texas May-93 8.50% 12.20% 1 0.85 Florida Jan-93 7.50% 11.00% 0 1.00 Florida Dec-92 7.25% 11.50% 0 1.50 11.70% 11.70% Illinois Dec-92 8.00% 12.00% 1 0.96 Texas Sep-92 8.00% 12.00% 1 0.73 Connecticut Aug-92 7.00% 11.50% 0 --- Florida Jul-92 7.10% 11.50% 1 0.81 Florida Apr-92 7.00% 11.10% 0 1.24 Nebraska Apr-92 7.50% 12.50% 1 0.79 Florida Mar-92 7.90% 11.50% 1 0.79 Pennsylvania Dec-91 6.80% 11.20% 1 0.55 Maine Dec-91 7.30% 11.80% 3 --- LANDAUER REAL ESTATE CONSELORS 80 percent, average 8.2 percent). These rates show changes from the first quarter of 1996, with the exception of the market rent and terminal capitalization rate which did not change. In addition to the investor survey, we have reviewed the market for recent sales of regional malls in order to extract rates from the market. The table on the facing page shows the rates for the regional mall sales that have sold since 1991. The sales indicate a range of discount rates (IRR) from 10.50 to 14.70 percent with an average of 11.91 percent. Initial capitalization rates range from 6.80 to 12.60 percent with an average of 8.44 percent. Overall rates varied based on the number of anchors included in the sale as well as on expansion opportunities of a center. This usually results in a lower rate because investors can expect to reap a development profit from a potential increase in cash flow. Yield requirements for investment properties throughout the United States have been relatively stable over the past year and competition for the better properties appears to be steady due to a variety of factors, including the scarcity of good quality investment real estate, the desire for an adequate hedge against inflation, and the quest for a safe haven for investment capital. Arising out of concerns over troubled real estate markets due to a receding economy and overbuilding, investor cash flow projections today tend to be more "realistic", incorporating assumptions and probabilities in keeping with actual market experience and predicated upon moderate future expectations. Good quality regional malls remain the top property preference for investors. Demand for these relatively scarce properties is strong and the market is characterized as a "seller's" market whereby the best properties are bid up in price. The market for average or "B" quality malls is less active than "A" malls like the subject in similar locations, and these properties must be competitively priced in order to attract buyers. The subject property is considered one of the better malls in its metropolitan area. Taking into consideration the 1994 renovation of the mall, a new anchor tenant (Von Maur), new food court, and an LANDAUER REAL ESTATE CONSELORS 81 18-screen General Cinema Theatre under construction, it is our opinion that a discount rate of 11.5 percent is applicable to the cash flows forecast during the ten year holding period. Further, a terminal capitalization rate of 9.5 percent applied to the 11th year net operating income is appropriate to calculate the reversion value estimate. VALUATION BY DISCOUNTED CASH FLOW ANALYSIS The initial step when discounting with this methodology is to estimate the appraised property's reversionary value. Our reversion calculation assumes that the property would be sold at the end of the previously stated holding period. The reversion value of the property at that time is estimated by dividing the forecast net operating income (NOI) from the year following the projected holding period by the terminal capitalization rate. In addition, disposition costs of 1.0 percent are applied against the reversionary value in order to arrive at an estimate of the net reversion. The net reversion value is added to the last year of the projection period's net cash flow, which then represents the total future net cash flow to be received in that last year. MARKET VALUE ANALYSIS AS OF SEPTEMBER 1, 1997 This analysis begins September 1, 1997, and continues for ten years, ending August 31, 2007. The 11th year net operating income (Fiscal Year 2008) is capitalized to produce an estimated reversionary value at the end of the holding period. Considering the foregoing, the results of our analysis for Yorktown Mall is as follows: Calculation of the Reversion 11th Year NOI (FY 2008) $14,911,935 Terminal Cap Rate 9.5% Gross Reversion $156,967,737 Disposition Costs (1.0%) (1,569,677) -------------- Net Reversion $155,398,060 LANDAUER REAL ESTATE CONSELORS 82 This net reversion is then added to the 10th year's net cash flow, which then represents the total future net cash flow to be received in the 10th year. The following matrix shows the values indicated by discounting the cash flows at rates of 11.0, 11.5 and 12.0 percent. Valuation Matrix Discount Rate Property Value Price/SF ---- -------------- -------- 11.0% $123,452,057 $256.90 11.5% $119,494,057 $248.67 12.0% $115,704,000 $240.78 Utilizing an 11.5 percent discount rate, the estimated value is $119,500,000 (rounded). The overall rate in the first year is 7.3 percent and 9.0 percent in year 2. The discounted reversionary value of $52,323,516 represents 43.8 percent of the final value, below 50/50 ratio preferred by many investors for a stabilized property. However, the reversion contribution to value also suggests that more reliance is placed in the cash flow, which is an investment assumption confirmed by numerous investors in today's marketplace. INDICATED VALUE BY THE DISCOUNTED CASH FLOW ANALYSIS.......................................$119,500,000 ============ LANDAUER REAL ESTATE CONSELORS 83 CORRELATION AND CONCLUSION In this report, we have utilized the Sales Comparison and Income Approaches in estimating the Market Value of the Leased Fee Interest of the subject property. A summary of our value estimates by each approach is as follows: Cost Approach Not Applicable Sales Comparison Approach $111,000,000 to $123,000,000 Income Approach $119,500,000 The reliability of the Cost Approach for the appraised property is weakened because an investor--the most probable potential purchaser of the property--typically is more concerned with the property's location, amenities, and ability to generate a required cash flow than with its replacement cost. In addition, the Cost Approach does not directly reflect the specific terms of actual leases signed or in negotiation at the property. Therefore, we have not used a Cost Approach in this analysis. The Sales Comparison Approach is an appraisal technique whereby the data of recent transactions involving similar or like properties is analyzed in order to derive an indication of the most probable sale price of the property being appraised. The reliability of this technique is dependent upon (a) the availability of comparable sales data, (b) the verification of the sales data, (c) the degree of comparability or extent of adjustment necessary for various factors, and (d) the absence of non-typical conditions affecting the sale price. This approach is most meaningful when income properties exhibit similar income and expense characteristics. The sales utilized in the analysis are national in nature, but are not truly comparable because of varying economic structures of the transactions, including lease structures, occupancy, etc. However, the adjusted value range and the rates exhibited by the data is useful as a check of the reasonableness of the Income Approach. LANDAUER REAL ESTATE CONSELORS 84 Most significant is the Income Approach, which focuses on investors' primary concerns about the property's potential for generating income and value appreciation. This approach is particularly relevant when well-supported market rent and income data are available, and when major cash flow assumptions are supported by market-derived analysis. Because this approach closely parallels the thinking of well-informed buyers and sellers of income-producing properties, the present value estimate by this approach is given the most weight. Greatest reliance is placed on the Discounted Cash Flow Analysis value estimate. After consideration of the factors presented in this report and with greatest consideration given to the Discounted Cash Flow Analysis of the Income Approach in arriving at a final value, the Market Value of Yorktown Mall, as of September 1, 1997, subject to existing tenant leases and the Assumptions and Limiting Conditions stated herein, is estimated to be: ONE HUNDRED NINETEEN MILLION FIVE HUNDRED THOUSAND DOLLARS $119,500,000 ADDENDA Photographs of Subject Property Legal Description Leasing Plan Comparable Mall Sales Lease Abstract Reports Professional Qualifications YORKTOWN MALL LOMBARD, ILLINOIS [PHOTO OMITTED] EXTERIOR VIEW - SOUTH ELEVATION [PHOTO OMITTED] EXTERIOR VIEW - WESTERN ELEVATION YORKTOWN MALL LOMBARD, ILLINOIS [PHOTO OMITTED] CENTER COURT [PHOTO OMITTED] TYPICAL INTERIOR CORRIDOR YORKTOWN MALL LOMBARD, ILLINOIS [PHOTO OMITTED] FIRESTONE OUTLOT PARCEL [PHOTO OMITTED] PIZZA HUT OUTLOT PARCEL YORKTOWN MALL LOMBARD, ILLINOIS [PHOTO OMITTED] COLE TAYLOR OUTLOT PARCEL CHICAGO TITLE INSURANCE COMPANY LOAN POLICY (1992) SCHEDULE A (CONTINUED) POLICY NO.: 1410 009309419 UL - -------------------------------------------------------------------------------- 5. THE LAND REFERRED TO IN THIS POLICY IS DESCRIBED AS FOLLOWS: PARCEL 1: LOT 4 IN YORKTOWN, BEING A SUBDIVISION OF PART OF SECTION 29, TOWNSHIP 39 NORTH, RANGE 11, EAST OF THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT THEREOF RECORDED SEPTEMBER 27, 1968 AS DOCUMENT R68-44972, IN DUPAGE COUNTY, ILLINOIS EXCEPT THE FOLLOWING DESCRIBED PROPERTY FROM SAID LOT 4: THAT PART OF LOT 4 IN YORKTOWN, BEING A SUBDIVISION OF PART OF SECTION 29, TOWNSHIP 39 NORTH, RANGE 11, EAST OF THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT THEREOF RECORDED SEPTEMBER 27, 1968 AS DOCUMENT R68-44972, BOUNDED AND DESCRIBED AS FOLLOWS: COMMENCING AT THE SOUTHWEST CORNER OF SAID LOT 4, BEING A POINT ON THE NORTHWESTERLY RIGHT-OF-WAY LINE OF OLD BUTTERFIELD ROAD; THENCE NORTH 2 DEGREES 58 MINUTES 03 SECONDS WEST, ALONG A WESTERLY LINE OF SAID LOT 4, A DISTANCE OF 78.22 FEET TO AN ANGLE CORNER IN SAID LOT 4; THENCE NORTH 60 DEGREES 00 MINUTES 00 SECONDS WEST, ALONG THE SOUTHWESTERLY LINE OF LOT 4 AFORESAID, 757.443 FEET TO AN ANGLE CORNER IN SAID LOT 4; THENCE SOUTH 30 DEGREES 00 MINUTES 00 SECONDS WEST, ALONG A SOUTHEASTERLY LINE OF LOT 4 AFORESAID, 130.252 FEET TO AN ANGLE CORNER IN SAID LOT 4, SAID POINT BEING ALSO ON THE SOUTHWESTERLY LINE OF SAID LOT 4; THENCE NORTH 60 DEGREES 00 MINUTES 00 SECONDS WEST, ALONG SAID SOUTHWESTERLY LINE, 282.665 FEET TO ANOTHER ANGLE CORNER IN SAID LOT 4, SAID POINT BEING ALSO THE POINT OF BEGINNING OF THE PARCEL OF AIR SPACE HEREIN DESCRIBED; THENCE NORTH 30 DEGREES 00 MINUTES 00 SECONDS EAST, PERPENDICULAR TO THE LAST DESCRIBED LINE, 17.69 FEET; THENCE SOUTH 60 DEGREES 00 MINUTES 00 SECONDS EAST, 160.98 FEET; THENCE SOUTH 30 DEGREES 00 MINUTES 00 SECONDS WEST, PERPENDICULAR TO THE LAST DESCRIBED LINE, 17.69 FEET TO THE POINT OF INTERSECTION WITH THE SOUTHWESTERLY LINE OF LOT 4 AFORESAID; THENCE NORTH 60 DEGREES 00 MINUTES 00 SECONDS WEST, ALONG SAID SOUTHWESTERLY LINE, 160.98 FEET TO THE HEREINABOVE DESIGNATED POINT OF BEGINNING, SAID PARCEL HAVING AS A LOWER LIMIT A HORIZONTAL PLANE OF ELEVATION +758.58 FEET (NATIONAL GEODETIC SURVEY DATUM) AND HAVING AS AN UPPER LIMIT A HORIZONTAL PLANE OF ELEVATION +775.58 FEET (NATIONAL GEODETIC SURVEY DATUM), IN DUPAGE COUNTY, ILLINOIS ALSO EXCEPT THAT PART OF THE FOLLOWING DESCRIBED TRACT LYING WITHIN LOT 4 DESCRIBED AS FOLLOWS: THAT PART OF LOTS 2 AND 4 IN YORKTOWN, BEING A SUBDIVISION OF PART OF SECTION 29, TOWNSHIP 39 NORTH, RANGE 11, EAST OF THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT THEREOF RECORDED SEPTEMBER 27, 1968 AS DOCUMENT R68-44972 DESCRIBED AS FOLLOWS: COMMENCING AT THE SOUTHWEST CORNER OF LOT 2 IN PEHRSON SECOND RESUBDIVISION OF LOTS 2 AND 3 IN THE RESUBDIVISION OF LOT 5 OF YORKTOWN (AFORESAID) ACCORDING TO THE PLAT THEREOF RECORDED SEPTEMBER 3, 1976 AS DOCUMENT R76-62393; THENCE NORTH 2 DEGREES 58 MINUTES 03 SECONDS WEST, ALONG THE EAST LINE OF THE AFORESAID LOT 4 IN (SEE ATTACHED) THIS POLICY VALID ONLY IF SCHEDULE B IS ATTACHED. - -------------------------------------------------------------------------------- CHICAGO TITLE INSURANCE COMPANY LOAN POLICY (1992) SCHEDULE A (CONTINUED) POLICY NO.: 1410 009309419 UL - -------------------------------------------------------------------------------- PEHRSON SECOND RESUBDIVISION, 217.86 FEET TO THE POINT OF BEGINNING OF THE HEREIN DESCRIBED TRACT; THENCE 611.59 FEET NORTHWESTERLY ALONG THE ARC OF A CIRCLE, TANGENT TO THE LAST DESCRIBED LINE, CONVEX NORTHEASTERLY, HAVING A RADIUS OF 518.00 FEET, AND WHOSE CHORD BEARS NORTH 36 DEGREES 47 MINUTES 29 SECONDS WEST, 576.68 FEET; THENCE NORTH 70 DEGREES 36 MINUTES 56 SECONDS WEST, ALONG A LINE TANGENT TO THE LAST DESCRIBED CURVE, 119.26 FEET; THENCE 265.51 FEET WESTERLY ALONG THE ARC OF A CIRCLE, TANGENT TO THE LAST DESCRIBED LINE, CONVEX NORTHERLY, HAVING A RADIUS OF 368.00 FEET, AND WHOSE CHORD BEARS SOUTH 88 DEGREES 42 MINUTES 54 SECONDS WEST, 259.79 FEET TO A POINT ON THE NORTHWESTERLY LINE OF THE AFORESAID LOT 2 IN YORKTOWN, SAID POINT BEING 105.99 FEET NORTHEASTERLY OF THE SOUTHEAST CORNER OF LOT 4 IN THE RESUBDIVISION OF LOT 1 IN YORKTOWN (AFORESAID) ACCORDING TO THE PLAT THEREOF RECORDED AUGUST 4, 1971 AS DOCUMENT R71-37751; THENCE NORTH 68 DEGREES 02 MINUTES 44 SECONDS EAST, ALONG A LINE TANGENT TO THE LAST DESCRIBED CURVE AND BEING THE NORTHWESTERLY LINE OF THE AFORESAID LOTS 2 AND 4 IN YORKTOWN, 604.01 FEET TO A CORNER IN THE NORTHERLY LINE OF LOT 4; THENCE SOUTH 89 DEGREES 57 MINUTES 16 SECONDS EAST, ALONG THE NORTH LINE OF LOT 4, A DISTANCE OF 120.00 FEET TO THE NORTHEAST CORNER OF SAID LOT; THENCE SOUTH 2 DEGREES 58 MINUTES 03 SECONDS EAST, ALONG THE EAST LINE OF LOT 4, A DISTANCE OF 722.27 FEET TO THE HEREINABOVE DESCRIBED POINT OF BEGINNING, IN DU PAGE COUNTY, ILLINOIS. PARCEL 2: THE RECIPROCAL AND NON-EXCLUSIVE RIGHTS, EASEMENTS AND PRIVILEGES OF USE, INGRESS AND EGRESS, PARKING AND FOR UTILITY AND OTHER PURPOSES CREATED AND GRANTED AS AN APPURTENANCE TO PARCELS 1, 3, 4 AND 7, AS DESCRIBED THEREIN, IN AND BY THAT CERTAIN RECIPROCAL CONSTRUCTION, OPERATION AND EASEMENT AGREEMENT DATED AUGUST 29, 1966 AND RECORDED SEPTEMBER 21, 1966 AS DOCUMENT R66-38010 AND AS AMENDED BY INSTRUMENT RECORDED SEPTEMBER 27, 1968 AS DOCUMENT R68-45002 BY AND BETWEEN LA SALLE NATIONAL BANK, A NATIONAL BANKING ASSOCIATION, AS TRUSTEE UNDER TRUST AGREEMENT DATED DECEMBER 10, 1965 AND KNOWN AS TRUST NUMBER 34500, HIGHLAND AVENUE CORPORATION, A CORPORATION OF DELAWARE, (BEING THE SUCCESSOR TO THE INTEREST OF CARSON PIRIE SCOTT & COMPANY), MONTGOMERY WARD REALTY CORPORATION, A CORPORATION OF DELAWARE, J. C. PENNEY COMPANY, A CORPORATION OF DELAWARE, AND WIEBOLDT STORES, INC., A CORPORATION OF ILLINOIS, AND VON MAUR, INC., BY TERMS OF SPECIAL WARRANTY DEED RECORDED MAY 18, 1993 AS DOCUMENT R93-099674, IN, ON, OVER, UPON AND UNDER A CERTAIN ADJOINING REAL PROPERTY THEREIN MORE PARTICULARLY DESCRIBED, TOGETHER WITH ALL OF THE RIGHTS, POWERS, PRIVILEGES AND BENEFITS UNDER SAID RECIPROCAL AGREEMENT ACCRUING TO THE OWNER OF SAID PARCELS 1, 3 AND 4, AS DESCRIBED THEREIN, ITS SUCCESSORS, LEGAL REPRESENTATIVES AND ASSIGNS. PARCEL 3: LOT 2 OF PEHRSON'S RESUBDIVISION OF LOTS 1 AND 2 IN THE RESUBDIVISION OF LOT 1 IN YORKTOWN, BEING A SUBDIVISION OF PART OF SECTION 29, TOWNSHIP 39 NORTH, RANGE 11, EAST OF THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT OF SAID PEHRSON'S RESUBDIVISION RECORDED SEPTEMBER 30, 1975 AS DOCUMENT R75-52797, IN DUPAGE COUNTY, ILLINOIS PARCEL 3A: EASEMENT FOR THE BENEFIT OF PARCEL 3 AS CREATED BY EASEMENT AGREEMENT FROM LASALLE THIS POLICY VALID ONLY IF SCHEDULE B IS ATTACHED. - -------------------------------------------------------------------------------- CHICAGO TITLE INSURANCE COMPANY LOAN POLICY (1992) SCHEDULE A (CONTINUED) POLICY NO.: 1410 009309419 UL - -------------------------------------------------------------------------------- NATIONAL BANK, NOT INDIVIDUALLY, BUT AS TRUSTEE UNDER TRUST AGREEMENT DATED OCTOBER 13, 1968 AND KNOWN AS TRUST NUMBER 37181 TO LASALLE NATIONAL BANK, NOT INDIVIDUALLY BUT AS TRUSTEE UNDER TRUST AGREEMENT DATED JUNE 4, 1970 AND KNOWN AS TRUST NUMBER 40909 DATED MARCH 17, 1975, RECORDED APRIL 29, 1975 AS DOCUMENT R75-18411 AND AMENDMENT TO EASEMENT DATED OCTOBER 28, 1976 AND RECORDED NOVEMBER 1, 1976 AS DOCUMENT R76-79179, FOR INGRESS AND EGRESS FOR THE PASSAGE OF VEHICLES (BUT IN NO EVENT FOR THE PARKING THEREOF) AND THE PASSAGE AND THE ACCOMMODATION OF PEDESTRIANS IN, TO, OVER, UNDER AND ACROSS THE REAL ESTATE DESCRIBED AS FOLLOWS: THAT PART OF LOT 3, IN THE RESUBDIVISION OF LOT 1 IN YORKTOWN BEING A SUBDIVISION OF PART OF SECTION 29, TOWNSHIP 39 NORTH, RANGE 11, EAST OF THE THIRD PRINCIPAL MERIDIAN, LYING WEST OF THE FOLLOWING DESCRIBED LINES: COMMENCING AT A POINT ON THE SOUTH LINE OF SAID LOT, SAID POINT BEING 52.00 FEET EAST OF THE SOUTHWEST CORNER THEREOF; THENCE NORTH ALONG A LINE DRAWN PERPENDICULARLY WITH SAID SOUTH LINE 155.738 FEET TO THE POINT OF INTERSECTION WITH A LINE DRAWN 26.00 FEET (MEASURED PERPENDICULARLY) SOUTHEASTERLY OF AND PARALLEL WITH THE NORTHWESTERLY LINE OF SAID LOT; THENCE NORTHEASTERLY ALONG SAID PARALLEL LINE 262.372 FEET TO THE NORTH LINE OF SAID LOT 3, ACCORDING TO THE PLAT OF RESUBDIVISION OF LOT 1 IN YORKTOWN RECORDED AUGUST 4, 1971 AS DOCUMENT R71-37751, IN DUPAGE COUNTY, ILLINOIS PARCEL 4: LOT 1 IN PEHRSON SECOND RESUBDIVISION OF LOTS 2 AND 3 IN THE RESUBDIVISION OF LOT 5 OF YORKTOWN, BEING A SUBDIVISION OF PART OF SECTION 29, TOWNSHIP 39 NORTH, RANGE 11, EAST OF THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT OF SAID PEHRSON SECOND RESUBDIVISION RECORDED SEPTEMBER 3, 1976 AS DOCUMENT R76-62393, IN DUPAGE COUNTY, ILLINOIS PARCEL 5: LOT 1 IN THE RESUBDIVISION OF LOT 5 OF YORKTOWN, BEING A SUBDIVISION OF PART OF SECTION 29, TOWNSHIP 39 NORTH, RANGE 11, EAST OF THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT THEREOF RECORDED AUGUST 4, 1971 AS DOCUMENT R71-37779, IN DUPAGE COUNTY, ILLINOIS. PARCEL 6: LOT 1 OF PEHRSON'S RESUBDIVISION OF LOTS 1 AND 2 IN THE RESUBDIVISION OF LOT 1 IN YORKTOWN, BEING A SUBDIVISION OF PART OF SECTION 29, TOWNSHIP 39 NORTH, RANGE 11, EAST OF THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT OF SAID PEHRSON'S RESUBDIVISION RECORDED SEPTEMBER 30, 1975 AS DOCUMENT R75-52797, IN DUPAGE COUNTY, ILLINOIS THIS POLICY VALID ONLY IF SCHEDULE B IS ATTACHED. - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] FLOOR PLAN - UPPER LEVEL [GRAPHIC OMITTED] FLOOR PLAN - LOWER LEVEL REGIONAL MALL SALE #1 Name: Towne East Mall Location: Mesquite, Texas Sale Date: Pending Interest Sold: Leased Fee Seller: Grosvenor International Buyer: REIT Land Area: 102 acres Description of Improvements Total GLA Sold: 426,000 Square Feet Enclosed Mall Area: 426,000 Anchors Dillard's 206,300 Foley's 190,200 JC Penney 190,100 Sears 190,100 Miscellaneous 45,300 --------- Anchor Total 822,000 Total GLA: 1,248,000 Square Feet ========= Year Constructed: 1971/1996 Sale price: $112,500,000 Sale Terms: Assumed cash. Price per Square Foot: $264 Income Data Net Operating Income: $9,900,000 ($23.24 per square foot) Retail Sales: $300 per square foot of enclosed mall Financial Indicators OAR: 8.8% Sale-to-price Ratio: 0.88:1 Internal Rate of Return: N/A Remarks: Mall stores were 93 percent occupied at the time of sale. The NOI is based on the reported OAR. REGIONAL MALL SALE #2 Name: Silver Lake Mall Location: Coeur d'Alene, Idaho Sale Date: June 1997 Interest Sold: Leased Fee (70%) Seller: Roebbelen Engineering, Inc. Buyer: JP Realty, Inc. Land Area: 31 Acres Description of Improvements Total GLA Sold: 324,300 Square Feet Enclosed Mall Area: 113,400 Anchors Lamont --- Sears 51,600 JC Penney 49,500 Emporium 43,400 ------- Anchor Total 210,900 Total GLA: 324,300 Square Feet ======= Year Constructed: 1989 Sale price: $38,000,000 (100% interest) $27,000,000 (70% interest sold) Sale Terms: The consideration consisted of 72,000 units of limited partner interest in Price Development Company ($1,863,000); assumption of debt $24,755,000; $9,000,000 in revolving debt, and $12,936,000 cash. Price per Square Foot: $117 Income Data Net Operating Income: $2,473,370 ($8.46 per square foot) Retail Sales: N/A Financial Indicators OAR: 6.51 percent Sale-to-price Ratio: N/A Internal Rate of Return: N/A Remarks: The mall was reportedly 99.4 percent occupied at the time of sale. JP Realty was managing the mall for the seller. Sears will expand to 95,000 square feet. This is a dominant mall in its area. REGIONAL MALL SALE #3 Name: Visalia Mall Location: Visalia, California Sale Date: June 1997 Interest Sold: Leased Fee Seller: Connecticut General Life Buyer: JP Realty, Inc. Land Area: 28 acres Description of Improvements Total GLA Sold: 439,500 Square Feet Enclosed Mall Area: 265,000 Anchors Gottschalk's 74,600 JC Penney 99,100 ------- Anchor Total 173,700 Total GLA: 439,500 Square Feet ======= Year Constructed: 1963, 1989 and 1995 Sale price: $38,000,000 Sale Terms: $37,000,000 third-party financing, $593,000 cash, and $407,000 tax-free exchange. Price per Square Foot: $86.46 Income Data Net Operating Income: $3,910,730 ($8.90 per square foot) Retail Sales: N/A Financial Indicators OAR: 10.3% Sale-to-price Ratio: N/A Internal Rate of Return: N/A Remarks: At the time of sale, the mall was 95.3 percent occupied (88.2% mall shops). The mall is a dominant mall in the area. REGIONAL MALL SALE #4 Name: South Towne Mall and Power Center Location: NEC 10600 South and I-15 Sandy, Utah Sale Date: March 1997 Interest Sold: Leased Fee Seller: Zell/Merrill Lynch R.E. Opportunity Partners Buyer: Macerich Company Land Area: 104 Acres Description of Improvements Total GLA Sold: 995,900 Square Feet Enclosed Mall Area: 434,000 Anchors JC Penney 99,200 Mervyn's 82,700 Target 171,800 ZCMI 198,200 ------- Anchor Total 561,900 Total GLA: 995,000 Square Feet ======= Year Constructed: 1986, 1992 and 1994 Sale price: $98,000,000 Sale Terms: The debt assumed bears an interest rate of LIBOR plus 1.75 percent. Purchase included an assumption of existing debt totaling $47,000,000 with the balance of $51,000,000 paid in cash. Price per Square Foot: $98.40 Income Data Net Operating Income: $8,400,000 ($8.43 per square foot) Retail Sales: $249 per square foot Financial Indicators OAR: 8.6% Sale-to-price Ratio: 0.91:1 Internal Rate of Return: N/A Remarks: Several out-parcel and pad sites were included, but no value is allocated to the pad sites. A Dillard's (212,000 sf) and enclosed mall expansion (27,000 sf) were under construction. The mall will total 1,234,900 square feet when these areas are open, but no allocation of the purchase price was made for the yet-to-be-completed improvements. The enclosed mall shops were 83 percent leased when sold. REGIONAL MALL SALE #5 Name: Valley Fair Mall Location: 3601 South 2700 West West Valley City, Utah Sale Date: December 1996 Interest Sold: Leased Fee Seller: Valley Fair Shopping Center, Inc. Buyer: Excel Realty Trust Land Area: 54 acres Description of Improvements Total GLA Sold: 608,000 Square Feet Enclosed Mall Area: 264,400 Anchors JC Penney 141,000 Mervyn's 91,000 CMI 111,500 ------- Anchor Total 343,600 Total GLA: 608,000 Square Feet ======= Year Constructed: 1970/1986/1987 Sale price: $37,300,000 Sale Terms: Excel REITs 1996 annual report states that $17,900,000 was financed with an existing 7.6 percent mortgage using about 50 percent leverage. Price per Square Foot: $61.35 Income Data Net Operating Income: $4,140,000 ($6.81 per square foot) Retail Sales: $250 per square foot of enclosed mall Financial Indicators OAR: 11.1% Sale-to-price Ratio: 0.56:1 (based on enclosed mall sales) Internal Rate of Return: N/A Remarks: The property was 85 percent occupied at the time of sale. A fourth anchor is planned. Additionally, 6 pad sites and four acres of excess land were included in the sale; however, no allocation is made for the value of the excess land. REGIONAL MALL SALE #6 Name: Old Orchard Shopping Center Location: Skokie, Illinois Sale Date: December 1996 Interest Sold: Leased Fee Seller: Zell/Merrill Lynch II Buyer: Urban Retail Properties Co. Land Area: N/A Description of Improvements Total GLA Sold: 630,000 Square Feet Enclosed Mall Area: 630,000 Anchors Nordstrom's --- Bloomingdale's --- Lord & Taylor 115,500 Saks 5th Avenue 103,300 Marshall Field's 446,000 --------- Anchor Total 1,211,000 Total GLA: 1,841,000 Square Feet ========= Year Constructed: 1956/1995 Sale price: $266,000,000 Sale Terms: Reported price included $106 million cash and $160 million of existing debt. Price per Square Foot: $421 Income Data Net Operating Income: $21,546,000 ($34.20 per square foot) Retail Sales: $310 per square foot of mall shops Financial Indicators OAR: 8.1% Sale-to-price Ratio: 1.56:1 Internal Rate of Return: N/A Remarks: This upscale property was 88 percent occupied at the time of sale. The mall underwent a major expansion and renovation in 1995. NOI is based on the reported OAR of 8.1 percent. REGIONAL MALL SALE #7 Name: St. Clair Square Location: Fairview Heights, Illinois Sale Date: November 1996 Interest Sold: Leased Fee and Leasehold Seller: Prudential Real Estate Buyer: CBL & Associates Properties Land Area: 89 acres (20 acres ground leased through 2071) Description of Improvements Total GLA Sold: 280,000 Square Feet Enclosed Mall Area: 280,000 Anchors Dillard's 170,000 Famous-Barr 236,000 JC Penney 164,000 Sears 169,000 Out-Parcels 35,000 --------- Anchor Total 774,000 Total GLA: 1,044,000 Square Feet ========= Year Constructed: 1978/1992 Sale price: $86,400,000 Sale Terms: Not disclosed. Price per Square Foot: $309 Income Data Net Operating Income: $7,733,000 ($27.62 per square foot) Retail Sales: $330 per square foot Financial Indicators OAR: 8.65% Sale-to-price Ratio: 0.94:1 Internal Rate of Return: 11.0% Remarks: The mall was 94 percent occupied at the time of sale. The mall is a primary retail destination for the St. Louis MSA population located east of the Mississippi River. REGIONAL MALL SALE #8 Name: Park Mall Location: Tucson, Arizona Sale Date: October 1996 Interest Sold: Leased Fee Seller: K-GAM Buyer: General Growth Properties, Inc. Land Area: 75 Acres (63 acres for mall, 12 acres excess) Description of Improvements Total GLA Sold: 447,300 Square Feet Enclosed Mall Area: 348,200 Sold Anchors Sears 255,500 Macy's 157,200 Dillard's 99,100 Sold Sears 190,100 ------- Anchor Total 511,800 Total GLA: 860,000 Square Feet ======= Year Constructed: 1974 Sale price: $50,000,000 Sale Terms: $25 million in shares of common stock and $25 million in cash. The motivation of the seller was in question. The mall was controlled by the estate of Joseph Kivel who was recently deceased. The mall was debt free, but the family of Mr. Kivel did not want to continue to operate the mall, choosing to place it on the market. Price per Square Foot: $112 Income Data Net Operating Income: $5,000,000 ($11.18 per square foot) Retail Sales: $225 per square foot (mall shops) Financial Indicators OAR: 10.0% Sale-to-price Ratio: 0.64:1 Internal Rate of Return: N/A Remarks: This is one of two malls in the Tuscon area but is not the more dominate of the two. The buyer intends to add two anchors and a small amount of shop GLA. The mall shops were 85 percent occupied at the time of sale. The mall was in excellent condition but had never had a major renovation. The 12 acres of excess land were landlocked at the rear of the site and, no value was ascribed to it by the buyer. REGIONAL MALL SALE #9 Name: Valley View Center Location: Dallas, Texas Sale Date: October 1996 Interest Sold: Leased Fee Seller: LaSalle Partners Buyer: The Macerich Company Land Area: 95 Acres Description of Improvements Total GLA Sold: 704,600 Square Feet Enclosed Mall Area: 471,600 Sold Anchors Dillard's 298,500 Foley's 298,400 Sears 265,000 JC Penney 233,000 Sold --------- Anchor Total 1,095,000 Total GLA: 1,567,000 Square Feet ========= Year Constructed: 1975/1993/1996 Sale price: $85,500,000 Sale Terms: Assumed cash. Price per Square Foot: $121 Income Data Net Operating Income: $8,000,000 ($11.35 per square foot) 1996 $7,700,000 ($10.93 per square foot) 1995 Retail Sales: $228 per square foot (enclosed mall) Financial Indicators OAR: 9.36% - 1996 NOI 9.00% - 1995 NOI Sale-to-price Ratio: 0.80:1 Internal Rate of Return: N/A Remarks: This is the largest mall in the Dallas/Fort Worth area, and has a fashion orientation. The center's mall shops were 85 percent occupied at the time of sale. The NOI shown is as projected for 1996, but the 1995 NOI was $7,700,000 which indicates an OAR of 9.0 percent. The buyer anticipated a significant upside potential by increasing the occupancy. JC Penney is a new lease in the mall in a space that was vacant for an extended period of time. REGIONAL MALL SALE #10 Name: Paseo Nuevo Location: Santa Barbara, California Sale Date: June 1996 Interest Sold: Leasehold Seller: JMB Realty Corporation Buyer: Taubman Realty Land Area: 12 Acres Description of Improvements Total GLA Sold: 158,120 Square Feet Enclosed Mall Area: 158,120 Anchors The Broadway 132,600 Nordstrom's 165,400 ------- Anchor Total 298,000 Total GLA: 456,120 Square Feet ======= Year Constructed: 1990 Sale price: $37,000,000 Sale Terms: Assumed cash to seller Price per Square Foot: $236 Income Data Net Operating Income: $3,810,000 ($24.10 per square foot) Retail Sales: $340 per square foot (enclosed mall) Financial Indicators OAR: 10.3% Sale-to-price Ratio: 0.69:1 Internal Rate of Return: N/A Remarks: At the time of sale the mall shops were 88 percent occupied. This is an unenclosed mall of quality. The high first year return is reflective of the leasehold interest being acquired (with stipulated ground rent payments reportedly limiting the buyer's upside potential) and a few small environment and engineering issues. This is the buyer's analysis. REGIONAL MALL SALE #11 Name: Grand Teton Mall Location: Idaho Falls, Idaho Sale Date: April 1996 Interest Sold: Leased Fee Seller: Equiteton Associates Buyer: J.R. Realty Inc. Land Area: 58 Acres Description of Improvements Total GLA Sold: 521,000 Square Feet Enclosed Mall Area: 195,500 Anchors Bon Marche 62,200 JC Penney 66,800 Sears 73,500 ZCMI 123,000 ------- Anchor Total 325,500 Total GLA: 521,000 Square Feet ======= Year Constructed: 1984/1990 Sale price: $34,375,000 Sale Terms: Assumed cash. Price per Square Foot: $65.98 Income Data Net Operating Income: $3,520,000 ($6.76 per square foot) Retail Sales: $240 per square foot (enclosed mall) Financial Indicators OAR: 10.24% Sale-to-price Ratio: 0.73:1 Internal Rate of Return: N/A Remarks: At the time of sale the mall was 85 percent occupied. The marketability of this mall was affected by its 2nd to 3rd tier status. Also, 1/3 of the employment base of the area comes from the National Energy Laboratory and investors were concerned about a potential downsizing of the operation. REGIONAL MALL SALE #12 Name: Charlestowne Mall Location: St. Charles, Illinois Sale Date: April 1996 Interest Sold: Leased Fee (32% interest) Seller: Charwill Associates Buyer: Ivenhoe Equities Land Area: 80.3 Acres Description of Improvements Total GLA Sold: 744,900 Square Feet Enclosed Mall Area: 315,300 Sold Anchors Carson Pirie Scott 141,800 Sold JC Penney 99,600 Sold Sears 98,200 Sold Regal Cinema 90,000 Sold Kohl's 80,000 ------- Anchor Total 509,600 Total GLA: 824,900 Square Feet ======= Year Constructed: 1991/1993/1995 Sale price: $85,000,000 (100% interest) Sale Terms: All cash Price per Square Foot: $114 Total sold (744,900 sq.ft.) $270 Enclosed mall (315,300 sq.ft.) Income Data Net Operating Income: $8,125,000 ($10.91 per square foot) - enclosed mall Retail Sales: $202 per square foot (total mall) Financial Indicators OAR: 9.6% Sale-to-price Ratio: 0.56:1 Internal Rate of Return: 12.0 Remarks: Buyer purchased 32 percent of the available equity for $27,172,000. A deal pending with Regal Cinema which would provide about $1.4 million in annual rent is not reflected in the NOI. The mall shops were reported to be about 79 percent occupied at the time of sale. YORKTOWN SHOPPING CENTER LEASE ABSTRACT REPORT FOR ALL TENANTS
PRIMARY/ ANNUAL SECONDARY SOUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ---------------------- --------- ------ ----- ----- ------ ---------------- --------- ------- # 1-SUITE 146 1 1,280 6/97 5/07 - 22.50 28,800 7.00 AEROSOLES - 6/98 30.00 38,400 6/00 32.00 40,960 6/04 34.00 43,520 # 2-SUITE FC5 2 2,529 12/93 12/01 - 25.00 63,225 25.00 ALADDIN'S CASTLE - 1/00 26.00 65,754 # 3-SUITE 158 1 5,171 1/97 12/97 - 17.98 92,975 6.00 AMERICAN EAGLE - # 4-SUITE 215 1 3,146 1/92 1/02 - 33.00 103,818 8.00 AMY'S HALLMARK - 1/98 37.00 116,402 1/00 39.00 122,694 # 5-SUITE FC1A 2 329 11/93 12/03 - 109.42 35,999 12.00 AUNTIE ANNIE'S - # 6-SUITE 113 1 3,000 9/82 1/98 - 0.00 0 6.00 B.DALTON BOOKSELLR - # 7-SUITE 165 1 5,058 9/86 1/00 - 20.86 105,510 5.00 BACHRACH'S # 8-SUITE 104 1 4,060 7/89 1/99 - 5.00 20,300 3.50 BARRETT, INC. - 1/98 13.28 53,917 CEILING BREAKPOINT PRO RATA % OF RENT TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------------- --------- --------------- ----------------- ---------- ----------- # 1-SUITE 146 UNLIMITED NATURAL RECOVERABLE TAX ZERO AEROSOLES RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 2-SUITE FC5 UNLIMITED 253 RECOVERABLE TAX ZERO ALADDIN'S CASTLE 1/00 263 RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 3-SUITE 158 UNLIMITED NATURAL RECOVERABLE TAX ZERO AMERICAN EAGLE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 4-SUITE 215 UNLIMITED NATURAL RECOVERABLE TAX ZERO AMY'S HALLMARK RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 5-SUITE FC1A UNLIMITED NATURAL RECOVERABLE TAX ZERO AUNTIE ANNIE'S RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 6-SUITE 113 UNLIMITED NATURAL RECOVERABLE TAX ZERO B.DALTON BOOKSELLR RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 7-SUITE 165 UNLIMITED NATURAL RECOVERABLE TAX ZERO BACHRACH'S RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 8-SUITE 104 UNLIMITED NATURAL RECOVERABLE TAX ZERO BARRETT, INC. RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO
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PRIMARY/ ANNUAL SECONDARY SOUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ---------------------- --------- ------ ----- ----- ------ ---------------- --------- ------- # 9-SUITE 266 1 7,413 12/97 12/07 - 21.00 155,673 BATH AND BODY HOME - # 10-SUITE 136 1 1,765 5/87 12/97 - 35.00 61,775 BOMBAY CO. - # 11-SUITE 234 1 1,933 1/94 12/03 - 30.00 57,990 BOUDIN BAKERY - 1/01 34.00 65,722 # 12-SUITE 158 1 825 1/92 12/00 - 44.00 36,300 BRESLER'S - # 13-SUITE 2660 1 1,428 6/97 12/01 - 30.93 44,168 CAR-LENE RESEARCH - 1/99 33.08 47,238 1/01 34.36 49,066 # 14-SUITE 258 1 4,500 8/94 1/06 - 24.13 108,585 CASUAL CORNER - 2/99 25.00 112,500 2/04 26.00 117,000 # 15-SUITE 207 1 6,170 5/94 4/04 - 18.00 111,060 CHAMPS SPORTS 1/99 20.00 123,400 1/02 22.00 135,740 # 16-SUITE FC9 2 612 2/94 2/04 - 71.90 44,003 CHICAGO HOT DOG - 2/00 78.43 47,999 CEILING BREAKPOINT PRO RATA % OF RENT TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------------- --------- --------------- ----------------- ---------- ----------- # 9-SUITE 266 UNLIMITED NATURAL RECOVERABLE TAX ZERO BATH AND BODY HOME RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 10-SUITE 136 UNLIMITED NATURAL RECOVERABLE TAX ZERO BOMBAY CO. RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 11-SUITE 234 UNLIMITED NATURAL RECOVERABLE TAX ZERO BOUDIN BAKERY RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 12-SUITE 158 UNLIMITED NATURAL RECOVERABLE TAX ZERO BRESLER'S RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 13-SUITE 2660 - - RECOVERABLE TAX ZERO CAR-LENE RESEARCH RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 14-SUITE 258 UNLIMITED NATURAL RECOVERABLE TAX ZERO CASUAL CORNER RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 15-SUITE 207 UNLIMITED NATURAL RECOVERABLE TAX ZERO CHAMPS SPORTS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 16-SUITE FC9 UNLIMITED NATURAL RECOVERABLE TAX ZERO CHICAGO HOT DOG RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO
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PRIMARY/ ANNUAL SECONDARY SOUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ---------------------- --------- ------ ----- ----- ------ ---------------- --------- ------- # 17-SUITE 162 1 11,960 8/97 1/98 - 5.02 60,039 - CHRISTMAS ON MALL - # 18-SUITE FC12 2 593 12/93 12/01 - 67.45 39,998 8.00 CINNABON - # 19-SUITE 148 1 1,354 9/93 1/01 - 65.00 88,010 8.00 CLAIRE'S BOUTIQUE - # 20-SUITE OUTLOT 5 4,800 6/82 12/00 - 17.58 84,384 COLE TAYLOR BANK - CEILING BREAKPOINT PRO RATA % OF RENT TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------------- --------- --------------- ----------------- ---------- ----------- # 17-SUITE 162 - - RECOVERABLE TAX ZERO CHRISTMAS ON MALL RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 18-SUITE FC12 UNLIMITED NATURAL RECOVERABLE TAX ZERO CINNABON RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 19-SUITE 148 UNLIMITED NATURAL RECOVERABLE TAX ZERO CLAIRE'S BOUTIQUE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 20-SUITE OUTLOT - - NONE COLE TAYLOR BANK
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PRIMARY/ ANNUAL SECONDARY SOUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ---------------------- --------- ------ ----- ----- ------ ---------------- --------- ------- 1-324 18.20 87,360 1/02 18.84 90,418 1/03 19.50 93,582 1/04 20.18 96,858 1/05 20.88 100,248 1/06 21.62 103,756 1/07 22.37 107,388 1/08 23.16 111,146 1/09 23.97 115,036 1/10 24.80 119,063 1/11 25.67 123,230 1/12 26.57 127,543 1/13 27.50 132,007 1/14 28.46 136,627 1/15 29.46 141,409 1/16 30.49 146,358 1/17 31.56 151,481 1/18 32.66 156,783 1/19 33.81 162,270 1/20 34.99 167,950 1/21 36.21 173,828 1/22 37.48 179,912 1/23 38.79 186,209 1/24 40.15 192,726 1/25 41.56 199,471 1/26 43.01 206,453 1/27 44.52 213,679 CEILING BREAKPOINT PRO RATA % OF RENT TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------------- --------- --------------- ----------------- ---------- ----------- - - NONE
YORKTOWN SHOPPING CENTER LEASE ABSTRACT REPORT FOR TENANTS 21 THROUGH 138
PRIMARY/ ANNUAL SECONDARY SOUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ---------------------- --------- ------ ----- ----- ------ ---------------- --------- ------- # 21-SUITE ATM 1 34 10/94 9/28 - 294.00 9,996 - COLE TAYLOR- ATM - 10/97 299.88 10,196 10/98 305.88 10,400 10/99 312.00 10,608 10/00 318.24 10,820 10/01 324.60 11,036 10/02 331.09 11,257 10/03 337.71 11,482 10/04 344.47 11,712 10/05 351.36 11,946 10/06 358.38 12,185 10/07 365.55 12,429 10/08 372.86 12,677 10/09 380.32 12,931 10/10 387.93 13,190 10/11 395.69 13,453 10/12 403.60 13,722 10/13 411.67 13,997 10/14 419.90 14,277 10/15 428.30 14,562 10/16 436.87 14,854 10/17 445.61 15,151 10/18 454.52 15,454 10/19 463.61 15,763 10/20 472.88 16,078 10/21 482.34 16,399 10/22 491.98 16,727 10/23 501.82 17,062 10/24 511.86 17,403 10/25 522.10 17,751 10/26 532.54 18,106 CEILING BREAKPOINT PRO RATA % OF RENT TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------------- --------- --------------- ----------------- ---------- ----------- # 21-SUITE ATM - - RECOVERABLE TAX ZERO COLE TAYLOR- ATM RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO
YORKTOWN SHOPPING CENTER LEASE ABSTRACT REPORT FOR TENANTS 23 THROUGH 138
PRIMARY/ ANNUAL SECONDARY SOUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ---------------------- --------- ------ ----- ----- ------ ---------------- --------- ------- # 23-SUITE FC1 2 393 10/93 10/03 - 89.06 35,001 DAIRY QUEEN - 11/00 101.78 40,000 # 24-SUITE 170 1 2,118 10/96 12/06 - 27.10 57,398 DECK THE WALLS - 1/00 30.82 65,277 1/04 34.35 72,753 # 25-SUITE 224 1 800 11/18 12/98 - 37.40 29,920 DESMOND'S - # 26-SUITE 159 1 6,432 4/96 4/06 - 22.00 141,504 DISNEY STORE - 1/02 24.00 154,368 # 27-SUITE 138 1 1,280 8/91 5/01 - 40.00 51,200 DOLCIS - # 28-SUITE 231 1 1,375 4/95 12/04 - 40.00 55,000 EASY SPIRIT - 1/98 42.00 57,750 1/02 44.00 60,500 # 29-SUITE 157B 1 3,620 7/96 12/05 - 20.72 75,006 EGG HARBOR CAFE - 1/98 18.65 67,513 # 30-SUITE 125 1 1,280 6/87 12/01 - 58.59 74,995 ELECTRONICS BOUTIQ - CEILING BREAKPOINT PRO RATA % OF RENT TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------------- --------- --------------- ----------------- ---------- ----------- # 23-SUITE FC1 UNLIMITED NATURAL RECOVERABLE TAX ZERO DAIRY QUEEN RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 24-SUITE 170 UNLIMITED NATURAL RECOVERABLE TAX ZERO DECK THE WALLS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 25-SUITE 224 UNLIMITED NATURAL RECOVERABLE TAX ZERO DESMOND'S RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 26-SUITE 159 UNLIMITED NATURAL RECOVERABLE TAX ZERO DISNEY STORE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 27-SUITE 138 UNLIMITED NATURAL RECOVERABLE TAX ZERO DOLCIS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 28-SUITE 231 UNLIMITED NATURAL RECOVERABLE TAX ZERO EASY SPIRIT RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 29-SUITE 157B UNLIMITED NATURAL RECOVERABLE TAX ZERO EGG HARBOR CAFE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 30-SUITE 125 UNLIMITED NATURAL RECOVERABLE TAX ZERO ELECTRONICS BOUTIQ RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO
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PRIMARY/ ANNUAL SECONDARY SOUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ---------------------- --------- ------ ----- ----- ------ ---------------- --------- ------- # 31-SUITE 235 1 2,073 11/87 12/08 - 33.00 68,409 EMPORIUM LUGGAGE - 1/01 36.00 74,628 1/05 39.00 80,847 # 32-SUITE 273 1 15,719 6/94 5/06 - 14.25 223,996 EVANS FURS - # 33-SUITE 120 1 10,110 9/91 1/07 - 20.00 202,200 EXPRESS INC. - 10/01 22.00 222,420 # 34-SUITE 168 1 1,401 9/93 8/03 - 32.85 46,023 EXPRESSLY PORTRAIT - # 35-SUITE 173A 1 3,000 2/97 12/01 - 15.00 45,000 EYE STOP - # 36-SUITE 225 1 956 12/92 12/00 - 65.00 62,140 FANNIE MAY - # 37-SUITE OUTLOT 5 9,217 1/68 5/00 - 2.66 24,517 FIRESTONE - CEILING BREAKPOINT PRO RATA % OF RENT TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------------- --------- --------------- ----------------- ---------- ----------- # 31-SUITE 235 UNLIMITED NATURAL RECOVERABLE TAX ZERO EMPORIUM LUGGAGE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 32-SUITE 273 UNLIMITED NATURAL RECOVERABLE TAX ZERO EVANS FURS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 33-SUITE 120 UNLIMITED NATURAL RECOVERABLE INS. ZERO EXPRESS INC. RECOVERABLE TAX ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 34-SUITE 168 UNLIMITED NATURAL RECOVERABLE TAX ZERO EXPRESSLY PORTRAIT RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 35-SUITE 173A UNLIMITED NATURAL RECOVERABLE TAX ZERO EYE STOP RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 36-SUITE 225 UNLIMITED NATURAL RECOVERABLE TAX ZERO FANNIE MAY RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 37-SUITE OUTLOT - - NONE FIRESTONE
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PRIMARY/ ANNUAL SECONDARY SOUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ---------------------- --------- ------ ----- ----- ------ ---------------- --------- ------- 1-331 2.75 25,347 1/01 2.85 26,234 1/02 2.95 27,152 1/03 3.05 28,102 1/04 3.16 29,086 1/05 3.27 30,104 1/06 3.38 31,158 1/07 3.50 32,248 1/08 3.62 33,377 1/09 3.75 34,545 1/10 3.88 35,754 1/11 4.01 37,005 1/12 4.16 38,301 1/13 4.30 39,641 1/14 4.45 41,029 1/15 4.61 42,465 1/16 4.77 43,951 1/17 4.94 45,489 1/18 5.11 47,081 1/19 5.29 48,729 1/20 5.47 50,435 1/21 5.66 52,200 1/22 5.86 54,027 1/23 6.07 55,918 1/24 6.28 57,875 1/25 6.50 59,901 1/26 6.73 61,997 1/27 6.96 64,167 # 38-SUITE 222 1 1,280 4/89 12/99 - 38.00 48,640 FLORSHIEM SHOES - # 39-SUITE 142 1 1,765 2/68 1/99 - 6.75 11,914 FOOTACTION - # 40-SUITE 131 1 1,667 12/95 12/97 - 25.00 41,675 FOOTLOCKER - CEILING BREAKPOINT PRO RATA % OF RENT TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------------- --------- --------------- ----------------- ---------- ----------- - NONE # 38-SUITE 222 UNLIMITED NATURAL RECOVERABLE TAX ZERO FLORSHIEM SHOES RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 39-SUITE 142 UNLIMITED NATURAL RECOVERABLE TAX ZERO FOOTACTION RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 40-SUITE 131 UNLIMITED NATURAL RECOVERABLE TAX ZERO FOOTLOCKER RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO
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PRIMARY/ ANNUAL SECONDARY SOUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ---------------------- --------- ------ ----- ----- ------ ---------------- --------- ------- # 41-SUITE 114 1 2,350 5/95 12/00 - 30.00 70,500 5.00 FRANKLIN QUEST - 1/98 32.00 75,200 1/99 34.00 79,900 # 42-SUITE FC7 2 616 12/96 12/06 - 109.58 67,501 11.00 FRULLATI - 1/02 121.75 74,998 # 43-SUITE 134 1 3,279 8/97 1/08 - 26.53 86,992 6.00 GADZOOKS - 8/02 29.22 95,812 # 44-SUITE 250 1 5,603 2/93 5/05 - 27.00 151,281 5.00 GAP 6/99 30.00 168,090 # 45-SUITE 237 1 4,491 11/95 1/04 - 19.50 87,575 5.00 GAP KIDS - # 46-SUITE 229 1 1,271 8/96 12/06 - 50.00 63,550 6.00 GARDEN BOTANIKA - 1/02 60.00 76,260 # 47-SUITE 201 1 1,300 1/93 12/02 - 29.40 38,220 7.00 GENERAL NUTRITION - 1/98 31.40 40,820 # 48-SUITE FC12A 2 512 10/96 12/06 - 78.13 40,003 12.00 GREAT AMER. COOKIE - 7/01 85.94 44,001 CEILING BREAKPOINT PRO RATA % OF RENT TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------------- --------- --------------- ----------------- ---------- ----------- # 41-SUITE 114 UNLIMITED NATURAL RECOVERABLE TAX ZERO FRANKLIN QUEST RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 42-SUITE FC7 UNLIMITED NATURAL RECOVERABLE TAX ZERO FRULLATI RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 43-SUITE 134 UNLIMITED NATURAL RECOVERABLE TAX ZERO GADZOOKS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 44-SUITE 250 UNLIMITED NATURAL RECOVERABLE TAX ZERO GAP RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 45-SUITE 237 UNLIMITED NATURAL RECOVERABLE TAX ZERO GAP KIDS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 46-SUITE 229 UNLIMITED NATURAL RECOVERABLE TAX ZERO GARDEN BOTANIKA RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 47-SUITE 201 UNLIMITED NATURAL RECOVERABLE TAX ZERO GENERAL NUTRITION RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 48-SUITE FC12A UNLIMITED NATURAL RECOVERABLE TAX ZERO GREAT AMER. COOKIE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO
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PRIMARY/ ANNUAL SECONDARY SOUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ---------------------- --------- ------ ----- ----- ------ ---------------- --------- ------- # 49-SUITE FC10 2 612 11/93 9/03 - 132.35 80,998 12.00 GREAT STEAK & POTA - # 50-SUITE 157F 1 1,800 7/95 12/06 - 25.00 45,000 5.00 GYMBOREE - 2/99 27.00 48,600 2/03 29.00 52,200 # 51-SUITE 203B 1 1,097 6/91 12/98 - 24.00 26,328 - HEAKIN RESEARCH - # 52-SUITE 211 1 3,926 1/97 12/97 - 13.75 53,983 6.00 HEALTHRIDER - # 53-SUITE 116 1 4,005 11/93 12/04 - 18.11 72,531 6.00 KAYBEE TOYS - # 54-SUITE 254 1 946 7/95 12/02 - 40.00 37,840 6.00 KENNY G'S COFFEE - 1/98 42.00 39,732 1/01 44.00 41,624 # 55-SUITE 157C 1 6,045 12/95 12/05 - 0.00 0 7.00 KERRY'S GRILL ROOM - # 56-SUITE 123 1 1,280 4/93 9/03 - 39.06 49,997 6.00 LADY FOOTLOCKER - 4/98 44.53 56,998 CEILING BREAKPOINT PRO RATA % OF RENT TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------------- --------- --------------- ----------------- ---------- ----------- # 49-SUITE FC10 UNLIMITED NATURAL RECOVERABLE TAX ZERO GREAT STEAK & POTA RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 50-SUITE 157F UNLIMITED NATURAL RECOVERABLE TAX ZERO GYMBOREE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 51-SUITE 203B - - RECOVERABLE TAX ZERO HEAKIN RESEARCH RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 52-SUITE 211 UNLIMITED NATURAL RECOVERABLE TAX ZERO HEALTHRIDER RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 53-SUITE 116 UNLIMITED NATURAL RECOVERABLE TAX ZERO KAYBEE TOYS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 54-SUITE 254 UNLIMITED NATURAL RECOVERABLE TAX ZERO KENNY G'S COFFEE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 55-SUITE 157C UNLIMITED ZERO RECOVERABLE TAX ZERO KERRY'S GRILL ROOM RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 56-SUITE 123 UNLIMITED NATURAL RECOVERABLE TAX ZERO LADY FOOTLOCKER RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO
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PRIMARY/ ANNUAL SECONDARY SOUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ---------------------- --------- ------ ----- ----- ------ ---------------- --------- ------- # 57-SUITE 209 1 5,686 11/95 1/08 - 20.00 113,720 5.00 LANE BRYANT - 1/02 22.00 125,092 # 58-SUITE 265 1 3,324 9/86 1/98 - 20.33 67,577 7.00 LECHTERS - # 59-SUITE 109 1 4,657 6/97 5/00 - 0.00 0 5.00 LERNER NY - - # 60-SUITE 223 1 506 11/96 12/06 - 84.98 43,000 6.00 LIDS - # 61-SUITE 216 1 11,070 11/91 1/07 - 20.00 221,400 4.00 LIMITED - 12/01 38.97 431,398 # 62-SUITE 152 1 816 9/93 12/03 - 73.53 60,000 6.00 LUNDSTROM JEWELERS - 1/99 75.66 65,003 # 63-SUITE 203 1 2,733 1/97 12/27 - 0.00 0 - MANAGEMENT OFFICE - # 64-SUITE KIOSK 3 140 12/96 12/99 - 200.00 28,000 6.00 MARIO TRICOCI COSE - 11/97 395.00 55,300 1/98 228.57 32,000 1/99 257.00 35,980 # 65-SUITE 256 1 1,290 8/97 8/07 - 21.45 27,671 6.00 MARIO TRICOCI TOO - 7/02 48.32 62,333 CEILING BREAKPOINT PRO RATA % OF RENT TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------------- --------- --------------- ----------------- ---------- ----------- # 57-SUITE 209 UNLIMITED NATURAL RECOVERABLE INS. ZERO LANE BRYANT RECOVERABLE TAX ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 58-SUITE 265 UNLIMITED NATURAL RECOVERABLE TAX ZERO LECHTERS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 59-SUITE 109 UNLIMITED NATURAL RECOVERABLE TAX ZERO LERNER NY RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 60-SUITE 223 UNLIMITED NATURAL RECOVERABLE TAX ZERO LIDS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 61-SUITE 216 UNLIMITED NATURAL RECOVERABLE INS. ZERO LIMITED RECOVERABLE TAX ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 62-SUITE 152 UNLIMITED NATURAL RECOVERABLE TAX ZERO LUNDSTROM JEWELERS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 63-SUITE 203 - - NONE MANAGEMENT OFFICE # 64-SUITE KIOSK UNLIMITED NATURAL RECOVERABLE TAX ZERO MARIO TRICOCI COSE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 65-SUITE 256 UNLIMITED NATURAL RECOVERABLE TAX ZERO MARIO TRICOCI TOO RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO
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PRIMARY/ ANNUAL SECONDARY SOUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ---------------------- --------- ------ ----- ----- ------ ---------------- --------- ------- # 66-SUITE 221 1 1,122 1/89 12/98 - 100.00 112,200 6.00 MARKS BROS. JEWELR - # 67-SUITE FC6 2 1,050 12/93 11/00 - 59.79 62,780 6.00 MCDONALD'S - # 68-SUITE 154A 1 525 9/94 12/99 - 55.00 28,875 8.00 MERLE NORMAN - # 69-SUITE 210A 1 756 9/97 12/97 - 23.81 18,000 - METRO TEES - # 70-SUITE 217B 1 796 8/92 1/03 - 33.00 26,268 6.00 MOTHERHOOD MATERN - 1/99 36.00 28,656 # 71-SUITE 121 1 600 1/97 12/04 - 70.00 42,000 8.00 MRS. FIELD'S COOKI - 1/98 75.00 45,000 1/02 80.00 48,000 # 72-SUITE 107 1 3,000 4/97 12/97 - 0.00 0 15.00 MURRAY'S IRISH OUT - # 73-SUITE 133 1 2,835 1/98 4/07 - 29.00 82,215 6.00 NATURAL WONDERS - CEILING BREAKPOINT PRO RATA % OF RENT TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------------- --------- --------------- ----------------- ---------- ----------- # 66-SUITE 221 UNLIMITED NATURAL RECOVERABLE TAX ZERO MARKS BROS. JEWELR RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 67-SUITE FC6 UNLIMITED NATURAL RECOVERABLE TAX ZERO MCDONALD'S RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 68-SUITE 154A UNLIMITED NATURAL RECOVERABLE TAX ZERO MERLE NORMAN RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 69-SUITE 210A - - RECOVERABLE TAX ZERO METRO TEES RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 70-SUITE 217B UNLIMITED NATURAL RECOVERABLE TAX ZERO MOTHERHOOD MATERN RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 71-SUITE 121 UNLIMITED NATURAL RECOVERABLE TAX ZERO MRS. FIELD'S COOKI RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 72-SUITE 107 UNLIMITED ZERO RECOVERABLE TAX ZERO MURRAY'S IRISH OUT RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 73-SUITE 133 UNLIMITED 1,049 RECOVERABLE TAX ZERO NATURAL WONDERS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO
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PRIMARY/ ANNUAL SECONDARY SOUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ---------------------- --------- ------ ----- ----- ------ ---------------- --------- ------- # 74-SUITE 238 1 1,865 2/93 12/01 - 30.00 55,950 10.00 NATURALIZER - 1/99 35.00 65,275 # 75-SUITE 227 1 1,266 5/95 4/05 - 32.00 40,512 6.00 NINE WEST - 5/98 34.00 43,044 5/02 36.00 45,576 # 76-SUITE 157A 1 494 7/97 12/03 - 60.73 30,001 - OBERWEIS DAIRY - 1/99 75.91 37,500 1/02 80.97 39,999 # 77-SUITE OUTLOT 5 10,539 3/86 12/99 - 5.95 62,707 - PACIFIC CLUB (NET) - # 78-SUITE 206B 1 6,691 6/97 5/07 - 17.94 120,037 10.00 PACIFIC RIM CAFE - 6/02 21.07 140,979 # 79-SUITE FC11 2 750 11/93 12/03 - 116.44 87,330 10.00 PANDA EXPRESS - # 80-SUITE 170A 1 4,515 6/86 5/98 - 23.12 104,387 5.00 PAUL HARRIS - # 81-SUITE 232 1 1,300 6/93 12/98 - 42.00 54,600 10.00 PERSONAL CREATIONS - # 82-SUITE 267 1 2,500 8/94 7/04 - 26.71 66,775 5.00 PETITE SOPHISTICAT - CEILING BREAKPOINT PRO RATA % OF RENT TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------------- --------- --------------- ----------------- ---------- ----------- # 74-SUITE 238 UNLIMITED NATURAL RECOVERABLE TAX ZERO NATURALIZER RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 75-SUITE 227 UNLIMITED NATURAL RECOVERABLE TAX ZERO NINE WEST RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 76-SUITE 157A - - RECOVERABLE TAX ZERO OBERWEIS DAIRY RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 77-SUITE OUTLOT - - NONE PACIFIC CLUB (NET) # 78-SUITE 206B UNLIMITED NATURAL RECOVERABLE TAX ZERO PACIFIC RIM CAFE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 79-SUITE FC11 UNLIMITED NATURAL RECOVERABLE TAX ZERO PANDA EXPRESS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 80-SUITE 170A UNLIMITED NATURAL RECOVERABLE TAX ZERO PAUL HARRIS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 81-SUITE 232 UNLIMITED NATURAL RECOVERABLE TAX ZERO PERSONAL CREATIONS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 82-SUITE 267 UNLIMITED NATURAL RECOVERABLE TAX ZERO PETITE SOPHISTICAT RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO
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PRIMARY/ ANNUAL SECONDARY SOUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ---------------------- --------- ------ ----- ----- ------ ---------------- --------- ------- # 83-SUITE 201A 1 995 3/98 2/08 - 67.28 66,939 6.00 VACANT SPACE - # 84-SUITE 233 1 1,926 5/92 12/00 - 28.00 53,928 10.00 PICTURE US - # 85-SUITE OUTLOT 5 4,035 1/68 12/05 - 8.18 33,006 5.50 PIZZA HUT - - 1-264 8.47 34,176 5.50 1/07 8.77 35,373 1/08 9.07 36,611 1/09 9.39 37,892 1/10 9.72 39,218 1/11 10.06 40,591 1/12 10.41 42,012 1/13 10.78 43,482 1/14 11.15 45,004 1/15 11.54 46,579 1/16 11.95 48,209 1/17 12.37 49,897 1/18 12.80 51,643 1/19 13.25 53,450 1/20 13.71 55,321 1/21 14.19 57,257 1/22 14.69 59,261 1/23 15.20 61,336 1/24 15.73 63,482 1/25 16.28 65,704 1/26 16.85 68,004 1/27 17.44 70,384 # 86-SUITE 157D 1 400 7/94 3/99 - 46.50 18,600 - PLAZA NEWS CEILING BREAKPOINT PRO RATA % OF RENT TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------------- --------- --------------- ----------------- ---------- ----------- # 83-SUITE 201A UNLIMITED NATURAL RECOVERABLE TAX ZERO VACANT SPACE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 84-SUITE 233 UNLIMITED NATURAL RECOVERABLE TAX ZERO PICTURE US RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 85-SUITE OUTLOT UNLIMITED NATURAL NONE PIZZA HUT UNLIMITED NATURAL NONE # 86-SUITE 157D - - RECOVERABLE TAX ZERO PLAZA NEWS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO
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PRIMARY/ ANNUAL SECONDARY SOUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ---------------------- --------- ------ ----- ----- ------ ---------------- --------- ------- # 87-SUITE 160 1 2,712 11/84 12/97 - 20.00 54,240 5.00 RAVE - # 88-SUITE 115 1 2,898 12/91 12/97 - 0.00 0 5.00 RECORD TOWN - # 89-SUITE 236 1 1,887 1/92 12/02 - 60.00 113,220 6.00 ROGERS JEWELERS - 1/00 65.00 122,655 # 90-SUITE FC2 2 519 12/93 12/03 - 119.46 62,000 11.00 SAKKIO JAPAN - 1/01 129.09 66,998 # 91-SUITE 173 1 12,486 12/95 1/06 - 13.05 162,942 12.00 SAM GOOOY - # 92-SUITE FC4 2 850 10/93 10/05 - 102.35 86,998 12.00 SBARRO - 10/99 116.47 99,000 # 93-SUITE 217A 1 609 12/93 1/01 - 53.37 32,502 6.00 SELECT COMFORT - # 94-SUITE 156 1 1,819 10/94 1/05 - 30.00 54,570 6.00 SOLE OUTDOORS - CEILING BREAKPOINT PRO RATA % OF RENT TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------------- --------- --------------- ----------------- ---------- ----------- # 87-SUITE 160 UNLIMITED NATURAL RECOVERABLE TAX ZERO RAVE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 88-SUITE 115 UNLIMITED ZERO RECOVERABLE TAX ZERO RECORD TOWN RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 89-SUITE 236 UNLIMITED NATURAL RECOVERABLE TAX ZERO ROGERS JEWELERS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 90-SUITE FC2 UNLIMITED NATURAL RECOVERABLE TAX ZERO SAKKIO JAPAN RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 91-SUITE 173 UNLIMITED NATURAL RECOVERABLE TAX ZERO SAM GOOOY RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 92-SUITE FC4 UNLIMITED NATURAL RECOVERABLE TAX ZERO SBARRO RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 93-SUITE 217A UNLIMITED NATURAL RECOVERABLE TAX ZERO SELECT COMFORT RECOVERABLE INS ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 94-SUITE 156 UNLIMITED NATURAL RECOVERABLE TAX ZERO SOLE OUTDOORS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO
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PRIMARY/ ANNUAL SECONDARY SOUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ---------------------- --------- ------ ----- ----- ------ ---------------- --------- ------- # 95-SUITE FC3 2 519 6/94 1/04 - 104.05 54,002 10.00 SOUPMASTERS - # 96-SUITE KIOSK 3 225 10/91 12/97 - 0.00 0 6.00 SPORTCARD HEAVEN - # 97-SUITE 220 1 1,260 9/93 12/00 - 37.06 46,696 7.00 STRIDE RITE - 1/99 30.80 38,808 # 98-SUITE 135 1 5,180 11/94 1/07 - 20.00 103,600 5.00 STRUCTURE - 12/00 22.00 113,960 # 99-SUITE 157H 1 710 10/92 12/02 - 49.30 35,003 7.00 SUCCESSORIES - #100-SUITE 157G 1 705 11/94 1/04 - 61.99 43,703 8.00 SUNGLASS HUT - 1/99 56.74 40,002 #101-SUITE 105 1 3,054 6/97 1/98 - 0.00 0 12.00 SUPERSTARS - #102-SUITE 210B 1 1,134 11/88 12/98 - 40.00 45,360 8.00 THINGS REMEMBERED - CEILING BREAKPOINT PRO RATA % OF RENT TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------------- --------- --------------- ----------------- ---------- ----------- # 95-SUITE FC3 UNLIMITED NATURAL RECOVERABLE TAX ZERO SOUPMASTERS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 96-SUITE KIOSK UNLIMITED ZERO RECOVERABLE TAX ZERO SPORTCARD HEAVEN RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 97-SUITE 220 UNLIMITED NATURAL RECOVERABLE TAX ZERO STRIDE RITE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 98-SUITE 135 UNLIMITED NATURAL RECOVERABLE INS. ZERO STRUCTURE RECOVERABLE TAX ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO # 99-SUITE 157H UNLIMITED NATURAL RECOVERABLE TAX ZERO SUCCESSORIES RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #100-SUITE 157G UNLIMITED NATURAL RECOVERABLE TAX ZERO SUNGLASS HUT RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #101-SUITE 105 UNLIMITED ZERO RECOVERABLE TAX ZERO SUPERSTARS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #102-SUITE 210B UNLIMITED NATURAL RECOVERABLE TAX ZERO THINGS REMEMBERED RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO
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PRIMARY/ ANNUAL SECONDARY SOUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ---------------------- --------- ------ ----- ----- ------ ---------------- --------- ------- #103-SUITE 140 1 2,250 11/93 12/04 - 30.00 67,500 5.00 THIS END UP - #104-SUITE 205 1 1,320 5/88 12/97 - 30.00 39,600 6.00 TINDER BOX #105-SUITE 119 1 680 12/91 12/98 - 110.00 74,800 8.00 TOPKAPI - #106-SUITE 205A 1 2,639 3/88 12/98 - 27.00 71,253 5.00 TREATS N' MORE - #107-SUITE 226 1 800 4/95 12/00 - 15.00 12,000 - U.S. POST OFFICE - #108-SUITE KIOSK 3 280 1/99 12/01 - 214.24 59,989 6.00 VACANT #109-SUITE 164 1 5,976 1/98 12/07 - 22.77 136,074 6.00 VACANT SPACE - #110-SUITE 172 1 4,905 4/98 3/08 - 22.77 111,687 6.00 VACANT SPACE - CEILING BREAKPOINT PRO RATA % OF RENT TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------------- --------- --------------- ----------------- ---------- ----------- #103-SUITE 140 UNLIMITED NATURAL RECOVERABLE TAX ZERO THIS END UP RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #104-SUITE 205 UNLIMITED NATURAL RECOVERABLE TAX ZERO TINDER BOX RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #105-SUITE 119 UNLIMITED NATURAL RECOVERABLE TAX ZERO TOPKAPI RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #106-SUITE 205A UNLIMITED NATURAL RECOVERABLE TAX ZERO TREATS N' MORE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #107-SUITE 226 - - RECOVERABLE TAX ZERO U.S. POST OFFICE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #108-SUITE KIOSK UNLIMITED NATURAL RECOVERABLE TAX ZERO VACANT RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #109-SUITE 164 UNLIMITED NATURAL RECOVERABLE TAX ZERO VACANT SPACE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #110-SUITE 172 UNLIMITED NATURAL RECOVERABLE TAX ZERO VACANT SPACE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO
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PRIMARY/ ANNUAL SECONDARY SOUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ---------------------- --------- ------ ----- ----- ------ ---------------- --------- ------- #111-SUITE 171 1 1,802 8/98 7/08 - 36.22 65,277 6.00 VACANT SPACE - #112-SUITE 218 1 2,472 5/98 4/08 - 36.22 89,548 6.00 VACANT SPACE - #113-SUITE 266B 1 8,367 9/98 8/08 - 22.77 190,517 6.00 VACANT SPACE - #114-SUITE 266C 1 6,607 12/98 11/08 - 22.77 150,441 6.00 VACANT SPACE - #115-SUITE 269 1 4,152 4/98 3/08 - 27.00 112,104 5.00 CONTEMPO CASUALS - 4/01 30.00 124,560 4/05 34.00 141,168 #116-SUITE 163 1 3,593 2/98 1/08 - 22.77 81,813 6.00 VACANT SPACE #117-SUITE FC8 2 610 6/98 5/08 - 103.50 63,135 11.00 VACANT SPACE - #118-SUITE 102 1 4,469 1/97 1/97 - 0.00 0 - VACANT SPACE - #119-SUITE 157E 1 6,700 6/86 1/06 - 22.00 147,400 5.00 VICTORIA'S SECRET - CEILING BREAKPOINT PRO RATA % OF RENT TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------------- --------- --------------- ----------------- ---------- ----------- #111-SUITE 171 UNLIMITED NATURAL RECOVERABLE TAX ZERO VACANT SPACE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #112-SUITE 218 UNLIMITED NATURAL RECOVERABLE TAX ZERO VACANT SPACE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #113-SUITE 266B UNLIMITED NATURAL RECOVERABLE TAX ZERO VACANT SPACE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #114-SUITE 266C UNLIMITED NATURAL RECOVERABLE TAX ZERO VACANT SPACE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #115-SUITE 269 UNLIMITED NATURAL RECOVERABLE TAX ZERO CONTEMPO CASUALS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #116-SUITE 163 UNLIMITED NATURAL RECOVERABLE TAX ZERO VACANT SPACE RECOVERABLE INS. ZERO - ECAM COMBO + 15% ZERO ICAM -MAJOR + 15% ZERO #117-SUITE FC8 UNLIMITED NATURAL RECOVERABLE TAX ZERO VACANT SPACE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #118-SUITE 102 - - NONE VACANT SPACE #119-SUITE 157E UNLIMITED NATURAL RECOVERABLE INS. ZERO VICTORIA'S SECRET RECOVERABLE TAX ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO
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PRIMARY/ ANNUAL SECONDARY SOUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ---------------------- --------- ------ ----- ----- ------ ---------------- --------- ------- #120-SUITE 261 1 3,032 1/91 12/00 - 29.00 87,928 6.00 WALDENBOOKS . 1/98 32.00 97,024 #121-SUITE 127 1 1,280 6/95 3/05 - 52.20 66,816 8.00 WICKS N' STICKS - 1/99 57.57 73,690 1/02 62.94 80,563 #122-SUITE 144 1 1,785 1/96 12/02 - 38.00 67,830 5.00 WILSON'S LEATHER - #123-SUITE 129 1 1,880 4/94 3/02 - 32.00 60,160 7.00 WITH BEST WISHES - 1/98 34.00 63,920 1/00 36.00 67,680 #124-SUITE 117 1 960 1/97 12/97 - 0.00 0 12.00 WITH LOVE FROM CHI - #125-SUITE 263 1 2,947 11/86 1/98 - 0.00 0 8.00 WOMAN'S WORLD - #126-SUITE 106/206 1 49,850 1/68 1/99 - 3.21 160,019 - WOOLWORTH'S - #127-SUITE 240 1 3,790 2/96 12/97 - 0.00 0 10.00 WORLD OF SCIENCE - CEILING BREAKPOINT PRO RATA % OF RENT TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------------- --------- --------------- ----------------- ---------- ----------- #120-SUITE 261 UNLIMITED NATURAL RECOVERABLE TAX ZERO WALDENBOOKS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #121-SUITE 127 UNLIMITED NATURAL RECOVERABLE TAX ZERO WICKS N' STICKS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #122-SUITE 144 UNLIMITED NATURAL RECOVERABLE TAX ZERO WILSON'S LEATHER RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #123-SUITE 129 UNLIMITED NATURAL RECOVERABLE TAX ZERO WITH BEST WISHES RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #124-SUITE 117 UNLIMITED ZERO RECOVERABLE TAX ZERO WITH LOVE FROM CHI RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #125-SUITE 263 UNLIMITED ZERO RECOVERABLE TAX ZERO WOMAN'S WORLD RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #126-SUITE 106/206 - - RECOVERABLE TAX ZERO WOOLWORTH'S RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #127-SUITE 240 UNLIMITED ZERO RECOVERABLE TAX ZERO WORLD OF SCIENCE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO
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PRIMARY/ ANNUAL SECONDARY SOUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ---------------------- --------- ------ ----- ----- ------ ---------------- --------- ------- #128-SUITE 205B 1 543 1/93 8/28 - 31.00 16,833 - YORKTOWN BARBER - 9/98 31.62 17,170 9/99 32.25 17,513 9/00 32.90 17,863 9/01 33.56 18,221 9/02 34.23 18,585 9/03 34.91 18,957 9/04 35.61 19,336 9/05 36.32 19,723 9/06 37.05 20,117 9/07 37.79 20,519 9/08 38.54 20,930 9/09 39.32 21,348 9/10 40.10 21,775 9/11 40.90 22,211 9/12 41.72 22,655 9/13 42.56 23,108 9/14 43.41 23,570 9/15 44.28 24,042 9/16 45.16 24,522 9/17 46.06 25,013 9/18 46.99 25,513 9/19 47.93 26,023 9/20 48.88 26,544 9/21 49.86 27,075 9/22 50.86 27,616 9/23 51.88 28,169 9/24 52.91 28,732 9/25 53.97 29,307 9/26 55.05 29,893 9/27 56.15 30,491 #129-SUITE OUTLOT 5 69,829 3/98 1/18 - 10.74 749,963 - YORKTOWN CINEMA 18 - 1/03 11.67 814,904 1/08 12.68 885,432 1/13 13.78 962,244 1-180 15.16 1,058,608 - 1/23 16.68 1,164,748 12/27 18.35 1,281,362 CEILING BREAKPOINT PRO RATA % OF RENT TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------------- --------- --------------- ----------------- ---------- ----------- #128-SUITE 205B - - RECOVERABLE TAX ZERO YORKTOWN BARBER RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #129-SUITE OUTLOT - - CINEMA FIXED CAM YORKTOWN CINEMA 18 - - CINEMA FIXED CAM
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PRIMARY/ ANNUAL SECONDARY SOUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ---------------------- --------- ------ ----- ----- ------ ---------------- --------- ------- #130-SUITE 260A 1 4,267 1/68 12/28 - 3.87 16,513 YORKTOWN MERCHANTS - #131-SUITE 201B 1 663 1/93 8/28 - 22.00 14,586 YORKTOWN SHOE REP. - 9/98 22.44 14,878 9/99 22.89 15,175 9/00 23.35 15,479 9/01 23.81 15,788 9/02 24.29 16,104 9/03 24.78 16,426 9/04 25.27 16,755 9/05 25.78 17,090 9/06 26.29 17,432 9/07 26.82 17,780 9/08 27.35 18,136 9/09 27.90 18,499 9/10 28.46 18,869 9/11 29.03 19,246 9/12 29.61 19,631 9/13 30.20 20,023 9/14 30.81 20,424 9/15 31.42 20,832 9/16 32.05 21,249 9/17 32.69 21,674 9/18 33.34 22,107 9/19 34.01 22,550 9/20 34.69 23,001 9/21 35.39 23,461 9/22 36.09 23,930 9/23 36.82 24,408 9/24 37.55 24,897 9/25 38.30 25,395 9/26 39.07 25,902 9/27 39.85 26,421 #132-SUITE MAJORS 4 1 1/97 1/28 - 0.00 0 MAJOR'S CAM CONTRI OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------------- ------- --------- --------------- ----------------- ---------- ----------- #130-SUITE 260A - - - RECOVERABLE TAX ZERO YORKTOWN MERCHANTS RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #131-SUITE 201B 7.00 UNLIMITED NATURAL RECOVERABLE TAX ZERO YORKTOWN SHOE REP. RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #132-SUITE MAJORS - - - ANCHOR'S CAM POOL MAJOR'S CAM CONTRI EXTERIOR CAM CONTR VON MAUR CAM POOL VON MAUR OTHER CAM
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PRIMARY/ ANNUAL SECONDARY SOUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % - ---------------------- --------- ------ ----- ----- ------ ---------------- --------- ------- #133-SUITE 162A 1 5,980 1/99 12/08 - 23.57 140,930 6.00 VACANT SPACE - #134-SUITE 162B 1 5,980 4/99 3/09 - 23.57 140,930 6.00 VACANT SPACE #135-SUITE 206A 1 7,274 5/99 4/09 - 23.57 171,426 6.00 VACANT SPACE - #136-SUITE 206B 1 7,273 9/99 8/09 - 23.57 171,402 6.00 VACANT SPACE - #137-SUITE 106A 1 17,652 12/99 11/09 - 13.93 245,820 6.00 VACANT SPACE - #138-SUITE 106B 1 17,651 7/99 6/09 - 13.93 245,806 6.00 VACANT SPACE - CEILING BREAKPOINT PRO RATA % OF RENT TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI - ---------------------- --------- --------------- ----------------- ---------- ----------- #133-SUITE 162A UNLIMITED NATURAL RECOVERABLE TAX ZERO VACANT SPACE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #134-SUITE 162B UNLIMITED NATURAL RECOVERABLE TAX ZERO VACANT SPACE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #135-SUITE 206A UNLIMITED NATURAL RECOVERABLE TAX ZERO VACANT SPACE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #136-SUITE 206B UNLIMITED NATURAL RECOVERABLE TAX ZERO VACANT SPACE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #137-SUITE 106A UNLIMITED NATURAL RECOVERABLE TAX ZERO VACANT SPACE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO #138-SUITE 106B UNLIMITED NATURAL RECOVERABLE TAX ZERO VACANT SPACE RECOVERABLE INS. ZERO ICAM -MAJOR + 15% ZERO ECAM COMBO + 15% ZERO
LANDAUER REAL ESTATE COUNSELORS - -------------------------------------------------------------------------------- Professional Qualifications JAMES C. KAFES, MAI, CRE EXPERIENCE: Landauer Associates, Inc. (since 1986) Managing Director, Member of the Board of Directors, Member of the Management Committee, and General Manager of the New York Valuation and Technical Services Division. Valuation and real estate counseling on major urban properties and portfolios, including financial and feasibility analyses, appraisal reviews and independent fiduciary services. Miller & Kafes Associates, Inc. (1972-1986) Principal. Valuations, market studies, investment analyses and counseling services on major commercial developments nationwide and in the Caribbean. James E. Gibbons Associates (1970-1972) Assistant Director. Real estate valuations and counseling services. National Bank of North America (1969-1970) Chief Appraiser. Market valuations and analysis of investment opportunities. General Services Administration (1962-1968) Economic analyses, highest and best use studies, market valuations. PROFESSIONAL ACTIVITIES: MAI: Appraisal Institute CRE: American Society of Real Estate Counselors Has served on national committees of the Appraisal Institute and ASREC since 1971, including current service as a board member and past service as Editor-in-Chief and Chairman of the Editorial Board of The Appraisal Journal, published quarterly by the Appraisal Institute. Member: Board of Directors, Cedar Income Fund Board of Directors, Realty Credit Corp. Roundtable of Advisors, Murray H. Goodman Center for Real Estate Studies, Lehigh University The Real Estate Board of New York, Inc. CERTIFICATION: Currently certified in the Appraisal Institute's voluntary program of continuing education for its designated members. EDUCATION: BS, MBA, Lehigh University LANDAUER REAL ESTATE COUNSELORS - -------------------------------------------------------------------------------- Professional Qualifications JOHN L WRZESINSKI, MAI, CRE EXPERIENCE: Landauer Associates, Inc., Chicago, Illinois (since 1982) Senior Managing Director, Member of the Management Committee and General Manager of the Chicago Regional Office. Active in general real estate consulting since 1972 with an emphasis in the valuation and financial analysis of income properties. Specialized experience in the preparation of feasibility, market and land use studies and litigation support. Assignments involved the evaluation and valuation of all types of real property throughout the United States for Insurance Companies, Pension Funds, financial institutions, developers, and industrial corporations. Lake Michigan Appraisal Co., Chicago, Illinois (1977-1982) Assistant Vice President and Secretary, (Subsidiary of Arthur Rubloff & Co.). Co-manager of the appraisal group; performing various market, feasibility studies and valuations of all types throughout the United States. Marshall & Stevens, Chicago, Illinois (1976-1977) Senior Appraiser. Appraisal and counseling assignments involving real property of all types in the Midwest principally but also in the Northeast and West. PROFESSIONAL DESIGNATIONS: MAI: Appraisal Institute CRE: American Society of Real Estate Counselors Member: - Appraisal Journal Board-Appraisal Institute - Chicago Real Estate Board - Illinois Association of Realtors - National Association of Realtors - Illinois Association of Certified Real Estate Appraisers - International Council of Shopping Centers - Lambda Alpha, Ely Chapter CERTIFICATION: Currently certified in the voluntary program of continuing education for designated members conducted by the Appraisal Institute. Currently State certified as a General Real Estate Appraiser Licensed Real Estate Broker EDUCATION: Bachelor of Science, School of Business Southern Illinois University, Carbondale, Illinois (1969) Numerous professional practice and real estate related courses offered by the Appraisal Institute. Also, various seminars, workshops and continuing education courses sponsored by the Appraisal Institute and the Chicago Real Estate Board. LANDAUER REAL ESTATE COUNSELORS - -------------------------------------------------------------------------------- Professional Qualifications STEVEN C OGASAWARA, MAI, SRA EXPERIENCE: Landauer Associates, Inc., Chicago, Illinois (since 1982) Managing Director, Valuation and Technical Services Division. General real estate consulting, with emphasis on computerized real estate analysis, valuation, feasibility and investment analysis, and market assessments. Independent Real Estate Appraiser, Chicago, Illinois (1977-1981) Contract appraisal work for various fee appraisers in Chicago, with emphasis on single-family residences, townhouse and condominium appraisal assignments. PROFESSIONAL ACTIVITIES: MAI & SRA: Appraisal Institute Member: Board of Directors, Appraisal Institute, Chicago Chapter Chicago Board of Realtors (Appraisal Council Chairman-1990) Chicago Real Estate Council Chicago Chapter. Appraisal Institute -- Admission, Nominating, Programs and Seminars Committees Expert Witness: Federal Bankruptcy Courts in the states of Wisconsin, Florida and Minnesota. CERTIFICATION: Currently certified in the voluntary program of continuing education for designated members conducted by the Appraisal Institute. Currently certified as State General Appraiser in: Illinois (License #153-000162), Ohio (License #385801), Michigan (License #1201002683), Indiana (License #CG69201431), and Minnesota (License #4003167). EDUCATION: MBA, Finance and Real Estate, University of Georgia College of Business Administration (1982) BA, Finance, University of Illinois (1977) This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. APPRAISAL of ARROWHEAD TOWNE CENTER GLENDALE, ARIZONA APPRAISAL of ARROWHEAD TOWNE CENTER GLENDALE, ARIZONA AS OF SEPTEMBER 4, 1997 PREPARED FOR MORGAN STANLEY MORTGAGE CAPITAL, INC. 1585 BROADWAY, 37TH FLOOR NEW YORK, NY 10036 PREPARED BY LANDAUER ASSOCIATES, INC. 225 WEST WASHINGTON STREET SUITE 1500 CHICAGO, ILLINOIS 60606 [LETTERHEAD FOR LANDAUER REAL ESTATE COUNSELORS] September 10, 1997 Mr. James E. Flaum Vice President Morgan Stanley Mortgage Capital, Inc. 1585 Broadway, 37th Floor New York, NY 10036 Re: Mall Store Space within Arrowhead Towne Center Glendale, Arizona Dear Mr. Flaum: As directed, we have made an appraisal of the above-captioned property. Arrowhead Town Center is a 1,132,244-square-foot, two-level, super-regional mall located in Glendale, Arizona. The property appraised consists of the mall store space totaling 394,297 square feet situated on a 38.25-acre site and thus specifically excludes the anchor store space of Dillard's, Robinson's-May, JC Penney, Montgomery Ward and Mervyn's. Additionally, the subject site contains some excess land zoned and physically appropriate for mall expansion; however, the expansion capability and thus value of this excess land is specifically excluded from this analysis. The purpose of this self-contained appraisal report is to estimate the Market Value of the Leased Fee Interest in the real property described herein, subject to the existing leases and encumbrances, and the general and specific assumptions and limiting conditions as discussed in the attached report. The estimate of Market Value is made as of September 4, 1997, the date the property was inspected. LANDAUER REAL ESTATE COUNSELORS Morgan Stanley Mortgage Capital, Inc. September 11, 1997 Page Two Based upon our analysis, we estimate the Market Value of the Leased Fee Interest in Arrowhead Towne Center, subject to the existing leases and the assumptions and limiting conditions contained in this report, as of September 4, 1997, to be: ONE HUNDRED FIVE MILLION DOLLARS $105,000,000 A summary of our analyses, opinions, and conclusions is contained in the following report, of which this letter is a part. Thank you for the opportunity to be of service. Respectfully submitted, LANDAUER ASSOCIATES, INC. /s/ James C. Kafes /s/ Paul F. Engel James C. Kafes, MAI, CRE Paul F. Engel Executive Managing Director Managing Director /s/ G. Jay Fenner G. Jay Fenner, MAI JCK/JIW/PFE/GJF:alj Landauer File No. C-223-971/7223 LANDAUER REAL ESTATE COUNSELORS TABLE OF CONTENTS Page Assumptions and Limiting Conditions..........................................1 Certification................................................................5 Summary of Salient Facts and Conclusions.....................................6 Nature of the Appraisal......................................................7 Identification of the Property and Interest Appraised....................7 Purpose, Function and Date of Appraisal..................................7 Scope of the Appraisal...................................................8 History of Property......................................................9 Exposure Time and Marketing .............................................9 Demographic/Area Review.....................................................12 Population Trends.......................................................12 Income Levels...........................................................14 Employment..............................................................14 Conclusion..............................................................19 Neighborhood Analysis.......................................................22 Retail Market Overview......................................................26 Trade Area Delineation..................................................26 Trade Area Population...................................................27 Income Estimates and Comparisons........................................28 Trade Area Expenditure Potential........................................29 Competitive Retail Analysis.............................................31 Property Description........................................................34 Site Analysis...........................................................34 Zoning..................................................................35 Real Estate Taxes.......................................................35 Improvements............................................................36 Highest and Best Use........................................................38 As If Vacant............................................................38 As Improved.............................................................38 LANDAUER REAL ESTATE COUNSELORS TABLE OF CONTENTS Page Valuation Methodology.......................................................39 Cost Approach...............................................................40 Sales Comparison Approach...................................................41 Elements of Comparison..................................................41 Applicability of Adjustments............................................43 Analysis and Interpretation of Data.....................................44 Income Approach.............................................................47 Discounted Cash Flow ("DCF") Analysis Assumptions.......................47 Revenue.................................................................50 Expenses................................................................54 Capital Items...........................................................57 Cash Flow...............................................................59 Discounted Cash Flow Analysis...........................................60 Rate Selection..........................................................61 Valuation by Discounted Cash Flow Analysis..............................64 Market Value Analysis as of September 4, 1997...........................64 Correlation and Conclusion .................................................66 ADDENDA Photographs of Subject Property Legal Description Leasing Map Tax Map Rent Roll Professional Qualifications LANDAUER REAL ESTATE COUNSELORS 1 ASSUMPTIONS AND LIMITING CONDITIONS This appraisal report has been made with the following general assumptions: o Title to the property is assumed to be good and marketable unless otherwise stated. No responsibility is assumed for the legal description or any legal matter. The property is considered to be under responsible ownership, management, subject to responsible leasing efforts, and free of all liens and encumbrances except as specifically discussed herein. o The definition of value, together with other definitions and assumptions on which our analyses are based are set forth in appropriate sections of this report and are to be part of these General Assumptions as if included here in their entirety. o The information furnished to the appraisers by the client and others, as contained in this report, is considered to be from reliable sources and, where feasible, has been verified; however, no responsibility is assumed for the accuracy of the information. The appraisers reserve the right to modify the value conclusion should the accuracy of that information change subsequent to delivery of this report. o All engineering is assumed to be correct. o It is assumed that there are no hidden or unapparent conditions in the property, soil, subsoil, or structures which would render the property more or less valuable. No responsibility is assumed for such conditions or for arranging for engineering which would be required to discover them. All materials used in the structures on the appraised property are assumed to be free of asbestos, toxic materials, or any other potential health risks unless otherwise so stated and identified herein. No opinion is expressed on structural or mechanical conditions. LANDAUER REAL ESTATE COUNSELORS 2 o Landauer has reviewed and relied upon the tenant leases or abstracts provided by the client. o It is assumed that there is full compliance with all applicable federal, state and local environmental regulations and laws, that all applicable zoning and use regulations and restrictions have been complied with, unless a non-conformity has been stated, defined and considered in the appraisal report. o It is assumed that all required licenses, certificates of occupancy, legislative or administrative consents from any local or national governmental or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based. o It is assumed that the utilization of the land and/or improvements is within the boundaries or property lines of the property described herein and that there is no encroachment or trespass unless noted within the report. The appraisal report has been made with, and is subject to, the following general limiting conditions: o The appraisers herein, by reason of this appraisal report, are not required to give further consultation, testimony or to be in attendance in court or at any governmental or other hearing with reference to the property without prior arrangements having been made relative to such additional employment. o The distribution, if any, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and buildings must not be used in conjunction with any other appraisal and are invalid if so used. LANDAUER REAL ESTATE COUNSELORS 3 o Use and disclosure of the contents of this report is governed by the bylaws and regulations of the Appraisal Institute. o The client may show the reports in their entirety to interested parties outside its organization. Furthermore, the client may reference Landauer as its appraiser of record and the limited reports in their entirety only in any registration statement, prospectus, proxy materials, other offering materials or other communication (whether oral or written) distributed to third parties, subject to Landauer's prior written consent to any such reference. It is the understanding of Landauer that among the uses of the reports will be the disclosure of their contents in offering materials for the sale of securities and in various filings pursuant to state and federal securities laws. o This appraisal report is based upon and supported by available factual economic and market data and our interpretation of market conditions as of the date of the appraisal. Though we believe that our assumptions and forecasts are well supported, we cannot be held responsible for events which may alter market and property conditions between the date of inspection and the effective date of the opinion of value. o The information furnished to the appraisers by the client and others, as contained in this report, is considered to be from reliable sources; however, no responsibility is assumed for its accuracy. The appraisers reserve the right to modify the value conclusion should the accuracy of that information change subsequent to delivery of this appraisal report. o The Americans with Disabilities Act ("ADA") became effective January 26, 1992. Landauer has not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in LANDAUER REAL ESTATE COUNSELORS 4 compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the property. Since we have no direct evidence relating to this issue, we did not consider possible non-compliance with the requirements of ADA in estimating the value of the property. The appraisal report has been made with, and is subject to, the following specific limiting conditions. o We have relied upon information supplied by the property manager and the owner. Additional details including landlord's tenant finish contribution, copies of leases or lease abstracts were not provided. o We have used a rent roll, leases and verbal confirmation of occupancy and tenant retention as the basis for our estimate of potential gross income. This appraisal specifically excludes the direct valuation of any developable, vacant land contained within the site described in the legal description contained in the Addenda. o We have relied upon 1994, 1995 and 1996 operating expense data as the primary data supporting financial projections. A 1997 budget was not provided. o The computation of recovery methods is based on information contained in the rent roll and discussions with representatives of Westcor Partners, the General Partner of the entity owning the subject. Information forwarded is assumed to be correct. o Special Limiting Conditions are also stated in various portions of the Self-Contained Appraisal Report and are to be carefully noted in accepting the appraisal report. LANDAUER REAL ESTATE COUNSELORS 5 CERTIFICATION The undersigned certify to the best of their knowledge and belief that: The statements of fact contained in this appraisal report and upon which the analyses, opinions and conclusions expressed herein are based are true and correct. This report is made subject to the Assumptions and Limiting Conditions set forth on the following pages which set forth all of the limiting conditions (imposed by the terms of the assignment or by the appraisers) affecting the analyses, opinions and conclusions contained in this report. Employment and compensation for making this appraisal are not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the attainment of a stipulated result, or the occurrence of a subsequent event. We have no direct or indirect current or prospective personal interest or bias in the subject matter of this appraisal report or to the parties involved. The appraisal assignment was not based on a requested minimum valuation, a specific valuation, or the approval of a loan. This report has been performed in accordance with the Uniform Standards of Professional Appraisal Practice as promulgated by the Appraisal Standards Board of the Appraisal Foundation adopted by the Appraisal Institute, and the Code of Professional Ethics of the Appraisal Institute. The use of this report is subject to the requirements of the Appraisal Institute relating to review by their duly authorized representatives. As of the date of this report, James C. Kafes and G. Jay Fenner have completed the requirements of the continuing education program of the Appraisal Institute. No one other than the undersigned prepared the analyses, opinion and conclusions concerning real estate that are set forth in this report. G. Jay Fenner inspected the property on September 4, 1997. James C. Kafes and Paul F. Engel did not inspect the property. /s/ James C. Kafes (MJK) /s/ Paul F. Engel James C. Kafes, MAI, CRE Paul F. Engel Executive Managing Director Managing Director /s/ G. Jay Fenner (Aid) G. Jay Fenner, MAI LANDAUER REAL ESTATE COUNSELORS 6 SUMMARY OF SALIENT FACTS AND CONCLUSIONS Property Identification: Mall Store Space within Arrowhead Towne Center Glendale, Arizona Location: North line of Bell Road, between 75th and 79th Avenue, in Glendale, Maricopa County, Arizona. Mall Space is comprised of the store space situated between the anchor space. Improvements/Site: Arrowhead Towne Center is a 1,132,244-square-foot, regional mall located in Glendale, Arizona. The property appraised is the mall store space totaling 394,297 square feet and thus specifically excludes anchor store space of Dillard's, Robinson's-May, JC Penney, Montgomery Ward and Mervyn's. This appraisal also excludes the valuation of any developable, vacant land contained within the site described in the legal description contained in the Addenda. Zoning: PAD, Planned Area Development Occupancy: Anchor store space is currently leased. Approximately 87 percent of the appraised property (353,914 square feet) is currently leased and occupied. Highest and Best Use: Present Use; Regional Mall Interest Appraised: Leased Fee Interest, subject to the existing and pending tenant leases and assumptions and limiting conditions stated herein. Date of Valuation: September 4, 1997 Date of Inspection: September 4, 1997 Market Value Indications Cost Approach: Not Applicable Sales Comparison Approach: $80,000,000 $100,000,000 Income Approach: $105,000,000 Final Value Conclusion: $105,000,000 ============ LANDAUER REAL ESTATE COUNSELORS 7 NATURE OF THE APPRAISAL IDENTIFICATION OF THE PROPERTY AND INTEREST APPRAISED Arrowhead Town Center is a 1,132,244-square-foot, two-level, super-regional mall located in Glendale, Arizona. The property appraised consists of the mall store space totaling 394,297 square feet and thus specifically excludes the anchor store space of Dillard's, Robinson's-May, JC Penney, Montgomery Ward and Mervyn's. This appraisal also specifically excludes the direct valuation of any developable, vacant land contained within the site described in the legal description contained in the Addenda. The property rights appraised in this report consist of the Leased Fee Estate. Leased Fee Estate, as defined by the Appraisal Institute Dictionary of Real Estate Appraisal, Third Edition, page 204, is: an ownership interest held by a landlord with the rights of use and occupancy conveyed by lease to others. The rights of lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease. PURPOSE, FUNCTION AND DATE OF APPRAISAL The purpose of the appraisal is to estimate the Market Value of the Leased Fee Estate as of September 4, 1997. The function of the appraisal is to assist Morgan Stanley Mortgage Capital I, Inc., Commercial Pass-through Certificates, Series 1997-LL1. The Uniform Standards of Professional Appraisal Practice defines Market Value as: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: LANDAUER REAL ESTATE COUNSELORS 8 - Buyer and seller are typically motivated. - Both parties are well informed or well advised, and acting in what they consider their own best interests. - A reasonable time is allowed for exposure in the open market. - Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto. - 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. SCOPE OF THE APPRAISAL The scope of this complete appraisal involved the systematic research and analysis necessary to reach a market value conclusion for the subject. The initial step was to inspect the property, the general market area and the neighborhood. After investigating the area regarding economic, political, social and physical factors, research was conducted relevant to the valuation process, including gathering land sales, financial information, data concerning competitive shopping center properties and comparable improved sales, and other information pertinent to the valuation. This information was reviewed, confirmed and analyzed through the use of the Sales Comparison and Income Approaches to value. These approaches are detailed in the appropriate sections of the report. The Cost Approach is not considered to provide a meaningful value indication and is excluded from the analysis as agreed upon by the client. Lastly, a final value estimate was concluded based on the above analyses, which, in turn, were influenced by the most reliable and appropriate data. This narrative report is the result of our findings and analyses. LANDAUER REAL ESTATE COUNSELORS 9 HISTORY OF PROPERTY Arrowhead Towne Center is owned by New River Associates, an Arizona general partnership. There have been no sales of the property in the past three years and there are no known options, offers or contracts outstanding on the property, nor is there any known formal listing agreement to sell the property. EXPOSURE TIME AND MARKETING PERIOD The concept of exposure time is historical in nature and is presumed to have occurred prior to the effective date of the appraisal. Alternatively, marketing period occurs after the effective date of the appraisal and may or may not be directly related to the value presented. The actual sale price could increase, decrease, or remain static during the marketing period depending upon market conditions and the type of property being appraised. CB Commercial's National Investor Survey - First Quarter 1997 reports marketing times for Class A national malls ranging from 8 to 12 months. They report an overall average marketing time for regional mall properties of 9.9 months. Korpacz's Real Estate Investor Survey - Second Quarter 1997 states an average marketing time for regional malls at 10.44 months. Since most investors' perceptions and estimates of marketing period are based largely on exposure times that they have recently encountered in similar transactions, it stands to reason that there should be come correlation between marketing periods and exposure times. In fact, in the absence of perceived changes in the market or other extenuating circumstances, marketing period and exposure time should be identical. That is to say, if other things are held constant, a property that (retrospectively) required an exposure time of one year could be expected to have a marketing period (prospectively) also of one year. LANDAUER REAL ESTATE COUNSELORS 10 Differences in the two concepts could appear when there is a perceived change in the market. To use the same example presented above, if a property required an exposure time of one year but perceived market conditions are improving, an appropriate estimate of marketing period could reasonable by expected to be less than one year. Conversely, if market conditions were anticipated to worsen, marketing period might exceed exposure time. Objectively quantifying such differences could be virtually impossible; however, understanding the relationship between the two concepts and how they are affected by perceived changes in the market allows one to better estimate (subjectively) a reasonable period for exposure time and marketing period. This is especially important during periods when actual market evidence is limited by a lack of transactions. It is then necessary to decide if exposure time began when the property was first offered for sale or when the price was dropped to (or near) the ultimate sale price. Further complicating the issue is the question of whether exposure time ends when a sale contract is signed or whether it ends at the closing date of a sale. Based upon our investigations, we believe that a marketing period of up to 12 months is reasonably appropriate. Furthermore, it is our opinion that the exposure time commensurate with our estimate of value for the subject would be up to 12 months. AREA MAP [GRAPHIC OMITTED] MARICOPA COUNTY, AZ REGIONAL ECONOMIC & DEMOGRAPHIC FACT SHEET (1990-2001)
Compound Annual 1996 2001 Percent Growth 1990 (est.) (proj.) 1980-1990 1990-1996 1996-2001 ---- ------ ------- --------- --------- --------- Population Maricopa County, AZ 2,122,101 2,512,278 2,816,850 3.5% 2.9% 2.3% Phoenix-Mesa, AZ, MSA 2,238,480 2,647,479 2,966,613 3.4% 2.8% 2.3% State of Arizona 3,665,228 4,359,186 4,901,861 3.1% 2.9% 2.4% United States 248,708,990 265,253,151 276,918,306 1.0% 1.1% 0.9% Households Maricopa County, AZ 807,560 980,382 1,103,543 4.0% 3.3% 2.4% Phoenix-Mesa, AZ, MSA 846,714 1,027,005 1,155,342 4.0% 3.3% 2.4% State of Arizona 1,368,843 1,670,286 1,885,951 3.7% 3.4% 2.5% United States 91,947,195 100,066,882 104,497,652 1.4% 1.4% 0.9% Avg. Household Income Maricopa County, AZ $38,979 $45,162 $54,335 6.3% 2.5% 3.8% Phoenix-Mesa, AZ, MSA $38,377 $44,420 $53,413 6.2% 2.5% 3.8% State of Arizona $35,459 $40,777 $48,847 6.0% 2.4% 3.7% United States $38,464 $44,680 $53,841 6.6% 2.5% 3.8% Per Capita Income Maricopa County, AZ $14,834 $17,710 $21,382 6.7% 3.0% 3.8% Phoenix-Mesa, AZ, MSA $14,516 $17,346 $20,936 6.7% 3.0% 3.8% State of Arizona $13,243 $15,819 $19,036 6.5% 3.0% 3.8% United States $14,220 $17,043 $20,545 6.8% 3.1% 3.8% Aggregate Income (000) Maricopa County, AZ $31,479 $44,493 $60,230 10.5% 5.9% 6.2% Phoenix-Mesa, AZ, MSA $32,494 $45,923 $62,110 10.4% 5.9% 6.2% State of Arizona $48,538 $68,960 $93,313 9.8% 6.0% 6.2% United States $3,536,695 $4,520,610 $5,689,345 7.9% 4.2% 4.7% Non-Agricultural Employment Maricopa County, AZ 984,200 1,235,201 1,404,581 4.4% 3.9% 2.6% Phoenix-Mesa, AZ, MSA 1,013,002 1,275,452 1,448,184 4.4% 3.9% 2.6% State of Arizona 1,482,901 1,855,717 2,099,106 3.9% 3.8% 2.5% United States 109,680,775 119,521,723 128,784,648 1.9% 1.4% 1.5% Retail Sales (000) Maricopa County, AZ $24,575,533 $31,910,469 5.4% Phoenix-Mesa, AZ, MSA $25,349,890 $32,858,334 5.3% State of Arizona $39,322,423 $51,198,827 5.4% United States $2,355,241,609 $2,871,024,805 4.0%
Source: Urban Decision Systems; Market Statistics; Data Resources, Inc. Retail Sales data is for 1995 and 2000 [Growth Rates - 1996 to 2001] [GRAPHIC OMITTED] LANDAUER REAL ESTATE COUNSELORS 12 DEMOGRAPHIC/AREA REVIEW The Phoenix-Mesa MSA includes all of Maricopa and Pinal Counties; however, Pinal County is sparsely populated except those areas adjacent to Maricopa County. The City of Phoenix forms the nucleus of the metropolitan area, surrounded by 23 incorporated cities and towns. The boundaries of Maricopa County encompass an area of 9,226 square miles, including about 100 square miles of water. The topography is generally characterized by desert valleys and low mountain ranges. Approximately 26 percent of the land within Maricopa County is privately held. Land under direct government control is divided between the federal government (60 percent), the state government (10 percent), and local governments (4 percent). Since 74 percent of the county's land area is under direct government control and nontaxable, development of taxable commercial, industrial and residential property is restricted to about one-quarter of the county's total area. POPULATION TRENDS As summarized in the table on the facing, the projected 1996 population for the Phoenix-Mesa MSA is 2,647,479, representing an increase of 408,999 persons from 1990 levels or a 2.9 percent compound annual increase. The estimated population in 2001 is 2,966,613 persons or total increase of 319,134 persons. From 1996, the population is estimated to increase at an annual rate of 2.4 percent. In general, the compound annual growth rate for the Phoenix MSA is similar that of the State of Arizona (the Phoenix MSA comprises about 60 percent of Arizona's population) and almost three times that of the U.S. as a whole. The Maricopa Association of Governments (MAG) publishes numerous demographic statistics for the county. The most recent population projections were published in March 1993, with the results outlined below for the county's five demographic regions, including Central, Northeast, Northwest, Southeast, and Southwest. LANDAUER REAL ESTATE COUNSELORS 13 Population Projections 1990 1995 2000 ---- ---- ---- Region Population Population Growth Population Growth - -------------------------------------------------------------------------------- Southeast 708,231 820,379 15.8% 961,117 17.2% Central 393,207 403,068 2.5% 417,349 3.5% Northeast 287,673 343,705 19.5% 396,933 15.4% Northwest 563,421 631,264 12.0% 708,831 12.3% Southwest 177,868 201,184 13.1% 203,870 14.8% ================================================================================ TOTAL 2,130,400 2,399,600 12.6% 2,715,100 13.1% - -------------------------------------------------------------------------------- Source: Maricopa Association of Governments, March 31, 1993 From this data it can be seen that moderate future growth is projected in the central region due to the limited availability of land. The four outlying regions (including the Northwest, or the subject's region) are projected to increase at least 12 percent between 1990-1995 and 1995-2000. The Greater Phoenix area is considered by many to be a prominent retirement destination area. However, most of the new immigration has been in younger age groups. The following table summarizes the age groups and their percentage of the total population. Age Distribution Age Group Percent --------- ------- 1-4 8.75 5-11 11.19 12-14 4.20 15-17 4.15 18-34 10.63 35-44 14.40 45-64 16.45 65+ 11.33 LANDAUER REAL ESTATE COUNSELORS 14 INCOME LEVELS Per capita income in the Phoenix-Mesa MSA in 1996 is projected to be $17,710, approximately equivalent to the national average but about 12 percent higher than the state of Arizona. Reflecting the younger population with slightly larger average household size, Phoenix-Mesa average household income is approximately 8 percent higher than the national average and 12 percent higher than that of the state of Arizona. Since 1990, per capita income in the Phoenix-Mesa MSA has grown at a compound annual rate of 3.0 percent, consistent with Maricopa County, the state of Arizona and the nation. This growth rate is expected to increase to 3.8 percent through 2001, an increase consistent with state and national projections of continued expansion in the regional, state and national economies. EMPLOYMENT From 1983 through 1988, the annual increase in employment in Maricopa County ranged from 4.1 percent (1987) to 10.0 percent (1984). In 1989, employment grew only 1.4 percent and 2.3 percent in 1990. In 1991 and 1992 Maricopa County experienced job losses as the economy softened. In 1993, net job growth increased by 31,000 jobs, which signaled the beginning of the economic recovery in the metro Phoenix area. The following chart summarizes employment growth for the metropolitan area since 1991. LANDAUER REAL ESTATE COUNSELORS 15 Changes In Average Employment Maricopa County Area 1991 To 1996 ------------------------------------------------------------------- Labor Force Employment Unemployed Average (000s) (000s) Change Rate ------------------------------------------------------------------- 1991 1,142.8 1,086.3 (30.1) 4.9% 1992 1,153.9 1,078.7 (7.6) 6.5% 1993 1,169.2 1,109.7 31.0 5.1% 1994(1) 1,267.0 1,204.2 94.5 5.0% 1995 1,372.1 1,328.7 97.0(2) 3.3% 1996 1,412.4 1,368.5 39.8 3.4% ------------------------------------------------------------------- (1) In January 1994, the Arizona Department of Economic Security redefined the geographical area for metropolitan Phoenix to include Pinal County. Thus, 1994 results are not directly comparable to prior years. (2) Denotes employment change from December 1994 to December 1995 ---------------------- Source: Arizona's Workforce, Arizona Department of Economic Security, Research The Phoenix metropolitan area ranked fourth among the 20 largest metropolitan areas in the United States in employment growth from 1984 to 1989, with a 25.7 percent gain, according to historical statistics compiled by Inside Phoenix. Simultaneously, businesses have been attracted by the good business climate and the available and growing labor force. Wage and salary employment has grown significantly over the past few years, increasing 4.6 percent in 1993, 6.3 percent in 1994, 5.0 percent in 1995 and 6.9 percent in 1996, according to the Arizona Department of Economic Security. According to the Blue Chip Economic Forecast, published by the College of Business at Arizona State University, employment growth is forecast to increase 2.8 percent per year in 1997. The current Phoenix area economy is reasonably strong and diversified. There is now an upward trend forecast for each employment sector except government. Historically known for the "Four C's" (copper, cotton, citrus and cattle), the economic focus has changed over the past two decades to those industries and economic bases which are more environmentally favorable and less sensitive to commodities markets which favor lower priced, imported resources. Continuing expansion of LANDAUER REAL ESTATE COUNSELORS 16 the electronics industry is expected to further the growing reputation of Phoenix as one of the major electronics centers in the country. Other important areas of income production include retail and wholesale trade, tourism, insurance, banking and a wide range of high-tech service industries. As outlined in the table below, the Phoenix area economy is currently led by the services, trade, government and manufacturing employment sectors. Maricopa County Labor Force & Employment - ----------------------------------------------------------------------------- February 1998 Category 1997 Percent Forecast - ----------------------------------------------------------------------------- Manufacturing 154,600 10.8 161,500 Mining & Quarrying 7,500 0.5 6,500 Construction 90,500 6.3 91,500 Trans, Comm & Public Utilities 68,400 4.8 72,300 Trade-Wholesale & Retail 335,500 23.4 357,200 Finance, Insurance and Real Estate 100,100 7.0 102,600 Services & Miscellaneous 423,000 29.5 458,400 Government 186,100 13.0 183,200 - ----------------------------------------------------------------------------- WAGE & SALARY EMPLOYMENT 1,365,700 1,433,200 TOTAL EMPLOYMENT 1,433,100 N/A TOTAL CIVILIAN LABOR FORCE 1,481,400 N/A TOTAL UNEMPLOYMENT 48,300 3.3% N/A ============================================================================= Source: Arizona's Workforce, Arizona Department of Economic Security, Research Administration Spurring the metropolitan area's population growth are the employment opportunities available to its residents. The source of future employment growth is four-fold: high technology/basic manufacturing, regional and/or national administrative headquarters, retirement/tourism, and the public sector. The high technology/basic manufacturing now counts for 10.8 percent of all non-agricultural employment. This job growth is largely attributed to gains in the high technology sector. High-tech industries comprise approximately half of all Arizona manufacturing, more than three times the national average. LANDAUER REAL ESTATE COUNSELORS 17 Beyond high-tech manufacturing facilities, Phoenix is becoming an increasingly attractive location for more basic, cost sensitive manufacturing and distribution firms looking to relocate from southern California. An additional source of growth in Phoenix is its emerging role as a regional hub. For many firms with five or six regional headquarters in such cities as New York, Atlanta, Chicago, Dallas or Seattle, Phoenix is a very strong candidate to be the site of their next regional location. Phoenix continues to benefit greatly from growth in tourism, seasonal migration and retirement residence. The local, state and federal government entities represent a large and growing source of employment within the Phoenix area. Government employment represented 13.5 percent of the total employment in 1995. By 1998 this percentage is projected to decline to 12.8 percent. The following table lists the largest employers in metropolitan Phoenix by selected industries. LANDAUER REAL ESTATE COUNSELORS 18 Metro Phoenix's Major Employers ---------------------------------------------------------------- Greater Phoenix Arizona ---------------------------------------------------------------- Manufacturing ------------- Motorola 17,962 17,962 Allied Signal 8,000 9,000 Honeywell 7,600 7,600 Intel 4,300 4,300 McDonnell Douglas Helicopter 3,000 3,000 Services -------- Samaritan Health System 9,103 9,867 American Express 7,200 7,200 St. Joseph's Medical Center 3,900 3,900 The Mayo Clinic 1,150 1,150 United Parcel Service 900 2,600 Resorts ------- The Pointe Hilton Resorts 3,000 3,000 Marriott Corp. Resort Operations 2,680 4,139 The Phoenician 1,200 1,200 Scottsdale Princess 1,000 1,000 Retail Trade ------------ Fry's Food & Drug Stores 5,727 8,067 Smitty's Super Value, Inc. 3,142 3,548 ABCO Foods 2,700 4,500 Safeway, Inc. 2,340 5,670 Smith's Food Store 1,850 3,700 Government ---------- Maricopa County 13,000 NA City of Phoenix 11,224 NA U.S. Postal Service 6,365 9,007 City of Mesa 2,800 NA City of Tempe 1,300 NA Other Major Employers --------------------- America West Airlines 7,584 7,646 Bank One Arizona 5,776 7,183 Arizona Public Service 5,456 6,324 U.S. Communications 5,200 6,400 First Interstate Bank 4,590 5,672 ---------------------------------------------------------------- Overall economic growth is expected to continue to spur employment and population growth in metropolitan Phoenix through the turn of the century. Several electronic manufacturing companies LANDAUER REAL ESTATE COUNSELORS 19 have built manufacturing plants in recent years in the Phoenix metropolitan area. These large facilities have lead the Phoenix area to become known as the Silicon Desert. In 1995, the Arizona Department of Economic Security estimated that electronic computer companies accounted for more than 25 percent of the total manufacturing employment in greater Phoenix. CONCLUSION The Phoenix-Mesa MSA possesses a favorable climate and pro-business environment, in response to which the area experienced explosive growth in the mid-1980s with annual population gains of 4 to 5 percent and employment gains of 2 to 5 percent. Since 1991, employment has grown 26 percent overall as reported by the Department of Economic Security. Accelerated real estate growth is also forecast for the next few years as existing supplies of leasable space are diminishing. The expectations of near term demand for housing is above the average demand level in recent years. All sectors of the metro Phoenix real estate market are improving. The office market, particularly Class "A," is experiencing declining vacancy rates. Grubb & Ellis believes that new Class "A" space needs to be constructed in the 44th Street Corridor and Scottsdale. Overall, vacancy rates for retail space in metro Phoenix have been declining and, because of the boom in single-family residential development, a recent surge in the construction of anchored centers has materialized. Virtually all single-family residential land in master-planned communities has been tied up by large homebuilders. New master-planned residential communities are being constructed in the North, Northeast, Northwest and Southeast Valley areas of metropolitan Phoenix. The apartment market has also been experiencing a construction boom in recent years as vacancies have declined and rental rates have increased substantially Since 1992, job and population growth within the metropolitan Phoenix area has continued at record rates. As a result, overbuilt real estate conditions have been reduced or eliminated in virtually every real estate sector. The Phoenix metro area is now considered to be one of the more attractive real estate markets in the U.S. by developers and investors. The single-family residential market experienced record activity in terms of building permits, absorption, and price increases LANDAUER REAL ESTATE COUNSELORS 20 during the 1993-1996 period. Multifamily residential during the same time period experienced the biggest decreases in vacancies and increases in rental rates since the 1980s. Both of these markets are expected to continue to grow, but it is generally agreed that 1997 levels of building permits, sales, absorption price and rental increases will be less than during the past three years. The industrial market is now experiencing the first speculative projects constructed since the late 1980s. The retail market is expected to remain active in terms of demand and new construction, stimulated by the metropolitan area's continued population growth. The new additions to supply will consist primarily of anchored centers within high-growth suburban locations. These markets should continue to show improvement in terms of vacancy and rental rates during 1997. Finally, the speculative office market is poised in terms of vacancies and effective rental rates to facilitate a modest level of new construction in 1997. NEIGHBORHOOD MAP [GRAPHIC OMITTED] LANDAUER REAL ESTATE COUNSELORS 22 NEIGHBORHOOD ANALYSIS The subject property is located in the central portion of the Northwest Valley area of Metropolitan Phoenix. The general neighborhood boundaries are as follows: North - Agua Fria Freeway (101) East - 67th Avenue South - Thunderbird Road West - Aqua Fria Freeway (101) The subject property is located in Glendale approximately seven miles west of the Black Canyon Freeway, four miles west of the Phoenix city limits, and immediately north and east of the city of Peoria. SURROUNDING INFLUENCES The subject property is located in what was a primarily agricultural area until the past decade. The subject neighborhood is comprised of a variety of land uses including single family residential, a regional mall (subject), shopping centers, golf courses, municipal facilities, and agricultural land. Existing land uses within the subject neighborhood south of the Arizona Canal and Thunderbird Paseo flood control district include single family housing, horse properties, two schools, and agricultural land. A large percentage of the single family housing product is medium to low density. Existing satellite commercial development to Arrowhead Mall includes the 243,485 square foot North Valley Power Center anchored by Target, Ross Dress-For-Less, and Home Express; the 232,706 square foot Arrowhead Marketplace anchored by Best Buy, Marshall's, OfficeMax, and Drug Emporium; and Arrowhead Crossing anchored by Fry's, MacFrugals, and Staples. To effectively plan for long-term development of this 796-acre region, the cities of Glendale and LANDAUER REAL ESTATE COUNSELORS 23 Peoria have adopted the North Valley Specific Area Plan. The majority of the existing development in the planning area is low-density single family residential. Existing subdivisions include Hidden Manor, Secluded Acres, Secluded Estates, and Arrowhead Estates located in the northern portion of the planning area. Additional land uses include the Greenway Sports Complex and the Peoria Sports Complex, spring training home of the San Diego Padres and Seattle Mariners. According to the North Valley Specific Area Plan, the maximum number of additional dwelling units for the 796-acre planning area includes 3,544 multifamily units and 174 single family units. Planned commercial/industrial development permits for 8.56 million square feet of space. The development area's land use mix includes 47 percent commercial retail, 17 percent multi-family, 8 percent single family, 8 percent light industrial, 7 percent general office, 7 percent business park, 3 percent limited office, and 3 percent neighborhood park. Approximately 70 percent of the development area is in Glendale with the balance in Peoria. North Valley Specific Area Plan - --------------------------------------------------------------------------- Acres Square Maximum Footage Dwelling Units - --------------------------------------------------------------------------- CITY OF GLENDALE Shopping Center 70.3 920,355 General Commercial 73.2 960,169 Limited Commercial 6.6 86,402 Light Industrial 64.0 836,703 Business Park 47.4 620,207 Regional Center 95.9 1,253,454 Multifamily 80.2 2,085 Single Family 69.3 174 General Office 16.3 568,116 Limited Office 22.6 219,756 Buffer-Open Space 3.0 Neighborhood Park 21.0 ----- TOTAL 569.8 5,465,152 2,259 CITY OF PEORIA Commercial 130.2 1,701,453 Multi-Family 56.1 1,459 General Office 40.0 1,393,920 ----- --------- TOTAL 226.3 3,095,373 1,459 =========================================================================== DEVELOPMENT AREA TOTAL 796.1 8,560,525 3,718 - --------------------------------------------------------------------------- LANDAUER REAL ESTATE COUNSELORS 24 Finally, the portion of the subject neighborhood north of Union Hills Drive houses a portion of Arrowhead Ranch, a 4,480-acre master planned community bounded roughly by Union Hills Drive, Deer Valley Road, 43rd Avenue, and the New River. The master plan calls for 13,631 residential dwelling units, commercial, a business park, two 18-hole golf courses, 465 acres of man-made lakes, hotel and school sites, and a wastewater treatment plan. Development of the community began in 1985. TRANSPORTATION The subject neighborhood's existing transportation network follows a grid pattern with major arterials aligned in one-mile increments. Major north/south arterials include 67th, 75th, and 83rd Avenues, while east/west arterials include Union Hills Drive, Bell Road, Greenway Road, and Thunderbird Road. Greenway Road does not extend continuously through the neighborhood. At this time it exists between 67th and 70th Avenues and between 75th Avenue and 81st Avenue. The Agua Fria Freeway curves approximately one mile north and one mile west of the subject site and is the neighborhood's northern and western boundaries. The Agua Fria Freeway follows an 83rd-99th Avenue alignment north from Glendale Avenue to the Beardsley Road alignment where it takes an east-west course intersecting with Interstate 17. In December 1990, 2.5 miles of the Agua Fria Freeway were added, completing ten miles between Glendale Avenue and Beardsley Road. Frontage roads between 75th and 31st Avenues were opened in April 1992. When completed in the year 2003, the Agua Fria Freeway will link Interstates 10 and 17, significantly enhancing the West Valley's accessibility. LANDAUER REAL ESTATE COUNSELORS 25 CONCLUSION The subject property is located within a region which has experienced rapid urbanization during the past decade, the majority of which has occurred adjacent Bell Road and within the master planned community of Arrowhead Ranch. The recent construction of the Agua Fria Freeway opened the subject neighborhood for development by enhancing accessibility and stimulating job growth. Given the large inventory of vacant land and the availability of services, strong urban development activity is anticipated to continue within the subject neighborhood. LANDAUER REAL ESTATE COUNSELORS 26 RETAIL MARKET OVERVIEW OVERVIEW The Phoenix retail market is delineated as containing five retail submarkets with total supply of about 80 million square feet of retail space. Currently, the overall vacancy rate of retail space is approximately 93 percent, the lowest level since the 1980s. At present, there is approximately 3 million square feet of retail space within 18 projects under construction in the Phoenix area, with most space concentrated within new neighborhood centers in suburban locations. There are fifteen regional malls in the Phoenix area containing about 14 million square feet of space, or about 18 percent of Phoenix's total retail space supply. Currently, occupancy at the area's regional malls is about 87 percent, reflecting Phoenix's five obsolete regional malls. Mall redevelopment and renovation at functional malls has been active over the past few years with the re-alignment of retailers at Christown Mall, Metrocenter Mall, Biltmore Fashion Park, and Scottsdale Fashion Square. Some older and ill-located regional malls are being redeveloped as retail and back-office centers including Park Central Mall, Tower Plaza and Valley West Mall. This activity will focus more mall traffic to the newer, more functional mall properties. TRADE AREA DELINEATION The ability of a retail store or group of stores to attract customers from within a specific market is limited by physical (geographic) are retail merchandising constraints. Consideration must be given to such factors as distance, driving times, the access convenience provided by existing and future highway systems, distribution of the resident population within the related region and the natural as well as man-made barriers which direct or channel the movement of residents within the area, (such as rivers, large bodies of water, marshlands, large public open spaces, political boundaries, and expressways or railroads). Other factors such as merchandising profile and strength exhibited LANDAUER REAL ESTATE COUNSELORS 27 by on-site retailers relative to competing shopping facilities may also have a profound impact on the trade area's definition. Typically, the majority of a mall's recurring sales are generated by residents located within a "Primary Trade Area", while additional sales are generated by persons residing outside of this area, either in a "Secondary Trade Area" or outside of the region altogether. The subject property is a suburban mall, located in rapidly expanding suburban area in Northwest Phoenix. The transportation plan in most areas of Phoenix relies on the grid street system and automotive traffic. Because of the lack of east-west highways in the northern portion of Phoenix, drive times can be lengthy on through streets. As such, mall patron will typically live or work within a 10 to 15 minute commute to the mall most frequented. Based on these drive time estimates, and recognizing the location of the competitive mall properties, an eight-mile radius is considered to encompass the subject's trade area. TRADE AREA POPULATION The table below shows the population of the subject's trade area, comparing the 1990 census data with 1996 estimates and 2001 projections. Urban Decision Systems, Inc. (UDS) estimates the 1996 trade area population was 490,241 persons, a 19.56 percent increase from 1990 census levels. Based on the 2001 population projections, the total population is expected to increase an additional 12.8 percent or by over 62,600 persons. Though not specified, the majority of population growth will occur toward the subject property because of availability of vacant land with utilities for development Arrowhead Towne Center Trade Area Population Estimates 1990 Census 1996 Est. 2001 Proj. ----------- --------- ---------- Trade Area 410,041 490,241 552,848 Phoenix-Mesa MSA 2,238,480 2,647,479 2,966,613 - --------------------- Source: Urban Decision Systems, Inc. ARROWHEAD TOWNE CENTER TRADE AREA ECONOMIC AND DEMOGRAPHIC FACT SHEET 1990 - 2001
Compound Compound Annual Annual Estimate Projection % Growth % Growth 1990 1996 2001 1990-1996 1990 ---- ---- ---- --------- ---- Population 410,041 490,241 552,848 2.56% 2.43% Households 160,256 195,922 221,284 2.83% 2.46% Average Household Income $37,288 $42,957 $51,506 2.09% 3.70% Total Personal Income (Millions) $5,976 $8,416 $11,397 4.34% 6.25% Disposability Factor* 88.2% 87.8% 87.8% N/A N/A Total Disposable Income (Millions) $5,269 $7,389 $10,006 4.29% 6.25% GAFO Expenditure Potential (Millions)** $1,054 $1,478 $2,001 4.29% 6.25%
* 1994 Disposability Factor used for 1996 and 2001 comparisons. ** GAFO Expenditure Potential is defined as the portion of personal disposable income spent on general merchandise, apparel, home furnishings, and other miscellaneous retail items such as food away from home, sporting goods, books, toiletries. - ---------- Source: Urban Decision Systems, Department of Commerce, Bureau of Census LANDAUER REAL ESTATE COUNSELORS 28 The preceding table shows population in the trade area increasing from 1996 to 2001 at a compound annual rate of 2.43 percent. This is above compound annual growth expected for the Phoenix-Mesa MSA. The following table displays the number of households included in the trade area as estimated by UDS. As with population, the total number of households in the trade area has increased 22.3 percent from 1990 census figures, a trend expected to continue at a slower rate (12.9 percent ) through the year 2001. Compared to the MSA, the trade area households have increased and are projected to increase at a faster rate. Arrowhead Towne Center Trade Area Household Estimates 1990 Census 1996 Est. 2001 Proj. ----------- --------- ---------- Trade Area 160,256 195,922 221,284 Grand Rapids-Holland 846,714 1,027,005 1,155,342 - ------------------- Source: Urban Decision Systems, Inc. INCOME ESTIMATES AND COMPARISONS The income characteristics of the population of the subject property's trade area has a direct bearing on the property's economic viability. The following table presents a comparison of the income characteristics of the subject property's trade area to the Phoenix-Mesa MSA and the nation. Arrowhead Towne Center Average Household Income Comparison 1990 Census 1996 Est. 2001 Proj. ------------ ----------- ----------- Trade Area $37,288 $42,957 $51,506 Phoenix-Mesa MSA $38,377 $44,420 $53,413 United States $38,464 $44,680 $53,841 - ------------------ Source: Urban Decision Systems, Inc. LANDAUER REAL ESTATE COUNSELORS 29 The preceding table indicates that the average household income level for the trade area is slightly below that of the Phoenix-Mesa MSA and the nation. Since the 1990 census, the trade area has seen average household income increase at a compound annual rate of 2.4 percent, in comparison to 2.4 percent for the Phoenix-Mesa MSA and 2.5 percent for the nation. The average household income for the trade area is projected to grow faster over the next five years, with a compound annual growth rate of 3.7 percent projected through 2001. This is about the same for the Phoenix-Mesa MSA and slightly slower than the nation. Of note is the fact that the trade area incorporates the Sun City and Sun City West communities, which are planned retirement neighborhoods. These residents, who typically are retired and have accumulated wealth but have lower levels of household income, influence the overall statistics for the trade area. TRADE AREA EXPENDITURE POTENTIAL The retail expenditure potential of the subject property's trade area is key to the mall's success. Landauer estimates the retail expenditure potential of a mall's trade area using a three step process: First, the total gross income of the trade area is calculated by multiplying the average 1990, 1996 and 2001 household income by the number of households; Second, the total gross income is multiplied by a disposable income factor (income remaining after taxes); and Third, disposable income is multiplied by a GAFO factor (the percentage of expenditures for general merchandise, apparel, furnishings and other retail purchases--the expenditure categories most directly related to a typical regional mall tenant mix) to estimate the amount of trade area income available for retail purchases. GAFO expenditures (expenditures for general merchandise, apparel, furnishings and other retail purchases) are estimated to be 20.0 percent of disposable income. For purposes of comparison, the expenditure calculations for the subject trade area are illustrated below for the years 1990, 1996 and 2001. LANDAUER REAL ESTATE COUNSELORS 30 Arrowhead Towne Center Trade Area GAFO Expenditures 1990 1996 2001 ---- ---- ---- Total Households 160,256 195,922 221,284 Average Household Income $37,288 $42,957 $51,506 Total Income (000) $5,976,000 $8,416,000 $11,397,000 Disposability Factor 0.882 0.878 0.878 Disposable Income (000) $5,270,832 $7,389,248 $10,006,566 GAFO Factor 0.20 0.20 0.20 GAFO Expenditures (000) $1,054,166 $1,477,850 $2,001,313 - --------------------- Source: Urban Decision Systems, Inc., Landauer Associates, Inc. GAFO expenditures are projected to increase by 6.25 percent per year between 1996 and 2001 which is faster than the 4.3 percent annual rate from 1990 to 1996. In our analysis, we are projecting 1998 mall sales (fiscal year ends August) to be $97,229,000, exclusive of all anchors which is expected to increase to $122,931,000 by fiscal year 2001, a 6.0 percent annual growth rate. This projection accounts for not only increased existing store sales but also for absorption of vacant space within the property. Our sales projections indicate that the appraised portion of Arrowhead Towne Center is expected to capture about 6.5 percent of potential trade area GAFO expenditures in fiscal year 1998. Based on sales for the anchor tenants as reported by Westcor Partners, this equates to overall mall capture of about 12 to 13 percent of GAFO. Typical capture rates for regional malls range between 7.0 and 15.0 percent of GAFO and the subject's capture rate is within the range. Growth rates for retail sales, space absorption estimates and market rents used later in this appraisal are developed based on projected growth in trade area retail expenditures. Utilizing the above analysis, historic and projected compound annual sales growth figures are extracted and analyzed. Between 1990 and 1996, estimated GAFO sales grew at a compound annual rate of 4.3 percent. Between 1996 and 2001, GAFO sales are expected to grow at a slightly faster rate of 6.25 LANDAUER REAL ESTATE COUNSELORS 31 percent. Based on these indications, we have estimated that existing mall retailers sales will grow on average at about 3.5 percent per annum, with the amount of space leased and thus producing sales growing at about 2.5 to 3.0 percent per annum. These estimates are considered conservative given the current and projected status of Agua Fria Freeway which will effectively expand the trade area. COMPETITIVE RETAIL ANALYSIS Arrowhead Towne Center is the dominant mall in the far northwest market. The center's location, size and tenant mix all act to enhance its competitive position and is considered superior to proximate, older malls in Glendale. The merchandise mix of the center appears to cater well to the population within its market. However, the property was constructed somewhat prematurely and while being open in excess of three years has yet to fill to capacity. This condition should abate given the good population and income growth prospects for the neighborhood and trade area. Retail development in the Phoenix MSA has been driven by national and regional big-box retailers. With the opening of Arrowhead Towne Center in 1993, there was a rush by retailers and developers to construct retail space for the significant draw provided by the subject. Over the past three years there has been over two million square feet of retail space constructed proximate to Arrowhead Towne Center. Recently completed properties include those for Albertson's, Toys 'R Us, and Arrowhead Festival Power Center. Also, discount department stores (Target, Wal-Mart,) are proximate to the property. More recently, development has turned to other property classes including apartments (about 1,600 units are planned for construction over the next two years just north of Arrowhead Towne Center ) and office properties. In regard to competing malls, the following describes the most competitive properties in terms of quality of development and tenants, and draw for automotive-bound customers. COMPETITION MAP [GRAPHIC OMITTED] LANDAUER REAL ESTATE COUNSELORS 32 o Metrocenter Mall is located approximately seven miles and fifteen minutes east/southeast of Arrowhead Towne Center at the intersection of Black Canyon Freeway (IH 17) and Peoria Avenue. Metrocenter contains about 1.55 million square feet, was developed in 1973 but extensively renovated in 1996, and is anchored by Sears, Dillard's, Robinson's-May, J.C. Penney, and Macy's. The enclosed mall area contains about 535,000 square feet, and there are about 200 stores of which few (less than ten) were vacant when the mall was inspected. The mall has an appealing food court, large carousel, interior fountains, and two stories of both anchor and specialty shop space. The property is managed by Westcor. Economic data on the mall are not available from the owner/manager but other area brokers report mall sales upwards from $300 per square foot and rents upwards from $40 per square foot. o Paradise Valley Mall is located approximately 15 miles east of the subject or about 30 minutes drive time in private automobile. Paradise Valley Mall was built in 1979 by and is currently managed by Westcor Partners. This is a single-level mall anchored by Dillard's, J.C. Penney, Robinson's-May, Sears, and Macy's. Paradise Valley Mall contains approximately 1.23 million square feet of retail space of which about 147,495 square feet is non-anchor space. On the day of inspection the mall had between five and ten vacant units. Because of its more distant location far from existing highways, Paradise Valley Mall is not considered a primary competitor of Arrowhead Mall. o Desert Sun Mall, formerly known as Westridge Mall, is located approximately 12 miles south of Arrowhead Mall on 75th Avenue just north of IH 10. Built in 1981 and renovated in 1993, Desert Sun Mall is one of the weaker new malls in the Phoenix area due to its location in a less affluent and slower-growing neighborhood. Desert Sun mall contains approximately 914,850 square feet of leasable area anchors, including Sears, Mervyns, Montgomery Ward, J.C. Penney, and Dillard's. The property contains about 302,624 square feet of specialty or mall store space which is about 85 percent leased and occupied. The mall is of single-story configuration. Most vacancies are noted proximate to the LANDAUER REAL ESTATE COUNSELORS 33 entrance to anchor stores. The property was constructed and is managed by Westcor Partners. o Other retail proximate to Arrowhead Towne Center include North Valley Power Center containing 243,485 square feet and anchored by Ross Stores, Saba's, Home Express, and Target; Arrowhead Marketplace containing 232,706 square feet and anchored by OfficeMax, Linens+More, Drug Emporium, Best Buy and Marshalls; Arrowhead Crossing Power I anchored by Fry's, Staples, MacFrugals and Lil' Things; and Arrowhead Crossing Power II anchored by Oshman's, Barnes & Noble, T.J. Maxx and Circuit City. These centers were all constructed between 1992 and 1994 and are within one-half mile of the subject. Retail construction has slowed considerably proximate to Arrowhead Towne Center which should provide opportunity for the subject mall's specialty space to absorb vacant space. LANDAUER REAL ESTATE COUNSELORS 34 PROPERTY DESCRIPTION SITE ANALYSIS The subject site is located on the north line of Bell Road between 75th and 78th Avenue in the city of Glendale, Maricopa County, Arizona. All the usual public utilities are available to the site. A site plan with the Arrowhead Towne Center specialty space, anchors, outlots and plaza strip center are outlined. No soils tests were available for our review, and we assume that no adverse soil conditions exist. The parcel occupied by the entirety of Arrowhead Towne Center contains about 91.25 acres of land area of which 53.00 acres have been developed by the mall's five department stores, leaving 38.25 acres for the mall shops which are the subject of this appraisal. The subject site is irregularly shaped which pertains to the property's function as the specialty shop location of the larger regional mall and contains the primary roadway easement areas to the perimeter mall street. The site is generally level and above street grade. According to Flood Insurance Rate Map (FIRM) 0400451190E dated September 29, 1989 the site is outside the designated flood zone hazard area identified as within the 100 and 500-year flood plain. ACCESS AND VISIBILITY Visibility to the site is good from Bell Road and 75th Street. Access is available directly from Bell, 78th and 75th streets, as well as the perimeter road of the mall. Signal lights permitting full turning movements are located at the subject on Bell Street and at 75th and 78th streets. The entrance to Agua Fria Freeway is located approximately one-half mile west of the site along Bell Road. ZONING MAP [GRAPHIC OMITTED] LANDAUER REAL ESTATE COUNSELORS 35 ZONING The subject property is zoned PAD for Planned Area Development by the zoning commission of the city of Glendale. This zoning designation expresses the allowable parking, property square footage and use of the site and represents the exacting detail of a special zoning ordinance tailored to a planned development. It appears that the subject improvements are in conformance with the zoning ordinance. REAL ESTATE TAXES The subject falls within the tax jurisdiction of the city of Glendale, Maricopa County, Arizona. Arizona Revised Statutes require that all property be valued annually at market value. From this Full Cash Value, Assessed Values of the subject property are determined according to an assessment ratio of 25 percent, which applies to commercial or industrial property. The Limited Value (LV) is based upon the Full Cash Value (FCV) and by Statute is never more that the FCV. The LV can only increase by the greater of 10 percent of the prior year's LV, 25 percent of the difference between the prior year's LV and the current year's FCV, or the ratio of the total FCV to LV for comparable properties within the same taxing jurisdiction. Meanwhile, FCV can increase to reflect the fee simple interest in the real estate being assessed and can increase more if necessary. The subject property, known as property No. 200-43-006M by the Maricopa County Assessors office, has a 1997 FCV of $39,914,536 as compared to 1996 of $36,031,532, a 10.8 percent increase. The LV is reported to be $37,120,518 for 1997 as compared to $28,680,484 for 1996, a 29.4 percent increase and exceeding the allowable increase by law. For this reason the LV for the subject property for 1997 is estimated to be about 10 percent above the prior year's LV or within 25 percent of the difference between the prior year's LV and the current year's FCV, or at about $31,500,000. Based on announced 1997 Primary Tax rates (combined) of $7.9439 per $100 LANDAUER REAL ESTATE COUNSELORS 36 valuation, real estate taxes for the subject property in 1997 are estimated at about $625,582. We expect the LV of the subject property to increase by the allowable limits for the next few years, creating a situation wherein real estate tax expense is expected to increase by about 10 percent per year over the next few years. IMPROVEMENTS Arrowhead Towne Center is a five-anchor, two-level, climate-controlled, super-regional mall containing 1,132,244 square feet of space. The anchor stores, which are not a part of this appraisal, contain 737,947 square feet. The subject property, comprising the specialty or mall store space, reflect the remainder of the property in Arrowhead Towne Center comprising 394,297 square feet. The center's square footage is distributed as follows, with the subject property delineated in bold: Arrowhead Towne Center Area Delineation (square feet) Enclosed Mall Stores 348,174 AMC Theater 43,123 ------ Subject Total 394,297 Dillard's 204,198 Robinson's-May 191,500 J.C. Penney 140,387 Montgomery Ward 119,862 Mervyn's 82,000 ------ Anchor Total 737,947 Mall Total 1,132,244 Arrowhead Towne Center was constructed prior to and completed and occupied in late 1993. The AMC space was developed on the subject site in 1996. Currently, the subject property is about 87 percent leased and occupied excluding leases out-for-signature and tenants who no longer occupy their space. The current occupancy includes some tenant classified as temporary having leases LANDAUER REAL ESTATE COUNSELORS 37 being less than two years in length. For calculating the occupancy, we have included the temporarily occupied unit as a vacant unit. The following is a brief description of the physical components of the subject property. Foundations: Spread reinforced concrete footings. Exterior Walls: Load bearing masonry walls and structural steel columns. Roof: Open web bar joists supporting a metal deck and a built-up roofing system. Ceilings: Sheet rock and dropped ceilings with skylights in the mall. Floor: Ceramic floor tile on the mall corridor. Lighting: Metal halide down lights with skylights in the mall corridor. Because of the large number of skylights, natural light is abundant in the mall. HVAC System: Evaporator cooling and forced air HVAC system. Fire Protection: The shopping center is fully sprinklered with a wet system. Condition: Based on our inspection, the property is considered to be in excellent condition with no deferred maintenance noted. The center is of average-quality construction with an appealing two-level design. Circulation and parking are adequate and appropriate for a regional-tenant shopping center. It is reported that their are no detrimental environmental issues associated with Arrowhead Towne Center. LANDAUER REAL ESTATE COUNSELORS 38 HIGHEST AND BEST USE Highest and best use is defined in The Appraisal of Real Estate, 10th Edition, as: The reasonably, probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible and that results in the highest value. Inherent in this definition is the separation of land and improvements. That is, the highest and best use for the land, as if vacant and available, could be different from the highest and best use of the improved property. All criteria must be met separately for both land and improvements. AS IF VACANT The subject property is located on a well-traveled interior neighborhood roadway. The best potential use would be one that benefits from the site's exposure and accessibility. The existing terrain is suitable for almost any type of commercial development. The property is zoned for commercial development (specifically, the subject mall development). Surrounding land uses include residential, commercial and office developments with commercial use as the dominant use. Considering these factors, the highest and best use of the site, if vacant, would be for a regional shopping center. AS IMPROVED The appraised property is improved with the specialty or mall tenant component of a regional shopping center. The design and layout of the center are suitable for typical tenant needs. Having analyzed competing retail centers, as well as the property's location, design, and condition, we conclude that the present use represents the highest and best use of the site, as improved. LANDAUER REAL ESTATE COUNSELORS 39 VALUATION METHODOLOGY All three approaches to value--the Cost Approach, Sales Comparison Approach, and Income Approach--were considered in the valuation of the Leased Fee Estate in the subject property. The Cost Approach is based upon the theory of substitution, which implies that a prudent investor will not pay more to purchase a property than it would cost to create a comparable substitute property. The value of the underlying land as if vacant and available for development is first estimated. To this is added the estimated cost of reproducing or replacing the subject property, minus the estimated amount of any depreciation (physical and functional) and obsolescence (economic). The Cost Approach is not used in this appraisal are agreed to by the client. The Sales Comparison Approach involves a direct comparison of the subject property with similar properties that have sold, in order to derive an estimate of market value. It is also based on the theory of substitution, and implies that a prudent investor would not pay more to buy the subject property than he would to buy an equally desirable substitute property. Because of wide differences in age, condition, tenancy, location, and (most importantly) anticipated net income, this analysis often provides only broad indications of general valuation parameters, such as price per square foot of gross building or rentable area, and overall capitalization rates. The Income Approach is usually relied upon as the primary indicator of value when analyzing income-producing properties. Either through the direct capitalization of net income or the discounting of projected cash flows into a present worth indication, the analyst has reliable tools with which to formulate an estimate of market value. Essential to this approach is an awareness of market rents, operating costs, current investor yield requirements, and the relative risks associated with varying types of investment instruments. Based on the methodologies of the three approaches to value, we have conducted our analysis of the subject property. Our assumptions and conclusions for each approach are presented in the following sections of the report. LANDAUER REAL ESTATE COUNSELORS 40 COST APPROACH The Cost Approach to value has not been used in this report for two specific reasons: Lack of truly comparable construction cost data; and the inappropriateness of the valuation technique. Current land value and construction cost estimates may be higher or lower than those estimated in the last nine years since the mall was built; as a result, the lack of recent construction data prevents us from quantifying the changes in replacement costs. The lack of comparable regional mall development activity also precludes us from making a reliable estimate of developer's profit. What was once achievable in the market may not be achievable today, and without an active market, the estimation of an appropriate profit margin becomes even more subjective. Additionally, as the subject is a portion of a larger mall development, the Cost Approach is not considered relevant. Income producing properties like the subject property do not lend themselves to reliable estimates of value by the Cost Approach. The purpose of this appraisal is to estimate the market value of the leased fee interest in the subject property. Because of the potential impact of above or below market leases, specific anchor tenant operating agreements, ground leases, and other unique lease requirements oftentimes found in shopping centers, the Cost Approach cannot accurately measure the effect of such factors. In addition, the Cost Approach does not reflect the motivations inherent in purchasing income-producing properties. Shopping centers in many instances require intensive leasing, management and operational skills in order to maximize their performance. The above relationships are economic in nature, and in our opinion are best measured by proper application of the Income Approach to value. As a result of this, we have not undertaken an analysis of the property by the Cost Approach as previously agreed to by the client and Landauer. LANDAUER REAL ESTATE COUNSELORS 41 SALES COMPARISON APPROACH The Sales Comparison Approach to value is a technique by which market value is estimated by direct comparison of the subject property with current offerings and/or actual sales transactions of like or similar properties that occurred recently. The process is one of analyzing the listing or sale and correlating the characteristics of the property involved and the known details of the transaction so that such data can then be adjusted relative to the subject property. Consideration is given to a variety of valuation factors, including: 1) The degree of comparability of each property with the subject property; 2) The date of the sale in relation to the date of the current appraisal, taking into account market changes during the interim; 3) Reliability of the sales data; and 4) Appropriate adjustments for unusual conditions, if any, affecting price or terms of the sale. To apply the Sales Comparison Approach, an appraiser considers data on sales, contracts, offers, refusals, and listings of properties considered comparable to the subject property. First, the appraiser thoroughly researches the prices, real property rights conveyed, financing terms, motivations of buyers and sellers, and transaction dates of the sale properties. Then details on each property's location, physical and functional condition, and income producing characteristics must be examined. ELEMENTS OF COMPARISON These are the characteristics of properties and transactions that cause the prices paid for real estate to vary. The appraiser considers and compares all differences between the comparable properties and the subject property that could affect value. Adjustments for dissimilarities are made to the LANDAUER REAL ESTATE COUNSELORS 42 price of each comparable property to make the comparable equal to the subject on the date of the appraisal. There are several common elements of comparison that should always be considered in a sales comparison analysis. Each is described as follows: Real Property Rights Conveyed: A transaction price is always predicated upon the real property interest conveyed. Many types of real estate, particularly income producing property, are sold subject to existing leases. The revenue generating potential of a property is often fixed or limited by the terms of existing leases. In the valuation process, adjustments must be made to any limitations which may inhibit the property's ability to generate a level of net operating income constrained only by market events. Financing Terms: The transaction price of one property may differ from that of an identical property due to different financing arrangements. Estimates of market value are generally based upon an all cash basis or subject to financing terms typically available in the market. Calculations for atypical financing vary depending upon the type of financing arrangement and the market perceptions of the added value. These adjustments are commonly referred to as "cash equivalency". Conditions of Sale: These adjustments usually reflect the motivations of the buyer and the seller. When non-market conditions of sales are detected in a transaction, e.g. distressed sale, related parties or foreclosure, the sale can be used as a comparable only after extensive investigation. The motivations of the sale must be thoroughly researched before an adjustment is made. Date of Sale: Market conditions generally change over time, but the date of an appraisal is a specific time. Therefore, past sales must be examined in light of the direction of change between the sale date of the comparable and the valuation date of the subject property. This adjustment reflects change in value and is often called a "time adjustment". LANDAUER REAL ESTATE COUNSELORS 43 Location An adjustment may be required when the locational characteristics of a comparable property are different from those of the subject property. Adjustments for location are usually expressed as percentages that reflect the increase or decrease in value attributable to the property's location or neighborhood. Physical Characteristics: If the physical characteristics of a comparable property and the subject property differ in any way, each of these dissimilarities may require comparison and adjustment to equal the attributes of the subject. Physical divergence may include magnitude of improvement, quality of construction, age/condition, functional utility, site size and amenities. Income Characteristics: Factors that affect the income a property can generate include the quality of management and resulting efficiencies of operations, as well as demand, property condition, average rental rates and growth rates. APPLICABILITY OF ADJUSTMENTS In practice, when considering the purchase of a regional mall, buyers tend to relate one mall to another in income-oriented terminology, i.e., discount rates, capitalization rates. The rating process would include judgments of a center's location, market potential, development or expansion potential, and competitive advantage. This information would form the conclusions relating to capitalizing net income or discounting cash flows. Very little emphasis is given to the usual comparison factors utilized in the Sales Comparison Approach such as price per square foot or gross income multiplier. The presence or absence of owned anchor stores, ground leases or other factors tend to result in a desperate price per square foot comparison, while gross income characteristics can vary widely depending on escalation practices, real estate tax levels, etc. The foregoing factors make it very difficult to adjust the traditional comparison factors from one mall to another.
- ----------------------------------------------------------------------------------------------------------------------------------- Summary of Improved Regional Mall Sales Sale Number 1 2 3 4 Property Name: Towne East Mall St. Clair Square Park Mall Valley View Mall Location: Mesquite, Texas Fairview Heights, IL Tucson, Arizona Dallas, Texas Sale Date: Pending Nov-96 Oct-96 Oct-96 Interest Sold: Leased Fee Lease Fee and Leasehold Leased Fee Leased Fee Seller: Grosvenor International Prudential K-GAM LaSalle Partners Buyer: REIT CBL & Assoc. General Growth The Maceruch Co. Land Area (Acres) 102 89 75 95 Total GLA: 1,248,000 1,044,000 860,000 1,567,000 Total GLA Sold: 426,000 280,000 447,300 704,600 Year Constructed: 1971/1996 1978/1992 1974 1975/1993/1996 Sale Price: $112,500,000 $86,400,000 $50,000,000 $85,500,000 Price per Square Foot: $264 $309 $112 $121 Net Operating Income PSF: $23.24 $27.62 $11.18 $11.35 Retail Sales PSF: 300 330 225 228 OAR: 8.80% 8.65% 10.00% 9.36% Sale-to-Price Ratio 0.88:1.00 0.94:1.00 0.64:1.00 0.80:1.0 Mall stores were 93% Mall stores 94% One of two malls in Largest mall in Dallas. J.C. occupied at sale. NOI occupied at sale. Good Tuscon area. Buyer to Penney took over vacant based on OAR. location. Regional add two anchors. anchor space. Remarks: center of quality. - -----------------------------------------------------------------------------------------------------------------------------------
LANDAUER REAL ESTATE COUNSELORS 44 ANALYSIS AND INTERPRETATION OF DATA A summary of the comparable sales can be found on the facing page. All of the sales occurred between October 1996 and a current pending sale, and the sale prices range from $112 to $309 per square foot, with first year capitalization rates of 8.65 to 10.0 percent. Details on the transactions are included in the remarks column of the table. Typically, the unit value of a sale is significantly affected by the inclusion of anchor tenants; thus, a comparison among properties is most meaningful when there is a match among the property components included in the transfer. Other important price variables include differences in age, condition, quality, the interest transferred, and the extent to which the properties are leased at market rentals, as well as the impact of income from other sources not being accounted for within the expression of a mall gross leasable area measure. The subject property consists of 394,297 square feet of enclosed mall space within a larger super-regional shopping center. Sale Nos. 1 and 2 reflect enclosed mall space sales without anchor space being part of the transaction. Sale Nos. 3 and 4 were primarily comprised of enclosed mall space but contained some level, but not all, of the anchor space associated with the mall. Sale Nos. 1 reflects the transfer of the enclosed mall space within Towne East Mall, an enclosed mall in east suburban Dallas completed in 1971 and renovated in 1996. As the property had been renovated prior to sale, the buyers could expect and increase in operating results from the property over the next few years. The property sold on the basis of 264 per square foot and reported retail sales of $300 per square foot for a ratio of .88 to 1.0. The overall capitalization rate was reported at 8.8 percent with the purchased component of the property being 93 percent occupied at sale. Overall, Sale No. 1 is superior to the subject in regard to demonstrated retail sales and occupancy, while the subject is superior in regard to location in a faster-growing suburban market and in recentness of construction. LANDAUER REAL ESTATE COUNSELORS 45 Sale No. 2 reflects the November 1996 sale of 280,000 square feet of enclosed mall space with anchors of Sears, Dillard's, J.C. Penney and Famous-Barr. The property was constructed in 1978 but renovated in 1992 and, thus, was in good condition at sale. Mall shops were reportedly 94 percent leased, considered a stabilized level of occupancy. Retail sales are reported at $330 per square foot while the purchase price of $309 per square foot indicates a price ratio of 0.94 to 1.0. Sale Nos. 3 and 4 included anchor tenant space which typically reduces the overall price per square foot of mall sales indications. For instance, Sale No. 3 sold on the basis of $112 per square foot and exhibits a sale-to-price ratio of 0.64 to 1.0. Sale No. 4 exhibits similar characteristics with a sales price of $121 per square foot and a sales-to-price ratio of 0.80 to 1.0. Sale No. 3, located in Tucson, Arizona, is the only Arizona mall analyzed in this analysis. The property sold on the basis of a 10 percent capitalization rate. Enclosed mall sales were reportedly $225 per square foot. Sale No. 4 sold on the basis of a 9 percent capitalization rate with the buyer anticipating increasing revenues with the addition of a new anchor. Arrowhead Towne Center is a good quality regional mall located in a growing region of the Phoenix-Mesa MSA. While operating performance is improving, the property is still somewhat under-performing in retail sales occupancy. While investors will purchase properties in anticipation of near-term financial improvement, most prefer to wager on improvements made to the property itself as opposed to speculation on continued improvement of demographic characteristics for increased financial rewards and stability. As such, the capitalization rates associated with Sale Nos. 1 and 4 are considered aggressive for the subject at the current time. In 1996, retail sales at Arrowhead Mall were about $184 per square foot for enclosed mall space. According to the sales report as of July 1997, retail sales volume has increased significantly and 1997 projected sales are about $240 per square foot of mall area. Based on average occupancy of about 87 percent, this indicates a level of sales signaling increased occupancy and profitability for retailers, prerequisites of long-term mall profitability. However, the reason for the increased mall sales and whether tenants maintained margins to achieve sales is unknown. As such, projected sales are considered somewhat speculatively in estimates of value via Sales Comparison. LANDAUER REAL ESTATE COUNSELORS 46 In general, the subject is a good-quality center in an area experiencing good growth patterns of income, population and households. However, investors are cognizant of the difference between projected performance and current, demonstrated financial performance. As such, Sale Nos. 1 and 2 establish an upper range of value indications for the subject on a price per square foot basis and a sales-to-price basis (when utilizing projected sales). Therefore, in our opinion, the price per square foot applicable to the subject is between $230 and $250 per square foot. Similarly, the ratio of sale price to sales applicable to the property is between 0.75 and 0.85 of projected sales. These result in the following value ranges. Indicated Value Ranges 394,297 square feet x $230 = $90,688,310 394,297 square feet x $250 = $98,574,250 and 1997 projected sales of $240 psf x 0.75 x 394,297 = $70,973,460 1997 projected sales of $240 psf x 0.85 x 394,297 = $80,436,588 In conclusion, the value indications at the middle to upper end of the range are most applicable to the subject. The value range indicated by the Sales Comparison Approach is: $80,000,000 to $100,000,000. INDICATED MARKET VALUE OF THE LEASED FEE ESTATE BY THE SALES COMPARISON APPROACH............$80,000,000 to $100,000,000 LANDAUER REAL ESTATE COUNSELORS 47 INCOME APPROACH Income property exists for the production of income. It is only natural that the value of an income producing property should be a function of earning power. This is the essence of the Income Approach to Value and all related theory and techniques. This is not to say that the production of income is necessarily the sole reason for such a property's existence, nor is it meant to suggest that factors not related to earning power cannot influence value. There is no question, however, that the expectation of monetary gain is the major consideration in the valuation of income properties. Indeed, the anticipation of future benefits, either amenities or dollars, is the very basis of the value of any kind of property. The theory of the Income Approach is based on the present worth of the net income, cash flow, and reversionary value in the property it will produce during the remainder of its productive life over a reasonable holding (ownership) period. The Income Approach, therefore, is a process of measuring or estimating the extent of future benefits which might reasonably be expected and translating these benefits into a present value at a particular point in time. DISCOUNTED CASH FLOW ANALYSIS ("DCF") ASSUMPTIONS We have utilized a computer-generated (Pro-Ject) discounted cash flow analysis program to estimate the future financial performance of the subject property. The assumptions employed to structure the pro forma cash flow and determine future income and expense estimates in addition to capital items are summarized below. The model also allows for the entry of basic assumptions concerning future lease revenues and expenses. LEASING SUMMARY The subject property has 143 enclosed mall retail tenants, 2 kiosk tenants, cart rentals, storage rentals, and two ATM leases. Fifteen spaces within the appraised property are currently vacant. LANDAUER REAL ESTATE COUNSELORS 48 Several existing tenants within the property are temporary in nature, having signed leases of less than two years, with many not utilizing the overall space within the demised premise. The overall occupancy for Arrowhead Towne Center is about 87 percent including the temporary leases. Currently, there is little physical expansion capacity for additional carts and kiosks at the property. However, with the expansion of the Northwest Valley neighborhood and trade area, and improvements to the subject's accessibility, there is good potential for additional leasing of space within the property. Over the next few years it is expected that the mall will increase in occupancy and that a stabilized level of occupancy of about 95 percent of mall or specialty space will be obtained. Below follows a brief summary of the more pertinent details and a general description of the enclosed mall and plaza leases. ENCLOSED MALL TENANT LEASES The mall tenant leases vary in length, but average about 8-years in duration. In general, the leases are based on a triple-net treatment of expenses and include an administrative factor to Common Area Maintenance and Enclosed Mall Expenses. Environmental Expenses are passed through to tenants and provide services to the entire mall property. Tax expenses cover only the portion of the property appraised. Most tenants have percentage sales clauses for the computation and payment of overage rent. The most common form of computation is with a natural break of 5 to 7 percent of sales; however, the percentage sales clause varies on a tenant-by-tenant basis. The property is a below stabilized occupancy and thus the landlord's share of operating expenses is less that that which would be incurred at higher occupancy. Common area and other common area (administration) expenses are recovered based on the tenant's pro rata share of GLA for the enclosed mall. In most leases, the common area expenses have a 5-percent administrative surcharge added for calculating recoveries. Most leases specify renewal options; however, the renewal option rent is to be negotiated to a market level. For this reason, renewal options, unless advantageous to the tenant, are not modeled for the enclosed mall tenants. LANDAUER REAL ESTATE COUNSELORS 49 MARKET RENT In estimating market rents for Arrowhead Towne Center, recent leases were analyzed, actual spaces were examined and leasing plans were reviewed at the subject center and at competitive centers. Being a newer property, all leases at Arrowhead Towne Center are less than five years old and, thus, are mostly reflective of current market rates. Rental rates signed at the property in 1993 and 1994 are generally higher than rates signed in 1996 and 1997. This event has two sources: tenants were optimistic on the rapid leaseup of space in Arrowhead Towne Center and wanted to have prime spots reserved; and most of the original leases in the property were for the prime space within each category of space and, thus, have a tendency to be higher than the averages within the categories. At present, there are fifteen vacant enclosed mall retail tenant units and several temporary leases which will become available for re-lease over the next year. In this analysis, the market rent conclusion for these spaces will be applied. Market rents for Arrowhead Towne Center have been estimated on a tenant-by-tenant basis. These estimates are influenced by recent leasing trends, the quality of the location and the size of the space. Although rents vary by space, they generally fall within a range dictated by the size of the space. Estimated market rental rates for 1997 are summarized as follows: Estimated Market Rent Size of Space Market Rent (Sq. Ft.) Per Sq. Ft. --------- ----------- 0-999 $45.00 1,000-1,999 $30.00 2,000-1,999 $25.00 3,000+ $20.00 Food Court $55.00 Restaurant $20.00 Kiosk $200.00 Jewelry $50.00 LANDAUER REAL ESTATE COUNSELORS 50 The forecasted basic lease structure and assumptions have been derived from the market, as determined by the rent survey and activity at the subject. The assumptions used in the DCF Analysis are: Projection Period: The projection period begins September 1, 1997 and extends for a term of 10 years through August 2008. Fiscal year 1998 (the first full year) is used as the initial base year. The 11th year's (2008) net operating income is capitalized to establish the reversionary value and is added to the 10th year cash flow. Gross Leasable Area: 394,297 square feet Lease Term: Typical enclosed mall retail leases at the subject are for a 8-year term Growth Rates: Market rental rates have annual escalations of 3.5 percent from Year 2 throughout the projection period. Expense categories are escalated annually at a rate of 3.5 percent through the projection period, except for management fees which are based upon a percentage of effective gross income, and real estate tax expense as detailed earlier in the report. REVENUE Minimum Rent: Rental rates for current tenants are dependent on specific lease terms which have been modeled in our analysis. For currently vacant spaces and for lease rollovers, tenant spaces have been assigned the market rent for the appropriate category. LANDAUER REAL ESTATE COUNSELORS 51 Most of the leases at the center are structured on a net basis with the tenant responsible for their defined pro rata share of operating expenses and real estate taxes. According to a rent roll provided for the appraisal, there are more specific expense recovery schedules. We have simplified the recovery methods for most of the tenants, and the general expense recovery structure applied in the analysis is described below. Enclosed Mall Expenses: Enclosed mall tenants pay a pro-rata share of enclosed mall expenses based on a proportion of unit size to either the enclosed mall GLA or the occupied area of the enclosed mall, excluding anchor tenants. The CAM recovery includes such expenses as insurance, electricity, heat oil/gas, water and sewer, cleaning, repair and maintenance and security. An administrative fee of 5 percent is applied to this total. Common Area Expenses: This expense is related to the maintenance and repair of the common area of the center (site, parking area, etc.). Items included within this category include landscaping, security, payroll and repair expense, trash removal, insurance, lighting and parking lot repairs. Most tenants pay a direct pro-rata share of these expenses based on the GLA at the mall. This expense includes a 5.0 percent administrative charge. Enclosed Mall Expenses: This expense category, known as EMM expense, includes expense items such as utilities, cleaning, security, salaries and benefits, maintenance and maintenance contracts, interior landscaping, trash removal, and other items. EMM basically accounts for the expense associated with operating the interior portions of the property. LANDAUER REAL ESTATE COUNSELORS 52 Real Estate Taxes/ Insurance: Real estate taxes are recovered based on the tenants prorated share of the GLA. As the anchor tenants are not separately assessed for real estate taxes, they also pay a prorated share of the expense. Insurance expense is allocated for the common area of the property. Percentage Rent: Also known as overage rent, percentage rent cited in the existing leases vary from 2.0 to 15.0 percent of sales above a natural or predetermined breakpoint. The most typical percentage rent rates found at the subject are 5.0 to 6.0 percent. Future sales volume forecasts for each tenant are based upon the information from 1995, 1996 and first quarter 1997 sales volume with trend projections based on past years experience to account for the seasonal nature of retailing, especially in Phoenix which has a larger winter tourist population. Vacancy/Credit Loss: A 2.0 percent deduction is taken against effective gross income to account for unanticipated future vacancies and credit losses. All mall tenants are subject to the vacancy credit. Other Income: This category includes income from cart rental, storage locker rental, and miscellaneous income. In total, Other income is estimated at $210,000 in the first year of analysis as compared to other income of $212,867 in 1996. Miscellaneous income is increased at the general growth rate of 3.5 percent per year. LANDAUER REAL ESTATE COUNSELORS 53 Tenant Retention Ratio: Upon the expiration of the existing leases, it is estimated that 70 percent of the expiring enclosed mall tenants will renew and 30 percent will vacate when the leases expire. Vacancy Between Leases: A weighted average of two to four months vacancy between leases is assumed at rollover. The weighted averages assume an actual downtime of six to twelve months for non-anchor tenants. In conjunction with credit loss allowances, this assumption models a long-term stabilized vacancy and collection loss factor of about 5% in the cash flow model. Rent Concessions: Rent concessions are not common in the regional mall market. However, some malls will give free rent instead of contributing toward the tenant's alterations. No rent concessions are assumed in this analysis. Lease-up Assumptions: As of September 1, 1997, the subject is projected to have about 40,383 square feet of vacant space, including portions of lease space not occupied by temporary tenants. Including space occupied by temporary tenants and two tenants identified by management as having vacated their lease space, vacancy at the property totals about 13% of total space. Our assumptions for leasing the vacant space include the gradual leasing of space on a suite-by-suite basis over the next three years of the analysis. Thus, by fiscal year 2001 the property is modeled to have reached long-term or stabilized occupancy. Rental rates and tenant finish allowances are taken into consideration based on the characteristics of individual spaces. ARROWHEAD TOWNE CENTER HISTORICAL OPERATING EXPENSES
Annualized Item 1994 1995 1996 MAR-97 1997 =========================================================================================== Income Minimum Rent $ 5,288,044 $ 7,187,150 $ 8,332,834 $ 2,217,868 $ 8,871,472 Overage Rent $ 92,244 $ 109,571 $ 193,624 $ 29,076 $ 116,305 CAM Recovery $ 1,508,829 $ 1,942,050 $ 2,184,259 $ 556,471 $ 2,225,884 Tax/Ins Recovery $ 480,110 $ 469,666 $ 558,634 $ 239,925 $ 959,700 Environmental $ 1,500,000 $ 1,523,393 $ 1,563,290 $ 405,016 $ 1,620,065 Promotion Revenue $ 527,077 $ 561,923 $ 583,124 $ 163,876 $ 655,504 Misc. Income $ 48,075 $ 24,530 $ 58,687 $ 22,118 $ 88,472 Total Income $ 9,444,379 $11,818,283 $13,474,452 $ 3,634,351 $14,537,402 Less: Vacancy & Credit $ -- $ -- $ -- $ -- $ -- Effective Gross Income $ 9,444,379 $11,818,283 $13,474,452 $ 3,634,351 $14,537,402 Expenses CAM $ 299,981 $ 457,588 $ 473,410 $ 131,541 $ 526,164 EMM $ 1,385,237 $ 1,618,395 $ 1,602,796 $ 415,316 $ 1,661,264 Environmental $ 977,917 $ 1,053,421 $ 1,049,422 $ 196,082 $ 784,328 Cart Expense $ 45,971 $ 45,811 $ 45,578 $ 15,986 $ 63,944 Real Estate Taxes $ 590,092 $ 567,928 $ 607,954 $ 266,100 $ 1,064,400 Insurance $ 13,135 $ 15,969 $ 15,969 $ 4,637 $ 18,549 Advertising/Promo $ 603,539 $ 700,271 $ 710,691 $ 138,747 $ 554,988 Management $ 376,232 $ 474,267 $ 500,818 $ 135,714 $ 542,856 Audit/Legal $ 37,420 $ 67,959 $ 68,000 $ 26,919 $ 107,678 Other $ 19,244 $ 56,791 $ 29,701 $ 19,547 $ 78,187 Total Expenses $ 4,348,768 $ 5,058,400 $ 5,104,339 $ 1,350,590 $ 5,402,358 Net Income $ 5,095,611 $ 6,759,883 $ 8,370,113 $ 2,283,761 $ 9,135,044 Management Fee $ 376,232 $ 474,267 $ 500,818 $ 135,714 $ 542,856 Percent of Income 3.98% 4.01% 3.72% 3.73% 3.73%
LANDAUER REAL ESTATE COUNSELORS 54 Options: Many of the tenants have renewal options included in their original leases. Most of the renewal terms cited in the leases indicate that the renewal rental rate will be at the prevailing market level. For this reason, we have not exercised any renewal options, except for leases in which an option is advantageous to the tenants. Renewals: Upon expiration of current leases, tenants are renewed at the higher of the last effective rent or the market rent (base plus percentage rent) in the renewal year. The sales volume continues from the base lease. Where no history of sales is present, sales volume is projected to reach breakpoint levels in the second, third, or fourth year of tenant leases, depending on the space. Each tenant is charged with a weighted average tenant improvement allowance. EXPENSES Operating Expenses: Operating expense estimates for Arrowhead Towne Center were based primarily upon historical data from 1995, 1996 and partial-year (first quarter) 1997 figures. The 1997 budget estimate of expenses was not provided. We have also taken into consideration expense data from other similar shopping centers as well as from trade publications such as Dollars and Cents of Shopping Centers: 1995, published by the Urban Land Institute. However, our expense conclusion is based primarily upon the historical levels found at the subject. A summary of the historical operating levels are found in the table on the facing page. LANDAUER REAL ESTATE COUNSELORS 55 CAM: Common Area Maintenance expense includes such outside functions as security, water and electricity, exterior maintenance, landscaping and other functions. In 1995 CAM expense was $457,588 and $473,410 in 1996. On an annualized basis (based on four months results) CAM for 1997 is indicated at $526,164. For 1997 we estimate CAM expense at $500,000. Enclosed Mall: Enclosed mall (EEM) expenses include items such as cleaning, interior repairs and maintenance, insurance, lighting, music, pest control, security, seasonal decorations, supplies, interior land-scaping and security. This expense totaled $1,618,395 in 1995 and $1,602,796 in 1996. On an annualized basis the expense is $1,661,264 in 1997. We estimate 1997 enclosed mall expense of $1,650,000. The expense is projected to grow at the general expense growth rate of 3.5 percent per annum. Environmental: The environmental expense is associated with interior payroll, equipment, utilities, various cart expenses, and other expenses associated with interior services. Common area expenses are for maintaining the exterior common area including landscaping, parking lot and ring road. Environmental expenses totaled $1,053,421 in 1995 and $1,049,422 in 1996. Based on three months data, 1997 expenses are indicated at $784,328; however, these expenses do not reflect the cost of summer air conditioning in Phoenix. We have concluded the 1997 environmental expense of $1,100,000. Real Estate Taxes: Real Estate Taxes at the property were reported at $567,928 in 1995 and $607,954 in 1996. Based on limitations on current assessment, and current tax rates for the subject, 1997 real estate LANDAUER REAL ESTATE COUNSELORS 56 tax expense is estimated at $630,000 in 1997. Because of the increased value of the property, the limited value on which the real estate taxes is based is expected to increase over the next few years. Thus, real estate tax expense is estimated to increase by 10 percent per annum over the next four years. Thereafter, 3.5 percent increases are projected. Other Expenses: Other expense estimates for 1997 include those for insurance ($18,550), cart expense ($60,000), audit and legal expenses ($72,000) and miscellaneous expenses ($25,000). All are based on the historical operation of the property and are increased at 3.5 percent per annum through the cash flow model. Advertising & Promotion: Although shown in the table as a gross expense, this category is offset by recoveries from tenants. The net expense for 1994 through 1996 has ranged from $76,462 to $138,348. We have stabilized the landlord's contribution at $130,000 for 1997. Management Fee: Management fees in the regional mall market range from 3.0 percent to 5.0 percent, depending the revenues to which it is applied and whether leasing commissions are paid separately. For most malls, the management fee is typically in the range of 4.5 percent of minimum and percentage rent and utility sales, charged between related entities. A higher management fee of 5.0 percent would be applied to a lower level of minimum and percentage rent. When applied to all revenue, management fees range between 3.0 and 3.5 percent. For the Arrowhead Towne Center, management is based on 4.0 percent of minimum rents and overage rents. Additionally, there is a separate charge for on-site management, personnel at the property which has historically LANDAUER REAL ESTATE COUNSELORS 57 been just under $200,000 per annum. On-site management is estimated at $200,000 for 1997 in this analysis. In total, management expense is estimated at $577,456 in fiscal year 1998 as compared to management expense of $500,818 in 1996. TOTAL EXPENSES The total expenses as concluded for fiscal year 1998 are projected to be $4,785,278. The 1995 actual expenses were $4,496,477 and 1996 expenses were $4,521,215. Our fiscal year 1998 conclusion of $4,785,278 is not out of line based on historical expenses. CAPITAL ITEMS This non-operating expense category includes tenant alteration and improvement costs, leasing commissions, and a capital reserve (or reserve for capital replacements). Tenant Alterations: We note that there is still a considerable amount of vacant space at Arrowhead Towne Center, and many mall tenants have leases which expire in 2000 through 2003. By 2003, the tenant spaces will be 10-years old and would require some refurbishing. Furthermore, the enclosed mall tenants renewal options specify that the renewal rental rate will be re-negotiated to a market level, and there is no rental rate incentive for the tenant to renew. The landlord and tenant will re-negotiate the rental rate with the tenant most likely demanding that the landlord contribute to refurbishing its space as if it was a new lease. Furthermore, as the neighborhood continues to develop its commercial character, additional discount retailers and infill in-line tenants would enter the market and compete with tenant sales at the mall. To remain competitive in the future, new tenants will likely demand and receive from the landlord a larger amount of tenant finish. Historical detail on landlord's new tenant improvement allowance is limited. The information which is available indicates a wide range of tenant improvement allowances generally ranging from LANDAUER REAL ESTATE COUNSELORS 58 about $5 to $30 per square foot of leased space. At Arrowhead Towne Center, we anticipate some allowance above the recent average will usually be necessary, and we project an allowance of $20.00 per square foot for new enclosed mall retail tenants, with a $3.00 per square foot allowance for tenant renewal. Leasing Commissions: The management fee arrangement at the property specifically awards management a leasing commission of $3.50 per square foot for new leases and $1.50 per square foot for renewals. This agreement specifically identifies management's obligations to pay outside commission from this negotiated fee. Capital Reserves: This category accounts for the fact that capital items such as the roof, building mechanical systems, and parking lot eventually will need major repairs or replacement. We are projecting a $0.10 per square foot expense, growing at a 3.5 percent rate. Cash Flow Analysis: Based upon the foregoing assumptions and projections, the cash flow forecast for Arrowhead Towne Center is presented on the following page. - -------------------------------------------------------------------------------- Arrowhead Towne Center Cash Flow of Mall Space As of September 1997
Fiscal Year Ends 1998 1999 2000 2001 2002 - ---------------- ---- ---- ---- ---- ---- Revenues Minimum Rents $8,846,980 $9,607,140 $10,132,902 $10,594,504 $10,856,490 Recoveries CAM/EMM $2,310,175 $2,391,031 $2,474,717 $2,561,332 $2,650,979 Environmental 1,611,955 1,668,373 1,726,766 1,787,203 1,849,755 Taxes/Insurance 621,839 682,915 750,060 791,177 818,868 ------- ------- ------- ------- ------- Total Recoveries $4,543,969 $4,742,319 $4,951,543 $5,139,712 $5,319,602 Overage Rents $472,730 $508,689 $580,170 $611,824 $585,811 Other Income Cart Rental $158,000 $161,687 $167,346 $173,203 $179,265 Misc. 25,000 25,583 26,479 27,406 28,365 Storage 27,000 27,630 28,597 29,598 30,634 ------ ------ ------ ------ ------ Total Other Income $210,000 $214,900 $222,422 $230,207 $238,264 Total Revenues $14,073,679 $15,073,048 $15,887,037 $16,576,247 $17,000,167 Less: Vacancy $277,274 $277,274 $277,274 $277,274 $277,274 -------- -------- -------- -------- -------- Effective Gross Revenue $13,796,405 $14,795,774 $15,609,763 $16,298,973 $16,722,893 Expenses CAM/EMM $2,200,167 $2,277,173 $2,356,873 $2,439,364 $2,524,742 Environmental 1,125,667 1,125,667 1,125,667 1,125,667 1,125,667 Real Estate Taxes 672,000 739,200 813,120 858,096 888,129 Insurance 18,932 19,594 20,280 20,990 21,725 LL Advertising/Promo 133,033 137,689 142,508 147,496 152,658 Cart Expense 61,400 63,549 65,773 68,075 70,458 LL Insurance 4,810 4,978 5,152 5,333 5,519 On-Site Management 204,667 204,667 204,667 204,667 204,667 Legal/Audit 73,680 76,259 78,928 81,690 84,549 Other 25,583 26,479 27,406 28,365 29,357 Management 372,789 404,635 428,523 448,252 457,690 ------- ------- ------- ------- ------- Total Operating Expenses $4,892,728 $5,079,890 $5,268,897 $5,427,995 $5,565,161 Net Operating Income $8,903,677 $9,715,884 $10,340,866 $10,870,978 $11,157,732 Capital Expenses Commissions $61,088 $58,555 $27,444 $29,109 $33,817 Capital Improvements 34,715 35,930 37,188 38,490 39,837 Alterations 329,578 319,170 162,119 169,477 154,914 ------- ------- ------- ------- ------- Total Capital Expenses $425,381 $413,655 $226,751 $237,076 $228,568 Cash Flow $8,478,296 $9,302,229 $10,114,115 $10,633,902 $10,929,164 - ---------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- Fiscal Year Ends 2003 2004 2005 2006 2007 2008 - ---------------- ---- ---- ---- ---- ---- ---- Revenues Minimum Rents $11,188,738 $10,556,928 $12,555,398 $12,928,116 $14,347,508 $15,257,554 Recoveries CAM/EMM $2,743,763 $2,839,794 $2,939,187 $3,042,059 $3,148,530 $3,258,729 Environmental 1,914,496 1,981,504 2,050,856 2,122,636 2,196,928 2,273,821 Taxes/Insurance 847,528 877,192 907,894 939,670 972,558 1,006,598 ------- ------- ------- ------- ------- --------- Total Recoveries $5,505,787 $5,698,490 $5,897,937 $6,104,365 $6,318,016 $6,539,148 Overage Rents $619,074 $504,433 $472,349 $476,045 $455,880 $471,749 Other Income Cart Rental $185,539 $192,033 $198,754 $205,711 $212,910 $220,362 Misc. 29,357 30,385 31,448 32,549 33,688 34,867 Storage 31,706 32,816 33,964 35,153 36,383 37,657 ------ ------ ------ ------ ------ ------ Total Other Income $246,602 $255,234 $264,166 $273,413 $282,981 $292,886 Total Revenues $17,560,201 $17,015,085 $19,189,850 $19,781,939 $21,404,385 $22,561,337 Less: Vacancy $277,274 $277,274 $277,274 $277,274 $277,274 $277,274 -------- -------- -------- -------- -------- -------- Effective Gross Revenue $17,282,927 $16,737,811 $18,912,576 $19,504,665 $21,127,111 $22,284,063 Expenses CAM/EMM $2,613,107 $2,704,566 $2,799,226 $2,897,199 $2,998,601 $3,103,551 Environmental 1,125,667 1,125,667 1,125,667 1,125,667 1,125,667 1,125,667 Real Estate Taxes 919,213 951,386 984,684 1,019,148 1,054,819 1,091,737 Insurance 22,485 23,272 24,086 24,929 25,802 26,705 LL Advertising/Promo 158,001 163,532 169,255 175,179 181,310 187,656 Cart Expense 72,924 75,476 78,118 80,852 83,682 86,611 LL Insurance 5,712 5,912 6,119 6,333 6,555 6,785 On-Site Management 204,667 204,667 204,667 204,667 204,667 204,667 Legal/Audit 87,509 90,572 93,742 97,022 100,418 103,933 Other 30,385 31,448 32,549 33,688 34,867 36,088 Management 472,313 442,455 521,110 536,166 592,135 629,171 ------- ------- ------- ------- ------- ------- Total Operating Expenses $5,711,983 $5,818,953 $6,039,223 $6,200,850 $6,408,523 $6,602,571 Net Operating Income $11,570,944 $10,918,858 $12,873,353 $13,303,815 $14,718,588 $15,681,492 Capital Expenses Commissions $31,458 $251,061 $60,736 $182,873 $91,995 $33,037 Capital Improvements 41,231 42,674 44,168 45,714 47,314 48,969 Alterations 149,156 1,232,061 308,487 960,916 575,251 183,715 ------- --------- ------- ------- ------- ------- Total Capital Expenses $221,845 $1,525,796 $413,391 $1,189,503 $714,560 $265,721 Cash Flow $11,349,099 $9,393,062 $12,459,962 $12,114,312 $14,004,028 $15,415,771 - 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LANDAUER REAL ESTATE COUNSELORS 60 DISCOUNTED CASH FLOW ANALYSIS As previously discussed, once the projected income stream over the projection period is determined, the next step is to discount the periodic cash flow and the reversion at the end of the holding period to an indicated value as of the valuation date. The following definitions and assumptions were employed in our analysis. Net Operating Income: Net income remaining after all expenses but before capital items, i.e., tenant improvement cost, leasing commissions, and capital expenditures. Cash Flow: Income available after all capital items, including reserves, leasing commissions and tenant improvements. Overall Rate: A rate which reflects the relationship of the first year's net income to total value, derived by dividing the net income by the indicated value. Discount Rate: A rate of return used to estimate the present value of future cash flows including the reversion (sales proceeds) of the property at the end of the holding period. The discount rate is alternately called an Internal Rate of Return. Terminal Capitalization Rate: An overall rate applied to the projected net operating income at the end of the holding period to determine the amount of the reversion. A disposition fee is usually deducted from the reversion. Holding Period: A holding period is the term of ownership of an investment, also referred to as the projection period for the purposes of analysis and valuation. LANDAUER REAL ESTATE COUNSELORS 61 RATE SELECTION The selection of appropriate Discount Rates and Terminal Capitalization Rates for use in arriving at an estimate of value is a judgmental process. Community centers similar to the subject have a market appeal to both national and local investors. Therefore, competition with many other investment vehicles has an influence on rates of return required by investors. One method used to estimate an appropriate discount rate to apply in the discounted cash flow model is to analyze the investment parameters of institutional-type investors, both for real estate and non-real estate types of investments. The following yields were noted for non-real estate investments for the year ending August 22, 1997. Non-Real Estate Investment Yields Investment Instrument Yield Rate --------------------- ---------- Government Bonds (10 Years) 6.27% U.S. Treasury (30 Years) 6.57% Aaa-rated Corporate Bonds 7.22% Baa-rated Corporate Bonds 7.85% A-rated Utility Bonds (30 Years) 7.74% Government issues, considered near risk-free, tend to offer the lowest yield, while Baa-rated issues are generally among the highest. For real estate investments, rates may be influenced by risk, degree of liquidity, burden of management, tax benefits, and future appreciation or depreciation. Adjustments must be made to the safe rate to compensate for these factors. Consequently, required real estate yields are generally higher than those for non-real estate investments. Survey of Investment Criterea Second Quarter, 1997 Regional Mall Market Current Last Year Quarter Quarter Ago ------- ------- --- Free & Clear Equity IRR - ----------------------- Range 10.50%-14.00% 10.00%-14.00% 10.00%-14.00% Average 11.75% 11.69% 11.50% Change (Basis Points) - 6 25 Free & Clear Equity Cap Rate - ---------------------------- Range 7.00%-11.00% 7.00%-11.00% 6.25%-11.00% Average 8.57% 8.57% 8.17% Change (Basis Points) - 0 40 Market Rent Change Rate - ----------------------- Range 0.00%-4.00% 0.00%-4.00% 0.00%-4.00% Average 2.86% 2.86% 2.64% Change (Basis Points) - 0 22 Expense Change Rate - ------------------- Range 3.00%-4.00% 3.00%-4.00% 3.00%-4.00% Average 3.75% 3.78% 3.89% Change (Basis Points) - -3 -14 Residual Cap Rate - ----------------- Range 7.50%-11.00% 7.50%-11.00% 7.00%-11.00% Average 8.78% 8.76% 8.56% Change (Basis Points) - 2 22 Source: Peter F. Korpacz & Associates, Inc. - Quarterly Survey of Investment Criteria National Investor Survey First Quarter 1997 Regional Malls, Class "A" Third Quarter Third Quarter First Quarter 1996 1995 1996 ---- ---- ---- Free & Clear Equity IRR - ----------------------- Range 10.50%-11.80% 10.00%-11.80% 10.00%-11.50% Average 11.10% 11.10% 11.00% Change (Basis Points) - 0 10 Free & Clear Equity Cap Rate - ---------------------------- Range 8.00%-8.60% 7.00%-9.00% 6.00%-10.00% Average 8.2% 8.2% 8.0% Change (Basis Points) - 0 20 Market Rent Change Rate - ----------------------- Range 3.00%-4.00% 1.50%-5.00% 0.00%-6.00% Average 3.50% 3.20% 3.50% Change (Basis Points) - 30 0 Expense Change Rate - ------------------- Range 3.00%-4.00% 3.00%-4.00% 3.00%-4.00% Average 3.70% 3.70% 3.80% Change (Basis Points) - 0 -10 Residual Cap Rate - ----------------- Range 8.00%-9.30% 7.00%-9.50% 8.00%-10.00% Average 8.70% 8.70% 8.70% Change (Basis Points) - 0 0 Source: CB Commercial National Investor Survey LANDAUER REAL ESTATE COUNSELORS 62 The discount rates and terminal capitalization rates applicable to first-tier regional malls have remained relatively stable over the last year. As summarized on the facing page, according to the Korpacz Real Estate Investor Survey, Second Quarter 1997, discount rates range from 10.5 to 14.0 percent, with an average of 11.75 percent. This represents a 25 basis point increase from average rates of one year ago. Residual capitalization rates range from 7.5 to 11.0 percent, with an average of 8.78 percent, a 22 basis point increase from second quarter 1996 levels. First year overall rates are reported at 7.00 to 11.0 percent with an average of 8.57 percent, representing a 40 basis point increase from last year's rates. CB Commercial's National Investor Survey, First Quarter 1997, also indicates similar averages in discount rates (10.5-11.8 percent, average 11.0 percent), terminal capitalization rates (8.0-9.3 percent, average 8.7 percent), and going-in capitalization rates (8.0-8.6 percent, average 8.2 percent). In addition to the investor survey, we have reviewed the market for recent sales of regional malls in order to extract rates from the market. The table on the following facing page shows the rates for the regional mall sales that have sold since 1991. The sales indicate a range of discount rates (IRR) from 10.50 to 14.70 percent with an average of 11.91 percent. Initial capitalization rates range from 6.80 to 12.60 percent with an average of 8.44 percent. Overall rates varied based on the number of anchors included in the sale as well as on expansion opportunities of a center. This usually results in a lower rate because investors can expect to reap a development profit from a potential increase in cash flow. Yield requirements for investment properties throughout the United States have been relatively stable over the past year and competition for the better properties appears to be steady due to a variety of factors, including the scarcity of good quality investment real estate, the desire for an adequate hedge against inflation, and the quest for a safe haven for investment capital. Arising out of concerns over troubled real estate markets due to a receding economy and overbuilding, investor cash flow projections today tend to be more "realistic", incorporating assumptions and probabilities in keeping with actual market experience and predicated upon moderate future expectations. ASSUMPTIONS AND RATES FROM SALES REGIONAL MALLS Price/ Sale # of Sale Location Date OAR IRR Anchors Ratio ================================================================================ Texas Pending 8.80% -- 0 0.88 Idaho Jun-97 6.51% -- 3 -- California Jun-97 10.29% -- 2 -- Utah Mar-97 8.60% -- 4 0.91 California Dec-96 10.00% -- 3 0.46 Utah Dec-96 11.10% -- 3 0.57 Michigan Dec-96 10.50% -- 4 0.43 Illinois Dec-96 7.90% -- 0 1.36 Illinois Nov-96 8.65% 11.00% 0 0.94 California Nov-96 9.10% 15.20% 2 0.47 Montana Nov-96 9.90% 15.80% 2 0.47 Tennessee Nov-96 9.90% -- 0 0.33 Texas Oct-96 9.00% -- 1 0.80 Arizona Oct-96 10.00% -- 1 0.64 California Jun-96 10.30% -- 0 0.69 Illinois Apr-96 9.56% 12.00% 4 1.56 Idaho Apr-96 10.24% -- 4 0.56 Connecticut Mar-96 6.80% -- 0 -- California Mar-96 7.60% -- 1 1.18 Pennsylvania Mar-96 13.00% 10.50% 0 0.50 Florida Feb-96 7.70% -- 0 0.80 New Jersey Aug-95 8.70% -- 0 1.09 California Jun-95 8.90% 12.30% 0 0.95 Massachusetts Apr-95 8.50% 10.70% l 0.81 California Jan-95 12.60% 13.50% 0 0.50 California Jan-95 7.80% 10.50% 0 1.14 Virginia Jan-95 7.80% -- -- 0.55 Texas Dec-94 6.70% 11.60% 0 1.03 Texas Dec-94 8.70% 11.50% 2 0.39 Florida Dec-94 8.20% 11.50% 1 1.00 Florida Dec-94 8.60% 12.00% 0 0.80 Arizona Dec-94 7.80% -- -- 1.02 Missouri Dec-94 8.00% 12.10% 0 -- Louisiana Dec-94 10.70% -- 0 0.50 No. Carolina Sep-94 10.60% 14.70% 0 0.50 Virginia Jul-94 9.00% -- 3 1.11 Louisiana Jul-94 8.90% -- 2 1.10 Florida Jun-94 7.50% 11.00% All 1.22 Alabama Feb-94 7.40% 11.50% 0 1.10 California Dec-93 7.00% -- 0 1.12 Arizona Dec-93 8.00% 11.00% 0 1.17 Florida Dec-93 7.50% 11.50% 0 0.91 Ohio Dec-93 7.50% 1l.30% 0 1.16 New Mexico Dec-93 7.25% 11.00% 1 0.76 New Jersey Jul-93 7.50% 12.40% 1 0.68 9.00% Oregon Jul-93 8.00% 11.50% 0 0.88 No. Carolina Jul-93 7.00% 12.10% 2 0.77 Florida May-93 7.50% 12.00% 1 0.64 Texas May-93 8.50% 12.20% 1 0.85 Florida Jan-93 7.50% 11.00% 0 1.00 Florida Dec-92 7.25% 11.50% 0 1.50 11.70% 11.70% Illinois Dec-92 8.00% 12.00% 1 0.96 Texas Sep-92 8.00% 12.00% l 0.73 Connecticut Aug-92 7.00% 11.50% 0 Florida Jul-92 7.10% 11.50% 1 0.81 Florida Apr-92 7.00% 11.10% 0 1.24 Nebraska Apr-92 7.50% 12.50% 1 0.79 Florida Mar-92 7.90% 11.50% 1 0.79 Pennsylvania Dec-91 6.80% 11.20% 1 0.55 Maine Dec-91 7.30% 11.80% 3 -- LANDAUER REAL ESTATE COUNSELORS 63 Good quality regional malls remain the top property preference for investors. Demand for these relatively scarce properties is strong and the market is characterized as a "seller's" market whereby the best properties are bid up in price. The market for average or "B" quality malls is less active than "A" malls like the subject in similar locations, and these properties must be competitively priced in order to attract buyers. The subject property is the newest new-construction mall in the Phoenix MSA and is located in a growing sector of the metropolitan area. While the relatively new physical condition and growing neighborhood are positive factors, the historical performance of the subject has been less than exemplary. Currently, occupancy is 87 percent, which is toward the top of historical performance. When constructed, the neighborhood population could not financially support the mall at full occupancy. Several tenants left after a few years of lackluster overall retail sales. In 1996 total mall sales were $72,554,116. Fiscal year 1998 mall sales are projected in this analysis to be $97,213,000, a 34 percent increase. While trended 1997 sales data (through July 1997) indicate that 1997 sales are up about 24 percent above 1996 comparable-period sales, and 1997 projected sales are $94,234,980, the sales still represent a hurdle for investors who would rather have economics proven by performance given fixed investment parameters. The subject still has vacant space to lease, which poses some business risk not associated with stabilized malls. The subject property is considered among the top suburban malls in its metropolitan area, and because of its suburban setting, some possibility exists for new competition being constructed. Currently, competition primarily comes from existing retail in the neighborhood, Metrocenter Mall and Paradise Valley Mall. Suburban malls generally do not have the density of population available to urban malls are not convenient to most employees during or after work hours in the suburban environment. Taking these factors into consideration, it is our opinion that a discount rate of 12.5 percent is applicable to the cash flows forecast during the ten year holding period. Further, a terminal capitalization rate of 10.0 percent applied to the 11th year net operating income is appropriate to calculate the reversion value estimate. LANDAUER REAL ESTATE COUNSELORS 64 VALUATION BY DISCOUNTED CASH FLOW ANALYSIS The initial step when discounting with this methodology is to estimate the appraised property's reversionary value. Our reversion calculation assumes that the property would be sold at the end of the previously stated holding period. The reversion value of the property at that time is estimated by dividing the forecast net operating income (NOI) from the year following the projected holding period by the terminal capitalization rate. In addition, disposition costs of 2.0 percent are applied against the reversionary value in order to arrive at an estimate of the net reversion. The net reversion value is added to the last year of the projection period's net cash flow, which then represents the total future net cash flow to be received in that last year. MARKET VALUE ANALYSIS AS OF SEPTEMBER 4, 1997 This analysis begins September 1, 1997, and continues for ten years, ending August 31, 2008. The 11th year net operating income (Fiscal Year 2008) is capitalized to produce an estimated reversionary value at the end of the holding period. Considering the foregoing, the results of our analysis for Arrowhead Towne Center is as follows: Calculation of the Reversion 11th Year NOI (CY 2007) $15,681,492 Terminal Cap Rate 10.0% Gross Reversion $156,814,920 Disposition Costs (1.0%) (1,568,149) ----------- Net Reversion $155,246,771 This net reversion is then added to the 10th year's net cash flow, which then represents the total future net cash flow to be received in the 10th year. The following matrix shows the values indicated by discounting the cash flows at rates of 12.0, 12.5 and 13.0 percent. LANDAUER REAL ESTATE COUNSELORS 65 Valuation Matrix Discount Rate Property Value Price/SF ---- -------------- -------- 12.0% $109,038,042 $276.54 12.5% $105,583,122 $267.78 13.0% $102,274,123 $259.38 Utilizing a 12.5 percent discount rate, the estimated value is $105,000,000 (rounded). The overall rate in the first year is 8.4 percent and 9.2 percent in year 2. The discounted reversionary value of $43,881 represents 45 percent of the final value, below 50/50 ratio preferred by many investors for a stabilized property. However, the reversion contribution to value also suggests that more reliance is placed in the cash flow, which is an investment assumption confirmed by numerous investors. INDICATED VALUE BY THE DISCOUNTED CASH FLOW ANALYSIS................................................$105,000,000 ============ LANDAUER REAL ESTATE COUNSELORS 66 CORRELATION AND CONCLUSION In this report, we have utilized the Sales Comparison and Income Approaches in estimating the Market Value of the Leased Fee Interest of the subject property. A summary of our value estimates by each approach is as follows: Cost Approach Not Applicable Sales Comparison Approach $80,000,000 to $100,000,000 Income Approach $105,000,000 The reliability of the Cost Approach for the appraised property is weakened because an investor--the most probable potential purchaser of the property--typically is more concerned with the property's location, amenities, and ability to generate a required cash flow than with its replacement cost. In addition, the Cost Approach does not directly reflect the specific terms of actual leases signed or in negotiation at the property. Therefore, we have not used a Cost Approach in this analysis. The Sales Comparison Approach is an appraisal technique whereby the data of recent transactions involving similar or like properties is analyzed in order to derive an indication of the most probable sale price of the property being appraised. The reliability of this technique is dependent upon (a) the availability of comparable sales data, (b) the verification of the sales data, (c) the degree of comparability or extent of adjustment necessary for various factors, and (d) the absence of non-typical conditions affecting the sale price. This approach is most meaningful when income properties exhibit similar income and expense characteristics. The sales utilized in the analysis are national in nature, but are not truly comparable because of varying economic structures of the transactions, including lease structures, occupancy, etc. However, the adjusted value range and the rates exhibited by the sales is useful as LANDAUER REAL ESTATE COUNSELORS 67 a check of the reasonableness of the Income Approach, although the conclusion by this approach is lower than the Income Approach. Most significant is the Income Approach, which focuses on investors' primary concerns about the property's potential for generating income and value appreciation. This approach is particularly relevant when well-supported market rent and income data are available, and when major cash flow assumptions are supported by market-derived analysis. Because this approach closely parallels the thinking of well-informed buyers and sellers of income-producing properties, the present value estimate by this approach is given the most weight. Greatest reliance is placed on the Discounted Cash Flow Analysis value estimate. After consideration of the factors presented in this report and with greatest consideration given to the Discounted Cash Flow Analysis of the Income Approach in arriving at a final value, the Market Value of Arrowhead Towne Center, as of September 4, 1997, subject to existing tenant leases and the Assumptions and Limiting Conditions stated herein, is estimated to be: ONE HUNDRED FIVE MILLION DOLLARS $105,000,000 ADDENDA Photographs of Subject Property Legal Description Leasing Map Tax Map Rent Roll Professional Qualifications ARROWHEAD TOWNE CENTER GLENDALE, ARIZONA [GRAPHIC OMITTED] TYPICAL CORRIDOR VIEW [GRAPHIC OMITTED] TYPICAL CART AND CORREDOR VIEW ARROWHEAD TOWNE CENTER GLENDALE, ARIZONA [GRAPHIC OMITTED] MALL EXTERIOR AND PARKING LOT [GRAPHIC OMITTED] TYPICAL CORRIDOR VIEW VIEW Rev: June 1, 1992 Rev: May 20, 1992 Rev: May 14, 1992 May 3, 1992 VT 13-18 LEGAL DESCRIPTION DEVELOPER TRACT ARROWHEAD TOWNE CENTER GLENDALE, ARIZONA THAT PORTION OF THE SOUTH HALF SECTION 35, TOWNSHIP 4 NORTH, RANGE 1 EAST, C. & S.R.B. & M., MARICOPA COUNTY ARIZONA, DESCRIBED AS FOLLOWS: COMMENCING for a tie at the Southeast corner of Section 35, the South line of said Southeast quarter of which bears West 2641.53 feet; THENCE West, along the South line of the Southeast quarter of said Section 35, said line also being the monument line of Ball Road as set forth in "Amended Map of Dedication and Grant of Easements", as recorded in Book 349 of Maps, Page 43, M.C.R., a distance of 1320.77; THENCE North, 115.50 feet to a point on the North right of way line of said Ball Road, THE TRUE POINT OF BEGINNING: THENCE North, 439.08 feet; THENCE West, 337.35 feet; THENCE North, 554.40 feet; THENCE East, 30.54 feet; THENCE North, 51.79 feet; THENCE West, 88.73 feet; THENCE North 45 degrees 00 minutes 00 seconds West, 87.40 feet; THENCE North, 61.13 feet; THENCE West, 9.91 feet; THENCE North, 21.75 feet; THENCE West, 317.17 feet; THENCE South, 24.67 feet; THENCE West, 9.92 feet; THENCE South, 22.70 feet; THENCE South 20 degrees 00 minutes 00 seconds West, 632.55 feet to a point on a nontangent curve left having a radial bearing of North 28 degrees 12 minutes 08 seconds East; THENCE along said curve left having a radius of 725.42 feet, a central angle of 28 degrees 12 minutes 08 seconds, an arc distance of 357.07 feet to a point of tangency; THENCE East, 620.38 feet; THENCE South, 24.58 feet; THENCE West, 620.38 feet to a point of curvature right; Page 1 of 8 June 1, 1992 VT 13-18 LEGAL DESCRIPTION DEVELOPER TRACT ARROWHEAD TOWNE CENTER GLENDALE, ARIZONA THENCE along said curve right having a radius of 730.00 feet, a central angle of 42 degrees 25 minutes 10 seconds, an arc distance of 555.49 feet to a point on the curve; THENCE South 89 degrees 13 minutes 45 seconds West, 45.51 feet; THENCE South 48 degrees 52 minutes 05 seconds West, 191.12 feet to a point on the East right of way line of 79th Avenue as set forth in afore-mentioned "Amended Map of Dedication and Grant of Easements"; THENCE North 41 degrees 07 minutes 33 seconds West, along said East right of way line, 28.59 feet; THENCE North 48 degrees 52 minutes 05 seconds East, 243.76 feet; THENCE South 45 degrees 00 minutes 00 seconds East., 20.03 feet to a point of curvature left; THENCE along said curve left having a radius of 725.42 feet, a central angle of 04 degrees 27 minutes 45 seconds, an arc distance of 56.50 feet to a point on the curve; THENCE North 20 degrees 00 minutes 00 seconds East, 503.23 feet; THENCE East, 113.07 feet; THENCE North, 454.96 feet; THENCE West, 39.23 feet; THENCE North 45 degrees 00 minutes 00 seconds West, 163.70 feet; THENCE South 45 degrees 00 minutes 00 seconds West, 84.00 feet; THENCE North 45 degrees 00 minutes 00 seconds West, 174.40 feet; THENCE South 45 degrees 00 minutes 00 seconds West, 28.00 feet; THENCE North 45 degrees 00 minutes 00 seconds West, 292.20 feet to a point on a nontangent curve left having a radial bearing of South 47 degrees 15 minutes 10 seconds East; THENCE along said curve left having a radius of 573.42 feet, a central angle of 42 degrees 44 minutes 30 seconds, an arc distance of 429.31 feet to a point of tangency; THENCE South, 174.61 feet to a point of curvature left; THENCE along said curve left having a radius of 725.42 feet, a central angle of 45 degrees 00 minutes 00 seconds, an arc distance of 569.74 feet to a point of tangency; THENCE South 45 degrees 00 minutes 00 seconds East, 204.84 feet; THENCE South 48 degrees 52 minutes 05 seconds West, 52.70 feet; THENCE North 00 degrees 10 minutes 31 seconds West, 39.72 feet; Page 2 of 8 June 1, 1992 VT 15-18 LEGAL DESCRIPTION DEVELOPER TRACT ARROWHEAD TOWNE CENTER GLENDALE, ARIZONA THENCE North 45 degrees 00 minutes 00 seconds West, 173.11 feet to a point of curvature right; THENCE along said curve right having a radius of 750.00 feet, a central angle of 25 degrees 44 minutes 00 seconds, an arc distance of 349.94 feet to a point on the curve; THENCE North 61 degrees 05 minutes 42 seconds West, 44.25 feet; THENCE South 76 degrees 39 minutes 18 seconds West, 139.87 feet to a point of curvature left; THENCE along said curve left having a radius of 1165.42 feet, a central angle of 03 degrees 13 minutes 39 seconds, an arc distance of 65.65 feet to a point of tangency; THENCE South 73 degrees 25 minutes 39 seconds West, 61.69 feet to a point on the afore-mentioned east right of way line of 79th Avenue; THENCE North 15 degrees 34 minutes 21 seconds West, along said East right of way line, 69.17 feet; THENCE North 73 degrees 25 minutes 39 seconds East, 61.69 feet to a point of curvature right; THENCE along said curve right having a radius of 1234.59 feet, a central angle of 03 degrees 13 minutes 39 seconds, an arc distance of 69.55 feet to a point of tangency; THENCE North 75 degrees 39 minutes 13 seconds East, 139.87 feet; THENCE North 34 degrees 24 minutes 19 seconds East, 44.26 feet to a point on an nontangent curve right having a radial bearing of North 81 degrees 34 minutes 37 seconds East; THENCE along said curve right having a radius of 750.00 feet, a central angle of 08 degrees 25 minutes 23 seconds, an arc distance of 110.25 feet to a point of tangency; THENCE North, 174.61 feet to a point of curvature right; THENCE along said curve right having a radius of 600.00 feet, a central angle of 42 degrees 12 minutes 04 seconds, an arc distance of 441.93 feet to a point on the curve; THENCE North 04 degrees 03 minutes 11 seconds East, 46.24 feet to a point on a nontangent curve left having a radial bearing of South 52 degrees 38 minutes 24 seconds West; THENCE along said curve left having a radius of 471.41 feet, a central angle of 32 degrees 01 minutes 29 seconds, an arc distance of 263.49 feet to a point of tangency; Page 3 of 8 June 1, 1992 VT 15-18 LEGAL DESCRIPTION DEVELOPER TRACT ARROWHEAD TOWNE CENTER GLENDALE, ARIZONA THENCE North 69 degrees 23 minutes 05 seconds West, 83.77 feet to a point on the afore-mentioned East right of way line of 79th Avenue; THENCE North 20 degrees 36 minutes 53 seconds East, along said East right of way line, 28.59 feet; THENCE south 69 degrees 23 minutes 05 seconds east, 83.77 feet to a point of curvature right; THENCE along said curve right having a radius of 500.00 feet, a central angle of 37 degrees 57 minutes 35 seconds, an arc distance of 331.26 feet to a point on the curve; THENCE South 42 degrees 34 minutes 01 seconds East, 24.00 feet to a point on a nontangent curve right having a radial bearing of South 42 degrees 34 minutes 01 seconds East; THENCE along said curve right having a radius of 551.42 feet, a central angle of 10 degrees 29 minutes 47 seconds, an arc distance of 101.02 feet to a point on the curve; THENCE South 45 degrees 00 minutes 00 seconds East, 398.10 feet; THENCE North 45 degrees 00 minutes 00 seconds East, 56.00 feet; THENCE South 45 degrees 00 minutes 00 seconds East, 245.11 feet; THENCE South 13 degrees 13 minutes 31 seconds East, 136.37 feet THENCE East, 10.09 feet; THENCE South, 0.83 feet; THENCE East, 290.17 feet; THENCE North, 0.50 feet; THENCE East, 56.31 feet; THENCE North 53.81 feet; THENCE North 45 degrees 00 minutes 00 seconds West, 23.18 feet; THENCE North, 75.05 feet; THENCE West, 10.00 feet; THENCE North, 191.09 feet; THENCE East, 15.00 feet; THENCE North, 317.12 feet; THENCE West, 578.01 feet to a point of curvature left; THENCE along said curve left having a radius of 575.42 feet, a central angle of 36 degrees 33 minutes 13 seconds, an arc distance of 367.11 feet to a point on the curve; THENCE North 36 degrees 33 minutes 13 seconds West, 24.58 feet to a point on a nontangent curve right having a radial bearing of South 36 degrees 33 minutes 10 seconds East; Page 4 of 8 June 1, 1992 VT 15-18 LEGAL DESCRIPTION DEVELOPER TRACT ARROWHEAD TOWNE CENTER GLENDALE, ARIZONA THENCE along said curve right having a radius of 600.00 feet, a central angle of 36 degrees 33 minutes 13 seconds, an arc distance of 382.79 feet to a point of tangency; THENCE East, 1018.10 feet to a point of curvature right; THENCE along said curve right having a radius of 1043.50 feet, a central angle of 27 degrees 00 minutes 00 seconds, an arc distance of 491.74 feet to a point of tangency; THENCE South 63 degrees 00 minutes 00 seconds East, 98.21 feet; THENCE North 72 degrees 00 minutes 00 seconds East, 42.43 feet; THENCE North 27 degrees 00 minutes 00 seconds East, 177.08 feet to a point of curvature left; THENCE along said curve right having a radius of 250.00 feet, a central angle of 08 degrees 52 minutes 14 seconds, an arc distance of 38.71 feet to a point of tangency; THENCE North 18 degrees 07 minutes 45 seconds east, 112.04 feet to a point on the South right of way line of St. John Road as set forth in afore-mentioned "Amended Map of Dedication and Grant of Easements"; THENCE South 71 degrees 52 minutes 14 seconds East, along said South right of way line, 57.17 feet; THENCE South 18 degrees 07 minutes 45 seconds West, 112.04 feet to a point of curvature right; THENCE along said curve right having a radius of 307.17 feet, a central angle of 08 degrees 52 minutes 14 seconds, an arc distance of 47.56 feet to a point of tangency; THENCE South 27 degrees 00 minutes 00 seconds West, 177.08 feet; THENCE South 18 degrees 00 minutes 00 seconds East, 42.43 feet to a point on a nontangent curve right having a radial bearing of South 27 degrees 00 minutes 00 seconds West; THENCE along said curve right having a radius of 600.00 feet, a central angle of 60 degrees 00 minutes 00 seconds, an arc distance of 659.73 feet to a point of tangency; THENCE South, 100.92 feet to point of curvature right; THENCE along said curve right having a radius of 760.00 feet, a central angle of 01 degrees 40 minutes 50 seconds, an arc distance of 22.29 feet to a point on the curve; THENCE South 40 degrees 35 minutes 48 seconds East, 42.49 feet; THENCE South 80 degrees 38 minutes 44 seconds East, 112.82 feet to a point of curvature left; Page 5 of 8 June 1, 1992 VT 15-18 LEGAL DESCRIPTION DEVELOPER TRACT ARROWHEAD TOWNE CENTER GLENDALE, ARIZONA THENCE along said curve left having a radius of 765.42 feet, a central angle of 05 degrees 49 minutes 50 seconds, an arc distance of 77.90 feet to a point of tangency; THENCE South 89 degrees 28 minutes 38 seconds East, 34.75 feet to a point on the West right of way line of 75th Avenue as set forth in afore-mentioned "Amended Map of Dedication and Grant of Easements"; THENCE South 00 degrees 31 minutes 22 seconds West, along said West right of way line, 28.58 feet; THENCE North 89 degrees 28 minutes 38 seconds West, 34.75 feet to a point of curvature right; THENCE along said curve right having a radius of 794.00 feet, a central angle of 03 degrees 49 minutes 53 seconds, an arc distance of 80.81 feet to a point of tangency; THENCE North 80 degrees 38 minutes 44 seconds West, 167.43 feet to a point on a nontangent curve left having radial bearing of North 84 degrees 06 minutes 48 seconds West; THENCE along said curve left having a radius of 735.42 feet, a central angle of 05 degrees 53 minutes 12 seconds, an arc distance of 75.56 feet to a point of tangency; THENCE North, 100.92 feet to a point of curvature left; THENCE along said curve left having a radius of 575.42 feet, a central angle of 63 degrees 00 minutes 00 seconds, an arc distance of 632.71 feet to a point of tangency; THENCE North 63 degrees 00 minutes 00 seconds West, 57.86 feet; THENCE South 30 degrees 00 minutes 00 seconds West, 483.33 feet; THENCE South 13 degrees 00 minutes 12 seconds West, 75.06 feet; THENCE South, 295.87 feet; THENCE South 61 degrees 09 minutes 09 seconds East, 54.16 feet; THENCE South 20 degrees 00 minutes 00 seconds East, 466.33 feet to a point on a nontangent curve left having a radial bearing of North 33 degrees 32 minutes 30 seconds West; THENCE along said curve left having a radius of 962.46 feet, a central angle of 13 degrees 26 minutes 08 seconds, an arc distance of 259.29 feet to a point of compound curvature; THENCE along said curve left having a radius of 674.43 feet, a central angle of 02 degrees 48 minutes 40 seconds, an arc distance of 33.09 feet to a point on the curve; THENCE South 51 degrees 47 minutes 27 seconds East, 60.99 feet to a point on a nontangent curve left having a radial bearing of North 31 degrees 47 minutes 27 seconds West; Page 6 of 8 June 1, 1992 VT 15-18 LEGAL DESCRIPTION DEVELOPER TRACT ARROWHEAD TOWNE CENTER GLENDALE, ARIZONA THENCE along said curve left having a radius of 735.42 feet, a central angle of 29 degrees 09 minutes 34 seconds, an arc distance of 374.28 feet to a point on the curve; THENCE South 80 degrees 38 minutes 44 seconds East, 55.39 feet; THENCE South 56 degrees 18 minutes 20 seconds West, 42.49 feet to a point on a nontangent curve right having a radial bearing of North 78 degrees 58 minutes 19 seconds West; THENCE along said curve right having a radius of 760.00 feet, a central angle of 24 degrees 23 minutes 43 seconds, an arc distance of 323.60 feet to a point on the curve; THENCE South 03 degrees 58 minutes 19 seconds East, 47.56 feet; THENCE South 48 degrees 58 minutes 19 seconds East, 103.07 feet to a point of curvature left; THENCE along said curve left having a radius of 209.41 feet, a central angle of 40 degrees 30 minutes 19 seconds, an arc distance of 148.03 feet to a point of tangency; THENCE South 89 degrees 28 minutes 38 seconds East, 162.76 feet to a point on the afore-mentioned West right of way line of 75th Avenue; THENCE South 00 degrees 31 minutes 22 seconds West, along said West right of way line, 41.17 feet; THENCE North 89 degrees 28 minutes 38 seconds West, 162.76 feet to a point of curvature right; THENCE along said curve right having a radius of 250.59 feet, a central angle of 40 degrees 30 minutes 19 seconds, an arc distance of 177.15 feet to a point of tangency; THENCE North 48 degrees 58 minutes 19 seconds West, 181.65 feet to a point on a nontangent curve right having a radial bearing of North 48 degrees 56 minutes 18 seconds West; THENCE along said curve right having a radius of 999.45 feet, a central angle of 25 degrees 00 minutes 59 seconds, an arc distance of 436.32 feet to a point on the curve; THENCE North 20 degrees 00 minutes 00 seconds West, 79.57 feet; THENCE North 70 degrees 00 minutes 00 seconds East, 28.00 feet; THENCE North 20 degrees 00 minutes 00 seconds West, 469.04 feet; THENCE North, 73.92 feet; THENCE West, 9.92 feet; THENCE North, 0.68 feet; THENCE West, 204.17 feet; THENCE South, 16.43 feet; THENCE West, 9.92 feet; THENCE South, 43.04 feet; THENCE South 45 degrees 00 minutes 00 seconds West, 92.81 feet; Page 7 of 8 June 1, 1992 VT 15-18 LEGAL DESCRIPTION DEVELOPER TRACT ARROWHEAD TOWNE CENTER GLENDALE, ARIZONA THENCE West, 37.37 feet; THENCE South, 504.63 feet; THENCE East, 148.08 feet; THENCE South, 72.76 feet to a point on a nontangent curve left having a radial bearing of North 03 degrees 38 minutes 34 seconds West; THENCE along said curve left having a radius of 1023.45 feet, a central angle of 41 degrees 19 minutes 38 seconds, an arc distance of 738.21 feet to a point on the curve; THENCE South 44 degrees 53 minutes 12 seconds East, 24.53 feet to a point on a nontangent curve right having a radial bearing of North 44 degrees 58 minutes 12 seconds West; THENCE along said curve right having a radius of 1048.03 feet, a central angle of 42 degrees 20 minutes 47 seconds, an arc distance of 774.58 feet to a point on the curve; THENCE South 45 degrees 00 minutes 00 seconds West, 43.93 feet; THENCE South, 360.50 feet to a point on the afore-mentioned North right of way line of Bell Road; THENCE West, along said North right of way line, 34.58 feet to THE TRUE POINT OF BEGINNING. The parcel to which this description applies contains 1,556,029 square feet or 33.25 acres, more or less, subject to easements and rights of way of record. This parcel has not been field staked. [LOGO] Page 8 of 8 LEASING MAP [GRAPHIC OMITTED] TAX MAP [GRAPHIC OMITTED] WESTCO PARTNERS LEASING [ILLEGIBLE] FOR PERIOD ENDING: 7/31/97 SUMMARY PROJECT: ARRHTC Arrowhead Towne Center GLA: 392,834 - ---RETAIL SPACE--- CURRENT AVERAGE NO. SF % OF RENTAL ANNUAL STORES AREA GLA RATE RENTAL ------ ------- ------ ------- --------- SIGNED* 151 348,054 88.60 24.71 8,600,405 SIGNED, PRE-COMMENCEMENT 1 850 .22 31.79 27,025 SIGNED, NOT OPENED 2 2,047 .32 27.11 55,500 UNCOMMITTED ** 22 40,383 10.28 22.09 891,977 UNDEFINED STATUS * 1 1,500 .38 25.60 38,400 --- ------- ------ ----- --------- 177 392,834 100.00 24.47 9,613,307 - ---STORAGE SPACE--- SIGNED 5 2,200 11.36 24,999 UNCOMMITTED 7 7,118 5.71 40,640 --- ------- ----- --------- 12 9,318 7.04 65,639 FURTHER BREAKDOWN OF LEASE STATUS IS AS FOLLOWS: * THIS FIGURE REFLECTS THE AMOUNT OF GLA IN THESE CATEGORIES THAT ARE TEMPORARY DEALS ** THESE FIGURES REFLECT THE AMOUNT OF VACANT ONLY GLA THAT ARE COMMITTED EITHER WITH LEASES OUT FOR SIGNATURE OR IN NEGOTIATION. SF % OF AREA GLA * TEMP DEALS 10,133 2.58 **DEALS OFS 0 0.00 DEALS NEG 8,321 2.12 NOTE: SPACE 2265 SHOWN IN UNCOMMITTED IS ACTUALLY SIGNED PER AN AMENDMENT BUT IS NOT INDICATED SINCE THE EXPANSION FOR SPACE 2268 HAS NOT TAKEN PLACE YET; THEREFORE, THE UNCOMMITTED CATEGORY SHOULD BE REDUCED BY 1,105 FOR A SQ. FT. OF 39,278 AND 10.0%. THUS INCREASING THE PRECOMMENCEMENT CATEGORY TO 1,955 & .50% Distribution: R. Ward, W. Chester, B. Williams, F. Collings, L. Moss, G. Cochran, P. Walser, T. Norwood, J. Cherry, D. Monk, A. Callahan, C. Davis, S. Goldberg, B. Whiteside, B. Mayhall, M. Shelton, J. Parker, P. Goldsmith, B. Mason, C. Harrell, M. Clutter, L. Soboslay, B. Campbell (JCP), A. Liftis (Gen. Gr.), J. Weisbecker (Gen. Gr.) M. Waters (Teachers), C. Hawkins (Wilson). 8/05/97 3:57:23 Page 1 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SIGNED PROJECT: ARRHTC Arrowhead Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- Bank of America - ATH2 1 5/01/96 12/31/03 BRT 13,488.00 488.00 1/23/97 7/17/96 001/ATM/ATM2 1 1/01/98 12/31/98 CPT 809.28 809.28 12/31/03 1/01/99 12/31/99 CPT 1,667.16 667.16 1/01/00 12/31/00 CPT 2,576.52 576.52 1/01/01 12/31/01 CPT 3,527.64 527.64 1/01/02 12/31/02 CPT 4,548.60 548.60 1/01/03 12/31/03 CPT 5,630.76 630.76 - ------------------------------------------------------------------------------------------------------------------------------ Cart Tenants 1/01/94 1/01/94 001/RET/CART-MC 12/31/25 - ------------------------------------------------------------------------------------------------------------------------------ Kiosk Tenants 1/01/94 1/01/94 001/RET/KIOSK-MC 12/31/25 - ------------------------------------------------------------------------------------------------------------------------------ Piercing Pagoda 160 9/01/96 12/31/99 BRT 30,000.00 187.50 5/16/97 9/01/96 001/RET/K1 160 1/01/00 12/31/01 BRT 33,000.00 206.25 12/31/01 - ------------------------------------------------------------------------------------------------------------------------------ Dolphin Quest 600 4/04/97 3/31/98 BRT 33,000.00 55.00 24.00 11/22/95 11/09/95 001/RET/1022 3,055 4/04/97 3/31/98 - ------------------------------------------------------------------------------------------------------------------------------ Call Jewelers 1,296 1/01/97 12/31/00 BRT 71,280.00 55.00 50.00 9/13/93 10/13/93 001/RET/1025 1,296 1/01/01 12/31/03 BRT 77,760.00 60.00 12/31/03 - ------------------------------------------------------------------------------------------------------------------------------ Wigs Amor 627 3/01/97 12/31/99 BRT 21,945.00 35.00 35.00 1/17/97 3/01/97 001/RET/1028 627 1/01/00 12/31/03 BRT 25,080.00 40.00 12/31/06 1/01/04 12/31/06 BRT 28,215.00 45.00 - ------------------------------------------------------------------------------------------------------------------------------ Italian Coffee Company 1,277 1/01/97 12/31/00 BRT 57,465.00 45.00 40.00 10/26/93 10/13/93 001/RET/1034 1,277 1/01/01 12/31/03 BRT 63,850.00 50.00 12/31/03 - ------------------------------------------------------------------------------------------------------------------------------ Crescent Jewelers 2,000 10/26/96 12/31/99 BRT 70,000.00 35.00 10/18/96 10/26/96 001/RET/1037 2,000 1/01/00 12/31/03 BRT 80,000.00 40.00 12/31/06 1/01/04 12/31/06 BRT 90,000.00 45.00 - ------------------------------------------------------------------------------------------------------------------------------ OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- --------------------------------------------------- Bank of America - ATH2 7/17/96 117,000 25.00% Minimum Annual Rent CPI 001/ATM/ATM2 Exclusive Use Improvement Based Adj/Majors Improvement Based Adj./Retail - ------------------------------------------------------------------------------------------------------------------------------------ Cart Tenants 1/01/94 REPORT SALES ONLY 001/RET/CART-MC - ------------------------------------------------------------------------------------------------------------------------------------ Kiosk Tenants 1/01/94 REPORT SALES ONLY 001/RET/KIOSK-MC - ------------------------------------------------------------------------------------------------------------------------------------ Piercing Pagoda 9/01/96 268,800 10.00% Improvement Based Adj/Majors 001/RET/K1 1/01/00 298,800 10.00% Termination Right Termination Right - ------------------------------------------------------------------------------------------------------------------------------------ Dolphin Quest 4/04/97 220,000 15.00% TEMPORARY TENANT 001/RET/1022 - ------------------------------------------------------------------------------------------------------------------------------------ Call Jewelers 1/01/97 1,188,000 6.00% 001/RET/1025 1/01/01 1,296,000 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ Wigs Amor 3/01/97 365,750 6.00% Improvement Based Adj/Majors 001/RET/1028 1/01/00 418,000 6.00% Improvement Based Adj./Retail 1/01/04 470,250 6.00% Volume Out/Landlord - ------------------------------------------------------------------------------------------------------------------------------------ Italian Coffee Company 1/01/97 718,313 8.00% 12,770 Exclusive Use 001/RET/1034 1/01/01 798,125 8.00% Improvement Based Adj/Majors Amd OFS deleted rent incr eff 1/1/97 - ------------------------------------------------------------------------------------------------------------------------------------ Crescent Jewelers 10/26/96 1,166,667 6.00% Volume Out/Mutual 001/RET/1037 1/01/00 1,333,333 6.00% 1/01/04 1,500,000 6.00% - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 2 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SIGNED PROJECT: ARRHTC Arrowhead Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- Claire's Boutique 1,089 1/01/97 12/31/00 BRT 49,005.00 45.00 45.00 7/19/93 10/13/93 001/RET/1040 1,089 1/01/01 12/31/03 BRT 51,183.00 47.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Footquarters 4,227 11/01/96 12/31/02 BRT 54,951.00 13.00 20.00 2/20/97 11/01/96 001/RET/1043 4,227 1/01/03 12/31/07 BRT 59,178.00 14.00 12/31/07 - ---------------------------------------------------------------------------------------------------------------------------- Team Shop 2,360 11/26/96 12/31/01 BRT 70,800.00 30.00 30.00 11/26/96 11/26/96 001/RET/1046 2,360 1/01/02 12/31/06 BRT 82,600.00 35.00 12/31/06 - ---------------------------------------------------------------------------------------------------------------------------- Bag 'N Baggage 2,194 1/01/97 12/31/02 BRT 65,820.00 30.00 29.00 1/27/95 4/01/95 001/RET/1049 2,194 12/31/02 - ---------------------------------------------------------------------------------------------------------------------------- Expressions 2,025 1/01/97 12/31/00 BRT 60,750.00 30.00 30.00 3/09/93 10/13/93 001/RET/1052 2,025 1/01/01 12/31/03 BRT 64,800.00 32.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Easy Spirit 1,219 10/13/93 12/31/97 BRT 40,227.00 33.00 35.00 9/29/93 10/13/93 001/RET/1055 1,219 1/01/98 12/31/00 BRT 42,665.00 35.00 12/31/03 1/01/01 12/31/03 BRT 45,103.00 37.00 - ---------------------------------------------------------------------------------------------------------------------------- Lady Footlocker 1,568 1/01/97 12/31/00 BRT 43,904.00 28.00 30.00 4/12/93 10/13/93 001/RET/1058 1,568 1/01/01 12/31/03 BRT 47,040.00 30.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Kay Jewelers 2,025 8/25/95 12/31/04 BRT 81,000.00 40.00 40.00 8/30/95 8/25/95 001/RET/1061 2,025 12/31/04 - ---------------------------------------------------------------------------------------------------------------------------- Victoria's Secret 6,014 10/13/93 1/31/98 BRT 90,210.00 15.00 17.00 9/29/93 10/13/93 001/RET/1067 6,014 2/01/98 1/31/02 BRT 102,238.00 17.00 1/31/06 2/01/02 1/31/06 BRT 114,266.00 19.00 - ---------------------------------------------------------------------------------------------------------------------------- Petite Sophicticate 2,518 10/13/93 12/31/97 BRT 60,432.00 24.00 25.00 9/29/93 10/13/93 001/RET/1070 2,518 1/01/98 12/31/00 BRT 65,468.00 26.00 12/31/03 1/01/01 12/31/03 BRT 70,504.00 28.00 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------- Claire's Boutique 1/01/97 700,071 7.00% 001/RET/1040 1/01/01 731,186 7.00% - ------------------------------------------------------------------------------------------------------------------------------------ Footquarters 11/01/96 915,850 6.00% Volume Out/Mutual 001/RET/1043 1/1/03 986,300 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ Team Shop 11/26/96 1,180,000 6.00% 100,000 001/RET/1046 1/01/02 1,376,667 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ Bag 'N Baggage 1/01/97 1,097,000 6.00% 21,940 001/RET/1049 - ------------------------------------------------------------------------------------------------------------------------------------ Expressions 1/01/97 867,857 7.00% 55,000 Improvement Based Adj/Majors 001/RET/1052 1/01/01 925,714 7.00% Improvement Based Adj./Retail Termination Right - ------------------------------------------------------------------------------------------------------------------------------------ Easy Spirit 10/13/93 670,450 6.00% 50,000 001/RET/1055 1/01/98 711,083 6.00% 1/01/01 751,717 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ Lady Footlocker 1/01/97 731,733 6.00% 001/RET/1058 1/01/01 784,000 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ Kay Jewelers 9/01/95 1,350,000 6.00% 180,000 Improvement Based Adj/Majors 001/RET/1061 - ------------------------------------------------------------------------------------------------------------------------------------ Victoria's Secret 10/13/93 1,804,200 5.00% 601,400 Volume Out/Tenant 001/RET/1067 2/01/98 2,044,760 5.00% 2/01/02 2,285,320 5.00% - ------------------------------------------------------------------------------------------------------------------------------------ Petite Sophicticate 10/13/93 1,208,640 5.00% 102,770 If Tenant exceeds Net Sales of $900,000 in any of 001/RET/1070 1/01/98 1,309,360 5.00% the first 3 Lease Years,m then as of 1/1 of Lease 1/01/01 1,410,080 5.00% Year after yr in which volume was achieved, MAR for such Lease Year and each year thereafter for the remainder of the Lease Term is increased by $2,518.00 ($1.00/sq.ft. of Floor Area). - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 3 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SIGNED PROJECT: ARRHTC Arrowhead Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- Helzberg Diamonds 1,391 1/01/97 12/31/00 BRT 75,000.00 53.92 45.00 8/06/93 10/13/93 001/RET/1073 1,391 1/01/01 12/31/03 BRT 90,000.00 64.70 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Bank of America 955 3/01/95 12/31/03 BRT 26,740.00 28.00 28.00 9/03/93 10/13/93 955 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------- Helzberg Diamonds 1/01/97 Grad. Base BREAKPOINT: 1,250,000.00 RATE: 0.0% 001/RET/1073 1/01/01 Grad. Base BREAKPOINT: 1,600,000.00 RATE: 6.0% BREAKPOINT: 1,800,000.00 RATE: 5.0% BREAKPOINT: 99,999,999.99 RATE: 4.0% BREAKPOINT: 1,500,000.00 RATE: 0.0% BREAKPOINT: 1,600,000.00 RATE: 6.0% BREAKPOINT: 1,800,000.00 RATE: 5.0% BREAKPOINT: 99,999,999.00 RATE: 4.0% - ------------------------------------------------------------------------------------------------------------------------------------ Bank of America 5/01/96 9,750 .25% Improvement based Adj/Majors Improvement based Adj./Retail - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 4 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SIGNED PROJECT: ARRHTC Arrowhead Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- AMC Theatres 46,123 7/27/96 12/31/01 BRT 415,107.00 9.00 6/28/95 8/02/96 001/THR/1079 46,123 1/01/02 12/31/07 BRT 507,353.00 11.00 12/31/16 1/01/08 12/31/12 BRT 576,537.50 12.50 1/01/13 12/31/16 BRT 645,722.00 14.00 OPTION: OP1 START: 1/01/17 END: 12/31/21 OPTION AMOUNT: 714,907 The Exercise Starting Date is 6 months prior to the beginning of the Option Period. If Tenant has not given notice to exercise its option, then the Exercise Ending Period shall be extended to 30 days after Landlord gives notice that Tenant has failed to exercise its option. There is no time restraint for Landlord giving Tenant notice, therefore, the Notify Date and the Respond Date are unknown at this time. 1-1-18 through 12-31-22, MAR = $714,906.50; BP = $8,936,331.25 OPTION: OP2 START: 1/01/22 END: 12/31/26 OPTION AMOUNT: 784,091 The Exercise Starting Date is 6 months prior to the beginning of the Option Period. If Tenant has not given notice to exercise its option, then the Exercise Ending Period shall be extended to 30 days after Landlord gives notice that Tenant has failed to exercise its option. There is no time restraint for Landlord giving Tenant notice, therefore, the Notify Date and the Respond Date are unknown at this time. 1/1/23 through 12/31/27, MAR = $784,091.00; BP = $9,801,137.50 OPTION: OP3 START: 1/01/27 END: 12/31/31 OPTION AMOUNT: 853,276 The Exercise Starting Date is 6 months prior to the beginning of the Option Period. If Tenant has not given notice to exercise its option, then the Exercise Ending Period shall be extended to 30 days after Landlord gives notice that Tenant has failed to exercise its option. There is no time restraint for Landlord giving Tenant notice, therefore, the Notify Date and the Respond Date are unknown at this time. 1/1/28 through 12/31/32, MAR = $853,275.50; BP = $10,665,943.50 OPTION: OP4 START: 1/01/32 END: 12/31/36 OPTION AMOUNT: 922,460 The Exercise Starting Date is 6 months prior to the beginning of the Option Period. If Tenant has not given notice to exercise its option, then the Exercise Ending Period shall be extended to 30 days after Landlord gives notice that Tenant has failed to exercise its option. There is no time restraint for Landlord giving Tenant notice, therefore, the Notify Date and the Respond Date are unknown at this time. 1/1/33 through 12/31/37, MAR = $922,460.00; BP = $11,530,750.00 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------- AMC Theatres 8/02/96 5,188,838 8.00% Exclusive Use 001/THR/1079 1/01/02 6,341,913 8.00% Termination Right 1/01/07 7,206,709 8.00% 1/01/12 8,071,525 8.00% - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 5 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SIGNED PROJECT: ARRHTC Arrowhead Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- Gap, The 5,277 1/01/97 12/31/98 BRT 131,925.00 25.00 25.00 11/23/94 11/23/94 001/RET/1088 5,277 1/01/99 12/31/02 BRT 147,756.00 28.00 12/31/06 1/01/03 12/31/06 BRT 168,864.00 32.00 - ---------------------------------------------------------------------------------------------------------------------------- Eddie Bauer 6,000 10/13/93 12/31/97 BRT 150,000.00 25.00 25.00 12/16/93 10/13/93 001/RET/1097 6,000 1/01/98 12/31/01 BRT 162,000.00 27.00 1/31/06 1/01/02 1/31/06 BRT 174,000.00 29.00 - ---------------------------------------------------------------------------------------------------------------------------- Athletic X-Press 2,368 10/13/93 12/31/03 BRT 61,568.00 26.00 26.00 4/07/93 10/13/93 001/RET/1100 2,368 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Pacific Eyes & T's 1,807 1/01/97 12/31/00 BRT 63,245.00 35.00 33.00 7/09/93 10/13/93 001/RET/1103 1,807 1/01/01 12/31/03 BRT 66,859.00 37.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Motherhood Maternity 001/RET/1106 1,056 1/01/97 12/31/00 BRT 36,960.00 35.00 32.00 3/24/94 4/30/94 1,056 1/01/01 12/31/03 BRT 40,128.00 38.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Derek Alexander Leathers 938 1/01/97 12/31/99 BRT 42,210.00 45.00 42.00 3/15/95 5/01/95 001/RET/1107 938 1/01/00 12/31/01 BRT 45,024.00 48.00 12/31/01 - ---------------------------------------------------------------------------------------------------------------------------- Payless Shoesource 3,080 10/23/93 12/31/03 BRT 77,000.00 25.00 25.00 12/08/93 10/23/93 001/RET/1112 3,080 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Jamsey 600 8/01/96 8/31/97 BRT 30,000.00 50.00 22.00 11/17/93 10/13/93 001/RET/1115 3,129 8/01/96 7/31/97 - ---------------------------------------------------------------------------------------------------------------------------- Cartoon Corner 520 3/01/96 12/31/97 BRT 21,000.00 40.38 20.00 2/28/95 3/01/95 001/RET/1118 2,720 3/01/96 12/31/97 - ---------------------------------------------------------------------------------------------------------------------------- Sports Cards Express 500 2/01/97 1/31/98 BRT 33,000.00 66.00 20.00 3/14/96 3/01/96 001/RET/1121 2,591 2/01/97 1/31/98 - ---------------------------------------------------------------------------------------------------------------------------- Arizona Outfitters 5,664 1/01/97 12/31/03 BRT 107,616.00 19.00 19.00 10/10/93 10/13/93 001/RET/1124 5,664 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------- Gap, The 1/01/97 2,638,500 6.00% 263,850 Volume Out/Tenant 001/RET/1088 1/01/99 2,955,120 6.00% 1/01/03 3,377,280 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ Eddie Bauer 10/13/93 3,000,000 5.00% 250,000 001/RET/1097 1/01/98 3,240,000 5.00% 1/01/02 3,480,000 5.00% - ------------------------------------------------------------------------------------------------------------------------------------ Athletic X-Press 10/13/93 1,026,133 6.00% 001/RET/1100 - ------------------------------------------------------------------------------------------------------------------------------------ Pacific Eyes & T's 1/01/97 1,054,083 6.00% 50,000 001/RET/1103 1/01/01 1,114,317 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ Motherhood Maternity 001/RET/1106 1/01/97 616,000 6.00% 25,000 1/01/01 668,800 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ Derek Alexander Leathers 1/01/97 603,000 7.00% Improvement Based Adj/Majors 001/RET/1107 1/01/00 643,200 7.00% Improvement Based Adj./Retail Volume Out/Mutual - ------------------------------------------------------------------------------------------------------------------------------------ Payless Shoesource 10/28/93 1,283,333 6.00% 001/RET/1112 - ------------------------------------------------------------------------------------------------------------------------------------ Jamsey 8/01/94 190,000 12.00% TEMPORARY LEASE; Renewal OFS thru 7/31/98 001/RET/1115 Termination Right - ------------------------------------------------------------------------------------------------------------------------------------ Cartoon Corner 1/01/97 175,000 12.00% Termination Right 001/RET/1118 TEMPORARY TENANT - ------------------------------------------------------------------------------------------------------------------------------------ Sports Cards Express 3/09/96 330,000 10.00% Termination Right 001/RET/1121 TEMPORARY LEASE - ------------------------------------------------------------------------------------------------------------------------------------ Arizona Outfitters 1/01/97 1,793,600 6.00% 190,000 Tenant Allowance/Payback 001/RET/1124 Amd OFS extend. gross rent to 12/31/97 - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 6 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SIGNED PROJECT: ARRHTC Arrowhead Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- Carol's Art Gallery 1,350 1/01/97 12/31/97 BRT 40,500.00 30.00 30.00 2/15/95 5/01/95 001/RET/1127 1,350 1/01/98 12/31/98 BRT 47,250.00 35.00 12/31/98 OPTION: OP1 START: 1/01/99 END: 12/31/01 OPTION AMOUNT: 47,250 1/1/99 through 12/31/99; MAR = $47,250.00 BP = $675,000.00 1/1/00 through 12/31/01; MAR = $60,750.00 BP = $867,857.14 - ---------------------------------------------------------------------------------------------------------------------------- Fletcher Music Centers 1,494 9/15/94 12/31/97 BRT 56,712.24 37.96 38.00 7/14/94 9/15/94 001/RET/1130 1,494 1/01/98 12/31/01 BRT 61,194.24 40.96 12/31/04 1/01/02 12/31/04 BRT 65,676.24 43.96 - ---------------------------------------------------------------------------------------------------------------------------- Lazy Bones 1,408 3/15/97 12/31/97 BRT 33,783.00 23.99 30.00 5/06/97 3/15/97 001/RET/1133 1,408 1/01/98 12/31/98 BRT 37,312.00 26.50 12/31/99 1/01/99 12/31/99 BRT 40,832.00 29.00 - ---------------------------------------------------------------------------------------------------------------------------- Cost Cutters 1,208 1/01/96 12/31/99 BRT 41,072.00 34.00 32.00 8/17/93 10/13/93 001/RET/1136 1,208 1/01/00 12/31/01 BRT 43,488.00 36.00 12/31/01 - ---------------------------------------------------------------------------------------------------------------------------- North Valley Grill 5,187 11/30/96 12/31/98 BRT 93,366.00 18.00 20.00 8/29/96 11/30/96 001/RST/1145 5,187 1/01/99 12/31/02 BRT 103,740.00 20.00 12/31/05 1/01/03 12/31/05 BRT 114,114.00 22.00 OPTION: OP1 START: 1/01/06 END: 1/31/11 OPTION AMOUNT: 124,488 1/1/06 through 12/31/07; MAR = $124,488.00 BP = $2,074,800.00 1/1/08 through 12/31/08; MAR = $127,081.00 BP = $2,118,025.00 1/1/09 through 01/31/11; MAR = $129,675.00 BP = $2,161,250.00 - ---------------------------------------------------------------------------------------------------------------------------- Nava-Hopi Gallery 1,067 10/18/93 12/31/98 BRT 37,345.00 35.00 35.00 9/23/93 10/18/93 001/RET/1148 1,067 1/01/99 12/31/03 BRT 42,680.00 40.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Simply Gourmet 743 1/01/97 12/31/97 BRT 31,206.00 42.00 40.00 12/02/93 2/19/94 001/RET/1150 743 1/01/98 12/31/98 BRT 32,692.00 44.00 1/01/97 12/31/99 1/01/99 12/31/99 BRT 34,178.00 46.00 - ---------------------------------------------------------------------------------------------------------------------------- Hot Sam Pretzel Bakery 743 1/01/97 12/31/00 BRT 49,560.00 66.70 56.00 7/19/93 10/13/93 001/RET/1151 743 1/01/01 12/31/03 BRT 57,820.00 77.82 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- -------------------------------------------------- Carol's Art Gallery 1/01/97 578,571 7.00% 25,000 Improvement Based Adj/Majors 001/RET/1127 1/01/98 675,000 7.00% Improvement Based Adj.Retail Volume Out/Landlord - ------------------------------------------------------------------------------------------------------------------------------------ Fletcher Music Centers 9/15/94 1,120,500 4.00% 92,928 Volume Out/Mutual 001/RET/1130 1/01/98 1,232,550 4.00% 1/01/02 1,344,600 4.00% - ------------------------------------------------------------------------------------------------------------------------------------ Lazy Bones 3/15/97 422,288 8.00% 001/RET/1133 1/01/98 466,400 8.00% 1/01/99 510,400 8.00% - ------------------------------------------------------------------------------------------------------------------------------------ Cost Cutters 1/01/94 513,400 8.00% 001/RET/1136 1/01/00 543,600 8.00% - ------------------------------------------------------------------------------------------------------------------------------------ North Valley Grill 11/30/96 1,556,100 6.00% Improvement Based Adj/Majors 001/RST/1145 1/01/99 1,729,000 6.00% Volume Out/Mutual 1/01/03 1,901,900 6.00% Amd OFS conv. to gross rent thru 9/97 - ------------------------------------------------------------------------------------------------------------------------------------ Nava-Hopi Gallery 10/18/93 466,813 8.00% Improvement Based Adj/Majors 001/RET/1148 1/01/99 533,500 8.00% Improvement Based Adj.Retail Volume Out/Mutual - ------------------------------------------------------------------------------------------------------------------------------------ Simply Gourmet 1/01/97 390,075 8.00% Improvement Based Adj/Majors 001/RET/1150 1/01/98 408,650 8.00% Improvement Based Adj.Retail 1/01/99 427,225 8.00% - ------------------------------------------------------------------------------------------------------------------------------------ Hot Sam Pretzel Bakery 1/01/97 495,600 8.00% 001/RET/1151 1/01/01 578,200 8.00% - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 7 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SIGNED PROJECT: ARRHTC Arrowhead Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- Marble Slab Creamery 001/RET/1154 695 1/01/97 12/31/98 BRT 31,275.00 45.00 50.00 1/25/96 4/15/96 695 1/01/99 12/31/02 BRT 34,750.00 50.00 12/31/05 1/01/03 12/31/05 BRT 38,225.00 55.00 - ---------------------------------------------------------------------------------------------------------------------------- Select Comfort 544 10/13/93 12/31/98 BRT 21,760.00 40.00 45.00 9/27/93 10/13/93 001/RET/1155 544 1/01/99 12/31/03 BRT 24,480.00 45.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Select Cellular & Paging 500 6/01/96 12/31/97 BRT 17,500.00 35.00 4/24/96 6/01/96 001/RET/1157 500 1/01/98 12/31/00 BRT 19,000.00 38.00 12/31/00 - ---------------------------------------------------------------------------------------------------------------------------- Hot Shots Imaging 741 12/12/96 12/31/98 BRT 17,043.00 23.00 1/07/97 12/12/96 001/RET/1160 741 1/01/99 12/31/99 BRT 18,525.00 25.00 12/31/01 1/01/00 12/31/01 BRT 20,007.00 27.00 - ---------------------------------------------------------------------------------------------------------------------------- New Home Concepts 1,096 1/01/97 12/31/98 BRT 32,880.00 30.00 28.00 8/02/94 9/01/95 001/RET/1163 1,096 1/01/99 12/31/00 BRT 38,360.00 35.00 12/31/00 - ---------------------------------------------------------------------------------------------------------------------------- Lee Optical 896 1/01/96 12/31/99 BRT 26,880.00 30.00 28.00 7/19/93 10/13/93 001/RET/1166 896 1/01/00 12/31/01 BRT 28,672.00 32.00 12/31/01 - ---------------------------------------------------------------------------------------------------------------------------- Zales Jewelers 1,296 1/01/97 12/31/00 BRT 64,800.00 50.00 45.00 8/27/93 10/13/93 001/RET/1169 1,296 1/01/01 12/31/03 BRT 71,280.00 55.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Kay-Bee Toy & Hobby 3,413 1/01/97 12/31/00 BRT 71,673.00 21.00 18.00 9/13/93 10/13/93 001/RET/1172 3,413 1/01/01 12/31/03 BRT 81,912.00 24.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Lechters Home Store 3,428 1/01/97 12/31/98 BRT 75,416.00 22.00 20.00 8/29/94 10/01/94 001/RET/1175 3,428 1/01/99 12/31/00 BRT 82,272.00 24.00 1/31/05 1/01/01 12/31/02 BRT 89,128.00 26.00 1/01/03 1/31/05 BRT 95,984.00 28.00 - ---------------------------------------------------------------------------------------------------------------------------- Gymboree 2,000 6/30/97 12/31/00 BRT 60,000.00 30.00 5/14/97 6/30/97 001/RET/1178 2,000 1/01/01 12/31/04 BRT 65,000.00 32.50 1/31/08 1/01/05 1/31/08 BRT 70,000.00 35.00 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------ Marble Slab Creamery 001/RET/1154 1/01/97 312,750 10.00% Improvement Based Adj/Majors 1/01/99 347,500 10.00% 1/01/03 382,250 10.00% - ------------------------------------------------------------------------------------------------------------------------------------ Select Comfort 10/13/93 362,667 6.00% 3,624 Volume Out/Mutual 001/RET/1155 1/01/99 408,000 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ Select Cellular & Paging 6/07/96 218,750 8.00% Improvement Based Adj/Majors 001/RET/1157 1/01/98 237,500 8.00% Improvement Based Adj.Retail - ------------------------------------------------------------------------------------------------------------------------------------ Hot Shots Imaging 12/12/96 170,430 10.00% Improvement Based Adj/Majors 001/RET/1160 1/01/99 185,250 10.00% Improvement Based Adj.Retail 1/01/00 200,070 10.00% - ------------------------------------------------------------------------------------------------------------------------------------ New Home Concepts 32,880 Improvement Based Adj/Majors 001/RET/1163 Improvement Based Adj.Retail - ------------------------------------------------------------------------------------------------------------------------------------ Lee Optical 1/01/96 448,000 6.00% 001/RET/1166 1/01/00 477,867 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ Zales Jewelers 1/01/97 1,080,000 6.00% 001/RET/1169 1/01/01 1,188,000 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ Kay-Bee Toy & Hobby 1/01/97 1,194,550 6.00% 50,000 Volume Out/Tenant 001/RET/1172 1/01/01 1,365,200 6.00% Termination Right - ------------------------------------------------------------------------------------------------------------------------------------ Lechters Home Store 1/01/97 1,256,933 6.00% 001/RET/1175 1/01/99 1,371,200 6.00% 1/01/01 1,485,467 6.00% 1/01/03 1,599,733 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ Gymboree 6/30/97 1,200,000 5.00% Volume Out/Mutual 001/RET/1178 1/01/01 1,300,000 5.00% 1/01/05 1,400,000 5.00% - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 8 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SIGNED PROJECT: ARRHTC Arrowhead Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- B. Dalton 5,289 10/13/93 12/31/97 BRT 105,780.00 20.00 20.00 10/18/93 10/13/93 001/RET/1181 5,289 1/01/98 12/31/01 BRT 116,358.00 22.00 1/31/06 1/01/02 1/31/06 BRT 126,936.00 24.00 - ---------------------------------------------------------------------------------------------------------------------------- Perfumania 1,594 9/15/94 12/31/99 BRT 52,315.00 32.82 33.00 9/26/94 9/15/94 001/RET/1184 1,594 1/01/00 12/31/04 BRT 55,790.00 35.00 12/31/04 - ---------------------------------------------------------------------------------------------------------------------------- Naturalizer 1,454 1/01/97 12/31/98 BRT 39,258.00 27.00 35.00 9/10/93 10/13/93 001/RET/1187 1,454 12/31/98 OPTION: OP1 START: 1/1/99 END: 12/31/03 OPTION AMOUNT: 43,620 1/1/99 through 12/31/00; MAR = $43,620.00 BP = $727,000.00 1/1/01 through 12/31/01; MAR = $46,527.96 BP = $775,446.67 - ---------------------------------------------------------------------------------------------------------------------------- Disney Store, The 3,737 11/08/94 12/31/98 BRT 74,740.00 20.00 22.00 9/23/94 11/08/94 001/RET/1190 3,737 1/01/99 12/31/02 BRT 82,214.00 22.00 12/31/06 1/01/03 12/31/06 BRT 89,688.00 24.00 - ---------------------------------------------------------------------------------------------------------------------------- Casual Corner 4,011 1/01/95 12/31/97 BRT 72,198.00 18.00 18.00 9/30/93 10/16/93 001/RET/1193 4,011 1/01/98 12/31/00 BRT 80,220.00 20.00 12/31/03 1/01/01 12/31/03 BRT 88,242.00 22.00 - ---------------------------------------------------------------------------------------------------------------------------- Bombay Company, Inc. 3,807 1/01/97 12/31/00 BRT 98,982.00 26.00 23.00 8/17/93 10/13/93 001/RET/1193 3,807 1/01/01 12/31/03 BRT 110,403.00 29.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------- B. Dalton 2/01/97 1,777,692 6.00% Exclusive Use 001/RET/1181 2/01/98 1,939,300 6.00% 2/01/01 1,953,992 6.00% 2/01/02 2,115,600 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ Perfumania 9/15/94 797,000 6.00% 55,790 Improvement Based Adj/Majors 001/RET/1184 1/01/00 929,833 6.00% Improvement Based Adj.Retail Volume Out/Mutual - ------------------------------------------------------------------------------------------------------------------------------------ Naturalizer 1/01/97 654,300 6.00% 30,000 Minimum Annual Rent CPI 001/RET/1187 Volume Out/Mutual - ------------------------------------------------------------------------------------------------------------------------------------ Disney Store, The 11/08/94 1,868,500 4.00% 250,000 Volume Out/Tenant 001/RET/1190 1/01/99 2,055,350 4.00% 1/01/03 2,242,200 4.00% - ------------------------------------------------------------------------------------------------------------------------------------ Casual Corner 1/01/95 1,443,960 5.00% 240,660 If Tenant exceeds $1,200,000 in Net Sales in any 001/RET/1193 1/01/98 1,604,400 5.00% first 3 Lease Years, then as of 1/1 of the Lease 1/01/01 1,764,840 5.00% Year following the Year in which sales were achieved MAR shall be increased to $76,209 & continue thru 12/31/97, or until T achieves Net Sales of $1.5M in any one of the first three Lease Yrs. As of 1/1 of the year after T' exceeds $1.5M in sales, MAR incr. to $80,220 thru 12/31/00. - ------------------------------------------------------------------------------------------------------------------------------------ Bombay Company, Inc. 1/01/97 1,649,700 6.00% 100,000 Volume Out/Tenant 001/RET/1199 1/01/01 1,840,050 6.00% - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 9 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SIGNED PROJECT: ARRHTC Arrowhead Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- Charlotte Russe 7,291 1/01/97 12/31/97 BRT 109,365.00 15.00 18.00 12/08/93 11/19/93 001/RET/1202 7,291 1/01/98 12/31/98 BRT 116,656.00 16.00 1/31/06 1/01/99 12/31/99 BRT 123,947.00 17.00 1/01/00 12/31/00 BRT 131,238.00 18.00 1/01/01 12/31/01 BRT 138,529.00 19.00 1/01/02 12/31/03 BRT 145,820.00 20.00 1/01/04 1/31/06 BRT 153,111.00 21.00 - ---------------------------------------------------------------------------------------------------------------------------- Lerner New York 8,000 10/15/93 1/31/98 BRT 120,000.00 15.00 17.00 9/29/93 10/13/93 001/RET/1208 8,000 2/01/98 1/31/02 BRT 136,000.00 17.00 1/31/06 2/01/02 1/31/06 BRT 152,000.00 19.00 - ---------------------------------------------------------------------------------------------------------------------------- Lane Bryant 6,429 10/13/93 1/31/98 BRT 96,435.00 15.00 17.00 9/29/93 10/13/93 001/RET/1214 6,429 2/01/98 1/31/02 BRT 109,293.00 17.00 1/31/06 2/01/02 1/31/06 BRT 122,151.00 19.00 - ---------------------------------------------------------------------------------------------------------------------------- Limited, The 6,727 8/01/95 1/31/98 BRT 100,905.00 15.00 17.00 9/29/93 10/13/93 001/RET/1220 6,727 2/01/98 1/31/02 BRT 114,359.00 17.00 1/31/06 2/01/02 1/31/06 BRT 127,813.00 19.00 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------- Charlotte Russe 1/01/97 Grad. Base 300,000 BREAKPOINT: 2,000,000.00 RATE: 0.0% 001/RET/1202 1/01/98 Grad. Base BREAKPOINT: 3,000,000.00 RATE: 10.0% 1/01/99 Grad. Base BREAKPOINT: 99,999,999.99 RATE: 11.0% 1/01/00 Grad. Base BREAKPOINT: 2,000,000.00 RATE: 0.0% 1/01/01 Grad. Base BREAKPOINT: 3,000,000.00 RATE: 10.0% 1/01/02 Grad. Base BREAKPOINT: 99,999,999.99 RATE: 11.0% 1/01/04 Grad. Base BREAKPOINT: 2,000,000.00 RATE: 0.0% BREAKPOINT: 3,000,000.00 RATE: 10.0% BREAKPOINT: 99,999,999.99 RATE: 11.0% BREAKPOINT: 2,200,000.00 RATE: 0.0% BREAKPOINT: 3,000,000.00 RATE: 10.0% BREAKPOINT: 99,999,999.99 RATE: 11.0% BREAKPOINT: 2,200,000.00 RATE: 0.0% BREAKPOINT: 3,000,000.00 RATE: 10.0% BREAKPOINT: 99,999,999.99 RATE: 11.0% BREAKPOINT: 2,200,000.00 RATE: 0.0% BREAKPOINT: 3,000,000.00 RATE: 10.0% BREAKPOINT: 99,999,999.99 RATE: 11.0% BREAKPOINT: 2,200,000.00 RATE: 0.0% BREAKPOINT: 3,000,000.00 RATE: 10.0% BREAKPOINT: 99,999,999.99 RATE: 11.0% Volume Out/Mutual Gross Lease - ------------------------------------------------------------------------------------------------------------------------------------ Lerner New York 10/13/93 2,400,000 5.00% 640,000 Volume Out/Tenant 001/RET/1208 2/01/98 2,720,000 5.00% 2/01/02 3,040,000 5.00% - ------------------------------------------------------------------------------------------------------------------------------------ Lane Bryant 10/13/93 1,928,700 5.00% 514,320 Volume Out/Tenant 001/RET/1214 2/01/98 2,185,860 5.00% 2/01/02 2,443,020 5.00% - ------------------------------------------------------------------------------------------------------------------------------------ Limited, The 10/13/93 2,522,625 4.00% 470,890 Volume Out/Tenant 001/RET/1220 2/01/98 2,858,975 4.00% 2/01/02 3,195,325 4.00% - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 10 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SIGNED PROJECT: ARRHTC Arrowhead Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- Miller's Outpost for Levis 5,536 2/01/97 1/31/98 BRT 77,504.00 14.00 16.00 1/04/96 11/10/95 001/RET/1226 5,536 2/01/98 1/31/01 BRT 88,576.00 16.00 1/31/03 2/01/01 1/31/03 BRT 99,648.00 18.00 - ---------------------------------------------------------------------------------------------------------------------------- Wherehouse 2,503 1/01/97 12/31/00 BRT 75,090.00 30.00 25.00 2/10/93 11/01/93 001/RET/1232 2,503 1/01/01 12/31/00 BRT 87,605.00 35.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Stacy's Hallmark Shop 4,530 1/01/97 1/31/05 BRT 104,190.00 23.00 21.00 8/17/93 10/13/93 001/RET/1235 4,530 1/31/05 - ---------------------------------------------------------------------------------------------------------------------------- Sungear 789 1/01/97 12/31/00 BRT 47,340.00 60.00 50.00 4/13/93 10/13/93 001/RET/1238 789 1/01/01 12/31/03 BRT 55,230.00 70.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Watch Out 750 10/01/94 12/31/02 BRT 18,750.00 25.00 26.00 7/06/94 11/04/94 001/RET/1241 750 1/01/98 12/31/99 BRT 22,500.00 30.00 12/31/02 1/01/00 12/31/02 BRT 26,250.00 35.00 - ---------------------------------------------------------------------------------------------------------------------------- Merle Norman Cosmetics 600 10/13/93 12/31/97 BRT 15,000.00 25.00 30.00 7/09/93 10/13/93 001/RET/1244 600 1/01/98 12/31/01 BRT 18,000.00 30.00 12/31/03 1/01/02 12/31/03 BRT 21,000.00 35.00 - ---------------------------------------------------------------------------------------------------------------------------- Weisfield's Jewelers 1,178 4/22/94 12/31/04 BRT 60,000.00 50.93 51.00 1/18/94 4/22/94 001/RET/1247 1,178 12/31/04 - ---------------------------------------------------------------------------------------------------------------------------- Lotions & Potions 939 10/13/93 12/31/97 BRT 32,865.00 35.00 35.00 7/14/93 10/13/93 001/RET/1250 939 1/01/98 12/31/99 BRT 37,560.00 40.00 12/31/02 1/01/00 12/31/02 BRT 42,255.00 45.00 - ---------------------------------------------------------------------------------------------------------------------------- Fancy That! 1,853 9/07/96 9/06/97 BRT 36,000.00 19.43 28.00 1/01/96 10/01/95 001/RET/1256 1,853 9/07/96 9/06/97 - ---------------------------------------------------------------------------------------------------------------------------- Fann's Impressions 736 1/01/97 12/31/98 BRT 29,439.96 40.00 38.00 8/31/94 11/25/94 001/RET/1259 736 1/01/99 12/31/00 BRT 30,912.00 42.00 12/31/00 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------- Miller's Outpost for Levis 3/01/97 1,550,080 5.00% 001/RET/1226 2/01/98 1,771,520 5.00% 2/01/01 1,992,960 5.00% - ------------------------------------------------------------------------------------------------------------------------------------ Wherehouse 1/01/97 1,072,714 7.00% Amd Signed reducing charges eff 4/96-12/97 001/RET/1232 1/01/01 1,251,500 7.00% - ------------------------------------------------------------------------------------------------------------------------------------ Stacy's Hallmark Shop 1/01/97 1,302,375 6.00% Recapture from Percentage Ren 001/RET/1235 - ------------------------------------------------------------------------------------------------------------------------------------ Sungear 1/01/97 591,750 8.00% Improvement Based Adj/Majors 001/RET/1238 1/01/01 690,375 8.00% Improvement Based Adj./Retail - ------------------------------------------------------------------------------------------------------------------------------------ Watch Out 11/04/94 234,375 8.00% 22,500 001/RET/1241 1/01/98 281,250 8.00% 1/01/00 328,125 8.00% - ------------------------------------------------------------------------------------------------------------------------------------ Merle Norman Cosmetics 10/13/93 187,500 8.00% Amd OFS incr size to 760 w/applic. rent incr. 001/RET/1244 1/01/98 225,000 8.00% 1/01/02 262,500 8.00% - ------------------------------------------------------------------------------------------------------------------------------------ Weisfield's Jewelers 4/22/94 1,000,000 6.00% 001/RET/1247 - ------------------------------------------------------------------------------------------------------------------------------------ Lotions & Potions 10/13/93 469,500 7.00% 18,780 001/RET/1250 1/01/98 536,571 7.00% 1/01/00 603,643 7.00% - ------------------------------------------------------------------------------------------------------------------------------------ Fancy That! 9/07/96 240,000 15.00% TEMP. TENANT; Ls Of$ w/Quilted Kottage 001/RET/1256 Termination Right - ------------------------------------------------------------------------------------------------------------------------------------ Fann's Impressions 1/01/97 368,000 8.00% Improvement Based Adj/Majors 001/RET/1259 1/01/99 386,400 8.00% Improvement Based Adj./Retail - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 11 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SIGNED PROJECT: ARRHTC Arrowhead Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- Hat Club, The 663 001/RET/1260 663 1/01/97 8/31/97 BRT 36,465.00 55.00 45.00 12/02/93 10/13/93 5/01/97 8/31/97 BRT 18,465.00 27.85 12/31/98 9/01/97 10/31/97 BRT 18,000.00 27.15 11/01/97 11/30/97 BRT 30,000.00 45.25 12/01/97 12/31/97 BRT 102,000.00 153.85 1/01/98 12/31/98 BRT 36,465.00 55.00 - ---------------------------------------------------------------------------------------------------------------------------- ACH's Wellness Connection 1,457 1/01/96 12/31/97 BRT 32,054.04 22.00 20.00 11/09/93 10/20/93 001/RET/1261 1,457 1/01/98 12/31/01 BRT 34,968.00 24.00 12/01/95 12/31/03 1/01/02 12/31/03 BRT 37,881.96 26.00 - ---------------------------------------------------------------------------------------------------------------------------- CPI Photo Finish 785 1/01/97 12/31/98 BRT 31,400.00 40.00 35.00 8/06/93 10/13/93 001/RET/1262 785 12/31/98 OPTION: OP1 START: 1/01/99 END: 12/31/01 OPTION AMOUNT: 33,755 Tenant may exercise Option if Tenant is not in default or has ever been in default, and Tenant has achieved Net Sales of $200,000 during any 2 of 3 Lease Years immediately preceding date of such exercise by Tenant. 1/1/99 through 12/31/01; MAR = $33.755.00 BP = $421,937.50 - ---------------------------------------------------------------------------------------------------------------------------- Kit's Cameras 1,294 1/01/97 12/31/99 BRT 41,408.00 32.00 30.00 8/18/93 10/13/93 002/RET/2010 1,294 1/01/00 12/31/02 BRT 43,996.00 34.00 12/31/03 1/01/03 12/31/03 BRT 45,290.00 35.00 - ---------------------------------------------------------------------------------------------------------------------------- Deck the Walls 1,530 4/01/95 12/31/97 BRT 48,960.00 32.00 32.00 1/13/95 4/01/95 002/RET/2013 1,530 1/01/98 12/31/01 BRT 53,550.00 35.00 12/31/04 1/01/02 12/31/04 BRT 58,140.00 38.00 - ---------------------------------------------------------------------------------------------------------------------------- Regis Hairstylists 1,174 1/01/97 12/31/00 BRT 41,000.00 34.92 32.00 8/27/93 10/13/93 002/RET/2016 1,174 1/01/01 12/31/03 BRT 44,000.00 37.48 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Coopers Children's Shoes 802 1/01/96 12/31/99 BRT 26,466.00 33.00 33.00 9/30/93 10/13/93 002/RET/2017 802 1/01/00 12/31/01 BRT 28,872.00 36.00 12/31/01 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------- Hat Club, The 001/RET/1260 1/01/97 459,357 7.00% Improvemenet Based Adj/Majors 1/01/98 520,929 7.00% Improvement Based Adj./Retail Amd OFS reducing rent & chgs thru 12/31/97 - ------------------------------------------------------------------------------------------------------------------------------------ ACH's Wellness Connection Improvement Based Adj/Majors 001/RET/1261 Improvement Based Adj./Retail Termination Right - ------------------------------------------------------------------------------------------------------------------------------------ CPI Photo Finish 1/01/97 392,500 8.00% Name to change to Kits Camera 001/RET/1262 - ------------------------------------------------------------------------------------------------------------------------------------ Kit's Cameras 1/01/97 1,035,200 3.00% Exclusive Use 002/RET/2010 1/01/00 1,099,900 3.00% Volume Out/Mutual 1/01/03 1,132,250 3.00% - ------------------------------------------------------------------------------------------------------------------------------------ Deck the Walls 4/01/95 699,429 7.00% 15,300 002/RET/2013 1/01/98 765,000 7.00% 1/01/02 830,571 7.00% - ------------------------------------------------------------------------------------------------------------------------------------ Regis Hairstylists 1/01/97 683,333 6.00% 002/RET/2016 1/01/01 733,333 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ Coopers Children's Shoes 1/01/96 378,086 7.00% 9,640 002/RET/2017 1/01/00 412,457 7.00% - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 12 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SIGNED PROJECT: ARRHTC ARROWHEAD Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- Wicks 'n' Sticks 1,500 11/16/95 12/31/97 BRT 40,500.00 27.00 30.00 10/11/95 11/16/95 002/RET/2019 1,500 1/01/98 12/31/00 BRT 45,000.00 30.00 1/31/06 1/01/01 12/31/03 BRT 54,000.00 36.00 1/01/04 1/31/06 BRT 57,000.00 38.00 - ---------------------------------------------------------------------------------------------------------------------------- Stag Tobacconist & Gifts 1,293 9/10/96 12/31/00 BRT 40,458.00 31.29 8/26/93 10/13/93 002/RET/2025 1,293 1/01/01 12/31/03 BRT 46,923.00 36.29 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Arrowhead Towne Center Travel 501 1/01/96 12/31/98 BRT 15,030.00 30.00 28.00 5/10/93 10/13/93 002/RET/2028 501 1/01/99 12/31/00 BRT 16,032.00 32.00 12/31/00 - ---------------------------------------------------------------------------------------------------------------------------- Gordon's Jewelers Since 1905 1,255 1/01/97 12/31/00 BRT 62,750.00 50.00 48.00 8/27/93 10/13/93 002/RET/2031 1,255 1/01/01 12/31/03 BRT 69,025.00 55.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Arizona Sports Club 1,864 1/01/96 8/31/97 BRT 55,920.00 30.00 30.00 12/13/93 12/05/93 002/RET/2034 1,864 5/01/97 8/31/97 BRT 19,920.00 10.69 12/31/01 9/01/97 10/31/97 BRT 36,000.00 19.31 11/01/97 11/30/97 BRT 48,000.00 25.75 12/01/97 12/31/97 BRT 120,000.00 64.38 1/01/98 12/31/99 BRT 55,920.00 30.00 1/01/00 12/31/01 BRT 59,648.00 32.00 - ---------------------------------------------------------------------------------------------------------------------------- Van's California Daze 2,203 1/01/97 12/31/00 BRT 61,684.00 28.00 26.00 10/25/93 10/13/93 002/RET/2037 2,203 1/01/01 12/31/03 BRT 66,090.00 30.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Animal Kingdom 2,149 1/05/96 12/31/98 BRT 53,725.00 25.00 26.00 8/04/95 1/05/96 002/RET/2040 2,149 1/01/99 12/31/02 BRT 58,023.00 27.00 12/31/05 1/01/03 12/31/05 BRT 62,321.00 29.00 - ---------------------------------------------------------------------------------------------------------------------------- Starlog: The Comic & Science 1,948 11/13/95 12/31/98 BRT 65,000.00 33.37 28.00 6/13/94 6/04/94 002/RET/2043 1,948 12/31/98 - ---------------------------------------------------------------------------------------------------------------------------- Surf City Squeeze 803 9/01/95 12/31/97 BRT 36,135.00 45.00 48.00 5/30/95 9/01/95 002/RET/2046 803 1/01/98 12/31/01 BRT 40,150.00 50.00 12/31/03 1/01/02 12/31/03 BRT 44,165.00 55.00 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------- Wicks 'n' Sticks 11/16/95 578,571 7.00% 15,000 Improvement Based Adj/Majors 002/RET/2019 1/01/98 642,857 7.00% Termination Right 1/01/01 771,429 7.00% 1/01/04 814,286 7.00% - ------------------------------------------------------------------------------------------------------------------------------------ Stag Tobacconist & Gifts 9/10/96 404,063 8.00% Volume Out/Mutual 002/RET/2025 1/01/01 484,875 8.00% - ------------------------------------------------------------------------------------------------------------------------------------ Arrowhead Towne Center Travel Improvement Based Adj/Majors 002/RET/2028 Improvement Based Adj./Retail - ------------------------------------------------------------------------------------------------------------------------------------ Gordon's Jewelers Since 1905 1/01/97 1,045,833 6.00% 002/RET/2031 1/01/01 1,150,417 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ Arizona Sports Club 1/01/97 844,000 6.00% 16,583 Volume Out/Mutual 002/RET/2034 1/01/98 932,000 6.00% Amd OFS reducing rent & chgs thru 12/31/97 1/01/00 994,133 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ Van's California Daze 1/01/97 877,146 5.00% 79,309 002/RET/2037 1/01/98 1,233,680 5.00% 1/01/01 1,321,800 5.00% - ------------------------------------------------------------------------------------------------------------------------------------ Animal Kingdom 1/05/96 895,417 5.00% 42,980 Improvement Based Adj/Majors 002/RET/2040 1/01/99 967,050 5.00% 1/01/03 1,038,683 5.00% - ------------------------------------------------------------------------------------------------------------------------------------ Starlog: The Comic & Science 1/01/96 350,000 12.00% 35,064 Negotiating with Rave 002/RET/2043 Termination Right - ------------------------------------------------------------------------------------------------------------------------------------ Surf City Squeeze 12/10/95 361,350 10.00% 002/RET/2046 1/01/98 401,500 10.00% 1/01/02 441,650 10.00% - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 13 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SIGNED PROJECT: ARRHTC ARROWHEAD Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- Godber's 2,316 1/01/97 12/31/98 BRT 70,638.00 30.50 29.00 6/14/93 10/13/93 002/RET/2049 2,316 1/01/99 12/31/01 BRT 75,270.00 32.50 12/31/01 - ---------------------------------------------------------------------------------------------------------------------------- Carimer 796 10/13/93 12/31/03 BRT 36,616.00 46.00 46.00 4/27/93 10/13/93 002/RET/2052 796 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Footlocker 2,397 10/13/93 12/31/03 BRT 71,910.00 30.00 30.00 4/19/93 10/13/93 002/RET/2055 2,397 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Pacific Sunwear of California 1,812 10/13/93 12/31/98 BRT 54,360.00 30.00 30.00 5/28/93 10/13/93 002/RET/2058 1,812 1/01/99 12/31/03 BRT 57,984.00 32.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Paradise Bakery 965 1/01/97 12/31/97 BRT 51,000.00 52.85 50.00 7/08/93 10/13/93 002/RET/2061 965 1/01/98 12/31/99 BRT 57,000.00 59.07 12/31/03 1/01/00 12/31/03 BRT 59,000.00 61.14 1/01/02 12/31/03 BRT 61,000.00 63.21 - ---------------------------------------------------------------------------------------------------------------------------- Great Steak & Potato, The 693 1/01/96 12/31/99 BRT 48,510.00 70.00 70.00 3/02/93 10/13/93 002/RET/2064 693 1/01/00 12/31/03 BRT 51,975.00 75.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- A & W Hot Dogs & More 633 1/01/97 12/31/00 BRT 41,145.00 65.00 70.00 7/21/93 10/13/93 002/RET/2067 633 1/01/01 12/31/03 BRT 43,044.00 68.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Subway 633 1/01/96 12/31/01 BRT 44,310.00 70.00 70.00 8/30/93 10/13/93 002/RET/2070 633 1/01/00 12/31/01 BRT 47,475.00 75.00 12/31/01 - ---------------------------------------------------------------------------------------------------------------------------- Fajita Prime 662 7/01/95 12/31/97 BRT 43,030.00 65.00 65.00 5/26/95 7/01/95 002/RET/2073 662 1/01/98 12/31/01 BRT 46,340.00 70.00 12/31/03 1/01/02 12/31/03 BRT 49,650.00 75.00 - ---------------------------------------------------------------------------------------------------------------------------- Pocket Change 4,690 1/01/97 12/31/00 BRT 131,320.00 28.00 26.00 9/30/93 10/13/93 002/RET/2076 4,690 1/01/01 12/31/03 BRT 140,700.00 30.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Pocket Change Carousel 1,018 20.00 9/30/93 10/13/93 002/RET/2079 1,018 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------- Godber's 1/01/97 1,009,114 7.00% 34,740 002/RET/2049 1/01/99 1,075,286 7.00% - ------------------------------------------------------------------------------------------------------------------------------------ Carimer 10/13/93 457,700 8.00% 002/RET/2052 - ------------------------------------------------------------------------------------------------------------------------------------ Footlocker 10/13/93 1,198,500 6.00% 002/RET/2055 - ------------------------------------------------------------------------------------------------------------------------------------ Pacific Sunwear of California 10/13/93 906,000 6.00% 80,000 Volume Out/Landlord 002/RET/2058 1/01/99 966,400 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ Paradise Bakery 1/01/97 728,571 7.00% 002/RET/2061 1/01/98 814,286 7.00% 1/01/00 842,857 7.00% 1/01/02 871,429 7.00% - ------------------------------------------------------------------------------------------------------------------------------------ Great Steak & Potato, The 1/01/96 606,375 8.00% Volume Out/Mutual 002/RET/2064 1/01/01 649,688 8.00% - ------------------------------------------------------------------------------------------------------------------------------------ A & W Hot Dogs & More 1/01/97 411,450 10.00% 002/RET/2067 1/01/01 430,440 10.00% - ------------------------------------------------------------------------------------------------------------------------------------ Subway 1/01/96 553,875 8.00% 002/RET/2070 1/01/00 593,438 8.00% - ------------------------------------------------------------------------------------------------------------------------------------ Fajita Prime 7/01/95 430,300 10.00% Improvement Based Adj/Majors 002/RET/2073 1/01/98 463,400 10.00% Volume Out/Mutual 1/01/02 496,500 10.00% - ------------------------------------------------------------------------------------------------------------------------------------ Pocket Change 1/01/97 875,467 15.00% 002/RET/2076 1/01/01 938,000 15.00% - ------------------------------------------------------------------------------------------------------------------------------------ Pocket Change Carousel 3/01/97 ILR 12/31/03 15.00% 002/RET/2079 - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 14 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SIGNED PROJECT: ARRHTC ARROWHEAD Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- Sbarro The Italian Eatery 956 1/01/97 12/31/00 BRT 57,360.00 60.00 55.00 7/09/93 10/13/93 002/FCT/2082 956 1/01/01 12/31/03 BRT 62,140.00 65.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Cajun and Grill 002/FCT/2085 900 1/01/97 12/31/00 BRT 58,500.00 65.00 60.00 8/05/93 10/13/93 900 1/01/01 12/31/03 BRT 63,000.00 70.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Hibechi-San 680 1/01/97 12/31/00 BRT 44,200.00 65.00 65.00 9/13/93 10/13/93 002/FCT/2088 680 1/01/01 12/31/03 BRT 47,600.00 70.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Panda Express 900 1/01/97 12/31/00 BRT 63,000.00 70.00 65.00 9/13/93 10/13/93 002/FCT/2091 900 1/01/01 12/31/03 BRT 67,500.00 75.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Dairy Queen 700 1/01/97 12/31/00 BRT 63,000.00 90.00 85.00 3/29/93 10/13/93 002/FCT/2094 700 1/01/01 12/31/03 BRT 66,500.00 95.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Gloria Jean's Coffee Bean 1,000 12/01/97 12/31/98 BRT 54,600.00 54.60 11/24/95 12/01/95 002/RET/2097 1,000 1/01/99 12/31/02 BRT 61,430.00 61.43 1/31/06 1/01/03 1/31/06 BRT 68,250.00 68.25 - ---------------------------------------------------------------------------------------------------------------------------- Icing, The 1,609 5/10/97 12/31/99 BRT 69,187.00 43.00 40.00 4/17/97 5/10/97 002/RET/2100 1,609 1/01/00 12/31/03 BRT 72,405.00 45.00 1/31/07 1/01/04 1/31/07 BRT 77,232.00 48.00 - ---------------------------------------------------------------------------------------------------------------------------- In the Swim 1,330 3/27/97 8/03/97 BRT 37,500.00 28.20 32.00 3/20/97 3/27/97 002/RET/2103 1,330 8/03/97 - ---------------------------------------------------------------------------------------------------------------------------- As Seen On T.V. 1,220 6/15/97 12/31/97 BRT 38,400.00 31.48 40.00 5/20/97 6/15/97 002/RET/2106 1,220 12/31/97 - ---------------------------------------------------------------------------------------------------------------------------- Hair Essentials 1,220 1/01/97 12/31/00 BRT 48,800.00 40.00 35.00 10/15/93 10/20/93 002/RET/2109 1,220 1/01/01 12/31/03 BRT 54,900.00 45.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Hi-Health 3,013 12/01/96 12/31/99 BRT 84,363.96 28.00 22.00 5/23/94 6/11/94 002/RET/2112 3,013 1/01/00 12/31/03 BRT 87,377.00 29.00 12/31/06 1/01/04 12/31/06 BRT 90,390.00 30.00 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------- Sbarro The Italian Eatery 1/01/97 717,000 8.00% 002/FCT/2082 1/01/01 776,750 8.00% - ------------------------------------------------------------------------------------------------------------------------------------ Cajun and Grill 002/FCT/2085 1/01/97 731,250 8.00% 1/01/01 787,500 8.00% - ------------------------------------------------------------------------------------------------------------------------------------ Hibechi-San 1/01/97 552,500 8.00% 002/FCT/2088 1/01/01 595,000 8.00% - ------------------------------------------------------------------------------------------------------------------------------------ Panda Express 1/01/97 787,500 8.00% 002/FCT/2091 1/01/01 843,750 8.00% - ------------------------------------------------------------------------------------------------------------------------------------ Dairy Queen 1/01/97 630,000 10.00% 002/FCT/2094 1/01/01 665,000 10.00% - ------------------------------------------------------------------------------------------------------------------------------------ Gloria Jean's Coffee Bean 12/09/95 780,000 7.00% Improvement Based Adj/Majors 002/RET/2097 1/01/99 877,571 7.00% 1/01/03 975,000 7.00% - ------------------------------------------------------------------------------------------------------------------------------------ Icing, The 5/10/97 988,386 7.00% 002/RET/2100 1/01/00 1,034,357 7.00% 1/01/04 1,103,314 7.00% - ------------------------------------------------------------------------------------------------------------------------------------ In the Swim Termination Right 002/RET/2103 TEMPORARY TENANT - ------------------------------------------------------------------------------------------------------------------------------------ As Seen On T.V. 6/21/97 255,996 10.00% Termination Right 002/RET/2106 TEMPORARY TENANT - ------------------------------------------------------------------------------------------------------------------------------------ Hair Essentials 1/01/97 697,143 8.00% 002/RET/2109 1/01/01 784,286 8.00% - ------------------------------------------------------------------------------------------------------------------------------------ Hi-Health 1/31/97 1,406,067 6.00% 40,000 002/RET/2112 1/01/00 1,456,283 6.00% 1/01/04 1,506,500 6.00% - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 15 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SIGNED PROJECT: ARRHTC ARROWHEAD Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- Radio Shack 2,745 1/01/96 12/31/97 BRT 49,410.00 18.00 22.00 12/16/93 3/01/94 002/RET/2115 2,745 1/01/98 12/31/01 BRT 54,900.00 20.00 1/31/04 1/01/02 1/31/04 BRT 60,390.00 22.00 - ---------------------------------------------------------------------------------------------------------------------------- Four Corners Home Accessories 750 5/01/97 12/31/98 BRT 31,800.00 42.40 5/16/97 5/01/97 002/RET/2118 2,694 12/31/98 - ---------------------------------------------------------------------------------------------------------------------------- Caravan Art Gallery 1,500 1/01/97 12/31/97 BRT 42,000.00 28.00 20.00 11/29/93 10/13/93 002/RET/2121 2,565 1/01/97 12/31/97 - ---------------------------------------------------------------------------------------------------------------------------- Pretzel Time 500 1/01/97 12/31/00 BRT 25,000.00 50.00 45.00 10/08/93 10/13/93 002/RET/2130 500 1/01/01 12/31/03 BRT 27,500.00 55.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Legends In Turquoise 1,305 7/01/95 12/31/98 BRT 43,065.00 33.00 33.00 2/28/95 9/01/95 002/RET/2133 1,305 1/01/99 12/31/01 BRT 48,285.00 37.00 12/31/01 - ---------------------------------------------------------------------------------------------------------------------------- Fast Fix Jewelry Repair 674 1/01/97 12/31/00 BRT 20,220.00 30.00 30.00 4/05/93 10/13/93 002/RET/2139 674 1/01/01 12/31/03 BRT 23,590.00 35.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Racine Formalwear Ltd. 2,901 2/23/96 12/31/98 BRT 34,812.00 12.00 22.00 1/08/96 2/23/96 002/RET/2145 2,901 1/01/99 12/31/00 BRT 43,515.00 15.00 12/31/05 1/01/01 12/31/02 BRT 52,218.00 18.00 1/01/03 12/31/05 BRT 60,921.00 21.00 - ---------------------------------------------------------------------------------------------------------------------------- Eye Masters 3,716 3/01/96 12/31/99 BRT 96,616.00 26.00 5/24/94 10/31/93 002/RET/2151 3,716 1/01/00 12/31/03 BRT 111,400.00 30.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Frederick Fisher Jewelers 1,000 10/01/94 12/31/98 BRT 64,489.56 64.49 65.00 2/24/94 10/01/94 002/RET/2154 1,000 1/01/99 12/31/03 BRT 55,000.00 55.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- L.A. Nails 616 5/01/96 12/31/97 BRT 15,400.00 25.00 30.00 5/24/95 5/01/96 002/RET/2157 616 1/01/98 12/31/00 BRT 18,480.00 30.00 12/31/01 1/01/01 12/31/01 BRT 21,560.00 35.00 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------- Radio Shack 1/01/96 1,235,250 3.00% 30,195 002/RET/2115 1/01/98 1,372,500 3.00% 1/01/02 1,508,750 3.00% - ------------------------------------------------------------------------------------------------------------------------------------ Four Corners Home Accessories 5/01/97 264,996 10.00% 002/RET/2118 - ------------------------------------------------------------------------------------------------------------------------------------ Caravan Art Gallery 1/01/97 300,000 10.00% TEMPORARY TENANT 002/RET/2121 Termination Right - ------------------------------------------------------------------------------------------------------------------------------------ Pretzel Time 1/01/97 312,500 8.00% Termination Right 002/RET/2130 1/01/01 343,750 8.00% Eff 1/1/97-6/30/97 MAR reduced to $1875/MO - ------------------------------------------------------------------------------------------------------------------------------------ Legends In Turquoise 1/01/97 538,313 7.00% Improvement Based Adj/Majors 002/RET/2133 1/01/98 615,214 7.00% Improvement Based Adj.Retail 1/01/99 689,786 7.00% Volume Out/Landlord Termination Right Amd OFS reduc. rnt to 10/1/97 - ------------------------------------------------------------------------------------------------------------------------------------ Fast Fix Jewelry Repair 1/01/97 252,750 8.00% 10,000 002/RET/2139 1/01/01 294,875 8.00% - ------------------------------------------------------------------------------------------------------------------------------------ Racine Formalwear Ltd. 1/01/97 580,200 6.00% 100,000 002/RET/2145 1/01/99 725,250 6.00% 1/01/01 870,300 6.00% 1/01/03 1,015,350 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ Eye Masters 1/01/97 1,932,320 5.00% Exclusive Use 002/RET/2151 1/01/00 2,229,600 5.00% Improvement Based Adj/Majors - ------------------------------------------------------------------------------------------------------------------------------------ Frederick Fisher Jewelers 10/01/94 833,333 6.00% 50,000 Incr. rent 1st 5 yrs due to payback of T.A. 002/RET/2154 1/01/99 916,667 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ L.A. Nails 5/04/96 192,500 8.00% Improvement Based Adj/Majors 002/RET/2157 1/01/98 231,000 8.00% Improvement Based Adj.Retail 1/01/01 269,500 8.00% Volume Out/Landlord - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 16 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SIGNED PROJECT: ARRHTC ARROWHEAD Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- Sunglass Hut International 782 1/01/97 12/31/00 BRT 46,920.00 60.00 55.00 11/09/93 10/13/93 002/RET/2163 782 1/01/01 1/31/04 BRT 50,830.00 65.00 1/31/04 - ---------------------------------------------------------------------------------------------------------------------------- Card Shoppe, The 3,623 1/01/96 12/31/97 BRT 72,460.00 20.00 20.00 7/19/93 10/13/93 002/RET/2166 3,623 1/01/98 12/31/99 BRT 86,952.00 24.00 1/31/05 1/01/00 12/31/01 BRT 90,575.00 25.00 1/01/02 1/31/05 BRT 97,821.00 27.00 - ---------------------------------------------------------------------------------------------------------------------------- Copper River 2,700 11/04/93 12/31/97 BRT 54,000.00 20.00 22.00 11/07/93 11/04/93 002/RET/2169 2,700 11/04/93 12/31/97 BRT 54,000.00 20.00 12/31/03 1/01/98 12/31/01 BRT 59,400.00 22.00 1/01/02 12/31/03 BRT 64,800.00 24.00 - ---------------------------------------------------------------------------------------------------------------------------- Golf Fore All 510 8/01/96 7/31/97 BRT 33,600.00 65.88 20.00 4/29/96 8/01/96 002/RET/2172 3,747 7/31/97 - ---------------------------------------------------------------------------------------------------------------------------- Champs 4,904 1/01/97 12/31/00 BRT 95,628.00 19.50 18.00 4/07/93 10/13/93 002/RET/2175 4,904 1/01/01 12/31/03 BRT 105,436.00 21.50 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Prints Plus 1,563 4/01/95 12/31/98 BRT 46,890.00 30.00 30.00 2/07/95 4/01/95 002/RET/2178 1,563 1/01/99 12/31/02 BRT 51,579.00 33.00 12/31/05 1/01/03 12/31/05 BRT 56,268.00 36.00 - ---------------------------------------------------------------------------------------------------------------------------- Things Remembered 1,263 1/01/97 12/31/00 BRT 50,520.00 40.00 37.00 8/18/93 10/13/93 002/RET/2181 1,263 1/01/01 12/31/03 BRT 54,309.00 43.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------- Sunglass Hut International 1/01/97 586,500 8.00% Volume Out/Mutual 002/RET/2163 1/01/01 635,375 8.00% - ------------------------------------------------------------------------------------------------------------------------------------ Card Shoppe, The 1/01/96 905,750 8.00% 54,345 002/RET/2166 1/01/98 1,086,900 8.00% 1/01/00 1,132,187 8.00% 1/01/02 1,222,762 8.00% - ------------------------------------------------------------------------------------------------------------------------------------ Copper River 1/01/97 Grad. Base 100,000 BREAKPOINT: 002/RET/2169 1/01/98 Grad. Base BREAKPOINT: 600,000.00 RATE: 8.0 % 1/01/99 Grad. Base BREAKPOINT: 749,999.99 RATE: 9.0 % 1/01/00 Grad. Base BREAKPOINT: 600,000.00 RATE: 8.0 % 1/01/01 Grad. Base BREAKPOINT: 749,999.99 RATE: 9.0 % 1/01/02 Grad. Base BREAKPOINT: 600,000.00 RATE: 8.0 % 1/01/03 Grad. Base BREAKPOINT: 749,999.99 RATE: 9.0 % 1/01/98 990,000 6.00% BREAKPOINT: 600,000.00 RATE: 8.0 % 1/01/02 1,080,000 6.00% BREAKPOINT: 749,999.99 RATE: 9.0 % 11/04/93 900,000 6.00% BREAKPOINT: 600,000.00 RATE: 8.0 % BREAKPOINT: 749,999.99 RATE: 9.0 % BREAKPOINT: 600,000.00 RATE: 8.0 % BREAKPOINT: 749,999.99 RATE: 9.0 % BREAKPOINT: 600,000.00 RATE: 8.0 % BREAKPOINT: 749,999.99 RATE: 9.0 % Volume Out/Mutual - ------------------------------------------------------------------------------------------------------------------------------------ Golf Fore All 8/01/96 336,000 10.00% TEMPORARY TENANT 002/RET/2172 - ------------------------------------------------------------------------------------------------------------------------------------ Champs 1/01/97 1,912,560 5.00% 002/RET/2175 1/01/01 2,108,720 5.00% - ------------------------------------------------------------------------------------------------------------------------------------ Prints Plus 4/01/95 781,500 6.00% 002/RET/2178 1/01/99 859,650 6.00% 1/01/03 937,800 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ Things Remembered 1/01/97 631,500 8.00% 002/RET/2181 1/01/01 678,863 8.00% - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 17 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SIGNED PROJECT: ARRHTC ARROWHEAD Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- Record Town/Saturday Matinee 002/RET/2184 7,613 1/01/97 12/31/00 BRT 182,712.00 24.00 22.00 8/06/93 10/13/93 7,613 1/01/01 1/31/04 BRT 197,938.00 26.00 1/13/04 - ---------------------------------------------------------------------------------------------------------------------------- Body Shop Skin & Hair, The 840 1/01/97 12/31/97 BRT 42,000.00 50.00 45.00 11/29/93 11/12/93 002/RET/2190 840 1/01/98 12/31/99 BRT 46,200.00 55.00 12/31/03 1/01/00 12/31/03 BRT 50,400.00 60.00 - ---------------------------------------------------------------------------------------------------------------------------- Nine West 1,469 11/19/94 12/31/99 BRT 41,132.00 28.00 35.00 2/02/95 11/19/94 002/RET/2196 1,469 1/01/00 12/31/04 BRT 47,008.00 32.00 12/31/04 - ---------------------------------------------------------------------------------------------------------------------------- Cinnabon 890 1/01/97 12/31/00 BRT 53,400.00 60.00 55.00 5/12/93 10/13/93 002/RET/2196 890 1/01/01 12/31/03 BRT 57,850.00 65.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Chevys Mexican Restaurant 7,114 11/09/93 12/31/08 BRT 170,736.00 24.00 24.00 8/18/93 11/09/93 002/RST/2199 7,114 OPTION: OP1 START: 1/01/09 END: 12/31/13 OPTION AMOUNT: ** SEE TEXT ** Minimum Annual Rental shall be increased at the beginning of the Option Period, 1/1/09, by the Lesser of 12.5% or CPI. The September index adjustment shall be compared to the index for the same month 5 years earlier. If such index is greater than the base index, Minimum Annual Rental for the next 5 Lease Years shall be adjusted upward. - ---------------------------------------------------------------------------------------------------------------------------- Johnny Rockets 1,487 1/01/97 12/31/00 BRT 50,558.00 34.00 30.00 5/28/93 10/13/93 002/RST/2202 1,487 1/01/01 12/31/03 BRT 56,506.00 38.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Sweet Factory 871 1/01/97 12/31/00 BRT 47,905.00 55.00 50.00 7/19/93 10/13/93 002/RET/2205 871 1/01/01 12/31/03 BRT 52,260.00 60.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Bank of America - ATM1 1 9/01/95 12/31/03 BRT 13,000.00 9/03/93 10/13/93 002/ATM/2206 1 1/01/97 12/31/97 BRT 780.00 780.00 6/01/95 12/31/03 1/01/98 12/31/98 BRT 1,606.80 606.00 1/01/99 12/31/99 BRT 2,483.16 483.16 1/01/00 12/31/00 BRT 3,412.20 412.20 1/01/01 12/31/01 BRT 4,396.92 396.92 1/01/02 12/31/02 BRT 5,440.68 440.68 1/01/03 12/31/03 BRT 6,547.08 547.08 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------- Record Town/Saturday Matinee 002/RET/2184 1/01/97 3,045,200 6.00% Exclusive Use 1/01/01 3,298,967 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ Body Shop Skin & Hair, The 1/01/97 840,000 5.00% 25,000 Recapture from Percentage Ren 002/RET/2190 1/01/98 924,000 5.00% Volume Out/Mutual 1/01/00 1,008,000 5.00% - ------------------------------------------------------------------------------------------------------------------------------------ Nine West 11/19/96 685,533 6.00% 75,000 Volume Out/Mutual 002/RET/2196 1/01/00 783,467 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ Cinnabon 1/01/97 628,235 8.50% 002/RET/2196 1/01/01 680,588 8.50% - ------------------------------------------------------------------------------------------------------------------------------------ Chevys Mexican Restaurant 11/09/93 3,104,231 5.50% 543,000 Exclusive Use 002/RST/2199 Volume Out/Mutual - ------------------------------------------------------------------------------------------------------------------------------------ Johnny Rockets 1/01/97 631,975 8.00% 150,000 002/RST/2202 1/01/01 706,325 8.00% - ------------------------------------------------------------------------------------------------------------------------------------ Sweet Factory 1/01/97 598,813 8.00% 002/RET/2205 1/01/01 653,250 8.00% - ------------------------------------------------------------------------------------------------------------------------------------ Bank of America - ATM1 5/01/96 9,750 0.25% Minimum Annual Rent CPI 002/ATM/2206 Improvement Based Adj/Majors Improvement Based Adj.Retail Exclusive Use - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 18 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SIGNED PROJECT: ARRHTC ARROWHEAD Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- Compagnie Int'l Express 8,880 10/13/93 1/31/98 BRT 133,200.00 15.00 17.00 9/29/93 10/13/93 002/RET/2208 8,880 2/01/98 1/31/02 BRT 150,960.00 17.00 1/31/06 2/01/02 1/31/06 BRT 168,720.00 19.00 - ---------------------------------------------------------------------------------------------------------------------------- Britches Great Outdoors 3,394 1/01/97 12/31/99 BRT 74,668.00 22.00 20.00 9/20/94 8/18/94 002/RET/2217 3,394 1/01/00 12/31/02 BRT 81,456.00 24.00 1/31/05 1/01/03 1/31/05 BRT 88,244.00 26.00 - ---------------------------------------------------------------------------------------------------------------------------- Structure 5,654 10/31/93 1/31/98 BRT 84,810.00 15.00 17.00 9/29/93 10/13/93 002/RET/2220 5,654 2/01/98 1/31/02 BRT 96,118.00 17.00 1/31/06 2/01/02 1/31/06 BRT 107,426.00 19.00 - ---------------------------------------------------------------------------------------------------------------------------- Kitchen Concepts 2,563 1/01/97 10/31/97 BRT 72,000.00 28.09 24.00 12/05/92 10/13/93 002/RET/2226 2,563 11/01/97 12/31/00 BRT 66,638.00 26.00 12/31/03 1/01/01 12/31/03 BRT 79,453.00 31.00 - ---------------------------------------------------------------------------------------------------------------------------- Successories 996 10/01/94 7/31/97 BRT 39,840.00 40.00 40.00 9/29/94 10/01/94 002/RET/2229 996 7/31/97 - ---------------------------------------------------------------------------------------------------------------------------- Wildlife Safari 3,325 1/01/97 12/31/99 BRF 24,999.96 7.52 22.00 9/17/93 10/13/93 002/RET/2232 3,325 1/01/97 12/31/00 BRT 83,125.00 25.00 12/31/03 1/01/01 12/31/03 BRT 99,750.00 30.00 - ---------------------------------------------------------------------------------------------------------------------------- Lenscrafters 3,225 1/01/97 12/31/99 BRT 90,300.00 28.00 26.00 2/02/95 3/31/95 002/RET/2235 3,225 12/31/99 OPTION: OP1 START: 1/01/00 END: 12/31/04 OPTION AMOUNT: ** SEE TEXT** 1/1/00 through 12/31/02; MAR = $90,300.00 BP = $1,806,000.00 1/1/03 through 12/31/04; MAR = $96,750.00 BP = $1,935,000.00 - ---------------------------------------------------------------------------------------------------------------------------- Knife Shop, The 838 4/01/95 12/31/97 BRT 37,710.00 45.00 50.00 3/27/95 4/01/95 002/RET/2238 838 1/01/98 12/31/01 BRT 44,414.00 53.00 12/31/03 1/01/02 12/31/03 BRT 47,766.00 57.00 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------- Compagnie Int'l Express 10/13/93 2,664,000 5.00% 888,000 Volume Out/Tenant 002/RET/2208 2/01/98 3,019,200 5.00% 2/01/02 3,374,400 5.00% - ------------------------------------------------------------------------------------------------------------------------------------ Britches Great Outdoors 1/01/97 1,866,700 4.00% 101,820 002/RET/2217 1/01/00 2,036,400 4.00% 1/01/03 2,206,100 4.00% - ------------------------------------------------------------------------------------------------------------------------------------ Structure 10/13/93 1,696,200 5.00% 565,400 Volume Out/Tenant 002/RET/2220 2/01/98 1,922,360 5.00% 2/01/02 1,696,200 5.00% - ------------------------------------------------------------------------------------------------------------------------------------ Kitchen Concepts 1/01/97 832,975 8.00% 89,705 Improvement Based Adj/Majors 002/RET/2226 1/01/01 993,163 8.00% Improvement Based Adj.Retail GROSS RENT thru 10/31/97 Termination Right - ------------------------------------------------------------------------------------------------------------------------------------ Successories 10/01/94 664,000 6.00% Improvement Based Adj/Majors 002/RET/2229 Volume Out/Mutual S&C OFS eff. 7/31/97; Ls OFS w/Ashley Avery - ------------------------------------------------------------------------------------------------------------------------------------ Wildlife Safari 1/01/97 1,162,500 5.00% 99,750 T rent based on 2325 s.f.eff. 1/1/97 - 12/31/99 , 002/RET/2232 1/01/00 1,662,500 5.00% - ------------------------------------------------------------------------------------------------------------------------------------ Lenscrafters 1/01/97 1,806,000 4.00% 002/RET/2235 - ------------------------------------------------------------------------------------------------------------------------------------ Knife Shop, The 4/01/95 538,714 7.00% Improvement Based Adj/Majors 002/RET/2238 1/01/98 634,486 7.00% Improvement Based Adj./Retail 1/01/02 682,371 7.00% - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 19 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SIGNED PROJECT: ARRHTC ARROWHEAD Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- Chain Reaction 565 1/01/97 12/31/99 BRT 33,900.00 60.00 60 8/15/94 10/03/94 002/RET/2240 565 1/01/00 12/31/01 BRT 36,725.00 65.00 12/31/01 - ---------------------------------------------------------------------------------------------------------------------------- Car-Lene Research 1,005 10/01/95 12/31/03 BRT 35,175.00 35.00 35.00 9/29/93 10/13/93 002/RET/2246 1,005 1/01/00 12/31/03 BRT 40,200.00 40.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Altered States 447 1/07/97 12/31/98 BRT 11,175.00 25.00 30.00 8/06/96 1/07/97 002/RET/2247 447 1/01/99 12/31/02 BRT 13,410.00 30.00 12/31/04 1/01/03 12/31/04 BRT 15,645.00 35.00 - ---------------------------------------------------------------------------------------------------------------------------- Samuel's Jewelers 1,400 6/01/96 12/31/99 BRT 70,000.00 50.00 35.00 1/26/96 6/01/96 002/RET/2250 1,400 1/01/00 12/31/03 BRT 77,000.00 55.00 12/31/06 1/01/04 12/31/06 BRT 84,000.00 60.00 - ---------------------------------------------------------------------------------------------------------------------------- General Nutrition Center 1,200 1/01/97 12/31/00 BRT 46,800.00 39.00 35.00 8/17/93 10/13/93 002/RET/2253 1,200 1/01/01 12/31/03 BRT 51,600.00 43.00 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- Game Keeper, The 1,000 1/01/97 12/31/99 BRT 35,000.00 35.00 35.00 7/14/94 9/01/94 002/RET/2256 1,000 1/01/00 12/31/01 BRT 40,000.00 40.00 12/31/03 1/01/02 12/31/03 BRT 45,000.00 45.00 - ---------------------------------------------------------------------------------------------------------------------------- Famous Footwear 4,210 10/01/95 1/31/05 BRT 92,619.96 22.00 15.00 12/19/94 4/29/95 002/RET/2259 4,210 1/31/05 OPTION: OP1 START: 1/01/05 END: 1/31/10 OPTION AMOUNT: 101,040 To exercise Option, Tenant must not be in default beyond any cure period and Tenant must have paid Percentage Rent for the preceding Lease Year. 1/1/05 through 1/31/10; MAR = $101,040.00 BP = $1,443,428.57 - ---------------------------------------------------------------------------------------------------------------------------- Spencer Gifts 1,499 1/01/97 12/31/00 BRT 46,469.00 31.00 28.00 8/05/93 10/13/93 002/RET/2262 1,499 1/01/01 12/31/03 BRT 53,964.00 36.00 12/13/03 - ---------------------------------------------------------------------------------------------------------------------------- A Perfect Smile 2,111 1/01/96 12/31/99 BRT 50,664.00 24.00 22.00 1/14/94 2/01/94 002/RET/2268 2,111 1/01/00 12/31/01 BRT 54,886.00 26.00 12/31/01 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------- Chain Reaction 1/01/97 423,750 6.00% 16,950 Recapture from Percentage Ren 002/RET/2210 1/01/00 459,063 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ Car-Lene Research Improvement Based Adj/Majors 002/RET/2246 Improvement Based Adj./Retail - ------------------------------------------------------------------------------------------------------------------------------------ Altered States 1/07/97 139,688 8.00% Exclusive Use 002/RET/2247 1/01/99 167,625 8.00% 1/01/03 195,563 8.00% - ------------------------------------------------------------------------------------------------------------------------------------ Samuel's Jewelers 6/25/96 1,166,667 6.00% Improvement Based Adj/Majors 002/RET/2250 1/01/00 1,283,333 6.00% Renewal OFS - see OFS category for terms 1/01/04 1,400,000 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ General Nutrition Center 1/01/97 688,571 7.00% 002/RET/2253 1/01/01 737,143 7.00% - ------------------------------------------------------------------------------------------------------------------------------------ Game Keeper, The 1/01/97 500,000 7.00% 60,000 Tenant Allowance/Payback 002/RET/2256 1/01/00 571,429 7.00% 1/01/02 642,587 7.00% - ------------------------------------------------------------------------------------------------------------------------------------ Famous Footwear 4/29/95 1,323,143 4.00% 105,250 Volume Out/Tenant 002/RET/2259 Gr.Ann. rent increment of R/E tx incr NTE 5% - ------------------------------------------------------------------------------------------------------------------------------------ Spencer Gifts 1/01/97 774,486 6.00% 002/RET/2262 1/01/01 899,400 6.00% - ------------------------------------------------------------------------------------------------------------------------------------ A Perfect Smile 1/01/96 1,013,280 5.00% 42,220 Exclusive Use 002/RET/2268 1/01/00 1,097,720 5.00% Improvement Based Adj/Majors Improvement Based Adj./Retail Amd OFS incr size to 3,255 sf - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 20 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SIGNED PROJECT: ARRHTC ARROWHEAD Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- A Perfect Smile ** 3,255 9/15/97 12/21/99 BRT 67,824.00 20.84 22.00 1/14/96 2/01/94 002/RET/2268 2,111 1/01/00 12/31/01 BRT 74,334.00 22.84 12/31/01 - ------------------------------------------------------------------------------------------------------------------------------ 348,054 8,600,405.84 - ------------------------------------------------------------------------------------------------------------------------------ OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- --------------------------------------------------- A Perfect Smile ** 002/RET/2268 - ------------------------------------------------------------------------------------------------------------------------------------ 8,267,623 - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 21 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SINGED, PRE-COMMENCEMENT PROJECT: ARRHTC ARROWHEAD Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- San Francisco Chocolate Fac *** 1,220 10/01/97 12/31/99 BRT 46,360.00 38.00 40.00 7/22/97 10/01/97 002/RET/2106 1,220 1/01/00 12/31/02 BRT 48,800.00 40.00 12/31/02 - ---------------------------------------------------------------------------------------------------------------------------- Model Homes Center 850 9/15/97 9/30/00 BRT 27,025.00 35.33 24.00 7/15/97 9/15/97 002/RET/2265 1,865 10/01/00 12/31/03 BRT 36,125.00 47.22 12/31/03 - ---------------------------------------------------------------------------------------------------------------------------- 850 27,025.00 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- -------------------------------------------------- San Francisco Chocolate Fac *** 10/01/97 662,286 7.00% 5,000 002/RET/2106 1/01/00 697,143 7.00% - ------------------------------------------------------------------------------------------------------------------------------------ Model Homes Center 30,000 002/RET/2265 - ------------------------------------------------------------------------------------------------------------------------------------ 30,000 - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 22 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SIGNED, NOT OPENED PROJECT: ARRHTC ARROWHEAD Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- Body Language 1,163 32.00 12/10/93 11/19/93 001/RET/1109 1,163 5/04/97 - ---------------------------------------------------------------------------------------------------------------------------- Original Cookie 884 1/01/97 7/31/97 BRT 55,500.00 62.78 60.00 5/28/93 10/13/93 002/RET/2022 884 6/16/97 - ---------------------------------------------------------------------------------------------------------------------------- 2,047 BRT 55,500.00 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------- Body Language 10,000 001/RET/1109 - ------------------------------------------------------------------------------------------------------------------------------------ Original Cookie 002/RET/2022 - ------------------------------------------------------------------------------------------------------------------------------------ 10,000 - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 23 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 OUT FOR SIGNATURE PROJECT: ARRHTC ARROWHEAD Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ -- MINIMUM RENT ----- RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- --- ---------- ------ ----- ----------- ------- Select Wireless 120 BRT 33,600.00 280.00 12/31/02 5 002/RET/K-003 120 - ----------------------------------------------------------------------------------------------------------- Finish Line 6,727 BRT 80,724.00 12.00 17.00 12/31/08 10 001/RET/1220 6,727 - ----------------------------------------------------------------------------------------------------------- Calla Bay 1,330 BRT 47,880.00 36.00 36.00 12/31/07 10 002/RET/2103 1,330 - ----------------------------------------------------------------------------------------------------------- Ashley Avery Collectibles 996 BRT 39,840.00 40.00 40.00 12/31/07 10 002/RET/2229 996 - ----------------------------------------------------------------------------------------------------------- Samuel's Jewelers 1,400 BRT 47,600.00 34.00 50.00 12/31/06 10 002/RET/2250 1,400 - ----------------------------------------------------------------------------------------------------------- 10,573 BRT 249,644.00 - ----------------------------------------------------------------------------------------------------------- OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT CAT BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------- Select Wireless RET 280,000 10.00% OPTION Y/M: M 002/RET/K-003 Gross Rental; Kiosk Lease; Long First Lease Year; 1/1/00 $310/SF - ------------------------------------------------------------------------------------------------------------------------------------ Finish Line RET 1,345,400 6.00% 175,000 OPTION Y/M: M 001/RET/1220 Long First Lease Year; 1/1/2004 $15/SF; Tenant to pay 5% over a 6% PRSL - ------------------------------------------------------------------------------------------------------------------------------------ Calla Bay RET 798,000 6.00% 25,000 OPTION Y/M: M 002/RET/2103 Short First Lease Year; 1/1/2001 $38/SF; 1/1/2005 $40/SF - ------------------------------------------------------------------------------------------------------------------------------------ Ashley Avery Collectibles RET 664,000 6.00% OPTION Y/M: M 002/RET/2229 Long First Lease Year; 1/1/2003 $45/SF - ------------------------------------------------------------------------------------------------------------------------------------ Samuel's Jewelers RET 685,714 7.00% OPTION Y/M: M 002/RET/2250 Short First Lease Year; 1/1/98 $39/SF; 1/1/99 $43/SF; 1/1/2000 $50/SF; 1/1/2004 $55/SF - ------------------------------------------------------------------------------------------------------------------------------------ 200,000 - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 24 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 NEGOTIATING PROJECT: ARRHTC Arrowhead Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ---- MINIMUM RENT ---- RENT/ MKT EXPIRATION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL CHG ANNUAL AMT SQ.FT. RATE DATE TERM - ------------------------------ ------- --- ---------- ------ ----- ----------- ------- Toni & Guy 1,490 BRT 001/RET/1010 1,490 - ------------------------------------------------------------------------------------------------------------ Garlic Shop, The 1,482 BRT 001/RET/1013 1,482 - ------------------------------------------------------------------------------------------------------------ Rage 2,296 BRT 001/RET/1016 2,296 - ------------------------------------------------------------------------------------------------------------ Lisa Frank 1,163 BRT 001/RET/1109 1,163 - ------------------------------------------------------------------------------------------------------------ Kiddie Kandids 2,500 BRT 001/RET/1115 2,500 - ------------------------------------------------------------------------------------------------------------ Florist 553 BRT 001/RET/1142 553 - ------------------------------------------------------------------------------------------------------------ Lemstone Bookstore 2,000 BRT 002/RET/2118 2,000 - ------------------------------------------------------------------------------------------------------------ Samaritan Health 6,855 BRT 002/RET/2127 6,855 - ------------------------------------------------------------------------------------------------------------ Sleep City 2,092 BRT 002/RET/2148 2,092 - ------------------------------------------------------------------------------------------------------------ Wet Seal 3,237 BRT 002/RET/2172 3,237 - ------------------------------------------------------------------------------------------------------------ 23,668 - ------------------------------------------------------------------------------------------------------------ OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT CAT BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- --------------------------------------------------- Toni & Guy RET 001/RET/1010 - ------------------------------------------------------------------------------------------------------------------------------------ Garlic Shop, The RET 001/RET/1013 - ------------------------------------------------------------------------------------------------------------------------------------ Rage RET 001/RET/1016 - ------------------------------------------------------------------------------------------------------------------------------------ Lisa Frank RET 001/RET/1109 - ------------------------------------------------------------------------------------------------------------------------------------ Kiddie Kandids RET 001/RET/1115 - ------------------------------------------------------------------------------------------------------------------------------------ Florist RET 001/RET/1142 - ------------------------------------------------------------------------------------------------------------------------------------ Lemstone Bookstore RET 002/RET/2118 - ------------------------------------------------------------------------------------------------------------------------------------ Samaritan Health RET 002/RET/2127 - ------------------------------------------------------------------------------------------------------------------------------------ Sleep City RET 002/RET/2148 - ------------------------------------------------------------------------------------------------------------------------------------ Wet Seal RET 002/RET/2172 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 25 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 UNCOMMITTED PROJECT: ARRHTC Arrowhead Towne Center GLA: 392,834
FORMER TENANT NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- No Former Tenant 1,490 44,700.00 30.00 30.00 001/RET/1010 1,490 - ---------------------------------------------------------------------------------------------------------------------------- No Former Tenant 1,482 44,460.00 30.00 30.00 001/RET/1013 1,482 - ---------------------------------------------------------------------------------------------------------------------------- Hickory Farms 2,296 57,400.00 25.00 25.00 001/RET/1016 2,296 - ---------------------------------------------------------------------------------------------------------------------------- No Former Tenant 2,167 56,342.00 26.00 26.00 001/RET/1019 2,167 - ---------------------------------------------------------------------------------------------------------------------------- Dolphin Quest 2,455 UNLEASED PORTION 58,920.00 24.00 24.00 001/RET/1022 3,055 OF COMMITTED SPACE - ---------------------------------------------------------------------------------------------------------------------------- No Former Tenant 921 27,630.00 30.00 30.00 001/RET/1031 921 - ---------------------------------------------------------------------------------------------------------------------------- Jamsey 2,529 UNLEASED PORTION 55,638.00 22.00 22.00 001/RET/1115 3,129 OF COMMITTED SPACE - ---------------------------------------------------------------------------------------------------------------------------- Cartoon Corner 2,200 UNLEASED PORTION 44,000.00 20.00 20.00 001/RET/1118 2,720 OF COMMITTED SPACE - ---------------------------------------------------------------------------------------------------------------------------- Sports Cards Express 2,091 UNLEASED PORTION 41,820.00 20.00 20.00 001/RET/1121 2,591 OF COMMITTED SPACE - ---------------------------------------------------------------------------------------------------------------------------- No Former Tenant 813 32,520.00 40.00 40.00 001/RET/1139 813 - ---------------------------------------------------------------------------------------------------------------------------- No Former Tenant 553 27,120.00 40.00 40.00 001/RET/1142 553 - ---------------------------------------------------------------------------------------------------------------------------- Arizona Gazebos & Spas 2,500 UNLEASED PORTION 45,000.00 18.00 18.00 001/RET/1253 4,000 OF COMMITTED SPACE - ---------------------------------------------------------------------------------------------------------------------------- FORMER TENANT NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------- No Former Tenant 001/RET/1010 - ------------------------------------------------------------------------------------------------------------------------------------ No Former Tenant 001/RET/1013 - ------------------------------------------------------------------------------------------------------------------------------------ Hickory Farms 001/RET/1016 - ------------------------------------------------------------------------------------------------------------------------------------ No Former Tenant 001/RET/1019 - ------------------------------------------------------------------------------------------------------------------------------------ Dolphin Quest 001/RET/1022 - ------------------------------------------------------------------------------------------------------------------------------------ No Former Tenant 001/RET/1031 - ------------------------------------------------------------------------------------------------------------------------------------ Jamsey 001/RET/1115 - ------------------------------------------------------------------------------------------------------------------------------------ Cartoon Corner 001/RET/1118 - ------------------------------------------------------------------------------------------------------------------------------------ Sports Cards Express 001/RET/1121 - ------------------------------------------------------------------------------------------------------------------------------------ No Former Tenant 001/RET/1139 - ------------------------------------------------------------------------------------------------------------------------------------ No Former Tenant 001/RET/1142 - ------------------------------------------------------------------------------------------------------------------------------------ Arizona Gazebos & Spas 001/RET/1253 - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 26 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 UNCOMMITTED PROJECT: ARRHTC Arrowhead Towne Center GLA: 392,834
FORMER TENANT NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- Four Corners Home Accessories 1,944 UNLEASED PORTION 002/RET/2118 2,694 OF COMMITTED SPACE - ---------------------------------------------------------------------------------------------------------------------------- Caravan Art Gallery 1,065 UNLEASED PORTION 21,300.00 20.00 20.00 002/RET/2121 2,565 OF COMMITTED SPACE - ---------------------------------------------------------------------------------------------------------------------------- No Former Tenant 6,855 109,680.00 16.00 16.00 002/RET/2127 6,855 - ---------------------------------------------------------------------------------------------------------------------------- No Former Tenant 500 22,500.00 45.00 45.00 002/RET/2132 500 - ---------------------------------------------------------------------------------------------------------------------------- No Former Tenant 519 20,760.00 40.00 40.00 002/RET/2136 519 - ---------------------------------------------------------------------------------------------------------------------------- No Former Tenant 1,043 26,075.00 25.00 25.00 002/RET/2142 1,043 - ---------------------------------------------------------------------------------------------------------------------------- No Former Tenant 2,092 52,300.00 25.00 25.00 002/RET/2148 2,092 - ---------------------------------------------------------------------------------------------------------------------------- No Former Tenant 616 19,712.00 32.00 32.00 002/RET/2160 616 - ---------------------------------------------------------------------------------------------------------------------------- Golf Fore All 3,237 UNLEASED PORTION 64,740.00 20.00 20.00 002/RET/2172 3,237 OF COMMITTED SPACE - ---------------------------------------------------------------------------------------------------------------------------- Model Homes Center 1,015 UNLEASED PORTION 24,360.00 24.00 24.00 002/RET/2265 1,865 OF COMMITTED SPACE - ---------------------------------------------------------------------------------------------------------------------------- 40,383 891,977.00 - ---------------------------------------------------------------------------------------------------------------------------- FORMER TENANT NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------- Four Corners Home Accessories 002/RET/2118 - ------------------------------------------------------------------------------------------------------------------------------------ Caravan Art Gallery 002/RET/2121 - ------------------------------------------------------------------------------------------------------------------------------------ No Former Tenant 002/RET/2127 - ------------------------------------------------------------------------------------------------------------------------------------ No Former Tenant 002/RET/2132 - ------------------------------------------------------------------------------------------------------------------------------------ No Former Tenant 002/RET/2136 - ------------------------------------------------------------------------------------------------------------------------------------ No Former Tenant 002/RET/2142 - ------------------------------------------------------------------------------------------------------------------------------------ No Former Tenant 002/RET/2148 - ------------------------------------------------------------------------------------------------------------------------------------ No Former Tenant 002/RET/2160 - ------------------------------------------------------------------------------------------------------------------------------------ Golf Fore All 002/RET/2172 - ------------------------------------------------------------------------------------------------------------------------------------ Model Homes Center 002/RET/2265 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 27 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 UNDEFINED STATUS PROJECT: ARRHTC ARROWHEAD Towne Center GLA: 392,834
FORMER TENANT NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT EXECUTION/ LEASE FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE RENEWAL TERM - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- Arizona Gazebos & Spas 1,500 7/12/97 10/30/97 BRT 38,400.00 25.60 18.00 7/12/97 7/12/97 001/RET/1253 4,000 10/30/97 - ---------------------------------------------------------------------------------------------------------------------------- 1,500 38,400.00 - ---------------------------------------------------------------------------------------------------------------------------- FORMER TENANT NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ---------------------------------------------- Arizona Gazebos & Spas 001/RET/1253 - --------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 28 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 SIGNED **** STORAGE **** PROJECT: ARRHTC Arrowhead Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT ----STORAGE DATES---- FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE START END - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- Disney Store, The 1,000 11/08/94 12/31/00 BRS 9,999.96 10.00 10.00 11/08/94 12/31/06 001/SGN/1190A 1,000 1/01/01 12/31/06 BRS 12,000.00 12.00 - ---------------------------------------------------------------------------------------------------------------------------- Healthrider 200 10/17/96 9/30/97 001/SGN/1191A 200 - ---------------------------------------------------------------------------------------------------------------------------- Kay-Bee Toy & Hobby 400 1/01/96 12/31/03 BRS 6,000.00 15.00 11/01/95 12/31/03 001/SGN/1253A 400 - ---------------------------------------------------------------------------------------------------------------------------- Healthrider 200 10/17/96 9/30/97 BRS 3,000.00 15.00 10/17/96 9/30/97 001/SGN/1253C 200 - ---------------------------------------------------------------------------------------------------------------------------- Sbarro The Italian Eatery 400 10/13/93 12/31/03 BRS 6,000.00 15.00 10.00 10/13/93 12/31/03 001/SGN/2085 400 - ---------------------------------------------------------------------------------------------------------------------------- 2,200 24,999.96 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------- Disney Store, The 001/SGN/1190A - ------------------------------------------------------------------------------------------------------------------------------------ Healthrider 001/SGN/1191A - ------------------------------------------------------------------------------------------------------------------------------------ Kay-Bee Toy & Hobby 001/SGN/1253A - ------------------------------------------------------------------------------------------------------------------------------------ Healthrider 001/SGN/1253C - ------------------------------------------------------------------------------------------------------------------------------------ Sbarro The Italian Eatery 001/SGN/2085 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
8/05/97 3:57:23 Page 29 WESTCOR PARTNERS LEASING REPORT FOR PERIOD ENDING: 7/31/97 UNCOMMITTED **** STORAGE **** PROJECT: ARRHTC Arrowhead Towne Center GLA: 392,834
OPERATING AS NAME LEASED/ ------------ MINIMUM RENT ------------ RENT/ MKT ----STORAGE DATES---- FLOOR/SPC TYPE/UNIT ACTUAL START END CHG ANNUAL AMT SQ.FT. RATE START END - ------------------------------ ------- -------- -------- --- ---------- ------ ----- ----------- ------- No Former Tenant 3,377 33,770.00 10.00 10.00 001/SGN/STORAGE 3,377 - ---------------------------------------------------------------------------------------------------------------------------- No Former Tenant 583 001/SGN/1037A 583 - ---------------------------------------------------------------------------------------------------------------------------- No Former Tenant 687 6,870.00 10.00 10.00 001/SGN/1129 687 - ---------------------------------------------------------------------------------------------------------------------------- No Former Tenant 1,463 001/SGN/1177 1,463 - ---------------------------------------------------------------------------------------------------------------------------- Desert Digs-Furniture & Doodad 443 001/SGN/1253B 443 - ---------------------------------------------------------------------------------------------------------------------------- Geppeddo's 200 001/SGN/1253D 200 - ---------------------------------------------------------------------------------------------------------------------------- No Former Tenant 365 002/SGN/2097A 365 - ---------------------------------------------------------------------------------------------------------------------------- 7,118 40,640.00 - ---------------------------------------------------------------------------------------------------------------------------- OPERATING AS NAME ------- PERCENTAGE RENT -------- TENANT FLOOR/SPC TYPE/UNIT DATE BREAKPOINT RATE ALLOWANCE COMMENTS - ------------------------------ -------- ------------ ------ ---------- ------------------------------------------------- No Former Tenant 001/SGN/STORAGE - ------------------------------------------------------------------------------------------------------------------------------------ No Former Tenant 001/SGN/1037A - ------------------------------------------------------------------------------------------------------------------------------------ No Former Tenant 001/SGN/1129 - ------------------------------------------------------------------------------------------------------------------------------------ No Former Tenant 001/SGN/1177 - ------------------------------------------------------------------------------------------------------------------------------------ Desert Digs-Furniture & Doodad 001/SGN/1253B - ------------------------------------------------------------------------------------------------------------------------------------ Geppeddo's 001/SGN/1253D - ------------------------------------------------------------------------------------------------------------------------------------ No Former Tenant 002/SGN/2097A - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
LANDAUER REAL ESTATE COUNSELORS - -------------------------------------------------------------------------------- Professional Qualifications JAMES C. KAFES, MAI, CRE EXPERIENCE: Landauer Associates, Inc., (since 1986) Managing Director, Member of the Board fo Directors, Member of the Management Committee, and General Manager of the New York Valuation and Technical Services Division. Valuation and real estate counseling on major urban properties and portfolios, including financial and feasibility analyses, appraisal reviews and independent fiduciary services. Miller & Kafes Associates, Inc. (1972-1986) Principal. Valuations, market studies, investment analyses and counseling services on major commercial developments nationwide and in the Caribbean. James E. Gibbons Associates (1970-1972) Assistant Director. Real estate valuations and counseling services. National Bank of North America (1969-1970) Chief Appraiser. Market valuations and analysis of investment opportunities. General Services Administration (1962-1968) Economic analyses, highest and best use studies, market valuations. PROFESSIONAL ACTIVITIES: MAI: Appraisal Institute CRE: American Society of Real Estate Counselors Has served on national committees of the Appraisal Institute and ASREC since 1971, including current service as a board member and past service as Editor-in-Chief and Chairman of the Editorial Board of the Appraisal Journal, published quarterly by the Appraisal Institute. Member: Board of Directors, Cedar Income Fund Board of Directors, Realty Credit Corp. Roundtable of Advisors, Murray H. Goodman Center for Real Estate Studies, Lehigh University The Real Estate Board of New York, Inc. CERTIFICATION: Currently certified in the Appraisal Institute's voluntary program of continuing education for its designated members. EDUCATION: BS, MBA, Lehigh University LANDAUER REAL ESTATE COUNSELORS - -------------------------------------------------------------------------------- Professional Qualifications JOHN I. WRZESINSKI, MAI, CRE EXPERIENCE: Landauer Associates, Inc., Chicago, Illinois (since 1982) Senior Managing Director, Member of the Management Committee and General Manager of the Chicago Regional Office. Active in general real estate consulting since 1972 with an emphasis in the valuation and financial analysis of income properties. Specialized experience in the preparation of feasibility, market and land use studies and litigation support. Assignments involved the evaluation and valuation of all types of real property throughout the United States for Insurance Companies, Pension Funds, financial institutions, developers, and industrial corporations. Lake Michigan Appraisal Co., Chicago, Illinois (1977-1982) Assistant Vice President and Secretary, (Subsidiary of Arthur Rubloff & Co.). Co-manager of the appraisal group; performing various market, feasibility studies and valuations of all types throughout the United States. Marshall & Stevens, Chicago, Illinois (1976-1977) Senior Appraiser. Appraisal and counseling assignments involving real property of all types in the Midwest principally but also in the Northeast and West. PROFESSIONAL DESIGNATIONS: MAI: Appraisal Institute CRE: American Society of Real Estate Counselors Member: - Appraisal Journal Board-Appraisal Institute - Chicago Real Estate Board - Illinois Association of Realtors - National Association of Realtors - Illinois Association of Certified Real Estate Appraisers - International Council of Shopping Centers - Lambda Alpha, Ely Chapter CERTIFICATION: Currently certified in the voluntary program of continuing education for designated members conducted by the Appraisal Institute. Currently State certified as a General Real Estate Appraiser Licensed Real Estate Broker EDUCATION: Bachelor of Science, School of Business Southern Illinois University, Carbondale, Illinois (1969) Numerous professional practice and real estate related courses offered by the Appraisal Institute. Also, various seminars, workshops and continuing education courses sponsored by the Appraisal Institute and the Chicago Real Estate Board. LANDAUER REAL ESTATE COUNSELORS - -------------------------------------------------------------------------------- Professional Qualifications PAUL F. ENGEL EXPEIRENCE: Landauer Associates, Inc., Chicago, Illinois (since 1984) Managing Director, Valuation and Technical Services Division. Management, preparation and review of real estate valuation services in all types of real property including portfolio valuation, partial interests and mvestment consulting in the Midwest region and nationally. Talman Home Federal Savings & Loan, Chicago, Illinois (1982-1984) Assistant Vice President, Appraisal Specialist. Real estate appraisals, feasibility studies, market analyses and liquidation pricing for all types of properties, Chicago area and nationally. Northwest Federal Savings and Loan, Chicago, Illinois (1968-1982) Assistant Vice President, Chief Appraiser and Manager of Appraisal Services. Real estate appraisals, loan committee participation, appraisal policy formation and administration of Appraisal Department. ASSOCIATION MBERSHIPS: Candidate Member - Appraisal Institute PROFESSIONAL ACTIVITIES: Past Secretary - Chicagoland Market Data Center Past Committee Member - Appraisal Institute Market Data Center (Chicagoland) OTHER ACTIVITIES: Participated in various programs for the Appraisal Institute; contributed to forming a monthly market data publication for Chicago-area appraisers. CERTIFICATION: Currently certified as State General Appraiser in: Illinois (License No.153-000410) Indiana (License No. CG 69201411) EDUCATION: Northeastern Illinois University Central YMCA College of Real Estate Appraisal Institute Courses 101, 201, R-2 Exam, Narrative Report Writing, Standards of Professional Practice. Seminars: Tax Considerations in Real Estate, Investment Feasibility Analysis, Special Use Properties, Regression Analysis, and others. Savings & Loan Institute; various courses related to real estate and Financial Industry. PROFESSIONAL QUALIFICATIONS G. JAY FENNER, MAI EXPERIENCE: G. Jay Fenner Company (Since 1994) Serving the real estate research, appraisal and consulting needs of clients while specializing in urban and suburban investment-quality properties located across the United States. Commercial Property Counselors, Inc., Houston, Texas (1990-1993) Partner. Responsible for the management and operation of the company, as well as the valuation and evaluation of commercial, multifamily and industrial properties throughout the United States. Landauer Associates, Inc., Houston, Texas (1987-1990) Assistant Vice President, Valuation and Technical Services Division. Responsible for valuation and evaluation of real property, with emphasis on commercial, industrial and multifamily properties. Robert B. Jones & Company, Houston, Texas (1984-1985; 1986-1987) Associate Appraiser. Appraisal concentration in commercial properties throughout Texas and the Southwest, including office buildings, shopping centers, office/warehouse facilities, single-family subdivisions, multifamily projects, motels/hotels, industrial developments and recreational facilities. PROFESSIONAL ACTIVITIES: Member: Appraisal Institute - MAI Member Number 8564 Appraisal Institute Admissions Committee Sub-Chairman Appraisal Institute Regional Panel Member - Ethics and Counseling Committee Appraisal Institute Regional Representative 1997 Association of Commercial Real Estate Professionals License: Real Estate Broker, State of Texas State of Texas Certified General Real Estate Appraiser Number - TX-1321773-G Lecturer: Houston Chapter - Texas Society Certified Public Accounts (Since 1992) EDUCATION: Master of Business Administration, University of Houston, 1985 Bachelor of Business Administration, University of Texas at Austin, 1982 Various courses, workshops and seminars sponsored by the American Institute of Real Estate Appraisers and the Appraisal Institute as well as other professional real estate and financial organizations. Appraisal Institute Continuing Education complete. This CD ROM contains an electronic version of appraisals for the Mortgaged Properties in PDF format. The appraisals for the Mortgaged Properties were prepared prior to the date of this Prospectus Supplement. Accordingly, the information included in such appraisals may not reflect the current economic, competitive, market and other conditions with respect to the Mortgaged Properties. The information contained in this CD ROM does not appear elsewhere in paper form in this Prospectus Supplement and must be considered together with the information contained elsewhere in this Prospectus Supplement and the Prospectus. The information contained in this CD ROM has been filed by the Seller with the Securities and Exchange Commission as part of a Current Report on Form 8-K, which is incorporated by reference in this Prospectus Supplement, and is also available through the public reference branch of the Securities and Exchange Commission. Defined terms used in this CD ROM but not otherwise defined therein shall have the respective meanings assigned to them in the paper portion of the Prospectus Supplement and the Prospectus. All of the information contained in this CD ROM is subject to the same limitations and qualifications contained in this Prospectus Supplement and the Prospectus. Prospective investors are strongly urged to read the paper portion of this Prospectus Supplement and the Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was not received in a sealed package, there can be no assurances that it remains in its original format and should not be relied upon for any purpose. Prospective investors may contact Cecilia Tarrant of Morgan Stanley & Co. Incorporated at (212) 761-6028 to receive an original copy of the CD ROM. MARKETABILITY STUDY OF NORTH SHORE TOWERS APARTMENTS INCORPORATED 269-10, 270-10 AND 271-10 GRAND CENTRAL PARKWAY FLORAL PARK, NEW YORK, 11005 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Regional Appraisal Associates o Valuation 300 East 42nd Street o Consulting New York, New York 10017 o Feasibility Studies (212) 599-0004 Fax: (212) 697-5526 o Estates Ms. Cecilia Tarrant, Vice President July 14, 1997 Morgan Stanley & Co., Incorporated 1585 Broadway, New York, New York 10036 Re: North Shore Towers Apartment Incorporated 269-10, 270-10 and 271-10 Grand Central Parkway Floral Park, New York, 11005 Dear Ms. Tarrant: At your request, we have completed a marketability study of the above noted property. The marketability study identifies the subject's market segment and all of the factors related to the demand for the property subject to the various Assumptions and Limiting Conditions set forth in the accompanying report. The physical inspection and analysis that form the basis of this marketability study have been conducted by/or under the direct supervision of the undersigned. The accompanying report includes the pertinent data secured in our investigation, as well as the exhibits and the details of the processes used to arrive at our conclusions. The subject property is on the northeast corner of the Grand Central Parkway Service Road (a.k.a. Marcus Avenue) and 267th Street, Floral Park, Queens County, New York. The site is identified on the New York City Tax Maps as Section 37, Block 8449 Lot 42, Block 8450 Lot 60, Block 8489 Lot 1. In addition to this land, the cooperative also has leased 4.47+/- acres in the northeast section of the property. The leased land is identified on the Nassau County Tax maps as Section 8 Block J, Lot 415. The total land (owned and leased) is 110.86+/- acres. The site is improved with three (3), high rise, elevatored, doorman, cooperative, apartment buildings. In addition, the site is also improved with a country club (including an 18 hole golf course that wraps around the apartment buildings, swimming pools and tennis courts) an underground three-level garage, parking lots, guard houses, metal fences, macadam driveways and parking lots, landscaped grounds, concrete sidewalks and benches. All utilities are available to the site. The subject improvements consist of three, high-rise, elevatored, doorman and concierge, apartment buildings. The buildings were constructed in 1971 as a three building, high-rise, apartment complex known as North Shore Towers. The total number of residential units is 1,844 (including 9 below grade units). In addition to the apartments, there is a commercial corridor that runs beneath all three buildings. The subject improvements are in overall good condition. Page 2 Ms. Tarrant July 14 This report conforms to the current Uniform Standards of Professional Appraisal Practice and the Financial Institutions, Reform, Recovery and Enforcement Act of 1989 (FIRREA). In arriving at the conclusions of the marketability study, we have given consideration to all items influencing value. Included are the items of location, appeal, contract rents, comparable rentals, market trends, existing and projected competition and continued space demand. As a result of the examination and study performed, it is our opinion that the market rental potential and gross sellout values of the subject property, as of June 30, 1997 the date of our inspection, is: 1. "As if" a conventional rental complex, the net income would be: $20,124,264 2. The Gross Sellout Value assuming cooperative ownership above any underlying mortgage or financing is: THREE HUNDRED AND FIFTY MILLION DOLLARS ($350,000,000) Respectfully submitted, /s/ D. Robert Hedrick /s/ Joseph E. Petrocine - ----------------------------- ------------------------------------- D. Robert Hedrick, MAI, Associate Joseph E. Petrocine, MAI, Director New York Certification #46-11150 New York Certification #46-3743 New Jersey Certified General #RG01814 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004
SUMMARY OF SALIENT FACTS & CONCLUSIONS Property Address: 0-10, 270-10, 271-10 Grand Central Parkway Floral Park, New York 11005 Ownership: North Shore Towers Apartments Incorporated Sponsor: Three Towers Associates Tax Identification: N.Y.C./ Section 37: Block: 8449: Lot 42 Block:8450 Lot: 60 Block: 8489 Lot: 45 Nassau County/ Section 8: Block: J: Lot 415 Taxes (1997-98): N.Y.C. & Nassau County Assessed Values: $85,858,402 Total Taxes (Rd): $9,550,000 Tax Exemption N/A Combined R.E. Tax: N/A &/or Abatements Annual Exemption: $111,689 Annual Abatement: N.A. Exemption Year: 1986 Abatement Total: N.A. Remaining Abatement Remaining Exemption Term: N.A. Term: N.A. Expiration Date: N.A. Expiration Date: N.A. Zoning/Comm./Res: Comm. FAR N/A R3-2/ Res.FAR 0.50 Flood Map: 360497-0045B Zone C non-flooding Lot Size (Acres): 110.86 Gross Building Area (SF): 2,400,000 Net Building Area (SF): 1,743,792 Number Of Rooms: 7426.5 Improvements: Built: 1971 Coop Conversion: 1986 No Of Stories: 33 Plus basement No Of Units: 1,844 (With Shares) - Owner Occupied: 1,549 84% - Sublets: 6 - Sponsor Units: 295 16% Investor owned- Rent Regulated: 0 - Destabilized: 0 On-Site Parking: 2,374
Layout: No. Of No. Of Type Rooms Total Units Of Unit /Unit Rooms ----- ------- ----- ----- 1 One bed 3 rms 684 s.f.-Acarde 3.0 3.0 1 Two bed 4 rms 712 s.f.-Acarde 4.0 4.0 1 Two bed 5 rms 1,216 s.f.-Arcade 5.0 5.0 6 Studio 2 rms.-300 s.f.-Arcade 2.0 12.0 22 Studio 2 rms.-450 s.f. 2.0 44.0 137 Studio 2.5 rms.-600 s.f. 2.5 342.5 403 One bed 3 rms 700 s.f. 3.0 1,209.0 706 One bed 4 rms 930 s.f. 4.0 2,824.0 444 Two bed 5 rms 1,200 s.f. 5.0 2,220.0 13 Two bed 7 rms 1,800 s.f. 7.0 91.0 104 Three bed 6 rms 1,350 s.f. 6.0 624.0 6 Three-bed 8 rms-2,000 8.0 48.0 ----- 1,844 7,426.50 - -----------------------------------------------------------------------------------------------------------------------------------
Regional Appraisals Associates 300 East 42nd Street, New York, New York 10017 o (212)599-0004
Cooperative Maintenance Total Monthly: $2,474,025 Average/Mth/Unit: $1,342 Utilities Paid By: Heat/Air Conditioning/Gas: Coop (Coop/Tenant) Electric: Tenant Highest and Best Use: As Improved Amount of Underling Mortgage: $71,000,000 Valuation: ---------- Effective Date of Study: June 30, 1997 Apartmental Rental Income: $43,086,696 Commercial Units: $544,000 Electricity $118,000 Country Club $430,000 Garage $2,140,000 ---------- Gross Potential Income $46,318,696 Rental Income Less Stabilized Adjustment: $2,420,280 Gross Potential Income $43,898,416 Less Vacancy $1,760,000 Less Operating Expenses: $22,014,152 Net Operating Income: $20,124,264 Market Capitalization Rate: 9.50% Avg. Monthly Market Rent/Unit: $1,947 Avg. Monthly Market Rent/Room: $483 Avg. Market Rent/Net SF: $24.71 (Before Stabilization Adj.) Avg. Gross Sellout Price/Unit: $224,701 Avg. Gross Sellout Price/Room: $55,793 Avg. Gross Sellout Price/Net SF: $237.61 Ground Lease: Yes Amount: $100/year Date: 99 years Professional Leases: Yes Amount: $544,000 per year Original Appraised Value: N.A. Amount: N.A. Date: N.A. Net Operating Income: $20,124,264 Gross Sellout Value as Cooperative Above Mortgage or Financing: $350,000,000 - ------------------------------------------------------------------------------------------------------------------------------------
Regional Appraisals Associates 300 East 42nd Street, New York, New York 10017 o (212)599-0004 TABLE OF CONTENTS Property Rights/Effective Date of the Marketability Study 1 Purpose of Marketability Study 1 Definitions 2 Limiting Conditions 3 New York City Description 6 Local Area Map 13 Neighborhood Description 14 Zoning Map 15 Zoning 16 Taxes/Flood 17 Building Location, Site and Improvement Pictures, 18 Property Description Highest and Best Use 38 Marketability Problem 40 Income Approach 41 Cost Approach 60 Direct Sales Comparison Method 61 Reconciliation & Conclusions 79 Certificate of Marketability Study 80 Qualifications of the Appraisers 81 Addenda Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 EFFECTIVE DATE OF THE MARKETABILITY STUDY The effective date of this marketability study is June 30, 1997. This report is subject to the property's conformance to all municipal requirements and a Certificate of Occupancy conforming to the representations as presented herein. HISTORY OF THE PROPERTY The property is known as 269-10, 270-10 and 271-10 Grand Central Parkway (a.k.a. North Shore Towers), Floral Park, New York was built in 1971 as a rental apartment complex. In 1986 the property was acquired by North Shore Towers Apartments, Incorporated. It became a cooperative at that time. Currently, 84% of the subject units are owner occupied and 16% are sponsored owned units that are under New York City's rent stabilization guidelines. These regulations control occupancy, lease renewals, rent increases, etc. PURPOSE OF THE MARKETABILITY STUDY The purpose of this marketability study is to identify the subject's market segment and all of the factors affecting the demand for the subject property (Land and Improvements) as a rental property and as cooperative apartment complex consisting of 1,844 residential units, seven units for the staff and commercial units located at 269-10, 270-10 and 271-10 Grand Central Parkway (a.k.a. North Shore Towers), Floral Park, New York FUNCTION OF THE MARKETABILITY STUDY This marketability study will be utilized by Morgan Stanley & Co., Incorporated for decision making purposes, with respect to purchase of the existing underlying mortgage of this cooperative currently held by John Hancock Insurance Company. 1 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 DEFINITIONS For the purposes of this report, Gross Sellout Value may be defined as the aggregate of the sale prices of the individual cooperative units, as of the date of the marketability study. This estimation of gross sellout value does not consider advertising, selling, legal or real estate tax expenses, nor any other cost associated with the marketing and transference of the property. Nor does this value reflect entrepreneurial profit or any discounting for a sellout period (i.e. - time value of money). Therefore, the gross sellout value should not be confused with the market value of the property to a bulk purchaser. MARKETABILITY STUDY DEFINED For the purposes of this report, a marketability study can be generally defined as follows "marketability studies are microeconomic studies that focus on the marketability of a given property or class of properties. Usually the appraiser must identify one or more market segments in which the property would generate market demand and all the factors related to that demand".(1) MARKET VALUE DEFINED For the purposes of this marketability study, Market Value can be generally defined as "The most probable price in terms of money which a property should bring in competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeable and assuming the price is not affected by undue stimulus. "Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. buyer and seller are typically motivated. 2. both parties are well informed, well advised, and each acting in what they consider to be there own best interest. 3. a reasonable time is allowed for exposure in the open market. 4. payment is made in cash or its equivalent. 5. financing, if any, is on terms generally available in the community at the specified date and typical for the property type in its locale. 6. "the price represents a normal consideration for the property sold unaffected by special financing amounts and /or terms, services, fees, costs, or credits incurred in the transaction."(2) - ---------- (1) The Appraisal of Real Estate, 10th Edition, the Appraisal Institute, page 606 (2) Byrl N. Boyce, Ph.D., SRPA, Real Estate Appraisal Terminology (Revised Edition; Massachusetts: Ballinger Publishing Company, 1984); pp.160-161. 2 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 LIMITING CONDITIONS 1. That no survey of the property has been made by the appraisers and no responsibility is assumed in connection with such matters. Representations in this marketability study are included only to assist the reader in visualizing the property. 2. That no responsibility is assumed for matters of a legal nature affecting title to the property nor is an opinion of the title rendered. 3. That information furnished by others is assumed to be true, correct and reliable. A reasonable effort has been made to verify such information; however, no responsibility for its accuracy is assumed by the appraisers. 4. That all mortgages, liens, encumbrances, leases, and servitude have been disregarded unless so specified within this marketability study. The property is appraised as though responsible ownership and competent management is in place. 5. It is assumed that there are no hidden or non apparent conditions of the property, subsoil, or structures which would render it more or less valuable. No responsibility is assumed for such conditions or for the engineering which may be required to discover them. 6. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless nonconformity has been stated, defined, and considered in this marketability study report. 7. It is assumed that all applicable zoning and use regulations and restrictions have been complied with, unless a nonconformity has been stated, defined, and considered in this marketability study. 8. It is assumed that all required licenses, consent, or other legislative or administrative authority from any local, state, or national governmental or private entity or organization have been, or can be, obtained or renewed for any use on which the market estimates contained in this marketability study is based. 9. It is assumed that the utilization of the land and improvements are within the boundaries or property lines of the property described and that there is no encroachment or trespass unless noted within the marketability study. 10. It is assumed that the existing improvements conform to the Certificate of Occupancy as issued by the appropriate municipal agency. 11. It is assumed that the subject property rental information as furnished to the appraisers is accurate. 3 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 12. It is assumed that all of the necessary and required permits and licenses are, or will be, in full force and effect. 13. It is assumed that the forecast income and operating expense estimates are based, in part, upon projections based upon local conditions obtained through contractors, vendors, and those usually in contact with similar apartment project operations. 14. It is assumed that a final approved survey will be submitted, conforming to the sketches and estimates as represented in this marketability study. 15. It is assumed that the estimated land area as provided by public records and/or property owners is accurate and was utilized as the total land area throughout this marketability. 16. It is assumed that the Gross Building Area (inclusive of common areas) as ascertained from the owners of the property, City records, and the architectural floor plans are accurate and was utilized as the total Gross Building Area throughout this marketability study. 17. If the reader is making a fiduciary or individual investment decision and has any questions concerning the material contained in this marketability study, it is recommended that the reader contact the undersigned. 18. Projections, as utilized in this marketability study, are based on certain assumptions and estimates concerning future events and circumstances. Future valuation estimates may be affected by events that are beyond the control of the property. These may be local, national, or international in scope. It must be understood that actual results achieved during projection periods may vary from those indicated and the variations could be material. 19. That this marketability study is meant to be presented in its entirety. If this report is presented in any form other than its complete form, it becomes invalid. 20. That this marketability study represents a summary of the findings of the data gathering process and the appropriate analysis. All input data would be too voluminous to include in this report. The exclusion of same does not preclude the appraisers from referring to this data at a future date. If the occasion arises, the appraisers reserve the right to refer to any of the source material used in the preparation of this marketability study to further clarify any item contained in this report. 21. That, to the best of my knowledge and belief, the statements of fact contained in this marketability study upon which the analysis, opinions, and conclusions are based, are true and correct; subject to the statement of Assumptions and Limiting Conditions herein set forth. 4 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 22. That this marketability study sets forth all Limiting Conditions (imposed by the terms of our assignment or by the undersigned) affecting the analysis, opinions, and conclusions expressed herein. 23. Demographic and economic projections used herein may be based in whole or in part on information obtained from outside sources. The undersigned takes no responsibility for the accuracy of this information. 24. Unless agreements have been made previously, the appraiser(s) will not be required to give testimony or appear in court as a result of having made this marketability study with reference to the property in question. Additionally, this marketability study was not prepared for court submission purposes. 25. Possession of this marketability study, or a copy thereof, does not carry with it the right of publication. This marketability study may not be used for any other purpose or any person other than the party to whom it is addressed without the written consent of the appraiser(s) and, in any event, only with properly written qualifications and in its entirety. 5 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 NEW YORK CITY DESCRIPTION Location Manhattan, an island 22.7+/- square miles in size and approximately two miles across at its widest point, is situated at the confluence of the Hudson and East Rivers, and is the focus of business, cultural and residential activity in the Tri-state area. The Tri-state area (New York-New Jersey-Connecticut) encompasses 8,500+/- square miles and contains a population of over 18 million. The City of New York, itself, consists of five counties, or boroughs, which include Bronx County, Kings County (Brooklyn), Queens County, Richmond County (Staten Island) and New York County (Manhattan). The Island of Manhattan is subdivided into various unofficial communities and areas. Population New York is the most populous city in the nation, with more than seven million residents, and one of the largest populations in the world. Population trends in the area had been stable through the period 1960 to 1970. During the 1970s and into this decade, overall population has declined by approximately 573,000. The principal cause of this shrinkage has been a decline in birth rate, the maturation of the population residing in the suburbs and a reversal of national migratory patterns, which resulted in a shift of population to the south and west. The following table shows the population change in the ten most populous areas of the nation from 1970 to 1990. - -------------------------------------------------------------------------------- 1970 1990 Annual % Change 1990 Rank Population Population 1970-1990 --------- ---------- ---------- --------- - -------------------------------------------------------------------------------- 1 - New York 7,895,563 7,322,564 -0.36 2 - Chicago 3,369,357 2,783,726 -0.87 3 - Los Angeles 2,811,801 3,485,398 1.20 4 - Philadelphia 1,949,996 1,585,577 -0.93 5 - Houston 1,288,443 1,630,553 1.32 6 - Detroit 1,514,063 1,027,974 -1.60 7 - Dallas 849,410 1,006,877 0.92 8 - San Diego 697,471 1,110,549 2.96 9 - Baltimore 905,787 736,041 -0.93 10 - San Antonio 708,582 935,933 1.60 - -------------------------------------------------------------------------------- Source: U.S. Department of Commerce, Bureau of the Census. These adjustments in population and other factors have resulted in fundamental changes in the New York City job sector from a manufacturing center to a white collar financial and business 6 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 center. Manufacturing and trade industry jobs have declined significantly over the past two decades. The redistribution of jobs within the area have fostered a stability and perhaps even an expansion in housing formations in the city. Recent Bureau of Census studies indicate that total New York City population shows a slight .36% decrease for the 1990 Census, thus stabilizing the severely declining population trend that started in the 1970s. Transportation The majority of the labor force reside outside the Manhattan business districts and are in New York City's remaining four boroughs and the neighboring suburbs of Nassau, Suffolk and Westchester Counties, as well as the States of New Jersey and Connecticut. Many commute to the city via some form of mass transportation. A network of surface and subsurface public transportation grids the city. The New York City Transit Authority and its affiliate, the Staten Island Rapid Transit Operating Authority, operate one of the largest municipal transit systems in the world. This system consists of more than 200 miles of subway routes and more than 500 miles of bus routes, many of which operate 24 hours a day. On a typical business day, more than five million passengers ride the trains and buses. In addition, the city operates ferries between Staten Island and lower Manhattan. Additionally, the Port Authority Trans-Hudson System (PATH) operates a rapid rail system between New York and several cities in New Jersey. This system provides fast, inexpensive transportation for the many people who commute between New York and New Jersey. Local and express bus service is also available, providing surface transportation to most points within Manhattan and the outer boroughs. In an effort to improve the flow of automobile traffic in the midtown area, the city has instituted several innovative traffic laws which, combined with strict parking law enforcement, have eased midtown traffic congestion during all but peak hours. A system of peripheral roadways conducts commercial and commuter traffic around the central business areas. The Port Authority Bus Terminal is located at Eighth Avenue between West 40th and West 42nd Streets, seven blocks north of Madison Square Garden and Pennsylvania Station. The 42nd Street-Times Square area is currently undergoing the Times Square Redevelopment project and the Jacob K. Javits Convention Center is located at Eleventh Avenue between 34th and 37th Streets. New York City's International Significance New York City is generally recognized as being a national and international commercial and cultural center of unparalleled importance and influence in world affairs. New York is considered to be the nation's financial and business capital due to the presence of Wall Street and the New York Stock Exchange. Manhattan's central business district contains the greatest concentration of business activities in the United States, with more than two million jobs 7 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 generated by the various firms and businesses located here. Five of the nation's largest banks are head quartered in New York City. In addition to financial institutions, many other principal industries also consider New York to be their capital, including advertising, fashion, publishing, communications, printing, jewelry and design. To accommodate the many business travelers, as well as tourists and residents, the city has a wide variety of hospitality, cultural and recreational facilities. In addition to business travelers, New York City's cultural attractions, entertainment, restaurants and retail shopping have helped to make it the number one transit destination in the country. It is the home of the United Nations, the Statue of Liberty and the World Trade Center. The theaters in the Broadway district attract international attention. Lincoln Center, home of the Metropolitan Opera, the New York Philharmonic, the New York City Ballet and Opera and the Juilliard School of Music, is considered to be one of the most important centers for the performing arts in the world. The Metropolitan Museum of Art, the Museum of Modern Art, the American Museum of Natural History, the Cooper-Hewitt Museum, the Guggenheim and many of the city's other museums and galleries are internationally respected. New York City's universities, including Columbia, Fordham, New York University and the City University of New York, are attended by students from all parts of the world. The theater district, along Broadway and Seventh Avenue in the mid-40s, is home to numerous legitimate theaters and cinemas featuring first-quality entertainment. In addition, there are numerous cabarets and supper clubs as well as a variety of restaurants featuring foods of many nations and regions at a wide range of prices. Other attractions include the Empire State Building at 34th Street and Fifth Avenue and Rockefeller Center at 51st Street. New York is also one of the world's leading art centers. The most prominent area for the art devotee is concentrated between 57th and 86th Streets between Fifth and Park Avenues. Many galleries and auction houses known throughout the world are located throughout the Upper West Side of the city, as well as in SoHo and Greenwich Village. Economic Base One of the most favorable economic characteristics of the New York City economy is the diversity of its employment base. No single sector is responsible for more than 33% of the employment. This shields the economy from the impact of fluctuations in the prosperity of a specific sector. The vitality and international stature of many of New York's businesses and industries have resulted in the need for vast amounts of commercial office space. However, as illustrated by the city's financial crisis of the mid-1970s, and now again in the 1990s, New York City is not immune to either economic fluctuations or the macroscopic trends that have affected many 8 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 northern urban areas in the nation during the past two decades. In tandem with national trends, New York's economic base has been undergoing significant changes. New York's economy is far from stagnant, and its national and international importance ensures its status as a major urban center. Employment growth in New York City is concentrated in Manhattan's midtown and downtown business centers. This corresponds with these areas' emphasis in those long-term employment growth sectors: finance, insurance and real estate (FIRE) and services. Conversely, the area between Canal Street and 34th Street (Valley area) is the home of most of the borough's manufacturing and apparel businesses. Employment Employment in New York City's manufacturing industries declined at an average annual rate of 2.8% between 1970 and 1990. This trend paralleled the national and regional trends during the same period, underscoring the decreasing importance of manufacturing industries to the economy. The decline in the nation's manufacturing employment is the result of three basic factors: improvements in technology, which have raised output per worker in manufacturing; rising real incomes that have resulted in a shift to relatively less spending for goods and more for services; and increasing labor costs that are significantly higher than in other, less affluent nations. Since average output per worker has grown faster than demand for manufactured goods, the relative number of workers has declined. Additionally, the oil embargo of 1974-75 focused the nation's attention on the issue of energy costs. With transportation expenses rising sharply, many manufacturers declined to move production closer to their raw materials. This influence, in combination with lower labor costs, land costs and taxes in the Sunbelt regions, catalyzed the migration of manufacturers to locations in Florida, Texas, the Carolinas and California. High labor costs also induced some manufacturers to leave the country altogether during this period. Replacing some of the lost manufacturing jobs during the period of 1970 to 1990 is employment in service trades, including the FIRE groups. 9 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 New York City Employment By Sector
-------------------------------------- Thousands of Employees and % of Total* -------------------------------------- - ----------------------------------------------------------------------------------------- 1960 1970 1980 1990 1994 - ----------------------------------------------------------------------------------------- Total Employment 3,538.4 3,745.4 3,301.7 3,569.60 3,304.5 Manufacturing 948.7 767.9 497.0 337.5 280.60 26.8 20.5 15.0 9.5 8.5 Construction 126.9 111.7 76.8 112.9 88.8 3.6 3.0 2.3 3.2 2.7 Transportation and Utilities 318.1 323.3 257.0 225.1 201.5 9.0 8.6 7.8 6.2 6.1 Wholesale and Retail Trade 744.8 735.3 612.8 605.6 541.1 21.0 19.6 18.6 17.0 16.4 Finance, Insurance and Real Estate 384.4 458.2 448.1 516.9 480.2 10.9 12.2 13.6 14.5 14.5 Services 607.3 785.8 893.7 1,163.9 1,146.6 17.2 21.0 27.1 32.6 34.7 Government 408.2 563.2 516.3 608.3 565.4 11.5 15.1 15.6 17.0 17.1 - -----------------------------------------------------------------------------------------
Source: NYC Department of Labor, Insured Employment, July, 1982 and 1987 Benchmark, 1990 and 1993 NY/NJ Port Authority. * Numbers do not add due to rounding. The prior statistics reveal that New York City employment has contracted consistently between 1970 and 1990, with most losses occurring during the 1970s. Most recently, in the five-year period between 1989 and 1994, significant losses occurred due to the economic recession across all sectors, the most severely affected being construction and manufacturing. Over the last year, the recession appears to have subsided and there is a general stabilization within the employment arena. Further evidence of stability within the economy can be found in the New York City unemployment rate, which decreased from 10.8% to 7.7% between January, 1994 and January, 1995, and has held steady throughout 1995; most recently 7.8% in November. 10 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Much of this employment was concentrated in the Wall Street area and its support services. The aftermath of the stock market crash of October, 1987 has been slow to manifest itself, but has resulted in a recession commencing in the last quarter of 1990. The direct effect of this downturn has been felt in FIRE sector employment in New York City. From 1987 to 1990, FIRE sector jobs declined by more than 30,000, or 6% of the total employed within the sector, and between 1990 and 1993 an additional 46,000 jobs were lost, indicating further erosion of 9%. Additionally, the merger of Chase Manhattan Bank and Chemical Bank will result in an estimated loss of 12,000 jobs. This trend has seemed to come to an end as 21,100 overall jobs were gained in 1994 and 8,600 overall jobs were gained in the first ten months of 1995. The job gains included 6,700 jobs within the FIRE sector over the two-year period. The current mayoral administration has met with mixed success in terms of job retention. Despite the present downturn, aggressive efforts have succeeded in keeping several prominent national employers from moving out of the city. These included the National Broadcasting Company and the Chase Manhattan Bank Company, which were planning to relocate 5,000 employees from lower Manhattan to New Jersey. However, there were several prominent announcements to leave the city, which included the Army Corps of Engineers, J. P. Morgan & Company, May Department Stores, New York Life Insurance Co., Dun & Bradstreet, Witco Corp., Ronzoni Foods Corp. and Quantum Chemical Corp.(3) Manhattan office market conditions improved modestly in the first quarter of 1996, with the primary (Class A) vacancy rate falling to 11.4% from 11.6% at the end of 1995 and from 12.6% a year ago. The vacancy rate for Classes A and B combined dropped by two tenths of a percentage point to 12.3% from the previous quarter and is down by more than a percentage point from March of last year. Leasing activity was slightly lower than the same period last year, with 3.3 million square feet of Class A space leased between January and March. Leasing in the Midtown South Market, in particular the secondary market (Class B), was strong, with leasing up 65% over the prior year. Asking rents in the primary Midtown South market were up to $26.20 in March from $19.83 in December, reflecting the availability of higher priced space and a moderately tightening office rental market. Asking rents for Midtown primary space were unchanged at $34.05 as of March 1996. The Downtown market is still relatively soft. The vacancy rates for Classes A and B space edged up slightly to 20.4% in the first quarter of 1996 from 19.7% in the previous quarter, and is up by three percentage points from a year ago. Leasing activity in Downtown during the first quarter of 1996 was the strongest since the fourth quarter of 1994 with almost a million (910,000) square feet leased in the Class A Market. However, the addition of a number of large blocks of space (50,000 square feet and above) to the market contributed to a negative absorption. Asking rents for Class A rose slightly from $30.10 in December to $30.86 in March while rent in the Class B space remained steady. - ---------- (3) Source: Crain's New York Business, July 4, 1994. 11 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Conclusion New York is a diverse city that is world-renowned as a business, cultural and entertainment center. In recent years, an economic recession as well as fundamental changes in the composition of its economic base have created a significant downturn in the local economy. It is now widely held that the worst of this recession has passed and in many market sectors, a recovery is well underway. Concurrently, New York has also lost much of its manufacturing base to other parts of the region and country, as well as internationally. However, over the same 20-year period, there have been significant gains in the service and FIRE sectors and the current labor force is more highly skilled than before. Despite some recent losses, New York City will likely retain its position for the foreseeable future as the preeminent world-class city given its diversity and ability to adjust to change. 12 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 AREA MAP [GRAPHIC OMITTED] 13 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 NEIGHBORHOOD DESCRIPTION The subject property is located on the northeast corner of the Grand Central Parkway Service Road (A.K.A. Marcus Avenue) and 267th Street, Floral Park, New York. Floral Park is in the northeast corner of Queens adjacent to Nassau County. The area has an irregular shape. The boundaries of this area are roughly Lakeville Road and Langdale Street to the east, the Grand Central Parkway to the north, the Cross Island Parkway to the west and Jamaica Avenue and Jericho Turnpike to the south. Surrounding communities include Glen Oaks and Bellerose to the west, Lake Success (Nassau County) and Little Neck to the north, North New Hyde Park (Nassau County) to the east and Floral Park (Nassau County) to the south. Land use is improved with one- and two-family homes and cooperatives (both garden apartments and high rise) apartment buildings constructed between 1946 and the mid 1980's. Many of the buildings in this area have been converted to cooperative ownership. Floral Park residents are primarily middle to upper middle income class. Nearby is the Long Island Jewish Medical Center. Union Turnpike is the main local shopping district with several shopping centers. Public transportation (bus lines) is readily available on Union Turnpike. This section of Queens has no subway service. The area is serviced by the Long Island Expressway and the Grand Central Parkway which are major east-west highways. Nearby is the Cross Island Parkway which is a major north-south highway. The subject's location is convenient with respect to access to Manhattan's major employment, entertainment, and shopping districts. Rents in the area typically range between $300 and $550 per room, depending on date of construction, size, condition and amenities in the building. Vacancy rates in the area tend to be 3-4%. The sales in the area typically range from $20,000 to $80,000 per room, depending on size, condition, and amenities. Typical marketing time in the area is between 3 and 6 months for units offered at market levels. Local brokers report that real estate values in the subject area have stabilized over the last year and are starting to increase. This judgment is supported by brokers, appraisers, builders and other real estate professionals in the New York Metropolitan area. 14 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 ZONING MAP [GRAPHIC OMITTED] 15 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 ZONING The subject property is located in an R3-2 district. R3 districts are lowest density zones in which multiple dwellings are allowed. The R3-2 designation allows for a variety of housing types, including garden apartments, row houses and an occasional apartment house surrounded by extensive open space. Parking is required for each dwelling unit in R3-2 district. Maximum FAR: .5 Minimum OSR: 150.0 Minimum lot area per room 84 to 77 square feet Required parking 1 per dwelling unit The subject site of 110.86+/- acres (4,829,062 square feet) is improved with three (3) high-rise apartment buildings with 1,844 residential units and a gross building area of 2,400,000+/- square feet. There is a an underground garage that can accommodate 2,374 cars. The FAR of the subject is .50 (2,400,000 square feet divided by 4,829,062 square feet equals .50) which is the legal maximum allowable FAR. The subject improvements represent a legal, conforming use of the land. 16 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 TAXES The subject is responsible for both New York City and Nassau County real estate taxes. The cooperative leases 4+/- acres of land situated in Nassau County and it is responsible for the Nassau County real estate taxes for this parcel. The real estate taxes are calculated as follows:
New York City - ------------- Section 37 Actual Transitional ------ ------------ Land (Block 8449, Lot 42, Block 8450, Lot 60, Block 8489, Lot 1) $29,349,000 $29,494,200 Building (Block 8489, Lot 1) $56,601,000 $56,385,800 ----------- ----------- Total $85,950,000 $85,880,000 Less Senior Citizens' exemption $111,689 $111,598 ----------- ----------- Adjusted Assessment $85,838,311 $85,768,402 New York City Adjusted Assessment $85,768,402 Tax Rate per $100 of assessed value $11.045 ----------- New York City Real Estate Taxes $9,473,120 Nassau County Land (Section 8, Block J, Lot 415) $86,580 Building (Section 8, Block J, Lot 415) $3,740 ----------- Total $90,320 Total Rate per $100 of Assessed Value x $87.432 ----------- Total Nassau County/School/Village Taxes $78,969
The total real estate taxes for New York City is $9,473,120 and the real estate taxes for Nassau County and the Village of Lake Success is $78,969. The total amount of real estate taxes is $9,552,089, rounded to, $9,550,000. Exemptions and Abatements: The subject has a senior citizen's tax exemption which the New York Assessor's Department reported will be in effect for the foreseeable future. We have taken this exemption into consideration in the calculation of the real estate taxes. FLOOD ZONE In accordance with Flood Insurance Map # 360497 0045B, dated November 16, 1983, the subject property is not located in a flood hazard zone. It is in a flood zone C which is an area of minimum flooding. 17 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Front View of 269-10 Grand Central Parkway (Subject): [PHOTO] 18 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Front View of 270-10 Grand Central Parkway (Subject): [PHOTO] 19 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Front View of 271-10 Grand Central Parkway (Subject): [PHOTO] 20 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Grand Central Service Road Looking West [PHOTO] 21 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Grand Central Service Road Looking East [PHOTO] 22 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Typical Roof [PHOTO] 23 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Grounds [PHOTO] 24 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Living Room [PHOTO] 25 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Typical Bathroom [PHOTO] 26 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Bedroom [PHOTO] 27 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 TAX MAP [GRAPHIC] 28 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 DESCRIPTION OF THE PROPERTY The Site The subject property is on the northeast corner of the Grand Central Parkway Service Road (a.k.a. Marcus Avenue) and 267th Street, Floral Park, Queens County, New York. The site is identified on the New York City Tax Maps as Section 37, Block 8449 Lot 42, Block 8450 Lot 60, Block 8489 Lot 1. Part of the subject site is also situated in Nassau County. This portion of the site is identified on the Nassau County Tax Maps as Section 8 Block J, Lot 415. The site, irregular in shape, slopes up gradually from the Grand Central Parkway Service Road (a.k.a. Marcus Avenue) and then levels off. The site then gently slopes downwards towards to the rear property line. The site has a frontage of 2,717+/- along the service road of the Grand Central Parkway and a depth of 2,600+/- feet along the western property line. The total land area is 106.39+/- acres. In addition to this land, the cooperative also leased a parcel of land in the northeast section of the property. This land is owned by the Michelin Tire Company. It was leased to the cooperative for $100 per year for a term of 94 years The leased site is irregular in shape with a frontage of 2,851+/- along the Grand Central Parkway Service Road and a depth of 872+/- feet. The total land area of the leased parcel is 4.47+/- acres. The leased land is being utilized for the first hole of the golf club, part of the tennis court and the eastern entrance roadway. For further details, see the subject tax map on the previous page. The total land area (both owned and leased by the cooperative) is 110.86+/- acres. Across the street from the subject is the Grand Central Parkway. The subject street is a quiet, two lane, east-west road that is primarily improved with residential developments along with some office buildings. Access to the sites is restricted to two (2) driveways. The driveways, situated on the Grand Central Service Road are located on the eastern and western ends of the site. The driveways are protected with 24 hour guard houses and security cameras which are monitored in the security office of the complex. The subject site conforms substantially to the surrounding sites in the neighborhood except that it is larger than the other sites. The site is improved with three (3), high rise, elevatored, doorman, cooperative, apartment buildings. The site is also improved with a country club (including an 18 hole golf course that wraps around the buildings, swimming pools and tennis courts) an underground, three-level garage that can accommodate 2,374 cars, surface parking lots that can accommodate 547 cars, guard houses, metal fences, macadam driveways, landscaped grounds, concrete sidewalks and benches. All utilities are available to the site. Improvement: The subject improvements consist of three, freestanding, high-rise, elevatored, doorman and concierge, apartment buildings. The buildings were constructed in 1971 as a three building, high-rise, apartment complex known as North Shore Towers. The total number of residential units is 1,844 (including 9 below grade units). The complex became a cooperative in 1986. Building One is 271-10 Grand Central Parkway (the Amherst), Building Two has the street address 270-10 Grand Central Parkway (the Beaumont) and Building Three has the street address 269-10 Grand Central Parkway (the Coleridge). The buildings form a semi-circle around landscaped grounds, parking lots and a circular driveway. The eastern and western access driveways 29 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 converge into this circular driveway. Each building has 33 floors (including a penthouse level) and from 600 to 632 residential units. The subject residential units are composed of studio units, one bedroom units, two bedroom units and three bedroom units. The buildings, including the arcade, have a total gross building area of 2,400,000+/- square feet. The figure was provided to the appraisers by the management agent from their architectural plans. The net living area of the residential units is 1,743,792+/- square feet, above grade and 4,412+/- square feet below grade. There is an arcade level (one level below the lobby level) which runs beneath all three buildings. The arcade houses nine residential units, seven staff units (living quarters), numerous stores, a bank, a financial center, doctor's office, movie house, deli, grocery store, a restaurant, etc. In addition, the management office and country club are also located on this level. Access to the arcade level is via elevators in each building. In the rear of the buildings is a service drive which provides access to the oil tanks, employee parking areas, garage and the truck tunnel. The truck tunnel connects 269-10 Grand Central Parkway and 270-10 Grand Central Parkway. It is a large enclosed driveway which is used for deliveries, removal of garbage and moving the furniture of residents. 271-10 Grand Central Parkway (Building One) has its own service entrance in the rear of this building. All of the building have a sub-basement. The sub-basement is utilized for the boiler room, employee's locker rooms, storage rooms, engineer's office, workshops, the main section of the movie theater and part of the health club. On this level in an adjacent structure is the generator plant which provides electricity for the complex. The site also has an underground, three level garage that can accommodate 2,374 cars. It is located below grade in front of the buildings. Pedestrian access to the garages is via glass enclosed kiosks which house stairways to the garage. The subject improvements are in overall good condition. Each subject building will be described on the following pages. 271-10 Grand Central Parkway (Building 1-The Amherst) The main entrance to this building is on the circular driveway. This is a 33-story story (including the penthouse level), elevatored, doorman, and concierge, apartment building having 600 residential apartments. Although the building has units designated as being on the 33rd floor these units are actually on the 32nd floor since there is no 13th floor. In addition, the building has a sub-basement and an arcade level (one level below grade). Each level will be described as follows: Sub-Basement This level has the lower level of the health club which is described more thoroughly below. Included on this level are such facilities as an exercise room, an aerobics room, a men's locker room and a women's locker room, etc. In addition, there are storage rooms including a large storage room for golf carts. 30 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Arcade The arcade is utilized for stores and the health club which is part of the country club. The health club has a reception area, lounge, dance floor/meeting room, an indoor pool and several outdoor pools, an exercise room and an aerobics room. In addition, there are several facilities which are designed to service men and women separately. The facilities include steam rooms, saunas, restrooms, massage rooms and card rooms. Lobby level The lobby level has a lobby, a doorman's station, a concierge station, an elevator bank with three elevators which service the arcade level through the 16th floor. A second set of three elevators service the sixteenth floors through the 33rd floor (penthouse level). 2nd level to the Penthouse level Each floor has apartments, hallways, an elevator bank, and three stairwells. 270-10 Grand Central Parkway (Building 2-The Beaumont) The main entrance to this building is on the circular driveway. This is a 33-story story (including the penthouse level), elevatored, doorman, and concierge, apartment building having 612 residential apartments. Although the building has units designated as being on the 33rd floor these units are actually on the 32nd floor since there is no 13th floor. In addition, the building has a sub-basement and an arcade level (one level below grade). Each level will be described as follows: Sub-Basement This level has the boiler room which provides heat and hot water for the buildings. In addition, there are storage rooms. the main section of the movie theater is on this level. The theater's auditorium can accommodate 475 persons. The theater facility also contains a men's restroom, a women's restrooms, a ticket lobby, a projection room and a management office. Adjacent to this building's sub-basement is a generator room. Six diesel powered generators provide electricity for the complex. In addition, the heat produced by the generators helps to heat hot water. Arcade This lower level runs throughout the complex. It is finished and contains some residential units, units for the staff, stores, a bank, restaurant, the superintendent's office and the on-site management office. Lobby level The lobby level has a lobby, a doorman's station, a concierge station, an elevator bank with three elevators which service the arcade level through the 16th floor. A second set of three elevators service the sixteenth floors through the 33rd floor (penthouse level). 31 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 2nd level to the Penthouse level Each floor has apartments, hallways, an elevator bank, and three stairwells. 269-10 Grand Central Parkway (Building 3-The Coleridge) The main entrance to this building is on the circular driveway. This is a 33-story (including the penthouse level), elevatored, doorman, and concierge, apartment building having 632 residential apartments, above grade. Although the building has units designated as being on the 33rd floor these units are actually on the 32nd floor since there is no 13th floor. The building has a sub-basement and an arcade level (one level below grade). Each level will be described as follows: Sub-Basement This level has the storage rooms, an employee's locker room, and a boiler room which provides heat and hot water for the buildings. Arcade This lower level runs throughout the complex. If is finished and contains nine residential units, units for the staff, professional units, stores, a bank, restaurant, the superintendent's office and the on-site management office. Lobby level The lobby level has a lobby, a doorman's station, a concierge station, an elevator bank with three elevators which service the arcade level through the 16th floor. A second set of three elevators service the sixteenth floors through the 33rd floor (penthouse level). 2nd level to the Penthouse level Each floor has apartments, hallways, an elevator bank, and three stairwells. A breakdown of the units for each building will be on the following pages of this report. 32 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004
271-10 Grand Central Parkway (Building 1-the Amherst) - Summary --------------------------------------------------------------- # of Area per Total Units Type Type Rooms Beds Baths 5 Studio 2 rms.-450 s.f. 2,250 10 0 5 40 Studio 2.5 rms.-600 s.f. 24,000 100 20 40 125 One bed 3 rms 700 s.f. 87,500 375 125 125 222 One bed 4 rms 930 s.f. 206,460 888 222 333 171 Two bed 5 rms 1,200 s.f. 205,200 855 342 427.5 4 Two bed 7 rms 1,800 s.f. 7,200 28 8 14 31 Three bed 6 rms 1,350 s.f. 41,850 186 93 108.5 2 Three-bed 8 rms-2,000 s.f. 4,000 16 6 9 --- ------------------------------ ------- ------- ------- ------- 600 578,460 2,458.0 816.0 1,062.0
70-10 Grand Central Parkway (Building 2-The Beaumont) ----------------------------------------------------- # of Area per Total Units Type Type Rooms Beds Baths 42 Studio 2.5 rms.-600 s.f. 25,200 105 21 42 142 One bed 3 rms 700 s.f. 99,400 426 142 142 253 One bed 4 rms 930 s.f. 235,290 1012 253 379.5 131 Two bed 5 rms 1,200 s.f. 157,200 655 262 327.5 5 Two bed 7 rms 1,800 s.f. 9,000 35 10 17.5 37 Three bed 6 rms 1,350 s.f. 49,950 222 111 129.5 2 Three-bed 8 rms-2,000 4,000 16 6 9 --- ----------------------------- ------- ------- ----- ------- 612 580,040 2,471.0 805.0 1,047.0
- -------------------------------------------------------------------------------- 33 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 269-10 Grand Central Parkway (Building 3-The Coleridge) -------------------------------------------------------
# of Area per Total Units Type Type Rooms Beds Baths 1 D/Two-bed-arcade 1,216 5 2 1 1 1&2/Two-bed-arcade 712 4 2 1 1 3&4/One bed -arcade 684 3 1 1 6 Studio 2 rms. -300 s.f.-arcade 1,800 12 0 6 17 Studio 2 rms.-450 s.f. 7,650 34 0 17 55 Studio 2.5 rms.-600 s.f. 33,000 137.5 27.5 55 136 One bed 3 rms 700 s.f. 95,200 408 136 136 231 One bed 4 rms 930 s.f. 214,830 924 231 346.5 142 Two bed 5 rms 1,200 s.f. 170,400 710 284 355 4 Two bed 7 rms 1,800 s.f. 7,200 28 8 14 36 Three bed 6 rms 1,350 s.f. 48,600 216 108 126 2 Three-bed 8 rms-2,000 4,000 16 6 9 --- ------------------------------ --------- ------- ------- ------- 632 580,880.0 2,473.5 800.5 1,058.5
Summary of All Buildings ------------------------ # of Area per Total Units Type Type Rooms Beds Baths 1 One bed 3 rms 684 s.f.-Acarde 684 3 1 1 1 Two bed 4 rms 712 s.f.-Acarde 712 4 2 1 1 Two bed 5 rms 1,216 s.f.-Arcade 1,216 5 2 1 6 Studio 2 rms.-300 s.f.-Arcade 1,800 12 0 6 22 Studio 2 rms.-450 s.f. 9,900 44 0 22 137 Studio 2.5 rms.-600 s.f. 82,200 342.5 68.5 137 403 One bed 3 rms 700 s.f. 282,100 1209 403 403 706 One bed 4 rms 930 s.f. 656,580 2824 706 1059 444 Two bed 5 rms 1,200 s.f. 532,800 2220 888 1110 13 Two bed 7 rms 1,800 s.f. 23,400 91 26 45.5 104 Three bed 6 rms 1,350 s.f. 140,400 624 312 364 6 Three-bed 8 rms-2,000 12,000 48 18 27 ----- ------------------------------- --------- --------- --------- --------- 1,844 1,743,792 7,426.50 2,426.50 3,176.50
The complex has 1,844 residential units including 9 below grade units. The breakdown of the above grade residential units is as follows; 22, two-room studio units, 137, 2.5 room alcove studio units, 403, three-room, one bedroom units, 706, four-room, one bedroom units, 444, five- room, two bedroom units, 13, seven-room, two bedroom units, 104, six-room, three bedroom units, and 6, eight-room, three bedroom 34 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 units. Most of the units above the fifth floor have balconies. The below grade (arcade level) residential units are composed of six (6), 2 room studio units, one three room one bedroom unit, and two (2) four room, two bedroom units. Above Grade Residential Units Each 2 room, studio unit has a living room/bedroom, kitchen, and a bathroom. The net living area is 450+/- square feet. Each 2.5 studio alcove unit has a living room, kitchen, an alcove bedroom area and a bathroom. The net living area is 600+/- square feet. Each three room, one bedroom unit has a living room, bedroom, kitchen and a bathroom. The net living area is 700+/- square feet. Each four-room, one bedroom unit has a living room, dining room, bedroom, kitchen and 1.5 bathrooms. The net living area is 930+/- square feet. The layout for each five-room, two bedroom unit includes a living room, two bedrooms, a kitchen, dining room and 2.5 bathrooms. The net living area is 1,200+/- square feet. Each seven-room, two bedroom unit has a living room, dining room, two bedrooms, kitchen, den, maid's room and 3.5 bathrooms. The net living area is 1,800+/- square feet. The layout for each six-room, three bedroom unit includes a living room, three bedrooms, a kitchen, a dining room and 3.5 bathrooms. Each eight-room, three-bedroom unit has a kitchen, dining room, living room, den, maid's room, three bedrooms and 4.5 bathrooms. The net living area is 2,000 square feet. The total number of rooms is 7,426.5, the total number of bedrooms is 2,426.5 and the total number of bathrooms is 3,176.5. The net living area is 1,743,792+/- square feet. The subject currently employs 150 employees including a general superintendent, three assistant superintendents, one chief engineer and ten assistant engineers (generator plant), doormen, concierges, porters, electricians, and fifty employees for the country club. The security departments is provided by an outside company. The occupants are primarily middle to upper middle income with generally one to four people per apartment. The complex is in overall good condition. Architectural Style: Three (3) high-rise, elevatored, doorman and concierge apartment buildings, non-fireproof construction. Structural Characteristics Foundation and Framing: The construction consists of reinforced concrete and steel girders. Interior Walls: Interior and fire walls are assumed to be masonry generally finished with sheetrock. 35 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Interior Floors: Concrete in the unfinished sections of the sub-basement. The arcade is carpeted while the lobby floor is marble. The hallways have wall to wall carpeting. The apartments have various floor coverings including wood floors, wood floors with area rugs and wall to wall covering. Exterior Walls: The exterior walls are metal panels. The walls appear to be in good condition. The appraisers noted no cracks in the subject walls. All windows are slider type glass windows within a metal frame. They appear to be in good condition. Entrances Access to the complex is through two driveways which have gate houses and 24 hour security service. The eastern driveway is for residents and visitors. The western driveway is for deliveries and service personnel. Access to each building is on the circular driveway. The entrances consists of glass doors with a metal frame and revolving doors. In addition, there are glass enclosed kiosks near the entrances to the buildings. These kiosks have stairways that lead to the below grade garage. Stairways Each building has three (3) stairways that extends from the sub-basement to the roof. The stairs are metal. Elevators Each building has three passenger elevators, except for 270-10 Grand Central Parkway which has four passenger elevators. There are a set of three elevators in the lobby that service the sub-arcade to the sixteenth floor. Another set of three elevators service the sixteenth floor to the 33rd floor (penthouse level). The additional elevator in 270-10 Grand Central Parkway services the lobby level to the arcade level. This elevator also services the sub-basement with the use of a special security key. The capacity of each elevator is approximately 2,500 pounds. Roof: Each structural roof deck is covered with gravel over built up composite material. The masonry parapet walls have metal copings and metal flashing. Each roof has bulkheads for the stairways and elevators. In addition, each roof has a water tower. Drainage is through leaders. Interior and Mechanical Characteristics Finishes-Hallways: The ceilings and walls of the hallways are painted sheetrock. The floor is carpeted. Entrance doors to the apartments are metal. Finishes-Apartments: The subject building is a cooperative and as a result there are no "typical" units, as each reflects individual owner's tastes. Apartment walls are painted sheetrock. Generally flooring is hardwood 36 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 throughout, although some units have area rugs and wall to wall carpeting. Interior apartment doors are wood. Kitchens have wall mounted cabinets, laminated counters with stainless steel sinks, four burner stoves and refrigerators, dishwashers and combination washer/dryer units. Bathrooms contain porcelain sinks, bathtubs and water closets. The floors and wainscoting have ceramic or marble tiles. H.V.A.C.: The complex has six (6) combination oil and natural gas boilers which produces heat which is then distributed via a hot water system. Hot water for the subject buildings is produced by coils within the same boilers. The buildings also have a heat exchange air conditioning system. Electrical Service: The complex produces its own electric via six (6) diesel powered generators. The subject has 3-phase, 100 amp service with circuit breakers. Electric service appears adequate for the complex. Plumbing: Domestic cold and hot water piping is reportedly made of brass and copper. Sanitary piping is of cast iron mains and vertical soil and vent stacks. Piping that was seen by the appraiser appeared to be in good condition. Gas piping is made of black piping. The electric is individual metered while gas for cooking is not individually metered. General: The complex is in overall good condition. 37 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 HIGHEST AND BEST USE The appraisers have analyzed the subject property for the purpose of determining the property's Highest and Best Use. Highest and Best Use is defined as: "That reasonable and probable use that supports the highest present value, as defined, as of the effective date of the marketability study. "Alternatively, that use, from among reasonably probable and legal alternative uses, found to be physically possible, appropriately supported, financially feasible and which results in highest land value. "The definition immediately above applies specifically to the highest and best use of land. It is to be recognized that in cases where a site has existing improvements on it, the highest and best use may very well be determined to be different from the existing use. The existing use will continue, however, unless and until land value in its highest and best use exceeds the total value of the property in its existing use. "Implied within these definitions is recognition of the contribution of that specific use to the community environment or to community development goals in addition to wealth maximization of individual property owners. Also implied is that the determination of highest and best use results from the appraisers judgment and analytical skill, i.e., that the use determined from analysis represents an opinion, not a fact to be found. In appraisal practice, the concept of highest and best use represents the premise upon which value is based. In the context of most probable selling price (market value) another appropriate term to reflect highest and best use would be most probable use. In the context of investment value an alternative term would be of most profitable use." (4) The subject property is situated on the southeast corner of the Grand Central Parkway service Road and 267th Street, which is a residential site in the Floral Park section of Queens. The subject has adequate exposure and visibility. Many apartment dwellings in this area have been converted to cooperative or condominium ownership. - ---------- (4) Byrl N. Boyce, Ph.D., SRPA, Real Estate Appraisal Terminology (Revised Edition; Massachusetts: Ballinger Publishing Company, 1984) pp. 126-127. 38 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Highest and Best Use of Land as Vacant: The subject property is on the northeast corner of the Grand Central Parkway Service Road (a.k.a. Marcus Avenue) and 267th Street, Floral Park, Queens County, New York. The total land area (both owned and leased by the cooperative) is 110.86+/- acres. The subject street is a quiet, two lane, east-west road that is primarily improved with residential developments along with some office buildings. The subject site conforms substantially to the surrounding sites in the neighborhood except that it is larger than the other sites. The site is improved with three (3), high rise, elevatored, doorman, cooperative, apartment buildings. The site is also improved with a country club (including an 18 hole golf course that wraps around the buildings, swimming pools and tennis courts) an underground, three-level garage that can accommodate 2,374 cars, surface parking lots that can accommodate 547 cars, guard houses, metal fences, macadam driveways, landscaped grounds, concrete sidewalks and benches. All utilities are available to the site. The site is physically well-suited for development. Assuming the subject property were vacant, a residential improvement containing approximately 2,400,000+/- square feet could be built, based upon current zoning regulations. This is maximal allowable building area which is the same amount as the current existing buildings. Most of the neighboring properties consist of residential buildings. As such, were the subject site vacant, such a development would be considered to be the highest and best use, that is, an apartment complex built to the maximum allowable bulk and density. Both the rental and cooperative markets are relatively strong in this section of Queens. Therefore, either a rental complex, cooperative or condominium project would be warranted as the highest and best use. Highest and Best Use as Improved The subject property is improved with three (3) high rise (33-stories), apartment buildings that have 1,844 residential units and commercial space below grade. As the current use provides a reasonable return to the land, and no alternative use appears probable which would justify the costs of buying out the occupants and demolishing the structure. Considering this information, the highest and best use of the property is for its continued operation as a cooperative apartment complex. 39 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 MARKETABILITY PROBLEM The subject property is an apartment complex consisting of three 33-story buildings. The improvements were constructed circa 1971 and have a total of 1,844 residential units. Most of the units have balconies and views of Little Neck Bay and the Manhattan skyline. The subject has many amenities including an 18 hole golf course, health club, on-site parking, doormen, concierge and on-site shopping. The complex is enclosed with access through two (2) gate houses with 24 hour security. We have launched a full scale search for rental and sales data in Queens and Nassau County. The search included contacting numerous real estate brokers, management agents and appraisers in Nassau and Queens. In addition, we have also used such sources as the Appraisal Institute's "Redbook", the South Shore Multiple Listing Service and the North Shore Multiple Listing Service. Due to the subject's outstanding amenities, there were no truly comparable projects. Instead, outside comparables were utilized and adjusted upward to take into consideration the subject's superior amenities. Although residents have to pay for their country club membership, the residents perceive the on site location of the county club to be a positive feature of the subject property. We have based our estimates of market rents and market sales on the information provided by the above mentioned data sources. We have also based our estimates on our real estate experience appraising and valuing apartment complexes in Queens and Nassau counties. It should be noted that the sales market for the subject units has been strong. Besides the numerous amenities of the subject, another reason for the appeal of the cooperative is that it does not readily allow sublets. Numerous sublets in a cooperative project generally reduces its appeal to cooperative owners. The subject has few sublets. The cooperative board allows an individual owner to sublet his or her apartment only once. The sublet must be leased to a tenant for a period of one to two years only. The above mentioned factors place North Shore Towers at the upper end of the sales and rental market. We expect that the appeal of the subject property will continue for the foreseeable future. 40 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 INCOME CAPITALIZATION INTRODUCTION The Income Approach is based on the underlying assumption that the value of a property tends to be set by the amount of anticipated benefits to be derived from its ownership. This approach, therefore, is a procedure in the appraisal process whereby anticipated economic benefits to be derived from property ownership are converted into a present value estimate through a capitalization process. The process of estimating future or anticipated economic benefits from a real property investment requires the estimation of potential gross income, less vacancy and collection loss to which a deduction for all operating and fixed expenditures are allocated. This results in a net income estimate as applied to the particular property under valuation. A selection process for the most appropriate capitalization method is then employed. A capitalization rate can be developed by a variety of methods and is dependent primarily on market derived findings with considerable emphasis placed on the type and class of property under review. Since this overall rate consists of a mortgage and equity position, these individual elements are carefully analyzed. In considering the rate of return necessary to attract debt proceeds or equity capital to invest in an income producing parcel of real estate, the following factors are analyzed: o The return that is available on competing forms of investments, taking into consideration the comparative risks and time element of money. o The character of the property with particular regard to the neighborhood, the type of tenancy, and the problems of management and liquidity. o Typical financing terms that are available for similar property types based on competitive yields commensurate with various alternative investment vehicles. o Potential property appreciation (residual value), equity buildup (debt reduction), and the accumulation of cash flows over a specified holding period. The Mortgage Equity (Ellwood Method) technique provides a developed rate that consists of a blending of mortgage financing, equity yield, equity buildup, and anticipation of property appreciation or depreciation. An overall rate developed in this manner is based on a basic weighted rate which consists of a weighted average of mortgage financing (expressed as a constant) and equity requirements (expressed as equity yield rate). This basic rate is adjusted to reflect equity buildup (debt reduction) and property appreciation (or depreciation) over a projected holding period. In addition, we have considered the superior amenities of the subject in the estimation of a market level capitalization rate. Mortgage Equity Analysis The Mortgage Equity Analysis used in this report recognizes that real estate investors are motivated by opportunities for leverage. It reflects the requirements of the lender through the 41 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 interest rate and mortgage constant that incorporates the return on and of the investment. The demands of the investor are provided by return on and return of the investment through the equity yield. The yield rate accounts for equity growth and recapturing of the initial investment at the end of the market holding period, as in this case 10 years. A mortgaged investment results in equity buildup. Equity buildup is..."an increase in the equity investor's share of total property value that results from gradual debt reduction through periodic repayment of principal on a mortgage loan, an increase in total property value, or both". (Ref. The Dictionary of Real Estate Appraisal, 3rd Ed., p 121). In all investments, the element of recapture is important. The investor deserves a return on invested capital and return of the investment. Under the Mortgage Equity procedure, the owner satisfies the debt service and equity returns from the net operating income. The property overall rate should consist of a weighted average for debt service and the cash on cash return anticipated by the equity investors. The holding period is estimated at 10 years for a mortgage at 65% of value. Current interest rates range between 7.5% to 9.50% payable monthly having terms (amortization schedules) of 15, 25 and 30 years. The subject is capable of securing an 9.00%+/- interest and 25 year amortization with a balloon payment after 10 years. At the end of ten years the owner could exercise one of two options: (A) sell the property or (B) refinance within that period. The yield rate utilized to discount the projected cash flows and eventual property reversion is based on an analysis of expected yield rates from several investors dealing in similar quality investments. We consider an equity yield rate (IRR) in of 12.5% appropriate for the derivation of a capitalization rate. We assume an increase in property value of 1% per year (non compounded) over the holding period. Using the above described assumptions, the developed capitalization rate is 9.7% which we rounded to 9.5%. In order to establish a potential gross income for the subject property the appraisers conducted a rental survey. The purpose of this survey was to determine market rents for the units in the subject property assuming it was converted to rental status. On the following pages are the results of our findings. 42 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 COMPARABLE RENTAL MAP [GRAPHIC] 43 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 RENTAL COMPARABLE #1 Address: 269-10, 270-10 and 271-10 Grand Central Parkway (Subject) Floral Park, New York The subject property is an apartment complex consisting of three 33-story buildings. The improvements were constructed circa 1971 and have a total of 1,844 residential units. Most of the units have balconies and views of Little Neck Bay and the Manhattan skyline. The subject has many amenities including an 18 hole golf course, health club, on-site parking, doormen, concierge and on-site shopping. The complex is enclosed with access through two (2) gate houses with 24 hour security. Listed below are the most recent market level sublets in the subject property which will be weighted heavily in the estimation of the gross potential rental income. - -------------------------------------------------------------------------------- ROOMS/BDRMS MONTHLY RENT RENT/ROOM - -------------------------------------------------------------------------------- 269-10 G.C.P.(Unit 5B) 2.5/0 $1,350 $540 - -------------------------------------------------------------------------------- 270-10 G.C.P.(Unit 6B) 2.5/0 $1,350 $540 - -------------------------------------------------------------------------------- 271-10 G.C.P.(Unit 8J) 3.0/1 $1,400 $467 - -------------------------------------------------------------------------------- 271-10 G.C.P.(Unit 8J) 3.0/1 $1,400 $467 - -------------------------------------------------------------------------------- 271-10 G.C.P.(Unit 18R) 4.0/1 $1,800 $450 - -------------------------------------------------------------------------------- 271-10 G.C.P.(Unit 31G) 5.0/2 $3,200 $640 - -------------------------------------------------------------------------------- 44 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 RENTAL COMPARABLE #1 Address: 269-10, 270-10 and 271-10 Grand Central Parkway (Subject) Floral Park, New York [PHOTO] 45 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 RENTAL COMPARABLE #2 Address: One-Two Bay Club Drive Bayside, New York The "Bay Club" is located on 23rd Avenue and Bay Club Drive, Bayside, Queens, New York. It is approximately four miles northwest of the subject property. This is an enclosed condominium complex consisting of two (2) 22-story apartment buildings containing 630 units. Most of the units have balconies and views of Little Neck Bay and the Manhattan skyline. The complex has a health club, on-site parking, a gate house with 24 hour security, doormen and concierges. Shopping and other support facilities are in close proximity. The condition and location of this project are similar to the subject. However, the subject amenities (including on-site shopping and an 18 hole golf course) are superior to the Bay Club. We have adjusted these comparable sublets upward. Listed below are the most recent sublets in this complex. - -------------------------------------------------------------------------------- ROOMS/BDRMS MONTHLY RENT RENT/ROOM - -------------------------------------------------------------------------------- 2.5/0 $1,250 $500 - -------------------------------------------------------------------------------- 2.5/0 $1,350 $540 - -------------------------------------------------------------------------------- 3.0/1 $1,400 $467 - -------------------------------------------------------------------------------- 4.0/1 $1,600 $400 - -------------------------------------------------------------------------------- 4.5/2 $1,850 $411 - -------------------------------------------------------------------------------- 5.0/2 $2,250 $450 - -------------------------------------------------------------------------------- 6.0/3 $3,000 $500 - -------------------------------------------------------------------------------- 46 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 RENTAL COMPARABLE #2 Address: One-Two Bay Club Drive Bayside, New York [PHOTO] 47 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 RENTAL COMPARABLE #3 Address: 18-05 215th Street Bayside, New York The "Versailles" is a property that is located on the east side of 215th Street, between 17th and 18th avenues, Bayside, Queens, New York. Immediately to the east of the property is the Cross Island Parkway and the Little Neck Bay. It is approximately four miles northwest of the subject property. This is 16-story, 243 unit cooperative building constructed circa 1969. This cooperative building is enclosed and shares common grounds with two other cooperative buildings which are identified as "the Americana" and "the Seville". The three cooperatives are collectively referred to as "Water's Edge". Most of the units have balconies with views of Little Neck Bay and the Manhattan skyline. The complex has a health club, a below grade shopping area and doormen. Shopping and other support facilities are in close proximity. The condition and location of this project are similar to the subject. However, the subject amenities (including more extensive on-site shopping and an 18 hole golf course) are superior to this cooperative. We have adjusted these comparable sublets upward. Listed below are the most recent sublets in this building. - -------------------------------------------------------------------------------- ROOMS/BDRMS MONTHLY RENT RENT/ROOM - -------------------------------------------------------------------------------- 3.0/1 $1,500 $500 - -------------------------------------------------------------------------------- 4.5/2 $2,000 $444 - -------------------------------------------------------------------------------- 48 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 RENTAL COMPARABLE #3 Address: 18-05 215th Street Bayside, New York [PHOTO] 49 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 RENTAL COMPARABLE #4 Address: 18-15 215th Street Bayside, New York The "Seville" is a property that is located on the east side of 215th Street, between 17th and 18th avenues, Bayside, Queens, New York. Immediately to the east of the property is the Cross Island Parkway and the Little Neck Bay. It is approximately four miles northwest of the subject property. This is 16-story, 290 unit cooperative building constructed circa 1969. This cooperative building is enclosed and shares common grounds with two other cooperative buildings which are identified as "the Americana" and the "Versailles". The three cooperatives are collectively referred to as "Water's Edge". Most of the units have balconies with views of Little Neck Bay and the Manhattan skyline. The cooperative has a health club, on-site parking, limited below grade shopping and doormen. Shopping and other support facilities are in close proximity. The condition and location of this project are similar to the subject. However, the subject's amenities (including extensive on-site shopping and an 18 hole golf course) are superior to this cooperative. We have adjusted these comparables upward. Listed below are the most recent sublets in this building. - -------------------------------------------------------------------------------- ROOMS/BDRMS MONTHLY RENT RENT/ROOM - -------------------------------------------------------------------------------- 3.0/1 $1,300 $433 - -------------------------------------------------------------------------------- 3.0/1 $1,400 $467 - -------------------------------------------------------------------------------- 4.5/2 $1,900 $422 - -------------------------------------------------------------------------------- 6.0/3 $2,500 $416 - -------------------------------------------------------------------------------- 50 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 RENTAL COMPARABLE #4 Address: 18-15 215th Street Bayside, New York [PHOTO] 51 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Analysis of Comparable Rents: We have uncovered rentals or sublets in four comparable buildings including the subject. The foregoing properties indicate monthly rental ranges of $400 to $640 per room for various sized apartments. These are rentals of fully modernized units. The subject property is an apartment complex consisting of three 33-story buildings. The improvements were constructed circa 1971 and have a total of 1,844 residential units. Most of the units have balconies and views of Little Neck Bay and the Manhattan skyline. The subject has many amenities including an 18 hole golf course, a health club, on-site parking, doormen, concierges and on-site shopping (below grade). The complex is enclosed with access through two (2) gate houses with 24 hour security. The subject's amenities are superior to all other projects (whether rental, cooperative or condominium) in Queens. At this point we will only be discussing the residential units above grade. The arcade residential units will be discussed separately after the above grade units have been analyzed. The staff's units will not be utilized in the income approach and the commercial units will be analyzed later in this section. The residential units range in size from studio units to three bedroom units. We have considered such factors as location, condition and amenities. We have estimated the rents for each subject type. Studio The subject has 22, two room studio units and 137, 2.5 room studio. In the subject complex , 2.5 room studio units have monthly rentals of $540 per room. Outside comparable 2.5 room studio rentals range from $500 to $540 per room. For the subject's 2.5 room studio units, we estimate that the monthly market rent per room is $540. For the subject's smaller two-room studio units, we estimate that the monthly market rent per room is $500. One Bedroom The subject has 403, three room one bedroom units and 706, four room, one bedroom units. In the subject complex two (2) three-room, one-bedroom units were sublet for $467 per room per month and there was one four-room, one bedroom that was sublet for $450 per room. Outside comparable one bedroom rentals range from $433 to $500 per room. We have placed the greatest weight on the subject sublets. For the subject's one bedroom units, we estimate that the monthly market rent per room is $467. Two Bedroom The subject has 444, five-room, two-bedroom units and 13, seven-room, two bedroom units. In the subject complex there was one (1) five room, two-bedroom unit (31G in 271-10 Grand Central Parkway) which has a monthly rent of $3,200 which equates to $640 per room. It should be noted that this is a furnished unit which is not typical in this market and is at the upper range of rental value. Outside comparable two bedroom rentals range from $411 to $450 per room. Considering above data, we estimate that the subject's two-bedroom monthly market rent per room is $500. 52 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Three Bedroom The subject has 104, six room, three bedroom units and six (6), eight-room, three bedroom units. There were no available sublet information on three bedroom units in the subject property. Outside comparable three bedroom rentals range from $416 to $500 per room. Based on the preceding data and conversations with local brokers, we estimate that the subject's three bedroom monthly market rent per room is $525. The monthly market rent per room for the residential units have been summarized as follows Studio-2 rooms $500 Studio 2.5 rooms $540 One-bedroom $467 Two-bedroom $500 Three-bedroom $525 Arcade Residential Units The below grade (arcade level) residential units are composed of six (6), 2 room studio units, one three room one bedroom unit, and two (2) four room, two bedroom units. It was reported than none of the subject's arcade residential units have been sublet. An extensive search did not uncover any comparable below grade residential sublets. A survey of local brokers indicate that such units should be able to be leased at approximately $250 per room regardless of the type of unit. Considering the subject's location and amenities this figure appears to be reasonable. Occupied Units - Stabilized Apartments Of the 1,844 residential units, 295 units are sponsored rent stabilized units. These rented units has existing tenants who hold a "Life Estate" in their individual apartments. These tenants occupied their unit prior to the cooperative conversion in 1986 and are regulated under the Department of Housing and Community Renewal (D.H.C.R.). Tenants in rent stabilized or rent controlled apartments are entitled to lease renewals in perpetuity and can not be evicted without just cause. Furthermore, immediate relatives of the tenant(s) of record have succession rights in most circumstances. The amount of rent a landlord is able to charge a tenant in this circumstance is strictly regulated. Because these units cannot be sold at market value unless the tenants moves elsewhere, the tenants would continue to pay actual stabilized rents as if the subject were converted to a rental project. Accordingly, the estimated gross market rental is adjusted downward to account for these rent controlled or stabilized units. Commercial Units The below grade shopping arcade has approximately 22 commercial spaces with two vacancies. The tenants include Chase Manhattan Bank, Towers Card and Gift Shop, Towers fruit, HBA Travel, N.S.T. Cinema, etc. The complete list of tenants along with their monthly base rents are listed in the addenda. The income from the commercial spaces for the past three years is as follows: 1994-$453,791; 1995-$546,807; and 1996-$543,697. We project that the commercial income will be 53 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 $544,000. It should be noted that the commercial spaces are being leased below market level. The prime objective of the commercial space is to be a convenience for the residents. The rent charged basically covers operating expenses with a small profit. In one instance a tenant (the movie theater) pays no rent. Electric The cooperative has its own electric generating plant which is operated at a profit. The income from the operation of the generating plant for the past three years is as follows: 1994-$77,442; 1995-$86,193; and 1996-$117,825. We estimate that the generating plant income will be $$118,000 per annum. Country Club The country club includes a health club, swimming pools, meeting rooms, cards rooms, a dance hall, tennis courts and an 18 hole golf course. Support facilities include restrooms, staff offices locker rooms and storage rooms. Membership in the country club is restricted to residents. Historically the income, net of direct expenses, has been reported as follows: 1994 - $505,871; 1995 - $479,774; 1996 - $429,327. We estimate that the country club income will be $430,000 per annum. Garage Income The subject has an underground three level garage that can accommodate 2,374 cars. Currently, the spaces are owned by the residents. If the complex was a rental property, the garage spaces would be able to be leased at $75 per month. We are not including the outdoor parking spaces since they are basically for visitors and some vendors. We estimate that the garage income will be $2,136,600, rounded to $2,140,000 per annum. On the following pages three tables will be presented. The first table (Table 1) will summarize both the rent stabilized units' actual rents and the estimated market rent for the rent stabilized units. At the bottom of this table the difference between the market rents and the rent stabilized units will be calculated. The second table (Table 2) presented will show the gross potential rental income as if there were no rent controlled or rent stabilized units. This will be followed by the estimated income and expense statement. The annual potential market rent from all apartments is $43,086,696, the income from the commercial spaces is $544,000, the income from the generating plant is $118,000, the income from the country club is $430,000 and the garage income is $2,140,000. The total gross potential income is $46,318,696. From this amount the difference between the rent stabilized units' estimated market rent and the rent stabilized units' actual contract rent was deduced ($2,420,280). The resultant adjusted gross potential income from all sources is $43,898,416. The summary of the stabilized units' actual and market rents and the difference between them have been summarized below. A complete list of the individual rent stabilized units' actual and market rents is located in the addenda of this report. 54 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Table 1-Difference Between Rent Stabilized Units' Actual Rent and Market Rent Monthly Rent $401,900 $603,590 No. of Months 12 12 ---------- ---------- Annual Rent $4,822,800 $7,243,080 Difference $2,420,280 Table 2--Estimated Market Rents For All Residential Units (excluding staff's units)
Market Market Total No. of Rms/ Tot. Sq. Ft. Total Rent Rent/ Ann. Rent/ Market Units Type Unit Rms /Unit S.F./Type Room Unit Net S.F. Rent/Type ----- ---- ---- --- ----- ----------- ---- ------- --------- ---------- 1 One bed-Acd. 3 3 684 684 $250 $750 $13.16 $750 1 Two bed-Acd. 4 4 712 712 $250 $1,000 $16.85 $1,000 1 Two bed-Ard. 5 5 1,216 1,216 $250 $1,250 $12.34 $1,250 6 Studio 2 rms.-Ard. 2 12 300 1,800 $250 $500 $20.00 $3,000 22 Studio 2 rms. 2 44 450 9,900 $500 $1,000 $26.67 $22,000 137 Studio 2.5 rms. 2.5 342.5 600 82,200 $500 $1,250 $25.00 $171,250 403 One bed 3 rms 3 1,209 700 282,100 $467 $1,400 $24.00 $564,200 706 One bed 4 rms 4 2,824 930 656,580 $467 $1,868 $24.10 $1,318,808 444 Two bed 5 rms 5 2,220 1,200 532,800 $500 $2,500 $25.00 $1,110,000 13 Two bed 7 rms 7 91 1,800 23,400 $500 $3,500 $23.33 $45,500 104 Three bed 6 rms 6 624 1,350 140,400 $525 $3,150 $28.00 $327,600 6 Three-bed 8 rms 8 48 2,000 12,000 $525 $4,200 $25.20 $25,200 1,844 7,426.5 1,743,792 Mthly Rent $3,590,558 No. of Mths. 12 -- Annual Rent $43,086,696 Mth. Rent/Unit $1,947 Mthly Rent/Rm $483 Ann. Rent/S.F. $24.710 - ------------------------------------------------------------------------------------------------------------------------------------
55 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004
APPRAISERS' ESTIMATE OF INCOME AND EXPENSES Number of Apartments: 1,844 Number of Rooms: 7,426.50 Gross Square footage: 2,400,000 Market Rent For All Residential Units $43,086,696 Commercial Units $544,000 Electricity $118,000 Country Club $430,000 Garage $2,140,000 Gross potential Income $46,318,696 Less Difference for Stabilized Rents $2,420,280 ---------- Adjusted Gross Potential Income $43,898,416 Less Allowance for Vacancy $1,760,000 EFFECTIVE GROSS INCOME $42,138,416 Per Room -------- Real Estate Taxes $1,286 $9,550,000 Insurance $67 $500,000 Electric & Gas (fuel) $256 $1,900,000 Water & Sewer $81 $600,000 Maintenance $229 $1,700,000 Management $170 $1,264,152 Labor $687 $5,100,000 Professional Fees $27 $200,000 Reserves $162 $1,200,000 ------ ---------- TOTAL EXPENSES $2,964 $22,014,152 ESTIMATED NET INCOME $20,124,264 Expenses as % of Eff. Gross Inc.: 52% Expenses per Room: $2,964 Expenses per Gross Square Foot: $9.17 - ------------------------------------------------------------------------------------------------------------------------------------
Presented on the following page is a historical overview of the expenses for the period 1994 to 1996 plus our stabilized estimate of the expenses for 1997. 56 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Building Expense Analysis Chart
Number of Apartments: 1844 Number of Rooms: 7,426.5 Subject History Gross Building Area: 2,400,000 Stabilized 1996-audited 1995-audited 1994-audited ---------- ------------ ------------ ------------ Real Estate Taxes: $9,550,000 $9,416,013 $9,306,885 $9,719,650 $ per Apartment: $5,179 $5,106 $5,047 $5,271 $ per Room $1,286 $1,268 $1,253 $1,309 $ Per Sq. Ft $3.98 $3.92 $3.88 $4.05 Insurance: $500,000 $499,078 $507,057 $472,347 $ per Apartment: $271 $271 $275 $256 $ per Room: $67 $67 $68 $64 $ Per Sq. Ft.: $0.21 $0.21 $0.21 $0.20 Electric& Gas & Oil: $1,900,000 $1,913,947 $1,419,157 $1,469,626 $ per Apartment: $1,030 $1,038 $770 $797 $ per Room: $256 $258 $191 $198 $ Per Sq. Ft.: $0.79 $0.80 $0.59 $0.61 Water & Sewer $600,000 $596,856 $607,831 $441,797 $ per Apartment: $325 $324 $330 $240 $ per Room: $81 $80 $82 $59 $ Per Sq. Ft.: $0.25 $0.25 $0.25 $0.18 Maintenance $1,700,000 $2,322,841 $1,486,842 $1,568,750 $ per Apartment: $922 $1,260 $806 $851 $ per Room: $229 $313 $200 $211 $ Per Sq. Ft.: $0.71 $0.97 $0.62 $0.65 Management $1,264,152 $875,000 $1,010,791 $1,074,105 $ per Apartment: $686 $475 $548 $582 $ per Room: $170 $118 $136 $145 $ Per Sq. Ft.: $0.53 $0.36 $0.42 $0.45 Labor $5,100,000 $5,106,006 $5,028,812 $4,980,047 $ per Apartment: $2,766 $2,769 $2,727 $2,701 $ per Room: $687 $688 $677 $671 $ Per Sq. Ft.: $2.13 $2.13 $2.10 $2.08 Professional fee $200,000 $197,480 $197,113 $178,450 $ per Apartment: $108 $107 $107 $97 $ per Room: $27 $27 $27 $24 $ Per Sq. Ft.: $0.08 $0.08 $0.08 $0.07 Reserves $1,200,000 TOTAL EXPENSES $22,014,152 $20,927,221 $19,564,488 $19,904,772 $ per Apartment: $11,938 $11,349 $10,610 $10,794 $ per Room: $2,964 $2,818 $2,634 $2,680 $ Per Sq. Ft.: $9.17 $8.72 $8.15 $8.29 ====================================================================================================================================
57 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 EXPLANATION OF ANNUAL EXPENSE ANALYSIS The subject improvements consist of three, 33-story, doormen and concierge apartment buildings containing 1,844 residential apartments, a below grade commercial arcade. The gross building area is 2,400,000 square feet. The total number of rooms is 7,426.5 rooms. The Expense data for 1994, 1995, and 1996 was provided for the subject property. Using this information and data from the local market, the following expense analysis is completed. The 1997/98 Tax Assessment: As previously calculated in the tax section of this report, the current real estate taxes are $9,550,000. Insurance premiums at the subject property have shown as follows: 1994 - $472,347 or $0.20/sf; 1995 - $507,057 or $0.21/sf; 1996 -$499,078 or $0.21/sf. Since insurance rates are subject not only to rate fluctuation but also to the amount of coverage purchased by the insured, it is difficult to project future costs. Our stabilized estimate for this expense is $500,000 per annum or $0.21 per square foot. Electric & Gas & Oil This expense is for electric (common areas, elevators), gas (for heat, hot water and cooking). The costs for the subject are indicated as follows: 1994 - $1,469,626 or $0.61/sf; 1995- $1,419,157 or $0.59/sf; 1996 - $1,913,947 or $0.80/sf. The cost of natural gas increased significantly from 1995 to 1996. We project that this expense will be stable over the near term. Our estimate is $1,900,000 per annum or $0.79 per square foot. Water & Sewer : For 1994 the expense was $441,797 or $0.18 per square foot; for 1995 the expense was $607,831 or $0.25 per square foot; for 1996 the expense was $596,856 or $0.25 per square foot. Our estimate for this expense is $600,000 per annum or $0.25 per square foot. Maintenance This item also includes the cost of repairs, supplies and miscellaneous expenses. This expense at the subject is reported as follows: 1994 - -$1,568,750 or $0.65/sf.; 1995 - $1,486,842 or $0.62/sf; 1996 - $2,322,841 or $0.97/sf. The 1996 figure also includes capital expenditures. Our estimate for this expense is $1,700,000 per annum or $0.71 per square foot. Management costs incurred by the subject have been relatively stable over the last several years. These costs ranged historically as follows: 1994 -$1,074,105 or $0.45/s.f.; 1995 - $1,010,791 or $0.42/sf; 1996 - $875,000 or $0.36/sf. Under the income approach, we are viewing the subject property as a rental complex as opposed to a cooperative complex. Management's responsibility is greater in a rental property than a cooperative property since the cooperative board handles many of management `s responsibilities. We estimate that a reasonable amount would be 3% of the effective gross income which equates to $1,254,766 per annum or $0.52 per square foot. This estimate is considered sufficient based on industry standards and considering the local market. 58 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Labor: The subject complex employs approximately 150 employees including a general superintendent, three assistant superintendents, a chief engineer (for the generating plant), handymen, doormen, electricians, concierges, porters, etc. The costs of wages, health benefits, payroll tax, and other related costs for these employees historically are indicated as follows: 1994 - $4,980,047 or $2.08/sf; 1995 - $5,028,812 or $2.10/sf, and 1996 - $5,106,006 or $2.13/sf. The superintendent and six other staff members occupy rent free apartments as additional compensation for their services. We estimate an expense of $5,100,000 per annum or $2.12 per square foot. Professional Fees: Costs in this category incurred by the subject have fluctuated slightly during 1994-1996. The trend is as follows: 1994 - $178,450 or $0.07/sf; 1995 - $197,113 or $0.08/sf; 1996 - $197,480 or $0.08/sf. This expense will be estimated at $200,000 which represents an estimated cost for this category equal to $0.08 per square foot. Reserves: This expense reflects an annual contribution to a fund for the replacement of items whose lives are less than the life of the improvements. These typically includes the roof, boiler, appliances and/or major renovations which may periodically be performed to the shell, lobby or other common areas. In addition, we have also taken into consideration, the large underground, three level garage (1,000,000 square feet), the truck tunnel and the generating plant. We have allocated $0.50 per square foot or roughly $1,200,000 per annum. SUMMARY The total expenses for the subject are $22,014,152. They equate to 52% of the effective gross income. This is equivalent to $2,964 per habitable room and $9.17 per gross square foot annually. Considering the current income (i.e. market rent estimates) and the level of services, this operating expense ratio (O.E.R.) appears reasonable. CONCLUSION OF INCOME APPROACH The appraisers conducted an area survey disclosing the details of market residential rents in the subject area of Floral Park and nearby Bayside, Queens County, New York. From this survey market rents are estimated for each unit type in the subject property, indicating a potential gross apartment income of $43,086,696. In addition, the subject also has income from the following sources; commercial space ($544,000, electricity ($118,000) the country club ($430,000) and the garage ($2,140,000). The total gross potential income is $46,318,696. From this figure the stabilized adjustment of $2,420,280 was deducted. The result is an adjusted gross potential income of $43,898,416. A vacancy and credit loss allowance of 4+/-% ($1,760,000) is deducted yielding an effective gross income of $42,138,416. Estimated annual expenses in the amount of ($22,014,152) are deducted resulting in a net operating income of $20,124,264. 59 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 COST APPROACH The cost approach has been traditionally applied as one of three methods for valuation and it is ordinarily most applicable to newer buildings in areas where recent raw land sales have occurred. The concept of the cost analysis is to determine the financial charges of producing the same or similar buildings and land as that of the property being valued. It stands to reason that a buyer or developer will not expend more for an existing property, if in fact, a similar and satisfactory property can be developed new. In addition to the estimated cost of newly developed property, the time element of construction and the risk of acceptable quality at completion are critical considerations to be thoroughly examined by the prospective buyer, developer, and financier. The method of application is to 1) summarize the estimated costs of reproduction or replacement according to actual bids or local cost indices; 2) acknowledge and deduct all forms of depreciation including physical deterioration, functional obsolescence, and adverse economic effects; and 3) add the current land value according to the highest and best use as indicated for the total relevant costs of the real estate being valued. In a metropolitan area such as New York City, the greater majority of structures are considerably older than five and ten years. These buildings are aged to the point that the cost approach is not readily applicable due to a low confidence level of accurately estimating the financial costs to cure the prevalent instances of physical depreciation and obsolescence. In addition, land sales are infrequent in an area which is nearly 100% improved with structures, streets, and parks. For these reasons the cost approach has not been used in this marketability study. Two other methods of valuation are ordinarily applicable to apartment properties. These are identified as the income capitalization and the sales comparison approaches. The income approach is presented in the preceding section and the sales comparison approach is presented in the following section. 60 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 DIRECT SALES COMPARISON METHOD A comparable sales survey of Floral Park, Bayside and the nearby Village of Kensington (Nassau County) was conducted in order to derive a Direct Sales Value estimate of the subject assuming cooperative ownership. The Direct Sales Value estimate is derived after consideration of both physical and non-property characteristics of the subject and comparable buildings. Physical characteristics include location, size, age, and condition of the property. Non-property characteristics include date of sale, lease encumbrances, financing, and sale terms. Properties used in estimating a value in the Direct Sales Comparison Approach are selected on the basis of similar property and non-property characteristics as applied to the subject. These characteristics adjusted to account for differences between the comparable properties and the subject. A positive adjustment indicates a particular characteristic of a comparable property as less desirable in terms of its overall value versus the subject; a negative adjustment indicates the opposite. A sampling of recent sales occurring in mid-rise and high-rise buildings were utilized. The sales used in this analysis were selected on the basis of location, date of sale, size, building type and age. Each of the selected sales were taken from cooperative apartment buildings similar in age, location, and type to the subject property. The major unit of comparison is individual unit price per room. A cash equivalency analysis was considered but not utilized in this report since the sales were conveyed based on typical financing terms, or for all cash. What follows is a comparable sales location map, a summary of the individual comparable sales, and Market Value Conclusion as derived from the Direct Sales Comparison Approach. 61 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 COMPARABLE SALES MAP [GRAPHIC] 62 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 COMPARABLE COOPERATIVE #1 Address: 269-10, 270-10 and 271-10 Grand Central Parkway (Subject) Floral Park, New York The subject property is an apartment complex consisting of three 33-story buildings. The improvements were constructed circa 1971 and have a total of 1,844 residential units. Most of the units have balconies and views of Little Neck Bay and the Manhattan skyline. The subject has many amenities including an 18 hole golf course, health club, on-site parking, doormen, concierge and on-site shopping. The complex is enclosed with access through two (2) gate houses with 24 hour security. Listed below are the most recent market level sales in the subject property which will be given great consideration in our estimate of market value. Listed below are the details of each sale:
- ------------------------------------------------------------------------------------------------------ BUILD/UNIT # DATE ROOMS/BDRMS PRICE PRICE/ ROOM - ------------------------------------------------------------------------------------------------------ 1/31G 8/96 5.0/2 $325,000 $65,000 - ------------------------------------------------------------------------------------------------------ 3/#5-arcade 8/96 2.0/0 $42,500 $21,250 - ------------------------------------------------------------------------------------------------------ 3/2U 9/96 2.5/.5 $82,000 $32,800 - ------------------------------------------------------------------------------------------------------ 2/14H 9/96 5.0/2 $270,000 $54,000 - ------------------------------------------------------------------------------------------------------ 2/15T 9/96 3.0/1 $141,000 $47,000 - ------------------------------------------------------------------------------------------------------ 3/24O 9/96 5.0/2 $350,000 $70,000 - ------------------------------------------------------------------------------------------------------ 1/4U 10/96 2.5/.5 $85,000 $34,000 - ------------------------------------------------------------------------------------------------------ 1/10A 10/96 4.0/1 $200,000 $50,000 - ------------------------------------------------------------------------------------------------------ 1/8X 10/96 3.0/1 $113,000 $37,667 - ------------------------------------------------------------------------------------------------------ 3/10U 10/96 2.5/.5 $75,000 $30,000 - ------------------------------------------------------------------------------------------------------ 2/23Y 11/96 3.0/1 $123,000 $41,000 - ------------------------------------------------------------------------------------------------------ 3/22T 11/96 3.0/1 $176,895 $58,965 - ------------------------------------------------------------------------------------------------------ 2/17V 11/96 6.0/3 $415,000 $69,167 - ------------------------------------------------------------------------------------------------------ 1/27E 11/96 5.0/2 $357,811 $71,562 - ------------------------------------------------------------------------------------------------------ 3/7U 11/96 2.5/.5 $86,000 $34,400 - ------------------------------------------------------------------------------------------------------ 1/21A 1/97 4.0/1 $200,808 $50,202 - ------------------------------------------------------------------------------------------------------ 3/17V 1/97 6.0/3 $446,000 $74,333 - ------------------------------------------------------------------------------------------------------ 3/27Z 1/97 3.0/1 $113,360 $37,787 - ------------------------------------------------------------------------------------------------------ 1/18K 1/97 5.0/2 $316,770 $63,354 - ------------------------------------------------------------------------------------------------------ 3/23H 1/97 5.0/2 $315,076 $63,015 - ------------------------------------------------------------------------------------------------------ 3/18D 1/97 4.0/1 $265,950 $66,488 - ------------------------------------------------------------------------------------------------------ 2/29D 1/97 4.0/1 $280,000 $70,000 - ------------------------------------------------------------------------------------------------------ 3/17E 1/97 5.0/2 $252,000 $50,400 - ------------------------------------------------------------------------------------------------------ 1/6M 1/97 3.0/1 $135,204 $45,000 - ------------------------------------------------------------------------------------------------------ 1/31N 1/97 5.0/2 $280,000 $56,000 - ------------------------------------------------------------------------------------------------------ 3/2C 2/97 3.0/1 $120,096 $40,032 - ------------------------------------------------------------------------------------------------------ 2/6V 2/97 4.0/1 $272,803 $68,201 - ------------------------------------------------------------------------------------------------------ 2/29A 3/97 4.0/1 $245,226 $61,306 - ------------------------------------------------------------------------------------------------------ 1/30N 4/97 5.0/2 $280,000 $56,000 - ------------------------------------------------------------------------------------------------------ 3/3V 4/97 4.0/1 $223,400 $55,850 - ------------------------------------------------------------------------------------------------------
63 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 COMPARABLE COOPERATIVE #1-Continued Address: 269-10, 270-10 and 271-10 Grand Central Parkway (Subject) Floral Park, New York
- ---------------------------------------------------------------------------------------------------- 3/1D 4/97 4.0/1 $195,020 $48,755 - ---------------------------------------------------------------------------------------------------- 2/24K 4/97 5.0/2 $235,000 $47,000 - ---------------------------------------------------------------------------------------------------- 3/23Y 4/97 3.0/1 $171,317 $57,106 - ---------------------------------------------------------------------------------------------------- 2/1N 4/97 4.0/1 $189,500 $47,375 - ---------------------------------------------------------------------------------------------------- 2/2M 4/97 3.0/1 $117,152 $39,051 - ---------------------------------------------------------------------------------------------------- 1/23A 4/97 4.0/1 $172,000 $43,000 - ---------------------------------------------------------------------------------------------------- 2/23K 5/97 5.0/2 $319,436 $63,887 - ---------------------------------------------------------------------------------------------------- 1/14K 5/97 5.0/2 $252,000 $50,400 - ---------------------------------------------------------------------------------------------------- 3/5S 5/97 4.0/1 $231,368 $57,842 - ---------------------------------------------------------------------------------------------------- 3/3Y 5/97 3.0/1 $138,000 $46,000 - ---------------------------------------------------------------------------------------------------- 3/2A 5/97 4.0/1 $149,000 $37,250 - ---------------------------------------------------------------------------------------------------- 1/1K 5/97 4.0/1 $193,256 $48,314 - ---------------------------------------------------------------------------------------------------- 2/28W 6/97 4.0/1 $279,256 $69,814 - ----------------------------------------------------------------------------------------------------
64 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 COMPARABLE COOPERATIVE #1-Continued Address: 269-10, 270-10 and 271-10 Grand Central Parkway (Subject) Floral Park, New York [PHOTO] 65 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 COMPARABLE COOPERATIVE #2 Address: One-Two Bay Club Drive Bayside, New York The "Bay Club" is located on 23rd Avenue and Bay Club Drive, Bayside, Queens, New York. It is approximately four miles northwest of the subject property. This is an enclosed condominium complex consisting of two (2) 22-story apartment buildings containing 630 units. Most of the units have balconies and views of Little Neck Bay and the Manhattan skyline. The complex has a health club, on-site parking, a gate house with 24 hour security, doormen and concierges. Shopping and other support facilities are in close proximity. The condition and location of this project are similar to the subject. However, the subject amenities (including on-site shopping and an 18 hole golf course) are superior to the Bay Club. We have adjusted these comparable sales upward. Listed below are the most recent market sales in this complex.
- ------------------------------------------------------------------------------------------------------- UNIT # DATE ROOMS/BDRMS PRICE PRICE/ ROOM - ------------------------------------------------------------------------------------------------------- 3D 9/96 4.5/2 $300,000 $66,000 - ------------------------------------------------------------------------------------------------------- 11U 8/96 3.0/1 $137,000 $45,000 - ------------------------------------------------------------------------------------------------------- PHO 9/96 5.0/2 $315,000 $63,000 - ------------------------------------------------------------------------------------------------------- PHX 12/96 6/3 $467,000 $77,833 - ------------------------------------------------------------------------------------------------------- PHL 12/96 3.0/1 $150,000 $50,000 - -------------------------------------------------------------------------------------------------------
66 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 COMPARABLE COOPERATIVE #2 -Photo Address: One-Two Bay Club Drive Bayside, New York [PHOTO] 67 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 COMPARABLE COOPERATIVE #3 Address: 17-85 215th Street Bayside, New York The "The Americana" is a property that is located on the east side of 215th Street, between 17th and 18th avenues, Bayside, Queens, New York. Immediately to the east of the property is the Cross Island Parkway and the Little Neck Bay. It is approximately four miles northwest of the subject property. This is 16-story, 243 unit cooperative building constructed circa 1969. This cooperative building is enclosed and shares common grounds with two other cooperative buildings which are identified as "The Versailles" and "The Seville". The three cooperative buildings are collectively referred to as "Water's Edge". Most of the units have balconies with views of Little Neck Bay and the Manhattan skyline. The complex has a health club, a below grade shopping area and doormen. Shopping and other support facilities are in close proximity. The condition and location of this project are similar to the subject. However, the subject amenities (including more extensive on-site shopping and an 18 hole golf course) are superior to this cooperative. We have adjusted these comparable sales upward. Listed below are the most recent sales in this building.
- ------------------------------------------------------------------------------------------------------ UNIT # DATE ROOMS/BDRMS PRICE PRICE/ ROOM - ------------------------------------------------------------------------------------------------------ 10J 7/96 3.0/1 $90,000 $30,000 - ------------------------------------------------------------------------------------------------------ 3K 9/96 3.0/1 $85,000 $28,333 - ------------------------------------------------------------------------------------------------------
68 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 COMPARABLE COOPERATIVE #3 Address: 17-85 215th Street Bayside, New York [PHOTO] 69 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 COMPARABLE COOPERATIVE #4 Address: 18-05 215th Street Bayside, New York The "Versailles" is a property that is located on the east side of 215th Street, between 17th and 18th avenues, Bayside, Queens, New York. Immediately to the east of the property is the Cross Island Parkway and the Little Neck Bay. It is approximately four miles northwest of the subject property. This is 16-story, 243 unit cooperative building constructed circa 1969. This cooperative building is enclosed and shares common grounds with two other cooperative buildings which are identified as "the Americana" and "the Seville". The three cooperatives are collectively referred to as "Water's Edge". Most of the units have balconies with views of Little Neck Bay and the Manhattan skyline. The complex has a health club, a below grade shopping area and doormen. Shopping and other support facilities are in close proximity. The condition and location of this project are similar to the subject. However, the subject amenities (including more extensive on-site shopping and an 18 hole golf course) are superior to this cooperative. We have adjusted these comparable sales upward. Listed below are the most recent sales in this building.
- ------------------------------------------------------------------------------------------------------------- UNIT # DATE ROOMS/BDRMS PRICE PRICE/ ROOM - ------------------------------------------------------------------------------------------------------------- 17K 7/97 3.0/1 $110,000 $36,667 - ------------------------------------------------------------------------------------------------------------- 15E 7/97 4.5 $175,000 $38,889 - -------------------------------------------------------------------------------------------------------------
70 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 COMPARABLE COOPERATIVE #4 Address: 18-05 215th Street Bayside, New York [PHOTO] 71 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 COMPARABLE COOPERATIVE #5 Address: One Kensington Gate Great Neck, New York This a six-story, doorman, cooperative building that was constructed circa 1970. This building is located approximately six miles north of the subject. This building's amenities include a doorman, swimming pool and a built-in garage. The building is located in the Village of Kensington which is a desirable suburban neighborhood. Shopping and other support facilities are located nearby on Middle Neck Road. Although this building's location is superior to the subject its amenities are inferior to that of the subject. In addition, the building's condition is similar to that of the subject. After considering these factors, we have given these comparable sales a slight upward adjustment. Listed below are the most recent sales in this building.
- -------------------------------------------------------------------------------------------------------------- UNIT # DATE ROOMS/BDRMS PRICE PRICE/ ROOM - -------------------------------------------------------------------------------------------------------------- 121 11/96 5.0/2 $260,000 $52,000 - -------------------------------------------------------------------------------------------------------------- 212 11/96 4.0/1 $213,500 $53,375 - -------------------------------------------------------------------------------------------------------------- PH25 9/96 5.0/2 $283,000 $56,600 - -------------------------------------------------------------------------------------------------------------- 207 9/96 4.0/1 $165,000 $41,250 - -------------------------------------------------------------------------------------------------------------- 210 8/96 5.0/2 $300,000 $60,000 - -------------------------------------------------------------------------------------------------------------- 310 8/96 5.0/2 $305,000 $61,000 - -------------------------------------------------------------------------------------------------------------- 216 2/96 4.0/1 $182,500 $45,625 - --------------------------------------------------------------------------------------------------------------
72 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 COMPARABLE COOPERATIVE #5 Address: One Kensington Gate Great Neck, New York [PHOTO] 73 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Analysis of Comparable Sales: The lack of similar projects in the area made it necessary for us to expand our search to nearby comparable areas including Bayside and the Village of Kensington, Nassau County. Although the subject is owned under the cooperative form of ownership, the subject is more similar to condominium developments than to other cooperative buildings. We are aware that condominiums are held in the fee simple ownership while cooperative ownership involves shares is a cooperative. The fee simple ownership is superior since a condominium owner can rent or sell a unit without the consent of the board. In addition, a condominium has no underlying mortgage and therefore, the monthly maintenance is lower than a cooperative. The condominium sales we have utilized (The Bay Club) will establish the upper limits of market value for the subject units. The appraisers' survey revealed 59 comparable apartment sales in five different buildings including the subject complex. Except for Comparable No. 5 all sales are in high-rise, doorman, apartment buildings. Comparable No. 5 is a low-rise (six-stories) doorman, cooperative building. The sales range from 2.5 rooms (alcove studio) to 6 rooms (three bedrooms). Excluding a below grade sale, the comparable cooperative sales included on the summary on the preceding pages range from $28,333 per room to $77,833 per room for various sized units. The comparable sales differ in terms of size and amenities (patio, country club, balconies, etc.). Market conditions have been relatively stable since roughly the beginning of 1996 and therefore no adjustment for market conditions is warranted. The most important determinants of value in the subject market are size, condition, amenities and location. Sales of apartments in raw or poor condition command prices at the bottom end of the range. Larger units in good condition with strong locations, and amenities, are priced at the high end of the range. In the subject building the sales range from $30,000 per room to $74,333 per room. These transactions were given significant consideration in our analysis. Generally speaking, most of the comparables are similar to the subject units in terms of location and condition. The subject's amenities are superior to the amenities of the other project. We have valued the subject unit types separately. Studio The subject has 22, two room studio units and 137, 2.5 room studio. In the subject complex , 2.5 room studio units have sales that range from $30,000 to $34,400 per room. There were no outside comparable studio sales. Our estimate of market value for the subject's studio units is $32,000 per room. One Bedroom-Three rooms The subject has 403, three-room one bedroom units. The subject's three-room, one bedroom sales range from $37,667 per room to $58,965 per room. Outside comparable three-room, one bedroom sales range from $28,333 per room to $50,000 per room. We have placed the greatest weight on the subject's comparable sales. Our estimate of market value is $50,000 per room for the subject's three-room, one bedroom units. 74 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 One Bedroom-Four rooms The subject has 706, four-room, one bedroom units. The subject's four-room, one bedroom sales range from $37,250 per room to $70,000 per room. Outside comparable four-room, one bedroom sales range from $41,250 per room to $53,375 per room. We have placed the greatest weight on the subject's comparable sales. Our estimate of market value is $55,000 per room for the subject's four-room, one bedroom units. Two Bedroom The subject has 444, five-room, two-bedroom units and 13, seven-room, two bedroom units. The subject's two bedroom sales range from $47,000 per room to $71,562 per room. Outside comparable two bedroom sales range from $38,889 per room to $66,000 per room. We have placed the greatest weight on the subject's comparable sales. Our estimate of market value is $60,000 per room. Three Bedroom The subject has 104, six room, three bedroom units and six (6), eight-room, three bedroom units. The subject's three bedroom sales range from $69,167 per room to $74,333 per room. There was one outside comparable three bedroom sale for $77,833 per room. Our estimate of market value is $70,000 per room. The market value per room for the above grade residential units have been summarized as follows Studio Units $32,000 One-bedroom (3.0 rooms) $50,000 One-bedroom (4.0 rooms) $55,000 Two-bedroom $60,000 Three-bedroom $70,000 Arcade Residential Units The below grade (arcade level) residential units are composed of six (6), 2 room studio units, one (1) three room one bedroom unit, and two (2) four room, two bedroom units. The only sale of an arcade unit was Unit 5, a two-room, studio unit. This unit sold in August, 1996 for $42,500 which equates to $21,250. An extensive search did not uncover any outside comparable below grade residential sales. A survey of local brokers indicate that such units should be able to be sold at 50% to 70% of the sale price of above grade units. We based on market data, our survey of local brokers and our real estate experience, we consider that the subject sale, Unit 5 in the arcade, sold at market level. Therefore, we estimate that the market sale price per room for the arcade units is $21,250. 75 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Occupied Apartments The cooperative contains 295 rent stabilized apartments which have existing tenancies that hold a "Life Estate" in their individual apartments. These units cannot be sold at market value unless the tenancy moves elsewhere. Based on the appraisers data on stabilized and rent controlled apartment turnover, a 15 year turnover rate is assumed. Further it is assumed that an investor would expect a 14% return on their equity above any negative cash flow from the apartment. The appraisers utilized a typical cash flow model similar to the one on the following pages: k(n-an) Present Worth =(d-kn) an+i where d= starting income k = amount of net income dollars declining per period an = present worth of $1 per period for n periods I = effective interest rate per dollar period Based on this model, the appraisers have discounted the estimated market value derived for the occupied apartments (rent stabilized or controlled units). The occupied units have been discounted to 15% of vacant market value. The summary charts depicting the rent stabilized units, as previously used in the income approach displays the discounted market value of the occupied units. As shown on the bottom line of the chart titled "Calculation of Controlled Apartments Market Value Difference", the difference between the total market and the discounted market value for the occupied units is $60,963,400. Accordingly, this amount is subtracted from the total estimate of market value of the residential units. The adjusted market value is calculated as follows: $414,348,009-$60,963,400 = $353,384,600 Say: $350,000,000 After a review of the comparable information, the appraisers arrived at the value conclusions presented in charts on the following pages. The first table presented summarizes the difference between the market value and the discounted value of the rent stabilized units. A complete list of the individual units is located the addenda. The second table will show the market value of all residential units before and after the stabilization adjustment. 76 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Table 1-Calculation of Controlled Apartments Market Value Difference Total Discounted Market Value Market Value ------------ ------------ $71,404,000 $10,710,600 Difference $60,693,400 After a review of comparable information, the appraisers arrived at the value conclusions presented in the summary chart included below. Table 2- Total Market Value-Before and After Stabilization Adjustment
Net No. of Rms/ Total S.F./ Total Market Market Est Value Total Units Type Unit Rooms Unit Net/S.F. Value/Rm Value/Unit /Sq. Ft. Market Value 1 One bed 3 rms 684 s.f.-Acd. 3 3 684 684 $21,250 $63,750 $93.20 $63,750 1 Two bed 4 rms 712 s.f.-Acd. 4 4 712 712 $21,250 $85,000 $119.38 $85,000 1 Two bed 5 rms 1,216 s.f.-Ard. 5 5 1216 1,216 $21,250 $106,250 $87.38 $106,250 6 Studio 2 rms.-300 s.f.-Ard. 2 12 300 1,800 $21,250 $42,500 $141.67 $255,000 22 Studio 2 rms.-450 s.f. 2 44 450 9,900 $32,000 $64,000 $142.22 $1,408,000 137 Studio 2.5 rms.-600 s.f. 2.5 342.5 600 82,200 $32,000 $80,000 $133.33 $10,960,000 403 One bed 3 rms 700 s.f. 3 1209 700 282,100 $50,000 $150,000 $214.29 $60,450,000 706 One bed 4 rms 930 s.f. 4 2824 930 656,580 $55,000 $220,000 $236.56 $155,320,000 444 Two bed 5 rms 1,200 s.f. 5 2220 1200 532,800 $60,000 $300,000 $250.00 $133,200,000 13 Two bed 7 rms 1,800 s.f. 7 91 1800 23,400 $60,000 $420,000 $233.33 $5,460,000 104 Three bed 6 rms 1,350 s.f. 6 624 1350 140,400 $70,000 $420,000 $311.11 $43,680,000 6 Three-bed 8 rms-2,000 8 48 2000 12,000 $70,000 $560,000 $280.00 $3,360,000 - ----- ------- --------- ------------ 1,844 7,426.5 1,743,792 Total Market Value $414,348,000 Less Stabilized Adj. $60,963,400 ------------ Adj. market Value $353,384,600 Before Stabilization Adj. Round to, $350,000,000 ------------------------- Gross Sellout Price/Unit: $224,701 Gross Sellout Price/Room $55,793 Gross Sellout Price/Net Sq. Ft. $237.61 - ------------------------------------------------------------------------------------------------------------------------------------
77 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 CONCLUSION - DIRECT SALES APPROACH: In conclusion, the appraisers valued the 1,844 residential units at the subject based on comparison to similar unit sales in the subject area and nearby comparable areas. The sales were adjusted based on differences in size, location, amenities and condition, to arrive an estimate of value for each unit. The table of concluded estimated market values is found on the preceding page. After adjusting the forgoing sales with respect to size, location, and condition the appraisers have reached the following conclusion as of June 30, 1997: ESTIMATED MARKET VALUE BY THE DIRECT COMPARISON APPROACH: $350,000,000 78 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 RECONCILIATION & CONCLUSIONS Income Approach- Net Income: $20,124,264 Gross Sellout Value as a Cooperative: $350,000,000 The value conclusions were based on the usual accepted methods of valuation and considered the property based on its current "as- is" condition. In utilizing the Direct Market Sales Approach to value the appraisers conducted a survey of recent cooperative apartment sales in Floral Park, Bayside and the Village of Kensington (Nassau County). The purpose of this survey was to disclose pertinent sales information in buildings similar to the subject. The sales were then adjusted for the, location, amenities, condition and size. The results of this analysis indicated a total market value estimate, as of June 30, 1997, of $350,000,000. The capitalization rate considered both the impact of mortgage financing and the return on and the return of the equity investment. It also considered a firm projection for property appreciation over an assumed holding period of ten years. The primary emphasis was placed on the mortgage equity technique. The appraisers conducted an area survey disclosing the details of market residential rents in the subject area of Floral Park and nearby Bayside, Queens County, New York. From this survey market rents are estimated for each unit type in the subject property, indicating a potential gross apartment income of $43,086,696. In addition, the subject also has income from the following sources; commercial space ($544,000, electricity ($118,000) the country club ($430,000) and the garage ($2,140,000). The total gross potential income is $46,318,696. From this figure the stabilized adjustment of $2,420,280 was deducted. The result is an adjusted gross potential income of $43,898,416. A vacancy and credit loss allowance of 4+/-% ($1,760,000) is deducted yielding an effective gross income of $42,138,416. Estimated annual expenses in the amount of ($22,014,152) are deducted resulting in a net operating income of $20,124,264. 79 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 CERTIFICATE OF MARKETABILITY STUDY We certify that, to the best of our knowledge and belief: o The statements of fact contained in this report are true and correct. o The reported analyses, opinions and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, unbiased professional analyses, opinions and conclusions. o We do not have present or prospective interest in the property that is the subject of this report, and we have no personal interest or bias with respect to the parties involved. o Our compensation is not contingent on an action or event resulting from the analyses, opinions, or conclusions in, or the use of, this report. o Our analysis, opinions and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Practice of the Appraisal Institute and in accordance with the standards and reporting requirements of the Federal Home Loan Bank Board. o The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. o D. Robert Hedrick and Joesph E. Petrocine have made personal inspections of the property that is the subject of this report. o No other individuals provided significant professional assistance to the persons signing this report. o As of the date of this report, D. Robert Hedrick and Joseph E. Petrocine have completed the requirements of the continuing education program of the Appraisal Institute and the professional licenses associated with their credentials. o The reproduction of this marketability study without the prior written permission of Mr. Joseph E. Petrocine is prohibited. June 30, 1997 /s/ D. Robert Hedrick /s/ Joseph E. Petrocine - --------------------------------- ------------------------------------- D. Robert Hedrick, MAI, Associate Joseph E. Petrocine, MAI, Director New York Certification #46-11150 New York Certification #46-3743 New Jersey Certified General #RG01814 80 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 QUALIFICATIONS OF JOSEPH E. PETROCINE EDUCATION Bernard M. Baruch College, The City University of New York Degree: Bachelor of Business Administration - 1976 Major: Quantitative Management/Finance PROFESSIONAL MEMBERSHIPS & REAL ESTATE LICENSES Member of the Appraisal Institute New York State Certified General Appraiser #4060 0000 3743 New York State Real Estate Broker Florida State Real Estate Broker Member of the American Management Association EXPERIENCE Active in the real estate business for 16 years; including sales, leasing, financing and property management. Active as a full time real estate appraiser since 1983 working in the fee appraisal business and also as a bank staff appraiser. While working at various banks, responsibilities included feeing out work, reviewing appraisals, assisting real estate workout personnel, analyzing problem loans and preparing internal appraisals. Other experience involved reviewing new loan submissions and preparing work-ups for commercial mortgages. FDIC bank merger experience involved the review of complete loan portfolios and the due diligence process associated with bank mergers relative to the rating and assimilation of the commercial real estate loans. EMPLOYMENT HISTORY 1995-Present Regional Appraisal Associates Director, Vice President 1994-1995 Brown, Harris, Stevens Inc. Chief Appraiser/Marketing Director 1993-1994 Principal Appraising & Consulting Services 1992-1993 Emigrant Savings Bank Vice President/Real Estate New York, New York Appraiser/Loan Officer 1987-1991 The Bank of New York Assistant Vice President New York, New York Real Estate Appraiser 1985-1987 Wm. A. White/Tishman Inc. Appraiser/Consultant New York, New York Responsible for narrative appraisals on commercial properties. 1983-1985 Dorman & Wilson Inc. Staff Appraiser & Howard Jackson Assoc. 1976-1982 Real Estate Sales Residential & commercial sales and property management.
81 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Qualifications of D. Robert Hedrick, MAI 47-06 Skillman Avenue Sunnyside, New York 11104 EDUCATION Appraisal Institute Courses and Requirements successfully completed: ------------------------------------------------ 1995 Passing Grade on the Comprehensive Examination 1995 Demonstration Report on an Income Producing Property 1994 Report Writing and Valuation Analysis 1993 Standards of Professional Practice Parts A and B 1993 Advanced Applications 1988 Capitalization Theory & Techniques Part A 1988 Capitalization Theory & Techniques Part B 1987 Real Estate Appraisal Principles 1987 Basic Valuation Techniques 1980 Queens College, Flushing, New York Degree Bachelor of Arts, Economics/Accounting EMPLOYMENT HISTORY: 1/95 to Present Regional Appraisal Services, 300 E. 42nd Street, New York, NY Staff Appraiser Preparing narrative appraisals of special-purpose, residential and income-producing properties to determine market value. These reports are used for mortgages, settlement of estates, real estate tax certiorari actions and condemnation cases. 11/90 to 12/94 Goodman-Marks Associates, Inc., 167 Willis Avenue, Mineola, NY Staff Appraiser Preparing narrative appraisals of special-purpose, residential and income-producing properties to determine market value. These reports are used for mortgages, settlement of estates, real estate tax certiorari actions and condemnation cases. 3/89 to 11/90 Bowery Mortgage Bank, 110 E. 42nd Street, NY, NY Staff Appraiser Preparing appraisals of residential properties to determine market value. These appraisals are used for mortgage purposes. 5/86 to 2/89 Jack Ciotta Associates, Ridgewood, New York Fee Appraiser Preparing residential and commercial and residential properties to determine market value. These appraisals are used for mortgage purposes. PROFESSIONAL AFFILIATION Appraisal Institute-MAI Designation No. 11,064 LICENSES Certified General Real Estate Appraiser, New York Certificate No. 4611150 82 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 ADDENDA Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Regional Appraisal Associates o Valuation 300 East 42nd Street o Consulting New York, New York 10017 o Feasibility Studies (212) 599-0004 Fax: (212) 697-5526 o Estates June 4, 1997 Mr. John B. Kessler, Vice President Morgan Stanley & Co., Incorporated 1585 Broadway New York, New York 10036 RE: 269-10, 270-10 and 271-10 Grand Central Parkway North Shore Towers Apartments Incoporated and Subsidiary Floral Park, New York 11005 --------------------------------------------------------------------------- Dear Mr. Kessler: This letter is to confirm my recent conversations with you as real estate advisor invoved with the analysis of the above identified asset. As we have outlined in our conversation, you are interested in employing Regional Appraisal Associates to prepare a market analysis for the above identified property. The subject comprises three high-rise cooperative apartment buildings containing 1,844 (plus minus sign) apartments. The subject comprises three high-rise cooperative apartment building. The buildings are 33 stories and include sub-terrain parking garages. The cooperative is reported to be 80% sold. It is located in the eastern section of Queens County, Floral Park, City and State of New York. The purpose of this market study is to estimate the reasonable market rent and gross-out values applicable to the various apartments, professional spaces and/or commercial spaces in the subject buildings. This market analysis will be used to assist Morgan Stanley with the decision process and efforts to acquire the underlying mortgage on the subject property in the amount of approximately $71,000,000. The report will be addressed to you and it will be prepared in a format that is acceptable and conforms to the requirements of Morgan Stanley & Co. Incorporated. The format will be a narrative market study with the scope as outlined below. You have indicated our inspection and research of the property will need to be handled discreetly. In this regard we will communicate with you before contacting the management company or any of the board members. Generally, we inspect the buildings from the exterior and interior, from the basement to the roof. We also inspect enough apartments so that we have a good feel for the various apartment layout in each building. You direction will be required, if this is acceptable or not. We will analyze and list all apartment floors plans and set-up same in a chart format. The concentration of our study will focus on the collection of market data of rented apartments (sublets) and sales (sold cooperative units) both within the subject and in nearby competitive properties. This information will be reviewed, analyzed and generally compared to the subject. An estimate of the appropriate market rent and applicable gross-sellout value per unit will be developed in our study. No property market value conclusions will be made in the income capitalization or sales comparison sections of this market study. However, an expense analysis and history of the subject's expenses as a cooperative will be presented in our report. The date of this study will be the date of the property inspection. We will make every effort to complete this market study within two and one half (2.5) weeks from the time we receive all information relative to this assignment, receive authorization from you to start this job and confirm a property inspection date. Assuming we received all information and confirm our inspection date by June 25, 1997, the completed report will be delivered to Morgan Stanley on/or about July 10. We are aware that time is of the essence in this transaction and will make every effort to complete this study in a timely manner. In the event data and information is slow in coming to us, we will apprise you of any anticipated delay. Generally, should this happen we will accommodate you by distributing completed components of the report to facilitate your efforts and study deadlines. Also, you have indicated that a DRAFT is required prior to our completing the final report. This would not be a problem and a draft will be delivered as we approach the completion date. Our fee for this assignment will be $6,500. The fee does not include future updates, valuations under different assumptions, court appearances or testimony with regard to the conclusions. Also, the fee is not contingent upon the value reported or any actions or events resulting from the appraisal. The fee will be credited toward additional study should you determine that a full APPRAISAL is required. This study and the data contained therein would be useful in an appraisal for a period of six months. This market study will be prepared in conformity with the Code of Ethics and Standards of Professional Practice of the Appraisal Institute and in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP), as published by the Appraisal Foundation. Should an appraisal result at a future date, it would be prepared in compliance with the Appraisal Standards set forth in the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). o Prior to commencing this study we will require the name of the management company and person to contact for assistance with the property inspection assuming an inspection is permitted If the foregoing is agreeable to you your authorization will be needed in order for us to proceed. For fax communication please use #(212) 697-5526. My phone number is (212) 599-0004. We look forward to working with you and Morgan Stanley and again thank you for this opportunity to be of service to you. Sincerely, /s/ Joseph E. Petrocine - ------------------------- Joseph E. Petrocine, MAI Director Accepted and agreed to BY: /s/ Cecilia Tarrant Date: 6/24/97 ---------------------------- Cecilia Tarrant, Vice President Morgan Stanley & Co. Incorporated, 1585 Broadway New York, New York 10036 Regional Appraisal Associates 300 East 42nd Street, New York, New York 10017 o (212) 599-0004 Market Value-Rent Stab. Units Area Room Market Total Discounted Unit Type Sq. Ft. ount Value/Rm Market Value Market Value No. of Area Rm Monthly Market Market Units Building Unit Type (S.F.) Ct Stab. Rent Rent/Rm Rent - ----- -------- ---- ---- ------ -- ---------- ------- ---- 1 1 8A One-bed 930 4 $1,117 $467 $1,870 2 1 9A One-bed 930 4 $1,105 $467 $1,870 3 1 12A One-bed 930 4 $1,170 $467 $1,870 4 1 16A One-bed 930 4 $1,324 $467 $1,870 5 1 26A One-bed 930 4 $1,091 $467 $1,870 6 1 27A One-bed 930 4 $1,308 $467 $1,870 7 1 31A One-bed 930 4 $1,259 $467 $1,870 8 1 15B One-bed 930 4 $1,080 $467 $1,870 9 1 16B One-bed 930 4 $1,124 $467 $1,870 10 1 21B One-bed 930 4 $1,394 $467 $1,870 11 1 31B One-bed 930 4 $1,095 $467 $1,870 12 1 2D One-bed 930 4 $1,223 $467 $1,870 13 1 7D One-bed 930 4 $1,224 $467 $1,870 14 1 10D One-bed 930 4 $1,273 $467 $1,870 15 1 16D Two-bed 1200 5 $1,738 $467 $2,340 16 1 18D Two-bed 1200 5 $1,703 $500 $2,500 17 1 23D Two-bed 1200 5 $1,582 $500 $2,500 18 1 26D Two-bed 1200 5 $1,613 $500 $2,500 19 1 33D Two-bed 1200 5 $1,700 $500 $2,500 20 1 2E One-bed 930 4 $1,140 $467 $1,870 21 1 4E One-bed 930 4 $1,152 $467 $1,870 22 1 6E One-bed 930 4 $1,499 $467 $1,870 23 1 9E One-bed 930 4 $1,264 $467 $1,870 24 1 11E Two-bed 1200 5 $1,662 $500 $2,500 25 1 15E Two-bed 1200 5 $1,737 $500 $2,500 26 1 18E Two-bed 1200 5 $1,601 $500 $2,500 27 1 20E Two-bed 1200 5 $1,637 $500 $2,500 28 1 24E Two-bed 1200 5 $1,974 $500 $2,500 29 1 25E Two-bed 1200 5 $1,922 $500 $2,500 30 1 2F One-bed 700 3 $ 758 $467 $1,400 31 1 3F One-bed 700 3 $ 735 $467 $1,400 32 1 4F One-bed 700 3 $ 749 $467 $1,400 33 1 5F One-bed 700 3 $ 791 $467 $1,400 34 1 2G One-bed 930 4 $1,401 $467 $1,870 35 1 5G One-bed 930 4 $1,179 $467 $1,870 36 1 9G One-bed 930 4 $1,299 $467 $1,870 37 1 19G Two-bed 1200 5 $1,656 $500 $2,500 Page 1 Market Value-Rent Stab. Units 38 1 26G Two-bed 1200 5 $1,528 $500 $2,500 39 1 7H One-bed 930 4 $1,246 $467 $1,870 40 1 9H One-bed 930 4 $1,299 $467 $1,870 41 1 23H Two-bed 1200 5 $1,510 $500 $2,500 42 1 26H Two-bed 1200 5 $1,528 $500 $2,500 43 1 28H Two-bed 1200 5 $1,692 $500 $2,500 44 1 3J One-bed 700 3 $1,010 $467 $1,400 45 1 4J One-bed 700 3 $ 846 $467 $1,400 46 1 8K One-bed 930 4 $1,294 $467 $1,870 47 1 10K One-bed 930 4 $1,255 $467 $1,870 48 1 12K Two-bed 1200 5 $1,593 $500 $2,500 49 1 20K Two-bed 1200 5 $1,736 $500 $2,500 50 1 22K Two-bed 1200 5 $1,666 $500 $2,500 51 1 1L One-bed 930 4 $1,192 $467 $1,870 52 1 4L One-bed 930 4 $1,342 $467 $1,870 53 1 9L One-bed 930 4 $1,289 $467 $1,870 54 1 17L Two-bed 1200 5 $1,657 $500 $2,500 55 1 20L Two-bed 1200 5 $1,576 $500 $2,500 56 1 21L Two-bed 1200 5 $1,705 $500 $2,500 57 1 25L Two-bed 1200 5 $1,554 $500 $2,500 58 1 1M One-bed 700 3 $ 627 $467 $1,400 59 1 3M One-bed 700 3 $ 775 $467 $1,400 60 1 5M One-bed 700 3 $ 963 $467 $1,400 61 1 6N One-bed 930 4 $1,380 $467 $1,870 62 1 8N One-bed 930 4 $1,296 $467 $1,870 63 1 11N Two-bed 1200 5 $1,628 $500 $2,500 64 1 12N Two-bed 1200 5 $1,733 $500 $2,500 65 1 16N Two-bed 1200 5 $1,375 $500 $2,500 66 1 21N Two-bed 1200 5 $1,803 $500 $2,500 67 1 24N Two-bed 1200 5 $1,803 $500 $2,500 68 1 25N Two-bed 1200 5 $1,737 $500 $2,500 69 1 5O One-bed 930 4 $1,333 $467 $1,870 70 1 14O Two-bed 1200 5 $1,789 $500 $2,500 71 1 16O Two-bed 1200 5 $1,855 $500 $2,500 72 1 21O Two-bed 1200 5 $1,859 $500 $2,500 73 1 24O Two-bed 1200 5 $1,646 $500 $2,500 74 1 27O Two-bed 1200 5 $1,613 $500 $2,500 75 1 4P One-bed 700 3 $ 986 $467 $1,400 76 1 27Q One-bed 700 3 $1,080 $467 $1,400 77 1 1R One-bed 700 3 $ 636 $467 $1,400 78 1 14R One-bed 930 4 $1,074 $467 $1,870 79 1 21R One-bed 930 4 $ 951 $467 $1,870 Page 2 Market Value-Rent Stab. Units 80 1 26R One-bed 930 4 $1,533 $467 $1,870 81 1 27R One-bed 930 4 $1,000 $467 $1,870 82 1 29R One-bed 930 4 $1,053 $467 $1,870 83 1 2S One-bed 930 4 $ 935 $467 $1,870 84 1 3S One-bed 930 4 $1,042 $467 $1,870 85 1 9S One-bed 930 4 $1,071 $467 $1,870 86 1 12S One-bed 930 4 $1,193 $467 $1,870 87 1 18S One-bed 930 4 $1,202 $467 $1,870 88 1 19S One-bed 930 4 $1,109 $467 $1,870 89 1 26S One-bed 930 4 $1,230 $467 $1,870 90 1 27S One-bed 930 4 $1,249 $467 $1,870 91 1 5T One-bed 700 3 $ 981 $467 $1,400 92 1 6T One-bed 700 3 $ 924 $467 $1,400 93 1 19T One-bed 700 3 $ 932 $467 $1,400 94 1 32T One-bed 700 3 $1,119 $467 $1,400 95 1 3V One-bed 930 4 $1,134 $467 $1,870 96 1 12V Three-bed 1,350 6 $1,602 $525 $3,150 97 1 1W One-bed 930 4 $1,098 $467 $1,870 98 1 5W One-bed 930 4 $1,351 $467 $1,870 99 1 4Y One-bed 700 3 $1,193 $467 $1,400 100 1 10Y One-bed 700 3 $ 864 $467 $1,400 101 2 1A One-bed 930 4 $ 900 $467 $1,870 102 2 25A One-bed 930 4 $1,050 $467 $1,870 103 2 28A One-bed 930 4 $1,432 $467 $1,870 104 2 PHA Three-bed 2,000 8 $4,037 $525 $4,200 105 2 2B One-bed 700 3 $ 694 $467 $1,400 106 2 3B One-bed 700 3 $ 697 $467 $1,400 107 2 17B One-bed 930 4 $1,007 $467 $1,870 108 2 3C One-bed 700 3 $ 756 $467 $1,400 109 2 6C One-bed 700 3 $ 741 $467 $1,400 110 2 7C One-bed 700 3 $ 744 $467 $1,400 111 2 4D One-bed 930 4 $1,193 $467 $1,870 112 2 7D One-bed 930 4 $1,237 $467 $1,870 113 2 8D One-bed 930 4 $1,393 $467 $1,870 114 2 11D Two-bed 1200 5 $1,860 $500 $2,500 115 2 16D Two-bed 1200 5 $1,822 $500 $2,500 116 2 19D Two-bed 1200 5 $1,773 $500 $2,500 117 2 21D Two-bed 1200 5 $1,869 $500 $2,500 118 2 4E One-bed 930 4 $1,441 $467 $1,870 119 2 22E Two-bed 1200 5 $1,338 $500 $2,500 120 2 28E Two-bed 1200 5 $1,337 $500 $2,500 121 2 7F One-bed 700 3 $ 995 $467 $1,400 Page 3 Market Value-Rent Stab. Units 122 2 9F One-bed 700 3 $ 971 $467 $1,400 123 2 10F One-bed 700 3 $ 818 $467 $1,400 124 2 6G One-bed 930 4 $1,589 $467 $1,870 125 2 7G One-bed 930 4 $1,294 $467 $1,870 126 2 12G Two-bed 1200 5 $1,463 $500 $2,500 127 2 15G Two-bed 1200 5 $1,473 $500 $2,500 128 2 19G Two-bed 1200 5 $1,643 $500 $2,500 129 2 22G Two-bed 1200 5 $1,728 $500 $2,500 130 2 25G Two-bed 1200 5 $1,257 $500 $2,500 131 2 5H One-bed 930 4 $1,268 $467 $1,870 132 2 6H One-bed 930 4 $1,382 $467 $1,870 133 2 19H Two-bed 1200 5 $1,625 $500 $2,500 134 2 29H Two-bed 1200 5 $1,562 $500 $2,500 135 2 7J One-bed 700 3 $ 958 $467 $1,400 136 2 12K Two-bed 1200 5 $1,606 $500 $2,500 137 2 15K Two-bed 1200 5 $1,447 $500 $2,500 138 2 16K Two-bed 1200 5 $1,458 $500 $2,500 139 2 21K Two-bed 1200 5 $1,680 $500 $2,500 140 2 1L One-bed 930 4 $1,329 $467 $1,870 141 2 2L One-bed 930 4 $1,068 $467 $1,870 142 2 3L One-bed 930 4 $1,080 $467 $1,870 143 2 9L One-bed 930 4 $1,321 $467 $1,870 144 2 14L Two-bed 1200 5 $1,741 $500 $2,500 145 2 21L Two-bed 1200 5 $1,429 $500 $2,500 146 2 28L Two-bed 1200 5 $1,333 $500 $2,500 147 2 30L Two-bed 1200 5 $1,352 $500 $2,500 148 2 33L Two-bed 1200 5 $1,526 $500 $2,500 149 2 7M One-bed 700 3 $ 782 $467 $1,400 150 2 4N One-bed 930 4 $1,270 $467 $1,870 151 2 12N Two-bed 1200 5 $2,191 $500 $2,500 152 2 22N Two-bed 1200 5 $1,963 $500 $2,500 153 2 30N Two-bed 1200 5 $1,477 $500 $2,500 154 2 4O One-bed 930 4 $1,269 $467 $1,870 155 2 21O Two-bed 1200 5 $1,746 $500 $2,500 156 2 22O Two-bed 1200 5 $2,019 $500 $2,500 157 2 28O Two-bed 1200 5 $2,107 $500 $2,500 158 2 1P One-bed 700 3 $ 900 $467 $1,400 159 2 3P One-bed 700 3 $ 928 $467 $1,400 160 2 5R One-bed 700 3 $ 746 $467 $1,400 161 2 11R One-bed 930 4 $1,098 $467 $1,870 162 2 15R One-bed 930 4 $1,111 $467 $1,870 163 2 24R One-bed 930 4 $1,028 $467 $1,870 Page 4 Market Value-Rent Stab. Units 164 2 2S One-bed 930 4 $1,181 $467 $1,870 165 2 5S One-bed 930 4 $1,147 $467 $1,870 166 2 8S One-bed 930 4 $1,217 $467 $1,870 167 2 9S One-bed 930 4 $1,168 $467 $1,870 168 2 15S One-bed 930 4 $ 990 $467 $1,870 169 2 23S One-bed 930 4 $1,152 $467 $1,870 170 2 29S One-bed 930 4 $1,240 $467 $1,870 171 2 33S One-bed 930 4 $1,253 $467 $1,870 172 2 26T One-bed 700 3 $1,105 $467 $1,400 173 2 27T One-bed 700 3 $ 925 $467 $1,400 174 2 2V One-bed 930 4 $1,136 $467 $1,870 175 2 7V One-bed 930 4 $1,406 $467 $1,870 176 2 10V One-bed 930 4 $1,440 $467 $1,870 177 2 14V Three-bed 1,350 6 $1,726 $525 $3,150 178 2 18V Three-bed 1,350 6 $1,880 $525 $3,150 179 2 20V Three-bed 1,350 6 $1,927 $525 $3,150 180 2 6W One-bed 930 4 $1,396 $467 $1,870 181 2 7W One-bed 930 4 $1,453 $467 $1,870 182 2 16W Three-bed 1,350 6 $1,665 $525 $3,150 183 2 19W Three-bed 1,350 6 $1,719 $525 $3,150 184 2 26W Three-bed 1,350 6 $2,250 $525 $3,150 185 2 27W One-bed 930 4 $1,554 $467 $1,870 186 2 11Y One-bed 700 3 $1,009 $467 $1,400 187 2 16Y One-bed 700 3 $ 949 $467 $1,400 188 2 25Y One-bed 700 3 $1,136 $467 $1,400 189 3 3A One-bed 930 4 $1,145 $467 $1,870 190 3 5A One-bed 930 4 $1,000 $467 $1,870 191 3 8A One-bed 930 4 $1,043 $467 $1,870 192 3 12A One-bed 930 4 $1,374 $467 $1,870 193 3 17A One-bed 930 4 $1,070 $467 $1,870 194 3 23A One-bed 930 4 $1,363 $467 $1,870 195 3 24A One-bed 930 4 $1,268 $467 $1,870 196 3 27A One-bed 930 4 $1,379 $467 $1,870 197 3 9B Studio 600 2.5 $1,145 $500 $1,250 198 3 18B One-bed 930 4 $1,162 $467 $1,870 199 3 22B One-bed 930 4 $1,218 $467 $1,870 200 3 5C One-bed 700 3 $1,089 $467 $1,400 201 3 17C Studio 450 2 $ 690 $500 $1,000 202 3 25C One-bed 700 3 $ 936 $467 $1,400 203 3 8D One-bed 930 4 $1,587 $467 $1,870 204 3 22D One-bed 930 4 $1,700 $467 $1,870 205 3 24D Two-bed 1200 5 $2,032 $500 $2,500 Page 5 Market Value-Rent Stab. Units 206 3 25D One-bed 930 4 $1,706 $467 $1,870 207 3 30D One-bed 930 4 $1,515 $467 $1,870 208 3 2E One-bed 930 4 $1,177 $467 $1,870 209 3 6E One-bed 930 4 $1,353 $467 $1,870 210 3 15E Two-bed 1200 5 $1,716 $500 $2,500 211 3 21E Two-bed 1200 5 $1,728 $500 $2,500 212 3 28E Two-bed 1200 5 $1,645 $500 $2,500 213 3 33E Two-bed 1200 5 $1,796 $500 $2,500 214 3 2F One-bed 700 3 $ 826 $467 $1,400 215 3 7G One-bed 930 4 $1,280 $467 $1,870 216 3 8G One-bed 930 4 $1,171 $467 $1,870 217 3 15G Two-bed 1200 5 $1,596 $500 $2,500 218 3 20G Two-bed 1200 5 $1,614 $500 $2,500 219 3 22G One-bed 930 4 $1,343 $467 $1,870 220 3 23G Two-bed 1200 5 $1,582 $500 $2,500 221 3 27G Two-bed 1200 5 $1,650 $500 $2,500 222 3 30G Two-bed 1200 5 $1,566 $500 $2,500 223 3 31G Two-bed 1200 5 $1,518 $500 $2,500 224 3 32G Two-bed 1200 5 $1,600 $500 $2,500 225 3 33G Two-bed 1200 5 $1,918 $500 $2,500 226 3 7H One-bed 930 4 $1,210 $467 $1,870 227 3 10H One-bed 930 4 $1,245 $467 $1,870 228 3 14H Two-bed 1200 5 $1,623 $500 $2,500 229 3 22H Two-bed 1200 5 $1,632 $500 $2,500 230 3 30H Two-bed 1200 5 $2,084 $500 $2,500 231 3 12K Two-bed 1200 5 $1,693 $500 $2,500 232 3 23K Two-bed 1200 5 $1,512 $500 $2,500 233 3 30K Two-bed 1200 5 $1,794 $500 $2,500 234 3 3L One-bed 930 4 $1,172 $467 $1,870 235 3 8L One-bed 930 4 $1,357 $467 $1,870 236 3 9L One-bed 930 4 $1,229 $467 $1,870 237 3 11L Two-bed 1200 5 $1,590 $500 $2,500 238 3 14L Two-bed 1200 5 $1,622 $500 $2,500 239 3 16L Two-bed 1200 5 $1,611 $500 $2,500 240 3 21L Two-bed 1200 5 $1,494 $500 $2,500 241 3 28L Two-bed 1200 5 $1,530 $500 $2,500 242 3 5N One-bed 930 4 $1,352 $500 $2,000 243 3 6N One-bed 930 4 $1,268 $467 $1,870 244 3 12N Two-bed 1200 5 $1,628 $500 $2,500 245 3 14N Two-bed 1200 5 $1,873 $500 $2,500 246 3 16N Two-bed 1200 5 $1,741 $500 $2,500 247 3 21N Two-bed 1200 5 $1,656 $500 $2,500 Page 6 Market Value-Rent Stab. Units 248 3 26N Two-bed 1200 5 $1,822 $500 $2,500 249 3 3O One-bed 930 4 $1,346 $467 $1,870 250 3 5O One-bed 930 4 $1,466 $467 $1,870 251 3 6O One-bed 930 4 $1,215 $467 $1,870 252 3 7O One-bed 930 4 $1,567 $467 $1,870 253 3 11O Two-bed 1200 5 $1,710 $500 $2,500 254 3 17O Two-bed 1200 5 $1,710 $500 $2,500 255 3 21O/P Three-bed 1,350 6 $2,054 $525 $3,150 256 3 29O One-bed 930 4 $1,751 $467 $1,870 257 3 32O One-bed 930 4 $1,392 $467 $1,870 258 3 2P One-bed 700 3 $ 797 $467 $1,400 259 3 6P One-bed 700 3 $ 897 $467 $1,400 260 3 27P One-bed 700 3 $1,310 $467 $1,400 261 3 27Q One-bed 700 3 $ 834 $467 $1,400 262 3 14R One-bed 930 4 $1,141 $467 $1,870 263 3 2S One-bed 930 4 $1,257 $467 $1,870 264 3 18S One-bed 930 4 $1,209 $467 $1,870 265 3 25S One-bed 930 4 $1,283 $467 $1,870 266 3 27S One-bed 930 4 $1,286 $467 $1,870 267 3 28S One-bed 930 4 $1,188 $467 $1,870 268 3 2T One-bed 700 3 $1,320 $467 $1,400 269 3 10T One-bed 700 3 $1,063 $467 $1,400 270 3 15T One-bed 700 3 $ 990 $467 $1,400 271 3 16T One-bed 700 3 $ 972 $467 $1,400 272 3 3U One-bed 700 3 $ 975 $467 $1,400 273 3 1V One-bed 930 4 $1,469 $467 $1,870 274 3 2V One-bed 930 4 $1,174 $467 $1,870 275 3 4V One-bed 930 4 $1,362 $467 $1,870 276 3 7V One-bed 930 4 $1,306 $467 $1,870 277 3 8V One-bed 930 4 $1,487 $467 $1,870 278 3 11V Three-bed 1,350 6 $1,761 $525 $3,150 279 3 14V Three-bed 1,350 6 $1,839 $525 $3,150 280 3 16V Three-bed 1,350 6 $1,773 $525 $3,150 281 3 27V One-bed 930 4 $1,257 $467 $1,870 282 3 4W One-bed 930 4 $1,274 $467 $1,870 283 3 5W One-bed 930 4 $1,237 $467 $1,870 284 3 6W One-bed 930 4 $1,331 $467 $1,870 285 3 11W Three-bed 1,350 6 $1,714 $525 $3,150 286 3 23W Three-bed 1,350 6 $2,211 $525 $3,150 287 3 28W One-bed 930 4 $1,570 $467 $1,870 288 3 29W One-bed 930 4 $1,680 $467 $1,870 289 3 33W Three-bed 1,350 6 $2,226 $525 $3,150 Page 7 Market Value-Rent Stab. Units 290 3 1Y One-bed 700 3 $ 637 $467 $1,400 291 3 4Y One-bed 700 3 $ 833 $467 $1,400 292 3 6Y One-bed 700 3 $ 98l $467 $1,400 293 3 17Y One-bed 700 3 $ 990 $467 $1,400 294 3 30Y One-bed 700 3 $1,120 $467 $1,400 295 3 25Z One-bed 700 3 $ 766 $467 $1,400 ------ ------ Monthly Rent $401,900 $603,590 No. of Months 12 12 -- -- Annual Rent $4,822,800 $7,243,080 Difference $2,420,280 Page 8 Market Value-Rent Stab. Units calculation of controlled apartment value market difference No. of Area Room Market Total Discounted Units Unit Type Sq. Ft. Count Value/Rm Market Value Market Value ----- ---- ---- ------- ----- -------- ------------ ------------ 1 8A One-bed 930 4 $55,000 $220,000 $33,000 2 9A One-bed 930 4 $55,000 $220,000 $33,000 3 12A One-bed 930 4 $55,000 $220,000 $33,000 4 16A One-bed 930 4 $55,000 $220,000 $33,000 5 26A One-bed 930 4 $55,000 $220,000 $33,000 6 27A One-bed 930 4 $55,000 $220,000 $33,000 7 31A One-bed 930 4 $55,000 $220,000 $33,000 8 15B One-bed 930 4 $55,000 $220,000 $33,000 9 16B One-bed 930 4 $55,000 $220,000 $33,000 10 21B One-bed 930 4 $55,000 $220,000 $33,000 11 31B One-bed 930 4 $55,000 $220,000 $33,000 12 2D One-bed 930 4 $55,000 $220,000 $33,000 13 7D One-bed 930 4 $55,000 $220,000 $33,000 14 10D One-bed 930 4 $55,600 $220,000 $33,000 15 16D Two-bed 1200 5 $60,000 $300,000 $45,000 16 18D Two-bed 1200 5 $60,000 $300,000 $45,000 17 23D Two-bed 1200 5 $60,000 $300,000 $45,000 18 26D Two-bed 1200 5 $60,000 $300,000 $45,000 19 33D Two-bed 1200 5 $60,000 $300,000 $45,000 20 2E One-bed 930 4 $55,000 $220,000 $33,000 21 4E One-bed 930 4 $55,000 $220,000 $33,000 22 6E One-bed 930 4 $55,000 $220,000 $33,000 23 9E One-bed 930 4 $55,000 $220,000 $33,000 24 11E Two-bed 1200 5 $60,000 $300,000 $45,000 25 15E Two-bed 1200 5 $60,000 $300,000 $45,000 26 18E Two-bed 1200 5 $60,000 $300,000 $45,000 27 20E Two-bed 1200 5 $60,000 $300,000 $45,000 28 24E Two-bed 1200 5 $60,000 $300,000 $45,000 29 25E Two-bed 1200 5 $60,000 $300,000 $45,000 30 2F One-bed 700 3 $50,000 $150,000 $22,500 31 3F One-bed 700 3 $50,000 $150,000 $22,500 32 4F One-bed 700 3 $50,000 $150,000 $22,500 33 5F One-bed 700 3 $50,000 $150,000 $22,500 34 2G One-bed 930 4 $55,000 $220,000 $33,000 35 5G One-bed 930 4 $55,000 $220,000 $33,000 36 9G One-bed 930 4 $55,000 $220,000 $33,000 37 19G Two-bed 1200 5 $60,000 $300,000 $45,000 38 26G Two-bed 1200 5 $60,000 $300,000 $45,000 Page 1 Market Value-Rent Stab. Units 39 7H One-bed 930 4 $55,000 $220,000 $33,000 40 9H One-bed 930 4 $55,000 $220,000 $33,000 41 23H Two-bed 1200 5 $60,000 $300,000 $45,000 42 26H Two-bed 1200 5 $60,000 $300,000 $45,000 43 28H Two-bed 1200 5 $60,000 $300,000 $45,000 44 3J One-bed 700 3 $50,000 $150,000 $22,500 45 4J One-bed 700 3 $50,000 $150,000 $22,500 46 8K One-bed 930 4 $55,000 $220,000 $33,000 47 10K One-bed 930 4 $55,000 $220,000 $33,000 48 12K Two-bed 1200 5 $60,000 $300,000 $45,000 49 20K Two-bed 1200 5 $60,000 $300,000 $45,000 50 22K Two-bed 1200 5 $60,000 $300,000 $45,000 51 1L One-bed 930 4 $55,000 $220,000 $33,000 52 4L One-bed 930 4 $55,000 $220,000 $33,000 53 9L One-bed 930 4 $55,000 $220,000 $33,000 54 17L Two-bed 1200 5 $60,000 $300,000 $45,000 55 20L Two-bed 1200 5 $60,000 $300,000 $45,000 56 21L Two-bed 1200 5 $60,000 $300,000 $45,000 57 25L Two-bed 1200 5 $60,000 $300,000 $45,000 58 1M One-bed 700 3 $50,000 $150,000 $22,500 59 3M One-bed 700 3 $50,000 $150,000 $22,500 60 5M One-bed 700 3 $50,000 $150,000 $22,500 61 6N One-bed 930 4 $55,000 $220,000 $33,000 62 8N One-bed 930 4 $55,000 $220,000 $33,000 63 11N Two-bed 1200 5 $60,000 $300,000 $45,000 64 12N Two-bed 1200 5 $60,000 $300,000 $45,000 65 16N Two-bed 1200 5 $60,000 $300,000 $45,000 66 21N Two-bed 1200 5 $60,000 $300,000 $45,000 67 24N Two-bed 1200 5 $60,000 $300,000 $45,000 68 25N Two-bed 1200 5 $60,000 $300,000 $45,000 69 5O One-bed 930 4 $55,000 $220,000 $33,000 70 14O Two-bed 1200 5 $60,000 $300,000 $45,000 71 16O Two-bed 1200 5 $60,000 $300,000 $45,000 72 21O Two-bed 1200 5 $60,000 $300,000 $45,000 73 24O Two-bed 1200 5 $60,000 $300,000 $45,000 74 27O Two-bed 1200 5 $60,000 $300,000 $45,000 75 4P One-bed 700 3 $50,000 $150,000 $22,500 76 27Q One-bed 700 3 $50,000 $150,000 $22,500 77 1R One-bed 700 3 $50,000 $150,000 $22,500 78 14R One-bed 930 4 $55,000 $220,000 $33,000 79 21R One-bed 930 4 $55,000 $220,000 $33,000 80 26R One-bed 930 4 $55,000 $220,000 $33,000 Page 2 Market Value-Rent Stab. Units 81 27R One-bed 930 4 $55,000 $220,000 $33,000 82 29R One-bed 930 4 $55,000 $220,000 $33,000 83 2S One-bed 930 4 $55,000 $220,000 $33,000 84 3S One-bed 930 4 $55,000 $220,000 $33,000 85 9S One-bed 930 4 $55,000 $220,000 $33,000 86 12S One-bed 930 4 $55,000 $220,000 $33,000 87 18S One-bed 930 4 $55,000 $220,000 $33,000 88 19S One-bed 930 4 $55,000 $220,000 $33,000 89 26S One-bed 930 4 $55,000 $220,000 $33,000 90 27S One-bed 930 4 $55,000 $220,000 $33,000 91 5T One-bed 700 3 $50,000 $150,000 $22,500 92 6T One-bed 700 3 $50,000 $150,000 $22,500 93 19T One-bed 700 3 $50,000 $150,000 $22,500 94 32T One-bed 700 3 $50,000 $150,000 $22,500 95 3V One-bed 930 4 $55,000 $220,000 $33,000 96 12V Three-bed 1,350 6 $70,000 $420,000 $63,000 97 1W One-bed 930 4 $55,000 $220,000 $33,000 98 5W One-bed 930 4 $55,000 $220,000 $33,000 99 4Y One-bed 700 3 $50,000 $150,000 $22,500 100 10Y One-bed 700 3 $50,000 $150,000 $22,500 101 1A One-bed 930 4 $55,000 $220,000 $33,000 102 25A One-bed 930 4 $55,000 $220,000 $33,000 103 28A One-bed 930 4 $55,000 $220,000 $33,000 104 PHA Three-bed 2,000 8 $70,000 $560,000 $84,000 105 2B One-bed 700 3 $50,000 $150,000 $22,500 106 3B One-bed 700 3 $50,000 $150,000 $22,500 107 17B One-bed 930 4 $55,000 $220,000 $33,000 108 3C One-bed 700 3 $50,000 $150,000 $22,500 109 6C One-bed 700 3 $50,000 $150,000 $22,500 110 7C One-bed 700 3 $50,000 $150,000 $22,500 111 4D One-bed 930 4 $55,000 $220,000 $33,000 112 7D One-bed 930 4 $55,000 $220,000 $33,000 113 8D One-bed 930 4 $55,000 $220,000 $33,000 114 11D Two-bed 1200 5 $60,000 $300,000 $45,000 115 16D Two-bed 1200 5 $60,000 $300,000 $45,000 116 19D Two-bed 1200 5 $60,000 $300,000 $45,000 117 21D Two-bed 1200 5 $60,000 $300,000 $45,000 118 4E One-bed 930 4 $55,000 $220,000 $33,000 119 22E Two-bed 1200 5 $60,000 $300,000 $45,000 120 28E Two-bed 1200 5 $60,000 $300,000 $45,000 121 7F One-bed 700 3 $50,000 $150,000 $22,500 122 9F One-bed 700 3 $50,000 $150,000 $22,500 Page 3 Market Value-Rent Stab. Units 123 10F One-bed 700 3 $50,000 $150,000 $22,500 124 6G One-bed 930 4 $55,000 $220,000 $33,000 125 7G One-bed 930 4 $55,000 $220,000 $33,000 126 12G Two-bed 1200 5 $60,000 $300,000 $45,000 127 15G Two-bed 1200 5 $60,000 $300,000 $45,000 128 19G Two-bed 1200 5 $60,000 $300,000 $45,000 129 22G Two-bed 1200 5 $60,000 $300,000 $45,000 130 25G Two-bed 1200 5 $60,000 $300,000 $45,000 131 5H One-bed 930 4 $55,000 $220,000 $33,000 132 6H One-bed 930 4 $55,000 $220,000 $33,000 133 19H Two-bed 1200 5 $60,000 $300,000 $45,000 134 29H Two-bed 1200 5 $60,000 $300,000 $45,000 135 7J One-bed 700 3 $50,000 $150,000 $22,500 136 12K Two-bed 1200 5 $60,000 $300,000 $45,000 137 15K Two-bed 1200 5 $60,000 $300,000 $45,000 138 16K Two-bed 1200 5 $60,000 $300,000 $45,000 139 21K Two-bed 1200 5 $60,000 $300,000 $45,000 140 1L One-bed 930 4 $55,000 $220,000 $33,000 141 2L One-bed 930 4 $55,000 $220,000 $33,000 142 3L One-bed 930 4 $55,000 $220,000 $33,000 143 9L One-bed 930 4 $55,000 $220,000 $33,000 144 14L Two-bed 1200 5 $60,000 $300,000 $45,000 145 21L Two-bed 1200 5 $60,000 $300,000 $45,000 146 28L Two-bed 1200 5 $60,000 $300,000 $45,000 147 30L Two-bed 1200 5 $60,000 $300,000 $45,000 148 33L Two-bed 1200 5 $60,000 $300,000 $45,000 149 7M One-bed 700 3 $50,000 $150,000 $22,500 150 4N One-bed 930 4 $55,000 $220,000 $33,000 151 12N Two-bed 1200 5 $60,000 $300,000 $45,000 152 22N Two-bed 1200 5 $60,000 $300,000 $45,000 153 30N Two-bed 1200 5 $60,000 $300,000 $45,000 154 4O One-bed 930 4 $55,000 $220,000 $33,000 155 21O Two-bed 1200 5 $60,000 $300,000 $45,000 156 22O Two-bed 1200 5 $60,000 $300,000 $45,000 157 28O Two-bed 1200 5 $60,000 $300,000 $45,000 158 1P One-bed 700 3 $50,000 $150,000 $22,500 159 3P One-bed 700 3 $50,000 $150,000 $22,500 160 5R One-bed 700 3 $50,000 $150,000 $22,500 161 11R One-bed 930 4 $55,000 $220,000 $33,000 162 15R One-bed 930 4 $55,000 $220,000 $33,000 163 24R One-bed 930 4 $55,000 $220,000 $33,000 164 2S One-bed 930 4 $55,000 $220,000 $33,000 Page 4 Market Value-Rent Stab. Units 165 5S One-bed 930 4 $55,000 $220,000 $33,000 166 8S One-bed 930 4 $55,000 $220,000 $33,000 167 9S One-bed 930 4 $55,000 $220,000 $33,000 168 15S One-bed 930 4 $55,000 $220,000 $33,000 169 23S One-bed 930 4 $55,000 $220,000 $33,000 170 29S One-bed 930 4 $55,000 $220,000 $33,000 171 33S One-bed 930 4 $55,000 $220,000 $33,000 172 26T One-bed 700 3 $50,000 $150,000 $22,500 173 27T One-bed 700 3 $50,000 $150,000 $22,500 174 2V One-bed 930 4 $55,000 $220,000 $33,000 175 7V One-bed 930 4 $55,000 $220,000 $33,000 176 10V One-bed 930 4 $55,000 $220,000 $33,000 177 14V Three-bed 1,350 6 $70,000 $420,000 $63,000 178 18V Three-bed 1,350 6 $70,000 $420,000 $63,000 179 20V Three-bed 1,350 6 $70,000 $420,000 $63,000 180 6W One-bed 930 4 $55,000 $220,000 $33,000 181 7W One-bed 930 4 $55,000 $220,000 $33,000 182 16W Three-bed 1,350 6 $70,000 $420,000 $63,000 183 19W Three-bed 1,350 6 $70,000 $420,000 $63,000 184 26W Three-bed 1,350 6 $70,000 $420,000 $63,000 185 27W One-bed 930 4 $55,000 $220,000 $33,000 186 11Y One-bed 700 3 $50,000 $150,000 $22,500 187 16Y One-bed 700 3 $50,000 $150,000 $22,500 188 25Y One-bed 700 3 $50,000 $150,000 $22,500 189 3A One-bed 930 4 $55,000 $220,000 $33,000 190 5A One-bed 930 4 $55,000 $220,000 $33,000 191 8A One-bed 930 4 $55,000 $220,000 $33,000 192 12A One-bed 930 4 $55,000 $220,000 $33,000 193 17A One-bed 930 4 $55,000 $220,000 $33,000 194 23A One-bed 930 4 $55,000 $220,000 $33,000 195 24A One-bed 930 4 $55,000 $220,000 $33,000 196 27A One-bed 930 4 $55,000 $220,000 $33,000 197 9B Studio 600 2.5 $32,000 $ 80,000 $12,000 198 18B One-bed 930 4 $55,000 $220,000 $33,000 199 22B One-bed 930 4 $55,000 $220,000 $33,000 200 5C One-bed 700 3 $50,000 $150,000 $22,500 201 17C Studio 450 2 $32,000 $ 64,000 $ 9,600 202 25C One-bed 700 3 $50,000 $150,000 $22,500 203 8D One-bed 930 4 $55,000 $220,000 $33,000 204 22D One-bed 930 4 $55,000 $220,000 $33,000 205 24D Two-bed 1200 5 $60,000 $300,000 $45,000 206 25D One-bed 930 4 $55,000 $220,000 $33,000 Page 5 Market Value-Rent Stab. Units 207 30D One-bed 930 4 $55,000 $220,000 $33,000 208 2E One-bed 930 4 $55,000 $220,000 $33,000 209 6E One-bed 930 4 $55,000 $220,000 $33,000 210 15E Two-bed 1200 5 $60,000 $300,000 $45,000 211 21E Two-bed 1200 5 $60,000 $300,000 $45,000 212 28E Two-bed 1200 5 $60,000 $300,000 $45,000 213 33E Two-bed 1200 5 $60,000 $300,000 $45,000 214 2F One-bed 700 3 $50,000 $150,000 $22,500 215 7G One-bed 930 4 $55,000 $220,000 $33,000 216 8G One-bed 930 4 $55,000 $220,000 $33,000 217 15G Two-bed 1200 5 $60,000 $300,000 $45,000 218 20G Two-bed 1200 5 $60,000 $300,000 $45,000 219 22G One-bed 930 4 $55,000 $220,000 $33,000 220 23G Two-bed 1200 5 $60,000 $300,000 $45,000 221 27G Two-bed 1200 5 $60,000 $300,000 $45,000 222 30G Two-bed 1200 5 $60,000 $300,000 $45,000 223 31G Two-bed 1200 5 $60,000 $300,000 $45,000 224 32G Two-bed 1200 5 $60,000 $300,000 $45,000 225 33G Two-bed 1200 5 $60,000 $300,000 $45,000 226 7H One-bed 930 4 $55,000 $220,000 $33,000 227 10H One-bed 930 4 $55,000 $220,000 $33,000 228 14H Two-bed 1200 5 $60,000 $300,000 $45,000 229 22H Two-bed 1200 5 $60,000 $300,000 $45,000 230 30H Two-bed 1200 5 $60,000 $300,000 $45,000 231 12K Two-bed 1200 5 $60,000 $300,000 $45,000 232 23K Two-bed 1200 5 $60,000 $300,000 $45,000 233 30K Two-bed 1200 5 $60,000 $300,000 $45,000 234 3L One-bed 930 4 $55,000 $220,000 $33,000 235 8L One-bed 930 4 $55,000 $220,000 $33,000 236 9L One-bed 930 4 $55,000 $220,000 $33,000 237 11L Two-bed 1200 5 $60,000 $300,000 $45,000 238 14L Two-bed 1200 5 $60,000 $300,000 $45,000 239 16L Two-bed 1200 5 $60,000 $300,000 $45,000 240 21L Two-bed 1200 5 $60,000 $300,000 $45,000 241 28L Two-bed 1200 5 $60,000 $300,000 $45,000 242 5N One-bed 930 4 $55,000 $220,000 $33,000 243 6N One-bed 930 4 $55,000 $220,000 $33,000 244 12N Two-bed 1200 5 $60,000 $300,000 $45,000 245 14N Two-bed 1200 5 $60,000 $300,000 $45,000 246 16N Two-bed 1200 5 $60,000 $300,000 $45,000 247 21N Two-bed 1200 5 $60,000 $300,000 $45,000 248 26N Two-bed 1200 5 $60,000 $300,000 $45,000 Page 6 Market Value-Rent Stab. Units 249 3O One-bed 930 4 $55,000 $220,000 $33,000 250 5O One-bed 930 4 $55,000 $220,000 $33,000 251 6O One-bed 930 4 $55,000 $220,000 $33,000 252 7O One-bed 930 4 $55,000 $220,000 $33,000 253 11O Two-bed 1200 5 $60,000 $300,000 $45,000 254 17O Two-bed 1200 5 $60,000 $300,000 $45,000 255 21O/P Three-bed 1,350 6 $70,000 $420,000 $63,000 256 29O One-bed 930 4 $55,000 $220,000 $33,000 257 32O One-bed 930 4 $55,000 $220,000 $33,000 258 2P One-bed 700 3 $50,000 $150,000 $22,500 259 6P One-bed 700 3 $50,000 $150,000 $22,500 260 27P One-bed 700 3 $50,000 $150,000 $22,500 261 27Q One-bed 700 3 $50,000 $150,000 $22,500 262 14R One-bed 930 4 $55,000 $220,000 $33,000 263 2S One-bed 930 4 $55,000 $220,000 $33,000 264 18S One-bed 930 4 $55,000 $220,000 $33,000 265 25S One-bed 930 4 $55,000 $220,000 $33,000 266 27S One-bed 930 4 $55,000 $220,000 $33,000 267 28S One-bed 930 4 $55,000 $220,000 $33,000 268 2T One-bed 700 3 $50,000 $150,000 $22,500 269 10T One-bed . 700 3 $50,000 $150,000 $22,500 270 15T One-bed 700 3 $50,006 $150,000 $22,500 271 16T One-bed 700 3 $50,000 $150,000 $22,500 272 3U One-bed 700 3 $50,000 $150,000 $22,500 273 1V One-bed 930 4 $55,000 $220,000 $33,000 274 2V One-bed 930 4 $55,000 $220,000 $33,000 275 4V One-bed 930 4 $55,000 $220,000 $33,000 276 7V One-bed 930 4 $55,000 $220,000 $33,000 277 8V One-bed 930 4 $55,000 $220,000 $33,000 278 11V Three-bed 1,350 6 $70,000 $420,000 $63,000 279 14V Three-bed 1,350 6 $70,000 $420,000 $63,000 280 16V Three-bed 1,350 6 $70,000 $420,000 $63,000 281 27V One-bed 930 4 $55,000 $220,000 $33,000 282 4W One-bed 930 4 $55,000 $220,000 $33,000 283 5W One-bed 930 4 $55,000 $220,000 $33,000 284 6W One-bed 930 4 $55,000 $220,000 $33,000 285 11W Three-bed 1,350 6 $70,000 $420,000 $63,000 286 23W Three-bed 1,350 6 $70,000 $420,000 $63,000 287 28W One-bed 930 4 $55,000 $220,000 $33,000 288 29W One-bed 930 4 $55,000 $220,000 $33,000 289 33W Three-bed 1,350 6 $70,000 $420,000 $63,000 290 1Y One-bed 700 3 $50,000 $150,000 $22,500 Page 7 Market Value-Rent Stab. Units 291 4Y One-bed 700 3 $50,000 $150,000 $22,500 292 6Y One-bed 700 3 $50,000 $150,000 $22,500 293 17Y One-bed 700 3 $50,000 $150,000 $22,500 294 30Y One-bed 700 3 $50,000 $150,000 $22,500 295 25Z One-bed 700 3 $50,000 $150,000 $22,500 -------- Total Discounted Market Value Market Value ------------ ------------ $71,404,000 $10,710,600 Difference $60,693,400 Page 8 1997 SALES - ------------------------------------------------------------------------------------------------------------------------------------
DATE APT GARAGE GROSS TRANSFER SOLD PURCHASER UNIT BLDG # LEVEL # SHARES PROCEEDS COMMISSIONS TAX ---- --------- ---- ------ ------- ------ -------- ----------- --- 1/ 3/97 SAMUEL/RITA M. COHEN 21-A (1) M6 LEVEL 3 2,661 $200,808.00 ($2,100.00) ($715.68) / 6/97 MAJORIE ROAS GEVINS 17-V (3) N49 & W22 6,205 446,000.00 (3,100.00) (2,323.61) LEVEL 2 1/10/97 CAROLE WEILER 27-Z (3) O42 LEVEL 3 1,899 113,360.00 (2,100.00) (394.03) 1/10/97 VIVIAN DAVIS 18-K (1) J14 LEVEL 2 4,167 316,770.00 (2,100.00) (1,095.12) 1/10/97 PAUL G. DETKIN 23-H (3) L32 LEVEL 2 4,145 315,076.00 (2,100.00) (1,088.35) 1/17/97 BEATRICE HANFT GLUCKSMAN 18-D (3) N40 LEVEL 2 3,507 265,950.00 (2,100.00) (919.98) 1/24/97 MOIJJE KESSLER 29-D (2) E2 LEVEL 1 4,782 280,000.00 (2,100.00) (919.91) 1/27/97 EDWARD/SONIA M. VESEL 17-E (3) N35 LEVEL 2/ 4,587 252,000.00 (2,100.00) (807.91) J36 LEVEL 3 1/29/97 VIVIAN BERNER 6-M (1) M13 LEVEL 3 1,809 135,204.00 (2,100.00) (481.41) 1/30/97 FLORENCE BURAN 31-M (1) O1 LEVEL 2 4,761 280,000.00 (2,100.00) (919.91) 2/14/97 JUDITH T. DWORKEN 2-C (3) L25 LEVEL 3 1,951 120,096.00 (2,100.00) (420.92) 2/27/97 EDITH DUBOVSKY 6-V (2) F4 LEVEL 2 3,596 272,803.00 (2,100.00) (947.29) 3/24/97 GEORGE/FRANCES KARSON TRUSTS 29-A (2) G26 LEVEL 1 3,050 245,226.00 (2,100.00) (865.04) 4/01/97 PAULA E. FRANKLIN 30-N (1) N8 LEVEL 2 4,746 280,000.00 (2,100.00) (919.48) 4/02/97 RICHARD/RUTH EPSTEIN 3-V (3) N50 LEVEL 2 3,747 223,400.00 (2,100.00) (749.46) 4/02/97 HERBERT/DAISY GREEN 1-D (3) N38 LEVEL 2/ 3,275 195,020.00 (2,100.00) (664.13) OUTDOOR 59 4/03/97 JACK LACHOFF/DONNA MACK 24-K (2) E19 LEVEL 1 3,969 235,000.00 (2,100.00) (767.66) 4/03/97 MARTIN GLASSER 23-Y (3) M32 LEVEL 3 2,264 171,317.00 (2,100.00) (597.50) 4/09/97 IDA PROVENZANO 1-N (2) J18 LEVEL 2 3,132 189,500.00 (2,100.00) (642.05) 4/10/97 EDWIN KAPLAN 2-M (2) W35 LEVEL 3 1,673 117,152.00 (2,100.00) (409.04) 4/25/97 RUTH REIN 23-A (1) K10 LEVEL 2 2,914 172,000.00 (2,100.00) (572.05) 5/01/97 MARLENE LEVY TTEE FOR IRMA GRUSHKIN 23-K (2) G20 LEVEL 1 3,955 319,436.00 (2,100.00) (1,105.28) REVOCABLE LIFETIME TRUST 1/7/97 5/06/97 GERALD/SHIRLEY STONE 14-K (1) O27/P8 LEVEL 2 4,253 252,000.00 (2,100.00) (835.54) 5/16/97 SYLVIA SHAFRAN 5-S (3) P25 LEVEL 1 2,867 231,368.00 (2,100.00) (809.4 ) 5/16/97 MARGERY C. RUBIN 3-Y (3) NO PARKING 1,840 138,000.00 (2,100.00) (492.3 ) 5/21/97 MYRNA FISCHBACH 2-A (3) P57 LEVEL 3 2,643 149,000.00 (2,100.00) (508.1 ) 5/29/97 SETH P. STEIN/ROBERT M. STEIN 1-K (1) N20 LEVEL 2 3,131 193,256.00 (2,100.00) (656.9 ) 6/12/97 GERRY DOMBROWSKY/CONRAD DAMON TTEES 28-W (2) F1 LEVEL 2 3,465 279,256.00 (2,100.00) (972.6 ) OF BERNARD COMBROWSKY TRUST ------ ------------- ----------- ----------- 94,994 $6,388,998.00 ($59,800.00) ($22,600. ) ====== ============= =========== ===========
NORTH SHORE TOWERS RESALES ========================== DATE APPROVED BY BUILDING/ PRICE PER BOARD OF DIRECTORS APARTMENT SHARES PRICE SHARE - ------------------ --------- ------ ----- ----- 10/17/96 271-8X 1,480 115,000 78 10/17/96 271-4U 1,435 85,000 59 10/17/96 270-27H 4,012 355,000 88 10/17/96 271-19N 4,707 460,000 98 10/28/96 269-08X 1,372 76,000 55 11/21/96 269-20D 3,631 285,000 78 11/21/96 269-28G 4,237 340,000 80 11/21/96 270-23Y 2,125 123,000 58 11/21/96 269-20B 1,771 81,000 46 11/21/96 270-17V 5,802 415,000 72 11/21/96 271-25O 4,938 350,000 71 11/21/96 269-32P 2,465 150,000 61 11/21/96 271-24Z 1,845 115,000 62 11/21/96 269-7U 1,495 86,000 58 TOTALS 301,162 20,286,462 NORTH SHORE TOWERS RESALES ========================== DATE APPROVED BY BUILDING/ PRICE PER BOARD OF DIRECTORS APARTMENT SHARES PRICE SHARE - ------------------ --------- ------ ----- ----- 07/25/96 271-22N 4,726 348,000 74 07/25/96 271-9F 1,916 85,000 44 07/25/96 271-9J 1,748 89,000 51 07/25/96 270-22S 2,969 230,000 77 07/25/96 269-24G 4,278 302,000 71 07/25/96 270-14A 2,751 200,000 73 07/25/96 270-12E 4,175 320,000 77 07/25/96 271-11-O 4,728 325,000 69 07/25/96 271-4D 3,142 209,000 67 08/15/96 271-23Z 1,838 85,000 46 08/15/96 269-ARCADE #5 746 42,500 57 08/15/96 269-1L 3,002 140,000 47 08/15/96 271-20A 2,751 180,000 65 08/15/96 270-25F 1,870 137,000 73 08/15/96 270-10D 3,157 260,000 82 08/15/96 271-31G 4,521 325,000 72 08/15/96 271-16L 4,061 298,000 73 08/15/96 269-1M 1,737 70,000 40 08/15/96 270-10L 2,970 255,000 86 08/15/96 271-8L 3,021 225,000 74 08/15/96 270-1D 2,940 155,000 53 08/15/96 270-14K 3,941 300,000 76 08/15/96 270-10T 2,107 145,000 69 08/15/96 269-1C 1,928 85,000 44 08/15/96 269-14E 4,541 285,000 63 08/15/96 271-31T 2,150 115,000 53 08/15/96 271-21K 4,367 270,000 62 09/19/96 270-21M 1,878 130,000 69 09/19/96 271-9P 1,893 125,000 66 09/19/96 271-11K 4,082 275,000 67 09/19/96 271-4S 2,582 187,500 73 09/19/96 269-5X 1,506 75,000 50 09/19/96 270-15T 2,238 141,000 63 09/19/96 270-14H 3,941 270,000 69 09/19/96 269-2U 1,444 82,000 57 09/19/96 271-17T 2,043 136,000 67 09/19/96 269-3J 1,629 105,000 64 09/19/96 269-10U 1,512 75,000 50 09/19/96 269-24O 5,153 350,000 68 09/19/96 269-3D 3,343 207,500 62 09/19/96 271-7M 1,816 115,000 63 09/19/96 270-21Y 2,106 140,000 66 09/19/96 271-10F 1,924 110,000 57 10/17/96 270-2T 1,972 118,000 60 10/17/96 271-10A 2,543 200,000 79 NORTH SHORE TOWERS APARTMENTS INCORPORATED AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
December 31, ------------------------------------ 1996 1995 ------------ ------------ Assets: Property (Notes 1, 2, 3, 5, and 6): Land $31,026,169 $31,026,169 Buildings and improvements 198,219,487 195,350,424 ------------ ------------ 229,245,656 226,376,593 Less accumulated depreciation 64,930,664 58,228,805 ------------ ------------ 164,314,992 168,147,788 Cash 1,363,172 945,308 Auxiliary reserve fund (Notes 2 and 4) 3,370,947 4,226,269 Reserve fund (Notes 1, 2, and 6) 4,423,242 5,202,134 Prepaid expenses and other assets (including prepaid real estate taxes of $4,962,378 in 1996 and $4,659,534 in 1995) 6,670,858 6,413,450 Unamortized finance and related costs (Notes 2 and 5) 1,476,112 1,622,425 ------------ ------------ Total assets $181,619,323 $186,557,374 ============ ============ Liabilities and tenant-shareholders' investment: Liabilities Accrued expenses and other liabilities $3,426,189 $4,201,686 Mortgage payable (Notes 1 and 5) 70,737,729 71,241,183 ------------ ------------ Total liabilities 74,163,918 75,442,869 Other comments (Note 7) Tenant-shareholders' investment 107,455,405 111,114,505 ------------ ------------ Total liabilities and tenant-shareholders' investment $181,619,323 $186,557,374 ============ ============
See accompanying notes. 2 North Shore Towers Apartments Incorporated and Subsidiary Consolidated Statements of Revenues and Expenses
Year ended December 31 Budget (A) Actual 1995 Actual 1995 (Unaudited) 1994 ------------------------------------------------------ Revenues Assessments from proprietary tenant: Maintenance charges, including electricity of $1,087,755 (1995) and $1,075,416 (1994) (Note 7(c)) $29,688,298 $29,690,067 $29,675,959 ------------------------------------------------------ Other income: Commercial rents, including electricity of $86,193 (1995) and $77,442 (1994) 615,134 602,500 531,233 Recreational facilities, net of direct expenses of $1,683,120 (1995) and $1,456,493 (1994) 479,774 501,000 505,871 Interest 391,703 210,000 268,577 Sundry, including work order income of $184,656 (1995) AND $238,652 (1994) and real estate tax refunds of $1,660,253 (1995) 1,993,168 2,934,000 445,538 ------------------------------------------------------ 3,479,779 4,247,500 1,751,219 ------------------------------------------------------ 33,168,077 33,937,567 31,427,178 Expenses Labor and related expenses 5,028,812 5,323,000 4,980,047 Power and natural gas 1,419,157 1,698,000 1,469,626 Water and sewer 607,831 537,000 441,797 Repairs, maintenance and supplies 1,486,842 1,662,000 1,568,750 Security 1,101,354 1,115,000 1,111,667 Insurance 507,057 524,000 472,347 Management fees (Note 7(b)) 1,010,791 1,145,000 1,074,105 Real estate taxes 9,306,885 9,524,000 9,719,650 Mortgage interest, including amortization of $139,422 (1995) and $11,323 (1994) (Note 5) 6,799,027 6,660,000 7,671,747 Interest--Securities Broker 2,040 7,000 94,101 Litigation and related costs (Note 7(f)) 34,047 180,000 253,996 Sundry (Note 7(e)) 538,948 1,092,000 657,118 ------------------------------------------------------ 27,842,791 29,467,000 29,514,951 ------------------------------------------------------ Excess of revenues over expenses before depreciation 5,325,286 $4,470,567 1,912,227 Depreciation (Note 2) 6,652,486 ========== 6,641,436 ----------- ----------- (Deficiency) of revenues over expenses $(1,327,200) $(4,729,209) =========== ===========
(A)--As approved by the Board of Directors on November 17, 1994. See accompanying notes. 3 [GRAPHIC] Floor Plan of 1st to 10th Floor [GRAPHIC] Floor Plan of 11th to 33rd Floor [GRAPHIC] Floor Plan of Penthouse *NORT* NST APARTMENTS INCORPORATED - --- PREPARED FOR --- --- PROPERTY --- PAGE: 1 NORTH SHORE TOWERS 272 GRAND CENTRAL PKY DATE: 3/20/97 FLORAL PARK, NY 11005 INTERIM STATUS
- -------- ---- ------------------------------------ ------- ----------------------- ------------- ------- -------- ----- BLD-TEN UNIT RESIDENT BASE OPENING OTHER CHARGES PAYMENTS CLOSING LEASE ACCT. NO ID NAME CHARGE BALANCE AND CREDITS RECEIVED BALANCE SECURITY EXPIR - -------- ---- ------------------------------------ ------- ----------------------- ------------- ------- -------- ----- 140-055 B1 HONEST BALLOT ASSOC. INC C 2432.21 2432.21 3/ 5 2333.32 9/ 8 - - - COM'L ELEC - - - 245.82 B 5 COM'L E 245.82 3/ 5 - - - HVAC - - - 479.50 B10*HVAC 479.50 3/ 5 ------- ------- ------- ------- ------- 2432.21 .00 725.32 3157.53 .00 140-060 C1 CHASE MANHATTAN BANK C 4464.95 25.41 B36 RETRO 4456.48 3/ 3 33.88 1.00 11/ 1 - - - COM'L ELEC - - - 685.59 B 5 COM'L E 685.59 3/18 - - - HVAC - - - 420.78 B10*HVAC 420.78 3/ 3 ------- ------- ------- ------- ------- 4464.95 .00 1131.78 5562.85 33.88 140-070 C2 ** VACANT ** 0.00N .00 01 VAC LOSS BEVERLY CHANNON, PRES. 140-080 C3 VERY IMPRESSIVE PRESENTS C 650.83 650.83 3/11 630.83 8/ 1 - - - COM'L ELEC - - - 25.00 B 5*COM'L E 25.00 3/11 ------- ------- ------- ------- ------- 650.83 .00 25.00 675.83 .00 140-081 C0 SUSAN SCHULTZ, INC. C 883.63 883.63 3/13 980.00 8/99 - - - COM'L ELEC - - - 100.00 B 5*COM'L E 100.00 3/13 ------- ------- ------- ------- ------- 883.63 .00 100.00 983.63 .00 140-082 C4 E.R. RABBANI C 733.33 733.33 1466.66 666.66 2/ 1 140-084 C5 ** VACANT ** 0.00N .00 01 VAC LOSS 140-086 C6 STUDIO 4 LIMITED C 306.25 306.25 3/ 7 506.33 4/97 - - - COM'L ELEC - - - 35.00 B 5*COM'L E 35.00 3/ 7 ------- ------- ------- ------- ------- 306.25 .00 35.00 341.25 .00 140-100 D1 LAMAR BOUTIQUE INC. C 1341.67 1341.67 3/10 3000.00 8/98 - - - COM'L ELEC - - - 63.95 B 5*COM'L E 63.95 3/10 ------- ------- ------- ------- ------- 1341.67 .00 63.95 1405.62 .00 140-102 D2 TOWERS CARD & GIFT SHOP C 1511.26 1511.26 3022.52 1600.00 12/97 - - - COM'L ELEC - - - 467.08 25.84 B 5*COM'L ELEC 492.92 ------- ------- ------- ------- ------- 1511.26 1978.34 25.84 .00 3515.44 140-104 D3 TOWERS FRUIT MARKET 1000.00 2000.00 1000.00 3/ 7 2000.00 2000.00 8/97 140-106 D4 SEIJIN CORPORATION C 2520.83 2520.83 5041.66 1.00 2/ 1 - - - COM'L ELEC - - - 350.77 325.51 B 5*COM'L ELEC 676.28 ------- ------- ------- ------- ------- 2520.83 2871.60 325.51 .00 5717.94
*NORT* NST APARTMENTS INCORPORATED - --- PREPARED FOR --- --- PROPERTY --- PAGE: 2 NORTH SHORE TOWERS 272 GRAND CENTRAL PKY DATE: 3/20/97 FLORAL PARK, NY 11005 INTERIM STATUS
- -------- ---- ------------------------------------ ------- ----------------------- ------------- ------- -------- ----- BLD-TEN UNIT RESIDENT BASE OPENING OTHER CHARGES PAYMENTS CLOSING LEASE ACCT. NO ID NAME CHARGE BALANCE AND CREDITS RECEIVED BALANCE SECURITY EXPIR - -------- ---- ------------------------------------ ------- ----------------------- ------------- ------- -------- ----- 140-107 D4 SEIJIN CORPORATION C 0.00 - - - COM'L ELEC - - - 1613.37 1440.72 B 5*COM'L ELEC 3054.09 ------- ------- ------- ------- ------- .00 1613.37 1440.72 .00 3054.09 GHULAM MUHAMMAD, PRINC. C 1022.92 1022.92 3/17 2500.00 11/98 140-108 D5 NST APOTHECARY - - - COM'L ELEC - - - 89.96 B 5*COM'L E 89.96 3/17 ------- ------- ------- ------- ------- 1022.92 .00 89.96 1112.88 .00 O.COLELLA/ G. DI MITRI 140-110 D6 FINANCIAL CENTER INCORPO C 2083.33 2083.33 1335.75 1/98 - - - COM'L ELEC - - - 503.51 B 5*COM'L ELEC 503.51 ------- ------- ------- ------- ------- 2083.33 .00 503.51 .00 2586.84 JEFFREY GLEISHER, PRES. 140-112 D7 NORTH SHORE VALET, INC. C 2333.33 2333.33 3/11 4000.00 10/97 - - - COM'L ELEC - - - 260.68 B 5*COM'L E 260.68 3/11 - - - HVAC - - - 437.50 B10*HVAC 437.50 3/11 ------- ------- ------- ------- ------- 2333.33 .00 698.18 3031.51 .00 140-114 D8 POURAN'S BEAUTY/BOUTIQUE C 1945.79 1945.79 3/ 6 17862.00 8/97 - - - COM'L ELEC - - - 538.50 B 5*COM'L E 538.50 3/ 6 ------- ------- ------- ------- ------- 1945.79 .00 538.50 2484.29 .00 140-116 D9 HBA TRAVEL, INC. C 1907.41 1907.41 3/13 1200.00 4/98 - - - COM'L ELEC - - - 219.47 B 5*COM'L E 219.47 3/13 ------- ------- ------- ------- ------- 1907.41 .00 219.47 2126.88 .00 140-120 TV2 TIME/WARNER C 0.00 1.00 - - - COM'L ELEC - - - 204.84 204.78 B 5*COM'L E 204.84 3/17 204.78 ------- ------- ------- ------- ------- .00 204.84 204.78 204.84 204.78 140-150 E1 K.C.N.S.T. CORPORATION C 1500.00 1500.00 3/ 4 25000.00 6/13 - - - COM'L ELEC - - - 1500.00 B 5*COM'L E 1500.00 3/ 4 ------- ------- ------- ------- ------- 1500.00 .00 1500.00 3000.00 .00 140-151 E4 KCNST CORP R 0.00 140-152 E2 K.C.N.S.T. CORPORATION 0.00 140-154 E3 K.C.N.S.T. CORPORATION C 0.00 - - - COM'L ELEC - - - -720.57 B 5*COM'L ELEC
*NORT* NST APARTMENTS INCORPORATED - --- PREPARED FOR --- --- PROPERTY --- PAGE: 3 NORTH SHORE TOWERS 272 GRAND CENTRAL PKY DATE: 3/20/97 FLORAL PARK, NY 11005 INTERIM STATUS
- -------- ---- ------------------------------------ ------- ----------------------- ------------- ------- -------- ----- BLD-TEN UNIT RESIDENT BASE OPENING OTHER CHARGES PAYMENTS CLOSING LEASE ACCT. NO ID NAME CHARGE BALANCE AND CREDITS RECEIVED BALANCE SECURITY EXPIR - -------- ---- ------------------------------------ ------- ----------------------- ------------- ------- -------- ----- 720.57 B 5 COM'L ELEC -------- ------- ------- ------- ------- .00 .00 .00 .00 .00 140-160 36 ROTHMAN-GOODMAN MGMT COR C 240.00 240.00 3/ 4 300.00 10/97 - - - COM'L ELEC - - - 60.00 B 5*COM'L ELEC 60.00 3/ 4 -------- ------- ------- ------- ------- 240.00 .00 60.00 300.00 .00 140-175 G3 TOWERS CAR CARE, INC. C 500.00 500.00 1000.00 8/98 140-185 T1 NST CINEMA C 0.00 2/96 140-200 L1 COINMACH IND. INC. C 0.00 1.00 5/ 1 - - - LAUNDRY IN - - - 1200.00 BT9*LAUNDRY IN 1200.00 -------- ------- ------- ------- ------- .00 .00 1200.00 .00 1200.00 140-250 A/C CONTINENTAL COMM., INC. C 0.00 1.00 2/ 0 - - - COM'L ELEC - - - -48.35 B 5 COM'L E 96.71 3/ 6 145.06 B 5 COM'L ELEC -------- ------- ------- ------- ------- .00 .00 96.71 96.71 .00 140-251 PH-1 CONTINENTAL COMM., INC. C 0.00 1.00 - - - COM'L ELEC - - - -561.43 B 5 COM'L E 1122.87 3/ 6 1684.30 B 5 COM'L ELEC -------- ------- ------- ------- ------- .00 .00 1122.87 1122.87 .00 140-252 R1 CONTINENTAL COMM., INC. C 0.00 1.00 - - - COM'L ELEC - - - -121.58 B 5 COM'L E 243.17 3/ 6 364.75 B 5 COM'L ELEC -------- ------- ------- ------- ------- .00 .00 243.17 243.17 .00 140-253 PH-2 CONTINENTAL COMM., INC. C 0.00 1.00 - - - COM'L ELEC - - - -45.08 B 5 COM'L E 90.17 3/ 6 135.25 B 5 COM'L ELEC -------- ------- ------- ------- ------- .00 .00 90.17 90.17 .00 140-254 R2 CONTINENTAL COMM., INC. C 0.00 1.00 - - - COM'L ELEC - - - -161.27 B 5 COM'L E 322.54 3/ 6 483.81 B 5 COM'L ELEC -------- ------- ------- ------- ------- .00 .00 322.54 322.54 .00 140-255 PH-3 CONTINENTAL COMM., INC. C 0.00 1.00 - - - COM'L ELEC - - - -488.78 B 5 COM'L E 977.55 3/ 6 1466.33 B 5 COM'L ELEC -------- ------- ------- ------- -------
*NORT* NST APARTMENTS INCORPORATED - --- PREPARED FOR --- --- PROPERTY --- PAGE: 4 NORTH SHORE TOWERS 272 GRAND CENTRAL PKY DATE: 3/20/97 FLORAL PARK, NY 11005 INTERIM STATUS
- -------- ---- ------------------------------------ ------- ---------------------- --------------- ------- -------- ----- BLD-TEN UNIT RESIDENT BASE OPENING OTHER CHARGES PAYMENTS CLOSING LEASE ACCT. NO ID NAME CHARGE BALANCE AND CREDITS RECEIVED BALANCE SECURITY EXPIR - -------- ---- ------------------------------------ ------- ---------------------- --------------- ------- -------- ----- .00 .00 977.55 977.55 .00 140-256 R3 CONTINENTAL COMM., INC. C 0.00 1.00 - - - COM'L ELEC - - - -539.92 B 5 COM'L E 1079.85 3/ 6 1619.77 B 5 COM'L ELEC -------- ------- ------- -------- ------- .00 .00 1079.85 1079.85 .00 140-257 R4 CONTINENTAL COMM., INC. C 10826.66 10826.66 3/ 6 1.00 2/98 140-260 TV1 COMMANDER SATELLITE CORP 0.00 1.00 9/ 4 140-265 269 SECURITY OFFICE 0.00 140-270 270 MANAGEMENT OFFICE 0.00 1.00 140-275 SUB POWER PLANT 0.00 140-280 CEL SUPPLY ROOM 0.00 140-285 ARC MAINTENANCE OFFICE 0.00 1.00 140-300 A12 NICK MARTI 0.00 140-305 A9 ANDREAS VASIADIS 0.00 140-310 A13 JOHN KENNY 0.00 140-315 A11 FRANK CUOZZO 0.00 140-320 A10 JOE RUSSO 0.00 140-325 A24 SHAM SOONDARIAL 0.00 140-330 10 271 - LOBBY 0.00 1.00 140-331 WFS BUILDING 1 - WATER FILTE 0.00 1.00 140-335 10 270 - LOBBY 0.00 1.00 140-336 WFS BUILDING 2 - WATER FILTE 0.00 1.00 140-340 10 269 - LOBBY 0.00 1.00 140-341 WFS BUILDING 3 - WATER FILTE 0.00 1.00 140-440 GRO GROUNDS 0.00 1.00 140-444 ARC TOWERS COUNTRY CLUB 0.00 1.00
*NORT* NST APARTMENTS INCORPORATED - --- PREPARED FOR --- --- PROPERTY --- PAGE: 5 NORTH SHORE TOWERS 272 GRAND CENTRAL PKY DATE: 3/20/97 FLORAL PARK, NY 11005 INTERIM STATUS
- -------- ---- ------------------------------------ ------- ---------------------- --------------- ------- -------- ----- BLD-TEN UNIT RESIDENT BASE OPENING OTHER CHARGES PAYMENTS CLOSING LEASE ACCT. NO ID NAME CHARGE BALANCE AND CREDITS RECEIVED BALANCE SECURITY EXPIR - -------- ---- ------------------------------------ ------- ---------------------- --------------- ------- -------- ----- ------------------------------------------------------------------------------------------------------------------ - TOTALS - 38204.40 9901.48 12820.38 40146.63 20779.63 63937.89 PARKING: 00000000 0000000000.00 0000000000.00 ------------------------------------------------------------------------------------------------------------------
STATEMENT OF COLLECTIONS 272 GRAND CENTRAL PKY PAGE: 6 FLORAL PARK, NY 11005 INTERIM STATUS FOR PERIOD ENDING: 3/20/97
INCOME CATEGORY ------- ACCT OPENING CURRENT PAYMENTS CLOSING - ---- CHARGE TYPE ------ CODE BALANCE CHARGES RECEIVED BALANCE - ----------------------- ---- ------- ------- -------- ------- BASE CHARGE------------------- 7,265.42 BASE CHARGE 100.0% 1-28 55 UNITS 38,204.40 VACANCY LOSS .0% 1-29 2 UNITS .00 RETRO 1-36 25.41 -30,847.18 14,648.05 COM'L-ELEC-------------------- 2,636.06 COM'L ELEC 5-28 12,944.17 -2,686.98 -7,961.67 4,931.58 HVAC-------------------------- .00 HVAC 10-28 1,377.78 -1,377.78 .00 LAUNDRY-INCOME---------------- .00 LAUNDRY INCOME 19-28 1,200.00 .00 1,200.00 - ---------------------------------------------------------------------------------------------------------- TOTALS 9,901.48 51,024.78 -40,146.63 20,779.63 - ---------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------- PAYMENTS ANALYSIS DEBITS CREDITS TOTAL - ------------------------------ ------ ------- ----- PAYMENTS .00 -40146.63 -40146.63 .00 - ---------------------------------------------------------------------------------------- TOTAL RECEIPTS -40146.63 - ---------------------------------------------------------------------------------------------------------- MANAGEMENT COMMISSION BASE -40146.63
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